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Friday, July 29, 2011

Is GOLD money? Or is it a commodity?

Nice article for reading.

If gold were simply bought for its industrial use things would be much simpler...

IS GOLD money? Or is it a commodity? asks Julian Phillips of GoldForecaster.

If gold is a commodity then it rises and falls as a result of the ebb-and-flow of the economies that use it. If so, it will move in synch with the financial markets cycles and remain subject to their dominance. But when it comes to gold and silver, nothing is that simple!

If the bulk of the demand for a commodity is contracted to buyers, then the only influence these contracts have on the price of the commodity is through the referencing of that supply to the market price.
The supply of the metal in the open market outside of contracted amounts is the quantity of that metal that determines the price of the metal. Call it the 'marginal' demand or supply. This supply is sent to the open market for buying by non-contracted buyers. It could be just to top up for unforeseen demand, or it could be to sell overbought amounts. This determines the liquidity of the market.

On top of that, speculators frequently enter the market taking a view on demand and supply expectations, taking off supplies to force prices higher or introducing them, to force prices lower. In a pure commodity market, these views are based on industrial demand/supply expectations.

But gold is not so simple or predictable. Most buyers of gold do not Buy Gold for its industrial use. Where it is used in industry it is done so for hi-tech purposes, which is relatively price-insensitive. So the price of gold has little bearing on the demand from industry.

Gold is used to decorate people in its Western jewelry application. There is little sense of showing off the extent of your wealth when wearing gold in the West. Additions of jewels and artistic presentations add so much to the cost of such jewelry that the price of gold in such jewelry is a minor factor. This type of jewelry demand does fluctuate with the state of an economy, but such demand is a small component of the gold market.

In the past it has been an influential one, particularly before the eastern markets 'emerged'. Add to this the determination of the jewelry trade to extend Buying Gold down to poorer people's levels by lowering the purity of the gold sold. This increased the vulnerability of the Gold Price to the state of the developed world economies. Such demand became the 'swing' factor in the Gold Price.

This too was at a time when central banks were not only out of the gold markets but encouraging a heavy increase in supply. As a result, analysts' studies placed great emphasis on western jewelry demand.
Then at the turn of the century, the gold market changed its shape. Asian markets 'emerged'. The driving force behind their buying was totally different to western attitudes. They followed the maxim, "One buys gold, not to make money, but because one has money."

The gold bought was nearly pure. It was bought because it was treated as money and money of a higher quality than currencies. When used in jewelry, it was a statement of the financial security of the wearer. Nothing could be more different than the Western view of jewelry. Central banks changed their attitudes to holding and selling gold then too.

These structural changes altered the dynamics of the gold markets. Over time, investment demand grew to become by far the greatest source of demand for gold. In addition, central bank-inspired supplies (through their encouragement of increased supplies) stopped and gold producers became a source of demand. This happened for a while as they bought back previously sold gold. Central banks cut back on their supplies to the market until they stopped selling and other central banks began buying.

But more was changing in the gold markets. As the ability of currencies to give an accurate measure of monetary values decayed, gold began to fill the hole they left. This aspect of value grew to the point that the Robert Zoellick, head of the World Bank suggested that gold be used as a reference for value measurement. The concept has taken hold again, but as a banker, Mr. Zoellick has remained silent since then. His silence, while deafening, has reaffirmed gold's inherent value. After all, as Alan Greenspan, the most famous Fed Chairman said, 'Gold is money in extreme times'.

Its monetary value lies in its remarkable quality of being both an asset and liquid cash, globally and in all circumstances.

Currencies can't be this. They remain the obligations of one nation or another, dependent entirely on the reputation of the nation printing them. Gold is considered money, without the strings that are attached to national money. Investors from central bankers to Indian or Chinese rural farmers believe that gold is a counter to unbacked currencies issued, at will, by national governments all over the world.

Gold has no nation.

It carries nobody's obligations.

It's what enemies will accept from each other.

The concept of consuming gold is no longer a part of this gold world. These structural changes cut gold off from being just a commodity.

Gold is not a commodity!

Julian D.W. Phillips, 21 Jul '11

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Wednesday, July 27, 2011

Why I was laughing at DRBHICOM technical analysis report?

I saw a DRB Hicom technical analysis on 26/07/2011. I can't help, but laughing.

On 25/07/2011 DRB Hicom was down about RM0.30 to RM1.95 in the last minute of pre closing. The Edge said got error trade. Some blogs said they do it on purpose. But I interpret that both will expect it to trade at about RM0.30 higher on the next day.

But the next day, there was one technical analysis report, purely based on technical analysis and commented on DRBHICOM.

1) It said DRB Hicom was under strong selling pressure and have a long black candle.
2) DRB Hicom broke many of the support level
3).... this is the best part... The analyst expect DRBHicom share price to continue falling due to strong selling pressure and bearish signs....
4) Other comments include "avoid this stock", sell at RM2.00.

What happen? The next day DRBHicom up RM0.29 to RM2.24  ! ! ! ! !

I am not criticising technical analysis. But I feel that a bit of common sense is needed here.

Purely based on technical analysis, the analysis was RIGHT. But if add a bit of common sense, the RM0.30 drop may be an exceptional case. 

I want to clarify that I am not good in technical analysis and it is just an opinion.

More info on Technical Analysis

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Tuesday, July 26, 2011

Why the US Stock Markets Did Not Crash

With the U.S. closer to default, I was wondering why the Stock Market didn't crash. I found one article quite interesting. Not sure how true but he got some points.

Over the weekend, both President Obama and House Speaker John Boehner insisted a deal needed to be completed before the Asian markets opened on Sunday afternoon New York time. Of course, the Asian markets greeted the lack of resolution with a collective shrug, as did the U.S. markets. On Monday, things only got worse, with a day of backbiting culminating in dueling prime-time speeches. And yet on Tuesday morning in New York, stock futures were up (although the market open mixed, with the Dow dragging close to 50 points) and the 10-year bond was trading at 3.00. Does that look like an impending crisis to you?
Many of my colleagues in the financial-political press seem to think we are about to see a repeat of the fall of 2008. Back then, amid market turmoil, the first Congressional vote on the TARP failed. But the horrific market reaction forced Congress to swiftly reconsider. The conventional wisdom holds that market turmoil forced Congress and the White House to bite the bullet and pass necessary, unpopular legislation. The presumption today is that only such market forces —- carnage in the bond market, a crash in the stock market, the hammer of a a credit agency downgrade -- will make Democrats and Republicans come together and strike a deal.

Don't hold your breath.

We're not supposed to say that it is different this time, but it is different this time. The 'markets,' to the degree that they have a mind, seem not to be too troubled by the debt-ceiling brinksmanship. Back in the 1990s, the common notion in Washington, popularized by Clinton adviser Robert Rubin and Federal Reserve Chairman Alan Greenspan, was that the bond market is like a crowd at a Roman gladiator match, signaling approval or disapproval of fiscal policy on a daily basis. But it clearly no longer serves that function.

Despite the hand-wringing about American decline and the constant refrain that the U.S. is the next Greece, the bond markets remain remarkably permissive. The U.S. government is currently borrowing for 10 years at almost exactly 3 percent, an extraordinarily low rate that is within spitting distance of a historic low. Look at the chart from the past six months. The Federal Reserve has stopped buying bonds, the political stalemate has worsened, inflation hasn't disappeared. And yet interest rates are contained. Why? As John Tamny and I discuss in the accompanying video, nobody really believes the U.S. government is going to default, even if it pierces the debt ceiling next week.

Nobody believes that the 10-year and 30-year bonds are not money good — i.e. they won't be paid off on time. This is emphatically not like the Lehman Brothers situation, when the world woke up one Monday and realized that $650 billion in debt was likely to be settled for pennies on the dollar. The government has revenues, and it has plenty of other people to stiff before it stiffs bondholders. In a time of turmoil and crisis, even when the crisis is over whether the government will pay its debts, the U.S. Treasury market is a safe haven. So don't look for it to be the fiscal enforcer.

As for the credit ratings, again, don't hold your breath. It would be an exceedingly bold move for S&P and Moody's to downgrade the U.S. sovereign credit rating. And, generally, these firms only act on sovereign credits after the market has made them look like chumps by driving up interest rates. If there has been a time in history when S&P downgraded a sovereign credit that was borrowing for 10 years at 3 percent, I'm not aware of it. Despite their desire to get ahead of the curve, the ratings agencies won't act until well after the market does.

What about the stock markets? Here, too, people hoping that a swift downdraft will spur action are likely to be disappointed. It's an enduring truism that the Dow and S&P 500, and indeed the global markets, are some barometer of opinion about how the U.S. is doing. That made sense in the late 1990s, when the U.S. represented about one-third of the global economy and its stock markets represented about 50 percent of global stock market capitalization.

While the U.S. is still the world's largest economy, global markets don't care so much about what happens here as they used to. Assuming the debt brinksmanship leads to a slowdown in U.S. growth, it won't put much of a crimp in Asian stock markets. The U.S. today is about 25 or 26 percent of the global economy and, more important, accounts for only a small sliver of the world's growth. As the rest of the world trades more with each other and less with the U.S., America has less ability to impact the trajectory of global growth. And if you believe the markets are rational and constantly factor in known data, well, sluggish U.S. growth and political dysfunction aren't exactly news.

Perhaps it is more surprising that the U.S. stock market has held up well in the face of this brinksmanship. And indeed, it's more likely that effects of a stalemate would be felt in the stock market than the bond market. Why? Huge deficit cuts, and a suspension of delay in the payment of salaries, benefits and entitlements would contribute to a demand shock, slowing growth (good for bonds, bad for stocks.) It could be that stock investors aren't watching cable news 24/7. But here, again, there's a sense that Washington, and even the U.S. economy, matters less and less with each passing day. Consider this: The typical member of the S&P 500 already gets about half of its revenues (and probably most or all of its growth) from overseas. The bigger the company, the less tethered to the U.S. Consider Intel, McDonald's, Coca-Cola, Apple; their earnings reports show that they are being driven by growth overseas.

If Washington is going to act on the debt ceiling and the long-term deficit, it will have to do so out of its own volition and sense of responsibility —- and not because of the savage demands of the credit and stock markets. Get ready for a few more weeks of brinksmanship.

Daniel Gross is economics editor at Yahoo! Finance.


What Do You when US Default, here.

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What to do if US default its debt?

What to do if US default its debt?

There are debate whether US will default its loan. Let us assume US default the debt and what will happen and what can we do.

This is more of a case study and I may be wrong.

US Dollar will drop.
Short US currency, buy gold, Sell US stock (not because of the poor earnings, but because of currency exchange). Short Dow Jones Index. Buy Dow Jones put option.

World Stock Markets will crash
Sell Futures index. Buy Put Option. Sell stocks.

Interest Rate will goes up, I think in Malaysia also.
Invest in Interest rate futures.
Property prices will drop, sell property.
If got extra money, buy back property when the price is very low, it may rebound sharply when the value of money drop.

Food and Gold price will goes up.
Buy food and store. Buy gold.

Economy not good due to rising interest rate and low demand
Sell Futures. Buy Put Option. Sell stocks.

World Central Bank start to sell foreign currency (especially US Dollar) and keep gold as reserve.
Buy Gold.

After X years, the market will be at bottom.
If you are still not a bankrupt and got money, buy shares, buy Futures Index, buy call option.

NOTE ! ! !
The above is for case study. I probably be wrong because I'm not good in economics. In economics, it is very hard to proof whether it is right or wrong. If Malaysia inflation is at 3%, how to proof?

I was wrong in 2008 when US was having subprime crisis. I thought US Dollar will go down, but it didn't. It went up, because many US companies recalled back the money invested in foreign countries back to US to help them survive in the weak US market business.

I schedule it to be posted the next morning. Maybe at the time of posting, Obama may have already strike the deal to increase the debt ceiling.

More info on the effect of US Loan default

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Monday, July 25, 2011

Armageddon (end time) in world stock market on 2 August 2011?

In some religions, Armageddon refers to the site of a battle during the end times. Will that happen on 2 August 2011 and the whole world stock market crash, including Bursa Malaysia Stock Market?
The U.S. borrowing limit, currently at 14.29 trillion U.S. dollars, and if by 2 Aug 2011 the US President Obama still unable to convince the US politicians to approve the increase of the ceiling limit, this will cause US to default its loan. After few tries, Obama still fail. Why so serious and the politicians may not want to approve it? The reason is Politics.
I’m not so good at economics. Extract some articles for your reading pleasure.
Pacific Investment Management Co. LLC Chief Executive Officer Mohamed El-Erian said a short-term default by the U.S. on its debt might have “catastrophic” legal consequences.
We would be in the land of the unpredictable” if lawmakers fail to reach an agreement to raise the $14.3 trillion debt ceiling and the U.S. misses a payment “simply because of the technical linkages,” El-Erian said in an interview on CNN’s “Fareed Zakaria GPS” program, scheduled to air today.
U.S. lawmakers are seeking a path to increasing the debt limit and to cutting at least $1 trillion from the long-term deficit before an Aug. 2 deadline. President Barack Obama plans to hold separate meetings at the White House June 27 with Senate leaders Nevada Democrat Harry Reid and Kentucky Republican Mitch McConnell in an effort to break an impasse that scuttled a seven-week negotiating effort led by Vice President Joe Biden. 
My advice is please try and get together and solve this issue in the context of a medium-term reform package,” El-Erian said. “If you can’t do that and you’re going to kick the can down the road, kick the can rather than face something that could be catastrophic in terms of legal contracts being triggered.”
Pimco, the world’s biggest manager of bond funds, sees more value in non-U.S. government bonds than U.S. Treasuries as the Federal Reserve prepares to end its $600 billion bond-repurchase program this month, El-Erian said. Pimco, of Newport Beach, California, is a unit of the Munich-based insurer Allianz SE. (ALV) 
A basic rule as an investor is don’t buy something unless you know who else is going to be buying,” he said. “So when we look at Treasuries, we see the big buyer stepping away from the market, for certain. And we ask the question, who else is going to be buying at these levels, and we can’t identify another buyer of the size of the Fed.”
El-Erian said the U.S. fiscal problems are dwarfed by those of Greece, whose debt reached 143 percent of gross domestic product last year. 
It is inevitable that Greece would have to restructure its debt,” he said. “Greece has two problems: it has too much debt and it cannot grow. And until these problems are solved, more and more of Europe is going to become contaminated.”
Europe has been treating Greece “not as a solvency issue, but as a liquidity problem,” El-Erian said. “We had a massive bailout a year ago in Greece, massive. A year later, every single indicator in Greece is worse off.” 
-- With assistance from Heidi Przybyla, Julianna Goldman, Cheyenne Hopkins and Ian Katz in Washington. Editors: Ann Hughey, Christian Thompson.
Republicans and Democrats have reached an impasse in an escalating ideological battle over raising the US debt ceiling, with the rating agency Moody's threatening to downgrade Washington's credit worthiness if the two sides fail to find a compromise by August 2 - a move that could destabilize the global economy.
"It's the foundation of our financial system," US Federal Reserve Chairman Ben Bernanke said during a recent congressional hearing. "The notion that it would become suddenly unreliable and illiquid would throw shock waves through the entire global financial system." 
Tax increases versus spending cuts
Both political parties agree in principle that the US must increase its $14.29 trillion (9.8 trillion euros) debt ceiling in order to continue paying its bills and avoid a short-term default on its financial obligations. Negotiations, however, have reached a stalemate due to a partisan divide over the appropriate balance between taxes and spending cuts.
Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift:  Democrats like Nancy Pelosi are reluctant to cut spending
Republicans have preconditioned any debt limit increase on parallel cuts in spending while at the same time rejecting tax increases across the board. Democrats, meanwhile, have been reluctant to make cuts in social programs such as Medicare and Medicaid that could alienate their electoral base, proposing instead to raise taxes on wealthier Americans. 
Republican House Speaker John Boehner and President Obama appeared on track to bridge the divide through a "grand bargain" that would have included a $3 trillion reduction in spending and $1 trillion in tax increases. Rank-and-file Republicans led by House Majority Leader Eric Cantor, however, rejected the deal due to the tax hikes.
In lieu of the politically risky "grand bargain," Cantor reportedly called for a short-term solution rooted in spending cuts. Cantor's proposal prompted Obama to dig in his heels against Republican demands in what has become a volatile game of political brinkmanship.
"The problem is that there is no party discipline," Josef Braml, an expert on American politics at the German Council on Foreign Relations, told Deutsche Welle.
"Obama can't get his liberals on board. On the other side, it's difficult for Republicans to get the Tea Party guys involved because they would commit electoral suicide if they agreed to tax increases."
Domestic dangers
Christian Lammert, an expert on US domestic politics, says that while fiscally conservative Tea Party Republicans stubbornly reject tax increases, many progressive Democrats are adamant in their opposition to cuts in social programs like Medicare, Medicaid and Social Security.
"That's the third rail of American politics," Lammert, with the John F. Kennedy Institute at the Free University of Berlin, told Deutsche Welle.
"If you touch it, this is political suicide especially for the Democratic Party. There is a lot of opposition within the party, especially in the progressive wing that will not support any deal between Obama and the Republicans that will be about such huge spending cuts."
Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift:  The fiscally conservative Tea Party has become a powerful force in Congress
According to Lammert, the US ultimately has no choice but to implement both tax increases and spending cuts in order to gain control over its $14 trillion national debt, regardless of what the ideological predispositions of the far-right and far-left prescribe.
Such measures, however, remain difficult to implement because they place new burdens on an American public still reeling from high unemployment, stagnant wages and low savings.
"The income inequality is rising in the United States to a level that the United States has not known since the New Deal and this will be a problem if this gap widens and the poverty rates go up," Lammert said. 
"It's just a question of time until this gets [to be] so huge a problem that there might be some forms of social unrest."
No longer a 'safe haven'
Not only has the weary American voter lost patience with Capitol Hill, but the international community is also beginning to challenge Washington's economic policy. Moody Investor's Service has placed America's AAA credit rating on review for a possible downgrade.
Such a move would be "extremely painful" for the US, said Jacob Kirkegaard from the Peterson Institute for International Economics in Washington. The US market for government bonds is, after all, not just some exchange, but rather the safe haven for investors worldwide, he said.
"The problem is that when you lose the status of 'safe haven' - which inevitably occurs with a downgrade - interest rates rise over a longer period of time," Kirkegaard said. It could take decades for the situation to normalize again.
In addition, the US would have to work hard to regain the trust it wilfully put at stake, he said.
"The US is not bankrupt, we aren't Greece," Kirkegaard said. The blame lies elsewhere: "A political system in America that is unfortunately unable or reluctant to raise the funds necessary for the style of government we want." This does not only apply to domestic policies, but also the global role of the US, he said. International commitment costs money.
According to Lammert, a downgrade would make it even harder for the US to get new credit.
"This will not help the economic recovery," he said. "This will mean a rise in unemployment and that's the major problem right now for the United States."
Global fallout
Washington's creditors in Asia have also begun to speak more forcefully as they worry that their own national interests are at risk in a system that appears unable to resolve its own problems.
"We hope the US government adopts responsible policy and measures to ensure the interests of investors," Chinese Foreign Ministry spokesman Hong Lei said recently.
The consequences of a US default are difficult to predict, although borrowing costs would certainly increase, putting even more pressure on an ailing American economy that still stands at the center of the global financial system.
"You can never tell where sheep are running," Braml said. "If it was true that markets are rational you could predict it, but we all know that the markets are anything but rational."
Authors: Spencer Kimball (Reuters, AFP), Christina Bergmann, Washington DC
Editor: Rob Mudge
New chief of the International Monetary Fund (IMF) Christine Lagarde said Sunday that there would be "real nasty consequences" for global economy if the United States defaulted on its financial obligations.
Lagarde, who took the post of the IMF managing director on July 5, said in an interview with the U.S. media that the default would cause interest rate hikes and stock market falls across the world.
Her comments came at a moment when the White House and Republicans are intensively involved in deficit reduction and debt limit talks.
The U.S. borrowing limit, currently at 14.29 trillion U.S. dollars by Aug. 2, was reached on May 16.
The U.S. Treasury Department said the United States would begin to default if there was not an agreement to lift the limit before the Aug. 2 deadline.
"If you draw out the entire scenario of default, yes, of course, you have all of that -- interest hikes, stock markets taking a huge hit and real nasty consequences, not just for the United States, but for the entire global economy, because the U.S. is such a big player and matters so much for other countries," said Lagarde, former French finance minister and the first female head of the 187-member international financial institution.
On July 6, Lagarde said sovereign debt challenges were threatening a broad range of advanced economies, not only many European countries, but Japan and the United States

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Saturday, July 23, 2011

52 Ways of Making Money in Stock Market - Part 20/52 - Free Vouchers

Free Voucher
Some companies give free voucher to their shareholders when they post out the annual report. The popular one is Genting where you get free nights stay in Genting. Some companies give you discount coupon or voucher and some give you coupon that you can redeem their products. Products range from food, hotel, travel, health products, etc.

Only some companies give out vouchers. The vouchers may not be useful to you. Eg some received many Genting vouchers but for many years also didn’t use it.

I notice that the vouchers are getting lesser and lesser. Eg past few years Genting have been cutting down the vouchers.

This is just an extra benefit.

For more info on 52 Ways of Making Money in Stock Market……..

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Thursday, July 21, 2011

My Fund Performance Update (up 31.90%++)

6 months
KLCI up 3.95%
My Fund 10.26% + 1.5% (charges) + 0.75% (management fee) = 12.5%

12 Months
KLCI 20.15%
My Fund 31.90% + 2.5% (charges) + 1.5% (management fee) = 35.9%

You will be asking why I need to add back the charges and management fee?
The charges and fees were deducted from my Fund, and I think it is only fair that I add back for comparison purposes with KLCI.
If you think that I should not add back, then you can use the net 10.26% or the 31.9%.

I’m quite happy that I can still outperform the Bursa Malaysia KLCI, even I made few bad decisions. I have checked with some investor friends, due to Japan earthquake (Tsunami plus nuclear leak) and Middle East political crisis, they said for the past 6 months have been very tough for them and about one third of them were having losses. Some perform better than me, of course.

This month my fund already see red. I saw a statement few months ago in which I agreed to it. The statement says the Fund that have higher gain may drop more during bear market. I hope that will not apply to me. I know during bear market, I will suffer losses and probably may perform worse than KLCI. But hopefully will not that bad. Maybe KLCI drop 10%, I hope mine will drop less than 10% or worst case 15%.

My objective is simple, that is to beat KLCI in every three years performance and have a much better return that FD.

Will update every 6 months.

Please note that I am having difficulties in trading in my fund and this is not the only fund that I have.

More info

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Wednesday, July 20, 2011

52 Ways of Making Money in Stock Market - Part 19/52 - Invest in hints or Leads

Hints or Leads
Certain happening will trigger some counters to go up. Eg if mother shares go up sharply, then the warrant will also goes up. If Genting Singapore goes up sharply, then Genting probably will also go up. If Genting Singapore comes down sharply, then Genting may also come down.

If you see the mother share go up sharply, then buy the warrant if not yet go up.

Another example is if a counter price jump up sharply, you may want to know whether the shareholders are public listed company. Example Parkway Holdings Limited was up sharply due to takeover offer. If you check out the shareholders list, you may found out that Keck Seng is one of the shareholders. True enough, Keck Seng later went up.

Examples of Leads/ Hints are:
Mother share – monitor the warrants
CPO price – Monitor the plantation counters
Sharp price increase- Monitor the public listed shareholders or common shareholders.
US Dollar Up – Export oriented company will benefit
China President in MalaysiaChina stock may go up
A stock goes up sharply, the same industry stocks may go up.
Projects – Who will benefit
Politician promoted – Any stocks relate to him?
Current government may be voted out - what stock to sell 

Not that easy. Talk is easy but practical is tough. The stocks may not necessary go up. Furthermore, these stocks may not be good in fundamental and you may also not so familiar with these stocks.

This need quick thinking and knowledge. If interested, discuss with friends and start to analyze and do paper trading to learn.

For more info on 52 Ways of Making Money in Stock Market……..

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Tuesday, July 19, 2011

How to make 130% Return from this bear market

If you interested to make 130% return from this bear market in Bursa Malaysia Stock Market, what you need to do is to predict correctly 5% of the direction of KLCI. Then you buy one lot of FKLI (The Futures Index of KLCI).

1 lot of FKLI is <RM3,000.
One point is RM50

Assuming you Sell one lot of FKLI at 1560, hoping KLCI will crash.
You pay RM3000.
Now one lot is less than RM3000 but you pay extra just to buffer for KLCI few points up.
If the FKLI drop 5% within one month, then you make 78 points.
78 points X RM50 = RM3,900.

Your profit is RM3900

RM3900 over your investment of RM3000 is 130%.

So easy right?

But will FKLI drop 5%? If it drop less than 5%, you still make profit, but less.
But what if the FKLI goes up? Then you lose money.
Very simple.

Am I investing? No. Because I don't know market is going up or down.

More on Derivatives or Futures, here.

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Monday, July 18, 2011

Point of Sale in Bursa Malaysia Stock Market

I will explain what is Point of Sale, then I will connect it to Bursa Malaysia Stock Market.

Point of Sale (POS), some people also call it Point of Purchase (POP), is the location where the transaction occurs. Survey shown that a high percentage of buying decision is made at the Point of Sale. We decided to buy Coke at home, but we ended up buying Pepsi because we changed our mind in the hypermarket.
Examples, we already decided and wanted  to buy iPhone. Then when we arrive at the phone shop listening to the salesman promoting the Samsung Galaxy,  and we ended up buying the Samsung Galaxy.
We already put the Enfagrow baby milk powder in our trolley, then there is this Mamil baby milk promoter promoting the goodness of Mamil. So, we change our mind, take out the Enfagrow and put in the Mamil.
Point of Sale or Point of Purchase is very important in Bursa Malaysia Stock Market. Where is the Point of Sale in stock market? It is at the location of the transaction. It can be during the phone call with remisier or dealer. It can be when we click on the online trading. It can be any other places that the transaction occurs.
Example, we have decided to buy CBSA stock. We call the remisier and said we want to buy. The remisier said “market sentiment really bad, US economy not so good, Euro debt problem, etc”. Therefore, we change our mind and we didn’t buy.
We may decided to sell Turiya stock. But when we log into our online stock trading system and we saw Turiya shares went uo 4%, we change our mind and decided to hold back.
We may call the remisier to ask him to buy GLBhd stock. But the remisier or the dealer told us SOP stock is better in terms of PE ratio or growth. So we ended up buying SOP shares.
What is the Implication of Point of Sale in Bursa Malaysia Stock Market?
1) You need to find a good remisier or dealer. He or she can give us good advice and give us enough information for us to make decision.
2) We must not deviate too much from our original strategy when we change our mind. If you have decided to buy, and after seeing the stock price dropped 4% and you decided not to buy. Why? Now is 4% cheaper and you decided not to buy? Why you wanted to buy at the first place? Fundamental or technical? Do not change your mind too frequent. Reassess your decision.

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Saturday, July 16, 2011

Shares Change of Name with old stock name and new stock name in Bursa Malaysia

PETRA PERDANA BERHAD old stock name change to new PERDANA PETROLEUM BERHAD stock name. The Perdana shares stock code remain unchanged, 7108.


Stock short name changed from Mutiara to NADAYU stock.


LEBAR DAUN BERHAD, the old stock short name is LDAUN.
The new name is LEBTECH BERHAD and the short name is LEBTECH.

Seacera Tiles Berhad changed to Seacera Group Berhad

For other changes in Name, you can click on my link here.

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Bumi Armada IPO fixes institutional price and public portion oversubscribed by 9.5 times

Bumi Armada Bhd's institutional price under its initial public offering (IPO) was fixed at RM3.03 per share after the completion of the bookbuilding process. The offshore oil and gas services provider stated that the final retail price was fixed at RM3.03 per share.

The company will refund the 12 sen difference between the final retail price and the retail price of RM3.15 per issue share, within 10 market days from the date of the final ballot of the applications.
The retail offering closed on July 7.


Bumi Armada Bhd's initial public offering (IPO) has been oversubscribed by 9.5 times.
The oil and gas services provider, en route to a listing on the Main Market of Bursa Malaysia on July 21, 2011, said it received 57,941 applications for 614.632 million shares for its public tranche of 58.569
million shares.

It said the retail, institutional, cornerstone and Ministry of International Trade and Industry (MITI) tranches of the IPO were priced at RM3.03 per share. The market capitalisation of the company at RM3.03 per share would be approximately RM8.9 billion, it added.

The IPO comprised 878.538 million ordinary shares or 30 per cent of Bumi Armada, of which 22 per cent were primary shares offered by the company and eight per cent were secondary shares offered by certain existing shareholders.

The total amount of funds raised through the IPO was RM2.7 billion, of which RM2 billion was raised by the company. The IPO is the largest public offering in Malaysia and the second largest in South East Asia, thus far this year.

The company also secured cornerstone investors for its institutional offering, namely Great Eastern Life Assurance (Malaysia) Bhd, Permodalan Nasional Bhd, HwangDBS Investment Management Bhd, Prudential Fund Management Bhd, Hong Leong Assurance Bhd, Guoline Capital Ltd and Asia
Fountain Investment Company Ltd which had agreed to purchase an aggregate of 300 million
shares, representing approximately 10.2 per cent of the company.

Souce: Bernama, The Star, Business Times.

For more info on Bumi Armada analysis, target price, etc, here.

More other info on recent IPO, here.

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Friday, July 15, 2011

52 Ways of Making Money in Stock Market - Part 18/52 - Invest in New Product in Stock Market

New Product in Stock Market
Whenever there is a new product by Bursa Malaysia, there may be an opportunity. How?

I can recall there was this Mesdaq (now is called ACE Market) counters offered by Bursa. Initially it was totally very different in terms of buying and selling. Most remisier cannot key in Mesdaq counters. If you want to buy, you may need a separate account or extra forms. The remisier have to fill up forms and this and that, so troublesome. Everyday the volume is like few lots a day or even zero. There were only few Mesdaq counters. Bursa Malaysia (was called KLSE) announced that the Mesdaq will be merged with all other KLSE stocks. So, later remisiers will be able to key in the buy sell just like other stocks.

I was thinking, after it merged, so easy to buy sell, sure people will play these Mesdaq counters and it will jump. Yes, true enough, after merged, these Mesdaq counters jumped.

Guess what? I was a NATO member. No Action Talk Only. I didn’t manage to open the account to trade in Mesdaq before it merge.

Another incident is Bursa Malaysia launched the Option product in Futures and Derivatives market. I was thinking, in Malaysia, only few people know how Option works. So, sure got a lot of people make mistake and I can benefit from it.

When Option is launched by Bursa Malaysia, true enough the price is like crazy, up sharply and down sharply.

Guess what? I was also a NATO member. I actually forgot about the launching date. Then the second day or the third day I went to put in orders, only got few buying or selling. Whole day only very small quantity done. After a while, this Option market is dead and disappeared.

Actually Option is a very good product. But in Malaysia, people just don’t understand how Option work. It is very difficult to explain to others.

You may know what is happening or how to make money, but may not take action.

Good opportunity during launching. You need someone to discuss with you, to explore opportunity, to remind each other or to motivate each other.

For more info on 52 Ways of Making Money in Stock Market……..

Thursday, July 14, 2011

TSH has 123,385 ha forestry management unit (FMU) land in Sabah = RM0.33 per share?

Brokers that recommed to buy TSH.
MIDF – Buy
Hwang- Buy
Maybank – Buy
KAF- Buy
Philip Capital- Buy
OSK- Buy

Besides the 100,000 ha of oil palm land (most are still unplanted), TSH has 123,385 ha of forest management unit (FMU) land in Sabah, on which the company plans to plant rubber covering an additional 8k ha.

I don't know what is FMU. Let us see what OSK say.

Source: OSK
As rubber is recognised as a timber species under the FMU programme, TSH could potentially plant a larger proportion of the FMU land with rubber trees. TSH was awarded with a 100-year concession in 1997 to carry out forest rehabilitation, environmental conservation and industrial tree planting on 123,385 ha of
forestry land in Ulu Tungud, Sabah. Currently, it has 2,121 ha of rubber planted area and plans to plant up to
8,000 ha of its FMU land with rubber. As the FMU program recognizes rubber as a timber species, TSH can actually plant a bigger proportion of the FMU land with rubber. That said, the company’s rubber trees are currently immature and have yet to start producing.

Assuming a value of RM15k per acre for its planted immature rubber and RM7.5k per acre for unplanted rubber land, we value the company’s total rubber area at RM0.33 per share.

Source: OSK.

Most of other research papers didn't really touch on the rubber. Based on the conservative valuation by OSK, we may add RM0.33 into TSH fair value if the analysts have not factor in the rubber land value.

OSK didn't not mention anything about Wakuba, not sure whether they have factor in the potential of Wakuba or not. Most analysts also did not factor in the potential of TSH Wakuba ramet that has potential to increase the yield. Depending on where the trees are planted and the age profile, on an average basis, I think the Wakuba can increase 30% of the yield.

For more info on TSH, here.

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Wednesday, July 13, 2011

PRESBHD IPO share price target fair value

Too many IPO, no time to think. Market also not so good. Do a quick one.

Prestariang PE ratio, 13.4x,  7.1x,  5.5x
Growth 102%, 86%, 27%
Net gearing nil, net cash
Prestariang dividend yield 7.1%

Prestariang dividend policy is 50% payout ratio for the next 3 years.

Above figures from TA Securities, Prestariang target price of RM0.98 based on 6x FY12 EPS of
16.3sen. The 6x PER represents a 50% discount to TA average technology sector PER of 12x which they believe is fair due to 1) its small market capitalization 2)conservative business model that merely focuses on government contracts 3) high proportion of offer for sale that cast doubt about management’s confidence in sustainable business. It offers a capital potential of approximately 9%. As such, TA recommend investors not to subscribe to Prestariang.

More info on Prestariang IPO.

More info on recent IPO

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Peterlabs Holdings IPO Share price target fair value

Too many IPO, let us do a quick one.

2010, 2011, 2012
Peterlabs PE ratio 9.5x, 7.5x, 6.13x
Growth 31%, 27%, 22%
Peterlabs net Gearing 0.22
Peterlabs dividend yield about 4%.

Peterlabs does not have any formal dividend policy. In the future, dividend payout ratio of about 30% may be posible.

The above figures are by TA Securities, with Peterlabs fair value at RM0.29. Using a FY12 target PER of 6x, being a trailing 3‐year average PER for peer SCC, TA derive a fair value of RM0.29/share for Peterlabs. Given the potential downside risk, TA recommend investors NOT TO SUBSCRIBE to the IPO.

More info on Peterlabs.

More info on recent IPO

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Tuesday, July 12, 2011

Hibicus Petroleum IPO share price target fair value

Actually why are we asking for the target price of Hibiscus stock? Hibiscus Petroleum is the first “Special Purpose Acquisition Company (SPAC)” in Bursa Malaysia. SPACs means they have no operations or no income-generating business. With the IPO money, they will buy other companies or business. They propose to buy oil and gas with E&P assets business.

So, tell me, how to value this company? How much will they be paying for the new business will be a major factor. It is an unknown to us.

In the Hibisbs IPO, they are also given a free warrant for each share. Expiry 3 years. Hibiscus warrant exercise price is RM0.50.

The independent directors and management also will get warrants but will be unlisted and the exercise price is RM0.10. Why don't they called it ESOS.

This is new to me and I really can't imagine the Hibisbs IPO share price fair value.

For more information, please refer to Hibiscus Petroleum prospectus or here.

More information on recent IPO, here.

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Philip Capital says buy TSH Resources Bhd

In its report dated 30 June 2011, Philip Capital says they are convinced that TSH will have strong growth due to the significant increase in production expected from the 67% of maturing oil palms over the next 3 years.

Points given are:

1)The average FFB yield will increase from current 22 mt to at least 25 mt when another 15,023 ha from Kalimantan mature over the next 3 years.

2)The maturing oil palm is almost 5 times of the size of mature area at present (I think probably added in the associate company).
The FFB production is expected to grow at CAGR of 41%. TSH will have a big jump in income in coming years.

 3)Huge Land Bank To Sustain Growth
TSH’s 61% unplanted area is probably the highest in the industry.

4)TSH is very cost efficient
EBITDA per mature ha of approximately RM10k which is the highest among the selected peers.

5) 4k to 5k Ha of New Planting Per year
TSH has committed new planting of 4 -5k ha every year. If plant 4.5k ha per year for the next 4 years, the planted area will reach 47,606 ha by FY2014 which is almost double of current size. This will help sustain the earnings growth in the future.

6) May Sell Ekowood
TSH management commented that they may dispose of loss making wood company Ekowood in near future. This will be positive.

7) Rubber may be another catalyst
TSH was awarded a 100-year concession to carry out forest rehabilitation and industrial tree planting of 123k ha of forest in Ulu Tungud, Sabah. The company has planted 1,649 ha of rubber trees and plans to plant 1-1.5k ha per year for the next 3 years. However, the management has no intention to grow this segment aggressively but to focus on oil palm at this juncture.

Philip Capital has made few comparisons between TSH with other similar size plantation company, IJM Plantation, Hap Seng Plantation, SOP, TH Plant

Unplanted Land
TSH (61%), IJMPlnt(22%), SOP (19%), HSPlant (11%), THPlant (1%)
With highest % of unplanted land, TSH has more potential to sustain the growth when more land are planted.

Immature Plant
TSH (67%), SOP (43%),TH Plant (40%), IJMPlnt (23%), Hap Seng Plant (9%).
 With highest % of immature plant, TSH FFB production will grow at a higher rate when more palms come into maturity.

EBITDA/ mature ha (RM)
TSH (10,121), TH Plant (8,402), Hang Seng Plant (7,860), SOP (7,601), IJM Plant (2,037)
TSH is very cost efficient

Few days ago I also put up an article on TSH, that Maybank just initiated coverage on TSH with a Buy call.

For more info on TSH

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Monday, July 11, 2011

52 Ways of Making Money in Stock Market - Part 17/52 - Invest in Old News

Sometimes a news have been announced but have not implemented yet. Many people will tend to forget about the news. I remember there was this counter the price drop to $0.305, but the company had announced that they are giving back $0.30 capital repayment and continue to stay listed. If we buy the stock, and get back the capital repayment, then our cost is just $0.005 (the lowest price a stock can trade is $0.005). What happened was after they announced the payment date, the price shoot up to around $0.355.

Sometimes the news will come out again and the stock start goes up again.  Example, ABC counter price jump because newspaper said they may be subject to a take over. After a while, due to bad market sentiment the price drop, but we have forgotten on the news. Then the news or rumour was announced again, the price jump again.

Some of the company projects may take times. You may buy before they make any announcement because normally share prices go up before announcement.

The risk is the proposed project may not materialized or take longer time than estimated.

Timing issue. Unable to predict when the news will announce again.

I’m sure you have your favourite stocks. Assess what are the chances that the news will announce again. Record it down and refer again later.

For more info on 52 Ways of Making Money in Stock Market…….

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Sunday, July 10, 2011

Waiting for my Google Adsense income to cross US$1,000

Total accumulated Google Adsense earnings US$900.78 (RM2700).

My current monthly average is US$100 (RM300) per month.

My blog started in March 2010, and I think the whole 2010 was less than US$200.

Then beginning of 2011, monthly average was about US$60 per month.

Last few months the monthly average was US$100.

Now I am eagerly waiting for it to cross US$1,000. I think by mid of August 2011, my total online income will cross US$1,000 (RM3000).

What did I do with the income? 95% Charity. 5% I rewarded myself with Pizza.

So far I have given to orphanage, blind centre, school, drug rehab centre, etc. Although the money is not much, but I could have bought myself an iphone or blackberry and still got balance for me to have nice dinners with my family.

I hope you guys can continue to visit my blog.

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Friday, July 8, 2011

Maybank says buy TSH Resources Bhd Shares

On 28 June 2011, Myabank initiated coverage on TSH Resources Bhd with a BUY call and TSH target price of RM3.84.

I am not surprise that Maybank have started coverage, and will also not be surprised if more brokers such as CIMB or RHB start recommending on TSH. It is a good stock to buy. Do not be concerned about TSH target price, it will be revised upward as the profits grow.

Current TSH Research Analysis that I know:
MIDF – Buy
Hwang- Buy
Maybank – Buy
KAF- Buy
Philip Capital- Buy

There are many good points given by Maybank, and I try to make it point form.

1) Young tree profile.
The average age of TSH oil palms is just 6.6 years. Among the lowest in the industry.

2) Huge unplanted land
TSH only planted about 28,000ha. More than 60% of the land is still unplanted. Probably the highest in the industry.

3)Earnings can be sustained even the CPO price dropped sharply
Due to the high growth in production, TSH can sustain the earnings even CPO price drop sharply to RM2400. But if CPO price is stable, the earnings will shoot up due to production growth.

4) Strong FFB production.
Strong 3-year forward CAGR of 20% due to more three coming into maturity
FFB production should increase from 278,800 tonnes (2010) to 481,252 (2013) representing a 73% growth. If TSH continue to plant more thees, the growth can extend to another few more years.

5) FFB yield will continue to increase
Due to average thee age of 6.6 year-old, TSH FFB yield will increase. FFB oil yield normally peak at age 11.

6) 54% of the tree are immature
Probably the the highest in the industry (except their associate company Innoprise which just started planting oil palm).

7) TSH to plant 4,000 to 5,000 ha per year
More land will be planted with trees to sustain the growth

8) Good income from other operations.
Such as milling, refining, kernel crushing, cocoa manufacturing and trading, renewable energy, biomass power, carbon credits

9) Gearing is at peak and to decline
Borrowing is reducing

What is the summary?
Sustainable growth for the next many years.

For your info, Maybank did NOT factor in the potential of Wakuba oil palm ramet.
Wakuba oil palm ramet was launched on 28 September 2010 with a promise of doubling the current oil yield. The new clone promises an oil yield of up to 10 tonnes per ha compared with the average current yield of about 4.5 tonnes per ha in the country.

In near term, TSH share price may goes up or down, very hard to predict. But if you want to hold some stocks for long term, TSH will be the stock.

More info on TSH

More info on Wakuba

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