USD-MYR 4.2370 -0.0167

There is something called "baked in" the news already.

Financial market doesn't wait something to react.
It reacts way before hand.
Buy and rumour, sell on news.

DJ did spike up a lot when the news of no rate increase broke out, but soon profit taking sent it back down.

May be investors think deeper, wait, Fed no increase rate because economy not so strong, hence take a wary stand.
Just like as you have mentioned, sometimes thing is not as simple yes and no.

Rate increase - stock market should come down, but why rate can increase, because economy good and inflation, but economy good, stock market should go up as corporate earning will be good.
Rate decrease - stock market should go up, but why central bank decrease rate? because economy no good. Economy no good, corporate earning would be poor, stock should go down.

That's why analyst always have endless story to tell and reports to write, which can be a high pay lucrative job.

USD-MYR 4.2288 -0.0249

That's why at any day there are many factors which affect the direction. Fundamental is 1 side, sentiment is also the other side. Most of the times the market cannot be reasoned. If it can be reasoned and follow a set of rules (like interest increase ---> this will happen), then economist and psychologist will be the richest person

Extracted from this article:

OPEC forecasts oil prices will grow by no more than $5 per barrel a year to reach $80 by 2020, with rival non-OPEC production growth slowing but not fast enough to fully clear the current oil glut, according to OPEC sources.

The report forecasts that non-OPEC supply would amount to 58.2 million barrels per day by 2017, some 1 million barrels per day lower than in the previous forecast.

Even if markets begin to rebalance as low oil prices are hurting high-cost non-OPEC producers, prices are unlikely to return above $100 per barrel until 2030-2040, according to one of the sources.


With the price at this level, wonder what will happen to the shale0il industry, shutdown?

This post has been edited by MGM: Sep 18 2015, 08:53 AM

Things are unpredictable nowadays, prices probably already factor this in the stock market.

Sorry, cherroy already explained above.

This post has been edited by MGM: Sep 18 2015, 08:58 AM

A lot of time, forecast is not materializing one.

Mind that early 2000, there was a time oil price fell below USD20, which was a supply destruction factor, that lead to non-stop bull run in oil price afterwards that sending price to USD140.
So oil price if staying at low point for a period of time, it could be repeating the history of another supply destruction as last time. We can see many oil company are reducing their capex significantly which could limit the future supply capacity.

Had anyone forecast oil will be USD40, when oil price was USD140 time?
Almost none, all said going to be above USD150 or USD200

Had anyone forecast USD will be so strong when QE started time?
Many said USD will be worthless instead.

The more people forecast on same path, the likelyhood it won't occur.
If forecast always materialize as what it forsee, then making money in the market become extremely easy, lot of people can become rich just based on forecast.
Yet, in reality it is not.

Good opinions from all. But one thing is for sure : when Fed increases interest rate, there will be less money floating around in the mkts around the world. The so-called capital flight will be funds being moved back to the US.

So : in order to keep the foreign funds in the local mkts, something must be done by the countries affected, especially the countries which are more susceptible to this outflow of funds, currently Msia and Indonesia.

Look at the patterns around us,.. globally.

The susceptible outflow is those hot money created during massive QE previously, while there are foreign funds in for long haul as well.
So easy comes one, easy goes.

The more important is the economy fundamental, if the economy fundamental is intact and good, and poses value for foreign investors (FDI not those hot money in and out stock market one) to come in to invest, then foreign investors will come naturally.

No one can forever rely on those short term foreign hot money, they are like firework, seems beautiful but won't last long, but you have to clean up the mess afterwards.

With inflation subdue due to low commodities price across, Fed's interest hike won't be too much.
In fact, it may be the one of major factor that holding back the hike that anticipated to be happening yesterday.

I would think the US mkt reaction to the no-hike decision can be explained this way : as the odds against the hike increase as we move towards to day of decision, the mkt rose because the mkts are forward-looking towards the rate hike decision.

Then the mkt is right : no hike. As you said, the Dow spiked a little bit more.

Subsequently, after the rate hike decision uncertainty has been put aside, the MKT TURNS to the next fundamental factor, could be oil and China. Since both oil and China still do not look very promising moving forward, the mkts moved downwards.

if it is so predictable, everyone will be rich.


but what is impt is not to ignore some compelling facts.

e.g. china is slowing and will not pick up fast so soon; commodities prices will stay low for some years.

and... rm will likely stay low since there is really nothing major to help it strengthen significantly.

Some 'forecastors' probably have certain agenda.

If it's random then people like Warren Buffett would not exist. People used to believe in Random Walk Theory until he proved them wrong.

I, on the other hand, carries the belief that the easy money that has been making us happy has done damages to us and our economies as well. When something good is always around us, we, as humans start to slacken and let down our guard. NO matter how strong our economic fundamentals are, there will be impact too.

I will give an eg of this : We all know abt Sgp. We all know abt Sgp's good fundamentals and governance. When times were good with easy money, the stockbrokers kept asking people to go on margin financing for their share purchases. Nobody asked the question of how the interest rates are decided upon.

Then recently, people started to realize that financiers peg the interest rates of the loans to the SIBOR (Sgp Interbank Rate) or the SOR (Sgp Overnight Rate). For those who have borrowed too much, they can only hope that the SIBOR and the SOR do not rise too much that it makes them unable to service their loans. If you look at the data for the SIBOR and the SOR, they have begun to rise even before the tapering started last year, and the curve has steeped upwards slightly more this yr..

Hence, what we have here is even Sgp is affected by easy money. Good findamentals or not, complacency will always set in when there is easy money around. The difference is who or which country gets hit the hardest when this easy money starts leaving.

Easy money WILL LEAVE when the Fed hikes, why ? Companies based in the US which borrowed heavily will want to repay the loans so as not to be overly burdened by higher interest servicings. Conpamies and individuals will find the USD more enticing and more worthy to carry and to invest in because a rising interest rate tends to strengthen a currency. Companies and individuals will want to invest 'back into' the USA which has a higher yield due to the higher interest rate. And more so if the interest rate is an increasing one, after the first hike, companies and people around the world will then be 100% that the Feds DARE TO increase interest rates.

I agree the Feds won't hike too much,.. and after what I heard from the press conf and what I read in the report sent to me this monirng by my RM,... I am more inclined to believe that the Feds are now more concerned about global growth than their own internal economy. There has always been sayings everywhere that the Americans care only about themselves and not the rest of the world.

That thinking and position now may change.

ON a personal side, I am glad I did not take the bait when my RM kept pestering me to take loans and take-up more shares and REITs earlier. Will my REIT counters suffer if the rate hike does take place ? YES, there will be a downward move initially, BUT : they will bounce back quickly. Most of the SG REITs' fundamentals are strong enough today with the gearing limits imposed and after what happened to many of them back in 2008/9, they have learnt how to circumvent this problem.

Our 'window of opportunity' is very short for us to buy-in more SG REITs.

Well.. just my side of the story of how this Fed rate hike thing impacts me personally.

I would leave WB out ! WB himself can move mkts with his money. We don't have enough money to move mkts, hence, we need to depend on what we interpret of the mkts, and to go only into defensive sectors.

As we speak, the Asian mkts are going green one-by-one, this is the expected reaction ! My RM just told me there is a small positive development in Chine this morning : house prices have risen in more cities in August compared to July.

You realize you are saying one person has enough money to move the entire US market? and keep moving it for 40 years?


This post has been edited by wodenus: Sep 18 2015, 11:11 AM

Hahah,... Angie Lau of Bloomberg just SAID THAT : the Feds are also concerned about the rest of the world now and not only the United States economy, unlike last year,... when Ben Bernanke was only for the US economy when he started the tapering.

He has been wrong at times in the last 40 years, but he has been right more than wrong. And he has always bought and seldom sold,... so chances for his counters to succeed would be high if given unlimited time, and of course, he has always chosen the correct counters, which is not difficult.

However : having said the above, I am hearing rumours from some friends in the US who were rich enough to have the Lunch Talk with him that he told them that the time for him to be wrong is approaching.

Ha incidentally that is why we are not in local markets much, it's too easy to move. I feel for the people who are caught at the wrong end when a Rm50K buy spikes the price (not to mention this increases short-term volatility and is not something a responsible investor should be doing.)

Can you imagine USD10K affecting the US market?

This post has been edited by wodenus: Sep 18 2015, 11:20 AM