Would like to wish you and your family a Very Happy and Prosperous Chinese New Year!
Best wishes,
Seng
Sunday, January 25, 2009
Gong Xi Fa Cai!
Would like to wish you and your family a Very Happy and Prosperous Chinese New Year!
Best wishes,
Seng
Friday, January 16, 2009
Compound Interest
Albert Einstein - in the early part of last century - once declared that "Compound Interest is the Most Powerful force in the Universe".
So powerful, that it's also been described as the 8th Wonder of the World. (which I think is an under-estimation - I would put it the 1st Wonder of the World *grin*)
Warren Buffett - one of the world's richest man living today, if not the World's richest man ever in the history of mankind - is a living example of what Compound Interest can do.
Yes, Compound Interest is that powerful.
But what is Compound Interest really? Do you really understand the mathematics behind Compound Interest?
Imagine this scenario.
Let's say you are a super-investor who can double your money every 2 years.
Yes, 100% return every 2 years.
And every time you doubled your money, you continue to do what you do, i.e. you let your interest work for you.
To me, this is a very, very tall order. Not impossible over the short term - from time to time, you hear of someone doing this. But almost never over a long period like 16 years. Even Warren Buffett himself doesn't do this throughout his nearly 6 decades of investing, and I doubt there is even a single 16 year period where Buffett achieved this. Sure, a year or two here and there interspersed with some lower years, but by and large, he falls short of this.
But let's say you have this ability to obtain 100% return every 2 years, over just a 10 year period, so, let's not talk about 16 years yet.
What does this mean?
For example, let say your living expenses 10 years ago was $50,000, or approximately $4,000 per month.
Of course, 10 years ago, $4,000 per month is not a bad sum, although probably not a terribly large sum.
If you live in KL, $4,000 per month 10 years ago is enough to survive.
Maybe not enough to drive an expensive BMW and live in a nicely renovated bungalow and to eat shark fin soup and abolone regularly, but $4k per month is enough to survive in KL if you watch your expenses.
But my question is what if - instead of spending $50,000 10 years ago, you had invested that in a money making machine that can double your money every 2 years.
How much would that $50,000 10 years ago be worth today?
$100,000?
$200,000?
What if I tell you $1.6 million? Yes, $1,600,000!
Why $1.6 million?
Well, in 10 years, this means that the money has doubled 5 times, if you can double your money in 2 years.
So, 2^5 = 32.
Which means every $1 becomes $32 in 10 years time.
Which means $50,000 becomes $1.6 million in 10 years time.
AMAZING ISN'T IT?
And that $1.6 million today is just from 1 year saving of expenses 10 years ago.
What about the saving from expenses 11 years ago? 12 years ago? 13 years ago? 16 years ago?
You'd think someone with this ability would be worth at least 8 digits, if not 9 digits today isn't it?
So, why is he wasting his time blogging, sending hundreds of emails, making hundrends of comments all over the Net, spamming every blog?
And worse, not even accepting my genuine business offer of $4 million to $8 million per year on the condition that he allows me to audit his trading records over the past 16 years?
LOL!
Anyway, as usual, I'm told that I don't know what I'm talking about ... *whistle* *wink* *grin*
So powerful, that it's also been described as the 8th Wonder of the World. (which I think is an under-estimation - I would put it the 1st Wonder of the World *grin*)
Warren Buffett - one of the world's richest man living today, if not the World's richest man ever in the history of mankind - is a living example of what Compound Interest can do.
Yes, Compound Interest is that powerful.
But what is Compound Interest really? Do you really understand the mathematics behind Compound Interest?
Imagine this scenario.
Let's say you are a super-investor who can double your money every 2 years.
Yes, 100% return every 2 years.
And every time you doubled your money, you continue to do what you do, i.e. you let your interest work for you.
To me, this is a very, very tall order. Not impossible over the short term - from time to time, you hear of someone doing this. But almost never over a long period like 16 years. Even Warren Buffett himself doesn't do this throughout his nearly 6 decades of investing, and I doubt there is even a single 16 year period where Buffett achieved this. Sure, a year or two here and there interspersed with some lower years, but by and large, he falls short of this.
But let's say you have this ability to obtain 100% return every 2 years, over just a 10 year period, so, let's not talk about 16 years yet.
What does this mean?
For example, let say your living expenses 10 years ago was $50,000, or approximately $4,000 per month.
Of course, 10 years ago, $4,000 per month is not a bad sum, although probably not a terribly large sum.
If you live in KL, $4,000 per month 10 years ago is enough to survive.
Maybe not enough to drive an expensive BMW and live in a nicely renovated bungalow and to eat shark fin soup and abolone regularly, but $4k per month is enough to survive in KL if you watch your expenses.
But my question is what if - instead of spending $50,000 10 years ago, you had invested that in a money making machine that can double your money every 2 years.
How much would that $50,000 10 years ago be worth today?
$100,000?
$200,000?
What if I tell you $1.6 million? Yes, $1,600,000!
Why $1.6 million?
Well, in 10 years, this means that the money has doubled 5 times, if you can double your money in 2 years.
So, 2^5 = 32.
Which means every $1 becomes $32 in 10 years time.
Which means $50,000 becomes $1.6 million in 10 years time.
AMAZING ISN'T IT?
And that $1.6 million today is just from 1 year saving of expenses 10 years ago.
What about the saving from expenses 11 years ago? 12 years ago? 13 years ago? 16 years ago?
You'd think someone with this ability would be worth at least 8 digits, if not 9 digits today isn't it?
So, why is he wasting his time blogging, sending hundreds of emails, making hundrends of comments all over the Net, spamming every blog?
And worse, not even accepting my genuine business offer of $4 million to $8 million per year on the condition that he allows me to audit his trading records over the past 16 years?
LOL!
Anyway, as usual, I'm told that I don't know what I'm talking about ... *whistle* *wink* *grin*
Monday, January 12, 2009
Update on $4 Million proposal to Samgoss - A Second $8 Million Proposal
Further to my $4 Million per year proposal to Samgoss, fellow blogger Moolah has also blogged on my Public Offer here - http://whereiszemoola.blogspot.com/2009/01/local-malaysian-blgger-claims-markets.html
Moolah's Comments
1. "An extremely profitable proposal that Seng has made."
[Seng comment: Yes, I want to emphasize that $4 Million EACH YEAR is a LOT of money to turn down.
Does Sam currently earns $4 Million EACH YEAR?
Seriously Sam, tell me HOW MUCH do you earn EACH YEAR in the last 5 years?
I can guarantee you more - MUCH MUCH MORE - than what you earned in the last 5 years.
Of course, you'll need to provide proof of you past 5 years income at the very least.]
2. "Of course it's a double sworded as this proposal also equates to a massive challenge for Sam to prove that he is not a fake."
[Seng comment: I want to emphasize that whilst it's a massive challenge, it's very simple action for Sam.
Why?
Because I am only interested in The Truth.
If the past results are there, I want to emphasize that he doesn't need to fear anything, or need to to do anything more.
Just let his past results speaks for themselves.
The audit will merely discover and report that truth.
You see, when you apply for a $40,000 per annum job (let's not talk about $4 Million per annum job), it is standard procedure for you to fill an H.R. form to state your name, your I/C number, your contact phone number, etc.
In this job, because it relates to a hedge fund investing, your track record is important. So, it's only standard procedure to audit your past claims, so, one needs to see your past trades and verify it with your both the securities firm and the banks. With audited data, we will then do more analysis and come to our own conclusion. Sam, you don't need to try to explain how you did it.
I have no doubt Sam will have made past withdrawals from his stock account (to buy property, car, eat abalone, shark fin soup, etc. as he claimed), so, I want to verify in the audit that money has been withdrawn from the stock broking firm to his bank. Everyone can lie about anything, but PAST financial transactions that has been filed to the regulators/Bank Negara - in theory - cannot lie.
All my request is basic standard info for this type of job. Nothing special.
For $4 Million PER YEAR contract offer, why doesn't Sam want to tell me BASIC, STANDARD data?
What is he afraid of?
What is he hiding?
What is he not telling us?]
3. To be honest, 1500% in 16 years is such a record to be proud off.
[Seng comment: Agree absolutely. I want to add that he is actually much better than that, because in that 16 years, he has withdrawn substantial amount of monies regularly and still achieve his 1,500%]
3. Perhaps iCapital, Tan Teng Boo, should hire Sam here to be the chief investment manager for his closed end fund.
[Seng comment: Yes, I must reluctantly agree. They are my competitors, because every fund manager with a little bit of smarts (doesn't need to be as clever as Buffett) will immediately jump to see if they can hire / create new positions for this super-investor, if his results are genuine.]
4. And if Sam record is as genuine as he proudly proclaim, won't you even want to invest in his funds?"
[Seng comment: Agreed. That's my original proposal, which is specially intended to let EVERYONE, including and ESPECIALLY Sam's followers to benefit from this proposal.
Currently, there are TOO MANY real life problems to follow Sam's call-
1. It takes a lot of constant monitoring and work to follow his convoluted blog timely.
2. There is time-lag from the time he buy/sell to the time he blogs.
3. By the time you want to buy or sell something, the time lag means price will have gone up or gone down.
4. Sam's backhand - which means you misses out.
5. Sam keeping his best ideas to himself.
6. 100 other reasons and too long to blog about it.
So, why should anyone - using Sam's own words in his blog - "like ck5354, Dylan, ccdev, newbies n ivtac" accept inferior method now?
So, I came up with this idea, so that EVERYONE now have a chance to get EXACTLY what Sam gets, and EVERYONE in his blog should be HAPPY and join my suggestion.
I really hope to hear from "ck5354, Dylan, ccdev, newbies n ivtac" that they like this idea.
Isn't this a good idea? If it's not good, why is it not good? Write to me, and tell me objectively and concretely why it's not a good idea.
You see, if we can pool Sam's own money TOGETHER with EVERYONE's, then, Sam's work is easier also.
He doesn't need to blog anymore. With his spare time, he can use my chatbox and my blog to continue to rubbish TA methods and to rubbish STOP LOSSES!
Yet, so many of Sam's "followers" are against this business proposal!
I am genuinely dissappointed that Sam's followers have not thought about Sam's BEST interest.
If they did, they all will be asking Sam to accept my business proposal.
Sam makes the Most Money out of my proposal.
His supporters will make MORE money than they did before.
Everyone here also Makes Money!
Win/Win/Win!
Isn't this logical?]
Jason Ups His Offer to $20 Million above my estimation
Jason responded with an even bigger offer than I estimated - https://www.blogger.com/comment.g?blogID=935072059836759128&postID=6590073621444877083.
1. "Put me on the audit team. I don't trust the majority of Malaysian audit firms. (having worked on their teams or with friends who worked there)
[Seng comment: Jason, I am sure ALL of Sam's followers will thank-you from the bottom of their heart for your support!
With your extra contributions, Sam can now look forward to $8 Million Income in 2009!]
Sam turned down my $4 Million Offer
1. See his blog here. http://samgang.blogspot.com/2009/01/v-wow-4-mil-offer-by-sour-seng-ah-seng.html
2. From a business perspective, I am extremely dissappointed with his childish response. There are MORE nonsense, and no serious consideration at all. No serious business man would respond like this in real life.
3. He responded by showing what he claimed to be his Public Bank pass book voluntarily to everyone.
a. How do we know this is his passbook and not someone else's without knowing his full name or his I/C number, and have this verified with Public Bank management?
b. Why show just one snapshot? Why not show everything continuously over the past 16 years to the external auditor in confidence? The external auditor can verify with Public Bank management.
Sam, do you see the problem with your response?
Sam's Compounded Annual Returns are MUCH higher than 1500%
You must remember that:
1. In 1992, Sam starts with $12k, as he said in his latest article above.
2. In 2008, Sam's fund is around $700k?
3. The yearly return = (700,000 / 12,000) ^ (1/16) = 28.93% per annum.
4. However, his true compounded yearly return would have been much higher than this, because over the years, he has withdrawn monies for the following purposes:
a. He purchased in his own words "properties". (Yes, he mentioned this more than once in his blog). KL properties - especially when renovated so nicely in his blog - is not cheap.
b. He purchased a BMW car, and very likely more than just one car over the last 17 years. BMW cars are not cheap like Proton cars ...
c. He withdrawn his fund to pay for his living expenses. Living in KL - even on poor taste - is not cheap.
d. He has expensive taste - just look at the food he boasts about.
e. Even if you conservatively estimate $4,000 per month to live in KL, which is EXTREMELY cheap, already, this is $50,000 per year, or $800,000 over last 16 years. Who pays for his living expenses? Is this from his investment earnings?
f. Conservatively, if you believe his blog, he would have spent additional $2 million to $3 million or even more just on items a., b., c., d., e. over the last 16 years.
g. What about sex? Do you think he pays for that or do you think he has a girlfriend or a wife? Add that to the expenditure.
h. Which means, he must have used just $12,000 to generate say $3 million to $4 million OR MORE at the least in the last 16 years.
h. But if he had compounded his returns, it would be much bigger than $3 million to $4 million at the least. Imagine if he had no spending? The monies saved in earlier years would have grown even more!!
i. So, my wild, rough guess is something like 100% per annum. He should be able to achieve this very easily, especially, when he has earned 299% over 26 months, or more than 115% per annum.
j. Do you see why this guy is MUCH BETTER than Warren Buffett?
Conclusion
This guy deserves to be investigated and audited in detail.
Seriously!
He claims to be THAT good, I don't know of anyone else on earth that comes close to his results.
All newspapers - not just Malaysian, but the Entire World - must know about him.
So, Sam, I am giving you a 2nd chance to have your results audited.
Why can't we deal like business-men?
I want to be your Manager.
Business-men don't need to rubbish each other.
I am not upset with you at all. I'm annoyed at your childish nonsense, but I'm never upset at you.
I just see a wonderful - once in a lifetime business opportunity - in you. If all your claims are true. We can make money together. I see GLOBAL OPPORTUNITY IN YOU!
My offer is genuine, because throughout my entire life, I have NEVER met anyone with a record like yours.
I have a close friend who is a Chief Investment Officer in a global financial organization based overseas (and his organization also has some investments in KLSE), and he has never heard of anyone with a record like you who managed to achieve what you did without leverage.
Conversely, he has seen, heard, and met far too many people who boasts like you, but in reality, are just "KOSONG", or are part of a syndicate.
So, if you are genuine, let's do business together, and let's start by having the results of yours audited.
Alternative Proposals If You don't want to work for me
With your talent Samgoss, I have MANY alternative proposals for you even if you don't like $8 Million PER YEAR!
Even if you don't want to work for me, but you can work for someone else, I also have MANY BUSINESS PROPOSALS for you! E.g. just look at the biography by Alice Schroeder on Buffett called "The Snowball". I want to get someone like Alice to write a biography on Samgoss life AFTER we audit!
We can discuss ANYTHING. But let's audit your results first. No need to fear anything if it's true. There's an English saying that says "Why would I want to kill the goose that lays the golden egg?" Samgoss - you ARE my Golden Goose!
I hope to hear a serious response this time.
Thank-you.
Moolah's Comments
1. "An extremely profitable proposal that Seng has made."
[Seng comment: Yes, I want to emphasize that $4 Million EACH YEAR is a LOT of money to turn down.
Does Sam currently earns $4 Million EACH YEAR?
Seriously Sam, tell me HOW MUCH do you earn EACH YEAR in the last 5 years?
I can guarantee you more - MUCH MUCH MORE - than what you earned in the last 5 years.
Of course, you'll need to provide proof of you past 5 years income at the very least.]
2. "Of course it's a double sworded as this proposal also equates to a massive challenge for Sam to prove that he is not a fake."
[Seng comment: I want to emphasize that whilst it's a massive challenge, it's very simple action for Sam.
Why?
Because I am only interested in The Truth.
If the past results are there, I want to emphasize that he doesn't need to fear anything, or need to to do anything more.
Just let his past results speaks for themselves.
The audit will merely discover and report that truth.
You see, when you apply for a $40,000 per annum job (let's not talk about $4 Million per annum job), it is standard procedure for you to fill an H.R. form to state your name, your I/C number, your contact phone number, etc.
In this job, because it relates to a hedge fund investing, your track record is important. So, it's only standard procedure to audit your past claims, so, one needs to see your past trades and verify it with your both the securities firm and the banks. With audited data, we will then do more analysis and come to our own conclusion. Sam, you don't need to try to explain how you did it.
I have no doubt Sam will have made past withdrawals from his stock account (to buy property, car, eat abalone, shark fin soup, etc. as he claimed), so, I want to verify in the audit that money has been withdrawn from the stock broking firm to his bank. Everyone can lie about anything, but PAST financial transactions that has been filed to the regulators/Bank Negara - in theory - cannot lie.
All my request is basic standard info for this type of job. Nothing special.
For $4 Million PER YEAR contract offer, why doesn't Sam want to tell me BASIC, STANDARD data?
What is he afraid of?
What is he hiding?
What is he not telling us?]
3. To be honest, 1500% in 16 years is such a record to be proud off.
[Seng comment: Agree absolutely. I want to add that he is actually much better than that, because in that 16 years, he has withdrawn substantial amount of monies regularly and still achieve his 1,500%]
3. Perhaps iCapital, Tan Teng Boo, should hire Sam here to be the chief investment manager for his closed end fund.
[Seng comment: Yes, I must reluctantly agree. They are my competitors, because every fund manager with a little bit of smarts (doesn't need to be as clever as Buffett) will immediately jump to see if they can hire / create new positions for this super-investor, if his results are genuine.]
4. And if Sam record is as genuine as he proudly proclaim, won't you even want to invest in his funds?"
[Seng comment: Agreed. That's my original proposal, which is specially intended to let EVERYONE, including and ESPECIALLY Sam's followers to benefit from this proposal.
Currently, there are TOO MANY real life problems to follow Sam's call-
1. It takes a lot of constant monitoring and work to follow his convoluted blog timely.
2. There is time-lag from the time he buy/sell to the time he blogs.
3. By the time you want to buy or sell something, the time lag means price will have gone up or gone down.
4. Sam's backhand - which means you misses out.
5. Sam keeping his best ideas to himself.
6. 100 other reasons and too long to blog about it.
So, why should anyone - using Sam's own words in his blog - "like ck5354, Dylan, ccdev, newbies n ivtac" accept inferior method now?
So, I came up with this idea, so that EVERYONE now have a chance to get EXACTLY what Sam gets, and EVERYONE in his blog should be HAPPY and join my suggestion.
I really hope to hear from "ck5354, Dylan, ccdev, newbies n ivtac" that they like this idea.
Isn't this a good idea? If it's not good, why is it not good? Write to me, and tell me objectively and concretely why it's not a good idea.
You see, if we can pool Sam's own money TOGETHER with EVERYONE's, then, Sam's work is easier also.
He doesn't need to blog anymore. With his spare time, he can use my chatbox and my blog to continue to rubbish TA methods and to rubbish STOP LOSSES!
Yet, so many of Sam's "followers" are against this business proposal!
I am genuinely dissappointed that Sam's followers have not thought about Sam's BEST interest.
If they did, they all will be asking Sam to accept my business proposal.
Sam makes the Most Money out of my proposal.
His supporters will make MORE money than they did before.
Everyone here also Makes Money!
Win/Win/Win!
Isn't this logical?]
Jason Ups His Offer to $20 Million above my estimation
Jason responded with an even bigger offer than I estimated - https://www.blogger.com/comment.g?blogID=935072059836759128&postID=6590073621444877083.
1. "Put me on the audit team. I don't trust the majority of Malaysian audit firms. (having worked on their teams or with friends who worked there)
[Seng comment: No problem. I will also be on the audit team myself.]
2. If I like what I see, I will personally put another RM2 million into this fund. And will attempt to put RM20 million in from friends and family."[Seng comment: Jason, I am sure ALL of Sam's followers will thank-you from the bottom of their heart for your support!
With your extra contributions, Sam can now look forward to $8 Million Income in 2009!]
Sam turned down my $4 Million Offer
1. See his blog here. http://samgang.blogspot.com/2009/01/v-wow-4-mil-offer-by-sour-seng-ah-seng.html
2. From a business perspective, I am extremely dissappointed with his childish response. There are MORE nonsense, and no serious consideration at all. No serious business man would respond like this in real life.
3. He responded by showing what he claimed to be his Public Bank pass book voluntarily to everyone.
a. How do we know this is his passbook and not someone else's without knowing his full name or his I/C number, and have this verified with Public Bank management?
b. Why show just one snapshot? Why not show everything continuously over the past 16 years to the external auditor in confidence? The external auditor can verify with Public Bank management.
Sam, do you see the problem with your response?
Sam's Compounded Annual Returns are MUCH higher than 1500%
You must remember that:
1. In 1992, Sam starts with $12k, as he said in his latest article above.
2. In 2008, Sam's fund is around $700k?
3. The yearly return = (700,000 / 12,000) ^ (1/16) = 28.93% per annum.
4. However, his true compounded yearly return would have been much higher than this, because over the years, he has withdrawn monies for the following purposes:
a. He purchased in his own words "properties". (Yes, he mentioned this more than once in his blog). KL properties - especially when renovated so nicely in his blog - is not cheap.
b. He purchased a BMW car, and very likely more than just one car over the last 17 years. BMW cars are not cheap like Proton cars ...
c. He withdrawn his fund to pay for his living expenses. Living in KL - even on poor taste - is not cheap.
d. He has expensive taste - just look at the food he boasts about.
e. Even if you conservatively estimate $4,000 per month to live in KL, which is EXTREMELY cheap, already, this is $50,000 per year, or $800,000 over last 16 years. Who pays for his living expenses? Is this from his investment earnings?
f. Conservatively, if you believe his blog, he would have spent additional $2 million to $3 million or even more just on items a., b., c., d., e. over the last 16 years.
g. What about sex? Do you think he pays for that or do you think he has a girlfriend or a wife? Add that to the expenditure.
h. Which means, he must have used just $12,000 to generate say $3 million to $4 million OR MORE at the least in the last 16 years.
h. But if he had compounded his returns, it would be much bigger than $3 million to $4 million at the least. Imagine if he had no spending? The monies saved in earlier years would have grown even more!!
i. So, my wild, rough guess is something like 100% per annum. He should be able to achieve this very easily, especially, when he has earned 299% over 26 months, or more than 115% per annum.
j. Do you see why this guy is MUCH BETTER than Warren Buffett?
Conclusion
This guy deserves to be investigated and audited in detail.
Seriously!
He claims to be THAT good, I don't know of anyone else on earth that comes close to his results.
All newspapers - not just Malaysian, but the Entire World - must know about him.
So, Sam, I am giving you a 2nd chance to have your results audited.
Why can't we deal like business-men?
I want to be your Manager.
Business-men don't need to rubbish each other.
I am not upset with you at all. I'm annoyed at your childish nonsense, but I'm never upset at you.
I just see a wonderful - once in a lifetime business opportunity - in you. If all your claims are true. We can make money together. I see GLOBAL OPPORTUNITY IN YOU!
My offer is genuine, because throughout my entire life, I have NEVER met anyone with a record like yours.
I have a close friend who is a Chief Investment Officer in a global financial organization based overseas (and his organization also has some investments in KLSE), and he has never heard of anyone with a record like you who managed to achieve what you did without leverage.
Conversely, he has seen, heard, and met far too many people who boasts like you, but in reality, are just "KOSONG", or are part of a syndicate.
So, if you are genuine, let's do business together, and let's start by having the results of yours audited.
Alternative Proposals If You don't want to work for me
With your talent Samgoss, I have MANY alternative proposals for you even if you don't like $8 Million PER YEAR!
Even if you don't want to work for me, but you can work for someone else, I also have MANY BUSINESS PROPOSALS for you! E.g. just look at the biography by Alice Schroeder on Buffett called "The Snowball". I want to get someone like Alice to write a biography on Samgoss life AFTER we audit!
We can discuss ANYTHING. But let's audit your results first. No need to fear anything if it's true. There's an English saying that says "Why would I want to kill the goose that lays the golden egg?" Samgoss - you ARE my Golden Goose!
I hope to hear a serious response this time.
Thank-you.
Friday, January 9, 2009
Samgoss outperforms Buffett over past 16 years? A $4 Million Proposal to Samgoss
Further to my article on "The Enigmatic Blogger" here - http://fusioninvestor.blogspot.com/2009/01/enigmatic-blogger.html - "okating" sent me 3 more comments!
As usual, there is MORE childish nonsense - including one that threatens me - which is not worth repeating, but the bit that I find enigmatic is this one - according to him, Sam asked "how come u know my published results are all false?"
Actually, it's simple. Of course, not everything is false, but I will just mention one (out of many examples) which I trust experienced investment professionals can deduce for themselves. The rest should remain unmentioned.
Samgoss beats Buffett returns in Past 16 Years?
1. 16 years ago, Berkshire stock traded around $9,000 per share.
2. Last night, it traded at $94,000.
3. This means that Berkshire stock has grown by approximately 10 times, or 1,000% over the last 16 years.
4. And since Berkshire doesn't pay dividends, never sells his shares and has over 99.9% of his net worth in Berkshire, this means that Buffett himself has "only" managed to obtained approximately 1,000% returns over in the past 16 years.
5. Samgoss on the other hand - if I recalled correctly - claimed that over the last 16 years, his returns was 1,500%! Yes, the link is here - http://samgang.blogspot.com/2008/04/v-299returns-in-26-months-what-is-so.html
Doesn't this mean Samgoss' 1,500% returns beat Buffett's 1,000% return, yes? *grin*
Isn't that simply amazing? *grin*
What a super-fantastic result.
Really.
If an external auditor can vouch and certify that this is true, then, I will be most impressed.
Otherwise, it's all just backhand, forehand, left hand, right hand, side spin talk and childish nonsense from Samgoss only isn't it for the last 2 years? *grin*
Additional Reasons why Samgoss claimed his actual returns is higher than 1500%
1. Firstly, you must remember that many professional investors lose to Buffett, whether it is over 5 years, 10 years, 15 years timeframes. But our very own Samgoss claimed to have beaten all of them over last 16 years!
2. You must understand that Samgoss claimed to have taken monies out for various reasons over the past 16 years. In other words, he achieved 1500% returns by NOT compounding his returns!
3. Whereas Buffett compounded everything and still lost to Sam!
4. Buffett is a frugal person. He never sold his stocks. He compound 100% of his earnings. And he still lose to Sam by a mile!
5. Just imagine what Samgoss' returns might have been, had he compounded his returns over the last 16 years. I have no doubt it will be much higher than 1600%! 3,000% is very possible!
WOW!
So, do you seriously believe Samgoss' claims?
A $4 Million Proposal to Samgoss
Ok. Let's give Sam a chance to prove he is genuine.
If Sam is willing, then, let me make this simple business proposal publicly.
Allow me to hire an external auditor to audit Sam's trades over the past 16 years.
If certified true, then, I will not hesitate to make a business proposal to Samgoss that guarantees that he will not be dissappointed.
He will stand to earn $4 million or more a year in income if he repeats his annual performance over the past 16 years.
A monthly adviser fee of $20,000 per month is a definite insult!
I am firstly a business man, and I really couldn't care less about the past. All I care about is the future.
To kick start this, I only require Sam to do one very simple thing.
Even a teenage child can do this.
All Sam have to do is to write to me to let me know this:
1. His full name
2. His I/C number
3. His contact number
4. The names of the banking and security firms he traded with over the past 16 years that generated 1,500% return.
5. Be ready to sign a document that would authorize an external auditor to investigate and audit his investing record over the past 16 years. I expect 100% cooperation from Sam and no childish nonsense.
I will select the auditor. I will bear 100% of the external auditor costs. ZERO cost to Sam. (If substantial, I reserve the right to refund this from the fund later).
AFTER the external auditor certify and vouch that his results are true, I publicly promise to do the following things:
1. I will personally provide Sam with $0.5 million of my own money to invest.
2. I promise to undertake - on best effort basis - to have my family and friends to contribute another $4.5 million, making a total contribution of $5 million for Sam to invest on our behalf. With an investing record of 1,500% return over the past 16 years, I am confident in raising AT LEAST this much. Easy sale job.
3. I also promise to undertake - on best effort basis - to have everyone I know to contribute another $15 million for Sam to invest. With better than Buffett's record, another EASY job.
* I recalled "dylan" claiming that he just invested $100k into Citibank, so, I believe it should be an easy job to persuade "dylan" to sell that, and invest in Sam.
* I recalled "newbie" claiming that he bought houses and other properties worth millions, so, it should be easy enough to get newbie to come up with $2 million to $4 million for Sam to invest.
* Many other investors here like dorraidd, Dali, and others who would be more than willing to contribute funds to Sam to invest. Dorraiddd is easily worth 8 digits, so, getting him to commit a few million with 100% returns should be doable.
* Also, bullbear - I'm sure he can easily come up with another $0.5 million if not more personally at least.
* Jason ... $0.5 million from him should be doable, and another $5 to 10 million from his hedge fund family with almost a sure chance to earn 50%-100% return in 2009 ...
* mydreamgetrich ... I'm sure his family would consider contributing $0.5 million to $1 million after the auditor certify.
* And there's ivtac, starter, and numerous other chatters here. Many would be willing to contribute at least $100k each after the external auditor certifies Sam's performance in the last 16 years to be genuine and true.
* And let's not forget "rising" who claimed to personally know people with 9 digit net worth. I'm sure getting a few million from these people should be "kacang putih". In short, $15 million here, plus $5 million in 1. and 2. is easy job.
4. Sam does not need to worry about regulations, licensing and all legal stuff. I will take care of this. As usual, we will require business insurance policies on Sam's life - this is just standard business clause, and nothing to be concerned about - the premiums gets charged to the fund. Sam does not have to worry about back-office, compliance, accounting, reporting, etc. - all this will automatically be taken care of.
5. Raising $20 million of funds to invest, AFTER the external auditor certifies 1500% returns over the last 16 years is genuine and true is The Easy Part. We might end up with more funds to invest!
6. This is essentially a hedge fund. Sam can expect 20% standard profit sharing for returns exceeding a low minimum threshold.
7. If he repeats his performance of 100% return per annum, then, 20% x 100% returns x $20 million = $4 million yearly profit for Sam alone!
8. Everything will be legal, Sam will be required to sign a contract.
9. At the right time, AFTER the funds are fully invested, we will arrange for newspapers to interview Sam. We expect this to boost Sam's returns BEYOND 100%!
10. I reserve the right to publish Sam's life story in book and every form. Of course, if Sam wants to keep a low profile, this is negotiable. But everyone knows newspaper exposure helps one to invest easier.
So, this is an open and serious invitation to Sam.
Once I receive items 1. to 4., I will then contact him to arrange a face to face meeting with the external auditor.
I envisage the auditor to give Sam a form to sign to authorize them to contact various banks and security companies to disclose past trade details for their investigation, amongst other things.
This could take a while since we are dealing with 16 years of data, but I am willing to pay 100% for the cost to verify this.
Once everything is completely verified and certified by the external auditor, I will contact Sam again.
We will then proceed to discuss all the necessary details, and I will personally take care of the rest so that Sam can focus on his investing job. All Sam has to worry about is how to generate 100% return in 2009 on an asset base of $20 million, based on his so called FA stock selection methods.
Naturally, we will also hire a bodyguard for Sam - 24 hours per day, 365 days per year. Anyone who can generate 1500% returns in past 16 years is priceless.
And more importantly, once the auditors certify that it is true, we will not prevent him from rubbishing TA methods in the Net. In fact, I will personally lend MY BLOG and CHATBOX for Sam to continue to rubbish TA methods! That's a promise from me!
So, Sam, how?
$4 million profit to you every year!
ZERO concern yes?
Send me NOW your full name, your I/C number, your contact number, the name of the banks and security firms that you have traded over the past 16 years that generated your 1500% returns for auditing.
And to all of "Sam's supporters":
I don't want to hear any more childish nonsense on anything else!
All I want to hear from you is why your "sifu" did not accept my $4 Million proposal yesterday.
I look forward to hearing from Samgoss personally by Monday latest.
Otherwise, the entire world knows that Samgoss is a FAKE.
Everyone will be asking why Samgoss turns down a $4 million per year offer.
Sam's records say that his fund is less than $1 million today. Why would anyone blog so much like he does, but doesn't accept a $4 million per year offer?
He doesn't have to do anything different.
So, I sincerely hope Samgoss is genuine. Otherwise, that would be extremely dissappointing, because I'm also finding it tough to generate a fraction of Samgoss' returns ... so, for everyone's sake, let's pray that Samgoss is genuine and NOT a fake.
As usual, there is MORE childish nonsense - including one that threatens me - which is not worth repeating, but the bit that I find enigmatic is this one - according to him, Sam asked "how come u know my published results are all false?"
Actually, it's simple. Of course, not everything is false, but I will just mention one (out of many examples) which I trust experienced investment professionals can deduce for themselves. The rest should remain unmentioned.
Samgoss beats Buffett returns in Past 16 Years?
1. 16 years ago, Berkshire stock traded around $9,000 per share.
2. Last night, it traded at $94,000.
3. This means that Berkshire stock has grown by approximately 10 times, or 1,000% over the last 16 years.
4. And since Berkshire doesn't pay dividends, never sells his shares and has over 99.9% of his net worth in Berkshire, this means that Buffett himself has "only" managed to obtained approximately 1,000% returns over in the past 16 years.
5. Samgoss on the other hand - if I recalled correctly - claimed that over the last 16 years, his returns was 1,500%! Yes, the link is here - http://samgang.blogspot.com/2008/04/v-299returns-in-26-months-what-is-so.html
Doesn't this mean Samgoss' 1,500% returns beat Buffett's 1,000% return, yes? *grin*
Isn't that simply amazing? *grin*
What a super-fantastic result.
Really.
If an external auditor can vouch and certify that this is true, then, I will be most impressed.
Otherwise, it's all just backhand, forehand, left hand, right hand, side spin talk and childish nonsense from Samgoss only isn't it for the last 2 years? *grin*
Additional Reasons why Samgoss claimed his actual returns is higher than 1500%
1. Firstly, you must remember that many professional investors lose to Buffett, whether it is over 5 years, 10 years, 15 years timeframes. But our very own Samgoss claimed to have beaten all of them over last 16 years!
2. You must understand that Samgoss claimed to have taken monies out for various reasons over the past 16 years. In other words, he achieved 1500% returns by NOT compounding his returns!
3. Whereas Buffett compounded everything and still lost to Sam!
4. Buffett is a frugal person. He never sold his stocks. He compound 100% of his earnings. And he still lose to Sam by a mile!
5. Just imagine what Samgoss' returns might have been, had he compounded his returns over the last 16 years. I have no doubt it will be much higher than 1600%! 3,000% is very possible!
WOW!
So, do you seriously believe Samgoss' claims?
A $4 Million Proposal to Samgoss
Ok. Let's give Sam a chance to prove he is genuine.
If Sam is willing, then, let me make this simple business proposal publicly.
Allow me to hire an external auditor to audit Sam's trades over the past 16 years.
If certified true, then, I will not hesitate to make a business proposal to Samgoss that guarantees that he will not be dissappointed.
He will stand to earn $4 million or more a year in income if he repeats his annual performance over the past 16 years.
A monthly adviser fee of $20,000 per month is a definite insult!
I am firstly a business man, and I really couldn't care less about the past. All I care about is the future.
To kick start this, I only require Sam to do one very simple thing.
Even a teenage child can do this.
All Sam have to do is to write to me to let me know this:
1. His full name
2. His I/C number
3. His contact number
4. The names of the banking and security firms he traded with over the past 16 years that generated 1,500% return.
5. Be ready to sign a document that would authorize an external auditor to investigate and audit his investing record over the past 16 years. I expect 100% cooperation from Sam and no childish nonsense.
I will select the auditor. I will bear 100% of the external auditor costs. ZERO cost to Sam. (If substantial, I reserve the right to refund this from the fund later).
AFTER the external auditor certify and vouch that his results are true, I publicly promise to do the following things:
1. I will personally provide Sam with $0.5 million of my own money to invest.
2. I promise to undertake - on best effort basis - to have my family and friends to contribute another $4.5 million, making a total contribution of $5 million for Sam to invest on our behalf. With an investing record of 1,500% return over the past 16 years, I am confident in raising AT LEAST this much. Easy sale job.
3. I also promise to undertake - on best effort basis - to have everyone I know to contribute another $15 million for Sam to invest. With better than Buffett's record, another EASY job.
* I recalled "dylan" claiming that he just invested $100k into Citibank, so, I believe it should be an easy job to persuade "dylan" to sell that, and invest in Sam.
* I recalled "newbie" claiming that he bought houses and other properties worth millions, so, it should be easy enough to get newbie to come up with $2 million to $4 million for Sam to invest.
* Many other investors here like dorraidd, Dali, and others who would be more than willing to contribute funds to Sam to invest. Dorraiddd is easily worth 8 digits, so, getting him to commit a few million with 100% returns should be doable.
* Also, bullbear - I'm sure he can easily come up with another $0.5 million if not more personally at least.
* Jason ... $0.5 million from him should be doable, and another $5 to 10 million from his hedge fund family with almost a sure chance to earn 50%-100% return in 2009 ...
* mydreamgetrich ... I'm sure his family would consider contributing $0.5 million to $1 million after the auditor certify.
* And there's ivtac, starter, and numerous other chatters here. Many would be willing to contribute at least $100k each after the external auditor certifies Sam's performance in the last 16 years to be genuine and true.
* And let's not forget "rising" who claimed to personally know people with 9 digit net worth. I'm sure getting a few million from these people should be "kacang putih". In short, $15 million here, plus $5 million in 1. and 2. is easy job.
4. Sam does not need to worry about regulations, licensing and all legal stuff. I will take care of this. As usual, we will require business insurance policies on Sam's life - this is just standard business clause, and nothing to be concerned about - the premiums gets charged to the fund. Sam does not have to worry about back-office, compliance, accounting, reporting, etc. - all this will automatically be taken care of.
5. Raising $20 million of funds to invest, AFTER the external auditor certifies 1500% returns over the last 16 years is genuine and true is The Easy Part. We might end up with more funds to invest!
6. This is essentially a hedge fund. Sam can expect 20% standard profit sharing for returns exceeding a low minimum threshold.
7. If he repeats his performance of 100% return per annum, then, 20% x 100% returns x $20 million = $4 million yearly profit for Sam alone!
8. Everything will be legal, Sam will be required to sign a contract.
9. At the right time, AFTER the funds are fully invested, we will arrange for newspapers to interview Sam. We expect this to boost Sam's returns BEYOND 100%!
10. I reserve the right to publish Sam's life story in book and every form. Of course, if Sam wants to keep a low profile, this is negotiable. But everyone knows newspaper exposure helps one to invest easier.
So, this is an open and serious invitation to Sam.
Once I receive items 1. to 4., I will then contact him to arrange a face to face meeting with the external auditor.
I envisage the auditor to give Sam a form to sign to authorize them to contact various banks and security companies to disclose past trade details for their investigation, amongst other things.
This could take a while since we are dealing with 16 years of data, but I am willing to pay 100% for the cost to verify this.
Once everything is completely verified and certified by the external auditor, I will contact Sam again.
We will then proceed to discuss all the necessary details, and I will personally take care of the rest so that Sam can focus on his investing job. All Sam has to worry about is how to generate 100% return in 2009 on an asset base of $20 million, based on his so called FA stock selection methods.
Naturally, we will also hire a bodyguard for Sam - 24 hours per day, 365 days per year. Anyone who can generate 1500% returns in past 16 years is priceless.
And more importantly, once the auditors certify that it is true, we will not prevent him from rubbishing TA methods in the Net. In fact, I will personally lend MY BLOG and CHATBOX for Sam to continue to rubbish TA methods! That's a promise from me!
So, Sam, how?
$4 million profit to you every year!
ZERO concern yes?
Send me NOW your full name, your I/C number, your contact number, the name of the banks and security firms that you have traded over the past 16 years that generated your 1500% returns for auditing.
And to all of "Sam's supporters":
I don't want to hear any more childish nonsense on anything else!
All I want to hear from you is why your "sifu" did not accept my $4 Million proposal yesterday.
I look forward to hearing from Samgoss personally by Monday latest.
Otherwise, the entire world knows that Samgoss is a FAKE.
Everyone will be asking why Samgoss turns down a $4 million per year offer.
Sam's records say that his fund is less than $1 million today. Why would anyone blog so much like he does, but doesn't accept a $4 million per year offer?
He doesn't have to do anything different.
So, I sincerely hope Samgoss is genuine. Otherwise, that would be extremely dissappointing, because I'm also finding it tough to generate a fraction of Samgoss' returns ... so, for everyone's sake, let's pray that Samgoss is genuine and NOT a fake.
US Intraday Trading & Capital
Dedication: This article is more a personal note to myself and to perhaps any Malaysian / non US Intra-Day traders who plan to do day-trades in the US markets.
This is a personal note to myself more than anything else. The key point is to NOT ASS-U-ME that the intra-day trading regulations works the same way in the US as they do in Malaysia. In short, they DON'T! *grin*
One of the things I'm still learning about intra-day trading in the US is its unique T+3 rules and Margin rules.
Unlike Malaysia, the US operates very differently in these areas.
In Malaysia, I'm finding that the local online brokers are actually relatively generous as a matter of default practice - compared to their US counterparts. (Their free trading tools might be lousier, but when it comes to financing, they are actually business friendlier). For example, with $100k cash, you might get 2 to 3 times multiple for trading. This means, there is potentially no practical limit to your daily turnover if you keep churning many times in a day. For example, you could put in a Buy/Sell for $300k in the morning, and then, in the afternoon, do the same thing again, and probably end up with a turnover that is - in this example - 6 times your cash of $100k. I haven't tried this before, but I think you could do say 5 round trips in a single day, and your broker will probably not complain (and be quite happy actually *grin*). And you could do this again tomorrow, the next day, etc. The T+3 rule does not apply to intra-day trading, as far as I understand.
However, in the US - or at least with TD Ameritrade - I am surprised to discover that this practice is completely different as a matter of default practice!
In the US, if your cash is $100k, and you've just traded $100k this morning in/out, you cannot put on another trade until 3 days later! The reason is because your last sale of $100k today will not be settled into your account until T+3 days later! So, you can't really do anything for 3 days, which is extremely frustrating for the intra-day trader who is so used to Malaysian rules!
A professional intra-day trader needs to be able to get in and out several times a day!
This US T+3 limitation is a serious limitation for the intraday trader, as it means that the size of his trade is much smaller than in Malaysia. For example, if you plan to do at least 2 trades a day, every day, then, the maximum trade size you can make is only say $16k, for $100k cash. Note that $16k x 6 times = $100k.
This is NOT ideal of course!
Reading more about the Margin Facility available, actually, it appears that whilst the above is the default practice, customers can actually apply to Ameritrade for a Margin Facility to allow him to trade bigger sizes. But it doesn't appear to be anywhere as generous financially compared to Malaysia. The process to apply appears straightforward, although it requires filling in a special separate and additional form, and reading and understanding a lot of unique US regulations. *phew* ?
There is also a waiting time for approval - I've been advised 24 to 48 hours. It appears that if the application is approved, then, the Margin Facility would permit one to at least double one's capital (Huh? Only double? So little.), but interest will be charged. (*shucks*). Still, the T+3 rules apply.
Furthermore, it appears there are special rules for the Intraday Trader. Interestingly, the US regulations defines who is an Intraday Trader and who isn't. The US term is called "Pattern Day Traders" and is defined as "... an account that makes four or more round-trip day trades within any 5 rolling business day period, provided the number of day trades represent 6% of the total trading activity during the same 5 business day period ..."
Huh? Let's try to go slower:
1. Need to make 4 or more round-trip day trades within any 5 rolling business day period.
2. The NUMBER of day trades must be at least 6% of total NUMBER of trades in that 5 rolling business day period.
(so, it's not based on contract size, but just NUMBER of trades ... what a strange requirement ... hmmmnn ...)
It then went on with a numerical example ... "An account that has a cash balance of $40,000 and no positions in the account could have access to $160,000 in day trade buying power."
"Be aware that accounts that have been flagged as Pattern Day Traders will have access to the greater of buying power or day trade buying power. Our systems will accept orders based on the higher of the 2 amounts. Since we have no way of determining whether or not you will hold the position overnight or just for the day, it is your responsibility to enter orders that remain within the buying power for the type of trade that you are placing. House and federal requirements apply to positions held overnight."
In addition, there is some rule to note about Minimum Equity size of $25,000 ...
"Day Trading Minimum Equity Call. If your account has less than $25,000 day trading equity and is identified as a Pattern Day Trading Account, a day trading minimum equity call will be issued. Pattern day trader accounts that fall below the $25,000 minimum equity requirement will NOT be allowed to day trade. If a day trade is executed when equity is below $25,000, your account will be restricted to closing transactions only for 90 days, or until the equity is brought up to $25,000. Funds deposited in an account to satisfy a day trading minimum equity call are subject to a 6 business day hold for checks and 3 business day hold for ACHs".
Get the last paragraphs? LOL! I guess to keep it simple, just make sure you have at least US$25,000 in your account if you don't want to understand this paragraph! kakakakaka
There are more rules than just these ... *gosh*
"Day Trade Buying Power Call" ... "If you account meets the minimum equity requirements for day trading and exceeds the day trade buying power on executed day trades, a day trade buying power call may be issued. ... " (huh?)
"Regulation T Restricted Accounts" ... "Pattern day trader accounts that are under a Regulation T restriction will have their day trade buying power limited in the following manner ... " (huh?)
"Prohibition on liquidating to meet a Regulation T call" ... "Clients may not make a practice of meeting Regulation T calls by liquidating securities ... " (huh?)
Did you understand all that? ... LOL!
Looks like it'll take me some time to really understand the full details ...
In the mean time, to keep it simple, just make sure to have lots of spare cash if one plans to to intra-day trading in the US, although if one's capital is limited, then, one must plough through the details to understand the detailed rules.
What strange and complicated rules they have in the US ....
Cheers!
This is a personal note to myself more than anything else. The key point is to NOT ASS-U-ME that the intra-day trading regulations works the same way in the US as they do in Malaysia. In short, they DON'T! *grin*
One of the things I'm still learning about intra-day trading in the US is its unique T+3 rules and Margin rules.
Unlike Malaysia, the US operates very differently in these areas.
In Malaysia, I'm finding that the local online brokers are actually relatively generous as a matter of default practice - compared to their US counterparts. (Their free trading tools might be lousier, but when it comes to financing, they are actually business friendlier). For example, with $100k cash, you might get 2 to 3 times multiple for trading. This means, there is potentially no practical limit to your daily turnover if you keep churning many times in a day. For example, you could put in a Buy/Sell for $300k in the morning, and then, in the afternoon, do the same thing again, and probably end up with a turnover that is - in this example - 6 times your cash of $100k. I haven't tried this before, but I think you could do say 5 round trips in a single day, and your broker will probably not complain (and be quite happy actually *grin*). And you could do this again tomorrow, the next day, etc. The T+3 rule does not apply to intra-day trading, as far as I understand.
However, in the US - or at least with TD Ameritrade - I am surprised to discover that this practice is completely different as a matter of default practice!
In the US, if your cash is $100k, and you've just traded $100k this morning in/out, you cannot put on another trade until 3 days later! The reason is because your last sale of $100k today will not be settled into your account until T+3 days later! So, you can't really do anything for 3 days, which is extremely frustrating for the intra-day trader who is so used to Malaysian rules!
A professional intra-day trader needs to be able to get in and out several times a day!
This US T+3 limitation is a serious limitation for the intraday trader, as it means that the size of his trade is much smaller than in Malaysia. For example, if you plan to do at least 2 trades a day, every day, then, the maximum trade size you can make is only say $16k, for $100k cash. Note that $16k x 6 times = $100k.
This is NOT ideal of course!
Reading more about the Margin Facility available, actually, it appears that whilst the above is the default practice, customers can actually apply to Ameritrade for a Margin Facility to allow him to trade bigger sizes. But it doesn't appear to be anywhere as generous financially compared to Malaysia. The process to apply appears straightforward, although it requires filling in a special separate and additional form, and reading and understanding a lot of unique US regulations. *phew* ?
There is also a waiting time for approval - I've been advised 24 to 48 hours. It appears that if the application is approved, then, the Margin Facility would permit one to at least double one's capital (Huh? Only double? So little.), but interest will be charged. (*shucks*). Still, the T+3 rules apply.
Furthermore, it appears there are special rules for the Intraday Trader. Interestingly, the US regulations defines who is an Intraday Trader and who isn't. The US term is called "Pattern Day Traders" and is defined as "... an account that makes four or more round-trip day trades within any 5 rolling business day period, provided the number of day trades represent 6% of the total trading activity during the same 5 business day period ..."
Huh? Let's try to go slower:
1. Need to make 4 or more round-trip day trades within any 5 rolling business day period.
2. The NUMBER of day trades must be at least 6% of total NUMBER of trades in that 5 rolling business day period.
(so, it's not based on contract size, but just NUMBER of trades ... what a strange requirement ... hmmmnn ...)
It then went on with a numerical example ... "An account that has a cash balance of $40,000 and no positions in the account could have access to $160,000 in day trade buying power."
"Be aware that accounts that have been flagged as Pattern Day Traders will have access to the greater of buying power or day trade buying power. Our systems will accept orders based on the higher of the 2 amounts. Since we have no way of determining whether or not you will hold the position overnight or just for the day, it is your responsibility to enter orders that remain within the buying power for the type of trade that you are placing. House and federal requirements apply to positions held overnight."
In addition, there is some rule to note about Minimum Equity size of $25,000 ...
"Day Trading Minimum Equity Call. If your account has less than $25,000 day trading equity and is identified as a Pattern Day Trading Account, a day trading minimum equity call will be issued. Pattern day trader accounts that fall below the $25,000 minimum equity requirement will NOT be allowed to day trade. If a day trade is executed when equity is below $25,000, your account will be restricted to closing transactions only for 90 days, or until the equity is brought up to $25,000. Funds deposited in an account to satisfy a day trading minimum equity call are subject to a 6 business day hold for checks and 3 business day hold for ACHs".
Get the last paragraphs? LOL! I guess to keep it simple, just make sure you have at least US$25,000 in your account if you don't want to understand this paragraph! kakakakaka
There are more rules than just these ... *gosh*
"Day Trade Buying Power Call" ... "If you account meets the minimum equity requirements for day trading and exceeds the day trade buying power on executed day trades, a day trade buying power call may be issued. ... " (huh?)
"Regulation T Restricted Accounts" ... "Pattern day trader accounts that are under a Regulation T restriction will have their day trade buying power limited in the following manner ... " (huh?)
"Prohibition on liquidating to meet a Regulation T call" ... "Clients may not make a practice of meeting Regulation T calls by liquidating securities ... " (huh?)
Did you understand all that? ... LOL!
Looks like it'll take me some time to really understand the full details ...
In the mean time, to keep it simple, just make sure to have lots of spare cash if one plans to to intra-day trading in the US, although if one's capital is limited, then, one must plough through the details to understand the detailed rules.
What strange and complicated rules they have in the US ....
Cheers!
Thursday, January 8, 2009
Monitoring Crude Oil News vs Prices to a Trader
This phenomena happens all the time, but just in case if you haven't seen this, or is not convinced, here's one (out of hundreds) of daily example where prices reflect news much faster than news can reach an average retailer like ourself.
Recall my earlier article last night at 11.45 PM last night(http://fusioninvestor.blogspot.com/2009/01/nymex-crude-oil-head-shoulder-formation.html), where I posted the Head and Shoulder formation, and when price breached the neckline at around $47.6.
I have just googled and found the news a few minutes ago (approx 7.30 PM today) which explained the sharp sell off in crude oil price from $48.x to $42.x.
The news is here:
http://www.newsday.com/classified/automotive/ny-bzoil08jan08,0,4347523.story
According to Google, this news was published apparently just 2 hours ago, or approximately 5.30 PM today.
Which means there is a time lag of approximately 18 hours.
Which means if you had decided to act on the basis of the news, you would be 18 hours too late.
18 hours is a long, long time. Current price touched a bottom of $42, and is now around $43 at the time of writing.
Which is why, I stick to my belief that current prices tells me everything that I need to know, for a deep and global market like Nymex Crude Oil.
Fundamental news like this - by the time it reaches an average retailer like myself - is simply too late. (The smart money of course pays for their news in order to get it sooner, but such paid subscriptions are usually too expensive for the average retailer, and you would still need to monitor such news. If you need to monitor news, why not monitor prices which is more direct?)
I know that by the time prices have settled down to a new level, the reason for the price fall will only be revealed later. For a move this size, I expect there to be a good reason of course, and in this case, the reason is due to new inventory figures showing increased stocks, which is bad for prices. But despite the good reasons, waiting for these type of news to come out - no matter how good the reason is - is simply too late.
In other words, whilst knowing the reason is useful lessons for the future, it is usually too late to act. The only real-time indicator that's important to a trader with open position is to monitor current prices, and to a lesser extent current news.
Prices are king, everything else is secondary.
For future reference.
Recall my earlier article last night at 11.45 PM last night(http://fusioninvestor.blogspot.com/2009/01/nymex-crude-oil-head-shoulder-formation.html), where I posted the Head and Shoulder formation, and when price breached the neckline at around $47.6.
I have just googled and found the news a few minutes ago (approx 7.30 PM today) which explained the sharp sell off in crude oil price from $48.x to $42.x.
The news is here:
http://www.newsday.com/classified/automotive/ny-bzoil08jan08,0,4347523.story
According to Google, this news was published apparently just 2 hours ago, or approximately 5.30 PM today.
Which means there is a time lag of approximately 18 hours.
Which means if you had decided to act on the basis of the news, you would be 18 hours too late.
18 hours is a long, long time. Current price touched a bottom of $42, and is now around $43 at the time of writing.
Which is why, I stick to my belief that current prices tells me everything that I need to know, for a deep and global market like Nymex Crude Oil.
Fundamental news like this - by the time it reaches an average retailer like myself - is simply too late. (The smart money of course pays for their news in order to get it sooner, but such paid subscriptions are usually too expensive for the average retailer, and you would still need to monitor such news. If you need to monitor news, why not monitor prices which is more direct?)
I know that by the time prices have settled down to a new level, the reason for the price fall will only be revealed later. For a move this size, I expect there to be a good reason of course, and in this case, the reason is due to new inventory figures showing increased stocks, which is bad for prices. But despite the good reasons, waiting for these type of news to come out - no matter how good the reason is - is simply too late.
In other words, whilst knowing the reason is useful lessons for the future, it is usually too late to act. The only real-time indicator that's important to a trader with open position is to monitor current prices, and to a lesser extent current news.
Prices are king, everything else is secondary.
For future reference.
An enigmatic blogger
Enigmatic comes from the word "enigma", which means several things, one of which is "something hard to understand or explain".
Anyway, let me just show you the facts, you can then decide for yourself how to explain this enigmatic blogger.
1. Unsolicited email from "oskstaff".
"oskstaff" is one of his many and favorite pseudonames. From above, you can see that I have managed to archived at least 90 emails from him.
Actually, I have received more emails from him, but some I have deleted before I discovered the "Archive" tool. Just one click, and it is removed from my Inbox. As they say, out of sight, out of mind. And he obviously knows this, which probably explains why he keeps sending me emails around 7 to 8 a month. Quite regular as you can see.
My rough conservative estimate is that he's written at least 100 to 120+ emails to me. Probably more.
All of that is unsolicited, meaning, I didn't reply at all, save for perhaps a couple of times in 2007, when it became obvious that I wasn't going to obtain a reasonable response from him.
2. Unsolicited comments to my blog from "okating", "okachuan", "FA investor", "CPO trader", "peaceminded", etc. and just today, in my own email from "obbserver obbserver".
This one, I didn't manage to consistently archive his comments since mid 2007. Most of his comments via "okating" were deleted. But from the screenshot, you can see that I received approximately 6 comments in December alone. My own estimation is that it is fewer than oskstaff emails. I would put a conservative estimate at around 30 to 50 probably ... The nature of the comments were spam-like, as you can glean from the screenshot.
3. His numerous blog articles on me
I don't think you need a link from me here *grin*.
As a policy, I no longer visit his blog since last year, except very occasionally when it became a topic of discussion in my chatbox.
According to jason, something like 4 out of 5 articles that he writes are character attacks against me.
I have not counted. But suffice to say that he's written at least 10 to 20 articles about me since 2007? Say once a month? Or more?
4. The comments in his articles.
Again, you can make your own rough guess on how many pseudo names, multiple personalities, and the total number of comments and character attacks he's made on me in all his articles and blog since mid last year. I probably can't count, and you might count a bigger number, but would 100 be a smallish figure?
5.Comments in other chatboxes
In the past, it started with the lower unregistered investssmart chatbox ... I didn't keep tab on how many of such character attacks, but over 100 would be an extremely conservative estimate.
And I understand in other chatboxes as well, there have been similar attacks. Again, I don't know exactly how many, but my guess is 100 is probably a low figure.
Also, I suspect he has infiltrated my chatbox under various names, including Dylan being a recent one, and probably more. The number of veiled attacks by Dylan is say 10, although the total is probably more.
6. Total
Conservative estimate is around 100 (oskstaff) + 50 (my blog comment) + 20 (his article) + 150 (comments in his article) + 100 (investssmart chatbox) + 100 (other chatboxes) = 520 plus, to maybe 1000?
That would make that an average of at least one character attack every single day since mid 2007?
Does this guy believe in "karma"?
6. Interpretation
Here's my own observation and interpretation.
1. This guy is definitely much more persistent than the average individual by a long shot.
For comparison, if I want something from someone personally, I might send an email. If I receive no response, I might follow up to see if he has received it. After the 3rd time, I would probably give up.
I doubt any reasonable person would attempt 10 times to solicit a response.
In comparison, this guy tried over 500 times!
How do you explain such a character?
2. I do receive spam emails unsolicited, like everyone. However, when I compare the direct marketeers efforts, they really pale in comparison to this blogger.
Serious. In my entire life, I have never received so many spams, that comes close to this guy. In my book, if there is such a title as the Master Spammer, this guy deserves the award by far. Direct marketing companies should try to interview this guy to see what drives him to do what he does, to see if they can learn something useful from him.
3. What intrigues me is would Master Investors and Traders do what he does? What about the genuine bloggers?
For example, Buffett - would he do what Sam does? What about Charlie Munger? Peter Lynch? John Bogler? Jim Rogers? and thousands of the other Master Investors?
What about the world's top traders? Jesse Livermore? Nick Davies? Jack Schawager?
Mark Cook? Mark Minervini? Richard Dennis? Bill Eckhardt? Curtis Faith? Ed Seykota? Richard Donchian? and thousands of the other Master Traders? Do you know if even a single individual behaves like Sam?
What about our top investing bloggers here locally as well as overseas? Does Dali behaves like this? Moolah? Alex Lu from nexttrade? The Admin from Bursa Trading Ideas? Stocktube? The Admin from tradesignum? Boon? Bullbear? Ben from Wisdom Wise? Does any one of them behaves like Sam?
Yet, Sam claims to have an investing record that beats all of them by a mile!
Does the world's greatest investor and trader behave like this, to this extent, with at least 500 plus character attacks against a single individual like me?
Let me say this upfront. My own result does NOT match any of the master investors and traders that I have listed here. My blog is just a shared journey with like minded individuals. If I can assist others, I try. Sometimes, I may be happy and show my happiness like the rest. But why is this guy spamming 500+ times, and attacking a relatively insignificant and small fish like me? Even doraiddd has stated many times that we are all relatively small fish here in Bursa.
Although not the main reason, but one of the reason why I have recently stopped chatting in my own chatbox, and chatted perhaps a bit more at CPCB chatbox is due to this guy.
Honestly, it simply turns me off to have to deal with this guy daily.
And I'm sure it turns many of the others off too.
Ok, maybe that's an excuse - there are other reasons why I've been absent lately, including trading midnight and sleeping in as I experiment more with trading US markets - but it would be an easy reason to stay away from my own chatbox due to this guy.
...
Anyway, it feels good to share these with you. I have been keeping this away from you because it is really not relevant at all if you wish to improve you own personal investing results, but keeping it bottled up is also not a healthy attitude.
And then, there is this issue about having a moderated vs an unmoderated blog. I trust by now why you see the need to have a moderated blog. An extra hassle, but a necessity if one wishes to keep the spam away. Sadly, all his 500+ comments are not really related to the topic.
Anyway, my small wish for 2009 is that hopefully this guy - after reading this article - will take a step back, and re-look at what he's done over the past couple of years.
The true Masters have many strengths, including the ability to reflect and see the bigger picture.
They would be sensitive to the effects of losing emotional control on their trading results.
They would be the first to understand the impact of greed, fear, and other strong emotions such as hating someone to this extent, and how such emotions would impact their own personal results.
No,I'm not referring to his published result - that I know is not his true result but his job.
Definitely, my own results have been adversely affected by this guy as well. I would be lying to you and to myself, if I were to publicly say that this guy has not affected me over the past couple of years - there are definitely times when I shouldn't be thinking about him and focused on the trade instead and sometimes, I didn't manage to focus as well as I should. But the positive side is that he has actually and indirectly spurred me to become a better trader - my own pocket is always my first priority and focus. And looking back since 2007, I can see the improvement in my trades, although my own results have not reflected that potential - probably, this is similar to most people. We always have room to improve.
Anyway, do you think it is too much to ask that this guy take a step back, reflect and review his actions over the past 2 year? And then do the right thing?
Too much to ask I hear? *grin*
No bets please *grin*
But seriously, and sincerely, my daily wish to everyone is "May all beings be well, healthy and happy."
Anyway, let me just show you the facts, you can then decide for yourself how to explain this enigmatic blogger.
1. Unsolicited email from "oskstaff".
"oskstaff" is one of his many and favorite pseudonames. From above, you can see that I have managed to archived at least 90 emails from him.
Actually, I have received more emails from him, but some I have deleted before I discovered the "Archive" tool. Just one click, and it is removed from my Inbox. As they say, out of sight, out of mind. And he obviously knows this, which probably explains why he keeps sending me emails around 7 to 8 a month. Quite regular as you can see.
My rough conservative estimate is that he's written at least 100 to 120+ emails to me. Probably more.
All of that is unsolicited, meaning, I didn't reply at all, save for perhaps a couple of times in 2007, when it became obvious that I wasn't going to obtain a reasonable response from him.
2. Unsolicited comments to my blog from "okating", "okachuan", "FA investor", "CPO trader", "peaceminded", etc. and just today, in my own email from "obbserver obbserver".
This one, I didn't manage to consistently archive his comments since mid 2007. Most of his comments via "okating" were deleted. But from the screenshot, you can see that I received approximately 6 comments in December alone. My own estimation is that it is fewer than oskstaff emails. I would put a conservative estimate at around 30 to 50 probably ... The nature of the comments were spam-like, as you can glean from the screenshot.
3. His numerous blog articles on me
I don't think you need a link from me here *grin*.
As a policy, I no longer visit his blog since last year, except very occasionally when it became a topic of discussion in my chatbox.
According to jason, something like 4 out of 5 articles that he writes are character attacks against me.
I have not counted. But suffice to say that he's written at least 10 to 20 articles about me since 2007? Say once a month? Or more?
4. The comments in his articles.
Again, you can make your own rough guess on how many pseudo names, multiple personalities, and the total number of comments and character attacks he's made on me in all his articles and blog since mid last year. I probably can't count, and you might count a bigger number, but would 100 be a smallish figure?
5.Comments in other chatboxes
In the past, it started with the lower unregistered investssmart chatbox ... I didn't keep tab on how many of such character attacks, but over 100 would be an extremely conservative estimate.
And I understand in other chatboxes as well, there have been similar attacks. Again, I don't know exactly how many, but my guess is 100 is probably a low figure.
Also, I suspect he has infiltrated my chatbox under various names, including Dylan being a recent one, and probably more. The number of veiled attacks by Dylan is say 10, although the total is probably more.
6. Total
Conservative estimate is around 100 (oskstaff) + 50 (my blog comment) + 20 (his article) + 150 (comments in his article) + 100 (investssmart chatbox) + 100 (other chatboxes) = 520 plus, to maybe 1000?
That would make that an average of at least one character attack every single day since mid 2007?
Does this guy believe in "karma"?
6. Interpretation
Here's my own observation and interpretation.
1. This guy is definitely much more persistent than the average individual by a long shot.
For comparison, if I want something from someone personally, I might send an email. If I receive no response, I might follow up to see if he has received it. After the 3rd time, I would probably give up.
I doubt any reasonable person would attempt 10 times to solicit a response.
In comparison, this guy tried over 500 times!
How do you explain such a character?
2. I do receive spam emails unsolicited, like everyone. However, when I compare the direct marketeers efforts, they really pale in comparison to this blogger.
Serious. In my entire life, I have never received so many spams, that comes close to this guy. In my book, if there is such a title as the Master Spammer, this guy deserves the award by far. Direct marketing companies should try to interview this guy to see what drives him to do what he does, to see if they can learn something useful from him.
3. What intrigues me is would Master Investors and Traders do what he does? What about the genuine bloggers?
For example, Buffett - would he do what Sam does? What about Charlie Munger? Peter Lynch? John Bogler? Jim Rogers? and thousands of the other Master Investors?
What about the world's top traders? Jesse Livermore? Nick Davies? Jack Schawager?
Mark Cook? Mark Minervini? Richard Dennis? Bill Eckhardt? Curtis Faith? Ed Seykota? Richard Donchian? and thousands of the other Master Traders? Do you know if even a single individual behaves like Sam?
What about our top investing bloggers here locally as well as overseas? Does Dali behaves like this? Moolah? Alex Lu from nexttrade? The Admin from Bursa Trading Ideas? Stocktube? The Admin from tradesignum? Boon? Bullbear? Ben from Wisdom Wise? Does any one of them behaves like Sam?
Yet, Sam claims to have an investing record that beats all of them by a mile!
Does the world's greatest investor and trader behave like this, to this extent, with at least 500 plus character attacks against a single individual like me?
Let me say this upfront. My own result does NOT match any of the master investors and traders that I have listed here. My blog is just a shared journey with like minded individuals. If I can assist others, I try. Sometimes, I may be happy and show my happiness like the rest. But why is this guy spamming 500+ times, and attacking a relatively insignificant and small fish like me? Even doraiddd has stated many times that we are all relatively small fish here in Bursa.
Although not the main reason, but one of the reason why I have recently stopped chatting in my own chatbox, and chatted perhaps a bit more at CPCB chatbox is due to this guy.
Honestly, it simply turns me off to have to deal with this guy daily.
And I'm sure it turns many of the others off too.
Ok, maybe that's an excuse - there are other reasons why I've been absent lately, including trading midnight and sleeping in as I experiment more with trading US markets - but it would be an easy reason to stay away from my own chatbox due to this guy.
...
Anyway, it feels good to share these with you. I have been keeping this away from you because it is really not relevant at all if you wish to improve you own personal investing results, but keeping it bottled up is also not a healthy attitude.
And then, there is this issue about having a moderated vs an unmoderated blog. I trust by now why you see the need to have a moderated blog. An extra hassle, but a necessity if one wishes to keep the spam away. Sadly, all his 500+ comments are not really related to the topic.
Anyway, my small wish for 2009 is that hopefully this guy - after reading this article - will take a step back, and re-look at what he's done over the past couple of years.
The true Masters have many strengths, including the ability to reflect and see the bigger picture.
They would be sensitive to the effects of losing emotional control on their trading results.
They would be the first to understand the impact of greed, fear, and other strong emotions such as hating someone to this extent, and how such emotions would impact their own personal results.
No,I'm not referring to his published result - that I know is not his true result but his job.
Definitely, my own results have been adversely affected by this guy as well. I would be lying to you and to myself, if I were to publicly say that this guy has not affected me over the past couple of years - there are definitely times when I shouldn't be thinking about him and focused on the trade instead and sometimes, I didn't manage to focus as well as I should. But the positive side is that he has actually and indirectly spurred me to become a better trader - my own pocket is always my first priority and focus. And looking back since 2007, I can see the improvement in my trades, although my own results have not reflected that potential - probably, this is similar to most people. We always have room to improve.
Anyway, do you think it is too much to ask that this guy take a step back, reflect and review his actions over the past 2 year? And then do the right thing?
Too much to ask I hear? *grin*
No bets please *grin*
But seriously, and sincerely, my daily wish to everyone is "May all beings be well, healthy and happy."
Crude Oil Update
Good afternoon!
Oh my, what a spectacular fall in Nymex crude oil further to my earlier article - http://fusioninvestor.blogspot.com/2009/01/nymex-crude-oil-head-shoulder-formation.html.
Certainly, the fall is a lot more than my expectation last night ... after I sold my longs, initiate a short, and then closed my short position, I had only expected it to fall to around $46 or thereabouts, and certainly not as low as $42.x ...
In retrospect, I still had room for improvement with this trade .... but my only "defence" is that it was nearly midnight, I had been right to get out of my longs, I had been right in getting a quick short, so, why be greedy when one is physically tired also?
Still, what I will take out from this experience is that this large fall should havebeen semi-expected, since the Head and Shoulder formation is not measured in minutes, but nearly over 24 hours, after a substantial rise over a week. In other words, it had enough "buildup" to fall significantly. I knew this theoretically, but when it comes to implementation, it is still not "automatic" enough for me to note even when I'm physically tired. Will promise myself to remember this one for future reference.
The fall, had a pennant pause, and then, continued to fall, again another classical Technical Analysis chart pattern.
Note also the "Measured Rule", which provides expectation of technical price targets which is also another textbook stuff here.
Three very strong technical points to note at the least.
"If only" I had kept the short position open ... shucks ... *grin*
Ok, just kidding with the "if only" - don't take it too seriously. One of the most important rule of being a trader is to not be greedy and not having regrets on past trades. I should be thankful that I had closed my long position, and not suffer a loss, and I should also be thankful that I did initiate a quick short also which is also positive. Both are far more than what I should expect. Anyway, back to work.
Oh my, what a spectacular fall in Nymex crude oil further to my earlier article - http://fusioninvestor.blogspot.com/2009/01/nymex-crude-oil-head-shoulder-formation.html.
Certainly, the fall is a lot more than my expectation last night ... after I sold my longs, initiate a short, and then closed my short position, I had only expected it to fall to around $46 or thereabouts, and certainly not as low as $42.x ...
In retrospect, I still had room for improvement with this trade .... but my only "defence" is that it was nearly midnight, I had been right to get out of my longs, I had been right in getting a quick short, so, why be greedy when one is physically tired also?
Still, what I will take out from this experience is that this large fall should havebeen semi-expected, since the Head and Shoulder formation is not measured in minutes, but nearly over 24 hours, after a substantial rise over a week. In other words, it had enough "buildup" to fall significantly. I knew this theoretically, but when it comes to implementation, it is still not "automatic" enough for me to note even when I'm physically tired. Will promise myself to remember this one for future reference.
The fall, had a pennant pause, and then, continued to fall, again another classical Technical Analysis chart pattern.
Note also the "Measured Rule", which provides expectation of technical price targets which is also another textbook stuff here.
Three very strong technical points to note at the least.
"If only" I had kept the short position open ... shucks ... *grin*
Ok, just kidding with the "if only" - don't take it too seriously. One of the most important rule of being a trader is to not be greedy and not having regrets on past trades. I should be thankful that I had closed my long position, and not suffer a loss, and I should also be thankful that I did initiate a quick short also which is also positive. Both are far more than what I should expect. Anyway, back to work.
Wednesday, January 7, 2009
Nymex Crude Oil: Head & Shoulder formation - Quick short trade
This morning (US time, night time Malaysia), I closed my long crude oil position and went short after anticipating the Head and Shoulder formation.
As I'm still reasonably bullish over the long term from a fundamental perspective, my short position is just for a quick intra-day trade, which is now closed at a quick profit.
My initial thoughts is that if future technical set ups are right, I lean towards intra-day shorts, until I've seen a new bottom to go long again. Like most thoughts, this is extremely fluid. And of course, one needs to be prepared to jump back in at a higher price if situations reverse when I sleep ... *grin*
The chart that triggered the idea is below.
Fairly typical, textbook stuff. You have a nice run up since $34 over the past fortnight, and then, the Head and Shoulder formation reared its ugly head.
Probably, such opportunities seem a lot less in Bursa where the market is much smaller (contrast the Nymex crude oil market is GLOBAL), where presence of one or two large players in Bursa basically mean they can decide whether to move the price up or down at their own whim.
So far, my own limited experience with Technical Analysis indicates that it works wonderfully well in the US. I must say the trade opportunities with the right set-ups overseas are a lot, in comparison to Bursa. In a sense, whilst I hope this good run continues, I feel a deep sense of regret that Bursa market is not quite the same as the US markets, as it means a completely different type of trading hours to trade the US.
For future reference.
As I'm still reasonably bullish over the long term from a fundamental perspective, my short position is just for a quick intra-day trade, which is now closed at a quick profit.
My initial thoughts is that if future technical set ups are right, I lean towards intra-day shorts, until I've seen a new bottom to go long again. Like most thoughts, this is extremely fluid. And of course, one needs to be prepared to jump back in at a higher price if situations reverse when I sleep ... *grin*
The chart that triggered the idea is below.
Fairly typical, textbook stuff. You have a nice run up since $34 over the past fortnight, and then, the Head and Shoulder formation reared its ugly head.
Probably, such opportunities seem a lot less in Bursa where the market is much smaller (contrast the Nymex crude oil market is GLOBAL), where presence of one or two large players in Bursa basically mean they can decide whether to move the price up or down at their own whim.
So far, my own limited experience with Technical Analysis indicates that it works wonderfully well in the US. I must say the trade opportunities with the right set-ups overseas are a lot, in comparison to Bursa. In a sense, whilst I hope this good run continues, I feel a deep sense of regret that Bursa market is not quite the same as the US markets, as it means a completely different type of trading hours to trade the US.
For future reference.
Monsanto
First noticed it at around $78.x at pre-market. It actually made it to the Active List too, which is why I first noticed it.
Searched the news, and noticed Yahoo carried an article on it about how it doubled its Q1 earnings and raises its profit outlook - http://finance.yahoo.com/news/Monsanto-1Q-profit-doubles-apf-13990679.html.
Stock price has battered down too over the past year.
Despite S&P500 opening lower 1.5% this morning, the stock price continued to shoot up. It seems the US players don't really care so much about depressed markets, when there is such good earnings to be had.
Even if one had bought at $78.x after such a run up, it appears it is not too late to buy during pre-market, as the opening saw even more buying entries, to raise it to $85.x in just a few minutes.
This would be an extremely interesting play for the intra-day trader.
In hindsight, it paid off wonderfully, but do you think think this is an extremely high short-term probability trade?
Of course, such a price action is rarely seen in Bursa stocks.
For future reference.
Searched the news, and noticed Yahoo carried an article on it about how it doubled its Q1 earnings and raises its profit outlook - http://finance.yahoo.com/news/Monsanto-1Q-profit-doubles-apf-13990679.html.
Stock price has battered down too over the past year.
Despite S&P500 opening lower 1.5% this morning, the stock price continued to shoot up. It seems the US players don't really care so much about depressed markets, when there is such good earnings to be had.
Even if one had bought at $78.x after such a run up, it appears it is not too late to buy during pre-market, as the opening saw even more buying entries, to raise it to $85.x in just a few minutes.
This would be an extremely interesting play for the intra-day trader.
In hindsight, it paid off wonderfully, but do you think think this is an extremely high short-term probability trade?
Of course, such a price action is rarely seen in Bursa stocks.
For future reference.
Which is cheaper - Parkson at $6 or Parkson at $4?
On the surface, the answer is obvious isn't it?
Who wants to buy something for $6, when you can buy it at $4?
But if you think $4 is cheaper than $6, what if I tell you that you are not necessarily right?
What if I tell you that the answer depends on what type of trader you are?
Take a look at this chart.
Imagine you are a mid-term swing trader who buys at the pivot point, and hold stocks anywhere from a few days to a few weeks.
You bought PARKSON at $6 at the pivot day 28 March 2008.
This is a wonderful timing, because it broke the downtrend line on that day, and easily exceeded $6. Any swing trader worth his salt whould have gotten approximately 5% to 10% return in a few days/weeks.
Yet, imagine if you bought PARKSON today at $4.
Of course, $4 is cheaper than $6 ...
Yet, the swing trader would probably not want to touch PARKSON at $4 today, but he is happy to buy PARKSON at $6 on 28 March 2008.
The question you have to ask yourself is which type of trader are you?
Are you happy owning PARKSON on 28 March 2008 at $6?
Or are you happy owning PARKSON today at $4?
Investing & trading are not absolute concepts.
Think about it.
Who wants to buy something for $6, when you can buy it at $4?
But if you think $4 is cheaper than $6, what if I tell you that you are not necessarily right?
What if I tell you that the answer depends on what type of trader you are?
Take a look at this chart.
Imagine you are a mid-term swing trader who buys at the pivot point, and hold stocks anywhere from a few days to a few weeks.
You bought PARKSON at $6 at the pivot day 28 March 2008.
This is a wonderful timing, because it broke the downtrend line on that day, and easily exceeded $6. Any swing trader worth his salt whould have gotten approximately 5% to 10% return in a few days/weeks.
Yet, imagine if you bought PARKSON today at $4.
Of course, $4 is cheaper than $6 ...
Yet, the swing trader would probably not want to touch PARKSON at $4 today, but he is happy to buy PARKSON at $6 on 28 March 2008.
The question you have to ask yourself is which type of trader are you?
Are you happy owning PARKSON on 28 March 2008 at $6?
Or are you happy owning PARKSON today at $4?
Investing & trading are not absolute concepts.
Think about it.
Opening Gap Down - WCT and Parkson from an Intra-day trader perspective
This article is for those interested in "quick screws" (i.e. intra-day traders mainly). If you are a longer term trader, or an investor, you may ignore this article as it would not fit your time-frame.
This morning, both WCT and Parkson opened with a gap down. They both followed fairly standard moves, where an experienced intra-day practitioner would have seen many, many times. The chart patterns are not unique, but have been repeated many times before. One of them is an ideal stock to trade very quickly with anticipation (in minutes). The other would have been clearly avoided. Do you know which one?
Well, if you did not, read on. And make sure you understand why one is a good prospect, and the other isn't.
PARKSON
PARKSON has been on a mid term uptrend in the last 2 months, since hitting the low of $2.55 on 28 October. Yesterday, it closed at $4.28, near its intra-day high of $4.30. The intraday low is $4.18. Due to its uptrend move, longer-term traders and some investors might have been tempted to purchase it.
This morning, PARKSON opened at $4.18. Would this have been a "sale"? A discount price in view of its steady uptrend the past 2 months?
For the experienced intra-day trader, the answer would have been a resounding NO. Not at $4.18. Even if you don't know any fundamental analysis of PARKSON, and even if you didn't check the news in the morning and learnt that PARKSON has lowered its growth guidance, the opening price alone is sufficient alert that something is amiss.
The experienced trader would pause for an instant and wait to see how prices behaved. And true enough, on third trade, price fell to $4.16, which is lower that yesterday's low. Already, Mr Market is SCREAMING at you to NOT touch this stock. It has all the makings of a falling knife. And if you even SUSPECT that it is a falling knife, DON'T touch it.
WCT
Now, even if you don't know what type of stock WCT is or what business WCT engages in, the price chart tells you all you need to know if you are an intra-day trader.
You see the rapid fall in prices in the 2 months (Sep to Oct), and relative sideways move.
Yesterday was a strong limit down move. This is huge alert by itself. A move like this with record volume shows extreme fear, and continued fall. Note that WCT closed from $1.67 to $1.29, which is the limit down price.
And this morning, the very first trade happened at $0.925, and then within the first minute, rose extremely fast. This alone is more than enough sign that Mr Market is SCREAMING at the intra-day trader to jump in at market price. WHY?
Several reasons:
1. Opening gap down near limit down price triggers alert watch.
2. Stock is clearly very oversold in past 2 days.
3. Very rapid price increase in the first minute of opening.
And if you screwed it, you could let go after a few minutes for a very nice quick trade.
Counter-intuitive isn't it?
Well, if you are an average investor, probably, you will have thought that Parkson is the better screw than this "WCT" stock. After all Parkson is probably better known, and many bloggers and investment advisers have talked a lot about Parkson. Heck, even Mr Tan Teng Boo was bullish on Parkson, so, $4.18 must be a discount right? And yet, what went wrong?
The answer is actually simple. An intra-day trader couldn't care less about fundamentals, for the simple reason that fundamentals are usually "longer-term" in its effects. Price action dominates his entry/exit decision, and these are governed by Technical Analysis. You may be surprised to know that the above chart patterns are actually "standard" chart patterns for the intra-day technical trader. These chart patterns repeat themselves with many different stocks. The key is to understand all the combined elements, and interpreting them correctly. One small difference in nuance, and the technical picture is different, with different market psychology.
Yet, you may ask - both gap down, but why is WCT the better intra-day trade than Parkson?
Again, the answer is rather simple. Parkson has been uptrending the last couple of months, and yesterday's candle was still bullish, with its story intact. Yet, this morning, something was amiss because it gapped down at the low of yesterday's price. Psychologically, it means that market fears something on Parkson, and this tells you to wait.
However, WCT limit down yesterday, and this is the crucial difference. The opening also gapped down, and again, it is near the limit price. It isn't enough to jump in yet. But the key difference is the price action IN THE FIRST MINUTE. This one ripped up so fast, that Mr Market says "technical rebound due".
Bear in mind ALWAYS that these patterns are:
1. Always repeated - just different stock name, different times, different stories, different reasons, but at the end of the day, it's the same price action.
2. Doesn't happen often - but when they happen, you must sit up and pay attention.
3. These patterns are primarily for the intra-day trader with time-frames that measures in minutes. Half a day is far too long.
Also worth bearing in mind that so far, all I've showed you are merely "chart patterns" and price actions. I have not talked about MACD or RSI or any other technical indicators. The reason is because these technical indicators are merely derivative of price. The primary factor is price because you only make a profit if you Buy Low and Sell Higher than what you buy. Never forget this fundamental point.
So, does this mean that fundamentals are irrelevant?
If you are an intraday trader, perhaps the most accurate answer is that they are important, but secondary to price action. For example, Parkson news announced last night at 7.35 PM is important one - the warning on SSS growth is already a critical news because 7%-8% is far lower than its high P/E multiple. A prepared fusion trader would take this piece of information and be alerted, and when he sees an opening gap down, it would confirm to him to stay away from Parkson at the opening.
WCT news on the other hand was not surprising - all the announcements yesterday on WCT were reflected in the limit down price - the only uncertainty is whether 30% drop in price is enough, or is there more to come, and he will not have the answers until 9.01 AM. And then, he sees a further huge gap down this morning which tells him Mr Market thinks there is more downfall. So, the prepared fusion trader would have been on the lookout for that strong upmove in the first minute of opening. And Mr Market tells him that someone out there really want to buy WCT at 92.5 sen this morning very, very strongly. And the first minute was so critical. Miss the first minute/s, and the bulk of the gains are more or less over. Fifteen minutes later, the professional intra-day trader would have already lost interest in WCT.
If you are an intra-day trader, all that I've mentioned here should be "standard stuff" to you. Nothing I mention here is surprising. WCT especially is a high probability set up that is bread and butter of the professional intra-day trader skill. Parkson set up is also equally high probability, except the message there does not help him make money, but merely helps him NOT to lose money. Knowing how to make money, and knowing how NOT to lose money are BOTH EQUALLY important to the professional intra-day trader.
Happy reading!
This morning, both WCT and Parkson opened with a gap down. They both followed fairly standard moves, where an experienced intra-day practitioner would have seen many, many times. The chart patterns are not unique, but have been repeated many times before. One of them is an ideal stock to trade very quickly with anticipation (in minutes). The other would have been clearly avoided. Do you know which one?
Well, if you did not, read on. And make sure you understand why one is a good prospect, and the other isn't.
PARKSON
PARKSON has been on a mid term uptrend in the last 2 months, since hitting the low of $2.55 on 28 October. Yesterday, it closed at $4.28, near its intra-day high of $4.30. The intraday low is $4.18. Due to its uptrend move, longer-term traders and some investors might have been tempted to purchase it.
This morning, PARKSON opened at $4.18. Would this have been a "sale"? A discount price in view of its steady uptrend the past 2 months?
For the experienced intra-day trader, the answer would have been a resounding NO. Not at $4.18. Even if you don't know any fundamental analysis of PARKSON, and even if you didn't check the news in the morning and learnt that PARKSON has lowered its growth guidance, the opening price alone is sufficient alert that something is amiss.
The experienced trader would pause for an instant and wait to see how prices behaved. And true enough, on third trade, price fell to $4.16, which is lower that yesterday's low. Already, Mr Market is SCREAMING at you to NOT touch this stock. It has all the makings of a falling knife. And if you even SUSPECT that it is a falling knife, DON'T touch it.
WCT
Now, even if you don't know what type of stock WCT is or what business WCT engages in, the price chart tells you all you need to know if you are an intra-day trader.
You see the rapid fall in prices in the 2 months (Sep to Oct), and relative sideways move.
Yesterday was a strong limit down move. This is huge alert by itself. A move like this with record volume shows extreme fear, and continued fall. Note that WCT closed from $1.67 to $1.29, which is the limit down price.
And this morning, the very first trade happened at $0.925, and then within the first minute, rose extremely fast. This alone is more than enough sign that Mr Market is SCREAMING at the intra-day trader to jump in at market price. WHY?
Several reasons:
1. Opening gap down near limit down price triggers alert watch.
2. Stock is clearly very oversold in past 2 days.
3. Very rapid price increase in the first minute of opening.
And if you screwed it, you could let go after a few minutes for a very nice quick trade.
Counter-intuitive isn't it?
Well, if you are an average investor, probably, you will have thought that Parkson is the better screw than this "WCT" stock. After all Parkson is probably better known, and many bloggers and investment advisers have talked a lot about Parkson. Heck, even Mr Tan Teng Boo was bullish on Parkson, so, $4.18 must be a discount right? And yet, what went wrong?
The answer is actually simple. An intra-day trader couldn't care less about fundamentals, for the simple reason that fundamentals are usually "longer-term" in its effects. Price action dominates his entry/exit decision, and these are governed by Technical Analysis. You may be surprised to know that the above chart patterns are actually "standard" chart patterns for the intra-day technical trader. These chart patterns repeat themselves with many different stocks. The key is to understand all the combined elements, and interpreting them correctly. One small difference in nuance, and the technical picture is different, with different market psychology.
Yet, you may ask - both gap down, but why is WCT the better intra-day trade than Parkson?
Again, the answer is rather simple. Parkson has been uptrending the last couple of months, and yesterday's candle was still bullish, with its story intact. Yet, this morning, something was amiss because it gapped down at the low of yesterday's price. Psychologically, it means that market fears something on Parkson, and this tells you to wait.
However, WCT limit down yesterday, and this is the crucial difference. The opening also gapped down, and again, it is near the limit price. It isn't enough to jump in yet. But the key difference is the price action IN THE FIRST MINUTE. This one ripped up so fast, that Mr Market says "technical rebound due".
Bear in mind ALWAYS that these patterns are:
1. Always repeated - just different stock name, different times, different stories, different reasons, but at the end of the day, it's the same price action.
2. Doesn't happen often - but when they happen, you must sit up and pay attention.
3. These patterns are primarily for the intra-day trader with time-frames that measures in minutes. Half a day is far too long.
Also worth bearing in mind that so far, all I've showed you are merely "chart patterns" and price actions. I have not talked about MACD or RSI or any other technical indicators. The reason is because these technical indicators are merely derivative of price. The primary factor is price because you only make a profit if you Buy Low and Sell Higher than what you buy. Never forget this fundamental point.
So, does this mean that fundamentals are irrelevant?
If you are an intraday trader, perhaps the most accurate answer is that they are important, but secondary to price action. For example, Parkson news announced last night at 7.35 PM is important one - the warning on SSS growth is already a critical news because 7%-8% is far lower than its high P/E multiple. A prepared fusion trader would take this piece of information and be alerted, and when he sees an opening gap down, it would confirm to him to stay away from Parkson at the opening.
WCT news on the other hand was not surprising - all the announcements yesterday on WCT were reflected in the limit down price - the only uncertainty is whether 30% drop in price is enough, or is there more to come, and he will not have the answers until 9.01 AM. And then, he sees a further huge gap down this morning which tells him Mr Market thinks there is more downfall. So, the prepared fusion trader would have been on the lookout for that strong upmove in the first minute of opening. And Mr Market tells him that someone out there really want to buy WCT at 92.5 sen this morning very, very strongly. And the first minute was so critical. Miss the first minute/s, and the bulk of the gains are more or less over. Fifteen minutes later, the professional intra-day trader would have already lost interest in WCT.
If you are an intra-day trader, all that I've mentioned here should be "standard stuff" to you. Nothing I mention here is surprising. WCT especially is a high probability set up that is bread and butter of the professional intra-day trader skill. Parkson set up is also equally high probability, except the message there does not help him make money, but merely helps him NOT to lose money. Knowing how to make money, and knowing how NOT to lose money are BOTH EQUALLY important to the professional intra-day trader.
Happy reading!
Monday, January 5, 2009
News will not make you money
Just saw this on Bloomberg this evening - http://www.bloomberg.com/apps/news?pid=20601086&sid=a1Ab6lUay5TE&refer=news
Jan. 5 (Bloomberg) -- The steepest plunge in crude prices on record may be setting up oil investors for a rally this year, if history is any guide.
The so-called forward curve of futures contracts traded on the New York Mercantile Exchange suggests oil will rise 28 percent to $60.10 a barrel by December. The curve looks almost the same as 10 years ago, after Russia’s default and the collapse of the Long-Term Capital Management LP hedge fund raised concerns that a global economic slowdown would reduce energy demand. Crude prices fell 25 percent in the final quarter of 1998, the steepest drop in seven years.
Basically, Bloomberg is now saying - on January 5, 2009, and note the date - that because of the steep "contango", it's setting up crude for a nice rally ... lol
The contango was of course noticed earlier - I blogged on it at the end of Dec here - http://fusioninvestor.blogspot.com/2008/12/light-crude-oil-is-this-normal-contango.html
There, I noted that the contango was probably at its steepest on Dec 19.
And Bloomberg reports it 2 weeks later on Jan 5 ... lol
I have the highest respect for Bloomberg news, but if one were to blindly follow Bloomberg, do you think one can make as much money than if one were to follow one's own personal convictions and observations?
For example, will Bloomberg immediately report the steep contango to you when it first happen, or only after vested interests have taken position before Bloomberg announces the news?
Always learn how to fish for yourself, never rely on others to fish for you.
Best wishes!
Jan. 5 (Bloomberg) -- The steepest plunge in crude prices on record may be setting up oil investors for a rally this year, if history is any guide.
The so-called forward curve of futures contracts traded on the New York Mercantile Exchange suggests oil will rise 28 percent to $60.10 a barrel by December. The curve looks almost the same as 10 years ago, after Russia’s default and the collapse of the Long-Term Capital Management LP hedge fund raised concerns that a global economic slowdown would reduce energy demand. Crude prices fell 25 percent in the final quarter of 1998, the steepest drop in seven years.
Basically, Bloomberg is now saying - on January 5, 2009, and note the date - that because of the steep "contango", it's setting up crude for a nice rally ... lol
The contango was of course noticed earlier - I blogged on it at the end of Dec here - http://fusioninvestor.blogspot.com/2008/12/light-crude-oil-is-this-normal-contango.html
There, I noted that the contango was probably at its steepest on Dec 19.
And Bloomberg reports it 2 weeks later on Jan 5 ... lol
I have the highest respect for Bloomberg news, but if one were to blindly follow Bloomberg, do you think one can make as much money than if one were to follow one's own personal convictions and observations?
For example, will Bloomberg immediately report the steep contango to you when it first happen, or only after vested interests have taken position before Bloomberg announces the news?
Always learn how to fish for yourself, never rely on others to fish for you.
Best wishes!
Saturday, January 3, 2009
Economist Interest Rate Predictions
There are 3 things you need to know about Economist Predictions:
1. Their short term predictions are generally lousy. Witness the most recent Fed Rate cuts. Majority of the economists expect 50 basis point cut, some expect 25 basis point cut, even when futures markets were pricing in nearly 100% probability that the cut is going to be at least 75 bp. And of course, the Feds lowered interest rates so large that it clearly exceeded all the economist predictions! *grin*
2. Their long term predictions are better.
3. In the long run, we are all dead. *grin* Ironically, this last point is probably the least contentious point amongst the 3, and is actually uttered by the famous economist of all time, John Maynard Keynes.
Anyway, humour aside ... I want to show you this chart, which is based on a Bloomberg survey of 50 economists.
The current Fed Funds rate is 25 bp, and economists are expecting this to stay the same until Q3/09, when they think it will then be raised a little, and then more in 2010. They also expect the bond yields to steadily increase over the same period.
My own opinion is that in the long run, they are probably right. *grin*. In the immediate term, if you bet on 1., then, it might not be a bad idea, to bet against the economists on the bond yield, although bear in mind, since the economists got it wrong the last time, randomness alone will probably mean that they'll be right this time. *grin*
1. Their short term predictions are generally lousy. Witness the most recent Fed Rate cuts. Majority of the economists expect 50 basis point cut, some expect 25 basis point cut, even when futures markets were pricing in nearly 100% probability that the cut is going to be at least 75 bp. And of course, the Feds lowered interest rates so large that it clearly exceeded all the economist predictions! *grin*
2. Their long term predictions are better.
3. In the long run, we are all dead. *grin* Ironically, this last point is probably the least contentious point amongst the 3, and is actually uttered by the famous economist of all time, John Maynard Keynes.
Anyway, humour aside ... I want to show you this chart, which is based on a Bloomberg survey of 50 economists.
The current Fed Funds rate is 25 bp, and economists are expecting this to stay the same until Q3/09, when they think it will then be raised a little, and then more in 2010. They also expect the bond yields to steadily increase over the same period.
My own opinion is that in the long run, they are probably right. *grin*. In the immediate term, if you bet on 1., then, it might not be a bad idea, to bet against the economists on the bond yield, although bear in mind, since the economists got it wrong the last time, randomness alone will probably mean that they'll be right this time. *grin*
More Monthly Stock Market Predictions for 2009!
Ok, more predictions for 2009 stock markets, not based on Feng Shui, but Statistics.
Like all statistical predictions, expect 50% of them to be right and the other 50% wrong! *grin* (personally, I think the odds are better than 50/50).
These statistics are for the US Dow Jones Market.
Summary of Prediction
Good months for 2009: Jan, Apr, Jun, Jul Aug, Oct.
Bad months for 2009: May, Sep.
Neutral months for 2009: Feb, Mar, Nov, Dec.
Basis
http://seekingalpha.com/article/112984-january-expect-gains
The rationale is that 2008 was such a bad year, that the author went back to history to look at what happens to the Dow the following year after a really "bad" year (bad defined as market having lost more than 20% prior). Data is since 1900. Read the article for more.
Like all statistical predictions, expect 50% of them to be right and the other 50% wrong! *grin* (personally, I think the odds are better than 50/50).
These statistics are for the US Dow Jones Market.
Summary of Prediction
Good months for 2009: Jan, Apr, Jun, Jul Aug, Oct.
Bad months for 2009: May, Sep.
Neutral months for 2009: Feb, Mar, Nov, Dec.
Basis
http://seekingalpha.com/article/112984-january-expect-gains
The rationale is that 2008 was such a bad year, that the author went back to history to look at what happens to the Dow the following year after a really "bad" year (bad defined as market having lost more than 20% prior). Data is since 1900. Read the article for more.
Thursday, January 1, 2009
Happy New Year and Welcome to the Year of the Investor!
Here's wishing you and your family a Happy New Year for 2009, and may all your wishes comes true!
As with all new years, this is the traditional time when people give some thought as to how they plan to improve their lives for the coming year. Personally, I don't have a fixed New Year Resolution, but rather, I prefer to implement change as soon as I am convinced that it is needed, rather than wait until the next year.
However, one area that I would like to rumble about is the era of being an investor versus a trader.
These are not mere labels, but different styles of trying to make money from the financial markets, such as the stock market. To me, they involve very different levels of risks, and different expected returns, and my own view is quite different from traditional investing textbooks.
My own personal view is that the ideal investor is a flexible investor who is largely an investor when markets are "low", and ride the bull all the way to the top. When valuations then becomes extended, he switches to become a trader, and would cut loss or hold cash as the bull markets crashes. Then, when it founds bottom or when valuations are compelling, he becomes an investor again. Such an approach is optimal and efficient, and involves minimum effort.
This contradicts traditional dogma, that says that you must choose either to become an investor or a trader, and not both. I don't know who first came up with such dogma, but presumably, like all rules of thumb, I'm sure initially, there's a good reason for it.
The biggest theoretical cricism levied on such changing styles which varies according to bull or bear markets is that no one can time markets perfectly. I have no wish to argue with the theoreticians. My own personal experience tells me that one can sense when one is in a bull market or a bear market. Not with 100% accuracy of course - this is the Holy Grail which can never be attained. But with 70%-80% of the time, and there are ways to manage ones portfolio if one doesn't get it perfectly right. In fact, one doesn't need to get it perfectly right to make money.
My general view is that if 2008 is the Year of the Trader, then, 2009 may be viewed back as the Year of the Investor.
In many sectors, valuations are attractive by long term historical standards. (Of course, what is cheap can always get cheaper, but from a long term risk/reward perspective, it borders on "cheap" than "expensive", as a general comment).
The fastest and most efficient way to greater wealth is now through an investing approach, rather than a trading approach. Theoretically, it doesn't make sense to cut loss when valuations are low and compelling, but rather averaging down. I also like to be a contrarian at this time, when news are bleak and everyone now says that Buy and Hold is dead.
In sophisticated financial markets such as the US, the participants are highly skilled in execution. I'm surprised to learn that something like up to 70% of the volume are attributed to program traders and robots. Recently, I have experimented day trading in the US markets and have found that trying to compete with them on an extremely short term basis (e.g. using 1 minute charts), is futile, when their execution is much faster than what retailers can even react manually.
So, I believe that the easiest way then to make the biggest buck with minimum effort is to go beyond the 1 minute trading horizon, and extend the time-frame to 3 to 5 years. For example, if one has a 12 month horizon, I've said that any price to buy crude oil below US$40 is considered cheap, and last night, crude shot up past $40 easily. There is no need to apply a minute-to-minute trading with stop loss, when an investing approach with averaging down at key pivot levels makes much more sense, and is also easier.
I think crude oil's recent performance in the last 2 weeks provides an early glimpse of what we can expect for the rest of 2009. There are still many markets which haven't yet rallied as much.
Averaging down is a highly skillful art, and can provide either FAST returns, or FAST loss. In terms of technique, it entails a HIGH degree of risk, with high rewards, when compared to stop loss. Averaging down commits increasing amount of capital into something, so, you BETTER be right, or else, you suffer HUGE losses, or it ties up your capital for a very long time, and this is the trader's greatest fear - the fear of not having enough capital to make future trades. Cut loss assumes that one does not have an idea of where the floor price is, and so, traders try to get out when they are uncertain of that.
For example, if a stock bought at $10 starts to fall to $8, do you cut loss, or do you average down? If you have no idea of where the floor price is, then, logic dictates that you cut loss, because to you, it is possible it could go down to $5 or even $2 say. But if someone else - through a careful study of the situation - personally believes that the floor is around $7, and maybe very very unlikely to be below $6, he may instead choose a different route to back up his view. For example, he would wait until he sees the price becoming closer to $7, such as $7.05. Then, he would start to monitor closely, looking for clues such as whether the support will hold at $7, and whether the price will bounce off $7 ... and be ready to average down when the price has bottomed, showed classical bottoming indicators, and then, average down at $7.20 when it is higher odds that it will bounce back up. And if it then goes down to $6.2, he does it again. And every move is preplanned before the word Go, before he entered at $10 originally. In short, by averaging down at $7.20, his average cost might be $8, and when it goes back to $8, he breaks-even. Whereas the trader who cut loss at $8, and still waiting to reenter might end up with a loss. Whilst the trader has peace of mind after cuting loss, and the investor in emotional turmoil as price fell below $8, and smart investor who knows his stuff and have a long term horizon, simply treats the same price fluctuations as merely "noise". And 3 years later, the stock price zooms to $20, and he's glad he kept the stock all these times and ignored the "noise". He doesn't need to stay glued to the 1 minute screen every single day. In this sense, it is very easy for the investor.
There are many reasons why I believe this year will be the Year where the Investor will match the performance of a Trader, and quite possibly beat them in the longer term.
When compared to the counter-trend trader, a strong up move like what crude oil did last night will leave the counter-trend trader with nothing in hand. They would have sold at resistance levels, and last night's move is so strong, it would have taken out most if not all their holdings.
When compared to a trend following trader, the trader would only have jumped in at a higher price compared to an investor.
These are just general comments of course, but personally, being an investor is easiest amongst the 3, during these times. Of course, when crude oil is $140+, when DJ is 14,000+, when KLCI is 1500+, it is not the same situation when crude oil is below $40, DJ around 8.5k, KLCI around 880.
There are MANY risks of being an investor too.
For example, one of the biggest risk is to appear to BE WRONG for an EXTENDED PERIOD of time. This to me is a time-frame issue, rather than an absolute issue, if practiced properly. When markets appear to have bottomed, and things appear to be relatively cheap when measured against long term historical average, it is appearance rather than true substance for the genuine investor.
Another risk is to be overcommitted too quickly. The counter-risk is to be less committed and the market shoots up. At the time of writing, I don't expect the latter to occur, so, better to err on a smaller allocation, than a bigger allocation in stocks. Cash is still king, although it's time for me to put my capital into work for the longer term.
Related to this is to average down too quickly. This one is an art. Lower fixed price is appealing because of its simplicity and can be executed mindlessly, but might not be most optimal. Averaging down based on Major Key Support levels, following by price action around these key support levels are technically more optimal, but requires more work and monitoring and you can always still be wrong. There are Masters of Averaging Down, and there are Amateurs of Averaging Down, and there is no short cut to knowing when to average down, and how much to average down. The general idea is to keep remember Buffett's maxim, that as an investor, when you think you have bought near the bottom, be prepared to see your investment holdings shrink by 50%. Well, maybe he didn't quite say it like this, but if one used Crude Oil as an example, I had earlier thought when crude first broke below $60, that $40 would be a floor. Well, I was proven wrong in that expectation, but here, being wrong is not catastophic because I then expect the floor to be $20 = 50% x $40. And if you are really unsure, plan for another 50% fall i.e. a floor price of $10. In other words, if you plan your averaging down so that the maximum worse case scenario is an extremely small probability of happening, then, you will always have cash to average down. The corrolary is that you won't be fully invested by the time bottom has occured and price starts to run upwards. This is the trade off.
Even more important is selling. Again, at bottom, the price run up can be fast and furious initially. This is evident recently, in many stocks in the US, such as DRYS (shipping sector), GS (financial sector), GM (auto sector), etc. Don't get me wrong - most analysts believe the financial and auto sector have not yet seen the worst and there is more downside, and individual stocks carry huge risks when compared to sector index funds, or a basket of carefully selected stocks to represent that sector. The main point is to be selective in selling when price runs up. Forget about selling at first resistance level, because the run up will be so fast, you will not have captured the most of the possible run. A fast run up means to balance the time to hold and the time to run. Most times, it means accepting the possibility that it could come down again after a small run up. You can't win all the time, but if the goal is to capture the BIG moves, then, when it's a bull run, the best course of action is to just sit tight.
The problem is that when prices are at the bottom, or at the lower 10%-20% of the cycle, news and analysts believe there is more worse news to come, and there is no one who rings a loud bell to say that the bull is coming. The truth is noone knows whether a bull is going to come in 2009. I also don't know.
But I am definitely alerted to the possibility that the bottom might have been found. There are more signs showing that the bottom is there, although all of these could end up being false bottoms (e.g. systemic reasons), in which case, I will still have my cash to average down below the last bottom. The goal is to not be greedy to try to have 100% shares when the bottom isn't clear yet.
For example, a crude oil recovery without a Baltic Dry Index recovery or other signs is somewhat meaningless, and is unlikely to be sustainable.
Another risk of being an investor is that you know for certain that market prices are going to show you that you are going to be wrong, and that in some time-frames, being a counter-trend trader would have given better returns. That is certain to happen. The question is will you have the discipline to execute your plan? Will you set aside a small portion of your funds for trading for pocket moneys, whilst keeping your eye on the long term Gold in 3 to 5 years time from now? One of the worst thing an investor could do is to sell off his permanent holdings too soon, in the first quarter of the long term bull leg, and not have any permanent holdings for the 2nd, 3rd and 4th quarter run which should run for years.
Why a time-frame of 3-5 years? Nothing scientific, but if you believe in a 7 year bear-bull-bear cycle (peak to peak, or trough to trough), and if now is close to the bottom, then, a peak should be around 3-5 years time. Long term cycles are not scientifically exact - e.g. there is a 10 year trough-to-trough cycle from 1987-1997-2007 for example, but 3-5 years should cover most of that long term bull run.
Another big risk of an investor who plans for the long term is that in the short term, he forgets and strayed away from his long term plans, and becomes say a shorter term trader. This is especially when he has changed to be a trader for the whole of last year. This change of behaviour and flexibility is very difficult to implement, even with awareness. This is what makes investing very challenging.
The choice of stocks and markets are very important for an investor. Personally, my thinking leans towards preferring US markets for investing reasons. Similarly, my thinking leans towards a basket of stocks / index funds for exposure to critical sectors, rather than a single stock to represent that sector. I have already decided what index and what group of stocks to buy. You have to make that decision yourself.
The arguments against US is often its currency which is expected to weaken. Most likely, I will enter the forex markets this year to hedge against that. One doesn't need a substantial exposure since forex markets are highly geared. Or I may end up trading forex for side pocket money. One of the good things about forex is that it lends itself to technical analysis very much. The charts is all you need to know and it's all that you need. And there is always a bull run in forex markets - just need to switch to a different currency pair. Naturally, stop loss is the only protection you have in forex, since averaging down indefinitely is impossible due to high gearing. You simply run out of capital eventually.
Another thing is I'm most likely to be less involved in running my chatbox in 2009 than 2008. Compromises have to be made, if I wish to pay more attention to US markets and to forex markets. For forex, I'm not in a rush to get in. I intend to try a demo account for a few months first, and I have just signed up with one last night. I have quietly ambitious goals with forex, but I want to make sure that I can substantially increase my demo account first before committing real monies. Apparently, many traders have doubled and tripled their accounts in months through forex, and strict discipline and strict adherence to entry/exit signals are the key. Anyway, these are just plans, random thoughts, call them New Year Resolution if you will, with nothing concrete to show for yet, and like all good plans, are flexible and can be changed when circumstances demand it - it doesn't have to wait for the next year.
Eventually, I expect to have only a small exposure to Malaysian stocks. However, I will continue to monitor on a macro basis, for a change in investor sentiment towards Malaysia. The key driver to pushing up our markets is foreigners - without them, our markets might not even break 1000 or 1100 in 2009. The recent drying up of volume and intra-day opportunities does not make our local market exciting at all, with less reason to spend all day monitoring our local stock market prices. Perhaps, this "drying up" and "quiet" period is a necessary period for our local market to consolidate and build base, so that after a prolonged period of consolidation, it then has the ability to go up again either later this year or after 2009.
In short, if you haven't made plans yet to be an investor, consider making one for 2009, at least with some of your capital like 50%. Split this into 3 portion, plan to enter around current / slightly below current levels, the 2nd third at prices below existing bottom, and the rest at below the lower bottom. For example, with crude oil, a third at below $40, another 3rd below $20, and another 3rd below $10 and you might split that into thirds or quarters further. You may fine tune it since 50% is a huge gap, and if you believe the chances of hitting $10 is almost nil, then, adjust your capital allocations accordingly. Be fluid, be flexible, but never forget the longer-term goals. Short term, it might not seem exciting, but over the longer term, I believe with the right approach, you should be well rewarded.
Best wishes for 2009 and beyond!
As with all new years, this is the traditional time when people give some thought as to how they plan to improve their lives for the coming year. Personally, I don't have a fixed New Year Resolution, but rather, I prefer to implement change as soon as I am convinced that it is needed, rather than wait until the next year.
However, one area that I would like to rumble about is the era of being an investor versus a trader.
These are not mere labels, but different styles of trying to make money from the financial markets, such as the stock market. To me, they involve very different levels of risks, and different expected returns, and my own view is quite different from traditional investing textbooks.
My own personal view is that the ideal investor is a flexible investor who is largely an investor when markets are "low", and ride the bull all the way to the top. When valuations then becomes extended, he switches to become a trader, and would cut loss or hold cash as the bull markets crashes. Then, when it founds bottom or when valuations are compelling, he becomes an investor again. Such an approach is optimal and efficient, and involves minimum effort.
This contradicts traditional dogma, that says that you must choose either to become an investor or a trader, and not both. I don't know who first came up with such dogma, but presumably, like all rules of thumb, I'm sure initially, there's a good reason for it.
The biggest theoretical cricism levied on such changing styles which varies according to bull or bear markets is that no one can time markets perfectly. I have no wish to argue with the theoreticians. My own personal experience tells me that one can sense when one is in a bull market or a bear market. Not with 100% accuracy of course - this is the Holy Grail which can never be attained. But with 70%-80% of the time, and there are ways to manage ones portfolio if one doesn't get it perfectly right. In fact, one doesn't need to get it perfectly right to make money.
My general view is that if 2008 is the Year of the Trader, then, 2009 may be viewed back as the Year of the Investor.
In many sectors, valuations are attractive by long term historical standards. (Of course, what is cheap can always get cheaper, but from a long term risk/reward perspective, it borders on "cheap" than "expensive", as a general comment).
The fastest and most efficient way to greater wealth is now through an investing approach, rather than a trading approach. Theoretically, it doesn't make sense to cut loss when valuations are low and compelling, but rather averaging down. I also like to be a contrarian at this time, when news are bleak and everyone now says that Buy and Hold is dead.
In sophisticated financial markets such as the US, the participants are highly skilled in execution. I'm surprised to learn that something like up to 70% of the volume are attributed to program traders and robots. Recently, I have experimented day trading in the US markets and have found that trying to compete with them on an extremely short term basis (e.g. using 1 minute charts), is futile, when their execution is much faster than what retailers can even react manually.
So, I believe that the easiest way then to make the biggest buck with minimum effort is to go beyond the 1 minute trading horizon, and extend the time-frame to 3 to 5 years. For example, if one has a 12 month horizon, I've said that any price to buy crude oil below US$40 is considered cheap, and last night, crude shot up past $40 easily. There is no need to apply a minute-to-minute trading with stop loss, when an investing approach with averaging down at key pivot levels makes much more sense, and is also easier.
I think crude oil's recent performance in the last 2 weeks provides an early glimpse of what we can expect for the rest of 2009. There are still many markets which haven't yet rallied as much.
Averaging down is a highly skillful art, and can provide either FAST returns, or FAST loss. In terms of technique, it entails a HIGH degree of risk, with high rewards, when compared to stop loss. Averaging down commits increasing amount of capital into something, so, you BETTER be right, or else, you suffer HUGE losses, or it ties up your capital for a very long time, and this is the trader's greatest fear - the fear of not having enough capital to make future trades. Cut loss assumes that one does not have an idea of where the floor price is, and so, traders try to get out when they are uncertain of that.
For example, if a stock bought at $10 starts to fall to $8, do you cut loss, or do you average down? If you have no idea of where the floor price is, then, logic dictates that you cut loss, because to you, it is possible it could go down to $5 or even $2 say. But if someone else - through a careful study of the situation - personally believes that the floor is around $7, and maybe very very unlikely to be below $6, he may instead choose a different route to back up his view. For example, he would wait until he sees the price becoming closer to $7, such as $7.05. Then, he would start to monitor closely, looking for clues such as whether the support will hold at $7, and whether the price will bounce off $7 ... and be ready to average down when the price has bottomed, showed classical bottoming indicators, and then, average down at $7.20 when it is higher odds that it will bounce back up. And if it then goes down to $6.2, he does it again. And every move is preplanned before the word Go, before he entered at $10 originally. In short, by averaging down at $7.20, his average cost might be $8, and when it goes back to $8, he breaks-even. Whereas the trader who cut loss at $8, and still waiting to reenter might end up with a loss. Whilst the trader has peace of mind after cuting loss, and the investor in emotional turmoil as price fell below $8, and smart investor who knows his stuff and have a long term horizon, simply treats the same price fluctuations as merely "noise". And 3 years later, the stock price zooms to $20, and he's glad he kept the stock all these times and ignored the "noise". He doesn't need to stay glued to the 1 minute screen every single day. In this sense, it is very easy for the investor.
There are many reasons why I believe this year will be the Year where the Investor will match the performance of a Trader, and quite possibly beat them in the longer term.
When compared to the counter-trend trader, a strong up move like what crude oil did last night will leave the counter-trend trader with nothing in hand. They would have sold at resistance levels, and last night's move is so strong, it would have taken out most if not all their holdings.
When compared to a trend following trader, the trader would only have jumped in at a higher price compared to an investor.
These are just general comments of course, but personally, being an investor is easiest amongst the 3, during these times. Of course, when crude oil is $140+, when DJ is 14,000+, when KLCI is 1500+, it is not the same situation when crude oil is below $40, DJ around 8.5k, KLCI around 880.
There are MANY risks of being an investor too.
For example, one of the biggest risk is to appear to BE WRONG for an EXTENDED PERIOD of time. This to me is a time-frame issue, rather than an absolute issue, if practiced properly. When markets appear to have bottomed, and things appear to be relatively cheap when measured against long term historical average, it is appearance rather than true substance for the genuine investor.
Another risk is to be overcommitted too quickly. The counter-risk is to be less committed and the market shoots up. At the time of writing, I don't expect the latter to occur, so, better to err on a smaller allocation, than a bigger allocation in stocks. Cash is still king, although it's time for me to put my capital into work for the longer term.
Related to this is to average down too quickly. This one is an art. Lower fixed price is appealing because of its simplicity and can be executed mindlessly, but might not be most optimal. Averaging down based on Major Key Support levels, following by price action around these key support levels are technically more optimal, but requires more work and monitoring and you can always still be wrong. There are Masters of Averaging Down, and there are Amateurs of Averaging Down, and there is no short cut to knowing when to average down, and how much to average down. The general idea is to keep remember Buffett's maxim, that as an investor, when you think you have bought near the bottom, be prepared to see your investment holdings shrink by 50%. Well, maybe he didn't quite say it like this, but if one used Crude Oil as an example, I had earlier thought when crude first broke below $60, that $40 would be a floor. Well, I was proven wrong in that expectation, but here, being wrong is not catastophic because I then expect the floor to be $20 = 50% x $40. And if you are really unsure, plan for another 50% fall i.e. a floor price of $10. In other words, if you plan your averaging down so that the maximum worse case scenario is an extremely small probability of happening, then, you will always have cash to average down. The corrolary is that you won't be fully invested by the time bottom has occured and price starts to run upwards. This is the trade off.
Even more important is selling. Again, at bottom, the price run up can be fast and furious initially. This is evident recently, in many stocks in the US, such as DRYS (shipping sector), GS (financial sector), GM (auto sector), etc. Don't get me wrong - most analysts believe the financial and auto sector have not yet seen the worst and there is more downside, and individual stocks carry huge risks when compared to sector index funds, or a basket of carefully selected stocks to represent that sector. The main point is to be selective in selling when price runs up. Forget about selling at first resistance level, because the run up will be so fast, you will not have captured the most of the possible run. A fast run up means to balance the time to hold and the time to run. Most times, it means accepting the possibility that it could come down again after a small run up. You can't win all the time, but if the goal is to capture the BIG moves, then, when it's a bull run, the best course of action is to just sit tight.
The problem is that when prices are at the bottom, or at the lower 10%-20% of the cycle, news and analysts believe there is more worse news to come, and there is no one who rings a loud bell to say that the bull is coming. The truth is noone knows whether a bull is going to come in 2009. I also don't know.
But I am definitely alerted to the possibility that the bottom might have been found. There are more signs showing that the bottom is there, although all of these could end up being false bottoms (e.g. systemic reasons), in which case, I will still have my cash to average down below the last bottom. The goal is to not be greedy to try to have 100% shares when the bottom isn't clear yet.
For example, a crude oil recovery without a Baltic Dry Index recovery or other signs is somewhat meaningless, and is unlikely to be sustainable.
Another risk of being an investor is that you know for certain that market prices are going to show you that you are going to be wrong, and that in some time-frames, being a counter-trend trader would have given better returns. That is certain to happen. The question is will you have the discipline to execute your plan? Will you set aside a small portion of your funds for trading for pocket moneys, whilst keeping your eye on the long term Gold in 3 to 5 years time from now? One of the worst thing an investor could do is to sell off his permanent holdings too soon, in the first quarter of the long term bull leg, and not have any permanent holdings for the 2nd, 3rd and 4th quarter run which should run for years.
Why a time-frame of 3-5 years? Nothing scientific, but if you believe in a 7 year bear-bull-bear cycle (peak to peak, or trough to trough), and if now is close to the bottom, then, a peak should be around 3-5 years time. Long term cycles are not scientifically exact - e.g. there is a 10 year trough-to-trough cycle from 1987-1997-2007 for example, but 3-5 years should cover most of that long term bull run.
Another big risk of an investor who plans for the long term is that in the short term, he forgets and strayed away from his long term plans, and becomes say a shorter term trader. This is especially when he has changed to be a trader for the whole of last year. This change of behaviour and flexibility is very difficult to implement, even with awareness. This is what makes investing very challenging.
The choice of stocks and markets are very important for an investor. Personally, my thinking leans towards preferring US markets for investing reasons. Similarly, my thinking leans towards a basket of stocks / index funds for exposure to critical sectors, rather than a single stock to represent that sector. I have already decided what index and what group of stocks to buy. You have to make that decision yourself.
The arguments against US is often its currency which is expected to weaken. Most likely, I will enter the forex markets this year to hedge against that. One doesn't need a substantial exposure since forex markets are highly geared. Or I may end up trading forex for side pocket money. One of the good things about forex is that it lends itself to technical analysis very much. The charts is all you need to know and it's all that you need. And there is always a bull run in forex markets - just need to switch to a different currency pair. Naturally, stop loss is the only protection you have in forex, since averaging down indefinitely is impossible due to high gearing. You simply run out of capital eventually.
Another thing is I'm most likely to be less involved in running my chatbox in 2009 than 2008. Compromises have to be made, if I wish to pay more attention to US markets and to forex markets. For forex, I'm not in a rush to get in. I intend to try a demo account for a few months first, and I have just signed up with one last night. I have quietly ambitious goals with forex, but I want to make sure that I can substantially increase my demo account first before committing real monies. Apparently, many traders have doubled and tripled their accounts in months through forex, and strict discipline and strict adherence to entry/exit signals are the key. Anyway, these are just plans, random thoughts, call them New Year Resolution if you will, with nothing concrete to show for yet, and like all good plans, are flexible and can be changed when circumstances demand it - it doesn't have to wait for the next year.
Eventually, I expect to have only a small exposure to Malaysian stocks. However, I will continue to monitor on a macro basis, for a change in investor sentiment towards Malaysia. The key driver to pushing up our markets is foreigners - without them, our markets might not even break 1000 or 1100 in 2009. The recent drying up of volume and intra-day opportunities does not make our local market exciting at all, with less reason to spend all day monitoring our local stock market prices. Perhaps, this "drying up" and "quiet" period is a necessary period for our local market to consolidate and build base, so that after a prolonged period of consolidation, it then has the ability to go up again either later this year or after 2009.
In short, if you haven't made plans yet to be an investor, consider making one for 2009, at least with some of your capital like 50%. Split this into 3 portion, plan to enter around current / slightly below current levels, the 2nd third at prices below existing bottom, and the rest at below the lower bottom. For example, with crude oil, a third at below $40, another 3rd below $20, and another 3rd below $10 and you might split that into thirds or quarters further. You may fine tune it since 50% is a huge gap, and if you believe the chances of hitting $10 is almost nil, then, adjust your capital allocations accordingly. Be fluid, be flexible, but never forget the longer-term goals. Short term, it might not seem exciting, but over the longer term, I believe with the right approach, you should be well rewarded.
Best wishes for 2009 and beyond!