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Showing posts from February, 2007
Ozone Layer In Markets Broken

Times like these, we have to assess major pointers and plan strategy. What we know:

1) This is a yen carry trade reversal fear, not a China thing anymore
2) This is largely fear based, rather than actual unwinding of stocks and bonds to buy back yen
3) Is growth intact, is earnings intact, yes and yes
4) What about inflation, if anything the US is headed for a soft landing
5) Now that the dust has settled, look at the interest rate differentials btw yen and uds, yen and ringgit, yen and aud, yen and euro ... the differentials are still very attractive to continue with the yen carry trade
6) Would carry trade unwind? Not likely, the differentials are still there... Why then the correction? Its largely fear-based, China dropped on silly rumours, yen held steady, Nikkei lost a bit. Dow carried on the losses but the yen gained 2 yen in strength during US time ... fear sets in that this is the beginning of a tide, but more likely it is just a lot of forex traders tak…
View To A Kill

The Nikkei did not drop by much yesterday and the yen was largely unaffected. Shanghai dropped on rumours of a 20% stock capital gains tax. This has already been refuted by the authorities in this morning's paper. Dow Jones fell but what was more interesting was the yen's strength, no reason for the yen to strengthen but for reversal of carry trades.

1) Reversal of carry trades in yen need only be a whisper and it will trigger off fears and prompt more currency traders to buy the yen, reinforcing the fears of those who borrowed in yen to buy stocks and bonds in other currencies.
2) Does it matter whether the yen deserves to strengthen? No, it does not matter, reality rules. Will the BOJ step in, yes and the rest of the Asian central banks plus Fed will step in to assuage the weakness.
3) The big wigs do not want the yen to strengthen too much from here.
Continued fear driven selling this morning. Expect yen to stabilise and gain support from central banks later today…
Ooooiii!!! Yus baby, where the f___ are you now?? Still buy aah??? - as heard in many broking halls this afternoon...
Drop Until Your Mother Also Cannot Recognise!

Well, everyone wanted the correction, but when it came, the severity was under-estimated. That's the problem when you are in a trend, everyone looks at the good stuff and brushes off the bad stuff. Well, all papers applauded the RM4bn turnover last week, nobody bothered with the potential selloff due to the build up in volume. The market would have needed to trade at RM3bn to RM4bn for three out of the next four days to alleviate the unusual overbought position .... but did any papers even highlight that fact, no its the RM4bn and better things to come, how not to die.

I still believe we are only in the second stage of a 4 stage bull run, and yes, it is still a super bull. Those caught on the wrong side, will have to accept their losses and try again, no point complaining. No more "I should have...""I could have..." .... I absolutely hate people who say those phrases ... it just mean you cannot stand to lose, not will…
Bursa The Confounding Stock

A regular reader wrote to me: "I was wondering whether you could share with your readers your thoughts on Bursa (the stock). I remember reading your blog some time back last year that it was one of your top 10 picks for 2006. The reason I am asking is that I am confused with the recent calls by analysts, a rare few say it's still a buy while most saying it is a sell due to high valuations vs. the region. How will you rate Bursa now? Still a buy vs the region, e.g SGX? .... Is our bourse really worth buying at 40x PER compared to SGX, Hang Seng or even ASX? What is the upside now? Recently, the news flow has been positive in the media with regards to our local bourse.. news such as higher volume is good for Bursa and that our market is slowly opening up with new products and ideas. e.g RSS. However, our bourse is and still is plagued by not-so-friendly policies which have seen some investors diversifying their assets overseas e.g in the case of PPB O…
Execution Wheels In Motion for South Johor
The HK Factor
An advisory committee which include 5 BSDs, some more so than others, has been put together to look into the development of the Iskandar Development Region (IDR) in Johor. The main objective is to figure out ways to lure foreign investments and turn the growth corridor into an attractive investment centre. Badawi apparently handpicked the five, thanks goodness KJ was not picked. The interesting thing is that all 5 areJohoreans and have agreed to be on the committee. The munificent 5 are: Tan Sri Samsudin Osman, Tan Sri Kishu Tirathai, Andrew Sheng, Tun Musa Hitam and Robert Kuok.
I am pleasantly surprised with the inclusion of heavyweights such as Andrew Sheng and Robert Kuok. There is a deliberate weighting to people who have successfully delivered outside of Malaysia, in particular HK, and with a solid reputation in Asia-Pacific. Andrew Sheng was the chairman of the Hong Kong Securities and Futures Commission, a post he has held …
Super Bull - Dejavu 1993?

While I have maintained my bullishness on global equities in general, the bullishness of the Malaysian markets have caught many by surprise, including myself. Having been through the 87 October crash (although to me I remembered it as the yen rally as I was working in Tokyo at that time) and the quite silly 93-94 super bull run in Malaysia/Asia, it makes for good comparison.

The 93 run was brought on by easy money from foreign investors seeking better returns. Call them hedge funds or cowboy funds or even astute international funds, but the 93-94 run was brought on by liquidity. Let's take the Malaysian example then. When you have good liquidity and the currency is looking strong, nothing seems to be able to go wrong. But the market was very maverick-driven, character-driven ... stocks associated with people will go very far and high. Plus it was very much retail driven. there were many days when we used to boast that our volume exceeded even the US markets…
I Left My Yen In Shinjuku

Rohan_888 said...
"Then, the yen starts to appreciate again – by a sharp 9% in one month - when a small emerging market economy defaults (Ecuador soon?) and a large hedge fund goes belly up (another Amaranth?). Then, suddenly one piece of good news comes out of Japan (a growth pickup?) and in a matter of 72 hours the yen appreciates by 12%. Then a major global macro hedge fund loses $2 billion dollars in 48 hours on the yen unraveling and decides to close shop; another one loses billions too and decides to restructure its operations. Carry trades unravel rapidly, margin calls are triggered, levered positions go belly up and the entire financial system goes into a seizure. Then the Fed is forced to cut the Fed Funds rate in between meetings by 75bps (in spite of still good US GDP growth) in order to avoid a financial meltdown, a collapse of US financial markets and a global recession.

Readers of this blog (Roubini) …
Thai-Tanic Or Thai-Wok

Well, the new government in bangkok is either headed for a Thai-tanic implosion or if you understand Cantonese its the latter, same thing. It seems the new people at the helm are slow in learning the ropes. The recent debacle over stopping foreign funds speculating in stocks and the baht was so ill-conceived and handled that a dramatic u-turn was necessary, at least they reacted fast and well. Even then, damage has been done, the SET index has failed to breach the 700 level since, making it the "cheapest" and most lagging equity market in Asia on a 6 and 12 month to date ranking.

There are basically 3 things which troubles investors about Thailand:

a) Don't try to fix something which you are ill equipped to. The rules concerning foreign capital inflows and outflows was a good example. Do it via other less intrusive ways. Are the new leaders satisfied after bactracking... apparently not, lose face I guess, so they keep coming up with new rules and regu…
A Yen For Your Thoughts

sopskysalat said...
Thinking aloud, can the recovery of nikkei be contributed by yen-carrying trade, borrowing yen to buy equities? Then, the weakness in yen can also be explained that yen were sold to reinvest into overseas "safe" instrument such as reits and bonds like you said earlier. I wouldn't think I will borrow yen and invest them into high risk instrument such as stocks in TSE. My opinion, learning to explain situation outside.

Actually, there is too much emphasis on the yen movement. The relatively big yen carry trade naturally creates a weak scenario for the yen going forward. You are correct in that they borrow in yen, convert (sell yen) and invest in other foreign currency assets (stocks, REITs, bonds or just currency deposits). Naturally this exacerbate the yen's weakness. Bank of Japan is at a quandry really. The economy has been improving and they would like to raise rates somewhat, but they also want the yen to be flat or weakish…
Possibly The Best China/Asia Play With Possibly The Best Mgmt In Asia

Readers of this blog will know that I have been an ardent admirer of Li & Fung from HK. It is possibly the "best China/Asia play" with possibly the best management in Asia. Trading company Li & Fung (0494) has entered into an agreement with Tommy Hilfiger to acquire the designer's global sourcing operations for HK$ 1.9 billion. Turnover of the sourcing operations for the year ended March was approximately HK$5.48 billion, while unaudited attributable adjusted earnings amounted to around HK$242 million, Li & Fung said Sunday. The deal is to be completed before March 28, with financing coming from internal cash resources. In September, the company raised around US$314.9 million (HK$2.46 billion), mainly for M&A activity and opportunity such as this. Tommy Hilfiger's buying offices in Hong Kong, Taiwan, India, Bangladesh and Sri Lanka will be integrated into Li & Fung, which buys co…
So, What's Really Driving The Markets?
Getting To The Core

You have equity markets gaining every single day for more than 10 days in a row. The record for US markets was, I believe a 10 day gaining streak back in January 1989. Since then, almost 18 years later do we see a similar phenomenon. Readers of this blog will be aware that I have been bullish since beginning of 2006, and even stressed that back then, all equity markets are going into, or even already in the midst of a bull market without most people realising it.

This bull run was cemented a few years back, the believers were few, which is why the level of participation rarely got to a prolonged euphoric state. This is clearly one of the quieter bull runs. But why are we in this bull run? Why are markets all so bullish?

If you cite earnings, lowering of interest rates ... it would be yes, and a maybe respectively. There must be some underlying reason for the hooplah. I think I must have touched on this before, but its worth me…
Hey Friend, Don't Talk Cock-Lah!
Anchor & Adjust Away

If there was one thing I learnt from this subject I took called Decision Making & Statistics, was Anchor & Adjust as a common form of decision making. Readers of this blog will be familiar with the concept as I use it all the time to bash the so called expert opinions.

A&A can hide incompetence and mask sub-par analysis. All you do is anchor to the most recent point of reference and adjust up or down according to available data. While that is not wrong, it is a chicken-shit way of analysis or offering an opinion. A bit like "after the horse has bolted", and all the expert is saying is "well, I think he went that way, and should continue doing so".

So it is certainly not surprising that many local and foreign research houses have come out with chest-pounding press releases in recent times. For someone to come out this week and saying "Bursa Malaysia is expected to surpass the Kuala Lumpur Com…
People Say I Am Pretty!
Are You Prepared For Re-entry?

Many investors may be shaking their heads at the rise and rise of blue chips in most Asian markets. The trouble is once you have taken your profits, it feels silly to reenter at higher prices. For once in a very long time, foreign funds and research analysts think Malaysia (and Asia) is beautiful. Not just pretty but looking pretty even when compared to other Asian beauties!

Do we need people to say we are pretty? Ladies should know better, when someone says you are pretty, they usually want something from you (yes, they want to f___ and f___ over you). Before you get all hyped up, they stand for flatter and fawn.

When did Malaysia get to be so pretty? Are we really pretty? The truth is, we are what we are, country themes are just like fashion fads, they come and go. When you are hot, do not fight it, just join in the trend but gotta be careful when the party is over. Once the pretty one has been partied on too long, and the guests a…
Wanted: Investment Expert, Must Have Humility
As Reported In Bloomberg

If you are Mark Cahart, you almost have it all your way for most of your life. Mark Carhart looks out over the packed New York conference and tells investors that Warren Buffett has it all wrong. Carhart, 40, co-head of the quantitative strategies group at Goldman Sachs Group Inc., uses his July speech to poke fun at Warren's penchant for investing in market-leading brands like Coca-Cola and Gillette. He cites study after study showing that big-name companies with high price-earning multiples or rapid growth rates make poor bets. Traditional stock pickers like Buffett, a fabled raconteur, do have one redeeming quality, Carhart jokes: ``They tell great stories.'' (Lesson - Don't fuck around with people who have done better and longer than you)

Carhart is one of the world's most successful money managers, a mastermind behind Global Alpha, a US$10 billion hedge fund for wealthy clients and employees o…
RSS/SBL, Same Smell

Bullshit - The word "bullshit" is most often applied adjectivally to deprecate a statement or an action. Bullshit (as a culturally based activity) commonly occurs in situations where truth and accuracy are far less important than the ability to achieve a suitable response in the audience. In many cases, such a response helps to gain popularity or favor (often needed in politics, religion or advertising). More mundane examples of bullshit often involve the lives of ordinary people. For example, it is not at all uncommon to hear of people "bullshitting" a job interview, or attributing their performance in an examination to their ability to bullshit. In this sense, bullshitting walks the line between extemporaneous speaking and lying outright. It is also common for people to bullshit friends or acquaintances, by spinning an elaborate tall tale. The object here is to make the bullshittees look foolish by dint of their gullibility in accepting the bul…