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“Investing is fun, exciting, and dangerous if you don’t do any work.”
“Your investor’s edge is not something you get from Wall Street experts. It’s something you already have. You can outperform the experts if you use your edge by investing in companies or industries you already understand.”
“Over the past three decades, the stock market has come to be dominated by a herd of professional investors. Contrary to popular belief, this makes it easier for the amateur investor. You can beat the market by ignoring the herd.”
“Corporations, like people, change their names for one of two reasons: either they’ve gotten married, or they’ve been involved in some fiasco that they hope the public will forget.”
“During periods when mutual funds are popular, investing in the companies that sell the funds is likely to be more rewarding than investing in their products. I’m reminded that in the Gold Rush the people who sold picks and shovels did better than the prospectors.”
“As the price of the stock rose, the Wall Street analysts increased their earnings estimates for the company. This is an example of tailoring the means to fit the ends.”
Sundew is a carnivorous plant which can be found on every continent but Antarctica. Mucilage which is drops of sticky substance could be found on the leaves of the plant. The mucilage attracts the insect to the plant tip because of its dew-drop appearance. The insects get stuck in the mucilage and become entangled. The substance then digests the helpless insect. The tentacles on the leaf bend toward the captured insect in about an hour time
This phenomenon posses a close similarity in a human world. In the investment, there are many sundews awaiting for the naïve insects trapped into their trap. The sundew proclaims themselves are Buffett disciples and follow Value Investing principles in their investment portfolio. When insects believe on them and pour out their hard earned money to the so-called “Value Investing”, sooner or later, they will find out that the truth is not as sundew proclaimed – following Value Investing principles. The sundew who proclaims himself as Buffett disciple make an investment in an lousy company where there is no profits, bad business prospect, stressing on form over substance and practice funky-punky corporate exercises. The exercises could be a beverage company get involves in aquaculture business, poultry farming company get involves in telecommunication business….etc for the sake of diversification. (or should I say DIEversification?)
People who know partially but not all are the most susceptible insects exposed to the danger of sundew. They are intelligent but without or lack of proper knowledge. Remember that intelligent does not equivalent to knowledgeable. Sir Isaac Newton is a highly intelligent person but still he falls in prey of South Sea mania which cost him a lot. People who know Warren Buffett is the world 2nd richest man in the world and his fortune is derived through investment admire of his fortune and look forward to follow his step. But, they might not even know HOW he invests. As long as there is a talk with a tag of “Warren Buffett”, “Value Investing”….etc, they would lure to it. The talk might be free of charge and even provide with food and beverages with some free goodies such as pen, umbrella and so forth. When the talk starts, it might begin with Buffettology investment principles. When they proceed further, their real motive revealed: with the help of their powerful software, it helps you to make “Value Investing”. Of course, they will show you with the help of the software, it achieves 100, 200 or even 500% return. The is no brainer logic of it: with over 1000 or even 10000 equities listed in the exchange, for sure there will be 1,2 or even 10 equities with the superb performance in short term. Whether the high growth rate could be sustained is another problem. But, they are smart enough to show you only the best of one or two while at the same time hundred or even thousand out there which perform poorly will not be shown. Since they show you with the superb result, you will enticed to purchase the “powerful” software and subscribe their service which always cost you not a dime. Who earns the most? Whether you could really earn from the investment is another story – money first dropped into the pocket of the software / talk promoters.
“What Wall Street gives with one hand, it usually takes away with the other.” How true of this. It applies not only in Wall Street as well as Main Street.
Technorati Tags: Investment, Sundew, Mucilage, Insect, Warren Buffett, Value Investing, Diversification, Corporate Exercise, Sir Isaac Newton, Wall Street
Investing is not a rocket science. You need not high IQ in order to invest. The only 2 criteria needed to ensure a successful investment are Firm Character and Knowledge, the sequence is important – without first criteria, second criteria only destroy you.
As Martin Whitman says:” "Many people on Wall Street know the price of everything but the value of nothing,", I would like to make some changes, “Many people in the market know the price of everything but the value of nothing.” The market mentioned here could be equities, real estate, commodities and so forth. In the era where the information is easily accessible, as long as you wish, you could get the Real Time pricing of any, being it an equity price that fluctuate minutes by minutes, commodities future or option that change every single minute, real estate price that change month by month. But, people should not forget that information is NOT knowledge as data is not information. The well sort and analyze data become information. While knowledge only obtained by the combination of information and Real Life experience that you learnt by hard. This experience is as precious as a rare diamond. People tend to think that as long as he is equipped with sufficient information, he could be success in 
investment. This mentality is totally wrong. If it is a case, a librarian would be a greatest investor for last century and a person who works in Google or Yahoo would be most successful investor in the world in this new century because they are surrounded by ton of information. But, in reality, this is not the case.
Be prepare that you will make many mistakes for the coming investment decisions. This is unavoidable. Warren Buffett did quite of number of mistakes, so did I. Though making those stupid mistakes, we learnt, we learnt by hard. One must not misinterpret that I am encouraging that we must make a lot of mistakes in order to be succeed in investment. As I mentioned, making mistakes is unavoidable, but one must make sure that the mistake that he made would not failed him forever. History already showed a harsh reality where the investors of Long Term Capital Management (LTCM) lost billions of dollars as well as Japanese real estate investors who also suffered same fate as his counterparts in LTCM. Reason? Over leverage.
“An account without accountability is just a number games, in which it serves other than none, entertainment purpose for you.”Often, individual investors fall into the prey of their predators in Wall Street. While the parties who manage the company account with “Creative Accounting” should be blamed for the fraud, the investors should not be left from the responsibility for the fraud. In the world of hoping for short term quick profit from the stock market, there is only one way to fulfill the hope: by cooking the book. Thus, the parties found hundred ways to inflate the reported earnings of the company to fulfill the consensus estimate and thus jerking up the stock price. The manipulated price would not long last. Sooner or later, the factor that determines the price of the stock lays no other places but in its ability to create a value to the society. People tend to forget about this reality and hope for unrealistic continuous earnings growth.
In nature, there is a cycle: the day would be last with night; the last of winter would be followed by spring. So, in business. Businesses rise and fall, only businesses that create values could last longer than ordinary businesses. The success of the businesses would not bear fruit in quarters, but in years. Hoping for quick result would only bring disappointment to the investors and the hope is just merely a utopian hope, the hope that does not exist in the reality.
60s - With the youth revolution, a wave of shiny new IPOs came to market early in the decade. Company names ending in '__onics'.
90s - '.com' replaced '__onics' after 30 years. New Economy emerged.
2020 - Companies with the name attached with "Bio__" or even "Martian Explorer".
Who knows this might be happen in our life time. Every time when there is a technological breakthrough, people would be brain-washed that "This time is different!", "Old methods of valuing no longer applicable"...etc. While the new discoveries or technological breakthrough would certainly change the live of humanity, it is not necessarily enhance the value of shareholder. Look back to the history, railroad is a breakthrough of transportation in 19th century but did it bring the fortune to the one who invested on it? How about airplane? Airplane is the wonderful vehicle that shorten a distance between continental and encourages a mixtures of people around the world. But, did the creation of airplane and later on airlines companies bring value to its shareholder? With the myth of "We are buying long term. The price will always increase." How "long" the "long term" meant? 100 years is not enough?
Thus, as an intelligent investor, a prerequisite for the success of an investment is know how to filtered out all noises around us. This is to ensure us become a prey of the predators in the jungle of Wall Street.
