Saturday, November 27, 2010

Sheer Arrogance

Taken from a blog's comment section, posted somewhere in May 2008:

"I do not base my picks on just NAV.

If you bother reading my blog from the start, you will find that a good portion of my portfolio was bought at prices that have since doubled or trebled.

Any old fogey can tell you to buy blue chips when they are distressed. In theory that sounds good, but it is not as simple to apply.

And the last I checked, most old fogies have less money than me in their bank."

For those who do not know, the person who made that comment has definitely a tidy sum of money in his bank account, probably around $300,000.
For clarity, this was what the blog owner was responding to:

"undervalued never works, buying blue chips in distressed markets works eventually they all shine

if u base your picks on NAV, the question is that how the market ignores them in the first place?"

The commenter did make a fair comment although I would hesitate to say buying undervalued stocks never work. Never say never.

But that is not the point. The blog owner's reply was sheer arrogance because the fact that he has more money in his bank account is not proof that his stock picking methods are successful to a large extent. Rather, the performance of his stock portfolio over a long period of time, would suffice in demonstrating to the commenter that his NAV-centric stock picking methods works.

I can link you to the blog to read the full extent of his hubris if you email me. But to summarize, he did turn the money that was in his bank account into a lot of money, doubling it to more than half a million in stocks at the height of the stock market in 2007-8. He was at ease dispensing advice to those who frequented his blog seeking an opinion. I believe he even tried to use his blog as a testimonial of his equity market acumen so as to land an investment banker job.

However the tide turned, something we knew after the fact. The portfolio shriveled and the blog owner disappeared. Despite people calling out for him on his blog, he has not replied aver since.

The point here is not to castigate him for his arrogance. Rather, it is meant as a cautionary tale for all retail investors, especially the new. There is nothing wrong with being confident. You have to be confident, if not why should you put money in the stock. However, as so many have pointed out, just because you happened to ride the wave up, does not make you a stock market genius. It is this over confidence and hubris that will be fatal for your wealth creation plans when a bear market strikes. Always have an open mind and be prepared.


  1. Nice article, and I believe I know which blog you are referring to, though I must say I did not spot that particular comment. I must say that many investment blogs at the time (2007-2008 period) were full of confidence (and hubris too, come to think of it), but many of them disappeared when the bear market hit.

    Which is why I always advocate being humble and to adopt an attitude which shows you are always willing to learn from mistakes. To consistently make money from the stock market is not as difficult as people think, but to achieve a return above the market return is more difficult than it appears to be on the surface. This is something that many people do not seem aware of; hence the misplaced hubris and pride in their stock-picking skills. I can safely say that I do not think it is easy for me to generate a decent return on my own portfolio, and I can hear the growing cacophony of voices urging me to buy an index-based ETF instead of slogging for tha extra 1-2% above market return (and perhaps not even achieving it). But it's more for the intellectual thrill rather than the extra return, and the ability to put on my thinking cap and interact with like-minded people.

    So once again during late-2010 we see many new investment blogs starting up with many talking about their stock picks. But until the next bear market, who knows if this new batch of stock pickers will be consistently successful?

  2. Yup..there are many new investment blogs lately.

    I dun rem it is that hot when i first started up.

    Anyway i still do not noes what blog that u guys are talking to share? haha

  3. Do,

    i really cant name names cause it will be unfair. but you can email me then i will send you the link via email. in anycase, this guy was like the man then. from 250000 to 600000 is no easy feat...


  4. Createwealth8888,

    nope... like mention, the blog owner has since "disappeared" .. but i guess if he waits a bit more, his portfolio will recover ...

  5. I used to follow daily two blogs - TopTrader and ExtraOrdinaryProfit till the blog owners ate grass in 2008/2009

    TopTrader said in his last post he would quit full-time trading and looked for a job.

  6. Createwealth,

    i can only say that your guesswork is very very good. i leave the rest for others to guess.