First posted on June 25th, 2007
There used to be a time when investing was simple.
You know what I mean? You buy at 10 and sell at 15 and make 50% on your money. I can understand that, and so can most investors.
I have to admit that some of these off book derivatives that banks and hedge funds are creating and trading are just not that simple to understand.
When the time comes and it will, you will see the you know what hit the fan. Some of these hedge fund managers will see that a lot of stuff that looked good in computer simulations, may not look or work as well in the real world (see the sub-prime melt down).
Just look at what happened to this hedge fund, Amarath Advisors who lost 6 BILLION and how they thought they where more smart that the markets.
And now the Blackstone Group has gone public with great fanfare. Now that's going to be an interesting one to watch. I am going to be watching this one closely, if it drops below its initial public offering at price of $31.00, it could spell problems for the whole market. If this stock trades below 30 you are going to see a lot of press, finger pointing and speculating that we are seeing a top in the markets.
The only way to consistently be successful in the market is to learn how the market works, have a game plan and have two other key elements necessary for success.
Here they are:
Once you understand how the markets work, have a game plan and master discipline and diversification, you are on your way to success.
Every success in the future,
One thought on “Nine months later, it still makes good market sense.”
And it's not just these crazy derivatives they keep coming up with too, it's the extra use of leverage by using the Yen carry trade that exaggerates the problems.
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