Friday, August 23, 2013

The Greed of Man - Part III

Strange but true - reminds me a lot about investing lessons by re-watching this drama.

(1) Make investing decision as if a failed decision will make you go bankrupt.

It was certainly comical watching Ar-Bok running between his 4 small businesses and a brokerage firm. He will close his shops whenever he made enough and ran to the brokerage firm trying to multiply his wealth by betting in the stock market.

Unfortunately, he came out from the shop with disappointed face because he lost his each of his bet.

One fine day he found a great inspiration. Sold off all his assets and businesses and put everything into stock market. By burning all his bridges, failure was not an option. He figured he kept losing money because he kept thinking no big deal that he lost it because he can always make it up in his next bet. Just like most of us were advised to cut loss - live to fight another day. The trouble with many of us also thinking since it is money that we can afford to "throw away", we place our bets very carefree and carelessly too.

He tortured himself and Ar-Mei by not doing anything and not eating anything. He must and will succeed or else they will end up living on the streets penniless. Though it was an over-exaggeration that he became a millionaire within 48 hours, the message was powerful - you must hit the bull eye or else ........

(2) Can "blind fists killed a grand master?". It was really funny how a person like Ting Hai who does not know anything about stock or future killed Tou Tou(TT). TT was a cocky trader who crowned himself Zhu Ge Liang the famous strategist of ancient time. He thought cooking the 5 crabs(Hai's) to revenge them for killing Teng Teng,  a sister of Ar-Bok, who he fell in love. He was taking advantage of Ah Hau, the eldest son of Ting Hai which took the company to public. TT was playing long and short to disoriented him left him with huge losses.

The initial win was very thrilling but TT was too obsessed of revenge but forgetting that the market is getting very overbought. Ar Bok figured that out saying the heavy buying volume supported by retail investors will soon ran out of oxygen and a market crash was imminent. Ar Bok look like a dummy but when he cited the volume similar prior to 1973 stock market crash, I was totally impressed. He stayed out on the day but TT planned to execute his plan to acquired their company.

The idiot Ting Hai who knew nothing should seek advice from stock market guru. He begged Man Yi who just came out from prison for help. Man Yi was saying there is no need any skill. All he needs was luck and go against the crowd. He did precisely that shorted the future contracts which failed to break through 4000 points. The stock market did collapsed and he made 4 billion dollars.

Ting Hai was impressed that Man Yi was really a genius. Man Yi who advised Ting Hai himself lost 90 million dollar. See, that was a perfect example of adviser did not walk the talk. Actually there are tonnes of financial planners and insurance consultants who could not manage their own finances will keep advising people.

During the 4 days market closed, Ting Hai seek Man Yi advice again what should he do? Man Yi advised him to burnt his enemy to eternal death. TT was highly emotional trying to defend $ 1 support but broke through due to heavy selling by Ting Hai. TT did not cut loss and trying to cover up he has deep pocket and taking every sell orders. Ting Hai was so mad that keep selling and sent the stock price down to 10 cents. TT effectively went bankrupt because he was buying all the way from $ 3.

These plots have many great lessons

  • Obsess with a company without taking into consideration of overall market is extremely dangerous. When market is dominated by narrow stocks to send indexes higher and higher, there are plenty of stocks can be attractively valued. There are plenty of stocks with single digit PE but when the big storm comes, it can also kena whack.
  • You really don't need IQ of 180 to be in stock market. Buy when there is blood on the street and sell when a shoe shine boy gives you stock tips. Pure and simple.
  • Dollar averaging down on leverage? Stupid idea. Dollar averaging can only work over a long period of time but never in a short time.
  • Beware of many crabs trying to teach us about financial planning while they can't walk straight.
  • Do you need luck yes. Plenty of them. Definition of LUCK = PREPARATION + OPPORTUNITIES.

1 comment:

Kris said...

I really like this series alot since it is regarding stocks even though I was just a young kid when I watch it :D

When I was 10-12 ish, I helped my parent to look at the mutual fund prices on the newspaper :D Last time public mutual only had 4-5 funds.