Happy New Year 2009!!!

It is the time again to celebrate a new beginning, a time to wish all my friends and loved ones a happy new year. Let this coming year be better than all others!

US will disintegrate in 2010?

What, are you crazy?
Well, even if you don't believe this shocking prediction by Prof. Panarin based on "classified" data, the article below provides a good read. It will be interesting to refer back this article when June/July 2010 comes.....by then California will be part of China and Texas will be part of Mexico?

The WSJ: For a decade, Russian academic Igor Panarin has been predicting the U.S. will fall apart in 2010. For most of that time, he admits, few took his argument -- that an economic and moral collapse will trigger a civil war and the eventual breakup of the U.S. -- very seriously. Now he's found an eager audience: Russian state media.

In recent weeks, he's been interviewed as much as twice a day about his predictions. "It's a record," says Prof. Panarin. "But I think the attention is going to grow even stronger."

Prof. Panarin, 50 years old, is not a fringe figure. A former KGB analyst, he is dean of the Russian Foreign Ministry's academy for future diplomats. He is invited to Kremlin receptions, lectures students, publishes books, and appears in the media as an expert on U.S.-Russia relations.

But it's his bleak forecast for the U.S. that is music to the ears of the Kremlin, which in recent years has blamed Washington for everything from instability in the Middle East to the global financial crisis. Mr. Panarin's views also fit neatly with the Kremlin's narrative that Russia is returning to its rightful place on the world stage after the weakness of the 1990s, when many feared that the country would go economically and politically bankrupt and break into separate territories.

A polite and cheerful man with a buzz cut, Mr. Panarin insists he does not dislike Americans. But he warns that the outlook for them is dire.

"There's a 55-45% chance right now that disintegration will occur," he says. "One could rejoice in that process," he adds, poker-faced. "But if we're talking reasonably, it's not the best scenario -- for Russia." Though Russia would become more powerful on the global stage, he says, its economy would suffer because it currently depends heavily on the dollar and on trade with the U.S.

Mr. Panarin posits, in brief, that mass immigration, economic decline, and moral degradation will trigger a civil war next fall and the collapse of the dollar. Around the end of June 2010, or early July, he says, the U.S. will break into six pieces -- with Alaska reverting to Russian control.

In addition to increasing coverage in state media, which are tightly controlled by the Kremlin, Mr. Panarin's ideas are now being widely discussed among local experts. He presented his theory at a recent roundtable discussion at the Foreign Ministry. The country's top international relations school has hosted him as a keynote speaker. During an appearance on the state TV channel Rossiya, the station cut between his comments and TV footage of lines at soup kitchens and crowds of homeless people in the U.S. The professor has also been featured on the Kremlin's English-language propaganda channel, Russia Today.

Mr. Panarin's apocalyptic vision "reflects a very pronounced degree of anti-Americanism in Russia today," says Vladimir Pozner, a prominent TV journalist in Russia. "It's much stronger than it was in the Soviet Union."

Mr. Pozner and other Russian commentators and experts on the U.S. dismiss Mr. Panarin's predictions. "Crazy ideas are not usually discussed by serious people," says Sergei Rogov, director of the government-run Institute for U.S. and Canadian Studies, who thinks Mr. Panarin's theories don't hold water.

Mr. Panarin's résumé includes many years in the Soviet KGB, an experience shared by other top Russian officials. His office, in downtown Moscow, shows his national pride, with pennants on the wall bearing the emblem of the FSB, the KGB's successor agency. It is also full of statuettes of eagles; a double-headed eagle was the symbol of czarist Russia.

The professor says he began his career in the KGB in 1976. In post-Soviet Russia, he got a doctorate in political science, studied U.S. economics, and worked for FAPSI, then the Russian equivalent of the U.S. National Security Agency. He says he did strategy forecasts for then-President Boris Yeltsin, adding that the details are "classified."

In September 1998, he attended a conference in Linz, Austria, devoted to information warfare, the use of data to get an edge over a rival. It was there, in front of 400 fellow delegates, that he first presented his theory about the collapse of the U.S. in 2010.

"When I pushed the button on my computer and the map of the United States disintegrated, hundreds of people cried out in surprise," he remembers. He says most in the audience were skeptical. "They didn't believe me."

At the end of the presentation, he says many delegates asked him to autograph copies of the map showing a dismembered U.S.

He based the forecast on classified data supplied to him by FAPSI analysts, he says. He predicts that economic, financial and demographic trends will provoke a political and social crisis in the U.S. When the going gets tough, he says, wealthier states will withhold funds from the federal government and effectively secede from the union. Social unrest up to and including a civil war will follow. The U.S. will then split along ethnic lines, and foreign powers will move in. California will form the nucleus of what he calls "The Californian Republic," and will be part of China or under Chinese influence. Texas will be the heart of "The Texas Republic," a cluster of states that will go to Mexico or fall under Mexican influence. Washington, D.C., and New York will be part of an "Atlantic America" that may join the European Union. Canada will grab a group of Northern states Prof. Panarin calls "The Central North American Republic." Hawaii, he suggests, will be a protectorate of Japan or China, and Alaska will be subsumed into Russia.

"It would be reasonable for Russia to lay claim to Alaska; it was part of the Russian Empire for a long time." A framed satellite image of the Bering Strait that separates Alaska from Russia like a thread hangs from his office wall. "It's not there for no reason," he says with a sly grin. Interest in his forecast revived this fall when he published an article in Izvestia, one of Russia's biggest national dailies. In it, he reiterated his theory, called U.S. foreign debt "a pyramid scheme," and predicted China and Russia would usurp Washington's role as a global financial regulator.

Americans hope President-elect Barack Obama "can work miracles," he wrote. "But when spring comes, it will be clear that there are no miracles."

The article prompted a question about the White House's reaction to Prof. Panarin's forecast at a December news conference. "I'll have to decline to comment," spokeswoman Dana Perino said amid much laughter.

For Prof. Panarin, Ms. Perino's response was significant. "The way the answer was phrased was an indication that my views are being listened to very carefully," he says.

The professor says he's convinced that people are taking his theory more seriously. People like him have forecast similar cataclysms before, he says, and been right. He cites French political scientist Emmanuel Todd. Mr. Todd is famous for having rightly forecast the demise of the Soviet Union -- 15 years beforehand. "When he forecast the collapse of the Soviet Union in 1976, people laughed at him," says Prof. Panarin.

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* GMAC gets USD5b investment from Treasury to help revive auto lending in US.

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* Bloomberg: Oil trades above USD40 as attacks on Gaza raise concerns supply may be cut.

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* Bloomberg: According to Barclays Capital, Japan's economy may shrink 12% this quarter, most since 1974.

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* FT.com: China has been knocked off for IPOs top slot in 2008, the first time since 2005 by New York.

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* TheStandard: According to The Chartered Institute of Personnel and Development's latest Annual Report, more than 600,000 people in the UK will be laid off in 2009, worse in 10 years.

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* Forbes: China's forex reserves has peaked and likely to decline in H1 2009- Moody's Economy.com

Technical Analysis - December 29 2008

S&P500 (873, last week 888 or-1.7% w.o.w )

The daily indicators continued to register uptrend although some weaknesses were shown last week. During the week, the index dropped below the 880 support level, ie the 20 day ema. The index needs to work hard to prop up the daily indicators so as to remain bullish. For the weekly readings, the indicators are improving slowly and the MACD is continuing to move upwards but no positive crossover yet. The weekly Parabolic SAR is also not positive yet. The uptrend will be enforced further if the daily/weekly ADX trend and DMIs (+ve and –ve) were to turn bullish too, so far still moving towards it only. Support is around 850 and resistance at 960.

KLSE CI (867, last week 876 or -1.03% w.ow)

The daily indicators improved further during the week despite a w.o.w decline. The index is still above its 20 day ema. The daily indicators of Parabolic SAR, ADX trend and DMI (+ve and –ve) are still positive but the DMI (+ve and –ve) are not strong. As indicated weeks ago, there is a likelihood the index will be under pressure again as evident from the high daily stochastic oscillator. This indicator is still correcting. The volume is also uninspiring. The weekly charts have improved and the MACD and Parabolic SAR are still positive. The uptrend will be enforced further if the weekly ADX trend and DMIs (+ve and –ve) were to turn bullish too, so far still moving towards it only. The index is expected to trade between 835 and 900.

HangSeng (14,184, last week 15,128 or -6.24% w.o.w )

A worrying trend just emerged during the week. The daily MACD and MACD Histogram and Parabolic SAR turned negative on the 24 December. The index which is the leading positive trend setter suddenly turned bearish. This was the due to the index's large drop during last week and its inability to remain above the 15,000 level or the 50 day ema. It is now below the 20 day ema of 14,500. Lets hope this could be a temporary situation as its daily stochastic indicator is poised to move upwards again. The weekly charts is also doing well, especially the MACD which had a positive crossover during the week. The weekly Parabolic SAR is also bullish. Support is seen at 13,300 and resistance at 15,500.

Nikkei 225 (8,740, last week 8,589 or +1.76% w.ow)

The daily indicators continued to improved further during the week. The index seems to be bunching around its 20 day ema of 8,500 level. It would be bullish for the index to see if the daily ADX trend and DMI indicators could show positive uptrend soon. The weekly charts are improving with the MACD crossed over on Friday. The Parabolic SAR has just turned bullish too. The index is expected to trade between 7,500 and 9,500.

* Selamat menyambut Ma'al Hijrah.

* Job losses on the rise...from Kuching to Kedah....from Nikko Electronics to Western Digital...Canon to Sony....expect more social and crime related problems to come...every one, plz stay alert and be very careful where ever you are...safety is our No 1 priority.

* Remisiers turn to part time jobs. Sigh!

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* Violence and unrest greeting the new 2009....Israel/Gaza, Thailand, Sri Lanka, Pakistan, Iraq.....

* Euro currency turning 10 years old come this January 1 2009! It is seen by many analysts as fulfilling promise as a way to lower borrowing costs, ease trade and tourism, boost growth and strengthen the European community.

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* Reuters via TheStar: Countdown to the coming 2009 will need to add an extra 1 second to match Earth's spin. It will be the 24th extra second to be added to the Universal Time since 1972, when the practice began.

Smart Investing/Trading for the week ending December 26 2008

US Markets Update and Outlook

U.S. stocks turn to final week of 2008
Investors likely to ditch worst stocks after market's 40% drop year to date

MarketWatch: The final week of the 2008 is unlikely to be as tumultuous for stocks as the year has been to this point.

But some economic data points might provide insight on the depth of the recession, and some selling is expected in the most battered stocks by investors seeking a break on their tax liabilities. "Next week, people will be finishing their tax strategies," said Hugh Johnson, chairman of Johnson Illington Advisors. "There will also be some rearranging of portfolios to prepare for the next year." As year-end nears, investors typically sell underperforming assets to offset tax liabilities.

This trend was partly at work over the past week, which saw the Dow Jones Industrial Average lose 0.7%, the S&P 500 index drop 1.6% and the Nasdaq Composite fall 2.2%.

And most investors probably won't have any trouble locating losing assets in their portfolios. Since the beginning of 2008, the Dow industrials have lost 35.8%; the S&P 500, encumbered by financials, is down 40.6%; and the Nasdaq Composite has fallen 42.3%.

In post-holiday trade Friday, the market managed to post gains in spite of grim results from the retail sector. Crude prices gained 6.7% to $37.71 a barrel, lifting the energy sector, after a four-session drop and a 33% drop thus far in December. The Dow industrials rose 47 points to finish Friday at 8,515, with shares of General Motors Corp. pacing the gainers. The Federal Reserve approved the request by GM's finance arm, GMAC, to become a bank holding company, clearing the way for it to receive aid from the government. Online retailer Amazon.com provided some cheer after saying its 2008 holiday season had been its best ever, in spite of grim results across most of the retail sector.

Economic woes

National retail estimates were more grim. Total retail sales dropped 5.5% to 8% for November and December, according to MasterCard's SpendingPulse. A 40% drop in the price of gasoline compared to December 2007 accounts for almost half of the decline. Excluding gasoline, total sales were down 2% to 4% this holiday season versus the same period in 2007.

"Everybody is going to watch the economic numbers looking for any signs that the consensus forecast is going to be right," said Johnson. "So far the consensus is that the economy will start to recover in the second half of 2009."

Meanwhile, more economic woes will likely be on display next week, with the release of the S&P/Case-Shiller Home Price Index, a manufacturing survey for the Chicago region, and a reading of consumer confidence, all due Tuesday. Wednesday will bring weekly jobless-claims data, an update on mortgage applications and crude-oil inventories. Markets will be closed, and no economic data will be released Thursday, New Year's Day. On Friday, a survey of the national manufacturing sector is likely to be closely watched. "Manufacturing has been plunging and we expect the ISM index to fall to 34 in December, pushing it below its 1982 recession low," economists at BNP Paribas said in a note.

According to Johnson, investors will try to read the tea leaves not only in forward-looking economic indicators but also in the economic policies of the incoming administration, as well as from the behavior of markets, including the battered credit markets.

KLSE CI Technical Update and Outlook

BT: The KLCI's brief technical rebound hit its intra-week high of 888.03 on Monday, moving into the confines of this column's envisaged support zone (879 to 913 levels).

Subsequent technical pullbacks sent the index to its intra-week low of 862.29 on Wednesday, staging a re-test of this column's envisaged support zone (839 to 873 levels).

Chartwise, the composite index continued to stay below the support of its immediate downside support for the sixth consecutive week. It continued to stay below its intermediate-term downtrend yesterday.

The index's daily trend continued to stay below its intermediate-term downtrend. It continued to stay below its intermediate-term downside support .

The KLCI's daily and weekly fast MACDs (moving average convergence divergence) continued to stay above the support of their respective slow MACDs at the market close yesterday. Its monthly fast MACD continued to stay below its slow MACD.

The composite index's 14-day RSI stayed at 49.29 per cent level yesterday. Its 14-week and 14-month RSI stayed at 29.36 and 29.10 per cent levels respectively.

The KLCI staged a failed attempt in trying to take out the resistance of its 50-day moving averages. A decisive break of the 50-day moving averages is likely to signal a major trend reversal. Until then, it will continue to consolidate within range-bound trading activities.

As it turned out, the traditional year-end window-dressing rally seemed to have run out of steam. With that, the KLCI will continue to consolidate within range-bound activities.

Next week, the KLCI's envisaged resistance zone hovers at the 870 to 904 levels while its immediate downside support is at the 830 to 864 levels.

* Worse one day death toll in Gaza in 6o years. Israel "air-tack" Hamas-ruled Gaza killing atleast 205 people, destroying 40 security compounds and wounding 700 Palestinians.

* South Korea sees unprecedented economic crisis looming!

* Bloomberg: Japan's recession deepens as industrial production falls most in 55 years.

* Thailand (SEA's second largest economy) plans to spend USD8.6b (or 3% of GDP) in stimulus package to boost growth. Malaysia? What slow down? We are still doing well and confident in achieving growth next year!!!!

Merry Xmas and a Happy New Year

May the spirit of the season brings you and your family love and joy to cherish! Happy holidays and a wonderful 2009!

Has OPEC stopped the slide?

The Opec cartel, which controls 40 per cent of the world’s oil production, last week announced a further 2.2m barrels a day cut, on top of the 2m b/d reduction pledged this year. The market participants waited eagerly to find out what would be the reaction of oil price due to the cut. There was a hope that the cut will result in stopping the slide of oil prices. It seems that the slide in the oil price did not abate but worsened...

FT.com: Was Opec successful in stopping the slide in oil prices? It depends on how you analyse the numbers.

A look at the Nymex front-month West Texas Intermediate contract, the oil market’s main benchmark, gives the impression of Opec failure. It plunged from $43.60 a barrel ahead of the meeting to close at a 4½-year low of $33.87 at the end of last week. A drop of $10 sounds very much like a vote of no confidence in the cartel.

This view is, however, misleading. The Nymex WTI front-month benchmark – in this case, the January contract – expired last Friday, distorting prices. The February contract, which on Monday became the market’s benchmark, was far more stable, losing $2 to $42.36.
But even this measure is incomplete. To attain a fairer view, it is necessary to dig deeper into the world of physical crude oil contracts.

As the cartel pumps mostly lower quality, heavy sour crude, the cuts will affect those grades first. It is there where the market should look for clues about the impact. It seems to be working. The price difference between lower quality, heavy sour crude, such as Dubai – the Middle East benchmark – and higher quality, light, sweet oil, such as WTI, has narrowed sharply, pointing to a tighter market.

And it is not just Middle East grades. JBC Energy, the Vienna consultants, says that American lower quality grades have recently shown their best side. In the US, medium grade Mars oil is now priced at its highest level in about 1½ years against the WTI benchmark. In Ecuador, Napo oil has also recovered.

Opec still faces a daunting job delivering its promised cuts amid fast-weakening demand, but investors should not disregard the cartel because the WTI January contract was weak.

For the time being, the physical market is giving Opec a cautious thumbs up. The drop came in spite of Opec’s production cut last week and assurances by Saudi Arabia, the world’s largest oil producer and the group’s leader, that Opec will implement the cut fully.

* Picture above courtesy of ChinaDaily.

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* Crude oil price for February 2009 is currently trading at USD39.45 per barrel in the Singapore market.

* Quantitative easing 101. Please read here.

* Bloomberg: China reduced its interest rate by 0.27 percentage point to 5.31% and deposit rate by the same amount to 2.25%. This will be its 5th interset rate cut in 4 months.

* BT(Singapore): HK Disneyland to expand park by a third more and may cost around USD450m.

* WSJ: Toyota sees first loss in 70 years!

* The Standard: OECD warns crisis may cost up to 25m jobs.

* Despite the indices showing uptrend, the quantity traded is uninspiring.

Technical Analysis - December 22 2008

S&P500 (888, last week 880 or +0.9% w.o.w )

The daily indicators continued to register uptrend. For the weekly readings, the indicators are improving slowly and the MACD is continuing to move upwards but no positive crossover yet. The weekly Parabolic SAR is also not positive yet. The uptrend will be enforced further if the daily/weekly ADX and DMIs (+ve and –ve) were to turn bullish too, so far still moving towards it only. Expect some selling pressure this week as evident from the daily stochastic oscillator. Support is around 850 and resistance at 960.

KLSE CI (876, last week 852 or +2.82% w.ow)

The daily indicators improved further during the week. The daily indicators of Parabolic Sar, ADX and DMI (+ve and –ve) in fact just turned positive too. As indicated last week, there is a likelihood the index will be under pressure again as evident from the high daily stochastic oscillator. The weekly charts have improved and the MACD and Parabolic SAR has just crossed over positively. The uptrend will be enforced further if the weekly ADX and DMIs (+ve and –ve) were to turn bullish too, so far still moving towards it only. The index is expected to trade between 835 and 900.

HangSeng (15,128, last week 14,758 or +2.51% w.o.w )

Perhaps still one of the best looking indices chart in the world now, the daily indicators are doing well and strong. The daily MACD in particular is above 0 level showing further improvement. It would be interesting to see if the daily ADX and DMI indicators can show positive uptrend soon; a position it last register in late July. The weekly charts is also doing well, especially the MACD which had a positive crossover during the week. The weekly Parabolic SAR is also bullish. Support is seen at 14,000 and resistance at 15,500 and 16,500

Nikkei 225 (8,589, last week 8,236 or +4.28% w.ow)

The daily indicators continued to improved further during the week. It would be bullish for the index to see if the daily ADX and DMI indicators can show positive uptrend soon. The weekly charts are improving with the MACD attempting to cross over. The Parabolic SAR has just turned bullish too. The index is expected to trade between 7,500 and 9,000.

* Bloomberg: US throws lifeline to Detroit as it pledged on a USD13.4b rescue plan.

* AP: Banks that are getting taxpayer bailouts awarded their top executives nearly USD1.6b in salaries, bonus and other benefits last year.

* ChinaDaily: China's forex reserves down to USD1.89T in October.(their first monthly fall since December 2003).

Smart Investing/Trading for the week ending December 19 2008

US Markets Update and Outlook

Light on data, earnings - and maybe, cheer

MarketWatch: Stock investors looking for a little year-end cheer may instead find themselves finishing the holidays with another dose of bah, humbug. Events that helped stocks post mild gains in the past week - namely, government interventions to prevent an even worse recession - may be in short supply, as Congress stays on recess and President-elect Barack Obama vacations for the holidays in Hawaii. Instead, a smattering of economic news and earnings from Walgreen Co. and Micron Technology will shape trading in the holiday-shortened week. These days, however, it's what Washington says that matters most.

"Other than the government largesse, there's really no good news," said Alec Young, equity strategist at Standard & Poor's. "It's not surprising rallies are fading." Stocks posted modest advances last week, thanks largely to the Federal Reserve's decision to cut interest rates to near zero percent, a record low, and its promise to buy up more debt to rejuvenate the housing market. The White House's decision to lend U.S. auto makers up to $17 billion also gave a lift to the indexes.

But the next big item on Wall Street's wish list - progress on another fiscal stimulus package - is likely to wait until next year, analysts said.

Fewer trading days

If holiday fizz is in low supply, investors won't suffer for long. The New York Stock Exchange closes at 1 p.m. Eastern on Wednesday and is closed Christmas Day. Other markets also have curbed hours. When they do trade, uncertainty about the length and depth of the global recession is likely to dominate. Optimism that the recession may avoid the worst projections has driven stocks higher in recent sessions.

But these gains have often evaporated by the close of trading, as fears took hold. The Friday gave up a nearly 200-point lead to end 26 points lower "People are placing bets based on how long the recession will be," Young said. A lot of bad news has been factored in already, which has helped the S&P 500 and Dow avoid undercutting their November lows. "But we're not going to get much upside," he said, "until people get the sense that things are stabilizing." Stocks have lost about 35% to 40% this year.

Economy: durables, spending

On the economic front, durable goods orders are expected to have another significant decline as business caution has postponed any capital spending. New home sales should drop to the lowest level since the 1981-82 recession, and consumer spending should drop for the fifth month in a row. "Recent economic indicators suggest that the U.S. economy fell off a cliff in the fourth quarter," said Michael Moran, economist at Daiwa Securities.

The Treasury Dept. will also test investors' appetite to buy yet more government debt at low yields. It will auction $38 billion in two-year notes and $28 billion in five-year notes. Both will set records for size. The Fed's aggressive moves supported a rush into Treasurys this week, driving yields to record lows and shaving a nearly half percentage point from yields on the benchmark U.S. Treasury note.

KLSE Technical Update and Outlook

I Capital: The KLSE CI is below its 30-day, 50-day and 50-week moving averages. Its daily MACD is bullish but its DMI is bearish.

On weekly Plantation Index. In the past few weeks, we have seen the Plantation Index starting to rebound. Many might think this is a sign of bottoming out as it has retraced towards the 50-week moving average resistance. Also, the Plantation Index has been moving sideways over the past 2 months after the sharp fall, which is common in a strong trend. Afer sinking in the negative territory for months, the daily indicators have finally turned bullish and the weekly MACD has also made a bullish crossover. However, the oil price is still dropping, despite a record oil production cut by OPEC. Would the current period of consolidation continue or are we seeing a cyclical bottom?

* Happy Dongzhi - Tang Yuen (Winter Solstice) Festival!

* Sterling near parity with Euro! 1 euro = 95.5 pence

* BT: Malaysia November inflation slows to 5.7% (October 7.6%)

* MS: Malaysia's growth for 2009 will be 0.5%.

* The Straits Times(S'pore): Japan's growth for the year to March 2010 will be zero. It recently cuts key interest rate to 0.1% and said it would buy corporate debt as a deepening recession chokes off funding for business.

One last try

They say all of us must have a positive attitude towards life and whatever we do. We should not give up hope even if we have only the last minute to live. Seems that this "never give up" attitude is also being portrayed in the financial markets lately, see Weekly MACD. As evident from the charts attached above (HangSeng, KLCI, Nikkei 225 and S&P500), there were not many occasions where the Weekly MACD have a positive cross over during the year 2008. In fact, for most markets, there was only once this year (except for S&P500 which has twice). Even though there was a positive crossover during that period, the markets were quick to succumb to selling pressure. Currently we are seeing the 2nd attempt (3rd for the S&P500) of the markets, lead by HangSeng to go for the final try for the year 2008. Will the markets close for the year with an uptrending pattern embracing a brand new 2009 and leave all the worries and hardships behind? Although I believe the uptrend to be short term in nature, it will not be easy to achieve. Lets watch them closely and keep our fingers crossed.

(refer here for 10 year analysis of Weekly MACDs)

* Make some money while the sun shines? There are some selected trending stocks which may do well in this uptrend: young trend-Ramunia, Lion Ind, TMI, IJM, Sapuracrest , mature trend-IOI, Genting, Gamuda, Zelan, Kinsteel, AMMB, Sime.

* CNN: Oil sinks to 4 1/2 year to USD40.06 per barrel after OPEC decided to cut production by 2.2m barrels a day starting next month.

* BT: Macquarie: Malaysia to grow 1% next year.

* Morgan Stanley posts USD2.2b quarter losses.

* Bloomberg: Obama said to be weighing a stimulus spending plan exceeding USD850b.

* Bloomberg: British Airways, Qantas end merger talks after failing to agree on terms.

The growing risk of deflation in the US

While we were busy talking about the aggressiveness of the Fed Reserve in cutting the Fed fund rates by 75 basis point to a near zero level and how the financial markets 'rejoiced" over the move, it may have slipped our attention that another important data for the US, ie November CPI also came out on the same day. The most striking news about the CPI this time was the November data declined by a very drastic rate compared with the October ones. After witnessing a significant rise in inflation over the passed half year, it seems that we are now experiencing its corresponding drastic drop. Below is an analysis of this stunning monthly drop and its significance to deflation. After reading it, I believe many of us will be waiting eagerly for the December reading which will come out on January 16 2009.

dshort.com: The November 2008 inflation rate was 1.07%, a stunning decline from October's 3.66%. In fact, the November Consumer Price Index for Urban Consumers (CPI-U) marked the largest monthly decline since January 1932 — the threshold of the Great Depression.

The Bureau of Labor Statistics began tracking the CPI in 1913. Since that time, only seven months have registered a month-on-month decline greater than 1.9%. In addition to January 1932, six occurred during the horrific deflation of the 1920s, as the above chart illustrates.

MyTake: Looks like the risk of deflation got higher! Would the US and world economies move in the following pattern ie recession, inflation, deflation, depression, stagflation or stagdeflation and recovery? We are living in very exciting times....imagine experiencing all these cycles in our life time?.....

* With the US Fed Reserve virtually abandoning Plan A (ie reducing interest rate), Plan B would include quantitative easing which means buying more long dated Treasuries and rolling out more program to boost the availability of loans - egs auto, student, credit card and to other lending customers.

* BT: Starting from April 2009, Malaysia timber companies will have to show documents that their sawn timber shipped into the US is legally sourced. Exactly how ah?

* As USD slides, Gold Bullion hits the USD850 mark.

* Goldman Sachs reported a loss for the 1st time since it went public in 1999 with a USD23b quarter loss.

Can China meet its 2009 money supply target?

TheChinaPost: China said it wants to increase money supply by 17 percent in 2009 as part of new measures to keep the world’s fourth-largest economy ticking over in the face of the global slowdown.

The government has taken a number of measures to boost domestic demand and cope with the downturn, including repeated interest-rate cuts and a four trillion yuan (US$586 billion) stimulus package announced last month.

In the latest steps, posted on government Web sites late on Saturday, China said it would aim to expand the broad M2 measure of money supply by 17 percent.

It said liquidity for banks would be addressed with shorter term bills, and that more rate cuts and foreign exchange flexibility would be considered. “In order to face the attacks of the global financial crisis... we must expand the scope of financial supports,” the State Council or Cabinet said.

The new measures are “aimed at expanding domestic demand,” it said. China’s M2 money supply growth target for 2008 was 16 percent.

Among other proposals, the Cabinet urged the completion of the Growth Enterprise Board, a Nasdaq-style trading entity aimed at helping small start-ups gain better access to capital markets.

After years of blistering double-digit growth that has turned once agrarian China into a world economic powerhouse, the economy grew at only nine percent in the third quarter, and fourth-quarter numbers are set to be even worse.

China fears that growth at less than eight percent will fail to keep unemployment in check and provide jobs for the vast numbers of people entering the workforce each year in the world’s most populous nation.

“If China’s GDP growth rate falls to six or seven percent, the quality of development would be seriously impacted,” Liu Mingkang, chairman of the China Banking Regulatory Commission, was quoted as saying Saturday.

“China’s economic and financial outlook is not optimistic and Chinese banks will face stern challenges in 2009,” Liu said.

MyTake: The previous vigorous monetary tightening policy to stem the overheating economy, high inflation and hot inflows of money into China has so far created the following effect:

monetary tightening--> interest rate goes up-->economic growth slows-->m2 supply reduces--> credit growth slows-->inflation reduces

However, the tonic proves too strong as the economic numbers are weakening faster than expected. Egs economic growth faltering fast, unemployment on the rise, m2 supply rapidly declining, inflation fast becoming disinflation and probably going into deflation, credit expansion becomes credit contraction.

What China is doing right now is directly the opposite it did earlier(plus fiscal stimulus). The monetary loosening policy stance now amongst others include reducing interest rate, increasing investment and the supply of m2.

I would like to briefly elaborate on the M2 supply in China and it significance. The proposed growth rate of 17% is not considered much different from its target 2008 growth rate of 16% but it is of great hope that such figure can be achieved in view of the weak economic picture. It is important to note that a slowing M2 supply is one of the main ingredients for deflation. By printing money may create liquidity but if banks are reluctant to lend the money will not be circulated. Although the government has stepped in to spur lending, credit conditions still show a lack of liquidity in loans between banks and to consumers. However, I do agree that some progress is seen lately and hopefully improving further. In order for bankers to overcome fear of default and consumers confident to spend, counterparty risk (risk of default) must be reduced – a rather difficult proposition in a weak economy.

* Bye bye Causeway checkpoint, hello CIQ.

* Madoff fraud rocks hedge funds.

* Oil hits USD44 per barrel ahead of OPEC meeting tomorrow.

* DailyFx: Dollar losing its safe haven status as risk rises and returns plunge. What will be the cut be tonite? 50 or 75 basis points? What is next after the near zero rate? Some analysts believe the Fed may pursue unconventional options like quantitative easing such as the Fed buying long term Treasuries to push rates down.

* We are witnessing simultaneous recessions in the US, Europe and Japan since WWII.

* Reuters: Astro shares downgraded due to worsening financials and the need for a further USD21.07m provisions for the closure of its Indonesian operations. Now, Credit Suisse's TP is RM3.00 (from RM4.90) and Merrill Lynch TP RM3.25 (from RM3.45).

* Another reduction in fuel costs by 10 sen. The price for RON97 is now RM1.80 per litre while RON92 and diesel is at RM1.70.

Technical Analysis - December 15 2008

S&P500 (880, last week 876 or +0.46% w.o.w )

Despite being flattish during the week, the daily indicators continued to register uptrend. For the weekly readings, the indicators are still showing weaknesses but the MACD is showing signs of bottoming. Support is around 850 and resistance at 960.

KLSE CI (852, last week 838 or +1.7% w.ow)

The daily MACD still remains in the positive as the index bounced up after touching the crucial level of decision making during the week. The MACD Histogram is also positive as it tries to go above the 20-day ema of 860. However, the Parabolic SAR continues to issue a negative signal giving the market some mix signal. There is a likelihood the index will be under pressure again as evident from the high daily stochastic oscillator at the end of Friday. The weekly charts are still in a negative territory but the MACD is showing signs of bottoming. The index is expected to trade between 835 and 900.

HangSeng (14,758, last week 13,846 or +6.6% w.o.w )

Perhaps one of the best looking indices chart in the world now, the daily indicators are doing well and strong. The daily MACD in particular is now above 0 level showing further improvement. The task of crossing above the 50-day ema, which is at 14,883 was achieved for a few sessions during the week but only to close below it on Friday. As reflected in the stochastic oscillator, there could be some short term profit taking during this week. It would be interesting to see if the daily ADX and DMI indicators can show positive uptrend soon; a position it last register in late July. The weekly charts is also doing well, especially the MACD is nearing positive crossover, a situation not seen since April 2008. Support is seen at 14,000 and resistance at 15,500 and 16,000.

Nikkei 225 (8,236, last week 7,918 or +4.02% w.ow)

The daily indicators eg MACD and MACD Histogram remained positive thanks to the index which came back to life during the week. The Parabolic SAR recovers and continues to issue a positive signal four sessions ago. However, it is important to note as reflected in the stochastic oscillator, there could be some short term profit taking during this week. The weekly charts are still in a negative territory but showing signs of bottoming. The index is expected to trade between 7,500 and 9,000.

* Bloomberg: OPEC the producer of 42% of the world's oil may make the biggest supply cut in a decade to halt the plunge in crude prices.

* Bloomberg: Japanese business confidence plunges most in 34 years as recession deepens.

* BBC: Ecuador set to default in its interest payment of external debt. Refer here for details.

* BT: Citi: KLCI will trough at "the earliest" next quarter and sees corporate earnings falling 11% in 2009.

* FT.com: Pakistan to remove its controversial market floor introduced in August this year to prevent share prices from tumbling further after many months of decline.

* Thailand's opposition leader Abhisit Vejjajiva appointed as the country's 3rd PM in 4 months. Now Thaksin's supporters have surrounded the Parliament! Wonder whether they can secure the airport too this time?

Smart Investing/Trading for the week ending December 12 2008

US Markets Update and Outlook

Auto bailout likely to steal limelight from Fed

Fed seen cutting rates; OPEC to cut production; Goldman, Morgan report

MarketWatch: Efforts to prop up the ailing U.S. auto industry, along with economic data that may provide fresh clues about the depth and duration of the recession, could outweigh investor interest next week in the Federal Reserve's interest-rate decision.

The possibility that a collapse of the Big Three automakers, General Motors Corp., Ford Motor Co. and Chrysler could plunge the economy deeper into recession rattled markets last week. "We're probably going to limp through next week as Washington tries to solve the auto bailout question," said Hugh Johnson, Chairman of Johnson Illington Advisors. "There will be a lot of attention on what the Fed does and what it says, but it won't be as important as what happens with the bailout." Senate talks on the package collapsed late Thursday, paralyzing a $14 billion federal loan package for the Big Three, which had been approved by the House of Representatives. Yet by Friday, the Treasury said it stood ready to provide funds for automakers until lawmakers consider a longer-term package next year.

Separately, Canada said it will provide CA$3.5 billion, according to reports. The assurance by the White House helped the market recover on Friday, with the Dow Jones Industrial Average finishing 64 points higher at 8,629, even as it lost 0.1% for the week.

The picture was brighter for the rest of the market. The S&P 500 climbed 6 points to end at 879 on Friday, giving it a 0.4% rise on the week. The Nasdaq Composite rose 32 points to 1,540, up 2.1% from a week ago.

Besides the auto bailout, investors have been hopeful that big infrastructure spending by the incoming administration of President-elect Barack Obama and by other governments around the world will help shore up economies and markets. "With fiscal stimulus all the rage around the world, it's no surprise that equity investors have bid up related industries," said Robert Kavcic, an analyst at BMO Capital Markets, in a note. "Among the top performers in the S&P 500 over the past month have been engineering, building products and construction materials, all up more than 20%."

Fed and OPEC cuts

The Federal Reserve is again widely expected to cut interest rates by another 50 basis points on Tuesday, bringing its key Fed funds rate down to 0.5%. The Organization of Petroleum Exporting Countries will also meet in Algeria on Wednesday, and is expected to deliver a big cut in production. Such expectations helped crude oil prices surge over the past week, providing support for the broad market as it lifted the shares of oil producers such as Exxon Mobil Corp and Chevron Corp. Crude-oil futures finished the week at $46.28 a barrel, posting a weekly gain of $5.47, or 13.4%, from last Friday's close of $40.81 barrel.

Economic data, earnings

Data on manufacturing in the New York region will be released on Monday, and for the Philadelphia region on Thursday. Monday will also bring the December housing market index from the National Association of Home Builders. Late Friday, Fitch Ratings downgraded the credit ratings of a number of homebuilders, citing the difficult housing environment and expectations that housing activity will be even more challenging than previously anticipated in 2009. Among those affected by the downgrades were KB Home. Besides the Fed decision, Tuesday will bring housing starts data for November. Wednesday will bring industrial production figures and the consumer price index for November. Weekly jobless claims data on Thursday will also be closely monitored. Last week, the labor market weakened further, with the number of first-time filings for state unemployment benefits jumping by 58,000 to a 26-year high of 573,000. The data showed that businesses are laying off workers at a rapid pace, and that finding employment is ever harder for those who've lost their jobs. also announced big job cuts on Thursday and the stock ended higher Friday, even as it fell for the week.

Next week, the two remaining U.S. investment firms Goldman Sachs and Morgan Stanley are expected to post big writedowns -- Goldman on Tuesday and Morgan Stanley on Thursday.

KLSE CI Technical Update and Outlook

ICapital on daily KLSE CI. It was moving in tandem with the other major indices admidst the disapointing outlook of the global economy. However, this past week, the KLSE CI has started to consolidate while consistently trending below the 30- and 50-day moving averages. Although the longer term indicators are still showing a grim picture, the daily indicators have somehow shown little improvement. Meanwhile, sentiment is now at a crucial stage as the series of measures launched by the US government to soften the credit squeeze is being watched for its ability to restore the normal functioning of the US economy.

* A beautiful view of Colmar Tropicale Hotel, Bukit Tinggi, Pahang amongst the hills. Politicians are jumping into the ban "hillside development" wagon! No more hillside projects here and there. Yeah....we will see.....

* Economic Intelligence Unit: Malaysia politically unstable, 2009 growth at 1.5%.

* Ms Russia Kseniya Sukhinova wins Miss World contest. Click here for photos.

Getting fabulously rich

TheStarBiz(by P Gunasegaram):
If you have ever wondered how to get rich in Malaysia – fabulously rich and very quickly at that – here's a model that you might want to look at very closely. Not easy to do but if you do have a couple of projects in the bag, it will set you up for several lifetimes.

First you need connections – strong ones, the higher the better and if it goes right up to the top all the better. You need this because you need to convince the powers that be that your projects are good.

But you might ask if your projects are so good, why do you need connections? Why don't you just go out and execute? Good questions, those. Here's the answer - you need the state to give you something to do the deal that will help the nation.

Still can't figure it out? See, it's like this. You want to help the country, right? The country needs say a port. But you can't build a port just like that. You need land to build a port. You tell the state or federal government you need land – cheap land, preferably free to build the port.

Or to take another example, you want to help the country by building a power plant. But look, you need land too and not only that you need the power to be sold. So you want an agreement – an iron-clad one to sell the power to Tenaga Nasional and to pass through all costs.

You see, that's your reward as an entrepreneur – you get someone else to build the power plant, they guarantee the performance of the plant and someone else guarantees to buy your power and pay for all your costs. Nice deal? You bet. Billionaires have been made that way.

Or you may want to start an air hub. If you are persuasive enough, you can even convince the government to compulsorily acquire the land and sell it to you cheap. Once you have cheap land, lucrative contracts and concession agreements, the sky's the limit.

Let's take it a step further. If you want to realise the value of all of these things that you have and still keep control of them, it's nice to have a listed company into which you can inject them. Inject one asset for shares and you gain control of the company.

And then inject others over the years for cash, taking the money out of the company. Who says you can't have your cake and eat it too? Do it right and get a flow of assets to inject in (you can do anything with discounted cash flow valuations – just change the discount rate, and presto, the value changes!), and you get a tidy flow of profits and cash into your personal accounts over the years. I mean a really tidy flow.

Just how much can you make this way, you ask? Why don't you take a guess first? Did you say RM500mil? Guess again. RM1bil? How about five times that and you may be getting into the right order of magnitude.

One Tan Sri Syed Mokhtar Albukhary actually made some RM4.5bil that way - actually more because he still controls the listed company. (refer here). We are not saying he is the only one, which makes your chances of joining the ranks better – if you are connected to high places that is.

But then again, if things change – and that's still a big ‘if’ – you might not find it so easy anymore.

MyTake: Kudos to one of my favourite award winning local news commentator and editor for another piece of "entrepreneurial" article! Do you agree with what the writer has written about how entrepreneurial "Jaguh Kampung" in Malaysia make big money? Or can you make lots of money just by being honest, hard work and lucky etc all at the same time?

* Bloomberg: Bank of America (3rd largest US banks) to cut at least 30,000 jobs over 3 years after the merger with Merrill Lynch.

* South Korea seeking help from Japan, China to stem its currency's decline which drop by 31% this year (Asia's worst performing currency).

* ADB: China's GDP to grow 8.2% in 2009!

* International Energy Agency: World's population will use less oil this year than last year. Global oil demand hasn't dropped since 1989.

It is gonna take time, patience and plenty of money.

I got my mind set on you

I got my mind set on you

But its gonna take money

A whole lotta spending money

Its gonna take plenty of money

To do it right child

Its gonna take time

A whole lot of precious time

Its gonna take patience and time, ummm

To do it, to do it, to do it, to do it, to do it,

To do it right child

"Got My Mind Set on You" by George Harrison

(This song which was originally recorded in 1962 and made popular again by former Beatles George Harrison reached number one on the BillBoard Hot 100 in January 1988).

Isn't it ironic ? Does this song sounds familiar to what the governments around the world (especially the US) are doing right now to fix their broken economy? What are we gonna expect from it? Well, it is gonna take time, patience and plenty of money. That's for sure!!!

* Source: "Its gonna take time and money" Refer here.

* Now to the Senate. House approves the USD14b US automakers bailout.

* Bloomberg: South Korea cuts benchmark interest rate to 3% from 4%, a record low, amid slowdown.

* BT: JP Morgan: Time to buy battered stocks as the global financial crisis is expected to retreat by the 2nd half of next year.

* DailyFx: Fed fund futures are now pricing more than 90% that Fed will cut rate to 0.25% from 1% in the coming last meeting for the year next Tuesday.

* ChinaDaily: China's November inflation falls to 2.4% (October 4%) while PPI is at 2% (October 6.6%). Meanwhile, China's exports and FDI both fell in November due to shrinking demand from overseas. Some economists are beginning to worry about deflationary effects due to prolong dampening prices due to over supply of goods in the market, reduction of money supply M2 and growing inability for loans to be paid by borrowers.

Iron ore prices set to fall?

Australia and New Zealand Banking Group said China could ask Cia Vale do Rio Doce, Rio Tinto and BHP Billiton and other iron ore suppliers to cut prices by 50 percent. This was because the fall in steel prices was not felt in the iron ore prices, one of the main raw materials used for the production of steel, besides coke. As reported here earlier, China has been very upset with the Rio Tinto and BHP Billiton miners ever since both companies practice double standards in selling to them and to Europe. The latter which accounts to less than 3% of the said companies' sales revenue were sold at a much lower price than China's which accounted to nearly 50% of their sales. Will China be able to turn the table around this time to force the bullies to cut their iron ore prices or face the consequences of a potential standoff? Stay tuned!

XFN-ASIA: China said iron ore prices should more closely track the decline in steel prices, the official Xinhua news agency reported, citing Shan Shanghua, secretary-general of the China Iron and Steel Association.

"Iron ore prices should be consistent with steel prices, which have fallen to the 1994 level. We will require Rio Tinto and other suppliers to cut prices sharply," Shan said. Benchmark contract iron ore fines sold by Rio Tinto are at around 92.58 usd per ton currently. In 1994 the price was 16.69, implying a decline of up to 82 pct if current prices are made to mirror that year's levels exactly.

* Bloomberg: Rio Tinto to slash 14,000 jobs and cut USD5b in spending.

* Malaysia frees 911 suspect.

* Markets in Asia continue to climb....towards 2008's year end window dressing?

* Bloomberg: Democrats, White House agree on the US15B US automakers bailout plan. Congress may vote today.

* The Standard: After proposing a 5T Yen extra spending plan in September, Japan is reported to be considering up to 20T Yen in new stimulus spending to avoid a long and painful recession.

* Interest rate for short term US T Bills has turned negative.