Stocks are no longer oversold

As has been hoped for, stocks have rebounded and quite strongly too, from the Aug 9 low. In my opinion however, the Aug 9 low is not the bottom yet. I expect the rebound to be short-lived ( a couple months), but will be using it to take profit and trim loss-making positions. I will no longer be adding positions.

After this rebound, another round of selling will come. I want to be prepared for that. Things I am considering doing include shorting indexes, buying gold and buying gold mining companies.

Doug Kass says bottom is on 9 Aug

Last year -- on July 6, 2010, Kass said the market had made its lows for the year and his call proved to be extremely accurate. And less than a week before the S&P 500hit a generational low of 676 on March 9, 2009, Kass went on CNBC and predicted the bottom. Now, Kass has predicted that the low of 2011 has been made - on 9 Aug 2011 (incidentally, Singapore's National Day). These are his reasons:

1.Such rapid and sharp declines have historically been followed by "the mean return gains of more than 10% 6 months later and greater than 20% a year later."

2. The S&P 500 is now more technically oversold than at any other time in the last 10years, with its 14-day relative strength index at 16.5 percent. A level below 20 generally attracts buyers.

3. He thinks the historic implication of the S&P downgrade will ultimately be a kind of wake-up call for lawmakers.

4. The ratio between normalized earnings and corporate bond yields has never been more stretched, like in 2009.

5. The economy is still growing, albeit very slowly.


Doug Kass, however, has not always made correct calls. In Aug 2009 for example, he made the wrong call that stock markets would fall again. Instead, they continued to rally. So, it is caveat emptor I guess. But I am hoping for at least one more rally in the near future, and signs are that the 9 Aug low has stayed for most stocks for now.

Brokerages have started downgrading shares, is a bottom near?

At least 1 brokerage have started downgrading shares in Singapore. These are the "new" target prices - 1)Yangzijiang:1.10 2)Sembcorp Marine:3+
3)Sembcorp Ind:2.90. Should I bail? No, when analysts say sell, it is time to buy.

Mistakes I have been making

I have made mistakes prior to this stock market crash. Otherwise, I would have taken more profit from the table, and thus have more to invest with now.

Mistakes I make include:

1. Investing in shares which are on the verge of overbought. (CNOOC @19.05, Sembcorp @5.09)

2. Needless cutting loss on shares. (Zhaojin)

3. Continuing to invest in counters which are loss making. (NOL)

There is therefore a need to:

1. Resist buying shares when they have moved out of oversold territory.

2. Refrain from cutting loss.

3. Need to do more due diligence in stock selection.

Tan Teng Boo now predicts stocks will fall 20%

Remember Tan Teng Boo? He confidently called for people to buy stocks way back during the market slump in 2008. Of course, he was right. Now, he is a bear. He is expecting more severe downside for global stocks in the coming few quarters. He says a severe downturn or recession in the US is on the cards. Also, Europe's debt crisis could get messier and inflationary pressure in emerging markets is unlikely to ease anytime soon.

As such, he expects the S&P to trade to a low of 900 over the next 12 to 15 months. He sees Hang Seng and Nikkei to trade to 15,000 and 8,000 respectively too. What will he buy when markets have fallen to those levels? He is eyeing London listed IP Group, DNA-sequencing company Illumina and Hong Kong listed REXlot.

I remember clearly Tan Teng Boo calling for a buy during those days. It pays to heed his advice now. I am keeping my powder dry. The next 12 to 15 months could be the most defining moment of my life.

NOL is the first blue chip in Singapore to fall to crisis low

NOL has become the first blue chip to fall to its crisis low of $1.02. It is interesting to see if others will follow soon. I am expecting to be so. Unfortunately, I have holdings in NOL at much higher prices, but will I be following the mad stampede out now? No way, but instead I am monitoring, and looking to average in. Preparing my bullets for the next Great Stock Sale.

Is QE3 coming?

BEIJING (MarketWatch) -- The world is likely to see a third round of quantitative easing in the U.S. soon, but the possibility of the U.S economy suffering a double dip isn't big, People's Bank of China adviser Li Daokui said Tuesday (9 Aug 2011).

Current market volatilities are purely caused by "blind actions" of U.S politicians, which lead to excess short-term fiscal austerity in the U.S., Li said on his personal microblog.

"The QE3 is to be launched soon, which is actually a second bailout, and the financial market will rise quickly," he said, adding that high-quality assets and currencies will benefit from such easing, though long-term Treasurys will fall.

"A double dip in the U.S economy is not likely, as asset prices will recover fast," he said.