** edited **

I for one do not think that it is wise to base one's market strategy assuming an event would happen, as in this case, selling stocks based on purely the assumption the market would crash. (SOME would call as market timing strategy)

Ok, we might perhaps argue about the basis and the logic of such strategy but end of the day, the market is and has always been irrational, which is why we get the oversold/overbought/blah blah scenarios.

But how about testing. Yes, market test the strategy. And luckily we have real proof that such strategy is nothing but a flip of the coin.

The thread started Aug 2018. And one of the theory is overdue for a correction, plus the fallacy that it is cast in the holy stone that market should crash every 10 years. It did not happen... Yet.

And of course Duckie stirred fried the economy with his tarrif wars. A single man made market chaos. Well if one was invested in stocks which had strong China connections, perhaps there was a logical decision to sell the stock based on this fact. And as proven earlier, one could have sold some 6 months earlier, instead of Aug or worst still Dec 2018. This would have been the much better alternative and logical investment/trading decision. You focus on your stock and not being blinded by trying to second guess what the market would or would not do.

By guessing when the next crash would happen is just silly in my opinion. If one is so scared the market would crash, might as well not play the market at all. Quit.

And this thread just proves it.

Lastly, to be a good in the market you need a bloody strong conviction. One should not be easily swayed by others different opinions. But then.... there's a bloody fine line between having a strong conviction and being utterly stubborn....

It is what it is.

And if it was that easy to make money in the market, everyone will be filthy rich.

Cheers and all the best.

This post has been edited by Boon3: Jul 13 2019, 06:15 PM

Woahhh!! Just realised the blooper I made.

My reply was a general reply and I SHOULD NOT have quoted.....

Wrongly quoted.

Hello.

Yes, there are many different strategies out there but to say to just use the ones you are comfortable, isn't quite right for me. I feel one should have UNDERSTOOD the strategy first.

Now, I am not sure if youare AWARE but clearing stocks before the coming crash (wasn't this topic used to be called clearing stocks before the coming recesssion? - so I guess recession isn't quite cutting it that the TS had to change the topic name again.. ) is the strategy of selling stocks in anticipation that a future event (in this instance, market crash/or recession) is what one defines as MARKET TIMING. (Try internet search) ... or maybe use the forum thread SEARCH function at the bottom and search MARKET TIMING and you can read my comments. This is market timing.

Cliches. Overused cliches. But then, isn't selling before the market crashes (of course if is wise to mitigate the risk, what) a cliche too?

An interesting exercise. Try search 'clearing stocks before recession lowyat forum' that on the web browser. There is this one thread, I am preparing for Global Recession, Be cash rich. Sounds familiar? Thread was started on Sep 2011. Yup, 2011. Where are we now?

You can call it whatever you desire but this thread is a MARKET TIMING strategy. Make no doubt about it.

But end of the day, yeah, its your money too.

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

Peter Lynch

This post has been edited by Boon3: Jul 13 2019, 10:06 PM

I hope you could understand the Peter Lynch quote I had shared....

Of course, mitigating market risks and protection of one's capital is important and paramount to the investor/trader success but much more important, I feel, is that one should at least do it correctly. In this particular instance, clearing the stocks in anticipation of a market crash (or recession) (and isn't this what the topic is all about?) , I feel that one should focus on the strategy itself. (And yes, for your sake, I would not use that so called cliche Market Timing).

Let's ask what could go right or wrong in such a strategy.....

If it goes right, ie one sold and then the market crashes, what's next? Well, if one had used such a strategy for selling, isn't logical that one would most likely be thinking 'buying stocks before the coming bull run'. If one was waiting analytical indications, using market indicators, what are chances of one buying cheap stocks during the market crash? Wouldn't one be waiting and waiting and waiting?

What if goes wrong? There's 2 issue to consider in the initial theory. The stock(s) itself and whether or not the crash would happen...

(a) The stock(s). As mentioned before, in every bear market, there always bull stock(s) and vice versa, ie in a bull market, there always exist a bearish stock(s). Which means, there's always possibility that stock(s) could actually perform and ignore the market. For example, a stock could fall just maybe 10-20% but then recover and move higher during the market crash. Yup, the correction could happen but the said correction was so minuscule that makes it difficult for the investor to buy back into the stock.

(b) The market crash does not happen after we clear the stocks. Yup, despite all our analytical study, the market crash did not happen. It's possible that we could read it wrongly. It's also possible, we could read it correctly but all that happens was a mere 10% to 15% correction. Again, a correction so minuscule. What then? Market rallies and we miss out? (For example, end of last year, wasn't it clearly a no brainer to whack on some stocks and be rewarded with some really handsome gains?)

So how would you rate such a strategy? So many things could go wrong, isn't it? Despite us, wanting to protect our money, isn't it possible that such a strategy actually prevent us from making good returns?

Reading what a stock would or would not do, is difficult itself. Adding in the attempt to read what the general market would or would not do, is even much, much, more difficult....

Risk management is important. I stresses on this myself. But it needs to access correctly....

Watch the tree and not the forest is what some had said before. It's much easier to manage our risks when we focus on the stock(s) itself and not the market. Know the stock(s) fundamental well would have been a much better way to mitigate our stock market risk than trying to guess when the market will or will not crash.

What's the alternative? What if we are holding stocks and a crash happens?

Firstly, I repeat again..

SO the assumption of course is we need to be trading or investing in stocks with good fundamentals. And needless to say, we cannot be simply overpaying for these stocks.

Take the last crash of 2008. So we got caught. But if one was an investor, one would have held onto these stocks, yes? And since 2008, which fundamental stock did not recover and better still, did they not actually delivered a stellar return for the investor after that crash?

Well?

Yup, know the fundamentals of the stock(s) is much more important.

Simply buying would not work in the stock market. Buying a brand name, doesn't work either. And in bull runs, some stocks can literally die. Yup, not all stocks will boom during a bull run. Some can die one.

Take the case of Transmile. Brand name. Super rich owners and well known funds. Yet the stock died cause of false accounting within the company. Or the case of Parkson. It crashed despite the local market embarking on a grand bull run.

Hello.

You should realise that I am a trader and not an investor and also, I avoid giving direct advice.

However, since I am not an investor, perhaps we can discuss sikit.

Here are some guides that I know which are useful, to the investor.

1. PE < 10.


The less than '10' can be adjusted, depending on the investor (user). for example, one can adopt a much lower number, say pe < 8.

PE. As useful as it is, many gets in trouble as it can be interpreted in many ways.
Some use, pe based on recent fiscal year. (risk in this is, many a times, earnings changes rapidly. And if the current earnings shows a sharp increase/decrease, the user can easily get blindsided)
Current/trailing eps. This would mean earnings based on most recent 4 quarters. Perhaps this is more accurate.
However, the market or the pros like to use forward pe. Earnings based on projections. (Risk? Earnings turns fantasy when the pros starts to inject cagr based on more than 20% etc ect)

Some would go a step farther. Use current pe < previous fiscal year pe.

warning: watch out for lumpy one off earnings.

a brief knowledge of earnings is useful. What would boost future earnings? What would cause earnings to decline? etc etc,

2. DY > x%.

Well x is up to the user's appetite.
Some prefer at least 4%.
Some insist 5%.

etc etc...

some go extra. The higher DY must not coincide with lower earnings.
Yes, companies can easily mask earnings shortfall by offering higher dividends. The risk here is we know such practice is not sustainable.
And when earnings keep falling and falling, logically it is expected that future dividends decline too.
Check dividend history.
Some companies makes it cloudy by offering a one off, one year special dividend, so therefore to based the DY on that dividend payout is pointless and extremely risky.

3. Profit margins > 15%.

Some like 20%. Some think 10% is sufficient... etc etc.

4. Some use ROE. Some use ROCE. Some use ROIC.

5. Some don't like small earnings, so they insist profit > 1 million RM. Some insist more than 5 million. Why 5 million? If profit is less than say 4 million per quarter, this means the company is making less than USD 1 million per quarter. Micky mouse earnings. Meaningless and would be hard to attract foreign funds into the stock.

6. Growth.

Need I say more? A company whose earnings is growing, means potential!!! Making more money. This is a damn sure reason to attract buyers for the stock.

7. Projects won...

8. Shareholders buying....

9. No funds disposal of the stock...


etc etc etc..........................

Yup, A lot of yardsticks. It depends on the individual user/investor. Some use just a combination of yardsticks. Some use their own. But no matter what, buying correctly does mitigates a lot of the risks and it makes the job of selling the stock much easier.....

ps. just some random idea. Like some would say, pick your own poison. Me? Remember I am a trader and I am not a qualified advisor. I am just someone talking ayam. ok?

ps. I could easily go more than 9.

for example.

10. Cash flow positive.

11. Nett cash. ie. Cash more than total borrowings.

12. Cash most show growth the most recent 3 years....

13. No borrowings...

etc etc etc....

like I said...pick own poison.

And there we go once more.

Weren't you the one insisting that Market Timing is such a cliche?

Haha.

You know. I am a trader. I know I am. I do not and never hide this fact.

Anyway, doesn't matter. I shall be polite and answer your question.

I am not concerned but I am calling out loud what this topic is. Selling out stocks assuming the market would crash is but market timing.

I am calling the white cat white.

Well yes.

Like I said I am no investor.
Just sharing.

And it's OK for you to disagree.

Cheers.

Haha.. Well you caught me out talking ayam on here.

How the shape? (Apa macam?)

Thanks for the addons, which I think should be very useful for those who are willing to listen.

Cheers

Rather amusing.

So be it since you insist.

Getting rather pointless.

Er. Thanks for the reply but I don't agree 100 percent with what you are saying. Hehe.

Not all traders are market timers la.
The good traders know better.
Market timing is simply not a good strategy.

There are traders who do not sell or lock in profit just because they think the market will crash.

I for one, don't make such a sell decision.

Wasn't hard for me to guess

Look what I found searching the Internet...





Yawn....

Btw. Just for the record, do refer post #299



Yup. I never did say MT does not work. And I just find it so amusing the reluctance to accept that clearing stocks before market crash or recession is nothing but market timing.

Calling the white cat white as it is.

So amusing that this has caused disturbance....

Nope unfortunately I wasn't referring to you in that instance.



Anyway what's there to agree or disagree when you refuse to acknowledge what Market Timing is?

Lol

Yaya...


Ps... Imagine the ruckus I would cause if I start discussing the negative points of averaging down?



This post has been edited by Boon3: Jul 16 2019, 07:05 PM