Sea of red

Today is another sea of red. In the morning bus, when I saw the early East Asia trade, I knew this is going to be another day of sell down. As I am busy at work, I don't bother to look at any market news.

The current problems(or excuses) are
- Weak economy outlook in US
- Afraid of more subprime loss
- Unwinding of yen carry trade amid rising risk

You name it, they have it. At the sametime, there is a wide spread of pessimism in the forum also. It is as good as tomorrow the world would be in total recession. Next year, US is either going to slow down or go through a recession to correct the excess. Few years down the road, the bull would be back again, although I won't say it has died already. In the coming century, Asia is still where the action is.

Stock market tends to overshoot. Just as you think it is doom and gloom, we might be at the bottom and ready to resume the upward trend. Or just you think all is well, surprise would come. I believe after another few round of sell down, maybe looking at STI 3200, it would be worthwhile to start buying in different tranches. We must overcome the human instinct to buy high sell low. After all, behind a stock is company, behind a company is a business. Business grows over time!!

Let's find some examples. Around 21 Nov 06,

Olam, 2.0+
China Hongxing, 0.4+
Ezra, 1.8+

Despite the current sell down, they are unlikely to go back to previous level. Because business has grow, stock price would follow. The thing that fluctuate is the valuation. When market is optimistic, you get high PE valuation. Otherwise, it is the other way.

Have faith, focus on valuation and pray. The risk of buying low is less than buying high.