Power of Fear!
August 14th, 2007 NW Teong
There is an interesting article in The Business Times today, titled “Sub-prime mess just a Chicken Flap” by Ben Stein. In this article, he went through the mathematics and deduced that the total loss due to sub-prime loan in US was only US$33b to US$34b. This is about 3.4% of total mortgage market in US which is about US10.4 trillion, a drop in the ocean.
Ben further mentioned the recent fear of market meltdown due to concern in sub-prime loan has helped to knocked off US1.1 trillion in stock market’s value. This is about 30 times higher than the total loss estimated in sub-prime market.
Is this surprising? Not really. This is basically the clear demonstration of the power of fear!
Fear of more losses in sub-prime market, fear of more funds and financial institutions being dragged down due to this, fear of collapse of US dollars as foreign investors pulling out of US market, fear of this problem spread to Europe, Asia and other parts of the world, fear of the sub-prime problem would ultimately pull down world economy and collapse the world financial system. The list can go on and on. In short, we are always fearful of the unknown, fearful of more bad news to come.
I am sure at this juncture, those smart readers would have deduced that it is also true on the contrary. That is in a very bullish situation, everyone keeps expecting good news.
Whether in bull or bear, the media is very likely to what I called over-reporting the news. In short, a piece of bad news in bear market is very likely to appear in news many times. You would get paranoid if you are exposed to bad news too many times! You see, media choose to highlight certain news and events under certain circumstances, it is you as a reader who needs to choose what news to read and analyse to your own benefits.
It is also interesting to note that there are articles appeared in today’s newspaper asking investors not to panic. The content basically mirrored what I have said in my blog “Market Crash, Don’t Panic” on 6 of August 2007.
Oops, discovered one stock with good speculative buy: Biosensors. It was a superb level to go in at S$0.63 yesterday. Of course, it is still a very good speculative buy at $0.68 today! While it has some positives news lately, it looks interesting purely from TA point of view. This stock has dropped about 40% in less than a month’s time! At S$0.63 is basically revisit its 2-year low at around $0.60.
Please read the disclaimer! Cheers!
3 Comments Add your own
1. vince lau | August 14th, 2007 at 9:54 pm
Hi Teong, I must say that your hunch about Biosensors was spot-on. It closed at S$0.82 today.
If only I had chanced upon your posting this morning.
2. chee chong | August 14th, 2007 at 11:21 pm
aiyah… really shld have read this morning, rather than now… so, is it too late to go in now?
3. NW Teong | August 15th, 2007 at 9:26 am
Hi guys, thanks for visiting my blog. FYI, I seldom give stock recommendation. As I believe, it is better for everyone to learn how to fish. However, I will occasionally give out some fish, so that after tasting the fish, readers would have the motivation to fish themselves.
As for Chee Chong’s question, my feel is that to buy at 0.82 level you can still make some money if you are willing to hold this stock say 3-6 months.
Please also be informed that I do not have too much time to cover as many stocks as I like. Hence, I might some of the opportunities in the market. However, I will gradually expand my own coverage using my valuation model. Good luck guys! Continue to watch out for some interesting stock s to come!
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