Friday, June 28, 2013

Politics & Business In Myanmar 2013

The phlegmatic government (you can try to get rid of the booger from your fingers but it just sticks around) of Myanmar just announced a shocking awardment of foreign telco licenses to build 4G networks in Myanmar. The winners of the 15 year concession were Telenor from Norway (DIGI fame) and Ooredoo from Qatar.

What was shocking was the favourites did not get a mention. SingTel which was easily the hot favourite did not get it. SingTel was bidding as part of a consortium with Myanmar's biggest bank Kanbawza Bank. SingTel with a large footprint in emerging markets, backed by Temasek, not to mention being buddies in  ASEAN loose coalition of neighbours to boot.



It would appear that there are other concerns in the awardment of the concessions. The messages are loud and clear. One, Myanmar still regards ASEAN as not the most important grouping as the memebrs try to make it out to be. Suffice to say, Myanmar has had lingering political issues that earned the ire of many foreign countries. Be it Aung San Sukyi or the dastardly acts towards the Rohingyas. It appears you cannot EVEN say anything negative or try to interfere in any way, even by political suasian or closed door sessions. A hands off and mouth zipped policies are valued.

The other favourite was a consortium led by Digicel, a Jamaica based telco that first invested in Myanmar in 2009 and employs close to 900 people in the country. The consortium also included Goerge Soros and Seung Pun, a leading businessman in the country. This was supposed to be a shoo-in. But no.

Again, that may have a message to George Soros, an advocate of democracy and supporter of many private efforts via NGOs globally. If you want to do big business in Myanmar, be apolitical.Any country that supports sanctions etc... will be "punished".

Ooredoo was ranked 9th out of 11 bids and was unlikely given the tension with anti-Islam violence with the Rohingyas, as the company was Qatari. Still, Ooredoo is 67% owned by Qatar government and provides telco services in Indonesia, Singapore, Laos and the Philippines. It supposedly has over 60mn customers in Indonesia alone. 

Telenor can better explain its cause as it has Norway government support. Plus the Norway government has been one of the more active European countries in Myanmar, supporting and funding various projects in the country.

So, it could be political ... or it could also be corruption. Who knows? It certainly did not look to be fully on merit alone. Though Telenor could win by merit alone as well. Too many questions, the perils of doing business with government. 

Stocks To Watch

Some of you may wonder how is the Murasaki ts system doing. Our subscriber base has been growing  well. The early months were choppy as people did not fully understand how to use the system. Now we are getting back many of our trial users to our Masterclasses (which are free). The weekly crowd is good and its getting to be a big social event and sharing of investing ideas. Below are two examples of how we use the system to pick early movers.


This screenshot was taken at 12.34pm Friday 28 June for LB Aluminum. FQR, M, Live MFI and BRH are our proprietary data. FQR is a measure of the fundamentals based on last 4 quarters. M is the energy index or Murasaki index. If a stock is behaving normally, it should register an M of around 100 or below. If its 400, it means it is 4x abnormal behaviour. 

The bottom right is the last 5 days data on M, MFI and BRH. As you can see, the M index was behaving itself for most of the past 5 days except yesterday, the 1,323 was a big anomaly which was accompanied by a positive uptick in price. Its a signal that let us confirm it is an early mover. It may not go up every day after that, but at least we know the engine has been started. Hence LB Aluminum is a good trade for a 1-15 day period.

The second stock highlighted is Ewein. Again, just by looking at the last 5 day pattern, you can already confirm 3 days back that something is up. The M energy continued, accompanied by positive upticks. As it is still well below the 1,000-2,000 reading on the M, you can conclude that it is early days still. Once it gets very speculative where day traders get in, the M will usually go into the few thousand category.

The other important indicator is the MFI or money flow index. The system is about the only one that has a live MFI. Others usually calculate MFI only at end of day. MFI gives an important read on the status of smart money residing in the stock. If the figure is steady or rising, one can safely continue to hold onto the stock. Once it starts dropping (more than 2%-3% points from the week's high MFI), you can basically conclude the smart money has exited and so should you.

Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Wednesday, June 26, 2013

Take Off The Collars

A fellow business blogger David Koay put this up his blog. Its a remarkable video. One that must be watched by all, especially our leaders. Even though I knew how the whole thing would turn out, it still made my eyes well up because it is so easy to have racism and discrimination instilled in us knowingly and unknowingly. Its powerful too. Kudos to the great teacher Jane Elliot.

Ms. Jane Elliott's "brown eyes, blue eyes" experiment in 1970 (the third one after her first in 1968). This "Eye of Storm" documentary was made by William Peters in 1970 for ABC News and later included in the documentary "A Class Divided" (1985), which included a class reunion (of 1984.)


Why Mining SPACs - Important

If you have listened to the S&M show you will have some idea of what I am talking about. The points I am trying to make:

a) why all oil & gas SPACs, the SC is sending out the wrong signals, telling the markets that they only like oil & gas sector

b) the SC has to be careful as it appears to be blurring the lines of approving based on ability and approving based on personalities

c) it is not SC's task to pick the sectors, you can put in the stringent requirements but not sector picking

We have a huge sector that has been largely ignored by EPU, the Capital Markets masterplan. Why:

1) there is no regional financial center to list regional mining stocks

2) Malaysia's vibrant equity markets have not be proactive to make it the center in terms of fund raising, listing, PE mining centric firms, primary greenfields investing, secondary investing, using of Syariah compliant instruments to promote the sector

3) the ring of fire, we are on a volcanic activity plate which also yields a lot of minerals in the region, including Laos, Vietnam, Cambodia and Malaysia ... though the mines may be smaller, they are still very much viable


4) imagine listing 2-3 mining stocks a year ... 5 years later we have 15 and there will be a vibrant equity market supporting the prospecters, early investors, even fund management and private equity

What we have now are viable mines having to go the long way to get listed or even tapping the capital markets. Why are they not listing on Bursa? There are plenty of local entrepreneurs, having to go the hard way... we are again losing talent, earnings, taxes and other multiplier effects. The following are Malaysian mines currently listed overseas and the market cap:

Gindalbie Metals / ASX / USD340m (RM1.08bn)
Avalon Materials / ASX / USD 30m  (RM96m)
LionGold / SGX / USD880m (RM2.8bn)
Golden West / ASX / USD37m (RM118m)
Peninsular Gold / AIM / USD22m (RM70m)
Besra / TSX / USD 32m (R102m)
CVM Minerals / HKG / USD40m (RM126m)
Monument Mining / TSX / USD103m (RM330m)
CNMC / SES / USD107m (RM342m)

They all could have and should be listed on Bursa!!!


Wednesday S&M Show Podcast

Why so many oil & gas SPACs, why not look at mining ...

http://www.bfm.my/snm-show.html

Topical song pick ... Lazy Ways, Hazy Days by 10cc from one of my top 3 favourite albums of all time "How Dare You". Go and google to find out why they chose the name 10cc.

Tuesday, June 25, 2013

Famous Eyeglasses - Artwork by Frederico Mauro


john-lennon-glasses

malcolm-x-glasses

lolita-glasses

morpheus-glasses

elvis-presley-glasses

blue-brothers-glasses

harry-potter-glasses

audrey-hepburn-glasses

tony-montana-glasses

woody-allen-glasses

steve-mcqueen-glasses

tom-cruise-glsases

sofia-loren-glasses

elton-john-glasses

steve-jobs-glasses

Fischer On Market Sensibilities

Finally, someone who talks sense about the current turmoil in the markets. The markets should not behave like a petulant child when candies are taken away from them. One, you cannot live on liquidity pumping forever. Two, the withdrawal will only happens when the global economy is recovering sufficiently. So where is the problem?

Billionaire investor Ken Fisher said the U.S. stock market rally that began in 2009 is only in its “middle” stages because most investors still underestimate the strength of the economy.

“We’re right in that transition between skepticism and optimism,” the founder of Fisher Investments, which manages $48 billion, said in an interview at Bloomberg News’s office in Seattle. “The notion that it’s actually the middle of a bull market and there’s a lot ahead -- that’s a really impossible concept for most people to get.”

Stocks tumbled last week, with the Standard & Poor’s 500 Index posting its biggest two-day drop since November 2011, and bonds fell around the world after Federal Reserve Chairman Ben S. Bernanke said the Fed may start reducing asset purchases that have fueled gains in markets. The S&P index has slid 4.9 percent since a record high on May 21.

“I’m always amazed that people don’t marvel at the power of global capitalism and global economies, that they’ve actually done as well as they have,” said Fisher, 62, whose company is based in Woodside, California.

If the Fed reduces the stimulus, known as quantitative easing, the economy will grow faster, he said in the interview hours after Bernanke’s June 19 announcement. That’s because key interest rates will rise, encouraging banks to lend more money to companies for hiring and expansion, the investor said.
“I want QE to end because it’s bullish,” he said.

‘Wildly Optimistic’

Fisher’s predictions proved too bullish six years ago.

“I’m on the wildly optimistic side of things,” he told Bloomberg News at the end of March 2007, as a decline in the U.S. housing market began fueling foreclosures and investment losses that imperiled the financial industry the following year. While the S&P 500 (SPX) went on to rise 10 percent to a then-record high about six months later, it turned and plunged as much as 57 percent through March 2009.

In April 2009, Fisher correctly predicted that the S&P 500 would extend a rally that started in the previous month to between 60 percent and 70 percent by March 2010. In January 2011, he told Bloomberg News he didn’t expect “high equity returns” in 2011. The S&P 500 ended the year virtually unchanged, losing 0.04 point for its smallest annual change since 1947.

Consumer Comfort

Americans’ views on the economy last week were the least pessimistic in five years, the Bloomberg Consumer Comfort Index shows. Its measure of how households view the state of the economy climbed to the highest since January 2008.

Slowing global growth contributed to this week’s stock declines. Manufacturing in China is shrinking at a faster pace this month, according to a survey of purchasing managers released yesterday. Jobless claims in the U.S. surpassed forecasts, climbing by 18,000 to 354,000 in the week ended June 15, according to a Labor Department report last week.

Investors who pushed stocks down this week are overlooking data showing long-term interest rates rising, a positive sign, Fisher said in another interview after U.S. markets closed yesterday.

“It’s Mr. Market doing what it does: It’s trying to see if it can turn you against your better judgment,” he said.

Gold is set for its worst week since April after falling below $1,300 an ounce yesterday to the lowest in more than 2 1/2 years in New York. Bullion has slid 23 percent this year through yesterday as the Fed signaled it will taper the debt-buying that has helped the metal’s bull run.

Inflation Translation

“Most of history it loses money,” Fisher said. “Before the 2011 peak, people were still holding their breath for QE to translate into inflation, which would then push gold up. And when you waited too long and that didn’t happen, it backfired.”

Fisher is best known for writing a column in Forbes magazine for almost 29 years, he also has published 10 books, including “The Little Book of Market Myths: How to Profit by Avoiding the Investing Mistakes Everyone Else Makes” (Wiley, 2013).

Murasaki Goes To Kuching

If you reside in Kuching or nearby, do call to sign up for a seat for our seminar this coming Monday. Seats are limited.

Saturday, June 22, 2013

WTF Closing Was That??!!

The sharp divergence in nearly 10 stocks at market close on Friday had everyone cursing, bitching ... cause most did not profit from the trades. There are a few clarifications that are needed. What happened? Were they mistakes? Here is my view:


a) Were they mistakes?
No. They looked to be real trades.

b) Obviously some fund was selling, why the rush and the size?
Funnily, none of the stocks had a grave impact on the KLCI, but they were high dividend yielding stocks. Hence one can infer from that that it was probably a big carry trade fund unwinding. It is not likely to be an indexed fund unwinding as none of them really matched the real index in any way. In fact weighted heavily on plantations as well.

Carry trades have been rampant over the past couple of years as big hedge funds could realistically borrow large sums at near 0%, provided it is in yen or USD. When Abenomics got rolling, a lot of the yen carry trade switched over to USD carry trades. When you are borrowing near zero, you want that 3%-5% dividend yield and lock in that spread. The bumper will be the capital appreciation, but usually they will also hedge the share price going in and out. 

Hedging means if I want to lock in a 4.5% dividend yield for JCY at 90 sen, I will enter into a similar contract for JCY to exit at same price. Hence when I exit, even though JCY was at 66 sen, I can still go out and lock in my dividend yield.

The other portion of the hedging has to be the currency, as you want them to be stable and not move against you, i.e. ringgit weakens substantially against USD thus making your dividend in USD a lot less, thus reducing your real yield. However, there are no perfectly hedged trades in reality, you are still vulnerable to certain fallouts and black swans. Plus to be fully hedge will often more than eats into your real arbitrage gains in the end.



c) So who benefited?
Those people who queued ... it does not look like any funds were involved in the buying. You can judge by the size and price done. They were not married deals per se, you want to sell 2 million, the system will calculate and add all the buyers lined up to make up 2 million and done at the lowest price. Same for the other side.

d) Shouldn't the fund have waited?
There are many reasons why the fund unwound. It could be because of the "rising interest rates" scenario owing to Bernanke's policy speeches. That may have caused the banks to tell these carry trades funds that they had to stop or face much higher interest rates in the coming months, or even that the banks are refusing to fund these carry trades with 'immediate effect' as the risk profile of supporting these trades have become untenable. 

Judging from the selling, it looks like a program trade and not done manually. The disparity between losses and market prices may seemed to be big but the fact of the matter was that it could be the carry trade may be USD800mn in size, and they have locked in their gains, thus to unwind a smallish RM40m would not matter much to the fund.

Technically, they would have had a better price if they packaged the whole thing and asked for a total bid from a big broking desk. Most would have no problem taking the whole shebang on for a 10%-15% discount. Sigh ... the perils of computerised trading. Someone should have over-ridden the program instruction.

e) Unwinding by a carry trade may explain the losers, but what about The Star and JCY surges?
This one is harder to explain. It could be short covering, i.e. a hedge fund borrows the stock to short, for various reasons ... hedging other long positions or you do not like these companies, and there are plenty of good reasons to NOT like JCY and The Star. JCY - haphazard earnings; The Star - may be a casualty of the recent elections. Sometimes a big carry trade fund may be practicing Multi-Strategy, i.e. locking in good dividend yield spreads between borrowing cost; and long/short strategy for some other stocks (e.g. in this case shorting JCY and The Star and going long Flextronics and SPH). Its just speculation on my part, but if a big fund is unwinding its carry trade, it may very well involve longs/shorts covering as well.

f) So who was the client and does the fund have more stocks to throw?
This is guess work at best. It is rumoured to be Bank of New York Mellon. Some smarter pundits went to check further what other Malaysian stocks BNY Mellon has. This is not to say they will also dump other shares in their fund. But they DO have other Malaysian stocks in their portfolio. I do not think its fair to reveal what are the counters as that may trigger an irrational reaction by local players. Do I have the list, yes I do. It is relatively easy to do a bit of research to get their holdings, but I certainly do not think its fair or wise to put them up.

This would not be the first but is significant as it is sizable and the drop in some of these share prices have been very significant. Malaysia is not the only market to experience this. Same can be seen in Singapore and HK as well, but it looks bad when some of these counters are not as liquid.

Well, I guess many people will start putting in big buy orders at very low prices or sell prices at very high prices in case these events happen again. They will happen again but only during these times when there are reasons for the carry trades to unwind.


So, I do not think its rebalancing (as was reported in the papers) because rebalancing usually involved largely indexed stocks. If all the 10 stocks were to be indexed stock, you will see the KLCI gaping down by 40-60 points. Hence it is more likely to be a carry trade fund unwinding arbitrage dividend yield plays.

What will happen on Monday, back to normal prices. You will not get to buy or sell at those prices for TDM, Coastal, BToto, Star, Batu Kawan, HS Plantation, JCY, CBIP .... but more people will queue like nobody's business at very high and very low prices.

Wednesday, June 19, 2013

Wednesday S&M Show Podcast

Chinese listed companies on Bursa ... Is there a problem?

http://www.bfm.my/snm-show.html

Enola Gay by OMD ... Orchestral Maneuveres In The Dark

Tuesday, June 18, 2013

Ideal Jacobs, Revamped?

I gave this counter hell when it was listed because from day one when it went listed, the shares was up for only a brief moment and closed the day down. It went down for next subsequent days and weeks, the first IPO probably to see such a huge down performance non stop. Their lows was near 10 sen and certainly it needed something totally new to turn this counter around.

Khairul Azwan Harun, Perak Umno Youth Chief, has taken a substantial stake in Ideal Jacobs last week. Although the stake was just 5.83%, it would be silly to assume that that will be the beginning and the end of the story. The rumoured plans include making Ideal Jacobs as part of a river based hydroelectric power plant project in Perak. The said project was on the books but was put on hold pending the recent elections. 



The company is relatively clean with losses stemmed judging from the last couple of quarters. Of course the hydro project will require funding, RM100m for 10MW and RM127m for 15MW. Khairul Azwan is also a director of Lumut Maritime Terminal.

Bottom line its current market cap of just RM28m makes it a relatively cheap and safe play. Its a bit speculative but given that we have had a plethora over crowding for marginal oil fields, Iskandar and Penang property counters as theme, ... an early Perak play could be in the works.


Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Sunday, June 16, 2013

Kini Biz Asked ...

"could Halim Saad have done it on his own?" ... in light of his lawsuit ....

my take ... "Could George Bush Junior have done it on his own???"

Happy Fathers Day

My friend, Roger Wang, who also happens to be one of the country's finest guitarist ... has composed a lovely song for his daughter. Plus he sings, OMG ... that is so rare. The video sets with the lego pieces, must have been such a labour of love ... Wonderful Roger...



This is the most important song I have ever written. 

It's also my first vocals outing and first music video that I created myself.
The song was inspired by my daughter's obsession with fairy tales and being a princess. It sums up a lot of my feelings about being a father as well as the hopes and lessons I have for her. 
It's often hard for a father to relate to dolls and the way young girls play. Playing Lego together was one of the few activities that we shared. All those hours helped bond us. This video was made with those Lego sets and mini-figures. They became the best way for me to express this song visually.
This song and video come from a very personal place, but it goes out to all fathers and daughters out there, regardless of age.
HAPPY FATHER'S DAY

Biz News Snippets Worth Following

I read, almost religiously, my favourite business magazines, in order of preference ... International Business Week, Fortune and Bloomberg Markets. I do read Forbes now and then but its such a slanted Republican thingee its like Harakah. I think to see how people from various sides and various places look at and view business and investments help to broaden our perspective no end. 

Since my almost weekly sojourn to Singapore, its also fun to read what the little island's papers are saying about business and investments.

Iskandar

The mood is good for Iskandar. They highlighted how well Affiniti Residences sold last weekend, noting that the price was RM850 to RM1,000 psf. They compared that to 1Medini which as launched in January 2012 and sold for just RM450 psf. Hmmm... whetting yand stirring up Singaporeans to further look at Iskandar as a great investing or flipping hotpot. They seemed focused on the Medini or rather the E&O branding, and they also seem to like Puteri Harbour.

Over the next 3-5 years there will be another 13,500 condos to be sold or built in Iskandar. Compare that to just 8,000 units launched between 2000 and 2012, you get what I am saying. Obviously, the powers to be in Singapore have tacitly approve of Singaporeans to invest big into Iskandar or else you won't be getting big spreads with lovely pics in the papers there. Possibly that is to quell the over investment into Singapore properties, which is already way out of the hands of most Singaporeans.

The supposed mulling over a special property tax by Johor state government seems to have little effect. Its not just Singaporeans though, a Japanese investment fund just bought an entire tower of 285 units at Medini at Iskandar Residences ... somehow I don't think they will be staying there. I wonder, how many will?

My view is that all is well and good for at least the next 12 months when big guns start to launch their flagship property projects. It is the sub-sale and resell or flipping that goes on that is the crux. Will there be people buying on the resale market for 20%-30% higher than the launched price just 6 months ago? It will be very hard to see that happening because of the number of projects that are coming on board. If all are pricing higher at RM900 and upping them to RM1,100 psf because of anticipated demand ... and we are not talking of just 5 or 10 extra condo developments... we  are talking about 30 to 40 a year ... its a tough ask to see it snowballing much further. I suspect RM1,300-1,500 psf would be the peak as people will start comparing with prices in Penang and KL.

The optimists will say look what Singaporean and foreign buyers can do to Sentosa property prices. Well, yeah, do you know how big is Iskandar compared to Sentosa?

The Real QE Poser

Why is the probable end of QE frightening markets? It has to do with interest rates. The selling now has largely been in REITs and dividend yield plays (which include a lot of blue chips). As rates rise from near zero, the yields of these counters will be reassess


ed relatively to the higher risk free yield. What we are seeing is the global portfolio rebalancing. Many funds are reducing their holdings in the above counters appreciably. The other side of the coin is that big banks should benefit from better net interest margins as they usually have a large pool of inert savings, which will not be so easily or swiftly adjusted in the rates. However, we are not seeing a proportionate flow of funds into big banks yet, although it should happen very soon.

We are not going to see a massive correction, in fact, we are already correcting. The markets are discounting all that ahead of time. Markets has to discount what it can forsee or roughly anticipate. In fact, higher interest rates will force funds out of dividend yield plays and into riskier instruments. All said, it is also May June July we are talking about, remember Sell In May Come Back In August ... actually its also summer holidays for a lot of people in the investing field although I doubt that will be as true as the markets are getting more and more global, not US or Europe centric.

Wednesday, June 12, 2013

Wednesday S&M Show Podcast

Share buybacks ... not all good.

http://www.bfm.my/snm-show.html


Libertango (I've Seen That Face Before) - Grace Jones


Monday, June 10, 2013

Have A Good Look At Cypark Resources

The market has been focused on oil & gas, marginal oilfields, Iskandar plays and even Penang's Second Bridge plays. Running out of ideas? So are the analysts. Still, there are gems to be found, and one of them is in Renewable Energy, Cypark Resources.

Cypark Resources Berhad is a Malaysia-based company engaged in the provision of environmental technology and engineering solutions to both the private and public sectors. Its services include transforming neglected, degraded or contaminated land into sustainable and manageable fields. Its projects include the restoration of a disused mining land in Cyberpark, Cyberjaya, and the Taman Beringin Safe Landfill Restoration project in Kuala Lumpur. 

It has three segments: landscaping, which is engaged in the provision of landscape services for public parks, public amenities and other landscaping developments; maintenance, which is engaged in the provision of maintenance services for public parks, public amenities and other landscape developments, and environmental, which is engaged in the provision of nature conservation and environmental amelioration. In September 2011, it acquired Cypark Suria (Sua Betong) Sdn. Bhd., Cypark Suria (Kuala Sawah) Sdn. Bhd. and Cypark Suria (Bukit Palong) Sdn.



The company is pumping up the revenue platform, hence if you focused solely on reported numbers you may miss the bigger picture. 1Q13 revenue rose by 20.6% to RM51m due to the start of Cypark's solar farm in Pajam and higher revenue from its waste-to-energy projects. At the same time, total costs rose by 26.8% to RM39.7m as the company is aggressively putting up RE projects around Malaysia. Management aims to add 15MW of  RE capacity in FY13, mainly in 2H. This will increase Cypark's total RE capacity by 83% to 33MW by end-FY13. The higher start-up cost has offset Cypark's top-line growth, leading to a 6.4% decline in EBIT to  RM10.1m.

The stock could be catalysed by the successful rollout of new renewable energy (RE) projects and signing of the Ladang Tanah Merah landfill concession. In addition to its MoU in Myanmar, Cypark can replicate its 
RE model in other Asean countries such as Thailand, which already has a feed-in-tariff mechanism in place.


Disclaimer: The content on this site is provided as general information only and 
should not be  taken as investment advice. All site content, shall not be construed 
as a recommendation to buy or sell any security or financial instrument. The ideas 
expressed are solely the opinions of the author. Any action that you take as a result 
of information, analysis, or commentary on this site is ultimately your responsibility. 
Consult your investment adviser before making any investment decisions.

Saturday, June 08, 2013

Action, Reaction, Inaction ... Karmatic

This video is about an island in the ocean at 2000 km from any other coast line. Nobody lives, only birds and yet, you will not believe what you will see here.

Please don't throw anything into the sea. Unbelievable, just look at the consequences.


Thursday, June 06, 2013

Asset Class Returns As At 31 May 2013

This is highly interesting. As a test, if you were looking at the table what could you say or what kind of observations could you make. Not trying to be an asshole or "guru" here, but if you are honest about your knowledge of markets, the ability to synthesize data and tell a story, you should do well in financial markets. If you can't, then you shouldn't be, or are just plodding along. To be in the markets you can study, but you have to have passion for it. Make your own observations before scrolling down.
060313Z.gif

- The one month data does not tell us much.

- YTD, the equity markets have been well led by the US, in fact emerging markets have been trailing ... suffice to say that most of the Asian markets which have been surging so far this year have been an anomaly, which further depresses the real performance of other emerging markets.

- We know the financial markets have been awashed in liquidity with QEs from various central banks, but where have they been headed. The YTD figures are again revealing, some have exited gold in a big way. Them taking money off gold may be just profit taking or likely to mean they are more comfortable that currencies won't be debased anymore, or that bailouts have finally went past a peak. The reduction of fear or volatility could be another reason.

- So where is the liquidity? They went largely into US stocks, US REITs and even foreign REITs. The REITs interest is but a reflection in a strong bottoming in property price correction and a resurrection of demand, and also a hint that people are more employable even now to take up new mortgages, and/or that a lot more PE/VC/vulture funds are taking advantage and making deals on distressed commercial properties.

- Look at crude oil, one month, YTD or 1 year even, that is a good reflection about the robustness (or lack of) of the global economic recovery. The recovery is benign and in patches still.

- Look at commodities, again the same conclusion as for crude oil, still working of excess inventory in the global system.

- Look at the emerging equity markets from 1 year ago, there has been a dramatic shift away from emerging markets back to US and possibly Japanese stocks. Again the robust performance of other Asian equity markets is very telling as it is viewed as largely unscathed and the equity markets there do attract sufficient interest compared to other emerging markets.

- The most important point one has to conclude is a drastic shift away from bonds of all kind. Bonds have been great on a 3 year basis but more funds are moving out. They move out because they either think there is a bubble there (too safe, and too many people willing to pay too high a price for low yields) and/or equity provides a better return even after accounting for risk.

From the above, I am quite confident that the current sell down in equities will be brief.




Wednesday, June 05, 2013

Wednesday Podcast S&M Show

http://www.bfm.my/snm-show.html

Long term investing vs short term ..... and Llorando by Rebekah del Rio.


Tuesday, June 04, 2013

The Fears Of The End Of Quant Easing

Markets everywhere have been shaken over the last two weeks. First was the correction in the Japanese equity markets. It has lost substantial ground over just the last couple of weeks. Next came the Bernanke's testimony which led all to conclude that QE would be ending soon. 

If an article in Monday's Wall Street Journal is anything to go by, the U.S. Federal Reserve is getting ready to unwind its massive monetary stimulus program. So, is that prospect as alarming for financial markets as feared?

Fed officials have mapped out a strategy to wind down its $85 billion-a-month bond-buying program in careful steps, although the timing of when that will start is still being debated, noted Fed watcher Jon Hilsenrath wrote in the WSJ. 

Any unwinding of the Fed's quantitative easing (QE) program, which has fueled a rally in equity markets and other risk assets, is generally viewed as negative and any indication of this happening has been highly anticipated in the U.S. since late last week. 

"Having spent two New York sessions pricing in a sharp change in Fed stance, it is not obvious that the article was worth the wait," analysts at Westpac said in a note. "The timing of the unwinding of QE remains data-dependent, not a serious prospect until perhaps late U.S. summer at the earliest."


Analysts say that in essence, the Fed appears to be managing market expectations that its quantitative easing program will not last forever. The Fed has said that it would maintain its key interest rate between zero and 0.25 percent until the unemployment rate fell to 6.5 percent. It has also committed to monthly purchases of bonds until labor market conditions improve substantially. 

And it is the recent signs of improvement in the jobs market that has renewed talk about a possible end to the quantitative easing. The latest non-farm payrolls report showed the U.S. economy created 165,000 new jobs last month, much more than expected, helping push the unemployment rate down to 7.5 percent. Data last week meanwhile showed jobless claims at their lowest level in almost 5-1/2 years. 

It looks like the markets are just grabbing at excuses to do a bit of sell down after a spectacular run in most equity markets since the beginning of the years. The timing is still a bit uncertain, but seriously folks, the end game only looks to peter out by December this year. It is very good that markets are readying itself for the end of QE.

The Fed officials are not going to raise interest rates until unemployment comes down to 6.5 percent, and could only come earliest by 1st quarter of next year. What is likely to happen is when unemployment dips below 7%, we may see a scaling back from the $85 billion buyback figure to maybe halve that. 

The knee jerkers would be better off looking at the positives:
That [an easing of QE] would be good for U.S. stocks because it would mean the U.S. economy is doing a lot better.
- That at least markets are already trying to price in the end of QE, instead of a surprising one off massive sell down.

The last part is very important as we can easily reference to the 1994 massive sell down, just because Alan Greenspan never gave any indication as to the imminent rise of interest rates in the US. That experience probably forms the backdrop for Bernanke's communication strategy. He is managing expectations very well. By putting it out there with the 6.5% unemployment target, it allows all to see the looming horizon.


I still think halving the buyback when unemployment dips below 7% would be an excellent strategy to manage expectations further. Everyone knows QE cannot be there forever.

I like the equity markets now more than in the beginning of the year. Japan has corrected substantially even though Abenomics will still be in the works. This will drive Japan to retests its high this year soon enough. I believe the sell down was a good profit taking exercise and actually allowing a lot of stale bulls (i.e. those holding onto Japanese shares for over 20 years) to exit - all that will come back to the market place for sure.

The local Malaysian equity market has held up better than the rest, and confidence breeds confidence. Having said that, Malaysia is only up 4.6% so far this, thanks to the uncertainty over the elections period. Other Asian markets have risen a lot more, and hence had more room for downside: Indonesia 15.2%, the Philippines 16.4% and Thailand 10.6%.

My Life's Aphorisms

Readers of my blog will notice that I haven't been updating my blog lately ... usually I am pretty not that busy ... now I have to go to Singapore every week for a couple of days ... and then there are the many meetings that suddenly crop up and classes that I have to give for Murasaki ... blah blah ... I miss writing my blog, I love it because its like a diary of sorts, I cannot ignore my blog cause its now 6 years of my life. If anyone reads it carefully, they would know me very well cause I never write to create a false persona, if you think I am an asshole, you are probably right. I don't like to be busy, it makes time flies, and I don't get to sit and relax and enjoy. My Monday nights drinks sessions are sacred, those of you who are part of it knows too well. We all have to slow things down and take stock of what we are doing, whether they correlate to fulfillment of your goals in life, so I think its time to re-look my own aphorisms in life, making sure I stay centered amidst the noise.

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Don't aim just to be rich, aim to create wealth, create better lives, create better livelihoods for people, create jobs where others can contribute to society and be a useful participant.

Use your wealth to fund your passions and causes, and don't forget to enjoy yourself in the process.

Stand up for injustice, for the downtrodden, for those who cannot help themselves. Aim for equality for all, in all.

Have a zest for good things, finer things in life, its OK to to enjoy.

Surround yourself with positive people. Make sure your life partner is enthusiastic, have energy for life, and empathy for people, friends and family.

Don't wait for fate or destiny to affect your life, its your life, make it happen.

Finding something or someone that/who means more to you than yourself.

Make a conscious effort not to hold onto people who don't love us or people who hate us or people who make us mad or people who take us for granted ... we also care too little for the people who love us unconditionally, the people who adore us, the ones who still stick around in spite of all your shortcomings.

Make an effort to to live healthy for yourself and the people who care for you. Live long but more importantly live well.

Make a conscious effort to better the lives of the people around you, your family and circle of close friends.

Bloom where you are planted, not whine about why you are where you are.