Sunday, January 6, 2013

The confession of a stockist

While having a coffee in his living room in Perth, he couldn’t help thinking of his hometown Bidor.  He knows he miss the country and his hometown’s food. He knows that he is not able to go back there anymore.  The banks as well as authorities are looking for him despite it being about 15 years now. He is now an Australian PR - thank goodness getting a PR was then easier. He can still remember he left Malaysia in a lurch the very same day 14-1/2 years ago, when the country's heads were scratching their heads in struggling with the rapid devaluation of its currencies as well as the collapse of the market. He left behind two condominiums in Mont Kiara and a banglo in Bukit Damansara hastily, on that night. The banks are having those properties now.

Who knows the "Tomyam effect" in Thailand could have spread to KLSE so fast. Yes, he still remembers it by the name KLSE. The owings to BBMB and Sime Bank is not RM400,000, it is not RM1.4 million even. It’s RM40 million. Such was the credit that a stockbroker was able to get those days - there was little collateral needed. But after the lost, had no choice but to leave the country - where to find the RM40 million.

He remembers the one week wipe off during the one month of March 1998 costs him that RM40 million. He rues putting all his eggs in the trading account. Should have taken part of them out.

Then he thought of another – as it becomes quite often different memories runs circle of his stockbroking active days. What happens to Xing Xing whom he met every night in the Monte Carlo karaoke he frequents to meet many of the Second Board’s MDs and their mistresses? Lost by the seemingly easy made Ringgit, he has his own mistress staying in one of his Mont Kiara’s unit as well. She must be in her 40s now...

It is not uncommon for RM2 – 3 million to be made in a week’s trade during the heydays of 1996 and 1997. After sharing them off with the other traders, he would net off half of that amount untaxed. The counters he was representing many of the MDs – there were no such thing as PEs as there were no profits even. There was no "E". There were just fishy announcements, untrue rumours of acres and acres of timber projects land in Papua New Guinea, Indonesia, Sarawak, Sabah – you name it. Then he had a wry smile. He remembers in one of helicopter trips with several of the broking firms’ analysts where the (now-delisted) BalakCo’s MD was trying to show the thousands of acres of timber project land. Heck! There was no MoU. There was just several meetings with pictures taken with the minister in charge of the portfolio. But the analysts did bite after a night karaoke session and the helicopter trip – that’s the important thing.

BalakCo’s tycoon in a MoU for timber concession worth RM700 million in Sarawak.” – that’s the planned headline. Then he chuckled, the analyst who was supposed to analyse did not even change the headline provided to him. “BalakCo stands to make RM100 million from the Sarawak concession.” is the headline from another analyst. The very next day, shares of BalakCo would rise from an already ridiculous RM70 per share to RM90. Their block of shares transferred from the MD was RM60. And if executed perfectly, they would have netted at least RM4 million from that block. It was that easy. They would just dump when the shares started to reach RM85. It does not matter if it reaches RM120 per share. That was the plan. No more stocks of BalakCo by that very evening before 5pm – it does not matter who holds it as long as it is not them. The strategy is "PUMP AND DUMP". His next assignment was a company selling biscuits which had plans to buy into a gaming company. Biscuit and gaming have no link – but who cares as long as there’s announcements – the punters will bite. Gaming is king! Biscuit is boring. A new gameplan in the offing - just news though. Never meant to be true.

Retired “aunties” who have lumps of cash from their just withdrawn EPF, students, teachers who just bought new NEC’s “Taikotai” (handphones) were all into 2nd Board’s stocks – it’s that crazy. Who cares about valuation. Fundamental is dead – the following day’s headline in the business section of Star, he remembers. Those who follow fundamentals are dinosaurs. Every weeknight, the beautiful Siti Rodziah would just appear on TV3 to recommend 5 new stocks - never need to provide reasons for the recommendation though. As long as he needs to get one of his stocks list onto her recommendation list - of course next to that piece of paper, there was an Omega watch - the very same one worn by Cindy Crawford.

But came October 1997, at the very last the hedge funds from “nowhere” had beaten them at their very own game…hmmm...even if you are a big fish, there's always another bigger fish in the ocean of the stock market, he is now thinking. It all becomes clear to him now sitting in the very same living room. Ironically, it was not the hedge funds for stocks but the hedge funds for currencies trading that caused the collapse!

Note: The story is entirely fictional and if it resembles any character you know, it is just by coincidence.


Newbie said...

What is the objective of this fiction?

What can we learn from it?

felicity said...

Even you are a big fish, there are definitely other bigger fishes in the ocean. Hence, if we are a small fish, better do what we do best rather than swim with the big ones...

yhtan said...

The financial crisis and the bull run during 90's cause a lot of our elder phobia against stock market, which is why when u go around telling those auntie/uncle about stock market, they will say it is a bad decision and try to tell u their old stories.

I saw a lot of people drop to hell after that financial crisis, but some people and company is much stronger after that, especially YTL corp.

Cash is king, but corporate nowadays are very aware of this, but problem nowadays is cash is flooding due to 3 QE and another 1 in progress. Personally i think this market is very hard for ordinary guy to predict.

felicity said...

I really get it, but with the QEs and such liquidities in the market, let's imagine if we are holding cash (not cashflow ya)...while enough cash to any corporations is good, holding just cash to any individuals in the long run is a doomed strategy.

With the situation today, the best thing to do is to let some of the cash to work for us rather than we just work for cash.

Value Investor said...

Agree with Felicity that holding just cash in the long run is a doomed strategy.

Just got my returns from a RM30K FD placement on a "special 1 year rate" package and that at a miserly returns of only 3.6%. My favourate banana leaf rice and wan tan mee has gone up between 5-10% in the last 18 months.

The point is:- keeping cash at current FD rates "depreciates" our wealth. There are still some well-managed companies on Bursa with decent growth prospects and willing to reward its shareholders with dividends yield between 5-7% per year. I would like place some my excess funds in these companies rather than waiting year after year for that GREAT opportunity to come.

Let's face it. Opportunities that come around like in 1997/98 and 2008 only arise once in a decade or longer and not many investors can stomach the volatility when it happens.

Unknown said...

Pretty good post. I just stumbled upon your blog and wanted to say that I have really enjoyed reading your blog posts. Any way I'll be subscribing to your feed and I hope you post again soon.
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