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)