Protected: Aug 5 2016 – Duterte’s Policies and How to Make Money with Them = Invest in the Companies Solving the Country’s Woes (Part 1)

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June 21, 2016 – FX Trading Plan for USDCAD

Weekly Structure of USDCAD

We’re at a possible weekly support range .  This is the midpoint of the last 15 years.  So I view this important.  Note too that we are currently testing the previous resistance of year 2007 that became the support for the dollar cad so 1.2680 level is an important level to note.cad weekly.png

USDCAD actually extended to a six sigma event or between 1.5-1.618 recently when it fell 1.2465.  This was when oil hit 52 dollars.  Oil is currently at 49.60 and if oil continues higher — then likely we’ll see the dollar further weaken in support of CAD however, as you can see on my previous article about the exhaustion point as well on oil – we’re likely going to see a lower high on oil and thus, a possible higher low on USDCAD.  Let me show the scenario.

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USDCAD structure shows us a consolidation of CAD gains for the year.  It shows me in the daily that it’s now in a range pattern with 1.3193 likely the top and 1.24 the likely extended drop and a basecase of 1.2643 as likely low for this week.

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USDCAD is interesting for me because it’s currently residing at the WATR estimated halfway bottom and very near support.

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My trade idea is that USDCAD will form a higher low so long 1.2743-1.2750; stoploss 1.2600

TP 1.2990 or better

*This assumes oil will not break 52 anytime this week.

Forex Factory Calendar Catalyst -June 22 Crude Oil Inventories 1030pm Philippine time tomorrow.  Brace for some oil volatility tomorrow.

  • Faceless Trader

 

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June 20-24,2016- FX Trading Plan for Brexit

$GBPJPY Weekly

This is interesting.  GBPJPY hit a six sigma event in the trading world.  It broke the 151.63 (low end of its range last week) and then went all the way to downside overshooting between the 1.5-1.618 extended downside move.  (It fell intraday low of 145 and is currently on the reversal bounce.  Currently 152.80 as of writing

gbpjpy weekly.png

GBPJPY daily shows us we have plenty of ways to milk this cow.  The longs are strong however so I suggest going long near 149.63-150 if ever the trading gods give us entries!  If you caught the longs at the 145-150 move. Congrats! 500 pips already and still plenty of rewards.  163.80 ain’t impossible but the 157.33 might give a selling area zone as well.  Gotta watch that.  Too close to call if we get a rally for selling too.

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Very strong longs with the gapup.  Hopefully we can enter in the gaps or make small sized long positions given strong upside of 500 pips at 157.33 area even if “entry of 152” is imprecise. Just small size if the stop is wide at 148 areas.  I am not assuming we visit the 145 extension move anytime soon.

 

I placed an entry at 152.00 (sana mabigyan ako but I will modify my long order within the next hour or so if I really can’t get done) My target price is 157 and my stoploss is 148.30

The nearer I can enter from the gapup zone, The better😀

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Here’s the weekly pattern of $GBPUSD.  It’s in a box.  No matter the brexit, It’s basically priced in. In fact as early as Thursday night, nobody cared about Brexit fears.

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GBPUSD daily shows us that its threatening a possible box breakout to the long side.gbpusd daily

600 pips for GBPUSD from the lows.  We’ll see the 1.4439 as a higher low support and a possible low risk entry in case we get any pullbacks before it makes a breakout move from the Jan 22- Jun 2016 box😀

 

See ya.

  • gbpusd long.pngFaceless Trader
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June 20-24, 2016 – FX Trading Plan for Yen Pairs

Last Thursday night, we mentioned in Faceless Trader Ground Zero facebook group that there was a strong reversal that called for all the bears to cover their shorts.

$SPX500 staged a fierce rebound such as V reversal from 2050 to 2070 and we closed all shorts and went long oil as well.  It bounced from 46 and is currently at 48.80;  I need to just hold on to my trades longer.  I keep taking small gains!  It’s a wrong habit! Even if it’s a gain, I need to hold longer and trail.

spx risk on.png

The oil rally coincided with the very strong reversal in SPX500.  The sentiment really shifted into risk on mode last Thursday evening😀

oil rallyNevertheless, The good thing is we have a trading setup.  Let’s look at USDJPY😀

I went long as well last Friday, and closed all positions for the weekend.  Day trade lang kasi iniisip ko pero maganda risk reward nitong usdjpy ngayon.

Look at Weekly pattern.

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usdjpy daily.png

I love trading gaps.  This is a nice confirmation of strength on the gap up and will go long on the gap fill residing between 104-104.33

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We enter some daily longs.

104.30 preferred entry though if within one hour I don’t get hit, I’ll move it to 104.50; doesn’t matter since risk reward pay off is nice.

My stop loss at 103.5 (the 886 fibo identified on weekly and the fibo extension on the daily -I didn’t draw it here but its a 1.382 extension to the downside move which I believe is an exhaustion.)

If I get really lucky this week, I’ll modify my reward from 106.50 to a higher Target Price.😀

See you guys!

enter daily long.png

  • Faceless Trader

To consistent trading!

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June 13-17 2016 – FX Trading Plan for SPX500

I’m expecting the Philippines and the rest of the world to consolidate into a box.  From a weekly perspective – SPX 500 stopped at 2120.7 intraday high last week and fell down.  This week it also followed through the downturn and went as low as 2063.6.

In the short term, you’re better off siding with the bears this week.

In what can be assumed as a large trading box pattern with a range resistance at the 2110 above zones, you can largely assume many traders are on a risk-off mode in equities.

I’m betting we’ll retest the May 15 2016 low point of 2025 this month or on July so take some profits off your stocks.

 

spx w.png

SPX is a box.  We are at the top end of the range and I believe we’re seeing a distribution at this area.  Best to be safe than sorry.  We use rallies as selling opportunities.

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Keep selling SPX.  Don’t hold back.  Use rallies to keep on selling S&P 500.  You’ve got tons of reward at 2030.  Just place a stoploss at 2110

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Looking further at the hourly chart shows us plenty of breakdowns to confirm our bearish views.  Just keep selling and selling SPX.  Don’t hold back.

spx seller.png

Here’s to hoping we get our sell limit orders done.  None of our stoplosses hit and mostly rewards for the week.

 

Have a good trading time.

 

  • Faceless Trader
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June 13-17,2016 – FX Trading Plan for Oil

Just like all traders, when I trade with a plan, I’m less emotional and I end up winning.  So I told myself since my logic in analyzing charts work well on a historical backtest, I just simply need to lessen my “rodeo ways” of trading when I see a candlestick pattern in a 15 minute chart, and simply stick to my carefully analyzed charts – just like how the USDCAD trades last week went.

You can check my pre-meditated trades on USDCAD last week and it’s essentially easier to trade when you meditate and have already planned your trade.  Next thing I just need to learn is to hold on to my trades as long as I can via better use of trail stops.

usdcad trade 2usdcad trade june

*****

My trade analyses this week will focus on US Oil.

We first look at the weekly structure:

weekly.png

On a weekly note, We can see that Oil has rallied from a low of 26 this year to a recent high of 51.63.  Essentially a 100% upmove in a span of 6 months.

Note that oil weekly had a breakdown of an important support line of 76.96= This is a multi year support in 2010, 2012, 2014 that was broken down and will now be a multidecade resistance.  For any oil bulls out there – I will not dare think that 26 can rally to 76 just without a fight.

Superb for the bulls to rally to the midpoint.  However, it’s a wonderful place for a trader and a position trader to sell into.  I actually sold oil last week at 51 but since I wasn’t trading with a plan, I covered with a 50 cent gain.  I’ll try to reenter this week with more oil shorts.  The reason is simply risk reward.  Here’s a daily chart.

You can see that Oil bears dominated the entire week.  5/5 days were bearish candles.  there’s a temporary doji at the 0.236 zone of 47.95 but I’m betting this will get smashed this week and still drop all the way down to midpoint range of 44.35-43.15

oil bear

I am super bearish on oil such that any rallies within this week 49.16-49.52 ; I will gladly take it and keep selling this commodity.  Risk of stoploss at 50.25/50.61 but reward is 44.35 or a 5 dollar gain versus only 50cent or 1 dollar loss shows me this really passes my risk reward position trade.

bear oil

 

Basically keep on selling oil all day long.  Sell oil. Sell oil.  Sell oil as high as you can.  I hope my sell order limits get done within the week🙂

basically keep.png

Wednesday Event for Oil – 830pm we have CAD Manufacturing sales

 

  • Faceless Trader
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June 8, 2016 – Citihub is Expanding. Do you want to Invest in a Citihub?

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This is Citihub.

http://www.citihub.com.ph/

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The most updated rates now as of June 2016 is 1700 for Fan rooms and 2500 for Aircon Rooms for a month.  This means for less than P60/day, we cover everything from bed space, to free wifi, to their water and electricity.  Meanwhile the aircon rooms cost P80/day.

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If you own land in the metro that’s 1,000 sqm at least and you’re willing to lease it to us to create half way houses ala Citihub, please message us through our email addresses and we will get back to you ASAP. Let’s schedule a meeting and negotiate as we have funds ready to deploy and are only looking for the right locations to place them. We prefer the sickpoint areas of Metro Manila.  The more congested, the more busy, the more the need for Citihub to be there to help our migrant workers have a place to stay that’s affordable during the week instead of the grueling commuting process which also is a lot of money to them in proportion to their wages.

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Watch some videos about Citihub below:

 

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We are looking for :

1.) Interns – Preferably Marketing background

2.) Landowners – Preferably within Metro Manila – We’d like to propose leasing or joint venture partnerships

3.) Tenants:

a.) We’ve currently secured sites in Sta. Ana Makati (170 bed space addition) – Estimated Opening Dates January – March 2017

b.) and are planning to expand in a site near Sm Sucat Paranaque (350 bed space addition)

If you’d like a Citihub near your place, please check out our facebook page where we’ll make polls and share insights on how to grow and live with Citihub.

 

– Faceless Trader is a happy cofounder of Citihub.  It is a for-profit social enterprise that can generate predictable returns with minimal risks while helping and allowing many Filipino migrant workers an affordable and dignified housing for a small portion of their funds.  Please help us expand by giving us potential locations to invest and grow a Citihub.  It is our vision to have a Citihub in major metropolis areas to help people go back home only on weekends (lessen traffic, better life, higher savings too)

 

Contact details for those interested:

Email us

Panya Boonsirithum <panya_boonsirithum@yahoo.com>,
Kenneth Stern <kstern11@gmail.com>, Nikki Yu <yu.nikki@gmail.com>
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June 6-10 2016 – FX Trading Plan for USDCAD

USDCAD

Daily Downtrend Bias

Daily (From swing high of 1.4695 to swing low of 1.2464) = 38.2 Resistance = 1.3306USDCADDaily

Shorter horizon:

USDCAD (1.33-1.2460 swing high swing low distance) – 886 Resistance at 1.3195

USDCADDaily886

In summary:

R2: 38.2 Resistance = 1.3306

R1:  .886 Resistance = 1.3195

Given bearish engulfing candles – trade idea is to continue shorting USDCAD given wedge type nature.

Use recent 764 resistance high of 1.31 as your stoploss and respect that as a resistance

H4 Entrypoints = Post sell limit orders

USDCADH4.png

Sell Limit at 0.618-0.50 Retracement Area or 1.3008-1.3034

Sell Stop Adds on breakdown of 1.2900

Stoploss at 1.3100

Target Profit Zone = 1.2773 (50% or half of the distance from the 1.2445-1.31 (bearish engulfing candle after the NFP report)

Duration – Entire Week.  Employ Trail stop when in favor.

USDCADH4

News Catalysts this week:

Tuesday 12:30am – FED Yellen Speaks

Wednesday: 10:30pm Crude oil inventories

Thursday: CAD 11:15pm – Governor Poloz speaks

Friday:CAD 8:30pm – Unemployment Rate, Employment changes

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April 19, 2016 – Have We Finally Topped Out?

A few market observations to note:

nothing good.png

Since March 21, 2016 – we haven’t had a really strong direction except a consolidation.  After hitting 7412, we drifted sideways.  While there was a move towards another peak on April 14, 2016 – it failed and we fell 200 points since then.

 

Meanwhile since March 21, 2016 – April 19, 2016

We evaluate price performance of PSEI stocks since then:

In this “month-sary” we can see where the best price action came from:

$CA, $NOW,$IMP – more than 100% gains in a month

$BRN,$VITA,$CPM,$PF,$ISM,$ALCO,$FNI all above 30% gains versus the highs made when index hit 7400

Collectively, the only positive movement defying the index sideways action were third liners.  Save for a few second liners such as $X,$COSCO,$LPZ,$RRHI – most issues never went above 10% this entire month.

Also, the most sold down in the market have been gaming with $BLOOM and $MCP dropping 20% so far, not far from this list is $PLC which has a 9% drop.  We notice that amongst index names, $DMC is the worst dropping 9%.  $ION which has lost its love also down 13% since the last month.  Gold stocks oversold with $LCB,$LC, dropping 15% and $PX also down 10%.  $AT also down 8%.  We also note that $PXP fell 17% in this time span.

So in one snapshot, we can easily see the market was dominated by a few third liners and went selling spree on gaming, mining and previous love affair $ION.

$CAL,$ARA – are a few of the third liners that have not joined the highfliers in its third liner space.

april monthsary

*****

How do we spell this phenomenon?  With S&P 500 going higher and now printing 2100, the Philippines has not followed the new highs being printed in S&P500 suggesting it’s weaker than the US markets.  In the $USDPHP chart as well, we note that the dollar has been strengthening with a rising RSI (10 day) despite the sideways movement of the USDPHP.  Even if we simply make a support resistance line, we can see that there are limited gains for the Philippine peso given the strong appreciation at the 45.85 level (a technical target from it’s previous 47.85 vulnerable level when panic first started)

Assuming mean reversion, we then have to assume USDPHP will move back near its possible 46.85 median in the next 4 months suggesting a higher risk for equities to fall with low participation in index issues on any advance.

spx what

incoming

Perhaps what would concern most investors is that foreign flows have started selling.

The advance decline shows us a picture where there are more decliners amongst issues and only a FEW handful of issues going up.  As the market condenses into just a few issues going up, we can then observe that we have a thinning market and are ripe for correction.

advance decline

Compare the number of decliners in each day – it is rising.  The one thing to note is that we don’t have foreign buying.  In fact, as of April 19 2016 – we have a net foreign selling of Php 706,752,162.

******

What’s more concerning? 2015 Annual Reports have shown unexciting earnings reports.

Here’s how headline news for most earnings look like:

1.) Gaming Sector – Billions of Pesos of Losses

(It’s no wonder they’re not being picked up by the market, as they have failed to show anything but losses.)

a.) Melco Crown Philippines (MCP), the local unit of Macau-based Melco Crown Entertainment Ltd., widened its net loss from P6.3 billion in 2014 to P9.1 billion last year, dragged by a net loss of P3.1 billion in the fourth quarter.

http://www.philstar.com:8080/business/2016/04/18/1573910/melco-widens-net-loss-p9.1b-2015

b.)  Bloomberry -P3.38B Loss in 2015

Bloomberry Resorts Corporation, owner and operator of the Solaire Resort & Casino and Jeju Sun Hotel & Casino, reported an audited consolidated net loss of P3.38 billion in 2015 from a net profit of P4.07 billion in 2014.

In a disclosure to the Philippine Stock Exchange (PSE), Bloomberry said this is inclusive of the P998 million loss from its Korean operations.

The main drivers of last year’s loss were the large increases in depreciation and amortization from Sky Tower as well as higher interest expenses from additional loan drawdowns made during the year.
Read more at http://www.mb.com.ph/bloomberry-reports-p3-38b-loss-in-2015/#uAI3qrBMr5gX4jrC.99

c.)  Resorts World  (profitable but down 26% yoy )

LISTED Travellers International Hotel Group Inc., the operator of Resorts World Manila (RWM), said its net income dropped last year due to foreign exchange losses incurred during the period.

In a disclosure to the Philippine Stock Exchange (PSE) on Thursday, the partly Andrew Tan-owned hotel and gambling unit said net profit declined by 26 percent last year to P4.01 billion from the P5.44 billion realized in 2014.

“The company focused on building a base in 2015, particularly in the mass and premium mass segments. Operating costs were controlled as the company remained profitable even as revenues declined,” Travellers said in its statement.

Resorts World 2015 profit down 26% on forex losses

2.) Telco Sector  – A tale of two different companies 

$TEL slides the most in its past 17 year history after showing a very bleak outlook for its next 3 years as it tries to shift and transform in the digital age.

http://business.inquirer.net/207778/psei-slides-on-gloomy-pldt-outlook

http://business.inquirer.net/207901/biz-buzz-the-cost-of-candor-p102b

$GLO meanwhile has stepped up all its efforts in ever expanding their capacity networks and is seen to hold more market share growth as years pass by.  No wonder it has been able to sustain its 34% runup from its lows (1600-2150).  It was a matter of faster data needs and Globe at least has delivered on this front.

http://thestandard.com.ph/business/202522/globe-investing-at-least-750m.html

http://thestandard.com.ph/business/198729/globe-s-profit-jumps-to-p16-5b.html

Excluding Bayan’s results, Globe’s net income and core net income jumped 22 percent and 5 percent, respectively from 2014, the company said.

Globe said it recorded consolidated service revenues of P113.7 billion last year, or 15 percent higher than the previous record of P99 billion in 2014.

“We made history again in 2015 as Globe delivered a banner year, closing 2015 with record revenues, Ebitda [earnings before income, tax, depreciation and amortization] and net income. We have proven year after year our strong commitment to create and deliver value for our customers and shareholders. Our latest achievements continue to motivate us to be more efficient, focused and ready to take on new challenges in the years ahead,” said Globe president and chief executive Ernest Cu.

“As we foresee an increasingly challenging competitive landscape moving forward, we will continue to strengthen our leadership in the digital space, gearing all our efforts toward uplifting the state of Internet services in the country and fortifying the Globe brand as a whole to be the customer’s first choice for all their data needs,” Cu said

3.) Consumer Sector?

a.) $URC – strong

EARNINGS of Universal Robina Corp. (URC) increased by nearly half in the first quarter of its 2016 fiscal year, on the strength of its branded foods segment and foreign exchange gains.

http://www.bworldonline.com/content.php?section=Corporate&title=urc-earnings-grow-47%-to-p4.79-billion&id=122987

b.) $JFC – in line

Jollibee 2015 earnings dip 10% on store openings, higher costs

The homegrown fast-food giant pocketed P4.81 billion last year, down by a tenth from P5.36 billion in 2014, JFC said in a disclosure to the stock exchange yesterday. In the fourth quarter alone, earnings were halved to P948 million from P1.72 billion.

Weighing on bottomline was P1 billion in short-term costs associated with information technology upgrade, increase in network development organization, the acquisition of American burger chain Smashburger and added supply chain and logistics costs — necessary investments to boost the company’s growth, JFC Chief Financial Officer (CFO) Ysmael V. Baysa said.

Without these extraordinary costs, operating income would have grown by 20.9% in the fourth quarter and 4.8% for the full year, while net income attributable to equity holders of the parent company would have increased by 8.2% in the October to December period and 7.8% for the entire 2015.

http://www.bworldonline.com/content.php?section=Corporate&title=jollibee-2015-earnings-dip-10%on-store-openings-higher-costs&id=122830

c.) $MAXS – Back in the Black

“The results validate a complete turnaround of our business. From a transformative period in 2014, we have successfully transitioned to the growth phase. We are confident with our strategies to sustain this trajectory in the coming years,” MGI President and CEO Robert F. Trota was quoted in the statement as saying.

MGI said restaurant sales climbed 6% to P8.59 billion in 2015, driven by the opening of 85 company-owned and franchised outlets across its brands, Max’s Restaurant, Pancake House, Yellow Cab Pizza and Krispy Kreme. MGI had a network of 588 stores, including 35 overseas, as of end-2015.

http://www.bworldonline.com/content.php?section=Corporate&title=maxs-group-back-in-the-black-in-2015&id=124580

d.) $DNL – in line –

D&L Industries’ recurring net income reached P2.29 billion, or earnings per share of P0.32, in the full year 2015. This is 12% higher than the same period last year. Earnings before interest and taxes were higher by 13% year-on- year at P2.90 billion. Revenues were down 5% from last year.

http://www.dnl.com.ph/index.php/news-events/102-d-l-industries-announces-proforma-full-year-2015-results

e.) $PF – San Miguel Pure Foods Co. Inc. (PF.PH) saw net profit jump 24% on year to 4.8 billion pesos, even as its revenue rose only 4% on year to 107 billion pesos.

Brightest spot in this arena comes largely from the branded value added group which caters to most fastfood chains such as KFC,JFC,Wendy’s and convenience stores such as Family Mart, 7-11 and Lawson amongst others

https://www.morningstar.com/news/dow-jones/staples/TDJNDN_201603172981/san-miguel-2015-net-profit-at-php382-billion-up-26-on-year.html

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great

Retail Sector – Shining Brightly for the Consumer Staples 

a.) $PGOLD,$COSCO – 10% ,12% growth respectively –  P5B and P4.5B in profits.

298 store

EARNINGS of billionaire Lucio L. Co-led Puregold Price Club, Inc. climbed by a tenth on robust consumer spending, as same-store sales growth accelerated to its fastest pace in four years.

At end-2015, Puregold was operating 298 stores nationwide comprising of 255 Puregold stores, 10 S&R Membership Shopping stores, 16 S&R New York Style Pizza stores and 17 stores of NE Bodega and Budgetlane Supermarket that were acquired during the year.

This year, Puregold is eyeing to increase net sales by 12%-15%, driven by the 3% and 4%-5% growth in same-store sales of Puregold and S&R outlets, respectively. This will also be boosted by the opening of 25 new Puregold and two S&R stores as well as the full-year contribution of NE Bodega and Budgetlane Supermarket.

 

http://www.bworldonline.com/content.php?section=Corporate&title=higher-same-store-sales-consumer-spending-lift-puregold-profit-to-p5b&id=126028

http://www.mb.com.ph/cosco-posts-record-r4-5-b-profit-in-2015/

b.) $MRSGI -20% growth

NEWLY listed Metro Retail Stores Group Inc. (MRSGI), the largest retailer in the Visayas region, said its net income in 2015 rose 20 percent from a year earlier to P758.6 million, boosted by its expansion efforts starting last year

Metro Retail 2015 income up 20%

c.) $RRHI – 22% growth – P 4 Bil income

Robinsons Retail Holdings Inc. said Tuesday net income jumped 21.9 percent in 2015 to P4.34 billion from P3.56 billion in 2014, on positive same-store sales growth and contribution from newly opened stores.

Robinsons Retail said in a disclosure to the stock exchange consolidated net sales hit P90.88 billion last year, up 13 percent from P80.40 billion in 2014.

The retail holding firm of the Gokongwei group said it opened 179 new stores in 2015 to end the year with a total of 1,506 stores. The opening of new stores expanded the company’s gross floor area by 9.7 percent year-on-year, it said.

The company said it registered same-store sales growth of 4.1 percent in 2015, higher than the 3-percent consolidated same-store sales growth target for the year.

Robinsons Retail said in the fourth quarter, consolidated net income attributable to equity holders of the parent company grew 12.7 percent to P1.37 billion from P1.22 billion last year.

http://thestandard.com.ph/business/202524/robinsons-profit-jumps-22-.html

d.) $SSI – The lone loser in the group –  strong competition from H&M & Uniqlo hurting them and tighter gross margins ahead

SSI saw its first profit decline in five years in 2015 amid rising competition and the need to match price discounts of rival brands like Hennes & Mauritz AB’s H&M and Fast Retailing Co.’s Uniqlo clothing chain. Net income fell nearly a fifth even as sales hit a record. Last year’s profit margin shrank to 53.5% from 56.1% the previous year, Mr. Huang said.

http://www.bworldonline.com/content.php?section=TopStory&title=luxury-brand-seller-braced-for-rising-competition&id=126165

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4.) Transportation Sector: – Glowing Earnings – due largely to low oil prices

a.) $CEB – http://www.mb.com.ph/cebu-pacific-quadruples-net-income-to-p4-4-billion-in-2015/

Robust passenger and cargo revenues coupled with lower operating expenses boosted Cebu Pacific (CEB)’s net earnings by 414 percent to P4.4 billion last year.

The airline’s passengers now number over 125 million since its inception – “a testament to our commitment in enabling everyone to fly, through our extensive and most affordable flight network.”

In 2015, CEB flew a total of 18.4 million passengers, up 8.9% from the 16.9 million passengers flown in 2014. The record numbers boosted passenger revenues to P42.7 billion, an increase of 6.2% year-on-year.
Read more at http://www.mb.com.ph/cebu-pacific-quadruples-net-income-to-p4-4-billion-in-2015/#uu7gLHLSGQoPSP7h.99
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Notable Small Cap Stocks

1.) $CROWN – crown up

2.) $VITA – profitable again

“The company has significantly increased 2015 sales to P3.445 billion from P2.366 billion in 2014 by intensive marketing, introduction of more food products, improved formulation technology for its feeds products and tolling operational partnerships,” Vitarich said.

The food segment, which involves production and distribution of chicken broilers, saw a 54% increase in sales to P1.22 billion due to increased turnover of poultry volume.

The feeds segment, which involves manufacturing and distribution of animal and aqua feeds and other products, reported a 30% jump in sales to P2.05 billion. Sales from the farm segment rose 23% to P164 million, driven by better supply of day old chick volume.

http://www.bworldonline.com/content.php?section=Corporate&title=vitarich-swings-backto-profit-in-2015&id=125232

*****

Conglomerates, Properties, Banks, Power, Oil and Mining – not included in this report – there were a handful of strong earnings from some of them, with some showing good earnings outlook for the 2017.  – next post for a summary –

*****

I guess  just simply reading headlines would tell you that not all stocks that have risen can sustain their run-up.  If their earnings cannot match their rallies, they’re likely just going to retest their recent lows of January 2016.

Nevertheless, some stocks despite negative earnings in 2015 could have seen their lows as prevailing prices for some commodities as well as oil have been increasing.

Nickel prices have started to stay above $4/lb

Oil prices as we have been watching – are trading between 36-42 this past month.

nickel up.png

Nickel prices worldwide seemed to have bottomed out judging from this chart.  While it can stay sideways for still a long time , at least we see higher lows forming for the commodity.

nickel lakas.pnggold bias.pngGold may be trading sideways but still above all the moving averages and between 1220-1260 in the past month.  Negative yield rates continue to benefit the said precious metal.

Pierre Lassonde writes more about this. http://www.valuewalk.com/2016/04/gold-the-investment-you-never-knew-pierre-lassonde-slides/

*****- Short note – with the recent drop of $LC at 23 cents, it would be useful to note that 20 cents held as a company’s support during a stock rights offering last 2014 and with a pending 19.8 Mil ounces of gold under Far Southeast – best to be seeing the company more as a bet on the FTAA license.  If you’re stuck with it, you’re better off just holding on to it with most alternatives in this market – unappetizing –

Recall the following:

“Gold Fields recognizes the positive results of the ongoing due diligence studies in the Far Southeast project. Our acquisition of the 40-percent stake, pursuant to the terms of the agreement, reflects our commitment to the project, the Philippines and the host community. Gold Fields looks forward to the acquisition of the remaining 20-percent stake upon the issuance of the FTAA,”

Also this one – on why sometimes it makes sense to buy an uneconomic gold company –

https://www.kitco.com/commentaries/2016-01-28/It-s-Time-To-Buy-Uneconomic-Gold-Companies.html

the wrath

Despite the failed Doha talks, Oil has traded in a sideways fashion although below 42.

oil sidewa.png

 

 

  • Faceless Trader

 

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November 14, 2015 – SSI Tanks. Permanent Problem on Inventory Level Build Up? Will we see a 50% downside after a 70% decline?

$SSI 3Q15 Earnings disappoint – a hiccup or a secular bear market to department stores and retailers?  Are we facing a decelerating margin?  Everything’s bad news.  Is nobody shopping anymore? It is undeniable that there are valid bearish concerns for this specialty retailer.

Screen Shot 2015-11-14 at 12.41.22 PM

9M15 seems to be showing us a new norm.  Sales fortunately went up at 17% YoY justifying their expansion of 114 brands.  However, gross margin fell from 56.3% to 53.1% thereby affecting the net margin to fall from 6.7% to 5.9%.  The company needs to manage their operating expenses more efficiently.

Screen Shot 2015-11-14 at 12.41.53 PM

A look at their sales data shows Fast Fashion being the largest contributor of the net sales growth.  Fast fashion refers to the likes of Zara, Stradivarius et al showed a huge increase generating a P4.3B sales versus a P3.6B sales a year ago.   It is a good thing to see that despite the ailing woes of a possible lessening of consumer discretionary items that their Luxury sales segment still rose albeit very little from P2.2B to P2.3B.  The sales number was overall a good picture as every segment rose.  Notable rise comes from Shoes as well P1.7B sales versus P1.4B.

We see a P130Mil loss in the “other income.”  The increase in other charges is attributable primarily to increases in interest expense and the Company’s share in net losses of joint ventures. Interest expense increased to P224 million from P194 million during the year ago period, while the Company’s share in the net losses of the FamilyMart, Wellworth and Landmark joint ventures increased to P164 million compared to P117 million during the same period last year.

While these joint ventures are increasingly net positive to SSI in the long run, investors should wait 3 years before these “other income” charges lessen as economies of scale particularly to the Family Mart convenience stores will need 300-400 stores.  The company currently has 113 convenience stores.

Another key factor that concerns many investors is the ballooning net debt position of $SSI.  Shown above is an increase of P1.6B in its total debt position.  It now has P8.9B debt!  This will further be detrimental to the company if inventory build up keeps worsening forcing the company to aggressively make more discounts.

Merchandise inventory as of September 30, 2015 was at P9.9 billion as compared to P8.0 billion as of December 31, 2014. Increases in inventory are driven by purchases for existing stores and new store openings.

SSI’s inventory rose by 25% year over year as sales only went up 17%, which is often a lethal combination to a retailer’s future profit margins as unsold items will have to be discounted. Weak third quarter sales, and a reduction in full year earnings guidance in part stemming from the company taking unplanned markdowns has forced $SSI shareholders to lessen their bullishness in the company’s margins.

Screen Shot 2015-11-14 at 12.56.04 PM

I think the key lesson to make a bullish case on $SSI will not simply be valuations or P/E ratios for that matter as an oversold stock can continue to be an oversold stock.  What would matter will be a better fundamental earnings report!!!

1.) Strong 4Q15 Sales – we need to see Fast fashion continue to deliver strong sales growth YoY.

2.) Stem the inventory buildup.  If the company can show a faster inventory turnover (meaning faster ability to sell their goods), then the stock can fundamentally go back up and rebound sustainably.

3.) Lower operating expenses and lower the Joint venture interests.  As much as I like Family Mart, I don’t think it is correct to continue expanding and bleeding shareholders on several joint ventures.  Maybe it will be better to pace the business ventures since a P1.1Bil investment in several JVs will not be profitable in the near term.

4.) Lower interest expenses – Php8.9Bil debt is not to laugh at.

Nov 13, 2015 – Stock Price on 3Q15 Earnings = 3.91 (ALL TIME LOWS)

-Faceless Trader

Hopes that the Rustan’s group who’s been able to manage many successful specialty brands over the years can address the concerns and mitigate the worsening margins over time.

References:

Read the 9M15 Quarterly Report found in edge.pse.com.ph

 

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November 8, 2015 -The Best Filipino Owned Company Two Years Straight is … ?

pointwest story

In 2003, nine individuals who later became the co-founders of Pointwest envisioned a Filipino icon in the global Information Technology and Business Process Management (IT-BPM) industry.  They aimed to show the world the caliber of top Filipino IT talent.

Today, Pointwest  Technologies Corporation is a leading 100% Filipino-owned service company with a proven track record in the IT-BPM industry. The company provides non-voice, higher-value services to Fortune 500 companies and a growing number of firms in the Philippines, New Zealand and Australia. Pointwest has continued to be profitable every year since it started operations.

Pointwest is a strategic IT partner for small to large enterprises who need to transform their businesses for the new digital economy. The company helps increase operational efficiency and enables innovation in selected industries such as transportation and logistics, healthcare, banking and finance, retail, gas, energy, media and entertainment, and the public sector. Majority of the company’s top accounts are Fortune 100 US companies, with the top two maintaining more than a decade of growing partnership.

pointwest timeline

visionary

spotlight

visionmission

pointwest airline

Pointwest Labs:

pointwest wonders

arko great

arko 2

Summary of Offering Details:

Offer: 417,000,000 common shares (278M- Primary; 139M -Secondary)

Offer Price: Up to ₱4.35 per Share

Joint Issue Managers, Joint Lead Underwriters, and Joint Bookrunners:  SB Capital Investment Corporation and Maybank ATR Kim Eng Capital Partners

Outstanding: 1,653,000,020 (approx 25% of the company will be float)

Company Net Proceeds: approximately ₱[1,098.89] million

Secondary Shares (Proceeds on Owners’ Pockets): approximately ₱[794.46] million, assuming full exercise of the Over-allotment option

(FT Comment: Quite a hefty block of secondary shares!) 

[83,424,000] Firm Shares are being offered to the PSE Trading Participants with [632,000] Firm Shares allocated to each of the 132 active PSE Trading Participants. [41,700,000] Firm Shares are being offered to local small investors (the “LSIs”) under the Local Small Investors Program.  Remaining [291,876,000] Firm Shares (or approximately 70% of the total Offer Shares) shall be distributed by the underwriters to institutional buyers and to the general public.

Numbers:

In the last five years, the Company maintained a CAGR of 19.41% in net revenues and 11.91% in EBITDA. For the three years ended December 31, 2014, 2013 and 2012, and the six-month period ended June 30, 2015, the Company’s revenues amounted to US$31.3 million, US$28.1 million, US$25 million and US$17.9 million, respectively, while the net income ratio range from 15% to 19%. These figures were achieved through organic growth while maintaining a zero debt ratio

The Company helps small to large enterprises meet their business goals and increase operational efficiencies. From three clients by the end of 2003, the Company has served a total of 71 unique small to large corporate accounts, of which 37 are currently active. Majority of the Company’s top accounts are with Fortune 500 U.S. companies, with the top two clients maintaining more than a decade of growing partnership with the Company. Among the Company’s major clients in the U.S. are Delta Airlines and JB Hunt Transport, while its roster of clients in the Philippines include Bank of the Philippine Islands, Bancnet, Globe-BPI BanKO, Social Security System and Department of Environment and Natural Resources.

The Company offers a wide variety of IT-BPM enterprise services to its clients namely software application development, software application maintenance and production support, independent software testing and business process management services. The Company considers itself as an emerging player in offering digital products and services in the areas of mobility, cloud and analytics. These services provide value by using technology systems to optimize the operational efficiency of the client’s business processes and through technology innovation contributes to the revenue goals of the clients.

The Company has been the partner of Delta Airlines since 2003. Its partnership with Delta Airlines as the latter’s niche provider of IT services has supported the airline’s business by improving its operational efficiency. According to Delta Airlines, its self service kiosks reduced the average wait of passengers by as much as 45% in 2014. The technology innovations introduced by the Company in luggage handling management systems also helped Delta Airlines transport 121 million bags in 2012.

The Company also helped BPI-Globe BanKO (“BanKO”) since the latter’s inception in 2011. BanKO introduced a mobile banking business model to revolutionize the banking industry and achieve financial inclusion by offering the first mobile phone-based savings bank that provides loans, bills payment, financing, and other banking solutions for the unbanked sector in the Philippines. The Company uses emerging technologies to help BanKO provide access to micro financial services to 68% of the households in the Philippines who remain unbanked and underbanked. BanKO has now more than one million account holders by building and maintaining their mobile banking technology platform that interfaces with BanKO’s strategic partners and vendors. The Company believes that the world is going digital and that digital technologies will increase global economic valueadded by about US$1.3 trillion by 2020. Digital economy means catering to the next generation of market needs driven by digital consumers, emerging economies and the digital way of doing business. Game-changing technologies such as SMAC are making digital transformation possible. The Company has made investments to position itself as an emerging player in helping majority of its clients in their journey into digital transformation by making their business and services easily available through different channels and customer touch points. The Company has established Centers of Excellence (“COEs”) in mobile, cloud and analytics as the center of research and development effort to design new digital services and development programs to equip the Company’s workforce with the necessary skills. In 2014, the Company created its own software product incubation space called “Pointwest Labs” to create highly engaging and commercially viable digital products. Pointwest Labs has successfully developed several products in various stages of commercial launch such as ARKO, which is a flood hazard and extreme weather monitoring mobile application that culls data from the Philippine Government’s Project for Nationwide Operational Assessment of Hazards (“Project NOAH”). ARKO has a free version for the general public who needs timely flood level alerts, and an enterprise edition for companies such as utility, energy and insurance companies that require hazard mapping and decision support systems. Aside from ARKO, the Company has also launched initial releases of four other digital products namely (i) Easimed, a suite of mobile applications and applications for the healthcare industry, (ii) Autoparq, a mobile application for searching parking spaces, (iii) EESY, a mobile application for engaging participants during events and conferences, and (iv) Centerpoint, a web-based service management application with mobile component for service request fulfillment services. The Company believes that it has a globally competitive talent pool in the Philippine IT-BPM industry, as attested by the size of enterprises that they service. By introducing an employee competency-based human capital management framework, the Company has grown its resource group of nine in 2003 to 1,186 as of June 30, 2015. The Company’s talent pool consists of skilled and experienced IT professionals which include project and technical managers, software application developers, business analysts, technical architects, usability designers, test analysts, and BPM specialists composed of registered pharmacists, registered nurses and data analysts for its healthcare client, all with broad experience in IT-BPM industry. The Company is known for its stringent hiring process and enviable learning and development programs that offers IT-BPM careers to its multi-disciplinary workforce. As a technology service company in the IT-BPM industry where there is a shortage of highly skilled professionals, the Company believes that strategic approach is key to maintaining a competent talent pool. The Company has institutionalized a feeder development program called “Bootcamp for Freshers” to bring in fresh graduates from top universities and colleges in the country and to produce software engineers that meet global standards in skills. A total of 938 graduates from different universities have gone through this feeder development program which started in 2004. The Company invested close to ₱200 million to make said program successful. This feeder program and other retention programs has helped the Company keep the average attrition rates at manageable levels in the last five years for both its IT and BPM talent pools.

future

References:

PointWest prospectus

http://d38p5w9uri24dm.cloudfront.net/PointwestTechnologiesCorp_Prospectus_20150930.pdf

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Aug 18, 2015 – False Sense of Control

The sell-all, buy-all mentality that most short term traders have ingrained with them is not a good strategy in my opinion.  Unlike other markets where you can actually buy your entire portfolio within a few ticks and no slippages, you cannot do that with the Philippine market.  I’m talking from experience.

A person must realize that while there are plenty of retail traders and investors trading in chaos and panic during a market sell-off, the larger whales who have the most to lose are actually just watching in the sidelines or waiting to pounce if and when the time is ripe.  How do I know this?  Also from experience.  I know this might just seem like an arrogant speech but everybody believes they can time the market.  The truth is that everybody actually only thinks they can.  When the going gets tough, it is only people who have too few shares who can actually get out or get in because volume and price in a thinly traded Philippine equity market is not the same.

I’ll give you a concrete example.

When the markets are rising, liquidity is typically very strong and abundant with volume hitting hundreds of millions giving the illusion that with high value traded, people can exit when they need to.  This is pure gibberish and illusionary.  Just to give you a snapshot, at least a P1B value traded hands for $SBS during the second day of its IPO at prices almost 100% of the IPO price.  It traded even as high as P6.18 for a brief moment with over 75M shares trading hands at levels of P5.60 or above.  Now that the stock is closing at P4.88, the exits are too little.  How do you think could someone who wants to exit 75M shares now get out when volume is trading at only 14M shares or P80M?  That means that despite that price decline, we have almost 100M shares that haven’t left the exits.  That’s an impending doom should they all suddenly wish to exit at any price level.  I’m just explaining how a herd mentality of strong price action can also quickly come crashing down (though this really depends on whether the stock can indeed be controlled with its little float but with 100m shares caught at the high end, it’s little thinking to see that the probabilities are going to be a volatile and turbulent scenario for the people with drawdowns and not yet exiting.)

Now consider this in a different scale as well, just recently, a lot of people couldn’t believe that a singular news snippet could trigger a 68% rise in a singular month (although it was simply speculation as the fact wasn’t real with most casinos falling hard with their earnings all disappointing.)  The point too is that when it fell at P4.88, the volume trading there was hardly climactic.  In fact, most volume of shares traded at the top end of the range.  The first 10% move was quickly snapped and eaten up by the early buyers.  With everyone optimistic, share prices aren’t only going to be sold with volume on the lower end such that it precipitates a fast recovery.  Think about the USDPHP.  The scramble for dollars at higher prices is a snapback effect.  Breakouts happen usually at higher levels as well as breakdowns.  The person claiming to have bought at the low and selling at the top is pure gibberish (especially when we’re talking about large sums of money which is often what professional traders handle – at least P10M.)

Do you believe that any professional manager will strictly trade based on technicals?  Through experience?  My answer there is no and this might come either as arrogant or what but I’m going to tell you that from experience, theories will not apply in the Philippine market.

This is a lesson I’ve learned during year 2011.  $AGI fell without a company specific reason but because it had been distributed and affected by the 2011 PIIGS dilemma, from 13 it traded to 8.  Many people have seen the distribution and sold 13s and 12s only to buy back at 9-10 but in one day, I distinctly remember that day when $AGI sank to 8.  It was also this day when $PSEI went to 3800.  There was no such thing as support in the index so people were just selling with market prices and no perceived support levels.  That any stock can fall 10% within one day would really just about happen to every stock trading in the market.  I remember all technicians sighing a relief of evading that one day dilemma but while they all evaded the drop, neither were they able to participate in a huge snapback rally.  After a breakdown of all signs of support, how would you expect that $PSEI goes from 3800 to 6000 without any correction?

By the way, $AGI went from 8 to 13 in just a month.  Also there was a slight correction then proceeded to 22, consolidating again and then rising before the distribution again.  Lemme show you the entire picture.

agi snapbacks

relentless boom

*****

Also from experience, when I hear people calling me and telling me to sell all without any care for prices, I distinctly remember one other day when $PSEI also hit 5,562.  During that day, when $MEG broke 3, it fell to 2.88 , $AC fell 10% to 388 and most people were sighing a relief but I somehow knew that while people weren’t thinking about prices and were just happy to unload without thinking, I could also sense that I’ve seen that market reaction repeated a lot of times and the people doing so are acting in a panic rush to the exits.

By no means is this attitude wrong, but from what I know, when everyone thinks that the only direction for the market to go is decidedly down, something always isn’t going to be.  That’s just how the market goes, whether its an overcrowded fundamental trade or an overcrowded hyped trade or even an overcrowded short position in the market.

They say in life, if everyone has already bought and is overly bullish, then no one is left to buy higher hence market will drop.  In this case, when everyone’s so dead sure about $PSEI falling into a cliff, I know that “everyone” is time and time again, not going to be true because for one, when the entire baby and the bathwater and the kitchen sink with the knives are all thrown into bits as if the carrots, apples, oranges and bananas are just the same, we have asymmetric opportunities.

Some people will realign their portfolios into which companies didn’t deserve the selloff and will bounce back

Some people will switch their losers which will never bounce back in a million years.  Let’s face it.  Some are doggone forever.  They’re cyclical and will never be back in a million lifetimes.

Some people will choose to do nothing and just treat time as an ally (assuming of course they chose business models that could last any downturn.)

This by no means discounts that technicals, flows are meaningless.  On Contraire, they’re important.  But with fresh breakdowns come fast moves.  Check history as a guide and you’ll see volatility and choppiness.  It never is a one way street.

The downtrend may be intact with resistances everywhere, but justifying that all companies (good or bad) are to be thrown away is a debatable game especially when astute value investors like Guy Spiers will tell you time and again that a rational mind armed with cash and position size will make some portfolios battle out a decidedly harsh market.

So will the Philippines avert an EM contagion?  Of course not.  Wouldn’t cash be the best hiding place?  Well, that’s true but that’s also if you can completely time every whistle and drizzle that the market will give every day.

Usually, I notice people will tend to over-trade and end up cutting, buying back, cutting, buying back resulting into the false sense of “control” and an entirely commission-draining whipsawing exercise.

Well that’s me.

People have a false sense of control.

Tomorrow or the next week, the market can gyrate 300 to 500 points in the downside or the upside.  What you choose to do is to be not certain of either event.

*****

– Faceless Trader

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July 24, 2015 – Extended Gaming – Bookaka Market Wrap Up

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July 23, 2015 – Winning Streak – Bookaka Market Wrap Up

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July 21, 2015 – High Probabilities Paid Off – Bookaka Market Wrap Up

– Faceless Trader

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July 20, 2015 – Bookaka Market Wrap up

– Faceless Trader

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July 15, 2015 – Market Recap (Philippines) via Bookaka

– Faceless Trader

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July 15, 2015 – Philippine Market Wrap via Bookaka

Please continue sharing to your friends to use Bookaka , your OPEN BOOK source for financial content in the Philippines.

http://www.bookaka.com

-Faceless Trader

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July 14, 2015 – Philippine Market Wrap Using TradeApp, Investagrams and Bookaka

1.) TradeApp

2.) Market Wrap using Bookaka

3.) Market Wrap using Investagrams

4.) Using Facebook Groups for Your Trading Advantage (PSMDCF, FTGZ)

Keep sharing and using.  Thanks

– Faceless Trader

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July 14, 2015 – How to Screen Stocks using a Powerful Free Trading App called “TRADEAPP”

Watch and enjoy😀

How to Screen Stocks Using TradeApp (Done 10:57am today July 14,2015)

I’m using Airserver’s free 7 day trial to mirror my iPhone. Help me extend my trial by downloading the app too.

Share this special link on your blog, website, Twitter or Facebook. Each time someone downloads and installs AirServer through this link, your trial extends by 7 days! http://www.airserver.com/Download/Referrer/6164649 – – See more at: http://www.bookaka.com/#sthash.CL0o0Xo4.dpuf

Please support my trusted Trading products too

1.) Bookaka.com (visit daily and keep using the site for your Philippine trading needs)

2.) Faceless Trader Ground Zero (a facebook community group for traders and investors and anything in between)

Thanks

– Faceless Trader

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July 11, 2015 – Faceless Trader Blog and Book Project (Video Version)

Comments are appreciated.  Thanks.

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July 11,2015 – How to Use Bookaka as a Trading Tool (Video Version)

Yey.  This is my first screencast!😀 Enjoy!

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July 11,2015 – 7-11! Whats a correction?

watch the video🙂

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2015 – The Journey It Entailed – Compendium (DRAFTS !!!)

Faceless Trader · Tales of how a faceless trader sought to become an elite trader, and the journey it entailed

*****

Preface

I’m not a fund manager like Peter Lynch of Fidelity Fund management who people would want to read about because people would want to know how he was able to generate his astounding returns and what people could learn from him.  Neither am I someone like Barton Biggs who has tons of experience and knows a lot about the hedge fund industry that it is apt to listen to him in whatever he speaks about concerning finance.  Since I’m not an authority in the subject, you might now ask yourself why I’m writing this book?   Unlike other personal finance books which aims to teach people what it takes for them to earn financial freedom or trading books which helps people on the methods of profitable systems, this is neither of them.

This is a narrative of my life in trying to pursue a career in trading and serves more like a diary for anyone who wants to find out if it’s something worth going into.  I’ll save you eight or ten years of your life and maybe you’ll realize something, that a career in trading may not be the most edifying place to be in.  However, if you do choose to pursue this track, I’ll let you see the tradeoffs and opportunities that you’ll encounter for choosing this path.  Some say friends don’t let friends into finance because it’s the wrong path to be in.  Perhaps, maybe more than once, I’ve deliberated and second guessed myself whether this career is a place I wanted to be in.  Perhaps, I was far too deep in this arena to also think of jumping ship.  You know the feeling where it’s too late to cut loss and you’ll just find a place for reversal even if you think it’s a long term downtrend? Dead cat bounces that never really come?  If there’s one thing I can be relied upon, my tale will blur the lines of fiction and non-fiction.  You won’t know which is true and which is false but as Albert Camus once said, fiction is the lie we use through which we tell the truth. 

Let’s begin.

*****  Unlike most people who know me now, I believe only a handful would have remembered who I was prior to dimsumtrader and facelesstrader.  I was this lone voice who started to trade in the markets during July of 2007.   

Most people do not know or cannot picture that this same person I’ll describe in the next few paragraphs is me.

I had lost over half of my capital.  I owed at some point in my life a million dollars before I’m 25 and I cannot repay that debt.  I was fired.  I have been called a wild horse who had the equivalent risk appetite of ten men in the room.  In the Van Tharp test, I’m labeled a spontaneous trader akin to Jesse Livermore, but if you truly understood the meaning of that trader psychology test, that would mean that I’m the most prone to suicide as well. Just like Jesse Livermore, I had that tendency to blow things up so my most dangerous weakness is position sizes during conviction trades. He wouldn’t be called Boy Plunger for nothing. Note too that many fund managers and stock market participants have actually undergone thoughts of suicide and some who really committed it. 

Below is a digitized version of a diary I had written during year 2008.  Remember June 27, 2008.

There are many dates that are unforgettable.

January 25, 1998 was an unforgettable date for me.

Another date for the history books is June 27,2008.

What transpired 10 years after. I don’t know if it’s coincidence.

But this day will forever be mired in my memory.

http://www.fromlonevoice.blogspot.com/2008/06/aftermath-of-downfall.html

Aftermath of a Downfall

2 am and a day has passed since my catastrophic destruction.

Up until today, I still don’t know how I can escape from the hole I dug so deep in. Never had I been scared so much in my life that after effects still scare me. I don’t know how to face people, much less face a person I’ve pushed away for my irresponsibility. With kindness, I have returned abuse. I have even blamed the person for being too good to me when I only learn my faults through whips, through harsh methods, through shouting and scolding.

I have not yet grown up.

Its really sad now that I reflect upon my life because trading has only been a reflection of a deep seated problem inside of me. It would have turned out sooner, I suppose, but I would have probably delayed my self-destruct button in just a matter of a few more trades, unless I just get lucky but I’ll still end up in the same conclusion.

I am far more vicious than a monster trapped in a bottle because my monster can go far and disguise itself as just a chameleon that can quickly change gears. I can be a demon and an angel at the same time and that has been such a difficulty that I’ve never recovered from.

I only become a good kid whenever I am scolded, whenever I am scared.

I have never, I suppose, really understood what unconditional love is.

I’ve never grown up with such a thing for the past 20 years.

The people who love me, I even push away through my words and actions.

I have lived in a world where I might be a Christian, I might have loved God, sang praises to God in church, helped children who have not gone to school but when there’s something wrong at me, I never correct them unless I am freaking scared.

And freaking scared is not even perhaps the right word to describe my state right now.

I suppose there are secrets that we have in this life that , sooner or later, will come out and they will be things that we think we can never live as normally as we would have, had they not been left a secret. 

My problem is that when I do a person wrong, I have always gotten away with it mainly because people normally can take just so much “wrongs” in life.

People could not withstand tremendous amounts of wrongs, that’s why, I was able to overcome them. The problems seemed small compared to my abilities. 

However, when kindness meets me, I’ve often done stupid things. I mean it.

The people who had loved me the most are also the people I’ve hurt the most.

I couldn’t live knowing so much hurt and pain that I’ve caused that I only try to do things more.

If I flunked a test, I would have simply studied more. 
Back then, If I had gotten a D in accounting, I just had to study for the next exam. My parents, my family would have known how sad I was with my failure but failing, to them, is something that is common to everyone. Also, in our values system, a test is a test. There will be other tests. As long as one would study harder, the next exam will at least be higher.

Fortunately or unfortunately, I’ve always passed my next series of exams. I have usually learned from one mistake. I have never repeated them quite again. When I reflect upon my life, I don’t think there was any endeavor where I committed the same mistake twice or even thrice. I always had gotten away, learned my lesson, and moved on.

Not in this case, and this time…a lot of people are already mad.

It pains me to know that I don’t think I can ever smile again.

AGAIN.

The last time I told myself “I think I can never smile again.” was when I loved, I suppose I thought I loved, a person so deeply, that I couldn’t understand how it seemed easy to dismiss things as a non-event. 

I think it took me at least 2 years  to recover from whatever experience that was. It influences me up until this day. So now you know why I can be sordid at times. My family most especially would often tell me that I am the most stubborn person in the world and that all I ever cared for was myself. It had always been me, trying to be independent, knowing everything, fixing my own problems. I had to cope up. I had to find myself and solve my needy side. I had to move on. 

Anyway, things today have crept inside the veins of my brain cells. I’ve tried everything I could to escape the heavy feeling in my heart of the nightmare that came alive in my world.   I am like the princess in the Rumpelstiltskin fairy tale..where the king locked me in a room with a pile of straw, who had to turn them all into gold the following day. Or so I had pressured myself to be, which had led me to my ultimate downfall.

rumpel

Because I have no rumpelstiltskin. I have no genie who would give me my happily ever after. I only have myself. And I couldn’t get up to the plate during the pressure.

The problem was…I locked myself in the addiction of pressuring myself to the highest limits.

No one was expecting anything. It was my brain that was trying to find a way out when the more I try to do so, the more I end up losing myself, my sanity, and more and more into the quicksand. I’ve pushed the people who have cared for me. That was the mistake I’ve made.

Watch this video: https://www.youtube.com/watch?v=i3O-kYwM8qY

Had I not felt any pressure to make money, to recoup anything, I figure none of this would have happened. I would not have had the eagerness to think all sorts of theories, all sorts of strategies just to fix the problem.

The difference between trading and other things in life, is that the markets are impersonal. The markets dont care. The markets are simply psychological patterns of supplies and demands. The more pressure we have, the more we will not perform.

I dont know if in basketball or in Math or in studies if the same things apply. I think that sometimes it does not because when I pressured myself to perform in school and I studied hard, i had direct results. The markets are independent of how many hours you diligently worked yourself off.  The only thing that is constant with the market, is that there is always the risk. Trying to figure what the market will do is a sure no-no, whether it be technicals or fundamentals. 

Risk management has always been the key.

Because in the markets, when you humbly approach that your cup is empty, that you know nothing, you would never ever go into a trade without a plan.

Trading with a plan, to me…and following that plan…no matter how simple those words are, and no matter how often repeated they are, are the only reasons why successful traders are alive today. They never knew what the markets were going to do. They just managed the risks. They always predefined how much they were going to lose in any trade.

So what had I learned?

Well I’ve learned a couple of points…

1.) Don’t pressure yourself
2.) Always learn
3.) Empty your cup.

Thats all. really. I can go on and specify the exact trading losses but it all boiled down to the psychological error of trying to pressure myself to earn.

That was the ultimate downfall.

***************

Next Chapter: We Blow Things Up

If there’s one thing you’d be surprised in knowing, I can be very good at blowing things up and losing money.  So if you’re looking for a book that tells you what not to do in order to secure a better financial future, as if you never knew how to smoke your money by yourself, this book with my own experiences can likely help you if you choose to believe the statements written.  As I said, to keep myself sane, I have to blur some lines of fiction and non-fiction.

The trader that I am 8 years ago and the trader that is me today is not far off.  Perhaps, the only difference between the two of them is that time heals or makes one forget one’s mistakes.  That’s a problem.  When we forget our mistakes, we are condemned to repeat them one way or another and I’ve seen my weakness resurface itself in different varieties of the same proposition.   My main waterloo up until this date is how to behave small against the market.  That means respecting the market and being humbled that one couldn’t possibly know more or be better than the market.  One has to respect time, price and more importantly cut losses and learn proper position sizes to grind one’s way out from a hole.  The problem is that most people, who are achievers and brought up in the same manner as I was, tend to be called “people who have little appreciation of capital.”  That in itself is a problem.  I tend to be proud which will lead me to my own demise.  That often leads me to problems and it escalates into larger symptoms when left unchecked.

It would be an exaggeration, however, to say that I’m uniquely special in blowing things up.  Like most real-world traders, I believe I belong to the 90-92% of all traders who aren’t part of the 8-10% elite traders.  What I mean to say is that Philippines needs stories of average traders developing skills to make super traders of themselves in the markets without resorting to manipulating the market.  It’s not fantasies.  I’m talking about real losses, real money and real lives wasting a number of years for the golden glory of elite traders’ status. How many traders have gone this path?  Surely there have been thousands that have failed for every one or two that have succeeded.

I speak for the passionate, transparent group of traders or “market addicts” devoted to sharing our knowledge (how little or how much it may be) about Philippine equity markets. I speak for the multitudes of traders who wish to address fears about getting into the stock market.  I want to dispel myths and misconceptions about traders and trading.  I want to open the Filipino public to a wider plethora of investments available for them.  Why stop at the Philippine stock market?  Why did Filipinos never entertain the HK markets or the US markets?  At the end of the day, I want to develop myself as a competent and successful trader to show that the development of a successful trader can be emulated to the development of other successful professions.  It takes hard work and discipline but I wish to show that it is possible.

Why read this book?

If you care for your financial future, then you are the right market.

You may think you have to be a trader with some experience at the least, in order to understand how this book may be useful to you.  No.  That’s not a requirement.  The reason is simple.  Taking responsibility to your financial freedom is necessary to every living being.  If you want to live a comfortable life, face it.  You need to understand how money works.  You may be a marketing professional working your way up to the corporate ladder or a gym trainer or a runner, a salesman, a graphic designer, an English teacher or a priest, but what we have to talk about will really be useful to you.  In fact, many OFWs who have no idea about the currencies have just woken up five years afterwards realizing that their wages and savings when converted to pesos have dropped by 50% had they simply left their savings of Euros in the bank.

tell to the europeans

Most people think that finance is only for the math geeks or the businessmen or the rich.  That’s a myth.

Most people think that making money via stocks is hard.  That is not a myth.

However, making money with simple strategies in stocks is possible.  Compounding your returns over time with a consistent rate of 15% a year will allow you to double your money in 5 years.  That’s respectable but not spectacular right?

Look at the variety of traders with different time horizons.  Some are happy with 15% a year, other’s aren’t satisfied with 15% a month!  Some make it, some don’t.  I don’t promise to make money for you over the long run.  This book was not made in order to help direct you to buy this, sell that etc.  I’m here to show my story, about how I trade and how I developed the skills that successful traders handling millions have done.  Naturally, I’ll tell you my failures because I have more of it than success.

Read this only because you know that trading is a serious profession.

Read this only because you know that the skills successful traders have can be reciprocated in other areas of life.

Read this only because you care for your future finances.

Read this because your life depends on it.

Managing your finances is a responsibility.

Whether you admit it or not.

************

(Next Chapter)

Who am I ?

one of

I’m just one of the millions of nameless, faceless traders.  The market doesn’t know who I am, nor does it care who I am.  I do not have an apparent or obviously special gift for trading the markets.  In many respects, I’m indistinguishable from other guys.

What I do have is a huge interest in learning as much as possible about the skill of making money consistently through the financial markets.    After years of trading the markets, I have no ego left to boast.  I know how much I’ve failed as a trader, and this a story of a failure who is determined to rise from the ashes.

I have tried several methods.  I’ve tried to spend my time as near the screens as possible, trading every tick from the 1 minute to the 5 minute to the 15 minute of the chart.  I’ve read myriads of books I can get my hands upon, as I deemed my lack of knowledge to be the primary culprit of my initial trading losses.    I speak no lies when I tell you how many nights I’ve lost sleep, nor lost my eating habits thinking about my positions in the markets.  Looking back, perhaps this speaks much to my amateur mistakes, which I’m still paying very dearly until today.

I’m not a market veteran.  I’m not a huge professional money manager.  I do believe I have a story, equally interesting to share, and perhaps more relevant to most people.

Perhaps, it is because it’s authentic, and speaks to 90% of all beginning traders.  I speak as the faceless trader, but perhaps you can also call me the failed trader.

Sometimes, when I think about the years I’ve spent trading the markets, I think about how much time I’ve wasted, and never seemed to have moved at all.  Gone are my dreams, my youth and more importantly huge sums of financial capital.  I begin to give up and cry silently.  It’s embarrassing, but that’s perhaps the thing about the markets.  You’re not the only one who fails.  You think you’re the only one going through it all, but you’re not.  I realized there’s 90% of us who fail at this game.

When things don’t quite work out, we force ourselves into a tough and painful acknowledgment that we may not be in the right career after all.  Tough times force many people into necessary reevaluations that lead in the long term to more fulfilling lives.  Whether I turn out to be a good money manager someday, I do not know.  I do know that while my failures have made me weak inside, they also forced me to think about formidable, actionable measurement plans and goals to make things better.

I swallowed my pride.  I acknowledged my mistakes, and perhaps it’s through this acknowledgment that I’ve increased my trader IQ points one notch, and began to see the light of day, at least gradually.  I’ve started to overcome the game’s mental aspect.  Yes.  I’ve realized that trading is not a game of financial prowess.  Your degrees, designations etc are not going to be a sufficient trading advantage over the rest of the market participants.  It’s all in the mind.  I may sound like a voodoo specialist or some psychological whacko, but I’ve learned that more than studying the charts, or the company’s fundamental positions, the more important thing that trading entails is the aspect of knowing yourself, and complementing that personality to the unique trading system that you’ll eventually use to enable yourself to be a better and consistent trader.  Only by then, can one be considered part of that 10% elite team of super traders, where performance and results are the only keys to financial success and more importantly, self-gratification for achieving a worthy goal for oneself.

How I wish that I can one day write in this book how my success story played out.  For now, the journey is still well in the beginning, despite eight years.  Thank you and I wish for a same fruitful journey with all my fellow travelers in this path.

As Minimalist Trader once wrote, “Trading is a path to build wealth, a road to ruin, unending entertainment when you’re clueless, crushingly boring when done right, enlightening window to the world and a glimpse of humans at their worst.”

Only traders can identify with me.  I’ve seen my evil, and it’s not a beautiful sight.    Cheers and let’s travel together in this path.

Take this empty cup and fill it with some innocence,

The Faceless Trader

*****

Next Chapter:

Question: Who would you turn for investment advice?

  • Someone who lost millions making dumb and reckless moves in the market early on in his career, wiping out most of the clients’ capital?
  • Someone who never lost a significant amount in his life?

Answer: Simple.  You learn more from one’s losses than one’s successes.

Most real-world traders will show their personal track records spanning at least 10 year horizons.  They’ll show how they managed to turn their $10,000 investments into millions.  What I can tell you is not all of them are fakes.  It is real and true that there are risk managers out there who have done that.  Jack Schwager interviewed these market wizards and updated it with his latest book “Hedge Fund Market Wizards”.  The entire series is a must read.  They are incredible stories verified with ledgers and you can go ahead to get your copies in learning from them.  Kathy Lien and Boris Schlossberg both co-wrote how average people managed to make millions and decent sums trading the currency markets.  Michael Covel wrote the legend of the Turtle Traders.  Timothy Sykes wrote his own book.  Nicholas Darvas.  Jesse Livermore.  Warren Buffett.  These are just a few.

The reason I’m still here today is a function of two important people.

One, I’ve a boss, a trading mentor and a friend, who’s been patient enough to guide me throughout my own trading hell and has been willing to stake out not only his own money but his own time, in allowing me to reap trading gains for him in the future.  He, it turns out, is not merely good in making money, but also in empowering people’s potentials and tapping them for God’s glory.  Traders help each other.  Note though that I’ve failed him numerous times. I still believe I’ve failed him.  That’s a tough burden to carry.

Two, I’ve been blessed to work with a man unparalleled for his market success and who’s largely been considered the Godfather if you will of the Philippine markets.  Many billions run through these two men in my trading life but none would ever say that money and success had ever changed them.  They are both highly frugal and practical.  I may not have worked for Warren Buffett or any prominent market wizards in my life but these two men were simply not written in both books but astounding in their own rights.  It’s a pity merely that nobody had ever written trading biographies of both men.  They’ve built the Philippine capital markets themselves and nothing could have explained the success of both men except through their own hard work.  Both men exemplified the love of the game and the respect needed in the markets.  Both men excelled with their own methods.  They were both pillars in the industry.  I could never quite understand how an average person, let alone a woman and not even a man, will defy the market gods and goddesses of luck for my extreme fat tail of being able to have a glimpse working with two men in my first eight years of trading.  I have nothing to offer and most everything to gain.  How I was able to muster the ability to work in what I deem to be the ultimate Goldman Sachs of the Philippines, I still do not know at times.

Both of them have considerably become my second fathers.  They have extended unsurmountable dedication in helping me achieve what I’ve wanted to become and I do not think I’ve really reached an inch of their successes.  They were also brokers like me when they started out.  I never have achieved the kind of successes they’ve had during their lifetime.  This is a tale of how a faceless trader sought to be an elite trader and the journey it entailed.

I am here today because of these two men.  I am here today because I love what I do and it makes me grow as a person.  I wake up thinking that I want to beat the market and make money every day (even if I know that it isn’t possible.) The process of beating the market has become a lifelong commitment.  Not only do I find it stressful and challenging, it also relives in me the dream that by making it, I do not merely have the money in the bank but the satisfaction that I did it through skill and we never forget luck.  Luck plays its role.

Successful trading encompasses not merely how you handle the area of quotes moving on your computer screens but also flows throughout other areas of your life – sports, relationships with family, loved ones and friends.

“We trade in the day, but we invest in our lives.” – Trader Planet

I have learned that while trading is an individual pursuit to find edges in the markets and making the most buck for the portfolio, money is never the end.  Making money is an effect of doing the right things (managing your risk, proper entry and exits, selecting high probability charts, doing your homework, reading etc.) The development of a successful trader starts with discipline and a mindset to win.  It is not a lucky stock that will give the jackpot at the end of the rainbow.  Rather, it is always the consistent singles and not the home runs that will deliver the smooth returns in the long run.

************

Next Chapter:  Why I Chose Trading Full Time As A Career

I can’t remember making any conscious decision.  It was a gradual process.  Trading literally took over my life.

https://dimsumtrader.wordpress.com/why-i-chose-trading-full-time-as-a-career/

HOW I STARTED

“Wall Street seemed very much like the place to be at the time.  The world didn’t need another lawyer.  I hadn’t the ability to become a doctor, and my idea for starting a business making little satchels to hang off the rear ends of dogs to prevent them from crapping on the streets of Manhattan never found funding.  Probably, the real truth of the matter was that I was frightened to miss the express bus on which everyone I knew seemed to have a reserved seat, for fear that there would be no other.

I certainly had no fixed idea of what to do when I graduated from college, and Wall Street paid the most for what I could do, which was nothing.” – Michael Lewis, Liar’s Poker

Why I Chose Trading Full Time As A Career

Trend follower and Bestsellers

I’m not sure if I represent most people or only a minority of fresh graduates.  Here’s the truth, despite countless years of formal education, I never really had that epiphany moment when I made a concrete decision as to what I wanted to do in my life. Most of my choices were made primarily by following the conventional wisdom.  I just followed the “herd”, the “experts”, my predecessors and friends.  In short, I was just a trend follower.
For example, the decision to take M or even entering in A was made without even blinking my eyes (Thanks Malcolm Gladwell for pointing this out ).  I simply knew I could never draw or sing for a living.  I couldn’t see myself programming computer softwares because I didn’t want to be an owl nor did I want to learn another language.  I was not beautiful enough for people to just watch me on screen, nor did I have any skill when it comes to dramatic arts.  I just probably know how to rant, cry and memorize lines like a robot.  Who’d pay to watch me do dumb things?  Maybe I could muster a handful of 10 to view me on Youtube?  Still won’t be enough even for my food.  I couldn’t play a sport so well for people to watch me.  I’m no Kobe.  I’m no coach like Phil.  My friends told me I could calculate numbers pretty fast, like some machine so they suggested I take something with lots of Math.  Really weird, if you can multiply 189 and 19 and come up with an answer in less than 1 minute, you can do math?  In hindsight, I guess most people just didn’t know what the hell to do , so any advice was still advice, whether stupid or not.

So here goes, “Indecisive Me“ simply checked where my friends were going, what they ticked as their course option and I took the same path.  I was not thinking whether I would like the curriculum or the professors.  I was in the illusion or presumption that since everyone I deemed “wise” chose this course to be their first choice, and then maybe that’s one of the best places to be.  I was just like a child entering a restaurant not really knowing what to order, so I just chose what everyone ordered.  What’s your best seller? Mildly spicy is fine.  Something sweet and bitter can be added into the mix.

My pattern of making decisions was mostly simple.  I don’t really analyze my choices (Even if my friends would say that I’m one of the most serious analytical people they’ve ever met).    Am I left-brain or right brain?  Words or Numbers?  Black or White?  Coffee or Tea?  English or Math?  Jock or Nerd?

Even if my college boasted of philosophy and theology to help directionless students like me to be more aware of ourselves to aid us in finding our careers, I just remember myself blurting out common passages professors wanted to hear.  I want to be the best I can be.  I want to find my limitless possibilities.  I want to be a “man for others”.  I want to be a social entrepreneur.  Yada yada yada.  Lots of big words, but ambiguous and never really anything much except an idea from the clouds.  Of course I’d insert some concrete lies, but I never really followed through with pretty much most of them.  If you ask me what I said I’d do after college then, and what I really did, they’d probably be like the North and South Poles.  A good friend of mine simply summarized me as someone unpredictable.  He couldn’t tell if I would eventually be an actuarial scientist, a doctor, an entrepreneur or a trader.  My strength and probably my weakness as well was that I was fine with everything.  I was like a “jack of all trades”.  I would never excel at something, but I would be above average with most things.    I guess being unpredictable is really a euphemism to say that I am going nowhere.  I have no plans where exactly I want to be or who I wanted to become. I just knew I didn’t want to be stuck with my family’s business.  I wanted to make it on my own.  I also wanted to be rich.  Who wouldn’t?  I told you I am just your normal kid.

Internships and Job Fairs

You can just imagine me during internships and job fairs.   I was just aloof with the whole world.  The whole world was changing right in front of me and you could see all my peers frantically preparing, submitting all their neat application forms in scented envelopes as if they had conceived this ever since they set foot in college.  If for one second, you could treat the job market as much as the financial markets, I simply found myself chasing after the same jobs most people wanted.  Since I knew pretty next to nothing about which jobs to take, I just followed everyone.  Just as stocks (read as job) could be worth nothing much than people perceive, probably overvalued the job’s good qualities, none of us really knew what we were doing (unless we did NPV analyses, but would you believe in fundamental valuation?  How do you value intangibles like personal growth development?).  Everyone was listening to the same salesperson (read as sell-side analyst) campaign why working for Company X has helped his growth advancement as a person etc.  The more of my classmates passing forms to this company, the more the worth of that job seemed to be.  Price action is far more important than whatever those speeches had to tell us.  Tell me how many from your batch worked for NGOs or social civic work?    I’m not really sure why most of my batchmates wanted a career in finance or marketing.  Prestige? Compensation?  Growth?

With all my indecisiveness, you guessed it.  I simply passed all my forms to these sectors.  It was simply like a lottery as to which company will have the decency/unluckiness to call me to work for them.

Lottery

I took an internship doing supply chain marketing with a cosmetics company (even if I knew next to nothing about make up) because they were the first one to call me and hire me.   Just as I told you, I don’t think much about jobs.  People treat their internships as something super important for their eventual jobs and resumes, while I just batted my eyelashes and crammed it like most of my projects in the process.

In any case, I found myself in a place where I didn’t want.  It’s a good thing internships only lasted for 2-3 months.  It was simply not a fit for me.  I have no problems at all with the people, or the management.  I just found myself wanting to do something else.

So how did I end up being a trader today?  What a long introduction right?

My First Encounters with the Stock Market

I’m not like most of the people who went to work in and for Wall Street.  Most people in this industry have watched Oliver Stone’s “Wall Street”, “Boiler Room” and other popular movies in relation to finance several times.  Others have been trading early on in their lives or have heard about stocks while they were still 12 or 13.  They probably have a father or an uncle who would talk about the markets during lunches.    How I wish I knew earlier that there was such a thing as the stock market, then I would have at least rode some part of the bull market with all the irrational masses from 2003-2007.   I probably would have ended up studying economics and psychology if I had to re-visit college.  That’s the closest thing to behavioral finance, at least here in the Philippines.

In any case, whether you believe it or not, I only knew much about the existence of the markets and the accomplishments of the market wizards pretty much during the latter half of 2006?  This was my 3rd year already in college.  I’ve always heard about Mr. Warren Buffett, the great sage of Omaha, being the 2nd richest guy before Bill Gates but my knowledge of the stock market was zero. To be fair, I was studying accounting and finance classes, and we’ll talk about the markets lengthily, but I never had any experience of trading it at all.  My definition of the stock market would be what my textbooks would say.  That pretty much sums it all.  Rote memory + numbers + concepts.  Formulas, NPVS, WACC, ROIC, income statements, earnings growth etc.    If I don’t apply it, I’ll quickly forget it after a while.  That’s what happened to my Calculus, Physics and Chemistry classes.

I guess a lot of it changed when I got hold of Jack Schwager’s Market Wizards Series, Phil Town’s “Rule # 1”, Benjamin Graham’s “Intelligent Investor” and Edwin Lefevre’s “Reminiscences of a Stock Operator”.  Those books as well as Ayn Rand’s “Atlas Shrugged” have somehow opened up to me the possibility that even without much capital, I could earn my own millions.  Self-made.  Perhaps that’s the best sales pitch anyone’s ever made to me.  Of course Robert Kiyosaki’s popularity with his Rich Dad Poor Dad series somehow made an impact for me to be more non-conformist and try new things.  Be contrarian, as he would say.  Although in a way, he betrayed me by becoming mainstream with all these cashflow games and redundant books spreading all over the world, I heard him once and that is enough.  Writing 6 or 9 books more on the same topic was just milking money from all his followers.

In any case, I wasn’t ever going to be a good real estate agent so I told myself I’d get my hands dirty with a career in finance.  Whether it’s investment banking, quantitative modeling, proprietary trading, research writing, I wasn’t sure.  I just wanted to be in finance, even if I had to start making someone else’s coffee just to be there.

Decisions with no known outcomes

I worked in this private bank for six months before I started proprietary trading.  The firm was touted as one of the best “go-to” places by my batch, so I joined them.  I wasn’t really thinking about the salary even if I heard their bonuses were good.  In fact, I even told them during the interview, I’d work for them even if they don’t pay me a single cent, because I wanted to learn everything I could from them.  I was honest.  I wasn’t making some bullsh*t press that I’d work without pay.  It was real.  Most of the traders I read in Market Wizards talked about working in finance as one of the most fulfilling jobs, they’d work even if they were only paid a dollar a year.  I believed them.  I simply wanted a mentor.  They were the most profitable department in Asia for what they were doing.  I felt as if I was doing the right thing, being in the right hands, so I joined them immediately.  That May of 2007, I was working as a marketing assistant for this private bank.

During those first months, I saw myself watching the movements of Philippine stocks rather than attending to my work.  I was more intrigued with the reports sent by my peers re equities and derivatives than anything else sent in my email.  It was during this time, when I was exposed to interest rate swaps, bonds, forwards and foreign currencies that I reaffirmed with myself that I did want to be in finance, but not in private banking.  No disrespect to my peers and mentors, I simply found myself looking for the kind of “excitement” and thrill felt by fund managers and proprietary traders who would risk their money (or their company’s) with their conviction ideas.  Before I could help and advise clients in private banking, I would first have to equip myself.  I found myself reading about blogs on macro topics, and reading research reports.  I envied the analysts who would have coverage of certain companies, look for value plays and write about them.  I told myself, I wanted to do something like that.

After 6 months prior to the regularization interview, I gave my resignation letter.  I told them that I wanted to work in the equities department, learning fundamental analysis.  My hero at that time was still Warren Buffett’s teacher Mr. Benjamin Graham.  I knew about technical analysis, but my heart was more bent on learning how to value stocks.

The Right Job

I knew exactly where I wanted to work in right after my stint in the private bank.  I wanted to work in brokerage firms.  I want every morning to wake up to Bloomberg and breathe stocks in my life.  I wanted to be as great as Jesse Livermore and Warren Buffett so I applied for any job that they would offer me.  Local equity brokerage firms were vastly different from where I used to work.  I could talk immediately to my research head and my bosses.  The organizational structure was very flat and the atmosphere was very casual.  They still meant business, but it was just more laid-back than where I was used to.  The feeling is much like being back in the neighborhood, after spending some time abroad.  It felt more homey.   January of 2008 was my first day researching for stocks.

Pretty soon, another 6 months would pass by and I would be asked if I wanted to transfer and work instead with the proprietary traders full time.  Instead of researching and writing reports for companies, I found myself watching a quote screen and working like all the guys out there.  We were all eager to make money and our first million for that year.  There were rumors that there was a trader making a million every month.   So if he could do it, why couldn’t we?  It’s just a matter of experience and skill right?  It can be learned right?  I transferred just 3 floors above where I used to work that June of 2008.  Finally in the right job, I say to myself.

I remember waking up every single day thanking God because I’m on my quest to be a super trader.  To make things worse, my overconfidence was fed with a nice compensation check because I’ve made quite a sum for my first two months.  I thought at that time 15% for the month was just ordinary.  I’m really stupid and a new trader, wasn’t I?

2 and a Half Years Later

I guess I should be thankful because my career started in the most historic of times.  I lived a once-in-a lifetime event: The Crash of 2008 and the Violent Rally of 2009.  If I had not made any money on the way down and on the way up, I could still say I had market experience.

If you asked me why I wanted to become a trader then, I would have given you the classic off-the-mill answers of most wannabe traders out there.  I came here to make money.  I was passionate and willing to commit the time and effort to learn whatever I needed to do in order to gain market experience, light years ahead of my age.    The dreams and the fantasies of a self-made millionaire, then possibly work as a hedge fund manager or pay for my further studies (ala- 21-esque) using my winnings from trading seemed like a nice thing to put on my future resume.  Things seemed easy.  I guess I was really stupid to think of things that way but the fact that most successful traders came from meager backgrounds provided me enough evidence to take that long Hail Mary shot.  Idealistic as I was, I believed that I’ll be one of those top 8% of traders who become super traders handling millions of dollars for their clients’ and personal accounts.

You only know what you’ve got until it’s gone.

Realization that Trading was Never a Themepark

I only knew I wanted to become a good trader when I already lost most of my dreams and fantasies that initially tempted me to become a trader.  Ironic or cliché as it may seem, you only know the things that you want to do, or love to do when someone takes out all the perks from you and yet you still continue to do it anyway.  If you’re constantly losing in your trading, and yet you still find yourself charting stocks, reading news reports and watching Bloomberg during your free hours, you are one of two types.  You are either a passionate trader who wants to improve his/her game by being up to date, or a chronic gambler who’s on the verge of lunacy partly due to the staggering amounts of money lost and the inability to get out from one’s hole.

I’m not sure what type I am.  I probably am both.  Still though, despite all the challenges I encounter from trading, I really can’t see myself veering away from it.  I believe trading has that certain hold on people.  Once you pop, you can’t stop.  This book is certainly one part of me, trying to put a structure to my passion/addiction with the markets.  I want to chronicle my education of becoming a super trader.  Welcome to my world.  It’s hell and heaven at the same time.

Trading for a living is different from trading.  Anyone can trade.  You just simply open an account, buy and sell a stock or any financial instrument, and you can call yourself a trader.  Becoming a trader for a living is an entirely different field.  Becoming a trader for a living means that you are looking for consistency in your life.  Just as most businesses have a stable cashflow, that is the goal of the trader.  You want to trade well and have stability in your account.  You want growth minus the wild volatility.    For a newbie to realize the difference between a senior trader and an amateur, one only needs to see how they both look at the market.  One sees it as a business, while the other sees it as a gold mine or a theme park.

(Insert a Drawing: Trading is not a themepark) 

I’m not a hypocrite.  I came to the trading floor because I wanted to handle huge amounts of money, getting myself and my clients as rich as possible, as consistently as possible, and as early as possible.  Timothy Sykes, George Soros, Nicholas Darvas, Jim Simmons, John Paulson, David Einhorn – they were all poster boys of non conformists and I wanted to be included in their pack.  The ability to help people is within their reach because they have the guns, the girls and the gold.  You need to have the gold.  I wanted the gold.

But of course, a few beatings from the market taught me that only those with the proper psychology, mindset and willingness to work hard could have the gold.  Trading, like every other business in the world, is a place to develop your self.  Trading is a means of self development.  You will begin to know your deep seated egos, and know who you really are, your strengths and your weaknesses, by the way you manage your trades.

“If I were a beginning trader and knew what I know now, I’d realize that trading is no less of a business than opening a store or a doctor’s office. It requires talents, developed skills, and a clear plan for success. It requires adequate capitalization, and it requires a firm ability to limit overhead during the early, lean years. Fantasies are exciting, but there is so much more to performance success in any discipline.”  -Brett Steenbarger

If you are past your fantasy stage and seriously looking to be a full-time trader or learn trading the right way (even as a passive trader), follow me in my own journey and let’s share our own stories.

******

Next Chapter: 2008 – 2011-  Lessons, Scribbles 

He had that effect on people.  Here we are, talking about it nearly ten years later.  It was a fear that I had pushed the envelope too far, to a risk level that was unacceptable.

I ended up blowing out the entire account in a few days.

I became more risk-control oriented afterwards.  I was never particularly risk-averse.

I’ve cut back trading size after the losing streaks.

You’ve got to figure out how to make money by being right only 20-30% of the time.

I had to get a copy of Ed Seykota’s Traders’ Window.  I had to empty my cup and I had to re-read the story of the Jade Master.

I must not trade what I can’t afford to lose.

Failure is an event, never a person.

I found myself trading once again, despite a desire not to do so.

Chosen Blogpost: https://facelesstrader.wordpress.com/2011/07/25/july-25-2011-trading-abysses-hitting-rock-bottoms-and-the-power-of-vulnerability/

JULY 25, 2011- TRADING ABYSSES, HITTING ROCK BOTTOMS AND THE POWER OF VULNERABILITY

You’re probably not stressed with the markets if you’re fairly new who never suffered a handful of losses.  However, if you’re not new, you may have thought about boxing to take away the stress inherent in trading.  You exercise, so as to keep your mind off of the markets.    I always remember Sean Mclaughlin’s thoughts when he once said that trading is not fun for most professionals.  He even went so far as to say that  trading needs to be boring and systematic enough to be mechanical, especially for traders who orient their systems with technical tools alone.  It’s easier to cut losses, when you’re numb with the figures, and just see the loss as part of the game.  It’s the amateurs who normally see the markets as such an exciting whiff every single day, which complicates trading in the first place.

At least for me, charting dulls the senses, if you do it the whole day, every single trading day for years, it also numbs the mind.  This is probably the reason why writing, reading different news,emails,tweets and links from a community of fellow market junkies generally fills my day with delight.  My day doesn’t seem to be complete without scribbling notes, here and there.    Not only have I been more informed and able to trade better, I’ve gained some friends too in the process.

Every once in a while, I encounter a few trading books and articles to which I can relate to.  Let me share to you Stuart Walton’s story.

In Jack Schwagers’ Interviews with Top Traders, he dished out the following:

Stuart Walton’s career as a trader is marked by a string of contradictions and paradoxes.  He wanted to be an artist or a writer; he became a trader.  Though he valued academics and disdained the financial world, the markets became his profession.  He once hated trading so much that he awoke feeling that he couldn’t do it for another day and quit his job that morning; several years later, the markets were his endeavor and passion. His initial forays into stock trading were marked by such ineptitude that he nearly went bankrupt,yet he subsequently became so skilled that he more than doubled his money annuallyWalton was relaxed and outgoing. We talked for five hours straight without interruption. The time passed quickly.

For a full writeup of Jack Schwager’s interview with Stuart Walton- Please read it here.

_______

When I was fairly new at trading, I literally thanked the Lord whenever the US market indices were up, and as absurd as this may now sound, I used to believe in making money every single day.

When a stock moved significantly that day, I thought I could have rode that %gain, had I only read the news article that mentioned about what was happening to that company (whether it was an earnings driven event, or something news related.), or did my charting homework yada yada yada.

If Stuart Walton was initially bankrupt in his first few years, I went into the same black place myself.  Am I a failed trader?  Yes.  Initially, I failed tremendously at it.  Have I recovered?  Well, I’m off my lows- if that’s good enough.

Of course you won’t believe me when I quote the favorite excuse of most failures in the world. “The addict needs to  hit the rock bottom before he can heal.”    I know myself.  I lived the idealism of my previous academic life.  While it’s exciting (and perhaps the only “exciting”) thing to have the responsibility of trading much money, especially if you’re a young guy, just barely out of your twenties hunting for your prey (both the female species and other endeavors in life).  At some level, instant gratification, excitement, sizzle and the comfort of knowing that lots of other guys have milked millions from this business are enough reasons why your net worth will go up in no time.  “If they can do it, surely I can”, so you say to yourself.  Don’t make me a fool, because at some level, I have that gambling urge and I satisfy my speculative trades as well.

My black abyss episode just taught me that salesmen could always make any story sound great.  Your guru is most often the best salesman because you trust him too much.  Beware.  The thought that because of some “gambling”,all-in shot I’m making, that I could lose everything that I had built up in savings for years really straightened me up for good.  Only it was too late, when I realized this.  I lost countless millions from either being too late in cutting my losses, too eager to take my profits, betting the ranch on an idea, getting whipsawed in my executions etc.

From that point on, I traded much better and just started to chip away at my losses.  I never went all in like a poker game with my portfolio.  I leave the all-in bets inside the poker tables and the casinos.  I never do it in my trading.

I woke up one day and told myself I didn’t want to worry about interest rates, Obama, Aquino, Wen, Cameron, Sarkozy etc.  I don’t want to worry about them for the rest of my life.  Eventually, after watching the markets for a long time, I looked hard on one of life’s crossroads and gave myself a measuring stick.  I gave myself X # of years, Y # of milestones to achieve and Z # of measures to prove or disprove whether I’m moving forward, or backward.  Portfolio value is merely one metric.  Performance is related to management of risk, taking appropriate risk levels (there is such a thing as too little), and providing the suitable trading style to each client.

I like the comforts of life, and for me, this business still seems one of the best ways to acquire that “good life”, despite the fact that I still wonder about my purpose .  I however, had to satisfy my creative side, and sought the combination of a financial job with my artistic interests through writing, re-learning digital arts, and pursuing my random interests such as algorithms and statistics.  Do not be surprised if I’m off doing some financial cartoons, as I’ve always wanted to do it anyway.

In a way, reading Stuart Walton’s philosophy reads very much like mine especially when he said “My philosophy is to float like a jellyfish and let the market push me to where it wants to go.  I don’t draw a line in the sand and say “this is my strategy and I’m going to wait for the market to come to me”.  I try to figure out what strategies are working in the market.  One year- it’s momentum.  Another year, it’s value.”

I guess I’d like to end this post with Brene Brown’s video “The Power of Vulnerability”

Here, she said that when people are asked about love, belonging and connections, people normally talk about breakups, exclusion and disconnections.  Shame is the fear of disconnection.  “I’m not good enough, I’m not smart enough, I’m not enough.”  However, if you totally deconstruct shame, in order for a connection to happen, you need to be seen, really seen for who you are (flaws and imperfections).  The fear that we are not worthy of connection, is the only variable that is setting us aback from all the rest.  It is that belief that we are unworthy.

Courage comes from the root word cor- which means heart.  Hence coronary diseases, corazon aquino, cory etc.  The courage to embrace your vulnerability is opening yourself up with your imperfect stories.  What makes each person beautiful is our vulnerability.  When we are willingly able to say I love you first, with no guarantees, with possible rejections, and when we are willing to invest in a relationship whether it will or won’t work out, when we breakdown which is just another word for a spiritual awakening, when we struggle, this is where the birthplace of belonging and of love exists.

We need to be open to the ideas of our failures.  It’s only when we know that we’ve failed as traders, that we’ll learn how to even begin.  Our greatest teachers, I often believe, are our greatest failures.  We are receptive and are in a tabula rasa state (blankspace), when we fail.

“When you enter the stock market, you are going into a competitive field in which your evaluations and opinions will be matched against some of the sharpest and toughest minds in the business.  You are in a highly specialized industry in which there are many different sectors, all of which are under intense study by men whose economic survival depends upon their best judgment.  You will certainly be exposed to advice, suggestions, offers of help from all sides.  Unless you are able to develop some market philosophy of your own, you will not be able to tell the good from the bad, the sound from the unsound.” – Edwards and Magee

“The fresher and more original the ideas you bring to the table, the more interesting you become both as an individual and as a storyteller.” – Vincent Sandoval, Filipino filmmaker-actor (He recently got his film in Locarno fest)

Despite the markets being competitive, at the end of the day, each one will have their own interesting stories to tell, I’d love to hear those stories.

-Faceless Trader

******

Next Chapter/ Chosen Post:

WHY MOST TRADERS FAIL

Reality Bites: 90% of Traders Fail.  Do you want to know why?

There is always a price to pay for education. For some it may be losing several accounts, for others it may be hiring a good mentor to teach them; for others it’s the school of hard knocks and even living at the border of impoverished conditions in order to study the market, back testing and forward testing several trading strategies until finally developing their own trading methodology.

It took me many years and thousands of hours of market watching to develop my own trading methodology. I’m still refining it and I don’t know if I can ever just have one system in trading consistently.  The baggage from my old “learnings” was so heavy that I was unable to trade successfully until I got rid of it.

I would estimate that, 80-90% of traders I’ve known are not consistently successful in the trading business.  Think about what that means in terms of lost money, accumulated debt, dashed dreams, and disappointed family members.  Why do no trading coaches talk about these personal tragedies and losses?  Why don’t the stories of the vast majority of traders ever grace the pages of trading magazines and trading books?

I do not know why.  Perhaps because they won’t sell well.  Perhaps.

What I do know are the reasons why most traders fail, and if I can spare you of the common pitfalls, perhaps, you can start assessing and making proactive steps into becoming better than all the rest of us.

1.) Most traders never took the time to decide how they should trade

Most traders I know skipped the parts on learning about their own temperaments, their discipline issues, their execution performance levels and just went straight to learning about charts and fundamental research reports, without realizing they skipped the most important part- their own ability to psychologically execute the right market timing, and the discipline to cut when they’re proven wrong by the market, no matter the fundamental value of the company they’re trading upon.

While it may seem trivial to answer psychological questions to yourself, the reason why I find this most important is because knowing yourself determines your ability to follow your own system.

All traders echo that successful traders need to have a system, but how can you create a system for yourself that you can follow, no questions asked, without understanding your own personal capacity to follow rules?  As a child, did you normally try to constantly challenge the status quo?  How can you accept trading rules, when you’re told to follow only the price, and nothing more?    How can one trade a system meant for day traders, when one’s inclinations are more rooted to analysis of companies, where position trading is more apt? How can you integrate your personal strengths and weaknesses in order to create a system which is successful, with a trading edge that can combat the markets, whether bull or bear?

Jeff Cooper once wrote this trading reality: “Hundreds if not thousands of books have been written about trade entry, but the important thing to understand is the personal psychology required to honor a protective stop and the discipline required to get out. “

In truth, traders never really can skip this lesson.  Whenever one trades without any system, and not according to the right precepts of good market timing suited to one’s temperament and ability to execute that system, one has to pay for the education.

2.) Most traders fail because money as a motivation isn’t enough

Be honest with yourself and think about whether you are intrinsically motivated, or whether you are really only in it for the money.

Money is and remains a so-called extrinsic motivation, the level of which – in contrast to a person’s inner drive, their intrinsic motivation, cannot just continue to rise.

Implementing your strategies requires character traits such as iron discipline, indomitable will power and the patience of a saint.

It’s easy to think and say that you love trading and believe in your trading skills in order to achieve that great success, but making this vision a reality is a long and uphill struggle, as many of you well know.

Everyday you have to fight against being your own worst enemy.  Everyday you put your wallet on the table and need to be mentally able to deal with the changes to its weight.  You will experience a roller coaster ride of emotions ranging from shouting in triumph at having achieved extraordinary profits to the feeling of being sunk in despair during severe drawdowns and long series of consecutive losses.  The one thing you can depend on is that your love of trading will be severely tested by the markets.  If money is the only reason why you’re in the markets, consider a different business.  If you think it’s not a business, you’ll be closing your shop soon anyway.

3.) Most traders fail because of the lack of patience 

Every time you have the urge to make an aggressive trade, especially out of emotion, take a step back and reevaluate. The moment you get impatient, bad things tend to follow. In tough markets, stay patient and let others beat themselves in order to be ready and fully prepared to pick up the low lying fruit from the sheer destruction and capitulation from others.

The willingness to wait for the right pitch will make all the difference between a successful trader and a trader wannabe.  If you are patient, the market has a way of painting its picture for you. The essence of a good trader is to wait for your pitch, your ball.

4.) Most traders fail to keep and study their journals

You can tell me that trading is a numbers game, but lip service is never going to be enough in the markets.  Your journals and your trades are the only basis to see whether you have understood the concepts right.  If you don’t even keep a journal, that’s even worse, because you cannot measure how you’re doing in your trading.  That’s similar to opening a business, without even reporting how much sales and operating expenses went throughout the day.

If you think this is minor, so be it.  The devil is always in the small details.  Simple advice: Have a journal, study your hit ratios, your profits and your losses.  Bottom line is, if you can’t study your mistakes, you will never see yourself,and will have a false sense of trading “eminence” which will be quickly disproved by your account performance.  Don’t be surprised if perception is not the same as reality.  You’ve been warned.

5.) Most traders fail because they still blame the markets

You may think I’m exaggerating but I’ve heard a lot of traders crucify the Dow for being down again for the eight or ninth week.  Failing traders blame their losses for most anyone except themselves.  Traders who never look at themselves are a hopeless basket case.

6.) Most traders fail because they believe the market is rigged and that they need inside information to benefit from it

I believe in saying that these are the same types of people who blame the world why their marriages have failed, why the prices of goods keep on rising, why everything else is moving out, except themselves.  These people aren’t going to get any better.  If you’re one of these kinds of people, consider assessing why you complain so much about the world, but not do anything as simple as looking at your own self.

7.) Most traders fail because of their inability to understand the true concept of taking risks

There’s a difference as big as day and night between trading and gambling, but then again, even long time traders can’t distinguish both things.  You’d understand what I mean, whenever I see a trader take a risk, whenever the reward’s measly.  Whenever a trader chases a price point, and gets rewarded, one believes that one has made a good trade.  The truth is, profits alone do not guarantee trading success for consistently long periods of time.  Process trumps everything else in the long run.

Also, risk management isn’t just about keeping losses down; it also means taking maximum prudent advantage of opportunities that present themselves.  Many traders fail because they can’t limit their risk.  Many others fall short because they lack the courage of their convictions.  Somewhere between confidence and overconfidence lies the sweet spot for successful traders.

8.) Traders fail because they confuse their cojones into their trading

In the business of trading, you’ve got to decide if you want to make money or if you want to be right.  To trade what is and not what we think should be, requires us to experience the market as it really is. Successful traders know when to cut losses if necessary. Don’t let your own desire to succeed be the enemy of good judgment.

There is no harm in guessing wrong, the sin is in staying wrong.

9.) Traders fail when they think they need to be right all the time

As a trader, you can make a great living if only half of the setups you take are winners, sometimes even less than half.  Dr Van Tharp once wrote that most of us grow up in an educational system that brainwashes us to think we have to get 94-100% correct to be excellent.  If you can’t get at least 70% correct, you’re a failure.  Mistakes are punished in school by ridicule and poor grades, yet its only through mistakes that we learn.

Indeed in the everyday real world, people have made millions on trading systems each with a reliability of only around 30-40%.  This means that great traders have the resilience needed, and emotional maturity to weather the draw downs, and tough times when their systems yield consecutive cut losses.  I’m sure you’ve heard this before but I’ll repeat the trader cliches.  Yes.  Trading truly is a numbers game.

10.)  Traders fail when they forget there’s plenty of opportunities other than trading

Perhaps this is ironic, but I’m sure you’ve heard the trading mantras “Scared money never wins”.  Every bet a trader does, once confused with many things such as tying up one’s own confidence capital, cojones other than the money involved normally loses.  When you trade thinking that trading is the only avenue for your income, that’s when you will normally fail.  Successful traders approach the markets without much emotional capital in every trade.  Sometimes, successful traders do not even watch the screens.  Less is more.  You can just place your stops, put your position size and do anything you want such as exploring other markets (learning about private equity, venture capitalism, foreign markets, currencies, commodities or some other entrepreneurial endeavor that piques your interests).  This may be counter intuitive, but trading while requiring hard work when it comes to preparation, is effortless when it comes to execution.  Once you’ve entered the trade, the stops and the sizes, everything else is automated.  You don’t have to worry about the intraday upticks and the downticks unless you are an intraday trader.

11.) Traders fail when they have a false recognition that trading is a walk in the park, and is static

The market is constantly evolving and you need to be able to change with it. A good student of the markets studies continuously.  Nicholas Darvas read hundreds of books before finding the system that best fit him, and he still continues to read even after trading millions successfully.  He traded his box theory during the momentum markets very well, and kept on dancing during the market cycles he didn’t have a trading edge upon.

Successful traders know that no strategy works forever. At least no static strategy. You need to adapt your approach as the market changes. Some people think they can learn a couple of easy patterns and just trade using them the rest of their lives and they’ll be fine. If those patterns are adaptive somehow, then maybe. If they can work in calm markets and choppy markets and trendy markets and panicky markets then great. Perhaps you can use them forever.

People are easily attracted to fantasies, instead of realities.  But no evil would be justified on the ground of expediency. It takes years to become a successful trader.  There’s not much shortcuts in most every field, and trading is the same.

___________________________________________________________________

I’m sure I can list many other reasons why so many traders fail, but I’d leave the readers to simply write their own reasons why.  What’s most important is that one recognizes why one fails, and actively tries to address and fix the reasons, in order not to fall in the same debilitating failures every single time.  :)

Hope the outline above helps,

The Faceless Trader

Inspirational References: Books and articles authored by Jeff Cooper (Hit and Run Trading, Chap. 17) , Brett Steenbarger (Trader Feed)  & Charles Kirk (Kirk Report)  , Mustapha Azeez (“Trading Facts Can Set You Free”.Trader Mag.June 2011)

********

Chosen Blogposts

https://dimsumtrader.wordpress.com/2011/02/27/feb-272011-boyscouts-in-trading/

FEB 27,2011- PROCESS TRUMPS OUTCOME OVER THE LONG-TERM.

001547_boy-scout-winners

I’ve a friend, who’s sad about his trading performance who told me something like this:

80-90% of traders fail.  They are no longer in the trading business.  Think about what that means in terms of lost money, accumulated debt, dashed dreams, and disappointed family members.  Why do no trading coaches talk about those personal tragedies and losses?  Why don’t the stories of the vast majority of traders ever grace the pages of trading magazines and trading books?

Permanent scars from pointless battles?  Dashed dreams?  Does this sound like your situation?  I was here.  I am still here.  I am recovering from that stage.

Here’s what I think someone in this stage can do:

1.)  You’ll have to start looking at yourself.  Weekly, Monthly, Yearly –  Trading results are the products of the traders themselves, not the markets.

2.) With the help of others, recognize and identify your weaknesses.  Take action by using gradual steps in the right direction.  Let’s say, you have a problem with money management.  Keeping a journal makes you aware of the sizes you buy and sell.  You’ll see your weaknesses thoroughly and you’ll be able to be more disciplined.

3.) Report trading results, weekly or monthly to someone.  Provide a brief comment on how well or how poorly you’ve behaved in your trading/investing roadmap.

4.) Know that the world is a very big place.  It is bigger than trading.  Yes.  Find a way to spend your life doing what you’re happy and passionate about. (Personally, I’m very tempted to go learn a few things myself.  Life is not just about trading.)

5.) I recommend anyone who want to understand trading to read chapter 17, from Jeff Cooper’s book (Hit and Run Trading).

Personal Favorite Lines from Chapter 17: Mind Over Money, Hit And Run Trading. Jeff Cooper:

1.) Hundreds if not thousands of books have been written about trade entry, but the important thing to understand is the personal psychology required to honor a protective stop and the discipline required to get out.

2.) As a trader, you can make a great living if only half of the setups you take are winners… if you use proper risk control on the other half.  You must accept that taking small losses is simply part of the game and part of one’s cost of doing business.

3.) Only the mastery of your own personal psychology, your own self-image and your own set of beliefs will determine whether you achieve the success you desire.

4.) Only the humble survive. – Jim Whitner

5.) Majority of those selling advice on Wall Street, most of who are trying to teach us how to trade, don’t actually suit up and trade for a living.  But, they have no trouble selling us research and attempting to tell us what works.  Historians are good ones to tell you what happened on the battlefield after the hostilities have ceased.

________

I’ve read Jeff Cooper’s book a lot of times.  This Chapter 17 resounds to me every so often.  All I can say is that, whether you are early in your trading, or experienced already, a good handle on your trading psychology is what takes a trader from volatility to consistency and possibly the ability to trade the markets successfully.  I didn’t give psychology too much importance before, but now it’s the most important tool in my arsenal.  Without understanding psychology, especially your own,  I believe you cannot trade anything well with any chance of consistency.

The only opponent you have to beat is yourself – the way you used to be.

I’ll tell you that there were days when my trading life was always filled with disasters and stress, one way or another.  I used to be sad and think about Katy Perry’s lyrics “Do you ever feel like a plastic bag, drifting through the wind, wanting to start again?”    The account was retreating step by step.  I found I didn’t enjoy trading as much as I used to.  I felt I’d aged 10 years.  There was a sense of disappointment, like all my hard work wasn’t paying off, that there was always something obstructing me.  The more I tried, the more I lost- that sort of thing.  I looked at a lot of Brett Steenbarger articles (Trading development blogs) to find answers to my own problems.    You know what I realized?

Every trader goes through that phase. Pain is inevitable, suffering is optional.

To keep on going, you have to keep up the rhythm.  This is the important thing for long-term projects.  Once you set the pace, the rest will follow.

If you firmly believe that you want to succeed in trading, I tell you that your discipline and money management is the first thing that we should work upon.  We should look at the process.  We measure ourselves by the way we process our trades, how we execute them.  The results do not determine the performance.  The results only confirm whether or not we followed our processes or not.

The hurt part, the dire state, the losses- they are unavoidable realities, but whether or not you can stand any more is up to the trader himself.  If anything, the survival rate of great traders is slim, but they’re always born in difficult markets, never the easy ones.

P.S.

I’m not really in my abyss state.  To me, my abyss state is when I’ve fully lost confidence with my system.

However, I felt a lot of articles currently are “somber” when it comes to relate to the  Phil markets.    I disagree.  That’s all.  In fairness, we’ll be getting good bounces on Monday, but aside from that, even if the markets slide to 3600,3500,3400 the next few months (IF EARNINGS DISAPPOINT, or some other external shocks), none of them really matters.    Good traders manage risks and prepare for unexpected events (i.e. boy scouts everyday, always with money management and stop losses in place).

Boyscouts – Always Prepared mantra right?

Traders- Always Honor Stop Losses and Protect downside 😀

Process Process Process.  Process always trumps outcome over the long term.

A candle loses nothing lighting another candle,

-DimsumTrader

*****

https://facelesstrader.wordpress.com/2011/08/02/august-2-2011-fried-brains-going-through-a-burnout/

AUGUST 2, 2011 – FRIED BRAINS: GOING THROUGH A BURNOUT

All quotes below are courtesy of Mr. Brett Steenbarger.  Every single time, I just feel like I need a trading counselor, I just google his name and read his articles, to make my day a little better.  Let me share each one of them:

1.) “Many a trader fears boredom, more than loss, thereby experiencing the two in sequence.” 

2.) “Either way, losing money has a purpose:  to make us better.  It does not have to be a threat to self-esteem:  it can be an opportunity to expand oneself.” 

___________________________

Today, I mustered up the energy to ask myself  “Am I tired?” , “Do I think I’ve had enough?” “Am I burned out on my job?”  Whether you’re a trader or a non trader, let me start my post by asking 5 questions from a CareerBuilder site.  Click the link for the entire article.

  1. Are you burned out or just exhausted?
    “Take a real vacation to find out,” says Rena Lewis, senior vice president for Lee Hecht Harrison, a job search, consulting and career management firm.
    Burnout: If you dread returning to work, you may be burned out.
    Temporary Heat Wave: If you come back rested and recharged, you just needed a well-deserved break.
  2. Are you reacting to a passing moment or an entire movement?
    Burnout: Your company recently underwent a major restructuring, doubling your responsibilities, and there’s no end in sight.
    Temporary Heat Wave: You’re buried in work because it’s your ‘busy season.’ But you do see light at the end of the tunnel.
  3. Are the demands of your job weighing too heavily on you?
    Burnout: Your supervisor is too demanding and you just can’t keep your head above water. You know you’ll never get her to change.
    Temporary Heat Wave: You’re too demanding on yourself and it’s causing you undue stress, not only at work but most likely in other aspects of your life as well. Time to let a few things go, like the perfectly clean house or some volunteer responsibilities.
  4. Do you find it difficult to focus on your job?
    Burnout: You face your projects with total apathy and feel you have nothing left to give.
    Temporary Heat Wave: Your lack of focus is rooted in the nebulous mess you call a workspace. Get organized and get rejuvenated!
  5. Have you got the urge to find greener pastures?

Burnout: You’re feeling more and more detached at work and catch yourself fantasizing about walking out the door to find that ‘dream job’ and leaving these ‘little minds’ behind.
Temporary Heat Wave: You’re in a rut and ready to venture past the usual lunch crowd and meet some new peers.

____

I answered more burnouts rather than just a temporary heatwave.  I probably even answered the burnout 5/5 in this set.

Most people are in a rut, doing what they’re expected to rather than what they want to do. I am like most of these people.  I am in a rut.  I am writing this post today, thinking whether what I’m feeling is just normal, or whether it’s just something that I have to put up with, as part of the daily grind.

Unlike others who feel that being out of work is a frightening emergency, rather than an opportunity to rethink  life’s priorities, I’m at this stage in my life where I’m asking myself “What is important to me now, and do I want to stay on the same course?”

_

Just recently, I saw from HF Observer an advertisement, telling students to pursue their undergrad/graduate studies in the hedgefund feeder schools for generational wealth.  All I can say is that students never truly understand what sort of pressure and stress a trading job is, or whether it even matters at all.

I find myself echoing New Yorker columnists and economists that the very embodiment of Wall Street, up until today, is the creation of vast amounts of wealth without producing anything tangible.  Was it Michael Douglas who once said that he creates something out of nothing?  I find myself like that at times, and I can’t help but wonder whether I should stay on course.

“If you are no longer enjoying your trading; if you respond to losses but get little enjoyment from gains; if you stop caring about your work; or if you are just too overloaded to get the work done, consider the possibility of burnout. Renewing yourself early in the process can save a career.” – B. Steenbarger

Overwhelmed by obstacles and challenges, traders shut down. They stop learning, and they stop taking the actions needed to move their progress forward. 

I know that this profession is stressful.  I know that making money is never easy, or else everyone would be a millionaire.  What nerves me most in this job is the hours of wasted time.  Trading is such a time-robbing junk for me, when I could be just working from home, doing freelance publishing, meeting with social entrepreneurs, studying a language, learning about making videos, interviewing people, while automating my transactions or having a broker or a popup alert to enable me to be mobile and track my trading positions without having to even check the market screens all the time.  That’s what completely nerves me.  I hate having to sit on a cubicle.  My cubicle brain has been fried for so many years, I don’t know whether I want to trade my youth and my brains for money, which I can most probably earn through trading in a different setup + other perks such as studying or writing or travelling.

“I have seen skilled, successful traders go through lengthy losing periods,” says Steenbarger. If making money is the sole determining motivator behind why you trade, these normal and predictable drawdown periods will have a damaging effect on your sense of self-worth. In other words, you’ll start feeling like a loser, and that’s likely to turn mild setbacks into protracted trading slumps.

Burnout is not laziness, and it will not go away with willpower. Getting away from work stress and attending to good sleeping and eating patterns can help provide the energy for a comeback.

A common denominator in much burnout is a perceived loss of control over one’s situation. Setting reasonable work goals, managing time effectively and reasonably, and finding elements in the situation that can be controlled all can be very helpful. By keeping goals modest and building small success experiences, traders can regain optimism and energy.

5 Signs of Psychological Burnouts (c/o Brett Steenbarger):

1.)  Loss of Motivation – This is experienced as just not caring as much as they used to. It’s also expressed as avoidance of work tasks.

2) Cynicism – The trader in burnout feels that nothing will work out right; the market is out to get him. There is a palpable sense of hopelessness in later stages.

3) Exhaustion – This is experienced both physically and emotionally. Traders know they should work on their situation, but just can’t muster the energy.

4) Sleep Disruptions – The trader who is burning out may oversleep or display insomnia and chronic tiredness.

5) Substance Abuse – Traders in early burnout stage may try to self-medicate to feel better and to escape their situations. Food may also serve as a refuge.

______

I have no qualms with the Philippine markets.  As far as I’m concerned, Philippines is such an awfully strong market, and no matter how volatile the whipsaws in the US and Asian markets have been trading at, Philippines has just been an island of paradise, a safe haven for a traders’ psychological fuel tank that’s run empty.  I may not be in a position to quit my job.  I have a lot of unfinished business with them.  Still though, the simple cure for my burnout may not just be a simple vacation.  I don’t know.  Is it the rain or am I just a gloomy person?

Please help, if you’ve ever felt this way, and how you’ve overcome it.

Other Recommended Links To Read Related to Burnouts:

Time Out From Trading

– The Faceless Trader

*****

SOLUTION FOCUSED TRADING

Recently, I listened to Geoffrey Colvin’s book “Talent is Overrated”. While the whole idea that “greatness is not born, but made” may seem quite common sense for most people, knowing and doing something about it seems to me to be quite an ordeal, and is the primary reason why there are approximately 10% who are elite traders in this field.  For instance, in my own trading, I sense that the reason why I’m not an elite trader despite knowing so many chart patterns is primarily because I’m not doing what great traders are supposed to be doing – “deliberate practice”.  

But what is exactly deliberate practice, when applied to the field of trading?  I set out to answer this question and found useful tidbits from Dr. Brett Steenbargers’ works.  Let me share and make a digestive summary of what I’ve learned.

Greatness is the outcome of a prolonged developmental process.   – Brett Steenbarger

Brett wrote this fantastic article “Focusing On Trading Solutions”, and here he dissects that for chart pattern savants like me, the most likely solution to problems such as discipline, over trading, patience and risk management can be harnessed by asking the right questions and having a routine measure to check this out.

For instance, instead of asking “How can I trade with discipline?”, which is a vague question.  The proper question to ask is “When have I been trading with good discipline?  What do I do differently at those times?”  He reasons that traders shouldn’t ask the  problem focused questions but rather ask questions that address the problems (solution focused).

I tried to answer personal trading questions as I log and evaluate my trading journal for the month.  For three straight months, I’ve had consecutive gains month on month, this month has been hard and I didn’t make net gains.

Looking past my journals, I realized there were three distinct problems in my trading, which if I could improve on, will have made this month possibly still a gainer, and me a better trader.  My streak of monthly gains didn’t make it this month.  While I can surely blame that the market had not been cooperative, an elite trader will owe up to one’s losses, and use those problems as opportunities to learn.  More than that, an elite trader will look at one’s strengths, identifying trading setups that presented good risk-reward levels, and capturing those moments, and repeating it over and over for consistency.

In my quest for deliberate practice in trading greatness, I’ve been reminded by Brett to focus more on  identifying my best practices, and to group them in categories, instead of always focusing on my problems.  Here’s how I did mine:

My Worst Trading Behaviors & My Best Practices & Key Measures:

1.)    I will average down on a stock -I’ve stopped the disastrous averaging down.

Key Measure: Cost Entries

2.)    I will buy more than my allocated size – I am now able to put position sizing as a key discipline.

Key Measure: # of Purchased Shares

3.)    I will buy a lot of setups leading to overtrading – I am now able to tone down, and make more concentrated, conscientious trades rather than blinking and triggering everything that “might” go up.  I am less likely to overtrade.  I am also able to manage my risks more.

Key Measure: # of Trading Setups Opened At a Time

4.) I will chase prices. – I still have yet to master patience in buying at the proper entry.  What I sometimes do is to buy the setup, and just limit the size to a smaller amount for fear of missing out.

Key Measure: List down times I chased prices and the trading results.  Learn that patience pays off, and gives better risk reward setups.

5.)    I will not cut at the pricepoint I placed as my stoploss, adding hope into the equation – I am now able to detach myself from the trades I made, cutting when the price is against me.

Key Measure: # of Losses capped to a $ Amount, Position Sizing

6.)   I will regret about selling too soon – I am now able to hold and lighten down on profits longer than usual.

Key Measure: Check journal on selling half principles, Evaluate # of Average Gains to Winners

7.) I will second guess/ hesitate executing a trading setup and miss out – I can see the market data and the underlying forces moving it.  I can thus formulate good stock picks based on this idea.  Once I identify these profitable setups, I look to find similar setups and repeat

Key Measure: Check the trades that were in my hit lists, but didn’t act upon.  Analyze the emotional decisions why I hesitated on making the trade.  Count the number of trades I hesitated, and look into improving this by taking the stigma of hesitation, and just concentrating on the setup.

8.) I have a tendency to square a position, despite being ahead- Once I am able to buy cheap, but have trouble maximizing the size.  I need to maximize the “free trade” by just letting the trailing stop be a mechanized decision.

Key Measure: Execution of Trading Stops

The greatness that I aspire is within my reach.  As Geoffrey Colvin reminds us, greatness isn’t reserved for a preordained few.  It is available to you and to everyone, but you need to know what intersects your interests and skills and deliberately practice those skills.

Mastery of any field inevitably also brings self-mastery. – Brett Steenbarger

Mastery of your strengths will lead to a repetition of your best practices.  Doing more of what works, will build them into habits.  Keeping a journal, and making tabs on measuring how you’re doing on each aspect of trading is what differentiates the trader who aspires to be consistently successful, and the rest of the populace who just wants to be successful.

Merely putting in the years does not hold up to becoming a great performer.  There are no shortcuts to success.  If you want to be the best you can be, you’ll have to commit yourself to years of repeated practice.  Recognize your consistency by evaluating your trading journals.  Go to each task with a new goal, instead of trying to get it done, aim to get better at it.  When you’re trying to stop yourself from chasing prices, do this by checking your trades whether you’re improving.  Keep a tab at your trades.  Have a template to follow, your hit list for the day, and how you’re doing with your entry and exit slippages. Make your learning structured.

What are your best practices for generating trading ideas?  executing trading ideas?  risk management? managing your positions and exiting positions?  How do you plan on getting better at it, and more importantly, how are you measuring it?

-The Faceless Trader

_______________________________

Inspirational References: Books and articles authored by Geoffrey Colvin (Talent is Overrated), Brett Steenbarger (Trader Feed)

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June 27, 2015 – Trading Diaries – Trading as a Calling

I wrote this many years ago.  Perhaps 5 years or 6 years ago.  I’m not sure when.  I’ve handwritten it but I don’t know what date so this is just digitizing it.

*****

When the Greek philosophers referred to happiness, they didn’t simply mean a positive, sunny mood.  Instead happiness was intimately tied to fulfilment – the sense of actualising one’s potentials and being the person you are capable of becoming.  A happy person in this sense can go through periods of sadness and loss , anxiety and frustration.  Indeed it is difficult to imagine a goal-directed life that doesn’t encounter such obstacles.

What contributes to happiness, however, is the deep sense of being on the right path in life; the sense that you’re doing what you’re meant to be doing.  

In that context, the opposite of Aristotle’s happiness isn’t sadness but rather a certain kind of emotional disease; a vague but pervasive existential guilt that you’re letting life’s opportunities slip by; that you’re settling for less than you rightfully should.

To prepare a challenging trade idea, execute it with a plan, and then see it make money yield a kind of happiness that can’t be achieved by the same profits from a dumb-luck trade.  Pride, not as in overweening arrogance, but as an inner sense of conviction about the rightness of one’s choices is an important manifestation of Aristotle’s happiness.

We profit from our life’s endeavours when we pursue our happiness.

You will know you’re pursuing your happiness when you’re so involved in what you’re doing that you don’t want it to be limited to business hours.

Trading can be a great job and a potentially lucrative career, but only if it’s also a calling.

This is a psychological paradox; to best focus on any single performance, it helped to be diversified among performances.

Diversification, in life and markets, reduces performance pressure and allows us to become immersed in what we are doing.

It’s not necessary that one feels great after every single trading day.  Much of psychological well-being is a function of the fit between a person and her social and work environments.  Risk and reward is proportional.  Pursuing large gains invariably brings large drawdowns.  The key to success is trading within one’s risk tolerance so that swings won’t change how one views markets and makes decisions.  How one manages trading depends on how one manages the rest of his life.

Emotional Checklist:

How are you feeling right now?

1.) Happy Neutral Unhappy

2.) Satisfied Neutral Dissatisfied

3.) Energetic Neutral Run Down

4.) Optimistic Neutral Pessimistic

5.) Focused Neutral Scattered

6.) Calm Neutral Stressed Out

7.) Competent Neutral Incompetent

8.) Growing Neutral Stagnant

-Faceless Trader

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June 27, 2015 – Reflections on Jeff Cooper’s Hit and Run Trading System

Written around 5 years ago during my Citisec days.  I just digitized it here.

Nikki Yu

“Our job as traders is not to call the market, but to interpret the setups that have an edge.  Our job as traders is not to make money, but to follow the rules step-by-step and take the setups day-by-day and the money will follow.  It’s all about interpreting the price action and the markets mosaic day-by-day, piece-by-piece. “- Jeff Cooper, Preface of Hit and Run Trading.

A good trader spots an opportunity, triggers the buying, consciously knows where he’s going to be selling, and where he’ll get stopped out of his trade.  Also, even when the stock is going in his favour, he doesn’t second guess himself on why he just has too few shares.  He consciously makes it a point to buy the proper position size.   When he deviates by buying more than he should, he will only lose tomorrow what he has profited from today.  Being inconsistent could do well in a few lucky trades.  (It’s still luck because even the strongest setups have a 60-40 batting average), but as time passes, the superiority of your system will only matter if you can continue doing what you should be properly doing every single trade, every single day.  

 

Cooper’s system allowed me to be consciously aware of my faults.  If I don’t make money trading Cooper’s system, I realised it’s mostly because I added a position which was 3-5% higher from my original entry price the second day.  I get excited adding more to my winners, thinking that the stock I have is outperforming a down trending market.  When my stock rallies, I get greedy (thinking I’m riding a winner), only to see the stock succumb to the falling market, with liquidity evaporating a potential 7% gainer into an almost 2% scratched trade.

I believe the frustration of every trader has to do with having the ability to find the stocks with the proper setups, and having the plan to trigger, but not being able to choose the one that flew high up above.  It was in the trader’s plan.  It was in the list.  Either I bought it, but isn’t choose to hold my other half.  I didn’t buy the stock on my list, because I already bought the other stocks (thereby having too much risk exposed.) I failed to follow my proper stop, selling earlier due to market conditions rather than the stock’s price action itself.  I failed to be patient and allow the stock some room to breathe.  I failed to sell a stock that wasn’t a winner the day I bought it (even if it didn’t hit my stop on that day, I realised that the stock will just tie up my money or eventually hit my stop the next few days.)

The hardest part for me is sticking to Cooper’s system when the market is falling.  What I’ve realised from my trading is that when the market is sideways and consolidating, Cooper stocks with strong setups will outperform the market, but hit ratios fall tremendously in a downtrending market.  From having a 60-40 or 50-50 batting average, you’ll only have 20% winners and 80% losers.  I don’t know if I should modify and just let Cooper’s trading signals go when the market is falling.

In any scenario, Cooper’s system helped me to realise that following rules and having a structure will ultimately lead to profits in time.  Most traders know how to say that consistency is the key, but I’m not sure whether everyone really pays attention to getting Cooper’s 1 point profit whenever he has it every single day or rigidly following the rule of selling the losers every day.  Trading is a probability game.  You try your best to follow your plan, and even if it results to losses, at the end of the day, one trade is just part of a series of trades a trader will make.  If he sticks to a superior system, his edge will come out eventually.  This is the only reason why I think I still can beat this market in time.

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June 21, 2015 – The Early Days of Obscurity

Thoughts after reading “Rework” by Jason Fried and David Heinemieier Hansson :

********

I do miss the early days of obscurity.

No one knows me.  I was happy being in the shadows.

The really important stuff doesn’t go away anyway.

But an audience coming at you, people coming to you, to see what you have to say, to listen to you, to readers.

If they like what I have to say, they’ll probably also like what I have to sell.

When you build an audience, you don’t have to buy people’s attention- they give it to you.  This is a huge advantage.

Sharing valuable information will surely slowly build a loyal audience, then when you need to get the word out, the right people will already be listening.

Businesses are usually paranoid and secretive.  They think they have proprietary this and competitive advantage that.  Maybe a rare few do, but most don’t.  And those that don’t should stop acting like those that do.  Don’t be afraid of sharing.

Letting people behind the curtain changes your relationship with them.  They’ll feel a bond with you and see you as human beings instead of a faceless company.  They’ll see the sweat and effort that goes into what you sell.  They’ll develop a deeper level of understanding and appreciation for what you do.

Wabi-Sabi – beauty of imperfection.  Wabi-sabi values character and uniqueness over a shiny façade.  It teaches that cracks and scratches in things should be embraced.  It’s also about simplicity.  You strip things down and then use what you have.

Leonard Koren – Pare down to the essence, but don’t remove the poetry.  Keep things clean and unencumbered but don’t sterilize.

Leave the poetry in what you make.  When something becomes too polished, it loses its soul.  It seems robotic.  Talk how you really talk.  Reveal things that others are unwilling to discuss.  Be upfront about your shortcomings.  Show the latest version of what you’re working on even if you’re not done yet.  It’s okay if it’s not perfect.  You might not seem as professional but you will seem a lot more genuine. 

Call someone.  Write a personal note.   Pitch her with some passion, some interest, some life.  Do something meaningful.  Be remarkable.  Stand out.  Be unforgettable.  That’s how you’ll get the best coverage.

Stories that start on the fringe can go mainstream quickly.

Principles:

  • Emulate Drug Dealers. Make your product so good, so addictive, so “can’t miss” that giving customers a small, free taste makes them come back with cash in hand.
  • Make something about your product bite size. You want an easily digestible introduction to what you sell.  This gives people a way to try it without investing any money or a lot of time.

You will not be a big hit right away.  You will not get rich quick.  You are not so special that everyone else will instantly pay attention.  No one cares about you.  At least not yet.  Get used to it.

Trade the dream of overnight success for slow, measured growth.  It’s hard but you have to be patient.  You have to grind it out.  You have to do it for a long time before the right people notice.

How long someone’s been doing it is overstated.  What matters is how well they’ve been doing it. 

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April 18, 2015 – The C & D

I’ve heard this line from Nix Nolledo two times already “Content (C)  is King but Distribution (D)  is King Kong.” The first time I heard him say it was during a presentation of “Rising Stars” conference held by COL Financial but it took a second time around for me to hear it to understand it more fully.  Technology entrepreneurs usually have a different way of seeing things so I often have to keep up with them to gain clarity with their vision for their companies.

In a little less than 6 months since listing in the market, Xurpas has already acquired 4 companies (Altitude Games (21.7%) , (31.52%) MatchMe, (49%) PT Ninelives Interactive and (51%) StormFlex.)

For all four companies, Xurpas spent a total $6.7 million.

And it will still continue its regional acquisition binge.

According to this news article in Manila Bulletin released just April 15,2015

Highlights:

1.) It still has close to P1 billion in cash to support its expansion in Southeast Asia.

2.) Nolledo noted that, with its recent acquisitions in the Philippines and overseas, “we are also expecting the two-year horizon for expansion to be shortened.

3.) while Xurpas will remain a casual games maker in the next few years, the firm will also try to expand its reach to other markets.

4.) Its mobile content service segment continues to be the key driver of the company, accounting for 79 percent of total revenues or P309.37 million last year and the rest from its other businesses.

Let’s list them down apart from discussing the core earnings that they’ve already reached prior to acquiring new companies.

5.) Expects Storm Flex to “contribute significantly” to their revenues and earnings in the coming years since it can now have an easier time wooing clients now that it is a subsidiary of Xurpas.

a.) Altitude Games  

Key People: (Impressive credentials of the team)

Altitude-Team-Photo-600x193

Dizon leads Altitude Games with four other veterans of the Philippine game industry – Luna Cruz, Marc Polican, Paul Gadi, and Chester Ocampo – all of whom he had worked with at some point during his 11-year game development career. Together, they want to distinguish the local video game scene through the creation of “original midcore games.” (Rappler)

The rest of the team includes Luna Cruz, who was formerly senior designer at Boomzap, where she was the lead designer on Awakening: The Dreamless Castle. That game turned into one of publisher Big Fish Games’ top franchises and now includes six titles. Cruz also helped develop other Boomzap franchises like the Dana Knightstone and Otherworld series.

Other Altitude Games founders include: Paul Gadi, former production lead at Gameloft Philippines and CTO at Anino Mobile; Marc Polican, former lead programmer at Boomzap and Gameloft Philippines; and Chester Ocampo, former art director at Imaginary Friends Studio.(Tech Crunch) 

*****

Gabby Dizon started Altitude Games in March 2014 with four other co-founders that he feels are the best developers in the Philippines. As CEO, he handles the business aspects of the company, sets the overall strategy, and makes sure the team is going in the right direction with all the resources needed to get there. He recognizes that they have a tremendous amount of talent in the company, but ultimately, it doesn’t matter how good the game they make is unless they can get people to download and pay for it.

Watch more here: https://youtu.be/ttMSTcW-0pE

More References here: http://gamesauce.org/news/2014/08/23/gabby-dizon-capitalize-on-the-next-billion-gamers-casual-connect-video/

1.) Gabby Dizon  

Dizon see a huge impact coming to the games industry as another billion mobile phone users come online during the next decade. The phones will most likely be Android, very inexpensive, and have no way to pay with a credit card. What the industry must consider is how to entertain this vast audience and how to enable them to pay for content.  When Dizon is gaming, he plays almost exclusively on mobile. He does own an Xbox 360 but rarely plays on it and has no plans to purchase any next gen consoles. He plays casual games like endless runners and puzzle games on his Android phone and more core games like Hearthstone and Battleheart Legacy on iPad. He used to be a huge PC gamer, but now plays only two or three of the best games each year.

Previous Positions :

a.) Senior producer of Singapore-based Boomzap

http://www.boomzap.com/

https://www.facebook.com/boomzap

boomzap profile

boomzap games

b.) President of Flipgames (https://play.google.com/store/apps/developer?id=Flipgames&hl=en)

c.) President of Game Developers Association of the Philippines  http://www.gdap.org.ph/

gdap

A former employee at bigwig PC casual game creator Boomzap, Dizon and his colleagues Luna Cruz and Marc Polican formed Altitude Games with one major goal in mind: to create globally-recognizable gaming intellectual properties through mobile. “It sounds silly now, but if you think about the most recognizable mobile IP games now, it’ll be the Flappy Birds and the Hay Days. We eventually wanted to be included in that conversation. It may be with our first game, it may be with our second. But that’s what we’re shooting for: creating an IP that transcends mobile games.”

Main Vision:

Dizon wants to see a household name emerge out of the Philippines. “We have had some pockets of success here and there (notably Kuyi Mobile’s Streetfood Tycoon series), but there has been no Minecraft or Angry Birds type success to come out of the Philippines,” Dizon admitted, but added, “That will change soon.”

Products:

1.) Run Run Super V

Speaking of their first game, the company’s upcoming project is called Run Run Super V, which combines the endless runner mechanic with the 70s Japanese sentai genre as its settings and aesthetics. e27 listed the game as one of the more promising titles that cropped up from this year’s Casual Connect Asia.

Download and read game reviews here by TechniAsia 

downloadable in android googleplay store

runrunsuperv

What a lot of game companies and publishers do is that they soft launch their games in the Philippines so that they can tweak their engagement metrics before moving it to countries with higher average revenue per user (ARPU) like in North America. Still, it’s always been a challenge to monetise that traffic,”

“America is very competitive and the best-polished games are out there. But I think there’s a lot of untapped potential in Asia because the typical strategy that you use to make money in America will not necessarily work in Southeast Asia. There’s the usual problems, like low credit card penetration, but I think  it’s also because of the region’s alternative business models that work.” In this case, he’s referring to credit services like MOL and Cherry Credits.

“There are things you can control because we’re from the region. I think it’s something we can experiment by ourselves. We’re looking at a self-distributing strategy in Southeast Asia. For territories like Japan and China, we’d want to work with strong partners to ingrain our games to fit those cultures, not just localise them.” Dizon stressed that by releasing its game in Asia first, the studio can improve and polish the game further to prep it for North American release.

Megatrend : Consoles and PCs —> slowly shifting into Mobile Games

market for long-term games that used to be on consoles and PCs are slowly shifting. “If you look at tablets now, there are now rich game experiences that used to just belong on high-end PCs.” He cited Witching Hour’s strategy games as an example of deep experiences on mobile devices. “Those are the type of experiences that we’re interested in.”

Accomplishments (apart from actually being one of the best selling product in casual games of Xurpas):

1.) RunRunSuper V – Special Mention in Casual Connect 2014

runrun

Check out all the other games worth mentioning in this article here:

http://e27.co/casual-connect-asia-2014-games-demand-mention-20140523/

2.) Techni Asia’s Best Indie Mobile Games Asia 2014  (https://www.techinasia.com/2014-best-indie-mobile-games-asia/)

references:

1.) https://www.techinasia.com/tag/altitude-games/

2.) http://e27.co/breaking-into-the-philippines-is-challenging-altitude-games-20140530/

MEGATREND: Mobile Free To Play Games (with in app purchases)

casual connect 2014

Casual Connect Asia takes the humble approach in entertaining and educating, though you have to understand that it’s catering to the current gaming landscape that’s relevant to the majority. Mobile and free-to-play games, like it or not, are the future of the games industry and that mandate is established in Southeast Asia. Games like Puzzle & Dragons and Brave Frontier, Japanese puzzlers and RPGs mind you, are on the top of every mobile gaming chart you’ve seen and heard on a small number of news sites and aggregate blogs.

A majority of game developers in Asia are making games for the iOS and Android, sometimes with the free-to-play design in mind. Why? Because it’s economical in the long run and Apple/Google’s outreach with their App Store and Google Play online stores span worldwide. Its reach and outlook is even further and more open-minded than Microsoft and Nintendo, and most third-party publishers. (http://e27.co/casual-connect-asia-2014-e3-southeast-asia-needs-20140527/)

Going into the free-to-play space requires more studying on economics and terms like ARPU (average revenue per user) and MAU (monthly active users). “It’s not about game mechanics,” Gregory said. “There are far larger parts of business and game economics that’s involved. You also have to design your game ahead to implement in-app purchases and ads. Screen space, timing, when are you going to haggle with the player — these are things you need to think about way early rather than tack them on at the last minute.” (http://e27.co/premium-vs-freemium-words-wisdom-witching-hour-studios-20140522/)

Learn more watching these videos:

Read More games here:

http://www.altitude-games.com/game-jam-2015-jammers-view/

Relevant News Timeline:

Dec 12, 2014 – days after the December 2 listing of the IPO, the company acquires a 21.7% stake in Altitude Games for Php32.97 mil

https://www.techinasia.com/xurpas-acquires-stake-altitude-games/

March 6, 2014 – Manila-Based Altitude Games Raises $275,000 To Develop Midcore Titles (Tech Crunch)

Altitude Games, a Manila-based mobile game studio, has raised $275,000 in seed funding from investors Nix Nolledo, Level Up! Games co-founder Philip Cahiwat, an undisclosed angel investor, and members of its founding team. The startup will use the capital to “jumpstart its creation of original intellectual property in the midcore game space.” Altitude Games plans to announce its first title in May during Casual Connect Asia, an annual industry event in Singapore.

Southeast Asian has previously been known as a great place to outsource game development, but we’re 100% focused on creating original intellectual property for mobile games. We want to combine midcore themes and casual accessibility to make games that are easy to pick up but contain deep gameplay that you can enjoy with your friends, he said.

*****

Feb 27, 2014 – Deal with Storm Flex allows Xurpas to expand from digital distribution to delivery of goods

Xurpas acquired a 51% interest in Storm Flex Systems, Inc., for P190.89 million.

The “flex benefits system” is currently used by some of the country’s leading local conglomerates, business process outsourcing firms, and fast-moving consumer goods companies in Metro Manila and Cebu.

“Until today, we have been distributing digital products to users on mobile telcos’ networks,” said Xurpas President and Chief Executive Officer Nico Jose S. Nolledo, who is also a minority shareholder and director of Storm prior to the acquisition.

“The acquisition of Storm signals our expansion into an entirely new distribution network, and into the selling of physical goods and services.”

After the buy-in, the listed firm expects to double the total number of client employees served by Storm to 30,000 this year.

“The business has been running successfully for the past two years, and can boast of a truly astounding growth trajectory. It has a sound revenue generation model which is both unique and exportable to other markets. So we consider it as one of the great inroads to regional expansion,” Mr. Nolledo said, noting that Storm’s revenue rose five-fold from 2013 to 2014.

“We feel this partnership will allow us to achieve the next stages of growth and development in the region. There is a tremendous opportunity ahead of us,” Storm CEO Paul V. Cauton said.

To know more about Storm Benefits, go to the website – https://stormbenefits.com/

http://stormrewards.ph/stormwebsite/about/

Key People:

1.) Paulo dela Fuente – Founder and COO. Paolo is a veteran web developer – turned entrepreneur. Paolo is the main designer of all of STORM’s systems and main driver for technical innovation. Aside from his work in STORM, also the co-founder and board member of STRATA.

2.) Peter Cauton – Founder and CEO. Peter is a veteran HR practitioner-turned entrepreneur. STORM was his first project and what he considers his startup baby. He is also the founder of the Filipino startup movement and blog, Juan Great Leap as well as STRATA.

*****

It is the first that I know of its kind.  I find the business model ingenious since this acquisition makes Xurpas more than just selling digital content.  They can now tangibly sell anything from shoes to coffee to anything inside the store for Storm Benefit clients.  They currently have a little less than 20,000 employees signed up inside the Storm benefits system and will grow it to at least 50% by 2015.  This is a scalable business which has relatively high margins as the only cost will be shipping the products to the employees saving on rental and marketing expenses usually accompanied with retailers.  The more companies partner with Storm, the higher the revenues stream and the faster the growth and earnings accompanied to it will be.

storm

I talked with the owner if the idea of Storm Benefits was copied anywhere else and I found it astonishing that it came straight and original here in the Philippines.  It was perfect since any normal retail store would usually need to “acquire” a customer.  Using this model of turning employees’ company benefits (sick leaves, vacation leaves) and to allow them to have the option to convert it into flex points, you have these employees turned into an automatic customer to your online benefit store thereby seamlessly transitioning your business not just into selling digital goods but outright tangible services.

For instance a sample of their benefits would be converting your flex points into a Gopro camera , a Nike shoe, anything inside Toby sports, a Travel Buddy luggage, even an Apple watch or Apple iPhone or any Apple product. You could also convert your points to Axalife, Sunlife or Manulife insurance funds, heck you can even get yourself an appointment with Belo clinic or buy a Zara or Lacoste or Superdry apparel inside their stores using your Storm flex benefits.

Check out at least 100 partners that they have in their benefits store and over 15,000 company employees already converted inside the StormFlex benefits system.

https://stormbenefits.com/partners/

gopro as an experience

Pretty smart investment indeed.  It’s HR benefits redefined.

3.) MatchMe

https://www.techinasia.com/xurpas-acquires-stake-matchme/

Xurpas bought 31.52 percent of Singapore-based MatchMe for US$1.4 million, it said in a disclosure to the Philippine Stock Exchange.

MatchMe runs a real-time, multiplayer platform for games. It’s also open to third-party game content integration. This means casual gamers can play in real-time versus other people regardless of data connection speed. It also allows customers to duel with friends or take part in competitive tournaments locally or on a national, regional, or even global level.

Under the terms of the agreement, Xurpas will be granted the license and right to use the MatchMe platform and its related game content. It also gives Xurpas exclusive rights to use MatchMe for telco deployment in the Philippines, Indonesia, and Thailand.

“MatchMe is a truly unique offering, potentially allowing millions of players to play against each other on any device, anytime, anywhere. The platform allows us to provide a unique game playing experience to consumers in the Philippines, the rest of Southeast Asia, and worldwide,” said Xurpas president and CEO Nix Nolledo.

*****

The beauty of this acquisition is the fact that most of Xurpas’ current 4 million gaming users are using Android and data connection speeds in the Philippines can affect the business of gaming if it frequently hangs.  This acquisition is going to be a complement to Altitude Games and other future game studios that Xurpas might own or already own to provide a worldwide friendly gaming experience.

“Casual games is one of Xurpas’ biggest growth drivers. As consumers move from feature phones to smart phones, new platforms like Matchme enable us to deliver amazing experiences to the next wave of mobile gamers,” he added.

4.) PT Ninelives Interactive – Access to Indonesia

https://www.techinasia.com/philippines-xurpas-enters-indonesia-acquires-mobile-content-provider-ninelives/

Xurpas said it bought 49 percent of PT Sembilan Digital Investama, parent of Ninelives Interactive, for US$245,000.

The Indonesian companies are engaged in mobile content development and distribution, the same business as Xurpas’. They have existing contracts with top carriers such as Telkomsel, as well as XL Axiata and Indosat.

The investment in Indonesia forms part of Xurpas’ strategy of expanding distribution channels for its products in Southeast Asia. It gives Xurpas access to a huge market for its games and other services.

“Indonesia is one of the most exciting mobile markets in the world with close to 300 million subscribers, making it the fourth largest mobile market in the world. Just like the Philippines, majority of users are still on pre-paid but they are rapidly moving away from fixed connections in favor of smartphones and mobile data. The striking similarity between the Indonesian market and ours makes it an ideal location to establish another stronghold,” said Xurpas president and CEO Nix Nolledo in a statement.

*****

Xurpas Other Relevant Meeting Notes:

1.) “no name” brands will be disrupted – note the increasing number of companies (we won’t name here) that essentially private label products manufactured in China.  What is at risk are intermediaries if they don’t adjust.

The people are loyal to the brands, not the intermediaries.

Manufacturer to Consumer (M2C) model will be the new trend

Often, Retailers 31-37% of revenues on marketing and operating expenses (rent, labor et al)

while Online retailers have  17-21% of revenues as expense (mostly shipping, labor)

2.) Assess the customer lifetime value (CLTV) instead of just the Gross Merchandise Value (GMV)

3.) Only 5% of the population or 5 Mil people in the Philippines have a credit card.  Our games are catered to the C&D market.  We don’t want to compete in the A,B markets which is a small number with lot of competitors (US,Japan et al)

4.) Smartphone gaming is all about multiplayer gaming formats (hence MatchMe)

5.) Again Content is King but Distribution is King Kong.  Storm’s business model is a distribution platform of goods and services.  Grow those ~20,000 employees; with the leverage now with Ninelives Interactive- we can tap companies in Indonesia to sell original games (Altitude Games-developed, other than those developed in house by Xurpas)

Out of the 4mil Android phone gamers of Xurpas, average top-up is P12/month.  That alone is different from the Apple model of 99 cents for their lowest in-app purchases.

*****

Conclusion:

Recent acquisitions of Xurpas has undoubtedly transformed the company in not only enhancing their content (Altitude Games), expanding presence (Ninelives interactive), expand into new platforms (Storm flex) and enhance the user experience (MatchMe, you cannot play a good Altitude game with a significant time lag.)  The company knows what it’s doing and is growing the business in the right places.

I only now realized that Xurpas is more than a simple casual gaming company.  It is ran by a very good management team who knows how to spend and carefully addresses markets with a ready business model.  I am excited personally of the Storm flex business out of all the acquisitions (though I wouldn’t say the rest weren’t impressive) since they all complemented each other.  Altitude Games will allow Xurpas to develop games it would have exclusive rights to distribute to Indonesia, Philippines and all other telecom networks in other countries (when they already have a license.)

We definitely have to watch out for all the rest of the acquisitions but notice that PLATFORMS are more important than CONTENT.  Hence Distribution Platforms (The Ds) which Xurpas is actively engaging in buying are the right strategies.  With Stormflex being a DISTRIBUTION platform for goods, with Ninelives being a DISTRIBUTION platform in Indonesia , we definitely have a lot of things being disrupted by Xurpas (traditional retailers must beware.)

Great company.

It would be hard to value the company so I simply placed field meeting notes and laid out the basic growth strategy but to me, it’s worth having in the portfolio.  Perhaps, better to get when it falls down to around a P10Bil or less market cap

Currently, it’s trading at a P16 Bil market cap at 9.02 (last traded price April 17, 2015) but I would think that the company could one day increase its current 2014 revenues of 392 Mil with a net income of P190 Mil to at least double by 2015 with their acquisitions.

To pay for a forward growth P/E of 40X at P9.02 assuming the company can double its income still seems a high price even if the growth plans and management can execute well, or maybe I’m just waiting really for a really low 20X P/E.  While that may not happen, a company that can grow 100%-200% its income stream in the next 2-3 years is widely expected to enjoy trading ranges between 20-80X multiples.  It’s but the nature of the game.  Here’s to hoping we can grab it nearer to the 20-30X end🙂

– Faceless Trader

Posted in A Little Common Cents Corner | Leave a comment

March 15, 2015 – A Domestic Differentiation. Recurring is Rewarding .

http://www.investopedia.com/terms/r/recurringrevenue.asp

DEFINITION OF ‘RECURRING REVENUE’

The portion of a company’s revenue that is highly likely to continue in the future. This is revenue that is predictable, stable and can be counted on in the future with a high degree of certainty.

*****

Landlords (commercial buildings such as malls and office space) are usually priced at a premium because even if the market climate for interest rates are highly susceptible to changes in spending; monthly rental from business is less fixated on such and is expected to be paid in advance (3 months deposit, some as long as one year deposit for discounted terms)  and hedged with inflation beating returns (as monthly rents have an inflationary adjusted incremental rate depending on terms stated by landlord and lessee.)

There has been wide receptance for REIT or Real Estate Investment Trusts because of this “high certainty” of cashflows.  The best valuation model to use for any type of entity that has a recurring cash flow will be DCF (or discounted cash flow methods.)

*****

Tomorrow, March 16, 2015 is the last day to purchase #PLC or Premium Leisure Corp and still be entitled to the 2.2 centavos per share dividend.

cash div 1

As of March 13, 2015’s closing price of P1.59; not only are we sitting in a company that will pay us 2.2 centavos in a day’s time, we are also sitting in the support zone which was retested 4 multiple times with strong buying on major funds and strong hands.

2.2 cents/1.59 = 1.3% dividend yield despite City of Dreams Manila just opening doors in 4Q2014.  Note that we should then estimate 2015-2025 earnings to come out with a dividend discounting model to value what #PLC is worth as well as the estimated dividend income (80% Payout ratio) to estimate the yield we shall receive every year.

 

*****

Note that the company has a dividend policy ratio of at least 80% of the company’s retained earnings to be paid every year.   It is the only Philippine gaming company which has this dividend payout policy.  It is the One and Only Dividend Yield Play in Philippine Gaming.

Premium Leisure Corp. has chalked up a consolidated net profit of P1.34 billion in 2014—its first year of reorganization as a gaming investment firm—enabling the company to start paying out dividends to shareholders.

PLC, formerly Sinophil Corp., obtained board approval to earmark P700 million or 94.63 percent of unrestricted retained earnings in 2014 as cash dividend to common shareholders. This is equivalent to a cash dividend of about P0.022 a share payable on April 17 this year to shareholders on record as of March 20.

The company announced earlier a dividend policy of paying out at least 80 percent of the previous year’s unrestricted retained earnings.

Last year, PLC realized gains from the sale of some property assets into parent Belle, the reversal of provision for impairment in Legend International Resorts Hk Ltd. and the higher market valuation of gaming assets transferred into its books when it was converted by Belle into its gaming arm.

This allowed PLC to declare dividends without waiting for the first full year of operations of COD Manila.

PLC is entitled to half of the gaming revenues or cash flow based on earnings before interest, taxes, depreciation and amortization of COD Manila. Belle is in turn seen benefiting from PLC’s dividends given that it owns 79 percent of the gaming investment firm.

As a gaming investment firm, PLC is being pitched to investors as a dividend play as it offers direct participation in the earnings of a gaming company.
Read more: http://business.inquirer.net/187995/premium-leisure-yielded-profit-of-p1-34b-in-14#ixzz3UQMJYNE5
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook

*****

http://www.investopedia.com/terms/d/dividendpayoutratio.asp

Remember this: A stable dividend payout ratio indicates a solid dividend policy by the company’s board of directors.

market cap

*****

What is Premium Leisure Corporation’s main business?  It is first and foremost a co-licensee in City of Dreams Manila.  It owns 100% of PLAI which in turn collects Gaming Ebitda from City of Dreams Manila as well as 34.5% stake in LOTO or Pacific Online Systems Corporation which is essentially Philippines’ only lottery and sweepstakes play.  It is a gaming-focused investment.

Highlights:

1.) 0 debt, no capex. 80% dividend payout policy = Only Dividend Player Among Gaming Companies

2.) Strong free cash flows stream.  At 1.59; with 2015 estimated net income of P3 Bil on gross gaming revenues of P4.8 Bil will yield 5% (8 cents/1.59) assuming the 80% policy rule.  This makes it at the top ten of the dividend paying companies in the Philippines at par with telco operators #TEL and #GLO

3.) High Upside , Protected Downside

Tremendous growth of the industry = higher FCF in the future; and higher dividend payout stream. Downside is protected as well.   After CoD Manila opens, MCP is obligated to make monthly payments to Premium Leisure (effectively equivalent to ~50% of gaming EBITDA).

With its strong free cash flows, even ascribing WACC rates of 11.5% – 12%; the estimated target price per share

assuming revenues of P4-5 Bil in Year 1  or a net income band of P3-4 Bil in Year 1 with industry growth rates of 20-30% until 2018 will still result to a target price band between P 2.20- P 2.60

4.) While Chinese crackdown have blinded investor appetite to assume gaming operations in the Philippines to suffer; earnings data and revenue numbers of the industry fail to show any decline and is alternatively growing.

what is plc business

lotto scratch it

codm

*****

Key Words: RENTAL INCOME.  INCREASED DEMAND.  

In a disclosure to the Philippine Stock Exchange, Premium Leisure said it set the price of the offer shares at P1.65 apiece, or a 10.33 percent discount from its last closing price of P1.84 per share on September 18 when the company went on a voluntary trading suspension at the start of the road show.

Premium Leisure shares resumed trading today, opening 7 percent lower at P1.71 per share.

Belle, its subsidiaries Foundation Capital Resources Inc and Parallax Resources Inc, and affiliate APC Group Inc entered into a placing agreement with CLSA Limited, Credit Suisse (Singapore) Limited and Macquarie Capital (Singapore) Pte Limited covering the sale of 3.26 billion shares in Premium Leisure.

Belle will unload 3.003 billion shares in PLC; Foundation Capital, 156.53 million shares; Parallax Resources, 13.824 million shares; and APC Group, 90 million shares.

Gross proceeds from the equity offering will reach $121 million, or P5.39 billion, before exercising the overallotment option. Belle will sell up to 489.56 million additional shares to cover the greenshoe option.

The offer shares will be crossed through the PSE today upon execution of a block sale. Settlement for the shares will be on October 2.

CLSA, Credit Suisse, and Macquarie were tapped as joint global bookrunners with CLSA acting as the sole global coordinator.

The Belle group trimmed its shares in Premium Leisure to boost the latter’s liquidity amid increased demand since it became the gaming vehicle of the Sy family.

http://www.interaksyon.com/business/96330/henry-sy-led-companies-to-sell-premium-leisure-shares-at-a-discount

CLSA Limited is buying 284.652 million more common shares of Premium Leisure Corp. (PLC) from Sy-led Belle Corp., exercising the greenshoe option to stabilize the share price of Premium Leisure.
In a disclosure to the Philippine Stock Exchange, Belle said it was notified by CLSA on exercising its right to by up to 489.556 million common shares of Premium Leisure under the over-allotment option.
“Based on said notice, CLSA will be purchasing 284.652 million Common Shares of PLC from the corporation at P1.65 per share payment for which shall take place no later than 11:00 a.m. (Philippine time) on 29 October 2014,” the disclosure read.
CLSA has already bought 204.904 common shares of Premium Leisure from September 29 to October 24 at an average price of P1.64 per share for stabilization purposes.
*****
Not only are current investors able to get a discount below BIG INSTITUTIONAL APPETITE for Dividend Yielding Plays; you also get a wide 8 centavos discount from the IPO and an even higher upside from a fundamental valuation perspective.
P1.59 receives 2.2 cents automatically and is 6 cents discounted from IPO price of P1.65; below the greenshoe option taken by Global coordinators.  What a great steal😀
If we assume #PLC can rise to P2.30 and have a cost of P1.59 ; not only are we able to get an upside of 44% for the year; we also will get a guaranteed 2.2 centavo dividend and a possible 8 cent dividend growing 20-30% year on year.  This is not only a great dividend stock but is also a great dividend grower such that its target price will naturally rise.
BUY #PLC 1.59 or lower.  Be Aggressive when the Fundamentals and the Technicals are all BUY Signals. 
*****
Industry Outlook:
Philippine Gaming: Strong Long-Term Outlook- Philippine Gaming Lures Bettors Away from Macau
News Worthy Snippets, Highlights (author discretion)
*****
1.) January 8, 2015
The Philippines is expected to be the fastest growing gaming jurisdiction in Asia, with gross gambling revenue likely to surge 32 percent in 2015 on the back of new openings, though the market may not be as deep as had been hoped, according to a report from Citi.
The growth will take the total size of the market to $2.7 billion in 2015, from $2.05 billion in 2014, a gain of 9 percent.
“We believe the exceptional growth in the Philippines gaming market seen in 2014 was a perfect example of “build it and they will come,” the report said.
City of Dreams Manila will become the market share leader and capture 23 percent of total market share by 2018, followed by Solaire at 20 percent and Resorts World Manila at 16 percent.
2.) Feb 6, 2015 
 – lure a slice of the revenues of Asia’s gambling market away from Macau and Singapore
– Melco Crown Entertainment in conjunction with Belle Corp, a subsidiary of major conglomerate SM Group, is banking on its 380 gaming tables, 1,700 slot machines, and 1,700 electronic table games to bring in the high rollers and boost its owners’ stock prices.
– dovetailing with the government’s plan to significantly boost the tourism sector.
– “Entertainment City”, a major strip of land right along Manila Bay earmarked for development as a fully-fledged gaming and entertainment zone.
– Melco Crown CEO Lawrence Ho expects CoD Manila’s revenue breakdown to differ a little. “Unlike Macau, where the gaming to non-gaming split is roughly 90/10, I expect non-gaming revenue in Manila to account for anything up to 25-30 per cent of total spend, given the huge domestic demand for entertainment and leisure,” he told Asean Confidential.
– Moreover, he expects the gaming component itself to be more evenly split 50/50 between VIP and mass-market customers.
– CoD thus has the potential to cannibalise a significant chunk of existing market from the likes of Bloomberry, as well as Pagcor, which simultaneously acts as the national gaming regulator and operator or several casinos nationwide. The resort’s potential to attract a big domestic following is also boosted by CoD’s tie-up with SM Group, the Philippines’ largest operator of shopping malls, which has helped drive the complex’s brand development.
– At a macro level, the Philippines’ chances of nibbling into Macau and Singapore’s market share has been further boosted by recent slowdowns in both. Macau, for example, recently recorded its eight consecutive month of negative growth in gaming revenue, dropping 17.4 per cent year on year in December to MOP23.75bn ($2.97bn).  Macau’s full-year revenue fell 2.6 per cent year on year, the first annual decline since records began, largely in line with widespread anti-corruption crackdowns in mainland China and growing entry visa restrictions. This could push some China-based high-rollers to consider Manila as an alternative, particularly given its proximity and cost competitiveness relative to Singapore
– Philippines has around 300,000 South Koreans working or studying in the country, and constitute a major target group.
3.) Feb 19, 2015 –

Supreme Court upholds Pagcor’s tax exemption

The Supreme Court has ordered the Bureau of Internal Revenue (BIR) to stop implementing its Revenue Memorandum Circular (RMC) 33-2013 subjecting income of Philippine Amusement and Gaming Corporation (Pagcor) from its operations and licensing of gambling casinos, gaming clubs and other similar recreation or amusement places, gaming pools and other related operations to corporate tax.Read more: http://business.inquirer.net/187082/supreme-court-upholds-pagcors-tax-exemption#ixzz3UQfa0K2x
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook

4.) Pagcor Delivers P3.25 Bil income for FY14  (Growing Despite Increased number of licensees such as CoDM, Solaire and RWM) – Industry is Increasing.  Build it and They will Come.
FY Net Income
2012  P2.8B
2013  P3.09 B
2014  P3.25 b
pagcor 2014pagcor 2013
casinos by pagcor
pagcor
Investing in Casinos Also Contributes to the Philippine Economy.  Did you know the Casinos pay one of the largest income contribution to the Philippines?
Nationbuilding through Casinos.  Yes.
nation building through casinos
Gaming Gives.
gaming gives
silid aralan project
Confiscated Illegal Logs Turned into Chairs for Public Schools
pinoy bayanihan
old slot machines to desks
5.) March 5, 2015 – Asian casinos steal Chinese bettors away from Macau

Macau casino revenue fell last year for the first time and may decline another 8 percent this year, according to analysts surveyed by Bloomberg. By contrast, South Korea and the Philippines will grow 16 percent and 33 percent, respectively, this year, gaining from the spillover of Chinese gamblers, Deutsche Bank analyst Karen Tang wrote in a note.

Major Structural Trends
1.) A Fundamental shift from West to East of the gaming industry is seen to boost Philippine economy
2.) Strongly Reflective of Highly Discretionary Consumption Spending of ASEAN neighbors and local affluence; Higher Disposable Income of Filipinos = Strong Tailwind for Casinos 
3.) Gaming Transitions from Gambling to Entertainment – Attract Leisure Spenders
4.) Build it and they will come: Seen as one of the drivers or “Tourist” attractions of the Philippines; Increased overseas reach as Philippines remains one of the lowest cost holiday destinations for ASEAN neighbors. 
5.) Diversified Clientele; Less Dependent to Macau Crackdown 
Korean, American, Australian, Japanese  and Canadian visitors being lead contributors outranking Chinese.

Visitors from Korea have the highest contribution with Php 61.02 billion, accounting for 33% of all inbound receipts. United States of America followed with Php 41.43 billion constituting 22% share, Australia (Php 13.94 billion) and Japan (Php 10.68 billion). Canada with Php 8.48 Billion ranked5th outranking China which recorded the fifth biggest revenue in 2013.   

strong asian wealth

 *****
I believe the Philippines’ gaming market has greater long-term growth potential than other ASEAN countries as it is largely sustained by a robust domestic economy, as well as a diverse VIP profile and growing affluence of the local population. Longer term, I expect the Philippine gaming industry gross gaming revenues (GGR)  to grow to $6-8 Bil by 2018-2020 or a CAGR beyond 30% due to new casinos and expansion of existing facilities in Pagcor’s Entertainment City.
Highlights:
1.) Less Dependent on Chinese Players in Macau = More Resilient Philippine Gaming Revenue Growth and Earnings Growth
Philippine Gross Gaming Revenues grew across the board for all players versus Macau gaming industry’s decline for 2014- We see Philippines a huge contrast versus Macau.  All Casinos in the Philippines are profitable.  Solaire, Resorts World Manila , Pagcor. 
a.) #BLOOM turns profitable within one year’s worth of operations

Bloomberry Resorts Corporation, owner and operator of the Solaire Resort & Casino, reported “a massive  turnaround in profitability” for the nine months of the year.

In a disclosure to the Philippine Stock Exchange, the firm said it generated earnings of P3.3 billion in the first nine months of 2014, nearly five times larger than the P868 million loss reported in the same period last year.

Bloomberry grew its total gross revenues by 127 percent to P22.44 billion from the P9.89 billion posted in the same period last year.

Read more at http://www.mb.com.ph/bloomberry-posts-p3-3-b-income-in-turnaround/#HHbFGQ4gubf2o3PJ.99

b.) #RWM GGR grew 4.7% YOY (9M14 vs 9M13) , EBITDA jumps 41.6% higher in 3Q14 vs 3Q13 at P2.8 Bil averaging 15% higher for 9M14 at P7.48 Bil. Net income for 9M14 12% higher yoy at P4 Bil.  

Travellers’ Net Profit at P4.0 billion, 12% improvement over same period in 2013

For the three months ended September 30, 2014, TIHGI posted total gross revenues of P8.0 billion, up 4.7% over the same period in 2013 and 9.9% over second quarter of 2014. Gaming revenues contributed P7.2 billion of gross revenues, with hotel, F&B, and other revenues at P772.3 million.  The Company’s gross gaming revenues for the three months ended September 30, 2014 registered a 6.2% improvement versus the same period last year and a 13.2% improvement compared to the three months ended June 30, 2014 with the improvement in win rate which is seen to continue to the next quarter.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the three months ended September 30, 2014 reached P2.8 billion or 41.6% higher compared to the P2.0 billion reported in the same period last year. EBITDA for the three quarters ended September 30, 2014 is at P7,486.5 million or 15.1% higher compared to the P6,502.4 million reported in the same period last year.

Travellers remains on net cash position at P4.8 billion as of September 30, 2014.

http://www.travellers.com.ph/travellers-net-profit-at-p4-0-billion-12-improvement-over-same-period-in-2013/#more-753

 2.) Macau may be contracting but Philippines is growing.  

A bigger domestic market is the Philippines’ key edge against other more established gaming destinations in Asia, states a report by Credit Suisse on the Philippine gaming industry.

In its ‘The Philippine Gaming Sector’ report, the Zurich-headquartered international financial services group said the Philippines is viewed as having a potentially large domestic market to complement the VIP market coming in from abroad. The VIP market is traditionally the main cash cow of casino hubs.

The Philippines’ large domestic market is expected to sustain the gaming industry, more so than its casino hub neighbors Macau and Singapore.

“The Philippine population of 97 million is almost 3 times that of Singapore, Malaysia and Macau combined, presenting sizeable onshore potential for the higher-margin mass segment. Meanwhile, limited hotel capacity and the absence of new casinos elsewhere in the region until 2015 could result in a spill-over of foreign VIPs into Philippines,” the report stated.

The Philippines also has the fastest growing working age population in Asia, aside from Japan, and is forecast to grow about 2% annually over the next 10 years.

An improving economy, accelerating wage growth, higher spending power and consumer confidence, which is at near-record highs, all point to favorable demand prospects, the report states.

May 2, 2013 http://www.rappler.com/business/industries/410-gaming/27944-ph-expected-to-have-sustain-gaming-market-credit-suisse

50% of Gross Gaming Revenues are coming from Mass Market 
Geographical profile of VIP customers: 
30% of VIP players are from Korea
30% from ASEAN
20% from China/ HK
20% Locals
Mass Gaming Revenues
More than 80% Locals
2.)  Strong Potential to Lure clients (junket operators) away from Macau and Singapore – Significantly low gaming taxes provides casino operators like CoDM, Solaire and RWM to increase junket commission rates.
3.) Strong Infrastructure Improvements –  P15.5 Bil NAIA Expressway would improve access to Entertainment City with a shorter travelling time.   Construction begun on 2 January 2014 and is expected to be operational by April 2015.[1][2]
Posted in A Little Common Cents Corner | Leave a comment

May 31, 2014 – Battle Tested Trading and Investing Methods to Beat Boring Bank Rates

It’s been a long while since I last made a blog post.  My temporary “hiatus” from social media is meant for me to study more for my CFA exam.  Meanwhile, let me share a rather nice CFA term which perhaps can be a trading meme best for recall.

What is a Spurious Correlation?

CFA- A spurious correlation – There may appear to be a relationship between two variables when, in fact, there is none.

In layman’s term – status relationship is “It’s complicated”

(anyway, sana may natawa sa joke ko.  Hindi ako comedian kasi.  Pero anyway, spurious correlation is actually one of the limitations of regression analysis.  This can be verified via a simple wikipedia or google search.  What it means is that, although there may be a significant statistical relationship between the amount of chocolates I eat and my stock market returns, it is a simple spurious correlation.  There was a study before that the amount of rainfall in Arkansas had a 90+ % correlation with stock market returns. Well I can’t remember where I read that from due to the number of articles or news I read from time to time. Sometimes it’s just serendipitous so don’t take every correlation seriously.)

*****

In my next series of posts (watch out for that – perhaps after June 7) ,  I will explain strategies that can be employed (General tactics and examples) to beat boring bank rates.  Some topics I will cover will be

1.) Peso Cost Averaging Works When Timing Entries and Exits are Difficult

2.) Support Zone and Resistance Zone Tranches (Collar Bone Style)

3.) Spot Vomits and Buy the Puke Method / Spot Euphorias and Sell Irrational Exuberance Method

(Find Capitulations, Bullish Hammers and Reversals.  Similarly Sell Exhaustions, Gravestone Dojis et al)

We will discuss the Safe Methods of Buying/ Bottom Fishing with concrete examples.  I will show you many charts and patterns to prove my point.

4.) Battle Tested Methods of Trading – from the MSCI quarterly rebalancing et al.  These are money making methods which you can take advantage.

*****

Fundamentals will eventually win end of the day so find companies with good fundamentals, good margin of safety entries and good risk reward ratios.  These can be boring companies but provided they give good dividends, you can weather it out and buy them slowly.

Quantify the impact of qualitative events.  Qualify the impact of quantitative events as well.

First Quarter EPS is not always equal to 2nd quarter EPS, 3rd quarter EPS and 4th quarter EPS.  Please check the nature of the business.  It may be cyclical, seasonal et al.  In general, mining companies are cyclical.  Retail companies are seasonal.  Ice cream sells better during hot days than rainy days and so forth.  Electricity consumption is high during hot weather rather than cooler days.  Retail spending is larger during Christmas and holidays prevalent during the last quarter of the year and so forth.  It takes a lot of common sense in understanding businesses.  Don’t always multiply by 4 whatever quarterly earnings you have to estimate the year’s income and the next years’.  Use the appropriate variables when judging the net income to make your forecasts and guesstimates at the end of day to be more precise.  In the end though, one must acknowledge that these are still only approximations and not actual results.

Fundamental Analysis is not as easy as it looks because analysis relies on assumptions.  When these assumptions are violated, inferences, target prices are questionable.  A good trader and investor must primarily know what are the variables?  Is it number of stores opened?  Is it the sales revenues per store?  Is it the sales growth per store?  How do we detect when our variables are over or under estimated?  How do we correct for it?

Rather than being static, the market and the variables are dynamic.  Hence, target prices of fundamental research reports are not futile but they have to be evaluated via assumptions.  It is up to the reader of the research reports to assess instead of ridiculing the analysts writing the research reports.  Any new information or news flow should affect the price whether in the short term or in its long term depending on the gravity of the nature of the disclosures set forth.  Do not involve yourself so heavily with target prices but weigh them against the assumed variables or drivers that grow the earnings of the business.   Intiendes?

I will discuss this in clearer form in my next posts with better and “in your face” examples to show that these methods work over time across many companies.  The purpose is for you to become a better trader in spotting them when they come along, and hopefully profiting from them.😀

 

Till then,

Faceless Trader🙂

 

P.S.

For any trader who is currently using the strategies I will explain in the next series of posts, no worries really because as they say in the world of markets – it is always the trader who knows the rules , when to break the rules and when to use them that matters.  These are all guidelines.  When enough people use these methods, the “arbitrage” profits tend to go away, making the inventive, adaptive, dynamic and creative traders flourish to make a new series of tools and methods to profit again.  Also, technical analysis as a method of making money has been written in so many books with methods repeated over and over again in centuries but human emotions never quite change, making the adept trader spot these arbitrage profits and make money over time.  Ain’t the markets fun?  There’s no one single method of making money in the markets.  :D

Come to think of it, it’s more fun writing a blog rather than status updates in social media since this is archived and easily referenced.  There are times when buying breakouts must be made.  There are times when you must fade a breakout.  Richard Dennis coined the Turtle Method – Buying Momentum – he’s widely acknowledged as one of the father of momentum trading with Curtis Faith talking about “The Way of the Turtle” in his own book as well as Michael Covel’s Turtle Traders narrative.  There’s equally a very successful trader named Larry Williams and Linda Raschke who have Oops Methodology and Turtle Soup Methods which are actually the opposite of Richard Dennis and Curtis Faith’s methods.  I like Mr. Jeff Cooper’s Hit and Run Methodology too.  There is one thing constant I find amongst very good traders and investors in the world.  They all have systems.  Fundamentalists can explain their systems.  Traders can explain themselves too.  Hybrids and macro investors and managers all have indicators and systems.  They all know when to cut loss and when to acknowledge the failures of their own systems.  :)

Posted in A Little Common Cents Corner | 2 Comments

April 1, 2014 – 30% Returns still exist in PSEI 6500- Know where to look for it.

Updated as of May 31, 2014 –

There’s been several news that came out that PCOR refinery plant which was scheduled to open 4Q14 will be delayed by 3 months or 1Q15 — which explains the sluggish price action.  Nevertheless, the core thesis of the fundamentalists never really changed.  NPV of the entire refinery plant will only be adjusted by 3 months which hardly makes any dent in the fundamental value.  For any investor, it’s just another 3 months worth of holding.  I too don’t know how long PCOR will rise but when you look at the MACD,RSI indicators, it really shows only a slow accumulation.  Worst case scenario , we get a retest at 11.50 (the placement price) but I peg this likelihood to around 20% chance only.

The good news is that Petron has gotten a lot of awarded contracts (AFP has already gave them a P4 Bil contract.)

http://www.doe.gov.ph/energist/index.php/80-categorised/downstream-oil-industry/4775-petron-wins-p4-b-afp-fuel-supply-deal

The fact that Petron can pay P600M pesos in its union of workers show that this refinery is a positive cash flow business in the long run so no worries.

http://www.interaksyon.com/business/87056/petron-bataan-refinery-and-union-sign-new-p600-m-cba—dole

It pleases me to tell any Petron investor that the engineering partner is world class to ensure that this upgrade in our refinery plant will happen.

http://www.engineeringnews.co.za/article/petron-refinery-master-plan-phase-2-upgrade-the-philippines-2012-02-24

To make yourself updated with any news specific to any company you are holding – please check my friend’s great website.  Mr. Jun Tags and David Miranda have created robots that help us curate and automate all the news links to make our investing and trading lives easier.  All the best faceless traders😛

http://bookaka.com/Home/Company/PCOR

 

*****

Highly Liquid Growth Stock Trading Less than 10X Forward PE (This Exists But Look Beyond the Short Term) 

#1 on this list is Petron Corporation ($PCOR)

Petron is a growth stock trading at no growth forward P/Es. At Php11.50-11.90 (any price below Php12.00) – you have a risk of only P1.00, but a reward of as much as P6.00 (for longer term people who can hold for at least a year.)

Which company in the PSEI can offer an earnings CAGR of more than 50% in the next 2 years?  Which company trades less than 10X Forward? Only Petron.

Why will Petron earn 50% income growth going forward?

Short Answer: Petron’s US$2bn refinery upgrade in Philippines is already 90% complete and should begin commercial operations in Q414.

Longer Answer:

Found via – http://businessmirror.com.ph/index.php/en/business/companies/17919-petron-set-to-complete-refinery-upgrade-in-2014

The project, aims to upgrade the oil firm’s 180,000-barrel-per-day refinery situated in Limay, Bataan.

The refinery upgrade will make Petron the only oil company capable of locally producing fuels that meet the more stringent and environment-friendly Euro-4 standard. The company said this will substantially improve margins as it eliminates the production of low-value fuel oil, converting it to high-value gasoline, diesel and petrochemicals instead.  Moreover, it will also give Petron the flexibility to refine crude from a variety of sources, thus enhancing the country’s supply security.  

When completed in 2014, Petron’s refinery will be able to produce petroleum coke, which may be used as fuel for the new cogeneration power plant for the refinery, the country’s largest oil refiner said in a presentation to its investors. Petroleum coke (often abbreviated as Pet coke or petcoke) is a carbonaceous solid derived from oil refinery cooker units or other cracking processes. 

The oil firm also reported that phase 2 of its cogeneration power plant is 80-percent complete. Phase 1 started operations in May 2013.

The new cogeneration power plant, which is expected to cost P21 billion, will initially use coal for its fuel requirements and then switch to Pet coke once  the  Limay refinery starts production in 2014.

 bataan refinery

petron bataan refinery

Here’s the website: http://www.petron.com/web/

 Important Questions:

1.) What just happened?  Why did Petron fall to 11.50-11.90?

PCERP (Petron Retirement Fund) sold 470M shares at P11.50.  Petron’s largest single majority shareholder is $SMC.

Important for Traders and Investors

This is actually positive to us because PCOR’s free float will increase from 16.61% to 21.62% post the sale.  This will effectively increase PCOR’s weight and may even be reasons for a possible entry in future FTSE,MSCI or PSEI rebalancing.  Note the Free Float is an important criteria. (Note that Meralco got included in PSEI primarily after the huge stake sale of $SMC.) 

2.) Will there be further placements?  You mentioned $2 Billion dollars worth of capital expenditures?

According to PCOR’s December 2013 public ownership report, the retirement fund owns 1,386,156,097 shares. Post the sale, the fund still has 916,156,097 shares. It is possible that the pension fund will sell the rest of its stake to raise an additional P10.5 billion (assuming a price of P11.50/share) given the huge capital outlay needed for the Malaysian refinery upgrade.   However,  as long as the market trades above P11.50 for $PCOR, it is highly likely that any further sales will be limited to this level.

2013 Public Ownership Report

2013 public ownership report

 

3.) Petron’s FY13 Earnings – What were the reasons for the jump in income? Is that sustainable?

By virtue of catalysts , it’s highly possible they can sustain and even grow due to so many catalyts.  So the market cap today of P110 Bil can grow to P150 Bil IF and only IF the earnings can grow to P10Bil in the next 2 years.  Is this possible? Via a change in margin and retail network expansion both Philippines and Malaysia – this is possible. a product mix change from negatives (fuel oil and asphalts) to whites (unleaded,diesel,gasoline,jet- better fuel like Euro 4 standards) – will make margin higher. Note too the various catalysts already pointed out. If service stations expand, then sales volume expands.  A rising GDP also means more fuel consumption.

 

Petron Corp. nearly tripled its net income in 2013 on the back of its sales performance in Malaysia.

In a statement, the country’s leading oil firm said it booked a consolidated net income in 2013 of P5.1 billion, nearly three times the P1.78-billion income posted in 2012 on “higher sales volumes for its Philippine and Malaysian operations.”

It maintained market leadership with an overall share in the Philippines of nearly 37 percent, driven mainly by its ongoing network expansion program.

Read more: http://business.inquirer.net/166842/petrons-consolidated-net-income-rose-nearly-300-in-2013-report#ixzz2xe0xcbjJ
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook

catalysts

 

 

2013 fy income

petron corp stock data

4.) Earnings Growth Comes from Product Mix Change after RMP 2 Refinery

RMP2 Project is 95% complete according to FY13 results briefing.  By 4Q14, commercial operations starts where earnings will improve owing to

a.) 5 year tax holiday

b.) higher refining volumes

c.) higher proportion of white products

Current Gross Profit Margin of 10% rises to 12%

 

5.) FCF positive by 2015, able to pay debts too by then.

After the 3 year Refinery programme, the company is expected to be able to pay off maturing debts since the earnings from the refinery and expanded network has an internal rate of return of 19%, higher than the debt interest of their perpetual bonds which is a mere 7.5%.

http://business.inquirer.net/105265/petron-raises-500m-from-sale-of-perpetual-bonds

 

6.) Valuations –

Most Refineries trade 15X P/E without much growth in earnings.  Petron on the other hand is a growth story, as long as you can hold until 4Q14 commercial operations and especially by 2015 when those Euro4 and Refinery 2 from Bataan earnings start kicking in.

 

This is a waiting game.  This is not for trading.  This is just buy and hold.

****

Risks –

There can be another Petron Retirement Fund selling since there’s still 900M shares to sell, but I’m not sure if they’d sell lower than P11.50

 

– Faceless Trader

Posted in A Little Common Cents Corner | 3 Comments

Oct 29, 2013 – Bad Girl RRHI? Really ? (Market Commentary re Robinsons Retail’s IPO)

RRHI

What is Robinsons Retail Holdings Inc?  If you look at the above picture which I took a screenshot of from the prospectus, it actually represents a multiple retail format holding company.  Why multiple?  It has supermarkets, department stores, DIY stores, convenience stores, drug stores, toy stores and specialty branded clothing stores.

According to Euromonitor’s store-based retailing market share data, RRHI is the second largest Multi-Format Retailer in the Philippines in terms of revenue in 2012. With over 30 years of retail experience, RRHI possesses a deep understanding of Philippine consumers and enjoy market leading positions across all of our business segments.

As of 1H13, RRHI consists of 940 stores nationwide, with 428 stores in Metro Manila, 423 in Luzon (outside Metro Manila), 55 in Visayas and 34 in Mindanao, with a total net selling space of approximately 545,337 sqm.

Core Retail Operations can be subdivided into 6 business segments:

1.) Supermarkets –

2.) Department Stores

3.) DIY stores

4.) Convenience Stores

5.) Drug stores

6.) Specialty Stores

RRHI Operating Information

Summary of the Offer, Use of Proceeds, Growth Plans :

Offer Period – October 29 to November 5, 2013

Listing Date- November 11, 2013

The offer of up to 484,750,000 new Shares, consisting of 461,897,500 Primary Offer Shares and up to 22,852,500 Optional Shares pursuant to the Over-allotment Option.

*****

At P58/share , the company’s total outstanding shares is 1,345,000 or a market cap of approximately 80 Bil.  The company will most likely be compared to Philippine retail counterparts – SM Retail and Puregold.  From proforma statements of 1H13, the company has EPS of P2.62 according to prospectus.  (Actually I have computed it myself and I only got 1.89 or approximately 2 bucks when I annualize the 1H13 net income number, so I’m not sure why my EPS calculation is different from theirs.   I used the outstanding shares, and it seems as if they calculated it based on the 473 M shares that will be sold to the market (which seems wrong.)

Calculated EPS =  Net income of 1H13 *2 = 1272*2 or 2,544

Outstanding Shares = 1,345 or EPS of 1.89 per share. (Seems the prospectus computed EPS here is wrong?)

RRHI EPS

How does the P58/share stack up against peers?  Well if EPS is 1.89/share then it’s trading at 30X 1H13 annualized P/E only at par with Pgold and SM Retail which are both aggressively expanding and also trading roughly at 30X P/E levels as well.  (SM Retail is computed via Sm Investments’ attributable marketcap.)

Is there growth in Robinsons Retail?

1.) 1400 stores by 2014  RRHI plans to increase their total number of stores across all retail formats to approximately 1,400 by the end of 2014, from 940 stores as of June 30, 2013. Approximately half of the proposed new openings are planned for Metro Manila, with the remaining new openings planned for the rest of the country. Approximately 20% of the new stores are expected to be larger format stores (supermarkets, department stores and DIY stores).

2.) Further increase operating efficiency and margins – Higher Margin from Product Mix and Cross Selling of Products

RRHI intends to continue to leverage their multi-format business model and scale to realize greater synergies in sourcing and procurement and also to maximize our bargaining position with suppliers and consignors. As we continue to grow our business, we negotiate for additional discounts for advertising support, product distribution, enlistment of new products, satisfactory service levels, volume purchase, offering preferential gondola placement and display to our suppliers, discounts for senior citizens and persons with disabilities, and supplier portal access, among others, to help increase our margins. We will also leverage our increasing bargaining power with landlords, to secure store places at prime locations and to seek attractive rental rates. Further, centralizing certain functions, such as information technology, marketing, intellectual property management and human resources functions across our operating formats has also helped control operating expenses. In the past three years, as a result of our cost control measures, our total operating expenses, as a percentage of total net sales, has remained relatively constant at 17.6%, 18.9% and 18.5% in 2010, 2011 and 2012, respectively.

In addition, we will look to improve margins through the optimization of our product offering mix. For example, we intend to increase the mix of higher margin non-pharmaceutical products from 40% to 50% at our drug stores by adding more beauty and healthcare products. We also intend to enhance the positioning of our convenience stores as a lifestyle store by strengthening its leadership in higher margin ready-to-eat products.

3.) Expand into new retail segments and pursue attractive acquisition opportunities – Robinsons Gourmet Food, Babies r Us et al

By leveraging the strong financial base provided by our established businesses, we intend to continue to explore expansion into new retail segments, such as home furniture, sporting goods, school and office supplies and coffee shops, which we believe will complement our existing portfolio, through new store openings and opportunistically through acquisitions.

On July 8, 2013, Robinsons Gourmet Food and Beverage, Inc., a wholly-owned subsidiary of RI, was incorporated to engage in the business of establishing, operating and managing retail coffee shops and espresso shops. In addition, within our existing retail formats, we will also look to pursue acquisitions of smaller local supermarket chains, DIY, drug store chains and consider including Babies “R” Us as a concept store within the Toys “R” Us store as a prospective expansion in an effort to consolidate the market, strengthen our market position and increase scale efficiencies. We intend to evaluate and assess each potential acquisition based on, among other things, the reputation, track record and locations of the targets. To ensure the successful integration of acquired businesses, we intend to standardize the operating procedures of any newly acquired assets. Our track record of successfully identifying and integrating new retail formats and businesses provides us with the confidence to continue to execute such a strategy going forward.

FAQs from Retail Clients : Can I flip RRHI on the first day?

In my honest opinion, if RWM has a successful run on November 5, people will order RRHI due to positive sentiment.  Downside is that if RWM fails in its IPO on Nov 5 (put it at 10% probability), then RRHI will falter more due to the perception bias that Gokongwei IPOs normally are a flop with CEB burning many investors’ pockets which will fail to rekindle any IPO interest with Gokongwei companies.  Nevertheless, looking at the contents of this company, assuming 2013 EPS is not 1.90 and if I’m wrong that it really can grow to EPS of  P2.30 by 2014 (conservatively earning 15% from 1H13 annualized)  then it can hit at least 66 or the high end of its original target range during the offer period of 55-66 price range.

Plus, it’s never wrong to hold RRHI for its retail components since the stock (assuming maipit ka) is earning money and the earnings can grow to where the price is currently at.  Also the use of proceeds seem to really add to the value of the company.  In a way, I think RRHI will somehow track the index in the future.  It won’t outperform like what Puregold did because of its massive expansion plans, but RRHI will not fail primarily because its in the right sector and still is at the heart of the retail segment – with track record in the industry for the past 30 years.  Good for longterm investors in my view.  It doesn’t seem to be bad girl RRHI for me.   Seems like a good girl RRHI.

badgalriri

Trivia: How did URC IPO fare before? During 1994, IPOs managed to go up but note too that 1994-1995 was a very strong bull market in the 90s.

See chart below.

In 1994, a total of 21 companies listed on the stock exchange, raising P37.4 billion. Among these companies were Petron Corp., SM Prime Holdings, Universal Robina Corp., Megaworld, Aboitiz Equity Ventures, Cosmos Bottling Corp. and Cebu Holdings Inc. The IPO fever made instant millionaires when new issues soared. IPOs such as Benpres and Petron closed more than double their IPO price during their first listing day.

The IPO fever symbolized the boom in the 1990s when virtually all kinds of company shares were gobbled up by investors of all stripes. That fantasy land, however, disappeared when the Asian financial crisis erupted in July 1997, taking shareholder wealth with it.

So far, more than 90 percent of those that have gone public have made good or even exceeded their promises,” said AB Capital Securities Erwin Balita.

Lim said the continued advance of the stock market benchmark PSEi, which is now at its highest level in nine years and nine months, has created a strong urge among many companies to offer their shares to the public rather than borrow from banks.

http://www.philstar.com/business/377735/return-ipo-fever

URC during IPO

– Faceless Trader

Posted in A Little Common Cents Corner | Leave a comment

July 14, 2013 – Perception Can Be Stronger and Lead to Reality

You must have heard about these cliches ” Fake it, until you make it.”  “Perception is stronger than reality.” As a trader for most of my life, perception is powerful and sometimes even stronger than reality.   You can often hear and read from experienced traders these simple lines “when in doubt, get out” as well as  “when there’s smoke, there’s fire”.  In fact, Larry Williams used to narrate about a bunch of Chicago pit traders who seeing strong typhoons in their midst (without setting foot in Orange County or Texas was it?) bought up hundreds and thousands of futures of commodities thinking that the rains will destroy all harvest inducing a short squeeze in lifting prices higher.  Whether or not there was indeed a scarcity was not the point, a bunch of traders believed it so, and thus prices moved wild.

Just as Bernanke’s hint of “accomodative monetary policy” shook the dollar and all assets correlated to it, the entire market seemed to obey only one word (at least for the time being) and it is the almight powerful Bernanke’s words.  Such power accorded to one must have been similar to how Alan Greenspan called traders’ actions “irrational exuberance” during his time when he mercilessly cut rates all the way inducing asset bubbles, but for the time being, traders didn’t care on being right, all they cared about was making money.

In one sense, what I write here is not about how these economists, traders and so forth meddle with each person’s life (knowingly or unknowingly) but more on the behavioral aspect of perception.

Too often, we think that perception is just an illusion.  However, consider so many studies proving the validity of panacea and laughter as the best medicine to patients.  The belief of getting well makes people well.  Beliefs are stronger than what we attribute them to be.  That’s why behavioral analysts are better than traditional accountants and conventional economists when it comes to getting as close to reality as possible.

Time and time again, perception has shown itself to be stronger than reality.

My Questions are:

1.) Does perception of a less corrupt Philippines lead us to be less-corrupt?

2.) Does effects of a better administration lead to a better administration, thereby a virtuous cycle?

Image

http://www.economist.com/blogs/graphicdetail/2013/07/daily-chart-8?Fsrc=scn%2Ftw%2Fte%2Fdc%2Fbribery

Countless studies seem to show that

we humans do tend to make our dreams and beliefs a reality.  Even rats respond to Pavlovian dogs.  Art of Manliness writes that studies have shown that rats can be taught to like having sex with death-scented rats. Read more  here “How delaying intimacy can benefit relationships)  

In one study, Pfaus painted female rats with “cadaverine” – a synthetic form of the scent of death. Cadaverine smells so bad that rats will scramble across electrified gates to get away from it. Thus when virginal male rats were put in a cage with these death-scented females, they at first predictably refused to mate with them at all. But after much coaxing from the researchers and flirting from the female rats (who were blissfully unaware of their repulsiveness), the male rats gave in and got down to business. Later on, when these male rats were given a choice between mating with the death-scented rats and ones that smelled naturally good (to a rat), they preferred to mate with those wearing eau de cadaver. Pfaus even tried perfuming some female rats with the delightful smell of lemon, but the male rats couldn’t be swayed from the preference they had formed during their first sexual experiences.

In another experiment, Pfaus put different virginal male rats in little Marlon Brando-esque leather jackets, which they wore during their first times mating. When the leather jackets were later removed and the rats given a chance to mate again, a third of them refused to even make an attempt, many that tried to give it a go couldn’t get an erection, and sex for all the rats took longer and required a lot of help from the females.

In both groups of rats, the male rats had come to associate certain elements (scent, jacket) that were present during their first sexual experiences with arousal, and had formed a preference and even a need for those same elements to be present for successful sex later on. This result has been shown in numerous other studies – when rats are sexually stimulated in certain locations or in various degrees of light, they will come to associate those conditions with arousal. It’s basic Pavlovian conditioning, applied to sex.

If we think we’re less corrupt, we act in less corrupt manners.

If we think we’re beautiful, we tend to become beautiful.

If guys think viagra helps their sexual performance, it makes them perform better mainly due to their confidence than the drug itself.

So just believe and you might lead yourself with your actions for that belief to be real.

Watch these TED videos:

Perspective is everything.

This is what every Axe commercial tries to use, and maybe it does work.

Note though that false perception can harm you.when perception harms you

– FT

Posted in Others | 3 Comments

July 15, 2012- Do not Crucify the Different Ones + Jessica Hagy’s a Genius

Good afternoon blog friends🙂

I’ve found some nice little jewels in my Facebook friends and wanted to share the best ones so I don’t forget.

1.) Jessica Hagy writes a list of 20 plus simple 3 sentence advice on finding your calling.  VERY Helpful.

People become fat one bite at a time, and we become adults one hour at a time, so what we do today matters. Check out all the interesting advice  here (really short ones from Jessica Hagy complete with visuals. This takes 3-5 minutes to read, but an entire day to reflect about.🙂

2.) iCats Fellowship – Sharing a friend’s shoutout who is merging her financial geekdom with venture capitalism and social entrepreneurship. For interested people – check out the website. Deadline is July 23 for this year (but u can always think about next year🙂

3.) Electricity Free Bamboo Iphone Speakers

http://www.stumbleupon.com/su/282aON/inhabitat.com/ibamboo-is-an-electricity-free-iphone-speaker-made-from-a-piece-of-bamboo/

4.) Direk Jose Javier Reyes has a blog! – Follow him.  Only learned about this from Rappler.  This is one of the nice posts I liked :D http://chokingonmyadobo.blogspot.com/2012/06/five-things-i-have-learned-about-rock.html

It is funny but the basic lesson in an industry like entertainment does not begin and end with box office or ratings results. It has everything to do with starting a trend … or reinventing … or repackaging … or surprising the audience with what else is there to offer when they think they have already seen everything. 

The moment you become predictable, you do not only lose your audience. You cease from being a performer. You become a spectator like all the rest.

And that is called career death. 

5.) And have some laughter bites🙂

6.) A Bad day is truly relative.  – April 14 , 2012 -$AAPL first broke the 600 mark , it still remains above 600 after 3 months🙂

7.) Do not crucify the different Ones.  Think Different.  Still missin Steve Jobs.

– Faceless Trader

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July 14, 2012- Philippines- Breakout Nation + Useful Methods Found in the Internet on Rising Markets

http://www.tradingmarkets.com/.site/stocks/commentary/editorial/How-to-Trade-in-both-a-Bull-Market-and-a-Bear-Mark-78601.cfm – Buy uptrending stocks on pullbacks.

bull market is when everything in the economy is great, people are finding jobs, gross domestic product (GDP) is growing, and stocks are rising. Things are just plain rosy! Picking stocks during a bull market is easier because everything is going up. Bull markets cannot last forever though, and sometimes they can lead to dangerous situations if stocks become overvalued. If a person is optimistic and believes that stocks will go up, he or she is called a “bull” and is said to have a “bullish outlook”. 

 

Be conservative and never invest in anything you do not understand. Before you jump in without the right knowledge, think about this old stock market saying: 

“Bulls make money, bears make money, but pigs just get slaughtered!”

Read more: http://www.investopedia.com/university/stocks/stocks7.asp#ixzz20Yzq8qrj

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Useful Article/Videos:

Philippines Credit Rating Should be Upgraded – June 14 2012 

http://www.bloomberg.com/video/94626815-philippines-credit-rating-should-be-upgraded.html

Asia’s Next Tiger – June 19 2012

http://www.foreignpolicy.com/articles/2012/06/19/asias_next_tiger

What’s behind Philippines’ Surprising GDP Growth? – July 12 2012

http://edition.cnn.com/2012/07/12/world/asia/philippines-surprise-surge/index.html

The economy was buoyed by strong domestic consumption. It is the money sent home to the Philippines by its overseas workers, known as remittances, and the rise of outsourced call centers that serve as the long-term stabilizers relatively unhindered by a sagging global economy, according to analysts.

*****

Lots of nice articles re Dolphy, but this one is one of the better ones 

http://www.rappler.com/entertainment/7400-the-man-who-made-us-laugh

– Faceless Trader

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July 14, 2012- How Crazy Passion Helps Each One of Us + Loving Jennifer Cheung And More

How difficult has it been turning your love of home baking into a business?

Any entrepreneur will tell you, starting and running a business is not easy, especially one in Food & Beverage. You run into problems and challenges that no textbook, classroom and any previous experience can either really prepare you for or teach you what to do. But at the end of the day, when you’re crazy about what you do, it’s just not that much hard work. So while it might still be manically stressful at times, the passion you have for the content inspires you to move forward. – Jennifer cheung

*****

I don’t normally work maniac 100+ work week hours.  Investment bankers do.  I think I know a few people who do.  Does that make me lazy?

Hmm… I realized though…that when I get home, the first thing on my mind is still reading news and disclosures.

It’s a Saturday, and the first website I went checking in was http://www.pse.com.ph and reading inquirer.net

I was going to read financial statements to understand the possible numbers for a buyout offer on Swift reported by Inquirer last July 12 (whether just as a personal exercise or such.)

Then it dawned on me… hmmm, I guess I probably work 100+ work hours without even knowing it.

Anyway, I don’t love to call what I do as work.  I just love reading about people’s success stories, their failures and whatsoever.  I don’t have the passion for the stock markets just for myself.  I think it’s crazy uplifting to help clients make money.  There’s a different feeling of knowing that one has been able to make others richer.  Of course, losses are part of the game, so we cut losses as well when we do.

Anyway, today I woke up and listened again to Ms. Jennifer Cheung of HK’s Sift Cupcakes.

She’s a Super Girl!  I super love her. She’s an investment banker who became a cupcake baker.

Read the following articles to know why I’m super loving her (and btw I haven’t even tasted her cupcakes yet!)

http://sassyhongkong.com/that-girl-jennifer-cheung-of-sift-desserts/

http://hk.asia-city.com/city-living/article/executive-decisions – for people at career crossroads, this can help

http://siftdesserts.blogspot.com/ – the small cupcake business that is getting raves from all over asia and now expanding to 4 stores!  Take them to Manila Jennifer!🙂

*****

I’ve got friends who went into the following business paths – Kada is a clothing brand similar to Tom’s shoes.  For each shirt you buy, they make a child go to school.  Hence their tagline is wear it forward.  I didn’t think my friend A. S. will be the entrepreneurial , philanthropist type but he is and he and his team are doing great things in helping kids get to school. Nice!

http://www.kadaclothing.com/

Jay Jaboneta and Dr. Anton Mari Lim, another friends of mine have made their lives concentrated on the Yellow Boat School of Hope. In September, Jay will be going to Acumen Fund Fellowship.  Kudos!  Both of them are working hard, very successful in their chosen paths and choose to give it back to the country.

http://yellowboat.tumblr.com/

Noreen Bautista, is part of the social entrepreneurship path presented by Gawad Kalinga’s Center for Social Innovation.  Google this girl.  She’s crazy all over doing bags out of hyacinth water lilies.

http://entrepsbuild.ph/

I’ve got lots of other amazing friends and I love them all.🙂

*****

End of the day, I just want my friends to follow their dreams.

The sooner you admit that money is a tool to make the world a better place, the better you will live.

Invest in relationships. Invest in GROWING and EARNING businesses (thereby companies giving more jobs to people).  Invest in REAL performances and not fictitious numbers.

Invest always “in good company”. 

*intentional ung in good company. I’m not barok english grammar.

In Good Company – (i meant it in a plural manner talaga because what I wanted to imply is that its not just simply companies that are listed.  There may be good companies that are privately listed, as well as  the people (the company of friends) who we hang out with that will result to the betterment of mankind.

Below’s a song from another great band “The Company”:D

– (Btw I’m not saying the lyrics relate to me. I just think this is one of the most popular songs by The Company- For non-Filipino readers, the song is about a broken-hearted martyr hehe, if there’s even such a term.)

This one looks like a good movie ah. (The Company din ung title.)

Forever an idealist, but understandably tempers my idealism to realism.

May your future and current businesses prosper and take the Philippine population to prosperity!  

Happy Weekend, Faceless Trader😀

(P.S.  If you make money in the markets, I believe you should point and ask yourself why you’re making money.  Is it because the overall Philippine trend is up?  As they say, do not confuse brains in a bull market.  Identify why you’re losing money too. Inability to be disciplined?  Inability to position size? Black Swan events if you don’t manage your risks.  Do not put it in one stock.  Have diversification.  Then over time— teach people to fish, and not give the fish.  One day, that person may even have the entire fishpond and will always remember you for being the first to help.)

Here’s an SSRN paper “Don’t Confuse Brains with a Bull Market: Attribution Bias, Market Condition, and Trading Behavior of Individual Investors” – Read it here http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1979208

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April 14, 2012- RFM Corporation- Magnum’s Sizzling Hot Brand Ambassadors- Enough Validation to Buy or Temporary Summer Craze?

Good afternoon😀  First disclosure – this is strictly an informal draft of chicken scribbles and thoughts after going through some PSE disclosures by RFM Corporation , specifically their 9M2011 Results and 2010 Annual Report.  I do not own any share of RFM Corporation’s shares and am strictly reading their reports only as a fundamental exercise.  I love eating a lot, to my body’s demise, though I haven’t even tried the Magnum icecream even though social networks and a lot of people tweet the icecream incessantly.  

*****

Backgrounder:

RFM’s shares have risen from Php1.20 at the start of January to Php2.20 as of last April 14, 2012.  Most market pundits attribute sizzling Solenn Heusaff et al, Magnum brand manager Jean Madrid , RFM CEO John Concepcion’s outstanding marketing campaign to be responsible for the skyrocketing sales whisper numbers to support the validity of the rise of the company’s stock to more than 90% for the year.  So…, I guess whether for hindsight reasons or just because I definitely missed this boat’s first run up, I’m here to just try to read up on the company’s financial statements and get to learn a deeper understanding of this company.  :)  Astonishingly, no single brokerage firm in the Philippines seems to cover this company.  So, allow me to take a stab at it in a simple informal blog post.  Note that I just like to blab and not make rigid market reports.  As far as you can tell, this is just another market-related wannabee post.

In this photo: Magnum Brand manager Jean Madrid and Unilever- RFM CEO and managing director John Concepcion

Check these news links to see what people have been talking about / tweeting about re the icecream:

1.)    April 1, 2012- Titanic ice cream gets a titanic launch

Magnum is the ultimate sensorial experience—velvety ice cream coated with real Belgian chocolate. It’s all such a hedonistic experience, really. – Tessa Prieto Valdes, Magnum Brand Ambassador

2.)   March 1, 2012 – When Belgian Chocolate meets Ice Cream

Magnum has less calories than a chocolate-chip cookie. – John Concepcion, Unilever-RFM Ice Cream CEO

3.)    March 29, 2012 – Cool Magnum strikes while hot

Understanding the Business Model:

While Magnum sales may take the cream of the crop among some market punters’ eyes, RFM is a holding company whose businesses are around 70% food and 30% non-food.  From their 2010 annual report, the businesses owned by RFM are the following:

Their more familar brands are  also the following: (this is a snapshot taken from their website: http://www.rfmfoods.com)

A Few Financial Highlights and Quick Number Analyses:

1.) According to RFM, they will finish 2011 with Php504 Mil Income, higher than markets’ estimates of Php 420-430 Mil income.

An excerpt from the news clip explains the reason why RFM exceeded market forecasts:

“Selecta Ice Cream, a joint venture with world giant Unilever, is increasing its leadership of the industry with market share going beyond 71%, coming from around 66% at the start of 2011.  Remarkable growth was seen in Selecta-Hersheys, Supreme, Classic and Cornetto lines, with innovations backed by strong marketing campaigns.”

“Flour-based businesses led by White King Fiesta spaghetti likewise continued to hit record sales levels, with growth close to 50%, hitting rated capacity starting September, and pushing up its recent market share in its biggest key account to 35% by yearend, from 28% in January last year.” Concepcion added.

RFM reported that aside from Selecta ice cream and Fiesta pasta, sales of Selecta milk, White King Champorado and Arroz-Caldo mixes, Sunkist litro pack and Swift Mighty Meaty and Corned Beef Swak also performed very well as the company rationalized and focused its brand portfolio, supported by more exciting product repackaging, aggressive merchandising and trade-related programs.

Here’s a snapshot of 9M2011 numbers.  The FY2011 annual report hasn’t been released in the PSE nor company website yet.

One of the most important tables I’ve read in their 2010 Annual report is this contribution to revenues breakdown.  Further reading in the annual report will also reveal that the ice cream segment (50-50 joint venture of RFM and Unilever under business segment URICI) contributed income of Php265 Mil on the back of Php2,746 Mil in revenues for 2010.  Since the company earned roughly Php625 Mil during that year, then the ice cream and milk segment contributed roughly 265/625 or 42% of income during 2010.

2.) Gross Margins, Sales Growth, Earnings Growth Etc.

I checked the 2008-2010 annual figures and got the following:

Gross profit margin in general has went up from 21.61% in 2008 to 34.39% in 2010.  9M2011 gross margin however, fell to 26.14% though, with the 25.92% increase in direct costs and expenses from 9M2010.  Company doesn’t write in their quarterly reports the reason for the rise in expenses but I will suspect that the increase in wheat prices, could have been one of the biggest culprit in the increase in those direct costs and expenses. Notice from the chart below that wheat price increased from 180/metric ton to 360/metric ton from June 2010 to June 2011.  Also, Anhydrous milk fat (AMF) that RFM sources from New Zealand went up too from 4500 to 5500 but soon went down gradually to 3500 in favor of the company.   Note that  the flour business contributes 37% to sales revenues, while the icecream and milk business (I estimate around 16%? as around half of the 33% perhaps will be revenues from Sunkist, ready to drink juices and the Swift foods group?).  Still, around 50% of the raw material expenses will be affected and highly price-sensitive with global wheat and milk prices.

3.) Notable Competitions to Consider: (Just click the image to read it thoroughly)

Reading their 2010 annual report shows that RFM is definitely more like a Spaghetti and Ice Cream Business.  Most of the growth comes from their Selecta and White King Fiesta Brand.  However, I really liked the fact that the company through their Interbake commisary supplies all the burger buns of McDonalds in the 260 stores of Luzon, and also supplies for Wendy’s and KFC.😀  Pretty neat businesses.

*****

Valuations:

There is roughly 3.16 Bil shares outstanding in RFM, and as of last April 14’s close of 2.20, the market capitalization of RFM is standing at approximately Php7 Bil.  Now here’s where some net income forecasts stand to be of use.  If this company can earn at least Php500 Mil for this year, roughly the same from 2011, then it’s priced fairly at about 14X P/E for 2012.  If however, earnings rise to Php600Mil, then it’s priced at about 11.67X 2012 P/E which seems to give some valid rationale why the shares’ rise can be sustainable with the earnings.  This, however, still seems to be fairly valued considering its obviously larger comparable like Universal Rubina (URC) trading just 13.96X 2012 forward P/E at the price of 64.90 (if COL EPS estimate of 4.65 is correct.)

Sigh, I’ll have to go deeper in understanding how  these income forecasts are.  Nevertheless, it’s been nice trying to look at this company.  At least, if in the future, some opportunity arises, I can at least make a guesstimate.  I still can’t believe that RFM actually traded just at Php 1.00 a couple of months ago, and more amazingly 20 centavos during 2008 and 50 centavos in 2009.  See that’s why I relish reading financial statements now, in case I want to bet a huge sum in a business for quite some value propositions.  :)

Of course, technicals help too🙂 Ciao and have a happy summer indulging in Magnum ice cream folks.

Interestingly, I just learned that Mr. John Concepcion pala is a joint business partner in Yabu, the katsudon restaurant that opened in Megamall recently.  teehee, yeah I love eating.  You can check some food blogs about that katsudon craze.😀

Read more about Yabu here: John Concepcion turns Japanese

– Faceless Trader

Posted in A Little Common Cents Corner | 4 Comments

March 4, 2012 – Some footprints on the sand

Market Outlook : Base Case Remains with the Risk On Trade which means any pullback in equities will be and should be bought. A Rotation to some speculatives may be possible.

There is no doubt that sentiment has improved dramatically. 5,000 may be just a number, but the psychological impact cannot be discounted.   With improving market conditions, speculative stocks are likely to participate in a round2 move in the frenzy (whether skyscraper gains, I don’t know).  Technically, Angping index stocks seem to have corrected and behaved just like technical textbook charts say, with prices and volume behaving well.

Pattern analysis may seem straightforward, but it is by no means an easy task. Richard Schabacker (Technical Analysis and Stock Market Profits)  states:

The science of chart reading, however, is not as easy as the mere memorizing of certain patterns and pictures and recalling what they generally forecast. Any general stock chart is a combination of countless different patterns and its accurate analysis depends upon constant study, long experience and knowledge of all the fine points, both technical and fundamental, and, above all, the ability to weigh opposing indications against each other, to appraise the entire picture in the light of its most minute and composite details as well as in the recognition of any certain and memorized formula.

I would presume a lot of traders who bought speculative stocks previously got stigmatized. (Especially GEO since this has gone up to 3 pesos to 1 peso, then 2.50 and then 1.50, 1.00 and 50 cents.  It’s a very traumatizing stock for the public.  In any case, that doesn’t mean these roller coaster stocks can’t be bought or traded.  High Risk Content Below (which is why I was thinking of whether publishing this. but anyway, let’s see just how far risk appetite goes).

*****

Historical Broker Transactions Analysis of GEO:

(Short Term Analysis)

1.) GEO – Footprints 

Period: Feb. 15, 2012 – March 2, 2012 (Round 2)

Pros

1.) Wealth, Kings and Goldstar Securities (269+389+170) are buying back the shares sold previously at prices of 0.96-1.02 cents (Accumulating worth Php 32M, 26M and 18M respectively)

2.) Firstmetro, Valuequest, SB Securities, Angping and Sincere Securities (267+190+115+110+129) are also buying at prices of 0.97-1.02 of amounts equivalent to Php11.5M, 16.88M, 8.3M,  12.2 M, 9M respectively.

3.) Lucky Securities, Yu& Co and Premium Securities are bullish supporting the stock too with greater than Php5M worth bought.  Yu&Co and Lucky is stuck at 1.07 and 1.01 prices, but Premium got in at 0.95

Symbol Name Buy Ave Sell Ave
269 WEALTH SECURITIES, INC. 0.9758 1.0629 32,441,750
389 KINGS POWER SECURITIES 1.0282 0.971 26,855,370
170 GOLDSTAR SECURITIES, IN 0.9609 0.9934 18,068,650
190 VALUE QUEST SECURITIES 1.0099 0.9829 16,884,350
110 ANGPING & ASSOCIATES SE 0.9862 1.0005 12,259,720
267 FIRST METRO SECURITIES 0.9769 0.9786 11,536,880
129 SINCERE SECURITIES CORP 0.9983 0.9598 9,009,690
115 SB SECURITIES,INC. 1.0102 0.9875 8,332,490
198 LUCKY SECURITIES, INC. 1.0161 1.0263 7,876,600
278 YU & COMPANY, INC. 1.0741 0.9564 5,634,050
225 PREMIUM SECURITIES, INC 0.9526 0.9499 5,154,500

Profit Takers/ Breakeven

1.) Abacus, MDR and Mountpeak sold 61.5Mil worth in total together between 98 cents to 1.00

2.) Triton, Equitiworld, HE Bennett, First Resources, Citiseconline, Benjamin, Mercantile and Optimum sold a total of Php60.7 M worth between 0.95-1.02

Symbol Name Buy Ave Sell Ave
102 ABACUS SECURITIES CORPO 0.9738 0.9872 32,441,750
208 MDR SECURITIES, INC. 1.0005 0.9759 26,855,370
210 MOUNT PEAK SECURITIES, 1.0043 0.9909 18,068,650
136 TRITON SECURITIES CORPO 1.0406 1.0272 16,884,350
153 EQUITIWORLD SECURITIES, 0.9897 0.9578 12,259,720
175 H.E. BENNTT SECURITIES, 0.9874 1.0247 11,536,880
252 THE FIRST RESOURCES MAN 1.0425 0.9799 9,009,690
203 CITISECONLINE.COM, INC. 0.9957 1.0002 8,332,490
123 BENJAMIN CO CA & COMPAN 0.95 0.9583 7,876,600
205 MERCANTILE SECURITIES C 0.9894 0.9741 5,634,050
215 OPTIMUM SECURITIES CORP 0.9623 0.9945 5,154,500

Period: Jan 31, 2012- Feb 14, 2012 (Round 1)

1.) The First Run-up from 60 cents to 1.20 were bought mostly by IGC Securities, Premium Securities, Angping, CitisecOnline, Wealth, Firstmetro, Tower etc.   Nevertheless, the bulk of buyers has average volumes of 85 cents to 95 cents. (We can see this to be a strong support in case things get awry).  There’s quite a huge buyer at 1.12 though from Damarket securities which could provide some temporary resistances.

Symbol Name Buy Ave Sell Ave Net Buy
140 IGC SECURITIES, INC. 0.9544 0.8168 52,044,250
225 PREMIUM SECURITIES, INC 0.7913 0.8286 50,255,660
110 ANGPING & ASSOCIATES SE 0.8428 0.9513 35,464,560
203 CITISECONLINE.COM, INC. 0.9552 0.9 28,720,610
269 WEALTH SECURITIES, INC. 0.849 1.0261 25,161,660
267 FIRST METRO SECURITIES 0.9016 0.8773 16,180,760
253 TOWER SECURITIES, INC. 0.9569 0.9302 14,990,880
210 MOUNT PEAK SECURITIES, 0.8546 0.9062 14,552,360
204 DA MARKET SECURITIES, I 1.1268 0.916 12,569,640
219 PAPA SECURITIES CORPORA 0.8814 0.8712 10,512,760
213 NIEVES SANCHEZ, INC. 1.0361 1.0047 9,507,340
136 TRITON SECURITIES CORPO 0.9658 1.0032 8,976,380
112 AB CAPITAL SECURITIES, 0.843 0.8405 6,709,550
115 SB SECURITIES,INC. 0.9525 0.9225 6,662,040
252 THE FIRST RESOURCES MAN 0.9228 0.8968 6,237,000
190 VALUE QUEST SECURITIES 0.8737 0.9967 3,869,700
2.) Kingspower managed to successfully buy a lot at cheap prices and take profits at 90 cents average. Mercantile Securities also managed to buy a lot at an average of 75 cents and sell at 95 cents average.
Symbol Name Buy Ave Sell Ave Net Sell
389 KINGS POWER SECURITIES 0.7849 0.899 -70,483,270
102 ABACUS SECURITIES CORPO 0.8882 0.8863 -24,139,980
153 EQUITIWORLD SECURITIES, 0.8286 0.8093 -21,893,550
208 MDR SECURITIES, INC. 0.8331 0.7673 -20,898,410
124 B.H. CHUA SECURITIES CO 1.0064 1.0246 -18,500,200
170 GOLDSTAR SECURITIES, IN 0.8684 0.9938 -17,434,640
154 EVERGREEN STOCK BROKERA 0.9557 0.8382 -15,283,410
275 YAO & ZIALCITA, INC. 0.9889 0.7898 -14,215,170
200 MANDARIN SECURITIES COR 0.9516 0.8876 -12,571,150
103 ACCORD CAPITAL EQUITIES 0.9042 0.8337 -9,420,160
205 MERCANTILE SECURITIES C 0.7444 0.9535 -7,443,960
283 EAGLE EQUITIES,INC. 0.9738 0.8723 -6,330,000
238 R.S. LIM & COMPANY, INC 0.8213 0.8463 -5,363,120
211 NEW WORLD SECURITIES, I 1.0004 0.7973 -5,250,300
266 VICSAL SECURITIES, INC. 0.8861 0.8459 -4,076,140
*****
Conclusions: Lots of resistances at 1.10-1.20 areas, but fairly strong supports at 85 cents to 95 cents presents a good buying opportunity/ tradable range for traders.
Sector Observations: I believe this is subject to NI,DIZ,AGP and other Angping index stocks to perform first, as GEO is just following the moves of the leading stock indicators like NI and DIZ.  Not to underscore the fact that if Nihao or Dizon stops climbing, the musical chairs may consolidate.  Also, if market action is focused on the index stocks or earnings announcements like TEL,ICT,EDC this week, there can be some more consolidations.
With oil stocks being bombard in the news reels, some third liner stocks have been getting some market activity so we’ll see whether the rally can rotate to some third liners like First Metro’s Gus Cosio’s OV, OPM,OPMB picks which are getting some loving in the markets.
What do you think?
-Faceless Trader
Posted in A Little Common Cents Corner | 1 Comment

Dec. 13, 2011- MEG Below 1.75

In the year 2011, Megaworld’s stock price has only dropped lower than 1.75 at only one time until today.  It was when the Philippine Composite crumbled to 3,700 end of September to early October.

1.) September 23 – Oct 14, 2011 Historical Broker Transactions

Brokers that accumulated during the sell off were primarily Macquarie, Aurora, BDO, JPMorgan, Goldstar and Wealth with net buy transactions greater than Php10 Mil.  The biggest sellers are coming from foreign brokers with CLSA at the helm, with DBP Daiwa, Deutsche, UBS and ATR-KE following with the selloff.

2.) The Scenario Today – Dec 12, 2011- Present – Another Sale? Or Cheaper for a Valid Reason?

Without going to the possibility that the exercise of the warrants at Php1.00 being the primary trigger for the sell off in MEG’s stock price, let’s first check at the primary big sellers causing the large sell off.  Below, I highlight the biggest sellers for the past two days on MEG, breaking the critical 1.78 support level of MEG with huge volumes, giving way to a big slide recently.

*Historical transactions from Dec.12-13, 2011

Notice in this sell off that CLSA and Credit Suisse were the first triggers of the sell off, selling huge truckloads at 1.76-1.78 leading other “followers of momentum”/ technicians to cut loss on their positions, hence BDO, Jaka, Macquarie and Deutsche’s selling prices are all selling shares lower than 1.75

Notice too in this sell off that CLSA is another big bulk seller in these low prices, same to the prior Philippine Composite sell off last September.  Either CLSA, often sells MEG shares at a bargain, or does CLSA and CSUISSE know something?  Can they be selling something fundamentally related?

Technically, the stock looks to retest its previous supports of 1.50-1.60 range.

*Another interesting thing I have observed is that CSUISSE has bought back 3M shares at 1.68-1.69 levels after selling a huge 30Mil position at 1.78, I’ll be watching what CLSA and CSUISSE does in the next couple of days, if I’ll be trading the stock MEG other than the charts.


What do you think?

-Faceless Trader

Posted in A Little Common Cents Corner | 11 Comments

Dec 4, 2011- Rogue Traders are Exhibiting Darwinian Instincts

Financial Times’ John Gapper has written an excellent article recently.  I recommend any trader/investor to read it.

What makes a rogue trader? by John Gapper

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My Personal Summary of Observations/Favorite lines in the article:

It’s interesting to know in the article, that rogue traders who double up or average down (Martingale’s system) or what we call gambling when the chips are already down, is a trait that’s not simply shared in humans, but across birds and other animals.  In a study made by biologists at University of Arizona, yellow-eyed junco birds who were starved for 4 hours, faced with losses started to gamble.  Normally, these juncos will generally avoid risk unless they face difficult energetic stress.

John Gapper writes:
In other words, they will choose the safe option for feeding – the closest natural equivalent to financial traders making money – unless they are in danger, either through hunger or cold. They will then switch from “risk aversion” to “loss aversion” – gambling in search of a bigger pay-off.

This phenomenon is not confined to sparrows. Experiments have found similar behaviour in mammals such as shrews and insects such as bumblebees. The difference is that bumblebees’ responses are triggered by collective stress – in one test, they preferred blue flowers with a constant amount of nectar to yellow flowers with a variable amount as long as the colony had plenty of honey in store. As soon as it ran short, its members chose the yellow flowers.

The Famous Kahneman Tversky Experiments

In experiments at universities in Tel Aviv, Stockholm and Michigan, Kahneman and Tversky set groups of people a series of tests. In one, they asked them whether, given a choice of gaining 450 units of the local currency, they would settle for that or take a 50-50 gamble on winning 1,000. Mathematically, the average gain was 500 – more than the 450 – yet the subjects were overwhelmingly risk averse. They chose the safe gain rather than the risky bet.

The psychologists then reversed the experiment (and a series of related ones) by offering the subjects a choice either of settling for a definite loss of 450, or taking a 50-50 gamble on losing 1,000 or losing nothing. This time, they rejected the definite loss for a half-chance of escaping unscathed.

Like other animals, they started to gamble.

 *****
– This article made me realize very important phrases I was told before-
1.) Scared Money Never Wins.
2.) You have to unlearn everything that’s human about you.  It’s normal human nature (Darwinian) to average down.  But the right thing to do is to average up.  It’s normal human nature to avoid losses, but the right thing to do in the market, is to cut the loss when one sees it.  It’s normal for humans to take profits when one sees it, but it’s right to hold onto it for the longest possible time, as long as one is ahead.
Rogue traders were too risk averse, too scared to lose money, ending up losing more money than they can handle.
The desperate scramble to avoid losses at all costs is a defining characteristic of the rogue trader.
The rogue trader may appear to be acting strangely, but he does what comes naturally. – John Gapper
MOST BREAKING INSIGHT
“Faced with life-threatening circumstances,” they say, “even the most disciplined individual may not be able to engage in individually rational behaviour thanks to adaptive ‘hard-wired’ neural mechanisms that conferred survival benefits to the species.” The survival of the fittest, they add, underlies “modern adaptations such as boredom, thrill-seeking behaviour, rebellion, innovation, and most recently, financial market bubbles and crashes… From an evolutionary perspective, financial markets are neither efficient nor irrational – they are merely adaptive.”
Watch this video.  :)  Courtesy of Reformed Broker good-morning-i-am-the-rogue-trader
– Faceless Trader ( I want to read this book Fake: My Life as a Rogue Trader by Mr. David Bullen)
Posted in Sharpening the Mind | 1 Comment

Dec 4, 2011- A Picture Paints a Thousand Words

Net Foreign Inflows – Philippines

 

Enough said.

– Faceless Trader

Posted in A Little Common Cents Corner, And The Message Can't Be Put Into Words | 5 Comments

Dec. 1, 2011- Turning Points – A Review of “Trading Without Ego” by Ms. Ruth Roosevelt

A good friend of mine shared a link of this article “Trading Without Ego” by Ruth Barrons Roosevelt.  I recommend you read it.  What’s most memorable here, and perhaps my own perceived difference in my own trading now, is that I don’t associate my ego anymore from my trades.  If the FED intervened today, giving me a good profit, I don’t pat myself on the back, telling myself how good I am.  I just consider it as a really lucky event, and thankful that it happened.  I am not hating myself today, why I only had that sized position.  I know that when I made my plan, I traded it and I’m basing all my trades from that plan.  I don’t care whether I should have earned twice or thrice, had I taken a larger position.

So these lines from the article have been really helpful for me.  Thank you Ruth Roosevelt, excellent psychological coach for profitable trading.  I think it has been more on the psychological aspect of the game, that has made me trade better, or at least at peace with myself whenever I have to cut losses or stick to a position size.  It was never reading about financial textbooks or getting a higher degree.  I don’t know about other traders, but psychological coaching really improves results.

*****

Very Relatable Lines:

1.) You hear about it. You read about it. Don’t be misled. Traders tell stories. They write stories. They tell how great they are. Big trades. Big numbers. Big egos. Hubris. And sooner or later, big downfalls. It goes with the territory.

2.)  “Authentic freedom cannot be experienced until one learns to tame the ego and move out of self-absorption.” – Wayne Dyer

3.)  “I’ve said it before, and I’m going to say it again, because it cannot be overemphasized: the most important change in my trading career occurred when I learned to DIVORCE MY EGO FROM THE TRADE. ” – Marty Schwartz aka PitBull

4.)  If your self esteem rises and falls with your trading results, you and your trading are in trouble. Self concept has to be strong and durable and not at the mercy of the current, last, or next trade.

5.)

Some typical symptoms of ego-tizing trading would be the following:

  • Not putting in stops. The ego doesn’t want to be proven wrong.
  • Hesitating before putting on a trade. The ego wants reassurance before it begins.
  • Overtrading. The ego wants to prove itself big time.
  • Getting stuck in a trade. The ego has intertwined itself with a trade and is holding on for dear life. It cannot cut out. The ego doesn’t want to be wrong.
  • Adding to a losing trade. The ego digs its hole deeper in a massive effort to crawl out.
  • Grabbing a profit too soon. The ego wants a pat on the back.
6.) She needed a boundary between her self-esteem and the outcome of a trade. She needed a boundary between self worth and being wrong. With such a boundary she could give herself permission to not always have to be right.
7.) You are more than your trading. A boundary also informs you that the results of one trade are not to be confused with the results of all of your trading. Boundaries guide you as to the difference between the past, the present, and the future.
– Faceless Trader ( I hope the article has helped you as much as it did mine).
Whenever I feel any itch to add positions and make big trades, I try to remember to tame my ego and tell myself, that I don’t need to “prove myself big time”.  I’m sticking to my planned position size, and I’ll be happy and content adding positions only if the levels are not extended.  If they are, I’ll be patient and wait. When I feel like adding leverage and putting more fire (more risks), I remind myself of the time when I was caught in the wrong direction so that I’ll always be aware and stick to a trading plan.  Murphy’s Law works everytime for me, when I want to add leverage.
Posted in Sharpening the Mind | 3 Comments

Nov. 30, 2011- Steve Perlman Explains How They created Benjamin Button’s Special Effects

I love watching and learning from different disciplines, perhaps because I never really knew anything about programming and coding.  I’ve often been fascinated with technology, even if I don’t understand quite everything that Steve Perlman here is talking about.  In any case, I’m sure we all agree that the facial capture technology leading to best special effects for “The Curious Case of Benjamin Button” etc, are all powered by technologies such as these.  I can only imagine my elation, if one day, I can understand even 1/10 of what these Silicon valley and Palo Alto engineers do in real time.  For now, I’m just happy watching it like a fan.

Enjoy and if you understand anything, I hope to interact with you guys.  (Leave a comment, or an email: facelesstrader@gmail.com)

– Faceless Trader (Wishes to understand technology in a deeper way, but understands it took years and lots of failures, and must first focus on the chosen niche of trading.  Nevertheless, this is pretty interesting right?)

Posted in Others | Leave a comment

Nov. 30, 2011- December and January Effects- Myth or Backed by Data?

Market Sci blog published two research posts yesterday, when it comes to seasonal effects in our markets.

December Super Duper Bullish

December (Not So) Super Duper Bullish

Generally, Decembers have always outperformed all other months of the year.  However, what’s interesting is that when Jan-Nov months are in an uptrend (which is how the Philippines have been trading at), we’re likely to finish stronger.  If Jan-Nov months are not up YTD, December isn’t going to perform.  Well, above is a statistic that takes into consideration the US Markets.  You can go take a look at it, and make better decisions with data.

Also, another good statistic to know upon making your bets with the markets (if you’re inclined to use historical statistics as a helpful probability in making trading bets) is the fact that we’ve been experiencing “all or nothing” days.  This means, we’re up very positively , or we’re down very negatively and not much in the “in-betweens”.  It’s literally a “pula or puti” kind of market.

(Data courtesy of Bespoke)

Still though, most market veterans will always say past results don’t forecast the future.

-Faceless Trader

Posted in A Little Common Cents Corner | 1 Comment

Nov 30, 2011- Pockets of Strength, Areas of Strong Growth and Themes for 2012

I can understand that most short term traders in the Philippines have seen only muted price reactions, perhaps even lethargic reactions to overall global markets’ cheer and exuberance over possible 30 cents assurance of IMF to cover the sovereign bonds of European debt, strong Black Friday US Sales etc.

For the past two days, AUDUSD which has been an excellent proxy with a 0.99 correlation to the Dow Jones index (1 Week) according to DailyFX’s Research team, rallied from lows of  0.9670 and is hovering near .9950 as of writing, from a short term high of 1.0070.  Some market pundits are now searching for levels on where the rally can possibly extend further, in order to initiate short positions, as there’s still a lot of bearishness on Europe’s fundamentals, weighing on the whole region, dismissing what transpired a few days ago as merely relief rallies on an oversold market.  Asian markets, US Futures are dropping again.

News that the Bears Love to Chomp Upon:

Today, I saw in the news stream that 7 US banks have recently been downgraded a few notches in their credit rating (Bank of America, Goldman Sachs, Citigroup etc), while Chinese banks got upgraded (Bank of China, China Construction Bank etc.).  JPMorgan was also removed from Australian Banks’ prime list.   American Airlines filed for bankruptcy.

Read more from Bloomberg here:  Stock Futures in U.S. Decline After Bank Ratings Cut by Standard & Poor’s

William Pesek’s Commentary on the Laughable Credit Rating Agencies, is a must read.

Pesek writes:

Come on, can anyone really say our global credit-rating system works? Look no further thanStandard & Poor’s downgrade of U.S. debt this year. Afterward, investors couldn’t get enough dollar-denominated securities. Then there’s MF Global Holdings Ltd., which S&P, Moody’s and Fitch Ratings all rated investment grade a week before bankruptcy. Congress is right to investigate whether Jon Corzine’s star power and political connections clouded judgments of the New York-based firm’s viability.

Our credit-rating system also shows how little things have changed. It missed the Asian crisis 14 years ago and Russia’s default a year later. It was asleep on the job when technology stocks crashed, Enron Corp. imploded, the U.S. housing bubble inflated, Wall Street lost all sense of responsibility and Europe veered toward a financial cliff.

*****

There’s just so many mixed views in the market, and this can be seen from the price action itself so I’d just like to concentrate on a few pockets of strength that are fundamentally good to look upon before trying to make any trading positions in a flaky market.  It’s easier today, to just do research and wait until things are clearer.  Since I’m a perennial optimist, I have listed below pockets of strength and areas of strong growth that’s besetting our futures.  They may be related to the markets, or may not, but nevertheless, these are places where I believe the future is bright.

Notes to Self: — Look and read further into these topics.  I just want to bring your attention to these themes.

Pockets of Strength/ Themes for 2012 and beyond: (Rough Drafts in my head) 

1.) China’s Luxury Market/ Luxury Retailers/ Gold, Watches and Expensive Bags

Mega Trends: Rising Consumption for High End Goods in Asia Unabated

Industry

Sales of luxury goods in mainland China hit an estimated US$8.6 billion in 2008, according to the consulting firm Bain and Company. When purchases by Chinese people abroad are factored in, the market was worth US$20 billion.

China is forecast to become the world’s top buyer of luxury goods by 2015, according to consulting firm PriceWaterhouseCoopers.

Source: China Post

Specific Company Earnings Results – Prada Beating Estimates

Nov. 29, 2011 – Prada Confident for Year as Quarterly Profit Beats Estimates (Bloomberg)

Sales Growth

Prada follows rivals including LVMH and PPR SA in predicting sustained demand for luxury items amid Europe’s sovereign-debt crisis. Burberry Group Plc’s Chief Executive Officer Angela Ahrendts said this month the British company can weather any fallout by focusing on wealthy clients in cities such as New York and Hong Kong. Still, Tiffany & Co., the luxury jewelry retailer, said today that sales growth will slow to the “low-teens” in percentage terms in the fourth quarter.

Prada said the pattern of retail sales in November is in line with previous months. Retail sales climbed 39 percent in the quarter and 36 percent in the nine months through October, the 98-year-old company said. While Prada is ready to react to defend profitability, “we remain highly confident about the potential of the luxury market,” it said.

Sept. 20, 2011 – Prada First-Half Profit Jumps 74% on New Stores, Asia Growth (Bloomberg)

Hermes International

Birinyi likes Hermes International  which he called the “most iconic brand in the world.” (Top 5 Stock Picks for 2012, Birinyi CNBC)

Sept. 2,2011-  Birkin bag maker Hermes International SCA overtakes France’s second biggest bank Societe Generale SA by market value

Hermes’s market value is 55 percent greater than Societe Generale’s, even though it has 5 percent of the staff and 8 percent of the revenue of the lender, according to Bloomberg data. Investors are paying 54 times reported earnings for Hermes compared with 5 times for Societe Generale.

2.) Data, Data and more Data is our Future, and the implications to productivity, profits

The Need for Data Aggregators, Data Scientists, Data Specialists

In the United States alone, our research shows, the demand for people with the deep analytical skills in big data (including machine learning and advanced statistical analysis) could outstrip current projections of supply by 50 to 60 percent. By 2018, as many as 140,000 to 190,000 additional specialists may be required. Also needed: an additional 1.5 million managers and analysts with a sharp understanding of how big data can be applied. Companies must step up their recruitment and retention programs, while making substantial investments in the education and training of key data personnel. (Reference: McKinsey Quarterly, “Are you Ready for the Era of Big Data”, Nov 2011)

Useful Quote Reminder:

“Capitalize on big data instead of being blindsided by it.” – McKinsey

More Useful References/Links on Data:

1.) Competing through data: Three experts offer their game plans (McKinsey)

MIT professor Erik Brynjolfsson, Cloudera cofounder Jeff Hammerbacher, and Butler University men’s basketball coach Brad Stevens reflect on the power of data.

“I first break down all of the statistics that I can on opponents to try to get my mind wrapped around what their trends are.” – Brad Stevens, Butler University Men’s Basketball Coach

“I think this revolution in measurement… is as profound as the development of the microscope and what it did for biology and medicine.” – MIT’s Erik Brynjolfsson on how big data yields productivity and profits.

“Conceive data as a competitive advantage.” – Cloudera cofounder Jeff Hammerbacher

2.)Data Analytics: Crunching The Future (Bloomberg Businessweek)

Minority Report- Becoming a Near Reality

The company works with law enforcement agencies around the U.S. to keep track of about 15,000 ex-cons, meaning it must collect and analyze billions of GPS signals transmitted by the cuffs each day. The more traditional part of the work consists of making sure that people under house arrest stay in their houses. But advances in the way information is collected and sorted mean SecureAlert isn’t just watching; the company says it can actually predict when a crime is about to go down. If that sounds like the “pre-cogs”—crime prognosticators—in the movie Minority Report, Florek thinks so, too. He calls SecureAlert’s newest capability “pre-crime” detection.

3.) Why Geeks are the Best Marketers (Bloomberg Businessweek)

Amazon.com is the king of all Moneyball Marketers and is so stealthy that Chief Executive Jeff Bezos has often stated that Amazon has “no marketing department.” What the company does have is hundreds of analytics geeks, running perhaps the world’s most sophisticated marketing effort—monitoring the performance of online and offline ads.

GEEK TECHNIQUE

Amazon spent more than $1 billion in marketing last year. The company runs thousands of ad tests each month to find keywords and messages that drive consumers to its website and gets them to buy. Ad spending is carefully analyzed to ensure payout. That’s a big reason why the company has grown an average 27 percent per year for the past 10 years.

4.) Subset on Data: — Sports Shoes + Performance Data = Ground Breaking New Products 

Adidas -$338 Shoe With a Chip To Show You Your Performance 

“We’re able to show you what you did, give you the key metrics of your game, and enable you to compare this to your previous performances, the performance of your friends, competitors, or our global stars,” says Ryan Mitchell, head of the product introduction team in Adidas’s interactive business unit. (Bloomberg BusinessWeek)

5.) Sustainability,Going Green, Solar Powered Phones, Electric Cars, Polysilicon wafers and Solar Panels as a Theme

While the topic of going green, and sustainable energy has often been a hot topic as hot as Asia leading our nations for the past 5-10 years, most companies in this sector aren’t really given much attention and still trading at a speculative story phase.  Since this is still relatively considered “innovative and pioneer products”.  Companies trading in this space are worth looking at.

Useful Links and Summaries:

1.) The business of sustainability: McKinsey Global Survey results (McKinsey)

McKinsey estimates that the clean-tech product market, for example, will reach $1.6 trillion by 2020, up from $670 billion in 2010. The World Resources Institute estimates that people at the bottom of the income pyramid, who earn less than $3,000 a year, embody a global market of more than $5 trillion.2

Company Specifics  (GE, Dow Chemical, Whole Foods, Walmart) 

GE, for example, placed early bets on climate change: in 2004, before Al Gore and Hurricane Katrina made this a top-of-mind issue, the company resolved to double its research investments and sales in clean technology. It also promised to “green” its own operations. As a result, GE’s Ecomagination division has been a tremendous growth engine, with product sales reaching $18 billion in 2009. Other companies too have found instructive ways to build sustainability into drivers of value.

Returns on capital

Most companies creating value through sustainability look first to improving returns on capital, which often means reducing operating costs through improved natural-resource management (such as energy use and waste). Dow Chemical, for example, reported that it invested less than $2 billion since 1994 to improve its resource efficiency. To date the company has saved more than $9.8 billion from reduced energy consumption and water waste in its manufacturing processes, even as it continues to develop innovations. In 1996, through a separate initiative, Dow also created a set of goals for environmental, health, and safety issues, and it has ensured their integration into the company’s processes by tracking progress with clear metrics. As a result Dow, with a 20 percent reduction in absolute greenhouse gas emissions, has gone well beyond Kyoto Protocol6 targets.7

Companies are also driving down costs by systematically managing their value chains. Wal-Mart, for example, expects to generate $12 billion in global supply chain savings by 2013 through a packaging “scorecard” that could reduce packaging across the company’s global supply chain by 5 percent from 2006 levels. Moreover, companies can add value by improving employee retention or motivation through sustainability activities or by raising prices or achieving higher market share with new or existing sustainable products. Whole Foods Market, for instance, raised its sales by 13 percent a year from 2005 to 2009, in an economy experiencing single-digit growth.

Companies To Study In This Space:

$TSLA, BYD Electric Cars (HK:1211), Samsung, GCL Poly Energy (HK:3800)

Videos on Tesla

Elon Musk Profiled: Bloomberg Risk Takers (Founder of Tesla)

Samsung Solar Powered Phones – http://inhabitat.com/samsung-releases-solar-powered-phone/

*****

Bottomline: Trying to make sense of today’s uncertain environment is a difficult game.  One’s better off just reading on industry sectors that are experiencing tremendous growth, rising earnings, expansions in stores and sales and do research more into it to understand what’s happening in the bigger picture, and where to hide for pockets of strength in a decidedly difficult global market.

Just today, I saw a news clip on Meg clinching a P7Bil Clark Dev’t Deal in the Inquirer.  I believe those types of news, particularly the Andrew Tan-led group Alliance Global also expanding to a $1.1 Bil Bayshore project are all bullish points to keep your radar stock screens on.

– Faceless Trader (Tesla Car is the featured image for this post)

Posted in A Little Common Cents Corner | Leave a comment

Nov 28, 2011- Philippines – The Islands of Safety – Perspectives from a bigger picture

It’s been a long while since I last posted any market-related research.  Frankly, I’ve missed creating reports that are actionable for readers too.  Here are some observations that I have in our current Philippine markets.  All views are independent.

Useful Reminders:

1.) Blogging about the markets is not just simply voicing personal opinions but it is about viewing the world in a certain way and sharing it with others.  It’s a communal activity, as Mr. Om Malik of the popular technological blog Giga Om would say.    Hopefully all of you – my super-smart readers who have also become friends – will join me in this journey, and offer me advice, guidance and tips.

2.) Being wrong is as important as being right. What’s more important — when wrong, admit that you are wrong and listen to those who are/were right.

(If you find some views here that contradict, or agree with your own researched views, please kindly leave them in the comments.  I’d love to create connections.  These normally lead me to think of new ideas and new opportunities too.  You can also choose to write an email to me: facelesstrader@gmail.com )

*****

We are continuously being bombarded with short, near term news and in the process, we are failing to think about the big picture.   We cannot blame ourselves for our often twitching market views though, because as you can see in the image below, we are experiencing extreme volatility swings ever since the last 3 months.

Whipsaw Markets Illustrated

Perhaps most of my Filipino readers can attest that a swing in our currency USDPHP from 44 to 42.50 to 44.00 in just a few months, isn’t quite “normal”, but this has been true for all other Asian and major currencies.  We have been swinging wildly back and forth. AUD went from 0.94 to 1.07 and was last seen trading at 0.9700 and currently swinging upwards at 0.9850 as of writing.

Thus, in my market research today, I’m going to try to stray away from my usual short term nature, into making a weekly analysis of how we have fared in the index, as we near the end of 2012.

*****

Important Questions of Market Traders and Investors + My Answers:

1.) Should we stay cautious?  Will we be seasonally stronger for December, just like all the other years?  Is there really a December effect?

To answer this- I looked, tabulated and typed the closing prices of the monthly historical charts of our Philippine Composite Index from Year 2001-2011, using publicly available market data to see whether if November is a down market, on whether there are “seasonal” bounces during Decembers.

From the data I gathered, I found that strong rises from previous uptrends tend to have stronger Decembers or at least a sideways December, except if we are in a serious bear market (such as 2002 and 2008).   From 2001 to 2010, we had only 2 bad decembers and 8 up december months, with three of them rising more than 5% in the last month of the year versus November’s monthly close.

So, if you ask me for an answer, based purely on data alone, we normally have good Decembers, and trying to buy stocks merely for that “December effect” has at least 80% chance of either breaking even or making money, rather than losing.

*****

2.) What would be a good long-term (6 month -1 year) strategy to develop and what are some conviction stocks (fundamentals,technicals) to accumulate for 2012?  

Right off the bat, I tell you I know nothing about what will happen for 2012, but the following are good stuffs I’ve been reading that can help in your decisions.

I don’t know the answers.  If I knew, then I’ll be a trillionaire.   What I can do is to help lead you to the insights that help you answer the questions yourself.  Below is how I think.

Btw, all of my research makes use of public information.  I just predominantly use newspapers and company reports disclosed in Philippine Stock Exchange.  I don’t have any sophisticated broker reports etc.

Here are news clips I’ve read that can be useful:

Bullish Prospects in the Philippines

Macro (Philippines)

1.)  Philstar Reports that GSIS To Hike Placements in Local Equities (From 10.5% to 15%, possibly next year) 

2.) Philstar columnist Valentino Sy of PhilEquity Corner writes several reasons why Philippines has placed gold medal in current world markets.

3.) Check news headlines if I’m wrong, but I’ve read that BPO centers in the Philippines are expanding and hiring more this year.  Definitely bullish prospects.

Micro (Philippine Specific Company News)
2.) Company Specific Bullishness/ Tourism/ Casino Entertainment Themes – (AGI)
Alliance Global Expanding into a Larger and Bigger Resorts World (Inquirer)
I think investors and traders have to look more closely and watch the price action in AGI, even if the chart is pretty much traversing a sideways range.  I don’t know what will happen.  I don’t see a buy signal, nor do I see any sell signal, but if I were simply to just do a peso cost averaging strategy, this company looks something to be investigated upon.
From my previous research in this company, AGI is very much cash rich with 78 billion pesos, and despite all economic forecasts pointing to a slowdown, this company is even expanding in a $1.1 Bil project that’s 3 times larger than Resorts World.  I think you have to check whether Mr Kingson Sian’s optimistic prospects are valid or bubbly.  Do your own due diligent research, and let me know your findings as well.  Do you think its over expansion or prudent use of their cash for new growth opportunities?  Technical price action was an undecided doji in the markets awhile ago with DBP Daiwa eating a lot of shares (Bought 1Mil +) at 10.20, but ending at 10.14.  We’ll see how the market thinks, but keep this in your radar.
Cebu Pacific  (CEB) – Valuation and Buybacks
Normally, if I’m a value investor, I don’t want company buybacks alone to be the sole reason why I like a company.  CEB’s technicals generally stuck in a downtrend and consolidating in the 70-72 areas, and will only be good for people who will accumulate for the longterm. Momentum traders generally avoid this stock.  There have been recent company disclosures that CEB’s management has bought back their shares at Php70.00, bringing their treasury shares at Php 5 Bil +.  I can’t remember where I specifically read the news, but I think one should put this on a radar screen if one’s a value investor.
Metro Pacific (MPI) – Metro Pacific eyes gov’t orthopedic hospital (Inquirer)
The Metro Pacific group plans to scale up its hospital group, currently the smallest in its infrastructure portfolio, into a P10-billion business in five years by acquiring more hospitals and unlocking more values from them. By operating a chain of hospitals, the group can benefit from improved purchasing leverage which in turn could translate to lower prices for patients.
*Just like AGI, I think investors should check deeper into this company, as Manny Pangilinan is making MPI a hospital acquisition warchest.
MEG,ALI – Property counters that have managed to bring positive earnings surprises in the 3Q2011’s report will also be companies that I’d investigate further if I was a value investor.
*As for the Momentum strength leaders such as LC,LCB, PGOLD, I’d just follow their price action, and not care much about the fundamentals.  I’d also consider studying all the MSCI inclusions – URC,SMC,ICT — since fund managers will somehow be buying index-constituents in the MSCI.  I better take a look at the company’s fundamentals and valuations for a long-term peso cost averaging basket portfolio.
*****
Most lack the conviction to deal with short-term pain in order to do the right thing for building long-term shareholder value. I have trouble myself sticking to long-term, but sometimes, I think a perspective from a bigger picture will help us make rational decisions for our portfolios (especially those with a medium/longer term bent).
On Missing Economists’ Estimates Today –
Watch this video clip in Bloomberg http://www.bloomberg.com/video/81678526/
Even the analyst here admit in the video that they find the Philippines to be resilient, and targets a Php41.00 in the next 3 years.
*****
Personal Conclusions:
If you take on a long-term challenge, show a deep commitment to the process.  If you take on a short-term view, show a deep commitment to the process of trading the technical price action alone.
Without a doubt, we should be grateful that Philippines remains an island of safety for our trading and investment public, amidst all the panic brought about by the European crisis into all the markets.  Cautious optimism is advised.
Be happy that we are living in an island of safety, peace and beautiful, pristine beaches and shores. (literally and financially)
– Faceless Trader
(I’ll try to write a post on technical views alone and historical broker price action in the next posts.  Thanks)
Posted in A Little Common Cents Corner | 1 Comment

Nov 24,2011- Inspirational Quotes and Pictures to Make You Smile

Quick confession.  I took up some graphic design lessons during a few Saturdays as a creative outlet, just to unwind.

Here are just a few things that I do to pass the time and make myself smile.  Hopefully , somehow you will smile too.

Below are just positive vibes😀

 

1.) So anyway, there was one time when I  just wanted to eat a nice chocolate cupcake swirl, so since my mom bought some from S&R, I went eating one, and felt like creating a small reminder for it.

2.) During a trip in India, I took this very happy picture from a bakery.

I inserted a nice quote to help keep the positive vibes going😀

“As you develop the daily habit of looking for good things, your life will steadily improve” – Andrew Matthews, Happiness in Hard Times

3.) Play is the highest form of Research. – Albert Einstein

I took a picture I saw in a store upon travelling in India, then I painted it to come up with this.

Before and After

 

– Okay- Have a great and happy day.  Smile!

– Faceless Trader (I never had any skill when it comes to coloring and painting, so I just try to go back to my inner childhood self, by doing digital arts.  I still have collages and scrapbooks.  I suppose it’s always been a childhood thing of mine to like lots of cute cartoons.)

Posted in And the Message Can’t Always be Put into Words | 1 Comment

Nov. 24, 2011- Movie Review – “The Wrestler”

Director Darren Aronofsky, Mickey Rourke, Marisa Tomei and Rachel Evan Wood all come together to give us this very gripping film about how a professional wrestler, a stripper and a child left alone struggle within their lives about second chances and the pursuit of belonging.

Plot Summary:

This is a drama about an aging professional wrestler, decades past his prime, who now barely gets by working small wrestling shows in VFW halls and as a part-time grocery store employee. As he faces health problems that may end his wrestling career for good he attempts to come to terms with his life outside the ring: by working full time at the grocery store, trying to reconcile with the daughter he abandoned in childhood and forming a closer bond with a stripper he has romantic feelings for. He struggles with his new life and an offer of a high-profile rematch with his 1980s arch-nemesis, The Ayatollah, which may be his ticket back to stardom. Written by Matlock-6 (IMDB)

Honestly, if you just simply view the plot as is, you’d think that you’d want to watch the movie precisely for the following:

1.) Marisa Tomei is still hot despite being 44 in this film.  There are a couple of topless scenes in the first few parts.

(If I can remain as fit as she is when I get to that age, I surely have something to be proud about in physical terms.)

2.)Mickey Rourke plays the perfect part of being a has-been wrestler, and seeing him in his 50’s with green tights this film is in some way a Schadenfreude for most people.  Come on, admit it to yourself, that you normally like to watch about a fifty year old guy, still trying to keep up with the times.

*****

Okay, All of the above are of course not the reasons why “The Wrestler” is worth watching.

Here are the real reasons why:

1.) Just as reviewed in NY Times by A.O. Scott, Darren Aronofsky perfectly captures the huge parallels between movies and professional wrestling’s brute realism.

Many people perceive professional wrestling as simply “fake pain”  Everyone just plays pretend, and it all is an artifice.  Is it really?

While the fights are choreographed, the pain and the blood are frequently real. We are privy to tricks of the trade, like the tiny bit of razor blade that Randy uses to open a cut on his face in the middle of a bout. And we witness a horrifying match involving broken glass, barbed wire and a staple gun, all of it agreed upon by the combatants.

– A.Scott

2.)  Performers

Randy (Rourke) and Cassidy (Tomei) (it’s not her real name, either) are both performers, both expert at faking something the customers desperately want to believe is real. The wrestlers don’t really hate one another, and the stripper doesn’t really love you. – A Scott

3.) A Story About Comebacks (The Realities)

Mickey Rourke plays the battered, broke, lonely hero, Randy (“The Ram”) Robinson. This is the performance of his lifetime, will win him a nomination, may win him the Oscar. Like many great performances, it has an element of truth. Rourke himself was once young and glorious and made the big bucks. He did professional boxing just for the hell of it. He alienated a lot of people. He fell from grace and stardom, but kept working, because he was an actor and that was what he did. Now here is his comeback role, playing Randy the Ram’s comeback. – Roger Ebert’s Review

*****

Traders frequently will have many setbacks.  Others “perform” out in the fields of CNBC or Bloomberg, talking their books whether fundamentally or technically, quantitatively or psychologically whatever they think is possible.  People normally talk about reality distortion fields and perceptions being stronger than realities.  Analysts, hedgefund managers and a lot of people in the finance industry are always performing everyday for their clients, and themselves.  The only thing that matters in the end of course is the performance scorecard in the bottom line.

This movie illustrates that fund managers/ hot shot traders have to be less blinded by their stardom or streak of good performances, and be able to admit to the realities that it never is forever.  Just like Randy, who has grown a little wiser with the years, this story is about struggles, comebacks and second chances.  Watch it yourself.

I cared as deeply about Randy the Ram as any movie character I’ve seen this year. I cared about Mickey Rourke, too. The way this role and this film unfold, that almost amounts to the same thing. – Roger Ebert

– Faceless Trader

P.S.

Watching this film evokes honesty, reality and struggle that one faces when one starts to crawl after the song and the limelight is over and has passed. Drop the I’m doomed mindset, and do something about it, or die trying.  At least, that’s what I somehow “get” from this film.

If you’re feeling lost, or want to watch a movie about people doing all that they can to set things right.  Watch this.

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October 13,2016- Fear and Greed are Relatives

Greed and fear are borne from the same parents. They feed on each other. A falling market prompts more selling just as a rising market feeds on itself. 
It’s a concept that I just had to learn myself.

Why do stocks that are undervalued continue to be undervalued? 

Why do stocks that are overvalued continue to be overvalued? 

These momentum types of traits are of the same nature.

Fear prompts more aggressive panic selling ; that’s why stocks that are already slumping continue to be sold and enter a vicious cycle ;

Could be margin calls causing them to fall even further . 

 This same self reinforcing process operates in the same way on why stock prices can be propelled into the stratosphere. A great story can go on forever whenever the herd mentality is strong. Investors copy each other buying and selling. Greed prompts more euphoria until the loudest and most vociferous voice of the bull market must admit that the honeymoon is over and when it happens; it is a sobering and humbling experience.
When these happen; the most conservative option is to cut costs and hope for the best.
– Faceless Trader

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Protected: Aug 15 2016 – Assessing the Duterte Administration’s REIT Laws, Infrastructure Spending and How We Make Money Through These (Part 2)

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