The Wild Swing to Continue in the Stock Market Worldwide

With USA market leading, the wild swings in the prices and indices is expected to continue for a while. With this back drop, I am expecting at least one sovereign default to take place before extreme measures will be implemented to stabilize the market. And my guess is Greece will be the bogey boy since its impact to other nations is among the smallest of all. Spain, Italy are too large. France is even larger. USA default means world economy collapse. Essentially, USA is "Safe".

It seems that we may not avoid the double dip after all. But the dip will be short lived. There will be immerse effort to blow up the bubble. Another much bigger bubble will be sharped in place to cover the current bubble. This seems to be the direction of how the world economy is moving towards to. As individual, we can't go against it. We can only trade along it. Even a country like USA or China can't fight this trend. The whole world is addicted to credit and spending future money. The addiction is too deep to ditch. Nobody is able to take the pain of curing.

Importance of Staying Engaged in the Market

Whether you are an investor or a trader in the stock market, the most important thing you must do is to stay engaged in the market through thick and thin. Let me elaborate. What I meant to say is that you must keep monitoring the market regardless of bull or bear markets, regardless of whether you are invested or sidelined.

One of the biggest lesson I learned in 2009 was how I missed the market bull run by staying away for too long. I quit the market in 2007 and avoided the major crash. I was engaged in a few major projects where I work full time on them. I was not monitoring closely the market during the period. I came back in mid 2010. I missed the major run. What a shame! Investing and trading is actually a long term engagement. Even if you are staying at the sideline, you must at least check on the market on the weekly basis. That will give you an idea of where the market is going and provide you with some minimum alertness when opportunity comes.

I had decided not to miss any such opportunities. I am watching the market on constant basis. I believe the reward will come when the time comes. Patience is part of the game.

Trade or Invest with clear understanding of your own situtaion

Here is the head line from By MarketWatch, Aug. 25, 2011, 1:05 p.m. EDT
Buffett’s BofA investment is the new TARP
Commentary: Private-sector bailouts are better way of injecting capital

Read Full News:
http://www.marketwatch.com/story/buffetts-bofa-investment-is-the-new-tarp-2011-08-25?link=MW_story_investinginsight

I am particularly interested in what the writer said at one point:

The question for investors who don’t get the nearly guaranteed 6% dividend is whether it’s worth following Uncle Warren in. Retail investors who followed Buffett into Goldman and GE aren’t in the money, with the Connecticut industrial giant again the far-worse investment.

That is precisely what we should as ourselves when we make a decision to invest or trade. We are at different position and we are not able to have to cushion that Warren has. Whatever theory he has, we cannot have it. So, eventually, we need a different strategy.

For investors who blindly follow, they will not be getting anything. For the abovementioned case, they may not suffer great losses but, they could have gain a lot more else where.

Investing and trading in stock market involves hard work. There is no easy way out. Listening to others may work but you may ended frustrated when a things don't turn out well. You can only do that if you are prepared to lose all your money. That means the invested money is something excess for you. You will never need those money no matter what happens.

Market Trend Analysis - Double Dip A Reality?

In 2008, the housing bubble in US triggered a worldwide financial melt down. The toxic financial derivatives has cause financial institutions all over the world to lose trillions of dollars in total. Many companies went bust and some large companies went into trouble.

In 2011, what is facing us is the sovereign default. With toxic "Assets" (if they are really assets) being taken into US Fed, the US banks are now operating as normal. However, that has not generated much changes to the fundamentals. US and Europe still operates under the same mechanism. Borrow money, spend to generate demand and growth. There is no change in fundamental of operations. There is no intention to change. Again this would certainly generate another bubble. The borrow and spend first and then pay later (if there is some spare cash) strategy is going to go on. Of course everybody is hoping this would go on forever. Even if it does not, it would be the next generation's problem.

Looking at the situation in Eurozone, I am tempted to think that we must wait for at least one country to default in order to see some fundamental shift in the methods of tackling the problem. It would really take some major events to make people realise that spending future money is not sustainable in the long term. The UK is smart not to join the Eurozone. Now the Germans must be regretting. Imagine trying to convince a hard working, thrifty person to lend money to a lazy person who refuse to work but wanted to live a more luxurious life! You must be treating the hardworking person like an idiot in order to come up with that idea.

Bailing out cannot go on forever. It is not sustainable. The Greeks must have a concrete plan to bring themselves out of the debt loop. This is like drug addiction. Only drastic, fundamental changes to the economic structure can bring them away from such addiction. And for that to happen, some pain has to be inflicted or else they would never wake up. So, the default is given. It is a matter of time. And it should be soon.

Trade Summary July 2011

July is a really bad month. It was hit by 2 unexpected events. One is the Ezra sudden fall by over 20% over 3 days because of poor results and another by SIA falling by 3.7% overnight. The combination of 2 counters accounted for 3.5% loss in the overall portfolio. The counter trend trade on NOL also did not work out. That accounted for another 0.5% loss in the overall portfolio. SMRT drop due to poor outlook also provided another 0.2% negative impact.

The month started rather positively with overall gain of about 2.5% and ended with an overall lost of 1.5%. Total draw down within the month is almost 4%. In a month that looks very promising at the beginning and ended with disappointing results.

Month Ended	Portfolio Value	Equity Value	Cash Value	DIV (Cum)	Vested	Chg	Portf Perf	STI Perf
31/12/2010	107,021.21	98,120.00	8,901.21		91.7%
31/01/2011	104,898.73	78,760.00	26,138.73		75.1%	-2.0%	-1.98%	-1.00%
28/02/2011	105,063.58	18,350.00	86,638.58	75.00	17.5%	0.2%	-1.83%	-6.26%
31/03/2011	105,074.09	67,770.00	37,229.09	75.00	64.5%	0.0%	-1.82%	-3.30%
30/04/2011	105,679.51	24,650.00	80,954.51	75.00	23.3%	0.6%	-1.25%	-1.03%
31/05/2011	105,154.94	59,330.00	45,309.94	515.00	56.4%	-0.5%	-1.74%	-1.65%
30/06/2011	104,713.75	73,430.00	30,643.75	640.00	70.1%	-0.4%	-2.16%	-2.58%
31/07/2011	102,789.02	83,260.00	18,551.52	977.50	81.0%	-1.8%	-3.95%	-0.72%

The market is always unpredictable. We need to live with it. July was a month with many negative financial news. Firstly, the Greek sovereign default and now the US debt ceiling. Even though the US debt ceiling is essentially non-event, the lack of economic growth is casting an extremely dark shadow on the investors worldwide. With the US unemployment potentially climbing up again, investors are looking else where to put their money. Gold is making new highs. Oil is not going too much higher partly because the US are selling part of their reserves.

Moving forward, it is more prudent not to take any counter trend trades. Even though the potential for achieving larger gains, the risk is much higher. The chance of success is below 50% and it is not worth taking such risks.

Trade Summary June 2011

After some miserable months, June starts to look a little better. But again, some silly mistakes were made when trying to optimize the portfolio. At times, over balancing is in fact counter productive. More patience is need for events to unfold and things to play out. Too much fear gets in the way for higher profits. The portfolio performance is slightly above the STI performance.

Month Ended	Portfolio Value	Equity Value	Cash Value	DIV (Cum)	Vested	Chg	Portf Perf	STI Perf
31/12/2010	107,021.21	98,120.00	8,901.21		91.7%
31/01/2011	104,898.73	78,760.00	26,138.73		75.1%	-2.0%	-1.98%	-1.00%
28/02/2011	105,063.58	18,350.00	86,638.58	75.00	17.5%	0.2%	-1.83%	-6.26%
31/03/2011	105,074.09	67,770.00	37,229.09	75.00	64.5%	0.0%	-1.82%	-3.30%
30/04/2011	105,679.51	24,650.00	80,954.51	75.00	23.3%	0.6%	-1.25%	-1.03%
31/05/2011	105,154.94	59,330.00	45,309.94	515.00	56.4%	-0.5%	-1.74%	-1.65%
30/06/2011	104,713.75	73,430.00	30,643.75	640.00	70.1%	-0.4%	-2.16%	-2.58%

The portfolio is more stable now.

With the new balancing of the portfolio, hopefully, the following month will see extra boost to the performance.

The trades taken was less than impressive. For the case of Ezra, it was too quick to cut loss. And for Noble, the trade should not have been taken at all.

Trades Since 01-01-2011	Qty.	Buy	Sell	Gain/Loss	Fees	NetProfit	DIV	Tot Profit	% ROI	Bought	Sold
Noble	5000	2.1000	1.970	-650.00	71.31	-721.31	125	-596.31	-5.68%	09/05/2011	13/06/2011
Ezra	10000	1.4200	1.380	-400.00	98.12	-498.12	0	-498.12	-3.51%	14/06/2011	18/06/2011

However, all is not lost. At least, I am not left with a more stable portfolio. With SinoGrandness and Ezra moving very positively, the portfolio is currently about 4% in the money excluding pending dividend (provided I hold on to the counters). Since both SIA and SMRT are relatively stable counter, I would not likely to sell them easily. The price fluctuation of these 2 counters are considered very low.

Stock Name Cash Holdings	Total Qty	Wgt Ave Price $	Last Done Price $	Unrealised P/L	Reason for Entry
Ezra	10,000	1.550	1.595	450.00	Bounce from support
NOL	10,000	1.490	1.485	-50.00	Support / Pullback
SIA	1,000	14.180	14.340	160.00	Trend / Pull back / Oil price
SinoGrandness	40,000	0.468	0.525	2,300.00	Support / Pullback
SMRT	5,000	1.890	1.950	300.00	Support Line / price hike

Trade Summary May 2011 SGX

Still struggling with the trades. Basically, sometimes, I just lose patience and make moves that only regret later. Essentially, I am still having trouble sticking to a system or should I say, still trying to figure out what is the most suitable system that I can adopt.

Trades Since 01-01-2011	Qty.	Buy	Sell	Gain/Loss	Fees	NetProfit	DIV	Tot Profit	% ROI	Bought	Sold
ComfortDelgro	5000	1.5400	1.480	-300.00	61.17	-361.17	140	-221.17	-2.87%	09/03/2011	19/05/2011
ComfortDelgro	5000	1.4700	1.480	50.00	61.00	-11.00	140	129.00	1.76%	09/05/2011	19/05/2011
CapitaLand	3000	3.1500	3.170	60.00	66.44	-6.44	180	173.56	1.84%	15/03/2011	19/05/2011
CapitaLand	2000	3.1000	3.170	140.00	59.87	80.13	120	200.13	3.23%	17/03/2011	19/05/2011
Wilmar	3000	5.1267	5.410	850.00	110.77	739.23	0	739.23	4.81%	05/05/2011	24/05/2011

The total REALIZED profit is S$1,020.75.
Well, I can say that, at least to console myself, it is a profitable month even though it is rather pathetic.

How did I do comparing to STI performance (excluding my Dividends)

Month Ended	Total Value	Equity Value	Cash Value	Vested	Chg	Port Perf	STI val	STI Perf
31/12/2010	107,021.21	98,120.00	8,901.21	91.7%			3212
31/01/2011	104,898.73	78,760.00	26,138.73	75.1%	-2.0%	-2.0%	3180	-1.0%
28/02/2011	104,988.58	18,350.00	86,638.58	17.5%	0.1%	-1.9%	3011	-6.3%
31/03/2011	104,999.09	67,770.00	37,229.09	64.5%	0.0%	-1.9%	3106	-3.3%
30/04/2011	105,604.51	24,650.00	80,954.51	23.3%	0.6%	-1.3%	3179	-1.0%
31/05/2011	104,639.94	59,330.00	45,309.94	56.7%	-0.9%	-2.2%	3159	-1.7%

Through out this year, my portfolio performed below par compared to STI. STI is down about 1.7% whereas my portfolio was down more than 2.2%. I am about 0.5% below par.

Looking back, since March this year, I had switched from S-Chip and Penny to STI counters. Buy trading STI counters, it is more difficult to beat the STI itself. However, this is a much lower risk method of trading. Trading in S-Chips and Penny will result is much better performance but carries a significantly higher risk.

One of my mistake was to stay in cash for too long in March and April while observing the market direction.

Right now, I notice many stock in SGX are showing down trend. I am not sure if this is going to persist for long. If this is just a short correction, I would move back into the market again. However, there is also a chance that this is a prelude to a more major problem to come. In stock market, anything can happen. One can only guess.