Excuse me: Hong Kong stocks still expensive

Pardon me for pouring cold water on speculators and Mr. Market. The prices of Hong Kong stocks are still expensive! Why? You must not forget that the value of Hong Kong stocks have fallen so much ONLY in terms of their peak value in Oct 2007 when the Hang Seng Index hit 32,000 pts. It was purely a market manipulation by inflating the stock bubbles through speculations, over-leveraging, rumors, and the famous MAD BULL disease spreading in the markets at that time!

Remember the evil rumor that all Chinese in our Mainland were permitted to transfer capital to buy stocks in Hong Kong? Our Central Government in Beijing was very wise to say no to such rumor! God knows who released such rumor and combined with the MAD BULL virus to artificially pull up the stock prices in Hong Kong.

Looking back, Mr. Market might be crying in angry tears! But keep calm. What you are seeing is just the beginning! As I have emphasized again and again, the local stock market actually peaked at 18,000 pts last year.

Our famous stock market commentator, Mr. Webb, carried out a certain survey in his website asking the question about the level of the Hang Seng Index when the MAD BULL disease had caught everyone last year. I gave an answer of 10,000 when the Hang Seng Index was hitting 30,000! That is still the maximum valuation that I believe Hong Kong stocks should worth. of course, there are individual stocks in Hong Kong that are over-undervalued and I must qualify my comments here. Well, I can't tell which individual stocks and you should do your own homework.

Someone told me that one should buy when the Hang Seng Index touched 16,000 pts or 12,000 pts! Yes, the index fell to 16,000 sometime ago but quickly fell to almost 10,000 last month! So I hit it again: don't fish for the bottom and don't think you can be clever!

I always stick to what I learnt: we must keep a margin of safety! The margin won't exist until the Hang Seng Index falls below 10,000 pts! The quicker the better because that may help the markets to normalize and recover sooner. The longer you delay the free fall, the more severe will be the attacks of the disease. That is what is happening in major stock markets especially in US.

Put yourself in the position of an objective investor and you would understand why we should ensure that the stock markets bottom as quickly as possible. The longer the prices remain at expensive level or refuse to go down to levels with sufficient margin of safety, the less attractive will stocks become. The longer investors wait for such margin, the quicker will their capital move away to other channels. And when you look at stocks again, you will be asking for a bigger discount to justify for buying back. So the vicious circle will continue and you will never see the bottom. This will truly produce a free fall until prices stay at zero or negative level!

I am not joking! Reuters has just released that many blue-chips in US are selling at prices below $10 and many in the S&P 500 have fallen below their qualified market cap! Time for these blue-chips to announce their net asset value more frequently in order to calm the market.

I am wondering what multi-billionaires and investors are doing now. They are of course always cash-rich. Would they buy now? Or are they still sitting sideline? Or are they acting like Warren Buffett by acquiring "distressed" securities and assets?

For poor guys like me, I decided to sell off everything when the US congress passed the evil Bailout Plan. I still cannot see the light at the end of the tunnel and to ensure a sufficient "margin of safety", I won't be buying back until the light has appeared.