Friday, June 28, 2013

Politics & Business In Myanmar 2013

The phlegmatic government (you can try to get rid of the booger from your fingers but it just sticks around) of Myanmar just announced a shocking awardment of foreign telco licenses to build 4G networks in Myanmar. The winners of the 15 year concession were Telenor from Norway (DIGI fame) and Ooredoo from Qatar.

What was shocking was the favourites did not get a mention. SingTel which was easily the hot favourite did not get it. SingTel was bidding as part of a consortium with Myanmar's biggest bank Kanbawza Bank. SingTel with a large footprint in emerging markets, backed by Temasek, not to mention being buddies in  ASEAN loose coalition of neighbours to boot.



It would appear that there are other concerns in the awardment of the concessions. The messages are loud and clear. One, Myanmar still regards ASEAN as not the most important grouping as the memebrs try to make it out to be. Suffice to say, Myanmar has had lingering political issues that earned the ire of many foreign countries. Be it Aung San Sukyi or the dastardly acts towards the Rohingyas. It appears you cannot EVEN say anything negative or try to interfere in any way, even by political suasian or closed door sessions. A hands off and mouth zipped policies are valued.

The other favourite was a consortium led by Digicel, a Jamaica based telco that first invested in Myanmar in 2009 and employs close to 900 people in the country. The consortium also included Goerge Soros and Seung Pun, a leading businessman in the country. This was supposed to be a shoo-in. But no.

Again, that may have a message to George Soros, an advocate of democracy and supporter of many private efforts via NGOs globally. If you want to do big business in Myanmar, be apolitical.Any country that supports sanctions etc... will be "punished".

Ooredoo was ranked 9th out of 11 bids and was unlikely given the tension with anti-Islam violence with the Rohingyas, as the company was Qatari. Still, Ooredoo is 67% owned by Qatar government and provides telco services in Indonesia, Singapore, Laos and the Philippines. It supposedly has over 60mn customers in Indonesia alone. 

Telenor can better explain its cause as it has Norway government support. Plus the Norway government has been one of the more active European countries in Myanmar, supporting and funding various projects in the country.

So, it could be political ... or it could also be corruption. Who knows? It certainly did not look to be fully on merit alone. Though Telenor could win by merit alone as well. Too many questions, the perils of doing business with government. 

Stocks To Watch

Some of you may wonder how is the Murasaki ts system doing. Our subscriber base has been growing  well. The early months were choppy as people did not fully understand how to use the system. Now we are getting back many of our trial users to our Masterclasses (which are free). The weekly crowd is good and its getting to be a big social event and sharing of investing ideas. Below are two examples of how we use the system to pick early movers.


This screenshot was taken at 12.34pm Friday 28 June for LB Aluminum. FQR, M, Live MFI and BRH are our proprietary data. FQR is a measure of the fundamentals based on last 4 quarters. M is the energy index or Murasaki index. If a stock is behaving normally, it should register an M of around 100 or below. If its 400, it means it is 4x abnormal behaviour. 

The bottom right is the last 5 days data on M, MFI and BRH. As you can see, the M index was behaving itself for most of the past 5 days except yesterday, the 1,323 was a big anomaly which was accompanied by a positive uptick in price. Its a signal that let us confirm it is an early mover. It may not go up every day after that, but at least we know the engine has been started. Hence LB Aluminum is a good trade for a 1-15 day period.

The second stock highlighted is Ewein. Again, just by looking at the last 5 day pattern, you can already confirm 3 days back that something is up. The M energy continued, accompanied by positive upticks. As it is still well below the 1,000-2,000 reading on the M, you can conclude that it is early days still. Once it gets very speculative where day traders get in, the M will usually go into the few thousand category.

The other important indicator is the MFI or money flow index. The system is about the only one that has a live MFI. Others usually calculate MFI only at end of day. MFI gives an important read on the status of smart money residing in the stock. If the figure is steady or rising, one can safely continue to hold onto the stock. Once it starts dropping (more than 2%-3% points from the week's high MFI), you can basically conclude the smart money has exited and so should you.

Disclaimer: 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.

Wednesday, June 26, 2013

Take Off The Collars

A fellow business blogger David Koay put this up his blog. Its a remarkable video. One that must be watched by all, especially our leaders. Even though I knew how the whole thing would turn out, it still made my eyes well up because it is so easy to have racism and discrimination instilled in us knowingly and unknowingly. Its powerful too. Kudos to the great teacher Jane Elliot.

Ms. Jane Elliott's "brown eyes, blue eyes" experiment in 1970 (the third one after her first in 1968). This "Eye of Storm" documentary was made by William Peters in 1970 for ABC News and later included in the documentary "A Class Divided" (1985), which included a class reunion (of 1984.)


Tuesday, June 25, 2013

Why Mining SPACs - Important

If you have listened to the S&M show you will have some idea of what I am talking about. The points I am trying to make:

a) why all oil & gas SPACs, the SC is sending out the wrong signals, telling the markets that they only like oil & gas sector

b) the SC has to be careful as it appears to be blurring the lines of approving based on ability and approving based on personalities

c) it is not SC's task to pick the sectors, you can put in the stringent requirements but not sector picking

We have a huge sector that has been largely ignored by EPU, the Capital Markets masterplan. Why:

1) there is no regional financial center to list regional mining stocks

2) Malaysia's vibrant equity markets have not be proactive to make it the center in terms of fund raising, listing, PE mining centric firms, primary greenfields investing, secondary investing, using of Syariah compliant instruments to promote the sector

3) the ring of fire, we are on a volcanic activity plate which also yields a lot of minerals in the region, including Laos, Vietnam, Cambodia and Malaysia ... though the mines may be smaller, they are still very much viable


4) imagine listing 2-3 mining stocks a year ... 5 years later we have 15 and there will be a vibrant equity market supporting the prospecters, early investors, even fund management and private equity

What we have now are viable mines having to go the long way to get listed or even tapping the capital markets. Why are they not listing on Bursa? There are plenty of local entrepreneurs, having to go the hard way... we are again losing talent, earnings, taxes and other multiplier effects. The following are Malaysian mines currently listed overseas and the market cap:

Gindalbie Metals / ASX / USD340m (RM1.08bn)
Avalon Materials / ASX / USD 30m  (RM96m)
LionGold / SGX / USD880m (RM2.8bn)
Golden West / ASX / USD37m (RM118m)
Peninsular Gold / AIM / USD22m (RM70m)
Besra / TSX / USD 32m (R102m)
CVM Minerals / HKG / USD40m (RM126m)
Monument Mining / TSX / USD103m (RM330m)
CNMC / SES / USD107m (RM342m)

They all could have and should be listed on Bursa!!!


Wednesday S&M Show Podcast

Why so many oil & gas SPACs, why not look at mining ...

http://www.bfm.my/snm-show.html

Topical song pick ... Lazy Ways, Hazy Days by 10cc from one of my top 3 favourite albums of all time "How Dare You". Go and google to find out why they chose the name 10cc.

Famous Eyeglasses - Artwork by Frederico Mauro


john-lennon-glasses

malcolm-x-glasses

lolita-glasses

morpheus-glasses

elvis-presley-glasses

blue-brothers-glasses

harry-potter-glasses

audrey-hepburn-glasses

tony-montana-glasses

woody-allen-glasses

steve-mcqueen-glasses

tom-cruise-glsases

sofia-loren-glasses

elton-john-glasses

steve-jobs-glasses

Fischer On Market Sensibilities

Finally, someone who talks sense about the current turmoil in the markets. The markets should not behave like a petulant child when candies are taken away from them. One, you cannot live on liquidity pumping forever. Two, the withdrawal will only happens when the global economy is recovering sufficiently. So where is the problem?

Billionaire investor Ken Fisher said the U.S. stock market rally that began in 2009 is only in its “middle” stages because most investors still underestimate the strength of the economy.

“We’re right in that transition between skepticism and optimism,” the founder of Fisher Investments, which manages $48 billion, said in an interview at Bloomberg News’s office in Seattle. “The notion that it’s actually the middle of a bull market and there’s a lot ahead -- that’s a really impossible concept for most people to get.”

Stocks tumbled last week, with the Standard & Poor’s 500 Index posting its biggest two-day drop since November 2011, and bonds fell around the world after Federal Reserve Chairman Ben S. Bernanke said the Fed may start reducing asset purchases that have fueled gains in markets. The S&P index has slid 4.9 percent since a record high on May 21.

“I’m always amazed that people don’t marvel at the power of global capitalism and global economies, that they’ve actually done as well as they have,” said Fisher, 62, whose company is based in Woodside, California.

If the Fed reduces the stimulus, known as quantitative easing, the economy will grow faster, he said in the interview hours after Bernanke’s June 19 announcement. That’s because key interest rates will rise, encouraging banks to lend more money to companies for hiring and expansion, the investor said.
“I want QE to end because it’s bullish,” he said.

‘Wildly Optimistic’

Fisher’s predictions proved too bullish six years ago.

“I’m on the wildly optimistic side of things,” he told Bloomberg News at the end of March 2007, as a decline in the U.S. housing market began fueling foreclosures and investment losses that imperiled the financial industry the following year. While the S&P 500 (SPX) went on to rise 10 percent to a then-record high about six months later, it turned and plunged as much as 57 percent through March 2009.

In April 2009, Fisher correctly predicted that the S&P 500 would extend a rally that started in the previous month to between 60 percent and 70 percent by March 2010. In January 2011, he told Bloomberg News he didn’t expect “high equity returns” in 2011. The S&P 500 ended the year virtually unchanged, losing 0.04 point for its smallest annual change since 1947.

Consumer Comfort

Americans’ views on the economy last week were the least pessimistic in five years, the Bloomberg Consumer Comfort Index shows. Its measure of how households view the state of the economy climbed to the highest since January 2008.

Slowing global growth contributed to this week’s stock declines. Manufacturing in China is shrinking at a faster pace this month, according to a survey of purchasing managers released yesterday. Jobless claims in the U.S. surpassed forecasts, climbing by 18,000 to 354,000 in the week ended June 15, according to a Labor Department report last week.

Investors who pushed stocks down this week are overlooking data showing long-term interest rates rising, a positive sign, Fisher said in another interview after U.S. markets closed yesterday.

“It’s Mr. Market doing what it does: It’s trying to see if it can turn you against your better judgment,” he said.

Gold is set for its worst week since April after falling below $1,300 an ounce yesterday to the lowest in more than 2 1/2 years in New York. Bullion has slid 23 percent this year through yesterday as the Fed signaled it will taper the debt-buying that has helped the metal’s bull run.

Inflation Translation

“Most of history it loses money,” Fisher said. “Before the 2011 peak, people were still holding their breath for QE to translate into inflation, which would then push gold up. And when you waited too long and that didn’t happen, it backfired.”

Fisher is best known for writing a column in Forbes magazine for almost 29 years, he also has published 10 books, including “The Little Book of Market Myths: How to Profit by Avoiding the Investing Mistakes Everyone Else Makes” (Wiley, 2013).

Three cheers for John Cassidy


Hurray for John Cassidy in being gutsy enough to write clearly about the Edward Snowden situation, as well as the broad and gutless media acquiescence to the "government line," few questions asked. First, some balance from an interview in the Australian media with Thomas Drake, another former NSA employee charged with espionage (felony charges were ultimately dropped):
INTERVIEWER: Not everybody thinks Edward Snowden did the right thing. I presume you do…

DRAKE: I consider Edward Snowden as a whistle-blower. I know some have called him a hero, some have called him a traitor. I focus on what he disclosed. I don’t focus on him as a person. He had a belief that what he was exposed to—U.S. actions in secret—were violating human rights and privacy on a very, very large scale, far beyond anything that had been admitted to date by the government. In the public interest, he made that available.

INTERVIEWER: What do you say to the argument, advanced by those with the opposite viewpoint to you, especially in the U.S. Congress and the White House, that Edward Snowden is a traitor who made a narcissistic decision that he personally had a right to decide what public information should be in the public domain?

DRAKE: That’s a government meme, a government cover—that’s a government story. The government is desperate to not deal with the actual exposures, the content of the disclosures. Because they do reveal a vast, systemic, institutionalized, industrial-scale Leviathan surveillance state that has clearly gone far beyond the original mandate to deal with terrorism—far beyond.
As far as I’m concerned, that about covers it. I wish Snowden had followed Drake’s example and remained on U.S. soil to fight the charges against him. But I can’t condemn him for seeking refuge in a country that doesn’t have an extradition treaty with the United States. If he’d stayed here, he would almost certainly be in custody, with every prospect of staying in a cell until 2043 or later. The Obama Administration doesn’t want him to come home and contribute to the national-security-versus-liberty debate that the President says is necessary. It wants to lock him up for a long time.
 Cassidy goes on to examine some of the cultural reasons leading almost all US news figures to pretty much toe the government line and to heap slander on Snowden. It's not pretty:
Snowden took classified documents from his employer, which surely broke the law. But his real crime was confirming that the intelligence agencies, despite their strenuous public denials, have been accumulating vast amounts of personal data from the American public. The puzzle is why so many media commentators continue to toe the official line. About the best explanation I’ve seen came from Josh Marshall, the founder of T.P.M., who has been one of Snowden’s critics. In a post that followed the first wave of stories, Marshall wrote, “At the end of the day, for all its faults, the U.S. military is the armed force of a political community I identify with and a government I support. I’m not a bystander to it. I’m implicated in what it does and I feel I have a responsibility and a right to a say, albeit just a minuscule one, in what it does.”

I suspect that many Washington journalists, especially the types who go on Sunday talk shows, feel the way Marshall does, but perhaps don’t have his level of self-awareness. It’s not just a matter of defending the Obama Administration, although there’s probably a bit of that. It’s something deeper, which has to do with attitudes toward authority. Proud of their craft and good at what they do, successful journalists like to think of themselves as fiercely independent. But, at the same time, they are part of the media and political establishment that stands accused of ignoring, or failing to pick up on, an intelligence outrage that’s been going on for years. It’s not surprising that some of them share Marshall’s view of Snowden as “some young guy I’ve never heard of before who espouses a political philosophy I don’t agree with and is now seeking refuge abroad for breaking the law.”

Mea culpa. Having spent almost eighteen years at The New Yorker, I’m arguably just as much a part of the media establishment as David Gregory and his guests. In this case, though, I’m with Snowden—not only for the reasons that Drake enumerated but also because of an old-fashioned and maybe na├»ve inkling that journalists are meant to stick up for the underdog and irritate the powerful. On its side, the Obama Administration has the courts, the intelligence services, Congress, the diplomatic service, much of the media, and most of the American public. Snowden’s got Greenwald, a woman from Wikileaks, and a dodgy travel document from Ecuador. Which side are you on?

Murasaki Goes To Kuching

If you reside in Kuching or nearby, do call to sign up for a seat for our seminar this coming Monday. Seats are limited.

Saturday, June 22, 2013

WTF Closing Was That??!!

The sharp divergence in nearly 10 stocks at market close on Friday had everyone cursing, bitching ... cause most did not profit from the trades. There are a few clarifications that are needed. What happened? Were they mistakes? Here is my view:


a) Were they mistakes?
No. They looked to be real trades.

b) Obviously some fund was selling, why the rush and the size?
Funnily, none of the stocks had a grave impact on the KLCI, but they were high dividend yielding stocks. Hence one can infer from that that it was probably a big carry trade fund unwinding. It is not likely to be an indexed fund unwinding as none of them really matched the real index in any way. In fact weighted heavily on plantations as well.

Carry trades have been rampant over the past couple of years as big hedge funds could realistically borrow large sums at near 0%, provided it is in yen or USD. When Abenomics got rolling, a lot of the yen carry trade switched over to USD carry trades. When you are borrowing near zero, you want that 3%-5% dividend yield and lock in that spread. The bumper will be the capital appreciation, but usually they will also hedge the share price going in and out. 

Hedging means if I want to lock in a 4.5% dividend yield for JCY at 90 sen, I will enter into a similar contract for JCY to exit at same price. Hence when I exit, even though JCY was at 66 sen, I can still go out and lock in my dividend yield.

The other portion of the hedging has to be the currency, as you want them to be stable and not move against you, i.e. ringgit weakens substantially against USD thus making your dividend in USD a lot less, thus reducing your real yield. However, there are no perfectly hedged trades in reality, you are still vulnerable to certain fallouts and black swans. Plus to be fully hedge will often more than eats into your real arbitrage gains in the end.



c) So who benefited?
Those people who queued ... it does not look like any funds were involved in the buying. You can judge by the size and price done. They were not married deals per se, you want to sell 2 million, the system will calculate and add all the buyers lined up to make up 2 million and done at the lowest price. Same for the other side.

d) Shouldn't the fund have waited?
There are many reasons why the fund unwound. It could be because of the "rising interest rates" scenario owing to Bernanke's policy speeches. That may have caused the banks to tell these carry trades funds that they had to stop or face much higher interest rates in the coming months, or even that the banks are refusing to fund these carry trades with 'immediate effect' as the risk profile of supporting these trades have become untenable. 

Judging from the selling, it looks like a program trade and not done manually. The disparity between losses and market prices may seemed to be big but the fact of the matter was that it could be the carry trade may be USD800mn in size, and they have locked in their gains, thus to unwind a smallish RM40m would not matter much to the fund.

Technically, they would have had a better price if they packaged the whole thing and asked for a total bid from a big broking desk. Most would have no problem taking the whole shebang on for a 10%-15% discount. Sigh ... the perils of computerised trading. Someone should have over-ridden the program instruction.

e) Unwinding by a carry trade may explain the losers, but what about The Star and JCY surges?
This one is harder to explain. It could be short covering, i.e. a hedge fund borrows the stock to short, for various reasons ... hedging other long positions or you do not like these companies, and there are plenty of good reasons to NOT like JCY and The Star. JCY - haphazard earnings; The Star - may be a casualty of the recent elections. Sometimes a big carry trade fund may be practicing Multi-Strategy, i.e. locking in good dividend yield spreads between borrowing cost; and long/short strategy for some other stocks (e.g. in this case shorting JCY and The Star and going long Flextronics and SPH). Its just speculation on my part, but if a big fund is unwinding its carry trade, it may very well involve longs/shorts covering as well.

f) So who was the client and does the fund have more stocks to throw?
This is guess work at best. It is rumoured to be Bank of New York Mellon. Some smarter pundits went to check further what other Malaysian stocks BNY Mellon has. This is not to say they will also dump other shares in their fund. But they DO have other Malaysian stocks in their portfolio. I do not think its fair to reveal what are the counters as that may trigger an irrational reaction by local players. Do I have the list, yes I do. It is relatively easy to do a bit of research to get their holdings, but I certainly do not think its fair or wise to put them up.

This would not be the first but is significant as it is sizable and the drop in some of these share prices have been very significant. Malaysia is not the only market to experience this. Same can be seen in Singapore and HK as well, but it looks bad when some of these counters are not as liquid.

Well, I guess many people will start putting in big buy orders at very low prices or sell prices at very high prices in case these events happen again. They will happen again but only during these times when there are reasons for the carry trades to unwind.


So, I do not think its rebalancing (as was reported in the papers) because rebalancing usually involved largely indexed stocks. If all the 10 stocks were to be indexed stock, you will see the KLCI gaping down by 40-60 points. Hence it is more likely to be a carry trade fund unwinding arbitrage dividend yield plays.

What will happen on Monday, back to normal prices. You will not get to buy or sell at those prices for TDM, Coastal, BToto, Star, Batu Kawan, HS Plantation, JCY, CBIP .... but more people will queue like nobody's business at very high and very low prices.

Friday, June 21, 2013

The War on Reality



If you're at all disturbed (I am) by the various recent revelations over massive data trolling by government agencies, you should read this article in the NYT by Peter Ludlow. It looks at the vast and largely invisible ecology of private security and intelligence firms that are not only gathering information on ordinary people, but actively creating and spreading disinformation (otherwise known as "lies") to discredit opponents of their corporate clients. They're information mercenaries who are essentially shaping reality as we see it -- and not with benign motives, you can be sure. Ludlow:
To get some perspective on the manipulative role that private intelligence agencies play in our society, it is worth examining information that has been revealed by some significant hacks in the past few years of previously secret data.

Important insight into the world these companies came from a 2010 hack by a group best known as LulzSec  (at the time the group was called Internet Feds), which targeted the private intelligence firm HBGary Federal.  That hack yielded 75,000 e-mails.  It revealed, for example, that Bank of America approached the Department of Justice over concerns about information that WikiLeaks had about it.  The Department of Justice in turn referred Bank of America to the lobbying firm Hunton and Willliams, which in turn connected the bank with a group of information security firms collectively known as Team Themis.

Team Themis (a group that included HBGary and the private intelligence and security firms Palantir Technologies, Berico Technologies and Endgame Systems) was effectively brought in to find a way to undermine the credibility of WikiLeaks and the journalist Glenn Greenwald (who recently broke the story of Edward Snowden’s leak of the N.S.A.’s Prism program),  because of Greenwald’s support for WikiLeaks. Specifically, the plan called for actions to “sabotage or discredit the opposing organization” including a plan to submit fake documents and then call out the error. As for Greenwald, it was argued that he would cave “if pushed” because he would “choose professional preservation over cause.” That evidently wasn’t the case.

Team Themis also developed a proposal for the Chamber of Commerce to undermine the credibility of one of its critics, a group called Chamber Watch. The proposal called for first creating a “false document, perhaps highlighting periodical financial information,” giving it to a progressive group opposing the Chamber, and then subsequently exposing the document as a fake to “prove that U.S. Chamber Watch cannot be trusted with information and/or tell the truth.” (A photocopy of the proposal can be found here.)

In addition, the group proposed creating a “fake insider persona” to infiltrate Chamber Watch.  They would “create two fake insider personas, using one as leverage to discredit the other while confirming the legitimacy of the second.” The hack also revealed evidence that Team Themis was developing a “persona management” system — a program, developed at the specific request of the United States Air Force, that allowed one user to control multiple online identities (“sock puppets”) for commenting in social media spaces, thus giving the appearance of grass roots support.  The contract was eventually awarded to another private intelligence firm.

This may sound like nothing so much as a “Matrix”-like fantasy, but it is distinctly real, and resembles in some ways the employment of “Psyops” (psychological operations), which as most students of recent American history know, have been part of the nation’s military strategy for decades. The military’s “Unconventional Warfare Training Manual” defines Psyops as “planned operations to convey selected information and indicators to foreign audiences to influence their emotions, motives, objective reasoning, and ultimately the behavior of foreign governments, organizations, groups, and individuals.” In other words, it is sometimes more effective to deceive a population into a false reality than it is to impose its will with force or conventional weapons.  Of course this could also apply to one’s own population if you chose to view it as an “enemy” whose “motives, reasoning, and behavior” needed to be controlled.

Psyops need not be conducted by nation states; they can be undertaken by anyone with the capabilities and the incentive to conduct them, and in the case of private intelligence contractors, there are both incentives (billions of dollars in contracts) and capabilities.

Several months after the hack of HBGary, a Chicago area activist and hacker named Jeremy Hammond successfully hacked into another private intelligence firm — Strategic Forcasting Inc., or Stratfor), and released approximately five million e-mails. This hack provided a remarkable insight into how the private security and intelligence companies view themselves vis a vis government security agencies like the C.I.A. In a 2004 e-mail to Stratfor employees, the firm’s founder and chairman George Friedman was downright dismissive of the C.I.A.’s capabilities relative to their own:  “Everyone in Langley [the C.I.A.] knows that we do things they have never been able to do with a small fraction of their resources. They have always asked how we did it. We can now show them and maybe they can learn.”

The Stratfor e-mails provided us just one more narrow glimpse into the world of the private security firms, but the view was frightening.  The leaked e-mails revealed surveillance activities to monitor protestors in Occupy Austin as well as Occupy’s relation to the environmental group Deep Green Resistance.  Staffers discussed how one of their own men went undercover (“U/C”) and inquired about an Occupy Austin General Assembly meeting to gain insight into how the group operates.\

Stratfor was also involved in monitoring activists who were seeking reparations for victims of a chemical plant disaster in Bhopal, India, including a group called Bophal Medical Appeal. But the targets also included The Yes Men, a satirical group that had humiliated Dow Chemical with a fake news conference announcing reparations for the victims.  Stratfor regularly copied several Dow officers on the minutia of activities by the two members of the Yes Men.One intriguing e-mail revealed that the Coca-Cola company was asking Stratfor for intelligence on PETA (People for the Ethical Treatment of Animals) with Stratfor vice president for Intelligence claiming that “The F.B.I. has a classified investigation on PETA operatives. I’ll see what I can uncover.” From this one could get the impression that the F.B.I. was in effect working as a private detective Stratfor and its corporate clients.

Stratfor also had a broad-ranging public relations campaign.  The e-mails revealed numerous media companies on its payroll. While one motivation for the partnerships was presumably to have sources of intelligence, Stratfor worked hard to have soap boxes from which to project its interests. In one 2007 e-mail, it seemed that Stratfor was close to securing a regular show on NPR: “[the producer] agreed that she wants to not just get George or Stratfor on one time on NPR but help us figure the right way to have a relationship between ‘Morning Edition’ and Stratfor.”

On May 28 Jeremy Hammond pled guilty to the Stratfor hack, noting that even if he could successfully defend himself against the charges he was facing, the Department of Justice promised him that he would face the same charges in eight different districts and he would be shipped to all of them in turn.  He would become a defendant for life.  He had no choice but to plea to a deal in which he may be sentenced to 10 years in prison.  But even as he made the plea he issued a statement, saying “I did this because I believe people have a right to know what governments and corporations are doing behind closed doors. I did what I believe is right.”  (In a video interview conducted by Glenn Greenwald with Edward Snowden in Hong Kong this week, Snowden expressed a similar ethical stance regarding his actions.)

Given the scope and content of what Hammond’s hacks exposed, his supporters agree that what he did was right. In their view, the private intelligence industry is effectively engaged in Psyops against the American public., engaging in “planned operations to convey selected information to [us] to influence [our] emotions, motives, objective reasoning and, ultimately, [our] behavior”? Or as the philosopher might put it, they are engaged in epistemic warfare.

Tuesday, June 18, 2013

Wednesday S&M Show Podcast

Chinese listed companies on Bursa ... Is there a problem?

http://www.bfm.my/snm-show.html

Enola Gay by OMD ... Orchestral Maneuveres In The Dark

Ideal Jacobs, Revamped?

I gave this counter hell when it was listed because from day one when it went listed, the shares was up for only a brief moment and closed the day down. It went down for next subsequent days and weeks, the first IPO probably to see such a huge down performance non stop. Their lows was near 10 sen and certainly it needed something totally new to turn this counter around.

Khairul Azwan Harun, Perak Umno Youth Chief, has taken a substantial stake in Ideal Jacobs last week. Although the stake was just 5.83%, it would be silly to assume that that will be the beginning and the end of the story. The rumoured plans include making Ideal Jacobs as part of a river based hydroelectric power plant project in Perak. The said project was on the books but was put on hold pending the recent elections. 



The company is relatively clean with losses stemmed judging from the last couple of quarters. Of course the hydro project will require funding, RM100m for 10MW and RM127m for 15MW. Khairul Azwan is also a director of Lumut Maritime Terminal.

Bottom line its current market cap of just RM28m makes it a relatively cheap and safe play. Its a bit speculative but given that we have had a plethora over crowding for marginal oil fields, Iskandar and Penang property counters as theme, ... an early Perak play could be in the works.


Disclaimer: 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.

Robots will take your job



From MIT Tech Review, this article explores an important question: is technology putting people out of work? That simple answer is of course "yes," technology in manufacturing, for example, is clearly replacing human workers on a massive scale. It's true elsewhere too: many of the poorly written finance articles you see today are also written by machines. But technology also creates jobs, and the bigger question is whether it creates more than it destroys. The article looks at the work of MIT researchers Erik Brynjolfsson and Andrew MacAfee who argue based on productivity data that technology is now on balance eliminating jobs, and is in large part responsible for slow growth in employment:
Given his calm and reasoned academic demeanor, it is easy to miss just how provocative Erik Brynjolfsson’s contention really is. ­Brynjolfsson, a professor at the MIT Sloan School of Management, and his collaborator and coauthor Andrew McAfee have been arguing for the last year and a half that impressive advances in computer technology—from improved industrial robotics to automated translation services—are largely behind the sluggish employment growth of the last 10 to 15 years. Even more ominous for workers, the MIT academics foresee dismal prospects for many types of jobs as these powerful new technologies are increasingly adopted not only in manufacturing, clerical, and retail work but in professions such as law, financial services, education, and medicine.

That robots, automation, and software can replace people might seem obvious to anyone who’s worked in automotive manufacturing or as a travel agent. But Brynjolfsson and McAfee’s claim is more troubling and controversial. They believe that rapid technological change has been destroying jobs faster than it is creating them, contributing to the stagnation of median income and the growth of inequality in the United States. And, they suspect, something similar is happening in other technologically advanced countries.

Perhaps the most damning piece of evidence, according to Brynjolfsson, is a chart that only an economist could love. In economics, productivity—the amount of economic value created for a given unit of input, such as an hour of labor—is a crucial indicator of growth and wealth creation. It is a measure of progress. On the chart Brynjolfsson likes to show, separate lines represent productivity and total employment in the United States. For years after World War II, the two lines closely tracked each other, with increases in jobs corresponding to increases in productivity. The pattern is clear: as businesses generated more value from their workers, the country as a whole became richer, which fueled more economic activity and created even more jobs. Then, beginning in 2000, the lines diverge; productivity continues to rise robustly, but employment suddenly wilts. By 2011, a significant gap appears between the two lines, showing economic growth with no parallel increase in job creation. Brynjolfsson and McAfee call it the “great decoupling.” And Brynjolfsson says he is confident that technology is behind both the healthy growth in productivity and the weak growth in jobs.

It’s a startling assertion because it threatens the faith that many economists place in technological progress. Brynjolfsson and McAfee still believe that technology boosts productivity and makes societies wealthier, but they think that it can also have a dark side: technological progress is eliminating the need for many types of jobs and leaving the typical worker worse off than before. ­Brynjolfsson can point to a second chart indicating that median income is failing to rise even as the gross domestic product soars. “It’s the great paradox of our era,” he says. “Productivity is at record levels, innovation has never been faster, and yet at the same time, we have a falling median income and we have fewer jobs. People are falling behind because technology is advancing so fast and our skills and organizations aren’t keeping up.”

Brynjolfsson and McAfee are not Luddites. Indeed, they are sometimes accused of being too optimistic about the extent and speed of recent digital advances. Brynjolfsson says they began writing Race Against the Machine, the 2011 book in which they laid out much of their argument, because they wanted to explain the economic benefits of these new technologies (Brynjolfsson spent much of the 1990s sniffing out evidence that information technology was boosting rates of productivity). But it became clear to them that the same technologies making many jobs safer, easier, and more productive were also reducing the demand for many types of human workers.
....

“We were lucky and steadily rising productivity raised all boats for much of the 20th century,” he says. “Many people, especially economists, jumped to the conclusion that was just the way the world worked. I used to say that if we took care of productivity, everything else would take care of itself; it was the single most important economic statistic. But that’s no longer true.” He adds, “It’s one of the dirty secrets of economics: technology progress does grow the economy and create wealth, but there is no economic law that says everyone will benefit.” In other words, in the race against the machine, some are likely to win while many others lose.
The story is of course more complicated than this. Lots of technology will work along with people and make them more productive. Over time, people can also learn new skills and move into new jobs, so the long term trend isn't clear. But I do find it hard to believe in the simple "the economy will adjust as it always has" argument for the reasons that rates of change and time scales matter. Technological advance is accelerating. The more technology we have, the faster we learn to create  still more. The only way people will keep up is if technology deployed on a massive scale also helps them learn new skills in an ever faster way. Is that happening?

Sunday, June 16, 2013

Kini Biz Asked ...

"could Halim Saad have done it on his own?" ... in light of his lawsuit ....

my take ... "Could George Bush Junior have done it on his own???"

Happy Fathers Day

My friend, Roger Wang, who also happens to be one of the country's finest guitarist ... has composed a lovely song for his daughter. Plus he sings, OMG ... that is so rare. The video sets with the lego pieces, must have been such a labour of love ... Wonderful Roger...



This is the most important song I have ever written. 

It's also my first vocals outing and first music video that I created myself.
The song was inspired by my daughter's obsession with fairy tales and being a princess. It sums up a lot of my feelings about being a father as well as the hopes and lessons I have for her. 
It's often hard for a father to relate to dolls and the way young girls play. Playing Lego together was one of the few activities that we shared. All those hours helped bond us. This video was made with those Lego sets and mini-figures. They became the best way for me to express this song visually.
This song and video come from a very personal place, but it goes out to all fathers and daughters out there, regardless of age.
HAPPY FATHER'S DAY

Saturday, June 15, 2013

Biz News Snippets Worth Following

I read, almost religiously, my favourite business magazines, in order of preference ... International Business Week, Fortune and Bloomberg Markets. I do read Forbes now and then but its such a slanted Republican thingee its like Harakah. I think to see how people from various sides and various places look at and view business and investments help to broaden our perspective no end. 

Since my almost weekly sojourn to Singapore, its also fun to read what the little island's papers are saying about business and investments.

Iskandar

The mood is good for Iskandar. They highlighted how well Affiniti Residences sold last weekend, noting that the price was RM850 to RM1,000 psf. They compared that to 1Medini which as launched in January 2012 and sold for just RM450 psf. Hmmm... whetting yand stirring up Singaporeans to further look at Iskandar as a great investing or flipping hotpot. They seemed focused on the Medini or rather the E&O branding, and they also seem to like Puteri Harbour.

Over the next 3-5 years there will be another 13,500 condos to be sold or built in Iskandar. Compare that to just 8,000 units launched between 2000 and 2012, you get what I am saying. Obviously, the powers to be in Singapore have tacitly approve of Singaporeans to invest big into Iskandar or else you won't be getting big spreads with lovely pics in the papers there. Possibly that is to quell the over investment into Singapore properties, which is already way out of the hands of most Singaporeans.

The supposed mulling over a special property tax by Johor state government seems to have little effect. Its not just Singaporeans though, a Japanese investment fund just bought an entire tower of 285 units at Medini at Iskandar Residences ... somehow I don't think they will be staying there. I wonder, how many will?

My view is that all is well and good for at least the next 12 months when big guns start to launch their flagship property projects. It is the sub-sale and resell or flipping that goes on that is the crux. Will there be people buying on the resale market for 20%-30% higher than the launched price just 6 months ago? It will be very hard to see that happening because of the number of projects that are coming on board. If all are pricing higher at RM900 and upping them to RM1,100 psf because of anticipated demand ... and we are not talking of just 5 or 10 extra condo developments... we  are talking about 30 to 40 a year ... its a tough ask to see it snowballing much further. I suspect RM1,300-1,500 psf would be the peak as people will start comparing with prices in Penang and KL.

The optimists will say look what Singaporean and foreign buyers can do to Sentosa property prices. Well, yeah, do you know how big is Iskandar compared to Sentosa?

The Real QE Poser

Why is the probable end of QE frightening markets? It has to do with interest rates. The selling now has largely been in REITs and dividend yield plays (which include a lot of blue chips). As rates rise from near zero, the yields of these counters will be reassess


ed relatively to the higher risk free yield. What we are seeing is the global portfolio rebalancing. Many funds are reducing their holdings in the above counters appreciably. The other side of the coin is that big banks should benefit from better net interest margins as they usually have a large pool of inert savings, which will not be so easily or swiftly adjusted in the rates. However, we are not seeing a proportionate flow of funds into big banks yet, although it should happen very soon.

We are not going to see a massive correction, in fact, we are already correcting. The markets are discounting all that ahead of time. Markets has to discount what it can forsee or roughly anticipate. In fact, higher interest rates will force funds out of dividend yield plays and into riskier instruments. All said, it is also May June July we are talking about, remember Sell In May Come Back In August ... actually its also summer holidays for a lot of people in the investing field although I doubt that will be as true as the markets are getting more and more global, not US or Europe centric.

Thursday, June 13, 2013

Stupid myths of public versus private

This interview of Mariana Mazzucato on the INET blog is hugely important. We're all influenced by some ideas floating around about how the private sector is sleek and efficient, risk taking etc, while the public sector is slow and wasteful, and almost none of this is based on any sound thinking or evidence. It's propaganda almost entirely. Mazzucato helps dispel these myths and her thoughts should be promulgated far and wide:

The Entrepreneurial State: Debunking Public vs. Private Sector Myths

The public sector is often seen as sclerotic and conservative in contrast with a dynamic and innovative private sector. This assumption lies at the basis of much of the outsourcing of public services to the private sector. In this interview and in her new book, Institute for New Economic Thinking grantee Mariana Mazzucato argues against this assessment and in favour of state-led innovation and economic growth. She maintains that the public sector usually bears the highest risks of funding innovation without then reaping the rewards. 
What are the myths about the public sector and private sector that you say need to be debunked?


The myth is of a dynamic, creative, colourful, entrepreneurial private sector, that at most needs ‘unleashing’ from its constraints from the public sector. The latter is instead depicted as necessary for fixing ‘market failures’ (investing in ‘public goods’ like infrastructure or basic research) but inherently bureaucratic, slow, grey, and often too ‘meddling’. It is told to stick to the ‘basics’ but to avoid getting too directly involved in the economy.

Instead, if we look around the world, those countries that have grown or are growing through innovation-led growth are countries where the state did not limit itself to just solving ‘market failures’ but actually developed strategic missions, and was active in directing public investment in particular areas with scale and scope, changing the technological and market landscape in the process. And ironically one of the government’s that have been most active on this front is the US government, which is usually depicted in the media (and by politicians) as being more ‘market oriented’. From putting a man on the moon, to developing what later became the Internet, the US government, through a host of different public agencies, provided direct financing not only of basic research but also applied research and even early stage public venture capital (indeed Apple received $500,000 directly from public funds). In each case it provided funding for the most high risk/uncertain investments, while the private sector sat waiting behind.

What do you say to those who would argue that the government is not good at picking winners? That government spending crowds our private investment?

All this fear about the government trying and failing to pick winners is exaggerated. Both Apple and the technologies behind the iPhone were picked! But picking winners is more probable when the state is described as though it is relevant rather than irrelevant. When government is given a mission, proper funding, and organizes its agencies so they are dynamic and able to ‘welcome’ the exploratory trial and error process that accompanies innovation, it can attract top expertise and dynamism.

Today, we see countries that are growing thanks to a courageous public sector and through mission oriented policies. For example, China is spending $1.7 trillion on five key new broadly defined sectors, including ‘environmentally friendly’ technologies. Brazil’s active state investment bank is spending more than $60 billion just this year on green technology. The economics profession doesn’t adequately account for this kind of state-led activity, but only warns of governments ‘crowding out’ private business or failing at picking winners.

What governments are doing today with regards green technology is not crowding out but crowding in business investment by creating a vision around it, and funding the most capital intensive areas with high market and technological risk. But we must also change the language. To me, ‘crowding in’ still sounds negative, as it is being compared to a benchmark of useless government. In my new book I go into this further, and suggest some new language and images that can really change the way we talk about and imagine the space for the public sector.

Could you elaborate on your argument that modern capitalism is rewarding value extraction over value creation?

The problem is that by not admitting this entrepreneurial risk-taking role that the state provides, we have not confronted a key relationship in finance: the relationship between risk and return. Innovation is deeply uncertain, with most attempts failing. For every Internet there are many Concordes or Solyndras. Yet this is also true for private venture capital (VC). But while private VC is then able to use the profits from the 1 out of 10 successes to fund the 9 losses, the state has not been allowed to reap a return. Economists think this will happen via tax (from the jobs created, and from the profits of the companies), yet so many of the companies that receive such benefits from state funding, bring their jobs elsewhere, and of course we know they also pay very little tax. Thus the return generating mechanisms must be rethought. It could be done through retaining equity, a ‘golden share’ of the intellectual property rights, or through income contingent loans. But currently this is not even discussed. When Google received funding for its algorithm from the National Science Foundation (NSF), is it right that after it earned billions nothing went back to the NSF (which is today starved of funds), or that some of Apple’s profits go into a national innovation fund to fund the next wave of Apples?

What this means is that we have socialized the risk of innovation but privatised the rewards. This dynamic is one of the key drivers of increasing inequality. Because innovation today builds on innovation tomorrow, the ‘capture’ can be very large. This would not be the case if innovation were just a random walk. Policy makers must think very hard how to make value creation activities (done by all the collective actors in the innovation game) rewarded above value extraction activities (in this sense capital gains taxes are way too low). And since the booty from the latter can be very large, redirecting incentives and rewards towards the value creators is essential. The problem is that some of the ‘extractors’ like to sell themselves as the creators.

Tuesday, June 11, 2013

Wednesday S&M Show Podcast

Share buybacks ... not all good.

http://www.bfm.my/snm-show.html


Libertango (I've Seen That Face Before) - Grace Jones


Happy Father's Day - Let The Man Be The Man He Is

I never thought a simple posting like this could have struck so many chords. We all love our mums, and rightly mums get most of the accolade, Mother's Day is always bigger than Father's Day. This posting got xx FB likes, I still cannot believe so many felt the same way. Its like we are so connected in what's deepest in us. I may not know all my readers personally, but I feel so humbled to know you all feel the same way. Its not easy to be a blogger, if there are 100 readers, there'd be 4 or 5 who will just hate your guts and they will post nasty comments to let you know that - even though out of the 100 70 or more may like you, but most will not bother to write and tell you nice things, thats the reality when you put yourself out there ... hence reading the comments for this posting was very shocking and restored my faith in humanity. I thought I had to say this, made me realise what I thought was something simple was probably my most important posting because so many people really cared.
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I had a good chat with a friend about dads growing old. I assume we are all filial sons and daughters. When our dads grow older and older, maybe some will have retired from their careers by now. I wonder how many of us "love our dads" in the way that allows him to continue to be the man that he is.

Dads who are now retired are dads from a different era. Most of our dads are the strong silent types, not like many of the younger dads nowadays who will try to be good friends with their kids. 

A man of the house usually takes the lead in the household. He takes care of the paycheck. He calls the shots in many areas of the household matters. When they retire, they may not have access to as much "money as before" - gee, do you ever wonder why, thats because he has brought you guys up, send you guys to further your studies, even finance your first car or even your first home, down payment for this and that. Flying you back from overseas, etc... 

Now he may be pushing 60 or 70, he may be living primarily off what you kids give him. We somehow think if we give them a few hundred or a thousand or two ringgit a month, we have done our part. Your dad is still the man he was, faults and all. He used to call the shots, ask you guys where you like to have dinner, ask you guys what you want for your birthdays.

Now, he has to take money from you guys. Funds may not be so "loose". When you guys take him out to dinner, he doesn't have the "right" to pay for you guys anymore. Heck, he may even shy away from ordering whatever he likes from the menu or dictate where he wants to have dinner. He may not even be able to just take your mum wherever they wish to go for holidays. 

In these very many small ways, he is not "allowed to be the man he used to be". We as children should empathise with that. If we can afford it, we should give him more than what he needs to survive. We should allow our father to be the father he still is. 

A person's spirit is the hardest to please and easiest to break. Love comes in many disguises. Love is not just money but our attitude as well. Reconsider how we love our dads. Mine is no longer around. If your dad still is, be thankful, and be the better son and daughter. Love your dad better.

Monday, June 10, 2013

Have A Good Look At Cypark Resources

The market has been focused on oil & gas, marginal oilfields, Iskandar plays and even Penang's Second Bridge plays. Running out of ideas? So are the analysts. Still, there are gems to be found, and one of them is in Renewable Energy, Cypark Resources.

Cypark Resources Berhad is a Malaysia-based company engaged in the provision of environmental technology and engineering solutions to both the private and public sectors. Its services include transforming neglected, degraded or contaminated land into sustainable and manageable fields. Its projects include the restoration of a disused mining land in Cyberpark, Cyberjaya, and the Taman Beringin Safe Landfill Restoration project in Kuala Lumpur. 

It has three segments: landscaping, which is engaged in the provision of landscape services for public parks, public amenities and other landscaping developments; maintenance, which is engaged in the provision of maintenance services for public parks, public amenities and other landscape developments, and environmental, which is engaged in the provision of nature conservation and environmental amelioration. In September 2011, it acquired Cypark Suria (Sua Betong) Sdn. Bhd., Cypark Suria (Kuala Sawah) Sdn. Bhd. and Cypark Suria (Bukit Palong) Sdn.



The company is pumping up the revenue platform, hence if you focused solely on reported numbers you may miss the bigger picture. 1Q13 revenue rose by 20.6% to RM51m due to the start of Cypark's solar farm in Pajam and higher revenue from its waste-to-energy projects. At the same time, total costs rose by 26.8% to RM39.7m as the company is aggressively putting up RE projects around Malaysia. Management aims to add 15MW of  RE capacity in FY13, mainly in 2H. This will increase Cypark's total RE capacity by 83% to 33MW by end-FY13. The higher start-up cost has offset Cypark's top-line growth, leading to a 6.4% decline in EBIT to  RM10.1m.

The stock could be catalysed by the successful rollout of new renewable energy (RE) projects and signing of the Ladang Tanah Merah landfill concession. In addition to its MoU in Myanmar, Cypark can replicate its 
RE model in other Asean countries such as Thailand, which already has a feed-in-tariff mechanism in place.


Disclaimer: 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.

Sunday, June 9, 2013

Thank You!

Life of Finance Blogger can be tough.
People have different time frame for trading and we all expect instant and positive results for all our trading. That is simply not possible and many times Trolls send abusive emails.
However, once in a while, someone send encouraging emails as well.
The following is an email from one of my long term subscriber:

Hello BB.
Thank you so much for a the many good calls you have come up with.
This has been quite a experience for me.

I would like to thank you for the newsletter and the many blog entries
you took the time to author.
I would also like to share a bit of my trading history, and the
reasons for me to sign up for the newsletter. You see I have been
trading for 7-8 years. It all started with the many daily discussions
about media, politics and financial bubbles of the danish housing
market (I live in Denmark), almost needles to say my views was/is
contrasting to the media painted views -  most the discussions back
then was ending the same way, with my friends telling me "if you are
that smart, go make some money". Well, I opened an account and so it
began.

After the beginning of my trading there was big wins and big losses,
my trading style was about macro and stats, I thought, but I was so
wrong. For me it was mostly about emotions. I became emotionally
exhausted and the timing of the swings was my bad. I saw ETF 3X move
up and run away with gains up to 100% ending with losses in the double
digits. What agony.

So I left the "minute chekking" - checking accounts on hourly basis -
emotional stress and returned to where my successes were (looking from
my trading history). It took half a year before I did any trade again
- and quit levered ETF as a whole (up till now). I never thought I
would be subject to this level of stress because I am a very clam guy.
After my pause I got some checks and balances in place which could
counter some of my bad trading habits (for instance if a trade goes
against you the counter trade is not the right one either, it not
about being IN - its about capital preservation).

I started following you on the blog and it was a easy choice signing
up for subscription to the newsletter and that was the first time ever
I paid for trading advise. But I knew I needed some guidance to grow
with. Partly so I would not revert to my old trading patterns of wild
swings (happened before) a sane voice so to speak, and to get my
emotional toolbox in order.

And now I am more confident than I have ever been and hoping to
continue the journey with you on ward and finally this week concludes
some of the best winning 9 months for me.
My deepest thanks for the advise and being the sane voice I needed so much.
THANK YOU.

With the best regards.


I was both humbled and touched with this email.
Thank you my friend.

Coming back to market, our exit time was very good and so far our new trade has played well. I was not able to scale in the 2nd part because it ran away from us on Friday but I decided not to chase it. I think the trade will come back to us on Monday to a certain extent when I will add the balance position.

I see a long term top forming on Housing and would think that with the coming bounce we should exit housing if we are long housing. Also with the sentiment negative on gold, I see a long term bottom forming but I still think we will have to wait somewhat more before we can go long.

Thank you and wish you all great trading.

Nanex: visualizing zillions of trades in a half-second

By way of Naked Capitalism, I learned of the video below produced by Nanex, the market data analysis company in Chicago. It runs for just under 6 minutes and shows all the quotes for Johnson & Johnson stock racing among a network of exchanges over just one half second of real time. Watch the whole thing and then remember -- this is just one half second (the clock, bottom middle, goes up in increments of milliseconds). Below the video, some explanation of what you're seeing from Nanex.




We got the idea after realizing, in face to face meetings with them [the CFTC], they didn’t understand market structure or the importance of latency and the consolidated feed. That was several years ago. We still aren’t sure if they get it, or are just playing dumb.

The bottom box (SIP) shows the National Best Bid and Offer. Watch how much it changes in the blink of an eye.

Watch High-Frequency Traders (HFT) at the millisecond level jam thousands of quotes in the stock of Johnson and Johnson (JNJ) through our financial networks on May 2, 2013. Video shows 1/2 second of time. If any of the connections are not running perfectly, High Frequency Traders can profit from the price discrepancies that result. There is no economic justification for this abusive behavior.

Each box represents one exchange. The SIP (CQS in this case) is the box at 6 o’clock. It shows the National Best Bid/Offer. Watch how much it changes in a fraction of a second. The shapes represent quote changes which are the result of a change to the top of the book at each exchange. The time at the bottom of the screen is Eastern Time HH:MM:SS:mmm (mmm = millisecond). We slow time down so you can see what goes on at the millisecond level. A millisecond (ms) is 1/1000th of a second.

Note how every exchange must process every quote from the others — for proper trade through price protection. This complex web of technology must run flawlessly every millisecond of the trading day, or arbitrage (HFT profit) opportunities will appear. It is easy for HFTs to cause delays in one or more of the connections between each exchange.

Saturday, June 8, 2013

Action, Reaction, Inaction ... Karmatic

This video is about an island in the ocean at 2000 km from any other coast line. Nobody lives, only birds and yet, you will not believe what you will see here.

Please don't throw anything into the sea. Unbelievable, just look at the consequences.


Thursday, June 6, 2013

First Meaningful Pull Back.

It has been a while since my last post. It is simply a function of lack of time. In the mean time, I have somehow managed to send the Weekly newsletters to the subscribers.
I was hoping for a market TOP around 1st week of May and accordingly we went long VIX (UVXY) and short Emerging markets and other sectors including Finance.
However, there was an over-shot and the markets kept going up till May 22nd. Obviously, there were some doubts amongst the subscribers. I kept stressing that the correct has simply been delayed not cancelled. And we kept hanging on to the long VIX and short everything else trade.
Yesterday and today we closed our positions. We made a tidy little sum on UVXY and peanuts on others. But at least there was no big red anywhere.
Now we are taking a new position for a short term trade.

I think we are in the process of a giant TOP forming which will take us till the end of summer before we see any major correction.
For now, I think the short term correction is over and we will see another bounce soon. How far it will go is a question of time. But if it fails to make a new high, we have problem. Big problem or little problem, I am not sure at this time.

We stayed away from Gold and Silver because I think the cycles did not bottom. Nor for that matter the cycle for Apple and we will see more downside for Apple as well.  We are waiting for more favourable time to go long PM sector.

We play the game by the seat of the pants. And we always correct the course of action as we go along. We cannot be correct 100% of time. For e.g. I am holding grain ETFs for few months now and I am under water, although not by much. But I am holding onto those positions for longer term. And that is where I find most folks have problem. Committing to a position for long term. May be we got brain washed by leveraged option trade, when we start expecting instant results. We get impatient and when a trade initially goes against us, we get scared. The cycle of fear and greed plays on.

Hope you guys are doing great.
Trade safe.

Asset Class Returns As At 31 May 2013

This is highly interesting. As a test, if you were looking at the table what could you say or what kind of observations could you make. Not trying to be an asshole or "guru" here, but if you are honest about your knowledge of markets, the ability to synthesize data and tell a story, you should do well in financial markets. If you can't, then you shouldn't be, or are just plodding along. To be in the markets you can study, but you have to have passion for it. Make your own observations before scrolling down.
060313Z.gif

- The one month data does not tell us much.

- YTD, the equity markets have been well led by the US, in fact emerging markets have been trailing ... suffice to say that most of the Asian markets which have been surging so far this year have been an anomaly, which further depresses the real performance of other emerging markets.

- We know the financial markets have been awashed in liquidity with QEs from various central banks, but where have they been headed. The YTD figures are again revealing, some have exited gold in a big way. Them taking money off gold may be just profit taking or likely to mean they are more comfortable that currencies won't be debased anymore, or that bailouts have finally went past a peak. The reduction of fear or volatility could be another reason.

- So where is the liquidity? They went largely into US stocks, US REITs and even foreign REITs. The REITs interest is but a reflection in a strong bottoming in property price correction and a resurrection of demand, and also a hint that people are more employable even now to take up new mortgages, and/or that a lot more PE/VC/vulture funds are taking advantage and making deals on distressed commercial properties.

- Look at crude oil, one month, YTD or 1 year even, that is a good reflection about the robustness (or lack of) of the global economic recovery. The recovery is benign and in patches still.

- Look at commodities, again the same conclusion as for crude oil, still working of excess inventory in the global system.

- Look at the emerging equity markets from 1 year ago, there has been a dramatic shift away from emerging markets back to US and possibly Japanese stocks. Again the robust performance of other Asian equity markets is very telling as it is viewed as largely unscathed and the equity markets there do attract sufficient interest compared to other emerging markets.

- The most important point one has to conclude is a drastic shift away from bonds of all kind. Bonds have been great on a 3 year basis but more funds are moving out. They move out because they either think there is a bubble there (too safe, and too many people willing to pay too high a price for low yields) and/or equity provides a better return even after accounting for risk.

From the above, I am quite confident that the current sell down in equities will be brief.