Had a great conversation with stupidbear this morning about pac andes. He forced me to think through some of my sloppy thinking. Well, at least now I got the theory just a little bit more accurate. The point is that if Pac andes ever reach 40 cts, it's a big bargain. I suppose that's what investors like mw and hh are trying to tell me - focus on valuation so as to know if the price you're paying is a bargain or not.
Despite people telling me that I've become a guru or expert in FA, I courteously decline that honour. I know myself better than to call myself a beginner. In truth, I'm a newbie who's just learning to crawl. If I haven't learn how to crawl, I better not learn how to run, lest I hurt myself in the process. I better not teach another how to crawl too.
I find that investors are generally a quiet lot. A tad mystical, a little too secretive. It's hard to find someone who will tell you what to do if you want to be a long term investor. Everywhere it's just hush hush. Perhaps the secrecy is important, for those who are truly interested and curious can discovery for themselves what it's truly like to be able to valuate companies. For the curious newbies whom like me, it's just discovering this less travelled path, well, there's always me to discuss in this blog. Impatient ones please find another pasture to graze.
I seriously started analysing business in around Nov/Dec 2007, so that puts it around 3 months. In terms of tangible rewards, there is none. If you liken it to planting a seed, well, you can't just stare at the soil for action. You stare at it for 1 day, 1 week, 1 month...then 'suddenly' something pushes the soil out and you get a seedling. For someone who didn't watch the gardener plant and water the soil everyday, they will believe that the gardener is lucky. Cause and effect, if they are separated by time, often get separated in relation too, so that the effect can no longer be attributed to any one cause. This inherently makes learning to invest for the long term difficult to practice. If I learn to ride a bike, I fall I learn...instantaneous learning through trial and error because the cause and effect is separated by a very short interval of time. If I invest in a company and I can only see the results in a long time, how can I learn from trial and error? I can't...because human life span is limited.
I can learn from other's mistakes though. I can read more books to learn from the wisdom of those that came before me. I can do more thinking that will propel me to mentally stimulated environments. That's how one should learn...to transcend beyond one's immediate physical environment by thoughts.
Ever seen a vampire who is poor? It's impossible if they just do the most basic of stuff - put their money in banks. Even a paltry interest rate of just 0.25% per year, if put over 288 years, it'll double your money. If we're talking about a more aggressive investor vampire who earns 8% interest per year, an equivalent 288 years will make $1 become $4,227,090,834 - inflation unadjusted returns. Even though our investor vampire won't probably be affected much by inflation of say 3.5%, let's see how his real returns are after 288 yrs...it dropped down to $320,252.
** The above is a vegetarian vampire who drinks only tomato juice as a substitute for blood; it's from Count duckula that my email is derived from. Don't ask me why 06, it's classified **
Well, this thought experiment shows 2 things:
1. First, being a vampire (or other seemingly long life span creature) is good, because compound interest will really work its magic. Here, having time in the market is important. If you haven't started investing, ask yourself why not?
2. Inflation the silent money killer will work its magic over time too. Compounded inflation is scary, because it's the default option - you can't opt out. A silly vampire putting his money under his pillow (or in his coffin) will be the first poor vampire in history, assuming that those fiat money are not antique highly collectibles currency by then.
A Friday night's rambling...
5 comments :
Feb 08, 11:45
Stupidbear: But why is that a bargain price when it's worth that price from it's earnings? Isn''t that buying at the price it's worth and not at a bargain ?
This is an excellent question LP. It dwells into a deeper layer of BA.
Gurus are never stingy in sharing, that's what I like about them and like to learn from them. KK said it right, market is the best teacher. Investment is a personal learning journey.
As I began my personal bible study. There are 4 important Rs which I follow: Read. Reflect. Response and Review.
Today is the first day I started my review. I am always good in reading, enjoy reflecting.. not so fast in responding but SELDOM review. (like weekly or monthly review)
As I review along, I thought of applying the same principles to my investments.
Read. Reflect. Response. Review.
After reading (and learning from forumers here), I reflected for a while and well, take some actions for my investments. (stocks, properties and others). Bearing in mind that my priority is to have a good long term investment so that I could focus on my spiritual growth.
Response doesn't mean TAKING ACTION. The choice not to take any action is a response too.
For StupidBear:
I do not have any secrets. I started working real hard, real young and save most of the money (at one period, 5 figs monthly. I do not have time to spend them). I lost bulk of the money in 2000 when I bought lousy stocks but held them long term. Recoup back all the losses in 2003. Now I try not to trade because I am lousy at it. Trading also affect my emotional well being.
I am influenced by 2 mentors who achieved spectacular returns at a young age. One passed on last year and and taught me an important last lesson that make me re-prioritize my life.
Blessings
Hello LP,
I think we all cannot claim to be any experts or gurus in FA or BA until we have managed to achieve financial freedom hehe. For me, that is the goal I am striving towards in about 10-15 years time when I hit 45 years old. My planning had started since I was 29 and it has been 3 years of studious investing that got me some returns. All of us are still learning and everybody's journey is personal (i.e. two people may view the same event but perceive something different from it).
As to why investors are generally a quiet lot, it's because there's nothing much to discuss about ! True investors will ignore the market and the huge amount of noise that comes from TV, commentators, analysts, economists etc. and focus on the real issues: the companies they own. Another reason why I keep quiet about my method of investing is because it is very UNPOPULAR ! Haha, almost no one I know will listen and pay attention because my method is slow and "boring" and requires extensive reading, research and analysis. I did mention in a previous post that most people find value investing archaic, and even WB wonders why value investing isn't more popular considering it's got a good track record ! If you look at the people around you, almost 95% will practice some form of trading or market timing; rarely do you find anyone who focuses just on companies and not markets.
Thus, I prefer to "join in" discussions about the market for the sake of social well-being, not because I generally care about the market. Sentiment is important for me to decide if anyone is being foolish and selling a good company at an attractive price, but otherwise I can ignore prices. They say it's easy to spot the value investor at a cocktail party: he is the ONLY one talking about an actual company when everyone else is talking about the market.....
Have a good week !
Regards,
Musicwhiz
Hi HH,
Thks for your comments :)
I'll follow your advice to read, reflect, respond and review. I'm rather weak at reviewing, so I'll do more of that now :)
I do agree that stupidbear asked a important question, haha
Hi Mw,
Haha, you're right, it's quite unpopular. You know, when i talked to my insurance agents (and his friends) about companies, they just shot me that 'what are you talking about' look. To think that he is a financial advisor...tsk tsk.
I think most people dun do it because it's very tough, dun see immediate returns and have to read a hell lot of things. It's hard to break into the technical jargons before reading anything makes any sense. It really took me a while before all the ratios start to make sense to me...so I wonder if anyone felt the same way?
Thks guys for the great comments!
LP,
You are responsible for your own investment learning journey. (and its outcome. To quote what STUpld said, don't trust anyone but your own analysis and observation.
MW, thanks for your thoughts as always. I couldn't have said it better.
HH
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