Recently, there was a book "The Most Important Thing: Uncommon Sense for the Thoughtful Investor" by Howard Mark.
This is a good book. The book strongly emphasize on a term called "SECOND LEVEL THINKING", which is very important for one who wants to be successful in investment. Howard Mark is implying that most people do first level thinking spontaneously, while only minority carries the habit of second level thinking.
First Level Thinking is a shallow way to interpret things without much effort needed to assess it's validity. It is simplistic and superficial, just about everyone can do it.
Second Level Thinking is deeper, complex and convoluted. It takes many things into consideration.
Examples of 1st vs 2nd level thinking in the book
1st Level Thinking says "It's a good company, let's buy the stock"
2nd Level Thinking says "It's a good company, but everyone think it's a great company, and it's not. So the stock is overrated and overpriced; lets sell"
1st Level Thinking says "The outlook calls for low growth and rising inflation. Let's dump our stocks."
2nd Level Thinking says "The outlook stinks, but everyone is selling in panic. Buy!"
First Level Thinking plays a very important role in all the bubbles happened in the past:
- The internet will change the world, let's buy internet stocks!
- China will grow forever, let's buy Chinese stocks!
Everyday, the market, the financial press, are full of information promoting first level thinking. In order to be successful, it is important to start develop SECOND LEVEL THINKING within ourselves.
Sunday 4 November 2012
Sunday 28 October 2012
Characteristics of a Bubble
1. A convincing idea, concept, or product. With potentials of rapid growth, and unlimited wealth
2. There are lots of excess capital in the market, or hot money "artificially created" through certain channel or policy. Once those capitals are all focused in this area, it will grow like a snow ball.
3. The idea must be simple but yet complicated. It has to be so simple until every ordinary people thinks it is a good idea, but yet it has to be complicated enough to have hard facts and data to prove it wrong
4. There are people start making money from the idea. The most attractive thing to the public is quick and easy money. It spreads even faster than virus.
5. When the bubble grows to certain extend, there will be lots of experts who come out to support and promote the bubble. Those experts are typically iconic figure, representing wisdom, authority, role model. The public believes they are modelling the highly successful people.
6. The duration of the bubble growth will last longer than expected. Those who initially pointed the danger of bubble burst will be taunted and laughed when the bubble is growing bigger.
7. It bursts.
Bubbles are well known in stock market. It happened and will happen again. However, bubble is not only limited to stock market, it can happen to anything: flower, stamps, watches, wine, oil, property, land, stones, gold, silver...as long as it is able to trigger GREED
Thursday 18 October 2012
The Story of a Cow
This is not to talk about the bullish market, it's about a story of a cow and a smart guy.
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John just bought a cow at $100, and he leave the cow at his backyard.
1 week later, John is running out of cash. He have no choice but to put the cow up for sale. He intend to sell it at $120 to pay his debt. Unfortunately, all potential buyers are only willing to pay maximum $100 as they think the cow only worth $100.
Being so desperate for money, John came out with an idea. John register a company called Cow Technologies Limited, with the cow as the asset of the company.
John applied for IPO and managed to get approval to issue 100 shares at the price of $3 each. In total, the IPO practice will raise $300 cash for John. In John's prospectus, Cow Technologies is described as "a conglomerate operating various business units to provide solutions for food and beverage industry in local and regional market".
The IPO get strong response with 10 times over subscription. John happily receives $300 from the IPO, while keeping the cow in his backyard. On the opening day, the share price of Cow Technologies Limited closed at $3.30, 10% higher than the IPO price.
In week 1 - $4.00
The price closed strong at $4.00
In week 2 - $6.00
Some experts start to analyze the productivity of the cow and conclude that, base on some calculation, after 3 years the number of cows will grow to 30 cows, hence the share price should worth much more than $4. Investors are encouraged and rush to market to buy at higher price. By end of the week, Cow Technologies closed at $6.00
In week 3 - $9.00
Investors visualize how many tonnes of milk will be produced by the cow and sold to the market. Realizing the value added, investors rush in to buy again. Price close at $9.00
In week 4 - $12.00
Investors heard news that Cow Technologies is forming a capable R&D team to develop a wide range of dairy products target for local market, and then export to other regions. There were also plans in setting up a factory to mass produce the dairy products. Some heard that Cow Technologies had already identified a land nearby to build the factory. Riding the strong outlook, the share price closed at $12.
In week 5 - 9.00
There are news saying the cow is old, and life span is not long. A small group of investors felt uncomfortable and starts to dispose the share. Share price retraced to $9.00. Yet most people think this is healthy correction, and its time for bargain hunting.
In week 6 - $4.00
A lot of rumors saying the cow is dying. Panic spread. More people dumb the shares. Price plunged to $4.
In week 7 - $0.50
People found that the cow carries mad cow disease, and highly possible it had infected residents in that area. Cow Technologies will be ordered to cease operation, and the factories and office will be quarantined. Further panic selling, the price plunged to $0.50!
In week 8 - $0.50
There's one crazy guy named Peter, went to visit John's house to find out what's going on. He found that John is sitting at home as usual, and cow the lazing around in the backyard. Nothing has changed. The cow is still worth $100, and the share worth $1. Peter decided to purchase the share at $0.50 from the market. Peter was laughed by other investors as being crazy to "catch the falling knife".
In week 9 - $3.00
Some people start to realize "the situation is not as bad as predicted" and start to rush into market to buy. Share price rise back to $3.
...........................
John lives happily ever after with his cow and $300 cash. End of story.
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Nothing has changed on the cow, John did nothing to the cow. Nothing happened, except for the extra $300 for John.
While nothing happen to John and his cow, many things happened in the stock market in a few weeks. Investors had ride through a rough roller coaster, enjoying the greed, and enduring the fear.
That's why, stock market is a fun place, for investors to imagine, hope, anticipate, fear, and panic.
Monday 15 October 2012
A joke about Share Price vs Share Value
This is a joke.
......
Once upon a time in Wall Street, there were 2 traders, Mr A and Mr B.
They trade a can of sardine with each other. Mr A sells the sardine to Mr B, and Mr B sells back the sardine to Mr A, then Mr A sells it back again to Mr B.....the process keeps on repeating without end.
In every trade, each party is able to sell the sardine at a selling price higher than buy price. Therefore, this ensures each party make profit in every trade!
In the long run, Mr A and Mr B both made good money by just trading the sardine to each other.
One day, out of curiosity, Mr A decided to open up the canned sardine to see what's inside, to understand why it is worth such a high price. Mr A was shocked to find that the sardines are actually rotten!!
He was so angry and go confront Mr B for selling rotten canned sardine to him.
Mr B replied, "Why do you want to open the can??? The sardine is meant for trade only, it is not meant to be eaten!!!"
......
Moral of the story:
1. Stock price movement is solely based on investors recognition on the share, and the price they are willing to pay. Price may not match the value.
2. It is all about investors' imagination and perception towards the stock.
3. A lot of times, hot stocks traded at high price are actually lousy companies, like the rotten canned sardine, until one day investors started to find out the truth, before the stock price plunged.
4. It is about the art of avoiding buying rotten sardines
5. It is about the art of exiting the market before people realize the market is full of expensive, and may be rotten canned sardines
6. Trading stock is just a game of trading a virtual contract, base on the market's hope, greed and fear.
......
Once upon a time in Wall Street, there were 2 traders, Mr A and Mr B.
They trade a can of sardine with each other. Mr A sells the sardine to Mr B, and Mr B sells back the sardine to Mr A, then Mr A sells it back again to Mr B.....the process keeps on repeating without end.
In every trade, each party is able to sell the sardine at a selling price higher than buy price. Therefore, this ensures each party make profit in every trade!
In the long run, Mr A and Mr B both made good money by just trading the sardine to each other.
One day, out of curiosity, Mr A decided to open up the canned sardine to see what's inside, to understand why it is worth such a high price. Mr A was shocked to find that the sardines are actually rotten!!
He was so angry and go confront Mr B for selling rotten canned sardine to him.
Mr B replied, "Why do you want to open the can??? The sardine is meant for trade only, it is not meant to be eaten!!!"
......
Moral of the story:
1. Stock price movement is solely based on investors recognition on the share, and the price they are willing to pay. Price may not match the value.
2. It is all about investors' imagination and perception towards the stock.
3. A lot of times, hot stocks traded at high price are actually lousy companies, like the rotten canned sardine, until one day investors started to find out the truth, before the stock price plunged.
4. It is about the art of avoiding buying rotten sardines
5. It is about the art of exiting the market before people realize the market is full of expensive, and may be rotten canned sardines
6. Trading stock is just a game of trading a virtual contract, base on the market's hope, greed and fear.
Sunday 30 September 2012
Profit from the Crash
This is a simple sharing about crash of stock market.
Stock market crash does not sound like a good thing to happen. Most people do want to see stock market crash.
People used to related stock market crash to
These are conventional wisdom.
Why not we view stock market crash from another angle - If we do things correctly, stock market crash benefits smart investors:
This is the only time great counters are offered at dirt cheap price. Time for bargain hunting. It is time to buy low. We can enjoy great appreciation in long term. For those with good dividend payouts, we can buy it at low price which mean high yield. For a share offering 0.10 dividend per year, there is huge difference in dividend return if we buy it at $1 vs buying it at $3. It is 10% vs 3%
For more aggressive investors, they can take further step to short sell. The more the market crash, the more they earn.
The conclusion is, we should look at market boom and crash neutrally, and take necessary actions to benefit ourselves.
[Note of Caution: Stock Short Selling is strictly prohibited in Malaysia. We can do shorting on the KLCI via FKLI futures contract. For further details you may Google it]
Stock market crash does not sound like a good thing to happen. Most people do want to see stock market crash.
People used to related stock market crash to
- Money losses in stock market
- Bad economy
- Loss of jobs, high jobless rate
- Bankruptcy
These are conventional wisdom.
Why not we view stock market crash from another angle - If we do things correctly, stock market crash benefits smart investors:
This is the only time great counters are offered at dirt cheap price. Time for bargain hunting. It is time to buy low. We can enjoy great appreciation in long term. For those with good dividend payouts, we can buy it at low price which mean high yield. For a share offering 0.10 dividend per year, there is huge difference in dividend return if we buy it at $1 vs buying it at $3. It is 10% vs 3%
For more aggressive investors, they can take further step to short sell. The more the market crash, the more they earn.
The conclusion is, we should look at market boom and crash neutrally, and take necessary actions to benefit ourselves.
[Note of Caution: Stock Short Selling is strictly prohibited in Malaysia. We can do shorting on the KLCI via FKLI futures contract. For further details you may Google it]
Wednesday 26 September 2012
Windows 8 and Microsoft (NASDAQ:MSFT)
http://windows.microsoft.com/en-US/windows-8/release-preview
Windows 8 is expected to launch in end October. After so many rounds of Windows upgrade, this seems to the most revolutionary and probably most ambitious.
It's a platform to cater for all hardware from smart phones, tablets, laptop PCs...everything.
In short, it covers ARM based and x86 based products. It comes with a Windows RT version
In one single platform, it can support touch and mouse control.
It can switch between 2 interface: a touched based interface more suitable for smaller gadgets like smartphones and tablets, and mouse based interface which is more towards what we have today, and it is meant for more commercial and heavier work.
The intention is very clear: To cover every area and extend it's domination. Past few years smartphones and tablets had been growing extremely fast, a term "Death of PC" are commonly heard. Actually it is implying The Death of Windows. This was an area Windows left out passed few years.
The term "Death of PC" sounds exaggerated. If we are to remove all Windows product from the world from now on, the world will collapse. It's serious. If we think carefully, all our daily activities are directly and indirectly supported by Windows based PC. If we are to remove all iOS and Android based products from now on, life will still go on as it only affects some of your leisure activities. Worst thing would be those tech fans will cry for a few days, but then you can go purchase other OS (Windows, Blackberry) gadgets to continue with you mobile surfing, gaming, and social networking.
Tablets don't allow you to do much things except for leisure and communication purpose, but Wintel based laptops are lack of the Cool factor of tablets. So here's how current market works: most consumers still own a Wintel based laptops as usual (as they still need to work, and can't live without it), and yet purchase another tablet for leisure purpose and to look COOL.
If I am a consumer, this might make me think twice before I spend money on another Android or iOS tablet. For necessity, I will still own a Windows product - it could be a hybrid product: A x86 processor tablet with laptop performance attached to separate keyboard and supports mouse. It can be used as a laptop or tablet depends on my need. Do I still have good reason to buy another tablet, since I already have one? Even if I justify myself to buy another extra tablet which is smaller and less powerful for leisure purpose, I can still chose between Win8, iOS and Android. So far, SURFACE and Samsung Win8 tablet look Cool.
So here might be the vision of Msft:
1. First, defend the fortress of PC - tell the world that PC (Wintel) will not die. It will evolve to something even stronger. I want all Wintel to remain powerful or even better, and now friendly for touch screen application
2. Launch a massive counter attack to tablet market. Now I am Cool enough for smaller tablet, while having the functions and versatility of wintel laptop
3. Then penetrate into Smartphones area. If number 2 starts to work well, now Cooler Windows 8 phone might look attractive, as it has good interoperability with my Wintel tablets or laptop.
DANG DANG DANG.
Sensitive and greedy investors already started to figure out the share price of MSFT in relation to the new Windows 8.
FACTS:
For so many years until now: Revenue, profit, EPS, DPS had been an almost perfect growth pattern.
Operating margin remain solid and high.
Balance Sheet: Cash and Debt level excellently managed at very healthy level
For punters, the price pattern had been very boring. Company growth and profitability remain positive. At current price of $30, this translates into PE of 15, which means it is not at super bargain price. But again, we have to consider the EPS growth in future. Dividend yield is 3+%, looks OK but not impressive for Malaysia and Singapore standard.
You may refer to Morningstar.com to retrieve further details:
http://quote.morningstar.com/stock/s.aspx?t=MSFT®ion=USA&culture=en-us
Windows 8 is expected to launch in end October. After so many rounds of Windows upgrade, this seems to the most revolutionary and probably most ambitious.
It's a platform to cater for all hardware from smart phones, tablets, laptop PCs...everything.
In short, it covers ARM based and x86 based products. It comes with a Windows RT version
In one single platform, it can support touch and mouse control.
It can switch between 2 interface: a touched based interface more suitable for smaller gadgets like smartphones and tablets, and mouse based interface which is more towards what we have today, and it is meant for more commercial and heavier work.
The intention is very clear: To cover every area and extend it's domination. Past few years smartphones and tablets had been growing extremely fast, a term "Death of PC" are commonly heard. Actually it is implying The Death of Windows. This was an area Windows left out passed few years.
The term "Death of PC" sounds exaggerated. If we are to remove all Windows product from the world from now on, the world will collapse. It's serious. If we think carefully, all our daily activities are directly and indirectly supported by Windows based PC. If we are to remove all iOS and Android based products from now on, life will still go on as it only affects some of your leisure activities. Worst thing would be those tech fans will cry for a few days, but then you can go purchase other OS (Windows, Blackberry) gadgets to continue with you mobile surfing, gaming, and social networking.
Tablets don't allow you to do much things except for leisure and communication purpose, but Wintel based laptops are lack of the Cool factor of tablets. So here's how current market works: most consumers still own a Wintel based laptops as usual (as they still need to work, and can't live without it), and yet purchase another tablet for leisure purpose and to look COOL.
If I am a consumer, this might make me think twice before I spend money on another Android or iOS tablet. For necessity, I will still own a Windows product - it could be a hybrid product: A x86 processor tablet with laptop performance attached to separate keyboard and supports mouse. It can be used as a laptop or tablet depends on my need. Do I still have good reason to buy another tablet, since I already have one? Even if I justify myself to buy another extra tablet which is smaller and less powerful for leisure purpose, I can still chose between Win8, iOS and Android. So far, SURFACE and Samsung Win8 tablet look Cool.
So here might be the vision of Msft:
1. First, defend the fortress of PC - tell the world that PC (Wintel) will not die. It will evolve to something even stronger. I want all Wintel to remain powerful or even better, and now friendly for touch screen application
2. Launch a massive counter attack to tablet market. Now I am Cool enough for smaller tablet, while having the functions and versatility of wintel laptop
3. Then penetrate into Smartphones area. If number 2 starts to work well, now Cooler Windows 8 phone might look attractive, as it has good interoperability with my Wintel tablets or laptop.
DANG DANG DANG.
Sensitive and greedy investors already started to figure out the share price of MSFT in relation to the new Windows 8.
FACTS:
For so many years until now: Revenue, profit, EPS, DPS had been an almost perfect growth pattern.
Operating margin remain solid and high.
Balance Sheet: Cash and Debt level excellently managed at very healthy level
For punters, the price pattern had been very boring. Company growth and profitability remain positive. At current price of $30, this translates into PE of 15, which means it is not at super bargain price. But again, we have to consider the EPS growth in future. Dividend yield is 3+%, looks OK but not impressive for Malaysia and Singapore standard.
You may refer to Morningstar.com to retrieve further details:
http://quote.morningstar.com/stock/s.aspx?t=MSFT®ion=USA&culture=en-us
Tuesday 25 September 2012
White Hot Apple
Every launch of new Apple product means headlines, hot discussions, long queue, hot selling. There is no difference for i-phone 5 this time, and it should be selling hot for coming 2 months.
Apple (NASDAQ:AAPL) share price is as hot. Recently it even once advanced above $700 mark. A few weeks ago, I met an auntie Apple fan. She has a whole collection of Apple products since early days from ipod, ipod touch, mac book, iphone 3G, 3GS, 4S, and going-to-be i-phone 5. What impressed me is she told me Apple share is going to go up and she wants to buy. Then Apple shares advanced above $700 a few days ago!
From profitability perspective:
2011 is so far the best year for Apple. Net profit was $25 billion, almost double of previous year. For year 2012, it shall be even higher, around $40 billion!
2011 is so far the best year for Apple. Net profit was $25 billion, almost double of previous year. For year 2012, it shall be even higher, around $40 billion!
In past 10 years, it was a perfect growth pattern for both revenue and profit. Every year and quarter we are seeing absolute strong growth. Cash remain rich with zero loans.
Interesting enough, looking at most recent quarterly earnings, for 3 quarters in a row, we are seeing $2-3 billion profit drop, $4-7 billion revenue drop QOQ. This is very unusual for Apple. Actual reasons are not sure.
To think positive it could be consumers holding back their orders to wait for iphone 5 launch. Other not so good reasons would be -
1. Android is growing at faster pace and more users switched from iOS to Android. Compare to 4 years ago Android was not really recognized. Now, Android market share is already 2x iOS in smart phone market.
2. People gradually start to perceive iphone differently, as it has lost it's "WOW" factor. The design does not evolve much in past 4 years. Consumer can switch taste quick, especially for tech gadgets. Recently we can see increasing number of people proudly flashing their Android based gadgets (especially Samsung phones).
Besides, some potential concerns for future:
1. Competition in tablet sector. More and more players entering. WINDOWS 8 might bring huge impact to tablet market. It shall be launching in 1-2 month's time.
2. Putting all eggs in one basket - over dependent on 2 products, iphone and ipad.
3. Competitiveness - it is still a question mark on the future innovation in the absence of Steve Jobs. When Jobs was fired, Apple ran into trouble, until Jobs came back to revive them with all the i-products. Now the captain has left the boat again.
4. Life Cycle - We learnt from history that life cycle for hot tech gadgets are even shorter an athlete's. We have witnessed the stories of Sony Walkman, Motorola Startec, Ericsson, Nokia, Motorola RAZR, Blackberry.
Despite all the theories above, good news for today are:
- technically the chart tells us the the uptrend remains, before it changes
- fundamentally, the PE ratio is 16, which is not high. Of course we have to know that PE ratio is inversely related to EPS. If EPS starts to shrink, it means PE ratio will increase.
- we are still seeing people queue over night for iphone 5 despite strong critics from analysts of "lacking of WOW factor"
To think positive it could be consumers holding back their orders to wait for iphone 5 launch. Other not so good reasons would be -
1. Android is growing at faster pace and more users switched from iOS to Android. Compare to 4 years ago Android was not really recognized. Now, Android market share is already 2x iOS in smart phone market.
2. People gradually start to perceive iphone differently, as it has lost it's "WOW" factor. The design does not evolve much in past 4 years. Consumer can switch taste quick, especially for tech gadgets. Recently we can see increasing number of people proudly flashing their Android based gadgets (especially Samsung phones).
Besides, some potential concerns for future:
1. Competition in tablet sector. More and more players entering. WINDOWS 8 might bring huge impact to tablet market. It shall be launching in 1-2 month's time.
2. Putting all eggs in one basket - over dependent on 2 products, iphone and ipad.
3. Competitiveness - it is still a question mark on the future innovation in the absence of Steve Jobs. When Jobs was fired, Apple ran into trouble, until Jobs came back to revive them with all the i-products. Now the captain has left the boat again.
4. Life Cycle - We learnt from history that life cycle for hot tech gadgets are even shorter an athlete's. We have witnessed the stories of Sony Walkman, Motorola Startec, Ericsson, Nokia, Motorola RAZR, Blackberry.
Despite all the theories above, good news for today are:
- technically the chart tells us the the uptrend remains, before it changes
- fundamentally, the PE ratio is 16, which is not high. Of course we have to know that PE ratio is inversely related to EPS. If EPS starts to shrink, it means PE ratio will increase.
- we are still seeing people queue over night for iphone 5 despite strong critics from analysts of "lacking of WOW factor"
Sunday 23 September 2012
KLCI dropped, blame who?
Recently a friend was joking with me, saying that since I posted an article of "Missed the boat, Chase the boat, or Leave the boat" back in July when KLCI hits historical high, then it lost its steam and not able to break through anymore.
Not only that, recent weeks in September we saw big sell down to push it to test 1600 level. My friend blamed me for bringing bad luck to KLCI so it's better for me to stop posting. It's just a joke from him, of course.
At the same time we must not forget some people who took the opportunity to short the KLCI index (FKLI) will be happy with recent movements.
So what is to blame for KLCI's case recently? A few things we commonly hear:
There are valid logic for each reasons above. Another factor to add in, is to go back to the basics of investment: Buy Low, Sell High. The higher it goes, the more prone to correction it is.
So there is no surprise to see recent correction. Those are small correction indeed. One day a real big correction will come.
Not only that, recent weeks in September we saw big sell down to push it to test 1600 level. My friend blamed me for bringing bad luck to KLCI so it's better for me to stop posting. It's just a joke from him, of course.
At the same time we must not forget some people who took the opportunity to short the KLCI index (FKLI) will be happy with recent movements.
So what is to blame for KLCI's case recently? A few things we commonly hear:
- foreign funds are not loyal to KLSE. They just ride on the trend to enter our market, when it is time, they just take profit
- local government and institutional funds are not providing sufficient fund to buy and support the market
- retail investors are not serious in investing in local blue chip counters. Most people are interested in penny stocks nowadays. [Note: KLCI consists of 30 blue chip counters only]
- election factor
There are valid logic for each reasons above. Another factor to add in, is to go back to the basics of investment: Buy Low, Sell High. The higher it goes, the more prone to correction it is.
So there is no surprise to see recent correction. Those are small correction indeed. One day a real big correction will come.
Thursday 20 September 2012
It's time to buy HIGH and sell HIGHER!
If, you bought a share at $1 three years ago. Now you sell it at $6, four months later stock market crashed. The share drops to $2 one year later, and you start to collect again. This is BUY LOW, SELL HIGH. Sounds very simple to make good money.
This is assuming that you had done a thorough fact driven analysis and made an informed decision.
Sounds simple, but it is quite difficult, here's why.
When you bought at $1, it must be a very bad market. After you bought it might fluctuate, may be to the low of $0.70 within 3-4 months which is a 30% paper loss. There are a lot of bad news around. Your friends might ridicule and taunt you for buying it at such a market. To justify you made a wrong move, there will be a lot of conventional wisdom driven theories like "The Worst has yet to come" "Don't catch the falling knife" "We are still not seeing the end yet". If you are buying a plantation stock, theories to justify your foolishness might be "The palm oil price is too low""Demand for palm oil is weak now""Soil bean oil is a great threat to palm oil". When it drops further to $0.70. It further proved you are wrong. Although eventually it is a great investment, but within this 4 months you have to see price fluctuation, negative news, and taunts from your friends. Do you have a big strong heart to hold on to your fact based study??? 4 months is not that short, can you stand it?
Same thing, when you sell it at $6. It must be a great bull market. Your study shows it is overvalued and the market is on the verge of huge correction. After you sold it, it might continue to go up to $7 in 4 months. Again, you will be flooded with good news from the media, and again taunting from your friends for selling so early to miss the boat of such great opportunity. Common theories to prove you wrong are like "We are in a very strong economy" "The bull is running with unstoppable momentum" "Demand for palm oil is ever growing" "It's different this time, there is strong demand from Asia". Again you will be laughed around for 4 months, there's a possibility you will live with regret. So again a big strong heart is needed.
Just look at some famous examples of Warren Buffet (WB).
During the dot com bubble early 2000, WB stayed at the sideline due to reasons that most of the tech stocks are horribly overvalued and their business are "difficult" to understand. As a result, he is heavily taunted by the public for being missed out this time. When the bubble bursts, everyone burnt, but WB's portfolio still grows steadily as ever. People might find ways to criticized him for missing out the chance to enter and "goreng" to enjoy the sudden Windfall profit, but actually it's those people who suffer the Windfall loss ultimately.
Another more recent example, PetroChina. WB started to buy it in 2002. Total initial investment $500 million. He sold all his stakes in 2007, with a total profit of $3.5 billion, solely because it is overvalued. It was the time where we talked about how strong China would be and how it would rule the world. After the sale, PetroChina continue to rise and made another all time high, where people estimated WB had missed out another few billions profit for selling early. Again, WB was being laughed at for making a poor investment decision (although he made $3.5 billion profit). Everyone what happened then. PetroChina crashed and goes back to where it was.
That is why, during bull market, it is easier for analyst and stock gurus to shout for buy call with reasoning of strong bullish momentum, and call to BUY HIGH, SELL HIGHER. You will be under a lot of pressure if you made anti climax caution statement to warn people of high valuation.
For retail investors, buy during bull market is much much more comfortable. At least you can see your shares stay there, or goes up a while (a few months or may be 1 year) to make you feel safe. At least you are making same move as everybody around you, no body will laugh at you, and you feel good.
So it is more comfortable to feel good and die later, rather than undergo big pressure to earn big bugs later. This explains why theory of BUY HIGH SELL HIGHER is well accepted.
For smart investors who wants to BUY LOW SELL HIGH:
Do your homework, make your smart moves QUIETLY, avoid sharing with others. Then highly likely you will enjoy earning big bugs, while staying away from noise and rubbish talks.
This is assuming that you had done a thorough fact driven analysis and made an informed decision.
Sounds simple, but it is quite difficult, here's why.
When you bought at $1, it must be a very bad market. After you bought it might fluctuate, may be to the low of $0.70 within 3-4 months which is a 30% paper loss. There are a lot of bad news around. Your friends might ridicule and taunt you for buying it at such a market. To justify you made a wrong move, there will be a lot of conventional wisdom driven theories like "The Worst has yet to come" "Don't catch the falling knife" "We are still not seeing the end yet". If you are buying a plantation stock, theories to justify your foolishness might be "The palm oil price is too low""Demand for palm oil is weak now""Soil bean oil is a great threat to palm oil". When it drops further to $0.70. It further proved you are wrong. Although eventually it is a great investment, but within this 4 months you have to see price fluctuation, negative news, and taunts from your friends. Do you have a big strong heart to hold on to your fact based study??? 4 months is not that short, can you stand it?
Same thing, when you sell it at $6. It must be a great bull market. Your study shows it is overvalued and the market is on the verge of huge correction. After you sold it, it might continue to go up to $7 in 4 months. Again, you will be flooded with good news from the media, and again taunting from your friends for selling so early to miss the boat of such great opportunity. Common theories to prove you wrong are like "We are in a very strong economy" "The bull is running with unstoppable momentum" "Demand for palm oil is ever growing" "It's different this time, there is strong demand from Asia". Again you will be laughed around for 4 months, there's a possibility you will live with regret. So again a big strong heart is needed.
Just look at some famous examples of Warren Buffet (WB).
During the dot com bubble early 2000, WB stayed at the sideline due to reasons that most of the tech stocks are horribly overvalued and their business are "difficult" to understand. As a result, he is heavily taunted by the public for being missed out this time. When the bubble bursts, everyone burnt, but WB's portfolio still grows steadily as ever. People might find ways to criticized him for missing out the chance to enter and "goreng" to enjoy the sudden Windfall profit, but actually it's those people who suffer the Windfall loss ultimately.
Another more recent example, PetroChina. WB started to buy it in 2002. Total initial investment $500 million. He sold all his stakes in 2007, with a total profit of $3.5 billion, solely because it is overvalued. It was the time where we talked about how strong China would be and how it would rule the world. After the sale, PetroChina continue to rise and made another all time high, where people estimated WB had missed out another few billions profit for selling early. Again, WB was being laughed at for making a poor investment decision (although he made $3.5 billion profit). Everyone what happened then. PetroChina crashed and goes back to where it was.
That is why, during bull market, it is easier for analyst and stock gurus to shout for buy call with reasoning of strong bullish momentum, and call to BUY HIGH, SELL HIGHER. You will be under a lot of pressure if you made anti climax caution statement to warn people of high valuation.
For retail investors, buy during bull market is much much more comfortable. At least you can see your shares stay there, or goes up a while (a few months or may be 1 year) to make you feel safe. At least you are making same move as everybody around you, no body will laugh at you, and you feel good.
So it is more comfortable to feel good and die later, rather than undergo big pressure to earn big bugs later. This explains why theory of BUY HIGH SELL HIGHER is well accepted.
For smart investors who wants to BUY LOW SELL HIGH:
Do your homework, make your smart moves QUIETLY, avoid sharing with others. Then highly likely you will enjoy earning big bugs, while staying away from noise and rubbish talks.
Friday 14 September 2012
Stocks to buy and hold for life time!!
I just recalled a few months ago a friend eagerly asking me to recommend a stock that she can buy now and hold forever for 40-50 years.
Of course my answer is I DON'T KNOW. Its not that I don't want to share, indeed I am very honest to her. I really don't know. Besides I also don't really understand her question and don't know what she wants. To help her to make the question more specific, I assume she is targeting to invest 1 million today, every year it will pay out dividend of 200k at least, and 30 years later the 1 million will turn into 100 million. This should be ideal enough.
We are too used to hear of classic examples of stocks that can hold forever, where it turned 10k investment 40 years ago to 1 million today (includes reinvesting all dividends and bonus shares) for instance Coca Cola, Gillette (P&G), Wal-Mart, American Express, Public Bank, Maybank, Genting...Those are such an inspiring story, no wonder people are so keen to find the next Coca Cola.
As a matter fact, how many investors who invested in those shares 40 years ago already expected this kind of return after 40 years? Besides Prophet, I wonder any human being can predict what will happen after 40 years.
In real world, a practical long term fundamental investing style should be identifying companies with great potential, invest only at good bargain, continue to monitor the progress of the business, to see if it continues on the right track, or something has structurally changed.
I felt sorry for my friend for not being able to give her a direct answer as I am not a Prophet.
Everybody likes to have money coming in easy. No need to think, no need to work, no need to bother, just tell me the answer will do (will people tell you the true answer?), I just want money to come in easy will do. Everybody DREAMED of this, and HOPE it happen in real life. The culture is so common in this country.
When HOPE and GREED are mismanaged in stock market, it's time for disaster.
Of course my answer is I DON'T KNOW. Its not that I don't want to share, indeed I am very honest to her. I really don't know. Besides I also don't really understand her question and don't know what she wants. To help her to make the question more specific, I assume she is targeting to invest 1 million today, every year it will pay out dividend of 200k at least, and 30 years later the 1 million will turn into 100 million. This should be ideal enough.
We are too used to hear of classic examples of stocks that can hold forever, where it turned 10k investment 40 years ago to 1 million today (includes reinvesting all dividends and bonus shares) for instance Coca Cola, Gillette (P&G), Wal-Mart, American Express, Public Bank, Maybank, Genting...Those are such an inspiring story, no wonder people are so keen to find the next Coca Cola.
As a matter fact, how many investors who invested in those shares 40 years ago already expected this kind of return after 40 years? Besides Prophet, I wonder any human being can predict what will happen after 40 years.
In real world, a practical long term fundamental investing style should be identifying companies with great potential, invest only at good bargain, continue to monitor the progress of the business, to see if it continues on the right track, or something has structurally changed.
I felt sorry for my friend for not being able to give her a direct answer as I am not a Prophet.
Everybody likes to have money coming in easy. No need to think, no need to work, no need to bother, just tell me the answer will do (will people tell you the true answer?), I just want money to come in easy will do. Everybody DREAMED of this, and HOPE it happen in real life. The culture is so common in this country.
When HOPE and GREED are mismanaged in stock market, it's time for disaster.
Saturday 8 September 2012
KLCI: WE WANT TO FEEL GOOD
KLCI has hit historical high of 1660+ lately, and corrected "sharply" last Wednesday and Thursday which creates quite a lot of talking points among local retail investors. The "sharp" correction is merely ~-2%. A 2-3% fluctuation is very common to be seen in Hong Kong, Japan, US...
Among opinions from local retail investors, I can conclude that most defend this correction as a healthy correction and their views remain bullish, as this is a good opportunity to enter for upcoming bull run. Minority have bearish view. In fact KLCI is among the best performers in the world this year. Within my knowledge, I can recall that lately only Malaysia and Indonesia had hit historical high, while the rest of market I know i.e. US, Japan, Hong Kong, Singapore, Korea, Taiwan...still have a long way to go to reach teh high before 2008 financial crisis. Not to mention China, the nation with the "strongest performing economy" , the Shanghai Index still hover around 2000, where the highest in 2007 was 6000 plus! This perfectly matches our proud and popular quote of "MALAYSIA BOLEH". Congratulations!
KLCI had been inching up as if there is an unseen propeller underneath. We are too used to see it goes up and appear to be so surprise to see the "2% correction". We are anticipating good news after good news to be published by the government to help propel the uptrend, so far it never fail us. We have been given different assurance with various good news to tell us that our economy is strong and able to withstand any storm. As a preparation of a very important event ahead for all Malaysians, cash after cash has been distributed directly to people (certain), and may be indirectly through the stock market. That is supposed to be an event where people must FEEL GOOD, certainly an up trending stock market will help. It makes me feel like engineering the KLCI to go up is an mission which cannot fail.
Externally, we also like to hear good news of how the developed countries come out with measures to stimulate the economy. Ever since 2008 financial crisis, we had heard countless massive stimulation measures especially in developed countries, of course in different names and terms. Stimulation, Quantitative Easing 1,2,3,4,5....It started in US, then EU, then now in China we are also anticipating eagerly for Mr Wen to announce stimulation plan to stimulate our sentiment. Every time a stimulation measure announced, as usual investors will anticipate eagerly, when it is confirmed, investors become so positive and it reflects in the stock market with a rally, a short term one at least, before we anticipate another round of stimulation.
The logic here is as if we need to survive by depending on the government to keep on printing billions of dollars and inject into the market to make us strong and happy. It is said to encourage increase in consumption hence revive economy activities. I hope this will make us good. This resembles an athlete who keep on injecting steroid to himself whenever he feels tired. Just imagine what will happen to the athlete if this keeps on repeating.
The measure of injecting money into the market to save the economy sounds very simple, and I sincerely hope it works by making our lives better. I am still figuring out whether this measure can bring good changes like making the lazy ones become hardworking, corrupted ones become honest, stupid ones become smart, wasteful ones become thrifty, inefficient ones become efficient, rude ones become polite, inconsiderate ones become civilized, criminals become good citizen.
Back to KLCI, facts we can observe lately
1. It is not cheap, especially blue chips. The most straight forward valuation, P/E ratio is not low, especially compare to regional peers
2. Along the year, most blue chips are in side way movement
3. KLCI has doubled since 2009.
4. The most active stocks for 2012 are penny stocks. If you go to the market, the daily top active list consists of penny stocks
5. Highest gain (of course loss) are penny stocks. The "GORENG" interest is strong.
If we hope it keep on go up go up go up as we wish, we need a real crazy bull to come, where the crazy bull can push the stocks to very high valuation, in another words, very expensive.
Any way, we are human, we always like to feel good, at least for a short while.
Among opinions from local retail investors, I can conclude that most defend this correction as a healthy correction and their views remain bullish, as this is a good opportunity to enter for upcoming bull run. Minority have bearish view. In fact KLCI is among the best performers in the world this year. Within my knowledge, I can recall that lately only Malaysia and Indonesia had hit historical high, while the rest of market I know i.e. US, Japan, Hong Kong, Singapore, Korea, Taiwan...still have a long way to go to reach teh high before 2008 financial crisis. Not to mention China, the nation with the "strongest performing economy" , the Shanghai Index still hover around 2000, where the highest in 2007 was 6000 plus! This perfectly matches our proud and popular quote of "MALAYSIA BOLEH". Congratulations!
KLCI had been inching up as if there is an unseen propeller underneath. We are too used to see it goes up and appear to be so surprise to see the "2% correction". We are anticipating good news after good news to be published by the government to help propel the uptrend, so far it never fail us. We have been given different assurance with various good news to tell us that our economy is strong and able to withstand any storm. As a preparation of a very important event ahead for all Malaysians, cash after cash has been distributed directly to people (certain), and may be indirectly through the stock market. That is supposed to be an event where people must FEEL GOOD, certainly an up trending stock market will help. It makes me feel like engineering the KLCI to go up is an mission which cannot fail.
Externally, we also like to hear good news of how the developed countries come out with measures to stimulate the economy. Ever since 2008 financial crisis, we had heard countless massive stimulation measures especially in developed countries, of course in different names and terms. Stimulation, Quantitative Easing 1,2,3,4,5....It started in US, then EU, then now in China we are also anticipating eagerly for Mr Wen to announce stimulation plan to stimulate our sentiment. Every time a stimulation measure announced, as usual investors will anticipate eagerly, when it is confirmed, investors become so positive and it reflects in the stock market with a rally, a short term one at least, before we anticipate another round of stimulation.
The logic here is as if we need to survive by depending on the government to keep on printing billions of dollars and inject into the market to make us strong and happy. It is said to encourage increase in consumption hence revive economy activities. I hope this will make us good. This resembles an athlete who keep on injecting steroid to himself whenever he feels tired. Just imagine what will happen to the athlete if this keeps on repeating.
The measure of injecting money into the market to save the economy sounds very simple, and I sincerely hope it works by making our lives better. I am still figuring out whether this measure can bring good changes like making the lazy ones become hardworking, corrupted ones become honest, stupid ones become smart, wasteful ones become thrifty, inefficient ones become efficient, rude ones become polite, inconsiderate ones become civilized, criminals become good citizen.
Back to KLCI, facts we can observe lately
1. It is not cheap, especially blue chips. The most straight forward valuation, P/E ratio is not low, especially compare to regional peers
2. Along the year, most blue chips are in side way movement
3. KLCI has doubled since 2009.
4. The most active stocks for 2012 are penny stocks. If you go to the market, the daily top active list consists of penny stocks
5. Highest gain (of course loss) are penny stocks. The "GORENG" interest is strong.
If we hope it keep on go up go up go up as we wish, we need a real crazy bull to come, where the crazy bull can push the stocks to very high valuation, in another words, very expensive.
Any way, we are human, we always like to feel good, at least for a short while.
Thursday 6 September 2012
Contrarian behaviour of KLCI
This is about how KLCI behaved, especially in year 2012. In simple words, it is a "contrarian" relative to regional markets.
Everyday at 5.30pm, you open up any finance website with a list of Asia stock market indices, you will find out:
1. If all markets are very GREEN, KLCI will be a little GREEN (0.1 to 0.2% will do)
2. If all markets are very RED, KLCI will also be a little GREEN, or occasionally a little RED (0.1 to 0.2% will do)
In general, it inches up a little by a little, regardless of what happened outside Malaysia, this is as if it is supported by an UNSEEN FORCE UNDERNEATH (what is that actually???). This matches the popular theory of Malaysia's economy and stock market are immune to external factors as we have strong internal play.
This is an interesting phenomenon to watch. Undeniably, Malaysia stock market is much less volatile compare to other regional bourses such as Hong Kong, Japan and Singapore which can easily fluctuate 1 to 2% daily. Malaysia market typically fluctuate less than 0.5% daily, and it doesn't allow shorting. It is very unusual to see more than 1% daily fluctuation.
This has to link with my previous post of "Missed the boat, Chase the boat, or Leave the boat" which mentioned KLCI had just reached historical high at the region of 1645-1650. So something unusual was observed last 2 days, where KLCI has made more than 1% drop for 2 consecutive days, while all other Asia markets are stably GREEN. From a bullish outlook at 1655, suddenly it is at 1617 which is said to be testing the 1600 support.
Ofcourse, I see mixed view from different forums where one side claim this to be perfect opportunity to enter while another side shows view of bearishness.
Not sure where it is heading to in near term, but THE KLCI BEHAVIOUR IS STRANGE WHICH WE SHOULD TAKE NOTE.
Everyday at 5.30pm, you open up any finance website with a list of Asia stock market indices, you will find out:
1. If all markets are very GREEN, KLCI will be a little GREEN (0.1 to 0.2% will do)
2. If all markets are very RED, KLCI will also be a little GREEN, or occasionally a little RED (0.1 to 0.2% will do)
In general, it inches up a little by a little, regardless of what happened outside Malaysia, this is as if it is supported by an UNSEEN FORCE UNDERNEATH (what is that actually???). This matches the popular theory of Malaysia's economy and stock market are immune to external factors as we have strong internal play.
This is an interesting phenomenon to watch. Undeniably, Malaysia stock market is much less volatile compare to other regional bourses such as Hong Kong, Japan and Singapore which can easily fluctuate 1 to 2% daily. Malaysia market typically fluctuate less than 0.5% daily, and it doesn't allow shorting. It is very unusual to see more than 1% daily fluctuation.
This has to link with my previous post of "Missed the boat, Chase the boat, or Leave the boat" which mentioned KLCI had just reached historical high at the region of 1645-1650. So something unusual was observed last 2 days, where KLCI has made more than 1% drop for 2 consecutive days, while all other Asia markets are stably GREEN. From a bullish outlook at 1655, suddenly it is at 1617 which is said to be testing the 1600 support.
Ofcourse, I see mixed view from different forums where one side claim this to be perfect opportunity to enter while another side shows view of bearishness.
Not sure where it is heading to in near term, but THE KLCI BEHAVIOUR IS STRANGE WHICH WE SHOULD TAKE NOTE.
Monday 13 August 2012
Pareto Theory in Stock Market? That's creative
Lately I met a friend who is kind of intelligent guy, shared his thoughts why only a few people make good money in stock market while majority lose money, using Pareto theory. This is something I haven't thought off in depth and it triggers me to think through it from another dimension. Here I triy my best to simplify and explain his theory:
Here's how the theory goes with the flow in sequence:
1. Original Pareto Theory says 20% of the people owns 80% of the wealth, which implies to wealth inequality. (I agree with this)
2. Then, people apply it into problem solving approach, where we should only focus on top 20% of root cause which bring 80% of the problems (I agree as well)
3. Then, it is also implemented into corporate world promotional and reward system nowadays. In many MNC's in every annual review 80% of the budget will be rewarded to the top 20% in the form of wage increment and bonus. (kind of agree)
4. Then, it is reflected into stock market or any other investment instrument market. 10% of the top investors profit from 90% of the investors, at the expense of their losses. (Totally agree)
Now we can see the difference between number 3 and 4.
In number 3 (corporate world), the fund comes from the company and distributed to all employees. Even if an employee gets the worst ranking in bottom 10%, the worst case is to get zero increment and zero bonus, but the salary still comes in every month. So there is no losses for any employee.
In number 4 (stock market), the fund comes from capital of every investor, with the intention to draw money from others to his own account. Those who profit are those buy at low price, and sell at high price. He sells at high price to investor who is willing to buy at high price. In this case he is gaining money from the person who is willing to pay more. The person who pays more might later find it difficult to have people willing to buy from him at a higher price. As time passed, he might find more and more people asking to buy at lower and lower price. In the end he might be forced to sell at much lower price due to fund constraint or fear.
Conclusion:
Gainers = buy low from losers, sell high to losers (only minority 10% are willing and capable to do this)
Losers = buy high from gainers, sell low to gainers (most people 90% likes to do this)
Total funds are still the same, just that the $ flows from majority to minority.
No wonder people call stock market as a Zero Sum game.
Indeed, if we factor in brokers who charge commissions for every trade, it should be called a Negative Sum game.
Here's how the theory goes with the flow in sequence:
1. Original Pareto Theory says 20% of the people owns 80% of the wealth, which implies to wealth inequality. (I agree with this)
2. Then, people apply it into problem solving approach, where we should only focus on top 20% of root cause which bring 80% of the problems (I agree as well)
3. Then, it is also implemented into corporate world promotional and reward system nowadays. In many MNC's in every annual review 80% of the budget will be rewarded to the top 20% in the form of wage increment and bonus. (kind of agree)
4. Then, it is reflected into stock market or any other investment instrument market. 10% of the top investors profit from 90% of the investors, at the expense of their losses. (Totally agree)
Now we can see the difference between number 3 and 4.
In number 3 (corporate world), the fund comes from the company and distributed to all employees. Even if an employee gets the worst ranking in bottom 10%, the worst case is to get zero increment and zero bonus, but the salary still comes in every month. So there is no losses for any employee.
In number 4 (stock market), the fund comes from capital of every investor, with the intention to draw money from others to his own account. Those who profit are those buy at low price, and sell at high price. He sells at high price to investor who is willing to buy at high price. In this case he is gaining money from the person who is willing to pay more. The person who pays more might later find it difficult to have people willing to buy from him at a higher price. As time passed, he might find more and more people asking to buy at lower and lower price. In the end he might be forced to sell at much lower price due to fund constraint or fear.
Conclusion:
Gainers = buy low from losers, sell high to losers (only minority 10% are willing and capable to do this)
Losers = buy high from gainers, sell low to gainers (most people 90% likes to do this)
Total funds are still the same, just that the $ flows from majority to minority.
No wonder people call stock market as a Zero Sum game.
Indeed, if we factor in brokers who charge commissions for every trade, it should be called a Negative Sum game.
Tuesday 24 July 2012
Missed the boat, Chase the boat, or Leave the boat
The KLCI had recorded it's historical high on 1645 a few days ago, and it has shown some correction for last 3 days. Some other Southeast Asia developing countries also recorded historical high lately on this strong run.
Not sure if it is time to enter on this correction, or it's time to leave the market.
On the OPTIMISTIC side, it can be explained by this theory: The market is on a bull run, the up trend is confirmed and intact. We should ride on the trend, and any sign of correction is a good opportunity for entry. Furthermore, since it has broke the resistance of historical high lately which provides us signal that the momentum is strong and backed by strong buying sentiment. Always remember to follow the trend, "The Trend is your Friend". This is good sign to enter the market.
Then there's another way to look at it. From 2003-2007 we enjoyed a great bull run lasted for 4 years. Then since 2009 till now 2012 we also enjoyed a nice uptrend. Assuming base on theory above, now will be good time to enter to ride on the bull, we can breakdown the years as below, on hindsight:
(Pls note that I am just talking about general market and KLCI, not any particular counter)
Last Run:
2003: Better better better better time to enter, Valuation more more more attractive
2004: Better better better time to enter, Valuation more more attractive
2005: Better better time to enter, Valuation more attractive
2006: Better time to enter, Valuation attractive
2007: Good time to enter, Valuation not expensive
2008: !@#$%^&*?
This Run:
2009: Better better better time to enter, Valuation more more attractive
2010: Better better time to enter, Valuation more attractive
2011: Better time to enter, Valuation attractive
2012: "Good time to enter, Valuation not expensive"
2013: Could be "Good time to enter, Valuation not expensive" again.
2014: Could be "Good time to enter, Valuation not expensive" again.
and so on.............
If the bull run will keep on continue, last much longer than previous one, and "It will be different this time" for sure I am happy to jump in with big positions now, bottom line is I sell at the right time and right price.
The music will keep on playing and no one knows which day it will stop.
I don't know when the music will stop, but if now we blindfold ourselves and randomly pick a stock out of 1000 counters without any FA and TA study, we still stand a chance to pick a counter that will appreciate 15-20% within a week, which will prove the first OPTIMISTIC theory is correct. Of course it can happen another way round. That's why skill in Enter (buy) and Exit (sell) are equally important.
Not sure if it is time to enter on this correction, or it's time to leave the market.
On the OPTIMISTIC side, it can be explained by this theory: The market is on a bull run, the up trend is confirmed and intact. We should ride on the trend, and any sign of correction is a good opportunity for entry. Furthermore, since it has broke the resistance of historical high lately which provides us signal that the momentum is strong and backed by strong buying sentiment. Always remember to follow the trend, "The Trend is your Friend". This is good sign to enter the market.
Then there's another way to look at it. From 2003-2007 we enjoyed a great bull run lasted for 4 years. Then since 2009 till now 2012 we also enjoyed a nice uptrend. Assuming base on theory above, now will be good time to enter to ride on the bull, we can breakdown the years as below, on hindsight:
(Pls note that I am just talking about general market and KLCI, not any particular counter)
Last Run:
2003: Better better better better time to enter, Valuation more more more attractive
2004: Better better better time to enter, Valuation more more attractive
2005: Better better time to enter, Valuation more attractive
2006: Better time to enter, Valuation attractive
2007: Good time to enter, Valuation not expensive
2008: !@#$%^&*?
This Run:
2009: Better better better time to enter, Valuation more more attractive
2010: Better better time to enter, Valuation more attractive
2011: Better time to enter, Valuation attractive
2012: "Good time to enter, Valuation not expensive"
2013: Could be "Good time to enter, Valuation not expensive" again.
2014: Could be "Good time to enter, Valuation not expensive" again.
and so on.............
If the bull run will keep on continue, last much longer than previous one, and "It will be different this time" for sure I am happy to jump in with big positions now, bottom line is I sell at the right time and right price.
The music will keep on playing and no one knows which day it will stop.
I don't know when the music will stop, but if now we blindfold ourselves and randomly pick a stock out of 1000 counters without any FA and TA study, we still stand a chance to pick a counter that will appreciate 15-20% within a week, which will prove the first OPTIMISTIC theory is correct. Of course it can happen another way round. That's why skill in Enter (buy) and Exit (sell) are equally important.
Monday 23 July 2012
FA or TA?
There are a lot of arguments on whether Fundamental Analysis (FA) or Technical Analysis (TA) is the "correct" method to be used to make money in stock market. TA fans will claim that FA method is very risky and stock price movement is solely triggered by buy sell behavior which has nothing to do with the underlying business performance. FA fans will claim that it is impossible to predict near term price fluctuation, while using charts and indicators to make trade decision is nothing different from gambling.
This is just like in football world where some fans will fancy attacking football with silky skills and slick passing like Barcelona and Spain national team, while another side of fans would fancy football based on solid defense, shear discipline and strong physical like Chelsea and Germany football team.
In fact, regardless of FA or TA, it is proven there are people who had been very successful in stock market applying either FA or TA, or combining both. That say, we should not argue which method is better since both of them proved to work because it already tell us that as long as either TA or FA are executed intelligently you can make good money.
Back to sports, both attacking+skill and defensive+strength football teams had won major trophies and championships, and nowadays top football teams had evolved into an all rounded approach in emphasizing both offense and defense.
So the most important thing is to choose a method that suit you most or you are most comfortable with, and at the same time respect other methods that proved to work well.
This is just like in football world where some fans will fancy attacking football with silky skills and slick passing like Barcelona and Spain national team, while another side of fans would fancy football based on solid defense, shear discipline and strong physical like Chelsea and Germany football team.
In fact, regardless of FA or TA, it is proven there are people who had been very successful in stock market applying either FA or TA, or combining both. That say, we should not argue which method is better since both of them proved to work because it already tell us that as long as either TA or FA are executed intelligently you can make good money.
Back to sports, both attacking+skill and defensive+strength football teams had won major trophies and championships, and nowadays top football teams had evolved into an all rounded approach in emphasizing both offense and defense.
So the most important thing is to choose a method that suit you most or you are most comfortable with, and at the same time respect other methods that proved to work well.
Friday 29 June 2012
Investment Education in Malaysia
It is found that investment looks to be a subject that is still very short of proper education in Malaysia. What I mean is, every profession, be it doctor, engineer, lawyer, pilot, accountant... it requires many years of basic education since we are kids, then years of higher education study, professional training, practice, gaining real life experience...and yet it doesn't guarantee we can master it. However at least there is a structured system that allows us to learn, and people are willing to learn from the system. Even for a particular skills like swimming, piano, guitar, cooking...trainings and classes are very common and well accepted.
Unfortunately for investment, it is a multi trillion dollar industry but yet there is no proper system to educate us. If a person wants to educate himself seriously with investment, he will find a hard time to do so. First of all, there are no such system to educate you. There are tonnes are information out there about investment, but they are in pieces and it takes lots of effort to organize and digest them properly.
From my observation, investing in stocks is kind of common in Malaysia, but majority of the investors invest without being equipped with all the tools necessary : MIND SET, ATTITUDE, KNOWLEDGE, SKILL, STRATEGY AND GAME PLAN, RISK MANAGEMENT. Stock market is a dangerous place where only the GOOD ones survive and get rewarded, having done so is like entering the battlefield naked and unarmed. We must understand, getting yourself equipped with all these tools requires education, practice and time.
In Malaysia, for a person who seriously want to get himself educated with investment knowledge will find the sources very limited. I had spent years of hard time to learn on my own, attended different classes in overseas, and find that learning could have been many times easier and shorter if there is a proper system.
With the vision of promoting healthy investment culture in Malaysia and help serious investors to profit consistently, I leverage on my knowledge and experience to come out with this comprehensive investment learning program to educate serious investors
Wednesday 27 June 2012
KLCI historical high 16XX
KLCI has touched it's historical high and stayed marginally above the 1600 level for last few days.
There are bullish analysts coming out with statement that it will challenge the 1700 level in a few weeks time.
Will it continue to move up next few days, or next week? My answer is: I DON'T KNOW
To make it more practical and meaningful from investment point of view, here are some points worth to think through carefully:
No one can predict the next movement with 100% accuracy. Regardless of which action you take, the key thing is you act on the option of HIGHER PROBABILITY OF SUCCESS and LOWER RISK. Then, regardless of whether it is a right or wrong decision, you have to REACT INTELLIGENTLY and SKILLFUL enough, so that you can EXTEND THE PROFIT, MINIMIZE THE LOST.
It requires knowledge, skills, and proper home work.
There are bullish analysts coming out with statement that it will challenge the 1700 level in a few weeks time.
Will it continue to move up next few days, or next week? My answer is: I DON'T KNOW
To make it more practical and meaningful from investment point of view, here are some points worth to think through carefully:
- From technical stand point, the price pattern and indicators shows it has bigger PROBABILITY to go UP or go DOWN? What kind of time frame are we considering? 1 week, 1 month, 1 year, 2 years...?
- Does it have high valuation or low valuation now? Is it expensive or cheap now?
- How will the global and local sentiment affect the upcoming movement of KLCI?
- How will the macro economy, structurally, affect the KLCI movement?
- How will internal events or human activities, affect the direction of KLCI?
- Is there an urgency I have to jump in to buy now, because it's an opportunity I cannot miss?
No one can predict the next movement with 100% accuracy. Regardless of which action you take, the key thing is you act on the option of HIGHER PROBABILITY OF SUCCESS and LOWER RISK. Then, regardless of whether it is a right or wrong decision, you have to REACT INTELLIGENTLY and SKILLFUL enough, so that you can EXTEND THE PROFIT, MINIMIZE THE LOST.
It requires knowledge, skills, and proper home work.
Monday 25 June 2012
Welcome to MY INVESTMENT COACHING!
Greetings and welcome to my blog!
I am a very Serious investor, and I hope to help others to treat investment VERY SERIOUSLY.
SERIOUS INVESTORS refer to investors, or investor-to-be, who are really serious in
1) wanting to earn serious return from stock investment. "Serious Return" refers to profit that are consistent and high enough to make a significant financial impact to you - good enough to improve your quality of life, a better peace of mind, or even ultimate financial freedom
2) wanting to spend time and effort to learn everything that can help improve their investment return.
"SERIOUS" had been strongly emphasized here, because only a person who is serious enough in what he is doing deserves to be successful in what he is doing. A person is serious in what he is doing because by nature he is passionate and enjoys what he is doing.
Just imagine if a person who is not serious in stock investment, reluctant to learn and do proper home work for his investment decisions, but yet he decided to invest his money in the stock market for some reason, and hoping to get a good and quick return. This has no difference from betting your money in the casino, or to buy lottery.
Good luck hardly follows a gambler, if it does, we won't be seeing billion dollar cash cow companies like Genting, Las Vegas Sands, SJM, BJtoto! Those Big Boys mentioned, become a giant cash cow, simply because they are SERIOUS in their business and did their home work. Being not serious in stock market, the person will ultimately become a "contributor", whereby he contributes his money to those SERIOUS investors who did their homework.
In this blog, we will post more interesting articles related to investment in stocks. Stay tuned and happy investing!
I am a very Serious investor, and I hope to help others to treat investment VERY SERIOUSLY.
SERIOUS INVESTORS refer to investors, or investor-to-be, who are really serious in
1) wanting to earn serious return from stock investment. "Serious Return" refers to profit that are consistent and high enough to make a significant financial impact to you - good enough to improve your quality of life, a better peace of mind, or even ultimate financial freedom
2) wanting to spend time and effort to learn everything that can help improve their investment return.
"SERIOUS" had been strongly emphasized here, because only a person who is serious enough in what he is doing deserves to be successful in what he is doing. A person is serious in what he is doing because by nature he is passionate and enjoys what he is doing.
Just imagine if a person who is not serious in stock investment, reluctant to learn and do proper home work for his investment decisions, but yet he decided to invest his money in the stock market for some reason, and hoping to get a good and quick return. This has no difference from betting your money in the casino, or to buy lottery.
Good luck hardly follows a gambler, if it does, we won't be seeing billion dollar cash cow companies like Genting, Las Vegas Sands, SJM, BJtoto! Those Big Boys mentioned, become a giant cash cow, simply because they are SERIOUS in their business and did their home work. Being not serious in stock market, the person will ultimately become a "contributor", whereby he contributes his money to those SERIOUS investors who did their homework.
In this blog, we will post more interesting articles related to investment in stocks. Stay tuned and happy investing!
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