What shall we talk about today? It has been almost one week since my last post, once again thanks to my thankless job, I did not have enough time to write much. However, as Chinese New Year draws close, I do feel obligated to post something just as a commemorative note to close off the year of the Ox. Heh heh. Call me a sentimental softie. hahaha.
My past few posts were mainly reflective of my views on the economy and market, less on stock specific issues. It is not because I have not been able to find value, in fact, this correction has thrown up some rather interesting stocks for me to look at. As earnings season kicks into overdrive, do expect me to come out with more stock ideas. Some people will say that I am fickle and do not stick to the same stocks, but I just want to clarify that I am not an analyst and I do not need to do updates on stocks unless I feel there is an extremely important statement to be made about a certain stock. My stock calls are all for the long term and they are what I consider value investments. My purpose for making those calls is to point my readers to the right direction and not to feed them for the rest of their lives. But I would like to open the floor up to all my readers to request for me to review any stock that comes to their mind.
Now refering back to my last post, I did mention that this week would be an interesting one and it has turned out to be. Right as I am writing this post, the European Union is deliberating whether to bail out good ole Greece. Bernanke went ahead and announced his grand plan of exiting the loose monetary policies (quite a lame one if I should say so myself). Jobless claims came in at the lowest level in months at 444k for the week, last week's jobs report showed 9.7% unemployment (come on, who are you trying to kid?) with a negative jobs number (-20k jobs)...Talk about manipulation of data. In my job, I get to read many investment strategists' outlooks and some of them believe that by some other measure, unemployment in the US is currently at 17% or more. So trust me when I say, the Federal Reserve will not be able to execute its exit strategy any time soon. Raising the discount rate will not be an issue for the markets as it just means that the banks will not be able to borrow from the discount window at such a low rate. Its not really that big a deal so do not expect the US dollar to rally significantly in the short term.
For those that remember the Asian Financial Crisis, they will tell you that initially when Asia went into crisis mode, global stocks got hit including that of the Eurozone and US. After the initial crash, developed economies stabilised and their markets showed much more resilience while Asia continued to languish.
Now its our turn to enjoy the show as developed economies struggle with their internal issues, Euro zone with Greece, Spain and Portugal while the US struggles with their municipal states facing bankruptcy i.e. California (poor arnold...the terminator may not be BACK). Asia amongst the rest of the emerging economies look like they are sitting pretty as economic growth seem to have stabilised and getting back on the track we were on in 2007.I fully expect "hot money" from carry trades to flow into Asia as fundamentals continue to improve and Asians get more affluent. It is not going to be a smooth ride, but one thing is for sure, we are right at the centre of all the action. So if you do not invest aggressively in this market, you will probably regret it going forward.
You have to be in it for the long haul. Some people tell me that they are not free to monitor the stock prices, that is why they do not buy stocks. What do I think of that explanation? BULL. One should not be monitoring the price of a stock after he/she buys it. They should only be monitoring the corporate moves and earnings reports. Who the hell cares whether the price of the stock is rising or not. It is the earnings growth that is key. If the earnings grow consistently with a strong balance sheet and positive cashflow, you will be rewarded eventually. Beautiful things cannot be kept under wraps for long without people discovering it. Take it from me, when I buy a stock for its value, I take it off my watchlist and stop monitoring it every day. My closest friends know that it is pointless to ask me about the stock prices of my favourite picks, I DO NOT KNOW. Can you do the same? Ask yourself that question as you are counting down to the holidays.
Happy CNY to all.
I will be giving all a preview into my latest pick soon. Just be patient. Warning...it is not a Singapore counter.
Best,
SVI
Thursday, February 11, 2010
Friday, February 5, 2010
Panic! Thats what the media does to you with their ignorance.
Blood on the streets. That I what I would describe the state of the markets over the past week. For the third week in a row, the markets have ended in the red. I cannot say that this was unexpected, considering the run up we have had from March 09 till mid Jan 10.
In my previous posts, I have already reviewed the factors in play and concluded that this was just a correction and not a reversal. Remember, my conclusion was based on whatever available information to us, laymen investors. As usual, I am seeing the usual phenomenon of "when it rains, it pours". During bull markets, the good news never seem to stop flowing in, when the market gets bearish, there seems to be nothing but bad news across the board. Fear builds on more fear, with a whole bunch of bearish analysts and strategists appearing on the media, trying to flame the fears and claim their 5 mins of fame. Sometimes, I do wish that the media can me less bias and be more objective in the news reporting. This I know, is not possible as the media thrives on riding the wave and focusing the latest rave news topics.
Bad news, bad news and more bad news. One would find it hard pressed to find any good news in the papers. This morning, I woke up early to watch my usual weekly NBA game, but I could not help but pick up the whole week's financial papers lying on my sofa. After browsing through a week's worth of Financial Times, Wall Street Journal and Business Times, it was almost impossible to not realise that there were no good news this week. If I were an every day investor, I would seriously be pissing in my pants (pardon my french). The markets do seem to be in panic mode with most asset classes getting hammered and a sudden rush into safe assets like the USD and Treasury bills.
One may ask, what is the main reason for this week's sell off? You want to hear my reason or do you want the media's reason. Before I go into the reasons, I would like to state that I mean no offense to journalists and reporters when I say this....The media knows NOTHING.
What the media says: "Worries over EU nations defaults, lead to flight to safety of the USD and risk free assets."
What I say: "Bull"
Greece, Spain and Portugal hogged the headlines over the past week, especially after Portugal's failure to sell all the debt they put out for sale. Attracting only Eur300m when they were looking for Eur500m. The lack of interest in the Portugal debt issue created a huges stir in the market with default swap yields rising overnight. The US dollar index hit a 7 month high, with the press attributing it to the fears of default in the Euro zone and investors fleeing to the USD. Do you think that these 3 countries are really that vital and crucial to the global financial system? Why don't I illustrate a point, the GDP of Greece is equal to that of Bavaria....get the drift? Who the hell cares about Bavaria or a country the size of Bavaria go bankrupt?
How about my reason for the fall? This is something that the media does not want you to know or should I say, the US government does not want too much coverage on.
On Thursday, Moodys released a statement warning that the US was in danger of losing its AAA sovereign rating as Obama's policies continue to pile on the debt for the US and by some measures, the total debt to GDP of the US will be more than 100% in 5 years. They warned that the US will have start to pare its budget deficits and start to be more prudent in their deficit spending and maybe ease up on the loose monetary policies. The market is starting to anticipate that the US government will start to tighten their stance in the near future. This is a forced move, not one that they want to do on their own free will. Taxes will be raised, quantitative easing to stop by end March, mortgage rates to rise slowly, money printing to slow down, more Tarp money to be repayed etc. What does that mean? The USD may see a rebound, that is why traders are positioning for it to rise, thus unwinding their USD carry trades and selling down their stock holdings to repay their USD loans.
What does this mean? It means that the rebound in USD or the dollar index is going to hurt the market till it stabilises or starts to fall again. The rebound in March 09 till now has been driven by liquidity and the USD carry trade. From my experience, this unwinding of the carry trade is going to be temporary just like what happened with the yen carry trade. The yen carry trade lasted for more than a decade with the zero interest rate policy in place. This is the same for the US. Even if rates are raised in the US, it will not be any where close to the levels seen before the crisis until inflation comes back or another Volcker comes along as Fed chief.
On a separate note, I would like to touch on the possible downgrade of the US sovereign ratings. In my view, the only way the market is going to come back down to the levels seen in March 09 is a downgrade in US or UK sovereigns. That is the biggest threat to the world's economic recovery. Not the Chinese bubbles or the sovereign defaults in the Eurozone. It is sometimes easy to be distracted by the headlines around us and it is really up to us to see beyond the surface and decipher for ourselves. You are going to read a lot of this in my future posts. One of the main reasons for this blog is to give us, laymen investors a chance to be independent and to stop us from being the pawns of institutions, government and the media. Do bear in mind what I have said, the key to doing well in the market is to have independent thought, a mind of our own and training to look beyond what is on the surface.
Thats all I have for now. The coming week is going to be interesting, but we will hit support levels soon. So hang in there.
Best,
SVI
In my previous posts, I have already reviewed the factors in play and concluded that this was just a correction and not a reversal. Remember, my conclusion was based on whatever available information to us, laymen investors. As usual, I am seeing the usual phenomenon of "when it rains, it pours". During bull markets, the good news never seem to stop flowing in, when the market gets bearish, there seems to be nothing but bad news across the board. Fear builds on more fear, with a whole bunch of bearish analysts and strategists appearing on the media, trying to flame the fears and claim their 5 mins of fame. Sometimes, I do wish that the media can me less bias and be more objective in the news reporting. This I know, is not possible as the media thrives on riding the wave and focusing the latest rave news topics.
Bad news, bad news and more bad news. One would find it hard pressed to find any good news in the papers. This morning, I woke up early to watch my usual weekly NBA game, but I could not help but pick up the whole week's financial papers lying on my sofa. After browsing through a week's worth of Financial Times, Wall Street Journal and Business Times, it was almost impossible to not realise that there were no good news this week. If I were an every day investor, I would seriously be pissing in my pants (pardon my french). The markets do seem to be in panic mode with most asset classes getting hammered and a sudden rush into safe assets like the USD and Treasury bills.
One may ask, what is the main reason for this week's sell off? You want to hear my reason or do you want the media's reason. Before I go into the reasons, I would like to state that I mean no offense to journalists and reporters when I say this....The media knows NOTHING.
What the media says: "Worries over EU nations defaults, lead to flight to safety of the USD and risk free assets."
What I say: "Bull"
Greece, Spain and Portugal hogged the headlines over the past week, especially after Portugal's failure to sell all the debt they put out for sale. Attracting only Eur300m when they were looking for Eur500m. The lack of interest in the Portugal debt issue created a huges stir in the market with default swap yields rising overnight. The US dollar index hit a 7 month high, with the press attributing it to the fears of default in the Euro zone and investors fleeing to the USD. Do you think that these 3 countries are really that vital and crucial to the global financial system? Why don't I illustrate a point, the GDP of Greece is equal to that of Bavaria....get the drift? Who the hell cares about Bavaria or a country the size of Bavaria go bankrupt?
How about my reason for the fall? This is something that the media does not want you to know or should I say, the US government does not want too much coverage on.
On Thursday, Moodys released a statement warning that the US was in danger of losing its AAA sovereign rating as Obama's policies continue to pile on the debt for the US and by some measures, the total debt to GDP of the US will be more than 100% in 5 years. They warned that the US will have start to pare its budget deficits and start to be more prudent in their deficit spending and maybe ease up on the loose monetary policies. The market is starting to anticipate that the US government will start to tighten their stance in the near future. This is a forced move, not one that they want to do on their own free will. Taxes will be raised, quantitative easing to stop by end March, mortgage rates to rise slowly, money printing to slow down, more Tarp money to be repayed etc. What does that mean? The USD may see a rebound, that is why traders are positioning for it to rise, thus unwinding their USD carry trades and selling down their stock holdings to repay their USD loans.
What does this mean? It means that the rebound in USD or the dollar index is going to hurt the market till it stabilises or starts to fall again. The rebound in March 09 till now has been driven by liquidity and the USD carry trade. From my experience, this unwinding of the carry trade is going to be temporary just like what happened with the yen carry trade. The yen carry trade lasted for more than a decade with the zero interest rate policy in place. This is the same for the US. Even if rates are raised in the US, it will not be any where close to the levels seen before the crisis until inflation comes back or another Volcker comes along as Fed chief.
On a separate note, I would like to touch on the possible downgrade of the US sovereign ratings. In my view, the only way the market is going to come back down to the levels seen in March 09 is a downgrade in US or UK sovereigns. That is the biggest threat to the world's economic recovery. Not the Chinese bubbles or the sovereign defaults in the Eurozone. It is sometimes easy to be distracted by the headlines around us and it is really up to us to see beyond the surface and decipher for ourselves. You are going to read a lot of this in my future posts. One of the main reasons for this blog is to give us, laymen investors a chance to be independent and to stop us from being the pawns of institutions, government and the media. Do bear in mind what I have said, the key to doing well in the market is to have independent thought, a mind of our own and training to look beyond what is on the surface.
Thats all I have for now. The coming week is going to be interesting, but we will hit support levels soon. So hang in there.
Best,
SVI
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