The Capricorn Effect and May Sell-off

[Mr Nobody]

I think it is due to change of French head, not the XD.

[VestedInterest]

I think it is due to change of French head, not the XD.

Yes, today's steep fall is more than the XD factor- it is the elections in Greece and France and the not-so-good job numbers in the US. Am quite certain that there is also some profit-taking.
Looks like the market has re-entered another phase of higher volatility again with the threat (again) of Greece being kicked out of the Eurozone. Nothing new but the market hates (or loves) uncertainties. Just have to sit this one out. Perhaps could do some spring cleaning at least. Just stick to the dividend yielding companies.

[VestedInterest]

I think there will be a few people questioning their 'value investing' credentials in the current market. I think it is a good time to rebalance the portfolio but not to totally sellout. Should be rotating into those good dividend yielding counters, that outpace the inflation rate here.

[arthur]

My few cents of general advice:
Value investing is even MORE important at such times.
It allows us to really discern which are the real good counters and those which LOOK good on the outside but empty inside.

When the tide drops, you will know who is swimming naked. And I'm referring not to the counters, but investors who thought they picked up a good bargain for past months based on airy fundamentals.

Who bought Wilmar for the last half yr? Kee Chiu.
You can call me Capt Hindsight, but I have not invested commodities for past half yr.
Just look at macro fundamentals. It's all there staring obviously.

The mkt moves in cycles. Different strategies for different periods.

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Add on afterthought:

Gents, my apologies if I sounded too high and mighty, as if I know all.
I don't but we should have expect this up and downswings to come.
I just feel sick in stomach reading some forumers pushing some counters as good ones.

Not going to comment who or what posts.

LTROs, QE 1, QE2, Operation Twist(QE2.5)
End of day, we still can't get Europe intact bcos the fundamentals are wrong at core. No amt of money printing or money exchanging or whatever exotic names will change the situation.
We are just prolonging the inevitable. Now I am starting to get nervous at China and India recent economic data as well.

[shanrui_91]

i don't understand why they must expect china to achieve gdp growth of 8%? It is simply unsustainable in the long run to expect China to be sprinting at such speed, sooner or later it will run out of stamina and take a rest. Neither should we expect europe to collapse as easily as this is unlike 2008 where people will say you are crazy to say the stock market and economy are going to plunge. They are much more prepared with ECB and Fed willing to print money should the PIGS really collapse en mass. It is likely to continue see-sawing up and down until Greece decides to pull out of Euro, Spain successfully revamps its bank and Italy slowly growing itself out of it.

Personally, I feel that the best stock to get in during a downswing should be the small cap with strong balance sheet, business and dividend yield as they are likely to be the one that will be more undervalued than the blue chip. Flight to safety will cause the blue chip to be trading at a much higher premium to the small and mid cap.

[Musicwhiz]

Hi Arthur,

Well, people may push, but those with eyes can see; and those with brains can figure out which are the good companies and which are not. The discerning investor has to do his own homework - relying on a forum for investment advice is foolhardy at best, downright foolish at worst.

For myself, I always compile my own spreadsheets, read financial statements direct from the companies and do my own thinking. There is really no substitute for your own thinking; but of course reading others' opinions may also help you to shape your own.

Shanrui,

A crash is certainly helpful if you wish to collect shares of good companies and watch them grow over the long-term. Stay liquid and prepared - it's hard to predict what's going to happen with China, Europe or any other country. All I know is we should watch the good companies and be prepared to buy when valuations are attractive.

That, in essence, is investing.

[arthur]

Actually I'm even more worried on the repercussions of the money printing by the two largest economy central banks.

We, in Singapore are suffering the effects of it already. Witness the 5.2% inflation CPI.
For general info, the CPI doesn't take into acct of housing prices. Wow. What a fantastic and realistic stats.

US wants to inflate it's debt out by printing money, and idiotic Ben wants to push the economy ahead by deliberating pushing equities price high in order to have a make feel good sentiment, hoping good sentiments will move the clogs of the US economy again.
What a sick joke.

Europe, having Germany as the leader, implementing austerity as its correction measures, will fail repeatedly. The rest of countries in the bloc cannot take such drastic measures n survive. They will suffer even greater contraction due to fiscal cuts imposed, which will lead to further decrease in GDP. It's a viscious cycle for them.
Put it simply, the fact France and Greece are having such electoral results prove this pt better than any economic hypothesis.

US, Europe, Asia, they are interconnected. Only difference is which region will be able to sustain greatest amt of hits without collapsing and thus, be the pillar of strength which will help the other two region to grow again.

When we reach the stage where three regions have finally solve their problems, we will have our next era of true golden years ahead.. That is till the next crisis decades down again.

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Hi Arthur,

Well, people may push, but those with eyes can see; and those with brains can figure out which are the good companies and which are not. The discerning investor has to do his own homework - relying on a forum for investment advice is foolhardy at best, downright foolish at worst.

For myself, I always compile my own spreadsheets, read financial statements direct from the companies and do my own thinking. There is really no substitute for your own thinking; but of course reading others' opinions may also help you to shape your own.

Hi MW

Yup, I agree with ur line of thought on not taking forums opinions at face value. I guess my reading of financial statement cannot hold a candle to urs nor my crappy spreadsheets.
I adopt technical and fundamental on both sides. It's just my style which I feel is suitable for me, i believe having a style that is comfortable to oneself is most impt.

Hv a great wkend!

Cheers.

[dzwm87]

i don't understand why they must expect china to achieve gdp growth of 8%? It is simply unsustainable in the long run to expect China to be sprinting at such speed, sooner or later it will run out of stamina and take a rest.

For China, growing at 8-10% is obviously unsustainable. moreover, when things are going bad at US or Europe, they tend to think that Asian countries will suffer no less either. It's a westerner's syndrome. Personally, I think 7.5% growth is still strong.

Europe, having Germany as the leader, implementing austerity as its correction measures, will fail repeatedly. The rest of countries in the bloc cannot take such drastic measures n survive. They will suffer even greater contraction due to fiscal cuts imposed, which will lead to further decrease in GDP. It's a viscious cycle for them.
Put it simply, the fact France and Greece are having such electoral results prove this pt better than any economic hypothesis.

IMO, I think Europe should go on an austerity measure. It is unlikely growth can pull them out from recession without taking on more debts. Hollande, an advocate of Krugman, favours fiscal spending a lot and that is actually bringing negative sentiments to the markets. I think eventually, unless the Euro devalue big-time or Greece exit the Euro, this issue will just be dragged on and on.

==
In addition, not only do we need to pick the better companies, we also need to have good asset allocation foresight. Yes, with price plunging, we can buy more at a cheap price. But what is cheap will becomes cheaper and one thing I have learned from latter half 2011 till now is that we must be aware that catching falling knives is not an easy feat. A proper and disciplined asset allocating strategy should be thought out as well.

At a bear market, every stock price (good or bad) goes now. So, it is difficult to find a 2-3 baggers during bear market. Ultimately, the best catalyst is still the return of a bull market. For now, we can only go for bullish thematic plays - consumerism, O&G, sectors favoured by Chinese government (under its 12th 5-years plan), etc.

[KopiKat]

I think there will be a few people questioning their 'value investing' credentials in the current market. I think it is a good time to rebalance the portfolio but not to totally sellout. Should be rotating into those good dividend yielding counters, that outpace the inflation rate here.

Looks like that's what's happening now in the market as I see many of my Dividend Stocks remaining strong, some even went up (perhaps supported by the 'cd' sign).

But, for me, when others rush in (making the Yield drop), I prefer to slowly sneak out (when it goes below my Yield Threshold level). Other stocks which'd drop a lot more are beginning to look attractive. Still best to do your own valuations and make buy/sell decisions based on that.

[dzwm87]

Time, to retail investors, is their best advantage. Institutional fund manager normally can't sit through 2-3 years, hence at a bear market, they might tend to either switch to defensive stocks or have less unhedged exposure to the market (0% net).

For retail investors, if they are able to find good quality companies at a cheap price, why move to dividend yielding stocks so as maintain paper profitability. Of course, it is subjected to one's risk appetite. If he/she is able to stomach through volatile times, then it will be better to switch out from dividend yield to move to those cheap and good companies.