Global Problemo

Poverty 2:177
Ignorance 17:36
Intolerance 49:13

"...when you have eliminated the impossible, whatever remains, however improbable, must be the truth." (Sir Arthur Conan Doyle)

VIX Gone Mad

On Aug 16, 2007 VIX Index shot up to 37.5 level intraday. It's now hovering around 25. What a week! Since right now Cash is King again, we are about 22+% in cash. Fed's move to lower the discount rate by 50 bp has resulted in a relief rally. Well, at least the markets' kinda stabilized at the moment. So, what to do? Here's some tips from citi sb - courtesy of Boon Heng:

Back to Basics: Ten Rules of Thumb for a Volatile Market

1. Focus on Organic Growth - companies with ability to increase their earnings at rates well in excess of the index through organic (i.e. non-acquisitive) growth. Check out those with early stages of new product cycles or brand-line extensions of popular products.
2. Focus on Companies that Make Other Companies More Productive - those with products and services offering a “value proposition” or enhanced ROI. Eg. producers of software and products that collect, measure, or analyze data to reduce labor costs (estimated to represent approximately 70% of U.S. corporations’ expenses) are poised to generate above-average growth.
3. Identify Long-Term Growth Trends - Shifting demographic patterns or new legislation can often lead to critical behavioral changes that influence the products and services consumers and corporations purchase.
4. Emphasis on Companies that Have Financial Flexibility - with financial strength to fund internal or external growth opportunities through strong and rising free cash flow (and low debt-service costs) tend to exhibit lower volatility and more stable returns. Check out: interest coverage, working capital efficiency and FCF.
5. Look for Strong Balance Sheets - low debt to total capital will be rewarded by investors, particularly when access to financing is perceived as becoming more limited. This “margin of safety” may provide a valuation floor.
6. Pay Attention to the Quality of Earnings - A good measure of a corporation’s quality of earnings is how closely its free cash flow (net income + depreciation and amortization +/- changes in working capital – capital expenditures) matches its net income.
7. Scrutinize Free Cash Flow - FCF: the clearest measure of a company’s financial flexibility. Companies generating excess free cash flow may choose to reward shareholders through the payment of a dividend or a share repurchase program. A large increase in receivables or inventories can be an indication of potential trouble ahead.
   
8. Avoid Value Traps - focus on forward earnings projections coz many economically sensitive companies, particularly at or near cyclical peaks, tend to appear attractively valued based on trailing earnings. Consensus earnings estimate revisions can provide investors with some insight into near-term operating momentum. Often, particularly during a period of slowing economic growth, the first earnings shortfall may act as a harbinger of future earnings disappointments.
9. M&A Selection Criteria Shouldn’t Be Dismissed - strong free cash flow, low leverage, and solid profit margins remain in place today, although in many cases at lower valuations. Check out companies with free cash flow yields well in excess of prevailing bond yields.
10. Focus on the Long Term, and Keep Emotions in Check - willingness to act quickly on investor misperceptions that frequently occur due to “panic” selling or “group-think.” Mkt = greed & fear vs careful analysis of fundamentals. Have a disciplined investment process, emphasize on strong or rising FCF, expanding profit margin, attractive valuation, positive changing internal dynamics, incremental market share opportunities, and strong management. These help maintain clarity in volatile markets.
    

What's Cooking

Went to the kitchen about 1400 & tried to cook Briani Tepek (recipe courtesy of Faez - Newcastle). Quite okay except that I accidently added too much chilly paste .. as a result the girls stopped eating halfway. Now, I've got cucumbers inside the rice cooker - may be that could absorb the heat .. donno .. may be it'll work.

Umm, just completed Episode 13 of The Riches .. that's the last episode I got. So far, okay .. so so. Will probably watch Psych by this week. Hope its a better series. And I'm still trying to figure out how to get my online satellite TV working. If it works, that means I dont have to go to White Lion or Roger's anymore to catch up on the games. May be I should just subscribe to £10 a month - Setanta Sports. Saves me all the trouble, not bad .. all games of the top 4 teams will be aired. But with Rooney out for 2-3 months and Ronaldo out for 3 more games, Man U could well fall out from the top of the table. But what the heck. By the way, Man U's new jersey's about £35 at Sport's World. A bit weird design though, but I like the Starsky & Hutch car stripe at the back. Ciao.