24 January 2011

Gold and Fear


The price of gold has gone up so much over the recent years, it has reached historical heights (see Gold Index on MarketWatch).  Several weeks ago, my aged mother decided to pawn away all her gold jewellery.  She's getting of age and has decided that cash is more valuable to her than holding hard assets like gold jewellery.  It brings to mind the saying that "cash is king".  There appears to be some spectre of wisdom here.  I figure when the wider populance is starting to mess around with buying-selling gold, it has perhaps just about reached a peak.  Time to exit gold?

Fear & Predictions

For much of 2010, the market talk was about caution and expectations of China being a market to be as an investor. 

It would seem that firstly, the market continues to climb a wall of worry as oft repeated by Wong Sui Jau's blog.  If I had stayed out of the market, I would certainly have been worse off.  It has clearly paid off to continue to invest in times of continued fear.  The outlook continues to remain the same for the year ahead.  Into the third year since the market low, it is of course a time for caution.  I'm going into a infinite loop here somewhere in this argument?  Hmmmm....

Secondly, China has turned out to be an underachiever in 2010 for the investor.  Is it perhaps a healthy correction?  For sure, all the wonderful market predictions just prove that there is no clairvoyance out there.  Generally wrong.  Fascinatingly, in Fundsupermart's latest issue of their magazine (which is now half-yearly), it has noted that their Country predictions have turned out to be quite poor.  There seems to be no reward for timing and picking the market.  I predict a second year of poor results for the China market (in so far as investors are concerned).  Another infinite loop?


How accurate have my own prediction and stock picking turned out?  So far, poorly.  On at least two ocassions when I exited a position, it turned out that the price I sold at was the bottom, and subsequently recovered.  Looks like I can be buy-indicator.  Buy when I sell!

Analysing deeper, I realised this wasn't quite true.  On several other ocassions, I have been correct, exiting as the stock started going sideways, and for months since.  So what's going on here?  It's the traditional historical bias of recency and loss aversion affecting the mental state!  Selective information processing?

What has remained rewarding has been to stick to stocks that had a business I could reasonably understand, good history of dividend payout, a fairly stable business which did not whipsaw rapidly, and companies where insiders were also regularly buying and not cashing out (and/or company buy-back of shares).

I remain commited to a steady investing strategy.

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