Tuesday, December 22, 2009

MAS Plans To Raise Right Issue ????????

NATIONAL carrier Malaysian Airline System Bhd (MAS) plans to raise at least RM2.67 billion from a rights issue to part finance new aircraft, its chief executive said on Tuesday. MAS, controlled by state investment firm Khazanah Nasional, has placed an order for 15 A330s with Airbus, Chief Executive Officer Azmil Zahruddin told a news conference.

Airlines globally have struggled in the past year as the economic crisis sapped demand for travel and trade, and as passengers turn to discount carriers to cut costs.

“We believe this is the best time to order aircraft. The aircraft will come in time when the economy picks up,” Azmil said.

The aircraft, to be delivered from 2011 to 2016, will serve the growing markets of South Asia, China, North Asia, Australia and Middle East, he said.

The MoU signed between MAS and Airbus in Kuala Lumpur on Tuesday has given the Malaysian airline the option to purchase another 10 A330s. The total cost of the 25 aircraft is $5 billion at list prices, said a MAS statement.

Apart from the one-for-one rights offering, Azmil said the airline also plans to raise new debt to fund the purchase, which is aimed at replacing older aircraft. On a separate issue, Azmil said MAS will take over aircraft order of six undelivered A380s from state-owned Penerbangan Malaysia, for RM1.54 billion.

MAS is expected to post a net loss of RM1.2 billion in 2009, according to the estimates of 10 analysts tracked by Thomson Reuters. Prior to the new purchase orders, MAS has firm orders for 35 B737-800 planes, with an option for another 20 B737s, costing a total of $4.2 billion.

Malaysia Airlines shares were halted from trade on Tuesday pending the announcement. The stock closed at RM3.05 on Monday.


Monday, November 16, 2009

Gold's Blood Relatives

1. "The banks are going to close! Street violence is coming!".

2. Remember those headlines going into Dow 6500? I do. I bought the Dow into those headlines. Of course, I kept up my insurance actions, removing money regularly from the financial system on a weekly basis. Nobody knew what would happen. Would the Dow make a bottom or go into an abyss with the thundering explosion of a thousand trillion dollars of OTC derivatives blowing to smithereens?

The decision was made to use fraud accounting to bury it all and attempt to print money to technically re-price assets, while actually devaluing them. That is a key concept to understand going forward as this crisis accelerates. Raising price of an item and raising the value of it are not necessarily the same thing at all times.

3. We are at a new Dow 6500 crossroads. An even bigger crossroads. This time, it is for the US Dollar. As the world's largest market, major action there brings the greatest debate and the most powerful players. While the global fear level is nowhere near as big as it was at dow6500, the dollars on the line are vastly larger.

4. Will the mighty US dollar stage a rally? Or will it melt down, possibly triggering a global paper currency crisis? Look at the indicators like MACD rolling over. This looks like the chart of an item that is preparing to crash, not rally.

5. The analysts are calling for a huge dollar rally and a stk mkt collapse are generally quite demoralized. The fundster technicians incorrectly identified the rising technical pattern in the Dow as an actual wedge, as opposed to the wedging action that is all it was.

I highlighted this repeatedly in my videos. Few listened. I kept seeing the same wedge drawn over and over. A costly error for those who bet large money on calling the Dow top with this "wedge". I would venture that the banksters kids have a joke about the fundsters with a Dow "wedgie". My bank trader friend told me his prime broker contacts told him a literal sea of fundsters were short the Dow on huge leverage at the recent Dow lows, sure they had the top. He pulled his own short positions. Dow top call number 10 zillion bites the dust.

6. The dollar could rally here. Jim Rogers says he's bought the dollar. My question to those selling commodities here to buy the dollar is alongside Jim "Mighty Man" Rogers is: Do you really think Jim Rogers is net long the dollar? Do you think he's bought more dollars than the commodities he holds as a core position?

The man opened up his bag of peanuts and he's chomping on a few US dollar peanuts. That is all that he is doing. Period. Many in the gold and fund community are already trying to eat the bag, shells and all, in a gorging on the dollar. Many of these players missed the move in gold from 905 or shorted it, and they are compounding one blown trade with another even worse set of tactics, to desperately "make back" their losses.

7. Play the dollar as an insurance trade or a simple counter trend play. Note the key word here is: Play. Not "sell all my gold at the market, it's going down!"

8. The possibility of a strong US dollar rally is very high, yes, but the odds of a dollar collapse followed by a global paper currency crisis, are even higher.

9. Remember when gold moved towards the $1000 marker, towards the neckline of the massive head and shoulders continuation pattern on the gold weekly chart? I said, "There is a 51% chance we go higher. I am long with an ultimate target of $6000 and no amount of possible gold weakness will cause me to take any action on the sell side with my gold positions".

10. When I look at the gold monthly chart, I see a stronger technical situation now than ever! Regardless of any minor trend rally (minor trends last 1-3 weeks in time), my view is the odds of a US dollar collapse are 55%. The odds of a major rally are 45%.

11. This is a time where put options on gold could be a good idea for those who are terrified of a dollar rally. You have solid profits in gold and related items, but the "will gold rise or tank" game being played out there is too much for you mentally. You could "insure" a portion of your gold portfolio for a small cost. If gold goes higher, your further gains should far outweigh the loss on the put options.

12. I personally will not be buying any put options. In fact, I'd rather buy call options here than put options if I was forced to choose one or the other. I will be buying more gold if it declines. All the way to zero in a pyramid formation. The buys growing larger as it declines.

13. There is no "gold top" and I don't care about gold 1100. It's a round number marker and I sold into it with bits of my trading position. End of story. Here's the chart. While the daily chart calls for booking modest profits, the monthly chart is on massive buy signals. Look the TRIX configuration. That is an enormous buy signal. Gold's major technical indicators are triggering buy signals, not sells.

While head and shoulders continuation pattern price targets are generally unreliable, this is one of the greatest examples of this pattern of all time. Targets of 1200-1400 are not unreasonable, just for the move from the head and shoulders. This pattern to me looks like price could soar far beyond that target. What happens now is not so important as insuring that you are in the gold rocket when it parks at moon $1400, on the way to mars $3000.

14. If a substantial decline of size were to commence in gold, well, I would suggest we are nowhere near that point yet. But if it did occur, you have to buy, not sell. We have the banksters, the fundsters, and now the Gold Topsters. My message to the topsters is this: Stop picking your gold nose. Or you will arrive at gold moon 1400 with bits of gold, if any.

15. My suggestion to those looking for real world tactics to manage your emotions and money on the gold rocket right now if you are feeling overwhelmed by both bull and bear pulls, is to focus on what I term "Gold's Blood Relatives".

16. I spoke about corn at length over the week-end. I don't view corn as better than oil or wheat, but I like to talk about one thing at a time so investors understand it, rather than just blabbing, 'oh yeah, corn is the big one, go go go!"

But you tell me, what makes more sense, a madman play to load up on dollars when there is a 55% chance of a global paper currency crisis, or to buy items like corn, one of the world's lowest risk investments, with a near-infinitely smaller chance of going off the board than the dollar? To repeat, I don't favour corn over any other gold-related item. Notice the Bloomberg headline that came out yesterday, right after my write ups. That Bloomberg story shows a stunning picture of what is going on in the Chinese corn market.

17. About 55% of all farms in China are about 3 acres in size. Or less. The six dollar a bushel marker is the corn market line in the sand. If Chinese farmers get less than $6 a bushel, the revenues needed to survive on a farm that is less than 3 acres in size just don't exist at less than 6 dollars a bushel. Chinese farming is not about profit margins. It's about revenues. The Gman is subsidizing the farmers, because the farmers are pouring out of the farms and into the cities.

18. Jim Rogers himself has stated while he doesn't think it will happen, he is clear that the risk is very real: water shortages could lay an unimaginable beating on the industrial revolution in China. No water equals: Starvation. The world bank notes the following about China:

o With 20% of the world's population but only 7% of global water resources, China meets with a severe challenge.

o More than half of China's 660 cities suffer from water shortages, affecting 160 million people.

o The per capita water volume in China is one fourth of the world average.

o 90% of cities' groundwater and 75% of rivers and lakes are polluted.

o As a result of widespread water pollution, 700 million people drink contaminated water every day.

19. Some cyclical forecasters believe an actual "dust bowl" type of event could occur in the 2011-2012 period. My suggestion is: If you are feeling like you can't go on in the gold market at this point in time, rather than trying to be king of the dollar bugs, simply shave off a FEW gold profits, and grab a nice piece of corn on the price weakness cob. Take a bite out of that, not US dollars, to kill your thoughts of gold suicide.

20. If gold goes to $3000, where will the dollar be? Focus on Gold's blood family, not gold's enemies. I would suggest you also consider the "cost of farming floor" with agricultural items like corn. It's not impenetrable by any means, but there is a price point below which the farmer throws in the towel. The odds of price going below there and staying there are small, never mind the odds of it going to a real price of zero.

The deflationists haven't factored starvation into their pipedream. There is much more Deflation of value coming to the world's economy, but there will be Inflation of Price. Earth to price deflationists on Mars: There can't be any deflation of price because we'll all starve to death. The global farming industry will collapse and we'll all die. The gold relatives advice applies to gold price chasers as well. Some have the thought, "I'm missing out, I just gotta buy, gold will be at 1200 and I'll have too little!"

If gold soars higher, do you think items like oil, food, and other hardcore commodities are going to tank? Not likely. But you can buy them without the adrenaline gusher that is present in the gold market right now. "I don't buy anything that just went to an all-time high" -Jim Rogers. Maybe you are smarter than he is. I doubt it. There are many items, like food and energy that are trading at low prices.

21. My most important point today is this: Many gold stocks haven't joined bullion yet. Those that have risen have done so modestly in most cases. Do not dump them to chase the bullion rocket. That borders on insanity. Gold stocks should be bought aggressively into any and all weakness. If you think you are missing out on bullion now, magnify that by 100, and you'll have the picture of how twisted your emotions will be when the gold stocks join the party and you sold out to chase a $100 move in bullion.

22. The Dow is beginning to hyperinflate, as major institutional players sense a US dollar meltdown is very near at hand. Rising bullion prices coupled with a soaring Dow put you, the gold stock owner, in what I term "The Ultimate Driver's Seat". There is no better place to be invested right here, right now. My suggestion is you scan the gold stocks horizon and buy what you can that is weak.

Don't walk to those stocks. Run. Notice I said "hurry". Not: "back up the truck". You don't need much fuel in a toy rocket to shoot it 500 feet in the air. That is the gold stocks market. But do not waste time. Time is of the essence. The gold juniors rocket is on the launchpad in a situation in time that I would term as about like where gold bullion was at $960 as it moved towards the triangle breakout.

23. The pros are moving onto the gold stocks rocket and preparing for liftoff, while the gold topsters are jumping out of the rocket onto the US dollar cement below. The banksters are transporting their broken bodies to the US dollar oven and preparing for final roasting. Do I have a few longside US dollar peanuts in my bag like Jim Rogers does? Sure I do. I've bought the dollar into this weakness.

With the peanut capital it deserves. So far, while I've banged about 10 or 15 USD pucks into the net on strength out of the hole from the recent low, overall it tastes like bits of USD shell mixed with USD peanuts. Those who sell gold stock in major size here and buy the dollar in size, are going to find they have a mouth full, not of shells, but of poison. It will be a mouthful far worse than the poisoning they got shorting the Dow into 6500. Gold's blood relatives versus USD paper bills in the oven. Not such a tough choice. Is it?

Stewart Thomson November 12, 2009

Saturday, October 31, 2009

US Stocks Close Sharply Lower; DJIA Ends Month Flat

NEW YORK (MarketWatch) -- U.S. stocks tumbled Friday, with Bank of America, JPMorgan Chase and Alcoa leading the Dow Jones Industrial Average's components lower as investors again grew concerned about the economy after the short-lived excitement over Thursday's good report on gross domestic product.

The Dow Friday posted its biggest one-day point drop since April 20, and ended October just 0.45 point above where it began. Other major measures, including the Standard & Poor's 500 and the Nasdaq Composite, ended the month in the red, marking their first monthly declines since February.

The Dow closed down 249.85 points, or 2.51%, at 9712.73, marking its 10th triple-digit movement this month. Five of them were down and five up, reflecting how volatile the market has gotten as investors try to get a handle on whether the 48% surge in the Dow since March can be justified by economic fundamentals. For the week, the Dow fell 259.45 points, or 2.6%, marking its second consecutive week in the red.

Among the Dow's big movers Friday, Bank of America tumbled 1.15, or 7.3%, to 14.58, while JPMorgan slid 2.58, or 5.8%, to 41.77, and Alcoa dropped 58 cents, or 4.5%, to 12.42.

Across other measures, the Nasdaq Composite fell 52.44, or 2.50%, to 2045.11. It was down 5.08% for the week, and 3.65% for the month.

The Standard & Poor's 500 dropped 29.93, or 2.81%, to 1036.18. For the week, it dropped 4.02%; it was down 1.98% for the month.

Friday's declines come as the latest measure of consumer spending came in weak, reflecting the biggest drop since December 2008, although it was in line with economists' expectations.

Still, investors are growing hungry for economic data to start showing improvement and strength, rather than simply being above or in line with expectations. In addition, they are starting to wonder how much of the economic growth that was reported Thursday would have been there if it weren't for all the government support through such programs as the "cash for clunkers" funding for automobile purchases.

Nonetheless, some market participants said Friday's decline was typical of a market in recovery, and therefore no major cause for concern.

"It's not unprecedented after having such a strong rally," said Mary Ann Bartels, head of U.S. technical and market analysis at Bank of America Merrill Lynch. "Markets need to consolidate in order to achieve new recovery highs, and a correction will broaden out the base-building process we've been in since last year," giving stocks more support for a move higher, she said.

Life insurers fell in an exaggeration of the declines across the market, as the sector is exposed to equities through its variable-annuity guarantees and other equity-linked retirement-income products. MetLife was among the decliners, slumping 2.81, or 7.6%, to 34.03, after it swung to a third-quarter loss on $1.4 billion in investment losses. The life insurer's stock had climbed 7.8% Wednesday ahead of the report.

McAfee declined 1.87, or 4.3%, to 41.88, after the security-software company said its third-quarter profit fell 25% as higher costs led to lower margins.

Stereo maker Harman International Industries was a bright spot, surging 4.61, or 14%, to 37.61, after the company reported fiscal first-quarter sales above Street expectations. The company said its markets are stabilizing and it is gaining market share.

Estee Lauder also rose, climbing 1.36, or 3.3%, to 42.50, after its fiscal first-quarter profit more than doubled as the beauty-products company posted higher earnings across all of its businesses. Goldman Sachs raised its investment rating on the stock to neutral from conviction sell.

ITT fell 3.66, or 6.7%, to 50.70, after the defense and industrial conglomerate reported a 73% drop in third-quarter profit, stemming from a $131 million charge for asbestos-liability claims.

Cummins was down 2.86, or 6.2%, to 43.06, after the engine maker reported its third-quarter earnings fell 59% from last year's record results as it struggles in the face of weak North American and European trucking and construction markets.

Beckman Coulter fell 2.73, or 4.1%, to 64.33. The maker of biomedical instrument systems and test equipment posted a 94% plunge in third-quarter earnings as restructuring and acquisition costs masked higher sales and margins.

Universal Health Services' latest quarterly earnings beat analysts' expectations, but its shares fell 5.07, or 8.4%, to 55.65, as investors focused on the hospital operator's growing bad debt, which climbed more than analysts had been expecting. The news weighed on Tenet Healthcare, which fell 37 cents, or 6.7%, to 5.12.

Thursday, October 15, 2009

With Dow Near 10,000, Stocks Might Get Stuck

Some strategists say sell-off might be in the cards.

NEW YORK (MarketWatch) -- With the Dow Jones Industrial Average fast approaching the 10,000 mark, more than a year after plummeting through it near the height of the financial crisis, market strategists believe passing the magic level convincingly might prove a sticky affair.

The blue-chip average holds a special place for the public. Reaching that level might therefore help soothe some of the trauma experienced when investors saw the Dow industrials sink more than 500 points on Oct. 7, 2008 -- the last day it traded above the 10,000 level.

"10,000 is such a big number," said Darin Newsom, senior analyst at Telvent DTN. "Reaching it the first time was a big deal and falling through it was a big deal."

But cheery media headlines and sighs of relief that 401ks have regained some ground might not be enough for the market, at least in the near term.

"For the market right now, it brings up the question of whether we're running out of gas," Newsom said. "Are we sizing up for a possible sell-off? These are some of the ramifications as we test this level."

Newsom thinks the Dow might be making a "last gasp" run at 10,000 for this year, as the market tends to reach highs in October. And reaching the number will raise questions as to what justifies further gains after the Dow's more-than-50% rally from its 2009 lows reached in March.

Overhead supply

"Being back closer to where we were before the disaster might signal it's time to get more cautious," said Marc Pado, market strategist at Cantor Fitzgerald.

A number of analysts, including Pado, believe the market is likely to run into so-called overhead supply below and above Dow 10,000. Overhead supply consists of a pool of willing sellers who had bought the market just before it went down and are keen to break even.

"The higher we go from here, the more supply we have," the analyst said.

The market has already shown signs of hesitations whenever the Dow has traded above 9,900. On Tuesday, the Dow industrials fell back 14.74 points, or 0.2%, to 9,871.06. The S&P 500 Index dropped 3 points, or 0.3%, at 1,073.18, while the Nasdaq Composite Index rose 0.75 points to 2,139.89.

Should the Dow break through 10,000 and hold above the mark against selling efforts, the level could then become support. Cantor's Pado still thinks the Dow will reach his price target of 10,500 before the end of the year. But not before a 7-10% sell-off in the market in the near term.

"We can continue to push higher but if companies reporting earnings only meet expectations, people will be disappointed and the 10,000 level will be the perfect excuse [for a sell-off]," he said.

Psychological factor

Retail investors have remained largely cautious since the March rally and Dow 10,000 might eventually do some work at restoring a certain level of confidence in the market, said Donald Selkin, chief market strategist at National Securities.

"Whenever it's a round number like that it's psychological," Selkin said. "A decisive break above that level, which would then be acting as a support on the downside, would in turn help investor psychology."

Selkin, however, also thinks that the market will first sell off upon reaching the level.

"We've been rallying into earnings and have had a relentless run to higher levels," he said. "We're very overbought."

Friday, October 9, 2009

Gold Taps Fresh Record Above $1,060

NEW YORK (MarketWatch) -- Gold futures climbed above $1,060 an ounce Thursday, marking a fresh record high for the third session in a row, as investment demand continued to rise and as the dollar weakened once more.

The gains appear likely to push the winning streak for the precious metal to five. Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by physical gold, rose for a fourth straight session, reaching the highest level in three months.

Fostering the gains in gold, the dollar gave ground in currency trading, under renewed pressure as the European Central Bank and the Bank of England made no changes in their respective interest-rate policies.

Gold for October delivery rose as high as $1,060.40 an ounce, the loftiest level ever for a front-month contract. It was last up $16.30, or 1.6%, to stand at $1,059.60 on the Comex division of the New York Mercantile Exchange.

Gold for December delivery, the most actively traded contract, was up $14.40, or 1.4%, at $1,058.80 an ounce, modestly off its intraday high of $1,062.70.

"New records each day, as higher volume, higher moving averages, higher open interest and huge ETF demand from investors continue," said George Gero, a precious-metals trader for RBC Capital Markets. "ECB and BOE left rates at lows, cheap rates make it easy to hold gold for investors as they prepare for possible future inflation."

SPDR Gold Trust holdings reached 1,109.31 metric tons on Wednesday, up 8.8 metric tons from a day earlier. That's the highest level since July 13. "The fact that the gold price broke through the old high of March 2008 is obviously attracting financial investors to the gold market," said analysts at Commerzbank in a note.

If demand for gold ETFs continues to rise, "a further gold-price increase has to be expected, especially as short-term oriented market participants are likely to be jumping on the bandwagon."

'Top heavy' in the short term?

Some analysts questioned whether the rally in gold could continue, however. Christopher Ecclestone, mining strategist at Global Hunter Securities, said gold's strength was "like a feather being pushed up by the lightest of breezes. There is no substance to the rise."

Indeed, gold's performance in the euro, the British pound and other currencies has been lackluster compared to its rise in U.S. dollars, a trend suggesting that investors are more interested in bullion as a hedge against the greenback than global inflation. "The short-term outlook is again beginning to look top-heavy with gold vulnerable to a correction should the dollar recover," said James Moore, analyst at TheBullionDesk.com.

In foreign-exchange trading, the dollar index moved down 0.4% to 76.191, leaving the benchmark just slightly higher than the one-year low hit about two weeks ago. A weaker dollar typically pushes up dollar-denominated commodities prices. The European Central Bank, which sets monetary policy for the 16 nations that use the euro, left its key lending rate unchanged at a record low of 1%. The Bank of England did likewise, its key lending rate unchanged at a record-low 0.5%.

For now, "gold prices continue to trend higher, driven by the same factors as in previous days -- a weaker [U.S. dollar] and still-low bond yields," analysts at Credit Suisse wrote in a note to clients issued Thursday.

Also in metals trading, December silver futures rose 17 cents, or 1%, to $17.67 an ounce. October platinum gained $8.80, or 0.7%, to $1,329.30 an ounce, and December palladium rose $4.95, or 1.6%, to $319 an ounce. December copper added 8.85 cents to $2.868 a pound, a 3.2% advance.

Friday, October 2, 2009

Is October Correction Inevitable For The Dow Jones ?

In order to predict the future, one must consider the past and research similar market cycles to come up with a probable forecast for the future. After studying comparable periods to the one we are experiencing today, investors will realize that an October correction is not likely.

Consider the following:

We have not yet recovered fully from 2008. The market rebound after the crash of 1987 did not see a correction of 10% until 1990, which is more than two years later. Moreover, that correction was after "only" a 35% drop from top to bottom. At present, we are only six months removed from a 55% drop in the market.

October may be a negative month, but it's usually more in the range of 3% to 5%. The Octobers of 2008 and 1987 were the two biggest October sell-offs of the last 30 years, but each was preceded by a negative September. This year, September was positive.

During past October sell-offs, the month didn't represent the first wave of the attack. May and June often paved the way. October then stepped up to wipe out the survivors who believed the worst was over. Again, we did not see major selloffs in May or in June. In fact, this past June marked the fourth consecutive month of gains.

If we do sink lower in October, the catalyst can easily be the lack of top-line growth in earnings reports. However, if top-line growth is present, it can be another factor driving the market up in October.

To play devil's advocate, I must point out that six months after the market bottomed in 1987, the market was 21% higher. After the 2002 bottom, it was 24% higher. Today, we are 58% higher than we were in March. This is a significant jump.

To prepare investments for October, consider diversifying with a prudent amount of truly non-correlated asset classes like Treasury Inflation-Protected Securities (TIPS), commodities such as precious metals, managed futures and inverse funds.

If you have already pulled significant assets out of the market and are sitting on the sidelines, get back in but not all at once. Dollar-cost-average back into a diversified portfolio in order to avoid buying in on the worst day of the year, and consider tactical asset allocation programs for a small percentage of your portfolio.

On the fixed income side, TIPS is a good way to get some income and inflation protection. The Fidelity Floating Rate Bond Fund still looks attractive. Blackrock Global Allocation is a wonderful fund with multiple asset classes.

For equities, Tom Soviero and some of the rest of the folks over at Fidelity Leveraged Company Stock Fund, are some of the best in the business, as is the team running the Kinetics Paradigm Fund.

In conclusion, it is inevitable that a correction will occur in the market at some point, but research shows that an October correction is unlikely. A 3% to 5% pullback is conceivable for October, but do not prepare investments for a major selloff. You will regret it.

Sunday, September 20, 2009

Selamat Hari Raya - Salam Aidilfitri.

May this year celebrating will be the Best Of All.

Wednesday, September 16, 2009

Gold Futures Advance on Inflation-Hedge Demand; Silver Gains

Sept. 15 (Bloomberg) -- Gold rose, closing above $1,000 an ounce for the third straight session, as commodities climbed on demand for a hedge against inflation. Silver also gained.

Federal Reserve Chairman Ben S. Bernanke said the worst U.S. recession since the 1930s has probably ended, while warning that growth may not be strong enough to reduce unemployment quickly. The Fed has kept its benchmark lending rate as low as zero since December. It authorized $1.45 trillion in purchases of mortgage-backed securities and other housing debt this year.

“The market believes that the Fed is not going to be able to withdraw the funds fast enough and that would cause inflation,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. “I don’t believe that for a minute, but this is what the market believes.”

Gold futures for December delivery gained $5.20, or 0.5 percent, to $1,006.30 an ounce on the Comex division of the New York Mercantile Exchange. On Sept. 11, the metal reached a record closing price of $1,006.40.

The price for immediate delivery gained $6.63, or 0.7 percent, to $1,006.93 at 2:54 p.m. New York time. Eighteen of 19 raw materials in the Reuters/Jefferies CRB Index rose today, led by a record surge in corn.

“The debate on gold’s price prospects remains alive and well among both fundamentals-followers and technicians poring over charts,” Jon Nadler, a Kitco Inc. senior analyst in Montreal, said in a note.

The dollar fell against a basket of six major currencies, extending a slide to the lowest in 11 months. Gold futures have rallied 28 percent since the demise of Lehman Brothers Holdings Inc. a year ago as investors bought precious metals to protect their wealth amid the first global recession since World War II.

Possible ‘Reversal’

“Charts indicate that if the $1,050 level is not attained during the current ‘break-out’ or if a double or triple top is confirmed under that same level, then gold could signal a reversal such as the ones that occur on average about every six years,” Nadler said.

Futures reached an 18-month high of $1,013.70 on Sept. 11. Gold may climb to as high as $1,100 in the next six months, researcher GFMS Ltd. said yesterday.

Sales at U.S. retailers in August surged 2.7 percent, the most in three years, from July, government data showed today.

“Gold is continuing to knock on the $1,000 door without making a concerted effort either way to test resistance or support,” GoldCore Ltd., a brokerage in Dublin, said in a note. “Gold needs to push above $1,012 in the short term and $1,020 in the longer term for the upward momentum to be regained.”

Net Longs

Hedge-fund managers and other large speculators increased their bets on rising New York gold futures to a record in the week ended Sept. 8, the U.S. Commodity Futures Trading Commission said last week. Net-long positions jumped 22 percent to a 224,676 contracts, the biggest increase this year.

Silver futures for December delivery in New York rose 37.7 cents, or 2.3 percent, to $17 an ounce. The price has gained 51 percent this year.

Platinum futures for October delivery was little changed at $1,320.30 an ounce on the Nymex. Palladium futures for December delivery gained 0.2 percent to $296.25 an ounce.

Tuesday, September 1, 2009

Stocks Bull Market Signals September Opportunity for the Bears

Dear Reader

The Stocks bull market continued to forge ahead with the Dow closing at 9544, after hitting a high of 9630 during the week, which is a stones throw from the target of 9,750, having advanced 3,280 points and more than 50% in less than 6 months, now it will be interesting to see how the market behaves as it enters the target zone for the termination of this phase of the bull run of between 9750 to 10,000, as my analysis of 5 weeks ago (updated this week) called for a more significant correction to follow than that which transpired during June to July, perhaps just about the time when many of the public bears throw in the towel and the not so smart money starts to pile in as greed replaces fear?

The perma bears having missed the whole bull market as each minor dip was THE end of the mistakenly labeled "bear market rally" for the rules are clear, pick up any reputable technical analysis book and you will read that a bull market is confirmed when an stock indices rallies by 20%, similarly a bear market is confirmed when an indices falls by 20% from a high, therefore regardless of the perma views of this being a bear market rally, whilst under the basis of technical analysis this rally has long since been confirmed as a bull market more than 30% ago! So much for the claims of following the basic tenants of Dow theory!

The stock market's powerful advance of 50%+ may soon give an opportunity for the perma bears to crow loudly as the market heads into the seasonally weakest period of the year i.e. Sept to October, especially as an technically overbought rally is well primed to achieve the anticipated 'significant' correction, perhaps even a crashette, where readers need to remember that the bull market would still remain intact as long as the Dow does not fall by more than 20% from the peak.

Rules exist for a reason, and that is to arrive at a FIRM TRADEABLE CONCLUSION, rather the deluded fixation that is indicative of a perma attitude that are perpetually fixated to one side regardless of the actual price action i.e. the whole rally has been supported by the crash is coming mantra for the past 6 months! A totally useless repetitive statement when it comes to the monetizing of analysis. There is no point in catching a say 15% drop if one fought against the 50% rally, as the net position is still for a 35% LOSS!

The target for the rally from 6470 has been for a move to 9750 to 10,000, at this point in time I continue to favour a price slightly north of 10,000 which would be enough to sucker early bears into losing positions, and as I voiced in this weeks update, the market's strong advance now points to an earlier peak.

Meanwhile the US Dollar continued to play out a double bottom pattern which is potentially bearish for gold, which in itself has traded in a tightening range that is likely to resolve soon, which again perma gold bugs hope will be to the upside though as my dollar analysis suggests it is more probably likely to be to the down side. I will cover Gold's probable trend in an in depth analysis next week as the existing analysis / forecast of January 2009 has expired.

On the topic of stock market plunges, Robert Prechter's latest 10 page Elliott Wave Theorist Newsletter, within which he states that the financial crisis is NOT over and gives a warning he's never had to include in 30 years of analysis.

Its Free, so grab it while you can !

Your stock index trading analyst.

By Nadeem Walayat

Tuesday, August 25, 2009

China To Maintain Stimulus As Economy Faces Fresh Woes.

BEIJING: China's top economic official cautioned that the country faces possible new problems and said Beijing will continue its stimulus policies because a recovery still lacks a solid foundation, according to comments reported yesterday.

Premier Wen Jiabao warned against being "blindly optimistic" despite improvements in economic growth, according to a report on the Cabinet's website.

"Economic operation still faces many new difficulties and problems," Wen was quoted as saying during a visit to southeastern China that ended yesterday.

He cautioned that the effects of some government measures might fade while others would take time to show results, the statement said. It gave no other details of potential problems.

Wen said Beijing will stick to policies meant to boost domestic demand, maintain easy credit and promote efficiency, the statement said. The government is in the midst of a two-year, 4 trillion yuan (100 yuan = RM52) stimulus that is meant to insulate China from the global downturn by boosting domestic consumption.

A drop in new yuan bank loans in July to 356 billion yuan, compared with an average of over 1.2 trillion yuan in each of the first six months of the year, has created worries among some analysts that the recent rebound in growth could be knocked off track.

Wen's comments echoed his repeated recent warnings against complacency and assurances that Beijing's stimulus spending and easy credit would continue. But they clashed with increasing optimism among financial analysts who say China is emerging from its economic slump.

China's economic growth accelerated in the latest quarter amid Beijing's huge stimulus spending but authorities have called for continued vigilance. They say weak corporate profits and other areas show a recovery is not fully established.

"The foundation of the economic recovery is not stable, not firm and not balanced, and we certainly cannot be blindly optimistic," Wen said during his visit to Zhejiang province south of Shanghai, according to the statement. - AP, Reuter

Monday, August 17, 2009

Market Outlook - Kaladher Govindan. FBM KLCI Ripe For Correction

Lower liner steel and construction-related stocks Sino Huaan, Kinsteel, Perwaja, MRCB, Ranhill and UEM Land remain top technical picks to out-perform the broader market.

RESURGENT rotational buying of lower liners and better-than-expected economic data from US, Europe and Asia managed to lift the local stock market and the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) for a fifth straight week of gains to track a 13-month high.

Plantation stocks led the way as investors increased their bet that commodities will see a revival in demand with the eurozone registering better-than-expected gross domestic product growth in the second quarter and China's resilient retail sales expansion of 15.2 per cent in July.

For the week, the FBM KLCI rose 3.69 points, or 0.3 per cent, to end at 1,188.57. Gains in IOI Corp (+3.42 points for the FBM KLCI), Sime Darby (+2.39), and KLK (+2.38) were offset by losses in Maybank (-4.23) and Genting Bhd (-1.47). Average daily traded volume and value recovered to 1.07 billion shares worth RM1.58 billion respectively, compared with 961.3 million shares and RM1.54 billion in the previous week.

Global market trends played a crucial role again in the FBM KLCI's movement last week. After reacting positively to the US market's performance on Monday, the FBM KLCI went into a sharper correction on Wednesday when worries about earnings surfaced after China warned about a slow recovery in its exports. Although the 23 per cent contraction in China's exports for July met consensus expectation, it was higher than June's contraction of 21.4 per cent,thus the worry that domestic expansion may not rise fast enough to absorb the impact of slower recovery in exports.

News of better-than-expected economic growth in Germany and France helped to breathe fresh life into the markets on Thursday that helped US equities to recoup early losses as an unexpected dip in the advance retail sales figure rekindled worries about the US economy. The Malaysian market reacted in tandem and rose close to the expected 1,200 resistance on Friday but closed lower ahead of the weekend.

From a fundamental viewpoint, trading at 16.4x CY10 PER, the FBM KLCI is more expensive than the benchmark indices of Singapore (14.8x), Indonesia (13x), Thailand (10.5x), South Korea (10.5x) and Hong Kong (15.1x), which explains in part the less vibrant foreign activities and more dominant participation of locals. Thus, the fact that the FBM KLCI has outperformed only the Nikkei and has underperformed the rest of the region in terms of year-to-date gain should not necessarily translate into an attraction unless earnings improve.

Until then, we should see more visible signs of a two-tier market where other big- and medium-cap plays playing catch-up with stocks listed in the benchmark index. While a minor setback in the benchmark index is expected this week, there are still buying opportunities.

It is heartening to see that big-cap plays like Commerce, AMMB and Air Asia reported better-than-expected earnings in the ongoing second-quarter 2009 results season. While Commerce is a "sell" as the share price has already fully factored in the earnings surprise, AMMB (Buy, Target Price: RM5.00) and Air Asia (Buy, RM2.20) are undervalued and worth buying.

AMMB not only has registered healthy loan growth and gained market share in deposits, it also has shown a steady improvement in containing costs after its solid partnership with ANZ Bank.

Despite a gloomy outlook for the airline industry caused by the spread of the influenza A H1N1virus, Air Asia has shown a strong load factor of 72 per cent as it steals customers from full-service airlines with its attractive promotions. Valuation wise, it is trading at a single digit FY10 PER of 4.6x only and appears attractive compared to rivals like Virgin Blue, Ryan Air and EasyJet.

Talking about A H1N1, expect this to be the single largest risk factor in the immediate term. The disruptions it causes to business will be great as the number multiplies and the private sector seems oblivious to the fact. Traders and pharmacies are seizing the opportunity to rake huge profits as face masks are in short supply. Some are even selling a piece for RM7 in Klang Valley claiming it to be of superior quality. The government has to ensure adequate supply of such items and take stern action against suppliers who hoard them. Corporations can view it as part of their Corporate Social Responsibility to supply free face masks to their employees.

Technical outlook

Shares on Bursa Malaysia managed to extend mild gains on Monday, helped by the less severe US jobless rate and a surge in Hong Kong stocks to an 11-month high. On the next day, as blue chips extended their profit-taking consolidation, cheap lower liners staged a strong comeback on resurgent rotational buying interest, highlighted by sharp rallies in lower liner rubber glove makers given the deteriorating health situation due to the H1N1 virus.

On Wednesday, stocks suffered a profit-taking correction triggered by sharp falls in the region led by Hong Kong and Shanghai after the mainland's ministry of commerce said efforts to boost domestic demand could not offset a huge export slump. The FBM KLCI subsequently fell to intra-week low of 1,178.51

However, stocks rebounded the next day in line with regional equities after the US central bank kept interest rates at record lows and said the recession is easing. The profit-taking consolidation extended ahead of the weekend, but the KLCI managed to rise to a 13-month high of 1,196.46 before settling last Friday at 1,188.57.

The daily slow stochastics indicator for the KLCI has dipped to the neutral region following last week's sell signal at the overbought region (Chart 1), but the weekly indicator continued to claw higher into the overbought zone. The 14-day and 14-week Relative Strength Index (RSI) momentum indicators remained in overbought territory with a reading of 74.58 and 76.63 respectively.

Meantime, the daily Moving Average Convergence Divergence (MACD) trend indicator is in bearish mode following last Monday's sell signal, but the weekly MACD indicator continued its upward expansion. The 14-day Directional Movement Index (DMI) trend indicator is still in bullish trending mode, with a higher reading on the ADX line of 56.54 as of last Friday.


The lower-than-expected US consumer confidence data and sharp fall in commodity prices last Friday due to concern the steep five-month recovery since March has lifted share prices to become overpriced should spark profit-taking correction in the region early this week. Nonetheless, expect the profit-taking correction to be shallow given that most investors would have sold on rally the previous few weeks, and are looking to buy back upon a more significant correction. Core blue chips are expected to consolidate while buying interest shifts towards lower liners on active rotational plays.

On blue chips, investors should buy on dip defensive gaming stocks Genting Bhd and Genting Malaysia given that the H1N1 virus scare has pressured share prices down to more bargain levels. Lower liner steel and construction-related stocks Sino Huaan, Kinsteel, Perwaja, MRCB, Ranhill and UEM Land remain top technical picks to out-perform the broader market. Also buy on dip Kencana and Wah Seong, while buy DNP, Hovid, Leader and RCE Capital on any profit-taking dips.

As for the KLCI, immediate support upon correction is set at 1,180, with 1,171, then 1,164 and 1,156 acting as stronger support platforms. On the upside, the significant upside hurdle will be at the 1,200 psychological level, which requires a bullish breakout to aid further upside towards 1,220, and then 1,248, which represents the 61.8 per cent FR of the fall from 1,525 all-time high to 801 pivot low, acting as a major resistance.

Tuesday, August 4, 2009

Malaysian Stocks Overvalued: OSK

Malaysian stocks, trading near a one-year high, face the risk of an “Edwardian Summer” that may end with a “crash” as shares are overvalued amid shrinking earnings, according to OSK Research Sdn Bhd.

“As with any Edwardian Summer, the longer it lasts, the more out of touch it gets with its fundamentals, and the greater the crash at the end,” OSK said in a report today. “The market is definitely overvalued.”

Investors should sell “into strength” and buy selected shares such as property developer Malaysian Resources Corp and Top Glove Corp, the world’s largest rubber glove maker, OSK said. It removed Public Bank Bhd from its top five picks.

Top Glove, the world’s biggest rubber-glove maker, gained 4.8 per cent to RM7.23 at midday, set for the largest increase since July 7.

The benchmark FTSE Bursa Malaysia KLCI Index rose 9.3 per cent last month, the steepest increase since April. The measure has risen 34 per cent this year, as the government’ stimulus plans and a RM10 billion fund set up to invest in publicly traded companies helped buoy the market.

Prime Minister Datuk Seri Najib Tun Razak, who took office on April 3, has announced stimulus plans valued at RM67 billion to revive economic growth.

OSK likened the market’s outlook to the “Edwardian Summer” in the UK during the reign of King Edward VII from 1901 to 1910. The Edwardian era was regarded as a romantic golden age of long summer afternoons, garden parties and big hats immediately prior to the First World War.

The stock index is trading above 17 times 2009 earnings, higher than the average of 15 times since 2000, OSK said. Companies in the index were trading at 15.5 times in 2006 and 2007 when earnings growth was averaging 30 per cent growth, it said.

With earnings set to shrink in 2009 and grow at only 12 per cent in 2010, the current price to earnings multiple is “excessive,” it said. -- Bloomberg

Thursday, July 30, 2009

Genting's Sentosa Casino Gears For Opening

Genting Bhd's new casino resort in Singapore will start receiving guests in two-thirds of the facilities by early next year, including Southeast Asia's first Universal Studio theme park and the casino.It is aiming for 60 per cent overseas visitors, most of whom will come from Malaysia.

Other key target markets are China, India, Indonesia and Thailand. An estimated 12 million to 13 million visitors are expected to arrive in the first year at the resort on Sentosa Island, a stone's throw from the harbourfront Vivocity shopping mall. "By early 2010, a good 60-70 per cent will be opened.

We are talking about the Universal Studio, four hotels, part of Festive Walk, which is a dining and shopping area, and the casino," Robin Goh, assistant communications director of Resorts World at Sentosa Pte Ltd, told Business Times in an interview in Kuala Lumpur yesterday. "We would love to (open by Chinese New Year), but we don't have the date yet," he said.

The rest of the project, including the Oceanarium and two more hotels, will be ready in the following months. The company is ramping up publicity and marketing efforts to prepare for ticket sales which will start towards the year-end. As a prelude to the opening, a charity concert will be staged within the resort in December, Goh said.

Both the integrated resorts in Singapore are expected to open in the first three months of next year. Analysts are speculating that Resorts World, which started construction later, may be the first to open after Marina Bay Sands encountered some delays. Marina Bay Sands will probably open in either January or February, its executive director of sales Paul Stocker told Business Times separately.

Analysts believe that the two resorts will strive to start operations before Chinese New Year, which falls on Valentine's Day next year, to capture the peak period for the casino. Goh said that Resorts World had yet to decide the ticket price for the theme park or the hotel room rates, but was "mindful" of its pricing strategy to attract the crucial Malaysian crowd. It will probably bundle hotel stays with entrance fees, apart from the day ticket, two-day pass and annual pass.

"What is important is that Malaysian families must be able to see value for money in our theme park. "The proposition is that this will be the nearest Universal Studio among the four parks in the world, and it is a world-class facility and not a watered-down version. "There will be 24 rides in Singapore's Universal Studio compared with around 21 for the other destinations in Osaka, Japan, and Orlando and Los Angeles in the US.

Eighteen of the rides are built exclusively for the park in Singapore, Goh said. Among the highlights, a new Transformers ride will debut in Singapore, replacing the popular Spiderman three-dimension thrill ride which is already in all the three existing parks.

Article from Business Times.com

Monday, July 27, 2009

Market Stays Above Key Support Level.

SHARE prices on Bursa Malaysia rebounded in tandem with the sharp rebounds on the Wall Street and regional stock markets over the last five trading days. The FTSE Bursa Malaysia Composite Index (FBM KLCI) continued to stay above its critical support of 1,100 when it closed at 1,155.88 points yesterday.

The FBM KLCI opened on a weak note before resuming its prior technical rebounds on Monday. The FBM KLCI closed at 1,139.25 points, posting a day-on-day gain of 18.35 points, or 1.64 per cent. Share prices on Bursa Malaysia paused for a brief consolidation on Tuesday. The FBM KLCI closed at 1,184.70 points, giving a day-on-day loss of 4.55 points, or 0.40 per cent.

Overall market sentiment improved significantly on Wednesday. The FBM KLCI rebounded to higher to its intra-day high of 1,160.61 before closing at 1,148.70 points, posting a day-on-day gain of 14.00 points, or 1.23 per cent. The FBM KLCI gyrated around its overnight level for the major part of the trading session on Thursday. The FBM KLCI closed marginally higher at 1,152.15 points, giving a day-on-day gain of 3.45 points, or 0.30 per cent.

Once again, the FBM KLCI moved sideways in consolidating its recent gains yesterday. It fluctuated around its overnight level for the major part of the trading session. It managed to close marginally higher at 1,155.88 points, giving a day-on-day gain of 3.73 points, or 0.32 per cent. On the foreign front, The Dow Jones Industrial Average (DJIA) rebounded in earnest on some economic recovery news over the last four trading days. The DJIA closed higher at 9,069.29 points on Thursday, recording a four-day gain of 325.35 points, or 3.72 per cent.

The tech stock heavy Nasdaq Composite Index staged a successful re-penetration of its overhead resistance of 1,900. It closed at 1,973.60 points on Thursday, posting a four-day gain of 86.99 points, or 4.61 per cent. The Tokyo stock market staged a strong follow-through technical rebound over the last five trading days. The Nikkei 225 Index closed at 9,944.55 points yesterday, posting a week-on-week gain of 549.23 points, or 5.85 per cent. The Hong Kong stock market climbed back above its critical support of 19,000. The Hang Seng Index closed at 19,982.79 points, recording a week-on-week gain of 1,177.13 points, or 6.26 per cent.

The FBM KLCI rebounded to close higher at 1,155.88 points yesterday, posting a week-on-week gain of 34.98 points, or 3.12 per cent. The FTSE Bursa Malaysia Second Board Index gained 168.42 points, or 3.48 per cent to 5,010.79 level while the FTSE Bursa Malaysia Mesdaq Index added 20.31 points, or 0.50 per cent, to 4,097.99 level.

Following are the readings of some of its technical indicators:

  1. *Moving Averages: The FBM KLCI continued to stay above its 10-, 20-, 30-, 50-, 100- and 200-day moving averages.
  2. * Momentum Index: Its short-term momentum index stayed above the support of its neutral reference line.
  3. * On Balance Volume: Its short-term OBV trend stayed above the support of its 10-day exponential moving averages.
  4. * Relative Strength Index: Its 14-day RSI stood at the 80.32 per cent level yesterday.

The FBM KLCI continued to rally to its intra-week high of 1,160.61 on Wednesday, moving into the confines of this column's envisaged resistance zone (1,124 to 1,163 levels). The FBM KLCI's weekly chart moved to the underside of its immediate overhead resistance (See FBM KLCI's weekly chart - A5:A6) yesterday.

It continued to stay above its resistance-turned-support trendline (A3:A4). Chartwise, the FBM KLCI's daily trend rebounded closer to its overhead resistance (See FBM KLCI's daily chart - B1:B2) yesterday. It continued to stay below its intermediate-term uptrend (B7:B8). The FBM KLCI's daily, weekly and monthly fast MACDs (moving average convergence divergence) stayed above their respective slow MACDs yesterday.

This augurs well for its near-term perspectives. The FBM KLCI's 14-day RSI stayed at 80.32 per cent level yesterday. Its 14-week and 14-month RSI stayed at 73.84 and 56.52 per cent levels respectively. Last week, this column commented that the FBM KLCI was poised to stage a re-challenge of the Fibonacci-based 50 per cent retracement objective at 1,163 level.

This column was spot on as the FBM KLCI hit its intra-week high of 1,160.61 on Wednesday. There were intermittent profit-taking liquidations over the last four trading days. The FBM KLCI is likely to pause for a short and brief consolidation before resuming its prior technical rebounds. Next week, the FBM KLCI's envisaged resistance zone hovers at the 1,159 to 1,193 levels while its immediate downside support is at the 1,116 to 1,150 levels.

Article from Business Times Malaysia

Monday, July 20, 2009

Citibank's Problems Are Far from Over

While there are a lot of numbers reported in Citibank's (C) recent quarterly earnings there is ONE critical comparison that is missing -- that is the sequential analysis of the credit losses (Q1 vs. Q2). I believe this is critical information not just for Citibank but for all financials.

First, here are the links to the Q1 report and Q2 report.

Getting to the point on credit losses:

April 17th report: Credit costs of $10.3 billion, up 76%, consisted of $7.3 billion in net credit losses, a $2.7 billion net loan loss reserve build, and $332 million of policyholder benefits and claims. The total allowance for loans, leases and unfunded lending commitments was $32.7 billion.

July 17th report: Credit costs of $12.4 billion, up 81%, consisted of $8.4 billion in net credit losses, and $3.9 billion loan loss reserve build. The total allowance for loans, leases and unfunded lending commitments was $37.0 billion, up from $21.9 billion in the prior year period.

As seen from these numbers, from Q1 to Q2 -- credit costs are STILL RISING. Losses were up by $1.1B and loan loss reserve is also higher by $1.2B. Unfortunately, from these reports, we do not get details of early delinquencies vs. late delinquencies; so a greater analysis of month to month trend is not possible based on these reports (companies like E*Trade Financial provide such details).

But given that on a quarterly basis numbers are still getting worse is an indication that problems at Citibank are FAR from being over. Indeed, increasing unemployment and recent indications that early stage delinquencies may be on the rise. For example, foreclosureradar.com's California report for June 2009, showed the HIGHEST number of notice of default on record ever.
Notice of default is the "first" step towards foreclosure and is the early stage indicator of things to come. June 2009 being worse than the entire last year and this year is indeed quite scary and banks like Citi, Wells Fargo (WFC), Bank Of America (BAC), JPMorgan Chase (JPM) etc. are more likely to be impacted by this than some of the other banks. And this is only mid-summer. Seasonally, things get worse in real-estate late-summer and fall.

While I wish to remain optimistic, and have net long position on financials (through XLF) - it is hard to remain optimistic in light of these numbers. I have tried to hedge my long position in financials with some FAZ.

Wednesday, July 15, 2009

The Great Baby-Boomers Economic Depression of 2007-2017

Prof Rodrigue Tremblay writes: "Banking Establishments Are More Dangerous Than Standing Armies." Thomas Jefferson (1743-1826), 3rd US President

"... a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall." Harvard Economic Society (HES), November 10, 1929

"While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us." President Herbert Hoover, May 1, 1930

"Under a paper money system, a determined government can always generate higher spending and hence positive inflation." Fed Chairman Ben Bernanke, in 2002

Many observers think that “prosperity is around the corner” and that this recession, like others since World War II, will end as soon as the stock market, as a leading indicator, recovers and people start spending again. This is a myopic view of the current economic big picture.

In fact, since the peak of the housing bubble (in the U.S.) in 2005, the onslaught of the subprime financial crisis in August 2007 and the beginning of the recession in December 2007, the U. S. economy, and to a certain extent, the world economy, have entered a period of protracted adjustments. For sure, there will be some quarters of positive economic growth ahead and the recession may be declared officially over in the coming months, but the radical economic reorganization that is taking place will go on for years to come.

Why is this so?

Essentially, because we are at the very end of the 60-year inflation-disinflation-deflation Kondratieff cycle that began in 1949 when war-frozen prices were liberalized; and that powerful long cycle is ending now. The post 1980s era, i.e. the Reagan era, is over, but the excesses and bubbles of the last few decades have to be corrected, at a time when large population shifts are about to take place. Such adjustments will take years to unfold and this will entail a lot of efforts and a lot of changes.

Indeed, the era of excessive spending and of excessive debt is over. The era of excessive government economic disengagement and of financial deregulation is over. The era of irresponsible Ponzi-scheme finance is over. The era of unregulated derivatives is over. The era of greed as an ideology is over. The era of wild and predatory capitalism is over. The era of cheap oil, of cheap transportation, of cheap commodities and of cheap food is over. The era of excessive concentration of wealth and income is also over. However, the age of political corruption, of incompetent politicians and of destructive wars of aggression is not over. What has arrived is the age of hyperstagflation.

The central driving force behind most of these developments, besides the collapse of the financial sector, the debt pyramid and the derivative products structure, and irresponsible talk of larger wars by loose cannon politicians (as if there were not enough problems!) is going to be demographic.

Indeed, we have entered a period during which the largest demographic cohort in the history of mankind, the post Word War II baby-boomer generation, has passed its spending peak. This is not something that can be reversed overnight. This is going to be a decade-long process of adjustment, of less spending, of more saving, and above all, of paying off excessive debt loads. Let's keep in mind that consumer spending represents 70 percent of GDP.

The economic consequences are going to be profound and will affect all sectors of the economy. We only have to consider how the automobile industry, once a major engine of economic growth, is presently going through a fundamental reorganization and downsizing. Even computer-based industries have matured and cannot anymore be considered fast growing industries.

The only growth sectors left in the U.S. seem to be the health services industry, as the population is aging, and the war-related industries, as the U.S. military-industrial complex keeps on expanding. But even those sectors will have to slow down; lest they bankrupt the entire economy.

That's why I think these industrial and demographic trends herald a period of slower economic growth that could last many years. Governments better wake up to the challenges that such a slow growth environment entails. Very few people are prepared for such a prolonged period of economic stagnation that will be accompanied by forced debt liquidation, in a deflationary environment.

This is particularly true of private pension plans that will have trouble paying pensions to recipients in the coming years. This is also true for employment that will expand at a slower pace than the working population, at least for a while, resulting in a rise in the level of unemployment.

Baby-boomers are those individuals who were born between 1946 and 1966. Because of its sheer size (more than 70 million people in the U.S.), this generation has been dominant in all spheres of life for the last fifty years. But now, it has passed its spending peak. This occurred in 2005-06, at the very top of the housing bubble.

The average age of the baby-boomer demographic cohort was then 50, which is the age of top spending. At that time, the U.S. personal savings rate fell to a whopping minus 2.5 percent per year. As a comparison, it was 12.5 percent during the 1981-82 recession and it has now rebounded a phenomenal 5.7 percent in April 2009, and it's climbing fast.

Indeed, the end of the housing bubble, the financial crisis, and the economic recession altogether have sent a clear signal to Baby Boomers. You'd better begin saving soon, or your retirement will have to be postponed. And saving means consuming and spending less, while paying up debts, in order to boost net current personal assets to a level that could sustain retirement needs. But if the largest cohort of consumers cuts down on its spending and borrowing, what does it mean for aggregate spending and economic growth?

It can only mean slower overall economic growth and some painful economic adjustments. Therefore, there is a high probability that this recession will be a super one that may linger on for years, being interrupted by short-run upside bursts, but soon being followed by a return of stagnant conditions. In Japan, in the nineteen-nineties, a similar financially and demographically induced recession lingered on for an entire decade. And even after twenty years, it cannot be said that Japan is out of the woods yet.

In the short run, in order to counteract the effects of the financial crisis and to fight the current recession that began officially in December 2007 (according to the National Bureau of Economic Research- NBER), the Obama administration has devised a three-quarter billion dollar stimulus plan and has let the fiscal deficit explode to more than two trillion dollars a year because of its bail-out of the troubled banks.

Similarly, the Fed has lowered short-term rates to zero and has purchased billions of dollars in long-term Treasury securities, in government agency securities, and even in mortgage-backed securities, in a desperate effort to save large financial institutions such as AIG, Fannie and Freddie, and other American financial institutions from imploding.

But now bond investors, especially international investors, are selling Treasury bonds and are pushing long-term interest rates up and the U.S. dollar down as inflation fears increase, even though paradoxically the collapse of the pyramid of debts creates a deflationary environment for the entire economy.

The danger here is that bond investors will be selling Treasury bonds faster than the Fed can buy them. In which case, there will be a downward spiral in bond prices as inflation and solvency fears are exacerbated. In a word, if the Fed does not tone down its current policy of excessive monetizing of public and private debts and its obvious 'benign neglect' policy toward the dollar, high inflation and possibly even hyperinflation become a possibility down the road. This has happened elsewhere in the past and there is no reason why it could not happen again, especially if the U.S. keeps getting involved in costly wars abroad, paying those adventures with money it does not have.

For now, a quick resurgence of inflation is only a remote possibility. This is nevertheless a possibility, considering that central banks have a tendency to overdo the printing of fiat money. In fact, if governements attempt to print their way out of the coming structural demographic problem, they will end up generating an hyperstagflation.

In a nutshell, this is what the huge international dollar-denominated bond market sees and fears, at a time when it has to absorb a huge supply of new bond issues. In reality, the bond market will always win against any central bank, any time. The solvency woes and the likely default of the state of California on its outstanding debt will only add to the anxiety.

A few weeks ago, I warned against the risk of future long term interest rates hikes and future U.S. dollar depreciation following the decisions by the U.S. Treasury and by the Fed to flood the markets with trillions of dollars of new Treasury bond issues and with newly printed money. The undertow is coming even faster than I thought.

Only when the markets expect relative economic stagnation and a lasting deflationary environment will long term interest rates taper off.

Brace yourself and hold on to your britches. There is a rough economic decade ahead.

Tuesday, July 14, 2009

Tipping Point For Nusajaya Growth In 2011: UEM Land

UEM Land Holdings Bhd expects growth for its Nusajaya township to start gathering momentum from 2011 as more infrastructure and other projects near completion. Managing director Wan Abdullah Wan Ibrahim said the year would mark the starting point for many large-scale projects in Nusajaya.

At the same time, work on other major projects would also be done by then. Among the projects that would be completed by 2011 are the coastal highway linking Johor Baru, quarters for state government staff and the federal government agency complexes. The Legoland theme park would also be in its finishing stage.

"The tipping point for growth to spurt in Nusajaya would be in 2011. That is when a new pace of development begins and the environment in Nusajaya and Iskandar Malaysia would pick up pace," said Wan Abdullah during a question-and-answer session after a briefing on projects under Iskandar Malaysia.

Housing and Local Government Minister Datuk Kong Ho Cha, who was on his first visit to Nusajaya with his deputy Datuk Lajim Ukin were among those at the briefing in Nusajaya, near Gelang Patah, Johor.

Also present were Iskandar Regional Development Authority chief executive officer Harun Johari and Iskandar Investment Bhd managing director Arlida Ariff. Wan Abdullah said Nusajaya already has the volume in terms of residents as 11,000 houses in the township were already occupied. Foreigners also make up almost two thirds of high-end homes such as the East Ledang project.

When asked about a public housing project which would cater to people working in the area, Wan Abdullah said the efforts would be made to ensure only qualified tenants would get the houses. UEM Land Holdings is the developer of Nusajaya's main features such as the state administration complexes of Kota Iskandar, Puteri Harbour, Southern Industrial and Logistics Clusters and Alfiat Healthpark and residences.

Article from Business Times.com

Tuesday, July 7, 2009

Five Fatal Flaws Of Trading

By Jeffrey Kennedy

Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or even turn a profit – and more importantly, do it consistently. How do they do that?

That's an age-old question. While there is no magic formula, one of Elliott Wave International's senior instructors Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. We don't claim to have found The Holy Grail of trading here, but sometimes a single idea can change a person's life. Maybe you'll find one in Jeffrey's take on trading? We sincerely hope so.

The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.

Why Do Traders Lose?

If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to prevent that invisible hand from depleting your trading account funds.

Which brings us to the question: Why do traders lose? Or maybe we should ask, 'How do you stop the Hand?' Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.

Fatal Flaw No. 1 – Lack of Methodology

If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.

How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly, how you use them. It doesn’t matter whether you use the Wave Principle, Point and Figure charts, Stochastics, RSI or a combination of all of the above. What does matter is that you actually take the effort to define it (i.e., what constitutes a buy, a sell, your trailing stop and instructions on exiting a position). And the best hint I can give you regarding developing a defined trading methodology is this: If you can’t fit it on the back of a business card, it’s probably too complicated.

Fatal Flaw No. 2 – Lack of Discipline

When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.

Fatal Flaw No. 3 – Unrealistic Expectations

Between you and me, nothing makes me angrier than those commercials that say something like, "...$5,000 properly positioned in Natural Gas can give you returns of over $40,000..." Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw: Unrealistic Expectations.

Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader – 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal for every trader their first year out should be not to lose money. In other words, shoot for a 0% return your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them – and achieve them – you will fend off the Hand.

*For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report, How to Use Bar Patterns to Spot Trade Setups, free.*

Fatal Flaw No. 4 – Lack of Patience

The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.

That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.

All too often, because trading is inherently exciting (and anything involving money usually is exciting), it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.

How do you overcome this lack of patience? The advice I have found to be most valuable is to remind yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month ... I promise.

I remember a line from a movie (either Sergeant York with Gary Cooper or The Patriot with Mel Gibson) in which one character gives advice to another on how to shoot a rifle: 'Aim small, miss small.' I offer the same advice in this new context. To aim small requires patience. So be patient, and you’ll miss small."

Fatal Flaw No. 5 – Lack of Money Management

The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves more than just a few paragraphs, because money management encompasses risk/reward analysis, probability of success and failure, protective stops and so much more. Even so, I would like to address the subject of money management with a focus on risk as a function of portfolio size.

Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% - 3% of their portfolio. If we apply this rule to ourselves, then for every $5,000 we have in our trading account, we can risk only $50-$150 on any given trade. Stocks might be a little different, but a $50 stop in Corn, which is one point, is simply too tight a stop, especially when the 10-day average trading range in Corn recently has been more than 10 points. A more plausible stop might be five points or 10, in which case, depending on what percentage of your total portfolio you want to risk, you would need an account size between $15,000 and $50,000.

Simply put, I believe that many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).

To overcome this fatal flaw, let me expand on the logic from the 'aim small, miss small' movie line. If you have a small trading account, then trade small. You can accomplish this by trading fewer contracts, or trading e-mini contracts or even stocks. Bottom line, on your way to becoming a consistently successful trader, you must realize that one key is longevity. If your risk on any given position is relatively small, then you can weather the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers, you’re out all together.

Break the Hand’s Grip

Trading successfully is not easy. It’s hard work ... damn hard. And if anyone leads you to believe otherwise, run the other way, and fast. But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one feels after a few nice trades is absolutely priceless. To get to that point, though, you must first break the fingers of the Hand that is holding you back and stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve outlined, you won’t be caught red-handed stealing from your own account.

For more information on trading successfully, visit Elliott Wave International to download Jeffrey Kennedy’s free report, How to Use Bar Patterns to Spot Trade Setups.

Jeffrey Kennedy is the Chief Commodity Analyst at Elliott Wave International (EWI). With more than 15 years of experience as a technical analyst, he writes and edits Futures Junctures, EWI's premier commodity forecasting package.

Sunday, June 28, 2009

NEoWave Warns Stock Market Has Peaked for 2009

NEoWave Institute's Glenn Neely is forecasting the largest vertical drop of the decade for the S&P 500. Neely predicts the stock market will decline 50% in the next 6 months.

Glenn Neely, founder of NEoWave Institute and prominent Elliott Wave analyst, today announces a startling prediction: The S&P 500 is forming a major top in June, which will be followed by a large decline, eventually pushing the stock market to record lows for the decade.

"Technically speaking, according to NEoWave a correction began at last October's low; the March-June rally is the final leg of that correction," Neely explains. "The March-June rally is now ending, allowing the bear market to resume. During the next six months, the S&P will decline 50% or more, breaking well below 500!" Currently, the S&P is hovering around 900.

Glenn Neely is providing this information not as a specific trade recommendation but as a general public service announcement. A prominent Elliott Wave analyst, Neely was recently recognized in Timer Digest's May issue as the #1 stock market timer for the past 12 months.

About Glenn Neely and NEoWave Institute:Glenn Neely, who is internationally regarded as the premier Elliott Wave analyst, founded the Elliott Wave Institute in 1983. In 1990, Neely published his advanced Wave analysis process in his now-classic book, Mastering Elliott Wave. In 2000, Neely changed the name of his research and advisory firm to NEoWave Institute to differentiate his scientific Wave analysis technology from orthodox, subjective Elliott Wave analysis, which is frequently nebulous, inaccurate, and constantly fluid.

This article appear on 16 June 2009.

Sunday, June 21, 2009

Why Stocks Will Collapse This Fall

Written by Graham Summers
Thus far, 2009 has been a virtual repeat of 2008 for financial markets.

So far, both years have had:
  • A Crisis/ Market low in March (Bear Stearns & March collapse to 666)
  • A Government/ Federal Intervention (Bear Stearns & Stimulus Package)
  • Gold testing/ breaching $1,000 in the first quarter (March & February)
  • Stocks rallying into the summer on worsening fundamentals
  • Stocks rallying close to their beginning of the year highs in May/ June
  • Commodities rallying into the Summer on the China story/ inflation concerns
  • Various government figures using the rally to claim that the “worst is over”

Stocks rolling over in earnest in June as fundamentals take hold

Even the charts are similar… except for the fact that 2009 has been like 2008 on steroid (the chart has been rebased to 100).

The Fed claims that it cut interest rates and pumped trillions into the market to lower volatility and return stocks to “normal” trading action. Looking at 2009’s performance compared to 2008, I’d say their efforts have been a complete and utter failure. The stock market has become more volatile with larger swings.

As I’m sure you’ll recall, stocks completely collapsed in the fall of 2008. I think that stocks will suffer a similar fate in 2009. My reasoning is simple:

1) The Fed’s moves have not solved the critical issues facing financial markets
2) The economic and financial fundamentals have worsened dramatically

The primary issue facing the financial markets is system solvency. In extremely simple terms there is too much debt, too many crummy assets, and not enough capital. Debt permeates our entire economy from the consumer level to the federal government. Debt became some out of control that at its peak, people could buy the largest single asset of their lifetime (a house) with no money down.

Since that time, Americans have done the sensible thing: deleveraging by paying off debt ($40 billion in credit cards debt Feb-May) and raising capital (saving their money). The In contrast, the Federal Reserve (the alleged back-stop for the financial markets), has done quite the opposite: issued more debt and spent even more money. Small wonder volatility has worsened.

The other critical issue facing the financial markets is accounting. To this day, no one knows the real value of the assets sitting on the banks’ balance sheets. No one knows if the banks are even solvent (I have my doubts). No one knows what the financial markets would look like without the Fed’s props in place.

To use a metaphor, the Fed has propped up a collapsing home with a few stilts and buttresses. Has the foundation improved? NOPE. Is the structure more stable? Definitely NOT. Do we even know the extent of the rot or damage that needs to be fixed? NOPE again. Have we spent a ton of money on the issue? YEP.

Now, onto issue #2 (economic and financial fundamentals are worsening dramatically). Sentiment and trading patterns may dictate short-term moves, but ultimately the market is driven by earnings. Well, earnings have fallen off a cliff. Consumers are not spending as they used to (they probably won’t ever again).

Year over year, retail sales are the worst seen in the post–WWII period. The last few months have shown the rate of collapse is slowing… but getting horrendous at a slower pace isn’t a sign of a turnaround.

Moreover, unemployment is rising which means even less spending (who goes on shopping binges to celebrate getting fired?). And this is happening at the same time that oil and other commodities are rising (which means operating costs will go up).

In very simple terms, higher costs + lower sales = much, much lower earnings. It’s simple math, but Wall Street analysts don’t seem to get it. Neither do any of the “green shoots” crowd.

So in summation, we have a MORE volatile stock market, rallying even harder on worsening fundamentals, with no real solutions to the structural issues plaguing the financial system.

If this isn’t a recipe for a potential Crash, I don’t know what is.

Good Investing?
Graham Summers

Courtesy From Jesper Lee - Cimb