Investors need to pick their poison: Either make more money when times are good and have a really ugly year every so often, or protect on the downside and don't be at the party so long when things are good.
Seth Klarman: At Baupost, we are all clearly in the same camp. We have all our own money invested in the firm, and so we are very conservative. We have picked our poison. We would rather underperform in a huge bull market than get clobbered in a really bad bear market.
http://www.scribd.com/doc/37358611/Seth-Klarman-CFA-Presentation
Showing posts with label bull market. Show all posts
Showing posts with label bull market. Show all posts
Friday 21 June 2013
Tuesday 20 November 2012
Are You Running With the Bull Market or Staying on the Sidelines?
Professors at the University of Pennsylvania’s Wharton School weigh the pros and cons of leaping into the stock market rally in a recent article in Knowledge@Wharton: “In or Out? The Case for — and Against — the Stock Market.”
For equity investors, Wharton finance professor Jeremy Siegel says pulling out of the stock market is a mistake.
“‘The public unfortunately lags (behind) what’s going on in the market,’ says Siegel, noting that rank-and-file investors tend to be bullish at the top of the market and bearish when the market is about to recover. ‘It is not unusual for the public to miss the first half to two-thirds of a bull market. Then they get in at the end, and they ride it down.’
“To sophisticated market watchers, the fact that most retail investors are staying out of the market right now is actually a positive indicator, since history shows that public flows in and out of the market are usually badly timed, Siegel says. ‘I still think this bull market definitely has room to run,’ he notes. ‘I can easily see stocks up another 20% to 30% from these levels in a year or two.’”
Not all of his colleagues agree with Siegel, the article notes.
“Wharton finance professor Richard J. Herring says the market outlook remains uncertain. ‘It is hard to imagine earnings continuing to grow since they are already at an historical high relative to GDP, and the economic outlook is tepid at best,’ he notes. ‘Many experts believe this is a market pumped up by QE3 and little else.’”
Monday 17 September 2012
Investment lifecycle in the Stock Market
Before choosing investments, think about the amount of time you can leave your money in the market.
Shares offer the greatest chance for growth in the long term, but if you only have a few months to invest, their volatility could leave you with losses. That is why you should always estimate when you might need your money again and invest accordingly.
Always remember that the value of investments can fall as well as rise and you may get back less than you initially invested even in the long term.
If you are unsure about investing you should seek independent advice.
Always remember that the value of investments can fall as well as rise and you may get back less than you initially invested even in the long term.
If you are unsure about investing you should seek independent advice.
Short-term approaches
If you only have a few years – or a few months – before you will need to pull your money out from the markets, you may want to look for low-risk, low-volatility investments.
A good short-term portfolio may include high exposure to bonds and gilts, as well as cash or cash-like investments. Some investors may also want to include some holdings in lower-risk shares from well-established companies.
Looking at the medium term
With 5 or more years, you can start looking at a more traditional portfolio, with a diverse mix of shares balanced with some holdings in bonds and cash. This is because in a typical economic cycle, 5 years is enough to recover from any significant downturns. Although this is not guaranteed.
Long-term investing
Younger investors saving up for retirement may find that that have 10 to 20 years or more before they will need to start drawing down money from their investments.
With the luxury of time, you may want to consider riskier and more volatile investments. While there are no guarantees, by taking on greater risk, you may earn a higher return. A downturn can hurt your portfolio, but you would be able to afford the wait for the eventual recovery. Then, as you approach retirement, you can slowly transition to safer investments in order to protect your gains.
Thursday 16 August 2012
Monday 23 April 2012
Standard bull markets typically have a shelf life of less than four years
This Bull Market Is Hard to Pin Down
By PAUL J. LIM
Published: March 24, 2012
By PAUL J. LIM
Published: March 24, 2012
HISTORY says that standard bull markets typically have a shelf life of less than four years. So when the bull that sprang to life in March 2009 turned 3 this month, it understandably raised some concerns.
Chris Goodney/Bloomberg News
Depending on how you mark the calendar, Wall Street’s recent surge could be just a late charge in a bull market ready to run its course. Or it could be the start of something bigger for stock investors.
Yet some strategists on Wall Street mark the calendar differently. They contend that the bull market that began in 2009 actually ended last year, when the Standard & Poor’s 500-stock index hit a rough patch from late April to early October.
During that stretch, the S.& P. 500 lost 19.4 percent from peak to trough based on daily closing prices — just shy of the 20 percent threshold for a bear market. On Oct. 3, though, the index actually fell through that barrier for a brief moment during the trading day.
If that was indeed a bear, the thinking goes, then a new bull market must have been born on Oct. 3. And that would imply not only that stocks have more room to run, but also that sectors like technology, which are sensitive to shifts in the economic cycle, are likely to do well. Despite a slight downturn last week, they have been buoyant for months.
“From an official standpoint, in terms of what Standard & Poor’s will count this as, the bull market is entering its fourth year because the market didn’t officially decline by 20 percent based on closing values,” says Sam Stovall, chief equity strategist for S.& P. Capital IQ. “However, if someone asks, ‘What do you think will happen in terms of performance?’ I think the market will act as if we’re in the first year of a new bull.”
At the moment, it is. Historically, the first years of major rallies provide investors with the biggest boost, with the S.& P. 500 having posted gains of 38 percent, on average, in Year 1 of past bull markets since World War II. True to form, the rally that began on Oct. 3 has already pushed the index 27 percent higher in less than six months.
That surge isn’t the only evidence supporting the view that Wall Street is in a new bull market. Normally, shares of small companies — considered higher-risk but higher-returning assets than blue-chip stocks — tend to outperform the broad market at the start of a new rally. Shares of large, industry-leading companies, by contrast, usually catch fire only after bull markets mature.
Sure enough, small-company stocks have been performing even better than the S.& P. 500 over the last six months. For instance, the Nasdaq composite index, made up of younger and faster-growing companies than are found in the S.& P. 500, is already up more than 31 percent since Oct. 3, while the Russell 2000 index of small stocks has gained 36 percent.
At the same time, economically sensitive sectors like technology and consumer discretionary stocks have been outpacing the broad market since October, which is also typical of the first years of bull markets, Mr. Stovall notes.
He added that if this were the fourth year of an aging bull, defensive areas of the market — like health care, consumer staples and utilities stocks — would be leading the charge. Yet they haven’t been.
Jason Hsu, chief investment officer for the investment consulting firm Research Affiliates, says that even if investors are not convinced that this is the start of a new bull, market psychology is likely to keep pushing the markets higher for now.
“Research on short-term momentum in asset prices says that if you had a strong six months of steady asset appreciation, that tends to drive further price appreciation,” he said.
He added that many investors “did not participate in the fairly speculative, risk-asset rally that began in October.” So, given the occasional herd mentality on Wall Street, these investors could simply be waiting for an opening to jump in. As a result, Mr. Hsu says he thinks that the broad market could keep rallying in the short run, and that there could be continuing demand for riskier, economically sensitive stocks, especially on market dips, he said.
TO be sure, there are different types of bull markets — so-called cyclical bulls that tend to run alongside a single economic expansion, as well as so-called secular bull markets that may last for more than a decade, often containing shorter bull and bear cycles within them. The stock market’s epic run from 1982 to 1999, for instance, was the last big example of a secular bull.
“I don’t think we’ve begun a new secular bull,” says Mark D. Luschini, chief investment strategist at Janney Montgomery Scott. He points out that historically, secular bulls tend to start at price-to-earnings ratios in the single digits, as was the case in 1982. But based on valuations using 10-year average profits, the market’s P/E ratio is above 20.
Doug Ramsey, chief investment officer at the Leuthold Group, also says that while this may be a new bull market, it is what he calls a “noneconomic” rally.
In other words, this bull market — unlike the one that began in March 2009 — emerged after a bear market that did not coincide with an official recession.
What’s the significance of that? “Recessions are what clear the decks for a longer-lasting recovery and drive valuations down to truly low levels from which bigger gains can spring,” he said.
Mr. Ramsey’s research on noneconomic bull markets since World War II found that these rallies tend to be shorter-lived — the average one lasted just 31 months. And they tend to be more muted. While the typical noneconomic bull market returned less than 62 percent, cumulatively, the median bull market that emerged after recessions gained nearly 102 percent.
Of course, given that stocks have gained 27 percent so far in their current rally, that would still leave the market some ample room for gains.
Sunday 22 April 2012
3 Stages of a Bull Market and 3 Stages of a Bear Market
2011 Value Investing Congress Notes
http://www.scribd.com/doc/54958483/2011-Value-Investing-Congress-Notes
o Constantly going between greed and fear, risk tolerance and risk aversion, and optimism and pessimism
o In theory, the pendulum should be at the happy medium
On average it is in the middle
But it spends little time there
Excesses constitute the errors of herd behavior
3 stages of a bull market
Few people feel things are getting better
Most people realize improvement is taking place
Everyone thinks things will get better forever
"What the wise man does in the beginning, the fool does in the end."
o The last buyer pays the price
3 stages of a bear market
Few people realize that things are overpriced and dangerous
Most people see the decline is underway
Everyone believes that things will get worse forever
o Great opportunity to buy if we can behave counter-cyclically - Importance of being a contrarian.
Ben Claremon: The Inoculated Investor http://inoculatedinvestor.blogspot.com/
Saturday 3 March 2012
Substantial rise in the market: Practical questions and psychological problems confronting the investors
A serious investor is not likely to believe that the day-to-day or even month-to-month fluctuations of the stock market make him richer or poorer.
But what about the longer-term and wider changes in the stock market? Here practical questions present themselves, and the psychological problems are likely to grow complicated.
A substantial rise in the market is
- at once a legitimate reason for satisfaction and
- a cause for prudent concern,
- but it may also bring a strong temptation toward imprudent action.
Your shares have advanced, good! You are richer than you were, good!
- But has the price risen too high, and should you think of selling?
- Or should you kick yourself for not having bought more shares when the level was lower?
- Or— worst thought of all—should you now give way to the bull-market atmosphere, become infected with the enthusiasm, the overconfidence and the greed of the great public (of which, after all, you are a part), and make larger and dangerous commitments?
It is for these reasons of human nature, even more than by calculation of financial gain or loss, that we favor some kind of mechanical method for varying the proportion of bonds to stocks in the investor’s portfolio.
- The chief advantage, perhaps, is that such a formula will give him something to do.
- As the market advances he will from time to time make sales out of his stockholdings, putting the proceeds into bonds; as it declines he will reverse the procedure.
- These activities will provide some outlet for his otherwise too-pent-up energies.
- If he is the right kind of investor he will take added satisfaction from the thought that his operations are exactly opposite from those of the crowd.*
* For today’s investor, the ideal strategy for pursuing this “formula” is rebalancing.
Thursday 13 October 2011
How to interpret Market Behaviour?
HOW TO INTERPRET MARKET BEHAVIOR
Whether you are an existing investor who holds a portfolio of shares or a beginner trying to enter the market, it is important for you to understand how the market behaves and where it is heading. The overall market health has a direct impact on a company’s profitability and almost all shares are impacted by the market sentiment, to a certain extent. Therefore, in order to be successful in stock investing, you must at least know how to recognise the major market trends.
What is a bull market?
A bull market refers to a stock market that is on the rise. It is considered as a bull market when almost all stocks are appreciating in value for a considerable period of time, usually with a price gain of over 20%. You will know that it is a bull market when everyone seems to be talking about buying shares and nobody seems to want to sell. This is when you observe that the demand for the shares is very strong resulting in limited supply, which in turn, pushes the shares prices even higher as investors are competing for the shares. During a bull market, investors are confident that the uptrend will continue into a longer term and the overall economy outlook is favourable while the employment rate is high. This is the time when everyone is exhilarated about the stock market as their chances of losing money in such market is quite low.
A bull market refers to a stock market that is on the rise. It is considered as a bull market when almost all stocks are appreciating in value for a considerable period of time, usually with a price gain of over 20%. You will know that it is a bull market when everyone seems to be talking about buying shares and nobody seems to want to sell. This is when you observe that the demand for the shares is very strong resulting in limited supply, which in turn, pushes the shares prices even higher as investors are competing for the shares. During a bull market, investors are confident that the uptrend will continue into a longer term and the overall economy outlook is favourable while the employment rate is high. This is the time when everyone is exhilarated about the stock market as their chances of losing money in such market is quite low.
What is a bear market then?
A bear market is the total opposite of a bull market. It is characterised by a market that is downward trending with the stock value being depreciated by more than 20%. During a bear market, the demand for stocks is low while supply is high because everybody is trying to sell and only a few want to buy as the price continues to dip further. In such a market, the chances of losing money are high and therefore, you will see that the market sentiment is very pessimistic. A bear market is usually associated with weak economic outlook and the likelihood of declining company performance.
A bear market is the total opposite of a bull market. It is characterised by a market that is downward trending with the stock value being depreciated by more than 20%. During a bear market, the demand for stocks is low while supply is high because everybody is trying to sell and only a few want to buy as the price continues to dip further. In such a market, the chances of losing money are high and therefore, you will see that the market sentiment is very pessimistic. A bear market is usually associated with weak economic outlook and the likelihood of declining company performance.
A typical bull market usually starts at the bottom, when the economy seems to be weak, such as during a recession. Here, you can observe governments trying to take certain measures like lowering interest rates to boost their economic recovery. When the market liquidity eases and company borrowing cost is lower, company profitability will improve and this in turn will indicate a positive sign for a bullish market to start.
On the other hand, when the market seems to be very hot with widespread bullishness, especially when the economic growth rate is high, coupled with high inflation rate, usually these signs signify a market top. This would indicate that there is a potential end of a bull market and the beginning of a bear market. During this period, investors should pay more attention to bad corporate news and warning signs to prepare for the turn in cycle.
How do these markets affect investors?
Investor would ideally buy when the bull market is just about to start. This is when the stocks are still cheap and riding the bull wave until it reaches the top, before being sold as to maximise profit. Unfortunately, no one can be certain as to when the market is going to reach the top or the bottom. Therefore, by understanding how the market behaves, investors would have an idea on where the market is heading so that they can prepare themselves to take the necessary action. For example, an investor may not catch the stocks at the very bottom of the market, but at least he or she would know that the market is on its way to recovery and as such would start to pick up stocks with sound fundamentals but are still undervalue to invest in. Then, they would wait for the price to come up. Relatively, investing in a bull market is easier as the chances of making losses are low compared to investing in a bear market.
There are a few strategies that investors may take when dealing with a bear market.
- The most conservative way adopted would be to move out from stocks and invest in fixed income securities until the market recovers.
- Some would turn to the defensive stocks, such as those in the industries that are less affected by economic downturn, for example, food or utilities industries.
- The third option that is viable for investors is buying as the market continues to drop further to capitalize on the price reduction. However, investors who adopt this option face the risk of having their cash drying up all before the market reaches the bottom.What is most important for investors to take note of when making investing decisions is the need for homework; they need to do their homework properly, be it on the company itself or the overall economic situation. This is to ensure that their investment risk is minimised.
Thursday 20 January 2011
Market Behaviour: Bull Runs
Sometimes you'll hear commentators say the bulls are running. When you hear that, be very cautious. Stocks are likely overpriced.
A bull run is the best time to sell stocks you own and take your profits, but only if you're ready to sell your stake in the company. If you plan to hold a stock for years, don't feel obligated to sell it just because the bulls are running.
You'll be watching a lot of people just starting to get into a market. People who are not intelligent investors tend to get caught up in the excitement of the market and think it's safe to get their feet wet. Unfortunately, these folks buy stocks at the high and, when the bears return, sell stocks at the low when they get scared.
As a value investor, you've likely bought your stock on sale and now you're seeing some great profits. You may or may not want to sell. Run a quarterly analysis of the stock you hold, and be sure it still fits with your criteria for holding a stock. You can design a strategy that works best for your based on your goals, your risk tolerance and your financial resources.
A bull run is the best time to sell stocks you own and take your profits, but only if you're ready to sell your stake in the company. If you plan to hold a stock for years, don't feel obligated to sell it just because the bulls are running.
You'll be watching a lot of people just starting to get into a market. People who are not intelligent investors tend to get caught up in the excitement of the market and think it's safe to get their feet wet. Unfortunately, these folks buy stocks at the high and, when the bears return, sell stocks at the low when they get scared.
As a value investor, you've likely bought your stock on sale and now you're seeing some great profits. You may or may not want to sell. Run a quarterly analysis of the stock you hold, and be sure it still fits with your criteria for holding a stock. You can design a strategy that works best for your based on your goals, your risk tolerance and your financial resources.
Related topics:
Market Behaviour: Can You Beat the Market?
The best answer to this question is, sometimes - but don't count on it.
Generally, the market does a pretty good job of pricing stocks, but when the crowd is acting irrationally, you can find your best and worst buys.
Don't try to beat the market.
Instead, focus on building the best portfolio you can.
Buy stocks when they're cheap and sell them when they recover.
Do not worry about missing the highest highs because you rarely can sell at just the right time to avoid the steep drop-off when the price of a stock plummets.
MOST PEOPLE GET CAUGHT UP IN THE EMOTIONAL HIGHS THEY FEEL AS STOCKS CLIMB AND DON'T ACT TO TAKE PROFITS BEFORE IT'S TOO LATE. DON'T GET CAUGHT UP IN THAT TYPE OF BEHAVIOUR.
Related topics:
Sunday 9 January 2011
My Investment Experience: My portfolio depreciated from RM3,000,000 to a mere RM50,000
My Investment Experience
by Gan Hong Leong
“Investment is most intelligent when it is most businesslike.” Benjamin Graham, widely known as the father of value investing, taught Warren Buffet this philosophy. Based on this wisdom, Warren Buffet invested in the stock market. Today he is the second richest man in the world. Learn from him, learn from his success, and you too can become rich.
The stock market was virtually a virgin jungle to me when I bought my first share. That was in 1960, and I was 21. At that time, I was as naïve and ignorant as a schoolboy regarding stocks and shares. So long as the price was low I would call it cheap. Undervalued stocks, fairly-priced stocks, or overvalued stocks are all the same to me. The chaff and the grains have no difference.
However, I was lucky to insist that the stocks which I bought must give good dividend yield. Buying shares o a cum-dividend basis was my preference. I would sell whenever I had a good capital gain of more than 50%. I continued to invest in that manner which turned out to be profitable. Little did I realised, I was actually buying fundamentally sound stocks at fairly low prices. My investment strategy was businesslike.
In April 1993, the Malaysian stock market had a super bull run. From a low of 645 points, the KLSE Composite Index hit its all time high of 1332. Speculation was rampant. Price rise was spectacular. The market was a hive of activities. To get a seat to watch the market in the broker firm, you need to cue up as early as 7:30 a.m.! In every corner of the town, people were talking about the market. There were no losers. Everyone was a winner. I sold at the later stage of the bull market and made a windfall. By February, 1997 the value of my portfolio appreciated to RM3,000,000 from RM48,000 about 20 years ago. However, I was still none the wiser about the stock market.
The years 1997 and 1998 were traumatic. The KLSE Composite Index was at 1279 in February, 1997. I bought the shares of an investment holding company listed on the main board and the share price was around RM15 per share in early 1997. By August 1997, it had declined to RM7.70 per share.
After I bought some at that price, the price kept on declining. Against the principle of wise investing, I started averaging down whenever there was a small decline. By November 1997, it had declined to RM1.83. I thought it would stop there. Alas! It was not to be. The price continued to decline. By August 1998, it reached a low of 40.5 sen per share.
Meanwhile, my portfolio depreciated from RM3,000,000 to a mere RM50,000. Suddenly, I realised that buying in a downtrend and holding on to a falling stock was extreme stupidity. “Never catch a falling dagger!” became my favourite phrase.
After the introduction of capital control in Malaysia in September 1998, the country slowly nursed back to health. By then, I had become smarter, having learned fundamental and technical analysis. My investment was starting to become intelligent and more businesslike.
In April 2001, I started to accumulate some stocks based on fundamentals. I chose company that had excellent management and great potential for growth. If it pays good dividends and the company was undervalued, I held on to the shares. By September 2003, the stocks that I had bought had appreciated and together with the dividends received, I got another windfall.
Words of Advice
For all stock market investors and speculators out there, here is my advice:
Value for money you must insist.
Buying in a downtrend you must resist.
The trend is your friend.
Follow it to the very end.
Holding on to a falling stock is unwise.
Cut your loses quickly is advised.
Never kill the golden goose when you have one.
Never sell prematurely, let it run for once.
Undervalued unpopular stock is never a fancy.
Glamour stock is the choice normally.
Join the crowd; enjoy the ride, if you wish.
Be careful though, lest you fall out and vanish.
The market is most tempting at the top.
Lock in your profit before volume has a good drop.
Sell your stocks when you love them most.
Take your money & let the deal be closed.
Buy when volume traded is at its lowest.
The market will then be at its dullest.
Investors should buy low and sell high.
Traders should buy high and sell higher.
Some day you will know what I mean.
By then, you are a stock market dean.
Success in any field requires your labour. The stock market is no exception. To be successful, ensure that you have the knowledge and wisdom to plan your strategies, the discipline to carry out your plans, the patience to wait, the perseverance and temperament to endure, the capital to implement, and above all, the will to win. Incidentally, these are traits of a successful businessman; hence, the usefulness of Graham’s advice.
Investment in knowledge pays the best dividends. I share this philosophy.
Disclaimer: The views and opinions expressed in this article are strictly those of the author.
Securities Industry Development Corporation (SIDC) organised an essay writing competition titled My Investment Experience with the objective of getting investors to share their investment experience, good or bad. We present you, the winning essay by Gan Hong Leong from Bentong, Pahang.
http://www.min.com.my/index.php?option=com_content&view=article&id=63
by Gan Hong Leong
“Investment is most intelligent when it is most businesslike.” Benjamin Graham, widely known as the father of value investing, taught Warren Buffet this philosophy. Based on this wisdom, Warren Buffet invested in the stock market. Today he is the second richest man in the world. Learn from him, learn from his success, and you too can become rich.
The stock market was virtually a virgin jungle to me when I bought my first share. That was in 1960, and I was 21. At that time, I was as naïve and ignorant as a schoolboy regarding stocks and shares. So long as the price was low I would call it cheap. Undervalued stocks, fairly-priced stocks, or overvalued stocks are all the same to me. The chaff and the grains have no difference.
However, I was lucky to insist that the stocks which I bought must give good dividend yield. Buying shares o a cum-dividend basis was my preference. I would sell whenever I had a good capital gain of more than 50%. I continued to invest in that manner which turned out to be profitable. Little did I realised, I was actually buying fundamentally sound stocks at fairly low prices. My investment strategy was businesslike.
In April 1993, the Malaysian stock market had a super bull run. From a low of 645 points, the KLSE Composite Index hit its all time high of 1332. Speculation was rampant. Price rise was spectacular. The market was a hive of activities. To get a seat to watch the market in the broker firm, you need to cue up as early as 7:30 a.m.! In every corner of the town, people were talking about the market. There were no losers. Everyone was a winner. I sold at the later stage of the bull market and made a windfall. By February, 1997 the value of my portfolio appreciated to RM3,000,000 from RM48,000 about 20 years ago. However, I was still none the wiser about the stock market.
The years 1997 and 1998 were traumatic. The KLSE Composite Index was at 1279 in February, 1997. I bought the shares of an investment holding company listed on the main board and the share price was around RM15 per share in early 1997. By August 1997, it had declined to RM7.70 per share.
After I bought some at that price, the price kept on declining. Against the principle of wise investing, I started averaging down whenever there was a small decline. By November 1997, it had declined to RM1.83. I thought it would stop there. Alas! It was not to be. The price continued to decline. By August 1998, it reached a low of 40.5 sen per share.
Meanwhile, my portfolio depreciated from RM3,000,000 to a mere RM50,000. Suddenly, I realised that buying in a downtrend and holding on to a falling stock was extreme stupidity. “Never catch a falling dagger!” became my favourite phrase.
After the introduction of capital control in Malaysia in September 1998, the country slowly nursed back to health. By then, I had become smarter, having learned fundamental and technical analysis. My investment was starting to become intelligent and more businesslike.
In April 2001, I started to accumulate some stocks based on fundamentals. I chose company that had excellent management and great potential for growth. If it pays good dividends and the company was undervalued, I held on to the shares. By September 2003, the stocks that I had bought had appreciated and together with the dividends received, I got another windfall.
Words of Advice
For all stock market investors and speculators out there, here is my advice:
Value for money you must insist.
Buying in a downtrend you must resist.
The trend is your friend.
Follow it to the very end.
Holding on to a falling stock is unwise.
Cut your loses quickly is advised.
Never kill the golden goose when you have one.
Never sell prematurely, let it run for once.
Undervalued unpopular stock is never a fancy.
Glamour stock is the choice normally.
Join the crowd; enjoy the ride, if you wish.
Be careful though, lest you fall out and vanish.
The market is most tempting at the top.
Lock in your profit before volume has a good drop.
Sell your stocks when you love them most.
Take your money & let the deal be closed.
Buy when volume traded is at its lowest.
The market will then be at its dullest.
Investors should buy low and sell high.
Traders should buy high and sell higher.
Some day you will know what I mean.
By then, you are a stock market dean.
Success in any field requires your labour. The stock market is no exception. To be successful, ensure that you have the knowledge and wisdom to plan your strategies, the discipline to carry out your plans, the patience to wait, the perseverance and temperament to endure, the capital to implement, and above all, the will to win. Incidentally, these are traits of a successful businessman; hence, the usefulness of Graham’s advice.
Investment in knowledge pays the best dividends. I share this philosophy.
Disclaimer: The views and opinions expressed in this article are strictly those of the author.
Securities Industry Development Corporation (SIDC) organised an essay writing competition titled My Investment Experience with the objective of getting investors to share their investment experience, good or bad. We present you, the winning essay by Gan Hong Leong from Bentong, Pahang.
http://www.min.com.my/index.php?option=com_content&view=article&id=63
Is it time to trade or invest when the market is at an all-time high?
Is it time to trade or invest when the market is at an all-time high?
By FINTAN NG
By FINTAN NG
IS this the time to enter the equity markets or is this the time to get out? This is the question that is always asked when equity markets are on a roll or when markets are rallying.
For the cautious types, this is the time to sell or to wait but risk-takers and optimists feel that markets can still go higher despite the fact that much of the performance of stock markets in emerging Asia, analysts point out, is largely due to the liquidity sloshing around in the system chasing higher returns that may not necessarily be based on fundamentals.
Cooler heads will point to the current disconnect between the macroeconomic outlook and the equity markets.
Long-term and cautious investors question how long will the “party” brought on by the funds entering emerging market equities will last.
Already World Bank managing director Sri Mulyani Indrawati has warned that quantitative easing may potentially create bubbles in assets such as equities, currencies and property.
She says Asian governments may need to turn to capital controls although these curbs should be targeted, temporary and tailored to address specific problems.
Morgan Stanley Research analyst Gerard Minack says in a Nov 5 report that markets are disconnecting from the macroeconomic fundamentals and the US Federal Reserve’s RM600bil quantitative easing programme may not be enough to significantly reduce recession risk, which is concentrated in the next couple of quarters.
“The other issue, however, is how long the markets can run on the quantitative easing without confirmation from macro data that things are improving,” he asks.
Minack says quantitative easing has pushed developed-world equities through the ranges seen over the past year and will not be able to defy the macro outlook for long.
“Before I turn cautious, however, I want to see that risk assets are starting to respond in a more normal fashion to incoming macro news,” he says, adding that the reaction to news have been reverse to what usually happens.
“It’ll be important when markets return to a good-news-is-good/bad-is-bad behavior,” Minack notes.
He says although the rest of the world outside the developed economies look fine with purchasing manager sentiment looking solid and with little risk of another global recession, there are hints of slowdown in Asia.
“For countries that produce monthly purchasing manager indices (PMIs), the four weakest – all below 50 – are in Asia: South Korea, Japan, Taiwan and Australia,” Minack says, although China, India and Indonesia remain strong. A reading below 50 for the PMI gauge denotes a contraction.
Although the pace of growth has slowed in the Asian emerging markets and will continue to slow at least into the first-half of 2011, stock markets have continued to surge.
The FBM KLCI, for example, has risen nearly 20% from a year ago and is now at historical highs.
If the market always anticipates the economy, than this time around investors may have gotten it wrong as growth next year, at least by Government estimates, will be lower at 6% compared to the expected 7% for 2010.
However, stock-market movements cannot rely on the amount of liquidity alone going forward, says Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias in an email reply to StarBizweek.
“Fundamental factors will have to support the overall trend. Should there be a moderation in global economic growth following the persistent weaknesses in major economies, regional markets (including Malaysia) will experience some degree of correction,” he points out.
Nor Zahidi says Asian economies, despite seeing more intra-regional trade these days, still have to rely on the G3 (United States, European Union and Japan) economies as the final destinations of their products.
He says right now, the rising stock market hints at the trend of economic growth in the next three to six months and is reflective of investors’ confidence in efforts by the Government over the past year to enhance efficiency thruogh the Government Transformation Programme and the Economic Transformation Programme.
“These have, to some extent, given positive vibes to foreign investors who, in turn, have increased their exposure to the Malaysian market,” Nor Zahidi says.
He adds that 0ther positive attributes of the Malaysian economy include the relatively stable growth prospects in the next few years following an expected steady improvement in private investment as well as resilient private consumption.
Nor Zahidi says among the signs of improving investor sentiment was the 9.4% surge in total investment in the first-half of the year compared to same period last year.
“The bond market is accordingly benefiting from investors who prefer debt instruments in Asian economies rather than those of the developed countries. This is reflected in the foreign holdings of Malaysian Government Securities which surged to 26.8% in September,” he adds.
Meanwhile, the World Bank which recently released this year’s Malaysia Economic Monitor, expects the country to achieve growth of 4.8% next year compared to 7.4% this year.
In the developed economies, despite risks of another downturn and sovereign debt concerns, markets have also risen with the S&P 500 and the Stoxx Europe 600 Index at its highest since September 2008.
For those who say that markets, at least in this part of the world, have some way to go before tanking, the arguments are that fundamentals such as positive demographics, youthful populations, urbanisation and rising middle classes will continue to drive domestic demand.
This is the view of HwangDBS Investment Management Bhd chief investment officer David Ng, who says conditions are ripe for the local bourse to experience a bullrun similar to what happened in the nineties.
Furthermore, these optimists argue that opportunities abound in the emerging markets of Asia, where governments have embarked on large infrastructure projects to boost their economies and ensure long-term growth.
They counter that as the outlook is still gloomy and with low household consumption in the developed economies, where else better to place their money than in the emerging economies?
Their views are backed by the weak US dollar, brought about by low interest rates and now facing more headwinds from the Fed’s programme to purchase US Treasury bills over an 8-month period.
The jobs outlook seems to be in favour of these group of investors too as unemployment in the United States stands at 9.6% while in the 16-member European Union, it now stands at 10.1%.
The data further supports these optimists, who point to the fact that deep public-sector spending cuts in the European Union over the next few years may crimp demand.
fr:biz.thestar.com.my/news/story.asp?file=/2010/11/13/business/7397848&sec=business
Malaysian market at record high – so what is the next thing?
Malaysian market at record high – so what is the next thing?
Making a Point by Jagdev Singh Sidhu
WHAT next? That might be a common question asked after the FTSE Bursa Malaysia KL Composite Index hit a new record high this week and therefore heads into uncharted territory.
That question is difficult to answer because unlike the previous rallies in 1993 and in 2008, the run-up this time around has been surprisingly orderly.
Volume, often an indicator of fervent euphoria, has remained sane and while the index has set a record, trading activity on Bursa Malaysia is nowhere close to previous high levels. This would suggest there is still more room to go.
Although the rise this time has less to do with direct retail interest as it did in the past, the professionalism in investing these days – where more Malaysians are putting their hard-earned money in the hands of professional managers to invest – is also a good sign.
It’s often joked that when retail interest shoots up and everybody becomes a tipster, it’s time to sell. Also a signal would be syndicate activity returning to the market in a big way.
That, to my knowledge, is nowhere close to the situation in previous rallies and surely is a contrarian indicator worth following.
Another fundamental backing to the rise this time would be borne by the efforts ongoing to revitalise the economy, especially the private sector and the investments it is expected to pour into the country.
Some may argue that economic growth might have some correlation to corporate earnings but the balance sheet and cash generation capability of most companies are far better now then in the past.
Maybe it’s also the better health and performance of the largest companies in the country where more focus and strict adherence to key performance indicators now then before have led to better financial performance and hence their attraction.
Furthermore, as more companies in Malaysia venture abroad and with the large commodity companies riding on skyrocketing crude palm oil (CPO) prices, the story at home might not swing investor focus as much as it did in the past.
But the surge in the local stock market also has to do with the amount of money that is swimming around globally, hunting for the best returns they can get.
Between the United States printing money from its quantitative easing and the still super-low interest rates globally, cash around the world has been hunting for returns.
They have so far got it from commodities. Among this group, CPO is rising and rubber has hit an all-time high.
And in emerging Asia, they might have also found an answer for now by buying the currencies of Asian economies.
The flood of money into Asian currencies has led to reciprocal rises in the stock markets in the Philippines and Jakarta, which have in recent months peaked at their all-time highs, suggesting that money is trying to capitalise on growth in equities as well as currencies. Markets in Thailand and Singapore are also rising strongly.
To pour more cold water on the rally, the market is said to be trading at high price to earnings ratio and economically, the horizon globally is less rosy.
Malaysia’s economic growth is forecast to fall next year to between 5% and 6% from a projected 7% this year.
Is 2010 a replica of the 1993 bull run? I don’t think so although most would love the ride, not the end.
The situation this time is vastly different but any time a market hits an all-time high, some caution should come into play. A market high does not happen often.
·Deputy news editor Jagdev Singh Sidhu is cautiously optimistic that the rally this time would not be accompanied by companies with poor fundamentals promising a pot of gold for unsuspecting punters
fr:biz.thestar.com.my/news/story.asp?file=/2010/11/11/business/7405348&sec=business
Mini Super bull run in the making before Chinese New Year?
Friday, November 5, 2010
Mini Super bull run in the making before Chinese New Year ?
Comparing the circumstances back in 1993 against the current situation.
In the early 1990s, despite slowdown in the global economy, as the third largest economy in South-East Asia, after Indonesia and Thailand, Malaysia was supported by relatively strong macroeconomic fundamentals and resilient financial system. With the real GDP growing at 9.9%, ringgit appreciation, strong export growth and the Government’s measures to hold inflation low at 3.6%, the local stock market became an attractive alternative to foreign investors.
In 1991, Tun Dr Mahathir Mohamad unveiled the philosophy of “Malaysia Incorporated” which was a development strategy for Malaysia to achieve a developed nation by 2020.
Before 1993
Foreign investment in Malaysia was - long-term direct investment in manufacturing sector.
However, massive influx of foreign capital inflow helped fuel the super bull-run in 1993.
Within the year, the market increased by 98% to reach an all-time high of 1,275.3 points and foreign investors’ participation accounted for 15% of total trading value of our local bourse. Lured many retailers into the market
1993
Government planned several mega projects, such as
KL International Airport (RM8bil), Johor-Singapore Second Link (RM1.6bil) and Kuala Lumpur Light Rail Transit (RM1.1bil).
Government planning on privatising its own corporations, such as Petronas, KTM and Pos Malaysia had also driven these counters into prime trading targets.
Besides, the ease of accessing bank credit by investors also contributed to the market rally.
High percentage of loans was channelled to broad property sector as well as the purchase of securities.
1994.
Bank Negara introduced a number of selective capital controls in early 1994 to stabilise the financial system,
2010
Economic Transformation Programme (ETP) with the aim to boost our gross national income (GNI) to US$523bil in 2020 from US$188bil in 2009. GDP growth is anticipated to increase by 6% this year.
September 2010 saw net inflow of foreign funds again in our equity market. Over the past few weeks, the average stock market daily volume had been hovering above one billion shares per day.
According to Andrew Sheng in his book titled From Asian To Global Financial Crisis, there were two main indicators to irrational exuberance during the super bull run in 1993. The first was the amah (domestic maid) syndrome. We need to be careful when amahs got excited about the stock market. This was because they did not know what they were buying and would always be the last to sell. The second indicator was when businessmen began to speculate stocks in the stock market. This was because they might neglect their businesses and use some of their cash for speculation.
Comparing our current market situation with the 1993 bull run, there are certain similarities that we see, such as strong economic growth, ringgit appreciation, inflow of foreign capital and ease of credit.
Local retailer participation may be the last push factor towards the bull run.
( source : The star )
http://acnews101.blogspot.com/2010/11/mini-super-bull-run-in-making-before.html
----
Is there a super bull run in 2010?
Personal Investing – By Ooi Kok Hwa
Although the economic situation now compares with that of 1993, the last push must come from local retail investors
THE recent rally in our local bourse has prompted many seasoned investors, especially those who experienced the super bull run in 1993, to wonder whether the current rally is about to turn into a real bull run. Of course, nobody can tell for sure what will happen next, but we certainly can do some homework, comparing the circumstances back in 1993 against the current situation.
In 1991, Tun Dr Mahathir Mohamad unveiled the philosophy of “Malaysia Incorporated” which was a development strategy for Malaysia to achieve a developed nation by 2020. In the early 1990s, despite slowdown in the global economy, as the third largest economy in South-East Asia, after Indonesia and Thailand, Malaysia was supported by relatively strong macroeconomic fundamentals and resilient financial system. With the real GDP growing at 9.9%, ringgit appreciation, strong export growth and the Government’s measures to hold inflation low at 3.6%, the local stock market became an attractive alternative to foreign investors.
Before 1993, foreign investment in Malaysia was mainly dominated by long-term direct investment in the manufacturing sector. However, as a result of measures taken to develop our domestic equity market, coupled with the strong economic backdrop, we saw a massive influx of foreign capital inflow, which helped fuel the super bull-run in 1993. Within the year, the market increased by 98% to reach an all-time high of 1,275.3 points and foreign investors’ participation accounted for 15% of total trading value of our local bourse. This had also driven the market into a highly speculative one, which lured many retailers into the market, thinking of making fast and easy money.
With the presence of new and unfamiliar players, the market became a huge “casino”. Retail investors bought into stocks based on rumours rather than company fundamentals. Among the hottest topics during that time were the awards of government mega projects, privatisation candidates, sector play and regular news on upward revision of corporate earnings. Examples for the highly speculative stocks were Ekran, Ayer Molek Rubber Co, Berjuntai Tin Dredging and Kramat Tin Dredging.
In 1993, with the economy booming, the Government planned several mega projects, including the KL International Airport (RM8bil), Johor-Singapore Second Link (RM1.6bil) and Kuala Lumpur Light Rail Transit (RM1.1bil). The news of contract awarding immediately sent the market into speculative mood on those potential candidates. Similarly, the news of the Government planning on privatising some of the its own corporations, such as Petronas, KTM and Pos Malaysia had also driven these counters into prime trading targets.
Besides, the ease of accessing bank credit by investors also contributed to the market rally. We noticed that a high percentage of loans was channelled to broad property sector as well as the purchase of securities.
As a result of massive inflow of foreign funds and the super bull run in stock market, Bank Negara introduced a number of selective capital controls in early 1994 to stabilise the financial system,
Recently, our Prime Minister Datuk Seri Najib Tun Razak unveiled the Economic Transformation Programme (ETP) with the aim to boost our gross national income (GNI) to US$523bil in 2020 from US$188bil in 2009. The programme is to attract investment not only from the Government, but also (more importantly) from domestic direct investment as well as foreign direct investment. In view of strong economic growth, our GDP growth is anticipated to increase by 6% this year.
In September, we notice that there was a net inflow of foreign funds again in our equity market. Over the past few weeks, the average stock market daily volume had been hovering above one billion shares per day. Almost every day, the top 10 highly traded stocks were those speculative stocks with poor fundamentals. In addition, we noticed that some retail investors had started to get excited again in the stock market.
According to Andrew Sheng in his book titled From Asian To Global Financial Crisis, there were two main indicators to irrational exuberance during the super bull run in 1993. The first was the amah (domestic maid) syndrome. We need to be careful when amahs got excited about the stock market. This was because they did not know what they were buying and would always be the last to sell. The second indicator was when businessmen began to speculate stocks in the stock market. This was because they might neglect their businesses and use some of their cash for speculation.
Comparing our current market situation with the 1993 bull run, there are certain similarities that we see, such as strong economic growth, ringgit appreciation, inflow of foreign capital and ease of credit. However, our local retailer participation is yet to get boiling, which may be the last push factor towards the bull run. Hence, once the participation of the local investors starts to get heated up, together with more inflow of foreign fund, that may be the signs of the market heading for a ‘mini’ super bull run.
● Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.
fr:biz.thestar.com.my/news/story.asp?file=/2010/11/3/business/7348793&sec=business
Mini Super bull run in the making before Chinese New Year ?
Comparing the circumstances back in 1993 against the current situation.
In the early 1990s, despite slowdown in the global economy, as the third largest economy in South-East Asia, after Indonesia and Thailand, Malaysia was supported by relatively strong macroeconomic fundamentals and resilient financial system. With the real GDP growing at 9.9%, ringgit appreciation, strong export growth and the Government’s measures to hold inflation low at 3.6%, the local stock market became an attractive alternative to foreign investors.
In 1991, Tun Dr Mahathir Mohamad unveiled the philosophy of “Malaysia Incorporated” which was a development strategy for Malaysia to achieve a developed nation by 2020.
Before 1993
Foreign investment in Malaysia was - long-term direct investment in manufacturing sector.
However, massive influx of foreign capital inflow helped fuel the super bull-run in 1993.
Within the year, the market increased by 98% to reach an all-time high of 1,275.3 points and foreign investors’ participation accounted for 15% of total trading value of our local bourse. Lured many retailers into the market
1993
Government planned several mega projects, such as
KL International Airport (RM8bil), Johor-Singapore Second Link (RM1.6bil) and Kuala Lumpur Light Rail Transit (RM1.1bil).
Government planning on privatising its own corporations, such as Petronas, KTM and Pos Malaysia had also driven these counters into prime trading targets.
Besides, the ease of accessing bank credit by investors also contributed to the market rally.
High percentage of loans was channelled to broad property sector as well as the purchase of securities.
1994.
Bank Negara introduced a number of selective capital controls in early 1994 to stabilise the financial system,
2010
Economic Transformation Programme (ETP) with the aim to boost our gross national income (GNI) to US$523bil in 2020 from US$188bil in 2009. GDP growth is anticipated to increase by 6% this year.
September 2010 saw net inflow of foreign funds again in our equity market. Over the past few weeks, the average stock market daily volume had been hovering above one billion shares per day.
According to Andrew Sheng in his book titled From Asian To Global Financial Crisis, there were two main indicators to irrational exuberance during the super bull run in 1993. The first was the amah (domestic maid) syndrome. We need to be careful when amahs got excited about the stock market. This was because they did not know what they were buying and would always be the last to sell. The second indicator was when businessmen began to speculate stocks in the stock market. This was because they might neglect their businesses and use some of their cash for speculation.
Comparing our current market situation with the 1993 bull run, there are certain similarities that we see, such as strong economic growth, ringgit appreciation, inflow of foreign capital and ease of credit.
Local retailer participation may be the last push factor towards the bull run.
( source : The star )
http://acnews101.blogspot.com/2010/11/mini-super-bull-run-in-making-before.html
----
Is there a super bull run in 2010?
Personal Investing – By Ooi Kok Hwa
Although the economic situation now compares with that of 1993, the last push must come from local retail investors
THE recent rally in our local bourse has prompted many seasoned investors, especially those who experienced the super bull run in 1993, to wonder whether the current rally is about to turn into a real bull run. Of course, nobody can tell for sure what will happen next, but we certainly can do some homework, comparing the circumstances back in 1993 against the current situation.
In 1991, Tun Dr Mahathir Mohamad unveiled the philosophy of “Malaysia Incorporated” which was a development strategy for Malaysia to achieve a developed nation by 2020. In the early 1990s, despite slowdown in the global economy, as the third largest economy in South-East Asia, after Indonesia and Thailand, Malaysia was supported by relatively strong macroeconomic fundamentals and resilient financial system. With the real GDP growing at 9.9%, ringgit appreciation, strong export growth and the Government’s measures to hold inflation low at 3.6%, the local stock market became an attractive alternative to foreign investors.
Before 1993, foreign investment in Malaysia was mainly dominated by long-term direct investment in the manufacturing sector. However, as a result of measures taken to develop our domestic equity market, coupled with the strong economic backdrop, we saw a massive influx of foreign capital inflow, which helped fuel the super bull-run in 1993. Within the year, the market increased by 98% to reach an all-time high of 1,275.3 points and foreign investors’ participation accounted for 15% of total trading value of our local bourse. This had also driven the market into a highly speculative one, which lured many retailers into the market, thinking of making fast and easy money.
With the presence of new and unfamiliar players, the market became a huge “casino”. Retail investors bought into stocks based on rumours rather than company fundamentals. Among the hottest topics during that time were the awards of government mega projects, privatisation candidates, sector play and regular news on upward revision of corporate earnings. Examples for the highly speculative stocks were Ekran, Ayer Molek Rubber Co, Berjuntai Tin Dredging and Kramat Tin Dredging.
In 1993, with the economy booming, the Government planned several mega projects, including the KL International Airport (RM8bil), Johor-Singapore Second Link (RM1.6bil) and Kuala Lumpur Light Rail Transit (RM1.1bil). The news of contract awarding immediately sent the market into speculative mood on those potential candidates. Similarly, the news of the Government planning on privatising some of the its own corporations, such as Petronas, KTM and Pos Malaysia had also driven these counters into prime trading targets.
Besides, the ease of accessing bank credit by investors also contributed to the market rally. We noticed that a high percentage of loans was channelled to broad property sector as well as the purchase of securities.
As a result of massive inflow of foreign funds and the super bull run in stock market, Bank Negara introduced a number of selective capital controls in early 1994 to stabilise the financial system,
Recently, our Prime Minister Datuk Seri Najib Tun Razak unveiled the Economic Transformation Programme (ETP) with the aim to boost our gross national income (GNI) to US$523bil in 2020 from US$188bil in 2009. The programme is to attract investment not only from the Government, but also (more importantly) from domestic direct investment as well as foreign direct investment. In view of strong economic growth, our GDP growth is anticipated to increase by 6% this year.
In September, we notice that there was a net inflow of foreign funds again in our equity market. Over the past few weeks, the average stock market daily volume had been hovering above one billion shares per day. Almost every day, the top 10 highly traded stocks were those speculative stocks with poor fundamentals. In addition, we noticed that some retail investors had started to get excited again in the stock market.
According to Andrew Sheng in his book titled From Asian To Global Financial Crisis, there were two main indicators to irrational exuberance during the super bull run in 1993. The first was the amah (domestic maid) syndrome. We need to be careful when amahs got excited about the stock market. This was because they did not know what they were buying and would always be the last to sell. The second indicator was when businessmen began to speculate stocks in the stock market. This was because they might neglect their businesses and use some of their cash for speculation.
Comparing our current market situation with the 1993 bull run, there are certain similarities that we see, such as strong economic growth, ringgit appreciation, inflow of foreign capital and ease of credit. However, our local retailer participation is yet to get boiling, which may be the last push factor towards the bull run. Hence, once the participation of the local investors starts to get heated up, together with more inflow of foreign fund, that may be the signs of the market heading for a ‘mini’ super bull run.
● Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.
fr:biz.thestar.com.my/news/story.asp?file=/2010/11/3/business/7348793&sec=business
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