Share Owl: When to cut loss?

I just signed up a 2-year Gold membership with Share Owl today. This topic was raised by a forumer, find it quite useful. Prof actually suggests to cut-loss during marco-economic events recessions and events like Asian Currency Crisis. I believe one point to add to that statement is, during PRO-LONG marco-economic events. Not not for short-term but abrupt events, e.g. 9-11??

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provocateur
Posted: Fri Feb 02, 2007 8:08 pm Post subject: WHEN TO CUT LOSS

Dear Kelvin Lee

For short term trades, you cut loss when you realize that the market thinks differently from you and if possible find out the reasons why.

For buy and hold stocks, you cut loss only when the fundamentals have changed for the worse e.g. Osim was good up to 2005 but not in 2006 when they started acquiring Global Active (GNC) and Brookstone and lately when they claimed the China copycats affected their sales there and finally the profit warning couple of days ago. Each of these events would be a reason for me to cut loss.

But for SIA Engg and Jardine C&C and Sino-Env (blue chips?), there were price corrections but the long term fundamentals remained solid and therefore I never cut loss on these stocks. I only buy more on price dips. For Sino-Env, I traded in and out between June and early Nov. But by 2nd week Nov it was buy and hold all the way with a buy on dip last Friday at $2.65.

But on a macro-basis, once in many years, you may need to sell at least half to 80% of your stocks en bloc like in 1985 recession, January 2004 and Dec 1999 (for blue chips) and March 2000 (for tech stocks) when prices went to ridiculous levels. The Asian Financial Crisis also warranted a massive sell-off. I watched from July till Sept and prices and Asian currencies came down and down and down. Then in Oct 1997, I could not take it any more and sold 80% of Spore stocks. Luckily because it was down to half of the Oct 1997 level by Sept 1998 with the STI at 800 points. I only started buying back in Jan 1999.