Is the Market Always Right?

Dear Speculators,

Many a times in the market, we make rational bets in the stock market and we lose even when we are right. Stock market is a game and the system is either rigged in your favour or against you. Because the market participants are all thinking individuals, they decide the market outcomes by voting with their Naira. If a greater number of people believe in a particular outcome, they move in that direction. The force of their investment moves the market in such a way that the outcome of events in the stock market is exactly as they all anticipated.

Confused? Here's a simple example. Imagine you are home alone. You think you will be hungry in an hour so you start cooking an hour early. Nearly an hour later, the food is almost ready and the enticing aroma makes you hungry. "Yes! I knew it", you say, "I correctly predicted what time I will be hungry". But at this point, it is difficult to substantiate correctly what triggered the hunger. It could have been the aroma, your prediction, your stomach, any of them or all of them together. Point is we will never know because the only fact we can confirm is that you are now hungry.

Your hunger for profits in the stock market will push you to make smart decisions or crazy decisions. My advice is don't over think it! If everyone else anticipates the same thing you do, whether right or wrong, the market will move in your favour. Money controls the market not brains. Next time you spot an investment opportunity and you decide to latch onto it, don't think only of what you will do but also how the market will react. Because if your moves aligns with theirs, you will be singing happy tunes to the bank.

Emeka Ucheaga,
Managing Partner,
Emeka Ucheaga Advisory

Comments

Ten Surprises of 2018

Dear Speculators, Let's face it, 2017 was a bad year. The only things that went the right way in '17 were crude oil, equities and the decelerating pace of inflation. From fuel scarcity to periodic power outages, rising unemployment to terrorism perpetrated by herdsmen, Nigeria looked more or less worse of the same. As usual, the new year has started with a lot of hope but the long queues at filling stations is enough to beat out the optimism out of most realists. To help in putting the most important things into perspectives so we do not dwell less on minor things rather than channelling all our attention to major possibilities this year, we have put together 10 of the biggest surprises this year you should pay attention to. Ten Surprises of 2018 1. The stock market ASI crosses 65,000 2. Banks post record annual profits for 2017 3. 1-year TBills rates fall below 13% 4. Inflation falls below 12.5% 5. Nigeria's economy expands by more than 4% 6. Crude oil price exceeds $...

It's a Dip not a Bear

Despite strong economic fundamentals and fairly optimistic market sentiments that have driven stock market prices in the past year and even stronger since the start of 2018, stock markets all around the world are witnessing an unexplained coordinated price descent in the past one week. Asides the biggest bitcoin price crash in years, now 66% lower than its record high price of $19,500 in December, nothing out of the ordinary has occurred. Yes, stock prices are at the highest it's been in since pre-crisis era in U.S and the market is due for a price correction but then how do we explain market dips in relatively cheap emerging markets? Something is amiss! As Central Bankers around the world have begun to discuss monetary tightening in a coordinated fashion as the quest for 2% inflation seems more achievable this year due to strong global economic and rising commodity prices, bond prices have dropped precipitously and the U.S 10 year Treasury bills risen above 2.5% a...

Brexit: Why the Market Got it Wrong

Dear Speculators, After 40 years of being in the European Union, the United Kingdom will no longer be a member nation of the EU after the exit plans have been finalized. The gloomy market prediction by top notch investors and analysts has now become a reality. The British pound has been "pounded" in the foreign exchange market, falling significantly against virtually every currency on earth. Pound sterling currently sits at a 30 year low against the dollar after shedding a record 11% in just one day. The equity market is a mess all over UK and Europe, banks have suffered the heaviest beating. $2 trillion has been wiped off global equities. At this point it will take a miracle and much more than $345b promised by the Central Bank to save the economy from entering a financial recession by 2017. Several market players were positioned for a stay in accordance with the opinion polls on Brexit even when the polls showed that a vote to remain wasn't significantl...

Emeka Ucheaga Advisory

Search This Blog