There were two young chaps talking about the current stock market after they finished their meals at a hawker center the other day. As much as I hoped for, it appears the price of foods never goes down and chances are it won’t no matter how much the fuel price drops. So stop believe those propaganda by government that the inflation has peaked and the prices of goods are going to come down soon. Anyway the two young chaps were very excited because they have just bought into some local stocks, believing that the stocks are already very cheap and they are on their way to make a killing this time.
Well, the young chaps could be right and should be proud that they’ve bought into the stocks now instead of early of the year. At least they can claimed they bought low and hopefully can sell high – that’s if they can hold on to their stocks until it appreciate and do not fall in love with them that they decided to hold on further only to find that the next bear cycle has started. That’s part of the stocks investment learning journey and nobody can skip the test. That was why you heard about newbies need to pay tuition fees to learn the rope. No genius is smart enough to bypass this baptism of fire. Heck, even Warren Buffett still makes mistake at his current age. Of course if you wish to show that you’re better than the Oracle of Omaha because you bought stocks at a lower price than him, you can do that anytime now *grin*.
While I don’t have (nobody has) the crystal ball to tell when is the bottom, the fact is the worst is not over and not all bad news are out from the closet yet. But if I read the above conversation by the two young chaps right, many beginners have actually used their bullets and assuming they do not have half a million in their war-chest, I (and FinanceTwitter readers) would have longer period of time to plan for the assault. I would be very worry if everybody is still holding their money and waiting for the “right time” to enter the stock market because that means the demand will suddenly skyrockets with little supply, and that’s bad. So my simple question to you is: If the stocks are really cheap and it’s time to buy, why are they still going down? You do believe the Dow Jones can slides further to 6,000 (yeah, I’ve bet that it would goes down to 7,000 recently) and KLCI to 700, do you?
Ask yourself another question – do you have confidence to buy stocks now? Do your friends, relatives, brothers, sisters, colleagues, aunties and uncles have confidence on the current economic situation? Conduct this simple interview and you’re on your way to understand the simple macro-economy better than the PM Abdullah Badawi. If the stocks have not stops purging, the stocks are not cheap regardless of technical or fundamental studies, not to mention the unbelievable low P/E (price to earnings) ratio.
While the problem of American International Group Inc.’s (NYSE: AIG, stock) is taking a backseat all the eyes are on Citigroup Inc. (NYSE: C, stock), once the mightiest and largest financial institution of the United States of America and one of the components of Dow Jones Industrial Average index. It is shameful that such an empire is now worth only $20 billion in market capitalization, less than 10% of what it was worth more than two years ago when the proud U.S. financial giant’s value was at a staggering $240 billion. Citigroup has now $65 billion in losses with its stock price at a pathetic $3.77 a share after Friday’s closing. It was like Malayan Banking Berhad (KLSE: MAYBANK, stock-code 1155) is trading at below RM1.00 a share. Can you imagine that? But Citigroup will not file for bankruptcy or Chapter-11 because the U.S. government can easily take over the institution now that it’s worth peanuts, minus the toxic assets of course. Nevertheless it’s time to fire the CEO Vickram Pandit (wait, he inherited the problem from his predecessor Charles O. Prince, didn’t he?), director Thomas G. Maheras, adviser Robert E. Rubin and a bunch of other lousy top management.
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