Thursday, 22 September 2011

Correction of credit risk rating

Italy had just been downgraded by S&P by one notch. Yesterday, many of the major banks' debt credit rating also been downgraded before the Fed announcement. Who will be the next one then?

Recently a lot of downgrading has been done by the agencies. Instead of downgrade, we can say this is the correction of their credit risk rating.


Sunday, 18 September 2011

Current Condition if warrented

Despite U.S recent dropped in consumer confidence, it has shown an increase in export activities. Deficit figures had been improving lately. Although retail sales in June and July had shown an increase in consumer spendings, the result in August was disappointing.

Will consumer be revived once more to support this giant market at the end?

Thursday, 15 September 2011

Part of US life style that would contributed to the Impact of US economy.

We understand that the lifestyle of the people living in the country does make an effect on the economy of the country. Based on the supply and demand chart, if there is no spending power, there will be no demand. 

Many of the people in the States are servicing their high study loan, this is one of the factors that cause the reduction of their spending power. 

In the nature of human, we have needs to be fulfill. However, when they are unable to satisfy their needs, other alternatives are being search for. In this case, cheap price items will have an advantage, therefore in order to sell cheap item and have a high profile margin, domestic market loses it's stand. This partly contributes an impact to the economic in US.

Our thinking:

Should education fee be that high? As we know the higher the loan is the more cash the people need to services. If fees is not that high, people are able to contribute to the domestic market as they doesn't need to look for replacement  which will diversify the risk as there will be demand in domestic market which will support part of the economy in the country.

What do you think?


Tuesday, 13 September 2011

Holy.... Look at the amount for Greece Credit Default Swap

Folks, if anyone out there is going to believe every words the politicians are going to say about Greece, why not take a look at the credit default swap before listening.

Sovereign Credit-Default Swaps

Just to let you all know, Greece CDS is at $4732...

That is ridiculous for a financially healthy country, if it is.


Sunday, 11 September 2011

Face it! Inevitable is coming

We wrote an article last week regarding the possibilities of Greece defaulting. It somehow came true. Not that we cursed the country's fate, but the facts are in front of everyone with selective perception. Come on let's face it, it going to happen someday or somehow, and there is no chance if they can escape it when their biggest donor is making plans to prepare for Greece's default.

Let see how the Euro Zone going to embrace it when the French banks are at risk of further downgrades by Moody's.


Thursday, 8 September 2011

Stimulus coming along the way...

We are coming to a point that this month will be packed with excitement of upcoming stimulus packages and formula introduced to spur up the overall economy. The first of its kind is the $447 billion job packages introduced by US President Mr Obama to spur up it's employment situation in the biggest economy. This package will start the engine rolling for players to start exiting safe haven assets, and spur up the sentiment for a bigger risk appetite. Of course, this is not the most anticipated package which we are looking for. QE3, or stimulus 3, which ever we call it, is the total program needed to entice players to get back into business. Today's G7 meeting may crave out some clues on the overall view from the G7 community. Hence, this September maybe a different September altogether.

But of course, do not get too excited if there are really many stimulus rolling out, it may prove to be another way to stall the explosion to be happening so soon.


Tuesday, 6 September 2011

Long term view vs short term view

A number of investors and traders will be questioning on the recent volatility in the market whether is it safe to go in and invest or trade. Gurus and experts had been shouting and screaming different perspective on the overall outlook of the economy. However, if we step back and think, most of them are talking rubbish. Why rubbish you may ask? It is because they did not fully clarified what is their true definition and explanation of their long term or short term view in a particular investment.

What is long term investment then? Long term investment is of a view of a particular assets or equities that have the potential for future gains over a long period of time. For a long term perspective, investors will tend to pick up stocks and assets which had their prices beaten down over a period of time. This method is known as 'cherry picking' for some of you. By purchasing it at different price level to average it out, investment profit tends to gain over a long period of time, but not guarantee. Long term investment maybe a method imposed by some well known fund managers, but does it also benefit fully for retail traders and investors? I do not agree with that because not alot of us really know how to apply it. Basic terminology on long term period is defined as a period at least 5 years and beyond. Do you have the patient to wait that long? No. Price actions and volume sometimes shown very clearly people act upon emotion and any immediate news to determine their trading and investment strategy. There are some who term it as very long period and long term should be anything above 1 year.

What about short term? Of course it means anything that is short time or period. You may term it to be just 1 week, 1 month, 3 months, 1 year, or even 2 years. Short term view tends to attract investors into buying assets that may enjoy a relief rally. This is quite dangerous, especially if you do not understand the underlying meaning from the price action, volume and sentiment. Of course some methods like 'cherry pricking' can be perform for short term, but to us it is purely suicide. Anything can happen every minute in the market to derail any bullish rally or any bearish move. There will be some who will enter the market based on 'expects calling'. This is the point which will cause people to be stuck as those experts did not clearly define their calling. End game, we called these experts lousy. That is an unfair statement. The problem is not with the forecast itself, but the implementation by investors incorrectly. Without clearly understand the need to set entry targets and exit strategies, you may end up stuck in the market, and inevitably transform into a long term investors.

Back to basic, market is operated by supply and demand law. Basic supply and demand law teach us that when supply goes up and demand goes down, prices have to drop in order to sustain the demand. If demand diminish at a certain price level, price will inevitable drop to another lower level to entice people to buy. Growing number of investors and traders concentrated more in daily news than understanding the current dynamic and sentiment that moves the overall market. Remember, there are many big time players in the market that move with volume, and hence there are seen sometimes as those who can manipulate the overall outcome. Even if you follow closely with their analysts calling, you may not get the same results as they does. By understanding your own risk level and investment logic, and also gauging for yourself the true investment horizon, you then can formulae out a set of strategy that suits your lifestyle and personality. With that, you can set entry and exit strategy for your investment and protect your capital, hence minimising the loses over time. Remember, market is still reacting based on demand and supply law, and the sentiment of the market force will act as a pushing or pulling effect.

Many of the retail investors have basic fundamental knowledge of how the market operates and their basic terminologies. They know very clearly on when to perform a trade or scoop up an asset at a low price. How many successfully did it? If many performed it well, we should have tons of billionaires out in the world, and inflation should have sky rocket to another dimension, which will kill people who are poor. In addition, No forecast in this world is 100% accurate, and there maybe event risks that derail these forecast away. That is nature. No choice. This is life.

Finally the saviour is here.......

In an unprecedented move the Swiss National Bank (SNB) has announced a commitment to set a base on the Eur/Chf exchange rate at 1.20 in an effort to aggressively protect the economy from the effects of rapid franc appreciation in recent years. However, to me this is an expected move long time ago. With the deteriorating situation in Swiss economy ever since the Euro crisis started, money have been flowing into Chf, causing it to be the most expensive currency currently. With it's safe haven reputation, investors and traders rushed into Chf to protect their investment in Europe. With today's pegging, this mark the start of the downtrend for Chf. 

Those who read our article on the 16 August on the possiblity of Chf pegging, you should have rip some good profit today after the crazy moves in the forex market. There will sure be some experts out there to argue that market forces will still flush into Chf given with the on going problem in Euro area. Please, step back and think, do you think SNB does this out of fun?