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3 Key Points To Lookout For When Buying Stocks In A Recession (Guest Post)

3 Key Points To Lookout For When Buying Stocks In A Recession (Guest Post)

A recession is a significant decline in economic activity, lasting more than a few months. But many asked, when to buy stocks? How to better time a market entry in a recession? Well, here are 3 points to guide you along.

This post was originally posted here. The writer, Royston Tan is a veteran community member and blogger on InvestingNote, with username known as Royston_Tan and has 22 followers.

A Looming Recession? Look at Interest Rates - WSJ

For those looking to time a market entry, some data points on when might be a good time.

WHEN TO BUY STOCKS IN A RECESSION? THE IDEAL TIME TO PICK A BOTTOM

While I don’t recommend trying to time stock purchases with a crystal ball in front of you, especially during a bear market potentially as severe as the one we are currently facing, I will provide some reference point as to when might be the IDEAL time to PICK a bottom and start investing more aggressively in a recession.

This is not going to be from my GUT but instead using historical statistics to time entry. YES, I know that historical performance is never representative of the future trajectory of the stock market, especially one that is seemingly unprecedented as the current one.

Then again, having some maths behind you beats randomly pulling out some FORECAST based on your gut.

Before I disclose “my formula” on when to buy stocks in a recession, the question I like to ask is: Are we already in a recession? Seems to be a no-brainer question especially with more than half the world being on lockdown, right?

WHAT DEFINES A RECESSION?

A recession is a significant decline in economic activity, lasting more than a few months. There is a drop in the following 5 economic indicators:

  1. Real Gross domestic product (GDP)
  2. Income
  3. Employment
  4. Manufacturing
  5. Retail Sales

The current situation seems to tick all the boxes in this category.

A “simpler” definition for a recession is when the GDP growth rate is negative for two consecutive quarters or more. While it might seem simple, there might be some confusion. Should we be measuring GDP growth on a YoY basis (ie compare 1Q20 to 1Q19) or should we be measuring it based on QoQ (ie comparing 1Q20 to 4Q19).

The latter comparing on a QoQ basis is often being termed as a “Technical Recession” within the Singapore context (If you type technical recession in Google, most of the results are related to Singapore).

HOW DOES THE US CALCULATE GDP GROWTH?

In the US, the Bureau of Economic Analysis uses real GDP to measure the US GDP growth rate. Real GDP takes out the effect of inflation. GDP is calculated every quarter but is being annualized. The aim of annualizing is to remove the effect of seasons. If the BEA did not do this, there will always be a spike in the 4Q growth rate due to the holiday seasons.

The BEA provides a formula for calculating the US GDP growth rate which I will not detail much in this article.

IS THE US ALREADY IN A RECESSION?

NEW YORK CITY TIMELAPSE (EMPTY AMERICA) — fullinsight

Depending on which article you read, some might say that the US is already in a recession while others such as this Bloomberg Tracker (last updated March 11) which pegs the probability at “only” 53%, still the highest level since GFC. However, that tracker was done before the jobless claims blew up over the past 2 weeks, now more than 10m, so I reckon that probability ratio will probably be inched up significantly in the next update.

Given the COVID-19 scenario that we are facing, whether we choose to look at GDP growth from a YoY or QoQ basis, it is difficult to argue against the fact that US GDP growth will be negative in 1Q20 and 2Q20.

Even if the COVID-19 issue miraculously resolves itself today, the uncertainty surrounding a possible relapse will result in nations all over the world engaging a protectionist stance that will stymie the global economic recovery process.

My best guess, if I am to look into my crystal ball is that the peak of the COVID-19 issue for developed nations such as US, Italy and Spain will probably be sometime in late-April to early-May by which the focus will then turn to developing nations such as India and Indonesia where cases are just beginning to ramp up.

Developed nations will continue to shut off their borders to foreigners for fear of a relapse, just like what China is currently doing. The V-shape recovery which many people are hoping for is probably not going to happen in such a scenario.

HOW BAD IS THIS RECESSION GOING TO BE?

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SIA Rights Issue: Debunking The Complication Behind The Math (Guest Post)

SIA Rights Issue: Debunking The Complication Behind The Math (Guest Post)

Most of you would probably have been aware of Singapore Airlines’ (SIA) plight and the need to do a massive fund-raising exercise, fully-backed by Temasek. This means that if Singaporeans are not willing to support our national carrier by subscribing to those new shares, Temasek will come in to backstop 100% of the issue. SIA looks to raise a total amount of S$15bn (SIA Rights), through a combination of S$5.3bn in Rights Shares issuance and S$9.7bn via Rights mandatory convertible bonds or MCB for short.

This post was originally posted here. The writer, Royston Tan is a veteran community member and blogger on InvestingNote, with username known as Royston_Tan and has 17 followers.

SIA reassures cabin crew on medical leave system, Singapore News ...

SIA RIGHTS ISSUE: DEBUNKING THE COMPLICATION BEHIND THE MATHS

By now, most of you would probably have been aware of Singapore Airlines’ (SIA) plight and the need to do a massive fund-raising exercise, fully-backed by Temasek. This means that if Singaporeans are not willing to support our national carrier by subscribing to those new shares, Temasek will come in to backstop 100% of the issue.

SIA looks to raise a total amount of S$15bn (SIA Rights), through a combination of S$5.3bn in Rights Shares issuance and S$9.7bn via Rights mandatory convertible bonds or MCB for short.

S$15bn looks like a HUGE amount of equity to be raised, particularly when one compares with SIA’s key competitor Qantas which, a few days prior to SIA’s announcement, highlighted that it has managed to secure ONLY A$1.05bn in collateralized (against its fleet of 7 Boeing 787 aircraft) debt funding at an interest rate of 2.75%. Qantas share price appreciated by 26%.

Unlike SIA which has been levering up on its balance sheet to make new aircraft purchases, Qantas, on the other hand, has maintained a steady net debt balance of A$3bn over the past 3 years. Comparatively, SIA’s net debt balance has ballooned to S$8bn (including lease liabilities) as at end-2019 as a result of their aggressive fleet renewal plan.

So, Qantas (with a market cap of A$5bn) requires an additional A$1bn to tide over this major aviation crisis (for now perhaps) while SIA (now with a market cap of S$7bn) requires a potential total of S$15bn (plus S$4bn in bridging loan) and one can see the huge disparity in terms of capital management.

With that notion in place, let’s evaluate the two Rights issuance, first the SIA Rights Share followed by the SIA Rights Mandatory Convertible Bonds.

I will then follow up with 4 scenario analysis for a potential SIA shareholder and calculate what might the market value of the SIA Rights Shares and SIA Rights MCBs be worth when they start trading.

They are;

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The Hammer Candlestick Trading Strategy Guide (Guest post)

The Hammer Candlestick Trading Strategy Guide (Guest post)

The Hammer candlestick pattern is a powerful entry trigger. If you were to trade it, your stop loss is at least the range of the Hammer (or more). But won’t it be great if you can reduce the size of your stop loss and improve your risk to reward?

This post was originally posted here. The writer, Rayner Teo is a veteran community member and blogger on InvestingNote, with username known as Rayner and has 310 followers.

According to most textbooks:

Whenever you spot a Hammer candlestick pattern, you should go long because the market is about to reverse higher.

And that’s what you do.

But the next thing you know…

The price immediately reverses and you get stopped out for a loss.

And you wonder to yourself:

“Wait a minute, isn’t a Hammer candlestick a bullish signal?

“Why did the market reverse against me?”

“What’s going on?”

Well, let me tell you a secret…

A Hammer candlestick pattern doesn’t mean jackshit (and I’ll explain why later).

But first, let’s understand what a Hammer candlestick pattern is about…

What is a Hammer candlestick pattern?

A Hammer is a (1- candle) bullish reversal pattern that forms after a decline in price.

Here’s how to recognize it:

  • Little to no upper shadow
  • The price closes at the top ¼ of the range
  • The lower shadow is about 2 or 3 times the length of the body

And this is what a Hammer means…

  1. When the market opens, the sellers took control and pushed price lower
  2. At the selling climax, huge buying pressure stepped in and pushed price higher
  3. The buying pressure is so strong that it closed above the opening price

In short, a hammer is a bullish candlestick reversal candlestick pattern that shows rejection of lower prices.

Now, this is important.

Just because you see a Hammer candlestick doesn’t mean you go long immediately.

Here’s why…

The truth about Hammer candlestick (that most gurus don’t even know)

Are you ready?

Here you go…

  1. A Hammer is usually a retracement against the trend
  2. The Hammer doesn’t tell you the direction of the trend
  3. The context of the market is more important than the Hammer

Let me explain…

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A MUST-READ SPECIAL REPORT: BEAR MARKET 2020

A MUST-READ SPECIAL REPORT: BEAR MARKET 2020

A MUST-READ Special Report: Bear Market 2020 by @jaytun

The bull market is onto its 11th year and due to the knee-jerk reaction to the fear for the economic impact done by COVID-19, global equity markets tanked 30% at an unprecedented pace.

During this period, these are the questions you should be asking:
  • What Are The Macroeconomic Factors That Will Directly Impact Your Portfolio?
  • What Are The Key Levels On S&P 500 Where You Can Buy Safely?
  • Is It A W-Shaped Or V-Shaped Recovery?
  • Where Will Be The Bottom And How To Find It?
  • What’s A Better Alternative Compared To Catching The Falling Knife So You Can Profit Safely?
  • What’s The Top 10 “MUST HAVE” Companies That Can Potentially Return Multi-Fold On Your Portfolio?
  • What’s The Key Price Levels To Buy On These “Beaten Down” Stocks To Supercharge Your Returns?
If you’ve asked others or yourself any of these questions, you’re at the right place.

This 32 page special report is specially curated for you to help you navigate this treacherous bear market filled with uncertainty, with the aim of enriching you through the research based on Fundamentals, Technicals & Macros.

Get this report for only $9.90.

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InvestingNote is the first and largest social network for investors in Singapore. Find out more about us here.

Download our free app here:

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3 Important Things You Should Do Before Investing (Guest Post)

3 Important Things You Should Do Before Investing (Guest Post)

You tend to hear horror stories about people going into debt. Others are buried under thousands of dollars of credit card bills. Some are picking up extra jobs and taking out loans left and right. Having a good system to manage your finances is a smart idea if you want to stay out of debt and possibly save for the future. Here is a beginner’s guide to managing your money before investing.

This post was originally posted here. The writer, James Yeo is a veteran community member and blogger on InvestingNote, with username known as Smallcapasia and has 821 followers.

 

Image result for working guy with 2 hands on the head

You tend to hear horror stories about people going into debt. Others are buried under thousands of dollars of credit card bills. Some are picking up extra jobs and taking out loans left and right.

Having a good system to manage your finances is a smart idea if you want to stay out of debt and possibly save for the future. Here is a beginner’s guide to managing your money.
1. Set up a Rainy Day Fund

Contrary to popular belief, setting aside is the most #1 important thing you should do as compared to learning how to save or cutting down your debt etc.

This is because a rainy day emergency fund is for unplanned essential expenses, such as a sudden car repair or if you lose your job. The rule of thumb is to have:

Rainy Day Fund: At least 3 to 6 months of your expenses

The easy way to go about it is to just spend an excruciating month tabulating your expenses for the entire month. After that, smoothen out any irregular spike in expenses based on the number of months/years – example spending for staycation or travelling worth $5k should be divided by how many times you do it in a year.

After you build your emergency fund, you may consider building up your savings.

 

Image result for saving budget

 
2. Automate your savings budget

When most people think of a budget, they think of a set of rules. Now, something is telling them what they can and cannot buy.

While this definition or practice is supposedly correct, i find that (from my friends) it rarely works. Its more of a theory thing.

Reason being that people will always spend whatever they have to the last dime and savings will only come by if there’s extra – but there wouldn’t be any!

So instead, we should all practise automation when it comes to our budget – Open a separate savings account and establish a automatic transfer of at least 10% of our take-home income.

Better still – Don’t apply any atm card for that account. Because…

You can’t use what you can’t see!

3. Protection before Earning

Last but not least, it is wise to have enough insurance coverage even before you start investing.

No matter how much you can earn, one illness can rob you of all these riches instantly. Health is always more important than Wealth.

Hence, you have to at least protect your downside (hedging) through insurance before you start to embark on the route to investing.

Conclusion

The first principle of managing your money is to live within your means. Always spend less than what you make and keep to your budget.

Once you have a strong foundation, you will not panic when your investments suddenly turn sour – just like the vicious spread of coronavirus which sent the markets into a tailspin.

Thanks for reading.

Once again, this article is a guest post and was originally posted on Smallcapasias profile on InvestingNote. 

Become a part of our community and also see what other investors are saying about the current market right now: (click on the view now button)

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InvestingNote is the first and largest social network for investors in Singapore. Find out more about us here.

Download our free app here:

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Essential Stock Market And Investing Wisdoms For Every Investor In 2020 (guest post)

Essential Stock Market And Investing Wisdoms For Every Investor In 2020 (guest post)

If you think Stock Investing is hard, you are right.

If you think Stock Investing is easy, you are also right.

Over time, different legends have emerged from the stock market and these are the wisdom shared that every investor needs to know by 2020.

This post was originally posted here. The writer is a veteran community member on InvestingNote, with username known as Spinning_Top and close to 500 followers.

keys-to-success

12 Market Wisdoms From Gerald Loeb:

1. The most important single factor in shaping security markets is public psychology.

2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.

3. Accepting losses is the most important single investment device to insure safety of capital.

4. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.

5. One useful fact to remember is that the most important indications are made in the early stages of a broad market move. Nine times out of ten the leaders of an advance are the stocks that make new highs ahead of the averages.

6. There is a saying, “A picture is worth a thousand words.” One might paraphrase this by saying a profit is worth more than endless alibis or explanations. . . prices and trends are really the best and simplest “indicators” you can find.

7. Profits can be made safely only when the opportunity is available and not just because they happen to be desired or needed.

8. Willingness and ability to hold funds uninvested while awaiting real opportunities is a key to success in the battle for investment survival.

9. In addition to many other contributing factors of inflation or deflation, a very great factor is the psychological. The fact that people think prices are going to advance or decline very much contributes to their movement, and the very momentum of the trend itself tends to perpetuate itself.

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How to Capitalise on the recent Keppel Corp News

How to Capitalise on the recent Keppel Corp News

Last week, the major news was Temasek’s plan to offer Keppel shareholders $7.35 per share, in cash, to buy 554.9 million shares or 30.55% of Keppel.

 

Related imageImage result for keppel corp

This partial offer will raise its stake in Keppel from the current 20.45% to 51%.

Temasek will be doing this through its wholly owned subsidiary Kyanite Investment Holdings.

Prior to this news which was released on 22 October Tuesday, Keppel’s shares were halted on 21 October Monday.

When the trading halt was lifted on Tuesday, after the news was announced, Keppel’s stock soared more than 10%.

If you’d bought the Keppel Corp Long DLC on 22 October – it gave a 70% in just one day!

However, this is where it gets interesting – even if you got in late, by buying the 5x Long DLC on 22 October AFTER the news and the stock shooting up, the DLC still could have made you more than 20% within a few days.

This is the magnitude of serious returns we’re talking about.

So what’s this all mean for retail investors?

A Daily Leverage Certificate (DLC) is a type of leveraged product listed on the SGX which allows you to get leveraged return of an underlying single stock or index. The leverage is fixed every day, e.g. for a 5x Long DLC, every 1% movement in the mother share will lead to 5% movement in the LongDLC price.

So whenever you see a short-term trading opportunity, e.g. stock about to break out, index reaching support level etc., you can use DLC as a tool to get leveraged return. This recent scenario of Keppel exemplifies this perfectly.

4 key reasons why you should use DLCs:

  1. Simple trading instrument to get leveraged return of popular stocks and indices from Singapore and Hong Kong
  2. No account opening process required; trade it like a stock – simply go to your stock broker account to trade DLCs (subject to SIP qualification)
  3. LongDLC and ShortDLC – two types of DLCs allow you to gain from both ups and downs of the Underlying stock or index
  4. Lower barrier of entry – one lot of DLC is 100 shares, and the unit price is usually much cheaper than the mother share, allowing lower barrier of entry and more flexible allocation of your investment capital

Here’s the full list of DLC & the corresponding underlying securities every investor and trader needs to know: https://dlc.socgen.com/en/product/search

Our ongoing simulation competition for you to experience trading DLC with up to $15,000 worth of prizes for grab: http://bit.ly/SGATT2019

Where to trade DLCs for real?

Find your preferred broker below:

 

There’s also a free Technical Analysis workshop upcoming on Saturday, 2 Nov. Find out more here: http://blog.investingnote.com/multiple-time-frame-analysis-mtfa/


InvestingNote is the first and largest social network for investors in Singapore. Find out more about us here.

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Upcoming Workshop: Applying The Multiple Time Frame Analysis To Stocks

Upcoming Workshop: Applying The Multiple Time Frame Analysis To Stocks

What Is Multiple Time-Frame Analysis?

Multiple time-frame analysis involves monitoring the same currency pair across different frequencies (or time compressions). While there is no real limit as to how many frequencies can be monitored or which specific ones to choose, there are general guidelines that most practitioners will follow.

Typically, using three different periods gives a broad enough reading on the market, while using fewer than this can result in a considerable loss of data, and using more typically provides redundant analysis. When choosing the three time frequencies, a simple strategy can be to follow a “rule of four.” This means that a medium-term period should first be determined and it should represent a standard as to how long the average trade is held. From there, a shorter term time frame should be chosen and it should be at least one-fourth the intermediate period (for example, a 15-minute chart for the short-term time frame and 60-minute chart for the medium or intermediate time frame). Through the same calculation, the long-term time frame should be at least four times greater than the intermediate one (so, keeping with the previous example, the 240-minute or four-hour chart would round out the three time frequencies).

This method can also work for the stock market, and this technical analysis workshop for intermediate traders will show you how.

mfta

In this workshop, you’ll learn about:
✔ Understanding the types of markets and how it impacts your strategies
✔ Incorporating different timeframes into your trading to maximise your trades
✔ The one most important thing that professionals use to test their and verify their strategies
✔ How to utilise two simple technical analysis tools effectively that usually outperform complicated tools
✔ Habits and daily regimes of successful traders that every trader needs to know and follow

There will also be live chart trading examples to highlight the importance of multiple time frame analysis, that can be applied for the stock market.

You can look forward to upgrade your trading skillset in this 3-hour workshop on 2 Nov, Saturday 10am – 2pm.

This exclusive event is free to attend and sponsored by City Index.

Register now, come later! 

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InvestingNote is the first and largest social network for investors in Singapore. Find out more about us here.

Download our free app here:

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Top 29 Warren Buffett Inspirational Quotes Of All Time (Guest Post)

Top 29 Warren Buffett Inspirational Quotes Of All Time (Guest Post)

Almost every investor has heard of the legendary investor Warren Buffett before. This is not only due to his exemplary investment track record, but also due to his sound advice on life and business in general.

 

This post was originally posted here. The writer, SmallCapAsia is a veteran community member and blogger on InvestingNote, with 700+ followers.

With that in mind, we have come up with a set of Warren Buffett’s Inspirational Quotes Of All Time below:

Warren Buffett Quotes on Life

1. Aim High But Don’t Over-Reach– “I don’t try to jump over 7-foot bars; I look for 1-foot bars that I can step over.”

2. Aim Well– “To swim a fast 100 metres, it’s better to swim with the tide than to work on your stroke.”

3. Focus On Your Goals– “I’ve often felt there might be more to be gained by studying business failures than business successes.”

4. Be Honest – “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

 

5. Believe In Yourself– “In the end, I always believe my eyes rather than anything else.”

Warren Buffett Quotes on Investing

6. Have A Philosophy– “Rule No.1 : Never lose money. Rule No.2 : Never forget Rule No.1.”

7. Ignore Mr. Market’s Moods

“The market is there as a reference point to see if anybody is offering to do anything foolish. When we invest in stocks, we invest in businesses.”

“(John Maynard) Keynes essentially said, don’t try and figure out what the market is doing. Figure out a business you understand, and concentrate.”

“The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values.”

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How Ready are You to Retire? (Guest Post)

How Ready are You to Retire? (Guest Post)

This week is pretty much drained. So I don’t have any bandwidth to explore things that are new. Weekends is probably to catch some breath.
retirement_financial_planning1

This post was originally posted here. The writer, Kyith is a veteran community member and blogger on InvestingNote, with username known as Kyith and 800+ followers.

One of my reader that I met up with some time ago asked me these 2 deeper question about retirement:

1.What amount of principal will you feel comfortable to quit the job & just collect investment dividends, with a not-too-spendthrift lifestyle?

2.How much to “reserve” for medical costs?

I thought it is easier to tackle in this week that requires some decompression.

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