SOS Robert Prechter said Cash is King

Cash is King.

Since August 2008 to Dec 2009

1. Investors cash out of mutual funds USD56bil

2. Investors cash in bond funds USD198bil

Other Issues

Bonds actually is the biggest bubble, according to Prechter.

The safest place is Cash (in a safe bank), period.

Stimulus - CPI still slow, gaining the upper hand.

Print, print, print, but Fed is actually getting worthless mortgages actually i.e. toxic assets

Why good for dollars, debtors cannot paid its IOUs, the debt will worth zero, amount equivalent of debt evaporated.

MyView

His argument actually is very simple, the money created since 2002 to 2008 is turning into TOXIC ASSETS i.e. debt that are not repayable. The printing on money by Fed is used to buy toxic assets, which eventually evaporate. Hence, there will be a lot of less USD circulating in the market when the Debt turns BAD.

SOS Finnish proverb

• A Finnish proverb: "Sh*t must be good. Millions of flies can't be wrong"


• More should be investigated on world derivatives of USD605 Trillion and its actual impact to the financial instituitions


• Charlie Monger said US has become a casino country, ponzi over ponzi schemes


• Iceland, PIIGS, Baltic Countries, UK, etc is over geared


• Everyone is relying on China, Shanghai Tower (highest building in the world)is due to open 2014


• James Chanos believe China properties bubble is Dubai 1000 times
• China sold USD46 billions of US treasuries and most likely to buy GOLD
• What about Australia?

SOS Going Forward

Picture 1
Picture 2

Picture 3

Picture 4

Look backward from picture 4 to picture 1. The probability of that happening is quite likely, simply because USA has created a bubble in the Property & Derivatives. When the debt implode, you will see the similarity of DJIA in 1929 and how it looks like Japan after the property and stock market crashed. Property value and share market dropped 75% compared with 20 years ago.

With the benefit of what had happened, one can stay ahead of the crowd.

Just an update:

Portfolio inflationist Down 3.7%

Portfolio deflationist Down 2.0%

Both portfolio started since 19 Oct 2009.

At this point of time after about 5 months plus, it appears both portfolios are pretty hopeless, whether you are a deflationist (short the market, short commodities, long USD) or inflationist (long the commodities, short the USD, long the precious metals). Well, we have to wait longer to see what is the outcome, lets wait.

SOS Robert Prechter Said

Precther said in Feb 2010,

the toxic assets which were built up in USA since 2000 to 2006 approximate USD40 to 50 trillion, will eventually evaporate into bad debt. No amount of bailout is sufficient to withstand that.

what was done since Sept 2008 is merely slowing down the crash or implosion of the toxic assets. his view was to be highly in cash while waiting for opportunity to invest in next 2 yrs. Preserve capital (next one to two years), then invest.

MyView

I believe investment or business is probability game. One has to knowledgeable and also using the correct tool to come up with a probability scenerio, i.e. the upside and the downside.

Reading the right materials and listening to the right advise wins have of the game, the challenge is to put those into action.

SOS China, what we seldom read in the mass media

SOS China Property Market

• Property market is building up a big bubble (the cost per square foot in Shanghai is close or higher than in New York City)


• Fundamentally the property in major city are over price with rental yield of only 3% p.a.


• Supply is over demand (google Andy Xie)

SOS China Spiritually Bankrupt

• China Communist Party (CCP) in 1999 percecuted Falun Dafa practitioners due to jealousy of the President then, Jiang Zemin, due to its popularity and growing in numbers (which brings fear to CCP)




• 1992, Falun Dafa established by Master Li as a type of qigong practicises and gain popularity via the word of mouth and has grown from a few thousand disciples to around more than 70 million people in China




• During 1992 to 1999, no official complains were filed against Falun Dafa, but in July 1999, Jiang Zemin, decided to percecute Falun Dafa disciples.




• Actually during that period of 1992 and 1999, many researches were done on the practitioners and were found it was beneficial to their health as well as improve the moral value of the practitioners and also won many certifications on health benefits and supported by various associations in China




• It was also spread to outside mainland China in 1993/4 and well accepted by other countries such as Australia, Canada, USA, Europe countries, South East Asia, Hong Kong, NZ etc.

For those who like to know more about CCP, one can go visit:

• www.epochtimes.com (look for Nine Commentaries of Communist Party)

• www.clearwisdom.net (to find out how to learn Falun Gong and practitioners experiences)

• www.falundafa.org (to download free materials on the excercises and books to learn more)

SOS Panic in Market

During a deflationary Crash (like NOW)

1. Stop on all "Long" stocks



2. Short the market, but ensure your short is what you can afford (short financials)

During a panic, everything will go wrong.

By Bob Prechter (listen to him)

SOS Confused about the direction of Market

Don't be.

The more you think about it, the more you are confused.

Why. Because the market is not rational.

The market movement is the actually make up of the crowd emotional action, in short, it is the result of the social mood.

It is the social mood that set the trends of the market. So, social moods is the cumulation of each and every individual actions.

The reasonings given day in day out in the media is basically the script written after the play is over i.e. the results lags the movements.

How then can you read the social moods. Elliotte wave can be used. It is not a perfect predictions, but it can help one to avoid the major mistake. Elliotte wave provide a predictive trends that one can avoid major mistake.

So, what then so big deal about Elliotte Wave. Actually, it is just a guiilding tool, nothing more, end of the day, we used it for our advantage be it in trading or investing. The best use is to put it in practice, and more importantly is to preserve your capital and allow one to put in the optimum yields.

MyView

There is no wrong or right in using a certain tool to guide in investments. It is actually how to resolve when there is a problem arise. The question is not what is best tool, the right question is get the best yields and know where you go wrong. Investments must be independent.

SOS SHORT the MARKET

Does This Look Like A Healthy Economy To You?

GET A RED UMBRELLA, WHEN THE MARKET BLEED, YOU ARE PROTECTED

Industrial capacity at an all time low: In November 2009 industrial capacity was 71% -- roughly 3 out of every 10 of our plants are doing nothing at all.

Shocking real unemployment: The Center for Labor Market Studies at Northeastern University estimates that real unemployment now stands at 18.2%: this is higher than the posted rate at the end of the 1930s.

Falling revenue and profits: Even after laying off people and cutting costs, year-over-year

Corporate Revenues and Operating Earnings fell 17% and 43% in 2009.

Food stamps in America? There are more than 35 million Americans on food stamps.

Falling incomes, rising debts: REAL incomes (not using massaged data), are down 40% since 1973 even while consumers still owe $2.46 trillion in credit debt

A creeping socialist tide: A full 18% of incomes are coming from an already broke government.

Unemployment desperation: No less than 53% of people falling off unemployment numbers are doing so because they've exhausted their benefits. This is an all time record.

Plunging state coffers: Individual tax receipts are down 29% year over year in October 2009 (the most recent data available). Keep in mind that this is a drop from 2008 levels! How is government going to pay debt or provide services?

Bankrupt governments: California is the first state to go begging for a bailout, but you can be sure that others will follow.

Fully 48 states are running deficits. Even if Obama doubled the bailout efforts, US states would still be underwater.

In very simple terms, the entire U.S. Government (state and federal) is bankrupt

SOS Short US & China Part2

Part 1 - Jan 20 2010
SH - 51.00 (short US stocks)
FXP-8.00 (short China stocks)

Part 2 - Feb 5, 2010
SH - 54.00
FXP - 10.19

Action:

Sell HALF of FXP - make 27%. Then keep the other half at average cost of 5.81 . Hence the chance of it lower than 5.81 is remote, historical low is 7.00. Historical high is on Mac 6, 2009 which is above 100.00

Why don't we try out

TWM - 27.50 @ 5 February 2010

This is the inverse ETF of Russell 2000 stocks of US. It track the Russell 2000 on double inverse basis.

150 shares x 27.50 = 4125

Say your expectation is that Russell 2000 will drop 30% in 2 years, hence, you may gain from TWM at least 60%. Try working out this strategy,

Sell

50 shares when it reach 34.40 or 25% gain (hence remaining cost is USD24.00 per share)

50 shares if it touches 41.25 or 50% gain from original cost of 27.50 (remaining cost is 6.70/sh)

Hence remaining shares holding cost is only 6.70, you may keep for long term, 2 to 3 years, to make the extra ordinary gain of 2 to 3 times your original costs of 4125.

Its 52 weeks high is on 6 March 2009 = 116.00 per share

Its 2 year high is in November 2008 = 168.00 per share

What is that chances of happening again? POSSIBLE I think. 50:50, hence if it does achieve say 116.00 per share , you actually make a total gain of 5465 gain or 132% of 4125 original cost.

SOS is it the Fed?

Issue: Is it Fed lower interest regime in 2000 onwards cause the 2008 financial crisis?

Not directly perhaps. Canada interest rate track closely to the US. Nothing happen to the boring Canadian banks. Why?

Simply because, Canada banking system is very stringent with bank leveraging. That's what differentiate the Canadian vs US. Derivatives in Canada banking system is limited.

By Paul Krugman (theStar, 3 Feb 2010)

SOS Can more debt solve the debt problem?

Obama offering to freeze spending by 17% in US discretionary-spending programs, after he ran them up over 20% in just one year, is laughable. Greece is an object lesson for the world, as Japan soon will be. You cannot cure too much debt with more debt