Stocks in most global markets are currently priced somewhere between 14-20 times their current, this year, earnings. That is also true for Thailand that stands at about 14 times.
Well, one can make a big argument that a typical Thai year is really much more crazier than most other countries, but then this story is not really about volatility. And also one can go back in Thai history for the past 15 years, to prove how this price of stock to earnings really does not apply in Thailand’s case at all, but then this is not a story about Thai history either.
But the American stock market regulators just did a study and found that the average time that those so called “Investors” as oppose to “Speculators” in the US stock market, have cut their average holding time of stock from about 5 months, down a whopping to 2 months. And no, this story isn’t about how investors who invest on fundamentals are disappearing, but “Everyone” is becoming instead “Speculators” who are driven by charts and liquidity at hand.
And no, you are also wrong to bet that this story is also about how big investors globally like mutual fund, can not afford to sell the stock market, because if they did, there will be nothing to go back and show the people who put their money with them-like mutual funds unit holders.
And I am also sorry to say, that this story isn’t about a big stock market bubble is forming or how in the 1930s depression, the stock market did make a daring bull run, before tanking for good and people were jumping out of tall building in New York and hitting the streets just a little faster than falling stock market-that re-crashed again and again.
What I am trying to say, is that there is absolutely no reason why this market should be at this level, from a fundamental and risk averse point of view.
So what is driving this bull run? Well what is driving the market is purely one emotion only-and that is greed.
According to aged old investment system-that came about way back Adam Smith invented capitalism-the stock market had always really been about the fight between fear and greed. When greed wins, the stock market goes up. When fear wins, the stock market goes down.
So globally, investors, speculators and all other market participants had been hammered with fear. The fear was a total collapse of capitalism, of global finance, of the global economy. That is “One Hell of a Fear factor.” But then things did not fell to that level, and fear subsided.
Then finally, the stimulus did its magic, and wholly “Stability” and “Safety” returned. Like overnight, it went from death to life. And off course, after being saved from near death-there needs to be a big celebration-and so off course the stock market is where the party is. Everything looks cheap now, especially with greedy eyes of next year and the following year’s earnings that will surely be great compared to this year’s level.
So this story is really about human nature more than anything else. And as most people know, after heavy partying, there are a few things that follows-depending who you are.
So for anyone trying to figure any stock market out-like where it is heading from this point forward-all one has to do really is to keeps a very objective observation of the level of fear and greed in the market. There are many ways to do this, as any capable investor who has played the market for a long time will tell you.
But one way psychologist who advises some of the richest stock market players in the world said in book about stock market and psychology, he said like anything else in life, “It takes an understanding of oneself and of the others, to understand anything and then able to get anything done.”
The problem with Thailand, that is different than a typical year of other countries, is that the Thais do not even understand themselves and they do not understand other people either. This is not about volatility as I mentioned before, but the top stock market analyst said it plainly to avoid Thailand and hold “Zero.”
But he said Thailand is a great place to be, when the Thais invest in their own stock market. What he meant was that when the Thais are confident about their future again and greed takes over again. That stock market guru clearly put the Thai stock market leadership in the hands of the Thais. With the Thai stock market up some 40% since the start of the year, looks like greed and confidence have returned to the Thais.
But do the Thais understand themselves and others, and so be able to understand fear and greed? Sadly, the answer is “No.” And I will leave you to ponder for yourself, what that means to their investments behavior and the future of the Thai stock market.