Thursday, October 30, 2008

How You Should View Bad Financial News

Hey shareholders... will be updating our fund's performance soon. Will be away for eye laser operation tomorrow and hopefully eyesights return in time for me to update by next Monday.

Worried about endless bad financial news recently? Read on...

"Stock markets worlwide are crashing and reaching historical lows...", so you turn on the television to catch the latest market news, so you flip pages of business sections to check how the market is doing or so you hear colleagues talk about not the right time to buy. But instead of logging to CNBC or CNN, imagine that you can tune in to Benjamin Graham Financial Network ("BGFN"). By the way, Benjamin Graham was a great teacher to Warren Buffett. On BGFN, the audio doesn't capture the famous sour clang of the market's closing bell; the video doesn't home in on brokers scrurrying across the trading floor of stock exchanges like angry dogs. Nor does BGFN run any footage of fund managers telling how bad the market is going to be in the next few months.

Instead, the image that fills your TV screen is the facade of the KLCI, festooned with a huge banner reading: "SUPER SALE! 50% OFF". A promoter girl announces brightly, "Stocks became more attractive yet again today, as the KLCI dropped another 5% on heavy selling volume - the third day in a row that stocks have gotten cheaper. Plantation investors fared even better, as leading companies like IOI Plantation Berhad lost another 10% on the day, third consecutive day of 10% drop, making them even more affordable. That comes on top of the good news of the past year, in which stocks have already lost half of its value, putting them at bargain levels not seen in years. And some prominent analysts from big houses like CIM Bank are optimistic that prices may drop still further in the next few months with their sell calls."

The newscast cuts over to top market strategiest, Mr Top Market Strategist of Top Research Firm, who says "My forecast is for stocks to lose another 15% by year end. I'm cautiously optimistic that if everything goes well, stocks could lose 30%, maybe more."

"Let's hope Mr Top Market Strategist is right," the newscaster says cheerily. "Falling stock prices would be fabulous news for any investor with longer time horizon."

(The above article was modified based on an article in page 222 of "The Intelligent Investor, The Definitive Book on Value Investing")


Anonymous said...

Thanks for the info.
I'm a market idiot, but before reading your article, the idea of investing came into my mind when i heard the stock market in the States went down with 900 points.

Simply because, the only thing I knew about mutual fund or stock market is that --> buy when it drops. Hehe (proven i'm simply an idiot in market theories)

Seane Lynch said...

hi... no worries. Glad to hear that you tot of investing. and frankly, many so called expert in market theories end up behaving like "idiots" when they are being tested by huge falls and rises in stock market.

may check out for how simple saving every month can earn u millions in long term.

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