Tempted to buy stocks now? Do your homework please

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Dec 12 2008
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UCLA Anderson Forecast report said U.S. recession will only worsen next year as unemployment, weak home, plunging stock prices and debt-laden businesses would reveal its true color by then. UCLA also expects the real GDP to shrink by 4.1%, 3.4% and 0.8% for fourth-quarter 2008, first-quarter 2009 and second-quarter 2009 respectively. Looking at the figures alone it seems on surface the U.S. economy could bring cheers from third or possibly fourth quarter of 2009 onwards – if we’re lucky and President-elect Obama could do wonders immediately, not to mention no-more ugly surprise factors. However the UCLA report does not talk about unemployment problem which was predicted to hit 8.5% by end of 2009. The Labor Department has just reported jobless claims hit the highest level since Nov 1982 at 573,000 for the week ending Dec 6.

Besides Europe and Japan which are already in recession the eyes are on China. China’s economy is expected to grow at 8.2 percent in 2009 compared to 9.5 percent in 2008. Inflation also dropped surprisingly to a 22-month low of 2.4% in Nov from 4% in Oct, a good sign that China’s economic is not overheating. But this also means the deflation possibility has grown. An analyst with CEB Monitor Group research firm in Beijing even predicted China’s inflation could reach negative 1.5% at the end of first-quarter 2009. As fun as it may be, investors are monitoring if the global crude oil prices could go under the psychological $40 a barrel. The fact is OPEC is fighting a losing battle to keep the oil prices high but now that Russia planned to lend its help to support the black gold prices it appears the foundation of $40 a barrel has increased in strength.

If you’ve been monitoring the Dow Jones performance lately you can’t help but to wonder if the bottom was behind us. Any investors will tell you that at this particular moment the chances of DJIA breaching below 8,000-level is history. There’re people (fund managers included) who cried that they have missed the bottom and scrambling to buy in case the stock market suddenly come charging. So, what happens to the “stocks will get worse before it gets better” trumpeted by the professional fund managers? Have we really seen the worst? I have not seen the worst yet therefore I can’t say it’s time for us to rock and roll. Has AIG suddenly recovered? Will we hear no more of companies planning to put thousands of staffs on the chopping board? Maybe the Detroit’s top three automakers bailout is the last that we’ll see. But hey, it appears the Senate refused to endorse (52-35 vote) the $14 billion rescue plan and the 3 million jobs are at risk here *scary, scary*.

Detroit 3 Ford GM ChryslerSo, are you tempted with the current stock market direction which is slowly forming volatility within “controllable range”? It’s neither too wild nor too mild, a heaven for swing traders. People still makes good money during such situation because the trading range is more predictable but you got to run for your life when you hit the threshold of profit. There’s no room for greed unless you wish to get slaughtered. Nevertheless you won’t know if the current nice weather is in fact another preparation for yet another fierce storm to come. Don’t get tricked that just because the local banking sector is not affected seriously (for the time being), it means 2009 will be the same. It’s not like the meteorite that hit the earth millions of years ago that wiped out the dinosaurs instantly. It’s a poison that is slowly spreading. In reality, we’re still savoring the meat from last year’s hard work with only days to go before the New Year *fireworks please*.

If you must because your hands are too itchy so much so that the doctor that you consulted concluded there’s no cure for such disease then please do your homework and do some research on the company’s financial report, not to mention the dividend factor. I’m wondering how long can Public Bank Berhad (KLSE: PBBANK, stock-code 1295) take the punches because this is one of the stocks that you cannot ignore. It would be a waste not to accumulate this stock but at the current price of RM8.30, I’m not tempted (please sell down this stock so that I can accumulate please *grin*).

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Hi, I like your analysis. Talking about PBBank, I agree it looks cheap but at 3x the NTA it’s the highest among the banking stocks at this point in time. The asset destroyer MBBank is trading around 1.3X the NTA and Eoncap… don’t know why it’s performance is louzy at under NTA (0.67x)!! I am as you said, itching to get into the market. Just holding myself back until after this motor industry collapse to ripple the market.

What’s your forcasted price you will enter to pick up PBBank?

Looks like most of the bad news are already out in the market.. the rest are just the “maintenence” part. just see how the joblessness will affect the market direction.

you think we will go back down to below 500! KLCI?? this time after the 97 meltdown we are prepared and may be this IS THE bottom. what say you?


I am still waiting for companies to announced dividend cuts in anticipation of very weak future earnings. So far that has not yet happened in the bigger MNC companies listed in DJIA.

And also, I don’t think there is an any dividend cuts on the local stocks. Correct me if i am wrong, as i have totally neglected local stocks for ~1.5 years. 😛

hello elmo,

pbbank is expensive for its reason and i believe i’ve wrote many months ago why PBBank is my favorite banking stock … i wouldn’t think about Maybank if i’ve a choice but i’m sure you know why this biggest lender screwed-up …

i would think 700 will probably scare the sh** out of many investors including local fund managers, so 500 would be near disastrous but then who would think the KLCI could plunged to below 300 back in 1997?

as i’ve said, the problem with PBBank stock is it’s stubbornly non-volatile but this is the game of patience …

cheers …

hello kris,

local stocks are moving very slowly and currently is pulling the hand-brake with all its might from slipping into the bottom …

once the hand-brake cable breaks … 🙂

cheers …

Great post! I personally will wait for SP 500 in the 400-600 range in the 2nd week of January 2009 before I take any real long positions. We have rode DTO, BGZ and SDS this far, why not go a little further!

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