The Three Dragons; A New Direction for the FBM KLCI?

To quote from the first article in the Three Dragons series:-

"The Moving Average Theory (or the Three Dragon concept in our case), works based on a few assumptions. The first is that the market reacts fast. Whatever happens today will be reflected in the markets tomorrow. The second is that the market over-reacts, be it to good news or bad. It will either climb too high or drop too low, before regaining its senses and getting back on an even keel. The third is that markets, although random, moves in general directions for certain periods of time before changing direction. That is, it won't go sky high today and drop to an abyss tomorrow all the time. Great movements come once in a while, but generally, it tends to trend.


When combined, these factors mean that when we draw a moving average line to match the actual prices, we get a line that is less fluactuating, but trending in the same directions. The highs are lower and the lows are higher. Consequently, when the market gets ahead of itself and cuts the Moving Average line upwards, we can be fairly confident that the market's exuberance would push it further up. And when suddenly the market panics and begins a steep drop, the cutting of the Moving Average line a downwards motion would mean that it will likely be driven even lower. Remember, Green is more energetic than Grey or Purple and always has bigger motions.


The longer the period we use for the Moving Average, the less sensitive it will be. As sensitivity increases (shorter time periods), we would tend to be able to get in lower and get out higher, but this is offset by the many false starts.


This method is always a safety net, because it would get us out of the markets when it cuts back downwards, helping us to cut our losses."

Well, guess where the Green/Red Dragon is right now in relation to Purple Dragon:-

Yup, the FBM KLCI just touched its 26 week moving average in a downwards motion last Friday.

Is this an indicator that we should get out of equities for now?

A few points:-

~The lines have touched, but touching is not as decisive as cutting. Will the line cut through at the end of this week?

~The Green/Red line has touched the Purple line, but the Purple line is still far away from the Grey line. Again, the former is not as decisive as the latter.

~However, judging by what happened the last time Green/Red cut Purple, the aftermath was quite drastic.

A decisive cut below the Purple line at the end of this week may signal a general change in market trends?

To recap, the moving average (Purple Dragon) is like a magnet that will always, always, always, pull the KLCI (Green/Red Dragon) back to it. After Green/Red overshoots Purple in a certain direction, it will be pulled back the opposite direction and overshoot the new direction instead. Of course sometimes, Green/Red will touch Purple and then stay with it for a while. But irrational human greed (uptrend) and fear (downtrend) will often make it overshoot.

The full series of The Three Dragons; Tracking the FBM KLCI can be found HERE.

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Magic of Moving Averages

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How Much Does It Cost to Run Wikipedia?

I just received the annual report of Wikimedia Foundation, and found that the answer is USD 5.6 million annually. This is to run not just Wikipedia, but the entire Wikimedia Foundation.

5.6 million bucks to run a world-changing organization...
Now, THIS is efficiency, real bang for buck, value money! (How much did we spend to put that Angkasawan in space again?)

The Annual Report for 2008/2009 can be downloaded HERE.

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The Wikipedia Revolution: How a Bunch of Nobodies Created the World's Greatest Encyclopedia

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Great Movies Coming To You This CNY of the Golden Tiger!

14 Blades


True Legend


Fist of Dragon


Little Big Soldier


72 Tenants of Prosperity


Alls Well Ends Well



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Ip Man; arguably one of the best kung fu films ever... Get it in Blu Ray:-

Ip Man [Blu-ray]

Malaysian Business Articles Have NO Stock Codes!

Our Malaysian business press really still has some catching up to do. Business articles do not even have the stock codes of the companies they are writing about. How difficult is it to get the stock code and plug it into the article for the benefit of readers? How can readers quickly locate the stock if you don't tell us the stock code???

Look at the following articles from TheEdge, Business Times and Star Biz:-

Come on guys, how difficult is it to get the stock codes for us...

Compare this to an article on marketwatch.com:-

Not only does the Market Watch article have the stock code, it also has the CURRENT stock price, and when you mouse over it, it even gives you a chart.

Gosh...

Come on Malaysia... maybe just the stock code for a start...?

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Market-Driven Journalism: Let the Citizen Beware?

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Why the Typical Businessman Seldom Makes a Good Stock Market Operator

I have many friends who are good businesspeople. Far less who are good stock market operators. And the reason for that, I suspect, lies in the concept of 'passivity vs activity'.

Aggression and initiative are hallmarks of the successful merchant. Let's take for example, a trader who comes into possession of 100 pieces of baby tiger plush toys, ready to sell them for profit this coming Chinese New Year. And let's say he got them for $6 a piece. Now, what would this good trader do next? Of course, he would aggressively hawk his wares, maybe renting a small space at the local market, promoting the stuff online, creating marketing gimmicks and such. He would study who would be willing to pay more for this stuff, and margin the tigers accordingly, then attack his target market.

But if this philosophy were to be imported to the field of stock market play, what would happen?

Imagine some guy who bought a hundred lots of Maybank shares at $6 a share, opening a stall at the pasar malam with share scrips on display.

Come buy my Maybank shares! These are special! Not like other people's Maybank shares! You can't get them anywhere else! Come come come! Mari mari mari!

If you happened to be at the pasar malam, what would you think of this guy? You'd be thinking about calling Tg. Rambutan, more like it...

The point is, no matter how this guy pushes his Maybank shares, there is no way he can get a higher price than the market value. And the market value, unfortunately for him, is available for all to know. The only way you could dispose of shares at the price you want is to wait for people to offer you that price. Yes, passively wait.

But passivity is the anti-thesis of business prowess. To turn the example around, imagine that you are the one who has bought 100 tigers from your supplier at $6 a piece. Do you think you can make a sale if you keep the 100 pieces at home and just wait for people to offer you $7 for one? Do you think you can make a sale without some active marketing on your part? With tigers, you simply can't. But with Maybank shares, you can.

And this is the main difference between conventional business and stock market play. But too many successful businessmen simply carry over their (proven) business methods to the stock market and expect to see the same results. Would it work? Would hawking shares at the pasar malam work?

With the stock market, you cede control of pricing, cede control of marketing, cede control of timing. You can only respond. But human nature is increasingly aggressive, the passiveness having been bred out by evolution. So, stock market play is heavily tuned to ruin most humans, except the few who somehow have the 'tidak apa / bo chap' gene transmuted down the line into their blood. And until these guys conquer the market and become rich and breed relentlessly, human nature will remain aggressive for quite a while. Even then, today's society doesn't really allow its winners to breed excessively.

Anyway, back to the topic of 'passivity vs activity'. Many of us are simply tuned to take action. When something is not right, we want to fix it. When the Maybank share you bought fails to shoot up within three days, you feel uneasy. And then proceed to make some stupid decision.

But we must realize that we do not control the market. Whether it goes up or down is not within our control. Your control has been 50% exerted when you made the buy, and the remaining 50% will be exercised when you make the sale. There is nothing you can do in between.

Consider the master investor Warren Buffett. How affable and down to earth he is. Only such a person could make it big in the stock market. Someone who's ego is not too big for his own head. A flamboyant cockerel like Donald Trump, on the other hand, may be effective as a businessman, but put him beside Warren, and you can see the difference in their sources of wealth.

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Recommended:-

Investment Psychology Explained: Classic Strategies to Beat the Markets (Book)



Aurora Plush 12" Teo, Aurora Babies White Tiger Cub (Toy)



Aurora Plush 12" Taz, Aurora Babies Tiger Cub (Toy)

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Gain Control of Your Finances; Practical Budgeting With Online Banking ~ CIMB Clicks... Maybank2u...

It is undeniable that technology and the faster pace of modern life has created havoc and chaos on the financial situations of many. We just can't seem to keep up, and by the end of the month, we have no idea where all the money went. No idea how much was put on the credit card, no idea how much was expensed, and no idea why we have no savings.

But with every con, there is a pro. Modern technology fortunately also brings modern solutions to our modern headaches. I discovered online banking some time ago, and must say that it does wonders in helping us create order out of chaos.

These are the features of online banking that were not available to us pre-Internet:-

~The ability to transfer money with a single click, without having to physically go to the bank(s).

~The ability to have updated account balances at our fingertips, never again unsure of our financial situations at any given point of time.

These two features, although deceptively simple, are powerful weapons in our personal financial arsenal, mainly because it allows us to:-

~Pay ourselves first. Paying yourself first (stashing something in savings the moment you receive your paycheck) is a cardinal rule of wealth management. But without online banking, it may be too much of a hassle to go to the bank to deposit a sum of money into a special purpose savings account. With online banking, it is simple to transfer out funds from our main 'transit' account to our special 'treasure chest' account.

~Pay loan obligations second. It follows that after stashing something away, the next thing to do would be to transfer money to loan accounts to meet monthly obligations. If you have to go in person from bank to bank to make payments, it may be so much of a hassle that you put it off day after day and finally when you decide to go in the middle of the month, you find yourself short. (This also applies to paying utilities, which can be done by direct online transfer).

~Have clear daily pictures of your finances. The simple act of logging in every morning or night to check your latest balance would help you to avoid over spending. Instead of using credit cards, you should from now on use a debit card that is linked to your main 'transit' account, so that any non-paper-money transactions are captured in the e-statements and easy to keep track off. And you get the convenience of plastic without inadvertently getting tricked into debt.

~Instantaneously place fixed deposits. As far as I know, both CIMB and Maybank have this feature where you can transfer your money from savings to an e-FD with the click of a button. So, for your treasure chest account, you can buy fixed deposits whenever you hit certain milestones like, say, 10K.

~Link to stock trading accounts. You can transfer funds to and fro your investment accounts.

~Save time, fuel and parking tickets. Imagine how much time and money you save each month by not having to drive to banks and post offices to pay this bill and that loan. The savings far outweigh the online banking charges (interbank transaction cost 2 bucks each).

All in all, I personally have had a very positive experience with online banking, and would recommend it as an invaluable tool in our wealth management toolbox.

I have used Maybank2u and CIMB Clicks, and both are nice (the CIMB one is a bit more visually appealing). And if you do some additional work, you can even have online banking through mobile internet. Now, that's truly informational power at your fingertips!

CIMB Clicks HERE

Maybank2u HERE

CIMB Clicks Widget for iPhone:-

Best iPhone apps at AppStoreHQ

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Recommended Reading:-

Electronic Banking: The Ultimate Guide to Online Banking

The Richest Man in Babylon

Andrew Chua

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Malaysian Consumers Overpaying for Proton Cars?

Came across the following info on facebook, posted by a friend:-

A quick check on the internet showed that 1 Saudi Riyal = 0.89 Malaysian Ringgit. So, Saudi drivers are getting Gen 2 cars for (gasp!) RM 29,904 only????

What the hell is going on here?

Another check on DriveArabia.com showed that new Gen 2's are available for 35,000 Dirham (RM 32,000). Still a lot cheaper than in Malaysia.

Our good ol' Proton-Edar website shows Gen 2 selling for RM 53,000 in Malaysia. Almost Double... And that's the cheapest model!

Can someone let me have a good explanation of what the hell is going on here, or is our 'National Champion' just ripping us off, cheating us out of our hard-earned money?

HERE is an earlier article I did on the subject of Proton.

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Recommended Reading:

Malaysian Maverick: Mahathir Mohamad in Turbulent Times (Critical Studies of the Asia-Pacific)

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