A good indication in long term investing is the foundation of successful operation.
Both Jiabao Wen (the premier of China) and Hu Jintao (the paramount leader of China) said China must change its system of absolute power and introduce more democracy. However, their political statements still not exceeded Xiaoping Deng's in 1979. From learning curve's point of view in average income between the second tier NIC (newly industrial country) and China. We can see that NIC take less time to involved in global supply chain than China and Europe's second tier countries. In other words, China's cheap labor is the main factor drives economic boom. However, this motivation may gradually slowing down by the countries chasing after it. Following, economic activity begin to slow down and finally hit the bottleneck of economic develop growth. Even if you can't see the result now, but the problem will be rise up in 5 to 10 years. Although it may have some time lag, the problem will surely be bring on the table.
Nowadays, there is less competition between China and the international, because its rapidly rising currency and income. This situation is getting worse, and pressed on every side. China' situation just as same as Taiwan in 1986, business seem to be flouring although the main reason was cheap labor. Until NT dollar got stronger on the international, Taiwan's economic growth becalmed in the recent 20 years.
In 20 years ago, I had indicated Taiwan stock will boom to 8,000 points while the average index was only 1,000 points. A good indication in long term investing was the main factor to achieve "ten-thousand fold profit in six years". It is just as said "one will not enter a tottering state, nor dwell in a disorganized one." For one who gets into the stock market, conducting research on which countries and industries might be dangerous or influence the market considers the most investment indicator. Otherwise, random stock picking will happened frequently in the process of investment.
Under the condition of lacking international updates and resources 20 years ago, financial magazine' stock chart was the only information we had. From these trend line, however, you would never predict the boom from 1,000 points to 8,000 points in Taiwan stock. I was forced to be aware of some big events such as "Foreign Exchange Control", because most information obviously was incorrect. Important statements such as "lifting of Martial Law" and "lifting Foreign Exchange Control" became the only and most important clues in long term investing. In the present stock market, I think still many people depend only on the technical analysis which influenced by earlier condition. The shortage of stock market information sources in my early experience, build my long term investing skills. It is a blessing in disguise. However, I did not profit explosively from my correct indication. I think lately. Not was I only lacking of analysis skill, but my most problem was incorrect operation method. No matter what, I was glad that I had not been drowned in the bust after boom stock market.
During the process of the end of 1990, I never forget I had always dreamed about an elder man, according to my age at time. In the dream, this man visited and said to me every night "you are not helping me, but killing me". And then, I awoke from this nightmare. In fact, this elder man was my neighbor who I usually chatted with about the stock. I know he was a retired teacher, and lived alone. When Taiwan stock was just about to going up, I told him, "I am involving in the stock market."
He said, "it is gambling, do not get into it. "
He warned me seriously, " find a regular job and work hard to gain money."
I told him that I was working in the stock investment company.
He looked at me curiously and thought "you are so dead ! "
But do not know what happened, he got in to the stock market while Taiwan stock is booming to 8,000 points. As soon he earned a lot of money.
In the beginning of 1990, I was holding the opposite option from him. I started to sell while he persistent to buy more. Lately, the stock turned south. I always boasted that I profited a lot from my selling. Lately, he suicide. After I known he was not only invested with all his retirement pay, but also took up the mortgage loan into the stock market. When he was ready to return home in mainland China after making quick money, however it totally came to nothing.
Investors shall take this example as a lesson: if you are not in the stock market, keep yourself away from it. However, it is the weakness of human nature.
To be continued...
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