US Markets hitting new highs!

*** Note: This post is of a very simplified calculation. There's nothing professional in it. ***

The numbers are appearing to break new highs. USA has broken it's high of 14198 in 2007 while STI appears to be languishing far below the 2007 high of 3906.

But is it really due to nominal value or currency value?
I shall make a simple comparison using USD to SGD as a simple consideration.


Adjusting for Currency Value + inflation
********************************************************************
Year 2007:
1 USD = 1.55 SGD
Dow Jones hit a high of 14198

Year 2009:
1 USD = 1.5 SGD
Dow Jones hit a low of 6469

Year 2013
1 USD = 1.23 SGD

Supposed value of SGD (simplified assumption) remains a constant,
14198 will work out to be 17892 (14198 / 1.23 * 1.55)
6469 will work out to be 7889 (14198 / 1.23 * 1.5)

Adjusting for average inflation rate of 2.0% for the USA from 2007 to 2013,
17892 will turn to 20149 today
7889 will turn to 8539 today

There is difference of 11610. Given the Dow Jones close is 15105, a difference of 6566 from the low.
The retracement percentage is roughly 56.6%



And if we assume the SGD stays at a constant value throughout.
With a high of 3906 in 2007 and a low of 1455 in 2009 (numbers from daily values of STI from Yahoo Finance)

Adjusting for average inflation rate of 3.5% for Singapore from 2007 to 2013,
3906 will turn to 4801 today
1455 will turn to 1670 today

There is difference of 3132. Given the STI is about 3430, a difference of 1760 from the low.
The retracement percentage is roughly 56.2%

In other words, nominalizing all to SGD and country inflation rate actually shows that the retracement percentages are very close (56.5% vs 56.2%).




So while the numbers in Dow looks to be breaking new highs, it is in my opinion a credit driven rally, made possible by the devaluation of the USD. In other words, valuations of stocks in USD are higher because valuations of USD has dropped significantly.

Just some two cents of thoughts, with plenty of simplifications.

Growth Strategy for 2011 and beyond

Happy new year to readers in the year 2011!

Year 2010 was a rather good year for me in terms of networth growth (nearly doubled). It was a year where I was super busy, but monetary and spiritually rewarding. Why I said it is spiritually rewarding is because I believe it is my calling now to assist and help students do well in their studies, through active teaching and through books.

Year 2011 and beyond is indeed more exciting than ever before. This post is not going to be about any new year resolutions, because I have already set myself in place with Goal 2013.

Apart from Goal 2013, this is my view of the economy and market in concise form:

Singapore Telecommunications Sector

Telecommunications

IDA mulling introduction of fourth mobile operator
Analyst: Jonathan Koh

Infocomm Development Authority (IDA) is considering parceling out the final fourth slot of 3G spectrum, which was not taken up during 3G auction in 2001 and was left unused for the past nine years. This could pave the way for IDA to bring in a fourth mobile operator.

Some Cartoons to enjoy :)

Some cartoons shared on rmao forum. Enjoy!

Private Equity Cos Awaiting Specifics On Obama's Bank Proposal

The following news could be the reason for the recent selldown. Bearish market could have commenced. I would probably sell some on rebound.

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NEW YORK (Dow Jones)--President Barack Obama's proposal to rein in banks contains a number of provisions that could have a serious impact on the private equity arms of banks, as well as the private equity industry overall, depending on how the vague outlines unveiled Thursday are filled in.

Obama said in his remarks on the proposal that "banks will no longer be allowed to own, invest in or sponsor hedge funds, private-equity funds or proprietary trading operations for their own profit, unrelated to serving their customers."

Some say the clause at the end of that statement about serving customers may provide a loophole, as most banks would argue that their PE investments do just that. But the proposal nonetheless could mean any private equity or venture capital firm run by a bank would need to spin out on its own or wind down.

US Dollar -- Time to say bye?

Much of the rise in the stock market has been attributed to the fall of the US dollar. But will the fall of the USD be sustained? Let's look at it from both the technical and fundamental point of view.

For the technical portion, I shall take a leaf from Elliott Wave International's technical viewpoint on the elliott wave count

http://www.elliottwave.com/freeupdates/archives/2009/10/13/U.S.-Dollar-Kiss-Goodbye-or-Reversal-at-Hand.aspx

Notice the drop since March 09? This is in line with the multi bear rally from Mar 09 in stock indices. An inverse relationship is obvious between equities and the dollar.

Interesting Insight from OCBC

REGIONAL MACRO PULSE: Another jobless recovery for the US?

• Easing layoffs amid still-high jobless rate. Although the pace of layoffs has subsided from the peak as more signs of economic stabilisation emerge, we expect the US unemployment rate to continue rising in the coming months and only recede gradually when the recovery takes hold. There are now widespread fears that the nascent economic recovery will be another jobless one.
• When will it end? Jobless recoveries were seen after the 1990-91 and 2001 recessions when payrolls languished even after the recessions ended. It took between 23 and 39 months before the labour market returned to normal. As such, we foresee that the unemployment rate will remain elevated for some time even if the unemployment rate peaks in 2H2010 or in early 2011. As the current recession was preceded by a deep financial crisis, the jobless recovery could last much longer than expected, probably at least 45 months.