KLCI 20090508 - what can you do now ?

First, it was bearish and most experts were saying the worst is yet to come;  (me too)

Then bull came and expert analysis polarize into 2; one group said that this is dead car bounce (me too)  and another group said the worst is over ! ( not me)

Now majority of the analysts are forced into agreeing on the bull trend. (not me)

Despite what they (I) said, what can you do at times like this?

First of all, no matter if you believe this is a fake or real bull.  The fact of up trend has been formed is a reality.  Following this method;

1) identify clear trend

You can see clearly that KlCI hit the ceiling at 1,032 on 7 May and therefore came down that day.   You probably should have sold some of your old holding stocks by now.  If you have just bought some, sorry for late posting lor :)

(I sold mine on 5 may, slightly earlier than the perfect point)

Anyway as you may see from above 2 blue lines and learning what to do during an uptrend from this article ...

2) earn in all market condition

You may wait till the following support line to buy again;

993 on 11 May

998 on 12 May

1002 on 13 May

1007 on 14 May

1011 on 15 May

Expected entry dates would be 12-13 May.

This is one of the examples to earn easy money from stock market during an up trend.  This particular analysis is confirmed on 30 Apr, so it would be best if you engaged on that point using this analysis result.

As of now, there is only 1 hesistation on this.  Observe the orange circle and rectangle,  stochastic shows that it is in oversold status.  So if it hits the support line on 13-14 May (late week) then it may indicate rebounce (buy before support line), if it hits support on 11-12 May (early week) then it may indicate a crash ( buy after rebound ).

An added strength to this analysis is that the whole Malaysia is crazy about technical analysis now.  Most investors think that technical will 'guarantee' profit due to their ignorance.  As described in these articles:

1) danger of Technical Analysis

2) Technical Analysis is as good as a gambling strategy

Technical chart alone are NOT the solution for stock investment !

Anyway, what really matter is, since the general public are dump and now they believe in technical charts, all of them will buy and sell based on the charts.  Knowing this, it will give you the advantage to get in and out earlier than them to earn better profit than them.

---- ok so far, above are considered as proper consultation despite what you believe how the market will move (scientific?), below this would be my own personal judgement (artistic?)---

Since I am one of those who believe in dead cat bounce, I wouldn't be able to enter market during the next rebounce.  I will have to wait till it really rebound then I will need to decide again if I still believe this is a fake bull or is the worst really over.

I am sure this article will be more confusing than helping to most.  But in general, what this kind of analysis has done is adding a dynamic variable to technical analysis - the Time factor.  It doesn't change the fundamental flaw in Technical Analysis but it does help to stay ahead of others who also use technical charts.

stock market making me dizzy ...

Was just having a little fun making world stock market spin like it rises now ... just to remind you that you may have 1 bird eye view on the whole world stock market performance in real time in stock.malpf.com ( no spinning )

Try move your mouse around the spinning markets to control the spins ... :)

Another way to value a house

In this post http://fishyre.blogspot.com/2009/04/here-it-is.html I compared renting versus buying, as one way to try and value a house.

However it does imply two things, 1) that you have money to pay down a mortgage. If not, it is much cheaper to rent the same property than to buy it. 2) that you have security of income stream. If not, having to sell under duress could be financially disastrous.

However, if I was an investor, I would be evaluating the price by slightly different metrics. As I mentioned, these mirror, but are not the same as the rent/buy comparisons.

Cash flow negative, neutral or positive?

OK time for some explanation. Every property is cash flow positive if you buy with 100% down! So these terms are relative. At what % of down-payment does the property become cash-flow positive. 10%, 25%, 50%?

During a boom, investors are more likely to buy properties which are only cash flow positive with high down-payments. It means they often 'top-up' the rent to pay the expenses, but expect to gain on a robust rental market, and with capital gains.

Rents go up by inflation or more, while the mortgage is being paid down, so properties that start off being cash flow often negative end up being positive after a few years.

In a recession the opposite is true. Rentals are weak, renters may fall behind, and capital gains cannot be counted on, in fact the property maybe dropping in price and will need repairs etc.

In this case I would want to see a the property cash-flow neutral or positive with a very small D/P at purchase.

AND...

I don't think this is the average recession. If it was, we would not be sitting at near zero rates and the politicians and central bankers would not be saying, with fear in their eyes, 'we must prevent a depression', before the recession had even started.

This may be one of the few times in history when renters can negotiate no increase or possibly even a rent reduction, when their lease comes up, as the economy softens.

I have just negotiated my house and commercial lease with zero increase for the coming year. And in case you think I am so smart (I am not) I could leave and get into comparables for both 5-10% cheaper. Had I done a bit more market research before I signed the lease extension, I may have got a better deal.

So imagine you are an investor and your renter wants a rent reduction. The alternative is to try and rent it our again in a softening market, with possibly other concessions too. In this instance, a cash flow positive property can become cash flow negative!


So if I buy something now:

1) I would have to be able to carry it without suffering too much, if the income drops or disappears...ie if the renter falls behind, or leaves after missing several months of rent, or it cannot rent quickly, or the market dictates a lower rent.

2) I could handle a reasonable increase in interest rates. No one can foretell where rates will be a year or five from now, but they are remarkably low now. So if the property cannot cash-flow at these rates, then you are unlikely to get much benefit from lower rates in the future.

Incidentally the investor will need to make provision for repairs and special assessments AND the very real possibility of increased property taxes after the Olympics.

While an owner may shrug these of as the cost of owning, for an investor these added expenses reduce, or in some case can completely obliterate his/her returns.

Therefore the deal for an investor has to be significantly better than the rent/buy comparison particularly in a softening market and recessionary environment.

BTW: another great post by Mohican which must not be missed:

http://housing-analysis.blogspot.com/2009/05/vancouver-real-estate-april-2009.html

Stock Pick 2009 05 05

Lucky or not, recent stock market's dead-cat-bounce is higher than expected, so high that the technical reading triggers the signal of end-of-bear-market, eventually made me changes my previous investment strategy, i.e. sell now instead of selling 3-5 years later.  In general this is an example of emotion overtake logic.

The emotion part is my belief that this is a dead-cat-bounce; the logic part is the clear technical signal of bear-end.  So sum all up, now even if the market goes crash, it would most probably be supported at 950.  Instead of the much lower level I expected earlier.

Although 70% profit within a month seems pretty good but almost any speculator for the past few weeks would most probably easily get that return rate and more.  Should I really keep for 3-5 years, 4x return isn't really that impossible.  To really feel the difference, try imagining earning $70,000 from $100,000 vs. the potential income of $400,000.  What can you do with an extra of $330,000?

Taking profit now actually allows me to rest for the year of 2009 (this year target achieved).  However, selling off everything I have now is a bad positioning move, so I will need to start working on 'what to buy now'.

So follow the same method to screen out stocks to be analyzed on, this time I am using these rules:

1) Volume higher than 15,000
2) Price between 0.30 and 0.50

This is the list I got;

AISB ANNJOO-WB BRDB-WA BURSA-CL DUTALND EDEN EQUINE GPHAROS HUAAN IJMLAND-WA INCKEN INSAS KEURO KHSB KUB KURASIA LBS LIONCOR LIONDIV MULPHA NTPM OILCORP PICORP POHKONG SALCON SANBUMI SCOMI TIMECOM WCT-WB

Screen through their finance data (ROE and EPS), these are the 3 stocks I am watching now.  More in depth study will be needed before taking any action but I have time for that (before end of 2009).

GPHAROS : EPS chart and trend line

INSAS : EPS chart and trend line

MULPHA : EPS chart and trend line

One exception during above exercise is NTPM.  It doesn't really fall under my worth buying now rules but it is the only pick that all its EPS stays positive during the whole period.  So I am keeping this on my watch list too.  I may not be able to earn 15% from this stock, but it will be a good safe and steady keeper which I will need should I be wrong in my dead-cat-bounce perception.

NTPM : EPS chart and trend line

KLSE update 090505 1009

How long have I been gone ?  Wow ... are we supposed to be sad for the swine flu or should we be excited about the market bullish movement ?

real time world market performance at stock.malpf.com

The key difference of this recent surge than before is that it breaks 200 days Moving Average.  A common indicator used by the western world that a down turn is over.  And today's investment is the world for technical analysis.  So everyone would most probably be following blindly on this signal alone - recession is over !  Yeah !

200 days MA is suitable for mature markets like USA and Europe, with some internal justification, I use 220 for KLSE, Malaysia market.  And this is the chart for it.

It tells the same thing, you all should rush into it NOW !  ( I didn't say that, the chart did )

As far as the 1view world chart and technical chart show, correction will not kick in today.  Even if it did, it wouldn't be a huge correction.  In other words, you may still have some fun yet.

but NOT me ...

Well I have 30% of my investment fund in KLSE which I initially planned to profit take 5-10 years later.  Due to this recent hike, I am selling them now.  I set my selling price slightly higher than market price because I am not that desperate yet.  If the sale proceed today or tomorrow, I would have gain about 70% from this transaction alone and may satisfy my annual target of 15%.  But then I will have to work something out for next year.

We will see ...

Personal Finance in 1Picture

I started this Blog with very fundamental talks on personal finance on lay man write up. I have to apologize if recent posts have become quite cryptic and speculative. So let’s get back to some of the unfinished fundamentals on personal finance.

First you must have an income. Income can be any form of received money including pocket money for kids, household money received from bread earner, begged etc.

No matter how you get your income, you must setup an automated system to save part of your incom; BEFORE you do anything else ! Remember you need your ASS - Automated Saving System.

In today standard, this automated saving system should give you some interest, preferably matching fix deposit rate.

No matter if your income makes you a Rich, Average or Poor person, if you don't have an ASS you may find yourself in trouble one day. Some even cost them their lives.

Once you have enough money in your ASS, ie. can substain your lifestyle for 3, 6 or 9 months. You will need to start thinking about Money Earns Money - MeM. 'Passive' is the keyword. Something that you do once now and enjoy a life long extra income in future.

There are standard methods or PF tools to achieve MeM. Each level up the pyramid requires more learning. Entering into any of this with the wrong preception or knowledge may bring negative MeM.

At this stage, many will tell you high risk high return, low risk low return. While they are not wrong, but that concept is not entirely helpful to your personal finance. In order to focus on what can helps, you may need 21st century understanding on Risk.

Further in future, you may see that MalPF will preach that

1) Personal Risk is what you know, the more you know the better it is, irrelevant to what PF tool it is

2) PF Tool Risk is fixed no matter who invest in it, irrelevan to who you are

Bundle together that 2 concepts result one simple action to position yourself well in MeM - keep learning ( the easy part ) and learn the right stuff ( the harder part - due to Rich Conspiracy ).

There are 2 BIG parts in MeM. The part mentioned above is Earn 2 with 1 or Doubling your money - MeMx2 The crucial part left out here on purpose is Time - which is also the variable for individuals.

We use Rule of 72 to quickly calculate this variable. For example, it takes 6 years to double my money if I get 12% return from my investment.

So far MalPF model works well without the need of setting goals. However MeMx2 is the part where you may see a distinctive difference between a person do it with goals and another without.

Should one still find it hard to find own goals, simply follow the magic number - 7. Setup 7 MeMx2 accounts for the following:

1. Car

2. House

3. Family

4. Education

5. Retirement

6. Charity

7. Holiday and Travels

The good thing about none goal specific MeMx2 is that they are flexible and interchangable. You should start all 7 accounts at once even if you think you don't need it. Even putting in 1 cent a month into each account is better than putting 10 cent into one investment account only. ( No, this is NOT diversification, this is just broaden your availability when you don't have a target, like spreading a fish net when you don't have a hook/bait )

The second part of MeM is to Buy 100 with 1 or Secure Future Money - MeM100. Also commonly treated as insurance. While MeMx2 urges us to learn more, gain more knowledge but there are always something we haven't learned yet or will never able to 'finish' learning. Hence for all the stuff we don't know, we apply MeM100 to it.

This is especially useful when you have goals in MeMx2. For example, I want to save $100 a month for 20 years with 12% return so that I can get my $100,000 for my retirement. So I can buy a $100,000 insurance just incase if I lost my ability to save that $100, I will still get my $100,000 regardless.

There are 5 big areas in MeM100:

1. Die Early

2. Living Dead

3. Fail to Die

4. Accident

5. Income Replacement

If you still don't have clear goals in life up to this stage. Then you will not be able to have an optimized Personal finance plan ie. Buy Term Invest The Rest. You would probably go for something traditional called Whole Life Plan. Its not bad at all for someone who cann't even figure out a single goal after 20+ years of life. Try This ...

and this is what this picture is all about ... ( may be not All but the nutshell yes )

Sorry about that lack of posts folks

I really don't have anything to say.

In my opinion, we are in a temporary stabilisation driven by low interest rates and the realisation that the financial world did not come to an end, despite the irresponsible actions of the elite who run it.

Nothing goes straight up or down and we were due for a bounce, to let some anxious buyers get on board.

I am waiting until after June to see what happens to prices.

I suspect there is a lot of inventory waiting for see firmness to list. If so, being human, they will wait and wait, until the first sign of weakness and then try and unload.

Time will tell...