Thursday, August 4, 2011


The Dow, S&P, Dax, FTSE, CAX all sank yesterday. This morning, the Asian indexes are all in the red.
I am not going to do anything for this period. No buy or sell. I made some bad calls with SIA and SAT recently but other than that most of my portfolio are profitable todate. These are the times I start to appreciate the defensive stocks in my portfolio.

US stocks plunged because they investors think that a recession may be looming. There is no liquidity nor credit crisis at this stage. I have no exposure to stocks doing a lot of businesses in US or US denominated dollar stock. So, I am not particular worried. A slowdown in US ultimately will affect Asia but the percentage consumption of US relative to the rest of the world are going down year by year.
Ten years from now, it will be a really different world, I believe. If there are no major unforseen events, the shift of economic center of gravity towards will be even more evident.

For Europe, the major fear is that the banks in Germany, France and peripheral region may be hit with the bad loans given to the high risk countries. This is largely an european issue though some American  banks may get hit is spain or italy get dragged in. Again, I do not think the local banks are exposed to the bad loans but may take some indirect hit. In any case, I do not think the impact will be that large compare to what see in 2008/2009 where nobody really know what going on. What is going on is that the uneconomic parts of europe have to adjust their standards of living relative to the rest of the world, albeit painful.

Yess, these are times that people get nervous (including me) but I am going to stay on the sidelines. For most of my portfolio, I did not do any buy/sell since 2009. It is only the 10% of my portfolio that I trade sometimes.

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