The impact of Yuan Revaluation

Posted by admin on April 11, 2010 under Articles | Be the First to Comment

Asia’s growth is impacting global financial relations, but the debate about the Chinese currency may be oversimplified.
Photo Credit: Flickr
As China’s overall trade surplus has continued to exceed market expectations, the United States is campaigning to persuade China to increase the value of its currency. Photo Credit: Flickr
The battle over revaluing the Yuan has big implications for the US economy, US-China relations, and the US’s global leadership role. As China’s overall trade surplus continued to exceed market expectations and reach record highs through 2006, US Treasury Secretary Henry Paulson, picking up where his predecessor John Snow left off, began a campaign of trying to persuade China to increase the value of its currency. The argument is that China is keeping the value of its currency low so that it can boost its exports. China allowed its currency to strengthen by 2.1 percent in 2005 as a response to these calls.

Not only does this debate mirror US concerns during the 1980s about the Japanese yen, but it is also riddled with the same oversimplifications. US pressure on Japan during the 1980s caused resentment in Japan toward the US but did little to improve the US trade deficit. Some even blamed the US for the subsequent real estate bubble that occurred in Japan.

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Japan risks going bankrupt

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TOKYO – GREECE’S debt problems may currently be in the spotlight but Japan is walking its own financial tightrope, analysts say, with a public debt mountain bigger than that of any other industrialised nation.

Public debt is expected to hit 200 per cent of GDP in the next year as the government tries to spend its way out of the economic doldrums despite plummeting tax revenues and soaring welfare costs for its ageing population.

Based on fiscal 2010′s nominal GDP of 475 trillion yen (S$7.09 trillion), Japan’s debt is estimated to reach around 950 trillion yen – or roughly 7.5 million yen per person.

Japan ‘can’t finance’ its record trillion-dollar budget passed in March for the coming year as it tries to stimulate its fragile economy, said Hideo Kumano, chief economist at Dai-ichi Life Research Institute. ‘Japan’s revenue is roughly 37 trillion yen and debt is 44 trillion yen in fiscal 2010,’ he said. ‘Its debt to budget ratio is more than 50 per cent.’ Without issuing more government bonds, Japan ‘would go bankrupt by 2011.’

Despite crawling out of a severe year-long recession in 2009, Japan’s recovery remains fragile with deflation, high public debt and weak domestic demand all concerns for policymakers. Japan was stuck in a deflationary spiral for years after its asset price bubble burst in the early 1990s, hitting corporate earnings and prompting consumers to put off purchases in the hope of further price drops. Its huge public debt is a legacy of massive stimulus spending during the economic ‘lost decade’ of the 1990s, as well as a series of pump-priming packages to tackle the recession which began in 2008.

But while Japan’s risk of a Greek-style debt crisis is seen as much less likely, the event of risk becoming reality would be devastating, say analysts who question how long the government can continue its dependence on issuing public debt. — AF

STI New High?

Posted by admin on April 4, 2010 under Articles | 6 Comments to Read

STI Upper Bollinger bands

Powerful repair above the Hourly Mid- and Upper Bollinger bands…and even pierce through the topmost horizontal resistance level within a day.

The rinse-and-wash tactic (washing cards) on last Wed was meant to shake out the weak holders and short-term traders.

As long as STI can stay above the 2941 level for more than 2 trading hours, we will be ready to see a new high for STI.

STI new high

If STI can create a new high, it will encounter a few resistance levels…

Daily Horizontal Resistance Level: 2979

Psychological Level: 3000

Daily Upper Parallel Channel: 3015~3025

More about Cinderella’s Trading Room

Defensive corner for dividend plays

Posted by admin on February 20, 2010 under Articles | Be the First to Comment

So there you have it – a shortlist of some stocks which potentially can sustain their dividend payouts, based on data from StarMine. You, of course, have to study them yourself and decide if any of them are good buys. Good luck!

posted by Rabbita/Cind – dividend plays

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Poor HSI charts, on the other hand, looks a bit bearish?

Latest HSI chart

posted by PPG – STI, HSI & DOW Charts

Line Chart Breakout Strategy

Posted by admin on January 31, 2010 under Articles | Read the First Comment

What a good breakout strategy play posted by Cind


Most of us are very familiar with candlestick charts which show the day high/low and closing. However, these intra-day highs and lows can create excessive noises and swings that may distort our technical analysis and buy entry level. In order to filter out such noises, a simple way is to change your charts to a linechart format, showing only the closing level of the counter. As the saying goes “the amateur opens the market while the pros closes the market”, the closing price or the line chart is more representative of the real strength and weakness.

How to apply LineChart Breakout
Conventionally, we often use 52-weeks high price level to define the pivot point for a breakout. When a trader chases after the new 52-weeks high price level, he/she will be subjected to higher risk of false breakout, higher penalty of cut-loss and higher mental stress. To have a good head-start in identifying a potential breakout counter, we can plot a linechart to define a much lower pivot point for buy entry.

An example using Kepland:
Line Chart Breakout Strategy

full article for Cind’s Line Chart Breakout Strategy

Other SGX Stock Market News at our Stock Trading Forum

Trajectories ~ when it comes to trading/investment

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Another good article contributed by Franklin

Trajectories ~ when it comes to trading/investment

No one, nothing can predict outcomes accurately and consistently. Not to mention timing the outcomes. Trajectories tend to limit thoughts and actions, implyng that there is only a ‘certain path’ to follow. Trajectories occur after the development of a dominant nature (e.g. 911, gold rush, asset bubbles), creating a ‘WOW’ effect, followed by certain “followership”.

Stocks trading can be at times paradoxical. Some are so adamant at their ‘forecasts’, that they close out diverging signs. Some try to follow each and every swing, big or small. Some simply wait and wait. While I reckon there are no ‘sure win’ strategy, trying to put the ‘cart before the horse’ for too many times can also be suicidal.

Conflicting? The point I am trying to address is that given today’s influential influx of information and knowledge, plus the “rate’ of CHANGE, perhaps we should attempt to ‘anticipate’ only the big swings and ride out the smaller ones. Over a longer period of time, transaction costs can become the tipping point in the P/L.

Entry basis and exit plans are ‘MUST’! But not at each and every turn of a stone. Yes, ‘fast money’ is possible, but not everyone is up to it. In addition, the frequency and difficulty in achieving that vary.

Whether it’s bull, bear or consolidation, only time will tell, and unfortunately, investment decisions are made now, only to be measured in the future.

9.20am ~ 26 Jan 2010

STI Chart

Posted by admin on January 17, 2010 under Articles | 2 Comments to Read

STI Chart

Hourly STI is now trapped within the bollinger bands…
So…the charging momentum of the blue chips over the past few weeks will be easing off…
Time to be more nimble and selective in trading liaoz…

visit Cinderella’s Trading Room

Stock Trading Tips – Cut Loss Strategy

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What arouse me to write about this?
Some people have asked me (at different point in time) whether do I adopt or ever apply a cut-loss strategy. In addition, I have witnessed several “applications” of such a strategy ~ some wise, some irrational.

To begin with, a cut-loss is needed when an anticipation of an investment or trade turns unfavourable. We should invest/trade when we are “convinced” by certain aspects of a particular counter, be it from technical view or fundamental view. It can be an anticipation of a breakout, reaching support level or a perception of under-valuation. We only act on the pre-determined cut-loss when things deviate from anticipation. If the situation is still within your expectation (which you should have before buying), why cut??

Correct or Wrong Decision
Whether the decision to cut loss is correct is not measured by the sole aftermath of the decision i.e. “Heng ah.. I cut and it goes lower” or “Sh1t! Should not have cut”. This “short-term” measurement is simply too silo. A strategy can only be more accurately measured in a longer term i.e. after several trades over a period of time. The acid test is only then. For example, since March low till now (STI about 2700), what is your net P/L? If you (typical longist) have not make profit (assuming active trading/investing) since then till now, most probably there is something wrong with your strategy.

Cut loss to protect capital is correct, but cut loss to protect capital so that it enables you to “chase” another counter is wrong. After a trade often comes temptation. “My counter is not moving, others are!” This can become a vicious cycle.

There are variables that will directly or indirectly affect your probability of success. These include your tolerance level and risk appetite, which is largely determined by your available resources. Patience can be another determinant. Timing, transaction costs and entry price are other factors. Besides, discipline is needed so that there is sufficient consistency for purposeful evaluation later. Having said these, I advocate that recipe (strategy) for success cannot be repeated identically and consistently. Learning from others is very important, but adaptation is also an absolute necessity. Cinderella and PPG adopt cut loss when necessary, but they are not identical in their strategies.

Be aware that distasteful results may not be due to faulty strategy alone. It can also be a case of wrong analysis or selection criteria.

I am not advocating i have good cut loss strategy or that a strategy will work forever. In fact, I personally do not believe such a thing as “best”. By its definition, “best” will mean the highest possible attainment even by future standards.

I simply buy and hold because the reasons for buying those counters have not changed.

by FCGY –

The 6 biggest investing mistakes in stock trading

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Burton G. Malkiel, Princeton economics professor and author of ‘A Random Walk Down Wall Street,’ and Charles D. Ellis, author of ‘Winning the Loser’s Game,’ have teamed up to write ‘The Elements of Investing.’

We’re both in our seventies. So is Warren Buffett. The main difference between his spectacular results at Berkshire Hathaway and our good results is not the economy and not the market, but the man from Omaha. He is simply a better investor than just about any other in the world. Brilliant, consistently rational, and blessed with a superb mind for business, he has managed to avoid the mistakes that have crushed so many portfolios. Let’s look at two examples.

In early 2000, Berkshire Hathaway’s portfolio had underperformed funds that enjoyed spectacular returns by loading up on stocks of technology companies and Internet startups. Buffett avoided all tech stocks. He told his investors that he refused to invest in any company whose business he did not fully understand – and he didn’t claim to understand the complicated, fast-changing technology business – or where he could not figure out how the business model would sustain a growing stream of earnings. Some said he was passé, a fuddy-duddy. Buffett had the last laugh when Internet-related stocks came crashing back to earth.

In 2005 and 2006, Buffett largely avoided the mortgage-backed securities and derivatives that found their way into many investment portfolios. Again, his view was that they were too complex and opaque. He called them “financial weapons of mass destruction.” When they brought down many a financial institution (and ravaged our entire financial system), Berkshire Hathaway avoided the worst of the meltdown.

Avoiding mistakes – such as the mistake of incurring unnecessary risks – is one of the great secrets of investment success. Be alert to these common ones that can prevent you from realizing your goals.

Mistake #1: Overconfidence
At our two favorite universities, Yale and Princeton, psychologists are fond of giving students questionnaires asking how they compare with their classmates. For example, students are asked: “Are you a more skillful driver than your average classmate?” Invariably, the overwhelming majority answer that they are above-average drivers. Even when asked about their athletic ability, where one would think it more difficult to delude oneself, students generally say they’re above average. They see themselves as above-average dancers, conservationists, friends, and so on.

And so it is with investing. In recent years, a group of behavioral psychologists and financial economists have created the important new field of behavioral finance. Their research shows that we are not always rational. We tend to be overconfident. If we do make a successful investment, we confuse luck with skill. It was easy in early 2000 to delude yourself that you were an investment genius when your Internet stock doubled and then doubled again.

To deal with the pernicious effects of overconfidence, think about amateur tennis. The player who steadily returns the ball, with no fancy shots, is usually the player who wins. And the prudent buy-and-hold investor who holds a diversified portfolio through thick and thin is the investor most likely to achieve his long-term goals.

Mistake #2: Following the herd
People feel safety in numbers. Investors tend to get more and more optimistic, and unknowingly take greater and greater risks, during bull markets and periods of euphoria. That is why speculative bubbles feed on themselves.

But any investment that has become a widespread topic of conversation among friends or has been hyped by the media is very likely to be unsuccessful. Throughout history, some of the worst investment mistakes have been made by people who have been swept up in a speculative bubble. Whether with tulip bulbs in Holland during the 1630s, real estate in Japan during the 1980s, or Internet stocks in the United States during the late 1990s, following the herd – believing that “this time it’s different” – has led people to make some of the worst investment mistakes.

Just as contagious euphoria leads investors to take greater and greater risks, the same self-destructive behavior leads many to sell at the market’s bottom when pessimism is rampant.

More money went into equity mutual funds during the fourth quarter of 1999 and the first quarter of 2000 – the top of the market – than ever before. Most of that money went to high-tech and Internet investments, the ones that turned out to be the most overpriced and then declined the most during the subsequent bear market. And more money went out of the market during the third quarter of 2002 than ever before, as mutual funds were redeemed or liquidated – just at the market trough. Later, during the punishing bear market of 2007-09, new record withdrawals were made by investors who threw in the towel at record lows just before the first, and often best, part of a market recovery.

It’s not today’s price or even next year’s price that matters; it’s the price you’ll get when you sell. For most investors, that’s in retirement – and even at age 60, chances are you will live another 25 years and your spouse may live several years more. So don’t let the crowd trick you into either exuberance or distress. Remember the ancient counsel, “This too shall pass.”

Mistake #3: Timing the market
Does the timing penalty – the cost of second-guessing the market – make a big difference? You bet it does. The stock market as a whole has delivered an average rate of return of 9.6% over long periods of time.

But that return measures only what a buy-and-hold investor would earn by putting money in at the start of the period and keeping his money invested through thick and thin. The average investor’s actual returns are at least two percentage points lower because the money tends to come in at or near the top and out at or near the bottom.

In addition to the timing penalty, there is also a selection penalty. When money poured into equity mutual funds in late 1999 and early 2000, most of it went to the riskier funds – those invested in high tech and Internet stocks. The staid “value” funds, which held stocks selling at low multiples of earnings and with high dividend yields, experienced large withdrawals. During the bear market that followed, these same value funds held up very well while the “growth” funds suffered large price declines. So the gap between overall market returns and an investor’s actual returns is even larger than those two percentage points.

Mistake #4: Assuming more control than you have
Psychologists have identified a tendency in people to think they have control over events even when they have none. That can lead investors to overvalue a losing stock in their portfolio. It also can lead them to imagine trends when none exist or believe they can spot a pattern in a stock chart and thus predict the future. In fact, the changes in stock prices are very close to a “random walk”: There is no dependable way to predict the future movements of a stock’s price from its past wanderings.

The same holds true for supposed seasonal patterns, even if they appear to have worked for decades. Once everyone knows there is a Santa Claus rally in the stock market between Christmas and New Year’s Day, the “pattern” will evaporate. Investors will buy one day before Christmas and sell one day before the end of the year to profit from the supposed regularity. But then investors will have to jump the gun even earlier, buying two days before Christmas and selling two days before the end of the year. Soon all the buying will be done well before Christmas and the selling will take place right around Christmas. Any apparent stock market pattern that can be discovered will not last as long as there are people around who will try to exploit it.

Mistake #5: Paying too much in fees
There is one piece of investment advice that, if you follow it, can dependably increase your returns: Minimize your investment costs. We have spent two lifetimes thinking about which mutual fund managers will have the best performance year in and year out. Here’s what we now know: It was and is hopeless.

That’s because past performance is not a good predictor of future returns. What does predict investment performance are the fees charged by the investment manager. The higher the fees you pay for advice, the lower your return. As our friend Jack Bogle, founder of mutual fund company the Vanguard Group, likes to say, “You get what you don’t pay for.”

We looked at all equity mutual funds over a 15-year period and measured the rate of return produced for their investors, as well as all the costs charged and the implicit costs of portfolio turnover – the cost of buying and selling portfolio holdings. We then divided the funds into quartiles. The lowest-cost-quartile funds produced the best returns.

If you want to own a mutual fund with top-quartile performance, buy a fund with low costs. If we measure after-tax returns, recognizing that high-turnover funds tend to be tax-inefficient, our conclusion holds with even greater force.

Mistake #6: Trusting stockbrokers
The stockbroker’s real job is not to make money for you but to make money from you. Brokers tend to be friendly for one major reason: It gets them more business. The typical broker “talks to” about 75 customers who collectively invest about $40 million. (Think for a moment about how many friends you have and how much time it takes you to develop each of those friendships.) Depending on the deal he has with his firm, your broker gets about 40% of the commissions you pay.

So if he wants a $100,000 income, he needs to gross $250,000 in commissions charged to customers. Now do the math. If he needs to make $200,000, he’ll need to gross $500,000. That means he needs to take that money from you and each of his other customers. Your money goes from your pocket to his pocket. That’s why being “friends” with a stockbroker can be so expensive. A broker has one priority: getting you to take action, any action.

We urge you not to engage in “gin rummy” behavior. Don’t jump from stock to stock or from fund to fund as if you were selecting and discarding cards in a game. You’ll run up your commission costs – and probably add to your tax bill as well.