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Sunday, August 24, 2008

Mass Moods

The days come that almost noone believes the trend could change its direction. The media in Bulgaria almost everyday tell us how bad is the health of the stock exchange. It's almost like in the days of euphoria - everybody had their arguments why the prices will continue to grow and now everone could tell you why they should fall.
We should be aware of the signs that tell us the time will change before everybody sees it and moreover, admits it. The timing is the hardest problem. Many people could see the sings and jump in the game. And then the market continues to go his way. After time they could be proven right but till that day they're on the losing side. And sometimes this could be a big risk - depending on the portion of your capital that you've chosen to bet on your understanding of the market. Sometimes on the very lows people that have managed to survive the big crisis could take their biggest loses - wheather they start to be impatient or the pride of "guessing" the crisis makes them more confident with themselves. This risk could be lowered by just waiting the market to completly change /when this is a fact is another question.../ its direction and then jump on. But as market is made by people there is no such moment as the right one for everyone. If everybody waits to see the complete turning who's going to buy so the prices could go higher?...

This is the best part - the different participants take actions in different times. The more condensed their actions are the more sharp and stronger the movements are. Now the movements are undefined with a slight direction downward.... Sometimes there are buy-outs on some positions yet the overall turnover remains low.

Monday, May 19, 2008

Rumours, beliefs and the actions we take...

Recently in Bulgaria we haven't seen a hostile rumors over some participants in our financial sector. In about 10 to 15 years ago there were some banks that didn't succeed in overcoming the rumors about their liquidity. After a substantial amount of the deposited money were drawn out they were forced to face bankruptcy. Many ordinary people were shocked and lost the money they held in these banks. Moreover the trust in the whole system was strongly affected. We faced hyperinflation, prices were running wild... All these reasons forced the country to accept the conditions of and to start living in a currency board. Our national currency /LEV/ was bound to the German mark at a fixed rate. After the euro was born the exchange rate was automatically adjusted to 1.95583 Lev/euro. This gave the system the needed stability and the situation was normalised.

A week or two ago our financial system was attacked with such rumors again. Alerted by the worldly financial crisis taking part over the previous several months and the problems many international banks reported, many of the clients of First Investment Bank (FIB) believed the gossips that the bank did had liquidity problems. These rumors were spread mostly in the Internet forums. At the most extreme moments of the story they were coming also by sms or spam emails. Surrounded by such fears the people preferred to withdraw their money from the bank while they still can. In the mean time the graph of the FIB trading on Bulgarian Stock Exchange looked more positive than negative. It didn't gave any hint such situation might not be a fake. Some days after the first queues of people in front of the bank offices the Central Bank of Bulgaria after asked by reporters commented the bank didn't have any liquidity problems. In the meantime for about two days the prices of the FIB shares lost about 10%. On the second day the positive sentiment prevailed and the prices closed above their open level for that day. The reports about the smaller and smaller queues of people withdrawing money continued to come. The situation seemed to calm down...

Maybe the FIB will survive and these times will be forgotten. But the situation is worth mentioning. It shows the strengths of the beliefs and fears, how they motivate people thus being one of the most powerful means of causing actions. Actions which might be right or not. Time will show.

Sunday, March 23, 2008

Bank problems...Bear Stearns & Co...

The Bear Stearns game appears to be a very interesting one. :)

Let's think - is there a better time for someone to aquire a competitor if not in a stormy time?... I'm not saying the bank didn't have problems - it most probably did. My point is... "the brilliance" of the game. :) The quicker eats the slower, the smarter - the rest. I'm sure the managers of "the Bear" are smart people. Somethimes the pure timing is all that matters. We face slow growing motions that are consisted of smaller ones. The deeper we go inside the timeframe the smaller parts we see. The particular reason the bank failed was the repo market. It's something perfectly usual and normal the banks do to provide more money for their opperations. But it happens to be a very risky one combined with other unstable parts of the body.

The stormy times provide opportunities the calm weather doesn't have. The waves of the raging sea test the quality of the ship. And the exellence of the captains. Yes, there are victims.. The hardest lessons of life are the ones that cost most. The good thing is the life goes on. And the money is to be spent. :)

Wednesday, February 6, 2008

passion is on the way...

Long time no seen.. :)

It's been more than 2 months since my last post here... The time was full of emotions, fears, hopes. Many people didn't believe the downtrend could take so long and worst - to be so intense! These months we've seen the record of daily fall of SOFIX broken twice - one day it fell about 6%, and only 3-4 days later there were another almost 8% downfall. Since the beginning of the year the overall decline became 20-25%. The prices went to levels not seen for an year. The situation was especially bad on Jan 22nd when the main index of the Bulgarian stock exchange open with a huge gap on the downside and went to one of its lowest points for a year ago - a value of 1233. There were simply no buyers on some of the most liquid positions.That continued for about half an hour and then one by one the stocks put to be sold were consumed. The day closed positive at values about 1384, only 3 points below its highest point for the day. The loooong legged doji was very well formed :) Still the indicators showed there was much fear and the next days prices continued slowly to fall. The volumes though were half the ones before the big fall. As if suddenly half the people stopped trading. Most of the players were not sure where the market would go. Moreover they were scared. Human mind is an interesting thing.. :)

The volumes lowered, the prices - also slightly.. The books say the bottom might be near. On the daily graph the market became more and more oversold. Till one day there were massive buy outs on some possitions. The volume doubled for that day. On the next one things repeated but with more players taking part. The crowd started looking around. Is it over?... After that there were some days of swinging up and down... But the bottoms were higher than the previous ones. On the weekly indicators still point down and they have a way more to go but today /06.02.2008/ we have a bullish macd crossover on the daily graph. And from a very low point. That could lead us to the level of the next resistance - maybe somewhere around 1480-1530. If we don't cross that one /and since the weekly points still downside../ we could swing up and down between 1500-1300 for some time.. :)

The last month the companies reports for the last quarter of 2007 were issued. One could find them on the site of the Bulgarian stock exchange - or through the new service presented by a leading bulgarian investment site - Some were good and some not so much. It seemed that everything was already into the prices.

Bulgarian market is a developing market. Because of the very low base the prices of some assets grow very fast. One such asset is land. Many public companies own land that is bought long before the prices achieve the nowadays levels. And it's calculated in their ballance sheets according to the price of achievement. The price of that asset could not grow forever with the speed it used to. Many companies could decide to recalculate their assets so they reflect their real market value and thus expanding their actives in the sheets. There are examples in the ballance sheets already. This could lead to a new way of attracting fresh money into the company - by selling something they don't need. Time will tell.