Mr. Alan Greenspan, the former chairman of the US Federal Reserve acknowledged he was in a state of "shocked disbelief" at the breakdown of credit markets that triggered what he called "a once-in-a-century credit tsunami" He had put too much faith in the self-correcting power of free markets and failed to anticipate the self destructive power of wanton mortgage lending.
I couldn't believe the Asian market would collapse again in yesterday's trading and suffered my biggest one day loss in electronic trading. Though I had a record profitable month, I was really humbled, my views were screwed despite the market showing early sign of weakness. The Dow Jones recovered more than 100 points overnight, there is no reason for the Asian market to keep falling.
It's the price I paid for being stubborn, there is no room for a trader not to admit he is wrong. I have not been objective, it must be the continuing unwinding of the huge positions by Hedge Fund Managers. I can't imagine how many Hedge Funds will go bankrupt with their clients' money. Of course, there are many that managed to make a killing as well, they will reward themselves handsomely without doubt.
"Trade what you see, not what you think" I have forgotten about this important rule.
Where is the bottom? Few weeks back, some friends asked me whether they can buy Cosco, Yang ZiJiang, Capital Land, etc. They were trying to average down from the stocks bought at higher levels. I told them I was not comfortable even at those levels unless they have deep pockets and can ride out the financial storm. I recommended instead some blue chips stock which I think will recover first if they insist on getting into the market.
I was dead wrong, some of those super blue chips tanked more than 40%. Can you believe it? Where is the comfort? Why were analysts still recommending buy calls weeks ago when the storm started? It's best they shut up, you will get screwed if you think they are good and believe in them, they are just human. The global meltdown has wiped out more than US$30 trillion from the value of stocks.
Economic forecasts are more often wrong than right. A July 2003 report by the US Government Accounting Office found that from 1991 to 2001, the IMF successfully predicted only 15 of the 134 recessions in developing countries during the period. Current account forecasts were also "inaccurate most of the time"
With regards to investment, it's money and risk management, we are wrong some of the time, no one is perfect. Everything is cheap now and it will get cheaper. I am worried for the economy and for those who will lose their job, it's going to be a "long cold winter", be prepared and get out of debt.
"Be greedy when others are fearful" Is it a good time to go into the maket? When can you buy shares at such a cheap price?