Wednesday, February 29, 2012

Or Shall We Call It Bernanke's Revenge?

Wondering about the sell-off in gold?
May be it was a revenge of Bernanke over Ron Paul?
Paul was showing him some precious metal and telling Ben how he screwed US Dollar. Then the sh*t hit the fan.

Gold Loses Glitter.

The big news for the day is sell-off in gold. GLD dropped from $172 to 168 in less than five minutes.
And there was no counter trend rally after that either. And the sell-off happened with very high volume.
By that standard, silver was relatively OK.  But almost everything in the commodity sector sold-off including copper and oil.

Such a waterfall decline in one class of risk assets do not bode well for the others.  I am not saying that the crash will start from tomorrow. Rather, I want to stress the fact that the up-trend is still intact despite all the divergences and warning signals. But Russell was down over 1.5 % while SPX was down merely 0.47%. We know that “Wall St” likes to make-up the stocks at the end of the month and high flying / well known stocks have to be guarded. May be that is why they can let Russet go but protect SPX and DOW somewhat.

I was not expecting any selling before next week so when SPX showed red I was rather surprised. With today’s price action we have a bearish reversal candle and may be a bearish engulfing candle as well. I am not sure of the bearish engulfing pattern because as per Bulkowski  : The body of the black candle should engulf or overlap the white candle’s body,…… Shadow overlap is not important.”  But in today’s case, I do not think the black candle body overlap the white candle body.
In any case, tomorrow being the 1st of the month as well as Thursday, we can expect the market to be up. May be it will re-test the high before turning down. We will have to wait and see.

The ECB handed out more than $700 Billion and that may have been the last act of kindness for a long time to come. When Mr. Ben indicated that there would be no QE for a while, the junkies in the market went for a withdrawal symptom.  Did the traders and speculators decided that since there will not be any QE anytime soon, there would be no more liquidity and so sell the gold? NY Fed even did a reverse REPO today.  Even before Bernanke opened his mouth, EURO was not showing much life after the news of LTRO. So what gives?

While the 4QR GDP was reported to be at 3% ECRI is not backing away from its call for recession.

Let us see how the next jobless numbers come out.

In the mean time the Trend Table continues in green except gold. But I am happy to wait on the side line to see if all other risk assets move in the same direction. We may see a whipsaw in gold.
Thank you for reading . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions.

Tuesday, February 28, 2012

Apple A Day Keeps Bears Away.

Or whatever.  The stock market keeps grinding higher and everyone hates this market. The bears hate it because it is grinding them to dust. Bulls hate it because they are under invested and would like to go back and invest more. Brokers hate it because there is no action. We are all calling a top for months now and yet nobody has seen a top.

Now that DOW has closed over 13000 and SPX over 1370, do we throw away all the rules of TA, cycle analysis and just believe in the powers of Central Bankers? Buy the F**king dip?  I am no bear and I have no problem joining the buy program only if I could convince myself that this time is different. That all the divergences do not matter!  That this time is truly different!  The path of least resistance is up-ward. So the next we hear is DOW 13500 and SPX 1400.

Look at the 5 min. chart of SPX.
In the normal course I would have said it is a double top. But now I don’t know what to say.

The summation index (NYSI) is turning down and in the past it has been followed by market corrections.
(Source: Ciovacco Capital)
Will it be different this time?

J Wagner of FXCM has the following chart;
Mr. Wagner thinks AUD has some juice left. 
Look at the weekly chart of AUD.
I am thinking that AUD is at the top of the range and not much room to run.

If we have to guess the Top based on TA, then there is no better person to guess than our good friend Cobra.

As per his measured move target, SPX can go up-to 1376.

In the mean time, the trend table continues to be long.
Do not front run unless you know what you are doing. Market is smarter than all of us. Too many of us are calling for the top and reversal and it will come when we least expect it. While we wait for the market to show us the next bend, here are some interesting reads:

Thank you for reading . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions.

If You Build, They Will Come

Readers will know that I have been a loyal follower of EAH. Depending on your entry price, EAH's performance may have been less than desirable over the last 6 months. However, when you take in the 1 for 2 free warrants and 1 for 2 bonus issue, the real effect is pretty good. Now, why would a company keep doing these kind of issues. It is important if your desire is to grow and make the Main Board. Secondly, its also an effective way to reward shareholders.

EAH just announced its 4Q2011 results and the full year's results have been tabulated below:

I don't know about you but from RM4m to RM11m net profit is nothing to be sneezed at. We should also ignore the diluted EPS because the warrants are only convertible at 40 sen compared to current share price of 20 sen. Hence at 20 sen, the stock is trading at historical PER of less than 4x. It is after all an ACE counter but investors should be looking at the growth percentages over PER to get at a more realistic valuation.

This is the sad thing about ACE stocks, the ones with good fundamentals and strong earnings growth are ignored by investors, but the ones that are in the red and bleeding with flimsy business models get syndicates to whack their shares skyhigh??!!

Good ACE counters suffer from a lack of exposure and following. I believe there are close to ZERO the number of local funds that can invest or are allowed to invest in good ACE counters. This has to be rectified. Without the emergence of strong institutional following, it is harder for their share price to properly reflect their real worth. IF THIS TREND CONTINUES, ACE COMPANIES WILL NOT BE INCENTIVISED TO "DELIVER STRONG RESULTS" but rather seek the easy way out ... e.g. pump and dump shares. Just like what we are teaching our children, what are our markets trying to tell good ACE counters?

Solution: the government and related institutions must make more funds available to invest in "good value" ACE counters. Only by 'rewarding' them this way, will we encourage the right entrepreneurial spirit. 

I have all these slides because I have introduced a few foreign fund managers to EAH recently and they were rightly impressed. The above chart indicates their business platform. What is striking is that they are qualified to bid for all government projects and has notched important government type projects. That is a strength not many companies in the same industry can boast.

I like EAH because it does not rely solely on organic growth, it actually sees many companies every month and when the synergy is there, the acquisition is EPS accretive, they will make their offer. Their 51% acquisition of DDSB has demonstrated that brilliantly. It is likely that EAH will gobble up the balance sometime this year.

The stock may be one of the longer term hold for me as I believe that's how I would manage and grow a small company. Rest assured that the management is highly professional. But I believe their profit will surge at least another 20%-30% this year. Its only a matter of time before somebody starts to take notice.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Monday, February 27, 2012

Anyone Seen A Top?

 - Otter Party!

Another BTFD day. Another world has been saved day.  And we have not seen helicopter Ben throwing money in USA yet, I mean directly. He is doing so indirectly by SWAP lines and ECB LTRO. Can you imagine where the indexes will be when Hel-Ben shows up here in USA, giving away free money? You better shed your bear skin and try to think like a bull. Because he will definitely show up.

I have whole host of technical indicators screaming murder but the bottom line is that the up- trend has not been broken. Time to buy?  I would say that unless SPX breaks 1370 convincingly (stays above the level for at least two days in a row), I am not ready to become a bull. VIX may be signaling something:

Also there is a divergence between SPX and VIX. SPX making higher high but VIX is not making lower low. Rather it is also making higher high. It is now up two days in a row.

Per ZH Dow crossed 13000 22 times today.
(Source: ZH)
Now we know that ZH is given to hysteria, but still they have a valid point here.

SPX closed 1.85 points up while Dow closed 1.44 points down. Gold sold off and so did oil. I have an interesting chart from Uempel :

He does not give conclusion but being a smart person that he is, poses a question. Anyone seen a top yet? So while wait for the trend change, here is the trend table for today. The Indexes are mostly unchanged.

Hope it will help you to stay on the right side of the market.

Thank you for reading . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions.

P.S. Interesting read from Stock Trader's Almanac;

Sunday, February 26, 2012

Remembering Bukit Merah

Mitsubishi Quietly Cleans Up Its Former Refinery

Rahman Roslan for The New York Times
Lai Kwan prepares to bathe her son, Cheah Kok Leong, who was born with severe mental disabilities. She believes that his condition is related to the radioactive exposure she received while working at the Mitsubishi Chemical’s refinery in Bukit Merah.
BUKIT MERAH, Malaysia — Hidden here in the jungles of north-central Malaysia, in a broad valley fringed with cave-pocked limestone cliffs topped with acacia and durian trees, lies the site of the largest radiation cleanup yet in the rare earth industry.

Residents blamed a rare earth refinery for birth defects and eight leukemia cases within five years in a community of 11,000 — after many years with no leukemia cases. Seven of the leukemia victims have since died.

The Bukit Merah case is little known even elsewhere in Malaysia, and virtually unknown in the West, because Mitsubishi Chemical quietly agreed to fix the problem even without a legal order to do so. Local protesters had contacted Japanese environmentalists and politicians, who in turn helped persuade the image-conscious company to close the refinery in 1992 and subsequently spend an estimated $100 million to clean up the site.
Image-burnishing was important because the company is part of the Mitsubishi Group of Companies, which has long made Malaysia the cornerstone of its southeast Asian operations. The group has dominant positions in manufacturing a range of products, including air-conditioners and cars.
Mitsubishi Chemical also reached an out-of-court settlement with residents here by agreeing to donate $164,000 to the community’s schools, while denying any responsibility for illnesses.
Osamu Shimizu, the director of Asian Rare Earth, the Mitsubishi Chemical subsidiary that owns the mine, declined to discuss details of the factory’s operation before it closed in 1992. But he said that the company was committed to a safe and complete cleanup.
Workers in protective gear have already removed 11,000 truckloads of radioactively contaminated material, hauling away every trace of the old refinery and even tainted soil from beneath it, down to the bedrock as much as 25 feet below, said Anthony Goh, the consultant overseeing the project for one of Mitsubishi’s contractors, GeoSyntec, an Atlanta-based firm.
To dispose of the radioactive material, engineers have cut the top off a hill three miles away in a forest reserve, buried the material inside the hill’s core and then entombed it under more than 20 feet of clay and granite.
The toughest part of the Bukit Merah cleanup will come this summer, when robots and workers in protective gear are to start trying to move more than 80,000 steel barrels of radioactive waste from a concrete bunker. They will mix it with cement and gypsum, and then permanently store it in the hilltop repository.
The refinery processed slag from old tin mines — material rich in rare earth ore. The company and Malaysian regulators said that it was statistically possible that the leukemia cases were a coincidence because tin mining towns tend to have above-average levels of background radiation. But an academic study of another tin mining town suggested that communities of Bukit Merah’s size should only have one leukemia case every 30 years.
Lai Kwan, aged 69, still recalls how she cheerfully moved in the 1980s from a sawmill job to a better-paying position in the refinery that involved proximity to radioactive materials. She remembers that while pregnant, she was told to take an unpaid day off only on days when the factory bosses said that a particularly dangerous consignment of ore had arrived.
She has spent the last 29 years washing, dressing, feeding and otherwise taking care of her son from that pregnancy, who was born with severe mental and physical disabilities. She and other local residents blame the refinery for the problems, although birth defects can have many causes.
“We saw it as a chance to get better pay,” Ms. Lai recalled. “We didn’t know what they were producing.”

Saturday, February 25, 2012

Weekend Reading.

Some interesting reading from various places on a lazy Saturday afternoon;

First from Eric Sprott and David Baker  of Sprott Asset Management.

2012 is proving to be the 'Year of the Central Bank'. It is an exciting celebration of all the wonderful maneuvers central banks can employ to keep the system from falling apart. Western central banks have gone into complete overdrive since last November, convening, colluding and printing their way out of the mess that is the Eurozone. The scale and frequency of their maneuvering seems to increase with every passing week, and speaks to the desperate fragility that continues to define much of the financial system today.

The first major maneuver took place on November 30, 2011, when the world's G6 central banks (the Federal Reserve, the Bank of England, the Bank of Japan, the European Central Bank [ECB], the Swiss National Bank, and the Bank of Canada) announced "coordinated actions to enhance their capacity to provide liquidity support to the global financial system".1 Long story short, in an effort to avert a total collapse in the European banking system, the US Fed agreed to offer unlimitedUS dollar swap agreements with the other central banks. These US dollar swaps allow the other central banks, most notably the ECB, to borrow US dollars from the Federal Reserve and lend them to their respective national banks to meet withdrawals and make debt payments. The best part about these swaps is that they are limitless in scope - meaning that until February 1, 2013, the Federal Reserve is, and will be, prepared to lend as many US dollars as it takes to keep the financial system from imploding. It sounds absolutely great, and the Europeans should be nothing but thankful, except for the tiny little fact that to supply these unlimited US dollars, the Federal Reserve will have to print them out of thin air.

Eurozone banks may now be hooked on what is clearly a back-door quantitative easing (QE) program, and as the warning goes for addictive drugs - once you start, it can be very hard to stop.
Britain is definitely hooked. On February 9, 2012, the Bank of England announced another QE extension for 50 billion pounds, raising their total QE print to £325 billion since March 2009.3 Japan's hooked as well. On February 14, 2012, the Bank of Japan announced a ¥10 trillion ($129 billion) expansion to its own QE program, raising its total QE program to ¥65 trillion ($825 billion).
Who needs traditional QE when the Fed already buys 91 percent of all 20-30 year maturity US Treasury bonds?  Perhaps they're saving traditional QE for the upcoming election.

All of this pervasive intervention most likely explains more than 90 percent of the market's positive performance this past January. Had the G6 NOT convened on swaps, had the ECB NOT launched the LTRO programs, and had Bernanke NOT expressed a continuation of zero interest rates, one wonders where the equity indices would trade today. One also wonders if the European banking system would have made it through December. Thank goodness for "coordinated action". It does work in the short-term.

The problem with central bank intervention is that it never works out as planned. The unintended consequences end up cancelling out the short-term benefits. Back in 2008, when the Fed introduced zero percent interest rates, everyone thought it was a great policy. Four years later, however, and we're finally beginning to appreciate the complete destruction it has wreaked on savers. Just look at the horror show that is the pension industry today: According to Credit Suisse, of the 341 companies in the S&P 500 index with defined benefit pension plans, 97 percent are underfunded today.12 According to a recent pension study by Seattle-based Milliman Inc., the combined deficit of the 100 largest defined-benefit plans in the US increased by $236.4 billion in 2011 alone. The main culprit for the increase? Depressed interest rates on government bonds.

Let's also not forget the public sector pension shortfalls, which are outright frightening. In Europe, unfunded state pension obligations are estimated to total

$39 trillion dollars, which is approximately five times higher than Europe's combined gross debt.15 In the United States, unfunded pension obligations increased by $2.9 trillion in 2011. If the US actually acknowledged these costs in their deficit calculations, their official 2011 fiscal deficit would have risen from the reported $1.3 trillion to $4.2 trillion. Written the long way, that's a deficit of $4,200,000,000,000,... in one year.

I know Eric Sprott wants us to buy gold from him but I could not agree more on the points he has made here or write any better. So I quote from a very long essay and applaud.

The next one is from David Rosenberg of Gluskinn-Sheff:

There is perception and then there is reality. In a replay of events this time last year, investor optimism is near an extreme according to many measures and views over the economic outlook have become much more constructive. This is the perception and it is well ingrained. But there is also the reality that some critical hurdles for the economy loom on the horizon and should not be dismissed out of hand:

The European recession is just getting started and the impact on Asian trade flows is already evident in the data — with Chinese export growth completely vanishing in January and manufacturing diffusion indices flashing modest contraction in February. We are potentially one to two quarters away from seeing a significant shock to the U.S. GDP data from an eroding net foreign trade performance.

What upset the apple cart this time last year was the run-up in oil prices, followed by a lag with a surge in gas prices at the pump. Once again, oil prices have ratcheted up and with a lag, we can probably expect a return to $4 per gallon for regular gas at the pumps by the time spring rolls around. The front page of the USA Today makes the case for why $5 per gallon is likely coming. The transport stocks see what's coming, having peaked on February 3rd, and since then this group has suffered 9 losses out of the past 13 sessions, representing a 4% decline from the nearby peak. This is a bit of a problem for the bulls because the transports never did confirm the new highs that the Dow and S&P 500 made — and the index is now at a critical juncture as it kisses the 50-day moving average on the downslope.

This hurdle will likely only become apparent in the second half of the year and it relates to tax uncertainties and the implications for rising personal and corporate savings rates.
First, the top marginal personal tax rate rises to 39.6% from 35% as the Bush tax cuts expire at the end of 2012. A limit on itemized deductions will add a further 1.2 percentage points to the top rate. Second, a new 0.9% Medicare tax on incomes over $200,000 gets imposed ($250,000 for joint filers). Moreover, the top 15% rate on long-term capital gains rises to 20%. And dividends will once again be taxed at ordinary rates — 39.6% for the top income earners. A new 3.8% tax on investment income also gets introduced for incomes over $200,000 ($250,000 for joint filers). The top estate tax rate goes from 35% to 55% (60% in some cases). The estate tax exemption falls to $1 million from $5 million (the gift-tax exemption also drops to $1 million and the rate adjusts hither to 55%). In all, 41 separate tax provisions expire this year.

Of course we know Rosenberg as the perma bear and as such his views are to be read with the dark glasses but there is no denying the points he is making. Understanding the risks will save us from snake oil salesmen who are painting the sky in rainbow colours now.

And then there is some interesting reading from Greece:

Greece MP sends one million euro abroad. (s/he should know why)

A third bailout of Greece is not ruled out (and we are not finished with 2nd one yet)

China asking for its pound of flesh from EU in exchange of promise to help.

John Stewart makes fun with the Republican contenders and Republican Party in general

Bill Maher gets nasty with Republicans as well

Some beautiful time lapse video photography of Yosemite
Thank you for reading . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions. Have a wonderful weekend folks.

Friday, February 24, 2012

Classic Value-Momentum Investing Candidate

I wrote about Ewein back in November which had a run then and then fizzled out. Over the last few days, volume and price activity have perked up significantly again. Will that fizzle out as well? No one knows. Sometimes, we have to note these momentum driven plays (with good fundamentals), sometimes it may take more than one run to "confirm" things. A stock may run on news of certain corporate developments, but as we all know the germination of an idea takes time to execute. Maybe this run is a better prelude to a proper move, I might be wrong again, but considering that the share has not had a significant run for more than a year, its a calculated good bet.

Key levels, 99 sen, its 4 week high and 1.15 its 52 week high.

24/02/20120.9250.92 - 0.9750.965+0.04 (4.32%)1,213,900
23/02/20120.890.88 - 0.930.925+0.035 (3.93%)1,011,300
22/02/20120.840.835 - 0.8950.89+0.05 (5.95%)764,100
21/02/20120.8050.825 - 0.850.84+0.035 (4.35%)60,600
20/02/20120.990.80 - 0.840.805-0.185 (18.69%)28,600
17/02/20120.990.00 - 0.000.990.00 (0.00%)0
16/02/20120.8050.79 - 0.990.99+0.185 (22.98%)15,100
15/02/20120.830.78 - 0.8050.805-0.025 (3.01%)25,100
14/02/20120.840.79 - 0.830.83-0.01 (1.19%)5,100

Previous write up back in November 18, 2011:

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Waiting For Godot.

First I would like to express my apologies for not being able to respond to some of the questions or comments from the readers. For some silly reason, Blogger is not allowing me to post response to the comments. I hope they sort it out soon.

Like the famous absurdist play by Samuel Beckett, we are all waiting for Godot, the market correction.  It just doesn’t want to listen to anyone. It simply refuses to show up and hiding behind the coat tails of the Fed.  In a liquidity induced rally, what will happen when all of a sudden a whole chunk of liquidity is removed from the market? As per Lee Adler of “The Wall St. Examiner” a total of $87 billion (yes, billion with a B) will be settling next Wednesday and Thursday. Won’t that be interesting! And cycles are calling for an end of this rally as well. We will see what next week brings.

Did SPX break its previous high? Yes and No.
It did a kind of peek-a-boo but there was no conviction. I suppose we will have to wait for another day to get a confirmation in either way.

While the trend is still not broken and SPX made a new high, not everything is well in the market place. Both Dow and DJ-Tran were in red. So was Russell 2000, gold, silver and copper. There are some funny disconnect in the market place and it is acting in the most irrational and suicidal manner. Euro is at a new high while Germany is saying that Greece bailout is not guaranteed. The Telegraph, UK has an interesting article on this:

While Greece has opened the bond swap under PSI, the threshold level is 75%. I am not sure if the Greek FinMin is ignorant or just bluffing but he says that nobody cares about a CDS event.  What happens if 25.1% of the bond holders do not agree and the PSI does not go through? I am sure lots of European Countries will say “Halleluiah”. The following is a chart of Greek PSI from BNP Paribus. Just replace 67% with 76%. 

Germany and other Northern European countries are waiting for such an opportunity when they can blame the greedy hedge funds for kicking out Greece.

So the risks are high in the market place and never for a moment believe in the US growth story or fall in unemployment numbers. The following chart is from which is self explanatory.

As the Trend following table is saying, the trend is up but barely so. It is advisable not to front run unless you are sure of what you are doing. I lost on the gamble which I should not have taken in the 1st place. Trading should not be a gamble and I am guilty of breaching my own discipline.
We know that a trend change is about to take place but it has not happened yet. So trade safe.

Thank you for reading . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions. Have a wonderful weekend folks.

Thursday, February 23, 2012

Trend Following.

With so many pundits calling for a top, I am afraid that the top will be delayed. Market knows how to screw the maximum number of long and short.

From the hourly chart of SPX of today, it looks like back testing / revisit of the previous high. And if tomorrow it fails to take out the previous high of 1367, we can be surer that a top is in.
At least for today, the trend was not broken. The Advance Decline line bounced off the 13 DMA.
Best of technical analysis have given numerous top signals and sell signals so far. Some of the signals have been rare and with over 90% success rate in the past. But external liquidity has trumped over everything and in this Presidential election year, this is going to be the story for the rest of the year. In order not to lose money, I think it is better to follow the trend and not front run. With that in mind, from now onward I will be incorporating a trend table based on the various TA and mathematical formula. As the table starts from today, some of the columns have no data. I have selected the three indices, gold and silver and two favourite companies each from tech. sector and finance sector. It takes into account the closing price for the day.
As with everything, trend following is not perfect. There are whipsaws and quick reversals. But the losses are expected to be less and you can let the profits run. Also, it is to be used in conjunction with the overall market. Therefore, while the indices show long, it is a decision call whether to go long at this point of time when we know that the markets are over bought and can reverse any time. If you are already long, you may want to hang on. But if you are thinking of adding fresh long position, you may want to have a very tight stop loss. I will try to update it every day. Let us see how this works out.

Thank you for reading . Please forward / retweet the post to your friends and join me in Twitter. (@BBFinanceblog). As always, I welcome your comments and suggestions.

Wednesday, February 22, 2012

Are We There Yet ? Part 2

The ever so slow trend change is yet to be confirmed. The Advance Decline line is sitting just above the 13 DMA.
After a long time today all the three indexes were in various shades of red, none severe. 
DeMark set-up gave a Trap Sell confirmation on SPX today. It is not one of the strongest of signals but taken with everything else, it does increase the chances of a correction. In the absence of any other trigger let us look at the FX today.

After the Greek drama, there is nothing much left for EURO to move higher. From a low of 1.2975, it spiked to 1.3291 on the news that Europe has been fixed.

After that it seems to have lost its MOJO and like the cardiogram of a dying patient, it is losing momentum. Sooner rather than later, gravity will pull it down. Its counterpart, USD has surprisingly come back to life.
From FXCM: "The dollar breached key resistance at the confluence of the 100-day moving average, former channel resistance dating back to January 13th, and the 50% Fibonacci extension taken from the August 1st and October 27th troughs at 9850. The index encountered resistance at the 50-day moving average at 9884 before closing just lower at 9880. Note that the daily relative strength index broke above former RSI support dating back to the October 27th low suggesting further dollar advances may be in the cards in the days to come."

AUD is on a sell signal and a comparison of SPX vs AUD shows that SPX has some catching up to do:

But if AUD cannot break down 1.06 level, then we may see it run above 1.0840 and SPX runs higher along with it.

While all these points to further downside in the short term, LTRO-2 will commence by end of the month and more liquidity will be pumped in. So unless we see some big drop in the next four trading days, we can kiss the correction goodbye for another two weeks. 

Thank you for visiting and following me in Twitter.(@BBFinanceblog).

Tuesday, February 21, 2012

Why Felda Global Ventures Is So Important To So Many

The investing community seems to regard Felda Global Ventures as another mega sized listing, and just happily trading the stock when it lists. It is a cash cow for sure, but its also about the equitable treatment of the settlers/stakeholders/peasants/farmers. There are news, theories and conspiracies. Read and try to discern and ask more probing questions, we all should arrive at our own conclusions. At least for now the injunction is  approved, thus halting the steamrolling listing.
Image Detail
From Business Times today:

The highly anticipated drama at Koperasi Permodalan Felda Malaysia Bhd (KPF)’s headquarters here today fizzled out when it cancelled its extraordinary general meeting (EGM).

In a statement yesterday, the 224,000-strong cooperative said the meeting was called off following the Kuantan High Court’s temporary injunction blocking the transfer of shares from the cash-rich cooperative to Felda Global Ventures Holdings Bhd.

Felda Global is on its way to a listing on Bursa Malaysia, expected to be as early as May.

“The cancellation is due to the Kuantan High Court order, through an interim injunction dated February 17, 2012,” KPF secretary Abidin Abd Rahman said in a statement yesterday.

Prime Minister Datuk Seri Najib Razak had been scheduled to attend the event. Last week, eight settlers who are members of
the KPF filed an application at the same court for an injunction to block the share transfer from KPF to Felda Global or for discussing it at the EGM.

It was the third application for an injunction against KPF.
The National Felda Settlers Children’s Association (Anak)
had filed a similar action twice, one to prevent KPF from holding its EGM end of last year, and the other today.

Lawyer Mohd Haris Abdullah, representing the settlers, said the application was made to prevent KPF from disposing of all or part of its equity in Felda Holdings Bhd to Felda Global.

KPF owns 51 per cent of Felda Holdings while the remaining 49 per cent is owned by Felda Global. Among the grounds for the application was that the KPF’s proposal to dispose of its equity
in Felda Holdings and other subsidiaries, worth RM3.13 billion, to Felda Global would not benefit them or KPF shareholders.

The settlers also claimed that the delegates who would attend the February 22 meeting were never given the mandate by KPF members to represent them at the EGM.

National Association of Smallholders Malaysia president Datuk Aliasak Ambia said the EGM was cancelled probably due to, among
others, the non-compliance with the Cooperative Act and the cooperative rules and regulations.

“KPF must do its homework first before carrying out the EGM. But I see this as temporary as the majority of settlers are all for the listing.

“The cancellation is good as it gives members more time to reflect on electing new board members such as a new chairman, secretary or treasurer at the next elections.”

An analyst at a local brokerage said it was unlikely that the listing would be derailed as the government is the ultimate owner of Felda.

"The Felda management must resolve this fast to build up investors' confidence," said the analyst.

Felda chairman Tan Sri Mohd Isa Abdul Samad said the EGM cancellation would not derail the listing, which is on track for as early as May. 

He declined to elaborate as he did not want to contravene the Securities Commission listing rules.

Felda Global is the commercial arm of the government-owned Federal Land Development Authority (Felda). It has operations in 11 countries, partly contributing to Felda's annual revenue of more than RM20 billion.

Read more: Koperasi Permodalan Felda cancels EGM

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From Malaysia Today's site:

That was what The Edge reported on Valentine’s Day, 14 February 2012. You can read the other news reports below, mostly controversial in nature.
Now, what I want you to focus on is this: Ethos & Company. And this is what they say on their website:
Ethos & Company is a boutique strategy-consulting firm based in Kuala Lumpur. We focus on serving private and public-sector clients on business and organisational transformation - from upfront planning to execution and implementation support. We aim to deliver value through building trusting relationships with our clients, working closely with our clients to solve their most critical issues, and creating lasting impact through insightful recommendations. (
And the main man in Ethos is Omar Mustapha Ong, the person who is advising Prime Minister Najib Tun Razak on his corporate moves and has been doing so even back in the days when Najib was still just the Deputy Prime Minister.
Omar Mustapha Ong is a member of Khairy Jamaluddin’s ‘Fourth Floor Boys’, the team that helped Abdullah Ahmad Badawi run the country when he was the Prime Minister. They not only ran the country. They ran it into the ground.
Do you remember The Khairy Chronicles that Malaysia Today published in the days when Abdullah Ahmad Badawi was the Prime Minister? Well, the whole story of ‘The Fourth Floor Boys’ had been revealed in great detail in this series that ran for more than a year.
Basically, what the news reports below have not revealed is how much are the boys within Najib’s inner circle going to make out of this entire exercise which is going to run into tens of billions of Ringgit? Yes, we are no longer talking about millions. We are not even talking about billions any more. We are talking about tens of billions.
That is called inflation.
Felda was the creation of the Second Prime Minister, Tun Abdul Razak Hussein, Najib’s father. It was so successful that the United Nations FAO used to send people from Africa and Latin America to Malaysia to study what Felda did so that they can go back to their own countries and do the same thing. Felda was the example for the world to follow.
Well, it is so successful that it has become a cash cow with a potential exceeding RM20 billion. So now they want to milk this cash cow till its tits run dry. And those boys surrounding Najib are going to dip their straw into the pail to sip the milk. And because there will be so much milk no one is going to notice the absence of a few drops.
Isn’t it nice to have cows around, you know, that animal with four legs and a tail and that goes moooooo? Hmm…I wonder what Moohidin’s boys are going to do about this. Surely they are not going to just keep quiet. This is the perfect opportunity to bring Najib down.
Hey, hold on a minute! Isn’t Omar Mustapha Ong one of Khairy’s boys? And are not Najib’s boys plus Tun Dr Mahathir Mohamad pissed big time because Najib has given this assignment to someone they perceive as Khairy’s boy -- plus appointed him to the Board of Petronas? And aren’t Najib’s boys plus Tun Dr Mahathir Mohamad trying to cut off Omar Mustapha Ong’s head with a rusty sword?
If I were a person with a suspicious mind I would say that Omar Mustapha Ong is setting Najib up for a fall with this Felda thing while making big bucks in the process. But then you know me. I have a wild imagination. I see conspiracies even when there are none.
I am sure this is a legitimate corporate exercise merely meant to help poor land settlers make some retirement money, that is all. And there are no behind-the-scenes goings-on at all. I mean, surely Umno is not going to screw the Felda settlers when the next general election will soon be upon us and Umno needs every vote it can get.
By the way, do you know who Omar Mustapha Ong’s father is? Yes, that’s right, the same man who tried to fix up Anwar Ibrahim on sodomy charges. (Read more here: ).
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This was what Anwar Ibrahim said in June last year:
Malaysian citizens have the right to know all information pertaining to Felda Global Ventures Sdn Bhd and its parent body the Lembaga Pertubuhan Felda, including the losses suffered by the subsidiaries and not only the main Group.
This is vital because we believe that Felda Global Ventures and Lembaga Pertubuhan Felda have borrowed about RM6 billion from the Employees Provident Fund, which of course is money belonging to the Malaysian citizens. Lembaga Pertubuhan Felda had firstly borrowed RM6 billion from EPF, out of which RM3 billion it loaned to Felda Global Ventures.
Why was the borrowing done by Felda without the Bill being tabled in Parliament, where the voice of the Malaysian citizens are being represented? Who authorised the EPF to loan such a big sum to the Felda Group? We also believe that overseas investments undertaken by the Felda Group using the funds borrowed from EPF have all incurred losses.
We believe that all the overseas investments undertaken by Felda Global Ventures using the borrowed funds from EPF and investing under the names of Felda Iffco Sdn Bhd, Twin Rivers Technologies US, TRT-ETGO Canada, Felda Global Ventures Middle East and also Felda Global Ventures Arabia have all suffered accummulated losses from the years 1997 to 2010 amounting to the sum of RM500 million and the stupidity of the management of Felda Global Ventures is just as great if not greater than the mismanagement of Sime Darby.
With Felda Global Ventures suffering such a massive loss in its overseas investments, we believe that the loan from EPF will not be repaid, but the repayment period will be extended and this will be borne by the Malaysian citizens. We believe that the Prime Minister has no knowledge of the terrible losses incurred by Felda Global Ventures in its overseas investments as the losses have been concealed by the massive profits made by Felda Global Ventures in its annual palm oil trading activities.
In reality, the profits from the palm oil trading by Felda Global Ventures have been used to subsidise the overseas losses suffered by Felda. The Prime Minister has proudly praised Felda Global Ventures for its overseas investments, but it is really shameful, as we believe that in actual fact, nearly all the overseas investments made by Felda Global Ventures have incurred losses.
We are made to understand that the investment that was made under the name of Twin Rivers Technologies US, a factory processing food and protein fats in the United States of America is the worst investment ever made in the corporate history of Malaysia. The early investment sum totalling RM175 million was forked out to buy over Twin Rivers Technologies US, which was sold by Procter & Gamble.
We are made to understand that after buying over Twin Rivers Technologies US, the Bank of America has made a demand for the loan amounting to USD100 million owed by Twin Rivers Technologies US. Felda Global Ventures then borrowed RM300 million from CIMB to pay Bank of America.
It also came to our knowledge that Felda Global Ventures have spent around RM600 million for a processing factory in Canada under a subsidiary of Twin Rivers Technologies US which goes by the name of TRT-ETGO Canada which until to-date has never made any profits.
Did Felda Global Ventures give any more loans to TRT-ETGO Canada amounting to the sum of RM100 million? Due to this, we believe that the overall investment of Twin Rivers Technologies US inclusive of its subsidiary is around RM1.175 billion. Although the investment is massive, we believe that Twin Rivers Technologies US has incurred losses every year from year 2007 to year 2010 with the amount close to being RM500 million.
If it is true that the Felda Group has borrowed RM6 billion from the Malaysian citizens via the EPF, we demand that an investigation be made into the activities of the Felda Group similar to what is being done in regards to the investigation on Sime Darby's activities and those in the Felda Group, for instance, its Chief Investment Strategy Officer, Suzana Wati Idayu Othman and its board of directors who are guilty in making these decisions that made Felda Group incurred such massive losses should be held responsible for their negligence in carrying out their duties.
Under the Felda Act, all the investments of Felda Group, in principle requires the approval of the Minister who is responsible for Felda, which since 1997 has been Dato' Seri Najib Tun Razak.
Whether the investment losses have been revealed to Najib or not revealed to Najib by the management of Felda Global Ventures, the responsibility of the losses must be borne by Felda Global Ventures and Najib. An investigation must be ordered into the matter and the results of the investigation revealed to the Malaysian citizens.
It is understood that Ethos Consulting, a firm where one of its partners Omar Mustapha Ong is a former special officer attached to Prime Minister Najib has been appointed as a consultant for Felda Global Ventures. We demand to know what is the consultant fee that is paid to Ethos Consulting by Felda Global Ventures and how is it that a consultant firm that has no expertise in the agriculture industry has been appointed as consultant for Felda Global Ventures?
If it is true that the overseas investments of Felda Global Ventures have incurred losses, then consultant fee payments should not be made to Ethos Consulting as it is obvious that it has failed to give sound advice. The Malaysian citizens demand answers to all the above questions because Felda has borrowed RM6 billion from us.
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FGV listing: Corporate vs. Peasant Settler
(Sakmongkol AK47, 26 December 2011) - Two upcoming events are waited upon with great anticipation. (1) The outcome of an injunction application by a few settlers to stop the FELDA FGV listing and (2) the 5th January EGM of Koperasi Permodalan FELDA.
The outcome of the second event is a foregone conclusion. Chairman Isa will get elected as the KPF chairman despite not having the qualifications to become an office bearer. He is not a settler nor is he a FELDA employee. But the Minister in Charge of FELDA has given his approval, what can people do. The Minister is also the PM. He is lord over whoever lives in this land.
We must not be sidetracked by this sideshow involving the two-bit actor Isa Samad. The more pressing matter concerns the listing exercise.
Why the injunction? Why should four people extend energy and time and assume the risks of being called traitors and all that want to apply an injunction? Greed can’t be the overriding objective? If it is, it’s more profitable for the four people to side with Chairman Isa who can be generous as he is pleased.
The object of the injunction is to stop FGV taking over assets and shares belonging to KPF in FELDA Holdings. These people believed that the 350,000 hectares of land which FELDA took was actually meant for settlers. All the assets owned by KPF in FELDA Holdings will be leased to FGV for the next 99 years.
They will no longer exercise control over the assets as their interests are all converted into shares. FELDA Holdings is 51% owned by settlers and 49% owned by FELDA Global.
They are willing to risk it all, because they believe settlers are being sold out.
This listing is the ultimate short-changing of settlers. The first occurred when FELDA withheld more than 300,000 hectares of land from being given to settlers.  By assuming ownership of the land, FELDA was able to become a planter itself.
So we have the peasant settler and the corporate settler. The corporate settlers have moved on to becoming fabulously rich while the peasant settler (Tun Razak’s regimented landless and jobless) have remained relatively behind. They get to enjoy the trickle down effects defined and determined by FELDA who practically run the business on behalf and for the benefit of settlers.
The corporate settler sells CPO and busies itself in a wide range of downstream manufacturing and marketing activities. They were even able to go into various businesses out of the capital created from ownership of the land, which was supposed to go to the landless and jobless.
The second took place, when FELDA listed its sugar refining business. It made over RM800 million out of that IPO. How much did KPF make by virtue of owning 20% of the business? On paper it made 300 million? 
How did Sabri Ahmad cull this figure? If KPF makes a paper gain of 300 million and the 300 million is 20%, then the whole gain is 1.5 billion. But Sabri says, FELDA made 800 million. Maybe it’s just a figure of speech - the point is, he wanted to say KPF made money albeit on paper. Does that raise the share value of KPF in FELDA Holdings now that it made 300 million paper gain?
If the injunction is successful, the proposed listing of FELDA Global will be delayed. The listing will see the merger of FELDA Holdings with FELDA Global. The smaller partner in terms of equity, FELDA Global is buying out KPF who has 51%.
How is the nature of the transaction? Does it involve and offer by FGV to buy out KPF at a certain price or will it involve just a share swap? You priced it with premium fella - that’s why KPF is getting 61%.
But the share price of the new listed entity is also at a premium. You can easily inflate the price of the would be listed entity, paint glossy pictures, introduce exotic phrase such as unlocking value and so forth- you will probably induce KPF representatives to believe they are getting a good deal. KPF will get 61%. That’s good you say. Isa Samad goes around berating ungrateful settlers - apa lagi awak semua mahu - dari 51% jadi 61%?
But we ask in return - 61% of how much? If 30% of the shares are sold to the public, the settlers end up with 61% of 70% of the business. That’s not all. 30% is held by the public - the interests of settlers are converted into shares, which are tradable in the market place. As with the track record of bumiputera held equities, you can bet that chances are, the shares will be sold.
We have to go back to the primary source of dissatisfaction. The peasant settler has remained more or less the same. The corporate settler has made it big. The peasant settlers get palliatives - bonuses here and there. RM1,200 as yearly bonus translates into RM100 per month. 400 per year translate into 30 Ringgit per month - not even enough to buy a T-bone steak at Meatworks.
The peasant settler gets MRSM colleges, indoor stadiums, futsal stadiums and other social amenities but the value of these, pale in comparison with the amenities and wealth enhancing resources obtained by the corporate settler. The corporate settler has moved on into oleo chemicals, downstream activities, hotels, sugar business, etc., why can’t the peasant settler be organised that same way?
The fundamental reason why this listing is vehemently opposed is that people believed it’s a sell-out and it’s the culmination of unconscionable acts by FELDA.
Felda Global Ventures gets new status
(The Star, 26 January 2012) - Felda Global Ventures Holdings Sdn Bhd has obtained approval from the Companies Commission of Malaysia to change its status from a private limited company to a public limited company.
Accordingly, it will now be known as Felda Global Ventures Holdings Bhd.
The company is currently pursuing a listing on Bursa Malaysia Securities Bhd. The status change, approved on Jan 18, is part of the preliminary process of preparing for its initial public offering (IPO).
In a statement, Felda Global Ventures group president Datuk Sabri Ahmad said the company’s panel of listing advisers were in the final stages of working out the details.
“Everything is going according to schedule and we should be ready to make a formal submission for listing to the Securities Commission,” he added.
Felda Global Ventures has appointed several advisors for its listing by June. The listing was announced by the Prime Minister when tabling Budget 2012 in parliament last October.
Felda overhaul could harden opposition to FGVH listing
(The Malaysian Insider, 20 February 2012) - Stiff resistance to the proposed Felda Global Ventures Holdings (FGVH) listing will likely grow once plans for a corporate overhaul of Felda are announced, Singapore’s Straits Times reported today.
The daily, quoting sources familiar with the deal, said “potentially contentious” issues include settlers handing over land to FGVH and surrendering control of the Koperasi Permodalan Felda (KPF) settlers cooperative to government-appointed representatives in exchange for shares.
“The main points of the deal appear palatable, but the conditions on the settlers to hand over their land through long-term lease agreement and surrender corporate control of their stake to the government will need to be resolved to get this deal to fly,” a senior Felda executive told the ST.
The as yet unfinalised proposal will also see the financially strong KPF transfer its assets to FGVH based on a valuation that will likely be hotly contested.
Prime Minister Datuk Seri Najib Razak is set to meet senior representatives from Felda and KPF this week to iron out any sticky issues that could derail the IPO.
The ST said Najib’s handling of the listing will have serious implications for Barisan Nasional (BN) and Umno in the coming election, noting that KPF was collectively owned by some 113,000 Malay settlers who represented a key demographic for the lynchpin party.
“Land is a sensitive matter for settlers, particularly from a family inheritance perspective. So any plan that doesn’t deal with this properly is surely to be exploited (by the opposition),” the chief executive of a financial institution involved in the listing plan told the paper.
Putrajaya has said it intends to list FGVH in April, instead of the middle of the year as announced earlier during the prime minister’s Budget 2012 speech.
But critics contend that the proposed listing, which will see loss-making FGVH assume control of KPF, will short-change smallholders and saddle Felda with up to RM1.5 billion in yearly deficit.
FGVH units such as Felda Iffco Sdn Bhd, Felda Global Technologies, Felda Global Ventures Middle East and Felda Global Ventures Arabia reportedly chalked up accumulated losses of around RM500 million up to last year.
Opposition to the government’s plan to list FGVH has been led by the National Felda Settlers’ Children’s Association (Anak), which won a temporary court order on Friday blocking the transfer of shares from KPF to FGVH.