It's now or much later.........

I've been wanted to capture my thoughts on plantation stocks over the weekend but there have been a lot of interruptions......some baby snails were literally ruining my plants so I've to harden my heart to get rid of them with a loaded pesticide water gun. Hasta la vista, baby!



The sector(plantation index) had a huge run prior to sub-prime collapsed and the Humpty Dumpty had a great fall. All were not lost, the market managed to stick back the pieces(with some help of all king's horses, all king's men and some luck of course). Since then it had a very successful recovery. The sector appeared to have been topped out in the early of 2011 and trapped in the downtrend for last 10-11 months.

The CRB index appears to have a similar pattern. It has been on the downtrend as well since the beginning of the year and the Baltic index is clearly looks like a Vietnam veteran having bad dreams, screaming at nights.



A main competing commodity to palm oil, soya beans, got hammered in September. They said they worry about global growth. They might be right, for once, I agreed with these traders. Damn! did I just shake my hand with them?????



Back to our KLSE, our top guns, i.e. heavyweight like Sime Darby, IOI Corp and KLK have been getting expensive. The valuation has caught up with price pretty fast. There are some issues and worries with these stocks(a story to be told in another day). Those market cap stocks between RM $ 5 - 10 B are also getting expensive. The valuation gap in fact had almost been eliminated. A lot of stocks with less RM 1 B had their days, justice had been served -- the valuation is also appear to be rich too. There are 2-3 more stocks like TDM is waiting for a handsome prince to kiss them. Don't let me stay like a frog forever, she said with her beautify winky eyes. Kiss me please.



Dividend yields are not that generous, on the average of 3+%, are indications of prices had surged too much. Some are even worse - less than 2% - telling us players are willing to go after capital gains only.

A few of the undervalued stocks have only a window of about 6 months, it's now or much later. The logic drives behind this premise is CPO price can still be firm due to the lower harvesting yields caused by heavy rainy seasons. When all stocks slide under water slides, pumping adrenalin will not equal to making money.

Take care all my friends.

Has Toyota lost its mojo?

What is mojo?

It's a noun. I know stupid. Be more serious.

It's something related to a magic charm when I looked up in Oxford dictionary.

Okay.

Has Toyota lost its mojo?

I would like to answer a question with a question. Why Toyotas' chiefs frequently shed tears?





http://youtu.be/OItBnWHjlFM

A doctor says it's got to do with biology.

Explain.

It's got to do with the level of testosterone.

How?

The higher the level of testosterone, the higher the level of aggression.

That makes sense, when the level of testosterone drops -- especially when they grow older -- they become more compassionate. Don't send them to kill a lion or else they........use your imagination to figure that out.

I see. When Toyota announced their withdrawal from F1, it's all about giving up something that they really passionate in exchange for something "bigger than my Alpha male ego" mission. It's painful you know. The future is not about something who can make a "beast" louder, stronger but about something is more friendly to our earth.

You mean there is a quiet revolution going on?

Yeah....check this out.



Can you feel the ice, not heat?

Driving L badge that starts at 168 k?

Yeah, it's very cool but you still have not answered my question.

Is it important?

Yeah.

Young man, young man. You don't like what you hear, don't you?

The young man had just turned into a classic stonewall. Muted.

All you care is UMW, isn't it young man?

Grin.

Drive carefully, don't flip like a turtle

It's fun to watch these World Rally Championship(WRC) pros flipped their cars like turtles. Most of them are rarely hurt because those cars were equipped with roll cages. A normal car is not, a driver will not survive any crashes like those in the video. Please drive carefully, especially it's a raining season now. Like investing, most people tend to think their driving skill is above average. I know you are good but there are many factors are not within your control - cows, snakes(yes, I met them once), elephants, dogs, spilled oil, rocks, other people lost control, etc......Live to drive another day people. Take care.

Christina's World

I love Andrew Wyeth's works. So much so that I was dreaming to buy one of his prints but my minister of finance stops me. He is one of the most celebrated American artists in the 20th century. His works were mostly contemporary realism, expressed in tempera and watercolor mediums. He has been referred as the people's painter because he painted mostly everyday's subjects around him, that kind of make an average Joe like me feels at ease.

One of the most famous piece is Chritina's world painted around 1948. I do not know what comes to your mind when you see this painting. Feminist would probably want to shoot him and me for promoting sexual objectification -- the curvy lady that you see. It's not what they think. They think we think women are weak and submissive, and an object of sexual pleasure. I do not wish to start a battle of sexes and I maintain that the world will be a wonderful world(less breakup or divorces) if a man behaves like a gentleman and a woman behaves like a lady, just like the old fashion way.

If you get to know the real story behind it, you probably will grab some tissues. Again, it's not what you think ............ you need it to wipe your tears.

Andrew Wyeth's world was shattered when his father met with an accident. His father was struck and killed at a railway crossing. My imagination could be too rich, I heard the rushing train, the scream and the smell of the blood. I felt my heart had just been pierced as I typed. The unspoken grief must be terrible. That was the turning point in his life at the age of 28. I felt it when I see the landscape was barren and his palettes was muted........the emptiness and tasteless world.

Something inspired him. He saw his neighbour Christina Olson sprawled on a dry field facing her house in a far distance. It broke my heart actually when I see her skinny hands. She suffered from an unknown disease, suspected to be polio, caused her unable to walk. Imagine that you were there, watching her crawling back to her house. It's a gigantic efforts. That was what inspired him. In his word, Christina "was limited physically but by no means spiritually." Wyeth further explained, "The challenge to me was to do justice to her extraordinary conquest of a life which most people would consider hopeless."

Added another link

I sometimes wonder investors really care about Corporate Governance(CG). Our actions do not seem to match with our words. They will only care when they lose money. From an illiterate, they suddenly will dress up something like this



They suddenly can argue so eloquently that everybody will be hypnotized, nodding their heads, screaming yeah GUILTY, GUILTY and GUILTY -- condemn those son of the bitch to hell. They forgot one point, it takes two hands, not one, not two left and right fingers, to clap. Yes, it takes two hands to clap!

Everybody knows the risk of having many fucking partners will have high chances of contracting AIDS. When they fuck, they don't even put on a condom. Be smart-lah. When they finally contracted with AIDS, they will argue the society is at fault, religion institutions have collapsed, law enforcement is zero and the list will go on and on..........

Have you visited a mad house? If you have not, I suggest you do. It will give you the best investing lessons in your whole life. Those people will argue so logically that you will begin to doubt that whether you are crazy or they are crazy. The best part is everybody is at fault but not them.

My "friends", ask ourselves, do we really care about CG? My gut feelings tell me otherwise. Why?

A "friend" of ours spends hours of his free time to write about CG but it has less than 200 clicks a day. For such a good blog, I think he deserves better than that. It ought to be on the link of every financial blog out there.

My blog is not that popular, [I can't help him to spread the fire -- added 10.30 am] but at least I voice out. I wish him the best of luck. Keep charging, keep up the good work.

P.S. Don't ask why I suddenly put up Demi Moore today.

Happy Thanksgiving Day

The US market will be closed tonight to celebrate Thanksgiving Day. It's a remembrance of the pilgrims rendered their thanksgiving to All Mighty God for his blessings. They were giving their whole-hearted thanksgiving to the Above for his guidance to see them through in the whole struggle and succeeded. But they remained humble, they did not pump up their fists, yeah I did it my way - unlike the Americans we see today. Instead they gathered men, women and children, probably have tears rolled down their cheeks, said it gratefully -- Thank You Lord.

I too want to thank you Lord for your mercy, kindness, blessing. I pray for other too that they will receive your love and kindness. Amen.

Market Commentatry

You may have noticed that I have been writing a lot about individual stocks lately. That's a preparation to wait for opportunity to show up. I find that the market participants are still a little too optimistic. They have not gone more bearish. I ran a list of FBMKLCI 30 and found that 20/30 stocks are below 200-day MA and another 10 stocks are abover 200-day MA.

Stocks below 200 MA
1. Tenaga
2. Genting
3. KLK
4. MISC
5. IOI Corp
6. MHB
7. YTL
8. YTL Power
9. HLB
10. CIMB
11. PCHEM
12. PBBANK
13. PPB
14. UMW
15. SIME
16. Gamuda
17. RHB Cap
18. Maybank
19. MMCCorp
20. AMMB

Stocks above 200 MA
1. HLFG
2. GenM
3. PETGAS
4. Maxis
5. Digi
6. Axiata
7. BAT
8. PLUS
9. PETDAG
10. TM

Upon closer examination, I found a lot of people still believe that they can find some kind of safe heaven. I would like to see these holders to be really be shaken. Then only, I think there is enough fear in the market that qualifies as blood on the street.

A lot of people are making references or anchoring 2008/2009 crisis. I do not believe S & P will make 666 or KLCI goes down to 800+ points. But I do believe S & P 500 ought to go down to about 950 +/- 50 points or KLCI to be around 1,250 +/- 50 points in another 3 - 6 months time.

2008/2009 was about credit crisis. It was about the whole world went into Matrix frozen moment. Can you imagine real business cannot get credit? Ships were grounded because nobody can get a Letter of Credit(LC)??? That was because the world did not how deep the derivatives hole was. European hole is known but they are just playing chess with one another - calling each other bluff. They may go to the extend of "manufacture crisis". I believe if they continue to play that game, the market participants will ask them to fly k***(wanted to use stronger words but points already got through, no dramatic words needed!).

This time is about a slow down or a low grade recession. We just have to shake off a little bit of optimism and bulls ought to charge!

P.S. Got a nice day off today. Had a nice morning hike and I felt extremely good. I need get back in shape -- and I have a plan to get up to Mount Kinabalu. Will make public announcement once I feel I'm fit enough. Have a good day everyone.

Eat to live or live to eat?

This entry is dedicated to kampong boys and girls.

My blog don’t talk a lot about foods because I’m kind of a guy who eats to live and not lives to eat. Given a choice, between going to a hawker center or a fine dining restaurant, I’ll choose hawker center anytime. It’s not about money or class but it’s about personal preference and a place that I can feel at ease — to be myself. It’s a place that nobody will give you satu macam kind of stares when you're screaming while making a bullish or bearish arguments, jeers or cheers for friends.

At times, I’m required to be completely civilized, a complete gentleman. I can’t really remember when my first time of doing fine dining was. All I remembered was my b**** shrunk by half. It was much more complicated than solving this equation

If 1/2x +1/2(1/2x + 1/2(1/2x +1/2(1/2x + ... = y,
then x = ?

No, perhaps it’s more difficult to solve a problem like how to prevent an European debts contagion. Or do I bet whether ECB will print infinite amount of money to bailout all the guys? Just kidding. :)

Back to the topic, I kept staring at the silverware. SOB, a fork is a fork, a spoon is a spoon, a glass is a glass but why so many????

Boy, I tell yea --- that dinner made me felt like trapped in an eternal hell.

I hope some of my young “friends” who read this blog may find this survivor tips handy in the future.

The general sequence is starter, main course and end with dessert.

That makes perfect sense, you will have to use your tools from farthest first for starter, slowly coming to inside for main course and end with desert. Hope this picture helps you.



Red wine or white wine? A wine is a wine but why ask me red or white. Most Asians will only care or heard so much about drinking red wine will help you to cut down their heart attack risks. Damn it, if we sit on our fat asses, red wine or coffee will not be able to save us.

I later found out it’s rather intuitive actually. Red meats like steak or lamb are heavier should match better with red wine which tastes heavier. As an Asian, I find that the smell of beef or lamb is stronger and red wine helps me during the meal. If I pair red wine with “lighter” food like seafood, cheese, fruits and etc…..it will overpower the food and just kill the taste. That’s why white wine works better.

Read more here if you want to know more about “civilized dining”. Good luck.

http://www.etiquettescholar.com/index.html

It's who you know, not what you know

Guys, gals – it’s story telling time because the markets offer no good news. Please donate a dollar to your favorite charitable organization if you like my story. If you don’t like it, buy yourself half can of coca-cola to relax yourself. Half? Yeah, no kidding – inflation-mah.

I can’t recall exactly how I got into stock market. It was described to me as a very mystified place -- a place that makes a man richer in a very mysterious way, if you have got some gold. In my time, those men driving 280 can shout the loudest. All men will listen to them attentively. Just hang on to every words of these prosperous gods have to say. They all said, it’s all about who you know and not what you know. Who you know will make you richer. A word from who you know will make you 10 times richer. Stock price don’t fly. They rocket. It was that fast, no exaggerations. What you know will only make you rich spiritually but poor materially. Choose carefully, my son, happiness or one-pack stomach filled? So forget about being a book worm, go and rub shoulders.

Poor man cannot “play” in a stock market. All they can afford was playing imaginary numbers game, taking mental notes, counting “paper” gains. Father will tell his son, if I have bought this stock and that stock, we are already living in a bungalow, driving 280 and “rinse” our mouths with shark fins.

They can only dream that one day they can bump into someone who will invite them to their exclusive club. In my time, all we know was price. Newspaper was only stock quote that we can get. It’s hard to even see a stock price trend unless we plot it on a piece of graph paper. I never heard of such thing called research paper. I thought it was probably a piece of 41/2 x 3” pink paper of ampat-ekor betting paper from illegal operators that my grand parents or parents asked me to buy. Every stock is pretty much like that, somebody will pay you money when your number strikes.

Such was my faint memories about stock market many years ago. Come to think of it, it’s still pretty much the same today but only in slightly different forms.

Dutch Lady

Until today, it remains as an unsolved mystery to me – why have I not bought this stock? I can keep piling justification upon justification until my reasoning breaks down. Enough of I know, I know, I should, I should….. Procrastination is a great thief of time.

I thought my conservatism worked against me. I thought I was worried that Dutch Lady’s sales growth will eventually slow down. I thought I was worried that PE was too high, etc. Upon reviewing my own writings, I found that I was my worst enemy, I was playing double standards, etc….. why was I sitting on dead money on Parkson for example – I was hanging on to the stock while earnings did not catch up fast enough with valuation. I finally told myself, enough is enough, if the industry dynamics is long term favorable and earning has caught up with valuation, just lock down the target and shoot!

One more point, I think I want to tweak my style a bit. I want to make it like writing letters to “friends” or write the way I’ve written in my diary rather than thinking of myself as an analyst or a preacher.

When I was looking at the stock way back in 2007 ~ 2008, the stock sold for 12 to 16 times PE. The stock was selling for 20 times PE in 2009 and 2010. It was clearly expensive in 2009 and 2010 and many other stocks were cheap. I did allocate some money in many other beaten down stocks. I was churning stocks during that period with around 60-70% return but Dutch Lady probably returned close to 100%. Ouch……why was I going the hard way? Why was I climbing the coconut trees top to pluck the fruits while I can sit back and relax -- let the monkeys to do the job??

The following is the EPS/PER history

2007/0.74/13X
2008/0.67/16X
2009/.944/19X
2010/.998/20X
2011/1.6(E)/14X

The earning jumped by 34% but the stock jumped by 135%, from 2007 to 2010. The last 2 year PE expansion has built in a lot of growth expectation. It was a no brainer to buy in 2007, still ok in 2008 but it was getting really expensive in 2009 and 2010. What about now?

The YTD EPS is RM 1.24, let's add another .36(latest Q3 ’11 result) to Q4 ‘11 and 2011 EPS will be roughly RM $ 1.6. The earning has caught up so much that the stock valuation is getting cheap again.

Given Malaysian lifestyle, I feel that the society will adopt more western style living as we get richer. Milk consumption is likely to go up in the future. Tell that your little boy/girl that he/she can get taller by drinking milk…..he/she will drink in barrels. Our per capita milk consumption is still low, the data is a bit outdated but it's the best I can find(2006). It's direction that I'm looking for.


I think the industry is not that fragmented. Since it’s a concentrated industry, the revenue will likely to go up if the overall industry is favorable. My daughter and I went around doing a bit of Sherlock Holmes’s work and we found that Nestle and Dutch Lady are pretty strong. If we buy Dutch Lay and Nestle, we are in a business to supply to almost to the whole country.






Supermarket and hypermarket operators play an important to nurture this industry. We can see Tesco, Carrefour, Jaya Jusco, Giant, the Store, etc are mushrooming. It has reached a tipping point for many Malaysia to expose to modern shopping and this will reach more and more people – beyond the city dwellers.

One of the things that worried me is the milk powder cost, it’s cyclical in nature. The cost has been going up after it bottomed out in 2009 and now is appearing to have peaked. We have been lucky that Ringgit was strong to offset some of the rising cost. However, if it goes the wrong way – weak ringgit, slow economy, rising milk powder cost – it can be negative catalysts sell off.



One of the more recent moves by new Dutch Lady’s management was to rationalize their product mix. They have been focusing on higher margin products and dropping the lower margin products. They did not give much details but I hope their higher margin products are not sensitive to economic conditions. That’s the reason why their 2011 financial results elevated to higher ground, both revenue and gross margin are expanding. I hope they can hang on, despite of a potential negative consumer sentiments ahead.

Disclosure: none

Hi

This entry is going to be short.....just to say hi.

I realize that reading and writing blog has evolved to a new level. I started to blog with a simple idea .....transition my paper diary into a digital diary. A personal diary(paper) of course will enable us to brutally honest to express our inner most thoughts. A digital diary will be less detail because I'm still too conservative to do nude sun bath.

Now I've came to realize a "virtual" bond or "friendship" begins to develop. Whenever I open up my favourite blogs, the "un-updated" page will give me some kind of uneasy feeling...are our "friends" doing well? Has he or she been too busy lately? That's why I'll always try to let "them" know how long I will be away.

It's funny that we are more connected "digitally" than we originally thought.

Got to go now, tons of stuffs are waiting for me. Take care.

A weekend stock to write

This stock drives me crazy. The nature of the business appears to defensive and do not think it will be affected by the European crisis. It has a lot of qualities that I like. The stock price is on a rising trend and beating KLCI flat. A rising trend without fundamental will not survive my 5 seconds test. It's an instinct that I developed over the years that I know it's a bullshit stock when I see one, in a matter of 5 seconds. And I don't waste more time on it. I have been following this stock for the last 5 years but have not made a single purchase. The reason main reason? The stock is always fully valued based on the current earnings. The stock that I'm talking about is Dutch Lady.




This cannot go on forever. I cannot allow hung jury. Over the weekend, I hope to put my thoughts in print, electronically of course, why I like this stock.

Buffett's inflection point?

On the road again. One of the things that I enjoy traveling on Singapore airlines is this. Like a first time middle class traveller on the plane who would cast spells on those nice knife, fork and spoon -- magically dissapeared, I would cast sapu-spells on all the reading materials on the plane - the WSJ, the Financial Times, the Economist, the Reader Rigest, homes and gardens, etc. It's a good time to think about a lot of things. Some are trivial, some are serious one. One of the more serious one is this.

Is Warren Buffett travelling trajectory approaching an inflection point?

2002 - bought Petrol China
2008 - bought BYD
2009 - all in wager for America. bought Burlington
2009 -- written S & P derrivatives bets
2011 - Repurchased own company shares. Bought IBM, Intel shares

Over the last 10 years or so, he did not put in more money in financial sector except in preferred shares like Bank of America that more of less guarantee his return . My opinin is he is taking it as a fixed-income investment than anything else. Is that a sign of banking business is a difficult space to make money for a long time?

Over the last 10 years or so, he bought into China story. He invested stocks outside the US. But his also bullish on the long term prospect of the US economy. Does that means that our grandchildren are going to live better than we are? Improving emerging economies will certainly benefits the US? At some point of time, the US people are going to make things/stuffs that emerging economies: need? --- use? --- eat? He is also seems to be concerned about energy issue.

He bought back his own company shares. Are there any other reasons beyond the simple fact of his company is undervalued? Is that a sign of too much money chasing too little return?

And now he is going into tech area. My question is did he made the decision or he let his potential sucessors made the decisions? The same question is did he already let his potential successors made many decisions over the last ten years, or may be even longer? If yes is the answer, I believe Warren Buffett is truly a person that doesn't carry a calculator but a telescope. While most people are crunching numbers he is looking beyond the numbers -- far far away in the galaxy! You get to see what your potential sucessors in actions(and validate them?) while you are alive and not when you are dead?

A return to the age of innocence

My adventure experience into e-book is proven to be good. The first thing I learned, I got to download an e-reader. e-Pub is a popular platform. Okay, that was the first thing I did, downloaded an Adobe Digital Editions at http://www.adobe.com/products/digitaleditions/



The next step was to hunt for a book. Amazon, Barnes and Nobles and etc. But then being new to this area, I did not want to pay before I was sure that this thing works. So, I went around search for free stuffs. No free lunches were proven to true, I hit into problems of virus after I downloaded free e-books from some of the free sites, read illegal download sites. Luckily it was not on my working notebook or else it's going to be embarrassing. Explaining I was trying to be frugal will not get a single sympathy vote.

After I cleaned up my mess, determined and not giving up, I stumbled into this site: http://www.booksonboard.com/index.php?BODY=under-five



Some of the books are really cheap but I think if we're willing to spend time shopping I think we can get even cheaper e-books. I downloaded The Adventure of Sherlock Holmes at free of charge, to kick start this adventure. The title Adventure attracted me because I was in the middle of an adventure then. I'm quarter way through the book now. The experience was good. So I decided to hunt for more free books. Then I found this site



Wow, there are 95 free books. http://mphonline.com/offers/free_ebooks.aspx

These books are what I called the return to the age of innocence. Yeah, it's kids' books. But my experience of drinking teaches me one or two things, we can drink the most exotic, most expensive stuffs in the world, at the end water taste the best. Pure and uncomplicated.

My thoughts on cigarette operators

This is an amoral investment write up. If it bothers your conscience, please skip.

Tobacco industry is one the very controversial industries. Smoking can cause lung cancer and other related diseases. This sin industry is always targeted by the governments around the world on the premise it can kill people. However, this is also a big and profitable business. It’s almost a RM 10 billion industry in Malaysia. Whenever our government needs money, they will just go to these guys and shake the so called money trees.

There are several risks in investing in cigarette companies. If Malaysian government decided to get as tough as Singaporean government one of these days, it’s going to be a long day. In 1970, 42% of the Singapore’s men and 4.5% of its women smoked. Today, this number has shrunk to only 14%. The consolation is the players seem to be die-hard, Singapore still got double digits of people smoke. You may want to read this paper of what the Singaporean government had done go here http://tobaccocontrol.bmj.com/content/13/suppl_2/ii51.full

Look the price in Singapore, you will almost pengsan.



http://www.imperial-tobacco.com/files/financial/presentation/190906/Asia.pdf

But don’t worry, it’s a different picture all together in Malaysia. Over the period of ten 10 years from 1996 to 2006, the number of smokers reduced merely by 3%. The cigarettes operators in Malaysia seem to be able to lobby our government to work with them in a friendly manner. Despite of more and more roadblocks are being put up. As you can see the below table, the freedom of promotion is as tight as Singapore but they seem to be surviving well.



The operators had done an excellent PR job demonstrating they have high standards of corporate governance. BAT for example won many awards from KPMG and Minority Shareholder Watchdog Group and enjoy endorsement from big fund like Aberdeen Asset Management. The cigarette operators were so proud of their success working with Malaysian government and often produce it as a case study in international conferences.

The real headache is the price difference between legal and contrabands. The price difference between legal and illegal is almost double. A pack of legal 20’s sticks cigarettes cost minimum of RM 7 vs. RM 3.5 for contrabands. I don’t care how efficient these legal cigarettes operators operate, there is no way they can close the price gap because a big chunk of them will go to tax. That drives the contrabands market share to record high of 38%. What it also means if the industry players behave irrationally to gain market share in the legal segment at the expense of others, profit margins can suffer.

IF, a big IF our custom officers will be as serious and effective comparing to their counter parts in Singapore, this industry suddenly will have big windfall. But you know the answer already-lah. Read here how aggressive the results shown by Singapore’s custom. These guys are talking about almost 40% reduction of contraband!

http://www.seatca.org/index.php?option=com_content&view=article&id=671:singapore-sees-40-fall-in-supply-of-illegal-cigarettes-250110&catid=1:regional-updates&Itemid=57

The major players are very similar internationally, dominated by the same multi-nationals. BAT has the highest market share of close to 60% and 15% JT International and 15% Philips Moris. Capital gains from BAT is fairly muted but JT International delivered a fantastic 50-75% share price appreciation.




The explanation is fairly simple, BAT revenue was flat while JT International delivered revenue growth year after year. If you already have a lion share of 60%, it’s very difficult to increase further. On the other hand, when your market share base is smaller, it’s much easier to grow. The big funds of course may have prejudice against JT International as a smaller player, despite both have about 5-6% yield. When I’m ready to place my chips again, I’ll park it at JT International.



If you happen to be able to invest in Indonesian stock market, Gudang Garam will be a far more attractive investment.

Disclosure: None

Are our necks still intact?

If our necks continue to be whipsawed -- up 3% one day, down 5% another day, I'm not sure our necks will still remain intact after a while. An environment like this is a heaven for speculators. Most of market players feel that the markets cried wolves too many times. The politicians are well trained to say the right things to soothe the players. Market events as if has become a TV commercial break, so just go to the toilet , our favourite TV show will resume after the pee.

The speculative on low liner stocks activities in the KLSE is very unusual. In fact some new terms have been invented, they called it PUNTA-MENTAL. I think I used pretty strong language yesterday like orgies. The way some of these guys behaved like totally disconnected from the world. They operate by just looking at charts. I pull three of the top volume stocks for you to see. The common patterns

1. decline for a long time
2. form a base and rebound with nice volume
3. no fundamentals or what so ever
4. they probable will use all kind of technical indicators like moving average, Fibo retracement, resistance, etc......to set their target price.





The return is seductively inviting. It's like a supermodel lifting her skirt very slowly. She promised you fun with no string attached. You are salivating, your heart is pumping and head is clouded, will you take her offer?[It's a trick question, think carefully. Added @ 4.03 pm]

Ayrton Senna - The Right to Win

It's approaching the weekend again, time to do things I like to do. Enough of the European headlines. The KLSE market activities hardly display any sign of depressions. 2.6 billion shares changed hands? There are so many of them are trading false hopes and pretty much enjoying themselves in orgies. Enough of bashing, otherwise, people think I'm jealous and having sour grapes.

There are so many things to do in life beyond making money. I watched a movie documenting Ayrton Senna's life while I was on the plane the other day.

Senna is the kind of the guy will inspire you. This kid had a crystal clear vision what he wants to be. He wanted to be a formula 1 driver which predominantly rules by the ang mo.. A guy from Brazil wants to be a F1 driver? Yeah right, not only was able to race in F1 but he was far better than that. He won three times world drivers' championship. As we all knows that Brazil is still at large a poor country especially in the early/mid nineties. His sheer determinations and achievements inspired many others for mission impossible.

He is a genius driver in the rains. His precision and ability to dance with the car in the rains will leave you in awe. Mind you, cars in those times were not assisted by computer. It's pure driving skill. He is the kind of the guy can produce jaw-dropping, eye popping moments, leaving you in awe -- how did he did it????

He hates the politics in the racing business. He is a guy with tremendous character. Read his legacy here http://en.wikipedia.org/wiki/Ayrton_Senna. He reminds us he is a human too, though he fought for improved safety but he was far willing to put other in danger to go for that gap.

I hope you can enjoy these two clips.

The Italian job?

I wanted to post this yesterday but I did't want to trigger a false alarm. There have been rumours swirling around once the Italian 10-yr bond yield crosses 7%, it will trigger the panic button -- it will rise like a hockey stick. It was 6.76% on Tuesday. The equity was still cheering on Tuesday after they heard the news of the Italian PM planned to step down after he gets his Italian job done -- meaningful austerity budget he promised. I heard that bond traders are a lot smarter than equity traders. The yield did not fall on news of Italian PM's plan. I took that a NO from bond traders. They were not convinced the problem will be solved just changing guards.

The government debt/GDP ratio of Italy is almost same like Greece. But in absolute value, Italian debt is 2.7X bigger than the combined debt of Greece, Ireland and Portugal. 1.9 trillions debt could inflict much bigger damage if it's not well contained.



But Marketwatch reported their fiscal position is better than the rest of bailout countries. Read the rest here http://www.marketwatch.com/story/margin-boost-pushes-italy-yields-to-brink-2011-11-09

The concern is debt roll-over by early of next year.

“You can have a minimal debt/GDP ratio, but if you need to roll over any debt and nobody will lend to you and you cannot print your own money, then you are bust,” Jenkins said. “Italy’s debt is far from minimal.”

The 10-yr yield is finally crossed 7% yesterday. That's certainly flashes red alarm.

Catching up with the trend.......e-Book

Imagine one day we have to pay a lot of money to enjoy the paper tactile feel, the smell of the printing ink and the dog-eared pages. It's funny that I suddenly felt so old in the world of Einstein. It's relativity stupid. Having living in the paper world for so long, it's hard to move on. But then there is no point to resist something about to pass a tipping point. A point that passes a threshold that spreads like wildfire.



http://www.ifbookthen.com/wp-content/uploads/2011/10/research.pdf

e-book market has surpassed US $ 500 million mark in the US. The trade related to e-book is passing US $ 2 billion. e-book penetration rate is reaching about 20%. Give it another a few more years, Star Trek generation will be here.

Most of the books that we read in English probably are coming from the USA. The train is coming, it's either I learn to adapt or I'll have nothing to read or pay a lot more money as a luxury indulgence. The writing is on the wall!

I resolute to read at least one e-book before 11:59 pm, December 31, 2011.

Good night.

China Updates

I was not sure whether my bearishness will change the way I see China for the next 2 years. I'm trying to avoid biasness as much as I can. When I arrived in Shanghai, the check out from the immigration counter was fast, unusually fast in fact. When I departed from Shanghai the last Friday, the check out was even faster. It was so fast that I felt eerie. I used to get a nice copy of Financial Times or Wall Street Journal on the planes but that was missing, budget cut I supposed. The planes were not full. These are very telling signs.

There is no doubt that the Chinese economy is slowing down. Q3 '11 GDP slowed to 9.1% and many expect it to slow down further to 8.5% next year.



The Chinese government understands credit is a double-edges sword. It can build an economy but it can also annihilate an economy. The chart below shows the dramatic increase of China's credit as a % of GDP since 2008. Even though the Chinese leadership has hinted they will fine tune their monetary policy to assist small and medium businesses after their outcry of credit crunch -- a few bosses abandoned their homes, businesses, committed suicides, borrowed from loan sharks, visiting pawn shops, etc. But I think it is unlikely that they will loosen its grip across the board.



The credit tightening effect was not only felt by SMEs but now spreads to property market. The property prices have finally fell dramatically and the new homes demand fell off the cliff. Chinadaily reported that new houses demand in Beijing fell 46% year over year. They slashed prices by 20-30% in response to mounting pressure to push out inventory. Read more here http://www.chinadaily.com.cn/bizchina/2011-11/05/content_14043826.htm

A dramatic price drop has a huge impact to new buyers. They will wait for the prices to come down even more, reinforces the downward spiral. Retail demand reduction is one thing but the other problem is many of the SMEs companies have ventured into properties will see their portfolio decline substantially. I hope the cold will not turn into pneumonia. The Chinese government had done a stress test indicating the Chinese banks can withstand property price decline up to 40%. I can buy into that but there will be a few scars here and there.

There has been a lot of talk that the Chinese local governments have been overburdened with debts. As of end of 2010, the local government debts stood at 10.7 trillions yuan or almost 30% of GDP. If it gets closer to 50%, I think the game will be over and they are over-extending themselves --not much room to expand their infrastructure projects.

When it rains, it pours. The problems just do not seem to stop. There will be another fresh problem will show up at the door. The EU. China is doing a substantial business with them and in fact this is their number 1 export destination. With PMI flashing below 50 across EU, I think contraction is a done deal. What does this means to China?

I'm not trying to depress you till a point to reach out a few Panadols or Prozac. What I'm saying this slowing is more problematic than 2008/2009. The dry gun powder inventory is dwindling down fast. I believe they will act a lot more rationally and will not turn on the money printing press to continue to over-extend themselves. They should allow the cleansing process to clean up the toxic from their economy so that they can emerge stronger after this crisis.

A reflection on charity

This is my first entry on this subject. This is a very complicated subject because it involves multi-disciplines. It’s like beauty – it’s in the eyes of the beholder. It’s also very difficult to break it down to a manageable level or deploying my favorite problem solving method by looking at problems from helicopter views, giving up many details and to focus on one or two things that matter the most.

My religion in Christianity has a strong influence on me. First, I agree completely with Jesus that “The poor you will always have with you…….” We can’t be the super-hero to the mankind. You can’t solve all problems. You can’t make all mankind happy. Absolute happiness only exists in heaven and I don’t believe and expect heaven on earth. I accept that we are living in an upside down world. I accept momentous of happiness, sadness, suffering, desolation, solitude, turbulence, peace, etc. It’s just the total package and non-negotiable, we just have to deal with it as best as we can as a human.

Secondly, my thought is also heavily influence by Darwin. Each of us has the survival instincts. We are tougher than we think we're. Or else how two people multiply to 7 billion plus today? The moment we’re born into this world, we’re already a winner. We defeated millions of other sperms to reach an egg. With that premise, I believe strongly that God will help those who want to help themselves. I don’t believe in giving away money to those appear to be very weak or pitiful. Just talk about NEP, that’s enough to light up the fire crackers in me. I can rant for hours, days, months, years, 'till the end of my life. Show me that you want to progress, I will invest in you.

Thirdly, I am also a strong believer of charity begins at home. Invest time with our kids. Coach them in their homework. Teach them to be money smart and street smart. Make them feel secure so that they can be self-confident. Nurture the goodness in them and at the same time teach them enough moral values to defeat or to contain the dark side in us.

Fourthly, this is a follow up on my point no. 3. The world has enough of its problems, just don’t add more problems to it. I’ll live as responsibly as I can while I still breathing on this earth. Do our job well. If our company doesn’t perform, they will fold. When it folds, hundreds dependents will suffer.

Fifth, this value is influenced by Warren Buffett. Everyone has his or her calling. Not everyone has a calling of mother Teresa. Investing is my passion and it’s one of my strengths. I want make highest impact with my money that I’ve grown at reasonable rates. I don’t want to give away fishes but I want to invest my money with fisherman. I don’t want to give away bread or rice but better seeds. The world wasted too much, pissed away too much money because of leakages. There is no point to give away money to churches that will install better sound systems or air-conditioners. I will invest my money in foundations that will fight corruptions, companies that pour money in R & D that can produce more food, companies that can make better medicines, foundations that will invest in education, etc. They got to have good governance.

Six, to be involved personally we must be prepared and trained. We cannot go into the “battlefield” with empty headed. We can be consumed by the “dark forces” and we can die for nothing. Involving in domestic social problems like(alcohol, gambling, domestic violence, etc), disaster relief, war torn victims, etc…

Lastly, give unconditionally. If we don’t want to give, it’s okay because it’s our money. If we elected to “give away” money, do it silently without the need to tell anyone. I mean it, not even to my wife.