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Monday, 29 August 2011

Knowledge versus Competence

I hear and I forget. I see and I remember. I do and I understand - Confucius

There are three methods to gaining wisdom. The first is reflection, which is the noblest. The second is imitation, which is the easiest. The third is experience, which is the bitterest. – Confucius

Above are 2 quotes from Confucius to act as the backdrop for my post today.

What is the difference between Knowledge versus Competence?

If you take someone relatively new to the stock market and give him/her a pop quiz on stock market terminologies – be it fundamental or technical – I bet he/she will score highly in this quiz! If we repeat the same quiz on old-timers in the stock market, they will not score too highly as their answers probably don’t fit the “standard” answers…

Why? These veterans would have “internalized” or “adapted” the theories and terminologies to reflect their real life experience; while rejecting those that don’t work.

As newbie, we do what we have been taught in school – quote famous people and sayings to “score” points in exams – forgetting this is not how it works in the stock market... (Hey! I just quoted 2 sayings from Confucius. Ouch!)


Knowledge is WHAT we KNOW.

Competence is HOW to DO IT.


It’s quite fashionable these days to see investors/traders giving themselves (including me) titles:

I am a value investor.

I am a dividend investor.

I am a growth investor.

I am a day trader.

I am a swing trader.

Blah, blah, blah.


But what we all really want to be is a MONEY MAKING investor/trader!


And we all know that takes competence (how to make money); not book knowledge (what we know).

No incantations or invoking of gurus’ names (but boy it sure impress people!) would help us in our competence development if we don’t:

1)     Act independently
2)     Experience the reality ourselves
3)     Reflect on the outcome ourselves


Please don’t steal the reflections of gurus as your own. Don’t believe? Just ask those self-declared disciples of Warren Buffet and ask how much they have made so far… You can easily substitute Warren Buffet with any famous guru – be it Peter Lynch, George Soros, Jim Rogers, etc. Ask and run away!

You may also want to take a peek at my previous post:  Are you the Opinion leader or Follower?

Be a first rate you!

Not a 2nd rate or 3rd rate Warren Buffet.

Be yourself! Stand tall, walk straight.              
          
          
         

Friday, 26 August 2011

Let our children learn “that” language so they don’t fall behind


The English language at Elizabethan times was merely a local “dialect” that’s part of the Germanic language family.

For the nobility and the intellectuals in England at that time, French was used instead to set themselves apart from the “common folks”.

It’s with the advent of Shakespeare that the English developed the self-confidence that it’s OK to speak with pride in their mother tongue.  

Of course, another main driving force of this new found confidence and self-believe is it coincides with the reign of Queen Elizabeth the first - when Britain defeated the Spanish Armada in 1588. Spain was the strongest and wealthiest European power at the time.

This set forth the foundation for Britain to rule the waves and the expansion of the British Empire, challenging the other European powers for world domination (Land grab? It’s definitely not spreading democracy and world peace!) And who can forget the spectacular naval victory at the Battle of Trafalgar during the Napoleonic wars?  

New markets emerged for British traders and manufacturers. (Although I wouldn’t call it free trade)

The sun never sets in the British Empire. This empire was so vast that even after the sun did finally set for the British Empire, English is now the most widely used language today – just add all the countries in the British Commonwealth plus USA and you can see how many countries have English as their first or second language. OK, Americans may have a different opinion as they speak “American” – not English. It’s a bonus! So we include additional countries that speak “American” – Taiwan, Philippines, Korea, Japan, and the Caribbean countries.

It’s a combination of three factors: cultural renaissance, economic power and military might that elevates a language to global prominence.

And for those non-British people in the colonies that can speak English, they have more opportunities opened to them and they enjoyed a different social status amongst their “local” peers.


Fast forward a few hundred years to today, and we see a new power emerging from her sleep…

I am amazed at the number of Koreans, Japanese, Europeans, and Americans that are now learning and speaking “that” new language during my travels and work assignments.

Perhaps a financial legacy that we can leave behind to our children has nothing to do with dollars and cents. It’s a gift of language?

Note: I am not advocating giving up English. Oh no! Britain went into decline long ago, but English is still widely used. English will not go away anytime soon. Yes, even if USA one day is no longer the sole superpower of the world.

If you call yourself an investor or trader, surely you would understand diversification or making a hedge. So encouraging our children to be bilingual – in English and “that” 2nd language could be a wise move.

Heads we win; tail we win too!

Wednesday, 24 August 2011

No wonder!

Long weekend in Sofia, Bulgaria during the 15 Aug 2011 Assumption holiday


Girls smile passing by
I walked taller with a strut
Is my fly open?

              
              

Monday, 22 August 2011

Short-sellers – keep them close to us!

In a market correction or crash, one of the favorite boogie-man to blame is the short- seller… Even governments blame them and try to change the rules as we go along. That’s lame.

If short-selling is “bad”, then ban it altogether! Not when it suits the governments or regulators.

Keep your friends near, but keep your enemies closer!

In a trade, there is a buy and there is a sell. Both are same sides of the same coin. Long only decision making can be limiting in the sense it creates a bias in our perception and analysis – the glass is always half-full.

If we pause for a moment and ask ourselves – the stock I am thinking of buying, is it a great candidate for short sellers? Perhaps the glass is more half-empty!?

For e.g., would you want buy at a technical price resistance level that short-sellers are establishing their new positions? Or would you wait till the price breaks through this resistance and buy into the momentum? Short-sellers covering their shorts (wrong bets) are now providing the wind behind our sails. How is that for support?

Or if you are more a bottom fisher, would you feel more secured that you are buying at a price no short-sellers would dare to establish a new short position? In fact, short-sellers taking profits on their short trades are good buying indicators!

I use short-sellers as the canary in the coal mine.

As I am at the bottom of the information hierarchy, if I find my canary is dead (price hit my 10% cut-loss point), I don’t ask questions. I just get out of the mine!

In my view, short-sellers are doing the “job” of the regulators. Just take the recent China stock fraud cases uncovered by the short-sellers in US – muddy waters and co…  

That means if I have stuck with my cut-loss plan, the max loss for me is 10%. Who likes to take a loss? But look at it this way. Would you prefer to have no “price destruction” and out-of-the-blue, the S-chip that you owned is suspended by SGX for accounting irregularities? Then months later the S-chip is de-listed with 100% loss?

If it’s a mental block to “respect” the role short-sellers play, I have one tip:

See them as fellow vested shareholders who are dumping their shares.
(Does it really matter they are selling shares they don’t own?)

To quote one Createwealth8888 saying that I like a lot: our car’s GPS signal turn left, we turn left. But when the same GPS signal we turn right, we question the GPS…

LOL!

Friday, 19 August 2011

I am wrong

Question:

When was the last time you heard yourself saying: “I am wrong?”
                
If you did, then you belong to the minority of people who are open to the idea that we can and do make mistakes. Or we take responsibility for what we say or do – and not play the blame game.

Next question:

How many of you say it this way: “I am wrong. How can I make it right?”

There’s a world of difference between the 2 statements! The latter one shows you mean it – sincerity.

Before I go on, for transparency, I must declare I am still stuck at the “I am wrong” stage. My Zen kung fu has not reached the latter stage. It’s still work-in-progress.

“How I can make it right?” is a statement not to be taken lightly. It means taking personal responsibility – and that could mean:

1)      pay for the damages;

2)      resign from your position;

3)      jail time;

4)      and so on…



OK, now that I have got the “context” out of the way, it’s the practical application for those who are not into philosophical musings…

Two weeks ago, after US debt got downgraded by S&P, the market fell apart. Some acted, some just watched. Can you remember the reasons you have acted or chosen not to act?

Are you still sticking to your original decision or plans?

If you are man (or woman) enough to admit: “I am wrong”; would you owe it to yourself to ask: “How can I make it right?”


As a cheerleader, I would like to cheer us on! Be selfish! Be nice to yourself!


Thursday, 18 August 2011

三善英史 裏町人生



A song dedication to Coconut who introduced this Japanese Enka (演歌) to me!

Many best selling HK and TW songs were cover versions of Japanese hits.

Will introduce my Japanese favorites with you all bit by bit ;)

Wednesday, 17 August 2011

Let me be there - Olivia Newton John



I am very much inspired and moved by Panzer's monday post about happiness:

Panzer's: happiness-is-little-moments-in-time

It brought up memories of the people who were there for me when I was young...

So for all the parents with young and "young-at-heart" children out there, this song is dedication to you all!

And perhaps a gentle reminder on what's really important years from now. It's not the expensive presents or overseas vacations that we remember fondly when we grow up... It's whether there's someone there for us - even if it's a scolding or beating. It shows you cared.

All right, how can we sit and listen to Olivia? Come on everyone! Get up from your chair! Move your feet and sway your hip!

Yes, that's right! You sir! And you madam! Thanks! You're a good sport!

Isn't it fun!?

Hum along now. Get ready! The chorus is coming... 1, 2, 3,

Let me be there in morning...

Allo sir! Yes, you there! Please come down from the desk. Don't get too carried away...

LOL!

Monday, 15 August 2011

Housing mortgage loan as an inflation hedge?

The US Fed has gamely revealed their poker hands for the next 2 years – rates will remain low. No surprise this decision is not unanimous! 3 out of 10 committee members dissented – the biggest split in 20 years. Talk about living in unusual times!

What is your housing mortgage loan rate? What’s the inflation rate in Singapore now?

I will soon have some spare cash by December of this year due to a recent “enbloc” of one shares counter in my portfolio. It’s more than enough to cover my remaining SGD 70,000 HDB loan. Would I pay up my HDB loan in advance and save on the 3.75% loan interests annually?

No way!

At least for the next 2 years anyway… Singapore’s bank rates are influenced by US rates. So savings and loan rates will remain depressed. Add to money printing in US, I don’t think inflation will go down anytime soon. More on the upside unless MAS allows our Sing dollars to strengthen to offset imported inflation; but that is mitigated by the need to maintain our export competitiveness – hence the Sing dollar “weakness” during 2008/09. Your guess is as good as mine (OK, yours is better!)

Was your pay increment more than 4.5% last year? If not, you are being “scrxxed” (pardon my French) – just like the bank savings account interests we are getting.

This unusual situation today regarding the housing loan interests offered by banks and the inflation rate is one rare chance where I can “stick it to the man”. Pay the bank back in money that’s worth less and less. Once in a while, the “smol” (the unintended acronym of my nick fits me well) man wins!

I am doing what the US government is doing – inflate your way out of the debt. So having a housing loan is an inflation hedge? No? Yes? Two can play the game what!?

In this “correction” or “bear” market (you take your pick of semantics!) scenario today, close one eye can easily find blue-chip counters that yield more than 4.5% annually. If I take more iron tablets to fortify my stomach, I can even swallow REITs and small caps that yield more than 9% annually.

Of course this game can only be played until the music stops – when housing loan interests is above inflation rate (and/or I can’t find other profitable investments that yield more than the housing loan or inflation interest rate – whichever comes first).


I have full respect for those who can’t sleep with a loan weighing on their mind; and would advocate paying off their loans as soon as possible. A good night’s sleep is worth its weight in gold! This I concur. I wish you sweet dreams!

Hey! Different strokes for different folks!


New readers may one to read an earlier post for "context":

Have my cake and eat it

Friday, 12 August 2011

Staying Alive - The Bee Gees




To be alive and well is a blessing I am grateful and thankful every morning I wake up. The markets are just one part of my reason for being. Thank goodness for that!

The Bee Gees are my top 3 favorite bands growing up in the late 70s. Never have so many classmates of my time tried to sing in falsetto! We rue the days of our puberty when our voice broke... LOL!

Hmm. I've not worn white pants since my secondary school days at Gan Eng Seng School (Anson road site). Maybe should buy one just to strut down Orchard road next year? But also buy matching white crocodile underwear. Don't want people to laugh: "Yee, orange one!"

Now who says only Bollywood male leads wear white pants?

But then hor,wiping the seats at hawker center with tissue not very mancho leh! Huh? Go to restaurant? Money used up to buy white pants oredi...

Wednesday, 10 August 2011

Middle path and Yin Yang balance

By nature, I have a glass half-full view of life.

Have to. For those of you that have read "My story", if I wallowed in self-pity or engage in mindless complaints, I would not have moved on and forward.

I have discovered that having too extreme view of things is not conducive to my independent thinking. I think the big word is polemic (me showing off a word I learnt recently).

Having said that, if I only see one side of the argument, I may suffer from blind-spot to the opposing view. I want to see with stereo vision (then got 3D effect mah)!

That is why even though I like to use leverage, I keep close company to "qian beis" that prefer to pay down their debts ASAP. Their reasons are all very valid! I use these reasons as "warning" signals or indicators to alert me when I have veered too much with leverage :)

Same for visiting blogs of active full-time traders. Even though I am not an active day trader, I have learnt a lot and have found techniques and strategies that I can apply for my dividend investing and swing trading. They are also my "gold fish" indicators on the "sentiment" of the market.

I am damaged in a sense I have been brought up to respect elders and "seniors". All things being equal, I tend to give more weight to "qian beis" who have eaten more salt than rice over me. But the drawback of "experience" is we tend to stick with our tried and tested ways. To get that breath of fresh air and "why didn't I think of that?" inspiration, I visit blogs of young investors who amaze me with their youthful exuberance. Especially when it comes to new technology and riding the next high tech revolution!

Looking at both sides of the argument is not the same as sitting on the fence - this I have to stress. I have my own opinion and point of anchor; different views are welcomed to test and strengthen my position. Metal is not strong if not beaten. The saw gets sharpened through friction. I am not afraid to admit I am wrong.

Today, I have added to my blog (way down at the bottom) 4 "unofficial" blogs of gurus who have a more "pessimistic" view on the world economy. For the faint hearted, I would not recommend you read them. But for those who are like me see the world as glass half-full, these gurus have very interesting counter-viewpoints. I see opportunities within all this doom and gloom ;) 

What? Roll-over and give up? This on-going credit crisis is small potatoes compared to our "qian beis" who lived through Singapore's independence struggles of 1965, and the pull-out of the British army in 1971.

I stand tall and walk straight.




Monday, 8 August 2011

The Barbarian and the Bard

La Papillion is so kind to give me his drawing of the Barbarian from his Bully the Bear blog. 


“You puny little thing!” growled the Barbarian as he put his giant foot on the chest of the fallen Bard he has just ambushed. “You can’t escape now. This shall make up for all the times you have escaped from my clutches.”

The Barbarian fisted at the Bard who is lying on his back, while wielding the dragon-slaying double axe in his other hand. The Bard desperately clutched at the Barbarian’s foot that is pressing on his chest. Pushing up with all his might to let some air into his lungs…

This feud between the Bard (who hails from the Guodolongdong clan of the eastern land of dragon-riders) and the Barbarian (who is from the Golden Axe clan of the northern mountains where the mammoth ice bears reign) has gone on for decades. Legend has it that the Golden Axe clan blamed the melting of their glacier lands on the fire spewing dragons from the eastern land. And so began the invasion of the eastern land of the dragon-riders and the resulting diaspora of the dragon-riders onto the separate realms of Middle Country.

“I am going to tear out your limbs one by one,” with a devilish grin. “And then I shall pluck out your eyes and tear out your tongue. Ha ha ha!” the Barbarian laughed with wicked delight.

Sensing that he had to do something quick, the Bard whimpered breathlessly, “Eh, you fly is open.”

Caught by surprise, the Barbarian looked down at his crotch while easing off the pressure of his foot on the Bard’s chest. This was what the Bard had hoped for!

With a quick flick of his left hand, the Bard let loose a fire arrow spell up towards the crotch of the Barbarian. Hit!

The Barbarian stumbled back and knelt to the ground with both knees and putting out the fire by cupping his loins. Now, a level 28 Bard’s fire arrow spell can’t injure a level 69 Barbarian with his bark skin amour defence; but it can afflict pain, and boy it does hurt!

With a back summersault, the Bard got up into his feet and in one swift continuous movement; he threw a poison dart straight into the screaming mouth of the Barbarian. Hit again!

Now you can’t have armour class defence at the back of your throat. The Barbarian gasped and choked in silence as he can yell no more… His eyes bulges in horror as he looks on with abject fear of what’s to come!

Rushing towards the Barbarian, the Bard leaps into the air, drawing his dagger in his right hand and raising it high above his head, the Bard hangs in the air arching his body back like a crescent.

Like a released spring, the Bard jams the dagger down into the left eye of the Barbarian. There, the deed is done. In a quick combo of 3 moves, a level 28 Bard has done the near impossible – dispatching a level 69 Barbarian!


This “fantasy” story is inspired from the events of last Friday.

Where you the Barbarian or the Bard?


For the analogy of this story, you may want to look at my comments AFTER you have made your choice.

Friday, 5 August 2011

Los Machucambos - Pepito



This is a song dedication to Coconut who likes to listen to oldies while trading :)


Below is the tongue-in-cheek mandarin version by Zhang Di for some humour on this red red day.


Wednesday, 3 August 2011

We have the land, they have the book

I remember hearing this quote from the BBC when they were doing a story about an African anti-colonial freedom fighter leader many years ago. The freedom fighter said:

“When the white men first came - they had the book, we had the land. Now we have the book, the white men have the land.”

No, I am not going to write about colonization or fighting for independence. I missed that boat in the 50s. Born at the wrong time.

But still it stuck in my head…


Let’s apply it to our financial decisions.

We have the cash, and after meeting someone (distant relatives and well-intentioned casual friends are the most dangerous!), did you notice if we are not careful, we often depart with our cash and come away with something the Red American Indians have also discovered after signing peace treaties with the white men:

Words written on water.

You may want to take a moment to pause and reflect.


There are many well-intentioned sermons to part with our cash –especially those that are stroking the inflation fears – that holding cash now is “foolish”.

Before we rush to buy “trinkets” from the snake oil salesmen, you make want to take your own counsel first.


P.S. I have hedged against inflation. The point is not to do nothing; but only act through your own volition. And there lies the key to true financial freedom – taking personal responsibility.

Monday, 1 August 2011

Are you the Opinion leader or Follower?


Where do see yourself in this picture?


Like lemmings to the cliff, there is one species of caterpillar in Athens where they will do mass migration to god knows where every summer. To new sources of food, I guess. It can be a frigthening sight - caterpillars everywhere! (You can stop laughing at me now)

Most will stumble onto the pavements and get stuck in the water drainage holes by the side of the road, or they will be crushed by the cars if the lead caterpillar decides to march across the road.

Like the human wave military tactic used by China in the 50s, it's an awesome sight (I can speak American OK?) to see the caterpillars march on despite the carnage up ahead. Perhaps they can't see beyond the ass of the caterpillar in front?

I was going to write a satire post on the "herding" behaviour of humans - be it in politics, our investment decisions, or our lifestyle choices (fashion, for eg).

Then it struck me! (I realise I like to use "then" a lot. A very Singaporean trait - then, hor!)

If a picture is worth more than a thousand words, whatever I write will be superfluous. Silly me!

I shall stop and leave you alone with the picture above, and this question:

Where do you see yourself in the picture? (Ouch!)
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