AAR & TOL 02 (Nov 08 - Jul 09)

[winston]

TOL:-

A little knowledge is very dangerous..

The more articles that I read about the various industries, the more I realized that I actually know very little about the various industries...

I may know the basics of a certain industry but I will not be able to smell the Risks and Opportunities in that industry. And it's very likely that I'm late to the party..

In the past, I have relied heavily on Analyst's reports. However, this round, it has dawned on me that if you depend on these guys, you have have been taken to the cleaners. They ask you to buy when you should be selling and ask you to sell when you should be buying. Their Target Price is also all over the place ...

So where do we go from here ? I really need to reflect more on this issue....

Perhaps be more of a Contrarian and Trader. When something has run up a lot, put a tight trailing stop loss and look for reasons why things cant continue. And when something has dropped a lot, try to look for a reason why it can go up. However, you can only find those reasons only if you have a very good feel of that industry ..

Ignorance seldom surface in my investment decisions. I need to be more careful else I will be made minced meat...

A little knowledge is very dangerous indeed

[Aspellian]

TOL:-

A little knowledge is very dangerous..

The more articles that I read about the various industries, the more I realized that I actually know very little about the various industries...

In the past, I have relied heavily on Analyst's reports. However, this round, it has dawned on me that if you depend on these guys, you have have been taken to the cleaners. They ask you to buy when you should be selling and ask you to sell when you should be buying. Their Target Price is also all over the place ...

So where do we go from here ? I really need to reflect more on this issue....

I fully agree with you... I have analysts friends who like me are greenhorns in the workforce (less than 10 yrs of working experience), research analysts are only a stepping stone for many of them to the funds industry. its the same as audit as a stepping stone to finance industry. so how much do they know of an industry, many a times, they are thrown to research on a totally unknown industry, and because of deadlines, they just churn out reports without fully understanding the industry... experienced management can easily paint a beautiful pictures. recently i read an article whereby the CEO is asked why revenue went down, he says they are "discouraging buyers" from stocking too much of their inventory, therefore the reduced sales. possible? yes! Likely? No! But the reporter probably treat that as truth....

In a bull market, they back-calculate (consciously OR subsconciously) to arrive at a target price. when that price is breached, they push the target price higher and shout BUY BUY BUY (when 9.5 out of 10 analysts say BUY; usually that is when the peak is reached)

In a bear market, they price it lower, when the low target price is breached, they price it even lower!! SELL SELL SELL!! (When 9.6 out of 10 analysts say SELL; bottom is reached!)

When market is recovering and share prices recovered, they move their target price again but they are still unsure, so they say HOLD HOLD HOLD!! They will shift their target price slightly lower than current price, saying that full valuation is reach.

So you see, analysts am always right! their target price is always quite close to the current price. herd instinct is dangerous, people like to read analysts that agree with the market - the society at large are afraid to be an outlier...

[winston]

To continue my ranting on "a little bit of knowledge" is very dangerous ...

I'm starting to think that it's "the blind leading the blind" here ...

The analysts dont have a good grip on what's going on, the business owners are either too positive or too negative in their outlook, the retail investors dont have adequate info, the big boys have slightly more info that the retail investors but still less than the business owners ...

So how does one make money then ?

I'm moving towards being a Contrarian for any Medium Term trades and being a Momentum Player for any short term trade .....

[kennynah]

frankly, i dont read analysts' reports... they can be biased and malinformed....

[Aspellian]

Analysts reports will be useful for FACTUAL information. The valuation part you can throw it out of the window... nowadays analysts just like to change prices / discounts / premiums etc according to "investors/market" sentiments!! how much more judgemental can you get!!??? I will expect that analysts are more scientific in their approach.

So its up to individual to interpret and counter check against various sources to have a clearer picture. it is a JUDGEMENT call again!!! hahaha!!!

[winston]

TOL:_

Have you all noticed that a counter tend to run up strongly, sometimes for a few days, just before a placement ?

Why was it running up ?

[winston]

TOL:-

I'm starting to think that the market would end up like the AFC..

1) Steep Drop
2) Steep Rise
3) Chinese Water Torture Drop for a two years ( with a 50% retracement )
4) Trend upwards again when the economy improve after 2 years

[millionairemind]

W - The chinese water torture with 50% retracements might come true, but I don't think it will be over a 2 yrs period. More like 4-6 months, IMO

I read some strategists on CNBC calling for DOW 12K by September, I cringe cos' there is just too much optimism.

I was talking to my broker and he was jokingly saying business picked up so much for him in May and that retail investors are coming in thinking that we will see STI at 3000 soon.

When I hear this kind of news, I always worry from a contrarian standpoint.

The fact that too many ppe. want it to happen (DOW at 12K and STI 3000) means it probably will not. Just like when DBS Vickers and others calling for a STI at 1300 back in March.

[winston]

Hi MM,

If the retracement is over 4 to 6 months, then it would not be a Chinese Water torture. It would have to be a crash

Yes, alot of optimism out there. Need to be stay flexible and to also give them the benefit of the doubt. They could be correct and this rally could last for a few more months

Take care,
Winston

[iam802]

even one more month at this current sideway market is a torture