US presidential election is only 5 days ahead and Barack Obama looks good to be the first and only "black" president ever. However I really think Barack Obama will destroy US economy worse than John McCain simply because he will use more government to try to solve the problem.
I am thinking if I am the next US president, what I gonna do?
First of all, I will fire Ben Bernanke. He is certainly one of the worst central banker in the world. I can't think of anybody that misuse monetary policy worse than him. He claims that he is the expert of Great Depression but he really knows nothing about GD. Get rid of him fast! I suggest replace him with Jim Rogers.
Well, I will fire Henry Paulson as well. Like Bernanke, he is also one of the worst in his position. Department of treasury suppose take care of fiscal policy and government budget. However he let US economy in trillions of debt and crazy budget deficit. The worst part is he still think he is right and will continue his policy. I think Marc Faber or Peter Schiff is the right man for this.
Next, I will raise interest rate to attract savings and preserve the value of US dollar. With saving from US citizen, US will be able to pay back some debt to foreign country. Inflated asset prices will come down to its reasonable level.
Fire CEO of trouble banks. Trouble banks are in trouble because of imcompetent CEO. They should be fired and replaced by qualify CEO.
So many more tasks to go. However I know i am not the next US president and I am pretty sure next US president won't do the same as above so still, GoodBye USA!
30.10.08
Good Bye USA!
Since last century, US have been most powerful nation in the world for 1 reason and 1 reason only: Economic dominance. Using their economic dominance, they were able to buy weapons and defeated the axis forces and become the absolute leader in the United Nations. They were also using their money to control many commodities in the world including crude oil.
So in general, every success story and greatness achieved by USA today rely on economy. Without it, they are nothing. They are nothing different than Zimbabwe, Argentina or Vietnam. They will lose their military dominance, political dominance and entertainment dominance(Hollywood).
Yes, i wish a good farewell to USA today after Federal Reserve of USA decided to cut the interest rate and discount rate by 50 basis point. Except Japan, no other advance country in this world ever had an interest rate of 100 BP or below and will never try to do such thing.
Japan is very different than USA. Japanese economy is built based on saving and manufacturing. Japanese save a lot of money into banks and that money is used to build factory. It produces electronic products such as TV, Camera, Computer etc. and car such as toyota, honda, mitsubishi stc.
That's why Japan's interest rate can be kept at 0.5%. Japanese do not want to borrow money to spend, they borrow money to invest and most of the money borrowed is not coming from printing press or borrowing from foreign nations but from money saved by average japan citizen. As we know, if too much money saved into the banks, the interest rate has to kept low.
Unlike Japan, American borrow money to spend and money they borrow is not coming from saving but by printing press or by borrowing from foreign nations. By logic, if we borrow money to spend on new car or tv , we can't pay it back because those products do not generate income. So we will bankrupt. The same situation occur for US economy. They borrow money all over the world or print money just to spend which does not generate return. That's why US debt level keep growing at a rapid pace.
How can a country has a debt of more than 10 trillion keep their interest rate at 1%? Who wants to save their money in banks when the interest earned is so low and if no one wants to save their money, how can US government repay their >10 trillions?
Print more money? Sound really like Argentina and Zimbabwe to me because the most dangerous effect of low interest to economy is not low savings but high borrowing. US firms and citizen will borrow even more money to spend because credit is cheap. Banks will lend more money to unqualified borrower because credit is cheap.
When this credit crisis started, we called it sub prime mortgages crisis. It simply mean sub prime borrower can't pay back their money to banks. Are we doing the exact same thing now? credit is cheap again and yes, banks will lend money to sub prime borrower again.
This is simple logic and even a uneducated person understand it. How can all the "expert in economics" person don't understand it??
Lastly i wish USA a good farewell and thanks for the memory of being the most dominance country in the world. Good luck and all the best.
29.10.08
Should Fed Cut The Key Rate To Zero?
Yesterday CNBC had a short talk on this question:
"Should Fed Cut The Key Rate To Zero"
Even more amazing is a so-called "expert" actually say yes!!!
Now clearly he missed his Economic classes and don't know what's interest rate and it's effect to the macro economy.
Well, even the famous Albert Einstein knew some economics and said this:
"compound interest is the most powerful thing in the universe"
HOW CAN INTEREST RATE CUT TO ZERO IS GOOD?
If interest rate cut to zero, central bank will lose control to the monetary policy. Imagine if you can borrow money without interest, you will borrow as much as you can.
Banks will do the same. They will borrow more than what they need and spend it on other toxic commercial paper or loan it to everybody else with or without a job.
The problem is we already know it is the bad solution since the credit bubble and sub prime problem started by banks gave loan to unqualified people.
No advance country in this world have lower the interest rate to zero because it is not a solution to save the economy, it is the poison that will kill it once and for all.
Ben Bernanke, Henry Paulson and other fed/treasury department officials tend to forget the cause of this credit bubble: too much money in the economy and interest rate is too low(2003-2006). Now they wanna solve the problem by using the same method that created this problem? Give me a break.
Besides that, imagine what zero interest rate will impact the inflation rate. I heard a fool on Bloomberg saying he willing to give up some to inflation rate in order to save the economy. Well, the zero-interest-rate method will never save the economy and clearly, this person doesn't know about interest rate and its crazy effect to the inflation. Inflation rate will shoot the moon if we do that. Dollar will fall through the ground because there will not be any carry trade and money supply is so much that you can simply pick up money off the ground!
Like Jim Rogers and every smart economist said: US is doom!
"Should Fed Cut The Key Rate To Zero"
Even more amazing is a so-called "expert" actually say yes!!!
Now clearly he missed his Economic classes and don't know what's interest rate and it's effect to the macro economy.
Well, even the famous Albert Einstein knew some economics and said this:
"compound interest is the most powerful thing in the universe"
HOW CAN INTEREST RATE CUT TO ZERO IS GOOD?
If interest rate cut to zero, central bank will lose control to the monetary policy. Imagine if you can borrow money without interest, you will borrow as much as you can.
Banks will do the same. They will borrow more than what they need and spend it on other toxic commercial paper or loan it to everybody else with or without a job.
The problem is we already know it is the bad solution since the credit bubble and sub prime problem started by banks gave loan to unqualified people.
No advance country in this world have lower the interest rate to zero because it is not a solution to save the economy, it is the poison that will kill it once and for all.
Ben Bernanke, Henry Paulson and other fed/treasury department officials tend to forget the cause of this credit bubble: too much money in the economy and interest rate is too low(2003-2006). Now they wanna solve the problem by using the same method that created this problem? Give me a break.
Besides that, imagine what zero interest rate will impact the inflation rate. I heard a fool on Bloomberg saying he willing to give up some to inflation rate in order to save the economy. Well, the zero-interest-rate method will never save the economy and clearly, this person doesn't know about interest rate and its crazy effect to the inflation. Inflation rate will shoot the moon if we do that. Dollar will fall through the ground because there will not be any carry trade and money supply is so much that you can simply pick up money off the ground!
Like Jim Rogers and every smart economist said: US is doom!
28.10.08
100 Basis Point = 100 Basis Point.
Today stock market in Asia shock me. Nikkei surges 6.41% in last minute bargain hunting and Hang Seng Surge 14.35%. FSSTI currently gain 1.65% but remember FSSTI closed yesterday so they missed the sell off yesterday.
last Friday s/p 500 dropped 31.34 point or 3.45% and yesterday dropped 27.85 point, so it had a two day drop of around 60 point. Mathematically and logically, FSSTI of Singapore should follow closely to that figure but instead market rally 1.65%.
What make FSSTI surges today? and what make Hang Seng, Nikkei, South Korea and pretty much all asia stock markets rally?
The answer is very simple: FOMC rate cut decision.
Everybody thinks 50 basis point cut or above. Some even say 100 basis point. However if Fed cut 50 basis point, the key rate will be at 100 basis point or 1.00%.
Let me walk you to the history of modern US economic and see how many times fed fund rate at 1.00% and what's the implication to the economics.
Fed fund rate or interest rate of US started in July of 1954 as a benchmark rate that Central bank lend money to banks. Since then, the lowest nominal fed fund rate was 100 basis point and it only happened once which was at June 25, 2003. The rate lasted around one year before a 25 basis point hike on June 30, 2004.
IF FED CUT THE KEY RATE TO 100 BP, WE WILL HAVE EXACTLY THE SAME SITUATION AS 2003. IN BOTH SITUATIONS, FED TRY TO PREVENT THE RECESSION AS A RESULT OF A BURST BUBBLE AND FED LOWER THE KEY RATE ALL THE WAY TO 100 BP TO PREVENT THE RECESSION FROM BURST BUBBLE.
HOWEVER WE ALL KNOW IT DID NOT PREVENT THE PROBLEM, IT JUST MAKE THE PROBLEM BIGGER AND HARDER TO SOLVE(EVEN GREENSPAN KNOW THAT). WHY IS FED LED BY BERNANKE DOING THE EXACT SAME THING JUST LIKE 2003 WHEN WE ALL KNOW IT IS WRONG AND WE ARE SUFFERING FROM IT NOW.
WHAT CAN FED DO NEXT? CUT THE KEY RATE ALL THE WAY TO ZERO? PRINT MORE MONEY AND BUY ALL THE TOXIC PAPER? LEND TRILLION OF DOLLAR TO BANKS AND CAR COMPANIES?
REMEMBER, 100 BASIS POINT THAT CAUSE THE CREDIT BUBBLE NOW IS EXACTLY THE SAME AS 100 BASIS POINT THAT WE WILL HAVE TOMORROW. ONLY THIS TIME WE MAY NOT HAVE SOME PROSPEROUS ERA LIKE WE HAD IN 2003 TO 2007.
last Friday s/p 500 dropped 31.34 point or 3.45% and yesterday dropped 27.85 point, so it had a two day drop of around 60 point. Mathematically and logically, FSSTI of Singapore should follow closely to that figure but instead market rally 1.65%.
What make FSSTI surges today? and what make Hang Seng, Nikkei, South Korea and pretty much all asia stock markets rally?
The answer is very simple: FOMC rate cut decision.
Everybody thinks 50 basis point cut or above. Some even say 100 basis point. However if Fed cut 50 basis point, the key rate will be at 100 basis point or 1.00%.
Let me walk you to the history of modern US economic and see how many times fed fund rate at 1.00% and what's the implication to the economics.
Fed fund rate or interest rate of US started in July of 1954 as a benchmark rate that Central bank lend money to banks. Since then, the lowest nominal fed fund rate was 100 basis point and it only happened once which was at June 25, 2003. The rate lasted around one year before a 25 basis point hike on June 30, 2004.
IF FED CUT THE KEY RATE TO 100 BP, WE WILL HAVE EXACTLY THE SAME SITUATION AS 2003. IN BOTH SITUATIONS, FED TRY TO PREVENT THE RECESSION AS A RESULT OF A BURST BUBBLE AND FED LOWER THE KEY RATE ALL THE WAY TO 100 BP TO PREVENT THE RECESSION FROM BURST BUBBLE.
HOWEVER WE ALL KNOW IT DID NOT PREVENT THE PROBLEM, IT JUST MAKE THE PROBLEM BIGGER AND HARDER TO SOLVE(EVEN GREENSPAN KNOW THAT). WHY IS FED LED BY BERNANKE DOING THE EXACT SAME THING JUST LIKE 2003 WHEN WE ALL KNOW IT IS WRONG AND WE ARE SUFFERING FROM IT NOW.
WHAT CAN FED DO NEXT? CUT THE KEY RATE ALL THE WAY TO ZERO? PRINT MORE MONEY AND BUY ALL THE TOXIC PAPER? LEND TRILLION OF DOLLAR TO BANKS AND CAR COMPANIES?
REMEMBER, 100 BASIS POINT THAT CAUSE THE CREDIT BUBBLE NOW IS EXACTLY THE SAME AS 100 BASIS POINT THAT WE WILL HAVE TOMORROW. ONLY THIS TIME WE MAY NOT HAVE SOME PROSPEROUS ERA LIKE WE HAD IN 2003 TO 2007.
27.10.08
What Is The Crude Oil Price In RM Term?
Every Malaysian knows world crude oil price drop significantly since it hit the high of around 147.50. However not all Malaysian knows what is the crude oil price in RM term as it is measured in barrel term.
First of all, crude oil prices differ in different markets such as New York Mercantile Exchange(NYMEX), Intercontinental Exchange(ICE) etc. NYMEX crude oil widely considered as the benchmark of world crude oil price so I will use NYMEX crude oil in our calculation.
NYMEX crude oil price (currently) = USD 61.72
In RM term = USD 61.72 x 3.571
= RM 220.4
1 barrel = 115.6 litres
So, 1 litre of crude oil(RM) = RM 220.4/115.6
= RM 1.91 (compare to market price of RM 2.30)
Crude oil price on 1st Oct. 2008 = USD 98.53/barrel
= RM 3.04/litre
Average between 1st Oct. 2008 and now = (1.91 + 3.04)/2
= RM 2.475
According to CNBC.com, crude oil price may fall below USD 50/barrel as slower demand as a result of global recession.
Malaysia government officials said petrol price (RON97) cut will not exceed RM0.15. It mean petrol price won't go below RM 2.15
So if current NYMEX crude oil price stand till end of the month, it will be at RM 1.91/litre and October average is RM 2.475/litre.
However Malaysia is a oil producing country so there will be subsidy given by government to Malaysian like other oil producing countries.
RM 2.475 (NYMEX crude oil price - Oct. average) - RM 2.15 (if government cut petrol price by RM 0.15) = RM 0.325(Subsidy by Malaysia Government and Petronas)
So next time you wanna calculate the petrol price in RM term, use the formula above. At least you know what is the resonable price level of petrol prices.
First of all, crude oil prices differ in different markets such as New York Mercantile Exchange(NYMEX), Intercontinental Exchange(ICE) etc. NYMEX crude oil widely considered as the benchmark of world crude oil price so I will use NYMEX crude oil in our calculation.
NYMEX crude oil price (currently) = USD 61.72
In RM term = USD 61.72 x 3.571
= RM 220.4
1 barrel = 115.6 litres
So, 1 litre of crude oil(RM) = RM 220.4/115.6
= RM 1.91 (compare to market price of RM 2.30)
Crude oil price on 1st Oct. 2008 = USD 98.53/barrel
= RM 3.04/litre
Average between 1st Oct. 2008 and now = (1.91 + 3.04)/2
= RM 2.475
According to CNBC.com, crude oil price may fall below USD 50/barrel as slower demand as a result of global recession.
Malaysia government officials said petrol price (RON97) cut will not exceed RM0.15. It mean petrol price won't go below RM 2.15
So if current NYMEX crude oil price stand till end of the month, it will be at RM 1.91/litre and October average is RM 2.475/litre.
However Malaysia is a oil producing country so there will be subsidy given by government to Malaysian like other oil producing countries.
RM 2.475 (NYMEX crude oil price - Oct. average) - RM 2.15 (if government cut petrol price by RM 0.15) = RM 0.325(Subsidy by Malaysia Government and Petronas)
So next time you wanna calculate the petrol price in RM term, use the formula above. At least you know what is the resonable price level of petrol prices.
Another Round Of Rate Cut?
Stock market all over Asia tumble hard Monday with Nikkei dropping 6% and hang seng dropping more than 1500 points. The only Asia market that end up in the positive territory is South Korea as their Central Bank cut the interest rate by 75 basis point to 4.25%.Dow Future currently drop 309 point indicate another round of sell off unless some "help" by uncle Sam.
So now everybody say we need another round of rate cut. Fed will announce it on Wednesday and UK PM also signal that rate cut is needed. According to Bloomberg, rate cut concencus is 50 basis point to 1%.
Fed Fund Future show that 50% chance of a 50 basis point cut, 30% chance of a 75 basis point cut, 10% chance each on 25 basis point cut and 100 basis point cut. Fed fund future also show 99% of a rate cut this Wednesday.
I really can't understand what are US officials thinking. Even Alan Greenspan admitted that he was partially wrong after the dot-com bubble burst which he apply a silly monetary policy(interest rate at 1%). This stupid policy create the credit bubble that burst 1 year ago and help drag down several banks and a insurance company.
However despite alan greenspan speech, Bernanke is trying to do the exact thing now. If Fed cut 50 basis point, we will have 1% interest rate exactly like 2005. Imagine if a dot-com bubble turn into this horrific credit bubble which was so much bigger, what will a credit bubble turn into? A bigger credit bubble?
No one knows the answer but we know it will create something even worse. Why can't Fed just lay their hands off and let the bubble go away so that we will have a fresh start. As long as fed keep intervening, they will create bigger and worse bubble.
Yes, we will have severe recession or even a depression of fed let free market system in control but at least we still have a small chance of survival. What fed do will certainly kill the biggest economy in the world.
Here is a sentence i picked from cnbc.com about market sell off of 20th and 21st century:
How can the crash contributed to the GD? the stock market crash didn't cause the Great Depression--the Great Depression caused the stock market crash. In other word, stock market is the indicator of economic condition. If Economy is sound, stock market is sound and vice versa. So Black Monday happened because of bad economic condition and not contribute to GD.
So for those who look for bottom, you will have to wait some more. As long as central bank intervene, market will continue to fall.
So now everybody say we need another round of rate cut. Fed will announce it on Wednesday and UK PM also signal that rate cut is needed. According to Bloomberg, rate cut concencus is 50 basis point to 1%.
Fed Fund Future show that 50% chance of a 50 basis point cut, 30% chance of a 75 basis point cut, 10% chance each on 25 basis point cut and 100 basis point cut. Fed fund future also show 99% of a rate cut this Wednesday.
I really can't understand what are US officials thinking. Even Alan Greenspan admitted that he was partially wrong after the dot-com bubble burst which he apply a silly monetary policy(interest rate at 1%). This stupid policy create the credit bubble that burst 1 year ago and help drag down several banks and a insurance company.
However despite alan greenspan speech, Bernanke is trying to do the exact thing now. If Fed cut 50 basis point, we will have 1% interest rate exactly like 2005. Imagine if a dot-com bubble turn into this horrific credit bubble which was so much bigger, what will a credit bubble turn into? A bigger credit bubble?
No one knows the answer but we know it will create something even worse. Why can't Fed just lay their hands off and let the bubble go away so that we will have a fresh start. As long as fed keep intervening, they will create bigger and worse bubble.
Yes, we will have severe recession or even a depression of fed let free market system in control but at least we still have a small chance of survival. What fed do will certainly kill the biggest economy in the world.
Here is a sentence i picked from cnbc.com about market sell off of 20th and 21st century:
Crash of 1929
The stock market crash of 1929 saw the market fall 12.8 percent on Oct. 28, 1929, known as “Black Monday," but the market fell almost as sharply the day after. The crash contributed to the Great Depression of the 1930s and many also consider it part of a two-decade bear market.
How can the crash contributed to the GD? the stock market crash didn't cause the Great Depression--the Great Depression caused the stock market crash. In other word, stock market is the indicator of economic condition. If Economy is sound, stock market is sound and vice versa. So Black Monday happened because of bad economic condition and not contribute to GD.
So for those who look for bottom, you will have to wait some more. As long as central bank intervene, market will continue to fall.
25.10.08
Why US Stock Market Just Can't Drop Further?
I didn't write anything for the past few days as i went for holiday but my god, i missed another great round of market sell off. Asia market hit the worst even their economy look perfectly fine and sound(except for Japan, of course) while UK's FTSE 100 only drop 5% although their GDP, the most important economy indicator, drop 0.5% quarterly.
However that's not the best story of the day. The most incredible story is that US market only drop less than 4% even before the US home sale report coming out. That's story is more amazing as S/P 500 was suspended from trading earlier today.
So i gonna do my best to answer the question that everybody ask (at least i receive a lot of email asking me this): Why US Stock Market just won't drop like other stock markets around the globe. Although Dow Jones and S/P 500 drop a lot this year, it is nothing compare to Hang Seng, Nikkei, FTSE, FSSTI, CAC, DAX or other stock markets.
1. Money
First of all, US are a lot wealthier than what we think they are. It's a 10 trillion dollar economy. Their economy is by far the most advance in the history of mankind. The pension fund in US hold trillions of dollar and average US citizen is wealthy even if US companies are not. A small portion of one pension fund is enough to make the market turn from red to green.
2.ADR
US stock market have the biggest amount of companies listing on it. A lot of them are American Depositary Receipt. Most of ADR companies are super blue chips in their respective country. That's why these ADR are well supported by funds from their country. Although all the ADR are not included in the Dow, Nasdaq or S/P500, they are giant in their industries and when they rebound, the whole industries will too.
3.Short Seller
Short seller. Short sellers are the single most important group for the US stock market. They are important not when they short sell but when they cover their position. Us stock market had it worst week in history when short selling was banned by government. It simply take away the buyer from the market as no short seller were they to take profit and cover their position(short sellers become buyer).
4.Irrational
US stock market has no correlation with the economy. Along the history of US economy, there were none indicator show any correlation between US economy and stock market. As we know market is irrational and unpredictable. Investor and trader buy and sell not based on current economy status by based on current emotion.
5.Government and Politics
First of all the US presidential election is just 2 weeks away. As we all know, prior to election stock market will surge as speculation aspect come into play. Either Obama or McCain comfirms that more government is needed to heal the economy and investor like it (although it won;t help US to recover). So government had intervene a lot previously and will intervene more in the future.
At the moment(3.05pm), Dow only drop 175 point(2.1%), Nasdaq drop 27 point (1.69%) and S/P 500 drop 19 point (2.1%). I won't be surprise at all if US market close today in the positive zone.
However that's not the best story of the day. The most incredible story is that US market only drop less than 4% even before the US home sale report coming out. That's story is more amazing as S/P 500 was suspended from trading earlier today.
So i gonna do my best to answer the question that everybody ask (at least i receive a lot of email asking me this): Why US Stock Market just won't drop like other stock markets around the globe. Although Dow Jones and S/P 500 drop a lot this year, it is nothing compare to Hang Seng, Nikkei, FTSE, FSSTI, CAC, DAX or other stock markets.
1. Money
First of all, US are a lot wealthier than what we think they are. It's a 10 trillion dollar economy. Their economy is by far the most advance in the history of mankind. The pension fund in US hold trillions of dollar and average US citizen is wealthy even if US companies are not. A small portion of one pension fund is enough to make the market turn from red to green.
2.ADR
US stock market have the biggest amount of companies listing on it. A lot of them are American Depositary Receipt. Most of ADR companies are super blue chips in their respective country. That's why these ADR are well supported by funds from their country. Although all the ADR are not included in the Dow, Nasdaq or S/P500, they are giant in their industries and when they rebound, the whole industries will too.
3.Short Seller
Short seller. Short sellers are the single most important group for the US stock market. They are important not when they short sell but when they cover their position. Us stock market had it worst week in history when short selling was banned by government. It simply take away the buyer from the market as no short seller were they to take profit and cover their position(short sellers become buyer).
4.Irrational
US stock market has no correlation with the economy. Along the history of US economy, there were none indicator show any correlation between US economy and stock market. As we know market is irrational and unpredictable. Investor and trader buy and sell not based on current economy status by based on current emotion.
5.Government and Politics
First of all the US presidential election is just 2 weeks away. As we all know, prior to election stock market will surge as speculation aspect come into play. Either Obama or McCain comfirms that more government is needed to heal the economy and investor like it (although it won;t help US to recover). So government had intervene a lot previously and will intervene more in the future.
At the moment(3.05pm), Dow only drop 175 point(2.1%), Nasdaq drop 27 point (1.69%) and S/P 500 drop 19 point (2.1%). I won't be surprise at all if US market close today in the positive zone.
20.10.08
Bernanke-Paulson-Bush Coalition Want More!
Today, Fed Chairman Ben Bernanke urges congress to pass new stimulus plan, couple of week after congress passes the 700 billion bail out plan.
Besides that, deflation risk become the hot topic as according to them, US starting to look like Japan in the 90's where deflation rate destroyed the economy even when the nominal interest rate was very low.
First of all, Bernanke is in the state of insane when he said another stimulus plan is needed. I think the first stimulus plan is absolutely crazy and now he ask for another one. Besides that, he also mention about cutting interest rate again.
I don't know if it's my problem but i really think there are a lot of similarity between what Fed did after the dot-com bubble and credit bubble this time around. In both cases Fed pump in huge amount of money into the system and lowering the key rate all the way to the ground. The only difference is commodity prices back then are low while although commodity prices hammered a lot in recent months, it still that much higher.
So by logic, if last time what Fed did to prevent the dot-com bubble from bursting create this "so much bigger" credit bubble, try imagine what will happen if fed try to prevent current credit bubble from bursting. It may create a bigger bubble which will destroy America.
Then again, this bubble may have the strength to kill America so we may not see the next big thing coming.
Everything that Fed did so far lead to high inflation rate. How can low interest rate and high money supply create negative inflation rate of what we called deflation rate. Commodity prices got hammered in recent months simply because it's a short term event that people think recession in US will lower the demand on commodity. In other words, speculation of investors come into play. It's not reflect the real economic activity.
Today China announced that Quarterly GDP growth slowed to 9%. However 9% is still a high GDP growth. So demand for commodity from Asia Countries is hardly affected. Investors always think if US in recession, the world economic engine will stop and whole world will be in recession but what they forget is Asia countries such as China, India, and Indonesia have huge population and their economic rely heavily on domestic market. Even if US is in recession (which i truly believe they are in now), Asia will hardly affected by this. Their demand for commodity is still pretty strong and by the time investors realize that, commodity prices will back to their high and may even higher then that.
That's why deflation risk will not be there but stagflation risk and depression risk is here. Depression mean a really really bad recession just like 1929 while stagflation mean a recession period with high inflation rate. In other word we will have a depression just like 1929 and high inflation rate (unlike 1929).
Stagflation usually happen in poor countries such as Zimbabwe, South America countries such as Argentina and Bolivia.
So another rate cut and stimulus plan will only kill the US economy faster. US economy is like a drug addict near death. Another dose of drug will certainly kill him but even without that last dose, he is still dying. There are nothing we can do but to let the free market prevail and have a depression for good just like in 1929. After the Great Depression 1929 finished in the late 30's, the world enjoyed a long, calm and prosperous years of economic nirvana.
19.10.08
"In The Long Run, We're All Dead"
"In the long run, we''re all dead"
This is the famous quote of late great John Maynard Keynes, founder of Keynesian Economy.
Today George W. Bush said economy will bounce back in the long run. The whole article is here so check it out.
http://biz.yahoo.com/ap/081018/meltdown_bush.html
There are a lot of questions exist here:
---Is George W. Bush knows anything about economy? Is he study economics in his college? The answer is no.
---In Economics term, long run mean period longer than 10 years. In other word, long run mean 10 years to infinity. So what Bush mean economics will recover in 10 years to infinity time period. When is it, President?
---What you mean by economy will bounce back? GDP will rise? Saving rate will rise? Interest rate will rise? debt level will fall? inflation rate will fall? Jobless claim will fall? unemployment rate will fall? Trade deficit will shrink? Dollar will appreciate?
Economy consist of so many thing and yet Bush think everything will recover and bounce back without mention which one recover first.
Well that's prove point 1 correct.
---"The federal government has responded to this crisis with systematic and aggressive measures to protect the financial security of the American people," Bush said. "These actions will take more time to have their full impact. But they are big enough and bold enough to work." Congress gave Bush a $700 billion plan to buy bad assets from banks and other institutions to shore up the financial industry.
This speech raise even more questions:
---Did the federal Government responded to this crisis with systematic and aggressive measures? exactly 1 year ago when the subprime bubble burst, every government official assured us that nothing is threatening the sound US economy. Few months ago, those same official came out again and said the same thing.
Besides that, what he mean by saying "systematic and aggressive measures"? Let us think what have the government did in the past year. All I can think of is lowering the interest rate to ground and inject money into the economy, and that's pretty much all they can do.
Wait a second, you may argue the whole subprime problem and credit bubble started with low interest rate and high money supply and you are absolutely right.
The credit bubble began with low interest rate and high money supply and US government try to fix the problem with the same way they started it. What is wrong with them?
A drug addict began with taking drug and we won't cure him with more drug, will we? Well, unless you are US government, no person in the world will do that.
---Bush also said the 700 billion bail out plan is bug enough to solve the problem.
700 billion vs 10 trillion of national debt. My math is poor but i think the 10 trillion is a lot bigger that the 700 billion.
Besides that, Fannie and freddie already taken away trillion of US dollar not to mention Bear, AIG, Indymac......
The US government have been pumping trillions of dollar into the economy and it does not solve the economy but now Bush think 700 billion is enough.
Let me tell you what 700b will do. 700 billion can only assure that some big and lousy companies won't foreclose. It will never solve the fundamental problem exist in the economy.
How can you solve a 10 trillion dollar economy with only 700 billion?
This is the famous quote of late great John Maynard Keynes, founder of Keynesian Economy.
Today George W. Bush said economy will bounce back in the long run. The whole article is here so check it out.
http://biz.yahoo.com/ap/081018/meltdown_bush.html
There are a lot of questions exist here:
---Is George W. Bush knows anything about economy? Is he study economics in his college? The answer is no.
---In Economics term, long run mean period longer than 10 years. In other word, long run mean 10 years to infinity. So what Bush mean economics will recover in 10 years to infinity time period. When is it, President?
---What you mean by economy will bounce back? GDP will rise? Saving rate will rise? Interest rate will rise? debt level will fall? inflation rate will fall? Jobless claim will fall? unemployment rate will fall? Trade deficit will shrink? Dollar will appreciate?
Economy consist of so many thing and yet Bush think everything will recover and bounce back without mention which one recover first.
Well that's prove point 1 correct.
---"The federal government has responded to this crisis with systematic and aggressive measures to protect the financial security of the American people," Bush said. "These actions will take more time to have their full impact. But they are big enough and bold enough to work." Congress gave Bush a $700 billion plan to buy bad assets from banks and other institutions to shore up the financial industry.
This speech raise even more questions:
---Did the federal Government responded to this crisis with systematic and aggressive measures? exactly 1 year ago when the subprime bubble burst, every government official assured us that nothing is threatening the sound US economy. Few months ago, those same official came out again and said the same thing.
Besides that, what he mean by saying "systematic and aggressive measures"? Let us think what have the government did in the past year. All I can think of is lowering the interest rate to ground and inject money into the economy, and that's pretty much all they can do.
Wait a second, you may argue the whole subprime problem and credit bubble started with low interest rate and high money supply and you are absolutely right.
The credit bubble began with low interest rate and high money supply and US government try to fix the problem with the same way they started it. What is wrong with them?
A drug addict began with taking drug and we won't cure him with more drug, will we? Well, unless you are US government, no person in the world will do that.
---Bush also said the 700 billion bail out plan is bug enough to solve the problem.
700 billion vs 10 trillion of national debt. My math is poor but i think the 10 trillion is a lot bigger that the 700 billion.
Besides that, Fannie and freddie already taken away trillion of US dollar not to mention Bear, AIG, Indymac......
The US government have been pumping trillions of dollar into the economy and it does not solve the economy but now Bush think 700 billion is enough.
Let me tell you what 700b will do. 700 billion can only assure that some big and lousy companies won't foreclose. It will never solve the fundamental problem exist in the economy.
How can you solve a 10 trillion dollar economy with only 700 billion?
18.10.08
Do You Think Buffett's Right?
Warren Buffet today joined many other economist and investors when he said it's time to buy US Stocks. He think US stocks drop too much since last year and it's a bargain to buy now.
DO YOU THINK HE IS RIGHT?
Let me give you some facts and numbers and you decide:
---Since the Great Depression 1929, every economy crisis started by a huge drop in stock market around the world. However, when a crisis headed towards the end, stock market tends to rebound to a level higher than before the crisis actually started.
---Stock market always climb and that's because inflation exist. Inflationary pressure will push the stock market higher. That's why when look at stock market, inflation rate must take into account.
---Here are world stock market friday close and its drop percentage off the high of last year:
Market Friday Close Off from high
Dow Jones 8852.22 37.11%
Nasdaq 1711.29 40.19%
S/P 500 940.55 39.43%
Russell 526.43 36.6%
FTSE 100 4063.01 39.6%
DAX 4781.33 41.1%
CAC 40 3329.92 43.13%
Nikkei 8693.82 48.75%
Hang Seng 14554.21 54.46%
FSSTI 1878.51 51.12%
All Ordinaries 3944.80 42.61%
Shanghai 1930.651 67.85%
NZX 50 2808.765 35.12%
SMSI (Madrid) 1035.09 40.29%
SMI (SWISS) 6099.62 32.54%
As you all can see, US stock market drop are relatively small compared to other stock market around the world such as Hang Seng, Singapore FSSTI and Shanghai. So if look at this data alone, US stock market are still relatively expensive.
Of course I admit that in every market, there are good and cheap stocks but in general, i still think US stock market are relatively expensive as average PE ratio of stocks are still very high (>10x) compared to other stock market.
So choose wisely and study the company well first before buy the stock of a company. Don't start by looking at the chart of a company but look at its balance sheet first. Find a profitable sound company may be a difficult one but that's the thing you gonna do.
So I don't think Buffett is absolutely right on that. Some US stocks may be cheap but others are really expensive and should be avoid at all cost. You don't wanna end up owning share of Bear Stearns
15.10.08
Suddenly, Even Nobel Proze Winner Think US Is Right
Paul Krugman, Princeton University professor, New York Times op-ed columnist and winner of the 2008 Nobel Prize for Economics, had been very critical of Treasury Secretary Henry Paulson’s original bailout plan, saying it was distorted by ideology.
Today, however, Krugman told CNBC he thinks the new plan, which will inject $250 billion into U.S. banks, “looks much better.”
“In the last six days this thing has come together with a plan that really does address the critical problem of inadequate capital at the banks (and) addresses the need for guarantees to calm the markets down," said Krugman. "We don’t know this is going to work, I wish we were sure, but this is a much better. For the first time I’m starting to feel that policy is really getting some traction on the crisis.”
Krugman said the current financial crisis repudiates the financial-markets-are-always right principle.
“A certain amount of public intervention, oversight and—in crisis—partial takeover of the financial system is something you have to do," he said. "Leaving the financial system to work things out on its own was disastrous in the 1930s and brought us to the brink of disaster again now.”
“This is not a case for socialism, it’s a case for regulation, oversight and for government-led rescues when there’s an emergency," he added. "We’re not going to go back to Karl Marx, but we are going to rediscover some of the things Franklin Roosevelt learned 75 years ago.”
Even with the new bailout plan, Krugman thinks we're headed toward a "serious recession."
"Even before the financial markets went crazy four weeks ago…there was a lot of downward momentum in the economy, and this isn’t going to reverse that. This is just preventing that from getting much worse.”
“I think this is the right thing for the immediate financial crisis, but I would say let’s have aid to state and local governments, let’s have public spending, let’s have some expanded unemployment benefits, partly because people need it, partly to put cash in the hands of people who are likely to spend it.”
Sources: CNBC
I copy this article exactly as seen on CNBC.com about Paul Krugman, the recipient of Nobel Prize Winner this year and frankly, i think he is wrong about that.
I know he is a very smart man and what he did is great. However his opinion for the plan is wrong. It's clear that he change his mind right after he receipt his nobel. Is that a coincidence? or political power come in play?
“This is not a case for socialism, it’s a case for regulation, oversight and for government-led rescues when there’s an emergency,"
I like this sentence so i highlighted it. So Paul, if you can hear me, how can the 700 billion bailout plan and 250 billion in bank nationalization is not socialism but regulation.
Glen Beck said once and i could not agree more: We are either a free market or we are socialism. We can't be both.
So you tell me is bailout most financial companies with trouble, ban short selling, nationalize banks are free market mechanism and not socialism?????????????
Name me a country that would do that. Argentina, China, Russia.... Are they capitalism or socialism?
So Paul, if you wanna repay US for awarded you with a nobel prize, at least say something wiser and with more intelligent because that's a joke!
14.10.08
For Those Who Bought Today, God Bless You!!
Stock market soared yesterday and today especially in Asia as people actually believe in G7 power and nationalization of banks would help the economy to recover.
Stock Market in Asia soared yesterday and today. Market such as Nikkei and Hang Seng, soared more than 10% in 2 days.
European stock market open high in early trade, rise more than 5%. Together with yesterday gain, European stock market rise more than 10% as well. FTSE 100 touched an intraday high of 4534.35, a 15% jump from last Friday close.
US stock market also surge more than 3% in the opening, that's a 13% gain from Friday close but came down sharply to settle at 9435, up only 50 points.
That's the good news folks, and that's the only good news for those who bullish about the market.
Here's the bad news: If you bought today at high or near the high, YOU WOULD NOT BE ABLE TO SELL YOUR STOCK FOR A LONG LONG TIME!!!!! SO GOD BLESS YOU.
Don't believe me? just wait and see.
Time and time again i proved myself right. If you follow my advice from the very beginning of my blog, you'd know i am right and you'd be able to make a lot of money. I remember my first recommendation was get away from Fannie and Freddie.......
This technical rebounded is one of the strongest in history. 15% in two days!!!
As we knew, the stronger the technical rebound, the harder it will fall afterward. So on average and in most conservative way, we will have a 10-15% more on the down side for any stock market from last Friday close. Eg. Nikkei recorded a 1171 point or 14.15% gain today as yesterday Japan stock market closed. So you should take the last Friday close 8276 minus another 14.15% on the down side which equal to 7105.
So that's the most conservative level for Nikkei. By this calculation, you will be able to find the conservative level for any stock market. It may fall lower as that's the most optimistic level. For instant, Nikkei may end up lower than 7105 but 7105 is the best possible ending for Nikkei.
So what we gonna do? I told you millions of time, buy gold and other commodities. Buy foreign currency against dollar such as euro, franc, canadian dollar, australia dollar, NZ dollar, Singapore dollar......
Stock Market in Asia soared yesterday and today. Market such as Nikkei and Hang Seng, soared more than 10% in 2 days.
European stock market open high in early trade, rise more than 5%. Together with yesterday gain, European stock market rise more than 10% as well. FTSE 100 touched an intraday high of 4534.35, a 15% jump from last Friday close.
US stock market also surge more than 3% in the opening, that's a 13% gain from Friday close but came down sharply to settle at 9435, up only 50 points.
That's the good news folks, and that's the only good news for those who bullish about the market.
Here's the bad news: If you bought today at high or near the high, YOU WOULD NOT BE ABLE TO SELL YOUR STOCK FOR A LONG LONG TIME!!!!! SO GOD BLESS YOU.
Don't believe me? just wait and see.
Time and time again i proved myself right. If you follow my advice from the very beginning of my blog, you'd know i am right and you'd be able to make a lot of money. I remember my first recommendation was get away from Fannie and Freddie.......
This technical rebounded is one of the strongest in history. 15% in two days!!!
As we knew, the stronger the technical rebound, the harder it will fall afterward. So on average and in most conservative way, we will have a 10-15% more on the down side for any stock market from last Friday close. Eg. Nikkei recorded a 1171 point or 14.15% gain today as yesterday Japan stock market closed. So you should take the last Friday close 8276 minus another 14.15% on the down side which equal to 7105.
So that's the most conservative level for Nikkei. By this calculation, you will be able to find the conservative level for any stock market. It may fall lower as that's the most optimistic level. For instant, Nikkei may end up lower than 7105 but 7105 is the best possible ending for Nikkei.
So what we gonna do? I told you millions of time, buy gold and other commodities. Buy foreign currency against dollar such as euro, franc, canadian dollar, australia dollar, NZ dollar, Singapore dollar......
11.10.08
Bear Market Trap Coming Monday???
Yesterday amazing rebound off the low at the US stock market marked a technical rebound for stock markets around the world Monday. I think market such as Nikkei, Hang Seng, and other Asia market will surge at least 4-5%. However it is called bear market trap.
Bear Market trap happen when a big technical rebound in between a long bear market trend and usually bear market trap suck in huge volume. So i guest Monday we will have a big surge all over the world with a huge volume to support it and everything will look just like we found the bottom for the great depression '08.
However, great depression 08 had just begun and still a long ride to go so people who buy next Monday will be trapped with bunch of overprice stock in their hand and will ask every expert they know either to cut loss or hold it for good.
As a stock market broker, I seen that situation many times during my career. I have client that hold Citigroup at 20 dollar, research in motion at 85, and GE at 26. So don't be like them. Don't try to buy when market is irrelevant and surge in the short term. Never think it is too late to buy. In the long term bear market like this, you always have the chance to buy lower so remember: cash is king and patient is your best friend.
So now the world are looking at G7. 7 most advance and wealthiest country in the world will be together to fight the credit crunch. However this will never work and here's the reason:
No Free Market Mechanism
Remember this: More Government intervention, more failure. The problem exist because of government intervention so we can not allow government to solve the problem. The government will make the problem worse. All the central bank will do is lowering interest rate and increase money supply and that will absolutely destroy the economy. In other word, central banks intervention will make great depression 2008 much meaner and last much longer.
All Central Banks all over the world have is interest rate and money supply. They can only use those two intsruments to control the economy. However, those two powerful weapons are useless. It is not what the economy needed.
No Fairy Tale or Epic Hollywood Movie
All 7 countries in the G7 coalition failed in their plan to solve the problem. They failed on their own and they actually think they can solve the problem by teaming up together. I remember some fairy tale such as the wolf and the 3 pigs and Hansen and Gretel where team work will make many weak character beat the strong. I also remember some epic Hollywood movie where a bunch of weak and lousy player teaming up and beat everyone and win the big cup etc.
Great Depression 2008 is neither a fairy tale nor an epic Hollywood movie. It can't be solved by simply team up few man together and train hard. If they all failed on their own, what make you think they can win as a team?
Too Little Too Late
The credit bubble burst more than a year ago and it was created 7-8 years ago. Now only the G7 react?
Well I remember Paulson and Bernanke keep saying last year that no problem and stock market jump to all time high last October, I guest everyone think it's a small and manageable problem. Then Fed and central banks all over the world started cutting interest rate and make the bubble bursting faster.
A year later, finally everybody admit it is a huge and unmanageable problem. Guest what they do now? They did exactly the same as last year such as cutting interest rate and increase money supply.
So what went wrong, Paulson, Bernanke, Bush? How you all manage the economy? You cut interest rate and increase money supply when you all said we have sound economy (2007) and you do the exactly same things now when you said we are in big trouble (2008).
So end of the day, you will see a jump in stock price next monday but beware, you might be trapped by the evil bear market trap!!!
Bear Market trap happen when a big technical rebound in between a long bear market trend and usually bear market trap suck in huge volume. So i guest Monday we will have a big surge all over the world with a huge volume to support it and everything will look just like we found the bottom for the great depression '08.
However, great depression 08 had just begun and still a long ride to go so people who buy next Monday will be trapped with bunch of overprice stock in their hand and will ask every expert they know either to cut loss or hold it for good.
As a stock market broker, I seen that situation many times during my career. I have client that hold Citigroup at 20 dollar, research in motion at 85, and GE at 26. So don't be like them. Don't try to buy when market is irrelevant and surge in the short term. Never think it is too late to buy. In the long term bear market like this, you always have the chance to buy lower so remember: cash is king and patient is your best friend.
So now the world are looking at G7. 7 most advance and wealthiest country in the world will be together to fight the credit crunch. However this will never work and here's the reason:
No Free Market Mechanism
Remember this: More Government intervention, more failure. The problem exist because of government intervention so we can not allow government to solve the problem. The government will make the problem worse. All the central bank will do is lowering interest rate and increase money supply and that will absolutely destroy the economy. In other word, central banks intervention will make great depression 2008 much meaner and last much longer.
All Central Banks all over the world have is interest rate and money supply. They can only use those two intsruments to control the economy. However, those two powerful weapons are useless. It is not what the economy needed.
No Fairy Tale or Epic Hollywood Movie
All 7 countries in the G7 coalition failed in their plan to solve the problem. They failed on their own and they actually think they can solve the problem by teaming up together. I remember some fairy tale such as the wolf and the 3 pigs and Hansen and Gretel where team work will make many weak character beat the strong. I also remember some epic Hollywood movie where a bunch of weak and lousy player teaming up and beat everyone and win the big cup etc.
Great Depression 2008 is neither a fairy tale nor an epic Hollywood movie. It can't be solved by simply team up few man together and train hard. If they all failed on their own, what make you think they can win as a team?
Too Little Too Late
The credit bubble burst more than a year ago and it was created 7-8 years ago. Now only the G7 react?
Well I remember Paulson and Bernanke keep saying last year that no problem and stock market jump to all time high last October, I guest everyone think it's a small and manageable problem. Then Fed and central banks all over the world started cutting interest rate and make the bubble bursting faster.
A year later, finally everybody admit it is a huge and unmanageable problem. Guest what they do now? They did exactly the same as last year such as cutting interest rate and increase money supply.
So what went wrong, Paulson, Bernanke, Bush? How you all manage the economy? You cut interest rate and increase money supply when you all said we have sound economy (2007) and you do the exactly same things now when you said we are in big trouble (2008).
So end of the day, you will see a jump in stock price next monday but beware, you might be trapped by the evil bear market trap!!!
Barca Cheted Against Much Smaller Club
Watch the Highlight of that match here:
http://www.lovefooty.net/shakhtar-donetsk-vs-barcelona-highlights-champions-league/
I didn't write about sport for some time now as i think stock market is much more interesting place to look at.
However i never miss my favorite sport event: football (or soccer). Last week i watched Uefa Champions' League match between Barcelona vs Shakhtar from Ukraine.
Shakhtar is no not a weak club but compared to Barcelona, they are much smaller and weaker.
The main focus on the game was on the 87th minute which Shakhtar were leading 1-0. Shakhtar had a player down and their player kicked the ball out of play. Then that injured player recovered and stand up. Barca player never give the ball back as a sign of sportmanship and use the opportunity to score.
Seven minutes later, Barca got the winning goal on the 4th minute of injury time, 2-1. However that goal was easily scored as shakhtar player gave up the play as they still disappointed by the controversial equalizing goal.
Now here's the question: Are they cheated?
According to FIFA and other regulation parties, they are not. In soccer, they are no rule about that. You do not need to give the play back to other team if something similar happened.
However it's the sign of sportsmanship. Sport is suppose to be an event to promote friendship among peoples of the world but what Barca did is destroying that.
SO, FOR ME, THEY CHEATED IN A LEGAL WAY
I remember few years ago, Serie A match between Roma and Sampdoria (if my memory served me well). Roma scored but the goal was disallowed. However the goal was clearly legal so Sampdoria player kicked the ball back into their own net. You might say it was a stupid move but i think they rather we a proud and cheered loser than a coward winner.
Apparently, Barca is different!
I didn't write about sport for some time now as i think stock market is much more interesting place to look at.
However i never miss my favorite sport event: football (or soccer). Last week i watched Uefa Champions' League match between Barcelona vs Shakhtar from Ukraine.
Shakhtar is no not a weak club but compared to Barcelona, they are much smaller and weaker.
The main focus on the game was on the 87th minute which Shakhtar were leading 1-0. Shakhtar had a player down and their player kicked the ball out of play. Then that injured player recovered and stand up. Barca player never give the ball back as a sign of sportmanship and use the opportunity to score.
Seven minutes later, Barca got the winning goal on the 4th minute of injury time, 2-1. However that goal was easily scored as shakhtar player gave up the play as they still disappointed by the controversial equalizing goal.
Now here's the question: Are they cheated?
According to FIFA and other regulation parties, they are not. In soccer, they are no rule about that. You do not need to give the play back to other team if something similar happened.
However it's the sign of sportsmanship. Sport is suppose to be an event to promote friendship among peoples of the world but what Barca did is destroying that.
SO, FOR ME, THEY CHEATED IN A LEGAL WAY
I remember few years ago, Serie A match between Roma and Sampdoria (if my memory served me well). Roma scored but the goal was disallowed. However the goal was clearly legal so Sampdoria player kicked the ball back into their own net. You might say it was a stupid move but i think they rather we a proud and cheered loser than a coward winner.
Apparently, Barca is different!
8.10.08
Another Round Of Rate Cut
Half an hour ago, Federal Reserve announced that the key rate will be slashed by another 50 basis point to 150 basis point. Together with fed are European Central Bank and four other central banks.
Well for those who follow my advice yesterday and bought, take this opportunity to sell.
After 700 billion dollar wasted, Fed continue their hilarious move by cut the key rate by 50 basis point!!! How much more they can cut? Why they cut?
Fed have lowered the key rate from 5.25 to 2.00 in less than 1 year but sluggish economy condition remain and now they hope 50 basis point more will save the economy???????
IT WILL MAKE IT WORST.
If 325 basis point and trillions of dollar didn't help the economy, how can 50 basis point does that? It just can't.
Sure we know the immediate effect of rate cut is jump in stock market and then what? It come down even sharper. The whole problem started when Fed led by Greenspan cut the key rate to 1.00 and created the giant credit bubble and guest what, they repeat the move.
Sometime i feel funny why Those Fed Official can't think logically, are they educated well, are they sane, are they can't handle the political pressure? Are they bought a lot of share? Are they in the short term irrational situation just like everybody else on CNBC and Bloomberg, Are they slave to wall street millionaire?
So many possibility but the ending is the same: another round of down turn.
Remember, take this opportunity to sell for those who bought some yesterday, you might not be so lucky!
Well for those who follow my advice yesterday and bought, take this opportunity to sell.
After 700 billion dollar wasted, Fed continue their hilarious move by cut the key rate by 50 basis point!!! How much more they can cut? Why they cut?
Fed have lowered the key rate from 5.25 to 2.00 in less than 1 year but sluggish economy condition remain and now they hope 50 basis point more will save the economy???????
IT WILL MAKE IT WORST.
If 325 basis point and trillions of dollar didn't help the economy, how can 50 basis point does that? It just can't.
Sure we know the immediate effect of rate cut is jump in stock market and then what? It come down even sharper. The whole problem started when Fed led by Greenspan cut the key rate to 1.00 and created the giant credit bubble and guest what, they repeat the move.
Sometime i feel funny why Those Fed Official can't think logically, are they educated well, are they sane, are they can't handle the political pressure? Are they bought a lot of share? Are they in the short term irrational situation just like everybody else on CNBC and Bloomberg, Are they slave to wall street millionaire?
So many possibility but the ending is the same: another round of down turn.
Remember, take this opportunity to sell for those who bought some yesterday, you might not be so lucky!
Get The New Peter Schiff's Report: The dollar
Just sign in to http://www.europac.net/ and get the free report.
Reminder: don't try to understand stock market before understanding economy. Economy performance is reflected by stock market performance.
I became stock market broker and trader for some time now and i seen a lot of amateur trader lose all of their money because they don't understand what is economy.
So my advise is start reading economy book such as crash proof before reading stock market book such as technical analysis explained or way of turtle.
P/S: Avoid age of turbulence if you know what i mean!!!
Reminder: don't try to understand stock market before understanding economy. Economy performance is reflected by stock market performance.
I became stock market broker and trader for some time now and i seen a lot of amateur trader lose all of their money because they don't understand what is economy.
So my advise is start reading economy book such as crash proof before reading stock market book such as technical analysis explained or way of turtle.
P/S: Avoid age of turbulence if you know what i mean!!!
Faber: Market Oversold, Short-Term Bottom Near
So now even Dr Doom himself said market is oversold in the short term perspective and rebound will follow soon especially when dow is below 10k and s/p near 1000 level and i agree.
Yesterday i posted the article saying dow will recover and it happened. From near 800 point to only 350 point, we know somebody is doing their job to keep wall street alive.
So where to buy and when to buy?
I believe it's a good opportunity to buy when s/p 500 reach 1k level. at the moment s/p 500 stand at 1034 level against yesterday low of around 1010. I will start short term buying when s/p 500 down to 1010 and dow down to around 9500.
I don't in the short term market will plunge lower than yesterday low as the support is phenomenon. However it's only a short term technical rebound. I never think US economy sound and never will but we need to think wisely and take advantage from it.
For the long term type investor just like warren buffett, well, not now!
Yesterday i posted the article saying dow will recover and it happened. From near 800 point to only 350 point, we know somebody is doing their job to keep wall street alive.
So where to buy and when to buy?
I believe it's a good opportunity to buy when s/p 500 reach 1k level. at the moment s/p 500 stand at 1034 level against yesterday low of around 1010. I will start short term buying when s/p 500 down to 1010 and dow down to around 9500.
I don't in the short term market will plunge lower than yesterday low as the support is phenomenon. However it's only a short term technical rebound. I never think US economy sound and never will but we need to think wisely and take advantage from it.
For the long term type investor just like warren buffett, well, not now!
7.10.08
Dow Under 10k!!!!!!!
Wow, Dow finally broke the 10k important psychology level. At the moment, Dow drop 474 point to stand at 9850 point and s/p 500 at 1042 point after tank 57 point. Last time Dow below 10k was October of 2004!
Everybody on CNBC and Bloomberg screaming about fear and recession including the "famous" jim Cramer. However as we all know, we should be greedy when everybody is fearful. That's why some real expert beginning telling people to buy. Even Don Harrold start telling you it's time to consider buying, and warren buffet already opened his check book.
Just as everything looks right to buy, Fed again pump in more money into the system. This time around, Fed extend its loan to banks to 900 billion. Furthermore, some even scream for another round of rate cut.
Let us all ask ourself a simple question: Who Federal Reserve and Department of Treasury want to save, the US economy or Wall Street?
World stock market plunge today but so what? Stock market all over the world has been rising since 2003 until 2007 and investors earn millions of dollar. Everybody is happy during that time. Federal Reserve and Treasury Department never come out and say it's enough but when stock market plunge back to 2004 level everybody is screaming for help. Amazingly Federal Reserve and Treasury Department really trying to help them.
I said it time and time again if Fed and Treasury continue their style of managing US economy like that, Stock market and Dollar will plunge. Although dollar is still amazingly strong, let us just wait for trend reversal and starting shorting it against all major currency in the world except for pound.
For those short term investor, consider start buying when the trend of Dow and S/p 500 change and i truly believe that will happen because of bargain hunter, US pension fund, Fed, foreign government and "stupid traders".
For long term investor, ask yourself a question: Is US in the recession yet? if no, then do you think US will be in recession, if yes then why buy now???
Everybody on CNBC and Bloomberg screaming about fear and recession including the "famous" jim Cramer. However as we all know, we should be greedy when everybody is fearful. That's why some real expert beginning telling people to buy. Even Don Harrold start telling you it's time to consider buying, and warren buffet already opened his check book.
Just as everything looks right to buy, Fed again pump in more money into the system. This time around, Fed extend its loan to banks to 900 billion. Furthermore, some even scream for another round of rate cut.
Let us all ask ourself a simple question: Who Federal Reserve and Department of Treasury want to save, the US economy or Wall Street?
World stock market plunge today but so what? Stock market all over the world has been rising since 2003 until 2007 and investors earn millions of dollar. Everybody is happy during that time. Federal Reserve and Treasury Department never come out and say it's enough but when stock market plunge back to 2004 level everybody is screaming for help. Amazingly Federal Reserve and Treasury Department really trying to help them.
I said it time and time again if Fed and Treasury continue their style of managing US economy like that, Stock market and Dollar will plunge. Although dollar is still amazingly strong, let us just wait for trend reversal and starting shorting it against all major currency in the world except for pound.
For those short term investor, consider start buying when the trend of Dow and S/p 500 change and i truly believe that will happen because of bargain hunter, US pension fund, Fed, foreign government and "stupid traders".
For long term investor, ask yourself a question: Is US in the recession yet? if no, then do you think US will be in recession, if yes then why buy now???
5.10.08
What Happen to US Politician??
Just as expected, last Friday the House of Representatives said yes to 700 billion bail out evil plan after Senate on last Wednesday. So here's the question: they really think the plan will save the US economy or they have to agree because of political pressure?
EITHER WAY, THEY ARE STUPID.
The House of Representative members are selected by the American citizen to represent them in the government. They suppose to fight for the people of US and give American people the best. They did the absolute correct thing during the first vote for the 700 billion US dollar bail out plan but unfortunately on the second vote, the evil prevail......
No strong economy has weak currency and everybody knows it. Look at China's Renminbi, China government try desperately to keep it down for international trade purposes(increase export) but it still appreciate like crazy against major world currency simply because China economy are sound.
How can members of the House of Representative don't know something as simple as that?
Well, maybe they know but they have to vote yes because of political pressure. In this case, they are even more stupid. They did the wrong and horrible thing to American people.
We all know the only way central bank of a country can influence in its currency is using monetary policy which consist of interest rate and money supply. Other factors(uncontrolled by central bank) such as soundness of economy, inflation rate, unemployment rate, balance of payment etc. will help currency investors do their judgement.
Federal Reserve already keep the interest rate at a unbelievable low level of 2.0% and now they wanna put 700 billion into the economy? How can US dollar survive from that?!
However I receive some email asking me why US dollar still rally in the past week?!
Here's my thought: short term market is always irrational. We saw the dow recover 485 point after the 777 point loss. That's irrational. We saw people still buy Freddie mac, fannie mae, AIG etc., that's irrational. We even see gold went down after the 700 billion plan agreed. That's absolutely insane.
The Dollar has been rallying for the past week and maybe people who are trend follower still long dollar, maybe a short covering for USD, maybe intervention by Fed or foreign central bank, maybe intervention by US pension fund......
Who cares, short run will always be irrational so we should only focus on medium and long run. The puzzle will be solved and suddenly everybody realize that US economy sucks, and run away from it, and it collapse.
Compare to great depression of 1929, situation now is a lot different. The only reason Franklin Roosevelt and his administration can save US from GD 1929 is because at that time, US was the top craditor in the world. US controlled more than 70% of world loan during that time so they can print so much money to save the US economy. Now US are the biggest debtor in the world. US total debt is more than 60% of world debt.
The good news is Federal Reserve can still print money and try to save the economy but the bad news is it will destro the Dollar and eventually the economy! Ask your congressman, how can Fed save the US economy if US dollar collapse and how can US dollar not collapse?!
I have a short term investment strategy that i always use and it's pretty profiting. Be a trend follower but only follow trend when you think it's the right trend. If it's not. just wait. Example: now US dollar is appreciating and it's not right so just wait. When the trend reverse and USD is depreciating, short it because it's the right trend. Let the trend run until that run reverse by more than 0.618%. If that happen, take our profit and wait to short again in the next trend reversal. Never invest against the trend!!! Wait for trend to reverse then only you invest. It should help you profit from the irrational short term irrational trend.
Anyway, medium and long term investment is the best option. Think rational and don't be influenced by folks that talk shit on CNBC and Bloomberg. If you think gold will rise, then buy it because you know 2-5 years from now, your gold will be the true "precious" metal!!!
EITHER WAY, THEY ARE STUPID.
The House of Representative members are selected by the American citizen to represent them in the government. They suppose to fight for the people of US and give American people the best. They did the absolute correct thing during the first vote for the 700 billion US dollar bail out plan but unfortunately on the second vote, the evil prevail......
No strong economy has weak currency and everybody knows it. Look at China's Renminbi, China government try desperately to keep it down for international trade purposes(increase export) but it still appreciate like crazy against major world currency simply because China economy are sound.
How can members of the House of Representative don't know something as simple as that?
Well, maybe they know but they have to vote yes because of political pressure. In this case, they are even more stupid. They did the wrong and horrible thing to American people.
We all know the only way central bank of a country can influence in its currency is using monetary policy which consist of interest rate and money supply. Other factors(uncontrolled by central bank) such as soundness of economy, inflation rate, unemployment rate, balance of payment etc. will help currency investors do their judgement.
Federal Reserve already keep the interest rate at a unbelievable low level of 2.0% and now they wanna put 700 billion into the economy? How can US dollar survive from that?!
However I receive some email asking me why US dollar still rally in the past week?!
Here's my thought: short term market is always irrational. We saw the dow recover 485 point after the 777 point loss. That's irrational. We saw people still buy Freddie mac, fannie mae, AIG etc., that's irrational. We even see gold went down after the 700 billion plan agreed. That's absolutely insane.
The Dollar has been rallying for the past week and maybe people who are trend follower still long dollar, maybe a short covering for USD, maybe intervention by Fed or foreign central bank, maybe intervention by US pension fund......
Who cares, short run will always be irrational so we should only focus on medium and long run. The puzzle will be solved and suddenly everybody realize that US economy sucks, and run away from it, and it collapse.
Compare to great depression of 1929, situation now is a lot different. The only reason Franklin Roosevelt and his administration can save US from GD 1929 is because at that time, US was the top craditor in the world. US controlled more than 70% of world loan during that time so they can print so much money to save the US economy. Now US are the biggest debtor in the world. US total debt is more than 60% of world debt.
The good news is Federal Reserve can still print money and try to save the economy but the bad news is it will destro the Dollar and eventually the economy! Ask your congressman, how can Fed save the US economy if US dollar collapse and how can US dollar not collapse?!
I have a short term investment strategy that i always use and it's pretty profiting. Be a trend follower but only follow trend when you think it's the right trend. If it's not. just wait. Example: now US dollar is appreciating and it's not right so just wait. When the trend reverse and USD is depreciating, short it because it's the right trend. Let the trend run until that run reverse by more than 0.618%. If that happen, take our profit and wait to short again in the next trend reversal. Never invest against the trend!!! Wait for trend to reverse then only you invest. It should help you profit from the irrational short term irrational trend.
Anyway, medium and long term investment is the best option. Think rational and don't be influenced by folks that talk shit on CNBC and Bloomberg. If you think gold will rise, then buy it because you know 2-5 years from now, your gold will be the true "precious" metal!!!
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