kcchongnz blog
Secrets of Tycoons revealed part 3, real time cases study in Bursa kcchongnz
In my recent article on “Does fundamental value investing (FA) have any predictive power?” In the link below here:
http://klse.i3investor.com/blogs/kcchongnz/92580.jsp
I talked about some academic research that demonstrate buying cheap in any form, be it be low P/B, P/E or P/CF (and also P/D) have been consistently over-performed than the broad markets and with less risk.
Then came these comments out of the blue in my thread talking something completely out of point:
Posted by lux88 > Mar 6, 2016 09:36 PM | Report Abuse 
KC, what your stock performance for 2016?
U not even dare to compete for the i3 stock pick competition.
Even though OTB portfolio is doing weak now, at least he dare to take part and dare to admit mistake.
OTB i believe will be stronger and wiser now.
The above prompted me to look at some stocks I have written in the past 6 months and published in i3investor to assess how they have been doing, and hence my article on “When Market Retreats, Pong Pong Pong Again” in the link below with the up to date return as shown in Table 1 in the Appendix.
http://klse.i3investor.com/blogs/kcchongnz/92727.jsp
At the close of the market this morning on 18th March 2016, the portfolio of 5 stocks written have an average return of 25.0% compared to the return of the broad market of just 0.6% this year. All stocks in the portfolio make double digits’ profit, with Scientex’s share price went up by a whopping 60.7%.
The great short-term return of the portfolio prompted me to think about what I have been arguing with someone in i3investor about encouraging youngsters to use margin finance in investing to obtain accentuated return; why didn't I myself use margin financing to the limit to amplify my return?
If I take “margin finance to the limits” as propagated and borrow RM1m on top of my own capital of RM1m say, I would have made half a million Ringgit instead of just RM250000 using my own money, ignoring all transaction costs for the time being.
So if you are good in investing, or rather think you are good, why don’t you use other people’s money to make more money. Why are you so stupid?
Let us re-read a couple of quotes from a well-known super investor and philosopher, Charles Munger, despite of what some people may claim,
“Investing is not easy, and anybody who thinks it is easy is stupid.”
"When you locate a bargain, you must ask, 'Why me, God? Why am I the only one who could find this bargain?'"
The above quote is a response of someone who said that since the interest rate for the margin finance is so low at 5%, and we are so sure of making so much more, why don’t we make use of other people’s money to make more?
There is a dark side of using margin financing, very dark. Let us look at another portfolio, a random but I would say, a good portfolio of stocks as shown in Table 2 in the appendix, and its real time return now.
Case study of margin finance on a Random Portfolio
“There’s no doubt that hard work, planning and persistence are essential for repeated success. But even the hardest workers and best decision makers among us will fail to succeed consistently without luck.” Howard Marks
I found a portfolio of stocks chosen at the end of year 2015 introduced in i3investor. Except for a couple of stocks such as V.S, which I have written numerous times, and a red chip of Xingguan, I would say all other stocks are good stocks. A few of those stocks, with their current share prices, actually meet all my criteria as written in the links below and hence I do own some of them too.
http://klse.i3investor.com/blogs/kcchongnz/92580.jsp
http://klse.i3investor.com/blogs/kcchongnz/92871.jsp
http://klse.i3investor.com/blogs/kcchongnz/93172.jsp
These are Latitude, Lii Hen, Canone, and Focus Lumber. Let us forget about the macro thingy such as whether exchange rate will continue to go up or down which is unknowable and unpredictable. Not only those companies are performing very well in their business recently with profit growth, high return on capitals, good cash flows, they are also selling very cheap in term of their earnings, firm level wise, or equity wise. Besides, they have quality assets and very healthy balance sheets too.
I am sure many have invested following a portfolio like this as those stocks picks are the more common ones in the stock pick challenge in 2016 in i3investor. I am also not surprised some youngsters, newbies and even old hands as well, after brain washed with so many advantages of margin finance to make amplified return, were lured by the remisiers, investment bankers and investment bloggers alike, have made use of margin finance.
But how have the stock prices and the portfolio return like recently?
Short-term return of the Random Portfolio
Table 2 in the Appendix shows the Random Portfolio has lost an average of 28.9%, in less than three months. Genetic and Xingguan have lost more than 50% in that very short period of time. If margin finance were used just to buy these two stocks, speculators would have lost everything, plus still owning banks some money.
What would you do with such losses in your portfolio?
For me, no big deal. Exchange rate goes up and down. Stock market also goes up and down. Businesses go in cycles. With those good stocks I have mentioned above selling at such steal prices now, I just keep them or may buy more and then go and play golf. Someone says if you buy stocks at cheap price, or high margin of safety, don’t worry. Just keep them for long term and values will be realized later.
Posted by tksw > Mar 18, 2016 03:31 PM | Report Abuse
I shall patiently wait....
To recover the loss of 28.9% in a year and then more later is not to say easy, but it is doable if you have a good portfolio of stocks such as like that one in Table 2 and those portfolios in the links below.
http://klse.i3investor.com/blogs/kcchongnz/92871.jsp
http://klse.i3investor.com/blogs/kcchongnz/88504.jsp
What if one purchases those stocks using margin finance, to the limit of say 50% equity and 50% margin for the stocks in that Random Portfolio above?
The Peril of Margin Finance in the Short-term return
Table 3 in the Appendix shows the return of the Random Portfolio using margin finance to the limit.
It is assumed that RM1m is used for buying the stocks forming the Random Portfolio, and on top of that, another RM1m of margin is used. The set-up fee is assumed to be 1%, and interest rate for the margin finance is 5%, or 1.3% in three months, and a transaction cost of 1%. Incidentally, margin users pay much higher broker fee too.
The aim of using the margin finance is to hope for the outcome in scenario 1 as shown in Table 3 in the Appendix, the hope that the portfolio can make 50% return in a short time. With the low interest rate, the portfolio would have made an accentuated return of 963000, or a return of 96%! Even a return of 30% for the portfolio as shown in scenario would be wonderful enough with an accentuated return of 56.5%.
However, one can hope for whatever he wants, but he has no control over it, and the market can spring surprises, big ones too.
As at the close of the morning market on 18th March 2016, the Random Portfolio lost an average of 28.9% as shown in Table 2 in the Appendix, while the broad market has gone up by 1.3% during the same period. Every one of the ten stocks lost in double digit figures, with no exception. That is the complete opposite of the portfolio return as shown in Table 1, why a luck!
The total accentuated loss is RM607000, or 60.8% as shown in column 5 in Table 3. What are the results and actions to be taken by the investor, or the bank?
Margin calls
Some investors may have encountered margin calls as their maintenance margin, i.e. equity/Market value of shares, has fallen below 40%. A margin call can be responded by depositing cash or marginable securities to the margin account or by liquidating existing stocks to get cash.
One of the most important things to understand about margin calls is that your brokerage firm has discretion as to when you are required to increase the equity in your margin account. Whether or not you have been contacted by your broker, they can take immediate action to increase the equity in your account if they decide the equity is too low and is not commensurate with the risk of your account. This means they can immediately sell out whichever securities they choose, regardless of the financial obligations for you. That can turn things into a vicious circle, especially for the illiquid stocks; the more they sell, the lower the price of the stocks, the more losses one will encounter.
Depositing more cash will subject to more risks if there is further drop of the value of the portfolio, and hence the risk of more losses. In the short-term, it is hard to know when the bottom of the share price will be, even for some good shares.
Liquidating some positions, stocks which you supposed to have purchased with wide margin of safety (for the long-term) will result in permanent accentuated, and realized losses which is very hard to recover, taking into consideration of the long-term return of the stock market is less than 10% a year.
What would you think a young investor using the margin finance above for this Random Portfolio and have lost 60.8% in less than three months will react? Do you think he has learned a good lesson, or never ever used margin finance again, or he think he has roughened up and he would be able to do better next time with more margin finance?
Better in what sense, and how is that he will be better in his skills in dealing with this margin finance? I would think the loss of 60.8% in less than three months would have left such a terrible scar on him that he will never ever touch any share investment any more in the future!
Some margin account may not have triggered margin call yet with the 60.8% loss of the Random Portfolio. Some investors, especially those loaded ones, may have the “special privilege” that margin calls will only be triggered if the maintenance margin is less at 30%, or the total loss is more than 70%. So they are not that worried, or is it?
I have personally seen a portfolio, even after depositing a huge amount of securities as additional collateral, still suffered a heavy loss of more than 70%, and after that the market still continued its sharp fall. That is exactly the problem; the more privilege you are, the more risks you are subject to, and the more you may continue to lose.
Conclusions
“The most dramatic way we protect ourselves is we don’t use leverage. We believe almost anything can happen in financial markets… [so] even smart people can get clobbered with leverage. It’s the one thing that can prevent you from playing out your hand.” Warren Buffett
Investing is supposed to be building long-term wealth in a stress free manner such that you can focus on the important things in life, such as your career and family. The stock market, economy, exchange rate, interest rate, and even individual company business is unknowable and unpredictable in the future, especially in the short-term.
“In the short-term, the market is a voting machine, but in the long term it is a weighing machine.”
In the short term, market or individual stock prices can tank. Even good stocks can go down in prices sharply too, even though the broad market is still okay as you have seen.
Margin calls can be a stressful experience with serious financial implications. Your brokerage firm has the right to sell shares you own at any time to increase your equity. This can be done with no written notice and without regard to any consequences for you.
It is your choice to build long-term wealth slowly but surely, or to get rich quick with leverage but with the risk of losing everything. If you prefer the earlier option, please contact me at
ckc14training2@gmail.com
But if you prefer the latter option, I can’t help you.
K C Chong (18th March 2016)
Table 1: Return of my stocks in 2016
Table 2: Return of a random portfolio
Table 3: Margin Finance and return of the Random Portfolio
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Discussions
4 people like this. Showing 50 of 68 comments
Posted by paperplane2016 > Mar 18, 2016 11:30 PM | Report Abuse
I agree with raider loh, kc is bias. How u call those pick are random? It is just picked based on certain perception.
Me: Where did I say those picks are random?
I said i choose a random portfolio.
2016-03-19 00:07
Posted by curious2 > Mar 18, 2016 11:33 PM | Report Abuse
Why KC never talk about AirAsia?
Agree with both paperplane2016 and raider. If follow KC only 10-20 stocks can buy the rest cannot.
Me: I am triple curious about your above statements.
Shy must I talk about Air Asia?
Where did I say “only 10-20 stocks can buy the rest cannot”.
Do yu have any idea how many companies are listed in Bursa?
2016-03-19 00:11
I got no AA but AAX is my largest position at around 25 sec.
I bot and sold AAX at around 20 sen previously , held for 4 months from August to Dec.
==============================
paperplane2016 Desa, see airasia? Since u got few calls and airasia major, congrats.
Now, look at MMC now by Che Khalid.
Read rhb rpt
17 hours ago
risk management......risk management is done by adjusting the amount bot and the diversification appropriate at the moment not by avoiding margin all together.
no ever become a tycoon without facing risks.
2016-03-18 14:52
How we can know if tht random portfolio is chosen random? And not without bias to show how great your portfolio is in comparison?
2016-03-19 03:21
Posted by paperplane2016 > Mar 19, 2016 03:21 AM | Report Abuse
How we can know if tht random portfolio is chosen random? And not without bias to show how great your portfolio is in comparison?
You got to read and understand the article rather than making so many presumptions.
Where have I compared my the return of my portfolio and the Random Portfolio?
Do you understand the gist of the article? And what message is it trying convey?
Whether the portfolio is randomly chosen or not, it doesn't matter. it is the perfect portfolio to use to convey an extremely important maxim is investing; Never follow anyone's advice to buy stocks, whether good or bad, with margin finance.
That perfect portfolio used shows that margin calls were effected with the sharp drop in prices of the portfolio, some of them even very good stocks,even though the overall market has gone up.
Google and read more about the serious consequences of margin calls. Or google the "advantages", and "benefits" of margin calls if you like, and see if you can find any.
2016-03-19 12:08
Theory is what, since everything happens in random, how does theory predicts what is random. Keep a lot of cash, cash flow is King, try to use margin buying only in very evitable situations. Cash is King. I rather spend the money in night-club than throw money away for no reason. Cash is King, go to night-call, have sssss, cash is king.
2021-05-29 20:35
Hi Kc , I go bursamalaysia website see the ECS chart price , why no same ? Got adjust? Ecs no right issue or bonus issue also . I remenber 2015 high is 1.78 low is 106 ... But i see the bursamalaysia ECS chart is high 1.21 low 0.88 , you know wat happen? Or bursamalaysia website error?
2016-03-19 14:51
to a gambler, if he didn't lose until he need to chop off his fingers , he will never believe gambling is bad
2016-03-19 15:52
it needs an exceptional Debtor to beat the Creditor...
even more so to beat the Margin Financer..
12-Year Old Child Reveals One of the Best Kept Secrets in the World
https://www.youtube.com/watch?v=JHQOX8EVNmE
2016-03-19 15:58
stockraider and his gang are gamblers, KC is not a gambler,
stockraider gang beleives in his skill and life long good luck
KC believe in value, less in good luck
if you want fast money, then join stockraider
if you want safe money, then join KC
the choice is yours
if you do not how to choose, then choose a pisang goreng
2016-03-19 16:03
stockraider,
why paste so much what other people had said
you think the readers here has no memory what they have read.
just write what you want to say, learn to be more straight forward in you expression
one simple personal request from me,
don't use too much loh,loh,leh, leh,...
i feel not necessary , it doesn't make your speech sounds more like an "old-hand or high-hand"
2016-03-19 16:10
raider is using margin trading.
He uses margin because whatever cash he has was not enough for his investing.
He is beholden to his tukang titik who provided him with margin financing.
He cannot badmouth margin trading as this would be bad for his industry, which his friends are closely into.
He is a good chap to observe but not to follow unthinkingly.
The stocks he likes or bought, he will defend these as having a margin of safety.
I have yet to comprehend how he gets his margin of safety after so many years observing his trades. :-)
2016-03-19 16:15
KC,
thank you very much, at one point I nearly use MF
luckily I read you table 3
I noticed,If I use mf and do not know how to cut loss fast
30% loss in the portfolio ,already enough power to send me to Holand.
how can I not grateful to you
2016-03-19 16:16
goreng, 3iii, m, all,
risk management......risk management is done by adjusting the amount bot and the diversification appropriate at the moment not by avoiding margin all together.
no one ever become a tycoon without facing risks.
face up to risk like a man
what to die, die with honor.
kc do a model margin portfolio and immediate starts with losing money.
the opposite is a margin that starts to make money immediately and equity start accumulating and growing immediately
2016-03-19 18:15
Posted by pisanggoreng > Mar 19, 2016 04:16 PM | Report Abuse
KC,
thank you very much, at one point I nearly use MF
luckily I read you table 3
I noticed,If I use mf and do not know how to cut loss fast
30% loss in the portfolio ,already enough power to send me to Holand.
how can I not grateful to you
Pisang Goreng,Your last sentence makes my day.
It now dawned to me that using margin is like an addiction. One can't pull himself out of the deep black pit.
But bear in mind that, go ahead with your addiction. do whatever you like. This is a free world.
But when you starts to preach an addiction, and encourage the young ones to get into this addiction, you are doing a great disservice to the society.
2016-03-20 01:02
Posted by Mr. M > Mar 19, 2016 04:26 PM | Report Abuse
KC, thanks for sharing. 1 question. What's P/D ratio referring to?
Price to dividend, the flip side of dividend yield.
2016-03-20 01:10
Posted by stockmanmy > Mar 19, 2016 06:15 PM | Report Abuse
risk management......risk management is done by adjusting the amount bot and the diversification appropriate at the moment not by avoiding margin all together.
ME: YOU ARE RIGHT. AVOIDING MARGIN FINANCE IS NOT A RISK MANAGEMENT. NOBODY SAYS STUPID THING LIKE THAT.
INSTEAD USING MARGIN FINANCE IS GAMBLING.
BUT I DON'T REALLY KNOW WHAT YOU ARE SAYING ABOUT RISK MANAGEMENT.
no one ever become a tycoon without facing risks.
YOU MAY BE RIGHT TOO HERE. BUT FOR EVERY ASPIRING TO BECOME A TYCOON, ONE SUCCEEDED AND 100 GET INTO BANKRUPTCY.
face up to risk like a man
what to die, die with honor.
ME: IS THAT HOW YOU LOOK AT INVESTING? GOOD LUCK TO YOU.
kc do a model margin portfolio and immediate starts with losing money.
ME; THAT IS NOT MY "MODEL PORTFOLIO". PLEASE GO AND CHECK YOURSELF WHOSE PORTFOLIO IS THAT. IT IS ALL OVER THE INTERNET.
the opposite is a margin that starts to make money immediately and equity start accumulating and growing immediately
PLEASE PUT UP ONE PORTFOLIO IN I3INVESTOR. A YEAR OR SO DOWN THE ROAD, THEN ONLY CLAIM WHATEVER YOU HAVE BEEN CLAIMING.
2016-03-20 01:13
Please read this very important statement b4 u decide to use margin loh...!!
RAIDER SAYS WHETHER U R 21 OLD OR 40 YRS OLD SHOULD U USE MARGIN LEH ?
ANSWER IT ALL DEPENDS.....BUT THE INVESTORS SHOULD BE GIVEN THE CORRECT BALANCE VIEW. THAT MARGIN IS NOT THAT BAD OR GOOD....IT IS A MAGNIFYING NEUTRAL TOOLS.
WHETHER THEY USE OR NOT TO USE....THEY THEMSELVES NEED TO DECIDE....AFTER EXAMINING ALL FACTORS LOH...!!
Question is:
Among the two, A&B, who would have acquired the highest amount of Savings by the time they retire? Since we can't talk about future with certainty...we have to ask who (A or B) has a higher odds of making more money by the time they retire? A&B should a general median sample representing the average people - as its pointless to talk about special extraordinary events or special skilled people here.
OF COURSE IF U R A SUCCESSFUL INVESTOR....YOUR WEALTH WILL BE HIGHER IF U ....USE MARGIN....BCOS IT MAGNIFY UR GAIN LOH....!!
ON THE OTHERHAND....IF U R A LOUSY INVESTOR...U SHOULD NOT USE MARGIN AT ALL LOH...!! TO BE BLUNT,IN FACT U SHOULD NOT INVEST AT ALL....BCOS YOUR MAKE UP...IS NOT SUITABLE FOR INVESTMENT MAH...!!
One way to approach this is just like how we evaluate a business Value using DCF. Starting with purely Equity funding and as the Invested Capital keep increasing due to Re-investments, leverage had to be utilized using Debts to Fund. We have to assume that the business has its ROIC or more accurately its RONIC with a certain uncertainty on its Return Value….possibly going below the Margin Finance interest rate. THATS WHY RAIDER SAYS...TO USE MARGIN OR NOT....DEPEND ON HOW SUCCESSFUL U R AS AN INVESTOR LOH....!!
GIVEN THE ABOVE CONCLUSION, A LOUSY INVESTOR SHOULD NOT INVEST AT ALL....!!
THEREFORE GENERALLY ALL GOOD INVESTOR...SHOULD BE ENCOURAGE TO USE MARGIN....BCOS THIS WILL MAGNIFY IS GAIN LOH...!!
Therefore if KC design a portfolio....for losers....!!
DON U THINK THE LOSERS SHOULD NOT EVEN INVEST IN THE 1ST PLACE ?
MARGIN SHOULD BE USE BY WINNERS AND NOT LOSERS MAH....!!
BCOS THE WINNER SUCCESS WILL BE MAGNIFY LOH
ON THE OTHERHAND A LOSER LOSSES WILL BE MAGNIFY TOO LOH...!!
PLEASE GET THE FACT RIGHT LOH....!!
2016-03-20 02:25
Posted by pisanggoreng > Mar 19, 2016 04:03 PM | Report Abuse
stockraider and his gang are gamblers, KC is not a gambler,
PLEASE NOTE THE FOUNDATION OF INVESTMENT COME FROM THE THEORY OF GAMBLING MAH....!!
A CONSISTENT SUCCESSFUL INVESTOR....MANAGE POSITIVE EXPECTED VALUE...WHEREAS GAMBLERS MANAGE NEGATIVE EXPECTED VALUE LOH...!!
WHAT IS NEGATIVE EXPECTED VALUE ?
IF U INVEST IN 4 EKOR....THERE ARE 10000 NUMBERS....!!
IF INVEST RM 1 IN EVERY NUMBER IT WILL COST U RM 10000 , BUT YOUR PRIZE IS ABOUT RM 6500 = THEREFORE UR NEGATIVE EXPECTED VALUE IS RM 3500 LOH....!!
AN EXAMPLE A POSITIVE EXPECTED VALUE....SAY THERE ARE 3 BOX...1 BOX HAVE RM 5000, ANOTHER HAVE RM 3000 AND THE 3RD BOX HAS ZERO CASH.
U CAN BUY ANY OF THE BOX FOR RM 2000 PER BOX.
SHOULD U INVEST ? THE ANSWER IS YES.....BCOS IT HAS POSITIVE EXPECTED VALUE LOH....!!
SHOULD U BORROW AND INVEST IN THE BOX ? THE ANSWER IS AGAIN YES...BCOS OF POSITIVE EXPECTED VALUE MAH...!!
stockraider gang beleives in his skill and life long good luck .
THIS IS NOT LUCK...BCOS WE DEAL WITH POSITIVE EXPECTED VALUE...USING MARGIN OF SAFETY MAH...!!
KC believe in value, less in good luck. USE KC RAIDER AGREE THAT KC BELIEVE IN VALUE...BUT HE HAS FAILED TO COMPREHEND THAT USING MARGIN IS VIABLE TOO....WHEN U DEAL WITH POSITIVE EXPECTED VALUE MAH...!!
if you want fast money, then join stockraider...RAIDER IS NO GAMBLER..BUT RAIDER ....KNOW HOW TO USE....ADDITIONAL INSTRUMENT (MARGIN)....WHEN THERE IS OPPORTUNITY TO TAKE ADVANTAGE OF POSITIVE EXPECTED VALUE LOH...!!
if you want safe money, then join KC...IF U STAY WITH CASH...RAIDER SAY FINE....!!
BUT AGAIN...PLEASE DO NOT MISLEAD PEOPLE...THAT MARGIN IS GAMBLING LOH...!!
the choice is yours...RAIDER AGREE FREE CHOICE WITH ALL THE FACTS LAYDOWN....!!
if you do not how to choose, then choose a pisang goreng..IT IS FINE IF PEOPLE....DO NOT USE MARGIN...!!
BUT TO SAY MARGIN, THE ROOT CAUSE OF INVESTMENT FAILURE...IS MISLEADING AND NAIVE LOH...!!
pisanggoreng
704 posts Posted by pisanggoreng > Mar 19, 2016 04:10 PM | Report Abuse
stockraider,
why paste so much what other people had said
you think the readers here has no memory what they have read.
just write what you want to say, learn to be more straight forward in you expression
one simple personal request from me,
PISANG GORENG...PLEASE RESPECT OTHER PEOPLE STYLE MAH...!!
IF U MAY NOT LIKE IT....BUT THIS IS RAIDER WAY LOH..!!
don't use too much loh,loh,leh, leh,...
i feel not necessary , it doesn't make your speech sounds more like an "old-hand or high-hand"
AGAIN THIS IS RAIDER STYLE....AND LIKE....IT HELP RAIDER TO THINK BETTER LOH....!!
3iii
136 posts Posted by 3iii > Mar
2016-03-20 02:50
Posted by 3iii > Mar 19, 2016 04:15 PM | Report Abuse
raider is using margin trading.
He uses margin because whatever cash he has was not enough for his investing.
He is beholden to his tukang titik who provided him with margin financing.
He cannot badmouth margin trading as this would be bad for his industry, which his friends are closely into.
He is a good chap to observe but not to follow unthinkingly.
The stocks he likes or bought, he will defend these as having a margin of safety.
I have yet to comprehend how he gets his margin of safety after so many years observing his trades. :-)
RAIDER SAY U CAN BAD MOUTH MARGIN, IF U GIVE THE CORRECT FACT MAH...!!
BUT MARGIN....IS HUST A NEUTRAL INSTRUMENT LOH...!!
AS FOR MARGIN OF SAFETY....RAIDER A TRUE PRACTIONER OF SIFU B GRAHAM LOH...!!
RAIDER DO NOT ENDORSE YOUR OVERVALUE BLUECHIPS....LIKE PETDAG, NESTLE, DLADY, PBANK AS HAVING MARGIN OF SAFETY BCOS IT IS REALLY OVERVALUE LOH...!!
2016-03-20 02:59
Peter Diamandis: Elon Musk deserves his success because he risked everything
learn to take risk, confront risk , manage risk. including margin accounts.
a famous i3 member famously posted about margin calls..........
but margin call is not the end of the world, he is still up a few hundred percent at the point of margin call...puzzled?
2016-03-20 05:03
Quote from: iiinvestsmart on Today at 06:56:45 AM
Essentially, raider is agreeing that 90% of thopse in the stock market should never use margins.
As for the other 10%, let raider tell us what happemed to them during the Asian Fonancial Crisis to those who are using margins?
RAIDER COMMENT;
No...raider only agree that, those incompetent & lose monies....should not involve at stockmarket mah....!!
Thus only Leaving the competent....that should be involve in stockmarket....loh...!!
Since the remaining balance of investor, they are competent..........they are encourage to use to magnify their return mah...!!
But using margin is at the investor option and perogrative loh....!!
Not all will use margin even competent...due to Age Old prejudice and misinformed..and misinterpretation....a good example is like investsmart and kcchong mah...!!
2016-03-20 11:30
From Raider's points...what I can conclude so far on how one can benefit from Margin Finance:
(1) You really need to diversify probably more than 20 over stocks from different sectors in your portfolio.
(2) You have to limit the Margin Finance to your Self funded Equity with a very much higher Safety Margin...instead of max 1:1 ratio...1 Self funded to 0.5 Margin Finance...so that even if stock market crashes comes close to 30%...you wont be forced to sell your Equities.
You really have to strictly follow the above and you cant really expect an extraordinary gain due to you large diversification...probably u will make 1 or 2% more over the Margin Finance Interest rate from the Margin Financed Equities.
I believe the above is mainly because Investment in stock market is not the same like Real Assets where you don't have a forced selling scenario when the Real asset value is valued much lower than your original purchase value simply because it did not generate Income at all or its ROIC is < COD during the first few years (short term).
2016-03-20 11:48
Posted by Probability > Mar 20, 2016 11:48 AM | Report Abuse
From Raider's points...what I can conclude so far on how one can benefit from Margin Finance:
(1) You really need to diversify probably more than 20 over stocks from different sectors in your portfolio. YES...!!
(2) You have to limit the Margin Finance to your Self funded Equity with a very much higher Safety Margin...instead of max 1:1 ratio...1 Self funded to 0.5 Margin Finance...so that even if stock market crashes comes close to 30%...you wont be forced to sell your Equities.
HAVE A LOWER GEARING IS PRUDENT....BUT A CRASH NOT TO FORCE SELL IS TOTALLY WRONG MAH....!!
SELLING WHEN THERE IS LOSSES IS PRUDENT LOH....!!
JUST LIKE WHAT KYY SAYS MARGIN CALL IS GOOD LOH...!!
U JUST NEUTRALISE THE MARKET FALL IMPACT LOH....!!
BUT ALWAYS BE ALERT TO GET BACK IN....ESPECIALLY THE STOCK WITH GOOD MARGIN OF SAFETY....WHEN MKT STABILISE....OR THE PRICE FALL TO A VERY VERY ATTRACTIVE LEVEL LOH...!!
You really have to strictly follow the above and you cant really expect an extraordinary gain due to you large diversification...probably u will make 1 or 2% more over the Margin Finance Interest rate from the Margin Financed Equities.
NOT TRUE LOH...THE GAIN CAN ON THE AVERAGE USUALLY DOUBLE USING MARGIN COMPARE WITH NOT USING MARGIN LOH...!!
WHY THIS IS SO ? IF U DON USE MARGIN....U ONLY PREPARE TO USE UPTO 70% TO 80% LEAVING SOME CASH TO TAKE ADVANTAGE OF OPPORTUNITY LOH...!!
A GOOD EXAMPLE IS ICAP....WHY IT FAIL TO PERFORM FOR THE PAST 4 YRS ?
BCOS IT HAS KEEP TOO MUCH CATCH AND UNDER INVESTED LOH....!!
WITH MARGIN U CAN GO 100% TO 120%....STILL GOT BULLETS TO TAKE ADVANTAGE OF OPPORTUNITY LOH...!!
I believe the above is mainly because Investment in stock market is not the same like Real Assets where you don't have a forced selling scenario when the Real asset value is valued much lower than your original purchase value simply because it did not generate Income at all or its ROIC is < COD during the first few years (short term).
THE FORCE SALE THING....IS A DOUBLE EDGE SWORD....IN CERTAIN CONDITION..U REALLY BENEFIT LOH....!!
BUT OF COURSE....SOMETIME U R AFFECTED TOO LOH...!!
PEOPLE SAY BULL MAKE MONIES...!!
PEOPLE SAY BEAR MAKE MONIES...!!
ONLY PIGS DON MAKE MONIES LOH...!!
2016-03-20 12:17
Raider...I didn't get you when you said :'forced sell - in certain condition you can benefit'...how is that?
You procured it at a higher price and because others selling brought down the price...you are forced to sell at a lower price. How do you stand to benefit...hope u can elaborate more.
And also, can you elaborate on this issue:
"Being a successful value investor requires that you have staying power. “Leverage can’t ever turn a bad investment good, but it can turn a good investment bad. When you are leveraged you can run into volatility, that impairs your ability to stay in an investment which can result in a permanent loss of capital.”
2016-03-20 13:36
Posted by Probability > Mar 20, 2016 01:36 PM | Report Abuse
Raider...I didn't get you when you said :'forced sell - in certain condition you can benefit'...how is that? A GOOD STOCK MAY SUBJECT TO FORCE SELL....AND AGAIN TAKE SOME TIME FOR IT TO RECOVER MAH...!!
JUST LIKE CIMB....IT USE TO BE AROUND RM 8.00....BUT IT WAS SELLDOWN TO RM 4.00....AND NOW HAD RECOVERED SLIGHTLY LOH....!!
SOME IMAGINE U R A CASH HOLDER OF CIMB....HOLDING COST OF RM 8.00..NOW AT RM 4.70....U WILL MAKE A SUBSTANTIAL LOSS OF MORE THAN 50% LOH..!!
BUT MARGIN HOLDERS....THE SELL TRIGGER WILL ALERT THEM TO SELL WHEN IT IS RM 7.00 TO RM 6.00 MAH....!!
HE CAN NOW BUY BACK CIMB....NOW RM 4.80 LOH....!!
SO FORCE SELL....HELP TO LIMIT LOSSES.
FORCE SELL...HELP HIM TO BUILD CAPITAL TO BUY BACK AT LOWER PRICE MAH...!!
You procured it at a higher price and because others selling brought down the price...you are forced to sell at a lower price. How do you stand to benefit...hope u can elaborate more.
U LIMIT THE LOSSES...IF U HOLD OWN U LOSE 50%....BUT U SELL ...U LOSSES IS LESS THAN 15% ....PLUS U GOT A CHANCE TO COMEBACK LOH...!!
And also, can you elaborate on this issue:
"Being a successful value investor requires that you have staying power. “Leverage can’t ever turn a bad investment good, but it can turn a good investment bad. When you are leveraged you can run into volatility, that impairs your ability to stay in an investment which can result in a permanent loss of capital.”
YES....STAYING POWER IS IMPORTANT....!!
USUALLY U WILL MAKE MONIES IN LONG RUN.
BUT MARGIN HOLDER HAVE AN OPTION....WHETHER TO RUN N COMEBACK...TO RUN JUST ENOUGH TO SATISFY A COMFORTABLE MARGIN.!!
BY SELLING SOME....U....STILL CAN BE A LONG TERM EQUITY INVESTOR LOH...!! EXAMPLE CIMB....!!
U HAVE OPTION TO BUY BACK MORE....WHEN TIME IS RIGHT LOH...!!
2016-03-20 14:16
Raider...I thought when you are forced to sell...then you have already reached the Margin limit. How to find more fund to buy back at a lower price...and isn't it much likelier that the price shoot up higher than your selling price after the forced sell.
Unless...you reallocate by selling other stocks and buy CIMB at 4.00..is that what you mean?
2016-03-20 15:18
Posted by stockraider > Mar 20, 2016 02:16 PM | Report Abuse
A GOOD STOCK MAY SUBJECT TO FORCE SELL....AND AGAIN TAKE SOME TIME FOR IT TO RECOVER MAH...!!
JUST LIKE CIMB....IT USE TO BE AROUND RM 8.00....BUT IT WAS SELLDOWN TO RM 4.00....AND NOW HAD RECOVERED SLIGHTLY LOH....!!
SOME IMAGINE U R A CASH HOLDER OF CIMB....HOLDING COST OF RM 8.00..NOW AT RM 4.70....U WILL MAKE A SUBSTANTIAL LOSS OF MORE THAN 50% LOH..!!
BUT MARGIN HOLDERS....THE SELL TRIGGER WILL ALERT THEM TO SELL WHEN IT IS RM 7.00 TO RM 6.00 MAH....!!
A cash holder of CIMB, using his own money of RM100000 to buy CIMB at RM8.00, would have lost only RM33000 at the present price of RM4.80, even if he is still holding the shares. The loss is 41%, and not your “U WILL MAKE A SUBSTANTIAL LOSS OF MORE THAN 50% LOH..!!”
For simplicity sake, let us look at a simple case.
You advised a newbie to invest in CIMB shares “using margin to the limit”. You asked him to invest RM200000, RM100000 is his own money and the other RM100000 from margin finance, because the interest rate was so cheap, and it is stupid not to use margin finance to make more money to buy a good share like CIMB, plenty of margin of safety mah!
Then the poor fellow encountered force selling at RM6.00, or 25% drop of the share price. He has now incurred a total loss of RM500000 because of the margins.
Nevertheless, the margin user seems to be happier, according to you, because his shares have been forced sold at RM6.00, and now he has “build up his capital” of RM50000, although he has made an exaggerated loss of RM50000 already.
Now you advise him to buy CIMB at RM4.80, a much lower price than his forced sold price, and that CIMB is such a good company.
Questions:
1) Are you advising him to buy using his own money of RM50000, or “use margin to the limit” again by using another margin finance of RM50000?
2) If the earlier option, he has lost RM50000, or 50% of his own capital, he needs to make 100% to recover. How long do you think he has to wait, just to recover his loss?
3) If the option is the later, what would happen if CIMB drops another 30%?
4) Or you think the scenario is (3) above won’t happen? Why are you so sure?
Have you seen a couple of stocks in the portfolio posted here, a genuine portfolio, and not randomly selected stocks to fail margin finance, have lost more than 50% in just three months, even when the overall market went up?
5) If (3) above happen, what would be your advice again? And why?
2016-03-20 15:48
My understanding is simplistic.
Margin = Leverage. Leverage = win more, also lose more. No need argue which is best. Margin is a financial tool, risky but if you are skilled, go ahead. I must declare I am not a user of margin financing.
KC should chill out when trolled. Perhaps you may not understand what is a troll.
"In Internet slang, a troll (/ˈtroʊl/, /ˈtrɒl/) is a person who sows discord on the Internet by starting arguments or upsetting people, by posting inflammatory,[1] extraneous, or off-topic messages in an online community (such as a newsgroup, forum, chat room, or blog) with the deliberate intent of provoking readers into an emotional response[2] or of otherwise disrupting normal on-topic discussion,[3] often for their own amusement."
-- from wikipedia. https://en.wikipedia.org/wiki/Internet_troll
Keep up the good posts, kcchongz.
2016-03-20 16:12
Stockraider,
aiyoh, you are very cute loh.....
RAIDER COMMENT;
No...raider only agree that, those incompetent & lose monies....should not involve at stockmarket mah....!!
Thus only Leaving the competent....that should be involve in stockmarket....loh...!!
you talk as if you are god loh..., sure win one loh...
my neighbor Ah Kau loh.. also had told me he gambles sure win one loh... he got all the necessary competencies and skills ma...
when we say gambling is bad, he will rebut that gambling is not that simple or evil as you viewed it. it is neutral, It can be viewed with a positive expected return or negative expected return
then, I asked,
how?
he said:if you think you can win big you must hit hard, dare dare borrow from ah long ,no risk no gain. that is how people get rich
he is really my hero loh.....
I met him yesterday, I got a shock
he was sitting listlessly at the corridor of a temple with a big milo tin in front.
murmuring non stop, loh,loh...leh,leh, mah, mah......
so pitiful....
I took our 2 ringgits from my pocket and put into his milo tin
Moral of the story:
Posted by pisanggoreng > Mar 19, 2016 03:52 PM | Report Abuse X
to a gambler, if he didn't lose until he need to chop off his fingers , he will never believe gambling is bad
2016-03-20 17:58
Posted by kcchongnz > Mar 20, 2016 03:48 PM | Report Abuse
Posted by stockraider > Mar 20, 2016 02:16 PM | Report Abuse
A GOOD STOCK MAY SUBJECT TO FORCE SELL....AND AGAIN TAKE SOME TIME FOR IT TO RECOVER MAH...!!
JUST LIKE CIMB....IT USE TO BE AROUND RM 8.00....BUT IT WAS SELLDOWN TO RM 4.00....AND NOW HAD RECOVERED SLIGHTLY LOH....!!
SOME IMAGINE U R A CASH HOLDER OF CIMB....HOLDING COST OF RM 8.00..NOW AT RM 4.70....U WILL MAKE A SUBSTANTIAL LOSS OF MORE THAN 50% LOH..!!
BUT MARGIN HOLDERS....THE SELL TRIGGER WILL ALERT THEM TO SELL WHEN IT IS RM 7.00 TO RM 6.00 MAH....!!
A cash holder of CIMB, using his own money of RM100000 to buy CIMB at RM8.00, would have lost only RM33000 at the present price of RM4.80, even if he is still holding the shares. The loss is 41%, and not your “U WILL MAKE A SUBSTANTIAL LOSS OF MORE THAN 50% LOH..!!”
For simplicity sake, let us look at a simple case.
IN ANYCASE THE MARGIN HOLDER WILL BE LONG GONE AT 7.00 TO 6.00....B4 IT REACH RM 4.00 MAH.....!!
THIS INDICATE MARGIN HOLDER WILL LIKELY TO LOSE LESS LOH...!!
You advised a newbie to invest in CIMB shares “using margin to the limit”. You asked him to invest RM200000, RM100000 is his own money and the other RM100000 from margin finance, because the interest rate was so cheap, and it is stupid not to use margin finance to make more money to buy a good share like CIMB, plenty of margin of safety mah!
AGAIN RAIDER WILL LIKE TO EMPHASIS IF A CASH HOLDER PUT RM 1OOK CASH ON CIMB.....AND HOLD UNTIL SAY RM 4.70....HE LOSSES AT RM 41K WILL NOT BE NOT LESS THAN THE MARGIN HOLDER WHO PUT RM 200K AT RM 8.00 AND LARI KUAT KUAT AT RM 6.50....A LOSS OF RM 37.5K LOH...!!
BUT UNLIKE THE CASH PURCHASER....THE MARGIN HOLDERS NOW IS IN A SIGNIFICANT CASH & FUNDING POSITION TO MAKE PURCHASES IF HE CHOSE TO MAH....!!
THIS SIGNFICANT MARGIN LINE.....ALLOW HIM TO TURNAROUND WHEN THE SHARE UPTURN. THE CASH PURCHASER WILL HAVE LESS FLEXIBILITY LOH..!!
Then the poor fellow encountered force selling at RM6.00, or 25% drop of the share price.(FORCE SALE WILL BE DONE NORMALLY AT RM 7.00 TO 6.00 THUS RAIDER TAKE RM 6,50). He has now incurred a total loss of RM500000 because of the margins, THE LOSSES FROM THE FORCE SALE IS RM 37.5K LOH...!! ABOUT 19% LOSSES MAH..!!.
Nevertheless, the margin user seems to be happier, according to you, because his shares have been forced sold at RM6.00(RAIDER SAY RM 6.50), and now he has “build up his capital” of RM50000, although he has made an exaggerated loss of RM50000(RAIDER SAY RM 37.5K) already.
Now you advise him to buy CIMB at RM4.80, a much lower price than his forced sold price, and that CIMB is such a good company.
HE HAS THE OPTION NOW TO BUY LOH....!!
JUST LIKE MAYBANK...IN 1998-1999...IS FORCE SALEDOWN TO ABOUT RM 2.50 MAH....!!
Questions:
1) Are you advising him to buy using his own money of RM50000(37.5K), or “use margin to the limit” again by using another margin finance of RM50000 (RM 37.5K)?
YES...HIS GIVEN AN OPTION OF 2ND CHANCE TO RECOVER....VERY FEW PEOPLE GOT THIS TYPE OF OPPORTUNITY LOH..!!
2) If the earlier option, he has lost RM50000 (RM 37,5K), or 50% of his own capital, he needs to make 100% to recover. How long do you think he has to wait, just to recover his loss?
RAIDER SAYS ASSUME THE CASH HOLDER WITH RM 100K CASH AND MARGIN HOLDER CAPITAL CASH RM 100K...BOTH LOSS SAY RM 40K...WOULD IT NOT BOTH HARD PRESS TO RECOVER ITS CAPITAL LEH ??
LOSING MONIES IS NOT DUE TO MARGIN OR CASH INVESTMENT....BOTH RUN INTO UNFORTUNATE BAD LUCK MAH....!!
3) If the option is the later, what would happen if CIMB drops another 30%? AGAIN RAIDER SAYS THE MARGIN HOLDERS HAS THE OPTION TO USE...HIS BUYING POWER LOH...!!
TO BUY AND NOT TO BUY IS AT HIS OPTION LOH....!! IF CHOSE TO BUY THE SAME LEVEL OF CIMB SHARE AS THE CASH HOLDER....HIS LOSSES WILL NOT BE MORE THAN THE CASH HOLDER....SHOULD THEY HAVE THE UNFORTUNATE CONDITION OF LOSING ANOTHER 30% LOH...!!
4) Or you think the scenario is (3) above won’t happen? Why are you so sure? OF COURSE THE ABOVE SCENARIO...DO HAPPEN....BUT THIS LOSSES IS APPLICABLE TO BOTH THE CASH HOLDER AND MARGIN HOLDER MAH...!!
YOUR ARGUEMENT & SCENARIO...IS LIKE PUTTING UP A CASE OF NOT INVESTING INTO EQUITY LOH....!!
IT IS NOT...LIKE SHOULD INVEST IN EQUITY....BUT USE CASH BUT DON USE MARGIN MAH....!!
BCOS THE CASH HOLDERS SUFFER ALMOST THE SAME LOSSES OF MARGIN HOLDERS LOH...!!
Have you seen a couple of stocks in the portfolio posted here, a genuine portfolio, and not randomly selected stocks to fail margin finance, have lost more than 50% in just three months, even when the overall market went up?
RAIDER ALSO SEE CASH HOLDERS LOSING 100% OF THEIR EQUITY TOO LOH...!!
IT HAS NOTHING TO DO WITH MARGIN HOLDERS ONLY....IT IS THIS PEOPLE ARE NOT CUT OUT TO INVEST IN THE 1ST PLACE LOH...!!
5) If (3) above happen, what would be your advice again? And why?
2016-03-20 23:48
Posted by kcchongnz > Mar 20, 2016 03:48 PM | Report Abuse
Posted by stockraider > Mar 20, 2016 02:16 PM | Report Abuse
A GOOD STOCK MAY SUBJECT TO FORCE SELL....AND AGAIN TAKE SOME TIME FOR IT TO RECOVER MAH...!!
JUST LIKE CIMB....IT USE TO BE AROUND RM 8.00....BUT IT WAS SELLDOWN TO RM 4.00....AND NOW HAD RECOVERED SLIGHTLY LOH....!!
SOME IMAGINE U R A CASH HOLDER OF CIMB....HOLDING COST OF RM 8.00..NOW AT RM 4.70....U WILL MAKE A SUBSTANTIAL LOSS OF MORE THAN 50% LOH..!!
BUT MARGIN HOLDERS....THE SELL TRIGGER WILL ALERT THEM TO SELL WHEN IT IS RM 7.00 TO RM 6.00 MAH....!!
A cash holder of CIMB, using his own money of RM100000 to buy CIMB at RM8.00, would have lost only RM33000 at the present price of RM4.80, even if he is still holding the shares. The loss is 41%, and not your “U WILL MAKE A SUBSTANTIAL LOSS OF MORE THAN 50% LOH..!!”
For simplicity sake, let us look at a simple case.
IN ANYCASE THE MARGIN HOLDER WILL BE LONG GONE AT 7.00 TO 6.00....B4 IT REACH RM 4.00 MAH.....!!
THIS INDICATE MARGIN HOLDER WILL LIKELY TO LOSE LESS LOH...!!
You advised a newbie to invest in CIMB shares “using margin to the limit”. You asked him to invest RM200000, RM100000 is his own money and the other RM100000 from margin finance, because the interest rate was so cheap, and it is stupid not to use margin finance to make more money to buy a good share like CIMB, plenty of margin of safety mah!
AGAIN RAIDER WILL LIKE TO EMPHASIS IF A CASH HOLDER PUT RM 1OOK CASH ON CIMB.....AND HOLD UNTIL SAY RM 4.70....HE LOSSES AT RM 41K WILL NOT BE NOT LESS THAN THE MARGIN HOLDER WHO PUT RM 200K AT RM 8.00 AND LARI KUAT KUAT AT RM 6.50....A LOSS OF RM 37.5K LOH...!!
BUT UNLIKE THE CASH PURCHASER....THE MARGIN HOLDERS NOW IS IN A SIGNIFICANT CASH & FUNDING POSITION TO MAKE PURCHASES IF HE CHOSE TO MAH....!!
THIS SIGNFICANT MARGIN LINE.....ALLOW HIM TO TURNAROUND WHEN THE SHARE UPTURN. THE CASH PURCHASER WILL HAVE LESS FLEXIBILITY LOH..!!
Then the poor fellow encountered force selling at RM6.00, or 25% drop of the share price.(FORCE SALE WILL BE DONE NORMALLY AT RM 7.00 TO 6.00 THUS RAIDER TAKE RM 6,50). He has now incurred a total loss of RM500000 because of the margins, THE LOSSES FROM THE FORCE SALE IS RM 37.5K LOH...!! ABOUT 19% LOSSES MAH..!!.
Nevertheless, the margin user seems to be happier, according to you, because his shares have been forced sold at RM6.00(RAIDER SAY RM 6.50), and now he has “build up his capital” of RM50000, although he has made an exaggerated loss of RM50000(RAIDER SAY RM 37.5K) already.
Now you advise him to buy CIMB at RM4.80, a much lower price than his forced sold price, and that CIMB is such a good company.
HE HAS THE OPTION NOW TO BUY LOH....!!
JUST LIKE MAYBANK...IN 1998-1999...IS FORCE SALEDOWN TO ABOUT RM 2.50 MAH....!!
Questions:
1) Are you advising him to buy using his own money of RM50000(37.5K), or “use margin to the limit” again by using another margin finance of RM50000 (RM 37.5K)?
YES...HIS GIVEN AN OPTION OF 2ND CHANCE TO RECOVER....VERY FEW PEOPLE GOT THIS TYPE OF OPPORTUNITY LOH..!!
2) If the earlier option, he has lost RM50000 (RM 37,5K), or 50% of his own capital, he needs to make 100% to recover. How long do you think he has to wait, just to recover his loss?
RAIDER SAYS ASSUME THE CASH HOLDER WITH RM 100K CASH AND MARGIN HOLDER CAPITAL CASH RM 100K...BOTH LOSS SAY RM 40K...WOULD IT NOT BOTH HARD PRESS TO RECOVER ITS CAPITAL LEH ??
LOSING MONIES IS NOT DUE TO MARGIN OR CASH INVESTMENT....BOTH RUN INTO UNFORTUNATE BAD LUCK MAH....!!
3) If the option is the later, what would happen if CIMB drops another 30%? AGAIN RAIDER SAYS THE MARGIN HOLDERS HAS THE OPTION TO USE...HIS BUYING POWER LOH...!!
TO BUY AND NOT TO BUY IS AT HIS OPTION LOH....!! IF CHOSE TO BUY THE SAME LEVEL OF CIMB SHARE AS THE CASH HOLDER....HIS LOSSES WILL NOT BE MORE THAN THE CASH HOLDER....SHOULD THEY HAVE THE UNFORTUNATE CONDITION OF LOSING ANOTHER 30% LOH...!!
4) Or you think the scenario is (3) above won’t happen? Why are you so sure? OF COURSE THE ABOVE SCENARIO...DO HAPPEN....BUT THIS LOSSES IS APPLICABLE TO BOTH THE CASH HOLDER AND MARGIN HOLDER MAH...!!
YOUR ARGUEMENT & SCENARIO...IS LIKE PUTTING UP A CASE OF NOT INVESTING INTO EQUITY LOH....!!
IT IS NOT...LIKE SHOULD INVEST IN EQUITY....BUT USE CASH BUT DON USE MARGIN MAH....!!
BCOS THE CASH HOLDERS SUFFER ALMOST THE SAME LOSSES OF MARGIN HOLDERS LOH...!!
Have you seen a couple of stocks in the portfolio posted here, a genuine portfolio, and not randomly selected stocks to fail margin finance, have lost more than 50% in just three months, even when the overall market went up?
RAIDER ALSO SEE CASH HOLDERS LOSING 100% OF THEIR EQUITY TOO LOH...!!
IT HAS NOTHING TO DO WITH MARGIN HOLDERS ONLY....IT IS THIS PEOPLE ARE NOT CUT OUT TO INVEST IN THE 1ST PLACE LOH...!!
5) If (3) above happen, what would be your advice again? And why?
2016-03-20 23:49
Posted by pisanggoreng > Mar 20, 2016 05:58 PM | Report Abuse
Stockraider,
aiyoh, you are very cute loh.....
RAIDER COMMENT;
No...raider only agree that, those incompetent & lose monies....should not involve at stockmarket mah....!!
Thus only Leaving the competent....that should be involve in stockmarket....loh...!!
you talk as if you are god loh..., sure win one loh...
my neighbor Ah Kau loh.. also had told me he gambles sure win one loh... he got all the necessary competencies and skills ma...
when we say gambling is bad, he will rebut that gambling is not that simple or evil as you viewed it. it is neutral, It can be viewed with a positive expected return or negative expected return.
RAIDER ALREADY POINTED OUT USING MARGIN IS NOT GAMBLING LOH...!!
MARGIN IS JUST A MORE EFFICIENT WAY TO MAGNIFY YOUR SUCCESS LOH...!!
OF COURSE IF U R NOT SUCCESSFUL YOUR LOSSES WILL MAGNIFY TOO LOH..!!
then, I asked,how?
he said:if you think you can win big you must hit hard, dare dare borrow from ah long ,no risk no gain. that is how people get rich
he is really my hero loh..... RAIDER ANSWER IS VERY SIMPLE ...IT IS FORMULATE WITH WHAT KC CHONG TALKING ALL ABOUT...HE CLAIM THAT HIS LEARNED INVESTMENT METHOD CAN MAKE SOMETHING LIKE 15% PA AVERAGE...THEN IF IT CAN BE DONE SUCCESSFULLY...THEN IT DOES NOT MATTER, WHETHER IT IS CASH HOLDER OR MARGIN HOLDER....THEY BOTH WILL BE SUCCESSFUL LOH...!!
JUST THAT THE MARGIN HOLDER WHEN SUCCESSFUL WILL BE MORE SUCCESSFUL MAH...!!
I met him yesterday, I got a shock
he was sitting listlessly at the corridor of a temple with a big milo tin in front.
murmuring non stop, loh,loh...leh,leh, mah, mah......THATS WHY RAIDER SAYS ALL THE WHILE...IF U R NOT CUT OUT TO BE GOOD IN INVESTMENT...U SHOULD NOT INVEST AT ALL MAH...!
IF U DO NOT INVEST AT ALL BCOS U R LOUSY IN THE 1ST PLACE...THEY WILL BE NO ARGUEMENT WHETHER TO USE MARGIN OR NOT MAH ??
so pitiful....
I took our 2 ringgits from my pocket and put into his milo tin. YES PITIFUL BCOS THIS ARE LOUSY INVESTORS...NOT CUT OUT TO MAKE IT...IN THIS INVESTMENT WORLD LOH..!!
Moral of the story: RAIDER AGREE..BUT USING MARGIN IS NOT GAMBLING LOH!
to a gambler, if he didn't lose until he need to chop off his fingers , he will never believe gambling is bad
2016-03-21 00:04
Its obvious that leverage magnifies the losses. I dont know how people can argue that margin call is a good thing.
Simple terms, if you leverage up to 2x, it takes a loss of 10% on the actual share price to make you lose 20%. If you use cash, you only lose 20% when the share price drops 20%.
Also what makes you think cutting loss is a good strategy ? It is only a good strategy if share price continues to drop after your margin call triggered. What if after margin call triggered, the share price goes up instead of down, you would have lost the opportunity to enjoy the gains vs a cash investor who had the holding power.
2016-03-21 00:10
Posted by kpfam > Mar 20, 2016 04:12 PM | Report Abuse
My understanding is simplistic.
Margin = Leverage. Leverage = win more, also lose more. No need argue which is best. Margin is a financial tool, risky but if you are skilled, go ahead. I must declare I am not a user of margin financing.
THIS IS PRECISELY WHAT RAIDER HAD BEING SAYING ALL THE WHILE.
BUT ONE POINT...I WANT TO CORRECT KPFAM...IF U R NOT COMPETENT U SHOULD NOT INVEST AT ALL LOH....!!
IF U DO NOT INVEST...THERE IS NO ISSUE OF USING MARGIN AT ALL LOH..!!
IF U R COMPETENT...THEN U SHOULD INVEST LOH...!!
THEN THE QUESTION ARISE...WHETHER U SHOULD USE MARGIN OR NOT TO MAGNIFY YOUR SUCCESS SINCE U R COMPETENT ?
2016-03-21 00:15
stockraider,
I gone through you comments with patience, then ,I realized why you like to paste other people comment.
you talk 3 talk 4, talk so long , talk so much, actually you are only repeating 2 points
1. "IF U R NOT COMPETENT U SHOULD NOT INVEST AT ALL LOH....!!
so what about your new born baby who is not competent to eat, can he not eat??
2. MF AMPLIFIES RETURN.
this is really words of wisdom, not many can see this powerful cash generator
your wisdom is not less wiser than my friend ah kau.
ah kau will never miss any chance to preach his theory to his friends including me.
he said :if you think you can win big you must hit hard, no bullet? dare dare borrow from ah long ,no risk no gain. that is how people get rich never let your chicken heart to have defeated your ambition to be super rich
of course in real life there are some lucky ah kau,super rich ah kau, KYY is one of them, you are the next to be
BUT, in reality , there are far more unlucky ah kau. holding milo tin
my dear friend,
do you know how I view you?
with you super wisdom and competency and years of fortune telling expertise, you can never be the unlucky one
moreover you are a good man , sharing with us how to get rich fast, God can not be that cruel, there is never a day I need not to put 2 pieces of RM1.00 into your milo tin.
2016-03-21 10:55
Goreng...Raider may have a point there ( Saying Margin is a Neutral tool)...I reserve my comments at this moment till I have gone through in detail and made some mathematical derivation on his arguments...lets see
2016-03-21 11:13
stockraider,
I gone through you comments with patience, then ,I realized why you like to paste other people comment.
you talk 3 talk 4, talk so long , talk so much, actually you are only repeating 2 points
1. "IF U R NOT COMPETENT U SHOULD NOT INVEST AT ALL LOH....!!
so what about your new born baby who is not competent to eat, can he not eat?? I am saying if u r not competent...acquire the competent 1st b4 use margin loh....!! Just like a newborn baby cannot run...then don run loh...crawl 1st mah...!!
2. MF AMPLIFIES RETURN.
this is really words of wisdom, not many can see this powerful cash generator
your wisdom is not less wiser than my friend ah kau.AS RAIDER SAY U FRIEND AH KAU...A LOUSY INVESTOR...CANNOT EVEN MAKE MONIES...USING CASH..HOW TO USE MARGIN LEH ?
IN ORDER TO USE MARGIN U MUST BE GOOD INVESTMENT 1ST B4 YOUR RETURN MAGNIFY LOH...!!
IF U LOSE MONIES...UR LOSSES WILL BE MAGNIFY LOH...!!
ah kau will never miss any chance to preach his theory to his friends including me. YES THIS PRECISELY LOH...IN THE 1ST PLACE...AH KAU SHOULD NOT INVEST AT ALL LOH...!!
IT IS PEOPLE LIKE U AND KC...LUMP FAILURE LIKE AH KAU, MISLEADINGLY...DUE TO MARGIN..BUT IT IS NOT DUE TO MARGIN...IT IS AHKAU...INCOMPETENT THAT LEAD TO HIS HARDSHIP LOH...!!
he said :if you think you can win big you must hit hard, no bullet? dare dare borrow from ah long ,no risk no gain. that is how people get rich never let your chicken heart to have defeated your ambition to be super rich. BUT AHKAU IS SUPPOSE...TO BE A SMALL BABY...HE MUST LEARN TO CRAWL 1ST...HOW COULD HE WIN A 100 METRE SPRINTING RACE ??
AS HIM TO SIGN UP WITH KC INVESTMENT COURSE 1ST LOH...!!
of course in real life there are some lucky ah kau,super rich ah kau, KYY is one of them, you are the next to be. U THINK PEOPLE LIKE MR KYY SUCCESS DUE TO LUCK MEH ? IT IS ALL SKILL MAH...!!
MAKING MONIES FROM STOCK MARKET NOT EASY LOH...FURTHERMORE U NEED TO MAKE MONIES CONSISTENTLY...IN ORDER BE SUCCESSFUL LOH..!!
BUT, in reality , there are far more unlucky ah kau. holding milo tin.AH KAU IS JUST A TYPICAL GAMBLERS...NOT ONLY HE GAMBLE...BUT HE MAKE USE OF MARGIN TOO LOH...!!
U MUST DUE WITH POSITIVE EXPECTED VALUE PROBABILIY AND NOT NEGATIVE EXPECTED VALUE PROBABILITY MAH..!! WHAT MORE U BORROW TO GAMBLE, SURE U LOSE HELL MAH...!!
my dear friend,
do you know how I view you?
with you super wisdom and competency and years of fortune telling expertise, you can never be the unlucky one. AS RAIDER SAY..THE SECRET OF INVESTMENT SUCCESS..IS DEALING WITH POSITIVE EXPECTED VALUE...THRU MARGIN OF SAFETY LOH...!!
RAIDER SHARE WITH U THE WONDERFUL WORLD OF MARGIN...BCOS IF U USE IT PROPERLY...U WILL BE VERY SUCCESSFUL MAH...!!
THIS TOOL U MUST USE IT PROPERLY WITH COMPETENCE LOH...!!
moreover you are a good man , sharing with us how to get rich fast, God can not be that cruel, there is never a day I need not to put 2 pieces of RM1.00 into your milo tin.
2016-03-21 15:13
stockraider,
you are a good man
finally you have made it clear that not every man can use margin finaning to invest.
One must learns how to crawl first before run, be bottle fed first before eating with spoon .
so this statement "IF U R NOT COMPETENT U SHOULD NOT INVEST AT ALL LOH....!! needs improvement , if not some baby may be very disappointed , never have a chance to grow strong and run fast like you
I am also glad that you recommend Ah Kau to join KC online course, that is right, if not , how can he know what is MOF
so , now I see , you are actually sharing something good.
but I still like to remind you that the good value of your sharing is overshadowed by all the cut and paste that i suggest you should try your best to do away. What's a waste if your heavenly wisdom is not allowed to exhibit but hidden in the shade. try it out,without cut and paste, there is nothing to lose, I am sure you will find thereafter your wisdom will shine brighter and you will come back telling me in reality it is true, MAN PLANS but GOD DECIDES.
GOOD LUCK and never never forget or ignore the role of LUCK in your investment which is indispensable especially in your margin financing to get rich fast
2016-03-21 17:13
When Raider say crawl....raider is not saying u go to learn margin financing straightaway....!!
U start with what is a prudent way of investing....Go and learn from Good guys like Kcchong....!!
After u learn....try investing...using cash 1st....!!
Then check & monitor how successful loh.....!!
If consistent successful.....!!
Then u can be more confident.....!!
Maybe if u want ....U may try out margin loh....!!
Again start with a small amount & slowly build up...!!
U increase your margin....only when your equity increase due to increase retained profit loh....!!
2016-03-21 19:14
I think most important...is to avoid being killed due to volatility.
(1) That has to be done via significant diversification...and perhaps stocks which are really close to negative EV and high MOS.
(2) Never use the Margin to the limit (have MOS here also)...so that you can dampen the damaging effects of volatility - avoiding losing your Capital significantly.
Hmm...i certainly need years to identify good stocks in such a 'convincing' manner......
2016-03-21 19:26
Posted by stockraider > Mar 21, 2016 07:14 PM | Report Abuse
When Raider say crawl....raider is not saying u go to learn margin financing straightaway....!!
U start with what is a prudent way of investing....Go and learn from Good guys like Kcchong....!!
Thank you very much stockraider
2016-03-21 19:26
KC,
I think you should thank me also
I contributed greatly to the "agree amongst the disagree" here .
2016-03-21 22:33
Posted by pisanggoreng > Mar 21, 2016 10:33 PM | Report Abuse
KC,
I think you should thank me also
I contributed greatly to the "agree amongst the disagree" here .
Pisanggoreng,
You know although I don't know you in person at all, but you are the few who always give me moral support. So it is understood that i always appreciate your kind words, just like a few others.
May be I have taken your kindness for granted.
2016-03-21 23:00
KC,
I am just joking with you. do not take it seriously, I take you as my sifu and a long acquaintance in i3.
2016-03-22 10:32
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
kcchongnz
Posted by stockraider > Mar 18, 2016 06:56 PM | Report Abuse
THE PORTFOLIO GIVEN BY KC, IN THIS EXAMPLE HAS BEEN RIGGED LOH..!!
IT IS DESIGN TO FAIL THE MARGIN INVESTOR LOH....!!
IF THE AUTHOR KC...IS GENUINE TO USE AS A CASE STUDY....WHY DON HE USE HIS 2013 PORTFOLIO, THAT IS HAS BEEN SUCCESSFUL & SEE WHETHER IF USE MARGIN, WILL HE MEET WITH FAILURE LEH ??
The portfolio was published in public forums on 26th December 2016. It is publicly available information with the prices at the time of publish.
Why is the “example has been rigged loh”? Who “designed to fail the margin investor loh”?
Yes, my 2013 portfolios, two of them made about 130%. However, the test of the survival of margin finance is not to choose a successful portfolio. Any portfolio using margin finance must be able to survive any market condition, especially in the short term, and a six-sigma market distress condition. And we aren’t even any time near to that yet. In fact, the broad market was up but that portfolio already suffered a big setback of 28.9%. How brutal it will be if there is a sharp drop of the market like the recent Shanghai Stock Exchange, that of 2008, 2001, 1998 etc.?
2016-03-19 00:05