The golden rule of investment for any successful investor is to buy low and sell high. But this is always easier said than done. Novice investors are more too often caught in buying frenzy, ending up as a laughing stock from seasoned investors as suckers for buying high and selling low. But take heart, do not be dishearten, even the very big boys of investors do end up buying high and selling low.
The recent sale of Barclays stake by Temasek does illustrate this point. It bought the stock almost at the peak and sold at the bottom of the market, losing an estimated S1.4 billion. Similarly, this Temasek shamble followed hard on the heels of the colossal loss on the Bank of American stake bought near the top of the market and disposed off near the bottom of the market. Temasek suffered losses in excess of S$3 billion over the sales of BOC stake.
The questions one beg to ask here is just how all the MBAs and PHDs of economics, outstanding scholars and civil servants of high pedigree, highly paid foreign talents with outstanding resumes got it all so wrong at Temasek. They are experts in field of finance and banking, risks management, strategic investment and due diligence. They are paid millions to be ahead of the curve and yet they display the same folly as novice investor. The simple truth is that no one is immune to this investment syndrome, ‘BUY HIGH, SELL LOW’.
Investment is all about timing. The professionals at Temasek got the fundamental outrageously wrong. They timing of the purchase was too premature and then made the classic error of selling too early. As the financial crisis deepened towards the end of 2008, with macroeconomic landscape deteriorating rapidly, they must have panic and decide to cut loss by dumping both Barclays and BOC shares. Interesting, recently the SWF of Abu Dhabi also divested their entire stake in Barclays with a gain of almost S$3 billion. It bought the stake after Temasek, when Barclays was desperate and sold last week when the stock recovered, after Temasek had disposed its entire stake.
The moral of the story is man is not infallible. In investment, strings of qualifications and experiences do not necessary guarantee success. Investment is a soft science that is complicated by too many variables. Choosing only the correct variables in decision making is an art as well as luck. The macroeconomics is many much affected by political decisions and fiscal policies. Human sentiment is normally unpredictable but is one of the greatest influences in investment climate. That could explain the volatility and incompatibility of stock prices at times. Common sense and rationality are at times completely ignored in investment, instead human allows sentiment to defy logics and reasons.
Getting it wrong in investment is no big deal. But in the case of Temasek investment in Barclays and BOC, the question on my mind is when did they acknowledged this investment has gone wrong. Upon acknowledging the mistake, as professional investors must do, quickly divest and mitigate the loss. Well, these professionals have the management tools and credentials to manage an aborted investment. Did they execute their decisions professionally and in a timely manner? We can only speculate, because no answer will be forthcoming.
For all those investors that have make wrong investment, do not despair as you are not alone. Even the best in the game can get it wrong. Take comfort, as in the bull fighting ring, the matadors do not win all the times, sometimes the bulls also win. The difference is, if the bull wins, the matador picture will be on the front page. Likewise, if the big boy loses big, we also read it from the newspaper. And when this loss becomes public news, they will be many vocal voices asking for accountability as the money belongs to the people and the state.
-------------------------------------Living to see the world------------------------------
No comments:
Post a Comment