Madoff who?

So, let's join in for the hottest topic of the financial world at the moment, since everyone else is also doing it... I'm just merely following the flow....

Before this, I've not heard of Madoff, but he's now the talk of the world. What attracted me is the simplicity of the scam. It's just an old trick. U use principle investment fund from new 'clients' (or, more likely the victims) to pay as dividend to the existing investors. Am damn sure I could have tat idea too!! But something called logic and morale told me that's wrong.

Madoff's method apparently is known as pyramid fraud. It works well if the existing investors do not withdraw their funds. Tat's exactly who he's caught when he can't return the funds which supposedly he used to do investment.

I think I would admire his personality and character. One would need some pretty persuasive methods to convince the big and small fish. Seriously! I mean, he's allegedly accumulated US$50 billion and his 'victims' included gigantic financial firms too such as HSBC. Surely he must be very good at selling his product.

Having said that, I wonder how can big financial instituitions with 'experts' on board still make mistakes like this? Is it because they trust Madoff, based on his past performance? But I understand Madoff had closely guarded his ledger books. So, Madoff fabricated his financial papers for his fund? If people like him does that, what guarantee I have that other fund managers or even companies not doing the same thing? The financial reports that I read before I decided on my investment is not true?!

Is there any law and regulation in the financial world? I'm beginning to believe that the players of the financial market have their own set of rules, and the bend the rules whenever possible. After all, rules are made to be broken.

Dear investors, who do u place ur faith in? Perhaps keeping ur hard-earned cash under ur pillow is not such a bad idea after all.

Exit!! When?

One of the hardest thing when planning a trade, I believe is the exit strategy. Now, there are alot of opinions out there, using various indicators.

I came across this article abt the Chandelier Exit (I know, it sounds romantic, haha!). Basically it's using ATR (Average True Range) as guidance to time the exit and place the stop loss. Yeh, placing stop loss.

http://www.esignallearning.com/education/marketmaster/Default.asp

Have a close read of the article, as it mentioned how to tighten the stop loss as the trade goes by. Main reason being the entry date price predicts movement for the next few days more accurately and the correlation will weakens with time. Hence, constantly readjusting the stop loss will ensure profit protection and less damage.

Having said that, these strategies work well in trendind market. With the volatility currently in the market, any sound advice from the experts?

Another Medium of Learning Shares

Being a novice in the market often means needing more guidance. I try to learn through different mediums. And guess what, I found this TV series about shares.... It's slightly old, made in 2002 and it's Japanese.

I stumbled upon this series and decided to give it a shot to learn some new stuff, thinking to myself, Japanese invented the candlestick, and they are one of the biggest financial centre of the world, surely I can learn something out of it.

I learned abit more abt how the share market function, but of course in the dramatised fashion, afterall it's a TV series. Best of all, it's free to watch online....

http://www.mysoju.com/big-money/

Enjoy! If u like learning through a fun and easy-to-digest fashion....

Who to trust?

I know I'm not that good at reading company financial reports yet. Hence I've since learned to rely on some indicators, namely the acclaimed research analysts to help me. Often companies listed on the US stock exchange would be given ratings. Some prestigious analysts rating include Morningstar, Standard & Poor and Moody's. Companies are graded on their financial performances, such as profit, future outlook, financial health.

Back in the good old days not that long, these ratings are really popular as part of an indicator for investors especially those who favours fundamentalism. But it seems things are changing very quickly.

http://www.bloomberg.com/apps/news?pid=20601039&sid=at5FqZ7Gr0nw&refer=home

The few companies mentioned in the article, including GM (yah, the almighty auto company) is given the highest rating by Moody's despite the hugely proportionally imbalance liability to asset ratio. Now, this really puzzled me. How can a source of analysis actually giving unrealistic ratings? I mean, am I assuming now those analysts are now basing their conclusions on the setting of the good old times? Are they still out of touch with the frantic, panic of the market? It's just unbelievable!!

Stop giving misleading info at this crucial moments!! Or I'm just paranoid? Do I still trust those guys with Zagna suits to provide insightful info anymore?

Technical Rebound..... or is it?

Human is such suspicious organism. We're skeptical of things we see, feel. Why don't we trust our senses? Afterall, it's how we've evolved. If that is the case, the share market will be a very boring place. People will just buy and sell with honest intentions, and at fair prices too. But, the human factor always preside the prices.

The central banks around the globe (and I really mean most of the countries) had responded to the recent credit crunch and taken actions deemed necessary. The players in the market still hesitate. The West, with all their efforts including huge interest rate cuts, billion-dollars-bail-out-plan, still can't convince the market. It seems like the market was still waiting on something else..... the emerging markets.

The East, especially the emerging markets like China who had survived the slump last decade seems to be in better position now. Some financial institutions are still affected, including DBS in Singapore whose investment products like High Note 2 & 5. Yet, most who's not exposed to the US financial jargon has good foundation, and cleaner ledger. That leads to the general view where the Asian markets will recover sooner than the West.

Hence, the market finally responded when China announced its economic stimulus package. The relevant sectors had gained on the hope that China, who's the major consumer of development will continue to grow. It seems ironic that China who used to depend so much on US consumers now is leading the consumption. Power of the people?

Nevertheless, suspicious human nature is still in play. I wonder how long can this euphoria sustain. And, I'm not the only one. Sir Howard Davies of London School of Economics and Political Science shared the same view in his recent talk.

http://www.straitstimes.com/Breaking%2BNews/Money/Story/STIStory_300640.html

Panicky people making rash decisions. That is what the market is at the moment. Great opportunities in the market, but definately not the faint hearted ones.

Some crucial timing

Sorry, looks like I've abandoned the blog for awhile... But I actually still monitor the market from a distance!! Yeah, given the crazy movements recently, good time to stay away from the market now... or is it really?

I'm a strong believer in trends. To me, the downtrend has not broken yet. Hence, we'll continue to see some downward movements across the global markets. And I'm not the only one. Charting master, Daryl Guppy said so too in his blog...

http://www.cnbc.com/id/27526911?__source=RSS*blog*&par=RSS

But the last few days we witnesses some very strong bull run, admittedly. It's most likely due to some investors doing bottom fishing, particularly when analysing the volume of trades involved. If so, is it a good time to buy in?

Right.... now, it depends on what your view is for the near future. With the global slow down, consumer spending will shrink too. But looking across the countries too, the interest rates are pretty low. So, if you're thinking of building some retirement nest or amassing some wealth, parking money in the bank is definately not the option. Besides, some are losing trust in banking sector, not surprised. Then, maybe parking money in the equity market will earn something. Now, that's just my 2 cents' worth of thought, everyone does have different appetite for risk too.

Of course, can't finish without mentioning the very 'hot' topic of the Obama-phenomenon. I guess the market has already expected for him to win, hence his official endorsement by the US public doesn't have a great impact on the market. It'll be interesting to see how he handle the crisis when he's inaugurated in Jan 2009. Personally, I've not seen him come up with a sound or different approach than the current administration. So, I'm still unsure how he will preside the ride.....

The Dow Jones Psychology

I know, it's been awhile since I updated this.... But I've not been slacking off! Just me keeping busy by enriching myself before putting up more news...

The market has been through alot recently, through the bulls and bears.... got my eyes crossed wondering what's going on with the world!

Yesterday the Congress finally approved the new and improvised bailout plan for the Main Street to save the Wall Street. Like most ppl, I dunno if the plan will work; let alone can save the market. Skeptism aside, if the good ppl of US think of it as investment, am sure they will benefit from this plan. History had shown the Dow don't just crash like that, even in the very bad 70s.

And the market was responding like crazy. Mayb I can put this in a metaphore.

Before the bailout plan was approved, the market was full of optimism in anticipation of the success. It's like the little boy before Christmas, expecting the favourite toy under the Christmas tree. The mood is good.... the DJ goes up....

When the Congress finally passed the bill, the market dropped! Well, on the morning the boy opened his present and discovered he did indeed received his anticipated toy, the wait is finally over. Then reality sinks in, and the boy wonder if his toy will be taken away from him, the anxiety and worry surfaced..... and the DJ frowns......

Well, I'm not a psychologist, but that's how I view it.... enjoy the ride!