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(24-08-2013, 09:45 AM)weijian Wrote: [ -> ]There are already too many intelligent people speculating over FED rates of 'when and how much'. My only opinion is that my speculative capability is much lower than the median capability. This self realization made me realize that it is quite a futile exercise to 2nd guess what Helicopter Ben will be doing. Instead, i will simply just take the stance that 'when rates are already so low, the ONLY way is up!' - ie, easy way out.

IMO, there's no need to be so precise as to 'when and how much' in our forecast, even if it's humanly possible... Even if we get it right, we may not get the next part right - how it'd impact our stocks / investment. The ecosystem is just too complex, with too many players.

But, that's not to say it's a useless or futile exercise. In my case, this exercise is part of trying to at least understand the environment our companies (stocks) are operating under and being aware that it'll impact them. From there, we can make better buy / sell / hold decisions.

An example of my thinking of this FED watch,

1. Free money will start easing soon, interest rate can only go up. Interest rate is in fact already starting to go up with this expectation.

2. In the immediate term, those who're addicted to cheap funding will be hit the hardest. Highly geared ones will be hit harder with higher interest expenses. Here, we saw the run on the REITs in previous months and the fears were even extended to other stocks.

3. In the longer term, it gets more fuzzy. The fact that the tap (of free money) is going to be slowly turned off is due to the US economy getting into positive recovery mode. That ought to imply better chances of growth / turnaround for businesses in general. US$ will likely strengthen and it'll be a fine balance on their competitiveness in foreign markets. That's where our stocks analysis skillsets will be best utilised... Growth (higher profits from higher revenues) has to offset higher Debts expenses, while remaining competitive.

4. US is just part of a bigger and more complex ecosystem of the world. It's good to see one 'sick man' to be taken off 'life support' soon as it reduces one worry (of a financial collapse) but there're others (Europe & Asia) to keep us vigilant.

Having said the above, if you do have the ability to find a stock with Buffett-like qualities of huge moat, great franchise, great mgmt, great value,... there'd be lesser needs to look at any other 'distractions' like FED watching and the time will be better spent on looking for more such stocks.

The reality (for me) is.... my skill sucks... I'm more often wrong than right... I make up for it by being more aware of the operating environment and by being more decisive when I'm either wrong or the environment hits my badly selected stocks (I see them fully naked when the tide goes down)...

Quote:I believe our emotional/intellectual reservoir to be finite. I am saving up those reserves for a better day when others have exhausted theirs!

I have a different view. The day when I exhaust my 'reservoir' is the day when I become senile... IMO, it helps to delay (hopefully prevent) that day by continuously using / stimulating my brain... The side benefit is to be able to fine tune our thinking process + the regular usage keeps us alert (on our toes to better react) and do better in our investments...

KopiKat, the sifu, already said most of the points I intend to post... Let me add a little bit more...

The conclusion of likely interest hike, has forced me to look deeper into debt structure of companies, not only on tenure, floating or fixed, it is also the currencies borrowed and the creditor(s)...

My investment skill, which is much worse than sifu, especially the skill in recycling capital, has forced me to learn more to compensate the lacking, hopefully...

I am also hoping that by taping to expert views, will able to reduce the learning time, but it seems that it is always conflicting camps within the experts... At the end, no choice, has to dig in and make a choice.

DPM Tharman's view, and I am convinced...

Fed tapering ‘will not be a bad thing’ for ASEAN

SINGAPORE — The current bout of uncertainty in financial markets underscores the need for the United States Federal Reserve to scale back its stimulus measures in a gradual and carefully managed process, but the so-called tapering will not be a bad thing, Deputy Prime Minister Tharman Shanmugaratnam said yesterday.

While market volatility will likely recur from time to time, members of the Association of South-east Asian Nations (ASEAN) are in a good position to weather large amounts of capital outflow as growth in the region is supported by solid fundamentals, he added.

“The tapering of quantitative easing and tightening of US monetary policy, when it eventually occurs, will not be a bad thing for the region’s economies. It is not in anyone’s interest, including emerging economies, for very low global interest rates to continue indefinitely. Low or negative interest rates have inevitably led to a search for yield, and a build-up of financial imbalances in Asia,” Mr Tharman said at the inaugural Network ASEAN Forum here.

“The (winding-down) of QE would also take place together with a recovery in the US, and is not in itself a negative for ASEAN countries. Growth among ASEAN countries has stronger structural underpinnings than in most other regions,” he said.

Mr Tharman also noted that the ASEAN countries had come a long way since the 1997 Asian financial crisis, when the region was hit by large-scale capital flight that sent many economies into a tailspin.

“Foreign currency debt levels are now much lower, and official foreign reserves much higher. Most ASEAN countries have shifted towards more flexible exchange-rate regimes, which has reduced the risk of overvalued currencies and a sudden re-pricing of foreign currency debt. Financial regulatory and supervisory regimes are also now more robust, and banks’ capital buffers are adequate.”

http://www.todayonline.com/business/fed-...hing-asean

Hi KopiKat and CityFarmer,
Thanks for the your responses.

Especially to Kopikat, i appreciate your elaborate posting and also sharing of your experiences. There is great value in what you have shared with regards to the part on continuous practising and fine tuning of our brains. My experience has been that Mr Market would frequently mess up my emotions/intellect if i do 'tap dancing' with it too much, but your counter argument is that as much as we need to ignore it, engagement with it is still atmost critical to learn and eventually take advantage of it.

Quantity of money and cost of money, though related, are not the same thing. There is a third variable: Credit, both on the borrower and lender pint of view. An example is during crisis, banks may be flush with cash but doesn't lend. Or in this environment of lending cheaply in an asset bubble with low regard for credit

Only common interests are reliable in the international market...

Fed officials rebuff calls for coordination as QE taper looms

JACKSON HOLE (Wyoming) — Federal Reserve officials have rebuffed international calls to take the threat of fallout in emerging markets into account when tapering United States monetary stimulus.

The risk that the Fed’s trimming of bond buying will hurt economies from India to Turkey by sparking an exodus of cash and higher borrowing costs was the focus of much of this year’s Federal Reserve conference at Jackson Hole, whose theme was the global dimensions of monetary policy.

Central bankers from around the world attended the conference, which wrapped up on Saturday, and their conclusion was not startling: Unconventional monetary policy in developed nations such as the US, while appropriate for domestic objectives, can have big spillover effects.

But there was disagreement as to the degree central bankers in rich nations should pay attention to the overseas impact of their policies.

Fed officials showed little interest in giving the international impact of their policies more weight, saying their sole focus is the US economy. The Fed has been buying US$85 billion (S$108.7 billion) in bonds each month, but plans to scale that back before year end and bring the purchases to a halt by mid-2014.

http://www.todayonline.com/business/fed-...aper-looms

Nothing new here, just another promising data...

US consumer confidence, property sector on the rise

WASHINGTON — Consumer confidence improved in the United States this month as Americans grew more optimistic about employment opportunities and the outlook for the economy.

The Conference Board’s index of sentiment advanced to 81.5 from a revised 81 in July, the New York-based private research group said today.

The median forecast in a Bloomberg survey of economists was 79.

Another report showed that home prices appreciated in June at the second-fastest pace in seven years.

Higher property values and stock-market returns are boosting income expectations that will help sustain consumer spending. Well-to-do households accounted for the pickup in sentiment this month, showing that bigger job and wage gains are needed for a broader expansion that benefits all income groups.

http://www.todayonline.com/business/us-c...ector-rise

I read Bill Miller's article in The Edge, and knew that the three sectors he focused on were, housing, finance, and airline. Housing and finance are well-understood, but not sure on the airline?

Bill Miller benefited from the US economy surges in the last one year...more than 40% ytd in 2013, with its size... Wow...

US economy surges in Q2

WASHINGTON — The United States economy accelerated sharply in the second quarter thanks to a surge in exports, bolstering the case for the Federal Reserve to wind down a major economic stimulus programme.

Other data yesterday showed the number of Americans filing new claims for jobless benefits fell 6,000 last week to 331,000, a potential sign of faster hiring this month.

US gross domestic product grew at a 2.5 per cent annual rate in the April to June period, according to revised estimates released by the Commerce Department. That was more than double the pace clocked in the prior three months.

The reports could boost confidence that the economy is turning a corner, shaking off the government austerity enacted earlier in the year when Washington hiked tax rates and slashed the federal budget.

The government had initially estimated that GDP expanded at a 1.7 per cent rate in the second quarter. But recent data showed that exports climbed during the period at their fastest pace in more than two years.

Economists polled by Reuters had forecast the economy growing at a 2.2 per cent pace.

Many economists expect that the economy will accelerate further in the second half of the year as austerity measures begin to weigh less on national output.

That drag was evident in the second quarter, when spending contracted at all levels of government. Indeed, yesterday’s showed the economic drag from spending cuts was greater in the second quarter than initially estimated.

Still, the data could make officials at the central bank more confident in their plan to begin reducing monthly bond purchases later this year.

In the second quarter, higher taxes appeared to hold consumers back. Consumer spending, which accounts for more than two-thirds of US economic activity, slowed to a 1.8 per cent growth pace after rising at a 2.3 per cent rate in the first quarter.

Corporate profits, however, unexpectedly climbed in the second quarter, posting their fastest after-tax gain since late 2011. REUTERS

http://www.todayonline.com/business/us-e...-surges-q2

Bill Miller is one of few reputable value fund managers with long track record. He got creamed a few years back by being too early in his buy calls on Financials. His tenacity is obvious when he piled into financials again after being forced to trim out, because now it becomes a career/ reputational risk. I give him credit for that, and also reminds us that value/ fundamentals need to come with catalysts.

Further update on the Fed's tapering...

US job growth below forecasts, may delay Fed pullback

WASHINGTON — Employers in the United States hired fewer workers than expected last month, which could delay the US Federal Reserve scaling back its massive monetary stimulus, lifting the stock market in early trade, but the gains were quickly reversed because of increased tensions over Syria.

Non-farm payrolls rose 169,000 last month, the Labour Department said yesterday, lower than economists’ forecast for a 180,000 increase, while the job gains for June and July were revised to show 74,000 fewer positions added than previously reported.

The unemployment rate fell 0.1 percentage point to 7.3 per cent, compared to the forecast for it to remain unchanged. It was the lowest since December 2008 but only because more people left the workforce. The participation rate — the share of working-age Americans who either have a job or are looking for one — dropped from 63.4 per cent to 63.2 per cent, its lowest level since August 1978.

“Since the report and the revisions are disappointing, that increases the odds of the Fed holding steady,” said Mr Wayne Kaufman, Chief Market Analyst at Rockwell Securities.

US stocks rose in early trade as the job report damped speculation that the central bank will slow down the pace of its US$85 billion (S$108 billion) of monthly bond purchases at its Sept 17 to 18 Federal Open Market Committee (FOMC) meeting. But they fell into negative territory after Russian President Vladimir Putin said at the Group of 20 meeting that his country would continue arms sales to Syria even if the US strikes.

US President Barack Obama, speaking after Mr Putin, said there was growing recognition that the world “cannot stand idly by” after a deadly chemical weapons attack he said was carried out by the Syrian regime.

On the economic front, he said the US and Europe had emerged from a difficult recession. But he warned Congress that it should not risk a US default “over paying bills we’ve already racked up”, saying he was determined that the world “has confidence in the full faith and credit of the US”.

US Treasury Secretary Jack Lew said last week the government will exhaust its borrowing capacity by the middle of next month.

About an hour after the opening bell in New York, the Dow Jones Industrial Average shed 0.7 per cent, while the US dollar fell 0.4 per cent to US$1.3172 versus the euro and was down 0.5 per cent at ¥99.73. October US crude oil rose 1.6 per cent to US$110.05 a barrel while Brent crude was up 0.4 per cent at US$115.77.

Fed officials have made clear that they would base their tapering decision on the progress the labour market has made since they launched their third round of quantitative easing a year ago. The latest report, the last monthly snapshot of hiring trends that Fed officials will see before they meet to formulate policy, suggested the economy was struggling to regain momentum after stumbling early in the third quarter.

Consumer spending, home building, new home sales, durable goods orders and industrial production all weakened in July. The economy grew at a 2.5 per cent annual pace in the April to June period and many economists had expected an acceleration in momentum in the second half of the year.

Still, the August job report is at odds with other data that have shown signs of improvement in labour market conditions, with the number of Americans filing new applications for jobless benefits near five-year lows. A gauge of service sector employment released on Thursday hit a six-month high in August.

Other details of the August employment report were mixed. Average hourly earnings rose five cents to US$24.05, while the length of the work week rebounded to 34.5 hours from a six-month low of 34.4 hours in July. AGENCIES

http://www.todayonline.com/business/us-j...d-pullback