Wednesday, April 9, 2008

Forecasting, the Great Humiliating Job

I have been refusing forecasting index target. Not that I have no guts but I feel it is a thankless job. People will mock at you, spit at you when you are wrong. What for? Plus, 8/10 times forecasters are wrong.

Case in point, let me quote what Dr. Check wrote in The Standard Finance, "Commodity guru Jim Rogers thinks the US economy will take five to eight years to recover.

I remember he suggested Alibaba (1688) in early December when it stood at HK$40. Yesterday the stock hit HK$17.40, a 60 percent fall in four months."

Not very kind isn't it? Let's review this entry 5 to 8 years from today.

If you like philosophy and to be lectured, J.L has one for us, a recipe to lose money. He lost all the money he won from the bucket shops. Upon self examination, he concluded the failures were due to trading in and out of seasons, without considering market conditions were favorable or not.

Consider these two stories of smart money begin to be skeptical of Malaysian market especially small caps. Why? Sorry, I don't have answers.

(The Star) PETALING JAYA: Goldman Sachs International disposed of 1.85 million shares of RCE Capital Bhd from March 28 to April 1 in the open market.

According to a filing with Bursa Malaysia, it sold 1.2 million shares on March 28, 318,000 shares on March 31and 340,000 shares on Apr 1.

After the share disposal Goldman Sachs' equity stake was reduced to 41.18 million shares or 5.79%.

RCE provides loan financing to civil servants. Its share price hit a 52-week high on Oct 7 last year at RM1.14 while its 52-week low was 49 sen on March 21. It is trading at a price-to-earnings of 5.21 times.

(The star) KUALA LUMPUR: The Dubai Investment Group Ltd sold down its shareholding in beleaguered PECD Bhd, disposing of 28.28 million shares on March 26.

A filing with Bursa Malaysia showed the Dubai group disposed of the shares, representing a 5.56% stake, in the open market. After the disposal of the shares, it ceased to be a substantial shareholder.

PECD share price closed at 10 sen on March 26. Its 52-week low was five sen on March 17 this year while its 52-week high was 85.1 sen on Dec 4 last year.

PECD is involved in construction and property development. For the financial year ended Dec 31, 2007, it reported massive losses of RM1.11bil compared with net loss of RM118.21mil in FY06.

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