Tuesday, August 13, 2013

The Greed of Man - Part II

I used to advise smart guys with MBA go and watch a movie or pick up a novel and read. They can teach us more things about human and investing. One of the reasons that I started to write a little more than usual because I see the old pattern of mature bull run is manifesting itself again. Just two weeks ago, I said I have turned very cautious because the time is near - 3 months, 6 months, 1 year or could be even 2 years before a major correction or a bear market set in. I praised the retail investors that they could be a lot smarter this time but looks like it is almost impossible for leopard to change its spots. They are back. Yes, the retail investors are back again. Daily participation is getting higher of 20% and if it inches higher around 35-40%, a shoe shine boy will give you stock tips. 

You will hear very frequent of people making 30% return in a week. You will hear people tell you the greater the risk, the greater the reward. 

That was the first phrase opening of a show down between Fong Chun Sang and Chen Man Yi. Fong Chun Sang who is a righteous man hated corrupted people had a great plan to bring down the corrupts - mafia, policeman and regulators. He planned to prick the stock market bubble. He knew Man Yi very well who is very fond of naked short selling. Chun Sang quietly amassed a lot stocks to execute his perfect short squeeze on Chen Man Yi. Though it was novel in nature but it does happened in real life hat reminds me of how Porsche created big short squeeze in 2008. Porsche has quietly building its position to acquire Volkswagen through cash-settled options. Then in the late 2008, they went out to the market announced that they secretly amassed of a lot of Volkswagen shares through cash-settle options with various banks. That created the mother of all short squeeze sending the share shot up to Euro 1005 in one day. In that year, Porshe made a gain of Euro 6.3 billion.

Back to the drama, Chun Sang was a genius with mixed lucks. The Chun Sang - Man Yi pair was a classic hedge fund manager though this job did not exist in the 70s. Man Yi was betting the stock price of a company would fall, convinced an impending legal announcement that the company needed to compensate million of dollars to British government.

Chun Sang took a contrarian stance. He bought every single shares that Man Yi was short-selling and sending the share price on an upward trend prior to the announcement. He was real lucky, while the whole world think it was unlikely the court would rule in favor of the company, but it did!. The good news strapped the stock to a rocket going to moon. The ruling was the catalyst but short squeezed was the real reason the stock price defied the gravity. Chun Sang would have been easily the richest man with that victory.

Unfortunately, Chun Sang met Ting Hai who mis-understood that he had stolen his sweetheart Ar-Ling. Chun Sang was beaten to coma state when Ting Hai saw a ring thinking Chun Sang must be proposing to Ar-Ling. (True on both counts but ...................)

He was unable to react to when the overheated market finally collapsed in 73-74 bear market. He could not take profit or cut losses  and repaid his borrowings. He was declared bankrupt and that was the beginning of a tragedy that brought a series of curses to his whole family.

It was really a heartache to watch how a family risen to the top of the world and then to the dust.

The 1973/74 bear market also had a huge impact on another person, Yip Tin, the right hand man of Chun Sang and Chin Bok's sifu.  He was dreaming to be a God of Wall Street and probably the best description that I ever seen how they describe a chartist of modern day. He would withdrew himself surrounded by cemetery cutting off the world just to focus on one that matters - price. I was really puzzled how a first rate person like that got wiped out in the stock market.

The greater the risk, the greater the reward. 

But remember too - 

Man plans, God laughs. 

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