Confessions of a former stock-market speculator

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#1
Found this old article on another forum and decided to share it here...

Confessions of a former stock-market speculator
Lorna Tan
Sun, Feb 03, 2008

The Sunday Times

MR PATRICK Lim, the associate director of financial advisory firm PromiseLand Independent, recalls vividly the anguish he felt when he lost nearly $380,000 on the stock market in less than seven hours in 1998.

This was when Malaysia unexpectedly introduced capital controls on Sept 1, 1998 and declared the trading of Malaysian shares on Singapore's Clob International to be illegal.

This caused the value of Malaysian shares traded on Clob to dive steeply.

Before that fateful day, Mr Lim had borrowed cash to fund his stock purchases and had several equity margin accounts with banks and finance companies.

Almost all of the securities pledged were Clob shares traded in Singapore. All were speculative counters or penny stocks.

After Malaysia imposed the capital controls, banks and finance companies would no longer allow investors to borrow money using Clob shares as collateral.

Investors like Mr Lim had to either put up fresh collateral that would be acceptable to financial institutions or repay the loans.

And he had only one day to do it, failing which his shares would be forcibly sold on the open market.

"Because of the six-figure loan I had taken, there was no way I could raise the capital, so my whole Clob portfolio was sold off," said Mr Lim.

At the time, Mr Lim had Clob shares such as Idris, Promet and Berjaya, which were the hardest-hit and were sold down aggressively, no thanks to margin calls by banks and finance companies.

"Having lost about $380,000 during the Clob fiasco and paid humongous 'tuition fees', I have learnt that, in any form of investment, one should never indulge in speculation," said Mr Lim.

He cautioned investors not to borrow or leverage to invest.

"Invest only the money that you can afford to lose," he added.
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#2
this guy was gambling, not speculating.

i feel he used the word 'speculation' too loosely.

speculation requires disciplined risk management.
rule of thumb, you don't stay more than 50% invested at all times.
if something happens in the stock market, you just lose 50% and still live to fight another day.

what he did, which was borrowing to the hilt, was suicidal.
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#3
gambling with margins... waos... :O
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
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#4
Is investment in Clob considered stock speculation ?

I would think is a basic fundamental foul that is even allowed to be traded. An unnecessary risk on Stock with added Nationalistic dimension. Who gains from it ?

Just my Diary
corylogics.blogspot.com/


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#5
Quote:Confessions of a former stock-market speculator
Lorna Tan
Sun, Feb 03, 2008
The Sunday Times
...
He cautioned investors not to borrow or leverage to invest.

I'm assuming the term "invest" he use does not to refer to include speculate.

Debt is what makes the world goes round, the chasing for higher returns to cover borrowing cost at the same time generate revenue.
Essentially, that's what the banks and corporations are doing.
In some cases, countries.
Debt can also be understood as Other People's Money (OPM).

Using OPM to purchase assets, is one difference between the "rich" and "poor".
"Poor" because of the missed opportunity cost and not financially poor.
I believe some people can save and invest without debt and still become financially free.

High quality asset to me would be something of intrinsic value generating a durable and consistent positive cash flow.
e.g. a rented apartment where rental is double of mortgage repayment

The problem is, there is almost no way one can leverage for free, and if even so, the quantity of funds borrow is limited.
(e.g. SCB's SalaryAdvance Account, 1st $3000 at 0% interest indefinitely, with min 3% repayment of principle/mth)

I was exploring this topic on debt and went to various banks to compare their cash/credit line products. Attached is a summary of my findings.
Not the best leveraging tools, but hey, found out a 0% product, ain't too bad.
Pls feel free to download and review.Big Grin



Attached Files
.xlsx   Cash_CreditLine Comparison.xlsx (Size: 34.91 KB / Downloads: 21)
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#6
SCB's SalaryAdvance Account,minimum monthly interest payable is $5. what does that mean? no borrowing also pay $5?
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#7
(12-06-2011, 10:37 AM)freedom Wrote: SCB's SalaryAdvance Account,minimum monthly interest payable is $5. what does that mean? no borrowing also pay $5?

It means that if you borrow more than $3k, there'll be a min interest.
e.g. if you draw $3001 from the acct, you incur the min interest.

If you draw $3000 or less there is no interest charge, no processing fees. Just a monthly repayment fee(3%==$90)

It can act as a revolving line-of-credit too.
If you repay per the minimum 3% on $3000 for a year, you get ard $1000.
You can then draw this $1000 out again.
This can go on forever, without you actually putting money in at all.

Catch is after 3 years, there'll be an annual fee of $80.
I asked 2 SCB staff from diff branches, they say, it probably can be waived.
I believe $3k is not a lot for many here.
For me, I'm just starting out, so this acts as a significant leverage tool in my warchest.
http://www.standardchartered.com.sg/pers...index.html

I'm not from SCB, just happen to see a few products from them that complement my current status.
Do bear in mind that ONLY the 1st $3000 of the credit line is interest free, and they might change the rules anytime.
Just like what they did to the manhattan card. So if anyone plans to get this line-of-credit, pls do keep track of the T&Cs.
"Caveat emptor"
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