Posted by: donmihaihai | October 19, 2008

Guidance light please.

WB is increasing becoming like “investing god”. His name can be easily seen or hear from almost every media outlet as the crisis deepen. Derivative is of mass destruction? When the destruction comes, many people agreed. Before that is another story. That is even after WB explained many times in different places.

“Buy American, I am.” from WB is circulating like hot fire. Everywhere I turn, it appears. Not just in US or Internet. I got friend who send it to me thru MSN… Today, it is in Sunday Times. I am in Singapore not American but it doesn’t seem to be matter. At this time, what many seek is guidance light and Singapore stocks seem to be hit harder than US(never measure).

It is like religion, god. It is not that investor is unable to tell themselves that currently is a good or not a good time to buy. I think what is lacking is independent thinking, conviction and temperament. But it is awful to be in this stage(anyway have we ever get out of this stage?). What happen if WB is not around? What happen if there is no new “investing god” after WB? Where do we seek guidance light from? Just someone, or anyone will do? What about Mr Ooi Hong Leong from Singapore?

Hold on to your belief, value investing work. This is dangerous too. When something become a belief, or because it work on other investor or history shown that it work, it can become like a religion. What happen and usually the case is it is not there when you need it the most. I have a strong belief in value investing at the start of my journey. And lucky my belief is so strong that it never breaks until sometime down the line, it is no longer a belief, it becomes an understanding. While it sounds like the same, there is a hell lot of different. Looking back, I was living in dangerous time because if the belief breaks, I may not able to climb out of that shit hole.

It is not normal time, the entire thing about so called value investing is being thrown away. Business change in days if not hrs and investor has to glue to the monitor everyday. While I am unable to offer good insights, it is certainly not true. When a stock is purchased for long term investing, it is of a certainty that long term include both normal time and recession time. So when choosing company, one cannot leave out the possibility of things will happen when recession come. If one only invest during good time, then he must be super good at reading the turns of economy and able to predict as well. Stock picked due to inadequate analysis cannot be considered as time has change. And there is nothing wrong about buying stock that has lot of leverage. Of course it is best not to do it but if buying, just like driving a car at 180km/hr compare to 90km/hr, any slight mistake is more deadly.

The current crisis is almost unthinkable and I have not thought of a situation like this and include it in my stock picking. But with strict requirement, all stocks are likely to be in a good position to ride through. The only worry is TPV and one of the evident is TPV stop buying back share suddenly. TPV debt is not high but the problem is that TPV require lot of short term financing for working capital purpose. so if bank does not do it with TPV as if it is normal time, not just that TPV can make losses, it can destroy TPV as well. But while TPV may not have bargaining power against banks, but because of TPV market position, TPV has lot of bargaining power against their customer. In any adverse situation, I think TPV can just call Dell, HP, etc for early repayment of receivables to smooth the flow. In short, TPV is like too big to fail in the pc industry and it happen, a TPV failure can stall the industry network. But before that, their smaller competitors will be gone 1st. So while TPV may earn lesser or making losses in the current situation, it doesn’t change the long term outlook.

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