'We beat the 6000 level at last'

Those are the words ringing in most of the market at the moment. That they had beat the psychological 6000 level must be fantastic, because the market had been on a downturn for quite some time already.

However, when looking back with perfect hindsight, last year we had spent alot of time pass the 6000 level. In fact, we were constantly hanging around the 6400 level. So, what is the significance of beating 6000 now? Just a few weeks ago, when you would read financial news, the market was overly-pessimistic and all gloom doom about the markets. Fast-forward a few weeks forward, and everything seems to have changed. How weird.

This shows one thing about the market. That the market is behavioural. Well, of course the market is actually made up of people, you and me, and collectively we are called the market. If we have emotions and behaviours, surely the market has behaviours too. Therefore, can the market correctly price every share every time to reflect all available information at any point in time, also known as, semi-strong or strong form efficient?

I would not like to believe so. Although, theoretically, I believe it at heart, I still don't know for sure. So far, value investing is working for me. It is when markets panic and is fearful that I go into the share, to make a gain in the long-term. There is another way to think of it. We usually like to measure risk by means of variance to the expected value. What if we buy at two standard deviations below the expected value, knowing that our calculation of expected value is correct, would it still be risky? I don't think so. That is what I would like to do as an investor. There is big bucks to be made.

Going into the second half of 2008, I really don't know what to expect. Resources seems the way to go, or maybe it is just because the big gains made so far has attracted me(and also many other investors) into the sector. One thing is for sure, I think that the oil price and the share price of oil companies to go with it are experiencing a bubble. There is no way the value of a company can change by 30% in just a week, of course, that is what its share price is emanating. Or maybe the companies have been undervalued so far, and that the rising oil price is just helping the market to bring the value up to its right level.

I have put forth my thoughts, but of course, I can be wrong. I am seeing things from my perspective. Everyone has their own perspective. I fundamentally believe my views are right, but we'll see how it goes. To every investor out there, good luck and happy investing in the 2nd half of 2008!