23 December 2016: Italy rescues oldest bank in the world

monte-dei-paschiThe Italian government decided to rescue the oldest bank in the world, Monte dei Paschi di Siena. The bank was in danger of collapsing because of a wagonload of bad loans and an insufficient amount of equity capital. The government in Rome also decided to set up an emergency fund of €20 billion to support other Italian banks which are in search of capital and guarantees. Seven years ago, this would have been reason enough for stock markets to go bananas. These days, however, it is the question if we we will see any ripple in the pond at all. Nevertheless, it should bother investors, that the banking sector in Italy and in some other Southern European countries, hasn’t come clean with their financial problems which caused the financial crisis at the end of the previous decade.

white-chapel-logo-smallSofter data on household spending and incomes in the US brought indices down. The Dow lost 0.12% and the NASDAQ ended even 0.44% lower yesterday. For the first time in six days, volatility was on the rise: the VIX added 1.4% and our UVXY ETFs gained almost 3%. Return for the year of our model rose to 263%.
White Chapel did not give a trading signal at the end of yesterday’s session. We keep our UVXY ETFs.

Accumulated capital at close of previous trading day

Return since start

Return this year

Return this quarter

$36,349

+263.49%

+263.49%

+18.7%

Our initial capital was $10,000 at 1 January 2016. Our average Annual Return is 280%.

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René’s Reflections @ Friday: In hard times, remember the three Fs

No, not those three Fs. In investing, when things get rough, and don’t go the way you want them to, what do you do? Depending on your character, you might blame the circumstances, the stock market, others, yourself, or none of the above.
The first thing to keep in mind, is to filter out the noise. Ask yourself this question: “Do I allow other people’s opinions to affect my investment decisions in any way?” If the answer is not a firm “no”, then think about it as something to work on. Assuming that you decided to follow a certain investment strategy to start with, then from that moment on, “what people think” should be stripped of any significance. If you would receive one dollar for every two financial analysts holding contradictory opinions on the same subject, you could gather a fortune that way. Nicholas Darvas, whom I wrote about in my Friday’s Reflections on 23 September, put it this way: “I found that, for myself, proximity to Wall Street was fatal. I was too easily swayed by the minor fluctuations of the market, the talk about impending mergers, acquisitions, splits; I could never stick to any sort of system while under such influences. Rather, it was during my absences from New York, and especially during the two years of a tour that took me around the world, when I found myself operating most profitably.”
Secondly, it is important to always keep faith in your strategy, no matter what happens. Even if you don’t allow other people’s opinions to affect your decisions, there’s still the danger that you allow your own opinion, or “gut feeling”, to ruin your potential investment success. “Gut feelings” may be very useful in many areas, but when it comes to investing, they are clouded by fears, doubts and frustrations. As a result, they are really good at leading you in the wrong direction. Investing is like walking in the dark, and faith is your compass. Without that compass, you will be walking in circles.
Last but not least, even if you’re steadfast enough to keep any emotions out of the way, following a strategy is of no value if you don’t follow it precisely. Timing is crucial. When your strategy tells you to trade today, don’t be headstrong by thinking you can do it later, whenever it might suit you better. Don’t make yourself feel sorry for self-inflicted missed opportunities.
In case you found a sound investment strategy, and value the principles of the three Fs: Filter, Faith, and Follow, there will come a time you can say: “It felt sometimes wrong, but it was always right!”
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