The magic lure of a constantly rising market soon becomes too much to resist. Now people are looking at future earnings, prospective dividend yields, and big contracts to justify buying. Little did they realize that the bubble has become much bigger and a burst can happen anytime.
In a prolong market advance, people become accustomed to the daily market rise. They soon throw cautious to the wind and start to buy in earnest. They think that with stop orders, they can limit their losses and hence only a small amount is at risk. In the meantime they can luxuriate in yielding to the herd instinct.
In real trades, stop orders may not be executed when they matter most. A suspension or sudden drop in price very much below your stop order can often happen at any time. This can inflate your limited loss to a catastrophe loss which may result in your inability to bear. And this can be disastrous.
The market gives and the market takes away. Don’t expect too much from the market if you don’t want to get hurt too deeply. The market does not owe you anything. Bet only what you can afford to lose.
When you are seduced into buying a stock you know is overvalued and hope to sell it a little higher to make a quick buck, this is a good indicator that a severe bear market is about to follow.
In the well-known philosophy called the ‘bigger fool concept’ it involves buying very date in a bull market in anticipation of a bigger fool to pay a higher price for your purchase. As the stock changes hands, the price hastens to the ultimate top. Eventually the person holding it finds that there is no one willing to pay a higher price for it. Thus if you do not find someone willing to pay a higher price for an overvalued stock, you must quickly sell it at a slightly lower price. Had the poor souls who bought Hwa Tai in 1997 at 200 sold it at 180, he would not have to ‘cut his limps’ when it subsequently dropped to below 3.
This blog disclaims all liability for your perusal of the above article. Whatever action you take, intelligent or otherwise, you do so at your own risk absolutely.
3 comments:
READ THE A GOOD ARTICLE I TOEBEAR'S BLOG AND I POSTED IT BELOW AND FOLLOWED WITH MY CAL TO WITHDARW ALL MONIES FROM MAYBAN, CUT THEIR CREDITS AND MOVE OUT FACILITIES TO OTHER BANK (OTHER THAN AMBANK)
"Wednesday, May 9, 2007
Maybank or Bumibank?
Again, Malaysia went 'famous' just because it's largest bank(however you wanna call it) declared that it now require all that law firms must have a 'bumiputra' partner with at least a 50% stake before they could do any business with the bank. Discrimination, arrogant and ungrateful are the words that I have for this bank.
I thought all these while the people have been thought to spend more effort in building self competency and companies to work hard in order to complete globally?...Capability, integrity, efficiency and merit if you ask me are the main criterias to consider when I want to do business with someone and surely not the race. Most of us are Malaysians, born and live here since independance....living peacefully in a multiracial country is something we're proud of...at least today we are.
Then all the sudden came a bank who without thinking implemented such rigid and ridiculous rule in the midst of the Gov's effort to build unity in the Malaysian people... even simple civilians who never had a chance to be educated knows how important it is for someone with a high place in the community to think before he says anything. For words spoken are hard to be taken back... it reveals the intention and the perception of that person.
Having said that, now I'm pretty sure we now know this bank's view on the people of this country.In short, if Maybank thinks that it's so darn big and powerful that is does not need contribution/business from other races in this country apart from 'bumiputra'. I say, go ahead and implement it....
I bet that when all the non-'bumiputras' withdraw their commitment with this bank...It's guaranteed that this arrogant bank will move from being the largest bank to the smallest(only if it's able to survive) in a relatively short time.Now to the 'ingenious' management of this bank who came out with that foolish decision, please use your head and think before you implement anything in future.
There's a saying, "There is pride before downfall". God gives us a head to think and not for fun! For if you don't need them, you won't have them."
THIS IS THE BEST POSTING I EVER READ READ FOR A LONG TIME.
TIME TO TEACH BIG AND ARROGANT MAYBAN A LESSON. FORCE THEM DOWN TO THEIR KNEES FORCE THEM TO BEG FOR FORGIVENESS
LET MAKES AN EXAMPLE OUT OF MAYBAN SO THAT OTHER BANKS (LIKE AMBANK)AND OTHER CORPORATIONS WILL IMMEDIATELY SCRAP ALL THEIR DISCRIMINATIVE POLICIES.
LETS ALL THE RIGHT THINKING AND FAIR MALAYSIAN WHICH FORM THE MAJORITY OF MALAYSIAN MAKE A CONCERTED EFFORTS TO UNITE AND WITHDRAW OUR SUPPORT FOR MAYBAN. LETS US WITHDRAW OUR MONIES FROM THIS ARROGANT BANKS. IF WE HAVE MAYBAN CREDIT CARDS - DO CUT THEM INTO TWO AND SEND THEM BACK TO MAYBAN. IF WE HAVE FACILITIES FROM MAYBAN - SERIOUSLY THINK OF MOVING IT TO OTHER BANKS (BUT NOT AMBANK UNLESS THEY ALSO DROPS THEIR DISCRIMINATIVE POLICY).
LET US SUPPORT ANY BANK WHICH TREAT ALL MALAYSIA EQUALLY.
LET BRING MAYBAN TO ITS KNEE - WE WANT MAYBAN TO PUBLICLY APOLOGISE TO ALL MALAYSIAN FOR HAVING DISCRIMINATIVE POLICIES AND GIVE A PUBLIC COMMITMENT THAT THEY WILL NEVER HAVE ANY DISCRIMINATIVE POLICY ANY MORE.
DO IT NOW - AND LATEST BEFORE THE END OF MAY. WE WANT IT TO SHOW IN MAYBAN'S NEXT QUARTER RESULTS.
LETS US ALSO STOPP SUPPORTING MAYBAN SHARES. SELL ALL YUOUR MAYBAN SHARES IF HAVE THEM. IF NOT, DO NOT BUY ANY MAYBAN SHARES. LET IS DROP LIKE FLIES!!!!!!!
TOGETHER WE UNITE TO RISE AGAINST AND DEFEAT ALL EVILS!!!!
Hi Ben,
Your article is timely. When I read this together with what Malaysia Finance is saying about Shanghai stock market, they both serve as timely reminders of what could happen in the near future. My own take is maybe a scenario involving Shanghai stock market crashing (following an eventual prick of the bubble), causing a ripple effect to the rest of Asia and the world, including Malaysia.
The problem is trying to predict how long Shanghai bubble can last. Bubbles can irrationally last longer than most bears predict, but the longer a bubble last, the worse could be the eventual fall.
In Malaysia's case, my own personal impression (and I don't consider myself an expert as I tend to carefully select and invest in individual securities and not the market) is that whilst our market is more sound fundamentally, we will not be immune to the effects of Shanghai. At the same time, should a crash comes, I believe it could present a great buying opportunity to those with cash. Malaysia market is still reasonably valued, that should it crash say next week, I believe it will be healthy and will recover faster. But these are just my own personal views.
Thanks for the article.
Cheers,
Seng.
PS. Whilst kennethoff is very enthusiastic posting his comments at every blog with unmoderated comments, I have some regret in the way and manner - the places especially - in which he has posted what could potentially be good points. His use of constant capital letters, exclamation marks, choice of words ... all these must dilute his central message, easily causing readers to dismiss him. That would actually be bad because I personally don't agree with what Maybank has done. Notwithstanding that, your topic is not Maybank, and it's sad to see kenneth's choice of conveying his message. My own personal wish is to see kenneth create his own blog, and just put a short comment (under an appropriate topic) to refer to the blog, to avoid similar appearance to spamming, which I personally find offensive. Also, more importantly, it could detract and dilute your own good message too, which I believe many visitors here finds it useful, and would rather read messages in their proper context. I hope you will consider enabling comment moderation, but even if you don't, I will continue to visit your blog. Thanks.
Hi Seng,
Thanks a lot for paying frequent visit to my blog and making good logical comments.
Stock markets, the world over, have become too interrelated for any one to be view in isolation. What happens in China will definitely affect us.
In case you have not heard of the 'China Strategy', a google search of it may be useful.
With regards to your suggestion on comments moderation, I shall do it if the need arises.
All comments relating to personal accusation and irrelevant comments will also be deleted.
I hope my readers get the message.
Cheers! Best wishes, Ben
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