Friday, August 22, 2008


There is a fellow blogger called Stupid but if name is an aspiration to strive towards, this blogger is anything but the name suggests.

Stupid (henceforth called Stu) mentioned about the irrational exuberance exhibited by buyers backed in August 2007. You can see it on Decipher's blog, dated 17th August, 2007. But to understand the messages between the lines, one needs to understand the language used by Stu.

1. L&S

This one is the crowd favourite question. Once and for all, L&S is a slang used by Stu to describe financial institutions. Another more common term might be BB, which to me, means the same thing. Stu probably worked in L&S before, so had the privileged knowledge of how insidious and manipulative they are. Stu's philosophy is not to believe in the lies issued by L&S and their cronies (erm, like FED for one) but to think independently. Therefore being smart, which is to follow L&S manipulations isn't really that smart...might as well be stupid.

2. OILies and GOLDies

This should be easy to decipher. Oil and gold. Stu had a few pet topics - inflation, gold/oil, L&S and currencies. Oh, Stu also believed in investing in 'polynomials' (the meaning of which will be described later) with good cash holdings and minimum debts, giving good yields.

3. Polynomials

Singapore is a unique place to invest in because of the presence of polynomials. These are big companies with monopolistic, duopolistic, tripolistic (and hence polypolisitc) kind of structure. There are only a few players, sanctioned by government and competition is thus restricted. Examples will be like the transport companies, telco companies and banks. I'm under strict orders not to mention more, so for those that I didn't mention, think harder :)

Some of the blue chips in Singapore are still overpriced, according to Stu. Only when it comes down to these target price will Stu consider buying. As it stands now, the price of these companies are still very much overpriced. Here's a few that Stu mentioned in cbox.

1. Capitaland - $2
2. SGX - $2
3. Singtel - $2.50
4. DBS and UOB between $15-$20. Perennial target for DBS is always $10, though hard to reach as the cash rich management will buy back shares to stem the price slide
5. OCBC between $6-$8
6. Citibank - $10. Actually Stu is aiming for between 0 to $10, if I remembered correctly.

For more stupid philosophy, visit Stu's site here, though it's no longer updated as frequently.


Correction: Stupid dropped by on 31-Aug and informed me on some errata. First, Stupid had never worked in L&S before. Secondly, the fair value of Citibank is from $0 to $15. Sorry stupid!


Derek said...

Whow, do you think those blue chips will ever drop to that price? If yes, I also can't wait to get my hands on it provided the company is not applying for bankruptcy. ;)

la papillion said...

Hi derek,

I think it's possible. I vaguely remembered SGX trading at around 2 to 3 in 2006, before the big run up in 2006/2007.

I think if it did hit these prices, the question I would have to ask myself is: Do I have the guts to buy? I hope so :)