I firmly believe that trading the markets does not only make you financially well-off or less-off, but it actually is the best introspection you can have for yourself. A trader, by the name of Mr. Ed Seykota, had already said this a number of times in the past but I feel it is worth repeating- if you want to know yourself, the markets is a very expensive way to know it.
Here’s what you learn to do in the markets over time:
1.) Accepting Outcomes and Concentrating on Processes
2.) Learning to be Humble
3.) Learning the Inevitability of Uncontrollability and Uncertainty (Hence risk management and position sizing)
4.) The Perfect acceptance of Imperfection (Stick to trading systems with a definable edge)
5.) Zen (Be at peace)
6.) Meeting God (You’re human and you don’t control outcomes)
For more information about Mr. Ed Seykota and his trading records, you can go to his own website as well as read the Market Wizards book of Jack Schwager. Perhaps his very low profile in his Wikipedia shows you how much respect I have for highly successful traders who have no hint of “yabang” when it comes to their level of success. May his life inspire you as much as he did mine.
Some people find it hard to understand that there’s no perfection or ideal when it comes to the markets. What I find so surprising is that many fail to realize that in many fields, neither are there. Rejecting this nature of reality is having your own denial shield. Einstein calls it insanity when a person repeats the same thing and expects a different result every time. The market is rigged, says Michael Lewis, in his book “Flash Boys.” What is new?
The Odds , Not the Evens
I made a small caricature of Mr. Odd and Mr. Even below.
Mr. Odd: I rule more than you!
Mr. Even: You’re not fair! This is not EVEN! Math says I am more than you!
Mr. Odd: The game’s odd and the market’s not even 🙂 wink wink
Use odds in the markets. Use your edge. The sooner you accept this reality, the better you’re able to overcome your biases and trade better. And I don’t mean inside information if that’s what you’re thinking. Sure, in your convoluted mind, I will say that those things exist in the real world. We can’t conclude with a 95% confidence interval that the people who generate the most alpha are playing the game evenly. We fail to reject the null hypothesis that the market is efficient because outliers such as the Market Wizards like Ed Seykota, Stanley Druckenmiller, Paul Tudor Jones (I just named a few of my personal idols) are freaks of nature right?
It’s dangerous when you predict the future (even if it is you who’s creating it.) Because life is not just dependent on one independent variable (which is you) but a summation of many independent variables (such as others) unless you are in a market where you are the only player. This is the reason why you should shy away from less liquid issues (not a lot of volume, not a lot of players) unless you want to control prices to your liking and in effect be a price manipulator of the said market.
And yes, in case you’re wondering – life does suck. You have to memorize formulas at times to be able to pass an exam. You have to wait in line just like all the rest of the people. And if you don’t wait in line, you know you’re still using some “privilege” pass that others don’t have which means that life does suck because there’s inequality. There will always be things that suck so don’t even try to paint a rosy picture. But neither does it have to continue to suck all the time.
It’s a balance of yin and yang. Sweet and sour pork. Bitter sweet chocolates and life really is a box of chocolates.
Why life isn’t as easy as it looks
There will always be outliers and statistically significant relationships. Get over it. May the Odds be Ever in Your Favor.
To put this into context, the current taxation system is vastly unattractive in third world countries versus developed countries (Please don’t call the BIR Commissioner.)
Take for example Philippines versus Singapore
Individual income tax in Singapore forms part of two main sources of income tax in Singapore, the other being corporate taxes on companies. Payable on an annual basis, it is currently based on the progressive tax system (for local residents and tax residents), with taxes ranging from 0% to 20% since Year of Assessment 2007. The Year of Assessment (YA) is based on the calendar yearcommencing 1 January to 31 December, and is payable on a preceding year basis, whereby taxes payable per year of assessment is based on income earned in the preceding calendar year.
Taxation is based on the source principle, in which only income earned at source, in this case in Singapore, or those derived from overseas but received in Singapore, are taxable. Any income arising from sources outside Singapore and received in Singapore on or after 1 Jan 2004 by an individual (other than partners of a partnership) is exempt from tax. This system has the potential to allow for tax avoidance practices by individuals who derive income from abroad, gain tax exemptions via their non-resident status there, and utilize this income outside Singapore.
So if I actually receive dividends from my Philippine stocks but register my company in Singapore, I’m exempt from taxes? Did I just read that statement right? No wonder Singapore’s the financial hub. It’s a tax haven. And here are the personal tax rates for individuals. They are capped at 20% and that assumes you’re earning way on the top of the food chain. 320,000 SGD is approximately Php10M. No wonder any sane person will get a flight and go straight to Singapore and trade there instead. What a system.
Please don’t get me started about the corruption cases in the Philippines. My clients are so mad about all these taxes. Even the 10% witholding tax on dividends want to be changed. Good thing PSE President Hans Sicat gave a firm word and even wanted to abolish taxes on IPOs.
They say the world’s only certainties are death and taxes.
32% tax in the philippines for anything above P500,000. (2% in Singapore for 10,000 SGD) Go figure.
Hongkong Tax Rates – similar to Singapore – that’s why it’s no wonder why Singapore and Hongkong are the financial hubs of the region.
TERRITORIAL CORPORATE TAX SYSTEM
Hong Kong follows a territorial system of taxation. In other words, tax will be levied only on profits arising in or derived from carrying on a trade, business or profession in Hong Kong. Profits tax is not applicable to profits whose source is outside Hong Kong. Hence, if you carry on a business in Hong Kong but your profits are derived from elsewhere, you are not liable to pay profits tax, irrespective of whether the profits have been remitted to Hong Kong. The territorial principle does not distinguish between residents and non-residents. You may be a resident in Hong Kong but if your profits are derived elsewhere, you are not liable to pay any tax on those profits. Likewise, if a non-resident derives profits from Hong Kong, he will be liable to pay profits tax in Hong Kong.
The salaries tax rate is the lower of either:
- 15% of “assessable income” after the deduction of allowances; or
- A progressive rate levied on “assessable income” after the deduction of allowances. For the 2009/10 tax year onwards, these progressive rates are:
- Nil to HKD40,000 – 2%
- HKD40,000 to HKD80,000 – 7%
- HKD80,000 to HKD120,000 – 12%
- HKD120,000 upwards – 17%
so let me get this straight, if Manny Pacquiao happened to be (lets say a Singaporean citizen or a Hongkong citizen) – he will not be hounded by BIR right? since technically he didnt earn anything sourced in the Philippines but outside Philippines such as Las Vegas, Macau and so forth. In the world of Hongkong and Singapore, he’s a perfectly free man.
– Faceless Trader
P.S. Not to sound hypocritical but Faceless Trader works in a brokerage firm and by virtue of the agent system, I am able to pay only 10% tax rate. http://www.bir.gov.ph/taxinfo/tax_withld.htm
I was thinking of other individuals on the 32% tax rule and not really on myself.