Monday, January 23, 2012

Why I need to be less bearish now


Qualitative Factors :-

News of Job cuts from the finance sectors. Recession News coming out from all authoritative sources like the IMF, global governments. The scary event of a Greece default which is getting nearer by the day. And what does the market do? When market reacts with ease to bad news, you can be sure it is discounted into the stock price.

The most worrying thing de-railing this "recovery" will be the Greece default. But you can see the actions of the European Union and ECB, it is just putting up a front. They have been saying tough stuff but their actions... they are all trying to prevent a liquidity freeze and breakdown in confidence of the system. They have done "quantitative easing" thru' the LTRO programme. They have started to call for a relaxation of stiff banking rules that might increase capital and liquidity risks to the banks. They have been playing tough on Greece saying Greece must agreed to this and that and time and again..they have relented and relax the terms.

So, I believe market have discounted all these news. They believe Greece will get its bailout money again no matter the rhetoric.

Update : FED 0% rate to stay till 2014 means more money coming into ASIA. The government might not stop inflow into the stock market and investments into businesses, but they will turn on more counter-measures to deal with the property market.

Quantitative Factors :-

From a valuation perspective, it is cheap now. Probably 1 sd away from the mean according to the reports. However, I do think the market is not as cheap as it was in 2009 because the stock prices of stocks in my watchlist are still way above my own estimated valuation. This was not the case during 2009.

Further, a lot of stocks seems to be in a bottoming process according to my noob skills (round bottom or spike bottom).

And I have my own major trend tracking chart I devised.. hehe....
 
 

  If I want to be safer, I would only buy when the curve reaches a turning point up. But right now, if I want to catch the bottom, I might buy now as it is already below the -200 zone and co-incides with major data points in 2001, 2003 and 2009.




If I already have a comfortable allocation to equities, maybe I won't consider adding now.
That said, do remember that I am increasing my allocation in a position of 0%. So, I could be doing it slowly whenever a dip occurs.

1 comment:

www.greenworldbvi.com said...

I do not think Germany and the ECB will allow the Euro to collapse. Greece may default, but this is already priced into the markets. Plus, the US economy is clearly turning around.