advocacy against hype and idiocy

HOW WE MADE FUN OF VSEGSInstinct or idiocy?

Betting on Harmonics

“The truth is, neither intuition nor instinct can be trusted in the absence of stable regularities in the environment.” – Daniel Kahneman, Nobel Prize Awardee

Betting on Harmonics

GURU MYTHS AND FALLACIES1. A rising tide lifts all ships so it doesn’t matter what you buy.Not true. There are fast ones, slow ones, ones that don’t move, and those that fall. Always stick to the leaders unless bombed out ones are ripe for bottom picking. Strive to trade within a portfolio context and rebalance with enough frequency to ensure that laggards and “shitty” ones are thrown away.

2. Big money is made by sitting on positions at least until the BEAR comes along.Not true. You cannot make big money from sitting on laggard stocks that gurus recommend to you. You just can’t. When bears come along, the sitting you did on your laggards will have cost you in two ways. First in keeping you out of winners. Second, from the losses you will incur for cutting when the bear comes.

3. Markets are random and unpredictable so it’s not my fault; it’s yours.Not true. People can define trend direction and anticipate probable ranges when planning trades. Fundamentals do not drive price action despite well timed press releases, and Astute Experts should know that. Flows matter and deep pocketed sponsors matter even more. Astute Gurus and Maestros should know if flows are forthcoming. It’s not your fault, it’s theirs!

4. No holy grail. Use tools that fit your personality the most.True. No holy grail. But tools should not be fitted based on personality. Instead, strive to be unemotional about investing. Develop strategies that best fit prevailing market conditions than trying to see what works for you.

5. I’m rich. I know rich people. Follow me.If you’ve been in the market for more than 20 years and still NOT rich by now despite several bull markets in the PH, I’d be very sad. If you’re rich and your friends are rich, then be happy. It’s still doesn’t mean you know what you’re doing.

© 2015 Betting on Harmonics

Unhidden FB Group HorrorsOne of the sad saga in the Philippine bull market has been the rise of stock market gurus and the horror stories from those who followed them fanatically. You might think that given how good some of their credentials are and the buoyancy of the broad market these past two years, these experts would at least have something to show for their advocacy on financial literacy. So far, however, all we have heard are stories about mangled portfolios and broken dreams from people whom these experts are helping–and not one single credible example of how truly transformative they have been.

While we are sure there are people who benefited from guru tips and recommendations, we are convinced that those who did just knew how to be more prudent than others who held onto the word and assurances of these beloved gurus. But we are fairly certain that there are more of those who have little to nothing to show for despite religiously following their guru tips.

Having said that, your money, your choice. If you lost because you embraced stupid trading strategies and advise, you can be excused. It’s not your fault; it’s your guru’s fault. But if you continued to lose money following money losing tips and switching strategies, your horror story becomes your fault. You have actual options if you were only willing to look.

Us, we still blame your gurus with a middle finger.


Bull Markets and the Rise of IdiocyJust a brief follow up on this topic. (It’s a Sunday and the sky is blue, I’m in my home office, so might as well.)

First, idiot gurus cannot be bothered to discriminate their target demographics. If only their silly recommendations victimized and impoverished rich, affluent folks (who should know better) then I couldn’t care less. It still would not be okay but I wouldn’t lose sleep over it.

Unfortunately, and the reality is, an increasing demographic of Filipinos who turn to stock market groups on Facebook are folks who until two years ago did not know about the stock market. You have the hard-working middle class who dream of catching a break; you have OFWs who work tirelessly abroad to provide a brighter future for family; you have stay-at-home moms who juggle child caring and everything else in between and trying to contribute in everyway they can; and finally, young graduates who are bushy eyed and eager to conquer the world.

Second, we are on the sixth year of the Philippine bull market that started in 2009 and this rise of idiocy is coinciding with the tail end of the multi-year run we’ve had. There is a bear market coming and I just cannot bear to see people “sitting” and “waiting” anymore.

So when you ask why BoH we feel so passionate about our views on other FB groups, this is why.


Delusions of Bagger StocksHave you heard about the latest “bagger stock” yet? If not, you will. It will be all over social media in no time with the same idiot gurus who assured you about their most recent failed idea telling you to switch out of your losses for now to their newest sure fire idea. So let me do you a favor and say: It’s a load of shit.

Despite the market hitting 8,000, it appears that these are difficult times for some of our kababayans who got snookered into buying into these “idiot stocks”– these are the fanatics who were impressed by fancy cars, sweet looking watches, and scantily clad women. They were sold greed and are now paying for it dearly.

For a while, our kababayans really thought they found the Messiah; the one who will help deliver them financial freedom and independence. But as it turns out, the idiots pushed them several years back with heavy losses with their smoke and mirrors, and I suspect same idiots sold while they told their followers to hold. Truth be told, that was always the plan.

At BoH, we can only give you these words of comfort. Cut and forget. All will be well.


Unreal GurusI am not a stock market guru but I do teach people how to properly think about markets. I don’t sell greed as the more astute gurus do but instead emphasize the need to manage expectations and to trade prudently and consistently at all times.

So far, the most negative I’ve heard critics say about our approach is that it’s too highbrow or too technical because I use models and talk about correlations and algorithmic drivels when discussing simple ideas. This is farthest from the truth.

One way to answer this is to point out that more than three fourths of our members are newbies and they have stuck with me for more quarters than I can count. Some who have been with me since 2010 have become good friends and through the Society I seem to be making more and more friends. If our approach to the market is as daunting as our critics make it out to be, how come people stay? I doubt it’s because of my humor.

But surely we don’t want to highlight how good we are by our growing number. Our recent experience with idiot FB groups should tell us it’s not a particularly good metric. The questions one should ask about any stock market group you encounter is whether the experts there help you to understand what’s going on, and whether it provides useful trading guidance for your investment decisions.

Me, I don’t particularly care what approach you embrace so long as it helps you out of trouble. To my mind, this is the only lesson any guru should be teaching you and none of that sitting in a bull market shit.


Hmmmm… It would give us great pleasure to see the VSEGs beaten at their own game for the good of our stock market. The impossible is afoot.

We have been fairly reasonable so far and have preferred to provide #rebelnarratives on all idiot stocks. Our goal with these narratives has never been to discredit but instead to make idiocy ineffective and help lessen people vulnerable to hype. We’d like to think we’ve helped despite the propaganda against seeking such help.

What does it mean to beat VSEGs? Well, it means seeing them panicked and paranoid. It means seeing them contradict themselves almost daily as they attempt to repair reputation. It means hearing them mouth off more hubris by projecting success using the same propaganda.

Do not worry about offending them. They are illogical and inconsistent. They have peddled a myth that they can no longer sustain.


Think About This

I’ve been talking to Ramon and Jojo about FB group readership, which is something both seem to have a good handle on than I do. And their insight, ruefully, was that Filipino investors really seem to care more about the next hot “bagger” idea – sure, some may really want to learn about the nuances of the stock market, but the sure-ball stuff is what truly gets them riled up.

I’m not okay with that. Instead of taking short cuts, people should be obsessed with trading efficiently, consistently, and even unemotionally. As we have seen repeatedly, to be chummy with stock market gurus and to be part of their inner circle is almost surely a bad thing, with trades more likely to even be worse off had one simply put together a sound trading plan and stuck to it, at least if you believed the lies you’re told.

Unfortunately, these are the popular groups. They are free, disorganized, noisy, and messy. I don’t know about you, but such groups don’t sound like the kind of group that will be healthy for my portfolio.


GAMBLER’S FALLACY

At BoH, we are traders not gamblers. We trade what we see and we’re often rewarded for it. We aim for outsized returns and not imaginary “baggers”. We are very measured in our views and precise with our trades.

We do not go ALL IN on any view because we are not silly. We aim for consistency and not CHAMBA jackpots that are common among gamblers and newbies. So while we do not believe that markets are random, we are experienced enough to say that we are human and we make mistakes too. And we try not to compound such mistakes by switching from one failed trade to another.

This is where the Gambler’s Fallacy comes in. Some Very Serious and Experienced Gurus will tell you that switching from one loss to another high risk trade is the way to go and that by riding this merry go round often enough the probability that you will win on the next trade rises exponentially.

This is the farthest from the truth. You know it’s not true.


Revisiting the Impossible• As part of our longer-term project, we have started to reach out to people who’ve

suffered from cutting edge wisdom from Very Serious and Experienced Gurus (VSEGs). Yet despite the reality, it seems that perception continues to dominate the conversation and people have continued to deny that they’ve been led astray. It’s a strange story.

• For the most part, the same VSEGs insist on portraying themselves as Masters of the Universe while failing to address the idiocy of their narrative – you don’t hear them citing instances of instinctual warning that saved followers from 20-50% losses on concentrated bets, you don’t hear from followers that benefited from the sure fire stuff. In fact, all you hear are half-hearted assurances and efforts to rewrite history by citing past exploits just to justify their existence.

• The truth is, as a market pundit, you’re only as good as your next big idea; not ideas that paid-off a year or two years ago.

• Yet, in the general discourse – the discredited VSEGs are still well with their myth peddled many times over. But we think we can still make a difference, and we will continue to press forward no matter how impossible the task may seem.


Burden of ProofHere’s what we know:• On 21 January, we said that inability to hold above 3.40 put the stock’s run at risk and warned of a

pullback all the way to 2.83.

• On 28 January, the stock was encountering significant selling pressure and was trading at 2.86. We warned that FNI’s FOO was at risk and that we heard that FOO will be at 2.00 as opposed to the maximum guidance price of 4.38. The stock traded as low as 2.69 on 29 January before rebounding to 3.06 where we saw several large crosses from BA Securities. It was at this pointed we reiterated our view that should the bulls fail to hold 2.83, downside risk pointed to 2.34 first, 1.98 next

• On 16 March, stock printed 2.21. Inability to hold 2.34 even briefly suggested it was on track to hit our 1.98 downside target. It was also at this point that we suggested 1.25 as the logical target for the stock. By 31 March, the stock closed at 1.90 as it found support at 1.76.

• Since printing 1.76, the stock has rebounded sharply and currently trading at 2.20. Our members started buying below 1.84 when we pointed out in real time that the stock was carving out an oversold bottom. Furthermore, we pointed out last 07 April that our math said the most the stock can do is 2.35 and that the only way to trade back to 2.83 would be to take out 2.35 convincingly.

• As far as EPS is concerned, we’ll speak more about such EPS shit once the company comes out with its Follow on Offering. At this point, we find it senseless talking about shit– not when we don’t even know what the final denominator on the EPS (yes, it’s a ratio!) is. VSEGs can claim Php8-9 billion annually all they want but with an FOO overhang, you don’t really know what you’re buying.


THE END

Betting on Harmonics 13

advocacy against hype and idiocy

Business