Tea with AK71: A good cat.

I spent an hour or so visiting local blogs on investment and trading just now. I read the latest post in Musicwhiz's blog.  It is titled: "Why traders are important for value investing." It had 22 comments by the time I read it.  I added a diplomatic 23rd comment.

Then, I came back to my blog and found a comment (from an anonymous reader) which likened buying stocks to betting on horses, saying that we want to bet on the fastest horse. This is found in my post: "Replies from AK71: More on REITs".

People will always have opinions about anything and everything under the sun. This is one reason why interaction between people is interesting. It would be terribly boring if everyone were to have the same opinions about everything. However, there will be times when strong feelings are attached to these opinions. To verify this, we just have to see how Musicwhiz's post invited some rather strongly worded comments.

What do I think? Well, I took a leaf from the late Deng Xiaoping's book. He said that it does not matter if the cat is black or white. If it catches the rat, it is a good cat. Deng Xiaoping was a truly visionary leader. China would not be where it is today if not for him.

Chamomile tea, anybody? It's calming, I was told. Have a great week ahead!

Gold at US$1,210 an ounce.

I started buying gold bullion coins in March/April 2009, believing that it is a hard currency that has intrinsic value unlike fiat currencies which are flawed.  Jim Rogers and Marc Faber have greatly influenced the way I look at current day world economics and I take their views to heart.

When I started this blog last Christmas Eve, one of my first posts was on the subject of gold. The last time I bought some gold bullion coins was in March this year and I gave one to my dad for his birthday and I just gave one to my mom for Mothers' Day. Last year, I gave each member of my family a gold coin as well and the value of those coins have gone up quite a bit by now.

I strongly believe that we need some hard currencies as a hedge against fiat currencies and inflationary pressures. Physical gold is the most accessible precious metal in Singapore at a "fair" price. There are issues but it's a lot better than the situation with physical silver, for example.

I continue to believe that every person should have some physical gold as a long term hedge against all other forms of investments and cash. This could be gold jewelry as well for people who do not like the idea of buying gold coins just for keeps, but, of course, we would be paying for workmanship and wastage in such instances. Some would buy gold coins with commemorative messages and we would be paying a higher price for numismatic value in such instances.  For me, I still prefer the boring 1oz Canadian Maple Leaf as I buy gold for its intrinsic value.

Gold closed at US$1,210 an ounce on Friday. Translated, to buy a 1oz gold bullion coin at UOB now, we would have to pay about S$1,880.  This compared to when I first started buying last year at about S$1,400 an ounce, the numbers speak for themselves. Check gold and silver prices at UOB.

Of course, gold price will not move up in a straight line.  Prices almost never do.  I would look out for dips and corrections to buy more gold.

I will also be looking out for opportunities to increase my exposure to silver as I believe that it is undervalued when compared to gold.

Related posts:
Gold: to buy or not to buy?
Gold or silver?

Charts in brief: 7 May 10.

Due to a suspected trading error, the US market was sent spiralling down 10 per cent at one stage and recovered to close the session at "just" more than 3 per cent down on Thursday. I can imagine the panic and the horror that shockwaved through the markets.

The technical rebound that quite a few amateur and professional chartists, independent and otherwise, opined would materialise yesterday for the Singapore market did not even get a chance.

STI drops 0.7% to 2,821.11 at closing
Friday, 07 May 2010

© 2010 - The Edge Singapore

Healthway Medical: Announced a dividend of 0.12c and that sent the share price up 1c to close at 15.5c, the resistance provided by the 100dMA. This up day was not achieved on high volume. Not convincing. The MACD has turned up but still remains in negative territory.  MFI has turned up from the oversold region.  OBV has turned up too. Personally, I would sell at resistance. 15.5c is a fair price to reduce exposure. If the price rebounds to 16.5c, even better. The 20dMA is declining and looks set to form a dead cross with the 100dMA.

CapitaMalls Asia: A white spinning top and I am still hoping to reduce exposure at resistance. Might have to lower my expectations as the 20dMA declines rapidly. Would it rebound to $2.10? Maybe.

Courage Marine: Guess what.  The BDI has exceeded 3,400 yesterday.  Nice. Courage Marine sank below support yesterday and closed at 19c despite this fundamentally positive development. If it continues to decline in price to approximate 17.5c, I would be sorely tempted to add to my position. A possible triple bottom in the making then?

Golden Agriculture: MACD continues to decline in negative territory. Candlestick suggests a possible reversal signal. Resistance at 55.5c and 58c. I might sell some of my remaining stocks if a rebound takes place.

SPH: Started the day below the 100dMA but ended the day with a nice white candle. A rebound might send this counter through the immediate resistance at $3.90. A chance to offload some shares, perhaps.

FSL Trust: OBV's gradient is turning gentler. The sell off is ameliorating. MFI has gone flat in the oversold region. That the sell off has been extreme could be seen from how the candles formed in the last three days were all beyond the lower limits of the Bollinger bands.  A black hammer formed in the last session. A rebound on the way? Perhaps. If it happens, sell at resistance? That would be consistent with my practice.

Stocks slide anew, but it's still not a correction
Seth Sutel, AP Business Writer, On Friday May 7, 2010, 8:06 pm

NEW YORK (AP) -- The stock market's wild ride may not be over yet.

The Dow Jones industrials whipsawed again Friday, a day after their largest one-day plunge. The average was down as much as 279 points in the morning, went briefly into the black around lunchtime, then ended with a loss of 139....

...The week's losses would put the market about well toward what analysts call a correction, usually defined as a drop of between 10 percent and 20 percent following a sustained rise. The Dow is now 7.4 percent off its recent high of 11,205.03 reached on April 26. The S&P 500 is down 8.7 percent from its recent high of 1,217.28 reached April 23...
 
Read full article here.
 
Related posts:
A correction? An opportunity.
Looking for value.
What are investors to do in downtrend?

What are investors to do in a downtrend?

I am a long only investor.  I do not short the market.  The blogmaster of Time to Huat has taken pains to explain to me that short sellers are necessary in the market. I understand the theory but I am still a long only investor.  Using CapitaMalls Asia as a case study, I am reminding myself of what I should be doing and hope that this post is useful to other like minded investors.

I stopped buying at supports upon realising that CapitaMalls Asia is in an obvious downtrend a while back.  Every single bullish reversal signal has failed so far. It cannot get more bearish than this.

I like the fundamentals of the company.  I like the fact that it is in a nett cash position.  Although as investors we want to exploit the discrepancy between price and value and buy undervalued stocks, we should do so when the time is right.  This is only possible when we combine FA with TA.

Buying at supports in an uptrend is the way to go.  When the trend is clearly down, what we should do is to wait and see if the next support level holds up.  We should look out for signs of a basing process.  CapitaMalls Asia is clearly still in decline and I would not add to my position in such an instance.  It has yet to start basing.

What we have to realise is that after suffering for more than a year, the tide has clearly turned in favour of the bears.  This might be momentary or prolonged.  It is futile to wonder how long this phase will last. What matters is to have the correct mentaility which is to stay pragmatic and not be too bullish or bearish.

TA tells us that a downtrend will invite short sellers.  Short sellers will come in and sell down stocks at resistance levels.  Every attempt the stock makes to rally would be cut down as selling at resistance caps gains and pushes down the price.  For long only investors, we should make use of such rallies to reduce exposure and preserve capital. Wait for that basing process and stronger signs of reversals before getting our feet wet again.

When CapitaMalls Asia started the day at $2.08, all hopes of a morning star setup went out the window. True enough, the counter went on to touch a low of $1.96 before closing at the round number $2.00. Another black candle day. MFI is still in the oversold region while OBV continues to decline.  MACD is pulling away downwards from the signal line. Using Fibo lines, we see the different support and resistance levels.

Short sellers also like margins of safety and if I were a short seller, a rebound in price to the 78.6% Fibo line ($2.13) or the 61.8% Fibo line ($2.19) would be salivating propositions.  Having been sold down relatively rapidly, a rebound to these levels is not impossible. After all, a bear market moves down a river of hope.

If I do reduce exposure in CapitaMalls Asia, this would be the second counter I am cutting loss on this year.  The first was China Hongxing which was rather recent as well. That was another case of failing reversal signals. Having conviction is different from being stubborn. The bears have left their caves and they will have their fun.