14.12.09

Debt

Today I wanna talk about debt (or accountants may wanna call it liability).

DEBT, a simple four-letter word that is more complicated than astrophysics simply because it carry around "THE MOST POWERFUL TOOL IN THE UNIVERSE" (Well, according to Albert Einstein), interest (compound interest to be exact).

We all think we know what is interest but in reality, average people like you and me know nothing about it. Once we understand what it really is, we will realize the power of interest is limitless (at least Einstein understood it although he is no economics and finance guy)

Imagine this: if a central bank create 100 dollar of money into the economics, the newly created money will be lent out to another party, eg person A (by a commercial bank) with interest attached, let say 10%. So this person A owe the commercial bank 110 dollar. If the 100 dollar is the total money supply of this economy, how A can generate 110 dollar to pay back the bank when the whole economics only has 100 dollar in it?

In other word, agents in economics (consumer, firm, government etc.) can't generate the amount of money higher than the money supply itself. So how can they pay the interest when every dollar created is attached with interest?

So, one thing is a certainty: in long run, people who in debt will find themselves bankrupt. So here's an advice: do not be in debt.

Unfortunately, many people do not realize they are in debt. Financial Institution nowadays created so many ways to "help" us get in debt without telling us the truth. They are creating so many creative way of getting us in debt. They make us feel we are wealthy by providing financial services to us. They "encourage" us to spend the money we don't have (yet) to get what we want today. Guest what, most of us do that.

The only reason we are in debt is we want to buy something we can't afford now. Car, property, business, etc.

So if we can't afford it now, don't buy it!!

2.12.09

What The HELL Are You Doing, Obama?

What the HELL are you doing, Mr Obama.

You've said you gonna reduce and improve unemployment rate......

You've said you gonna improve the US financial problem (toxic assets)......

You've said you gonna help the poor......

You've said you gonna reduce US deficit......

You've said you gonna reduce US national debt and international reserve......

You've said you gonna improve equality among US citizen......

You've said you gonna close Guantanamo Bay (Gitmo)......

You've said you gonna improve US image to the world......

You've said you gonna get the troops from Iraq and Afghanistan back to their home......

You've said you gonna give Afghanistan the freedom and independence they deserve......

You've said you gonna give detainees at Gitmo a proper trial......

You've said yo gonna stop the torture at Gitmo and other US concentration camps around the world......

You've said you not gonna send more troops to either Iraq or Afghanistan......

YOU FAIL AS A PRESIDENT OF USA OR A HUMAN BEING......

30.11.09

Dubai => Beginning Of The End

Dubai probably the most frequent used word for the past week. 60 Billion dollar of default sink the stock markets all over the world. Everybody feel fear among us and seller absolutely dominated trading.

I am not gonna commend on Dubai. It's only 60 billion dollar. It's less than one third of what AIG received last year (185 Billion). It's only 10% of the first TARP last year (600 Billion). I bet it's even less than the bonus and remuneration that bankers all over the world received last year combined.

Dubai default is so small that a tips from Rockefellers or Rothschilds at dinner might be bigger than it.

Dubai is very similar to "Sub-Prime" in late 2006 or early 2007. By the way do you still remember the word "sub-prime"?

The word sub-prime emerged at the end of 2006 and it's a warning sign that the financial system in the world is in big problem. At first it's not seen as a threat by investors all over the world. However by February of 07 people start to realize the problem but ignorance and greedy trader continue to buy and pushed the market to the high of Oct / Nov 2007.

Remember, sub-prime crisis does not kill the stock market at the end of 07. It work as a trigger to this massive financial mess that we are in. Similar situation happen now. I am sure Dubai default won't kill the stock market. It's a big warning sign that we haven't solve our financial problem and it's still a mess.

So will stock market continue higher in the short term? might be yes (just like in 2007) or no. The point is: it doesn't matter. Stock market did make a new high at Oct of 2007 (US and Europe market) and Nov of 2007 (Asian and South America market) when the big warning sign was around. Well look what happen next......

So the best way I can put the mess we encounter now is this: US financial system = HIV positive. AIDS won't kill US but it kill its defense. It weaken the system and allowed any disease to attack it. Dubai default is just a small flu or fever yet it manage to shake us heavily. Wait till it get TB or cancer. Unfortunately AIDS is incurable but fortunately it can be delayed so we shall see how Bernanke, Geithner and the gang delay it but the day will eventually come. Until then, enjoy the healthy day!

21.11.09

HK Technical Analaysis Video 11/20

Ireland vs France: Forget It, Ireland

I am sure one of the headline at sport column since last week has to be Ireland vs France world cup qualifying match second leg. We all seen the replay and the clear hand ball by Thierry Henry.

FIFA yesterday dismissed the Football Association of Ireland (FAI) for a rematch.

To be brutally honest, i agree with FIFA. The decision of referee is final. Ireland and France knew it before the match started. I don't think Ireland will agree for a rematch it happen the other way. Rule is rule. If you don't agree with it, don't take part.

Throughout history, we have seen some even more ridiculous and controversial decision in sport. England football team won the 1966 world cup with a goal that never went in. Argentina won the quarter final football match of 1986 world cup with the "hand of god" and eventually won the world cup. Who can forget the 1972 Olympics basketball gold medal match between Soviet Union and USA where referee virtually gave Soviet Union second chance and they took it.

More recently, Dallas Maverick lose to Denver Nuggets at last year NBA playoff Western Conference Semi Final as all 3 referees didn't see the foul that committed by Mavs. Shogun Maricio Rua clearly beat Lyoto Machida at UFC 104 but all 3 judges gave Machida the win. Defending world champion Italy won the quarter final of 2006 world cup against Australia with a dodge from Fabio Grosso.

The truth of the matter is this: you live by the rule if you decide to take part. Otherwise don't participate. This is the thing that make sport exciting and unpredictable. I guest West Germany can call for a rematch for the 1966 world cup if FIFA allow a rematch between Ireland and France.

16.11.09

WCG 2009 or WCG 1999?

I am a big fans of video game. I started playing video game (NES) when i was 5. Mario, Donkey Kong and Link pretty much filled my childhood.

WCG or world cyber games was created in 2001 and South Korea was the host nation for the WCG 2001 tournament. Since then, WCG kick off as the biggest and greatest video game tournament in the world. It's called "Olympics of video games"

In 2001, 6 games were selected. AOE 2, Starcraft, Fifa world cup, Counter Strike, UT and Quake 3. All those games are appropriate and great at the time.

However, if you can believe it, 3 of those games are still here at WCG 2009 which is Starcraft, CS and Fifa. Luckily Fifa world cup is changed to fifa 2009 but the other 2: starcraft and CS is still here. Then in 2003, warcraft 3 was added into WCG and guest what, it is still here. Luckily we have track mania, guitar hero and VF 5 to save the day.

So back to the topic of this article, are we in 2009 or 1999? is WCG in 2009 or 1999. Are we in the twenty first century yet?

Starcraft is a 11 years old game (released in March 1998 and its expansion, Brood war released in November 1998) and Counter Strike is a 10 years old mod (created in 1999) based on a 11 years old game (half life). Although Warcraft 3 was a 2002 game and its expansion, The Frozen Throne, released in 2003, the graphic element in this game is poor and cartoon-like.

This 3 games feel and look like twentieth century and nowhere near twenty first century. We got simply tons of games that play just as well as those 3 games but way better in graphic and sound element and would simply make the WCG experience that much better.

Starcraft and Warcraft 3 are RTS game. We got World in conflicts, Company of Heroes, Command and Conquer 3 and Red Alert 3, Medieval 2 Total war, Supreme Commander, Sins of Solar empire. I believe all of them play just as great as those 2 but have much better graphic, realism and experience.

As for Counter strike, I can name dozens of great FPS game that is much better than CS either in graphic, sound and even game play. Crysis, call of duty (all of them, especially modern warfare) Gears of war, Medal of Honour (all of them, especially airborne), Brothers in Arms (all of them), Battlefield series (all of them), Dooms 3, UT 2007, Quake 4, Halo (available in pc remember), Rainbow Six (4, Lockdown and vegas), Ghost Recon 2, and the list just continues......

Computer hardware and software nowadays let us know we are in 2009 and not 1999, the game installed in our PC let us know we are in 2009 and not 1999, the calender of the wall let us know we are in 2009 and not 1999. I hope WCG will let us know it is the year 2009 and not 1999.

P/S: No offense for CS, Warcraft 3 and Starcraft fans but you need to move on and look at games in the present and future, not past.

15.11.09

Luck in Football

I wanna talk about sport (as my blog name suggest, sport and stock) especially football (or soccer in US).

Few weeks ago, i watched Chelsea beat Manchester United 1-0 at Stanford Bridge. A day after that, sport media around the world were flooded with reports saying Chelsea were lucky, MU should win etc. Columnist around the world commented about Chelsea were lucky to get the win.

I remember May this year, most football fans said Barcelona were lucky in their Uefa Champions' League clash with Chelsea. Then Later some people even said Barcelona were lucky to win the UCL (although Barcelona dominated the whole match and beat MU fair and square).

People, you need to understand this: football match is determined by no. of goal and only no. of goal. It doesn't matter if a team dominate 95% of playing time, have 100 attempts on goal or 50 corner kicks. If you can't score, you can't win. So i can't see what's the connection between controlling a football game and winning the game.

Although MU did manage to control the match against Chelsea, they did not manage to score so the most they can hope for was a draw. Chelsea on the other hand did manage to score so they deserve the win. It doesn't matter if Chelsea goal should be allowed or not. If referees said yes, then it's a goal.

Similar situation for Chelsea vs Barcelona match. Yes Chelsea did manage to control the whole match and scored a goal. However they can't maintain the lead all the way to the end and Barca equalized at the very end. Iniesta goal was a very beautiful goal so instead of saying Barca were lucky, how bout saying Barca finishing touch was superb.

Simple example: no matter how many time resources a student allocate to an exam, if the student can't write the correct answer, he will fail.

So there is no luck in football, there are finishing touch and goal. These are the essence of winning in football

13.11.09

Nominal and Real

Let me start by asking you a question: if a stock that usually traded at around 10.00 now trading at 0.50, is that stock cheap?

I did a survey and asked 150 people that involve in stock market and guest what, 112 of them immediately say yes, it's cheap and they want to know the name of the stock so that they can buy it. 27 of them say depend on occasion and the stock itself and 11 of them say they won't touch this kinda stock.

Well, 75% of my sample think the stock is cheap without even know the name of the stock and other information about it.

That's what i mean in this article, most of us tend to look at nominal value and ignore real value. Real value in economic means adjusted value (usually inflation adjusted). Most of us do not care about real value of an asset as long as we get higher nominal value.

This kind of thought lead to those 75% of people think a stock that usually traded at around 10.00 is cheap at 0.50. However in reality, 0.50 may not be cheap if it's adjusted.

Even professional stockbrokers are doing the same thing. They recommend stock based on nominal value. They don't even find the real value of a stock adjusted to inflation, earning or earning per share. (if you don't believe me, try ask them!!!)

Similarly, the high of 14000 for Dow in Oct 2007 is just a nominal value, if we adjusted with US dollar, we can see that the real value of Dow adjusted using USD is well below the 2001 level. Here are the video done by Don Harrold on Youtube



If we study the topic more, we can see that strong rise in precious metal is caused by severe drop in USD and not other currency. The Gold / Euro value is still below it's high at March of 2008. In other word, Gold's nominal value is rising (as gold is in USD denominated) but its real value is stagnant. So next time you wanna buy share of gold stock, think again.

In conclusion, nominal value of an asset is useless. If you can't get the real value of an asset, don't say it's cheap!

11.11.09

Let's Not Forget What is Investment

Just an update: I am a bear now and have been a bear since July of this year. I still think market will come crashing down once this fake and unrealistic rally since March end. Market will revisit March 2009 low at some point in 2010.

This article is all about investment in stock market. I think many investors nowadays forget or rather don't know when and why stock market was created for. Almost every country has its own stock exchange and some has more than 1.

If i am not mistaken, stock market was created in the 13th century in Europe for debt trading. It helps company to manage their debt and risk.

Then stock market evolved to a place for public to buy and sell shares as secondary market. Company who wanted to raise money and capital can sell shares to public through stock market and public can join the ownership by buying company's share. During that time, investment and stock market were becoming one. Buying and selling shares was called investment.

However, stock market today has evolved to a strange place. People no longer look at share as a ownership of a company. They look at it as a product. Stock market is no longer a place to invest in good company, but rather become a place to arbitrage their products.

Yes Arbitrage. Since more than 90% of people trading shares is looking for a profit by arbitrage (sell at higher price for profit) and not ownership of a company. So, shares of Jp Morgan Chase and Bank of Yesterday (US smallest bank by asset) have no different. They are just financial products. People will threat them the same as long as both can generate arbitrage profit. This is why share analysis report by financial institution always provide target price for you to sell.

This is also why we can't have more "Warren Buffett" in stock market. The answer is very simple: very few people nowadays invest in company share to become a shareholders. Many analysis has been done to explain why we can't have second "Warren Buffett", for me the answer is simple, nobody wants to hold share of company forever as part owner, they only wants to sell it when it has good value.

So next time when you wanna buy / sell something like Bank of Yesterday, you are becoming its owner!

23.10.09

Malaysia Government Budget 2010: Big Conflict??

Today Malaysia Government announced the annual budget for 2010. Some were happy and some were not. One thing for sure: everybody is still busy debating on it.

Prime Minister of Malaysia really make me confuse. There are big conflicts between what he plan and what he implement in terms of economics.

The main goal / objective of this government budget is reducing budget deficit! Malaysia's budget deficit is at 7.4% of GDP in 2009 which is severe. That mean Malaysia government spent 7.4% more that what it earned. FYI, US recorded 7.4% government deficit in 2008, around the same figure as Malaysia.

In Economics (Keynesian), to cut deficit, government need to implement contractionary Fiscal policy which increase tax, decrease government spending or both. The cost of contractionary fiscal policy is slower GDP growth as higher tax or lower government spending will hit both private and public spending.

Classical economics basically has the similar idea.

This is simple: government spend more than they earn so either slow the spending(government spending) or increase the earning (tax revenue).

However, that is opposite of what government is doing!

Annual government budget 2010 implement lower taxes both company tax and personal income tax by 1%. This is clearly not contractionary but rather expansionary fiscal policy. Lower deficit by lower tax?????

Do they know what they are doing???

Fortunately, they also implement slower government spending. However, that's not clear. No clear information introduced by government. The only thing we know is:

"The main spending cuts came from reduced “operating expenditure”, lower food and fuel subsidies, a sensitive political issue for an unpopular government, and less money for development spending."

I am not sure they know this or not, but operating expenses of government is not part of government spending. Eg wages of public servants. So up until now, the only thing we know is that government will reduce subsidies in both food and energy sector.

Basically this is good idea in economics as subsidy is always a "bad" thing that interfere the free market system.

So that's a big surprise, instead of focus on demand side spending cut, Malaysia government focus on supply side spending cut. That's a very dangerous thing as unlike demand side spending cut, supply side spending cut will not only mean slower economy (slower GDP) but also higher prices (higher inflation).

This basically mean although Malaysian can expect slower economic growth, prices won't go down with it.

According to government consensus, government deficit will decrease from 7.4% in 2009 to around 5.6% in 2010. We know that taxes will be cut 1%. If I forecast 1% cut in taxes will result in 2-3% in tax revenue for government, then operating expenditure and subsidies will need to be cut around 3.8-4.8%.

If half of the cut is on subsidies, which is around 1.9-2.4%, we can at least expect 3 times (300%) the rise in actual prices which is around 5.7-7.2%.

So for Malaysian or people who will live in Malaysia next year, save now to buy expensive food and fuel next year!

22.10.09

Hong Kong Stock Market Analysis Video Oct 20th



This is a video produced by a friend of mine on Youtube on Hang Seng and various other markets including some stocks listed at HKSE. He will update his analysis video every weekend and Wednesday. So if you interesting in Stock market analysis especially Hang Seng Analysis, check it out!

21.10.09

Justice System 2.0

In justice system 2.0, i wanna talk about another part of our justice system, police force.

As we all know, society (you and me) give tremendous power to the police forces to implement justice. They got all kind of power including power to kill. They have the authority to involve in any criminal cases and power to hold and analyze all the evidence found. They have the power to forward the evidence to public prosecutor to continue with the trial.

We give all these powers to the police to maintain our safety. However, is our safety secured? does crime rate decrease? is our tax money well spent?

More importantly, are police doing their job according to rules and regulations?

Over the years, we have been informed with countless numbers of wrongfully convicted cases. It makes me wonder how polices determine their suspect and how they implement their investigation. It seems like they got it wrong so many times we lost confidence at them.

Recently i am pen-paling a death row inmates at San Quentin named William (Bill) Clark. Now i don't him and i can never be sure either he is guilty or not. However from the information and evidence of the case, it is very likely that he is wrongfully convicted and sentence to death primarily due to police misconduct.

Police is just a job / occupation. Police officials are human just like you and me. We have emotions such as anger and eager to win. If police officials choose the wrong suspect and determine to put the person behind bars simply because of anger or eager to prove their point. They got all the powers they need to manipulate, lie or create a virtual reality.

Another famous case of police misconduct is Ellen Reasonover case. Thankfully her case was overruled and she got her freedom now. The police department admitted they got it wrong and give Ellen 7.5 million for her 16 years in prison.

So, in reality, we give all the powers including license to kill (just like god) to a group of people just like us who work as police officials. They have the same emotional behavior like us, same IQ like us, same EQ like us and commit mistakes just like us yet we still trust them and continue to provide powers of god to them.

17.10.09

Something I wanna say about Justice System

First of all, stock markets around the world keep making new highs. Dow broke the critical resistance level of 10000, Russia and South America markets make you feel stupid if you didn't invest.

However, I keep my "short" call and i still think somewhere before the end of this year we gonna see collapse (and not correction) of markets around the world. USD is way too oversold short term or medium term and precious metal is way overbought. Expect USD to reverse and go at least to test 80 level and gold retrace to at least 950 level.

Today I wanna talk about justice system. I am doing a research on criminology economics and come across various argument about our justice system. I am sure everyone aware that justice system was created way back during the ancient Babylon which is called "code of Hammurabi". The objectives of justice system is simple: to protect the population from danger / threat.

When i am studying justice system and criminology, I start wondering about our justice system. Every country in the world now has its own justice system and law and all of them are pretty much the same.

However the more I learn about that, the more i doubt it. Basically the justice system exist today require only a very small amount of people to determine the safety of our society. Judge(s) or jury team is the determiner in justice system. That mean the safety of the whole population is depend on few persons (normally less than 10). Besides that, how much trust do you have for these Judges or Juries? How many time did we heard of wrong conviction?

If wrong conviction does happen, well we can only say sorry for the "suspect" for wrongly convict him/her and put him/her behind bars for n years.

So that mean not only the safety of the population is under the shoulders of the judges or juries, the fate and life of suspect is under their shoulders as well. Again, do you trust them and confidence they will not make any mistake?

We can see the heavy bias and inconsistent factors exist in our justice system. 2 criminals who did the same crime under same situation may and (normally will) not not get same sentences. I would like to ask those judges WHY? How do they decide the exact sentence? Do they always give same sentence for same crime under same situation?

If not, why should i trust you and put you in charge of my safety?

11.10.09

Just Abolish The Death Penalty

I wanna take the chance here to talk about something i seldom talk. Death Penalty.

More than one third of the country in this world still maintain Death Penalty as an option in their justice system. Personally i think this is sad and should be abolished.

Yes, Death Penalty is created to punish those which commit a very serious crime and yes, the methods used for death penalty are some of the most humane way to kill.

However, it's still killing!

Let me put it this way. A person (man or woman) kill some one. He/she is guilty for murder. If we punish him/her by killing the person, does it make us guilty for murder too?

You may say the justice system punish him/her, but in reality we as a person authorize the government to kill a person still make us a murderer.

Furthermore, i thought prison/ jail/ correctional center should be the place to correct people, not punish people. Justice system suppose putting people behind bars to correct the person and make the person "not dangerous" anymore.

So do you think we can correct people using punishment and punishment only? i doubt it.

Death Penalty also has a big problem. What if the person is innocent? He/she may not has the chance to prove it. Over the years we seen countless number of death penalty inmates executed before found innocent.

Besides that, most death row inmates are placed in a small cell, 24 hours a day, 7 days a week, decades before the execution of death penalty. So that mean not only the convicted person have to encounter death penalty punishment, but also mental punishment as well.

So the whole point of death penalty is not about correctional, but isolation. The convicted person is claimed by justice system as "too dangerous" to live among us and has to be isolated and put away for good.

Wait, i thought we got something for that situation. It's called the Life in prison without parole. Why Death Penalty and why not life without parole?

I can only see two benefits of life without parole vs Death Penalty. First, cost. An inmates cost around USD 100-30,000 per year depending on country.

Reason 2: fear. The whole point of Death Penalty to public is to inflict fear among us to stop serious crime.

Both reasons are bulls**t.

If we can spend USD 100 million or more to build a prison or jail, why can't we afford the small amount of death penalty inmates. Remember every year we only got around 100 new death penalty recipient. I mean if we can go to moon 40 years ago and only got few tons of moon rock for few hundreds billions dollar, what's the problem of supporting inmates?

Second point is absolutely useless. Over the years, murder cases have been increasing with high percentage. Other serious crimes' number are also fast on the rise. That mean although everyone does feel fear of death penalty, serious crimes still happen.

People who commit serious crimes never thought of the punishment simply because they think they gonna get away from it. They think they can escape from justice. So the death penalty sentence does nothing to stop crime.

No, i do not think murderers "good" people. I hate them as much as all of you. I just don't think the death sentence is suitable and humane way of stopping crime. It's just torture. It's murder as well.

So next time you see a death sentence inmates executed, you, your country and your country's justice system are the murderer!

29.9.09

Useless & Misleading Investing and Trading Cliche

As we expected, the very last leg up of stock market is happening now. I expect this should be the top for stock market in 2009. Take 100% of your profit and relax yourself.

Today i wanna talk about some useless and misleading cliche (saying/idea/expression) of investing and trading. I hear it all the time from investors and traders. We all think these cliches are true but it's absolutely garbage.

1. High Risk High Return.

This cliche is probably the most famous among amateur traders and investors. It is so widely used by everyone and everyone thinks it's the truth. It leads people to believe in order to achieve reasonable high return, you need to take unreasonable level of risk. Besides that, it also encourage people to take risk without understand risk and ability to manage risk. So many people will ignore the high risk of a financial asset thinking they will get higher profit by investing in high risk financial products.

Yes, I admit, it is easier to get higher profit by investing in high risk assets. However it does not mean we can't reduce the risk involved. By understanding and with ability to manage risk, we can significantly reduce risk of risky financial assets such as derivative, option or foreign currency exchange. In other word, although we are investing in risky assets, by managing it, we can make it into a medium risk investment but able to generate handsome profit with it. So now it will become, reasonable risk, high profit.

How to reduce and manage risk? I have wrote some article able predicting stock market movement and you can check it.

2. Buy Low, Sell High.

This is also a popular saying in investing. Everybody knows we need to buy low and sell at high price to get profit.

However not many people can tell what is low price and what is high price. Most amateur investors and traders use historical market price as a measurement of price level.

Example: Microsoft (MSFT) was traded at around 55 (peaked at 58.80 at 24 Dec 1999) during the dot-com bubble. After the bubble burst, MSFT dropped straight to around 40 level which is around 32% drop. Many amateur investors, using the cliche of buy low and sell high, think 40 is low based on previous market price. They bought it at 35-40 level and stuck with it ever since. Even at the peak of 2007, MSFT still did not make it back to that level.

So the correct cliche should be buy at some level, sell at higher level.

To determine what is the good entry exit level, never use historical or current market price as indicator. You should use the fundamental and technical analysis tools to help you.Check my previous blog article for it.

Another mistake that amateur investors and traders always make it only decide where to enter but rarely decide where to exit. They usually spend huge amount of time deciding the reasonable entry level but seldom put any effort in planning the exit strategy. They rarely think about the profit taking level, cut loss level, collecting level, all in level and so on. So they will easily panic when something unexpected happen and make silly mistake.

Remember this, exit level is much more important than entry level as exit level will determine either you make profit or loss. Even if you enter the market at perfect moment does not guarantee you a profit, rather exit the market at perfect moment usually guarantee handsome profit.

3. Buy The Rumors, Sell The News

This is another popular cliche that i disagree on. It encourage people to invest based on rumors without consider facts behind it. It mislead people to make silly investment without knowing much info behind it.

I admit sometime, in short term trading, you may get lucky by investing according to this cliche. However i consider that as gambling and not investing. Rumors mean something that is not confirm and has no definite answer.

In other word, invest or trade based on rumors is exactly like gambling. It has a 50% chance of being right and 50% chance of bust. So you are investing based on 50-50 chance of getting profit and there is no chance of managing risk involved. If that's not gambling, i don't know what is.

Another funny part of this cliche is why you need to sell at news? If we got a good news about something, why should we abandon it? We should buy more on it.

Example i own a HK listed company call Enviro Energy (8182, HK). Few months ago it announced that it found some new oil field in Mainland China. That's a positive news. Why should anybody sell the share of this company based on that good news?

4. Stock Always Goes Up.

This is one of the funniest cliche i think i will ever heard. Many people say stock always goes up. Is that true?

NO. Bullish market mainly based on rising inflation. Inflation will always lift the price of everything higher including financial assets. Besides stock, food and commodity price will goes up as well.

Inflation happen mainly based on money supply. Higher the rise in money supply, higher the rise in inflation. That mean more money in economy, higher the inflation will be.

So to sum it up, stock goes up because of rising money supply. Is money supply always rising?

NO. Some countries experience negative growth in money supply such as Japan. As a result, the Nikkei 225 index drop from 40,000 in 1990 to 10,000 now.

However, rising stock market does not necessary a good thing. Rapid rise in money supply may result in bubble and hyperinflation. Look at Zimbabwe. Zimbabwe stock market did rise more than 700% from 2003 to 2007, but their inflation rate rises by 13.2 billion percent a month. That mean Zimbabwe is experiencing 516 quintillion percent annual inflation (516, 000, 000, 000, 000, 000, 000, 000% a year)

So still think rising stock market caused by rising money supply is good? think again.

That's all for today. Next time I will introduce more silly investment cliche.

25.9.09

Obama = Worst US Presiden Ever?

Stock Market is heading lower! It may not happen today or tomorrow as it may still have a leg up but nevertheless, it will heading lower this coming Oct or Nov so brace yourself for a bad Christmas.

Anyway my focus today is not about the market but about President Obama. I am sure he is one of the most influential US president ever domestically or outside the USA. The world loved him last year and congratulated him for winning the presidential election. He promise "Change" and "Change that we can believe in." However what has he done so far compare to what he promised to do last year?

His biggest promises are improve the economy and US foreign policy. From the first sight look like he is doing quite well but if you look carefully, he is climbing the ladder of the worst US president of all time.

First of all let's talk about US foreign policy. Obama promised us before the election that he will bring back US troops, close Guantanamo and give Iraq and Afghanistan freedom. The world loved the idea and praised Obama for these promise.

However what did Obama do since winning the election?

Afghanistan was having their election, but the election is rigged and corrupted. Hamid Karzai won simply because of graft and force and not support from Afghan.

Iraq is going nowhere near democracy. There are more suicide bombing in Iraq in the past 12 months than the history of Iraq history.

Furthermore instead of bringing back US troops, Obama is actually adding more troops in that 2 countries. The total troops in Iraq alone is rising to 130,000 from 115,000. FYI, all other nation have withdrawn their troops except for USA. That's not all, USA has spent more than 2 trillion US dollar since invading Iraq in 2003. How about the condition of US troops in Iraq? Here are the fact:

U.S. Troop Casualties - 4,340 US troops; 98% male. 91% non-officers; 82% active duty, 11% National Guard; 74% Caucasian, 9% African-American, 11% Latino. 19% killed by non-hostile causes. 54% of US casualties were under 25 years old. 72% were from the US Army

Non-U.S. Troop Casualties - Total 316, with 179 from the UK

US Troops Wounded - 31,483, 20% of which are serious brain or spinal injuries (total excludes psychological injuries)

US Troops with Serious Mental Health Problems - 30% of US troops develop serious mental health problems within 3 to 4 months of returning home

US Military Helicopters Downed in Iraq - 71 total, at least 36 by enemy fire



All these may not caused by Obama but he is certainly responsible for some of it as he still refuse to bring back the troops.

Now, Guantanamo Bay. Why is this torture chamber still standing on earth. I am sure all of us have information about this place and we know this place is hell for those inmates. Why Obama still let the torture activities going? Like Top Gear Hosts like to say : "How hard can it be" to close the Guantanamo Bay. Just charge the inmates and bring them to justice if they did something wrong. What's the difference between USA and Myanmar when both countries lock and torture someone without bringing them to justice?


Second part of this article is economy. Obama did promise a lot last year and it was sweet. He said he will bring the US economy back to its feet. He also promised he will cut down the deficits. Unfortunately, everything goes wrong!

First he appointed Tim Geithner as US secretary of treasury. Then he expanded the Toxic Asset rescue plan (TARP) and add more fund to "borrow" to large corporations through "stimulus package". Then he reappointed Ben Bernanke as the chairman of Fed and lastly he introduced the health care plan which "force" every US citizen to buy insurance policy.

Now if you think any or all of these actions by President Obama is/are good, then you probably don't understand the truth behind it or you are a CEO or chairman of "wall street" large company.

Tim Geithner and Ben Bernanke are no doubt big spenders. Personally i think Geithner + Bernanke + Tarp + stimulus package + health care plan are absolutely good enough to bankrupt US. The scale of this collapse will be much bigger than 1970s, 1980s or dot-com. I even think it will be bigger than great depression.

So after all this, how Obama can reduce US deficits? by spending more money? does Obama understand what is deficit?

Decifit means spending / expenditure higher than income. So how can he generate enough income to cover the huge spending? Enough with reducing deficit, how can he generate income to maintain balance US budget. The only way is TAX. Yes you will see incredible rise of tax rate in US.

Even then I still don't think tax will be good enough to cover US debt. US dollar will crush and US economy will collapse. I can't think of anything that can save US economy except for a giant ball of money drop down from sky.

...... and Obama will stand tall in history as one of the worst US president ever.

19.9.09

Can We Really Eliminate Racism?

Precious Metal start reversing. Gold was traded below the support level of 1008. However Silver still hanging above its support level of 16.70-16.80. I think you should take 80% of the profit and let the rest on the table. It doesn't mean precious metal can't go higher but the risk is just getting bigger.

Stock Market is look more and more like it gonna crash. CNBC team said it's bullish time again and this is the clear sell signal for stocks. However, again, it doesn't mean market can't go higher before the crash. I just can't see stock market all over the world rallied more than 60% from March low simply out of nothing. What's the most significant good economic news from March? Recession is over by Bernanke!

Here i wanna take a chance to talk about racism. I know this is a sensitive and serious topic. Everyone wants to eliminate racism but can we really go that.

To be honest, i don't think so.

Last month, a devastating typhoon hit Taiwan and killed more than 600 people and it was a disaster. People of Hong Kong and China donated huge amount of money, health care products and daily items.

However where are help from western countries?

Yes i know red cross association was there at Taiwan to help and i also know many people from western hemisphere did donate but where are help from other government?

Few weeks after that, Turkey was hit but the largest flood in decades. Thousand and thousand of people have no shelter to live. Many people from Western Hemisphere donated but where are those Hong Kong and China people that donated for Taiwan?

My point is that deep in our heart, racism is always there. China and Hong Kong people will car more of Taiwan people. Their action prove the point. I was in Hong Kong at during the disaster at Turkey and I never heard anybody saying anything about donate or offer help to the Turkish. I believe the same situation happen in Western countries when Taiwan was hit by disaster.

So, "eliminate racism" may only become a catch phrase to promote unity. Until we truly care of each other regardless of colour of their skins, religious and race, "eliminate racism" will never ever happen.

17.9.09

Technically, Ben Bernanke is RIGHT!

2 Days ago, Ben Bernanke said recession is over. It's the greatest news especially to wall street and stock market all over the world response well.

To be honest, I think Ben Bernanke is technically right this time. According to Keynesian economics, recession mean 2 continuously negative economic growth. I am absolutely confirm that US will register positive economic growth for the third quarters of 2009 simply because of trillions of Dollar been pumped into the system.

So, Ben Bernanke is right. Nowadays we use Keynesian theory to run our economics and he is following the rule.

However, is US economy back on the "right track" again? I don't think so. Is GDP the only indicator of economy?

NO. Until today we still don't know what is the figure of money supply in US (M1, M2 or M3) since it's controlled by a private agency called Federal Reserve. So, if rise in money supply is higher than rise in GDP growth, then we are looking bubble and inflation.

However, we are neither looking at Asset bubble of Japan in the late 80's nor Asset bubble of China in 2008. We are talking about a "poor" country that own 60% of world's total debt facing some giant bubble.

So, from what i can see, this bubble will kill US dollar and US economy. If you think the economic crashes of 80%, burst of dot-com bubble or recession of 2008 is terrible, wait until you see the next crashes. It will be so huge and will sent US back to square one. Dollar will fell through hell and precious metal price will skyrocket.

However, since now recession is over, enjoy!

15.9.09

Easy Way To Get Rich

Stock market around the world stand still for few weeks and nothing big happen except for precious metal. So you should hold on to the precious metal that you've bought and aim higher.

Since we have no real surprise in stock market, I will talk something about a theory. This theory use sophisticated analysis tools to teach us how to get rich.

Although this is a theory, it's actually applicable in real world as i believe most of the "rich man" in the world now are using this theory.

The philosophy behind this theory is simple. Assume we only have 2 people and 1 product in this world. To get rich, first person A will buy the product from person B. After that, person B buy the product from person A again with a higher price and person B finance it using money borrow from bank. After that Person A will again buy the product from person B with even higher price and the process continues.

At the end of the day, person A and person B are two rich man.

Wait, this story sound ridiculous right?


Yes. However the world is using this theory to manage our money and economy. It's Keynesian circular flow of income.

And yes, what i mean is the world today is using some useless and hopeless theory to evaluate wealth and money. However somehow we still use the theory and think it's suitable for us simply because many "expert" always tell us this is the right way to live. What we actually create using this method is none other than inflation and bubble

So you may ask what if the circular flow of income stop and 1 person refuse to buy from other person with a higher price?

Yes, this will create a crisis which technically called Asset bubble burst. Ever wonder why we have more economic crisis in the last 80 years than 500 years before in human history from 1500s to 1900s?

Keynesian theory of economics.

It's the perfect formula to get rich. All you need to do is spend money on an asset and sell it higher no matter how you finance the transaction. Ever wonder how some people can become so rich that we can buy the world? ever wonder how Rockefeller, Chase, bilderburg group and others can become so rich?

Yes, they all create situations where they can buy something and sell it higher. So they create ways to force you physically and mentally. They control your money and wealth. To do that, they must control government around the world and they did actually, believe or not.

Did anybody realize for the past 10 years, our life change dramatically? Our life is no longer belong to us but belong to the government. There are more legal acts that control our life in the past 10 years than 6000 years of civilized mankind history. Latest act is health care plan and it is created basically to control your way of managing your own health. You are forced to do something you don't want with hard earn money so that those rich people can become richer.

At the end, the goal is always the same, world government where the rich people and control everything including our life and soul and from their past and present performance, I guest they will be success for them.

So how they did it again? Yes, Money that created and controlled by them we become the slave for them. We work 8-10 hours a day for maybe 40 years for money and wealth and in the end, we get nothing. No life, no family time, no fun with friend......

You may say this is impossible and this can't be happening and it's just a conspiracy theory.......

To counter your argument, remember: We are using money created by rich people (federal reserve is privately owned organization!) on rich people. In other word, they are buying something from us (eg. time of our life as labor) and force us to spend our money buying something from them with much higher price and when we can't afford to buy it, we will borrow money from them with high interest and have to sell more of our time working as a labor. The cycle continues.

So you know how easy to get rich using this theory right?!

2.9.09

Look Out For Precious Metal!

Look out for the precious metal. They are rising and rising fast.

Precious metal have been underperformed compare to stocks and other commodities for the past few months. However in my opinion, you should at least allocate 25% of your capital into precious metal. They are going to explode just like 1980!

Why?

1. Billions of Dollar injected into the economics from central banks all over the world. Sudden increase in Money Supply = inflation. Many of you influenced by Keynes theory and think Inflation is calculated using consumer price index (CPI). Actually inflation should be calculated using increase in money supply.

2. Ben Bernanke. Last week Ben Bernanke remain as the chairman of federal reserve. He is throwing money from helicopter and everyone knows it. He will print infinity amount of money into the economics.

3. Interest rate. Even though everybody is talking about the recovery and end of recession, interest rate is kept low. Fed funds rate kept at 0-0.25%, Boj rate kept at 0.1%, Boe rate kept at 0.5% and ECB rate kept at 1%. Easy money is still here or should i say free money is at US which banks can borrow money for no interest!

So the best way to invest in precious metal is buying actual gold/silver/platinum/palladium bar or buying their future. However if you do not have the access to that, get yourself in precious metal etf such as gld or slv.

Try not to invest in stocks related to precious metal as most of the stocks are very expensive and overrated. Furthermore stocks tends to follow the stock market index and not their respective sector index. Example Barrick gold (ABX) has higher correlation with s/p index than gold future index. So this make the process of evaluate precious metal related stocks even harder.

Personally I got some of Zhaojin mining (1818.HK) and SLV.

P/S: to Tan, this is my recommendation. Try get some of these!

17.8.09

For Those Who Missed The Short Opportunity

Well for those of you who follow my lead before, congratulation. You should be up at least 5%.

However for those who missed the shorting opportunity, don't worry. There are still lots of opportunity for you. I am talking about short to medium term period of opportunity.

No doubt market will start with a large drop tonight but i think market will reverse course near closing and close with smaller drop. Market may rebound in next few days and here's your opportunity. This maybe the last opportunity for you to grab something on the way down.

Seriously i am talking about at least Dow 8000-8500, S/p500 850-900. However US market did not rise as much as some crazy markets so aim at those which rose more than 25% last month alone.

You already see what happen to china markets for the past few trading days. The same will happen to other markets too and the higher they rise, the harder they fall.

However if you wanna focus on US market, aim at those bear ETF such as SRS, FAZ, TZA and DXD.

4.8.09

How To Predict Stock Market Movement Correctly: Part 2

As we all know, one of the essence of stock market prediction is knowledge so I will suggest some of the knowledge of stock market based on my shallow experience and education. Remember this, you can get this knowledge by either education, experience or even from good investment and trading book.

First of all we can divide knowledge of stock market investment and trading into 3 major parts: fundamental analysis, technical analysis and economic environment analysis. Each of these three analysis are essential for us to predict the future and gain some handsome profit.

However before i begin, here are some of the thing everyone should remember: never target to buy at lowest and sell at highest. We all know we should buy low and sell high but remember, we can't get the lowest price to buy and highest price to sell simply because we are not David Rockefeller. And No, we should buy when the price is low as we will never know "how low is low".

So when should we buy and sell?

We buy when we find out that there is a confirmation of a uptrend and we sell when we get the confirmation of a down trend. When the uptrend confirmation reached, the price is not necessary low but we significantly increase our chances of getting a return for our investment and that's pretty much investment is all about.

One more thing: never regret selling too fast when price continue to rise and vice versa. We sell because we get the downtrend confirmation and not because the price reach the top. A winning trade is a winning trade. Don't fell bad when this situation happen. You should fell please avoid a loss and get a reasonable amount of gain.


Fundamental Analysis

Fundamental analysis mean the usage of fundamental data from single company to predict the future stock movement. Generally fundamental analysis aimed for medium to long term investment. There are hundreds of fundamental analysis tools available. However i will only highlight some of it. I will divide it into 2 categories: useful and useless.

Useful

1. NTA / share.

NTA or net tangible asset per share is my personal favorite tools for FA simply because it work every time. NTA actually represent the actual value of a company and NTA / share represent the actual value of a single stock. Generally if a share traded below its NTA / share value, it's a buy.

If you carefully examine NTA / share you will generally find one trend. Share price of a Big company (blue chip) in general is higher than its NTA / share as the demand for blue chip company is relatively higher that medium and small cap. So should we follow the rest and buy blue chips or we should buy medium and small cap that provide us with a below NTA / share opportunity?

In my opinion, we should choose the second option. Every great investor including Mr buffett is telling us that we should buy blue chip but remember this: Mr Buffett made his fortune by investing in Berkshire Hathaway, a small company that had lot of potential.

I am not recommend you to buy any medium to small cap but rather choose medium to small cap company that traded below NTA / price. If you manage to find a blue chip with below NTA / share price, grab it!!!


2. Return on Equity

We invest in a company and become one of the owner of the company because we think it's a potential and profitable company. So we would like the company to perform well in the future but how would we know the company will do well in the future? Yes, using past data. Return on equity is a rather useful tool to target a potential great company. If a company maintain double digit ROE in the past 10 years or so, what make you think the company can't continue the trend. That's why ROE provide us the valuable information on the management quality to maintain profit and return on our investment.


3. Gearing Ratio

AKA risk ratio provide us the risk involved for investing in a company. Company with high Gearing ratio usually will has high fluctuation. That mean greater movement in stock price. Since Fundamental Analysis aim at long term, consistent return investment, company with lower gearing ratio is my choice. It provide us with steady return with low risk and that's sweet!

Useless

1. P/E ratio.

Yes, P/E ratio is one of the useless ratio. Although it is probably the most famous FA tool and used widely by investment banks in their analysis, it is absolutely useless. We will never know which is better, high P/E or low P/E. High P/E mean high demand and low P/E mean great value.

I've seen company with really low P/E ratio stay underperformed for more than 10 years. I've also seen company with negative P/E ratio maintained its high price for more than 5 years.

Look at all the market movers. They are stocks with high PE and negative PE and yet they still lead the market one way or the other.

So basically PE ratio is the absolute useless tools to find valuable and potential company.

2. Current Ratio / Quick Ratio.

To be honest, current ratio or quick ratio is one of the most famous but useless ratio. As everyone know, difference between current ratio and quick ratio is inventory. Both ratios offer no help to you to find a potential company as they only give you very limited information about short term solvency of a company.

Company in different sector will provide different value of CR or QR. Example consumer sector companies normally have high CR /QR while property and construction companies normally have low / below 1 CR / QR.

So the figure never give you any information how good a company is.


Technical Analysis

Technical analysis is much more complicated than FA. Generally TA provide relatively shorter term information on market movement or stock movement. TA involve use of chart to analyze the market.

TA is crucial to predict short term market movement and an expert in TA will have more than 80% chance of correctly predicting the market.

So what you need to predict the market in short term?

1. Moving Average.

Moving average is probably the most important tool of TA. It provide support and resistance level for us and based on my experience, more than 90% of the time simple moving average (SMA) will work as support and resistance.

However, you may wonder what the number of SMA to use.

For index and commodity, you should use 18, 45, 100 while for single stock the magic number is 10, 20, 60, 100, 200. Example if you are looking at 1 minutes chart of an index, what you need is SMA of 18 minutes, 45 minutes and 100 minutes.

2. Fibonacci

Fibonacci is another absolutely important tool of TA. Like SMA, it provide crucial information on support and resistance. Together with SMA, it provide an ultimate support and resistance data with accuracy of more than 95%!

At you need to do is tick the lowest and highest point of a run and look at 68.2%, 50%, 38.2% level of that run. It will serve as either support or resistance of the counter move.

Example, stock market spiked up for the last 3 weeks. So now if market reverse which i think will happen, 68.2% of that spiked up run will be our first level of support, 50% will be our second support level and 38.2% will be our third support level. If market brake 38.2% support, then most probably market headed toward the original point of that spiked up run.

3. Elliot Wave.

Elliot wave is a super complicated tool of TA and it is so accurate i think all investor and trader should learn. Although Elliot wave provide no precise information on the market, it tell you where you are and where the market is headed. You can't know how many point market will rise or drop but you can know when market will rise and drop and where it is heading to.

Elliot wave use a simple 3 wave pattern for bearish market and 5 wave pattern for bullish market to predict the market and believe it or not, it work most of the time. Besides that, you can use it to predict the market in short term or long term.

4. RSI

Relative strength index is another popular TA tool. It provide fairly good information on the movement on the market. When RSI reach 70 or above , the market is said to be overbought while RSI 30 or below is said to be oversold. Market tend to reverse after that.

However, RSI only suitable for index and commodity and not suitable for stock. Stock can reach as high as 99 on RSI and stay there for sometime so beware.

5. Stochastic

Stochastic is highly important TA tool which basically tell you either the market is overbought or oversold. Unlike RSI, stochastic work for index, commodity, stocks or other financial assets.

You should always use fast stochastic with 14 period as it provide more accurate data.

Stochastic analysis involve 2 lines: K line (usually black) and D line (usually red). In normally circumstances, when K line crosses D line, market will reverse. Of course to confirm the reversal movement, we usually wait for one of two trading period to confirm.


Economic Environment Analysis.

Economic environment analysis mean predict the market movement using economic indicator such as interest rate, inflation rate and unemployment rate.

To master this analysis, you should either go through a good education system, read a lot of investment and economic books, or have years of experience in investment.

Although this analysis does not feels very complicated, it's actually the hardest part to master. Most traders or investors do not understand economic environment analysis thoroughly but they think they do.

It's far more difficult to predict the economy than to predict the market and remember: it's the economy which affect the financial market and not the other way around.

Financial market go up will not cause the economy to improve but rather because of improved economy. Worsened economy cause the stock market to tumble and not the other way around.


Conclusion

First of all, I am not saying i am at expert in predicting the market. I am only a regular guy who went through some years of education and have some experience in financial market.

Also, I am not saying you must use those tools to predict the market. I just found out those tools are good enough for you to correctly predict the market. I truly believe you will be able to do that with those tools i recommend. FA + TA + EEA = more than 80% successful rate.

Do your homework and profit isn't far away!

3.8.09

One Of The Best Video on Youtube (Don Harrold)

For me, this is a very good video from Don Harrold at Youtube. I consider it as one of the best. Don address this in absolute pinpoint way.

Are You Ready?

Last year, almost all Economists, Analysts, Leaders, bankers, financial program hosts, billionaires, columnists, critics, journalists, blog writers, investors, speculators, traders, CNBC team (Jim Cramer, Larry Kudlow, Fast Money gang......), and everybody else said this economic slow down is the worst since Great Depression 1929 and world war 2.

For those of you who does not know much about The Great Depression, you will misunderstand what those people mean.

Most of us think Great Depression ended at 1933 but actually world economic did not recover fully until end of world war 2 so we can even paired Great Depression and World War 2 together as the single most destructive economic problem in the history of earth.

So here we are in August of 2009, around 6/7 quarters of economic misery (slow down started at last quarter of 2007 but some argue recession started at first quarter 2008), suddenly every thing is going fine. We can 1-2 month of crazy surge in stock market and those people that told us "this is the time since GD" suddenly say "we are recovering".

Some Asia country recorded really strong GDP figure such as S. Korea, China and Singapore while western countries such as England and US still show weak GDP data.

So how can one of the worst recession or even depression in human history only lasted for 6/7 quarters?

Well you may say it's the wisdom of world economic leaders that save the world.

However I don't agree at all. Can you tell me what our Leaders did for the past 6-7 quarters?

Appeared on TV and said "the recession is worse than we thought and we need stimulus"

In other word, our leaders only spent huge amount of money.

So if Spending a lot of money is the cure, then why should this problem called the worst recession since GD 1929?

So what I mean is either this recession is not a problem at all or we haven't solve our problem at all. I prefer the second.

Spending money led us to this recession and spending money will lead us out? How stuopid do we need to be to suggest this.

From 1500 to 1929, every country in the world who used Adam Smith's free market or laissez-faire system only experienced 1 major economic crash while from 1929 to 2009, we had at least 5 major economic crashes.

You must be wondered what happened in 1929 that led to a series of economic crisis (except Great Depression, of course). Yes, Keynesian theory of economics created.

So back to our topic, if you think the worst economic crisis since GD 1929 end now after only 6-7 quarters, buy!

However if you think the worst economic crisis since GD 1929 will last longer than 6-7 quarters, the get ready to short. Collect it from time to time. You will be rewarded.

28.7.09

Invisible hand VS Invisible inflation

Invisible hand VS invisible inflation is my title today. I assume everybody does not know what is invisible hand so i gonna tell you (again).

Invisible hand was probably the most significant Economic term created by Adam smith, the father of modern economics, in his book, An Inquiry into the Nature and Causes of the Wealth of Nations or sometime only known as Wealth of Nations (WON). A lot of economist try to describe the term in some very hard-to-understand way. So i will try to explain the term in the simplest way.

Every entity in the Economic such as you and me only care for ourselves and we shall choose the option of economy that benefited us the most. When every entity does that, it will create a market force called "INVISIBLE HAND" that will correct any unwanted or unhealthy economic problem such as inflation, unemployment, and so on.

In other word, we do not need regulator, the market which include everyone will correct ourselves. Example when prices of computer is high, we do not need government to implement price ceiling policy. We simply do not buy it (demand lowered) and hence the prices will drop again.

However, this is not the way our world is working. Every country on the planet do not like the idea and instead choose Keynesian theory of economic.

According to Keynesian, we need regulators such as government.

back to our topic, most of the country in the world recorded negative inflation rate, also known as deflation rate which mean continuously drop in the overall prices for the last few months.

Almost everyone blamed the Great Depression of 2007/8/9 as the sole reason it happened.

However, I DO NOT THINK SO......

We recorded deflation simply because we use Consumer Price Index (CPI) to measure the overall prices of all the products in the market.

Let me ask you a simple question: besides gasoline / petrol, anything around our everyday life became cheaper for the last 6 months?

Food? Cloth? public transport? bank charges? beauty products?

Anything became cheaper? Yes: price of properties, prices of commodities and prices of shares which have very small impact on the average life of a regular family.

So in other word, what we experiencing now is called deflationary asset prices and not deflationary goods / services prices.

For decades, leaders and regulators are telling us in order to achieve relatively high economic growth, we need to sacrifice moderate rate of inflation. Keynesian theory of economic really pinned into the mind of our leaders and regulators.

So according to Keynesian, US is the richest country in the world since US has the highest GDP figure in the world (25% of world GDP).

However US own 70% of total world debt. So, late John Maynard Keynes or any Keynesian Economist, can you explain this?

25.7.09

Market Rallied 5% - 15% In The Past 2 Weeks - Economic Recovery?

Market all over the world is in a buying frenzy in the past 2 weeks or so. Some market rallied as much as 15%. Wow, that's around 1% a day. Something really big are happening.

Wait, what happened in the past 2-3 weeks that got us all into the buying frenzy? does this mean we are out of Recession? Does this mean Economic is recovering? Or better still, Recovered?

Let's analyze...

1. Company financial result.

One of the most important reason market rallied is companies' better than expected financial result for the second quarter of 2009.

What is better than expected financial result? Who is expecting what kind of result?

So few so called "analyst" gave their expectation on a company's financial result and when the actual result exceed it, we buy?

Is that how we decide to buy the share of a company?

So if those "analyst" gave some very ridiculously low expectation and the actual result exceed it by miles, the company is suddenly on the right track again?

This is what happened in the past 2 weeks, some analyst gave some ridiculously low level of expectation and almost certainly below the actual financial result. The actual result are not as good as everybody think, you know.

2. Overall Economy Condition

Overall economy condition look like recovering. In US, some important sectors are improving. Housing sector, Health care, Transportation and banking sector all are improving. Or is it?

Did unemployment rate dropped? Did consumer confidence improving? Did commodities improving along side stock market as well? NO.

Everything is still as bad as before except for few "better that expected" figure in a few sectors. Come on, you don't believe those analyst that told you to buy at Dow 14,000 in 2007, do you?

Today, UK announce their second quarter GDP data and guess what, here's the result:

The Office for National Statistics said GDP fell by 0.8 per cent on the quarter, taking the annual decline to 5.6 per cent. Analysts had forecast a quarterly decline of just 0.3 per cent after a hefty 2.4 per cent drop in the first quarter.

Remember UK is the first developed country to announce their GDP data. What fo you think will happen to the rest of the world?

3. China

Is China the main reason we rallied? No. Is China a reason we rallied, ABSOLUTELY YES!

China Economic Growth accelerates to 7.9%. That a huge boost for China and whole Asia. Or is it?

Remember what happened to the second quarter of 2008 when we all thought economic recovering was on its way and suddenly in third quarter everything became horrible? Will it be happening again? You decide...

4. Fear Index

Volatility Index, known as Fear Index is declining in fast pace signaling Economic Recovering.

here are the chart of VIX for the past 6 months.



I am no expert in Technical Analysis but my brain is telling me a heavy drop like this will result in a heavy bounce and a heavy bounce in VIX will result in slump in stock market.

Anything else? you tell me. For me, one word can summarize the reason market rallied all over the world: SPECULATION. Everyone is speculating the economy will recover and want a piece of it. However in reality, fundamental of economy does not change at all.

After all, if we can solve the biggest slowdown since THE GREAT DEPRESSION with just money and 2 quarters of negative growth, we would not call it the biggest recession since TGD.

So what do we got? YES, SHORTING OPPORTUNITY! Prepare you ammo, ready to shoot it down!

23.7.09

Teoh Beng Hock's Death: Let eliminate some possibilities

For all Malaysians, Teoh Beng Hock was probably the most frequent speaking name since last week. He was the political secretary of Selangor Assemblyman and Exco Ean Yong Hian Wah.

Chief of Police has warned everyone not to speculate the death of Teoh Beng Hock so i won't. However i will try to eliminate some possibilities regarding his death.

1. Suicide: before we relate Teoh's death to suicide, we must first understand why a person will attempt sucide. Suicide may occur for a number of reasons, including depression, shame, guilt, desperation, physical pain, emotional pressure, anxiety, financial difficulties, or other undesirable situations.

Back to Teoh's case, he was a responsible and man. He was financially healthy and had a wonderful family. He had been planning to register his marriage with his engaged and pregnant girl friend the day following his death.

Ss was Teoh suicide? you decide...

2. Accident: Teoh was a 30 year old healthy person. He was not a disable person. The window which Teoh fell down is 3 feet above the ground. So imagine Teoh opened the window, accidently fell down from 14th floor with a 3 feet barricade....... hard to imagine though.

So what else? ooooop, i can't write further since the police warned us not to speculate.

SUICIDE? ACCIDENT? OTHER REASON? YOU DECIDE ......

At last, I'm Back

Wow, after few months absent, i am back.

Well, i am here today to offer my thought on overall stock market and some blockbuster films that i watched.

Remember the most famous quote of Warren Buffett:

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
"

Well if you follow Mr Buffett and start buying at Dow 6500 where everyone is fearful, you are making really big profit now.

However everyone is greedy now and stock market all over the world are carry upward by the raging bull. Most Asian stock market reach the highest point of 2009 this week. Eu market and US market are near their year high.

Reason? better than expected companies' financial result and comment by many analyst including Nouriel Roubini.

Recession is over!!!!! Or is it?

Remember the quote: we should be fearful when others are greedy!

So everyone is buying now. Ever wonder who is selling?

Yes, Companies' major shareholders.

They are clearing their position and getting away from this huge rally.

And YES, GET READY TO SHORT, you don't wanna miss the opportunity. Concentrate on the market that has risen more than 7% since last week. Do you math!

Go for options, futures or shares, just prepare to short the market.

Ok enough for stock market. I am watching more than 10 movies since last week and wanna share with you my thought on some of them although i am quite sure most of you have watched these movies.

Harry Potter and Last Half Blood Prince - Best in the series, must watch for harry potter fan. Highly recommended.

Transformer: Revenge of the Fallen: One of the worst movie i have ever seen. Wonder why it broke so many box-office record. Feels like going through heavy metal concert with a lousy singer. Recommended if you are deaf but not blind because of Megan Fox!

Ice Age Dawn Of The Dinosaurs: Good movie, although not best in the series. Scrat is Still the main attraction and 3D animation for this film is just great.

Land of the Lost: Movie that will make you lost. It will make you wonder why you spend your hard earned money and go through 90 minutes of boredom. Unless you are will farrell's fan, forget it.

Public Enemies: I love this movie. Johnny Deep is still solid as usual and bank robberies scene really make the movie that much better. If you want action movie, this is the one for you.

The proposal: in my opinion, The proposal matched up great cast with stupid story. Sandra Bullock and Ryan Reynolds are great but the story really turn it down.

So here's what you should do next: go watch harry potter and prepare to short the market next week or a week after that!







15.2.09

I'm Back

I'm back from South Africa after more than 2 months trip as i was sent there to assist the company operation. It is a great experience.

However i am back to Asia and i will continue to do the same fun job again.

US again passed another stimulus package worth 787 Billion dollar. The package include 1/3 of tax relief and rest of it is to help banks to "survive"

paul krugman, nobel prize winner last year said the bill is too small to solve the economy. So what is he expect? 7.87 Trillion?

FYI, 787 billion is 787,000,000,000 or more than 2500 per capita. That mean every American have to give banks 2500+ of money for them to loan money back to American with high interest payment. That does not sound right for me.

Furthermore CNBC yesterday publish a very good article about the "loss decade of Japan".

Here are the article:

The Obama administration is committing huge sums of money to rescuing banks, but the veterans of Japan’s banking crisis have three words for the Americans: more money, faster.

The Japanese have been here before. They endured a “lost decade” of economic stagnation in the 1990s as their banks labored under crippling debt, and successive governments wasted trillions of yen on half-measures.

Only in 2003 did the government finally take the actions that helped lead to a recovery: forcing major banks to submit to merciless audits and declare bad debts; spending two trillion yen to effectively nationalize a major bank, wiping out its shareholders; and allowing weaker banks to fail.

By then, Tokyo’s main Nikkei stock index had lost almost three-quarters of its value. The country’s public debt had grown to exceed its gross domestic product, and deflation stalked the land. In the end, real estate prices fell for 15 consecutive years.

More alarming? Some students of the Japanese debacle say they see a similar train wreck heading for the United States.

“I thought America had studied Japan’s failures,” said Hirofumi Gomi, a top official at Japan’s Financial Services Agency during the crisis. “Why is it making the same mistakes?”

Many American critics of the plan unveiled Tuesday by Treasury Secretary Timothy F. Geithner said the plan lacked details. Experts on Japan found it timid — especially given the size of the banking crisis the administration faces.

“I think they know how big it is, but they don’t want to say how big it is. It’s so big they can’t acknowledge it,” said John H. Makin, an economist at the American Enterprise Institute, referring to administration officials. “The lesson from Japan in the 1990s was that they should have stepped up and nationalized the banks.”

Instead, the Japanese first tried many of the same remedies that the Bush administration tried and the Obama administration is trying — ultra-low interest rates, fiscal stimulus and ineffective cash infusions, among other things. The Japanese even tried to tap private capital to buy some of the bad assets from banks, as Mr. Geithner proposed.

One reason Japan’s leaders were so ineffectual for so long was their fear of stoking public outrage. With each act of the bailout, anger grew, making politicians more reluctant to force real reform, which only delayed the day of reckoning and increased the ultimate price tag. Japanese taxpayers are estimated to have recouped less than half what it cost the government to bail out the banks.

A further lesson from Japan is that the bank rescue will determine the fate of the wider economy. While President Obama has prioritized his stimulus plan, no stimulus is likely to succeed unless the banking sector is repaired.

The Japanese crisis of the 1990s and early 2000s had roots similar to the American crisis: a real estate bubble that collapsed, leaving banks holding trillions of yen in loans that were virtually worthless.

Initially, Japan’s leaders underestimated how badly the real estate collapse would hurt the country’s banks. As in the United States, a policy of easy money had fueled both stock and real estate speculation, as well as reckless lending by banks.

Many in Japan thought that low interest rates and economic stimulus measures would help banks recover on their own. In late 1997, however, a string of bank failures set off a crippling credit crisis.

Prodded into action, the government injected 1.8 trillion yen into Japan’s main banks. But the injections — too small, poorly planned and based on little understanding of the extent of the banking sector’s woes — failed to stem the growing crisis.

Fearing more bad news if banks were forced to disclose their real losses, Japan’s leaders allowed banks to keep loans to “zombie” companies on their balance sheets.

Japan, instead, experimented with a series of funds, in part privately financed, to relieve banks of their bad assets.

The funds brought limited results at best, says Takeo Hoshi, economics professor at the University of California, San Diego. For one thing, the funds were too small to make an impact. The depository for bad loans had no orderly way to sell them off. And the purchases that did take place failed to recapitalize banks because the bad assets were priced so low.

So far, the Obama administration’s plan avoids the hardest decisions, like nationalizing banks, wiping out shareholders or allowing banks to collapse under the weight of their own bad debts. In the end, Japan had to do all those things.

Economists say these blunders meant Japan’s financial system did not start to recover until late 2002, six years after the crisis broke. That year, the government of the reformist leader Junichiro Koizumi ordered a tough audit of the country’s top banks.

Called the Takenaka Plan after Heizo Takenaka, who headed the government’s financial reform efforts, the move finally brought the full extent of bad loans to light. Initially, banks lashed out at Mr. Takenaka. “The government can’t order bank management to do this and that,” Yoshifumi Nishikawa, president of the Sumitomo Mitsui Financial Group, complained to the press in October 2002. “It’s absolutely absurd.”

But Mr. Takenaka stood firm. His rallying cry, he said in an interview on Wednesday, was, “Don’t cover up. Don’t distort principles. Follow the rules.”

“I told the banks clearly, ‘I am in a position to supervise you,’ ” Mr. Takenaka said. “I told them I am not open to negotiation.”

It took three more years to finally get the majority of bad loans off the banks’ books. Resona Bank, which was found to have insufficient capital, was effectively nationalized.

From 1992 to 2005, Japanese banks wrote off about 96 trillion yen, or about 19 percent of the country’s annual G.D.P. But Mr. Takenaka’s toughness restored faith in the banks.

“That was a turning point in the banking crisis,” said Mr. Gomi of the Financial Services Agency, who worked with Mr. Takenaka on the audits.

By then, other factors had fallen into place that aided economic recovery, including a boom in exports to the United States and China.

(Those very share holdings would come back to haunt banks, as the recent market sell-off batters their balance sheets. And as the economy worsens, bad loans are again on the rise, the Financial Services Agency said Tuesday.)

The United States will probably not be able to count on growing demand for its products, since the global economy is worsening.

“The way things are going right now,” said Mr. Hoshi, “the U.S. taxpayers’ burden will keep going up and up.”

In other word, Alan Greenspan, Ben Bernanke, Tim Geithner and other "economist" critized Japan for their mistake for bailout "zombie bank and Zombie company" and cost japan 13 years of deflation in housing market and huge amount of debt. However they are doing exactly the same as Japan.

Few days ago i watched 8 banks' CEO in a hearing with House of Representatives and CEO of Citigroup, Vikram Pandit said decoupling will never happen and US will continue to be the financial center of the world.

However, here's the funny part: if US is so strong and powerful, why president Obama and other fed officials blaim China for their intervention with Renminbi? Why more than 30% of Citigroup, Bank of America and Jp morgan Chase own by people from Asia? Why top three of the largest bank in the world are all from China?

The answer is obvious...