Portfolio Update

Recent market rebound added 1.3% gains to portfolio. Now stood at 9.3% gains through Oct 13, 2011. At the peak of the market, my Turtle portfolio gain only 20%, so I am not upset about it. I estimated that I can pick up another 2 more points when market is having less bad news.

I guess I shocked many from time to time but this time would be a Richter 8 quake shocked. Some reacted more than others but I believe these are good people. Those care enough will voice out their opinions. Thank you for everyone concern. I have not lost my minds nor I have been capitulated.

I see a number of stocks got bashed down a lot more than the index got bashed down. I know I have sold many strong fundamental stocks. I am thankful for that because it is precisely they are strong I did not suffer much, not like 50-60% down from the peak.

I believe a lot of people regretted that they sold their stocks two weeks ago, when they saw the markets accelerated sharply right after the hair pin turn, the got panic and rushed back to buy crazily.

Bad macro news from time to time will flush out the weak holders. With plenty of cash now, I am going to focus on my next few steps. It is time to identify the most mis-priced stocks now. Don't get me wrong that I want to jump back to market now. All I am saying is our time now should be devoted to look at companies rather than macro pictures. Macro big picture is a done deal, it will continue to drift for a while.

Have a nice weekend.

Sold PIE and CIMBC25

KLCI 1444.87

Sold 1,000 shares of PIE @ 3.45
Sold 4,000 shares of CIMBX25 @ 0.83

Two more dogs to go.

50-50

Not going to talk about charts, big pictures and other stuffs today. I rarely use charts unless we have come to critical turning points. A time when it reaches all time high or all time lows. The higher a market goes, the sharper and the faster the market falls. A breakdown of a new low is something I pay attention because when people are giving up hope, they become unpredictable. Other than that, I leave them alone.

I was wondering if people ever consider risk and reward other than thinking of going for a quick flip. It's like going to Jenting casino. I'm going to do the last bet, if I win I will go home. Most people rarely stick to his/her promise and end up going home empty handed with sappy eyes.

I have a quiz question for today:



I assign the targets and probability arbitrary but I think they are right directionally. I cannot understand why people want to take a small pay off of 1-5% for 50-50% chance.

The pay-off is a better at higher targets but the odds are less than 50% in short term(1 year or less). Some may want to challenge me saying I assign low probabilities in the latter scenarios. I am sure many can agree with me that the economic conditions are going to be weaker, 3-6 months from today, why should we then assign higher probabilities for less favourable conditions?

I rather step aside when risk and reward situation is not compelling. Why risk our money for a small gain but with larger downside potential?

Very Susah

People say we should not read newspaper because people who read newspaper are whole bunch of depressive lots. So are reporters, professional or community are alike. I don't mean to depress you, certainly not in the morning. I also don't mean to run my bad news press, after all I have no short positions. However, running good news for the sake of good news is not a good policy.

More headwinds ahead of us.

1. Indonesia cuts interest raise is an act of acknowledging of slowing down. The rest of South East Asian countries are launching stimulus spending. I applaud their efforts. It is good to be proactive.

http://www.bloomberg.com/news/2011-10-11/indonesia-unexpectedly-lowers-interest-rate-to-bolster-economic-expansion.html

2. US is acting stupidly but hopefully in a more controlled manner. The senate passes a bill allowing them to raise import duties from China. Protectionism is bad for global trade. Childish act!

http://www.bloomberg.com/news/2011-10-11/u-s-senate-passes-bill-allowing-duties-to-offset-china-s-undervalued-yuan.html

3. Alcoa is missing the analysts' estimate. Not a big deal and nothing wrong with Alcoa, just the stupid analysts are being too optimistic.

http://www.marketwatch.com/story/alcoa-misses-a-low-target-2011-10-11?link=MW_story_investinginsight

I noticed local retail investors made up almost 30% of daily trading in the recent weeks. This number is high by historical standards.

Surprisingly

Surprisingly number of readerships surged right after I raised cash. I suspect the level of anxiety and excitement are very high among retail investors.

Surprisingly too the markets are zooming up Fast and Furiously. Changing my stance now will make me look like a clown.

It's a powerful counter rally is going on now. There are truly a number of contrarian indicators in favor of bulls.

(1) The capitulatation indicator done by BCA Research shown that they are pretty close to the past market bottoms but no where near to extreme events or extreme bearish market like '74.



(2) Equity dividend Yield is better than 10-year yield. I mentioned this anomality before.



However, despite of all the rallies here and there, the markets are still stuck in a range bound. London FTSE and German DAX to represent European markets are in ping pong bounce.





S&P has not reached the resistance level of the upper range bound. May be still has a bit more to go.



I need to see a breakout from the range bound to be convinced to participate in the short term. Or else we will be like a dog chasing its own tail, keep chasing the wrong direction. Bought at the resistance level and sold at the support level.

Links Update

Links housekeeping. Added An Undomesticated Blogspot to my links. I've bookmarked this blogspot sometime ago and reading it very frequently. Thought of just adding it to my links so that I can access to it more easily.

She writes every piece beautifully and thoughtfully. The English is superb. I like her writing styles. She writes like a novelist, poet, philosopher and Freud psychoanalyst.

Her writings will stimulate your minds to think a lot. About many things. She questioned a lot about the purpose of our existence. In school of philosophy, we called it existentialism. To understand more about this subject click on this link

http://en.wikipedia.org/wiki/Existentialism

She has another advantage, being a woman, she can express more openly compared to men. She will expose your irrationality, your fantasies, your dark secrets, etc. She can peel layer by layer of your defensiveness and travel deep inside your subconscious level. Understanding your subconscious minds will help you to deal with a lot of problems. A lot of times, many problems are solved by itself, by just surfacing the unconsciousness.

My track record of picking blogspot has been terrible. She thought of closing her blog many times but I hope her blog will be in business for a longtime.

Explain it again, one more time.

This blog was born around the beginning of 2008, after the market topped out. The market continued to slide down while I continued to stay bullish for a while but I turned bearish starting around Sept/Oct '08. At that point of time, the portfolio was young and I have not much to lose because the portfolio was small, only about $ 10,000 through October '08. The damage would not be great if I were to mis-read the market.

This time round, the portfolio stood at $ 44 k. If I were to get it wrong. If the markets were to drop another 15-20%, this portfolio can suffer losses of $ 8 - 9 k. It will make it more difficult for me to recover or improve my return.

The following chart show 2 obvious stages for bull run after bottomed out in March 2009. The first stage delivered almost 50% gain within 5-6 months before went sideways to make way for the second phase of bull run. The second stage delivered additional 30% gain but went sideways for most of the time. To win big, I must make sizable bets after the market has a huge decline. The window is quite small and that is why I am willing to forgo some technical rebounds and prefer cash instead.



There are a few developments concerned me. Hang Seng Index entered bear market around August 2011 and suffered about 30% decline when it topped out from 25,000 level. Usually the index can fall by another 20-30% after it entered bear market.



Our market usually lagged behind more risky markets about 2 - 3 months due to the perception of safe haven.

There are a lot of people argued that about the US market is just short of 1% to enter bear market and followed by key reversal day have caged the bears, for now. But I believe these bears will not give up easily. It's a matter of time they will revisit the previous low again.

Two. Huge breakdown in the copper market really concern me. It's a strong indication of China market is slowing down.



Three. The European sovereign debt issues have stolen the limelights. The worry of slowing down or possible of a recession was not discussed much by the media yet. Soon, instead of watching political theatrical plays in Opera London, people will buy a few tickets to watch Broadway shows in New York.

Four. I believe the authorities are running out of policies options to tackle anaemic growth problem. The emerging economies have to slow down so that it can reduce growth in exchange for friendlier commodities price. Falling commodities price will lend to slower inflation rate. Taming inflation will, then, only giving them some rooms to ease their interest rate.

Five. The big bears are not out there yet. When these big bears start to appear on TV regularly. When big bears running their bad news windmill at full speed. That will reinforce the downward spiral.

Six. Possible Malaysia GE may bring some cheers but it's a double edges sword. If they lose in next GE or deliver some nasty negative news post GE. The downside risk will be tremendous.

Seven. This is not a concern but I think the possibility of year end Santa rally will make people feel at ease, cheering the bull markets are here to stay. The bears are dead. The complacent market participants may get slaughtered later. Will Santa rally turns into a Trojan Horse troy?