Olam buys sugar mill at US$73.8m, EBITDA accretive in yr 1

By TEO SI JIA


Agricultural company Olam International Limited on Wednesday announced that it has bought 100 per cent of the shares in Hemarus Industries Limited (HIL) of India and its accompanying assets for US$73.8 million.

It will acquire a sugar mill that produces 3,500 tons crush per day and a 20 MW co-generation facility in the purchase.

Olam will be injecting US$6.6 million to bring the sugar mill's capacity to 5,000 TCD, following the transaction.

The sale will be fulfilled in part by US$8 million in cash and US$66 million in debt assumption.

'This acquisition strengthens our position in the Indian sugar industry and is in line with our stated strategic objective of building an annual sugarcane crush capacity of between 2 to 2.5 million tons over the course of the next 5 years,' said Sanjay Sacheti, Olam's India and SAARC regional head.

HIL, which has a book value of US$70 million, is expected to contribute US$90-100 million in turnover and a 32 per cent return in equity.

The acquisition is expected to be Ebitda accretive in its first year and earnings accretive in the next.

Competency versus Expectancy

Just For Thinking ....

Read? Knowledge versus Competence

How to raise competency level?

If we continue to be happy with low expectancy e.g. 4-5% ROC even after years of investing in the stock market. Are we be able to raise our competency level with such low expectancy?

I like to think that it will be hard. Right?

To raise competency level, we will have to continuously challenge ourselves by setting higher progressive investing goals. In this way, we may be able to identify any competency gaps when we are unable to meet progressive higher investing goals. But, we must also be realistic that we may not have the necessary skill sets to fill up all these gaps and continuously learning and changes in this journey is a must.

STI

Straits Times

2,885.26

+93.37

+3.34%

Olam reports full-year net profit of S$444.6m

By Amanda Feng


SINGAPORE : Mainboard-listed Olam International on Monday reported a net profit after tax (including exceptional items) of S$444.6 million for its full year ended June 30, a growth of 23.6 per cent compared to S$359.7 million achieved last year.

This is despite significant volatility in commodity markets, which saw a rally in prices across commodity asset classes during the first nine months, followed by a weakening of prices during the last quarter, particularly towards the end of June.

Olam added that its decision to invest selectively in upstream and midstream growth initiatives with attractive returns, such as plantations and value-added processing, helped enhance margins and strengthen returns.

Olam, which processes agricultural products and food ingredients, said commodity food prices might continue to go up in the light of inflation.

Olam International's CEO, Sunny Verghese, commented: "Although all this economic turmoil has happened, commodity prices and food prices have only come down about one and a half per cent."

"This reflects the strong underlying demand and supply side drivers which will keep commodity prices over the middle and long term pretty elevated," he added.

- CNA/ms

DOW

Dow

11,559.95

+20.70

+0.18%

YF News

Market Update

4:30 pm : Selling in the final minutes caused stocks to settle short of their session highs, but the major equity averages still managed to hold on for another gain.

Stocks extended their early morning slide in response to an abysmal Consumer Confidence Index for August. The Index had been generally expected to ease to 52 from just above 59, but slumped to 44.5, which is the worst reading since April 2009. It is suspected that the worse-than-expected reading was the result of stock market volatility, slow job growth, and concerns about the pace of the overall economic recovery.

Although there isn't any empirical evidence that connects consumer confidence with actual spending, participants used the report as an excuse to sell stocks. That sent the broad equity market down to a loss of more than 1%, but it didn't take long for buyers to scale back in. The stock market's move off of its morning low was rather choppy, though.

Minutes from the most recent FOMC meeting failed to have any meaningful impact on trade. They didn't offer any clues for plans of further stimulus, although the members of the Committee agreed monetary policy couldn't completely address the various strains on the economy.

Despite a general lack of leadership, stocks were still able to work their way up to a modest gain. The effort was challenged shortly before the toll of the closing bell, but stocks the major equity averages managed to hold on for varied gains -- the Nasdaq again outperformed its counterparts with help from Internet-related plays.

Gone Fishing: 28 - 30 Aug 2011

Batam

Vicom

Is this stock defying stock market gravity and not subject itself to Law of the Jungle?

Don't Be a Yield Pig

By Seth A. Klarman

I have thoroughly reviewed the U.S. Constitution (and the Bill of Rights for good measure) and, contrary to popular belief, there is no mention of a right for savers to earn high rates of interest on government guaranteed principal. Nevertheless, it comes as a terrible shock to a lot of people that some current short-term interest rates are only one- third of early 1980s levels. The correct response to this shock can be crucial to your financial health.

There is always a tension in the financial markets between greed and fear. During the 1980s investor greed frequently got the better of fear, with the result that yield-seeking investors, known among Wall Streeters as "yield pigs," were susceptible to any investment product that promised a high current rate of return, the associated risk notwithstanding. Naturally, Wall Street responded by introducing a variety of new instruments--junk bonds, option-income mutual funds, international money market funds, preferred equity return certificates (PERCS)--anything that promised high current yields to investors.

Unless they are deluding themselves, investors understand that to achieve incremental yield above that available from U.S. government securities (the "risk-free" rate), they must incur increasing levels of principal risk. There is no risk-free yield enhancement on Wall Street. The painful result: Higher risk investments often erode one's capital and produce lower returns--the worst of all investment worlds. Higher-returns-for-higher-risks only applies on average and over time.

Investors must carefully examine alternative investments to assess when they are being adequately compensated for bearing risk and when they are not. When the yield differential between riskless and more risky securities is sufficiently large, even a conservative investor might reasonably venture beyond U.S. government securities. Thus, for example, it made sense to buy the Federated Department Stores senior-secured bonds,

Harcourt Brace debentures and Manville preferred stock when panic hit the junk bond market in late 1990 and early 1991.

These days, however, I don't believe investors are being compensated sufficiently to venture beyond risk-free instruments. Yield spreads between government bonds and corporate credits have contracted sharply this year from levels a year ago. Some bonds of such highly leveraged issuers as Burlington Industries and Unisys now trade above par. A year ago they sold at substantial discounts from par.

Yield-starved investors also have been bidding up the bonds of such deeply troubled issuers as Chrysler, Stone Container and Marriott. The General Motors PERCS--a newly created instrument that only a yield pig could love--recently traded at a level so high that the common stock became a better buy no matter where GM common traded and no matter what action GM's board took on its dividend.

Some investors, desperate for better yield, have been reaching not for a new Wall Street product but for a very old one--common stocks. Finding the yield on cash unacceptably low, people who have invested conservatively for years are beginning to throw money into stocks, despite the obvious high valuation of the market, its historically low dividend yield and the serious economic downturn currently under way.

How many times have we heard in recent months that stocks have always outperformed bonds in the long run? Funny, but we never hear that argument at market bottoms.

In my view, it is only a matter of time before today's yield pigs are led to the slaughterhouse. The shares of good companies and bad companies alike are vulnerable to sharp declines. Moreover, many junk bonds that have rallied will tumble again, and a number of today's investment-grade issues will be downgraded to junk status if the economy doesn't begin to recover soon.

What if you depend on a higher return on your money and can't live on the income from 4% interest rates? In that case, I would advise people to ignore conventional wisdom and consume some principal for a while, if necessary, rather than to reach for yield and incur the risk of major capital loss. Stick to short-term U.S. government securities, federally insured bank CDs, or money market funds that hold only U.S. government securities. Better to end the year with 98% of your principal intact than to risk your capital roofing around for incremental yield that is simply not attainable.

I would also counsel conservative income-oriented investors to get out of most stocks and bonds now, while the getting is good. Caution has not been a profitable investment tactic for a long time now. I strongly believe it is about to make a comeback. Seth A. Klarman, president of The Baupost Group, Inc., a money management firm, is the author of Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful

Current Dividend Yield is good but avoid falling into potential Dividend Traps (3)

Read? Dividend Yield is good but avoid falling into potential Dividend Traps (2)

Recently, I realized that I have been reading more blog posts championing dividend yield investing as the way forward to invest as the market diving deeper into the Bear Market. We can easily understand the sentiment of fears in a bear market of falling stock prices. It can hurt us badly and force us to appreciate the attractive bird-in-hand element in dividend yielding stocks.

But avoid falling into dividend trap by seriously looking and evaluating their dividend payout ratio and potential capital appreciation when the Bull comes roaring back. In Bear market, potential good dividend yield and high capital appreciation is not mutually exclusive.

For example, I realized that my long-term holding position in Noble which is never a dividend yield play stock still gave me decent yield for the past 3 years: 6.7% (FY 2008),  5.3% (FY2009), and 4.5% (FY2010).

Noble reports its earning and pays its dividends in USD so dividends received will be subjected to currency risks.

STI vs. DOW

STI has quite a bit to catch with the big brother.

DOW

Dow

11,284.54

+134.72

+1.21%

By: JeeYeon Park

CNBC.com Writer

Stocks finished higher in a volatile session Friday after after Bernanke's speech raised hopes that the Fed may consider further stimulus measures to boost the economy during an extended policy meeting next month.

The major indexes snapped a four-week losing streak and logged its best week in eight.
The Dow Jones Industrial Average rallied 134.72 points, or 1.21 percent, to finish at 11,284.54. The Dow plunged almost 220 points in a knee-jerk reaction immediately after Bernanke started his speech, but quickly pared their losses.


The S&P 500 gained 17.53 points, or 1.51 percent, to end at 1,176.80. The Nasdaq climbed 60.22 points, or 2.49 percent, to close at 2,479.85.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished below 36.

Federal Reserve Chairman Ben Bernanke said the Fed is ready to use additional tools to help the economy, but he stopped short of talk of another round of monetary easing. Bernanke said the Fed will meet for an extra day in September to discuss its options to provide additional monetary stimulus, among other topics.


While Bernanke expects growth to pick up in the second half of the year, if signs of a recovery fail to materialize in the near-term, the FOMC may consider additional policy tools at its September meeting.

“[Bernanke] outsmarted Wall Street,” said Todd Schoenberger, managing director of LandColt Trading. “His speech was plain vanilla and his plan was not to have a plan … He basically gave us a carrot so that we can hold our breath for the next month.”

This time last year, Bernanke laid the groundwork for the Fed's $600 billion bond-buying program to revive the economy, also known as QE2.

“I like that [the Fed] stood tall and didn’t give into the financial panic,” James Paulsen, chief investment strategist at Wells Capital Management told CNBC. “If they had acted, it would have been a sign that the Fed is nervous and it would have scared investors,” Paulsen added. “So I’m optimistic that this is a good outcome.”


ECB President Jean Claude Trichet is expected to speak at Jackson Hole Saturday and some are expecting him to signal a more dovish position on rates.

STI

Straits Times

2,748.18

-17.56

-0.63%

DOW

Dow 11,149.82 -170.89 -1.51%

STI

Straits Ti...

2,764.96

+45.06

+1.66%

DOW

Dow

11,320.71

+143.95

+1.29%

By: JeeYeon Park

CNBC.com Writer

Stocks rallied strongly in the final hour Wednesday, logging a three-day gain, after hovering near the flat line for most of the session, but investors remained cautious ahead of Federal Reserve Chairman Ben Bernanke's Jackson Hole speech at the end of week

The Dow Jones Industrial Average jumped 143.95 points, or 1.29 percent, to close at 11,320.71, in a volatile trading day. The blue-chip index crossed the flat line almost 15 times during the trading session.


The S&P 500 rallied 15.25 points, or 1.31 percent, to end at 1,177.60. The Nasdaq rose 21.63 points, or 0.88 percent, to finish at 2,467.69.


The CBOE Volatility Index, widely considered the best gauge of fear in the market, traded around 35.

“Yesterday’s rally was about 30 to 40 percent short-covering and I would be very careful going into Friday,” Art Cashin, director of floor operations at UBS Financial Services told CNBC. “There could be a big surprise from Bernanke by saying nothing, and that could catch the markets off base.”


Many investors are awaiting Federal Reserve Chairman Ben Bernanke's speech on Friday at a banking conference in Jackson Hole, Wyoming, in hopes that he may announce some form of monetary policy to help support the U.S. economy.

Meanwhile, gold tumbled sharply to settle below $1,760 an ounce, falling more than $100 as investors took profits after the metal's strong rally.

When blue chips give you the blues

Beware - while value-investing may seem easy, human frailty often turns it into 'unconscious speculation'


By WILLIAM CAI

IN THE third quarter of 2010, a slew of positive economic data was evident in the media. The idea of investing for the long term - by picking Singapore's 'solid' dividend-paying blue-chip stocks - became an attractive proposition in a low-interest-rate environment. Coincidentally, this was also when the Singapore Investor Confidence Index Poll reached a high. From a contrarian perspective, that's when one should worry.

A 'death cross' occurred when the Straits Times Index (STI) fell to 2,797. It's a term used when a security's 50-day moving average price line crosses over its 200-day moving average line from the top, generating a long-term bearish signal which suggests that investors should adjust their bullish view to bearish.

While 12 out of 18 'death crosses' resulted as false signals (whipsaws) over the past 30 years for the STI, investors should still take the bearish signal seriously. Firstly, as a lagging indicator, the signal usually occurs after the STI has fallen by 10 per cent or more, and only to be compounded by further losses if a severe bear emerges. Secondly, six out of the 18 signals resulted in losses ranging from minus 22 per cent to minus 54 per cent. Thirdly, it is worrying that more than 60 per cent of the STI constituents, which are classified as 'blue-chip' stocks, have generated the 'death cross' signal.

More importantly, the 'death cross' has also occurred for various other global markets, increasing the odds of a full-blown bear market.

The definition of an 'investment', as offered by Benjamin Graham in 1934, 'is an operation that promises the safety of principal and satisfaction of return. Operations not meeting these requirements are speculation.'

Contrary to popular belief, Warren Buffett is a great market timer. He plays the game well by raising cash when he cannot find attractively-valued stocks. He waits for opportunities to pick up stocks at fire-sale prices, especially when there's blood in the streets.

The biggest mistake an investor can make is to focus only on the idea of getting stable dividends, with disregard to price. For example, when investors buy blue chips at a high price during the mature stage of an economic cycle, this increases the possibility of seeing their stock value fall 50 per cent or more in the next economic slowdown.

Despite the potential poor risk-adjusted ratio, investors stick to the concept of buying blue-chip stocks as they harbour the hope of capital appreciation which bonds may not match. This does not make sense as corporate bonds can do the job of providing a steady income better without similar risk to equity.

Untrained investors would focus on buying blue chips with the highest reputation, quoting their good management and their ability to continue to deliver profits for the long term as reasons for investing in them. Such investors do not wish to engage in market-timing activities as they equate these to speculation. Therefore, they pay insufficient attention to prices given their assumption that well-chosen blue chips would recover from an economic downturn. Ironically, that is a speculative assumption as many of today's blue chips could become tomorrow's losers.

For example, an investor who bought SGX shares at $14.40 on Oct 2, 2007 would have seen the price fall 53 per cent as at Aug 22, 2011. Assuming dividends reinvested, the loss would be large at minus 46 per cent. Investors who bought stocks like Cosco, NOL and Yangzijiang at their peak in 2007 would still be nursing losses of between minus 50 per cent to minus 84 per cent.

Contrary to popular belief, Warren Buffett, the famous value investor, is a great market timer. He plays the game well by raising cash when he cannot find attractively-valued stocks. He waits for opportunities to pick up stocks at fire-sale prices, especially when there's blood in the streets. As the key to long-term investment success is to first avoid losing big, a true long-term investor should do the same and wait for a market crisis to buy stocks at attractive prices. Then, they can ignore the madness of short-term volatility and sell the stocks when they become overvalued. Over time, this strategy can substantially increase the wealth of investors.

For most investors, professionals included, qualitative factors like good management are difficult to deal with intelligently and such an evaluation can be clouded by an investor's own confirmation bias. Quantitative factors, like the continued ability for a business to deliver steady earnings growth, would need investors to have a considerable amount of investigation and business acumen.

Savvier investors could argue that Singapore stocks are now reasonable, based on their current price ratios and forward-looking evaluations. This requires the calculation of the intrinsic value of a business as determined by its future earnings. However, history has repeatedly shown that during the good times, many analysts become over-optimistic and assume a sustainable earnings trend. In reality, the concept of intrinsic value is arbitrary at best. It is elusive and hard to determine, due to the uncertain future and the irrational market.

In addition, few analysts dare to offer views different from the herd as it is often safer to err with the masses. For an analyst to be wrong alone, it can lead to the demise of his reputation and career. Even if the trend of earnings and intrinsic value can be determined reliably, it does not sufficiently provide a safe basis for investing, especially during a bear market.

Currently, the price-to-book (P/B) ratio for the STI stands at 1.3 times and history has also shown that since 1994, whenever the P/B ratio drops from 1.5 times, its downward momentum would bring it to lower levels. This assigns a high probability that the STI could have more to fall as it just breached its 1.5 times P/B level this month.

Unfortunately, during a mature economic cycle, undervalued blue chips are uncommon and many investors end up investing without sufficient regard to price. Investors should focus on value investing as it helps investors invest better by selecting stocks based on the margin-of-safety principle. This means that one buys undervalued stocks at a price lower than their intrinsic value.

This helps to prioritise the safety of capital while dividends are viewed as of secondary importance. While dividends come in handy as a 'cushion' to effectively lower losses when stock prices fall, dividend yields are lower when blue chips are bought at higher prices. Furthermore, during an economic downturn, companies do slash their dividend payouts to preserve cash holdings. This was true during the last crisis for blue chips like SIA, NOL, SGX, CapitaLand, DBS, UOB and ComfortDelgro, as their earnings fell.

While value-investing may seem easy, human frailty often prevents successful implementation. It is hard to prevent human emotion from corrupting an investment framework. Even if the necessary fundamental analysis is used to scan for value stocks, investors may end up with a handful of stocks from boring industries which are not what he initially deemed as blue chips. More importantly, it is hard to be fearful when others are greedy, and vice versa. It is hard to think independently and go against the herd.

Nevertheless, I hope that this article has helped instil a new level of consciousness to replace unconscious speculation. When the stock market enters a bear phase, extreme fear rather than fundamentals rules the day. Even the bluest of blue-chip value picks can fall by a considerable amount. Dividends are often insufficient to cushion a market bloodbath. How much more refuge can an expensive blue chip provide? Investors who buy stocks at a high premium during a stockmarket high unwittingly end up as 'long-term investors'.

With the current global economic slowdown, coupled with the lingering US and European sovereign debt crisis, the recent market carnage could be the beginning of something worse. Buying blue chips based on dividends alone while ignoring price, potentially deteriorating fundamentals and the economic cycle can be disastrous. It's never too late to avoid unconscious speculation and to invest wisely.

STI

Straits Times

2,719.90

-45.25

-1.64%

Down -14.9% from recent peak

DOW - Rebound?

Dow

11,176.76

+322.11

+2.97%

By: JeeYeon Park

Stocks closed near session highs Tuesday, with the Dow posting its biggest gain in almost two weeks, despite a 5.8-magnitude earthquake in Virginia that shook parts of the U.S. East Coast and after investors shrugged off a handful of disappointing economic news.

The S&P 500 jumped 38.53 points, or 3.43 percent, to end at 1,162.35. The Nasdaq spiked 100.68 points, or 4.29 percent, to close at 2,446.06.


The CBOE Volatility Index, widely considered the best gauge of fear in the market, tumbled near 36.

A magnitude 5.8 earthquake struck the U.S. East Coast from Virginia to at least Boston, according to the U.S. Geological Survey. The Pentagon and U.S. Capitol Building in Washington were evacuated, as were courthouses in New York City.


"Our building shook pretty well for about a minute, but then it stopped," said Peter Tuz, president of Chase Investment Counsel, based in Charlottesville, Va. "It is very unusual for this area. Mineral, Va., the epicenter, is about 30 miles to our east."

Stocks were higher throughout the session, despite a handful of weaker-than-expected economic reports and as investors awaited a speech by Fed Chairman Bernanke later this week.


“This is a dead-cat bounce…we were in an oversold position and investors are trying to find any single positive data to create an opportunity,” said Kenny Polcari, managing director of ICAP Equities, pointing to better-than-expected economic news from Germany and China.

At the end of the week, all eyes will be on Federal Reserve chairman Ben Bernanke as he makes his widely-anticipated speech at the Fed's annual Jackson Hole, Wyoming symposium. Investors will watch for any signs of a possible round of asset purchases (also known as quantitative easing) which will likely help bolster the stock market.

Portfolio Peak-and-Trough over Market Cycles

Portfolio = Capital + Realized Gains + Unrealized P/L

Realized Gains = P/L + Stock Dividends received

(23-Aug-2011)

Not again!

STI

Straits Times

2,765.15

+33.34

+1.22%

Singapore CPI up 5.4% on-year in July

SINGAPORE: Singapore's consumer price index (CPI) rose by 5.4 per cent on-year in July, due largely to higher costs of accommodation, private road transport and food.


According to the Department of Statistics on Tuesday, the higher accommodation cost was largely contributed by higher imputed rentals of owner-occupied accommodation, while the higher transport cost was due to the sharp increase in Certificate of Entitlement (COE) premiums compared to a year ago.

Excluding accommodation costs, the CPI went up by 4.2 per cent compared to the same period last year.

On-month, the CPI was up 1.5 per cent, on higher costs of housing, transport, food and clothing.

Housing cost went up 3.2 per cent due partly to higher accommodation costs and electricity tariffs.

Transport cost saw an increase of 2.7 per cent, due to higher petrol price and car price.

Food prices crept up by 0.2 per cent on dearer prepared meals, fresh fish as well as rice and other cereals.


- CNA /ls

DOW

10,854.65

+37.00

+0.34%

YF News Market Update

4:20 pm : Buying was strong and broad this morning, but it took little time before the effort was challenged. Support at the flat line ultimately helped prevent a broad market loss, though.


Given that the stock market has fallen in each of the past four weeks for a cumulative loss of about 16%, early participants bid stocks higher with the notion that they are likely due for a bounce, especially since the tone of trade in Europe had improved so much in the region's first session of the new week. As of last week's close, the EuroStoxx 50 had fallen more than 15% during August to a new two-year low, but it bounced back to a 1% gain today.

Europe's major bourses actually gave up some of their gains, though. That drift off of session highs provided an excuse to some domestic participants to capitalize on the opening pop by U.S. markets. The S&P 500 was up about 2% at the open, but steadily surrendered all of that until it came in contact with the flat line. On a few occasions participants provided support to stocks near the neutral line, but none of that ever provided stocks with a floor for a sustainable rebound.

Keppel says Aqua to buy rest of Floatel shares at NOK19.50 each

By ANGELA TAN

Keppel Corporation Limited said on Monday that its associated company, Aqua Pellentesque Limited, will buy the Floatel International Ltd shares that it does not already own at NOK 19.50 each.

This follows Aqua's amalgamation agreement on August 21, 2011 with Floatel to form a Bermuda exempted company.

Keppel already holds a 31.7 per cent stake in Floatel through its subsidiary, Wideluck Enterprises Limited. Wideluck is also the 50 per cent shareholder of Aqua. The remaining 50 per cent of Wideluck is held by Jonathan Fairbanks.

'The amalgamation is entered into in view of the long term attractiveness of Floatel's business which generates a recurring and stable cash flow secured through term contracts with reputable customers,' the company said in a statement.

It added that the deal will allow Floatel to be privatised via an efficient and cost-effective mechanism and to put in place a more efficient capital structure for the amalgamated company after the privatisation.

Choo Chiau Beng, CEO of Keppel, said the move reflects the company's growing confidence in the long term prospects of Floatel in its ability to provide high quality floating accommodation semisubmersibles for Brazil and the North Sea.

"Through this amalgamation, we hope to increase our interest in Floatel, to enable us to play a more active role in growing the company," Mr Choo said.

The offer price was arrived at taking into account the share price of Floatel in the last six months, the control premium, Floatel’s new fleet and the potential synergies between Floatel's business with Keppel's offshore and marine business.

Floatel was established in 2006 to satisfy a market demand for a new generation of offshore floatels.

Investing Made Simple by Uncle8888 (23)

Read? Investing Made Simple by Uncle8888 (22)

Beware of Little Black Swan in your Portfolio

What does Uncle8888 fear most? Bear or Swan?

Uncle8888 fears that Little Black Swan in his portfolio most.

Some people have been asking him when he is going to add more of this stock or more of that stock. No, no, no once he has enough he is not going to add more. Uncle8888 is terribly scare of keeping a Little Black Swan in his portfolio.

Why did Uncle8888 can't keep buying more of the same stock?

Firstly, he is not so smart. Secondly, he doesn't have deep pocket. When you have deep pocket; your mind is calm and can buy whatever and whenever.

Uncle8888 always like to think of risks before profits and that has been his strategy.

When it is uncertain

When he is faced with uncertainty in the stock market; he will choose to diversify. When you diversify you are actually spreading your risks when you get it wrong. But, when you are right; your rewards/returns will be diluted too. 

When more certainty seems to return

When he senses more certainty in the stock market; he will choose to concentrate by trimming those laggards in his portfolio as not all his stocks are expected to recover at the same speed. Some will lead while others will lag.

Diversification across stock and time domain

He will diversify across stock domain by adding more new members into his portfolio and diversify across time domain with his Money Plan. Read? Money Plan

In this way, he will not fear of that Little Black Swan appearing in his portfolio.

Sanity Check on the Money Plan against STI Support Levels

Read? Money Management Plan for Big Bear 2011/12

The Money Plan

checked against STI Chart for support levels

So I will be looking closely at these support levels.

Good luck!

F&N Weekly

Wilmar Weekly

SATS Weekly

SPH Weekly

SCI Weekly

SML Weekly

Crash? You ain't seen nothing yet: analysts

$21 billion wiped off Singapore market - but observers say stocks could fall another 20-30% before hitting bottom


By VEN SREENIVASAN

THE bloodletting which wiped some $21 billion off the Singapore market yesterday could be the beginning of a selldown which could lop another 30 per cent off the value of stocks here.

That seems to be the view of some analysts and strategists following a rampage which dragged the Straits Times Index (STI) down 3.2 per cent or 91.33 points to 2,733.63 points yesterday - its lowest in 15 months.

'What we are seeing is a perfect storm - a confluence of negative factors,' said Prabodh Agrawal, CEO of Singapore-based IIFL Institutional Equities.

'Despite the selldowns we are now seeing, most blue chips and bellwethers here are still trading at just below their long- term price-book levels. During the last recession, they were trading at about two standard deviations below their long-term average. If we assume the same numbers and circumstances, stocks could fall another 20-30 per cent from current levels.'

The selldowns here and across the Asia Pacific region came on the heels of similar overnight savaging of Wall Street and European markets following more disappointing US economic data and intensifying concerns about a potential global economic recession triggered by the European sovereign debt crisis and a sharp US economic slump.

The dive across Asian bourses followed 3-5 per cent plunges in the US and Europe. And the selldown intensified as Wall Street futures remained deep in the red and Europe opened sharply lower again yesterday.

In Tokyo the Nikkei 225 gave up 2.51 per cent to 8,719.24, while Hong Kong's Hang Seng lost 3.08 per cent to 19,399.9 and Sydney's ASX200 dived 3.51 per cent to 4,101.90.

In Singapore, with yesterday's plunge, some $117 billion has been lopped off the value of Singapore equities this month alone.

And technical analysts see more downside. Kim Eng Securities' technical charts suggest a potential low at 2,350 points - a whopping 14 per cent under current levels.

'Based on the weekly chart trends, our chartist sees the STI trading within the 2,600-2,680 area in the short term, which coincides with the 50 per cent Fibonacci level,' it said in a note yesterday. 'The index could further correct downwards to the 2,350-2,420 area if this support area is broken.'

But many analysts also point out that medium-term fundamentals-wise, many stocks are turning attractive and thus providing opportunities for bottom-fishing.

Melvyn Boey, head of research and strategy for Asean, Bank of America/Merrill Lynch, added that although there's a looming crisis in the West, this region's fundamentals are intact.

'Asean, and especially Singapore, remain vulnerable to the impact of a global recession,' Mr Boey said.

'But, that said, South-east Asia's fundamentals are a lot stronger today than five or 10 years ago. Investors should look at stocks of companies with revenue growth, pricing power, cashflow and strong overall fundamentals to ride through the recession.'

Mr Boey added that while a recession seemed imminent, the down-cycles were getting shorter and tighter.

In short, the recovery could be as swift as the slide is brutal. So stick to fundamentals.

On the other hand, Mr Agrawal was more circumspect. 'The 2008/09 crisis lasted only four quarters because governments and central bankers were able to act aggressively and in concert to recapitalise distressed asset markets. Today, government balance sheets are in poor shape, thus diminishing their ability to act as aggressively,' he said.

Mr Agrawal noted that the intervention in 2008/09 had reflated the asset markets, but not the economies concerned. He now sees a potential for several rounds of continuous deleveraging dragging all asset markets - equities, commodities and property - further southwards. In Singapore, he cautions against jumping back into stocks too early.

But then, asset markets - especially equities - could get another reflation if US Federal Reserve chairman Ben Bernanke unveils a new stimulus package or 'QE3' at next Friday's Jackson Hole meeting.

Work Less and Gone Fishing Planning Room (7)

Read? Work Less and Gone Fishing Planning Room (6)

Someone said she don't quite understand what I wrote. May be it is easier to understand by illustrating it using a picture and saving me thousands of words to explain it.

I am setting up three Money Pots for my retirement. The first money pot is from CPF OA/CPF RA and it is not expected to be an investment based money pot for generating returns.

Fattening your Wallet or Fattening your Ego?

Just For Thinking .....

When investing in the stock market, do you want to flatten your Wallet more and then laughing to the bank or you are fattening your Ego much more than your wallet.

If you want to flatten your Wallet much more than your Ego; then do this -  More Investing and Less Analyzing. Check your 3M's - Method,  Mind, and Money. Place more focus on Mind and Money. Your method may be simple; but your Mind must be strong and steady. Your Money management must be sound so that you will have some money to invest in long bear market - buy slowly. While you may not buy at the actual market bottom; you may be able catch at least some near the actual market bottom with sound money management.

Check back how were you doing at the last Bear market. If in the last Bear market, you have to dip into your emergency fund in the earlier part of the Bear market to invest. It could be an indication that you may have to seriously review your Money management this time to prepare for Mr. Bear. He may or may not come.

Look closely the picture above. Who did Mr Bear caught?

Tell me if you know the answer? hee hee.

Is Bear Market coming soon? Are you really feeling painful?

So be mentally prepared for more fears, more pains or more sianz.

From past histroy, look like it may be just the beginning of more painful days ahead.

Bear market is here. Let's accumulate more by average down? (2)

Read? Bear market is here. Let's accumulate more by average down?

Let me repeat it again. If you are small retail investor like me; then must learn to know the big difference between Average In and Average Down in term of risks control and portfolio management.

Average down

How do you know you are averaging down and not averaging in?

You must ask yourself these two question:

(1) Did you plan for this level of capital into your beloved stock? e.g. 20 or 30% of your capital

(2) Did you bought more of it due to its falling stock price since it has become cheaper, more attractive and more under-valued?

If your answer is (1); then you are Averaging In.

If your answer is (2); then you are Averaging Down.

When you are averaging down, you are actually taking more risks than initially expected. You are thinking of profits ahead of risks. As small retail investors, most of us may have limited incoming stream of new capital so it is better for us to think of risks first before profits. This sort of thinking will help us to survive in the stock market to fight another day.

Next time, when you seek advice or see your favourite bloggers, chatters, gurus or sifus in cboxes or stock forums who are buying more of the same beloved stock as you.

Don't be fooled by that buying action of your sifu.

Your sifu may be Averaging In; but you may be Averaging Down. Your sifu may be taking reasonable risk due to his portfolio size; but you may be taking too much risks and has ignored the importance of portfolio management for survival in a prolong bear market where there are many more other gems to be found. Diversification is a key survival for not so smart in the stock market.  If you are the smart ones in the stock market then people should be following you. Right?

BTW, one young man whom I know failed to appreciate it when I replied to his email; but has to learn this lesson through a more painful way.

"Think of Risks before Profits" - Createwealth8888

DOW

Dow

10,817.65

-172.93

-1.57%

NEW YORK (AP) -- A growing belief that the U.S. economy may be headed toward recession gave the stock market its fourth straight week of losses.

The anxiety in the market was obvious Friday as the major indexes went from moderate gains early in the day to another sharp loss. The Dow Jones industrial average had its 10th move of more than 100 points in 15 trading days this month.

"We just don't know whether we're going to have a recession," said John Burke, head of Burke Financial Strategies.

There was little news to help investors determine their next moves. However, JPMorgan Chase & Co. joined other financial firms and cut its forecast for economic growth during the fourth quarter. It's now predicting growth at annual rate of just 1 percent, down from an earlier forecast of 2.5 percent. That added to the recession fears.

Investors disliked the news late Thursday that Hewlett-Packard Co. is planning to exit most of its consumer businesses, including PCs. HP fell 20 percent to a six-year low. HP plans to transform itself into a company that caters to corporations.

After the market rose early, some investors sold in case bad news comes out of Europe over the weekend. European investors were also cautious -- banking stocks fell near two-and-a-half-year lows, dragged down by rumors about banks' potential losses on bonds issued by heavily indebted governments.

"These things usually break out over the weekend and then you have a mad dash Monday to react to them," said Mike McGervey, the head of McGervey Wealth Management.

The drop late in the day recalled the 2008 financial crisis. Then, many investors stepped up their selling in the afternoon out of fears about news that might break overnight -- or on weekends. Lehman Brothers failed on Sunday, Sept. 15. The government took over mortgage companies Fannie Mae and Freddie Mac the previous weekend.

The Dow lost 172.93, or 1.6 percent, and closed at 10,817.65. It was down 4 percent for the week. Since July 21 -- four weeks and one day -- the Dow is down 15 percent.

The Standard & Poor's 500 stock index fell 17.12, or 1.5 percent, to 1,123.53. It was down 4.7 percent for the week. All 10 industry groups that make up the index fell.

The Nasdaq composite fell 38.59, or 1.6 percent, to 2,341.84. It was down 6.6 percent for the week.

Although stocks fell, investors did not continue pushing the price of Treasurys, as they have the last three weeks. The yield on the benchmark 10-year Treasury note was almost unchanged at 2.07 percent, compared with late Thursday's 2.06 percent. It had been up to 2.11 percent earlier in the day. The yield fell below 2 percent Thursday for the first time as heavy demand sent its price sharply higher.

Investors began the week confident after last week's volatility, the worst the market has had since the 2008 financial crisis. The Dow rose nearly 215 points on Monday when Google, Time Warner Cable and Cargill were among companies announcing multi-billion deals. The market remained relatively calm the next two days. But on Thursday, a stream of bad economic news in the U.S. combined with worries about Europe's debt problems and sent the Dow plunging 419 points.

Since July 21, the market has gone from one crisis to another, and the weakening U.S. economy has been at the heart of the selling. In late July, the concern was the debt debate going on in Washington. In early August, it was the downgrade of the U.S. debt rating by Standard & Poor's. Since then, worries about the impact of the downgrade have faded, and growing evidence that the economy is slowing has driven stocks down.

Signs of a slower economy around the world have only made investors more pessimistic about the U.S. Earlier this week, Germany said its economy grew just 0.1 percent in the second quarter. And Germany is the strongest economy in Europe.

Stocks fell Thursday on news of another drop in home sales, weaker manufacturing in the mid-Atlantic states and an increase in the number of people who applied for unemployment benefits.

The stock market tends to reflect the expectations that investors have for the economy and company earnings six to nine months in the future. So traders are interpreting the numbers they're seeing as part of a slide in the economy that will continue for some time.

A recession is generally thought of as two consecutive quarters in which the economy contracts, as measured by a country's gross domestic product. With expectations of growth in the U.S. already low, investors worry that the economy can't withstand another unexpected event like the earthquake in Japan or the string of bad weather that ravaged the South earlier this year.

JPMorgan analyst Michael Feroli said business confidence, household wealth and global growth all look worse than just a few weeks ago. He expects economic growth to be nearly flat into the first quarter of 2012.

Next week is likely to bring more volatility. On Friday, the government will give its second estimate of how the economy did during the second quarter. It said a month ago that the GDP grew at an annual rate of just 1.3 percent during the quarter. Economists expect the government to announce a lower reading: 1.1 percent. The GDP report July 29 contributed to the market's heavy losses. So did the government's revised estimate for the first quarter: 0.4 percent.

Next Friday also brings the Federal Reserve's annual retreat at Jackson Hole, Wyo. It was a year ago at Jackson Hole that Fed Chairman Ben Bernanke hinted that the central bank would begin buying $600 billion in Treasury securities to stimulate the economy. The buying ended June 30. Now investors want to know if the Fed will act again.

But some analysts think that the U.S. economy will continue to grow on its own, although slowly.

"The market is thinking that we're going into a recession, but the data is telling you that we're not," said Jonathan Golub, chief U.S. market strategist for UBS. He pointed to an increase Thursday in an index of economic leading indicators that suggested the economy is expanding slowly.

STI since 1990

STI is going to support the greatest support soon.

STI: Correction is not. Heading towards Bear.Market!

Straits Ti...

2,733.98

-90.98

-3.22%

Down -14.4% from its recent peak,

120 days

A look at the Dow's worst drops since 1899 - updated

Read? A look at the Dow's worst drops since 1899 - updated

Createwealth8888: If you think it is like 2008 again, then a few more big drops will be expected.

1. Aug. 04, 2011: 513 points, or 4.3 percent
2. Aug 08, 2011: 635 points, or 5.6 percent
3. Aug 18, 2011: 420 points, or 3.7 percent

1. Sept. 29, 2008: 778 points, or 7 percent
2. Oct. 9, 2008: 679 points, or 7.3 percent
3. Oct. 15, 2008: 733 points, or 7.9 percent
4. Dec. 1, 2008: 680 points, or 7.7 percent

Here we go again: Another big down day for Dow

Dow

10,990.58

-419.63

-3.68%

NEW YORK (AP) -- Just when Wall Street seemed to have settled down, a barrage of bad economic reports collided with fresh worries about European banks Thursday and triggered a global sell-off in stocks.

The Dow Jones industrial average fell 419 points -- a return to the wild swings that gripped the stock market last week.

Stocks were only part of a dramatic day across the financial markets. The price of oil fell more than $5, gold set another record, the government's 10-year Treasury note hit its lowest yield, and the average mortgage rate fell to its lowest in at least 40 years.

The selling began in Asia, where Japanese exports fell for a fifth straight month, and continued in Europe, where bank stocks were hammered because of worries about debt problems there, which have proved hard to contain.

On Wall Street, the losses wiped out much of the roughly 700 points that the Dow had gained over five days. Some investors who bought in the middle of last week decided to sell after they were confronted with a raft of bad news about the economy:

-- More people joined the unemployment line last week than at any time in the past month. The number of people filing claims for unemployment benefits rose to 408,000, or 9,000 more than the week before.

-- Inflation at the consumer level in July was the highest since March. More expensive gas, food, clothes and other necessities are squeezing household budgets at a time when most people aren't getting raises.

-- Sales of previously occupied homes fell in July for the third time in four months -- more trouble for a housing market that can't seem to turn itself around. This year is on pace to be the worst since 1997 for home sales.

-- Manufacturing has sharply weakened in the mid-Atlantic states, according to a report from the Federal Reserve. Manufacturing has been one of the strongest parts of the economy since the recession ended in 2009, but its growth has slowed this year.

The manufacturing news was especially bleak on an already bad day, said Dan Greenhaus, chief global strategist at brokerage BTIG. He called the Fed report "an atrocious set of numbers."

"That really set the market on its head," he said.

Wall Street and other financial markets have wrestled for several weeks with fears that a new recession might be in the offing. Morgan Stanley economists said in a report Thursday that the U.S. and Europe are "dangerously close to recession."

"It won't take much in the form of additional shocks to tip the balance," they wrote.

Worries about European debt also hang over the market. A default by any country would hurt the European banks that hold its bonds, plus American banks that have lent to their European counterparts.

Renewing the fears, The Wall Street Journal reported Thursday that U.S. regulators are looking at the U.S. arms of big European banks to make sure they have enough money for day-to-day operations.

"I don't want to pretend that the market knows what it's thinking about too much," said David Kelly, chief market strategist at JPMorgan Funds. "We live in an environment of sell now and ask questions later."

Asian markets started Thursday's drop. Japan's Nikkei 225 index fell 1.3 percent. The main stock indexes in South Korea and India each dropped a little more, then Europe more than that -- 4.5 percent in Britain and 5.8 percent in Germany.

In the United States, the Dow fell 419.63 points, or 3.7 percent, to 10,990.58. The Standard & Poor's 500 index fell 53.24, or 4.5 percent, to 1,140.65. The Nasdaq composite fell 131.05, or 5.2 percent, to 2,380.43.

The Dow is down 13.6 percent since stocks began falling July 21 -- four weeks that have rattled Americans watching their retirement savings and other investment accounts shrivel.

Lee Applegate, a retired sales executive from Cincinnati, watched the latest market plunge uneasily but said he was planning to stay the course with his investments. He and his wife have several retirement accounts.

He remembers the mistake he made in pulling his money out of stocks in early 2009, just before the market started its two-year surge. Since March 9 of that year, the S&P 500 is up 68.6 percent.

"I think things are going to get worse before they get better," Applegate said. "But I'm still going to ride it out."

The selling Thursday was immediate. The Dow plunged from the opening bell and was down 528 points about a half-hour into trading. It essentially moved sideways for the next six hours.

New York Stock Exchange volume was 6.2 billion shares -- busy for a summer day, but not as busy as during the worst of the selling earlier this month, when volume sometimes hit 9 billion.

Last week was one of the wildest in Wall Street history. The Dow moved more than 400 points on four straight days for the first time. But stocks had been relatively stable this week because investors were calmed by strong earnings reports.

The Dow fell 76 points Tuesday and rose four points Wednesday -- the first time in nearly three weeks that the average rose or fell by less than 100 points on two straight days.

That ended Thursday. And with stocks down big, money flooded into U.S. Treasurys and gold, both considered safer investments.

The yield on the 10-year Treasury note briefly fell below 2 percent for the first time. It hit 1.98 percent before rising to 2.07 percent. Investors are willing to accept a lower return on their money in exchange for safety.

The price of gold reached yet another high -- $1,829.70 per ounce. Gold keeps setting records bcause some investors are looking for stability and others are simply looking to cash in.

The price of oil fell $5.20 to $82.38 per barrel after the economic reports raised concern among traders that demand for gasoline would fall. One survey this week found Americans have already cut back on gas 21 weeks in a row.

And the average rate on a 30-year fixed mortgage fell to its lowest on record. The rate on the most popular mortgage hit 4.15 percent -- just below the 4.17 percent reached last November. The last time long-term rates were lower was in the 1950s, when 30-year loans weren't widely available.

Nicole Sherrod, a managing director at broker T.D. Ameritrade, said the market volatility has led more clients to put automatic protections in place to sell a stock or an investment fund once it falls below a certain value.

"Our clients are saying that this is not a buy and hold market," she said. "This is a buy and protect market."

In addition, computer systems that are programmed to analyze charts, capitalize on tiny changes in price and execute trades with no human intervention are making the market rougher.

High-frequency trading programs make up about half of the trading volume in a normal market day but 70 percent or more on a volatile one.

Stock Volatility to Leave Lasting Scars

By Laura Keeley

Last week’s record volatility in U.S. stocks ended after four days. The anxiety it instilled among mutual-fund investors may linger for years.


Investors pulled a net $23.5 billion from U.S. equity funds in the week ended Aug. 10, the most since October 2008, when markets were reeling from the collapse a month earlier of Lehman Brothers Holdings Inc., the Investment Company Institute said yesterday. The period tracked by the Washington-based trade group included three of the unprecedented four consecutive days in which the Standard & Poor’s 500 Index rose or fell by at least 4 percent.

The roller-coaster ride was unnerving for fund investors who have already endured the bursting of the Internet bubble in 2000, a 57 percent collapse in the S&P 500 Index (SPX) from October 2007 to March 2009 and the one-day plunge in May 2010 that briefly erased $862 billion in value from U.S. shares. The debacles, combined with falling home prices, unemployment above 9 percent and a lack of trust in government to bring down spending, may sour individual investors on domestic stock funds for an additional three to five years, according to Andrew Goldberg, a market strategist at JPMorgan Funds in New York.

“You can’t keep having bombs, so to speak, go off,” Goldberg said in a telephone interview. “If the second you walk outside another one goes off, you’re going to stay inside for longer, and that’s what’s going on.”

History Not Repeating

The $12.2 trillion mutual-fund industry has historically been able to count on investors to come back to stocks after a significant selloff. They did so following “Black Monday” in October 1987, the Asian currency crisis in 1997 and Russia’s debt default in 1998. In the year after the 2000-2002 bear market, U.S. equity funds attracted $130 billion, ICI data show.

Funds that buy domestic stocks lost $98 billion in 33 straight weeks of withdrawals last year after the 20-minute plunge in May, ICI data show. They’ve had redemptions of $74 billion this year. The latest withdrawal streak began in 2007 and didn’t end even as stock surged from their March 2009 lows.

“What we have seen this time is a much slower return to risk-taking,” said Francis Kinniry, principal at Vanguard Group Inc. in Valley Forge, Pennsylvania, the largest U.S. mutual-fund manager. He attributes the difference to falling home prices. In bear markets prior to 2008, residential property values were rising.

“There was significantly more wealth destruction this time around,” Kinniry said.

Index Funds, Bonds

Investors have compensated by shifting some of their money into passively managed index funds and exchange-traded funds that track stock benchmarks, forsaking managers who select the investments they buy and sell.

U.S. stock index funds have posted net deposits every year since 2001, according to Morningstar Inc., a Chicago-based research firm. Investors have similarly poured $851.5 billion into ETFs for all asset classes from 2001 to July 2011. Unlike mutual funds, ETF trade throughout the day like stocks.

Bond funds also have been winners, adding $75 billion in deposits this year, while funds that buy non-U.S. stocks took in $15 billion, according to ICI.

“Over the past couple of years and especially the past couple of weeks, I have heard a large number of clients and acquaintances express fear and dislike for the stock market,” Eitan Tashman, a financial planner in Beverly Hills, California, said in a phone interview. While “many investors are scared of the volatility and seeming instability of the stock market and would even like remove their money from the stock market,” there are few alternatives, he said.

Baby Boomers

The post-World War II generation known as the baby boomers is the largest group of investors in mutual funds, said Geoff Bobroff, an investment-management consultant in East Greenwich, Rhode Island. As they go into retirement, they might not return to equities after two bear markets and the volatility this year, he said.

“They are already thinking now about their retirement years,” Bobroff said. “They may be in fixed-income of different flavors, but equities may no longer be on their horizon.”

The recent volatility makes Mark Beller, 42, a physician in Northridge, California, want to put more of his money into real estate.

“The market is so volatile, 1,400 points in a week? Give me a break,” Beller said in a phone interview. “I have money to invest, and my portfolio is down about 15 to 20 percent, so I’m going to wait for it to come back to where I feel comfortable.”

Cash is King

Younger investors aren’t replacing their retiring counterparts. Cash holdings are at the highest levels since the record in March 2009, according to an Aug. 16 survey by Bank of America Merrill Lynch. Investors from 18 to 30 years old have the highest cash position of any age group at 30 percent of their portfolio, MFS Investment Management said in an Aug. 8 report. Almost three in five investors cite fear about volatility or needing money someday as a reason they hold high or increasing levels of cash.

“Investors are in cash for a reason and, regardless of time horizon, conventional investing wisdom no longer applies,” William Finnegan, senior managing director of retail marketing at the Boston-based firm, said in the report. “The Great Recession of 2008 has had a profound and longer-lasting impact on investors’ confidence than expected.”

The average investor tends to hold large amounts of cash when the markets are at a low and thus miss out on gains, JPMorgan’s Goldberg said. The previous high of cash as a percentage of portfolios was in October 2002, right before the start of a five-year bull market.

Institutions Hold Tight

“Households had become so conservative that they were sitting on all this cash that should’ve been seeking out opportunity,” he said. “To the extent that emotions drive decisions, they’re going to get it wrong.”

Brad Durham, managing director of research at EPFR Global in Cambridge, Massachusetts, said retail investors are exiting funds while institutions are modestly adding to their holdings. Retail investors pulled $26 billion from U.S. equity funds from May 1 to Aug. 10, while institutions added $689 million, he said.

“Institutions are using this period to change their exposures around and they’re not selling as aggressively, while retail investors have just been fleeing,” Durham said.

The return of the S&P 500 during the past 10 years has been about 3 percent including dividends. Investors have experienced “a far greater degree of volatility than one would expect for such meager returns,” Greggory Warren, a Morningstar analyst, wrote in a June 29 research note.

Toll on Managers

“The problem is you don’t really know what to do,” said James Dean, 67, a salesman for an information-services company who lives in Panama City, Florida. “There’s no rhyme or reason for the market to be doing what it’s doing other then the mess our government has gotten us into.”

The investor exodus is taking a toll on publicly traded fund companies. The S&P index of money managers and custody banks has fallen 15 percent since the May 2010 plunge, compared with the 5.8 percent increase by the S&P 500, a benchmark for the largest U.S. companies.

Janus Capital Group Inc. (JNS), which is off 47 percent, led the drop. About 89 percent of the Denver-based company’s assets under management is in stock funds. It has had eight straight quarters of net withdrawals totaling $21.6 billion.

Closely held American Funds and Fidelity Investments are among the big asset managers bearing the brunt of investor defections from U.S. stock funds, according to Morningstar. American, owned by Los Angeles-based Capital Group Cos., had an estimated $43 billion in redemptions this year through July, while Boston-based Fidelity lost $8.8 billion, Morningstar data show.

Best Positioned

Diversified managers such as Invesco Ltd. (IVZ), BlackRock Inc. (BLK) and Franklin Resources Inc. (BEN) are the firms best prepared to capitalize on the environment, Morningstar’s Warren said. Invesco, based in Atlanta, bought Morgan Stanley’s Van Kampen mutual funds last year, giving it a broader domestic base. San Mateo, California-based Franklin has 89 percent of its assets outside of domestic equities. The Templeton Global Bond Fund attracted $10.9 billion through June, the most of any U.S. mutual fund.

BlackRock of New York, the world’s largest asset manager with $3.66 trillion assets under management, owns iShares, the biggest provider of ETFs.

Vanguard, which has about half its mutual-fund assets in index funds, saw net deposits of $30 billion this year through July, according to Morningstar. At Pacific Investment Management Co., the Newport Beach, California-based manager of the world’s biggest bond fund, investors put in $25 billion this year.

Not all investors are panicking or leaving the market.

‘Pleasantly Surprised’

“Generally, they’re holding tight, and I’ve been pleasantly surprised,” Kevin O’Reilly, a financial adviser based in Phoenix, said in a telephone interview. “I haven’t gotten, really, nearly as many calls panicking as I thought I would have.”

Investors may be getting used to the volatility, which isn’t necessarily a good thing, said Lee Ann Knight, a financial adviser in Bedford, Massachusetts.

“They may be immune to worrying about it when they should be,” she said. “What surprised me is that I have had a few phone calls from people wanting to use this opportunity to invest. That’s great, that’s good, but I feel like I had these conversations for 10 years, and people were like, ‘No way, no way.” ‘