Believe it or not? I am starting to love technology stocks.

In what was possibly the worst week of my working career, there were many lessons which I learnt. 1) That there will always be people who do not have basic respect for other fellow human beings. 2) There will always be people who only look for you when they need your help. 3) The market is always poor in terms of interpreting news, sensationalised ones especially.

In my previous post last week, I stated very clearly that the market was wrong in their assessment of the Goldman news. Goldman was just a scapegoat to justify the need for further financial reforms. Politics is indeed dirty. If they really wanted to charge Goldman, they would not have informed Goldman that they were going to sue them 9 months before they did so. The markets have more than fully recovered to their highs in the US and there seems to be nothing that will stand in the way of the way up.

This week, shipping and shipbuilding was the hot sector, with the news of Yangzijiang buying into Bakertech's shipbuiding arm. Rickmers Maritime trust also revealed good news in the form of cancellation of their commitments on their ship orders. Rickmer's announcement is a clear indication that shipbuilders have not come out of the clear from their troubles as yet. However, the market tends to look forward and price in recovery before the actual recovery occurs.

The loser sector was once again Chinese property sector, with the likes of Yanlord, Capitaland, Capital Mall Asia getting hit. Prices of chinese properties are still rising strongly, from last month's data, the chinese are still wiping up properties as if they are free. Once again, it shows the market's tendency to price in weakness before the actual event happens.

What does all these mean for investors? In order to be successful, we all need to be able to see things before they happen. I am not saying a crystal ball is available on the shelves for us to buy, but if we pay enough attention to the signs around us, we will be able to spot trends before they actually happen.

Take for example, one thing I can see for this moment is the resurgence of tech stocks. In Singapore, we have seen the likes of Sunningdale tech, Ellipsiz, Huan Hsin etc doing particularly well last week. I would like to add my weight behind them, to say that technology stocks will outperform that of other sectors going forward. In fact, I feel that this is just the beginning of the technology rally. People who know me will know that I have been anti tech stocks for the longest time because I do not really like the heavy capital expenditure and erratic profits. That does not mean that I do not know how to see a trend in tech before it happens.

If we look at the profit turnarounds in the likes of Huan Hsin, we can see the V shape recovery is firmly entrenched with technology counters in Singapore. I am currently looking for undervalued tech shares not just in Singapore but also elsewhere. I have looked at the tech related mutual funds and I realised that there has not been many global technology funds launched in the last 10 years. As many people should know how I invest. I love to look at unloved stocks, that is where most money can be made. Technology and internet related stocks have been most unloved in Asia, thus this is my latest sector pick. If the funds are not looking at it, that means there will be a lot of rich pickings for retail investors in this sector.

Basically, I always believe is loving the unloved. Contrarian investing? No its not. Contrarian is buying something that is on the downward trend, that may lead to catching a falling knife, thus the risk is high. I will coin this my way of investing. Unloved investing. That is investing in stocks that do not see much love from investors but still delivering profits. That is where you will end up buying a stock below its intrinsic value and lowering your margin of error.

This is what I do best. Looking for companies that are below the radar of investors while having consistent earnings. I have done well using this unloved investing strategy and I hope that you will also learn how to profit from it as I have done over the years.

Stay tuned, I will be identifying tech or internet related stocks to buy, over the next few weeks.

Best,

SVI

Are All Banks and Bankers unethical? Are pigs greedy? Answer is the same.

It is not everyday that you wake up knowing exactly what would happen for the day in the market. Tomorrow is one of those days. Sad to say its not going to be a good day thanks to the news that the Securities Commission sueing the Great Goldman Sachs for fraud. Ironic is the word I would use to describe for this whole affair. For those who are not familiar to what happened here is the lowdown.

First of all I need to explain the instrument which this whole fraud is revolving around.

Synthetic CDO is a portfolio of credit default swaps (CDS). Each CDS is a form of insurance on a bond or other obligation (the "reference security"). The CDS seller provides protection (insurance) in the event of a default or specified "credit event" related to the reference security. The CDS buyer pays a premium in exchange for this protection.

In simple layman terms, Goldman Sachs structured a synthetic CDO and sold it to its investors. However in every synthetic CDO there are two parties to the trade. One will be the seller of the credit default swaps which means they are willing to provide the insurance and to the underlying bonds within the synthetic CDO portfolio. The other is the buyer of the credit default swaps which means the ones that are buying the insurance on the bonds.

So imagine this. If the people buying the credit default swaps were the ones that determined the bonds in the portfolio. What if they abused it by deliberately choosing the bonds that will be defaulting and not actually doing it for hedging but actually betting on the fact that the bonds would default and get paid for the credit default swaps. Would that be fair? Basically, that is what happened and the SEC is accusing Goldman Sachs for allowing it to happen and not fully disclosing it to the sellers of the CDS.

Goldman has issued a statement that they felt there was no truth to the accusations made. Goldman stock fell 12% on Friday night, pulling along the whole market with it. 90% of the constituents within the S&P500 fell on Friday and thanks to this piece of news, it is reasonable to expect the market to be in fantastic shape tomorrow. Of course, I am being sarcastic here.

So what do I think of this? Will this hurt the markets over the long term? My answer is a clear no. In the short term, the market will definitely be going through a short term correction as the market tries to make some sense of the Goldman affair. Personally, I feel that the market reacted the way it did on Friday was due to 2 reasons. 1) Finding an excuse to take some money off the table after that great run. 2) Investors are wondering whether there will be other banks brought to court by the SEC.

For the second reason, I really do not think that there is a problem of that happening because if they wanted to take unethical practice lawsuits to the banks, I will quit my job and go into law. Law will be the next boom industry. Every single bank in the world do not operate on the basis of ethics and I believe any investor knows that. It is like saying that only one politician is corrupt or there is only one liar in the world. Lets face facts here. Life is a zero sum game. One has to suffer losses for someone else to gain. That is a fact of life. When a person wins so many times, they become rich while someone else becomes poor.

So what do I really think? I think that the SEC is full of bull and are just making an example of Goldman Sachs. Why Goldman? Because they are probably the only one that can take the hit. Other banks are still too weak to take such a blow. JP Morgan probably is the other, but if Citi takes a hit like this, they are so dead.

I believe the world is a place full of propaganda and private vendettas, nothing is done for the good of all men but more for the good of a few men. Trust me when I say, there will not be many more repercussions to this Goldman debacle but short term weakness is a sure thing.

Take this opportunity, to buy into quality and accumulate more. Try to have a good week ahead.

Best,

SVI