tag:blogger.com,1999:blog-28021668.post7758154026168365813..comments2023-10-12T21:12:41.408+08:00Comments on Value Investment - Musicwhiz's Journey: Musicwhizhttp://www.blogger.com/profile/10950754156386935254noreply@blogger.comBlogger57125tag:blogger.com,1999:blog-28021668.post-6397977041727896192008-09-25T00:01:00.000+08:002008-09-25T00:01:00.000+08:00Hi Mick Ong,Please let the matter rest. I don't wi...Hi Mick Ong,<BR/><BR/>Please let the matter rest. I don't wish to see any more "spats" relating to name-calling or difference in views.<BR/><BR/>Thanks.<BR/><BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-21380252484256562562008-09-23T10:45:00.000+08:002008-09-23T10:45:00.000+08:00Anon @ Sep 15 2008You called 8%pa a snob, got no b...Anon @ Sep 15 2008<BR/><BR/>You called 8%pa a snob, got no balls, rude and condescending based on he using the word "loser" which wasn't even directed to you. So who is rude and condescending?<BR/><BR/>The word can just mean loser in an argument or debate. Not necessarily the incompetent, incapable, failure in life, that you are thinking. It may not be used to ridicule.<BR/><BR/>It is not implied that traders are bad, traders lose in the markets. Traders and value investors lose in the markets. Traders and value investors can both be lucky as well. It is ok to respect both as they are. Your criticism here is flawed.<BR/><BR/>And on statistics, not sure if you actually studied. Hypothesis testing IS a valid method. Finally on lingual gymnastics, seems to me more like you are the one using it to divert attention. <BR/><BR/>Rgds<BR/>Mick OngAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-28021668.post-36637762116371113332008-09-15T21:01:00.000+08:002008-09-15T21:01:00.000+08:00Re: Anonymous and 8percentpa verbal sparring,I hop...Re: Anonymous and 8percentpa verbal sparring,<BR/><BR/>I hope all who contribute to this comments section can remain civil and be tolerant of each other's different viewpoints. Using sarcasm and "flaming" is certainly not a pleasant experience for anyone and I hope that this will not continue.<BR/><BR/>Let's all learn to respect each other, be they traders or investors. Value investing is NOT the only way to make money consistently, it is merely MY way; and I won't say it's the RIGHT way cos everyone is different and everyone should have the right to choose a method which suits their temperament and financial goals.<BR/><BR/>This blog is merely an account of my investing journey using the principles of value investing. There is no guarantee I can actually consistently get a decent return, but I certainly hope to be able to demonstrate this over time. If readers out there are still around after 5-8 years, hopefully this blog will be too, documenting my exact decisions and supporting them with facts and figures.<BR/><BR/>Regards,<BR/>Musicwhiz<BR/><BR/>P.S. - Do note that future postings of an inflammatory nature will be deleted by me.Musicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-80913887127872657042008-09-15T20:57:00.000+08:002008-09-15T20:57:00.000+08:00Hi 8percentpa,In response to your initial 2 posts ...Hi 8percentpa,<BR/><BR/>In response to your initial 2 posts @ Sep 15, 2008:-<BR/><BR/>I was never really good at statistics, haha. But I do know about confidence interval and sample size and all that. However, I think as long as we preserve capital and get a decent return, I will be satisfied. I am not out there to directly compare with anyone else, be they trader or investor. Everyone has different financial circumstances.<BR/><BR/>Regards,<BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-91871238167312466972008-09-15T18:52:00.000+08:002008-09-15T18:52:00.000+08:008percentpa,Wow… just wow. Not only have you showed...8percentpa,<BR/><BR/>Wow… just wow. Not only have you showed us what an arrogant snob you are in your earlier posts, you have also subsequently demonstrated that you don’t even have the balls to stand by what you wrote. Your attempts at back paddling are disingenuous and an insult to anyone who has been following the exchange.<BR/><BR/>You tried to deflect criticism right at the start by saying “I use offensive words like losers etc more for effect than anything else”. This statement is so tautological that it’s completely meaningless. Of course offensive words are used for “effect than anything else”, they are meant to taunt, insult and ridicule for effect. That’s just stating the obvious.<BR/><BR/>Allow me to quote what you previously declared “For those bashers here, you are the loser here for faulting someone pursuing what he truly believes and what’s more, the verdict is not out in 14 yrs”.<BR/><BR/>The message was clear and simple, you were labelling people who “faulted” (whatever that means) musicwhiz as losers and bashers. Instead of simply admitting that you were rude and condescending, you chose to do a clintonisque spin by claiming “everyone is a loser at some point… Buffet was a major loser in the dot.com bubble” to justify your language. Going by that ridiculous rationale, we should go around calling each other losers since all of us would have lost money at some time. Go down to SGX and try this stunt of yours, don’t forget to report back - if you make it out in one piece.<BR/><BR/>You then went on “I have never said that practicing value investing will ensure a better result than trading.” Don’t think anyone claimed you said that, whatever was that for?<BR/><BR/>A belated patronising attempt appears in the form of “I may belong to the value investing style but I respect traders a whole lot.” All this after claiming that “If you traded and made money. Again, it is all about luck! You are just lucky.” What did you say you respected traders for again? For being lucky?<BR/><BR/>You said “On the 17 yrs, I think my explanation is quite clear. Backed by a statistical method and a logical thinking behind it.” Not at all, what you presented wasn’t backed by any verifiable statistical method, you couldn’t even cite us a respectable source for Christ sake. All you did was regurgitated some basic statistical concepts like confidence interval, standard deviation etc. That’s just basic Secondary school knowledge, come back when you find the actual study. <BR/><BR/>I will repeat my original stand on your 17 year claim. Not withstanding you being able to cite a proper peer reviewed study, I am extremely sceptical that any study can conclude that 17 years is a cut off point to determine between skill and luck.<BR/><BR/>Most bizarrely, you then remarked “ ETFs is for lazy people, it was meant to be a compliment”. Next you will be telling us that black is white and the sun rises from the west.<BR/><BR/>“This shall be my last post on this thread as to ensure I do not engage in meaningless comment battles.” Nice try. In short, you started of haughtily by ridiculing anyone who disagrees with musicwhiz and by extension to yourself. When taken to task, all you could muster were those pathetic lingual gymnastics to argue why calling people all sorts of names is OK While such skills are in need during a legal hearing, it’s pathetic and goes against common sense when you are trying to interact in a blog with common people.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28021668.post-1258112860052459332008-09-15T14:38:00.000+08:002008-09-15T14:38:00.000+08:00Haha, very emotional post here. Ok just let me cla...Haha, very emotional post here. Ok just let me clarify a few things here. <BR/><BR/>Some times I use offensive words like losers etc more for effect than anything else. When it comes to the markets, everyone is a loser at some point in time. Buffett was a major loser in the dot.com bubble.<BR/><BR/>I have never said that practicing value investing will ensure a better result than trading. Pls read carefully. Both are difficult in different ways. It takes a lot of effort no matter which style you pursue.<BR/><BR/>It is easier to put pple into "for" and "against" and then fight. I may belong to the value investing style but I respect traders a whole lot. I read up books on trading/TA/candlesticks and salute legends like Baruch and Livermore and I believe the respect should be vice versa.<BR/><BR/>The posters here on the trading side don't really give that impression though. Esp those under Anonymous.<BR/><BR/>On the 17 yrs, I think my explanation is quite clear. Backed by a statistical method and a logical thinking behind it. Again pls read slowly and carefully.<BR/><BR/>On ETFs is for lazy people, it was meant to be a compliment. The next line reads I myself would put substantial amt into ETFs. It is interesting how emotions cloud the reading ability.<BR/><BR/>And finally, I always believe nobody has a monopoly on knowledge. I have never rode any horses and I don't drive a car. We are all here to learn and help one another.<BR/><BR/>This shall be my last post on this thread as to ensure I do not engage in meaningless comment battles.Jayhttps://www.blogger.com/profile/03292158817395898619noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-30811890295511867952008-09-15T10:38:00.000+08:002008-09-15T10:38:00.000+08:008percentpa,While your frevor for value investing i...8percentpa,<BR/><BR/>While your frevor for value investing is noted, you might want to get down from that intellectual high horse of yours.<BR/><BR/>So what if people don't agree with your brand of value investing? Branding others with differing view points as "losers" and "bashers" does nothing but exposes your immaturity in both the markets and in life.<BR/><BR/>And btw, there are many reasons why people buy mutual funds and ETFs. Some do it for diversification, others use it as a a natural hedging instrument. You might want to read up and interact more before spouting nonsense like ETFs is for lazy people.<BR/><BR/>I see you also engage in "bashing" traders. Going by your definition, traders who make money are just lucky and value investors who make money are not a result of luck but skill!? Oh yeah, I get that logic, rite...<BR/><BR/>Out of no where you come up with this theory about 17 years is a cut off point to determine between luck and skill. Since you are unable to cite your source, also hard for bloggers to comment. But what I can say is it seems unlikely an academic study would conclude the way you put it across to us. The statistics might be true, but I suspect you are taking quite some liberty in interpreting.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28021668.post-30754050904536999282008-09-15T09:45:00.000+08:002008-09-15T09:45:00.000+08:00Oh I forgot about the confidence interval thingy. ...Oh I forgot about the confidence interval thingy. Maybe it's 17 yrs for 90% confidence that this guy got skill.<BR/><BR/>And 95% confidence would be 20+ years and 99% confidence interval would be 30+ yrs etc.<BR/><BR/>Btw in stats, you can never get 100% bcos it will take forever. Normal distribution, that sort of thing. <BR/><BR/>Stats revision for me and maybe a lot of pple here huh? :)Jayhttps://www.blogger.com/profile/03292158817395898619noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-3280217376663087992008-09-15T09:39:00.000+08:002008-09-15T09:39:00.000+08:00I don't really have a source per se for the 17...I don't really have a source per se for the 17 yrs. I read in somewhere some time ago. More accurately, I think it's like it takes 17 yrs of track record in order to be statistically significant, t > 2 or something (if you still remember your stats!). ie H0 hypothesis: test for excess return over benchmark > 0 or not. Logically, it sounds about right bcos 1 cycle (peak-to-peak) lasts 7 years on average right? So if you are right 2.5 cycles, probably you got some skill lah....<BR/><BR/>Then again, we shouldnt really be bothered by the benchmark. In the end, as you said, it is about capital preservation and capital growth (if poss!).Jayhttps://www.blogger.com/profile/03292158817395898619noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-9468397000243808432008-09-15T00:36:00.000+08:002008-09-15T00:36:00.000+08:00Hi 8percentpa,Nice of you to drop by and leave a c...Hi 8percentpa,<BR/><BR/>Nice of you to drop by and leave a comment ! Your blog is a very good read and your posts are also very entertaining (I like your casual style of explaining value investing to the layman). Yes, 45 comments are a lot but note that 50% are my replies ! So it's actually only about 22 la.....<BR/><BR/>It's quite amazing that 95% of retail investors LOSE money in the stock market. If you think of it, markets basically only go up or down, so by right it should be 50-50 right ? haha. But I can see why if people constantly churn their portfolio and try to catch the next hot tip. Contra and margin can also kill many people and it probably has in this current bear market. This is why I strive for capital preservation rather than attaining huge profits. Many of the "bashers" only concentrate on the profits I missed out, without realising that it is capital preservation and a decent return on investment which I am seeking, not lottery-style "winnings". For goodness sake, investing is not a competition or a race, though everyone seems to treat it as such. Witness how many people say "win or lose" money, it's pervasive and it's totally wrong to embrace such a concept of the stock market.<BR/><BR/>Just curious though, how did you come by 17 years as an appropriate measure of an investor's true returns ? How do you actually differentiate whether it is luck or skill, since I know randomness can also play a big part in ensuring one profits every year, regardless of actual skill. Hope you can elaborate ?<BR/><BR/>Thanks a lot for the encouragement. I do believe in what I practise and I believe in the getting rich slow method. Hopefully, I can be consistent and steadfast over the years in order to attain my goal of a decent, consistent return on investment.<BR/><BR/>Cheers,<BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-45455527594768924612008-09-15T00:25:00.000+08:002008-09-15T00:25:00.000+08:00Thanks Ryan,Now I know where you got your estimate...Thanks Ryan,<BR/><BR/>Now I know where you got your estimate of 2015 from. But may I remind too that market cycles may not repeat themselves in the same way or have the same duration in future; as economic conditions change and the financial situation changes as well. The world is dynamic and few things are constant, so as you say the excesses need to be flushed out first. How long this takes is anyone's guess.<BR/><BR/>Your observation of Pacific Andes is sharp, and glad that you have your margin of safety of 50%. I am trying to average down my cost in time to achieve higher margin of safety, as this is one of the companies I own where I feel I have insufficient margin of safety.<BR/><BR/>Thanks again for the comments, and take care.<BR/><BR/>Cheers,<BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-530950166096192732008-09-14T23:26:00.000+08:002008-09-14T23:26:00.000+08:00Hihi45 posts! That's a record for a value inve...Hihi<BR/><BR/>45 posts! That's a record for a value investing blog, hehe. Well done MW!<BR/><BR/>Would like to share just a few thoughts here.<BR/><BR/>90% of all professional fund managers cannot beat their benchmark ie indices like STI, S&P500 etc. Any it is said that 95% of all retail investors lose money in the stock market, we are not talking about beating indices. It is not surprising that most people don't make money.<BR/><BR/>Even if you do beat the index, it takes 17 yrs to differentiate whether it is due to luck or skill. Like someone pointing out, those who started in 2003 will make money, those who started to 2006 will lose money.<BR/><BR/>For a lot of people, winning or losing in the stock market is about luck. <BR/><BR/>So MW, just by following truly to your investment philosophy is a great feat. Do it for 17 yrs with the zeal you have and I am sure you will be rewarded.<BR/><BR/>For those bashers here, you are the loser here for faulting someone pursuing what he truly believes and what's more, the verdict is not out in 14 yrs.<BR/><BR/>If you can't wait that long, go buy indices, ETFs. It is the best way to invest for the lazy people. Actually I would put a substantial portion of my money in ETFs, and much lesser in stock picking.<BR/><BR/>If you think trading is a better way to make money than value investing, I suggest you read up. To be a good trader is as difficult as anything else, a good artist, writer, surgeon, lawyer, value investor etc. If you traded and made money. Again, it is all about luck! You are just lucky.<BR/><BR/>Cheers!Jayhttps://www.blogger.com/profile/03292158817395898619noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-49726572592075825252008-09-13T18:04:00.000+08:002008-09-13T18:04:00.000+08:00Hi Musicwhiz,Why 2015? It's just my rough estimate...Hi Musicwhiz,<BR/><BR/>Why 2015? It's just my rough estimate. Because I read in my childhood about a story that in old Egypt, there was seven yrs of great crop abundance and followed by seven yrs of drought. Year 1982 to 2000 is the biggest bull-market run in human history. For the next bull market to start, the excesses will have to be let off first, first by p/e contraction followed by corporate earning downgrade. This vicious cycles will go for a few rounds and all these will take roughly the same time to run its full course. <BR/><BR/><BR/>To Kan Cheong,<BR/>I have also recently get into a small position in Pacific Andes.<BR/><BR/>Reasons:<BR/>1. Strong management and "what they say they will do" attitude as seen from annual reports 2001 to 2008<BR/>2. China consumer and resources play; complementary to my whole portfolio <BR/>3. 50% margin of safely <BR/><BR/>Top Risk:<BR/>1. High gearing ratio; it's why i only take a small position<BR/><BR/>Singapore market is highly volatile due to its small size (i.e. very easy to manipulate by BBs) so, you must do its homework to determine your intrinsic value of the company. Then have some margin of safely.<BR/><BR/><BR/>regards,<BR/>RyanRyanhttps://www.blogger.com/profile/11183920412816909665noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-90063440495471758772008-09-12T01:01:00.000+08:002008-09-12T01:01:00.000+08:00Hi Kan Cheong (that's not really your nick eh ?),I...Hi Kan Cheong (that's not really your nick eh ?),<BR/><BR/>I would strongly suggest you do your own research on the companies you wish to own in future and not just follow the companies I buy. It is good to understand the company yourself first and to feel comfortable as a shareholder.<BR/><BR/>If you invest in a company for its business, you should not worry too much about price movements. Pac Andes is more than 50% down from my purchase price, but so what ? As long as I see evidence of its business growing, I am not worried.<BR/><BR/>As to whether I will average down more, I cannot tell at this point as I am saving my funds for other significant investments too.<BR/><BR/>Sleep tight and stop worrying ! The sky ain't going to fall down...hehe<BR/><BR/>Regards,<BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-5345688264328082372008-09-12T00:58:00.000+08:002008-09-12T00:58:00.000+08:00Hi Ryan,I see that you strongly believe in alterna...Hi Ryan,<BR/><BR/>I see that you strongly believe in alternative fuels eventually replacing gasoline. While I concede that this may happen some time in the future, it is unlikely that in the near-term (next 5-8 years), something can displace gasoline and crude oil as the dominant provider of energy in our world. In my opinion, oil will not form a "bubble" like the one you envisage, because there is always scarcity and scarcity will act as a natural driver of prices (along with inflation). Hence, oil exploration will still continue for quite some time and provide Semb Marine and Keppel Corp with business for at least the next 8-10 years (forseeable future). <BR/><BR/>Why the year 2015 ? Do you forsee that some new technology will appear to completely replace crude oil or at least act as a commercially viable substitute ? It's possible and as an investor in this industry, I have to be alert for any such developments. If the news is big enough (i.e. significant enough) to cause an impact to our daily lives (and not just cause a stir in some distant laboratory), then I am sure many newspapers will publish it. Investors can then mull over the news to decide if there are far-reaching consequences.<BR/><BR/>Investing is not an exact science and it's impossible to see so far into the future (which you have tried to do by stating 2015). Being nimble and reacting to news is but one of the traits of the dilligent investor.<BR/><BR/>Your article (URL) is interesting, but at this stage it is still very preliminary and experimental; thus I will not dwell too much on such "discoveries", as there are probably a thousand such discoveries made every month all over the world. Let's not try to second-guess which will be the next "big" thing.<BR/><BR/>Regards,<BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-90638972717362251512008-09-11T21:58:00.000+08:002008-09-11T21:58:00.000+08:00MW,I follow you to buy pac andes cos' I learn abou...MW,<BR/><BR/>I follow you to buy pac andes cos' I learn about your blog from WS and was following your investments. Now Pac Andres dropped almost 40% from my buy in price. <BR/><BR/>Do you know what is the reason? I am getting very worried. <BR/><BR/>Will you buy more? Can you share more info with a small kan cheong investor like me?<BR/><BR/>Thanks,<BR/>Kan CheongAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-28021668.post-75477302660740249792008-09-11T09:55:00.000+08:002008-09-11T09:55:00.000+08:00Hi Musicwhiz,Not that I doubt all forms of financi...Hi Musicwhiz,<BR/><BR/>Not that I doubt all forms of financial statements, it is just that ships itself cost a lot to build and also cost a lot to maintain. In the worst case scenario if the O&G industry collapses i.e when oil prices fall below $70 or even less, not one will pay to maintain all the support vessels except the company itself.<BR/><BR/>I believe in peak oil theory but not in peak oil prices. Human innovation and ingenious will get us out of crude oil addiction and into a more sustainable economy. I also believe in invest for abundance not in scarcity. Scarcity for resources create bubbles, likewise I think O&G exploration may be the next bubble to be explode. <BR/><BR/>I also do not expect the various alternative energy to save our economy now, but maybe from year 2015 onwards. That is also when the next bull market will start. <BR/><BR/>Sidetrack to gasoline part, you may refer to that article http://www.technologyreview.com/Biztech/19128/ (Making gasoline from Bacteria) It may be the next Google. It's just one unknown risk that will kill O&G. <BR/><BR/>All well be prosperous,<BR/>RyanRyanhttps://www.blogger.com/profile/11183920412816909665noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-31419654285950555482008-09-11T01:58:00.000+08:002008-09-11T01:58:00.000+08:00Hi Simon,Thanks for your comment with regards to C...Hi Simon,<BR/><BR/>Thanks for your comment with regards to Corporate Man's second comment.<BR/><BR/>I do think value investing should incorporate realism because we are looking at actual businesses and how they survive out in the dog-eat-dog world. Although I have never run my own business, I do enjoy analyzing them as a hobby.<BR/><BR/>I guess I will enjoy investing even if I retire, as it keeps my brain juices flowing and also allows me to engage others as well. Quite fulfilling, I must say !<BR/><BR/>Regards,<BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-30657747404451910852008-09-11T01:56:00.000+08:002008-09-11T01:56:00.000+08:00Yo Corporate Man,Thanks for your very long post de...Yo Corporate Man,<BR/><BR/>Thanks for your very long post detailing your history of investing and also justifying your disillusionment with value investing. You are free to have whatever opinion you wish to have of me - that I do not know what I am doing. I can't very well claim I know a lot as I have been investing for just 3 years, but I would like to add that "not knowing what I'm doing" does tend to sound a little extreme. It reminds me of trying to squeeze toothpaste back into the tube - a valiant effort but utterly futile.<BR/><BR/>Your apology is accepted and no, you will NOT get flamed by my "loyal subjects" because not everyone who reads my blog is a value investor or believes in value investing.<BR/><BR/>Just a quick note - if you say you do not know how to improve on fundamental analysis and value investing, then how did you figure out that I don't either ? It's puzzling because if I hadn't seen an elephant before, I would not be able to tell that a person HAD seen one, would I ?<BR/><BR/>You keep mentioning "fundamental analyst", but I think value investing is not just about analyzing financials, getting together with buddies to talk about economic news, and going to AGM. It's a mindset which involves attitudes, behavioural finance (this is integral), mental attunement and an understanding of the intangibles which make up a business. In short, value investors are business analysts la. I always feel that whether or not value investing works depends as much on the practitioner as well as the methodology. You say that of your friends, some managed to get a decent return while some lost money and "quit" (assume they gave up value investing and turned to some other form of investing). The practitioner is the one who internalizes knowledge and uses it to adapt to the situation at hand. Investing is fluid and needs to be flexible in order to survive through the times.<BR/><BR/>On the same point, I wonder why you keep referring to "beating the index" as a good benchmark that "you've made it". If you aim is not to emulate Buffett's returns (who can, anyway ??), then you should simply be satisfied with a decent return on investment ! Ask yourself a basic question - what is the purpose of investing ? It's to receive an adequate return on your investment over time, higher than inflation hopefully. I feel it is pointless to compare your effots to the index because in that case, buying an index fund will suffice.<BR/><BR/>In fact, I think you are a success (not a failure) because you managed a consistent return over 7 years without losing money ! Capital preservation is the key to investing and you have already achieved that, so why deny yourself the feeling that you've achieved something which not many are able to achieve ?<BR/><BR/>For me, I emphasize getting a decent return on investment over time, hopefully just 4-6% per annum is enough (inflation is usually at 2-3% except for the recent temporary spike). Thus, the result I am getting, though not spectacular, is satisfactory to me. Do note that I have also considered ETFs like you have done, but for now I prefer to research individual companies rather than just buying the index.<BR/><BR/>So to conclude, I am NOT trying to beat the market. The reason why I chose the path of value investing is to preserve my capital (I had been losing money through directionless investing from 2004-2006) and to get a decent return. So far my objectives are being met, and my time horizon is 10-20 years (I personally think 7 years is not long enough - maybe you wanna wait another 13 ?).<BR/><BR/>As for your colleague sitting on massive losses, did he buy with margin of safety ? I think you should separate FA from value investing because as mentioned above, value investing is really so much more than FA.<BR/><BR/>I think it's OK to ramble. Heck, you've made me ramble on too ! Haha. You have a good week ahead and take care.<BR/><BR/>Cheers,<BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-83224365321049147622008-09-11T01:39:00.000+08:002008-09-11T01:39:00.000+08:00Hi Simon,Yes, in a bear market suddenly a lot of p...Hi Simon,<BR/><BR/>Yes, in a bear market suddenly a lot of people are also following Mr. Market's moods and are affected by them. I always say it's a sign of the times (a Petula Clark song frmo the 60's). When markets are in "bull" mode, no one questions valuations and prospects; but when the tide turns, suddenly every industry is subject to a slowdown, amid the threat of a global economic recession, the likes of which no one has ever seen (emphasis intended) !<BR/><BR/>So I take comfort in knowing that the companies I own are well-run and profitable. I have no data points to look out for; I am focusing my attention on other opportunities in such "troubled" times.<BR/><BR/>Regards,<BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-35904205066042670492008-09-11T01:36:00.000+08:002008-09-11T01:36:00.000+08:00Dear Ryan,About the capex part, if you don't u...Dear Ryan,<BR/><BR/>About the capex part, if you don't use operating lease expenses as shown in the P&L, as well as capital commitments note as shown in the Annual Report, then pray tell what exactly can you rely on for "investor value" ? You sound as if you doubt all forms of financial statements because of the possibility of "financial engineering", but in turn this undermines the entire investing process doesn't it ?<BR/><BR/>Mental framework by Charlie Munger, yes I had read about that. He advises using a multi-disciplinary model, which I have tried to do on most occasions. As I am much younger than the man, forgive me if I do seem to lack more knowledge in this area, but I promise to catch up on my reading.<BR/><BR/>What Buffett said is that he cannot tell what price oil will be in 3-5 years time, and I dare say no one can. But do note that oil is a finite resource (like coal), and as we dig up more of it, there's naturally going to be less of it. I doubt you would disagree with this statement. Thus, over the long-term, prices will tend to trend upwards as supply diminishes; while world population continues to grow. Increasingly, the "easy" oil in shallow waters is being used up, and oil majors have to go deeper. This capex will mean that oil and gas support companies will continue to be in demand. As for charter rates, I would forsee them to remain stable until at least 2011-2012 when the new batch of AHTS for deepwater come into play.<BR/><BR/>You mentioned alternatives to oil, and I concur - yes there are many ! But which one of them can be mass produced on a large-scale as oil refineries are doing now ? Thus far palm oil, solar and wind energy (and some say nuclear) have been touted as the "next big thing". Perhaps someday one of these will take over; but that day is not at hand. Also, I dare say most of our machinery and vehicles are made to run on gasoline, so the use of oil will still be very prevalent for the forseeable future. You say that Ezra + Swiber are facing "invisible" competition - other companies producing other products also face such competition (threat of substitutes) so it's really nothing new in terms of evaluation of a company. Every company must be constantly vigilant in case a substitute appears to render their products/services obsolete.<BR/><BR/>I don't understand lateral thinking "qualitative", please kindly explain. The above points which you raised have already been thought about by myself some time back when I invested in both companies, I just have not blogged about it thus far. So thanks for giving me the chance to put my thoughts down.<BR/><BR/>Cheers,<BR/>MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-46785876299129544262008-09-10T19:45:00.000+08:002008-09-10T19:45:00.000+08:00corporate man, 7 years is a long time! haha. lucki...corporate man, 7 years is a long time! haha. luckily i found out after 4 yrs...not much better, but at least i realise there is a need to inject some 'realism' into the idealistic notions of value investing...<BR/><BR/>ANYWAY...just to remind everyone im not taking sides, but corporate man, your way of investing is not much of a strategy la!...u just buy blue chips every half a yr..u can't get much alpha returns from that..there's not much active asset allocation involved at all.<BR/><BR/>and u bought from 2003!!, that was the start of the boom mkt and when SARS was just subsiding, i think anybody in this world who bought in 2003 would have made money and much more too, unless u r damn noob. and yr friend who invested in late 2006, im not surprised if he lost money. u can't make the same comparison like that...simonhttps://www.blogger.com/profile/01511349808077597074noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-9127294466784854732008-09-10T14:18:00.000+08:002008-09-10T14:18:00.000+08:00Ok musicwhiz,Looking back, I agree that my comment...Ok musicwhiz,<BR/><BR/>Looking back, I agree that my comments esp. the “Warren Buffet wanabe” have been inappropriate and harsh and for that I apologise, but I stand firm on my fundamental POV, i.e. you don’t know what you are doing. Seeing that I seem the only person around here who’s not into value investing, I’m probably gonna get flamed by all your supporters for saying that though.<BR/><BR/>Maybe let me qualify a bit why I haven’t been able to offer you constructive criticism on how you can improve your fundamental analysis – that’s because I have no idea how to do it and based on what you blog, it is my belief that you don’t either.<BR/><BR/>I used to think I was a good fundamental analyst just like you in the past – way earlier than you in fact. Got so “on” about the whole thing that a lot of like minded people like me got together to form some sort of unofficial investor club. We were no technical traders, we were the true disciplined disciples of Graham and Buffet who will eventually prevail and even if we don’t match his 22% p.a. return, we’ll still beat the market by 3%-5% over a long term.<BR/><BR/>Or so we thought. Every fortnight for more than a year we got together at some member’s home and spent a weekend afternoon discussing investment concepts, business analysis and other news that crop up. It’s not really that different from what you doing in your blog now, just that last time internet not so prevalent and blog wasn’t invented yet. <BR/><BR/>Besides this particular group, I also spend a lot of time mingling with other like-minded people, attend AGMs and what have you. After more than 7 years, based on my observations and quite a decent sample size (20+ FA practitioners I know quite well), I was faced with the following reality: <BR/><BR/>1) Some incur loses and quit <BR/>2) Most make some return, but not enough to justify all that effort and time put in<BR/>3) A few can beat STI a little <BR/>4) NONE has demonstrated that they can beat the market convincingly and make all the whole effort worthwhile.<BR/><BR/>I belong to #2, made money but underperform STI slightly and all in all, I figured I could have made so much more in those 7 years if I had taken up some advisory projects using my professional expertise with the same time spent on investing homework. <BR/><BR/>That’s why I made a decision in 2003 to switch into a regime of buying solid blue chips every half a year ignoring both fundamental and technical analysis while relying on diversification and portfolio balancing instead – haven’t looked back since. Been grabbing various ETFs since they were introduced as well. Over the years, they have generated a decent return no different from my investor club days, but I get a lot more free time to do so much more.<BR/><BR/>You mentioned the following key points:<BR/><BR/>[[“So pray tell what basis does an investor have to determine if a company is suitable for investment, if not through Annual Reports and/or press releases?".<BR/><BR/>“ What I do as a value investor is to closely track the businesses I own, and not just through press releases. I also talk to the Management and read up on other sources of information on the companies and its competitors (scuttlebutt) …”<BR/><BR/>“If you are indeed suggesting having "special insight", then one must either be intimately involved in the industry, or else he must know some information which is not known to the general public.”]]<BR/><BR/>All I can say is that you aren’t the first and won’t be the last to rationalise in that way, been there done that for me. I don’t know, maybe you’ll be the first guy I know who can outperform the market with a profitable margin to boot. From what we can see now, your returns of $19k over the 2004 – 2008 period ain’t that spectacular, but you’ll no doubt argue that you go long term. Be that as it may, just sharing some life experience with anyone who’s interested anyway.<BR/><BR/>Actually directed to your site by a colleague and unlike you who started earlier, he wasn’t so lucky. He’s a FA guy and started stock investing in late 2006, demonstrates the same pluck and confidence in FA like I and my peers did more than 10 years ago, and he’s sitting on massive loses now. <BR/><BR/>Looks like I have rambled on and on, should end now, got too engrossed with life story.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28021668.post-53069465508428240342008-09-10T14:08:00.000+08:002008-09-10T14:08:00.000+08:00well, it looks like everybody is against buying ez...well, it looks like everybody is against buying ezra and swiber. maybe this is the best time to pick up some. =)<BR/><BR/>musicwhiz, what do you think? <BR/>i think ppl's perception of these 2 stocks have deteriorated quite a lot. What data points are you looking for before you add more position to swiber and ezra?simonhttps://www.blogger.com/profile/01511349808077597074noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-43852810929318649042008-09-09T11:39:00.000+08:002008-09-09T11:39:00.000+08:00Hi Musicwhiz, I don't wish to agree or disagre...Hi Musicwhiz, <BR/><BR/>I don't wish to agree or disagree with your Pt 1-5. Generally, I feel that you know what you're doing. <BR/><BR/>About the capex part, i don't take P/L account as face-value. Accounting principles does not reflect accurately "investor" value as you should know by now.<BR/><BR/>One important thing that I look when I invest in the prospects of the industry in 10-20 yrs time. <BR/><BR/>Mental framework as Charlie Munger called it. <BR/><BR/>You assume that O&G exploration continues into the next 50 years<BR/><BR/>1. What is the break-even oil price for O&G exploration? $100 or $200?<BR/><BR/>BUFFETT: Well, the biggest variable in whether it's a good investment is the price of oil. Now, it's important to know how much they can get out and what their costs are going to be and what the capital costs--all of that is important and that fits into it. But you still have to figure out what your own feeling is about what oil's going to be selling for three years from now or five years from now. Because you could be the world's greatest mining engineer, but if you were wrong about the price of oil in a big way it would negate all that knowledge. So it--I can tell you that if 100--if you had $120 oil from now till, you know, 50 years from now, that the tar sands would be--would work out very well. But I don't know the answer to that. And I may form an opinion at some point, and I've got it--I'm prepared to form that opinion now. <BR/><BR/>With that mind, the break-even oil price for O&G is $120. If the exploration costs for out-shore drilling exceeds $120 per barrels, it make no sense at all. O&G drilling is, itself, capital and energy intensive industry. With the increases in energy price (oil price), the break-even costs for O&G will be even higher (a vicious cycle as we can see)<BR/><BR/>2. What are the competitors to oil?<BR/><BR/>Solar, wind, nuclear energy… We can list all the renewable energy; what are their break-even price based on oil? Less than $100 per barrels?<BR/><BR/>From what I know, EU and USA are slowly transforming into a renewable hydrogen-based economy when transportations will be run by hydrogen or electric fuel cars. Transportation sectors use the highest proportion of oil. <BR/><BR/>I could not predict how high the oil price will rise in 10-20 yrs. But I can safely say that Ezra or Swiber are facing much more invisible competition outside their own industry! With so much unknowns and uncertains… how can one invest safety? <BR/><BR/>Lastly, I hope to see more such lateral thinking “qualitative” in your blog. <BR/><BR/><BR/>Regards,<BR/>RyanRyanhttps://www.blogger.com/profile/11183920412816909665noreply@blogger.com