Think shares are going to be cheaper? Think again...

Many analysts are predicting that in 2012, things will get worse before getting better. Hence, to hold off buying stocks for now. I really think it is not the best piece of advice. A close look at the markets now reveal a very different picture of things. Many stocks are emerging from the  deep slumber that they were in since middle of last year (Remember bear markets can be short!). In fact, some stocks have gone as far as break their 200-day EMA, what I view as a start of a new bull market. (Remember I wrote last week on the high probability that this bear market could be ending soon. I am so glad I did not sell during the bear, but have instead been buying). KepCorp, SembMar, SembCorp Ind, GLP, F&N... are some of the local blue chips that have broken above their 200-day EMA. There could be very bullish times ahead. Indeed, the old adage "To buy when others are fearful" is true. Many people are putting off buying stocks, yet stocks are creeping up.

At this juncture, I only manage to find one voice who shares exactly my sentiments (which is not really a bad thing since it wll not be bullish if too many people are touting buying stocks). According to Michael Gordon, chief investment officer of equities at BNP Paribas Investment Partners, stocks will do very well in the next 3-6 months, and even post double digit growth for the year. Extremely cheap valuations, positive US data coupled with people getting bored with problems in Europe will be the key drivers for stocks to go higher. The good showing of equities in the first weeks of the year already indicate that risk aversion to equities is fading. The next trend will be a short-term rebound in global equities, where emerging market equities will outperform their developed market peers. For a more sustainable bull market, Gordon is looking at price action of gold. If equities rise 10% to 15%, but gold doesn't, then it is a clear sign of more good thing to come for equities. Gordon also warns against investing in defensive stocks as they could underperform this year.

I am happy that finally, my portfolio is seeing some improvement. But on the other hand, a little regretful that I have not bought enough for this bull market. Nonetheless, should this still unconvincing bull market stall, I will be buying again. Meanwhile, enjoy the ride up (hopefully). My personal opinion is that it should last a few months at least. 

How long more will this bear market go?

Shanghai Index has been in bear territory (never recover above 200 day EMA) since May 2011, Hong Kong since June, Singapore since August.

Notwithstanding, Dow Jones and FTSE have recovered above their 200 day EMA. DAX is on the verge...

I think it is a matter of time before the Asian markets follow. This bear market won't be too long. 

Ouch... my portfolio is hurting

My portfolio, going into 2012, is hurting. This is in contrast to last year, where I went into 2011 on a high.

Trading
ICBC	+9%
Anhui	-7%
Yanzhou	-15%
Investing
NOL	-37.5%
Noble	-1%
Sembcorp Ind	-15%

Ok, let's be honest, I am actually a little panicky. But, will I be cutting losses? No, I am in for the long haul.
In fact, I will be adding more to my portfolio once the crisis becomes full blown. There is no better time to start a portfolio than the next few months, because we will be getting value for a song, once the inevitable stock market rout/s arrive.

My main aims in 2012 are two-pronged. The first is to build up a portfolio of stocks(remember asset allocation is the ideal way to build wealth) , returning me approximately 10% p.a. This porfolio is long term in nature. The second will be to maintain a trading account. This account is shorter term in nature. My aim is to make money in as quick time as possible through timing the markets. Although the disadvantages of timing the markets are well-known, successful stories of traders keep me firmly rooted in the belief that success in trading is possible.

For starting a portfolio of stocks, the following must be considered:

Stock Types	Expected Return	Allocation
Growth	20%	20%
Value	10%	20%
REITs	6%	40%
Cash	0.5%	20%

I am also thinking of bonds, index funds and ETF to add to the portfolio. I will update my knowledge of these products before adding them to my portfolio.

As of now, my portfolio only has growth stocks (not very healthty)!

Why saving money now is the best policy?

Why is it very important to raise cash in 2012?

"Because in the next 12 to 18 months, we can have so much discounted value in equities, bonds... dislocation that could be the best 18 to 20 months in our lives." - Steen Jakobsen, chief economist at Saxo Bank (Tan Teng Boo has the same view, 19/8 post)

His strategy: Have 60 - 70% in cash now, and wait for S&P to break 1,000. Then, over the following 6 to 12 months, invest 5% to 10% every month, once a month.

So what does that mean for now? Yes, go out there and raise lots of of cash, because the best investment opportunities are coming soon.

Reading Company Prospectus

 When reading a company's prospectus, read  

1. Chairman's statement

2. Review of operating and financial performance

3. Board of directors + senior management 

4. And of course...

     Balance Sheet/ Profit and Loss Statement

Profitability Ratio
Gross Profit Margin	Gross Profit/ Revenue
Net Profit Margin	Net Profit/ Revenue
Return on Equity	Net Profit/ Equity
Return on Asset	Net Profit/ Total Asset
Liquidity Ratio
Current Ratio	Current Assets/ Current Liabilities
Quick Ratio	(Cash+ Short Term Investments + Accounts Receivables) / Current Liabilities
Cash Ratio	Cash + Short Term Investments/ Current Liabilities
Solvency Ratio
Debt to Equity Ratio	Total  Debt/ Total Equity
Interest Coverage Ratio	EBIT/ Interest Expense
Solvency Ratio	Net Profit/ Total Debt

Cash Flow Statement

Cash flow from
Operating Activity	Is profit converted to cash?
Investing Activity	Is company too aggressive in investment?
Financing Activity	Is company borrowing to finance investments?

I am back to profitable for the year

After a harrowing past few months, where my portfolio was decimated by more than 50%, I am back to slightly profitable for the year. I intend to continue to hold out for the unfolding year end rally. Seems like these days, I have to short the market in order to maximise the opportunities out there.

New Year's Rally?

I think there will be one this year. Look at the chart below:

In a trendless market like now, RSI is a very good indicator of when to buy/sell. Coupled with news of integrated efforts of both China banks and EU to prop up the economy, the rally, is half way through by now.  
Going forward, my stance is to sell on rally, and buy on dips.


My portfolio now:

China Shares
	Bought (HK$)
Anhui Conch	24.80
ICBC	4.22
Yanzhou	19.50
Singapore Shares	(S$)
Noble	1.15
NOL	1.80
Sembcorp Ind	4.80