Recently in my Church Cell I was reminded of how we should always be humble. I’ve never really associated humility with stock market investment but after reflecting on it, I must say it is extremely relevant.

All this while, I’ve been wandering in the dark thinking that I know it all.

The truth is well put by Peter Lynch:

“In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”

I hear stories of people who suffered the 1997-98 stockmarket crash and never recovered. This is sad indeed.

If you have been in that situation, my heart goes out to you. You probably hate the stock market so much that you vowed never to buy stocks again. If this is so then perhaps I can offer you a fresh perspective.

I’ve lost money on the market before and I know how it feels. It was a humbling experience. For a time I didn’t want to touch the market.

But I’m glad I am now over that phase.

See, the stock market itself isn’t necessarily bad. It’s just a tool in the economy for people to use. What is bad is in our heart and attitudes, in the way we invest. Our motive is to get rich quick so we can satisfy the cravings of our heart. We want that new BMW, Gucci handbag, or that prized property. The bible says:

Guard your heart more than anything else
Because the source of your life flows from it
Proverbs 4:23 (God’s Word – Student Edition)

You know, some of us are fitness fanatics. We jog and run miles and do everything we can to keep our heart in tip-top condition. We know that when the heart stops pumping we die.

In the same way, how many of us actually exercise our spiritual heart? When do we say enough is enough when it comes to money? When do we put our own ego aside and say maybe the other person is right?

Humility means that when we make a mistake, we admit it and rely on the grace of God to move on. The more humble we are, the more of God’s grace we receive in our lives.

Palm Oil
I’ve always liked palm oil. It’s a useful commodity, something that the world needs that we can supply. But when CPO started reaching RM3500 per ton, I started disliking it as an investment proposition. And looking back I was right about this.

Am I saying this to boast? Far from it! When we are right we tend to be overconfident in ourselves. And that is where we make many investment mistakes.

You see the palm oil analysis to me is quite simple… producers can produce at a cash cost of around RM1000 per ton. Basic economics would tell you that there are super normal profits in the industry and supply will increase because everyone wants to make more money, and therefore price will drop. It was only a matter of time. But everyone was bullish. Analysts were screaming Buy at 3000 and when it reached 4000 it was still a Buy. What garbage I thought… to a point where I was scornful of all this palm oil analysis!

I realized that each good call I made caused me to be more confident about myself. And guess what? The obvious happened… I made some bad calls.

Humility would say that everything happens according to God’s timing. We ought NOT to think ourselves more highly than others.

Keep an Open Mind

The smarter you are, the more you think you know. But we are told that knowledge puffs up, while love builds up.

“The man who thinks he knows something does not yet know as he ought to know. But the man who loves God is known by God.”
1 Corinthians 8:3 (NIV)

Humility would say that despite not agreeing with the analysts on palm oil, I should respect their call. In fact my closed mind has both caused me to lose money and kept me from making money on some stocks.

IOI Corporation started at around RM3.00 in the year 2000, before its spectacular run. If we adjusted for bonus issue and share split, I estimate that the recent peak of RM8.60 would equate to an adjusted share price of around RM60 (someone please correct me if I’m wrong). So it has gone up 20 times in the span of 8 years! But my closed mind said at RM5.00 that it could not go up much further. The analysts who were still calling Buy are just plain silly. Of course, I was wrong about that too.

I am not afraid to admit my mistakes to you. I hope it will give you more insight and wisdom and if you are blessed by it, then it would be a cheap price to pay.

(Picture Source: One Year Bible Images)

http://www.horizon.my/investor/details.php?counter=sime

Their Net Cash pile has gone down a bit, but still sitting pretty at RM1.2 billion.

As a side note, RHB Research has updated their Plantation sector report today. They are still negative over the sector and Sime’s EPS for FY09 has been pegged at 38.5 sen. It expects crude oil prices to weaken further thereby impacting CPO prices as well.