28 November 2018
5 Stock Investing Lessons from Car COE 20181128
By Dr Tee Tong Yan
Latest Singapore Car COE for Cat A (Nov 2018) is $25000, falling from nearly $100000 over the past 6 years till now. Many people wonder if it is possible to get COE at $50 or even $1 again.
I review the last year Ein55 Graduate Homework (Nov 2017) in application of Optimism on Singapore Car COE, here are the 5 lessons which can be learned and extended to stock investing.
1) Trend of long term car COE is up, indicating COE has become an asset (although limited lifetime of 10 years) or commodity which has value.
- Similar to investing, even for giant stocks which could grow in share price over the decade, they may not be suitable for everyone, only for longer term investors. A key difference is stock value could remain or stronger after 10 years but Singapore Car COE would drop to value of $0.
2) Optimism has been declining over the past 6 years, COE price trends have been bearish in short term and medium term. Over the past few years, each time COE shows a record lower price since the peak of $100000, potential buyers would get attracted to buy car but get disappointed later as price continue to drop further the next year.
- Similar to investment, even for long term value investing stocks, their share prices could fall in short to medium terms. Therefore, integration of trading into investing is crucial, avoiding buy low get lower. More importantly, an investor should know the fair value of a stock, buying at a low optimism price.
3) Few people is able to buy at $1 historical low price of Car COE as usually it happens during global financial crisis when most people are fearful with limited cash or purchasing power. The timing of next possible $1 Car COE price depends on when will be the next global financial crisis and also the degree of low optimism.
- Similar to stock investment, we don't have to guess when a crisis would come. Instead, we just wait for the low prices come to us. When the great sales of global stocks (global financial crisis) has come, one needs to prepare in advance, eg. selling stocks at high optimism first, converting to cash, waiting patiently for prices to drop below value again, more precisely, a low optimism price. This way, we don't have to speculate on future happening, depend on known facts of value and prices available now to make a high probability decision: Buy, Hold, Sell, Wait, Shorting.
4) In general, Car COE Category A < $10,000 could be considered low Optimism price, any lower price (eg. $1 to $9999) is just a bonus. Value is what you get (10 years COE) and price is what you pay. Therefore, for 2 different car buyers, one may buy COE at $10000 while another one may be lucky to get at $1, but both will be happy, $10000 buyer may not think "losing" of $9999 when comparing with lucky case of $1.
- Similar to stock investing, investors should not speculate to buy at the lowest price as it is nearly impossible to know (reverse is also true, to sell at the highest price). Instead, we should apply Optimism to know when to buy low enough, when to sell high enough, which is more reliable from probability point of view. Some stock investors who acquires stocks at high value (eg. high quality assets of property or cash), they may still feel "lose" money when share prices fall down. One should train to view value and price as if buying a handbag at 2 different sales, one could be 50% sales, another one could be 70% sales, both are bargains, no need to buy at the best sales which no one would know exactly.
5) For car owners with COE expiring soon, there is an option to renew with 5 or 10 years extended COE (at the current rate of $25000), using the next 5 or 10 years to wait for the next global financial crisis, if it happens 2 years later, just sell back the remaining years of COE (eg. 3 or 8 years) at the original price of $25000, buying a new car with lower optimism COE price (eg. less than $10000 for Category A), "earning" from the difference.
- The strategy above is similar to shorting in stock trading, sell high buy low. Although there is no shorting in Car COE, this is a strategy as car owners may not able to wait for a period of time without car to buy car at low optimism price. However, it is possible for stock investors to keep 100% cash, waiting for the next global financial crisis to buy low safely with 10 global giant stocks, assuming one has the holding power through the winter time of stock market.
Latest Singapore Car COE for Cat A (Nov 2018) is $25000, falling from nearly $100000 over the past 6 years till now. Many people wonder if it is possible to get COE at $50 or even $1 again.
I review the last year Ein55 Graduate Homework (Nov 2017) in application of Optimism on Singapore Car COE, here are the 5 lessons which can be learned and extended to stock investing.
1) Trend of long term car COE is up, indicating COE has become an asset (although limited lifetime of 10 years) or commodity which has value.
- Similar to investing, even for giant stocks which could grow in share price over the decade, they may not be suitable for everyone, only for longer term investors. A key difference is stock value could remain or stronger after 10 years but Singapore Car COE would drop to value of $0.
2) Optimism has been declining over the past 6 years, COE price trends have been bearish in short term and medium term. Over the past few years, each time COE shows a record lower price since the peak of $100000, potential buyers would get attracted to buy car but get disappointed later as price continue to drop further the next year.
- Similar to investment, even for long term value investing stocks, their share prices could fall in short to medium terms. Therefore, integration of trading into investing is crucial, avoiding buy low get lower. More importantly, an investor should know the fair value of a stock, buying at a low optimism price.
3) Few people is able to buy at $1 historical low price of Car COE as usually it happens during global financial crisis when most people are fearful with limited cash or purchasing power. The timing of next possible $1 Car COE price depends on when will be the next global financial crisis and also the degree of low optimism.
- Similar to stock investment, we don't have to guess when a crisis would come. Instead, we just wait for the low prices come to us. When the great sales of global stocks (global financial crisis) has come, one needs to prepare in advance, eg. selling stocks at high optimism first, converting to cash, waiting patiently for prices to drop below value again, more precisely, a low optimism price. This way, we don't have to speculate on future happening, depend on known facts of value and prices available now to make a high probability decision: Buy, Hold, Sell, Wait, Shorting.
4) In general, Car COE Category A < $10,000 could be considered low Optimism price, any lower price (eg. $1 to $9999) is just a bonus. Value is what you get (10 years COE) and price is what you pay. Therefore, for 2 different car buyers, one may buy COE at $10000 while another one may be lucky to get at $1, but both will be happy, $10000 buyer may not think "losing" of $9999 when comparing with lucky case of $1.
- Similar to stock investing, investors should not speculate to buy at the lowest price as it is nearly impossible to know (reverse is also true, to sell at the highest price). Instead, we should apply Optimism to know when to buy low enough, when to sell high enough, which is more reliable from probability point of view. Some stock investors who acquires stocks at high value (eg. high quality assets of property or cash), they may still feel "lose" money when share prices fall down. One should train to view value and price as if buying a handbag at 2 different sales, one could be 50% sales, another one could be 70% sales, both are bargains, no need to buy at the best sales which no one would know exactly.
5) For car owners with COE expiring soon, there is an option to renew with 5 or 10 years extended COE (at the current rate of $25000), using the next 5 or 10 years to wait for the next global financial crisis, if it happens 2 years later, just sell back the remaining years of COE (eg. 3 or 8 years) at the original price of $25000, buying a new car with lower optimism COE price (eg. less than $10000 for Category A), "earning" from the difference.
- The strategy above is similar to shorting in stock trading, sell high buy low. Although there is no shorting in Car COE, this is a strategy as car owners may not able to wait for a period of time without car to buy car at low optimism price. However, it is possible for stock investors to keep 100% cash, waiting for the next global financial crisis to buy low safely with 10 global giant stocks, assuming one has the holding power through the winter time of stock market.
