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Showing posts from June, 2007

Shout out: A dangerous time to be in Singapore market

I can't resist myself. I can't resist shouting that the Singapore small caps market is dangerous now. It has risen 60+% last year and now, it has risen 82% year-to-date.

Currently many small caps stocks are moving upwards, especially those that have some properties element. Also, small caps with funny fundamentals are also starting to move. I think the small cap market is showing quite an exuberance now, similar to the China Spore-listed stocks at start of 2006.

History almost never repeats. But most servere corrections come after a period of extreme exuberance. We are currently in exuberance stage, perhaps in extreme exuberance stage. I don't know. Likewise, I do not know when the small caps market may crash or correct.

But my guess is someday sometime the crash or correction will come. The only question is time.

Book Review: Happiness Lessons from a New Science

I have just finished reading the book “Happiness: Lessons from a New Science” by Richard Layard. This book has a few controversial points, which people may find them disagreeable. However, I shall start with the more agreeable points first. Before I start, I shall state that this content in this book is lighter than most non-fiction books and it is not a bad read. The book can be found in NLB under 302.5 LAY.

1) We (humans) tend to seek happiness. That is, we would want to feel better.

2) We tend to prefer to be with company most of the time than to be alone. This is supported y research that friendship and marriage tend to improve happiness. Unemployment, on the other hand, lead to unhappiness as one of the reasons is that it cuts away the social ties one has with one’s former colleagues.

3) We will be happier if we can trust people more. For example, if you can trust your family, friends or colleagues, you tend to worry less and enjoy their company more.

4) We are attached to status quo…

Oak Value Fund Manager Interview

Have just read this informative interview of Oak Value Fund Managers at Motley Fool.

http://www.fool.com/investing/value/2007/06/20/oak-value-interview-meet-the-managers.aspx

Here are some excerpts. Happy reading.

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But I will tell you, one of the things we have wrestled with often is when you find a good company,if you find a great company -- and in many ways youhave talked about your interest in eBay, and I thinkwe would all probably agree, it really has many of thecharacteristics of a great company.

Valuation is the hard part. We run a worst case, abest case, and a base case. We do our work using abase case of what we think is a very reasonable,rational, and what we usually find to be a veryconservative thought process of what will unfold. Therisk to us is that if we find a really great one, andthere are not that many really great…

A book on America Fringe Economy

This post will present a short review on a book ”Shortchanged” by Howard Karger. Next, a personal niggling thought on the stock market is posted.

”Shortchanged” is a book depicting the financial life and debt in the fringe economy in America. It tries to show how financial companies (e.g. pawnshops, credit card, cash cashiers) do business with the low-income as well as debt-ridden consumer (which is the fringe economy). As these low-income or debt-ridden consumers are usually deemed as high-risk borrowers, they are not able to borrow funds at the normal interest rate. Neither do they have the funds to purchased discounted white goods without the use of installments. As such, the financial companies would levy higher interest rate (too high, in fact, as the book describe some interest rate charged is around a few hundred percent a year!) on the loans given to these group of people.

Of course, these low-income consumers are likely to lack the financial education or time to read through th…

The Power of Diversity

I have recently read the book “The Difference” by Scott Page. It is a book on how diversity can create better groups, firms, schools and societies. Similar to previous post, I would recommend you to buy the book and read it. I am not sure if the local bookstores have it as I got mine from Amazon.com

I shall list the learning points I gathered from the book below. However, these points may not be correct or may not be complete as it depends on my understanding from my first read of the book.

1) Diversity helps to solve difficult problems given certain assumptions. The assumptions are that the group of diversified people can coordinate well, the diverse group has different skills and the group must be smart.

2) Why diversity helps. Given that a smart person in a diverse group may get stuck at a sub-optimal solution to a difficult problem, another person in the diverse group may be able to start from the sub-optimal solution to get to a better solution using different skills and knowledge f…

An Engine, Not a Camera

The following are my notes (or what I have learnt) from the book, ‘An Engine, Not a Camera'. It is written by a sociologist. I would recommend those who are interested in financial theories and its effects on the market to read it. My notes may not be self-explanatory if one lacks the context behind the book.

The notes are:

1) Financial theories may be performacity or counter-performacity. Performacity are theories that act to make the markets to conform more towards the theory. For example, B-S options model when known actually help the option prices to converge to B_S model. But after 1987, B-S model becomes off-the-mark as traders become more risk-averse (introduction of volatility smile). Efficient market hpothesis (EMH) lead to index funds which may have the counter-performacity effects. Shares that are announced to be included in the S&P index may have an increase in prices of these shares. The announcement of shares being removed from an index would lead to a decrease in …