Bull Markets For 2012?

[bepgof 20]

just curious.

what was the value of your stock as at the end of 2011 (ie. purchased price is 121,032.76, market price of these was?)

were the returns (31,682.29) derived from dividend payments or from gains made on buy/sell, etc?

To satisfy yr curosity.

Market value aa at today = $ 73,600

Purchased price = $121,032.76

Of course return incl dividends.

Worth mentioning, mid dec 2011, I let go some, lossing abt $7k. The capricon effect, for this year, seem not to be actualised.

[random_username 0]

To satisfy yr curosity.

Market value aa at today = $ 73,600

Purchased price = $121,032.76

Of course return incl dividends.

Worth mentioning, mid dec 2011, I let go some, lossing abt $7k. The capricon effect, for this year, seem not to be actualised.

thanks! i always learn a lot from your posts!

so your return on 31,682 is already net of the 7k realised loss? and your return includes positive capital gain on sold stocks?

is the return of 31,682 also after take into account the "paper" loss of stocks unsold but selling at lower price than you bought (since 121,032.76 > 73,600)?

How do fund managers treat these?

Edited January 16, 2012 by random_username

[bepgof 20]

thanks! i always learn a lot from your posts!

so your return on 31,682 is already net of the 7k realised loss? and your return includes positive capital gain on sold stocks?

is the return of 31,682 also after take into account the "paper" loss of stocks unsold but selling at lower price than you bought (since 121,032.76 > 73,600)?

How do fund managers treat these?

1. "actualise" means actual losses + actual gains = $31,682, during the whole year.

2. "paper loss" not reflected in book.

3. Actually should consider a few "opportunity costs", if this $250k were put in somewhere(s) else:

- bank saving/FD account, 1% interest

- Bonds, gives 5% pa return (less liquid)

- Foreign currency capital gains+ interest gain, perhap 3%

- Gold trading, if timings right ~ 15%

- Other businesses?

Golden rule(sound simple but not easy): Decision made yesterday is result of today.

Last yr ~ sept I "actualised" an "investment programme" by submitting my registration which I supposed to have initiated some 19 yrs ago, when I choose to "receive HDB key", instead of choosing this "investment programme". Time really flies.

This "investment Prog" =BBM(Bachelor of Business(Management)) by SIMGE & RMIT. 12 subjects, incl 4 electives on business finance. 2 years, $18k. I'm now in wk2 of the programme.

Might come here less cos too many materials, to write essays with referencing and data.....really "heavy"..

[random_username 0]

1. "actualise" means actual losses + actual gains = $31,682, during the whole year.

2. "paper loss" not reflected in book.

3. Actually should consider a few "opportunity costs", if this $250k were put in somewhere(s) else:

- bank saving/FD account, 1% interest

- Bonds, gives 5% pa return (less liquid)

- Foreign currency capital gains+ interest gain, perhap 3%

- Gold trading, if timings right ~ 15%

- Other businesses?

Golden rule(sound simple but not easy): Decision made yesterday is result of today.

Last yr ~ sept I "actualised" an "investment programme" by submitting my registration which I supposed to have initiated some 19 yrs ago, when I choose to "receive HDB key", instead of choosing this "investment programme". Time really flies.

This "investment Prog" =BBM(Bachelor of Business(Management)) by SIMGE & RMIT. 12 subjects, incl 4 electives on business finance. 2 years, $18k. I'm now in wk2 of the programme.

Might come here less cos too many materials, to write essays with referencing and data.....really "heavy"..

noted.

i suppose there are different views on point 2 and how to treat it, and the outcome would be different. Also, wrt to point 3. opportunity cost, if there is a portion held in cash, the outcome would also be different since interest rates/returns are low.

really admire your can-do attitude! All the best for your program!

[gimz63251073 0]

i think opportunity costs used traditionally in corporate finance and economics is quite academic and impractical.

as the investor himself, i would be concerned instead with real returns. It would be risky to say put everything in bonds or everything in stocks or everything in gold. Most would want some form of diversification as we are not experts like Warren Buffett.

but with FD rates at less than 1%, it can hardly be called an investment! I dun even bother to putting excess money in the FD, i rather wait for a good opportunity for stock market to drop and buy in.

Bonds or even preference shares will drop in price during recessionary periods or during crisis periods as seen in bank preference shares during the Lehman crisis. That puzzles me a bit as i was expecting a "flight to safety". However, i guess the market does not feel that bank preference shares are safe enough.

[bepgof 20]

noted.

i suppose there are different views on point 2 and how to treat it, and the outcome would be different. Also, wrt to point 3. opportunity cost, if there is a portion held in cash, the outcome would also be different since interest rates/returns are low.

really admire your can-do attitude! All the best for your program!

I'm yet to buy a Texas Instrument BA2+ finaancial calculator for cal npv for various "investments" - FD, insurance...., those movables & immovables...

The "paper loss" just brush aside, it is important but not urgent, i can wait to "reap" them one day. Opportunity cost is quit academic but this concept must always be in mind when one does "investment". Mkt is volatile, the "paper loss" amount, at every seconds, up & down.

Last Dec again, SIL was mentioning the monthly $300 maintenance fee for her S1 girl is insufficient....ended up wife & I sat together, seriously cal the monthly expensesfor our 2 children(JC1 ans S3, this yr), everything apportioned to monthly: to my "horror", they "consume" us, monthly, slightly >$1k each!

The knowledge to investment is one thing, skill(knowledge+experience) is another, behavious(skill + value systems)sums up the rest.

Invest while young, fall can always stand up again. Do investment at old age(say >50yr)without prior skills, kill.

[bepgof 20]

Just some financial maths cal here for making decisions:

Topic: Putting $250,000 in saving acct(monthly compunding, J=12) or FD acct(yearly compunding, J=1)?

Prevailing mkt rates:

FD=0.9% pa, standard chart.

Saving = 0.8%, HSBC premier

We are to calculate the future value(at end of 1 year) of the initial capital of 250,000

FD

PV=250,000

FV=???

r=0.9%= 0.009

n=1

FV1=PV(1+r) to power of n

=250,000(1.009) power of 1

=252,250

2,250 is the interest or opportunity cost, or sometime can also called as cost of capital.

Saving (compounding monthly= (interest+principal)at end of each month

PV=250,000

FV=???

r=0.8%/12 = 0.000667

n=12

FV1=250,000(1+0.000667)to power of 12

=252,008

2,008 is the interest....

Difference = 2250-2008 = $242

What happen if we put the respective amounts in respective act for another 1 yr, given interest rates remain unchange.

FD

FV=250,0000(1.009)to power of 2 (because of 2 years) = 254,520.3

Saving

FV=250,00(1+0.000667) to power of 24 = 254,032.5

Difference = 4520.3-4032.5= 488 = 242 x 2

So, which acct yield better? By how much? Risk of respective accounts?....All these are "decision making" inputs.

I raise the above real-life example because someone mentions it is "academic", true enough, as mkt is volatile. However, we need some basic "know how" in order to make sound decisions, not "anyhow hamtan". During GFC in 2008, banks "switched off the taps", ended costs of borrowing(Ki) being shotup, cost of equity(Ke) become cheaper source of fund. After QE1, QE2, paper $ flooded the mkt and the taps switched on again, Nominal Interest Rates goes down, cost of borrowing become cheaper in relative to "own money" or "equity".

I will later touch on "annuities" which are "practical" in real life, like those home loan mortgages,.....

[gimz63251073 0]

i think i am that "someone"?

think bepgof's example illustrates whether you would give up 0.1% of returns for locking up your money?

i suppose there can be many variations, for example, splitting up the $250k into $100k, $100k, $50k and spread over different banks.

An investor can then use $100k to buy property, stocks, etc when he thinks its of good value. Hence, he need not put $250k into just one bank. That would reduce his "opportunity cost".

Alternatively, you might get a different answer if you compare SG govt bonds (the true risk free rate of return) as compared to fixed deposits (where only 30k is guaranteed in the unlikely event of a bank run).

When i was in school, we were taught that the US 30yr bond is the risk free rate, i wonder whats in the syllabus nowadays?

[bepgof 20]

Academically, gov bonds are "risk free". This claim is based on assumption that gov would "keep its word". But in actual fact?? Look at Greece and Italy (rose to 14%), why investors hesitant to buy?. Even Germany just "managed" to sold finished selling bonds.

SG govt issue bonds to raise $, because she finds it is cheaper this way then to use her own $(Ki, Ke issue) When in FC, "own $" is the cheapest source of fund. This is the same for the Sing Power(cash cow) who issued bonds.

In very actual fact, the true risk free rr is the $ in cpf's special account(4%).

[gimz63251073 0]

the cost of equity fundamentally depends on the risk free rate, since risk free rate is academic, then cost of equity would be similar right?

To put it simply, if the fundamental key input is arbitary, the end result would be arbitary. Garbage in, garbage out.

There is also a risk where corporate finance does not cover - events with a small probability but has disastrous effects. I read it in a book somewhere but forgot the title. Corporate finance can be used when everything is fine, business as usual. But once crisis kicks in, things go haywire and you no longer know what input to apply.

the CPF is the cheapest form of loan for the govt, book entry till maybe 40yrs later then need to repay. where to find?

CPF's special account is risk free but no longer at 4%, and have to discount away liquidity (put in cannot take out).

[bepgof 20]

Cost of equity(Ke)=the cost of using own money to do certain investment. Cost of debt(Ki)= the cost of using "borrowed" money to do certain investment.

When mkt is cash-rich, ie cost of interest is low, wiser to use "borrowed" money to do investment instead of using own $. Ki presently hovering around 4-5%, Ke ~ 8-12% in Asia mkt. This is although academic but also a practical "concept" or "picture" that FM for big corporation must have, and the projection is always in the range of 5-10yr, as well as to consider "own" working capital amount and the projection of net incoming and outgoing cash flow within the 5-10yrs.

To a smaller scale to an individual(say an employee)who knows his existing "working capital" (saving), annual earning(pa inflow) and outflow (expenses,pa)for the 5-10yrs range, so enable him to consider certain investment. Without doubt, this involves certain amount of uncertainty(risks), but, this is the one & only "conservative" and "done the home work" "skill" to do an investment in the long run.

That is the fundamental reason/cause that why youngsters fail their "business", without a proper "big" picture in mind with support of certain calculations (cash flow in & out, working capital....)Just my "certain years" of experience through handon, study and observation. Discussion welcome.

Edited February 3, 2012 by bepgof

[gimz63251073 0]

one company which was borrowing to invest would be 2nd Chance. Listed on the SGX.

They borrow from banks to invest in reits, reason being yield on reits are higher and they can pocket the difference. No prizes for guessing what happened when the credit crunch came:

1. banks stopped lending to them

2. reits are traded in the market, so accounting wise, have to mark to market value. reits came crashing down, dragging down profits and hence the share price of the company.

3. the company cannot borrow from banks, cannot re-issue shares as share price is too low and cannot have no choice but to sell of reits at depressed prices.

they were lucky the credit crunch was short and they survived.

Corporate finance attempts to measure many things, but its not sufficient. Now companies would rather hoard cash as they are wary of a similar crunch becos the crunch is still quite recent and in their memory. Come a few years later, a new CEO comes in, it could be in a different situation.

Many biz do not use leverage at all or use very little leverage. What's their concern? FOr example, asia enterprise.

[bepgof 20]

2nd chance enterprise has becomes 2nd chance property(Malay owner if I remember correctly), it tells that companies must really innovate, be adaptive to environmental, economical and social changes. Look at A&W vs Mcdonalds. Noikia - connecting people, now "disconnected" from ppl. What do all these tell? Apple's Tim Cook is facing a big challenge of "WHERE to" & "HOW TO" make use of the existing huge sum of cash which has been accumulated over the yrs (without issue dividend). He can buy over facebook with cash over the table! IBM is another cash rich.

Ascendas REIT just announced acq 4 science park properties from Ascendas Land, for S$183mil. Yet to decide to raise fund through debt by borrowing or via equity through share issue. But for sure, its share price will drop after this announcement.

WHAT to buy for investment is an investment ddecision. Where to get the fund to buy for such is the financing decision. To issue divident or not for the stakholders is the dividend decision. Corporate Finance Chief everyday are bothered by these 3 decisions.

I have asked myself to put how much in stock mkt to "lend" to these corporations-financing decision. I also faced WHAT stocks to buy for best return- investment decision. Where and how I spend the "profit" from these investments is the dividend decision. So I can be a Corporate Finance Chief liao, correct?

[bepgof 20]

Look like the small bull is in process, reasons?

http://sg.finance.yahoo.com/q/bc?s=%5ESTI&t=6m&l=on&z=l&q=l&c=

- Anything to do with gov budget to be announced 17 Feb?

>FT freeze/cut

>improve public tpt

>Training

>Corporate tax cut

>Personal income tax incentive

>another baby incentive

>retirement village??

- Many companies book close in Mar, dividend payable in Apri-May, now only 2ndwk of feb, so kiasu, start keeping stocks?

[bepgof 20]

The "small bull run" will be over pretty soon, after the Jan's capricon effect and the gov budget announcement. Basically, there will be no good "stimulating" news to drive the market, may be until Aug, national day?

Bad news sure to come soon. Standby. Failing to prepare is preparing to fail.

Edited February 27, 2012 by bepgof