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Showing posts from June, 2012

Mind Of The Market II: All-Is-Well Syndrome, A Habit Of Misplaced Hope

In a chaotic world, a barrage of mirages can, sometimes, be confused for reality. In an environment of sustained negative developments and events, it seems somewhat paradoxical for misplaced hope to find an audience.
The second part in the Mind Of The Market series (Part I, here) will focus on recent elections in Greece and France, and the culture of all-is-well and misplaced hope that pervades market participant positioning. Paradoxically even as mainstream media resonates with negative undertones, participant actions paint another story.

Greeks came, voted a second time, and all seemed well. Again. For a disaster seemed averted. Greeks avoided Tspirageddon and offered the reins to a pro-bailout coalition led by New Democracy and PASOK, to steer them through the new phase in a never-ending saga.

The flight of deposits that had begun from Greek coffers into banks in stronger EU countries (run-rate approx. EUR 800 mm per day) seemed like a costly hedge to those that p…

Mind Of The Market - I : Pavlovian Conditioning, Paradoxes & The Psychology Of Herding

In what should evolve into a multi-part series, Mind of the Market will endeavour to peer under the hood of the largest laboratory of human psychology in the world; the financial markets. Where frigid numbers and emotive participants spar enthusiastically in an elaborate and often bewildering drama-in-motion. Where apparitions and reality merge so finely as to be mostly indistinguishable. Where paradoxes and circular relationships reign supreme, frequently, and fervently, questioning the very essence of rationality and cause-and-effect.
Part I addresses the dynamics of Pavlovian Conditioning and market participant response to stimuli in investment decision-making. Intriguing paradoxes and the behaviour of asset prices - a cause (and consequence) of market participant response - is considered concomitantly. Finally, the psychology of herding closes Part I.
Pavlovian Conditioning and Asset Price Behaviour When Ivan Pavlov discovered his lasting contribution to humanity - Classical Condi…

The Correction (& Persistence) Of Anomalies

During dreary journeys across the market landscape scouring for interesting opportunities, the investor occasionally stumbles upon an oasis. Of extreme anomaly. The sighting is generally a mirage, a ray of false hope; but in some instances, the manifestation is very real and extremely intriguing, especially so when the anomaly manifests across companies operating in the same business.
The anomaly was first highlighted here ('Over-priced anomalies in bear markets'), when discussing One Life Capital Advisors (Bloomberg: OCAP IN). Extreme pricing is generally either an outcome of mass euphoria/fear, or a flock of informed market participant presence. OCAP IN seemed to be in the latter category. The post also highlighted the case of peer, Brescon Corporate Advisors (Bloomberg: BFS IN), as an example of under-appreciation. 
For brevity, the scheme of things as on the date of writing (Dec '11) is reproduced:

Such cases of extreme pricing always pique my interest. The situation seem…