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Tea with ENZA: Explaining Mr. Market's behaviour.

Thursday, March 20, 2014

I chatted with a private banker on FB this evening and he shared some interesting stuff with me.

perhaps I know a little too much of how the inside job, so the more I m actually reluctant to share with the outsiders. because they don't know how to take advantage, but just make noise.

not the inside information, but more of how the institutional investor invest and how fund house and banks work... that's the big big thing coz we don't know why people do certain things and when price moves everyone panic etc...

an example is: sell in may and go away...

By using statistic, 32 out of 34 years actually proves to be true... But the thing is, why??? May is a summer period in Europe. They get 10% of monthly salary for summer holiday. So nobody would like to work during that period. institutional or retail, half of them would go for summer holiday.

So who is there to provide liquidity?? The remaining half. But before people go for holiday, they are worried about market fluctuation... so how to negate that, they hedge off or sell off... Market plunge...

That thing itself is actually a very common sense thing, but who would be able to link the entire picture until we are in the industry working...

Same thing for santa clause rally...

It seems like a simple thing, but those so called technical analysis bullshit to an extend people thought it is a kind of voodoo effect...

and of course the post-may period is a low period, few market data, few earning reporting release, TA guys get out of the fun... the entire duration is low volume and neither bull or bear...

When I suggested that I would like to share the above with readers in my blog, he said:

**send killer to hunt ASSI, burn the laptop and the house**

So, I am actually risking my life to share this here in my blog!


Don't worry because he finally agreed.

aahhh... ok ok go ahead and post ba hahaha

FB has allowed me to "meet" some really nice people.


cindy tan said...

Thanks for sharing. It's a reminder that May/June is a good time to buy :)

Solace said...

Got chance help me ask how does institutional investor or big boys do window dressing. Provide some insights would be nice. Haha.

AK71 said...

Hi Cindy,

I find it interesting that the reason for selling in May could be as simple as this. :)

When value emerges, that is when we buy. It could happen in May or in June. It doesn't matter. ;)

AK71 said...

Hi Solace,

OK. I have made a mental note. ;)

Ray said...

LOL, actually if you follow enough of the finance websites in the US, these sell in May and Santa Claus rallies have been discussed so many times! not exactly secrets anymore :)
In a way they are becoming self-fulfilled prophesies because people come to expect it and therefore contribute to it.

AK71 said...

Hi Ray,

I am a frog in a well. -.-"

It was an interesting chat I had on FB and thought it would be nice to share with readers who might be fellow frogs. ;p

Capricon said...

Not forgetting the World Cup is round the corner too ..

AK71 said...

Hi Capricon,

Football? It has an effect on Mr. Market too? I am truly amazed. -.-"

Tien Song Chuan said...

I was wondering if you can explain the price surge of Olam.

AK71 said...

Hi Tien,

"A unit of Singapore’s state-owned investment company offered to take over Olam International Ltd. in a deal that values one of the world’s top three coffee and rice traders at S$5.3 billion ($4.2 billion), reports Bloomberg.

"The bid by Temasek Holdings Pte’s unit reflects growing interest in agricultural assets as rising global populations and emerging middle classes boost food demand. Breedens Investments Pte is offering S$2.23 cash per share, a 12 percent premium to Olam’s closing price of S$1.995 before the bid."

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