The Wild Swing to Continue in the Stock Market Worldwide

With USA market leading, the wild swings in the prices and indices is expected to continue for a while. With this back drop, I am expecting at least one sovereign default to take place before extreme measures will be implemented to stabilize the market. And my guess is Greece will be the bogey boy since its impact to other nations is among the smallest of all. Spain, Italy are too large. France is even larger. USA default means world economy collapse. Essentially, USA is "Safe".

It seems that we may not avoid the double dip after all. But the dip will be short lived. There will be immerse effort to blow up the bubble. Another much bigger bubble will be sharped in place to cover the current bubble. This seems to be the direction of how the world economy is moving towards to. As individual, we can't go against it. We can only trade along it. Even a country like USA or China can't fight this trend. The whole world is addicted to credit and spending future money. The addiction is too deep to ditch. Nobody is able to take the pain of curing.

Importance of Staying Engaged in the Market

Whether you are an investor or a trader in the stock market, the most important thing you must do is to stay engaged in the market through thick and thin. Let me elaborate. What I meant to say is that you must keep monitoring the market regardless of bull or bear markets, regardless of whether you are invested or sidelined.

One of the biggest lesson I learned in 2009 was how I missed the market bull run by staying away for too long. I quit the market in 2007 and avoided the major crash. I was engaged in a few major projects where I work full time on them. I was not monitoring closely the market during the period. I came back in mid 2010. I missed the major run. What a shame! Investing and trading is actually a long term engagement. Even if you are staying at the sideline, you must at least check on the market on the weekly basis. That will give you an idea of where the market is going and provide you with some minimum alertness when opportunity comes.

I had decided not to miss any such opportunities. I am watching the market on constant basis. I believe the reward will come when the time comes. Patience is part of the game.

Trade or Invest with clear understanding of your own situtaion

Here is the head line from By MarketWatch, Aug. 25, 2011, 1:05 p.m. EDT
Buffett’s BofA investment is the new TARP
Commentary: Private-sector bailouts are better way of injecting capital

Read Full News:
http://www.marketwatch.com/story/buffetts-bofa-investment-is-the-new-tarp-2011-08-25?link=MW_story_investinginsight

I am particularly interested in what the writer said at one point:

The question for investors who don’t get the nearly guaranteed 6% dividend is whether it’s worth following Uncle Warren in. Retail investors who followed Buffett into Goldman and GE aren’t in the money, with the Connecticut industrial giant again the far-worse investment.

That is precisely what we should as ourselves when we make a decision to invest or trade. We are at different position and we are not able to have to cushion that Warren has. Whatever theory he has, we cannot have it. So, eventually, we need a different strategy.

For investors who blindly follow, they will not be getting anything. For the abovementioned case, they may not suffer great losses but, they could have gain a lot more else where.

Investing and trading in stock market involves hard work. There is no easy way out. Listening to others may work but you may ended frustrated when a things don't turn out well. You can only do that if you are prepared to lose all your money. That means the invested money is something excess for you. You will never need those money no matter what happens.

Market Trend Analysis - Double Dip A Reality?

In 2008, the housing bubble in US triggered a worldwide financial melt down. The toxic financial derivatives has cause financial institutions all over the world to lose trillions of dollars in total. Many companies went bust and some large companies went into trouble.

In 2011, what is facing us is the sovereign default. With toxic "Assets" (if they are really assets) being taken into US Fed, the US banks are now operating as normal. However, that has not generated much changes to the fundamentals. US and Europe still operates under the same mechanism. Borrow money, spend to generate demand and growth. There is no change in fundamental of operations. There is no intention to change. Again this would certainly generate another bubble. The borrow and spend first and then pay later (if there is some spare cash) strategy is going to go on. Of course everybody is hoping this would go on forever. Even if it does not, it would be the next generation's problem.

Looking at the situation in Eurozone, I am tempted to think that we must wait for at least one country to default in order to see some fundamental shift in the methods of tackling the problem. It would really take some major events to make people realise that spending future money is not sustainable in the long term. The UK is smart not to join the Eurozone. Now the Germans must be regretting. Imagine trying to convince a hard working, thrifty person to lend money to a lazy person who refuse to work but wanted to live a more luxurious life! You must be treating the hardworking person like an idiot in order to come up with that idea.

Bailing out cannot go on forever. It is not sustainable. The Greeks must have a concrete plan to bring themselves out of the debt loop. This is like drug addiction. Only drastic, fundamental changes to the economic structure can bring them away from such addiction. And for that to happen, some pain has to be inflicted or else they would never wake up. So, the default is given. It is a matter of time. And it should be soon.