Sunday, September 30, 2012

Dark Clouds Over Euro.

Beginning 2012 Euro was already sliding down from 1.4750 of 2011 and had reached 1.27 by Jan 2012. Greece was at the front and centre of all news and it was looking as if Euro is going to break up any-time  And I was writing that we should keep an eye on the commercial position in the COT report. Commercials were increasing their long position throughout the year and even when Euro reached 1.20 in June/August of 2012, the long position of the commercials were at record high. In June 2012, the Euro long position in COT was at record level of 329K long vs. 70K short. In other word, when the Euro was reaching its low for the year, commercials were holding almost 5 long for 1 short. 

Now when Euro has touched 1.32, we see that the commercials are reducing their long drastically. From the last week COT report, there are only 120K long vs. 60K short. Looking at other way, while there has not been major change in the short position, the long position has reduced by 64% over this period and most of these reductions have come in the last two weeks.

Regular readers know I had written in the past that demise of Euro is premature. But now it seems that the cows are coming home.  Spain is going to ask for almost $ 300 billion by October end and after that Italy.  There is not enough money in Europe to bail out 11 of the 17 members. And everyone expects Germany to pay up. I don’t think it is going to happen and my prediction of two years back that we might have two tired Euro, one for Northern Europe and one for Southern Euro, may well come true in 2013/2014.

The monthly chart of Euro is also very interesting;

It has made three attempts at 1.20 levels since 2008-9 and is now hanging just above there. If it breaks that level, there is only air below till 0.90 where it started its life.

Tom McClellan of McClellan Publication shows some interesting chart about Euro Dollar COT Position and according to him, the stocks somehow follows it with a 12 months lag. That indicator is reaching the top around November 2012 and dives 30000 ft down in 2013/14.

Seeing how the commercials operate on a very long term time scale, I do not think there is imminent danger and we will most likely get the final pop by November / December of 2012 but I would expect to take position on the defensive side thereafter.  

On a shorter term time scale, coming week, it is very likely that we will see a test of SPX 1420. If we see SPX testing 1410-20 level and bouncing from there, I would most likely start taking long position. While going long, I would select sectors like Bio-technology (XBI), pharmaceuticals (SGEN), precious metals (CDE, AGQ, DGP) and TBT. Deutsche Bank and JPM both have buy recommendation on CDE and it has a beta of 1.5. However, PM sector is due for a pull back and most likely we will get the pull back this week.  And since we are not day traders and want to take the correct position while avoid whipsaws, we better be patient before taking any position.

I am extremely thankful for your overwhelming response to my request. Guys please disable ADBLOCK . I am now spending more time on this blog and I need to survive. In future I plan to bring you reports on commodities like Corn, Wheat, Nat.Gas and other futures.  It will help me to do more research on stocks, commodities and sector rotation. Thank you for your understanding and support.

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Saturday, September 29, 2012

burps&giggles ... the loveliest cafe in the country

Was back in Ipoh for a memorable weekend for my alma mater's Centennial Reunion Dinner, what a blast. Julie Song from Indulgence "instructed" me to visit her new place called "burps&giggles" (its exactly behind the famous Kong Heng, house of mirrors, in old town).

I will just let the pictures tell you the story, its easily the loveliest, most rustic, romantic cafe  I have ever come across. So, for your next trip, besides Ipoh taugeh chicken, Hakka mee, beef noodle, dry chicken curry nasi kandar @ Yong Suan, Funny Mountain taufoofar ... you should add burps&giggles to your Must Go To list.

the entrance

nostalgic knick knacks all over the place 

my lunch, bam-bam burger with chunky fries (with melted cheese and truffle oil) 

go through the backdoor and you have a quirky yet sublime place called the "lazy lane", great atmosphere to unwind and enjoy an environment just like the 40s and 50s "concubine lane"

every corner, every angle is a photographer's dream .....

Food include a long list of premium burgers, pastries and sweets plus great coffee.

clever usage of lights and lamps to enhance the very cosy feeling

the foyer with high ceiling as they have removed part of the first floor

(behind Kong Heng)
93 & 95 jalan sultan yussuf

Seeking "ivansml"

I'm finishing off my forthcoming book Forecast: What Extreme Weather Can Teach Us About Economics and have today been going over page proofs (extreme tedium...fixing typos etc). An important matter: I've referred in the book to some work on learning in macroeconomics (Evans and someone else) that was suggested to me by "ivansml", a graduate student at some European institution. Ivan: can you email me ( I would like to point out in a footnote that you directed me to this work. I can do this either using "ivansml" and referring to this site, or by using your real name (which I would rather do). THANKS!

Weekend Report.

We all can see the writing on the wall but can we read it? The Chicago PMI, another cooked up data by the Govt. went negative, despite all efforts by the powers that be, for the 1st time since 2009. The following chart is from Reuters:

Now we know the reason for the “Hail Mary pass”. Bernanke knows something which we don’t. But the virus has developed resistance for the medicine and now the medicine is causing more sickness. Borrowed money, money printed out of thin air cannot create prosperity. I wish you would see the following presentation in full:

So do we go short here?

Heck no! Not till after election. Let me quote from Stock Trader’s Almanac:

Psychological: Intoxicated. Despite weak fundamental data, Europe’s debt crisis, escalating geopolitical tensions, the pending fiscal cliff, etc. the market continues to drift higher with only an occasional pause. Central banks, the world-round, have either pledged to or have already begun to refill the punch bowl. At some point it time it may run dry again, but for now the market seems to care little about anything else.

Fundamental: Weak. Global growth is slowing and it was confirmed by warnings from Caterpillar and FedEx. Many Q3 corporate earnings forecasts are actually expecting year-over-year declines. Unemployment is still above 8% and the recent decline in the headline rate was actually due to the labor force shrinking, not because of new hirings. Today’s sharply lower than expected final Q2 GDP showing just 1.3% annual growth and the abysmal durable goods orders report only further underscores why the Fed took action.

Technical: Consolidating. After breaking out to new recovery highs, the market yielded to typical end-of-September weakness while digesting the Fed’s latest action. Provided the geopolitical environment and economic data do not deteriorate in any meaningful manner in coming weeks, the market is likely to resume its drift higher, at least until after the election when Congress returns to session. 

My short term cycles are down for some more time and I think we will see lots of chop. I was hoping that PM sector will sell off and offer a good entry point but so far it has not obliged. SPX 50DMA is around 1410 and unless it is broken convincingly, there is no reason to go short given that the last push up is about due. ( Does not apply to day traders). I see that the sentiments have turned bearish in the last two weeks and everyone is expecting the top or some sell off.

When everyone agrees it is time to be contrarian. The market inflicts maximum pain to maximum number of people and I think it is laying a bear trap. In the coming week, we might see little more selling just to keep the bears excited and entice them with more shorts and then zoom up. Where and how far it will go up, I do not have any idea. However, it can test the all time high of 1526 before the fat lady sing again.

I have a favour to ask you guys. And I am taking the cue from Tim Knights of SOH. Guys, if you are not donating, please disable ADBLOCK . I spend lots of time on this blog and I need to survive.  Thank you for understanding.

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Thursday, September 27, 2012

On Script So Far.

Few days back I wrote that I expect lots of head fake and whipsaws. Yesterday I said that it is not yet real deal. And here we are today; another 1% gain day when GDP estimate was below 2% (nearing recession) and Europe is burning. All because China is expected to pump and save the world? One reader complained that there is no action with me but I would like to point out that it unless we have a definite trend it makes sense to wait in the sideline and not chase the bus in either direction, unless of course you are a day trader. Money not lost in trading is money earned.

So far SPX has tested 1470+ and is now moving between 1430 to 1460. Unless it clears 1460 with authority or breaks down below its 50 DMA which is around 1410 now, we are in the chop zone and taking a position in the chop zone is injurious to health.

The signals are all conflicting, both technically as well as fundamentally.  The world economy is possibly on its death bed and the doctors (central bankers) are keeping it alive with huge doses of steroid (read liquidity). It is not going to make it better, but will definitely keep it alive for a while longer while prolonging the agony.  
Looking at a very long term chart (monthly), I get a feeling that we still have another 100 point or so to run.

We got the bounce we were looking for and from here, either we test /ES 1455-60 again tomorrow and sell off or we break it and start the final phase of the journey. Seasonality and cycles say that we will take a breather; I think we will see a high in the morning and sell off in the afternoon. But that is just a guess and don’t catch my neck if it turns out some other way. It does not really matter because all I am interested to see is a failed test of the high before deciding the next course of action.

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Sometimes We Take People For Granted

My Blackberry Is Not Working!

Many of you would have seen this already. Trust the English to put a skit up thats relevant and makes fun of the evolving English language. Smart and sassy, 15m viewers cannot be wrong. Please note that Orange is a telco service provider in the UK.


I just stumbled on this post from a few months back by Noah Smith. Like all his stuff it is a fun and informative read. Essentially, he looks back to the famous experimental paper of Vernon Smith and colleagues which found clear evidence for strong and sustained bubbles in an artificial market with students trading a fictitious asset with real value. The novelty of the experiment was that this asset had a clear and perfectly well-known fundamental value (unlike real financial instruments), and so it was easy to see that the market value at first soared way above the fundamental value, and then crashed down again.

Noah's post looks at why this result, for financial economists, didn't nail the proof that asset bubbles can exist and ought to be expected in real markets. Most of the arguments seem to be centered on the idea that the people acting in real markets are far more sophisticated than those students, and so would never pay more than the true fundamental value for anything. Suffice it to say this argument doesn't hold together at all well in the face of empirical evidence on real trading behavior, some of which Noah reviews.

One thing caught my eye, however, and is worth a short mention. As Noah writes...
If bubbles represent the best available estimate of fundamental values, then they aren't something we should try to stop. But many other people think that bubbles are something more sinister - large-scale departures of prices from the best available estimate of fundamentals. If bubbles really represent market inefficiencies on a vast scale, then there's a chance we could prevent or halt them, either through better design of financial markets, or by direct government intervention.
 I am certainly someone of the latter camp -- convinced that markets often depart from fundamentals (even such values even exist) for long periods of time. But I think the third sentence on what we might do about bubbles needs to be refined a little from a logical point of view.

Bubbles aren't necessarily totally bad things. Perhaps we may find that they are a useful and necessary part of the collective learning process. The foraging of a flock of birds is highly irregular; it moves this way and that, following the lead of different birds at different times, sometimes moving on large excursions in a single direction. A market might be somewhat similar as a collective social process for searching and exploring. We shouldn't expect that what it has found at any one moment is optimal; it may often make huge mistakes. But the process of exploration may be useful anyway.

In that case, we may find that we don't want to stamp out bubbles, unless they get really big. Or if the bubble is one driven by a systematic increase of leverage by investors which sets the stage for a certain explosive episode of de-leveraging, with subsequent long term consequences.

What we do want to stamp out, however, is the dangerous idea (still supported by many economists) that bubbles don't exist. That's the one idea that can make our markets really prone to disasters.

Wednesday, September 26, 2012

No Cigar Yet.

I am amazed to see how quickly the sentiment changes from euphoria to doomsday. Was it last week, there were talks of SPX 1500 or higher? And now the coming doom! Part of the reason being the Fed has taken out the surprise factor. For last three months the Pavlovian dogs have been drooling about the coming QE and now that it is here, they are caught in the headlight.  And so far we just had about 2% correction.

Few days back I wrote that we should expect a correction of about 5% or so and that would be a good buying opportunity. I cannot say for sure how deep the correction will be but so far it appears that it is not a real deal. So long SPX does not break down below 50 DMA, there is no reason to take it seriously.

I think we will test SPX 1410 on Friday and if we bounce from there, which would be an opportunity to long. Again, timing is everything and if that bounce fails to clear the high of September 14, then and only then we can say that we have a good shorting opportunity.  Of course this is a text book situation and the real thing may unfold differently, but it’s all about probability. Nobody except GS and JPM can beat the market everyday of the quarter.

Nothing has been fixed, Europe is as broken today as it was day before, China is still a fantasy land of infinite growth, Japan with its 240% debt to GDP ratio is now ready to fight China and drag USA with it, Israel and Iran can’t wait to bomb each other. But hey, what does it matter, USA can still print money and prosper.

We know how it is going to end but if your central bank is giving you free money, it would be very un-patriotic to refuse that offer. After all, it is the land of the free and brave. I am not so brave but I still want the free money. So I am waiting for a pull back of gold and silver to their 50 DMA and take an entry which should be good for at least the 2ndquarter of 2013. The fly in the ointment in the theory is a possible war somewhere in the world which will cause huge recession worldwide. But that is something we do not have  much control and if I can read the evil plan of the Banksters, we are OK till May of 2013.

Tomorrow we may see a bounce but the selling is not over yet. We need to test the 50 DMA in SPX which is around 1410 and see if that holds. I am ready to wait till Friday to decide if there is a trade worth taking.

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A Gentle Soul Departs

Many people pass on everyday, some famous some ordinary folks ... everyone will leave their own legacy and their influence to people around them. No one is more important or less so than the next one. Andy Williams was way popular way before I was even born. I think his passing deserves a mention cause I have rarely read a bad article about him, and he performed very well for a very long time. A gifted crooner, at a time when crooners were highly respected. A gentle soul whose voice brought us memories of wonderful melodies and lyrics for decades past and decades to come.

Andy Williams, whose soothing baritone and relaxed performing style made him one of America's top pop vocalists and a popular TV variety-show host in the 1960s when he recorded hits such as "Moon River" and "Days of Wine and Roses," has died. He was 84.
Williams, who announced in late 2011 that he had been diagnosed with bladder cancer, died Tuesday at his home in Branson, Mo., his family announced.

Tuesday, September 25, 2012

Have We Seen The Top?

However much I want to believe that it is a top and the road is down, I am not jumping the gun yet. Yes it is topping but even with this 1% drop (wow!) (how come Ben?) we do not have the sell signal yet. Remember that chart of Presidential Election Cycle from Bespoke? Here it is for your ready reference:

So it is just about time for a correction.  Whether it will be 3% -5% correction or 10% + correction, we will have to wait and see. As of now it is a warning shot. The line in the sand /ES 1445 has been broken. The indexes opened high, reached higher and closed in red, which means that more correction ahead. It need not be tomorrow though because SPX has 4 red days in a row and a bounce is due.

Yesterday I wrote that we will see a test of the high today and a top is near. We did see SPX reach 1462.80 before selling off. So it is on script.

In the morning I tweeted that all the asset classes are selling in sync. But when the indexes dropped hard in the last two hours, oil, gold and silver did not budge much. May be gold and silver will sell off in the Asian session , so I am willing to wait a while longer to decide if the sell-off is real or it’s a head fake. In all probabilities, we will see a bounce in the next few days.

I want to share a chart from Lance Roberts:

Lance thinks that any correction here is a buying opportunity and I somewhat agree with him, at least till election. I would love the indexes do a dead cat bounce, re-test the high in the next few days or so and roll over 100 SPX points, but that’s just wish full thinking.

Euro is hanging around 1.29 levels and it has already made three attempts to break below and have bounced from there. Will 3rdtime be the charm?  If it breaks from here the next level is 1.2750 and it will take equities along with it.

The Euro position in the latest COT report shows that commercials are still net long Euro by almost 3 times.

However, the long for the last week has come down to 140 k from 230 k. which is almost 40% drop in the long position in one week and that indicates that the commercials may be winding down their long position. We will keep an eye on this one. If you remember, in the past I had repeatedly mentioned that commercials are long Euro and all talks of Euro disintegration is just talk, at least for now.

Bonds gave a buy signal and their bounce seems to be more serious kind of bounce.  From $132 in end of July, TLT came down to $118 on 14th Sept. It has now bounced back to $ 123. I think it will re test the high one more time before the boom is over.

Thanks for sharing my thoughts. Join me in twitter for the real time market action and to avoid head fakes (@BBFinanceblog). By the way, the blog now has a “ Donate” button and your contributions will be my stimulus package.

Why A Documentary Is Better Than A Movie

Have you seen this? If you haven't been to an IMAX movie you haven't seen this. Obviously this documentary uses a lot of simulation footages but the realism is palpable. You do feel you could have been in the spaceship ... but to be cooped up for 7 months to travel to Mars is no joke, you probably need some sedation drugs to hibernate or else you will go crazy in an enclosed space for a prolonged period.

Still, we have figured how to get to Mars but how to get back? Its a huge lot further than the moon. But one can already see and feel the magnificent achievement from the joyous faces of the people at NASA. Its a wonderful feat by fellow planetarians to just get that far. Now, when can AirAsia get us to Mars for RM1.99???

Actually, travelling to Mars as a commuter is not that far away. Have you heard of the sharpest guy in town called Elon Musk, co-founder of PayPal, sold it and now is running Tesla the magnificent electric car, he has a company SpaceX which aims to transport people to Mars for fun. Already he has over $3b in pre flight bookings up to 2017. Not space dreams anymore.

Spirit, MER-A (Mars Exploration Rover -- A), is a robotic rover on Mars, active from 2004 to 2010. It was one of two rovers of NASA's ongoing Mars Exploration Rover Mission. It landed successfully on Mars at 04:35 Ground UTC on January 4, 2004, three weeks before its twin, Opportunity (MER-B), landed on the other side of the planet. Its name was chosen through a NASA-sponsored student essay competition. The rover became stuck in late 2009, and its last communication with Earth was sent on March 22, 2010.

The rover completed its planned 90-sol mission. Aided by cleaning events that resulted in higher power from its solar panels, Spirit went on to function effectively over twenty times longer than NASA planners expected following mission completion. Spirit also logged 7.73 km (4.8 mi) of driving instead of the planned 600 m (0.4 mi), allowing more extensive geological analysis of Martian rocks and planetary surface features. Initial scientific results from the first phase of the mission (the 90-sol prime mission) were published in a special issue of the journal Science.

On May 1, 2009 (5 years, 3 months, 27 Earth days after landing; 21.6 times the planned mission duration), Spirit became stuck in soft soil. This was not the first of the mission's "embedding events" and for the following eight months NASA carefully analyzed the situation, running Earth-based theoretical and practical simulations, and finally programming the rover to make extrication drives in an attempt to free itself. These efforts continued until January 26, 2010 when NASA officials announced that the rover was likely irrecoverably obstructed by its location in soft soil, though it continued to perform scientific research from its current location.

The rover continued in a stationary science platform role until communication with Spirit stopped on sol 2210 (March 22, 2010). JPL continued to attempt to regain contact until May 24, 2011, when NASA announced that efforts to communicate with the unresponsive rover had ended. A formal farewell was planned at NASA headquarters after the Memorial Day holiday and was televised on NASA TV.

The clip is taken from the IMAX movie "Roving Mars" from 2006 . This is an edited short version. Thanks for watching and please take your time to rate.

Cooking With Dali - Pig Trotters Vinegar Ginger

Yes, it seems like I am cooking all dishes for pregnant women, but somehow I love these dishes. I have tried and tested and refined this so many times till I got it right. Somehow, many seems to be fearful to try to cook this, I hope this will demystify the dish.

Ingredients are relatively few:
Old ginger or Muntong ginger (about the size of a hand)
Good sesame oil
One pig trotter (get the front legs not the hind legs as the latter is way too fatty)
One packet of black beans
One small bottle of sweetened vinegar
One large bottle of black vinegar
Gula melaka
4 eggs

Get your pig trotters from Sanbanto if you can, they have very good quality pork there. Start with 3 pots. One to boil the trotters (a must) to rid of the impurities or else you will get a stinky smell. Dry roast the black beans for 10 minutes till all are crackling and split. Boil to make hard boil eggs.

Once you see sufficient impurities on the trotters pot (after 10 minutes or so), remove and wash clean, set aside. Now boil the black beans in water for 15 minutes on high, a must to soften the beans sufficiently - the water will be so dark. Drain and set aside.

The coarsely sliced ginger, dump into a wok with 6 table spoons of sesame oil. Fry for 5 minutes. 

Then add the drained trotters, aim is to brown them with sesame oil and ginger coating and to precook them as later you do not need to stew them for too long with vinegar (as your vinegar will evaporate if you do so for too long a period). The browning process should take another 5 minutes.

 Add the bottle of sweetened vinegar and one bottle of black vinegar, the other bottle of black vinegar you need to keep in case to fine tune the final result, and it should look something like below. The secret here is do not use caster sugar as that would make it sickly sweet (even weakens your teeth). Throw in the black beans as well. Chop one roll of gula melaka and add to the stew. Gula melaka has a more rounded sweetness and better caramelisation without being too sickly sweet. Go on low fire for simmering for 45 minutes. Stir with soft hands every two minutes to make sure all pieces gets proper cooking.
 Add the egg after 10 minutes of simmering when you don't have to stir so much as the eggs might break easily. After 30 minutes of simmering, taste to see if you need more gula melaka or the black vinegar to balance the taste.

End result. You can let it cool down and separate into 5 plastic containers, so it can last a few meals or you can give some away.

Monday, September 24, 2012

Wait and Watch.

As I said yesterday, I was not convinced that we had a trend change and we are more likely to see a test of the high. So when the market opened lower, I sent out tweets that /ES 1445 is the line in the sand. The line held and the market erased most of the morning loss. Just to repeat myself, today was officially the  1stday of QE3.

It has been a long time; we have not checked the sentiment indicator chart below:

In the battle between fear and greed, greed definitely has an upper hand right now.  Yesterday I asked, can the equities prices fall when there is a QE in play? The answer is: depends. In short term, the risk asset prices rise as we have seen in QE 1 and QE 2. But when there is QE infinity like they have in Japan, the asset prices go down over a longer time horizon. It has happened in Japan where Nikkei is down to 9000 from 38000 in 20 odd years.

I quote the following from Peter Tchir:

The Fed first cut the target rate from 5.25% to 4.75% on September 18, 2007.  Remember when 50 bps was a big cut and not twice the target rate?  The S&P 500 was 1,477 the day before the cut.  It popped 43 points that day to close at 1,520.  It got as high as 1,565 in October and has never been above there since.  So in a 5 year period where the Fed has been more aggressive than any other central bank known to mankind, the Fed is still losing.  Before going further, think about what the Fed has done since that first rate cut and where stocks are now.
I am not looking to go toe to toe with the Fed for 10 rounds of a bare knuckle brawl, but “don’t fight the fed” as an effective investment strategy has a lot of flaws.
Also contrary to the universally accepted wisdom that QE ensures good stock performance, we show QE isn't a cure all for stocks and then many other things, including powerful earnings growth (which we neglected to mention) helped power stocks.  On an even more basic level, the initial QE1, didn’t turn stocks around immediately, and stocks in fact sold off for months and hit record lows after QE was announced.

Therefore, while liquidity will trump in short term, fundamentals will catch up in long term and one should play accordingly.

What is the short term play now? The market is in consolidation mode and the mantra is BTFD. I am waiting for the market to break this consolidation range in either way. A correction is due but with all the free money around, it is hard to come by. So the only sensible thing to do is to wait. The cycles are showing a top in a day or two, therefore I expect a test of high by tomorrow or soon thereafter.  If it makes a new high, all bets are off. If it fails to make a new high, the minor expected correction may follow through. As of now, there is no sell signal yet.  October is going to show which candidate will win the race.

Precious metal sector is showing some signs of weakness. Silver appears to be weaker than gold.
In conclusion, its wait and watch time and cash is king.

Thanks for sharing my thoughts. Hope I have been able to help in whatever small way. Join me in Twitter (@bbfinanceblog) and share it with your friends. By the way, the blog now has a “ Donate” button and your contribution to keep this blog running will be highly appreciated. 

So Proud Of You Shila!!!

Shila Amzah, who knew .... against top singers from other Asian countries, and winning comfortably at each round. She won over the 9 esteemed judges made up of well known producers and major top singers. OMG, her rendition of the two famous Mandarin songs, Forever Love and Zheng Fu, were delivered in immaculate intonation and the emphasis on the words were appropriate and meaningful.

To win over the mostly China audience and judges must say a lot as there were other Chinese artistes as well. Loved the costumes as well. Well done! ND Lala must be so proud!

Sunday, September 23, 2012

Bearish Reversal?

Friday we had a bearish reversal day when the market opened higher closed lower / red.  In a normal world I would have considered it as the signal for a top and trend reversal. But in this day and age of new normal, I am asking myself, was it a failed tests of the high and I am not convinced that it was so.  The price actions of other risk asset classes were not in sync with a sell off yet. Therefore, my take is, even if we see little weakness in the next day or day, we are unlikely to close below 1450 in SPX. If however it does close below 1450, that will be the 1stwarning shot. On the other hand does it mean we are going higher to the moon? Not yet.  I expect there will be lots of head fake and whipsaws in the next few days.  Let us not forget that QE3 or QEInfinity officially starts from Monday.

Question is, can the market go down when QE is on? The following chart is from Dshort.

Which shows that equities have gone up during the earlier QEs.  This was precisely the reason the US stock market is sitting at multi year high when everything ran up on the anticipation of QE.  But it does not tell the whole story. The law of diminishing return in coming in play and the balloon seems rather fully inflated. The next is an asset bubble burst of epic proportion. Also if you carefully analyze the chart, you will see that immediately after every QE the market has actually gone down and then up.

I think we are coming close to a short term top of some kind but it is not the ultimate top. For that we will have to wait till after election when the sh*t fits the fan. It now seems that whole world want ”O” to be re-elected and EU leaders have expressed their dislike for the Republican candidate and the party in many shapes and forms. Europeans and even the Russians think that they are better off with the known devil in an uncertain world and they will not rock the boat too much till November. Even the two mad men of Middle East will wait till the election in USA to start the war game, if at all. In some sense, discussing politics is a waste of time because the politicians have already sold themselves many times over to the highest bidders and irrespective of whom so ever wins, we will be screwed. Guaranteed!

Bottom line, a 5-7% correction now will be a good buying opportunity. In any event, precious metals will be a safe play long run because everyone is printing and inflation will pick up sooner rather than later. You may ask if inflation is a concern how come bond yields are going down. One of the reasons is that the Fed is monetizing the debt and now holds almost 30% of all outstanding treasuries. But soon the Fed is going to lose control and interest rates will rise poking a giant hole in the bond bubble. It’s just bit early for the balloon to burst but burst it will. The Fed is actively seeking inflation and it will get it. The problem with inflation is, once the genie is out, it is difficult to put it back in the bottle. It is a question of when not if.

Elsewhere in the world, Spain is fighting with its autonomous regions who are asking for fiscal independence.  It is like playing a game of bluff within bluff. Catalonia is bluffing Spain and Spain is bluffing EU. Who will blink first? And here is an article about another region of Spain which is without medicine as well as empty construction projects.
And we thought only China has ghost towns. It seems the story of boom and bust is same everywhere.

All in all, it is going to be an interesting week or two going forward. So remember to fasten your seat belt and trade safe.

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Thursday, September 20, 2012


Well, the market action was kind of a teaser. It raised hopes for the bears with SPX down 10 points by 10AM. But I sent out four tweets suggesting caution and to avoid taking short bets. Thankfully, it worked out as planned and the indexes were almost unchanged. We should be testing the highs of last Friday and that may well happen tomorrow or next Monday.

Therefore, nothing much to blah blah today. I think we are approaching a topping zone but given all the liquidity around, it is risky to be short without adequate confirmation. Next week has a possibility to be interesting.

Tomorrow is triple witching and regular folks should stay home, away from computers, least we do something stupid and take a trade.

Hope my nagging is able to keep you from harm's way. That's all I have for tonight. Thanks for reading World of Finance. Join me in twitter (@BBFinanceblog) and share it with your friends.

Wednesday, September 19, 2012

Got My La Escepcion Finally!

Finally got my hands on a box of La Escepcion, Selected Finos Panatela. Heard so much about it for the past few months and wrangling here and there for just one box. 

(not my fingers if you were wondering)

In 2011, Habanos brought back an old Cuban brand La Escepción. as an Regional Edition for Italy. The size is a 6 1/2 x 38 Panatela called Selectos Finos, a size that had never been offered by La Escepción prior. La Escepción is one of the oldest Cuban cigar brands with its introduction by owner José Gener sometime in the late 1850s. It was always thought of as a sister brand to Hoyo de Monterrey, mostly because Hoyo was also started and owned by José Gener, albeit after the La Escepción brand.

La Escepcion    

La Escepcion Cigars
Year of foundation: 1850's decade
Tobacco Country: Cuba
Tobacco Procedence: Vuelta Abajo
Factory: La Corona

First of all, we may remark a very funny anecdote. The name of these cigars is La Escepcion, but had to be La Excepcion (meaning exception in English). So this misspelling became one of the most famous in the history of Havana cigars. This brand has always been linked to Hoyo de Monterrey and after being sold several times, it finally remains in the hands of the firm F. Palacio y Cia. Production was not at all affected by the Revolution and eight models were listed in Cubatabaco official catalogue. It was in the 80's decade when a drop in production can be appreciated, perhaps because the most remarkable characteristic of these cigars, their extreme strength, is no longer liked by the customers. The brand was discontinued in 1989.

La Escepción Selectos Finos  ER Italy 2011 Box 4

Review: I tend not to review cigars as that may seems like encouraging people to smoke, but this is worthy of a review. The red-brown wrapper with hints of oil is already to die for. Its a great hint of a prelude to a good smoke. Now is this as good as everyone says it was.

One sentence: its the best cigar I have smoked for the past 10 years, and thats a lot of cigars to compare to. Hints of hay to start and then the explosion of espresso and dark chocolate flavours. Starts off as a medium strength and ended a bit stronger. Layers and layers of flavour and depth but a cool smoke at the same time. Still young and would smoke brilliantly in another 2 years in the humidor. What a wonderful cigar!
As there were only 2000 boxes made, I think I should try and stock up. The price should double in 3 years time, and its not even cheap now. If you can get it overseas (Italy, Geneva), you should be paying $630 per box. If it ever gets to Asia, be prepared for RM2,800-RM3,200 per box.

Qfinity and Insanity.

Well, we did see a green close, as I said yesterday and we still have two more days to see the test of the high. In this day and age of Qfinity anything is possible and team O&B may not like to see the market red for too many days. It is now illegal to have red close for more than two days in a row.  However if we do not see the test of the high by Friday and we see continued weakness, I would advise caution if you are planning to go short. The cycles are up till around 25th-27thSeptember. After all, the test of high is only about 10-15 points away and unless we have seen a failed test of the high, it is too risky to short.

That Bernanke put is reflected in the following chart.
Investors Intelligence Sentiment Chart

The bullish sentiment is now reaching the danger zone but not everything is extreme yet.

Today both bonds and equities were up. Gold and silver spent the day hurrying up and going nowhere. But Crude gave sell signal. However, given the geo political madness in Middle East, I do not want to take a short trade on Oil. Thanks but no thanks.

I would like to share few videos from Bloomberg:
That pretty much explains QFinity.
Forbes also talks about gold:

If you remember, I had written before that I expect gold to reach around $2500 in near future and I am waiting to get long gold again, now that every central bank has started printing money and inflation will come before they realize it. I am waiting for a good entry in PM.

Things may seem quite but it is churning inside and it is highly unlikely that a triple witching week will be quite. It is time for portfolio adjustments. So better be careful.

Thanks for reading World of Finance. Join me in twitter (@BBFinanceblog) and share it with your friends.

The Price Determines The Attractiveness

There was a great article in The Star a few days back which had a couple of fund managers being negative on Astro IPO. When I read further I was shocked at the valuation. At an indicative price of RM3.60 (this is the price that has been set for bumiputra investors) and based on its earnings of RM629.6mil for its financial year ended Jan 31, 2012 (FY12), this translates to a price-earnings ratio of 38 times. 

I have written that I like Astro IPO as a dividend play, BUT at RM3.60, the price-earnings ratio is more than 30 times and the dividend yield is only 2%. Now this pisses me off. I have been defending AK's strategy to delist and relist as they were still within the rules operating at the time. You come back with a dividend play scheme and if its really RM3.60, you can go fly wau.

Luckily it was an indicative pricing, today's article came out with firmer details.  Astro Malaysia Holdings Bhd, a pay-TV firm, has set an indicative price range of 2.70-3.00 ringgit per share for institutional investors for its initial public offering that could raise up to RM4.56bil (US$1.5bil), a source with direct knowledge of the deal said.

The institutional book for Astro will open on Wednesday, said the source, who declined to be identified as details of the deal were not yet public.

Based on the indicative price range, the total 1.52 billion shares in the offer could be worth 4.1-4.56 billion ringgit.

The deal is being handled by CIMB, Maybank and RHB, while several foreign banks are also advisers including UBS, Credit Suisse, Goldman Sachs and JPMorgan.

Comment: Even at the reduced price of RM2.70, its still a very high price, yield will just be 2.66%, which there are plenty of other blue chips offering better than that. I doubt very much it will even break RM2.80 upon listing. Hence the upside will only be good if you can get it between RM2.50-2.55. I expect it to trade with a very small premium (maybe 5 sen) if they stick to RM2.70 as IPO price. Its all in the dividend yield people. Too greedy, just too greedy.

Tuesday, September 18, 2012

Backing and Filling.

Today it was all about backing and filling, like I said yesterday. In the morning I Tweeted that it is not the time to short yet. And the market was not in a hurry to go anywhere. I think we are going to see green close tomorrow and a test of SPX 1470 by Friday.

Only exciting thing was the selloff of Nat. Gas which lost over 3% and Crude closed below $ 96. But again, no sell signal yet.

The interesting development going forward is going to be how Spain goes with the begging bowl to ECB. Remember how they removed Bunga Berlusconi? The Italian bond yield spiked up and the greatest womanizer of Italy was forced to step down despite having a majority in parliament.  Now the same routine will be played on Rajoy.  Spanish bond yield have started to flirt with 7% and the much promised unlimited yet sterilized bond buying program of ECB is not anywhere near. The markets are going to test the resolve of the ECB and the European politicians very soon.

Let me quote from Peter Tchir:
I am growing more concerned that Europe is slipping back into crisis mode.  We have had a window where the ECB stepped up, Germany backed down, and there is enough “wiggle room” to get something done.  Spain needs to ask and they need to ask soon, because all Europe has is “wiggle room”.  There is not true deep support for the ECB’s new policy.  Heck, the IMF has admitted how difficult it is to structure programs for EU nations.  The German court upheld ESM, but will other countries raise their own challenges?  Will disgruntled Germans (and those in other countries) find alternative ways to try and block plans for more widespread ECB intervention?
I don’t know the answers to those questions, but it would be foolish to think that someone isn’t working on those plans of attack.  Draghi is desperately trying to get pregnant.  He knows there is no such thing as being “a little pregnant” and once the OMT is turned on for Spain, and then Italy, there will be almost no turning back.  Either the programs will work right away – doubtful, or every 6 months or so, Europe will be faced with the alternative of taking losses on existing programs and stopping them, or upping the ante – likely.  So the likely scenario is every so often (3 to 9 months), Europe will face the same old decision, admit you were wrong, take losses, and move on to proper restructuring, or paper it over and pretend it will get better (which eventually it may).  We all know what Europe will decide.  Politicians and Central Bankers don’t lose money, not if they can help it.  So Draghi needs to get on that slippery slope of aggressive buying before he gets stopped out.

 That scenario very much plays along with the expected sell off in the equities by the last week of September, early October and eventually, the mess in Europe, Fiscal Cliff in America and geopolitical volcano in Middle East will all come together to create the perfect storm in 2013-2014.

I feel bad that the best days of investing are behind us all. The period from 1985 till 2000 was golden when SPX travelled from less than 200 to 1500 in 15 years without any hiccups. And we are still struggling to go near 1500 after another 12 years. More likely we will see SPX below 500 again because of the stupid policies of the central bankers and politicians. It is no fun investing in a bear market.  Just ask Japan and I am afraid, so is Bernanke that USA is becoming another Japan. To avoid that deflation he is ready to embrace inflation but when you ride a tiger, you cannot get down without getting killed. Ben knows that as well but he hopes it will not be his problem as his term will expire soon. He has already shown his hand and there is no other trick up his sleeve.

But I am just wasting time with all these silly talks. It’s all markets fault. There is nothing happening and please don’t do anything silly out of boredom. Two good opportunities are around the corner and we just have to be patient. You know my favourite quote” Forget about the fear of missing out”.

Thanks for reading World of Finance. Join me in twitter (@BBFinanceblog) and share it with your friends.

Cooking With Dali - Drunken Chicken Ginger Broth

OK it seems I have nothing much to say about the markets over the last couple of weeks. Share with you all another minor passion of mine, cooking - freestyle. I hate recipes. If I like something, I will try and decipher and breakdown the dish and put them together my way. For more traditional ones, I will get my mum to give the basic ingredients and away I go to come up with something I really like.

Today I felt a stirring and yearning for Drunken Chicken Ginger Broth. Its easy yet so satisfying, and heaty. Try it, you will love this version:

Unless you brew your own rice wine, any Hua Tiew wines will do, all supermarts have them, about RM10-14 per bottle, try to get two different brands for "depth". Use only drumsticks and thighs, chop into pieces.

Here is where it gets tricky, USE only Buntong Ginger (Muntong Keong), it costs a huge premium to normal ginger and is only available at morning markets. The ginger is so refreshing, you can even bite into it like a fruit to enjoy and yet gives the most soothing ginger taste, not overpowering.

Marinade the chicken with soy sauce, lots of white pepper and a table spoon of good sesame oil. Put aside for at least 30 minutes or longer.

Dice the ginger 3 ways, julienne, thicker julienne and rough pieces... texture baby, texture. Heat your wok with 6-8 tablespoons of sesame oil (its OK to be generous), throw in the ginger on medium heat for 5 minutes. Then throw in the chicken, making sure to brown all sides for another 6 -7 minutes.

This is important as you want the chicken to be coated, pre-cooked, so that it does not need that much boiling time with the wine.

I always have ready some useless whiskey or brandy as top ups, just in case. Put in the Hua Tiew, slow fire with the chicken and ginger the whole shebang, cover with lid. It needs to simmer for 10 minutes, really simmer, not any hotter as the chicken would be rough and not smooth in texture - always with lid on as you do not want too much alcohol to escape.

Taste, add salt and sugar to get the right mix. In this case it needed two teaspoon of salt and 4 tablespoon of sugar to balance out the alcohol. The versions you have outside are so diluted and pathetic, thats why these things usually cost RM10-14 per serving and still tastes diluted.

 Boil some Wan Yee (again available at all supermarts) in water for 10 minutes, drain then slice, throw the bugger in for the last 5 minutes of simmering.

This broth can serve 6 but the bill comes to nearly RM50 but its got the real kick in the guts feeling.

 End result, all in less than one hour, rice with kick ass drunken wine ginger .... sweat like mad but heavenly so. Till my next recipe..... cheers.