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Don’t catch the dip, wait for generational opportunity to buy stocks

What is a generational opportunity to buy stocks?

  1. A generational opportunity is a window granted to individuals to buy stocks at a deep deep discount.
  2. One must possess great patience to wait and strong stomach or foolhardiness to plunge in when the time comes.
  3. Investors do not believe that such levels will come but history repeats as long as people continue to be driven by animal spirits.
  4. When you catch such an opportunity, you stand to make more money than trading.

 

Are you kidding? Such windows happen at all?

In the past 20 years, there were at least two such generational buying opportunities.

  1. Asian Financial Crisis (68% correction from market high of STI 2504 points in 1996 to bottom of STI 800.27 points in 1998).
  2. SARS Epidemic (see story of SARS in Singapore in 2003 here)
  3. Subprime Crisis (63% correction from market high of STI 3906.16 points late 2007 to bottom of STI 1455.47 points early 2009).

For those with eyes on foreign stock markets, there was also the bailout of Long-Term Capital Management that more of less coincided with the timing of the Asian Financial Crisis. Followed by the bursting of the Dot Com Bubble and then 9-11 tragedy, markets more or less recovered only with the end of the the SARS Epidemic in Asia. When bad luck strikes, they usually come in twos and threes.

Straits Times Index

Monthly chart of Straits Times Index STI from 1993 to present

 

What happens if history repeats?

A repeat of the kind of market corrections with magnitudes between 63 – 68 percent will bring the Straits Times Index to level between 1109 – 1282 points. Every dollar of capital not spent now can fetch three times as much at price earnings ratios that are so much more attractive.

 

So, when is time to buy Singapore stocks?

Wait for it. As I said earlier “When bad luck strikes, they usually come in twos and threes.”

 

 

 

 

 

 

 

Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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4 thoughts on “Don’t catch the dip, wait for generational opportunity to buy stocks”

  1. Shao Guoyong says:

    thank you Terraseeds for constantly coming up with good articles.
    Everyday I look forward to reading these articles and improving on my investment knowledge,
    so that when the next window comes, I can be on the right side when wealth changes hand from the misinformed to the informed.

  2. Daniel Ku Guet Liang says:

    Question: assume that the STI fall to the level said above, would the index usually form a reversal signal before recovering? and does such signal typically span over a few years? Thank you in advance.

    1. Soh Tiong Hum says:

      Big movement call for big reversal patterns. A reversal pattern is not just a shape that we can see on a chart. It is also a process where shares change hands from weak players to strong ones with new capital. Such a process takes time to complete. When the process ends, shares reverse bullishly. Therefore be ready to wait for some time.
       
      As for duration, you don’t have to look further than the chart above. The width of the coloured boxes shows the time it takes for price to reach each selected bottom. Extend to the right to see how long it takes for stocks to go from valley back to peak.

  3. Helmy Hamzar says:

    great article Tiong Hum! Keep it up!

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