THE GAME PLAN: WAIT

Good opportunities will come at some point next year and we want to be ready to take a position to make a lot of money at that time.

We may be currently trading a winner in and out on a bear rally in the year ending or on some window dressing activity. I suggest we take profit and put it back in our cash chest. If we must trade, use only 20% of our cash chest. Losing money now is foolish and we'll forgo that opportunity for better rewards next year. This is the season we need to wait for something to come along that we know is right.

In the meantime, educate ourselves about broader market trends and trading patterns so that we will be in a position to gain more the next time real opportunities does come. The fortune that comes to those of us willing to to invest time and effort in will be enormous.

THE GAME PLAN: MARKET DIRECTION

For my investing friends:
Some financial experts will emerge and tell you that they can make big gains for you right now and yes, even in this market situation. I would be wary of these claims- the market is in terrible shape. The probability of losing is greater by three to one.!

You may have made some money from some dumb luck but without a consistent strategy in investment, you may have or will probably lose it. Honestly, ask yourself this question:- if you want to continue making money, what would be a good way of doing it..

A simple answer - in a market downtrend, preserve your capital in cash and wait. If you have to wait months then wait and do nothing except to observe direction of the market. Only take an investment position that aligned yourself with the broad uptrend of the market. This necessary low risk/high reward position to will put you in best position to make money.

The best way to make money is to be in a position to buy stocks near the start of the next bull market. In this manner you manage your risk to make sure you never have big losses ever again.

Jim Rogers, a former partner of George Soros the most successful hedge funds manager is quoted as saying:

"One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do. Most people - not that I'm better than most people - always have to be playing; they always have to be doing something. They make a big play and say, "Boy I am smart, I tripled my money." Then they rush out and have to do something else with that money. They can't just sit there and wait for something new to develop."

THE GAME PLAN: BUY TO SELL

Dedicated to my ex-colleague:

Recently I bumped into an ex-colleague who remarked how his investment in a list of unit trust funds has caused him an unrealised loss of RM100,000 on top of losses suffered at the stock market. Yes I do invest a small sum of money in the unit trust fund and my scrutiny today reveals a depreciation of 38% over a year.

Many people are losing a lot of money in this bear market. This friend is one of the many who is sitting on an enormous loss on his portfolio of stocks & unit trust funds and are confused at what he should do.

He started accumulating stocks and mutual funds units last year on the advice of some financial consultant. He had hope that the advice of "BUY & HOLD" would bear fruit but is now aware of the futility that comes with such, in a down-trodden market.

It's not a small amount. Assuming RM100,000 loss = 38%, he must have invested RM260,000 in unit trust funds alone. I don't know how much he is invested in stocks.

I don't know if it's better to to swap trust fund units to stock shares or vice versa. Or to relocate to better performing sectors, or ultra-depressed equities in the stock markets in the hope of a quicker recovery and jump in their price. In this bear market, all mutual funds prices, virtually every stock in all sectors are in decline.

• What I do know is that monetary loss is part of the game. What I do know is that when he does sell at a loss, he does not have to reinvest immediately for fear of missing out of a rally.
  
• What I do know is that unrealised loss (paper loss) is same loss as the loss of money in your hand or in your account. The monetary value is the same, in your trust fund, stocks or cash or account.
• What I do know is to be in cash at the moment. I begin selling since mid-May, took profits on some positions and cut losses in some. Since then I did many intraday and contra trades that yielded little. This is a hostile market that respects no fundamental or technical analysis but thrives on volatility.
  
• Stay away from investing (BUY & HOLD) strategy in this uncertain market. Stay away from the invisible market forces at work at the moment that seek only to confuse you. If you must, trade intraday, contra and cut losses early before it turn huge.
  
• What I do know is to sit on cash. Cash is going to be the best performer of the year. It's going to allow you to buy stocks, units at the near of a fresh bull market. For now I cannot see anything worth investing or buy & hold.
• Market has fallen so much that it is more difficult for people to sell their stocks and funds now. Market will favour a temporary rebound against the overall trend but it's not going to be the next bull.
  
• What I do know is I buy to sell. I'm not against the buy and hold strategy which has its place in a uptrend market. Knowing when to sell is the most important discipline in making money in the stock market.
  

The important thing is not my friend portfolio worth but what has been learnt. He bought stocks and trust units with no idea of when to sell. He was an eager buyer but reluctant seller. He bought without any plan of selling. And it isn't necessarily his fault. Most willing investor have no idea of what is required to make money and if they have a broker or investment advisor, almost none will tell you either.

They almost never advise you to take a loss when something goes against you. It is a dis-service to both the investor and themselves. They don't always have a game plan; when to sell if you buy. They are just making naive people lose money. My friend learned this the hard way.

I have no doubt my friend will recoup his losses when the economic and financial situation turns in his favour. After all he paid his dues and learnt the most important discipline in investment and trading.

Gold Will Rise to $2,000 by 2010

Precious metal remains my favourite play for past years and will continue to perform inspite of correction along the way. Read the following comments:

The price of gold is set to rally to $2,000 per ounce next year as an improvement in the economic outlook causes fear of inflation and currency debasement, Philip Manduca, head of investment from ECU Group, told CNBC.

"Gold will be going through $1,000 very shortly in 2009, and go on to as high as $2,000 by 2010 and I'm very confident of those predictions," Manduca told "Worldwide Exchange."
The economy will show signs of a bounce in the coming months because of the amount of monetary and fiscal stimulus and improving optimism from investors and consumers, Manduca said.

"People just want to believe that it's going to come to an end someday soon, preferably tomorrow," he added.
When the state of the economy appears to have improved, investors will get "very real fears of a combination of currency debasement on the one hand and ... inflation on the other," Manduca said.
Dean Barber, founder & chief investment officer at Barber Financial Group agreed with Manduca's predictions and said the entire commodity space was set to do well next year.

Singapore Commodity Play

Take a look at Wilmar and Straits Asia Resources

Tough Times

Datuk Mohamed Azman Yahya said the current crisis may be more challenging for Malaysia than the economic crisis it faced in 1998 as the economy faces the risk of stagflation where growth slows down amid a high-cost environment.

"From an economist's standpoint this is probably one of the worst positions to be in. More worrying is that this is today a global phenomenon. From a policy response this is tricky - too much stimulus either fiscal or monetary may lead to inflationary pressures, too little may lead to a recession," Azman who is a member of the recently set up Economic Council said.Malaysia is also facing challenges in general competitiveness, especially because of its long over-dependence on cheap foreign labour.

"This is very dangerous because there will always be some country somewhere that will be cheaper, and once these countries sort out their legal and infrastructure issues, they will be more competitive. We have to be more forceful in changing the drivers to our economy," Azman said.He said Malaysia must adopt a measured approach to increase wages and productivity while keeping a watch on inflation.

He also observed a generally pessimistic sentiment and low consumer confidence and said that widespread belt tightening measures will affect the velocity of money and the domestic economy. In the current weakened global economy Azman believes that the export-based manufacturing and commodity sectors will be most affected, as global demands contract. "This in turn may affect the SMEs that rely on these sectors. At the same time, the property sector, which normally does well when wealth is created (either through earnings or stock market) and was, over the last few years fuelled by foreign buying, will also be affected," he added.
Likewise, consumption of non-necessities such as motor vehicles and some retail goods may also be adversely affected.

Australian Commodity Stocks Play

For those with an interest on Aussie stocks, check out how much BHP Billiton, Rio Tinto and MacArthur had plunged...

BHP fallen from AUD48 to AUD 24, Rio from AUD150 to AUD40, MacArthur AUD20 to AUD4.

Potential play in 1H 2009.

Gold Investment

Gold has fallen 30% in 8 months from a high of USD 1002 to about USD 766 as global slump curtails comm0dity use of metals; basic and precious.

Silver plunged almost 50% in the same period from USD 20 to about USD 9 while platinum dropped 65% from USD 2300 to USD 800.

The Reuters/Jefferies CRB Index of 19 raw materials has dropped 35 percent this year. Commodities often move in the opposite direction of the U.S. currency.

Australia Cut Key Interest Rate

Australia's central bank slashed its key interest rate Monday a full percentage point to 4.25 percent as it tries to prevent the economy from contracting. The global financial crisis has taken Australia's economy from boom times to the verge of recession in a matter of months, and policymakers are throwing billions of dollars at the economy to try to stop it from tipping over the edge. Australia's S&P/ASX 200 index was down 3.2 percent at 3,564.

Markets in the Philippines, Taiwan and South Korea also dropped.
Among major regional markets, only Singapore and mainland China rose.

Ringgit could recover in 2H09

KUALA LUMPUR: The ringgit, which is expected to trade weaker going into 2009, will likely stage a recovery during the second half of the year, analysts said.
ECM Libra Investment Bank Bhd economist Dr Lai Mun Chow said the currency should reverse its decline against the US dollar in the second half, but until then it was expected to trade between 3.50 and 3.60 against the greenback.
“Based on our forecast, the credit crunch in the United States would come to an end by the middle of next year and the largest economy in the world would gradually recover by then,” he said.
“As foreign funds return to Asia, we would see the substantially undervalued ringgit resuming its upward trend from 3Q09,” Lai said. His end-2009 forecast for the ringgit is 3.25 to 3.27 against the US dollar.

While most analysts expect more rate cuts in the first quarter of 2009 and a weaker ringgit as a result, Lai believed the movement of the overnight policy rate was only material to the local unit if the global foreign exchange market returned to stability.

“If the United States really slips into a very deep recession and the China economy undergoes a hard landing, the Malaysian economy will definitely not be spared the adverse effects,” Lai said.
“In order to support the ringgit, it is crucial that the central bank maintains the growth momentum of the economy and ensure that it would not slip into recession.”

The ringgit closed 0.11% lower against the US dollar at 3.6235 on Friday. Year to date, the currency has fallen 8.53%.