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Sumatec shares rise after rights issue price announcement ~ 14 April 2016

Sumatec closed @ RM0.115 (+0.005, +4.5%) with 11.24 million shares done on 3 Jun 2016.

Sumatec closed @ RM0.44 (-27.87%) with 739.24 million shares done on 20 Aug 2014.

The gambler's fallacy

Gambling with Other Peopleís Money

Imagine a superb poker player who asks you for a loan to finance his nightly poker playing. For every $100 he gambles, heís willing to put up $3 of his own money. He wants you to lend him the rest. You will not get a stake in his winning. Instead, heíll give you a fixed rate of interest on your $97 loan.

The poker player likes this situation for two reasons. First, it minimizes his downside risk. He can only lose $3. Second, borrowing has a great effect on his investment ó it gets leveraged. If his $100 bet ends up yielding $103, he has made a lot more than 3 percent ó in fact, he has doubled his money. His $3 investment is now worth $6.

But why would you, the lender, play this game? Itís a pretty risky game for you. Suppose your friend starts out with a stake of $10,000 for the night, putting up $300 himself and borrowing $9,700 from you. If he loses anything more than 3 percent on the night, he canít make good on your loan.

Not to worry ó your friend is an extremely skilled and prudent poker player who knows when to hold ,em and when to fold ,em. He may lose a hand or two because poker is a game of chance, but by the end of the night, heís always ahead. He always makes good on his debts to you. He has never had a losing evening. As a creditor of the poker player, this is all you care about. As long as he can make good on his debt, youíre fine. You care only about one thing ó that he stays solvent so that he can repay his loan and you get your money back.

But the gambler cares about two things. Sure, he too wants to stay solvent. Insolvency wipes out his investment, which is always unpleasant ó itís bad for his reputation and hurts his chances of being able to use leverage in the future. But the gambler doesnít just care about avoiding the downside. He also cares about the upside. As the lender, you donít share in the upside; no matter how much money the gambler makes on his bets, you just get your promised amount of interest.

If there is a chance to win a lot of money, the gambler is willing to take a big risk. After all, his downside is small. He only has $3 at stake. To gain a really large pot of money, the gambler will take a chance on an inside straight.

As the lender of the bulk of his funds, you wouldn't want the gambler to take that chance. You know that when the leverage ratio ó the ratio of borrowed funds to personal assets ó is 32Ė1 ($9700 divided by $300), the gambler will take a lot more risk than youíd like. So you keep an eye on the gambler to make sure that he continues to be successful in his play.

But suppose the gambler becomes increasingly reckless. He begins to draw to an inside straight from time to time and pursue other high-risk strategies that require making very large bets that threaten his ability to make good on his promises to you. After all, itís worth it to him. Heís not playing with very much of his own money. He is playing mostly with your money. How will you respond?

You might stop lending altogether, concerned that you will lose both your interest and your principal. Or you might look for ways to protect yourself. You might demand a higher rate of interest. You might ask the player to put up his own assets as collateral in case he is wiped out. You might impose a covenant that legally restricts the gamblerís behavior, barring him from drawing to an inside straight, for example.




--- Quote from: king on June 04, 2016, 08:50:29 AM ---
--- End quote ---

SUMATEC to hit a new low once the last low @ RM0.10 is taken out.

In technical analysis, a stock that has made a new low is one that must be treated with caution and to be avoided buying for longterm investment.

When a stock is in a bear-market territory, the last low will be retested and the share price will move much further down, forming a new record low.

SANICHI (0133) ~ Trading in a downward sloping channel; bias to the downside


SOLUTN (0093) ~ Blue-sky breakout

SOLUTN closed @ RM0.43 on 3 Jun 2016.


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