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Hi, Csltay8033,
I am no Feng Shui follower. It so happens that the CLSA Feng Shui’s forecasts for July and August are rather similar to my own analysis of the market based on a combination of the following factors:
1. Technical Factor: The prices of many stocks have been sliding from a high around January to its low point in June – over 5 months. Based on observations of similar previous bull market cycles, the probability of stock prices making a turnaround after 5 to 6 months of slide is extremely high, especially the longer the slide.
2. Fundamental Factor: Many fundamentally sound stocks are now selling at much lower prices and at PE of under 5x, while their earnings have improved significantly – thus valuation becoming much more attractive. Such a scenario normally happened only at the low end of a bull market. At this time, the downside risks to holding stocks, especially those with good earnings and that have been sold down, are increasingly less while the upside potential capital gains are increasingly more. Those not averse to taking calculated risks could find this a great opportunity to buy, if they believe we are not in a bear market.
3. Psychological Factor: Stock prices always reach their lowest level when the fear factors reach their highest point – thus making sense to be a contrarian. As for the European Debt Crisis, I believe a compromise solution would eventually evolve among the European nations and likewise, the American politicians would also have to compromise and do something constructive to save their economy as next year is their election year and they would not want to be unpopular and get booted out of office. However, the fact remains that US has absolutely no way of paying back their national debt and a huge financial crisis is looming ahead for the Americans and the whole world. The Americans are doing everything to stall this crisis for as long as possible. I believe much of the current bad news have already been factored into our stock prices.
4. Liquidity & Ultra-low Interest Rates: Traditionally, these are 2 very good ingredients for fuelling a bull and not a bear market. Unless they disappear, it would probably require another major crisis, more severe than the 2008/9 one, to end the current bull market anytime soon.
I take calculated risks and I am almost fully invested at this point of time. Please do not follow my example or believe everything I said. You need to do your own homework and check everything out. What matters most for everyone, ultimately, is to achieve a healthy bottom line at the end of the day, regardless of the investment strategy adopted.
May you have a profitable season.
Thank you obverser2 for sharing yr views, which are sensible and insightful. I would only add that, as far as I am concerned, the stock market is a much more complex ecosystem than most of us can imagine. That means, we will always be surprised at how things turn.
Look at Qingmei – I bought in at 26, it went up to 35, angmo fund accumulating at as high as 32. Now? 19 cents. How on earth could we have predicted the volatility?
I was clearing my inbox just now – went back to 2006 mail from remisier with analyst reports. As I deleted lots of reports, one thing struck me: Some of the stocks were highly touted – such as Jiutian Chemical, Sino Environment, China Milk, etc. Now these are dead.
Even Best World – wah, high CAGR in past few years, riding on affluence of ASEAN consumers, blah blah. Stock was 63 cents then, now 18 cents.
Who knows where stocks will go in the next 3-6 months? If you think you do, good luck. But I am sure the market will have surprises for you. At the end of the day, diversify yr portfolio, don’t overweight only a few stocks, and take profit when the bull is cheong-ing. Buy now when stocks are depressed.
Hi, Joes,
The stock market is irrational and can also be treacherous sometimes. It does not always react in the same way to a same set of circumstances. What you have been going through is rather common and not surprising. However, all of us respond differently to such a situation depending on one’s investment objectives. Many would be tempted into becoming a Trader. Unfortunately, the sad truth is that the majority of traders don’t really do well as not everyone has the knowledge, skills and temperament to be a successful trader.
I also bought Qingmei (from 19 to 28 cts) and saw my large paper profits evaporated and turned into a loss. For me, this is not the first time such an incident happens. I am not a trader and have learned to accept that volatility is part and parcel of the market behaviour. I am very comfortable with my position so long as the fundamentals of the company do not deteriorate, and I would add on to my position if the stock gets any cheaper. Having gone through the ups and downs of many market cycles, the market really does not offer any more surprises to me as it is to you.
Wishing you a profitable time over the next few months.
Think S Chip facing 2 types of risks..
Systematic Risk (also call market risk) where every stock are facing, due to Japan post Tsunami economy slow down, US post GE2 slowdown, Euro Greek debt issue.
Unsystematic risk such as frauds in Chinese companies.
I believe it will take longer than we expect for S chip to really pick up themselve.. especially those smaller companies
Dow +109 points. This is the kind of volatility that drives investors nuts.
Signs that a widespread European debt crisis could be averted helped send stocks up sharply Monday.
French banks agreed to accept slower repayment of Greece's debt. That would give Greece more time to meet its other immediate financial obligations. French bondholders hold about $21.3 billion in Greek government debt. Greek lawmakers are also debating austerity measures that must pass before the country can receive another financial rescue package to help avoid default.
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