Crisis? What Crisis?

It has been more than 1 month since the Sub-prime crisis broke out. Back then, most if not all of the global markets faced a heavy sell down and many investors rushed for the exits and have been staying on the sidelines. Many things had happened since then: global mutual funds faced liquidation problems, some even stop quoting their redemption prices; banks have to disclose how much they are affected, to calm the nerves of investors and depositors, and of course, further panics and sell downs; the phrase "subprime crisis" has been on the front pages of newspapers almost everyday and many were screaming that the global stock market bubble is going to burst and the world economy is heading into recessions, multi years' recessions; the governments have to take various measures to calm the panics, including bailing out failing banks, pumping liquidity into the market; and most significantly, cutting its discount rates.. all in all, most were preparing for the doomsday and were all gloomy about the stock market back then.. just 1 month ago.. (However, not all things are bad, to fans of Arsenal Football Club, "We are back on top of the Premier League, yes!!")

One month later, today's front page stories? "Asian Stocks, rise to record"; "Hang Seng seeks 7th straight record high"; "Australian shares at fresh record highs"; "Singapore Straits Times Index hits record high"; "Indian Stock market hits record level"; "Dow Jones near all time high" and etc and etc.. I didn't made these up, try Google those indices and all these headlines will pop up in the search results page.. (hmm.. what about KLCI? "Malaysian shares slightly higher on Wall St gain.." er... nothing mentioned about "record highs" like the others.. oh well, at least we are not the only down market")

See how fast the mood swings? Call it funny or ironic, facts are, there are many that are hurt from such wild fluctuations, or at least, miss out on the run up that started few weeks ago. So, where is the market heading? Come to think about it, does it actually matters anymore? There are a few quotes from Mr Buffett himself that I would like to share (well, for my own records too),

"The market is there only as a reference point to see if anybody is offering to do anything foolish. When we invest in stocks, we invest in businesses."

"Charlie (his partner in Berkshire Hathaway) and I never have an opinion on the market because it wouldn't be any good and it might interfere with the opinions we have that are good."

"If we find a company we like, the level of the market will not really impact our decisions. We will decide company by company. We spend essentially no time thinking about macroeconomic factors. In other words, if somebody handed us a prediction by the most revered intellectual on the subject, with figures for unemployment or interest rates, or whatever it might be for the next two years, we would not pay any attention to it. We simply try to focus on businesses that we think we understand and where we like the price and management. If we see anything that relates to what's going to happen in Congress, we don't even read it. We just don't think it's helpful to have a view on these matters."

"For some reasons, people take their cues from price action rather that from values. What doesn't work is when you start doing things that you don't understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it's going up."

"The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values."

He didn't say these yesterday, nor one month back. These are all quoted at least a decade ago. Moral of the story? Do not try to predict the market, nobody will be successful doing that (unless one think that he/she could be smarter than the 2nd richest man on earth). Do your homework and stick to value investing and do what you understand. Believe it or not, that's what the most successful/wealthiest investor of all time has been doing since decades ago.

Tips From the Hong Kong Buffett

I came across a recent interviews made with Hong Kong's Billionaire Lee Shau Kee.

A brief introductions, Lee Shau Kee is the 2nd richest man in Hong Kong (sometimes 3rd, depends on price fluctuations of the shares he is holding. For me, I wouldn't bother of the standings if I have a net worth of USD17Bil!!) and 22nd in the world ranking. He made his fortune through property and share investments. He currently controls one of the biggest property developers and conglomerates in Hong Kong, Henderson Land Development, with interests ranging from town gas, properties, hotels, internet services and etc. He has increased his net worth very significantly since 2006 after betting big on China's stock market. And hence, he was dubbed the "Hong Kong's Buffett" and "Asian Master of Stocks".

Mr Lee was recently interviewed and asked on his views about the future directions of the stock market and tips on investments. Here's the summary of what he said:

Firstly, one should pick the right country to invest. At this juncture, China offers the best opportunity and US the worst. US has too much problems to worry about, including its trade deficits and National debts which are close to USD10 trillion, the interests on such debts alone would have put a heavy burden on its economy.
(side note: the implication of such high debts? that would be another long but interesting discussions. From my point of views, debts might not necessarily mean bad things for the stock market. The national debt of America has been on the rise for the past few years, see where the Dow's heading? Breaking into new highs few times this year alone. Anyway, for the sake of this blog, I am merely translating what Mr Lee said)

Secondly, pick the right industries to invest. He personally recommended insurance, utilities and properties.

Thirdly, pick the right companies. It is recommended to pick the industry leaders, and after these leaders have risen substantially, only then one should switch to other laggards in the same industry. He continue to recommend some industry leaders like China Life (2628-HK), Ping An Insurance(2318-HK), PetroChina (0857-HK), CNOOC (0883-HK), China ShenHua(1088-HK), China Coal(1898-HK), Country Garden (2007-HK), China Oversea (0688-HK) and R&F Properties (2777-HK)
(Side Note: I haven't looked into these companies in details for some time now, the last time I checked, some of them are already very highly priced. I wouldn't be surprised if they are currently selling at 30~50 times PE.)

Fourthly, as the US start lowering its interest rates, USD devalues, dragging a few other currencies along. If one were to invest overseas, this is one factor to be considered carefully. He further pointed out that the Australian Currencies are one of the strongest currencies and offering some good interest returns.

Fifth point is a trading strategy. Buy a stock with good prospect and sell short another with bleak futures, either in another country or industry. It works something like a hedge. As an example, he recommended buying China Life and Ping An Insurance and short selling some American property stocks or Japanese Banking stocks, at the same time. The idea is, you will receive the proceeds from short selling and utilise it on buying those with good prospects. Zero capital (well, excluding some negligible transaction costs), and if you are right, you're gonna gained from both transactions. The downside risk is of course, if both of them go the opposite ways (ie. if the China stocks crashed and the US stocks prosper). However, Mr Lee himself was saying that the chances for this scenario to happen as "highly unlikely".
(side note: most if not all Malaysian trading houses do not provide much flexibility and facilities for such transactions. But such services are very common in Singapore and Hong Kong. However, personally I do not recommend short selling, unless one is very familiar with the risks involved and understand its consequences. I do agree that the global financial market is very wide-opened nowadays and is providing huge investment opportunities. In fact, that's where my personal career is heading into. More about the opportunities and potential of global investing on another blog..)

Just before the interview ended, Mr Lee predicted that the Hang Seng Index will be quiet for the month of October, however it should reach 28,000 points by year end and touch 30,000 points by the Lunar New Year (around February) next year
(side note: as of this writing, Hang Seng broke through 26,000 point. It had rebounded nicely from its 20,000+ points low when the Subprime crisis broke out. The Shanghai Index had also almost doubled since beginning of the year. Scarry eh?)
(side note for reading pleasure: Mr Lee Shau Kee had spent around HK100mil for his son's wedding in Sydney last year and all his staffs who attended the wedding received a HK10k spending money. I believe this spending pattern is something the original Buffett won't be doing even with a knife pointed at his throat.)
(HKD1 = USD0 .128560).

New Blog

Dear Readers,

I have started a new blog called "Searching for Values" at http://www.search4values.blogspot.com/. My intention is to share my views on some interesting companies that I have found. Please drop by occassionally for update.

Cheers.

This is my story - The beginning of a new chapter

(This blog has nothing to do with investment. It's just another piece of My Story.)

It has been a week since I quit my job. The destination is still very far away, but hell, I am one step closer to it by any counts. I wanted to write down the feelings I have right now because it is something I don't have for some time, and I am sure, I won't be having it again anytime soon. Most people are shocked by my decision to quit my confortable job. It is a job any employee would have hoped for. A fat paycheque (compared to other employees with my kind of experience and qualification, and trust me, most people will live quite well with such pay, and the nice part is, the annual salary increments have been quite satisfactory over the years), nice superior (he is a very nice guy, to be honest, except for some bad temper, occassionally), very nice colleagues who support me in many ways, very relax schedule (very "flexible" working hours), good employee benefits, not much responsibility except to do some very routine "overseeing" and "supervising" jobs in the plant (pretty much like a 30 minutes walk in the morning to greet my fellow colleagues "Good Morning"), and lastly, attending meetings which has usually been taken care of by highly qualified personnel and my job is merely to listen to what they've got to say, not much deicion makings are required. All in all, little input required, but high pay kind of job. So, what the hell am I thinking when I decide to tender my resignation back then? Simple, because there are some other things I need to achieve in my life.

Life is so unpredictable, and you would never know what's going to happen until it happens. And when something terrible actually happens, it's usually too late to say "if I know this would've happened, I would have..." or "Oh God, if I could have another chance, I would have... " worse still, sometimes you might not even get the chances to say these..

So, do what you have to, when you have to. Time and Opportunity are 2 things that never wait. I know, my decision might not have been made at the right time or might not be the RIGHT one after all, but I certainly want to give it a shot and even if I failed, I can look back and tell myself, "I've tried".

Here are 2 nice quotes:
“Why do people persist in a dissatisfying relationship, unwilling either to work toward solutions or end it and move on? It's because they know changing will lead to the unknown, and most people believe that the unknown will be much more painful than what they're already experiencing.” - Anthony Robbins

“It is only through labor and painful effort, by grim energy and resolute courage, that we move on to better things” - Theodore Roosevelt, the 26th President of US

Dear Reader, it's a great pleasure having you reading until this part. I owed you a "Thank You", for listening to my mumblings. One final piece I would like to share in choosing a carear path: Choose a carear that you have great interest and passion in, and you will definitely do it better than the others.

“If there is no passion in your life, then have you really lived? Find your passion, whatever it may be. Become it, and let it become you and you will find great things happen FOR you, TO you and BECAUSE of you.” - T. Alan Armstrong