Thursday, February 28, 2013

Something Is Not Right With This Case In Singapore

Something like this was not supposed to happen in Singapore. Its a brilliant piece of investigative journalism by FT. Its also very sad for the family involved. The whole thing reads like a convoluted but brilliant movie script .... C'mon Singapore, come clean ...

The entire article is so very long like a mini novel but very gripping, read the rest at this link:

February 15, 2013 1:10 pm

Death in Singapore

On June 24 last year, the body of a young US electronics engineer, Shane Todd, was found hanging in his Singapore apartment. Police said it was suicide, but the Todd family believe he was murdered. Shane had feared that a project he was working on was compromising US national security. His parents want to know if that project sent him to his grave
Shane Todd on a dragon boat in Singapore during an outing with friends and colleagues in 2011
Shane Todd on a dragon boat in Singapore during an outing with friends and colleagues in 2011. This is one of a number of images featured on Shane’s Facebook page. The photographs of Shane Todd have been provided by the Todd family
Mary and Rick Todd were anxious about entering the apartment where their oldest son had lived and died. Late last June the couple had flown from Montana to Denver to Los Angeles to a colonial-era house in the Chinatown district of Singapore to try to make sense of an unthinkable loss: Shane Todd, a young engineer who had just wrapped up an 18-month stint with a government research institute known as IME, was dead – an apparent suicide, according to the Singapore police. Mrs Todd felt her heart pounding as she climbed the narrow staircase to his apartment and thought about what the police had told her two days earlier.
Shane had died a week before he was to return to the US. The police said he had drilled holes into his bathroom wall, bolted in a pulley, then slipped a black strap through the pulley and wrapped it around the toilet several times. He then tethered the strap to his neck and jumped from a chair. Shane, 6ft 1in and nearly 200lb, hanged himself from the bathroom door, the autopsy report said.



So the Todds, along with two of Shane’s younger brothers, John and Dylan, were unnerved by what theydidn’t see as they crossed the threshold. The front door was unlocked and there was no sign of an investigation – no crime-scene tape, no smudges from fingerprint searches. “The first thing I did was make a beeline for the bathroom,” Mrs Todd recalled. She wanted to see exactly how Shane had died – and she saw nothing that fitted the police description. The marble bathroom walls had no holes in them. Nor were there any bolts or screws. The toilet was not where the police had said.

Test Of The High?

Today the indices were up for most of the day but some late selling forced them to close in red.
Was it was a re-test and failure of the last high? I think it is still early to call today's action as failed re-test.
However, SPX is still above 1500 and DOW still above 14000. I would like to see indices making a lower low 1st and then re-test the 1530 level in SPX and fail there. Only time will tell whether the market will actually behave that way.

But what lead to the last hour selling? Was it fear of Sequestration or just regular pump and dump action?

But more than the red indices, I would like to draw your attention to Gold which again closed below $1600. I think the bounce in Gold is over short term and we will see some renewed selling. So those of you thinking about catching the falling knife, better be careful. However when the mood becomes totally negative on gold, that would be the time to go for it. We will have to wait a while longer for that to happen.

Nothing much is happening anywhere else really.

Equities will continue their up and down dance for a while more. Grains are still making a bottom before the rally. No much to do in Oil and Nat. Gas either.

All in all, we are in the waiting mode. Our sell signal has been triggered but something else is holding us back from going short at this point of time. I am expecting some whipsaws in market action and better to avoid emotional and moral hazards.

Folks normally get frustrated when there is not much action. We think we always have to buy or sell but in reality, we don't have to. Sometimes it is better to give up short term gain for longer term opportunities. This is one of those times.

March subscription is still open for two more days, before the next Newsletter comes out on Sunday and if you would like to avoid walking in the dark, you are welcome to join the gang.

Wednesday, February 27, 2013

Bull vs Bear. Who Is Winning?

Few days back I wrote that the bull may be wounded but not dead.
Today's market action again proved my point. One day SPX down 2% and next day it is up almost another 2%! Go figure.
The fact remains that upside is limited but Ben is not ready to accept defeat so quickly and easily. And as you know, there is no easy trade. When everyone is expecting the "Top", it remains in hiding. The market will kill the early bears and suck in the late bulls. And another new month is coming with new fund allocation. Why give up all the free money?
But why every 10-15 point move up or down make such huge news? For one, the 24/7 news media is hungry for sound bites and dramatizes every small insignificant issues. But the more important thing which was point out by Josh Brown of The Reformed Broker is that, almost everyone has jumped in the options bandwagon and are playing with leverage. A 1% move has multiplier effect when combined with leverage. This is not investing. This is speculating. And speculation is anything but good for long term financial health of an individual investor.
So where do we go from here?
For one, I have avoided the urge / temptation to go short for now and have advised subscribers likewise. I am sure I will lose some of my subscribers with my constant call for caution and not having enough action. But the fact is we are making a top and direction is not clear. We have a sell signal and yet I am hesitant to take action based on the sell signal. And it is my policy that when in doubt, do not trade. I would shoot, only when all the ducks are lined up in a row. Sometimes give up short term opportunity for longer term clarity.
Folks who have been in the market long enough know that we make 80% of the profits from 20% of the trades.
Going back to the question, who is winning the battle of bull vs. bear, look the following picture for an answer:
It is the TBTF Banksters who are winning.
Yesterday Jamie Dimon told an analyst covering the bank to go F**K himself.  The following is from Reuters:

At a J.P. Morgan investor event this week Mike Mayo, an analyst at CLSA, who has been a critic of large banks and, at times, Dimon, asked if J.P. Morgan wasn't at a competitive disadvantage compared to more highly capitalized peers. (Here is a playback via Business Insider:

Mayo: I think what I hear UBS saying in the presentation is that if I'm an affluent customer I'll feel a lot better going to UBS if they have 13.5 (percent) capital ratio than another big bank with a 10 percent ratio. Do you agree with that?

Dimon: You would go to UBS and not JPMorgan?

Mayo: I didn't say that. That's their argument.

Dimon: That's why I'm richer than you.

This exchange shows what is wrong in the system and Jamie Dimon personifies the arrogance of the Banksters and how they game everything.

In this environment, it is important that small investors start with "Return of Capital" not "Return on Capital" because the fat cats will steal everything otherwise. Avoid risk and everything else will follow.

That's all for tonight. Good luck trading every one.

Tuesday, February 26, 2013

E.U. Recovery Faces Huge Stumbling Blocks From Italy

Just when everything seems to be going hunky-dory, along comes the Italian Job. The election results is one of the worst you could get which could impede ECB's strategy for recovery. Italy could very well opt out of E.U. and adopt back the lira. Its ok to opt out if you are the weak link like Greece as opting out could help resuscitate your country better. To opt out, if and should Italy do so, one must question Italy's loyalty and sense of belonging in the E.U. .... Italy is basically opting out when it looks terrible for them. Let's boycott pasta!!!


Italy’s electoral earthquake is ‘‘a catastrophe for the euro and the European Union’’, according to Luxembourg’s foreign minister, Jean Asselborn.
Italy is big enough to bring down the eurozone if mishandled. 
The verdict was much the same in chancelleries across the eurozone, especially in those countries already starting to feel the first wave of contagion.

‘‘The result touches us all,’’ said Spain’s foreign minister, Jose Manuel Garcia-Margallo. ‘‘It is a jump into the void that bodes well for nobody, neither for Italy, nor for the rest of Europe.’’

Almost 57 per cent of the Italian vote went to parties that have vowed to tear up the EU austerity script. Together they control a majority of senate seats.
The Five Star movement of comedian Beppe Grillo, which won 25 per cent of the vote, has called for a euro referendum and has a return to the lira as one of its manifesto pledges, while ex-premier Silvio Berlusconi has threatened to pull Italy out of the currency bloc unless the EU switches to a reflation strategy.

Even if the centre-left leader, Pier Luigi Bersani, can put together a ‘‘grand coalition’’ with Mr Berlusconi, there is no going back to the hairshirt regime imposed by Mario Monti’s technocrat government at the EU’s behest over the past 15 months.

‘‘A deal with Monti is impossible,’’ said Mr Berlusconi yesterday. ‘‘His austerity policies have put the country into a dangerous recessionary spiral, with rising debt and unemployment, and the closure of a thousand firms a day.’’
The great fear is that the European Central Bank (ECB) will find it impossible to prop up the Italian bond market under its Outright Monetary Transactions (OMT) scheme if there is no coalition in Rome willing or able to comply with the tough conditions imposed by the EU at Berlin’s behest. Europe’s rescue strategy could start to unravel.

Andrew Roberts, credit chief at RBS, said: ‘‘What has happened in these elections is of seismic importance.

‘‘The ECB rescue depends on countries doing what they are told. That has now been torn asunder by domestic politics in Italy. ‘‘The big risk is that markets will start to doubt the credibility of the ECB’s pledge.’’

It is a widely shared view. Luigi Speranza, from BNP Paribas, said: ‘‘We fear the markets could lose faith in the OMT’s effectiveness.’’

Bond buying under the OMT can begin only after countries in trouble request a rescue from the EU’s bail-out fund under strict terms.

This then requires a vote in the Bundestag.Germany’s ECB board member, Jorg Asmussen, backed the plan when it was unveiled in August, signalling the crucial acquiescence of Chancellor Angela Merkel. The concern is that Germany could withdraw that assent if provoked.

Mr Roberts said: ‘‘The big unknown is how much Germany is going to buckle over the next six months. German leaders want to keep up the appearance that the eurozone crisis has been solved, at least until their elections in September.’’

In one sense, Italy is in a weak bargaining position. It must raise 420 billion euros this year, making it acutely sensitive to the latest surge in borrowing costs. Yields on 10-year bonds surged 34 basis points yesterday, pushing the spread over German Bunds to 330, with traders eyeing the 400 level where stress begins in earnest. Italian bank shares tumbled in Milan, with Intesa Sanpaulo down 8.4 per cent on fears of losses on sovereign bonds.
Yet Italy is big enough to bring down the eurozone if mishandled. It is also the one Club Med country with enough fundamental strengths to leave EMU and devalue, if it concludes that would be the least painful way to restore 35 per cent of lost competitiveness against Germany since the launch of the euro.

It has low private debt and euros 9 trillion of private wealth. Its total debt level is 265 per cent of GDP, lower than in France, Holland, the UK, the US or Japan.

Its budget is near primary balance, and so is its International Investment Position, in contrast to Spain and Portugal. It could in theory return to the lira without facing a funding crisis, and this may be the only way to avoid a crisis if the ECB withdraws support. Any attempt to force Italy to knuckle down risks backfiring disastrously for EMU creditors.

The question is whether the election will prompt a radical rethink in Brussels and Berlin. Martin Schulz, the European Parliament’s president, said the vote had shown the intellectual bankruptcy of current EU policies.

‘‘People will make sacrifices, but not at any cost,’’ he said.
Defenders of the Monti policy say in retrospect that it was an error to push fiscal tightening of 3 per cent of GDP last year when Italy was already in depression - and did not have a deficit crisis - and neglect the greater task of marshalling public support behind reforms.Critics are harsher.

Nobel economist Paul Krugman said the EU policies imposed on Italy and others has been ‘‘a disastrous failure’’. If there is no change in strategy, this election will be ‘‘just the foretaste of the dangerous radicalisation to come’’.

Read more:

Monday, February 25, 2013

Let's Get Serious - Pakatan's Manifesto

Can they govern? .... Of course they can, just look at the current cabinet, you tell me we cannot find capable people to replace them??? Gawd!!! As for some cynics who question as to how the missions will be funded or whether they are empty promises - seriously, I don't think they will be able to meet all that has been written in the manifesto, but I do think they can achieve at least 1/3 and maybe another 1/3 work in progress and the balance will be status quo, even then that will be 100x better than the administration we had for the past 50 years. Much of whats written below has to do with economics, but to me another key point which I am sure Pakatan can do and will do is restore credibility and independence to the judiciary ... and improve the regulatory and policing bodies - only when its fair can you live in our own country without fear or favour. Why is it that we Malaysians hesitate to talk about which political side we are aligned with??? Where did that fear come from? What are we fearful of??? Who put those things there? Why aren't things that are supposed to protect me of my rights  there to protect me when I need it?

Below is the summary of Pakatan's Manifesto:

1.  Eliminating discrimination
2.  Recognizing the contribution of women and senior citizens
3.  Developing the national education system and a rming all
educational streams 
4.  Respecting the position of Sabah and Sarawak within the Federation
5.  Preserving Orang Asli customary land rights and welfare
6.  Respecting the position of Islam as the o cial religion,
guaranteeing the freedom of religion
7.  Promoting culture as the foundation of community living

"It’s for the good of BN that we vote for PR and for better future for the people at the same time.   What happens when PR becomes the New Government? We have a New Government with Less Experience in CORRUPTION and SCANDALS..... good for people.  We have a STRONG and RICH Opposition with 50 years Experience  in matters pertaining to CORRUPTION and SCANDALS.  They know the ins and out of corruption and scandals, so they can better check the PR government...."

1.  1 million job opportunities for the people
2.  Equitable productivity sharing through minimum wage
3.  One million school leavers trained as skilled labour
4.  Education reform to drive the economy
5.  Cultivating smart partnership of trade unions, employers
and government
6.  SMIs and innovation to drive the national economy
7.  Tax adjustment to promote equity
8.  Sustainable economy
9.  Defending military veterans’ economy and welfare
10. Making taxi entrepreneurs viable
11. R & D investments to reach 5% of GDP
12. Public transportation – the lifeline of the national economy
13. Breaking monopolies, encouraging competition

Pakatan Rakyat will increase the government contribution to the Armed Forces Fund Board (AFFB) from 15% to 20% to secure soldiers’ savings. An additional contribution of 5% will be administered in a special fund and separated 
from the pension fund contributions, to be used to finance funds and direct assistance to pensionable and non-pensionable soldiers.

Pakatan Rakyat will introduce a Soldiers’ Dividend which will remunerate non-pensionable veterans to the amount of RM2,000 per year, derived from supplementary governmental allocation and profit gains of AFFB. The estimated allocations needed to finance the Soldiers’ Dividend is RM400 million per year.

Pakatan Rakyat will abolish the system of granting taxi permits to selected companies who profit from taxi drivers’ labour. Taxi permits will be given directly to the taxi drivers in order to produce more taxi entrepreneurs.

Public transportation to be made free for differently-abled people.
Remodeling the planning of the Klang Valley public transportation system from being MRT-centric, to an integrated plan involving MRT and buses to improve the existing network and access.
Examining each contract awarded in the MRT package in light of updated legislation, to ensure it is corruption-free and cost-effective for the people.
Additional investment of RM2 billion in the first year to double the number of buses and bus routes in the Klang Valley 

Initiating steps towards building the first inter-city high speed rail system in Southeast Asia Pakatan Rakyat is committed to resolve the problem of traffic congestion in the Klang Valley and other major cities within 10 years 
of coming to power, with the aim of reducing congestion by 50% during its first term. Congestion problems have worsened due to policies which have neglected inter-city and intra-city public transportation systems. For a 
long time, investments in the public transport system were ignored until people had no choice but to use private vehicles.

Reliance on private vehicles has adverse effects on the economy. It increases subsidy expenditure, the economic burden on families, pollutes the environment and contributes to congestion.

Prudent and wise investment in public transport systems under Pakatan Rakyat will make public transportation a national economic lifeline.

"There is far too much subservience in our society. Observe functions where a minister turns up. Immediately there will be the sound of shuffling chairs as people stand up. Why should we do so? Why the grovelling and hand kissing? Democratically elected officials are just like any one of us and to afford them such obsequiousness is unseemly and an affront to the entire idea of democracy and equality amongst all people. - Azmi Sharom"


Monopolies are an encumbrance to economic growth and discourage competition. Allowing big companies to monopolise goods and services gives them the power to impose exorbitant and burdensome price increases. Monopolies impede competition and narrow the space for new businessmen and entrepreneurs to grow.

Pakatan Rakyat economic policy will focus on breaking up monopolies and encouraging competition. It will lower the price of goods from burdensome levels and build a resilient national economy that will produce many successful new entrepreneurs.

Establish an Anti-Monopoly Commission and amend existing laws relating to competition to have more power to stop unfair business practices
Establish a Public Contracts Commission to evaluate and act as arbitrator to ensure that all agreements between the government and private sectors are not biased or unfavourable to the people
Dissolve 1MDB so that Khazanah remains the only state investment body
Disposal and handover of government holdings in government-linked companies (GLCs) which are not involved in businesses of national importance. This will be done via management buy-out (MBO), with
the objective of producing more viable Bumiputera entrepreneurs
Break up monopolies in communications, essential foods, pharmaceuticals, civil aviation and other key sectors
Restructure unfair independent power producer (IPP) agreements to stop the enrichment of cronies via public funds
Restructure the role of Ekuinas so that the agency assists in the takeover of GLCs by the management and qualified entrepreneurs
Ensure overall implementation of procurement by open tender in the 
management of public entities

1.  Alleviating the burdensome cost of living by        abolishing monopolies and reducing prices
2.  Restructuring automotive policy to reduce the people’s burden
3.  A ordable and comfortable housing for all
4.  Free education for all, abolishing PTPTN
5.  Abolishing AES, revoke AES summonses
6.  Justice for Felda settlers
7.  People’s safety
8.  Ensuring free basic health access
9.  Building a social safety network

As promised in the Orange Book (Buku Jingga), Pakatan Rakyat will take over the highways with the intention of gradually abolishing tolls. The financing of the highway operations will be accommodated by using the RM5 billion fund that has been paid as compensation to the concessionaires. Abolishing tolls will help to reduce the price of goods

Monopolies held by several cronies linked with the present ruling party have allowed them to control product prices. As a result, monopolies have become 
the main cause of why product prices are rising in the country. Monopolies exist in many key sectors – from telecommunications to ASTRO, from rice prices to sugar prices. Pakatan Rakyat will abolish these monopolies to 
increase competition such that lower product prices will result.

The ratio of car prices in Malaysia to average household income is one of the highest in the world. The lack of effective public transport facilities gives the people no choice but to buy their own cars.  As a result, car debts are the main financial burden incurred by every household. Every month a large portion of their income goes to servicing their car loan installments. To reduce the people’s burden and increase their disposable income, Pakatan Rakyat will 
restructure automotive policy as follows:

Car excise tax that is currently being levied is at an excessive 70 %, resulting in high car prices. Car excise prices will be lowered in stages with the 
intention of abolishing it in 5 years’ time in order that car prices can be more competitive.

150,000 affordable homes in the low-cost category (below RM75,000) and medium-cost category (between RM150,000 and RM250,000) will be built 
in the first term of the Pakatan Rakyat administration. A National Housing Corporation (PPN) will be established as the primary agency to build, regulate 
and develop affordable housing. PPN will be responsible for building houses for the people in order to balance the private sector’s exorbitant 
housing prices.

It will ensure the sustainability of the national housing industry by ensuring fairness to the buyers and developers, including implementing the ‘build and 
sell’ concept more extensively. 

Pakatan Rakyat will invest RM 5 billion in the first year to build affordable housing, followed by RM 2 billion funding every year from the second to fifth year.

Liberalising the national automotive industry will increase its competitiveness and add value for people. Pakatan Rakyat believes that a truly competitive 
automotive industry can produce cars priced as low as RM 25,000.

Pakatan Rakyat will defend the dignity, performance and reputation of FELDA to ensure the economic position and land ownership of the settlers. This includes restructuring all ownership in Felda Global Ventures (FGV) with the aim of returning operation and ownership of FELDA land to the settlers and staff. FELDA settlers’ contribution to the country’s wellbeing is immense. Palm oil revenue will be used to fund other development projects.  Therefore, FELDA settlers are entitled to receive a fair and higher proportion of revenue sharing.

Settlers are not paid their real income through manipulation of the Grade Extraction Rate (GER) by FELDA. Pakatan Rakyat will review all compensation 
claims as a result of the GER manipulation and pay appropriate compensation to affected FELDA settlers.

"I have said many times in the past that a clean electoral system is a diffuser of political chaos. When people feel that a party has won or lost fair and square, there is no need to take to the streets. There is after all the next time an election is called and you can make changes then. It is only in the face of a brutal and unfair system that anger spills over. It happened in the Philippines, in Indonesia, in Egypt and many other places where people felt they either had no voice or their voice had been disregarded by a flawed and corrupt election. A government that truly respects democracy understands this.They will be willing to lose an election in the hope and expectation that they will be able to fight another day and win back the power they lost if they have the right ideas. They will also understand that a lasting peace depends on a sound democracy. Only a government that is totally obtuse and totally uncaring about anything else except their own precarious clutch on power will fail to realise the importance of a fair electoral system. - Azmi Sharom"

The rapid increase in crimes throughout the country, whether in urban or rural areas, with victims of young and old, illustrates the immense failure of the policing system we have today. Pakatan Rakyat is determined to return the police personnels’ focus and responsibility to protecting the people and solving crime. This will restore the position and respect of the Royal Police Force of Malaysia (PDRM) in the eyes of the people.

The following measures will be implemented to restore the dignity of  police personnels and to protect the public:
Aim to increase police personnels’ remuneration by 15% in stages through manpower rationalisation and resource reallocation from non-core duties to core duties of crime solving and ensuring people’s safety;
Rationalising manpower and resource allocation will involve transferring and retraining of personnel in order to increase personnel strength of the Crime Investigation Department (CID), including reducing the size of General Task Force (PGA) and other non-core task forces; 
Additional allocation of RM 50 million a year to build police posts in places of high public concentration;
Extra allocation of RM 200 million a year to increase PDRM’s capabilities and effectiveness in forensic investigation.

1.  Reforming Islamic and religious institutions
2.  New remuneration and service packages for civil servants
3.  Clean, fair and transparent elections
4.  Reforming the judiciary, Attorney General's Chambers, MACC and PDRM
5.  Reforming Parliament
6.  Media freedom and restoring trust in media practitioners
7.  Abolishing UUCA and ensuring academic freedom
8.  Abolishing all anti-people laws
9.  Corruption Elimination Policy (DEBARAN)

The war on corruption is at the centre of Pakatan Rakyat’s struggle. The Pakatan Rakyat administration will introduce the Corruption Elimination Policy (DEBARAN) with an integrated approach that is incisive and specific in order to eliminate corruption.

DEBARAN is based on two major principles, namely empowering MACC fully through leadership and administrative reforms so that it will earn the respect of the people and amending current legislations to enhance its effectiveness in combating corruption. For this purpose, through DEBARAN the Pakatan Rakyat administration will:

Restructure MACC’s power and leadership in order to rebuild its integrity in the people’s eyes which may include giving MACC the power to prosecute
Restructure the practices and processes of MACC to focus on investigation and prosecution towards big corruption cases that involve the public interest in order to dispel the perception that MACC only concentrates on small cases whilst being lenient on the big cases
Tighten corruption-related legislation (including the Whistleblower Protection Act) to firmly implement anti-corruption laws that can tackle  significant corruption cases that involve the public interest

"Only when we have people in power, and by this I mean the legislature, executive and judiciary,  who have the aspiration of protecting rights as far as possible; who believe that human rights are an ideal, not an imposition on governments; and who have the conviction to live and make decisions according to these principles; only then can the Asean Human Rights Declaration have any meaning. Maybe I am not being pragmatic; perhaps the thin air in my ivory tower has made me light headed and foolish; but I don’t care, because the alternative to living without aspirations, ideals and principles is not worth contemplating. - Azmi Sharom"

March Subscription Is Now Open

It is the Subscription renewal time again.
How quickly a month pass!
It was on 1st of Feb. when SPX reached 1513 and we went out of the market.
Now it is morning of 25th Feb. and SPX is starting the day from 1515.60
Not much has changed in the last 3 weeks and we saved ourselves emotional trauma by waiting in the sideline.
So is $ 49 a month worth for having an action plan in this market?
Many of our readers think so. It is less than a cup of coffee per day from your favourite coffee shop and yet provides you, the reader specific action points on various asset classes with at least two weekly updates, if not more.
Extract of some part of one of our old Newsletter is here for your review:

The coming week, we have two indicators for sell signal:
  • SPX closing below XXXX, DOW below XXXXX.
  • VIX closing above XX.
When we see the Indices closing below those levels, we will know that we have seen the highs. From then on, it is a question of Indices making a lower high or re-testing the previous high and failing in the process.

I think we have a good opportunity coming up and let us remain focused on that only, nothing else. We are not economists and at least I do not understand how it works. Just concentrate on making money with low risk.  

PM Sector:
We have met our downside price target of Gold. Silver still has more to fall before it can find a bottom. While I am sure about a new all time high in gold but we may have to wait for 2014 for that to happen. The idea is to buy it when everyone hates it and I think we are reaching that point. Many of you may already be thinking that there is no future for gold. Main Stream Media (MSM) is writing about how Soros sold his gold. So we are getting there. However, if Gold closes below $1600, we will have still lower prices and that will remove all weak hands. So for now, we wait on the sideline with respect to PM.

Only parts of the Newsletter. And the levels keep updating / changing to reflect the dynamics of the market price movement. Apart from Equities and PM, we cover Oil & Nat. Gas, Copper (sometimes), Grains & soft commodities and treasuries.

Are we always right? Nobody is or can be and we are no exception. But we make every effort to reduce risk and shoot only when when we think all the ducks are lined up.  And I try to explain that we do not have to be always invested (Only Wall St. wants you to be 100% invested 100% of the time) and cash is a position. I quote from Josh Brown: "Guys talking about being all-in or all-out can and will change their opinions quickly. This is what they should be doing as professional, full-time speculators. But are you a full-time speculator? If someone can and frequently does go from fully invested to all cash to fully invested over the course of a few days, is there any particular reason that you should be paying attention to them? Will they personally be calling you to give you the second half of their trade? Well, most of you don't realize this so when someone says "ALL IN" or "ALL OUT", it gets you talking, thinking, retweeting, sharing etc.

So if you think caution is your style and you value your savings, want to grow it in a low risk manner, may be you should give it a try. Click on the "Donate" Button above and pay $ 49. In the subject line mention Subscription for "March" and you are all set.

I look forward to hearing from you soon.

Thursday, February 21, 2013

The First Warning Shot.

We heard the first boom.
Intra-day, SPX went below 1500 but closed above at the end.
While we saw a breach in the up-trend it will be wrong to say that the bull is dead. Wounded yes, dead? No.
Those who are thinking of shorting the market now, should do well to keep the fate of this guy in mind.

This was the 1st meaningful pull-back in many moons and at this point of time, is just a healthy correction.I think we will see a bounce very soon, may be as soon as tomorrow. Only when it makes lower high, we can think of an intermediate term top. Just like last time.

When the indices made few lower highs and there were reversals of reversals of reversals, we did see meaning-full correction.  It will follow similar path this time around and prudent traders / investors should wait for price confirmation.

Subscribers know the level to watch for and when the sell signal will be triggered. They also get mid-week and end of the week update, which help us to remain on the right side of the market without front running.

Other risk assets are getting slaughtered as well. Oil had a flash crash yesterday but for now I think it has found a bottom. But there is no such respite for precious metals. We have been out of it for a while and waiting in the sideline for the right time to get long. But we may have to wait for a while till everyone gives up on gold and all gold bugs fly away.

Some other interesting trades are developing in the soft commodities/ grains / Nat.Gas and we will have some action there soon.

All in all, end of Feb./ early March promises to be interesting in contrast to the last 3 weeks which has been a boring kind of market.

Hope you all are doing great and wish you all best of luck trading.

Finally, A Sensible Cost Of Living Study - An Important Posting

This is a reposting from October 2009 of what is still quite a relevant piece. Enjoy.

(click on image to enlarge)

There have been many cost of living studies which somehow does not get it quite right. In many cases, it is skewed towards the expatriate lifestyle. The flamboyant CLSA has come up with a highly interesting piece on Asian living standards, with comparisons as well to US, UK and Australia. The basket of 27 items were well selected as reflective of a middle class lifestyle maintenance. It also looked into the currency effects, which will give a true purchasing power parity comparison.

The items selected:
1) Nokia 3600
2) Mobile phone monthly bill
3) Monthly broadband bill
4) Apple iPod
5) Acer laptop Aspire
6) Levis jeans
7) Louis Vuitton handbag
8) TV- 37" Sharp Aquos
9) Sony Playstation PSP
10) DVD (err...)
11)Movie ticket price
12) Coca-cola
13) Canned beer
14) Champagne
15) Marlboro Lights
16) Chicken
17) Rice
18) Eggs
19) English Newspaper
20) Economist magazine
21) KFC meal
22) Lowest price for new car
23) Toyota Camry 2.4
24) Petrol
25) Taxi flag down rate
26) Private doctor consultation
27) Private school fees per month

Taking the US living cost as the 1.00 benchmark, then one can assess the relative disparity. The table showed that India is at 0.59. Relatively speaking, one can buy the same items 41% cheaper in India and so on. Followed by Indonesia at 0.60, China at 0.69 and then Malaysia at 0.72... surprisingly on par with Taiwan at 0.72. It is more expensive in Thailand, coming in at 0.79. HK is there but at a surprisingly mild 0.93. It is more expensive/costly to be living in Australia, UK, Singapore and Japan, coming in at 1.14, 1.14, 1.15 and 1.57 respectively.

The fun part is here, dissecting the report and data. Interesting facts, if buying an iPod, best to go to the US, HK or Indonesia where is is less than $150. In the Philippines and Thailand, its double that. Same for the laptop, the Acer Aspire 10 inch screen cost$330 while its $400-500 in Asia, and a stupid $785 in the UK. The Sharp Aquos TV sells for $500 in the US, Malaysia, Singapore and Thailand but is double that in China, Japan, Korea and Taiwan. Its even more than double in Australia and the Philippines.

The usual 20 Marlboro Lights cost $1-$2 in most of Asia, but is $8 in Singapore and most other Western countries. Guess what, as governments try to alleviate the health care cost side, the $1-$2 will gravitate towards $5 within 5 years.

The figures on its own are meaningless in PPP UNLESS you divide it by the annual median income. One would not mind so much living in Singapore compared to Malaysia (the PPP being 1.14 vs 0.72 if one's pay reflects that disparity - e.g. if you earn $30,000 in Malaysia a year, you should be equally well of earning $47,500 in Singapore. (1.14 /0.72 x 30,000).

Basket Shortfall: The basket of items missed out on a few critical items. If you are going to reflect on PPP vs median income, a proper Cost of Living study must include rental/mortgage costing as that should easily be the #1 cost item in most households. Another is, owning a car is one thing, maintaining, running, parking, tolls are another - people in HK and Singapore can tell that those are major considerations. The other would be the tax considerations. It is not clear but one should take the net disposable median income for a more meaningful analysis.

A better measure: I am surprised CLSA did not do this. One should just take the cost of purchase for the basket of items and divide them by the annual median income for each country. That would yield a better value add measure. It is no point if you are living in India with the lowest cost factor at 0.59 if your income is way lower than everybody. So, I have taken the median annual income and divided by the cost of living for each country. The higher the figure the better as that is basically how many multiples of the annual expense of the basket of items:
1) US 4.9x
2) Australia 2.9x
3) Japan 2.5x
4) UK 2.2x
5) Korea 2.0x
6)Taiwan 1.5x
7) Singapore 1.47x
8) HK 1.3x
9) India 0.9x
10) Malaysia 0.8x
11) China 0.3x
12) Indonesia 0.2
13) Thailand 0.15x
14) Philippines 0.11x

From the table above, despite being more expensive, one is still much better off living and working in Singapore, the UK, the US and Australia, and even Japan. Of course some caveats, the annual median income is skewed if your population is predominantly labour intensive or have a large proportion of rural folks. Hence if you are living and working in executive positions in countries such as Indonesia, Malaysia, India or China, your income should be a lot higher than your country's median income, thus making them quite liveable and actually higher in the rankings.

The Malaysia Problem: The PPP can act as a basic argument on overvaluation and under valuation of the local currencies vis-a-vis the USD. For instance, the Sing dollar is technically 14% overvalued while the ringgit and renminbi are 28% undervalued. But of course there are other more pertinent factors as to why some currencies will stay undervalued substantially vs the USD for the longest time: one is reliance on cheap currency for export competitiveness; two, cheap currency to make it an attractive destination for foreign direct long term investment; three, a high subsidy mentality towards essential goods and services; four, how "open" is the central bank in allowing the free flow of the currency in circulation; five, global acceptance and unencumbered circulation of currency; six, political risk ... etc.

It can be said that countries such as Taiwan, China, Malaysia are all registering strong surpluses and have a more than adequate foreign reserves. Why then are the governments there not allowing their currencies to appreciate - my thesis is that these currencies are NOT ALLOWED to appreciate by their own governments and central banks, rather than the global markets stopping these currencies from rising - they are more concerned with making sure their industries stay competitive, preserve jobs. Singapore can allow their currency to appreciate because they are not tied to exports, they have made services as their major economy cornerstone and thus brought in expertise and high value added industries to their economy. You need to continually move up the industry value chain. Granted, Singapore is also a financial center, something Malaysia cannot easily aspire to become, but we must be aware of these gaps and at least narrow the gaps. You cannot and should not use the cheap currency as the driving force of your economy as that will put things on the backfoot and forever end up with industries that are either sunsetting, labour intensive or low value add. That will forever lock us in low pay, low value add, low income environment.

The problem will be cyclical as well when your currency is cheap and your industries are low value add and labour intensive as that will bring forth the need to maintain relatively low wages but also a lot of subsidy on essential goods in order to maintain the equilibrium. Why do you think Malaysia has over 2m legal foreign workers and probably another 2m illegal ones - its to keep the wages low. It may not be a deliberate policy but one that is brought on by our low cost environment. In the end, our subsidy on essential goods and services will come to a highly significant amount that we no longer can tolerate.

Have a masterplan to dismantle the subsidy, have a schedule. Eventually that will mean that only companies and industries that are globally competitive (without subsidies) can survive, with the exception of a few critical sectors. For example, why are petrol, gas and electricity the same for companies and the public? Why are we subsidising the companies as well? If there are certain industries that cannot compete once we remove the indirect subsidies, then we will be better off. We do not need steel plants or cement plants if we can buy them cheaper elsewhere.

We can still play this game as we are a resource rich country, but we all know that those resources are being depleted rapidly. Petronas provides a huge chunk of our country's spending budget. Imagine if Petronas can only give half of what they have been giving for the past few years - we cannot even pay for the civil service.