Investing with Help
The smartest thing The Pig did during the early days was to obtain assistance of a retired successful professional to assist me to invest in stocks. My partner had lost a few hundred thousand in CLOB. I was holding a substantial sum of funds belonging to both of us. I was apprehensive of releasing my partner share of the funds to him. With his agreement, I sought the assistance of our mutual friend to get her husband, “Dave” to invest the sum in stocks for us. He was a successful professional stockbroker who stopped work before retirement age.
Though I was not close to Dave, I assessed him to be a cautious and reliable guy. He was active in horse racing and betting but did so sensibly and I learned, quite profitably. To me, he is one who knew his odds.
He was given a free hand to buy and sell any stocks for us using our account. I will pay his broker, “WH”, directly. That is how I come to know this wise old lady who will guide me successfully when I started actively again in buying stocks in 2009.
On my own, I followed Dave’s purchase of Singtel and Chartered. Through Dave, we made good money buying IPO of Chartered Semi-Conductor IPO, and another tech stock; lose some money on Ong & Company IPO and Pac Century. He brought Singtel and Chartered Semi-Conductor in substantial amount. I remember he told me that these should be the two main stocks we should be holding, one defensive and other more volatile. Now I understand this is a diversification strategy. He quitted doing this for us suddenly when we were still in the blue. It is only after some time that I realized he stopped and I still did not know the reason to date. On the whole, the trade or shares brought though him did make money. I suspected it is the burden of bearing some responsibility if I lost. I am grateful to him. If not, the pig would already been “Cha Siu”.
I recalled averaging down Singtel from $3.20 to as low as $1.30. In the case of Chartered Semi-Conductor, I averaged down from over $5 to about $2. It went down to below $1. The price did recover a little but far from it heyday. The amount invested in Chartered was more than total I put on Intraco, Kian Ann and others which I brought on my own. I suffered a huge loss of 75% of the total amount invested in Chartered. I caught the “falling knife”. Fortunately, I did not average down at the volume which I did for Singtel. Without the profit I made on Singtel, I will be badly hurt. 25% of my Singtel profit was sufficient to cover my losses in Chartered.
behavioural economists such as Richard Thaler and Werner De Bondt have uncovered strong evidence that regression to the mean, or something akin to it, occurs on financial markets. It occurs at both individual and aggregate levels, i.e., with respect to both individual securities and markets as a whole. Using data for the period 1926-1982, Thaler and De Bondt studied the securities of those companies whose prices over a three-year interval had either increased or decreased more than the market average. They found that “extreme returns of stocks listed on the New York Stock Exchange were subsequently followed by significant price movement in the opposite direction.”
Leithner. (15 Jun 2002). Regression to the Mean in Financial Markets. Leithner.com ,
My confidence in Singtel lays in the perception that Lee Kuan Yew allotted Singtel shares during its IPO to all Singapore citizens allowing them to use CPF for purchases. His aim was for Singaporean to share wealth of the country. It is unlikely for the Old Man to let Singtel go down the drain – he cannot let his fellow citizen lose money. I was right philosophically but, now with better understanding of the stock market, it is more likely the ”regression to the mean” of the market or a return to its fundamental value after the bubble.
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