VIX

This is the weekly chart of VIX or volatility index. Every indicator on this chart (Macd, Stochastics, double bottom etc.) shows a bullish outlook. So if VIX is bullish, chances are stocks are bearish. Lookout!

3 Great Movies

Watched 3 movies this weekend. 1 at cinema and 2 on DVD. All 3 are great movies so I plan to share my thought here. Btw as predicted market is going south (with or without the Egypt problem). Commodity had a great rally thought (slv!!!)

1. The Way Back.

The way back is a great movie. IMO it excel in 3 areas: directing, acting and story. I think this is Peter Weir best work ever and he done a fantastic job of turning The Way Back into one of the must-watch movie.

Acting is also superb. Jim Sturgess, Colin Farrell, Ed Harris, Saoirse Ronan and rest of the cast are all amazing. It is their acting that make this fictional story believable.

Story is also another superb element of the film. The main storyline is good but the real clever part of the story is the interaction between characters.

However, they are some "not-so-good" part in the film. The opening part is boring and too long. There are some unnecessary characters and the ending is pretty stupid. (spoiler alert! go back to Poland after 1989? lol)

Great movie, 8.5/10.

2. Buried.

I didn't go to watch this at cinema and it was a bad decision. The movie is great in its genre. The real clever part of this movie is the originality of it. 1 actor, 1 location, 1 simple story. That's it.

Ryan Reynolds I think did a good job. Although he is overreacted in some parts, overall his acting is believable. Director Rodrigo Cortes manage to turn this into something exciting and suspenseful.

For me the best part is the ending. Although many critics and viewers criticize the ending, I think it is great. Spoiler alert! When the guy said sorry they found Mark White instead of Paul Conroy, it is a dagger to the heart and will leave a much longer memory on the viewers than simply a successful rescue.

There are some flaws with this film like the snake part is really stupid and the joke about voice mail is dump as hell. Still a great movie. 8/10

3. 127 Hours.

Unfortunately in Malaysia, this movie still hasn't screened yet. This is a fantastic film based on a true events. Most elements of this film are superbly done. James Franco is amazing. He deserves the oscar this year. His portray of Aron Ralston is both funny and merciful. Unbeatable performance.

Director Danny Doyle is great and manage to keep the 90+ minutes movie entertaining with only 1 actor.

The beginning of the film is probably the weak part of this film and the inclusive of that 2 females is bad and boring.

The film should get 8 or 8.5 but because of Franco I will give it 9/10. One of the best movie of the decade for sure.

Next movie for me (at cinema) is probably sucker punch (kick ass trailer!!!).

Beginning of the End?

Yesterday was a significant day in financial markets. Although stock markets across the globe weren't badly affected (Europe markets were the relatively underperformer).

However commodity markets were severely affected. energy decreased more than 2% and precious metal decreased more than 1%.

The most important indicator, copper, gave up more than 2% as well.

Bearish sentiments are all around every corner. Although firms' earnings are good, they are past data. Quantitative easing 2 (QE2) is not likely to save the economy from going south.

From technical, financial and economics point of view, there is no way the stock markets can maintain at current level. The contraction or at least correction that were predicted by many analyst last year is still pending. All we got last year was some small downs and mostly marginally increases.

Unemployment stay high across the developed nations, China inflationary pressure and artificial expansion of monetary aggregates. All of these can only lead to lower stock markets.

So, can we gain from all these?

(1) Hold as many money in risk free (or minimum risk) assets as possible.

(2) Invest in dividend yield firms in minimum exposure markets (such as New Zealand or Indonesia).

(3) Short the over inflated markets (almost every markets lol)

(4) Wait to buy any commodities when the prices are reasonable (I prefer silver and sugar)

Just think for a second: markets around the world has risen at least 100% from their lows and at most 40% of their high in 2007 but the economy are going nowhere in the past 3 years (at least for developed nations). How can stock markets keep getting better??

Private vs Public Universities, The Case Of Malaysia

As a part time lecturer in one of the private universities in Malaysia, I get this question all the time. Generally students think that private universities are better than public universities. I disagree so here are my brief analysis on private and public universities in Malaysia.

In Malaysia, public university are non-profit organisation partially funded by central government and private university are profit based non-government coorperation. The followings are (for me) the advantages of public university:

(a) Academic stuff. Since 2010, public university have over 80% of their academic stuff are Phd or Phd candidate while less than 20% of private university academic stuff fall under that category. Phd graduates academic stuff may not be the best lecturer / tutor, but they are most likely to be better researcher.

(b) Research. Just look at the thesis done by private university student and public university student and you'll imediately know why public universities is better. I have the access for Master level thesis of some private universities in Malaysia and most of them are worse than undergraduate level thesis for public universities.

(c) Facilities. Since public universities are non-profit organisation and partially funded by government, their facilities are much better than private universities'. The library and database of public universities are incomparable.

(d) Students. In Malaysia, generally we have a tradition: The very best high school / secondary school graduates will study oversea in foreign universities. The next level of graduates will study in public universities and the rest will end up in private universities. This is happening as private universities tends to accept weaker students for higher profit. Because of that, public universities have much better competition among students and the environment of study is better too.

Private universities are catching up to public universities but they have a long way to go before they reach the level of public universities. As long as they can't improve on those areas, they will never surpass public universities.

A Freeman is captured

Surfing the web led me to this funny page. It is a page in the Florida DOJ. The inmate's last name is Freeman and apparently his attempted escape from a prison has failed.

A Freeman is captured!!!

Well Done China!!!

According to JP Morgan and Morgan Stanley, China may raise the benchmark lending rate by as many as 3 times in the first half of 2011 as inflation is a major concern in China. Other emerging countries are expected to do the same shortly.

Ever since the phillips curve created by William Phillip in 1958, which shows an inverse relationship between Inflation rate and unemployment rate, very few nations choose the maintain price stability. They were more concern on the rise in unemployment rate.

Then in the 1970's, rational expectation and non-accelerating inflation rate of unemployment (NAIRU) arose that explain the long run relationship between inflation rate and unemployment rate. Unemployment rate will be at natural rate of unemployment in long run. Inflation rate on the other hand will fluctuate accoordingly.

Although the phillips curve is no longer used as it is too simplistic, the long run relationship between the inflation rate and unemployment rate is still correct according to NAIRU.

Since in the long run, we will have natural rate of unemployment, it is not hard for any economist to target inflation rate especially when we know that money neutrality concept holds (through countless number of researches).

It seems like China are among the first nation in the world that realize that and they start increasing their key interest rate as early as February of 2007. Although they did eventually lower the overnight rate to 5.31% on December of 2008, it is still among the highest interest rate in the world (lower than other well managed economies such as Brazil and India).

Since money supply is now considered as exogenous by some Economists, perhaps the best way of lowering money supply thus lowering inflation is increase interest rate.

US and other developed countries still maintaining a superbly low interest rate simple for the reason of boosting employment and GDP but look at the BRIC nations. They all have high interest rate and they all have powerful growth of GDP and GNP.

India are another well managed economy. The unemployment rate continue to decrease while the key rate is kept at such a high level.

We still have quantitative easing 2 (QE2) to come. It seems like developed countries are not going for interest rate hike anytime soon.

Do Business Students Need Macroeconomics?

Nowadays many business programmes (undergrad or postgrad) do not include any Economics paper. Some only offer Microeconomics (although they may call it principles of Eonomics or introduction to Eonomics). I had a conversation with a MBA graduate last week about this and according to her, business students do not need Macroeconomics. She said (quote)"business student only need to know Microeconomics such as demand, supply and elasticities. They do not need to know how to calculate GDP and unemployment rate"

This is my opinion as an Economics graduates to the question "Do business students need to learn Macroeconomics"

I think Business student need Macroeconomics more than they need marketing, logistic, human resource management etc. Macroeconomics is not a study of approaches to determine GDP or Unemployment rate. Macroeconomics is a study of the relationship of aggregate variables in Economics. Macroeconomics determine the effects and consequences of a change in an aggregate economics variable to another (or more) aggregate economics variable(s).

If unemployment rate increases, what will happen?

If money supply increases, what will happen?

If tax increases, what will happen?

Since business (firm sector) is a subset of Economy (other agents include consumer/ household, government and international sector), It can affect the economics and vice versa.

The best example of how Economy can affect business (firm sector) is during an economic crisis. Sub-prime crisis in 2007 started when Federal Reserve increased the money supply and decreased the interest rate after the Dot-Com bubble in 2001. Eventually it led to the overshooting of money supply and GDP and we all know the consequences after that.

During the crisis, the firm with best management team in the world either suffered decrease in profit, huge loss or even faced bankruptcy.

WHY?

I did a simple correlation of profit of firms in Malaysia, Singapore and Hong Kong. I used 3 economics variables: GDP, unemployment and money supply (M1) and 3 management variables: gearing ratio, company credit rating and quick ratio.

The result speaks for itself.

Correlation with profit:

GDP = 78.32%

Unemployment rate = 91.12%

Money supply = 92.85%


Gearing ratio = -18.5%

Credit rating = 38.75%

Quick ratio = 62.33%


In essence, Economics is a study of choices occurred results from unlimited wants and scarce supply. So Economics students study the management of resources and the flow of income.

For me, Economics graduates are similar to Business graduates. Only different is Economics students study the management of an (aggregate) economy while Business students study the management of a firm.