(CHOIVO CAPITAL) In the market, nobody is your friend.




One of the most common questions in the forum here is.

    Can buy ah?
    What is the TP?
    Should I sell?

To the people naïve enough to ask these questions. What makes you think the answers from people with their own agenda’s and self-interest be of any use to you?

The only thing people are interested in the market, is to take the better end of the trade. No matter if you’re a long term investor, or short term speculator. Everyone wants to be the one with the better deal. And the only way to do it, is to give someone the short end of the stick.

I play cash poker often. And there is a saying in poker. “There’s always a patsy (someone everyone wins money off) at the table, if you don’t know who it is, it is you!”

Everybody wants to sell their overpriced shares to you, and everyone wants to buy cheap shares from you. And everybody wants your hard earned savings.

I and kcchongnz want you to sell your cheap shares to me, Icon8888 and OTB wants you to buy their shares from them when it’s expensive. Stockraider really wants to make money from ah moi’s selling vegetable and lose most of it to pondan’s.



There are a few kinds of people who want your money.



    The detailed quarter predictors

They are a few people that do this, some for their private clients, some write it out.

For those that do it for their private clients, their interest is first their own, and second their private clients. You will only know after they bought. Nothing wrong with it, but you need to know.

One of the funniest thing I read recently, was while I was in the following blog post

“LIONIND – The massive 900,000 ton Hot Briquetted Iron (HBI) Plant 100% EXPORT at PE = 1”

I asked a few questions on the writers assumptions and thought process, and for some reason, someone took offence to my questioning, and said:


“The whole article consists of extensive network of data points taken from numerous sources, it took the author tremendous effort to piece together the whole picture. For that, his effort should be commended, not belittled.”

Wow, it was as if the person was buddha doing charity, and my purpose in life is to be supportive of him

Why do people write these articles?

When sudden and unexpected earnings occur, especially if people did not expect it beforehand, the price of the stock will shoot up suddenly. HUAAN, PARKSON, FLBHD and a few more I can remember, nobody expected the sudden rise in earnings. These companies, rose 50% to a few hundred percent after the earnings, even though there was zero articles about them previously.

So clearly, if you know you are right, the logical move is to shut up, keep buying as much as possible, and when result fly sell, instead of increasing your cost by letting people know too.

Now, before we continue, let’s be clear. It is perfectly fine them. Ethics at the end of the day, comes down to how your look at the world. Some people don’t buy gambling, drinking ot smoking stocks, I don’t have such qualms. In fact, warren buffet famously does not own smoking or gambling companies, but he is fine with buying their stock. Ethics is largely a grey area.

So why do people like to write these articles? Especially those with clickbait titles?

Because, they think there is a reasonable chance their prediction will come true, but, THEY ARE NOT SURE!

Therefore, the logical move for them, is to first buy up their position. They will then cherry pick the best data and perspectives, and then weave a narrative, in a clear and easy to follow manner, about how the profit WILL go up.

Do note, they won’t tell you they are unsure, or the expected value of the trade, and how it shifts as sentiment, and prices change or about the unknown factors that will fuck it up, or about other opportunities in the market (despite investing and trading being comparison between different opportunities) .

The argument will be very convincing as they have done their study, espeacially for the average person with low critical thinking, limited mental models, no investment philosphy beyond anything that make money, and shallow knowledge of the markets.

Some of them, will even be very proactive is answering questions. Why? The goal is to get you to buy and push up the price, and if even possible, whip up sentiment.

Now, if successful, before the future profit figure even materialized, the price of the stock will have fully risen, and they can now either get out of their position, or sell down some of it (depending on how sure they are) and close out their profit.

Ever wonder why you bought a stock expecting stronger profit, but when the stronger profit came, the stock price went down?

Well, it’s because it was priced in. People sold the second the result with the good profit came out, because everyone wanted to sell at that time.

It’s not just about what you know, it’s what you know and what everybody knows. If you know the same thing everybody knows, you are fucked. You want to know things that people do not know.



    The investors

Again they are very similar. The first own the stock already, but because the stock have low visibility, now write about the economic advantages of it after building the position. Often, the company is really not that amazing to begin with, it might be good-ish, and pretty attractive valuation wise, but it just isn’t fantastic.

Ie, they are usually cost based businesses, with little moat. The kind of company you don’t really feel like holding for a long time, and whose economic characteristic could deteriorate over time, even with a large margin of error, and so you write a post to move it along.

It always strike me as odd when people ask me to recommend a company.

Now, companies like the above, I have no problems recommending. In fact, I wrote a short bit on FLBHD, INSAS etc in the comments at RM1 and RM0.8.

But when the company is fantastic, AND available for a fantastic price. One would want to buy as much as possible, for as long as possible. Why would you ever want to share your recommendation and potentially increase your cost price? Even when I interview for analyst positions, I don’t talk about them.

Having said that, there is also another time, when one would be willing to write about a fantastic company. It’s when the price is a little expensive or above fair value.

In which case, you might need a little goreng help, or you want to be damn bloody sure. And the best way to find out the right answer on the internet, is to write the wrong one! Haha.

In my case, I wrote my piece on TIMECOM, because  i really really liked the company, but it wasn’t cheap to begin with, and if I am wrong, I would like to know as soon as possible, because the margin of safety is low



Not out of charity, but to protect my capital.



Conclusion

Good luck, and if you’ve determined that you are the patsy, ie, the person everyone is making money from, I would suggest you go and buy the Chinese index. Its very cheap now, and you will beat 50% of the market right away.

And you will not have time to do things other than read annual reports!

Me on the other hand, love reading annual reports. To each his own. Haha.

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