What Now, Brown Cow?
Just Don't Be A Bigger Sime Darby

If the end result of the mega merger of PNB companies result in just a much bigger Sime Darby, then don't do it. It is very silly and exhausting. I basically agree to the concept. There are a few questions though:

1) It looks like Synergy Drive was "created" as an independent party so that PNB could vote on the deal, which requires 50% plus 1 vote to push it through. If PNB has mooted the deal on its own, PNB will be forbidden from voting its stake. Hence Synergy Drive may not as "sinister" as the cynics might have it. However, Securities Commission could be tasked to look over Synergy Drive's existence, and whether PNB is in cohorts to circumvent the regulations to the detriment of minority shareholders. Ball in your court SC.

2) The entire exercise is expected to be complete by 4Q2007. This is one of the major hurdles we have to eradicate. By making companies having to jump through so many hurdles, and knowing that each hurdle tends to take time - this is what we call red tape, bureaucracy, causing misallocation and wastage of resources = inefficiency and lower productivity. Can the powers to be, please, implement a task force to reduce the red tape-gate. It is certainly not hard. If this deal were to be done via SGX or HKSE, I can tell you it will be completed with all the approvals within 4-6 months. The sad thing is, we don't seem to care, and just accept it as status quo - we could do things so much better. Dragging out the approval process to 12 months is highly unacceptable. Yes or no, it should be decided asap, as a lot of things get hung in the air, suspended like inert useless things.

Corporate moves like this is welcomed and would excite foreign investors. I am surprised that Bank Negara would be so welcoming to ANZ's investment into AMBank Group. This is yet another positive step and would win points in the eyes of foreign investors. As a whole, we need to keep an open mind and not be so nationalistic if we are to compete and attract FDIs. We can lock ourselves up and not sell anything and end up like North Korea. Certain critical sectors, we need to maintain national ownership but we must also be flexible. As proposed before, if we could revamp the rules regarding REITs - e.g. foreign controlled REITs need no longer comply with NEP equity ratio, watch the flood of funds snapping up commercial properties in Malaysia. Its a willing buyer, willing seller, no need to protect and say foreign interest owns a majority of our commercial properties - so what, its a reallocation of resources. Our minds need to think bigger than that.

Mega Merger Of Sime Darby, GHope & Guthrie
The Good, The Bad & The Ugly

Well, its about time, and I thought it was never going to happen. Both Golden Hope and Kumpulan Guthrie have performed well in share price returns this year, while Sime Darby has been ignored. Based on pure palm oil play and the biodiesel rally, Golden Hope has gained some 21% over the last 6 months year while Guthrie has registered a scorching 53%, meanwhile Sime Darby just beat my savings account rate coming in at 2.5%. Is this to save Sime Darby? Despite that underperformance, there isn't a shadow of a doubt that the management at Sime is still top tier.... although they could do with a bit of reinvention and strategic shifts.

Already Sime Darby has been dragged lower due to the aversion by fund managers from conglomerates, why add more slices of bread to the pudding? In fact, Sime Darby would be better advised to properly distinguish the various business units into a cleaner structure. The work is only halfway done, you have: Sime Properties, Sime Engineering. What you need is also Sime Energy & Utilities, Sime Manufacturing, Sime Infrastructure and Sime Plantations. Then take Sime Darby private, and leave the business units listed. All capital needed for business ventures would be raised via these business units. If Sime Darby stays listed when the plate is so huge, even when all units make a lot of money, it would not be reflected in the real value behind Sime Darby. As you can raise funds via the seperate business units, there is no longer a need for the holding company to be listed.

If I was the adviser, I would use the listed vehicles of Golden Hope and Guthrie to inject the various assets to align the business, for example I can inject all plantations into Golden Hope, and all infra related businesses into Kump Guthrie. I betcha that would make a lot more sense. It also streamlines management of business units and not by listed vehicles which may have similar businesses under different unit managers.

Size, its all about size. We need more big swings dicks in the market place. Sime's market cap is RM15.2b, Kump Guthrie's at RM4.1b while Golden Hope is at RM7.4 b = RM26.7b (finally a stock with a decent US$7.5b market cap). In fact, if they follow the formula to create listed seperate units the total market cap could be boosted by another 10%-15% at least (RM3b is nothing to be sneeze at).

Things that look good on paper - economies of scale in terms of management of resources. Sime Properties suddenly looks very good with the prime pieces of development under Guthrie, and I think it would be a much easier sell under the Sime UEP Properties banner.

That is also why I have rated PNB as the better manager of resources and in strategic planning. As all 3 come under the banner of PNB, it just makes sense. Look forward to a favourable VSS - its a good thing, a better redeployment of resources. It also makes for better leveraging based on Sime Darby's superior managerial layers of professionals.

The one thing Sime Darby has not been that good in, its when they go overseas, they need to buckle up, get better people and do more vetting of partners. Their HK and China record could be much better. CONSOLIDATE then REFOCUS. Malaysian companies once they get big will want a finger in every pie, that's OK, just manage them as seperate business units and allowed to be valued and listed as such. Even the wonderful General Electric is a conglomerate that can be valued and managed clearly via business units - but they also get rid of non-performing units very fast. Sime needs to learn to do that, or rather PNB has to give Sime the leeway to do that.

Advantage Kerzner!
Why Genting Will Not Win Sentosa

Sticking my neck out here but am pretty confident now that Kerzner will get the Sentosa IR project ahead of Genting. Let's look at Genting's bid details:
- partnering Star Cruises and Universal Parks
- build a Universal Studios theme park to draw 5m visitors a year with 16 new/unique rides
- new rides based on King Kong and Madagascar, Revenge of the Mummy and Waterworld
- larger than the one in Hollywood with room for expansion
- plenty of shade structures in keeping with the sunny weather
- some additional juice based on Universal's relations with NBC but no details as yet

The trouble with Genting's bid:
- another theme park thing, theme park thing is so 90s
- it's Universal but not Disney, and what if Nusajaya gets Disney (its a longshot but still a possibility)
- theme parks and fun rides does not add much "real value" to kids

After Marina has been awarded, the Sentosa IR would have to be awarded on being a different IR, no point having same IR. The Sentosa IR has to be more focused towards family and kids and less towards MICE. Marina is city casino while Sentosa is a resort based casino. Whoever wins Sentosa has to be different and offer different things than Sands.

Looking at Kerzner's bid yesterday, the advantage goes to Kerzner. Here are the details:
- partnership with Discovery Channel, MTV and Nickelodeon
- 34 f&b outlets with internally recognised chefs such as Gordon Ramsay and Nobu
- its the seaworld concept and will be called Atlantis Sentosa
- teamed up with Capitaland
- clearly targets 4 age groups: "under 3", 4-8, 13-18 and adults
- Kerzner's Discovery Kid's Camp in the Bahamas, a jv with Discovery Channel, will be a trump card
- the resort design will be led by Frank Gehry, this looks to be another trump card for Kerzner as it plays on Singapore's feelings of inadequacy. Singapore has made it as a developed financial center, with very high GDP per capita, and some of the priciest real estate. Singapore can get the best entertainment and shows and artists to perform in the island state, it tries to buy and import some culture, and a building by a renowned architect is lacking in Singapore. All major cities have their IM Peis and Gehrys, so to have a Gehry designed building is like having a Dali or Picasso masterpiece in the real world.

Looking at the price jumps, investors seem to have factored in a 70% chance that Genting will get Sentosa IR. Not going to happen.

History & Stock Markets
We Are At Crossroads

Now that most equity markets are near or just surpassed their all time highs, most investors are loathed to put forward their opinions on the near future direction of equity markets. Most had been wrong for the past 6 months as they expected markets to be weakened by the high oil prices and the mess in Iraq.

As mentioned before, I am still bullish on equities globally, in particular on markets where their currencies are still deemed undervalued. That's because growth in earnings will be there, but equally as important is the inflationary aspect. The more undervalued your currency is, the better it is to withstand imported inflation by rising in value and yet not hurt your export competitiveness much.

While we are standing by and watching equity markets at highs, there has been a general wave of increase in almost all asset classes. Commodities did their thing over the past 24 months, and even with the correction, the prices are still relatively high. The other notable class of asset which rose enormously is real estate. Especially at centers of financial money making. Has anyone try to buy an apartment in London or New York, and just look at the up-upper class property launches in Singapore over the last 6 months - you'd think that the top 10% popoulation in Singapore earns S$500,000 minimum a year!! The St Regis Residences developed by City Developments sold at S$3,030psf or RM7,086psf (or US$1,970psf or HK$14,770psf). Surprisingly, real estate prices did not rise by that much in HK or Japan... yet.

They point to a lot more liquidity swishing around. Despite in rate increases over the last 2 years in the US, there is still ample liquidity in the system. China has plenty of cash and so too does the oil producers. When painting by Klimt can go for US$137 million, when money chases after ugly art, something is not quite right. However, this time around, most equity markets are still not at excessive valuations. As far as I can see, I can only be wary of one possible time bomb in all asset classes, and that is the over-exuberant valuations of Chinese banks. There is still a lot of shitty stuff in the provisions and those items not classified as NPLs yet, and the new loans growth should be viewed suspiciously as the risk inherent in most of the loans are tied to the excessive property prices in Chinese markets. One can just imagine the dominoes thingee... and no one seems to want to write anything bad about Chinese banks or the over-glorifying-performances by all parties involved in IPOs.

For the last 2 years, most central bankers would promote easy money on fears that higher oil and comoodity prices might choke off growth or even result in depressed economies in their own sphere - that fear is largely gone now. So, the way forward is to see if central bankers will be tightening soon. However, most of the world looks to the Federal Reserve for direction. And, surprise, surprise, we just went past the mid-term elections, which means we are in the final two years of a presidential term. Believe it or not, since 1923 there were 23 mid-term elections and for the next 15 months, 21 out of 23 times the equity markets were up. They were up by an average of 23%.

I don't know about you but 21 out of 23 times is a pretty good strike rate. That's an incredible 91% strike rate. One can even explain it as the final two years of a presidential term tend to see markets performing better because deliberate policies and things tend to converege and happen more often. In fact the only two times out of the 23 when the markets were negative were in 1938 and 1948-49, no need to elaborate further I guess.

What the historical data confirms is that while we have strong surges in asset prices, and liquidity is ample, chances are the Fed would still maintain a relatively easy money period owing to fact that we are moving into the last 2 years of the presidential term. Plus the sharply lower housing starts in the most recent US figures would at least delay any raising of rates till at least March-June 2007, if there should be one. One final comment, the fact that Paulson is there at the White House would ensure a very positive global trade/biz relations with China, Japan and the rest of the world - in fact, I expect him to revamp the Sarbanes-Oxley thingee to the betterment of the US markets very soon as well.... and that can't be a bad thing.

Hard to believe, but most equity markets should have a clear road ahead, till March 2007 at least. Over and out.

Gawd, I Hope Nobody Finds Out That I Am So "Average"
An Investment Pro's Biggest Fear

Why so harsh on JP Morgan Asia? Well, just have a look at the share prices in Southeast Asia, which have climbed three times faster than in the Asia-Pacific region. Stocks in Indonesia, Malaysia, the Philippines, Singapore and Thailand, tracked by the FTSE/Asean Index, have gained 27 percent in dollar terms this year. FTSE Group's Asia Pacific Index has risen 8.6 percent. ... and our JP Morgan friend has the audacity to proclaim in a report just a few days old that they JUST RAISED Thailand equities to overweight and JUST RAISED Malaysia and Indonesia to NEUTRAL. So, Malaysia and Indonesia were to be underweighted or an avoid for the past few months, I guess! Its people like that that gives investment analysts and strategists a really bad name.

Let's checkout a recent Bloomberg survey on what investing pros were saying and rate their statements by their insights and intelligence, or lack of.

'`We're still buying heavily into Southeast Asia,'' said Ian Beattie, who manages US$1 billion in Asian equities at New Star Asset Management Ltd. in London. ``Fundamentals are still sound even with the recent performance.
(the key here is "still buying", as usual, the sharper SEA fund managers are based out of Europe)

Indonesia's economy, the largest in Southeast Asia, expanded in the last quarter at the fastest pace in a year. The Asean index climbed 1.1 percent last week, beating the 0.1 percent gain in the Asia Pacific measure. The Straits Times Index in Singapore, Southeast Asia's biggest market, performed the best among Asean country indexes by rising 1.9 percent. Southeast Asia produced the best-performing benchmark in all of Asia this year: Vietnam's Ho Chi Minh Stock Index, which has jumped 87 percent.

Asian equities strategists at Merrill Lynch & Co., Macquarie Securities Ltd. and JPMorgan Chase & Co. recommend investors hold more Southeast Asian shares than are represented in benchmark indexes because lower borrowing costs will spur economic growth in the region. The central bank in Indonesia reduced its benchmark interest rate this month for the sixth time since May. The Philippine central bank on Nov. 2 effectively trimmed borrowing costs for the first time in three years by reducing the interest paid to lenders for deposits.
(many strategists cite lower borrowing costs as the kicker for SEA markets, that's a bit underdone for me, its the currency stupid, just have a look at the underlying strength of each of the country's currency, that explains the lower production cost per man hour and hence the more competitive exports, its that each of the SEA currency is at least 15%-25% undervalued still... with the exception of Sing dollar. The strategist at Merrill's (interviewed below) also seems to have missed the bigger picture just like the JP Morgan guy..)

Indonesia's Jakarta Composite Index has advanced 44 percent this year, the third-biggest gain in Asia behind Vietnam's index and China's Shanghai and Shenzhen 300. The Philippine Stock Exchange Index has climbed 36 percent. Policy makers have yet to lower rates in Malaysia, where the Kuala Lumpur Composite Index has risen 16 percent this year, and in Thailand, where the SET Index has risen 2.8 percent. The Malaysian central bank has held borrowing costs unchanged since April, and Thailand last month kept rates steady for the third straight meeting.``Indonesia and the Philippines have been driven up by falling rates and an improving economic outlook,'' said Spencer White, a Hong Kong-based strategist for Merrill. ``Looking into 2007, Thailand and Malaysia both look interesting. Rates will fall in both and there will be a cyclical recovery in the domestic economies. ''Singapore's economy grew at an annual 5.7 percent rate in the third quarter, after expanding 3.9 percent in the previous three months, according to revised estimates released today by the trade ministry.Indonesia last week reported 5.5 percent growth from a year earlier during the quarter. The country outpaced expansion of 2.7 percent in Japan, Asia's largest economy, and 4.6 percent in South Korea, the region's biggest emerging market.

``Growth is still in the emerging world rather than developed economies,'' said Franki Chung, who oversees US$700 million of Asian equities at CIBC Global Asset Management (Asia) Ltd. in Hong Kong. Emerging markets ``will continue to do better than, say, Japan or Australia.
(nothing spectacular, but at least he is saying something decent and a worthwhile opinion, rather than a wishy-washy one... you know one .. the one hand, and on the other hand statements...)

``The potential for surprise in Southeast Asia is really that domestic consumption has yet to be mobilized,'' said Anthony Muh, who helps manage US$1 billion at Alliance Trust Plc in Hong Kong. ``We've bought into the story and I think it will continue.'' His biggest holdings in the region are in Singapore. Because emerging markets dominate Southeast Asia, the region tends to be hit relatively hard when fund managers switch to less risky investments. FTSE's Asean index tumbled 19 percent between May 8 and June 13, exceeding the 15 percent loss in the Asia Pacific index, as stocks fell worldwide.
(at least this guy gave a worthwhile opinion)

'`If there's a global slowdown or investors become risk averse, they will withdraw money,'' said Grace Tam, a manager of investment services at JF Asset Management in Hong Kong, which holds US$78 billion of assets in Asia.
(sure, this may have been taken out of context, but statements like these should never be printed, its like saying my mum is a woman ... adds zero value and makes the investment pro look bad ... bad business journalism)

Fund managers appear bullish for now. Investors were the most optimistic this month about equities since April, according to a Merrill survey of 216 fund managers that was published Nov. 14. Respondents investing in the Asia-Pacific region excluding Japan rated Singapore, Indonesia and Thailand as favorite.``We see a lot of fund inflows into Southeast Asia,'' Tam said. ``We prefer Southeast Asia more than Northeast Asia right now because of falling interest rates and also because of strong domestic demand.''
(at least Tam was quoted better this time around, and the opinion has more meat in it)

Better Late Than Never
But Why Are They Paid So Much For?

JPMorgan (JPM) has upgraded its recommendation on equities from Thailand, Malaysia and Indonesia, citing "pro-growth monetary policy" in all three countries. In a report released Monday on the 2007 outlook for emerging market equities, JPMorgan said it has raised Thailand equities to overweight and Malaysia and Indonesia to neutral. Other macroeconomic factors working in their favor include strengthening local currencies and increased domestic consumption as a result of lower gasoline prices, the report said. JPMorgan was more specific on its view on Thai equities, saying it "expects that both economic and profit forecasts will be revised higher over 2007." A more defined economic policy from the government during next year will also benefit Thai stocks.

As for the broad asset class of emerging market equities, JPMorgan predicts that conditions in 2007 will remain about the same as this year. Earnings growth will still surpass rates in developed markets. Headline growth rates in all regions remain robust, with domestic demand a key constituent of growth. The U.S. economy is expected to slow somewhat, but a moderation to 3% growth would augur well for emerging markets, as it is likely the Federal Reserve will stand pat on interest rates. Risk appetite in the context of moderating U.S. growth should put the spotlight on robust domestic demand stories, which abound in (emerging markets), the report said. In this scenario, international allocation to the asset class should rise.

One danger, JPMorgan pointed out, is that the market appears unprepared for the Fed to start raising rates again. The investment house expects the tightening cycle to resume in June 2007. If the shift in policy catches the market by surprise, emerging markets could sell off in the second quarter, JPMorgan warned.

According to the survey by Thomson Extel, what JP Morgan writes we should listen cause they were the top equity house in Indonesia and HK. But alas, just look at the report, it would have looked better if it was released in June 2006 or even January 2006, and not November 2006. To me, the strategy proclaimed is so stale and regurgitated already. Tell us something new, please ... buggers at JP Morgan Asia are way overpaid to write this diatribe. ... Gee, if I were them, I would prayed nobody finds out how "average my investment mind" is .... that I am really way overpaid and just ambling along, you know... smoke and mirrors to mask my inadequacies.., , and kinda got lucky to land this job...

Country Manager For A Day ... For Make Benefit Glorious Nation of Malaysia
If I Was An Invited Speaker At The UMNO Assembly...

I am basically a supporter of Malaysia's current PM Badawi. I believe his heart is good, just that he may be pulled by many "hidden forces" in all directions which prohibits him from doing a better job. May never be PM, but if I was, for a day, I would implement the following Ten Things:

1) Instruct all government depts to pay outstanding bills of more than 3 months, and work towards a target "to pay all outstanding bills within 30 days" from mid-2007 onwards

2) Remove KJ from UMNO

3) Raise Anti Corruption Agency's annual budget to RM250m a year, set conviction targets to triple current convictions (less than 100 a year), strengthen the independence of ACA with new regulations. Cash incentives for informers resulting in positive convictions.
Install a new Internal Audit department of all local government bodies, municipals, trade units, cooperatives - to audit that all funds allocated to specified bodies are accounted for and reaches the target audience (e.g. if RM500m was to be spent to improve livelihood of rubber tappers and its owners, the funds must reach the final targeted parties minus reasonable operational cost)

4) Once a company is controlled by foreign investors, the company no longer needs to comply with NEP equity ratio. This is to boost investments into REITs, private equity and M&A activity

5) A one-stop center manned by EPU, which will process all applications concerning FDI, capital transfers, professional job permits and travel visas, FIC approvals, fund mgmt applications, MSC relocations and investments and tax holidays - turnaround time within 24 hours on all issues

6) Stop subsidising any industry in the country with a clearly mandated time frame. Removal of import taxes and duties on all autos by end-2007. No more APs. No more minimum or maximum prices for steel and cement. Fuel and gas subsidies to be erased with a proper time frame - 50% of current subsidy by 2008, 25% subsidy by 2010, total removal by 2012. (The subsidy removal will be cushioned by zero duties and import taxes on cars). Only subsidy to be maintained for "necessities" (poultry, flour, rice, sugar, etc.)

7) Establishment of proper masterplan economic zones, not just for South Johor alone. Do one for Kedah-Perak area, that is a huge area untapped. Another for East Coast/Terenggannu-Pahang. And another for East Malaysia. Each economic zone should have a concentration of specified industries, target investors, critical mass for production, export and dissemination, tax incentives and financing plans.

8) Engage an Asian/European clearing system for Malaysian stocks and derivatives. This way you do not have to send funds to Malaysia or keep CDS in the country to buy/sell stocks and derivatives. Things get cleared in places like Euroclear and custody is kept there as well. You know and I know why we need to do that, the CLOB thing and capital controls are things we need to rectify.

9) Transparent bidding and awarding of all contracts and projects. Blacklisting all parties publicly who are just rent-seekers, alibabas, and those who fail to carry out projects effectively from any future government projects

10) Stop dreaming! ... and remove KJ again (just in case).

p/s ... actually I have a number (11), but ... sigh ... anyway, it is to sell Johor to Singapore for RM300 billion - then we don't have to fund the South Johor miracle, plus those who want to stay with the economic miracle of Singapore can do so, and be citizens of the Mega Free Trade SJ Miracle Zone. The RM300 billion will be divided among 25 million Malaysian citizens only (Indonesians living less than 5 years in Malaysia need not apply) and we will get RM12,000 each, every man, woman and child...

.. actually on further deliberation, this might not be such a great idea ... a family of 4 will get RM48,000 ... they will probably go to holiday in Singapore because of the new IRs , the wife will spend RM20,000 on shopping while the husband will lose another RM20,000 at the very nice Sands casino ... before you know it, we will have dumped back RM300 billion into the Singapore economy, and lost Johor in the process (not that that's a bad thing, anyway) ..

The WSJ Asia 200
Now For The Smaller Companies

The cover pages of The Edge last week carried the top 10 companies from Malaysia which made the WSJ Asia 200 rankings. Ranking was based on:
Long Term Vision
Innovation
Quality
Reputation
Financial Soundness

Unfortunately, those which made the top 10 for Malaysian companies were all players which have been hanging around for some time, they include:
1) Maxis
2) Public Bank
3) DIGI
4) YTL
5) Star Publications
6) Genting
7) Resorts World
8) IOI Group
9) UMW
10) Southern Bank

When you have hung around for so long, you must be doing something good. But what about the younger listed companies? Good companies if they possess the crucial growth traits and sensible management, will see their market cap expand exponentially over the years - hence it pays to spot them early. Here I have attempted to list my top ten for "stars-of-the-future" based on the same criteria as above:

1) Astro
2) Pelikan
3) CCM
4) Commerce/CIMB
5) IJM
6) NextNation
7) Pos Malaysia
8) Mah Sing
9) UchiTec
10) Scicom

Asia-Pacific Brokerage Firms Rankings

Asiamoney provides good ranking services, but this year Thomson Extel has muscled into Asia Pacific territory by announcing the awards ahead of Asiamoney. The awards were voted by more than 100 fund management groups across Asia. Voting was conducted among 109 buyside firms in Asia.

Leading Equity House

Australia & NZ - Macquarie Equities
China - CLSA
HK - JP Morgan
India - Citigroup
Indonesia - JP Morgan
Malaysia - UBS
Singapore - Citigroup
South Korea - UBS
Taiwan - CLSA
Philippines - UBS
Thailand - Credit Suisse

What is surprising is the number of awards UBS managed to snare because despite their strong brand name, most of the employees at UBS do not get paid as much when compared to their peers. Head HR honchos at UBS always trumpet the fact that employees of UBS should be glad to have the opportunity to work there, and that money making is largely due to the company's name rather than the individual's efforts. Hmmm... Looks like UBS is going down the same path as BNP Paribas (losing staff by the dozens and losing money in sure fire places like China), and surprise, surprise, the French bank also trumpets largely the same mantra as UBS. As the American houses try to establish a stronger foothold in Asia, primarily China, HK and India... rest assured that UBS will lose even more people to them. And lets see if the name does bring business in.

The smugness of UBS is largely due to their very strong private banking and funds management side, which provides the turnover and large buys/sells movements across Asia. Their very strong quant funds management side moves markets, and clients need to have that information flow from UBS. That is largely why UBS need not pay well. So, UBS... no need to call me... OK!

Market Outlook

Readers of this blog would be aware that I have been bullish on all equity markets, yes, even Malaysian equity market, since the beginning of the year. The correction in oil prices was a boost to the underlying strong tone for equities. I did mention that if oil and gas prices fell too fast, it could hasten a more hawkish Federal Reserve. Thankfully, the biggest factor which is US housing has shown some weakness despite the dip in oil prices. The decline in residential construction could reduce GDP by 0.5 to one percentage point over the next 12 months. That’s not enough to push the economy into a recession but could easily persuade the Fed to leave rates alone for now and even to nudge it lower come 2Q2007. However, firm labour costs is the other side of the coin as many companies are reporting strong earnings growth and bonuses should be substantive and that may cause the Fed to leave rates alone for now.

The way it is now, markets will bring one another up, and naturally it will lead to some over valuation but is there any negative triggers in the horizon. Not any that I can see. If there are no negative triggers, chances are the party will continue with more drinking and merry making. Flushed with liquidity, it takes a while to wind down the party. Even when there are pullbacks, it should not be severe because I still think we are only in the middle of a bull market, one that is quite silent and not as voracious or loud as the bulls of the past.

For the bigger markets, they should continue to chug along even though, every now and then you have doom sayers. One has to get the big picture right. The big picture is the developed economies are outsourcing a lot of stuff to cheaper cost nations, and this has enabled many of these companies to post good earnings growth. Of course this will reach a climax but not so soon as the per labour cost differentials are still wide, and that means companies in developed countries will be able to maintain and massage their profit margins. The opening up of markets in China and to a lesser extent India and South America spell of substantive growth opportunities for the big companies. This reinvestment and liquidity recycling thing will prompt better demand from these poorer nations. We are seeing the benefits of globalisation.

If the big boys do well, they also import more from smaller nations, and that cycle is underway. The recent boom and bust of commoditie is but a side effect of the confluence of these factors. You will also note that the markets tend to be careful in their increments as many are still wary of being caught by a market slide. These has kept most markets within reasonable valuations still.

The other big developments to consider is the amount of cash residing in many big companies, and the way they have been buying back shares and cancelling them to boost eps. As mentioned before the amount of cash within listed US firms has never been at a higher level. Another factor is the rise of hedge and private equity funds, they now tend to be more carnivorous and bigger. Any mis-pricing in any stock will be noticed by these firms which can only bring up valuation of these companies. Correlated rise within same industry due to M&A activity also brings up prices and valuations of similar companies. For example, you see private equity bidding for Bally, and then the rush for Stanley Leisure abd London Clubs, followed by a takeover notice for Harrah, all conspiring to lift valuations for all gaming companies. These activity cannot be underestimated owing to the size of funds under private equity now.

p/s while the KLSE will also go higher, it does not detract from the fact that the Malaysian bourse is still lagging its regional counterparts in market velocity, status, new listings and strategy

The World Needs A Democrat President In USA

Like it or not, the global military, technology and economic leadership comes under the umbrella of USA. I think we have enough of the Bushes or Cheneys. I wouldn't have minded so much if Colin Powell stood for Presidency but he prefers doing something else. We need a more empathatic leadership from the US, a better way to mend fences and heal internal wounds and international bruises. Hilary Clinton should secure one of the nominations, and its high time for a woman to lead, and a crucial time to signal a new era for the world. Many countries have had wonderful female country leaders, and America is lagging. Its a big education for all, if a woman can be President of America, what institution, company dare to deny a similar fate. Young girls everywhere will be empowered even more to think big, and step out of the invisible box.

However, a spanner has been thrown in the works, now there is another very credible candidate from the Democrats too, Barack Obama. His father is black and mother white as chalk. Obama is highly intelligent and a wonderful speaker, and would rally not just the blacks but also most of the other minorities to vote for him. The empathy vote would be stronger for Obama. You either love or hate Hilary ... and that could swing the Democrats to choose Obama to get a better sense of victory. While some question the fact that he does not have actual military or foreign policy background... surely you cannot be worse than Bush??!! The tv comedians will have a big day rapping Obama to Osama in their skits.