Asset management, Behavioral finance, Commodity price, Commodity risk, Market psychology, Market trends, Psychology, Risk management, trading, trend following

Lessons in asset valuation: the great warrants bubble of China

Investors exert a great deal of intellectual effort to determine the correct valuation of securities. Economic value is central to our decision making and it plays a major role in our intuitive psyche. In daily life, when we buy a loaf of bread or a tank of gasoline, we tend to have a good idea about what we think is cheap and what’s expensive. We like bargains, don’t enjoy being ripped off, and just as we are inclined to shop for value as consumers, we find value investing intuitively appealing. But here’s the critical difference between buying goods and investing: shopping for investments is speculative while buying stuff isn’t, and speculation activates the part of our mental circuitry that can heat up to a boiling point and overwhelm any rational consideration of value. Continue reading

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Asset management, Behavioral finance, Bitcoin, Commodity price, Market psychology, Market trends, Psychology, Risk management, trading, trend following

Of Bitcoins and bubbles

In my book, “Mastering Uncertainty in Commodities Trading” I argued that security prices “are driven by human psychology and its self-stoking collective action that can sustain major trends spanning many years.” Tat’s because in speculative decision making, our views about the actions of others can entirely override our rational appraisal of the underlying asset value.

The most recent example of this is the price of Bitcoin that has surged from below $400 in January last year to $4,300 this week. When we set up the Altana Digital Currency Fund several years ago, many people thought that digital currencies were just a strange fad and investors continued to show little interest in them – until very recently. Continue reading

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Real life

Eyes of beauty

My mother is a remarkably wise woman, but she’s a trained engineer, pragmatic and not indulgent of new-age spiritual musings. So I was surprised when one day, she told me that Maya had such beautiful eyes, that she could see the same something in them as in her mother’s eyes. Many years later Ethan, the other beautiful soul in my life – he’s only 7 years old – told me that one day he was looking into Maya’s eyes and found them so beautiful that it made him cry.

Maya

So long sweet friend. I’ll miss you forever.

They say that eyes are the window to the soul… But Maya just passed away and I am not in a mood to philosophize. Instead, I’m thinking that her body is at the vet’s office now… and perhaps I should go there and sit in front to be closer. Perhaps I’m beling silly but I’m pretty sure that whenI finish work I’ll spend some time sitting in front of the vet’s office.

That gleam in Maya’s eyes, that was something. Something beautiful and pure. Now I feel like I’ll miss her forever.

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Asset management, Behavioral finance, Commodity risk, Complexity, Hedging, Market psychology, Market research, Market trends, Psychology, Risk management, Something completely different, trading, trend following, Uncategorized

Speculation in the natural world

Nature has … some sort of arithmetical-geometrical coordinate system, because nature has all kinds of models. What we experience of nature is in models, and all of nature’s models are so beautiful. – R. Buckminster Fuller

Nature’s survival strategies that bear the most similarities to activities of market speculators are those of predators. To live, predators must hunt and this activity includes elements of speculation. Like trading, predation requires knowledge, skills, judgment and decision-making. It also entails risk and uncertainty. A predator can’t be sure where her next meal is coming from. Each hunt is an investment of resources; it involves the risk of injury and loss of energy expended in failed hunts, which tend to be more frequent than successful ones. To survive and procreate, predators must consistently generate a positive return on this investment. Too much of a losing streak could turn out to be fatal. In his book, “The Serengeti Lion: A Study of Predator-Prey Relations” George B. Schaller painstakingly documented the details of hundreds of hunts by large cats in the Serengeti National Park in Tanzania. We have all seen wildlife television programs showing lions and cheetahs hunting, but Schaller’s work offers a much richer account of the life of predatory cats including their hunting behavior.

The anatomy of a hunt Continue reading

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Economics, Eurasia, Media, Policy, Politics, Social development, Truth

Vladimir Putin’s 17 years in power: the scorecard

Mr. Putin can’t seem to get a break in the western media. I watched his recent interview with CBS’s Megyn Kelly with her tiresome, boring questions like, “did Russia interfere in our election,” “did your ambassador meet with Trump’s election officials,”  “isn’t it true that you’re a corrupt murderous thug,” etc. Only in response to Kelly’s last question did Mr. Putin get to name a handful of his achievements in Russia. But someone ought to better prepare his talking points on this score. The below excerpt from my upcoming book summarizes how Russia has changed during the 17 years since Mr. Putin has been at helm.

Continue reading

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Central banking, Economics, Inflation, Monetary reform, Social development, Uncategorized

Inflation: lessons from the last empire’s collapse

So far, the dreams of 1,000-year empires and stable world domination have eluded the ruling elites throughout history and across the globe. Empires arise, sustain themselves for a century or two and then rapidly decay and collapse. The collapse may appear relatively fast and obvious in hindsight, but in reality it spans decades, may appear as a series of temporary crises and only become obvious very late into the slow-motion train wreck. Continue reading

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Policy, Politics, Social development

Surveillance state: it ain’t about your privacy

We should be very concerned about the surveillance state in the west – but our privacy is not the main reason why.

Wikileaks’ latest dump of CIA documents confirmed what many of us suspected all along, especially after the Edward Snowden revelations: that the NSA (and GCHQ…) use our computers, mobile devices, and even internet-connected TV sets to spy on us. Some people feel they have nothing to hide, so they aren’t bothered about it. Others feel outraged on the grounds that it violates our civil liberties and our right to privacy. But there’s a much more important reason to be concerned about mass surveillance, and it isn’t about the privacy of the vast majority of us. Continue reading

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