April 2008

Market Review for March:
The madness of March saw stock markets all over the world, Singapore included, falling like ten-pins from the beginning of the month.
Again their falls were led by Dow Jones dropping 316 points on the 1st trading day of March.
Many reasons were attributed to the Dow’s drop.
These reasons were old and stale – sub-prime mortgage effects, recession, inflation, record oil & commodity prices & weak USD.
They have been repeated weeks before.
So what led to the Dow taking a kick in the butt, resulting in world bourses also feeling the pain?
Co-incidence or not, Warren Buffet announced the day before the 316-point drop, he was withdrawing his offer of US$800b to buy over US Municipal debts.
Actually Mr Buffet need not make the announcement — which led to the blood-bath.
His initial offer in February was straightaway rejected – only it was not publicized.
US Federal Reserve Board quickly came out with an announcement that it would release US$200b to prop up the US economy and the finance system
Dow went up 417 points. World markets took a another gulp of breath.
Dow & world bourses, Singapore included, after bleeding for more than a week, had one last kick and went into a state of comatose.
This was due to revelations that a US Hedge Fund, Carlyle Capital faced liquidation if it was not able to meet redemption demands of up to US$17b on the US sub-prime loan.
Mid-March venerable US Bear Stearns Banking Group which already lost two of its hedge funds, Bear then exposed its nakedness to the US Federal Reserve that without immediate emergency financial assistance, it could bear no more and had to liquidate with dire consequences, not only to the US banking industry, but also to the whole US economy.
Dow in coma broke the critical 12’000-point support, 14 March.
Again, with the Bush’s and US Federal Reserve’s financial wizardries, they quickly came up with announcements to prop up Dow and in particular, help Bear and the likes.
An emergency order was given to the Federal Reserve Board to invoke the “1960 emergency power” for the Fed Board to immediately grant financial assistance to any US bank or financial institution to prevent it from failing and dragging down the US economy.
Hurray! Another legitimate US case of monetizing debts — only this time the US printing machine has to be set at 14-digits.
With the double dose injections – Interest rate cuts and Talk of Fed Board’s intervention – Dow managed to jerk twice, mid-March, and quickly fell back into coma again.
This was because the double-dose injections were without medications — just Talk, Cheap Talk.
Stanley Bing, author of “Crazy Bosses” mentioned sarcastically that US Federal Reserve could try to save the US economy by cutting interest rate until it is minus zero.
That is to say, Fed Board and US Banks beg borrowers to borrow and reward the borrowers with perks and no need to pay interest.
[This has already happened in Singapore. Car buyers pay lower prices for new cars bought with financing than those who chose to pay cash in full.]
The only danger the US Fed Board faced monetizing the billion-dollar bailouts is US would run out of wood on which the paper money is printed and the USD would become a very big banana note.
Bear Stearns agreed mid-March to accept JP Morgan as its savior for US$2 per share based on valuation of Bear Stearns at US$236m when the day’s Market Capitulation of Bear Sterns’ share was US$3.5b!
US Fed Board did not bail out Bear. It just provided JP Morgan with US$30b to bear the Bear’s redemptions — so save America.
Supercalifragilisticextracalidocuous financial wizardry.
When the deal was done on 18 March, Dow shot up 420 points.
Next day Dow was down again 293 points.
A critically ill patient just could not suddenly do a 100-metre sprint.
The rest of March was more “ding” than “dong” with the rest of the world markets, Singapore included, “dinging” along with Dow.
The month of March witnessed a “Chain of Fools” as mentioned by The Economists, 9th February 2008.

Guidance:

The obvious consideration for retail investors in the present market condition is to be wary of the USD.
Try not to put money in USD fixed deposit to earn higher interest. At the end of the term, what is made out of interest may be lost in exchange rate and buy/sell spread at due date.
Even fundamental stocks quoted in USD may be disadvantaged. Profit from rise in share price may be knocked off by loss in exchange rate.
Same with investment in gold and the likes quoted in USD.
Borrowing in USD for investment or business is intelligent.
Some stock daily volatilities are very Hi and good for day-trade.
Carrying contra trades overnight risks being trapped by the bear when Dow shows weakness.
Buying for investment based on fundamentals is safe.

“Gloom in the markets means great opportunities if you have got the courage and patience.”— Shawn Tullly, Fortune Magazine.

“In unsettled markets like today’s, with inflation on the horizon, dividend-paying stocks can be an investor’s best friend.”
— Katie Banner/Eugenia Leveson, Reporter Associates.

*If you wish to contact our writer, please email at sllau@uobkayhian.com

Market Review for March:
The madness of March saw stock markets all over the world, Singapore included, falling like ten-pins from the beginning of the month.
Again their falls were led by Dow Jones dropping 316 points on the 1st trading day of March.
Many reasons were attributed to the Dow’s drop.
These reasons were old and stale – sub-prime mortgage effects, recession, inflation, record oil & commodity prices & weak USD.
They have been repeated weeks before.
So what led to the Dow taking a kick in the butt, resulting in world bourses also feeling the pain?
Co-incidence or not, Warren Buffet announced the day before the 316-point drop, he was withdrawing his offer of US$800b to buy over US Municipal debts.
Actually Mr Buffet need not make the announcement — which led to the blood-bath.
His initial offer in February was straightaway rejected – only it was not publicized.
US Federal Reserve Board quickly came out with an announcement that it would release US$200b to prop up the US economy and the finance system
Dow went up 417 points. World markets took a another gulp of breath.
Dow & world bourses, Singapore included, after bleeding for more than a week, had one last kick and went into a state of comatose.
This was due to revelations that a US Hedge Fund, Carlyle Capital faced liquidation if it was not able to meet redemption demands of up to US$17b on the US sub-prime loan.
Mid-March venerable US Bear Stearns Banking Group which already lost two of its hedge funds, Bear then exposed its nakedness to the US Federal Reserve that without immediate emergency financial assistance, it could bear no more and had to liquidate with dire consequences, not only to the US banking industry, but also to the whole US economy.
Dow in coma broke the critical 12’000-point support, 14 March.
Again, with the Bush’s and US Federal Reserve’s financial wizardries, they quickly came up with announcements to prop up Dow and in particular, help Bear and the likes.
An emergency order was given to the Federal Reserve Board to invoke the “1960 emergency power” for the Fed Board to immediately grant financial assistance to any US bank or financial institution to prevent it from failing and dragging down the US economy.
Hurray! Another legitimate US case of monetizing debts — only this time the US printing machine has to be set at 14-digits.
With the double dose injections – Interest rate cuts and Talk of Fed Board’s intervention – Dow managed to jerk twice, mid-March, and quickly fell back into coma again.
This was because the double-dose injections were without medications — just Talk, Cheap Talk.
Stanley Bing, author of “Crazy Bosses” mentioned sarcastically that US Federal Reserve could try to save the US economy by cutting interest rate until it is minus zero.
That is to say, Fed Board and US Banks beg borrowers to borrow and reward the borrowers with perks and no need to pay interest.
[This has already happened in Singapore. Car buyers pay lower prices for new cars bought with financing than those who chose to pay cash in full.]
The only danger the US Fed Board faced monetizing the billion-dollar bailouts is US would run out of wood on which the paper money is printed and the USD would become a very big banana note.
Bear Stearns agreed mid-March to accept JP Morgan as its savior for US$2 per share based on valuation of Bear Stearns at US$236m when the day’s Market Capitulation of Bear Sterns’ share was US$3.5b!
US Fed Board did not bail out Bear. It just provided JP Morgan with US$30b to bear the Bear’s redemptions — so save America.
Supercalifragilisticextracalidocuous financial wizardry.
When the deal was done on 18 March, Dow shot up 420 points.
Next day Dow was down again 293 points.
A critically ill patient just could not suddenly do a 100-metre sprint.
The rest of March was more “ding” than “dong” with the rest of the world markets, Singapore included, “dinging” along with Dow.
The month of March witnessed a “Chain of Fools” as mentioned by The Economists, 9th February 2008.

Guidance:

The obvious consideration for retail investors in the present market condition is to be wary of the USD.
Try not to put money in USD fixed deposit to earn higher interest. At the end of the term, what is made out of interest may be lost in exchange rate and buy/sell spread at due date.
Even fundamental stocks quoted in USD may be disadvantaged. Profit from rise in share price may be knocked off by loss in exchange rate.
Same with investment in gold and the likes quoted in USD.
Borrowing in USD for investment or business is intelligent.
Some stock daily volatilities are very Hi and good for day-trade.
Carrying contra trades overnight risks being trapped by the bear when Dow shows weakness.
Buying for investment based on fundamentals is safe.

“Gloom in the markets means great opportunities if you have got the courage and patience.”— Shawn Tullly, Fortune Magazine.

“In unsettled markets like today’s, with inflation on the horizon, dividend-paying stocks can be an investor’s best friend.”
— Katie Banner/Eugenia Leveson, Reporter Associates.

*If you wish to contact our writer, please email at sllau@uobkayhian.com