Merry Christmas

Merry Christmas

To everyone out there,

Merry Christmas to you and all at home.

May the spirit of Christmas bring to you

Family love

Peace and

Joy.

May also the spirit of Christmas bring

Less Earthquake (tsunami)

Better economic data

Less global tension

A resolution to European sovereign debts and

Global growth.

Again, Merry Christmas to all.

Take care and lots of blessed love.

Patrick SEE and family.

To expect the unexpected

(Posted Sunday, 530 pm)

The main point of this post is a discussion on expecting the unexpected. Look at how the market reacted when the unexpected were announced.

It is a no brainer. If we can expect the unexpected, all of us will be rich. The surprise last week were

·         the coordination of Central Bank actions AND

·         The 50 basis point cut in China’s RRR.

What’s even more surprising is that the news came together. This resulted in an even bigger rally.

The other recent occurrence was on Oct 26^th thereabout. The event were

·         The EU summit announcement of the Greek haircut, bank recapitalization and EFSF

·         The very favorable announcement of the Oct US GDP data

Again, the combination of two big news on a single day contributed to the HUGE rally in high yield assets, commodities, currencies and the equity markets. Though the Oct 26^th event did not really take off well, the markets did not test the support levels again (yet?).

Fortunately, the news was favorable. BUT what if the news were unfavorable and what if there were more than one bad news on s single day? To expect the unexpected and taking pro-active management before the event can certainly maintain or generate potential returns. (I believe that my posting before the markets melted late Q2 and early Q3 was of benefit to your portfolio!)

If you can contribute, thefinance.sg would certainly be the place to post your comments. Let’s bring our brains together and prosper! It will be alright if you remain anonymous, even better if you like to put a nickname!

Thinking out of the box by expecting the unexpected would certainly generate high potential returns but I am one, the audience is many!

 Happy investing and have a great weekend. The jungle warfare begins tomorrow when New Zealand opens at 2am Monday morning!

Did you miss an important post for November?

Commencing December 2011, I will try to post the articles that had received weak readership from the previous month. If the contents may be of interest, press the hyperlink to journey onto the right post!

The following were posted but received weak readership; what you may have missed 

Would the ECB/IMF theory become a probability ; a possible channel to solving the Euro debt crisis and hence solving the European debt crisis.

Global major indices close down for November ; Link to US economic and global calendars

The US dollar index ;A very important indicator that predicts rally and slumps

Dynamic risk profiling; The wrong assumption most investors make while completing the risk profiling questionnaire

Markets can stay more illogical than you can stay We all trade logically we still lose money. Why is that?

Are Asia Pacific equities impotent? Explains why Asian markets are different from US markets

YTD major benchmark performance 2011 Nov 11th This is useful if you were investing in Unit Trusts. The posts identify which markets are in correction or bear market territory.

Again, are we out of the bear market? Read comments!

(Posted Saturday, 6pm)

Let’s make this post a two way street. How about the audience providing some feedback on why you’re still skeptical about the recent rally and that we are still in a bear market?

The discussion is a two way communication. I am not here to prove who is right or wrong. The obvious judge will be time.

I’ll start of by presenting my opinion on why we are out of the bear market territory.

1. Let’s use the DJIA for discussion. Since October 4^th, the market has tested the 12,200 resistance level four times. Despite the Europe sovereign debt concerns, the support lows should be getting lower with increase concerns in Europe, right? But the (support) lows are getting higher with support level at 10,400 and 11,250.

2. Are you familiar with the Relative Strength Index (RSI) on DJIA? Did you notice what happened when the index breached 30 (the oversold level) on Nov 25^th? The US market (coincidentally) rallied on news of better Black Friday sales. I could be wrong but I don’t recall any financial provider discussing the DJIA being on the oversold index level!

3. The economic data from US, the world largest economy is generally better than expected lessening fears of a double dip recession. The latest being the unemployment rate dipping to 8.6% matching the lowest since March 2009 from 9%.

4. Emerging markets like Brazil, China, Indonesia and Thailand had lowered interest rates in their monthly Monetary Policy Meeting (MPM). This indicate that they are sending a clear message their support for global growth vs their fight again inflation. The lowering of interest rates makes borrowing cost lower thereby promoting growth!

5.Similarly, China, which is the world’s second largest economy, had lowered 50 basis point in their RRR; making borrowing cost lower in China. This is their pledge to support growth instead of fighting inflation.

6. The CBOE VIX (with a low high range of 25 - 45) has been at the 27-28 level for the last 2-3 days indicating speculator’s sentiment on lower volatility.

7. As you probably know that hopes and speculation move the market, the French, Italy and Spain bonds are yielding much lower than the unsustainable 7% level. Global investors are hoping of a favorable outcome of the EU summit on December 9^th.

8. Expect the unexpected.

The big surprise (last week) was the coordination of Central Bank actions to reduce the interest rate on dollar liquidity swap lines by 50 basis points.

9. More talk on the ECB/IMF channel to fight the European debt crisis primarily in Italy and Spain. In addition, tougher enforcement of budget rules by Germany and France to manage the Europe debt crisis in its 3^rd year.

I had post more than 8 points. Is this sufficient? How about some feedback through some comments?

Again are we out of the bear market? 

Next important data:

Watch out for Australia’s and Europe next MPM this coming Tuesday and Thursday. A widely expected 25 basis point cut would further support global growth. The initial knee jerk reaction is for the Aussie/Euro to drop 30 pips upon receiving the news. Otherwise, the Aussie/Euro would strengthen.

Response on comments by audience:

If you know me by now, I am the professional who never recommends what to buy or sell. However, I am the ears and eyes to inform the audience what is happening in the market (before the headlines!).

Why prices go up or why prices go down? I believe that without understand the price movement, the real reason why prices move, I will NOT be able to understand if prices proceed in the same trend or will it reverse.

As you also probably know by now, I have my basic indicators where I gather the sentiment of global investors and place it on the table for your decision making. I can’t recommend mainly because the audience have different

·         Time horizon; short, medium or long term

·         Investment objectives; shorten your mortgage, down payment for a property, build up your retirement fund, etc

·         Risk profile; static and dynamic, etc

As one comment from the audience asked, ‘should be buy now?’ without knowing your specific investment objectives, risk profiling, time horizon, etc I am just foolishly giving prescription without proper diagnosis. Hence,

Dear audience,

Please contact me if you have a specific question. Providing some background information would be helpful in my response.

Some grave mistakes if my (blind) recommendation were to go ahead and buy:

Buying a call option vs a put option.

Buying Eurusd vs Usdcad

Buying Audusd vs Gbpusd

Buying Jpyusd vs Us dollar index

Need I explain further?

French and Spanish bonds were well received, read comments!

Global growth concerns are less of a worry in Q4 as compared to previous quarters. While the US benchmark indices have rallied back towards the flat line, the European bond yield has kept investors on the edge.

If you’re investing or trading, one of the indicators you need to watch out for are the global sovereign bond yields. As of late, the French and Spanish bond sales were well received yesterday. The yields for France, Spanish and even Italy are below the sustainable 7%.

Have you been noticing the US dollar index lately? Since it tried to test the resistance level of 80, it seems that it will be a deja vu !

Where has the market headed?

With China cutting the RRR by 50 basis point and the joint coordination of Central Banks actions, both on Wednesday, coupled with bond yields lowering the sustainable level. Markets rose while taking a breather on Thursday.

I suspect Asia will be quiet on Friday morning with some action late in the Europe session while awaiting for the US nonfarm payroll data. The short to medium term, say one month will largely depend on the NFP data due, 930pm Singapore time.

If favorable, the US major indices will have one of the best week rally since March 2009!

Happy trading!

DJIA proved me wrong for November closing

(Posted Friday 3am)

The original post was posted November 29^th. It received very little audience. The post was posted before month end because equities performed so badly (as you all know) for the month of November. And it would have been a miracle if any major indices closed in the black.

I tried to be smart by closing before Novermber 30^th. But the market proved me wrong!

In conclusion, Thailand and Mexico did outperform the major benchmark by closing in the black. Unfortunately, KLSE did not make it and closed down for the month. I missed out Russia which performed quite well. The performance of Crude Oil contributed to the Micex index!

The miracle was that the DJIA came rallying all the way from Monday thru Wednesday (just three days) and closed positive for the month of November. It fell from mid November for two weeks. Within the last three days of November, the DJIA erased two weeks of losses. What a miracle!

For being smart, I tried to post before the headlines. The market reacted so quickly and proved me wrong. I have learnt a lesson trying to post before the headlines. I admit defeat.

But on the bright side, he who laughs last laughs bests!

It is RISK ON! two BIG move, two BIG surprises

Briefly, The last hour or so, we saw coordinated Central Bank actions, PBOC cuts RRR, very favorable ADP data, etc.

We just noticed high yield assets rallied sharply. Europe indices are up more than 3.7% UK FTSE is up 3% while US indices are up 2.9%.

Major Central Banks took coordinated actions to boost liquidity into the global financial systems. This was backed by the ECB, The US Federal Reserve, the BoE, the central Banks of Canada, Japan and Switzerland. This is a BIG surprise and BIG news.

There was speculation that China would cut their Reserve Ratio Requirement (RRR) in the 2^nd half of 2012, while the majority of analyst expected the cut to be in Q2 2012 while a few expected it to be late Q1 2012. Never would I give a thought that China had announced a cut in the RRR by 50 basis point today. This is another favorable surprise and BIG news. China is sending a clear message that they are ready to relax their monetary policies. The last time China relax its monetary policy stance was December 2008, how timely!

Thailand also followed fellow Asian countries like Australia, Indonesia and China to cut rates by 25 basis point. Asian countries are seen cutting rates to boost (global) growth rather than fight inflation.

The BIG news does not look like rumours as compared to the daily noises we hear coming out from Europe. It is CHINA. It is Central bank cordination! Looks like the whole act is coming into play. This is certainly a RISK ON for the next 1-2 days.

More details coming. If you like the timely updates, please help to forward the posts to friends who might find this posting useful. Thanks in advance. Bookmark this blog for timely updates.

Insurance is not a necessity

(Posted Wednesday, 3pm)

The following is just a guide to assist you to determine if there is a need. In the end, the decision is yours finally.

When you buy insurance, you are actually practicing a sort of risk transfer by

·         transferring a potential financial loss to

·         a third party (insurer)

·         Whereby the proceeds will be distributed through a will or by nomination.

The later part of the above sentence is often not debated.

What happens if there is no income to protect? A homemaker or a minor does not earn an income.

It all depends on whether the loss of your loved ones will impact you financially. A homemaker would have economic value. She looks after your home, looks after your children, sends your children to school, cooks a nice meal when you reach home, etc. In other words, in the event of the loss of a homemaker, who would look after the above? Would the replacement impact you financially?

A child does not earn an income. So why do you buy whole life insurance for your child(ren). Your response is that there may be a need for child education funding or hospital and surgical (H&S) expenses. I am here to clarify. Then your child is NOT buying life insurance. You are actually transferring your financial risk for child education funding or related H&S expenses. A whole life plan does NOT provide child education nor H&S benefits.

I am very worried that the audience has a whole wardrobe of clothes for display and may not have the appropriate combination for a particular function. In other words, buying prescription for the wrong reason.

What sort of questions do you need to think about before meeting your insurance agent or financial planner?

1.    What is the objective of buying life insurance?

2.    Is this to protect the potential loss of your income?

3.    Who are my dependants or beneficiaries?

If you do not have dependants or beneficiaries, it is obvious the financial benefits will go to you (self). In other words, you are buying life insurance for one’s own interest.

You could be single, not married. You may not have siblings, dependants or children. Then what sort of insurance plan would meet your criteria? An endowment plan, whole life or term plan?

·         Would a term plan (low cost, high protection) with Total & permanent disabilities and/or terminal illness benefits suit you? Low cost

·         Would an endowment plan suit your needs for high protection in the event of disabilities or terminal illness? (This would be the highest cost) Or

·         Would you choose a whole life plan even when you’re single with no dependants or beneficiaries? Your answer could still be Yes because it provides cash values while a term plan does not. However, would the difference in premium between a whole life plan and a term be better use elsewhere in your financial planning?

In other words, did you consider financial planning and budgeting? You may chave to consider your budget at the next financial planning stage, like a comprehensive hospital and surgical plan with ‘as charged’ benefits, long term care income, disability income, supplement your retirement planning. While paying more for a life plan, you may have fewer budgets to address other financial needs.

There’s no right or wrong answer whichever you choose. What is more important is that the fact find process would result in a list of goals with priorities (with your adviser) and due diligence is provided to assist you to make a decision. That’s why the ‘fact finds’ or ‘know your client’ questionnaires is an important process.

The above is NOT a discussion about whether term, endowment or whole life is a better choice. There is no right or wrong answer. The main point is ‘do you see the importance of a comprehensive fact find and financial planning process’? Well the benefits is certainly obvious – a complete financial peace of mind!

(Penny for your thoughts.

An honest and totally unbiased financial planner is certainly hard to come by. It is again, sad to say that life insurance agents do not qualify being unbiased because they can only market their own products. What if they don’t have the products? It is obvious, the fact find forms don’t address those concerns.

Take long term care income as an example. There are only three insurers out of ten insurers addressing long term care concerns. If you are not connected with these three insurers, your insurance agent would not have discussed long term care concerns with you. Hospital and surgical plan in another area where not all insurers in Singapore provide. Hence, is there a complete fact find process?)

Would the ECB/IMF theory become a probability?

Have you ever wondered how the Europe crisis started? What is more important is how would the European crisis end?

Markets have been volatile not knowing the outcome of the European debt crisis. The bears have been designing speculative attacks on most high yield assets. Investors have flocked to the US dollar and the Treasury for safety. Again, have you wondered how the European crisis would end?

The above theory was posted in possible blueprint to easing global worries, ECB/IMF theory on November 22^nd. 2011.

 A Reuters report dated Nov 29^th mentioned,

“Belgian Finance Minister Didier Reynders said European finance officials will discuss the possibility of the ECB lending to the IMF. Finance officials will offer some proposals, he said, but it is up to the ECB to decide.”

IMO, since the above mentioning by the Belgian FM is being discussed; it would then be a probability for European countries to tap this facility from the IMF with the ECB backing up with funds. Would 600B be sufficient for Italy to tap on? Would this ease the European crisis?

Would Germany/Angela Merkel support this probability or go against the proposition? If favorable, the market would begin to have a nice rally until year end, otherwise I suspect it would be the end of the Euro unless there are other avenues which I have not thought of! And what does the end of the Euro mean? There won’t be any ‘Christmas’.

Why the end of the Euro? Italy is one of those “too big to fail”. If Italy falls, the rest of Euro will fall. I dread this would happen because Germany and France understands this and would never allow Italy to fall!

On a related issue, the US dollar index is still stubbornly trading at 79 thereabouts. Most of the scenes in this act tell me that there will be a ‘breakout’ from this trading range very soon.

Global major indices close down for November

(Posted Wednesday 150 am)

November 30^th will be the last trading day for November. Most if not all major indices will close lower for the month of November. It would be a miracle if any major indices would close in the black with the exception for Thailand in Asia and Mexico in Latin America.

KL Composite would have a good chance if it were to close in the black tomorrow. The worst performing is Mumbai in India. The inverted yield curve theory still holds true. Weak growth coupled with stubbornly high inflation had cause the index to slump 10% thereabouts for the month. GDP data, out later on Wednesday may extend the decline.

Asian indices closed mixed with the best performing index coming from Japan and South Korea while Europe extended her second day of advance.

At point of writing, Dow and S&P extended their second day of advance assisted by better consumer confidence data, revised upwards for the previous month and leapt 15 points to 56 in November. This is the largest gain in confidence data since Year 2003! It is no wonder why the retail sales data for Black Friday was overwhelming! Does the confidence data prompt the non-farm payroll data due this Friday?

There’s a whole bunch of data coming out from US due WTF. Click here. For the Global economic calendar, click here. The HSBC China Manufacturing PMI should be due Thursday or Friday!

Another bull trap?

Markets nosed dive again (since Nov 14^th) to a low last Friday, November 25th.

The technical support (and also the 2011 low) for DJIA was 10,400 thereabouts on October 4^th 2011. The low for this month of November was 11,250 thereabouts on November 25^th, last Friday. Note: 10,400 on Oct 4^th and 11,250 on Nov 25^th. What a coincidence!

From another angle, the lows are getting higher, while the highs are getting lower. From a technical perspective, while the highs and lows converge, it would indicate a breakout of this range. The biased is downwards. But anything could really happen.

While some of you may already note in times of extreme volatility, when the major averages were declining, the ‘mental’ S&P technical support was 1100. Once it reached that level, the ‘big boys’, bargain hunters, fund managers all kicked in with program trading and lifted the S&P more than 20% from October 4^th 2011. This is hindsight.

What needs to be seen is that the rally on Monday, was it a technical level that pushed Europe indices 4-6% higher, US indices 2.5-3% higher?

Imo, the lows and highs are converging. Note the support and resistance level. You may then panic or rejoice when either is breached. Click here for the second BIG rally the week after!

Similarly, the US dollar index was just a nose away from the technical resistance level of 80. This and the above may coincide to determine where markets will be heading soon.

Important data this week: India GDP, China PMI (the previous was just flash estimates). The estimates for India GDP is below 7.1%. The ^BSESN index may test the lows in the next 1-2 days. Please also note the inverted yield curves.

Europe: The source of information is getting ‘tricky’. As you probably know, the market reacted very strongly when news was published that IMF would help bail out Italy. Market and currency markets rallied. This was subsequently denied. High yield currency pared gains while equities retain their gains. Even, the source of information from reliable financial providers can be totally misleading.

Happy trading!

The US dollar index

That is the title of my post today – the ALL important US dollar index. If you have positions, you will need to monitor the US dollar index.

I had been waiting for the US dollar index to reach 79. The low today is 78.33 thereabouts, while the high is 79.38. It is just a nose away from the psychological resistance of 80. The last time it breached 80, the US dollar index closed below 80 for the week and reversed to 74.9 thereabouts closing down 14 days out of 22 days.

Why am I so excited with the US dollar index? I feel that when it reaches 80, the whole drama is about to settle down or that the outcome on the whole European crisis is about to be revealed – in other words, I am speculating that this down trend is about to reveal the next move.

(Forget about Gold and all the Gold experts’ talk of it being a safe haven. Isn’t it awkward that the coast is so quiet with even all the sovereign debt crisis and that Gold fell more than US$ 100 since testing the US$ 1,800 level? Where is all the safe haven talk and Central Bank buying of gold? If you don’t understand Gold and its mysterious characteristics, I have one word for you – beware!

Trust me! When Gold rises in the next week or so, all the talk about safe haven, volatility will come back. Gold buggers would have forgotten that amidst the debt crisis in Europe and clashes in Egypt, Gold fell.)

Imo, the European leaders are intelligent, not stupid. Like their US counterpart, the emphasis is so concentrated on politics, image, treaties, rules, etc. Rules and laws are made to be amended such that there WILL be progress.

Are they blind? Are they deaf? I do not think they are. It is just that their role in this global drama have not been called for. 3 of 5 leaders had toppled over a span of a month. It is part of a whole drama, etc.

EU summit, G20 and their role – what else? A meeting of leaders leaving clowns to amuse the financial world. What is the outcome? A joke I would say. Are they spending taxpayers’ money to watch a bunch of clowns testing their leadership? I don’t think so. How would you compare 'ex PM Greece referendum affecting financial markets' and 'Europe sovereign crisis affecting financial markets' - just the same thing but slightly on a bigger scale.

When there is a problem, there is always an opportunity. As the Chinese saying goes ‘problems are never too big, if it is, it is not a problem’.

Since October 28^th, the S&P, the Aussie, the Euro and most high yield assets are on a down trend. Interestingly, energy/crude oil rose, as a result of supply rather than demand. The primary beneficiary is none other than the US dollar and of course, the US dollar index.

The reason being it is still the global safe haven despite all the US debt talk, US credit rating being downgraded, supercommittee and the fear of another US credit rating downgrade by S&P, Moody and Fitch. What a load of !@#$%^&*!

I am just another clown waiting for the next scene on how the US dollar index is about to play in this very interesting drama. Watch the US dollar index reveal the next move in financial markets!

Dynamic risk profiling

(Posted Wednesday, 4pm)

If you're not praticing dynamic risk profiling, do not blame yourself if you see your wealth wither and disappear, especially where the global sentiment is so focus on Europe!

Risk profiling is a series of questions which attempts to help the client understand what his risk appetite would be. Mostly, the questions will include an understanding of his time horizon, objective and his reaction to volatile markets, etc.

A score will be tag to each question and the total tallied. This total should represent where or which category the client falls into ranging from conservative to aggressive. Risk profiling helps the planner to determine what sort of volatility the client can stomach. Imo, it does help the 'conservative' client to limit his losses (bear market) and not potentially enhance his investment (bull market)! Anyone like to provide additional comments?

As one audience commented (refer to comments in my posts) the risk profiling will not reduce (it actually aggreviate more) losses if your profiling is aggressive in bear market territories nor reap (but actually limit) potential gains if your profiling is conservative (bull markets). Hence, one should realize that the (static) recommendation would not only limit losses, it would also limit potential gains!

Imo, if there are a set of similar questions that is tag onto your risk profiling for a short, medium and long term goal(s), the relative performance could generate better results.

In addition, the client could even limit losses and reap potentially higher gains if there is a risk profiling in times of potential bear or bull markets.

In light of all the above, I hope you have the right professional wealth planner to enhance your wealth. Otherwise, if you are still wondering why your investment, results relatively weaker, it is probably that your adviser is either sleeping or is not attending sufficient CPD courses! I suggest you remunerate your wealth planner accordingly because good planners are hard to come by!

Does this sound reasonable? Guess who may understand your risk profiling and markets trends better?

Possible blueprint to easing global worries, ECB/IMF theory

(Posted on Wednesday, 3am)

Original post in black. Latest update in blue


Briefly, the US GDP data came in at 2% vs the previous month estimate of 2.5%. This estimate is worrying. First weak data for a long time from the US since mid October.

HSBC Chinese Flash PMI sinks Asian market. 'Flash' is a preliminary PMI before the actual data which is normally release at the end of month or 1st week next month. The data sank to 48 from above 50 which shows contraction. As a result, consumer sentiment weakens sending the Aussie dollar and Asian markets lower.


For the record, the previous month HSBC flash estimates was lower than the actual data released. In addition, the real data from the Chinese was much lower than the HSBS data. But this is how the market trend - relying on fundamentals as well as how the investor interpret the data.  Bookmark here for updates!

IF (a big if) this is a knee jerk reaction, it would be a good time to go bargain hunting. The flash estimates would ease worries of China over heating and hence a possible easing in China's monetary policy - easing of RRR rather than on interest rates!

1. Italian bond yield has been rising. Yesterday, the 2 year yields were at 7.05% as compared to the 10 year yields at 6.87%. In other words, short term bonds are paying more than long term bonds indicating there’s an inverted yield curve in Italy.

What does this mean? Bad for Italy. Let’s hope the ECB and/or the IMF would come to the rescue. Read IMF new announcement.

2. IMF new announcement – IMF announces stepping up a new credit facility. The facility allows IMF members up to

·         Five times the member’s quota for six months.

·         Ten times the member’s quota for 12-24 months loan

Let’s hope this timeframe is sufficient for the member to regain its creditability. What a timely event for Europe members to tap on this facility.

3. There is also a rumor that the two largest economies in Europe will soon announce treaty changes. This is economic convergence!

With the above news circulating, US major indices with triple digit losses recovered and tested the flat line!

As you probably know the European Central Bank (ECB) is the last lender of resort to financial institutions and not for the sovereign members, while the IMF comes in to ‘bail out’ sovereign debts.

Would the Europeans debt crisis ease if the ECB were to lend to the IMF who would then ‘bail out’ the European sovereign debt countries? This may overcome the ECB’s current obstacle. While this may be in the pipeline it would possibly mean that the sovereign debt countries may be able to tap on this facility, to buy time and regain the markets confidence.

When would helicopter Ben come to the rescue? Price stability and employment! I think QE3 may be launched sooner than later (possibility Q1 or Q2, 2012). But would Ben wait for the next market slump before releasing QE3? In other words, the global situation needs to be worst off before QE3 is released.

That’s my blueprint out of this global debt situation for Europe and US and possibly global financial worries. Time is just the solution to end all pain and worries!

Notes: (An inverted yield curve has predicted every US recession since the 1950s and has only once sent a false signal (a recession narrowly avoided in 1967).

Read more on inverted yield curves posted 10 June 2011. Since then, Brazil had cut rates twice leading the yield curve to be normal. However, the inflation in China had just managed to improve. The curve is flattening. But the inflation in India is still on the high side which explains why the stock market has not picked up as compared to the BRIC countries!)

If you find the post beneficial, join as followers with Google friend connect, facebook or twitter for timely updates. If you find the post beneficial to your friends, siblings, loved ones, please feel free to forward such that it could reach out to a wider audience.

Markets can stay more illogical than you can stay solvent

(Posted Tuesday, 115am)

The above is one of my favorite phrases. It is also a reminder to me when markets are trending illogically. But what seems illogical to me may seem logical to others!

Take for e.g. global equities fell during the third quarter.  Hindsight: The reasons were with weak manufacturing data, inflation, global growth concerns, rising interest rates, unemployment, Europe debt crisis, etc.

As you probably know, US economic data for the past month or two had been encouraging (the latest existing home sales data rose 1.4%, better than expectation). Inflation fears had fallen with respective CPI in US and China, falling to comfortable levels with lower inflation expectations.

Manufacturing data in US and China has been encouraging. Employment is steady. Global growth is less of a worry with the exception for Europe. Interest rates had fallen in Brazil, Indonesia and Australia with most on hold. In other words, the fundamentals are better and the stock markets rallied.

Here is the first illogical scenario. Instead of focusing on favorable fundamentals, global investors’ mindset is focused on the Europe sovereign debt crisis, PIGS, then Greece, Italy, Spain and France. This week, the baton is passed to the US, with US markets falling due to unfavorable deficit reduction pact by the ‘supercommittee’.

Hence, global investors flee equities and high yield assets to safe havens. Here is the second illogical scenario. The safe haven beneficiary turns out to be no other than the US dollar and government bonds. The current/latest worry is on US deficit, yet investors flee to US dollar and US bonds. Is this a rational behavior? Yes and NO depend on who you are!

Gold is deemed to be a safe haven asset. We saw Gold rise when there were problems in MENA and when equities and currencies were plummeting in Q3, Europe debt crisis, etc. The third illogical scenario is Gold (instead of rising, Gold) fell last week and extended losses today! Coupled with the extension of the European debt crisis and Egyptian violence between protestors and security forces, Gold had plummeted more than US$ 100 since testing the US$ 1,800 resistance. Is Gold a safe haven asset? The safe haven investors are saying yes but the markets are saying NO.

What may seem to be a logical trade may be confused by the illogical market. But again, what is illogical to you is definitely logically proven right by the market. Hence, markets can be illogical, stay illogical than you can stay solvent.

Are you confused? Please allow me to explain. There are two herds of investors with different psychological mindset. The majority wins the tug of war.

Whichever, the fundamental and/or technical trading strategy that you are using, remember to bring your umbrella with you? The weather can change anytime, from anywhere.

How far can the market fall? I think the support level on October 4^th should hold. Otherwise, by that time, either Europe and/or the US would have been in very deep waters. If that happens, I would think the helicopter will make its appearance! Don’t forget QE3 is dying to be launched.

Are you keeping in touch with developments from the ECB and the IMF on how the Europe debt crisis can be resolved? Stay tuned!


If you find the post beneficial, please feel free to visit my blog at seettpat.blogspot.com and choose the categories: Market trends or Investing. If you find the post beneficial to your friends, siblings, loved ones, dependants, please feel free to forward such that it could reach out to a wider audience.

The best product for major Illness is?

(Posted Saturday, 7pm)

Financial risk management is the study of financial impacts affecting an income earner in the unfortunate event of temporary or permanent loss of income of self, a loved one, siblings or dependants. One method of risk management is risk transfer. Without the client realizing a financial impact, the planner cannot proceed.

For e.g. the loss of potential income for a breadwinner, age 35, He has a wife and a child age 1. The family saves 35% (CPF and 15% cash savings). Supposing his annual income is S$40,000 a year. In the unfortunate event of premature death, he does not want his wife, sibling or loved ones to shoulder his burden. His potential loss of income for the next 25 years (cost of seeing his child through education and he also plans to retire at age 60) is 40k times 25 years. That’s a whopping S$ 1 million. My responsibility as a financial doctor is to ask if this would be a financial impact. If he does, my next step is to ask for his agreement and I’ll proceed.

Let’s get to the concern upon diagnosis of a major illness. Others would term major illness as dread disease or critical illness, etc. Let’s use Cancer for discussion. Assuming you understand the policy schedule and definition for benefits payable upon the diagnosis of major cancer.

Upon diagnosis of major Cancer, the benefits are payable. I highlighted major because this event is critical, is a dread disease and is grave. Imo, this would seriously impact the potential income of the earner.

Otherwise, I would term this stage of Cancer as ‘not’ major, not critical, early stage. The impact could be resolved by looking into hospital and surgical insurance (a cost reasonable solution), outpatient Cancer treatment or early stage critical illness coverage.

Imo, the confusion comes from the last 2 paragraph, if the insurance agent or financial planner does not get his fact finding right! The client will be paying additional premium.

The client agrees that upon diagnosis of a major illness he wants a solution. As being matured, professional, he shares his concern and financial impact. Upon early diagnosis, he would like a comprehensive hospital and surgical (H&S) plan. He figures that early stage diagnosis would not warrant a loss of income and the H&S plan would cater for his pre, in and post hospitalization expenses. They have emergency funds to see them through for early stage recuperation and other expenses.

Hence, I offered 4 different types of solution from 4-5 insurers. This would provide him an unbiased solution as compared to just one insurer. A preferred insurer may NOT provide choice of cost/premium, yield, features, and benefits from a range of 4-5 insurers. You may be ‘blinded’ by the frog that lives in an island without knowing what the global world is offering! But that’s not the point!

The following is the comparison for Sum assured S$ 300,000, Age 35, Smoker until age 65 (Would most of the audience still earn an income after age 65?)

A: Term plan with critical illness benefits

B: Whole life plan with accelerate/enhanced critical illness benefits

C: Whole life plan with additional critical illness benefits

D: Whole life with embedded critical illness benefits

E: Endowment plan with accelerated/enhanced critical illness benefits

Annual premium  / Type	A	B	C	D	E
Basic plan	1652.25	6743.95	6743.95	3963.30	11624.55
Enhance CI		2049.15		(embedded)	1623.40
Additional CI			4783.65
Total	1652.25	8793.10	11527.60	3963.30	13247.95

Please note that the benefits payable for (A) and (D) is exactly the same if death or diagnosis of major illness were to occur before age 65. Actually, A pays more than D in the event of TPD!

We are human ‘machines’. Like it or not, with the food we are eating, the pressure we face in our daily lives and at work, death is a sure thing, but major illness will certainly accelerate the death benefits.

I am NOT going to dwell into Whole life or Endowment has cash values. But which would you pay for the risk transfer upon diagnosis of a major illness for possible loss of income. The cards are laid upon the table. You, as the client is deemed to be informed, which would you, decide?

Would you choose ‘A’ or one of the others because it has cash values? If you are choosing the one with Cash Values, than the whole fact find / diagnosis has to go back to the beginning to change your priority to cash values instead of risk transfer upon diagnosis of a major illness. You can’t have the whole pie and just eat it!


Finally, the best product for major illness coverage (in my opinion) is ADVICE! Similarly, in the medical field, it is not the medication that addresses your concern but you seek the doctor's advice for the right prescription, am I correct?

If you find the post beneficial in risk management or insurance matters, please feel free to visit my blog at seettpat.blogspot.com and choose the categories: Evergreen or risk management. If you find the post beneficial to your friends, siblings, loved ones, dependants, please feel free to forward such that it could reach out to a wider audience.

Please note. NO recommendations are made. The choice is yours. My primary responsibility is to lay the cards on the table such that you are informed to make a wise decision!