22
Jan
08

Buy, sell or hold in a market stacked against you

Own shares? Wish you didn’t?

There’s something unseemly about talking about money. These days people are more likely to spread details of their sex lives around the globe than talk honestly about how they feel about personal investing, savings or money itself. But like sex, some seem to need it more than others, it’s hard for most to get by without it, and a little more from time to time never hurt.

But with all the news about a panic interest-rate cut following stock market dives around the world on fears of a U.S. recession, because Joe Average American can’t pay his mortgage, because unscrupulous bankers lent money they never had to people who didn’t read the fine print on mortgages whose payments were set to explode months later and doom them to default, mortgages which were then bundled together and sold to suckers investors half-way around the world who also never bothered to read the fine print and didn’t know what they were buying into anyway…

…when you factor in sky-high oil prices coupled with a possible collapse of the shrinking U.S. dollar, it helps to step back, cut through the crap and gain a little perspective on what’s only the latest in a long line of financial crises born of greed and swindle.

tv.jpg

One of the things I used to do as a way to make a living was cram myself into a van along with a driver, soundman, cameraman and technician, spin through the green hillsides of the Hong Kong New Territories, past stinky tofu and joss stick hawkers and through a long, dirty tunnel into Asia’s Manhattan to interview stock brokers and company analysts on daily matters financial.

Then I’d go back through the tunnel to the bureau, cut the best two quotes, lay a bunch of wallpaper footage of stock market traders talking on the phone, people buying things, and of course lots of money – people counting out money, bits of change falling out of pockets… well, not quite that bad….

…but anyway I’d put together a little package, gussy it up with little tidbits of what was happening in the markets around Asia and the world, add a few items of business news, go get slapped on so much make-up I’d put a corpse to shame, plunk myself in front of the camera and then try to look and sound like I knew what I was talking about. Sometimes, I even succeeded. It was a great job, paid the rent and then some on a Hong Kong shoebox apartment, and I even got to learn a thing or two.

Like for instance:

  • Nothing personal if that’s your line of work, but they’re all full of shit. Next time you see Gordon Gotbucks up there on CNBC Squawkbox blabbering on about where the Hang Seng is going to trend for the next fortnight or next year, throw a brick at it. Can ol’ Gordo predict the next September 11? The 1995 earthquake in Kobe, Japan? A civil war in China? These things have and will move markets up or down, but the thing is, nobody can predict the news.
  • All they want is your money. Because at the end of the day, whether you’re buying, selling or watching it melt before your eyes, you will always pay a fee to whoever is doing the buying and selling. With online trading the fees have been cut to a fraction of what they used to be, but there are more playing the game. It always will be the oil that greases the skids and keeps them fat and happy on their yachts. Sure, you will always be given the line that stocks outperform over the long term, but I have yet to see an investment fund brochure that didn’t have a caveat at the bottom in fine print: past performance is no guarantee of future returns.
  • The game is stacked against you. I’m not a conspiracy theorist, and I do know there are honest people in the business, but the fact of the matter is that insider trading is what makes the markets go ’round. I had colleagues ask me to give them hot stock tips. When I said I didn’t have any, they didn’t believe me. What? Aren’t you getting any inside dope from them? One of those colleagues, btw, is now anchoring on a well-known financial news channel.
  • If you’re reading this on a computer, you’re already rich, you’re just trained to think you’re not. The finance industry has a vested interest in making sure you know that someone else has more money than you do, you should envy him for it, and adjust your portfolio accordingly. Step back. If your pile is small, count your blessings. If it’s large, look where you could spread it around to do some good. Just remember to keep receipts to deduct those donations at tax time.

Oh, and a precious few tips gleaned from some of the sharks:

1. Never catch a falling knife. Translation: never buy shares in a company whose share price is falling.

2. Sell everything when you start to hear cab drivers and fitness instructors giving investment advice.

3. Buy the hell out of the market when there’s blood on the streets.

Only three? Hell, two of them contradict each other. Seriously, I know very little about this. I was only a business reporter for four years. That’s where the cynicism comes from, I guess.

© 2008 lettershometoyou

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12 Responses to “Buy, sell or hold in a market stacked against you”


  1. January 22, 2008 at 4:19 pm

    Having read The Black Swan, where Nassim Nicholas Taleb talks about the sheer randomness of everything, and analysts’ inability to predict anything, I now don’t take any self-styled experts seriously.

    However if they once wore a shed-load of make-up to appear on TV in Hong Kong, and now write a great blog, then I take them very very seriously. Thanks for the advice.

    Charlotte – coming from you, that’s quite a compliment! I unfortunately have no advice – it is indeed a random walk.

  2. January 22, 2008 at 6:50 pm

    Yes well I got up too late this morning to catch any good buying opportunities, so sad. I don’t pay too much attention to the gurus and their advice I go by gut instinct. I didn’t panic and sell anything mostly because I like high quality blue chip with good dividends. Every once in a while I’ll bet a little on a spec stock but I don’t get greedy and sell when I’ve made a few bucks and go on to the next one. This is a market correction, long overdue in my mind…ciao

  3. January 23, 2008 at 3:50 pm

    Well I do wish you luck, rositta – I’ve been out of the game for a long time, and don’t miss it a bit.

  4. January 25, 2008 at 3:24 pm

    What do this post and safe investments have in common? Both are gold. ;-)

  5. January 25, 2008 at 4:17 pm

    Indie – and did you know that the current British Prime Minister, Gordon Brown, back when he was in charge of the treasure chest, dumped nearly all their gold reserves when gold was less than a third what it is now? I tell you, it’s all a mug’s game…when the top guys get it wrong, who can get it right?

  6. January 31, 2008 at 9:45 pm

    Ian my dear fellow,

    It is just a game, like everything else in life. Stop taking it so seriously, it is not that important. May I offer a few thoughts for consideration to the points you raise:

    1. They are not ALL full of shit – MANY are full of shit. This is no different to any profession or role I have ever come across. Your job, if you are interested, is to work out the ones that are and are not.
    2. All anyone in any industry wants is your money – past performance… is an industry caveat because no one knows what will happen in the future. RISK is involved. Put your money with people / instruments with a track record. Many DO exist, you need to find them.
    3. The game is not stacked against you. You are stacked against you. Most investors, including institutional bankers and asset managers are lemmings. Don’t be one.
    4. If you have a computer, you are very rich so use it. You can access knowledge on most everything you need on the planet, it is what you do with this knowledge that matters.

    Your concluding precious tips are spot on, but you are likely to hear those from sound investor rather than sharks. Unfortunately this is where most people fail.

    All markets: property, credit, bond, equity, commodity, derivative, fruit, etc. have a core attribute in common that is more important than understanding the underlying fundamentals or technicals. They are governed by irrational humans pretending to operate in a rational system.

    BB

  7. February 29, 2008 at 10:52 am

    Excellent post! I had no idea you were on tv, but your words ring very true. I’ve always thought a lot of those guys were full of crap. :)

    Analysts and experts are horrid at predicting anything in any field. It’s always seemed rather laughable. The same thing happens with many horse racing “experts.” I remember sitting at Pimlico last May the day before the Preakness listening to a full conversation they were broadcasting with many of the biggest named “experts” in the sport. All of them concluded Curlin had no chance to win. I just laughed under my breath at the time muttering “we’ll see about that!”

    Still, I envy your ability to get in front of a camera and do this. Most people would be paralzyed with fear at the prospet of being seen on tv.

  8. March 1, 2008 at 10:53 pm

    No, they really are all full of shit. I loved reading Liar’s Poker, The Fall of Baring’s, When Genius Failed, etc, etc.

    This is excellent. Operation Global Media Domination needs a television correspondent, so this is one less Craigslist ad I have to post to staff up. Yay!

  9. 9 sense
    December 4, 2012 at 9:57 am

    Hmm it appears like your blog ate my first comment (it
    was super long) so I guess I’ll just sum it up what I submitted and say, I’m thoroughly enjoying your blog.
    I too am an aspiring blog blogger but I’m still new to everything. Do you have any tips and hints for rookie blog writers? I’d really appreciate it.


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