Warren

(My friend showed me another email with GS on the very same day. I agree it is illuminating.)

GS,

Some important survival tips that I have learned in last bear market.

1. Buy only when Mr. Market feels hopeless, not just panic. Based on previous observations, Mr. Market is considered hopeless when the turnover of market drops by 80% compared to its peak in bull market.
2. After a drastic panic plunge, there will be 20-30% further “slow decay” despite several sizable rebounds in a typical bear market, all speculators will be driven off by then.
3. Don’t trust any “research report” or “recommendation” from the investment banks. Either they still need some “concept stocks” to speculate even in bear market or they just want to “escape” at better price.
4. “10%-cut-loss” principle doesn’t work because you will need to cut loss for all stocks you have bought in bear market. Eventually you are left either cashless or hopeless after repeated cut loss.
5. Don’t switch your provident fund to cash. This is a golden chance for your portfolio to accumulate shares at bargain price (provided you are holding an index fund or your fund manager is above-average) for your retirement.

However, nobody can accurately predict the market. My wife’s portfolio has further accumulated HSBC shares this morning at a PE of 9.8 and dividend rate of 6.1% (have you got any property with comparable rental return rate?). My portfolio is still keeping cash to wait for the massacre in A/H stock market.

Warren