German residential market is booming due to extremely low interest rates and, respectively, very cheap mortgages. But if the rates grow, the market is going to crash! For instance, a current rate for 10 year mortgage without a downpayment is about 2%. A new rural house costs about €300000. A typical borrower can pay about €1000 monthly installment + €5000 extra redemption in the end of year. If the rate jumps to 4%, the house price will drop to €246303, i.e. 17.9% (this is just estimation, however, it is not implausible). And additionally the residual debt refinancing costs will increase by €31762 (this is a precise calculation).
Zinsänderungsrisiko ist aktuell so hoch wie noch nie! Die Kredite sind wegen extrem niedriger Zinsen zwar günstig geworden, aberdie starke Nachfrage trieb die Immobilienpreise so hoch, dass barwertig gesehen, ist der Erwerb einer Immobilie doch teuerer geworden. Und wenn Sie dazu Ihre Immobilie nicht auf einmal, sondern mit dem Anschlusskredit finanzieren, kann die Restschuld für Sie sehr teuer werden. Selber Schuld, wenn Sie Ihre Risiken nicht nachkalkulieren (letYourMoneyGrow.com hilft Ihnen gerne bei Kalkulation).
Recently we revied the performance of Einstein, a German trader who managed (without a leverage) to make almost 2000% in less than three years. LetYourMoneyGrow.com translates his investment grades in layman's terms:
Tenbagger - the stock will grow ten times within 3 years.
Doubler - the stock will grow twice with a year
Outperformer - the stock will be better than peer group by factor 2
Money - one may but not necessarily need to buy the stock
No-hoper - one will neither lose nor earn money with this stock
Pinocchio - the board does not get along with the truth
Brief - one may but not necessarily need to sell the stock short
Short - one can earn money if sells this stock short
Snot - avoid buying this stock, do sell it short!
Snot to the power of 10 - target zero, total loss, blacklist and megashort!
As I read Oleg Barmin's book "Я помню всех, кто мне когда-то не перезвонил" (I remember everybody who once did not call me back) I saw a lot of parallel to Theodore Dreiser's Financier Frank Cowperwood (Charles Yerkes). Like Cowperwood (who being a teenager bought and re-sold a soap with profit), teeny Barmin bought a frozen fish, smoked it and re-sold with profit. In the age of 21 he built a flourishing car business ... and like Cowperwood was wiped by crisis and was imprisoned (however, only on remand). Like Cowperwood, he rose again (in florist business). Though Barmin had not (yet) built something like London Subway, he is only 35 and who knows, maybe we will see more parallels with Cowperwood...
In spite of such praising summary the post is going to be critical: we will concentrate on what Oleg missed from risk management point of view.
My wikifolio ("Somewhat better than DUCKS", ISIN: DE000LS9HDK3) is investable from 28.10.2016. It surely beats the DAX (main German stock index) both on absolute and risk-adjusted performance. Though I am very proud of my performance, I provide a closer look at it and show that sometimes I had just luck and sometimes I could have done better. I always preach for the rigorous and cold-blooded performance analysis and the best sermon is to demonstrate it by the example of myself.
BigData and DeepLearning are popular buzz words nowadays. But the number of the genuine success stories is relatively small.
In trading the BigData technology is mostly associated with automatic analysis of the news and sentiment in social networks. But unless you are Google or Reuters, you will never be the one who gets the news first. Additionally, a market reaction both to news and sentiment is often vague and amorph.
Large deep neural networks closely resemble a human brain, which also has a lot of neurons, interconnected in many layers. But it doesn't mean a breakthrough to a real artificial intelligence: all is not gold that glitters.
a positive side: trading is only a part of the financial world. Likely, BigData + DeepLearing has a high potential in adjacent areas like risk profiling and credibility analysis.
The maximum drawdown (MDD) is likely the most important measure of risk in practice. We explain how to calculate it and why you should keep it under control. Remember, if the MMD reaches -50% the portfolio have to grow +100% in order just to compensate the previous loss!