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.