Standing BESIDE the shoulders of Giants  

Posted by Book Eater

When I was young, I read in one guy's commencement address the following verse:

"If I have seen further, it is by standing on the shoulder of giants."

I thought before mejo astig ung quote na un ah, only to find out that the verse wasn't original. I dug deeper and the quote came from Isaac Newton.

The essence of the quote, as Wikipedia has defined, is

Someone who develops future intellectual pursuits by understanding the research and works created by notable thinkers of the past

Today may be another great day for having stood BESIDE the shoulder of giants. I guess that's the beauty of working with great people.

Anyway, let me share to you what they've shared to me (invisible strangers/readers/ complete void virtual spaces). They told me to read this newsletter from Marc Faber.

Marc Faber wrote the following:

Remember the definition of a stock that has fallen 90%: one that's fallen by 80% and then halves. - Gerard Minack

Great quote eh? But even greater if you actually delve deeper. Wow. Shorting a stock that is 80% down can even present a 50% profitable opportunity. Now if that's not a great "cheat sheet". I don't know what is. Imagine, the stock that has fallen 80% of its value is clearly a stock that has probably had fundamental issues, downgrades etc. No wonder, financial stocks and insurance stocks have been dead but nails are still being hammered in their coffins. The resurrection of the dead are zombies :) Watching zombies in the movies are nothing as scary as the zombies of the market haha.) When the zombies try to come alive, shoot them down :) It is a great opportunity to short things. (Okay...I'm trying to be corny :P)

Here's to go down further with the point. Marc Faber illustrated the great Kirk Kerkorian's costly mistake of trying to pick bottoms.

Kirk Kerkorian – not exactly a na├»ve and novice businessman – (seven richest American who started with nothing) thought General Motors to be a bargain at around $30 and bought close to 10% of the outstanding shares (he sold his shares in the meantime). But with the shares now at a 53-year low (11!) he was clearly wrong about GM’s potential but shrewd enough to get out in time.

The lesson of the story ?
All I wish to bring across is that
a) You should not think that I know much more than you do and
b) The fact that a stock or for that matter any asset market including a currency which has declined by 60% or even 90% does not make it necessarily a great buy!

We should have no confidence in calling a low for stocks. :)

You know the old cliche of not catching falling knives right? Well, don't get your hands slit. Those knives are dangerous. They can even cut through not just your pockets but your minds.

I attached a simple picture. It is the divergence between Energy and financial stocks. Among the stocks that are still up there in the charts for the US stocks, they are mostly technology and cyclical stocks as well as emerging market equities.

The investment strategy team here (where I work for) as well as in Marc Faber's newsletters have been bearish in consumer discretionary for quite some time now.

Here's Marc Faber's encompassing monthly view:

Sell into rallies – in particular technology and cyclical stocks and emerging market equities.

Byee :) Till nextime.


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