OBAMA's First Address to a Joint Session of Congress - Feb 24th 2009

I heard the speech last night. It was delivered powerfully. I recorded it and heard it again. There is no doubt that he is a good speaker. But many wonder if there is enough depth.

I think he pointed out many issues correctly.

First, we should maintain HOPE although it is not clearly visible how the current problems can be resolved. There is no point in being too negative and despondent. If we disagree with what he is doing, then what are your solutions? We need to recognize that there are real strengths in America which are still admired by the world - cutting-edge technology, unmatched top-end university research, leadership in many industries, “can do” attitude, diversity of thoughts, freedom of speech, willingness to embrace change, and true democracy--which has been recently rung even more true by the election of an African-American as President of the United States of America.

Isn't it true that if Obama does not support the mortgage and financial system urgently, the economy will sink into a deeper recession that will take a lot longer to get out? It may not be fair, but what are the alternatives? If we let the economy sink further, it is true that we will get into a pit too deep to get out. Bernanke understands this, having been the authority on the Great Depression whilest he was an academic at MIT. Many people are ranting against the stimulus plans. But what are the alternatives? Give that man a chance.

Secondly, I think Obama's strategic directions are right. The national education system has to be revamped. This is the lifeblood of the economy to allow America to compete in the 21st century. Healthcare needs to be reformed. We cannot wait any longer. We have no choice but to spend money on these items.

Many people argue that we should let the market work out this mess on its own. I think America got into this mess because she has allowed the market to work things out unchecked - thus the excesses of greed and lack of regulation resulting in major scandals, lavishly overpaid executives, over-leveraging of banks and out-of-control borrowing. What is needed is a balance between market forces and regulation.

America needs to break through into new technologies, industries, and lessen its dependence on oil. Through these efforts, emerging industries and new jobs will be created. Hopefully, it will result in a more competitive workforce and increased productivity. I disagree with people like Doug Casey who lean totally to the right and who are recommending Americans to migrate elsewhere.

It is a very complex problem now. It is easy to be critical. At least, I find in Obama someone who is willing to identify some sensible directions and proceed to implement plans quickly. At least, he is a leader who can inspire and pull the nation together. What I also see is a man who is compassionate. His goals to have most people adequately covered by health insurance and receive education are laudable. He promised that the majority of people will not see tax increase. He will tax the richest 5%. So he will not be popular with the rich. We should have no problem with paying more taxes if we can afford to. We are blessed to bless others.

Since Obama is elected, we should give him the support. This is part of the American democratic process. Being negative and critical will not help. Every criticism should be accompanied by constructive alternative solutions.

The key to success lies in execution. If he can pull off the savings in the Federal budget, cut excess spending, control fraud and corruption, I think the budget deficit can be reduced although I am still skeptical about the $2 trillion savings identified so far.

People who are against Obama are conservatives and religious right wingers who have supported BUSH. Obama is leaning more to the left; overtly he is neutral on abortion and gay marriage. It is not necessarily so that he also holds to these stances on a personal level. Actually, I believe he is personally against it as a Christian but does not want to mix religious views with running a democratic populace.

What I want to see is someone who can inspire, lead and execute. We had BUSH who is someone who reads the Bible every morning but who has really messed up an economy which was already fragile to begin with. It takes someone who is reasonably intelligent, who's a team player, an inspiring leader, a problem solver, strategic thinker, and a good communicator, to succeed & get us through these unprecedentedly difficult times.


Finally, a soundbite from the speech that's already a stimulus to the garment industry.. :-)

Why I like the Canadian Dollar

Canada has escaped the subprime crisis. There are no TARPs and bailout for banks.
There are no Fannie Mae and Freddie Mac and all the mess. Three of the largest Canadian banks voluntarily cut their own pay in response to the global crisis. Unlike Merrill Lynch, whose CEO spent $1.4m on office-renovations & pay bonuses just before announcing disastrous results.

Canadian Banks are currently the strongest banks on the planet. They are under-leveraged. They are very conservative. ALL US banks are over-leveraged and many of them are technically bankrupt.

Canadian corporate tax is currently around 18.5% going down to 15% in 2012. It is the lowest among the G7. This is very good for business. US' corporate rate is currently 35%.

Canada operates on a long term budget surplus. US has an unimaginable deficit and a debt that will take generations to repay. They are printing money to spend on stimulus projects. With the increased money supply, US dollar will have to come down. Currently, it is strong because the economic situation is less ugly than what it is in Europe. But there are no real reasons for US$ to be stronger than C$.

It is a matter of time that gold and oil will go up. Canada stands to benefit greatly from the bull cycle.

Thus, I will be changing US$ and S$ to Canadian dollars in the next few weeks. I expect the C$ to be one of the strongest currencies in the world. Shorter term, it may be down a bit more but it is certainly over-extended.

When there is a bottom in the market, Canadian banks will be the first to recover. Right now, the Canadian banks are selling at incredible bargains. With operating margins exceeding 30%, and dividend yields between 6% and 8%, Canadian banks are selling at only around eight times earnings. Bank of Montreal is my favorite - it's selling for only six times this year's expected earnings and is yielding 10%. It is still too early to buy. But when the bottom is near, buy Canadian banks.

Investor or Trader?

Is there a difference between a trader and an investor?

Many traders will say that a trader is NOT an investor. Many traders do not care about the fundamentals and many of their trades stick strictly to rules established through technical charting.

For myself, I keep ahead of economic news, research the fundamentals on stocks and basically try to get a feel of the market environment. It makes trading more fun, intellectually challenging and justifies my MBA training and years in the business world.

Longer term stocks move up because it provides superior value. It must be a better product with superior managers who know how to add value for their shareholders.

Nevertheless, I remarked to someone today while playing tennis that in order to invest, it is important that you learn to trade. You need to grasp the basic principles of trading especially those in regards to mental discipline and risk management.

Stocks can move in directions completely contrary to fundamentals. Stocks can be irrational longer than you can remain solvent. Never fall in love with your fundamental analysis which is complicated, usually flawed, often biased, seldom complete and it often it takes a longer time to reflect its value.

Thus, it is important to learn the skills regarding when to enter and exit, how to handle risk and manage money. Use your trading rules to confirm the fundamentals before entering a trade.

My opinion is that a combination of fundamentals and trading gives one an edge. Use fundamentals to decide strategies for stocks but use your trading system to decide your own short term directions. Both skills are complementary and can be used to direct your strategies and trading decisions.