Low Interest Rate Environment

(14-07-2022, 03:45 PM)Behappyalways Wrote: I am a bottom up investor. Which is why I continue to build up a small database in investideas. So that when I want to catch a fast glimpse on a particular stock, I could just open up and take a look. It gives me a feel on the company before I go into deeper research.

But I realised that if a stock market crash is coming then most stocks' price will probably come down. Maybe a few stocks would behave otherwise but the probability that they are the ones one hold.....is pretty low. In normal times ( no market crash) bottom up will do well.

When your portfolio is significantly down due to market crash, it takes quite a while to restore it to former value. So one not just need to learn to pick up good bargains, but also need to learn how to protect it from losses.

Remember Warren's rule number 1..... don't lose money....

快下大雨了， 快收衣服

If you are not active trader there is no need to protect from losses as that means you are timing the market which has been historically proven to be almost impossible to get right and also doesnt make much difference in a longer term compounding portfolio. 

In hindsight it would have been best to sell all stock and get into a cash position at the moment till fed PIVOTs. But if its a V shaped recovery will you be able to get back in time? 

However if you do it the long term compounding dividend "buffett type" way then market crashes are just excellent opportunities to deploy cash.

For example, I have stocks that are paying me 20%+ dividend yield on cost and share price has gone up 2x-3x over past decade. if market loses 40% and stays down, i would break even in 2 years easily vs if i sell and lose enjoyment of that cash flow...

IMHO better to be diversified with other assets like property/metals/cash/bonds/etc as even during a recession not everything moves down in the same percentage.

You have also slightly misinterpreted warrens rule, what he means is not to buy investments as something you are prepared to lose, which is more akin to gambling. You have to try to understand the company well that you are buying so as to make an informed investment thats lower risk but has a fair chance of good gains over a longer term.

Yes BlueKelah you are right. Warren does not meant that. Just that I am starting to read finance book upside down these days a lot of things got thrown out...hee hee...

Cheers

(14-07-2022, 09:54 PM)Behappyalways Wrote: Yes BlueKelah you are right. Warren does not meant that. Just that I am starting to read finance book upside down these days a lot of things got thrown out...hee hee...

Cheers

Hi Behappyalways,

One key flaw that we (including me) always fall into - is to try to fit lessons into our belief, rather than tuning our beliefs based on the lesson. If we do the former, we actually have wasted our time learning/reading about the lesson.

The principle of value investing emphasizes margin of safety and one gets it from (1) conservative balance sheets, (2) conservative Mgt team with robust track records, or (3) not paying a high price for it.

I believe most VBs do some amount of market timing (Yes, it shouldn't be a dirty word or taboo topic for value investors) - Rather than going to extremes (like 100% cash OR 0% cash), I think the OPMI is doing a wise thing to adopt the middle path - as VB Squirrel shared before - an overweight in cash position could probably be like 30-40% cash, while an overweight in equities position could be a 5% cash scenario.

(for disclosure sake, I am doing the same thing as VB Squirrel but slightly more conservative than him as I am still learning)

I am quite a firm believer that one needs to be at the right place at the right time. Timing need not be exact, but the timeline needs to be somewhat accurate relative to the industry we are dealing with.

To quote a few examples. The hour glass/cortina did exceedingly well the past 2 years. My take is that the companies have competent management and is in the right business, at the right time. Nothing more nothing less. They have done very well as a middle man.

And we have all heard about the $40M coffeeshop takeover. The towkay started selling mixed vegetable rice and worked his way up and started owning coffeeshops. It is hard work no doubt and kudos to that. Dwell a little deeper, we can see that coffeeshop takeover fees goes up significantly higher relative to say general property prices. The tail wind of rising prices enabled the coffeeshop towkays to get really really rich very quickly and enabled them to diversify into other businesses OR expand their business.

So it is not really about being very smart or extremely gutsy. More about being at the right place at the right time, putting in the required amount of work needed and continuing to hold on to the business. Opportunities will come and we would not know exactly when.

(15-07-2022, 11:55 PM)Big Toe Wrote: So it is not really about being very smart or extremely gutsy. More about being at the right place at the right time, putting in the required amount of work needed and continuing to hold on to the business. Opportunities will come and we would not know exactly when.

Thanks Big Toe for the healthy reminder. I am reminded of an old VB KopiKat's signature that I try to keep in my heart, and is similar to what you have espoused:

Luck & Fortune Favours those who are Prepared & Decisive when Opportunity Knocks
-KopiKat