Market Report for Feb 8-12, 2010 by Bill Wermine
Dear Traders,
Our high quality shares strategy with dividends/ heavy cash position has protected us in the current correction. Remember that these shares are supported by professional players as they offer higher income in a low 
yield environment of 2 % fixed deposit rates.
yield environment of 2 % fixed deposit rates.Our capital losses from the KLSE 1308 high are less than 2 % but since JTI recently paid a 2.5 % dividend we are in profit.
There are 3 things impacting world markets including the KLSE:
Unwinding of the USD carry trade as fear has gripped world markets. Fear and panic has caused investors world wide to dump shares/ commodities and seek the safe haven of US Treasury bonds/ USD which pay miniscule returns.
China is pulling liquidity out of its economy by raising reserve requirements. Their aim is to wash out speculators from the markets so they can buy essential commodities cheaper.
Fear of country defaults in the PIGS economies (Portugal/ Ireland/Greece/ Spain) . This has caused an 8% drop in the Euro vs the USD. 40% of earnings in the S & P are in Euros this has a negative impact on major US corporations.
Just like everything in life, this too will pass- just like the panic of 2008 which is now history
Fear and bad news is the friend of the buyer as Warren Buffet would say. Expect more volatility/panic/ fear selling in the next 2 months and since we are holding a lot of cash we can exploit our strategy to lock in higher yields in quality shares when the time is right.
Our recent book Dividends dont Lie has a list of these shares. It is available at MPH or if sold out I have a few copies at my office.
Hold on to your hat next week and remember to maintain your calm,
Bill
