Being an academic by profession can be rather a handicap at times. Often the comment has been made:"Ah! that is only theory!" when I express an opinion that a stock is too high. So this chapter, a report is given on the thoughts and experience of a layman who had little academic training in investment but yet had made a great success of it. Let me introduce you to my good friend Charlie who is one of the few persons personally known to me who had made a tidy sum from stocks without resorting to stock manipulations or by financial trickeries. Let us hear from him on how how he did it "his way". Although this interview was conducted in late 1982, Charlie's views still have much relevance and immediacy today.

Charlie is a rather remarkable person. He is a doctor by profession although not really by choice. Since his father is a doctor, he was more or less pushed into it as a young man. Although he is a good doctor (as far as can be seen), he is not very popular because he refuses to conform to the local practice of prescribing six different pills for just a common cold. Not being popular has its advantages; it leaves him enough time to pursue his second career as an investor. In less than ten years since he started, he has made a small fortune for himself. He is too modest to say how much but it must certainly be well into seven figures.

When did he first develop an interest in stocks? To be sure, that is a very unusual hobby for a doctor.

"As you know, I have never been too keen on being a doctor. So while I was at university (he was educated at a well-known US university) , I tried to widen my interests by taking extra courses. As in most American universities, auditors (students who attend lectures without taking the examinations) were welcome at most lectures. I audited a course on investment management by a rather famous professor and I found it fascinating. The Professor would often quote stories of wild successes and terrible disasters in investments. Stories like that of Jimmy Ling who played a small US$50 million company into US1 billion LTV and back to almost nothing again. This professor also had a terrible contempt for market professionals and always told us that the quickest way to the poor house was to over-rely on their advise. I believed him because young as he was, he drove a beautiful Porsche and was always impeccably dressed in English-tailored suits. He could not possibly do that on a professor's salary. I suppose it was then that I decided that investment may be an interesting and profitable hobby to pick up."

"How did he ever learn enough to make decisions on investment?

"Understanding an annual report is far easier than most laymen realise. It does not take many hours of work with an elementary book on accounting to understand what each item on the annual report means, It is of course much more difficult to be an accountant but you do not need that much knowledge to understand an accountant. But a knowledge of accounting is secondary compared with a knowledge of what does each company actually do. You must realise that at a minimum, a good investor must keep track of thirty or so companies. One needs a very high order of natural curiosity to wish to learn a lot about each of these thirty companies.One must know what each company sells, to whom, at what profit level, against which competitors, etc.

It is neccessary to know all this about a company because one must be ever ready for buying or selling opportunities. Above all else, one has to keep track of the market prices as well as the PER and dividend yield every trading day. I am fortunate in that I have a very well-honed and disciplined memory. I can digest a lot of information and keep it filed for future reference. I suppose a less lucky person may have to develop a good filing system."

Does this take a lot of time​?

"Not really, it is the consistency that is important. I suppose I spend about a couple of hours a day on it, more or less. You must not forget once the market has gone mad, I would be totally out of the market. I have not bought anything since early 1980 except new issues. Those do not take much time at all.

Does he have an overall strategy in investment?

"Oh, most definitely! I strongly believe that investment in Malaysis is a loser's game."

What the heck is a loser's ga​me?

That turned out to be a rather long story. Let me explain it quickly before continuing with Charlie's story.

The loser's game.

 It so happens that Charlie is a keen tennis player and he has bought many books trying to improve his rather mediocre game. Among the books he bought was one by Dr. Simon Ramo entitled Extraordinary tennis for ordinary tennis player.

 Dr. Ramo noticed over a period of observing the game, that tennis is actually two different games. One type of tennis game is played by the professionals and very few gifted amateurs while the other type is played by all the rest of us.

 Although the players in both types of games use the same equipment, play to the same rules and wear roughly the same clothes, the games cannot be more different. After extensive computerised analysis, Dr. Ramo uncovered the big difference. Professionals win their games by winning more points than their opponents (for example, by hitting a superb cross-court volley which the opponent fails to return) while amateurs win their games by losing fewer points than their opponents (who lose point after point by hitting into the net or hitting out, for example). While professionals seldom make errors, amateurs continually make errors.

Professional tennis is therefore a winner's game while amateur tennis is a loser's game. A professional wins because he is better than his opponent. An amateur, if he wants to win consistently, best plays a highly defensive game and lets his opponent attempt to make all the winning shots. This for sure he will not be able to do because he is an amateur. The opponent will always end up killing himself and handing over the game to you. This may be a very dull strategy but it works precisely because amateur tennis is a loser's game.

What makes Charlie decide that investment in Malaysia is a loser's game?

"Let us face it. It is a real jungle out there. How much chance do you think a small guy like me has against the big guys?  Of course, one cannot prove it but there are syndicates with tens of millions of dollars to play the market, insiders with top secret news, investors who are in cahort with brokers and big boys who can eat you for breakfast without thinking. You must be a fool to think that you can win playing their game. What is the use of hot tips you get from your brokers? Do you think he passes them to you first? What is the use of chasing a stock after a bonus issue is announced?  The smart guys would have bought it before the rumours had even started. Let's face it, in this game, we are as much losers as if I were to face Borg or McEnroe in a game of tennis"'

Charlie continues, "The only way to play this game is to accept the undeniable fact that we are losers right from the start and play a loser's game. We only play where and when the big boys are not playing. We only play on our terms, not theirs"

To be continued..... (A LOT MORE FROM DR NEOH's BOOK - SO YOU MUST COME BACK FOR MORE LATER!!)

Calvin comments:

I have warned about syndicated play on Sumatech (Sumatran Techno Tiger)

Also warned about IFCA -

If

Fall

C (Hokkien for "Die")

Argh!!

And VSolar (Very Stupid)

XOX -

X = Double bladed Knife.

0 = the human head.

X = Double bladed knife. 

How many dumb fools have been eaten by syndicates?

So please play "A VERY DEFENSIVE GAME"

Regards,

Calvin Tan

So Calvin always avoid syndicated popular "hot stocks" BECAUSE OF DR.  NEOH"S WARNING!

To be continued.....