Actually, I'm just waiting for some of the latest updates on the bailout news. Well, I saw plenty of doom articles saying that if the bailout is not set, we will probably see black monday and bloody tuesday. Jim Cramer even suggests that Dow could go as low as 8000.
Bailout News
As of 2314Hrs singapore time (GMT +0800?), I think the bailout is going to be successful. So... I need to rethink a bit.
Dollar
I think the dollar is a tricky issue. Is a bailout good on the dollar?
1. If you look from a confidence point of view, maybe bailout brings back confidence and people start buying dollar.
2. If you look from money printing point of view, dollar has to go down.
Again, we should just sit tight, probably ignore the market for some time. Take a nap elsewhere, come back and see that the dollar is now at 1:1 against Singapore dollar. =)
Stock Market Crash
Honestly speaking, I really think that the only way to the bottom is a crash. Somehow someway, I believe that it is coming.
1. It is a type of panic selling.
2. Unjustified short selling ban will create some sort of bubble. (short term)
3. I don't see a bottom yet and bankruptcies are coming fast.
4. I guess I'm just a natural bear who want to get a market crash correct. Self-fulfilling? Possibly actually.
5. Maybe it is also because I have some put warrants on hand!!!
Some Rules
Rule no.1: Time Stop - If I'm not wrong, the short selling ban will be over on 2nd Oct? I will see how it goes on 3rd Oct then. Probably a time stop on 3rd Oct.
Rule no.2: Price Stop - Dow 8000 for simplicity sake.
Rule no.3: Hmm... follow 1 and 2. What a cliche rule, but it works somehow.
Let's see if I have improved from a year ago or am I back to square one
Latest Update
Cool, a pure gut feel thing. Bailout wasn't accepted and we had a sellout. 700 points on Dow. My adrenaline was rushing when I saw -700 on dow in that split second. Again I emphasize that this is not the bottom so please, don't go into the market thinking that it is cheap now. If you will listen to me, sell all you have. It is easy for me to say, but why are you stuck in current situation in the first place... Have you thought through that? Somehow, my rules aren't applicable anymore. LOL things change fast. I will be holding my puts
Hardwork is approximately linear to reward
Our very genius, Mr. X
Sunday, September 28, 2008
Thursday, September 25, 2008
Mid Week Pit Stop #22
I have some trouble trying to persuade one of my research team mates to convert the rating on keppel corp to a sell. I have some trouble trying to tell people to short the whole world (the market). Lastly, I have some trouble trying to advocate my thoughts that one day, everyone will hate stocks for a long period of time.
I actually talk to Mr. X's father about the 2nd great depression thoughts and he mentions a very important word that I have always ignored - diversification. Honestly, diversification doesn't run in my blood. You can say don't put all your eggs in one basket but I will tell you to put all your eggs in one basket and watch the basket. The word never has any impact on me until I begin to face those troubles.
It is very difficult for people to take my stand of extreme bearishness to some extent. I will not be shorting and keeping the shorts forever anyway (the world is against shorters, they will think of new plans). I realise that emphasing a stock market doom is not very applicable for most people. I begin to think about the word diversification and it leads to one smart man - Jim Rogers. Needless to say, there can only be one word to relate to him and that is "Commodities"!
Another Asset Class - Commodities
Somehow, nobody likes to go into commodities because it is perceived to be risky. After all, the only way to purchase pure commodities is through futures. You can go down to some shops and buy gold bars though.
There are few reasons why I like commodities:
1. Personally, this is the main reason - money has to go somewhere. This sounds very fuzzy and lack of substance. But it makes a lot of sense isn't it. Though demand and supply should be the main way to comment on commodities, but I like to be fuzzy at times.
2. Jesse Livermore actually earns bulk of his initial fortunes with cotton.
3. As risky as it sounds, the gains are awesome. Yeah, you hear stories of people losing their shirts with futures but... ... Alright, it is risky if you don't know it well.
4. Honestly speaking, I'm super new to commodities. Humans love novelty. It is not men who love novelty only.
5. Just like Indices, I think commodities are really much simpler than stocks itself.
Why Commodities Will Be The Next Big Thing?
1. Actually it has, in history, come to spotlight many times.
2. Stock market doom... I have emphasized this enough.
3. You can see it coming isn't it? Lots of commodities funds are sprouting out. More news coverage and so on.
4. You have a very out-spoken guru that speaks the very truth and people will listen.
Like what Jim Rogers said, "Enron was a natural gas company but it went to zero. " There are also many examples that you can find in his books about lousy oil stocks during the oil spike.
The thing is this.
What's the point of worrying about whether the profit margin of a company will improve or not with higher oil prices in the future when you can simply buy oil if you see strong demand for oil in the long run.
Last Words
I urge you to be opened to a new asset class that most people tend to avoid. Now it is still not too late. Gold can go much higher, oil can go much higher. I will read up more on commodities on my part as well. Nonethless, start reading what Jim Rogers has to say about commodities. It is going to make you a better investor in the future. Thank you
You can no longer buy commodities at Merrill Lynch. My guess is many analysts and even executives are too young to know how profitable a hot commodities market can be. They will soon.
Jim Rogers
Friday, September 19, 2008
Desperate Times Calls For Desperate Measures
Interestingly, Buffett doesn't buy a bank stock with his recent purchase. Hmm...... need me to explain more?
Also if you want to know the whole story of what has happened recently. I can't explain that well so it's best that I try to find something that explain it properly. Read this.
Desperate Times Desperate Measures
Well, honestly speaking, I still don't see any panic selling for the week. Those are really true selling in my opinion. Of course, many people want to blame "shorters" again, maybe this world has something wrong with short people. Why not blame "buyers" who pushes the price up so far in the first place. Seriously speaking, this isn't right.
But anyone who knows the truth, knows that everything is just a facade.
This week is amazing indeed.
1. We are very close to flat for the week.
2. We have a short selling ban. I mean... if that's what it takes to stop the selling and drag the problem. So be it. I probably earn less money. That's all.
3. Gold was good. Up close to 13%.
4. I sold half of my put positions, when China was flat on wednesday afternoon. HSI was still down some 500 points I think (off lows of 1200 points).
I Am Not So Smart (my views)
1. Well, if you buy the story that the worst is over, its safe to buy stocks now, blah blah blah, think about it. A rally created by banning short sellers, how creative can the officials get? If the prices are falling so badly, why not close down wall street for a few days, a week or even more. Why not let banks take a break and go for some holiday? This is insane isn't it. Not because the rally eats into some of my profits but it is not beneficial at all in the long run. This is not even a panic selling.
2. I have this funny feeling.
If you actually read back some of my previous post, this chart has become a classic. When I look back at what has happened this week and this chart, I have this funny idea. Honestly speaking, I really don't wish to hold my shorts for so long but I feel that I have to re-think about that situation. The bankruptcy is coming too fast for me to understand the whole situation. Luckily, they ban short selling for 10 days so in a way we will not see any selling for at least 10 days. It has given me some time to think through some stuffs. Maybe, we will really remember 2008 as the Bank crisis year.
3. Actually point no.2 never really mentions about the chart. I think the big one is upon us. I find it funny that nothing was mentioned about citigroup and jp morgan. Also, I just realise that AIG derivatives holding is just 60billion. That's 0.1% of the total amount of OTC derivatives held in the world. Let's hope the rest of the 99.9% is safe. I'm sure.
4. Did I mention much about the chart? Alright, I think the bottom is way much lower than I have previously thought. Since bankruptcies have already taken place, I believe there is more to go and I really believe that JP morgan is the last bomb. The bank that holds the most amount of OTC derivatives. If I am not wrong, they hold 90 trillion notional value of OTC.
DO NOTE THAT THE NUMBERS ARE IN TRILLIONS (notional value)
5. Buy Gold. Please, gold is cheap now. I really can't emphasize this anymore, if you want to keep some money and earn some money, please go to the nearest gold shop, buy some gold bars and keep at home. Alright, you can buy some ETFs also or futures on gold.
6. I'm probably going to find some ways to hold some shorts for 1 year or so.
7. I'm not so smart, so do read thru properly.
"The truth isn't what you want to see"
Toh Chin Sheng =)
Also if you want to know the whole story of what has happened recently. I can't explain that well so it's best that I try to find something that explain it properly. Read this.
Desperate Times Desperate Measures
Well, honestly speaking, I still don't see any panic selling for the week. Those are really true selling in my opinion. Of course, many people want to blame "shorters" again, maybe this world has something wrong with short people. Why not blame "buyers" who pushes the price up so far in the first place. Seriously speaking, this isn't right.
But anyone who knows the truth, knows that everything is just a facade.
This week is amazing indeed.
1. We are very close to flat for the week.
2. We have a short selling ban. I mean... if that's what it takes to stop the selling and drag the problem. So be it. I probably earn less money. That's all.
3. Gold was good. Up close to 13%.
4. I sold half of my put positions, when China was flat on wednesday afternoon. HSI was still down some 500 points I think (off lows of 1200 points).
I Am Not So Smart (my views)
1. Well, if you buy the story that the worst is over, its safe to buy stocks now, blah blah blah, think about it. A rally created by banning short sellers, how creative can the officials get? If the prices are falling so badly, why not close down wall street for a few days, a week or even more. Why not let banks take a break and go for some holiday? This is insane isn't it. Not because the rally eats into some of my profits but it is not beneficial at all in the long run. This is not even a panic selling.
2. I have this funny feeling.
If you actually read back some of my previous post, this chart has become a classic. When I look back at what has happened this week and this chart, I have this funny idea. Honestly speaking, I really don't wish to hold my shorts for so long but I feel that I have to re-think about that situation. The bankruptcy is coming too fast for me to understand the whole situation. Luckily, they ban short selling for 10 days so in a way we will not see any selling for at least 10 days. It has given me some time to think through some stuffs. Maybe, we will really remember 2008 as the Bank crisis year.
3. Actually point no.2 never really mentions about the chart. I think the big one is upon us. I find it funny that nothing was mentioned about citigroup and jp morgan. Also, I just realise that AIG derivatives holding is just 60billion. That's 0.1% of the total amount of OTC derivatives held in the world. Let's hope the rest of the 99.9% is safe. I'm sure.
4. Did I mention much about the chart? Alright, I think the bottom is way much lower than I have previously thought. Since bankruptcies have already taken place, I believe there is more to go and I really believe that JP morgan is the last bomb. The bank that holds the most amount of OTC derivatives. If I am not wrong, they hold 90 trillion notional value of OTC.
DO NOTE THAT THE NUMBERS ARE IN TRILLIONS (notional value)
5. Buy Gold. Please, gold is cheap now. I really can't emphasize this anymore, if you want to keep some money and earn some money, please go to the nearest gold shop, buy some gold bars and keep at home. Alright, you can buy some ETFs also or futures on gold.
6. I'm probably going to find some ways to hold some shorts for 1 year or so.
7. I'm not so smart, so do read thru properly.
"The truth isn't what you want to see"
Toh Chin Sheng =)
Tuesday, September 16, 2008
Mid Week Pit Stop #21
1 Year ago...
I remember it was April, when the markets kept making new highs every week. I was like looking at everything and telling my frens that the markets are going crazy and it shouldn't be like this. China was like up 170% for a year or so, STI was up 25% in a year. There is only one thought in my mind at that point of time - STOCK MARKET WILL CRASH...
Well, when subprime comes in july, I begin to study the impact of housing on the US economy. Also, this is also about the time when my investment begins to form. Mr. X, the mail man (missing in cornell), one more guy (haven't thought of a nickname for him) came together with the same mentality - stock market will crash.
We understand the housing implication; the intangible side of credit, something that cannot be built overnight since its a matter of trust. The markets pick up real fast after Aug, and we decide to short the market heavily when STI was around 3600. The rest is history.
My point of telling this story is that sometimes, its quite fruitful to do things in a group especially when you are doing it with a bunch of people who think the same way as you. Of course, we met lots of trouble - getting caught in a crazy last burst of fire from the bulls, getting killed by time decay on our warrants, lots of emotional ride here and there. But it was a good learning experience. We understand what's going on, just that we don't know how to make full use of it.
Coming to present, we met again on monday night and were looking at the Dow closing at 500 points down (yes, we were still watching cnbc at 4am). Even though, we were late for a year and didn't have a position in the market as team (I have on my own of course), we knew that we came together as a team for a good reason and the initiative was very right in the first place.
So I urge you to learn from your friends, maybe you can form a team as well to assist in your learning. We can form a new team as well if you wish to learn together with me. I don't mind. The whole purpose of this blog is to educate people and provide a new learning platform anyway.
Looking at the market now...
Again, yesterday night was not panic selling as well. There is more to come. But be prepared, the bottom is coming soon. Well, I don't know how low HSI will go but I'm pretty happy to sit on my put warrants anyway.
I have lowered my target for China to about 1700. I can't really picture anything for HSI and STI. Dow target still stands at 9750. Remember, we want to pull out only we see panic selling.
Gold is doing good as well. Buy some gold for long term purposes.
The stock market continues, and investors continue, to want to believe that what they’ve seen in the past over the last 20 years is what they’re going to see in the future. They refuse to face the truth.
Anonymous
I remember it was April, when the markets kept making new highs every week. I was like looking at everything and telling my frens that the markets are going crazy and it shouldn't be like this. China was like up 170% for a year or so, STI was up 25% in a year. There is only one thought in my mind at that point of time - STOCK MARKET WILL CRASH...
Well, when subprime comes in july, I begin to study the impact of housing on the US economy. Also, this is also about the time when my investment begins to form. Mr. X, the mail man (missing in cornell), one more guy (haven't thought of a nickname for him) came together with the same mentality - stock market will crash.
We understand the housing implication; the intangible side of credit, something that cannot be built overnight since its a matter of trust. The markets pick up real fast after Aug, and we decide to short the market heavily when STI was around 3600. The rest is history.
My point of telling this story is that sometimes, its quite fruitful to do things in a group especially when you are doing it with a bunch of people who think the same way as you. Of course, we met lots of trouble - getting caught in a crazy last burst of fire from the bulls, getting killed by time decay on our warrants, lots of emotional ride here and there. But it was a good learning experience. We understand what's going on, just that we don't know how to make full use of it.
Coming to present, we met again on monday night and were looking at the Dow closing at 500 points down (yes, we were still watching cnbc at 4am). Even though, we were late for a year and didn't have a position in the market as team (I have on my own of course), we knew that we came together as a team for a good reason and the initiative was very right in the first place.
So I urge you to learn from your friends, maybe you can form a team as well to assist in your learning. We can form a new team as well if you wish to learn together with me. I don't mind. The whole purpose of this blog is to educate people and provide a new learning platform anyway.
Looking at the market now...
Again, yesterday night was not panic selling as well. There is more to come. But be prepared, the bottom is coming soon. Well, I don't know how low HSI will go but I'm pretty happy to sit on my put warrants anyway.
I have lowered my target for China to about 1700. I can't really picture anything for HSI and STI. Dow target still stands at 9750. Remember, we want to pull out only we see panic selling.
Gold is doing good as well. Buy some gold for long term purposes.
The stock market continues, and investors continue, to want to believe that what they’ve seen in the past over the last 20 years is what they’re going to see in the future. They refuse to face the truth.
Anonymous
Sunday, September 14, 2008
Here We Go Again
Actually, I don't really like my army days but "here we go again" sounds catchy and it is very applicable to what we are going to see and what we ought to do.
Well, it's the same story. Short anything you see, in particular financials. Short the dollar. I have covered my Lehman on friday. Not much of a difference between $3 and $1. Learning from what happened to Bear Sterns, Freddie and Fannie, get out when you can. But Tuesday is Fed's rate day. We should see Fed doing nothing with the interest rate or even a small cut of 25 basis point.
PAUPER-DOllAR
Pretty much expected, dollar is beginning to revert back to its bearish mood. This is a daily chart. You can actually see a shooting start at index level of 80.5 (I know I mention 80 but give me some allowance please). Again, if you go back to the fundamentals of dollar, why would anyone want the dollar. We are probably going to see some sharp correction in dollar soon. I have a short term target at index level of 75. Do me a favour, throw away your dollar.
GLITTERING GOLD
1.If you still remember, I mention about shorting gold all the way to $700 when it failed to hold at $850. Honestly speaking, I lost faith in that view when gold shot back to $800. Nonetheless, even though there is a possibility that gold might still fall despite of dollar fall. Possible but unlikely.
2. No.1 is just something that I wish to remind you of.
3. Regardless of anything, my super long term view in gold remains the same. If you actually look back all the way to the 1980 where we are crazy inflation and an oil spike, gold went into a crazy bull market - almost vertical. Of course, I advocate a great deflationary period in front of us, I still like gold and believe that it will behave the same way during the great inflation of the 80s.
My Position
1. Some gold if my money allows me to actually
2. Lots of HSI put warrants (super long term ones, I can't stand the time decay thing). I might pull out when HSI reaches 18000 actually. Really have to see how the general environment goes. It is very difficult for me to give a fix target.
3. Short and Hold basically. Anything in sight. Index, financials (like AIG, Merril Lynch), some china stocks (well for those from singapore, I reckon Cosco going all the way down to $1)
Last But Not Least...
HERE WE GO AGAIN, SAME OLD SHIT AGAIN...
Latest Update
In my opinion, Dow losing 500 points on monday is not panic selling. So please don't cover your shorts or go in and buy some things thinking that it's "cheap". We still have more to go!!! Here we go again... ...
Remember I believe Dow can go below 10000. So, HSI, STI and Shanghai targets must all be adjusted as well.
“The market today is dominated by much younger people who have not experienced a bear market.”
George Soros
Well, it's the same story. Short anything you see, in particular financials. Short the dollar. I have covered my Lehman on friday. Not much of a difference between $3 and $1. Learning from what happened to Bear Sterns, Freddie and Fannie, get out when you can. But Tuesday is Fed's rate day. We should see Fed doing nothing with the interest rate or even a small cut of 25 basis point.
PAUPER-DOllAR
Pretty much expected, dollar is beginning to revert back to its bearish mood. This is a daily chart. You can actually see a shooting start at index level of 80.5 (I know I mention 80 but give me some allowance please). Again, if you go back to the fundamentals of dollar, why would anyone want the dollar. We are probably going to see some sharp correction in dollar soon. I have a short term target at index level of 75. Do me a favour, throw away your dollar.
GLITTERING GOLD
1.If you still remember, I mention about shorting gold all the way to $700 when it failed to hold at $850. Honestly speaking, I lost faith in that view when gold shot back to $800. Nonetheless, even though there is a possibility that gold might still fall despite of dollar fall. Possible but unlikely.
2. No.1 is just something that I wish to remind you of.
3. Regardless of anything, my super long term view in gold remains the same. If you actually look back all the way to the 1980 where we are crazy inflation and an oil spike, gold went into a crazy bull market - almost vertical. Of course, I advocate a great deflationary period in front of us, I still like gold and believe that it will behave the same way during the great inflation of the 80s.
My Position
1. Some gold if my money allows me to actually
2. Lots of HSI put warrants (super long term ones, I can't stand the time decay thing). I might pull out when HSI reaches 18000 actually. Really have to see how the general environment goes. It is very difficult for me to give a fix target.
3. Short and Hold basically. Anything in sight. Index, financials (like AIG, Merril Lynch), some china stocks (well for those from singapore, I reckon Cosco going all the way down to $1)
Last But Not Least...
HERE WE GO AGAIN, SAME OLD SHIT AGAIN...
Latest Update
In my opinion, Dow losing 500 points on monday is not panic selling. So please don't cover your shorts or go in and buy some things thinking that it's "cheap". We still have more to go!!! Here we go again... ...
Remember I believe Dow can go below 10000. So, HSI, STI and Shanghai targets must all be adjusted as well.
“The market today is dominated by much younger people who have not experienced a bear market.”
George Soros
Wednesday, September 10, 2008
Mid Week Pit Stop #20
The Bottom That We Are All Looking For
Alright, this post is for everyone. New learners, old time professionals, children of all ages whatever...
I really think that we have a bottom. But some signs have to be met.
1. Bankruptcy!!! Well I learn this from Jim Rogers. I was watching a video of his and he was telling people about airlines. He was bullish on airlines when oil was $140. Honestly speaking, my eye brows were raised. But he mentioned that bankruptcies mark the end of a bottom and many airlines were bankrupt already. I probably mention this before but I need to emphasize this again because it is very applicable now. Fannie and Freddie are sort of considered gone. Lehman will probably be next from the way things are going (but it will be like Bear Sterns case). Maybe more financials will go as well, like MF global or something.
2. Panic Selling. Even though I think we will see a bottom soon, but this bottom will be accompanied by a period of panic selling. Real crazy selling, maybe 1000 points off DOW in a week? Something of that magnitude. Like what I have mentioned before, I wish to see HSI at 17000, STI at 2400, Dow at 9750, Shanghai at 2000 or even below 2000.
3. Catalyst is the key that marks the end of a bottom. I have mentioned about the emergency rate cut before by the Fed that marks a mini-bottom. We have a 2% interest rate now and I will not be surprised if they bring it to 1% to save the market. =)
4. Few scenarios that I picture. Might not be true but just to give you some guide on what might happen.
a. not much news -> no rate cut -> market sell off -> emergency rate cut (not sure about this, but it did happen in 2002)
b. crazy bankruptcy news like lehman and more -> panic sell off -> emergency rate cut/ normal rate cut on 15 sept to 1%
c. nothing happens -> things resume as normal (no panic selling and we are at a bottom already) -> I'm very WRONG.
It isn't as important to buy as cheap as possible as it is to buy at the right time.
Jesse Livermore
Alright, this post is for everyone. New learners, old time professionals, children of all ages whatever...
I really think that we have a bottom. But some signs have to be met.
1. Bankruptcy!!! Well I learn this from Jim Rogers. I was watching a video of his and he was telling people about airlines. He was bullish on airlines when oil was $140. Honestly speaking, my eye brows were raised. But he mentioned that bankruptcies mark the end of a bottom and many airlines were bankrupt already. I probably mention this before but I need to emphasize this again because it is very applicable now. Fannie and Freddie are sort of considered gone. Lehman will probably be next from the way things are going (but it will be like Bear Sterns case). Maybe more financials will go as well, like MF global or something.
2. Panic Selling. Even though I think we will see a bottom soon, but this bottom will be accompanied by a period of panic selling. Real crazy selling, maybe 1000 points off DOW in a week? Something of that magnitude. Like what I have mentioned before, I wish to see HSI at 17000, STI at 2400, Dow at 9750, Shanghai at 2000 or even below 2000.
3. Catalyst is the key that marks the end of a bottom. I have mentioned about the emergency rate cut before by the Fed that marks a mini-bottom. We have a 2% interest rate now and I will not be surprised if they bring it to 1% to save the market. =)
4. Few scenarios that I picture. Might not be true but just to give you some guide on what might happen.
a. not much news -> no rate cut -> market sell off -> emergency rate cut (not sure about this, but it did happen in 2002)
b. crazy bankruptcy news like lehman and more -> panic sell off -> emergency rate cut/ normal rate cut on 15 sept to 1%
c. nothing happens -> things resume as normal (no panic selling and we are at a bottom already) -> I'm very WRONG.
It isn't as important to buy as cheap as possible as it is to buy at the right time.
Jesse Livermore
Sunday, September 7, 2008
The Market Is Really Bad
Recently, I have met some people that are interested in stocks and are telling me that the market is really bad right now. Some of them asked me what am I holding right now and I replied, "Put Warrants." Somehow, most of them were surprised. It makes me think about the mentality of those people and a theory that Mr. X (well, Mr. X wasn't surprised with my holdings) tells me about - Anchoring.
Well, we have to think through a few questions before we move on.
1. How bad is considered bad? Bear turf? 20% from 14k peak? China at 2200 from a peak of 6000 last year?
2. Can a bad situation get worse? If so, can market go even lower? Can China go below 2000?
3. This question is quite interesting. Is it really a bad situation that is being justified in the first place? Could what we are seeing right now be the truth in the first place and the last 2 year bull run wasn't really justified?
People are used to anchor their judgement on certain significant point or events. The reason why they say that the market is really bad now because they anchor on the peak level that we have seen in the past. HSI 30k, STI 3800, Dow 14k... All these levels are close to mind blowing and paint a very rosy picture about the future. When one look at the indices right now (HSI 20k, STI 2500, Dow 11k), the first impression that one forms is a very bad market. Something is wrong here isn't it?
The next comment that usually follows a very bad market by those people that speak to me is, "I think the prices are very cheap right now." Oh man, what is really considered cheap? Again, most people anchor their judgement on prices that could be too high in the first place isn't it. Most people fail to consider the 2nd question because they are illusioned by the crazy bull market in the last 5 years and the amazing century that stock market has been through. Because of this very reason, most people don't really question a bull market and there seems to be a social stigma with bear market. It seems logical to most people for the market to go up in the long run that's why they are going to "invest". But the fact is, there is 2/3 of the time that the market doesn't go up.
On a side note, success of Warren Buffett could be the undoing of most young investors right now but I shall not be too explicit. I am still a fan of Warren Buffett. =)
Alright, time to see how bad the market can get...
The Dollar
The dollar index stands at 79 last week and is very close to the 80 resistance that I see in the dollar. If we actually look beyond next week, we have Fed meeting the week after. I remember seeing a headline on Cramer calling for rate cut again. Don't really like to do this as it gets pretty self-fulfilling, but could it be possible that Fed will call for a cut as the strengthening of dollar recently has given them some leeway to do so? Everything falls in place to some extent.
Dollar Reaching Resistance soon -> Fed Cuts Rates -> Dollar Loses Steam and Falls
We could also add something to the equation.
Oil price reaching legendary $100 -> Dollar reaching resistance soon -> Fed Cuts Rates -> Dollar Loses Steam and Falls -> oil price bounces above $100 -> commodities rally
Can't really see the light at the end of the tunnel yet, I'm still on the short side which I believe is the right side. =)
Financials, Where Are You? I Can't Hear You
Alright, we are actually going to hear from the treasury about the fate of Fannie and Freddie. Again, there is not much news about the rest. You have lots of speculation and rumours about Lehman and that's it. Nothing Else.
Stocks Challenge
Few stocks challenge games are coming up next week. You have OCBC, Poems and Citibank. So try them out. Macquarie hotshot just ended and sadly, I didn't win the big prize. Asking too much of myself lol.
We enjoy the process far more than the proceeds.
Warren Buffett
Well, we have to think through a few questions before we move on.
1. How bad is considered bad? Bear turf? 20% from 14k peak? China at 2200 from a peak of 6000 last year?
2. Can a bad situation get worse? If so, can market go even lower? Can China go below 2000?
3. This question is quite interesting. Is it really a bad situation that is being justified in the first place? Could what we are seeing right now be the truth in the first place and the last 2 year bull run wasn't really justified?
People are used to anchor their judgement on certain significant point or events. The reason why they say that the market is really bad now because they anchor on the peak level that we have seen in the past. HSI 30k, STI 3800, Dow 14k... All these levels are close to mind blowing and paint a very rosy picture about the future. When one look at the indices right now (HSI 20k, STI 2500, Dow 11k), the first impression that one forms is a very bad market. Something is wrong here isn't it?
The next comment that usually follows a very bad market by those people that speak to me is, "I think the prices are very cheap right now." Oh man, what is really considered cheap? Again, most people anchor their judgement on prices that could be too high in the first place isn't it. Most people fail to consider the 2nd question because they are illusioned by the crazy bull market in the last 5 years and the amazing century that stock market has been through. Because of this very reason, most people don't really question a bull market and there seems to be a social stigma with bear market. It seems logical to most people for the market to go up in the long run that's why they are going to "invest". But the fact is, there is 2/3 of the time that the market doesn't go up.
On a side note, success of Warren Buffett could be the undoing of most young investors right now but I shall not be too explicit. I am still a fan of Warren Buffett. =)
Alright, time to see how bad the market can get...
The Dollar
The dollar index stands at 79 last week and is very close to the 80 resistance that I see in the dollar. If we actually look beyond next week, we have Fed meeting the week after. I remember seeing a headline on Cramer calling for rate cut again. Don't really like to do this as it gets pretty self-fulfilling, but could it be possible that Fed will call for a cut as the strengthening of dollar recently has given them some leeway to do so? Everything falls in place to some extent.
Dollar Reaching Resistance soon -> Fed Cuts Rates -> Dollar Loses Steam and Falls
We could also add something to the equation.
Oil price reaching legendary $100 -> Dollar reaching resistance soon -> Fed Cuts Rates -> Dollar Loses Steam and Falls -> oil price bounces above $100 -> commodities rally
Can't really see the light at the end of the tunnel yet, I'm still on the short side which I believe is the right side. =)
Financials, Where Are You? I Can't Hear You
Alright, we are actually going to hear from the treasury about the fate of Fannie and Freddie. Again, there is not much news about the rest. You have lots of speculation and rumours about Lehman and that's it. Nothing Else.
Stocks Challenge
Few stocks challenge games are coming up next week. You have OCBC, Poems and Citibank. So try them out. Macquarie hotshot just ended and sadly, I didn't win the big prize. Asking too much of myself lol.
We enjoy the process far more than the proceeds.
Warren Buffett
Wednesday, September 3, 2008
Mid Week Pit Stop #19
P.S: I wish to apologise for the low quality of my recent post again for the 2nd time since I began writting 4 months ago. I totally ignore what I have preach thus far about the general environment in the stock market. Well, most will have notice about the oil positive during last weekend post by me based solely on an oil chart. In a rush to produce the post, I fail to reflect back on what I see on the dollar (run up to level 80 as a pullback) and reflect on the general environment of the market where the correction for commodities was underway and good news like gustav is generally ignored. I'm really sorry to the readers out there and I hope to produce better articles in the future.
Environment Analysis
I actually coin this term. Don't really know that if it is really considered as a field of study as compared to Technical Analysis and Fundamental Analysis, the two schools of investing that most people fall into. Of course most people will claim that they are both, I don't know why. Somehow, there is a social stigma among the young adults on sticking to just one school. For me, I proud to say that I follow environment analysis.
What is environment analysis?
Actually it's a lot on macro aspects of the market.
The no.1 rule is of course to determine whether it is a positive environment or a negative environment. As simple as it sounds, it requires some thinking, only some =).
To do this, you need to understand some characteristic of the market.
1. In a positive market, the indices will usually go up steadily.
2. There will be no crazy huge gain day usually.
3. Bad news are ignored.
4. Corrections are triggered by weird news that don't make sense. For eg, "Fed Is Not Cutting Rates This Time". To some extent, you can actually "feel" that the market is bound to correct and it is just using something as an excuse.
5. The opposite applies for a negative market.
6. Oh man, this is very simple, can I make some money now? =D
Picture paints a thousand words
Well, to see things in a clearer manner, you need to look at some charts. Wait a min, isn't charts technical analysis?
Honestly speaking, technical analysis is a lot more on indicators that are designed by "smart" people. But there are tons of indicators out there which all claim to work just as well. Hmm... ...
Nonetheless, charts tell you a lot, and I don't consider it technical analysis. This is the DJI chart for your info. To understand the environment, you need to realise how crazy the market has been going. One look at the chart, you can see two distinct gradient lines.
Conclusion: Link back to point no.1, you actually see a take off in the market which is good for all bulls out there but a possible indication of the final stage of a bull market. I mean, it is logical to think it the same way as "last burst of fire". Along the take off stage, bad news were ignored. Well, sub prime fiasco was introduced during July 2007 but after 1 month, the market continued its rampant bullish mode.
Why Environment Analysis?
I have emphasized this many times and I think I should emphasize it again. In a bull market, all stocks go up (at least most of the blue chips or sound companies), in a bear market, all stocks fall. There is only one side to the market and that is the right side. It is not the long or short side. Bear this in mind, and tell this to people around you as well.
Maybe, you need some great fundamental analysis skills to pick out really amazing performers but if you could understand the Shanghai market environment, you are looking at an index that shot up 300% in two years. Do you really need to study a lot of fundamentals of companies? Good companies like Goldman Sachs, RIMM can't tank the market selling pressure as well. But they have real solid fundamentals. I'm not trying to deny fundamental analysis strengths and if you disagree with me, read the previous paragraph again. =)
Honestly speaking, technical analysis is... you know...
Alright, if the indicators really work so well, everyone will be rich. =)
Is that all?
Actually, you need to have some economics knowledge. Don't really need very in-depth one. To some extent, it's also common sense. Take sub-prime for example.
1. You need to know that consumption is the main driver of the US economy.
2. You need to know that housing drives consumption in US economy. Don't really have to know why, it is common knowledge. Just accept the fact.
3. You need to know that sub-prime deals with credit and credit is an intangible stuff. It means that you can't build credit overnight. It is like trust, you can't place your trust again on someone who has broken it. It takes time for you to trust and believe in him again isn't it. Sometimes, it takes forever.
4. So, after know the above 3, you can come to the conclusion with the death of consumerism in mind and the downturn in US economy. Of course there are more underlying issues and more economics at work but let's just take things simple.
5. Lastly, you need to realise that it takes time for reality to catch up with the illusion especially when they have diverged from one another for quite some time. Even though you know the economy is going to be very bad, be patient, it takes time for things to unfold. I have made this mistake before, I hope you don't follow my footpath.
So...
To sum things up, if you sort of apply to current situation, we are still in a crazy bear market isn't it. No matter what price level is oil heading to, it is largely viewed as an negative news. We haven't really reached some panic selling stage. It makes sense for a bear market to end with some bankruptcies. I feel that the bottom is coming (dow 9750, sti 2400), I think some real panic selling and bankruptcies will follow soon. Lehman and The two F words? lol possibly?
I hope to fine tune this theory more. This is the prototype, but the general idea is still there.
Environment Analysis
I actually coin this term. Don't really know that if it is really considered as a field of study as compared to Technical Analysis and Fundamental Analysis, the two schools of investing that most people fall into. Of course most people will claim that they are both, I don't know why. Somehow, there is a social stigma among the young adults on sticking to just one school. For me, I proud to say that I follow environment analysis.
What is environment analysis?
Actually it's a lot on macro aspects of the market.
The no.1 rule is of course to determine whether it is a positive environment or a negative environment. As simple as it sounds, it requires some thinking, only some =).
To do this, you need to understand some characteristic of the market.
1. In a positive market, the indices will usually go up steadily.
2. There will be no crazy huge gain day usually.
3. Bad news are ignored.
4. Corrections are triggered by weird news that don't make sense. For eg, "Fed Is Not Cutting Rates This Time". To some extent, you can actually "feel" that the market is bound to correct and it is just using something as an excuse.
5. The opposite applies for a negative market.
6. Oh man, this is very simple, can I make some money now? =D
Picture paints a thousand words
Well, to see things in a clearer manner, you need to look at some charts. Wait a min, isn't charts technical analysis?
Honestly speaking, technical analysis is a lot more on indicators that are designed by "smart" people. But there are tons of indicators out there which all claim to work just as well. Hmm... ...Nonetheless, charts tell you a lot, and I don't consider it technical analysis. This is the DJI chart for your info. To understand the environment, you need to realise how crazy the market has been going. One look at the chart, you can see two distinct gradient lines.
Conclusion: Link back to point no.1, you actually see a take off in the market which is good for all bulls out there but a possible indication of the final stage of a bull market. I mean, it is logical to think it the same way as "last burst of fire". Along the take off stage, bad news were ignored. Well, sub prime fiasco was introduced during July 2007 but after 1 month, the market continued its rampant bullish mode.
Why Environment Analysis?
I have emphasized this many times and I think I should emphasize it again. In a bull market, all stocks go up (at least most of the blue chips or sound companies), in a bear market, all stocks fall. There is only one side to the market and that is the right side. It is not the long or short side. Bear this in mind, and tell this to people around you as well.
Maybe, you need some great fundamental analysis skills to pick out really amazing performers but if you could understand the Shanghai market environment, you are looking at an index that shot up 300% in two years. Do you really need to study a lot of fundamentals of companies? Good companies like Goldman Sachs, RIMM can't tank the market selling pressure as well. But they have real solid fundamentals. I'm not trying to deny fundamental analysis strengths and if you disagree with me, read the previous paragraph again. =)
Honestly speaking, technical analysis is... you know...
Alright, if the indicators really work so well, everyone will be rich. =)
Is that all?
Actually, you need to have some economics knowledge. Don't really need very in-depth one. To some extent, it's also common sense. Take sub-prime for example.
1. You need to know that consumption is the main driver of the US economy.
2. You need to know that housing drives consumption in US economy. Don't really have to know why, it is common knowledge. Just accept the fact.
3. You need to know that sub-prime deals with credit and credit is an intangible stuff. It means that you can't build credit overnight. It is like trust, you can't place your trust again on someone who has broken it. It takes time for you to trust and believe in him again isn't it. Sometimes, it takes forever.
4. So, after know the above 3, you can come to the conclusion with the death of consumerism in mind and the downturn in US economy. Of course there are more underlying issues and more economics at work but let's just take things simple.
5. Lastly, you need to realise that it takes time for reality to catch up with the illusion especially when they have diverged from one another for quite some time. Even though you know the economy is going to be very bad, be patient, it takes time for things to unfold. I have made this mistake before, I hope you don't follow my footpath.
So...
To sum things up, if you sort of apply to current situation, we are still in a crazy bear market isn't it. No matter what price level is oil heading to, it is largely viewed as an negative news. We haven't really reached some panic selling stage. It makes sense for a bear market to end with some bankruptcies. I feel that the bottom is coming (dow 9750, sti 2400), I think some real panic selling and bankruptcies will follow soon. Lehman and The two F words? lol possibly?
I hope to fine tune this theory more. This is the prototype, but the general idea is still there.
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