Zbigniew Piekarski goes in search of loopholes on the WSE
The market is a dispassionate final arbiter. It's no use looking for loopholes after you have lost your money. The trick is to know what the market is, know its individual characteristics, find the loophole, plan and prepare and then act.
It's only then that you may stand a chance of earning some money.
Many investors tend to forget that the stock market is, first and foremost, a capital-raising mechanism. It is primarily for the benefit of companies. The fact that an individual investor may benefit on the back of a successful company is important, but not essential. There are always other investors to take his place, and the institutions will always be there.
Second, the market is a "zero sum" mechanism.
Ever wonder what happened to the huge losses sustained by investors over the last few years? I have news for you - somebody somewhere has gained - and he is keeping quite about it. So, if you gain, somebody loses, and vice versa.
So what is the "individuality" of the WSE from my perspective?
After giving this wonderful spiel about researching a number of companies within each sector, I find that it's just not worth it. Let me explain.
In one corner we have over 20 financial institutions providing pension and individual savings policies plus 14 investment funds and 24 brokers.
In the other corner we have around 373 listed companies, of which only 134 are traded continuously throughout the day, and of those, three provide most of the volume - TPSA, PKN Orlen and Bank Pekao.
This definitely does not fit in with the scenario that I had imagined. I am also attuned to the fact that the vast majority of companies are what I would term "penny shares" in which the share price is very low; therefore, little price movements have a disproportionate effect on the total. But I am not a reckless gambler. I prefer chess and poker, and this will be the style of my approach to the market.
Here financial institutions dominate even more than in other markets and I, as a private investor, refuse to compete with them.
Financial institutions are staffed by the most gifted individuals from each generation who, within a few short months, become divorced from reality and become brokers, investment managers or analysts (whether fundamental or technical), and internalise institutional values.
Therefore, when an institutional broker tells you right now that your losses will turn into profits "in the long-term", he means "long-term" as defined by the institution - two or three generations - not "long-term" as defined by an individual as within his or her own lifetime.
Within the financial institutions, only pity the investment manager, for his hands are legally tied. He is only able to keep a certain percentage in cash since the rest has to be invested within predefined sectors and has to stay invested. Therefore, he is unable to adhere to the "natural laws" of the market's ebb and flow.
To know of and use the market's basic characteristics and the "natural laws" are the only advantages an individual investor has over the institution. I cannot emphasise this strongly enough.
Any and every market moves in as many directions as a coin has sides. No, not two, but three. A coin has three sides - it has an edge.
A market has three directions. It can move up, it can move down, and it can also drift in a sideways direction - as it is doing now.
If a market is drifting sideways, then use that time to research and plan and prepare for future opportunities. Unlike the poor investment manager, a private investor does not have to be in the market when he or she does not want to be and, as we all know from life, saying "no" is difficult, but necessary at times.
What I require to travel further and make profits within this market are the following:
" A situation within which I can make money regardless of whether the market goes up or down, provided I bet correctly.
" One that is liquid. In other words, one within which I can always sell my asset and will always find buyers at the price shown. This transparency was only really available for the 135 companies with continuous listings, and the majority of those were "penny shares".
" Finally, one with "leverage" where I can place a stake of less than 100% but gain profits on the total investment accredited to me.
Let me leave you with a foretaste of what is to follow - from W.C. Fields again: "Every man should have a flask of whiskey in his pocket at all times just in case he gets bitten by a snake - and in his other pocket he should keep a small snake."
P.S. Why is the Polish market so resilient in comparison to our European brethren? When you want to sell, you have to find someone who will buy; but if no one wants to buy, you cannot sell. However, not for long, as the prognosis is down, down and down.
