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Long time no post

If you are a vivid follower of the stock market, the recent plunged of Shanghai stock market was due to deleveraging. It can just declined more than 20% in 2 weeks. The above chart looks scary to me. The margin is even higher than the tech bubble. It will be too late to run when the margin calls are here.

'Black Friday' sweeps over stock market

By Dai Tian (chinadaily.com.cn)Updated: 2015-06-26 16:34

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Investor at a securities brokerage in Huaibei city, East China's Anhui province, June 26, 2015. [Photo/IC]

Chinese stocks suffered a "Black Friday", with the ChiNext index, a Nasdaq-style board ofShenzhen-listed growth enterprises, plunging 8.9 percent as fears saw leveraged investorsjettison their holdings.

The benchmark Shanghai Composite Index dived 7.4 percent to 4,192.87 at the close, itssteepest fall in five months, while the Shenzhen Component Index slumped 8.2 percent to14,398.79.

"Signs of the market edging down have triggered panic among investors, many of whom areleveraged and forced to close their position," said Yang Delong, chief strategist at ChinaSouthern Asset Management.

Data showed pullback by leveraged trading as the outstanding balance of margin-debt at theShanghai Stock Exchange fell from a record high for a fourth day on Thursday to 1.42 trillionyuan ($229 billion).

"The market will remain volatile but likely to rebound if not in a short term," the strategist toldChina Daily, adding that it's too early to say the country's year-long bull market has peaked.

The market view diverged however as Morgan Stanley advised clients to refrain frominvesting in mainland shares in a report on Friday, saying the top for the cycle has beenreached.

Nearly 2,000 stocks tumbled by the daily limit of 10 percent on Friday, among whichtechnology shares and small companies led the rout.

"The decline is part of an automatic adjustment in response to the rapid surge earlier and isthe result of a market mechanism, amplified by liquidity fluctuation and deleveraging," saidZhang Xiaojun, a spokesman for the China Securities Regulatory Commission, at the weeklybriefing on Friday.

Despite the sharp correction, market liquidity is abundant and the economy has shownstronger signs of stable growth, he added.

The Shanghai gauge has surged nearly 30 percent since the beginning of this year and 124percent over the past year until Thursday.

"The deleveraging is healthier for the market after all," said Yang, adding that he recommendsblue-chips whose valuations are below the historical level and defensive sectors such asbeverage and insurance stocks.

The CSI 300 Index slumped 7.9 percent to close at 4,336.20 on Friday.

Cai Xiao contributed to this story.

When kings got dethroned.....

First, it was Bill Gross got dethroned as king of bonds and now we have Mark Mobious dethroned as king of emerging markets. Those basically believe in valuation practically got hammered and driven to the ground.


The End of Mark Mobius’s Reign as King of Emerging-Market Stocks

For a quarter of a century the name Mark Mobius has been synonymous with investing in developing markets. A bald, energetic, New York native who often dresses in white suits, Mobius is constantly tweeting and appearing on television from St. Petersburg to São Paulo encouraging investors to put money into fast-growing developing economies. A Mark Mobius comic book published in Asia in 2007 chronicled his globe-trotting exploits. (Really.) In the U.S. he was voted by his peers onto a list of the top 10 investors of the 20th century, putting him alongside Warren Buffett, Julian Robertson, and George Soros. What Bill Gross was to bonds, Mobius was to emerging markets: the King.
His reign may be coming to an end. Like Gross, Mobius, 78, has posted mediocre numbers in recent years and seen investors depart. While they still make money, 11 of the 13 largest funds that Mobius oversees at Franklin Templeton Investments have underperformed their benchmarks over the past five years. At his zenith in 2011, Mobius oversaw $39 billion. Today that figure is down to $26 billion. And in December, his flagship Asian Growth Fund lost its long-held position as the region’s largest to First State Investments’ Asia Pacific Leaders Fund. “He’s one of the few well-known managers in emerging markets,” says Todd Rosenbluth, director of mutual fund and ETF research at S&P Capital IQ. “Unfortunately, the track record is below average. Investors are more frustrated.”

http://www.bloomberg.com/news/articles/2015-05-06/mark-mobius-s-reign-as-king-of-emerging-market-stocks-nears-end-

There is only one kind of people that I know is making money now: traders and momentum traders.....If you don't belong to this special breed, be very careful. You can loose your shirt minus your pants....yes....pants(plural).

Random thoughts on the markets

Waiting for major market corrections requires a lot of stamina. But I know if I give in now, I would really an idiot. Why?

Look at this chart.

S & P 500 is valued @ 21x PE ratio. Except the extreme bubble or of the chart during 2009 crisis, it is certainly at top of the valuation range. The median is 15 x. I always believe in reversion to mean.

KLCI is selling for 17 PE ratio. Again it is above the long term valuation and also at the top of trading range. Corporate earnings have been dissapointing. 

My only market that I used to be bullish while the rest of the world keep saying China was about to implode due to property bubble, crashing economy and shadow banking. As time goes by, my convictions were proven right. China is heading towards managed landing. China stock market is getting very pricey, close to 20x PE.

What is really worrisome the stock market is fuel by high school drop out and "da ma".

I don't think I am looking for the end of the world scenario but we certainly need a deep 20-30% corrections before the bull run can continue.

Please note that the cheap money is here to stay forever, is an illusion. Look the US unemployment is approaching full employment. It's close to 2006/2007 level.

Yet the interest rate stays ZERO?

No, it will not stay for long, at least not what 10 year treasury traders think. It starts to trend up.

To those who still swimming out there, just be careful. Just like Warren Buffett said: "A bull market is like sex. It feels best just before it ends."

LKY......Thanks

It was strange that I feel sad for a man whom I never met. Have not really even really read one of his greatest trilogy writings. Have heard about younger generations of Singaporean ranting for wanting more freedoms. Certainly have seen a successful Singapore, feel safe walking any where you want and getting a lot things done very fast.

If you want to know how much respect you got is what your people say about you when you are no longer around. Even Dr. M has something nice to say about him, in a personal way, Kuan Yew and I

http://chedet.cc/?p=1620

What he has done inspired many third world countries to do the same. China was one of them. Deng Xiao Ping opened up China after a visit to Singapore. As a result of that, millions and millions of people were liberated from poverty. I am sure the world has also benefited from this multiplier effect.

The greatest criticism on him was authoritarian style. Many have also abused by saying a country can achieve what Singapore had achieved if they sacrifice some of their freedom. In a real world, it is not so simple.

I had a long walk this morning to think about this. My conclusion was, yes I don't mind to submit to a leader who is smart(1st class Cambridge graduate), a workaholics, 100% clean and like a candle that burning himself to light up the nation. That is why too, many tried the model, only a handful successful because some ingredients were missing. Thanks LKY.

Ringgit to USD Chart ...... pray it does not breakout @ MY 3.70 !

MYR closed at 3.64 against USD today. It's getting very close to 2009 level.

We may think that USD is universally getting stronger against a lot of currencies but look this. I do not want to show SGD here because we always have something to say that they are a well managed country. Let's compare to Thailand.....Geez......holidaying in Thailand seems to get much more expensive.

I don't think Ringgit depreciation is driven by poor sentiments or uncertainty caused by 1MDB alone. First almost default on RM 2 billion loand and now rumors are swirling of RM 3 billion cash injection needed.

http://www.themalaysianinsider.com/business/article/ringgit-under-pressure-over-1mdb-debt

Something is wrong!

But at the same time, things seem to be quite calm in the bond markets.

Our 10 year yield is still quite stable and I do hope things will be under control. The movement so far has been in locked steps with US 10 year bond yield though there were some spikes that quickly brought back under control.

http://www.tradingeconomics.com/malaysia/government-bond-yield

The divergent is building up. It's really time to be vigilant.

Spring Cleaning.........Welcoming Goat Year

Aha.........the good news is I have finally done spring cleaning my house. When I was young, I remembered we all would gathered at grandma house turning her house upside down to make it sparkling clean. We would repaired leaked roof and repainted the gate. Then welcomed a new year.

During those days, it were really special occasions that we get to eat chicken and receiving red packets. 

During those days, red packets were more symbolic gesture of love than money.

The situation is quite different nowadays - the tradition is either disappeared fast or hard laborers of love replaced by maids......sigh.......The situation has also changed due to much smaller family size. In my case, I ended up doing most of the works(without maids).

I finally reached the last and my favorite place today -- my store....it's a place that we tend to throwing in our stuffs or keeping our stuffs promise to deal with it. It's kind of writing IOU. Unfortunately we usually default on our IOU - don't make good on our promises. I finally resolute to make good of my spring cleaning. 

I found there were many things that obsoleted, I mean technologically....So I finally made up my minds to get rid of the ADSL modems  as we had transitioned to Unifi. I found copies and copies of old annual reports and also warranty cards that more than 5 years old. Sorry, those were also finally ended up in a big rubbish bag.

I also had something I really wanted to keep such as this old mobile phone which is more than  17 years old.....Not too sure it will worth a lot of money if I keep it for another 17 years old.

I also have a prized 17" Macbook Pro that was 12 years old. The screen was not in working conditions but it was still one of those stuffs that I wish keep.

Fortunately for me this year, when come to investment portfolio, I don't have to work very hard. It looks pretty clean because most of them are in cash or really long term investment that I don't intend to sell even during the next bear markets.  Despite of high cash position, I still have no intention to re-balance it by moving some of cash to equities or other assets. It is not so fun though seeing strong markets rebound from sharply oversold markets in December 2014. I keep reminding myself everyday that it is better to have lower return from risk free investment than making a negative return by making wrong moves at the wrong time. 

Wishing everyone a happy Chinese New Year. May the year of goat brings lots of good lucks, good health and good fortunes.