24th Dec 2007

First of all, merry christmas! :)

I have not been posting for quite a few days as I was down with flu and fever, and didn't really monitor much on the stock markets. However, some key things that I normally check are as follows:


YEN/USD currently at 114.12-114.16 + 0.99, which is getting better each week. Once it resumes its normal 116 range, I can probably say that it's going to be a relatively strong USD rally.

Next, as of this timing, SGD seems to be weakening against some of the currencies:

Currency Rate
USD vs. SGD 1.4548
EUR vs. SGD 2.0930
SGD vs. MYR 2.2961
SGD vs. THB 20.8620

Looking at some of my posts a few weeks back, SGD was around $1.44 against USD. As for the LIBOR rates, this is one of the websites I found:

http://www.bankrate.com/brm/ratewatch/other-indices.asp

Looking at this:

1 Month LIBOR Rate 4.95 4.78 5.35
3 Month LIBOR Rate 4.93 5.00 5.37
6 Month LIBOR Rate 4.83 4.86 5.37

As of now as compared to one of the forummer who contributed this useful information:

Posted: Thu Dec 13, 2007 8:11 pm

1-Month Libor 5.03 4.65 5.80 5.32 5.35
3-Month Libor 4.99 4.87 5.69 5.36 5.36

It seems to be showing a fall and it is showing the positive effects from the fed rate cuts.

Next, will we see a better 2008 as compared to 2007? My broker had sent me quite a few reports from various investment banks and most of them noted a much more volatile year as compared to 2007. Let's see what happened in 2007. Especially in August, when the subprime issue came out. Ultimately, put it in a simplier way to look at things, it was more towards the credit issues with people unable to pay up the morgage loans, and it was indirectly due to the rise of interest rates within that short span of period. However, the property is still physically there! What has been lost in between are the bonds and CDOs that were created by many investment banks and sold to many other banks with high interest rate yields. If you compare to 911 or SARS, it doesn't really match up to a global epidemic, but a problem caused by the banks themselves.
Does this credit crunch make people poorer? Well, it's hard to say as it goes both ways. Why do I say that? Firstly, probably people who default the payments are really broke and unable to pay up, and since it covers a majority in the US, probably it affects their consumption power as well, which indirectly affects most other retail or large businesses, which may in turn lead to a drop in sales and profit and ultimately, as what they always say, leading to a recession.
Stagflation is something that they really will do their best to avoid, as US will be having their elections next year. Alot of carrots will be thrown out and as I mentioned earlier in my previous post, the market will not let itself fall normally on special occasions.
The other thing about this is, since this subprime is only in the US, which means you will ask, so why is Asia and Europe affected? Well, remembering the point where the banks bought the CDOs to make a very high interest yield, and seriously, I believe unless you stay in the US itself to understand its local market, you would definitely not know what's going on there through hear-say. Well, even you are there, it may not help too! Look at Bear Sterns, Merrill Lynch, Morgan Stanley, which suffered quite substaintially from this credit crunch. But the best thing is, even suffering a loss, their year end bonus does not decrease and in fact, it raised close to a 14% which was reported on news last week or so! I never indicate that the loss was a big one, because it depends on each individual to really determine what's big or small. Well, to me, a few million is a very big loss, but maybe to the bank itself, a loss of a few billion is nothing! That's the reason why when the news came out, it may be overhyping the issue with the figures and causing panic in my opinion. This is a form of psychology and it's probably useful to know some to enter the market.

Lastly, oil prices is the 3rd thing I look at. Now currently trading at the range of $90+, what significant impact does this have? If you monitor the US markets as well as other markets, most of the commodities stocks have risen quite a fair bit. Simple way to know this, look at your basic necessitites and the food you eat, you will know roughly whether there's an increase. With oil trading at that price, there's alot of question marks for this. Where do we go from here? As far as I can see, 1 thing is for sure, if oil prices really drop below $80 or what, it is a high chance that recession may kick in. Oil prices will generally move with the trend of the growth of the economy. Just like any other commodities, it will just become more and more expensive because we are more advanced in our society. If they have to jack down commodities or oil prices, which you can see in the SARS period, it was a economy slowdown instead. Now, everyone is complaining that oil prices are expensive and getting overpriced, but sooner or later, people will just get used to that price and carry on with life. Simple as that. A simple fact is you can't replace oil that easily at this point of time and you got to use it.

Ok, these are some of my thoughts for the issue and I will wait for the rest of the year end reports to come out and time to enjoy the holidays too! :)