Master Rider Blog

Foggy Zone!

January 4th, 2008 admin

Looking back at my last blog posted on 1^st of July, the past two months’s market condition was really very ideal to perform what I coined investrades. While I predicted an imminent technical rebound in my blog of 1 July, markets actually rebounded about two weeks after that (i.e. on around 15 July). So, my call was a bit off mark from a micro level but it was still a credible call from a macro level. Anyway, if we investraded along the way, there were really plenty of good investrade opportunities.

Despite the volatility, I noted that both DOW and NASDAQ have trended up very nicely since 15 July (see chart below).  Unfortunately, this is not the case for most regional indices in Asia. While they do have a technical rebound at around the same time, the indices have since resumed their down trend. It is hence even more vital to investrade along in Asia markets. In short, last two months was really a fun time to do investrades

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My view forward is that we will be entering what I called a foggy zone. This foggy zone is really referred to a time zone (roughly from September to October in this case), where our view is blurred by multiple factors. In short, markets could continue to be volatile. More importantly, markets could be seeking one of the last lows for the year. This means that we could have a good opportunity to position ourselves once more. My own view at this moment is that if you cannot stand the volatility in the next two months, then you should avoid the markets totally and enter the markets only from 1^st week of November onwards. However, do not regret if markets have rebounded strongly within the next two months!

One point I need to clarify here is that, I am not throwing away the concept of value-investing. You see, at this juncture, we could deploy multiple investment strategies. One is a longer term strategy where we continue to search for good value companies that meet all our investment criterions. For instance, if you could find a blue chip stock that trades at around 5 times its current year earning and is growing at around 15% to 20% in turn of both top line and bottom line growth per annum. To top it off, it still gives you a dividend yield of 5% p.a. Then, I would say, go ahead and buy this stock with a view to hold longer term. [Note: Make sure the earnings are of good quality, i.e. it will not get adversely affected by changes in macro picture]. So, this is a mid to long term investment strategy. The other one is of course is to investrade which is a shorter term strategy. Recall what I said in my book? Yes, we need to learn all these tools and strategies and use them appropriately, be it technical or fundamental. You are only limited to the tools/strategies and of course knowledge that you have mastered.

Before I sign off this blog, please be reminded of the important anniversaries such as 911, and the Black Monday in October 1987. Good luck!

Cheers!

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