Master Rider Blog

Foggy Zone!

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

.

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!

Master “The Essence of Stock Investment” and ride towards the journey of your financial freedom to be the “Master of Your Own Destiny”! Welcome to visit the #1 value-added stock and option investment education website in the world, www.master-rider.com!Disclaimer: Investors are investing at your own risk. Please read full disclaimer at the end of the blog or from the main page of the website.

September 4th, 2008 NW Teong

How to Tame Market Volatility?

For those who have read my blog on Market Crash? Don’t Panic dated 6 Aug, you may recall that I mentioned about market volatility in that article and despite market weakness, I mentioned that I can afford to wait a while before going into the market. Quote from my blog on Market Crash? Don’t Panic dated 6 Aug: …. As you can see, market is extremely weak today (6 August 2007), I can afford to observe for the next few days before buying my list of potential stocks. unquote

I would like to point out few things to you:-

First, market always tends to overshoot or under-shoot. It overshoots during extreme bulls and under-shoot during extreme bears. While I cannot say it is extreme bear now, market sentiment is extremely weak at the moment due to eventual explosion of the sub-prime loan saga (one of my hedge fund friends told me that we are yet to see the worse. Of course, while we listen to the experts’ view, we must always listen with a pinch of salt). More often than not, this is also times for market to under-shoot. Under such scenario, it pays to be a little patient. You must still do your homework and have all the buy and sell (and target) levels ready for all your stocks in your valuation model and monitor the situation closely. I believe the trigger of our buy decisions is not too far away (well, I am saying those stocks really have great fundamentals, good growth potential and relatively inexpensive valuation….please refer to my earlier blog).

Second, watch out for liquidity. Liquidity may suddenly dry up due to the negative chain effect from the sub-prime loan debacle. This will further damp the market sentiment and force the markets to fall at a higher speed. Watch out for interest rate, watch out if there are signs for the unwinding of yen carried trades, watch out for the weakness of regional currencies if any (note: when funds pull out from local market, the local currency will be weaken vis-à-vis US$).

Third, as I mentioned before, some important anniversaries are approaching. Dates such as 911, Black Monday, will further make investors jittery about the stock markets.

Fourthly, how markets move with relative to interest rates movement? Traditionally, they are negatively co-related.

This is the relative movement between the 10-year treasury and Nasdaq index. If you study the above charts carefully, you will find that traditionally, the big correction in the markets will be preceded by the peak in interest rates. Have you noticed the 10-year treasury peaked around 5.2% sometime at mid June and early of July? Interestingly, Nasdaq index peaked right after that at round 2700 sometime at the middle of July.

Despite the above, I will not hesitate to execute my buy decisions after I have done my home work. For those who are really scared but still want to participate in the stock market, you may consider buy your desired stocks but hedge them against the index. (I apologise if the above charts did not appear properly, however you can always go to yahoo.finance to view these charts: ^TNX for the 10-year treasury, ^IXIC for Nasdaq chart)

Cheers!

Add comment August 10th, 2007 NW Teong

Welcome!

Hi there! Welcome to my blog. In the days to come, I’ll be blogging my personal thoughts and observations. Feel free to leave your comments.

If you find my blog beneficial, I would like to encourage you to also visit my website at: http://www.master-rider.com.

Add comment August 3rd, 2007 NW Teong

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