2008 Investments - Idea Sharing

[fletchsmile]

Following on from last year's thread of a similar title: http://www.thaivisa.com/forum/index.php?showtopic=148391 , I got a few useful ideas for investing. I'm still mainly an equity based fan by nature, but take on board other instruments to diversify my portfolio.

For/throughout 2008 what are your ideas on where to put your money?

I don't really care whether you're an expert or novice, optimist or pessimist. Everyone's got a view or two. I believe there's a few of us interesting in hearing them. Just one request again: Would appreciate if the flamers and people who just want to insult others go and play elsewhere.

[fletchsmile]

On the whole it feels harder to find "good places" compared to the start of 2007. My thoughts for 2008,

to start off a few ideas:

Countries:

- 2007 saw some good gains in China and India. I'm a little more nervous in these areas, so while I still like the "BRICs" concept, and think that's where more of the future is, I'll be looking a little more to Brazil and Russia (added to Russia last week). I'll reduce China and India a little and take a few profits, but am still interested in them.

- Asia : again saw some good rises last year, so while it'll still be a key area for me, I'll take a few profits

- Thailand: I hope to see 1000+ on SET by mid-year, and 1100+ by y/e. Living here, I also want exposure to the country and protection vs rises in costs, i.e as the country develops I want to share in it. I don't want to get left behind with too many mature "olde world" investments in "olde world" currencies.

- US: not interested, unless it falls further for bargains

- UK, Eur: will hold, tho' am not expecting big things. Mainly held as: its where I come from; to diversify; and in case I need to go back

- Africa: Will be adding to the small holdings I have and looks more interesting. Perhaps also Latin America

Sectors:

- Feeling positive on commodities, resource companies and infrastructure, in these uncertain times. So will be adding to these

- Will also look more at Agriculture funds.

Currencies:

- Mainly hold THB, GBP and SGD, as these are mostly "home", and where I spend my money! Will look for opportunities to easily get into CNY, and keep the rest diversified just in case. Don't really want USD or EUR. CNY is the main one I'd put money on strengthening.

Anyway: A few ideas. Agree or Disagree. Would be very happy for ideas/open to debate or suggestions. BTW These are just my own thoughts/ ideas and what I'll be doing. Not recommendations to other people, and not necessarily suitable for others either.

Edited January 7, 2008 by fletchsmile

[Naam]

2008 Investments - Idea Sharing / What's On Your Mind?

even more cash than i hold presently Fletch. never in my life i liked cash more than nowadays

[Phil Conners]

Most people seem to think gold and oil is going up - but what stocks to buy to profit on that trend?

[jbaldwin]

I am 42 from the UK and retired to Thailand 5 years ago. My investments spread is as follows:

UK Equities - 25%

Thai Equities - 10%

Other Equities - 18%

GBP Cash - 10%

THB Cash - 13%

With profits insurance policies - 9%

Index Linked Gilts (the UK equivelent to TIPs) - 6%

Bonds - 5% (mainly UK corporate)

Property Funds - 3% (mainly Thai)

[jbaldwin]

Most people seem to think gold and oil is going up - but what stocks to buy to profit on that trend?

My view is that major oil companies are fairly valued if you assume average oil prices over the next few years will be $50-60. I think that oil prices will fall but will remain above the $50-60 level so oil companies are good value.

However, I think commodity price could fall sharply and given major cost pressure and believe shares in mining companies are too expensive (I have had this view for 2 years and have as far been wrong)

[fletchsmile]

Most people seem to think gold and oil is going up - but what stocks to buy to profit on that trend?

I hold JP Morgan Natural Resources Fund, and Black Rock Merrill Lynch Gold and General Fund. If you've access to the UK it's easy to buy these two funds to get equity exposures from GBP. Both have served me very well over the years.

First State Global Resources and UOB Gold and General are similar funds in Singapore, if you're using SGD or USD. It's harder to get the initial charges discounted in Singapore tho' on funds. In contrast the two via the UK, I get the initial charges discounted to zero.

Edited January 7, 2008 by fletchsmile

[Irene]

My 2008 strategy is to pick up stocks in Thailand when people are irrationally disposing their stocks at any price. I am accumulating PTT when under 350 and prepared to wait for a few years with that holdings. TDEX is another slow but safe stocks. I stay away from small and medium-sized companies. I go into the future market using the same technique but quick to close my position because of the fear of it volatility in which no one can predict. So far so good.

In the international market, I try to hold cash and ready to buy when the financials become ridiculously low e.g. Merrill Lynch and AIG. But I slowly pick up EEM, MSCI Emerging Market, and EWZ, (Brazil stocks). I am a bit scared of Chinese, India and Japan. Today I start to pick up gold through TMB Fif fund.

2007 was a bad year for me on stocks but good year on Thailand future market. I hope I am wiser this year.

[fletchsmile]

I am 42 from the UK and retired to Thailand 5 years ago. My investments spread is as follows:

UK Equities - 25%

Thai Equities - 10%

Other Equities - 18%

GBP Cash - 10%

THB Cash - 13%

With profits insurance policies - 9%

Index Linked Gilts (the UK equivelent to TIPs) - 6%

Bonds - 5% (mainly UK corporate)

Property Funds - 3% (mainly Thai)

Cheers for the post. I'm also considering early retirement at some point, tho' not just yet so have been developing my theories about the best way to finance it. The overall concept would be something similar to yours, but probably different splits, i.e enough THB cash and THB equity exposures, plus international and product diversification.

BTW Not sure how your with profits stuff is doing, but I've been getting rid of what I had, as returns have been poor in the last few years, some now paying only around 3.5% guaranteed. For pension funds I actually cashed most of my with profits schemes in last year, and transferred into equity funds in a SIPP. Some I couldn't tho' as they were "protected rights". I figured given the time to retirement (soon to be 55 for a personal pension fund), I'd take the cuts/MVAs and make it up with the increased returns. For me the initial cuts I took were all made up by year-end. I guess yours are insurance policies tho' so slightly different.

Hadn't really looked at Thai property funds. Who do you use?

[fletchsmile]

My 2008 strategy is to pick up stocks in Thailand when people are irrationally disposing their stocks at any price. I am accumulating PTT when under 350 and prepared to wait for a few years with that holdings. TDEX is another slow but safe stocks. I stay away from small and medium-sized companies. I go into the future market using the same technique but quick to close my position because of the fear of it volatility in which no one can predict. So far so good.

In the international market, I try to hold cash and ready to buy when the financials become ridiculously low e.g. Merrill Lynch and AIG. But I slowly pick up EEM, MSCI Emerging Market, and EWZ, (Brazil stocks). I am a bit scared of Chinese, India and Japan. Today I start to pick up gold through TMB Fif fund.

2007 was a bad year for me on stocks but good year on Thailand future market. I hope I am wiser this year.

Irene,

Who do you do your futures with in Thailand? It's something I've been looking at. Tho' to be honest I've looked more at options for hedging exposures I have in Thai mutual funds. The Aberdeen funds I have made around 16-19% last year, but ING funds were much better in the 30's, so I was quite happy with Thailand. I did want to hedge around the elections in Dec, but didn't find a good way to do in the end. Lucky to date it hasn't been needed. These have been averaging 20%+ since 2000, but there are times when things look tough going, so hedging would be a useful option...

BTW I cheked out the futures prices at lunch today. Not sure on your view, but to me SET50 Index futures looked cheap. March and June both below 600. Even Sep not much above. Any thoughts?

BTW2 I've never done well on Japan. Last year lost 12%. Each year I hear things might go well. These days I hold a small amount for diversification, and curiousity/just in case, but me and Japan don't seem to mix!

Edited January 7, 2008 by fletchsmile

[jbaldwin]

I am 42 from the UK and retired to Thailand 5 years ago. My investments spread is as follows:

UK Equities - 25%

Thai Equities - 10%

Other Equities - 18%

GBP Cash - 10%

THB Cash - 13%

With profits insurance policies - 9%

Index Linked Gilts (the UK equivelent to TIPs) - 6%

Bonds - 5% (mainly UK corporate)

Property Funds - 3% (mainly Thai)

Cheers for the post. I'm also considering early retirement at some point, tho' not just yet so have been developing my theories about the best way to finance it. The overall concept would be something similar to yours, but probably different splits, i.e enough THB cash and THB equity exposures, plus international and product diversification.

BTW Not sure how your with profits stuff is doing, but I've been getting rid of what I had, as returns have been poor in the last few years, some now paying only around 3.5% guaranteed. For pension funds I actually cashed most of my with profits schemes in last year, and transferred into equity funds in a SIPP. Some I couldn't tho' as they were "protected rights". I figured given the time to retirement (soon to be 55 for a personal pension fund), I'd take the cuts/MVAs and make it up with the increased returns. For me the initial cuts I took were all made up by year-end. I guess yours are insurance policies tho' so slightly different.

Hadn't really looked at Thai property funds. Who do you use?

I own TFUND, FUTUREPF, SIRIPF and SPF. They are listed on the SET so you need to have a Thai stockbroker to deal. They have dividend yields in the range of 7.25% to 9.9% (although FUTUREPF and SPT own leasehold not freehold property so the yields effectively include a return of capital as well as income). In my view these funds provide an excellent risk/reward balance.

[sonicdragon]

BTW I cheked out the futures prices at lunch today. Not sure on your view, but to me SET50 Index futures looked cheap. March and June both below 600. Even Sep not much above. Any thoughts?

On what basis do they look cheap ? There shouldn't be much, if any, discount on the front month vs fair value, and any discount further out might be a reflection of uncertain dividends (which might affect the front month too).

[sonicdragon]

I pretty much agree with everything in the analysis of the OP, though I am not so optimistic about the SET.

I'm overweight in cash and commodities (precious metals and agriculturals in particular), underweight in equities and bonds, and on a currency basis, underweight USD, GBP, EUR ; overweight CHF, SGD, THB, CNY.

[Irene]

fletchsmile,

My replies are in blue:

Who do you do your futures with in Thailand? It's something I've been looking at. Tho' to be honest I've looked more at options for hedging exposures I have in Thai mutual funds. My broker is Phillips,http://www.poems.in.th/home/th/index.htm Its online trading is the best on futures and options but lousy on stock tradings. You could have hedged on the election through futures or index options on SET50.

BTW I cheked out the futures prices at lunch today. Not sure on your view, but to me SET50 Index futures looked cheap. March and June both below 600. Even Sep not much above. Any thoughts? It can be cheap at one point (temporary) and could hit 670 very fast. Rarely does it come down below 600. So my motto is to long (buy) when below 600 like the past few days but tend to short when above 600 depending on the Dow Jones the night before. (Don't ever say anything cheap in this market, you could regret easily especially on the future market. At the beginning of the subprime crisis, it hit the bottom at 510. I lost a hefty sum using that motto).

BTW2 I've never done well on Japan. Last year lost 12%. Each year I hear things might go well. These days I hold a small amount for diversification, and curiousity/just in case, but me and Japan don't seem to mix! I was good at the Japan market through investment in ETF fund called EWJ. I started with EWJ three years ago at 11 and sold at 14 a few months ago. I am now waiting for the right moment to buy when it is below 13 unless the Japanese scene has gone worse than present.

[Irene]

On what basis do they look cheap ? There shouldn't be much, if any, discount on the front month vs fair value, and any discount further out might be a reflection of uncertain dividends (which might affect the front month too).

There can be a difference between the market quote and the benchmark of SET50. It can be higher or lower by more than 10 points. During the beginning of subprime crisis, it was lower than the SET50 index by more than 20 points. The gap is dependent on the view in future of the punters. So it can be very cheap if you dare to go against the tide. It can also be too expensive if there is a euphoric mood. Investment is like golfing. Sometimes, you thought that you were Tiger Wood and sometimes you want to cry on your swing. That is why the game is challenging, it is never constant.

[fletchsmile]

BTW I cheked out the futures prices at lunch today. Not sure on your view, but to me SET50 Index futures looked cheap. March and June both below 600. Even Sep not much above. Any thoughts?

On what basis do they look cheap ? There shouldn't be much, if any, discount on the front month vs fair value, and any discount further out might be a reflection of uncertain dividends (which might affect the front month too).

I thought they looked cheap for the 6m, 9m, 12m contracts, given they don't seem to be pricing in hardly any gains for this year

http://www.tfex.co.th/tfex/dailyMarketRepo...ml?locale=en_US

eg SET50 Index around 586, and futures as follows:

Symbol Contract Month/ Open/ High/ Low/ Bid/ Offer

S50H08 Mar 08: 591.90 592.00 584.00 584.00 584.50

S50M08 Jun 08: 592.60 592.60 584.00 583.50 584.70

S50U08 Sep 08: 591.00 591.00 587.70 582.20 587.50

S50Z08 Dec 08: 591.00 591.00 591.00 583.00 589.50

I can perhaps understand the front contracts, but there must be some good opportunities for gains in 9m and 12m in particular.

Edited January 8, 2008 by fletchsmile

[sonicdragon]

BTW I cheked out the futures prices at lunch today. Not sure on your view, but to me SET50 Index futures looked cheap. March and June both below 600. Even Sep not much above. Any thoughts?

On what basis do they look cheap ? There shouldn't be much, if any, discount on the front month vs fair value, and any discount further out might be a reflection of uncertain dividends (which might affect the front month too).

I thought they looked cheap for the 6m, 9m, 12m contracts, given they don't seem to be pricing in hardly any gains for this year

http://www.tfex.co.th/tfex/dailyMarketRepo...ml?locale=en_US

eg SET50 Index around 586, and futures as follows:

Symbol Contract Month/ Open/ High/ Low/ Bid/ Offer

S50H08 Mar 08 591.90 592.00 584.00 584.00 584.50

S50M08 Jun 08 592.60 592.60 584.00 583.50 584.70

S50U08 Sep 08 591.00 591.00 587.70 582.20 587.50

S50Z08 Dec 08 591.00 591.00 591.00 583.00 589.50

I can perhaps understand the front contracts, but there must be some good opportunities for gains in 9m and 12m in particular, for anyone who like short term trading.

Errrr...you do understand how stock index futures are valued, right ? The difference in price between each contract in the series is simply a function of the carrying cost and the dividends paid on the underlying index. If you just want to be long then it is usually better to own the front contract and just buy the calender spread before expiry, since the longer dated contracts tend to be quite illiquid with much wider bid-offer spreads.

[Irene]

You are right the market does not seem to price in that much with gain on the long term contracts. The answer is simple. The punters do not think much of the future and/or the market has yet to become sophisticated to understand this. The trick is to accumulate the 6m, 9m and 12m contracts if you think there is an upside then. Your gain can be substantial when that day arrives. This assumption is correct only if there is an uptrend in 2008. With the talks of recession in the US etc., do you think there is still an uptrend or the past uptrend in 2007 may not repeat itself in 2008. If there is a downtrend, then the loss could be quite hefty as well.

[fletchsmile]

Errrr...you do understand how stock index futures are valued, right ? The difference in price between each contract in the series is simply a function of the carrying cost and the dividends paid on the underlying index. If you just want to be long then it is usually better to own the front contract and just buy the calender spread before expiry, since the longer dated contracts tend to be quite illiquid with much wider bid-offer spreads.

Yes I understand thanks. On a simple model of:

FV equity futures = today's price + interest cost - div receivable

=> 586 + say 3.6%(approx BIBOR rate) x days/365 - divs receivable

Was just a little surprised that June's opening (592.6) was higher than Mar, but tails off again in Sep (591) and Dec (591). Perhaps also due to timing of the different quotes. I'm not sure how frequently they update.

No big deal tho' really.

[sonicdragon]

Errrr...you do understand how stock index futures are valued, right ? The difference in price between each contract in the series is simply a function of the carrying cost and the dividends paid on the underlying index. If you just want to be long then it is usually better to own the front contract and just buy the calender spread before expiry, since the longer dated contracts tend to be quite illiquid with much wider bid-offer spreads.

Yes I understand thanks. On a simple model of:

FV equity futures = today's price + interest cost - div receivable

=> 586 + say 3.6%(approx BIBOR rate) x days/365 - divs receivable

Was just a little surprised that June's opening (592.6) was higher than Mar, but tails off again in Sep (591) and Dec (591). Perhaps also due to timing of the different quotes. I'm not sure how frequently they update.

No big deal tho' really.

It's not so much the frequency that quotes update....you seem to be looking at the "open" prices - it's the timing of the first trade of the day (longer dated contracts will probably open a little later) and whether the first trade is on the bid or the offer. If you look at the closing offer prices, they are all slightly higher than the preceeding one, as you would expect if using a constant dividend yield to value them.

[sonicdragon]

You are right the market does not seem to price in that much with gain on the long term contracts. The answer is simple. The punters do not think much of the future and/or the market has yet to become sophisticated to understand this. The trick is to accumulate the 6m, 9m and 12m contracts if you think there is an upside then. Your gain can be substantial when that day arrives. This assumption is correct only if there is an uptrend in 2008. With the talks of recession in the US etc., do you think there is still an uptrend or the past uptrend in 2007 may not repeat itself in 2008. If there is a downtrend, then the loss could be quite hefty as well.

Can you elaborate on the first part of the foregoing in bold ? Futures prices should not be influenced by expectations of price rises as far as I know......

[Irene]

You are right the market does not seem to price in that much with gain on the long term contracts. The answer is simple. The punters do not think much of the future and/or the market has yet to become sophisticated to understand this. The trick is to accumulate the 6m, 9m and 12m contracts if you think there is an upside then. Your gain can be substantial when that day arrives. This assumption is correct only if there is an uptrend in 2008. With the talks of recession in the US etc., do you think there is still an uptrend or the past uptrend in 2007 may not repeat itself in 2008. If there is a downtrend, then the loss could be quite hefty as well.

Can you elaborate on the first part of the foregoing in bold ? Futures prices should not be influenced by expectations of price rises as far as I know......

Common sense tells me that if we expect the future trend to be rising, the future prices of 6m 9m and 12m should be higher than the current price just like oil, interest rate and commodities as noted on the US market. The Thai market prefers the short term trading. Anything over one week is regarded as too long. Hence the pricing of 6M, 9M or 12M in Thailand is not a good guidance to the current price unlike a matured market in the west. However, this quaintness turns out to be an opportunity to long now on 6M or 9M if you think once the elected government is in their places and hopeful of a big-name economist in the Finance Ministry. The market force on those future issues do not recognise that trend. With no fancy calculations but just based on my understanding of the behaviours of Thai investors and my pleasure and pain of previous hits and misses, I accumulated a lot in early December 07 on the March 08 issues and realised a large gain in early January 08. Why the gain? Because I got my bargains earlier on in December. Why should I realise that in Jan. 08? Because I did not like the immediate outlook of uncertainty in the US.

My theory may be heretic under Finance 101, but my past experiences tell me to use my senses on economics far more than the other technical analysis. I used to do a lot of technical calculations a few years ago and got excited about them. I made a mess of my investment choices. I still keep those investments with book losses of 30% to 50% just to remind myself of my then lapse of senses.

[Kf6vci]

I would either buy some long time puts on indices or sell some futures. The Baht is overvalued IMHO so I would not want any holdings. Those trading futures might consider buying T-Bills and then using those as security.

[sonicdragon]

You are right the market does not seem to price in that much with gain on the long term contracts. The answer is simple. The punters do not think much of the future and/or the market has yet to become sophisticated to understand this. The trick is to accumulate the 6m, 9m and 12m contracts if you think there is an upside then. Your gain can be substantial when that day arrives. This assumption is correct only if there is an uptrend in 2008. With the talks of recession in the US etc., do you think there is still an uptrend or the past uptrend in 2007 may not repeat itself in 2008. If there is a downtrend, then the loss could be quite hefty as well.

Can you elaborate on the first part of the foregoing in bold ? Futures prices should not be influenced by expectations of price rises as far as I know......

Common sense tells me that if we expect the future trend to be rising, the future prices of 6m 9m and 12m should be higher than the current price just like oil, interest rate and commodities as noted on the US market. The Thai market prefers the short term trading. Anything over one week is regarded as too long. Hence the pricing of 6M, 9M or 12M in Thailand is not a good guidance to the current price unlike a matured market in the west. However, this quaintness turns out to be an opportunity to long now on 6M or 9M if you think once the elected government is in their places and hopeful of a big-name economist in the Finance Ministry. The market force on those future issues do not recognise that trend. With no fancy calculations but just based on my understanding of the behaviours of Thai investors and my pleasure and pain of previous hits and misses, I accumulated a lot in early December 07 on the March 08 issues and realised a large gain in early January 08. Why the gain? Because I got my bargains earlier on in December. Why should I realise that in Jan. 08? Because I did not like the immediate outlook of uncertainty in the US.

My theory may be heretic under Finance 101, but my past experiences tell me to use my senses on economics far more than the other technical analysis. I used to do a lot of technical calculations a few years ago and got excited about them. I made a mess of my investment choices. I still keep those investments with book losses of 30% to 50% just to remind myself of my then lapse of senses.

The reason why the term structure of futures on commodities is almost always upward sloping is twofold: First, the increased carrying costs compared to financial futures. Carrying costs of the underlying financial futures (stock index futures as an example) are usually limited to funding costs, but commodities may often have storage and transport costs associated with them. The second reason is that they do not pay a dividend. Since carrying costs increase fair value and dividends decrease it, the net effect is a more positive term structure.

If stock index futures really "predicted" a higher index price, then arbitrageurs would simply buy the cash index and sell the futures contract for a near risk-free profit. To the extent that funding costs can change and future dividends are uncertain, there is a small element of risk. In some markets where it is difficult to borrow stock, futures can trade at a discount to fair value.

[jumnien]

Investor's Business Daily

America's Pursuit Of Happiness

Wednesday January 2, 6:20 pm ET

Ibd

Public Opinion: Each time you open a newspaper or turn on a TV, you'll hear how unhappy, glum and dissatisfied Americans are. Don't believe it. The U.S. is, to borrow a phrase, the happiest place on Earth.

ADVERTISEMENT

A long-forgotten 1960s movie title pretty much sums up how Americans feel about their lives: "What's So Bad About Feeling Good?" According to a new Gallup Poll, for most people that's not just a rhetorical question.

"Most Americans say they are generally happy, with a slim majority saying they are 'very happy,'" according to the Gallup Poll released on the final day of 2007. "More than 8 in 10 Americans say they are satisfied with their personal lives at this time, including a solid majority who say they are 'very satisfied.'"

Another extensive survey conducted in 2007 by the Pew Research Center found that 65% of Americans termed themselves "satisfied" with their lives. That compares with the four economic powerhouses of Britain, France, Germany and Italy, which averaged about 53%.

This difference isn't something new. It's been around for a long time. It's a part of what foreign-affairs mavens call "American exceptionalism." The question is, why are Americans so darned happy?

For one thing, Americans are far richer than those in other countries. And yes, this matters. Contrary to popular belief, neither the Europeans nor the Japanese lead better lives than Americans.

A study a few years back by Sweden's Timbro think tank came to these startling conclusions: Virtually every nation in Europe lagged the U.S. in income. Indeed, if it were a state, the EU would rank 47th in per capita GDP -- on par with Mississippi and West Virginia.

Americans' homes have roughly twice the square footage per occupant as those in the EU, Americans own more appliances, and, on average, they spend about 77% more each year than Europeans.Yet, though the U.S. economy is head-and-shoulders above the others, you'd never know it from our friends in the mainstream media. As repeated surveys show, U.S. media coverage of the economy is overwhelmingly slanted toward the negative side of things.

But a look at the facts shows something quite different.

U.S. household wealth climbed from $38.8 trillion in 2002 to $58.6 trillion in the third quarter of 2007, an unprecedented 51% surge in just five years. That includes the recent meltdown in home prices.

By any historical standard, Americans are unbelievably wealthy.

Moreover, despite the near-collapse in housing, the U.S. economy remains strong. It grew at a 3.1% rate during the first three quarters, and almost certainly kept growing in the final three months.

Economist Irwin Stelzer adds another reason why Americans are happy right now: a million new jobs over the last year, a milestone that is underpinning U.S. economic growth right now.

But can economics really matter that much? You bet. Money may not buy love, but it helps buy happiness. In fact, according to the Pew folks, there's a 72% correlation between per capita GDP growth in a country and its citizens' happiness.

What about social trends? As economist Irwin Stelzer recently noted, "teenage drug use, pregnancies, smoking and drinking are all on the decline; welfare reform is working, bringing down child poverty, and the divorce rate is falling."

Oh, and we're having more babies than at any time since the 1970s -- not something that a gloomy, depressed society does. Our 2.1 babies per adult woman puts us at the top of the developed world's fertility rankings (Europe, by comparison, has a population-shrinking 1.5 rate). A child is the biggest bet on a happy future that two people can make.

Then there's religion. A 2006 Harris Poll found on average that 43% of those in Britain, Germany, Italy, Spain and France believed in a Supreme Being. In the U.S., it's 73%. That suggests a link, in developed nations anyway, between religiosity and happiness.

Face it, Americans are an unusually happy, optimistic people. In a way, it defines us. A big reason is our economy -- huge, innovative, low-tax and less regulated than others.

That's what makes us different. Vive la difference!

[Irene]

You are right the market does not seem to price in that much with gain on the long term contracts. The answer is simple. The punters do not think much of the future and/or the market has yet to become sophisticated to understand this. The trick is to accumulate the 6m, 9m and 12m contracts if you think there is an upside then. Your gain can be substantial when that day arrives. This assumption is correct only if there is an uptrend in 2008. With the talks of recession in the US etc., do you think there is still an uptrend or the past uptrend in 2007 may not repeat itself in 2008. If there is a downtrend, then the loss could be quite hefty as well.

Can you elaborate on the first part of the foregoing in bold ? Futures prices should not be influenced by expectations of price rises as far as I know......

Common sense tells me that if we expect the future trend to be rising, the future prices of 6m 9m and 12m should be higher than the current price just like oil, interest rate and commodities as noted on the US market. The Thai market prefers the short term trading. Anything over one week is regarded as too long. Hence the pricing of 6M, 9M or 12M in Thailand is not a good guidance to the current price unlike a matured market in the west. However, this quaintness turns out to be an opportunity to long now on 6M or 9M if you think once the elected government is in their places and hopeful of a big-name economist in the Finance Ministry. The market force on those future issues do not recognise that trend. With no fancy calculations but just based on my understanding of the behaviours of Thai investors and my pleasure and pain of previous hits and misses, I accumulated a lot in early December 07 on the March 08 issues and realised a large gain in early January 08. Why the gain? Because I got my bargains earlier on in December. Why should I realise that in Jan. 08? Because I did not like the immediate outlook of uncertainty in the US.

My theory may be heretic under Finance 101, but my past experiences tell me to use my senses on economics far more than the other technical analysis. I used to do a lot of technical calculations a few years ago and got excited about them. I made a mess of my investment choices. I still keep those investments with book losses of 30% to 50% just to remind myself of my then lapse of senses.

The reason why the term structure of futures on commodities is almost always upward sloping is twofold: First, the increased carrying costs compared to financial futures. Carrying costs of the underlying financial futures (stock index futures as an example) are usually limited to funding costs, but commodities may often have storage and transport costs associated with them. The second reason is that they do not pay a dividend. Since carrying costs increase fair value and dividends decrease it, the net effect is a more positive term structure.

If stock index futures really "predicted" a higher index price, then arbitrageurs would simply buy the cash index and sell the futures contract for a near risk-free profit. To the extent that funding costs can change and future dividends are uncertain, there is a small element of risk. In some markets where it is difficult to borrow stock, futures can trade at a discount to fair value.

Wow! I think I will stick to my theory for Thailand futures and index options.

[lannarebirth]

Irene,

Given the lack of liquidity in Thai markets, do you take a hedge (say an OTM put) for the long futures position you hold? I do it sometimes, even in markets with infinitely more liquidity.

[sonicdragon]

Shorting an ITM call might be an idea worth looking at, if IV is as high as it was when I last checked SET50 options....and if you're long the futures with the same broker I assume there would be no additional margin requirement ?

[Irene]

Irene,

Given the lack of liquidity in Thai markets, do you take a hedge (say an OTM put) for the long futures position you hold? I do it sometimes, even in markets with infinitely more liquidity.

lannarebirth,

I never thought of it. That is why I like this Thaivisa forum, one always learns something. Many thanks.

[ray23]

Just want to follow the thread, excuse me