100k. What would you do with it?

Business Money
41

[quote=“GuyInTaiwan”]Firstly, I’m actually really shocked by comments from people here that 1) they’ve never had 100,000NTD in their lives, 2) they can’t save 100,000NTD/year. Wow! Doesn’t this worry the hell out of you guys? What are you going to do in twenty, thirty, etc. years? What are you going to do when you’re too old to work, especially given the nature of the EFL industry here (where too old often means 40 onwards and where student numbers are dropping)?
[/quote]

I’m not sure if you’ve read Ferguson’s latest thoughts:

bbc.co.uk/news/world-18456131

"We blame the politicians whose hard lot it is to bring public finances under control, but we also like to blame bankers and financial markets, as if their reckless lending was to blame for our reckless borrowing.

We bay for tougher regulation, though not of ourselves."

42

I just ran the numbers again for Nankang Rubber Tire Corp, but this time I used other companies to compare.

The parameters for the calculations are as follows:
Initial purchase of 1000 shares at late 2002 prices (used some discretion to pick realistic entry points).
Cash dividends and stock dividends are included in the total return for each stock.
Cash dividends are not reinvested; stock dividends are not sold, but accumulated.
Stock dividend multiplier used: 1000 shares times (Yahoo Finance Taiwan) stock dividend number for the year divided by 10 plus 1. E.g. of Nankang Rubber, 1000*(2.2/10)+1 = 1220 shares.

2101: 807% total return from late 2002 to current. 90% annual return. (Nankang Rubber)
2105: 515% total return from late 2002 to current. 57% annual return. (Cheng Shin Rubber - another, 6xbigger, but similar company)

2353: 106% total return from late 2002 to current. 12% annual return. (Acer Corp)
2357: 25% total return from late 2002 to current. 3% annual return. (Asustek)

2498: 1353% total return from late 2002 to current. 150% annual return. (HTC) - NOTE: incredible!

2412: 281% total return from late 2002 to current. 31% annual return. (Chungwa Telecom)

2882: 27% total return from late 2002 to current. 3% annual return. (Cathay Financial)
2891: 66% total return from late 2002 to current. 7% annual return. (Chinatrust Financial)

Why the hell rubber / tire companies return this much money to shareholders compared to computer hardware manufacturers and financial services companies, I don’t know.

Obviously there is something special about these rubber / tire companies. They must make a shit load of cash to compensate shareholders this handsomely.

@Tony: Thanks for introducing this stock to me. I’m going to wait for a Lehman style event to knock the shit out of this stock (and others) and then I’m going to load up on it for a fraction of the price today to maximize value. It looks like a price sub-NTD15 would be a nice entry point.

BTW, HTC might be a good example of the past not equaling the future, but it made someone very very wealthy.

43

tom: As usual, Professor Ferguson is right on the money. Also, as usual, he will be completely ignored.

SillyWilly: Again, I think you need to look at the underlying value of the company. Looking at the stock price is a dangerous game. It’s purely speculative. In the short term, the stock market is a voting machine; in the long term, it is a weighing machine. Someone famous once said that.

The problem with these stock dilutions is that eventually, investors realise what’s going on, and the stock price plummets. If a company’s true valuation (assets minus liabilities) equal 100 million NTD, for example, and there are 100 million shares outstanding, for example, then the real value of those shares is 1 NTD each. If the stock price stays the same, and they issue 100 million shares, then the real value of your shares has not doubled. The company is not suddenly worth 200 million NTD. It doesn’t suddenly have twice as much money in the bank, or own twice the number of machines or buildings, etc. If issuing more stock increased the value of a company, then why stop at only 100 million new shares? Why not 1 billion new shares, or 10 billion new shares, etc.? Everyone could be making gains of 1 million % p.a., right? Why these pathetic returns of 100% people are currently getting? Because the company still only has 100 million NTD of underlying assets minus liabilities and the rest is simply creative accounting.

The whole way you are looking at this is pieces of paper. The shares themselves are worthless. What is worth something is what they represent. Each share actually represents a small fraction of that company, i.e. its assets minus liabilities. You may be lucky and make a quick profit by speculating on the stock price, but you’ve already talked about buying and holding. If you buy and hold these shares for the long term, then there will eventually be a price readjustment in line with the total number of outstanding shares, i.e. the more shares that get issued, the more the price of the company’s stock should decrease. The people running the company haven’t actually given you anything by these stock issuances unless you make a speculative quick profit. They have, in effect, given you something with their left hand (additional shares) that they took with their right hand (the underlying value of each share).

I really think you need to read Benjamin Graham, Warren Buffett, Seth Klarman, etc. on this matter.

Please do the following to really calculate the return on your investment.

  1. Calculate the following for the company when you bought it: (assets - liabilities)/number of outstanding shares
  2. Calculate the following for the company now: ((assets - liabilities) + (dividends issued))/number of outstanding shares
  3. Calculate the total return of return for the company as a percentage: (2. - 1.)/1. x 100/1
  4. Calculate the total annual return for the company: Put 3. into a compound interest calculator with the number of years you’ve held the shares as the time frame. You should then get the annual return rate as a percentage.

Notice that the stock price is completely irrelevant in calculating the true value of the company.

44

[quote=“GuyInTaiwan”]tom: As usual, Professor Ferguson is right on the money. Also, as usual, he will be completely ignored.

SillyWilly: Again, I think you need to look at the underlying value of the company. Looking at the stock price is a dangerous game. It’s purely speculative. In the short term, the stock market is a voting machine; in the long term, it is a weighing machine. Someone famous once said that.

The problem with these stock dilutions is that eventually, investors realise what’s going on, and the stock price plummets. If a company’s true valuation (assets minus liabilities) equal 100 million NTD, for example, and there are 100 million shares outstanding, for example, then the real value of those shares is 1 NTD each. If the stock price stays the same, and they issue 100 million shares, then the real value of your shares has not doubled. The company is not suddenly worth 200 million NTD. It doesn’t suddenly have twice as much money in the bank, or own twice the number of machines or buildings, etc. If issuing more stock increased the value of a company, then why stop at only 100 million new shares? Why not 1 billion new shares, or 10 billion new shares, etc.? Everyone could be making gains of 1 million % p.a., right? Why these pathetic returns of 100% people are currently getting? Because the company still only has 100 million NTD of underlying assets minus liabilities and the rest is simply creative accounting.

The whole way you are looking at this is pieces of paper. The shares themselves are worthless. What is worth something is what they represent. Each share actually represents a small fraction of that company, i.e. its assets minus liabilities. You may be lucky and make a quick profit by speculating on the stock price, but you’ve already talked about buying and holding. If you buy and hold these shares for the long term, then there will eventually be a price readjustment in line with the total number of outstanding shares, i.e. the more shares that get issued, the more the price of the company’s stock should decrease. The people running the company haven’t actually given you anything by these stock issuances unless you make a speculative quick profit. They have, in effect, given you something with their left hand (additional shares) that they took with their right hand (the underlying value of each share).

I really think you need to read Benjamin Graham, Warren Buffett, Seth Klarman, etc. on this matter.

Please do the following to really calculate the return on your investment.

  1. Calculate the following for the company when you bought it: (assets - liabilities)/number of outstanding shares
  2. Calculate the following for the company now: ((assets - liabilities) + (dividends issued))/number of outstanding shares
  3. Calculate the total return of return for the company as a percentage: (2. - 1.)/1. x 100/1
  4. Calculate the total annual return for the company: Put 3. into a compound interest calculator with the number of years you’ve held the shares as the time frame. You should then get the annual return rate as a percentage.

Notice that the stock price is completely irrelevant in calculating the true value of the company.[/quote] Absolutely agree.

@Guy: You’re right. But I’m not looking to invest like Ben Graham or Buffett. I’ve extensively studied the Intelligent Investor and value investment measures. I majored in investment management and finance. I’m more thinking speculative play for this stock. About the stock dividends diluting ownership, I understand that. But 2101 has managed to trade at least within a reasonable band ($30-$60) between 2004-2012, if the financial crisis is excluded. And in terms of risk adjusted returns it has done quite incredibly, especially considering the overall market.

BTW, at current levels I wouldn’t dream of buying. That’s why I said, I’ll put it on my shopping list for when there is blood in the streets.

45

and that’s why we hate the speculators - no soul!

I’m going to make the rational capitalist argument: invest capital in businesses you can trust in a market you can trust or leave it idle. The ‘get-rich-quick’ club are all smoke and mirrors. Maybe they like it that way, maybe they are themselves deceived, maybe they enjoy deception or maybe they think they can profit from it. Maybe they are simply immoral.

Why don’t you check out social banking such as Bank to the Future. There you can team up with real investors and people with real ideas. Maybe you can come up with something. Try micro-finance initiatives or setting up a co-operative. These things create money and jobs and actually improve the world, rather than sucking the life out of it like a virus.

The main problem is that there is a global downturn which is in fact a depression so there is hardly any market for anything. It’s called a bear market for a reason (for the pun of it, surely!?).

Or just go down to the casino? You might win…

The way I see it is that the market goes up and everyone appears to make money then the bubble bursts and it looks as if everyone has much less money. The only people really making money out of this disaster are those in the financial services because they sell the thing that everyone wants: [strike]money[/strike] debt.

So, if he has no soul, the OP should invest in working for a bank; otherwise he could consider something other than pure profit margins and the ever illusive get-rich-while-doing-nothing. He could think of his soul and how his happiness is ultimately dependent not on his financial wealth alone but on the happiness of those around him.

46

[quote=“trubadour”]
and that’s why we hate the speculators - no soul![/quote]

:roflmao: :roflmao: :roflmao: :roflmao: :roflmao: :roflmao: :roflmao: :roflmao:

Since when has it been a crime to plan for the future and to buy when everyone else is selling? Sorry, didn’t get that memo. :loco: It’s not like I’m going to cause a financial crisis to profit from. No, that would be the big banks’ game.

If you don’t have the stomach to take financial risks, leave it to those who do.

47

@Trubadour: I realized you may not know the original quote and that it sounds pretty harsh…blood in the streets.

The original quote is credited to Baron Rothchild and is the heart of contrarian investment strategy: “Buy when there’s blood in the streets, even if the blood is your own.”

It was just his way of saying buy when everyone else is selling, even if your own investments are in the red.

48

[quote=“SillyWilly”][quote=“trubadour”]
and that’s why we hate the speculators - no soul![/quote]

:roflmao: :roflmao: :roflmao: :roflmao: :roflmao: :roflmao: :roflmao: :roflmao:

[/quote]

I suppose that that would be “MWAH HA HAH HA HAAAA!”

Since when has it been a crime to plan for the future and to buy when everyone else is selling? Sorry, didn’t get that memo. :loco: It’s not like I’m going to cause a financial crisis to profit from. No, that would be the big banks’ game.

If you don’t have the stomach to take financial risks, leave it to those who do.[/quote]

I love how you make it all macho like, “U dont have the guts for makin’ a killin’ boy???”

Speculating is cambling on the price of commodities that are often essential to the well being of real people who stuggle to buy the things they need when the price gets inflated beyond their means.

Put that in yo’ pipe, boyyee…

Yeah - profiting from poor people is manly

And the ‘blood in the streets’ thing! Bet you regret writing that now~!

ha. ha. ha.

49

SillyW: you got your [strike]retraction[/strike] contextualisation thing in before my reply. Yet I think the analogy is apt. Your stated intention (and that of Rothchild) are the same - to profit from the misfortune of others. I think the quote reminds us that this is real people and real people’s lives that we gamble with when we ‘play’ the stock market. We do a lot to dehumanise it but at the end of the day that is what it is - dehumanising and destructive. It is real blood on real streets. You think the 1930’s depression was just a game? Not at all - we are talking the real blood of real men here. Remember it took WWII to get us out of it.

I guess it looks like you are the one not man enough to accept the consequences and face the real risks of your actions. So for you, not me, it’s time to man up.

50

FYI, we were talking about a stock listed on the Taiwan stock exchange and not commodities. Unless people started munching on stock certificates, speculating in company stock effects no real commodities (wheat, sugar, soybeans) Read the posts next time before making outrageous accusations. :loco:

I realized that you would have no idea what the reference to “blood in the streets” meant so I tried to educate you a little.

51

Time to dial back the drama.

52

This may be true about certain kinds of complex institutional speculation, or pump and dump schemes, but individual speculators like SillyWilly are actually doing the opposite – they are taking on risk and increasing liquidity in the market. This is even more the case if they are buying when there is “blood in the streets.” They didn’t cause the blood. If anything, they are helping those who are continuing to bleed, i.e. who are still stuck in the market. (This observation is limited to the kind of long strategy and timing that he is specifically describing.)

53

It’s not the individual speculators and traders that cause commodities to reach sky high prices. It’s the suppliers and buyers hedging their risk. The big boys that take delivery of the commodity. The speculators provide a needed service for them in providing the liquidity that allows these markets to to smoothly function. A market with no volume is unstable and extremely dangerous. Take the speculators out, and the suppliers/farmers/producers as well as the buyers/factories will have no one to take the other side of their trade and thus no way of limiting or hedging their risk. This will of course lead to higher consumer prices in the end. I highly recommend getting ahold of some COT reports and in depth studies that have been done on this myth. The more you research and understand the less you will believe such nonsense.

This is common myth. Even Obama a few months ago started rambling about attacking speculators when he was being harassed about the price of oil. It’s all misguided misinformed ignorance. His aids quickly ‘educated’ him on the reality and we haven’t heard anything since then. Removing speculators is a surefire way to send prices skyward and create wild unstable markets.

Commodity prices are going up. Period. End of story. You can blame the speculators, the producers, the buyers, the president, anyone you want, but this won’t change the end result. There is a finite amount of resources available, and the price of extraction is rapidly rising while the quantity is decreasing. Meanwhile the demand is increasing as the consumer base grows in places like China and India, and the world population grows. It makes no sense to blame anyone, it’s a matter way beyond the control of speculators, presidents, producers, or buyers. It’s a structural issue and beyond a massive plague or catastrophe, its not going to change directions. Heck even the crazy global weather has started wreaking havoc on commodities.

You can ignore it and ignorantly blame the speculators, or use common sense and plan accordingly. The next 5-30 years will have some harsh realities when it comes to commodities. Even things we take for granted like fresh water will have a steep price.

54

Commodities already had a run up and many of them are going to crater as demand in China levels and drops off and more supply comes online.

The high cost of one commodity can result in other commodities gaining favour e.g. Gas vs Oil, Graphite vs Copper.

It’s not the same story for every commodity of course, some like oil are genuinely hitting peak supply but I think oil is the exception. There is a shortage of water in some parts of the world but that has always been the case and is caused by mismanagement in most cases.

55

SillyWilly: I’m not sure that I really understand where you’re coming from. On the one hand, you talk about buy and hold. On the other, you talk about speculation. The two are not always at odds with one another, but they’re on a collision course given a long enough time frame.

trubadour: If people get burnt by the market, then they need to accept that. If someone else profits from their loss, so what? When those people profit, they often do so at the expense of someone else. Unless we’re only talking about buying and selling stocks at increased prices that reflect their real increase growth, then someone is always going to be a winner, and someone is always going to be a loser.

Let me explain that last sentence before I continue though. Let’s say a company has 100 million dollars of underlying assets minus liabilities, and 100 million outstanding shares. Each share is worth $1. If the company’s underlying assets minus liabilities increase to 200 million dollars, then each share is now worth $2. If a share is then sold at anything other than $2, then there is a winner and a loser in that transaction. Of course, if someone sells a share for $1.80, he has still made a profit, though he has sold his share below its value. The real issue comes at the buyer’s end though because they are attempting to predict the future.

Yet here is where you are wrong regarding your comments about the stock market, and why. Let’s say that after the second person buys it for $1.80, the company tanks (and its stock price with it). The guy who owns the share sees it decline in price to $1.70, then $1.60, then $1.50. At this point, he sells it to someone else because he wants to stop bleeding. This guy has no right to claim he was taken advantage of, that someone else was profiting at his expense, etc. precisely because at some level he was originally motivated by greed and hoped to one day sell his share on to some other sucker, at the time when he originally bought his share, he thought he was getting it at a steal ($1.80, remember, rather than the $2.00 it was really worth).

Of course, all of that assumes that stock prices even vaguely reflect the underlying value of the companies. Often, the two are wildly and widely divergent, in which case the entire enterprise has more in common with a casino. Do people have a right to complain when they go to a casino and blow all their money on the one armed bandits or if they play in a poker competition and get cleaned out? Whose fault is that?

Basically, if you’re not prepared to lose, you shouldn’t play the game. This is as true of the stock market as a high school basketball match as Hungry Hungry Hippos (http://en.wikipedia.org/wiki/Hungry_Hungry_Hippos). You can’t have it all your own way and demand it as your right to win. No one forces anyone else to go and buy these shares. No one went and forced anyone else to go and speculate during the lead up to the Great Depression. People need to take some personal responsibility. It’s as simple as that.

56

Time to dial back the drama.
I realized that you would have no idea what the reference to “blood in the streets” meant so I tried to educate you a little.
[/quote]

Indeed: The phrase blood on the streets is said to be from the time of the French revolution and the Commune that the revolutionaries made of the central of Paris. It was the days of the terror, lawlessness was rife, and there was a massacre due to over-crowding in the prisons - so there was literally blood on the streets. Of course, the phrase means to buy while the market is undervalued but it comes from a time when there was actual blood on the streets. Indeed, the phrase is renown precisely because it is so inhuman (aka business-like) a response to human tragedy. Do not try to deny the literal or the figurative meaning to this kind of ‘practical advice’.

So your argument is you are just boys? I said you guys needed to man up.

[quote=“Homey”]The speculators provide a needed service for them in providing the liquidity that allows these markets to to smoothly function. A market with no volume is unstable and extremely dangerous. Take the speculators out, and the suppliers/farmers/producers as well as the buyers/factories will have no one to take the other side of their trade and thus no way of limiting or hedging their risk. This will of course lead to higher consumer prices in the end. I highly recommend getting ahold of some COT reports and in depth studies that have been done on this myth. The more you research and understand the less you will believe such nonsense.

This is common myth. Even Obama a few months ago started rambling about attacking speculators when he was being harassed about the price of oil. It’s all misguided misinformed ignorance. His aids quickly ‘educated’ him on the reality and we haven’t heard anything since then. Removing speculators is a surefire way to send prices skyward and create wild unstable markets.
[/quote]

Myth upon myth!

The farmers need speculators! That’s amusing. Farmers need to hedge. Speculators are an altogether different proposition.

http://www.americandailyherald.com/business/economy/item/hedgers-vs-speculators

[quote=“Homey”]Commodity prices are going up. Period. End of story. You can blame the speculators, the producers, the buyers, the president, anyone you want, but this won’t change the end result. There is a finite amount of resources available, and the price of extraction is rapidly rising while the quantity is decreasing. Meanwhile the demand is increasing as the consumer base grows in places like China and India, and the world population grows. It makes no sense to blame anyone, it’s a matter way beyond the control of speculators, presidents, producers, or buyers. It’s a structural issue and beyond a massive plague or catastrophe, its not going to change directions. Heck even the crazy global weather has started wreaking havoc on commodities.

You can ignore it and ignorantly blame the speculators, or use common sense and plan accordingly. The next 5-30 years will have some harsh realities when it comes to commodities. Even things we take for granted like fresh water will have a steep price.[/quote]

Speculation is nothing to do with supply and demand. Speculators seek to profit from price increases as much as from decreases. It has nothing to do with supply and demand. Supply and demand effect the market pricee of goods independently of speculation, but only in a positive way - i.e. as demand goes up, so do prices, and thus the incentive to produce a given good. The opposite insures goods on the market remain diverse. Speculation is not what you think it is.

http://www.iadb.org/intal/intalcdi/PE/2011/08247.pdf

GuyInTaiwan: I fear you both misunderstand and accept my point. I am trying to highlight the need for people to responsibility for their actions when investing. I am not suggesting they don’t know the risks or deserve some kind of sympathy if their investments fail. I am suggesting that they don’t understand that the consequences of their actions are far worse than possibly losing some money. Even if they profit from speculation they impoverish and/or disrupt the production and supply of food (for example). The disruption effects the producers and the consumers and thus effects us all. Perhaps some here think it is OK that one might profit from impoverishing another, or perhaps they have convinced themselves that their actions do not negatively effect others - or even themselves. They are, sadly, wrong.

In short, the losers of stock market gambles are not the investors (on the contrary). The losers are us and everybody - particularly those who produce and consume the given commodities.

57

Food and water and energy supplies do not need speculators to ‘hedge bets’. In fact governments can be prudent and create critical stockpiles and adjust policies when required.

Now if you said investors I might have time for this but derivative traders, I don’t think so. All these extra funds pumping into the system raise the price beyond market demand and actually can cause huge instability by interfering with the normal operation of supply and demand.

58

trubadour: The blood on the streets quote, at least with respect to investing, refers to Rothschild.

As for speculation, I don’t engage in it really (all investments are, in a sense, speculative, of course), but I really don’t have an issue with it. People need to design systems that are robust enough to withstand market speculation. Many of the examples of speculation in food markets are merely the end events that follow a series of poorly thought out policies that have often created perverse sets of incentives for the production or extraction of certain goods or the way they get into the market. Any attempts to control a market ultimately create unintended consequences, often of a speculative nature themselves. One of the defining characteristics of tightly controlled markets is the emergence of a black market. This is as true of the former Soviet Union as it is of the War on Drugs as it was during Napoleon’s Continental System.

59

Who is going to take the other side of the trade if speculators are removed from the market? Nobody. The farmers want a high price, the factories/retails want a lower price. There is no way they can limit or hedge their risk without speculators. The miners are certainly not going to lock in contracts at a low price when the market is going up, in the same way that factories are not going to lock into contracts when the price is higher and heading down. The only ones that will take the other side of these trades are the speculators.

There is a huge huge difference between the big evil manipulators like GS MS JPM and other big banks and the individual futures trader. It’s not the little guy that is moving these markets, never has been and never will be. It’s impossible. If Goldman Sachs is selling many tens of thousands of contracts and Bob in his living room is buying a few contracts, he is going to get ran over and the price will drop regardless of his few measly contracts. Like I say, do some research. It’s quite obvious that its the institutions and commercials that move futures markets, not retail. 98% of retail futures traders get their face ripped off and very very few last for more than a year. Most blow up their account within a few weeks or months. Anyone who has direct experience will verify this.

It’s funny, but when prices drop the clueless masses never seem to give credit to speculators, but when prices go up it’s all because of those damn speculators. If they are to blame when it goes up, then they are also to blame when it goes down.

What speculators do is exaggerate moves in the market. They clearly can add some momentum to price movements, whether this is up or down. This exaggeration is exactly the same thing that happens in all markets, not just the futures. It’s actually a wonderful thing if you have enough common sense and awareness to spot this when it happens. What ever market it is, will always return to a balanced state. It’s not static, but rather constantly in motion trying to find the balance.

We could just as easily blame speculators for sending facebook to 45, but it would be ignorant and pointless. Facebook didn’t stay at 45, it dropped quickly in it’s effort to find balance. The speculators that bought at 40+ got their face ripped off. This same exact process is at work almost 24 hours/day in the futures markets. If your gungho to blame someone, blame MS and the other big banks that manipulate ALL THE MARKETS each and every day. It’s silly to pick the individual futures traders and blame them while they get wiped out by these very same banks.

60

We know a lot of this, the problem becomes when people start artificially boosting the cost of life critical food. Now you might say that it boosts the demand and farmers plant more crops but that’s no use if you get malnutrition or die in the meantime.
This is not an esoteric financial problem.