Who is Really Benefiting from US Fed Stimulus?

In China two thirds of country's wealth is estimated to be held by just one percent of the people while in US the top one percent population controls only one third of its wealth. Watch the video below to see the real beneficiaries of the FED Stimulus.

A Very Interesting Speech by Chidambaram on Reviving GROWTH

India’s economy has encountered serious headwinds with economic growth slowing from near double-digits to below five percent a year. Finance Minister Chidambaram discussed India’s economic future and his government’s plans to restore rapid growth. He also discussed the role that the U.S.-India economic relationship can play in stimulating India’s economic revival. 


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India Gold Premium Hits Record 21.6%

With India's 10% gold import duty on top of other capital controls, the price one has to pay for gold in India has reached a record spread of 21.6% vs. what one has to pay in countries where there are no such controls or import duties as can be seen from the chart below.

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Neuroscience May Help Us Understand Financial Bubbles

Five years on from Lehman Brothers' collapse and “where did it all go wrong?” analysis is all the rage. Answers have varied: poor regulation, malicious bankers, dozy politicians, greedy homeowners, and so on.

But what if the answer was in our minds? New research published in the journal Neuron suggests that market bubbles are in fact driven by a biological impulse to try to predict how others behave.

Any analysis of the global financial crisis would be incomplete without a thorough understanding of the asset bubble that preceded it. In the run up to 2008, property prices hit dizzying levels, construction boomed and the stock market reached a record high.

Economists have long picked over the causes of bubbles. But researchers at the California Institute of Technology wanted to know whether neuroscience could tell us anything about why so many people kept inflating the bubble to irrational levels.

Benedetto De Martino, now at Royal Holloway University of London, is one of the study’s authors. “For a long time,” he said, “the study of how people actually made decisions was not considered important.”

“It was always assumed people were rational and wanted the best for themselves. But this didn’t match with our observations of how people actually acted in many situations. Now, thanks to advances in neuroscience, we can begin to understand exactly why people behave as they do.”

This new field, known as neuroeconomics, combines traditional economics with insights on how the brain works. To conduct the research, De Martino, a neuroscientist, teamed up with finance professor Peter Bossaerts and Colin Camerer, a behavioural economist. Collaboration between these academic disciplines was key.

The study asked participants to make trades within an experimental bubble environment, where asset prices were higher than underlying values. While making these trades, they were hooked up to scans which detected the flow of blood to certain parts of the brain.

They found two areas of the brain’s frontal cortex were particularly active during bubble markets: the area which processes value judgements, and that which looks at social signals and the motives of other people.

Increased activity in the former suggests that people are more likely to overvalue assets in a bubble. Activity in the latter area shows participants are highly aware of the behaviour of others and are constantly trying to predict their next moves.

“In a bubble situation, people start to see the market as a strategic opponent and shift the brain processes they’re using to make financial decisions,” De Martino said.

“They start trying to imagine how the other traders will behave and this leads them to modify their judgement of how valuable the asset is. They become less driven by explicit information, like actual prices, and more focused on how they imagine the market will change.”

“These brain processes have evolved to help us get along better in social situations and are usually advantageous. But we’ve shown that when we use them within a complex modern system, like financial markets, they can result in unproductive behaviour that drives a cycle of boom and bust.”

But not everyone agrees with the findings of this study. Richard Taffler from Warwick Business School points out that bubble markets exist in a social context that is difficult to replicate in a lab experiment.

“In the real world there are lots of actors - investors, the media, pundits, politicians - all unconsciously colluding together to create a desired reality,” he said.

In the case of asset pricing bubbles such as the property market in the last decade, or the dotcom boom of the late 90s, everyone has a vested interest in maintaining this unconscious fantasy.

For Taffler, understanding how the brain processes these decisions is useful but still, “a few stages removed from the reality of a real market environment in the middle of an asset pricing bubble.”

“‘Mania’ is a more useful word for this phenomenon than ‘bubble’ as it implies manic behaviour, with people getting carried away.”

But this research is just the beginning, and it is clear that the overlap between neuroscience and economics will yield some important insights into human behaviour. As De Martino points out, markets are made by people, not numbers, and the human brain has been around for far longer than any financial market. To understand the market, we must understand the brain.

This article was originally published at The Conversation. Read the original article.

THE FOUR PRINCIPLES OF SPRITUALITY

The First Principle States:

"Whomsoever You Encounter Is The Right One"

The Second Principle States:

"Whatever Happened Is The Only Thing That Could Have Happened"

The Third Principle States:

"Each Moment In Which Something Begins Is The Right Moment"

The Fourth Principle States:

"What Is Over Is Over"

click here to DELVE


Courtesy: Unknown Author

How can you ensure your Success in Stock Market?

An Investor or a trader in stock market has to be very much disciplined, organized, and should have the ability to pay rigorous attention to details. As warren Buffet once said,

 “We don't have to be smarter than the rest. We have to be more disciplined than the rest”. The above-mentioned attributes should hold good even in your personal life, not just professional life. Otherwise, you will be unable to give complete focus to your investment or trading-- and you will fail.

Majority of the people are attracted to market with the sole object of making a financial killing within a short span of time. They merely participate in market with this aim (hope rather) only and start spending lot of time on daydreaming about it, instead of focusing more time on developing a process or a system or a set of rules, which might actually help them realize their goal at least in the long run. In addition to the unrealistically set goal, their own unwillingness to work (may be, out of ignorance) makes them fail. They start blaming the market for their failure and in the process refuse to realize this is a marathon, not a sprint and it takes strength, endurance and good health to stay the course and win the race. They gradually start feeling bad about themselves, start losing their confidence and may even end up with an unstable mind. Unfortunately, they may remain unconscious to these developments for a long time until they are made to realize by some kind of upheaval in their life.

There is absolutely no such thing as a sure thing in stock market (or in life). This is a game of probabilities, and the goal is to make more than you lose. You should develop tolerance for down ticks and draw downs as there is absolutely no room for perfectionism (everything has to work every time) in stock market. This is not to say you should risk your entire capital. Your process or system should help protect your capital as and when necessary. It is equally important to be cautious even when you are consistently making money as there is a high probability of being carried away by your success. The way in which a winner and a loser view or experience the market is dramatically different. The winning investor will have proactive approach while a losing investor a reactionary approach. Benjamin Graham, considered to be father of value investing, has said "Individuals who can't master their emotions are ill-suited to profit from the investment process."

After a slew of successful investments, it may so happen you are unable to identify any good opportunity in market but still you force yourself into some trades which in all probability can lead to losses. You should always remember the distress that each lost rupee causes is twice as high as the pleasure we get from each rupee gained.  So, it is equally important to avoid the highs that come from success just as the lows that appear after failure. The skill of knowing when not to invest is as important as knowing when to invest. You should avoid investing or trading for excitement instead of making profits. To put it in Seth Klarman’s words: "You can wait for opportunities that fit your criteria and if you don't find them, patiently wait. Deciding not to panic is still a decision." By overindulging in market you will be risking your psychological capital as you will be emotionally drawn down. This may result in, you missing the real big opportunity as and when it comes by which time you would have drained your energy levels completely and hence unable to participate in market although you have the required financial capital.

You should be able to assess and ascertain at all times whether your profits or losses are by design (your system or process) or by chance (luck factor, good or bad). There is a possibility of you earning profits without your true knowledge because you just happen to be with the flow of the market. Similarly there is a possibility of making losses when you are against the flow of market. So, it is very important to be with the flow of market as far as possible by design to better your prospects of making profits.

In the current environment, media (social media, in particular) has become an integral part of our daily life. So, it has become important to understand the role of media and its perceived influence on markets. Media can at best influence market on an absolute short term basis and can have zero influence on a sustained basis  It is very important to develop a kind of skill to separate news from noise, because media keeps on transmitting  endless stream of cacophony under the guise of news. You can come under its  influence if you monitor it too closely. We should be thankful to media though, as it provides us exposure to some of the best and brightest minds of the world thereby giving us the opportunity to gain valuable insights from them. At the same time, we should realize they are in business for profits and hence they would try to make money out of us and may not make money for us. So, you have to bear this in mind and take a balanced and judicious view while following media.

Finally, you should learn to accept total responsibility for all your actions irrespective of their outcomes. Some of your actions may be indirect like, you acted upon a recommendation of someone whom you believed to be an expert, and you should accept responsibility for such actions too even when the result of such action goes against you. It is normal human tendency to attribute success to one's intelligence and failure to circumstances or someone else. But, when you start accepting total responsibility for all your actions you are improving your self-accountability and a chance to learn from your failure. You learn almost nothing from your success.  You should always remember you are the only person who can truly control you and you cannot control anything else or any one else.

I am concluding with a Peter Lynch quote wherein he has aptly put together all the qualities required for an investor to be successful.

"The list of qualities an investor ought to have include patience, self-reliance, common sense, a tolerance for pain, detachment,  open-mindedness, persistence, humility, flexibility, a willingness to do independent research, an equal willingness to admit mistakes, and the ability to ignore general panic."

Can Financial Intelligence ensure SUCCESS in Stock Market?

The general perception is, it will. A study done at the University of Pennsylvania suggests otherwise. As per it, there is a big downside of getting financially intelligent. And this is what it has to conclude. Financial intelligence increases the confidence levels in an investor which leads him to make worse investing decisions!

The same study reports - "finance courses increase confidence, but this could reflect overconfidence" .It also cites an example - "Over-optimism and over-confidence in finance decision making is widespread. In a 2005 survey, 65% of Americans believed they were 'very' or 'highly' knowledgeable about personal finance, although they performed abysmally on objective questions about the subject.

This sums up the reason why so many investors run into financial problems despite being financially intelligent. We believe financial knowledge in isolation isn't enough and should be combined with emotional intelligence with it as well for becoming a successful investor.

As Warren Buffett once said, "Success in investing doesn't correlate with IQ once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing."

So, your financial intelligence or your ability to master the fundamentals can only improve you to a point. It helps you to build a strong base but the work you should do after that is your own and that is the work that will carry you forward. It means, you can learn trading techniques or investment principles from a good book or from an experienced person. Unfortunately, you cannot learn about yourself from any book or from any other person. So, when we are telling you that mastering emotions is a fundamental requisite for an investor, it simply means that your emotions can undo your work (by overriding your  financial intelligence)  because you will only know what is going on in your heart and head when your speculative bets or investment positions are going against you.

You may know a lot about the markets. You may even know … when to buy, when to sell, and which stocks have the potential to move. But how well do you know yourself?.. ... is all that matters the most.