SOS Rule #1 in Investment

"Missing a market move may be a shame, but getting caught on the wrong side of one means you lose money. People who have gone through the experience know there's a big difference."

Patient is the name of the game. It can be one year, or two or even three to four years. The importance is that one should not lose its capital.

Sounds easier said than done, when 90% makes money, and you are missing it, it is a shame. But, one must remember, a market never end, only the players opt out. So, if one wants to be in the game for long houl, PATIENT is the first requirement of the game.

SOS Let's Evaluate the Changes

SOS Let us take a look at the Government actions (whether it is sustainable or necessary during an economic boom)

1. Stimulus - car credit, housing allowance [broken window concept]


2. Bailout - supporting too big to fail incompetence banks or conglomerates [proven to be waste of resource]


3. Zero interest rates [if it is good for the economy, they should have done so during the good times]

If you realise, the above steps are unsustainable and unproductive over a long run.

Let revisit what got us into the mess and see if any major changes:

1. sub prime mortgage and prime mortgage for housing


2. commecial collapse


3. derivatives debt exploded

None of the above actually changes much, in fact the following happen

1. Unemployment get to 10%


2. Food stamps at historical high


3. Bank giving out credit plummet


4. Saving rates increased

None of the above effects are good for the economy.

So, just look at the 3 solutions, the 3 causes and the 4 results you will notice that LONGER run the economy of USA is getting worst. It is similar to Europe.

Can Europe and US get out of the crisis?

Can the BRICS save them?

Depends who you ask, if you go for the school of deflation depression theory, i.e. it will effect worldwide, hence, the above answer is No and No.

SOS Two schools of thoughts

The two major schools of thoughts in Economics are:

1. Hyperinflationist
2. Deflationist

Both is actually right, it is a matter of timing. The Hyperinflationist says it is going to happen soon (1-3 years). The Deflationist says deflation is going to happen first i.e. 1-3 years, then only Hyperinflation will come much later 3-5 years from now. Their differences actually arises from the following:

1. printing of money
2. evaporation of credit

The deflationist is of the view of the evaporation of credit is much faster pace than the printing of money or creation on new credit. The school of hyperiflationist: Jim Rogers Peter Schiff Marc Faber The school of deflationist: Robert Prechter
Gary Shillings Steve Keen Mike Shedlock Hence, the investment strategy should be OPPOSITE for both schools of economists. MyView Robert Prechter and Gary Shillings and Steve Keen views are more convincing because the DEBT level from conventional housing and commercial loans as well as derivatives is far larger than the Government can handle from printing of money i.e. the implosion of bad debts is far greater than the printing of new money. On top of that, one has to acknowledge the following that drives the economy:

1. changes in unemployment level
2. consumptions capacity (depends on household debt level & unemployment)
3. prices level of housing (long term) and commercial properties
4. changes of bad debt for derivatives

Should the above four factors cannot improve on a SUSTAINABLE level, we can conclude that DEFLATION will come first and Hyperinflation will sets it many years later.

SOS Economic Behavior

the lower the price the lower the demand, the higher the price the higher the demand

no wonder it is always the 90% that lose their money

this is what Robert Prechter believe;

when the US dollar appreciate (the loan become bad far exceed new credit created)

the following will happen

• crude oil will drop
• precious metals will drop
• agricuture commodities will drop
• stocks will drop
• property prices will drop

Thanks to the near zero interest funding, most of the cash went into the above assets classes. when the US dollar strengthen, the carry trade will unwind, hence, selling those class of assets and running back to USD.

SOS Leadership

Hmmmm.........................................

Some of the good tenets of a leader

Effective leadership is putting first things first. Effective management is discipline, carrying it out. Stephen Covey

I suppose leadership at one time meant muscles; but today it means getting along with people. Mohandas Gandhi

Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall. Stephen Covey

A good objective of leadership is to help those who are doing poorly to do well and to help those who are doing well to do even better. Jim Rohn

Leadership and learning are indispensable to each other. John F. Kennedy

It is better to lead from behind and to put others in front, especially when you celebrate victory when nice things occur. You take the front line when there is danger. Then people will appreciate your leadership. Nelson Mandela

Leadership is solving problems. The day soldiers stop bringing you their problems is the day you have stopped leading them. They have either lost confidence that you can help or concluded you do not care. Either case is a failure of leadership. Colin Powell

Management is doing things right; leadership is doing the right things. Peter Drucker

Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes. Peter Drucker

No institution can possibly survive if it needs geniuses or supermen to manage it. It must be organized in such a way as to be able to get along under a leadership composed of average human beings. Peter Drucker

Leadership is the art of getting someone else to do something you want done because he wants to do it. Dwight D. Eisenhower

The supreme quality for leadership is unquestionably integrity. Without it, no real success is possible, no matter whether it is on a section gang, a football field, in an army, or in an office. Dwight D. Eisenhower

You don't lead by hitting people over the head - that's assault, not leadership. Dwight D. Eisenhower

Absolute identity with one's cause is the first and great condition of successful leadership. Woodrow Wilson

I have a different vision of leadership. A leadership is someone who brings people together. George W. Bush

Leadership to me means duty, honor, country. It means character, and it means listening from time to time. George W. Bush

Leadership is influence. John C. Maxwell

I speak directly to the people, and I know that the people of California want to have better leadership. They want to have great leadership. They want to have somebody that will represent them. And it doesn't matter if you're a Democrat or a Republican, young or old. Arnold Schwarzenegger

SOS World Class Org Chart!

Just a mindless joke. Don't take it so seriously.

When top level guys look down, they see Sxxx
When lower level guys look up, they see Axxxxxx

SOS Living in Heaven?

Sometimes I wonder if we know we are living on heaven.

Take a break and enjoy the marvellous scenes.

SOS Rarely Happen?

Summary of comments for April Issue in Elliote Wave by Bob Prechter

It is rare to have technical indicators all lined up on one side of the ledger. They were lined up this way—on the bullish side—in late February-early March of 2009. Today they are just as aligned but on the bearish side.

Consider this short list:

1. 3.5% cash on average in mutual funds. This figure matches the all-time low, which occurred in July 2007, the month when the Dow Industrials-plus-Transports combination made its all-time high.
   


2. 10-day moving average of the CBOE Equity Put/Call Ratio … investors are interested primarily in betting on further rising prices, not falling prices, and that’s bearish.
   


3. VIX, a measure of volatility based on options premiums, has been sitting at its lowest level since May 2008, when wave (2) of 1 peaked out and led to a Dow loss of 50% over the next ten months.
   


4. The Daily Sentiment Index, a poll conducted by Trade-Futures.com, a poll conducted by Trade-Futures.com, reports the percentage of traders who are bullish on the S&P. The reading has been registering highs in the 86-92% range ever since last September.


5. The Dow’s dividend yield is 2.5%. The only market tops of the past century at which this figure was lower are those of 2000 and 2007, when it was 1.4% and 2.1%, respectively.


6. The price/earnings ratio … has improved tremendously … but … is in the area of the peak levels of P/E throughout the 20th century.


7. The Trading Index (TRIN) … the 30-day moving average of daily closing TRIN readings has been sitting at 0.90, the lowest level since June 2007. … Usually long periods of low TRIN exhaust buying power.

MyView

How often can you find 7 indicators that points to the BEARISH market, once every 80 years. So what should you do when you sees one. Two options, first the save options, stays out of the market and wait until market crash at least 50% before reenter.

A more aggressive option is to SHORT SELL the market, with leverage. After market is down more than 50%, consider to go in SLOWLY i.e. concentrate on dividend yield stocks.

SOS 1929 to 1932

Between 1929 and 1932 July, DJIA lost 80%.

In between, there were about 9 rebounds, ranges from 15% to 65%.

Between 2007 and 2011, DJIA will lose about 70%, i.e. from 14,000 to about 4,500.

Nothing much change actually, human behaviors remains.

NOT many survivals has the experience of seeing the tsunami waves. The people who sees it, and believe it, but did not live long enough to tell it.

The plate already cracked, the wave is building up, by the time we sees it, it is too late, no time to run up the hill.

So, please, while you still have a window of opportunity RUN, RUN, RUN now....................... Good luck.

SOS Portfolio D & I May Update

Updated on 7 May 2010

Portfolio Deflation +2.46%

Portfolio Inflation -2.41%

Date of inception of Portfolios = Oct 2009.

SOS Derivatives 605T

Derivatives

1. Total Derivatives currently is USD605trillion (no colleteral)


2. Naked short selling. Equivalent to counterfeiting. Selling things you don't owned. It is Fiat.


3. Buy stocks in margin. Borrowing stocks and selling short during Lehman Brothers.


4. Program sellings, took advantages on gap between genuine traders.

Web of Debt

1. Ellen Brown, author for Web of Debt. Bank can borrow at 0.25% (benefits the banks that cause the problems)


2. Need to have own credit system like North Dakhota, and not dependent on the Wall Street.

SOS When will the Music Stop

Mr Bullish - you just miss the once in a lifetime bull market if you do not enter soon, as proven since March 2009.

Mr Bearish - you must be crazy to enter the DJIA now as it has increase about 75% from its March 2009 low.

Bullish Team - most of them already entered the market i.e. action already taken, not much cash left to enter the market

Bearish Team - has been side line since August 2009, almost 10 months did not enter the market on worry that the market will collapse further below March 2009

Realistic Team is short the market (when it is near 11,000), while trade on good dividend yield stocks since August 2009.

MyView

At the moment, Realistic Team may be losing money on his short, but the good dividend yield stocks has gave them a reasonable gain. So when the market turn bearish, the Realistic Team will reduce its good dividend yield stock and make money from the SHORT.

Actually it does not matter if you are bullish or bearish, the one that makes reasonable return is actually the realistic team.

So how would one be consider a realistic team? Follow good dividend yield stocks until it is no longer attractive (i.e. yield below 6%) and then put a short just in case the rally collapse like in Sept 2008. The short is a hedge to a sudden collapse, while the high dividend yield stocks act as the cash cow until it is no longer attractive.

SOS Good Movies

Old and good movies

1. Stranger than Fiction


2. The Bucket List


3. Seven Pound


4. An Education


5. I am Sam


6. Movies in cinema actually reflect the social trends.

SOS will it repeat?

What is the probalistic chance of this happening in May to Oct 2010? Let me just count, hmm, it has been almost 80 years since 1929, chances are low, ain't it?

What about this?

• Do we believe if we are in the 70s thought China would be what it is today?
• Do we believe that in 1998, when crude oil price is at USD10-15 per barrel became USD147 per barrel in 2008?

What are the odds?

Does trends always need to be linear?

Why, start researching

SOS Economics

Economics is great, anyone can become one.

Even kids can be good economists.

What do they need to know, nothing much actually.

The amount of data analysed by PhD, Dr, on economics is unbelievable.

Everyone has one theory.

So will be the kid.

Bottomline, economic is up to your own interpretation and perception, depends what angle you are looking from.

MyView

The point here is economics learned in school is theory, not reality, hence, there is no correct answer to economic problem because the elements involves is far from just statistics, figures, or facts, it involves something we seldom learn in school, and hard to predict, it is called human behaviour.

Until we are able to have a feel how human behaviour react to a economic situation, it will be hard to predict what will happen next. Economist may suggest all methods to solve the problems, one thing which they are sure in their mind is that they are not sure the reaction of the solution. It can go both ways.

The SOLUTION is no solution. Just do it for the best interest of the majority, not the wall street, the main street, even at the expense of losing your popularity.

SOS Conventional Analyst

What is their report based on?

• PE ratio


• GDP growth


• interest rate trends


• war


• economic crisis


• RNAV


• DCF


• EBITDA/EV


• Dividend

Just look at the recent news on Greece,

When the market goes up, the news will be (Forbes)

March 26, 2010
A Greek default has been avoided. The ECB is holding its nose. But the test will come in the markets next week.

When the market goes down

April 29, 2010
Greece explodes -- and so does an oil rig. Here's what they have in common

If you notice, the news is after the event, so it cannot be wrong. When the markets drop, the news will say it drops because of .......

And when it goes up, the news will say because it ...............

This is the same for conventional analyst who based on GDP, interest, PE ratio, DCF, RNAV, and whatever fancy ratio to substantiate their Target Price. One month hot, one month cold. Can you imagine, if an investor follow this analyst, within a span of 2 months, the target price can range between RM3 to RM8 per share? It is a fallacy to say that this conventional analyst is objective in his statement. We are lying to ourselves.