in term, Long or Short?

Are you a LONG or SHORT term Investor?

Chances are:
You are likely feeling Long term in rising market,
turning Medium term in retreating market,
fully Short term in plunging market.

If you ask me, my answer is:
“In what term?”

If you push your luck a bit further, the answer is:
“In my favourable term”

Imagine for a moment, the following scenarios:
You are sprinting against Usain Bolt in 100 meters run or
playing badminton against Lee Chong Wei or
competing against Stephen Curry in basket.

What are your chances of winning?
I hope you came to the same senses as mine.
No Chance! 

OTOH, Stock Market is a game played by professional fund managers, brokers, bankers and other market makers whose resources are almost unlimited.

The goal of the game is to earn money in the shortest time.
Playing their chips in trading, speculating and scheming are the processes of the game.
The rule of the game is defined by the goal:
Do whatever necessaries to earn money in the shortest time.

What are your chances of winning?
I hope you came to the same senses as mine.
No Chance! 

So, what then should we as minority (usually small) investors do?
We should only play with them
in our favourable game, in our favourable term.

How to win playing against Usain Bolt, Lee Chong Wei & Stephen Curry?

The answer, my friends, is simple.
If you are a Grand Master in Chess, ask them to play Chess.
If you are a Himalayan trekker, ask them to hike the Everest.
If you are a good Business Investor, ask them to compete in investment.
(I might have carried the last point too far,  but heck, I am the one writing, am I not? hahaha).

Back to Stock Market, what is our favourable term?
The answer, my friends, is simpler.
Do not play their game.

Can you be more specifics?
Pay attention to their goal, rule and processes are mentioned above.
What do they do?
1. They do not invest in long term, rather, they speculate, trade and pump&dump the markets to profit in the shortest time.
2. They scheme the markets by providing noises such as rumours, write speculative reports and comments.
They buy from you when you sell after the panic due to bad news or rumours.
They sell to you when you buy after reading the positive comments or news or research reports.

What should we do?
Do not play their game.

  1. Invest in a company in stock market as if you are investing with your friend or family.
    You may think that we are too naive since our stake in the listed company is damn tiny.
    You are not wrong, but the important thing here is the right mindset.When you invest with your partners, do you keep looking at the price of your shares every few minutes, every hour or every day?
    Do you ask whether you will invest short term, medium term or long term?
    The answer I hope is as obvious to you as it is to me.
    As Munger once said:
    “I’m right, and you’re smart, and sooner or later you’ll see I’m right.”

    To me, investing with people I respect, is not for long term, it is FOR-EVER.

  2. Read news frequently and widely.
    Learn until you can differentiate between opinions and facts.
    Opinions are mostly useless or noise to treat as grain of salts.
    Facts are what you should appreciate and embedded in your logical thinking.
  3. Of course as in anything, there is always risk.
    Even if you have found and invested in respectable Management in good business with reasonable price. Things may still turn out to be wrong.
    Either due to changes in Government policy, technology or even nature.To this, I will let Howard Marks have the last say:
    “Experience is what you got when you didn’t get what you wanted.”

As a parting gift or homework (depends on how you look at it), below case in point for your food of thoughts:

  • Lippo Cikarang (LPCK) has recently made a big splash in launching Meikarta.
    A grand project touted to be the Shenzhen of Indonesia.
    It is even recorded in Indonesia record as the most units sold in 1 day (16800 units).
  • I am quite sure some people bought up LPCK due to the news and hence the hiked of the price in the subsequent days.
    Just to see the price came back down after the sentiments settled down.
  • What do I think about the (likely aggregated) news & projects?
    Since we are talking about term, let me put them down in terms:
    * In short term, the project will affect the bottom line of LPCK due to expenses incurred in launching, administration, marketing (eg: running 5 pages coloured ads in multiple main newspapers for days), which I argued should not be capitalised and should be expensed off right away.

    * In medium term, the first phase of the project will have minimum impact to bottom line due to the margin compression.Meikarta’s first few condo towers have been offered to mostly Lippo Group’s employees and probably also to some public investors, with huge discount (about 44%).
    This calibrated and hopefully calculated actions are bold decisions.
    In order to expedite the critical masses in Meikarta, such actions are important and calculated risks to achieve longer term fruits.

    * In long term, if the Management managed to pull their efforts through and reached the critical masses for Meikarta to flourish. This project will have tremendous rewards to shareholders (provided they manage to sit on their hand).

    Although I am not in favour of throwing huge capitals and discounts to rush any projects to fruition, I am inclined to appreciate Management efforts in Meikarta.

    I’m also in opinion (due to gut-feel and not facts) that Meikarta will be a focus of Lippo to make it a success.
    Putting your wife or mother name in a city, made it personal.

    When something is personal to someone, he will make huge efforts to make it a success. The only question is, in what costs?

    Personally, I believe the answer is in cost of short term, naturalised in medium term and reward to the long term.
    This is what, I as an Investor will do as well.
    And for that I (for once and rare) appreciate Lippo group’s effort for planting the seeds for the future.


One comment

  1. Thx fall cushion, another superb article that leaves us thinking deep into investing the rational way. Appreciate ur constant efforts to educate, remind and challenge our logical thinking.


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