2010 should be an excellent year for planters

Asia to stay hungry for palm oil By Ooi Tee Ching bt@nstp.com.my 2010/09/10 ASIA’S robust economic growth and hunger for vegetable oils will continue to drive demand for palm oil and keep prices buoyant at around RM2,600 per tonne. In an interview with Business Times, Malaysian Palm Oil Council chief executive officer Tan Sri Yusof Basiron said Asia is expected to consume more palm oil, particularly countries with a high population such as China and India. South Korea for example has started to buy more from Malaysia in a big way, thanks to a free trade agreement (FTA) that led to tax-free palm oil shipments. Following are excerpts from the interview: QUESTION: Last year, crude palm oil prices averaged at RM2,250 per tonne. In the first eight months of this year, it averaged higher at around RM2,500 per tonne. Where do you see palm oil prices heading for the rest of the year? Why? ANSWER: This year, global vegetable oils supply had been rather tight. Malaysia’s palm oil production until July 2010 has only seen a slight 0.7 per cent increment, due to the El Nino effect at the end of last year. Latest data from Indonesia show palm oil output may fall 10-15 per cent from last year's volume. While the US foresees huge soyabean crop coming into the market from mid October, rape seed oil supply is badly affected by dry spell in Europe, Canada and China. According to Oil World, this year’s rape seed output is likely to fall 5 per cent to 56.9 million tonnes. With less vegetable oils supply in the global market, stock-usage ratio (SUR) will go down. The lower the SUR, the more bullish the prospects for vegetable oil prices. We must remember that petroleum prices also has an influence on palm oil pricing. Continued robust economic growth in India and China, and higher usage of vegetable oils in Europe and South America’s energy markets will keep palm oil prices buoyant. Assuming petroleum hovers at US$80 per barrel (RM248), we see palm oil trading in the RM2,500 to RM2,700 range. Q: Malaysia started exporting palm oil to China in 1985. Since then, shipments have continued to grow. Is the trend likely to continue this year, from palm oil exports to China of 4 million tonnes in 2009? A: As the largest vegetable oil consumer in the world, China’s palm oil usage makes up 15 per cent of global consumption. Palm oil is the second most consumed there, after soyaoil. This year, China has started to import more soyabeans instead of soyaoil. This is because the Chinese government wants more crushing activities domestically and more soyameal to feed its pig, cattle, dairy and poultry farms. According to Oil World, China’s January-July 2010 oilseed imports went up 12 per cent to 32.15 million tonnes. On the contrary, imports of oils and fats fell 9 per cent to 5.38 million tonnes. Although we see this situation prevailing, we’re not too worried. China has a big appetite for palm oil. According to Oil World, palm oil shipment from Malaysia, in the first seven months of this year, surged 17.2 per cent to 2.34 million tonnes. This was due partly to Indonesia raising tax on palm oil to as high as 4.5 per cent. In August, it was lowered to 3 per cent but raised to 6 per cent, this month. As a result of Indonesia’s tax regime, Malaysia’s palm oil shipment to China expanded. Judging from this trend, we’re hopeful of achieving 5 per cent growth to 4.2 million tonnes this year. Q: Malaysia’s FTA with Pakistan, which came into effect January 2008, has expanded palm oil shipments. Will Pakistan’s demand from Malaysia exceed 2 million tonnes this year? A: Last year, we achieved a record high of 1.76 million tonnes in palm oil exports to Pakistan. Apart from the FTA, Malaysia’s investments in Port Qasim’s bulking and refinery facilities have helped secure steady demand. The recent unfortunate flooding catastrophe in Pakistan have, somehow, compounded the need to balance its oils and fats requirement. In the first seven months of this year, Malaysia exported 1.2 million tonnes of palm oil to Pakistan, up 11 per cent from 1.08 million tonnes a year ago. I believe we can achieve the 2 million-tonne export target, this year. Q: After a 10-year decline, India bought more palm oil from Malaysia last year, surpassing the 1.35 million tonne level. From January-July of this year, however, the pace slowed dow. Do you expect to see palm oil exports to India exceed the 1 million-tonne level? A: India is now the world’s largest vegetable oils importer. There’s tremendous potential for higher imports considering its relatively low per capita consumption of just 14 kg. Palm oil already make up 75-80 per cent of its import basket. Last year, India’s 1 million tonne-import from Malaysia was exceptional. Poor domestic crush margins, rapid consumption growth and a stronger Indian rupee against US dollars fueled the surge in imports. To date, India has bought around 700,000 tonnes of Malaysian palm oil. I’m optimistic that exports will, once again, exceed the 1 million-tonne level. Q: South Korea is buying more palm oil from Malaysia. Any changes in vegetable oil tax regime brought on by bilateral trade agreements? A: South Korea’s oils and fats consumption grew at 2.6 per cent in the past 10 years. Going forward, it will have to rely on imports as it is not able to grow enough oil crops for its own use. Apart from conventional usage in the food and oleochemical industries, South Korea’s biodiesel sector has started to use palm oil as feedstock since 2007. With higher blending ratio of 2.0 per cent this year from 1.5 per cent in 2009, South Korea needs to import 100,000 tonnes more. In 2007, South Korea signed a FTA with the Association of Southeast Asian Nations, resulting in tax-free palm oil shipments from 2009.

Plenitude Bonus Issue 1 for 1

As at 30.06.2010, the key statistics of Plenitude were as follows:

No. of shares issued: 135m of RM1 each

Net tangible assets: Rm 5.37 per share

Earnings per share: 62.36 sen

Current Assets: 517, 783,000 (Cash & Bank balances: 326,292,000)

Current Liabilities: 149,448,000 (Bank overdraft: 1,239,000)

The company declared a tax free dividend of 15 sen per share and a bonus issue of 1 for 1 yesterday. At the time of writing this post, the share has shot up 38 sen to $4.26. At this price the price earnings ratio is 6.831. This is undemanding and I am of the view that there is more upside for the stock. The company has developments in Penang, KL, Puchong, Johor & Sg. Petani.

Will this September be different?

HOME > STOCKS
The Most Punishing of All Market Months (October? Think Again)
Will September Live Up or Down to Its Past?

By Robert Jay Mon, 23 Aug 2010 15:15:00 ET	Email | Print | RSS | My Updates	BOOKMARK AND SHARE IT!

Most investors know that famous stock market crashes have struck in October: 1929 and 1987 immediately come to mind.

Some may recall the "mini-crash" on Friday the 13th in October 1989. More recently, the Dow Industrials lost 18% the week of October 6, 2008.

All of that said, October is not even the second-worst month for stocks (it ties for fourth-worst with June).

More than 100 years of data show that the worst month for stocks is September.

Mark Hulbert of MarketWatch recently noted that since 1896, the average gain in the Dow Industrials in September is -1.2%, which underperforms all other months by far. The Stock Trader's Almanac also reports that September is the month when the leading U.S. stock indexes perform most poorly.

Of course, historical averages are no guarantee that this September will be the worst month of 2010. But realize this:

"The stock market continues to work lower, with declining legs unfolding...Momentum is set up to fall again with stocks."

August 20, Short Term Update

So with the above analysis in mind -- and considering that the worst average month for stocks is just days away -- may we suggest that it's wise to be prepared for this September before it arrives.

History and the Wave Principle alike are saying, "Look, look -- pay attention to this!"

So stay on top of the market with analysis you cannot get anywhere else. Click here for a 30-day no obligation look at the Elliott Wave International Financial Forecast Service.

TAGS: STOCK MARKET CRASHES, MARK HULBERT, MARKETWATCH, THE STOCK TRADER'S ALMANAC, ELLIOTT WAVE

Rating: - based on [139 rating(s)]

Silver Uses (This is a extract from the SilverInstitute) Demand for silver is built on three main pillars: industrial and decorative uses, photography, and jewelry & silverware. Together, these three categories represent more than 95 percent of annual silver consumption. In 2007, 455.5 million ounces of silver were used for industrial applications, while over 128 million ounces of silver were committed to the photographic sector, 163.4 million ounces were consumed in the jewelry market, and 58.8 million ounces were used in the silverware market. Why is this indispensable metal in such demand? The reasons are simple. Silver has a number of unique properties including its strength, malleability and ductility, its electrical and thermal conductivity, its sensitivity to and high reflectance of light and the ability to endure extreme temperature ranges. Silver’s unique properties restrict its substitution in most applications. Choose from the following list to learn more about some of the various applications of silver: Traditional Coinage Photography Silver Jewelry Silverware and Table Settings Industrial Batteries Bearings Brazing and Soldering Catalysts Electronics Emerging Medical Applications Mirrors & Coatings Solar Energy Water Purification

Best Under a Billion

Friday September 3, 2010

Nine M’sian firms make it to Forbes’ Best under a Billion

SINGAPORE: Nine Malaysian companies made it to the Forbes Asia’s Best under a Billion list this year compared with eight companies last year, according to Forbes Asia.

Glove maker Hartalega Holdings Bhd, which made it to the list for the first time, was also profiled in the September issue of Forbes Asia.

Other Malaysian companies that made it to the list are CBS Technology Bhd, Coastal Contracts Bhd, Hai-O Enterprise Bhd, KKB Engineering Bhd, Latexx Partners Bhd, Mudajaya Group Bhd, My E.G Services Bhd and Willowglen MSC Bhd.

CBS Technology specialises in RFID (radio frequency identification), e-security and e-procurement services; Coastal Contracts is involved in marine services and vessels while Hai-O is a multi-level marketer of herbal care products.

Besides steel fabrication, KKB manufactures steel pipes and LPG cylinders as well as hot-dip galvanising. Latexx manufactures rubber gloves, Mudajaya is involved in civil engineering and construction services, My E.G is an e-government service provider and Willowglen is a computer-based control system provider.

According to Forbes Asia, more companies are making their maiden appearance on Forbes Asia’s Best under a Billion list this year.

“In all, 151 firms are new on the list, compared with 136 last year, while 49 are returnees. Firms in information technology, healthcare and electronics sectors accounted for close to half of the 200 companies on the list,” Forbes said in a statement yesterday.

The annual Best under a Billion list picks the top-performing 200 firms from close to 13,000 publicly listed Asia-Pacific companies with actively traded shares and sales between US$5mil and US$1bil.

Forbes Asia said the selection of the final 200 was based on earnings growth, sales growth and shareholders’ return on equity in the past 12 months and over three years.

This year, China and Hong Kong have once again outdone the rest of Asia-Pacific with the most number of small and midsize firms represented on the list.

“This is the third consecutive year that both economies have dominated the list with 71 firms making the cut, down from 78 last year,” it said.

India is in the second place with 39 entries, 19 more than last year, thus making it the biggest gainer while South Korea is in the third position with 20 companies, followed by Taiwan with 19 and Australia with 13. Malaysia tied with Thailand for the sixth most number of entries.

The 200 winning companies will be honoured at an award ceremony and dinner in Hong Kong on Nov 23
.

I Just Saw the Greatest Gambling Spectacle in History

I Just Saw the Greatest Gambling Spectacle in History By Frank Curzio, editor, Phase 1 Investor August 27, 2010 "The only thing Macau needs to create is a way for gamblers to go to the bathroom without getting up from the tables." I thought my friend Leung was joking. Leung is one of my contacts I met with in Hong Kong. Hong Kong is my first stop in a six-city, 10-day China trip with my Phase 1 colleague Larsen Kusick. Our goal is to find small companies with huge growth potential. We'll keep Growth Stock Wire up to date as we travel to Shenzhen, Shanghai, Xi'an, Beijing, and Macau, our second stop... Leung is an executive for one of America's largest financial companies (he asked me not to disclose the name). He knows a lot about China and buys distressed debt all over the country. But as he pointed out, there are no signs of distress in Macau. Macau is a tiny island on the southern coast of China. And it's the gaming capital of the world. It brings in more revenue per year than Las Vegas. Last month, gaming revenue totaled $2 billion, a new record. Macau is the only area in China where gambling is legal. For 40 years, Macau's casino industry was a monopoly controlled by Stanley Ho, the richest person in Asia. This changed in 2002, when Macau granted licenses to three American gaming companies... Today, Las Vegas Sands, Wynn Resorts, and MGM Resorts are operating Macau casinos. Most of MGM's properties are located in the states. But Wynn and Las Vegas Sands are benefiting from the massive Macau trend, which is showing no signs of slowing down. I think that's a big part of the reason these stocks have held up so well in an otherwise depressed market. To get to Macau from Hong Kong, you must take a one-hour ferry. They leave every 15 minutes. I counted at least 10 boats at the port before boarding my ferry. Each boat can carry 250 to 300 passengers. I got a late start, leaving at 7:30 on a Monday. The boat was packed. So was the Venetian Macau, which is owned and operated by Las Vegas Sands. At over 10 million square feet, it's the fifth-largest building in the world based on floor space. When you walk inside, it seems even larger. The ambiance was similar to most Las Vegas hotels – large chandeliers, fountains, and such. But there was one major difference... I've been to nearly every major casino in Atlantic City and Las Vegas. The Venetian's casino space was about three times the size of anything I've seen. And nearly every table was full. Leung later told me the hotel had to close some restaurants to make more space for gamblers. The area across the street from the Venetian is also owned by Las Vegas Sands. The company is building three more hotels to accommodate the huge demand. Based on the construction site in the picture below, it's clear Las Vegas Sands is betting big on Macau. Our next stop was the Wynn Macau resort, which caters to high-end clients. The casino floor was smaller, more like a Las Vegas casino. And while it wasn't as packed as the Venetian, it was still crowded. There was a line of two-dozen cabs picking up tourists from the hotel. Most were dressed for a night on the town. The Venetian and Wynn also have high-end malls. Store names include Louis Vuitton, Gucci, Chanel, Dior, and Prada. At both casinos, the stores were crowded. Many people were carrying bags, not just sightseeing. Easily One of the Safest Ways to Invest in China How to Trade One of the World's Great Legal Monopolies Based on what I saw, the growth in Macau is real. It's no wonder Las Vegas Sands and Wynn Resorts have trounced the market this year. If these stocks do pull back, I'd use the opportunity to buy. Good investing, Frank Curzio

PN17

Do you know what PN17 stocks have in common? There are all debt-ridden. So, be careful when you buy into a company that has high debt.

Make 10 Times Your Money without Taking Big Risks

By Dan Ferris, editor, Extreme Value

Friday, August 20, 2010

Investing is like tennis. It's a loser's game.

Think of the difference between professional and amateur tennis players. Professionals win points. Amateurs lose them. When weekend warriors play tennis, the losers determine who wins. They hit the ball into the net. They whack it out of bounds. And they routinely double-fault on their serves. That doesn't happen nearly as much in pro tennis, with its long rallies and pinpoint shots.

Most investors are like amateur tennis players. They lose money in stocks because of their own behavior. There's no opponent outplaying them. They beat themselves.

DALBAR, a Boston-based research firm, compared the returns from market index funds with returns real investors earned in equity mutual funds...

From 1989 to 2009, market index funds returned 8.3% per year. If you compound $10,000 at that rate for 20 years, you'll wind up with just under $50,000 – five times your money. For buying an index fund and doing nothing else, that's a great return. No research necessary. No thinking required. Just buy and wait. It couldn't be easier, and you get five times your money, pretax.

The only problem with that 20-year, five-times-your-money return is thatalmost nobody earned it.

Real, flesh-and-blood investors investing their own real, hard-earned money made significantly less than 8.3% per year over that time. On average, individual investors in U.S. equity funds earned just 3.3% per year. At that rate, $10,000 grew to just $19,150 in 20 years. They didn't even double their money – in 20 years! Most investors just can't hit the ball back over the net.

Most real investors investing their own real money perform even worse relative to the overall market in bull markets. During the great bull market to end all bull markets from 1984 to 2000, DALBAR found equity mutual fund investors made 2.57% per year, with market index funds compounding at 12.22% per year.

The age of the daytrader treated investors worse than most periods. Investors ran around the court faster than ever, swinging like mad, only to hit more balls out of bounds and into the net than ever, turning a $10,000 investment into just $15,000 during the biggest bull market in history. Had they simply failed to lose, they'd have turned $10,000 into just over $100,000.

Investors could have made 10 times their money in 16 years by refusing to overmanage their own money – by letting stocks do the work for them.

A large dose of humility would help most investors make more money in stocks. For starters, most investors just shouldn't buy individual stocks. They should buy index funds and plan to hold for decades. Almost everyone else should build a diversified portfolio of only the highest-quality names and plan to hold them for at least 10 years.

If you can't hold on for a long time, be prepared to take losses.

In my Extreme Value newsletter, I have a list of the world's best companies that are currently trading at absurdly cheap prices. I've mentioned a few here before: Microsoft (MSFT) and ExxonMobil (XOM) are two of my favorites.

These and stocks like them are an excellent start on a diversified portfolio that could earn you 10 times your money – remember, that's 12.22% per year for 16 years. Most stocks like this will compound your money at single-digit rates. But one or two could produce enormous returns.

You don't need to take on big risks to earn that kind of return. All you need to do is wait. To master the loser's game, you must be patient. You must master time itself.

Good investing,

Dan

Editor's note: Dan Ferris writes the monthly Extreme Value, focusing on stocks trading at huge discounts to their true values. His strategy of selecting safe and cheap stocks has earned him one of the most impressive track records in the industry. To learn more about a trial subscription, click here.

Further Reading:

Steve Sjuggerud has figured out a simple way for investors to avoid getting scared out of stocks long enough to lock in huge gains. If you don't follow this rule, Steve writes, "chances are great you'll make an emotional decision... and sell at exactly the wrong time." Learn Steve's rule here:Avoiding the Biggest Mistake Investors Make.

With his recommendation of World Dominating oil producer ExxonMobil, Dan is going head-to-head against one of the world's greatest short-sellers. Learn why this famous investor expects this stock to drop... and why Dan believes it "is one of the world's greatest long-term investments"... here: This Famous Investor Is Dead Wrong.

Email story Print Share

Fima Corporation Berhad

The latest quarterly earnings of Fimacorp for the period ended 30.6.2010 shows tremendous growth of the company.

Its revenue of 81,029,000 and EPS of 28.49 sen compare excellently with those of the corresponding period of the previous year when revenue was 62, 679,000 and EPS was 19.05 sen. The growth of EPS shows a jump 47% while revenue improves by 29.28%. At the last closing price of RM4.75 per share, there is fantastic value for the stock.

Using the EPS of 28.49 sen and the reference price of 4.75, the forward PE works out to be 4.168. A higher PE of 6 is not unreasonable for such a solid stock. Thus my target price of 6 ringgit per share is not difficult to achieved.

This is my opinion. You don't have to agree with me.

To know more about the company, click here.

The market is always mysterious

At times when you think you can't possibly lose, you probably blow up. It never pays to be overconfident.

In a horse race, it is not unusual for the most fancied runner to come in last. Do you know why? The simple answer is: The horse was doped; it was planned to fail.

In the stock market, you probably have heard of Pump and Dump. This means that a stock is pushed up to an unreasonably high level for the purpose of distribution. If you are not careful, you could be tricked to go in while smart money is going out. Think twice before you act. Common sense is the key.

The big boys know that you are looking at your charts to track them. So they use red herrings to mislead you. That's why we have false breakouts and breakdowns. Hence, the difficulty to read charts accurately. If you have been experiencing with charts, you will probably agree with me. Therefore whenever I make a mistake, don't make a mockery of the issue. After all, to err is human. Besides, only infants expect to score all the time.

I don't claim that I am an expert in chart reading. Neither do I have a crystal ball. What I post here are my opinions. If you choose to follow them, remember it 's your decision to do so.

If you lose money, don't blame me. If you make money, don't share them with me.

Constructive comments are always welcome. Profanity, sarcastic remarks, irritable phrases without respect for others, and mentioning of other blogs with intention to incite hatred, will be considered as undesirables and will not be published.

Singapore company bars top management from casinos

Published: 2010/08/28

Share1

PDF

EMAIL

PRINT

CURRENCY CONVERTER

LARGER TYPE

SMALLER TYPE

TOOLS DICTIONARY : THESAURUS :

SINGAPORE: A Singapore company has banned its top management from the country's two new casinos after reports that a local businessman lost a fortune at the gaming tables, its founder said yesterday.

Mohamed Salleh, chief executive officer of retail and property firm Second Chance, said he had applied for casino exclusion orders for himself and six of his top personnel using a system designed to keep gambling addicts out.

"A few days ago I read about this Henry Quek... who lost S$26 million (S$1 = RM2.32) at this casino, so I was thinking, why not I include all my top executives and my finance people?" he said.

Mohamed said his decision was also prompted by a case in which one of his managers stole gold items from the firm to pay off gambling debts before the casinos opened their doors.

"It's better to be safe than sorry," said Mohamed.

Financial group DBS said on Thursday that Singapore's two casino resorts are expected to contribute S$2 billion to the country's economy this year. - AFP

Read more: Singapore company bars top management from casinos http://www.btimes.com.my/Current_News/BTIMES/articles/casban/Article/index_html#ixzz0xrHNhB4D

Buy rubbish and you stay with rubbish

One frustrating experience you may have is to find that year in and year out, a stock that you have in your portfolio is showing no growth or even negative growth. Its EPS continues to be near zero. The company pays you no dividend and you get nothing. The only thing you can do is to get out. But even this is not easy because there are no scapegoats around. And your funds continue to be tied up with these rubbish shares.

At Bursa, these rubbish shares are aplenty. Check them out, avoid them, and note the names of the directors. Pay special attention to who the CEO is.

They say if you buy rubbish, you stay with rubbish. You may even have to sleep with them. Abhorrence of this nature can be avoided if you are careful whenever you buy a stock.

What are the things you should look at when you buy? First on the list is earnings. A company cannot survive without earnings. Other things to take into consideration are: calibre of management, business model, barrier of entry, sound balance sheet, gearing, cash flow, and dividend yield.

Always remember this quote from Warren Buffett:

Investment is most intelligent when it is most businesslike.

Telekom Malaysia

Buy (unchanged) Share price: RM3.55

Target price: RM3.86 (unchanged)

Khair Mirza khair.mirza@maybank-ib.com (603) 2297 8678

Under-estimated and misunderstood

Another under-appreciated facet of Telekom Malaysia is its over RM1.1b worth of shares in Axiata Group and Measat Global that can be realised over the next 6-12 months. Maintain our Buy call and RM3.86 DDM-based TP which leaves room for further upgrades if it surprises the market on its HSBB execution in 2011-12.

Look past 2Q’s net profit. TM reports its 2Q results today, where we expect Streamyx (ADSL) subscriber additions to exceed 1Q’s record 52,000. Nonetheless, with 2010 being TM’s peak year of capex for the HSBB roll-out, we also expect it to be the peak year for associated operating expenses in relation to HSBB roll-out activities. For instance, TM could have over 6,500 Unifi (fibre) subscribers at end-July (1Q: 2,000 subs) for which the cost of end-user equipment will be expensed but for which revenue will only begin to be recognised in 3Q.

Non-core assets ready to be monetised. As part of its demerger with Axiata, an ESOS program put nearly 200m Axiata shares into TM’s coffers. Option holders only profit from the difference between the market price and the exercise price of these options, which is between RM4.70-4.80/shr. At yesterday’s price, this stake is worth RM870m. Add the RM252m in proceeds that TM will receive from Measat’s privatisation and TM could be sitting on over RM1.1b in cash.

Clearly misunderstood. We think that this will once and for all clear any doubts about the sustainability of TM’s dividend guarantee of a minimum RM700m annual pay-out in 2010-11 before the earnings accretive impact of HSBB begins to kick in.

Buy this under-estimated gem. Our RM3.86 DDM-derived TP assumes only the minimum net dividend of RM700m p.a. The RM1.1b (or 31.7sen/shr) in cash and near cash that TM could dividend out over 2010-11 would add another 8.2% to our TP, to a blue-sky scenario RM4.18. We may review our TP after its results release tomorrow after gauging the details of its progress on the roll-out of the HSBB network.

Aug 13, 2010

Genting S'pore hits jackpot

RWS' cash registers netted $9.6m in average daily sales in Q2

By Francis Chan, Companies Correspondent

DOUBTS about whether Genting Singapore had hit the jackpot with Singapore's first integrated resort (IR) were put to rest on Thursday.

Genting Singapore's Resorts World Sentosa (RWS) had powered ahead to generate a sparkling $860.8 million in revenue with pre-tax profits of $503.5 million for the second quarter of this year.

This works out to RWS' cash registers netting $9.6 million in daily sales, from which Genting Singapore pocketed a tidy $5.6 million in pre-tax profits.

The blistering performance of RWS propelled mainboard-listed Genting Singapore to the big-time profits league.

More importantly, the performance refutes early scepticism that the IRs, and the casinos they house, would not take off.

The decision to build the IRs - taken by the Government in 2005 - was to beef up tourism in the city-state and create jobs but the move was hotly debated.

Should you average down?

The general rule of thumb is that traders should not average down. Instead they should cut loss quickly. Buying more shares at lower prices than what you initially paid is called averaging down. This strategy may work well for investors. But for traders, it is as dangerous as catching the falling dagger. If you are not careful, averaging down can turn out to be a catastrophe.

Once a trader told me that when he bought, he must see the money in the next 15 minutes otherwise he would cash out and called it a day. My first thought was that he was being boastful. When I thought about it later it. I realize that his strategy is not unreasonable.

As a trader, you don't buy a stock that is in static mood. Only when a stock shows that demands have picked up and prices are moving will any bet be placed on it. When a stock is moving, its price can move fast and assumed to continue. If however, the price retraces back the moment you put in your money, you should cut loss when the price hits a certain predetermined point. This is called cut loss. You don't allow the loss to become bigger. Thus, you have to be on your toes all the time.

When you lose, at what percentage point should you cut loss? This depends on your risk tolerance, the amount of money you can afford to lose and also on your personal character. Some will not allow the loss to be more than 10% while others may allow a bigger margin. Note that the lower the price, the easier the 10% will get hit. For those who study charts, they will probably place the stop-loss slightly below the latest support level.

Cutting loss is probably a good strategy. The idea is lose little when you judge the market wrongly and to win much when you are right. The problem is that you may not be able to carry out your plan as planned. To cut loss is to admit that you have made a mistake. Believe me, many people are not able to do that.

A trader does not have to know about the stock's fundamentals because his romance with it will last only for a short time. Just like when you go for a fling, you don't have to know too much about your partner.

If you are an investor, averaging down is a good strategy. I shall tell you why and how you should do it some other day.

Don't be the next victim.

Man who lost S$26mil gambling to sue casino

Fri, Aug 20, 2010 The Star/Asia News Network

A RICH Singaporean man, who lost S$26mil in a three-day gambling spree, plans to sue a world-renowned casino there for loaning him a huge sum of money to gamble without first checking his financial position, reported China Press.

According to a legal document, the 50-year-old businessman, was loaned S$500,000 for gambling by the casino in March and the loan was later increased to S$2mil the following month.

He also claimed that he had experienced losing and winning money amounting to a few hundred thousand dollars in each gambling session and once it reached as high as S$6mil and yet he could still get a loan by just filling up an application form.

When his losses exceeded S$4mil, the businessman said his girlfriend cried and begged the casino not to loan him any more money.

In spite of that, the casino staff told him that he could continue getting loans although he had exceeded the credit limit.

A spokesman of the casino said the company could not comment on their customers.

A Blessing in Disguise

I am an optimist. I like to see things from the bright side. They say, everything dark cloud has a silver lining.

More often than not, when I bought a stock it usually dropped initially. If I had used a stop-loss, I would have lost money most of the time. But I am not a trader. I am an investor. This means that before I buy a stock, I do a due diligence on the company. Only when I am completely satisfied that the company is safe, its business model is good and its core business is viable, will I put in the money. Thus I am not worried when the price has a small downward move.

The most important thing to remember when you invest is not to overpay. Everything has a price. When you overpay even for a great company, it is difficult for you to make a profit. So choose your entry point carefully.

Sometime ago, I recommended a buy on EPIC when it was selling at 2.11. The stock did move up to 2.30 plus. Those who chased the stock are probably scolding me for their paper losses.

I had anticipated the stock to move up going by the movements of the share price. It was then rumored that the company would be taken private. Unfortunately, the company denied of such a movement going on. Subsequently, the price of EPIC took a dive and hit below two ringgit.

EPIC is one of my heavy-weighted stocks in my portfolio. I have been accumulating this stock for quite some time. My average price is about RM1.68 per share. It is my intention to add more of this stock to my portfolio. But I won't be chasing it until more positive signals are displayed in my chart. Anyway, my opinion is that the company is a safe bet, and that a privatization will become a realty in the not too distant future.

A drop in the price of a stock may turn out to be a blessing in disguise.

Lady Luck

I wish Lady Luck smiles at us