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Trend Commandments

Michael Covel (FT Press)

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The Little Book of Trading

Michael Covel (Wiley)

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The Complete TurtleTrader

Michael Covel (Collins)

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Trend Following

Michael Covel (FT Press)

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Broke (Film DVD)

Michael Covel

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IndyMac Insight

Holy Grails | September 26th, 2008

So why did people line up to put their money into IndyMac bank? It is a question I had not considered until I went to an IndyMac branch this summer in California. What did I learn? While waiting outside to talk to IndyMac clients, some of whom were going to lose money due to IndyMac’s failure, I was approached by a local broker who worked next door. He had spent much time talking with IndyMac clients about coming over to his nationally known (and very solvent) brokerage and parking their money there. Even in the midst of IndyMac’s share price cratering, even in the midst of constant negative news, people would not leave IndyMac for safer havens. Why? They all wanted those high return saving and money market accounts IndyMac was offering. The extra 1% (or whatever it was) was so enticing to these people that they were willing to risk their entire account values for a few extra bucks. Crazy? Of course. Normal behavior for some people? Unfortunately, yes.

Note: No vulgarity or ugly attacks. There are other places for that.

  • Mohammad Saleh

    Change holds obscure risk (deferent to deferent people, for some that amount is equal to their holdings in IndyMac for example) When you have all your eggs in one basket, you may experience one of two fears, either the fear of total loss or the fear of gradual loss, in the case of fear of total loss you become in denial and that will prevent you from cutting your gradually mounting losses short. You no longer see the losses happening in the moment of now, but instead you tend to attempt to predict good future outcome and prediction like we all know is a linear impossible ignorant act of focusing on one probability which we choose and ignoring the rest of the probabilities. So by isolating this good probability and weighing it against the losses, no matter how big the loss is, you will be fooled by thinking that things will turn around, basically we are like a horse with blinders, we see what we wish to see and ignore what we wish to ignore, we create our own reality by not accepting what reality creates for us, it does not work.

    I have just taken my first look at IndyMac chart, it was in decline from February 2007, in July 2007 things have gotten worse, any sane stocks trader would have unloaded his long and if allowed he has been short a lot, for other sane banking with IndyMac, maybe move to HSBC or CitiBank. It is not hard to be reactive, it is just common sense.

    Maybe people read the news and because there is so much news out there, people tend to choose what they want to hear and ignore the rest because it gives them a sense of comfort, and it is true that it is easier to sit still than to act, yet it is on the long run dangerous to be comfortable, like Ed Seykota mentioned: Tensions Indicates Intension, if you don’t feel pain you will not act.

  • Ralph Horwood

    I feel that Michael Perry was an HONEST MAN and got taken down by —- Schumer. He was the problem! Why didn’t Schumer find a problem with the banks in his home state of New York? He is a crook from day one!


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