One morning, someone came up to me and asked if I thought that the market would rebound or continue dropping over the next month. As an investment professional, I felt compelled to answer the question however I knew there was no way I was certain and could give a fair answer to her....so I stole a quote from the Great JP Morgan when he was asked the same question more than 90 years ago.....I am sure that...."It will fluctuate."
Of course, I am sure she wanted to kill me for giving her such a condescending answer but she could help but break out into a laugh and called me an ass...What a way to start a day.
Musicwhiz left a comment on my last post and I just want to say, I totally agree with you on your comment. I really felt the company has so much value after the integration and this would be the year when results start to show. Well that is life isn't it. Look on the bright side, at least KS Energy shareholders did not suffer the same fate as Sino-Forest shareholders.
In my previous post, it was said that we were going to have a very tough week because history and the current technical chart clashes. What we had was a roller coaster trip and the tug of war between the bulls and bears. It ended with the market ending negative for the week. Why did we have such a tough week?
1) The FOMC revised down down their growth forecasts for 2011 and 2012. The projected growth for this year’s GDP was lowered to a range of 2.7% to 2.9%, down from the April forecast of 3.1% to 3.3%. GDP outlook for 2012 also was revised significantly lower to 3.7% at the high end of the range from a high of 4.2%.
2) US unemployment was revised up to a range of 8.6% to 8.9% this year from 8.4% to 8.7%.
3) Headline inflation for 2011 was placed in a range of 2.3% and 2.5%, compared to 2.1% to 2.8% in its April projections, and for 2011 to 1.5% to 2.0% from 1.2% to 2.0%. In both years the lower end of the range has been increased, decreasing the chance of prices stalling out. Core PCE too saw an increase, with prices expected to climb 1.5% to 1.8% in 2011, compared to 1.3% to 1.6%.
The higher inflation forecasts seem to have made an important difference to the Fed, which now does not see quantitative easing as a proper solution. We’ll see how long that lasts if the economy continues to disappoint, but it will take several months of persistently worse employment data for the Fed to act with looser policy.
The funniest part was during the press conference with Bernanke, he said something that gave the world jitters.
From Marketwatch: “We don’t have a precise read on why this slower pace of growth is persisting,” Bernanke told a press conference after the Federal Open Market Committee meeting where the central bank said it would end a $600 billion bond purchase program as planned in eight days and kept interest rates at historic lows.
Bernanke said that “some part” of the slowdown was due to temporary factor such as higher food and gasoline prices and disruptions to manufacturing because of lack of key parts from earthquake ravaged Japan.
But the Fed chairman said it was possible that some of the slowdown might be to longer-lived issues that could persist into 2012. He cited weakness in the financial sector, the housing market and consumer balance sheets as three headwinds.
“We have an awful lot of uncertainty right now about how much of the slowdown is temporary, how much is permanent; so that would suggest, all else equal, that little bit of time to see what’s gong to happen is — would be useful in making policy decisions,”
I love the fact that he said he is unsure which part of the slowdown is due to permanent structural changes....The Fed Chief saying he is not too sure. Now he wants to wait and see before deciding on future policy options. I tell you what that means. Right now is not the time to do QE3 because inflation is on the uptick and if he even suggests QE3 now, he will get slaughtered. What he did was to indicate that the growth in 2012 will continue to be tepid due to some permanent structural issues. That leaves the door open for more stimulative measures next year or the end of the year should inflation start to taper off.
How will inflation taper off? This is just conspiracy theory on my part but this is one of the moves....
**** Oil consumer nations announced the release of 60 million barrels of oil from strategic government reserves Thursday. The motive behind the move was to cause a drop in oil prices and buttress the global economy. The International Energy Agency (IEA) plans on releasing 2 million barrels a day over a 30 day period to make up for the lack in Libya's production. The United States will provide the bulk of the supply (approximately 50%) from its vast crude reserves, with Europe supplying 30% in crude and refined products and the remainder to be supplied by Pacific OECD nations. The declaration could be construed as a direct reaction to the Organization of the Petroleum Exporting Countries (OPEC) failure to raise production in a meeting on June 8. (Read about it here) Moreover, guarantees from OPEC's principal producer Saudi Arabia that it would fulfill any request for production fell on deaf ears. Prior to the OPEC gathering Riyadh talked over an exchange with the US where US crude would be supplied to Europe, no arrangement was attained.
Libya, an OPEC member, exported approximately 1.2 million barrels per day prior to the ongoing upheaval that brought Libyan oil production to its knees. The IEA stated
"This supply disruption has been under way for some time and its effect has become more pronounced as it has continued. Libya is likely to remain off the market for the rest of 2011.”
the IEA who went on to say
"Greater tightness in the oil market threatens to undermine the fragile global economic recovery."
The IEA was formed in 1974 in reaction to the Arab oil embargo. This is the third emergency release in the 37-year history of the organization. Oil prices traded down $6.17 a barrel regarding benchmark Brent crude, which dropped to just over $108 a barrel. US crude tumbled over four dollars a barrel to approximately $91 a barrel.
This move puzzled the whole world including me. Inventory levels are at highs and supply of oil is supposed to be plentiful at this time. There was absolutely no sign or even worries about oil supply issue globally. Look at the Nymex WTI crude. The gap between WTI and Brent is already close to US$20 and this reflects the worries over the supply disruption in the Middle-East thus the premium on Brent crude. But why would the US need to have more supply at this time? There are a few arguments for this move, either the the supply situation is dire contrary to all the reports of plentiful supply over the past few months or the US wants to lower expectations of oil prices in order to lower sentiment for the commodity complex.
Unfortunately this IEA effort is just a drop in the bucket and will have a nominal short term effect on oil prices. The drop in prices today should be seen as a buying opportunity for the non-OPEC integrated players who will benefit from rising prices once the dust settles and everyone realizes the theory of peak oil may soon be proven true.
My bet is, this move is going to fail and energy prices will remain well supported going forward. Knowing Bernanke, he is frustrated not because he is uncertain about which part of the current weakness in growth is due to permanent factors and which is due to temporary ones. He is frustrated because he feels his hands are tied by the growing inflationary pressure in his core CPI numbers. Given his strong conviction behind how monetary policy and exploitation of the fiat money can bring the US economy out of the sh*% hole, he must be having sleepless nights over not getting free reign to keep the printing presses working.
Well lets see if I am right in 6 months.
Best,
SVI
Sunday, June 26, 2011
Monday, June 20, 2011
KS Energy privatised.....Remember this was a pick of mine for 2011. Daylight robbery.....
Had to write a post on monday rather than over the weekend because I was too busy preparing for some lame presentation which caused me literally a sleepless night. Do not think this will be a long post because my eyes are close to shutting at this moment.
Last week, we saw the market finally breaking the 6 weeks of negative returns on the S&P500 and Dow Jones. However last week was triple witching week which often leads to positive returns for the week. As for the week after a triple witching week almost always means trouble for the market. Since the first quarter of 2000, only 13 of 40 weeks after a TWW were positive, none of these were after a June TWW however.
The June stats are so bad, in fact, the week after a June Triple Witching Week has been negative for the Dow Jones Industrials 19 out of the last 19 years. June is ranked as only the 10th best month for the S&P 500 historically and the 11th best for the Dow. Basically what that means is June is possibly one of the worse months for stocks in a year.
Even though history paints a bleak picture for the markets, technically, the S&P500 has hit their up trend line support established over since markets recovered in 2009. This is a very strong support which should give us a rebound from current levels. Since 2009, whenever the S&P500 has pulled back, it has always rebounded off this trend line. Should this support be broken, the only support in the way of the downward move will be the 200 day moving average. Lets hope it will not come to that extent.
So history and technicals are telling us differing stories and lets see how it pans out over the next 4 days.
I am sure many of you remember KS Energy as one of my top picks for this year. It has not done very well YTD but on Friday, a firm linked to chairman and CEO Kris Wiluan offered to take KS Energy private by paying S$1.07 for outstanding shares not owned by him. Now this is what I call daylight robbery, but obviously shareholders are going to agree to the deal because they cannot wait to exit this position. The past 2 years have not been good for KS Energy as they struggle with their integration project. Now that integration seems like it is working, he decides to take it private? Haha. Well at least I got another privatisation candidate onto my stock picking resume. If I had this stock, I would never let go of my shares at that price.
Any stock picks for this week? Seems like I should pick a stock soon because this is the best chance to pick up some bargains. But please pardon me, I am just too tired today. Will write more next week.
Have a great week ahead!
Best,
SVI
Last week, we saw the market finally breaking the 6 weeks of negative returns on the S&P500 and Dow Jones. However last week was triple witching week which often leads to positive returns for the week. As for the week after a triple witching week almost always means trouble for the market. Since the first quarter of 2000, only 13 of 40 weeks after a TWW were positive, none of these were after a June TWW however.
The June stats are so bad, in fact, the week after a June Triple Witching Week has been negative for the Dow Jones Industrials 19 out of the last 19 years. June is ranked as only the 10th best month for the S&P 500 historically and the 11th best for the Dow. Basically what that means is June is possibly one of the worse months for stocks in a year.
Even though history paints a bleak picture for the markets, technically, the S&P500 has hit their up trend line support established over since markets recovered in 2009. This is a very strong support which should give us a rebound from current levels. Since 2009, whenever the S&P500 has pulled back, it has always rebounded off this trend line. Should this support be broken, the only support in the way of the downward move will be the 200 day moving average. Lets hope it will not come to that extent.
So history and technicals are telling us differing stories and lets see how it pans out over the next 4 days.
I am sure many of you remember KS Energy as one of my top picks for this year. It has not done very well YTD but on Friday, a firm linked to chairman and CEO Kris Wiluan offered to take KS Energy private by paying S$1.07 for outstanding shares not owned by him. Now this is what I call daylight robbery, but obviously shareholders are going to agree to the deal because they cannot wait to exit this position. The past 2 years have not been good for KS Energy as they struggle with their integration project. Now that integration seems like it is working, he decides to take it private? Haha. Well at least I got another privatisation candidate onto my stock picking resume. If I had this stock, I would never let go of my shares at that price.
Any stock picks for this week? Seems like I should pick a stock soon because this is the best chance to pick up some bargains. But please pardon me, I am just too tired today. Will write more next week.
Have a great week ahead!
Best,
SVI
Saturday, June 11, 2011
I love watching movie re-runs and the stock market seems like a re-run of last year.
"A sixth consecutive week of negative returns in the US." This is the headline you will read over this weekend. Longest negative streak in 2002. The Dow cracked the psychologically important 12000 point mark. The S&P500 broke the first level of support of 1293 points. Man those bear market prophets are going to have a field day once again.
Plenty of theories are being passed around on why the market is dropping like that. The funny thing is, none of them sound convincing. So I am not even going to be bothered about writing about them.
So in order to think through things more carefully, I went to check back on the market levels before QE2 was announced. The Dow was at 11192 points, so we have given back half the gains from the positive sentiment after QE2. What levels should we wait till before buying into the market? Do you expect the market to give back all its gains before climbing back in? The US market has led the rally over the past 7 months of QE2, rising more than 14% and so far it has given back a little more than 7%. The best equity market performer so far this year is the US and now it is close to giving back all its gains. It is funny how the market works. Taking a nice gradual rise over 6 months and taking only 6 weeks to lose most of it back.
I was bearish on the market in April and now I am getting more and more bullish as the days go by.
Remember a year ago the stock market fell into a a depressive state buffeted by troubles in Greece, worries about a double-dip in the US economy, and the proclaimations by many analysts that the Federal Reserve was powerless to stimulate growth.
Reading the headlines recently and watching the recent activity in the stock market, I cannot help but get the feeling that we've seen this movie before. Greece is still in danger of default; economic growth in the US slowed in the first quarter; and the Fed has just announced that QE2 will end soon.
In the end stocks reversed their 2010 April-June tailspin and recovered to close over 15% higher on the year. Those investors who sold out in the midst of all the negativity in summer missed a terrific year for stocks.
One clue that stocks, and for that matter the economy, were not headed for a double dip was the fact that actual reported earnings were moving sharply higher.
In short, the picture for mid-June 2011 is similar to mid-June 2010. Stocks are selling off, while actual earnings, and analysts' year-end earnings estimates are continuing to rise.
If corporate earnings continue to be strong, as I believe they will, I believe that stock market activity in 2011 might turn out to be a re-run of a movie that we have seen before down in the summer, up by year-end.
Have a good trading week ahead! Accumulate on weakness.
Best,
SVI
Plenty of theories are being passed around on why the market is dropping like that. The funny thing is, none of them sound convincing. So I am not even going to be bothered about writing about them.
So in order to think through things more carefully, I went to check back on the market levels before QE2 was announced. The Dow was at 11192 points, so we have given back half the gains from the positive sentiment after QE2. What levels should we wait till before buying into the market? Do you expect the market to give back all its gains before climbing back in? The US market has led the rally over the past 7 months of QE2, rising more than 14% and so far it has given back a little more than 7%. The best equity market performer so far this year is the US and now it is close to giving back all its gains. It is funny how the market works. Taking a nice gradual rise over 6 months and taking only 6 weeks to lose most of it back.
I was bearish on the market in April and now I am getting more and more bullish as the days go by.
Remember a year ago the stock market fell into a a depressive state buffeted by troubles in Greece, worries about a double-dip in the US economy, and the proclaimations by many analysts that the Federal Reserve was powerless to stimulate growth.
Reading the headlines recently and watching the recent activity in the stock market, I cannot help but get the feeling that we've seen this movie before. Greece is still in danger of default; economic growth in the US slowed in the first quarter; and the Fed has just announced that QE2 will end soon.
In the end stocks reversed their 2010 April-June tailspin and recovered to close over 15% higher on the year. Those investors who sold out in the midst of all the negativity in summer missed a terrific year for stocks.
One clue that stocks, and for that matter the economy, were not headed for a double dip was the fact that actual reported earnings were moving sharply higher.
In short, the picture for mid-June 2011 is similar to mid-June 2010. Stocks are selling off, while actual earnings, and analysts' year-end earnings estimates are continuing to rise.
If corporate earnings continue to be strong, as I believe they will, I believe that stock market activity in 2011 might turn out to be a re-run of a movie that we have seen before down in the summer, up by year-end.
Have a good trading week ahead! Accumulate on weakness.
Best,
SVI
Thursday, June 2, 2011
A short note before flying off. Tip: Look back at my old posts on Sarin. See the value.
Flying off for the weekend for a wedding in Malaysia. This will not be a long post because it is in the middle of the night and I really do not want to make a habit of writing late into the night because I am no Stephen King or John Grisham. Speaking of this weekend, I am really dragging my feet to go for this wedding as I have to host it too....Maybe when I finally make enough money to retire, I will host weddings professionally. At the rate I have been hosting weddings over the past few years, I am starting to feel like the flying dutchman.
Like I said, this week the market has not performed any better. It is still weak. We saw the first 2% fall in the Dow and the S&P500 in 8 months. Some bankers actually called me early in the morning to ask me what happened. It is panic stations with some investors. This is the part which I hate most about being in the investment business. People tend to get emotional when the market corrects. Human beings are really weakened by emotions. They do not think straight and some of the brightest minds in the world disintegrates in the face of a market correction. June is going to be pretty similar to May because everyone is getting ready to go for their summer holidays. So expect bigger moves and more panics.
Some of you who have been following my blog for some time will know that I have been predicting higher privatisation and M&A action this year. It seems like every week we have a nice little privatisation offer at a significant premium. This week we had Portek getting the offer to be taken private and it is really a waste because I was actually getting ready to invest in it. I know, you may think I am speaking for hindsight, but my broker (whom I know reads this blog) can be my witness that I have been wanting to buy this stock since more than 2 weeks ago. Another wasted opportunity...meaning a later retirement for me.
Another notable mention for the week is the movement of one of my all time favourites, Sarin Technologies. I have written about this stock twice and there are quite a few people who followed my call who were complaining that I have picked another dog...However, good things comes to those who wait. The stock has moved up more than 30% over this one and half weeks. Expect more to come because I believe this is a winner. Do take a look at my old posts to see how my analysis of the company is coming true now. You will have to go back around 9 months to see those posts. It is the only stock which I have ever written twice about. Shows you my conviction. This is no Sarin gas.
There are many more value picks in this blog which still have not moved and I know patience is waning on some of them. But when you are onto a good thing, do not give up. If the company is a good one, when the time comes, you will be handsomely rewarded. Investing is not about the short term, its all about the medium to long term. Give it some time, it will come. It is just like buying properties after the Asian crisis, how many years did it take for property prices to hit a new high? 10 years? 13 years? But when it did, pay day really came to those who had the discipline to wait. The same thing will happen with financials like Goldman, Citi, Wells Fargo etc. If you have money and have the patience to wait, it will do very well.
This week, something wierd also happened. Artivision (stock of the year) fell from its lofty highs of $0.29 cents to $0.11 cents in a matter of 4 days. The fall from grace was as swift as its rise to stardom. Funny thing is, when it was rising, SGX did not even bother to question this company on the trading activity. However, when it came down, the SGX came out with a set of questions on whether the company was had the resources to maintain its going concern status. Isn't that wierd? This company has not changed in terms of fundamentals at all. It is still losing money, burning its cash and not doing much. Why weren't the questions asked when the stock was rising 300-400%? Funny how regulators work. Always behind the curve. Intelligence is obviously lacking in the organisation.
Million Dollar Question: Do you think the US housing market is going to turn around soon? Or is it a double dip in the housing market?
The prices of single-family homes in 20 major cities fell for the eighth straight month and confirmed that there is a double-dip in the housing market, according to the S&P/Case-Shiller home price index released Tuesday by Standard & Poor's. Home prices fell a non-seasonally adjusted 0.8% in March. Prices have moved down 3.6% in the past year. Home prices declined in 18 of the 20 metropolitan areas tracked by Case-Shiller in March compared with February. Washington D.C. and Seattle were the only markets where home prices increased in March.
What does this mean? QE2 has failed. In my previous post, I have already said this. This double dip shows wealth destruction continues in the US. Consumer spending and confidence is not going to be strong as long as the largest asset on most family balance sheets continues to drop. It is pure logic. Bernanke seems to think that inflating the prices of other assets like stocks, bonds and commodities will make people feel richer, distracting them from the pain of losing their home equity. Plain stupidity. Now we are seeing the market falling even as the USD continues to be weak. What does that mean? They are expecting QE3. Treasury yields are falling again, what that means is that the market totally expects more support for treasury bills from the Fed. This is in the face of Moodys warning that they are downgrading the outlook for US debt. Do not even get me started on ratings agencies. Dumb as hell....
Ok this is turning out to be a criticism piece by me on SGX, the Fed and ratings agencies. It must be due to the immense pressure faced during work and the assignment of hosting a wedding which I wanted no part of.
Its getting late. Better go to bed.
Have a good weekend and week ahead!
Best,
SVI
Like I said, this week the market has not performed any better. It is still weak. We saw the first 2% fall in the Dow and the S&P500 in 8 months. Some bankers actually called me early in the morning to ask me what happened. It is panic stations with some investors. This is the part which I hate most about being in the investment business. People tend to get emotional when the market corrects. Human beings are really weakened by emotions. They do not think straight and some of the brightest minds in the world disintegrates in the face of a market correction. June is going to be pretty similar to May because everyone is getting ready to go for their summer holidays. So expect bigger moves and more panics.
Some of you who have been following my blog for some time will know that I have been predicting higher privatisation and M&A action this year. It seems like every week we have a nice little privatisation offer at a significant premium. This week we had Portek getting the offer to be taken private and it is really a waste because I was actually getting ready to invest in it. I know, you may think I am speaking for hindsight, but my broker (whom I know reads this blog) can be my witness that I have been wanting to buy this stock since more than 2 weeks ago. Another wasted opportunity...meaning a later retirement for me.
Another notable mention for the week is the movement of one of my all time favourites, Sarin Technologies. I have written about this stock twice and there are quite a few people who followed my call who were complaining that I have picked another dog...However, good things comes to those who wait. The stock has moved up more than 30% over this one and half weeks. Expect more to come because I believe this is a winner. Do take a look at my old posts to see how my analysis of the company is coming true now. You will have to go back around 9 months to see those posts. It is the only stock which I have ever written twice about. Shows you my conviction. This is no Sarin gas.
There are many more value picks in this blog which still have not moved and I know patience is waning on some of them. But when you are onto a good thing, do not give up. If the company is a good one, when the time comes, you will be handsomely rewarded. Investing is not about the short term, its all about the medium to long term. Give it some time, it will come. It is just like buying properties after the Asian crisis, how many years did it take for property prices to hit a new high? 10 years? 13 years? But when it did, pay day really came to those who had the discipline to wait. The same thing will happen with financials like Goldman, Citi, Wells Fargo etc. If you have money and have the patience to wait, it will do very well.
This week, something wierd also happened. Artivision (stock of the year) fell from its lofty highs of $0.29 cents to $0.11 cents in a matter of 4 days. The fall from grace was as swift as its rise to stardom. Funny thing is, when it was rising, SGX did not even bother to question this company on the trading activity. However, when it came down, the SGX came out with a set of questions on whether the company was had the resources to maintain its going concern status. Isn't that wierd? This company has not changed in terms of fundamentals at all. It is still losing money, burning its cash and not doing much. Why weren't the questions asked when the stock was rising 300-400%? Funny how regulators work. Always behind the curve. Intelligence is obviously lacking in the organisation.
Million Dollar Question: Do you think the US housing market is going to turn around soon? Or is it a double dip in the housing market?
The prices of single-family homes in 20 major cities fell for the eighth straight month and confirmed that there is a double-dip in the housing market, according to the S&P/Case-Shiller home price index released Tuesday by Standard & Poor's. Home prices fell a non-seasonally adjusted 0.8% in March. Prices have moved down 3.6% in the past year. Home prices declined in 18 of the 20 metropolitan areas tracked by Case-Shiller in March compared with February. Washington D.C. and Seattle were the only markets where home prices increased in March.
What does this mean? QE2 has failed. In my previous post, I have already said this. This double dip shows wealth destruction continues in the US. Consumer spending and confidence is not going to be strong as long as the largest asset on most family balance sheets continues to drop. It is pure logic. Bernanke seems to think that inflating the prices of other assets like stocks, bonds and commodities will make people feel richer, distracting them from the pain of losing their home equity. Plain stupidity. Now we are seeing the market falling even as the USD continues to be weak. What does that mean? They are expecting QE3. Treasury yields are falling again, what that means is that the market totally expects more support for treasury bills from the Fed. This is in the face of Moodys warning that they are downgrading the outlook for US debt. Do not even get me started on ratings agencies. Dumb as hell....
Ok this is turning out to be a criticism piece by me on SGX, the Fed and ratings agencies. It must be due to the immense pressure faced during work and the assignment of hosting a wedding which I wanted no part of.
Its getting late. Better go to bed.
Have a good weekend and week ahead!
Best,
SVI
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