Any Experience going through a Bubble and Recession?

[BfGf Money Blog]

Calling out to all veteran investors,

I am looking to write an article on my blog about investors and their experience going through recessions.

Would like to know what are the noticeable warning signs of a bubble. E.g, one investor shared that he read news of cab drivers selling their cabs in China to trade the stock market in 2007.

As for my father, he mentioned that during 1997 and 1998, butchers were chopping up pork meat while staring at Teletext. And as I was still too young then, I remembered the whole of SIngapore was staring at Teletext and making phone calls to their brokers.

So, what's the one thing you remember going through a bubble/ recession?

[Musicwhiz]

So, what's the one thing you remember going through a bubble/ recession?

During bubbles and heady times, brokers will write about how a Company which is trading at 25x PER deserves to trade at 30x or more. The example was Synear Foods back in 2006-2007. Every story will sound too good to be true and all sorts of weird companies will come to market. Case in point was Gems TV back in 2007 with their reverse auction model. Needless to say, that failed badly and THG had to write if off.....

During a deep bear market, analysts value most companies on a price to book if they make losses, and assign very low multiples to profitable companies because their peers are all trading at equally low valuations. So it becomes obvious that valuation becomes a moving target with no fixed reference - if everything else is cheap then something "deserves" to be cheap. But a case can always be made for a BUY, even if you have to justify a P/B of 1.5x when the Company is trading at 0.8x (for example).

[opmi]

It is a bubble when everyone thinks they are god's gift to the market...hahaha...

In a bubble, there will be goldfingers with Midas' touch:-

Msian 90s boom - Daim boys - Renong/TRI
Dotcom bubble - Richard Li/Steve Case, Companies like i-One-Net, Horizon, CMGI, PCCW, Hikari Shushin, etc

In Japan superbubbles, people paying to eat gold or Sh** (fresh). Land under Imperial Palace at mkt value can buy whole of California
In TW bubble, university students quit school to play stocks. Same too for NUS students during 90s bull run.
In HK 90s property bubble, people paid $$$ to queue numbers for condos. And triads also join in.
In 2007 PRC stock bubble, banner said "Why rob, just speculate in shares!"

I love bubbles.

[BlueKelah]

Good examples of on the street observations of bubbles.

More academically, good way to tell a bubble is there - look at the speed of credit increase financing that particular bubble.

Property bubbles you will see massive home loan increases, stock bubbles you will see massive increase in margin accounts.

And if you have valuebuddies attitude, you will notice the prices in the bubble be it stock or property or wine are much too high compared to the long term historical average thus being way way overvalued..

[Life is a game]

When everyone is greedy and rushing in together on a single investment vehicle = bubble form. When everyone is running in fear and exiting a single investment vehicle all together = bubble pop.

[AQ.]

I am looking to write an article on my blog about investors and their experience going through recessions.

Would like to know what are the noticeable warning signs of a bubble.

I'm a bit puzzled what your article is abt. Is it abt recessions or is it abt bubbles?

Or is it abt bubbles pricking leading to a recession?

Bubbles do not necessarily lead to a recession and a recession need not be caused by bubbles.

[edragon]

In 2006 ML road show:-

Following were the companies covered in last week's Merrill Lynch Roadshow at Ritz Carlton:

Singapore Chinese Connection Investor Forum
Tuesday 28 - Wednesday 29th November 2006,
The Island Shangri-La, Hong Kong
Thursday 30th November - Friday 1 December 2006,

The Ritz-Carlton, Millenia Singapore

Merrill Lynch brings you the best of the Chinese Connection in Singapore.
We bring to you Chinese companies listed in the SGX which represent
exciting opportunities in the fastest growing economy in the world. These
selected companies cut across many sectors of the economy but they all
have one thing in common: excellent growth prospects and great value.


23 Confirmed Companies

AsiaPharm Group Limited Market Cap USD 187mn
Beauty China Holdings Limited [BCH SP] Market Cap USD 200mn

Celestial NutriFoods Limited [CENU SP] Market Cap USD 619mn
China Enersave Limited [CHEN SP] Market Cap USD 48mn
China Essence Group Limited [CESS SP] Market Cap USD 151mn
China Fishery Group Limited [CFG SP] Market Cap USD 700mn
China Hongxing Sports Limited [CHHS SP] Market Cap USD 423mn
China Milk Products Group [CMILK SP] Market Cap USD 582mn
China Petrotech Holdings Market Cap USD 90mn
China Sky Chemical Fibre Company Limited Market Cap USD 594mn
Cosco Corporation Singapore Limited [ COS SP] Market Cap USD 2684mn
China Sun Bio-chem Technology [CSBT SP] - Market Cap USD 372mn

E-Pure International [EPUR SP] Market Cap USD 200mn
Fibrechem Technologies Limited [FBCM SP] Market Cap USD 419mn
Full Apex Holdings Limited [FAPX SP] Market Cap USD 157mn

Hengxin Technology Limited [HENG SP] Market Cap USD 104mn
Jiutian Chemical Group Limited [JIUC SP] Market Cap USD 118mn

Landwind Medical Holdings [LWMH] Market Cap USD 84mn
Luzhou Biochem [LUBC SP] Market Cap USD 182mn

Sunshine Holdings [SUNS SP] Market Cap USD 138mn
Synear Food Holdings Limited [SYNF SP] Market Cap USD 977mn
United Envirotech Limited [UENV SP] Market Cap USD 56mn
Want Want Holdings Limited [WANT SP] Market Cap USD 2371mn

For me, losses on China Enersave, Fishery & Cosco. Managed to get out of China Milk at a slight profit.
Since MW mentioned Synear, thought I copy and paste for discussions of that period prior to 2008.

[HitandRun]

As for my father, he mentioned that during 1997 and 1998, butchers were chopping up pork meat while staring at Teletext. And as I was still too young then, I remembered the whole of SIngapore was staring at Teletext and making phone calls to their brokers.

I think that was in 1993/1994 bull run and not 1997/1998. I participated in that bubble too..

[BfGf Money Blog]

This is good stuff!

Keep it coming guys! I would like to hear more personal experiences !

All these will be edited and posted on the blog article. Also let me know if you prefer to remain anonymous.

If not I will just quote your nickname.

Thank you!

[BfGf Money Blog]

So, what's the one thing you remember going through a bubble/ recession?

During bubbles and heady times, brokers will write about how a Company which is trading at 25x PER deserves to trade at 30x or more. The example was Synear Foods back in 2006-2007. Every story will sound too good to be true and all sorts of weird companies will come to market. Case in point was Gems TV back in 2007 with their reverse auction model. Needless to say, that failed badly and THG had to write if off.....

During a deep bear market, analysts value most companies on a price to book if they make losses, and assign very low multiples to profitable companies because their peers are all trading at equally low valuations. So it becomes obvious that valuation becomes a moving target with no fixed reference - if everything else is cheap then something "deserves" to be cheap. But a case can always be made for a BUY, even if you have to justify a P/B of 1.5x when the Company is trading at 0.8x (for example).

Hi MusicWhiz,

I know you should remain subjective and come to your own conclusion with regards to valuation. But how to you tune out from all these noise? Surely, you will be affected or slightly influenced by it somehow.