SOS should we buy and hold stocks?

World GDP is about USD60 trillions

World derivatives is about USD600 trillions

Daily world trade is about USD4 trillions

Fiat money created over the last 10 years via derivatives is about USD500 trillions.

What will happen when 10% of the derivatives turns bad?

Some of the questions we need to ask ourselves.

1. Is the zero interest effective?
2. Is the first bailout effective?
3. Why the second bailout?
4. Any action to resolve the Derivatives problems?
5. Is the problem cause merely by sub prime? or is it Derivatives created via sub prime?
6. Why is the world stock market still so volatile?
7. Should one enter the market at this stage?

MyView

In a long run, it is not going to be pretty. One needs to protect our hard earned wealth. How? High cash flow stocks and high dividend stocks may be a good protection. A small portion in precious metal is not a bad idea. Shorting the markets is risky.

SOS Thanks Giving & secrets of the rich

Do you have your health? Be thankful. Do you have people in your life who will stick with you through thick and thin? Be thankful. Do you have enough food to eat? Be thankful.

And if there's one pasture our eyes glance toward perhaps more than others -- it's the rich person's pasture. "If I were only rich, then I'd be happy." But would you?

A STORY from BRITIAN

British magazine mogul Felix Dennis published a book some months ago titled, "How to Get Rich." And he does indeed write about how one might get rich. But he also describes the downside:

"Happiness? Do not make me laugh. The rich are not happy. I have yet to meet a single really rich happy man or woman -- and I have met many rich people. The demands from others to share their wealth become so tiresome, and so insistent, they nearly always decide they must insulate themselves. Insulation breeds paranoia and arrogance. And loneliness. And rage that you have only so many years left to enjoy rolling in the sand you have piled up.

"The only people the self-made rich can trust are those who knew them before they became wealthy. For many newly rich people, the world becomes a smaller, less generous and darker place. It sounds ridiculous, doesn't it? Ridiculous and gloomy.

"But then, you are to consider that I have been very poor and I am now very rich. I am an optimist by nature. And I have the ability to write poetry and create the forest I am busy planting. Am I happy? No. Or, at least, only occasionally, when I am walking in the woods alone, or deeply ensconced in composing a difficult piece of verse, or sitting quietly with old friends over a bottle of wine. Or feeding a stray cat.

"I could do all those things without wealth. So why do I not give it all away?

"Because I worked too hard for it. Because I am tainted by it. Because I am afraid to. All those reasons and more. Perhaps, if I am lucky enough to become old, I will accumulate something else: the courage to give it all away before I die. That would be a good thing, I think."

MyView

What did Napolean Hill said?

In a recorded speech (Napolean Hill) in the 1950s, he said the saddest thing about his research was to discover that not one of those wealthy people came close to having peace of mind.

What did Dennis said (above)?

It seems that rich comes with a lot other things but almost certain, it does not comes with peace of mind.

Rich is relative, most would refer to financial, what about rich in health, rich in good relationship, rich in intellectual, rich in kindness, rich in compassion, rich in tolerance.

Well, in short just be thankful of what we have. Be happy, not because we are not rich (financially), but because it is a state of mind. Of course it is not a sin to be rich, it could be predestined.

SOS Market Capitalisation of Bursa

Market Cap of Bursa

March 2009 RM662 bil

Nov 2010, 22 RM1,200 bil

GDP of Malaysia

2009 RM679bil

2010 Estimate RM760 bil

GDP 3Q 2010 is RM195 bil, 5.3% growth from Q2.

Market cap is a perceived value - subject to social mood, but influenced by liquidity, government policy, unemployment rate, talent migration

GDP is the "real" value - measurement of production of each sector

Market cap is like the share price of a listed company while GDP is the Financial Statements of a company.

MyView

Hence, market cap does not measure exactly the health of an economy. Far from it. It is just an indication of the social mood at certain time.

SOS Coupled or Decoupled?

The never ending debates on:

1. Coupled or Decoupled economy
2. Inflation or deflation
3. Protections or Liberalization
4. Boom or Bust
5. Hot Money or FDI
6. Peak Oil or Non Peak Oil
7. Can Fed QE solve the problems?
   

It may be worthwhile to research on the said topics above. Whatever it is, there is no simple answer, like the world is either black or white or right or wrong.

It is much more complicated than anyone can guess, is China's figures sustainable?

MyView

One must do an indepth research before we are closer to the truth. Intelligent research is required.
Do you know China print more money than the USA?

SOS Double Top?

Double top just formed. Cautious.

SOS Zig Zag

The stock markets are in for a zig and zag mood.

One day up, one day down 1-2%. Very volatile in fact.

One day implosion of bad debt, one day quantative easing.

One day Bernanke, one day Ireland.

One day China, One day Australia.

Why?

Because, most investors invest based on NEWS. The funny thing about NEWS is we can see it from both sides. Analyst will recommend their stocks based on their fancy, sometimes they use PE, sometimes EBITDA and sometimes industry averages, and sometimes on NEWS and THEMES. They can support their analysis whichever way they like, and whichever way it is, it is not wrong.

It is nothing more than intelligent GUESSES.

MyView

How do we improve our GUESSES?

If we look in the mirror as shown in the cartoon, you will see how pretty you are. The real fact is that you are "UGLY". But why does the market prices does not reflect it? It is based on investors perception, majority study the same economics, hence, have the similar perception.

SOS Age of Deleveraging

Gary Shillings' new book, the age of deleveraging

Here is the glimse:

1.U.S. consumers will shift from a 25year borrowing-and-spending binge to a saving spree. This will spread abroad as American consumers curtail the imports of the goods and services many foreign nations depend on for economic growth.

2. Financial deleveraging will reverse the trend that financed much global growth in recent years.

3. Increased government regulation and involvement in major economies will stifle innovation and reduce efficiency.

4. Low commodity prices will limit spending by commodity-producing lands.

5. Developed countries are moving toward fiscal restraint.

6. Rising protectionism will slow, even eliminate global growth.

7. The housing market will be weak due to excess inventories and loss of investment appeal.

8. Deflation will curtail spending as buyers anticipate lower prices.

9. State and local governments will contract.

MyView

Gary Shillings is one of the great investors for the past decades.

Here is his investment themes in the long run:

Gary discusses 12 investment areas to sell or avoid in the long run.

Included are expensive consumer discretionary purchases like motor vehicles, appliances, airline trips and ocean cruises. These will be hurt by consumers' zeal to save and by the self-feeding downward spiral of deflationary expectations. The latter has locked automakers into profit-killing rebates. Similarly, credit card and other consumer lenders will suffer from the household shift from borrowing to debt retirement. Conventional homebuilders and their suppliers will be pressured as more than 2 million excess house inventories drive prices down another 20%.

The 10 investment sectors he favors include Treasury bonds. Back in the early 1980s, when the 30-year Treasury yielded 15.25%, he said we were entering "the bond rally of a lifetime.” He believes that rally is still intact as 30-year yields head for 3% and 10-year yields for 2% amidst slow economic growth, deflation and Treasurys’ global appeal as safe havens.

Dr. Shilling also likes securities with high, reliable and growing cash returns such as stocks that pay significant dividends.As households increasingly separate their abodes from their investments, they’ll favor small single-family houses, especially the cost-effective homes built in factories. Rental apartments will also be attractive as younger couples stay in them until their children are old enough to need single-family houses, and empty-nesters will prefer rentals to condos when they sell their suburban money pits.

Our nation has decided to reduce its dependence on unreliable foreign energy sources, so he likes conventional North American energy suppliers such as coal, nuclear, natural gas, oil sands and related industries, but no government subsidy-dependent renewal energy such as ethanol, wind, solar and geothermal.

I believe some of the following sectors worth watching is:

1. High dividend yield stocks
2. Continuous high demand in emerging market such as Water, Health, Food

Let us look back his investment theme for 2010 below:

The good news: Six buys for 2010
Buy treasury bonds.
Buy income-producing securities.
Buy consumer staples and foods.
Buy 'small luxuries.'
Buy the U. S. dollar.
Buy eurodollar futures.

Now the bad news: 11 sells for 2010
Sell U.S. stocks in general.
Sell home-builder and selected related stocks.
Sell big-ticket consumer discretionary equities.
Sell banks & other financial institutions.
Sell consumer lenders' stocks.
Sell many low- and old-tech capital-equipment producers.
If you plan to sell a home or investment house, do so yesterday.
Sell junk bonds.
Sell commercial real estate.
Sell most commodities.
Sell developing company stocks and bonds.

I believe some of his 2010 predictions is too early, such as commodities. Only time will tell, still one and a half month to go.