Trading With A View

(Tradeview 2020) - Flash Crashes Come & Go, Do Not Fear. Ride It Out.

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Publish date: Mon, 26 Oct 2020, 12:19 PM
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Author of Once Upon A Time In Bursa : The MONEY Equation. A corporate strategist, lawyer & avid investor who has two great passion in life: Financial Markets & Real Estate. A true fundamentalist and financial writer motivated to tip the scale in favour of retail investors. Believe the stock market can be force for good.

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Major events are catalyst for the stock market. Depending on the outcome, more often than not, a knee jerk reaction is triggered. For those who have position in the stock market, the dilemma of holding or selling becomes the million dollar question. 

2020 is a truly extraordinary year. It is extraordinarily worrying and uncertain. For Malaysia, the people's mandated government fell due to Sheraton Move. Then the Covid-19 pandemic exploded globally. Yet in the middle of all this, the stock market went through an extraordinary period of boom due to the reactionary monetary policies from the federal government. 

From the lows of March 2020, the stock market went through a V shape recovery before hovering around 1500 levels. It is now end October. In another 1 week, US will be having their election. Globally, it is the most important macro political event as it impacts the global economy especially after 4 years of Trump's rule. Under Trump's Presidency, trade wars between nations commenced, trade agreements & international accords were abandoned, multilateralism & globalisation were replaced with unilateralism and nationalism. Again, all these happened whilst a global pandemic swept the world. 




Coming back to the domestic front, it would now appear that Malaysia is going through its own major political event. With the incumbent PN Government seeking to stay in power via "Emergency Declaration", that was a risk of triggering a huge selloff for the stock markets. Foreign investors be it in the stock, bond or FOREX market do not like uncertainty. What they dislike even more is the erosion of democracy and free markets. In the event this "Emergency Declaration" is allowed in whatever name or form, it would be tantamount to a subversion of democracy and in turn the free market as an authoritarian government doesn't require Parliament endorsement for its action allowing executive branch of the Government a free hand to enact an laws, policies and orders they deem fit. Thankful, this democracy crisis was averted yesterday when the King rejected the proposal by the Prime Minister. 


My biggest concern however has always been the US Elections 2020 as its the major political event for the world. The outcome will either roil or rally the markets globally, including KLCI. It will also determine if the stock market recovery of Bursa is L shape or W shape. In my view, most funds be it foreign or local have been selling off to raise cash and stay sidelines. In the event of a steep selloff, their position is protected and they have cash to manoeuvre.



 



This is one of the rare video interview of Warren Buffet when he was only 31 years old and his views on the 1962 flash crash. I think its apt for me to share this as I believe the potential selloff in the coming 1-2 weeks is temporary in nature and not caused by structural or fundamental change to the economy. 





Majority of retail investors loses money. From my experience, even many professionals / experts loses money from investing. This is because investing based on sentiment and herd mentality doesn't give you an edge over others. The stock market is a zero sum game where when someone wins another loses. Most who are successful in the stock market or in life for that matter definitely would have extraordinary traits that the majority doesn't possess. One may be extremely intelligent, prudent, brave, patient or lucky. Any of the traits mentioned, if you have one over the others that means you have an edge. 

My readers would know by now I am a contrarian investor. I do not go with the common view. This is because I am objective. Just because select media, analysts or funds thinks in a way doesn't mean I will follow. Being objective and impartial in my view allows me to make the best decision based on the circumstances. However, as a believer in buying on weakness, selling on strength, potential flash crashes in the coming weeks will provides good  opportunity for me to enter the market. 

KLCI apart from the healthcare and tech stocks, majority especially traditionally strong blue chips companies has been whacked down terribly. I have not seen Tenaga below RM 9, Genting below RM3, Axiata below RM3 etc for a long time. However, these Foreign fund favourite stocks are being punished for a reason. It is also in line with the fact that foreign fund have been ditching out share market for a long period now. I believe strongly this is related also to our unstable political situation. 

In my article last week, I stated "if the healthcare index do not perform and continued being sold off, nothing else will do well. Possibly tech sector may still sustain (but bear in mind if anyone thinks Gloves are overvalued, tech is 3 times overvalued). This means, no other sector will generate returns and yields to the funds in the next 1 year if the healthcare sector is dismissed as game over." 


There are only 2 courses of action for investors in the event of a market selloff. 

1. Either you stay sidelines and observe (wait & see); or
2. You buy on weakness in batches (scale your entry)

This is on the assumption that you have cash on hand. Panic selling, which most retail investors do during a market selloff , is the sure way to lose money. This is because panic selling leads to even more vicious selloff and you neither benefit by selling at low price or when the market rebounds, you have no position on hand to capitalise on the uptrend.

No one knows what will happen in the next few weeks. Whether current incumbent government would still be in power, whether a new leader will emerge, whether Trump or Biden will win and so on. But I know the pandemic would still be around and vaccine which may or may not be approved by November would not eradicate Covid-19 in the next few months. This means if you adopt either of the 2 choices above, your best bet for buying on weakness would only be the glove sector and select blue chips. This is a foolproof playbook. 

_______________________________________________________________

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Food for thought: 












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Discussions
2 people like this. Showing 6 of 6 comments

SureWin1Woh

I always find your article sensible and provide good view from another perspective. Keep it up!!

2020-10-26 13:34

Erudite

gud one! nice

2020-10-26 17:54

CCCL

Not only gloves, tech and blue chips..look for underdog sectors when others overlooked.

2020-10-26 21:23

tylee81

https://www.theedgemarkets.com/article/asian-rubber-prices-soar-supply-woes-covid-glove-shortage-and-china-tyre-demand

2020-11-01 11:35

stockraider

Beware of this sohai dishonest 3iii loh...!!

He always ask u to chase expensive & overvalue loh...!!

Warren Buffett looks at three character traits in people who surround him: integrity, energy and intelligence. He says, if you don't have the first, the last two will kill you. In fact, if they don't have integrity, he would rather his managers be lazy and dumb.

"Integrity is like oxygen. If you don't have it, nothing else matters."

"Be honest. Never lie under any circumstances. Just basically lay it out as you see it. Simply speak openly and frankly."

Integrity is also about principles, full disclosure and openness.

Integrity is a choice, and the lack of it most often leads to self destruction.

The above lead Raider think of sohai dishonest 3iii of double standard below loh..!!

This sohai 3iii really talk like sohai loh...!!

What about Dlady fallen from Rm 66 to Rm 34.58 leh ??
What about Padini From Rm 6.00 to Rm 2.08 leh ??
What about Petdag from Rm 32.00 to Rm 17.20 leh ??

This what invest all about value & margin of safety loh...!!

U NEED TO UNDERSTAND RAIDER BREAKEVEN COST ON NETX IS 11.5 SEN, BUT AS AT NOW THE PRICE is 10.5 sen...RAIDER LOST MORE THAN 10% OR COST OF MYV LOH...!!
BUT THIS IS A TEMPORARY FLUCTUATION LOSS DUE TO MR MARKET MAH...DO REMEMBER THAT THE NET CASH PER SHARE of netx IS 15 SEN PER SHARE CERTAINTLY U SHOULD FEEL HIGH COMFORTABLE BASED ON THIS HIGH MARGIN OF SAFETY LOH..!

COME TO SOHAI 3iii LOOKING AT his PORTFOLIO ABOVE...U WILL NOTICE OVER 2 YEARS THIS SOHAI LOST MORE THAN 50% MARK TO MARKET VALUE OF HIS BLUECHIP PORTFOLIO LOH..!!
IF SOHAI 3iii CLAIM HE HAS RM 60M MARK MKT HIS PORTFOLIO 2 YRS AGO..TODAY IT IS WORTH ONLY RM 30M TODAY LOH...!!

HAVING SEEN THIS SOHAI 3iii STAGGERING LOSSES, DO U NOT THINK..THIS SOHAI IS NOT VERY SORE WITH SIFU CALVIN & GENERAL RAIDER LEH ??

BY RIGHT THIS SOHAI 3iii SHOULD LEARN FROM REFRAINING KEEPING OVERVALUE STOCK EVEN IT IS BLUECHIP LOH..!!
AS ADVOCATED BY SIFU CALVIN & GENERAL RAIDER U SHOULD SELL TO MR MARKET WHEN OVERVALUE LOH...!!


Posted by Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥ > Nov 1, 2020 8:50 AM | Report Abuse

conman calvin, dishonest raider and their whiners, groaners and moaners should be remorseful for deleting all the sincere honest truthful posts of their purported "naysayers". These deleted posts have saved many from losses in Netx.

Well done to the naysayers for their intelligence, diligence and hardwork in fundamental research on Netx.

2020-11-01 12:08

stockraider

correctloh...!!

Netx has gone thru development stage already spend Rm 200m loh...!!

The netx stage of commercialization more exciting towards making monies loh...!!

With cash hoard over Rm 126m....Netx has financial muscle loh...!!

U need to allow time for it to bear fruits loh..!

Posted by Good123 > Oct 28, 2020 5:26 PM | Report Abuse

Think long term

“The big money is not in the buying and selling, but the waiting” - Charlie Munger

Finally, patience. If you’ve been you’ll know that we’re long-term investors at heart.

As humans we generally have a tendency for activity, we always want to be doing something. In financial markets, that can take the form of buying and selling frequently.

However, if we buy and sell, we unnecessarily interrupt the 8th wonder of the world from working its magic: compound interest.

To illustrate, if you start with $1 and it increases by 1% each day and is compounded daily for a year, it grows to $37. That’s a 37 fold increase.

After 5 years, that initial dollar becomes $77,002,912.

So long term investing is where the big money is made.

2020-11-01 12:13

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