Four months and a half in my equities trading experiment and this is how the market looks. If you are not familiar with this kind of chart, it's the day's full chart of US companies from FinWiz. Red means that a square goes down, green that it goes up. My "portfolio", meaning my assorted stock that I created buying every month since the beginning of the year, is now 20% less valuable. This sounds bad, but it is even worse, since at the beginning of April it had not lost any value.

  I did not invest much, so I can only imagine the pain people feel when their portfolio is actually their savings and this happens. To me it's a game, to others it's life and death. And I know that in theory if you put all your money in stock, then you did it wrong, but it can't feel good. And now it's almost certain that a recession is coming, possibly a "stagflation", which is the finance sector's version of "Everything Everywhere All at Once". Sorry, I couldn't help it, since I've just watched that film. It was good. Also, very on point, I now realize.

  So what do you do when everything seems stacked against you? Well, why ask me? Haven't you read above? I am playing at trading and watching movies instead of learning to do it better. But I will tell you anyway, because that's the kind of person I am.

  Here is what has been going on the last few months.

First, the market started to lose steam from its heights in November, mostly because the United States stopped the "money printing" they used to handle Covid. Typical Americans, right? First try to blow it up, then they throw money at it. If you don't know what that means, the Biden administration pushed for trillions of dollars to be poured into the economy as the country was at a viral standstill. It may have been a bad choice, but I believe it wasn't the worse and possibly it was the only one they had. But now that the Covid pandemic is "gone", the money went away and it basically burst a bubble. In the U.S. there is the lowest unemployment since forever, but also the highest inflation. So their Federal Reserve started to increase interest rates, taking the steam from the growth of the country, basically.

Secondly, Covid itself did some damage to the global economy, rising tensions, making people crazier than usual - and that's saying something, but also disrupting the supply chains. These are the connections that countries, corporations and people have created over the decades in order to keep functioning. All this on the basis of past experience, where circulation of people and produce was relatively cheap and easy all over the planet. Not anymore! Every day we now hear of shortages of material and people. What that means is that you have a producer of something, be it material or service, and you have a buyer that is interested in it. When you have both demand and offer, you make money. Not this time! Because the producer can't produce things fast enough to cope with demand. They've "streamlined" their business for so long they can only do it one way and that way is gone.

Then, some Russian decided Ukraine was a nice toy and went for it. I don't know if you've heard of that. And everybody else decided they didn't want to have anything to do with Russia. It so happens that Russia and Ukraine are the main suppliers of raw material in a lot of economic sectors, including grain and natural gas. I guess it is an important moment to take stock (pun not intended) at how important these countries are for the planet (as well as many others that we've ignored because they are not in the spotlight). What that leads to is more shortages, which leads to price increases for the remaining sources of material. A minor thing to add here is that one of the supporters of Russia, at least partially, is China, a great supplier of work and material.

It's the perfect storm, yet most people still cling to the status quo they've had for possibly the entirety of their lives. Every low in the market is now a dip to buy even when the market keeps going lower. And lower. And lower. Every temporary high of the market is a bullish rally that will get us out of the situation. In case you didn't know the financial industry is at balance with nature, so everything is named after some animal: bulls, bears, hawks. It's like King-Fu, but with money! Every new startup is the savior of the market with their technology that will solve everything. And then there are the charts. People love to read the charts, like leaves in tea, and predict the future. They give pet names to patterns in the charts, they make analogies to things past, they criticize others and delight in their own perfect strategy for the future.

Only it's not that easy. There are money in the world, but they can't move. There are people in the world, but they are sick, at war or falling prey to opportunistic governments that use this moment of weakness to get the worst out of people. Old strategies (well, not that old, but an eternity from the viewpoint of a day trader) don't work anymore because the situation is different. This time, I am afraid, it really is very different.

Let's look at some investing strategies

First of all, everybody knows, when the market starts to fall, you sell the "growth stocks", meaning you stop betting that some companies will have a sudden growth spurt like tech companies and "disruptors", and you buy more stable things, like bonds. Perhaps you still want to keep stock, but you choose the safer ones: oil, retail, real estate. A lot of people did that and were wallowing in schadenfreude watching other still cling to their belief this was a temporary lull in the market. But then major retail companies like Target and Costco fell 12% in one day. Why? Because money is losing value (inflation), products are shit (supply chain disruption) and there is no energy to improve on them (stagnation).

Because of the Russian conflict, oil is through the roof right now. Oil is still good, if you bought it early, but if you buy it now it will keep at the same price for a while, then drop. Funny enough, this will lead to an explosion of renewables, but not immediately because they don't have the rare and specialized material they need to build it. As for real estate, that still works for now, but for how long? People will start losing jobs, their money lose value and with the entire economy down, they will not find estate buyers or renters either.

What about bonds, then? As I was saying, the Fed is increasing borrowing interest rates to stave off inflation. Bonds have an inverse relationship with interest rates. There.

What about utilities?! What about energy? What about Big Pharma?!

I could write on and on, but first of all I am not that good (have you read this far?!) and second it's simple: if there is less energy in the system, the system will slow. Probably pharmaceuticals are a good bet, because no matter how poor you are, health is important. But watch out, because a lot of companies rose to prominence lately on their work against Covid. With less Covid, these companies will still do well, but they will lose from their overall value. So you get in a situation where you kind of wish everybody has Covid except you... I personally think that's very funny, but I have a weird sense of humor.

What about money, then? Just keep the money in the bank. That's safe, right? Well, yes. It's safe, but during rampant inflation, what you see is that money is losing value. Same thing as with house renting. You maybe get enough to counteract inflation, but just that. Gold would work, but it's cumbersome, unsafe to hold and it's already pretty high because for a while everybody wanted to have it just in case the war expands. It might still do. You buy it now, it might deflate later.

There are things one can do, like "alternative investing". I couldn't tell you exactly what that means. Being alternative means they are like plan B when everything else fails. It sounds the right direction, but what should you choose? There are for example some platforms that allow you to invest in art, like you buy 10% of a painting. Or stuff like hedge funds, which is an entirely different can of worms. Or even private equity, which makes you more of a company partner than just buying publicly traded stock because only a few people have access to it, like the founders.

The end of investing?

Best strategy: sell your investments and start drinking it away! No. That doesn't really work, either, as fun as it sounds. In fact, investing is a good strategy at any moment. Yes, those are bold letters. Investing is the opposite of spending or, at best, doing absolutely nothing. For example learning new skills is investing, too, and maybe the best possible kind. But I am not here to tell you to grow up, so let that go for now. Spending some money, though, is not a bad idea. For example one could use some money to go on some cheap vacation or buy something that makes them happy. When nothing has value, everything does, right?

The problem with stagflation is that value goes down and then there is a plateau where nothing happens. If that is coming next, then you can buy stock at any time during the plateau and you see no result for years. If you buy too early, the market can still go lower and you lose. And we're not even sure a stagflation is coming, which means you don't know exactly when to find that sweet spot to buy, either.

But the silver lining is that you don't have to. The fact that companies went down is actually an opportunity. The only problem is that it's long term. No matter when you buy: now or further down the line, their value is guaranteed to come up. At some time. Four months and a half is not long term, decades is long term. That is why you don't keep all your savings in stock, either. You have cash for short term.

Does this period hurt investors? Hell, yeah. Especially if you started in November and not in January like me... Suckers! It is even more painful when you started somewhere in 2020 and you saw everything explode and go up and up and up, just to see it all crashing down again. And it all feels hopeless and you had dreams and you got just a little too greedy and if you had just exited at the right time and so on and so on. It's all bullshit. No one could have predicted this with any significant accuracy. Unless it's your job, losing money on the stock market is just normal. It's all chaos. What is not chaos is finding some companies that you trust (to not implode and disappear, like Blockbuster or Nokia, and to continue growing) and stick with it. Investing is not about winning, but about growing. Winning implies a moment in which it happens, but growing is a continuous process.

So no, it's not the end of investing, it's barely the start. These things happen and in the large scheme of things they are merely blips. The general principle remains: you either trust humanity goes forward or you don't. In the first case, you're an optimist, life is always ahead of you and investing is the rational thing to do. On the average it just goes up. In the second case, you're a grouch! Why continue living if the best of everything is behind you? On a more metaphorical level, every second of life is a compound investment.

What I wanted to convey in this post is that you have to thread carefully because there is a lot of shit happening, but it certainly not the end of the world... or is it? Ta da daaaaaam!

In my previous trading post I was recommending taking your savings and investing them in stocks. And to minimize risk and effort, just put them in a so called "index fund", which is an aggregation of top stock. History shows that this strategy outperforms the market and any bank savings interest in the long run. But why?

Common sense would say that if a strategy to beat the market exists, then everybody would do it, pulling the market to the same level. The definition of "top" is also something nebulous that doesn't mean anything unless clearly defined. So here is a video that explains some of the shortcomings of the index fund. Basically:

• "top X" syndrome, where the items accepted as top are more discoverable, therefore performing better from sheer demand size
• wrong criteria for stock inclusion, where fundamentals lose to market demand and trading size
• fake diversity, where the X seems large, but most funds are based on a much smaller subset of stocks, with the rest having no impact
• exaggerated past, where a fund may have been defined a century ago, but came in actual use a lot more recently

[youtube:95OR1ZNj3iY]

Index Funds Are The Biggest Bubble Of Our Time (Hypothesis)

Also, there is a very interesting link that shows the constantly updated index funds may have performed worse than just investing once in a fixed number of companies, even if some of them have long disappeared.

Personally, I think that the gain in time you get by investing in a fund is worth the loss of efficiency. And there might not even be a loss, since until you create a diverse enough portfolio, chances are you are going to lose money, not make any. Keeping all of your savings in a bank is stupid, I am convinced of that! But that doesn't mean you should keep them all in stock (or in any one financial instrument). At this moment don't take my word for anything, but as soon as I gain more knowledge and confidence, I will post about trading and investing. At least it keeps things interesting.

  So yeah, I've decided to try out stock trading. I wanted to see how it works, how it feels and if it's a valid avenue for investment versus something like placing money in a bank. Long story short: it is! I fact, I would say placing money in banks feels stupid now. Will this make me a billionaire in Euros? No. But let me detail.

  Usually, when people get some extra money they think: should I leave them in my expenses account or should I move a sum to a savings account? The difference being the amount of interest and some rules against retrieving money from the savings account. One account is for fast operations, the other is for the rainy days, one you think of in days, the other in months. Well, imagine you have to save money in order to someday retire. That's one you would think of in decades. Well, in that case, stocks are what you need. 

Here is a chart of QQQ, a aggregate stock on the top performing stock, for the last 22 years. Its value rose consistently and grew 536%. That's 8.7% a year on average. In comparison, the average inflation rate in the same period is something like a third. Tell me, which bank will give you this interest?

But take a closer look. You see that big spike at the end? That's November 2021, when the U.S. market reached its apex, due to various reasons. Since then it plummeted, so the value now is the same as in June 2021. If you would have read a blog post like this and invested all your money in QQQ stock in November, you would have found a special set of skills, found me and killed me now. Or look on the left of the chart, to the spike there. In March 2000 the value increased to 118, only to then go down for a period of 16 years, only to grow 250% in the next 6 years!

So in the end, it goes to your trust in the world as a whole. Will it grow, stagnate or disintegrate? If you are optimistic in the long run or at least think that the next 20 years will go the same, then this is for you.

Of course, it was an interesting moment to start learning and experiment with stock trading in 2022. The boom that the trillions of US dollars injected by Biden in the economy because of Covid (so yeah, you read that right, the economy went up during the pandemic) ended, also the distraction caused by Covid which turned from an excitingly unexpected threat to life to an endemic virus that coexists with all the others we got used to. Now we have to look back at how to get those trillions paid, how much good Brexit does to the economy, how the European Union economy recovers and, to add insult to injury, another psychopathic world leader threatening World War III. Can you even think of making money on the stock market now?

The answer is again, yes! Did I make more money? No. But I didn't lose that much either and I believe that loss will disappear. I won't go into the details, but enough to say that while the stocks that took the market to that November high dropped, but other stocks that are considered safe, like the dividend stocks of huge companies, went up. And there is another hook: if the market goes down and you trust it to increase (on average) every year, that means the lower the stocks the higher they will rise in the future!

But, you will ask yourself, what am I missing? I everybody could do that, why don't they? Where is the high risk that everybody warns me about when talking about the stock market?

Well, first there are the short to medium term risks like the 2008 economic crisis or a measly World War. However, can you show me without looking at the years where is that crisis on the chart above? As I said, this is a "sure thing" only on large periods of time and while the global order remains largely unchanged. Also, money itself is a form of national stock. That's why you get inflation, where the buying power of the same sum of the same currency is vastly different from year to year. It's not a matter of money vs stock, but of stock vs stock, of managing risk.

Again with the risk! Where is it? Personally I think there is a huge psychological risk. Because you have a lot more options, you get more opportunities to fuck it all up. For example a guy sold his house and bought Tesla stock for all the money. He even tweeted to Elon Musk to encourage him to increase the value of the stock from $900 to $1000. The highest value for Tesla was 1222, but now it's 838. The guy could have increased his personal wealth 20% in just 20 days if he bought in October 2021. He didn't.

There is a huge pressure to perform when you gamble (and that's the correct word) with your money. You may take a few hundred Euros like me and play around, then the pressure is not that high, but if you put most of your savings into this, you always get to second guess yourself. Did I buy the correct thing? Oh, it's growing! Oh, it's going down! Oh, no, I am losing money, should I sell early or wait until it gets back up?

Sometimes you trust a company so much that it makes no sense to invest in something else. So you just buy the one stock. And then it goes bankrupt! Or the stock falls so much and forever that you have lost all of your savings. Having a diverse portfolio decreases your risk, but also your revenue.

There is a saying among traders that goes something like this: 95% of people trading are losing money and the rest of 5% bought some stock and then forgot about it for a few years. This says something about the safest way to proceed, but also tells you something about where the money from trading is coming from: those 95%.

So I am not an expert in any conceivable way, but I am going to try things out. There is a lot to learn, but when you push everything aside, there are two basic strategies: timing the market and investing long term.

Timing the market is to "buy the dip" when the stocks are low and sell them when they spike. The good news is that it makes you filthy rich, the bad news is that you can't time the market. And I am not joking. This is basically playing Roulette. If you consistently place your bets on the right number, you become filthy rich (or are thrown out of the casino), but that's theoretically impossible. And while a casino game is probabilistic, the market is actually fighting against you, adapting to strategies and making them obsolete in days (if not in minutes, considering you are competing with AI algorithms run by companies betting billions).

Investing long is what I described above. You take your savings (which come after you've bought your house, saved some in the bank and you have a comfortable sum left to live on) and you buy either diverse stocks from the top 500 or ETF (Exchange traded fund) which does this for you, for a small percentage. Invesco QQQ from above is an ETF, for example. And you do it with your monthly savings, every month. And you leave it alone. And you count your money (or lack thereof) when you retire.

That being said, there is a lot to learn about trading. The statistical indicators, what they mean, the math, the taxes, the way to investigate companies, how to structure your portfolio, the information sources, the gotchas, the various people and tricks that want to manipulate you and/or the market so that they make the money.

  Trading for a Living is a pack of four different books, but of similar design:

• The Best Trading Lessons of Jesse Livermore
  • contains quotes from Jesse Livermore and a short translation/analysis from Frank Marshall for each
• Expert Trader: 93 Trading Lessons of Richard Wyckoff
  • contains quotes from Richard Wyckoff and a short translation/analysis from Frank Marshall for each
• Secrets of Trading Performance
  • a list of 10 principles to help you get in the mindset of a day trader
• Trading Essentials
  • a list of 20 principles to help you get in the mindset of a day trader

On the surface of it, you might say that this is not a book at all, just a collection of random musings from Frank Marshall. However, it does offer a direct and clear entry in the world of trading. As a complete noob in the business, I thought it was useful, if only as a browse-through and a reference book.

While I may have the utmost respect for Livermore and Wyckoff, they were trading a century ago. Their insights, even translated by a modern trader, don't mean much, although the small explaining paragraph from Marshall at the end of each is concise and useful. However, the two small booklets at the end, with the 30 principles in total, are kind of gold. And not gold in the sense of "read those and you will get rich!", but because they are honestly telling you:

• trading is HARD, because it depends on you finding an edge over everybody else (you only win because someone else loses)
• trading is discipline, because you need to fight your own urges and emotions and follow an (ever evolving) strategy
• you need to keep your own mind, body and life in balance (he even recommends meditation and therapy)
• trading is a job, which needs to be done with the mind, not the heart
• most people losing big (the 90% that don't make it) usually enter trading with the wrong mindset: trying to prove something, gambling, fear, wanting to get rich fast, etc.
• trading is hard work: following the trends, interpreting the data, doing math and statistics, etc.
• you trade because you enjoy it, otherwise you won't make it

Bottom line: Frank Marshall is telling you NOT to pick up trading unless you are really into it. Even these relatively vague advice he gives is prefaced in every book by a disclaimer that you are not to follow it with the expectation that it will automatically make you win money. You need to put in a lot of work to even start making a dent and strong discipline is required to stop yourself from going in too deep and never coming back up.