Zbigniew Piekarski begins his magical mystery tour of the Warsaw Stock Exchange
So here we go.
First, I am not interested in whether a share price or an index goes up or down, unless I have money riding on the outcome. Comments about what a market did are of little interest unless I have directly benefited from making the right decision and increased my stake or, if I have made the wrong decision, but managed to minimize my loss.
I can absolutely guarantee that anyone can make money from the "market." All you need is greed, intelligence, endless hours of research, a predictive system, an overriding philosophy, the courage of your own convictions, a loving other half who understands you and forgives the endless hours you spend in front of the computer screen - and luck.
You need basic information on the target market first, then on its indexes (ranging from the main WIG blue-chip index to WIG-Info, a subindex listing for IT companies) and their performances over the past 12 months.
During this year, the main market WIG has delivered a solid and impressive performance of 8.75%; the WIG-Spożyw, an index of companies that produce food, has gained a remarkable 65%; while unsurprisingly, the TechWIG, a listing for telecom and IT companies, has lost 38.08% in line with most technology-derived indexes around the globe.
My next task in writing this column is to make a shortlist of six companies within each index - two large caps, two medium-sized caps and two small ones in order to track their movements. I will not, however, play unlisted markets because I am risk averse and weep when I lose.
Then I have to determine the prevailing trend not only within the principal and sector indexes here in Warsaw, but also of those wider indexes - mainly in Germany and the United States - which exert their influence here.
And finally, I have to decide just who I am and what type of game I would feel happiest playing. The choices are as follows: chess, bridge, poker, brag or a simple toss of a coin. You can choose no more than two. The choice determines your degree of risk aversion and the time that you are prepared to take in order to make decisions before you act.
For now, I am concerned with the following questions:
What is the immediate trend on the WSE? Answer: The trend is DOWN.
What is the intermediate trend over three to six weeks? Answer: The trend will remain DOWN.
So in order to make money, should I be "in" or "out of the market" or should I be "short?"
Response: If the trend is "down," you should either be short or in cash. Why risk your hard-earned money if you cannot be sure of a profit? Why waste time searching for the one in 100 chance of a share price rising substantially?
Please remember that we are in the market for a "good" time - and by that I mean profits - and not for a "long" time.
And now the answers to the questions posed at the outset:
Where is the Polish Stock Market going? Down, recovery and then down again.
Where are the main stocks going? Same as above.
Where is the bond market going? Up and up, and then down and down, and then incurring major losses.
What are the prospects for projected IPOs? Very grim unless the markets recover or the "foolish factor" remains high.
Are small company bonds "junk bonds" now? They always have been, but they were not perceived as such in the optimism that prevailed at the time. Remember - bonds are safe only to the extent that companies and governments have the ability to pay and do not default.
During the coming weeks, I will be piloting a theoretical portfolio through the Warsaw Stock Exchange. Join me for the journey. My aim is a positive return.
Zbginiew Piekarski is a portfolio manager based in Warsaw. He can be e-mailed at zbigp@bipnet.pl. The Warsaw Business Journal cannot accept any responsibility for advice and tips offered in this column.
