tag:blogger.com,1999:blog-28021668.post9043336853564953019..comments2023-10-12T21:12:41.408+08:00Comments on Value Investment - Musicwhiz's Journey: Behavioural Finance Part 5 - Gambler’s FallacyMusicwhizhttp://www.blogger.com/profile/10950754156386935254noreply@blogger.comBlogger19125tag:blogger.com,1999:blog-28021668.post-22791599611443031462009-09-30T14:00:00.750+08:002009-09-30T14:00:00.750+08:00Hi Panzer,
You are indeed too kind haha, I am jus...Hi Panzer,<br /><br />You are indeed too kind haha, I am just articulating some of my thoughts. Thanks for your kind compliment.<br /><br />I think as investors/traders, we should keep detailed records in order not to mislead ourselves that we are doing far better or worse than we think we are.<br /><br />SWFs like GIC and Temasek can of course say as they wish, but ultimately it's long-term performance that counts. They can use whatever method they wish - they are a black box anyway and it's as good as viewing them as a hedge fund as they are not transparent enough with their disclosures to Singaporeans.<br /><br />I've always felt that a purist approach works better for me, rather than try to meld the best of both worlds of TA and FA to achieve a hybrid successful mix. I am comfortable with what I do and how I do it, and though I will modify my strategies and criteria as I go along, it will be along the lines of value investing (and not related to TA).<br /><br />Cheers !<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-91461869280197198872009-09-30T13:56:31.887+08:002009-09-30T13:56:31.887+08:00Hi dsea,
Yes, I think they flag those out as &quo...Hi dsea,<br /><br />Yes, I think they flag those out as "red numbers" and refuse to sell anymore to people. This is to limit their liability in case that number turns out to be the first prize! They use probabilistic computations to arrive at the optimal number they should sell to maximise their own profits.<br /><br />Cheers,<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-12717028308896799912009-09-30T13:55:21.480+08:002009-09-30T13:55:21.480+08:00Hi Createwealth8888,
Why did you use 5-7 years as...Hi Createwealth8888,<br /><br />Why did you use 5-7 years as your time frame? Is there any particular significance to this?<br /><br />Thanks,<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-13825001827712443312009-09-30T08:54:56.241+08:002009-09-30T08:54:56.241+08:00Hi MW
Another interesting post which is worthy of...Hi MW<br /><br />Another interesting post which is worthy of publication in Business Times IMHO.<br /><br />Even Temasek and GIC time the market (although Tony Tan kept saying only this "once") with their bets on US financials despite their public position of being "long-term" investors.<br /><br />How long-term can one get when you buy/sell the same company within 1 year?<br /><br />Even Sovereign Wealth Funds can fall prey to the Gambler's Fallacy, i.e. when global equities go up, they say it's because of their astute value investing for long-term. But when subprime fiasco occurs, they conveniently blame external factors (beyond their control).<br /><br />In the meantime, GIC/Temasek chaps are not poorly remunerated especially at the top echelons.<br /><br />I think we sometimes get too fixated about dogma when it comes to investment philosophies, i.e. FA vs TA. To me, do you make $ or not using whatever approach that is aligned to your own risk/reward trade-off tramework.<br /><br />I agree that tracking gains/losses are important and I've been tracking since 2003. It may not be 100% accurate but it's 95%+ and gives me a very good idea whether I've employed the capital (personal investible net worth) of Panzer Pte Ltd effectively, beating 2 x fixed deposit returns.<br /><br />Be well and prosper.PanzerGrenadierhttps://www.blogger.com/profile/15836438378215893219noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-33768070569047115752009-09-29T22:39:00.409+08:002009-09-29T22:39:00.409+08:00Hi Keat,
TOTO are pari-mutuel games. In which, ...Hi Keat,<br /><br /><br /><br />TOTO are pari-mutuel games. In which, Singapore pools is just the "totalisator", ie., the admin chap that collects the bets from all of us, annouce the winnig number, deduct the admin expenses and pay out the winnings. Not exactly a call option for the participant. <br /><br />The closest analogy would be the participating fund of an life fund insurance company, preferably a mutual insurance company, where its run for benefit of policy holders.<br /><br />For 4D, Singapore pools do practice position limit. Note that they do refuse to sell 4D when they hit their position limit.dseahttps://www.blogger.com/profile/15659015361274204794noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-62253362037649419862009-09-29T21:03:21.128+08:002009-09-29T21:03:21.128+08:00http://createwealth8888.blogspot.com/2009/09/find-...http://createwealth8888.blogspot.com/2009/09/find-your-perfect-pitch.html<br /><br />Limit your journey to 5-7 years and see where are you getting to and change course if necessary.Createwealth8888https://www.blogger.com/profile/08563834016250153049noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-85090986786719562772009-09-29T16:09:43.540+08:002009-09-29T16:09:43.540+08:00Hi JW,
Yes, in fact investing is a journey of a l...Hi JW,<br /><br />Yes, in fact investing is a journey of a lifetime ! We should grow and enjoy it as we move along through this fantastic voyage. For if one learns to invest properly, the rewards at the end of the journey are bountiful!<br /><br />Cheers,<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-71016861936466949792009-09-29T10:03:53.230+08:002009-09-29T10:03:53.230+08:00Hi MW,
"Although you may argue this method &...Hi MW,<br /><br />"Although you may argue this method "deprives" me of better gains, there is no conclusive proof this can work well for me (it's a personal issue)."<br /><br />I have to say I agree fully with this. One should stick with a style that one is most comfortable with :) TA might just now work for you, so I won't go further on that. This is something I realised quite recently on my foray into this new arena.<br /><br />Anyway, I've only just embarked on my investment/trading path (<1 yr). Still lots more to learn :)<br /><br />A university honours degree requires 4 years of our life to complete, but this journey will take much longer than 4 years. <br /><br />Cheers!JWhttps://www.blogger.com/profile/04633191740991225888noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-16013109216823062082009-09-29T02:15:43.942+08:002009-09-29T02:15:43.942+08:00Hi Simon,
Sorry if my reply was a little late. I ...Hi Simon,<br /><br />Sorry if my reply was a little late. I am sure there are FA people out there who are willing to help, but this is not an easy question to answer, so let me try.<br /><br />Cash burn rate is tied to the amount of cash a company uses in excess of what it receives. That is 1 definition. Another is the rate of cash usage by the company. I would think exact figures are hard to obtain unless you are working in the Finance Dept of the company!<br /><br />You can get some hints from the Cashflow statement, but the actual cash burn rate is usually just an estimate.<br /><br />Donmihaihai has also given good guidance on cash burn rate too, kudos to him.<br /><br />Cheers,<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-68927875283982981622009-09-29T02:09:00.354+08:002009-09-29T02:09:00.354+08:00Hi JW,
No offense taken, but yes my post was defi...Hi JW,<br /><br />No offense taken, but yes my post was definitely biased towards TA, and I make no bones about it. I know there are probably 99% of people out there who either believe in TA, or use some form of TA combined with FA. But I choose to invest purely based on a company's fundamentals and prospects, and will not rely on historical price charts or trendlines at all.<br /><br />Although you may argue this method "deprives" me of better gains, there is no conclusive proof this can work well for me (it's a personal issue). Thus far, using FA alone, I have been getting a decent return on my investment.<br /><br />As for value traps and the possibility of being wrong, yes of course FA cannot eliminate the probability totally, but what you can do is to understand the economics of the company and over the long-term, the merits of the company will shine through and ensure your downside is much lower than your potential upside. That's the bet that investors make, I guess.<br /><br />Btw, good comment! I really liked it. :)<br /><br />Thanks,<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-29733688880595744162009-09-29T02:04:44.246+08:002009-09-29T02:04:44.246+08:00Hi Keat,
Haha point noted. Everyone is hoping for...Hi Keat,<br /><br />Haha point noted. Everyone is hoping for their own "Black Swan", and in the end Singapore Pools is the only one getting richer. Hehe.<br /><br />Cheers,<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-34298116720214345552009-09-29T00:22:04.425+08:002009-09-29T00:22:04.425+08:00hi donmihaihai,
thx for the explanation. very hel...hi donmihaihai,<br /><br />thx for the explanation. very helpful!<br />btw, since there's no rigid model, and to simplify things a little, do you think using the operating expenses in the p&l (e.g. admin expenses, selling expenses etc.) would still give a good picture of the cash burn rate per year for the company? in my opinion, i would think so because it would roughly represent the amount of cash that has to be paid out each year. I would like your (or others) opinion on this.<br /><br />simonsimonhttps://www.blogger.com/profile/01511349808077597074noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-29674584836203405442009-09-28T23:42:53.466+08:002009-09-28T23:42:53.466+08:00hi simon,
If there are lot hardcore FA ppl and no...hi simon,<br /><br />If there are lot hardcore FA ppl and no one is helping you then either they are all selfish or you should self help rather than asking around. Or maybe there arn't lot of hardcore FA ppl around.<br /><br />Anyway as far as I know, there isn't any rigid model to extract "cash burn rate" from financial statements.<br /><br />Cash burn rate usually refer to start-ups that are not generating enough revenues to cover all expenses. For more mature companies where revenues is way > expenses then this does not apply. But if you are looking at the amount of "fixed expenses" a company must bare if it is to keep as an operating entity, then it can be done but that required not just the knowledge of accounting, finance but understanding of the company and the industry. It vary from company to company.donmihaihaihttps://www.blogger.com/profile/07209484060024612572noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-56774617577168642372009-09-28T22:31:32.655+08:002009-09-28T22:31:32.655+08:00seriously guys, a lot of you are hardcore FA ppl. ...seriously guys, a lot of you are hardcore FA ppl. could someone kindly tell me how do i find out a company's cash burn rate from the company's financial statements?simonhttps://www.blogger.com/profile/01511349808077597074noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-86637851058361726912009-09-28T22:28:29.220+08:002009-09-28T22:28:29.220+08:00seriously guys, a lot of you are hardcore FA ppl. ...seriously guys, a lot of you are hardcore FA ppl. could someone kindly tell me how do i find out a company's cash burn rate from the company's financial statements?simonhttps://www.blogger.com/profile/01511349808077597074noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-88355343638036509142009-09-28T13:41:20.255+08:002009-09-28T13:41:20.255+08:00Hi MW,
there's one portion I don't fully ...Hi MW,<br /><br />there's one portion I don't fully agree.<br /><br />"By studiously going through a company’s newsflow, fundamentals and financials, one can make a more informed decision of the actions he should take with regards to an investment which are not prejudicial to his own interests. Instead of relying on price actions to guide his decisions, one can make more astute decisions by treating stocks as part ownership of businesses and making a business decision instead."<br /><br />One can also make use of price actions to guide one's decision. The key is whether one is sufficiently trained to do so (i.e. TA). To me, your post was a little too biased against TA.<br /><br />Be it TA or FA, as long as one did not do it studiously, one is speculating/gambling.<br /><br />And be it TA or FA, both are done with the aim of increasing your odds of succeeding in buying the share. Informed decisions can be made by either camp.<br /><br />Let's focus on FA since yours is a FA blog ;) Even having calculated the value of the stock, and buying because of it, you are still making an intelligent bet just like TA. Reasons being:<br />(i) value traps as you have mentioned before<br />(ii) analysis of profitability could be wrong, and hence value could drop.<br /><br />No offence ok? Just sharing of thoughts :)<br /><br />Lastly, although I know you are a pure FA person (I tried to start out this way too), I would like to introduce you to the idea of Elliott Wave Theory, and it's applications to socionomics and behavioural finance as well. To me, it's a theory that's part FA part TA, and it's very very interesting. Do take a look :)JWhttps://www.blogger.com/profile/04633191740991225888noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-48496344448929333652009-09-28T12:13:34.465+08:002009-09-28T12:13:34.465+08:00Sometimes people buy Toto is in hope of a "bl...Sometimes people buy Toto is in hope of a "black swan event" (of hitting the jackpot). <br />Its sort of like buying a cheap call option with very high upside?<br />The casino or Singapore Pools selling u the option of which they definitely on a net-net basis earn more premium than actual paid-out event.SKhttps://www.blogger.com/profile/03483637013866641159noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-34824661763936435102009-09-28T07:18:19.215+08:002009-09-28T07:18:19.215+08:00Hi createwealth8888,
I was actually aware of the ...Hi createwealth8888,<br /><br />I was actually aware of the difference between pure gambling and intelligent speculation, but was hoping someone would point it out in the comments. I am glad you did make a comparison.<br /><br />I have knowledge of people who make intelligent bets when the odds are strongly in their favour - this counts as speculation but there is an element of probability present which works in favour of the bettor. So I guess we must reakky weight our risk/reward ratio before proceeding.<br /><br />Cheers,<br />MusicwhizMusicwhizhttps://www.blogger.com/profile/10950754156386935254noreply@blogger.comtag:blogger.com,1999:blog-28021668.post-4487601377466675752009-09-27T23:11:42.793+08:002009-09-27T23:11:42.793+08:00http://createwealth8888.blogspot.com/2009/09/gambl...http://createwealth8888.blogspot.com/2009/09/gambling-investment-speculation.html<br /><br />See the differences.Createwealth8888https://www.blogger.com/profile/08563834016250153049noreply@blogger.com