Monday, October 13, 2008

Financial Intelligence - Part XIV

Fortes fortuna adiuvat!
(Fortune favors the bold!)

Last weekend, chances are you would have come across the following headlines:

KLCI at 28-month low, Asian markets battered ‘The Star Malaysia’
Indonesia may halt stock trading all week ‘Associated Press’
US Stocks Slump, Capping Worst Week Ever ‘Bloomberg’

Chaos, Fear and Panic are sweeping across global financial markets. One by one, indices of major stock markets are plunging in a free fall. More than USD6 TRILLION was wiped out of global equities last week. There are fears that even money kept in banks are at risk. So, what should we do?

Carpe Diem (Seize the Day)
For those of us wish to be wealthy, remember: Fortuna, the Goddess of Fortune helps those that are audacious and willing to take risks. In the following months to come, the stock market will be in doldrums. Consider seizing this golden opportunity to invest whilst Mr. Market is in a depressed mood.

The Pandora’s Box
As Intelligent Investors, we need to understand the cause of the current financial crisis. It all began with the US Subprime Mortgage Crisis. Click the arrow buttons on the SlideShare presentation to understand how this crisis started. To view the slides in full screen, go to the bottom of the presentation and click on the second button from the right.

US Subprime Mortgage Crisis
View SlideShare presentation or Upload your own.

“If only …”

In the aftermath of the 1998 Asia Financial Crisis, there were many people that uttered the following:

“If only I had invested in the shares of [company name] then, I would have made a fortune!”

Now, a decade later, opportunity knocks on the door once again. Will you seize the moment or let it pass by? The decision lies in your hands.


Damien Tan

Buy low, sell high. Make sure you are not buying junk stock that will never recover. Too many uncles and aunties prefer to buy on rumors than fundamentals, gambling rather than really investing.


Dear Damien,

True enough. Even if we rely on fundamentals, there are still off-the-balance sheet type of transactions such as SPVs and derivatives to worry about. Hopefully, with the tightening of accounting rules, the loopholes are reduced.



Yeah, I'm thinking about increasing my 401k contribution to take advantage of buying shares at the lowest prices. Hopefully, the buying frenzy in the days to come gets the market enrgized again.
Thanks for the reminder.

Have a good week,


Dear TashaBud,

Just some words of caution:

1. Leave some amount in cash. With the current financial crisis, it's better to hedge your bets, so don't go overboard.

2. Remember to diversify your investments and/or make sure your 401K plan does so.

3. Stock markets usually goes down quickly but it'll take quite a while for it to recover. We might be looking at 1-2 year time horizon before it recovers.



Thanks Avatar for your reply and for your word of caution.


Myspace Layouts

well financial intelligence is very important in today's world


You're welcome. Since none of us are omnipotent, we still need to exercise caution. Benjamin Graham always stressed on the 'Margin of Safety' concept in his book 'The Intelligent Investor'. Simply put, we can't afford any huge losses since it's impossible to recover from them as compared to institutional investors. That's why we have to be even more cautious.

Thanks for commenting. I appreciate it :) Indeed, Financial Intelligence is critical. It makes me wish Financial Intelligence (aka Money Management) is part of our school syllabus.


Damien Tan

My hunch says the US national debt and energy supply crisis has changed the nature of this recession and will put us at a tipping point. We may be thrown into uncharted territory. Even recoveries may be temporary at best. I won't be surprised if old and familiar market rules are shattered by the time this is over. High time too.

By the way, the anti-spam filter on my blog is misbehaving and is delaying my readers comments. Your comments were among those that it snagged and I had to de-spam manually. Sorry about that.


Dear Damien,

Well, you might be right. However, I believe if we invest based on the fundamentals of each company on a case-to-case basis [as you pointed out earlier], the dangers can be minimized. Unfortunately, we can never be completely sure. That's a risk we have to take if we want higher returns on our principal.

Thanks for informing me on the anti-spam filter on your blog. Initially I thought my No-Script add-on for Firefox had blocked my comments and retyped it in but that didn't work either.


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