Historical Cycles - From Rags to Richest! ( Not Grammer problem..purposely one)

Why must CNBC show Barack Obama and John McCain's election sentiment results on airtime....arrgh! We don't care about Politics...We just care about Ben Bernanke and Henry M. Paulson! They should be the Presidents! Neways..let's talk about why you should start eating bread and drinking water for lunch and dinner. Breakfast skip. And the money go where?....show hand in the stock market loh. Portfolio allocation: 99.999% in stocks...0.0001% in Ezlink card! ( Ok exaggaratting and joking..). Let's look at history, shall we?

Based on the above data from the US government ( legitimate ok...dont pray pray), for the latest time horizon, from 1945 -2001, there were 10 cycles. The average duration from Peak to Trough is 10 months while the average Trough to Peak is 57 months. This is summarised by our cheap artist below:

This means that downturns are fast and furious and upturns are relatively slower. And what does this mean again...my friends... ( Darn Citigroup best man...their commercial has really captured our mind day and night...cannot get the words out of our head!!) But then again..this is unprecedented....yeah!

How To Expedite Global Market Recovery ? The Cheapskate way - SGDividends way!

Taking a cue from Behaviourial Finance, market will start to pick up when people have become numb to all the bad news flow and it just starts to be well, normal..whats the big deal after the while......life goes on..

So ...Why not just take it all in ..people of the world . Are you numb yet? If not, please read the above headlines, day, morning and night, dream it, breathe it....

And guess who's being cool....the fogey old man.

"Yeah...i may be fogey but i'm buying...You should too!"

Predict Cycles ....Easily...

SGdividends met a student today...yes a student...and we learnt a lot from her...Why? Cos she thinks simply and have not been brainwashed or blasted with loads of marketing research reports..bloomberg...reuters and all the jazz matazz of finance and investing. She told us isn't it obvious 1-2 years ago that something was going to be wrong.... Let's see why she said that...shall we?

Before we continue, just know that if the yield curve is increasing the probability of recession or anything go wrong with the economy is very minimal. If the yield curve becomes flat...higher probability....if it becomes inverted ..very probable....basic economics.

2002 yield curve(above)...its increasing....

2003 yield curve (Above) ....Still increasing


2004 yield curve(above ).. It is still increasing.

2005 Yield Curve...above ...getting flatter but still increasing!

2006 yield curve (Above) seems to show invertness in the near term. Something is going wrong!

2007 Yield Curve (Above)....Persistent invertness..WARNING!

So you see, my friends, at around early part of year 2007, the shape of the 2006 yield curve has already been publicly released ( in fact the yield data is publicly available month by month) and shouldn't we be forewarned already? Start overweighting in cash then and expect increasingly dangerous times ahead.....which we are now...simple? Think John Sloman Economics Text Book.
In 2002, if we had invested, we would have made money ! So where are we now? See the curve below...what do you think?

Think simply to invest profitably.

Who To Bail Out The Governments?

The FDIC, the entity promoting public confidence in the US financial system by issuring deposits is now, itself facing some headwinds. Their reserve ratio has fallen below their target of a reserve ratio of 1.15 %! This shouldn't be surprising given the enormous number of bailouts they have been doing. (See article).

Based on the article published on ChannelNewsAsia regarding Singapore's SDIC ( equivalent of FDIC), " the goal is to hit $120 million by 2016......reserve ratio of 0.3 percent". OK, 0.3 percent? Thats lower than FDIC's reserve ratio.

SGDividends has full faith and confidence in our government, honestly, and with FDIC having a reserve ratio of 1.01 percent, way higher than our 0.3 percent ( based on 2016 target forecast..we are not able to find the current ratio data).

We think the financial system in USA ( world) should still be ok. Relax..don't panic and let's ride it out in style.

The US Currency - Its gonna go down!

The US public debt is increasing and now standing at 5.8 Trillions Dollars! What does this mean? Based on fundamental economic theory, it means they have to print more money to repay their debt, and when they print more money, slowly but SURELY..their currency is going to go down!

Now, what does this mean? You might think of buying US equities now and it might be a good idea. But take note that if you are buying foreign equities, you are not only exposed to stock market risk but exposing yourself to exchange rate risk. Also, do you know that if the US counter you are buying is incorporated in USA, you face a 30% withholding tax on your dividends...ouch!.

So, should i invest in US equities now or not, given the undeniable fact that the US currency is going down in the long run, if you believe your stock can still make a good return after netting off the loss in exchange rate....pls go ahead. See the video below with Jim Rogers

( I have something to say about him..but i will leave it for another time)

Why SGdividends Think the Decoupling Theory is Fluff.

The decoupling theory that Singapore is cushioned by the twin rising powers of China and India has been a hotly debated topic for some time. SGdividends will now use facts to see whether it is true.

In our previous article, titled: Its Official - Singapore is in Technical Recession (Under the label: Economy Awareness), the chart shows non-oil exports to China has been increasing rapidly, albeit still a small percentage of the total pie. At first glance, the slow decoupling process from the US and EU seems quite true. Let us delve into it a little deeper....shall we?

China Top Exporting Countries

India Top Exporting Countries

China's top exporting country is still USA and its increasing. India's top exporting country is still USA and its increasing. So, yes we are exporting more to China and India but who do they export to, the USA!

It seems the decoupling theory is not really true. We are still interconnected...just more indirectly now.

It's Official- Singapore is in Technical Recession!

SINGAPORE (AFP) — Singapore's trade-sensitive economy has declined for a second straight quarter, the government said Friday, meaning the city-state has entered a recession for the first time in six years. On a seasonally adjusted quarter-on-quarter annualised basis, real GDP declined by 6.3 percent in the third quarter after contracting 5.7 percent in the previous quarter,estimates from the Ministry of Trade and Industry said.It did not describe the economy as being in recession, but a technical recession is generally defined as two consecutive quarters of quarter-on-quarter contractions in economic output.

Economists polled by Dow Jones Newswires had forecast a 0.3 percent quarter-on-quarter rise in gross domestic product (GDP), the value of goods and services produced in the economy.Singapore's last technical recession occurred in 2002, and the most recent full-scale recession was in 2001 when the economy contracted 2.4 percent during the year.

Based on the latest trade statistics by IE Singapore, our top destination for exports is the European Union and USA, consisting of 15.8% and 12.8% of our total trade respectively and we do know how bad these 2 economies are doing now. We also know Spore is an export oriented economy, expect to be hit damn real HARD! Huge layoffs are expected, frens, time to spend more....on equities that is.

Follow the sectoral investing write-up below for some ideas on which sectors to load up on.