A slightly different view of the stock market in 2011

Richard Band asked everyone to buy stocks in his mass emails in March 2009, and of course, he was spot on (but I regret now that I didn't follow his advice then). I googled for reviews on his stock recommendation newsletters, and the majority were approving of his performance. He has written on his predictions for 2011. It is interesting to note that whilst many others are bullish on emerging markets including China, he has turned very negative on China. Also, while others are bearish on the dollar, he is very bullish on the dollar.

1. The S&P 500 and Dow will breeze past this year's 9%+ performance in 2011.

2. Obama and the Republican Congress will shove aside their differences and work together in the New Year. Good news for investors.

3. The Dollar Will Rebound

4. Look for Serious Cracks in the China "Miracle"

5. Brazil & India Will Be Red-Hot

6. Gold, Silver & Oil Will Hit New Multiyear Highs

7. Home Sales Will Bounce Back

Caveat Emptor.

Analysts' picks for 2011

A strategy of selective buying is recommended in a mature year of the bull market in 2011. Some analysts reveal their buying lists:

Credit Suisse: Kep Corp ($12.10), SembMar ($5.50).
Wilmar ($7.35)

Kim Eng: Noble ($2.95), Olam ($3.88), Kepland ($5.60)

Citi: DBS ($15.90)

Views from various analysts on stock market performance in 2011

These views are gathered from an article in The Edge, after interviews with Angus Tulloch (First Inv), Bob Doll (Blackrock), Frederic Lamotte (Credit Agricole), Lim Say Boon (DBS Pte Banking), Mark Mobius (Templeton), Tan Teng Boo (Capital Dynamics) and Xavier Baraton (HSBC Global Asset Mgt).

1. Bull run to continue
Bull run is not over, as markets have not reached the euphoric stage. However, there is an increased need to practise stock selection, and also to pay attention to valuations.

My opinion: Bull run will remain, at least till middle 2011.

2. Emerging markets remain the place to be
Fund flows into emerging markets to continue, but there is a case for developed countries, especially those with operations in emerging economies. However, Tulloch is not too excited on China, citing further interest rate increases needed than market anticipates. He is negative on Chinese banks (oops, China Construction Bank is in my portfolio), as he believes deposit rates will rise more than lending rates, is squeezing margins). Tan(a reputed contrarian who correctly predicted a bull market back in 2009)is however, more optimistic on China. In fact, he sees a recovery in the Chinese stock market next year as valuations look attractive and there are just too many China bashers.

My opinion: The US may have more room to recover, but STI is still the place I am most comfortable investing in, and it will not change in 2011. I just have to pick the right sectors.


3. Gold and commodities price to continue to rise. Emerging market currencies to rise against dollar.

My opinion: My stance is still to long gold and the commodities companies in Singapore.


4. Some events that may derail the stock market recovery
These include the euro soverign debt, Iran, N. Korea, investor concerns with governments running out of stimulus bullets, hard landing in China, deflation and of course, finally an asset bubble that will eventually burst. But, no one believes that the bubble will burst in 2011, yet.

My opinion: I am optimistic, but cautiously so. Valuations are not exactly cheap now, and I will never stake everything on stocks. Especially in 2011, the 3rd year of the bull run that started in early 2009.

If the last bear has turned positive, is it time to be weary?

Marc Faber, the last bear, has stated that he does not foresee a double dip recession. This is definitely positive. But does that mean that stock prices are going to fly off the window from here on?

Remember, the markets have rallied hard from the low of March 2009. Our local STI, for example, has rallied by as much as 120% since. Will the market continue to go up in a straight line? Well, someone told me that a bull market can last anything from 2.5 to 5 years. Going by the most conservative measure, the earliest the bull market can peak is by the middle of 2011. This leaves us with just 6 months to prepare sufficiently for an exit from our long positions!

What can derail the stock market? For one, stocks are getting expensive in relation to their dividend yield and price/earnings multiples. And I read in the headlines today that inflation will be the key threat in 2011. With inflation, comes rising interest rates, and although rising rates and stock prices can rise simultaneously, after a while, they begin to go in different directions. And I expect this to happen sometime in the second half of 2011.

Whilst I am positive on selective sectors in the first part of 2011 such as gaming, plantation and oil (I am invested in these sectors), I will avoid property due to likelihood of increase in interest rates.

Even Marc Faber does not think there will be a double dip

Dr Doom Marc Faber has finally admitted that he does not expect a double dip recession. Now, this is a major major statement coming from the bear of bears. This is what he wrote in his blog: "I don`t think it will double dip for now, we are living in a global economy today and you have parts of the world that are relatively weak, like the US and Europe, although from the lows they have recovered somewhat. Than you have other parts of the world that are very strong, emerging economies, especially China and India. The big question is what will happen to that part of the world."

Three cheers to the economic economy.

Wilmar's woes continue

My decision to cut Wilmar off from my portfolio should prove to be right, given that the stock is now off more than 5% from my purchase price - only thing is, I have not managed to dispose of it (at the price I want), and am now "holding the bomb".

Here is what triggers the massive sell-off in its shares: Wilmar (F34.SG) is down 1.5% at a 6-month low of S$5.83 on concerns the group may be losing its focus as it ventures into property development in China with Kerry Properties (0683.HK) and Shangri-la Asia (0069.HK). OSK, which has a Buy call with a S$7.35 target, says while the project in Liaoning''s Yingkou City would be profitable given the expertise of Wilmar's partners, "this could mark the start of Wilmar''s loss of business focus and corporate discipline."

Citigroup, which has a Hold call and a S$6.76 target, expects Wilmar to bid for more sites in China; "we agree that Wilmar can leverage on its existing contacts and network, but we are not entirely comfortable with the fact that they are expanding beyond the consumer food-related business." The companies will jointly develop residential and commercial properties and a hotel in Yingkou. Near-term support is at S$5.60 (June 30 low).

In a separate report, Phillip Securities has highlighted that " most of the negative developments have already been prices in to its share price, and moreover we do not expect price control to be long drawn. Growth story of WIL still intact, and we see buying opportunity in current price and upgrade our recommendation to a Buy while keeping our target price of S$7.08.

I retain my stance of looking for the best opportunity to get rid of this stock from my portfolio. This is more to do with my wishing to lighten my portfolio than about Wilmar's foray into property. Between Wilmar and Olam, Olam is the stock I prefer in my portfolio.

This may not occur over the next few days, but I believe a temporary reversal in the price of Wilmar could result in an opportunity to exit at a more desirable price.

Goldman Sach's predictions for 2011

Goldman Sachs is the bank that survived the financial crisis very well, so it is good to pay attention when they just released their surprisingly bullish 2011 Forecast.

In it, the banking giant predicts that oil futures will climb to $105 a barrel and that the S&P 500 will continue its uptrend a further 25% next year.

Not surprisingly, Goldman strongly recommended investing in the U.S. large cap commercial banking sector.

But perhaps most shocking is Goldman's prediction that gold prices will climb to $1,690 an ounce by the end of 2011 - and that prices will continue to rise to $1,750 sometime in 2012.

That's an additional 25% upside for the yellow metal in a decade that's already seen 266% gains in the price of gold.

I have welcome Noble back into my portfolio

As I believe that equity prices should recover for the Jan rally, I have made further purchases in Noble and Olam today. This is despite the stock market continuing to weaken. However, I will be looking to dispose Wilmar, as its immediate prospects are not eactly exciting. I should have researched the stock more thoroughly before purchasing it. Therefore, my portfolio going into 2011 will be:


Singapore counters
Genting
Olam
Noble
STX OSV

HK counter
China Construction Bank

US counter
Bank of America

Commodity
SPDR Gold

I will not be looking to add any more positions, unless there is drastic declines in the market.

Will emerging markets falter soon?

Many analysts are now saying that emerging markets are the place to be in. However, this is exactly why it is so worrying to be investing in emerging markets now - for the sole reason that there is a lack of bears.

Individual investors are pouring money into emerging market stocks at the fastest pace since 2007. The last time investors were this bullish - the MSCI Emerging Markets Index sank 11%. The index now trades at 2 times net assets, within 4% of the most expensive level on record versus MSCI World Index. Non-conformist fund managers such as Harris Associates' David Herro and Jack Ablin are busily reducing their exposure to these markets. They are instead turning to US companies with strong exposure to emerging markets.

The implication: A more meaningful correction for Asian markets may be round the corner. In fact, the Hang Seng is now in the process of breaking down from its head and shoulders pattern, a bearish sign.

But I am still a believer in the Asian growth story, and will be keeping cash in reserves to take advantage of just such an opportunity, if emerging maket stocks falter.

Dow may hit new record in 2011?

With the Dow just 23 per cent away from its all-time high, it is not surprising if it hits a new record next year, even though many analysts do not expect it to be so soon. This article explains why. But after that, stocks may not stay that high for long.

Global stocks to rally as much as 15% in 2011?

Just like Brown, Udo Frank is equally optimistic on stocks next year, predicting stocks to rally as much as 15 percent, outperforming bonds and precious metals. Frank is chief executive officer of RCM Capital Management LLC.

In a Bloomberg interview on Dec 1, Udo Frank said that "2011 will be a positive year for the global economy and equities as an asset class," Frank predicts "balanced" gains for equities in the U.S., Europe and the emerging markets as world economic growth quickens from this year's levels and corporate earnings grow at a "double-digit" pace. Stocks will also outperform other asset classes as investors turn away from gold and other precious metals after they surged to record highs this year, he said.

So, should I sell my gold? Nah, I will wait till $2,000.

Rig Builders, Plantations and Tourism stocks are DBS Vickers' picks for Jan rally

Janice Chua, senior vice-president and head of research at DBS Vickers has swept numerous awards for picking the right stocks and making accurate forecasts. So, I listen with great intent when she announces her buy list for the Jan 2011 rally. She will be buying rig builders, plantations and tourism related stocks. Chua sees the current Korean tension as temporary, and is recommending buying stocks during this current market lull.

She recommends rig builders because she sees the upward cycle for newbuild jack-up rigs continuing, as oil majors are spending again in view of high oil price. Stocks: Keppel Corp and SembMar in that order. Plantation stocks are also recommended because "we are entering into an inflationary boom cycle and a period of high liquidity means that commodities like palm oil willl be going up. Stocks: Indofood, First, Noble and Olam. Finally, go for tourism because there will be a rise in holidaymakers during December and new junkets expected next year. Stocks: Genting, CDL Hospitality, SIA and UOL.

I have instituted fresh positions

The much awaited correction either have not arrived, or will not arrive. Anyway, since stocks have refused to budge from their support levels, but instead reversing direction, I have decided to replenish my portfolio with the following stocks:

China Construction Bank
Genting
Wilmar
STX OSV

I also have Bank of America, which is now becoming a "long-term investment". My target is to hold on to these stocks till the next peak in March/ April or when my price target is reached. If the market falls further before then, I will continue to load more shares.

Graham's quick checklist

Benjamin Graham, the mentor of Warren Buffet, has his wealth severely depleted during the Great Depression. Thereafter, he came up with a checklist for selecting stocks. Sad to say, performing these checks will not be able to yield us any hidden gems on the SGX today. The criteria:

1. Market Leader (at least 25% share)
2. Current Ratio > 2
3. Long term debt < Net Current Assets
4. Debt to equity ratio < 0.5
5. 10 years profits
6. EPS grow by 1/3 in 10 yrs
7*. 20 yrs of dividends
8*. av last 3 yrs PER < 15
9*. P/B ratio < 1.5

The last 3 criteria are deemed especially relevant by Mr Ooi Kok Wah, MRR Consulting.

Outlook for 2011

If I believe in Warren Buffett, if I believe in John Paulson, then I will believe that the economy will not tank next year, that is, there will no double dip recession. I happen to believe in them.

According to Allan Brown, CIO of Schroeders, we could easily see double-digit returns for equity markets next year. This is due to price-earnings-multiple expansion and moderate earnings growth. He has 36 years of investment experience, and he thinks that there will be no double dip recession.

He is most bullish on emerging markets, and is of the view that equities in these markets are far from a "bubble". Yes, they may be expensive compared to their peers in Europe and US, but that is justified.

He also feels that interest rate hikes will be gradual, and although equity markets could respond negatively for a few months afterwards, they should get back to normal. Interest rate rise is good as it reins in inflation. Inflation is bad for equities. High inflation leads to PER contraction, and low inflation causes high PER.

Brown is most positive on technology stocks in 2011, as a beneficiary of the ongoing capital spending cycle. He is also bullish on agricultural commodities and gold.

The true value of BAC

The price of BAC has kept dropping since the day I bought it. In fact, I was very unlucky to have bought it just before it announced its third quarter losses. I have been holding the stock for almost 6 months now, and am staring at a nearly 30% loss. So, do I cut loss? Never. Because I believe in the American Recovery.

An article taken from the Street:
Bank of America had a noisy third quarter, as the company posted a net loss of $7.3 billion, or 77 cents a share, resulting from a non-cash goodwill impairment charge of $10.4 billion at its FIA Card Services subsidiary. This placed a drag on third-quarter earnings for the entire banking sector according to the Federal Deposit Insurance Corp., but excluding the goodwill charge - which didn't eat into investor capital - the company would have earned $3.1 billion, or 27 cents a share, declining slightly from the previous quarter. Bank of America's shares were trading for 0.9 times tangible book value as of Tuesday's market close, which is a very low level for a company with such a national presence, including Merrill Lynch and Countrywide's mortgage business. Surely the nation's largest bank, which will have tremendous earnings power when the economic recovery eventually picks up steam, is worth more than its liquidation value. Analysts concur, with 17 out of 25 analysts covering the company rating its shares a buy, while the other analysts all have hold ratings. Based on the median price target of $18 among analysts polled by Thomson Reuters, the shares have 62% upside potential from Tuesday's closing price of $11.09. However, most of the analyst targets are for 12 months, which really isn't that long-term an outlook. An investor confident in the eventual economic recovery who is willing to go in for several years, might be in for a fat triple-digit return.

I can start buying

I may think that the STI is only half way through a correction, but stocks are stubbornly refusing to fall further, but instead clinging on to meaningful supports. Of the stocks on my radar screen, Noble is well supported at 1.98 (61.8% retracement), NOL at 2.10 (50% retracement). Genting, a stock I was initially not looking at, is becoming attractive. It is supported at 1.93 (61.8% retracement), and is rebounding from oversold RSI. The last time that RSI was oversold was way back in April and of course, we know, the stock rallied hard by 170% afterwards. So, Genting is my choice, and I will be scaling in my positions on this counter, with an aim to evenually build a 10-lot position for its next peak by April 2011.

Correction is not over

I reckon that the surge yesterday in our markets are more attributed to a technical rebound. Overall, I do think that the "broader market has further to fall over the very near term. We’re in that lull between earnings seasons, and investors are much more likely to pay attention to bad news. If we get a further correction in share prices over the coming weeks, then we’ll have a good entry point for new positions. My best guess is that we’re not quite there yet." (Ahead of the Street Column, by Mitchell Clark, B. Comm)

Stock Market to crash in May 2011?

We have read about many predictions on market crashes since the Great Stock Market Recovery of 2009, but of course, now we know that they are all proven untrue. But of course, now that the bull market is in a more mature state, the arguments for a fall seem more convincing. This article details the reasons that may precitate such a fall in the stock market. It is predicting this to happen by May 2011.

But then again, as a value hunter, it is our mission to hunt for good deals during a crisis like this. So, I await greedily for such an opportunity. But, I may be disappointed again, as so many times in the past, such predictions always did not come true.

Turning cautious on China stocks

Martin Lau's First State Regional China Fund has been generating top-notch performance in recent years. However, he is turning cautious on China. Why? One, the recent wave of optimism about Chinese stocks especially in consumer and pharmaceutical has become too euphoric for his liking. Two, many investors are so passionate about IPOs, and that is usually not a good sign. Three, further raising of interest rates by the Chinese government could cause Chinese stocks to tumble. Lau reckons there will be a series of rate hikes.

Lau has been cutting exposure to overpriced Chinese consumption stocks and remains light on property and financial counters. He is currently vested in property names like China Vanke and China Resources Land, bank China Construction Bank and consumption play Yantai. But all in all, he is not that excited about China anymore.

It is too late for me to take profit on SOHO (a property name) now, but I will sell it during the rally that follows this correction.

Update: I have sold SOHO at 6.32 on a brief rebound for a 29% GAIN IN 3 months.

What really is market timing

This article extols the true meaning of what is market timing. Often, we are taught to time the market by cutting losses (selling when market is low), and letting profits run (refusing to sell when market is high). This article tells us that contrary to popular belief, market timing is to sell at high, not at low (to cut loss).

What can I buy during correction

One of the best things is that the good stocks also gets whacked during a correction. Therefore, the most logical thing to do is to load up on good stocks. Definitely, to me, this means stocks in the Straits Times Index. I am looking greedily at SembMar ($4.50 -$4.60 will be good price, below $4.50 will be super bargain price), SembCorp ($4.50 - $4.65 good price, below $4.50 super bargain price) and Noble ($1.90 - $2 will be good price, below $1.90 super bargain) again. I am also looking at STX OSV (below $0.70 would be a steal) as I feel that it is just unlucky to be listed when there is a correction. This one is definitely unfairly sold down.
I am not looking at Genting as I feel prices have peaked, and may not rise very much in the near term. Finally, I am looking at gold ($125 - $129 good price, below $125super bargain).

The correction has most likely come, but it is time to buy

Given the massive sell off in equity markets, one can't help but conclude that the inevitable correction has finally arrived. But fear not, as I think this creates another good opportunity to load up on stocks. Prior to this correction, I have sold various positions in SembMar, NOL and Noble. For various reasons, I am still holding on to gold, BOA and SOHO. I have done an analysis on my performance, and found that there is much to improve upon. Of the counters I sold, I managed to garner the following "batting average", or percentage of the move.

NOL 38% for 7% gain
SembMar 33% for 12% gain
NOBLE 65% for 19% gain

Verdict: I sold too early.
AFI: Need to develop more nerves of steel in order to maximise returns from current bull market. Remember, before I know it, the bull market may be over, so make the hay while sun still shines.

Interesting article on market correction

An interesting article on how we should be rational, not emotional, during a market correction. I love the concluding paragraph "Remember, just because you follow the majority of people, doesn't mean the majority of people aren't wrong. That's why 95% of investors aren't driving Mercedes and living in Key West three months out of the year. Base your decisions on analysis and value and you will, more often than not, come out ahead."

$2,000 is the price that I will sell out my gold for

Is the gold bubble bursting? Like Peter Grandich, I think gold is half way through its rally, and will likely enter a parabolic phase of volatile but phenomenal increase before its final decline. Which means, that in this correction, I should be adding on to my position, and then wait to sell when gold eventually reaches $2,000. When will it reach this price target? Anytime in 12- 36 months.

My learning journey 2010 Part 2

Even as I have enhanced my portfolio performance over the past few months, I still have a lot of room to improve upon. I am currently exiting far too early in my positions, resulting in far less gains than the market wants to give me. Why am I not getting the desired returns? It is because I have not perfected the art of staying disciplined over the long haul. From now on, I need to remember (adapted from the book "The Guru Investor"):

1. It is essential to stick to my strategy for the long term. Even the best strategies have down periods, and it can sometimes take over a year to reap the benefits of a good method. If I try to time my use of a strategy, I'll likely miss out on some big gains.

2. Be prepared for short-term 10 to 20 percent downturns that are inevitable in the stock market - and the less frequent but also inevitable 35 to 50 percent downturns I will occassionally experience. I can't predict when they'll happen, but I will just have to roll with them if I want to reap the market's long-term benefits.

3. Give the internet a rest (my exiting my SembMar positions so early is due to this bad habit). Checking your portfolio every day, let alone every 10 minutes, can make you jump in and out of the market, which hurts my long-term performance.

My learning journey 2010 Part 1

"If investing is entertaining, if you're having fun, you're probably not making any money. Good investing is boring." - George Soros

"The essence of mathematics is not to make simple things complicated, but to make complicated things simple." - Stanley Gudder, Mathematician

I am still learning, but I came to truly understand the above two statements this year. Before that, my trading was complicated and confused. I was also easily influenced by "noise." Which meant, that one moment I would be buying, and the next, I would be dumping wihout good reason. This brought me erratic results. Then one day in July, I met a "guru". Ironically, he was trying to sell me his services. He was churning unit trusts. Although I did not buy his service, what he said stuck. He said "Stocks always go up in the long run, so why worry about the short term? Very few people make money by jumping in and out of the market." I have since adopted an investment approach to my stocks. But instead of unit trusts (which I don't like because of high transaction costs), I am buying good stocks (blue chips). Ever since, I have enjoyed much better results. I have come full circle in my learning journey.

N.B: I am eyeing only to buy stocks two times a year from now onwards. The rest of the time, will be spent waiting for prices to go in my favour.

Marc Faber says correction is overdue

According to Marc Faber, "A correction is overdue, but I would not think that a bear market is around the corner. The correction will be a buying opportunity and then we will have a boom in stocks and in commodities like we had between the end of 1999 and March 2000 when markets went up very strongly."

If this is true, then it will turn up to be yet another fantastic opportunity to load up on stocks. But personally, I will not be surprised if the markets correct only next year, as so many people are screaming for correction currently. But, I will be preparing to sell my remaining positions next few weeks to have fresh funds available during the next market correction.

100% SOLD:
NOL : +7.77% (3 mths)
Sembmar: +12% (3 mths)

50% SOLD:
Noble: +13.5% (3 mths)

STILL HOLDING:
Gold: +18% (10 mths)
SOHO: +35.3% (3 mths)
BOA: -23.4% (3 mths)

Some counters I am eyeing in the current market lull

The current lull in the market is throwing up possible long candidates. I am waiting to add to gold. I may also open a partial long position on SGX. I may also "average down" on Bank of America.

John Paulson is now less bullish on BOA

Shucks... the worst happened.... John Paulson has gotten less bullish on BOA.

He has lowered his target of $3 EPS by beginning 2012 to $2.66.

However, that still translates to $26, assuming BOA trades at PE of 10.

How long will the current stock market rally last?

As correctly predicted, the stock markets are in rallying mode. How long more to go?
According to Mark Mobius, "these bull-market runs can last for years." Adds DBS Carbon, "The liquidity rush into Asia has only just begun. Quantitative easing is not something that will be switched off. I believe that these inflows are going to pour in for a long, long time." Famed investor Jim Rogers agreed, "I suspect that there will be continued improvement in the global economy because there is so much money being printed. However, he warned, "Eventually, there will be a massive bubble here in Asia as well and we know all bubbles end in tears, and this one won't be different." When will this bubble burst? No one knows (someone warns it could take 12-18 months), but for now, enjoy the party while it lasts.

Therefore, make hay while the sun shines. I am of the opinion that we are still at the start of the bull run, but the market may from time and time again, be subject to shocks from events in the developed world. Still, I will be a net buyer of mostly blue chips on dips, and take profit on rallies over the next couple of years.

Will 2011 really be a good year?

Many people are already predicting 2011 to be the year of return to economic recovery. So, stocks should grind even higher right? However, bearing in mind that the majority is often wrong, it is useful to think about what could go wrong. This site offers some opinions.

Why this may not be the best time to be pouring money into the markets

The stock and commodities indices are registering new highs...public are warming up to the markets again... is the party going to go on or soon end?

Well, history has demonstrated time and time again that when it is when the general public is most bullish, that it is always the worst time to invest. A useful indicator, the CBOE (a sentiment gauge) is now at a bullishly low of 19. I am not saying that the markets will not go higher, but this is the best time to take profits, not institute fresh positions.

This article outlines a few key reasons why markets may be priming for a fall.

Is it time to be a seller of Bank of America?

Just in case I am thinking of cutting loss on my Bank of America position, during 1988–1992, Barclays traded around a p/nav of 0.88 for four years. However, once the UK property market (and the economy) turned, the Barclays share price went up 500% over the next 15 years (33% average per year). So, now is the time to be a buyer, not a seller of US banks.

Now that BOA has tanked, is it worth holding on?

BOA has sunk even further, and I am deep in the red. Should I cut loss? Not if I follow the advice of this article, about "reversion to the mean for the downtrodden", meaning that what goes down must come back up.

Also, a recent article on why we should be buying Bank of America.

And finally, Bruce Berkowitz has reckoned that the recent sell-off in financial stocks is just based on "yesterday's news". He has the mean reputation of buying stocks on the cheap and then making lots of money selling them later. His portfolio is now heavily weighed towards financials.

Now that BOA has tanked, what will be my strategy? I will be seeking to open a second position once it falls to around 10 dollars. I do believe in averaging down, especially in the case of BOA.

Buffett doubts Euro strength

Billionaire investor Warren Buffett is cautious in his outlook for the Euro, even as the currency made a strong rebound in the third quarter. At a conference outside Tel Aviv, Buffett said that the euro's strength would still be tested.

"There's a real challenge when you try to get a large group of countries with different cultures, different attitudes toward fiscal policy, to share a common currency... I think it's going to be an interesting one to watch," Buffett said in previously recorded remarks, according to Bloomberg.

While the U.S. can print money to repay its debt, the cannot operate an independent monetary policy.

The Gold Bubble Is About to Burst?

This article argues that gold is going to fall to US$600 soon. Some reasons cited are that investors have endured panic for three years, and gold has rightfully gone up. Now that the cataclysmic panic is subsiding those left carrying gold in their portfolios are trying to come up with reasons to justify the holding.

In addition, Gold at $1,400 an ounce is eerily similar to oil at $140. Remember all the credible firms extrapolating the speculative action into $200 oil forecasts. Those same bubble-builders are now calling for $2,000-an-ounce gold.

Then last month, Soros told investors that gold is the ultimate bubble and that it's "certainly not safe, and it's not going to go up forever."

Should I sell out now? I am long-term positive on gold, and view any dip in gold price as correction, not crash. Therefore, I will be making use of price dips to add on to my position. However, if there is a fundamental improvement in US currency, then I may look to taking profit on gold.

BOA Target price

On 5 Oct 2010, both Credit Suisse and JP Morgan Chase advise investors that Bank of America offers significant upside. JPMorgan Chase has set a target share price of
$21. This represnts a potential upside of 59.70%. ($13.15)

Credit Suisse have a target share price set at $20 - that is 52.09% higher than at yesterdays close. ($13.15)

For more details, refer to this article.

Marc Faber's view in the short term

I. He is underweight equities right now.
II. Emerging Markets - Faber would not be buying these high-flying markets right now even though they could enter a final parabolic phase. He would be selling positions.
III.Faber believes that a inflection point could be at hand leading to a nice move upward move in the dollar. He would not be short the dollar right now.
IV.Gold and Commodities - Because he is bullish on the dollar right now, Faber believes there could be a significant correction in gold and other commodities.

More can be found here.


Update on my holdings:
Sold 50%- NOL (+8.8%), Noble(+13.5%) and SembMar (+8.4%)
Holding 100% - Gold (very long term), SOHO (not high enough), BOA (still at loss)

Investing Basics

Banish Bias… Erase Emotion
The Gambler: When people bet on sports, they often lean towards their favorite teams or let nostalgia play a part in their decisions.

The Investor: Don’t fall in love with a stock just because you like the company’s products or your Aunt Rose gave you the shares on your 15th birthday. Those emotional investment decisions shouldn’t even factor into whether to own a stock.

Don’t Follow the Crowd
The Gambler: Looking for “easy money,” gamblers latch onto what the crowd is doing and money then piles towards a particular favorite. But just because something/someone is favored doesn’t necessarily mean it’s a sure shot to win.

The Investor: Same thing with stocks. Sometimes, a rumor or hot tip will cause money to flow towards an investment. And more often than not, the crowd blindly follows.

But the crowd is often wrong about certain stocks and trends and you’re usually better off going against the consensus. Remember, by the time a stock or trend is considered “hot,” there’s probably more risk than reward left in the opportunity. Go with out-of-favor stocks that have huge upside and limited downside.

Don’t Over-Extend Yourself
The Gambler: Gamblers often bet more than they can afford to lose.

The Investor: Avoid this trap by position-sizing (that means investing similar amounts in your positions) and diversifying. And no matter what you’re buying, never invest more than you can afford to lose, or invest so much money that you’ll lose sleep at night.

Don’t Get Greedy… Take Profits
The Gambler: Often, a gambler riding a hot streak will get greedy or cocky and up the ante on his bets, rather than taking profits.

The Investor: Recognize the importance of locking in gains now and again. As my colleague Karim Rahemtulla warned a couple of weeks ago, don’t get greedy when it comes to selling your investments. The reason you invest is to make money, so once you make it, take it!

Cap Your Risk
The Gambler: Needless to say, gamblers don’t usually exercise enough risk management. When they bet, too much is put on the line.

The Investor: If you pay too much attention to profit potential at the expense of adequate risk management, you’re setting yourself up for failure.

(adapted from Investment U)

Know EXACTLY When Your Money Will Double

The Rule of 72 is simple way to measure how long it will take you to double your money with a dividend stock. All you have to do to make solid plans for your retirement is divide 72 by the annual rate of interest you receive from a dividend-paying stock.

So if you have a stock that pays 7% a year, and you reinvest the dividends, you'll double your money in 10 years. With information like that, it's a lot easier to know exactly what you'll be able to afford for your retirement.

John Paulson Update

Forbes recently reported:

“Multibillionaire hedge fund operator John Paulson, the investment genius who made a killing going short subprime mortgages a few years ago, told a standing room only crowd at New York’s University Club that double-digit inflation is about to rear its ugly head by 2012, killing the bond market, and restoring strength to equities and gold.”

In 2009, Paulson opened up a hedge fund and made some pretty significant bets on gold and gold stocks.

Paulson’s moves have been echoed by China this year. The “communist” nation dumped $33 billion in Treasuries, bringing its total ownership to the lowest level since June of 2009.

More on John Paulson's greatest trade here.

Is a correction coming?

Dow Jones breaking out of symmetrical triangle. More upside ahead?





On my simple indicator, stocks are slightly overbought, and I will not be adding to my current holdings (despite what newsletter writers say).

Thus far, I seem to be finding some consensus. Goola Warden warns of "possible reversing VIX (remember I wrote about very low VIX readings few weeks back), which may cause downward pressure on stocks in the weeks ahead". Guppy says that "GMMA of Shanghai Index has compressed, suggesting that investors are also joining in the selling". UBS says S&P risers/ fallers ratio has risen, signalling concerns of a possible slide in equities into October. Remember, when the majority are bullish, it is time to get bearish.

However, since I am medium-term positive (at least till end 2010), I will leave my stocks untouched. But should there be a slide in equity prices, I will be hitting the Buy button again.

Reasons to be bearish going into 2011

We all know the reasons to be bullish on stocks now: corporate earnings for the third quarter would surprise on the upside; a cloud of investor pessimism still prevails over the market; and stocks are simply attractive compared to U.S. Treasuries that offer little to no return and that may be our next bubble to burst.

Michel Lombardi is bearish on stocks further out in 2011:
"I have great concern towards the U.S. dollar, am concerned about its possible collapse (which would push domestic interest rates up,
sending the stock market down), and see the weight of the U.S.
housing market putting additional pressure on the economy.

The National Bureau of Economic Research said earlier this week
that the worst U.S. recession since the Great Depression ended in
June of 2009. I agree with this. But the U.S. economy is still so
fragile, so very delicate; we could lapse back into recession if the
cards are not played right.

The U.S. brought interest rates down in 2004 to their lowest level in
46 years. And what did Americans do with their access to easy
money? They borrowed and borrowed some more, investing the
borrowed money into real estate. Looking ahead, perhaps the Fed's
actions (of bringing interest rates so low as to entice consumers to
borrow more than they can afford) will one day be regarded as one
of the most costly errors committed by it or any other banking
system in the last 75 years."

On US banks, he has this to say "I don't have any specific statistics to quote, but I believe that U.S. banks have plenty more bad housing loans on their books to eventually deal with and clear out. The banks have been taking
homes back (foreclosing) so much that they have actually slowed
down the foreclosure process, because they do not know what to do
with all the homes they have already repossessed."

Newsletter writers are calling for rallies ahead... time to exit stocks?

Richard Band has called for everyone to make sure that we’ve bought all the stocks and funds you’ve been wanting to buy before October 15. Because after that, a powerful rally will drive blue chip indexes back to their April peaks—and higher!

His reasons for buying:
-Since 1995, the S&P has suffered six dismal Augusts—just like the one we experienced—YET in every case, the rest of the year has clocked a gain!

-The double-digit recession crowd is being muted, as industrial-commodity prices hit a new 2010 high in early September.

-Investors are beginning to sense that there’s going to be a big GOP win in the midterm elections.

-Up until a couple weeks ago, investors had left the building. But they are now returning.

P.S. Richard Band called for a buy back in March 2009 in stocks, and he was right on target.

Another newsletter writer, Louis Nevallier wrote that "current market forces have put me in one of the most bullish moods I’ve been in in quite some time". He recorded his reasons in this article.

With so many people turning bullish, is the market due for a correction? I think it may. But if it does, I will add to my current holdings.

Warren Buffett says there will be no double dip recession

Warren Buffett says that based upon all the evidence he is seeing, a double dip recession is out of the question. Given Buffett's track record, and that he was criticized for saying the United States was about to go off a cliff long before others agreed with him, this is a big, big statement. I am definitely paying attention.

Source: Bloomberg, Sept 13 2010

Dow May Advance 23% by June 2011

Ralph Acampora gained fame for his 1997 prediction that the Dow would reach 10,000, after the index averaged 7,500 that year. It rose to that level in March 1999.

In 2007, he warned investors to avoid equities as strategists at the biggest Wall Street firms forecast gains. We know what happened after that. Now, he has boldly declared that the Dow Jones Industrial Average may climb to 13,000 by next June. This is because investors are too pessimistic about the economic outlook. Read more.

What a value hunter is investing today

Peter Langerman is CEO of Mutual Series, whose preoccupation is to hunt for deep-value stocks. Recently, he reveals that his investment team has once again started deploying cash in a big way as buying opportunities arise. Amongst the stocks he is invested in are AP Moller Maersk, Schindler, BAT, Imperial Tobacco, Lorillard Tobacco (Darvas' first big trade), Nestle, Kraft, Carlsberg, Pernod Ricard, Microsoft, Vodafone, Bank of America and Jardine Matheson. This is what he thinks of BOA: The bank has a valuable franchise and is selling near its book value. Confident that it will make it through the rocky period, even if US eonomic growth stalls. Comforting words to me indeed.

Is this still the time to be in stocks?

Alexander Green contends that the market is almost as cheap today as it was during the depths of despair in March 2009.

How is that possible when the Dow is already more than 3,500 points higher?

Because a stock or index price doesn’t tell you anything about valuation. What matters are earnings and the multiple that the market puts on them.

The three main reasons for buying high-quality stocks now are:

1.Near zero interest rates.
2.Little inflation.
3.most stocks are unloved and undervalued around the world.

And the best time to buy stocks would be - when so many others stop believing in it -and that time is now. Read the article.

My personal portfolio:
BOA
SOHO China
Noble
NOL
Sembmar
SPDR Gold

When to buy and sell stocks? The VIX indicator

The CBOE Volatility Index (^VIX) is a measure of market sentiment, based on options trading among the S&P 500 companies.

The most extreme bullish is at 13 and the most bearish events is at 49.

- At 13: This means investors are very complacent. We should buy the VIX and sell stocks.

- At 49-Plus: This means investors are panicking. We should sell the VIX and buy stocks.

Currently, the VIX indicator is at the low 20s, and declining. It is time to get ready to sell. A more detailed discussion can be found here.

Why I would not be following some investors on rushing to the exits

Current picture:
1. Investor sentiment is as bad as it was during the market's low in March 2009
2. Only 29% of stocks rated by the usually uber-bullish analysts have a buy rating
3. The stagnating economy, the persistently high jobless rate, taxes, war....


Why we should be buying stocks?
1. In 2010, S&P 500 earnings are expected to grow 46%, the largest increase since at least 1988.
2. Next year, the S&P is expected to earn $94.31 per share, putting the P/E at a low 12 times expected earnings and below the 14% growth rate.
3. Since 1988, the S&P 500 has traded at an average historical P/E of 19.3. Today, it's at 15, implying a return to 1,417 if it simply trades back to its average P/E.

"Times are tough, but that's when you're supposed to buy stocks, before things turn around. Perhaps it truly is "different this time." But I'm not buying it. I'm buying stocks instead." - Mark Lichtenfeld

Noble represents good value

Finally, Noble has turned, and has broken its 20-day high. According to the turtle trading method, this is a buy signal. Fundamentally, now could be time to pick up shares of the China-backed commodity supply- chain manager. CEO Ricardo Leiman told shareholders and analysts via a conference call on Aug 12. “Despite the fall in profit, we are on target to double our profits to US$1 billion within the next three years.” Analysts' target for the stock range from 1.62 to 2.26. Current price is 1.71. More on this article

Noble Group: Share price falls to attractive levels as earnings take a hit
Monday, 23 August 2010

© 2010 - The Edge Singapore

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What is overbought can remain overbought

C K Ee's explanation of why RSI can remain overbought is an extremely interesting one.

This is as follows:

For Long, buy when

-RSI cuts back into overbought territory the second time. Condition is that RSI has to remain above 50.
- Exit when RSI cross below 50.

Example:

The meaning of expected value

Say in a game of roulette, there are 37 numbers, 0 to 36.
The casino payout is 35:1 for winning no.
The odd of winning is 1/37.
The odd of losing is therefor 36/37.
EV = 1/37 x ($35) + 36/37 x ($1)
= - 0.027

Hence, we say the expected value to us is -$0.027

The Turtle Trading Method

I have long been interested to learn the trading method, but have not managed to, until recently, when I attended C K Ee's workshop. In short this is what it is about:
It is a trend-following system based on:

System 1: Long on 20-day high
Exit on 10- day low
or vice-versa

System 2: Long on 55-day high
Exit on 20-day low
or vice-versa

Initial stop-loss at 2 x ATR

Limitations of the Turtle trading include 1. Whipsaw losses
and 2. Slow and insensitive

However, in the long run, the expected return is positive (about 4%). Therefore, it is a system that is worth applying, especially with penny stocks.

What is the right bet now?

On March 13, 2000, The Wall Street Journal ran an op-ed piece from Wharton Professor Dr. Jeremy Siegel entitled "Big-Cap Stocks Are a Sucker Bet." The column shocked the investment community.

Siegel focused on the 33 largest firms based on market capitalization - those with values greater than $85 billion. Of these, 18 were technology stocks. He noted that their market-weighted P/E equaled 126. What's more, he pointed out that half of the large-cap technology stocks had P/Es over 100. For these stocks, the market-weighted P/E was 208.

These prices were totally unjustifiable. There was no way that these companies could grow fast enough to support such insane valuations.

Are You Heeding Siegel's Current Warning?

That month, the Nasdaq - home to these tech giants - hit its all-time high of 5,132. From there, it imploded. Many of the stocks he singled out in the column - like Yahoo! (Nasdaq: YHOO) and JDS Uniphase (Nasdaq: JDSU) - plunged over 99%.

Even today - more than 10 years later - the Nasdaq is 60% below its high.

It's great when a knowledgeable analyst like this rings a clear warning bell at the top. So understand that he's doing it again today.

Earlier this month, he wrote another Wall Street Journal op-ed piece. This one is called "The Great American Bond Bubble."

Siegel says: "What is happening today is the flip side of what happened in 2000. Just as investors were too enthusiastic then about the growth prospects in the economy, many investors today are far too pessimistic."

As a result, they're plowing money into Treasuries and Treasury mutual funds.

This will almost certainly end badly.

Unless we have a full-blown deflationary depression, these bonds are a horrible bet, offering minuscule yields and huge downside risk. Many investors don't realize how badly they can get clobbered in super-safe Treasuries when the bond market turns down. (And those holding leveraged bond funds could see 40% or more of their principal vanish in a matter of months.)

As Siegel concludes: "Those who are now crowding into bonds and bond funds are courting disaster... The possibility of substantial capital losses looms large."

What does Siegel propose that income investors hold instead?

Don't Be a Sucker: Invest in This Asset Class Instead

Large-cap dividend stocks.

He points out that the 10 largest dividend-payers in the United States are:

AT&T (NYSE: T)
Exxon Mobil (NYSE: XOM)
Chevron (NYSE: CVX)
Procter & Gamble (NYSE: PG)
Johnson & Johnson (NYSE: JNJ)
Verizon (NYSE: VZ)
Phillip Morris (NYSE: PM)
Pfizer (NYSE: PFE)
General Electric (NYSE: GE)
Merck (NYSE: MRK)

And together...

They sport an average dividend yield of 4%, substantially more than what 10-year Treasuries are paying.
Their average P/E ratio is 11.7 versus 13 for the S&P 500.
Aside from the mountain of cash they're sitting on, their prospective earnings will cover their dividends by more than 2 to 1.

Despite fears of another stock market dip, income investors are wise to switch from Treasuries to high-dividend stocks. It might not feel like the right thing to do, but neither did buying stocks at the market low 17 months ago.


Adapted from Alexander Green's article "Are You One of the Millions Making This Sucker Bet?"

Why penny stocks stink

Alexander Green has this to share on penny stocks. His views are congruent with mine.

Long Shots: The vast majority of tiny, unprofitable companies are such ridiculous long shots, they don't even merit your attention. Most of these companies have little, if anything, in the way of profits, not to mention the first prerequisite: sales.

Wide Bid/Ask Spread: You could drive a cement mixer through the bid/ask spread on many penny stocks. For instance, if a stock is offered at 30 cents and bid at 24 cents, you're down 20% as soon as you get your trade confirmation. (And that's before commissions.

Low Liquidity... High Risk: Penny stocks are thinly traded and easily manipulated. You may buy a penny stock and see it zip higher. But then try getting out. It's pretty disheartening to know that you can drive down the price of your stock simply by selling a couple of thousand shares at market.

Often referred to as a "pump-and-dump" a penny stock scam is when the insiders talk the stock up on one hand while bailing out like there's no tomorrow on the other.

That's usually because despite the great story (and make no mistake, the stories are always fabulous) the company's genuine business prospects are usually nil. But penny stock promoters want you to trust them and believe in the hot tip.

BOA has broken below neckline

As if leading the Dow, BOA has broken below the neckline of head and shoulders pattern, signalling more downside. Shall I panic, and sell with the crowd? No. I will be looking to buy more. It is not time yet for the bear to arrive. The current price levels are simply too low.

Dow to tumble 'several thousand points?'

According to this article, Robert Prechter predicted that the coming months hold the potential to be the most exciting so far. The Dow could be targetting 8,000 once the neckline of its reverse head and shoulders is breached.

Time to buy stocks now

It was a tough week for the stock market, amid concerns that the economy has stalled and signs that the U.S. job market is headed backwards.

But are you spending too much time listening to what Alexander Green calls "the siren song of the naysayers?" He says many investors are doing just that - and could regret it in a year's time.

While acknowledging the negative forces in the United States economy and market, Alex says many are ignoring the reasons why stocks could be higher in 12 months - including two key trends. He explains what they are - and why you should be buying stocks now.

The target for BOA is $29

The target price for BOA is $29, says John Paulson in this report back in May. When does he expect the target to be reached? End 2011.

John Paulson says now is the time to buy a house in America

John Paulson says now is the time to buy a house in America. He is bullish on real estate and gold. Paulson, the man who made billions shorting financial stocks before the crisis, says we are now at the tail of the credit crisis, which has stifled much home buying. He believes we are in the midst of a sustained recovery with a less than 10 percent risk of a double-dip recession. But while he's bullish on America, he's not as optimistic on Europe, calling it the "one soft spot" in the world.

Robert Prechter is bullish on dollar and bearish on stocks

Robert Prechter is bullish on the dollar and bearish on stocks for the moment. This is because there is 6% bulls left in the dollar, as on 11 Aug 2010. As for the stock market, studying the Dow's wave structure since the top in April 2010 and comparing it with other wave structures, he discovered a similar set-up to 1987 before the October crash. He adds that "It doesn't mean there has to be a crash, but it does mean keep your cash cool. The market needs another leg down." The full report here.

August is a bumpy month for stocks?

According to the CLSA Feng Shui Index for stocks, 10 August to 7 Sep will be bumpy for stocks. This is becuase this is the month of the Metal Monkey and "Springers (Tigers) and swingers (Monkeys) make for strained bedfellows,and we’ll all do well to watch our health, wealth and happiness during these next few weeks. Expect volatility in all spheres. That said, when the going gets tough, the bargain-hunters go shopping, and this month’s market jitters should see some value propositions carelessly cast aside."

How accurate is the almanac?
In Feb, it predicted good month, but stocks went down. 0-1
In Mar, it predicted bumpy month, but stocks went up. 0-2
In Apr, it predicted bumpy month, stocks peaked. 0-3
In May, it predicted bumpy month, stocks went down. 1-3
In Jun, it predicted great month, stocks went up. 2-3
In Jul, it predicted good month, stocks went down then up. 2-3
In Aug, it is predicting bumpy month. What next?

This strategy is definitely worth researching

I recently heard about a strategy which allows an investor to earn rent on his shares. It is commonly known as a covered call strategy. According to Karim Rahimtullah, "When you sell call options against your shares that you already own, you’re getting paid to sell your shares at a higher price.
And that only happens if the shares close at or above your chosen strike price when the options expire. Think of it as collecting rent from your portfolio. And who doesn’t like collecting rent?"

Definitely a great idea, but how to do it? Will explore more on this.

Is BOA worth buying?

I am vested in BOA (America's No.1 bank), but am running a paper loss. According to this article however, BOA is definitely a buying opportunity right now. This is because earnings are expected to rise next year due to reduced provisions for bad loans.

Institutional Buying actually increases during last two months when markets corrected!

Stock buying by institutions actually hit a peak last month, even as retailers sell out amidst the stock market correction. They are betting that forecasts for the fastest US profit growth in 15 years and economic expansion averaging 3% through 2012will help equities recover after S&P 500 fell 13% in May and June. Personally, I have used the correction to enhance my positions.My portfolio now include:

Bank of America 15.06
NOL 1.93
SembMar 3.80
SOHO China 4.87

Citigroup says China equity market near bottom

China's stock market, the worst performer in Asia this year, is near bottom, and may rally as much as 14%, as policy tightening concerns ease amid slowing economic growth, according to Citigroup Inc. The Shanghai Index may reach 2800 to 3100 before
year end. But, the market will be mixed in the near term before being spurred by a
"liquidity rally". Recommended sector are consumer, insurance, transportation, healthcare, auto, technology and electrical machinery and equipment.

Technical Analysis fails as money-making strategy for stocks

Making money is not as easy as just mastering technical analysis. It consists of a whole suede of skills.

Birinyi writes "Technical approaches can and should be a useful adjunct to every investor's - amateuer and professional - arsenal, if and only if used properly and with understanding.

Shanghai develops end of downtrend behaviour

Daryl Guppy has confirmed that China has reached a bottom. According to him, the strong breakout above 2,480 is bullish. Investors should wait for the rally to retreat and successful retest 2,480 as a support level. Time to get ready the bullets.

I missed the 2009 bull run

This video captures my missing of the bull run since 2009. I really feel like an idiot!

Where am I invested right now?

Right now, I am a believer that there will be no double dip, and that the correction is just over. Hence, the best time to put money to work in shares. I am currently invested in:

1. NOL @1.93
2. SembMar @3.80

I will be looking to invest in China through the ishares 50 over the next few days. On the local front, may be looking at acquiring 1 or 2 more blue chips.

US stocks are cheap!

According to this article, 13 out of the top 25 companies in the S&P trade at or below 10 times estimated 2011 profits. All 25 stocks look reasonably priced, with good upside potential and little downside. Barron's has written favourably about many of the companies on the list. Banks (JP Morgan, Bank of America, Citigroup and Wells Fargo) on the list are expected to show sharp gains in 2011 profits due to declining provisions for losses. This could be the best time to buy.

Have China bottomed?

Sean Darby, head of equity strategy at Nomura Securities, says China’s A shares are inexpensive right now. That’s because Chinese government wants to bring property prices down by squeezing liquidity. And the expectation of property price deflation has left local investors holding cash, Darby says.

“Foreign investors can buy A shares at cheaper valuations than H shares in many instances,” he writes in a report dated July 9. “In our view, mainland equity markets, because of the closed capital account, afford international investors protection against external credit shocks. They are uncorrelated equity markets while also inexpensive in absolute terms. The earnings integer continues to rise.” The Shanghai Composite Index rose 55 points to close at 2,470.

Personally, I think it is a good time to invest in China. I am looking to seek exposure through either the shares listed in my earlier blog or the ishares China50. The ishares 50 seems a better choice, since it affords me greater diversity.

No Double Dip

Harvard professor Kenneth Rogoff has good and bad news. The good news is he does not expect a repeat of the sub-prime crisis any time soon. “You tend to be vaccinated. The worst is over but it can happen again in 15 years,” he says. Neither does he anticipate a double dip. While Greece is still floundering, the US and Europe are unlikely to go into a recession again, he says.

Rogoff also reckons the “Japan syndrome” is unlikely to materialise in the US because of its easy monetary conditions. “The US Fed will keep interest rates low for a long time.” However, the indicators don’t look so good for the Eurozone. “There is a greater risk for Japan syndrome in Europe,” he says.

Although Rogoff expects economies to recover, he doesn’t expect the US housing market to find their feet. “If you’re a country in the epicentre of a crisis like the US and UK, housing prices don’t come back for a decade,” he says. “One in five Americans are going to lose their homes. Half the people will have mortgages that are worth more than their house.”

For stock market players, there is better news. “The amazing thing about equity is that they have come back to above pre-crisis levels two to three years after the crisis,” Rogoff says. Based on his 200-year data, he observes that the S&P falls around 56% from peak to trough in a period of 3.4 years before turning around.

Risk to avoid China

Wong Kok Hoi from APS turned in 98.3% in 2009, so he definitely knows what he is talking about. He is currently taking big exposures on China, which is the worst-performing stock market in the region this year. Given that China stocks are currently trading at attractive valuations with EPS of over 25% on average, APS says it would be a "risk" to stay out of Chinese equities. Nevertheless, it could take another two quarters before a full-fledged recovery takes place in regional and Chinese equities. His key holdings include Ju Teng and Shenzhen International.

Will stock markets probe new lows?

The Shanghai market has broken below an important support at 2,500. Will it challenge 1,664 Oct 2008 low soon? Daryl Guppy thinks it would. This is despite having tentatively called a "bottom" in China 2 weeks ago. If China makes new lows, the Western markets will likely follow too. I should wait a while more before moving in on China.(although it is very attractive now).

How to invest for the second half of 2010

In the most recent Barron's Roundtable conference, Marc Faber indicated that the stock correction was not done. He said that the market would only bottom in October/ November, and the rally would resume from a substantially lower level. He sees the market being moderately lower at end of the year from today, and a bear market next year. He also recommended shorting the Aussie dollar as a way of playing the slowdown in China. You can find the article here.

My own take on investing my money now

I am basically of the belief that this is not exactly the best time to invest in the local stock market. The STI has surged 100% from March 2009, but has only corrected about 12.8% from the top. I am expecting more to come. China is a totally different story. It made a bottom in Oct 2008 and peaked last July. It has since corrected
25%. The charts of Shanghai Index paints an increasingly attractive picture. It is currently sitting on the 50% Fibo retracement from peak to trough. Monthly and weekly stochastics are oversold. But I will not be staking everything on this one. Probably, divide my purchase into 2 or 3 parts.

Shares to look at

Financial
China Construction Bank
China Life Insurance
Industrial & Commercial Bank

Energy
China Shenhua Energy
CNOOC
Fushan
Petrochina

Resources
South Gobi
Yanzhou

Industrials
Denway

Property
Evergrande
Henderson
Hopson
Shimao
SOHO

How to invest in China

Ways to invest in China

1. Unit Trust

Not my favoured channel since it involves high mangement fees.

2. ETF

There is one ETF listed on SGX, but it requires a huge capital outlay (cash). Not for people with limited cash.

3. Individual stocks.

Difficult to invest in individual stocks in China.

4. CFDs

My preferred route since I can also enjoy leverage, and exposure to a wide range of stock counters in China. I am using CMC.

Should we buy China shares now?

The previous article puts up a case of looking at China.

In this article, Guppy argues why the Shanghai index will bottom soon. But, it is also his opinion that markets in the West have not bottomed yet, and it is a good time to book profits in those markets.

China's market preparing for a rebound

Despite the lacklustre performance of the world stock markets, the China stock markets are showing signs of revival. Just last month, Chinese shares began beating the MSCI Emerging Markets and Asia ex-Japan indexes. Is it time to invest in China again?

Is there more downside to come?

According to this article, the probability of the Dow sliding, when it has already lost 14.4%, increases to 25 out of 32. Only 7 instances in the past did the Dow stop short of 20%. Currently, the Dow is already down by 14.4%. Chances are, it will continue to go down further.

Read on...