Tuesday, June 28, 2011

US Fed Prints More Money....

Read This : Fed May Buy $300 Billion in Treasuries After QE2

If you ever catch a Jim Rogers interview on TV, more often than not you will hear him say, "All they know how to do is print more money".  Then he goes on to talk about the virtues of investing in gold, commodities and farms.

In an earlier posting, I explained how the US Fed prints money. It creates money (out of nothing) to buy US treasuries from the US banks. What has all this printing done to the US dollar? I had a business contract in which I was getting paid in US$. The contract was signed 6 years ago and as the progressive payments come in the US$ drops from S$1.66 to S$1.23. This money printing serves several purposes. First it caises the US$ to drop and this makes US companies competitive. Second it reduces the US govt debt - debt that it has difficulty servicing and conspiracy theorists believes the Fed needs to do this because the US is no longer able to service its debt.. Third it keeps the interest rate low and that helps to stimulate the US economy preventing it from slipping into recession.

The problem is such massive printing of money causes inflation. Inflation so far looks tame only because the US economy is very weak - even so we see oil prices trading above $100 per barrel a few months ago before the recent falls. Commodity and food prices have also gone up. The MAS (under Tharman) tried to keep inflation out of Singapore by allowing the S$ to appreciate against the US$. There is a limit to doing this and stock investors know too well - the strong S$ has caused our exporters' margins to decline sharply in the last quarter so we cannot keep the S$ rising against the US$.

The options for central bankers around the world are quite limited right now. They have used up all their bullets to tackle the financial crisis and the Great Recession that followed that crisis. Right now they are just kicking various cans down the road - both the EU and US are doing just that. The financial markets appear to be temporarily rescued from a Greek default and each time they do it the escape becomes narrower and disaster seems to get closer. It is just a matter of time before we face another crisis when it is no longer possible to delay the inevitable.  While the latest QE (QE3?) might reignite the stock market and commodities market ....so far that has been only what each round of QE has been able to accomplish - the US economy has been pretty anaemic after 2 rounds of QE. While some argue that the economy will be in worse shape if not for the stimulus packages, low interest rates and 2 rounds of QE, the current slowdown just shows how bad the situation is....the best they can do is to just keep it going until something happens....

Monday, June 27, 2011

Badly needed CPF Reforms ....

Recently the govt announced another increase of CPF minimum sum(MS) to $131,000. from $123K For many who are unfamiliar, this sum seems somewhat astonishing and arbitrary but the rules and rationale for the minimum sum was laid out during Goh Chok Tong's time as PM in 2003. The goal was to raise minimum sum to $120K of  2003 dollars i.e. adjusted for inflation.

Only if you have more than the minimum sum when you reach  age 55 you can take out the excess. Otherwise you have with until age 65 to start the monthly drawdown. The principles applied in the minimum sum legislation is very simple - the goal is to minimise the govt financial responsibility and push as much responsibility of retirement to individuals themselves. If individuals still can't take care of themselves, the govt backup is the Maintenance of Parents Act which forces children to take care of their parents. The minimum sum scheme effectively pushes retirement to 65 for many Singaporeans and a large segment will never retire because they cannot build up enough funds to do so. We are not talking about a 1st world quality of retirement for Singaporeans but maintaining basic subsistence ....even this is a problem for a large segment of people given less than half the people  can meet the minimum sum[Link].

Singaporeans have the 2nd highest savings rate in the world  of about 20% (China took over us as the highest) due to the CPF yet do not have enough to retire. What has gone wrong?

1. Use of CPF for housing. The liberalisation of CPF for housing is believed to have caused the rise in housing prices in the 90s[Link]. Through land sales, the Singapore govt has been able buid up reserves which are now one of the biggest in the world due to higher property prices.

2. Low fixed returns on CPF Funds. Every single major pension fund in the world invest to get good returns for the account holders to ensure that they obtain an real return on the account. This done for, say, the Malaysia EPF which consistent beats our return on CPF funds relative to inflation(see article below). The long term implication of low returns is Singaporeans have to set much higher proportion of their income for retirement than in schemes where pension funds are properly invested to achieve higher above inflation returns. In a parliamentary sitting, Minister Hen revealed that CPF funds are loaned to the GIC  which invests it and keep the excess returns. This again trades off Singaporeans' ability to retire for building state reserves.

3. High income gap. The very large income gap in Singapore makes it hard to uphold the principle that everyone should be responsible for his own retirement. A  large segment of the population will never be able to retire because of low income. The lack of a scheme to take care of the old has led to many working at a very advanced age. Many Singaporeans find this inhumane, unconscionable and unjust as we see elderly workers from a generation that was considered the number one workforce in the world still doing menial jobs to make ends meet. There is no money to help them but there is cash for voters during election period \and money to fund all sorts of estate upgrading including an artificial river in Bishan if people cast their votes to support the PAP.

CPF has to be reformed to give our retirement funds a higher return above inflation. There is also need for a scheme that will  take care of  a large number low income workers who will never be able to save enough for retirement- these can be done if the PAP govt can overcome its ideological contrants to do the right thing. The link between CPF and property unfortnately is not so easy to unentangle. Too many Singaporeans have invested too much of the CPF in property and are vulnerable to long term decline in this asset class. There are schemes now such as the lease-buybacks which monetise the homes of the poor who don't have enough to live on when they retire - designed to take back the homes from the low income folks when they die leaving nothing for their next-of-kin who are also likely to be  poor.
EPF's investment income best ever at

PETALING JAYA: The Employees Provident Fund
(EPF) returned its best performance to date to post a gross investment income of
RM24.06bil in its financial year ended Dec 31, 2010 reflecting a 39.8%
year-on-year growth amid the impressive recovery of the Malaysian economy from
the 2009 global economic recession,

The growth had also led EPF to
declare a dividend rate of 5.8% for 2010, up 15 basis points compared with the
previous year.

The EPF also recorded its highest ever dividend payout
amount of RM21.61bil, an increase of 11.55% over the 2009 dividend payout of

“Financially, we leveraged on the recovery in the markets to
garner our highest gross income to date, while operationally, we further built
upon the strong foundations laid to enhance operational efficiencies, deliver on
key performance targets and elevate the customer service experience,” said EPF
chairman Tan Sri Samsudin Osman in a statement yesterday.

The EPF's
Annual Report 2010 was tabled in Parliament yesterday.

The retirement
fund maintained its prudent strategy and devoted the majority of its investments
in 2010 to fixed income assets with 32.38% invested in loans and bonds, 26.9% in
Malaysia Government Securities and 5.45% in money market instruments.

Equities emerged as the single-largest asset class comprising about one
third or 34.85% of total assets, while 0.42% was invested in properties.

The year also saw the EPF total investment assets crossing the RM400bil
mark to stand at RM440.52bil as at Dec 31, 2010.

Monday, June 20, 2011

Rethinking Education....the Great Equaliser...

 I want to show you a clip from a documentary called "Waiting for Superman".

You can watch the full documentary here  on YouTube : Link

On the surface, the American education system is nothing like ours. By many measures, their public school system is a omplete failure relative to that of other developed countries. However, because there are so many problems there, there is plenty of research work done on the system to figure what went wrong. 20 years ago it was widely believed that low income children failed to get to college because of their poor family background and less educated parents. This belief led to under-investment in neighborhoods schools and a decline in the quality of education for the lower income groups.  The lastest research completely dispels this common belief and shows that if children from lowest income families are put in a good education system from an early age, their chance of going to and succeeding in college is as good as children from high income families.  The evidence is overwhelming as 'charter schools' like Kipp Academy scale up and spread its success throughout America.

There is one hard truth that we must not believe...and if we believe will doom us to make the same mistakes as the Americans and allow the gap in their society to spread into the education system:

"People get educated, the bright ones rise, they marry equally well-educated spouses. The result is their children are smarter than those who are gardeners. Not that all the children of gardeners are duds. Occasionally 2 grey horses produce a white horse but very few . If you have 2 white horses, the chances are you breed white horses. It's seldom spoken publicly because those who are NOT white horses say, "You're degrading me". But its a fact of life. You get a good mare, you don't want a dud stallion to breed with your good mare. You get a poor foal.

Your mental capacity and your EQ and the rest of you, 70 to 80% is genetic. "

- MM Lee, Hard Truths interview.

If the children of rich successful parents are inherently smart and have success inbuilt in them, why do rich smart families try get to their children into the best primary schools by buying property within 1 km of these schools. They know the importance of going into a good school and high quality early education. It  was reported recently that some of our rich spend close to $20K-$30K  a year on pre-school while poor parents don't send their children for pre-school  or make do with $10 pre-school:
300 children from lower-income families get a feel of Primary One

by Kavitha Karum 05:55 AM Dec 18, 2010

Three hundred children, some of whom have never attended pre-school, graduated on Friday from a four-week course to help them prepare for Primary One next year.

The graduation ceremony for the K2-One Bridging Programme was held at Bottle Tree Park in Yishun.

Pre-school is not compulsory in Singapore, and some children, especially from lower-income families, may not get to enjoy this benefit.

Singapore's four community self-help groups have been jointly organising the programme since 2006 to help these children improve literacy, numeracy and social skills and also adjust to formal schooling. The course fee is $10. KAVITHA KARUM

The latest evidence shows that if there is any academic achievement gap between the children low and high income groups is due mainly to the difference in quality of education system especially early pre-school education. In Singapore, as the income gap grows, the difference in quality of education between children also widens to entrench the gap in our society. Until today, the PAP govt refuses to give more aid to poor parents to ensure that their children have more equal start and access to high quality pre-school education. These policy decisions are likely to have their roots in MM Lee's flawed elitist belief on genetics which is against the best evidence we have today. This elitist belief contributes to Singapore's widening social gap which is the highest in the developed world.

Sunday, June 19, 2011

Lessons from The Greek Tragedy

I've been catching up on my reading these few days. There is a backlog of books I wanted to read but haven't found the time until last week. I'm also watching what is happening in Greece very closely - there are many lessons here to be learned. Greece's problem is not difficult to understand. Greece has a population of 11 million, a GDP of US$329B and owes US$500B. Greece owes too much money and does not have the means to pay back. To put things into perspective - Thailand with a population 67M and GDP of $180B collapsed during the Asian crisis under a debt of US$100B. Thailand took 3 years to come back. For Greece we are looking at something like a decade or even longer.  How Greece got here is not difficult to understand:

"Initially currency devaluation helped finance the borrowing. After the introduction of the euro in Jan 2001, Greece was initially able to borrow due to the lower interest rates government bonds could command. The late-2000s financial crisis that began in 2007 had a particularly large effect on Greece. Two of the country's largest industries are tourism and shipping, and both were badly affected by the downturn with revenues falling 15% in 2009.[22]

To keep within the monetary union guidelines, the government of Greece has been found to have consistently and deliberately misreported the country's official economic statistics.[23][24] In the beginning of 2010, it was discovered that Greece had paid Goldman Sachs and other banks hundreds of millions of dollars in fees since 2001 for arranging transactions that hid the actual level of borrowing.[25] The purpose of these deals made by several subsequent Greek governments was to enable them to spend beyond their means, while hiding the actual deficit from the EU overseers."

[Source : http://en.wikipedia.org/wiki/European_sovereign_debt_crisis]

The Greek govt took on a lot of debt then hide it from EU with the help of investment banks like Goldman Sachs. When the financial crisis came, it couldn't service its debt.  Prior to the crisis, Greece was the fastest growing economy in Europe and proudly hosted the 2004 Olympic games.When things look good, nobody bothered to look under the hood and there were heaps of praises for the Greek govt and its fast economic growth. The lesson for us, Singaporeans, is never wait for things to happen then look for transparency - it is too late.  Transparency like sunlight is a natural disinfectant ...we have to be active citizens  - keep asking questions and demand greater transparency and accountability at all levels of govt. As Greece falls apart, the ordinary citizens are asked to swallow the bitter pill while the rich elites who benefitted most from the years of high economic growth simply moved their money and assets out of their country to avoid rising taxes[Link:Greek wealth finds a home in London ]. The Greeks had a bad tax collection system and the rich were able evade tax when the economy was doing well and they were most willing to pay. The lesson for us is keeping taxes low to attract the wealthy has little benefits for ordinary Singaporeans except the few in the wealth management business - when things go wrong, they will simply move money out and you will suffer a double whammy. For survibability in crisis is best for wealth to be more evenly distributed in society and proper progressive taxation to achieve that is best vs fixation with lowering taxes for the rich.

On 16 June 2011, when the Greek crisis threatened to erupt into a new global crisis as European leaders squabble over the rescue package, Under HDB's DBSS, Sim Lian launches the most expensive new public housing ever sold in Singapore - $880K for DBSS in Tampines[Link]. With an income ceiling of $10K, it means that these flats are priced at at least 88 times monthly income. If I'm not wrong, it translates to roughly using about half the income to service the debt over a 20 years period.  This is the best case since we are talking about people at the income ceiling so there will be people with even higher debt burdens. Whoever buys these flats assumes that things will be smooth economically for the coming decades - rather oblivious to the external environment. While the EU will likely put together another 'band-aid\ type rescue package for Greece to calm jittery markets in the next few days,  they are just kicking the can further down the road postponing a major crisis for another few months. There is also a small chance that the Greek govt collapses suddenly due to protests and infighting bringing forward this day of reckoning that will plunge the global economy to another crisis - one perhaps more serious and longer lasting than the 2008 financial crisis.

Friday, June 10, 2011

Legal and Moral Role of the President...

Yesterday, Jayakumar said he is both 'surprised and disappointed' by statements made by presidential hopefuls:

 "That is the clear legal position. So I think it is good that all Singaporeans, especially candidates, are very clear about what exactly the role of the President is. I say that because I do worry that otherwise there may be wrong expectations about the role of the President and we should avoid that."
- Jayakumar.

President Nathan said a few days ago when he answered to criticisms that he did not do much::

"There are voices saying that, but I can't answer them. I know the limitations of the Constitution and what you have to do. So I'm not there in a boxing match. Although I've been quiet, I've been doing work"[Link]

Lets be very clear. When the constitution was changed to have elected presidents, the laws were designed to limit the powers of the president to specific areas and roles. President Nathan kept strictly to that role and Jakakumar wants future presidents to play a limited role.

However, lets not forget that the president is the only leader in the country that is voted by all citizens eligible to vote. No other leader is elected in the same fashion in Singapore. When the candidates campaign, they will have to state their agenda and what they will do. Voters select the candidates based on their agenda. The president when selected will have a powerful mandate and moral authority. While it is true that the President cannot legally force the PAP govt to accept his recommendations e.g.  greater transparency for our reserves,  his recommendations will carry great weight and moral authority because he represents the people of Singapore who supported his agenda.

I will not support a presidential candidate who believes he cannot do much for the people of Singapore and campaign on an agenda that he will sitick narrowly to the legal role carved out for him in the law. This is a chance for Singaporeans to choose someone who can make a difference to our lives and bring more transparency to management of our reserves - Singaporeans have been asking for this for years and want a president who will do as much as he can to make this happen.
Statements by some hopefuls 'surprised and disappointed' Jayakumar

by S Ramesh

04:47 AM Jun 10, 2011

SINGAPORE - The statements made by some of the presidential candidate hopefuls on what they would do if elected "surprised and disappointed" him, said former Senior Minister S Jayakumar yesterday.

Speaking at the launch of his book, Prof Jayakumar, who was involved in the crafting of the Elected President laws when he was Law Minister in the '80s, did not name the individuals he was referring to.

"Some of their statements seem to imply that the President is a centre of power and to himself distinct from the government of the day and implies he has certain executive powers. That is not the case," he said.

Earlier, potential candidate Tan Kin Lian had said if elected, he would aim for a more conservative approach in investing Singapore's assets, and suggested publishing an annual report on Singapore's reserves.

Dr Tan Cheng Bock, also a potential contender, said that if elected, he would scrutinise the appointment of top leaders, and work with the government of the day to protect Singapore's reserves.

Yesterday, Prof Jayakumar said the President does have some discretionary custodial powers, mainly in the protection of reserves and key appointments, and some custodial powers in ISA detentions, CPIB investigations and Maintenance of Religious Harmony Act restraining orders.

But even in those few areas, the President has no power to initiate decisions or policy. He only has blocking powers. In all other areas, the President under the Constitution must act on the advice of the Cabinet.

Said Prof Jayakumar: "That is the clear legal position. So I think it is good that all Singaporeans, especially candidates, are very clear about what exactly the role of the President is. I say that because I do worry that otherwise there may be wrong expectations about the role of the President and we should avoid that." S RAMESH


Thursday, June 09, 2011

PM Cameron on UK's immigration woes...

This is a well balanced speech on UK's immigration problems. Cameron acknowledges the contributions of immigrants to UK but feels that the 'high' influx has strained its infrastructure and the social fabric of the country. This is now a very big issue in UK right now and the Cameron govt has to answer to angry citizens.

I couldn't help feeling amused halfway through the video:

"I'm also clear about something else. For too long immigration has been too high. Between 1997 and 2009, 2.2 million more people came to live in this country than went to live abroad. This is the largest influx of people that britain has ever had. It has placed real pressures on communities up and down our country. Not just pressure on schools, housing and healthcare - those have been serious- but social pressures too" - Cameron, 3:47 into the video.

Geee...as a Singaporean, the numbers PM Cameron mentioned seems very small for a relatively big country like UK...yet they are so alarmed by it.

I double check the figures he spoke about and found this article about immigration in BBC [Link] about UK's 'alarming' rate of immigration - about 145,000 a year. - that is causing much hue and oitcry among the British people.

"Between 2005 and 2009, Singapore's population surged by roughly 150,000 people a year to 5 million—among the fastest rates ever there—with 75% or more of the increase coming from foreigners. In-migration continued in 2009 despite expectations it would collapse because of the global recession." - WSJ article "Singapore's Expat Surge Fuels Economic Fears"[Link]

UK has a population size of 61 million people i.e. about 12 times the size of Singapore. That makes UK's per capita immigration rate one tenth that of Singapore's. UK land area is about 350 times that of Singapore. The British are protesting against a foreign influx that is miniscule compared with the rate in Singapore.  Indeed PM Cameron is very serious about tackling a issue that is one-tenth the magnitude that of Singapore.

Very often PAP leaders accuse ordinary Singaporeans of being small minded and intolerant of immigrants. This is not true. The PAP's policy on the foreign influx borders on the extreme and in any other country the govt would have been voted out had their govt imported foreigners at such a high rate. The PAP is riding on some goodwill from a distant past and unfair elections which favors the incumbent. It should take this borrowed time for a hard reflection of this issue. Lets get this very clear. Singaporeans are very open and tolerant people - most of us lived in a multiracial and multireligious society all our lives. We tolerated 10 times the per capita immigration rate in Britain for years before it became a big issue when it affected our lives adversely.  It is hurtful and insensitive when the PAP calls us small minded and says we are unable to integrate with foreigners. Many of us have friends and relatives who are foreigners. That was never the issue. The real issue is the extremely large numbers the PAP govt permitted into the country.

Wednesday, June 08, 2011

Gambling : Singapore to overtake Las Vegas this year...

Quite amazing I think. It was also reported that Singaporeans have become the No. 2 biggest gamblers in the world[Link] after the casinos were build. Remember that George Yeo was the Minister of Trade and Industry when the decision to build the casinos was raised in parliament.

"Mr Yeo, as then-Trade and Industry Minister, first broached the casino idea in Parliament during the Budget debate last year" - Straits Times, 15 April 2005[Link]

Regular readers of this blog know how strongly I oppose the casinos and the negative impact it has on  our society. If George Yeo runs for president, you should not forget his role in bringing the casinos to Singapore - putting money above the values of our society.
Associated Press

Singapore to take No. 2 gambling spot from Vegas
Associated Press, 06.07.11, 04:44 AM EDT

MACAU -- Gambling industry executives say Singapore is set to overtake Las Vegas to become the world's second-biggest casino market as early as this year.
Frank Fahrenkopf, president of the American Gaming Association, said Singapore raked in $5.1 billion in gaming revenue last year and could bring in up to $6.4 billion this year. The city-state opened its first two casinos last year.

Las Vegas earned $5.8 billion in casino revenue last year, but is a mature market with little potential for big growth.

Fahrenkopf made the prediction Tuesday at the start of a gambling industry conference in Macau.

He said "it's going to be an extremely good year here and in Macau," where annual revenue will grow 25 to 50 percent this year.

Sunday, June 05, 2011

The Presidential Election...

I was at the Bedok Library today. When you go past the library entrance, you will see a poster with our past presidents on it and a table with  a number of books on Singapore and a few books on our ex-presidents. I saw President Wee's book which I read a few years ago and a book on President Devan Nair.  If you look at our past presidents and their achievements, there are a few that stood out. President Wee was loved for being a people's president - someone who rose from a very humble background and was very approachable. President Devan Nair fought for workers as a leftist for years before he became president. The achievement that most Singaporeans remember well and probably appreciate the most is President Ong Teng Cheong fighting his ex-colleagues in the cabinet for greater transparency of the reserves. I have a confession to make here. In 1993, like many other Singaporeans, I voted against Ong Teng Cheong because I felt that having a former PAP minister check on a party he used to belong would be a real farce. I think he eventually proved all us wrong but he could not complete what he set out to do - to fight for greater transparency of our reserves....we don't even know how much it is yet we are accused of raiding it when we asked for more reasonably priced flats.

In 2008, when Lehman Brothers collapsed, thousands of Singaporeans saw their lifesavings wiped out due to financial products marketed by banks, I watched our elected leaders and MAS very closely for their reaction. I believe they would have walked away from this group of ordinary Singapore if possible and leave them to "swallow their losses" - the 1st act of the MAS was not to go and talk to these Singaporeans to find out how they can be helped but to have discussions with the banks. Our leaders said these investors went in "with their eyes open" and legally deserve no compensation. They forgot the impotance of  justice and fairness and the need to intervene to bring about a just outcome. Because our laws impose the mandatory death penalty for various crimes, it does not mean it is always right and just to put someone to death. The President holds the power to pardon death penalty cases and while our society debate whether we need to be more humane, we need an enlightened president who puts the spirit of justice above the letter of the law in such cases.

There is only one potential candidate who stood up for ordinary Singaporeans in the dark days of the Lehman collapse, only one candidate whom we can trust to continue and complete what President Ong tried to do to safeguard our reserves and fight for greater transparency and one candidate with the humility of President Wee that endeared him to ordinary Singaporeans.

I hope Tan Kin Lian runs. but I will respect him as much if he decides not to. It is a big persoanl decision because the post comes with a complete change in life, decorum and total loss of privacy. Also, Tan Kin Lian has shown he can contribute when the need arises without being president and the position comes with ceremonial duties that will take up a lot of time.

Friday, June 03, 2011

Asia Charts : Strategies for income and wealth?...

This article is meant for people with more than a passing interest in investments and the financial markets.

On 10 Jul 2009, I wrote an article called "The Simplest Investment Advice" [Link]and that is the only advice I would give when someone comes to me. If you have followed that advice and invested in stocks or property during the last recession, you would be sitting on pretty good returns. Once again that simple advice has proven itself effective....don't need to attend investment seminars, trading courses, etc. The reason this is the only advice I give is most people can follow it properly anything more complex tend to get misinterpreted.

I don't attend investment seminars or pay for investing courses because I believe they are often run by dubious characters out to make a quick buck. A few days ago I decided to make an exception when I saw the above advertisement. There are 2 reasons for the exception - the seminar is free and Leong Sze Hian's picture appeared on the ad did lend some credibility to the whole thing - I thought he was going to appear at the seminar so I can get to meet him in person.  He was in Siberia attending a conference and didn't appear at the seminar.

Let me tell you why I have an interest in this area. Many years ago when I started working, I wanted to figure out how to invest my money and I wasn't too busy with work so I thought I spend some of my spare time to figure out what kind of strategies would work, what kind of stocks to buy, how much I can lose in a bear market and how much I can make in a bull market...whether stocks move before or after a recession is over and so on. I had hunderds of questions to be answered, the Internet had not arrived in Singapore so how to I get the data to figure out the answers to all the questions?  I found a company that sold a stock charting software together stock price data, another that published the last 5 years of financial data on companies listed on Singapore and Malaysia exchanges and other publications that had past economic data.  I used this vast amount of data to answer the questions I had one by one. I found that there are events that occur consistently during business cycles, correlation between the economy and stock market that are reliable and discovered what commonplace  ideas that were misconceptions. For example, I found out that stock markets turn around long before the economy recovers usually after the worse point in the recession and if you invest when the recession is over or when the economy is back on its feet, you are buying at much higher prices.  Other questions include what are the best stocks to buy for the long term, what are the stocks you buy during the bull market.  I was a computer programmer at that time and found it quite easy to use the charting software to generate scripts that will give answers to numerous "what ifs" questions I had - e.g. what if you try to limit your loses selling your stock everytime it drops by 10% is it a good strategy? If you had a stock that went up 30%, should you buy more or sell?

One of the questions I tried to answer was what are the best stocks to buy from the start of a bull market right up to the peak if you want to make a "hell lot of money". I found out that there are quite a few stocks that would go up 300%, 400% or even 1,000% during a bull market. These stocks are generally divided into 2 categories growth stocks with fast earnings and speculative stocks - lets call them super-stocks. It is quite rare for well established blue chips to go up by more than 200% during a bull market. I took a look at the price movement of the super-stocks and found that you can pick them out at the initial part of the rally because they have price movements that are stronger relative to other stocks. However, you need to be able to exit these stocks properly because they can fall as fast as they rise. The movements of these super-stocks are non-random and they maintain their trend for extended periods counter to what one expects from EMH (Efficient Market Hypothesis) ...that was what I found. I will give a possible explanation for this later on.

Asia-Charts is a small company started by a group of "private traders" that teaches investors how to a trade stocks using a strategy built around the buying and selling of these "super-stocks". From what I gather from the preview, they use a "breakout" system for stock entry - enter the stock when it breaks out of a trading range and exit the stock when it falls below a trading range - this trading band is based a proprietary formula. They seem to have put together elements a workable strategy which includes entry and exit points and money management strategies. From the general principles ( you get the details only if you attend the course) in the preview seminar and the stock data I analysed,  the strategy is workable during bull markets and would have made moneyfor those using in past few market rallies, in other words, it is a positive expectation system....compared the strategies used by herd of investors who lose their shirt and pants at the stock market.  Together with this strategy the company also teaches short term trading based on pullbacks( I have no idea what it is or whether this works). The company has a separate course on forex and futures trading. The forex/futures trading strategy from the material I gathered from their office is likely based on a trend following system known as Turtle Trading System which also has some validity if you look academic research on the positive expectation of such system in the futures market.

I don't recommend anyone attend their course to learn something relatively simple, you have to make your own decision  here- the price looks quite steep to me although they are not more expensive than other trainers who teach totally useless stuff. The preview is conducted by the founder of the company Mr CK Ee, quite an  interesting chap who keeps it entertaining and educational. There is no hard sell but he does use an endless flow of  positive examples to show that the system works and numerous testimonies and results of past students.  The preview would be an eye opener for investors who invest using company fundamentals because it shows you how a simple technical approach can also generate high returns during bull markets. There are however a few caveats and words of caution. Any system that becomes popular also destroys the inefficiency in the market it is exploiting so if Asia Charts courses become very popular and they train tens of thousands of investors to use the same strategy, the system will become suboptimal as a large number of investors try to enter and get out using the same signal - this is a problem for "super-stocks" which are very often mid or small cap stocks. There is no guarantee that any system that has worked in the past will work in the future. The stock market also spends plenty of time going sideways during which it strategy cannot be applied or might generate wrong signals (commonly known as false breakouts). You also need to check the system yourself to have a good understand of its behavior for under various market conditions to understand how the system can possibly fail.

I enjoyed the Asia Charts preview a lot but was a little disppointed that Leong Sze Hain did not show up. I wanted very much to ask him whether he endorses the course personally and what he thinks of it. Given the price and various potential pitfalls, I'm quite surprised Leong Sze Hian allowed his picture to be used for the Asia Charts ad. There is a real risk that the system stop working as with many trading systems in the past and he will be linked to it which may not be 100% wise and that was why  I wanted to ask him personally what he thought about it.

For those who are interest in learning more about investment strategy and have more than a passing interest in stock investment, there is a relative low cost source of information and resource available on the Internet. It is maintained by AAII (American Association of Indvidual Investors) www,aaii.com. It monitors a wide range of investment strategies and how they have performed over the past few years. These include the CANSLIM strategy, Motley Fool stock criteria etc. Suppose you learn from somewhere that investing in stocks trading at discount to their book value is a good approach, you can check the AAII website to find out how such a strategy have performed in the last 5 years. Suppose someone tells you that investing in stocks with high dividend payout is a good strategy - check it out so you know what to expect. There are actually hundreds of successful strategies that will make you money but the bad news is there are thousands of ways to lose money! 

Wednesday, June 01, 2011

Shadrake starts jail term...

There are not too many countries these days that throw people in jail for writing books and I believe no other developed country does that anymore.

A few years ago, I saw a documentary that questioned the competence of lawyers assigned to suspects being charged for crimes punishable by the death penalty in Texas, USA. The documentary found that some of the govt lawyers assigned to suspects who were poor lost all their cases for past few years and questioned if it was right to assign such lawyers to suspects of crimes punishable by death. In the documentary, they also questioned the outcomes of a number of cases. It is legal to ask these questions about the judiciary in other countries.. I can't remember exact title of the documentary (perhaps someone can help me) but it was on one of  the major networks.

"I feel fine. I feel that Singapore has shamed itself again by jailing me,"
- Shadrake told AFP by telephone

Singapore has  the highest per-capita execution rates in the world. We should be to scrutinising our system and questioning it more than people of other countries....unfortunately it is illegal to do so....but we are expected to have full confidence in a system we cannot criticise.
Writer starts Singapore jail term

(AFP) – 2 hours ago

SINGAPORE — A 76-year-old writer who published a book denouncing judicial hangings in Singapore started a prison term on Wednesday for contempt.

Alan Shadrake, who wrote about the use of hanging to execute drug traffickers and murderers in the city-state, turned himself in at the High Court.

On Friday he lost his appeal against a six-week sentence, the toughest ever imposed in Singapore for contempt.

Shadrake could not afford to pay a Sg$20,000 ($16,200) fine on top of the prison term, resulting in another two weeks in jail, taking the term to eight weeks in total. He could be released earlier for good behaviour.

He was allowed to undergo a medical test before serving his sentence.

"I feel fine. I feel that Singapore has shamed itself again by jailing me," Shadrake told AFP by telephone.

"For Singapore not to allow this free expression, to jail someone for their opinions... it's bloody nonsense," added the author of "Once A Jolly Hangman: Singapore Justice in the Dock".

London-based Amnesty International denounced Shadrake's imprisonment and urged Singapore to release the author.

"Singapore has thrown Alan Shadrake in prison solely for exercising his basic right of free speech," Lance Lattig, Amnesty Southeast Asia researcher, said in a statement.

"The Singapore government should release Shadrake and scrap laws that criminalise peaceful criticism with imprisonment and crippling fines," he said.

Shadrake's book includes a profile of Darshan Singh, the former chief executioner at Singapore's Changi Prison who, according to the author, hanged around 1,000 men and women including foreigners from 1959 until he retired in 2006.

Shadrake's book features interviews with human rights activists, lawyers and former police officers, and alleges that some cases involving foreigners may have been influenced by diplomatic and trade considerations.

He was arrested by Singapore police in July last year while visiting the city to launch the first edition of his book, which was first published in neighbouring Malaysia.

Shadrake said previously that the second edition of his book was already on sale in Australia and was due to be launched in Britain on June 1.

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