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TOP 5 Reasons You Should Unload Your Stocks Now



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May 20 2007
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Are you a successful stock investor, property investor, option trader, future trader or even a successful blogger? Everyone would like to be addressed as a successful person, though the definition of successful is very subjective. Whichever category you belong to, chances are you’ve money, more like paper money (regardless of gain or loss) especially in stocks. Successful people will normally have extra cash investing stocks, right? Well, as long as you’ve not sell off your equity postions it’s still paper gain (or loss) but there’re still values in it.

So what have you done with your stocks portfolio for the last, say 1 year? Still holding it? Great, but please be sensitive to the global economy’s pulse especially China. I’m not saying it’ll crash but it sure is very hot – too hot as a mater of fact that you should consider doing what most investors are reluctant to do. Sell your stocks, at least sell a certain portion of it. Consider the following factors:
  1. No one understands and knows China’s internal economy better than China Government itself. China’s economiy has been booming for decades without sign of cooling off, and this worry China very much. China is not afraid if Taiwan declares independence tomorrow, not even give it a damn if U.S. sent supercarrier USS Nimitz ready to bomb China tomorrow but it’s surely scares of a sudden economic collapse simply because it can happen anytime soon. So it was not surprise when China raised interest rate yesterday, the first time the central bank has taken such a strong measure to contain the booming economy. The one-year benchmark lending interest rate was raised 0.18 percentage point to 6.57 percent. This is hoped to be able to cool down the economy and the stocks price rise.
  2. Top banking executive such as from HSBC is warning about bubble burst especially in China’s stocks market. HSBC executive director warned of “serious” impact on the Hong Kong stock market if the Chinese market bubble burst – a signal obviously targeted at Hong Kong stock investors or speculators. When a top banking officer issue such warning, you better listen because every average Joe knows that the last thing a bank will do is to stop people from borrowing to invest. If the financial institution knows something is not right and need to protect its’ risk and exposure, it will issue such warning.
  3. Hong Kong tycoon Li Ka-shing warned about the risks of trading China stocks, saying he was “worried” over the high share prices following their record breaking run. Who can blame the Superman-Li when the stocks are trading at ridiculously 50 to 60 multiples of its’ earning (P/E ratio)? Li is one of the closest tycoons in Hong Kong who has great relationship with China government. It was said that Li was the economic adviser of Beijing in certain aspect. I don’t think he enjoys seeing streets of blood when the stock market crashes even though it presents him with an opportunity to buy at the lowest and possibly triple his fortune – the price to pay is too high.
  4. The Shanghai Composite Index breached the historic 4,000 points level for the first time last week. While this is not a reason to chicken out from the stock market, the fact that the stocks are trading at P/E (price to earning) ratio of 50 times as compare to Asian average of 14-18 times is worrying. While the China has over US$1 trillion in foreign exchange reserves, a collapse will see the domino effect of panic sell-off in regional stock markets which might turn the 1997-1998 Asia Currency Crisis looks like a boy-scout. Speculators are watching and will definitely add salt to the wounds should the bubble burst.
  5. You can see vegetable sellers, fishmongers, grocery owners, housewives or even students are thronging into the stocks market leaving their jobs and profession behind – a simple sign of a bubble is about to burst. For those who experienced the past bubble burst and recession would understand what I am trying to say. These are the last crowds or the last line of defence (or rather victims) a stock exchange can have before the final burst occurs.

Having said that, how do I know the bubble will burst? Well, I don’t but all the signs are there on the wall already. You just need a small spark of cry to create the anxiety amongst the investors or speculators and the fear-emotion will be the fuel to the fire.

Depending on your region, you might want to consider selling half of your portfolios (as long as you’re making money) or at least a portion of it. When the China’s economy bubble burst, I’m sure you know which countries will be affected the most. U.S. is not the only economic superpower now, though I can surely say U.S. might be the country which will recovers the fastest should anything happened to China’s economy. Recentyl when the China Sneezes, U.S. Catches Cold and Others Panic is a good example of how volatile and influence China’s factor is in current global economic situation.

But seriously, even if you’re being warned now and the stock started to crack tomorrow, Monday 21-May 2007, would you sell? I doubt so because 90% of the investors will hold on in hoping their respective stocks will recover – this is the human aspects which have never changed since the word “stocks market” was created. You should know that you can never buy at the lowest nor can you sell at the highest. As long as there’re profits to be made, you’re considered a winner. Remember the saying “Bull and Bear makes money, Pig gets slaughtered”?

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