In the movie, the terrorist betted US$100 million, and the broker said that he was going against the market. Hence, there is this shady side to buying stocks. There are some people who plot against companies, and they stand to make huge financial gains when they succeed. According to the movie, airline stocks crashed, and there were people who made huge financial gains from shorting the market. Since this is a movie, we should take this with a pinch of stock. For the normal everyday investors like us who are not privy to such knowledge, we are at the losing end.

As someone told me, trading can be a dirty game. Of course, there are safeguards, but to small time investors, it is tough against companies with huge money. If we are looking at penny stocks, the usual trading volume can be quite low. If a fund company decides to buy that stock, it will increase the trading volume tremendously, and the price will increase. At the same time, if this company decides to sell, then the price of the penny stock will fall.

But seriously, could this be a new form of terrorism? Terrorists may target certain institutions or companies, and when they make the money from such means, they can use it to further their cause. There is money to be made from bull markets and bear markets. That’s something to think about.

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With US heading towards a recession, it may affect Hong Kong and other markets. When the stock bubble in China bursts, Hong Kong will be affected.

Is this a cause for concern? Should I keep the money and exit the market now? So far, there have been a couple of false alarms, especially regarding China and India, but it’s starting to sound like the Nasdaq crash.

I guess those who had made significant profits on China should start to lock in some profits. For those who had just jumped on the bandwagon, just be careful and continue to monitor the market closely.

Sarah Tan – SingaporeProfit.com

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I finally cut my recent losses completely, because the stocks went below 8% of the price I bought them at. 8% is the cut loss percentage for traders. However, because I was unable to sell them at the prices I want, I had to sell them at a lower price, so I chalked up a bit of losses, though they are manageable losses.

I’ve learnt my lesson on cutting losses, because the first time I tried for my first stock, I did not do that completely. It was just like having a gangrenous toe and not amputating it, then letting the wound fester until you had to cut away the entire legs. I had let the first stock plunged until I finally saw the light, and sold it. I had misunderstood MACD until recently.

As for the other two stocks I held, they were just slightly below the cut loss price, so it was ok. Strangely, I felt calm when I sold my stocks, which meant I am feeling detached. I don’t feel the panic that newspapers like to write about in their headlines: Panicky speculators sold at a loss during stock market free fall.

Interestingly enough, I received news that there are many traders who are laughing their way to the bank because they had made huge profits from shorting the market. One even made half a million! I have not learnt how to do this, so even though I had anticipated the crash, I did not act on my instincts. This is something I have to improve on.

The great part is I’ve overcome my psychological barrier on protecting my capital. When I have more time to take a breather, I’ll load up my ammunition and get started again.

Sarah Tan – SingaporeProfit.com

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The performance of the Notes are linked to the share price performance in these companies:

1. Singapore Airlines Limited
2. Singapore Exchange Limited
3. Singapore Press Holdings Limited
4. CapitaLand Limited
5. Keppel Corporation Limited
6. DBS Group HOldings Limited
7. Oversea-Chinese Banking Corporation Limited
8. United Overseas Bank Limited

How the Pinnacle Notes work: 

1. Spend S$10000 on the notes.
2. Wait for results of Worst Performing Stock (WPS), the stock that has the lowest percentage rise compared to the rest.

Worst Performing Stock

There is no way the customer can win.

Assuming the stock market is doing great, and all the stock prices increase by 10%, some probably more, you will only get back a maximum of 8.8% in interest. Where does the other 1.2% go? This will be considered part of their expenses. If all the stocks make 20%, you still only get a maximum of 8.8%. The rest of the 12.2% does not go to your pocket. And because of a knock-out feature, if the closing price of WPS is at or above 100% of Initial Spot price, you will not be able to continue to invest. They will return you your money. Remember, the 8.8% is based on per annum, so if your Notes are knocked out within 3 months, you will only get 2.2% interest maximum.

Let’s say most of the stocks did well, except for the WPS. Perhaps this blue chip company had adverse publicity or they lost money due to some reasons. It may drop to 90% of its initial price, and you will only get back 4.8% in interest. This could happen even if the rest of the stocks increase by 20%.

If there were a scandal at one of the companies the Notes are tracking, and the stock price crashes. Even if the rest of the companies do well, you may still lose part or all of your capital.

Just based on the three simplified scenarios, there is no way the investor can win. Probably the investor can win if all the companies did not make much money, but then again, the 8.8% interest is not guaranteed.

Most likely, the notes are targeted at the lay person who thinks that investing in the notes offer better returns than putting the money in local fixed deposits. However, the risks here are greater, and they protect the issuers more than the consumers. There are so many other ways to grow your money. Even unit trusts have a better chance of making more money.

You may also take a look at how Tan Kim Lian feels about such structured products as he writes about avoiding complicated products.

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