The necessity of losing and why it makes sense and cents

Necessity of losing in the stock markets. Losses give you impetus to persevere

Imagine for a second that from the day you started to play the markets you never lost; you always came out ahead each and every time no matter what stock you bought or sold; sooner than later winning would become boring because you would not have anything to compare your wins to. The reason a win feels so good is because you compare it to a point in time when you lost something. Not only do you bask in the new felt emotion (because you remember the pain of losing), but you also feel incredibly great because of the financial windfall from that win. What we are trying to state here is that losing or failing is an important and integral part of winning and success and that without the other life would be drab and dry.

However, what happens over time is that most individuals seem to think that they can do nothing but fail or lose, especially when it comes to the markets (this occurs on a subconscious level, that’s why more individuals lose than win when it comes to the financial markets).

The way to stop this evil process is to immediately understand the purpose of losing and failing. When you lose or fail it means you have done something wrong, you are being given a second chance to evaluate where you might have strayed or erred. Most of us instead just keep doing the same thing that made us experience our first loss, and we hope that sooner or later we will hit the mother-load by luck. If we examine the reason we lost or failed, we see exactly what it was that caused us to fall off the tracks, and, even if we don’t succeed on the next attempt, we will at least make sure that we never ever repeat the same mistake again. Through constant analysis of our mistakes, we can finally develop a system or systems that can with patience and persistence help us win in the markets. More importantly it could help us with the most important battle in our lives: the quest to find happiness, which is really nothing other than the quest to find inner peace. Remember this, nothing good ever comes easy; if it did it was not worth it in the first place.

Imagination was given man to compensate for what he is not, and a sense of humor to console him for what he is.
~ Francis Bacon 1561-1626, British Philosopher, Essayist,

The following random musings were extracted from  Dec 19, 2006, Market Update

Random Musings

Housing problems

Another ominous warning sign that the housing meltdown has only begun and not ended is the huge drop in the practice of taking home equity loans.  This is how most of the masses have been leading their lofty lifestyles and buying stuff with money they don’t really have. Now that house prices are falling they are running scared and the worst part is that their bill has actually increased significantly.  To put things into perspective there was 52% drop in home equity loans in the 3rd quarter; total withdrawals slid from 235.9 billion in the 3rd quarter of 2005 to 113.5 billion in the 3rd quarter of 2006.  Expect this to drop even more by the end of this quarter. Things are not getting better as the press and top economists would have you believe they are actually getting worse.

Late Mortgage payments

According to the Mortgage bankers association (MBA), late payments and foreclosures rose in the 3rd quarter and this trend is expected to continue as a huge number of adjustable mortgages reset in the next couple of months. When these mortgages reset the monthly payments are going to go up significantly; to make matters worse those that have already fallen behind will pay even higher rates because their credit rating has already fallen.  Expect the number of foreclosures to increase substantially next year; foreclosure rates could hit new 3-6 year highs. The biggest increases will be in the former red-hot markets of Florida, New York, Arizona, California, etc.  Our advice for over 2 years  for those who had more than one home  was to sell one or more; risk takers were advised to sell their existing homes and rent.  The MBA predicts that a whopping 1.1 to 1.5 trillion worth of loans will reset next year; 700 million of this amount will be refinanced and up to 800 million will adjust at less affordable rates.  The fireworks are going to begin sometime next year.


The big theme now is to state inflation is under control, but that’s one of the biggest lies out there. Note how the so-called soft commodities have exploded in price (grains, sugar, coffee etc); these markets are the last to take off but when they do there can be no doubt that inflation is starting to run and all it takes is a small push in the right direction for it to run wild.

Economists had been expecting a rebound in wholesale prices following two months of big declines. However, the 2 percent jump was four times bigger than the 0.5 percent increase they had forecast. Even excluding volatile energy and food prices, core inflation posted a 1.3 percent advance, the biggest jump in 26 years. Full Article

The above story clearly illustrates that inflation is not in check and that the press and the top economists are either consuming large quantities of mind-altering drugs or they are completely asleep at the wheel.

The story below provides one clue as to what could be the ultimate trigger for a possible hyperinflationary move in the United States.

President Vladimir Putin said Wednesday that a ruble-denominated oil and natural gas stock exchange should be set up in Russia.  Speaking before both chambers of parliament, cabinet members, and reporters, Putin said: “The ruble must become a more widespread means of international transactions. To this end, we need to open a stock exchange in Russia to trade in oil, gas, and other goods to be paid for with Roubles.”
“Our goods are traded on global markets. Why are not they traded in Russia?” Putin said. 
Full Story

We have been stating for some time now that Russia is looking to deliver some sort of massive blow to the United States and thus severely cripple it.  All the natural resources are being brought under State control and they are aggressively buying interests in commodity based companies outside Russia. One of their main strategic moves was to take control of Still water mining (North America’s largest Palladium producer) and thus control over 70% of the world’s Palladium supply. They bought controlling interests right around the time SWC was putting in a long-term bottom and thus were able to pay a measly 7.50 per share. They are now trying to do the same thing in Western Europe.  If the above exchange is opened it will destroy the dollar as Russia will start to sell oil in Rubles and it will bring the Ruble to the forefront of the currency markets. In one move, Russia will suddenly move its currency from the bottom of the barrel to almost the top of the barrel. Then other nations such as Venezuela and Iran will follow suit and this will add even more pressure to the dollar.

Do not forget that disaster always bring about great opportunities; those positioned in the right sectors will make money regardless of whether they are dollar based or not as oil, gas, coal, and other commodities based stocks will gain 3-15 times as much in value.

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Articles of interest:

Technical Analysis

Why Mechanical and Technical Analysis Systems Fail

The Limitations of Trend Lines

Contrarian Investment Guidelines

Inductive Versus Deductive reasoning

Mass Psychology Introduction


The necessity of losing and why it makes sense and cents