Sunday, 7 August 2011


The biggest drawback of infrequent blogging is that I can't keep up with goings-on as I would like to. Last Thursday I wrote a short post, but this was just an exception that proved the rule... Last Monday I hatched the idea of writing about Mr Sikorski hapless utterance on Warsaw Uprising, but in the meantime markets crashed, Polish former deputy prime minister died and United States had their credit rating downgraded. Time to catch up...

1. Mr Sikorski's blunder...
Is an ideal starting point for a discussion on limits of free speech. Two days before the anniversary he dared to announce on Twitter (or twitted) Warsaw Uprising had been a national disaster we should learn a lesson from and linked to a webpage run by opponents of cult of Uprising. The backlash came immediately. Politicians from his party described his statement as inappropriate and politicians from PiS deemed it to be flagrant. The harsh reaction speaks volumes about state of free speech and situation of dissenters in Poland. Everyone can have their own views, but if they are not in line with generally accepted ideology, please keep quiet...

But let's take the issue apart. I wrote two years ago a post on the Warsaw Uprising and haven't changed my mind since then. There's no need to repeat what I said then, so let's just invoke the figures that should get stuck in your minds. 180,000 civilisans dead, those alive driven out of the city, capital of Poland virtually wiped off the map. Given the death toll and scale of destruction, wasn't it a disaster? Didn't Mr Sikorski have courage to say what other people are afraid to say? As I mentioned in the posting dated 1 August 2009, my own family was also affected by the uprising and my parents' and mine opinions have been shaped by what we have heard at homes. For us, the uprising was an act of not only great courage but also of great desperation. I mused about those young people who couldn't wait to get back on their oppressors and probably if I had lived then, I would take the same decision. I would fight, even if I knew it had been a losing battle. Therefore I believe we must foster rememberance of those days and commemorate those brave young people who fought to free their beloved city, pay tribute to thousands of innocent civilians who died in numerous carnages, but I refuse to speak highly about generals who masterminded the whole operation. The price to pay seems for me too high. Some would argue, it was worth doing, because Stalin's army waited until insurgents in Warsaw breathed their last and it halted advance of communist soldiers into Western Europe. Uncanny, yet logical hypothesis, but do Westerners care???

2. Andrzej Lepper's death
The news that former deputy prime minister in Jarosław Kaczyński was found hung in the head office of his party in Warsaw hit me on Saturday. Officially, he committed suicide, all evidence indicate he did it himself, only the question about reasons remains unanswered. Some speculate about family problems, some claim financial troubles pushed him to take the last step. But hang on, sex scandal problems have long been sorted out, his son was said to be terminally ill, but hasn't died yet. Grief after son's death could push him to a suicide, but not the illness. Did he know too much, was it in someone's vested interest to liquidate him? I know this sounds like conspiracy theory, yet such concepts spring up whenever there's a lot of room for doubts and an event is hardly believable. Andrzej Lepper was a strong man, he fought his way into the parliament, went through a stormy coalition that wiped his party off the policital arena. Came hell or high water, he would stay afloat, so what could cause a breakdown that allegedly made him grab a rope and kick away a stool?

3. Market crash.
Shit happens sometimes. We haven't seen such a panic since 2008 and the worst is not over. On Friday when markets opened, panic sell-off reached its climax. After a few minutes of trading stock prices bounced back and for the rest of the day stayed between 1% and 2% below Thursday's close. There was a moment, just after upbeat US pay-roll data was released, when some stocks were quoted higher than the day before. To paraphrase the old saying - what comes down, must go up. After a three-day sell-off when the panic was gone, speculators should step in and bet a rebound. Hopes for such scenario were dashed on Saturday morning when S&P agency announced it downgraded US sovereign rating from AAA to AA+ and reaffirmed negative outlook. Two other rating agencies upheld their grades of triple A. What the implications for the markets will be then? Judging by plummeting indices in Middle-East countries, another wave of panic is about to spill over and the coming week will be marked by fear and gloom. But on the other hand every man with a head screwed in has long realised United States are bankrupt and their debt service capacity is conditioned only on possibility to roll it over. So does a downgrade mean anything? From an economic point of view nothing has changed, but from technical perspective, the downgrade will force investment institutions that build their investment portfolios according to specific guidelines to reshuffle the securities they invest in. Swiss franc and gold will probably remain safe havens what will send prices of both to new record-breaking levels. The troubles must be really serious, if governors of central banks called a meeting together to map out a plan to contain turmoil on financial markets. I know they have little chance to do so. Katharsis is under way and has to last until the air is cleared (even if I am to pay the price as well)...

Now I'll take the opportunity to say goodbye to my capital gains tax for 2011. According to Polish tax law, losses can be carried forward, so this might be a good moment for a farewell with part of possible capital gains tax for 2012. I came to terms with the losses (an equivalent of my monthly salary - could have been worse), now it's time to work out a plan how to recover from this. Free fall of stocks may last a day, two, or three, but on the markets nothing lasts forever and the direction must change, as it always happens after the slump, the subsequent reversal will be abrupt. Now the goal is to catch the right moment and win something back. In the middle and long-term I would keep away from the market or stay in or out of it only for speculative purposes. That's just money, one-third of my all savings, recovery rate is still much higher than in the case of loan to my ex-friend gambler, I'm in good health, I have a job, no major problems, no debts.

Chin up! It's just the second melt-down. I hope this time we'll learn from the crisis, because as I've repeatedly claimed, the recent one, or the ongoing so far one, has taught us nothing.

Have a good week and don't panic!


Anonymous said...

I'll comment here rather than the last post. Why did you panic?

I'm assuming you did panic because you only have a loss of a month's salary if you pressed the 'sell' button - unless the broker closed it for you because you were too overexposed? Easily done, that was my first lesson!

I've not been at this game long but I'm learning fast. On the 4th August I was already well down (on paper) and concerned about what was likely to happen. I sold the 2 of my stocks that I had the least confidence in, which were also the two with either no or little loss anyway. The others, in which I have full confidence in the medium/long term I held, despite many of them being considerably down and still heading South.

I waited patiently for what I thought was the bottom, which I called sometime on the 9th August, whereupon I purchased more of the stocks I'm still holding at nice cheap prices thus lowering my averages quite a bit. I also speculated a small amount (800 quid) on Lloyds bank shares, not something I would normally do (banks) but I like the odd risk. I kept the bank amount small so I can easily top up with more if/when they drop below the price I paid (32p).

Since then they have all risen, one of them over 40%. A few more days like this and all will be in profit. The account as a whole is already back above the amount invested.

If you play the game right it is very hard to lose. You need to remain within sensible boundaries so you don't get closed out while your back's turned and you may have to wait longer than you expected (so you don't want to be relying on using the money for other things) but generally the main lessons are

1/ In a crappy market like we've had all this year, pick the shares you hold onto very carefully. There are many shares I sold when I realised the market was weak (between November and May mostly). So far evey one of them is considerably down and with little hope of coming back any time soon.


Best of luck with your future trading. Don't give up now, just when you've learnt a valuable lesson.


Anonymous said...

By the way, my money is on Lepper's problem being financial or at least that being the last straw.

There was a strange coincidence between the markets crashing and his suicide.

student SGH said...

Ian, thanks for the comment, but where did you read I had fallen into panic? In this post, nor in the previous one it wasn't written. I was angry with myself.

The was a hige panic on the market, and indeed I sold some stocks, but only to buy them back later in bulk. The market didn't break my back, it made me stronger. I'll give a longer coverage in form of typical blog post called Markets go haywire tomorrow.

Anonymous said...

It was hard to tell from the two posts whether you had sold or not and also no information about buying back in. I was picking up the emotion about losing money and taking CG tax losses.

I'll wait for the next post then!