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6 Points that may help you navigate this Draw Down in Global Markets

Back in 2011, the stock market was plague with bad sentiments from the contagion with the European countries collectively known as PIIGS.

The market have been down 15-18%, the exact amount I couldn’t remember.

What I do remember is that everyone is expecting what happen in 2008 to happen in 2012.

It never did.

When the year starts, the market went straight up.

There was no dip for the investors to get in.

The guys who congratulated themselves be in 100% cash by selling everything, was caught being too under invested.

This time round, in 2016, it is the exact opposite.

If you are invested based on the January Effect, where quantitatively speaking, tends to do quite well, you get caught with your pants down.

Market has a way of making us look stupid.

I will keep this article short, because I met up with some bloggers and the consensus is that the articles tend to be a bit too long.

So this is the short version.

Read Howard Marks Latest Letter

For the investors who are still thinking this is a correction or something more than that, it pays to read some of the works of Mr Marks.

He is the chairman of Oaktree Capital, which is more heavily focus on distressed debt investing.

That tends to require the folks in there to be more in tune with the term RISK.

This kind of distress is where they operate best.

But Mr Marks skill is explaining what we are facing right now in the simplest way.

In this article he explains how from his perspective, he sees the China issue, the interest rate issue and the Third Avenue Junk Bond situation.

The Negatives Build >>

Ed Hyman and Stattman on the Global Outlook

Hyman has been voted Wall Street’s top economist by Institutional Investor for 35 consecutive years. The streak is unprecedented. Hyman may be the most influential strategist the public never heard of.

Earnings Period Can’t Come Sooner

Part of the process involves looking forward and ensuring where you put your money in is able to navigate the challenging environment well.

The data from the financial results gives us some idea how well the prospects and existing stocks will do.

Results allows us to value the business well and eventually decide whether to take up a position.

Bull or Bear or Sideways, the process is important.

If all prices recover, so be it.

The three categories of stocks

When general stock market falls 25%, there are 3 categories of stocks:

  1. Stocks that have price falls, with business that coincide with cyclical downturns
  2. Stocks that have price falls, with business that are exposed, or eventually exposed due to the causal factor of the market falls
  3. Stocks that have price falls, with business that stay largely intact, with the fall due to bad sentiments, fund flows

Which category would you go for?

What I written on related subjects in the past

I shall not repeat too much. Here are some related posts on the subject:

Selling and Buying


You can sell everything if you think the world is going to collapse on you.

But what is important?

To me its not about selling. You can sell so that you do not feel the psychological stress. Wiping your stuff off to start at a clean slate. That is good.

The important thing is whether you can get in to take advantage of low prices.

Whether you bought enough.

If you use the example of Keppel Corp, it presents a great opportunity when it fell from $12 to $8.

That is a 33% fall. You could sell at 10% fall hoping to buy back cheaper.

So what price would you buy Keppel at then? $8? $7? or $4?

How can Keppel fall to $4!

If you see $6 and you pull the trigger, a fall to $4 is still a 33% fall.

There is seldom an escape from the emotion roller coaster of stock market investing.

Unless you are a fundamental momentum trader.

So make sure you bought enough. And live to tell the tale.

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Monday 18th of January 2016

1 point to help you : Try to sell when the price hit your target and not in reaction to market sentiment. For e.g. noticed you waited to sell Singpost only after it started to suddenly fall back to $1.50 from $1.9 despite you buying at $1 and could have comfortably sold around $2 if your target was for stock to double. Looks very like emotional investing.

Otherwise your company analysis and picks are pretty good, good luck :D


Monday 18th of January 2016

hi bluekelah, thanks for the advice. i dun know how far singpost will run, but yes that is emotional. then again i tried pulling back most of my smaller positions and leaving the bigger positions around. the lesson taught was let your winners run and cut your losers.


Sunday 17th of January 2016

Thanks for the sharing. Suspect your "Negative Builds" link is wrongly linked.



Sunday 17th of January 2016

oh damn i think so


Sunday 17th of January 2016

Howard marks article is a great read. Thank you.


Sunday 17th of January 2016

no problem. you either get freak out by what he writes or be more calm

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