SOS The Market can stay irrational longer

Economy is basically partial science (can be measured and tested) and partial arts (basically a collection of human behaviour)

Hence, if ANY government gave a set of statistics or information to the public, and in the best interest of the public to know, more often than not it is not accurate. Of course this arguable. However, one thing is for sure, the government will paint a story (in the government's interest) with whatever set of information or statistics or data.

An example: assuming the Fact that oil price surge to USD120 per barrel

1. They can say, the good new is that demand is good, which translated into a vibrant economy, hence push the price to higher level.

2. However they choose not to mentioned it "may" be cause by stimulus or money printing or speculation with "cheap money", which is not sustainable, i.e. the same fact can be explain in 2 different ways.

So, as usual, the society will always live in a "delusion" based on what the government has "mold" the mind of its citizens. An the truth is always not told, because, it is in the best interest of the country not to tell the truth.

MyView

When the reality and the "painted story" gaps grows wider, something drastic will happen, example, when the mass realised what is said and what is the reality is so different, the citizen will "revolt", no matter what the satistics say otherwise.

The American is good at hiding the truth, hence, voted # 1. So is China, the Chinese Communist Party will take the #2 spot. Check out what did the CCP did to its citizens since the revolution, google, NINE COMMENTORIES.

SOS Have we BOTTOM yet?

Look out for the following statistics on the health of the US economy:

1. Unemployment
2. Consumer purchasing index
3. Housing Index
4. Housing Stocks
5. Credit growth
6. Number of foreclosed banks
7. Number of foreclosed house
8. Total debt to GDP
9. Renewal of loan in housing
10. Commercial Estate Index
    

SOS Boom and Bust

How do we identify the boom and bust of an economy?

One of the main indicator is the "Genuine Employment"

What is genuine employment:

• employment that involves in productive activities, produce goods or render services;


• proportion of employment with public sector and private sector can also be a consideration, some public sector may be overstaff (i.e. involve in non productive employment, just merely sit there and do nothing)


• not too much proportion involve in financial services such as real proporty agents, or too many middlemen business or ali baba type of contracts

Of course, it is not easy to get such information. Some of the way to look at it is from the influx of FDI and foreign expertise (not cheap labour like maids, waiters, construction workers, plantation workers, and etc.).

SOS Housing Bubble?

This is an interesting chart. Just look at China and Japan.

Other ways to detect whether housing bubble is looming is using

• New housing price over the household income
• Rental yield of housing sector
  

SOS Billion Ringgit Companies In Malaysia?

"Why Are There So Few Billion Ringgit Companies In Malaysia"

35% of the Market Capitalisation of the Bursa principally came from the Banking and Plantations. It is rather unusual to have the Banking sector being a significant contributor to the stock index. In NYSE, 10 years back, the banking sector contribute about 15% of the NYSE. Today, before the financial crash in 2008, it contributed as high as 22 at its peak%. It would be interesting to find out the ratio of Financial Index over the total market capitalisation of Bursa Malaysia. As at 30 June 2010, the financial stocks market capitalisation is about RM200b as against total market capitalisation of Bursa is RM1,000b. Hence, the ratio of financial stocks is about 20%. And plantation sector is about 15%.

Other significant Market Capitalisation of Bursa are namely monopolistics or GLC type [about 20%], such as Maxis (4%) TNB (3.6%), Telekom Malaysia (3.1%), Petronas Gas (2%), MISC (4%), MMC, YTL Group (3%), etc.

Coming back to the question of so few billion ringgit companies in Malaysia is a combinations of various factors listed below:

1. lack of meritrocracy in education


2. corruption in politics


3. deficit in leaderships


4. Ineffective policies


5. Big government


6. Signifcant beauracracy in business


7. Marginalised minority


8. Security issue


9. Racial instability


10. Questionable justice system

Hence, due to the above factors, they became a deterant for businessman to reside in Malaysia and also discourage talent to stay here due to lack of opportunities.

SOS Market Up

The market went up about 200 points on 22 July 2010 in the early trade. Will it sustain? Is it due to the announcement of further stimulus plan? Is the loan implosion is able to wash off the stimulus?

Well, if you are Bear 3x, go for TZA for short term up and down.

Why don't we try TZA? We know that the graph will be going down in a zig zag line.

SOS Conquer the Crash Second Edition

First and foremost, thank you for your interest in this blog. I didn't realise there are any readers. I always assumed I am the blogger, writer, and sole reader of this blog. To my supprise, there is more than one reader. Comments are all welcome.

First, i like to recommend to all readers, Conquer the Crash 2nd Edition, it is a remarkable book that explains the economics logically, rationally and entirely.

As we are entering the 2nd Tsunami, it is advisable to stay out of the market for a while. The 2nd Tsunami will destroy more than the eye can see. Of course, for aggressive traders, shorting the market (NYSE) is an option.

Prechter named this coming Depression as the Grand Supercycle (for the Bear). It is like, the eclipse of the sun, the timing is perfect. At all angle, based on

• Cycle
• Technical
• Elliott wave
• Demographics
• Fundmental
• Factual

In short, it was all common sense, explained in sophiscated "economics terminology".

SOS Debt Crisis Ahead

1. There is a quadrillion dollars worth of BAD DEBT over the entire world


2. Even all central banks and Fed cannot handle that


3. Net supply of money and credit is shrinking in a fast pace


4. Clear demographic trends make US Debt issues even more pressing (baby boomers consumption spending peak in 2007)


5. Stimulus spending in 1930s eased the pain of the day, but did not cause a recovery, it was the rising spending wave within 1942 to 1968 that cause the sustainable recovery.


6. Despite the recovery, rising defaults from mortgage due to mortgage resets between August to Oct 2010


7. Household debt as a percentage of disposal income increased from 22% in 1946 to 130% in 2009,

Big suprises ahead

1. Major Stock Crash (Aug to Dec 2010)


2. Major Real Estate Crash (late 2010 and late 2012)


3. Gold falls and US Dollar Rises


4. Rising tax rates


5. Sale of a lifetime on Stocks, Bonds and Real Estates

MyView

The government/world central banks has deferred the 2nd tsunami for about 1.5 years since March 2009, we will see how the when and how large the Second wave. It is going to be very very very interesting.

The world is living on borrowed time (i.e. the implosion of debt is ticking).

Perhaps look at Japan's deflation since 1989 as an example, mainly on real estates and stocks. The only different is Japan has surplus, the West has deficit when debt imploded. Japan crash did not spread to the entire world, this round, it is hard to say.

SOS The Secret is No Secret

The secret of success is no secret.

In order to achieve something, you must be willing to do whatever it takes to accomplish it.

The key: Willingness (a frame of mind)

Where it starts: With You (accept responsibilities and take control)

What you need to achieve it:

1. A clear idea of what you want (specific)


2. Commitment (like willingness, it is an attitude)

How the principle work:

1. the concept of thoughts as things


2. the law of attraction


3. the phenomenon of accelerating acceleration


4. the power of an open mind

What Keeps the Principle from Working

It is your willingness which opens your mind to unlimited possibities. Without that willingness on your part, the mechanism stops.

Willingness is the KEY.If you have it, you can get anything, if you don't, you won't.

It's that simple.

SOS Are we there yet?

Harry Dent said in July 2010 -

based on his demographic trend said it is time to sell ahead of the tsunami between August to Oct 2010. Mainly because mortgage loan is due for resets, rising geopolitical tension in Iran, consumers slow again, disappointing 2nd quarter GDP, government default in Southern and East Europe, rising long term interest and mortgage rates, unprecedented bubble in China bursts after the US and Europe slow again

Robert Prechter said in July 2010

based on social mood reflected in the Elliott Wave, all signs shows going down from now, cycle, technical, waves etc.

Gary Shillings said

slows in consumer spending, implosion of debt (US and Europe), saving rate, credit contration

MyView

Simple analogy, the factors that cause the crisis in 2008 is not addressed, i.e. over spending, over leverage, derivatives.

Instead, the government trying to stimulate out of the problem by encourage more spending and debt, and did not do anything on the derivatives.

So, when the drug in the blood wear off, what will happen? The questions is why now, i.e. August to Dec 2010? See above.

SOS Property

How to spot a property bubble?

1. Current ratio of house price to average rent ratio


2. Long term rental yield


3. Cost of interest


4. Affordabilty ratio (3-5 times annual salary)


5. Stocks available, stocks turnover days
6. Loan affordability ratio

MyView

Property bubble can last longer than you can expect. Example, a Singaporean with a salary can buy a property in KL for only 1.5 times his annual salary, can keep the condo vacant until he is able to find a buyer or tenant in a year or two. The the price is artifically high as he has the holding power.

The price of the condo or property actually is based on sentiment of the crowd (local or not local). Hence, MARKETING plays a big role in sustaining the price. Another way of the sustainability of a housing property is the MANAGEMENT. If no one clear the rubbish, over a long run, do you think this will be a popular place to stay, or would a rationale person pays to stay there. Of course, the most fundamental reason for sustaining price is the LOCATION. Another factor for sustainable price is dependable on the long RENTAL YIELD. This will keep the investors keeps coming back.

SOS Slope of Hope

Despite this outlook, keep in mind what The Elliott Wave Theorist said last month: “Even though the market is about to begin its greatest decline ever, the era of hope is not quite finished.”

For as long as another year and a half, there will be rallies, fixes, hopes and reasons to believe in recovery.

Our name for this phase of a bear market is the Slope of Hope. This portion of the decline lasts until the center of the wave, where investors stop estimating upside potential and start being concerned with downside potential.

Economists in the aggregate will probably not recognize that a depression is in force until 2012 or perhaps beyond. That’s the year the 7.5-year cycle is due to roll over (see April 2010 issue). Stock prices should be much lower by then, but optimism will still dominate, and it will show up in the form of big rallies and repeated calls of a bottom.

MyView

This is what Robert Prechter. Many have called him "crying wolf". He has been calling berish since 2000. Even a broken clock is correct twice a day. I think he is going to be very very famoust for his latest call.

This is because he nailed it in the Eliotte Wave, Cycle, Technical and also Fundamental, which forms the Supercycle.

SOS Is it a Dead Cat Bounce

DJIA 7 July Wed up about 400 points 8 July Thur up about 120 points

Yahoo! We are out of the woods. Let me ask Paul. Hello! Paul, UP or DOWN for next 6 months. Well, unfortunately Paul pick DOWN. Ok, now, down how many points, 3000 or 6000? Wheww.... Paul picked 3000. Well, in times of uncertainties, don't trust Bloomberg, CNBC, Fox or Wall Street, don't even trust your brokers or financial analysts, go for the OCTOPUS.

MyView

It doesn't take a genius to figure it out. An octopus is suffice. In the Depression in 1929 to 1932, there are 9 rebounces, average 20 to 24%. In total, it loss about 90% from its peak.

SOS Conquer the Crash

Markets are responding primarily to liquidity flows, not on stocks but also commodities.

Crashes do not typically occur in straight lines. Even they have a structure, with period of bounce and recovery. Each positive sign will probably be taken as the bottom.
Between late 1929 to 1933, the stocks market drop about 90%. During that period, there were 9 rebounds, on average 24% each rebound.

So, why does not many talk about liquidity nowadays? M1, M2 & M3.

SOS What it takes to be a good Trader

By Bob Prechter

1. Method


2. Discipline


3. Experience


4. Take Responsibity


5. Take Losses


6. Take Gain

#3 is a derivatives of #2 is a derivatives of #1

One must established what method to use, Candle stick, Elliott wave, MACD, RSI, etc. Test it out the method. Then choose the method. Discipline is basically follow through with the method. Experience is basically School of Hard Knock, no short cut. Playing with portfolio without real money does not involve emotion, hence only real experience count.

Take responsibility is to acknowledge no system is perfect and you are able to find out why you loose money. Losses is part of the game, don't get too stress out, it may effect your next trade. Gain or super gain is part of the reward of following the steps rigourously.

MyView

Trading is taxing, actually need to master it over time. It takes a while to learn, of course, best is to sit with a mentor for a period of time to reduce your learning curve. But nothing beats real experience and real money.

Spend some time and money to learn from the BEST. Who is the BEST. I believe we have to ask around and talk to lots of people. It is a skill worth learning, spend some time reading books, research on internet, or simply speak with people who trades and make money over a long period of time. Is there a short cut in making money, NO.

All successful people says there are no short cut, do your homework, have passion in your work/investment, use your own expertise, use common sense.

SOS Suprise!

Harry Dent said in May, DJIA will rebound up to 11,800 by Aug 2010 and then straight down to 3,800.

Robert Prechter said in May, DJIA will go down like lightning bolt, zig zag down from now to 2016.

Gary Shillings believe a reasonable DJIA should be around 6,000 points

MyView

They are all deflationists. It is not for us to believe, but things they have been quite accurate previously, of course, some mistakes as well.

SOS why 95% not rich

SOS Get Rich

Over 95% are not rich because:

1. FEAR


2. RISK (lack of knowledge)


3. GET RICH QUICK (impatient)


4. ENVIRONMENT (depends who you mingle with)

The 5% knows:

1. to mingle with the positive people who wants to get rich or already rich


2. build up positive cash flow


3. Leverage - learn to leverage

Steps

1. interest only loan


2. no money down


3. asset alteration (increase room)


4. how to find high yield assets

SOS Portfolio update

Both portfolios started in Oct 2009


Portfolio Inflationist DOWN 5.7%

Portfolio Deflationist UP 6.5%

Different of 12.2%

Uptodate - Deflationist camp is leading by 12.2%.

Japan property and stocks deflated, not its services and daily consumables, transport is expensive, entertainment is expensive, food is expensive, hotel rate is expensive.