Con questo articolo il giovane economista finlandese Mikko Myyryläinen inizia la sua collaborazione a Libertates. Il mercato e le sue insidie, sostiene, spingono spesso le persone comuni ad affidarsi a predizioni improbabili, ad abbandonarsi a paure irrazionali e primitive, a rassegnarsi alle perdite abbandonando la partita. Ma di fronte a questi timori, l’unico attegiamento saggio è quello di … prendersi una vacanza e godersi la natura (quella finlandese è documentata nelle sue fotografie). Solo a mente serena si potrà comprendere che la “mano invisibile” del mercato non ha mai smesso di operare, e che il mercato resta il luogo dove potremo operare con fiducia.
“Sell Your Stocks and Take Six Months Off”
or Continue On the Market?
Buy Low, Sell High” — But then buy what/invest in what?
Now especially people in Europe are witnessing an interesting move: European central bank has long ago set guidance on negative interest rate, but now negative interest rates are finally reality.
In general weare witnessing the situation where (taking into account the inflation and different bank service costs), depositors are losing money when holding it in a bank account. Now the EU is trying to boost consumption in Eurozone by making money saving unprofitable and this could even work if people just had jobs. From economic perspective, now would be the right time to buy and make investments, but buy what and invest in what/where? According to many analysts, now would be the right time to take more loan and invest in future. In the past, clearly the right decision would have been investing in such things as gold or properties, but at very the end properties or gold are no different than stocks, what it comes to forces affecting to marketprice. So is there a safe haven anywhere? Privately held companies? Peer-to-peer lending? Establishing an offshore bank accountor holding company? Or what? Consumers have become fearful, because analysts arefinding ‘bubble’ here and ‘bubble’ there. The uncertainty mantra has become a controlling force in everyday decisionmaking. Can you even remember when was the last time we had certainty of something according to analysts?
Uneven Capital Gains Taxation affecting investors’ decisions
In some EU countries like e.g. in Finland the Capital Gains Tax is 30% on realized capital income, and if the realized capital income is over 40 000 euros, capital incometax is 32% (33% in 2015). In Finland carry forward of realized losses is allowed for five years, with certain limitations. There is one exception as capital gains from the sale of residential homes is tax-free after two years of residence, also with certain limitations. Finland is, no doubt, almost the opposite to tax heaven, if comparred to other places like e.g. the Republic of Cyprus, where gains from the sale of shares listed on the stock exchange are excluded from capital gains tax, as specified in the Capital GainsTax (Amendment) Law, No. N119(I) of 2002.
EU countries have nothing but consistent Capital GainsTax rates. If for example the Finnish investor wants to buy a car at current situation it would most likely be much cheaper to take a loan than sell stocks. On the contrary, e.g. in the Republic of Cyprus the situation is quite different. In Finland and many other countries/places in the Eurozone, the government is trying to cut down day trading and short positions. Let us assume you hold a share currently worth of € 8 per share (up 150% per share) and would like sell it and re-invest the money into another company worth of € 8 per share. Right when you sell your position, you have actually 30% or 32% (33% in 2015) + different comissions and possible service fees etc. less euros. So, what you do? Clearly one should not re-invest the money, but what would he/she buy then? Instead of supporting consumption, we may actually be supporting just the opposite and even further accelerating wealthy peoples’ money moving out of the Eurozone to the tax heavens. As a result of this, many governments are planning different sanctions how to take portion of escaping money. But is that the solution to the problem or just the beginning of even bigger problem? How about doing something in order to standardize taxation in EU countries?
Buy when everyone else is selling
Some analysts are predicting we are near the ‘Big Drop’, ‘Wall Street Crash’ and “Black Tuesday”: others seeing the future in more positive light. This pessimism is not new in Economic literature ore ven in the history of mankind: Analysts and clairvoyants have been predicting the end of the world for 1000s of years by now. When it does not come the arguement is usually that signs have not been clear and that it comes this year or 5 years from now. Almost like rain in the UK, if it is not raining cats and dogsnow, the sky will most certainly be cloudy in one or three hours from now, or at least next week.
Another explanation to the pessimism is that we want to believe that the negative energy needs to be unravel before the situation can be neutralized, human nature probably figuratively needs to see the clean table be fore we can start believing again. It is in our nature to trying to simplify and create simplier models from complex phenomena. What we don’t really understand, we try to make more understandable.
It is commonly known fact that fear on the market opens ossibilities and ‘blood’ gives new life (e.g. Zero-sumgame). Because ‘there is no suchthing as a free lunch’, right?
Momentum…Market Movement is What Keeps Wall Street Players Alive
If there is no movement on the market, there is no point in taking short-term positions, possibility of ‘taking vision regarding the future trends’, nor possibility of making huge short-term profits — yes, no possibility of gambling and not even possibility for some to illegally utilize inside information. The nature of investing has changed: literature does no more highlight long-termpositions, but more like ‘selling on the news’ type of strategy. We are one way or another encouraged to take reactive positions where we lose the big picture from what is happening and in worst case scenario, our investment strategies that we have been following. When going back to the wellknownslogan: ‘there is no such thing as free lunch’, when we are driven separate from the rest of the pail (in this case our own strategies), we will most certainly be eaten by sharks or other predators, because we lose the control of what we are doing and why. And in which case we might as well be on holiday as we are not focused and doing things in a systematic manner.
Disclosure:If the mind is crowded with fear and direction is lost, then it might be a good idea to take even a 6 months holiday, but not because the market needs or even encourages us to do so, but instead because on needs that to find the direction again. Market never needs any individual, it is we who need the market and the figurative invisible hand which finally brings us back to the market and keeps us there.
Mikko M. Myyryläinen