THE IRRATIONAL BEHAVIOR OF PEOPLE IN THE STOCK MARKET

It is ironical that intelligent, well educated  people succeed in the real world but behave very irrationally in the stock market. These are some of my observations of their mad behavior.

 

  1. In  Supermarket We Rush to buy more when there is a sale or price crash. But when there is a Sale in the Stock Market Crash we are afraid to buy –  but shun those bargain stocks instead.

See: 1 Kg Anlene Milk Powder sells for Rm36 a bag. Now there is an offer at Rm29.00.  Almost 20% discount? We load up more. And if Anlene crashed to Rm19.90 (45% off)  WOW! Time to buy even more!

Now take a look at Stock “X”. Price crashed Rm20%?  Time to buy some?  And price crashed by 45%? Oh No! In fear we didn’t buy more but sell out in a time of panic! If you have done your homework well and are sure that the Stock you picked is sound and solid, why panic? Just buy more!

 

2. In Real Life When We Buy A Car We Will Test Drive It. Check out its engine, its interior and the ride. Same goes for the house or anything that we fancy. We examine them personally & carefully before making a purchase.

In the Stock Market man behaves irrationally. Just at the mention of a hot tip we plonk thousands, even tens of thousands of dollars into a “hot stock” without bothering to check out the nature of the company ourselves.

 

3. In Real Life We Learn Maths/Science from our teachers. We learn driving from Driving Instructors. We learn swimming or diving from Swimming Coaches. You see, we seek out experts in their field and learn from them. Sometimes paying high fees to acquire skill and real knowledge.

In the Stock Market? They say the Stock Exchange is the only place in the world where tycoons who arrive in Rolls Royce listen to stock tips from shoe shine boys or those who came to work by the subway. This foolish behavior is daily found in the stock market and also among many in Investlah Forum & also in  i3 Investors Forum

 

4. When we buy a house we don’t pick up the phone and check with the Real Estate agent about the status of the house price morning , afternoon and evening. Do we? However, when people buy the share of a company he phone his stock broker all the time – morning, afternoon and at night. This irrational behavior is compulsive and real. Think if someone checking about his house price all the time? No. He buys a house and let that be a long term investment. No so for the irrational guy in the Stock Market. He is irrational and itchy in behavior and cannot sit still.

 

5. In real life we know that we can  easily run on flat ground, we can still jog up hill slope (though harder now) and we have to  crawl up near  mountain summit at the very top. Running on flat land is quite effortless. We all like that. Climbing up hill slope? Ok once a while. Crawling on our knees on all four near mountain peak? That’s strenuous exercise. Few really want to do that.

Now look at a growth value stock like Oka when it was 35 cts or Ajiya when it was Rm1.00. They grew pretty well year after year by 20% to 30%. So can buy? Now look at Blue Chip like Nestle or Dutch Lady at their lofty peaks – squeezing out a growth of only 3% to 4%. When buy blue chips at their loftiest peak with little room for further growth?

Why avoid buying Value Growth Stock? This is not rational at all.

 

6. In The Real World We Buy Stuff When They Are Priced Sensibly. Like buying a cheap P. Axia at Rm25,000?

Now if the car price increases by Rm1,000? So P. Axia now Rm26,000. Can buy? Yes, why not ? Rm1,000 increase only. Now see if P. Axia price going up by a whopping 200%? P. Axia at Rm75,000?  Immediately sales crashed to near zero. At  Rm75,000 THERE ARE MUCH BETTER BUYS OUT THERE! P. Exora at Rm65,000 or P. Alza at only Rm55,000.  Both are much better cars than P. Axia. So why still go buying any more P. Axia.

 

Let us apply this to stocks. Latitude, Li Hen, VS, Airasia, Triple C and many other high flying hot hot  stocks – ALREADY UP BY 200% to 300%. Why experts still come out to tell people to chase after them? ISN’T THIS IRRATIONAL MADNESS?

Only thing is.

In The Real World We SEE through Correct &  Rational Perspective. In the Stock Market We are Irrationally Carried Away By Our Greed with Distorted Vision.

 

7. Every Thinking Man or Woman knows that gambling in the casino is a losing proposition – so they avoid gambling.

36 numbers for you to choose. If you are lucky and strike – the pay out is 1  = 30.  Want to be 100% sure you will strike? Then just buy all – no 1, no 2 all the way to no 36. Sure win mah?

So you buy 36 numbers at Rm1 each. The pay out is Rm30 for the number you are spot on. So what? you have just lost Rm6 in the first round. That’s a lost of 16% of your capital!! Repeat that 16% loss in the 2nd, 3rd round and more?

You are guaranteed to lose. So you avoid gambling? Good. You can think rationally.

Now apply this to the Stock Market. You think you can win by contra or short term punting? The law of statistics are stacked against you. Every time you buy or sell you are also paying a fee like the 16%  in a casino. After the trading fees are much lower than the casino. So what? Since you are addicted to Bursa and the Stock Market you will still pay by more frequent dabbling in shares. SEE – that’s how 80% of the people will finally end up losing money in the Stock Market. Why then are so many so IRRATIONAL? Aha! Many will end up as poor as a RAT! Are you one?

 

To be continued…

 

By Calvin Tan Research

ZELAN – A Penny Stock With Great Prospects

Zelan looks like a penny laggard now with great prospects:

1) Already secured half a Billion Ringgit (Over Rm600 millions) projects in hand.

And more to come

2) Malaysia Registered an increase of Total Exports for 1H 2016. Good for all ports.

3) MMC is buying up Klang Ports & Penang Ports

4) And Rm18 Billions Expansion for PTP. PTP is already the Biggest Container Port in the world now.

5) All these bode well for Zelan future prospects in securing vital jobs as Zelan & MMC are closely linked.

6) And More Jobs Award from RAPID for Zelan possible.

7) Zelan might also win the upcoming New Johor Airport in Pontain.

8) And if TPP goes through expect Malaysian Exports to explode upward

9) Last time Zelan experienced bad debt due to the Crisis in Middle East. Now the jobs secured are mostly within Malaysia. So there is less risk of default in collections.

10) And since DRB, UEMS & others Govt Link Election Stocks Have Rebounded It Is Only A Matter of time for Zelan’s turn going into GE Year of either 2017 or 2018

From all rosy prospects Calvin thinks Zelan’s future is bright.

 

PTP to Invest RM8.6 billion in Expansions

Port of Tanjung Pelepas’s efficiency and productivity level is set to increase with expansion plans and become the preferred transhipment port in Asia over the next 15 years

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PTP to Invest RM8.6 billion in Expansions
An overview of the vast Port of Tanjung Pelepas

Malaysia’s biggest single port operator and a subsidiary of MMC Corporation Berhad, the Port of Tanjung Pelepas (PTP) announced that it will invest more than RM8.6 billion with its new expansion plan to improve the port’s capacity over the next five to fifteen years.

PTP to Invest RM8.6 billion in Expansions 1
Johor Chief Minister Dato’ Khaled Nordin during his official visit to the Port of Tanjung Pelepas.

The expansion plan was revealed during Dato’ Khaled Nordin, Menteri Besar Johor’s visit and Tijarah Ramadan to PTP. Also present were Datuk Ir. Haji Hasni Haji Mohammad, Johor State Executive Council for Public Works, Rural and Regional Development Dr. Haji Zaini Abu Bakar, and Iskandar Puteri MP and Chairman of PTP, Dato’ Sri Che Khalib Mohamad Noh.

“As one of the fastest growing ports in the world, PTP is committed to increase its efficiency and productivity level. The expansion is to ensure that PTP remains competitive in the market and ultimately become the most preferred transhipment port in Asia,” said Che Khalib.

PTP is currently operating 14 berths measuring five kilometres of quay length. As an important regional transhipment hub, continuous capacity expansion is a smart move to ensure the port can handle future growths while still offering valuable business proposition to its clients, both old and new.

“We anticipate the expansion of PTP will create more job opportunities to the locals, thus further position Johor as a regional economic power and not just a part of the Malaysian economy,” said Khaled.