Friday, January 30, 2009
Things people do..haha.
Also, I got a feel that the market is going to drop in the next few days. It has risen TOOO fast over the Chinese new year, together with all the job cuts, the index has to drop. I am looking forward to load up STI ETF ( shall talk more about it soon. I have been researching on this recently). I will either load up when the index hit 1600 or around the end of the year., which ever comes first..
Tuesday, January 27, 2009
What was said in this article was actually quite simple. However I finally got some idea what people mean when they always say 'you should trade with a style that is suitable for you'.
Here are is the list of different 'positive trading style'. By positive, it means that people who trade with the expectation of making a profit. ( Yes, there are styles where the people do not have the intention to make a profit,but I will not list them here. If you would like to find out more, here is the link to the article. )
After seeing this table, what kind of style do you think you belong to?
*Credits given to Prof Lawrence Harris.
Link to the article can be found here ( taken from turtletrade.com , it is essentially a style of trading too)
Sunday, January 25, 2009
Hi to all, Happy Chinese new year!
Welcome to the year of the Ox! ( Which is also my year =) )
Anyway, I got gut feeling that the economy might not actually in the second half of the year as predicted by analyst and including myself. Why? because there are TOOOO many people predicting that it is going to recover around the second half of the year. ( Just read the straits times today,and you will realize this already )
The reason why I predicted the recovery will be around May 09 is due to technical analysis ( before any brokerage reports). I did my analysis based on past trends. I.e how long the economy usually take to recover from a recession. By predicting in May 09, I am actually taking the probability of the quickest recovery.
Therefore it will most likely, in my opinion recover either very soon, or early next year ( basically not in the second half of the year). The probability of a quick recover is actually very low, because all the 'help' from the various government has really yet to show. Therefore a high possibility of recovery would be next year. ( at least for the stock market, though i think the property market will be bad)
Therefore, I feel that the timing to buy stocks should START from June. Though we are not exactly at the bottom, but we should be closer to it than buying from now.
Last of all, have a good CNY! Enjoy all the food and the hong baos! =)
Thursday, January 22, 2009
S$20.5billionfor the economic stimulus plan, out of which S$4.9 billion is coming out from our reserves for the first time. Seems like the economic crisis is really bad this time round.
To keep things short, it is to help the lower income/middle group in terms of their tax reliefs like the individual income tax, property tax(only for homes that you occupy, hence the richer people with multiple homes do not benefit). But more importantly, it is targeted to helping companies.
Hence, it is technically the best time to set up a business, provided that you can find your niche. The lower corporate tax, the higher government guarantee and all the packages to help train workers. To me, it sounds like a possible business idea.
*picture taken from here
I am thinking of setting a business to educate people on personal finance . It may be similar to what a financial planner might be saying, but I am non bias, I don't get you to buy any products and I genuinely want to help you to save money. I am thinking of teaching simple facts like
- Power of compounding interest
- Places to make your money grow
- Ways to save money
- How to effectively make use of your CPF
- And other things that will be financially
Also, since the government is providing funds to send workers for training, I might be able to tap on these funds..as companies can send their workers to learn about financial planning.
To add on, the government also intend to spend $9200 per student for the next 5 years, which I suppose are for enrichment courses.
Imagine charging a fee of $20/ person per session, but doing it on a large scale, say for example 30 students at a go and trying to target ALL schools/community centres/youth groups/enrichment courses 'add ons' etc.
Any comments from anyone? Or anyone who is keen on helping develop the idea?
Monday, January 19, 2009
- US personal expenditure has been dropping for 5 months ( consumption decrease)
- US personal savings have been going up since Aug
- Manufacturing has dropped
- The new stimulus package is aimed at low to middle income people with an emphasis on tax cuts.
The reason why Singapore was the first to go into a recession in Asia is due to our high dependency on the US economy, hence news of the US economy will ultimately affect us the most.
Now about some other things. If you all have been keeping up with earnings reporting, there is a majority of companies reporting losses. Which is actually a good thing. It is because it is 'performing' up to expectation of the market from 6 months ago. And if you also realized, the market is not really shaken by these reports already. This I feel is a sign that the bottom might be coming.
Also, like in my past posts, I mentioned about an increase in auctions. 'The Edge' Magazine also reported about this finding. It says that there are a lot of people attending these auctions, but most are not buying because they are afraid that the price will drop further. However the article also says that most of the time, people will wait till they miss the bottom and start buying only when the market is already mid way of its bubble. So in general if you think its cheap enough, it should be alright to buy. But in my opinion, wait till the end of the year first. The property market still has MUCH MUCH more to drop.
One more of my gut feel is being reported. Soy beans! The edge magazine has an article on it. Seems like it might start to get more coverage. Next thing before you know it, the price of it will be running like crazy. This is usually how prices of things run. First, people who have been doing their homework finds the good investments and start investing in them. Then there will be more coverage of such investments in order to lure more people into buying it. Hence the price will start running. And when the is about to burst, the people who are first to exit are the same people who entered it first.
Thursday, January 15, 2009
Contango is a term used in the futures market to describe an upward sloping forward curve (as in the normal yield curve ) ....From Wikipedia
Usually the price of oil futures ( price of buying oil in the future) are usually higher than spot prices ( present price of oil). This is because oil futures take into consideration the spot price, the cost to store the oil in the meantime and the opportunity cost of not collecting money for the futures till the expiry date.
Hence a simply arbitrage example could be as such. Spot price (today's price) could be $50/bbl. Future price for 6months time is $70. Cost of storing the oil for 6 months could be $10. Hence I can buy one barrel of oil at $50 today, store if for 6 months at a cost of $10. This will incur a total cost of $50+$10 = $60.
Concurrently, I will short the oil futures today at $70. Hence at the end of 6month, I will just have the deliver the oil i bought initially to close the contract. Profiting $70-$60=$10
Such examples are so simple that such opportunities usually do not last very long. However it is happening right now ( according to the article). Hence the article is trying to look deeper into what is happening with the oil market.
Possible reason of this occurrence: The easy oil storage places could be already full. Hence even if you have the money to store the oil, there is no place for you to store it. Hence we are not able to take advantage of this opportunity. Though this can be easily solved by the oil producing countries by not pumping so much oil now,and pump more when the prices go up, BUT they are not doing that. Why?.....
Reason: The oil countries are hard up for cash. So even if they don't earn much from each barrel of oil ( due to the drop of oil prices), all they have to do is sell more barrels of oil.
Here are some statistics :
Russia needs $70/bbl to balance its budget and current accounts. http://www.ft.com/cms/s/bbacc5ac-bc66-11dd-9efc-0000779fd18c,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F1%2Fbbacc5ac-bc66-11dd-9efc-0000779fd18c.html&_i_referer=
Venezuela needs $60 to balance its 2009 budget, which is a belt-tightening for Chavez. http://www.economist.com/world/americas/displaystory.cfm?story_id=12853975
Saudi Arabia needs $49 to balance its budget. http://www.bloomberg.com/apps/news?pid=20602099&sid=aoDi6KxVnBR0&refer=energy
In all: We are expecting oil prices to go up, as the oil producing countries NEED the cash. So those of you who have the same belives, you might want to conside these 2 oil ETF to long
- USO - United States Oil Fund (USO US)
- Double-long Crude Oil Fund (DXO US)
Link to the article : http://economistsview.typepad.com/economistsview/2009/01/super-contango.html
Tuesday, January 13, 2009
Facts first :
- Profit after tax and minority interest (PATMI) drop 35% Year-on year ( YOY) to S$73m ( first since 1Q03)
- Mostly due to S$33.7m losses in marked to market (MTM) on investment portfolio, mostly in externally managed funds
- Printing revenue ( core business) drops
My analysis ( some assumption because I did not look at the balance sheets) :
- From point 1 above, it implies that the previous year's PATMI is around S$112m.
- Assuming there is no MTM loss, the PATMI for the current year should be S$73+S$33.7 = S$106.7m
- This implies there is additional loss of profits from other factors like the advertisements of around S$112-S$106.7 = S$5.3m
- From what I know, the cost of placing advertisements in the straits times has increased by many times over the years.
- Hence for the total revenue to stay the same, it means that there are actually fewer people placing ads in the newspaper. ( i.e. there is a lack of supply of people wanting to put ads)
- With the crisis slowing creeping into Singapore, I would expect lesser people wanting to put ads, and hence this is going to affect their operating profits even more.
- However on the other hand, MTM loss is really just 'The act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.' ( taken from Wikipedia)
- Hence its more of a paper loss. Meaning if the market to recover, this MTM will defintely contribute to the 'profits of the company.
In all it seems that SPH's is really diversifying its business into property and investments. If you have faith in their investments ( which are causing the MTM losses ), it might be a good time to buy this stock.
As for the ads revenue, it will not be THAT bad, but i feel that for SPH to grow even more and give shareholders more value, we should be looking more at their investments and property business.
Sunday, January 11, 2009
*taken from bloomberg
At the STI index of 1780.57 the STI is trading at 1.1x P/B which is similar to the that during SARs. However the lowest it did go to was 0.7x P/B which was in 1998's Asian's financial crisis.
Looking at the above graphs. We can see that the STI levels is around the level of SARs in terms of price to book ratios. ( This might be a better gauge than absolute number in terms of the index, as earning by the respective companies would have changed since SARs in 2003 )
Even though there is still the possibly of valuations to go even lower, it might be time to start searching for stocks and put them in your watch lists. In general I will recommend blue chips first, as they are more unlikely to pull through this crisis,however after the fall of Lehman Brothers, anything is possible..
Particular counters could be like Keppel Corp. They are specialized in shallow water rigs, which are usually used as a short term investment in infrastructure for oil rig companies, and their production can be easily stopped ( which is what is happening now). Hence they are more affected by the crisis. However when the economic picks up, they should be able to recover faster than other oil rig companies who specialize in deep sea digging which are less prone to market cycles. ( Reason: Rigs for deep sea is more expensive but the rigs can last longer,as there is more oil there. Shallow sea rigs are cheaper as usually they dun have as much oil , hence its a case of having a quick/simple rig to dig for oil and to move on)
REITs are looking really really good with yields that are crazily high. Imagine that you bought a stock of $1 now a getting a 10% dividend. When the economy recovers and the price goes back up to $2, if the dividend percentage stays the same, you effectively get a dividend of20%! Of course that is provided the absolute amount of dividend increases too.
Commodities too. SPC, Wilmar , noble. These are companies who deal in commodities. I have not looked at them yet, but shall be starting my research soon. ( I am personally bullish on commodities)
And many more... shall update more when I have the time.
Thursday, January 8, 2009
Hence most people will be expecting the share price to drop when the company issues rights, which it did, on the day of the rumor. Capital Land closed 8.2% down to $3.12 on possible news of the rights issue.
Firstly, let me explain roughly how bonuses work. They are similar to stock splits. I.e if I hold 10 lots now, and the company gives me another 10 lots, I would have a total of 20 lots ( where each lot is half of the initial value,hence no change in total worth). Which is essentially similar to having 10 lots spiting into 2, to give you 20 lots ( where each lot is half of the initial value).
It is usually done because the company believes that it will do well in the following months ahead. So even though the stock price has halved in the example I have given above, with profits from the company, the stock price will still rise.
However for rights, you would have to subscribe to it by paying a certain amount of money. This is generally a means for the company to raise funds, but it is usually not welcomed, as it is diluting the value of the stocks that current shareholders are holding on to. An analogy would be, the profits are like a pie of a company. With more rights issue, there will be more people and hence more people to share the pie. Without an increase in profits of the company ( pie size) each existing person will eat lesser.
On a side note, companies that are doing well and require funds usually turn to taking up debts by issuing corporate bonds or bank borrowing. This is because they will get the necessary funding without diluting the shareholders holdings and would only need to pay the minimal interest from the debt.
Tuesday, January 6, 2009
Anyway, recently the market is rising a little too fast though there is not much change in the fundamentals of the market...this implies that the market is very optimistic. Hence any bad news will trigger off a massive sell down, as big and as fast as how it has risen over the last few days. Only when a constant supply of good news is announced, in the form of fundamental changes and not in the form of rescue packages can we be almost certain the crisis is over.
This video talks about the possible movement of oil prices.
Here is a summary
- It has drop 53% in 1 year last year, from a high of $147
- Reason is because lower demand
- Even though the OPEC cut in oil supply has not really affected the oil price, it might be too early to say, as cuts only start from 1st Jan 09. Hence we should wait for the exact figures to find out if there is really a shortage of demand
- Price drop also because funds are moving out of commodities into safer investments like treasury bills
- $40 will be a good support and $50 will a resistance. However if resistance is broken, $75-80 is possible in the medium term
- We will also need to observe what is happen in the middle east, as it will affect oil prices
Sunday, January 4, 2009
In this video, the following was also addressed :
- Jan effect shows that from 1802-2004, Jan's return is highly than the other months for 16.9% of the time ( not very high in my opinion)
- Works best on countries with no tax on capital gains i.e Singapore ( But based on my own research from IRAS on tax laws. Apparently capital gains/loss does not affect on the individual level. It only affects companies. Hence I would think that this is more applicable to hedge funds and investment companies. By 'making a loss' this year, there are able to reduce their tax for this working year)
- Works best on small caps stock
- Might actually be good to invest in Singapore stocks are we are presently the lowest in PE ( price to earnings) ratio.
- Singapore PE=6
- Hang Seng (Hong Kong) PE = 8.7
- Shang Hai PE= 14
- Dow Jones PE=10
- Thailand PE = 7
Friday, January 2, 2009
Also, because this is at the start up stage, there will be a need to invest our own capital and there will be no pay untill the business starts earning money. (sorry, but there is no free lunch in this world. But of course, if we make it big, the profits will be shared)
Hence I am looking for people who have the following attributes.
- Have the technical expertise to make a website
- Business minded
- Dedicated ( as I have big dreams for the project)