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Friday, 30 November 2012

Zealot, Atheist, and Agnostic

Have you wondered which one is you when it comes to your investment/trading beliefs?


Zealot and Atheist

A Zealot and an Atheist are on opposite side of the spectrum. But they are very much similar than you think - both their cups are full; and they both think they are right and the other person has some serious issues. They are great talkers.

Common arguments or debates between academic and cantankerous (I learnt this word from reading Garfield) market participants are:

1. Fundamental versus Technical analysis

2. Investing versus Trading for success

3. Passive indexing versus Active stock picking

4. Buy-and-hold versus Market timing

5. Dollar-cost-average investing versus Lump-sum market timing

6. Price action versus Technical indicators

7. Dividend yields versus Capital gains   

8. Astrology versus Dart throwing by monkeys (voodoo or what?)



I personally think it's a case of who shouts the loudest wins! 

Both sides can throw the "book" at each other. There's never short of new studies by academia to back them up. Never under-estimate the human ingenuity to selectively data-mine information to back-up a preconceived thesis!


Or they can fight a proxy war by chanting and invoking their respective iconic gurus. My guru more powderful than yours!
 

Agnostic

An agnostic investor/trader is someone who basically says "Gee, I don't really know. Do tell me more."

He is a listener.

And is humble to admit when he is wrong and switch positions.

He is not interested to be right. He just wants to makes money. Period.

Do not confuse an agnostic with the person who loves sitting on the fence. The person who sits on the fence just sits there. He does nothing.

An agnostic is willing to put money where his opinion is. Strong conviction but no vested positions equals a NATO.       

And he does not consider it's blasphemous to to mix a bit of fundamental with technical analysis. To trade around a long term core investment position. To have both long and short positions at the same time, etc.



Different seasons; different investing/trading styles. 

 

Tuesday, 27 November 2012

Memory good for longer term positions; bad for short term trades



After 12 odd years stumbling, falling, and muddling through in the markets, I would like to share this reflection of mine.

But don’t get me wrong. I am constantly struggling in the implementation. It’s like we know too much fried food is bad for us; but it’s hard not to nibble or be in denial by saying eating once in a while can’t hurt…




Memory good for longer term positions

By going through market tops and bottoms - I’ve learnt how markets can overshoot and stay frothy longer than that pint of beer that you have been nursing all night; or how markets can plunge and shake out the stoutest of long and hold believers, piercing their betraying hearts twice (entry and exit wounds) by rebounding with such vigour and speed to leave these once zealots shell-shocked…

And one great example is when I was in Shanghai during 2007. The Shanghai Composite Index has just broken 5,000 (a new record) and the media was reporting the frenzy and new record of Chinese citizens opening new brokerage accounts for the first time in their lives.

One company driver was confidently telling me that with the coming opening Beijing Olympics next year, the market will not crash. It's “face” thing he says. And he was “right”!

The Shanghai Composite Index rose to 6,000 (a newer new record!) with the flood of new dumb retail funds pouring in (record new opening of brokerage accounts remember?) in the next months.

I started accumulating cash big time. It was a long frustrating 2 years wait before I started employing my cash hoard (OK I exaggerate; it’s more like a biscuit tin) around Sept 2009 – see “My Story”.

I remember I’ve read somewhere about a famous investor who started selling after he got a stock tip from a shoe-shine boy. Reading and knowing is one thing (knowledge). Putting it into action is something else (competency)!    

Guess what? 6 months before the start of the Beijing Olympics in August 2008, the Shanghai Composite Index started to tank… A leading indicator before what the rest of the world felt during the Lehman 2008 event 6 months later?

When I was in Shanghai 2 weeks ago, there was chatter in the media that the China authorities will not let the market dip below 2,000 during the leadership transition. “Face” again? 

I just noticed the Shanghai Composite Index just dipped below 2,000 inter-day today? Now, is this a bullish or bearish sign? (Tip: It’s not what you may think. And I have no clue either; just a hunch.)

Notice I substituted the word “investment” with “longer term positions”?

The drawback to my longer term position trading style is I am unlikely to get 10 baggers… 

But you don’t buy stuffs with percentages. If I got $10,000, I need a 10 bagger to make $100,000. But if I got $100,000, all I need is a 2 bagger to get the same $100,000. If I got a million, I just need a 10% win to make $100,000.

Size matters! You think why all money managers seek to grow their asset under management?

We play according to the cards we are dealt. Be it brain power, personality traits, or chip count.


Memory bad for short term trades

I got into the CBOT mini-silver futures for Dec 2012 recently at an average price of $32 while I was in Shanghai. After seeing the price went up to $32.90 plus, it started to dip down towards $32.00 two Fridays back. I sold at $32.50 for a quick profit that covers all my travel expenses for my Shanghai trip.

I was right for 8 hours. During the night US session, silver dropped down to below $32.10. I’ve stuck with one of my trading rules (I stolen it with pride) – never let a profitable trade turn into a loss. 

But if you look at silver prices today - more than $34.00! 

Was I wrong? Maybe.

During my early trading years, having a residual short term trading memory hurt me badly.

I’ll remember this silver trade into my next trade and refuse to have a trailing profit stop. Yup, next trade I will turn a profitable trade into a loss!

Or remember the first time you use stop-loss? I’ll get stopped-out a couple of times, and most of the trades will move in the right direction a few days later without me on-board!? I still remember saying stop-loss is rubbish! 

Then the next trade I didn’t use stop-loss I got clobbered big time!!! And you look up into the sky and say why? 

I learned painfully the no.1 reason for using stop-loss – it’s so you don’t get mortal wounds.

Yes, trading rules and plans are the result of past memories and experiences; but they are not trades. There’s a difference. 

Each trade should be zero-based - the market doesn’t care at what prices you have bought or sold previously. Nor should you.

Stick to your trading rules or plans. And if you are wondering – that’s the difference between speculation and gambling.

Reviewing my silver trade, I did not beat myself up too much. I did right for sticking to the rules.

What I did “wrong” was enjoying my chunkier SIMSCI short winning boonanza too much that I fell asleep on the wheel and missed the silver reversal trade last week. Ouch!

Now that's another story all together. 

Sunday, 25 November 2012

Roots - 寻根


What a strange coincidence!

Just the other day I was blogging and wondering what made my ancestors move out of their comfort (or uncomfortable and unbearable) zone to leave their homeland to seek a new life in the Southern Seas?

And today, I got a pleasant surprise in the Chinese daily that the tomb of my great great grandfather was discovered after one year's search. He the one that came from China that I was talking about - the 18 year old clerk that got his start in the Chandlery trade.


It's also telling that the news is on the front page of the Chinese daily, but not a word was found in the Sunday Times.

I've been buying and reading the Chinese daily ever since my return. Only on Sundays do I buy the Sunday Times in addition. I've discovered during my time in Shanghai that how the Chinese speaking world view the world is quite different from the English speaking world.

It started from a speculation angle for my investment and trading, but it has since evolved into my cultural and philosophical renaissance of sort.

Don't worry. I am not a Chinese chauvinist.

My mind thinks in English; my heart sings in Mandarin.

I am not as emotional as Nehru, but I think I can understand how he must have felt when he discovered he is more English than Indian.

Similarly, there's a gentle weeping in my heart that I can express better in Mandarin and English over my Teochew mother tongue. 

With gratitude to my maternal grandma who was from China (whom I consider a foreign talent; although she has never worked a day in her life), I was able to pick-up some of her Mainland China's Teochew - conversationally at least.


I discovered my heritage when I was in secondary school. When mom showed me a Chinese article on my great great grandfather - the King of Gambier.

Ever since, I have on and off embarked on a journey of tracing my roots. But I've never document it down.

Perhaps its a sign that I should add another interest tab called "Roots" to my already very "rojak" blog. You never know! One day some precocious child may ask in my twilight years:

"Granduncle Jared, where did we come from?"

"Child, we are descended from dragons. One day, one intrepid young dragon braved the vast ocean and landed on a little red dot..." 
             

Before your imagination ran wild, I would like to share these truths:


1)   My lineage traces from secondary wife (not concubine). So my pedigree is not powderful or pure enough.

2)   And from a financial comparison perspective, my family's standing is the equivalent of weaving straw sandals. Our branch pretty much lost all of the inherited wealth during our grandparents' days. I was born into a Queenstown HDB 3 room flat; but we could afford Bata shoes. So it wasn't so bad.

It's definitely not an "official" tracing of my roots; more a personal journey in retracing the steps of my heritage. A recording of my reflections and emotions along the way.

And I would like to do both side of the story - tracing the roots on my paternal and maternal side. 



       

Friday, 23 November 2012

Shanghai Nov 2012 - Old Town and Bureaucrats

I've always loved cities. Especially the old ones.

Not so much a nature trekker I guess

It's a bit of a paradox, but I do enjoy the slight tinge of solitude walking amongst the teaming mass of strangers. Of disappearing and losing myself in a crowd. I become invisible.


Old cities provide me 2 of my favourite interests:

People watching - Why is he wearing a frown? They looked like they have fought? Ah! Love birds! She looks so happy. Is he going for an interview? Bad hair day? She is talking; he is not listening.

Buildings - I like functional sculptures that reflect a society's culture (or lack of), their shared memories, and the inspirations of where they want to be in the future.


If you would like to visit the authentic old town of Shanghai, and you are not on a package tour, you may want to stopping at this LaoXiMen (老西门站) metro station instead of the Yuyuan Garden (豫园) metro station.

All package tours will bring you to Yuyuan Garden. It's the near equivalent to our Chinatown - just as sanitized, just as touristized. Don't get me wrong! Do pay to visit the Yuyuan gardern. It's a good representation of Jiangnang style architecture and garden landscaping. 

Remember, go INSIDE the garden

Many tour guides just bring their flock to the shopping and eating places OUTSIDE the garden (where they got cover commissions) and skip the main attraction. 

Or I could be wrong. Most tourists prefer shopping and eating. Who wants to learn about Chinese architectural styles and garden landscaping anyway?


By alighting at LaoXiMen, and I am assuming you have a map, you will have the opportunity to walk through the real and authentic old town of Shanghai. It will probably take you around 40 minutes or an hour - depending on how adventurous you are weaving in and out of the maze like alleyways. 

Don't worry about about getting lost. Just smile and ask the residents where is Yuyuan garden 
 















If you are lucky, you may find middle-aged aunties carrying spittoon in the streets towards the public toilets.

When I first came to Shanghai, I thought it's quite quaint that Shanghai have public baths. I thought the Shanghainese are like the Japs

Then I realise the really old Shanghai houses in this part of town have no baths and WC facilities in their homes. 

And spittoons are used not just for spit. Just look at the picture above. Remember, it's year 2012 now.


    

And the wash basin is outside the house. 

Is the door used for preventing people from outside getting in; or is it to prevent people from inside getting out?


   

Why do we have windows? To let in sun and air?

Quick! Take a look at your own windows. 

Are they closed and the curtains drawn? 

Makes you wonder... No?



    
Better be quick if you want to visit the real old part of Shanghai. It's getting enbloc soon.

Bureaucrats are the same everywhere. These buildings and the people living there are an "embarrassment" if your KPI is to develop Shanghai into a 21st century cosmopolitan city to rival Hong Kong, London, and New York!

Slash and burn.


It's a pity we have destroyed the character and soul of our own Chinatown...

Lucky Little India is still alive and kicking! Budget hostels, pubs, eateries, expansion of Mustafa do not distract from the charm of Little India. In fact I find them complementary.

Especially if they are bottom-up grassroot endeavours by entrepreneurs. The local community should be the best judge which developments should fail, which should thrive. 

Be very afraid of heavy top-down broad strokes from bureaucrats who find the sanitized and touristized Chinatown a success - just because we can get X numbers of tourists visiting it per year.

It about numbers again.

But there is hope. The Ministry of Education has stop publishing the top student rankings for PSLE. That's one baby step in the right direction.


 
  
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