Where is the stock market heading...

Oblivion! That is where our stock market is heading. And this is not due to the current financial meltdown across the world. There are just too many inherent weaknesses in the system that spells one way, doom. We were building a financial centre, a really huge one to befit our ambition, but relying on the foreign funds to come in and prop it up. For our own market, including funds and investors, is just too small. The over reliance on foreign funds and fund managers means that they can push it sky high and let it drop like a coconut when they decide to pull out. And they are just doing that right now. The next problem related to this wild ambition is the padding of the stock markets with as many stocks as they can grab hold of, and many were simply junk stocks. To make things worst, derivatives upon derivatives were created almost daily which means that the market is over diluted. Every dollar is spread too thin. As long as the foreign tap is open, and the funds keep flowing in, it looks sustainable. The commission structure that favours funds and house trading is a killer to the small traders. When big boys trade without having to pay commission except for a small clearing fee, how could small investors survive when they steamroll their way over them? Then there is the new game of short selling. Small investors normally trade one way. Investing for the long term and and normally long in the market. And the big boys just shorted them out, all the way. The more ruthless is the shorting, the greater the profit for the big boys. Where would all this lead to? The death of small investors. Small investors are being driven to extinction. All their money gone in a game with a loaded dice. Their money were also gone when IPOs after IPOs were listed and subsequently all melted away. The billions that were sucked out from the stock market are hundreds or thousands of times the fees that the SGX collected from the listing companies. What we have is a stock market that is not only leaking, but with a hole as big as a big longkang. Unless the whole system is restructured, fast, it will only head one way, for sure. The big volume of daily trading is only an illusion. The quantity of stocks is also an illusion. Many of the penny stocks are waiting to fold up. Just shell companies in a way. And the big stocks are also not spared from a system that allows shorting the stocks down, with no regards to their value and business.

Myth 191 - The Big Apple

The Big Apple is the greatest success story of modern history. After WW2, in a matter of 50 years, the US saw tremendous exponential growth to propel it to become the undisputable superpower in military, intellectual and economic terms. All the great success stories came from America. From rags to riches and from family fortunes to bigger fortunes. The best brains of the world are gathered in the US. But the moral of the story is that the shine of the apple is only the exterior. You do not know how bad is the rot. Even with the best and brightest running the show, it can still go wrong. The saddest part is that it was going wrong for too long but the Americans were lulled by the good times, the complacency, to know that hell is calling. Do not be deceived by the juicy big apple. Dig in to find the truth. Take the good news with some caution and scepticism. The financial failure and coverup were a near perfect job in deception at the highest level in corporate America and govt.

Of fine food and shit

The foreign workers problem in Serangoon Garden is like the traffic congestion problem. You squeeze at one corner, it will prop up in another corner. That is how small and how tight we are. We don't have the luxury of space. When your neighbour farts, you smell it. What we need is a special path direct to heaven for the foreign workers. I mean have a special express like helicopter lift, from dormitory to work place and back. You cannot have the cake and eat it as well. You want to eat all the fine food, be prepared for the smell when they are turned into shit.

Too much financial engineering

The financial crisis is partly caused by too much financial engineering and pushing sophisticated products, instruments and derivatives to the ignorants. The days of govt bonds, FDs, stocks and unit trusts were gone. It is now a jungle out there. These sophisticated instruments are meant for funds and finance trained professionals. They are the ones who traded in these instruments for hedging, arbitraging, taking advantages of market inefficiency and their timely news and network of information. Asking the Ah Peks and Ah Mahs to invest in these instruments and expecting them to understand what they are in for is asking too much from them. In the stock exchange, there all also many derivatives and instruments that are not easy for the average punters to understand. Even the remisiers and dealers will have a hard time trying to manage them and trade these instruments to their advantage. They lack the skills, equipment, softwares and resources to compete against professional fund managers. It is an uneven playing field. The O level students pitting against the PHDs. Training derivatives, with their high risks and leverages, should not be marketed to the average investors. The watchdogs should also spend time looking into these instruments and gauge their usefulness in a market with unsophisticated investors.

The badness of short selling

Short selling came to attention recently and the US even banned it for a short while. SGX did banned short selling which I find amusing for the reasons and the nature of it. SGX is only against naked short selling. But the big boys or anyone can short the whole market till kingdom comes if he has the ability to borrow scrips to cover his short position. Why is short selling bad? It goes against the principle of investing in stocks. Investors put money into stocks for its potential to grow. The better the company is managed, the better chances that it will make more profits to reward its shareholders, thus leading to higher share prices. With short selling, the fundamentals of share investment have changed. It becomes gambling. The funds are saying that they can make money by buying or shorting the market, regardless of fundamentals. It is no longer whether the company is good or bad. Good company can still be shorted and its price forced down by short sellers to make their profits. How so? Over the years, many small investors have lost their money in the stock markets for many reasons, a shrinking economy, too many stocks, too many derivatives, too little money and of course short selling. We have reached a stage when there are just not enough small investors in the market for fair play. And the shortists, mostly big funds and house traders, have unlimited resources to short out the buyers. The one who who is able to keep on buying or selling wins. This is the game in the market today. Even very sound companies are not seeing their prices moving up. They all fell victims to this new gambling strategy. When there are few small investors buying, the big boys just short and force them to sell at a loss. Investors beware. Only when the big boys start to buy up the market will the stocks run up. But there are no one buying the market except the small investors. And they are either stuck for the very long haul or have to cut losses and get out. This is the new game play.