Updates

"Ability is nothing without opportunity" - Napoleon Bonaparte

Skills, Knowledge, abilities and experiences are only useful if you are at the right place!

Finance Minister Tharman Shanmugaratnam defended the overall track record of Temasek Holdings, which grew S$56 billion from March 2003 to November last year even after taking recent sharp declines into account.

Temasek had made "large investment gains" of S$114 billion over the preceding five years. I am really curious how they have done it. With good government connections and huge resources available to them, they have the privilege to cherry pick the best local companies to invest in at a discounted price.

It would be interesting to know how much Temasek actually gained from their overseas investments till now, because the huge losses we know are mostly from overseas. That will be a good way of evaluating Temasek's performance where the playing field is slightly level.

I have spoken to Robert about my decision to close account 1 since he has not traded for quite some time. It has been stressful for him and he felt sorry about it. There is no hard feeling, just sound business decision, Robert is still among the most respected trader I know. He is just not ready now, I still look forward to working with him in the future.

I will be transferring the balance into account 2 by end of next week. My strategy for account 2 is basically taking up hedging position in the Topix/Nikkei contract which I am very comfortable with. I hope to build up some foreign capital before going into some outright position trading.

Profit to date is S$7,731.00 and have long 3 Topix/Nikkei spread position.

Adversity Quotient

Take a look at the picture for a minute -

If this is the first time looking at this picture, and after 30 seconds you still didn't realise that there is a shark at the back, then you probably need to improve on your Adversity Quotient.

It is the same as making investment. You always get attracted to those supposedly BIG returns, and often miss the lurking risks that may occur.

A good one, emailed by a friend.

Updates

"Tough times never last, but tough people do" - Robert H Schuller.

It's been a very tough trading week. There is not much volatility in the Topix/Nikkei spread recently, so not much of an opportunity to make money. I still don't have much appetite for risk and trying to stick closely to my objective for the account.

It's being an internal struggle for me over the past weeks whether to take on higher risk. Robert is having the same problem, the fear of losing money for the account has kept him inactive for almost 2 months. As we can't spend too much time with the account during our own trading, I guess we have to be very patient and wait for the Durian (king of tropical fruits) to drop before going into position.

Profit to date since March 2009 is S$7,386. Though I am not exactly satisfied with the performance, I guess we shouldn't be too greedy in this tough environment where fixed deposit in the bank hardly earn any interest. Futures trading is risky, thus the reward should be higher or else it's not worth the risk.

Remarkable Feat

"They succeed, because they think they can" - Virgil

What a remarkable feat by our Singapore girls, Lee Li Hui, Jane Li and Esther Tan to conquer Mount Everest. I feel proud for their achivements. I admire their passion, determination and never say die spirit despite the initial lack of funding. "They spent years of their lives planning,raising funds and training for this" Congratulations!

If traders have the same attitude, I don't see why they cannot make it in trading.

Where is the Money Management?

"If you want a guarantee, buy a toaster" - Hollywood actor Clint Eastwood on stock trading strategies.

Local businessman Oei Hong Leong - dubbed the "man with the Midas touch" - lost a whopping $1 billion on foreign exchange and US Treasury bond transaction last year. He is now suing Citigroup's private banking arm for negligence and misrepresentation.

I respected this man tremendously for his savy investments as well as his generous gifts to charity. I am sadden to learn of this huge losses. He disclosed that he had earmarked $1 billion last year to worthy charitable causes.

It will be a interesting court case even though I doubt he is able to claim much damages. As a trader, we need to know our own positions and exposure, I paid a price for that in November last year. Obviously Mr Oei has taken very huge positions, over exposing himself to the huge swing in the currency and treasury market.

Where is the risk and money management? It seems that Mr Oei is handling his investments personally and without doubt he has performed very well in the past. I hope that he can recover from this setback.

Bad Timing

"The greatest right in the world is the right to be wrong" - Harry Weinberger

What a shock to learn that Temasek Holdings sold all its Bank of America shares in the first three months of this year, resulting in estimated losses of between US$2.3 billion and US$4.6 billion. After all, outgoing CEO Ho Ching reiterated that the investment fund takes a long term view, at least 10 years and up to 50 years.

The Fear factor of BoA being nationalised which might cause the value of it's shares plunging to near zero might have the decision makers in Temasek biting the bullet. The selling of such a huge stake might have caused the share price of BoA to plunge from US$14.81 to a low of US$2.53 in just two months.

The timing of the purchase and sale of the investment is really bad despite Temasek having the brightest, well paid analysts and fund managers. What they lack is experience and foresight, they have stick out their hand to catch a falling knife.

There is a thin and blur line between gambling and investment, we hate to call ourselves gamblers because it's such a derogatory word to describe a profession, we would rather call ourselves investors/traders taking calculated risk.

We have liquidated all our positions and profit to date for the account is S$6,704.00

Updates

"Cutting losses, cutting losses, and cutting losses are the three keys to successful trading"

Cutting losses is one of the most difficult decision for a trader to make and once you hesitate, it might burn a big hole in your pocket one fine day.

The recent rally in the Asian stock market led by Taiwan caught many traders by surprise. It's the magnitude, speed and force of the buying that is the killer that caught most short term traders. World market has recovered quite a fair bit, inching up for more than a month with the occasional profit taking. The herd mentality of missing out the market rally by regional Fund managers pushed the market up strongly with their buy orders.

Traders who refused to believe and stubbornly held on to their short positions got themselves burnt badly. I was told 2 traders lost more than S$300,000 in 2 days of trading and overall losses of more than a million from others in the trading arcade.

I asked one of the trader how long it would take him to recover from busting his account and probably start anew with a small trading capital of maybe S$30,000. He said it might take him more than a year or two to recover. Surprisingly, he is still very optimistic despite the setback.

Though I was not caught, I did not make a killing in such a big move, on hind sight, what a waste. Being very close to the market and a micro trader, I did not capitalise on this move.

The cleaner in our arcade told a friend that she was sad for not buying enough stocks and missed out on such a furious up market. I was a bit surprised and shocked to hear that and probably she might even make a better trader, who knows.

For account 2, I have liquidated the Tw/Simsci spread at a small loss and reduced the Topix/Nikkei spread to 4 lots. Profit to date is S$2,045. The unreliable pat's system automated trading makes me very cautious in my execution of trades, it can be rather costly if I am caught with a one sided execution.

Updates

"If you find yourself in a deep hole, the first thing to do is to stop digging"

Account 2 suffered some heavy paper losses, the equity balance as at 1st May is S$262,553.00. I am now holding long 2 Simsci/short 3 Tw and long 5 topix/short 10 Nikkei spread. Losses to date is S$4,315.00. The equity has dropped almost S$10,000 from last week since holding the positions. It's a good stress test for the account as we go for higher returns with higher risk following closely behind.

With Japan having the Golden Week holidays, the Japanese market will be closed for 3 days from Monday till Wednesday.

The automated Pat's system trading platform for the Topix/Nikkei spread failed twice last week resulting in some additional losses for the account. It's a cheap platform, we are paying peanuts and so getting monkeys. Since the account is not that active, we will have to bear with it, be extra careful and vigilant after putting in the orders.

The Taiwan market surged more than 10% last week on news that Chinese companies can now invest on the island. The big move came on Wednesday night when the Tw Futures Index was pushed all the way to 1st limit up of 7% which caught most traders off guard as major world markets were only up slightly. Investors started pouring in on Thursday on the bullish news and shorties start covering their positions pushing the Index much higher.

As I have written earlier, the Taiwan market is a gangster market that defies all logic with good daily volatility and loved by most traders. I watched the news about the signing ceremony on cross straits ties between China and Taiwan on Sunday evening. I was rather bullish on Monday with the news and traded mostly on the long side but was caught when the market was sold down due to the swine flu.

I was told by Robert that there was a big sell order on Wednesday evening of about 600 contracts before the big move up leading to most traders believing that the market is going to go down. When the buying started slowly, most were caught off guard and started selling on the way up as the rest of the world market remains in a tight range. Robert was caught and he told me there was no news he is aware of. It's a great deception to catch the shorties.

Once the buyers accumulated enough sizable positions, they started to buy aggressively leading to stop losses and higher prices. Stubborn sellers who averaged up their positions faces huge losses. With the buyers in control, they can play the game by occasionally selling down the market to take profit to mislead those who think that the market is correcting before buying up again to hit the 2nd limit up. It's a dirty game and I can only speculate that the Taiwanese government might be the operator behind it.

A trader in our arcade was caught badly on Wednesday night and average up on Thursday morning, he could have taken a small profit when the market corrected after the opening. Unfortunately, he did not cover his position and the market went up again furiously even as most of us thought that it's already been more than overdone. This trader busted his account with more than S$200,000.00 losses on that day as he was forced to cover his position. I felt sorry for him.

I suffered similar losses as a floor trader in 1998, as I average shorting the Nikkei until it went limit up. It was the biggest loss in my trading career. It's really painful and I didn't sleep well for the next 3 nights asking myself, WHY? Even after more than 10 years as a floor trader, I still make such stupid mistake and got carried away. Being human, I am are still vulnerable to make mistakes, the only thing is minimising the damage and having faith in my ability to recover it back.

Lesson here is never average on bad trades and admit that we do make wrong call, just cut the losses early. It's easier said than done, sometimes even for experience traders.