It is a massacre out there

The bulls are getting slaughtered left, right and center in the Asian share markets today. The low liners and the speculative stocks that skyrocketed last week and earlier in the KLSE fell heavily – some by more than 30% from last Friday’s close. Their prices had dropped lower than levels reached during the global markets plunge last Tuesday. The KLSE index led the falls in the South East Asian stock markets.

One just watched the carnage from the sidelines in the peace and quiet of my office. Sipping coffee followed by some Chinese tea after that. My four favorite pages of 17 live stock quotes each on the computer monitor were all dressed up red. Blood red! So was the page on volume leaders. With an overwhelming majority of shares counters quoted in the KLSE falling like ten pins, how can the bears not win this battle?

In a quiet moment, one had spared a thought for some friends. After seeing the year highs, they had refused to sell their shares at lower prices along with me. At least one had warned them, over the phone, not to buy any after the rebound on Wednesday and for the week, since one expected heavy falls this week. If they chose not to listen, what can one do? When a stockbroker assistant asked why I was selling so many shares in such a short spate of time, my answer was, “I am easily startled”. (No, I was not born in the year of the Rabbit!) She had never listened to a word I said about the KLSE over the years, so why bother.

Have a thought for the latecomers (retailers and punters) who bought stocks at sky high prices and who are left holding the ‘hot sweet potatoes’. Trading in shares is a game of musical chairs with a twist – in case readers do not understand what it involves – the last player(s) holding the ‘hot sweet potatoes’ loses, not win. If punters have followed the ‘blind’ and bought more when shares rebounded last week thinking that the technical charts still look good or had followed Dr. Chuah, the Yijing scholar from Penang, who predicted the worst is over for the year, they could be in for further surprises around the corner.

Bull Runs do not follow trends or charts. It is all about liquidity and confidence. That is why one often tells friends, that shares float up on hot air. If confidence fizzles out, markets plunge.

It was rather fortunate that one had read the thoughts of ancients who taught the Chinese how to trade. Their trading strategies more than two millennia ago still work today. One also put Leon Richardson’s strategies in shares investment into good practice. Mr. Richardson had shared his wisdoms in the Asia Magazine back in the 1980’s before he retired. To buy low and sell high, traders can make a profit. It is that simple. But Malaysians have a tendency to buy shares at high prices in the hopes of selling higher.

Since some friends have asked, this is what one will do. Wait. One will wait until no one wants to buy those shares I had sold earlier. Those who bought the shares last week have already lost much. Therefore, it is just and fair to buyback shares especially from a seller who had bought them from me – even though they remain faceless – one keeps meticulous records of which stockbroker sold to me or bought my shares. (To answer questions before they are raised.)

Markets do not ‘die’ where trade exists. Those who lost everything in their haste to make much more money will. The Malaysian Chinese like to joke about ‘chopping off their fingers’ every time they lose bundles of money. There had been many such occasions since the early 1980’s. But their itchy fingers magically grow back very fast if there is money to be made in the KLSE. Old fools seldom learn. New fools are born every day. But this old fool could be a bit luckier in 2007.

One wonders how Dr. Chuah will face his irate followers or readers who bought shares in the KLSE on his advice after the plunge on Tuesday or this morning, if any. Do Yi students see the difficulties in remaining blameless?

It is advisable not to be a ShenXian in tumultuous times like these!