Remember one year ago, when the RBS (Royal Bank of Scotland) paid $100bn for ABN Amro?
For the same amount of money today, it can now buy:
Citibank $22.5bn
Morgan Stanley $10.5bn
Goldman Sachs $21bn
Merrill Lynch $12.3bn
Deutsche Bank $13bn
Barclays $12.7bn
And still have a $8bn change, with which you would be able to pick up GM, Ford, Chrysler, and many other companies.
No wonder RBC is in trouble.
Saturday, January 31, 2009
Can an average investor get >10 returns / annum consistently?
My answer is yes. I have averaged more than 10% returns for the last 15 years. There were years that I got 2-3 % returns but there were also years, I got more than 50% returns on my portfolio.
There are a few key factors that go towards achieving this kind of performance:
1. Get started on being financially literate. Keep up with what is happening. There are market news, market commentary, economic indicators, technical updates, stock recommendation and market updates – all for free from the Internet.
2. There is simply too much of an information overload out there. However, amongst the piles of rubbish are also many precious gems and insights. The key is to learn how to filter through the masses of information and device a clear strategy for investment with clear exit, stop loss and profit taking. I believe you can do this roughly within an hour per day during weekdays and another 4-5 hours of research during the weekends.
3. Ensure that you have a clear trading plan in which you merge fundamental insights and technical indicators to ensure that your risk is limited. Thus, when opportunities arise, you are able to ride on the upside wave. This is a skill can be acquired over time. Most people fail because of a lack of discipline.
4. The majority people dare not short the market. It is difficult but can be very profitable. My best trading performances were during periods of market downturn. Most do not know how to capitalize on the market when it is down but are just watching it in fear. It takes a little skill and experience to short the market. This is not for the fainthearted. Having said that, there are many more hedge funds adopting a shorting strategy nowadays and thus making my task more difficult now!
The world has changed. We now have all the resources that were previously available only to financial institutions, professional financial advisers and brokers, as long as you are willing to put in some effort and time. You are now able to trade at the same level playing field as any professionals with nominal commissions on the Internet. Get organized and you are on the way to being able to control your own finances.
I have been asked many times by numerous friends and relatives on how to manage your portfolio. I am in the process of designing a system where you can start your journey to manage your portfolio effectively. This is by no means a holy grail or a black box that can guarantee profit but a simple basic system with sound trading principles that will limit your risk and increase the probability of capitalizing on upside opportunities. It will equip a beginner with the adequate skills and launch them on a journey towards increasing your wealth on the long term. A common principle applies: the more effort you take to improve your skills, the more rewarding it will be.
There are a few key factors that go towards achieving this kind of performance:
1. Get started on being financially literate. Keep up with what is happening. There are market news, market commentary, economic indicators, technical updates, stock recommendation and market updates – all for free from the Internet.
2. There is simply too much of an information overload out there. However, amongst the piles of rubbish are also many precious gems and insights. The key is to learn how to filter through the masses of information and device a clear strategy for investment with clear exit, stop loss and profit taking. I believe you can do this roughly within an hour per day during weekdays and another 4-5 hours of research during the weekends.
3. Ensure that you have a clear trading plan in which you merge fundamental insights and technical indicators to ensure that your risk is limited. Thus, when opportunities arise, you are able to ride on the upside wave. This is a skill can be acquired over time. Most people fail because of a lack of discipline.
4. The majority people dare not short the market. It is difficult but can be very profitable. My best trading performances were during periods of market downturn. Most do not know how to capitalize on the market when it is down but are just watching it in fear. It takes a little skill and experience to short the market. This is not for the fainthearted. Having said that, there are many more hedge funds adopting a shorting strategy nowadays and thus making my task more difficult now!
The world has changed. We now have all the resources that were previously available only to financial institutions, professional financial advisers and brokers, as long as you are willing to put in some effort and time. You are now able to trade at the same level playing field as any professionals with nominal commissions on the Internet. Get organized and you are on the way to being able to control your own finances.
I have been asked many times by numerous friends and relatives on how to manage your portfolio. I am in the process of designing a system where you can start your journey to manage your portfolio effectively. This is by no means a holy grail or a black box that can guarantee profit but a simple basic system with sound trading principles that will limit your risk and increase the probability of capitalizing on upside opportunities. It will equip a beginner with the adequate skills and launch them on a journey towards increasing your wealth on the long term. A common principle applies: the more effort you take to improve your skills, the more rewarding it will be.
Short Term Market Directions
Market nearly tested the low in end January. My belief is that we are at a critical juncture. My bias now is that the market will be up on a bear rally short term - maybe a few weeks or even 2-3 months. It may test the low of Nov21st 2008 before moving up. Last week's actions seemingly indicated that it may not test the low. We may be seeing a rally next week! Remember that we cannot be dogmatic about a particular outcome and that it is in fact dangerous to become attached to any possible result. It is all about probabilities.
If the market fails to hold SP 810, it will move quickly to SP 750. If it fails SP 750, it will probably go very quickly to SP 650. There is a lot of fear but a lot of sideline money waiting to load up. This underlies the importance of using stop loss while you bet on a trend.
My bias now is that it will go up temporarily before resuming the downtrend. This is known as the bear trap in the world of stock market jargon.
If the market fails to hold SP 810, it will move quickly to SP 750. If it fails SP 750, it will probably go very quickly to SP 650. There is a lot of fear but a lot of sideline money waiting to load up. This underlies the importance of using stop loss while you bet on a trend.
My bias now is that it will go up temporarily before resuming the downtrend. This is known as the bear trap in the world of stock market jargon.
Tell this message to GM
This movie was made during the peak of the market in 1991. Good acting and a realistic message.
Saturday, January 3, 2009
Famous Quotes for 2008
Chris Dodd -chairman of the Senate Banking Committee, July 14, 2008.
"Fannie and Freddie are very solid institutions. They have more-than-adequate capital. They have access to capital markets."
In September, the U.S. government seized control of both Fannie Mae and Freddie Mac, concerned about their mounting losses.
Barney Frank (D-Mass.), House Financial Services Committee chairman, July 14, 2008
"I think this is a case where Freddie Mac (FRE) and Fannie Mae (FNM) are fundamentally sound. They're not in danger of going under…I think they are in good shape going forward."
Two months later, the government forced the mortgage giants into conservatorships and pledged to invest up to $100 billion in each.
Bernie Madoff Well-known investment guru Oct. 27, 2007
"In today's regulatory environment, it's virtually impossible to violate rules...it's impossible for a violation to go undetected, and certainly not for a considerable period of time."
Madoff was arrested in December 2008 for allegedly running a $50 billion Ponzi scheme, the biggest financial scam in history. Madoff allegedly misled hundreds of investors around the world for years.
Lee Kuan Yew – Minister Mentor of Singapore said this in April 2007 to justify the pay of Singapore political leaders that is amongst the highest salaries in the world.
Lee Kuan Yew - Founder of Modern Singapore justifying the highest paid politicians in the world for a small country.
.”.you have to pay the market rate or the man will up stakes and join Morgan Stanley, Lehman Brothers or Goldman Sachs and you would have an incompetent man and you would lose money by the BILLIONS.....!!!!!!”
In 2008, all these companies became either bankrupt, bailed-out or taken over because of the greed, corruption and short-sighted vision of these CEOs.
"Fannie and Freddie are very solid institutions. They have more-than-adequate capital. They have access to capital markets."
In September, the U.S. government seized control of both Fannie Mae and Freddie Mac, concerned about their mounting losses.
Barney Frank (D-Mass.), House Financial Services Committee chairman, July 14, 2008
"I think this is a case where Freddie Mac (FRE) and Fannie Mae (FNM) are fundamentally sound. They're not in danger of going under…I think they are in good shape going forward."
Two months later, the government forced the mortgage giants into conservatorships and pledged to invest up to $100 billion in each.
Bernie Madoff Well-known investment guru Oct. 27, 2007
"In today's regulatory environment, it's virtually impossible to violate rules...it's impossible for a violation to go undetected, and certainly not for a considerable period of time."
Madoff was arrested in December 2008 for allegedly running a $50 billion Ponzi scheme, the biggest financial scam in history. Madoff allegedly misled hundreds of investors around the world for years.
Lee Kuan Yew – Minister Mentor of Singapore said this in April 2007 to justify the pay of Singapore political leaders that is amongst the highest salaries in the world.
Lee Kuan Yew - Founder of Modern Singapore justifying the highest paid politicians in the world for a small country.
.”.you have to pay the market rate or the man will up stakes and join Morgan Stanley, Lehman Brothers or Goldman Sachs and you would have an incompetent man and you would lose money by the BILLIONS.....!!!!!!”
In 2008, all these companies became either bankrupt, bailed-out or taken over because of the greed, corruption and short-sighted vision of these CEOs.
My personal trading methology
I believe in fundamentals. These are the key to business performance. When I look at a stock, I like to know its business models, earnings record, cash flow and strength of management. But often, fundamentals do not work because it takes a lot of good information-which is lacking-to really understand a business. It takes real skill to understand the success of a business just from its reported financial information. Even the Board of Directors cannot predict the eventuality of their own business. Second, the market price often reacts in a herd fashion before the fundamental strengths are recognized. In other words, fundamentals are important but they should not be the main determinants of stock price movements. In a way, I find it hard to be a 100% VALUE-investor because it is hard to determine value.
So, timing is important despite what many fundamental-investors say that it is impossible to time the market. We have people like Warren Buffet and Jim Rogers who can hold on to stocks indefinitely until they come back to their value. This downturn, however, has been a disaster to many value-investors including famous legends like Bill Miller and Legg Mason. Some of them are 60% down in their portfolios. Even Warren Buffet, the most successor stock investor in the world, has lost 30% of his value. When I was on the Board of Directors of a number of public listed companies, I find it hard even to predict the short term price fluctuations within 6 months, even though I had insider information.
I use a number of technical analyzes to help me with the timing. These are never perfect but at least they help me pin point the tops and bottoms of markets. And, when I am wrong, I will normally cut loss immediately and try out the next peak or trough for shorts and longs respectively.
Many of the technical-analysis techniques are very questionable and worthless. But no one can deny emotions and clear trends in the market, which are analyzed by some of these techniques. Stocks get over-bought, over-sold and sometimes for extended periods of time. The key objective is to ride the trends. My favorite indicators are tools commonly used to measure trends and emotions.
My basic steps are:
·Have a direction on the indices. Focus on the “now moment opportunity” when the stock has reached the turning point of a “high” or “low”. Technical indicators used include trendlines, moving averages, momentum and price patterns to determine these points.
· Proceed to add long or short positions from list of stocks in a diversified watch list which consists of technology, pharmaceuticals, financial, gold and oil stocks. I have some good understanding of the fundamentals of these companies and this helps me to decide whether I should go long or short. From each individual price charts, determine my entry and exit positions.
· For oil, gold and finance, I use a number of ETFs – some with 2x leverage to give me a better ride. There are a number of new ETFs with 3X leverage which I starting to use it successfully.
· From here I take a directional bet. It is a probability game but I believe I have the edge because of my fundamental and technical analyzes.
Important principles
· Execute the trading plan consistently. This means you have to trigger the pre-determined entry and get out at the risk calculated if you are wrong.
· Take profit frequently especially when stocks are statistically out of the trading-band, greatly oversold or overbought. Extensive experience has taught me that these stocks will revert to the mean while you are feeling really high!
My watch list consists of 50 counters and I trade about 4-5 counters each day depending on the market conditions. In my portfolio, I keep a list of around 15 stocks.
I am planning to elaborate more on specific details as I continue to write on the blog.
So, timing is important despite what many fundamental-investors say that it is impossible to time the market. We have people like Warren Buffet and Jim Rogers who can hold on to stocks indefinitely until they come back to their value. This downturn, however, has been a disaster to many value-investors including famous legends like Bill Miller and Legg Mason. Some of them are 60% down in their portfolios. Even Warren Buffet, the most successor stock investor in the world, has lost 30% of his value. When I was on the Board of Directors of a number of public listed companies, I find it hard even to predict the short term price fluctuations within 6 months, even though I had insider information.
I use a number of technical analyzes to help me with the timing. These are never perfect but at least they help me pin point the tops and bottoms of markets. And, when I am wrong, I will normally cut loss immediately and try out the next peak or trough for shorts and longs respectively.
Many of the technical-analysis techniques are very questionable and worthless. But no one can deny emotions and clear trends in the market, which are analyzed by some of these techniques. Stocks get over-bought, over-sold and sometimes for extended periods of time. The key objective is to ride the trends. My favorite indicators are tools commonly used to measure trends and emotions.
My basic steps are:
·Have a direction on the indices. Focus on the “now moment opportunity” when the stock has reached the turning point of a “high” or “low”. Technical indicators used include trendlines, moving averages, momentum and price patterns to determine these points.
· Proceed to add long or short positions from list of stocks in a diversified watch list which consists of technology, pharmaceuticals, financial, gold and oil stocks. I have some good understanding of the fundamentals of these companies and this helps me to decide whether I should go long or short. From each individual price charts, determine my entry and exit positions.
· For oil, gold and finance, I use a number of ETFs – some with 2x leverage to give me a better ride. There are a number of new ETFs with 3X leverage which I starting to use it successfully.
· From here I take a directional bet. It is a probability game but I believe I have the edge because of my fundamental and technical analyzes.
Important principles
· Execute the trading plan consistently. This means you have to trigger the pre-determined entry and get out at the risk calculated if you are wrong.
· Take profit frequently especially when stocks are statistically out of the trading-band, greatly oversold or overbought. Extensive experience has taught me that these stocks will revert to the mean while you are feeling really high!
My watch list consists of 50 counters and I trade about 4-5 counters each day depending on the market conditions. In my portfolio, I keep a list of around 15 stocks.
I am planning to elaborate more on specific details as I continue to write on the blog.
How deep is the recession?
This recession is more serious because it is not typical business cycle downturn, which normally lasts 12-18 months. This is a recession caused by a big financial crisis and a breakdown of system that supports the economy.
To say that 2008 is tumultuous year is an understatement. It is historic. The whole business financial model has broken down. All six big investment bankers were either taken over, converted to bank or bankrupt. The result is a cumulation of years of reckless spending, consumption and greed.
So, it will take a few years to recover. There will be bear market rallies followed by new waves of crisis. I expect the next waves will be the collapse of commercial real estates and credit card defaults. It should come within the next 6 months.
The Fed is probably running out of options having fired the last silver bullet having reduced interest rates to almost zero percent.
So I am not optimistic about the market. With the rallies over the last few weeks, I am looking for the right opportunity to short the market. The timing could come anytime but it could come in a few weeks to 2-3 months. Normally, bear rally can also overextend itself. Very likely, there will be quite a bit of optimism in the beginning of 2009 with the inauguration of a new president who has also made history.
I am hoping for the best but am prepared for the worst.
Following are some my investment directions:
o long on oil and gold although at the right timing I may get out.
o put some money ( about 10% ) to buy physical gold
o shorting 20 years US Treasuries and US dollars
o Iooking for opportunity to short the market testing the tops. Have failed when S&P tops 930 today. Next target is S&P to hit 950 – could be a major top. If not, it could run up 1000 before it comes down.
o Conserve cash
My advice to people is to conserve cash, stay out of the stock market if you are not familiar with it, simplify your lifestyle, stay out of debt and enjoy your family.
To say that 2008 is tumultuous year is an understatement. It is historic. The whole business financial model has broken down. All six big investment bankers were either taken over, converted to bank or bankrupt. The result is a cumulation of years of reckless spending, consumption and greed.
So, it will take a few years to recover. There will be bear market rallies followed by new waves of crisis. I expect the next waves will be the collapse of commercial real estates and credit card defaults. It should come within the next 6 months.
The Fed is probably running out of options having fired the last silver bullet having reduced interest rates to almost zero percent.
So I am not optimistic about the market. With the rallies over the last few weeks, I am looking for the right opportunity to short the market. The timing could come anytime but it could come in a few weeks to 2-3 months. Normally, bear rally can also overextend itself. Very likely, there will be quite a bit of optimism in the beginning of 2009 with the inauguration of a new president who has also made history.
I am hoping for the best but am prepared for the worst.
Following are some my investment directions:
o long on oil and gold although at the right timing I may get out.
o put some money ( about 10% ) to buy physical gold
o shorting 20 years US Treasuries and US dollars
o Iooking for opportunity to short the market testing the tops. Have failed when S&P tops 930 today. Next target is S&P to hit 950 – could be a major top. If not, it could run up 1000 before it comes down.
o Conserve cash
My advice to people is to conserve cash, stay out of the stock market if you are not familiar with it, simplify your lifestyle, stay out of debt and enjoy your family.
Thursday, January 1, 2009
Watch these scary and informative videos
I O U USA
US Govnt Immorality Will Lead to Bankruptcy
Comments:
o America is in a long term decline unless something drastic actions are implemented. So far, no signs of return to prosperity given the actions of government not having the courage to do the right things politically.
o Short term dollar and the market may be up. It is almost sure that dollar will fall massively and there will be hyperinflation
o Need to allocate some of your money into gold not just gold stocks but phyiscal gold. Suggest 10% of your networth for "insurance". I use goldmoney.com to invest on physical gold.
o Commodity price will go up. Oil's price is very low now. It should hit $50 from around current $40 within 12 months.
o The almost slam dunk investment now seems to short 7-15 years treasury. It is simply ridiculous that people are investing in Treasures for 2% over 7-10 years. It is a classic extension of fear. To invest, I buy TBT and PST
o Short term stocks may go up. I am looking forward to get back to my short positions again once the market extends itself. The timing is difficult but my style is to test the tops a couple of times until I get it. Normally, I am out with 2-4 % loss. When I strike it is a 20-50% return within weeks.
o Time to conserve cash, reduce debts and invest wisely.
o It is not time to invest in stocks yet but when the time comes probably in 8-12 months, it will be investment opportunity of a lifetime that can carry you through retirement. As to when I do not know but when it is time, I will put it on the blog.
US Govnt Immorality Will Lead to Bankruptcy
Comments:
o America is in a long term decline unless something drastic actions are implemented. So far, no signs of return to prosperity given the actions of government not having the courage to do the right things politically.
o Short term dollar and the market may be up. It is almost sure that dollar will fall massively and there will be hyperinflation
o Need to allocate some of your money into gold not just gold stocks but phyiscal gold. Suggest 10% of your networth for "insurance". I use goldmoney.com to invest on physical gold.
o Commodity price will go up. Oil's price is very low now. It should hit $50 from around current $40 within 12 months.
o The almost slam dunk investment now seems to short 7-15 years treasury. It is simply ridiculous that people are investing in Treasures for 2% over 7-10 years. It is a classic extension of fear. To invest, I buy TBT and PST
o Short term stocks may go up. I am looking forward to get back to my short positions again once the market extends itself. The timing is difficult but my style is to test the tops a couple of times until I get it. Normally, I am out with 2-4 % loss. When I strike it is a 20-50% return within weeks.
o Time to conserve cash, reduce debts and invest wisely.
o It is not time to invest in stocks yet but when the time comes probably in 8-12 months, it will be investment opportunity of a lifetime that can carry you through retirement. As to when I do not know but when it is time, I will put it on the blog.
Great British satire on the financial crisis
Introduction
This blog will track my investment style, thoughts and philosophy.
I am a full time trader after spending time in corporate managements and start-ups of 5 companies.
I have decided to move to Vancouver, Canada in 2006 from Singapore. Moving here allows me to focus on my trading skills although I have been active on the US market for 13 years.
Being a trader allows me to make my money work harder.
It was a tough 2008 although I went through relatively unscathed. My biggest mistakes were my over confidence in gold stocks which went against every fundamentals and go down with the market. Longer term, I am still optimistic about gold and pessimistic on the US dollars but this is a classic example of why fundamentals do not often relate to the market short term.
If I had followed conventional investment advice of strictly following fundamentals, "buy and hold" philosophy, I would have lost at least 50% of my investments.
2008 happened to be the first lost in my trading on the stock market for more than 10 years. The key reason was that I did not follow my discipline. I thought the market could not go lower in September.
The key lesson is to keep to your trading plan. It is fundamental that if you keep strictly to your trading plan ,you will do well by the end of the year. There are many trading plans possible but you need to keep to one that you have developed and fit your personal beliefs. If I were to do "paper" trading on any reasonable plan, I will end up positive because there were no emotions involved. I can demonstrate it easily with back testing over daily trades over a 1-2 years period on any stock.
My trading plan is based on the following assumptions:
- stock markets move with a trend and often overshoots. The main objective is to capture the trend early when it changes.
- I will take risk to catch the trend early establishing tight stop losses. It may take a few attempts before I can ride on a trend. Support, resistance and multiple time frames are used to establish the change in trend.
- Once on the trend, always take profit on the way and get out when the market clearly shows that it has changed. If wrong, I will not hesitate to get back on the direction of the trend again.
I will elaborate more as I continue to blog.
It is my sincere hope that his blog will help people who are seeking to manage their own money.
Trading is a complex task with multiple factors of technical, emotions, fundamentals and probability in play. It is fun and challenging because it really make use of all your fundamental knowledge, technical skills, temperament, risk profile and psychological stability competing against the very best to win.
It is my objective to make oversize returns in the market so that I can deploy the money to support my relatively simple lifestyle. Money making is not the primary objective. I have clear purpose in life. Having money, however, will allow me to fulfill meaningful purpose I am establishing for my life.
I am a full time trader after spending time in corporate managements and start-ups of 5 companies.
I have decided to move to Vancouver, Canada in 2006 from Singapore. Moving here allows me to focus on my trading skills although I have been active on the US market for 13 years.
Being a trader allows me to make my money work harder.
It was a tough 2008 although I went through relatively unscathed. My biggest mistakes were my over confidence in gold stocks which went against every fundamentals and go down with the market. Longer term, I am still optimistic about gold and pessimistic on the US dollars but this is a classic example of why fundamentals do not often relate to the market short term.
If I had followed conventional investment advice of strictly following fundamentals, "buy and hold" philosophy, I would have lost at least 50% of my investments.
2008 happened to be the first lost in my trading on the stock market for more than 10 years. The key reason was that I did not follow my discipline. I thought the market could not go lower in September.
The key lesson is to keep to your trading plan. It is fundamental that if you keep strictly to your trading plan ,you will do well by the end of the year. There are many trading plans possible but you need to keep to one that you have developed and fit your personal beliefs. If I were to do "paper" trading on any reasonable plan, I will end up positive because there were no emotions involved. I can demonstrate it easily with back testing over daily trades over a 1-2 years period on any stock.
My trading plan is based on the following assumptions:
- stock markets move with a trend and often overshoots. The main objective is to capture the trend early when it changes.
- I will take risk to catch the trend early establishing tight stop losses. It may take a few attempts before I can ride on a trend. Support, resistance and multiple time frames are used to establish the change in trend.
- Once on the trend, always take profit on the way and get out when the market clearly shows that it has changed. If wrong, I will not hesitate to get back on the direction of the trend again.
I will elaborate more as I continue to blog.
It is my sincere hope that his blog will help people who are seeking to manage their own money.
Trading is a complex task with multiple factors of technical, emotions, fundamentals and probability in play. It is fun and challenging because it really make use of all your fundamental knowledge, technical skills, temperament, risk profile and psychological stability competing against the very best to win.
It is my objective to make oversize returns in the market so that I can deploy the money to support my relatively simple lifestyle. Money making is not the primary objective. I have clear purpose in life. Having money, however, will allow me to fulfill meaningful purpose I am establishing for my life.
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