Warning bells are ringing?

With STI coming to 3200, I can almost hear the silent (and maybe not so silent) cheering for the market by people in the forums or in this cbox. With the number of unique users in the blog climbing up steadily, it meant only one thing - that we're back in the bullish period again. Have people started selling their mothers and mothers-in-law to get a bigger stake to play the game? I think not, but perhaps we'll see it coming soon.



One of the most obvious signs of market overheating is when newspaper start reporting, with bullish tones no doubt, that market had reached yet another high. This is precisely the warning bells that one must be aware of when staking your money in the stock market. Call me a perm bear if you will, but I would rather be cautious when others are so fearlessly chasing the oh-so-high prices. I don't know how people can whack the recently launched Yamada Green resources to make it reach above 60+% on debut, above IPO price. I've not seen such things for a very long time since I'm in the market. The last I saw such things, I was a newbie chasing after high prices and being the last one to leave the party, holding the hot potato.

What are some of the warning signs:



1. Newspaper reporting people with no knowledge or skills, perhaps students, playing the market and earning thousands in a day. Some might go as far as thinking of quitting their jobs to go full time because it's such easy money. When the majority are making money in the market, it's really time to leave the party.


2. You'll see many IPOs rushing to launch itself. Companies are not stupid - why sell equities when the times are bad and they can't get good money for them? Government related companies might try their luck too. Singtel IPO was just before the dot com bust, if you remember.


3. You go to public area and see people reading books on market. Esp trading books, because it's perceived to be easier than investing fundamentally. In truth, it's not, and it requires just as much hard work as investing. I remember watching a couple at mac discussing what stocks to buy for the coming week, the table full of charts and figures.


4. You see champions talking on TV and forums, well, like champions. The moment they remove fear out of their discussion, as if the market will continue this way forever, full of confidence because all their recent picks are all winners - ah...we had better slowly exit before the mad rush out of the party begins.


5. Analyst started using PE ratios instead of PB or NAV in their reports. I started an article on this way back  when I noticed the terminologies used in reports vary according to times. They must have something to write, so the emphasis to sell their point will vary according to the times.




I'm a net seller these few months, taking out more money than putting them into the market. If the market allows me to remove stuck positions, I'll gladly and gratefully do so with no remorse. In the meantime, I'll be very careful before adding new positions. Based on bro8888's latest article on the different types of animal, I think I'm a cross between a bo chup bull and a bearish bull wanting to be a bullish bear. Yea, I'm complicated.