post brexit world

Early morning (IST) Jun 24th UK votes to leave European Union 

source telegraph.co.uk

World Market Reactions 

source yahoo finance
Note FTSE outperformed because pound fall is expected to be good for the economy (export oriented services)
NIKKEI underperformed the most since Britain’s vote to leave the European Union prompted investors to flee global markets and seek safety in Japanese government bonds.The currency came within 6 yen of erasing the impact of more than three years of central-bank stimulus, piling pressure on policy makers to slow the advance. At its peak Friday, the yen was almost 7 percent stronger. The yen rally will render its exports less competitive, making the Bank of Japan’s 2 percent inflation target a more distant prospect. (source Bloomberg.com)

Gold Spikes up 

spike in gold is due to flight to safe heaven assets, the black swan event of Brexit makes the possibility of FED tightening unlikely this year which is positive for gold 
source: goldprice.org

Crude down due to recession worries in EU 

source nasdaq.com

Brexit Poll Trends

source Financial Times

How the betting market got it totally wrong

source betfair
Few theories on this How did the wisdom of crowds fail so spectacularly? One theory holds that the Brexit market was swayed by a small number of big bets by optimistic “remain” voters, who tended to be richer than those who supported “leave”. People who found it unfathomable that Britain could vote to leave, primarily because such an event had never happened before, probably in turn succumbed to confirmation bias.They may have also fallen victim to the “availability heuristic”, presuming that the EU vote was likely to resemble that of Scotland’s 2014 independence referendum (source economist.com)

Post Brexit views from EU titled Euroskepticism

source pewglobal.org

Currency Market (USD/Yen/Bitcoin up while Euro/Pound hammered)

source XE.com

Bond yields plunges

The yield decline reflects a growing chorus of investors and analysts who say Britain’s political earthquake will force the U.S. central bank to abandon its plans to boost interest rates this year.
source Bloomberg

Brexit Adds $380 Billion to Global Negative-Yielding Bond Pile

source Bloomberg

Fed Rate Hike probability shot down

Note: Post Brexit Fed rate hike chances drops to zero mostly, 4.8% in current quarter and 12-22% by year end but mostly zero throughout the year. In fact driven out of options, FED could well be considering Negative Interest Rates (NIRP) in US
source @jsblokland on twitter

Volatility Index (VIX) spikes 50% on Brexit

chart source Google finance

Persistent weakening in US markets in all time frames

10 year, 1 year, 1 month chart shown below

The pattern is clearly developing into a slower version of 2008 
chart source Google finance

UK Default risk shoots up

source zerohedge

Credit Default Swap soars for European countries

source markit.com

European/American Banking & Financial stocks hammered 10-20% down

Barclays, Deutsche, RBS, Barclays, Goldman, JP Morgan, CItigroup .. they all fell down

source Google Finance

Deutsche bank looks particularly disturbing

source zerodha

Stocks related to real-estate and property market come down

London property market has been in a bubble phase for sometime now along with others like SFO and many cities in Australia. Atleast UK bubble might pop which could lead to a chain reaction around the world
source @AlliHayman

Industry Impact

source yahoo finance

Brexit Vs Lehman comparison

This does not give the most accurate picture due to base effect, take into account percentages over absolute numbers
source CNBC on twitter

Over $2.1 trillion in value lost in stocks globally

Huge wealth erosion happened for the wealthiest in the world since their net worth is very closely linked to stock markets now. 400 richest lost $127 billion in one day. 
Worldwide markets hemorrhaged more than $2 trillion in paper wealth on Friday, according to data from S&P Global, the worst on record. The prior one day sell-off record was $1.9 trillion back in September of 2008
source CNBC

Brexit roadmap

source BBC.com

reversing Brexit

source yahoo finance

Other EU countries in line for exit referendum 

Although you see leave vote far below 50% in many note that this does not mean rest are in remian camp. There could be a large percentage in undecided
source Bloomberg

rate cut probability by Bank Of England  rises to negate the effects of Brexit

source Bloomberg

Other Important Events:

• British PM David Cameron has resigned, bringing an abrupt end to his six-year premiership, after the British public took the momentous decision to reject his entreaties and turn their back on the European Union. (source theguardian)
• Scotland's government began moves Friday to hold a new referendum on independence from the U.K. after the "Brexit" vote, saying it faced being taken out of the European Union against its will. (source NBC News)
• Bank of England Governor Mark Carney said on Friday the central bank was ready to provide 250 billion pounds of additional funds to support financial markets after Britain voted to leave the European Union. (source reuters.com)
• Italy’s 5 Star Movement Calls for Euro Referendum (source The Wall Street Journal)
• "We’ve seen markets sell off and we’ve seen marking down of assets on books, we haven’t yet seen the big margin selling that will come in soon, I’m sure there will be some hedge funds that will declare bankruptcy. There are going to be some add on effects that could start to gather some momentum.” (source Max Keiser on RT)
• Leaving the EU would hit British living standards, stoke inflation and wipe up to 5.5% off GDP. The IMF said last month that Brexit could spark a stock market crash and a steep fall in house prices. Under that scenario, the UK would fall into recession in 2017, IMF officials said. “The implication would be negative growth in 2017,” said one official briefing reporters in a conference call. (source theguardian.com)
• UBS derivatives strategist Rebecca Cheong, who picked up Kolanovic' baton, and according to whom selling of US stocks in the aftermath of Brexit is just getting started for quantitative traders who make buy or sell decisions based on price trends. According to Cheong, such sales could total as much as $150 billion should equity volatility persist in the S&P 500 Index for the next week. “They’ll be buying volatility and selling the S&P,” said Cheong. (source zerohedge)
• Central banks will carefully monitor market functioning and stability, and cooperate closely,” he said in a statement. The Global Economy Meeting is a discussion forum that includes the heads of central banks in 30 developed and emerging-market economies. (source Marketwatch.com on Basel for the BIS’s annual meeting)
• Banks have already begun to take action to shift operations out of the UK, with the governor of France’s central bank warning on Saturday that Britain’s financial services groups were at risk of losing their right to operate across the EU. (source cnbc.com)
• Treasury slipped to 1.58% Friday, dragging mortgage rates and other long-term borrowing costs with it. One reason for the drop is that fixed-income investors reckon that global central bank policy will be looser after the vote, with the Bank of England, the European Central Bank and the Bank of Japan likely to ease policy, and the Federal Reserve putting off its plans to raise rates until the end of this year, at the earliest. (source WSJ.com)
• Of course, there is a possibility that the trouble in the U.K. could expose unknown fragilities in global credit markets that spill over to the U.S (source WSJ.com)

Market Essentials by PO

Essential for success .. think then highlight here ==>Optimism<==

Essential for longevity .. think then highlight here ==>Caution<==

Essential to reach the top .. think then highlight here ==>Courage<==

Essential to select the right path .. think then highlight here ==>Knowledge<==

Essential to stay on the right path .. think then highlight here ==>Patience<==

Essential to avoid the pitfalls .. think then highlight here ==>Experience<==

Essential to recover from failures .. think then highlight here ==>Persistence<==

Essential to enjoy the journey .. think then highlight here ==>Have Fun<==

My opinion on your opinion

I am right, you are wrong is a familiar debate that we face every now and then. Many times I post a news of interest "to me" on facebook mostly "for myself" to keep track of things that "I need to" and get blasted randomly by someone who gets offended by the news. I use facebook more as a news feed than a networking site. As far as opinions are concerned, neither your's nor mine is of any value to me. I believe and follow market opinion which is much greater than you or me individually. It is the opinion aggregated over millions of opinions of some of the smartest people on earth with real time access to all the information in the world. I try to understand what the market thinks and align myself to the winning side. If I get it right, I make a decent profit. If I get it wrong, I make a punishing loss and then I correct myself.
So once again to put things into perspective, I believe in market opinion and if I go wrong I correct myself based on the market feedback.

I am the proverbial bad boy when it comes to opinions & suggestions
Given that I have access to such a massive source of intelligence, I usually don't bother about "individual" opinions. Individual opinions are important to me if it can be aggregated with the market opinion as a part of the whole instead of seeking to be the whole in itself. However if anyone thinks that they can transform my thinking by preaching their opinion to me or blasting me or my posts, please do not waste your time and effort. Time and effort is money according to me and I always discourage wasting money (invest it, don't waste it) .

The Central Intelligence Server
Now that we are clear on the worthlessness of individual opinions (your's and mine included) let me take this opportunity to introduce you to this vast store of intelligence available for free to all of us. It is called the stock market. It is a place of confluence of all sorts of opinions news, views, controversy, hypocrisy, real, fake BUT at the same time it is a place where the right view ultimately crystallizes into a pattern or a bias and the wrong view slowly disappears into a black hole because market has an inbuilt mechanism that rewards the right opinion and ruthlessly punishes the wrong opinion on a continuous basis. For me that is a wonderful way of testing if my analysis is right or wrong. I am right if I am on the winning side and wrong if I am on the losing side.
Following the stock market, you can also get to follow some of the most successful people on earth the Tata's, Birla's, Damani's and Jhunjhunwala's very closely, people who have proven to be right most of the time for the longest time. When you have access to such a proven source of information which is flocked by some of the best minds in the world, then why waste your time on individual opinions?
So next time your blood boils because of any of my posts and you feel like giving me a piece of your mind please remember "I don't care". So take a chill pill, like, ignore or just move on with your life !

newbie to pro in one hour

This set of 5 videos should take you from newbie to pro in stock market in less than an hour. Enjoy!

Getting started with stock market

Stock Market Technicals vs Fundamentals

First Investment

Simple support & resistance for complex trend analysis & technical forecasting

Building a portfolio

Coming Soon ....

Right Expectations

Say on your visit to a hospital you are going to get an injection and if your expectation is that it will feel something nice, what happens when the needle is actually poked into your skin? On the other hand say you are terrified of needles and get all stressed and fearful about the impending injection, what would happen. Now say you know it will feel like a prick and will be done and over with within a short second, how would you handle the event? That is the power of having the right expectations. It makes even difficult time and things also feel happy and just right.

Expectations & decisions
No matter what you do, your expectations will always play a very major role in the decisions you take and the impact it has on your life, family, career, just about everything. For me the biggest help I received from fine tuning my expectations was in handling my investments. It doesn't matter how much you know, how much you research and which complex algorithm you use to analyze the market, if your expectations are not right, you will most probably end up taking all the wrong decisions even with the most sophisticated tools at your disposal.

What are the common expectations of an investor?
All investments should earn profits.
All investments should go up all the time.
All investments should grow fast.
Everytime we look at our portfolio we should have become richer.

Identifying expectation issues:
Obviously these are ridiculous expectations, but believe it or not when we keep refreshing our investment portfolio 20 times a day during the market hours, inherently these are our expectations and that is why we feel happy when we see a green uptick (expectations met! :) ) or sad when we see a red down tick (expectations not met :( ) This is a clear signal that we do not have the right expectations from our investments and it is affecting us emotionally. We all know theoretically about long term investments, patient investing,  investing discipline, etc etc but unknowingly we do not practice the same. Somewhere in our heart we have ridiculous expectations from our investments. These are not harmful in individual instances except for the emotional stress but these do accumulate in our heads over a period of time and sometimes we end up taking disastrous decisions due to accumulated emotional stress from unfulfilled expectations over a period of time.

You must have heard and read several times on how we should control our emotions when dealing with financial decisions but no one tells you what is the root cause behind it. Well root cause of emotional stress is perceived failure in achieving a goal due misplaced expectations both in time and quantum. Once we understand this and set our expectations right, it can take away lot of unnecessary stress from our life which in turn can help us take correct and sensible decisions. Even better it can help us totally avoid disastrous decisions. This will ultimately lead to success in achieving realistic goals which will lead to peace and happiness.

Applicable everywhere
Didn't I tell you market lessons are for life and not just for making money ! I guess lessons like this will be more applicable to family & relationships which are primarily based on expectations. So fine tune your expectations till you get it right and enjoy a happy life :)

Million Dollar Question

When analyzing a complex situation with too many rapidly changing time and event variables it is often easy to get distracted and get caught up in little things while losing sight of really important one's. How do we make sure that we are focusing on the right things and not wasting our time on trivial things specifically when we are dealing with something complex and important. One technique that is useful in such situations is to look for the "million dollar question" in the problem we are attempting to solve.

What is a million dollar question?
A million dollar question is the most crucial, most important part of the puzzle. Getting an answer to this question will solve most of the problem and give the greatest chance of success. Let's take a simple example. Say you want to buy a home. There are so many things you need to figure out example location, number of rooms, builder, whose name should the house be on, which society, water, electricity, and other basic convenience, proximity to schools, healthcare, premium features like club house, etc etc but what is the million dollar question here? Do you have the necessary financial arrangement to buy the house or not. If you have figured this out then you can sort out everything else. If you have not figured out the financial arrangements then it doesn't matter if you have sorted everything else out. You still cannot own a home. So your million dollar question here is if you have the necessary financial arrangements in place to buy a home or not? It is not always about money. For example choosing a school for your kids will have a completely different set of variables and a completely different million dollar question associated with the decision along with several other small distractions.

Solve the biggest part of the puzzle first or fail fast
But the key here is to understand this. Whenever working on a complex thing, we need to figure out what is that most important thing that I need to ask and solve first and worry about the rest later. Easier said than done. The million dollar question almost always is not as straightforward as the other smaller parts of the puzzle and as humans we tend to try to solve the easiest problems first and deal with the difficult one's later until it cannot be delayed any further. The problem being if later at the last moment you are unable to solve the biggest block of the puzzle then all the effort and time spent solving the smaller one's go waste and we have setup ourselves for a royal failure.

On the other hand if we solve the million dollar question first then our chances of success increases dramatically. If not, then we simply fail fast and move on with other options.

Just keep in mind
Nothing new in this blog. This theory of attacking the hardest and most important problems first has been discussed & taught in almost every training but the only difficult part is practicing the theory. For me it is just easier to remember & practice it by looking for the "million dollar question" in every complex problem I am working with. Maybe I understand things better if you associate a concept with money for me, especially a million dollars :) So give it a try !

Shivlinga and the mystery life lessons

Shivlinga is a popularly worshiped by many in India across the country from north to south, west to east. It is an abstract form associated with Lord Siva one of the three main Gods in hindu culture  that forms the trimurti or the hindu trinity Brahma the creator, Vishnu the preserver, and Shiva the destroyer or transformer. There are lot of theories behind what Shivlinga represents and why it is worshiped but I will discuss the most interesting and non-conventional one that I came across recently while watching a video.

It says that Shivalinga is actually a normal distribution with a positive skew. If you look at the image below you will understand what I mean. (I created it using different images from Internet and superimposing a normal distribution on Shivlinga). I further extended it using balanced normal distribution along with the positive and negative distributions and I got the trinity !

So Shivliga is like a statistical function, what's the significance? To understand this, let's look at the statistical significance of the normal distribution. From Wiki
"In probability theory, the normal (or Gaussian) distribution is a very common continuous probability distribution. Normal distributions are important in statistics and are often used in the natural and social sciences to represent real-valued random variables whose distributions are not known.
The normal distribution is useful because of the central limit theorem. In its most general form, under some conditions (which include finite variance), it states that averages of random variables independently drawn from independent distributions converge in distribution to the normal, that is, become normally distributed when the number of random variables is sufficiently large."

In short everything is a Normal distribution. So what does the positive skew mean? The normal distribution with the positive skew has a secret message on how life should be lived which is also mentioned in the maha mrityunjaya mantra below:

Maha Mrityunjaya Mantra:
1: Om Try-Ambakam Yajaamahe
2: Sugandhim Pusstti-Vardhanam
3: Urvaarukam-Iva Bandhanaan
4: Mrtyor-Mukssiiya Maa-[A]mrtaat ||

Meaning:
1: Om, We Worship the Three-Eyed One (Lord Shiva),
2: Who is Fragrant (Spiritual Essence) and Who Nourishes all beings.
3: May He severe our Bondage of Samsara (Worldly Life), like a Cucumber (severed from the bondage of its Creeper), ...
4: ... and thus Liberate us from the Fear of Death, by making us realize that we are never separated from our Immortal Nature.

The third line actually signifies the positively skewed normal distribution. We come to life and as we rapidly grow young we become more and more active, ambitious and adventurous where we want to do, experience & achieve everything that life has to offer (this is the peak of the Shivlinga or the normal distribution), but once we reach the peak we must slowly and gradually detach ourselves from the bondage of the material world so that our transition out of this life is easy, without fear and peaceful without any attachment to the material existence (like a cucumber). This can happen only if we work on it gradually over a long period of time like the positive skew. Worshiping the Shivlinga is actually a reminder for us to bring this positive skew in our life, being prepared for the transition instead of dying abruptly while still full of earthly desires. Note that traditionally Maha Mrityunjaya Mantra is also recited to avoid pre-mature or abrupt death (Mrityunjaya: victory over death). It is in a way a request for more time to seek a gradual transition instead of abrupt ending, considering eternal victory over death is impossible.

Now let's look at the Sanskrit meaning of linga 
"The lingam (also, linga, ling, Shiva linga, Shiv ling, Sanskrit meaning "mark", "sign", "inference" ) is a representation of the Hindu deity Shiva used for worship in temples." 
Makes sense that it carries a mystery lesson for life :) ?