What's with the market?

Markets recover from near death

STI rebounded today, up 6.57%, 128.02 points. G7’s effort has put some confidence back into the market today.

Most indices rebounded today, but bear run is not over yet.

It’s still a comfort to see a white candle today, pushing the high higher than yesterday’s open.

I just received the financial report in one of the companies I invested in. KTL is still making money, revenue went up more than 50% and net profits went up as well.

But stock prices remained low. I am glad that I wasn’t pressurized by the market sentiments to give up my investments.

Anyway, the market confidence looks good today.  Market should continue a short rally these few days till Friday, ceteris paribus, no more close downs from Wall Streets.

Jim Rogers: Let them go bankrupt

Jim Rogers views on the bailout:

The current rescue plans, which will force governments to issue more debt, print money and flood the markets with liquidity, will flare up inflation after the crisis is over and will create worse problems, Jim Rogers CEO of Rogers Holdings, told CNBC.

"We're setting the stage for when we come out of this of a massive inflation holocaust," he said.

And the plans are unlikely to fend off a severe economic downturn, as the crisis starts affecting all walks of life.

"We had the worst excesses we had in credit markets in world history. We're going to have to take some pain," Rogers said.

"Many people bought four or five houses with no money down and no job.....You think we'll just say well, that's too bad, we'll start over and nobody loses their job? Be realistic."

"What about all the people in countries that minded their manners, saved their money, didn't get overextended and now all of a sudden they're being asked to bail out a bunch of guys on Wall Street who were incompetent at best and some of them crooks?"

"I thought it outrageous that anybody has to step in a bail out a bunch of 29 year olds driving Maseratis," he said.

There are not many safe havens in the volatile markets, he said.

"I have an enormous amount of cash and I've been using it to buy more Japanese Yen, more Swiss Francs, more agricultural products....There's a liquidation phase going on, where everything is being liquidated. They're selling everything in sight."

"In a period like this the way you make money coming out of it is to own the things were the fundamentals have not been impaired," Rogers added.

"I've been buying agricultural commodities. I bought some a couple of days ago. It's down today. It did not matter, I bought them. I covered shorts yesterday," Rogers said on CNBC.

Rogers told CNBC's Maria Bartiromo that the financial markets are in a liquidation phase. "Commodities are only thing that I can see that will not be impaired.

"The way to solve this problem is to let people go bankrupt," Rogers said.

"Then you will hit bottom and then you start over. The people who are sound will take over the assets from the people who aren't sound and we will start over. This is the way the world has worked for a few thousand years."

Financial crisis is like a public demonstration PART 2

The last part of Financial crisis is like a public demonstration, read Part 1 here. Let’s see some of the points I have raised in Part 1.

By the time, I post this Singapore is already in a recession in technical sense. 

The transition of emotions:

• Stage 1 - Enthusiasm
  
• Stage 2 - Excitement 
  
• Stage 3 - Frustrations
  
• Stage 4 - Hysterical
  

Stage 1 Enthusiasm – Market sentiments are usually a speculation of market reactions to rumours and news. Like it or not, even people with no vested interest in any counters join the pack because of the herd mentality. Which shares to sell? How’s the market performing?  In a financial crisis like this, it’s not hard to find people following the market news even if they usually don’t. Some individuals are ready to sell even at a loss even before another bad news trigger their decision to sell. They have read enough bad news especially when the media is giving coverage on the falling market everyday.

Stage 2 Excitement – As the sentiments gets worse, more sellers jump in to sell off their shares. The large crowds and the intense emotion attracted more dejected and worried shareholders. A negative excitement out of desperation.

Stage 3 Frustration – More bad news. Portfolio losses. The individual cannot understand how he could have incur so much of loses within a short span especially the investor whose investments are tie to sub-prime companies. The disappointment in financial products and financial markets guarantee the coming of mass selling and closure of investment portfolios. The ineffectiveness of capital injection will drive the market crazy.

Stage 4 Bloodbath in the market. Frantic selling at its height, worrying that the crisis may become unstoppable, investors start selling off their investments, they don’t care if they are losing money when they realised their portfolio, even though holding on could only mean paper loses and not actual loss - the hysterical sellers. They will sell at any price as long as there are buyers. Exit has no strategies; at this point it is totally useless to them, non-existent. 

Gone baby gone.

In Technical Analysis, this is called the Total Despair (what an unpleasant name but it sums up the sentiments in the market), confidence lost, gone case, “I am selling and I don't care if I am making loses”. You can't blame them, not everyone is financially literate, not everyone knows about paper lost, nobody cares if this is only temporary; they have to put food on the table.

The market cycle repeats itself again and again from bloom to doom vice versa caused by nothing but sentiments.

Singapore in a recession, technically

The recession creep is here, this sneaky fellow smuggling into Singapore to cause havocs.

The first ime in 6 years since 2002. 6 years only? Good times never last. It takes only 6 years to go from bloom to doom. 

Singapore is the first Asian country to fall into a recession since the crisis started. Japan is teetering on one, and New Zealand slid into a recession in the second quarter for the first time in more than a decade.

We have to be the first remember? First in everything including recession, there is no way we are going to let anyone beat us to it. And we got it now. We are the first in the race.

Financial crisis is like a public demonstration PART 1

I see some similarities between the two. The sentiments are equally worrying. The herd mentality is contagious.  

Some demonstrations are peaceful while some turned into violent.

The recent financial crisis (I hate this word) is the worst since the Great Depression. I wasn’t born yet so I don't know how bad it is. During an interview recently, Warren Buffett said that he has never seen anything like this in his entire life, I bet there are a lot of people even the most seasoned investors have never in their life experience anything like this.

The transition of emotions in public demonstration are similar to what we have seen in the stock market. I won’t name all of them but the more noticeable ones.

In a public demonstration:

• Stage 1 - Enthusiasm
  
• Stage 2 - Excitement 
  
• Stage 3 - Frustrations
  
• Stage 4 - Hysterical
  

Stage 1 Enthusiasm - News of an organized demonstration spread like fire. Enthusiasts or the dissents will join the demonstration (Some emotions already exist or arise in the individuals before they join protest groups; while others are formed or reinforced in collective action itself), starting from a handful of protestors at the beginning to a larger group. More people join in and a predictable flow of behaviour will follow. The group gets bigger. 

Stage 2 Excitement -As the group gets bigger without interference, voices became louder (oh...unity is strength), the large crowds and the intense emotion attracted eccentrics as well as mourners and the numbers grow. Grievances became a norm; the group is ready for a march anytime. 

As the group grows, commotion becomes louder and it will take a deaf man to ignore them.

Stage 3 Frustration or angst - whichever you like. Demonstration usually take a few hours or maybe a day or longer, look at the Taiwan's demonstration to oust the President out of his office, it took days and hundred thousands of protestors. As time goes by, the protestors suffer from fatigue, hunger and thirst and bad weather will have a dampening effect on the psychology of the protestors. The frustration escalates especially when the objective of the demonstration isn't achieved. 

Stage 4, this is the nightmare, not desirable but unavoidable, the group turns hysterical. There several reasons to this behaviour: Fatigue and provocation from anti -riot police or instigation from fellow protestors.  And the worst case scenario: Authorities ignored the agenda of the protest sending the wrong message to protestors.

The crowd starts to vent their anger, perhaps a little violent will cause the authority to rethink their decisions?  The demonstration turns violent, turns into a riot ......

a bloodbath

PART 2