Save Mr. Market

If you are in the stock market, I think you should read or should've read this piece:

"[..] you should imagine market quotations as coming from a remarkably accommodating fellow named Mr. Market who [..] appears daily and names a price at which he will either buy your interest or sell you his. Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market's quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. [..] If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren't certain that you understand and can value your business far better than Mr. Market, you don't belong in the game. As they say in poker, "If you've been in the game 30 minutes and you don't know who the patsy is, you're the patsy."

- Warren E. Buffett

Value vs. Greater Fool

I learned in the Corporate Finance course that there're two approaches toward the stock market.

One is by fundamental values. Say you wanna save an amount of money. You checked the CD rate: it's 5%. at the same time, you're considering buying the stock of the ABC company: the closing price of the day is $10, and it's paid 6 cents dividend per year for 2 years. You figured that despite the risks, the stock yields more thus is the better option. Congrats! Call yourself a value investor, like Buffett.

The other is the Greater Fool Theory. It says that there's no price too high, as long as you can sell it at an even higher price to the next fool. If this is your thing, and you're confident that you can time the market well, congrats to you, too. This is the index used a thousand times to show the U.S. housing bubble that destroyed the world economy. You'll know when you see it.

Recent events and my plumbing portfolio value made me believe that the GF Theory fits better. But to be a money winner, you have to be a bit of a gambler and an excellent mob psychologist.

Something Weird

Which theory you believe is your choice - it's your money after all. End of story, until I read this: 十教授上书建议扩大内需把提振股市作为切入点. If you own stocks (A or H), it absolutely worth your time reading it.

Some best part below:

"激活股市的关键是锁定当前股市下跌的主要原因，对症下药。中国股市一年来下跌幅度超过了70%，远远超过美国股市近40%的下跌幅度，我们认为我国股市下跌的主因是内因而不是外因；内因的宏观政策原因目前已经解决，而股市自身的“大小非”和“大小限”等制度性缺陷却至今仍未消除。目前股市“大小非”和“大小限”合计高达1.18万亿股，比两市流通股的两倍还要多。大小非的问题不仅极大地改变了沪深股市的供求关系，而且改变了市场的估值体系，即使股市跌到1000点，这些一元钱左右的低成本股票仍然有利可图。无论1.18万亿的限售股在现实中是否会流出，对于投资者而言都是悬在头上的一把“达摩克利斯宝剑”，对于市场信心和流动性都是致命的威胁。"

(老师们好！06至07年间，中国股市上涨300％，美国股市上涨30％。请问，上证指数突破6000点大关的时候，我在习读《马列主义》和《毛选》，“大小非”和“大小限”原地不动，老师们在哪儿混哪？）

“建议国家外汇投资部门和公司把战略重点从美国转到香港，购买当前质优价廉的H股公司，动用500亿美元左右的外汇在香港市场吸纳H股，其意义：(1)化解外汇储备风险；(2)知根知底，风险可控，加上手中的政策工具，可确保国有资本保值增值；(3)围魏救赵，履行国际承诺，进退自如；(4)守住了香港“桥头堡”，就堵住了外部金融危机对A股市场传输恐慌，有利于A股市场稳定。”

（顶！可惜我不炒股，能不能把我那份（30美元左右）还我？我特想筹钱买台数字电视）

In short, their suggestion is: the government should be the Greatest Fool.

Alas, if there's an argument, I guess they're right and I'm wrong. This is a concluding remarks: 尚福林:努力提高各类机构入市资金比例. It's a great article: everything he said sounds so right, only I can't remember a thing of what he said as soon as I closed the link.

Damn, my digital TV!

But still, I don't think I will send my kids to where those profs teach.