The last 3 months have been a tough quarter for the global stock market. the month of April and May were losing months and June will probably be a losing month too. The concerns around the world were so great that the spotline fell on Doomsday economists again.  Dr Nouriel Roubini, also popularly known as Dr Doom,predicted that we will see a double dip reccession soon. The problem with Doomsday economists are that they are frequently wrong and always right because every other year will be a recession. Here is an example by Daryl Guppy, CEO at Guppytraders.com. Daryl Guppy is known for his Guppy Trading methods and is frequently interviewed by major media around the world. For those who are not familiar with the US Stock Market, the Dow is 26% higher since the time he predicted the “double-dip recession”.

Here is a Summary of the important events that happened in June:

-          Greece is towards another bailout as the parliament comes together to pass the Bill and the main opposition party of Greece is admant not to let the Bill pass. Huge strikes and protest around the country crippled major transportation services in the country. The Eurozone and IMF have prepared the bailout package and what is left is the political will of the country. This is the main factor bothering the global economy and stock market at the moment.

-          Data in US continues to point towards a slow down in the pace of growth in US. Unemployment remains stubbornly high while major corporations in the country are holding record amount of cash reserve and are not employing them to increase hiring.

-          China leading indicators are slowing and China leaders are hailing their success in directing the country towards a soft landing. The Chinese and Hong Kong stock indices rallied greatly on the news that tightening in China is going to end at last

-          Japan economic indicators are showing data that the country is recovering quickly from the greatest disaster the country has ever faced. The stock market rallied on the news.

-          Oil prices fell to $90. The OPEC countries resisted the call by developed countries to increase their production in order to depress the price of oil. This is to ensure that the global economy is not further derailed by an oil shock. In retailation, the US Strategic Petroleum Reserve release oil from their reserve and oil prices tumbled. The impact is expected to last only in the immediate short term.

Are We Going Into The Pits?

Are we heading for another big dip? That is the question on everybody mind right now. The world seems to be in a fragile state. US growth is slowing, Eurozone having problem with debt crisis, China’s economy is slowing down and Japan is still trying to recover from the Triple Disaster. Any additional crisis may tip the global economy into a double dip recession. I wouldn’t say that will not come to pass but I strongly believe that the record amount of stimulants thrown into the global economy since the Great Recession will slowly bear fruits. The Greece government have passed the bailout bill and the fresh money is expected to last till Sept. Meanwhile, the global stock market has rallied stronly on the news that the crisis is over, for now. I believe that the market will have a major rally that will last till Aug at least and the long wait for a significant rally is over. We should see some decent recents at last!

The Convergence of The Market

3 months ago, I wrote about the underperformance of the Asian market and why the US, Euro and Asia will converge at one point in time, and therefore, any new investment should go to Asia and not to the other parts of the world. Here is a chart of the 3 major index in the world and their relative position to each other. The Green is MSCI Europe, Blue is US S&P500 and the Green is MSCI Asia Ex Japan.

Clearly from the chart, you can tell that the 3 lines have converge and shld we have invested in US and Europe, the damage will be in much greater magnitude than investing in Asia. Another thing we can learn from the chart is that the global stock market has been trending downwards since March and therefore, giving miserable returns. Things just got better in the last 3 days and let’s hope things are smooth from here.

Fund Performance and Strategy

The portfolio lost less than the average index due to the concentration of funds in Asia and Emerging market. Resource are hit hard due to the fall in oil prices. I believe that the fall is temporary and any sign of recovery in the world will push commodities prices up again. Long term prospect of commodities is still bullish. Indonesia again outperformed the rest of the country and is still my favorite country to invest in at this moment in time. US and European funds are at the bottom of the heap and China has not done well last month. However given the current situation in China, I believe that it will do much better for the month of July. There is no change of strategy with most of the allocation in Emerging markets, Asia and resource. I do not see any need for any switch now as I believet that this allocation should be optimal at this point of time.

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 The month of March is interesting indeed. We have quite a number of events that as investors, we have to analysis the impact. On the other hand, the rest of the world is doing well and humming along quite nicely. Here are some of the impt events of March 2011.

 Japan Earthquake, Tsunami and Nuclear disaster lead to a big correction in global markets as the world fears that the 3^rd largest economy in the world will spiral into a recession due to the strain placed by the triple disasters. The world markets have mostly recovered since than.

• UN stepped in to take military action to aid the Libiya citizens on grounds of humanitarian aid and preventing the military from killing innocent civiliance. Analyst predict that the conflict will end much faster due to the pressure on the ruling government
• US financial situation continues to improve with unemployment seeing signs of falling. US corporate profits are expected to improve significantly in the first quarter.
• Oil and Gold prices hit a record high as unrest in middle east and multiple natural disasters lead to a shortage of supply of food and resources.
• SGD has appreciated significantly against USD off setting the gains in commodities prices.

 Good news here. Asia markets have performed significantly better for the past months and is catching up with the US indices in terms of gains. From a technical analysis point of view, many markets are breaking out from their sideways movement and is trending upwards again. STI is expected to regain 3200 soon. March is also a good month for SEA as it outperformed the rest of the other sectors and country. China is starting to perform now that the urgency of tightening their market gets less and less everyday. Best performing market for the month is Korea and the worse, as expected is disaster hit Japan.

The Japan market lost up to 14% today and recovered to a loss of 10.5% by the close of the market. The collateral damage to Asian economy is less than I expected with resource intensive SEA holding up well as compared to our more developed northern neighbours. Our current portfolio consisting  of emerging markets with a big chunk of it in SEA and China should have weather this crisis quite well. 

For clients who are asking me if it’s a good time to get into Japan now, I listed a couple of concerns: 

1. I am not a major fan of Japan stocks in the first place as I believe the country is heading for an economic stagnation due to low birth rate and an exclusive culture that does not encourage entrepreneurship and immigration. Coupled with a sluggish government who prefers status quo than to make changes, potential growth of the country is stifled.
    
2. The total risk is still unknown as the market can still plunge by another 10% if there is a nuclear meltdown. Even though the areas affected are not as essential as the industrial and financial heartlands of the Kansai and Kantou area (Osaka, Kyoto, Nagoya and Tokyo), any nuclear meltdown with unknown an area of effect damage  may lead to more serious impact on the industrial capacity of Japan.
    
3. Yen is artificially high as funds flow back to Japan and will drop sharply when the situation recovers. Any gains in stocks will be wiped out by the currency losses and most likely the risk that an investor has to undertake and the potential profit may not worth the trouble.
    
4. If the incident is similar to the US 911 crisis when the market dropped sharply and recover within 2 weeks. Switching of funds, which will take t+5 days and another day to buy (7 working days), may put us in a situation when the price may not be as favourable as what we wanted.
    
5. Personally, if I wish to take advantage of this situation, I will prefer to invest in countries which will help and profit from Japan’s recovery. Resource rich countries like Indonesia, Thailand, Australia and Russia. They need certain resources from these countries. Coal, timber and food from SEA to meet the sudden shortfall of agricultural and energy needs from Japan’s local economy. The downside risk is a lot lower compared to a direct exposure to the Japan economy and the upside potential can be just as good.  

In short, I would say that the Japan Tsunami crisis can be an extremely good buying opportunity but the question is where and when to buy. So for those who are more adventurous seeking a higher risk/reward ratio, they can consider taking a blindfolded plunge into the Japan market. For more conservative investors who is more interested in protecting the capital while capitalizing on any good recovery profit, sticking to my current strategy should do the trick!

There are many fears that the recent Japan Tsunami Crisis will have an immerse impact on the world financial markets, especially Asia. I have pushed the emergency update till Monday when the markets are open so as to give a better assessment of the impact.

In short, there will be a knee jerk emotional sell off in the short term while the long term growth of the global economy will not be affected. Here are some important facts to be considered:

1. The portfolio I constructed has no exposure to Japan. Any impact will be indirect. Based on the impact of the 2004 Indonesia Tsunami Crisis, the regional stock market recovery will be rapid. May be a buying opportunity.
2. The Japan Nikkei stock index has dropped 4.5% as of now and is expected to fall up to 10% as industrial production is partially affected due to temporary electricity and water outage. The Tsunami has hit mainly non essential industrial areas.
3. Oil prices experienced a sharp drop as the expected fall in oil consumption in the 3^rd largest economy in the world will fall due to the crisis. On the other hand, materials and raw resources stocks are expected to do well as Japan will need resources to rebuild the economy. In my opinion, both effects will offset the sentiments of the resources market and will not have a big impact in the longer run.
4. Japanese Yen has a sharp rise as hot money is pulled back to the country for any emergency use. This will impact the Japan economy than the rest of the Asia. Asia resource producing countries will do well as they will sell rebuilding resource at a better currency exchange. 

I do not see a need for any change in the current strategy. Buying into Japan as a form of short term strategy may sound good but reality, the returns will not be fantastic given currency exchange risk as yen will fall sharply as the economy recovers, offsetting the potential gain in the stock market. I will continue to monitor the situation and update you if the needs arises.

Below is an update of the performance of the funds I recommended so far (sorted in order of 1 month performance)

As expected, First State Global resources and United Gold fund are the best performers due to Gold!! Glorious gold! On the other hand, the highly anticipated BRIC fund delivers the lowest return with a measly 2% over the last 1 month. Once again, this is due to stagnant performance of our dear China.

Even the more diversified Aberdeen Pacific Equity Fund perform better than BRIC fund which is the largest emerging market. This is because Aberdeen has a larger allocation into South East Asia including Singapore, Thailand and Indonesia which are the better performers.  

And speaking of Indonesia, I am starting to move funds into it due to…

Why Invest into Indonesia

1)      Largest Commodities Mining Country is SEA

The abundance of Indonesia’s natural resources is evident in all sectors, particularly land resources, mines & minerals, agriculture/plantation, marine & fishery, forestry, and natural scenery. With increasing population around the world, food demand will increase and Indonesia will profit from it.

2)      Huge Domestic Demand

With a total population of 210 million, which was just reached in the early 1997, and a fast-growing middle class (totaling around 35 millions), Indonesia is indeed a huge, potential market. As the people welfare improved, demands for goods and services do not merely rely on quantity, but quality, variability, and on-time availability.     

3)      Stable Political Situation

We don’t see riots or any red shirt protests in Indonesia. With stable politics, more external parties are willing to invest inside the country.

4)      Increasing FDI (Foreign Direct Investment)

http://www.reuters.com/article/idUSJAK11838320100803 China has reported to invest $25 billion into Indonesia.

5)      Stronger Economic Base

Indonesia is undergoing a transformation from agricultural-base economy to an industrial-base economy. Manufacturing industry has become the backbone of Indonesia’s export drive. Changes in composition of GDP by sectors during the 1980s and 1990s showed that such situation is true. Ever-increasing volume and value of industrial products have made the national economy not depended merely on oil & gas exports. Since mid-1980s, non-oil & gas export revenues have been jumping up beyond the oil & gas exports; and during the last-few year oil & gas export revenues constitute even less than a quarter of the total export income.

            However, investing into a pure Indonesia fund is not for the faint hearted due to its high volatility. I will recommend Legg Mason SEA fund to get exposure into other counties instead.

Action Plan:

If you are a pure BRIC investor and running out of patience on China,

I am recommending a switch to Aberdeen Pacific Equity fund.

If you wish to wait for BRIC to breakout and have extra funds to spare,  

I am recommending to stay invested with BRIC and start investing into Pacific Equity.

If you share my optimism on Indonesia, we can start allocating a portion into SEA fund.

Thank you.

            However, most people spend all they earn, and they end up with almost nothing after 40 years. That is why the Government is making every Singaporean start a forced saving account through their CPF. Unfortunately, CPF has been depleted greatly by many Singaporeans to buy house, pay for their kids’ education. Therefore, depending on CPF savings is no longer sufficient.

            But if you can save $300 (10% * $3k) of your monthly income and invest them into a managed portfolio that can earn you a 10% return a year, you will have accumulated a total of $1.59 million! This is the power of compounding! By just saving 10% of your income and growing them at 10% per year, you will be a millionaire when you retire! And by taking this $1.59 million and buying an annuity that pays 5% p.a, you will receive approx $6.6k per month for the rest of your life!

Start Now!

          Many people procrastinate when it comes into saving and give the excuse that “I will save when I earn more.” However, I found out that if a person can’t save 10 cents out of a dollar, he will not be able to save $100k out of a million. Therefore, I urge you to start small and allocate a fixed percent of your income to savings and investment every month.

            Your wealth is not determined by how much money you made but rather, by how smart and prudent you are managing your money. By starting a consistent and disciplined way of investing, with time and compound interest as your ally, you would have a substantial nest egg years down the road.

            Every day you delay will cost you hundreds of dollars of future money. Here is a calculation to prove the statement.

            If you were to save $300 a month for 40 years at a 10% return, you will have accumulated a total of $1.59 million at the end.

            But if you procrastinate and start 1 year later (39 years), you will have accumulated a total of $1.44 million at the end. That is a loss of 148k!

Meaning to say…

Every year you delay = Loss of $148k

Every month you delay = Loss of $12k

Every day you delay = Loss of $400!

Ouch! Start saving and investing now…

Well, I have been sourcing the websites and reading reports for an answer.

In March 2009, global stock markets hit their bottoms after enduring one of the greatest depression of all times in mankind. 13 months later, in US market are up 69%, Chinese markets are up 81% and Singapore markets have rallied a whopping 100%. Those investors who followed my advice to enter in early 2009 should be sitting on spectacular returns now.

Now, the question I get oftenly is “is the economic recovery sustainable? Will the market continue to go up? Is this the start of the next bull run or is it a short-lived bear rally?”

To answer those questions, lets take a look at what the bulls and bears are saying in the market.

What the Bulls say?

1)      We are still under the historical peaks

Studies have shown that most stock markets always move higher and higher in the long-run. They are driven by population growth, globalization, technological breakthrough and inflation. These factors are indeed set to continue.

Every crash, no matter how severe, always leads to a new boom, just like the bull run after March lows last year. Therefore, the bulls say that stock markets will eventually climb back to their pre-crisis levels and beyond. That is another 27% upside to the Dow Jones to their 14,000 points high and an upside of 29% to the STI index to the 3800 highs. The Hang Seng index still has around 50% upside to go.

In short, the bulls say that if you have missed out the start of the recovery rally last year, you still have a great profit opportunity if you start investing now.

2)      Fair Stock Markets Valuation

Many analysts are saying that market valuations today are still fair compared to the peaks years ago. There are still quite an amount of profit to be made.

3)      Accelerating Economic Growth

Increasing growth, corporate profits, industry production are signs of a recovery. US GDP grow 5.7% in the fourth quarter, while China increased 10.7%.

4)      Low interest Rates

In 1991, the US Federal Reserve cut the interest rate down to a shocking low of 3% to stimulate growth. And it is one of the key factors that ignite the bull market to 2000. Now, interest rates are close to 0.5%.

5)      Huge Government Stimulus

In 1991, the US government pumped in more than $150 billion into the financial system to stimulate growth and it spiraled off to one of the best performing decade in history.

In comparison, the global stimulus from US and China stood at more than $10 trillion today!

What the Bears Say?

1)      Artificial Recovery

Many bears say that the recent recovery is a result of the massive stimulus spending by the governments. Once it is removed, the economy will stagnate and even contract.

2)      High Unemployment

Unemployment rates in US and Europe remain high. As a result, it leads to weak consumer spending and this could derail the economy.

3)      Interest Rates will increase

With interest rates near zero today, the only way to control inflation is to raise interest rates. And when it happens, it will hamper economic growth.

4)      Unsustainable Debt Levels

US debt has shot past $13 trillion. Japan ‘s debt level is already above 100% of their GDP growth and we have the ongoing Greece crisis. If they default on their debts and went out of control, another crisis will be inevitable.

So What is the Conclusion?

            It is impossible to predict the future with 100% accuracy. Many things can happen that can lead to unexpected results. However, the good news is that successful investing has got nothing to do with your ability to make predictions.

            Legendary investor, Warren Buffett, once said that, “I have no idea where the market is going. I never have. It is something I don’t think about at all. But I prefer it to go down, as I can find better deals then.” See his video at

And since there is a correction now, it is good news for many of us! For clients who have not start investing, now is an golden opportunity to start. However, I do not encourage lump sum investment as the market is unpredictable. Use dollar cost averaging (a disciplined way of investing every month) to ride out the volatility. For clients using this method currently, continue with it or even increase it to take advantage of this opportunity.

I remain positive on gold, commodities, due to expected inflation and emerging market due to their explosive growth.

            However, as I have mentioned before, I do not believe in buying and hold long time. Proper asset allocation and portfolio rebalancing remains a key to succeed in investment. 

I think this update should come in a timely fashion. The market is in a sharp decline, and many investors are worried whether we are facing a double dip recession. On the other hand, some investors are asking whether this is a healthy correction.

Well, I have been sourcing the websites and reading reports for an answer.

In March 2009, global stock markets hit their bottoms after enduring one of the greatest depression of all times in mankind. 13 months later, in US market are up 69%, Chinese markets are up 81% and Singapore markets have rallied a whopping 100%. Those investors who followed my advice to enter in early 2009 should be sitting on spectacular returns now.

Now, the question I get oftenly is “is the economic recovery sustainable? Will the market continue to go up? Is this the start of the next bull run or is it a short-lived bear rally?”

To answer those questions, lets take a look at what the bulls and bears are saying in the market.

What the Bulls say?

1)      We are still under the historical peaks

Studies have shown that most stock markets always move higher and higher in the long-run. They are driven by population growth, globalization, technological breakthrough and inflation. These factors are indeed set to continue.

Every crash, no matter how severe, always leads to a new boom, just like the bull run after March lows last year. Therefore, the bulls say that stock markets will eventually climb back to their pre-crisis levels and beyond. That is another 27% upside to the Dow Jones to their 14,000 points high and an upside of 29% to the STI index to the 3800 highs. The Hang Seng index still has around 50% upside to go.

In short, the bulls say that if you have missed out the start of the recovery rally last year, you still have a great profit opportunity if you start investing now.

2)      Fair Stock Markets Valuation

Many analysts are saying that market valuations today are still fair compared to the peaks years ago. There are still quite an amount of profit to be made.

3)      Accelerating Economic Growth

Increasing growth, corporate profits, industry production are signs of a recovery. US GDP grow 5.7% in the fourth quarter, while China increased 10.7%.

4)      Low interest Rates

In 1991, the US Federal Reserve cut the interest rate down to a shocking low of 3% to stimulate growth. And it is one of the key factors that ignite the bull market to 2000. Now, interest rates are close to 0.5%.

5)      Huge Government Stimulus

In 1991, the US government pumped in more than $150 billion into the financial system to stimulate growth and it spiraled off to one of the best performing decade in history.

In comparison, the global stimulus from US and China stood at more than $10 trillion today!

What the Bears Say?

1)      Artificial Recovery

Many bears say that the recent recovery is a result of the massive stimulus spending by the governments. Once it is removed, the economy will stagnate and even contract.

2)      High Unemployment

Unemployment rates in US and Europe remain high. As a result, it leads to weak consumer spending and this could derail the economy.

3)      Interest Rates will increase

With interest rates near zero today, the only way to control inflation is to raise interest rates. And when it happens, it will hamper economic growth.

4)      Unsustainable Debt Levels

US debt has shot past $13 trillion. Japan ‘s debt level is already above 100% of their GDP growth and we have the ongoing Greece crisis. If they default on their debts and went out of control, another crisis will be inevitable.

So What is the Conclusion?

            It is impossible to predict the future with 100% accuracy. Many things can happen that can lead to unexpected results. However, the good news is that successful investing has got nothing to do with your ability to make predictions.

            Legendary investor, Warren Buffett, once said that, “I have no idea where the market is going. I never have. It is something I don’t think about at all. But I prefer it to go down, as I can find better deals then.” See his video at

http://www.youtube.com/watch?v=9sgCYOeYrnw&feature=related

And since there is a correction now, it is good news for many of us! For clients who have not start investing, now is an golden opportunity to start. However, I do not encourage lump sum investment as the market is unpredictable. Use dollar cost averaging (a disciplined way of investing every month) to ride out the volatility. For clients using this method currently, continue with it or even increase it to take advantage of this opportunity.

I remain positive on gold, commodities, due to expected inflation and emerging market due to their explosive growth.

            However, as I have mentioned before, I do not believe in buying and hold long time. Proper asset allocation and portfolio rebalancing remains a key to succeed in investment.

My main allocations in Asia, emerging markets and Commodities with the exceptional of the gold fund, have been struck a blow. China is badly affected as their tightening process to prevent a domestic bubble coincides with the Euro programs, compounding the fall in China stocks. Let me boldly make a few forecast on what is to happen and what are the opportunities right now!

Gold, Glorious gold!

1)      I have been advocating gold for a long time and now, I think I must reemphasis that this will probably be one of the best investment to make in the next 5 years. Traditionally, USD and gold has an inverse relations. Gold typically moves in same direction as Euro as both gold and Euro are seen as alternative currency in comparison to USD. At one pt of time, businesses around the world prefer transacting in Euro over USD as people are worried about the huge US trade and government deficit which will lead to a rapidly diminished USD in the future.

Right now investors are worried about the Euro dollars being dismantled as the richer European countries refuses to bail out their much more extravagant and reckless neighbours and Euro dollars are being hammered as the Greece saga drags on. Just 6 months ago, Euro is at 2.1 vs SGD. Currently, it is at 1.79 and still falling. That’s a 15% fall in Euro dollars in just a couple of months. So if Euro fell, does it mean that USD has appreciated against SGD. Wrong again! 4 months ago, USD is 1.42 and currently it is at 1.39. This means that global investors prefer SGD to Euro or USD?!? That’s is being absurd given how small our country is. This only goes to show one thing. Global investors are losing confidence in the 2 most important currencies and other than USD and Euro, what other currency can they fall back on? Yen? Yuan? Pounds?

The answer to this question is obviously gold, the de facto currency of the world that has ruled thousands of years before being replaced by paper just 40 years ago. As of today, Gold prices has blown past $1200 per oz and has appreciated against both USD and Euro. There is a clear trend that global governments, financial institutions and individuals are buying gold. Let’s see the following scenarios and how it will affect gold price

1)      Greece doesn’t get bail out. Euro drop even more and Germany and France threatened to withdraw from Euro to save their own economies from influenced by Greece. More money will pour into gold as what we have seen in the last few weeks. Asia currency will rise against USD and Euro as investors trust currencies with a stronger economy (Asia) and the rising currency will be a blow to the mainly exporter nations as their profit margins eroded by currency losses. Asia growth will halt, stock market and property market get hit and we are set back a year or two towards recovery. In order to prevent the currency from rising too fast, Asian government will need to sell both Euro and USD and guess what they have to buy. Yes, gold.

2)      Greece gets bail out and Euro recovered. However, it will take a while to regain confidence. As investors leave the “safe shelter” of USD and put the money back into riskier assets, investors will remember that US is actually the same state as Greece, Technically bankrupt with a huge deficit. USD will start to fall again and this time round, investors will not have that much confidence in Euro. In order to protect themselves from a falling USD, investors have to put their money elsewhere. Euro and pounds? Not much confidence. Yen? Japan holds too much USD and is as good as a proxy as USD. Yuan? China has most of their reserves in USD and only 1.6% in gold. The only thing left is gold. (AUD may do well as they are still a primary commodity currency and they have one of the highest interest in the developed nations now)

So no matter what scenario that pans out, it will be favourable to gold from the short to medium term. The PiiGs (Portugal, Ireland, Italy, Greece, Spain) crisis only serves to strengthen the belief that only gold can be the real currency of the world. As to how much can gold rise, it is for me to know and for you to guess.

Short Term Trading Idea: European Bonds

With the Euro hitting a new low, many investors been asking me if Euro is a good buy now. Yes and No. Yes as in it is cheap and there is huge potential to make a decent profit when the PiiGs woes are over but I expect the rise to slow and moderate. Remember how long some Asian countries took for their currency to recover during the Asian currency crisis in 1997? It’s almost the same scenario. Government overspending, reckless and wild. No as in, the Euro may continue to fall even with the bailout as confidence need time to build. Euro can continue to fall from this stage! So I would advise investors to put their money in Gold first being a safer bet and if they have extra money, they can try European bonds. The returns can be fantastic if the recovery is fast making potentially 50% pa or it can take forever and your capital stuck in unproductive Euro dollars

Equities Takes a Hit:  China Worst Hit

China market has taken a beating ever since the government tries to slow down the economy. Interesting fact to note is that whenever the government announces a double digit growth for the quarter, stock market will plummet. When the government announces a single digit growth, the market rallies. What the market wants for China is a moderate sustainable growth with only small bubbles forming. The world has no doubt which is the fastest growing country in the world but not that fast! Recent news from China indicated that growth has indeed slowed. Manufacture Index growth has dropped tremendously and the rise in Yuan against both USD and Euro, Chief export nations, will slow the economy down. With China using monetary, fiscal and currency tightening measures, I have no doubt that it will slow down to a more moderate pace. Once growth in china is more predictable, and no more “shock” announcements by the Chinese government, the stock market can perform again.

The Black Horse: Indonesia

World’s third largest population, huge resources, growing middle class, relatively smooth sailing political situation, rich Indonesians buying Singapore properties by floors. I think you get the picture. Indonesia is essential to the growth of the region, especially Singapore. During the roaring nineties and the time of Suharto, Singapore benefited from the tremendous growth from Indonesia and that critical period, propelled us from a developing nation to a developed nation. The best performing markets in 2003- 2007 is China and India. This time round, maybe we can add Indonesia to the List. I would strongly recommend in a BRIIC fund. (Brazil, Russia, India, Indonesia, China)

The Future Ahead

The next few months will be extremely volatile and creates many opportunities to buy cheap. The long term fundamental is still there. US reporting slow but steady growth in all areas. Asia has little exposure to the PiiGs economies and is still doing well. The rise in Asian currency will hurt them but as long as the rise is controlled with global demand catching up on the loss of profits due to currency losses, Asia markets will still be the best performing in coming days. Greece and other troubled nations will probably be bailed out as they are “too large to fail” and gold will continue to do well. Oil will be at the mercy of economic growth and may underperform gold in the next few months. I still do not believe in the “safety” of bonds when interest rates are still at their extreme low and I believe that this crisis will be short term. Clients who are doing short term trading in Singapore stocks/ US stocks & options. Please be careful. Technical Analysis breaks down in extreme political intervention and when anything can happen out of the blue, TA will fail to work.

Warmest Regards,
Jimmy Ling
Financial Consultant
finexis Advisory Pte Ltd
Email: jimmytheifa@gmail.com
Blog: http://jimmytheifa.wordpress.com/

Below is an article from Biz Times which I thought will help you understand more about gold.

Inflation could force gold to be new global currency

Gold prices continue climbing, and acts as a warning of times to come. -BT

Sat, Aug 08, 2009
The Business Times

By ANTHONY ROWLEY
TOKYO CORRESPONDENT

IT’S party time again, it seems, in world stock markets and revellers are beginning to sound as though the financial crash and the global recession were nothing more than a pause for breath.

Yet the ‘ghost at the banquet’ is the gold price which, at near US$1,000 an ounce, is an unwelcome guest to have around just when it seems the good times are ready to roll again.

Even as advanced and emerging equity markets hit their highest level for the year on Monday of this week, the gold price continued its upward climb and reached US$955 an ounce. What’s more, even those investment managers who do not normally display a tendency toward hyperbole said it would hit US$2,000 an ounce soon and could go on to reach US$3,000.

So, what is the gold price trying to tell us from the elevated heights where it stands sentinel nowadays over securities markets? Presumably that all is not well with the current state of the world, and that things are not what they may seem to be in the investment universe.

Not that many people pay much attention to gold nowadays. It is seen as being just another commodity, or a ‘barbarous relic’ as John Maynard Keynes once described it. But whether viewed as an anachronism in a world of paper and electronic money or just a quasi currency, gold has an eerie way of being able to see into the future.

Gold coasted along at around US$250 an ounce throughout much of the 1990s, content, it seemed, in the knowledge that inflation was under control and that the oil shocks of previous decades were over. Its relatively low price was seen by some as evidence that gold had finally been relegated to a minor role in the monetary and investment firmament.

But once the new millennium dawned, and with it the boom and bust of the IT bubble (provoking a profligate monetary response by the US Federal Reserve and other equally panicked central banks), gold reverted to its barometric role of acting as a storm warning.

The price doubled quite quickly as gold scented inflation. Inflation did not come in the expected form of hikes in the prices of goods and services in the developed world, because China and other emerging economies were flooding the world market with cheap goods while India and others supplied outsourced services that also kept conventional measures of inflation in check.

Instead, ‘asset inflation’ reared its head as stocks and real estate reached for the sky.By the time the most recent crisis struck, gold had already signalled its mounting alarm at the dismal stewardship of the global economy and of the international financial system by moving inexorably upwards.

Then came the crash and with it the potential (and in some cases, such as that of Japan, actual) threat of deflation. With the steam knocked out of global demand and commodity prices in general collapsing, gold ought in theory to have slid back down again, safe in the knowledge that its inflation-hedging role was no longer needed, at least for the present.

Instead the gold price continued to climb. If this ancient store of value is not worried about actual inflation, what is keeping it awake around the 24-hour trading clock as its refuses to relax its vigilance?

The answer is the profligacy of central banks – the US Fed most of all – in printing money as if there were no tomorrow and of government (again the US) in spending that money. Such habits have led to hyper-inflation in the past and could again if a bubble in stocks and other assets coincides with an abundance of financial liquidity, as appears to be the case now.

Stock market bulls would do well to bear in mind the danger of inflation devouring wealth gains that stem from easy money rather than from hard slog.

Gold has more to worry about than a new great inflation. There is a widespread perception (going well beyond China) that the US has debauched its currency by printing so much of it and that its future value as the principal store of international reserves has been compromised as a result.

What will step into the breach if confidence in the dollar continues to wane? Not the euro, because as former Fed chairman Paul Volcker pointed out recently, it is not in the long-term interest of any single nation (or geographical region) to bear the burden of operating a global reserve currency.

Another candidate could be forced willy nilly to occupy the role of principal store of value and immutable medium of exchange – ie gold.

It has been playing these roles for thousands of years, even if forced to do so in a ‘shadow’ capacity recently by a belief that fiat currencies such as the dollar (and before that the pound) were as good as gold. This is why the gold price is where it is now. Be warned.

This article was first published in The Business Times.

An MRTA, Mortgage Reducing Term Assurance, is a decreasing term plan, whereby if something unfortuante happens to the property buyer, the outstanding loan for his property will taken over by the insurance company. It is to have a safety net around your family, in the sense that, if your timeline gets disrupted, the heavy burden of paying the house mortagage will not be passed to your spouse and other family members.

The rate at which the sum assured decreases follows the interest rate of mortgage loan. The higher the interest rate, the higher the premiums. This is because a higher interest rate translates to higher interest payments for the mortagage loan. The outstanding loan decreases at a slower rate and therefore, a higher premium is required to ensure that the loan is paid off at the end of the term.

Should I buy MRTAs?

Yes, if you have just purchased property and have taken a loan. MRTAs are cheap as they are essentially term plans and have no cash value. The sum assured decreases as time passes, so the cost of protection (premium) will also decrease accordingly. As a rough guide, a 25-year MRTA plan with interest rate of 5% and sum assured of $500,000 will only cost around $400 to $440 in annual premiums. This is less than $40 a month.

An MRTA may not be required if the the buyer has sufficient life insurance coverage to cover the cost of property, on top of other essential living expenses and children’s education.

Who Should be Insured under MRTA?

There are 2 types of MRTA plans, single life and joint life. In single life policy, only a person (typically the breadwinner) is insured. In a joint life, both husband and wife are insured. Hence if both husnabd and wife are working and contributing rather equally to the household income, it may be advisable to purchase a joint life policy. Of course, it will be more expensive than single life, as it covers both parties.

Some people have argued that it is better to purchase 2 single life MRTA instand of 1 joint life MRTA. Is that true? We will only find out after we compare both policies from several insurance companies.

Some people also asked if it is advisable for a working couple to purchase a joint life MRTA with half the sum assured, in order to decrease the premiums. At first glance, it may seem reasonable, since both are working and if one passes away, the insurance company will pay out half the remaining loan and the remaining spouse can carry half the remaining burden. But what if the remaining spouse also pass away, or get crippled and unable to work? What will happen to the children?

Hence, if the couple wants to minimise the premium, it will be better if they purchased 2 single life MRTAs with half the sum assured. This is to ensure the other party is insured too even if one got disrupted.

As can be seen, there are many factors to consider when buying MRTAs. It is important you go through the details with a financial adviser in order to make a suitable decision.