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Posting #51: Fri Aug 8th, 2008 12:44 |
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KLSE Composite Index : Market Valuation
The 4th AGM of icapital.biz Bhd on 2 Aug 2008 was another lively event. Almost 500 people turned up. The question and answer session with our managing director, who is the designated person for the Fund, received a continuous stream of questions. The most common question was whether the Fund would change its investment policy to allow it to invest globally. The popularity of the issue is a reflection of the current unsettled Malaysian political landscape.
The Malaysian political scene is unfolding rapidly and seems to be heading for a climax of sorts in the coming months. Who is in the prime ministerâs seat, which party is governing the country matters little to us. What matters is that there must be sound socio-economic policies formulated and implemented effectively and efficiently. The Malaysian economy must be able to achieve and sustain growth rates of 6-8% per annum for a prolonged period. Otherwise, Malaysia will forever remain emerging.
Most Malaysians have complained that the Malaysian economy under prime minister Badawi has been lethargic and lacked the âfeel goodâ atmosphere. In this respect, a look at Malaysiaâs economy shows an interesting and unnoticed development. Figure 1 shows the OCED Composite leading Indicator (CLI) together with Malaysiaâs GDP growth. In the past, when the OCED CLI plunges, Malaysiaâs GDP growth rate also plunges. In the recent years, while the OECD CLI has plunged, Malaysia is still enjoying growth rates of 5-6%. This is due, one, to the strong performance of the commodity sector, which includes palm oil, rubber, and oil and gas. Two, the tourism industry has been experiencing steady growth â see figure 2. Three, private consumption in Malaysia has remained robust, despite the rising rate of inflation â see figure 3. While the important manufacturing sector has slowed sharply, and despite the fact that the Malaysian government has not resorted to higher budget deficits, the overall economic growth has been expanding at a decent pace. This illustrates the fact that the Malaysian economy is more balanced than when it was under the 4th prime minister and thus, despite the plunge in the OECD CLI in recent times, Malaysia is still expanding at 5-6%.
What is also confusing investors is the state of the global economy. At first, the worries centred on the subprime problem. Then, investors became concerned with the solvency of the Western financial institutions. This subsequently gave way to worries about global overheating and surging inflation as oil price continued to surge amidst the mortgage and banking problems. All of a sudden, the price of oil and many commodities plunged. The global overheating concerns evaporated and were replaced by a global synchronised economic slowdown. The worries now are centred on global cooling.
The economic data coming out from Europe has been more negative than positive. Japan has been a mixed bag. China is slowing down, as intended. The situation for the US is not all doom and gloom. While the housing sector continues to contract, the readings for the ISM manufacturing and non-manufacturing sectors show that the overall US economy has not fallen off the cliff. Given the volatility in the equity and commodity markets and these confusing economic statistics, what do we make out of the current situation ?
Most stock markets peaked about 9-12 months ago. Given that they often serve as leading indicators of economic conditions 6-9 months down the road, it is thus not surprising to see economic figures that are negative being released now. In fact, the negative economic data being seen now is about right in terms of timing. What is important for our subscribers is to look for a bottom to the equity markets. They will bottom first before economic growth picks up momentum again. If the stock markets bottom out in the next 3-6 months, which i Capital expects them to, then, economic growth will pick up pace as 2009 unfolds.
It is important to be clear what is the cause, what is the effect. The cause of the current economic slowdown is not the subprime problem. The main cause of the current global economic slowdown was the relentless rise in crude oil price. The subprime and mortgage problems are manageable problems. Policymakers and politicians need to just wave their magic wands and the problems disappear overnight. The problem of insufficient oil supply is of a different magnitude altogether. It is simply beyond the power of the policymakers and politicians. The only effective way of dealing with a relentless rise in oil price is the price of oil itself. It simply has to reach a level where demand is choked and equilibrium between the supply of and the demand for oil is reached. This is what is happening now. Given that they have risen so much, the prices of oil and many commodities have more room to fall. As they do, the foundation for the next round of global economic recovery is being set in place. In the initial stage, the sudden plunge in the prices of oil and many commodities would reinforce the bears who would see them as confirmation of the doomsday scenario. Fortunately, this will eventually give way to the view that the plunge in commodity prices is part and parcel of the i Capital Long Boom. In this Long Boom, volatility is the name of the game, as our managing director has advised previously. The sudden plunge in the prices of oil and many commodities would eventually restore confidence everywhere. In the end, i Capital remains positive about the world economy.
As we ride through a volatile phase, our Malaysian subscribers, when thinking and judging their political monkeys, may want to ponder on two insightful quotes.
âA liar will not be believed, even when he speaks the truthâ â Aesop.
âI don't care what anybody says about me as long as it isn't trueâ â Truman Capote.
The KLSE
i Capital retains its immediate-term outlook of the KLSE at a range of 1,100 to 1,200. For the short-term, i Capital retains its outlook at a range of 1,100 to 1,400. For its medium- and long-term outlook of the KLSE, i Capital still expects the KLSE CI to hit 2,000 points. With the 2008 election results now history but with the political comedy still being acted out, i Capital will review its medium- and long-term outlook at a relevant time.
ICGF plunged 7.78% in Jun
The NAV of the i Capital Global Fund (ICGF) dived 7.78% in Jun 2008 to US$989.865 from US$1,073.42 in May 2008. The Morgan Stanley World Index plunged 8.1 % during the same period. The Morgan Stanley All Country World Index also plunged 8.34%. This index includes China, which the ICGF cannot invest in at this point in time.
Since Jul 2007, the NAV of ICGF, nett of all expenses, has fallen 1.01% and has once again beaten the Morgan Stanley indices by a huge margin. The Morgan Stanley World Index plunged 14.05% during the same period and the Morgan Stanley All Country World Index slumped 12.88%.
The i Capital Global Fund (click to view)
If in such turbulent and volatile conditions the ICGF can more or less maintain its asset values, imagine what it would be like when the stock markets are rallying again. The best times to invest are when most people are frightened. After all, bull markets can only start during bear markets. For those who missed investing in the ICGF earlier, the current volatility is a great time to invest or to add on to your earlier sums. However, do not forget that the Fund is a long-term global fund.
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Donât Try to Predict the Future / Be In Harmony with the Market / Donât fight the Market ~Charlie Wright
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Posting #52: Sat Aug 9th, 2008 01:30 |
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Recession or recovery?
[Updated on 09/08/2008 08:01:00]
Is the US economy going into a recession or is it starting a recovery ? If one listens to all the doom and gloom forecasts, not only is the US economy going into a recession, it is falling off the cliff. However, if one looks at the facts, then, the situation looks very different. In fact, it would appear that the US economy has already entered a recovery phase, after hitting a soft patch in the 4th quarter of 2007. What are the facts ?
Figure 1 shows US quarterly GDP growth rate from the 3rd quarter of 2007. After a strong 3rd quarter, the US economy slumped in the 4th quarter. Since then, US economic growth has actually gathered momentum as figure 1 shows. The typical response or explanation for this improving performance is the US fiscal stimulus. Economists and analysts would attribute the pick-up in GDP growth rate to consumers spending the cheques received from the US government. There is no doubt that the fiscal stimulus helped but to ignore the positive contributions from the other factors would be to miss the real causal factors. What are these ?
When US GDP growth fell in the 4th quarter from the 3rd quarter, export growth fell substantially and inventory contracted instead of expand â see figure 2. While personal consumer spending growth fell, two other key components also performed weaker in the 4th quarter than in the 3rd. When the 2008 2nd quarter GDP growth rate picked up pace, it was essentially a jump in export growth in the 2nd quarter that pulled the US economy up even as inventory shrank at a rapid pace.
Essentially, the two important swing factors of the US economy in recent quarters that have been totally ignored by the mass media have been export growth and inventory contraction. US export growth, due to a strong global economy, has remained strong. US inventories have been contracting for three straight quarters, setting the stage for a strong rebound later on. In addition, the negative contribution from residential investment has been going on for more than 10 quarters and would be beginning to reverse soon.
What do all these mean for the NYSE ? If it had been falling because it anticipated a US recession, then, the NYSE should be rising soon, in anticipation of stronger US economic growth rate. An extra impetus for a reversal of the short US bear market would be the falling rate of inflation, courtesy of the declining and thus lower crude oil price.
i Capital sees the fall in the NYSE from Jul 2007 as a correction in a long bull market. Over the next few months, investors should see a resumption of the bull market that started in 2002-2003. 2009 may end up as a Goldilocks year as i Capital advised last week. Thus, i Capital retains its bullish short-term outlook of the NYSE at a range of 1,190 to 1,500. i Capital also retains its long-held bullish longer-term target of the NYSE at 1,900 - 2,000.
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Donât Try to Predict the Future / Be In Harmony with the Market / Donât fight the Market ~Charlie Wright
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Posting #53: Fri Aug 15th, 2008 15:04 |
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KLSE Composite Index : Market Valuation
The world economy has transformed. Japanese exports fell, American exports surged. Yet both are selling to the same doom-and-boom global economy. The Japanese exporters are worried; the American exporters are ebullient. It is the best of times for one; it is the worst of times for the other. i Capital is confused how some well-known economists and investors are calling the current situation as the worst crisis since 1930. We must be living in different planets.
In the 1930 Great Depression, the US unemployment rate shot through the roof and hit 25%. Now, the unemployment rate is at a âvery worryingâ 5.7%. During the depths of the Depression, thousands of American banks went bankrupt in a month; now, there have been a few bank failures since Jun 2007. The bear market in the Great Depression saw the NYSE plunging 90%; now the NYSE has fallen a âbearishâ 24% while the Dow Jones Transport Index is near all-time high. In the 1930s, the global economic powerhouses, the US and UK, were in deep shit; now, the global economic powerhouse, China and CLEB, is powering ahead smoothly and pulling the rest of the world along. In the Great Depression, there was fierce competition among the major economies to devalue their currencies; now, the major currencies have adjusted and are adjusting seamlessly.
One of the most important differences between the really doom-and-gloom 1930s and the current Goldilocks global economy is world trade. 75 years ago, there was globalisation of protectionism as country after country retaliated against Smoot-Hawley; now, there is globalisation of free trade and free market capitalism. The 4th prime minister of Malaysia totally abhorred globalisation and misunderstood what economic development needs in the current environment. Without globalisation of trade, of ideas, of capital, of investment, and more, the US subprime problem would have by now sparked a global economic crisis. In this issue of i Capital, it therefore takes a look at globalisation, a process that has resulted in a prosper-thy-neighbour world economy instead of a beggar thy-neighbour global economy.
The price of crude oil and other commodities plunged. Stock markets rallied. The US$ strengthened. And without much fanfare, the Doha talks on global trade liberalisation collapsed. All these events were unexpected by many investors, forecasters and observers. The cycles are so different this time round â some so short, others so prolonged; some seem sure bets, others seem sure losers. In his talk and explanation on the i Capital Long Boom in the past years, our managing director had advised and predicted that, as part of the phenomenon called the i Capital Long Boom, the business and investment environment would be volatile. He even made the unheard of forecast that inflation would be cyclical as opposed to being secular. Even up to now, there are lemmings out there who cannot believe that inflation can be cyclical or who cannot understand or simply refuse to acknowledge the fact that inflation can be cyclical.
This anticipated volatility will remain for quite some time to come and there are various reasons for such volatility. One of the reasons is the enlargement and encroachment of globalisation across the whole world economy. By now, almost every country has embraced globalisation in some form or another. Currently, it is hard to find a pure, centrally planned autarky. Even closed economies like Myanmar, North Korea, and Cuba are, to some extent, part of the world economy and cannot be totally isolated. Globalisation is a development that has permeated every corner of the world economy. It has become so entrenched in the world economic system that a reversal of globalisation would mean a disastrous end to the robust world economic growth that we have enjoyed in recent few decades and for many, this state of affairs has been taken for granted.
The argument in favour of globalisation is stark and simple. An end to globalisation now would send the world economy spiralling downwards and into possibly another Great Depression. And there is certainly a high level of risk that politicians in many countries (for Malaysia, this would include a still high profile ex-politician) would use globalisation as a convenient scapegoat for their own policy mistakes or unwillingness to face the music of the voters in elections. The quote from âThe World is Flatâ, written by Thomas Friedman, is apt and illustrates the obstacles and challenges facing politicians and policymakers in making sure that the globalisation process does not backslide.
âGirls, when I was growing up, my parents used to say to me, âTom, finish your dinner â people in China and India are starving. My advice to you is: Girls, finish your homework â people in China and India are starving for your jobs.â
Politicians anywhere would find it easier to impose tariffs and duties and resort to all kinds of protectionism, instead of taking painful but necessary structural adjustments. Populist measures are always popular but they are often the hideous cancer destroying the entire fabric of a nation.
Protectionism provides instant gratification and because of this, it can be an extremely popular policy option. Protectionism is without doubt a populist measure. From a longer-term perspective, however, protectionism has always led to economic decline and will always lead to the same results. Its popularity with the masses and politicians and its many harmful longer-term effects make protectionism, which is the antithesis of globalisation, so scary. It is the worst enemy of any economy that wants to develop successfully.
Fortunately, the global economy has moved towards globalisation over the decades. As a result, world trade has expanded at a faster pace than world economic growth â see figure 1. This is necessary as this is the only way that a country can grow fast without the expense of another country. For world trade to grow at such positive-sum rates, globalisation must be able to proceed in an unfettered manner.
For the i Capital Long Boom to materialise, there needs to be 4 factors. One of them is globalisation, a factor necessary for China to develop rapidly and for the benefits of her economic transformation to be transmitted to every corner of the globe. Of all the current developments, the collapsed Doha trade talks and until-not-too-long-ago, the surging oil price, have the greatest potential to derail the current global economic boom. Having felt the pain, we all know what a rising oil price is but what is globalisation ? Many people talk about it but do not really define what it is.
In a speech given in 2000, ex-Federal Reserve chairman Greenspan said that most economists refer to globalisation as âthe interaction of national economic systems.â This is a useful working definition to start with. These economic systems are often, if not always the case, market oriented. Globalisation is not a new phenomenon. One can divide it into two distinct waves. The first wave ended around the time of the First World War while the second wave, which is still ongoing, began after World War II.
Agreement on Tariffs and Trade was formed in 1947. It was essentially an agreement signed by 23 countries containing tariff concessions and a set of rules to prevent concessions from being stymied by restrictive trade measures. The reason for its formation was simple and sound.
The world trading system collapsed during the Great Depression as the major economies of that time engaged in âBeggar thy neighbourâ policies. Protectionist policies by one country were responded to with similar measures from the trading partners. One currencyâs devaluation was met by countless retaliations. The catastrophic end result of this âBeggar thy neighbourâ policy is shown in figure 2. After the Great Depression and the Second World War ended, the major economic and political powers of that time decided that there needed to be global institutions that could prevent a repeat of such man-made catastrophes. One of these is GATT, the predecessor to the WTO. After World War II ended, the communist Soviet bloc emerged as a serious challenge to the dominance of the US, the accidental champion of capitalism and democracy. The world was divided into 2 main groupings and the Cold War was born.
It was believed then, and rightfully so, that trade was supposed to draw the 3rd world nations into the capitalist camp, and prevent them from becoming communists. To achieve this, US tariff concessions were granted to Americaâs trading partners. There was trade liberalisation in Europe also, and the Common Market and the European Coal and Steel Community were formed. Globalisation gathered momentum and more and more countries and politicians found its many benefits hard to resist.
Figure 3 below shows that by the Eighties, the trend of lower and lower tariffs was already irreversible. Globalisation was an unstoppable process and those economies that embraced it, got ready for it, and leveraged on it. These economies, even those with small populations and domestic market sizes, found that sustained robust economic growth was an entirely plausible proposition.
For policymakers and our subscribers, understanding globalisation is important. While it contributes to the secular boom envisaged in the i Capital Long Boom, it is also an important contributing factor in the cyclical inflation process, also envisaged in the said boom. i Capitalâs definition of globalisation is different from the others. To i Capital, the current wave of globalisation started with the massive global economic transformation around the late Seventies and the early Eighties.
The launch of the 1978 reforms in China and the subsequent opening up of Chinaâs economy is probably the most important component of the current wave of globalisation. Coincidentally, the US and UK economies were going through difficult times in the Seventies. This set the stage for the pro-market leaders to assume leadership. Americaâs Reagan and Britainâs Thatcher reformed their sluggish economies. They implemented policies that were more market-oriented; they reduced the barriers to trade and commerce; they privatised state-run enterprises and they let the private sector take the lead in creating economic growth and wealth. Then, when the Berlin Wall fell on 9 Nov 1989, this released a part of the world that was governed by the former Soviet Empire and allowed Eastern Europe to integrate with the rest of the world.
For many economies that were socialist-oriented, the totally dismal failure of the centrally planned approach meant that a different approach had to be taken. It is not surprising that free market capitalism found its way to most parts of the world â be it Asia, the Middle East, Africa, and Latin America.
Together with the many technological innovations in communications and transportation, the world became smaller and very tightly linked through expanded trade and capital flows. The many technological innovations in communications and information technology increased the interactions between the domestic and international contexts, whether in the areas of economics, politics, or culture; in fact, almost anything one can think of. Many countries rely heavily on technological transfers, human and capital flows, trade, and so on â making the world economy more and more interconnected. To i Capital, this is what we call âglobalisationâ.
The KLSE
Realisations are an important part of growing up and maturing. They help one to come to terms with realities. Realisations can come about in so many ways. Some are self-realised while others are rudely imposed on us. For Malaysia and the ruling coalition and the opposition, the election results of Mar 2008 must surely be one of realisations. An important realisation has to be that there is a new and potentially better Malaysia in the making. Whether Malaysia is able to tap on the recent realisations and become a better nation would depend a great deal on the maturity of the many politicians in both camps. For these politicians to be matured, they must realise that they cannot continue to act and behave like monkeys. They need to grow up and realise that Malaysians are utterly fed up with being left behind so many countries in so many endeavours. Malaysians know and realise that they need better politicians but are these monkeys capable of self-realisation?
i Capital retains its immediate-term outlook of the KLSE at a range of 1,100 to 1,200. For the short-term, i Capital retains its outlook at a range of 1,100 to 1,400. For its medium- and long-term outlook of the KLSE, i Capital still expects the KLSE CI to hit 2,000 points. With the 2008 election results now history but with the political comedy still being acted out, i Capital will review its medium- and long-term outlook at a relevant time.
____________________
Donât Try to Predict the Future / Be In Harmony with the Market / Donât fight the Market ~Charlie Wright
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Posting #54: Sun Aug 17th, 2008 08:17 |
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Strong exports
[Updated on 16/08/2008 07:57:00]
Last week, i Capital asked, âIs the US economy going into a recession or is it starting a recovery ?â It would appear that our question has been answered very quickly. The export number for Jun was strong as US exports jumped 4.0% to US$164.4 bln. As if to mock the pessimists, this is the biggest jump since Feb 2004. In addition, the trade deficit shrank even though oil price was at a record high. The surprisingly robust trade data should lead to an upward revision of the 2nd quarter GDP growth estimated initially at 1.9%, to possibly as high as 3%. It would then be difficult to call 2008 a recession year for the US economy, unless those who keep claiming that 2008 is a recession year come out with a new definition of what a recession is.
The US is a large exporter. Who is she selling to ? The world economy must be in a pretty robust state to absorb such large increases. Of course, the weak US$ helped as well. Now we know why exports from Japan and Europe were weak. It is not that the global economy is slowing so sharply; it is that the American exporters have captured some market share.
The pessimists do not expect the strong growth rate in US exports to continue. They point to recently weak economic numbers from Europe and Japan. Even if this is the case, we do not think that the US economy would slide into a recession.
First, since Jun, prices of oil and many commodities have plunged. This has sent a big sigh of relief among central bankers and consumers. The American consumers would certainly welcome the big drop in commodity prices and are likely to be less worried about spending in the coming months. Private consumption in the US in the coming quarters may pick up momentum as consumers have more spending power.
Secondly, consumers in the rest of the world would also be welcoming this unexpected change in the direction of commodity prices. The slowdown seen in many countries may receive some lift from the lower commodity and oil prices. The worldâs economic powerhouse, China, is seeing a continuation of a surge in retail sales even without the steep drop in commodity prices occurring. Retail sales in Jul jumped more than 23%. The slowdown in global economic growth in the recent months would be short-lived. US exports would still remain relatively healthy for the rest of 2008.
If one listens to all the doom and gloom forecasts, it would seem that there is no end to the end of the world. The facts point to a welcomed slowdown, not a frightening apocalypse. What do all these mean for the NYSE ? The NYSE should be rising soon, in anticipation of stronger US economic growth rate. Last week, i Capital said that it sees the fall in the NYSE from Jul 2007 as a correction in a long bull market. i Capital retains its bullish short-term outlook of the NYSE at a range of 1,190 to 1,500. i Capital also retains its long-held bullish longer-term target of the NYSE at 1,900 - 2,000.
____________________
Donât Try to Predict the Future / Be In Harmony with the Market / Donât fight the Market ~Charlie Wright
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Posting #55: Fri Aug 22nd, 2008 14:59 |
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KLSE Composite Index : Market Valuation
In advising subscribers over the last 20 odd years, i Capital has always advocated or recommended long-term investing. Yes, there will be wrong calls or even costly mistakes (which approach does not have mistakes anyway), but investing long term increases the chances of long-term investing success. As i Capital used to say, do not be short-term greedy, be long-term greedy. Why does i Capital advocate such an unpopular approach ? Why not flow with the crowd ?
Our managing director sees investing from the perspective of a businessman and not just that of a typical fund manager. Seen in this way, one then recognises that it takes many, many years to build and grow a business. Capital Dynamics Sdn Bhd had to endure 4 continuous years of losses when it started in 1989. As an independent investment adviser, these 4 years were really worse than climbing Mount Everest or Mount Qomolangma. There was just no one to turn to for any kind of assistance and most people did not believe that we could survive beyond the first year. Yet, despite the many difficulties, our managing director stayed very focused. The only âassistanceâ he could turn to was the subscribers. He had to convince the subscribers and potential subscribers that i Capital was a trusted investment adviser. To be a trusted investment adviser meant only one thing. i Capital had to be built upon its 3 core values of independence, intelligence, and integrity. But becoming a trusted investment adviser and for the 3 values to be appreciated takes years. Thanks to the trust placed in us by our subscribers over the last 20 years, Capital Dynamics Sdn Bhd is able to survive and yet remain totally independent. This has allowed us to provide objective investment advice all this while, without any hidden agenda.
Our managing director has studied the experience of Value Line, Inc. and was rather inspired by it. Value Line, Inc. publishes the Value Line newsletter, a product that even Warren Buffett strongly recommends. Like Capital Dynamics, Value Line, Inc. also has a fund management arm. Like Capital Dynamics, it is an independent investment adviser except that it has grown big enough even to be listed on the NYSE. If an independent investment adviser can survive and grow in the US, why not Malaysia, a country that is in very dire need of objective advice ? At the same time, our managing director knew that the trust has to be earned, the hard way. If i Capital does not provide consistently good objective investment advice, then, i Capital will cease to exist very quickly, just like many other investment advisers did a few years back. 20 years later, we are still surviving. Many subscribers who started out with us in our very first year of business are still with us. i Capital has withstood the most cruel test of it all, the market place.
The following passage from the 1940 book, "Where are the customers' yachts ?" written by Fred Schwed is revealing:
"An out-of-town visitor was shown the wonders of the New York financial district. When the party arrived at the Battery, one of his guides indicated some handsome ships riding at anchor.
He said, 'Look, those are the bankers' and the brokers' yachts'.
'Where are the customers' yachts ?' asked the naive visitor."
If our subscribers do not have their yachts, we would not even have our sampan. It is as simple as that. Many of our subscribers have thanked us for the immense sums they have made from stocks like Parkson, icapital.biz Berhad, etc. Do not get us wrong. In our website, i Capital has very frankly said that we make mistakes.
A Humble Claim
We do not claim to be 100% accurate. We are certainly not. What the i Capital aims to achieve is contained in the following advice:
Why does Buffett place great emphasis on having a sound framework ? His own experience at the beginning of his investing career was not much different from ours. Like most of us, he had to learn the hard way as he "was spending a lot of time at a brokerage office... following various stocks. But he didn't have a system for investing - or if he did, it was haphazard. He would study the charts, he would listen to tips. But he didn't have a framework. He was searching."
A Sound Framework
So, instead of pretending that we can be 100% accurate, i Capital provides investors with a sound framework. What is our investing framework ? It is built upon very comprehensive analysis.
To arrive at our advice and recommendations, we analyse foreign economies and stock markets, interest and inflation rates, bonds and commodity markets, market psychology, in addition to the local environment. i Capital provides a clear perspective of how markets interact and how this interaction influences your investment. It translates the significance of events and interprets them in terms of the market. We study PE ratios or return on equity or Wilder's RSI, for example. But we are neither chart fanatics nor pure fundamentalists.
Over the years we have certainly made many mistakes. As Warren Buffett advised: âIf you arenât prepared to see your stocks go down 50%, you shouldnât own them. Be prepared for declines â and arrange your financial affairs such that you wonât have to sell outâ. There will be many more mistakes to come. Those who are looking for a perfect score should look at themselves. Those who need a sound rational investing framework will instead find i Capital highly productive. Subscribers need to read every section to gain the maximum benefits.
Instead of hiding its mistakes, i Capital has been brutally self-honest about them. Take Section D2 for example. This highly unusual section was set up in the issue dated 14 Dec 2000. i Capital explained:
âThe 2nd Chance portfolio is specially set up, at our own initiative, to help subscribers who may be holding some of our stocks selectionsâ dead ducks. We are assuming that the investors initially invested RM10,000 (or its percentage equivalent) for each dead duck and the quantity bought is derived from there. Any dividends received have been ignored. We sold some of these dead ducks last week and would then reinvest the proceeds at the right time. The objective is to recover our principal as soon as it is realistically possible. Once this is done, we will close this special portfolio. We certainly have no idea when this would be. As a start, let us pray hard. In buying 6 counters, we started with RM60,000 and when we sold 2559.3 Malayawata shares, 767.36 Wijaya, 1365.65 Fututech, 2605.52 CSM, 2161.79 HLPB, 2335.14 Muhibbah on 7/11/00, we raised RM15,275.69.â
Not every investor or trader will find i Capital useful. We have previously said that i Capital cannot be a best seller. It is not meant to be. Our unique series on Confucius or China on the Move or Depression Watch are aimed at serious investors. Even the entire i Capital or http://www.icapital.biz is structured in such a way that is very different and needs some time getting used to. Newer subscribers may not notice it but i Capital is the only investment adviser that it knows of that discloses its interest in securities, as required by the Capital Market and Service Act 2007. At the end, we look forward to another 20 years of providing sound, independent investment advice to those who want it.
Having built up Capital Dynamics over the years, our managing director recognises that investing in the stock market demands the same commitment as well. It cannot be otherwise. Let us recall the following story, first told in i Capital dated 17 Aug 2000.
âAn aspiring technopreneur had come to her office (the CEO of a Singapore IT company) with a business plan for an Internet venture âŚ..The CEO looked at the business plan and noticed it didnât go beyond Year 3. So what happens after that, she asked. The chap breezily admitted he hadnât really thought that far because âI hope to IPO after the first yearâ.â
The same long-term commitment is necessary in managing and developing a country successfully. One of the important reasons why Singapore has succeeded so well is because her leaders had this long-term commitment and focus. One important reason why Malaysia has fallen so far behind is she does not have this dogged determination.
KLSE
They say the global economy is not decoupled. Yet, as Japan and Europe contracted in the second quarter of 2008, the US expanded at a healthy rate. Since the simple word of decoupled seems to mean so differently to different people, i Capital would like to share some humorous definitions on investing from the Money Management magazine.
1. Bull market â A random market movement causing an investor to mistake himself for a financial genius.
2. Bear market â A six to 18-month period when the kids get no allowance, the wife gets no jewellery and the husband gets no sex.
3. Market correction â The day after you buy stocks.
4. Stock split â When your ex-wife and her lawyer split your assets equally between themselves.
5. Standard & Poor â Your life in a nutshell (this is our favourite).
Meanwhile, the 1,100 support of the KLSE gave way. With volume extremely low, judging the shorter-term direction of the KLSE becomes difficult. One important saving grace is that the plunging oil and commodity prices would be a welcome relief for many consumers. The expanding global economy would get a boost from this relief and the nerve-wrecking KLSE would eventually benefit from this. After all, why should the state of Malaysian politics affect global demand for palm oil, or crude oil and gas or the semiconductors ? i Capital revises its immediate-term outlook of the KLSE to a range of 1,050 to 1,200. For the short-term, i Capital also revises its outlook slightly at a range of 1,050 to 1,400. For its medium- and long-term outlook of the KLSE, i Capital still expects the KLSE CI to hit 2,000 points. With the 2008 election results now history but with the political comedy still being acted out, i Capital will review its medium- and long-term outlook at a relevant time.
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Donât Try to Predict the Future / Be In Harmony with the Market / Donât fight the Market ~Charlie Wright
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Moolah
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| Joined: | Sun Jul 9th, 2006 |
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Posting #56: Thu Sep 18th, 2008 02:14 |
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wanderer wrote: Strong exports
[Updated on 16/08/2008 07:57:00]
If one listens to all the doom and gloom forecasts, it would seem that there is no end to the end of the world. The facts point to a welcomed slowdown, not a frightening apocalypse. What do all these mean for the NYSE ? The NYSE should be rising soon, in anticipation of stronger US economic growth rate. Last week, i Capital said that it sees the fall in the NYSE from Jul 2007 as a correction in a long bull market. i Capital retains its bullish short-term outlook of the NYSE at a range of 1,190 to 1,500. i Capital also retains its long-held bullish longer-term target of the NYSE at 1,900 - 2,000.
If one listens to all the doom and gloom forecasts, it would seem that there is no end to the end of the world. The facts point to a welcomed slowdown, not a frightening apocalypse.
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