Monday, January 4, 2016

Black Monday Revisited On The First Day of Trading

We are into the first day of trading on the new year and what we get from the market was a blood pool sea of red, mainly impacted by the share price decline led the blue chips such as banks, telcos and developers. The STI ended -47 to close at 2,835 but there's a strong sentiments that 2016 is going to be much cloudier than what the stock market presents at the moment.
The Shanghai index leads the fall in today's Asian market session as it went to drop beyond 7% before the circuit break takes effect and the market went in halt for the day. The news quickly spread across the Eur and US market as we are seeing almost a negative 300 points drop on Dow, so there might be a chance after all that we get another black Monday so soon after what happened late last year.

I wrote an article in the past about how capital preservation is key during a prolonged bear market because we don't want the value of our asset to keep dropping each day but the other parts which was not mentioned is that they are part of an overall package if you were to be successful in investing which means that as investors, we need to be able to stomach the ups and downs like the world is going to end and feel little or no emotion to it.
Timing in the market also appears to be much harder than it appears because seemingly almost anyone in the street can tell me that 2016 is going to be a bad year for the economy. But the stock market usually reacts in a different way. The more they are likely to happen the reverse they will happen. This is probably because the stock market reacts in advance to what the retail investors know so the decline may sometimes have already been priced in the share price, not all the time but sometimes.
Patience is key in investing but too much patience on the other side could mean loss of opportunity costs. The key is still to understand the valuation of the company you are looking into and ensuring that their fundamentals don't erode with the revolving economy. I've seen a couple of friends who are sitting in cash in 2007 and are still sitting in the same cash in 2015. To me, it appears that they are just lost, not because they are patient enough to wait for the market.
We'll have to see if the market appears bad enough in the next few days, as I had already some intention to put across my money from this month cashflow into work as I find the valuation of my stock watchlist attractive enough. We'll see if that can happen.
What about you? Are you surprised at the opening of today's selldown?


  1. Hi Brian , it's been awhile since I last blogged. Anyway I am not surprised by the sell down as I am more focused on my work these days and hardly check stock movements. If you focus on dividends, it ll be easier.

    Recently, I added st eng, RMG and SGX. Haha, I think my blog is probably due for a post. :)

    1. Hi Eye

      You are right. Focusing on the share price does seem silly because they are not a congruent of what value is.

      Please update your blog, we are all eagerly waiting what's in store for you recently ;)

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  2. hoping to deploy some funds on good bargains

    1. Anything interesting we should be looking at?

  3. Hi B,

    Patient with strategy and set points knowing when to react Vs patient not knowing what to do without any strategy!

    The key difference is perhaps the guts and decisiveness in the implementation.

    Hence maybe the same word can have different meaning!

    Different people employ different strategies. As long as it can arrive to the same destination or objective in more or less the same time!

    1. Hi Rolf

      Patience without having any strategy is blur sotong I guess ;)

      Yeah, many roads to rome for as long there are proper strategy implementation in place, i think it's fine. Yesterday is always easy on hindsight.

  4. It is true that the market sometimes react the opposite of the current events because they've sometimes oversold or overbought a couple of weeks in advance. I remember the Wall Street recovered 6 months faster than main street.

    I was expecting the drop, but I didn't know about the 7% drop in China Shanghai exchange and the halt of trading until this morning. I'm expecting the DOW will return to 15000 level at some point this year, or even lower. I'm reserving the cash until then. I'm long with my positions on my portfolio, but I've reached FI, my level of risk tolerance has changed.

    1. Hi Vivianne

      Ahh you've changed your strategy by keeping some cash now. I think you're sitting in a rather sweet pot so I trust you will do very well with your plan ahead.

  5. Hi Brian,

    I didn't expect it to go down that much yesterday although I did think that this year is more like a continuation of 2015...seems like the Traders are back at work...lots of volume as compared to the festive period.

    1. Hi Joyce

      I was not expecting it either given that it's only the first day of trading but yeah I guess market always react when we least expected it to be.

    2. Traditionally, the first month of trading would be up,
      1. people were harvesting the previous year loss, and they'd use the cash to buy.
      2. Election year, stocks would mildly move up on election year waiting for the direction of the election. Democrat wins, stock goes down. Republican wins, the stock go up (less regulation on Wall Street).

      This year is WILD. Day Trader would love this!!

  6. Hi B!

    So far the new year has been up and down. I have high hopes for 2016!

    What is your outlook on the new year?

    Happy new year! :-)