Recessions & Crashes: Memories & Lessons

[helios]

no more $$$ $$$ ...

ha ha ...

[kennynah]

Ken ge,
I decided not to subscribe the magz this year.
Pointless. Maybe i've outgrown it ... ...

san mei mei.... it's a natural progression, i guess....

[winston]

TOL:-

Over the past few cycles, what caught have you by surprise, both on the upside and downside ?

For me, it's an event where:
1) I cant estimate a number for it
2) I cant estimate a probability for it

Examples:-
1) 1987 Black Monday Crash: Dow dropped 25%
2) Japanese Crash
3) Tech Bust
4) Biotech crash
5) Gold Crash in the 1990s
6) Asian Financial Crisis
7) 9-11
8) Financial Tsunami
9) Flash Crash

Nowadays, I always try to put a number around an event as well as estimate it's probability. If I cant put a number around it or if I cant estimate it's probability, then I think the event has further to go.

If I can put a number around it or estimate it's probability then that event may not be as big as those parrots on CNBC are saying.


Example: Greek Crisis

How can a country of 11m bring down the financial system ? Ok, you can add in their cousins in Ireland, Portugal, Italy and Spain and I still think that it wont bring down the whole financial system.

And if most of my investment is in China anyway, I know I have plenty of time before it hits me. If I'm trading Euro then it's a different story.


Also, for any crisis, it always starts with a sharp decline. That's the time to time your exit. And the time to get out is on the technical rebound. It always happen with a "M".

Similarly, for any rebound, I have to look at the "W". This is more difficult for me because by training, I always look at what can go wrong. Never have I being trained to look at what can go right. So hopefully, I can balance myself to also look at the the half-full part of the glass, once in a while. But it's always hard to teach new tricks to old dogs ..

What are your thoughts & comments ?

[winston]

Calling the Shots: How to Be the CEO of Your Own Life

During the 1990s, my financial life was like a Caribbean cruise ship during hurricane season: I was in a cabin at the center of the ship, unaware of the storms approaching from the horizon.

By 2001, I’d wandered onto the deck in the midst of Hurricane Debt and Failure; I found myself in financial and personal trouble. It took a few years, but eventually I discovered that I had more control over that cruise ship than I thought.


http://www.thetradingreport.com/2011/02 ... -own-life/

[Aspellian]

TOL:-

Over the past few cycles, what caught have you by surprise, both on the upside and downside ?

Similarly, for any rebound, I have to look at the "W". This is more difficult for me because by training, I always look at what can go wrong. Never have I being trained to look at what can go right. So hopefully, I can balance myself to also look at the the half-full part of the glass, once in a while. But it's always hard to teach new tricks to old dogs ..

What are your thoughts & comments ?

TOL: -

I only started investing in 2005 - ride the boom (feel like king) and the bust and cashed out at the bottom..

From that I learnt:

- when share price go up, it may not be because you are good, it could be just rising tide raise all boats.

- stocks with great stories will climb the farthest (sexy stories sell better - reminds me of gossip magazines in HK

- the more ridiculous the story, the better!!!! [bearing in mind the points below])

- buy stocks with something NEW: New Management, New Customers, New Markets, New Products etc

- my margin of safety comes from growth stocks - both in revenue, GP margin and EPS - the faster the % growth the better

- to incorporate additional margin of safety - buy stocks with net cash, manageable debts (definitely no convertible bonds)

- buy only companies that distribute dividends (show me the $$ - this i learnt from cif5k)

- never fight the market direction thinking you know better than 99.99% of the market (knowing myself now, i dun have the stomach to sit through a 70% loss in share price)

- get your hands dirty and kick the tyres (do your FA and TA well)

- follow the force that is guiding you

- cut loss: a 50% loss requires 100% gain to breakeven but with capital relatively intact (eg. 10% loss), you can earn 100% much more easier. But ego and love is often a big challenge

- be patient and put your hands under your buttocks and not be finger-trigger happy (hardest thing to do) - or else be struck with a water-bottle up your XXSHOLE!

Something that MM and Learn2win say struck me are:
- the market will always be there; why rush to buy
- when the risk-reward ratio is favourable and IBD says Uptrend (esp after severe correction); LOAD up the truck!

Something Winston always says which rings in my head often:
- do i know why I am buying or selling????

Kenny Da-Ge says:
- have a plan ready before you buy - especially your exit strategy

802:
- no set-up; no trade

[winston]

Profit Like It's 1933! By Jason Holland

On May 27, 1933 - in the heart of the Great Depression - a crowd of more than 30,000 people stood in line to get into the "Century of Progress" World's Fair, held in Chicago, IL.

Over the next 24 months, 39,052,236 people would attend the fair. To put that in perspective, the entire US population at the time was 125,578,763. So 32% of them found a way to get there.

The cost of admission alone brought in $19,526,118... in 1933 dollars. That would be the equivalent of $325,247,383 today.

And when you consider the money spent on food, parking, gas, knickknacks, and lodgings, it is estimated that the "Century of Progress" brought in well over a billion dollars.

And remember... this was during the Great Depression, with unemployment at a whopping 24%.

Two of the people making serious money from the "Century of Progress" were Rufus Dawes and Charles Dawes. The brothers were Chicago bankers who benefited wildly from the fair being held in their city. Rufus was the president of the fair corporation. Charles was head of the bank that handled most of the funding. (He had also been Vice President of the US from 1925 to 1929.)

Many other individuals and companies rose to the top during those troubled times.

For example, in 1929, Kellogg's was a relatively small company. Their market share trailed far behind that of their main competitor, Postum Cereals (later known as General Mills).

However, by the end of 1939 Kellogg's had decidedly taken the lead - a position it holds to this day. While thousands of other companies were failing, Kellogg's couldn't produce its cereals fast enough. Its revenues shot into the hundreds-of-millions, and its profit margins were in the double-digit percentages.

Then there was Charles Darrow. After the Crash of 1929, Charles lost his job and much of his money. Not having anything else to do, he decided to refine a little-known parlor game. By 1937, his version of the game - Monopoly - had sold more than 6 million units at an average price of $10. That would be about $150 in today's dollars. Incredible.

I'm confident Mr. Darrow never worried about money again.

And what about Michael J. Cullen? Michael started his career working as a warehouse boy with The Great Atlantic and Pacific Tea Company. But in 1930, he came up with the idea of a "supermarket." He began buying or renting deserted warehouses and manufacturing plants and stocking them with huge quantities of cheap food, clothing, and household supplies.

Within a few years, he was a multi-millionaire many, many times over.

Here's the point...

If you know where to look... and you know what to look for... there's a lot of money to be made during a financial crisis.

And right now, we are in a serious financial crisis... and it's only going to get worse.

The question is this...

Are you going to be like the 24% of the population that lost it all during the Great Depression... or are you going to profit from the enormous opportunities that are sure to arise?


Source: ETR

[winston]

TOL:-

Not too long ago, everyone was talking about how smart the Wenzhou businessmen were. Even my mum was telling me about them

They were supposedly buying up all the nice shops in London and Paris.

They were supposedly buying up all the best real estate in China.

And what has happened to them now ?

Anyway, didnt you hear these stories before ?

Around 2005, everyone was talking about how smart the Malaysians, Singaporeans, Thai and Indonesians were.

The yatchs and private jets makers were always in town to sell their toys.

So what happened to all those private jets and yatchs during the AFC ?

[winston]

How to Increase Wealth in an Economic Downturn
Author: Wealth Building Daily

It’s easy to feel pessimistic during an economic bad patch, but it doesn’t mean there aren’t opportunities to improve things.

Wise Bread gives us some pointers.

The current economic environment has led many investors to become pessimistic about the United States’ economy.

Consumer confidence is low and unemployment is running high. But as Warren Buffett has often noted, economic recessions are when investors can find some of the absolute best opportunities.

Let’s take a look at a few ways to build wealth during the current downturn.

1. Invest in areas where no one else is
2. Build another income stream
3. Buy residential real estate

http://www.yolohub.com/business/how-to- ... c-downturn

[winston]

THE NEXT RECESSION WILL BE TRIGGERED BY OIL

At this point, watch the price of oil if you want to know when the next recession is going to begin.

As I’ve pointed out many times in the past, recessions (well, at least since World War II) have all been preceded by a sharp spike in the price of energy.

Any move of 100% or more in a year or less, has historically been the straw that breaks the camel's back. Modern economies cannot survive that kind of shock. It invariably triggers the collapse of consumer discretionary spending and economic activity comes to a grinding halt.

In 2007 oil surged out of the 3 year cycle low into a parabolic advance as Bernanke trashed the dollar in the vain attempt to halt the sub-prime collapse.

That 200% spike in oil is what tipped the economy over into recession, which was then magnified in the fall of `08 as the financial bubble and debt markets imploded.

http://goldscents.blogspot.com/2012/09/ ... ed-by.html

[winston]

How to Profit From the New Recession

Brace yourselves ... another recession is coming

By Lawrence Meyers

Source: InvestorPlace

http://investorplace.com/investorpoliti ... 78ZukDhu1c