Wolf Money(Portfolio update end July 2025) part 1
Bulls or fools?
In 1998, the Chicago Bulls won their last NBA title. It was their sixth and final one. Michael Jordan had previously inspired a generation of mine to play basketball. Many people including myself still believe, Michael Jordan, is still the best player in NBA history. The free scoring shooting guard helped Chicago win their 6th NBA title. While fans were celebrating the victory, economic malaise was spreading like wildfire in South East Asia. The Asian Financial Crisis was triggered by the devaluation of the Thai Baht. Many stock markets in ASEAN were in free falling mode for the past year. Massive unemployment caused street protests in many ASEAN countries. Some companies in Singapore were hit by the massive devaluation of the Indonesian rupiah. By the time, index bottomed out at 939 points, two months after the Bulls’ win. Many investors have suffered huge losses. Properties were on fire sales with some units going at a 50% discount. Within 1 year, our stock market had more or less recovered from the trough in 1998. Unfortunately, for the Bulls, their search for a NBA title since 1998, continues to elude them.
The feeling of the bull market is back. Although officially, one can’t proclaim our market to be in a bull market without the 20% rise in our index. The tenner percentage gain is as good as it gets. This rally is slightly different from last year. The current rally involved more mid and small-cap stocks. I am sure old timers of our market can appreciate the differences in the current rally.
What if one is new to our market and the first few trades of yours had resulted in big gains? Do you chase the rally or one should be staying cautious? I want to set your expectations right. The current bull market is 18 years in the making. It is not a recurring phenomenon. If I had a time machine to bring me back to the last bull market…
In 2007, Wall Street was celebrating one of the longest bull runs since the end of 2002. The current rally has gone into its 4th year with the Dow climbing from near 8,000 points at the start of 2003 to nearly 14,000 points by mid-2007. The first sign of trouble for the market was HSBC’s US mortgage unit writing off a substantial portion of their subprime loans in the early months of 2007. It planted the seed for the 2008 GFC collapse in the stock markets worldwide.
In a typical bull market, most investors are skeptical during the initial rally given it has been a long while since we saw sparks in our market. Even if the retail investors are convinced, they usually start with the well-oiled and time-tested safety of the blue chip. From my recollection, the market bull run will always start with the bluest of blue chip stocks. The banks and SingTel made good gains last year to early this year. If the rally continues to have legs, the mid and small cap with good fundamentals will follow. At the end of the stock market rally, the aerotyne international of the market will dominate the top 20 active list. I try to envision with a degree of caution what is happening in our market now.
1.) The bluest blue chips had moved. The banks, SingTel and the Sembcorp of the world had made their uptick to near 52-weeks high.
2.) The second scenario is for the market to search for the laggers in component stocks. Even with our index hitting an all-time high, we do have at least one sixth of the index-linked companies trading below the mid-point of their 52 weeks with some closer to their multi-year low. I wouldn’t go into the names of the companies, but active participants of our market should know who they are.
3.) Quality mid and small caps experience big price gains due to decades of undervaluation with some trading at -2sd(standard deviation)valuation at one point. The recent rally had more or less pushed valuations back to their means with a small pocket of mid and small cap still trading at negative standard deviation.
4.) The last phase of a bull market will be dominated by micro caps. Those sub-10c stocks will be making a beeline into the active volume list. This is the stage retail investors should be most concerned with. A prolonged period of micro caps dominating the active list also signal the end of the bull market where ideas, some not fundamentally driven, are being chased with great interest. My best guess is that we have gone past the awareness phase(chart) and probably past the middle point of mania phase.
Greed and fear
In a bull market, we all want to make money, unfortunately, some investors will lose their pants during a bull market. These are my past observations of a bull market.
1.) Initial skepticism of the rally gave way to FOMO. How many times an investor saw an initial run up in the stock market with suspicion and disdain, but was later sucked into the stock market because some colleagues of yours have boasted about making good money. The “feel good” factor is a common bias when people like to talk about their winnings. Nobody likes to talk about their losses. Ask a person who lost a huge amount on a property transaction. Will the person ever speak favourably about property as a good investment? Most unlikely. 一朝被蛇咬，十年怕井绳. A bite by the snake, the fear of seeing the rope will last for decades.
3.) RTOs(Reverse Takeover)are common during a bull market. The market likes new ideas. By injecting another “seemingly” good piece of business into another “dead” company. The “dead” might have a chance of rising from the ashes. “XYZ buying ABC company for 1 billion dollars by injecting a precious gold mine in La La land worth 10 billion dollars”. Unfortunately, most RTOs failed, and the former company subjected to the RTO is more dead than before. Usually, RTO will be done by issuing enormous amount of shares at a very low price by the target company. Sometimes as much as 4.5x of the current issued shares. The former shareholders are condemned to Dante 9 levels of hell through massive share dilution.
4.) If your financially unsavvy uncle is telling you he is making good money in the stock market. It is time for you to make a grand exit out of the stock market and sit out for the next 12 to 18 months. 夕阳无限好 只是近黄昏, it translates, Sunset is always beautiful, but it’s near dusk.
Please consider following us on telegram for the latest update on Lone Wolf investor by clicking on the link below. No form filling, no payment required, no collection of data, no data mining, no hard selling, no obligation.
https://t.me/joinchat/oCgkD3sQFRMzMWM1
Disclaimers
All investments is highly speculative in nature and involves substantial risk of loss. We encourage our reader to invest very carefully. We also encourage reader to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way whatsoever warrant or guarantee the success of any action you take in reliance on our statements. All information provided are for education only. Buyer beware,do you own due diligence.
Comments
Post a Comment