Smart money moving out of commodities into tech?

CNBC: Is this the beginning of a rotation in the stock market? There's debate about this, but there are signs that some smart money is positioning themselves for a rotation out of commodities -- and into tech. This has been spurred by concern that the Fed will begin sounding more hawkish on inflation tomorrow. This (along with some signs that inflation is moderating in Europe) is giving a modest boost to the dollar in the last week. The result: Money has been quietly coming out of commodity stocks like gold and metals -- but even out of agricultural stocks, despite stellar earnings. At the same time, classic tech momentum stocks like Google, Baidu.com, Research in Motion and Apple have broken out to multi-month highs. Are the fundamentals for commodities falling apart? No. Demand for gold remains strong. Oil is at 116.. potash is contracting at $1000 a metric ton. Steel prices remain firm. Iron ore prices are rising. But the commodity/commodity stock trade is very long in the tooth (materials stocks are up over 100 percent in the past five years), and it is, as traders say, a very crowded long.

MyTake: It is possible that there will be some rotational play but I do not think it will be for the longer term. Besides, there are many value buys with growth potentials on other sectors like oil and gas, consumers etc. in the market. This tech play could be rotational only because the tech stocks have not shown much growth stories since many years ago. For example, Microsoft's application softwares business growth has been zero since four years ago. Besides some bright sparks in some other tech stocks eg Google which shows good growth especially its online advertising revenue, the industry does not have any yet to be launched kick ass revolutionary technologies/gadgets break through that could spark the dot com craze again. Could the possible M&A between Microsoft and Yahoo provides the catalyst? I seriously doubt so. On the other hand, although the strengthening of the USD has somewhat lowered the commodities prices currently, I believe the commodities would still be on the rise albeit slower due mainly to supply/demand factors. According to a study done by Schroders Singapore, over 200 years -average commodities bull cycle lasted 20 years. Energy bull started 6 years ago while agriculture bull just started 2 years ago. So commodities stocks would probably slowed down for a while before continuing its journey to the north again latter.

* This picture is a leaked photograph of the latest Blackberry 9000 soon to be launch in August 2008. It appears in a gadget news site. It promises more web features and faster surfing compared to the earlier versions. This new 3G phone is known as "AK" or "Apple Killer" by its programmers. It has faster processors, larger screen and better browser that resembles the web experience on a computer. iPhone needs to move fast as AK is coming after you!

Why should we always follow?

This article below titled " Price Trading rules for Bursa" appears in The StarBiz today. The sub headline was :"Some retail investors believe counters with low share price and lacklustre trading should be de-listed" My comments are in red.

Trading volume in a number of lower liners has risen, with penny stocks such as Pilecon Engineering Bhd, PECD Bhd and Mesdaq-listed Wimems Corp Bhd now suspended from trading, having been heavily sold down to below 10 sen per share. The feeling among some retail investors is that counters with low share price and lacklustre trading should be de-listed. Of course everybody has his or her own views but I dare say that the majority of retail customers do not have such sentiment. Those that are still holding or just bought such stocks will be waiting to sell for a higher price and will never want it to be de-listed (hoping someday it will be saved by a white knight or more favourable business proposals to come) while those that have not bought it could not care less. Punters will definitely want these penny stocks to stay for punting purposes.

Apparently, the New York Stock Exchange (NYSE) has a "quantitative continued listed standard" rule to make it possible to de-list a stock that is trading below US$1 for 30 consecutive trading days. If the rule in Malaysia is RM1.00, many of our listed companies will have to close shop. Please go here to check out about a US company that was affected by this ruling and the procedures to "cure" this problem.

So why not on the local bourse? Simply due to practical reasons. We already have rules and regulations on suspension and delisting of companies (refer comments below). Further, what price are you going to set for stocks to be considered delisting, 1 sen, 10 sen , 20 sen or ? Do you realise that low trading price does not always mean low quality or valuation and as such warrants delisting. Sentiment does not always corresponds with fundamentals. Even if it is a low quality stock with low price, so what? Buyers need to be aware what they are buying. It is "you buy, I sell or vice versa situation". Can the authorities detect if the share was being sold down on purpose for reasons known only by the seller. Further, would the company be held responsible if the share price hits the delisting price level? Can the shareholders, bankers and suppliers etc sue the company as it caused them to lose money? We do not have the market makers, the depth, volume, liquidity compared to matured markets. In terms of market capitalisation, our markets are liken to be a tiny rice in a bowl of rice. According to Wilshire Associates, the total US market capitalisation is approximately US15.35 T (May 23, 2007) or 51 x Malaysia's. I would think even Singapore does not have this rule implemented as it is not practical and viable for their markets.

Bursa Malaysia Bhd chief regulatory officer Selvarany Rasiah said there was currently no policy on Bursa Malaysia to de-list penny stocks or securities that are trading below certain price levels."The present de-listing criteria are not based on price but on major non-compliance on the listed companies' part with the Listing Requirements,'' she told StarBiz. "The three listed issuers named are classified under PN17 and GN3 as the case may be, as having poor financial condition."Selvarany added that Bursa would continue to monitor developments domestically and internationally."Changes and improvements to the rules will be made as and when necessary, to keep pace with the changing market environment," she added. The existing rules eg PN17/GN3 and PN16/GN2(Cash Companies) are good guidelines for financially distress companies to opt for a regularisation plan on a stipulated period to be approved by the SC and other relevant authorities. Any delays in meeting the set deadlines by Bursa would qualify for a suspension and delisting accordingly. We do not always need to follow what other markets have if it is not practical to us ... we have not reached NYSE's standards or even Singapore's yet. Thank god this Bursa lady is not as gungho as the reporter who wrote this article. I would say, we or for the matter Bursa, should instead be more focus and proactive in encouraging quality companies to list here or to remain listed here. Far too many good Malaysian or overseas companies have bypassed the KLSE to somewhere else.

* Buffett is acting like a "lad in a candy store again". He and Mars have agreed to buy Wrigley for USD23B. Apparently they will pay a premium of almost 30% based on Wrigley's current price. After the merger, Mars-Wrigley will hold about 15% of world's confectionery/sweet market share compared to Cadbury's 10%. Will this merger be the start of more M&As to come?

* BT Singapore: Mikhail Bolotin, one of Russia's richest men, reportedly paid US$100 million in June last year for Dunham-Bush in Malaysia, got it de-listed and is now moving the company's headquarters to Singapore. He is seeking a listing of the Malaysian company on the Singapore Stock Exchange to raise US$1 billion. Malaysia's lost is Singapore's gain!

Any Tips ah?

Thinking of what stocks to buy when the KLCI takes a breather? Off course blue chip stocks are the easiest choice of stocks to consider. However, if these stocks are considered pricey and "so-yesterday" to you, here are a few amongst many others that may be of interest to you as the current price movements from the charts are showing that they may outperformed the KLCI in the near future. The fundamentals of these companies are good too:-

Small money chasing big money-

TA-WB expires June 2009 -RM0.33
Sunway-WB -Oct 2008-0.245
Waseong-WA 2013-0.49
Spsetia-WB 2013-0.70
Suncity-WA 2017-0.445
Affin-WC 2010-0.345
Sapuracrest-WA Feb 2009-0.845
Hovid-WA 2013-0.075

Oil & Gas stocks that I like-

Kencana-2.03
Sapura Crest-1.56
Ramunia- 1.47 and Ramunia-WA 2014-1.06
Waseong-2.5
KNM-6.80
Petra Energy-2.56
Perisai-1.27
M3energy-1.02
Saag-4.30
Scomi-1.07
Ranhill-1.56

Steel stocks that I like-

Kinsteel-1.42 and Kinsteel-WA 2011-1.22
Lion Ind-2.37

Timber stocks

TAAN-7.8
Lingui-1.73
WTK-2.60
Tekala-0.77

Construction stocks

MRCB-1.46
Zelan-2.76

Property stocks

Spsetia-4.02
IGB-1.85
Suncity-2.84
YNH Prop-2.35
RB Land-2.24

Finance

PBB-11.30
Commerz-9.95
AMMB-3.80

Good luck to you if you are buying! A word of advise though. Buy and hold is wrong. It should be buy and do homework (ie read latest news on the stocks) at least an hour per week..(quote from a famous investment "guru" you see on CNBC). This review would enable us to determine whether we should still hold the stocks, buy some more or sell progressively with a target price in mind or sell all immediately to cut a loss.

* According to James Cramer, the weird investment "guru", it is advisable not to "take" stock tips. You must do your own studies and researches. He says tips are only for waiters and waitress! Are you one? Food for thought ya?

Technical Analysis- 28 April 2008

S&P500 Chart (1,399)

The daily charts are looking good and trending upwards. For weekly charts, MACD has a positive cross over now at -25 and MACD Hist is positive. The DMI (+ & -) needs to hook up first to see a more concrete uptrend but the ADX seems to weakens a little (ie from 29 to 27). The index is expected to trade between 1,380 and 1,430.

KLSE CI (1,288)

The daily charts are generally positive and has improved further. The daily MACD is doing well while the daily RSI is low at 54 indicating the market is not expensive. The daily DMI (+ & -) has a positive hook up but the ADX is getting weaker(ie 21). Weekly indicators are still weak although improved. The Index needs to stay above 1,290 if uptrend is to be more meaningful. The index is expected to trade between 1,260 and 1,314.

HangSeng (25,517)

The daily charts are generally positive. The weekly DMI (+ & -) has just touched each other for a hook up and the ADX is at 23 (ie ranging trend).Any ADX from 25-40 will denote a strong trend. The MACD has just crossed positively over at -400 and MACD Hist has also just turned positive. However, there may be profit taking as the stochastic oscillators is now at 95. Index has cleared 24,700 and stayed above 25,000 to move away from the downtrend channel created since Oct 2007. Immediate support is 24,300 and resistance at 26,000.

Nikkei 225 (13,864)

The daily charts are looking good and trending upwards. For weekly charts, MACD has just turned positive at -600 and the MACD Hist has also turned positive. The DMI (+ & -) are still far away from each other but is improving while the ADX is still strong (ie 36) indicating the strong trend is still intact. The good news is it managed to crept out of the down trend channel created since Oct 2007. Needs to see them have a positive hook up to confirm a strong uptrend. Resistance is seen as 14,100 while immediate support is 13,450 and 12,900.

Smart Investing/Trading for the week ending April 25 2008

Weekly US Markets Update and Outlook

U.S. stocks set to face a less-friendly Fed
First-quarter GDP, employment report, earnings could test market

MarketWatch:U.S. stocks will face renewed pressure next week, with investors facing not only another heavy week of earnings, but also key data that may confirm the U.S. economy is in recession and a Federal Reserve increasingly expected to pause its campaign to lower interest rates. On Wednesday, the market will deal with the first reading of first-quarter gross domestic production, which may show negative growth, along with the Fed's decision on interest rates. The market currently expects the central bank to cut its key rate by a quarter-percentage point and to signal a pause. Friday also will bring the all-important April jobs report.

"Next week will be a make-or-break week," said Paul Mendelsohn, chief investment strategist at Windham Financial Services. "Are we in a recession? Is the Fed going to be one- and done? Either way, it will give us a feel for where we're going in the short term." A late turnaround on Friday helped stocks finish the day and the week higher. This marked the second week of gains in a row, and kept the market on the uptrend that began in mid-March, after the near-collapse and subsequent bailout of investment firm Bear Stearns Cos.The Dow gained 42 points, or 0.3%, to 12,891, giving it a 0.4% gain on the week. Blue chips were supported by a smaller-than-expected loss at American Express Co , shares of which gained nearly 6%. Overseas profits helped cushion losses in the credit-card giant's U.S. operations, echoing a now-familiar tone of this earnings season. The broad S&P 500 Index added 9 points, or 0.7%, to 1,397, leaving it 0.5% higher on the week. But the technology-laden Nasdaq Composite Index fell 5.9 points, or 0.3%, to 2,422, which is up 0.8% from last Friday.

Software giant Microsoft Corp. disappointed the market with revenue for the previous quarter and its outlook for the next falling short of Wall Street's. " Overall, multinationals report that losses related to the weakening U.S. economy are being somewhat offset by international sales. A weak dollar has made U.S. goods cheaper for foreign consumers. Multinationals' results also benefit from translating overseas revenue into weaker dollars.

Earnings for S&P companies are now expected to have fallen 14.1% in the first quarter from the year earlier, a slight improvement from forecasts of a 14.6% drop last week. Results at ailing financial firms are weighing on overall results, with the sector expected to post a whopping 70% drop in profits from the year earlier.

Turning to oil, crude surged again Friday, gaining more than $2 after reports that a U.S. cargo ship fired at two unidentified boats in the Persian Gulf. The barrel ended at $118.52, gaining 1.6% on the week. The central bank is widely expected to cut its key rate by a quarter-percentage point to 2% on Wednesday. It's also increasingly expected to signal in its statement that it will pause, at least for now. Given improved sentiment in financial markets, central bankers are now believed to have grown more concerned about a surge of inflation in energy, food and commodity prices. Expectations of lower rates have put heavy pressure on the dollar since last summer, but the greenback appears to have stabilized somewhat recently, along with expectations that the Fed's job is done.

Yet the market's reaction to the "one-and-done" scenario might well depend on both the estimate of first-quarter gross domestic production and the April employment report. "If the advance GDP comes in as a positive number, then the market will be wiling to accept it," said Mendelsohn of Windham's Financial. "If not, they won't. It's the same for the employment numbers." Economists surveyed by MarketWatch expect no growth for the first quarter. Meanwhile, the economy is expected to have shed another 85,000 jobs in April.

KLSE Update and Outlook

I Capital on Weekly KLSE Composite Index: The index has staged a rally for the third consecutive week. Its DMI is climbing up slowly and its MACD is also starting to move the same way, suggesting that the index could be in the early process of recovery. A successful penetration of the 50-week moving average at the 1,310-level will see more positive confirmation. Though the sentiment is improving gradually, the volume must expand more substantially because it is vital for the rally be upheld.

* Our country begins her 12th Parliament tomorrow. It will be interesting as this is the first time BN does not hold a 2/3 majority. How the politicians perform will ultimately affect the well being of the people and country. Ultimately, equality and fairness, strategic and longer term views with check and balance as we move forward is the best gift the politicians can bring to us, the "citizens or the boss".

Hey Ben! Do that to me one more time...

WSJ: The Federal Reserve is likely to cut its short-term interest rate by a quarter of a percentage point next week -- but then may be ready for a breather. The Fed, meeting Tuesday and Wednesday, is likely to make what would be its seventh cut in eight months. The reason: Some officials see a case for more insurance against a deeper recession. But others are concerned a cut could contribute to inflationary pressure with little benefit for growth. That means the option of standing pat will likely also be on the table. If it does cut rates, the Fed could signal in the statement accompanying the decision an inclination to pause and assess the impact of its cuts, which have lowered the federal-funds rate to 2.25% from 5.25% since last year. Officials say the case for lowering rates further rests primarily on the value of additional insurance against a worse-than-anticipated economic scenario.The shifting sentiment doesn't mean the Fed thinks the worst is past for the economy. It is almost certain to signal continued concern about economic growth and a willingness to cut rates further if the outlook worsens.

Still, officials would like to see whether their rate cuts, the Fed's other steps to lubricate credit markets and imminent tax rebates help produce a second-half recovery. Moreover, while they think inflation is headed lower over the next year, they are sensitive to the risk that additional rate cuts could stoke inflationary psychology. Once embedded, such psychology can make a temporary rise in inflation permanent. A willingness to pause in rate cuts could help reassure investors the Fed takes the inflation risk seriously....

MyTake: I believe it will be a wise move by the Fed if they lower interest once more this 30 April and then wait to see how the economic situation panned out before further cut, if necessary. The cuts since September 2007 needs time to filter into the economy. Although the economy's unconfirmed economic data is showing the US is seen to be going into a mild recession, the recent economic data shows some of the indicators have probably bottomed. Egs last week's workers filing initial claims for unemployment benefits which was surprisingly lower and the appetite by corporations in investing as evident from Durable Goods Order. These are some of the economic indicators that support the slowing and pausing of the interest rate cycle. Already, short-term U.S. interest rate futures imply about an 80 percent chance of the Fed cutting rates to 2 percent at its April 29-30 policy meeting, with about a 15 percent chance of no rate move. Just over a week ago, futures implied about a 50 percent chance that the Fed would cut by an aggressive 50 basis points. This expectation has strengthened the USD as the Euro:USD which has recently dropped from 1.602 has now gone up to the current level of 1.5607. Even today, the expected shift in interest rate policy has resulted the Japanese government bonds to suffer their biggest one-day drop in nearly five years. The good thing about this stance is that we will probably see firmer dollar in the horizon and will indirectly pushes oil prices and other commodities prices lower...hence food prices (assuming no external/supply demand shocks). The more stable and firmer dollar would also benefit exporting countries as exporters are more willing to export without losing money. In theory, the firmer and appreciating dollar will push the bonds lower and the stock markets higher.

* Also on the subject of interest rate and currencies, according to The Standard HK, the yuan deposit account in HK has increased by 90% compared to last year. This amount of 47.8B yuan(HKD53.5b) is about 1.7% of HK deposits. The increase was attributable to weak HK stock market, declining HKD savings rate(almost zero), weak HKD which is peg to USD and anticipation of yuan appreciation(expects 6-8% this year).

Thanks Doc! I feel a lot better now....

What a day China markets experienced today with investors and funds cheering with a big "stamp" of approval! The SSEC (Shanghai Composite) closed at 3,583 points with a gain of 305 points or 9.3%. Intra-day high was 3,593 points or 9.7%. At least 80 stocks climbed to the 10 percent daily limit.Counters like Ping An, Shanghai Pudong Development Bank and Sinopec flies up more than 7% while Citic, China Merchants Bank and Baoshan Iron Steel hits the 10% limit up prices. The jump came after the government announced late Wednesday that it was cutting a stamp tax on share transactions to 0.1 percent from 0.3 percent effective today, reversing a move it made last May when it was seeking to cool surging stock prices – the index rose by 141 per cent from February to October 2007 which touches slightly above 6,000 points. The rally also draws in more than 300,000 new investors accounts in a single day.

Only last weekend the Chinese Government/Authorities aka "Doctor" announced that shareholders selling more than 1 percent of a stock within a month must do so in single trades, keeping the transactions off the open market to support equity valuations. It seems the Authorities believed that the 3,000 points is an oversold position and this allowed them to release further the second "booster jab" to the market. This latest move by the Authorities is another positive and aggressive move, although short term , to encourage investors to return and calm the market or rebuild confidence to a market that had fallen by more than a half since it peaked six months ago. As mentioned in my earlier post (go here), China needs such intervention to spark of buying catalyst in its markets. Generally, the economic environment - higher inflation and tighter monetary policy is still the main concern of the Authorities. How far the market will rise depends on whether the government will successfully curb inflation and avoid slowing economic growth too much. In the long run, how companies’ earnings fare will determine market directions. An interesting point to note is that Yuan is expected to strengthened further and as such, hot monies will probably drive the stock markets further soon. Like it or not, I believe the Authorities, in the months to come will be intervening further to boost the market confidence and morale of the people as the nation inched towards the celebration of its success in organising and participating in the Beijing Summer Olympics on 08 August 08. Let's face it, the host country will not want the world to see sad and grim looking faces of China on TV as the Olympics begins.

* Can this latest 'stamp duty' boost by the Chinese Authorities be able to lift the markets higher? Already this year, the Shanghai market itself has plunged more than 35% and is the second worst performing market in the world. It has lost about US1.9T in market value...about the size of Canadian or German stock markets or 6x of Malaysian market.

Put this crisis into historical perspective

A very interesting article that compares the current situation in the US to the previous slumping economic eras and with Japan during its "lost decade" of the 90s. The writer may sound a little optimistic but the figures are all there. Sometimes, the best buying opportunities come about when market is very pessimistic. However, this is the period most of us shy away from the market while waiting for the markets to fall further. In life , nobody actually knows what lies ahead....

FT.com: Hillary Clinton is one of several prominent figures to warn that the US "might be drifting into a Japanese-like situation". But she and other alarmists are just as wrong as when similar false comparisons were popular during the dotcom bust in 2000. Most modern mature economies are surprisingly resilient even in the face of large financial shocks. Take 2000-03, when the loss of wealth from America's stock market crash added up to 90 per cent of US gross domestic product. That dwarfs the 60 per cent loss in the two years following the crash of 1929. Yet the recession of 2001 was the mildest of the postwar era. GDP fell slightly for just one quarter.

For a financial shock severely to damage a modern economy, that economy has to have deep-seated structural flaws, as Japan's did. Three factors distinguish its long malaise from the present US crisis: the source of the problem, the size of the problem and the response of policymakers. Japan's economic flaws were woven into the fabric of its economy. While international firms such as Sony and Toyota excelled, most of Japan's domestic economy was kept inefficient by regulations and anti-competitive practices designed to protect the weak. The authorities responded to a structural shortfall of consumer income and demand by using monetary steroids to feed investment in unneeded plant and equipment. These trends were reinforced by a dysfunctional banking system. The end result was a mountain of bad debt and "white elephant" fact­ories, stores and offices.

By contrast, America's subprime fiasco resulted from correctable policy mistakes. Regulators allowed non-banks to issue risky mortgages without having to heed the regulations applied to banks, such as requiring a down payment and proof of ability to repay the loan. The former Federal Reserve chairman Alan Greenspan refused to use the greater regulatory powers given him by Congress. Adding fuel to the fire, the tax code and stock option compensation system provide incentives to financial executives to take excessive risks with other people's money. Congress and the new Fed chairman, Ben Bernanke, are moving to correct the regulatory mistake

As for the magnitude of the crisis, there is no comparison. Most analysts believe the US housing crisis will cost about 3 per cent to 4 per cent of GDP. The higher figure equals the size of the savings and loan crisis of the early 1990s. Yet the 1990-91 recession was the ­second-mildest of the postwar era. In Japan's banking crisis, writedowns of non-performing loans amounted to a mammoth 20 per cent of GDP. In the 10 years before the 2006 peak, US house prices in the 20 biggest cities rose almost 200 per cent. In the 10 years prior to Japan's 1991 bust, commercial land prices in its six biggest cities rose almost 500 per cent. The bust not only erased all of that gain but also brought Japanese prices down to 25 per cent below 1981 levels. Most forecasters think US housing prices will drop a third from their peak, leaving them well above pre-boom levels.

While Japan's ills penetrated almost the entire economy, most of today's problem is focused on subprime adjustable-rate mortgages, which account for only 7 per cent of all mortgages. About 11 per cent of subprime ARMs are now in foreclosure, but among prime fixed-rate mortgages, which account for 65 per cent of all mortgages, the foreclosure rate is only 0.55 per cent.

Finally, US policymakers and financial institutions are responding far more quickly and aggressively than in Japan. Behind Japan's slow response was the fact that pervasive structural defects made many of the needed solutions painful. The US has much more room to manoeuvre. The government is applying fiscal stimulus, financial institutions are rapidly writing off bad assets while seeking new capital, Congress is working on mortgage relief and the Fed is acting aggressively to forestall a credit crunch. While interest rates have risen for risky assets and some narrow credit markets have occasionally seized up, ordinary bank loans for business and consumers are still expanding at a healthy clip.

No one should underestimate the damage done to the US by hands-off regulators and a harmful executive compensation system. Worse, today's housing crisis comes at a time when the US economy is under stress from high oil prices, low consumer savings and other problems. So even more action will be needed. But let us maintain perspective. Spreading panic is not the way to restore the economy.

* The above picture is not a juicy orange but a sun. It is comparing the size of sun with earth and other planets. Noticed how small is our beloved earth compared with the sun and how small and insignificant we are in this universe. Relax and learn to smile to everyone...yezz!

How to reduce escalating food prices?

As the USD weakens and climatic, political and social issues emerge in certain parts of the world, the commodities prices has spiralled up dramatically. Consequently, the cost of producing food has also sky-rocketed. What can we do to reduce food price? The good news is that, food commodities, unlike oil and minerals which are finite, may not last very long (I hope), it is important all of us be wise enough to do our bit. Besides the proposals to provide additional funding to the poor, improving agricultural policies or equip farmers with new farming technologies, here are some steps the Authorities and Consumers could do NOW:-

1) reduce import and export duties on food. This would substantially lowered food prices; ie a more "liberal" approach rather than "protectionism" policy;

2) let local currency appreciates more;

3) Develop approaches that reduced the reliance of crops to form bio fuel eg corns now are being shared between human, animal and bio-fuel production. It is a case of environmental against human needs and affordability;

4) Eat more vegetables instead of meat, as it is cheaper and faster to grow crops rather than rearing animals for their meat;

5) Be more wiser when preparing or ordering food and avoid wastage of food. The Chinese custom especially of ordering hugh amount of food to "show off" to business associates/family/friends needs to stop;

6) Buy only the necessary, don't buy more than required. Due to the escalating commodities prices, farmers will be planting more and more crops(and possibility of hoarding), which will ultimately resulting a glut in supply. If the supply is more than demand, prices will eventually fall;

7) Concerted intervention by Governments in the Commodities Exchanges or Money Markets to get rid of speculators and hedge funds. Is it possible given most Governments favour no intervention?;

8) Governments must besides checking on unscrupulous wholesalers and retailers raising of food prices for exorbitant profit and building adequate stock levels, it must also ensure the growth of the country is much faster than the rise of inflation to ensure we have a positive real GDP growth so that we can all still be "affordable".

The above suggestions may not be all and may be just baby steps towards fighting increasing food prices but are mighty steps forward. Any other suggestions on these baby steps? Aiyah, my daily "chap fan" with a meat and vegetable cost me RM4.50 already...


* Earth Day is a name used for two different observances, both held annually during spring in the nothern hemisphere, and autumn in the southern hemisphere. These are intended to inspire awareness of and appreciation for the Earth's environment(wikipedia) Earth Day promotes healthy and sustainable environment and clean energy. It hopes to raise awareness against deterioration of the environment and global warming.

Beijing needs more market-friendly moves to spark rally

The Standard: In order to restore market confidence, the China Securities Regulatory Commission, in a sudden move last night, announced that effective immediately the offloading of tradable shares by controlling shareholders and cornerstone investors needs to be done through placement - not on the open market. Analysts said the move was read as a rescue measure to the slumping market and may spark a new rally in the domestic market today. "The offloading of tradable shares by shareholders should be done through an over-the-counter system, not in the secondary market, and upon approval of regulators," a CSRC spokesperson said.

"Shareholders need to announce their plans of offloading in the coming month if they hold more than 1 percent of shares." Controlling stakeholders cannot sell their shares 30 days ahead of a company's annual and interm reports, CSRC said. Shareholders who hold more than 5 percent should provide prompt notices and information disclosures. The move is aimed at moving closer toward international standards, where most overseas markets have similar requirements. "Prices would need to be negotiated between parties," the CSRC said.

During the first three months, the benchmark Shanghai Composite Index has plunged more than 34 percent from the end of 2007, and it further dipped more than 10 percent during last week amid tradable shares becoming available for sale in the secondary market. There have been mounting calls from retail investors that Beijing step in to restore the market by regulating mega share sales - especially by controlling shareholders - after Ping An (2318) planned its 160 billion yuan (HK$177.6 billion) shares sale in January. "The regulator wants the market to develop in a steady and healthy way, so setting up a system to monitor the selling of the abundant tradable shares is needed. Otherwise it will become an obstacle for market growth," China Securities News cited an unnamed CSRC source as saying yesterday. However, the rumored policy of imposing a special levy on early transactions has not materialized, as the state-run paper had reported. It was rumored there would be special levy imposed on those wishing to reduce their stakes within one year's time after the shares become tradable. The levy cost will become less if stockholders hang on longer, and they need not pay if shares are sold after eight years. The move was seen as a bid by the government to boost investor confidence. A large number of shares coming out of lockup has been among the factors blamed for the market's dismal performance so far this year.

MyTake: The market initially reacted positively as it opens up 6.8% on Monday, with investors buying large-caps such as Sinopec. The benchmark Shanghai Composite Index jumped to 3,305 points from 3,094 points at the close on Friday, which was down 49% from its peak in mid-October. However the euphoria dies down at the closing bell with the index closed just up 0.7% at 3,112 points. Although this latest regulating rescue measure move seems to be market friendly and is in part working towards international practices (eg 5% shareholder disclosure, off market platforms), it is also seen as moving away from international practices.(ie changing the rules of the game). Sceptics would argue why should there be a time frame or announcement on when to offload off market deals but no such thing is required when buying. I believe the off market platform would sufficiently serve the market well as all large selling/buying could be done without affecting the general market prices and sentiment. I am of the opinion that besides the above move, the Chinese markets need further market friendly interventions by the Government before any buying catalyst can be formed. Some of those catalysts could come from further proposal that State Pension Funds buying listed shares freed up by the expiry of lock-up periods (roughly about USD1,300 bil), further liberalisations of QFII Funds, reduction of transaction cost egs stamp duty etc and most importantly the start of monetary easing policies. Would this be the start to shore up confidence in the market before the start of the Beijing Olympics?

* The Beijing Olympic torch run started on April1, 2008 from Greece and covers about 137,000 km to continents across the world, including Malaysia and will arrive back in China on May 4. So far, there were a few big demonstrations during the run against China's human rights and Tibet issues in countries like the US, UK and France.

Technical Analysis- April 21 2008

S&P500 Chart (1,390)

The daily charts are looking good and trending upwards. For weekly charts, MACD has a positive cross over now at -35 and MACD Hist has just turned positive. The DMI (+ & -) needs to cross over first to see a more concrete uptrend and this is possible as the ADX has developed a stonger trend. Expect the index to have some profit taking latter this week if the index goes up further as the stochastic oscillators have reached 82.8 (normally it drops back when it touches 90-100) The index is expected to trade between 1,360 and 1,430.

KLSE CI (1,268)

The daily charts are generally positive although considered weak. The daily MACD is doing well while the daily RSI is low at 45 indicating it is still in an oversold position. The daily DMI (+ & -) has a positive cross over but the ADX is getting weaker. Weekly indicators are still weak. The Index needs to break above 1,277 and would be ideal to stay above 1,290 if uptrend is to be more meaningful.

HangSeng (24,197)

The daily charts are generally positive but the DMI (+ & -) and ADX seems to be getting weaker. No positive uptrend confirmation yet in the weekly charts. The Index needs to clear 24,700 and stay above 25,000 to move away from the downtrend channel created since Oct 2007. Immediate support is 22,700.

Nikkei 225 (13,476)

The daily charts are looking good and trending upwards. For weekly charts, MACD has just turned positive but DMI (+ & -) are far away from each other but the ADX is still strong indicating the strong trend is still intact. Needs to see them have a positive cross over to confirm uptrend. Resistance is seen as 14,100 while immediate support is 12,900.

Smart Investing/Trading for the week ending April 18 2008

US Markets Weekly Update and Outlook

Stocks face more earnings with newfound optimism
Friday rally leads market to top its February highs; Apple, BofA results on tap

MarketWatch: U.S. stocks will enter the coming week with newfound optimism, after a spate of quarterly results from ailing financial firms failed to spook jaded investors, while upbeat earnings at technology and multinational companies soothed concerns about global growth. A week ago, the market was shocked by General Electric Co. as a surprise loss at the stalwart international conglomerate fueled fear that global growth wouldn't be enough to overcome the impact of the credit crisis and of a U.S. recession on profits. But over the past week, "we've gotten better than expected earnings results from the likes of JP Morgan, IBM, United Technologies, Honeywell, and of course Google," said Robert Pavlik, chief investment officer at Oaktree Asset Management. "These results have completed trumped last Friday's negative earnings report by GE," he said. "I think what we're seeing is an alleviation of some of the fears that the slowing economy would drag down corporate earnings."

Spring rally

The Dow Jones Industrial Average surged 228 points, or 1.8%, to 12,849, topping its Feb. 1 intraday high of 12,841. For the week, the Dow advanced 4.3%. The S&P 500 index gained 24 points, or 1.8%, to 1,390, advancing 4.3% for the week. The Nasdaq Composite rose 61 points, or 2.6%, to 2,402, surging a whopping 4.9% on the week.

Global growth and global risk

The market also received strong support from upbeat results at equipment-maker Caterpillar Inc. and fellow industrial firm Honeywell Inc. , both of which derive most of their revenue overseas. "We're getting strong results from companies that have a bigger exposure internationally and don't have the same financial exposure that GE has," Nolte said. In other sign of confidence about global growth, a firmer dollar and a drop in commodities prices Friday failed to dent investor appetite for the shares of companies in the materials sector of the S&P. Meanwhile, crude oil prices surged well past the $116 a barrel mark, and even touched $117 in after-hours trading amid supply disruptions in Nigeria. But while all seemed rosy for profits over the past week, the sustained surge in commodities prices, including for food, is adding to concerns about consumption and the economy down the line. "Many have been calling for a softening U.S. economy to undercut strong commodity prices," said Doug Porter, chief economist at BMO Capital Markets, in a note. "It's increasingly looking like those tables have been turned--persistently strong commodities are threatening to further undercut a struggling U.S. economy." Yet for the moment, "a sense that the worst may be over on the credit crisis front is gradually rolling over the market," Porter said. Setting aside last week, stocks have been on an uptrend since mid-March, ever since the near-collapse and subsequent bailout of investment firm Bear Stearns Cos. led the market to hope the worst of the credit crisis is behind.

Biggest week of earnings season

Next week, investors will brace for 157 earnings reports from S&P 500 companies, marking the busiest week for the first-quarter reporting season. Earnings at S&P 500 firms are now forecast to have dropped 14.6% from the year earlier quarter, slightly worse than expectations for a 14.1% drop last week, according to Thomson Financial. "It looks like we'll have our third straight quarter of negative earnings growth, which we haven't seen happen since 2001," said John Butters, an earnings analyst at Thomson. The outlook for the second quarter has also worsened, with earnings now expected to fall 4% in the quarter compared with a drop of 3.2% last week. But with much of the pain coming from financials, and much of it already expected by the market, investors will again turn to results that may point to global resilience. "We have a much broader array of companies reporting next week, with many firms across all the sectors," Butters said.

Proof in the earnings, data pudding

"The market is now betting that we'll have a short and relatively shallow economic slowdown, which would allow earnings to come back relatively quickly," said Hinsdale's Nolte. "But that feeling may only last one week."
Besides the flood of earnings, more economic data awaits investors next week, namely new and existing home sales for March, along with March orders for durable goods, weekly jobless claims, and the Michigan consumer sentiment survey. "Durable goods orders will give us an idea of the impact of the housing slump on consumption and the economy," Nolte said. "These orders had popped higher during the housing boom."

Weekly KLSE Update and Outlook

I Capital: The KLSE CI is above its 30-day but below its 50-day and 50-week moving averages. Both its daily MACD and DMI are bullish. This week's I Cap updates the daily Plantation Index. The mild rebound mirrors the Plantation Index recovery. The bullish daily MACD has improved further while the DMI has just turned bullish after being bearish for one month. Meanwhile, the weekly MACD and DMI are turning flat, indicating that the consolidation phase may last a while more. Still, the energy stocks and commodities remain favourable as investors remained concerned over the US and European credit markets.

* Picture above is Robert Mugabe, President of Zimbabwe since its independence. Will he be able to hold on to power despite "unconfirmed results" and "yet to be released results" show that he has lost the election? What is fair and square to us? Can we square a circle or wrong a right?

Melting of Iceland

Thomson Financial (a week ago): Investors Service in an annual report on Iceland said the economy is heading for a difficult landing that could lead to negative GDP growth for a few quarters. Moody's said as conditions have objectively worsened and risk has heightened, the authorities in Iceland may have to find ways, like in other countries, to support the financial system. However, Moody's said the economy has been extremely flexible in response to shocks, and it does not see a crisis that would disrupt the payments ability of the government. The report takes reference from the large buildup in external debt by the banks over this recent period of overheating. Most of this include financed investments abroad or Icelandic corporates with natural hedges in foreign currency. Moody's believes these foreign currency contingent liabilities are stretching the sovereign authorities' lender of last resort capacity in a way that is not compatible with a 'AAA' standing. This concern prompted the change in outlook on Iceland's 'AAA' government ratings to negative from stable in March. However, Moody's said the recent Central Bank of Iceland measures are helping ease the difficult funding conditions currently prevailing for the banks. Also, a more relaxed fiscal policy will soften the blow of the economy's hard landing, it added.


MyTake: Moody's has been a little accommodating when describing the daunting economic situation Iceland is currently facing. According to the International Herald Tribune, " a huge investment boom and the privatization of the banks eight years ago left the country with a yawning current-account deficit - $2.7 billion, or 16 percent of its total economic output in 2007. By comparison, the much-criticized current-account deficit of the United States is 5.3 percent of total output". The country's economic boom has probably ended and the banks are believed to be facing the prospects of defaulting loans originating from the subprime investments. The Central Bank is expecting negative growth in the few quarters to come due to increasing double digit interest rate (now 15.5%) to fight inflation. The currency (Krona) has collapsed more than 22% since January 1. (note: Fitch and S&P has also done similar down gradings of credit ratings). Only in recent months, market has talked about hedge funds actively shorting Iceland in view of the country's banks defaulting hugh foreign loans. Will Iceland be the first country to be swept away by the credit crisis that originated from the US to the many parts of the world? Would the Government be able to bail out, if these banks and economy collapsed due to insufficient reserves?? I am not sure! In view of the above, would Ice-cream be more expensive in Iceland soon?? You bet!

Iceland is probably best known for the extreme forces of nature. But despite the chilly name of the country, its climate is a lot milder than most people expect. And though being situated on the volcanic active mid-Atlantic Ridge, earthquakes are usually small. In a country which has only about a quarter of a million people, Iceland has supplied three Miss World winners (1986, 1989, and 2005) * Picture above is Miss World 2005.

Watch out for Carrefour Express outlets near you

BT: Late last month, Carrefour opened a convenience store in Kuala Lumpur under the franchise concept in a move to gain a bigger slice of the RM64 billion retail market in Malaysia. MALAYSIA'S smallest hypermarket in terms of outlets, Carrefour, appears to have skirted rules by moving into the convenience store business. It is a clever move because the stores, which are not allowed for foreigners under current rules, will be run under the franchise concept. By doing so, the business falls under a different set of rules under the Ministry of Entrepreneur and Cooperative Development. Currently, hypermarkets are regulated by the Ministry of Domestic Trade and Consumer Affairs. Carrefour officials have declined to comment.

Late last month, the French retailer opened a convenience store under the brand, Carrefour Express, in Wangsa Maju, Kuala Lumpur. More stores will be opened, one source told Business Times. This means that the franchise concept may help Carrefour gain a bigger slice of the RM64 billion retail market in Malaysia. Although it was the first to enter Malaysia in 1994, Carrefour has the least number of outlets at 13. It trails Hong Kong's Dairy Farm, which has 28 Giant hypermarkets, and the UK's Tesco, which has 14 stores. Dairy Farm also operates Giant and Cold Storage supermarkets/superstores and the Guardian health and beauty/pharmacy chain. Tesco, meanwhile, also runs six Tesco Extras which cater for both retail and wholesale buyers.

.... Carrefour is the second largest retail chain in the world in terms of revenue, after the US' Walmart. According to the Carrefour group website, it currently operates four main grocery store formats: hypermarkets, supermarkets, hard discount and convenience stores. It has more than 15,000 stores, either company-operated or franchises. As at December 31 2007, there were 4,800 convenience stores worldwide, 95 per cent of which are operated under franchise agreements.

MyTake. A very clever move by Carrefour to outsmart some of the local protectionist guidelines set by the Ministries. By franchising, Carrefour capitalised its brand name and enables it to expand quicker, deeper and further to the customers without taking too much risk. I believe the stores set would be similar to the ones like 7-11 but having a wider range of fresh daily groceries produce ala small mini markets. Because of economies of scale, the price will be very competitive. I think the housing mini markets will be badly affected by this move as competition sets in but it is definitely a plus for consumers. I can smell this franchising concept a success already provided the Ministries don't step in and stop it.

Note: The above post is not a paid advertisement or paid write-up.

Citigroup upbeat on Malaysian shares

KLSE CI failed to sparked today despite the overall 2% up in Dow Jones overnight. The benchmark composite index closed up only 3 points at 1,256 with a small volume of 552 mil shares. Its intraday high was 1,266. It failed to clear this level achieved weeks ago as it attempts to closed the gap of 1,277 created on March 10; the unforgettable, indelible and eventful 1st trading day after the 12th General election. Chart wise, the daily MACD is inching slowly upwards while the weekly indicator not having turned positive yet. It seems to have difficulty clearing the 1,266 level and this is crucial before the any positive signals be seen again. Meanwhile, Citigroup came up with an upbeat KLSE CI's 2008 forecast today. Oh, so different to CLSA's gloomy year end forecast of 1,150 which I posted earlier.

Reuters: WALL Street bank Citigroup expects Malaysia’s key share index to rise 15 per cent by year-end, saying the stock market is highly unlikely to fall much further after the government’s election upset last month.In its strategy report on Malaysia, the investment bank said it is bullish on banks, plantations, telecommunications, utilities and gaming.It put the end-2008 target for the benchmark Composite Index at 1,449 points by year-end, up 14.7 per cent from the current level of 1,263.31. “Malaysia is now trading at discounts relative to the region and its historical valuation benchmarks,” Citigroup said. On top of the fear of a US-led global recession, the market had priced in the worst outcome on Malaysian politics, it said.

“A lot of bad news is already in the price. In an illiquid market like Malaysia, we urge investors to start positioning.” Citigroup said it had added property firms SP Setia, KLCC Property and UEM World to its list.“We continue to like IOI Corp, KL Kepong and IJM Plantations in the plantation space but are dropping Sime Darby,” it said.“Telcos is always on our Buy list. Small/mid stocks like SapuraCrest and TA Enterprise should deliver strong share price performance,” it said.

Sex drive profits men?

Newsweek: It's been a long time since the dot-com days of "irrational exuberance," but John Coates remembers them well: he lived them. As a Wall Street trader, he watched as his co-workers drove stock prices into the stratosphere and themselves into a frenzy. "They were acting like they were on a drug," he says.

Since then Coates has left Wall Street for the University of Cambridge and dedicated his time to figuring out what that drug was. In this week's Proceedings of the National Academy of Sciences he announces his results: it was testosterone. In a new study he reports that traders who start the workday with high testosterone levels make more money on that day than their low-testosterone colleagues do. A hot day on the market sends their levels of the natural steroid up even more, Coates says; under the influence of their own hormones, they start to take bigger risks in hopes of bigger rewards.

Classical economic theory assumes that people make financial decisions in a rational way. But Coates's finding is part of a growing body of work explaining why, in reality, they often don't: they're at the mercy of their biology. This school of thought helps illustrate how economic trends can get out of control, ballooning until they burst. It also suggests one reason why central banking is so tricky: policymakers don't often take hormones into account. "[Former Federal Reserve chairman] Alan Greenspan spent his whole career trying to control economic bubbles," says Coates. "I don't think he realized he was up against steroids."

Coates first started thinking about testosterone in traders when he came across the so-called "winner effect," a phenomenon that has been observed in the lab for more than a decade. In animals, success at a given task begets a boost in testosterone, which in turn begets a number of changes in the brain. An animal pumped up on testosterone makes decisions faster, tries harder to win and is willing to take risks that a more timid counterpart—perhaps one with a record of failure—won't go for. "When he goes into the next round of competition, the testosterone gives him an advantage," says Coates, "and he may win again. It's a feedback loop." The winner effect has been examined in human male athletes, too, with the same results: a win releases more testosterone, which increases the player's chances of succeeding the next time around. But winning can't go on forever, and, in fact, the kind of risky behavior needed for extreme success often leads instead to spectacular failure. That too owes something to hormones: too much testosterone can ultimately cloud a person's judgment. "Testosterone may help you make decisions faster," says Coates, "but it doesn't help you make better ones."

In animals testosterone-fueled perpetual winners eventually get careless. "The hormone gets to a point where it starts to impair their judgment," he says. "They start going out in the open too much, they pick too many fights, they neglect their parenting duties. It turns into stupid risk-taking." In humans the desire for ever greater risks can destroy careers or even, when it catches on en masse, whole economies.

That's where the reverse of the winner effect—call it the "loser effect"—comes in. After a loss testosterone levels in males come right back down, and levels of cortisol surge instead. Cortisol, a stress hormone, is the brake to testosterone's gas pedal, and what sends it spiraling up is uncertainty—just the kind of condition a trader would encounter in a suddenly volatile market. "If you have chronic exposure to cortisol, you start to recall bad memories more often and you see risk everywhere," says Coates. "This hormone may make traders dramatically risk-averse." Just as testosterone increases in an economic bubble, cortisol may rise in a recession. That, says Coates, is yet another reason that central-banking policies sometimes can't halt an economic downslide. "At some point, what people are responding to is more than price levels."

Traders shouldn't take Coates's study as advice to start doping they way athletes do in hopes of increasing their testosterone. For one thing, the research doesn't necessarily show that men with high testosterone levels always make better traders, especially in the long run. Putting aside the other traits a trader needs for success—intelligence, specialized knowledge, the ability to function on three hours' sleep—there's more to risk-loving behavior than the amount of testosterone a man has. He also needs to be physically sensitive to the chemical. If his body doesn't have many receptors reacting strongly to its effects, the amount of the hormone in his bloodstream doesn't really matter. "I don't think high baseline levels of testosterone tell you anything," says Coates. "All we care about is the effects of these androgens, not the amounts."

The study also doesn't mean that men are better traders than women. The winner effect hasn't been found in females; the act of competing increases their levels of testosterone, but whether they actually win or lose the game has no observed effect. That could mean that women are less likely to get so "addicted" to success that they seek it out aggressively by taking risks, says Coates. It also means they may be less likely to succumb to testosterone-fueled stupidity—the downside of the winner effect. Anecdotally, Coates says that during his Wall Street days he thought that "women traders didn't seem to be as affected" by irrational exuberance. A 2001 paper in the Quarterly Journal of Economics backs up that observation. "In areas such as finance," it found, "men are more overconfident than women." As a result, male stock traders tend to do more buying and selling than female traders do. Each trade costs money, and over the long term that money adds up. In the final calculus, according to the 2001 paper, it's men, not women, who underperform. The key to success on the stock market, then, may be letting the hormones flow just enough—benefiting from the boost in confidence but not letting it get out of hand. "The really good trader," says Coates, "is the one who feels these things but knows how to control them. He knows when to pull the plug and go home." Testosterone may be good stuff, but don't put too much stock in it.

MyTake: This article is very interesting indeed as I always felt the "winning and losing effects" but never knew it was the workings of biology. Being a remisier, I have always notice among clients and including myself, that after winning a trade, we will soon go after the next trade and the trade quantity gets bigger and contracts more frequent. ( ...greed sets in) The feeling of "lucky", confident or "I am good at it and nothing could go wrong" sets into our minds. This "winning effect" pushes the stock prices upwards drastically. Counter wise, the "losing effect" comes in when we start to lose our breaks and mistakes with losses set it We begin to feel less confident and go for smaller quantity trade and less frequent. After a period of losses, we will lose all the confidence and shy away from the market. Over the period, the cycle starts over and over again. My humble advise, although timing is very important, we need to "Know when to say enough when making money and losing money" (I guess it is easier said than be done....hmmm). Here comes my raging hormones again!! Buy...Buy...Bye...Die?!!!