Global Economy Slowdown?
Blogged By: Low Hang Wei @ March 1st, 2007 - 12:07 amI logged into my mutual fund accounts and saw a large 3% average drop today. This is the biggest change I had experienced in my investment so far, so I went off to read news, which I seldom did. As expected, the news did mention a drop in stock markets around the world, so all my funds were affected. I’m not satisfied with just learning that, so I went off to look at more research to see if there are any markets I should move my funds to. My verdict was that it seems like stock markets and consequently mutual funds are not the best thing to buy into at the moment and I’ll explain why. Before I do that, let’s just look at my portfolio, which had suffered the full impact.
Now that you have seen how hard my portfolio had been hit, let me go on to explain my rationale. First of all, I looked through the news on various websites and they said that they are expecting the medium-term to look good. It’s basically just a good way to say that in the short-term, the stock market is going to suffer. Additionally, my friend said that there was a spike in interest in bond markets among the various investment houses. If this is true, this means that money is going to leave the stock markets and enter bond markets. On the consumer side, many might be hesistant to invest for fear of a major bear market. Basically, this means that there is going to be less demand for stocks and the global stock market might just fall on its own weight.
With that said, I’m not intending to sell off my mutual funds, because sales charge is not something fun to play with. Although I believe that the funds will drop a bit further, I have no wish to play with timing the market and I’ll be keeping my holdings. However, if you would like to invest your money, I would suggest that you take a step back because now might just be the time when waiting is good. Whether the stock markets will fall further remains unforeseen, but I believe it’s likely. If you think like me, keep your money in the banks and wait for the stock markets to drop further. You might just be able to buy either stocks or mutual funds at bargain prices in the near future.
To sum everything up, I expect the market correction to continue for some time and stock markets to perform moderately bearish in the short term. However, I don’t think we will go into a major recession unless some terrorist decides to bomb somewhere important again. If I’m really lucky, maybe this correction won’t even last as bargain hunters push up the prices and brings the stock markets back into a bull run. Although I don’t think it’s likely, it’s possible. 
Blogged Under: Personal Finance
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March 1st, 2007 at 1:17 am
Hi Hang Wei,
There is a topic that probably increase your investing idea. That is the concept on “Behaviour Finance”. This idea widen my perceptive , allow me to view common mistakes that most of us make and way to avoid them.
Having said that, thank for the reply in the previous comment i made. Looks like there is more thing to learn especially the bond markets , it looks very interesting.
March 1st, 2007 at 2:04 pm
Great. This is way good way to avoid the herd mentally that we have in the bullish markets. As many had said before, try to sell when everyone is buying and buy when everyone sell.
Addition to your pt stated, behaviour finance will touch on common mistakes like cause and effect of overconfidence, lose adversion , overemotion factors ,etc.
Most important is that it will have a small psychological test to guage if you are having any sympton of the mistakes.
Have a nice day.
March 1st, 2007 at 5:39 pm
Now i have a burning qns. In your opinion, What do you think determine the selling price for the stock.
For i know that there is never a selling price unless fundamental change but most of the time i always miss the chance of cashing it at profit. :$ Currently, people are using DCF,NAV to determine that target price of equity.
What do you suggest to calculate on the selling price? TA or Funda.
Oops cannot resist the temptation of asking qns. Thank you
March 1st, 2007 at 9:32 pm
AS you have said Mike, its behavioural finance. Plot your game matrix to determine who wins and who loses, confirm it by looking at the Ax, see how far away it is from your target (which can be fundamental or technical doesn’t matter), determine if its impossible by speculating people’s perception of the stock, set a LMT order and wait for it to fill. Alternatively, if you’re on a bull run, set a trailing stop!
March 2nd, 2007 at 10:53 am
Let me conclude and see if i am right. Pls correct me if i am wrong
For hangwei, you felt that day trading will be good and the possible of setting a in /out price for the trader to be comfortable with. That price will have to be backed by TA first then FD.
For shu han, you felt that i should plot the price over the volume and see how it fluatuate and set an exit price and a cut losee target. After that, compare the current price with my target price. Btw , do you know of any free software that can help me keep track of the movement?
March 2nd, 2007 at 11:56 pm
Mike, I am not telling you to plot the chart. You can get tons of free charts on the web. For US you might want to try finance.yahoo.com; for Singapore you might want to try www.chartnexus.com. What I mean is to do a comparative analysis of your next best move by plotting a game matrix digram. Also, confimating by the Ax means looking at the deep book orders of the pre-dorminant floor trader or market maker and act according to him.
March 3rd, 2007 at 3:37 pm
Oh yes, Michael. If you’re confused by He Shuhan, don’t lose heart. He’s a professional trader and can come out with a lot of interesting information that we might need some time to digest and research.
To elaborate on what he’s saying, there are different levels of quotes. For level 1 quotes, which is what we see on exchanges, aka the most basic information on a stock (bid, ask, volume, high and so on). Level 2 quotes reveals the order book for a stock, showing the bid and ask of market participants. It tells you how many stocks each market maker is posting to buy/sell and at which price. Personally, level 2 quotes is the furthest I have seen.
Basically, the Ax is the primary market maker, which supposedly everyone is following. Therefore, what you see in level 2 quotes might be a reflection of the Ax’s actions, just that it is delayed.
March 8th, 2007 at 11:11 am
Hmm alot of familiar names.
March 10th, 2007 at 10:49 am
Is plotting a game matrix even possible?
Game matrix was developed to take into consideration a few parties and a few options. While in the market now there are so many different factors. FA or TA still works best. But do we really have enough info to even do a proper analysis?
March 11th, 2007 at 10:02 pm
You sound infuriated. Did you lose money in the correction?
How wide and how deep your information source determines the quality and quantity of the information that you can utilize.
There are programs that can analyse thousands of competing agents and millions of options quickly. Perhaps that is still considered a few parties and a few options that you are talking about.
Similarly, whenever I cross the road I meet up with a big problem. I don’t have enough info to even do a proper analysis of whether I will be knocked down by a car around the corner which I cannot see.
After waiting for days, I think I cannot wait anymore. I decide to cross the road after looking left and right. Its a wonderful feeling. You should try it some time.
March 12th, 2007 at 6:13 pm
Haha no i didn’t. Anyway was just wondering about the effectiveness of game matrix in this situation. Guess eventually it will still be based on ur gut feelings. Care to share about the different programs Shuhan? Can’t really picture how it works. Thanks.
March 12th, 2007 at 6:28 pm
There’s no perfect model in the market. For the game theory to work in BA, you probably need to employ reductionism and be willing to take up some level of degrees of freedom for the variables on hand. I would say its gut feel based upon a set of informed results which you can expect, so you know the possibilities of losing.
For an off the shelf, Try gambit. http://econweb.tamu.edu/gambit/
For a more extensive one, you got to build a custom one. A good platform to work with would be MATLAB. http://www.mathworks.com/products/matlab/
March 13th, 2007 at 6:48 pm
Hey Hang Wei care to share where your got your unit trusts from?
March 16th, 2007 at 9:11 pm
I got them from DollarDex.com or FundSupermart.com. DollarDex seems to have the lowest sales charges, unless you are talking about Singapore equity.