100,000 Page Views !!!

$1Million Personal Financial Diary has hit a major milestone : 100,000 total page views. It has taken slightly more than 3 years, but we're finally here, and it's worth a blog post because I owe it all to you readers.

Three years back, I started this blog to detail my process of accumulating wealth and eventually achieve financial freedom. I also shared many of the milestones in my life such as balloting for a HDB flat, achieving my first target of $70,000 before age 25, getting my first job, etc. It has been a fulfilling three years as I have learnt a great deal from reading my blog comments and other financial blogs.

I will continue posting monthly net worth updates promptly and share my investment thoughts and actions. My next net worth target is $200,000 by December 2016 (age 28). Many people have casted doubts on this goal but I personally feel that it is achievable. Continue to follow me on my journey to achieve/exceed the net worth targets I set for myself and I wish you the best in your financial journey.

Cheers!

Why so FEAR if US Federal Reserve stop QE ?

Global shares tumbles to multi-months low, especially in Asia whom did well year-to-date thanks to Japan's Abenomics. Commodities and gold also can't spare from the bearish sentiment across investment markets. Reason? US Federal Reserve may stop/scaling down their bond-purchase program. Huh!!!

Is this the real reason?

Like what I always said, analysts always give a reason for whatever bull or bear markets (after it had happen). For me, the main reason was (again) profit-taking activities took place in view of the good performances during first half of this year.

How about Federal Reserve's QE ?

It's funny to blame Federal Reserve for the corrections. First, why Fed want to stop QE at the first place? It's because US economy is recovering well. Wasn't this a good news to global markets? Definitely. Then, why we're so fear if Fed stop QE ? Doesn't make sense, right?

Anyway, like what I said, the real reason was profit-taking activities which is normal after a good run-up. Current stage must took place before the market can move higher. Good for investors. Good for you. Good luck.

Crummy Numbers - Big Rally

As expected, the economy continues to limp along.  The jobs report this morning showed 175,000 new jobs.  With net downward revisions for the prior months, the number was barely above the 150 K mark.  The result -- 7.6 percent unemployment unchanged.  Five years after the bottom, still a pitiful recovery.  But, that's good news for Wall Street because it suggests that expansive liqudity provision by the Federal Reserve will remain the policy.

For a while, higher stock prices will paper over the continued stagnation of the American economy.  But those looking for jobs and wage gains have all but given up hope in this tepid recovery.  The economy figures to soon be body slammed by Obamacare, so don't expect a healthy economy for quite a while.

Hoping for Bad Economic Numbers

World stock markets appear to be hoping for a bad employment number this morning.  Why?  They want Bernanke to continue QE3.  That's why.  Global markets reflect the new wave:  hope for bad economic news and expect a bailout.  This mentality encourages homeowners to borrow more than they could ever afford to pay back.  Student borrowers are encouraged to do the same.  Gaming the system by behaving economically foolish pays off because of the expectation that the government will step in.  At the end of the day, that is what Obamacare is all about as well.

In the bad old days, we expected free markets and incentives to fuel economic growth to raise living standards.  That is no longer the plan.  Now, it is all about slicing up the pie, while the pie no longer grows.  The taxpayer is assumed to have endless resources.  A bad assumption.

The 'entitlement mentality' has permeated every level of society and has infected global equity markets as well. 

Those who are hoping for bad economic numbers will likely get their wish.

The Equity Risk Premium Puzzle

One of the more interesting, yet to be explained, facts in finance is the fact that common stocks perform so well, as compared to less risky assets.  Treasury bills are earning almost nothing these days, but stocks are on a tear.  Why?

The same pattern has held historically.  The gap between what stocks earn and what much safer assets earn has been much, much bigger than could possibly be explained by aversion to risk.  Something more is afoot.

The question is front and center today.  Usually the question is posed as: "why are short term rates near zero, but other assets -- stocks, housing, e.g. -- doing so well.  Why don't people simply shift from treasuries to stocks and housing?"  Apparently folks are doing just that, but not by enough to narrow the return gap.

You could argue that there is not enough investment by ordinary folks in stocks.  That means that stock prices never get quite high enough to deflate their long run return prospects.  But, what about housing?  It is hard to believe that a similar argument would apply to housing.

I'm no fan of the equity market these days (I became bearish at 1391 in the S&P and the market is 15 percent higher than that today).  But, long run, you can't beat equities.  You just have to somehow ride through the rough patches, which may lie just ahead.

Bad News is Good News

Stock markets rallied yesterday upon learning that US factory activity plunged to new lows.  The factory activity index reached a low of 49, where anything below 50 is considered a sign of economic contraction.  Three cheers!  Weak economic news means the Fed will continue its QE3 purchases of more than $ 80 billion of debt each month.

Stock market mavens no longer hope for good economic news.  That seems an unlikely prospect.  Instead weakness suggests more aggressive Fed activity, so market prognosticators stay tuned in to see how bad it can get.  The more the economy worsens the better.

Maybe the Obama Administration is long the stock market.  If so, that might explain policies that seem designed to prevent the economy from what should have been a strong economic recovery.

So, instead of jobs and economic growth, we get higher stock prices.  At least for a while.

New Fund: AmIncome Flexi 3 Bond Fund

Following the success of the 1st and 2nd tranches of AmIncome Flexi, which were launched on Sept 18 and Dec 12 last year, with Rm100mil and Rm250mil in asset under management respectively, AmInvest once again would like to satisfy investors appetite.

"Given ample liquidity from the various central bank easing measures, the bond market is expected to be well supported in 2013". The 3 year closed-ended fund, targeted at investors seeking regular income and potentially higher returns than fixed deposits but with lower risk than equities.

How to do that?

To achieve the investment objective, the fund intends to invest its NAV in a portfolio of domestic and/or foreign sovereign issued bonds and corporate bonds, with minimum 'A' credit rating. The manager will purchase bonds which will generally have shorter or same maturity to the fund's maturity. The fund employs a flexible investment strategy as follows:-

1. Will not actively adopt a trading strategy unless there are decrease or expected decrease in interest rates resulting in an increase of bond price, for the purpose of maximizing returns of the fund over 3 years;
2. May at its discretion dispose off a bond to mitigate currency risk for the benefit of the fund;
3. May also opt to dispose off a bond when it has achieved at least 15% cumulative return before its maturity, and return the proceeds of the bond to investors;
4. May liquidate the particular bond affected in the event of a credit downgrade if the manager at its discretion feels that there is a likelihood of credit default. The bond's sale proceeds may be reinvested in fixed deposits, money market instruments and/or other bonds;
5. May use derivatives for currency hedging purpose, for investment in foreign currencies denominated bonds.

For more info:

Click here to download the fund prospectus