08.19.07
Posted in Freakonomics, Investment at 2:55 pm by ngkaboon
Many may not understand the impact behind the recent fall-out on the sub-prime loan but it is a classical bubble case. Bubbles are best understood as objects that take up volume and continue to do so until they burst. Before they burst, everybody think it will keep growing and continue to need more real estate, i.e., volume. Once they bursts, nobody realizes how much volume it had taken up because these bubbles were hidden deep below. Overtime, the bubbles with impact the layer above and subsequently, it would reach a point that the structure collapses and everybody realized what is happening.
In this case of sub-prime loan, we are giving people money that they are unlikely to pay back. This easy credit creates a situation of over-supply (in this case of houses) against a somewhat artificial or more appropriately, hollow demand. When this demands disappears, the supply chain collapses. The funny part about economy dependency is that when you give people easy money, the money circulates around for all kinds of unrelated things like sport players’ transfers fee, mergers and acquisition, stock markets investments, etc. Once the easy money flow disappears, the rest of the unrelated things are impacted. Fortunately, in some cases, the value is huge but not substantially huge until it kills off everything else, so the impact diminishes as it propagate down these unrelated economic activities. Unfortunately, in some cases, it gets blown out of proportion. It is not so long ago that we were all killed by money being paid for 3G licenses across the globe.
I will not be surprised if this current spate of bad news about the subprime loan fall-out eventually impact the sports’ transfer market. The key here is not on the locality of the fallout but the actual value of the fallout. Given that central banks are putting tens of billions to fill in the cashflow gap, you do get the feeling this is of the same magnitude as the 3G fallout. As such, it is not hard to imagine a worldwide recession being felt in the next one to two years, especially after China, who has been the last bastion of strong economy, loses it immunity when the Olympics begin!
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Posted in Asia, Investment, Politics, travel at 2:25 pm by ngkaboon
I recently went Saigon. It is a bustling city destined to make a mark in the next 10 to 15 years. The French influence is clearly still felt, especially around the culture and food. Like any other developing city, there is too much pollution and poorly governed traffic, all the more so under earlier French influence and relatively cheap influx of motorcycles.
Vietnam on the whole as a reasonably large population but it is overshadowed due to the global interest in the two mammoths in Asia, China and India. Having said that, due to its more manageable size and distribution in population, it could still sneakily catch up with the two big players. Definitely a country with much potential.. I cannot help but think that socialist model mixed with international collaboration is the faster mode of development compared to laissez-faire democracy for developing countries.
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01.02.07
Posted in Untagged, Investment at 8:22 pm by ngkaboon
I have recently cashed in some investments of over 5 years. I am sitting on some paper loss still. For the cash-in portion, I am mostly ahead.
I had a few misconceptions to my trading style. Basically, I follow a buy-and-hold strategy. In general, the strategy worked well, but the money allocation did not. If I had equally distributed my investments, I would have done better. I had most money in two stocks. One is doing okay and the other is down at least 70%. As a result, over the 5 years compound, even with discounted shares, I am only up about 2% per year. Good thing is that I did not lose that much of money but the bad thing is that 5 years have gone and I am pretty much where I started. From a timing perspective, I could not have done better, I started buying as the market loses steam and sold as the share market is hitting new peaks (and I only did 2% CAGR). The first misconception is the lack of money management/risk control. I subscribed to the Buffett-Fischer school of selecting very good stocks but the only problem is that I realized that given my time spent and the information available, there is no way I can be so accurate in picking the right stocks. As such, I need to adopt a money/risk management approach to buying stocks. More concretely, I need to be more distributed in my purchase. Putting it in two baskets is clearly not enough. I need more baskets. Having said that, I am still not a big fan of diversification and I still believe in picking a small pool and making sure this small pool do well as a whole.
Second, timing is of certain importance. For example, my global internet unit trust has lost money since my initial purchase and the fund was introduced after the internet stocks have gone down. Therefore, it looks risky buying at a high or when the trend is moving down, because using the buy-and-hold strategy, it will take a long time to reach the break-even point. If I would to do this again, I would rather buy as it is going up, rather than going down. And I should persists my buying over down period rather than stop (because I had to get married and spend money elsewhere!).
Third, what worked well was my money market fund. Sure, the returns are most likely to be described as pathetic, but the fact that I saved $100 a month for 5 years resulted in a $7k savings. Imagine, if i have saved $200, the savings would be $14k and if I have saved $500, it would be $35K. For that matter, this investment worked so well that I am really better off saving a large pool of money in this type of money market fund and invest the money when the market is really doing bad, or as it is picking up from a bad spell.
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04.01.06
Posted in General Technology, Singapore, Asia, Investment at 11:37 pm by ngkaboon
I first started investing seriously about 6 years ago. I started with subscribing to IPO. I tried internet day-trading which was quite a nightmare. I realized from quite early that unless you are using a direct terminal, it is quite impossible to day trade successfully using internet. I always thought that if I buy technology shares, I would be at an advantage because of my technical skills. It was later that I realized that technology business is more business than technology and Asia-Pacific technology is even more business than technology.
After 6 years or so, my greatest “wins” have the following characteristics
- Sure-win investment are typically not a regular investment. Like company shares which are discounted
- Lucky and ignorant about potential risks
- Well-run companies in a non-sexy industry. But these companies should exhibit high profit growth.
- Buying good company (esp with government backing) when they are low
My on par performance come from the following categories
- Large established index stocks
- Well-run company with a so-so business but not showing good profit growth.
My poorest performance comes from the following categories
- Company with no profit and most likely have not establish its viable model
- Company with profits but do not have trading volume and revenue growth. Healthy balance sheets are insufficient (in fact, it is still my greatest loss!)
Interestingly, I learn that
- One must always be able to bet heavy on right bets to win. I bet heavy on wrong investment. Also, it pays to switch even at loss if you realize things are wrong. And it is easier to switch earlier on than later on.
- Trying to exploit little known characteristics of a stock exchange has not work well in general.
- Established index funds company should be acquired during down periods. They should come back up. If you invest regularly on a good company (meaning sustainable healthy balance sheet), you tend to be gain when the market swing up.
- Profitability is not enough. Growth must be present (especially for very tech-related company).
- A commodity value chain can have high value at some parts of the chain
- Good companies tend to continue to grow and I must learn to have guts to buy them at a high. (The only problem is that you tend to buy them at a high and have to wait for them to hold steady or drop before peaking again.)
- If there’s a genuinely good deal, you must be willing to bet heavy. And you should not wait because you always find ten thousand reasons why this is not genuinely a good deal.
- The way down takes a while before it bottoms. There is no need to hurry.
- After 6 years, I realized my investment is more based on luck than skill. This leads me to understand that it takes a long time before a skillful person would be better than his lucky counterpart consistently. (Though I haven’t invest since about 4 years or so back)
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