Sunday, December 31, 2017

My 2017 Review & 2018 Prospects

Time flies and today is the last day for 2017.

Looking back for the past 365 days, I would say it is a memorable year to me in doing business, looking for the other half and the road in investment.

Doing Business

With the current economy situation, a lot of things getting tougher and it is no longer comfortable doing business like last time. All we need is keep changing and walk ahead of others. Thank God that this year our business has improved comparing to last year even though the revenue is slightly shrinking. But thanks to the team's continuous efforts, improvement and hardworking, we managed to improve our margin.

For 2018 prospects, I would say it is getting more challenging due to the stiffer competition of price and competitors, employees turnover and higher demand from the customers. We have no choice but will try to get talented employees and be innovative in order to overcome these challenges.

The Other Half

I'm quite sick of looking for the other half at my current age, as I think it should be way over. Unfortunately, I have tried my very best but to no avail at this moment. The available candidates are too limited at this moment. By being more aggressive and thick face, hopefully I can try to solve this problem by 2018. :)

Investment Road

I feel like being cheated for my 2nd unit of local property investment by the developer salesperson 2 years ago, and hence, that unit investment brought negative return to me this year. I have no choice but to hold the unit for now. Anyhow, the market is quite pessimistic for now.

As of crypto currency, I don't understand how it works. Hence, I'm not interested to invest in it for now.

I'm doing reasonably okay for local stock market investment thanks to bull market. Even though I've made huge mistake in investing one of the companies, there's still good return in overall. I have reviewed the lessons learned this year and look forward for better return in 2018. Hopefully I continuously improve my return and eventually achieve my early retirement age in the future.

Good bye 2017, and welcome 2018! Happy new year to you, cheers!

Sunday, December 3, 2017

Seven Traits of Super Investors

How to be a super investor?

“Investment success does not require glamour stocks or bull markets. Judgment and fortitude were our prerequisites. Judgment singles out opportunities, fortitude enables you to live with them while the rest of the world scrambles in another direction.”
John Neff

People always ask me how I attain such a spectacular performance in stock investment and how I make so much money in the market. People must be thinking that I got my level of mastery in investing because of my inborn talent. Whilst I wish I had been born with the investing genius in me, I must say that the wealth I have amassed so far is mostly from the effort that I put in to earn and to accumulate from my business and investment. And, I agree with Albert Einstein that “genius is one percent talent and ninety-nine percent hard work.” Of course, it is good to have an aptitude for investment, but you still need to devote a lot effort to nurture the investing talent within yourself before you could become a superinvestor. Always remember that no one is born a superinvestor. It takes knowledge, skills, correct action, patience and experience and lots of trainings to be a superinvestor. These are the main ingredients that you need to excel in investment. Even those well known superinvestors took years, if not decades, to acquire, practice and refine their knowledge, learn from their mistakes, form their investing philosophies and learn to control their emotions before they achieved their current status and results.

For example, during market crash in 1961-1962, Carl Icahn lost all his money he earned since his Army days. But he later on said that, “going broke was good, because I grew so much from it and realized that I had to learn more than anybody else about something.” By acquiring the right recipe and working hard, he staged a series of striking rebounds after the crash and he eventually became one of the most successful investors in the world. With a $16.6 billion net worth under his belt, he is ranked number 55 in Forbes 2017 Billionaires List.

Similarly, the Great Depression and stock market crash in 1929 nearly wiped Lord Keynes out financially. But he got back stronger in the game after the crisis and after refining his philosophy by switching from top-down investing method (macro strategy, which is relying on the predictions of economic performance to choose stocks in the industries that generate the highest returns) to bottom-up value investing approach (which is selecting stocks based their intrinsic values, dividend rates, cash flow, future earnings and business prospects). His innovative style, recognition of mass psychology and animal spirits play in the market, and buy-and-hold method enabled the funds he managed, including the endowment fund of King’s College, Cambridge, the fund of the National Mutual Fund Society, the fund of the Provincial Insurance Company and the personal funds of his friend, family and himself, grew exceptionally well and outperformed market indexes almost every year thereafter, except 1938 and 1942.

By now some of you must be thinking that one has to be very skilful at predicting the next market crash (or boom) to be a successful investor. Far from it – none of the superinvestors, at least not that I know of, have the ability to predict short-term market movement. The competitive advantage they possess over ordinary people is their positive learning attitude, high mental strength, solid financial knowledge and high self-awareness. Thus, to be a superinvestor, you do not need to master the skills of predicting the next market crash or short-term market movement. What you need is to mimic the traits, habits and behaviours of superinvestors and follow the advice I have listed down, based on my observation and my personal experience, below. Once you have appreciated, embraced them, and have them ingrained in your DNA, nothing can stop you multiplying your wealth; only the sky is the limit.

“Rather than guessing where the market or the economy may be headed, here is a little rhyme to help you remember a better way to decide when to buy stocks:
When stocks can be found at cheap prices,
the time is ripe to buy.
When appropriate values cannot be found,
the market is too high.”
Charles Brandes

Trait 1: Ability to buy stocks while others are panicking and sell stocks while others are euphoric. Be an intelligent contrarian investor.

“The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists.”
Benjamin Graham

“The time to get greedy is when everybody’s running for the hills with fear. That’s usually a great time to get the greed going.”
Bruce Berkowitz

There is a famous axiom in the investment world that the market is driven by two factors: greed and fear. When the economy improves, people become bullish about the market. The greed in people will boost their confidence level, stimulate their risk-seeking behaviour, encourage them to chase the winners and result in poor decision making. As they assume that the stocks are on the fast track to profit growth and are fixated to short term gains, they are more than willing to pay enormous premium for the stocks, which results in the prices of the stocks being bid up to an overvalued level and the room for long-term gain in the stocks being compromised. Unfortunately, over the long term, the business performance of most companies tends to revert to the mean, as their profit margins eroded when as more and more unforeseen competitions arrive to share a piece of the pie. Ignorant investors who bid up the stocks to astronomical levels at later-stage are then vulnerable to huge financial loss.

During the bear attack, when stock prices take a nosedive, the innate fear of losing in human will be triggered. The self-defence mechanism then kicks in immediately. People will suddenly become risk averse. In addition, the exaggerated bad news cast over the media will result in stress and overloading of the brain’s capacity. When the emotions are combined with the herding mental shortcut (belief of following other people selling is safer than doing it differently), it leads to panic selling, as the depressed investors unwittingly allow their emotion to overcome rational thinking in the decision-making process. This is the reason why the speed of stock price falling is much faster than that of its price rising, and the portfolios of people who sell in panic during financial crisis are always severely damaged.

Superinvestors, on the other hand, understand that the market cycle and the mood of people in the market resemble the movement of the pendulum swinging back and forth to the extremes of its arc. By staying the course and staying sane, they are able to see a wider market view clearly and able to avoid dire mental pitfalls. During market crash, when everyone is in a panic state, they remain unemotional, cool and calm. They know that no matter how gloomy the weather is, when the dark cloud overcasting the sky disappears, the earth will be brightly lit again. They know that the market will boom and bust, but it won’t collapse. And no matter how severe the damage caused by the financial turmoil, given some time, good companies will eventually return to their glory day again. Therefore, superinvestors are able to seize the opportunity to buy aggressively with conviction when stock price plunges. When the crowd is in a euphoric state, the superinvestors are happy to sell their overvalued stocks, even if they could not sell them at the peak, and they then spend the lonely time sitting on their cash to wait for another perfect time to swing their bat again. Instead of following the crowd, stories, fads or hypes, they follow their selection criteria, investment philosophies, focus on risk management and stay level-headed.

That being said, it does not mean that superinvestors will buy all kinds of undervalued stocks. In any depressed markets, good bargains can be found effortlessly. If they split their money evenly to buy all the undervalued stocks in the market, very little amount of fund they can allocate for the truly good stocks that can outperform the index. Instead of buying all the undervalued stocks, superinvestors buy stocks selectively. They pick only a handful of remarkable stocks that meet their selection criteria and buy them as much as they possible can. For example, they look for high-probability events and they only buy those undervalued stocks that they understand the businesses well, companies with trustworthy management and businesses with strong competitive advantage and tremendous profit growth potential in large quantities. By being intelligent contrarian investors, they can be sure of their winning possibility even before the deals are executed.

Trait 2: A great investor is one who is obsessive about playing the game and wanting to win. These people do not just enjoy investing; they live it.

“We wake up every morning and go to sleep each night thinking about stocks. When you are as focused and obsessed as we are, you develop certain tenets about investing.”
Mario Gabelli

“Very few people had the tenacity I had. I’m a very competitive guy. Passionate or obsessive, whatever you want to call it. And it’s in my nature that whatever I do, I try to be the best.”
Carl Icahn

According to studies, most people do not enjoy investing in the stock market even though they trade stocks. If you ask any of the people you meet in stock brokerage house what motivates them to buy or sell stocks, I am very sure the answer -- and the only answer -- you will get is “to make some money”. Neither they have a set of rules to guide them in investing nor do they have any clearly-defined methodologies to buy or to sell stocks. They trade stocks with gambling-like emotion. They buy on news. Most of them do not know that before any good news is released; the price of a stock has gone up substantially. It is probably the worst possible time to buy the stock when the positive news is released. The worst thing is some of them refuse to cut loss when they realise that they have made the mistake. They hope that the price of their holding will rebound so that they get to sell it at their breakeven price. By the time when they sell the stock, as they have frustratingly held the underperforming stock for an extended period of time, the stock price is probably at its lowest level. All in all, they are not making money from stock trading, but are funding their trading with their lifetime saving or with the money earned from their day jobs. How can we expect someone who keeps losing money in stock trading to enjoy playing the game?

Unlike ordinary investors, superinvestors are obsessive about playing the investing game and wanting to win or to be the best. In addition, these people do not just enjoy investing; they live it. They are so fascinated with the game that they can work extremely hard and are willing to spend most of their time to studying the businesses of each company so that they can find more good stocks to buy. If the joy of finding a girlfriend is in the pursuit, to them the joy of investing is finding another good share to buy. That’s why they devote so much effort to analysing the businesses of each company.

To superinvestors, investing is also like operating a company. They have their own mission and vision for investing in the stock market. They have a mental picture of what their investments will become in five to ten years. They have their own roadmaps, together with which they use their investing philosophy, method, strategy and intuition to guide them to the glory in their investing journey.

Superinvestors enjoy what they are doing. They know their circle of competence and they know how to increase their odds of winning in the game. They are loss averse and always do their best to reduce the risk or to protect their capital. Therefore, they only invest in companies they can understand the businesses well and with profit growth potential so that they get to enjoy the snowball effect of wealth accumulation. Further, they never stop learning about investing. They spend most of their time reading and acquiring knowledge. They keep refining their philosophies, skills, methods, strategies. They perform post-mortem on all their trades, so that they can improve their results and become better investors. Moreover, they constantly study their failures, be it in analysis or in decision making process. Because of their fervent passion and commitment to investing success, their performance gets better year by year. That’s why they are spectacularly wealthy.

Despite their wealth, they do not stop investing. Why? Because their main focus is not on money, but rather on their objectives and targets, to test their philosophies and to leave a great legacy. They know that if they follow their golden rules and the path they have chosen, the monetary reward is beyond their imagination when they reach their destination. To them, money is just a scorecard and a form of reward for their brilliant ideas and magnificent philosophies, and it is not their main goal. The amount of money they need to enjoy the freedom and independence is far lesser than what they possess. That’s why they donate most of the money they have earned, like what I am doing now, to help the needy ones and society and to help more people achieve their goals.
Sir John Templeton once said “Do something where you’re performing a real service for people. It’ll be a success. I like investment counselling. And I like helping others. It gives you pleasure you can’t get spending thousands of dollars.” Therefore, earning tonnes of money is not their priority in investing. If money is their main motivator, they would have stopped investing after becoming millionaires, but they did not stop – and will never stop.

Trait 3: A good investor is one with willingness to learn from his or her past mistakes and to analyse them.

“To others, being wrong is a source of shame. To me, recognising my mistakes is a source of pride. Once we realise that imperfect understanding is the human condition, there’s no shame in being wrong, only in failing to correct our mistakes.”
George Soros

“While most others seem to believe that mistakes are bad things, I believe mistakes are good things because I believe that most learning comes via making mistakes and reflecting on them.”
Ray Dalio

“Granted, we all make mistakes. The important thing about making errors in judgement is the ability to admit those errors. If you grow into adulthood unable to acknowledge your mistakes - in life, as well as investing - you will learn your lessons the hard way. Only when you recognise your mistakes will you be able to make corrections necessary to put yourself on the right path.”
Jim Rogers

Investment mistakes refer to the decisions or judgements made by investors that result in poor returns in their investments. All these mistakes are stem from the presence of bias -- be it representative bias, familiarity bias, misattribution bias, disposition effect, cognitive error or any other psychological biases. Making mistakes is the most important part of our investing journey. Mistakes do not kill us, but they make us stronger if we learn to avoid them.

Superinvestors are no different from ordinary investors; they too make a lot of mistakes in their investments and are not afraid of making mistakes. Jean Paul Getty once said there is nothing shameful in making mistakes once, but repeating the same mistakes is a disgrace. Therefore, superinvestors constantly look out for their own biases and flaws in their investing philosophies, critically analyse their theses and decisions, ready to admit and correct their mistakes, appraise them and avoid them in the future, so that they do not compound them. This is the reason why Bruce Berkowitz said “We spend a lot of time on mistakes and asking why we make them. It’s great for the investment process.” And at the Value Investing Congress of 2009, David Einhorn shared the practice with people that “when something goes wrong, I like to think about the bad decisions and learn from them so that hopefully I don’t repeat the same mistakes”.

However, most people never learn from their past mistakes. This is apparent during bull markets. They tend to repeat the same mistakes again and again, and become arrogant after pocketing some profits from their recent bets. Their fear of loss has evaporated. Their egos have grown so big that hardly any sincere advice and invaluable opinions can get into their head until they experience another great setback. Their inflated confidence will lead to overestimation of their abilities and underestimation of the risks. As the winning streak continues, they have the propensity to put all dangers behind them, break their own investment rules, ditch their old philosophies again, and join the herd singing “this time is different”. In fact, the self-serving bias is a hindrance to seeing the imminent danger and the reality is the history is still repeating itself. Most of them won’t see the disaster coming until the moment they are about to fall off the cliff one by one like lemmings. It is undeniable that winning big is so easy and the temptation is so irresistible when stock price soars, but how many people managed to pull the hand brake timely at the edge of the cliff. Before 1997 -- Asian financial crisis, money invested in any stocks, including those speculative stocks with businesses bleeding financially, could be easily turned into “gold”. But how many people managed to walk away happily or had their portfolios left unharmed after the bubble burst?  

Humility should therefore be embraced in the philosophy of every serious investor. Superinvestors always stay humble even when they make enormous profits and remain upbeat when the markets perform badly. Unlike common investors, every superinvestor understands that he or she is fallible and always look out for flaws in his or her investment theses. If he or she discovers the mistakes, he or she will have no qualms about admitting his or her mistakes, abandoning his theses, and even selling the stocks he or she bought earlier on immediately, analysing the mistakes, then learn some painful lessons from the mistakes and avoid them in the future. That’s the reason why Charlie Munger likes the maxim of Jacobi -- man muss immer umkehren, which means invert, always invert -- so much that he does not only use the concept in testing his theses, but he also uses it in analysing his mistakes in a few different ways and then have the findings included in his checklist to guard himself against the same errors and proclivities. 

Some of the superinvestors, on the other hand, like to keep a journal or a diary of their trading records for self-reflection. They understand that human memory is only suitable for remembering stories, but not good at recording facts. By keeping a journal of the information of stocks he or she purchases, his or her emotional state and mood before making decision and how the decisions are arrived at for the investments, he or she can reflect on his or her past mistakes so that he or she is not susceptible to the same mistakes. Moreover, he or she can regulate his or her mood and control his or her emotion so that he or she won’t repeat the same mistakes again in the future.

“Forgive yourself for your errors. Don’t become discouraged, and certainly don’t try to recoup your losses by taking bigger risks. Instead, turn each mistake into a learning experience. Determine exactly what went wrong and how you can avoid the same mistake in the future.”
John Templeton

Trait 4: An inherent sense of risk based on common sense. You must have the common sense to realize the risk of buying any share which has gone up a lot and when all the analysts are recommending buy. Always take an analyst report with a pinch of salt.

“Economics and markets cycle up and down. Whichever direction they’re going at the moment, most people come to believe that they’ll go that way forever. This thinking is a source of great danger since it poisons the markets, sends valuations to extremes, and ignites bubbles and panics that most investors find hard to resist.”
Howard Marks 

"It is our opinion that the consensus view finds comfort in groupthink and therefore pays little attention, if any, to the historical accuracy of the agencies publishing these estimates."
Arnold Van Den Berg

Very often people buy or sell shares solely based on their projections, charts or news. For example, speculators make their purchase decisions based on the assumption that the share prices will grow continuously without even using some common sense to examine the risk levels of the investments. This over-optimism problem always results in overpaying for a stock and underestimating valuation risk.

Similarly, some analysts perform valuation only based on the balance sheet or using those financial models with complex formula, five-decimal-place numbers and all sorts of Greek symbols. Some chartists, on the other hand, making buy calls solely based on the charts with the underlying business performance and companies’ future largely ignored. If you buy stocks in uptrend motion or stocks with a healthy balance sheet, but with no profit growth potential or with oversupply problem, the money that you pour into the investment will not be working productively for your wealth and the likelihood of losing money is fairly high.

Superinvestors understand the importance of preserving capital. In addition to using some key valuation metrics and charts, they also use some common sense, experience and intuition when valuing a company. This is to ensure that they do not lose money nor have any laggards sitting idly in their portfolios.

Whilst it is good to read some economic news and analysis reports to keep ourselves abreast of world development and to get some investment ideas, you should not accept the entire information, news, and analysts’ projections without processing them. Be wary of the flaws in analysts’ projections and views. Always take analysts’ reports or news with a grain of salt and be sceptical of the so called “experts”, especially when they express optimism about the future of a company. I have seen many people who reacted swiftly to news and analyst reports ended up having their fingers burned. Making buying or selling decisions immediately after reading news and reports is not investing, it is called speculating. Speculating is a dangerous game, which is highly susceptible to psychological biases.

According to studies, newspapers with exciting headlines and stories have a better chance in capturing and retaining market share. Any reporters who have the ability to attract more readers will have better chances of getting promoted. Hence, all of them too have a tendency to produce exciting yet exaggerated news. Similarly, sell side analysts are handsomely rewarded for writing good reports and providing right buying recommendations, especially during economic boom. As a result, many of them are not only bullish about the market, but are also overly optimistic about the economy and are overconfident at the peak. Most of their projections and estimations are overblown figures. If you allow your emotion to be manipulated by these mass media stories and analyst reports without using business sense to judge them logically, you are literally chasing hot stocks and your investments will be in danger. You will one day wake up to discover that you are also one of the patsies left without a chair when the music stops.

Trait 5: Great investors have confidence in their own convictions and stick with them, even when facing criticism.

“To succeed as a contrarian you must recognize what the crowd believes, have concrete justification for why the majority is wrong, and have the patience and conviction to stick with what is, by definition, an unpopular bet.”
Whitney Tilson

“Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig. It takes courage to ride a profit with huge leverage.”
Stanley Druckenmiller

“Because I became worried about the Japanese stock market in the late 1980s due to its gigantic credit boom, we sold all of our Japanese stocks in mid-1988. Some investors questioned us for pulling out from the second largest stock market in the world, but I said it’s better to take some money off the table than to participate in market mania. Obviously, I was wrong and unhappy in the next 18 months because the market went up another 30 percent, but in 1990 when the market collapsed, we owned nothing in Japan and our decision was proved logical.”
Jean-Marie Eveillard

In late 1990s, when the whole world embraced the speedy advancement in Information Technology and when people believed that the revolution will too change the doctrine of conventional investment method and that a new approach assessing investment based on growth model should be employed, a minority group of people adamant that they would shun high tech stocks and would continuously look for undervalued stocks ditched by Mr. Market. This group of investors is no others except value investing followers. And most of them are superinvestors, who had millions, if not billions of dollar assets under their management. According to Bill Ruane, one of the superinvestors Warren Buffett mentioned in his essay called the Superinvestors of Graham-and-Doddsville, “The recipe for delivering superior long-term performance requires equal parts of picking the right stocks and avoiding the wrong ones. We were not even tempted to join the recent speculative frenzy in the sector.” At the same time, near the peak of the dot com boom, Jean-Marie Eveillard said “I would rather lose half my shareholders than lose half my shareholders’ money,” as he believed technology stocks were overvalued and he foresaw the dot com bubble would burst soon.

Not only did the media criticise them for their old-fashioned investment style, many of their clients also puzzled why didn’t they buy a single share of those fabulous technology stocks. Their answers to the public were that they really concerned at the high valuation of those information technology stocks and that they only invested in stocks they have an edge and with limited risk. They insisted that only when having informational, analytical and psychological advantages over the crowd would they deploy their capital for the investment. Following the crowd to chase those glittering stocks was not the game in which they would participate. Their convictions were later proven right when the internet bubble burst and their funds achieved double-digit returns in the same year. Their due diligence and convictions did not only protect them from the loss of capital, but it ensured that the odds were in their favours before they committed their capital. In his interview with Ronald Chan in 2012, Jean-Marie Eveillard mentioned that “Our fund had total assets of around $6 billion in 1997, but by 2000 it was down to $2 billion. I was unhappy, but I constantly reminded myself that I was acting in the best long-term interests of our investors, so I had to do the right thing. When the mania was over, investors came back and praised our discipline. The fund [the First Eagle Global Fund] today has a size of close to $30 billion.”

The Dot Com mania mainly stems from the emotional, cognitive errors and psychological biases of human. Human’s greed and fear is the root cause of bubble forming and bursting. Financial losses or economic recession is just a by-product of the crisis, not the root cause. The similar type of nightmare will always come back to haunt people again and again in different contexts. For example, the subprime crisis in 2008 and Asian financial crisis in 1998 began with greed and ended with fear. If you stick to a sound approach, have faith in your convictions, only buy fundamentally good stock with growing profits and profit growth potential, maintain your belief, even in the face of peer pressure, stay sane and are not easily swayed by market sentiments or any other fishy stories, you will not only be able to detect bubbles, but will also be able to capitalise on human’s psychological biases to make tonnes of money in the violently swinging stock market in the future.

Trait 6: Ability to think clearly.

“If you stay rational yourself, the stupidity of the world helps you.”
Charlie Munger

“The power of psychological influences must never be underestimated. Greed, fear, suspension of disbelief, conformism, envy, ego and capitulation are all part of human nature, and their ability to compel action is profound, especially when they’re at extremes and shared by the herd. They’ll influence others, and the thoughtful investor will feel them as well. None of us should expect to be immune and insulated from them. Although we feel them, we must not succumb; rather we must recognize them for what they are and stand against them. Reason must overcome emotion.”
Howard Marks

“You need to divorce your mind from the crowd. The herd mentality causes all these IQ’s to become paralyzed. I don’t think investors are now acting more intelligently, despite the intelligence. Smart doesn’t always equal rational. To be a successful investor you must divorce yourself from the fears and greed of the people around you, although it is almost impossible.”
Warren Buffett

Common stock is the best financial tool for rational investors to amass their fortune over the long haul, but the worst vehicle for irrational investors to even preserve their wealth. The discrepancy between the traits of these two types of investors (rational and irrational investors) is that the former always stick to their dispassionate analysis, whereas the latter allow their emotions to control their judgement. As a result, irrational investors cannot think clearly in their decision-making process. This behaviour is very evident during the bear stampede that this group of investors always busy despondently disposes all their holdings whilst the clear headed superinvestors keep hunting for undervalued stocks in the same market.

One of the reasons why people cannot think clearly and sell stocks panicky during market crash is that they do not know the actual worth of the businesses when they bought the stocks. According to studies, most of the investors do not like to read financial reports; many of them do not even bother to understand the companies’ businesses. They buy the stocks solely based on hype and hope that the stocks will decuple in twelve months. During economic crisis, when everyone rushes to sell the stocks and analysts also give strong sell recommendations; there is no reason for them not to liquidate their positions hastily as the hope has vanished into thin air.

Another factor why people are captive to the bias is that they use emotion in their decision making process. In comparison to the systematic and logical approach, this method yields quicker results and is effortless. Instead of performing due diligence, such as analysing the underlying business performance, profit growth prospects and value of the business, this system uses some mental short-cuts based on similarity and familiarity to judge what the market will do next. For example, when the system receives some negative news of a stock, it will link the news to price falling and will trigger the fear of loss. In such case, the most natural reaction the system will take is to sell the stock without investigating further. The massive disposal of a stock will then lead to its price plunging. Likewise, the fear of loss also causes people to ignore bargain. Therefore, this group of investors tends to lose their lifetime savings in a very short cycle and is unable to capture the rare opportunity when the stock price running out of control. This is the reason why Walter Schloss advised people “Try not to let your emotions affect your judgment. Fear and greed are probably the worst emotions to have in connection with the purchase and sale of stocks.”

I remember in 1983 when the Hong Kong stock market crashed, as China Government gave notice to the British Government to take back the sovereignty of Hong Kong, the Hang Seng Index went down below 1,000. The fear that the Chinese Communists were going to rule Hong Kong led to the massive disposal of shares in the market as if there were no more tomorrow. Sticking to my own rules and selection criteria, I identified one of the most undervalued stocks called HK Realty & Trust. Before the crash, it was selling at HK$ 13.60 and during the crash it was selling at HK$ 3.60 per share. Moreover, its audited accounts showed that its cash value per share was HK$ 10.00. During the crash, I bought the stock as much as I possibly could. As soon as China granted a 50-year extension of the lease, the market rebounded and HK Realty & Trust shot up above HK$ 15.00, so as most of the other counters. The market had a new lease of life and every investor quickly jumped in to buy. As my holdings went higher I could buy more shares on margin finance and the rest is history. The opportunity for me to make a mint during the crash is mainly attributed to the greed and fear in people. Had the market been more rational responding to the news and been able to overcome the psychological pitfall, it would have not been possible for me to earn so much to afford 46% of stake in Kaiser Stock & Shares Co Ltd.

Trait 7: Ability to live through volatility without changing your investment thought process.

“To be a very successful investor you have to be able to avoid some natural human tendencies to follow the herd. The stock market is going down every day your natural tendency is to want to sell. And the stock market is actually going up every day your tendency is to want to buy. So in bubbles you probably should be a seller. In busts you should probably be a buyer. You have to have that kind of a discipline, you have to have a stomach to withstand the volatility of the stock market.”
Bill Ackman

“The value investor sees this volatility and says, “What a great opportunity.” However, the masses generally say, “This stock is way too risky, I’ll pass.” We are full believers in the “buy low, sell high” investment philosophy, so to us this would be a great opportunity.”
Arnold Van Den Berg

“Successful investors tend to be unemotional, allowing the greed and fear of others to play into their hands. By having confidence in their own analysis and judgement, they respond to market forces not with blind emotion but with calculated reason. Successful investors, for example, demonstrate caution in frothy markets and steadfast conviction in panicky ones. Indeed, the very way an investor views the market and its price fluctuations is a key factor in his or her ultimate investment success or failure.”
Seth Klarman

Every investor wishes to receive a windfall gain from his or her stock investment. However, the fact is, not many people can win in stock investing. Why is it so?

One of the reasons why so many people lose money in the stock market is that they allow their investment thought and decision making processes to be influenced by their emotion. For instance, when a company reports a sudden drop in profit, they would be sceptical about the company’s future and immediately sell the stock without probing further what drives the cost up or causes its profit drop. The hasty decision without further thought is always the biggest regret of investors when the stock he sold shows increasing profits in the following quarter or next year.

Speculators, on the other hand, would sell their holdings to buy some hot stocks if they heard from their neighbours or brokers that the hot stocks will be doubled in three months, even though some of the original holdings they disposed are high yield stocks with bright profit growth prospect. Coincidentally Christopher Browne also shares the finding with my observation. In his book titled The Little Book of Value Investing, Browne stated that “Most people seek immediate gratification in almost everything they do including investing. When most investors buy a stock, they expect it to go up immediately. If it doesn’t, they sell it and buy something else.” The myopia always leads to ignorance of the underlying business and overemphasis of short-term gain. What they are interested in is making a quick profit. Most of them hope to become millionaire overnight. When the hot stocks lose their momentum and heading south, the late comers will be spooked by the selloff and tend to sell immediately at a loss. Therefore, it is hardly surprising that some people have never even won a dime in their investments.  

Superinvestors understand the importance of confidence, patience and self-control, which are the keys to success in stock investment. They do not change their investment thought easily. They do not follow the crowd buying any hot stocks. They know what the crowd is always wrong. This statement is further supported by Robert Cialdini that “Quite frequently the crowd is mistaken because they are not acting on the basis of any superior information, but are reacting, themselves, to the principle of social proof.” Superinvestors will not stray from their principles and golden rules. What they normally to do are buying a handful of stocks with marvellous profit growth potential according to their plan after performing due diligence and then they watch the stocks unfold their fantastical tales themselves patiently and let their prices increase gradually. Their investment horizon is usually three to five years or even longer. And they understand that there will be some peaks and troughs along the way. That’s why they adhere to the principle of 7Ps -- Proper Planning and Preparation Prevents Piss Poor Performance. Regardless of market volatility, they always stick to their golden rules, investment philosophies, and methods even when they are criticised by people.

Article Source taken from: 

Saturday, November 25, 2017

I'm Getting Rich Soon

I received an email 2 days ago from an anonymous, mentioning that he wants to share with me USD1.25M. Hey, yea I know, again...

Let's look at his email content (I copied and pasted exactly the same content, font color & size) below:


Dear Sir / Madam,
I write to inform you that the GOVERNMENT OF THE KINGDOM OF THAILAND in conjunction with International Monetary Fund (IMF), has resolved to refund each victim of scam (Advance Fee FRUAD) the sum of $2,500.000 (Two Million Five Hundred Thousand Dollars only) On that note, I seek your consent to collaborate with me so that I will put your name as one of the victims entitle and legible for this refunds for our mutual benefits.
If you are interested in actualizing this deal with me respond back urgently with your below details to enable me put your name among those that will benefit from the refund this month.
1 Your full names/ address.
2 Your phone number.
3 Your age/sex and occupation.
Please note that the process of filing for this refund is risk free and has nothing to do with illegality because I have perfected every plan for the smooth processing of the refunds. Bear in mind that our working ratio shall be 50% each as soon as we get the refund in your name.
Yours Faithfully,
Mr. Rodrigo de Rato
Managing Director
International Monetary Fund

What do you think?

First of all, I found a lot of typos in his email and the content looks really unprofessional. It seems like this fellow has a lot to improve.

Secondly, this tactic is totally obsolete. But this fellow is still trying his luck, by changing from one story to another.

Thirdly, this email is attention to Sir / Madam, and TO: is left empty. This fellow doesn't know who to send to. So it should be a mass mailing to try his luck.

Fourthly, it mentioned he is the MD of IMF, Rodrigo Rato. Okay, have a check at IMF MD list, the latest MD is Christine Lagarde. Rodrigo is retired since year 2007!

Finally, I found out if I decided to reply to work together, it is replying to a GMAIL instead of the original email.
from: Rodrigo de Rato


Yes, it is another usual spam email. But it's having fun to find out what can be improved.

Saturday, October 21, 2017

Hit Jackpot from Share Investment

Talk about share investment, my return stumbled badly yesterday afternoon after one of my heavyweight invested listed company got serious fire incident at the main factory. This is the first time in my life suffering so much loss from share investment.

As per quick phone interview with the company director published by the media, he expressed that there’s about 500 control machines were affected, estimated $150 million losses and roughly needs 9 months to recover! And their existing inventory can only last for 2 months.

Once this news spreads out yesterday noon, the counter share slumped 30% just within an hour and it’s been suspended due to hit the down limit. And it also hits the highest volume among the entire stocks, about 36.7 million shares transacted within an hour! Not only that, it also created the highest volume record since listed from 2005! Why majority of the shareholders has just a big reaction while fire incident is not something new for manufacturer?

Unfortunately, this is not the first time for this company to hit fire incident. The previous incident was occurred in Jan 2014, merely less than 4 years! And this time, the estimated losses and recovery time are at least 3 times worse than the previous fire incident!

To me, it’s not a big deal about the fire incident and one-time loss, as most probably they can be recovered 80 to 90% via insurance compensation. What matters me is the company reputation and customers’ order! With the production is affected for 9 months or more, how can they deliver the goods to customers as their inventory only can last for 2 months?

I’m not sure the current factory capacity % and number of control machines at Plant 2, 3 & 4, but the affected factory is the core production site which consists of 1,500 control machines and about 1/3 of the machines are affected by fire. Assumed the capacity is about 80-90% with another 750 control machines, they only manage to cover 75 – 150 machines capacity while the remaining 70-80% of productions are not able to fulfill after 2 months.

Put aside the trust and the upcoming 9 months affected income, if they are not able to deliver the goods to customer but the customers are growing, what will happen next? The customers will definitely approach other manufacturers for the orders, may be for short term. But if other manufacturers are aggressive enough, providing perhaps a better quality and price than this problematic company, what will happen next? That’s what I worry about.

The revenue can sure come back upon the rebuild of the machines and production. But trust and orders cannot once customers ran away. Unless the management is able to demonstrate the outstanding leadership and effective way to solve this production issue, else I think that’s it.

The company market capitalization is about $312m before slump, and now at $230m upon slumped. Can you see that? The fire incident has caused $150m loss but the capital is only $230m. It looks very attractive provided the management takes a prudent steps to pinpoint this issue by next week.

Well, crisis always comes with opportunity. I think most probably I’ll give it a small shot on next Monday to average down my buying price, regardless the share price slumps further, retains or bounces back. I personally think this company is still having a bright future, but perhaps I have to hold longer than I expected now.

Sunday, October 8, 2017

How to Fake Confidence

I watched a video lately from YouKu and found out there are 4 small key areas to boost (fake) our confidence from a seduction guru.


How? Basically you don't have to be loaded, smart and charming, just be self-confidence with the following keys:

(1) Always having a relax and steady appearance.
Your appearance will always look relax and steady, including stand and sit posture. You also responding your opponent's question in steady and pausing mode. By acting so, you are basically not worrying anything at all time, you can handle everything under relax and steady situation. Hence, it enhances the appearance confidence.

(2) Take care of your physical appearance / image.
Yes, you don't have to be good looking. Yet you don't have to wear too over or too casual. Just be yourself and pay respect to yourself. It proves that you can take care of yourself in the first place.

(3) Don't boast or compliment yourself automatically. Some people are lack of confidence and they afraid others cannot notice them. A person who are confident do not worry about it. The best way is to be cocky and funny, somehow people feel good about it especially women.

(4) Be humorous
Humorous is not about telling jokes or funny story. It's about demonstrating your self-confidence level, where it proves that you have nothing to worry about and that's why you have time to be funny. Well, this is the hardest part but it can be learned. You can observe and learn the leaders, normally they have absolute humorous and always bring cheers and fun to be public whenever they are around.

That's the simple 4 key areas to pay attention to. Have a nice weekend, folks.

Sunday, September 17, 2017

Malaysia Economy Is Getting Better or Worse?

As a Malaysian, we are happy to see our quarterly GDP has improved for the recent 2 quarters, 5.4% & 5.8% respectively.

By looking back the past 20 years GDP growth, actually Malaysia in average is able to obtain 5-7% GDP growth year-on-year. That is consider a stable and healthy growth under a developing country.


However, a lot of residents complained or felt that the local economy is not getting any better. They feel in pain. Why is that so, since the GDP from low point of 4.0% to 5.8% within 1 year?

I believe the major pain is the MYR currency depreciation against major currencies like USD and SGD. USD to MYR has appreciated from RM3.10 in year 2013 to RM4.40 lately, and now retrace a little bit to RM4.20. A whopping jump of 35%! Whereas SGD to MYR has appreciated from RM2.50 in year 2013 to RM3.15 lately, and now retrace to RM3.12. A significant jump of 25% as well. That means whatever imported to the country with these appreciated currencies, will be having price hike of at least 25-35%.

The second pain point is Government Service Tax (GST), 6% GST imposed on all items from April 2015 is also a drastic burden to all citizens. Every 1 dollar you spent, you will have to pay additional 6 cents. That's indirectly make the inflation goes up 6% straight.


There's another indirect impact which is the deterioration of the Government efficiency and business strategy. You can see most developing countries in ASEAN are trying to attract foreign direct investment (FDI) by improving internal infrastructure and procedure. But it seems like Malaysia is running backward. Well, I'm not sure about it but you can see the local well-known businessmen's negative comments and feedback in business magazines. We haven't talk about the Government investment scandal yet. ;(

With the combination of these 3 factors, how can the economy turns better in such a short time even with a good GDP statistics? Imagine if you used to make $1,000 and spent $700 and save $300. Now you will have to spend at least $800-$900 and only can save around $200-300. What can the citizens do? Tighten their belt in order to save more and sustain.

Remember, the salary is the one that won't be increased over such a short time, but inflation & the factors above.

Sunday, September 10, 2017

I'm Back

Time flies, I've been escaping from writing this blog for 7 weeks.

Usually on Sunday late noon, I spent my time to write this weekly blog article. For the past few months, I went out coffee with friends or do some casual articles reading over the Internet, because I'm bothering by a big issue in my life. :(


My purpose of writing this blog is to share, in terms of what I know, what I discover and what lessons I learned in my life. I hope the readers can benefit from those articles, as simple as that. So why I escaped and came back again?

Initially I thought of giving up, as there’s no response, no feedback and I’m quite demotivated to write it further. Until I saw a positive feedback comment last few days about my last blog article, which I missed the comment earlier. That’s the reason I’m back again. J

I'll update again next weekend. For now, let’s prepare to start a tough Monday again.

Sunday, July 23, 2017

18% Annual Return on Investment

If there's a company offering 18% annual return on Australia real estate investment project, are you interested to participate?

Of course I would love to, if it is genuine! But how to identify if it is genuine, or it's just another ponzi scheme like money game?

Well, just don't get excited and jump straight into it, even the plan you joined is endorsed by the government! I hit the stone before no worries, I understand how the investors feel.

Here's the full news of the suspected ponzi scheme.


Sunday, July 16, 2017

The Only Way to Get Rich Safely for Normal People

I have been thinking how to get rich for many years. Well, I guess a lot of people are thinking the same thing. But most of us still at the same spot. We probably made and save some money which we are trying our best. We sacrifice a lot of things to work hard and trying to get more income, and we did get so. However, inflation and assets appreciation kill our hard earn money badly.

I remembered a kolomee in my hometown used to cost me $3.50 10 years ago. Today it needs about $7.50. And seems like it is going to inflate higher and higher in the future. Same goes to property and stocks. Those good lots and counters, they are flying high and higher, and we never see their price return again.


I realized apart from work hard and smart is one thing. If we realized we are just ordinary people, investment is the only way to get us rich with lesser risk. I'm not talking about money game, you know you are not going to get such a high interest in any ordinary investment, or at least it's not long term. I'm talking about the only 2 in this world, stock market and property.

Regardless you are a boss, self employed or working for others, if you want to retire early with sufficient fund and overcome inflation, you will have to invest to let your money grows more than inflation. Invest in 'assets with potential valuable in the future' is the only way to gain capital appreciation AND regular consistent income. For property, it is rental income and for stock, it is dividend. And both return is definitely better than fixed deposit over the mid to long term.

However, it is not so straight forward. You must do a lot of homeworks, able to think independently, train your insight about the prospect, be daring and greedy when you think the opportunity comes, dare to commit mistake with loss of money, and finally, be able to think big. There's a lot of logic and experience behind this, those who complied and stick to the principles, win big.

Perhaps you think local property market has already reach a peak time. If you stick to the principles above, I'm sure there are cheap sale and opportunities. If you really think that you cannot afford for now, go for stock investment. It's highly affordable. I'm talking about stock investment, not speculation!

Refer to the diagram below, it depicts a better picture of how can your assets bring regular incomes to you even you don't work, compare to salary only. Yes, perhaps you think you already know this theory long time ago. So are you already succeed?

Fight alone is difficult. Perhaps you should join an aggressive group and let's fight hard together. :)

Have a nice working week ahead.

Saturday, July 8, 2017

2 Types of Knowledge

There's a story from Charlie Munger:

I frequently tell the apocryphal story about how Max Planck, after he won the Nobel Prize, went around Germany giving the same standard lecture on the new quantum mechanics.

Over time, his chauffeur memorized the lecture and said, “Would you mind, Professor Planck, because it's so boring to stay in our routine, if I gave the lecture in Munich and you just sat in front wearing my chauffeur's hat?” Planck said, “Why not?” And the chauffeur got up and gave this long lecture on quantum mechanics. After which a physics professor stood up and asked a perfectly ghastly question. The speaker said, “Well I'm surprised that in an advanced city like Munich I get such an elementary question. I'm going to ask my chauffeur to reply.”

In this world we have two kinds of knowledge. One is Planck knowledge, the people who really know. They’ve paid the dues, they have the aptitude. And then we’ve got chauffeur knowledge. They've learned the talk. They may have a big head of hair, they may have fine temper in the voice, they’ll make a hell of an impression.

But in the end, all they have is chauffeur knowledge. I think I’ve just described practically every politician in the United States.

And you are going to have the problem in your life of getting the responsibility into the people with the Planck knowledge and away from the people with the chauffeur knowledge.

And there are huge forces working against you. My generation has failed you a bit… but you wouldn’t like it to be too easy now would you?


Sunday, July 2, 2017

How to Keep Skin Looking Young?

I read a newspaper article 2 days ago about 3 sisters and their parents all look at least 10+ years younger than their actual age. The article topic immediately drew my attention.

The sisters age 36, 40 and 41, namely Sharon, Fay and Lure, but most of them look like late 20s. On top of that, all the 3 sisters look pretty and maintaining slim body. I personally prefer Lure, the eldest yet she has the most attractive face and attractive line. What shock me further is, their mother 63, but only look like 40+. That's amazing!

Lure (41), Fayfay (40) & Sharon (36)

What could be their secret when asked by the journalist? It turns out the family works their magic with hydration and proper diet. Lure said that the key is to drink water and eat vegetables. She added that moisturizing helps so - “you don’t even need to worry about aging and wrinkles”.

Do you believe what she said? Or we just give it a try?

For the entire news URL, you can read it here.

Sunday, June 18, 2017

3 Things You Should Do Every Day If You Want to be Successful

When it comes to money, it's easy to understand how daily habits add up. There are simple equations you can use and routines you can set up to make sure you stay within your budget.

But optimizing how we spend time is more difficult, psychologists say. Spending the odd hour scrolling through social media doesn't seem like such a bad thing until we realize what that time could have been used to accomplish.

Business titans like Bill Gates, Tony Robbins and Warren Buffett know that over time, daily habits can amount to big achievements. That's why they make a point of adhering to a few specific ones.

Here are three things to do every day to become more successful:

1. Take time to process

Every morning, Tony Robbins starts his day with 10 minutes of meditation that involves a specific breathing technique, prayer and a pep talk.


It sets him up for success, he says, because he primes himself to be grateful and calm. Having quiet time to analyze your thoughts is associated with stress reduction, studies show.

Meditation is also shown to boost activity in areas of the brain related to paying attention, indicating it could help you focus better throughout the day.

If you're interested in starting a meditation practice, entrepreneur and author Tim Ferriss has some great advice.

"Start small, rig the game so you can win it, get in five sessions before you get too ambitious with length," Ferriss says on his podcast. "You have to win those early sessions so you establish it as a habit, so you don't have the cognitive fatigue of that practice."

Begin with a two-minute routine a Harvard-trained psychologist recommends to help you relax.

2. Go on a daily walk or to the gym 

Spending even just a few minutes every day exercising will clear your head and make you feel more motivated, studies show. That's one of the reasons many successful business leaders make sure to work out.

Twitter co-founder and Square CEO Jack Dorsey likes to run six miles every morning. Oprah Winfrey practices yoga and makes sure to log over 10,000 steps each day on her fitness tracker.

Billionaire Richard Branson says his morning routine of waking up at 5 a.m. to play tennis or bike has doubled his productivity.

"I definitely can achieve twice as much by keeping fit," Branson tells FourYourBodyPress. "It keeps the brain functioning well."


If you don't have time to go to the gym, take five minutes to go on a walk. Stanford researchers found that the very act of walking boosted a person's creativity by an average of 60 percent.

-Tim Ferriss, entrepreneur and author of "Tools of Titans"

3. Pick up a book

Both Gates and Buffett make a point to read every day, a habit that research shows reduces stress and boosts intelligence.

"Reading books is my favorite way to learn about a new topic," Gates writes on his blog. "I've been reading about a book a week on average since I was a kid. Even when my schedule is out of control, I carve out a lot of time for reading."


Every evening before bed, he reads for one hour. By making time every day, he reads a whopping 50 books each year.

Buffett too credits much of his prowess to reading. He says he starts every morning by poring over several newspapers and estimates he spends as much as 80 percent of his day reading.

When asked once about the key to success, the Berkshire Hathaway CEO pointed to a stack of books and said, "Read 500 pages like this every day. That's how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it."

As Ferriss writes in his popular book "Tools of Titans," habits are more important than we think.

"To enjoy life, you don't need fancy nonsense," Ferris writes, "but you do need to control your time."

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