Can we expect Santa Claus rally this year?
Stock markets traditionally see upward swing during the 12 days of Christmas


By Zhen Ming


THE bottom line for investors in 2008: Recession, recession, recession.

Methinks, maybe not - there's still a good week left to prove the pundits wrong.

That's my take on the old adage about the Santa Claus rally - a phenomenon that often (but not always) proves remarkably reliable for stock markets around the world.

This year-end rally is usually a surge in the price of stocks that often occurs in the week between Christmas and New Year's Day.

There are numerous explanations for this yearly phenomenon - including tax considerations, happiness around Wall Street (none this year), people investing their Christmas bonuses (again, none this year) and the fact that the pessimists are usually on vacation this week.

For the Singapore stock market in particular, this Santa Claus rally does stand up to fairly rigorous statistical analysis.

Fact and fantasy

Fact and fantasy have marched arm-in-arm on three out of every four Christmases in Singapore in the past 20 years.

That is, if we were to systematically track the performance of this phenomenon as starting from 11 Dec (two weeks before Christmas) and ending on 5 Jan (on the 12th Day of Christmas, remember that song?).

Even during some years when Father Christmas failed to show up in time, he sometimes made up for it - by paving the way for a January Effect rally instead.

On Christmas Eve, the Dow Jones Industrial Jones ended the shortened trading week at 8,468.48 - a 683.13 point pullback from its intra-month high of 9151.61.

Meanwhile, the Straits Times Index closed at 1,736.99 - 3.19 per cent lower than its 1,794.16 closing on 11 Dec (the supposed start date for this year's Santa Claus rally).

But with five trading days still left before the 12th Day of Christmas, the question on everyone's mind: Has Santa skipped Singapore? Or is he just a bit too late this season?

To be sure, the gloomy economic data earlier this week was hardly surprising.

But, this time, it's not only US and European automakers that are hurting.

The Japanese automaker Toyota has already said it expects to post its FIRST operating loss in more than 70 years, an announcement that capped a year of record-breaking corporate losses and sheer drops in global stock markets.

Although stock markets have historically performed well in the weeks around Christmas and New Year's Day, expect investors hoping for a last-minute rally to ring out 2008 to be somewhat disappointed.

At this juncture, expect trading volumes in global stock markets to remain light, what with many traders already on vacation.

Silver lining

But there's an imminent silver lining here: Expect an amazingly volatile January Effect in 2009 when the so-called Big Boys return from their holidays.

These Big Boys (from Shenton Way to Wall Street) have already been quietly accumulating stocks on the sly, all in anticipation of January.

Here's my 'proof' of what's going on:

According to the latest Reuters poll, amid the gloom and doom, global investors quietly lifted their equity holdings for the second month running in December.

Surveys of 44 leading investment houses in the US, Japan, continental Europe and Britain showed an average mixed-asset portfolio holding 56 per cent in stocks, up from 54.8 per cent in November.

Recent uptick

But this recent uptick in equity holdings among the Big Boys still remained below the long-term average holding of almost 60 per cent.

Here's more good news (especially if you had timed your investment successfully): In the past few weeks, world stocks, as measured by the Morgan Stanley Composite Index, rose by around 20 per cent - after hitting a 51/2-year low on 21 Nov.

So, while (for many) Santa might have been late this year, (for me) he's already arrived - in late November, unannounced, and without fanfare.

By all means, do proceed to welcome January, with your eyes wide open. Only with the money you can live without.


Source: The New Paper, Sat 27 Dec 2008

Don't worry about gurus of gloom

By Zhen Ming


WITH just 10 days left before New Year's Eve, the countdown to 2009 will soon begin.

It's time now for me to look ahead and make some predictions for the New Year.

And as I gently wipe the dust from my crystal ball, all I can see initially is the word 'recession'.

And then I can also see signs of cutbacks, layoffs - and pure worry.

That's because, for many, the future is frightening.

A record 63 per cent of Americans in a recent ABCNews/Washington Post poll, in fact, think the US is in a 'long-term economic decline'.

So how bad is it out there? And what's in store for us in 2009?

To find out, I scoured cyberspace to seek the views of three gurus of gloom:

Marc Faber

Known internationally as 'Dr Doom' , the Swiss-born investment guru is publisher of the Gloom, Boom & Doom Report. He once warned investors months before the so-called Black Monday crash of 1987.

Dr Faber recently made the following predictions on Bloomberg television:

'Next year, if the economy in the US is as weak as I think it would be... I think sovereign wealth funds are going to be very busy supporting their own markets, they won't have much money to buy assets around the world.

'The next emergency measure will be that Americans are not allowed to buy foreign currency and transfer money overseas, and the next measure will be not permitting Americans to buy gold and so on and so forth.'

Nouriel Roubini

Also known as 'Dr Doom' but more among Americans, the economics professor at New York University reputedly saw the 2007 mortgage-related meltdown coming - long before many of his peers did.

Dr Roubini this month made the following scary predictions in Fortune magazine:

'We are in the middle of a very severe recession that's going to continue through all of 2009 - the worst US recession in the past 50 years ...

'For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade.

'I wish I could be more cheerful, but I was right a year ago, and I think I'll be right this year too.'

Gerald Celente

As CEO of the Trends Research Institute (a panel consisting of 25 experts with a variety of backgrounds), he is renowned for accurately predicting future world events such as the fall of the Soviet Union and the 1987stock market crash.

Mr Celente told Fox News late last month that, by 2012, America will become an undeveloped nation, and that there will be a revolution marked by food riots, squatter rebellions, tax revolts and job marches.

In a subsequent interview, Mr Celente also added: 'It's going to be very bleak. There is going to be a lot of homeless, the likes of which we have never seen before. Tent cities are already sprouting up around the country and we're going to see many more.'

Mr Celente, who also successfully predicted the 1997 Asian currency crisis and the sub-prime mortgage collapse, last year told UPI that 2008 would be known as 'The Panic of 2008', adding that 'giants (would) tumble to their deaths'.

Mr Celente's predictions have seemed to come true, what with the collapse of the likes of Bear Stearns and Lehman Brothers.

So how worried should we be by these dire warnings? Should we lose any sleep over their predictions?

To be sure, many banks in the West have had to be saved, asset prices have plummeted, and a recession is now hitting the global economy.

To be sure, we're now in a period of what economists call 'forced liquidation', which has happened less than 10 times in the past 150 years.

And yet, we're still around.

And yet, if you were take a good look around, the streets of Singapore are still full of flashy cars, our shops still full of food, and most of us are still gainfully employed and comfortably housed.

So let's shrug off our irrational shivers and instead look forward to 2009.


Source: The New Paper, Sun 21 Dec 2008

Worst 5 money predictions of '08


By Zhen Ming


HERE'S my pick :

1 Jan 2008

PREDICTION: According to the Chief Executive magazine's annual poll, US CEOs expect the Dow Jones Industrial Average to sit at around 13,359, oil prices to be at US$96 a barrel and US Federal Reserve funds rate to remain at 4.25 per cent by the end of 2008.

REALITY: Fast forward to Wednesday, and the Dow is still largely directionless at 8,824, oil prices are at a four-year low of around US$40 a barrel and Fed rates are now at near zero per cent.

Oil, which peaked in July at about US$147 in July, could even decline to US$25 next year - despite the OPEC production cuts.

2 Mar 2008

PREDICTION: Jim Cramer, the volatile host of CNBC's Mad Money programme, when responding to a viewer's e-mail, arrogantly asserted:

'Peter writes: 'Should I be worried about Bear Stearns in terms of liquidity and get my money out of there?'

'No! No! No! Bear Stearns is fine! Do not take your money out. ... Bear Stearns is not in trouble.

'I mean, if anything they're more likely to be taken over. Don't move your money from Bear! That's just being silly! Don't be silly!'

REALITY: Hopefully, Peter (the viewer put down by loud-mouthed Cramer) had the cow-sense to seek a second opinion.

Six days after the show's broadcast, Bear Stearns was sold for a pittance to JPMorgan Chase - after widespread speculation about the investment bank's massive exposure to subprime mortgage.

4 Sep 2008

PREDICTION: Donald Luskin, in his article 'Quit Doling Out That Bad-Economy Line' (appearing in The Washington Post), boldly proclaimed:

'Anyone who says we're in a recession, or heading into one - especially the worst one since the Great Depression - is making up his own private definition of 'recession'.'

REALITY: The day after Luskin's self-delusional forecast, Lehman Brothers filed for bankruptcy. And the rest is history.

5 Nov 2008

PREDICTION: Outgoing US Treasury Secretary Henry Paulson, on National Public Radio, prematurely bragged about the improved health of US banks:

'I believe the banking system has been stabilised. No one is asking themselves anymore, is there some major institution that might fail and that we would not be able to do anything about it.'

REALITY: Paulson, who emerged in October with a US$700 billion 'bazooka' to blast away toxic assets in troubled US banks, ended up acquiring direct equity stakes instead (a move he himself had rejected earlier).

Unfortunately for Paulson, shortly later, Citigroup's stock price plunged 75 per cent in one week - closing below US$5 for the first time in 14 years.

June 2007

PREDICTION: Dennis Blair and Kenneth Lieberthal, in their Foreign Policy essay 'Smooth Sailing: The World's Shipping Lanes Are Safe', declared:

'In reality the risks to maritime flows of oil are far smaller than is commonly assumed. Tankers are much less vulnerable than conventional wisdom holds.

Limited regional conflicts would be unlikely to seriously upset traffic, and terrorist attacks against shipping would have even less of an economic effect.

REALITY: On Wednesday, the United Nations said Somali pirates in inflatable rafts have made US$120 million ($175 million) in pirate attacks this year.

In two months, they had hijacked 30 ships.

The UN on Wednesday approved air and sea attacks on Somali pirate bases.


Source: The New Paper, Fri 19 Dec 2008

Another Ox Year, Another Baby Bust?

By Zhen Ming


THE proverbial stork now comes much later and on fewer occasions, too.

Not surprisingly, the size of the average Singapore family has shrunk sharply.

Among women 40 years or older who have ever married (that is, among those who are quite likely to have already completed their child-bearing) the average number of children has fallen continuously since the 1990s — this, despite a slew of generous procreation incentives introduced in recent years.

Singapore women in their 40s, for instance, gave birth, on average, to a total of 2.75 children in 1990.

But by last year, most of them would have experienced motherhood, at most, only twice in their lifetime (an average of 2.07 children).

(My own better half is in this category and we have two grown-up daughters.)

Dwindling dramatically

Even among the older generation (women 50 years or older), the average number of children has also dwindled dramatically — from 4.69 in 1990 to only 3.03 by last year.

Amazingly, despite a faster-growing population in Singapore since the start of the new millennium (arising chiefly from the influx of new immigrants), the number of locally-born children has stayed consistently below 40,000 a year since 2003 — when a serious SARS epidemic placed a big dampener on the local economy.

Earth Dragon high

This low birth rate situation in 21st century Singapore pales in comparison to the all-time high of 52,957 newborns in 1988, during the auspicious Year of the so-called Earth Dragon, when the Singapore economy was also on the up and up.

To be sure, with three-quarters of all Singaporeans still of Chinese descent, zodiac signs will likely remain an important consideration as to when many newlyweds should start their families (and when we can expect a bumper harvest of new babies).

More recently, however, the cyclical ups and downs of the Singapore economy have become equally important for the many married Singaporeans who remain childless by choice, especially during their first five years of marriage.

But what do oxen, tigers and dragons (plus nine other zodiac sign animals) have to do with when our newlyweds will take their first plunge into parenthood?

And how has this time-tested formula for family planning been rudely interrupted by the periodic economic dislocations that we’ve experienced since the mid-1980s?

Back in 1985 (a Year of the Ox, a beast of burden), when Singapore experienced the onset of its first full-blown post-Independence recession, there was widespread workforce retrenchment.

Lag time

But given the (ahem) unavoidable lag of about nine months between conception and birth, the sharp drop in new babies showed up only in the following year (which back then also coincided with an avoid-it-if-you-can Year of the Tiger).

A similar delay-parenthood-if-we-can pattern showed up in mid-1997 (another Year of the Ox) when the onset of the Asian currency crisis led to another sharp economic downturn (this time, on a much broader, region-wide, basis).

Not surprisingly, Singapore went through a prolonged two-year baby bust — starting in 1998 (another Year of the Tiger) and spilling over into 1999 — before the return of confidence and a new Dragon Year in 2000 (at the height of the dotcom boom) helped our newlyweds overcome their fears about first-time parenthood.

Short-lived boom

But this baby boom soon proved short-lived when the ensuing dotcom bust of 2001 and then (horrors) the subsequent SARS slowdown of 2003 all but ensured that the number of new babies thereafter would stay permanently below 40,000 a year.

And just when you think the worst is over, here we are, once again, about to set off for yet another economic (and family-planning) roller-coaster ride.

The Ox returns

With the onset of the global credit crunch in late 2008 — and with further economic uncertainties in store for us next year (another Year of the Ox!) — expect the next baby bust to last at least two years (inclusive of another Tiger Year!).

But if life is an ever-repeating zodiac cycle (like what most Chinese families think it should be), expect a rebound in new babies by 2012 (another Dragon Year).

That’s when, thankfully, you can also expect a full-fledged global economic recovery.


Source: The New Paper, Sun 14 Dec 2008

Pity if hidden gems remain hidden

By Zhen Ming


SWEDEN'S Prime Minister Olof Palme died in 1986 in Stockholm at the hands of an assassin.

Back then, his murder in the middle of Stockholm's downtown shocked the world. (Political assassinations, until then, were virtually unheard of in Scandinavia.)

Mr Palme was born into an upper-class, conservative family in Sweden in 1927. Nevertheless, he still required a scholarship to study at the pricey Kenyon College (my alma mater in Gambier, Ohio), graduating with a BA in 1948.

At Kenyon, Mr Palme was an excellent student, earning all As in his major subjects (economics and political science). He was also a member of Kenyon's first varsity football squad. And, like me, he washed the college president's car for pocket money.

After graduation, Mr Palme spent three months hitchhiking his way through the US with only US$300 (S$450) in his pocket.

Mr Palme later said that what he heard and saw on that US trip - the deep economic inequality and racial segregation - influenced his political and social ideals.

Around the time when Mr Palme was still prime minister of Sweden, one Barack Obama was enrolled, on a college scholarship, at Columbia University in New York City, where he majored in political science with a specialisation in international relations.

Mr Obama then graduated with a BA from Columbia in 1983 and later entered Harvard Law School in late 1988 (here again, on another college scholarship).

He gained national media attention when he was elected the first black president of the Harvard Law Review. And the rest, as they say, is history.

Seventeen years after graduating with a Juris Doctor magna cum laude from Harvard in 1991, Mr Obama is set to be the 44th president of the United States.

Generations of outstanding men (and women) like Mr Palme and Mr Obama have all benefited from the generosity of the privately-funded US higher educational system.

For years, it all seemed so simple - donations would first roll in, the booming stock market would then multiply them, and the college endowments would then swell.

At the wealthiest schools, the millions would become billions, and even small colleges (like Kenyon) would start to amass sizeable fortunes.

But with Wall Street's recent meltdown, all bets are off.

With most endowments predicted to plummet by 30 per cent this academic year, many US universities are downsizing or even shelving long-term plans.

Even the wealthiest schools - among them Harvard, MIT and Dartmouth - suddenly find themselves in the unfamiliar situation of trimming budgets and freezing hiring to offset heavy investment losses.

In September, Harvard University announced that its endowment, the country's largest, had risen to a staggering US$36.9 billion as of 30 Jun.

But just last week, in a stark sign of the economic times, Harvard said the value of its investments had plunged 22 per cent, or about US$8b, in the past four months. It anticipates a further 30 percent loss by next June.

Now, many other top universities worldwide (including those in Singapore), while declining to provide specifics, have also publicly acknowledged substantial losses.

My hope for 2009 - that this swift reversal of university fortunes won't hinder a future Olof Palme or another Barack Obama from maximising his or her potential.


Source: The New Paper, Fri 12 Dec 2008

Detroit's rescue could also be S'pore's windfall


By Zhen Ming


IF the US government bails out the car makers, this could be good news for Singapore.

The US government will set conditions which car companies were reluctant to follow before.

President-elect Barack Obama plans to put one million 150-mpg (about 64 kpl), plug-in hybrids on US roads within six years and give American consumers a US$7,000 ($10,700) tax credit to buy these fuel-efficient cars.

This retooling of Detroit impacts Singapore.

Dr Michael Quah Cheng-Guan, a Harvard-trained American fellow at our Energy Studies Institute, said there would be a trickle-down effect that would help our economy.

'For instance, the need to develop and improve components of these electric systems would spin off R&D benefits to Singapore's strength in semiconductors, power control devices, IT command and control programs, and even to the new nano-materials, which will serve the high power needs for switch gear and associated peripheral components.'

But it will be a tough ride for US car makers, said Dr Quah, and it remains to be seen if the US can get over 'its obsession with what Singapore's (Ambassador-at-large) Prof Tommy Koh calls the 'Socially Unacceptable Vehicles (SUVs)'.

Said Dr Quah: 'The car lobby remains very strong simply because American car companies (and their suppliers) constitute a major industry in the US, where many jobs, including those in my home state of Michigan, are on the line.'

Last but not least, the US - as a country with 5 per cent of the world's population using 25 per cent of its energy resources - must admit that there are huge opportunities in energy-efficiency gains.


Source: The New Paper, Fri 05 Dec 2008