Why Singaporeans should not cheer for negative Japanese interest rates?

The Straits Times Index jumped by more than 2% on the last trading day of January after the Japanese central bank announced that a key interest rate would be made negative. Despite this intervention and same-day reaction, I am sticking to my prediction that there will be a tumble to 2,200-2,400 levels before recovery because other central banks have used the same negative interest rate policy with little effect on the stock market. I believe the Japanese central bank's intention is to weaken the Yen than stimulate the stock market.

If anything, that last day jump means we are closer to that last phase of the bear market, where the mood of the market turns from surprise/disbelief into despair. This is because, to steal a movie quote, there can be no true despair, without hope. Japan's central bank intervention represents that hope before the STI tumbles into 2,200-2,400 levels. A quiet recovery, not noticeable by many until after the fact (2-3 months out) will ensue after true despair has set in.

Meanwhile, I have been trawling through blogs, valuebuddies and sharejunction for ideas on which stock to pick up. SingPost remains on my watchlist but I have added Riverstone and NSL and Lee Metal Group for future considerations. The temptation to average down on KrisEnergy however, has become very strong.

The weak Singapore job market starts to hit me

I work as an analyst for a US multinational corporation. Business conditions have been poor because of the weak commodities market affecting our major clients. Several rounds of layoffs have occured globally, including in Singapore. Thus, it was a great worry two days ago when my senior manager sent out an email at 10pm to attend a conference call held at 11pm the same night. Of course I missed out on the conference call. I was busy catching up on my sleep.

It was definitely not positive news because the next day, I received multiple meeting invites from various managers - I work in a company with a very complicated structure. Turns out that the company was going to freeze promotions as well as pay for the coming year. The upside we were told by the team leader, was that our jobs would remain secure until end-2016 and that the our incentive would still be paid out. The team broke out in laughter.

Straits Times Index Bear Market into 9 months, Sharp Plunge Ahead

If we took April 2015 as the peak and end of the bull market, we are now entering the ninth month that the market has trended down. This is essentially a bear market. As I have written in my previous post, I argued that there has been two distinct phases in the bear market and that there will be one more phase. This is the phase where there will be sharply declines but the mood of the market turns from surprise/disbelief into despair. This is also where the market starts to recover.

I have made some predictions for the first three months of the year and I have been spot on so far. And if history is any indicator, on average, we should see an inflection between one and nine months time or between February and October 2016. In the last financial crisis, the STI was at its lowest around 1,600 points at one level. My opinion is that we will almost certainly (93% +/-6%) not hit sub-2,000 like in the GFC.

Singapore Stock Market Outlook 2016

Those viewing my blog on a desktop version will see my latest prediction for the coming year. For the benefit of readers viewing my posts on their smartphones, the below is my market outlook as of 31 December 2015.

Singapore Stock Market 2016 Outlook

3 Month Outlook: The market will decline sharply (more than 6% decline from peak to trough) and will probably (75% chance, +/-12%) touch 2,600 levels.

3+3 Month Outlook: Market will decline (3% from peak to trough) or have (volatile day-to-day swings of +/-1.5%) sharp swings.

6+6 Month Outlook: Market will embark on a slow recovery (start of the right side of the "V"), likely to end the year at 2,900 level +/- 50 points.

Notes:

3 refers to the immediate following three months

3+3 refers to the 3 months period after the first three months

6+6 refers to the 6 months period after the first six months

Please do your due diligence. I am only a blogger. The aim of the predictions is just to share with your my sentiment of the market using more precise language. This will allow me to test my predictions. It will be updated on an as and when basis, but at least every 3 months.

Organising your mind for 2016

If you find yourself constantly forgetting things or not really performing at work due to the lack of focus, you should read The Organized Mind: Thinking Straight in the Age of Information Overload by Daniel Levitin.

This is the book to read to understand why our memories are getting poorer with the smartphone among other things. For instance, we take notes on our smartphone, but it is also the same device where we store photos and videos. Although it is very helpful in externalising our memory, as a result of the multi-functionality of the device, our memory does not "associate" clearly or link with the phone. This is compared to the olden times where each device only had one function. One of the ways he suggests to help your improve memory, is to have two phones, one for work-purposes and the other for taking videos and photos.

The first half of the book explains how our mind works and how it is being challenged by distraction caused by the age of the Internet and smartphone. We are simply too distracted to focus on a task, to allow the memory linkages to build in our minds. In the second half, he prescribes simple methods that will help improve our memory as well as reduce distraction.

Having read that book, for 2016, I will very likely have a paper notebook to jot down work-related instructions and thoughts. I will also switch off my office's instant messenger and emails during windows of time. This includes hiding my mobile phone in a hard to reach place.