THE INVESTMENT APPROACH OF CALVIN TAN
THE GREATER FOOL THEORY - By Dr. Neoh Soon Kean (Comments & highlights by Calvin Tan Research)
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Publish date: Tue, 11 Apr 2017, 12:01 AM
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Hi Guys,
I have An Investment Approach I which I would like to all.
I have An Investment Approach I which I would like to all.
'THE GREATER FOOL THEORY By Dr Neoh Soon Kean (Excerpts from STOCK MARKET INVESTMENT)
Author: calvintaneng | Publish date: Tue, 7 Feb 2017, 11:18 AM
This is an excerpt from STOCK MARKET INVESTMENT In Malaysia And Singapore by Dr Neoh Soon Kean, the Benjamin Graham of Malaysia. Year of printing 1985
THE GREATER FOOL THEORY (Page 67 Last paragraph)
This is a theory that is usually very popular during the immature phase of a stock market's development. More of the followers of this theory are not aware that the trading system which they believe in goes by this peculiar name. From the stock market's behaviour during the past three booms, we can say that many Malaysians/Singaporeans appear to be strong supporters of this theory. This theory was very popular in the US during the 1920s but since then, it has fallen out of favour even though pockets of true believers still appear from time to time.
In essence, believers of this theory hold that stock prices are not dependent on anything tangible but rather dependent on the continual appearance of more people who are willing to purchase the stocks at an even higher price {these people are the so-called 'greater fools'). Thus, it neither matters what price one buys a stock nor that the stock's price is ridiculously high by any normal standard of measurement. Thus the believers of this school of thought hold the view that whatever stock one buys can always be sold at a higher price because there will always be greater fools than themselves. Thus, it is fine to buy MUI Bhd at $24.00 because there will be another person foolish (or brave) enough to pay $26.00 for it. Believers of the greater fool theory never for a minute think that the supply of fools will be exhausted and that they may be the final purchaser before the crash.
During every stock market boom, there are usually a large number of believers of the greater fool theory and some of them actually make a lot of money on the way up. Some of them get out in time by finding some greater fools to take over their hot potatoes in the nick of time but many find that they themselves end up as the greatest fools because there is no one else willing to bid up the price anymore. Needless to say, the Greater Fool Theory is a much discredited one among academics and most professionals. But it still finds many adherents. Why is this so? Everyone is having too much fun, (that is, making so much money) on the way up that they do not want to leave the market. George Goodman, writing under the pen name of 'Adam Smith' has this wonderful parable to explain how people are caught up in the web of the Greater Fool Theory and do not know when to get out.
We are all at a wonderful ball where champagne sparkles in every glass and soft laughter falls upon the summer air. We know, by the rules, that at some moment, terrorists will burst in through the terrace doors, killing many and scattering the survivors. Those who leave early will be saved, but the ball is so splendid that no one wants to leave while there is still time. Everyone wants to enjoy one more dance and sip one more glass of champagne. So everyone kept asking: "What time is it? What time is it?" We look around and find that all the clocks have no hands.
This may be a surrealist's way of describing the stock market but Goodman's parable has a great deal of truth in it. Of course, we know that in every speculative boom of the past, the 'terrorists' did come when most of the guests were still enjoying themselves at the ball. As 'Adam Smith' implies, nobody knows when a speculative boom will end but end it must for that is the rule. At every speculative boom, not many of the small speculators escaped with their gains made on the way up. Most of the smaller speculators known to me eventually lost all their gains and much more than what has been gained.
Some even lost a large part of their original capital. Thus on the next occassion when you happen to find yourselves at this type of a ball, try to leave early. The problem is that once one is caught up in the fun and games of the party, one is apt to lose touch with reality. Chances are that believers of the Greater Fool Theory will hang on to the bitter end, only to be slaughtered. It is better to miss a few dances or a few glasses of champagne than lose one's life.
In concluding this section, an anecdote about Bernarde Baruch, generally acknowledged to be the greatest stock traders of the 1920s is related. He was once asked how it was that he remained so rich while many of his contemporaries had declared bankrupt. This was his splendid answer: 'I always sold too early.'
Calvin comments:
This book called Stock Market Investment in Malaysia & Singapore was written & printed by Dynaquest of Dr. Neoh Soon Kean in year 1985 (now out of print).
Did you notice these words from Dr. Neoh?
Thus, it is fine to buy MUI Bhd at $24.00 because there will be another person foolish (or brave) enough to pay $26.00 for it. Believers of the greater fool theory never for a minute think that the supply of fools will be exhausted and that they may be the final purchaser before the crash.
Yes, Mui Bhd was chased up to a high of Rm24.00 per share during its heyday. And Mr. Market was going GaGa chasing it then. It was totally wrong to chase Hot Hot Popular Stocks like Mui Bhd at over Rm20.00 then.
So it is the same today! Many are going GaGa over Hot Hot Stocks of the hour! They are too dangerous to chase.
And look at Mui Bhd share today. It closed at 19 sen.
So from Rm24.00 to 19 sen Mui Bhd has crashed by more than 99%!!
So at Its Peak of Rm24.00 a share Mui chai (Mui Bhd) was the darling of the Market. And that was the wrong time to buy.
And now that Mui Bhd has fallen more than 99% to only 19 sen that the Market behaved totally opposite of those days of euphoria! Mui Bhd falling 99% is worst than the fall KLSE during the Asian Financial Crisis of 1997/8 when KLSE fell from 1,332 points to 262 points - a Drop of 81%.
It is even worst the the 1929 Stock Market Crash of New York when Market plummeted 89% & ushered in the Great Depression Years.
Those who bought KLSE at 262 points when Dr. Neoh Soon Kean said "KLSE was the Bargain of the Century" made great fortunes later.
Same for Sir John Templeton who bought Stocks at the very bottom of the Great Depression at the Outbreak of the 2nd World War in 1939! Sir John Templeton later became a legend.
And this is now the correct time to buy Mui Bhd at this Rock Bottom Price of 19 sen.
Calvin Tan Reseach advocates buying Mui Bhd share and holding it tight for these reasons:
1) Divorce settlement will Force Sale of Assets. Either by Tan Sri Dr Khoo himself or by Court Order
2) Tan Sri Dr. KKP is now 78 years old. The Word of God says, "
Psalm 90:10King James Version (KJV)
10 The days of our years are threescore years and ten; and if by reason of strength they be fourscore years, yet is their strength labour and sorrow; for it is soon cut off, and we fly away.
In modern English it means the years of our lifespan are 70 years. And by reason of strengh (through proper exercise, proper food, care from loved ones) they might reach 80 years old.
Tan Sri Dr. KKP is now 78 years old. And with so much besetting problems he should call it a day. Sell & liquidate Mui Group, distribute assets & Cash to share holders. Call it a day. And retire to a life of prayer and contemplation.
After all the things of this world are temporal & the things unseen are eternal.
This is only Calvin's suggestion. Will this be the best course of action & God's will for Tan Sri Dr. KKP's life. Only he and His Master can decide.
Warmest regards,
Calvin Tan
Singapore
Please visit Calvin's Prayer Website www.inspiretopray.com
As Matthew Henry says, "A life spent in communion with God is the pleasantest life in the world"
O the pure delight of a single hour
That before Thy Throne I spent
When I kneel in prayer and with Thee my God
I commune as friend with Friend.
https://www.youtube.com/watch?v=-bKdowFr9rc
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Discussions
2 people like this. Showing 50 of 61 comments
Calvin, you are giving people the wrong impression that MUI was sold all the way down from RM24 to 19sen. Come on, the shares outstanding is 2.933 BILLION today, not million. Are you trying to tell people that in 1984, the company was worth RM70.39bil. You should know that over the decades, there were more shares issued to raise money and therefore shares dilution. By the way I have always enjoyed reading your articles and I do agree that the company is undervalued. However, my take is that if a person cannot share his wealth with his love ones, I don't think he can be generous with the general public.
2017-04-11 22:33
Mystery of MUI Solved!
MUI =
Multiple Streams of Businesses - Hotel, Retail, F&B, Travel & Tours & Stock Brokeriing
Universal expansion - UK Hotels, Europe Luara Ashley, Land Australia, Malaysia & USA, Spore
Infinite deep Value Assets
So MUI is
1) Multi
2) Universal
3) Infinite
Do you get it?
2017-04-12 08:25
Tan Sri Khoo rather go to jail then give a penny to pauline chai. he will find ways to delay ANd prolong the settlement citing his assets is less than what the British court awarded. Give hi,m 2-3 years. he says bye ' amen " personal and corporate ownership is different.
2017-04-12 12:17
I wonder why Calvin is so enthusiastic in participating here at i3, though most of time I find myself not agreeable with him.
This is the character that deserve my respect
2017-04-12 12:28
Buying long depressed stocks are just like buying a shoplot and could wait for 5, 10 or even 20 years to appreciate. I would suggest only put 20% of your investable capital in MUI etc.
2017-04-12 13:17
Listen here!
This is the way to invest in High Asset Neglected Stocks.
Just follow Walter Schloss' method:
Buy a basket of 30 to 100 stocks which have
1. Low price backed by High Value Assets like
a) Lots of Cash
b) Gold bars.
c) Valuable Lands, factories, warehouses, resorts, houses, islands
d) Goods of value like hard metals, oil palm trees and others.
2. Make sure major shareholders are buying and not disposing. Selling a little for needs ok. Best is Insiders keep up buying.
And hold tight.
One day the tree will bear fruit and you shall reap.
This method is proven by Superinvestor called Walter Schloss for 40 long years.
It never fail.
Hip hip hooray.
2017-04-12 13:35
Neoh's book was published before the famous 1993 bull market. All lot of young people then who opted to be a greater fool made tons of $$$$. Subsequently, those older ppl who followed lost their $$$.
Those who followed Dr Neoh's method did not managed to make $$$$ in 1993 bull.
2017-04-12 15:27
if that is the case, 2017, 2 chicken almanac later also same.
sted by Junichiro > Apr 12, 2017 03:27 PM | Report Abuse
Those who followed Dr Neoh's method did not managed to make $$$$ in 1993 bull.
2017-04-12 15:33
1993 bull not about pass wealth......
its all new wealth and stock brokers
2017-04-12 15:35
Every new cycle in the stockmart has its new characteristics. Those who made $$$ in the 1993 bull subsequently lost it all when they use the same 1993 cycle method.
The Edge interviewed Dr Neoh after the 1993 bull and commented that he is too conservative.
2017-04-12 15:43
Junichiro Every new cycle in the stockmart has its new characteristics. Those who made $ in the 1993 bull subsequently lost it all when they use the same 1993 cycle method.
The Edge interviewed Dr Neoh after the 1993 bull and commented that he is too conservative.
12/04/2017 15:43
Whatever cycles & whatever markets the fundamental law of VALUE will prevail.
Look at gold as a Store of Value. What Gold bought in ancient times still remain true today. Gold has an intrinsic Store of Value that cannot be destroyed by wars, inflation, deflation or good/bad times. Its Value adjusts accordingly just like water also finds its own level. So is gravity.
These are immutable Laws God create to govern the physical world.
And what is true there is also forever true about Investments
They are ALWAYS BASED ON VALUE!
And the Share Price of a Company will ULTIMATELY BE REFLECTED IN ITS TRUE INTRINSIC VALUE!!
2017-04-12 16:11
cal
People want to make money and hope to avoid losses when game is over.
People do not want no gain no loss. aka dead stocks.
2017-04-12 16:14
Are you sure those who follow Dr Neoh's method did other make money in he 1993 Super Bull? The index shot up to 1300+ from about 600...
Many of those punters lost what they made from 1993 plus their own money after 1993 subsequently using their "methods".....
It was euphoria then and people just crazy then buying empty company like Berjuntai Tina @RM38....and many many more...which collapsed subsequently.....
Hahaha!
2017-04-12 18:25
liew
don't be so scared of uncertainties.
actually it is uncertainties that create higher beta.
you hope to get the good beta and avoid the bad beta.....that is how to get high alpha.
2017-04-12 18:49
Stockman, different people different approach.. some like to gamble but some stick to investment into a good business....but by and large, malaysian retailers in the stock market like to gamble...
I have seen so many failed punters....Look at Dr Neoh'S portfolios right now, you can check that he bought and kept those shares for years.... collected dividends and the share prices have multiplied many folds....
It's not easy for us to emulate....most of us prefer quick kills... haha! Either kill or be killed! Haha!
2017-04-12 19:47
Calvin - aptly described and hit the nail chun-chu on the head of so called accountant. Laugh die me lah .
2017-04-12 20:44
if the stock has all the certainties, where is the risk premium?
why should there be risk premium.?
money is make from the stock market by taking on risk ...and proven right later.
that is the function of the stock market.
2017-04-12 20:47
go buy cash companies .la
buy Puncak, miss the whole bull run.
Puncak sure got clear cut intrinsic value.
MG9231 > Apr 12, 2017 08:44 PM | Report Abuse
Calvin - aptly described and hit the nail chun-chu on the head of so called accountant. Laugh die me lah .
2017-04-12 20:49
Privatised? Stop dreaming. Divorce settlement by Pauline will cost him RM 355 million poorer.
Posted by xcelcap > Apr 11, 2017 08:53 AM | Report Abuse
possibility of privatisation?..as KKP has the dough...lol
2017-04-12 20:51
ultimate truth about stock market
no risk no reward.
risk is uncertainties.
2017-04-12 22:01
how to make 1 mil in bursa? risk also become bangrupt. tracoma bought 1.80 sold at 10cts after 6 years, SAAG bought before rights issue at 5.30 sold at 75cts after 6 years. both PN17 after I cut loss.parkson bought at 5.20 before last election now 63cts. talking about risk?
2017-04-12 22:02
Pls paste advertisement MUI put up assets for sale and buyer interested. Divorce settlement by Pauline(64 million pound) is confirmed news.
2017-04-12 22:09
High guys,
All must go read up THE INTELLIGENT INVESTOR By Ben Graham
Especially the very last chapter on THE SUPERINVESTORS OF DODDSVILLE & GRAHAMSVILLE by Great Sifu Warren Buffet himself
The proper way to Successful Investment is found in this investment Bible.
The way to avoid pitfalls.
Study it carefully. read the Book twice every year until its precepts & purpose sink into your heart.
If you still fail then just put your monies in Bank FD & forget about investment, ok?
2017-04-12 22:38
Haha! Rank how much is determined on 31st December 2017 (more than 8 months away!) So wait till then
And from you own mouth this is what you say
See
Posted by John Lu > Mar 14, 2017 10:18 PM | Report Abuse
LOL...bro Calvin...this competition is 12 months la
2017-04-12 22:44
its inadvertent because that is who calvin is.
John Lu > Apr 12, 2017 10:40 PM | Report Abuse
After read and like you rank 214 stock pick, how?? Haha haha
2017-04-12 22:58
This Mui itself is 6cts up since Calvin wrote about d sleeping giant!
19cts to 25cts today. It's ok to b last when u can make such a call within 3days.
2017-04-12 23:13
Haha Seek,
You are correct!
No use if busy here busy there posting and arguing if pockets full of holes.
We concentrate on making monies and our pockets full of Cash. Hahaha!
2017-04-12 23:21
no risk no reward is a fundamental truth.
people have tried all kinds of smart ways to break this fundamental truth.
no one has succeeded and no one will succeed.
2017-04-13 00:13
Warren Buffet always says go for low risk but high reward loh....!!
Warren Buffet says value investment with margin of safety...is never high risk and high reward mah.....!!
High risk and high reward....leave it to speculators and gamblers thats what W Buffet mean loh....!!
No need to jump over 6 ft hurdle....look for 1 ft hurdle and step over loh.....!!
2017-04-13 00:21
Warren Buffet has never once in this entire life bought any thing because he liked the past of the company...or past wealth,
All his purchases is because he sees the business sense and likes the future. ...and is willing to accept the risks as offered to him
All stock market returns beyond risk free returns are because he has to assume the market risks and stock specific risks ...and be right that the risks can be solved.
That is the function of the stock market....For someone to assume the risks and be rewarded afterwards if he is proven right.
2017-04-13 08:56
WB talks a lot...
so called value investors talks a lot....
Judge a person by what he do , not what he says
WB has been sailanging all his life.
2017-04-13 08:58
risk against reward. past return is no guarantee for the future. look at nokia or our home grown proton. either you change or you be changed. last time you buy and hold ( you can still hold for the next 10 years ) this is just my personal take.
2017-04-13 09:00
don't want high risk , high return?
then buy lower risk for lower return.....there is no such thing as low risk, high return.
y stockraider > Apr 13, 2017 12:21 AM | Report Abuse
High risk and high reward.
2017-04-13 09:25
when people tell you low risk high return
it is hang pig head, sell dog meat.
2017-04-13 09:26
calvin the self declared Warren wannabe knows nothing about his sifu.
Warren Buffet has never once in this entire life bought any thing because he liked the past of the company...or past wealth,
2017-04-13 10:37
I awarded him as MAN OF THE YEAR 2017 for chuncai sakuah grand price !
LOL !!!
2017-04-13 10:41
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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....
Lim Yan Kai
I know this theory
2017-04-11 22:00