Saturday, December 20, 2008
Millionaire Mindset You Can Have!
Many of us would love to have more money in their bank accounts. Yes?
Everytime we update our bank savings account book, we look at the balance amount with a blank expression. I believe many of us are not too happy with what we have just seen. Not enough zeros behind numbers we just saw in the bank book. Yes?
Whatever reasons you are tempted to give does not matter. You reap what you sowed, that's what most people are taught. Have you ever wondered why you sowed so little even though you "knew" that you had to sow more in the beginning?
The answer lies in our value systems deep down in our souls!
When our values do not match with what we intended to do, for example, that is to be RICH, to be a millionaire by age 40... we will never be one!
What is your deep down values? Do you despise, frown upon, dislike or hate the rich and their possessions? Do you stop others from thinking or dreaming about getting rich too?
Some people equate rich people as greedy people, rich people as corrupted people, people who pulled strings to get to where they were. Rich, is a negative word in their dictionaries.
These people will NEVER be rich. "FULL STOP".
If you want to learn how to be rich, read "Secrets of the Millionaire Mind" book authored by T. Harv Eker. Check out his website at http://www.millionairemindbook.com/ for a great transformation in the way you think.
Once you have decided to be RICH, give me a call at 9001-1082 and I will help you plan for your financial security and success! Yes?
Everytime we update our bank savings account book, we look at the balance amount with a blank expression. I believe many of us are not too happy with what we have just seen. Not enough zeros behind numbers we just saw in the bank book. Yes?
Whatever reasons you are tempted to give does not matter. You reap what you sowed, that's what most people are taught. Have you ever wondered why you sowed so little even though you "knew" that you had to sow more in the beginning?
The answer lies in our value systems deep down in our souls!
When our values do not match with what we intended to do, for example, that is to be RICH, to be a millionaire by age 40... we will never be one!
What is your deep down values? Do you despise, frown upon, dislike or hate the rich and their possessions? Do you stop others from thinking or dreaming about getting rich too?
Some people equate rich people as greedy people, rich people as corrupted people, people who pulled strings to get to where they were. Rich, is a negative word in their dictionaries.
These people will NEVER be rich. "FULL STOP".
If you want to learn how to be rich, read "Secrets of the Millionaire Mind" book authored by T. Harv Eker. Check out his website at http://www.millionairemindbook.com/ for a great transformation in the way you think.
Once you have decided to be RICH, give me a call at 9001-1082 and I will help you plan for your financial security and success! Yes?
Monday, December 01, 2008
Wealth Protection - How Much Is Enough?
Many times, we read about "other" people getting murdered, dying from accidents, dying from natural causes, committing suicide, sudden unexplained deaths at home and abroad, killed by terrorists and dying from major illnesses.
Has it ever occured to you that one day, that "other" person will be YOU? Other people also think that other people, not them, will be next to go. So who will be the next to die?
The Greek Philosopher, PLATO, once said: "There is no certainty than the certainty of death and there is no uncertainty than the moment and timing of death."
Death is certain but when will it happen? No one knows!
When that happens, are we prepared mentally, spiritually and financially?
Here I will address the FINANCIAL issues since we know for sure one day we will die...)
1) Upon death, we have to set aside enough funds for the family expenses and savings to last till our youngest child is independent financially. 25 years old is a good goal to set. You may want more if the child is not mentally capable to take care of itself.
2) But what if we don't die immediately, what if we are disabled after an illness or by a freak traffic accident? You may have to get an income that will take care of at least 75% of your monthly income till your intended retirement age. Most people can still get on with their lives after a reduction of 25% of their income by giving up some of their luxuries.
3) But what if we fall terribly sick and need lots of medical attention, both in and out of hospital? We need a good hospitalisation expenses reimbursement plan plus get an amount of money that can provide us with 3 years of our annual income as most people can't live past the third year. If you get past the third year, you will need another year or two to get back into the main stream society by taking enrichment courses or upgrade your skills. Another lump sum of 2 to 3 times your annual income will take care of any immediate expenses that you need to get out of the country to recuperate or spend it in any way you deem necessary to help you recover as soon as possible.
Remember, it is not the person who lies in the coffin who suffers BUT the surviving loved ones who will suffer if there is not enough financial provision. A traditional Chinese funeral can cost more than $30,000 in Singapore! Mourners will say "yes" to funeral directors when they are emotionally unstable. They want the best for the deceased.
So, if you think you want to do something now while you are alive, why not give me a call to discuss how a financial plan can prevent these miserable moments in your family.
Do you still want to provide the best for your loved ones when you are no longer around?
I can be reached at 9001-1082 if your answer is "YES"
Has it ever occured to you that one day, that "other" person will be YOU? Other people also think that other people, not them, will be next to go. So who will be the next to die?
The Greek Philosopher, PLATO, once said: "There is no certainty than the certainty of death and there is no uncertainty than the moment and timing of death."
Death is certain but when will it happen? No one knows!
When that happens, are we prepared mentally, spiritually and financially?
Here I will address the FINANCIAL issues since we know for sure one day we will die...)
1) Upon death, we have to set aside enough funds for the family expenses and savings to last till our youngest child is independent financially. 25 years old is a good goal to set. You may want more if the child is not mentally capable to take care of itself.
2) But what if we don't die immediately, what if we are disabled after an illness or by a freak traffic accident? You may have to get an income that will take care of at least 75% of your monthly income till your intended retirement age. Most people can still get on with their lives after a reduction of 25% of their income by giving up some of their luxuries.
3) But what if we fall terribly sick and need lots of medical attention, both in and out of hospital? We need a good hospitalisation expenses reimbursement plan plus get an amount of money that can provide us with 3 years of our annual income as most people can't live past the third year. If you get past the third year, you will need another year or two to get back into the main stream society by taking enrichment courses or upgrade your skills. Another lump sum of 2 to 3 times your annual income will take care of any immediate expenses that you need to get out of the country to recuperate or spend it in any way you deem necessary to help you recover as soon as possible.
Remember, it is not the person who lies in the coffin who suffers BUT the surviving loved ones who will suffer if there is not enough financial provision. A traditional Chinese funeral can cost more than $30,000 in Singapore! Mourners will say "yes" to funeral directors when they are emotionally unstable. They want the best for the deceased.
So, if you think you want to do something now while you are alive, why not give me a call to discuss how a financial plan can prevent these miserable moments in your family.
Do you still want to provide the best for your loved ones when you are no longer around?
I can be reached at 9001-1082 if your answer is "YES"
Wednesday, November 19, 2008
Friday, November 14, 2008
Wednesday, November 12, 2008
IPP Investment Commentary
IPP Investment Digest
Weekly roundup of headline news.
For the week ending 9 Nov 2008
Equity Markets: The US indices perked up on Fri after two sessions of loss, following the US Presidential election. European indices also edged higher on Fri on news of rate cuts, after sharp drops on Thu. Some of Asia’s indices closed the week up, with STI, Hang Seng and Nikkei moving up 3.86%, 1.97% and 0.07% respectively.
Commodities: Crude oil prices remain low on pressure of Opec’s rising spare capacity by 1.6m barrels a day, and recession fears. Crude oil Nov contract (Nymex Nov West Texas Intermediate) at one point fell to $60.16 a barrel. Gold often seen as an inflation hedge also saw low prices as inflation risk abate. Currencies: US$ weakened (-2.45%) against £ over the week, while gaining marginal strength against the € (+0.83%) and ¥ (+0.13%). S$ weakened by 0.60% against the US$ over the week.
Economy: IMF forecasts growth to be -0.3% and -0.2% in advanced economies and Japan for 2009. China, widely counted on to sustain global growth is forecast to grow at 8.5% in 2009. US reported Oct job loss to be at 240,000, economists had forecasted loss at 200,000. US unemployment in Oct was 6.5%.
Interest Rate: Bank of England cut interest rate by 150 bps to 3% - lowest level in 50 years. Swiss National Bank and ECB both cut interest rate by 50 bps to 2% and 3.25% respectively. Reserve Bank of Australia cut interest rate by 75 bps to 5.25%, with more cuts expected. LIBOR rates have come down versus a month ago, with 3-month, 6-month and 1-year rates at 2.71%, 2.97% and 3.17% respectively (as at 5 Nov).
Banks/IMF: IMF approved a US$15.7 bn loan for Hungary, the approval makes US$6.3 bn immediately available and the remainder will be available in five installments subject to quarterly reviews.
Corporates: Toyota Motor reported Q2 net profits that fell 69% and warned of possibility of zero profits in 2H. Ford Motor cuts salaried expense by another 10%, further to a 15% cut earlier in the year. Goldman Sachs cut 3,000 jobs, while Fidelity Investments plan to cut 1,290 jobs. Mattel announced 1,000 job cuts worldwide. DBS is expected to cut 900 jobs; its Q3 net profit of S$379m is sharply lower on a year-on-year basis (S$610m last year).
Politics: US elected its first African American President (44th), letting the Democrats take lead in the White House beginning next Jan. Three terrorists, who set off bombs in Bali in 2002, killing hundreds of people, were executed in Indonesia.
This material is prepared by IPP Investment Division (IPP) and is provided for information purposes only. IPP does not warrant the
adequacy or completeness of such information. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for
any loss arising whether directly or indirectly as a result of you acting on this information. Reference to specific securities (if any) is
included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same.
Weekly roundup of headline news.
For the week ending 9 Nov 2008
Equity Markets: The US indices perked up on Fri after two sessions of loss, following the US Presidential election. European indices also edged higher on Fri on news of rate cuts, after sharp drops on Thu. Some of Asia’s indices closed the week up, with STI, Hang Seng and Nikkei moving up 3.86%, 1.97% and 0.07% respectively.
Commodities: Crude oil prices remain low on pressure of Opec’s rising spare capacity by 1.6m barrels a day, and recession fears. Crude oil Nov contract (Nymex Nov West Texas Intermediate) at one point fell to $60.16 a barrel. Gold often seen as an inflation hedge also saw low prices as inflation risk abate. Currencies: US$ weakened (-2.45%) against £ over the week, while gaining marginal strength against the € (+0.83%) and ¥ (+0.13%). S$ weakened by 0.60% against the US$ over the week.
Economy: IMF forecasts growth to be -0.3% and -0.2% in advanced economies and Japan for 2009. China, widely counted on to sustain global growth is forecast to grow at 8.5% in 2009. US reported Oct job loss to be at 240,000, economists had forecasted loss at 200,000. US unemployment in Oct was 6.5%.
Interest Rate: Bank of England cut interest rate by 150 bps to 3% - lowest level in 50 years. Swiss National Bank and ECB both cut interest rate by 50 bps to 2% and 3.25% respectively. Reserve Bank of Australia cut interest rate by 75 bps to 5.25%, with more cuts expected. LIBOR rates have come down versus a month ago, with 3-month, 6-month and 1-year rates at 2.71%, 2.97% and 3.17% respectively (as at 5 Nov).
Banks/IMF: IMF approved a US$15.7 bn loan for Hungary, the approval makes US$6.3 bn immediately available and the remainder will be available in five installments subject to quarterly reviews.
Corporates: Toyota Motor reported Q2 net profits that fell 69% and warned of possibility of zero profits in 2H. Ford Motor cuts salaried expense by another 10%, further to a 15% cut earlier in the year. Goldman Sachs cut 3,000 jobs, while Fidelity Investments plan to cut 1,290 jobs. Mattel announced 1,000 job cuts worldwide. DBS is expected to cut 900 jobs; its Q3 net profit of S$379m is sharply lower on a year-on-year basis (S$610m last year).
Politics: US elected its first African American President (44th), letting the Democrats take lead in the White House beginning next Jan. Three terrorists, who set off bombs in Bali in 2002, killing hundreds of people, were executed in Indonesia.
This material is prepared by IPP Investment Division (IPP) and is provided for information purposes only. IPP does not warrant the
adequacy or completeness of such information. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for
any loss arising whether directly or indirectly as a result of you acting on this information. Reference to specific securities (if any) is
included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same.
Friday, October 31, 2008
Happy Weekend, Everyone!
Jesus said: "COME TO ME, ALL YOU WHO LABOR AND ARE HEAVY LADEN, AND I WILL GIVE YOU REST. TAKE MY YOKE UPON YOU AND LEARN FROM ME, FOR I AM GENTLE AND LOWLY IN HEART, AND YOU WILL FIND REST FOR YOUR SOULS. FOR MY YOKE IS EASY AND MY BURDEN IS LIGHT."
( MATTHEW 11:28-30 *NKJV )
THE LORD UPHOLDS ALL WHO FALL, AND RAISES UP ALL WHO ARE BOWED DOWN.
( PSALMS 145:14 )
CAST YOUR CARES ON THE LORD AND HE WILL SUSTAIN YOU; HE WILL NEVER LET THE RIGHTEOUS FALL. After all; GOD IS OUR REFUGE AND STRENGTH, A VERY PRESENT HELP IN TROUBLE.
( PSALMS 55:12 ) & ( PSALMS 46:1 )
BLESSED IS THE MAN WHO PERSEVERES UNDER TRIAL, BECAUSE WHEN HE HAS STOOD THE TEST, HE WILL RECEIVE THE CROWN OF LIFE THAT GOD HAS PROMISED TO THOSE WHO LOVE HIM.
CAST YOUR CARES ON THE LORD AND HE WILL SUSTAIN YOU; HE WILL NEVER LET THE RIGHTEOUS FALL. After all; GOD IS OUR REFUGE AND STRENGTH, A VERY PRESENT HELP IN TROUBLE.
( PSALMS 55:12 ) & ( PSALMS 46:1 )
BLESSED IS THE MAN WHO PERSEVERES UNDER TRIAL, BECAUSE WHEN HE HAS STOOD THE TEST, HE WILL RECEIVE THE CROWN OF LIFE THAT GOD HAS PROMISED TO THOSE WHO LOVE HIM.
( JAMES 1:12 )
PRAISE BE TO THE GOD AND FATHER OF OUR LORD JESUS CHRIST, THE FATHER OF COMPASSION AND THE GOD OF ALL COMFORT, WHO COMFORTS US IN ALL OUR TROUBLES.
( 2 CORINTHIANS 1:3-4 )
PRAISE BE TO THE GOD AND FATHER OF OUR LORD JESUS CHRIST, THE FATHER OF COMPASSION AND THE GOD OF ALL COMFORT, WHO COMFORTS US IN ALL OUR TROUBLES.
( 2 CORINTHIANS 1:3-4 )
Monday, October 27, 2008
Saturday, October 18, 2008
IPP House View
Commentary by IPP Investment Division
14 Oct 2008
Financial Markets
The world’s financial markets went on a wild roller-coaster ride over the past 2 weeks. With the concerted efforts displayed by G7 and European leaders, we are optimistic that this coordinated approach is likely to provide stability to the present extremely volatile market.
Deleveraging will reduce global liquidity considerably and the global economy is likely to slow. The global economy will need time to work out the excesses but will emerge stronger in the recovery process.
Asia ex-Japan & Emerging Markets
•Present valuation of Asia-ex Japan and emerging markets continues to look attractive. With the likely slowdown in global economic growth, we expect growth in Asia ex-Japan and emerging economies also to slow but still grow at a higher rate as compared to the developed economies.
•We continue to favor and over-weight Asia ex-Japan and emerging markets. We hold our views that investing into Asia Ex-Japan and emerging markets is likely to provide better potential returns when financial market recovers, as Asia ex- Japan and emerging markets remains the world’s growth engines.
US & Europe
•While the financial markets went into a tailspin over the past week, the governments around the world acted swiftly and took concerted actions to "calm" the markets. G7 has pledged "no more Lehman-type failures" in an attempt to restore confidence in the market.
•While the concerted efforts by US and European governments are likely to help stabilise the financial markets in US and Europe in the short-term, we do not see this as a quick fix to the present financial crisis. Nonetheless, it is a very encouraging start.
•Deleveraging will take some time and US/UK/Europe economies will need time to work out the excesses. Liquidity will not be as plentiful as in the past and economic growth is likely to stall during the early phase of the recovery process.
•Hence, we do not see an end to the present problems in US/UK/Europe in the short-term and will continue to underweight them.
Commodities
•Commodities will still remain volatile going forward. However, the demand for commodities will be there as long as the emerging markets continue with strong internal consumption demand. The mid- to long-term trend in commodities prices is still positive.
•We think that an allocation to commodities is important to the portfolio as commodities generally provide a hedging mechanism to inflation, which will better manage volatility in a diversified portfolio.
Australian Dollar Denominated Fund
The Australian dollar weakened suddenly and sharply over the past 2 weeks. The primary cause is the unwinding of yen-carry trade. When the RBA cut interest rate on 7 Oct, yen-carry traders had to reverse their positions, selling Australian dollar which now has a lowered yield at 6%. The selling pressure weakened the currency.
For clients who have invested in funds denominated in Australian dollar, we think staying invested is appropriate at this current juncture.
Position For Recovery
•In current market environment, we see opportunities for the medium to long term investors in these investment themes: Asia, commodities, Middle East & North Africa and BRIC that have sound fundamentals and are poised to recover quicker and stronger in the future.
•It is probable for markets to see sharp rebounds as investors cheer over the initial coordinated efforts of governments and central banks. However, the initial euphoria could dissipate as the real economy works out the impact of the initial financial markets fall out. We must expect volatility.
•For equity investments, we reckon that this is not a good time to cash out as markets have fallen drastically. For clients who have longer-term investment horizon, we believe this is good time to accumulate more units through RSP.
•For fixed income investments, focus on those with shorter duration. For clients that are jittery and are looking for absolute safety, consider switching back to cash/CPF and start a 24-month RSP programme to invest in equities.
•For clients who are losing sleep due to the volatile markets, consider shifting to safer investments such as money market funds or switch back to cash/ CPF and start a 24-month RSP programme.
•Own a diversified portfolio. This is not the time to take concentrated bets on specific investments or sectors as recovery in financial markets is unlikely to be immediate.
This Investment Commentary is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. Opinions expressed in this commentary are subject to change without notice, and no part of this publication is to be construed as an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. We will not accept any liabilities whatsoever whether direct or indirect that may arise from the use of information in this publication. The company, its directors, connected persons or employees may from time to time have interest in the securities mentioned in this publication. Past performance is not necessarily a good indicator for future returns. Please consult your IPP FAR for any intended implementation.
14 Oct 2008
Financial Markets
The world’s financial markets went on a wild roller-coaster ride over the past 2 weeks. With the concerted efforts displayed by G7 and European leaders, we are optimistic that this coordinated approach is likely to provide stability to the present extremely volatile market.
Deleveraging will reduce global liquidity considerably and the global economy is likely to slow. The global economy will need time to work out the excesses but will emerge stronger in the recovery process.
Asia ex-Japan & Emerging Markets
•Present valuation of Asia-ex Japan and emerging markets continues to look attractive. With the likely slowdown in global economic growth, we expect growth in Asia ex-Japan and emerging economies also to slow but still grow at a higher rate as compared to the developed economies.
•We continue to favor and over-weight Asia ex-Japan and emerging markets. We hold our views that investing into Asia Ex-Japan and emerging markets is likely to provide better potential returns when financial market recovers, as Asia ex- Japan and emerging markets remains the world’s growth engines.
US & Europe
•While the financial markets went into a tailspin over the past week, the governments around the world acted swiftly and took concerted actions to "calm" the markets. G7 has pledged "no more Lehman-type failures" in an attempt to restore confidence in the market.
•While the concerted efforts by US and European governments are likely to help stabilise the financial markets in US and Europe in the short-term, we do not see this as a quick fix to the present financial crisis. Nonetheless, it is a very encouraging start.
•Deleveraging will take some time and US/UK/Europe economies will need time to work out the excesses. Liquidity will not be as plentiful as in the past and economic growth is likely to stall during the early phase of the recovery process.
•Hence, we do not see an end to the present problems in US/UK/Europe in the short-term and will continue to underweight them.
Commodities
•Commodities will still remain volatile going forward. However, the demand for commodities will be there as long as the emerging markets continue with strong internal consumption demand. The mid- to long-term trend in commodities prices is still positive.
•We think that an allocation to commodities is important to the portfolio as commodities generally provide a hedging mechanism to inflation, which will better manage volatility in a diversified portfolio.
Australian Dollar Denominated Fund
The Australian dollar weakened suddenly and sharply over the past 2 weeks. The primary cause is the unwinding of yen-carry trade. When the RBA cut interest rate on 7 Oct, yen-carry traders had to reverse their positions, selling Australian dollar which now has a lowered yield at 6%. The selling pressure weakened the currency.
For clients who have invested in funds denominated in Australian dollar, we think staying invested is appropriate at this current juncture.
Position For Recovery
•In current market environment, we see opportunities for the medium to long term investors in these investment themes: Asia, commodities, Middle East & North Africa and BRIC that have sound fundamentals and are poised to recover quicker and stronger in the future.
•It is probable for markets to see sharp rebounds as investors cheer over the initial coordinated efforts of governments and central banks. However, the initial euphoria could dissipate as the real economy works out the impact of the initial financial markets fall out. We must expect volatility.
•For equity investments, we reckon that this is not a good time to cash out as markets have fallen drastically. For clients who have longer-term investment horizon, we believe this is good time to accumulate more units through RSP.
•For fixed income investments, focus on those with shorter duration. For clients that are jittery and are looking for absolute safety, consider switching back to cash/CPF and start a 24-month RSP programme to invest in equities.
•For clients who are losing sleep due to the volatile markets, consider shifting to safer investments such as money market funds or switch back to cash/ CPF and start a 24-month RSP programme.
•Own a diversified portfolio. This is not the time to take concentrated bets on specific investments or sectors as recovery in financial markets is unlikely to be immediate.
This Investment Commentary is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. Opinions expressed in this commentary are subject to change without notice, and no part of this publication is to be construed as an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. We will not accept any liabilities whatsoever whether direct or indirect that may arise from the use of information in this publication. The company, its directors, connected persons or employees may from time to time have interest in the securities mentioned in this publication. Past performance is not necessarily a good indicator for future returns. Please consult your IPP FAR for any intended implementation.
Friday, October 17, 2008
Plan for Recovery
From the Investment Desk
Eddy Tan
Head, Analytics & Asset Allocation
Bush & co. didn’t find any weapons of mass destruction ("WMD") in Iraq. Instead, they exported their own version of US-made sub-prime and credit WMD that blew up everywhere in the world. Equity markets were severely hammered last week.
US equity indices lost >20% the whole of last week. Central banks around the world appear to have coordinated desperate moves to deal with desperate times, from injecting liquidity, to resuscitating financial institutions, to guaranteeing deposits (to prevent bank runs), to slashing interest rates (100bp in Australia, 50bp in many other countries).
Consider Iceland "bankrupt" – the volcanic country of 320,000 people should have kept more gold bullion. Exporters to Iceland are asking for upfront payment, many avoiding Icelandic krona. Tempers are flaring elsewhere – in Pakistan, between Thailand and Cambodia over a temple,…
No wonder, gold is still holding up above US$800. Last Monday, US equity indices staged a powerful +11% rally, a 75-year historic jump; while ST Index rose 6.6%. US equity indices fizzled since then, and so did other markets. Equity indices could test the last low.
- Hedge funds reported redemption orders placed last month, which should pressure equities come December. I reckon outflow of US$1.6-2 trillion, from multiple of 4-5x of US$400 billion redemption. Fortunately, our recommended hedge funds could still employ short and use liquid instruments.
- Focus has shifted away from sub-prime. There are more defaults in prime mortgages. Wait for the other shoes to drop – credit cards, automotive loans and commercial property loans, as recession bites and credit remains tight. JP Morgan, Citigroup and American Express, among others, issuer credit cards. Recent equity injection by US government could ease some pressure, for now.
- UK residential house index is under tremendous stress, given the higher leverage and that prices have not fallen as rapidly compared to the US. We reckon up to 25-30% downside in UK home value.
- The size of credit derivatives, at US$60 trillion overwhelms global GDP. The size of derivatives of all sorts is even a larger US$600 trillion. Several voices call for regulation of these instruments. We look forward to that, but taming such monster will be a nightmare.
- The war on naked shorts evolves into a war against all kinds of equity shorts. That is blunder – equity markets tumble, nonetheless. Shorts grease the wheels of capital markets. Italian Prime Minister’s call to halt global equity trading is also another mistake; fortunately he retracted.
- Volatility Index ("VIX", tradable on CBOE), which measures investors’ fear, soared to >70. Some pundits target 90. Goldman Sachs volatility traders made a killing. Under normal circumstances, VIX hovers around 24.
- Spikes in LIBOR rates (>4% for USD, >5% for ₤) still express suspicion among banks (cash hoarding). Businesses are getting squeezed from tight credit, so expect pressure on corporate earnings. Let’s apply discounts to those projected PE multiples. Initial attempts to unfreeze credit will take time, which will invite confidence back to businesses and equities.
- Global bail out tab nears US$3 trillion. Global printing presses are cheapening currencies. Central banks have restricted (their own) gold lending, sending lease rates higher to >2%.
Plan For Recovery in 2H09 (fingers crossed)
Many of us spend hours glued to the internet and television searching for answers but only to see more bad news. Until next year, expect >10% daily fluctuation. There will be casualties. Bail out programs won’t rescue every financial humpty dumpty. Failed entities lead to job and pay cuts, and haircuts by creditors, counterparties, shareholders and tax payers.
But that should lead to a new era of prudent banking practices. Certain Asian, Middle East & BRIC economies flushed with surpluses will keep their economies humming; their equities have been unfairly sold down.
Plan now and prepare deploying cash to buy depressed but attractive assets. Monthly RSP is the way to go and would position medium to long term investors for the market recovery.
This Investment Commentary is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. Opinions expressed in this commentary are subject to change without notice, and no part of this publication is to be construed as an offer to buy or sell any securities or financial instruments whether referred to herein or otherwise. The information herein was obtained from various sources; we do not guarantee its accuracy or completeness. We will not accept any liabilities whatsoever whether direct or indirect that may arise from the use of information in this publication. The company, its directors, connected persons or employees may from time to time have interest in the securities mentioned in this publication. Past performance is not necessarily a good indicator for future returns. Please consult your IPP FAR for any intended implementation.
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