THE INVESTMENT APPROACH OF CALVIN TAN

'THE GREATER FOOL THEORY By Dr Neoh Soon Kean (Excerpts from STOCK MARKET INVESTMENT), Calvin Tan comments

calvintaneng
Publish date: Tue, 31 Aug 2021, 12:25 PM
calvintaneng
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Hi Guys,

I have An Investment Approach I which I would like to all.

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 MUIB 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:

Greater fool theory applies to these

1) PUNT HOT STOCKS WITH NO FUNDAMENTAL

Buying a stock with no fundamental but just based on pump and dump operating of syndicates that churn up stock prices by sheer price rising & rumour....making the stock market like a casino

 

2) OVER PAYING EVEN FOR A GOOD STOCK

Over pay & chase even a good stock into complete & total over valuation

There is an intrinsic value for everything but in greater fool game "value is thrown on & a stock is bidded up into irrational zone".

Those who can enter early & leave early might still make gains but eventually al who played this game will still lose out by high brokerage commissions due to over trading costs

 

WHY SHOULD A STOCK GO UP IN VALUE?

 

Only Two Reasons:

1) BY REAL CONSISTENT & INCREMENTAL EARNINGS OF A COMPANY THROUGH ITS ENTIRE LIFE CYCLE

Behind every stock is a Real Company selling Real Goods or Services. And they should generate real profits that pay out dividends to share holders

 

2) BY REDUCING COST OF PRODUCTION

A company which looks to save on cost by efficiency can also increase in profits

 

ALL OTHERS ARE JUST SCAMS IF PRICES ARE MANIPULATED TO THE SKY.

 

 

THE GREATER FOOL BLOWS BIG, BIGGER & BIGGEST BALLOON STOCKS (LATER ALL GO  BURST!!!) - THE INVESTMENT APPROACH OF CALVIN TAN | I3investor
 

THE GREATER FOOL BLOWS BIG, BIGGER ...

 

 

The “greater/bigger fool” theory | Chi Nguyen
 
1,660 Fool High Res Illustrations - Getty Images

 

 

 

 

 

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Discussions
Be the first to like this. Showing 38 of 38 comments

calvintaneng

80% of the people only play play and punt punt in the stock market like gambling in a casino is bound to fail

10% will break even but wasting their time

Only 10% minority who invest carefully will succeed

2021-08-31 12:50

DickyMe

LOL..Care to tell us about your NETX investment?

ROFLMAO !!!

2021-08-31 12:51

calvintaneng

Netx?

I still happily holding Netx

Netx is

Cash rich
Zero borrowing for business except small loan for shophouse worth Rm5 millions
Netx has Rm100 mil in cash equal to 12 sen
Netx at 11 sen is selling below cash value

Netx has margin of safety at 11 sen with Nav of 19 sen

Gemspot which is like a small grab business

So Netx is not a greater fool stock at current low prices

2021-08-31 13:04

DickyMe

Then why did it do share consolidation and killed many of your followers.

2021-08-31 13:05

calvintaneng

killed what?

Netx is still an inspiring work in progress and will rebound in its own time

Did you notice my warnings in gpacket and mmag when both were pumped up to Rm1.60?

Today gpacket crashed to 17 sen and mmag collapsed to 9.5 sen (more than 90% wipeout?)

2021-08-31 13:10

calvintaneng

Dickyme

If I remember correctly you chased Sendai at Rm1.60? Today Sendai crashed to 22.5 sen and you confessed you lost Rm80,000 in send die?

2021-08-31 13:13

DickyMe

LOL..

I wish it was true!

2021-08-31 13:16

calvintaneng

Not you then ? Who was that?

2021-08-31 13:16

DickyMe

I don't know.

2021-08-31 13:17

Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥

Short-cut to figure out fake stock tips provider

Be aware of tips provider.

Be aware of high return promises. 50%+ monthly return promise is the almost sure-shot sign of fraud.

You should only choose equity advisors who provide investment tips with detailed logic and proper report on the company.

Most tips providers don’t provide any logic. They just mention “Buy with target and stop loss”. Ask them what is the rationale behind the call? Find out whether you are getting any satisfactory answer or they are just avoiding it?

Don’t get fascinated by the fabulous past records and few clients’ testimony. Those can be false also.

Various new methods are coming day by day to trap innocent investors. So, always be aware.

2021-08-31 15:53

abang_misai

Very true. I have witnessed period of time where there were virtually no buyer when the market drops. At that time, nobody would talk growth, cash flows, low PE etc. All they talked was to get out even at big loss

2021-08-31 16:04

ahbah

The theory is for us to play play the stock mkt circular musical chair for fun n

enjoyment mah.

2021-09-01 10:27

ahbah

Veri exciting n entertaining !

2021-09-01 10:34

Keyman188

Kesian...kesian...kesian...

Semua masih fikir...mimpi...semoga..."Skim Cepat Kaya"...

2021-09-01 10:36

Citadel666

Post removed.Why?

2021-09-01 10:50

calvintaneng

Hahaha

So many people with so many different ideas

All welcome

Welcome to share your views freely

2021-09-01 10:58

CHONG Kong Hui

When 'tips' to invest in TGUAN released with best presentation in Oct 2020, the share price peaked and down all the way till now, still not yet back to the RM3.30 level.

Beware of kind sharing from 'expert'.

2021-09-01 10:59

ahbah

Netx is a fun stock, a stock to play for fun onli, why sailang so much ?

2021-09-01 10:59

CHONG Kong Hui

In Oct - Nov 2020, TGUAN is under this category

OVER PAYING EVEN FOR A GOOD STOCK

2021-09-01 11:00

calvintaneng

ahbah ahbah

Calvin advise you better buy some really good shares and make good money

Then don't eat so much unhealthy nasi lemak ok

please eat more fruits and vegetables for your health sake

2021-09-01 11:01

calvintaneng

Post removed.Why?

2021-09-01 11:04

calvintaneng

leno By now,
u should know,
small fish do not move market.
Force-Converting them is a waste of time.

If we take 100 members
5 members own 95% of stocks value
95 members own remaining 5%.

Your job is to convince the main 5 members.
And to be humble enough to learn from this 5 members.
There must be good reason why they can reach their level.
01/09/2021 11:09 AM


YOU ARE SO CLEVER

I KNOW THESE 5 BIG FISHES & I DON'T THINK I WANT TO FOLLOW THEM

TOO RISKY

I RATHER EAT LESS & SLEEP WELL EVERY NIGHT WITH GOOD CONSCIENCE

2021-09-01 11:27

calvintaneng

calvintaneng leno By now,
u should know,
small fish do not move market.
Force-Converting them is a waste of time

Actually I am not force - converting but trying to save as many as possible from bankruptcy & later chased by ahlong or loan sharks

2021-09-01 11:29

calvintaneng

CHONG Kong Hui When 'tips' to invest in TGUAN released with best presentation in Oct 2020, the share price peaked and down all the way till now, still not yet back to the RM3.30 level.

Beware of kind sharing from 'expert'.
01/09/2021 10:59 AM

YOU ARE CORRECT!

DON'T OVERPAY EVEN IF A STOCK IS GOOD

See My Buy Call on ANNjoo at Rm1.35

http://www.sharetisfy.com/2019/02/annjoo-steel-why-is-it-in-calvin-tan.html

TODAY ANNJOO ALREADY UP 100% & WHATASPP FRIENDS ITCHY TO CHASE?

I WARN THEM NOT TO CHASE ANNJOO AS PRICES NOT CHEAP & BAD DEBTS MIGHT COME FROM STRESSED OUT CONTRACTORS DUE TO HIGH STEEL & LABOUR COST

2021-09-01 11:33

calvintaneng

Posted by leno > Sep 1, 2021 11:37 AM | Report Abuse

let say A is holding Bpower stock.
u say Bpower going to bacrupt.
U ask A to sell.
A sell to who ?
Sell to C ?
Then u must ask C to not buy from A.
Then how leh ?
Who are u going to save ?
A or C ?

At the end,
it is all coming back to the point i have been repeating again and again.

Your mission is to dig up good stock,
and let's the 5 members share their view with u

MISSION TO DIG UP GOOD STOCK SHARE WITH 5 MEMBERS?

YES OF COURSE IF REFER TO WHATSPP FRIENDS SURE CAN

PROBLEM IS THE 5 VERY BIG ONES OUT THERE

THEY NO WANT BUY GOOD STOCK

THEY LOOK FOR "STRANGE" STOCK WITH LESS PAID UP CAPITAL TO BUY THEN GORENG UP & SELL TO OTHER WATER FISH & AHBAH ALSO LOVE TO JOIN THEM?

AHBAH ARE YOU OK?

2021-09-01 11:41

calvintaneng

LENO LENO

HAVE YOU STUDIED COMPUTER FORM WITH ALMOST VERY LITTLE EARNINGS?

SELL LANDS PRICE CAN UP 1,000%

ONLY 205 MILLION SMALL CAPITALISATION?

VERY EASY TO CORNER BY BIG 5?

DID YOU GO GIVE WARNING?

2021-09-01 11:44

ahbah

ahbah is a small kampong kid, kena bully everywhere even here, so got to keep a big

dog to take care of him lah.

2021-09-01 12:10

ahbah

Nasi lemak ... veri healthy food bcos got santam, got coconut oil containing vit d

which protect us from catching c 19 !!!

2021-09-01 12:12

calvintaneng

Post removed.Why?

2021-09-01 12:16

ahbah

Fruits ... not so good lah bcos got sugar / sucrouse mah. Bad for those who got

diabetes !

2021-09-01 12:16

calvintaneng

ahbah Nasi lemak ... veri healthy food bcos got santam, got coconut oil containing vit d

which protect us from catching c 19 !!!
01/09/2021 12:12 PM


WRONG LAH

COCONUT MILK IF COOKED TURNED INTO BAD CHOLESTOROL


WILL CLOG UP YOUR BLOOD

TAKE VIT C 1000 MG FOR PROTECTION AGAINST COVID 19 BEST

2021-09-01 12:18

ahbah

Coconut milk when cooked turned into coconut oil which also can tahan veri high

temperature without getting spoiled.

2021-09-01 12:24

ahbah

" Malaysians have no issue with eating nasi lemak at any time of the day, be it breakfast, lunch, dinner or even supper! "

NO ISSUE at all !!!

2021-09-01 12:34

calvintaneng

Post removed.Why?

2021-09-01 12:42

calvintaneng

Ok where is Leno?

Pls come and post comments

2021-09-01 12:46

calvintaneng

DickyMe I don't know.
31/08/2021 1:17 PM

Ok Dickyme

I just found out the guy who lost Rm80,000 in Sendai

His name is i3lurker (not you)

2021-09-01 17:56

calvintaneng

Paragon kena UMA today after gone Limit Up

Paragon has no earnings but losses in last two qtrs

It is a Greater Fool stock of little value

Any one holding paragon please sell 1st thing tomorrow & don't look back

If you got CF (Computer Form) also MUST SELL & GET OUT!

2021-09-01 18:57

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