Part 19 - Ten-thousand fold profit in six years- the legend of Taiwan stock market

Not only in political, America’s national strength and world-renowned companies make the impact globally in every way. Such as CNN produce reports from American perspective; American funds cause trouble in global financial market; Credit rating agency assigns credit ratings to the world’s most famous companies according to American view; American investment banks are making American style research reports. It almost dominates the main trend of global financial market in one hand. Even many big companies utilize America’s political power to set all kinds of regulations and agreements. Making complaint against international to take by force and encroach benefits as gnawing silkworm and swallowing whale. This almost like another form of war. Using nonmilitary way to take role of international power and resources.

Therefore, as what Warren Buffett said, “If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy." After that, I was carefully paying attention to America trends from the America news and funds’ research reports
As the example of 1993, America cut interest rates to kick-start spending. And many America investment banks began to aim its spear at the 10% GDP growth Southeast Asia countries. Although I was not familiar with the condition of Southeast Asia, but since America economy was depressed and MSFT seems to be a stagnation status. Therefore, I was following American hot money to invest in the economic growth and prosperity of Southeast Asia. Of course, the ROI(Return On Investment) was up to 70% in that year. This was my first success by following American funds.
Then, I received the order to operate Taiwan Stock with the management position in the middle of 1993. So, I took very close look at the international funds movement which would impact on Taiwan Stock Market. Lately, I found the tendency of some Taiwan electronic stocks were increasingly rising after the fourth season of 1993, and America electronic stocks were also ready to react. From this fact I knew America’s economy was recovering that caused by 6 to 7 times of continuously lowering their interest rates. Therefore, I purchased my first blue chip electronic stocks such as (2317)Hon Hai , (2311) ASE Inc and (2313) Compeq…,etc. (For I still had no clue which would be set apart from the competition, so I bought whole bunch of them.)

As expected, America was seven times continuously rising interest rates after its booming economy. Taiwan electronic stocks also about to boom after the bust since 1990.

To be continued….

Part 18 - Ten-thousand fold profit in six years- the legend of Taiwan stock market

Since then till 1993, I found Japan stock market, which had been falling for two to three years, showed no obvious rebound. And I noted that only if Japanese yen had appreciated, Japan stock market would fall. Most importantly, if the United States stated that Japanese yen still has much room for appreciation, it would do so and caused the downfall of the stock market. This especially impacted Japanese electronic industrial, that was acting high status, its stock price had terribly plunged much more than the index.

I finally realized the power of a country was considered as its most powerful and strong economic weapon. At the beginning of 1980th, Japan hold the world’s most powerful electronic industrial. American pilots knew their airplane would never fly without Japanese electronic component. Not very long ago American companies such as Inventec has grown significantly, and Microsoft has taken the place of world’s largest software maker. How about NEC, Toshiba and Fuju?

The truth is that American was worried about their airplane cannot fly and the weapon may cause problem without Japanese electronic technology. Therefore, the main target of Plaza Accord was to deal with Japan. Japanese yen had appreciated from 360 yen in 1973 to 79 yen in 1995 against one USD. Although Japanese was awesome, still couldn’t afford 400% of huge appreciation over a decade. This was a part of global market competition. Until then, I suddenly realize how important to consider the international political issue when viewing the financial and stock market. For it is the most significant influence to the market.

What called “individual companies’ revenue and profit" are the second consideration, because they are lack of total autonomy. Once the international political environment has changed, they will be impacted as well. According to the example of former American presidents. Only if Republican Party took role, America would get busy internally and externally. However, once Democratic Party replaced the role, it would give another look. Therefore, President Clinton oversaw a period of considerable economic growth and expansion during his tenure; George W. Bush resulted in bail out damaged financial institutions and a weakening economy.

To be continued…

Part 17 -Ten-thousand fold profit in six years- the legend of Taiwan stock market

“Only if one pay attention to the surrounding environment, will he be able to discover the global trend is taking place. Behind these trend is the enormous investment opportunity."

Were it not for my global investing opportunity, I could not think of MSFT and see the treasure in advance of others. In fact, I noted the opportunity of the United States’ bull market in the fourth quarter of 1994. Meanwhile, the market was already starting to appear its best investment status – low interest rate, foreign exchange rate and stock price. It was like Japan’s stock market in June and July of 1975. Therefore, I boldly indicated that Dow Jones would had boomed to 10,000 point before 1999 while it was not only 4,000 point. (Many “professional" global fund managers and financial newspaper’s editorial said Dow Jones would not excess more than 5,000 points.)

Afterwards, the fact has proved I was correct. In the same time, I was also incorrect. Because what mainly caused this happened was not DJIA (Dow Jones Industrial Average), but NASDAQ. Specially, MSFT (Microsoft stock) was the leading stock which I had bought earlier. Was this another fortunate occurrence? Someone believe that it was because CNY had depreciated to 8.7 RMB from 5.3 RMB against one USD by China government (There was still dual exchange rate system at time). This depreciation of RMB caused global transformation that obviously remain today. In my opinion, the depreciation of RMB was not an occasional cause, but an inexorable trend. As my past experience, how should I know I was going to unveil another enormous treasure while I was purchasing (2915) Ruentex Industries Limited in the end of 2008.

Jintao Hu had a speech about China’s labor income, he hope it could grow faster after the event of Foxconn suicides in 2010. Just like the saying: “Fruits fall off when they ripe"- things will be easily settled when conditions are ripe.

Due to China’s lack of funds after the government was taking control of economic policy in 1978. It want to follow the example set by Japan and Taiwan: increasing external funds from export trade. Besides its extremely fossil and opposite concept. China found its costly labor expense, according to the currency at time, was the main problem of economic decline. Therefore, it always found ways to liberalize its currency and foreign exchange currency rate. Not until 1994, RMB had greatly depreciated and got the significant progress after that. (We can obviously see the change of RMB/USD from the illustration. Nevertheless, it is the official price, the black market was about 2.8 RMB against one USD. )

I don’t want to mention about my awareness of purchasing NASDAQ. Here I want to talk about was I unconsciously hold the key of another map’s treasury box, not only the present wealth. (2303) United Microelectronics Corp., a manufacturer of DRAM at time, have gradually raise while I bought MSFT in 1991. Meanwhile, I was unaware about the relationship between MSFT and (2303) United Microelectronics Corp, for my lack of knowledge in electronic industrial. I was curious why this semiconductor stock, that had ignored by most investors before, was increasing. Although I have worked in Advanced Semiconductor Engineering and understand what so called " Semiconductor" and all its progress of packing. I still had no clue about the relationship between Semiconductor and Microsoft.

I was so upset after I figured them out. Because I lose the great chance to have my first bucket of gold. Under this uncertain conditional, were few Taiwan traders know to buy the semiconductor stock, especially MSFT. In spite of that, I got to know about semiconductor industrial in advance than others.

To be continued….

Part 16 - Ten-thousand fold profit in six years- the legend of Taiwan stock market

What caused me to purchase MSFT (Microsoft stock)? Because I was so frustrated about my “old" computer, and MSFT was the only few US stocks I known. However, I gasped with surprise after the agent’s reply. The price of MSFT boomed tens and hundreds fold after it had been listed on the Stock Exchange. I think I was a genius who dared to buy this burgeoning stock which had been raised numerous fold. Fortunately, my supervisor had great discerning and allowed me to do this transaction. (Past experiences has proved my advices was right although it was always out of his expectation.)

However, things was not going well as expected. Everyone was fear and away from the electronic stocks – high risk and unlikely high profit. Although my supervisor did not understand stock market well, the “dukes" of my group who considered themselves as the US stock experts. So, I had the verbal battle to fight before achieved this transaction. I found many excuses to face these “dukes" – Remembered?! They were oversea Financial PhD. Many of them had lived in America for many years, and some of them were teachers whom taught American students how to invest US stock.

Therefore, the reason I gave them was simply from the analysis which they could not understand. I was exactly right! Also I found a fact: A good teacher may be not a good investor.After all, MSFT’s price had boomed hundreds fold before I left this organization.

Note here, the stock splits of MSFT from 1986 to 2000: Sep 21, 1987[2:1], Apr 16, 1990 [2:1], Jun 27,1991 [3:2], Jun15, 1992 [3:2], May 23, 1994[2:1], Dec 9, 1996 [2:1], Feb 23,1998 [2:1], Mar 29, 1999 [2:1], Feb 18, 2003 [2:1]

The price had jumped absolutely 60 X 288=17,280 fold

Only in 1991 to 2000, the stock had splited 36 fold. There were about 450 fold increasing during the progress of this investment. (see the illustration below)

I have been inspired by investing MSFT: only if one pay attention to the surrounding environment, will he be able to discover the global trend is taking place. Behind these trend is the enormous investment opportunity. Besides MSFT, I did not purchase any other electronic stocks at that time. For I had no idea about “globalization trend" ,which I am talking about now, nor any concept about that. I only felt “earning money is easy" after profited hundred times from it. Anyhow, I stepped forward to “profit ten-thousand fold in six years" by purchased MSFT.

To be continued…

Part 15 - Ten-thousand fold profit in six years- the legend of Taiwan stock market

Before the end of Gulf War in 1991, I obviously had no clue about any investing strategies. My main strategy was avoid Japan and Taiwan stock market. Others like purchased European and American stock mutual funds. And of course, the necessary during the war – gold. After that, I was suspicious stared at the financial market.

Most my updates and information were given by the mutual fund companies and the underground futures office that I had mentioned in my previous blog posting. I remember that the most I purchased were Fidelity and Jardine funds. Why I was so concentrated on those two companies. The reason was simple. I just wanted to exchange more information from them between the transactions.

Although my company was big enough and had the fatal attraction for any of the financial instruments companies (If I told them our company had hundred billion dollars as capital, they would had believed.) We didn’t have enough information resources such as internet, updated computers, mine was an old 80860 system one, economic and business daily, nor any other newspapers. I always had to deal with the computer virus, specially when I was typing reports and see the sudden falling words. Dealing with virus wasted most of time instead of making the reports. In my first year of career, I was always away from my office and spent most of time in the underground futures office which was two blocks from mine. There were Reuters, business and economic daily to read and people to discussed.

Most of people from my company though I would never achieved success, although I already passed the six months examine period.

To be continued…

Part 14 - Ten-thousand fold profit in six years- the legend of Taiwan stock market

It wasn’t hard for me to reach 7.875% on ROI in 6 month. For I known Taiwan stock market would surly be bursted down, as well Janpan’s. But I just couldn’t figure out the situation was that worse. After many years, one of the manager in Barings reminded me I said in March, 1990 that TWSE would crash down to 2,500 points while the highest point was 12,682 in February. He said I was predicted right, however I indeed forgot I had told him that.

Six month passed, my ROI was 16.5% (include NTD depressed 3.8% against USD), therefore I passed the first level. In comparison, a proprietary trading department broker had lost 40% of ten hundred million dollars on investing. Ironically, her securities manager ever said to me that I was like “small feet walking in big shoes” ,because I put money into oversea stock market.

I think the reason I could stand firm in this organization was I stayed away from the crisis of TWSE 2,500 points tumbled from 12,000 point. I dare to said “No” to a group of oversea PhD, big men of the stock market while they forced me to invest Taiwan stock market. This made they very impressive about me. Why I dared to said “NO”? The reason was simple, I had involved in Taiwan stock market for ten years since the index only 300 points. Anyone would be trembling with fear in the process of 300 points to 10,000 points. Therefore, my sincere advice to you: if one are too optimistic about the market when the point is booming, his should take the thinking of those who involved in the lowest point. This is a very important way of thinking. For those who involved in low point are majority shareholders whom understand their own company well, therefore they still buying the stocks during the economic depression. Although they may not judged correctly about the trend, however they understand companies’ quality and constitution well. This caused them to buy in the low point while people are negative toward the market. Besides that, if you are a hipper active investor who invested while the market seem to be excellent, you would learn to see the trend chart upside down.

Still remember the broker who worked in the proprietary trading department I was mentioned above? On January 1990, she got ten hundred million dollars to invest, however only four hundred million left in the end of August 1990. Until September, She had been layoff. Maybe she might be an expert, however she didn’t have a look of empty market and asked suspension of operating. If not, end up fired. In many consequence, the turning point may considered “crisis” or “chance”.

To be continued…

Part 13 - Ten-thousand fold profit in six years- the legend of Taiwan stock market

The illustration above is the foreign exchange rate (DEM, FRF, GBP, JPY vs USD) in 1981-1990. 

Apparently the highest exchange rate of Japanese yen had appreciated to 79.5 yen against one dollar. It was more than four times against USD from 1973 to 1995, and caused great depression in Japan’s economy.

This illustration of foreign exchange rate is my first treasure map, which I found it through Plaza Accord (hereafter refer to PA) and its meaning impacted global market. “A short article worth thousands billion US dollars" (https://philwu5389.wordpress.com/2015/08/11/ten-thousand-fold-profit-in-six-years-9/ ) was talking about this event. However, it was a pity that United Daily News only gave a small place to this big global event due to Taiwan Martial law- the political effect I called. So, only celebrities like Wan-lin Tsai was able to know the fact behind the story. How much money worth of this news report? It is uncountable! It gave birth to Taiwan’s Fubon Financial Holding Co., and defrosted many “frozen shares" while average daily stock volume was only about ten to hundreds shares in those year. CDFH(2883)’s capital boomed to tens billion from original few hundreds million, price from 20 NT dollars to 1,000 NT dollars. Cathay Life Insurance boomed from 50 NT dollars to 2,000 NT dollars, capital also from few hundreds million to tens billion. Wan-lin Tsai became the richest man in Taiwan, because he saw the business opportunity of PA. This opportunity also ended up Taiwan’s Martial law. After lifting foreign exchange control, TWSE (Taiwan stock) boomed to 12,682 points.

Above all, I am going to talk about: “How to find the treasure?" In the end of May 1989, just few days before June Fourth Incident, TWSE was very active and boomed to 10,000 points. This number was much higher than the one I had been laughed. During that time although index had already risen 10 times and more, people was alive again. The restaurants were full house everyday; a go-for of the security earned about seventy to eighty thousand per month. If a securities specialist not earned at least five hundred thousand per month, he would consider an unprofitable one. Lately, I received a call from one of my department professors, he asked my interest to work for a “big" legal person as the financial planning personnel. “big"? How “big" was it? I wondered. But my second thought was that if someone dared to give me ten hundred million for investing? Who cares? America stock seemed to be stagnation. It might be a chance for me better than doing nothing in America.

I was shocked when I first walked into this “legal person" ! It was a really “big" company which I trembled to enter it. However, I finally exercised my specialty to reply the company’s representative when he was asking me about investing in Taiwan shares. My answer surprised both of us: “TWSE seems to be booming to high, it is not a good time to purchase them."Was I crazy?! I flew hundred miles back to Taipei and said “No". Why wasn’t I told them on the phone? I was really a freak. My sense told me to say “No", however I really wanted to work in this big company. So I said even more curiously,
“Although TWSE is rising rapidly, other countries still have much potential." Gosh! I was nervous about my words, for I had never had any experience with international stock market. But only some mutual funds. Nonetheless, this company held many stocks that since they were founded. And so, none of them involved in TWSE before, not even “international stock market" which made them be caught unprepared.

Lately, when I was about to present a plan of global stock market investing, I suddenly found 2/3 of examiners were oversea PhD and the big men of Taiwan. Some of them were often reported on the newspaper. I was fussy to step up for my presentation. Why was that so serious? I wondered. Twenty big men had against a young man like me (I was the youngest at the meeting). After, I felt they spoke to me with kind words and agreed with my opinion. But, my teacher unexpectedly said “most of them seemed to hold opposite point of view from you." I astonished about his reply that I couldn’t get what people actually mean in my age of thirty. I finally understood the way how big men talked. It suddenly reminded me a trick called “needles in cotton", which was from a kunfu novels I used to read when I was little. I thought that was it.

Anyhow, I thought it was because of my teacher’s influence. They had bit the bull and given me some money: about two hundred million. Although this number was different from what was expected, ten hundred million. But it was better than nothing.
And above all, I was a real broker, especially a global financial broker.

To be continued….