ML S-Shares index - Jan-08

ML S-Shares index update
The objective of the ML S-shares index is to provide exposure to stocks likely to benefit from the growth in China’s economy in general and the money flow into Chinese companies listed on Singapore Exchange (S-shares) in particular.

QDII coming to town
We believe that when QDII fund managers look at S-shares, they will largely focus on S-shares that are reasonably sized and have sufficient trading liquidity.
There are also plans to require all newly launched funds to invest not more than 30% of assets in a single market to ensure proper risk diversification. This would lead new QDII funds to look beyond HK into Singapore as well as US and Europe.
We expect more QDII funds to be launched in the near future, which will further escalate interest in S-shares given their cheaper valuation compared to A-shares and HK-listed Chinese equities. These funds can invest in S-shares either directly or indirectly.
In view of the above, we believe S-shares should continue to be an attractive asset class to investors (including QDII funds) but investment should (and will likely) be in a selective and disciplined manner given the vast quality differences within the sector.


Composition of the ML S-shares index
Name - MarketWeight

COSCO 4.60%
Yangzijiang 4.60%
Yanlord Land Group Ltd 4.60%
China Hongxing Sports 4.60%
Synear Food Holdings 4.60%
China Energy Ltd 4.60%
China Aviation Oil Sing 4.60%
Ferrochina 4.60%
China Fishery Group Ltd 4.60%
Midas 4.60%
Fibrechem 4.60%
China Xlx Fertiliser Ltd 4.60%
China Milk Products 4.60%
Sino-Environment Tech 4.60%
Jiutian Chemical 4.60%
China Auto Electronics 4.60%
Sino Techfibre Limited 3.85%
Celestial Nutrifoods 3.74%
Capitaretail China Trust 3.33%
Asia Environment Hldgs 3.07%
Delong 2.96%
Pine Agritech 2.96%
Bio-Treat 2.27%
China Sport 2.21%
China Sky Chem 2.05%

Estimatged Date of Result Announcement

Singapore Press Hldgs Ltd 14-Jan-07
Singapore Exchange Limited 15-Jan-07
Innovalues Limited 29-Jan-07
Koda Ltd 30-Jan-07
SP Chemicals Ltd 5-Feb-07
ASL Marine Holdings Ltd 11-Feb-07
Aztech Systems Ltd 11-Feb-07
Inter-Roller Engineering Ltd 11-Feb-07
Singapore Food Industries Ltd 11-Feb-07
SNP Corporation Ltd 11-Feb-07
Eastern Asia Technology Ltd 28-Feb-07
Capitaretail China Trust 16-Jan-08
Singapore Petroleum Co Ltd 24-Jan-08
Keppel Land Limited 25-Jan-08
Multi-Chem Limited 25-Jan-08
Keppel Corporation Limited 30-Jan-08
SIA Engineering Co Ltd 5-Feb-08
Singapore Airlines Ltd 5-Feb-08
Singtel 5-Feb-08
China Milk Products Group Ltd 5-Feb-08
Capitamall Trust 11-Feb-08
Fraser And Neave, Limited 11-Feb-08
Surface Mount Tech (Hldgs) Ltd 11-Feb-08
Yaan Security Technology Ltd 11-Feb-08
Cosco Corporation (S) Ltd 12-Feb-08
Portek International Limited 12-Feb-08
Olam International Limited 13-Feb-08
Singapore Tech Engineering Ltd 13-Feb-08
Aqua-Terra Supply Co. Limited 13-Feb-08
KS Energy Services Limited 13-Feb-08
Capitaland Limited 14-Feb-08
Sembcorp Marine Ltd 14-Feb-08
Starhub Ltd 14-Feb-08
ECS Holdings Limited 14-Feb-08
DBS Group Holdings Ltd 15-Feb-08
Sembcorp Industries Ltd 15-Feb-08
Wilmar International Limited 15-Feb-08
Agva Corporation Limited 15-Feb-08
Petra Foods Limited 15-Feb-08
Asia Enterprises Holding Ltd 16-Feb-08
Genting Int'l Public Ltd Co 22-Feb-08
Noble Group Limited 22-Feb-08
Oversea-Chinese Banking Corp 22-Feb-08
Eucon Holding Limited 24-Feb-08
Neptune Orient Lines Limited 27-Feb-08
Thai Beverage Public Co Ltd 27-Feb-08
City Developments Limited 28-Feb-08
United Overseas Bank Ltd 28-Feb-08
Yanlord Land Group Limited 28-Feb-08
Telechoice International Ltd 28-Feb-08
Jardine Cycle & Carriage Ltd 29-Feb-08
Hongkong Land Holdings Limited 6-Mar-08
Jardine Strategic Hldgs Ltd 7-Mar-08

曾渊沧@股友通讯录 - 十二月份

各位朋友：

新年进步。2007 年是惊骇的一年。短短12 个月里，股市出现3 次大调整。第
一次调整与第二次调整，我都建议大家不要慌张。但是，去年十月份的通讯录，我第
一次警告大家：“不管你用什么衡量工具来衡量这个股市，我们都可以说现在的的确
确已进入泡沫时代，股价已经升得很高，是随时可以发生股灾的时候……。”
很不幸，海峡时报指数就是在2007 年十月升至最高点3906 点而开始大幅调
整，直今仍未恢复。

现在，中短期的关键是十月至今的调整出现了一个双底反弹之势，我们仍然得
耐心地观察这个反弹是否能突破3600 点。若然突破，可以再乐观一点。如果不能突
破，则得小心，看看会不会出现一浪低于一浪的走势。若是的话，就得准备大撤退，
大减持。

新加坡航空入股中国东方航空之事可以出现变数。以北京为基地的中国国际航
是东方航空的重要小股东，曾经公开反对这项入股。最近，国际航空的董事长李家祥
升了官，当上中国民航总局局长，管所有的航空公司。他若反对新航入股东航，则入
股之事会告吹。日前，国际航空母公司中航集团已公开说收购价太低，要求新航再出
高价，如果这宗收购不会成功，会打击新航及东航的股价。

展望2008 年，我倒也不悲观。本月底美国联邦储备局会再议息，相信会再减
息，减息有利减低美国次级贷款所带来的金融灾难。最坏的时刻可能是今年二月至三
月。当美国各大金融企业公布2007 年极差的业绩时，必然导致市场出现调整。但是，
那时候可能也是最佳时候趁低入市，特别是金融银行股。

去年房地产市道大丰收，但已开始放缓升势，销售速度也减慢，但相信今年房
价依然会上涨。因此也不必对房地产发展股太悲观。去年酒店股，工业股表现得不
错，今年应该可以继续看好。政府说今年的三大政策重点之一是陆路交通，因此，造
路建地铁的计划会推出基建材料，建筑公司股也可以看好。

大家可能也会担心中国的经济会放慢，宏观调控力度会加大。去年美国股市没
有在七、八月份的调整后创新高，道琼斯指数在14000 点阻力重重，而新加坡股市都
能在七、八月份的调整后再创新高，主要的力量来自中国。中国宣布港股直通车，使
到新加坡投资者憧憬有一日港股直通车会扩大至新加坡股直通车，还有QDII 也会扩大
至新加坡。后来，十一月初，中国总理温家宝亲自告诉大家为什么港股直通车会叫
停，股市也因此出现大调整。但是，我依然相信港股直通车只会延期，不会取消。时
间可能是2008 年或2009 年。因此，也不必急着卖光股票靠边站。

今年是北京奥运年，北京奥运会带动整个东亚、东南亚的旅游业，与旅游有关
的股也不宜看淡。

SBS

I like to look at SMRT and SBS as advertising media. That's the cash cow where Public Transport Council can not touch. For the latest quarter, revenue/profit from advertisement are 4.756m/3.08m and 7.441m/4.541m for SMRT and SBS respectively. The margin is sweet.

Note that all MRT stations are PRIME AREAS for retail rental, whereas bus interchanges and depots are not as good. I suppose that's the reason why SBS has not had a segment on Rental (5.8m revenue for whole of FY07). I believe too that the growth on rental will be significant given such a low base and the sweet margin (SMRT 2Q08: 9.822m/7.658m).

Bus fare is calculated using “CPI + X” formula and CPI basket has 22% weightage in "Transport and Communication". I am not sure how to prevent an inflation here (Read: Fare will continue to rise into the future). This should prevent loss-making for the Bus Operation for both companies.

End of the day, buy the Rental and Advertising businesses.


I will like to highlight that a up and rising star for SBS is the NEL line. This year onwards will be the re-rating of SBS whereby the trains are finally rolling in the profits. From FY04 operating loss of S$21m to S$5.7m YTDSept07 operating profits (FY07 could be as high as $7.5m). and remember there is a demographic/population shift to NEL. There are still plenty of empty land in NE Spore which are ideal for residential devt.

Other operating income (based on annual reports, at least half is of rental income), has increased from $9m(rental income of $5.8m) in FY06 to S$12m operating income in 9M07 (YTD Sept 07). Assuming half is rental; so 9M07's rental income is already more than prior year.


But I urged forumners to see this investment as mainly a dividend yield play (>8%) as a long term hedge against inflation. Capital appreciation is a bonus.

SBS-Transit

A fundamentally sound counter which gives >8% of dividend: SBS-Transit

It dropped from a high of $3.8 to $2.9+. Reason for drop is because of 3Q07 earnings dropped substantially as SBSTransit absorbed the 2% GST increase.

But from 1 Oct 07, the Public Transport Council approves a 1.8% bus fare "adjustment". So this will partially offset the impact of GST.

North East Line (NEL)
Reason for SBST hit a high of $3.8 is because of the turnaround of NEL. It is now quite a significant contribution to the bottomline. For those who use NEL line, you will noticed that its getting MORE and MORE crowded! a lot of new flats are being build at Buangkok area. More and more families (esp. young couples) are driven to Sengkang and even Punggol area because of the v high property prices. Therefore high probability that profits for NEL line will continue to go up.

More people may also take public transport with the increase in taxi fares and inflation.....

Rental Income
A point to note is that rental income for SBS transit is increasing as the redevelopments of bus interchanges (Toa Payoh, Sengkang and Ang Mo Kio) are bringing in income. There's further potential for this to increase. In a way, SBS-T is following SMRT in developing its premises to bring in more revenue.

Sustainability of dividends
This is mainly a dividend play stock (25-28.5 cents since 2004), therefore we need to be assured that dividends are to continue for years to come. Comfort Delgro owns 75% of SBST and is squeezing this cash cow for every cent possible to finance its overseas expansion... this is very evident whereby SBS-T paid 25 cents dividends in the last 3 years despite NEL bleeding badly.
Therefore SBS-T classify most of its dividend as "Special Dividend" (15 to 17cents) and this Special is usually paid out in 4Q-2007 together with final dividend.

But during this 3Q-2007, for the first time during this time of the year, a special dividend of 7 cents is declared.
This can mean 2 things, its either 7 cents is the ONLY Special dividend that is to be paid during the year, OR there's a shift of the bulk of Special dividends to FINAL dividend.
So there's 2 different perspective on the signalling effect of dividends. Its up to each to judge.

Dividend Yield
Assuming that dividend of 25 cents is given for the full year, at current price of 2.93, dividend yield is 8.5%.

How the capex will impact its valuation or its ability to pay dividends going forward ?

LAND TRANSPORT SECTOR - A Complex Issue

The Prime Minister Mr Lee listed land transport as one of 3 significant policy decisions in 2008 in his New Year Message.

He noted the following:
- Key focus is to improve our public transport so that more Singaporeans will take buses and trains, instead of driving cars.
- Singapore roads are getting more crowded and traffic jams worsening.
- While measures like building more rail lines are long-term in nature, improving bus services, making transfers more seamless and convenient, can and should be made more quickly.

PM Lee suggested the following solutions:
- Lowering the vehicle growth rate;
- Stepping up measures to manage demand for road space: enhance the ERP and extend its coverage so that driving costs significantly more; and
- Balancing the above with lower vehicle ownership taxes.

Comments
1. The PM’s New Year Message is a reminder the Land Transport Review, the first in 10 years, is not ready (it was to have been completed by end’07), underscoring the complexity of the undertaking (eg opposing views on whether there should be one or more public transport operators).

2. What is however clear is the need to lower vehicle growth rate - recall former PM Goh had allowed for a net 3% annual increase. And driving costs, especially ERP charges, will be significantly higher (charging 50 cents to a dollar on ECP since November does not seem to have made a difference).

3. Tan Chong (TCIL) is probably the “purest” car play on the local market, hence likely to be affected by lower COE availability. But TCIL is an unattractive stock in any case, having been recently rebuked by the HK Exchange for poor corporate governance.

4. Jardine C&C is today more a proxy for the Indonesian, than Singapore, car market (where
sales of Mercedes Benz, its lost lucrative marque, have slowed in recent years) while WBL has a
myraid other interests.

5. Comfort Delgro’s SBS Transit should, in our opinion, merge with SMRT. But this is likely fraught with political sensitivity (over fare increases), and may or may not become reality.
Good thing however is that they offer attractive yields. (Comfort Delgro paid 10.05 cents per share, net, for 12 months ended Jun’07, giving a yield of 5.5% at $1.83. SMRT’s yield is 4.5% at $1.68 based on 7.5 cents net for 12 months to Sept’07.)

6. We prefer SMRT.

Dividend Investing

I have a couple different portfolios. With my older one, I mostly use dividend investing. It’s a portfolio for the long-term. My newer one is for Magic Formula investing. We're using it for money we want to use in about 4 years. Since most people already know about the Magic Formula, I figured I'd write about dividend investing this time.

I got the dividend investing idea from Motley Fool. Originally from the "Dogs of the Dow" plan back around 2000. “Dogs of the Dow” is simple. Pick the 5 stocks from the Dow with the highest dividend yield and re-adjust once a year. It worked well in the late 90s. It’s had some rougher years lately.

However, I never really did the "Dogs of the Dow" once I discovered that there were companies out there who paid 12% dividends. I actually just started randomly investing in very high dividend stocks with minimal screening. Some examples were AHR, CARS (gone now), KMP, and HT.

That actually worked out fairly well for me at first. But I eventually realized that those are some pretty darn volatile stocks. Mostly REITs and Energy stocks. So I figured it was time to diversify. I started out by adding more large cap stocks. I actually picked several of the Dogs of the Dow. I added in MO, CAT, GE, C, and a few others. At this point, my goal was to get the portfolio to have a total dividend yield of 7% or higher. Ideally, the stocks would also grow some and I could get return about 15% per year.

The 7% has been pretty tough, especially lately. REITs have been hit pretty hard so the portfolio has had a dividend yield closer to 5%. However, until this year, the growth has been pretty steady so over the last 5-ish years, I've averaged about 12% return per year.

My latest dividend investing tactic was to take the good dividend stocks and screen for value and quality. I'm not a huge stats geek, so I just concentrated on 2 numbers, P/E, and PEG. Then to balance it out I used Morningstar to devise a quality score. If a stock had a Morningstar rating of A,A,A, I'd give it a 3. A,D,D would be a 1. D,D,D would be a 0. Then I could give that score some weighting and use it in a formula. My basic screening formula was something like (40-P/E) + (10-PEG) + (MS rating) + (Div*10) or something like that so I could rank stocks.That’s about it.

Lately, of course, my new money has been going into “Magic Formula” stocks. However, several of these have high dividends as well (CHKE, FDG, PCU). Some of those, I've also purchased in my dividend portfolio. Basically, these are the best of both worlds. Good enough for “Magic Formula” and good enough for Dividend investing. Those are definitely my favorites. If I could find enough, I’d only buy this kind of stock.

Here's some lists.

Favorite long-term dividend stocks: AHR, HT, MMP, O, NRGY

Favorite Magic Formula AND Dividend stocks: PCU, FDG, CHKE, GNI, PBT

Dividend stocks that flopped: IMH, NEW, RAS (however, RAS only flopped after making me over 100% in dividends).

Investing in Dividend Stocks… The Truth about Dividends and 4 Ideas That'll Surprise You

Sam Zell pays you big dividends…

As America's biggest office landlord, Zell paid out $700 million to shareholders of his company, Equity Office Properties, last year - that amounted to a 7% dividend. But should Zell have written $700 million in checks to shareholders? Or would we, as shareholders, have been better off if he had reinvested the earnings in his company (were that an option)?

The real questions are… Should we care about investing in dividend stocks? Should we favor companies that pay dividends over those that don't? Should companies pay dividends at all? And how much should a company pay?

I'll provide you with some answers to these questions… answers to help you better understand-and profit from-dividends. Let's start out with the traditional wisdom… and then finish with my take…

Dividend Investing Is the Holy Grail… To Academics, at Least

When I was in college studying finance, we were taught what the professors considered the "Holy Grail" in determining the proper value of a stock. It's called the "Dividend Discount Model." It wasn't until after I graduated and tried to apply it in the real world that I realized the professor's Holy Grail about investing in dividend stocks was actually completely worthless…

The basic idea of the professor's Holy Grail is that the current value of a stock is the value of all its future dividends, discounted back to the present. It's a nice theory. But it doesn't work… The theory whittles down to this formula: Dividend DIVIDED BY (required return on stock MINUS expected growth rate) EQUALS value.

When you try to apply this formula to a stock like Microsoft a few years ago, you can see where all the problems come in… The whole thing amounts to an enormous amount of guesswork - assumptions about growth rates, returns, and when they'll pay dividends, if ever. With a few bad guesses, you can easily come up with a negative value as the fair value for Microsoft's shares.

In short, using dividends to value stocks (as they teach in school) seems like a colossal waste of time.

Beyond Theory… Let's Look Into What's Really Happening with Dividend Investing

There are a few theories on investing in dividend stocks that I like. Let's consider them. There's…

1) The signaling hypothesis:
This is the idea that investors don't necessarily care about dividends in particular, but they do care about changes in a firm's dividend policy. Investors regard changes in dividends as signals of management's opinion of the company. If management raises the dividend, it's optimistic. The stock will react positively. If it cuts its dividend, the firm is in dire straits, and the stock might crater. So the change in dividend is a signal about the company's prospects.

2) The dividend irrelevance theory:
The dividend irrelevance theory is the idea that a company's dividend policy really has no effect on the value of the company. Instead of calling dividends the Holy Grail, this is the opposite idea…

It's the idea that a shareholder can simply create his own dividend policy if he wants… If a person has $100,000 and wants income of $5,000 a year from that portfolio, that person can simply sell $5,000 worth of stock. He doesn't have to receive it in dividend income. This theory says, "Who cares about dividends?"

3) The bird in the hand theory on dividend investing:
This theory says, "I do… I care about dividends and investing in dividend stocks." When a company pays me hard cash, I know that the company is really making money. It's not just telling me it's making money. In the post-Enron, post-WorldCom world, there's something to be said for cash in hand. This is the idea that investors value a cash payment in their hands over the hope of future profits.

4) The clientele effect:
This is an interesting theory… a company tends to attract a set of investors who like its dividend policy. So if a company wants a stable shareholder base, it could have a stable policy of paying out a good percentage of its earnings in dividends. But then the company risks a huge shareholder defection and a serious fall in share price if it cuts its dividend.

What I Think About Investing in Dividend Stocks…

I don't think that dividends are the right way to value stocks, despite what they teach in school. But I do think the four theories above are all true.

As for me personally, I do like a bird in the hand. Future profits are uncertain. In uncertain times, I like to get paid the cash. The big check hitting your account out of the blue is nice. Whether it's true or not, it feels less speculative…

In sum, I like investing in dividend stocks and receiving checks at regular intervals that dividends offer (particularly if there is no tax effect, like in a retirement account). But ultimately dividends shouldn't be the primary reason for an investment. The prospects for the potential investment are dramatically more important than the company's dividend policy.

Only when choosing between two nearly identical opportunities would I choose the one with the substantially higher dividend. That bird in the hand can tip the scales. But don't let it do much more than that…

The Power of Dividend Growth

Many investors think of dividend-paying companies as boring, low-return investment opportunities. Compared to high-flying small-cap companies, whose volatility can be pretty exciting, dividend-paying stocks are usually more mature and predictable. Though this may be dull for some, the combination of a consistent dividend with an increasing stock price can offer an earnings potential powerful enough to get excited about.

High Dividend Yield?
Understanding how to gauge dividend-paying companies can give us some insight into how dividends can pump up your return. A common perception is that a high dividend yield, indicating the dividend pays a fairly high percentage return on the stock price, is the most important measure; however, a yield that is considerably higher than that of other stocks in an industry may indicate not a good dividend but rather a depressed price (dividend yield = annual dividends per share/price per share). The suffering price, in turn, may signal a dividend cut or, worse, the elimination of the dividend.

The important indication of dividend power is not so much a high dividend yield but high company quality, which you can discover in its history of dividends increasing over time. If you are a long term investor, looking for such companies can be very rewarding.

Dividend Payout Ratio
The dividend payout ratio, the proportion of company earnings allocated to paying dividends, further demonstrates that the source of dividend profitability works in combination with company growth. Therefore, if a company keeps a dividend payout ratio constant, say at 4%, but the company grows, that 4% begins to represent a larger and larger amount. (For instance, 4% of $40, which is $1.60, is higher than 4% of $20, which is $0.80).

Let's demonstrate with an example:
Let's say you invest $1,000 into Joe’s Ice Cream company by buying 10 shares, each at $100 per share. It's a well-managed firm that has a P/E ratio of 10, and a payout ratio of 10%, which amounts to a dividend of $1 per share. That's decent, but nothing to write home about since you receive only a measly 1% of your investment as dividend.

However, because Joe is such a great manager, the company expands steadily, and after several years, the stock price is around $200. The payout ratio, however, has remained constant at 10%, and so has the P/E ratio (at 10); therefore, you are now receiving 10% of $20 in earnings, or $2 per share. As earnings increase, so does the dividend payment, even though the payout ratio remains constant. Since you paid $100 per share, your effective dividend yield is now 2%, up from the original 1%.

Now, fast forward a decade: Joe's Ice Cream Company enjoys great success as more and more North Americans gravitate to hot, sunny climates. The stock price keeps appreciating and now sits at $150 after splitting 2 for 1 three times. (If you are uncertain about share splits, check out Understanding Stock Splits.) This means your initial $1,000 investment in 10 shares has grown to 80 shares (20, then 40, and now 80 shares) worth a total of $12,000. If the payout ratio remains the same and we continue to assume a constant P/E of 10, you now receive 10% of earnings ($1,200) or $120, which is 12% of your initial investment! So, even though Joe's dividend payout ratio did not change, because he has grown his company the dividends alone rendered an excellent return--they drastically expanded the total return you got, along with the capital appreciation.

For decades, many investors have been using this dividend-focused strategy by buying shares in household names such as Coca-Cola, Johnson & Johnson, Kellogg, and General Electric. In the example above we showed how lucrative a static dividend payout can be; imagine the earning power of a company that grows so much as to increase its payout. In fact, this is what Johnson & Johnson did every year for 38 years (since 1966)! If you had bought the stock in the early 1970s, the dividend yield that you would have earned between then and now on your initial shares would’ve grown approximately 12% annually. By 2004, your earnings from dividends alone would have given a 48% annual return on your initial shares!

This chart of Johnson & Johnson’s adjusted share price, which accounts for both splits and dividends, visually demonstrates just how powerful an appreciating share price can be in conjunction with a steadily increasing dividend. The split adjusted share price for JNJ at the beginning of 1983 was $0.09; in mid-2004, the stock traded for a split adjusted price of around $55. Wow!

Conclusion
We'll be the first to admit this might not be the sexiest investment strategy out there. But over the long run, using time tested investment strategies with these "boring" companies will achieve returns that are anything but boring. For an in-depth introduction to different investment strategies, including the income investing strategy, check out the Guide to Stock Picking Strategies.

美卡債拖欠率遽增 專家發出警告

美國人遲付信用卡帳單的情況越來越普遍，過去這一年未按時付帳單（delinquency）和不履行還款義務（default）的比率增加到兩位數字，專家並警告未來情況將更嚴重。

美聯社（AP）分析了美國最大信用卡發卡公司的財務資料，發現拖欠還款超過90天的信用卡帳戶增加最多。專家說，許多屋主財務情況惡化，部分是次級房貸危機的副產品。史丹福大學訪問學者，也是信用危險專家的克里夫‧譚（Cliff Tan，譯音）說：「債務最終會滲透到其他領域，可能從房貸開始，滲透到信用卡，也可能反其道而行。」

AP審查了17家大信用卡信託基金，發現遲付信用卡帳單至少30天的帳戶金額，今年10月比去年同期增加26%，達173億元，占全部信用卡未還本息的4%以上。這些信用卡的發卡公司包括美國商業銀行、Capital One和零售商家庭站（Home Depot）、華爾市場（Wal-Mart）等。

根據各信託基金向證券管理委員會提出的報告，不履行還款義務的比率10月也上升18%，達9億6100萬元。不履行還款義務是指貸款公司基本上已放棄借款人會還款的希望，並沖銷虧損。

嚴重的拖欠還款也大幅上升，一些全國最大的貸款公司，包括Advanta、GE Money Bank和匯豐銀行（HSBC），都報告拖欠還款至少90天的帳戶金額，比去年同期增加50%以上。

AP分析了由信用卡信託基金控制的3億2500萬個個人信用卡帳戶，這些信託基金是由信用卡發卡公司設立的，旨在把信用卡債務出售給投資人，類似許多銀行把次級貸款加以包裝和出售，出售給投資人的信用卡債務，占聯準會認定美國人信用卡債務9200億元的45%。

即使最近變壞的貸款大增，信用卡業務仍是非常非常賺錢的，這主要是由於其利率最高可達36%，再加上延遲還款的罰款和其他罰款。但各信託基金21日提出報告，顯示遲付信用卡還款的趨勢延續到11月，11月拖欠還款和不履行還款義務的比率都比去年同期增加，許多也比10月增加。

許多經濟學家預測，拖欠還款和不履行還款義務在節日購物季過後，將進一步增加，Economy.com公司首席經濟學家和共同創辦人贊迪說，房貸問題是造成拖欠信用卡還款的原因之一，其他原因還包括中西部、南部和西部部分地區疲弱的工作市場，這些地區的房地產市場已受重創。此外，專家也表示，美國長期以來認為債務，即使是高利率的信用卡債務，都不是大問題，消費者無窮的欲望和花費，是美國的經濟基礎，但人們將承擔自己行為的後果，這是一個痛苦的過程

New STI

New STI (30 Stocks) - From 10 Jan 2008

CAPITALAND
CAPITAMALL TRUST
CITY DEVELOPMENTS
COSCO CORPORATION (S)
DBS GROUP HOLDINGS
FRASER AND NEAVE
GENTING INTERNATIONAL
HONG KONG LAND
JARDINE CYCLE & CARRIAGE
JARDINE STRATEGIC
KEPPEL CORPORATION
KEPPEL LAND
NEPTUNE ORIENT LINES
NOBLE GROUP
OLAM INTERNATIONAL
OVERSEA-CHINESE BANKING CORPORATION
SEMBCORP INDUSTRIES
SEMBCORP MARINE
SIA ENGINEERING
SINGAPORE AIRLINES
SINGAPORE EXCHANGE
SINGAPORE PRESS HOLDINGS
SINGAPORE TECHNOLOGIES ENGINEERING
SINGAPORE TELECOM
STARHUB
THAI BEVERAGE
UNITED OVERSEAS BANK
WILMAR INTERNATIONAL
YANGZIJIANG SHIPBUILDING HOLDINGS
YANLORD LAND GROUP

Investing tricks of the wealthy

RECENTLY, I asked a wealth manager whether an average investor can make more money by mimicking the investment strategies of the rich. He answered: not really. Later he explained that the rich invest differently because, well, they're different. They can take more risks because they have more money to lose. Furthermore, they can speculate and have a short-term view because losing money is not a problem for them.

Well, I do not totally agree with his opinion. For the past few years, I have been advising wealthy people on their financial well-being. As a financial adviser, my job is to help these rich clients search for financial services who meet their needs. Throughout my interaction with them, I have gained an insight into how they accumulate wealth.

I can tell that the rich don't necessarily have any special insights into which stocks or assets are going to soar. But what they do have is the confidence to apply a disciplined and systematic approach to managing their money. They have the habit of applying common sense to each investment opportunity facing them. Even though the interests of wealthy investors are not always necessarily aligned with those of the average investor, there are a number of principles and strategies employed by wealthy investors that do apply to virtually anyone who seeks to invest for the future.

It is a common fact that most financial textbooks teach us that in order to build wealth we need diversification, wealth preservation and strategic growth. To me, this not an accurate statement in itself because two of those strategies - diversification and preservation - don't help to build wealth. Perhaps the rich use these two strategies to maintain wealth.

After they have accumulated great wealth, they didn't use the strategies during the accumulation phase and they tend to preserve the wealth they have built. Yet average investors have not yet reached the ranks of the financially independent, so they are generally more concerned about investment growth and losses. The wealthy, as a general rule, do not have this concern. At the same time, they also learn how to avoid taxes legally so that they can keep their money working for them and learn how to pass their assets on to the future generations without the government taking a huge part of what they spent their lives building.

Another common perception is that the rich take more risk, therefore they accumulate wealth faster. However, the truth is that the majority of rich people do not build their fortunes by speculating on high-risk investments as is commonly believed. My experience tells me that the rich do not heavily rely on high-risk investment vehicles like hedge funds or venture capital funds but are moderate risk takers who put more than half of their money into listed securities and keep a large amount as cash. The reason for this is that they have so much money that even if they do not meet their goals for investment growth, it would not be bad news to them; however losing their financial independence would be devastating.

So how do the rich invest? Unlike the average investor, the rich think long term in most of their investment strategies. They believe that there is power in long-term thinking and many of them make it habit of doing so. Great investors like Warren Buffett - his successes in investment include Washington Post Co, where Berkshire invested US$11 million in 1973 and which investment was worth US$1.3 billion at the end of 2006. That is 33 years of holding power which demonstrates his investment philosophy - always invest for the long term. Hence, most rich do not engage in short-term speculation but have a long-term goal in mind.

However, the rich make use of risk by taking advantage of risk. They often build fortunes using volatile assets and investments but that does not mean they were engaging in risky behaviour. They understand the risk and embrace risk because they know it always brings an opportunity for growth; however, the average investor is fearful of risk. Nevertheless, taking risk for the rich does not mean taking a shot in the dark. The rich take calculated risk that means to gain knowledge first and to consider the consequences of failing before taking action. The rich overcome fear with knowledge as knowledge can cause fear to fade away.

The rich also demand value for their money. Otherwise, how do you think they got to be rich in the first place? Value to them is buying assets at a discount to its intrinsic value. So for them the right time to buy is when there is weakness in the market. They buy when others are despondently selling and sell when others are greedily buying. This requires the greatest fortitude but also has the greatest rewards. This bargain-hunting approach to buying value will enable them to buy quality assets at reasonable prices. So they buy when there is bad news and sell on good news. For instance, some of the wealthy invest because they understand that the weakness is only temporary, and the stock price had fully priced in negative news and it was time for them to hunt for bargains again.

If we look back at the Singapore stock market, there are many opportunities for investors to bargain hunt and buy on bad news, e.g. the Asian financial crisis in 1997/98, the Sept 11 terrorist attack and SARS. The rich take advantage of these negative events to buy assets, whether in real estate or stocks and that's where value can be found. However, the average investor will seek to sell and get out of a bear market fearing that the asset will fall in value.

To the rich, probably now is the best time to sell and get out of the market, where all assets prices have gone up in value. Over the past years, we have very good reports about our economic growth and all the good news are now factored into the stock price, so for the rich it's time to sell.

Another investing secret of the rich is that they approach investing like a business. They set up a business plan, establish annual targets, then analyse the results and they have reasonable expectation. At the end of the day what they want to achieve is increasing their net worth and not their income. The rich truly understand the meaning of working smart not working hard: to focus on growing your net worth is working smart but working for an income is working hard. As their net worth grows, they do not increase their spending, instead they increase their investment. By repeating this over the years, once their net worth is built to a certain level, they are free to do what they want. Hence, to increase your net worth you need patience, knowledge, and wisdom.

Often they are not willing to pay more for investment services simply because they find a particular adviser to be charming or knowledgeable. Nor do they chase after the hottest manager or the most publicised fund. Instead, they go shopping for the best combination of reasonable fees and consistently good performance. However, they will pay for advice from people who have specialised knowledge in a field they need to learn about. They don't believe in free advice as it can often be the most expensive advice.

As you can see, most investing secrets of the rich are nothing more than a combination of basic common sense and knowledge. The difference between the rich and the average investor is that they have the self-confidence to stick to the basics and to find out what they need to know. They don't get caught up in the theory of the week or the trend of the month. It's an approach that's easy to articulate but difficult to follow.

However, average investors can learn important lessons from the wealthy, specifically the need to manage both risk and their own investment expectations. The failure to match expectations to the risk an investor is willing to take can result in frequent switching among investments, or even worse. Now the good news for the average investor is that you can apply many of the same techniques to your own investments, no matter how big or small your portfolio is.

Dividend Investing

One can be a value or growth oriented investor. Long term results favour value investing. Dividend growth investing combines the two approaches by looking for stocks that are undervalued but which have high and sustainable growth rates. This essay by John Dorfman is worth reading from this perspective.

•Growth of yield is the single best piece of information an investor can have since it implies:

–A company is financially strong enough to raise its dividend.
–There are sufficient earnings to support a dividend increase.
–Management has a clear commitment to grow the company.
–Management is confident enough about future cash flows to share current prosperity with share holders.

•Rising dividends impact a stock’s total return. All things being equal, when the dividend increases over a period of time, the stock price increases proportionately. Moreover, a rising dividend creates additional appreciation based on the appeal to investors of expected future dividend growth.

•A simple rule of thumb: CURRENT YIELD + DIVIDEND GROWTH = EXPECTED AVERAGE ANNUALIZED TOTAL RETURN

•Analysis starts with quantitative and financial screens. Evaluated are:

•Cash Flow •High projected growth of dividend
•Low payout ratios •High dividend yield
•Balance sheet strength •Consistent dividend growth history

Using high dividend yield as a screen for stocks

Readers of Show Me The Money 2 by Ms Teh hooi Ling would have came accross this article she published in the Business Times on 5 July 2003.

In that article, she explore using high dividend yield as a screen for stocks, measuring their performance against those that do not. It was found that your chances of picking a winner increases if you screen stocks that pays their shareholders well. Also a large proportion of the stock’s positve equity returns was due to the dividend component thater than the price appreciation component.

She listed down some companies that were providing above average yields. All stocks then was yielding at least 4.2% to 10.4% (thats my beloved ASJ btw). I Thought its interesting to see how they were doing this 3 years since she release that article.

I calculated the total dividend returns as well as the price appreciation. The results are listed below. Note that F&N and SPH subsequently had a split, so I couldn’t effectively calculate them.

One can gather a few things from the data.
--The dividend yield of all stocks were at least 5% per annum.
--Dividend returns have reduce the capital losses of many counters. However they still underperformed the market.
--Well covered (blue chip stocks) tend to perform better than those ulu ones.
--Average yield was 11% per annum.

All stocks still give out dividends during this period one way or another. Note that some counters such as ASJ and Transit did stop giving during some of the years.

Conclusion:
--Looking at high yields is not enough.
--Yield stocks which cannot expand its free cashflow, ROE consistently, Average
management will most likely be bad investment as well.

Dividends can be important drivers for your overall returns. But if you buy at the wrong price, your end result will not look good either.

Risk in picking dividend stocks

The strategy has the potential to outperform the market as a whole, but stock selection should not be made on the basis of dividend profile alone to optimise the risk and return available.

Decreasing the risk
Consideration should always be given to all available company information, such as the quality of the balance sheet, cash flows and growth prospects. Companies that pay higher dividend yields on a sustained basis tend to operate in mature established industries. This can make them less volatile and not as high risk as others, but it is still important to diversify geographically and across sectors to decrease the overall portfolio risk.

Investing through a fund has some noteable advantages over directly purchasing the same underlying assets. Firstly, by investing in a collective fund an individual can cost-effectively gain exposure to a broad selection of stocks.

Typically, a fund would have a minimum investment amount, but this investment would gain exposure to the performance of the whole portfolio within the fund.

Except for very large investments, it can be difficult to cost-effectively purchase the same diverse range of stocks directly.

Taxation of funds
The taxation treatment of funds is also a major factor in deciding whether it is suitable to invest in this way, and is particularly important in relation to investing in equities with a high dividend yield.

While different classes of investor are subject to differing tax regulations, and everybody’s individual situation is different, investing in a high yield equity fund would generally be considered more attractive from a tax perspective than direct investment.

Dividend income received by an individual is liable to income tax at that person’s marginal rate.

This can impact on the attractiveness of high yielding equities, particularly for those investors paying income tax at the higher rate as this is significantly higher than the tax rate chargeable on capital gains. Direct investment in equities therefore carries this potential drawback.

Rich Man Poor Man

The article is written by Richard Russell. John Mauldin wrote a introduction to this article:

What can one say about my friend Richard Russell without using a lot of superlatives? Richard has been writing and publishing the Dow Theory Letters since 1958, and never has he missed an issue! It is the longest newsletter service continuously published by one person in the investment business. Richard is now 80 years old, and writes an extremely popular daily e-letter, full of commentary on the markets and whatever interests him that day. He gets up at 3 am or so and starts his daily (massive) reading and finishes the letter just after the markets close. He is my business hero.

He was the first writer to recommend gold stocks in 1960. He called the top of the 1949-66 bull market, and called the bottom of the bear market in 1974 almost to the day, predicting a new bull market. (Think how tough it was to call for a bull market in late 1974, when things looked really miserable!) He was a bombardier in WWII, lived through the Depression, wars, and bull and bear markets. I would say that Russell is one of those true innate market geniuses that have simply forgotten more than most of us will ever know, except I am not certain he has forgotten anything. His daily letter is loaded with references and wisdom from the past and gives us a guide to the future.

When I asked Richard to contribute an article, I wanted his wisdom more than his actual market theory, and that is what he has given us. You (and your kids!) should read this again and again! Richard lives in La Jolla with his wife Faye.

-------------------------------------------------------------------------------------

Making money entails a lot more than predicting which way the stock or bond markets are heading or trying to figure which stock or fund will double over the next few years.
For the great majority of investors, making money requires a plan, self-discipline, and desire. I say “for the great majority of people,” because if you’re a Steven Spielberg or a Bill Gates you don’t have to know about the Dow or the markets or about yields or price/earnings ratios. You’re a phenomenon in your own field, and you’re going to make big money as a by-product of your talent and ability. But this kind of genius is rare.

For the average investor, you and me, we’re not geniuses so we have to have a financial plan. In view of this, I offer below a few rules and a few thoughts on investing that we must be aware of if we are serious about making money.

I. The Power of Compounding

Rule 1: Compounding.
One of the most important lessons for living in the modern world is that to survive you’ve got to have money. But to live (survive) happily, you must have love, health (mental and physical), freedom, intellectual stimulation — and money. When I taught my kids about money, the first thing I taught them was the use of the “money bible.” What’s the money bible? Simple, it’s a volume of the compounding interest tables.

Compounding is the royal road to riches. Compounding is the safe road, the sure road, and fortunately anybody can do it. To compound successfully you need the following: perseverance in order to keep you firmly on the savings path. You need intelligence in order to understand what you are doing and why. You need knowledge of the mathematical tables in order to comprehend the amazing rewards that will come to you if you faithfully follow the compounding road. And, of course, you need time, time to allow the power of compounding to work for you. Remember, compounding only works through time.

But there are two catches in the compounding process. The first is obvious — compounding may involve sacrifice (you can’t spend it and still save it). Second, compounding is boring — b-o-r-i-n-g. Or I should say it’s boring until (after seven or eight years) the money starts to pour in. Then, believe me, compounding becomes very interesting. In fact, it becomes downright fascinating!

In order to emphasize the power of compounding, I am including the following extraordinary study, courtesy of Market Logic, of Ft. Lauderdale, FL 33306.

In this study we assume that investor B opens an IRA at age 19. For seven consecutive periods he puts $2,000 into his IRA at an average growth rate of 10% (7% interest plus growth). After seven years this fellow makes NO MORE contributions — he’s finished.

A second investor, A, makes no contributions until age 26 (this is the age when investor B was finished with his contributions). Then A continues faithfully to contribute $2,000 every year until he’s 65 (at the same theoretical 10% rate).

Now study the incredible results. B, who made his contributions earlier and who made only seven contributions, ends up with MORE money than A, who made 40 contributions but at a LATER TIME. The difference in the two is that B had seven more early years of compounding than A. Those seven early years were worth more than all of A’s 33 additional contributions.

This is a study that I suggest you show to your kids. It’s a study I’ve lived by, and I can tell you, “It works.” You can work your compounding with muni-bonds, with a good money market fund, with T-bills, or say with five-year T-notes.

Rule 2: Don’t Lose Money.
This may sound naive, but believe me it isn’t. If you want to be wealthy, you must not lose money; or I should say, you must not lose BIG money. Absurd rule, silly rule? Maybe, but MOST PEOPLE LOSE MONEY in disastrous investments, gambling, rotten business deals, greed, poor timing. Yes, after almost five decades of investing and talking to investors, I can tell you that most people definitely DO lose money, lose big-time — in the stock market, in options and futures, in real estate, in bad loans, in mindless gambling, and in their own businesses.

Rule 3: Rich Man, Poor Man.
In the investment world the wealthy investor has one major advantage over the little guy, the stock market amateur, and the neophyte trader. The advantage that the wealthy investor enjoys is that HE DOESN’T NEED THE MARKETS. I can’t begin to tell you what a difference that makes, both in one’s mental attitude and in the way one actually handles one’s money.

The wealthy investor doesn’t need the markets, because he already has all the income he needs. He has money coming in via bonds, T-bills, money-market funds, stocks, and real estate. In other words, the wealthy investor never feels pressured to “make money” in the market.

The wealthy investor tends to be an expert on values. When bonds are cheap and bond yields are irresistibly high, he buys bonds. When stocks are on the bargain table and stock yields are attractive, he buys stocks. When real estate is a great value, he buys real estate. When great art or fine jewelry or gold is on the “giveaway” table, he buys art or diamonds or gold. In other words, the wealthy investor puts his money where the great values are.

And if no outstanding values are available, the wealthy investors waits. He can afford to wait. He has money coming in daily, weekly, monthly. The wealthy investor knows what he is looking for, and he doesn’t mind waiting months or even years for his next investment (they call that patience).

But what about the little guy? This fellow always feels pressured to “make money.” And in return he’s always pressuring the market to “do something” for him. But sadly, the market isn’t interested. When the little guy isn’t buying stocks offering 1% or 2% yields, he’s off to Las Vegas or Atlantic City trying to beat the house at roulette. Or he’s spending 20 bucks a week on lottery tickets, or he’s “investing” in some crackpot scheme that his neighbor told him about (in strictest confidence, of course).

And because the little guy is trying to force the market to do something for him, he’s a guaranteed loser. The little guy doesn’t understand values, so he constantly overpays. He doesn’t comprehend the power of compounding, and he doesn’t understand money. He’s never heard the adage, “He who understands interest, earns it. He who doesn’t understand interest, pays it.” The little guy is the typical American, and he’s deeply in debt.

The little guy is in hock up to his ears. As a result, he’s always sweating — sweating to make payments on his house, his refrigerator, his car, or his lawn mower. He’s impatient, and he feels perpetually put upon. He tells himself that he has to make money — fast. And he dreams of those “big, juicy mega-bucks.” In the end, the little guy wastes his money in the market, or he loses his money gambling, or he dribbles it away on senseless schemes. In short, this “money-nerd” spends his life dashing up the financial down escalator.

But here’s the ironic part of it. If, from the beginning, the little guy had adopted a strict policy of never spending more than he made, if he had taken his extra savings and compounded it in intelligent, income-producing securities, then in due time he’d have money coming in daily, weekly, monthly, just like the rich man. The little guy would have become a financial winner, instead of a pathetic loser.

Rule 4: Values.
The only time the average investor should stray outside the basic compounding system is when a given market offers outstanding value. I judge an investment to be a great value when it offers (a) safety, (b) an attractive return, and (c) a good chance of appreciating in price. At all other times, the compounding route is safer and probably a lot more profitable, at least in the long run.

II. Time
TIME: Here’s something they won’t tell you at your local brokerage office or in the “How to Beat the Market” books. All investing and speculation is basically an exercise in attempting to beat time.

“Russell, what are you talking about?”

Just what I said — when you try to pick the winning stock or when you try to sell out near the top of a bull market or when you try in-and-out trading, you may not realize it but what you’re doing is trying to beat time.

Time is the single most valuable asset you can ever have in your investment arsenal. The problem is that none of us has enough of it.

But let’s indulge in a bit of fantasy. Let’s say you have 200 years to live, 200 years in which to invest. Here’s what you could do. You could buy $20,000 worth of municipal bonds yielding, say, 5.5%.

At 5.5% money doubles in 13 years. So here’s your plan: each time your money doubles you add another $10,000. So at the end of 13 years you have $40,000 plus the $10,000 you’ve added, meaning that at the end of 13 years you have $50,000.

At the end of the next 13 years you have $100,000, you add $10,000, and then you have $110,000. You reinvest it all in 5.5% munis, and at the end of the next 13 years you have $220,000 and you add $10,000, making it $230,000.

At the end of the next 13 years you have $460,000 and you add $10,000, making it $470,000.

In 200 years there are 15.3 doubles. You do the math. By the end of the 200th year you wouldn’t know what to do with all your money. It would be coming out of your ears. And all with minimum risk.

So with enough time, you would be rich — guaranteed. You wouldn’t have to waste any time picking the right stock or the right group or the right mutual fund. You would just compound your way to riches, using your greatest asset: time.

There’s only one problem: in the real world you’re not going to live 200 years. But if you start young enough or if you start your kids early, you or they might have anywhere from 30 to 60 years of time ahead of you.

Because most people have run out of time, they spend endless hours and nervous energy trying to beat time, which, by the way, is really what investing is all about. Pick a stock that advances from 3 to 100, and if you’ve put enough money in that stock you’ll have beaten time. Or join a company that gives you a million options, and your option moves up from 3 to 25 and again you’ve beaten time.

How about this real example of beating time. John Walter joined AT&T, but after nine short months he was out of a job. The complaint was that Walter “lacked intellectual leadership.” Walter got $26 million for that little stint in a severance package. That’s what you call really beating time. Of course, a few of us might have another word for it — and for AT&T.

III. Hope
HOPE: It’s human nature to be optimistic. It’s human nature to hope. Furthermore, hope is a component of a healthy state of mind. Hope is the opposite of negativity. Negativity in life can lead to anger, disappointment, and depression. After all, if the world is a negative place, what’s the point of living in it? To be negative is to be anti-life.

Ironically, it doesn’t work that way in the stock market. In the stock market hope is a hindrence, not a help. Once you take a position in a stock, you obviously want that stock to advance. But if the stock you bought is a real value, and you bought it right, you should be content to sit with that stock in the knowledge that over time its value will out without your help, without your hoping.

So in the case of this stock, you have value on your side — and all you need is patience. In the end, your patience will pay off with a higher price for your stock. Hope shouldn’t play any part in this process. You don’t need hope, because you bought the stock when it was a great value, and you bought it at the right time.

Any time you find yourself hoping in this business, the odds are that you are on the wrong path — or that you did something stupid that should be corrected.

Unfortunately, hope is a money-loser in the investment business. This is counterintuitive but true. Hope will keep you riding a stock that is headed down. Hope will keep you from taking a small loss and, instead, allow that small loss to develop into a large loss.

In the stock market hope gets in the way of reality, hope gets in the way of common sense. One of the first rules in investing is “don’t take the big loss.” In order to do that, you’ve got to be willing to take a small loss.

If the stock market turns bearish, and you’re staying put with your whole position, and you’re HOPING that what you see is not really happening — then welcome to poverty city. In this situation, all your hoping isn’t going to save you or make you a penny. In fact, in this situation hope is the devil that bids you to sit — while your portfolio of stocks goes down the drain.

In the investing business my suggestion is that you avoid hope. Forget the siren, hope; instead, embrace cold, clear reality.

IV. Acting
ACTING: A few days ago a young subscriber asked me, “Russell, you’ve been dealing with the markets since the late 1940s. This is a strange question, but what is the most important lesson you’ve learned in all that time?”

I didn’t have to think too long. I told him, “The most important lesson I’ve learned comes from something Freud said. He said, ‘Thinking is rehearsing.’ What Freud meant was that thinking is no substitute for acting. In this world, in investing, in any field, there is no substitute for taking action.”

This brings up another story which illustrates the same theme. J.P. Morgan was “Master of the Universe” back in the 1920s. One day a young man came up to Morgan and said, “Mr. Morgan, I’m sorry to bother you, but I own some stocks that have been acting poorly, and I’m very anxious about these stocks. In fact worrying about those stocks is starting to ruin my health. Yet, I still like the stocks. It’s a terrible dilemma. What do you think I should do, sir?”

Without hesitating Morgan said, “Young man, sell to the sleeping point.”

The lesson is the same. There’s no substitute for acting. In the business of investing or the business of life, thinking is not going to do it for you. Thinking is just rehearsing. You must learn to act.

That’s the single most important lesson that I’ve learned in this business.

Again, and I’ve written about this episode before, a very wealthy and successful investor once said to me, “Russell, do you know why stockbrokers never become rich in this business?”

I confessed that I didn’t know. He explained, “They don’t get rich because they never believe their own bullshit.”

Again, it’s the same lesson. If you want to make money (or get rich) in a bull market, thinking and talking isn’t going to do it. You’ve got to buy stocks. Brokers never do that. Do you know one broker who has?

A painful lesson:
Back in 1991 when we had a perfect opportunity, we could have ended Saddam Hussein’s career, and we could have done it with ease. But those in command, for political reasons, didn’t want to face the adverse publicity of taking additional US casualties. So we stopped short, and Saddam was home free. We were afraid to act. And now we’re dealing with that failure to act with another and messier war.

In my own life many of the mistakes I’ve made have come because I forgot or ignored the “acting lesson.” Thinking is rehearsing, and I was rehearsing instead of acting. Bad marriages, bad investments, lost opportunities, bad business decisions — all made worse because we fail for any number of reasons to act.

The reasons to act are almost always better than the reasons you can think up not to act. If you, my dear readers, can understand the meaning of what is expressed in this one sentence, then believe me, you’ve learned a most valuable lesson. It’s a lesson that has saved my life many times. And I mean literally, it’s a lesson that has saved my life.

STI to hit new high

Some of the reasons that I have turning bullish on our STI market, going forward into 2008:

1) Our econonmy should be able to achieve 7.5% growth to 8% growth for 2007.

2) According to our MTI, S'pore economy should be expanding again at 4.5% for 2008. S'pore should expand by another 4% to 5% for 2009 despite a possible U.S recession in 2008. 2008 & 2009's growth supported by the IRs prjects, Jurong Island projects, more private & public housing projects in 2008 to 2009.

3) Contrary some bearish expectations, our corporate earnings should be still growing by 3% to 5% for 2008, lead by banks, property & Oil & Gas companies.

4) They are full of spare/excess liquidity in our banking system. According to recent MAS official report, our local residents deposits has risen to $232billion in Oct 2007. All this are excess funds/excess liquidity not invested in stock market yet. This figure should rise further in Jan 2008 when all employees receive their year end bonus by lastest Jan 2008.

Please note that stock markets are driven by liquidity also, beside fundamentals.

5) On a global scale, the spared/excess liquidity by the Soveriegn Wealth Funds (SWFs), other Oil Exporters, China & S'pore Govts, could easily exceed USD7 trillions, should be much more. Not forgetting, the Oil exporters will get richer in the next 12 months to 24 months as long as Nymex stay above USD70 for the next 12 to 24 months. Saudi's SWFs alone, already USD900billion easily.

6) What the SWFs is doing to rescue to U.S. banks now, is not even 10% of their SWFs. Hence, the U.S. banks should be prepare for any possible "hostile takeover" by the SWFs, if the subprime mess get worse.

7) Decoupling is already happening, otherwise Dow Jones should be 8,700 by now.

Please note that i am only 80% confidence that STI would hit 4100 by April 2008. My confident level would only increase to 90% if Dows would drop further to 10,500 in 2008.

Sell Dows & buy STI market is my strategy for 2008. STI may have 30% to 40% chance to hit 4410 by Dec 2008.

A key reason why we think a recession in 2008 is unlikely

Monetary policy was not particularly tight at any point in this economic cycle.

Generally, recessions begin when the Fed over-tightens monetary policy in an attempt to dampen inflation pressures. While the Fed ultimately lifted interest rates by a substantial 425 bps in the current cycle, this was from record low levels.
Real interest rates arguably never went into restrictive territory, and since the Fed was so quick to cut interest rates (-100 bps in the last three months) the probability of recession decreases substantially.

In the current cycle, the real fed funds rate, defined as the level of the nominal fed funds rate minus the year-over-year change in the core CPI, peaked at 3.0% in June 2007. In the 2001 recession, the real fed funds rate peaked at 4.0%; and in the recession before that, 1990-1991, it peaked at 5.3%. The average real fed funds rate at the start of a recession is 5.0%, which is 200 bps above where the fed funds rate peaked in the current cycle. A lower peak in real fed funds combined with aggressive easing since then should eventually help steady the financial markets and economy. We expect another 50 bps in rate cuts as an insurance move to assure a second half 2008 acceleration. We project the unemployment rate to edge up slightly in the next few months and headline inflation to decelerate as energy prices stabilize/decline in response to
slower growth--accordingly, inflation expectations should drift lower.

If economic growth was accelerating significantly, we would be more worried about inflation. However, the reacceleration should be modest at best, since most of the pick-up in domestic demand will likely be back-loaded into H2 2008.

After all, the traditional channel through which lower interest rates lift growth, namely housing, is a channel that is likely to be of limited use in the near term since the housing sector continues to work through a massive supply imbalance which may be relatively immune to lower interest rates. Consequently, the possibility of a longer and more extended period of declining home prices cannot be ruled out and with that increased downside growth risks.

Did Jim Rogers imply that Temasek is stupid ?

Jim Rogers, [ former partner of George Soros in the famed Quantum Fund ] a fund manager who has traveled extensively in emerging markets and lives part of the year in Asia, says sovereign wealth funds in Abu Dhabi and Singapore that recently made large investments in Citigroup and UBS AG are likely to lose a lot of money on their ploys.

"They're making a big mistake; these banks have many more problems still ahead. They should wait until these companies are really on the ropes a few years from now . . . and trading at $5 a share."

But aren't they supposed to be the smart money? Maybe not. "I know these people, and they have never given me the impression that they're smarter than anyone else," Rogers says. " They have gigantic amounts of money, but they've made a bad judgment in these cases."

Citi, Merrill, JPMorgan face larger writeoffs: Goldman

CitiGroup Inc may need to slash its dividend 40 percent to preserve capital, and with Merrill Lynch & Co and JPMorgan Chase & Co may write off $33.6 billion of debt this quarter as the global credit crunch deepens, a Goldman Sachs & Co analyst said.

"It will be a couple of quarters before the current credit crisis is fully digested by the markets," the analyst, William Tanona, wrote in a report released on Thursday. "Fourth-quarter trading results are likely to be among the weakest we have seen in some time."

Tanona nearly doubled his forecast for write-downs after mortgage losses led investors to shun debt they once thought safe but now deem risky.
He now expects Citigroup, Merrill and JPMorgan to write off a respective $18.7 billion, $11.5 billion and $3.4 billion for collateralized debt obligations this quarter, up from a respective $11 billion, $6 billion and $1.7 billion.

Tanona also said Citigroup may in 2008 cut its quarterly dividend of 54 cents a share, equal to a 7.1 percent yield, to help raise or preserve $5 billion to $10 billion of capital. He rates Citigroup "sell," and Merrill and JPMorgan "neutral."

Citigroup spokeswoman Shannon Bell and JPMorgan spokesman Joe Evangelisti declined to comment. Merrill did not return several requests for comment. Citigroup has projected an $8 billion to $11 billion fourth-quarter write-down.

In afternoon trading, Citigroup shares fell 92 cents, or 3 percent, to $29.53; Merrill fell $1.28, or 2.35 percent, to $53.26, and JPMorgan fell 89 cents, or 2 percent, to $44.05.
Through Wednesday, the shares were down 45 percent, 41 percent and 7 percent, respectively, this year.

Financial companies including Bank of America Corp and Switzerland's UBS AG have already announced more than $70 billion of write-offs tied to the credit crisis.
Debt losses led to Citigroup replacing Chief Executive Charles Prince with Vikram Pandit, and Merrill replacing Chief Executive Stanley O'Neal with John Thain.

BILLIONS STILL AT RISK
Tanona said that after the projected write-downs, Citigroup would still be exposed to $24.5 billion of CDOs, Merrill $7.7 billion and JPMorgan $5 billion.
He said Merrill's write-down will be larger than previously expected because Thain will try to clean up problems now rather than let them fester in 2008.

The analyst boosted his forecast for fourth-quarter losses per share to $1.33 from 52 cents at Citigroup, and to $7.00 from $1.50 at Merrill. He cut his forecast for profit per share at JPMorgan to 65 cents from $1.04.

Analysts on average expect respective losses of 61 cents and $4.00 per share at Citigroup and Merrill, and a profit of $1.01 per share at JPMorgan in the fourth quarter, according to Reuters Estimates.

Brad Hintz, a Sanford C. Bernstein & Co analyst, on Thursday predicted a $10 billion fourth-quarter write-down at Merrill, leading to a quarterly loss of $5.10 per share.

Last month, Citigroup shored up capital by selling a $7.5 billion stake to Abu Dhabi's government. Merrill, meanwhile, on Monday announced a $6.2 billion infusion from Singapore's government and money manager Davis Selected Advisers.