Posted by: donmihaihai | September 7, 2022

Group think

I don’t know how to read the market, but it does look like it is going nowhere. Rally a little and get knock down. Crash some and rally back. Something quite different from recent history.

If the current market trends continue, which I really hope it will, it will resulted in very cheap stock price years down the road. And that is for US market and yes when I say years, I literally mean YEARS, maybe a decade or two. If that happened, who want to own it? Think about HSI or STI for the last decade to two and how you got laughed at when you said STI is cheap in 2020/21. And if you started the journey fully invested…

Of course, I was talking about the market and US market in particular. If you are picking stock like I am, then it is different. Individual stock can outperform as long as you are able to pick the right stocks. The problem? It is damn hard to pick the right stocks. Even if you are able to, valuation can be lower. Maybe say half of what they are trading at in 2021.

Since I am at it, I would say this. Do I believe that it is wise to invest in the same few names that everyone appear to be holding on? No. Group think doesn’t work well in investing unless this is a special group. Nah, they are just trend followers.

Interest rate is going up. SSB coupon and fixed deposit rates are higher. A 10 year SSB has a rate of close to 3%. Good, it will remove some yield chasers from stock market and savers are getting more for their money.

The problem? People are guide by greed and recent history. I can still remember my first FD rate at 5% and the FD rate dropped to 2 something % a year later upon renewal. I was like what why so low. I knew nothing about interest rate and the only two things I know then was I got 5% in the previous year and that was way more money. And I have never place any money in FD since then. A few years later, all my money are in stock market with extra money in bank account and I sleep like a pig while the market swing. Oh yes, I hardly log in and check stock price too. I like the feeling of seeing price jump/crash 50% so why check when price swing 10 to 20%?

I am wired differently from most but I still acted just like everyone.

Recent increase in rate cause many to jump. Wasn’t it just 1plus % recently? Oh yeah, how many those that refinanced your mortgage loan 6 months to 1 year ago actually went for the fixed rate? I said good job to my colleague recently when she said she the rate jumped after she re financed one of the two loans under fixed rate. But in my mind, I was like why just one loan and not both? Didn’t I say, the rate was really low historically, and if you believe inflation is coming(war started, hard/soft commodities going up), then fix the rate. Wasn’t that what your banker told you? Of course, for those who buy/invest in property in the last decade or two, the experience was don’t fix the rate, float it.

Now, everyone seen to like long duration FD or SSB. Luckily, SSB can be redeemed any time before maturity date. It won’t be a costly mistake if group thinking turn out to be wrong again.

Advertisement

Responses

  1. There was a decade or so in the 90s-00s where the S&P 500 was going nowhere. If the US markets indeed enter into a long-term bear market, won’t the other markets in other countries like the STI index for e.g. be the same as well?

    • Why do the stock markets across the world have to move in lockstep with S&P 500 over a longer period? If so, do they share the same return?

      Dig out 50 to 70 years of historical charts of the major markets or those you are interested. They tell another story.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Categories

%d bloggers like this: