Thank God, the Fed is Listening, but too little too late?

This a welcome development as the Fed begin to shift attention from economy growth and financial crisis to inflation and the dollar.

(WSJ--3June08)Mr. Bernanke also suggested that the Fed is unlikely to lower official interest rates further, though his remarks suggested that -- barring a further rise in inflation expectations -- the Fed probably won't contemplate higher rates until there is more stabilization in home prices.

It's good that he begin to talk down the inflation expectations however he must restore credibility as most sees it as a dinasour and a toothless tiger bows down to Wall Street demands. Ben please walk the talk, if you mop up the excess liquidity, expectations could not be translated into actions i.e. commodities prices will be friendly.

Mr. Bernanke's comments suggest the Fed still sees global economic forces -- particularly faster growth in emerging economies and supply constraints -- as the main factors in the rise in commodities.

Still, Mr. Bernanke said high commodity prices are an "important risk" to the inflation forecast, especially if they become embedded in expectations for future inflation.

Recent consumer surveys suggest households expect inflation to rise significantly over the next year, and they've boosted their longer-term expectations as well.

Mr. Bernanke warned that higher inflation expectations could become "self-confirming" and are thus a "significant" upside rise to price stability.

Malaysia, Thailand Cut to `Underweight' at Goldman

The Bloomberg reports Goldman downgrades Malaysia and Thailand to 'underweight'.

June 3 (Bloomberg) -- Malaysia's political volatility made its shares least favored in Southeast Asia, Goldman, Sachs & Co. said, recommending that investors also pare holdings in Thailand, Indonesia and the Philippines as growth and earnings slow.

The nations' equities were cut to ``underweight'' from ``market weight,'' Singapore-based analysts including Rick Loo wrote in a report dated yesterday. The region's shares are unlikely to rise as economic concerns escalate, they said.

In Malaysia, opposition leader Anwar Ibrahim is seeking to oust the ruling party, while Thailand's benchmark SET Index yesterday plunged the most since January on speculation anti- government protests and rising consumer prices will dent growth. Inflation will hurt the Philippines most and Indonesia faces a ``tighter fiscal and monetary backdrop,'' Goldman said.

The question is: did they exit the market and recommend to underweight? Is this a new news or old news? Well, let's see whether KLCI will fall more after this being made public.

Inflation headlines are finally showing up

Inflation is one of the things that I've been watching closely. Buffett always worries about inflation. Now, the headlines are finally flashing everywhere. Looks like media, big boys, politicians, central bankers, etc begin to talk about it extensively compared to two months ago. Some people think this is more of a transitional period for developing economies, it's cyclical in nature. They opined inflation should peak soon as developed countries knocked into a slow down or recession. Did Asian Central banks got their bet right? Bloomberg writes: China Leads Asia in Retreat From Inflation Battle.

June 2 (Bloomberg) -- Plummeting currencies did in the first Asian economic miracle. The second may fall victim to surging inflation.

Central banks from Beijing to Bangkok are losing their bets that a global slowdown would temper price increases. While export demand from the U.S. and Europe may have eased, it has been replaced by rising domestic consumption that has helped push inflation rates in Asia as high as 26 percent.

The result: In China, Thailand, the Philippines and at least eight other Asian economies, benchmark borrowing costs are lower than the rate of inflation, resulting in negative real interest rates, according to data compiled by Bloomberg. The risk is that prices will spiral even faster, leading to overheated economies and an eventual bust.

``Unless there are concrete measures to tackle inflation, investors are going to reconsider the Asian growth story and realize it's not as rosy as it seems,'' says Sailesh Jha, an economist with Barclays Plc in Singapore. ``Confidence will weaken, and there'll be a significant correction in asset prices such as stocks as capital flows out.''

Thailand's central bank has held its main rate at 3.25 percent for almost a year, while inflation has tripled to 6.2 percent. The People's Bank of China, which announced in early December a planned shift to a ``tight'' monetary policy, has kept its main lending rate unchanged at 7.47 percent since the end of 2007, even as inflation soared to 8.5 percent, near a 12- year high.

Asian Central bankers had better take quick action to catch up loss time. I've been worry about this when I made two entries earlier(Forget about subprime, in Asia the big fear is inflation and oil speculation) With enough pressure builds up, some will take some money off the table--reducing their bets exposure. As soon as this "first wave" fear subsides after a big sell-off, it will attract more hot money to bet on interest increase or currency appreciation. The "second wave" will continue to drive up asset prices again. If left unchecked, this self-reinforcing loop is dangerous. It will create assets bubbles, when it burst, it will be very ugly. There will be people get hurt.

Why I bought Parkson?

At last I bought Parkson, after waiting for 2.5 months. I made the first entry about Parkson by examined the macro picture in March 15. The next day, I wrote a brief entry about Parkson. I was a bit unlucky because Parkson went on sales around $ 5.40 - $ 6.00 but having insufficient funds. I told myself between discipline and making money, I prefer to preserve discipline. Parkson continue to deliver earnings at high growth rate bring down valuations quickly.

Learned something new, when a stock has presence in many countries, volatility will jump cause by good news or bad news. If something were to happen in China, Hong Kong, Vietnam or Malaysia, news may move price, could be very wild too.

Two negative catalysts had brought down the price so far (i) disappointments by Hong Kong investors (ii) Vietnam stock market turbulence. Will there be a third negative catalyst to bring the stock down another 10%? It may well could happen but I don't know.

You may notice that I don't use that much of technical analysis. I derive my entry price largely by valuation and observe general pessimisms. I'm happy being approximately right - if the price goes down more than 15%, I know I bought too early.

When I saw Parkson opened around $6.10 this morning, I figured out with 5% intra-day volatility could bring the price down to $ 5.80. So just ordered 500 shares at $5.80 and went on to work. Just a very simple mechanism to time my purchase - neither too technical nor too scientific.

Turtle bought 500 Parkson shares at $ 5.80

Turtle bought 500 Parkson shares at $ 5.80. More updates later.

Food Fight Over Biodiesel

United Nations Food and Agriculture Organization is organizing a Summit in Rome to debate about food fight over biodiesel. I extracted part of the article appeared in the WSJ.

"The fuel of the rich is competing with the food of the poor," says Willem Jan Laan, director of external affairs for Unilever, the consumer-goods company. Unilever buys shiploads of vegetable oil every week to make soap, shaving cream, ice cream and candy. That puts Unilever in competition with fuel companies for the corn, rapeseed, oil palm and other crops used to make biofuels. Mr. Laan says that at a panel discussion in the coming week, he will argue for increased use of other alternative-energy sources, such as wind and solar power, and fewer biofuels.

I would argue that for very short term, everyone should drive lesser. If you look at the main demand driver, it's transportation. Based on Exxon Mobil forecast, this sector will take up huge portion in years to come but non-OECD demand is still relatively small compared to total global fleet. By looking at the data, alternative energy will solve some of the industrial and power generation but not transportation.


As people getting richer, they will own more vehicles. Exponential demand growth can be observed once certain income per capital breakthrough is achieved.



For now, I agree with the statement that we should not let them convert food into gasoline to fill up their gasoline hungry automobiles. It's a dumb idea. Additionally, the US protectionist policy also contributed to the problem - maintaining silly tariff of US $ 0.54/gallon on imported ethanol. This is extremely irrational because sugar-based ethanol produces by Brazil is a lot cheaper than US corn-based ethanol.


It is not fair for them to point fingers at Asian saying we are the cause of the food inflation.

"The problem is rising food and feed demand in Asia," EU Agriculture Commissioner Mariann Fischer Boel said in a speech this past week. She argues that only 1% of EU arable land is used to plant biofuels, making the impact on land prices negligible.

I think many people are desperate and hitting every where but missing every where also without examine the root cause. If you ask 5 times WHY, you should get the real root cause. Why food inflation? Because we divert them to biodiesel. Why biodiesel? Because of high energy price. Why high energy price? Because flight of the dollars? Why flight of dollar? Because the Fed printing money like nobody business. Why the Fed printing money like nobody business? Just to save a few politicians and Wall Street firms.

Turtle Portfolio Update - June 08

Received regular saving $ 888 for June. This monthly regular saving is forcing me into a dollar averaging program. I can buy about 3-4 times/year. With an interval of 3 - 4 months, this has helped me to smooth out volatility.

Vietnam stock market turmoils has sent most of the Malaysian stocks with Vietnam operations into a tailspin. Parkson is no exception. This will provide an excellent entry point because their operations are too small to dent Parkson's earnings. It has taken more than 15 years of blood, sweat and tear for Parkson to be sucessful in China, this kind of turmoil is nothing as they have just set foot in Vietnam.

SINGAPORE: The worst may not be over for Vietnam’s stock market, the world’s biggest decliner, as shares resumed declines after a computer breakdown halted trading for three days.

The benchmark VN Index fell 1.5% to 414.10, extending this year’s 55% retreat, after a government report showed prices jumped the most since at least 1992. Morgan Stanley said Vietnam was heading for a “currency crisis” and Fitch Ratings cut its outlook on the country’s debt rating.

The Ho Chi Minh City Stock Exchange fixed the computer error that interrupted the VN Index’s 17-day tumble, the longest streak since October 2003, according to a statement from the bourse on Thursday. The gauge tripled in value from the end of 2005 through 2007. The VN Index yesterday closed at its lowest since Aug 2, 2006.

“We’ll see a continuation of the selling,” said John Shrimpton, a director of fund manager Dragon Capital Group. “Inflation is one aspect causing the drop. The market was clearly overvalued.”

The VN Index, started in 2000, surged almost five-fold in the two years through its March 12, 2007 peak as the economy grew at the fastest pace in a decade and a government equity sale programme helped lure foreign and domestic investors.

Even after the tumble, Vietnamese stocks are not cheap enough to prompt Templeton Asset Management Ltd’s Mark Mobius to buy.

“It’s got a little way to go down still,” said Mobius, who oversees US$47bil in emerging-market equities at Templeton in Singapore. “If you’re going to go in there, you better think long term, otherwise you can get stuck with a very illiquid security.”

I've made an entry last month saying there is no point reviewing portfolio gains/losses too frequent on price basis, since it has down from last month, let me just report as it is, MUI is down from 23% gains to about 7%, so that my readers will not think I am running away. From next month onwards, I will not be reviewing by monthly basis but yearly basis.