Fusion Investor Chatbox

This chatbox is for fundamental, technical and related discussions on investing in Bursa Malaysia. Registration is required to join. Please email me at fusion.investor@gmail.com with your preferred name and password and I will inform you when registration is confirmed.

Disclaimer: As usual, you are solely responsible for your trading & investing decisions.

Thursday, August 16, 2007

Can a blog article affects a stock price in the long term?

Recently, there was some unexpected comments by one individual (let's call him "Mr P", ass-u-me male for simplicity) in the 2nd chatbox against a fellow blogger.

Now
, Mr P didn't get support in the cbox. My observation is because of several reasons. 1. He started off with a personal attack (that's a No No in my cbox). 2. He used capital letters (another No No), which his fellow chatters find offensive. 3. He was not specific (which doesn't promote rational discussion). 4. A reader commented that they didn't find Mr P's comment useful to them personally.

I am a Buddhist, and a believer that everyone has hidden inside them, a seed of greatness. To cut a long
story short, today, Mr
P didn't dissappoint me, and came back and the atmosphere was calmer than yesterday. And my observation is that Mr P perceives the root cause to be a negative article written by a fellow blogger against a stock owned by Mr P, which is PSCI. The assumption made by Mr P is that the blogger has the power to influence the market with his article.

Now, the reason
I mention this is because I have also personally experienced the same thing. Some time ago, I wrote what someone perceived to be a negative article on CRESBLD. And I received this email. Take a look:




And interestingly, I recalled that Maxforce
, Wisdom Wise, Malaysia Finance have all experienced similar things. In other words, there seems to be a strong belief amongst a small minority of readers, that blogging (or chatbox) can really influence a stock price in the long term. The reason I say a small minority is because that is the only email (3 in total, from a reader who calls himself "oskstaff") I got which is negative, but I have received in total over 200 emails, many of which are queries. But is this belief justified?

I really like to hear your comments on whether you think this belief is justified or otherwise. Some of my thoughts are:

1. In the long term, the stock price is determined by the underlying business performance. If a business keeps churning excellent business results, it's just a matter of time that the market will appreciate it. Conversely, if the business keeps churning lousy business results, it's just a matter of time before the market dumps the stock.

2. Buffett - the world greatest investor - is fond of saying "in the short term, the market is a voting machine, but in the long term, it is a weighing machine". What Buffett means is that in the long-term, the stock price / market capitalization will reflect the true worth of the business rather than all the hype surrounding it. I've read that there are many research & articles showing that whilst in the short term, prices may fluctuate away from value, but the collective action of a very diverse and complex market do steer stock prices towards its true business value in the longer term.

3. I recalled reading somewhere that Bursa eResearch attracts nearly 15,000 registered members (I am sure I am precisely wrong, so, don't quote me). My simple guess is that there should be at least 50,000 investors investing in Bursa on an average day (and don't quote me - I know I am precisely wrong here also). On the other hand, my cbox which has been up for the last 6 trading days has attracted around 2,200 views, or approximately 400 views per day max. Now, I don't know about you, but my feeling is that out of the 400 views per day, maybe only 10% takes my views seriously?? Let's be generous and say 100 (out of 400) takes my views seriously. Now, do the maths - what % is 100 out of a large market of 50,000 buyers and sellers? Seriously. Even though I know I am precisely wrong in both figures (15,000 and 50,000), I know I am approximatly right in my conclusion that the current readership is peanuts in comparison. And we are not even institutional investors who control large amounts of money, but merely individual enthusiasts many of whom is made up of relatively poorer "young adults who just started work and investing". Seriously ...

4. And if you compare my blog with Bursa eResearch who has 15,000 registered members, mine is peanuts. And if you compare my blog with a brokerage firm (say OSK or CIMB), they easily influence many, many more players with many times the fund size. And so it is for advisers like ICapital. And what about the Star newspaper who reaches readership numbering over 1 million??? In this overall context, my blog 100-400 readers a day is just a tiny, tiny drop in the ocean.

5. So, I submit to you for your own personal and critical examination. What influence can one blog (whether it is mine or a similar one) affect on the market??? Is it as effective as Star newspaper? Is it as effective as Bursa eResearch? Is it as effective as a broker/analyst report?

6. And I believe we are a relatively small community over the Net. All of us. What % of internet investors are there, compared to the entire investment community in the real world?

My personal conclusion is that this blog (and others like it) have practically no influence on the market. Any blog that attempts to promote a speculative stock is likely to cause its readers signficant loss in the long term, if they are not smart enough to run in time, and that is not a true investment blog in my books. Occasionally, for an illiquid stock, my comments here (either article or cbox) might cause a temporary blip, but that blip is so short, and so small, that I doubt anyone, even myself, can take advantage of it. So, I don't even try. Instead, I find it easier to try to find good quality stocks and let the business and the market does the work for me. So, if you see that my stocks went up in the long-term, - it's definitely not because of me. And vice versa. All I do is to merely spot it, and mention it.

And of course, because I am human like you, I can be wrong!

And I am certainly not god as another reader commented not too kindly. Even the kindest angel in the world do not invite comments :-) And as usual, comments (whether they are similar or different than mine) and questions are welcomed.

Good luck during these turbulent times.

2 comments:

Mr Tee C.S said...

Hi Seng,

Thanks for allowing me to be able to chat in your cbox, though till now I have no time to join in due the busy hospital work. Somehow, I do have the pleasure to read about the past chats that sent to me through the Yahoo Groups.

Regarding the Q of how influential a blog can be to the stock price = public = crowd psychology, I would rather judge it in term of if the blog a worth a read at all or not..., in respect to both the chatbox comments and the articles written.

I am no psychiatrist like Alexander Elder or that kind of sober mind like Warren Buffet, but I do know how to judge if a blog is worth a read or not and will it really help, if at all, my knowledge on my adventures into the deep heart of forest of KLSE.

Many times, after reading some investment blogs from, like Blisswise, fusiontrader, Moolah, Dali and stocktubes, I find it useful to go through again each of the company’s profile to verify if things are right or wrong, as mentioned in the blogging articles. Only then I will decide if the stock as recommended is worth a buy or not, either for trading or long term investment.

Ok, back to the Q -

So will this influence the price of a particular stock at all, be it on the majority or minority? I would say yes and no.

But the answer is never important here!

This Q arises because of someone losing out money based on another person’s observation and try putting the blame on that particular blogger or out of jealousy.

I would say this kind of person should never do well in the market at all as;
• He follows the hearsay!
• Lazy to read and learns, and to compare!
• He belongs to the 90% group of hopeless punters who just wants to make quick bucks, as if the market owes them
• Egoistic
• Unable to control emotion – cheapskate
• Never follows the trading principles


Lastly, influence on the market to me is never important. Personal progress in learning how trade and how to assess a particular stock is more a priority than just simply accusing others – a.k.a – Kurang Ajar.

Seng, don’t be bothered at all by this kind of personality. They would never do well in life due to their attitude.

Keep up the good work - on the chat and articles.Ultimately, majority of us are quite happy here and benefited in the presence of you.

Have my thanks.

tanhin said...

Dear Seng,

As we all know those reading the blogs especially financial/stock blogs are the enlighten few and the influence or impact are rather small. This cannot be compare to forums/newpaper/business magazine that have wider readership.

But the scenerio is a bit different in the chinese stock blogs that are few in number and majority not updating frequently.The bloggers, I would say all come from the same community http://chinese.cari.com.my/ and they are interlinked to each other very closely through sms/phone/pm with gathering/meeting every now and then.

Thus whoever write something new will be reposted to the chinese.cari forum and the blogger will answer query and comments at the forum.

Furthermore some establishes bloggers also write to the business section of chinese newpaper like Guang Ming,Oriental post and others,sometime the newpaper will also quote the responses/comments from the forum

Thus there is quite substantial influence as Chinese cari had 193000 members and at any one time you visit http://chinese2.cari.com.my/myforum/forumdisplay.php?fid=401, the stock/business section there is easily >50 reader and the herd mentality in following the good/famous forummer/blogger is great.

Just quote you some establish chinese stock blog:
technical
http://psrngurney.blogspot.com/
http://stfund.blogspot.com/
http://klsetechnical.blogspot.com/

fundamental
http://tengkhan.blogspot.com/
http://supperteam.blogspot.com/

and of course my not so matured blog http://tanhin.blogspot.com/

Anyway,influence or no influence, investing or speculating is made by own decision.

Whether that person want or dont want to do homework, to check the figure,to believe or not the analysis,to trust the so called insider information or not is up to him/her, it is his or her money, he or she should be responsible to his/her actions

This is my simple feedback.hope it helps.

tanhin