Take Your Profit While You Can
About a week ago, a finance manager of my company called me.
Apart from generally enquiries, he asked for my opinion on the stock market. Naturally, I gave a gloomy picture. Since the exposure of US subprime problem, I have not been rosy on the stock market. He said that he is still holding to Singtel shares in his CPF and asked for my advice. Normally this is the kind of thing I don’t like to do as the situation may turn otherwise. He assured me no liability. I told him to sell and lock in the profit while he can. In fact, I had shared with some friends and colleagues to be watchful on the economy especially the US economy. And if they are sitting on some good profit, they should consider letting this profit materialize.
Your gains are only real when it becomes hot cash in your bank account. The investment account statement is still on paper.
What Are The Issues?
1) For a start, we have US subprime problems. People default on loan, and many financial companies write off tonnes of money from their accounts. And believe me, it hasn’t ended yet.
2) To battle subprime problem, Fed bring down interest rate. But unf.gif)
ortunately, they faced another set of problem – inflation. Actually many countries today are facing this problem. Singapore is not spared. To contain inflation, government needs to engage contractionary monetary policy. One way is to increase interest rate. Now you can see something is contradicting here. In Mandarin, I call it 骑虎难下. I think Fed is stuck in between.
3) Oil price at 100. Before Christmas last year, I had a dinner with two friends. One of them is currently working in a private fund house. While I was sharing the danger of rising oil price, this friend opined that rising oil price is not a concern. I totally disagree with his opinion. Although today’s rising oil price is backed by demand especially from emerging countries, high oil price will result in high business operations costs. I don’t have a PhD but I think this is really commonsense. (And my lecturer Mr. Fred Keer used to say that commonsense is the least common human attribute). This rising costs will be pass on to end consumer. The consequent is – inflation!!! Can we cope with high expenses? Can US citizens cope with high living costs especially energy and petrol? Well, since I don’t have a PhD, and that I am not working in a fund house, today I mark down my analysis. The answer should be out soon.
4) US employment. This is really something hot from the oven. Last Friday, DJIA plunged another 256.54 points to close at 12,800 due to unemployment in December rose to two-year high. Job creation in December almost came to a full stop. I remember reading somewhere that the US needs to create around 300,000 jobs every month. What will happen if unemployment rate goes up? What will happen to Singapore? With knowledge I acquired through years of reading financial news and analysing the market, this is my view:
> Singapore economy grow by non-oil domestic export.
> Singapore products mainly export to Europe and US.
> Europe and US will order if their economy is still growing.
> US economic growth largely depends on consumer spending.
> The “Ang Moh” (the Americans) will continue to spend if they got money in their pocket.
> They will only have money if they got a job. Well, if they didn’t, then work your math backward.
What To Do With Stock Now?
I am not saying that we are definitely in for a recession. Neither am I saying that you should dump all your shares at whatever losses. But in my opinion, we should really trim down the size of our portfolio at least by half. Hold more cash while we monitor the global economy. Prepare for the worst. You may start switching to bonds but may also stay sideline for a while.
On stocks, you only keep those companies that have a catalyst. For example, Koh Brothers with the potential of getting casino tower construction project, marine and oil-related companies with the potential to continue riding on high oil price etc. Certainly do not buy any tech stock. Last Friday, I dumped my last tech stock at a small loss. So now my portfolio does not have any tech stock. Take profit on companies that do not have any catalyst. Consider the possibility that you may be able to buy it back even cheaply.
This evening, STI plunged another 84.73 points to 3,353.06. The market will be very volatile this year, a good year for the speculators though. And god knows what will happen after the Olympic. So be prudent, overcome your greed and fear, use more commonsense and DON’T RETURN YOUR HARD-EARNED MONEY TO MS. MARKET. A perfect storm may be coming. And if it come, it’s going to have a deep impact.
About a week ago, a finance manager of my company called me.
Apart from generally enquiries, he asked for my opinion on the stock market. Naturally, I gave a gloomy picture. Since the exposure of US subprime problem, I have not been rosy on the stock market. He said that he is still holding to Singtel shares in his CPF and asked for my advice. Normally this is the kind of thing I don’t like to do as the situation may turn otherwise. He assured me no liability. I told him to sell and lock in the profit while he can. In fact, I had shared with some friends and colleagues to be watchful on the economy especially the US economy. And if they are sitting on some good profit, they should consider letting this profit materialize.Your gains are only real when it becomes hot cash in your bank account. The investment account statement is still on paper.
What Are The Issues?
1) For a start, we have US subprime problems. People default on loan, and many financial companies write off tonnes of money from their accounts. And believe me, it hasn’t ended yet.
2) To battle subprime problem, Fed bring down interest rate. But unf
.gif)
ortunately, they faced another set of problem – inflation. Actually many countries today are facing this problem. Singapore is not spared. To contain inflation, government needs to engage contractionary monetary policy. One way is to increase interest rate. Now you can see something is contradicting here. In Mandarin, I call it 骑虎难下. I think Fed is stuck in between.3) Oil price at 100. Before Christmas last year, I had a dinner with two friends. One of them is currently working in a private fund house. While I was sharing the danger of rising oil price, this friend opined that rising oil price is not a concern. I totally disagree with his opinion. Although today’s rising oil price is backed by demand especially from emerging countries, high oil price will result in high business operations costs. I don’t have a PhD but I think this is really commonsense. (And my lecturer Mr. Fred Keer used to say that commonsense is the least common human attribute). This rising costs will be pass on to end consumer. The consequent is – inflation!!! Can we cope with high expenses? Can US citizens cope with high living costs especially energy and petrol? Well, since I don’t have a PhD, and that I am not working in a fund house, today I mark down my analysis. The answer should be out soon.
4) US employment. This is really something hot from the oven. Last Friday, DJIA plunged another 256.54 points to close at 12,800 due to unemployment in December rose to two-year high. Job creation in December almost came to a full stop. I remember reading somewhere that the US needs to create around 300,000 jobs every month. What will happen if unemployment rate goes up? What will happen to Singapore? With knowledge I acquired through years of reading financial news and analysing the market, this is my view:
> Singapore economy grow by non-oil domestic export.
> Singapore products mainly export to Europe and US.
> Europe and US will order if their economy is still growing.
> US economic growth largely depends on consumer spending.
> The “Ang Moh” (the Americans) will continue to spend if they got money in their pocket.
> They will only have money if they got a job. Well, if they didn’t, then work your math backward.
What To Do With Stock Now?
I am not saying that we are definitely in for a recession. Neither am I saying that you should dump all your shares at whatever losses. But in my opinion, we should really trim down the size of our portfolio at least by half. Hold more cash while we monitor the global economy. Prepare for the worst. You may start switching to bonds but may also stay sideline for a while.
On stocks, you only keep those companies that have a catalyst. For example, Koh Brothers with the potential of getting casino tower construction project, marine and oil-related companies with the potential to continue riding on high oil price etc. Certainly do not buy any tech stock. Last Friday, I dumped my last tech stock at a small loss. So now my portfolio does not have any tech stock. Take profit on companies that do not have any catalyst. Consider the possibility that you may be able to buy it back even cheaply.
This evening, STI plunged another 84.73 points to 3,353.06. The market will be very volatile this year, a good year for the speculators though. And god knows what will happen after the Olympic. So be prudent, overcome your greed and fear, use more commonsense and DON’T RETURN YOUR HARD-EARNED MONEY TO MS. MARKET. A perfect storm may be coming. And if it come, it’s going to have a deep impact.
