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.

"God of Stocks" tells of pain

The stock markets can really humble a person....the more you learn, the less you know. You can even ask an "experienced" old timer like the god of stocks, Mr Lee Shau-kee; he will agree. The billionaire investor Lee said in May this year his investment strategy will switch to aggressive from defensive in August, and forecasts the Hang Seng Index to hit 30,000 by that time. However, in an actual scenario during that period, the Hang Seng tumbled from 25,000 to 21,000 in August and fall again to 11,000 by end October. It has since recovered to 15,000. Here is what Asia's Warren Buffett or Asia's Master of Stocks has to say now ....

TheStandard: Lee Shau-kee, even after an impressive surge in the stock market yesterday, wants everyone to forget he is known as the "God of Stocks," admitting that followers have lost money after listening to his advice. The Henderson Land Development (0012) chairman, previously tagged as "Asia's Warren Buffett," said he will not predict what level the stock market can go.

"One time, I received letters from investors who followed my opinions. One of them said he lost much money in stocks and asked me to compensate him for some losses," said Lee after the company's annual general meeting yesterday. "That person said he was so pathetic that he borrowed money from relatives to buy stocks and had to repay them. He asked me if I could lend him money."

After an investor asked Lee about his stock picks for next year, he refused to respond. The company's vice chairman, Colin Lam Ko-yin, said: "Lee is not an investment consultant."

Earlier though, the veteran investor said "bliss will come out of the depth of misfortune" for the stock market next year and he hopes it will recover soon. "The market is not as strong as before. I am neither buying nor selling now," Lee said. "Warren Buffett is buying stocks now."

Lee said he has lost much because of the financial tsunami and, even though "the recession has yet to come to an end" in Hong Kong, he expects the property market to improve next year with limited ups and downs. "The property market will remain sluggish in the first half of next year and the market will hopefully recover slightly in the second half if the global economy improves." Lee said the property market now is still better than the market during the SARS period in 2003.

* YahooFinance: Congressional Democrats and the White House worked to resolve their last disputes Monday over terms of a $15 billion bailout for U.S. auto makers -- complete with a "car czar" to oversee the industry's reinvention of itself -- that's expected to come to a vote as early as Wednesday.

* Bloomberg: Japanese economy shrinks by -1.8% in the 3Q (2Q -0.5%) as recession worsens.

* BT(Singapore): The Australian government delivered more than AUD8B in cash payments to families and pensioners from yesterday to stop the economy from sliding into recession and urged people to spend the money ahead of Christmas.

* WSJ: Merrill Lynch and Morgan Stanley will not pay bonuses this year to their CEOs and other top officials.

* Obama to spur the US economy with the nation's largest infrastructure spending in the last 50 years noting the state governors have such projects that are "shovel ready".

* China Daily: China car sales continued to fall in November as the passenger/sedan sales slip by almost 11% year on year. Apparently, the good old days of 20% growth rate has been "driven" away!

Technical Analysis - December 5 2008

S&P500 (876, last week 896 or -2.23% w.o.w )

During the week, the index gave up a small percentage of its gain gathered a week earlier. The daily indicators continued to register uptrend. It is noteworthy to mention the daily index is sitting above the 20-day ema; a task it tries to do since mid November. The ability of the index to stay positive will help the daily indicators turning more bullish and give a more concrete direction for the index which has been rather hard to predict of late. 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 940.

KLSE CI (838, last week 866 or -3.2% w.ow)

The daily MACD still remains in the positive but is almost touching the crucial level of negative cross over again due to its listless trading during the week. The MACD Histogram is showing weakness ahead unless the index able to come to life again. The Parabolic SAR continues to issue a negative signal. The weekly charts are still in a negative territory. The index is expected to trade between 800 and 900.

HangSeng (13,846, last week 13,888 or -0.3% w.o.w )

Similar to the S&P500, the daily indicators are doing well and strong. The Parabolic SAR has since turned positive too. It is noteworthy to mention the daily index is sitting above the 20-day ema; a position it has maintained since late November. The next task will be the 50-day ema, which is at 14,883. 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 are still in a negative territory but there seems to be some bottoming process as evident from the MACD indicators. Support is seen at 13,300 and resistance at 15,500.

Nikkei 225 (7,918, last week 8,512 or -6.97% w.ow)

The similarity with HangSeng ended last week. The index seems to be getting weaker and did not recover after a bout of profit takings during the week. The daily indicators eg MACD and MACD Histogram which have decided to go up instead down a week earlier are now in flattish position. The Parabolic SAR continues to issue a negative signal. It is most important the index does come back to life positively during this week if to save the daily indicators from turning bad this week. The weekly charts are still in a negative territory. The index is expected to trade between 7,500 and 8,500.

* Asian and European markets are flying on hope of global stimulus plans to boost world growth. Is the worse over already?

Smart Investing/Trading for the week ending December 5 2008

Weekly US markets update and outlook

Washington may steal Wall Street's limelight
With no relief seen in economic data, eyes turn to more federal bailouts

Marketwatch:Stock investors can expect little relief from economic data or corporate reports in the week ahead, making Washington's efforts to fix the broken credit system the one possible bright spot.

The Dow Jones Industrial Average and S&P 500 come to grips with the magnitude of the problem, tumbled last week as a drumbeat of bad economic and corporate news increased the likelihood the U.S. economy was in the midst of a severe recession.

"It looks like the market is starting to are already starting to get baked into prices," said Russ Koesterich, head of investment strategy for Barclays Global Investors. Economists don't see much moderation on the recession front for the week ahead. Retail sales and consumer sentiment reports are expected to show large drops and multi-decade lows. Wholesale prices are forecast to have retreated -- generally a good sign -- but one that's due to plunging oil prices. Prices have dropped as depressed consumers and manufacturers have used less.

Similarly, the handful of companies scheduled to report earnings - including consumer-oriented firms H&R Block, Inc. Costco Corp. and CKE Restaurants -- will be hard-pressed to find something good to say about the U.S. spending environment. Their reports will follow the worst monthly job loss and the grimmest month for same-store sales in more than three decades.

The dismal economic and corporate outlook leaves the heavy lifting to Washington, D.C. Lawmakers are debating bailout requests from struggling carmakers General Motors Corp., Ford Motor Co. and Chrysler LLC

Also, investors will be keyed into any announcements from President-elect Barack Obama or House Speaker Nancy Pelosi, D-Calif., on the direction of another fiscal stimulus package.

And the Treasury and Congress are expected to make further proposals on direct aid to mortgage markets, say economists at IHS Global Insight. Announcements about an alphabet soup of programs to lower borrowing costs and make loans more available have rocked credit markets in recent weeks. Some of these programs have started to achieve their ultimate purpose -- driving rates down. Spreads to Treasurys on mortgage-backed securities and debt issued by Fannie Mae and Freddie Mac have fallen sharply since the Fed said it would buy this debt Nov. 25. Mortgage rates dropped to 5.53%, a January low.

Treasury yields have also sunk, to historic lows, with declines hastened by Fed Chairman Ben Bernanke's comments Monday that the Fed might buy up Treasurys to push rates down. But borrowing costs for companies whose debt isn't backed by the U.S. government have risen in many cases. That's one more sign that risk fears are still running high, say strategists. "You'll know when risk appetite comes back into the market when yields on Treasurys start to back up," said Koesterich. The 10-year Treasury yield last week hit 2.655%, the lowest since at least 1955. Thirty-year bonds touched 3.165%, the lowest since at least 1977.

Still, a rally in stocks on Friday, the same day the Labor Department said the U.S. destroyed 553,000 jobs last month, have given some strategists reason hope for a turnaround. "In view of the 'mild' reaction to the U.S. employment report today, a modest increase in risk appetite between now and the end of the year is still not completely out of the question," wrote Stephen Gallo, head of market analysis at Schneider Foreign Exchange Ltd. More willingness to take on risk usually bodes poorly for the U.S. dollar. Like U.S. Treasurys, it's benefited from a flow into safety assets.

The U.S. dollar index gained 0.6% last week. Despite a nearly 260-point, or 3.1%, gain on Friday, the Dow-30 ended the week 2.2% lower. The S&P 500 lost 2.3%.

Oil futures plunged 25%, their worse weekly loss since Jan. 1991.

Weekly KLCI Update and Outlook

ICapital: The KLSE CI is below its 30-day, 50-day and 50-week moving averages. Its daily MACD is struggling to stay bullish and its DMI is bearish.

This week, we continue to see endless developments such as the continued bailout of the US economy, interest rate cuts by China, BOE, ECB etc leading to a short-lived rally. Locally, Bank Negara also lowered its OPR to 3.25%, the first reduction in more than 5 years. However, the KLSE CI still ended lower in lacklustre trade. Technically, the weekly MACD is still bearish but it has stalled its fall. Has it reached a bottom or has it not?

* Tmn Bkt Mewah, Ampang landslides kills 4 people and evacuated thousands of residents. (site is just a few kms away from the Highland Towers disaster in 1993 where 48 people were killed. PM: Stop all hillside projects! I am quite sure we will very soon forget about it and happily approving it all over again!

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* Despite Paulson(US)'s calls for stronger RMB, some analysts were of the opinion it will not happen so soon as the currency is set to depreciate further. This is in view of the declining China exports and easier to tame inflation.

* TheStar Biz: South Korea's forex reserves fell to new lows with a drop of USD11.7b in November to USD200b (lowest since January 2005 when it was at USD199.7b). Japan's forex reserves meanwhile touches USD1T in November (October USD977.72b) on US Treasury gains as it came with lower yields.

Bloomberg: Interest rate cuts everywhere! Egs: NZ cuts its key interest rate to 5% from 6.5%. Thailand cuts its benchmark interest rate to 2.75% from 3.75%. UK cuts interest rate to its lowest since 1951 to 2% (from 3%) while ECB cuts to 2.5% from 3.25%.

* Bloomberg: Jim Rogers says commodities fundamentals are unimpaired and prices will rebound when a lack of new supply leads to shortages. Still so bullish?Merrill Lynch is predicting a USD25 per barrel for oil next year if China economy slumps. Oil is nearing USD40 per barrel now.

* US lawmakers will vote as soon as Tuesday on a proposal being worked out this weekend to help save the failing US carmakers.

Cyclical Bull in Secular Bear markets

Everyone agrees that we are in a bear market. Prices are down badly and almost everybody wishes they did not dabble with stocks in the first place. Here is an article which provides some useful historical analysis of the US bear markets since the 1900. It defined the bear periods categorising them as secular and cyclical and identifying cyclical bull within the secular bear markets. It also provides some important features of the beginning and ending of a secular trend. Importantly, it was aimed to highlight investors opportunities in a Bear Market, if any. The final decision to buy stocks for the next cyclical bull is yours and it would be good if the buys are at least supported by fundamental and technical analysis, knowing the bigger picture and an exit plan, of course.

BizWeek: It has been a rotten time to be an investor. But Ned Davis Research, a financial research firm in Venice, Fla., has some good news: In times like these, during a decidedly bear market, one often gets big upswings. NDR's chief investment strategist, Tim Hayes, looked at the four secular bear markets since 1900 (as he measures them, they came in 1906-21, 1929-42, 1966-82, and 2000 to the present) and has defined 18 cyclical bull markets that took shape within them. (The defining characteristic of a secular bear market is that it starts with a bubble and ends with no one interested in stocks, Hayes says, and they typically last more than 10 years; a cyclical bull market is shorter and may occur within either a secular bull market or a secular bear.) The median upswing was 371 days, and the median rise of the Dow Jones industrial average was 55%.

BusinessWeek's Amy Feldman spoke with Hayes about secular bear markets, cyclical bull markets, and what these patterns mean for investors.

Are we headed for a lost decade?

I wouldn't say we're heading into one—we've been in this environment since 2000. Since January 2000 the annualized return of the Dow was -4%, and after inflation it was -7%. We don't think we're at the end of this secular bear market, but that doesn't mean there isn't a good cyclical opportunity.

What has happened in secular bear markets in the past?

These things go on for many years. The last went from 1966 until 1982. Some people compare today with the 1930s, a time characterized by deflation and the stock market crash. Now is closer to the 1970s in terms of market action, but there are differences in the secular trends. While commodities today have had a big decline, they have maintained their long-term uptrend. We've called that a cyclical bear market in a secular bull market.

When will the secular bear market end?

Secular trends typically end when valuations go to an extreme. You start to have a price-earnings ratio so low—typically single digits—that it cannot get lower at the same time that earnings are actually growing relatively well. When people have given up on stocks, you have reached the end of the secular trend. Our measures say we are about halfway down from the bubble of 2000. If you date this secular bear market from the beginning of the decade, you still have five years to go, maybe longer. It could end up being more like the second half of the 1970s, when the real damage was done in the first half of the secular trend and then you go through a long consolidation, or recovery, period.

With markets falling around the world, is there any reason to invest globally anymore?

seen correlations [between the U.S. and international markets] tighten up, as they tend to do at the end of a decline. But there will be longer-term opportunities in emerging markets and China, where the long-term case remains favorable. China is not in a secular bear market. It has been in a cyclical bear market within a secular bull market. While markets around the world will move in one direction when we get the next move higher, the upside will be much greater in the markets in secular uptrend, like China's.

Where's the upside at home?

You could get a cyclical bull market, where valuations expand for a period of time. The median cyclical bull within a secular bear is a rise of 55%. There have been 18 cases of this. So we are pretty hopeful about the next six to nine months.

Surprisingly, UBS has today boldly predicted that "Stocks will surge in 2009, S&P500 may climb 53% to 1,300! (read here for details) They must have read this article in the BizWeek!

* Umno sacks Zaid.

* China's sovereign wealth fund, CIC, which last year invested USD5b into Morgan Stanley, is reluctant to plow more money into foreign financial institutions until governments hash out coherent policies to cope with the global economic and financial turmoil.

* Bloomberg: GM seeks USD4b to survive the balance of days in 2008 and USD18b in total US assistance.

* BT: Now Tunku Imran quits Petra Group even after Bruce Willis has decided not to sue the Group! Enough is enough! !

* Another cut in fuel prices yesterday. Ron 97 is now RM1.90 (from RM2), Ron 92 and Diesel RM1.80 (from RM1.90)

NBER's announcement comes early

What a fiery start for the US markets this December month; a month of holidays, bonuses (if any) and window shopping, or rather dressing! The first day of trading resulted a loss of nearly 9% in a single trading session for the S&P500! This is in stark contrast compared with the performance during the whole of last week- a 12% gain. The selling particularly in the afternoon session is probably due mainly to the National Bureau Of Economic Research's (the economic panel recognised as the arbitrator of business cycles) announcement that the US has entered recession in December 2007 (refer also here) based on its measures of income, employment and other factors.

The NBER's pronouncements historically come long after recessions have begun. (discussed here before in this blog). Yesterday's announcement probably surprised everyone as the US has not fallen into recession yet, technically speaking.(ie continuous 2 consecutive Quarters of negative growth). In fact, basing on the passed announcements, almost all of NBER's announcements come late either when the economy is at the tail end of recession or right after recession. Does it means that the "recession" in the US is ending or at its tail end? Does it means that the "recession" has probably ended without the economy falling into technical recession? I really doubt so.

Why is the announcement coming in early this time is interesting. Three simple deductions can be made from the early announcement. One thing for sure, I believe the NBER is very worried about the current state of economy and the numbers are worsening at a rapid rate that policy makers and public needs to be warned and be prepared. Secondly, the usual argument that the recession will be over or already over as soon as the announcement from NBER is officially out may no longer be valid. This is because based on the economic data that are coming out for the passed half a year or so, things are expected to get worse before stabilising. We are still not at the end of the tunnel yet. Thirdly, be prepared to wait longer this time for the recovery in the economy and the financial markets compared with other past recessions.

* Thailand's 2nd PM in 3 months Somchai is ousted by court today!

* Oil falls to USD47.36 barrel!

* Central Bank rates at a glance. NZ 6.5%, ECB 3.25%, US 1% and Jpn 0.3%.

* RBA cuts its interest rate by 100 basis point to 4.25% today.

Technical Analysis - December 1 2008

S&P500 (896, last week 800 or +12% w.o.w )

Last week saw a major reversal for the index. It did a drastic U-turn with a weekly gain of 12%. As a result, the MACD cuts up again with a positive crossover 3 sessions ago. The Parabolic SAR has just turned positive 1 session ago. A word of cautious though, the Stochastic Oscillators are at its recent high and some profit may be taking place this week. The ability of the index to stay positive will help the daily indicators turning more bullish and give a more concrete direction for the index. For the weekly readings, the indicators are still showing weaknesses. Support is around 850 and resistance at 940.

KLSE CI (866, last week 867 or -0.00% w.ow)

The daily MACD remains in the positive and managed to gain a little strength with a dismal performance last week. However, the Parabolic SAR continues to issue a negative signal. The weekly charts are still in a negative territory. The index is expected to trade between 830 and 950.

HangSeng (13,888, last week 12,659 or +9.7% w.o.w )

Looks like the daily indicators eg MACD and MACD Histogram have decided to go up instead down when they touches the decisive and crucial level last week. However, the Parabolic SAR continues to issue a negative signal. The weekly charts are still in a negative territory. Support is seen at 12,200 and resistance at 15,000.

Nikkei 225 (8,512, last week 7,911 or +7.6% w.ow)

Similar to the HangSeng index, the daily indicators eg MACD and MACD Histogram have decided to go up instead down when they touches the decisive and crucial level last week. However, the Parabolic SAR continues to issue a negative signal. A word of cautious though, the Stochastic Oscillators are at its recent high and some profit taking be taking place this week. The weekly charts are still in a negative territory. The index is expected to trade between 8,000 and 9,300.

* XFN: China is not facing major bubbles, adjustments "benign"-Central Bank adviser Fan Gang.

* XFN: 2009 growth seen at 10% and CPI at 3%-State Councils Development Research Centre researcher Zhang Ligun.

* Sounds familiar? The Standard: Canada's opposition parties have agreed in principals of a deal to topple the newly elected government arguing the government lead by PM Stephen Harper has no solid plan to deal with the current global economic crisis.