"When is it time to buy stocks again?" This was the question on everyone's lips at the Asia Trader & Investor Convention over the weekend. Like Singapore investors, Malaysians are just as keen to dive back into the markets. It's quite apparent that most people who showed up at the Kuala Lumpur Convention Centre were biding their time, getting ready to pounce once things turned. This is almost the smartest thing investors can do. Almost. While the Dow Jones Industrials Average gyrates in 300-point ranges, investors who've got their eye on the long term are not perturbed. They use the steady compass of valuations. They are, to borrow the oft-used phrase, walking placidly amid the noise and haste.

Which brings me to my favourite hobby horse: conventional un-wisdom. Stuff that people truck out and cling to because it sounds comforting, but which either makes no sense at all or contradicts common sense. Here are my two favourites:

"Good things come to those who wait". What nonsense! Anyone who teaches their children to take opportunities as they come along will know that this is pure and utter rubbish expounded only by those too lazy to get off their butts and make things happen. Plus it contradicts that other great adage, "don't wait for your ship to come in, swim out to it". Or as Confucius put it: "A man who stands on a hill with his mouth open will wait a long time for roast duck to drop in."

This is just as true in the markets as it is in other aspects of your life.

A worse version of the above is:

"No one wants to catch a falling knife". Here is another phrase which analysts use to explain the absence of buyers. This is more a sign of ignorance and the absence of a strategy than any real, valuable insight. The sentence means that no one knows how far the market is going to fall, and therefore anyone who buys in now will get "cut" as prices fall further.

Implicit in this sentence is the assumption that we don't know how far the proverbial knife is going to fall. I don't profess to be an analyst, nor do I know how far the market is going to fall. But then, I don't care about how far the market is going to fall. What I, and most investors, want to know is when valuations are reasonable, even when you take into consideration a decline in earnings. Only when you look at stock specifics, and forget about the market, do you start to get clarity.

The knife is not falling. In fact, there is no knife. It's more like a gold pan. Slowly we're washing out all the mud and rocks. What remain are nuggets. Those nuggets may fall in price before they shine through. But nuggets always shine through in the end.


Mark Laudi, who prefers to use the elevator metaphor. It doesn't matter which floor you're on, or even if your elevator goes down in the short term before riding up in the long-term - as long as the elevator you take is of good quality.

To comment on this blog, go to the Investor Central blog.

Visit the brand new Investor Central website! for free SMS alerts to news about stocks in your watchlist

Labels: Asia Trader Investor Convention, falling knife, Good things come to those who wait