Prof Chan is bullish on the stock markets

Famed stock punter Prof Y C Chan had this to say about the current market turmoil:

1. US credit ratings downgrade

People holding such a view do not understand how US gets its AAA rating.
Debt obligation rating has nothing to do with the amount of outstanding debts, but its ability to meet its obligations when due. Unless partisan poliical infighting prevents US from rolling over its debts and printing currency notes, debt default is unlikely as all debt obligations are denominated in US$. US government can print any amount of currency notes to repay its obligations at any one time.

2. Will there be QE3?

There is no direct relationship between QE3 and the upper limit of
debt obligations; US is still the strongest world power, people are willing to accept itsdebt instruments for acceptable rate of returns. Past QE2 was to lower the interest rate of national debts, and to enable the market remain at low interest level, which had no direct relationship with debt obligations. Large quantum of debt instruments may indirectly lead to rising interest rate; Fed may have to use QE3 to surpress the interest rate, but no indication of such a move for the time being.


3. What happens from here?

Now US debt default risk is on hold. Europe’s debt defauft risk remains, but
the issue has been played up so many times its impact has been diminishing. From
now the market should focus on corporate results.


4. Advice for investors?

My advice is not to panic, as bad news dissappear, I expect the STI to break the high level early in the year to attain new high

Bold remarks in these times indeed. But I am listening, and am preparing to scoop up bargains as markets fall further.