Marc Faber Questions If Dow Could Hit 1,000
In the August edition of the ‘The Gloom, Boom & Doom Report’ Marc Faber questions whether the Dow could hit 1,000 as predicted by Robert Prechter, based on his interpretation of Elliot Waves, Fibonacci numbers and socioeconomic trends.
Prechter, who has written 13 books on finance, believes that the stock market is historically overvalued in terms of dividends and earnings, because of a “great rise in positive social mood.”
But the mood changed in 2000 and the “trend toward negative social mood will lead to an economic contraction,” according to Prechter.
“Small bear markets lead to recessions, big bear markets lead to depressions. The current bear market will be the biggest in nearly 300 years, so the depression will be correspondingly deep,” Prechter said.
Prechter goes onto to suggest the bear market is of super-cycle degree, the biggest since 1720-1784 and will therefore see a decline for equities deeper than the decline during the great depression, which saw the Dow fall 89 percent.
“The trend toward negative social mood that has been in progress since 2000 and which is about to accelerate will continue to curtail lending and lead to a tidal wave of defaults and a terrific deflation,” he said.
“The amount of outstanding credit today is so large that system-wide defaults could lead to as much as an 80 percent –90 percent decline in the volume of dollar-denominated credits worldwide,” according to Precther.
“In such an environment, surviving dollars and dollar credits, representing the denominator of the DJIA, will rise in value, and the Dow —along with everything else not used as money — will fall in dollar price,” he added.
Faber’s Response
Marc Faber says before dismissing Prechter as a lunatic you should look at his record. In 1978 when he predicted the Dow would reach 2,300 in his book Elliot Wave Principle no one believed it possible.
“Prechter is right when says that when manias come to an end, prices tend to retreat to where the mania started. So from this point of view, a Dow Jones at 1,000 should not be excluded,” Faber said.
Faber also sympathizes with Prechter’s view that there will one day be a complete credit collapse. Where he differs from Prechter is on that crucial factor, timing.
“It is likely that if the Dow where to fall by more than 20 percent from the present level there would be further massive fiscal and monetary stimulus packages – not just in the US but worldwide,” Faber said.
“These economic policy measures would likely fail to boost economic activity in the US but could support asset markets,” he added.
Faber’s biggest problem with Prechter’s theory is his view that surviving “dollars and dollar credits, representing the denominator of the DJIA, will rise in value, and the Dow – along with everything else used as money – will fall in dollar price.”
“The question here is really, with the Dow below 1,000, what kind of dollars – and especially what kind of dollar credits – will survive,” Faber said. “It is safe to assume that almost all banks in the world, and almost all governments, will be bust.”
“I want my readers to think very carefully about the implications of a Dow below 1,000 (or even just below 5,000). Does anyone really think that the money printing presses won’t run 24 hours a day? For sure I don’t,” he wrote in his August report.
And how do you trade the Dow at 1,000?
One suggestion from Faber is buying a self-sustainable farm in the middle of nowhere surrounded by high voltage fences and barbed wire and equipped with booby traps and an arsenal of machine guns, hand grenades and armed vehicles guarded by vicious Dobermans.
Source: 2010 CNBC, Inc.
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
Doing The Dead Cat Bounce? DOW 5,000 in 2010? – Robert Kiyosaki
Dow 5,000 in 2010?
In my last column I predicted a “dead cat bounce” in the stock market and a possible Dow plunge to 5,000 this year. Obviously, many readers mocked my prediction.
But the dead cat bounce is very important, especially in today’s market.
Simply put, ‘a dead cat bounce’ looks like Diagram 1 below:
The market crashes, rebounds, and runs out of steam, then crashes again…unfortunately, and possibly, to a lower low. When professional investors observe a ‘dead cat’ forming, many will begin to sell. If their selling leads to a panic, the stock market goes even lower.
Putting today’s numbers to the ‘dead cat’ diagram gives this topic more meaning.
In 2002, the Dow hit a low of 7,286.
In 2007, the Dow hit a high of 14,164
In 2009 the Dow fell and stopped at 6,547.
Dow 6,547 is where the market stopped falling and the dead cat bounce began. At 6,547 the market was oversold and buyers came rushing back in, looking for bargains. The Dow headed back up, and a bear market rally began.
On February 5, 2010 the Dow closed at 10,012.
What Does This Mean?
So the question is, “What do these numbers mean to me?” The answer to that question depends upon you. If you are a bullish person, you will be optimistic, reassured by these numbers, and looking forward to the Dow breaking 14,000 soon.
If you are bearish, you will be waiting for the dead cat to finally die and for a double dip recession to begin.
One of the theorists (and writers) I follow is Richard Russell, a wise sage who is in tune with markets and the madness of crowds. He has been in the business for about 50 years, so he has the wisdom and perspective of time. Lately, he has been writing about the ‘50% Rule’ of Dow Theory. I thought I would pass it on to you because it may assist you in seeing the future of the economy, even if –like me — you do not trade in stocks.
The following is my interpretation of the ‘50% Rule’ using real numbers.
In 2002 the low of the Dow was 7,286.
In 2007 the Dow hit a high of 14,164.
The ‘50% Rule ‘number is 10,725…the halfway point between 7,286 and 14,164.
In 2007, when the market headed down and broke 10,725, professional traders who follow the Dow Theory ‘50% Rule’ knew what was going to happen next. On March 9, 2009, the crash stopped at Dow 6,547.
On that day, what I believe is a ‘dead cat bounce’ began as the market moved up.
On January 19, 2010, the Dow stalled at 10,725 and headed down again. This is spooky. The 50% rule came true.
The next interesting point is 7,286, the low of 2002, when the rally began. According to Russell, if the Dow holds at 7,286 and begins a rally, this might be a good time to buy. But if it fails to hold at 7,286 and slides past 6,547, then look out for dead cats dropping from the sky. Russell predicts that Dow 1,000, the number at which the Dow began its rally in the 1970s, may not be out of the question. If that happens, there will be millions of baby boomers joining the dead cats falling from the sky as their 401(k)s and IRAs implode.
Other Markets
This ‘50% Rule’ may apply to other markets such as gold, the hot commodity of this era.
In 1971 gold was $35 an ounce. I began buying gold in 1972 when I was a pilot in Vietnam, watching the Vietnamese panic when they knew the U.S. was not going to win the war.
Gold hit a peak of $850 an ounce in January of 1980.
Gold dropped to a low of $252 in July of 1999. Obviously, I bought a lot of gold in 1999. Gold was at an all-time low because Central Banks, such as the Fed and the Bank of England, were dumping gold in an attempt to protect the value of their counterfeit currencies.
According to the ‘50% Rule’ of Dow Theory, when the price of gold was passing $600 an ounce(halfway between $850 and $252), a rally in gold was on. When gold passed $600, mainstream financial experts began warning of a crash in the price of gold… stating that gold was in a bubble.
Today gold fluctuates between $1,000 and $1,200 an ounce.
Is Gold in a Bubble?
When you factor in inflation and devaluation of the U.S. dollar, $850 gold in 1980 is $2,500 an ounce in today’s dollars. In other words, gold might be at 50% at $1,200, which is the highest of highs. Could there be a run to $2,500?
Your personal answer to that question will depend upon how confident you are in Fed Chairman Ben Bernanke, President Obama, and Wall Street. If you have faith in our leaders of commerce, don’t buy gold. If you do not have faith in them, maybe you should buy gold or silver.
If the dead cat bounce dies and the Dow drops to 5,000 in 2010, as I predict, then the price of gold and silver may die with the dead cat of the Dow, as investors cling to cash. The next question you need to answer is, “If the Dow dies and the price of gold and silver drop, what should you invest in at the bottom…stocks, gold and silver, or cash?”
I know what I will do. I will buy more gold and silver. Why? The answer is because I trust gold and silver more than Central bankers, the Oval Office, and Wall Street. Gold and silver have been real money for thousands of years.
The Lost Decade
The people I am most concerned about are the average investors who have bought their financial planner’s advice of “Invest for the long term in a well-diversified portfolio of stocks, bonds, and mutual funds.”
Many investors are calling the past 10 years The Lost Decade. That means those who invested for the long term in stocks, bonds, mutual funds, and cash are long-term losers. Japan has been in a Lost Two Decades.
A ‘lost decade’ means:
1. Zero job creation.
2. Zero economic gains for the typical family. Home values are down and many families owe more on their home than the home is worth.
3. Zero gains in the stock market.
Over the next few months, it is important to watch both the Dow and gold. As I write, the Dow is around 10,000 and gold is at $1,000. If the Dow breaks 7,286, the 2002 low, and continues down below 6,547, the 2009 low, watch out below. If 6,547 is broken and gold passes $2,500 an ounce, you’ll have even more to worry about.
Source: Yahoo Finance
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
My Contributing Article For Moolah.asia, the 1st Flipping Financial Magazine Online!
Hope that everyone enjoyed their long Lunar New Year! After a long holiday, it is now time to get our engines running again and strive towards our goals for the Tiger year. I’ll like to start my blog rolling with a piece of good new – I’ve been invited to be a contributing writer to this online financial magazine – MOOLAH.asia
My very first contribution is a chapter extracted from my eBook (if you have not subscribe for it, you can do so for FREE at the bottom of this page) which I re-wrote to cater for their Valentine’s Day theme. Wow, I never thought that I could really write before starting my blog, and now I’m invited to be a writer! Of course, I must first thank all of you for showing support to my blog, that really gave me a whole lot of encouragement and confidence 
Due to my agreement with the MOOLAH.asia folks, I can only publish part of my article below. But not to worry, MOOLAH.asia is a FREE magazine, so you can access my article along with the other interesting content simply by registering at their magazine site.
I’m extremely excited about this new online venture and it is definitely a great motivation for me to continue writing. Now, let’s take a peek at my virgin editorial contribution:
Why You Should Never Fall In Love With Stocks
Love is an integral part of our life and we should show our love to people we care for – our spouse, parents, children, siblings, friend etc. But as a trader, bear in mind this golden rule in the stock market – NEVER fall in love with stocks!
Just because you are working in a specific company or have made money from a certain stock before does not mean that you should buy and hold onto the stock blindly. Buying and selling decisions in the stock market need to be made with logic and reason, not with emotion.
Let’s take a look at Cosco Corp below, which used to be a hot potato in the Singapore stock market. Note that the phrase ‘used to’ signifies that its glorious days are already history.
Cosco Stock Chart
The Ship That Sank Along With Their Money
Cosco is a famous shipping company in Singapore, and its stock has enjoyed spectacular ratings from several analysts and broking houses. Cosco’s share price has been climbing up since its IPO days and whoever bought it during its early days would surely have loved Cosco like crazy! However when its earnings started to decline during the 2007 financial crisis, a lot of people did not pay attention to how overpriced the stock really was.
The shareholders of Cosco were probably thinking “Come on, the price has fallen this much already, how much lower can it go?” Even when the stock dropped to S$6 from a high of S$8.20, they continued to reassure themselves that “good companies will always rebound” and “you just have to be patient in the stock market”.
Come On, It Can’t Go Any Lower.. Can It?
Sad to say, thousands of shareholders who believed in the “it can’t go much lower” theory was proven to be wrong over and over again each time the share price breaks a new low in front of their eyes………….
…………………………………………………………………………………………………………..
The MOOLAH.asia guys forbid me to reveal any more than this, so please visit their magazine site and subscribe for FREE to read on 
May the trend be with you guys! Cheers
To your Dream,
Derick
“Dreampreneur” – Engineer Your Dream. Be an Entrepreneur.
2010: The Best of Times or the Worst? – Robert Kiyosaki
“It was the best of times. It was the worst of times.” - Charles Dickens
Is the recession over? Are happy days really here again? Paraphrasing Dickens, my answer is, “For people who are prepared, 2010 will be the best of times. For many, 2010 will be the worst of times.”
The following are a few of my predictions and reasons behind them :
Prediction #1: The real estate market will crash again.
Pictured above is a graph of mortgage resets. In simple terms, a mortgage reset is when a mortgage comes due. In normal times, refinancing was a simple process…but these are not normal times. Some points of interest:
1. In September 2008, the mortgage resets hit $35 billion that month. That was the exact time the financial crisis hit. When people could not afford to refinance and began to default, the stock market and banking industry crashed.
2. The eye of the storm: In the summer of 2009 mortgage resets were low — around $15 billion a month. This is when optimists began to see “green shoots” in the economy. The green shoots were the eye of the storm. In 2010, as I see it, the second half of the financial hurricane hits. By late 2011, the resets climb to nearly $40 billion a month. The storm will not end until 2012.
3. The first half of the storm was primarily due to subprime defaults. The second half of the storm will hit more solid homeowners. The question is, can they weather the storm? Will Mac Mansion foreclosures be next?
4. In America, there are over 40 million people who own more than two homes. Can they afford to carry and refinance two or more mortgages?
5. Since home values have gone down, many homeowners will find they owe more than their home(s) are worth. Will the bank be kind to them?
6. The time for using your home as an ATM is over. This is crushing retailers and retail real estate. Shopping centers are in trouble. Strip malls are empyting as shopkeepers close — permanently. This will lead to the crash of the office, warehouse, and other commercial properties.
My prediction: Obviously these are the best of times if you are a buyer of distressed properties and the worst of times if you are a seller.
Other things I am watching for in 2010:
1. Will China crash? America’s crash has hit China in the gut. The Chinese are laying off millions of workers. Only massive government bailout is keeping the economy afloat. The Chinese boom will eventually go bust…but will it bust in 2010? Only time will tell.
2. When America stopped importing from China, China stopped importing from the rest of the world. This affects Asian countries as well as Australia, Brazil, and other suppliers of raw materials.
3. Fed Chairman Ben Bernanke is replacing toxic debt with new debt. By protecting his friends in the mega-banks, he is turning the U.S. into a zombie nation. The recession is over, but America is entering an era we will be calling The New Depression, a period when the rich become extremely rich but everyone else becomes poorer. Taxes will kill anyone working for a paycheck.
4. The U.S. dollar will grow weaker. If the dollar strengthens, we will have more unemployment because our goods become too expensive and we will export less.
5. The deficit will increase. The bailouts for the rich are killing the economy.
6. Israel may attack Iran. Israel will not tolerate Iran developing nuclear power, even if Iran claims it is for peaceful purposes. If there is an attack, oil prices will go through the roof.
7. Dead cat bounce. The current stock market rally will probably turn into a dead cat bounce. If the Dow drops below 6500, 5,000 may be the next stop.
The Best of Times
I know I sound painfully pessimistic. I know my predictions are bad news for most people. Yet, for others, bad news is good news.
The following are the bright spots for people who are prepared.
Prediction #2: Gold, silver, and oil will continue to be safe investments in 2010.
The following recaps the year-end prices of gold and silver:
YEAR GOLD SILVER
2000 $ 273 $ 4.57
2001 $ 279 $ 4.57
2002 $ 348 $ 4.78
2003 $ 416 $ 5.92
2004 $ 438 $ 6.79
2005 $ 518 $ 8.80
2006 $ 638 $12.78
2007 $ 838 $14.77
2008 $ 882 $11.33
2009 $1100 (approx) $17.50 (approx)
In 2009, the Dow rose approximately 18%. Gold rose approximately 25%. Silver rose approximately 50%.
By the end of 2010, I predict gold will be at $1,775 an ounce, silver at $24 an ounce, and oil at $85 a barrel. If Israel attacks Iran, these predictions will be blown away.
Prediction #3: The next market to crash will be commercial real estate.
Cash flow positive real estate will be even more affordable. 2010 through 2012 will be a real estate buffet for those with cash and access to credit.
My Personal Investments
As I stated in 2002, “You have up to the year 2010 to become prepared.”
The following are things I have done to prepare myself:
1. I started The Rich Dad Company in 1997 because I saw this crisis coming. For the past three years, I have tightened internal controls and prepared for global expansion via a franchise distribution system. The company is debt free with strong income.
2. 2009 was my best real estate year to date. With the Fed handing out large sums of money and pension funds looking for projects to invest in, my real estate holding company has acquired tens of millions of dollars for acquisition of bankrupt properties and development projects. Development projects are affordable again, as labor, material, and land costs are low and the government is generous with 40-year, low interest, non-recourse loans. People still need a roof over their heads.
3. My oil development projects have done well. We drilled three wells and hit oil on two of them. Government tax breaks for oil exploration remain generous, even for dry holes. Even if the economy crashes, we will still burn oil.
4. I took 90% of my money out of the stock market in 2007. If the Fed raises interest rates, the stock market and real estate market will collapse.
5. I loaded up on gold and silver between 1996 and 2004.
6. With the Fed printing trillions of dollars, cash is trash and savers are losers. As soon as I have excess cash I invest in oil, real estate, gold, and silver.
7. In a zero-interest-rate environment, debtors are winners…but only if you have good debt…debt that’s paid by tenants.
In Conclusion
A few years ago, Japan was ‘King of the Financial World.’ Japan’s economy was the world’s second largest economy — till the bubble burst in 1990. Japan’s budget went into deficit in 1993. Since then, the deficit has averaged 5.4 percent of GDP per year. As a result, Japanese government debt is now 200 percentof GDP today. The U.S. is following Japan, and China will follow the U.S.
We will not see much inflation because the Fed is not able to print enough money to replace the losses from the burst of the credit bubble. Also, factories have too much excess capacity due to lack of demand, which means prices for consumer goods will remain low and unemployment will remain high. Instead, we will see inflation in gold, silver, oil, some stocks, some real estate sectors, and food — not because values are going up but because the dollar is going down.
Welcome to The New Depression. And may these times be the best of times for you.
Source: Yahoo Finance
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
Global Market Outlook For Week Beginning 9th November 2009
Straits Times Index(STI) was well supported at the 2600 level, indicated by the uptrend line drawn. It should be retesting the stubborn 2746 resistance level after piercing through the 2700 once again. If 2746 can be broken successfully, the forward momentum should bring STI towards the 3000 mark before the end of the year.
After breaking out from the 2600-3000 consolidation range, Shanghai Stock Exchange(SSE) is now trading within the uptrend channel shown. Technically, it should be testing the 3478 ceiling, based on the upside target projection. Now, SSE is the leading indicator for global stock markets, taking over the leadership baton from the U.S. market.
Hang Seng Index(HSI) will soon be testing the 22,620 resistance level, attained on 23th October. If this barrier can be penetrated with the help of positive move from SSE, HSI will have the potential to reach the 23,368 level before the close of 2009.
Jakarta Composite Index(JCI) fell off the cliff and experienced a 13% decline within 2 trading weeks. The 2271 support level succeeded in cushioning the drop and JCI has since rebounded from that level. If it can push through the 2259 resistance level, the next ceiling for JCI will be the 2774 region. But if it fails to do so, there lies the danger of the formation of a Head-and-Shoulders chart pattern. If the 2271 were to be penetrated later on, JCI can be expected to experience further weakness.
Bombay Stock Exchange(BSE) SENSEX is also one of the best performing market in Asia, together with SSE, HSI and JCI, after registering a whopping 117% rally from the early March low!! After hitting the high of 17,493 region on 17th October, it plummeted 14% before it found some footing at the 15,600 support level. If it has the strength to break the ceiling of 17,493 level, the next overhead resistance will be at the 17,736 mark. 15,600 will provide the necessary underlying support, but if it were to be broken, we may see SENSEX decline to the 14,700 region.
Kuala Lumpur Composite Index(KLCI) seems to be enjoying a pretty good bull rally, bouncing along the uptrend line obediently. If it continues to perform accordingly, its next 2 resistance levels will be at 1276 and 1305 respectively. 1231 should act as a good support level to prevent any further decline.
S&P 500 rebounded from the 1019 support region, staged a powerful run-up and is now preparing to test the 21st October high of 1101. The next target for S&P 500 will be 1168 if it can penetrate this 1101 level successfully.
If NASDAQ can punch through the 2190 resistance level, it will complete a Double Bottom chart pattern, which will propel it to hit the next target of 2318. At this point of time, 2040 looks like a good support for NASDAQ to repel any further weakness.
Dow Jones has remarkably penetrated the 10,000 full number mark! But the worrying thing is that this was achieved with declining volume, as illustrated by the volume bars at the bottom of the chart. This shows a lack of institutional buying. Technically, it has the potential to hit 10,683 objective while its downside will be supported at the 9,630 level.
Will there be a Christmas Rally this year?? I definitely hope so! Let’s all party and enjoy while the going is good. Some green shoots are slowly turning into yellow weeds, eg. U.S. unemployment rate in October was a staggering 10.2%, 120th bank have been closed down since the start of 2009 in U.S….etc. Will 2010 Tiger Year turn out to be a good year for the global stock markets? Personally, I doubt so. Nevertheless, let’s all enjoy this rally as much as possible before more ugly events start to appear next year.
Cheers
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
Global Market Outlook For Week Beginning 12th October 2009
2700 really proves to be a very tough resistance level for STI to crack, it has till now altogether tried 4 times unsuccessfully! It maybe attempting for the 5th time these coming weeks. If it can be broken, the next ceiling will be at 2746, the previous supports attained in Jan and March 2008. I am cautiously optimistic that STI will just have enough strength to hit 3000 before year end comes. We should see a substantial correction in coming 2010.
Trading for the China market has just resumed after a week long celebration of the 60th anniversary of PRC and the mid-Autumn festival. Shanghai Stock Exchange (SSE) will be trading and consolidating between the 2600 and 3000 level to provide a solid base for further uptrend continuation to retest the early August high of 3478. This current consolidation should be viewed as a pause in the long term uptrend rather than the start of a trend reversal for SSE.
Hang Seng Index (HSI) is now climbing towards the 21930 level attained on 17th Sept 209. It will have enough momentum to head towards the next 23300 and 26300 resistance levels if this 21930 ceiling can be penetrated. The immediate support for HSI is at the 21200 level.
In U.S., S&P 500 maybe testing the 1080 resistance level soon. If this can be accomplished, it will have enough strength to climb higher towards the next resistance level of 1168.
Technically, NASDAQ seems to be the stongest index among the 3 major U.S. indexes. It is now approaching the barrier of 2167 level. If it can power through this resistance level, it will have a good chance of testing the next ceiling of 2319.
If Dow Jones can break the 9918 level, it will face a very stubborn resistance at 10,000 level, about 100 points away. Personally, I believe this will be a very very DIFFICULT level to break through. Till now, Dow Jones is lagging behind the other 2 major US indexes, only rallying 53% from the March low, as compared to 71% for NASDAQ and 62% for S&P 500.
Personally, I feel that the global stock markets may have another 1 or 2 more upburst before they experience a substantial correction next year. I am quite sure that the double-dip recession will come next year, but how bad is it going to be, only time will tell. Let’s all enjoy this party, created by the excessive money pumped in by all the central banks in the world through bailouts and stimulus plans, while we can because next year we should see some very bumpy days ahead, maybe well into 2011. I have doubt that we have seen the worst of the financial meltdown triggered by the subprime mess YET 
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
Global Market Outlook For Week Beginning 28th September 2009
STI has the tested the 2700 level 3 times but is still unable to break this stubborn resistance successfully. It may experience a pullback to the immediate support level of 2560. If 2560 cannot prevent the drop, the next support levels will be at 2521 and 2424 respectively. Singapore market seems to have lost its upward momentum, it is now going through some consolidation before it has enough strength to break through the 2700 level, hopefully going towards the 3000 mark before the end of the year.
Trading for the China market will be light this week because of the 8 days “Golden Week” break. SSE will most likely consolidate between the 2600 and 3000 level, before it can gather enough momentum to break the 3000 ceiling to retest the early August high of 3478. At this point of time, signs are still showing that this is just a temporary halting of the upward momentum, the long term uptrend for SSE is still intact.
After breaking the resistance of 21200, Hang Seng quickly fall below this level in quite a drastic manner. It should find some support at around 20600 level, based on the uptrend line drawn starting early March. If 20600 cannot provide the necessary support, HSI may have a chance to fall back to 19400, the low attained in early September this year.
S&P 500 could not hold above the 1060 level for long and dropped consecutively for the next 3 trading days. The next immediate support will be at 1039, follow by the next uptrend line support of 1000 level.
NASDAQ did not have enough strength to power through the ceiling of 2167. As a result, it declined together with the general weakness in the US market. The next support for NASDAQ will be at the 2050 level.
Dow Jones is experiencing weakeness as well, with the next closest support at 9630. If this fail to provide the necessary flooring, the next critical support will be 9250. The 10000 level will be a very very tough ceiling to crack if it can trend upwards from here.
I can feel that the markets are slowly running out of steam as they have run too far ahead of the real economy. People are starting to realise that the “green shoots” are not really growing into small plants, instead some of them may have slowly turn into yellow weeds. Our Finance Minister Tharman has already forewarned us that we may have a double-dip recession next year, which I fully agree. The stock market has already factored in for a good economy recovery, it may turn down next year when the fundamental does not live up to the expectation. If this happen, we will most likely have a W-shaped recovery, rather than a V-shaped recovery predicted by a few TOO optimistic experts. A lot of experts associate this financial crisis to that of the Great Depression, which started from October 1929 and ended in July 1932, Dow Jones collapsed almost 90% after having a few powerful rallies. This current financial crisis started around October 2007, has it come to an end after just 18 months? I doubt so, we may see some after-effect of weakness, maybe in 2010.
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
Days Of Making Easy Money In the Stock Market Are OVER! Join Me At My FREE Seminar To Find Out How To Select The Right Stocks and Capitalise On Them To Accumulate Our Wealth.
Remember those early days of March, April and May this year when almost any stock that we bought then would have made us very good profit? SORRY!! Those days of making easy money are already over! The 86% rally of Straits Times Index (STI) from early March of 1455 till now is abit too fast, too much and too far ahead of the real economy!
1)Where will STI and the global market be heading from here?
2)What are the common mistakes a lot of traders SHOULD NOT commit in the market?
3)How, when and what stocks to select so that we can participate in the current rotational play in the market? How to exit and lock in our profits? How to perform correct money management to grow and safeguard our money?
Join me at my FREE seminar whereby I will share all the above mentioned and much much more…. so that we can all learn how to accumulate and protect our wealth in the stock market. For more details, please visit www.trackthetrend.com/t30 to find out.
Hope to meet you guys in person soon!! Cheers
10 Eventful Days in 2008
WHAT A YEAR FOR 2008!! In my 10 years of investing experience, I have never seen anything of this magnitude and severeness 12 months of chaos and never-ending crises that destroyed wealth and shook the business and financial sector unlike anything since the Great Depression of the 1930’s. Let’s do a recap before 2008 draws to an end and a brand new year begins in 2009:
(1) 2 Jan – Asian market meltdown
ASIAN stock markets were battered, with STI plunging 187.1 points, or 6%, its worst one-day fall since October 1987. Similar carnage struck the region with HK’s Hang Seng Index suffering its biggest fall since the Sept 11, 2001 terrorist attacks. Traders blamed it on hedge funds trimming their positions across the region and intensifying fears of a US economic recession. 1 day later, the US Federal Reserve slashed interest rates to try to stop the global rout. It worked, as Asia’s stocks rallied sharply in reaction, with the Hang Seng Index soaring 10.7% in its biggest 1-day point gain ever. The turbulence was so great that equity experts dubbed that week as the ‘5 days that shook the market’.
(2) 16 March – Bear Stearns bailout
WALL Street and the rest of the world felt the year’s first major financial tremor when Bear Stearns, the fifth-largest investment bank, faced near-collapse. Bear Stearns had invested heavily in US sub-prime mortgage instruments and other securities, which had fallen sharply in value. It survived – sort of – when the US Federal Reserve stepped in to facilitate a fire sale to JP Morgan. The crisis also sparked fears and rumours that Lehman Brothers might also be in financial trouble and sent stock markets down sharply. In late May, Bear Stearns vanished into Wall Street history when its shareholders approved its sale to JP Morgan at US$10 a share. 1 year earlier it was trading as high as US$170 a share.
(3) 3 July – oil hits almost US$150
THE price of black gold soared to a record US$147 a barrel that day, fuelled by a larger-than-expected fall in US stockpiles and the threat of conflict with Iran. The slumping US dollar and speculation from hedge funds further aided oil’s dizzying rise and prompted a Goldman Sachs analyst to forecast that crude could hit US$200 in the next 2 years. But fears of shrinking demand caused by a global recession have sent oil plunging to near US$30 earlier this month – its lowest level in 5 years. The retreat has brought a smile to consumers and businesses BUT the the good times may not last for long, as the Organisation of Petroleum Exporting Countries(OPEC) has promised sharp supply cuts to push oil back to US$75.
(4) 7 Sept – Fannie Mae, Freddie Mac rescued
US MORTGAGE giants Fannie Mae and Freddie Mac were handed a lifeline by the US government, which committed up to US$200 billion (S$290 billion) to boost the much-needed capital the pair failed to get from private investors. The government also offered to buy back mortgage-backed securities and to provide Fannie and Freddie with a liquidity support facility of unlimited size. Their failure was not an option, as they own or guarantee almost half of the country’s US$12 trillion home mortgage debt. US Treasury Secretary Henry Paulson said they were ’so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe’. Asian financial institutions and central banks – especially in Japan and China – hold billions of dollars worth of debt securities issued by both firms. So the bailout brought lots of cheer to the region, with investors propelling markets from Tokyo to Singapore to their best showing in months.
(5) 15 Sept – Lehman Brothers goes under, Merrill Lynch sold
A FINANCIAL tsunami was sparked when Lehman Brothers – a 158-year-old Wall Street stalwart and the fourth-largest US investment bank – was brought to its knees by the sub-prime mortgage crisis. Facing a mountain of debts, it filed for bankruptcy protection that fateful day – making it the biggest such filing in history. Hours later, the third-biggest investment bank, Merrill Lynch, sought refuge in a US$50 billion takeover by Bank of America (BoA), shocking analysts worldwide. Merrill, a venerable 94-year-old Wall Street institution, agreed to sell itself to BoA for US$29 a share in an all-stock deal. These events created shockwaves around the world and sent stock markets into free fall as investors fled to the safety of government bonds and gold. Even investors in Singapore were not spared. Hundreds of people here, including housewives and retirees, had invested in structured products linked to Lehman, eg. DBS High Note 5…etc. Most have seen their savings largely diminished. Even eight town councils here had about $16 million invested in troubled structured products, which included Minibonds linked to Lehman.
(6) 17 Sept – AIG nearly collapses
ANOTHER instance of the financial crisis hitting Singapore’s shores came when troubled US insurer AIG American came to the brink of bankruptcy after ratings agencies cut its debt ratings. That forced the already cash-strapped firm to immediately raise a further US$14.5 billion to cover its obligations. Scores of Singaporean policyholders besieged AIA’s customer service centre in Finlayson Green to surrender their insurance policies and get their money back. But disaster was averted a day later, when the US government intervened with a US$85 billion rescue loan, saying the insurer’s failure could hurt already stressed financial markets and the economy. Back home, AIA Singapore also assured policyholders that it has enough funds to meet its obligations. It also moved with the Monetary Authority of Singapore(MAS) to calm fears that AIG was so short of ready cash that it would reduce the capital of its subsidiaries or tap into its booming Asian operations for cash.
(7) 27 Oct – Bloody October
STOCK markets, especially those in Asia, were savaged in late October. The carnage was especially bad on Oct 27, when investors dumped regional stocks on fears that government action would not be enough to stave off a deep global recession. HK’s Hang Seng Index saw its biggest drop since 1997, while Japan’s Nikkei 225 index plunged to a 26-year low. In Singapore, $123.5 billion was erased from the market value of stocks that month, with the STI plunging as low as 1,473 points. According to financial information provider Standard & Poor’s Index Services, world equity markets registered their worst month in history, as investors lost an estimated US$5.79 trillion in that time.
(8) 1 Dec – US officially in recession
ARGUABLY the world’s worst-kept secret was confirmed when the National Bureau of Economic Research (NBER) – a private, non-profit research body – concluded that the US has been in recession since December last year. The last time the US was in a recession was in 2001, and this would make it the longest contraction since 1982. If the recession lasts for 5 more months, it will become the most lengthy since the Great Depression. Unusually, the NBER does not define a recession as 2 straight quarters of shrinking economic output. Instead, it looks for a decline in economic activity, spread across the economy, and lasting more than a few months. Some economists predict that the US economy will contract by as much as 5% in the current 4th quarter. The US joined other economies officially in recession, including Singapore, Hong Kong, Japan, New Zealand, Ireland, Italy, Germany and Britain. The euro region and Japan both fell into a slump in the 2nd quarter of this year, making it the first simultaneous recession in all 3 regions in the post-war era.
(9) 11 Dec – Madoff scandal
INVESTORS big and small were rocked when top Wall Street broker Bernard Madoff was arrested and charged with fraud in one of the biggest-ever such cases. This allegedly involved a loss of up to US$50 billion in cash and securities. The ex-Nasdaq chairman was accused of running a ‘giant Ponzi scheme’ – a pyramid scheme in which early investors are paid their promised high returns with money pulled in from newer investors. Big names caught in the scam included Britain’s Royal Bank of Scotland, HSBC Holdings and Man Group, France’s BNP Paribas, Spain’s Grupo Santander and Switzerland’s Union Bancaire Privee and Benbassat & Cie. Even local insurer Great Eastern Holdings said it has $64 million of indirect exposure to Madoff’s funds. Earlier this week, a French fund manager who lost more than US$1 billion of his clients’ money in the scam committed suicide at his Manhattan office.
(10) 16 Dec – Fed cuts interest rate to near ZERO
THE US Federal Reserve made an unprecedented move, cutting its target rate for overnight loans between banks to the lowest level since it started publishing the target in 1990. The Fed slashed rates from 1% to a target range of 0% to 0.25%, and said it would keep rates ‘exceptionally low’ for some time. With no room to cut rates further, the spotlight has now shifted to stimulus packages, particularly the ambitious one being drawn up by US President-elect Barack Obama. Economists expect the FED to expand its purchases of assets to enlarge its balance sheet. This could include buying corporate debt or state municipal bonds to ease the credit squeeze in those markets. However, they also warn that the near-zero interest rate could push the US into a liquidity trap like the one experienced by Japan in the 1990s, when the economy simply refused to respond to rate cuts.
Will 2009 be a better year than 2008? I certainly hope so!! My heart hope so, BUT my head think otherwise. Nevertheless, it is always good to be positive-thinking, right? Wishing everyone of you guys out there a Happy, Healthy and Prosperous 2009!!
Cheers
Source: Straits Times
Multi-Millionaire Oei Hong Leong: Get Out When The Market Rallies!!
Mr Oei Hong Leong, the 29th richest man in Singapore who has the nickname “Golden Finger”, advised retail invetors to GET OUT OF THE STOCK MARKET WHEN IT REBOUNDS!! He felt that the US$700 billion package to bail out banks by buying their toxic mortgage-based debt is “FAR FROM ENOUGH” to restore stability in the financial markets. If u think that the market has bottomed, please thinking seriously again!! THE CAPITULATION IS NOT HERE YET! According to Mr Oei, we are now having the mortgage crisis, next to follow will be the credit card crisis. Trouble have spread from U.S. to Europe, slowly coming to Asia, ultimately will be hitting Singapore. I want to stress again: buying share now does not stack the odds of winning in our favor, we should be doing SHORT-SELLING through the legitimate way of using CFD (Contract For Differences).
Cheers
Source: Straits Times
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
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