Saturday, October 25, 2008

So Do You Think We have Bottomed?Ask Your Auntie and Uncle

Below is an article extracted from a US newspaper published on 24 Oct 2008 where they mentioned their 5 reasons they do not believe market has bottomed.(Which SGDividends shares the view too. See our article on 9 October where we say we are still 1/2-3/4( as in around 1/2 to 1/4 more to a market bottom, reaching there). In red are our commentateries.Charts are placed by SGDividends. Must say or else gana sued. USA is Sue King. Singapore is Complain King. ( but we are seeing an emergence of Sue kings here)

Stocks Haven't Bottomed
The best news today is that most indexes didn't breach intraday lows set on October 10. The bad news is we're still testing them. (For the record: Intraday lows on that day were 7884 on the Dow and 840 on the S&P 500.) Even after most markets crashed by more than 25 percent in the past month, the longer we spend bouncing around lows amid huge volatility, the longer daily trade will remain a white-knuckled ride.
(SGDividends: Good morning ladies and gentlemen..*beads of sweat trickling down*...erhem....*silence for a moment* ...We have no Comments only to say that the Spore market laggs the US market...and wait till this local earnings season has passed and more layoffs have been announced.)
The Dollar's Rise Is Fear-Fueled
While world markets sink, the dollar is continuing to climb. While that's great for American purchasing power, the disconnect going on in currency markets right now is a big part of what's keeping traders spooked. The yen is rallying hugely too, hitting a 13-year high against the dollar today. The rise in both comes thanks to cash fleeing riskier markets around the world and seeking out the safe-haven currencies. (Another good indicator on why Market's have not bottom. However, SGDividends think this is highly irrational. Because we bet our pet monkey's banana that in the long run the US dollar will go down. The "wisdom" of the crowd.....tsk tsk.Transfer here transfer there...won't you lose out on transaction costs? Unless you are a Forex trader...)

The Global Recession Looms
The drop in the stock market made its way around most of the globe before hitting the United States. Japan, Germany, and Britain all watched with horror as their stock markets slumped close to double digits in a single day. It's a loud hint that the problems in credit and the economy that sent U.S. markets into the tank over the past several months are not a local phenomenon. Also, Britain's GDP shrank 0.5 percent in the quarter, a sign that a '90s style recession is in the works. The sterling had its worst day against the dollar in 37 years. For American investors, it's the latest confirmation that hoped-for export growth won't do much to boost U.S. sales as the entire globe suffers an economic slowdown. Two other points there: Gold and oil prices continue to drop as commodity demand says a global slowdown is already here.
(SGDividends: Did't we hear people calling us to invest in Gold not so long ago? Didn't it appear in newspapers not so long ago?And how about Commodities in Newspapers? Morale of the story is go against the crowd. When newspapers publish something to promote it...its most probably the time to sell.....quite logical but safety in numbers..we hear...Another way is to go to the market and talk to aunties and uncles, drink kopi with them, massage their backs, rub their legs "chikopek" them and ask for their advise. Then do the opposite.We think this is very very accurate. Fund Managers should consider employing these people to give views internally, then publish the opposite. Quite sure will beat benchmark index easily.***Not disrepectful of the elderly, its just that they are laggards of the grapevine.)

Earnings Are Still Falling

You hear a lot about how stocks are cheap these days, but whether you think that's true depends on whether you trust earning estimates. Today, Sony and Daimler scaled back their earnings forecasts. So far, the third quarter has been a season of lowered expectations as analysts slash their 2008 and 2009 forecasts. And even after all of this, markets may not be cheap yet: Mark Hulbert at MarketWatch notes the history of price-to-earnings ratios show stocks don't necessarily look cheap at these levels. Using as-reported, trailing 12-month EPS, P/E ratios have been higher than they are now only 21 percent of months since 1871. That means stocks now are more expensive than 79 percent of the months going back 138 years. Tough odds, those. (SGDividends: Earnings season in Singapore now.And the above article uses the P/E which we think is quite crappy by the way ..this ratio.)

Credit Refreezes

Schadenfreude was flying yesterday after former Federal Reserve Chairman Alan Greenspan said he was "shocked" at the credit market "tsunami" and admitted he was "partially" wrong not to regulate some of the securities that caused the problem as they evolved on his watch. His admission came during the first week in months that frozen credit markets showed early signs of a gradual thaw—until last night. The sell-off put the fear right back into banks, as the Libor lending rate jumped 7 points overnight to 1.28 percent. It looks as if we've taken a step back. A loss in confidence between lenders around the globe was beginning the slow process of reversing itself for most of the past week, and that improvement was viewed as a first step on the road to recovery. That has now stalled in various corners of the credit market. Investment grade debt is weakening, too. (SGDividends: Not comments...go read the newspapers. )

Volatility Signals Confusion
Market volumes were about average despite the swings, but fear is still sending indexes whipsawing. The VIX index, Wall Street's "fear gauge," hit a record high of 81.17 when the market hit its current low on October 10. It traded near 86 at the open before falling back as the market's worst fears went unrealized. Six months ago, the VIX was around 20. (SGDividends: Its one of the indicator we use.)

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