INFLECTION - FIND YOUR OWN PATH WITHIN
(Weekly newsletter 16-20 August 2010)
Dear Members,
While ignorance is first to blame for investment mistakes, for experienced investors/traders, not following predetermined rules is more often than not the reason leading us to wrong paths. Jesse Livermore (arguably the greatest trader ever born), used to said that when you make money, take out the profit in cash and keep it in the bank so that you have the ability to take advantage unexpected opportunities. He made fortunes in the 1907 crash and made $100 million in a single day during the crash of 1929. However, he then lost money for quite some time afterwards, simply by not following strictly his own investment rules.
At age 16 he ran away from home because he never wanted to do farming. From a young age he started putting money on the market at bucket shops, a type of gaming establishment that took bets on stock prices (instead of actually buying and selling the stocks). He was winning so much that soon he was barred from all bucket shops.
He moved to New York and made his first fortune in 1907. Later, however, he lost everything during 1908-12 in cotton by not following his rules. In 1912 he was in such debt that he had to declare bankruptcy. Yet later he paid everybody off by making money from the markets during World War I.
Many people still believed that the 1929 crash was triggered by Jesse Livermore. Even JP Morgan blamed him for the crash. His shorts made 100 million dollar (in today’s terms: $2 Billion) in a single day during the crash. However, he lost all the fortune he made during 1931-1934 and declared bankruptcy again, which resulted in suspension of his Chicago Board of Trade membership. The specific reasons for such gigantic accumulated losses were never disclosed, but once again, as he confessed in his own book, that he lost money because he was ignoring his own rules when trades were going against him.
Eventually, suffering from chronic depression, he committed suicide in November 1940. He wrote a note before dying to his third wife: “My dear Nina, can’t help it, things have been bad with me. I am tired of fighting, can’t carry on any longer. This is the only way out. I am unworthy of your love, I am failure and truly sorry, but this is the only way out for me”. He left untouchable trusts and cash assets worth over $5 Million at the time.
A few weeks back I mentioned about the luck factor, and that I believed 100% in luck. On 28 March 1933, Livermore married third time to Harriet Metz Noble (Nina). I believed that he made the biggest blunder of his life by marrying Harriet because all her previous four husbands committed suicides and I found that in Harriet’s astrology chart, the seventh house—house of marriage and life partner—clearly indicates by planet Venus that whoever married to Harriet would eventually committed suicide. Yes, your luck and the lucks of other people (parents, wife, children, friends, secretary or boss etc...) around you also play roles in shaping your life.
Life always carries two parallel paths: One is “Yes”, and the other is “No”. Each decision you make in your personal life or in investment has a hidden meaning and result behind it. I am not trying to turn you into a superstitious person but there is no harm in analyzing events that happen in daily life and learn from such analysis.
In 1987, I met someone who just started work on helping people obtaining passport. He said to me: “Mahendra, make your passport”. Still a poor student in college, I said to him that I didn’t want to spend this money and I never thought of going out of India. The cost of making the passport at 375 Rupee was a big deal for me at the time, but he offered me to pay him in installments. I agreed and I got my first passport in three months. Then all of a sudden, on a fine day, a client of mine from Kenya called to invite me to fly to Nairobi to read a few top politicians’ charts. I immediately came to realize that this was the reason why my friend came into my life and offered me to make my passport immediately so I could fly overseas in time.
I left for Kenya in three days for the few weeks and in ten days a leading local newspaper published an article about my interview that carried a headline prediction of “A man who sees tomorrow” – article was talking about fall of USSR. Three days after the article was published, USSR disintegrated. The whole country wanted to know about me and wanted to know how I predicted this huge event just a few days before it took place. Eventually, I settled down there for 13 years and that country gave me a lot during the period.
We can see two important inflection points about decision making from this story of mine. First, when my friend wanted me to make my passport that I did not see the need to have, I had to say yes or no. I said yes. Second, when I got the call from Nairobi, I had to make a decision if I’d like to go, I simply connected this invitation to fly to Nairobi to the passport making incident. Immediately I said yes because it seemed destined to happen. Had I said no to either event I don’t know where I would be today. That is why saying “yes” and “no” is very important in life because both decisions hold the hidden future paths of our life. The same rule applies to investing in markets and to each and everything in our daily life.
Yes, I am so much interested in the hidden natural rhythms or forces because I believe they are the ultimate rulers and predictors of all events. Since I started newsletter writing I always tried to talk about issues that are connected to our life so subscribers can appreciate how these forces, manifested by planet movements, influence our lives and financial markets. You can look at your own key events in life, be it sad, happy or life changing, and then analyze the scenarios where you had to made decisions in these events and see how life would be different. Jesse Livermore should have thought twice on his third marriage with Harriet before he made the decision. He could have asked himself why all her previous four husbands committed suicides? He must have felt such bizarre coincidences for a moment but perhaps he was too successful and so too arrogant to care about any “hidden natural force”. In a parallel universe, he might have a very different life without marrying Harriet.
Luck, or some people might call karma, dictates our decision making in every crossroad of life (and of course, investment). I believe that humility plays a critical part in determining investment success because humility makes you serious and calm enough to determine “Yes” or “No” in each event in life. I know luck is a very complicated, philosophical subject but it is extremely fascinating. After all, it might just be the most important thing that determines the result of anything! And this notion of luck pervading in each moment of our life humbles your mind to function at a whole new, much clearer level that opens the door to a potentially very different future that might just be part of your exciting destiny.
Anyway this subject will be revisited in much greater details in my coming book so I’d stop here at the first part of this week’s weekly newsletter. But again this exploration of natural forces is one of the ways to push your brain to higher levels constantly to stay ahead of the curve in a very competitive and chaotic global financial market. That is why many subscribers liked our first part discussion “Luck and us” a few weeks back. Though many of our members are from hedge funds and banking industry that look for clues in market directions, they often tell me that they always read the first part of the letters very carefully and that is one of reasons they remain as our members over the years. I know many of these professional members understand markets fundamentals, economy or technical charts better than I do, but they read our views and theory behind the hidden forces that constantly humble everyone engaged in the investment race.
This week newsletter from 16-20 August
GOLD/SILVER
I still remember the year 2005/6, when I was in Dubai during the launch of my astro fund with ABN AMRO bank. I met quite a few high net worth clients including some from royal families. That was the period when the Dubai property market was flying, and stock markets were making new highs. Everyone was making money and the word “loss” was growing foreign in investors’ minds. We (ABN AMRO and I) advised them that this high flying small market won’t be able to hold such rate of growth for long, and the bubble would burst eventually so it’s better to take profits and reinvest in commodities and other financial instruments in bigger markets. I predicted real estate crash after 2007 purely based on planetary movement (or the hidden wave) and ABN AMRO was talking about diversification. But most investors were not agreeing with us on the coming meltdown in Dubai. In fact, like what I have seen many times when I made shocking predictions, they were laughing on us. They said: we are making 100% every year so why invest in something that generates only 15 to 20 percent returns? Later, of course, the UAE stock market collapsed and in the last two years many of them lost fortune in the real estate market as well.
Yes, gold/silver and commodities provide great alternative investment opportunities. The growing world population requires more grains, and expanding global infrastructure especially in the emerging markets take up more steel that require more mines to produce. So the bull market in metals and commodities overall is going to continue.
In 2001 we came with the prediction that a great rise in gold and oil was coming. Today they are very high, but is it still a good time to invest in them? I say let’s wait for the right opportunity to trade in metals from the middle of September. That means that planets are telling us that gold/silver will move down from the current level on a short-term basis. Those who bought gold around $300 or $400 for them our advice is to book some partial profit.
This week we will see some volatility in the metals markets before they move down big from next week. Once again we see that there is a good amount of correction in the cards within next three to four weeks. Metal stocks will fall with the coming stock market correction, which has already started. Since the last few years we have noticed that when the stock markets moved down metal rose but this time this won’t be case—both will be falling.
On Monday gold and silver will trade weakly so any rise should be taken as a selling opportunity.
On Tuesday, Wednesday and Thursday the metals will move in both directions with a huge amount of volatility. Any sharp fall should be taken as a buying opportunity and any sharp rise as a selling opportunity but this is only valid for intraday trades. On Friday one can build substantial short positions as from next week a huge correction is on the way.
From the end of September, a bull market in gold and silver will start so get ready for big move.
COPPER/PLATINUM/PALLADIUM
Last week base metals remained weak as mentioned in the newsletter. This week we see base metals trading….
COFFEE/COTTON
This week coffee and cotton and will remain sideways. Yes coffee was our favorite in 2010 and the planets are still supporting coffee but in few weeks it may trade sideways or weak. This week coffee will…..
Cotton prices moved up during last week….
SUGAR/COCOA/ORANGE JUICE
Last week sugar remained very volatile, as planet Sun is changing the house today and that is….
STOCK MARKETS
All major stock indexes will start moving down from….
GRAINS
Corn paid handsomely in the last one month; and planetary positions are indicating that corn and wheat will move higher in the medium and longer term……
Rice has been giving good money to our members since the last two weeks…..
OIL
Last weeks oil came down sharply as predicted, our lower side target got fulfilled…..
Natural gas will turn around from …..
CURRENCIES
As expected dollar gained a huge amount during last week, we…..
Thanks & God Bless
Mahendra Sharma , 15 August 2010