Greed-Fear Index

A friend just showed me this interesting chart - Greed-Fear Index. It attempts to show if we are now in the region of extreme bearishness, or extreme bullishness.

From the website, is says "The Greed-Fear Index uses a blend of global emerging markets as the benchmark for the greed side of the equation. These emerging markets are Brazil, China, South Korea, South Africa, Russia, India, Israel, Chile, Hong Kong, Thailand, Indonesia and others which make up less than 10%. The mix of these markets is uneven and proprietary and may change without notice."

I've posted the link to it in the right panel, so that you can refer to the most updated chart regularly:
http://www.greedfearindex.com/charts/plot_GFI_behavioral_finance_bullish_bearish_market_sentiment.php

Coincidentally,  i posted a link to market harmonics earlier. Check out the equity put-call ratio:

The put-call ratio also attempts to indicate extreme sentiments.

Essentially, they are both screaming out the same message - Oversold!

Keppel Corp

Took the opportunity to initiate another small position in Keppel Corp.

Reasons:

1. Together with SempCorp, they are the market leaders in the world Offshore and Marine.
2. Other than Offshore and Marine, Keppel Corp has stakes in the rising property market and growing its infrastructure business as well
3. It has strong free cash flow since 2001 (did not check earlier than 2001)
4. Based on the total dividends given in 2009, its dividend yield is over 6% at current stock price
5. Divident policy: 50-60% PATMI
6. Owns portion of M1, K1 Ventures, Senoko waste, Tuas Waste, NeWater, K-REITS, Green Trust

Downside risks will be associated with oil and property prices, as well as the global economy situation.

Views are my own. Please do your own due diligence before committing the investment =)

BP PLC (ADR)

Last night I initiated a small position in BP (ADR).

Reasons:

1. Max loss estimated is $15B. Given that 1 ADR is equivalent to 6 shares, there are 3B outstanding shares. As such, every $1 loss in stock price = $3B loss in equity value of the company. A $15B damage should rationally be translated to $5 loss in share price. Since the accident happened on 22nd April, BP share had dropped from $59 to yesterday's $47, a loss of $12. This is over-reacting
2. This lost is likely to only pay out many years later, referencing Exxon's case: http://en.wikipedia.org/wiki/Exxon_Valdez_oil_spill
3. BP's PE ratio of 8 is the lowest in the industry
4. BP has positive free cash flow for the past 5 years (i did not look further than 5 years)
5. BP is unlikely to fail because of this $15B loss, which is about slightly less than 2009's PROFIT.
6. BP has high dividend yield of 6%
7. BP is trading at slight below book value

Views are my own. Please do your own due diligence before committing the investment =)

How to value a Property

It pains me to see so many people over-paying for property.

The problem lies in over-zealous calculation/valuation of property, or simply the lack of such valuation.

Instead of relying on past transactions, which tends to feed on itself, one should value the property based on cashflow - cashflow from rental, even if it is for your own stay. Because, you never know when you might choose to rent it out and stay in another place. So, don't cut off your options.


Valuation

So, how to value the property? A simply formulae is:

(Rental Income - Expenses) / Required Returns


Eg. Suppose a property is able to fetch $2,500 rental per month (thus $30,000 p.a), and expenses is $500 per month (thus $6,000 p.a), and you desire a return of 5% p.a, then the value of the property would be:

(30,000 - 6,000) / 0.05 = $480,000


Expenses

These are some expenses that one should factor in:

1. Property Tax
2. Insurance
3. Repairs and Maintenance

What about Capital Appreciation?

Yes, there might be capital appreciation. However, it is not easy to determine the upside. You can project growth in the rental income, but you will be taking on this upside risk.

Also, our calculation did not factor in months where there are no rental (vacancy rate), as well as we are projecting the rental income as perpectual (and not 20 years or some other fix time duration).

As such, the calculations offered would be a good trade-off for potential capital appreciation.


Of course, if you are a speculator (or a fanciful so-called invesculator), then you probably won't be interested in all these calculations, as you are feeding off sentiments.

Sovereignty Debt: Why Greece is in trouble and Japan is not

Problem with Greece

The answer lies in the following:

1) Who holds the debt. For Japan, most of its debt are held by its citizens, and thus it is very much in control although its debt/GDP ratio is very high as well.  A big portion of Greece's debt is held by other countries such as France and Germany and when these countries press Greece for the money, Greece will be in trouble.

2) Ability to inflat its currency. Japan can choose to inflat its currency to reduce the cost of debt.

3) Pension scheme and percentage of civil servants. Greece has very generous pension benefits for its civil servants, and have relatively high percentage of civil servants of its work force.


Problem with Japan

Japan has a different problem. It has to do with the following factors:

1) Demographics. Rapidly aging population, resulting in less consumer spending and thus leading to deflation.

2) Savings habit. The money printed by the government goes right into the people's savings accounts, again leading to less consumer spending, in turn leading to deflation.


Who bears the burden

We have seen that the burden is passed from:

Institutions -> Consumers -> Government who now bears most of the debts

These burden can be borne (and resolve) by the following:

1) Future Generations (eg. 2-3 generations paying off the properties in Japan)
2) Trading Partners (eg. pressure on china to revalue yuan)
3) Debtors (inflat to make debt cheaper)
4) Government (simulating growth. revenue/tax will increase and thus fiscal deficit will decrease)

Home-School Distance

Extracted from http://www.kiasuparents.com/kiasu/content/measuring-home-school-distance

• Paid services.
• The official source is SLA's INLIS. The Singapore Land Authority (SLA) is the source that provides the home-school distances to MOE every year. Parents can enter a postal code or address of their residence and then select the Primary school which they wish to calculate the distance from their property. This is NOT a free service, and costs about $2.10 per computation.
• StreetDirectory. StreetDirectory.com is probably the best known map in Singapore. Unfortunately, the search for educational institutions feature is not a free service, and users have to pay about $0.54 per request.

• Free services. There are several free services out there which allows parents to guage the home-school distances. However, such services cannot be used as official proof of home-school distances for Primary 1 Registration.
• MyLifeStyleMap. This used to be called CAN.COM.SG, and is operated by Greendot Media, a portal company that owns several online websites. In many ways, this is the best free alternative because the map data actually comes from SLA itself. So the results should be quite close to what the schools have.
• StreetDB. StreetDB.com is a new site born of a joint collaboration between SingaporeExpats.com and AGIS, a local mapping company.

Trading Hours and Data

1. Gold, New York Spot Price, EST 9.30 - 17.30, http://66.38.218.33/charts/historicalgold.html
2. Silver, New York Spot Price, EST 9.30 - 17.30, http://66.38.218.33/charts/historicalsilver.html
3. DOW, GMT+8 10.30pm - 5am, http://sg.finance.yahoo.com/q/hp?s=%5EDJI
4. NASDAQ, GMT+8 10.30pm - 5am, http://sg.finance.yahoo.com/q/hp?s=%5EIXIC
5. S&P500, GMT+8 10.30pm - 5am, http://sg.finance.yahoo.com/q/hp?s=%5EGSPC
6. S&P500 VIX, http://sg.finance.yahoo.com/q/hp?s=%5EVIX
7. Brazil Bovespa, Rio de Janeiro Stock Exchange, GMT+8 10pm - 4.45am, http://sg.finance.yahoo.com/q/hp?s=%5EBVSP
8. Germany DAX, GMT+8 4pm - 3am, http://sg.finance.yahoo.com/q/hp?s=%5EGDAXI
9. London FTSE 100, GMT+8 4pm - 12.30am, http://sg.finance.yahoo.com/q/hp?s=%5EFTSE
10. Brent Oil, http://production.investis.com/bp2/download/brent_oil/
11. Baltic Dry Index, http://www.eoddata.com/StockQuote/INDEX/BDI.htm

World Time: http://www.timeanddate.com/worldclock