AhYap’s Blog

Chinese like RED. Chinese New Year is always associated with the color RED. Many even wear RED clothes in Chinese New Year. The stock market in the WHOLE WORLD celebrate Chinese New Year together yesterday with the color RED. So here comes the RED gong xi fa cai from the US Dow Jones.

I watched the whole thing yesterday from 10.30pm at night Malaysia time to 5.00am in the morning. I have to watch because you don’t see this kind of fire crackers so often! The last one was on September 11, 2001 (more than 5 years ago). [The News]
How is it possible that I will know there is a FREE fire crackers show yesterday night? Lilian Too didn’t told me. That was because KLSE drop 3%+ yesterday. For those who are not familiar with the significance of the percentage, a drop of more than 1% in a day is consider a lot. It was 3% yesterday. So I hook up to Yahoo Finance and look at the world indexes. (To go to this page manually, simply go to finance.yahoo.com and look for the first column on your left named Market Summary and click on Indices - World)

Shanghai Composite Index fell 9% in a day. Remember I just told you 1% is SERIOUS? A glance on other indexes in Asia and Europe say the same thing, averaged to 3% drop in almost all exchanges in the world. And because Americans are lazy, they wake up later than Japanese, We (Malaysians) and Europeans (they wake up later not because of lazy lar, it is because the sun reach them later).

Because all stock markets in the world are one big family, waking up late doesn’t mean you can bypass the fortune of other family members. So everyone get ready to dump the stocks when the market open.

Here is what you can learn from Sifu Yap (You can’t learn much from reading The Star Business or Sin Chew Business because they always over-exaggerate on day events to make their news hot and interesting)

1. 9% drop in Shanghai index is a nightmare? Those who believe that when the read the newspaper are blind-leaded. You need to compare 9% to something to make sense. 9% drop in a day will only hurt those who jump into the market recently. Those who buy high and hope to sell higher. If you compare the 9% drop to the 126% increase of Shanghai Index in 2006, it just mean your gain is now 115% (instead of 126%). So what matter is when you enter the market.

People looking at the small picture see this - Shanghai Composite 5 Day Chart.

People looking at the BIG picture see this - Shanghai Composite 1 Year Chart.

2. Another example is our own KLSE index. 3.5% drop yesterday and 3.5% drop today. Is that scary? If you have enter the market in November 2007 (less than 4 months ago) when the index hit 1,000, it get near to 1,300 few days ago. It drop 7% this 2 days. So what? It only matter if you enter the market this month. Those who enter long ago still have a delicious 20% gain.

Your stockbroker, The Star Business, Sin Chew Business, Uncles and Aunties, Grandpa and Grandma see this - KLSE Composite 5 Day Chart.

Intelligent investor, and those who have read my blog and become more intelligent by 0.06% see this - KLSE Composite 1 Year Chart.

3. A stock market correction or bear market, which is scary for your grandma are actually good news for Rule #1 Investor and Warren Buffett disciples. Because it gives us the chance to buy something at a discount price. This is different than the wisdom of most people, who are trying to BUY HIGH and hope to SELL HIGHER. Intelligent investors don’t do that, we (ahem, AhYap *think* he is one) like to go shopping when they are giving BIG discounts.

My wish? I hope the whole market continue to fall so I can stock up my portfolio at discount price. For those who have buy low long ago, they have nothing to worry as well, as their cushion-protection is big enough. Only those who jump into the boat this month will have to lose some sleep and their children get scolded more often.
Phil Town, the guy who set a nuclear bomb in my brain on investing last October with his book Rule #1 is answering my question again today! Gotta love this guy. Here is the post -

Rule #1 Question of the Week: How Do You Calculate the Big 5 After a Merger or Acquisition? (Part I)

Phil Town, the best selling writer for the book “Rule #1″ post an answer to my question today at this post.
After completing Phil’s book, I also read his ENTIRE blog, which is as precious as his book.

He totally change the way I think about INVESTING (which you know I sucks from this post ‘My trading and investing story Part 1‘).

His book and his blog contains too many useful information that I can’t summarize here, so you MUST read it yourself! A friend recommend this book to me in October and I have been recommending this book to everyone that I have meet.

I want to share 2 things with you today.

1. Why long-term trader THINKS differently than a short-term investor?

I have always been a short-term trader and the reason for that is simple. It looks like I have more control on the short term than the long term. I find it very hard to imagine 3 years from now, 5 years from now or 10 years from now. Or maybe you can say, I am too lazy to wait 3 years from now. I want it now!
So, short-term traders are those who find that investing for the long term is RISKY (hard to predict) and thus they prefer to trade for the short term. They also find ‘long term’ too long to wait for.
Then after reading Rule #1, I find out the long term investor (Phil Town and Warren Buffet), they are not investing in stocks! They are actually investing in BUSINESSES. This is very important. They are not actually investing in ’stock’, but investing in the business!

These guys (long term investor) find that short term market movement is very hard to predict but find it easier to estimate the long term prospect of the business.

Saw the differences now? Short term trader find it risky to invest long term while long term investor actually find it risky to invest short term. How dramatic can it be!

2. Short Term Trader is not an Investor, it is a Job (or Slave to the market)

I am a big fan or Robert Kiyosaki (although Robert and Donald Trump cheat my money for their new book Why We Want You To Be Rich). According to his CashFlow Quadrant, a real investor is the one that have money working for him and thus he will have more time and freedom.

On the other hand, a trader (especially day trader) is not an investor but a self-employed. He is doing a job everyday. There is no freedom. He is working everyday when the market open. If your goal is to achieve freedom, how can a trader probably going to give you freedom?

You probably won’t even have peace in the weekend when the market is closed. Why? If you have a big losing position Friday that you haven’t close, you will have to wait until Monday morning before the market continues. You won’t be able to sleep well and play well on the weekend!

Maybank release a preview of their new trading platform today. They finally upgrade their rubbish trading platform to a better rubbish platform after more than 3 years!

Why the new trading platform is a better rubbish?

1. They design a platform that won’t work under Mozilla FireFox but only Internet Explorer (IE). I think maybe they started planning for this project few years ago and at that time FireFox is still not popular. But man, FireFox has conquered 20% of the browser market today.

2. They still live in the small world, their platform is best displayed in 800×600 resolution only (old 14″ dinosaur monitor) and can be enlarged to maximum 1024×768 only (Old notebook resolution). Again it must have taken them years to create this platform as they didn’t foresee that today notebooks are basically on at least 1280×800 and desktop on 1280×1024 (17″+ LCD)

3. Pretty hard to navigate, once you double click on a counter, you saw the day chart of that stock, but hell, it took me a very long time to figure out how to ‘back’ to the last page (the listing page you see from the screenshot above) because there isn’t a ‘Back’ button nor a quick icon for listing! End up that I need to click on the “Stocks Menu” and then “Quotation”. Come on, this platform is design for end-users, not brokers. We assume we can use it immediately without reading a bunch of help files.

4. I am lazy to dig further…

I have the opportunities to play with some US trading platform and I can say that trading platform in Malaysia is still in the STONE-AGE. But we are a small country isn’t we? Wahahahaha.

I always read the classifieds in Sin-chew everyday to see if there are any bargains or opportunities (not under job but under for sale!). Classifieds in Perak’s newspaper is pity when comparing to The Star KL classified. There are only 4 pages while comparing to 40 pages in KL! It is like comparing mosquito to cow.

I also like The Star online but recently some ‘smart’ guys of The Star ‘upgrade‘ their system to a worst online search and listing! This is what I call non-online guys doing online stuff. They can’t make sense of what they are doing.

Enough of classified bullshit, now come back to the Petrol Station. I saw an ad saying that there is a petrol station for sale in Perak inclusive of land, building and rights of business. Interesting because I have never saw such an ad before.

So I pick up the phone to and we talked for over 30 minutes. Here is what I get and let’s see if you will be interested in running this petrol station?

- It is a Mobil located at Teluk Intan. I pump Mobil myself because I have smile card and they accept credit card directly from pump, so I like it.

- Selling price RM930,000 (almost 1 Million). You can do business immediately. You may want to consider renovate with another RM100,000. Assume no renovation.

- Profit is around RM20,000 per month total to RM240,000 per year.

- Able to sell 150,000 litre of petrol every month.

Here comes the math I do myself.

What is the return per year?
Return will be

total profit
total capital

= RM240,000 / RM930,000 = 25%

Wow! If you are familiar with investment returns, you will be very excited with this number BUT if you are financially-blind (like my girl friend), than it is just very hard for you to get it. Compare to these, savings account return is below 1%, fixed deposit return is 4%, real estate around 8%-12%, mutual fund from -50% to 8% (wahahaha), Rule #1 investor 15%, Warren Buffet 23%, ah-long (loan shark) 50% … Does the 25% look good?

25% also means that you can get back your capital in 4 years.

What is the estimated Revenue and Profit Margin?

How do you calculate the revenue of the petrol station? (Revenue = Total sales before cost) Easy, we know the market price of Petrol which is $1.92. Round it to RM2.00, revenue would be RM300,000/month (150,000 litre x RM2). That’s RM10,000/day.

If revenue is RM300,000/month and profit per month is RM20,000, that means the cost of the business is RM280,000/month. Profit Margin is around 7%. Because your business is selling petrol and the cost of your petrol and the selling price is FIXED by the gouverment, the margin will be somewhere around that.

What are the advantanges of running a petrol station?

1. You don’t need to spend even 10 cents on advertising. Mobil, Shell or Petronas will do that for you.

2. You don’t need to negotiate price with your customer. No one will come to your petrol station and tell you, “Wei Uncle, Less 10 cents per litre can ar?”

3. Consider a very stable and consistent business for the long run. All cars need petrol and there will be more and more cars in the future. Anyone trying to invent an alternative to petrol will be *assassinated* by the rich oil companies. Wahahahahaha. Don’t play play!

What are the disadvantages of running a petrol station?

1. Profit margin is very low because it is a commodity product (7% from calculation is quite high and I believe it should be around 5%). You petrol station will be collecting most money in CASH and end of each business day, you will have RM10,000 cash and 95% of it is the COST of your business. Put in another word, that’s NOT YOUR MONEY! You need to use that money to pay your petrol company, your employees, etc. Losing others people money is more PAIN than losing your own money! You need to make sure the RM10,000 is safe everyday because 95% is not yours. If your manager run away 10 days of your money, that is RM100,000 which is 5 months of your profit! Your hair will get white in one day while he can take his holiday for 2 years. There will also be robbers waiting for you outside the petrol station everyday.

2. Petrol is a commodity product and because of this if the customer doesn’t like you or your father-in-law or your dog or your Benz, they don’t need to come to your shop. There are many other petrol stations. Your staff at anytime can poke a hole in your pocket by saying Diu-Nia-Ma (Fuck Your Mother) to your customer and they will never come back.

* Commodity is a product that a customer can buy from anyone because they are almost the same, such as petrol, rice, sugar, chickens, beef, pork … If you price it higher than someone or if the customer doesn’t like you, he can buy from someone else.

Conclusion

This is an incredible deal based on the return and stability of your investment if everything describe by the seller is legitimate (malay saying: no prawn behind the rock). However, you will need to be careful of your cash. You need a manager that you can trust or you manage it by yourself (go stay in Teluk Intan and watch the Clock House everyday, forget about watching movie at TGV or GSC). If you don’t, make sure you buy Wella from Watson so you can dye your hair when your manager run $100,000 away from you. Get your Great Eastern medical card ready if your heart is weak. Say Diu-Nia-Ma 100,000 times a day to your manager for the next 5 months.

Look at this chart, it shows you the 34 most active stocks of today. I like this chart because they are almost all RED. Red means the price is DOWN. 3 are YELLOW which means price unchanged. There is no GREEN, so no UP for the day for the 34 most active stocks.

Why I say KLSE traders are POOR? Let’s examine the price of the 34 stock and calculate how many stocks are below RM1? There are 28 out of 34 (82%)! That means Malaysians are focusing on cheap-plak stocks under RM1 most of the time. This is what the uncles and aunties are looking at everyday in the brokerage house (the BIG screen).

Why do they like cheap stocks?

1. They don’t have much money, so they can only afford to buy cheap stocks.

2. If a cheap-plak stock of $0.20 rises 10 cents to $0.30, that is a 50% gain! If a $2.00 stock rises 10 cents to $2.10, that’s only 5% gain. “Not shock” for them.

3. Cheap-plak stocks are better target for big-boss to ‘fry’ it up and make money. A few millions are enough to ‘fry’ a stock up high and create a lot of volume and get them into the top 10 active stocks of the day. Uncles and aunties get attention and put their money in. The remaining is like LIQUA…

4. Did you notice that there are something like -CA and -WA in the counters name? These are not stocks! These are cheaper alternative to stocks thats is similar to stock options. But most uncles and aunties don’t know that (they don’t care also). As what they need to know is that they are cheap so that they are afford to play. -CA and -WA are something that will expired one day! And when it expired, it has the potential to worth nothing! $0! The rewards is that it can go up faster but the risk is that you can lose everything. How many of those who buy them know about this fact? In order for -CA and -WA to make money, the underlying stock (PLUS for PLUS-CA, GENTING for GENTING-CA…) must go up a lot. IF the underlying go down, stay the same or go up just a bit, you lose money! It is cheaper because of this risk and that it will expired in a predetermined day.

5. While KLSE index is represented by the 100 largest companies traded in KLSE (list here), only a few are in the top 34 active counters, they are DIALOG, TENAGA, MAYBANK, AMMB, TIME and COMMERZ (-CA and -WA are not included because they are not stocks). KLSE components are blue chips that are more expensive, so uncles and aunties are not interested with them.

Malaysian traders are indeed very poor and highly speculative (gambling mind)! Let’s say an uncle bought IRIS or JOTECH (the 1st and 3rd active stock of the day) and you ask him this question, “What business is IRIS and JOTECH in?”, I am willing to bet that he has NO IDEA at all! He is gambling, he is not investing! Same for my mum who got 30+ stocks which name I never heard of. She own more counters than Warren Buffet! But she knows nothing about the businesses. They don’t know what they are buying.

If I put something inside a box and want to sell it for you for RM1,000, will you buy it from me without knowing what’s inside?

Trading in KLSE is somehow became a morally-correct-legal-gambling for most. Pity Malaysians.

The first book I read about stocks is “How to make money in the Stock Market for IDIOTS”. Wahahahaha. I read that book 3 years ago in 2003. It is really an idiot book and do give me (the idiot) an introduction about the stock market. But it didn’t teach me how to make money like the book title says. I don’t recommend this book to anyone even if you strongly believe that you are an idiot. (this book make you an idiot instead of teaching idiot)

Later I went to a RM400 introduction seminar on Technical Analysis organized by iCapital.biz (they have a column in the newspaper and now they manage a close-end fund listed in KLSE with the symbol ICAP). I got introduced to technical analysis and find it very interesting. It is about stock market charts and how you can make money by looking at them! The speaker show you some charts with technical analysis indicators and tell you, “You buy here, sell here, buy again here, sell here … and see how much money you make!”. Cool!

Later I bought a Technical Analysis book from Amazon called “Technical Analysis for the Financial Market” by John J Murphy. They claimed that Mr Murphy is the father of technical analysis. The book does cover a wide range of technical analysis indicators, so much that I didn’t complete the book. And because of the wide coverage, I personally think that the explanation on each indicators is insufficient. Personally, I do not recommend this book as well.

I traded in the KLSE stock market in 2004 as an idiot using Maybank2u. But this little idiot did make some good money by picking the hot stocks! It seems like whichever stock I picked, it made money! I thought I am very smart (a virgin in stock market that makes money, if it is not smart then it is what?). Note: I didn’t use any analysis (even technical analysis) or method or system in picking my stocks, I only use my feeling. Something like, “I feel like this stock is good, so I buy”.

But what I didn’t realize was that in 2004, it is a BULL market due to the coming 2004 general election! (They say that when election is near, the politician party will push up the market to get cash for their political campaign, they ‘fry’ the stock market).

When Barisan National win big in the election, stock market shoot up like rocket and I sell all my holdings, cashing in my money. After I sold my stocks, Datok Seri Najib was elected as the deputy Prime Minister and the stock market immediately shoot up another level to the moon. Since I already sold my stocks, I didn’t get any money from Mr Najib!

And because I’ve made some good money in the stock market, I thought making money is really that simple. And because I miss out Mr Najib’s big money because I sold too early, I feel bad and want to ‘revenge’. I want to make back MY money! Wahahahaha! So I continue to buy stocks after the election.

I open a new OSK trading account to get a better trading platform. I bought 8 stocks based on hot news on newspaper, hot tips from the internet forum and maybank2u staff. They are all active counters, which means HOT counters, counters that when you watch news on TV, they will appear at the end of the news as the 10 most active stocks of the day. Stocks that people are most interested in at that time.

Let’s look at my portfolio and my performance!

1. CAMERLYN - Bought $1.09 Sold $1.005 (-8%) in 3 months. Buy because internet forum say it is going to be ‘fry’ by big boss.

2. MHOUSE - Bought $1.90 Sold $1.64 (-14%) in 3 months. Don’t know why I buy. zzz.

3. KRNSOFT - Bought $1.10 Sold $0.91 (-17%) in 3 months. Buy because it keep going up like no tomorrow.

4. LIQUA - Bought $2.27 Sold $1.85 in 1 day (-19%) . Buy because it is the hottest stock at that time and it is ‘fry’ to very high.

5. SCOMI - Bought $1.70 Sold $1.45 (-15%) in 6 months. Buy because it keep going up like no tomorrow and it is Pak Lah’s son company.

6. LIONIND - Bought $1.88 Sold $1.44 (-24%) in 2 months. Buy because newspaper say it is going to rise to the moon.

7. LIONCOR - Bought $1.71 Sold $1.36 (-21%) in 2 months. Buy because newspaper say it is going to rise to the moon.

8. PWORTH - Bought $1.20 Sold 1.01 (-16%) in 2 weeks. Don’t know why I buy. zzz.

I want to cry. I lose a lot of money including everything that I’ve made before the election. Wasn’t it making money from the stock market easy? Hmm….What if I don’t sell my holdings and hold it until today? Since they say we need to be long term investor and if we didn’t sell, we didn’t lose any real money and it will recover one day! Let’s take a look at their price now if I didn’t sell (after 2 years).

1. CAMERLYN - $2.56 (+134%)

2. MHOUSE - $0.72 (-63%)

3. KRNSOFT - $0.08 (-93%) wahahahaha! Waiting to file for bankruptcy.

4. LIQUA - $0.255 (-89%) wahahahahha!

5. SCOMI - $0.96 (-44%)

6. LIONIND - $0.93 (-51%)

7. LIONCOR - $0.59 (-65%)

8. PWORTH - $0.72 (-40%)

Now if you look at that, I am consider very lucky! For those who hold on to their stock until today, there is no chance at all that they will recover! This happens to my mum and dad and grandmother who refuse to sell and hold it until today! All their hard earned money is gone FOREVER. They hold rubbish stock for more than 10 years, buy them at all-time-high and now at their all-time-low. They still say things like ‘we are long term investor’, ‘if we didn’t sell, the lost is only on the paper and it is *still* possible to recover’… This is called ignorant and ignorant can cause you all your money. I lost 20% of my money which is already very PAIN.

Imagine if I pretend that nothing happen by closing one eye? This is LIQUA 3-year chart until today.

Look at how the stock being ‘fry’ from below $1 to above $2 in a short period of time? Many people get greedy (including me) and want to be part of the craze to make BIG money. I got in at $2.27 and got out at $1.85 the next day because of panic selling. Lost 19% in 1 day! The stock recover the next day and many people get in again. 1 weeks later, the stock crashed from above $2 back to below $1 in 2 days. if you buy at $2 and sell it at $1, you lost 50% of your money. If you sell it at $0.50, you lost 75%. If you sell it today at $0.255, you lost 88%!

In simple mathematics, if you have $10,000 and you lost 50%, you left $5,000. And you need to gain a full 100% to just BREAK EVEN! If you put that money in 4% annual fixed deposit, it will need 18 years for it to get back to $100,000! Even if the bank pays you 10% annual return, you still need 8 years! (compounding returns)

I end my story today with Warren Buffet’s 2 rules of investing. He is the 2nd richest man in the world as an investor and you really need to listen to what he has to say about investing!

Rule #1 - Don’t Lose Money!
Rule #2 - Don’t Forget Rule #1!

Remember that!

Song Title: My Money Live Over The Ocean

Lyric:

My Money Live Over The Ocean!

My Money Live Over The Sea!

My Money Live Over The Ocean!

Oh Bring Back My Money To Me!

Bring Back! Bring Back!

Oh Bring Back My Money To Me! To Me!

Bring Back! Bring Back!

Oh Bring Back My Money To Me!

(click the play button to play dude)

This incredible WordPress audio plugin is provided by 1 Pixel Out for FREE!

A quick comparison table is available at BankingInfo. But this table is limited to the following tenure, 1, 3, 6, 9 and 12 months. More than 1 year is available here.

Direct links to the specific bank’s website to check for their current fixed deposit interest rate

Local Banks

MayBank (Winner of AhYap’s “THE SLOWEST MALAYSIAN BANK”. ATM, check deposit and cash deposit machines doesn’t seems to improve their counter services AT ALL)
AmBank
Public Bank
CIMB Bank (Previously Bumiputra Commerce & Southern Bank)
RHB Bank
Hong Leong Bank
EON Bank
Alliance Bank
Affin Bank (Winner of AhYap’s “THE MOST UGLY BANK’S WEBSITE”. I will never put money in a bank that can’t design a good website! BCB & Southern bank websites are also very ugly. No wonder they are taken over by CIMB now!)

Foreign Banks

UOB
OCBC
HSBC
Citibank
Standard Chartered

AhYap’s Knowledge Zone

Why do some banks offer higher interest rate while some are lower (esp. foreign banks)? Higher interest rate means the bank need your money. Foreign banks are usually financially stronger and has strong backup from their mother company. So they are not worry about the money too much.

How do banks make money? Lim Goh Thong put $1,000,000 in the bank and the bank give him 4% interest. The bank then loan the money to Ananda Krishnan and charge him 7% interest. The bank make the difference 3%.

Let’s say now Ananda has a choice to get the loan from either AmBank or UOB. AmBank offer him 7% while UOB 6%, which loan do you think he will take? Foreign banks are smart, they want to get more customers. And customers are those who loan money and not those who deposit money! In order to lower the loan interest rate, the deposit rates must also be lower. Else they can’t make good money. This explains why foreign bank don’t offer good deposit rates but VERY GOOD loan rates.

So if you are smart, you will put your fixed deposit in 1 bank and get a loan from another.

Viagra is always the winner of SPAM in my mailbox. Reason for such SPAM are obvious, they want to sell their viagra pills. They want to make money from you.

One exception is SPAM that contain viruses and trojans. Their purpose is not to sell you anything but to infect your computer with virus.

However I couldn’t understand why I am receiving so much SPAM on stocks, which usually give you hot tips on which stock to buy. They are not selling anything or trying to infect you with virus.

The only reason that make sense to me is that they are syndicates who try to make money via the recommended stock. They want to move the stock by creating news (using SPAM).

What I want to show you is the SPAM Stock Tracker. A guy named Joshua processed 4,272 SPAM stock emails and compiled an investment portfolio by following all the hot-tips. The result is amazing. Total investment would be $69,010.00 and you will lose $45,794,70. That’s 66.4% lost!

Because it takes so many weeks to climb up but takes only 1 or 2 weeks to crash like SHIT. I really means SHIT.

Look at the 1 year chart of Dow Jones Industrial Index. It takes a full year to climb up steadily but takes 2 weeks to crash like SHIT.

So, you still buy mutual fund from your ‘bankers’? LOL. If you want to know why the stock market (the whole world incluidng KLSE) will crash like SHIT and why your EPF will no longer be able to give you decent returns, read the book PROPHECY by Robery Kiyosaki.

Then why I still like the stock market when it crash like SHIT? Short Term, you can make fast money by trading PUT options. Long Term, it gives you the opputunities to grab stocks at bargain. I am sorry to say that this opputunity doesn’t benefit mutual fund and EPF holders. Because mutual fund and EPF can only make money when market is going up.