Smart Investing/Trading for the week ending November 21 2008

Weekly US markets update and outlook

Stocks look for respite in holiday-shortened week
Obama's picks of Geithner, Clinton, Richardson seen reducing uncertainty

Marketwatch: U.S. stocks will start next week with investors looking for some respite after reports of key nominations to the administration of President-elect Barack Obama helped stem heavy selling that had slammed the market to 11 year lows.In particular, the nomination of Tim Geithner, currently the head of the New York Federal Reserve, as the next treasury secretary, seemed to find immediate approval from Wall Street, judging by a market rally that saw the Dow industrials jump nearly 500 points Friday. "That's good news," said Robert Pavlik, market strategist at Oaktree Asset Management. "Now we have a team that can come together and start coming up with a plan. The foundation has been laid to start addressing the situation." The New York Times reported that Sen. Hillary Clinton has accepted Obama's nomination to be secretary of state. NBC news reported that besides Geithner, the president-elect has selected Bill Richardson, a former energy secretary under President Bill Clinton, as his nominee for commerce secretary.

An avalanche of reports on the economy next week, which will be shortened by the Thanksgiving holiday on Thursday, could also provide further evidence of the depth of the recession. But "there's a possibility that we have a decent week because there won't be many people at their trading terminals," said Paul Nolte, director of investments at Hinsdale Associates. On Friday, the Dow Jones Industrial Average jumped 494 points, or 6.5%, to 8,046, following the reports. But the rally still barely made a dent in the week's heavy losses, which left the Dow 6.5% lower, the S&P 500 index down 6.3%, and the Nasdaq Composite, off 8.7%.

On Thursday, stocks took a nosedive, with the S&P 500 ending at its lowest level in more than 11 years, battered by mounting worries about the fate of U.S. automakers and Citigroup Inc. Citigroup shares plunged 50% over the past week, slumping 20% on Friday alone, even after reports that the bank might put itself for sale.

"When a major institution has to consider selling itself up or selling assets at a discount value, that's not a good sign," Pavlik said. Financial stocks have taken another round of hits after current Treasury Secretary Henry Paulson said he would not spend more of the $700 billion from the Trouble Assets Relief Program. Meanwhile, Congress postponed debates on aid to the Big Three automakers -- General Motors Corp., Ford Motor Co. and Chrysler Corp. -- further fueling fears about the economy just a day after Federal Reserve officially said the U.S. was in recession.

Following Thursday's plunge, the S&P, the market benchmark most followed by professional investors, had lost nearly 52% since its record high close on Oct. 9, 2007. "Have we discounted the worst? I hope so," Nolte of Hinsdale Associates said. "But I don't know. Not only when you look at the problems in banking, but the technical picture in the market is not yet healthy." Investors scrambled for a safe haven as concerns mounted about the health of financials and the economy, sending gold futures back above $800 an ounce, up 6.6% for the week. On the other hand, economic concerns drove oil futures to plunge 13% on the week.

Economic data

Of particular interest for the market next week will be housing data -- October existing home sales on Monday, new home sales on Wednesday, and the S&P/Case-Shiller home price index for September on Tuesday. Tuesday will also bring the Conference Board's consumer confidence index for November. Wednesday will be data-heavy, with weekly jobless claims, another reading of third-quarter growth, personal income data, a manufacturing survey from the Chicago region in November, and durable goods order for October. "Worries about automakers, the weak economy, massive layoffs and weak consumer spending, it will still be the same next week," Pavlik said. "But [the market has] declined so much, that some people might be willing to step in just because stocks seem cheap."

Weekly KLSE CI Technical update and outlook

ICap on daily KLSE CI. The increased level of volatility has been seen across the global markets and when it is coupled with weakening fundamentals, it makes it extremely hard to predict when the bear will end. Meanwhile, its daily MACD's bullish signal is now waning, accompanied by its stochastic oscillator that has turned down amid the declining trading volume. The KLSE CI is unlikely to move out from the downtrend soon.

* Do the predominently Muslim countries like Indonesia, Middle East, Pakistan or Turkey allow their Muslim countrymen practice Yoga?? (read here for Malaysia's top Islamic body's ruling)

* Bloomberg: The Aussie/NZ dollars dropped to their 5 year and 6 year low respectively. 1 AUd: 60.76 US cents, 1 NZD: 52.39 US cents. The RBA has been active lately in the money market. In fact for the month of October, almost USD2b worth of AUD was bought to prop up the currency.

* Argentine Senate approves takeover of USD24B in pensions resulting opposition crying out "cash grabbing" by the government.

* BT: Bruce Willis to sue Vinod Sekhar(Petra) and Imran Tunku Jaafar saying USD900,000 of the USD2m he invested in a "green rubber" venture wasn't returned to him! He seems to be of the opinion, "If you don't sue and make it public, you will not get your money back"!

* Japan's central bank has left its key interest rate unchanged at 0.3%.

* First Dr M, now Najib?......Call for changes in the world financial markets architecture....via another Bretton Woods. Yes, details please????(discussed here before)

Too big for anyone?

Speaking at the launch of Carrefour hypermarket 's price cut campaign yesterday, Najib said to fellow Malaysian, " Malaysia can ride out economic downturn". However, his comforting statement was virtually "ridiculed" by Dr Mahathir when the former PM latter said that " I have no confidence in Obama, so what about Najib, because this (economic challenges) is too big, too big for Najib and too big for Obama". Dr Mahathir believes that no countries will be spared and they are heading into a worldwide recession unless changes are made to the international system. Although I have never been a fan of Dr Mahathir, I tend to agree with him that the world economies are heading towards recession. However, I believe the changes to be made in the international system may not come so soon and that simple to avoid the impending recession.

The current international system which enables currencies to float and move freely was established after the ending of Bretton Woods system(established after WWII and after the Great Depression). Briefly, the new system came about after President Nixon suspended dollar's convertibility to gold in 1971 to get more money to fight the Vietnam war resulting all other major currencies were left unpegged to USD and floated freely. It further resulted to the more frequent printing of money and over the years set financial markets into further deregulation and development of variants of futures, options, swaps or derivatives. The combination of cheap money, deregulation, global imbalances, the US housing bust and credit clog, further risky financial innovation and greedy bankers with the view of maximising profits causes the existing system to break; which is what we are experiencing right now.

How much the changes and reforms could be made in the existing system's architecture is still a mystery but some leaders from EU (detail here) have been calling a change via Bretton Woods II in the coming Nov 15 G-20's summit in Washington. Perhaps the details would be revealed out then. I believe in order for the changes to be made, we need to have strong and charismatic leaders today to solve issues and bringing law and order. Do we have them today? The new system if ever proposed must be fair and not skewed towards any particular country economically and financially and must not be seen as a deterrent to financial innovation with a view of further improvement. It is easy to be a critic but to give constructive criticism is another matter.

* Good luck! November and December months are examination months for most of the senior highs! Good luck to the SPM, STPM and under graduate candidates! Also, today is South Korea's college entrance examination...a 9 hour examination....an exam that is very crucial to secure limited entries to universities. Coincidentally, the UPSR results are also out today!

* RBS: Sell yuan, buy HKD as China's economy is expected to contract faster than expected and since HKD is pegged to the USD which is considered to be stronger as it is viewed as a stable and safe currency like the yen.

* Bloomberg: Jim Rogers: Global financial markets have yet to bottom after this rout. Bonds investment is terrible as economic problems may persist until 2010.

* Oil hits its 22 months low at USD55 per barrel.

* Collapse of Big 3 auto makers- Chrysler, Ford and GM have severe repercussion to the US economy. It may eliminate up to 3m jobs and deprive governments more than USD150b in tax revenue. An estimated USD25b is needed to keep the industry afloat. Despite the criticism, I believe the Fed will be able to use the existing USD700b cash to bailout the auto industry and other non bank business too.

* China Daily: A senior government official says the China's stimulus plan is aimed to guarantee at least 9% economic growth over the next 2 years. To avoid further meltdown, the property prices and employment must be in tact, but this is very tough indeed.

* World Bank is set to provide USD100b in new aid to developing countries.

* FT.com: Iceland's rescue plan flounders?

*BT(Singapore): A study concluded that in London, for every 1 financial job there are 2 persons eyeing for it. Morgan Stanley, Goldman Sachs are all cutting down staff. There is one place that may be interested in hiring...KAF-SeaGroatt-Campbell (refer here).

Smart Investing/Trading for the week ending November 7 2008

Weekly US markets update and outlook

Choppy markets look for surety
On light week for data, attention could focus on next administration's strategy



MarketWatch: The economy and the next U.S. president's plans to fix it will likely dominate markets in the coming week. After a volatile five sessions highlighted by the U.S. presidential election, a dismal October jobs report and a cash crunch at General Motors Corp. investors can look forward to a lighter week, at least as far as scheduled news items. The sparse calendar will allow traders to focus on new information about the depth of the U.S. recession. "The market's trying to digest how bad it can get," said Michael Gibbs, managing director in equity strategy at Morgan Keegan & Co. Glum headlines from Detroit may further sour the outlook. On Friday, GM announced a $2.5 billion loss for the third quarter and said may have to halt assembly lines to deal with a cash shortfall. Also of special attention: president-elect Barack Obama's initial moves to counter what he called "the greatest economic challenge of our lifetime."

On Friday, three days after beating Republican contender Sen. John McCain in their race for the White House, Obama briefly addressed his priorities after meeting with his top economic
advisers. With his inauguration three months away, the Illinois senator's efforts are largely limited to supporting fellow federal lawmakers as they discuss a second stimulus package. He can name the appointees that will eventually make the big decisions, however. Of particularly interest is his choice to replace Treasury Secretary Henry Paulson. "The market is wrestling with so much uncertainty now, anyone with a solid financial background, would be a positive," Gibb said.

Markets in the coming week will also get a dash of earnings from the retail sector, which has already said sales floundered even more than analysts anticipated last month. A handful of retailers will report earnings, including Wal-Mart Stores Inc Starbucks Corp., Nordstrom Inc. and Penney Co. Inc.. With the exception of Wal-Mart Thursday, analysts are anticipating all will report a drop in operating profits. That's in keeping with a 14% decline in third-quarter earnings S&P 500 companies are on track to report, says Thomson Reuters. American International Group, Inc. and Microsoft Corp. are also scheduled to report earnings, on Monday and Tuesday, respectively.

Tuesday holiday

Economic releases are few next week, in part because the federal government will close for the Veteran's Day holiday Tuesday. Bond markets and banks are also mostly closed that day. Stock markets, energy and metals futures, and currencies will all trade normally. The biggest dose of economic data comes Friday, when the University of Michigan releases its consumer sentiment index for November and the U.S. government will report retail sales for October.

KLSE CI Update and Outlook

ICap: THe KLSE CI is below its 30-day, 50-day and 50-week moving averages. Its daily MACD has turned bullish but its DMI is bearish.

As the buying interst emerged, the KLCI has been advancing for about 2 weeks, albeit within a defined downtrend. Accompanying sharp reversal pattern is an upswing of its daily indicators. Since the weekly and monthly technical readings are still lagging, more encouraging developments are needed for a significant breakout of the descending channel. Would the US new president able to revive the world's largest economy and hence reverse the global bear markets?



* Still making news. Dr Sheikh: "I am a millionaire? I wish I were"..........One thing I am sure, you have spent millions of dollars. Where is the so called "space experiment report" ah?

* IMF: Expectations of a new Bretton Woods system overhyped! "Things are not going to change overnight"