Tuesday, June 26, 2012

Euro-vision - some progress at last!

While Sweden has won the Eurovision song contest this year the winner of Eurozone or the winner of European Union in general remains to be seen. While all this political and populist discussion on whether we should bail out Greece or whether UK should remain in EU is taking place for a second year now jobs are lost and the people of Europe are suffering from worse economic conditions. It's no wonder that UK opposes all measures regarding their banks or Finns are getting tired of paying the bills of overspending Southeners - that's how it should be in an institution without vision that is focusing on details.

Imagine a company that has all the traditional departments like marketing, production, accounting etc. Imagine that all these departments are working for themselves. Production is keeping the costs low, marketing is advertising the product as the best there ever is etc. It doesn't take a genius to figure out that without common understanding of what kind of products we are selling and how to market these products best we can achieve some kind of goals.

Imagine a field of football players where there are only rules but no common goal! Everybody knows that the ball can't be touched by hands but some think that the ball needs to be kicked into the goal and some are convinced that all they need to do is dribble.

Now imagine Europe where everybody is fighting for themselves to look good for their supporters (voters). Imagine Europe where there is no common understanding where Europe is or should be heading. Imagine Europe where everyone's role in fixing things is up to their understanding of doing things together. Wow, that's what's happening now in Europe!

Europe needs a common vision and goals, Europe needs an understanding why we are doing the things we are doing. Right now countries have been rushing to join the EU just to get access to a huge market while they should have joined since they shared the same understanding of integration process.

You can't keep rescuing countries like Greece or Spain when you don't know why we need to do that. We can't have a banking union unless we understand that it is in our common interest. Maybe some principal arguments were dismissed long time ago if understanding as such existed.

That's why applaud to Herman Van Rompuy's proposal of a vision for Europe which can be accessed HERE. Even though it is not perfect and some countries (read: Germany) already oppose it, it is ├╝ber-necessary to agree on a common vision.

Earlier thoughts on this HERE

Thursday, June 21, 2012

Technical analysis is not a surgical process

Again and again I see people confusing technical analysis with rocket science or a surgery. Technical analysis is not an exact science like mathematics. There are no right or wrong places on the chart where the chart will turn. The price isn't moving cause it is supposed to. The price is moved by a great number of investors and traders doing their daily business.

So why on earth do we see people analyzing the charts and saying things like "the price turned because it hit the 43 EMA (exponential moving average)" or whatever the number is? The idea behind technical analysis is to spot trends and possible support and resistance levels. Moving averages (MA) are and will be a tool to predict trends, they spot possible changes in momentum (when short term MA approaches long term MA then the price is slowing down (either selling or buying pressure is decreasing)).

Use common sense, don't overdo it, you will be trapped by the scientist's fallacy.