The Stock Market Casino

Is trading in stock markets a luck business ? or does it require skills ? How many investors remain making profits for a long time or become rich and stayed one ? I know you might tell me that Warren Buffet is the man ! But was he lucky or does he posses an outstanding skills in investing?. I think he has the two factors, by being lucky and a man of craft.This will open a new discussion called: “Probabilities” and I’m  no expert in that field, but i know some basic knowledge that I can use now to validate my arguments.From my experience of 7 years of securities trading in US market I know for sure that most traders depend on luck. They are in the market like gamblers in Casinos . They are trading for the thrill. Of course there is an exception here , and I mean the sophisticated investors, traders and institutions.

Every one of them (the 2 teams) are looking for the profit. But how do each one of them look at the trading process ? Like I said gamblers and yes I call them so because they depend on luck and probabilities are so different than the professional ones ! But in What way ? The professional do their best to filter the securities by choosing the right bargain . I didn’t mention the long process of filtering , you may ask me why ? Because at the end of financial calculations , investors face a critical  phase : that is the decision making phase to pick the hot stock. While the gamblers don’t get involved in the previous process, all they are after is the quick profit and the thrill of trading and sometimes  the fear of losing. Some gamblers certainly go through a process which is obviously different than common security analysis. What makes both different is the mentality of each one. The investors group use skills finalised by sophisticated decisions. Gamblers however, value profit without knowing the mechanics and fundamentals of stock markets.

Both teams are exposed to luck and losing money, as no one can anticipate the markets surrounded by many economic and political influences . We live in an enigmatic and uncertain world anyhow. No matter how skilful you are , you can not control the consequences . You can get lucky if you are good and gain money. Still you can win many trades while being merely lucky with no skills at all. For example by following experts advice or getting to know insiders. I know many investing-coaches who claim that  they are experts in stock markets but still lose and close many of their own portfolios . Despite that they continue giving lectures and courses. I call that a foolish act because these morons are fooling themselves and their clients. I’m sure you have seen them every where and not just in the finance industry. What was the reason for them for not being able to beat the market ? Was it of their lack of technical knowledge ? I doubt it. Was it because of the “Market Efficiency hypothesis” theory ? Which states that you can not beat the market by using technical analysis or manipulating the insiders information to profit before every one else ? I don’t believe in that theory , because in reality there are plenty  who profit from the markets by using technical charts and insiders secrets.

All I can say is that there are  winners and losers in securities markets and its irrational to categorize their actions into “The seven habits of Highly effective or ineffective investors” book . because even if you apply those habits , it does not mean that you are isolated from risk and uncertainties. I still trade despite of what I just said and I did not write this article to put you off trading or investing. My point is to illustrate that investing is mainly a probability game, however with a spice of skills it can become a non-gambling profession.

Tags: Philosophy, Probability, profession, risk, stock market, trading

Risk Management (RM)

What is risk management ?

Risk management is a process or a collection of strategies and techniques utilised to benefit businesses and companies in many ways: it  helps businesses to protect assets by managing and controlling resources; and thus enabling companies improve performance and efficiency by proper planning and tuning that will lead to  better decisions.  There are many risk solutions in the real world depending on the size and type of industry (case studies).

What are the risk management solutions ?

Many of risk management companies offer some or all of the following solutions;

• Enterprise risk management (ERM).
• Financial risk management.
• Operational risk management.
• IT risk management.
• Compliance risk management.
• Market risk management.
• Credit risk management.
• Strategic risk management.

There are many tools/software that can be used in risk management. They are designed by many companies. You should be careful not to use any tool though, make sure its compatible with your business model and needs. If you are not sure, you should consider consulting a risk management firm.That’s the advantage of industry specialisation. Many worldwide companies started to pay attention to risk management after the financial crisis that hit the world lately. So relatively speaking , risk management is somehow a new profession/speciality. Insurance used to be the only solution to avoid risk, but its not the case any more. Businesses and insurance companies started to realise that it is vital and necessary also to take risk management into consideration. Otherwise  premium will be high and risk is too high. Risk does not have to be physical only, there are many risks and most importantly accounting/money risk that many contemporary companies are falling under ( Credit crunch) and Enron in the past.

Risk management is not a cut-off solution and it does not mean that it will prevent risk entirely. There is no such thing as  risk-free. Its just a control and a measure that hopefully will minimize risk, or at least is considered a roadmap (benchmark) which is adjustable and changeable.

There are many risk management companies in the west. I’m just not sure about the Middle East. I think big companies in Middle East depend mostly on Western companies to give them solutions and support, which I do not agree with entirely. Its fine to get help from outsiders if they have good solutions, but there are regional factors that the Western countries can not solve or understand and that is considered as a chief reason. There should be regional business that understands the area. I only spotted few companies such as : Diligence and  Sophis , the later is the main sponsor of Risk Middle East conference .There is also a Kuwaiti company: Global Consultants. Please let me know if you have a list of names of other companies.

The reason I’m talking about risk management in this post is because I think risk management is linked with my blog speciality- that is entrepreneurial tools. RM is an important tool for entrepreneurs and companies for any time or any industry. RM is a process that goes hand-to-hand with the business cycle not just emergencies. The technology has provided us many tools that can be used in the risk management business, and we shall take advantage of it. That does not indicate that we should be pessimistic, quite the opposite optimism is healthy and vital, for the sake of innovation and going forward. RM  is just a sort of planning for success, and like the saying: failing to plan is planning to fail.

Tags: Enterprise Risk Management, Entrepreneur, Entrepreneurial resources, Entrepreneurship, ERM, kuwait entrepreneurs, Kuwait risk management, Kuwaiti Entrepreneur, Middle East risk Management, online entrepreneur tools, risk, risk management