Sharing by Warren Buffett

Warren Buffett: We begin this New Year with dampened enthusiasm and dented optimism.

Our happiness is diluted and our peace is threatened by the financial illness that has infected our families, organizations and nations. Everyone is desperate to find a remedy that will cure their financial illness and help them recover their financial health.

Every new year, I adopt a couple of old maxims as my beacons to guide my future. This self-prescribed therapy has ensured that with each passing year, I grow wiser and not older.

This year, I invite you to tap into the financial wisdom of our elders along with me, and become financially wiser.

Hard work : All hard work brings profit; but mere talk leads only to poverty.
Laziness : Sleeping lobster is carried away by the water current.
Earnings : Never depend on a single source of income.
Spending : If you buy things you don't need, you'll soon sell things you need.
Savings : Don't save what is left after spending; spend what is left after saving.
Accounting : It's no use carrying an umbrella, if your shoes are leaking.
Auditing : Beware of little expenses; a small leak can sink a large ship.
Risk-taking : Never test the depth of the river with both feet.
Investment : Don't put all your eggs in one basket.

Opportunities are never lost. The other fellow takes what you miss.

Truly words of wisdom, aren't they? The above article is sourced from an email received recently.

* Malaysian katak and politics. Frogs are great jumpers, hardy, exceptional ability to hide and camouflage, poisonous and at times noisy. According to Wikipedia, frogs feature prominently in folklore, fairy tales and popular culture. They tend to be portrayed as benign, ugly, clumsy, but with hidden talents.

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* Australia announces its 2nd "move earth and heaven" stimulus package worth up to 4% of GDP or AUD42b while cutting interest rate by100 basis point to 3.25%. The news pushed AUD up by 2% yesterday.

* Bloomberg: Isuzu, Japan's largest maker of light duty trucks may post its first annual loss in 6 years.

Technical Analysis - January 19 2009

S&P500 (850, last week 890 or -4.5% w.o.w )

The daily index has succumbed to selling pressure during last week. The Daily MACD, MACD Histogram, Guppy MMAs, Parabolic SAR and DMIs (+ve and –ve) are all showing negative already. However, we cannot discount a short term rebound during this week. For the weekly readings, the MACD, MACD Histogram and Parabolic SAR are still positive but will eventually turned negative if the selling continues further. The weekly ADX trend and DMIs (+ve and –ve) are not bullish yet while Guppy MMAs is weakening. The market is at best range bound. Like others, the market is still stuck in a major downtrend channel created since November 2007. Support is around 800 and resistance at 890.

KLSE CI (896, last week 919 or -2.5% w.ow)

One of the remaining few markets that still have a positive gain for the year but this may not likely to last soon. The index is finding it hard to sit above the daily 50-day ema. The daily indicators are at a crossroad again with the MACD, Parabolic SAR, ADX trend and DMI (+ve and –ve) going into an early bearish tone. The weekly charts MACD and Parabolic SAR are still positive but will eventually turned negative if the selling continues further. The market will need to work hard to avoid indicators turning negative again. To be positive, the index needs to clear the 935 level (a 20-day ema) and as such will breakaway from the major downtrend channel created since January 2008. The index is expected to trade between 850 and 970.

HangSeng (13,256, last week 14,377 or -7.8% w.o.w )

The index is determined to go south again. All the daily indicators like Parabolic SAR, the daily MACD and MACD Histogram and Guppy MMAs are turning negative and will remained so unless the index goes up strongly this week. We could see a short term rebound this week. The weekly charts are still positive, especially the MACD, MACD Histogram and Parabolic SAR but will eventually turned negative if the selling continues further. Support is seen at 12,600 and resistance at 15,000.

Nikkei 225 (8,230, last week 8,837 or -6.9% w.ow)

Similar with S&P500 and HangSeng, the index seems determined to go south again. However, we cannot discount a short term rebound during this week. All the daily indicators like Parabolic SAR, the daily MACD and MACD Histogram and Guppy MMAs are turning negative and will remained so unless the index goes up strongly this week. The weekly charts are still positive, especially the MACD, MACD Histogram and Parabolic SAR but will eventually turned negative if the selling continues further. Support is seen at 7,500 and resistance at 9,500.

* YahooFinance: Buffett says US in "economic Pearl Harbour".

* Bloomberg: China economy probably grew at slowest pace in 7 years as export slump.

* After ending 22 days of conflict leaving more than 1,200 Palestinians and 13 Israelis dead, Israel and Hamas has both declared victory?

Smart Investing/Trading for the week ending October 3 2008

Weekly US markets update and outlook

After bailout, stocks face economic, earnings woes
Investors to seek signs in credit markets, economic data and earnings

MarketWatch: Investors will enter next week relieved that a $700 billion financial bailout passed Congress, but still concerned about seized-up credit markets and a worsening outlook for the economy and earnings, as reporting season officially kicks off."The news over the past week is that the credit crisis continues to widen, affecting other industries and banks in Europe," said Ken Tower, senior vice president at Quantitative Analysis Service. For the market, the bailout is "positive news that could lead to a short-term rally," Tower said. "But the longer-term picture is still that of an economy struggling with the impact of this credit crisis and the market is therefore not out of the woods yet." On Friday, the Dow Jones Industrial Average ended down 157 points, or 1.5%, to 10,325, with traders selling positions following news that Congress had approved the bailout. Stocks had rallied in anticipation of the vote and traders "sold the news," a typical reaction in cautious bear markets. The S&P 500 index fell 15 points to 1,099. The Nasdaq Composite lost 29 points to end at 1,947. For the week, the blue-chip average ended down 7.4%, the S&P fell 9.4% and the Nasdaq lost 10.8%. "This is a major market disruption," Tower said. "Even though we might be due for an interim rally, this is not the end of the problems. We're telling clients not to get over-invested in any rally that develops."

Another harrowing week

On Monday, the House of Representatives turned down the bailout, sending the Dow plunging by 777 points, its worst point drop on record. On Tuesday, the rates at which banks lend money to each other surged. The overnight London interbank offered rate, or Libor, registered a record one-day increase, reaching 6.875% from 2.568% on Monday. "A lot of what's going on in markets is confidence-related. At a bare minimum, the [bailout] bill should help with confidence," said John Miller, chief investment officer for Nuveen Asset Management, which oversees more than $60 billion in fixed-income assets. While overnight lending rates eventually came back down by Wednesday, money markets have remained nearly frozen as banks remain unwilling to lend to each other amid fear that more bankruptcies might be revealed. Many home-equity loans, lines of credit, student loans, small-business loans and credit-card rates uses Libor as a benchmark, further fueling worries about the wide economic impact. "Something has to change meaningfully in credit markets to avoid the continued slide in the economic data," said Miller.

Markets and the R-word

On Friday, the latest employment report revealed the economy lost another 159,000 jobs in September. The economy has now lost 760,000 jobs this year, further evidence that the economy was in a recession even before the financial market crisis of the past few weeks. "We are in a recession and the trend is in place to go to further job losses," said William Bellamy, who manages about $1 billion as director of fixed income at Thompson Siegel & Walmsley. "The bailout is going to work on the margin, at best," Bellamy said. "It will be nothing near the silver bullet people are hoping for. It's just one more step in a series that's going to need to be put in play. It will help. Will is cure it? No." With dire reports that the economy is shedding more jobs and that manufacturing continues to contract, investors have already started massively selling the shares of companies whose earnings depends on growth in the U.S. and globally. Separately, Merrill Lynch cut its 2009 oil price forecast to $90 a barrel from $107 a barrel and warned that a "synchronous global recession" could bring oil prices to $50 a barrel.

Economic data

On Tuesday, data on consumer credit in August will be released. Minutes from the last meeting of the Federal Reserve also will be released. The market is currently expecting that the central bank will cut interest rates by 50 basis points to 1.50% when it next meets at the end of the month. Wednesday will bring data on pending home sales for August, and on Thursday will be weekly jobless claims and wholesale trade data. Friday brings data on the trade balance in August, as well as the consumer sentiment survey by the University of Michigan.

Weekly KLCI Technical update and outlook

BT: Market to continue sideways? The KLCI's weekly and monthly fast MACDs (moving average convergence divergence) continued to stay below their respective slow MACDs. Its daily fast MACD continued to stay above its daily slow MACD. The index 14-day RSI stayed at 35.37 per cent level yesterday. Its 14-week and 14-month RSI stayed at 27.51 and 35.95 per cent levels respectively. The KLCI moved sideways during week as many institutional investors were away on their festive holidays. There was not much to work on during the three-trading-day week. Next week, the KLCI's immediate overhead resistance zone is set to hover at the 1,019 to 1,053 levels while its immediate downside support zone is likely at the 979 to 1,013 levels.

* USD700b bailout plan finally completed. Here is what to expect for market watchers and US consumers.

* Maybank also finally completed the 55.6% buy of BII, but at whose expense? (please read here for analysts' negative comments).

* Bloomberg: Now SGD is being sold down. Last Friday saw Aberdeen Asset and Daiwa selling the currency on speculation the central bank will curb the currency advance as the Singaporean economy teeters on the brink of recession.

* Last week saw Warren Buffett having another bite of a Wall Street company- GE with a USD3b stake in the company. His name speaks volume and confidence....Can't help but wonders whether he coming in too early?

* Japanese retail gasoline prices dropped for the 8th week in a row as price competition intensifies and demand weakens. Hello....When is the next reduction for Malaysia is going to be? sigh!

* Thailand's inflation slowed for the 2nd month in September falling to 6% from 6.4% in August.

Now Warren Buffett smells blood....

"... the catalyst needed for the market to start its meaningful uptrend is not here yet but will only come about when Warren Buffett and the likes start buying in the market or when states and pension funds, national funds or even tax payers monies are being used to prop up badly beaten stocks (HK uses it successfully in 1998) and the buying of defaulted housing loans and schemes from banks and companies. These type of intervention is not talked about as it touches on bail-out, especially this year is an election year. However, if things get real tough, these desperate measures will probably save the day".

This was what I wrote on March 19 this year(here) after the Fed Reserve lowered its Fed Fund rate by 75 basis points to 2.25%. At that time the US markets have gone down by more than 10% in less than 3 months and many were asking whether we have reached the bottom then and are we seeing light at the end of the tunnel? So another half year latter now and with the US financial markets tumbling almost 15% to date, the billion dollar question arises again. As you probably notice, the main difference now compared to then is that tax payers monies are now being used to rescue companies(Bear Stearns- Fed backed/Fannie/Freddie/AIG)and financial experts like Warren Buffett (investing about USD5b in Goldman Sachs) are slowly coming into the picture and these are probably some of the important points to note indicating markets are getting desperate while going from bad to worse and shrewed investors are taking opportunity to buy certain good value stocks with a bargain. Based on these facts and technical charts, I believe the US markets could have found its temporary bottom last week. The technical indicators for S&P500 are still not showing any positive signs yet and will provide a big confirmation if it does with fresh buying momentum in the coming weeks. The road ahead is still very rocky with high probabilities that many more big corporate names going under and more house buyers defaulting loans etc. In the meantime, Americans must take this crisis to seriously improvised, take some financial beating(including the egos) and shedding excesses along the way...otherwise the recovery ahead would be slow and painful...

* Bloomberg: Warren Buffett stands to gain USD437m on the Goldman Sachs's deal deal!

* FBI investigationg companies(Fannie/Freddie/AIG/Lehman Brothers) at the heart of financial meltdown. This is a good move. Find out what went wrong and how to improve from here.

* Bloomberg: Pakistan may default on its debt soon? Moody's Investors Service cuts its outlook on the country's credit rating on Tuesday. Citing heightened prospects of "missed repayments" on the nation's debt. Pakistan's government debt is the riskiest in the world. I shivered thinking Maybank's investment in Pakistan.

* Malaysia's August inflation at a 27 years high at 8.5% . Other countries' inflation seems to peak in July and starts to tapper off in August

Warren Buffett: US economy is already in recession

Warren Buffett told CNBC today that that by a "common sense definition", the U.S. economy is already in a recession, even if it hasn't met the technical definition of two consecutive quarters of negative growth.

He's been saying for several months that the U.S. could easily fall into a recession. He restated, however, his view that over the long-run the U.S. economy will do fine and that each generation will live better than the one before it. Buffett also said current conditions are "nothing like" the downturn of 1973 and 1974, although he can't rule out the possibility that things will get worse. Buffett noted that Federal Reserve Chairman Ben Bernanke has a tough "balancing act" and risks reigniting inflation with a series of rate cuts by the central bank.

Buffett also told CNBC's Becky Quick that while stocks are "not cheap" now, they're not extreme, either. He says he's waiting for when stocks become "very cheap." He does, however, "find more things to look at now than I did six months or a year ago." The best opportunities he sees right now are in bonds rather than stocks.

Buffett says his offer to guarantee $800 billion dollars in municipal bonds now backed by Ambac Financial Group Inc and FGIC is "not on the table" any longer. "We tossed our hat into the ring, and they tossed it right back."

The big bond insurers soundly rejected the offer Buffett made first made public last month on Squawk Box, saying their prospects would be severly damaged if Buffett took over the relatively solid muni bond guarantees, while not also backing the other very risky investments that threaten the bond insurers' financial footing. Berkshire created its own bond insurance subsidiary late last year.

In his letter to Berkshire shareholders on Friday, Buffett said he had identified four people who could take over making Berkshire's investment decisions, should he reluctantly give up that role.

Today he told Becky that none of those candidates are female, in part because not many women expressed interest in the job. Buffett's current role will be broken apart when he leaves Berkshire. The company had already identified candidates for Buffett's CEO role.to

My Take: Mr Buffett's views are too important to ignore or taken lightly. A very good example was last year when he disposes all his investment in PetroChina, many sceptics were saying he probably missed the China hot air balloon. It is true that he missed the last leg up in the HKSE but looking back now, he has made a correct decision and a handsome profit.