Sunday, November 16, 2008

THE BLACK SWAN - Is This The Right Timing ?

The Black Swan - How do we theory by this word ? The Black Swan theory refers to a large-impact, hard-to-predict, and rare event beyond the realm of normal expectations.

World financial meltdown or financial crisis is something beyond our expectation. It is something that we never expected it to happen. The Black Swan theory sometimes can terms as an opportunity once in a life time.

Last year if we take a look on most of the Wall Street's counter, it was impossible for us to invest in any of the counter that beyond our capability to purchase or to own any of these shares.

I still can remember when I went through some of the prices in some of shares listed in US share market last year, the prices were incredible. Most of the good counters prices at between USD 40.00 to USD 120.00 per share but today we can own it at about USD 2.00 to USD 15.00 per share.

This is something that only happens once in a blue moon. This is what we call THE BLACK SWAN. A crisis that has become an opportunity. Today I'm just trying to explain that the time will arrive but the when is the right timing to implement this kind of strategy (invest for long term) ? This would be another big question that we need to find out an answer for it.

Would it be this year or maybe next year ? Is this the right timing to accumulate some of these shares ? For my point of view it would be better to wait until next year (2009).

I'm not only referring to the US share market. I'm also referring it to the whole world share market including Malaysia, Singapore, Thailand, Hong Kong and even in European and Australia share market. As I have mention just now, timing will be the right tools to apply in this current crisis right now but when is the right timing ?

I still can remember one of the famous chartist that use to trade in 1990's. He can be consider quite a good trader, like to share his own opinion and making his own money most of the time but when 1997 Asian Financial Crisis strike, he was in deep trouble when he was hit hard by that financial crisis.

During that time, he didn't got burn at 1,000 points to 1,200 points level but he was caught at 550 points to 750 points level. He brought a lot of shares at this level.

He didn't expect the KL Composite Index was heading towards 260 points. He got burn so badly (huge losses) and at one time he can't even cover his debt and has no choice but to work as a chartist adviser in one of the broker firm in Kuala Lumpur to repay his margin debts.

After this incident he told me that Timing is the most important element to determine whether you will make it at the right time. Right at the moment either we want to play short or long will depend on the current world financial situation.

The ability of the world financial institutions to weather one of the deadliest disaster will determine the next course of the world share market movement. Basically Dow Jones Industrial Average will play an important role as the main actor towards the whole music.

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