Thursday, November 08, 2007

Feels like sat - nah..it's a public holiday

I just finished reading "The mind of wall street" by Leon Levy. A rather interesting and easy read. I like the way he finds insights in the various interests that he had, besides the stock market. He can derive new insight by travelling, archaeological findings and economics - and he expresses the importance of creativity in such pursuits.

This entry is not about the book review though. I finished this book in a day and a half (it's just too engaging not to finish it) and had a snapshot for US economy and the market since 1950s to early 2000s. A few ideas persists after reading:

1. Risk never disappears, it's just transferred or sold to another person. Somehow, I just find this line too important not to blog it now. I know not why.

2. Long term capital management (LTCM), which is a fund set up by nobel prize winners and academics is an interesting case study of treating the market too seriously. By that, I mean to see the market as a highly efficient system where all the participants are rational people. They can't be more wrong. At most the market is pretty efficient (and at certain times only), at the worst, it's just a cauldron of irrational people tossed with spices like greed and fear. This story about LTCM is worth pursuing further. I'll probably write more about this :)

3. Market psychology plays a part, besides fundamentals. Warren buffet, I suspect, is a robot with no emotions. I do not think I can ever be like him (i can try!), unless something drastic like cutting off my hypothalamus. Even then, that's just me. Can someone invests without emotions? Would that make the choices rational? Is rationality and emotions mutually exclusive? Hmm, interesting questions to ponder about.

4. This one I agree fully and I'm guilty of doing - "if you want to follow a stock, the best way is to take a small position; practitioners always outperform professors. You must put yourself on the line".

How I agree! It's interesting that just a blog entry before, I was criticizing myself for doing research AFTER I buy it. Here's a few examples:

a. I went into warrants one fine day last year when I saw Dow dropped 400 over points I went to read up about HSI warrants (how to read the labels, difference between call and puts) and went in. I learn on the go after I started. I was interested to know when to sell, so I went to read up about charts. Charts didn't tell me any story, so I went to find out about technical analysis, especially indicators (esp esp stochastics which I honed well during my warrant trading days).

b. Went straight into stocks even knowing how many shares there are in 1 lot. Kena suan by the dbs broker for being such a noob. Haha, I initially wanted to buy 20 shares :) Learnt a lot on the go - still learning now.

c. Went ahead with a big insurance plans without knowing the difference between term and whole, what the hell is Investment linked policies (ILP). So to find out more about my choices, I started to open an account with dbs vickers. My prime aim is to learn how to read charts and how to see stocks, NOT to buy! But heck, I did all that I set out to do and more.

d. The most recent ones - to buy singpost before doing my due diligence. I started finding out more after I buy, haha :) To the death of warren, I think :)

What to do? I'm just not programmed to do that, though I tried. Somehow, I feel that I do not have a stake in whatever I was doing if I didn't participate in it. I always feel that the best way to learn is to jump right into it - if I didn't drown, I'll learn how to swim :) Yes, by all means, learn what you can from other people's mistakes, by the lessons I learnt by reading and observing wouldn't be as close to me as the mistakes I made myself. Born to have hardlife I think, haha

KEYWORD here is to take a small position. Nobody ask you to risk it all.

Now I'm sufficiently prep myself to read those thick FA notes that I gathered since May. Time to jump into it.

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Quite a number of people asked me why I blogged everyday. I usually have so much things to say that I need more than 1 postings to say it all out. It had been a routine to me already - looking at data, doing homework, looking at trends, analyzing - that it didn't feel like work to me.

The encouragement and the general response to my blog helped a lot too. I hoped everyone benefits from having a place to voice out his/her opinions. I certainly need someplace to write out my thoughts.

Have a great deepavali!

5 comments :

fishman said...

Hi lp,

I find the story of you trying to buy 20 shares very funny! Thanks for sharing! haha

Like you mentioned, I'm also learning. But unlike you, I dare not try till I'm very certain. And even when I'm certain, I only start small. Reason is because I follow Buffett's advice of "avoiding losses". Any loses would mean my investments need to work double hard to recoup. So I'm incline to be cautious.

I really enjoy reading your blog, though don't know if I can keep up with the rate that you write!

Happy holiday to you! or what's left of it! ;=)

cheers!
fishman

la papillion said...

Hi fishman,

Starting small is fine, as long as you start. I also wanted to be certain before I jump in, but usually after reading a bit, I find that nothing gets absorbed. Afterall, one cannot test drive a car by reading it. I guess for me it's the same :)

Noob-trader said...

I guess I started much like you... But didn't fare well.... About reading, perhaps young ppl are anxious so they jump in earlier ba.

la papillion said...

haha, noob, you say until like fishman so old :) Not sure about his age though :P

fishman said...

Hi guys,

I'm still in my twenties! haha

I agree that starting is very important. I realsie I learnt more about Unit Trust when I started investing in them.

cheers
fishman