T3B Gathering: Wealth Creation & Portfolio Mgt

As quoted from Mr. Chow Y H from T3B Forum:

I thought it will be beneficial to reiterate what Keane has gone through in our Wealth Creation Portfolio Management Part 1 course. For those who were unable to attend as well as for attendees to recap! Rain started pouring an hour before the start of the session and I thought the attendance will be affected. To my surprise, the rain did not dampen the eagerness of the attendees to listen to what Keane has for us.

Keane began with a harsh reminder to attendees who failed to take advantage of the recent stock market crash which was comparable to that of the Great Depression. He mentioned that the "best bear" is over but shorting is still an important skill as there are "at least 2 corrections in a bull run". He wanted us to reflect on the mistakes that we have made throughout the past year and why our trading has not been successful as what it should be. Be it that we have not been following the rules, or not taking actions, or even taking too much actions; we ought to reflect on our trading behavior.

To trade successfully using the T3B system, he stated the 3 qualities to dream big!
1) Conviction - we must have faith in the system and believe it will work. The moment we second guess the system, we will find it hard to follow the rules, and it become a self fulfilling prophecy that it will not work.

2) Courage - Following rules properly and cutting losses require courage. Never stop trading despite a few losing trades also requires courage.

3) Confidence - We must have confidence in the expectancy of the system. Confident that as long we follow the rules and keep trading, the expectancy will be positive and result in profits.

Current Market Conditions
I could feel Keane's excitement at the current opportunity and he wants us to be ready for it. He does not know whether the Singapore market has really bottom out, and was wary it might be a W-shaped recovery. Nonetheless, he believed that STI will not go below the low of 1455. Coupled with the affirmation from Coppock Curve, STI may move on to the previous high of 3900. At current level of 1800, he feels that we have nothing to lose even if it drops 350 points to 1455. Hence, we have more upside probability than going downside.

Apart from the comments on STI, he was actually more bullish about China companies listed in Hong Kong Stock Exchange. The main reason was that China has the best economic stimulus package in the world in reaction to the recession. He elaborated that the package involves empowering the Chinese population with subsidies which "force" them to purchase goods and services. The large Chinese population will be able to consume enough to sustain the growth of the Chinese economy throughout this difficult time. It has been evident in the stock market that these Chinese companies have began their run.

Sharing Fundamental Analysis
As a technical trader, I did not expect him to do fundamental analysis. At this depressed market, he believes this is an opportunity to take advantage of. Warying of the collapse of big companies like Lehman Brothers, he is more inclined to local companies with government backing. He has 3 rules to evaluate companies' fundamentals:

1) (profit growth) must be consistent and predictable

2) company must have competitive advantage for a long period

3) the product must be simple and never be obselete

One good example is SMRT where it satisfies all 3 criteria - 1) its profits have been growing steadily despite the downtrend. 2) The local MRT market is considered monopoly, if not at least obligopoly. 3) Everyone still needs to commute during an economic downturn. In fact, more may sell cars and take public transport.

He added that companies should have debt gearing ratio less than 10 to lower the chance of insolvency. The strategy to adopt is to find value-growth stocks with buffering dividend yield. Value = after the downturn, many stock prices have dropped below from what the companies are worth. Growth = companies are still able to expand and grow their business in such economic conditions. Buffering dividends yield = 4% dividends yield is a reasonable expectation. If we are to enter now and the market goes further down to 1455, it would mean a 20% decrease. However, a 4% dividend yield will soften the impact and make it up in 5 years even if the fundamentally sound company has zero growth (which is unlikely).

He also advised that one should have substantial capital to do such fundamental investing, otherwise, T3B trading should take precedence for higher profits.

It's not all about money I could feel the Keane's sincerity to bring every T3B graduate onboard his ship and sail towards the pot of gold at the end of the rainbow. He does not wish to leave anyone behind. He told us he gains by sharing his thoughts. He believes by giving more, he receives more. It just reminded me of Zig Ziglar's famous phrase, "You can get everything in life you want if you will just help enough other people get what they want."

*Ed notes: It was mentioned in another forum posting that a new strategy - S4 was developed.