PART 1 - I KNOW WHAT YOU DID LAST CHRISTMAS

Written on 25 December 2014:

Oil will continue to drop to as low as USD30 per barrel.  US of A will panic later in first half of 2015, realising the financial risk from the drop of crude oil price outweigh the gain for the consumers. (too much hot money in commodities over last many years)

Stocks in USA will go into a tailspin. And world will goes into recession.  It is not a prediction, it is just a GUESS based on the current event. (Equities will be the last to fall after JUNK bonds)

Put some into USA dollar or USA Treasurys (10 or 30 years).

Accumulate DEFENSIVE STOCKS in Malaysia slowly i.e. 20% 30% 50% in 2015, 2016, 2017.

DEFENSIVE STOCKS is recession free, high dividend (>4%), double digit growth in revenue and earnings, low PE (below industry average PE for last 5 years)

PART 2 - AN EARLY RELEASE FOR THIS CHRISTMAS

UPDATES

Your return if you have invested in USA Treasury (10-30 years) in Dec 2014, your gain is about 40% in ringgit terms.  If you have done so, I suggest lock in your profit NOW at about 4.50.  Keep the remaining 50% for longer term.

For those who have bought DEFENSIVE stocks, just keep it.  If it drop 15-20%, add more.

MAJOR TRENDS

World is going through a deflationary environment.  There will be CONTRACTIONS in economic activities.  COMMODITIES will continue to be lower.

China's miracle growth "fairy tale" is over for the time being.  Government interventions in equities and currency won't help.  Whichever pockets of financial markets that is inflated due to easy money (carry trade) from QEs and ZIRPs will gradually implode.  

Glencore is a great example.  Traders start pricing Glancore bonds like junk, as per CNBC, 4 hours ago. Some even said it is a Lehman for commodities.  Total loans and bonds in Glencore is about USD50 billion, market cap is about USD20 billion today.  Is it a sign of Lehman of commodities?  

DEBT REMINDER (Updated)

Courtesy of Mr Davidstokman:

                                       1994             2014           CAGR

GDP                                28T              78T              5.3%

DEBT                              40T              225T            9.0%

DERIVATIVES                50T              650T         

DEBT/GDP                     1.4X              2.9X

Derivative/GDP              1.8X              8.3X

The Elephant in the room is Derivatives, period.

NEW IDEAS

1.  Gary shilling expect commodities will continue to drop.  I agree.  He suggested short copper.  Suprisingly, the copper price did not move up despite the earthquarke in Chile, which produces one-third of world production of copper.  

2.  Gary Shilling also recommended to short HK Dollars (via CDS - for institution, COBE - for retailers).  I am not sure how is it done, but, I believe he is right.  According to him, you can have a Credit Default Swap, if the HK Dollar do drop/repegged lower, your gain is 1 to 15 to 20 times.  So, millionaires out there, put in USD1m, turn it into USD20m.  I understand Credit Default Swap bet minimum bet is very huge (could be more than USD1.0 million).

3.  Crude oil will continue to fall.  You can short it via ETFs.  Gary think it will fall to as low as USD10 per barrel.  I believe, likely it can touch USD20 per barrel.

4.  For Local Stocks, I maintain, buy VALUE, DEFENSIVE STOCKS with 20%, 30%, and 50% over 3 years (2015, 2016 and 2017).

5. This morning on BFM radio, I heard an "internet insurance" promoting "uforlife" for term life (also listed in i3investor).  

    Research result (Term Life, p.a.)      UforLife          Other Major Insurers       PruInvestorCare    UnitTrust

    Age 50 (Female) cover RM300k       RM3,500*             RM4,200*                      RM850**            FOC***

    * - rates increase by age

   ** - flat rate until reach 70 years old (PM - 0122037325) - need not invest

  *** - some unit trust gave FOC term life but you must invest up to RM100,000 with their unit trust and stop when you withdraw.

6.  Ideas for item 1-3 are for Aggressive Investors.

DISCLAIMER

This is not a recommendation to buy or sell or hold or short.  Please consult your dealer, remisier, financial advisor or financial planner. This blog or the author is not responsible whatsoever for any gains or losses.  

(Do read some of the past articles for "ideas".  I did consolidate some of the ideas in www.sosfinancialplanning.blogspot.my)