In the Western society, there is an analogy that choosing a stock is like choosing a wife. In fact, in their 1997 annual meeting, Warren Buffett and Charlie Munger were talking about opportunity costs when choosing a particular investment, and Charlie Munger likened the process to choosing a wife. In contrast, parents in Asian societies generally have a stronger (though not absolute) influence in their children’s spouses, and perhaps this analogy will be a better one for this article.
Today, I will liken my thinking and selection process to an Asian parent when assessing his future son-in-law. Imagine now you are an Asian parent, and your precious daughter brings home her boyfriend. You look at him and begin to assess him with cold hard logic, devoid of any emotions and with an intent to maximise your daughter’s and family’s gain while at the same time minimising her risks. What are the things we will look at?
Do note that the way this article is written may make sense to an Asian who is born and raise in a collective society, where society is above the family and the family before self. This line of thinking may run counter-intuitive to people raised in Western societies where the individual is given higher importance.
Nationality
In the past, people only marry within their own country. However, with globalisation, people have access to cultures from other countries, and some of them fell in love with foreigners. It is the same for stock investing. Unfortunately, we know that not all countries are equal. Some are stronger, some are weaker. When buying a stock, we are first investing into the country. When I buy a US stock, I change my Singapore Dollars (SGD) into USD, and use the SGD to buy American assets. If the country is failing, my investments in the country may go to waste. True, some may say there are always gems within the rubbish dump, but unless you know the rubbish dump very well, I would not risk putting money into it. Choosing a country that first inspires confidence is the number 1 criteria.
If your in-laws are blood suckers (corrupt) and poor (backward, seriously undeveloped), then not only will they not be able to contribute resources for the new family, you may even have to send monetary aid (topping up money to DCA the stock) to them every now and then. I don’t know about you, but if my daughter is going to marry into such a country, I probably would be doing whatever I can to stop her.
The Job
We then ask the future son-in-law, “What’s your job?”. The job gives an indication as to his future and potential success. In fact, it is best if his ‘good’ job is aligned to his family’s, much like how the company we invest in must be aligned to the country. I invested in Hainan Rubber and COFCO Sugar in China, but I will never invest in Singapore’s primary industry, simply because Singapore is not cut out for the primary industries. Going against the country’s strengths and investing in its weaknesses is suicide to me. Imagine your future son-in-law coming from a family of doctors, and he tells you, “I ain’t gonna depend on my parents. I am going to be an artist and carve out a career for myself.’ You are probably going to flip.
The Assets
We need to look at the financial stability of the future son-in-law if we are going to determine if our precious daughter is going to marry well. Imagine he tells you he has 3 houses and 2 fanciful cars. You go, “Woah not bad! He is rich!”. Then you dug further and realised he is $10 million in debt and housing mortgage not even fully paid for. Does it make sense to you? Of course not. Hence, we need to check out the company’s financial report and find out the nett assets after liabilities.
Cashflow
Imagine now he really has paid off all his houses and cars. His assets are really his and without debt. But he has only $1000 in the bank. One day his and your daughter’s baby got sick and need to be admitted into the hospital, and you realised he does not have enough cash to pay off the bills. He has no choice but to sell off his house at a loss to raise money for the hospital bill. Does it still make sense to you? Of course not. Just like how it works for the daily running of a family, a healthy cashflow is needed for a company to engage in its daily operating activities and to react against any unforseen circumstances.
Profit and Loss
Is your future son-in-law making money? There is a type of person who has a strong family background, rich with assets and rich with cash. But you realised he did not earn everything by himself. Everything he has was given by his rich father. He is a typical useless rich man’s son with no capability of his own. Your daughter is marrying him, not marrying his father. Few days back I researched into Sinochem International Corporation (600500). This company has a powerful background, rich with assets and a lot of cash, but the company itself is making losses. It cannot compete with its Western counterparts in terms of higher-end technologies, and the lower level productions is too competitive with oversupply of goods in the market. It cannot compete with its peers, it has bad self-management (the management in the company is horrible) and hence it is a big no-no to invest in the company.
Cycles and Seasonality
To do the right thing at the right time is not only important, but also critical. To study hard as a student, to work hard as an adult and to enjoy life as a retiree. But some chooses to slack off as a student and as an adult, then decided to work hard in old age. That is totally wrong and does not maximise any desired results. Similarly, stocks, commodities, bonds and whatever financial instrument has their cycles and seasonalities.
I invest in Hainan Rubber because I believe that rubber is in an upward cycle. However, the moment the cycle is going downtrend, I am going to dump the stock without hesitation.
Loyalty
Our daughters need to be a self-loving, self-respecting and loyal woman. But it ain’t need to be so for our money. Show no loyalty, spread your money across different investments, diversify risks, extract maximum value and finally discard without hesitation when they are no longer useful. Sad to say, but the financial markets is always a zero-sum game. Your wins are other people’s losses.
Personal Preferences
Some prefers a son-in-law who has the drive and potential to climb up to the top (Tech and AI stocks), while others like me prefer a son-in-law who regularly gives me money (dividend stocks). No right, no wrong. Do your homework, pick your deal.
Intuition
Sometimes the math and the logic works out well. Everything seems to be fine. But when you look at the person in front of you, you go, “There is something wrong with this guy. I cannot put a finger to it, but if I marry my daughter off to him, I cannot sleep well at night.” In that case, dump the stock. It is better to miss a good stock than to have sleepless nights because of it. There are always opportunities around.
Romantically Obsessed
Do not be romantically obsessed like your daughter. There are always the type of people who are so romantically obsessed with another person that they make wrong and stupid decisions at the detriment of their emotional, mental, physical and financial well-being. Why do you want to marry him? No idea, I just love him, everyone said he is good and he is handsome.
Choose your son-in-law (stocks) with nothing but cold hard logic backed with a good understanding of politics, economics, current affairs and mathematics.
Showing 1 - 2 out of 2
Page 1 out of 1
| - | Resources | Price | |
|---|---|---|---|
|
|
 |
$5.00
|
|
|
|
 |
$1.00
|