Chinese Finance Fengshui 4 Feb - 5 Mar Wood Tiger

Just when you thought the old growler had finally given up the ghost, the White Rabbit opens the adventure by promptly disappearing down a hole. All very well for bears caught short (this is a wood month), but perhaps it's best for the rest to consider ourselves blessed simply that spring has sprung and a new year begun.

A couple of admonitions during this bumpy beginning: incline to the horizontal, and decline the pervertical. Remember that the raisin d'etre of dried fruit is to help prune the posterior and repair the interior. Health is wealth and happiness is all. Don't let that tired and tiresome Tiger get the best of you: Grab the bull by the horns and get set for a much better ride ahead.

Overall: Bumpy
Carrot days: 4, 8, 20 Feb, 4 Mar
Sticky days: 9, 12, 18 Feb, 3 Mar
      

China tweaking 5 year plan in opposite direction

Recently China has declared a change in their financial planning for the next 5 years. As I wrote previously speculating or postulating this shift, the results will be progressive and finally will see a "be careful of what you wished for" scenario - especially for USA.

Instead of focusing GDP growth, this strategy and policy will go the opposite. Through the years since the invention and reliance on the "GDP factor" as an economic health indicator, countries around the world blindly followed this capitalist propaganda. Because the proof was sort of in the pudding. It is true, GDP growth means a better consumption rate, better disposable income, better life, more products, bigger homes, car ownership, expansion of the urban sprawl, creating of suburbs (because we can afford to drive an hour to work), better gadgets, improvement in IT products because of demand and thus competition. So on and so forth. And obesity!

So grab that last sentence: obesity. GDP growth if applied to a human body would be like this following short story.
A baby is born needs alot of nutrients, mother's milk, love, care, food, to grow. The cells will multiply. The baby's weight has a superb "GDP growth". Good because that is what a human baby needs. Growth. Then teenage more different types of growth - hormonal, physiological, psychological, mental. Language skills. But the body now grows in different manners. More muscles, more shape. Some acne. Bone growth slows but still growing. So during the 20s, the body literally doesn't grow anymore. If it did, imagine a humongous monster, devouring anything in sight!

Apply this to basic economics whether the experts agree or not. Growing just by GDP is a fallacy. You can grow in other ways. Manage the growth. Grow mentally. Grow the education and healthcare. Grow the mindset - self-sufficiency. Instead of unlimited multi-storey villas and five swimming pools. Do you ever swim like 12 hours a day, every day? And what is with the golf course. This resource intensive "sport" is a very big sin. Water is consumed in the value of 5 elephants per day. Plus maintaining the "green grass". Why not maintain green vegetables? And water for plants and animals? The space itself for a golf course, could have been a nice shady tree-filled park.

Many times I meet people from the First World Countries - and they have nice things to say about Asia. Then one or two times, they will say this. I find it strange Asian always thinking about "saving face". Well saving face is not a concept created in Asia. It was created in the West! Have you noticed that it is quite strangely white those people on TV (politicians, actors, etc) have - for their teeth?!! And bronze lobster-red body with a high potential of the big C - cancer - imprinted? And what about coats and ties, plus unbelievable prices for a dinner and alcohol?

USA is wishing and pressuring China to increase the value of the yuan. Reduce their exports and start importing. Reduce their GDP. So China has been thinking (and perhaps reading my blog and articles through the years) - yes, let us give them what they requested.

So the scenario will surely be good for USA. Or not?
These scenario will eventually happen:
1) The yuan (oh, and if you cannot pronounce it correctly, it is not "you-wan", it is yuan) will increase in value. Those who hold the yuan or earning yuan, will have a better and higher disposable income. Meaning more chance to buy products from another country, or more expensive, higher quality (maybe) products.
2) Treasury Bills will be slowly discarded and buyers will be few. Meaning a direct reduction in the demand for US Dollars. US policies that rely on these loans will be diminished. Meaning US influence and stranglehold (hegemony) will disappear throughout the globe. Military bases will have to be closed because of insufficient funding.
3) As opposed to completely-free democracy, whereby land/property is openly offered, and thus creating property boom and bubbles, such as in USA, UK, possibly Thailand and so on and so forth, China doesn't have such as system. Perhaps they will extend a hand to "overseas Chinese" - those with Middle Kingdom heritage can now purchase property in the motherland. So whatever happens, it will have a loyalty effect. Property will keep growing, wealth flowing into China. Chances are overseas Chinese from Singapore, Canada, French Reunion Island, Indonesia, Malaysia, Antigua - everywhere - could have a shot at buying and owning a property in China.
4) US Dollar would have dropped (gradually) 10%, maybe 40%. Low enough for middle and higher income investors from China to buy out corporations in USA. Or via Mergers and Acquisitions. Not that the anti-trust law will be rearing the protective nationalistic front. So perhaps not. China will instead invest in itself, and other commodity filled countries. Thereby reducing not just indirect investments in USA (T-Bills) and now direct investments - from stocks, corporations and even education.
5) It is possible to employ a maid from the USA for about 2% of your salary - in the year 2020.

Riding the Wave Methodology - 8 July 2009

Posted 08 July 2009 - 09:01 PM

Here are some summary of some personal messages that are related to this topic.
8 July: Now is week one of July. Things have as noted in the detailed analysis above, going slowly, going downwards, 10-20% off the current year's peak for some stocks. Many many wrote telling me negative sentiments. You feel low because the STI is low. You feel you bought just before the "crash" and thanked me for the article, at the same time, hoped it was written at least a month ahead.

Predicting and getting it correct was not my main goal of the writeup. But to show the mechanics and automation of how the whole electronic system runs virtually behind our computer monitors and LCD screens.

Therefore: A pep talk. Down, low, doesn't mean you have to feel low. It's perhaps the second chance to take up enough position now before things go upwards as clockwork.

Case in history: The 1997/1998 then 2001/2002 bear runs where terrible to many. Yet when things went upwards, nobody stated nor proclaimed - Now is the bull run. The bull run or in more subtle wording, the upward movements, just go, gain momentum, and those who bought really really early, gained. Others keep watching, and waiting for the bull run. Then when it's over a considerable peak, you would finally attempt to purchase unit trust funds, or buying a home, but alas, it's too little too late. You'd be paying a hefty amount. For instance, many bought into Rio Tinto when it was peaking at 130 AUD because they finally (too late) believed China and BRIC will gobble and maintain that demand from their mines for the rest of the decade. Today, you know the price.

In cyberspeak: There's no better time to buy that laptop but now.
http://www.singaporestocks.com.sg/topic/12157-coming-correction-because-of-selling-july-sept-2009/

Coming correction because of selling - what I wrote on 13th June 2009

Posted 13 June 2009 - 12:54 AM

Many have asked me with a lingering concern of a correction.
A correction means a downwards movement after and strong surge in the market. Thie is mainly due to institutional buyers/ (YOUR! Unit Trust) funds, selling their purchase to make a profit and most times, these are made by robots or computer algorithm pre-programmed into their systems during purchase. Most of these fund managers/system, have not just research, but also some complex mathematical automaton, to calculate, suggest and pre-program a fair sell price for the sake of the portfolio's holders which is you the investor in the unit trusts.

For instance, HSBC (Hong Kong) went down to 35 HKD from a high of over 140 HKD, but all along this time there are selling and buying, by the (now not so) complex systems of algorithms and predictive calculations. So when the computer or program sets sight on on buying at 35 HKD, it has some safety threshold to pull out at a staggered level - e.g. sell 10% when gain 10%, sell another 10% when gain 20%. Buy 5% when down 15%. Note that these funds are huge: just like you were told - unit trust are funds put in by people, pooled together to make good decisive (maybe not now) purchases and investments.

So perhaps this Fund spent 100 million HKD (40 million SGD). So prices went up to 35 x 1.10 = 38.5 SOLD 10% of holdings
38.5 x 1.20 = 46.20 SOLD 10% of holdings
46.20 x 1,20 = 55.44 SOLD 10% of holdings
That's already 30% sold and prices has went up by 57%

Today: HSBC has moved over 70 HKD. Well still half of it's former 2007 glory days. BUT the computer or program were already pre-program. It's not just one stock nor one fund. It's 200 funds, managing 1000 stocks and chances are most of them buy into high profile stocks that we all know moves the market and also are part of the indexes - STI, KLCI, FTSE index. In short sometimes these "lazy fund managers" just mirror most of an index - then sets the program going automatic.

So now you have: Singtel, SIA, Citibank, big, all very big, Toyota, Walmart and 1000 other stocks that MOVE THE INDEX all going into auto-pilot. And these auto-pilot has seen prices going up and up at an accelerated speed literally - exponential in such a short time. So in effect, it will come a time when the system seems to be doing the selling at around the same time - it triggers the technical or computerised situation of a correction. The casual investor panics and sells as well. But remember the programs will set AUTO to buy when a stock goes down 15%. So when you SOLD your stock and a few of your friends too who pushed the price down 15%, the AUTO buys it in. Knowing that it had previously MADE PROFIT when it was up to the 46.20 HKD.

What did you learn from the above? The more money pooled, the more powerful you can control and make profits. A 5% gain x 40 million SGD is alot of money. So now you understand why those FUND Managers keep pestering you to invest in their 20% p.a. profit fund. (Past performance doesn't guarantee future yields!)

Back track to the main topic: so reading the signs to see why this correction is coming. CHINA SSEA up 52% since 31st Dec 2008. Canada 28%. HK Hang Seng 29%, STI 35%, KLSE 19.5%, KOSPI 28% Taiwan 51% Thai 32%, Brazil 66% Emerging Market MSCI 38%. (Page 90, The Economist 6th - 12th June 2009)

Basically not looking at previous historical highs of 2007, comparing just last day of 2008 - to current status. Most are up avg 38%.

Stock portfolio are supposed to outperform bonds(5-7%), FD (3-5%), cash (0-2%) by say 8-12%. Now it's up 38% half a year or 76% p.a. rate.

Therefore, the question you have asked me is WHEN? Humbly, my educated and researched guess is from July to Sept or should I say, between July nd Sept. Because both statements have their merits. It could be a continuous slow nosedive and nobody (the small individual buyers) seem to be able to pick up - e.g. 2 cents down every week OR if could be a major 1-5 days of spiral just like in the bad old days of Sept 2008.

Extra news:
Several Middle East funds bought into ailing UK banks etc at the downturn, some even before the downturn. Even Temasek or GIC bought some of those e.g. UBS. Selling today still make a loss. But still a smaller loss so some of them recently were sold. Some were sold too because of the imminent crash of the USD.

Comments, suggestions, thanks welcomed.
If you do write to me, kindly put in more details. Some introduction would be nice. E.g. you are starting with x amount of stocks. You are using this system. You read about Wilmar's stock news. Show some of your research. It's not quite polite or amusing if you just wrote "do you think Nokia will go up? Thanks". 

Singapore Stocks Old Post

Previously, I have been writing all my Fundamental Analysis in SingaporeStocks.com.sg - now I am porting them over here.