Latest Ideas Achieve Financial Freedom...www.1012financialfreedom.com

Malaysia's Property Prices To Rise As Much As 20% Within 6 Months?

2010-08-10T12:43:00.004+08:00

According to Datuk Michael Yam, President of Real Estate and Housing Developers' Association
Malaysia (REHDA), prices of residential properties will rise 10-20% over the next six months because of cost and inflationary pressures! He added that the current housing market is simmering, and there is neither boom nor bust, but property prices will rise. The increase will be in high-rise and landed properties in all price categories across Malaysia! The issue of rising property prices was partly due to an imbalance of supply and demand as more migrants move to land scarce Kuala Lumpur.

Interestingly, in a recent survey of 133 Rehda members, 81% expect price hikes by as much as 20% in the next six months!

Can you ever imagine a terrace-linked house being sold for about RM1.6 million? Well, that's happening in the upper-class enclaved Desa Park City!

Nevertheless, there are views that Malaysia's property prices are still under appreciated by foreigners. Some experts attributes this to a lack of liquidity in the market and competition from Hong Kong and Singapore where capital appreciation is better due to price volatility. In addition, when other important consideration comes into play, such as public transportation, the branding of the city and KL is considered provincial when compared to London, Hong Kong or Singapore. In simple terms, KL needs to be seen as world class and provides better livability.

For the full article on the above, click this link.

Back In The Black, For Now At Least...

2010-05-14T10:21:00.004+08:00

Malaysia has just reported a strong growth of 10.1% for the 1st quarter of 2010, led by strong recovery in exports! On the other hand, Central Bank has also raised the OPR (Overnight Policy Rate) or the official interest rate by another 25 basis point. That means Bank's BLR will go up likewise, by the same token at the very least.

Seems Malaysia represents only the handful countries in Asia that keeps pushing up interest rates...

In a way no surprises to me, given BNM's normalization process as economy recovers. In fact, I expect another rate hike coming around July after the announcement of 2nd quarter GDP.

Does this mean all are hunky dory from now on? Not quite. Much will still depend on how the current European (PIIGS) sovereign debt crisis pan out. Greece has been bailed out no doubt, but that could well be just the tip of the iceberg!

If things turn out for the worst, then we should expect economy to start turning down again in the second half of this year.. Expect to have an eventful second half! In the midst of another potentially looming crisis, the consolation is that we can at least sit back and enjoy the upcoming football World Cup.....It will be another set of drama for sure!

How To Invest in Individual Stocks Using EPF Money

2010-05-13T14:15:00.005+08:00

Phillip Capital Management (PCM) is one such company licensed by Securities Commission and an approved Fund Manager for EPF. In order to invest your EPF money with Phillip Capital to buy individual stocks, you will need to first of all satisfy the criteria set by EPF as summarised in my previous article "Can You Invest In Individual Stocks Using EPF Money?"

Calculation example:

Procedure:

Fill up the application Form KWSP 9F (AHL) which you can download from EPF website or visit your nearest EPF office.
Download or obtain a copy of the latest EPF statement
In the Form, indicate the amount you are entitled to withdraw and submit it to PCM, together with a copy of your MyKad, and that's about all!
PCM will then submit the relevant documents to EPF for processing, which is expected to complete within 2 to 4 weeks.
Once completed, the funds will be transferred into your PCM trust account.
You may start to purchase any of your desirable stocks using PCM's online trading platform.

Upon disposing the stocks, the funds will be returned to the PCM trust account. Upon termination of account, the funds will be reverted back to your EPF Account 1.

Other noteworthy Terms & Conditions:
- upfront fee of 3% chargeable by PCM. Withdrawal from EPF is free of charge;
- annual management fee of 1.5% is chargeable by PCM;
- normal on-line trading brokerage & admin charges at about 0.55% of transaction amount is payable;
- minimum holding period is 1 year. Termination only upon one month's written notification thereafter;
- minimum investment is RM30k but can be broken down into trunks starting with RM10k, as long as the minimum amount is satisfied within one year;
- Stocks are only applicable for equity stocks, excluding warrants or any other preferential stocks

Do manage your risks before investing! Best to adopt defensive strategy as EPF money is not meant for excessive speculation!

Can You Invest In individual Stocks Using EPF Money?

2010-05-13T10:33:00.011+08:00

Many people are probably aware that they can withdraw money from their EPF (Employees Provident Fund) savings to invest in ministry approved Unit Trust funds. However, many are probably not aware that there is also a way to invest the EPF money on individual Bursa Malaysia stocks!

Some people prefer the idea of leaving the tough decisions on choosing the right investments with Unit Trust Fund Managers but in doing so, they effectively relinquish control over how the money will be invested. Ironically, the objective of Fund Managers are often to safeguard their jobs, instead of looking after investors' best interest, i.e., make money and return on investments!

On average, EPF's average annual rate of dividend is between 5% to 6%. The rate of return is no doubt better than Fixed Desposits (FD) return but for the savvy or wise investors, this sort of return is barely sufficient to counter inflation! (By the way, forget about the so-called officially reported inflation rate of 2% to 3% because the reality is much higher than that!)

So instead of keeping all your money in EPF or leave the money with someone else, why not consider moving some money from EPF to investing in individual stocks of your choice? Without doubt, there are risks with this approach because one can potentially lose this hard earned money if the wrong choice of stocks is chosen! With the stock market being so volatile, you may think that this is extremely risky!

To mitigate the risk, one of the key success factor is through first of all doing a little bit of homework up-front and selecting stocks or companies that possess good quality and fundamentals, plus supported with decent dividend yield. To be comparable with the annual rate of dividend from EPF, one should look for dividend yield that can at least match EPF's if not better. A scan across some of the quality Bursa stocks will reveal that a number of companies under REITs and consumer businesses generally do fit such criteria!

So how do you qualify to withdraw funds from EPF for the above investment? Let's list down some of the salient points:

savings of at least RM5,000 more than the Basic Savings amount required in Account 1, and must be equal or below 55 years old. The basic savings is the minimum amount you must have in Account 1 before you can apply under this scheme. The table below shows the different minimum savings required for people of different ages:

2) 20% from your savings in excess of your Basic Savings amount in your Account 1, that means the minimum amount for investment withdrawal is RM1,000.00, given the condition set in point (1).

3) Formula of eligibility = (Account 1 – Basic Savings) x 20%.
4) Investment can be made at the intervals of 3 months from the date of the last transfer, subject to the availability of the required balance in Account I.
5) Investment must be through appointed external Fund Manager by the Ministry of Finance. Click here for the complete list.

I hope this gives you an idea of an alternative form of investing, for your hard-earned savings that you can't simply screw up, i.e., EPF. In my next post, I shall touch on precisely how you can invest in individual Bursa stocks using your EPF funds and the inherent costs that you should be aware of.

Here's the link to EPF should you require further clarification.

The Inevitable...Postage Rate Hike

2010-04-07T11:25:00.006+08:00

After much speculation, I just got the confirmed news that POS Malaysia will increase the tariff or postage rate effective from 1st July 2010! Frankly, I foresee the rate hike is a matter of time, given that the last hike was way back in 1992!

As per the information that I have gathered so far, the postage increase will affect domestic postage stamps for standard mail below 50gram, non-standard mail below 100 gram, periodicals, and PosDokumen.

Here's the quantum of increase....
- For standard mail weighing up to 20 gram - RM0.60 to 0.70 (from the present RM0.30 to RM0.40).
- For others in general, the quantum of increase is 75%.

The higher postal tariffs effectively paves way for POS Malaysia to raise employees’ salaries (which is currently reported to be below the average government servant’s salary) by 30%.

In addition, the higher earnings will also pave the way for the company to undertake it's aggressive transformation plan such as potential mergers & acquisitions, revamping operational efficiency and cost reduction exercise.

No wonder it's share price has also shot up the past few days...let's take a look. "Someone" obviously knew this is coming for sure!

Is US stock market on verge of another big rally?

2010-03-26T14:17:00.005+08:00

Some experts say investors are starting to believe that the U.S. stock market is on the verge of another big rally.

The fact is, Dow Jones Industrial Index have just posted new high above 10,800 compared to previous high posted in January 2010.

US's National Association of Realtors reported a drop in homes sales last month that wasn't as steep as forecast.

However, the report on housing was typical of recent economic numbers that have been somewhat better than expected but still point to a weak economy.

For now, it appears the sales numbers aren't disrupting hopes that the economy can recover even if there is only a slow stabilizing in the housing market.

A month ago, investors shrugged off an 11.2% drop in sales of new homes.

The market's continuing advance has been welcome but analysts are divided over whether stocks have run too far or if they have more to gain because of improvements in the economy. The story on investors is that they are afraid of missing out on further gains, after seeing the Dow making new highs.

On the other hand, investors seem optimistic about the health of corporate earnings for the January to March quarter.

Also, unlike the developed nations, Asia (excluding Japan) is still growing and certainly is the place to be at least for the next couple of decades. So despite America's and Europe's problems, it's a mere fact that there are certainly plenty of light at the end of tunnel elsewhere! It's a certainty that American companies will follow suit where the money is.

However, the issue on sovereign debts of Dubai and Greece has still not gone away, despite plenty or reassurances from various party.

As always, there are two sides of the coin to look at. One can be optimist or pessimist. May be one more for being neutral? Whatever it is, I always believe in following the trend, and that's where the smart money is. Current trend obviously still point to the north (up trend), supported by relatively strong volumes, amidst intermittent signals of danger looms!

Why do I say so? Well, simply the hot money (or better termed as liquidity) is still there, no matter what people say. The smart money has come to the realization that money has to be invested and parked somewhere (to counter inflationary stress), no matter fundamentally it's right or wrong!

However, the musical chair will stop one day of course....So until then, let the party moves on.

The Year of the Tiger, A Year Of Volatility?

2010-02-13T15:43:00.005+08:00

The tiger is characterized by being energetic, optimistic, impulsive and restless. 2010 is the year of tiger in the Chinese lunar calendar (4708). People born in this year are believed to be adventurous, sensitive, emotional, risk-taking, smart, and straightforward by nature.

Chinese New Years falls on 14th February 2010. Celebrations start on the eve of the new moon and end 15 days later with the full moon lantern festival.

According to many Feng Shui master, 2010 Year of the Metal Tiger will be a Bad Year! Inside the Tiger, there is Wood, Fire and Earth elements. Here lies the "problem", ie., having no water element is the problem!

So, if the Feng Shui views were to be believed, then expect high volatility in the global stock markets for the year of 2010! Already we have seen glimpses of trouble started off by Dubai, followed by the PIIGS (Portugal, Italy, Ireland, Greece and Spain). With further tightening of lending by Chinese Government to curb speculative activities, and the imminent raise of interest rates by the U.S. in the near future, risk aversion will likely return to haunt the markets as USD-carry trades being unwinded.

Things can only return to the better unless the fundamental aspects of the real economy such as consumption, exports and employment return to normal.

Last but not least, I would like to wish all Chinese a Happy and Prosperous Chinese New Year!

New Roads to Travel,
New Skies to Conquer,,
New Dreams To Live,
New Hopes to Cherish,
It's the Beginning of Yet Another Year,
May it Be a Fulfilling Experience For You!
A Year of Excellent Health, Wealth, Happiness and Wisdom!
Happy 4708!

A Case of Reality Check

2010-02-09T16:12:00.003+08:00

2009 was a stellar year for global stocks recovery. As I had written before, it was more hope than factual when global funds decided to take on an optimistic route. 2010 is expected to be a lot tougher, in the sense that what was expected last year must bear fruit this year, in order to sustain the bullish views across global economy and investments.

Last year (until the beginning of this year) we saw massive inflows of funds into emerging markets particularly like China, frenzily mopping up undervalued equity stocks and real estate properties. Property prices in Shanghai, for example, has even surpassed the previous highs made before the 2007 financial crisis! Things were beginning to look more bubblish and speculative than solid fundamental!

Problems began to emerge towards the end of 2009, in places like Dubai where they were not able to service their massive debts, to the point they need to be rescued by Abu Dhabi's sovereign funds.

Next in line comes some of the European countries commonly known as the PIIGS (being Portugal, Italy, Ireland, Greece and Spain) who appear increasingly unable to service their respective sovereign debts.

The key question in everyone's mind is that will this snowball into a global issue? Thus turning it into a double dip recession, as what some economists have predicted?

Worries about Europe caused the Euro to hit an eight-month low against the US dollar.

The perception of US Dollar may even turn to become a safe haven! Some analysts are also predicting a bullish rally on US Dollar this year against world major currencies!

China's Financial Market: Positive Reforms

2010-01-11T17:28:00.002+08:00

China's latest decision in introducing derivative stock-index futures, short-selling and margin financing in equities are additional positive reforms designed to bring its markets in-line with other major global stockmarkets. Could this be also a further sign that China's financial markets are growing in maturity?

Personally, this is definitely setting the path to the right direction as China continues its effort to liberalize its markets, in order to become more competitive. However, in the short term, it may come at a cost to local Chinese investors as they require time to familiarize themselves with more sophisticated instruments. The degree of learning curve will definitely affect the outcome and return on investments too. For instance, margin financing may sound attractive to many people, in the form of easy availability of funds but if it's not managed properly and effectively, investors may find themselves landing in a bigger financial hole than they could ever imagine.

See related post "Is Margin Trading Right For You?"

Nevertheless, it is widely expected that the above reforms should help shrink the valuation gap that has kept yuan-denominated shares (A-shares) at a premium to similar shares listed in Hong Kong (H-shares) and Singapore (S-chips). The valuation gap between Hong Kong and China, for instance, could trade more than 50% such as what happened in August 2009.
The valuation gap between the two is often attributed to China's capital-account restrictions, which make it hard for average investors to buy shares in foreign markets.

With the availability of shorting mechanism, it will then be possible for qualified Foreign Institutional Investors to short the more expensive A-Share and buy cheaper H-share companies.

Short-selling refers to selling a particular stock first with the aim of buying back at a lower price later, for a profit.

HSBC have estimated the reforms will boost the amount of cash circulated on China's yuan-denominated stock markets by 200 billion yuan (US$29 billion) to 500 billion yuan during the next 12 to 24 months.

It will also be interesting to see if the H-shares will outperform Chinese stocks in the near future, once the above instruments were implemented.

With some believing that the introduction of index futures will help moderate share-price volatility, personally I have doubts that this will happen. Volatility will stay as long as there are abundance of liquidity in the market.

Nevertheless, one could certainly use index futures to hedge against stock holding risk, by shorting index future while being long on stocks.

No Escape From Credit Card Service Tax

2009-12-29T10:17:00.004+08:00

For all Malaysians who carry credit cards, looks like your faint hope of the Government withdrawing their decision to charge service tax is in wane! In the light of Government's push for "prudent spending", better act smart now!

If you try to contact your banks these few days, chances are the phone lines could be jammed with traffic!

However, the good news is that you are unlikely to be charged the service tax immediately, as the fee is only payable when new credit card is issued, or upon the anniversary date of the credit card issuance.

For example, if a credit card is issued to a new cardholder on Jan 15, 2010 with a validity period of a year expiring on Jan 14, 2015, a service tax of RM50 would be chargeable on Jan 15, 2010. On the anniversary date of the following years (i.e., Jan 15 for year 2011, 2012, 2013 and 2014), the same amount of tax will be charged again on the respective dates.

For existing cardholders, for cards issued on Sept 18, 2008 with a validity period of five years and expiring on Sept 17, 2013, service tax would be charged on its anniversary date on Sept 18, 2010, followed by Sept 18 2011 and Sept 18, 2012. However no tax will be levied for 2009 given that the policy will only be effective Jan 1, 2010.

Credit cardholders can expect to see the payable amount of service tax in their statement separately.

In the event a credit card is upgraded (such as in the case of a Classic card to a Gold card) or downgraded (such as in the case of a Gold card to a Classic card) or converted (such as in the case of an Islamic card to a conventional card) or reinstated (such as in the case of a cancelled card), the service tax will be charged on the new cards issued unless the anniversary dates of the previous and the new cards are the same,

For supplementary card holder, the amount of tax levied is RM25 per card.

The above tax applies to both credit cards or charge cards, but not on cash cards such as debit cards, petrol cards, closed community charge cards, loyalty cards and e-money like “Touch n’ Go”.

Another piece of good news is that most banks have agreed to allow card holders to pay the service tax via reward point redemption. The estimated point for redemption is about 10,000 bonus point for principal card and 5,000 point for supplementary card. However, the points could vary from bank to bank.

Related Post:- To Cut or Not To Cut?

Merry Christmas & Happy New Year

2009-12-25T02:20:00.003+08:00

I would like to take this opportunity to wish all my friends a MERRY CHRISTMAS and Happy New Year! May the good times and treasures of the present become the golden memories of tomorrow. Wish you lots of love, joy and happiness.

Happy investing and many good returns ahead in 2010!

China Stocks To Rally In 2010?

2009-12-04T13:00:00.004+08:00

Source of Article: Bloomberg

Chinese shares may rise as much as 35% next year as the yuan strengthens and earnings growth accelerates, according to Greenwoods Asset Management, manager of this year’s best-performing Chinese long-short equity fund.

According to Greenwood's Hong Kong office head Joseph Zeng, the gains by A shares denominated in yuan in Shanghai and Shenzhen will probably exceed a forecast increase of as much as 30% for mainland companies’ H shares traded in Hong Kong. Zeng's prediction is that China shares will extend gains as they have yet to enter a speculative “bubble”, and now trade at about 24 times estimated earnings, below the 10-year average of 35 times. In addition, China will probably yield to pressure from trading partners by allowing the yuan to appreciate by between 4% and 6% by end-2010, easing imbalances that worsened the global economic crisis.

The Shanghai Composite Index has jumped more than 8-% this year, as the government implemented a four trillion yuan stimulus package and allowed banks to lend beyond targets to support an expansionary monetary policy.

However, the US$1.3 trillion credit boom and a revival in the property market have triggered warnings about possible asset bubbles by officials and investors. Zeng on the other hand believes that overall property market isn’t in bubble territory yet either, because the “big gains” in prices were mainly confined to major cities.

According to Zeng, Greenwoods’ US$174 million Golden China Fund has 30% of its portfolio in A shares. The fund favours companies whose A shares are trading at lower valuations than their H shares. It also likes companies with “compelling valuations” in industries that are under-represented in Hong Kong, including Hundsun Electronics Co, which develops software for financial companies.

The Golden China Fund, which invests in A shares, H shares and American depositary receipts of Chinese companies, rose 137% year to date as of Oct 31, the best return among Chinese long-short equity funds, according to data from Bloomberg and the company. It also has the highest total return over one year, three years and five years among 37 peers tracked by Bloomberg.

Lifeline For SwissCash Investors?

2009-11-16T10:47:00.006+08:00

SwissCash, an internet investment ponzi scheme that has caught many investors on fire a few years ago, has finally laid claim to a RM31million (USD9.1million) settlement with Malaysia's Securities Commission (SC).

Indeed, according to Zarinah Anwar, the Chairman of SC, investors who are successful in getting a restitution are fortunate given the elaborate scam by the Malaysian masterminds who went to great lengths to establish set-ups in a number of jurisdictions in an attempt to appear legitimate.

The SC initiated civil proceedings in the High Court against Albert Lee Kee Sien, Kelvin Choo Mun Hoe and Dynamic Revolution Sdn Bhd and last September, the court ordered them to pay US$83 million (RM280.62 million) — the estimate of total investments in the scam. The SC then obtained a worldwide Mareeva injunction restraining the defendants from disposing of their assets.

As for the investors, you have the SC to thank for as they rightfully have no obligation to the loss of your money in such schemes!

To recap, the scheme offered investors as much as 300% annual return of their investments and many were hooked by the "get rich quick" tags.

There is no doubt over some investors did get their payoffs but just like many of the other get-rich-quick schemes, this kind of scheme works like a musical chair. When the music stops, the ones caught without the chair will be punished or banished!

Despite the lessons learned, I am pretty sure schemes like this will continue to pop up in the future, mainly to take advantage of mankind's major weakness, i.e., GREED! Recently, i have come across another potential scam in-the-making investment scheme involving casino operation, with apparent connection with the upcoming Singapore's new casinos. Similarly, lofty returns were promised with further lavish incentives such as free Macau vacation tour and gifts in the form of gold chain or accessories.

DON'T BE THE ONE CAUGHT WITHOUT THE CHAIR WHEN THE MUSIC STOPS!

The Worst Is Over? Listen To What the Two Richest Men Have To Say

2009-11-13T17:24:00.005+08:00

Capitalism is still alive and well, say the world's two richest men, despite lingering shocks from the longest, deepest recession since the Great Depression.

During a live interview in an auditorium filled with nearly 1,000 people at a CNBC-sponsored event at Columbia University in New York, Warren Buffett, the CEO of Berkshire Hathaway, and Microsoft founder Bill Gates fielded questions from Columbia Business School students on the recession and investing.

Most notably, Warren Buffett said that the financial crisis is behind us, and the bottom has come in stocks, therefore do not pass on something that's attractive today!

Both Buffett and Gates also agreed that although mistakes were made, the fundamentals of the American system and a marketplace-driven system where American invest in education and innovation, coupled with a great long term infrastructure, will continue and augurs well for the future of U.S."

To watch the video of Warren and Gates interview, click this link.

For the full article, visit Yahoo News

For Buffett's latest view on investment, click this link.

To Cut or Not To Cut?

2009-11-10T17:10:00.006+08:00

For many Malaysians, the first thing that probably comes into mind is the on-going P1 WiMax advertisement that has caused some gender controversies but essentially tried to convince consumers to switch their internet broadband services to the wireless WiMax technology. The latest P1 WiMax technology is supposed to make the experience of broadband internet surfing better and faster, "plug-and-play" with no physical phone line required.

Now that's not what I am referring to. I am referring to the more pressing issue of Malaysia's Government's recent plan to introduce service tax for credit cards from 2010 onwards. To recap, each card holder will be charged RM50 and RM25 for each principal card and supplementary card respectively, starting January 2010. If a person holds 5 credit cards with two supplementary, the total amount could add up to RM300 each year, and that's a big amount to pay for!

Personally, I hold something like 10 credit cards! Well, it's not that I'd like to have so many of them but merely because of the different kind of benefits that each of these cards could offer. For example, some credit card offer 2% rebate on petrol usage, while some others offer better discounts or rebates for supermarket spending, etc. Essentially, the banks have been very creative in rolling out different kinds of benefits to entice consumers to sign up for different credit cards. Since we can't have all-in-one facility, we have no choice but to sign up for these different cards. After all, there is no harm done provided the use of credit cards are not abused.

With the introduction of service tax, the benefits now seem to be muted. Besides the consumers, the biggest losers will be the banks and the sales agents whose livelihood depends on promoting the credit cards to earn a commission!

While the objective of prudent spending appears sound and should be supported, I believe it should not be done at the expense of genuine credit card spenders. The Government should instead impose targeted measures on credit card holders who defaults on payment on a regular basis. For instance, a mechanism to suspend all the credit cards of a particular credit card holder who defaults more than x number of times should be considered. Else, create more incentives for the use of debit cards instead of credit cards instead.

Nevertheless, if you are holding on to many credit cards right now, do not simply cut them apart. Wait for further advice from banks pertaining to this matter. I believe banks are actively pursuing the matter with the Government in order to come up with better measures. With the Government's constant flip-flopping policies, it will not be a surprise if they decide to change it again!

After all, it's also still not too late to make a final decision to cut your credit cards in December, if the situation renders so.

Power Towards High Income Nation....How la?

2009-10-26T16:38:00.004+08:00

Our beloved Prime Minister of Malaysia had finally delivered his much anticipated 2010 budget. It was claimed to be a peoples' budget, with the stated aim of elevating the people of this country to high income status....

Sure, a number of positive incentives were tabled, such as:
- reduction of personal income tax from 27% to 26% effective 2010;
- an increase of RM1,000 for personal tax rebate
- an additional RM1,000 for personal tax relief on pension fund and life insurance
- people who are self-employed are given the option to contribute to the pension fund savings at any amount monthly starting 2010, with the Government contributing further 5% to the amount of contribution;

However, the positives are mitigated by the following negatives:
- introduction of RM50 service tax on each principal credit card holder and RM25 for each supplementary credit card holder
- reintroduction of real property gains tax (RPGT) for real estate disposal, starting from 2010, with a minimum of 5% tax regardless of the duration of holding period (Again, a common Government flip-flop policy sickness has reemerged!)
- realigning the fuel subsidy scheme to make sure that it benefits the lower income group....Whatever that means!

Is there really much to shout about? Hang on a second....how are these supposed to elevate the people to become high-income nation? To make things worse, the Government has also slashed next year's targeted GDP growth to around 3%! On the other hand, Malaysia is barely a decade away from its Vision 2020 target and there's certainly little sign that the developed status objective can be achieved by then! As per my understanding, the nation will need to grow something like 7-8% per annum on average for the next decade in order to achieve that and that's a very tall order indeed!

I am sorry, I just don't see how the "high income" word can be associated in this context! It certainly won't work unless there is a radical change in the governing approach and mindset, and with principal focus on meritocracy, liberalization and enhancing competitiveness as the priority.

What's your thought on the recent national budget for 2010? I look forward to your sharing.

Is Gold Truly A Safe Haven?

2009-10-15T00:38:00.005+08:00

Following my post on "How To Invest In Gold?", I received a number of queries on whether investing in gold is truly safe as projected by many investors or analysts.

For the matter, i can assure you that all investments come with risks, with gold being no exception.

With gold prices reaching record highs and recently exceeding USD1,000 per ounce, there were many bullish calls for gold to scale even higher!

Before you decide to jump into the gold rush, i recommend you to first read this new book written by Doug Eberhardt. The title of the book is "Buy Gold Safely". The book reveals the importance of gold, how you can keep your gold investment secured, the underlying secrets of gold investing that the experts do not want you to know, common pitfalls to avoid while investing in gold and much more!

Click Here!

Although some of the information contained in this book are slightly outdated, it certainly pays to understand how gold mechanism works and why it is absolutely critical in preserving our wealth and maintaining a balanced investment portfolio!

On the other hand, do not make the mistake of simply assuming investing in gold at any time is good! Remember the big correction in gold prices in 2008 from the peak of 1000 to the low of 712? Understanding the state of affairs and a sense of timing are still essential!

Click Here!

How To Invest In Gold?

2009-10-09T23:24:00.007+08:00

Arguably, gold is the only investment asset class in the world that is widely perceived to be the safe investment haven. Many investors will therefore choose to invest in this precious metal as part of their wealth preservation and creation strategy.

During last two years, when all the asset classes have failed to perform, gold is the only investment asset that has remained outperformed. As such, Gold is also widely believed to be the best hedge against the U.S. dollar and inflation. When U.S. Dollar falls, demand for gold is set to increase as investors sought to preserve their wealth. In addition, gold has a very low correlation with other asset classes like equity and debt thereby it's a very good asset to diversify for the overall portfolio.

The most direct way of investing in gold is to purchase the physical gold bullion directly from financial institutions or dealer. You can then choose to safe keep the gold yourself or the safer alternative is to keep them in a secured vault owned by third party such as banks.

Instead of holding physical gold bullion, there are a number of other forms of investment in gold without the need to hold physical stock. In Malaysia, both Maybank and Public Bank offer the convenience of gold investment account with a passbook, whereby every trade is done through the account without the involvement of physical stock. Transactions are highly liquid as the buying and selling are based on the bank's prevailing quoted buying and selling prices.

Other means of gold investment (without physical delivery) include Gold Exchange Traded Funds (ETFs), unit trusts (mutual funds) and also the choice of investing directly in gold mining companies.

Gold ETFs are open-ended mutual funds that are passively managed and they mirror the return of spot price of gold. Gold ETFs are listed and traded on stock exchanges just like stocks. As such, the cost of trading Gold ETFs is lower compared to mutual fund type of investment. Gold ETFs provide returns, which before expenses, closely correspond to the returns provided by physical gold. Each unit is approximately equal to the price of 1 gram.

Some of the most popular regional gold ETFs and mutual funds include:
- DWS Invest Gold and Precious metals Equities (listed in Singapore)
- United Gold & General Fund (listed in Singapore)
- DWS Noor Precious Metals Securities A USD (listed in Singapore)
- SPDR Gold Trust ETF (listed in U.S., Hong Kong, Singapore and Japan)

Here you are some of the gold investment vehicles available for your consideration, should you decide to get hold of one of the world's most highly sought after precious metal!

It's All About Liquidity

2009-09-25T11:49:00.004+08:00

What happens when you have lots of money in the bank? Quite rightfully, the tendency is to either spend it or invest it wisely. In a macro scale and global financial terms, we call this liquidity.

Back in 2006 and 2007, global financial markets were flushed with liquidity, aided by the sub-zero interest Yen-carry trades. After all, funds were cheap and it was not surprising that investors took the risk to invest in assets with higher returns with lower cost of funds. However, many investors were caught badly burned as the global financial markets collapsed in the wake of the collapse of Lehman Brothers, followed by the massive loss of liquidity.

When funds dried up and there was a massive loss of confidence, investors naturally become risk averse. Markets continue to fall until the first quarter of 2009 amidst this phenomena.

Since March 2009, the outlook has changed drastically, due to massive pump priming by countries around the world and the huge injection of funds by the U.S. Government to bailout troubled financial institutions. Quantitative easing (printing of money) by countries such as U.S. and U.K. has certainly contributed massively to the availability of funds as well.

As a result, global financial markets are now flushed with liquidity. Whether this is artificially created or not is subject to your own interpretation though.

With U.S. economy showing signs of recovery, the U.S. Government has to decide whether it's time to gradually withdraw the stimulus plan. Indeed, this is what comes out of yesterday's FOMC meeting, however, with no specific timeline mentioned yet. Federal Reserve is not likely to do so until U.S. unemployment rate starts tapering off. Bear in mind that with all the talk about U.S. recovery, the unemployment rate is still hanging high at almost 10%!

With liquidity being the major driving factor, any move that could potentially dampen liquidity prematurely may spark another round of fear within the financial sector.

On the other hand, i believe the bull party is ain't over until there is a dramatic change in liquidity. As such, I am quite prepared to hold on to my positions until there is a clear sign of otherwise emerged.

Exchange Traded Fund vs Mutual Fund (Unit Trust)

2009-09-08T00:34:00.001+08:00

During an uptrend market like the current, you may consider to invest in an index linked security (alternatively also known as tracker fund) instead of trying to pick the right stock. An index linked security essentially links its performance according to the broad market index performance, such as Dow Jones Industrial Index or Malaysia's FBMKLCI. Locally in Malaysia, there are many index-linked unit trust funds available in the market. However, before you consider parting your money in an index-linked Fund, understand your cost of investment and consider the alternative such as ETFs (Exchange Traded Funds).

  ETFs are baskets of securities that trade like stocks on an exchange and are designed to track the performance of an index. Examples are FBM KLCI ETF Fund and MyETF Dow Jones Islamic Market Malaysia Titans 25, the first Syariah compliant ETF in Asia.

Investors who want to buy an index linked unit trust fund may be better off buying the ETF which does exactly the same. The obvious benefit is that the cost of ETF is cheaper. This is because there are no management and upfront fees, unlike unit trusts.   The upfront fees for unit trust in Malaysia on average is about 3% to 5% but could be as high as 7%!

Besides, a unit trust fund may charge up to 1.5% a year on management fee, which is much higher than the 0.5% charged by the FBM KLCI ETF.

Buying ETF is exactly the same as buying a stock, with the same lot size of 100 units. Unlike unit trust, buying and selling ETF is easy and traded real-time. Dividend is also distributed by ETFs generally on a half yearly basis.

So next time when you were to be approached by unit trust salesperson, find out about the cost of investment first. Don't let the hidden charges affect your fund performance.

Unlock The Equity Cross Road....

2009-08-27T16:36:00.009+08:00

The word goes that when the U.S. sneezes, the rest of the world catches a cold. The above scenario is still pretty much valid, given how the financial troubles in U.S. had led to the global economic meltdown for the rest of the world! So despite all the speculation about the potential decoupling of world's economy from the U.S., it is simply not true as globalization has increasingly turned the world flat and like it or not, Americans are still the biggest spenders in the world, mopping up many products and services the rest of the world has to offer!

However, China has gradually and surely increased its role in the world's economy, given its huge domestic market (served by 1.4 billion people) and the enormous pace of growth averaging 8 to 10%. In time to come, it will not be exaggerating to say that if China sneezes, the world will likely catch a cold too!

Global stock markets have recovered strongly, against the odds, for the past 6 months. Major doubt is now being raised as whether the optimisms have run ahead of fundamentals or it's a mere speculation? The answer, I'm afraid, is highly subjective. Bear in mind that equity market is always forward looking, which essentially means that as an investor, we simply cannot wait until the event unfolds! Yes, it's a calculated risk that we all will have to take.

Recent data seem to have pointed to a sustainable recovery. However, whether one views it as a V, W, U or S shaped type of recovery is again highly subjective! Tan Teng Boo of iCapital Fund Management seems to believe we are at the beginning of another bull run and there will be a V-shaped recovery! However, most other analysts or financial gurus tend to take a more conservative view. Taking a long term view with China and likely India to spearhead future's economic growth, it is likely that we should have seen the worst for now provided U.S. do not spring more surprises or open up another can of worm!

Right now as we speak, global markets seem to be reaching a cross road where the next direction should be. It is understandable that investors are feeling nervy, having witness a dramatic bull rally for the past 6 months. An overheated bull will tend to follow with meaningful short term bear correction. Only then will the bull have an opportunity to recharge.

Mark Mobious, the well-known founder of Templeton Asset Management and investment guru, stated about a month ago that markets could decline between 20% to 30% following the recovery.

As a matter of fact, China's Shanghai market has corrected (or crashed?) about 20% the last couple of weeks, driven by fear of Chinese Government's plan to tighten the domestic credit market. Tightening credit at a time when China's export and unemployment are still weak does not seem to make sense. However, it is also a concern that excessive liquidity could lead to excessive speculation and unproductive output. As such, the latest measure is meant to ensure that credit resources are diverted to productive investments, which will strengthen real economic activities rather than continue to create bubbles in the stock market and the real estate.

To me, it's good to take a pause and re-assess the status quo, rather than taking the gung-ho approach. The faster one climbs, the harder one falls....

Perhaps, it's also a good time to re-assess your portfolio too. Some spring cleaning will always prove to be timely indeed in due course.

Is U.S. Housing Making A Comeback Soon?

2009-08-20T23:38:00.008+08:00

Housing, which led the U.S. economy into recession, may be one of the forces that helps to pull it out of the ditch. Although nobody expects a renewed housing boom, at least sales and construction spending are not falling any further.

Some of the signs of stabilization include:

Home builders are gradually becoming more hopeful, even though surveys show most builders are still very discouraged. The builders' housing market index has risen in four of the past five months.
Housing starts have increased in four of the past five months after tumbling to a postwar record low. Building permits for single-family homes have risen at a 109% annual rate over the past three months.
Sales of new single-family homes have risen three months in a row after falling to a record low in March.
Sales of existing homes have risen four of the past five months, supported by a government subsidy for first-time buyers and by sales of foreclosed homes.

However, residential mortgages either in foreclosure or with at least one payment past due hit 13.16% in the 2nd quarter, the highest percentage ever recorded!

Mortgages somewhere in the foreclosure process reached 4.3% of all mortgages, up from 3.85% in the 1st quarter and 2.75% in the 2nd quarter of 2008

With current U.S. unemployment rate at almost 10%, it leads to the sign that mortgage performance is once again being driven by unemployment. In fact, prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five. While 41 states had increases in the foreclosure start rate for prime fixed-rate loans, 43 states had decreases in that rate for subprime adjustable-rate loans.

Until the U.S. employment situation improves, it is unlikely that there will be meaningful improvement in the foreclosure and delinquency rates.

Data Source: MarketWatch

Is Margin Trading Right For You?

2009-08-08T00:58:00.007+08:00

Leverage your money. That's what many of us have often been told or practising. However, not all forms of leveraging is good. For example, not repaying fully your credit card bills and servicing high amount of interests is not a good way of leveraging. To sum it up, you need to weigh the cost and benefits of such leveraging and the associated risk before jumping into it. If the cost outweighs the benefits and comes with high risk, such form of leveraging is obviously not for us!

In equity trading, there are generally two forms of account, being cash account and margin account. Cash account simply means you pay cash up front, before purchasing shares. In countries where settlement period (T+x day) is allowed, full settlement has to be made upon the maturity of the settlement period. Margin account, on the other hand, allows an investor to purchase more shares than his cash deposit allows, normally two times the amount. For example, supposed you have $10,000 in cash deposit, you are allowed to purchase up to $20,000 worth of shares. The other $10,000 is like a form of borrowing from you broker or securities firm, in which they will charge you interest (for the amount of borrowing) based on prescribed interest rates calculated on a daily basis.

Effectively, this is a form of leveraging. Question is, is this a good form of leveraging? Let's explore the advantages and the inherent risks.

Quite clearly, margin trading allows you to trade more than what you have, and therefore, allows you to make more money if your share price projection turns out to be correct. However, the same holds true (i.e., more losses) if the share price goes against your direction!

Here's the added risk when the direction of the share price goes against you. When the amount of shareholding falls below a certain predetermined amount (by the broker or securities firm), the broker is entitled to issue a margin call. What a margin call simply means is that you will need to top up the shortfall immediately or latest by the next business day.

For example, supposed you have cash deposit of $10,000 and you have bought shares worth $20,000. Let's say share prices have gone down by $6,000 and you now have $14,000 remaining. Your net cash position now is %$4,000 ($10k - $6k loss). Assuming margin requirement is 30%. you will need to maintain a minimum of $4,200 ($14k * 30%). In this case, there will be a margin call given your net cash position runs below the safety margin.

Failure to top up within the set timeline will render the broker disposing your shares. Worst of all, it can be done without your knowledge!

To further add salt to the wound, your losses could be blown out of proportion as you continue to top up your margin but the market further deteriorates against your expectation!

You need to be also aware that the amount borrowed incurs interest on a daily basis. As such, it is an added cost of investment. As such, there are holding costs should you decide to hold on to a stock.

In conclusion, my advice is do not trade margin account unless you absolutely understood the kind of risk that you are dealing with and is prepared to take on such risk without major adverse consequences. Personally, I do not and will never trade with a margin facility. Simply, it's way beyond my tolerance of risks!

How To Invest In Overseas Equity Market?

2009-08-03T00:24:00.004+08:00

For those who would like to diversify their portfolio investments beyond the local shore, this article sets to explore the ways to do so. Just to emphasize, I am articulating on direct or active investment instead of passive investment such as investing in unit trusts.

Thanks to globalisation and increased investors' appetite for better investment returns, many Malaysians have started investing offshore (In part this is also due to the fact that Malaysia stock market is no longer favoured by foreigners and is lagging far behind stockmarkets in Hong Kong, China or even Singapore in both performance and liquidity).

If you are interested in investing in multiple key global markets, the one that instantly comes to my mind is Interactive Brokers (IB). IB offers a very comprehensive list of financial markets to invest in, ranging from North America (U.S, Canada, Mexico) to Europe and Asia Pacific (Australia, Hong Kong, India and Japan) region. The products offered are also wide ranging, from equity to forex, derivatives, bonds, ETFs, CFDs and so on.

IB's brokerage rate is also one of the lowest available. For instance, to trade in U.S. stocks, the brokerage charge is only US$0.50 per lot (of 100 shares) with a minimum $1 brokerage per order!

Application for an account can be done easily through the web (online). Even Agreements can be digitally "signed" online! The only manual work which you need to provide them is a copy of your Passport and a signed copy of certain local Authority Form such as W-8BEN in the case of trading in U.S. For added convenience, you may fax them a copy of these documents or simply scan and email a copy to them.

One word of caution though, the trading software for IB is not that user friendly. So it may take some time for you to get used to it. However, step-by-step guides are readily available from their website. All you need to do is to run the videos.

For those who are interested in trading in the U.S. market only, my preferred broker is ThinkorSwim (ToS). Brokerage rate is higher at $1.50 per lot or fixed at $9.95 per trade (whichever is lower and subject to a maximum of 50 lots for fixed rate) but the trading software is much more user friendly and feature packed. Among them include the ability to display multiple chart patterns all in one screen.

The beauty about these online brokers is that you can also do virtual trading, that is, trade without real money! This will give you a sense of better confidence before starting real trades, and is ideal for beginners who would like to get familiarise with the trading platform and/or test certain trading strategies.

To start real trading, you will need to deposit funds first into the trading account. In other words, there is no more T+x day type of settlement. All trades are cash up front but you may choose to trade with a margin facility.

Funds can be easily transferred from your local banking account to the U.S. designated account using wired transfer or more commonly known as Telegraphic Transfer (TT) in Malaysia. You will need to bear the TT charges (charged by both local and foreign banks) as you do the transfer. Just inform the broker about the transfer and they will notify you once the amount is successfully banked in. Normally, this should happen within the same business day.

Trading platform is much more sophisticated compared to our local markets as you can literally set your trading criteria (e.g., entry price, stop loss and profit target) and walk away without ever watching the screen again! You can even set orders such as market order, stop order with or without limit and OCO (One Cancel Other) orders. Once you learn how to do it, trading is very easy and a peace of mind in case you are busy at work or go to sleep!

Other than signing up with online brokers, the other viable option is to trade via your local investment bankers or stock brokers. A number of local Investment brokers have for the past couple of years rollout offshore trading in order to cater for this increased interests. Among the Investment Brokers offering this service include CIMB, OSK, Kenanga, Maybank and RHB Investment Bank.

However, do take note that this type of trading is not done online. The arrangement is between yourself and your local broker. Orders can be instructed by you and your broker will forward the trade instruction with their respective counterpart in the particular country of trade. Exchange rate is determined by the broker on the day of trade. There is no standard brokerage rates apply so you will need to verify with your preferred broker before trading. There will also be some signing of paperwork required before you want to start trading offshore.

Generally, this type of 3rd party or indirect trading will be more costly than online trading. It will probably be fine if you do not intend to trade offshore frequently and do not have the time or patience to learn a new trading platform. Also bear in mind that there will be a delayed trading execution given the offline mode of instruction and involvement of 3rd party.

Rich Dad Poor Dad With A Twist..

2009-07-08T23:21:00.003+08:00

Many people are familiar with the book Rich Dad Poor Dad authored by Robert Kiyosaki.

Here's a different twist with a different perspective on who's rich and who's poor.

One day, the father of a very wealthy family took his son on a trip to the country with the express purpose of showing him how poor people live. They spent a couple of days and nights on the farm of what would be considered a very poor family.

On their return from their trip, the father asked his son.
Father: "How was the trip?"
Son: "It was great, Dad."
Father: "Did you see how poor people live?"
Son: "Oh yeah."
Father: "So, tell me, what you learned from the trip?"
Son: "I saw that we have one dog and they had four. We have a pool that reaches to the middle of our garden and they have a creek that has no end; We have servants who serve us, but they serve others; We buy our food, but they grow theirs; We have walls around our property to protect us; they have friends to protect them."
The Father was speechless, before the son added: "Thanks Dad for showing me how poor we are!"

A different perspective may change our way of life and success, for the better forever.

Do you have a story? Please share.

Is Michael Jackson Worth Investing?

2009-07-06T18:06:00.007+08:00

The news of Michael Jackson's death has caught many people by surprise. Right after the news were released, the memorabilia market instantly heated up. Copies of his best-selling album, "Thriller", worth normally US$10, were fetching 5 to 15 times more thereafter!

Bizarrely, a single Cheeto, a cheese-flavored, finger-sized snack, that purportedly resembled Jackson doing the moonwalk was sold for $35.18 on eBay on Jun 25th!

Prices for all things Jackson, from albums and tour posters to commemorative coins and more, popped up like a champagne cork and have shown little sign of coming back to earth.

People are so overcome with emotion that they are willing to pay almost anything rather than thinking they should wait for the spike in prices to disappear.

Other groups of people are now either looking to cashing in all things Jackson related or investing (buying) with the hope of holding on to it for future gain.

But this will come back to reality soon, most likely when the news stop producing Jackson's headlines or when people get tired of it. People are often fickle minded after all! They will move on to the next major headline after some time.

For the matter, anyone thinking of Jackson memorabilia as an investment, or with a spare copy of Thriller gathering dust in the basement, may want to move it now because the market is never likely to be this hot again.

However, if someone does hold on to something genuinely unique or rare items of Jackson's, then perhaps there is a higher chance that these unique or rare items can fetch a much higher price in the future. The same principle, however, is unlikely applicable to something like Jackson's Albums (eg., Thriller) though, where there were huge production supply in the market.

Also watch out for items that are fake or scam!

Ultimately, people should return to their senses.

Nevertheless, Michael, thank you for bringing to us your special brand of music and entertainment that will live with us forever!

For those who would like to catch a glimpse of one of Jackson's final moments, watch
this video of Michael Jackson's last concert rehearsal on June 23 2009, two days before his death, at the Staples Center in Los Angeles.

Liberalisation or Desperate Measure?

2009-07-02T00:21:00.005+08:00

Finally, the 30% quota Bumiputera (Native) requirement for new listing of public companies in Malaysia has been abolished by the Government of Malaysia! This is in the wake of the country's diminishing competitiveness and the continued diminishing foreign interest in Malaysia's capital market. The Government labels the move as an economic liberatisation. To me it's more like a desperate measure (against potential political flak) to salvage the alarming situation!

Let's take a closer look at the equity side. The current weightings of 2.2% of foreign funds in Malaysia (as a percentage of their Emerging Asia exposure) pales in comparison to its own historical averages of 3.7% post crisis and 4.0% in the preceding upcycle of 2003-07. The resulting ratios of current exposure to previous historical averages are therefore the lowest ever recorded! (Source: CIMB Research).

Despite the recent 20+% market rally in Malaysia, the support is primarily coming from local funds. This shows that Malaysia market has been ignored by foreign investors thus far in this run up, and the exposure is clearly on a downtrend rather than up!

Nevertheless, with the new measure, what this has done is that it has freed both Malaysian and foreign entrepreneurs from having to worry about obtaining a 30% bumiputra equity participation before they can expand their businesses.

The 30% bumiputra equity requirement thus is no more an administrative micro target. Instead the government will keep that as an overall macro target leaving it to regulators in the respective sectors to decide how to do it.

The significance of this becomes more apparent if one considers the listing process. Previously, one had to get a 30% bumiputra partner and then float at least 25% of the issued capital on the market through an IPO. That effectively meant that a majority of 55% stake had to be given up!

If the bumiputra investors subsequently sold out, the major shareholder will most likely be required to top up the bumiputra equity stake at the next fund-raising exercise.

Now, all it takes is a 25% public float of which half or 12.5% of equity capital will be allocated to bumiputras via a public balloting process. If not enough bumiputra participants have applied, the bumiputra requirement is deemed to have been met.

Also all listed companies do not have to periodically increase their bumiputra stakes to previous levels when these are sold down, thus eliminating a recurrent headache!

A more interesting public statistics shows that of the RM54bil of equity distributed to bumiputras through these means between 1984 and 2005, only RM2bil are still in bumiputras' hands!

On the other hand, all property transactions, except for those involving a dilution of government or bumiputra interests for property valued at RM20mil and above, would no longer require Foreign Investment Committee (FIC) approval.

The role of FIC has also become obsolete...Way overdue!

The world is getting flat....It's time to heed the wake up call or face elimination!

Capital Gain vs Cash Flow

2009-06-19T16:33:00.006+08:00

When it comes to making a decision on investing, would you choose one based on the criteria of capital gain or cash flow? It's a tough one, isn't it? Frankly, the answer varies from person to person. However, i would say that for most ordinary people, they would prefer capital gain.

Let's quote an example, suppose you purchase an asset for x amount of dollar and sold it for a nice 40% gain in 3 years, versus you purchase an asset for the same amount that gives you say 8% annual return in the form of dividend or rental for instance, and the asset only appreciates less than 5% a year. For most people, they would probably go for the first example, where higher capital gain is made. After all, it sounds more convincing and exciting when you tell your friends or business partners that you have pocketed handsomely in this deal!

Question is, what do you do with the money gained thereafter? Most commonly, there is always a lurking temptation to spend on luxury items when you have spare cash in hand, be it a luxury holiday, fancy car, watches, etc. After all, why wouldn't you want to pamper yourself a "little" for closing a wonderful deal! Nothing wrong with pampering yourself sometimes (good way to recharge the batteries!), but it's the quantum of spending unecessarily that you would want to take caution of. Bear in mind, spending unnecessarily means you are giving away an opportunity to make money work for you in the future!

On the other hand, can you find another opportunity that can give you similarly good financial returns after this? Chances are you may not. So you will end up with plenty of cash on hand and as time passes, the temptation to spend grows!

For me personally, although short term capital gain sounds sweet and exciting, there is no guarantee that a particular investment will yield the expected capital gain. Therefore the risk increases. On the other hand, human nature to spend unnecessarily is also a lurking danger. On the contrary, an investment that can generate a regular streams of income (cash flow) is perceived to be lower risk and helps to sustain your own personal financial position in the longer term. To take one step further, go for investments which generate positive cash flows.

Positive cash flow simply refers to the excess regular income generated by an asset after deducting all the relevant expenses in deriving the particular income. A good example is property rental income where the tenant will pay the property owner rental every month as long as the property remains tenanted.

A good point of comparison is between landed property and rental yield property such as high rise residential apartment. Landed property has bigger potential for capital gain (but not guaranteed) but poor rental yield. That means extra burden having to regularly service the commitment from your own pocket and opportunity cost! On the contrary, good high rise apartment may not generate as high capital gain but gives much better return when it comes to rental yield. In this case, the tenant will finance your property but the property is still owned by you!

A long lasting positive cash flow will help a person or a business to survive and sustain longer, without the need to continuously spend more money and therefore sacrificing other opportunities. As you build more businesses or acquire assets that generate positive cash flows over time, you will find that you have truly gained the ultimate goal of financial freedom!

Nevertheless, that doesn't mean you should ignore capital gain all together! Why not the best of both worlds? According to Robert Kiyosaki, the key to financial intelligence is how to use both cash flow and capital gains to grow wealthy. So many people are not successful, because they’re generally focusing on only one of the two.

Crude Oil...the Beauty and The Beast

2009-06-11T12:58:00.006+08:00

Now that the price of crude oil has more or less double up from the lows of $30s per barrel at the beginning of the year to the current $70 range, everyone seems to be cheering, as reflected in the optimisms in the global stockmarket performances to-date, and many were making bold conclusions that the worst of the state of economy is over. However, questions remain as to the real cause of the price hike...could it be pure speculation at play or fundamentally driven? It could well be a combination of both, of course. The next fundamental question to be asked is that have the price run ahead of its fundamental too soon? What if the price of crude oil continue to rise above $80 for instance?

Not forgetting it was only not too long ago (last year in 2008) when crude oil price was driven up to $140 per barrel and there was massive problem in global inflationary pressures on all goods and services and subsequently caused havoc to global economies!

It is therefore important for the price of crude oil to maintain stability (around $50 to %70) and avoid catching the rocket (of over speculation)! If that happens, it will surely introduce another set of massive inflationary issues just when the global economy is barely trying to find its footing of recovery. More so, we are probably ahead of the fundamentals right now and nothing solid (such as corporate earnings and positive growth, increased demand, lower unemployment rate, etc) has come out of the whirlwind. Moreover, there is also the problem of potential US dollar devaluation and the possible hyperinflation the world has to tackle with, given the massive quantitative easing measures taken by the U.S!

So, beware of the beauty and the beast!

Discovering Relationship Between Dollar & Oil

2009-05-28T17:43:00.011+08:00

Do you ever wonder if the strength of US Dollar that you are holding affects the price of oil or vice-versa? Here's an interesting article written on its likely relationship and perhaps put you in a better guidance when you should invest in the commodity of crude oil and/or gold.

Since the beginning of the year, the price of crude oil has increased by more than 30% from US$43 a barrel in January to a high of US$60 in mid-May. This could boil down to multiple factors, including improved growth prospects, speculation and the weakness of the US dollar. In addition, the outlook for economic giants the US and China has improved materially over the past month, leading many people to believe that the worst of the global recession is almost over.

US and Chinese economic data, along with comments from central bankers seem to support this rosy outlook. Early this month, US Federal Reserve chairman Ben Bernanke told the US Congress that the recession is easing and that growth should take place by year-end. Most other central bankers expect their countries to return to positive growth in 2010. Given that oil prices
plummeted in the second half of 2008 because of deleveraging and the fear of a deep
recession, the promise of a brighter tomorrow is driving oil prices higher. However, a slower pace of contraction and the prospect of increased demand are not the only reasons oil prices are higher.

Recent US dollar weakness is contributing to the recovery. Of course, many people will argue
that the US dollar is weaker because the US economy is doing better, which is true, but the
relationship between oil prices and the US dollar’s value is too significant to ignore.

Since the beginning of 2008, the correlation between oil prices and the US-dollar index has
been roughly -0.90. In other words, 90% of the time, when the US-dollar index falls, oil prices
rise.

The chart below shows the tight correlation between the two instruments:
Here's the argument for dollar driving the price of oil:
- Oil is priced in US dollars. According to OPEC, the relationship between oil prices and the dollar is almost mechanical. When the dollar falls, oil prices have to go up in dollar terms to stay constant in euro terms. Oil producers receive their oil revenues in US dollars and need to be compensated for the fluctuations of the greenback. This does not always hold true, of course, otherwise the correlation would not have broken in the beginning of the year.

Here's the argument for oil price driving the dollar:
- A study by the IMF in 1996 found that a 10% rise in the real price of oil induces a 2% real depreciation in a typical OPEC's real exchange rate. This should not be completely surprising because higher oil prices do result in higher cost of oil imports for the US, leading to a higher current account and trade deficit, which is US-dollar bearish. It also affects growth. When oil prices were nearing US$150 a barrel, gasoline prices in the US went as high as US$4 a gallon or more. It's like a tax on consumers and significantly affected companies!

The conclusion is that the relationship between oil prices and the US dollar is both schizophrenic and symbiotic. When oil prices were hitting record highs in July 2008, it can be argued that the price of oil was driving the value of the US dollar because of concerns about the strain it would have on the US economy. However, currently it is more likely that the dollar is driving the price of oil because the outlook for global demand is not clear and investors are less focused on the impact that higher oil prices can have on trade than they are on its signal of stronger growth.

The full article can be found at Moneyshow.com.

Money-printing Caused Market Rally?

2009-05-21T11:16:00.006+08:00

What has caused the recent stock market rally across the globe? Too fast, too soon, as there are hardly sufficient evidence to fundamentally support a market euphoria? Here's another theory by the well-known commodity investor, Jim Rogers.

According to Rogers, the recent market rally is flooded with "artificial" liquidity as a result of the various printing money (technically known as Quantitative Easing) initiatives taken by central banks of certain developed countries, particularly U.S. As such, Rogers believe that the next financial meltdown will be in the currency markets.

Rogers claimed that he has bought the Yen because he expects the Japanese currency to withstand future problems, but he does not have short positions in any currency and is currently not buying the yen any more. However, Rogers has not shorted the U.S. dollar at the moment, although it may be at the peak.

Nevertheless, Rogers also believe that for the moment, currencies may look safer than anything else in the markets, as stocks may face a new bottom since they were artificially lifted by the amount of money created by central banks, but there are pitfalls ahead.

Rogers's view seem to coincide with the views of other legendary investors such as Warren Buffett....

Beware of the potential next currency crisis, particularly if you have exposure to multiple foreign currencies!

Malaysia Stockmarket - Upcoming Changes You Need To Know

2009-05-08T23:08:00.011+08:00

If you are an investor of equity stocks in Malaysia's stock market, you should be aware of the following impending changes taking place soon. First and foremost, on 6th July 2009, Bursa Malaysia will change the market’s primary benchmark index from the 100-stock Kuala Lumpur Composite Index (KLCI) to the FTSE-Bursa Malaysia KLCI which comprises just 30 stocks. 73 stocks will thus fall out of the new benchmark index while three new stocks will be added.

The transition will be seamless, i.e., the new FBM KLCI will start off with an index value equal to the closing value of the current KLCI on 3 July 2009.

Secondly, the main board and second board of Bursa Malaysia will be merged and be known as the "Main Market" while the Mesdaq market will be transformed into a sponsor-driven market known as "ACE Market" from 3rd August 2009.

The requirement for listing on the Main Market will also be eased with companies needing only an aggregate after-tax profit of RM20 million over three to five years with at least RM6million in after-tax profit in the latest financial year. This compares with current requirements to have aggregate post-tax profit of RM30 million with at least RM8 million in the latest financial year.

The Mesdaq market, which was reserved for technology companies, will be transformed into an alternative market open to companies of all sizes and from economic sectors.

All equity-based proposals, such as share placements, rights offerings and restricted share issuances will no longer require the SC's approval.

In order to attract both local and foreign companies to list in Bursa Malaysia, the Securities Commission is also relaxing rules on secondary listings of foreign corporations, effective 3rd August 2009. The relaxed rules include foreign companies no longer need to have at least RM1.0 billion in market capitalization with RM60 million in after-tax profit in the latest financial year for a secondary listing.

In order to encourage private equity activities and corporate mergers and acquisitions, SC will also allow the listing of shell companies that have no operations but have intentions to merge with or acquire operating companies or businesses with their IPO proceeds. However, a shell company seeking a listing must raise a minimum of RM150 million through its IPO and must complete an acquisition within 36 months of listing.

Sell In May and Go Away?

2009-05-07T21:11:00.005+08:00

There is this old adage "Sell in May and go away" for Wall Street. Fact or myth? In essence, this is a belief that the period from November to April inclusive has significantly stronger growth on average than the other months from May to October.

Quite simply, the facts seem to indicate otherwise.

The chart below shows the percentage of time the market rises from May 1 through September 1 over various time frames. Over each time frame covered, the market has a positive return at least 60% of the time. Since 1929, there have been 30 years where the Dow went up more than 5% between May 1st and September 1st, while there have only been 14 years where the index declined by more than 5%. There have been 14 years where the index went up more than 10% versus only 8 occurrences of double digit declines.

Moreover, the fact that Wall Street has been in a free fall mood since the 4th quarter of 2007, it's high time for a decent bear rally, given that the latest economic data in U.S. seem to point to a gradual recovery and possibly an indication that the worst is over. The to-be released bank stress test will further give a clear indication of the health of U.S. banking industry.

As a matter of fact, the Dow has recovered by about 31% as of yesterday since March 2009.

Signs of Recovery?

2009-04-30T23:35:00.005+08:00

Malaysia Central Bank has left the key interest rates unchanged at 2.0% and emphasized that the present monetary policy measures were sufficient to provide support to the domestic demand, despite exports are widely expected to contract drastically in both first and second quarter of this year.

With the status quo unchecked, it could well suggest that Malaysia's economy and business prospects may well recover in the second half of 2009.

That likely explains why the local stock market has had a rally of 19% within the past one and a half months. Investors are clearly anticipating the worst is over and a major recovery will take place.

The Age of Buy and Hold Is Over?

2009-04-28T10:26:00.003+08:00

Based on various feedback, this is a mixed view. Some say the age of "buy and hold" stocks and/or equity related investments is simply over, simply due to the fact that economy and business are cyclical in nature. For instance, many stocks (even the bluest of blue chips) effectively wiped out the entire gains made during the last 10 years in just one year of global economic crisis last year!

On the other hand, others say that adopting the "buy and hold" strategy is the best strategy to investing as it is not possible to time the market in terms of peaks and troughs.

Personally for me, the "buy and hold" strategy will not work at turbulent times like this as every single company 's market share will be severely affected by sentiment. Instead of "buy and hold", the likely apprroach during such time in fact is "dump first, think later"! The objective of course, is capital preservation.

However, the strategy of "buy and hold" may make sense during market bull rally. For instance, US market went through a 5 year up trend from 1995 to 1999, followed by from Year 2003 to 2007. Notice that market went through a 3 year correction from year 2000 to year 2002. Assuming the stock price performance is correlated to the index, it would be wise to take some profit during initial market downtrend instead of waiting out for the unknown.

Year 2007 to date performance is a classic example where things really turn nasty! For those who hold on to their investments, chances are the entire gain built up over the last 10 years or so may be wiped off completely! Is it worth while to continue with the gung ho approach then?

So the question is how do you tell the market is undergoing bullish trend or bearish trend then?

Answer lies with Technical Analysis. As technical chartists often say, the charts do not lie! Mind you, technical charts are no crystal ball! They serve the purpose of serving a strategic or tactical guide, based on market "psychology" which will be reflected in the chart. As one say, the Trend is your Friend! Do not fight against the trend when it comes to trading or Investing! Tonnes of hard earned gains accumulated over the years could well be wiped off in an instant!

At the end of day, trade or invest with the trend rather than fighting it. One may not be able to time the market perfectly but at the minimum invest with proper risk management in place is the key to long term success.

Similarly, one needs to know when to cash out when the trend changes. No point be the hero. After all, IT'S YOUR MONEY!

Read This Only If You Are Serious In Changing Your Financial Life Forever!

2009-04-21T00:08:00.003+08:00

I wasn't convinced but I am now! Before I attended this program, i was just as sceptical as you do...reading the same headline. I thought i knew everything there is to be financially successful but I soon realize that what i lack is a solid financial blueprint of wealthy and successful people. Mind you, a solid financial blueprint, is not just all about money but also about having the right positive and balanced state of mind!

Have you ever wondered why some people seem to get rich easily, while others are destined for a life of financial struggle?

Over the years since we were a child, our minds have been conditioned to think a certain way about money and success. If you have not realized it, this is one of the most important factor affecting our finances today!

You need to unwind these conditioning, and learn how to identify and change your personal money and success blueprint, FOREVER!

Introducing Millionaire Mind Intensive, a program that has touched and helped more than half a million people worldwide and is now coming to Asia!

If you are serious in changing your financial life forever, this is certainly an event not to be missed! Besides, it does not cost you an arm and a leg to attend this program as they are giving a very special promotion price that will simply blow your mind off! (Trust me, it will!)

Click this link now to find out more. To register, all you need to do is go to the bottom of the page, pick the appropriate date and venue, and then fill in the information as required.

This is certainly a weekend worth sacrificing for.....To me, it's one of the best I have ever attended and it has certainly changed my financial life for the better, FOREVER! I sincerely hope you are the next to benefit too.

Click here: A Weekend That Will Change Your Financial Life, Forever!

P.S.: This is a definite sell-out program. You need to register fast before the seats are gone! FYI, the special promotion price is only valid until 30th April 2009. So Act now!

P.P.S: Be honest with yourself! This program is not suitable for people who continue to live their lives in self-denial! One way is to look at your own results!

Should You Invest In Foreign Currency Account?

2009-04-17T00:07:00.005+08:00

What is a Foreign Currency Account? Foreign currency account is essentially an account maintained in a financial institution in another currency other than the local currency. As most banks in Malaysia are offering this facility, you can easily open up one account, with normally the condition that you have an existing deposit account with the bank.

There are several purposes why one would require a Foreign Currency account, namely:

An account to hedge against foreign currency transactions whether in the form of business or personal use;
Higher yielding interest rates (e.g., Australian and New Zealand Dollar) compared to local interest rates;
Children education funding;
Individuals with sources of income from overseas;
Investment return

One should bear in mind the most important factor to consider is the direction of the foreign currency versus local currency, no matter what the purpose are. In other words, one should invest into foreign currency account only if there is a perception or expectation that the foreign currency will appreciate against local currency. Otherwise, the benefits of having a foreign currency account may well have been offset by a depreciating foreign currency even though one may gain from the supposedly higher yielding interest rates for instance.

In general, many have this perception that local currency will tend to depreciate over time but certainly this could be a false perception at times. Economic fundamentals and market sentiment definitely have a large role to play in the direction of currency strength. For instance, the value of Australian Dollar had in fact depreciated by more than 20% against Ringgit Malaysia early part of this year!

Therefore, it's important to study these factors before plunging into any foreign currency or open a foreign currency account.

There are generally two types of account, being call deposit and term deposit account. Call deposit is equivalent to a savings account and in most currency offered, there will be nominal interest rates computed daily credited month-end. Currently, US Dollar does not offer any interests. Term Deposit on the other hand is a fixed term deposit account whereby higher interest rates are given upon maturity.The term can range from 1 week to 12 months.

Locally in Malaysia, there is generally no fees charged for opening a foreign currency account. However, the catch is this.....the bank would have earned from you already the moment you open one due to the exchange rate spread between buy and sell rates. As such, don't be overly excited when the bank officer tells you that they do not charge any fees!

Options Trading Course By David Yuen Reviewed

2009-04-09T22:21:00.003+08:00

David Yuen is a relative unknown in the options trading coaching world. A search of him in the internet has found hardly any information about himself or his credentials. Yet, David Yuen runs a low profile options trading coaching course (TeraOne) in Malaysia for about 3 years now (based on information given by David). David is also the founder of Teraoptions, an investment education center. Unlike the sort of publicity often generated by other options trading coaches such as Clemen Chiang from Singapore and Mirriam Mac Williams from the U.S. who both conduct respective coaching courses in this region.

Why I choose David over the others? Well, i believe the decision boils down to his presentation style.....Concise, straight to the point and most importantly, NO HYPE! Elsewhere, one could often hear about the possibility of becoming a millionaire by trading options or achieving sizzling returns in one day, etc but not from David. You will hear none of that! David in fact was frank enough to admit that this course does not guarantee success but is meant for those who work diligently and follow the rules and principles. On this point, unfortunately, David could not illustrate a better proof of success by inviting some of his ex-student to share their experiences and/or success, or illustrate to me his (successful) students' long term track record. David would certainly have reinforced his creditials better by introducing the above. So it remains to be seen whether how many of his students do make it a success!

After attending his course, my conclusion is that David is very sincere in teaching his students in his 20 hour course a practical guide and strategy to trading options, using a detailed step-by-step approach. His course includes the following:

- basic fundamental analysis using automated tools;
- basic technical analysis using support and resistance, and Japanese candlestick;
- Long Call and Put option strategy with emphasis particularly on risk reward ratio;
- Price charting;
- How to analyse Options such as fair value, volatility and greeks;
- Real interactive live training with the U.S market on the final day.

In conclusion, I would regard David's coaching as decent, practical, straight to the point and covers the essential elements of trading. However, the strategies presented are limited. In options trading, there are many other (around 66 of them!) powerful strategies such as spread, naked options, covered options, straddle, butterfly, etc., which cater for different trading scenarios and tactics. It is a regret that David does not cover these strategies.

David's rationale is that the best way for beginners to study options trading is to keep it simple. His reasoning being such that although the other strategies can be useful, they are also very complex in nature and deployment.

Ironically, David does not offer a more advanced course to his fellow students.

In a nutshell, I would rate David Yuen's Options Trading course as a diploma grade relative to a full-blown premium degree. Nevertheless, what David teaches is workable and does offer the practical knowledge and skills to trade successfully based on a certain limited strategy.

How To Predict Stock Market Movement Using Currency

2009-04-07T23:49:00.007+08:00

Most traders use technical analysis to make a prediction the likely movement of stock market. For most layman, learning up technical analysis takes time and a fair amount of patience and technical interest. For most, they simply give up.

There is one other way of making advance predictions of stock market movement, and based on my observation, the correlation between the two is a pretty good one.

Take currency versus US Dollar comparison. When US Dollar gains strength against other currency, stock market will likely go down. On the contrary, the exact opposite movement (market rises) happens when US Dollar depreciates against other currency.

Take the following two examples (USD vs Ringgit and USD vs Singapore Dollar) to study the correlation:

Do you see the opposite trend being formed? It may not be the most perfect correlation but generally, it holds true.

To explain this, generally speaking it is a case of US Dollar demand is stronger during rising risk aversion (i.e., funds are risk averse to investing overseas and therefore more funds are repatriated to U.S.). On the other hand, US Dollar demand will be weakened when funds are more eager to invest overseas, thus outflow of funds from U.S.)

So if you would like to predict the day's market movement, study the currency strength versus US Dollar.

Options Trading For Beginners

2009-04-01T10:27:00.009+08:00

Due to the current financial and economic crisis in U.S., I have started evaluating some stocks in the U.S. Before 2008, trading in U.S. stocks would certainly require deep pockets, particularly for myself due to my country's unfavourable exchange rates ($1 to RM3.5 on average). Never in my life could I imagine stocks in U.S. could one day be trading at such low prices! eg., financial giant like Citigroup trading below $1? GE trading below $6? There are many other examples, such as General Motors and AIG. Then of course, these stocks were trading at such low levels due to their own respective unprecedented crisis!

So I started putting some money into U.S. stocks and thankfully, i made some decent gains in a short period of time. Having a solid trading plan knowing when to enter and exit was the critical success factor. By the way, adopting buy and hold strategy no longer works these days in my opinion, due to the volatile nature of markets and frankly, no one knows for sure whether the markets have bottomed. So why take on the risk of hitting the unknown?

Precisely. But here's a problem. Investing in U.S. stocks means that I will still need to pump in a sizeable amount of money to trade (bearing in mind my unfavourable exchange rate)! There comes to my mind options trading which I had heard so many times before but have very little knowledge of. Options trading utilises the power of leveraging on stocks and is a very powerful form of derivative instrument. So powerful that even Mr. Warren Buffett is fearful of (as he recently criticised as one of the major cause of stock market crash).

As I recalled, I had contemplated to learn options trading in June last year but I dropped the notion because I was not ready then (Please refer to my archived post entitled "Do I Need Options"). Now I believe I am ready to explore this new frontier (new, at least for me...) and to uncover it's perceived power of leveraging and to unlock the myth of successful options trading.

Haven't attended numerous previews of Options Trading learning courses in the past and feedback from numerous ex-students and friends who ventured into options trading, I was certainly skeptical on which Options Trading trainer or course would actually deliver the goods. My attempted research through the internet was of little benefit too as no website content would reveal satisfactory practical knowledge on options trading. Finally, I had little choice but to take a calculated gamble by learning from a fee-based course.

Next I shall reveal which course I have selected and my ground up review.

Shall I Accept A Lower Loan Installment?

2009-03-25T14:26:00.003+08:00

In view of the current low interest rates environment due to global economic crisis, costs of borrowings have become cheaper and if we were to base on the original loan facility agreement with the bank, the repayment period for the affected loans will be shortened, assuming the same amount of installment were to be paid each month. In some countries, banks are required to voluntarily reduce the monthly installment amount of loans so that the repayment period will not be shortened. In some cases, banks even allow troubled borrowers to stop payment for a specific period of time, or willingly negotiate with the borrower to restructure the terms of loan. The objective of this is simple, that is, reduce the burden on consumers and/or businesses in a challenging time like this.

Some people have sought my opinion whether to accept the reduction in installment amount. My answer to that is why not, even if one has no financial difficulties! After all, one could save a fair amount of commitment each month and assuming one has multiple loans (like myself), the amount of savings each month can be quite sizeable.

There are many advantages reduced commitment can bring to the equation. Among them include:
- excess funds for spending on goods and services. Flow of funds and spending are essential for the growth of economy. An environment without consumer and business spending will just make the already stale situation worse off!

- pay off debts which carry a higher interest rates than one's mortgage loan. Credit card debt is an obvious example. This could lead to significant savings in cost of debt.

- best of all, use the savings from the excess funds to invest wisely. Given that many investment grade assets have been bashed down badly during the past one to two years, great bargains are abundant! For instance, stockmarket is expected to give the best return once the global economy recovers. So for those who have not acquired the knowledge of investing, now is the best time to educate yourself, before it's too late!

Also, keeping extra cash in your pocket at the time of crisis is definitely a wise thing to do. After all, we will not know what may happen next. For instance, job retrenchment, business failure, etc, may just pop up down the road, especially if the economy gets worsen.

One word of caution though, do not expect every bank will voluntarily reduce the installment for you. I know for some banks, you will actually have to write in to request for the reduction. So do not just assume this will be done automatically. Go ASK YOUR BANK now!

8 Reasons Why Obama Will Not Solve This Crisis

2009-03-24T17:02:00.005+08:00

JS Kim does it again! With his unorthodox assessments and predictions (that often come true, i have to say!), here are 8 reasons why he thinks the Obama administration will not pull America and the world with it, out of its current economic throes, by the end of this year!

(1) Consider that President-elect Obama voted FOR the horrible $700 billion bailout plan that accomplished less than zero in fixing the global economy while only transferring wealth from people that were struggling the most to the unethical financial executives that created this problem.

These were my exact words in October, 2008, verbatim, about the eventual effect of the bailout plan: “Don’t believe the media spin. This will fix nothing. Even if and when the government overpays Wall Street and US banks by 300%, 500% and 1000% for their toxic assets, this temporarily recapitalizes these financial institutions but only creates A MUCH BIGGER PROBLEM for the future.”

If I understood why the bailout plan would most definitely fail, and the next President of the United States could not, that is a scary thought. On the other hand, if President Obama understood that the bailout plan would likely accomplish nothing but the transference of wealth from hard-working citizens to corrupt financial executives and still voted for the bill, then this action needs no further discourse.

(2) The problems afflicting the global economy still have not yet been addressed by any Central Bank or government in any intelligent manner and thus, are not on the path to recovery. No single man, no matter how competent and no matter how much goodwill he possesses worldwide, can fix this current crisis without severely overhauling the current fiat monetary system. There has been zero evidence thus far, that the Obama administration wishes to address the root problem of this crisis – an unsound monetary system.

(3) This crisis is being misreported by virtually every finance journalist in the world due to an education system that teaches an unsound Keynesian economic model at every top university in the world. From the Obama administration’s actions thus far, it is clear that he is taking a Keynesian approach in his attempt to fix the problem, which is to spend your way out of an economic meltdown. The only problem is that any “fix” that may result from such an approach will be 100% illusory and only result in further destruction of wealth by ensuring future devaluation of the world’s major currencies.

(4) Thus far, President Obama’s cabinet appointments do not reflect, in the slightest manner, the enormous change that he spoke of during his campaign. On the contrary, his talk of change, quite honestly, appears to be 100% rhetoric. A clear example of this is President Obama’s appointment of Timothy Geithner, the former President of the New York branch of the U.S. Federal Reserve, to the U.S. Secretary of Treasury, and his appointment of Paul Volcker (Chairman of the Federal Reserve Board, 1979-1987; Chairman of the New York investment banking firm, J. Rothschild, Wolfensohn & Co.; Chairman of the Board of Trustees of the Washington-based financial advisory body, the Group of Thirty; founding member of the Trilateral Commission; and Chairman of the Board of Trustees of the New York-based International House) to head his economic advisory board.

A further inspection of Obama’s economic advisory board reveals a who's who of executives from the institutions that created this current mess!

Furthermore, Volcker was highly instrumental in ensuring one of the worst decisions in economic history, the U.S. decision to suspend gold convertibility in 1971 that subsequently allowed a 100% fraudulent monetary system to spread globally, and consequently almost resulted in the collapse of the U.S. dollar in the late 1970s. Obama’s cabinet appointments are perhaps the most damning evidence that he is strictly about maintaining the status quo and not at all about change when it comes to Wall Street.

(5) For a historical example of how the Obama experiment is likely to turn out, please research the election campaign of Mexican President Vicente Fox (Mexico’s President from 2000-2006). Vicente Fox was largely perceived as a savior among the Mexican general masses because he was the first opposition candidate to defeat the PRI (Institutional Revolutionary Party), a party that had ruled Mexico for more than 70 years. Fox’s election campaign, full of slogans like “Vote for Change" and “Enough!", could have served as a blueprint for Barack Obama’s masterful election campaign. By the time Fox’s six years of Presidency had expired, he was widely regarded as a huge disappointment for failing to implement almost every major plan of change he promised during his campaign and doing very little to change the status quo.

(6) Don’t let President Obama’s professed anger regarding the $165 million of bonuses slotted for AIG executives fool you. The U.S. government clearly changed security laws at their whim last year by making short selling of financial stocks illegal for periods at a time to artificially force financial stock prices higher and thus, help out financial executives, with little opposition. Thus if the President and U.S. Congress’ anger about these bonuses are real, it seems to me that they would just implement new laws to end fraudulent bonuses. They would just “do” instead of keep “trying.”

(7) Why wasn’t the expressed outrage of the Obama administration regarding $3.6 billion of bonuses that Bank of America (BAC) paid to Merrill Lynch (MER) executives, a figure that dwarfs $165 million, equivalent to the outrage being expressed over the AIG bonuses? Something tells me that because AIG is not a pillar of Wall Street it is receiving harsher treatment. I’m not arguing against this harsher treatment by any means. I’m merely illuminating that the hypocrisy in these different standards is an indictment that Wall Street firms’ ties to the U.S. government are so strong that they are still being favored despite the rhetoric.

(8) Remember when former U.S. Treasury Secretary Hank Paulson’s original $700 bailout bill was a 3-page document and he promised that no money would be spent without extremely close supervision? Remember how this 3-page bill mysteriously morphed into a 450-page $850 billion bailout, and loopholes galore were snuck into this new bill last minute so that billions of the bailout money could be allocated for executive bonuses although Paulson promised us such shenanigans would not occur? Remember that Obama voted for this bill!

Here you have it. Time will tell whether his views are proven valid. If indeed correct, it is a scary thought that the world economy will take some more beating before the dust finally settles.

For the full article, please click here.

Is US Dollar A Bubble In The Making?

2009-03-18T18:24:00.000+08:00

Many perceive the US Dollar to be a safe heaven, never mind that the US economy is in shambles and the largest banks and automotive companies are almost to the brink of bankruptcies, never mind that US has been selling Treasury bills by the tons to avert a financial collapse and never mind that the US stock markets have shed its value by about half in less than one year! The US Dollar has in fact appreciated against most major currencies by a large scale except for the Yuan and the Yen.

So what caused the Dollar to appreciate?

- Risk aversion to global markets, due to the crash in most global asset classes and the credit crunch in the US. There is therefore a strong demand for US Dollar to be averted back to the US. Also, severe deterioration in world wide economy following the US footsteps has further caused risk aversion and repatriation of funds from both developed and emerging markets.

With the US resorting to printing money (or technically termed as "quantitative easing" to make it sound diplomatically correct!) in order to bailout the banks and save the faltering economy, questions are asked whether the Dollar's strength can sustain in the future.

In essence, any currency will lose its value when the supply is more than demand over time. The problem with quantitative easing is that by the time the money reaches the level of the common consumer and caught up with the excess money in the market, inflation cripples in and the dollar worth of currency will therefore be reduced. This is not the case when the money is first injected as it takes time for inflation to recognise the new money and catch up.

As such, the current strength in US Dollar will likely be hampered in the long term as inflation or hyperinflation takes effect in the US, as and when the economy recovers.

It is also likely that prices of commodities will again be on the rise by then!

On the other hand, better lock down your mortgage rates before interest rates move up in tandem with inflation or a hyperinflation!

Recession Is On The Cards? (Part 2)

2009-03-10T20:03:00.004+08:00

Against expectations, the Malaysia Government throw in a massive RM60 billion (US$16.2b) stimulus package, that is equivalent to about 9% of GDP! The increased spending will effectively blow up Government's budget deficit to 7.6% in 2009.

The RM60bil package, to be implemented over 2009 and 2010, includes RM15bil as fiscal injection, RM25bil in Guarantee Funds, RM10bil for equity investments, RM7bil for private finance initiatives and off-budget projects, as well as RM3bil in tax incentives.

The package is aimed at reducing unemployment, increasing consumption and spending in order to kick start the economy, enhances bank lending and liquidity, providing a lifeline to businesses through improved working capital and incentives.

For me, the next critical step is how efficient and how well these measures are going to be implemented. Based on the history as guidance, implementations tend to be poorly executed and there is also the issue of lack of transparency. I only wish the Government will improve this time, given its significance.

One important point to note is that despite the record amount of targeted spending, the Government has only revised this year's GDP growth to the range of minus one to positive one percent! Which means Malaysia would have certainly fallen into a more severe recession if without these measures taking place! Any blips in execution could well cause a more severe downturn in our economy.

Do not be too surprised if that happens, though!

For the complete story, read here.

Worst Ever Results For Berkshire: Warren Buffett

2009-03-09T23:35:00.008+08:00

Berkshire Hathaway Inc. posted its worst results ever in 2008! Billionaire Warren Buffett said the economy “has fallen off a cliff” and that efforts to stimulate recovery may lead to inflation higher than the 1970s. Berkshire’s shares have lost almost half their value in the past year as the bear market dragged down financial assets and the recession put pressure on profit from the company’s more than 70 operating businesses. Berkshire’s fourth-quarter net income fell 96 percent to $117 million. Book value per share, slipped 9.6 percent for all of 2008, on the declining value of derivatives and the company’s stock portfolio.

He believes the bailouts of the banking system and “quasi-banks” such as AIG were necessary, even if everyone dislikes what’s been done to salvage the New York-based insurer. He favored insuring all bank deposits, and in response to a question about nationalizing lenders, Buffett said he doesn’t see any moral hazard in the U.S. seizing an institution when shareholders are already almost wiped out.

He also believes the root cause of the current crisis was that companies used too much leverage and “played games” such as creating special investment vehicles to keep producing earnings growth. The U.S. economy was not a "house of cards" over the past ten years, but mistakes were made when it came to borrowing money.

Other keynotes include the following:
- The American public is fearful, confused and changing their buying habits,
- The economy turnaround won't happen fast.
- Five years from now, the economy will be running fine. The strength of the American system will pull it through, just as it has many times in the past.
- Most banks are in "pretty good shape" and can "earn their way out" of the current problems given the low cost of funds. Banks, however, "need to get back to banking.";

- It is extremely important that the government make clear depositors won't lose their money if banks fail;

- Buffett wishes he had written the New York Times "Buy American" a few months later, but stands by the basic argument that one will do better over a ten-year period with stocks that one will with Treasuries. He said in the article he wasn't calling the bottom of the stock market, and he still isn't;

- Buffett says derivatives are not "evil" and to be avoided at all costs, but they are "dangerous" and should be used very carefully. He still expects to make money on the long-term "put option" equity derivative contracts Berkshire has written;

- Housing market could work through, or "sop up," its excess supply in as little as three years if new construction is reduced to a level below natural population growth;

- Mark-to-market accounting should be retained, but regulators shouldn't use it so much to require institutions to increase their reserves.

Here are the full videos of Warren Buffett's interview with CNBC. It's quite a long interview but well worth the time listening.

US Economy has fallen off the cliff

Q&A

Fear Affects Everyone

Banks should go back to basics

Crooks & Investment Advice

Investment Regrets

Automotive Bailouts

Deals and Opportunities

Finding the right solution

Advice for Obama

The rich to subsidize the poor

Final Thoughts

How To Invest At A Point of Maximum Pessimism

2009-03-04T23:31:00.004+08:00

Want to know how to invest at the point of maximum pessimism (given current stock market's doldrums)? Below is an experts' view on investing techniques at current market pessimism and where Malaysia stands from both economic and technical perspective.

The live interview was conducted by TheStar newspaper on 20th February 2009. This video may be a tad back-dated but the interviewees certainly gave a full-hearted and frank opinion on current business and market conditions, and sharing good ideas on investing for better future returns.

Here's the video. Enjoy.

AIG Continues To Bleed....Badly!

2009-03-04T00:46:00.004+08:00

American International Group (AIG) incurred a record loss of US$62 billion last quarter!

Here are some startling statistics:
- The loss occurred in just 92 days, i.e., $470,000 a minute! And it's more money than Bill Gates' net worth.

- The quarterly loss was the biggest in corporate history, topping the previous record of about US$45 billion set by Time Warner Inc. during the fourth quarter of 2002.

- AIG continues to bleed, despite U.S. Government bailout fund of US$150 billion! Now AIG is asking for another US$30b!

- AIG's quarterly loss is about 12 times the $5.3 billion it lost in the same quarter of 2007. That was more than half the US$114.53 billion lost by nearly all other Standard & Poor's 500 companies combined in the fourth quarter. This represents also the first quarter ever that the S&P 500 has tallied a loss.

- AIG lost more in the fourth quarter of 2008 than it made from 2001 to 2007!

- If $62 billion was distributed across the U.S. population, Americans could each get about $200!

- AIG's loss amounts to 92 percent of the US$67.4 billion that Americans spent at world's largest retailer Wal-Mart Stores in the fourth quarter, which includes the holiday season.

- It would take a person spending $1 million per day, everyday, the next 169 years to spend as much money as AIG lost during the fourth quarter, which lasted just 92 days!

I really wonder how on earth a once proud insurance giant would now become such a miserable sick patient?!

Malaysia Going Into Recession?

2009-03-02T23:22:00.003+08:00

Despite Malaysia Government's constant state of denial, the statistics couldn't lie!

Last Friday the GDP data announced for the fourth quarter of 2008 came up short of expectation....only a mere 0.1%. That is to say, Malaysia's economic growth had plummeted from the previous quarter's 4.7% to no growth in the last quarter!

It seems the RM7 billion (US$2billion) were not sufficient to save the economy (as expected), as a result of the larger than expected fall in exports.

The world is suffering from global recession and every country is now scrambling to revise growth outlook and desperately trying to stem the collapse through various stimulus packages.

In Malaysia's case, the Government is going to announce another stimulus package before mid March. Given it's timing (being announced in March and assuming implementation within 3 to 6 months), the effects on economy will mostly likely take place only thereafter. This could well imply that Malaysia could well be in recession in the first and second quarter of 2009!

It's regrettable that the Government took so long to realize the current miserable state and to come up with positive new measures to tackle the economic problems! Ironically, they certainly appear more interested to tackle the various political issues and to safeguard their own political agenda for the past one year up to this present moment!

Recession Is On The Cards?

2009-02-25T00:02:00.005+08:00

In a highly unexpected move, Malaysia's Central Bank cut its interest rates by 50 basis points to 2 per cent on Tuesday due to rising concern about the country’s economic growth.

The Central Bank also cut the commercial banks’ statutory reserve requirement (SRR) by 100 basis points to 1% effective March 1.

This was the third straight rate cut in as many meetings and came after a shock 75 basis point cut last month.

Despite Malaysia Government's constant denial of possible recession, the latest measures clearly indicate that the economy is all but well, and is deteriorating at an alarming rate! Perhaps, the feared word "recession" is truly on the cards!

Dividend Yield? Don't Bank On It!

2009-02-24T23:21:00.005+08:00

At a challenging time like this, more and more companies are slashing their dividend payout to conserve cash for either future defensive or offensive measures. Some time ago i have written the possibility of such scenario happening and how true indeed.

JP Morgan, U.S. second-largest bank, slashed its common stock dividend by 87%, a surprise move by a lender considered among the strongest in the U.S. financial sector. This came about despite the bank claiming a "solidly profitable" quarter, and that the outlook being in line with expectation.

It's decision to lower its quarterly dividend to 5 cents per share from 38 cents will save US$5 billion of common equity a year and hopes to pay back the US$25 billion of capital it got in October from the U.S. government's Troubled Asset Relief Program faster.

Among others, Bank of America and Citigroup, have in fact slashed their quarterly dividends to a penny per share since November 2008!

It is highly expected that more companies across the globe will continue to slash dividends in order to conserve cash.

Locally in Malaysia is no exception, whereby Carlsberg Brewery Malaysia announced an unprecedented reduction in dividend distribution by 60% compared to the past. In the past, such company has never failed to give out high dividend yields from the range of 8% to 10%.

With the current global financial crisis and recession looming, one should not blame them for being conservative. After all, no one knows how bad the situation may pan out. It's better be safe than sorry!

Warren Buffett's Words of Wisdom for 2009

2009-02-21T00:01:00.006+08:00

Here's a special message from the one of the wealthiest man on earth and is worth your time reading and taking notes....It's simple yet powerful and meaningful.

"We begin this New Year with dampened enthusiasm and dented optimism. Our happiness is diluted and our peace is threatened by the financial illness that has infected our families, organisations and nations. Everyone is desperate to find a remedy that will cure their financial illness and help them recover their financial health.

They expect the financial experts to provide them with remedies, forgetting the fact that it is these experts who created this financial mess.

Every new year, I adopt a couple of old maxims as my beacons to guide my future. This self-prescribed therapy has ensured that with each passing year, I grow wiser and not older. This year, I invite you to tap into the financial wisdom of our elders along with me, and become financially wiser.

Spending: If you buy things you don't need, you'll soon sell things you need.

Savings: Don't save what is left after spending; spend what is left after saving.

Hard work: All hard work brings profit; but mere talk leads only to poverty.

Laziness: A sleeping lobster is carried away by the water current.

Earnings: Never depend on a single source of income.

Borrowings: The borrower becomes the lender's slave.

Accounting: It's no use carrying an umbrella, if your shoes are leaking.

Auditing: Beware of little expenses; a small leak can sink a large ship.

Risk-taking: Never test the depth of the river with both feet.

Investment: Don't put all your eggs in one basket.

I'm certain that those who have already been practicing these principles remain financially healthy.

I'm equally confident that those who resolve to start practicing these principles will quickly regain their financial health.

Let us become wiser and lead a happy, healthy, prosperous and peaceful life."

- Warren Buffet

U.S Consumer Aid: Step In the Right Direction?

2009-02-19T11:28:00.006+08:00

US President Barack Obama pledged another US$275bn to a program that includes cutting mortgage payments for as many as 9 million struggling homeowners and expanding the role of Fannie Mae and Freddie Mac in curbing foreclosures.

The plan includes US$75bn to reduce monthly payments for borrowers, helps
homeowners with loans owned or backed by Fannie Mae and Freddie Mac to refinance at lower rates. On the other hand, the Government will double to US$200billion funding available for Fannie and Freddie to buy loans.

Further deteriorating market data showing U.S. housing starts and building permits dropped to record lows in January, as builders shelved construction plans to try to clear a glut of unsold houses caused by the slump in demand.

Major doubts remain over the effectiveness of this latest measure. However, it could well be a positive step towards salvaging a catatrosphic mushrooming in defaults and thus putting more pressure on banks, property prices and limiting consumer spending, which is an important element of U.S. economy.

Are You On The "Unwanted" List?

2009-02-17T17:35:00.003+08:00

Here's some startling facts and figures which I have gathered from some local publications. According to Bernama, companies operating in Malaysia had retrenched 14,484 workers between October 2008 and January 2009, of which 4,207 workers left their jobs under a voluntary separation scheme (VSS)!

Looking ahead, the Manpower Department anticipates some 100,000 people in Malaysia to be retrenched by April! Singapore, on the other hand, was prepared to retrench all its 300,000 foreign workers, of which 200,000 are Malaysians.

To hit the final nail, the Deputy Prime Minister of Malaysia has also hinted that the Government may have to reduce further the country's GDP forecast for 2009, which currently stands at 3.5%!

Some analysts are predicting that Malaysia will fall into recession this year. What's your thought?

Whatever it is, be prepared but do keep this in mind at the same time.....When there are CRISIS, there are OPPORTUNITIES!

Cheaper Credit Card Debt: What You Should Know And Ignore

2009-02-13T10:27:00.002+08:00

Here's a piece of good news for Malaysians with credit card debt! The Central Bank of Malaysia have just declared that interest rates for credit cards will be reduced by 0.5 to 1.5% for credit cardholders, while late payment fees will be slashed to a minimum of RM5 and a max of RM75 (against previous fees of RM10 or 1% of total outstanding balance subject to a maximum of RM100) effective from 31 Mar 2009.

To recap, Tier I being cardholders who pay at least the minimum amount promptly over 12 consecutive months, will now pay 13.5% in annual interest, from the present 15%. Tier II being cardholders who pay at least the minimum amount promptly over 10 consecutive months, will now pay 16% in annual interest, from the present 17%. Finally, Tier-III cardholders who do not meet the above criteria will have a minimal reduction of 0.5% from the present 18%.

The reduction in interest rates should give rise to savings for credit cardholders. However, i believe this is merely an act of reducing potential debt default (in view of the economic slowdown or possible recession) instead of increasing consumer spending, as consumers face the likelihood of reduced income or income uncertainties due to job losses and business slowdown.

Nevertheless, the silver lining to this is that nobody should use the credit card as a form of borrowing due to the extreme high cost of financing. It is advisable to pay off such credit debts with lower cost of financing such as personal loan, property loan refinancing or make use of tools such as credit balance transfer to another credit card with much lower cost of financing.

Avoid credit card debt!

Stimulus Or Mere Hindrance?

2009-02-12T13:39:00.005+08:00

U.S. Government have unveiled the much anticipated financial sector rescue plan. The Treasury Department and Federal Reserve took the bold step of committing more than US$1trillion in financing for loan purchases as well as commercial mortgage-backed securities, and unveiled a sweeping reform to previous programs.

Here are some of the salient points:
• The banking sector will undergo a check up to determine whether banks have adequate
capital to continue lending. Financial institutions will also be tested to see if they can stay
solvent if the downturn turns worse than expected;

• Efforts will be made to improve banks' public disclosure of their holdings. Besides, banks with assets greater than US$100billion will have to undergo individual assessments;

• Similar to the existing US$250bn Capital Purchase Program (CPP) under the Troubled
Asset Relief Program, Treasury will continue to help banks shore up capital after
undergoing a stress test. Like the TARP program, Treasury will take an equity position in
the form of preferred shares in banks receiving CAP investments. The investments that
Treasury makes will then be placed into a separate trust, overseen by fund managers;

• A public-private investment fund will be setup to help banks cleanse their holdings of "toxic" assets in order to extend private lending. However, no specific amount was provided;

• banks receiving government funding are required to show how they are using the money they receive for lending. They must also submit a plan to Treasury detailing how they expect to use bailout money to boost lending;

• Companies in receipt of bailout funding will be required to cut their dividend to a maximum
of 1% per quarter until the loan is repaid. Banks cannot repurchase privately held
shares, and they cannot buy other healthy banks without Treasury's consent;

• Executive pay at some bailed-out banks is to be capped;

• A foreclosure prevention program valued at US$50bn will be introduced to mitigate foreclosures and make housing more affordable by lowering interest rates;

• A new program to boost small business and community bank lending will be introduced, by financing purchases of high-quality Small Business Administration (SBA) loans and increasing
SBA loan guarantees to 90% and reducing their fees.

Many investors have started to question if the latest stimulus plan is enough to halt the economic slump, particularly after billions of dollars pumped in but have yet to witness any form of positive results.

What's your thought?

Source of rescue plan : CNN Money

Asia To Outperform The Rest of World

2009-02-11T16:33:00.004+08:00

1997 was a year of crisis originated from the Far East. Then, the likes of emerging markets such as China and India had not quite come on stream... Ironically, Asia is again hit by financial crisis a decade later. This time albeit is originated from the west, namely U.S, followed by Europe.

Being predominantly export-led markets, Asian shares have been dragged down as a result by the global financial crisis that has seen foreign investors oozing to clear the fire exit. The outlook for this year is certainly bleak, no thanks to the over-dependence on exports. It remains to be seen how long this current crisis would unfold towards recovery. Asia perhaps stand a much better chance to withstand the current storm and outperform global shares in the mid to long term.

Here are my six reasons why.

Asian countries do not suffer from the consumer indebtedness and deleveraging that is now causing massive headaches in the western countries.
Asian financial system never became as dependent on credit markets and its banks are far less exposed to the toxic debt in U.S. and Europe;
Asian economies are generally buffered with high foreign exchange reserves, high savings rate and current account surpluses;
Asia's favourable demographics, being higher population growth with lower dependency ratio;
Asian equities are now trading on a similar valuation to global average. Thus, undervalued and attractive stocks are aplenty across the region.
Asia's long term growth prospects are still good, with both China and India leading the pack.

It's worthy to note that the above reference to the word Asia excludes Japan, which has had experienced stagnant growth for the past 2 decades.

Interest Rate Cut: How Does It Impact You?

2009-01-22T12:28:00.007+08:00

The Central Bank of Malaysia cut its interest rates by 75 basis point from 3.25% to 2.5%. The latest move is higher than the consensus expectation of 50 basis point. The higher than expected rate cut probably reflects a faster than expected deterioration in the country's economy.

In the same token, the Central Bank has also reduced the Statutory Reserve Requirement (SRR) of banks by 150 basis points, from 3.5% to 2%. This potentially neutralizes the expected margin squeeze on banks (due to lower rates) by reducing banks' cost of funds, expanding liquidity in the banking sector and thus increases the capability of banks to restructure loan defaults and helps reduce risk of non-performing loans.

With the latest low interest rates, it's a blessing to loan borrowers but a bane to depositors. For loan borrowers, it is a good time to refinance their existing loans. A low interest rate environment will most likely bring some relief to the property market too.

On the other hand, the lower interest rate should benefit bond yield.

With the slowing economy (and possibility of recession) and volatile investment climate, it is indeed imposing greater challenges to sustaining real wealth creation in the foreseeable future.

What Do You Really Want?

2009-01-20T00:02:00.002+08:00

An interesting story about an investment banker and a fisherman...

An investment banker was at the pier of a small coastal village when a small boat with just one fisherman docked.

Inside the small boat were several large yellow fin tuna.

The banker complimented the fisherman on the quality of his fish and asked how long it took to catch them.

The fisherman replied, “Only a little while.”

The banker then asked, “Why didn’t you stay out longer and catch more fish?”

The fisherman said, “With this I have more than enough to support my family’s needs.”

The banker then asked, “But what do you do with the rest of your time?”

The fisherman said, “I sleep late, fish a little, play with my children, go for walks with my wife, stroll into the village each evening where I sip wine and play guitar with my friends. As you can see, I have a full and busy life.”

The banker scoffed, “I am a Harvard MBA and can help you. You should spend more time fishing; and with the proceeds, buy a bigger boat! With the proceeds from the bigger boat you could buy several boats.

“Eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing and distribution.

“You would need to leave this small coastal fishing village and move to the capital city. After that, who knows, maybe you could take on the world!”

The fisherman asked, “But, how long will this all take?”

To which the banker replied, “I’d say about 15 to 20 years.”

“But what then?” asked the fisherman.

The banker laughed and said, “That’s the best part! When the time is right, you would announce an IPO and sell your company stock to the public and become very rich, you would make millions.”

“Millions?…Then what?” the fisherman continued prodding.

The banker said, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, go for romantic walks with your wife, and in the evenings you could sip wine, play guitar and sing songs with your friends!”

To which the fisherman mused, “Now, isn’t that strange? Isn’t that what I’m doing now?”

Now, ask yourself, what do you really want?

Global Banking Crisis In The Making

2009-01-15T00:09:00.004+08:00

In the past, i would never have believed the possibility of Citibank encountering severe financial crisis let alone on the brink of bankruptcy. That is until recently, after the startling US financial bailouts in 2008....

Another global bank, London-based HSBC Holdings Plc, Europe’s largest bank by market value, announced that it may have to raise as much as $30 billion and cut the dividend in half as earnings drop!

One of the better performer in the banking sector last year, HSBC’s profit is likely to fall sharply this year and recovery is expected at the earliest 2011.

According to Morgan Stanley, HSBC has one of the weaker capital ratios in Europe and the second weakest in Asia.

In addition, HSBC will have to make greater provisions in 2009 because 75% of its loans are in the U.S. and U.K.

The worst financial crisis since the Great Depression is hurting banks worldwide. Deutsche Bank AG, Germany’s biggest banks, reported a loss of about 4.8 billion euros as it increased provisions for bad debt. Citigroup is selling its best performer, Smith Barney brokerage to Morgan Stanley and may also dump the CitiFinancial consumer-lending unit, pointing to an imminent breakup of the once giant financial group.

Nothing seems impossible these days.....

Video On The Resignation of Ramalingam Raju of Satyam

2009-01-08T13:13:00.003+08:00

Found this video on the resignation of Ramalingam Raju, former Chairman and founder of Satyam. Watch this...Sounds more like a commentary on a horse racing day!

Watch YouTube videos on AOL Video

Oh No, Another Accounting Scandal?

2009-01-08T00:43:00.004+08:00

Oh no, here it is again, another massive accounting scandal and fraud, involving another top company. This time, is happening at the shores of one of the world's fastest growing emerging market, India. The latest fiasco involves India's fourth largest information technology company, Satyam (Computer Services), that is.

The chairman of India's fourth largest information technology companies admitted he concocted key financial results including a fictitious cash balance of more than $1 billion, a revelation that sent shock waves across corporate India and is likely to prompt investors to question the validity of corporate results as the once-hot economy slows.

B. Ramalinga Raju, is the founder and chairman of Satyam. In fact, the word "satyam" means truth in Sanskrit! Satyam has presence in over 66 countries and employs more than 53,000 global workforce. Together with the revelation, Raju has also tendered his resignation today. In his letter, he revealed overstating profits for the past several years, overstated the amount of debt owed to the company and understated its liabilities.

Raju said that Satyam had inflated its operating profit for the three months ended Sept. 30 to 6.49 billion rupees ($136 million) from 610 million rupees reported previously, while revenue was inflated to 27 billion rupees from 21.12 billion rupees. It had reported an operating margin of 24% which was actually 3%.

Raju also said Satyam's balance sheet as of Sept. 30 had a non-existent cash balance of 50.4 billion rupees; nonexistent accrued interest of 3.76 billion rupees; an understated liability of 12.3 billion rupees; and an overstated debtor position of 4.9 billion rupees compared with 26.51 billion rupees reflected in its books.

This has resulted in artificial cash and bank balances going up by 5.88 billion rupees in the second quarter alone.

Interesting to note that the auditor of Satyam Computer Services is no other than one of the big four Accounting Firm, PricewaterhouseCoopers (PwC). Questions point to whether PwC was involved in the accounting fraud. Remember the fate of Arthur Andersen with Enron?

Satyam's share price has plunged a staggering 78% in one day! On the other hand, India's Bombay Stock Exchange has plunged more than 7%.

For a copy of the content of the letter, please click here.

Belated Santa Rally?

2009-01-06T19:24:00.008+08:00

Just when the expected year-end (2008) window-dressing activity (or commonly known as Santa Rally) for global stock markets ended with much disappointment, global stock markets have surprisingly started the year with resolute intention! The chart below shows selective global market performance over the first 2 to 3 days of trading.

Having a sense of too good to be true, especially after so many false starts and suckers rally?

This may well be an exception! In my opinion, key global markets are possibly gearing up for a mini-rally this month, particularly after such a severe bear beating last year. So, there is a good chance we may experience more than just a technical rebound. After such a devastating and disappointing stock market performance in 2008, where key global markets plummeted from around 30% to more than 60%. The start of the year saw fund managers worldwide jostling to position their portfolios for the new year and the bombed out stocks worldwide, a scenario that has not happened for a very long time.

In Malaysia, the reasonably high average daily Bursa volume of about 700 million seem to support the notion too, suggesting there were plenty of buying support, on top of the more than 5% gain in 3 days.

However, bear in mind that this does not mean we have seen market bottom. It's just market "forces" at play at the moment.

While the US Government is doing what they possibly can to salvage the wreckage back home, the story in Asia may just be the beginning of a severe slowdown. Hence, the worst may have yet to happen in Asia. On a conservative note, economic recovery may be more realistic in 2010 than the second part of 2009.

The Best And The Worst of 2008

2009-01-02T11:39:00.001+08:00

2008 is an eventful year but probably a year to forget for many! Ironically, it is so eventful that perhaps it is impossible to forget!

To name a few....sub-prime financial crisis, global credit crunch, global assets crash(es) followed by the extreme volatility, oil price skyrocketing to $147/barrel followed by skydiving to below $40, inflation followed by stagflation, global recession, Obama becoming the first black American President, the collapses of well-known global powerhouses such as Lehman Brothers, financial bailouts of giants such as Citibank, China Sichuan earthquake, etc.

For Malaysia, we have the added March 08 General Election followed by the political uncertainties.

Here's how some of the major markets have performed in 2008:
Dow Jones Industrial Average -33.8%
Japan's Nikkei -42.1%
Hong Kong's Hang Seng index -48.1%
Singapore's Straits Times Index -49.4%,
Malaysia's KLCI -39.3%

By the way, the dash (-) stands for minus!

Below shows the best and worst performing stock markets all around the world in 2008. Interestingly, only one stock market (Tunisia) ended in positive territory. Some you probably never even knew existed, but all were victims of the credit crisis and global recession.

Source: BBC

Best Wishes

2008-12-25T13:19:00.000+08:00

I would like to take this opportunity to wish you all Happy Holidays!

I wish you the best this holiday season and hope that we can look forward to a better year ahead!

Have a Merry Christmas and a Happy New Year!

Beware Of The High Yield Trap

2008-12-24T12:01:00.004+08:00

Many analysts and advisers have been recommending high dividend yield stocks as one of the most effective and defensive instrument against the current beaten down and volatile markets. The principal to follow here is that as long as you are buying or holding on to stocks that continues to distribute decent percentage of dividend on an annual basis, you are assured of receiving at least a decent amount of dividend income, as a cushion against the possible slide in share prices.

The dividend yield is calculated as the amount of dividend per share against the share price. The projected yield is therefore taking into account the future projected earnings and the average dividend distribution ratio. Instances where companies are committed to a certain percentage of their net earnings as dividend distribution augurs well for such defensive strategy.

However, beware of the earning trap, before you jump out of the bandwagon and start collecting high yield stocks!

Technically, as every country is experiencing recession or severe economic slowdown, so will the corporate earnings! This is inevitable as business and consumer confidence will surely take a hit, whether one likes it or not. In some cases, business could be driven down by slower and lesser demand, thus driving them out of business. In most cases, people could well be taking a more cautious or "wait-and-see" approach, thus limit spending. Bnnks on the other hand, are more likely to take a cautious approach to lending, although liquidity may still be abundant. This literally reduces credit availability in the market and ultimately increases cost of borrowing. All-in-all, business and consumer spending sentiment will be affected.

As the above takes place over a period of time, it remains to be seen the degree of severity of the business downturn. As you can see now, more of more companies are reporting lower than expected corporate earnings recently.

As such, one has to review carefully the forecasted earnings of companies before taking the defensive high yielding approach. When the chips are down, do not be surprised that companies may actually declare lower dividends or even cancel them altogether in order to preserve cash (for rainy days)!

Look out for companies that are least affected by the economic slowdown and consistently payout dividends through rain or shine. Companies in the utility sector (such as power generator) may be one of them.

Short Term Pain, Long Term Gain?

2008-12-18T13:12:00.004+08:00

This is a video of an interview with Alan Valdes, trader and Vice President of Hilliard Lyons on the current loss of confidence in the market and what he claims to be a short term pain, long term gain for America (and possibly the rest of the world?). His favourite quote:"Don't Short America"! Find out why he thinks America is not heading into a depression and why Americans are going to change the way they do business but definitely not out of business!

Is It Much Easier To Make Your Second Million Than First?

2008-12-15T16:49:00.003+08:00

According to surveys in the US, most millionaires are not made by winning the lottery, a brilliant business idea or through inheritance. Most do it the steady way via disciplied savings and investing. But how hard is it to achieve a million this way?

Let's say you start with nothing in the bank and put away $1,000 a month. With income increases and bonuses, let's assume you add to the savings at the rate of 5% a year. After one year, you would be putting away an average of $1,050 a month. With an average return of 8% per annum, you would hit the $1 million within 22 years!

But then, here's the bad news. In 22 years, your million would be worth only about $340,000, assuming annual inflation rate of 5%.

The good news is, given that the assumptions are right, your second million will be much easier to achieve. It the rate of savings remains, the second million would be made in another seven years. The third million, you would make in another four years. Even if you stop contributing after you reach the first million, the second million would be made in nine years, less than half the time it took to accumulate the first million.

If you put away $1,000 a month without increasing your savings, you would go from zero to $1million in 26 years and $2million in 35 years.

In a nutshell, most of the effort is spent in accumulating that first million. Once you get to that level, the magic of compounding and the opportunities that will open up to you, will help you get that second and third million.

They say the rich gets richer, and that is really true.

No Pay Cut, Says Auto Union!

2008-12-12T23:49:00.005+08:00

Here's the bad news....negotiations to approve U.S. automakers $14billion bailout plan had stalled, due to rejection from U.S. Senate. Strange decision for me, considering the amount was only a "fraction" of what the U.S. banking industry had sought earlier ($700billion)! Further digging revealed that the only reason the plan was rejected was due to the fact that the U.S. Auto Workers Union rejected the Republican demands to accepting a pay cut, in order to realign the wages with Japanese automakers, namely Toyota, Honda and Nissan.

Doesn't sound like an unreasonable demand, does it? Let's face it, in order for someone to gain (from continued employment), it's fair to expect that someone ought to give up something in return. So given the unrealistic nature of the union workers, the decision probably serve them right!

It is reported that both General Motors and Chrysler are experiencing severe cash flow problems and they may not even survive beyond the month of December without filing for bankruptcy.

I would imagine is probably wiser now to bite the bullet, and then demand for better package when business improves later down the road!

Nevertheless, the White House later said it was willing to consider using money initially set aside to shore up the banking sector to give these beleaguered auto makers urgent aid. However, whether such plan will materialize or not remains to be seen.

One other thing, the investment community may not have the patience to wait for the saga to unfold. It may just lead to another global market white wash!

Let's hope not!

$15billion U.S. Auto lifeline

2008-12-10T12:42:00.004+08:00

There were fresh news on U.S. Congressional Democrats and White House negotiators agreed on the outlines of a $15 billion plan to give General Motors and Chrysler federal loans to stay in business while requiring them to restructure their operations. An agreement in concept with lawmakers and that negotiations on details were still continuing. However, the plan still needs voting of approval from the Senate.

The legislation would however, include protections for taxpayer money, including the appointment of a so-called car czar who could force the companies into Chapter 11 bankruptcy if the companies don’t come up with a viable business restructuring plan by the deadline of March 31, 2009. Nevertheless, a 30-day extension beyond the deadline is possible if the plan is determined to be positive on a preliminary basis.

Both GM and Chrysler have said they need at least $14 billion in combined aid to keep them from running out of cash by early 2009.

More than a million Americans are believed to be employed in the U.S. automotive sector. Another reason why U.S. Government cannot afford to let them vanish, perhaps?

Will The Great Wall Withstand The Economic Storm?

2008-11-28T17:41:00.003+08:00

China warned its economic downturn was deepening with the spread of the global financial crisis, raising the possibility of job losses and social unrest in the world’s most populous nation.

The warnings from the country’s top planner came shortly after China’s central bank slashed interest rates by the biggest margin in 11 years to protect its economy from the worst global downturn in decades.

China’s economy has been hit by a sharp drop in demand for its exports, due to a severe economic slowdown ignited by the U.S. financial crisis. This quarter is expected to be its worst in three years.

The State Information Centre, a government think-tank, forecast annual growth would slow to 8% this quarter from 9% in the third quarter, still a respectable figure but a far cry from blistering double-digit growth rates recorded in the past five years.

With factories closing by the thousands, slowing growth may undermine the stability that the ruling Chinese Government craves for its 1.3 billion people. Excessive bankruptcies and production cuts may lead to massive unemployment and social unrest.

A severe slowdown in China's economy will further dampen the hopes of Asian economies' battle against the severity of recession.

Has Calm Been Finally Restored?

2008-11-27T23:19:00.008+08:00

Stocks rallied worldwide this week after China cut borrowing costs by the most in 11 years and the Federal Reserve’s pledge to buy $600 billion of debt sent mortgage rates down by the most in at least seven years.

On the other hand, Citigroup has jumped 87% since the U.S. government injected $20 billion of capital into the bank at the start of the week and guaranteed $306 billion of its mortgages and other troubled loans.

More than $30 trillion has been wiped off the value of global equities this year as credit losses and writedowns approached $1 trillion in the worst financial crisis since the Great Depression.

The question remains, have we reached the bottom?

Past year's trend tells us that we should not get overly optimistic yet, as any signs of recovery could well be merely a bear trap!

Here is one of the key observation I made, that is, Down Jones Industrial Index is still trading within a bearish descending triangle. It is now at a critical cross road, that is, the next few days or weeks could potentially derail again all the positive development that has been established over the last one week! Technically speaking, the signs are pointing to a likely major bottom again!

I am holding on the same view until it proves me otherwise...

Happy Thanksgiving!

2008-11-27T19:26:00.004+08:00

It's ironic that the general mood could be down, unemployment rate at a high, consumer confidence at the lowest and Americans are preparing to face the challenges of a recession (I supposed already in one for many but technically not by official measurement)....Anyway, it's a day for thanksgiving! What a great moment for the families and friends to get together and share a joyous moment! How about sharing some thoughts?

To all Americans, I wish you all a Happy Thanksgiving!

No Such Thing As "Too BIg To Fall"

2008-11-25T17:17:00.005+08:00

In the eyes of the world, Citibank was "once upon a time", solid like a rock. That was true, until the current financial crisis! Exactly 11 years ago, when Asia was at the peak of its financial crisis, many people were either contemplating or switching their life savings from local banks to international foreign bankers. Among the beneficiary was Citibank. In their minds then, western foreign banks were supposedly the "safe heaven", highly regulated and possessed a solid financial framework.

How times have changed! The once giant Citigroup who owns Citibank is now in financial trouble, no thanks to the billions of dollars of exposure to sub-prime and it's related toxic securities! Many people were initially holding on to the believes that they were too big to fall, just as we initially thought so on the likes of giant Lehman Brothers, AIG, Morgan Stanley, etc.

From the height of more than $50 a share in 2007, the stock price of Citigroup has plummeted to less than $4 last Friday! Alarm bells were ringing aloud as they were desperately seeking either a financial bailout from the U.S. Government or faced the possibility of being taken over or the worst possible outcome of bankcruptcy!

As expected, the U.S. Government could not afford to let them down, as this would have severe repercussions on U.S. businesses and consumers. A financial lifeline of $20 billion (in addition to the $25 billion extended earlier), coupled with U.S. Government's guarantee of up to $306billion. The plan announced calls for Citigroup to obtain US$27bil of capital by issuing preferred shares, which carry a special 8% dividend. Citigroup agreed to absorb the first US$29bil of losses on the US$306bil portfolio, plus 10% of additional losses, for a maximum total exposure of US$56.7bil. On the other hand, dividend distribution for equity shares will be reduced to only 1% for three years, unless the company obtains consent from three federal agencies, being the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp.

Without the aid, Citigroup, along with many other corporate giants, would have fallen, irregardless of size!

On the flip side, i trust my local bankers more than anyone else!

Protect Growth To Avoid Recession

2008-11-24T22:56:00.004+08:00

In line with global interest rate trend, Malaysia's central bank cut its key overnight policy rate (OPR) by 25 basis points to 3.25% at its final rate-setting for the year on Monday as a preemptive measure to avoid a severe economic downturn due to the global economic slowdown and credit crunch. This is also to ensure that domestic demand does not decelerate too quickly.

The central bank said the ceiling and floor rates for the OPR are correspondingly reduced to 3.50% and 3.00% respectively, and reduced Statutory Reserve Requirement to 3.5% from 4.0%, with effect from December 1st, 2008. Lowering statutory reserve requirement will lower cost of funds for banks, thus increases liquidity for lending. The rate change is the first since April 2006.

The Central Bank also hinted that there may be more rates reduction going forward, depending upon the state of the economy, particularly in 2009.

Although inflation for the month October was reported to be 7.6%, inflation is expected to come off sharply moving forward. As such, greater focus will be spent on protecting economic growth instead of fighting inflation.

Good news for both consumers and businesses as loan rates are expected to fall!

Be Prepared For More Thunder Storm...

2008-11-22T00:18:00.008+08:00

Just when many people were expecting the worst of the U.S. financial crisis was probably over, another thunder started brewing when U.S. automotive sector requested for a US$25billion bailout package. Finally, the storm arrived yesterday when U.S Congress reacted negatively to the bailout package, followed by Citigroup reported to be in deep financial trouble, whereby Citigroup lost a quarter of its value in one day and Wall Street tumbled more than 5% overnight! Worst still, Dow Jones Industrial Index had overtaken the previous low of 7,882 recorded on 10th Oct 2008 to a low of 7,552, thus pointing to another potential major bear run! Some analysts are expecting the Dow to possibly fall as much as to the level of 6,500!

This could well be another bad news for the rest of global financial markets!

So far we have not quite seen the impact of the crisis trickling down to the other industries but the signs are surely there, starting with the auto sector!

Be prepared for more thunder storms ahead, as more corporate earnings downgrade and fallouts are expected to happen down the road!

On the other hand, Asian markets generally rose today against all odds after the initial knee-jerk reaction to Dow's drop overnight. There were news reported that China may come up with another stimulus package to support its growth. Positive news it may be (if true) but i am afraid the real problem lies else where in the west!

Light At The End of Tunnel?

2008-11-20T17:26:00.006+08:00

U.S. Federal Reserve policy makers now predict the U.S. economy will contract until the middle of 2009, according to the minutes of their October's FOMC meeting released yesterday. Government figures showed that consumer prices excluding food and fuel costs fell for the first time since 1982 last month.

This effectively increased the odds that the Fed will cut its benchmark interest rate again next month.

Deflation, is now a significant concern. Deflation refers to a prolonged decline in prices, which hurt the economy by making debts harder to pay off and lenders more reluctant to extend credit. Japan is the only major economy to have suffered the phenomenon in modern times. Looking at Japan as an example, the country has suffered from deflation and economic stagnation for more than a decade. Question is, will U.S. suffer the same fate too? On the other hand, there isn't a lot more room to maneuver given that benchmark interest rate is already at 1%.

What about the USD700billion bailout plan?

Does anyone see light at the end of tunnel yet? Personally, i have not!

It's Time To Think About The Future

2008-11-18T23:11:00.003+08:00

A piece of advice for investors who have little time to monitor market's daily movement, don't know much about technical analysis, but appreciate long term value and can look beyond the present crisis....

Buy low, sell high...Sure, it sounded simple but in reality, no one can truly predict when is the low or lowest! So, instead of trying to time the market at perfection and fear for losing the plot, let's look at an alternative approach where you can better manage risks and emotions.

For many, it is often hard to think about the world in the next five years from now. It is even harder to think about things that have yet to happen. Still, decisions with your investments should depend on future potential instead of what is happening now and in the past.

A long-term perspective means looking at the potential for your asset in the next five-years. If so, then don’t panic if you have not exited the market earlier and your portfolio is down.

Time to do some reshuffling (asset reallocation) and do not hesitate to chop down the dead woods. If you have wrongly invested in certain assets, cut the losses and shift the funds to the ones with the highest potential for recovery and value growth over the next five years.

Bear in mind, markets react in anticipation of the actual event. As such, you just can't wait to enter the market only until the economy has recovered. On average, markets will react six months in advance of actual. Therefore, it is a calculated risk. For example, if you believe that the global economy will turn better in the second half of 2009, 1st quarter of 2008 may well be the major turning point.

Dollar-cost Averaging is one technique where you can look at to consistently accumulate promising assets going forward. Set aside a certain percentage of your income and keep to the discipline by investing the money on a regular basis (common is monthly). However, make sure the money you set aside are not meant for emergency purposes and is relatively free from emotion, in case you have to bear some short term losses in the event the asset value goes lower.

Remember this, abundance of wealth can be best created during crisis! Now is not the time to feel sorry but to look ahead for opportunities!

U.S. Federal Reserve, the modern Santa Claus

2008-11-13T23:57:00.003+08:00

The U.S. Treasury Department initially promoted the US$700 billion financial rescue package approved by Congress last month as a vehicle to buy toxic mortgage assets from banks and other institutions to spur fresh lending. However, in a sudden twist of event, it has decided to change its target to focusing on making direct investments in financial institutions and shoring up consumer credit markets instead. This has certainly rocked the equation and many were questioning the rationale of this sudden change of target, thereby causing immense uncertainties.

Apparently, the original plan never got off the ground and U.S. Treasury Secretary Henry Paulson declared that asset purchases were not the most effective use of the funds!

Hey, isn't he the same guy who advocated the original idea at the first place? A sign of "loss of direction"?

With the other significant root cause of the problem being the sky-diving U.S. consumer confidence, this change of target is therefore aimed to help restore credit flows to U.S. households by using financial rescue funds to lure investors back to markets for securitized debt such as car loans, student loans and credit cards.

It appears that many more troubled banks, companies or industries have started asking more bailout funds from the Fed, as if they are some kind of Santa Claus freely distributing free handouts! The latest being AIG, whose original US$85 billion bailout has now ballooned to US$150 billion, and the U.S. automotive companies also similarly demanding some large sum of rescue funds!

Last but not least, U.S. leading charge card company AMEX has now been granted a Bank holding status, i.e., they are now much more ready to tap into the seemingly "un-exhaustable" Federal Reserve funds!

To the U.S. Government, they will have a busy task to make sure that their money printing machine is not going to let them down by going overtime!

Start Buying Now, Seriously?

2008-11-12T23:51:00.006+08:00

This is a recent interesting article that i would like to share with my readers. The author claims that it is now the right timing to re-enter equity markets.

Warren Buffett proclaimed that it is now time to buy American stocks, and he certainly led by example. Bear in mind given that Warren is the top 2 richest man on earth, his words are definitely not to be taken lightly.

However, there are also many doomsayers who claim that the worst is yet to come. At the same time, many so-called investment gurus were criticising Warren. They said he was irrelevant to the new economy in 1999, when he refused to buy technology shares. They say he didn’t understand the situation when he said that financial derivatives were “financial weapons of mass destruction” back in 2002. And now they say that he is simply trying to talk up his own investments, when he said recently to “Buy America”. These things they say of the world’s most successful investor. Nobody remembers these “they”, but Warren Buffet continues to make loads of money from his investments.

The reasons in favour of things will get worse include:
1) This time is different, because this is an unprecedented global economic slowdown!
For this reason, the author argued that of course it's always different. After all, if it wasn’t different, no one would panic, and no one would sell their shares, and stock markets wouldn’t fall. However, he also argued that human race has always been able to find solutions to these problems and emerge stronger. This is one of the reasons world stock markets grow over the long term!

Point taken!

2) There's no clear sign that the recovery is in sight!
For this reason, the author argued that if we had clear signs, the stock markets would have gone up a lot, and you would have missed the opportunity to make profits. Stock markets always anticipate economic recoveries. By the time the analysts are able to report clear signs, we would be more than halfway to the top. The author also claim that some of the "clear signs" could well be the fiscal and monetary policy actions undertaken recently by various governments of different countries.

Valid point again!

3) The recession will last for another 3 quarters!
For this reason, the author argues that assuming this is true, three quarters means the last quarter of 08 and the first two quarters of 09. Let’s budget another quarter and say it goes on till the end of 3Q 09. Stock markets always recover before the economy does. So if stock investors all thought that the global economy would recover by end of 3Q 09, we ain't that far away....

Lastly, the author points to the "I wish I had bought" syndrome. Many investors surely have experienced this before and regretted not buying when the market was heavily trashed! The author's reasons for optimism include Malaysia's current low market Price Earnings (PE) valuation, supported with growing population and successful regionalization of many local businesses, which means many businesses are less dependent on one country's economy alone.

Nevertheless, the author further advised that make sure one invests with money one can set aside for at least three years, so that one will not be caught short having to sell at the wrong time, as market needs time to realise its potential!

Here you are. Do you agree now is the time to re-enter equity investment?

The above article was written by Moh Hon Meng, the co-founder and executive director of iFAST Corporation.

For the full article, click here.

Five Personality Tips To Better Your Investment

2008-11-11T23:48:00.008+08:00

First Tip: Save Money
Many people come to me and tell me that they have no money to invest. So i ask, " Do you spend money on buying unnecessary items each month?" Most responded by saying they do. Here lies the problem. People mindset are naturally tuned to spend but not to save!

Keep a diary of what you plan to spend versus the actual spending for each month. Make sure you spend within budget and only on necessities. If need be, you may also budget not more than 5% to 10% of your income on entertainment or something to pamper yourself each month. What's left over should be kept as savings. At the minimum, the savings should be at least 10% of your income.

Do not think the amount of savings is too small to begin with. Let's just say $200 a month. This will accumulate to $2,400 a year! Multiply that with compound interest year on year and you will get the picture...

2nd Tip: Invest Only Money You Can Afford To Lose
Try not to invest money that are to be used for emergency purposes or other purposes such as your children tertiary education fund! Reason is because this kind of funds tend to attract plenty of emotions during investing, i.e., one simply can't afford to lose it! Remember, one of the most fundamental rule of thumb in investing is that one must be able to control his or her own emotions. Emotions tend to lead to poor decision making and panic state!

That does not mean you absolutely can't invest your emergency funds. First and foremost, you should classify the risk profiling associated with the type of funds you have, prior to investing. You may place funds that have the lowest risk profile into cash instrument such as Fixed Deposit or capital guaranteed mutual fund or unit trust. Choosing the latter has the advantage in the sense that you have a chance to see the money grow but at the same time capital is guaranteed. However, bear in mind you should expect a lower rate of return for such capital guaranteed instrument.

3rd Tip: Invest Comfortably
One should adopt a systematic approach to investing, particularly for investments such as equity, derivative or currency. The key is model after what other successful traders have done, emulate their trading style and follow a systematic approach. Eliminate as much as possible the element of GREED, FEAR AND EMOTIONS from your investments so that investing is enjoyable and least stressful.

Where applicable, try adapting a particular trading style to suit your own needs and practice. However, bear in mind you should never deviate too far away from the successful trading principles and make sure the adaptations must make sense and workable.

4th Tip: Invest In What You Know Best and Stick To It!
In a nutshell, don't be a Jack of all trade and master of none! Given there are so many investment instruments out there, choose only the ones you know best and focus in perfecting your investment technique.

Trust me, it's easy to always think that the grass on the other side is always greener but the reality is that it's seldom true! When something work against you, don't just give up and jump onto another bandwagon! After all, there are so many instruments out there where you can invest, be it equity, derivative, bond, currency trading, various types of commodities, wine, etc.

Always find out the reasons for failure and learn from it. Don't simply give up!

5th Tip: Stay Current
Stay current and be up-to-date with latest happening, trends, economy and industry development. Knowing the latest trends will help you to unearth the next potential boom or burst! You can achieve this by reading the latest books or publications, attend workshops or seminars, or even through sharing with friends and peers.

What Does De-leveraging Mean To You?

2008-11-06T10:30:00.001+08:00

In 2007, we had the the buzzword carry-trade, followed by sub-prime. Both have had devastating effects on global financial markets! The latest financial buzzword is "de-leveraging". In simple terms, it means that banks, consumers, companies, and the government need to reduce their debt.

From the early 1920s through 1985, the average level of debt-to-GDP in the U.S. was 155%. The highest peak in history (until the recent debt boom) was in the early 1930s, when debt-to-GDP soared to 260% of GDP. In the 1930s, the ratio then cratered to 130%, and it remained close to that level for another half a century.

In 1985, U.S. started to borrow, and last year, when U.S. finished borrowing, the country had borrowed 350% of GDP! To get back to that 155%, U.S. need to get rid of more than $25 trillion of debt!

For a start, U.S. banks have written off $650 billion of debt so far!

Global stock and asset prices in general have been the victim of the global de-leveraging exercise, pushing prices of equities and commodities to unrealistically low levels. This de-leveraging is being driven by the unwinding of over-leveraged positions, and compounded by fund redemptions and frozen credit markets.

The bottom of the markets will happen when this whole de-leveraging exercise ends - which for now is still uncertain. It is important to take note that Lehman Brothers reportedly has between US$40 billion to US$70 billion of assets belonging to hedge funds that are frozen in its UK arm - and negotiations are still ongoing with the administrator to release them.

When the time comes, prepare for another round of "de-leveraging" exercise!

To The American...It's Time For A Change

2008-11-05T17:09:00.005+08:00

It's finally over! U.S has a newly elected president in the name of Barack Obama, ending the longest presidential campaign (21 months) in the history of America! Obama is also the first black African-American to become president of the states and what a victory it was, beating his counter part John McCain convincingly!

Let's hope the new leader will bring peace to the world (unlike the predecessors) and rekindle the past glory of the American economy, and indirectly helping the rest of the world to get rid of the current gloom and doom!

For detailed analysis on why Obama won, read here.

Here's a video of Obama's victory speech...."All Things Are Possible"!

Malaysia's Economic Stimulus Plan: What To Expect?

2008-11-03T12:23:00.006+08:00

THE second phase of Malaysia's economic stabilisation plan to be unveiled by the Government later today is expected to focus on measures to restore consumers’ and investors’ confidence. The stabilisation plan could see the Government focusing on shorter-term projects with a higher multiplier effects on the economy, and ensure that the country’s banking system remains strong, while funding and credit lines remained open to small businesses and manufacturers. The expected major beneficiaries for these measures could well be the construction and oil & gas sector.

Besides, the Government could introduce new measures to boost consumer spending, perhaps in the form of optional reduction in employees’ contribution to the Employees Provident Fund, similar to what has been done in both 2001 and 2003.

The plan could also include income support programs to protect rural households, especially smallholders in the palm oil and rubber plantations, amid the plunge in related commodities’ prices.

In anticipation of the positive measures from the plan, KLCI rose 4.1% yesterday in active trade.

So, could we expect a sustainable stock market recovery going forward? Well, in my opinion, much will depend on the state of affairs and key performance data released from U.S., and how the rest of the world respond. One of the key data to watch out for this week is the employment data to be released on Friday. Besides, whether related or unrelated, the world will be watching over the choice of American's next President in tonight's U.S. Presidential election!

Can Rate Cut Work Its Magic In U.S.?

2008-10-30T11:40:00.006+08:00

As expected, U.S. cut its interest rates by 50 basis point to 1%. Multiple central bankers followed suit thereafter, including China and Norway, who slashed rates respectively. The Bank of Japan is also considering cutting rates on Friday but will watch market conditions before deciding. More countries are expected to follow suit.

The interest rate cuts, sent the U.S. dollar plunging to its biggest one-day drop in 23 years yesterday!

It is widely expected that U.S may further reduce rates in December. If this happens, U.S. will be reminiscent of Japan, which has been maintaining a zero or sub-zero interest rate over the past decade. However, bear in mind that Japan failed to revive its economy despite slashing rates to zero in 1999! Also recalled that Japan became mired in a decade of lost growth in the 1990s after the real-estate prices collapsed, which is now happening in U.S! That caused a severe bout of deflation in Japan, which is a destabilizing drop in prices.

Will history again repeating itself, albeit this time in the U.S?

Is US Fed Likely To Cut Interest Rates?

2008-10-29T23:04:00.004+08:00

U.S. Federal Reserve is expected to reduce interest rates today, in order to further increase banking liquidity, inter-bank lending and unfreeze credit markets. Question is what quantum of interest rate cut will be considered optimum?

Yesterday with the anticipation of further rate cuts, U.S markets underwent a strong rebound rally by rising almost a whopping 11%! The rally certainly took many by surprise! A "short squeeze" occurred when traders with short positions, betting on falling stocks, were forced to buy to avert heavy losses. The rally occurred despite U.S. consumer confidence index plummeted to a record low of 38.0, down from 61.4 in September, signaling more retrenchment by consumers.

Could this be a major turnaround or yet another sucker's rally?

Common sense tells me that the economy and consumer confidence will take a while to move its course and enable a sustainable recovery, even with a significant interest rate reduction.

The consensus rate cut is 50 basis point, bringing Fed interest rate to 1.0%.

Currency: Does US Dollar Deserve To Be Strong?

2008-10-29T00:01:00.003+08:00

This article is written by Abd Ghani Hamat. He shares his view on why US Dollar remains strong despite a faltering economy and what the reality may potentially unfold.

"The poignant reminder simply won’t go away. Last week, investors bracing for a global recession traded the US dollar to two-year highs against major currencies except the yen. In fact, the British pound suffered its biggest one-day percentage drop on Friday since September 1992, Reuters reported.

It’s unsettling to note that the greenback had firmed up against the likes of euro and sterling even after the US financial system has hit the rocks, dragging down the world with it.

Why has the world continued to accept an artificially strong dollar and not let it slide? It’s untenable. Sooner or later, the dollar will find its true value.

The world will wake up one day and realise that the game is up; it cannot continue to prop up a currency whose country has run up a federal deficit of almost US$1 trillion (RM3.53 trillion) or 7.5% of GDP in a single year and national debts of US$10 trillion.

It’s not right for the world’s biggest debtor to have a strong currency. A time will come when the greenback will be subject to the same argument that resulted in Argentina, for example, devaluing its peso by 30% in 2002.

The only reason the dollar has remained strong — as the whole world is aware by now — is that too many countries have too much money to lose on a cheap dollar.

A sudden withdrawal of the foreign money, which had been a big contributor to the steady appreciation in US asset prices, would lead to massive writedowns and losses. But what is the point of holding on to assets and securities that have shrunk to a fraction of their values with no guarantee whatsoever of their restoration in the foreseeable future?

The situation in the US is truly dire.

Federal Reserve chairman Ben Bernanke, in explaining the US$700 billion bailout package last week, said: “If we don’t do this (bailout), we may not have an economy on Monday.”

The general consensus in the country is that the financial meltdown has not played out fully, and main street is bracing for the impact at any time.

“Wealth has eroded enough that you will see some changes in the US style of living,” reads a comment on a US investing website. Of course, there are also less savoury comments, like the one calling for a lynching of Wall Street barons.

But why is the world ignoring US economic fundamentals and continuing to have confidence in the dollar? After all, the writing has been on the wall for the longest time.

In March 2006, the UNDP’s International Poverty Centre issued a report saying “the growth of the US economy since the 1990s had relied on sucking in foreign savings at an alarming rate”.

Terry McKinley, the author of the report titled The monopoly of global capital flows: Who needs structural adjustment now?, said the inflows of capital into the US were almost twice as large as the amount needed simply to finance its current account deficit.

He said this implied that the corresponding capital outflows from the US were almost the size of the current account deficit itself.

“This suggests, in turn, that capital inflows are not only financing excess consumption by US citizens but also reciprocal investment by US private investors abroad.

“In other words, central banks in other countries are helping subsidise US foreign investment and profits.”

Sobering thought. The rest of the world had helped the US become a monster!

Now, the question is, are central banks the world over helping to keep the dollar artificially high to give themselves time to unwind their positions in the US? For, surely the world has realised that it is doing itself a lot of disservice by backing a declining world economic power. If that is the case, the dollar is due for a very rough ride.

But where do you put the money, or what’s left of it, that you pulled out of the US? Where ever it is, I suppose, it should be a major consideration in all this talk about a new global financial architecture.

It is important to note that the decline in US financial strength has coincided with the emergence of new global economic powers in the likes of China, India, Brazil and Russia. Not only have the new economic powers eroded the dominance of the US and Europe in world economy, they are also transforming the flow of trade and capital.

As we look to contain the impact of the looming global recession at home, we simply cannot ignore the changing economic landscape.

While we keep a close watch on commodity prices, we must note that the world post-recession will not be so West-centric as it is. Therefore, efforts to contain the immediate impact of a global financial turmoil should not be at the expense of finding our rightful place in world economy later on.

No doubt, with so many new economic powers about, it would be harder to carve a market niche. That’s why we should start ridding ourselves of the inefficencies and set proper goals now.

Fear Factor Catching Up With Asia

2008-10-27T23:26:00.006+08:00

First it was the U.S, Europe follows. Question is....is the crisis fear factor finally caught up with Asia too?

In the past, major Asian countries had been perceived to be relatively insulated from the U.S. financial crisis, as both China and India were believed to be holding the fort and able to maintain the relative strength and growth of the economies among Asian nations. However, that seemed to have changed for the worst, following Singapore being the first major Asian country to have gone into recession. As business and consumer confidence take a tumble and collapsing by the day, serious doubts are now placed on the survival of the regional financial institutions and corporations. In addition, the continuous rise of Japanese Yen as a result of the unwinding of Yen-carry trades further weigh on the sentiment as major currencies such as USD and Euro (against Yen) continue to weaken.

After about a week of "calmness" among Asian bourses, major Asian stockmarkets started to tumble again last Friday and the panic state seems to snowball going into this week, as indicated by today's (Monday) dizzy falls in Hong Kong (12.7%), Philippines (12.3%), Thailand (10.5%), and Japan Nikkei closes at its lowest in 26 years! Both Singapore and Malaysia markets have escaped the rout as both markets are closed for observing a public holiday (Deepavali).

It appears the fear factor has reached another level, or shall i call it "despair"?!

Is Law of Supply & Demand Dead For Gold & Silver?

2008-10-22T17:13:00.002+08:00

Spot gold prices fell below US$760 today during Asia trading, as the U.S. dollar rallied strongly against the euro to its highest level since February last year. Recall the price of gold was still trading above US$900 level in the early part of this month! So what is in store for gold prices? Isn't gold supposed to be an investment safe heaven? The article below shares an insight of the pattern of gold trading recently and why investors should beware.

This article is kinda long so be patient reading...

"During the recent gold and silver correction that began on July 14, 2008 and which perfectly coincided with the miraculous surge higher in the U.S. dollar, there was a massive story unfolding that should have been a lead story in every financial magazine, newspaper and website. Yet the media responded with silence. The story was so big, as a matter of fact, that every economics textbook should now have to remove the Law of Supply and Demand from their pages because if free markets still exist, the recent behavior in gold and silver markets strongly obliterates it.

Before I begin with that story, make no mistake that we have just experienced a steep correction and not the end of the gold and silver bull. Also make no mistake that this recent dollar rally is a miraculous rally because fundamentally nothing has changed about the U.S. dollar that could explain such a quick surge higher. In my last post, though I described calling the bottom of the gold markets a “sucker’s bet” that was a waste of time when markets are so blatantly manipulated, I foolishly took the bet anyway and was wrong about predicting the bottom (I’ve now learned my lesson about taking a sucker’s bet when I know it is one! Still, my subscription members well know my updated position about the short-term direction of gold and silver markets since this last public posting). But on to the meat of this article.

The Law of Supply & Demand is Broken: Demand Soars and Prices Plummet!

Consider the following. As gold and silver prices started to plummet on July 14th, surging physical demand for gold and silver continued to lead gold and silver prices markedly lower. For the first time in history, record demand in a commodity was helpless to stem plummeting prices and in fact, contributed to further price declines. In July, India bought 22 tonnes of gold. In August, according to Reuters, India increased its gold purchases by more than 350%, buying more than 100 tonnes of gold.

This figure also represented a 56% increase in purchases when compared to purchases during the same month from a year prior. In Dubai, demand surged as well.

“We are definitely witnessing a surge in demand for gold in Dubai and physical shortages have been reported by many dealers,” said Ian MacDonald, the Dubai Multi Commodity Center’s executive director for gold and precious metals. “We are also seeing demand being driven by currency concerns in the region as many investors perceive the precious metal as one of the few strong currencies.”

Gold jewelry sales in Abu Dhabi soared 300 percent in volume and almost 250 percent in value in August from a year earlier after the metal dropped to nine-month lows, the emirate’s industry group said on Monday.

“It was the best month the market has seen in almost 30 years and it compensated for any drops we have seen earlier this year,” Abu Dhabi Gold and Jewelry Group Chairman Tushar Patni told Reuters.“We had never expected (emphasis mine) that if gold fell below $800 an ounce we would see a 300 percent increase in volume and 250 percent in value, especially as many buyers are abroad on holiday.”

In the United States, the stories were the same. Many gold and silver bullion and coin dealers reported record sales in August and shortages of supply. I could quote fifty other stories similar to the ones above, but for the sake of brevity, I will not. Global sales of gold and silver would have to be at record levels in August for gold and silver prices to be pushed much higher for that month, and all preliminary indications are that global sales in August for gold and silver were indeed at record numbers. So how can it be that record demand and sales in the physical gold and silver markets would cause gold to plummet from a price of $910 an ounce at the beginning of August to less than $750 an ounce, and silver to plummet from a price of close to $18 an ounce at the beginning of August all the way down to almost $10 an ounce?

When this inexplicable anomaly was pointed out (at least inexplicable according to the supposedly irrefutable Law of Supply and Demand), gold and silver analysts employed by Wall Street to spread disinformation responded only to stories of shortages being reported in the United States and did not address record sales of physical gold in various countries in the Middle East and in Asia. They responded to reported U.S. shortages of bullion and coins by stating that dealers had supply but were simply not being honest about their supply numbers because they did not want to sell any more stock at such depressed prices. This certainly could have been a very reasonable and logical explanation that adequately explains some of the shortages that were reported by gold and silver dealers. However, this was not “mystery solved” as these demagogues employed by Wall Street claimed.

During this Correction, Gold & Silver Steady or Much Higher Many Days in Asia, Down Markedly Lower by Close of New York Markets

How can record sales, the strongest in 30 years, and shrinking supply in other regions of the world like the Middle East and India, cause prices of gold and silver to plummet steeply as well? Clearly, since price is a function of supply and demand, rising record demand for gold in India and the Middle Eastern markets should have stopped the downward slide in gold and silver markets dead in its tracks and led the price higher again. And indeed this is exactly what happened. But it happened only in the futures markets in Asia. Last week MarketWatch reported a story that gold experienced one of its worst months ever in this bull run because August had not one day where gold closed higher in price; however, this article only told half the story as the media so often does. Gold experienced many days in August were it closed higher in Asia and significantly higher, often piling on gains of $5 to $10 an ounce. These gains were only lost once London markets closed and New York markets opened; only then, were gains quickly sold off and then transformed into deep losses within a span of 24 hours.

If one constructs the 24-hour gold and silver charts for every day during this correction, one will discover an overwhelming amount of days when gold and silver were significantly higher in futures markets in Asia, but then were sold off harshly at nearly the exact same time (within a 30 minute time frame) when London markets closed and New York markets opened. How could this have happened? Simple. The price for gold and silver that you see plastered all over financial tickers everyday is established in the paper futures markets and not in physical markets where REAL gold and silver actually exchange hands. In the futures markets, only 1% of all futures contracts are closed out with actual delivery of the physical commodity. Instead 99% of all futures contracts are closed out with the purchase of another paper contract. In the case of gold and silver, futures contracts represent digital bytes of gold and silver flying around in a paper market, not real ounces of gold and silver that exist in the physical market. Thus it is entirely possible to utilize this discrepancy to create two entirely different prices for the same commodity. In other words, if not properly regulated, futures markets provide a gateway to manufacture massively fraudulent prices non-reflective of the buying and selling volumes that are occurring in the physical markets!

Two Parallel Markets For Gold & Silver: Paper Markets & Future Markets

Thus, the world can end up with two parallel markets that act differently: a papers market for gold and silver and a physical markets for gold and silver that establish significantly different prices for the same commodity over short periods of time, odd as this may seem (I say short periods of time because unless perpetually manipulated, free markets will eventually work out such massive distortions over time). The recent actions that were coordinated in the futures markets for gold and silver beginning on July 14th would most likely have been impossible to replicate in the physical world of gold and silver. To any veteran investor in gold and silver, the manufacturing of this correction was as plainly transparent as a two-ton boulder falling out of a clear blue sky. Though I won’t discuss the other mounds of evidence that explain how this correction was manufactured, these other specifics deal with large U.S. institutions that piled on huge short positions in the futures markets for gold and silver in an incredibly compressed period of time around July 15th.

Again, the gold and silver analysts paid by Wall Street to spread misinformation spoke out against the manipulation theories, simply stating that the dollar was overdue for a bounce and gold and silver markets were overdue for a correction. I have stated multiple times myself over the years that bulls never rise straight higher and will correct, and that bears never plummet straight downward and will experience bear market rallies. This much is true. Still, what transpired starting this past mid-July was far beyond the realm of a free-market inspired U.S. dollar bear market rally and a free-market induced gold and silver bull market correction. The meteoric rise of the U.S. dollar since July 15th and the panic inducing slide in gold and silver prices reeks of manipulation and not a natural free-market rally and correction for many reasons.

For instance, try explaining this. I know for a fact that certain gold coins that were selling in the low $700 range when the price of gold bullion was at $680 an ounce a couple of years ago were still being priced at more than $1,100 by gold coin dealers even when gold slid all the way down to $750 an ounce during this current correction. When I inquired as to why the prices of these gold coins had not also slid to $780 or so (as would have been dictated by the spot market price of gold), but were instead still selling for well over $1,100 a coin, the dealers answered that demand, not the spot price of gold in the futures market, was setting the prices of these coins. Since demand was off the charts, the prices did not reflect the monumental drops in price in the futures markets. When I checked the market for silver coins, I discovered the same massive disconnect between prices set in the physical markets for silver and in the silver futures markets (that only comprise “paper” silver). Silver coins were selling at prices sometimes 60% to 70% higher than what would have been indicated by the spot price of silver determined in the futures markets.

Last month it was clear that the Law of Supply and Demand was dead for gold and silver markets. Soaring physical demand for gold and silver were not factored at all into the prices set in the PAPER gold and silver futures markets. Incredibly, soaring physical demand created a greater acceleration of losses in the prices in the PAPER gold and silver markets. One way to interpret this disconnect between physical and paper gold and silver markets that clearly happened last month is this: If a bushel of corn were selling in the September futures market for $1.40, but if you were to go to a farm in Anytown, USA and had to pay $3.10 for a bushel of corn, what would you conclude was the REAL price of corn? This is how you can determine the real price of silver and gold today. Look to the physical markets, not the paper markets, for the real price of gold and silver. Who cares what the paper futures markets are stating as the spot price of silver, if I still have to pay 60% more than this price when buying silver coins in the real world? The price is simply what I have to pay for the real physical silver, period.

The Usual Suspects

The most likely culprits of this manipulation are all members of the U.S. President’s Working Group on Financial Markets (the SEC, the Commodities Futures Trading Commission, the U.S. Treasury, and the U.S. Federal Reserve). A massive disconnect between the price of gold and silver in physical markets and the price in paper futures markets, of the extent that happened last month, either means that the Law of Supply and Demand has just been proven to be invalid, or that massive fraudulent manipulation just occurred. I will let you make this conclusion. However, let me be clear that the evidence of manipulation was so overwhelming this time that it was not just the usual suspects, including yours truly, voicing these opinions. It must have greatly dismayed the mainstream analysts that try to cover up evidence of manipulation in commodity markets, particularly in gold, silver, and oil, that a member of the mainstream investment community attributed the recent gold and silver decline to manipulation.

It also must have dismayed these same analysts that four U.S. Senators who are key members of Congressional energy committees recently stated that the Commodities Futures Trading Commission “obviously knew that underlying data used to prepare the interim report was seriously flawed.” (emphasis mine) (The report referenced by the Senators was a key report distributed to U.S. Congress days before a legislative vote to close commodity trading loopholes that allow massive manipulation of commodity markets. The report stated supply and demand was solely responsible for the recent run up in oil prices to $147 a barrel. The seriously flawed data that was contained in the report, after it was corrected, demonstrated that manipulation was responsible for the run up in oil prices. Based upon the deliberately falsified data provided by the CFTC (the Senator’s words, not mine), Congress voted to keep the loopholes open. Read the whole story here).

Don Coxe, chairman and chief strategist of Harris Investment Management in Chicago, one of the top respected investment groups in the United States, called this recent manipulation of gold and silver markets that broke the Law of Supply and Demand a “brilliant” plan executed by the U.S. Federal Reserve and U.S. Treasury. My reply to Mr. Coxe? Let’s not get carried away. If I was in charge of the U.S. Treasury and could direct the CFTC, the SEC and various Wall Street firms through the President’s Working Group on Financial Markets, I could have pulled this plan off in my sleep. If the plan was executed in the manner that Mr. Coxe speculates, there was nothing brilliant about it. Let’s call the plan for what it was. Fraud and a shameful dismantling of free markets and capitalism. Plain and simple.

But in today’s world fraud is the name of the game. When the Law of Supply and Demand was broken in the gold and silver markets in August, for a comparable story of similar magnitude to exist in the scientific world, the Law of Gravity would have to be disproven. If it was reported that in California, a man ran down the street, threw his hands in the air and flew for a length of 200 meters while 10 meters from the ground, don’t you think that reporters would be scrambling to report this story? Yet gold and silver markets just proved the Law of Supply and Demand to be no longer relevant in August 2008, and ZERO members of the mainstream financial press deemed this story to be newsworthy.

Fannie Mae (FNM) and Freddie Mac (FRE) committed fraud for years and nearly triggered the collapse of the entire U.S. housing market. When their bailouts finally became necessary, people that ingested the force-fed spin that this bailout was “for their own good” and don’t understand the implications, cheered the fraud that allowed the Fannie Mae and Freddie Mac CEOs to retain their tens of millions in salary and bonuses they collected from engineering this fraud. Furthermore, for their roles as architects of this fraud, Freddie Mac CEO Richard Syron and Fannie Mae CEO Daniel Mudd are to respectively receive a severance payout of approximately $6.3 million and $7.3 million, respectively. When Stan O’Neal and Chuck Prince were respectively ousted from Merrill Lynch (MER) and Citigroup (C) for their terrible leadership and participation in creating the most massive financial crisis the U.S. has seen in decades, what were their rewards for leading investors of their stock into financial ruin? A $160 million and a $40 million golden parachute, respectively.

The reason this current story is so important is the following: The very acceptance and nonchalant reactions to this fraud by billions of people worldwide poses an equally serious threat to the health of the U.S. and global economy as the actual perpetrators of these fraudulent actions. Though I’ve never asked any of my readers to take action before, I urge you this time to email the link to this article at my investment blog, theUndergroundInvestor, to every single person that you know that has ever had so much as a ruble, a dollar, a peso, a real, a Swiss franc, a Euro or a pound invested in stock markets. Knowledge is power, and only knowledgeable persons can prevent these same shenanigans from happening in the future. As this financial crisis deepens and we have only seen the very beginning of it, the intensity of disinformation campaigns will increase at an exponential rate. To solve the crisis will require aware and knowledgeable investors, and masses of them. Thus, we must begin spreading awareness today and not a day later.

The Likely End Game: Re-Capitalization of the U.S. Financial Sector at the Expense of the Individual Investor

I’ll conclude this article with my theory of why this manipulative scheme was executed in the gold and silver markets, for I have not seen another analyst give any credence to this theory as of today’s date. This sell-off in gold and silver and the U.S. dollar rally wasn’t engineered just to stem the record rate at which foreign central banks were dumping U.S. Treasuries (another huge story that somehow the entire mainstream financial press somehow missed). Furthermore, this scheme wasn’t hatched solely because it was a necessary step to save the global financial markets as Don Coxe speculated. Both are fine reasons, but ultimately, unlikely to fully explain why this scheme was hatched in July. With the failure of Fannie Mae and Freddie Mac, the failure of Merrill Lynch (just announced Monday), the likely failure of Lehman Brothers (LEH), and the likely failure of a huge U.S. financial institution on the imminent horizon, all these failures are about to place a serious squeeze on the already hemorrhaging balance sheets of some of the world’s largest financial institutions. With foreign interest in increasing ownership in these institutions quickly dissipating and weak share prices unable to translate secondary offerings of stock into significant amounts of capital, some of the largest financial institutions were absolutely desperate to find a channel in which to raise significant amounts of capital (not hundreds of millions, but billions of dollars) very, very quickly. What just happened in the gold, silver and oil markets accomplished this goal, and thus may have been integral in preventing a global financial collapse.

Let me explain. During this recent gold and silver correction, gold and silver markets were higher, and significantly higher in Asia before drastically turning significantly lower in New York almost on a daily basis. The creation of these huge arbitrage opportunities could have been exploited by large financial institutions to reap billions in profits in an incredibly condensed period of time. The type of arbitrage opportunities that existed during this recent correction in gold and silver was absolutely enormous. Unprecedented 2% to 5% swings in the price of gold and silver bullion from their highs in Asian markets to their lows in New York markets happened time and time and time and time and time and time and time again during this recent correction (if you were unaware of this action or don’t believe me, simply search out the 24-hour charts for gold and silver for the entire month of August and you will be absolutely dumbfounded from what you will discover). These swings in prices were so enormous that daily swing trades in futures markets, given these arbitrage opportunities, could have produced hundreds of millions of dollars of profit in a single 24-hour trading day. During the past few weeks, these arbitrage opportunities may have produced profits in the tens of billions of dollars, if not more, for just a small handful of firms.

If I were a large financial institution with a critically hemorrhaging balance sheet due to massive losses created from insane foolish and risky bets on MBS (mortgage backed securities) and CDOs (collateralized debt obligations), and I wanted the quickest way to recapitalize my balance sheet, how would I do it? Through gross manipulation of commodity markets, in particular the gold, silver, oil and agriculture markets. Of course, I would need the help of certain regulatory agencies to achieve this and wouldn’t be able to accomplish this on my own, but I’m going to speculate that this is exactly what just happened. This correction was not only just about shoring up the U.S. dollar and U.S. Treasuries, but also about recapitalizing Wall Street and huge banking institutions. Though I haven’t covered the oil and agriculture futures markets, there is more than ample evidence that the same thing has occurred in these markets as of late as well (and again, the evidence is blatant enough that U.S. Senators have demanded investigations into much of the curious behavior I have delineated in this article)."

The above article was posted by JS Kim, founder of SmartKnowledgeU™ and the evolutionary MoneyPing™ investment strategies.

What are your thoughts about the views shared in this article?

It's Time To Be Greedy When Others Are Fearful?

2008-10-21T17:17:00.007+08:00

The Master of value investing has to be no other than Warren Buffett himself. A couple of days ago, he made a personal call to suggest that now is the time to invest in the banished equity market. For the faithful fans of Warren Buffett, his statement carries a lot of weight and influence. Below is an extract of Warren's statement.

The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts. |

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities."

For the original article, please visit this link.

In the past, there were at least 2 similar calls made by Warren. Following his first call in year 1974, the Dow Jones Industrial Average and the S&P 500 soared by 86% and 70%, respectively, over the next two years. His second call came in 1979 and two year after that, the S&P achieved an annualized return of 17.3%, nearly twice the average 9.6% return for bonds.

Is It Important To Time The Market?

2008-10-20T18:21:00.004+08:00

For a long term type of investor such as Warren Buffett, timing the market does not appear to hold much degree of significance. After all, this type of investor believes that an undervalued company (coupled with solid fundamentals, management, etc) will find its feet ultimately and investors will "recognize" its value one day. This group of investors are generally seen as the minority group, as most of the others generally prefer to go for short-term or medium-term type of investment. For this majority, they will most likely argue that timing the market is of utmost significance. After all, catching a falling knife is likely to hurt one, badly!

So, who is right, who is wrong?

Most long term investors will argue that volatility in equity prices is an inherent part of investing. It takes courage, discipline and foresight to remain invested in the market, especially when the urge to avoid financial pain is strong. Investors may be prone to sell in a volatile market because they think they can wait until the market settles lower and go back in when the market starts to recover. This strategy seems to make common sense". However, the problem with this strategy is that they may miss their chances of missing the major market movements that signal the start of a longer recovery. Many of these major upside moves can happen quickly, often in just a few days.

Interestingly, a study conducted by a local asset management group on Malaysia's equity market (KLCI) has the following analysis.

Missing five of the best trading days results in negative returns of 17.39%.
Missing the 10 best trading days and the loss almost triples to 49.13%.
Missing the 30 best trading days and the loss soars to 83.07%. This represents just 30 days out of approximately 3,807 trading days in total, or merely 0.79% of the total trading days
An investor who remained invested throughout the last 15 years enjoyed returns of 82.25 per cent.

Nevertheless, how about if we assume an investor manages to avoid the worst trading days? The results of the study reveals the following:

Remaining invested through- out the last 15 years gives returns of 82.25 %.
Avoiding just the five worst trading days results in positive returns of 260.15%.
Avoid the 10 worst trading days and the gain jumps to 413.62%.
Avoid the 50 worst trading days and the returns are a phenomenal 3,266.59 %.

The results are far better than than the first scenario. However, the most fundamental question is whether the investor is able to have the foresight and timing to perfection to avoid those worst trading days? Quite likely, the answer is No, likewise no one is able to aim buying at the cheapest price!

Does this mean that investors should never attempt to time the market at all and buy at whatever time, even if the market is expected to sink further?

Certainly not.

In my view, first and foremost, we need to understand that timing the market does not equate to trying to mark an entry at the best possible pricing. It just means a way to minimize one's risk or what we call risk management. The best way of gauging the timing of the entry is by using tools such as technical analysis, i.e., enter the market only when there is an appropriate buying signal. Sceptics will argue that technical analysis is no crystal ball. It may be true somewhat but the key here is risk management. By using technical analysis, one can reduce the risk of getting it wrong. Why invest when the market has shown little sign of recovery or a sustainable recovery? Catching a falling knife can hurt the most! The current global crisis is the best case of example. Cheap stock prices and undervalued companies are aplenty, but when sentiment is against you, no fundamental holds as fear factor will over power any positive mindset!

In addition, it may also take years before the market recovers. For instance, the Dot Com burst in Year 2001 took around 2 to 3 years for full market recovery.

While it may appear sensible for investors with plenty of cash to just ignore the timing, buy and then put aside without ever looking at if for several years, many investors are simply not in the same league financially. The fact is many investors also do not possess the right emotional state to handle large amount of paper losses.

As such, the "safest" route for many, is still timing.

"Its not about being right or wrong, rather, its about how much money you make when you're right and how much you don't lose when you're wrong" - Quote by George Soros

However, for those who are not active investors, perhaps leaving it to the professionals may be the better option. However, be prepared to see your investment values erode as market will most likely not recover so soon.

For more details on the study, please click this link.

Measure To Boosting Banking Sector and Confidence

2008-10-16T23:32:00.006+08:00

Following the footsteps of Hong Kong, Australia, Ireland, Germany, Denmark and Greece to fully guarantee bank deposits, Malaysia Government likewise has announced that they will fully guarantee, with immediate effect, all ringgit and foreign currency deposits with commercial, Islamic and investment banks regulated by Bank Negara.

The Central Bank and the Ministry of Finance said in a joint statement the guarantee also extended to deposit-taking development financial institutions regulated by the central bank.

The deposits would be fully guaranteed by the government through Perbadanan Insurans Deposit Malaysia (PIDM) until December 2010.

The guarantee extends to all domestic and locally incorporated foreign banking institutions; and access to Bank Negara’s liquidity facility will be extended to insurance companies and takaful operators regulated and supervised by the Central Bank.

The above move will indeed shore up the country's banking sector in terms of consumer and business confidence. At the same time, this should prevent potential outflow of funds from the country to other countries (particularly Singapore) that offer the full guarantee.

In the same accord, the Singapore Government has also announced full deposit guarantee.

Related Story: How Safe Is Your Money In the Bank?

Fear For Recession Looms

2008-10-15T23:58:00.004+08:00

True to my scepticism, global markets did not hang on to a sustainable recovery as the optimistic mood from the series of global banking rescue plan fizzles out. Investors' mood soured when the U.S. government report showed that sales at U.S. retailers last month slid by the biggest monthly drop in more than three years. For that matter, U.S domestic growth is heavily reliant on consumer spending as consumer spending accounts for two-thirds of U.S. economic activity.

Technically U.S is still not in recession but unfortunately most people in the streets already feel so many months ago!

With the ballooning debts in US ( i was told national debt has reached US$10 trillion!), it is certainly an extremely worrying course for the Americans and the rest of the world!

Switching to Cash May Feel Safe, but Risks Remain

2008-10-15T00:39:00.006+08:00

Amidst the current global market weakness and the downward spiral performance of most asset classes, many people have advocated keeping cash as the best form of capital preservation. Recently I came across an interesting article that discusses the wisdom of liquidating one's investments and keeping cash. This article was written by Ron Lieber from The New York Times.

"It’s a question we’ve all asked in our darker moments of late: Why not just put all of our investments in cash, 100 percent, just for a little while, until things calm down?

Some people already seem to be acting on that instinct. In the first six days of October (through Monday), investors pulled $19 billion out of mutual funds that invest in United States stocks, matching the outflows for the entire month of September, according to TrimTabs Investment Research.

“What clients are looking for is safety,” said John Bunch, president of retail distribution at TD Ameritrade. “They are seeking solutions that are backed by the federal government. Specifically, F.D.I.C-insured money funds and certificates of deposit. All of it is under the umbrella of, ‘Am I safe and insured?’ ”

By fleeing for the comfort of safe and insured, however, investors with a time horizon beyond a few years may be doing real damage to their long-term finances. If you’re tempted to make a big move to cash right now, you’re doing something called market timing. It’s an implied statement that you’ve figured out the right moment to get out of stocks — and will also know the right time to get back in.

So let’s dispense with the first part straightaway. The right time to move out of stocks was a year or so ago, before various stock indexes the world over fell by one-third or more.

If you missed that opportunity, you’re hardly alone.

But if you sell now, you’ll be locking in your losses. And once you’re in cash, there isn’t much upside. In fact, with interest rates low, you’re likely to lose money in cash, because inflation will probably eat up the after-tax returns you earn from a savings or money-market account.

A guarantee of a small loss may sound good right now. But if you’re not bailing out of stocks once and for all, how will you know when it’s time to get back in? The fact is, any peace of mind you gain by being on the sidelines now will turn into a migraine once you see how much you can harm your portfolio over time by missing just a bit of any rebound.

H. Nejat Seyhun, a professor of finance at the Ross School of Business at the University of Michigan, put together a study in 2005 for Towneley Capital Management, where he tested the long-term damage that investors could do to their portfolios if they missed out on the small percentage of days when the stock market experienced big gains.

From 1963 to 2004, the index of American stocks he tested gained 10.84 percent annually in a geometric average, which avoided overstating the true performance. For people who missed the 90 biggest-gaining days in that period, however, the annual return fell to just 3.2 percent. Less than 1 percent of the trading days accounted for 96 percent of the market gains.

This fall, Javier Estrada, a professor of finance at IESE Business School in Barcelona, published a similar study in The Journal of Investing that looked at equity markets in 15 nations, including the United States. A portfolio belonging to an investor who missed the 10 best days over several decades across all of those markets would end up, on average, with about half the balance of someone who sat tight throughout.

So moving to cash right now is just fine as long as you know precisely when to get back into stocks (even though you didn’t know when to get out of them).

At some point, stocks will indeed fall enough that investors will remove the money from their mattresses and put it to work, causing prices to rise significantly. But, as Bonnie A. Hughes, a certified financial planner with the Enrichment Group in Miami, put it to me, there won’t be an e-mail message or news release that goes out when this is about to happen. It will be evident only afterward, on the few days when the market surges.

And it gets worse for those who think they won’t have any trouble investing in stocks again later. Medium- or long-term investors who are considering a big move into cash right now are probably making an emotional decision, at least in part. For those who follow through, the same instincts will probably hurt when trying to figure out when to reinvest in stocks.

“The emotional forces that drove them out of the market aren’t likely to let them back in ‘until things are better,’ ” Dan Danford of the Family Investment Center in St. Joseph, Mo., said in an e-mail message. “And for most people, things won’t feel better again until the market has already moved back up.” In fact, he added, plenty of people may not allow themselves to get back in until the market has already risen significantly. "

Do you agree with the views posted on this article?

For the full article, please read on this link.

Buying Opportunity of the Life-time Or Just Sucker's Rally?

2008-10-14T00:01:00.003+08:00

Global markets rebounded handsomely today after some great uncertainties in relation to which direction the markets should move, as shown by the intra-day volatility of most Asian markets today.

Fundamental question is, is this a Buying Opportunity of the Life-time Or Just Sucker's Rally?

To recap, a number of financial measures or incentives were handed out by several countries yesterday. For instance:
- UK's £35 billion retail bank rescue funds for HBOS, Royal Bank of Scotland, Lloyds TSB and Barclays;

- A separate financial package included a £50 billion cash injection, guaranteeing interbank lending by £250 billion to help unfreeze wholesale markets, and extending a Bank of England scheme that swaps banks’ risky assets for government debt to provide £200 billion of cash to the system

- European central banks to temporarily guarantee inter-bank lending;

- Australia to fully guarantee all bank deposits

- Plans by U.S. Government to own stakes in U.S Banks;

According to Aaron Task, one should be cautioned the fact that there is still lack of a coordinated global policy response, and the U.S. continuing to lag other nations in taking the most dramatic steps like insuring all bank deposits and directly injecting capital into banks. Secondly, unemployment in U.S may hit 8.5% before the cycle turns. Last but not least, valuations tend to overshoot on the downside and bear markets historically don't end until P/E ratios hit single digits.

Here is a video report of the above discussion.

The Real Economy Tells The Story

2008-10-10T09:30:00.003+08:00

This article posted by Down Jones Newswires probably sums it all up after last night's (another) Wall Street plunge and the latest confirmation that Singapore has entered into recession. Here's an extract of the article:

"The financial markets are sucking the oxygen from news headlines right now, but it's worth heeding an economic warning that has just come out of Singapore.

The island state is, like many others, heavily reliant on exports to support the economy, especially things like biotechnology and technology. It is also increasingly trying to be a financial services economy, a regional hub for key banks and brokerages.

Anyone living in Singapore would tell you that things haven't changed measurably. Restaurants are still busy, shops full and taxis impossible to find.

But it's clear that it may not stay this way. The recessionary data show that GDP fell 6.3% on the quarter, compared to a Dow Jones Newswires poll forecast for a 0.3% rise; GDP was down 0.5% on the year, versus a 0.8% rise expected.

Manufacturing output slumped 11.5% on the year; services output was 6.1% higher and construction output added 7.8%, though growth in both these sectors is slowing.

The authorities cut their 2008 growth forecast to 3%, from the prior 4%-5%, after the data were released, while the Monetary Authority of Singapore loosened monetary policy.

We've already had warnings from other parts of Asia. This week, data showed Taiwan exports fell 1.6% in September, the first decline since February 2007 on a fall in exports to China, Southeast Asia and the U.S.

That was a sharp turnaround from August's 18.40% export growth.

Readings on manufacturing meanwhile, via things like PMI data, are showing some weakness - not just in Asia, but in Europe, another key market for exporters.

And the recent monetary policy easing by China - along with other stimulatory measures - show Beijing is growing more concerned about the outlook for growth, even if the economy there is in no risk of falling in a hole.

This week we also had news that customers of iron ore from Australia's Mount Gibson Iron had asked the company to delay shipments in the fiscal second quarter ending Dec. 31.

Analysts called that an ominous signal that falling steel prices and growing iron ore stockpiles in China were set to impact miners.

Last week this column wrote about several economic canaries in the coal mine, including a drop in the Baltic Dry Index of shipping rates.

The Singapore data are enough example of that. The canaries are pretty much slumped at the bottom of their cage right now and gasping for breath - the question is if anyone will notice them amid the panic in the markets.

Of course the financial crisis is itself feeding into economic worries with investors, some of them sitting on major losses in pension and other retirement funds, knuckling down and cutting spending on discretionary items.

For policy makers that makes it ever more important to stop the rot in markets. So far there's been no silver bullet, as even the large, coordinated interest rate cuts made this week by many central banks failed to calm things.

Now there's the chance of even bigger-bang efforts from Friday's meeting of finance ministers and central bankers from the Group of Seven industrialized nations.

There's talk, for example, of officials agreeing to guarantee all interbank lending.

That's an extreme move but one, in the current climate, which may be needed to get liquidity pumping and markets back on their feet.

The downbeat signals coming now from various economies suggest officials can't afford to let the market rout continue, or the chances of a global recession will mount.

They've been deploying bazookas. Now they need to carpet bomb."

Above article is written by Rosalind Mathieson, Asia-Pacific Managing Editor for Market News at Dow Jones Newswires.

Unprecedented Interest Rates Cut

2008-10-09T11:48:00.002+08:00

In an unprecedented move, the U.S Federal Reserve announced an emergency interest rate cut by 0.5% in both the Fed Funds rate and discount rate, along with other central banks. European Central Bank, Bank of England, Switzerland, Canada, Sweden and Hong Kong Monetary Authority all cut their official interest rates by 0.5%.

This move followed Australia's move to cut interest rates by 1.0% the day before.

Question is, will this be sufficient to lift the current gloom and doom?

Personally, it still doesn't rectify the fundamental flaw in the current financial systems. However, some small portion of confidence could be restored and hopefully this will strengthen both business and consumer confidence going forward.

How Safe Is Your Money In the Bank?

2008-10-08T17:07:00.001+08:00

Given the current crisis surrounding many global financial institutions and their recent collapses and/or near collapses, question must be asked about how safe is it with your money deposited in your local and overseas financial institutions?

Well, for most of the advance and developing countries, the funds in the banks are most likely insured or guaranteed, but subject to a certain limit. In the case of Malaysia, all bank deposits in financial institutions licensed under the Banking and Financial Institutions Act 1989 are automatically insured under the Deposit Insurance Scheme administered by Perbadanan Insurans Deposit Malaysia (PIDM). All financial institutions are automatically registered with PIDM, thus the compulsory deposit insurance which members pay. This covers both commercial either conventional or islamic bankers.

Insurable deposits include:
- All deposit products including current, savings, fixed and investment deposits;
- Certified cheques, bank drafts and other similar payment instructions drawn or made against a deposit account

Non-insurable deposits include:
- Deposits not payable in Malaysia
- Foreign currency deposits

Please take note that the limit for the above guarantee is only up to RM60,000 (US$17,242) per depositor per member institution. This limit covers both principal amount and interests, and applies separately to both conventional and Islamic deposits.

The following financial institutions are however, not covered under the deposit insurance scheme:
- Merchant banks and discount houses (which do not accept retail deposits from the public)
- Overseas branches of domestic financial institutions
- Development financial institutions, including Bank Simpanan Nasional,
Bank Pertanian Malaysia and Bank Kerjasama Rakyat Malaysia Berhad
(which are either backed by Government guarantee or by their status as statutory bodies)
- Insurance companies (which are separately covered under the Insurance Guarantee Scheme Fund established by the Insurance Act 1996)
- All non-bank financial intermediaries such as provident and pension funds, co-operative societies, housing credit institutions and building societies, which are not supervised or regulated by BNM.

For more information on PIDM, please visit this link.

In U.S., the insurance deposit limit per depositor per FDIC-insured bank is US$250,000 for the period from October 3, 2008, through December 31, 2009. Normal coverage is up to US$100,000. For more information, please visit this link.

For European Union, the minimum bank deposit guarantee has just been raised yesterday to euro50,000 (US$68,160). However, not all European countries adopt the same policy.

Why Americans Oppose US$700billion Bailout Plan?

2008-10-03T00:23:00.004+08:00

The revised US$700billion bailout plan may stand a chance of revival after all, as the bailout plan passed last night by the Senate and heading toward the House. However, it's pretty obvious to anyone paying attention a majority of Americans oppose the bailout plan. Here are a couple of videos that pretty much sum up why the Americans feel that way.

What do you think?

Nighmare on Wall Street

2008-09-30T16:55:00.004+08:00

Much to the shock of the global investors community, the much anticipated US$700 billion bailout plan was rejected by a 2 to 1 decision in the US Congress meeting yesterday. It immediately brought Wall Street to its worst single day point drop in history, with Dow Jones Industrial crashing by 7% (780 points) overnight!

That means there is still no potential sustainable solution to the prolonged financial and credit crisis currently experienced by the U.S plus its contagious effects experienced particularly in Europe.

So why the bailout plan did not get through?

The defeat of the rescue package represented a perfect collision of the forces of modern politics - a fast-moving Internet campaign, vulnerable incumbents, a weakened and unpopular president, and a roiling presidential campaign.

Based on poll, the American public appears to reject the plan as well. Perhaps, this is one scenario where few people really want to do it, given the presently politically sensitive timing!

The vote also represented an extraordinary rejection of Bush, who personally called wavering lawmakers and delivered a last-ditch public appeal Monday morning, as well as Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.

Taking public funds to bailout failed financial institutions is indeed unpopular and perhaps against the principles of a free market but given the circumstances, it is perhaps justifiable to save the ship or else everyone may drown!

So it remains to be seen what is in store next. One thing is for sure, credit will be further tightened and more financial institutions and possibly companies (who are deprived credits) will start to fall if the financial crisis is not rectified in a speedy manner.

Yesterday's crash had also effectively wiped off US$1.2 trillion from the market in one day!

Do follow the video below for further reaction to the rejection of the bailout plan.

More Bailouts!

2008-09-30T00:27:00.003+08:00

Below is a list of the latest bailouts from the financial shores. The only difference this time is that it has extended beyond the U.S financial shores...

Facing insolvency, U.S. Wachovia sold its banking operations to Citigroup, which took an immediate US$42 billion loss, slashed its dividend and said it will seek to raise US$10 billion in equity to offset the loss. The transaction was brokered by the Federal Deposit Insurance Corporation (FDIC), which received US$12 billion of warrants in Citi in exchange for insuring the bank's losses won't exceed US$42 billion.
The Belgium government bought 49% of Fortis, Belgium's largest bank; the Netherlands and Luxembourg also participated in the deal. Fortis' near-death experience hit Hong Kong insurer Ping An, which owns a stake in the company.
UK regulators seized Bradford & Bingley, a large real estate financing company.
Hypo Real Estate, Germany's second-biggest commercial-real estate lender, received a 35 billion euro loan guarantee to prevent its insolvency.
Iceland bought 75% of Glitnir Bank, the nation's third-largest bank.