Equity market going to rise or plunge further?..

Hey, what's going on with the market?!?... a question that is ringing in many of our minds and in fact, fundamentally the economic situation in the US is doing well despite the S&P downgrade, however, Europe is the culprit... unless the sovereign debt issue is resolved with solid measures being implemented, one of them letting countries that are weak to fail or default and kick them out of the Euro circle. By continuing to bail them out is only going to create more issues down the road and we will never get to invest in peace knowing we just buried a "time bomb".

Well many can say, what's the big deal with the debt ceiling? nothing too serious in my opinion... the US can still print money as they have always been doing and will continue so in the future.
The most critical day that many investors are waiting is Aug 26th the day the Fed will meet and many are expecting there will be some indication of stimulus as evident in the last few days whereby bargain hunters swooped in....

Tell you what, if by Friday the stock market is reasonably sustained, why would the Fed be doing anything? Another way of saying is why does the Fed need to say something to the tune of QE3 (for example)? They don't!!... the Fed has said that they will keep interest rates low until mid of 2013 and they will let the market ride out the rough waves... what makes you think the Fed would be announcing some stimulus for the economy or even QE3?

While I remain a buyer, I just don't think the market have reached the bottom on the overall... some stocks don't need to wait until the market tanks before they reach super cheap status... with the rate that the KLCI is going (for example), many stocks are already fundamentally cheap if you are to long them... Key is to spot them and take the risk...

Main concern here is Europe needs to do something fast before it drags the US banking system down with it...
Last I want to see is Dow Jones down more than 1000 points in a day.... To Germany, the big brother of Europe "Be a man , do the right thing".

So what now?...

The US Federal Reserve has decided to keep interest rates at the current level for the next 2 years.... US market reacted only to give up the gains the next day... With the ECB is buying Italian and Spanish bonds in an attempt to address the concern on the European sovereign debt issue,US economy is apparently slowing down...

With so much cash in the market, where do these money needs to go? Treasury bonds yield lesser than peanuts, commodity prices are dropping...stock market have suffered major selloff of late.... so what? buy gold? Well, may not be a bad thing but not a preferred. Why?

Simple, we need to understand what's the main issue here.

1) US debt problem is not new, the situation in US does not gets worse only of late.

2) Neither is Euro debt problem, so what if banks starts to fail? let them be. only the strong survives

3) Asia's economy is relatively strong and the next decade and beyond it will be Asia led by China and India.

4) Asian currency will rise with the fall of US dollar (continuous quantitative easing)

5) The problem today is 80% confidence crisis, 20% real financial problem.

What if France lose its AAA rating? - not surprising since US "lost" it too. Impact will be negligible. What if French banks incur major lost from the exposure to the euro governement debts? The damage is already done... Germany needs to take lead and work out the revamp to lead Europe out of the woods. I just don't think Italy will fall as many have feared.

The hedge funds and foreign institution funds need to pay dividend and where else to park their money to work for them if not Asia? For every major selloff like the one we've seen in the last few days, things are bound to recover at least 30% in the next 9 months or so.... so what's your take? I'm a buyer.

US market a dip or a start of the double dip?...

This is a very emotionally challenging moment...with the US Dow Jones index plunging close to 4.5% while the Nasdaq closes down >5%... S&P wiped out more than 1.28tri dollars in value... so just when the majority of the public felt the slightest tinge of relieve that the US manage to avoid a default, the stock market is being shorted on the ground that the US economy outlook is growing negative.... the continuous fear of Euro crisis...plus the impending job reports tomorrow...

So what is real message here? Is the economy really in trouble? or perhaps US re-entering another recession?

My opinion is this... Today's fall is merely caused "categorically valid" fear by hedge funds heading the pack to reduce risk exposure to the equity market and perhaps repositioning their portfolio for the next 2-3 quarters...

So is the spectre of QE3 getting stronger with today's selloff in equity? Yes, just look at the VIX.

As a matter of fact, QE3 looks almost certain should the job reports re-affirm investors' fear on the streets...US dollar value will continue to slide 3-6 months down the road. While the dollar will suffer because of the perception of a likely introduction of QE3, the impact to the equity market may not be a big as some may expect if it happens... What happen to day is people are hoarding cash instead of investing... people are held back by their fears to invest for the future and all the negative data released of late certainly reaffirm that.

Anyway, rule of thumb in investing is to keep some cash at least 30% of your total investment capital have to be in cash for opportunity like this... Main sectors that investors should take advantage of is the technology sector in my opinion. Tech will fare well as compared to the rest.

I personally don't believe this is the beginning of a "double dip"... but merely a short pullback in the stock market.... Keep a cool head and think rationally. Don't let the crowd fool you.

Like I mentioned in my earlier posting, stay hungry(look out for opportunity) and stay foolish(discard the herd mentality). Asia market will not be spared of the selloff but it will only be a short dip not and am not going to change my outlook on the equity market for the next 6 to 9 months from now...

Stock market...buy, sell or do nothing.

Well now that Obama has sign the debt bill into law, people are worried with the spending cuts and the impact on economy of the US that has a slightly above 400mil population... To be honest, the resolution to the debt issue is a no brainer and its merely how the politicians wanted to use it to score points. Regardless, spending cuts and tax structure revamp (impacting the rich) is essential, not cool but necessary.

Anyway with regards to US equity market I am very bullish on how the market will move in the next 6-9 months. US companies with exposure to Asian market particularly China and India will register growth and those with extremely well managed ones are going to continue to report extraordinary growth and earning reports down the road.

KLCI, on the other hand is expected to break 1600 soon... selective companies in sectors such as property, construction, plantation and leisure and hospitality is expected to lead the rise.

Stay hungry, stay foolish... don't follow the crowd.

By the way, the US will keep its AAA ratings... that's for sure.