Big Market Movement Coming!

Like many reports.. the market is moving side ways now, looking for a direction, because there is no big catalyst yet. BUT I foresee a big movement soon! (Technical indicators points to a major movement soon)

It will most probably be a break out, because sentiments are bullish, judging from the numerous reports from the various brokerage houses. Thus, if you got the capital, do take this opportunity to buy in when the price drops.

However do set cut loss prices, because bullish sentiments do not mean that short term bear corrections cannot take place. And I also advice strongly against shorting the market in the long run.

I was back testing several technical indicators, most shorting trading plan do not work reliably in the present bullish market. It is safer now to blindly go long then trying to short the market via technical or fundamental analysis.

Quadruple Witching

Today, 17th Sep 2009 is one of the quadruple witching days of the year (Applies to Walls Street). I came across this term 'quadruple witching' in an article from the Straits Times and decided to research on what this is. Below is the explanation of the quadruple witching: Extracted from Here

NEW YORK — For the unsuspecting investor, quadruple witching can be just as scary as it sounds.

The oddly named phenomenon, which happens on Wall Street four times a year — including Friday — involves the expiration of several types of futures contracts on the same day. Generally only the pros have to deal with it, but even everyday investors who don’t wade deep into the market’s intricacies can feel whipsawed by heavy volume and bouncy trading that often results.

For many investors planning to make changes to their stock holdings, the best move might be to mark the days on a calendar and plan to sit on the sidelines. It’s easy to mistake the big moves that can occur for something more meaningful than what they really are — in some cases, nothing more than traders dotting an I or crossing a T on certain types of investments.

Here are some questions and answers about quadruple witching and what investors should know.

Q: What is quadruple witching?

A: It refers to the simultaneous expiration of four types of options and futures contracts. The deadline forces traders to tie up loose ends in contracts they hold. The “witching hour” is what traders sometimes call the final stretch of such a day, before the closing bell — a period that can see particularly heavy volume.

Q: When does it occur?

A: It takes place just before the end of each quarter, on the third Friday of March, June, September and December.

Q: What effect does it normally have?

A: The market usually manages to advance, at least in the short term.

Curtis Teberg, portfolio manager at the Teberg Fund and a market historian, said the moves aren’t significant to a long-term investor. But knowing that stocks tend to rise on this day, he said he had made a list of stocks he wanted to sell.

“If there are some things that I want to sell I know historically today is a much better day,” he said.

Q: What tends to happen in the days that follow?

A: It’s not unusual for the market to fall. Teberg noted that the Dow Jones industrial average has fallen in the week after the June quadruple witching in 16 of the last 18 years.

Q: Why does it sometimes wreak havoc on the market?

A: Traders are forced to step in and buy and sell stocks in order to wrap up the futures and options contracts. That can lead to huge volume, particularly in the first and final hour of the day. And the higher the trading volume, the more stocks can move up and down.

Q: What should everyday investors keep in mind?

A: Analysts say it’s smart to make note of the day before making a trading decision.

“We try not to make investment decisions on these days,” said David Chalupnik, head of equities at First American Funds. “We typically just back off.” He noted that the moves in stocks related to quadruple witching tend to fade within a day or two.

My Opinion

I feel that this might not affect the Asian markets as much as compared to the past. This is because I noticed, in recent months, the Asian markets do not really take cues from the closing of the Dow Jones. Instead, the Dow Jones is taking cues from the closing prices of the Asian markets.

UOL paid S$508 psf for Dakota Crescent and Chestnut Avenue Sites

There are 13 bids for the Dakota Cresent land! (Its not a freehold land, but just a 99 years one)
And below is the respective bids and how many times over the minimum bid of $201

The winning bid by UOL, paid around 2.5 times of the minimum bid!

There are also 7 developers bidding more than 2 times of the minimum bid!

This tells a lot of the property expectation in the next few years. If you think about it, these land developers will not pay such a high premium of the land, unless they are quite confident that the prices of property will go up. It is possible for 1 developer to make a bad prediction of property prices, but more than 7? I don't think so.

In addition, in the report where I got this information from (DMG & Partners), it is said that, UOL will need a break even selling price of $910. Which is very high! ( I would think this is near freehold price ranges)

So now might actually be a good time to invest in property. Considering that the SIBOR rates are really low now, getting a housing loan that is peg to the SIBOR rate, would mean paying lower interest for the house. Given the 'prediction' by these developers, it might not be a bad idea.

HOWEVER, this is not an inducement to start going out to buy houses. Invest within your means! ( Remember that things can go wrong, and you might be stuck with a monthly loan that you cannot service and thus be forced to sell the house, at a price that might be below the initial price that you bought!)

But I would think, if you intend to buy a property to live in, now much actually be a better time to buy one, than say 3 years time!

Citibank's 'Trust and will' Talk

I just attended a Citibank's Trust and Will talk today at Oriental Mandarin today.

Here is a link to my previous blog post on writing Wills and Trusts.

Basically here is parts of the talk that I found useful and interesting.

1. Private Investment Companies (PLC)

To protect your overseas assets from estate taxes ( taxes that have to paid after you passed away, before they can be transferred to your beneficiaries) , you can make of of PLC. Essentially, these are corporation that helps to hold your assets overseas, but the asset still belongs to you.

Hence legally, when you pass away, all the PLC have to do is to transfer your overseas assets to your beneficiaries.

This is because, in the eyes of the law of that particular county, the owner of the asset, which is the PLC, is not dead! However, such PLCs have to be housed in countries that have no estate taxes, for example Singapore.

2. Universal Life
It is similar to long term structured deposit in my point of view.

What it does is :

• You pay a premium, can be a lump sum or monthly install, or just the interest
• When you pass away, you beneficiaries get a big sum of $$.

Here is an illustration. For example, at 60 years old you will have an rough gearing of 2.
This means that, say you put $100,000 in this universal account. When you pass away, your beneficiaries get $200,000.

Of course when you put in younger, say 30, your gearing is much higher, might even be in the order of 10. Meaning you put in $100,000 and your beneficiaries get $1 million!

As for the payment method of this 'policy', here are the 3 ways (given a scenario of an 'investment' of $100,00)

• Lump sum ($100,000)
  
• Monthly over say 10 months ($10,000 per mth)
• Interest (But you have to pay part of the 'investment' . So it could be a down payment of $30,000. As for the remaining $70,000, you can just pay 3% worth of interest per year. However when you pass away, and your beneficiaries get the money, this reamining $70,000 have to be deducted and be paid back to the bank)

Hope this is useful for people who would like to write a will.

The part on PLC will be particularly useful for people with lost of foreign assets!

Performance report of the world stock market

Just to keep things in perspective, here is the list of stock market indices and their returns so far. STI is one of the best performers!

Click on the picture below to enlarge


*Credit given to Citibank