History & Current

Possible future KLCI Chart 2010-2012


1 = 800
2 = 1500
3 = 600
4 = 900
5 = 500

or ????


1 = 1300
2 = 300
3 = 1500
4 = 800
5 = 1700

or this ???

a = 800
b = 1500
c = 1100
d = 1500
e = 1400

We will see soon which chart that would be selected by 1Malaysia.

Posted by Mr Thx Sunday, October 25, 2009 0 comments

Our stock markets are now well into 60% rally territory. Which begs the question: how does this rally stack up with previous ones based on such arcane concepts as economic fundamentals. We present some of the key criteria of how previous 60% rallies have looked like when analyzed across 10 different key economic dimensions (which are completely irrelevant now). Data courtesy of Contrary Investor.

  • Year over Year Retail Sales: 9.3% average in prior 60% rallies versus -5.3% in the current one
  • Consumer Confidence: 95.5 average; 53.1 now
  • Capacity Utilization: 79.9% average; 66.6% now
  • Year over Year Industrial Production: 4.1% avereage; -10.7% now
  • ISM: 53.9 average; 52.6 now
  • Payroll employment gains over period: 2.2% average; -2.0% now
  • Decline in continued unemployment claims from cycle peak: -26.3 average; -11.6% now
  • Year over Year growth in total credit market debt: 9.3% average; 3.0% now
  • Year over Year growth in household debt: 8.8% average; -0.1% now
  • P/E Multiple: 16.8x average; 20.0x now

With the exception of ISM, this 60% rally is completely nonsensical. On 9 out of the key 10 economic dimensions we are cruising purely on hope and on expectations that Uncle Sam will continue printing trillions of dollars simply to get us out of this mess. Or not even that, but merely the excess hundreds of billions in liquidity courtesy of Ben Bernanke, are following the path of least resistance straight to equities. Whatever the reason, the current rally, at least when juxtaposed with previous ones, is a complete sham. Anyone who believes there is any ounce of economic fundamental credibility to it needs to take a careful look at the data. Unfortunately, all will be happy to be blissfully ignorant until, as always, it is too late.


Posted by Mr Thx Tuesday, October 20, 2009 0 comments

By Nico Isaac
Mon, 19 Oct 2009 18:00:00 ET

Once upon a time, the term "Black Monday" was to Wall Street what the name "Lord Voldemort" was to Hogwarts. It turned the air freezing cold and sent traders flinching around every corner in fear of a repeat of the October 19, 1987 or October 28, 1929 meltdown.
Case in point: The 2008 "Black Monday" anniversary. At the time, the U.S. stock market was locked in a ferocious downtrend that included regular, triple-digit daily declines of 400 points and more. Needless to say, when the final two Mondays of October arrived, the least superstitious investors surrounded their portfolios with more good-luck talismans than a Bingo player. See October 19, 2008 AP headline below:
"Black Monday: Stocks Sink As Gloom Seizes Wall Street. Prolonged Economic Turmoil" is seen.
That was then. Today, the usual dread surrounding the back-to-back string of "Black Mondays" is nowhere to be found. In its place, media reports abound of a new, global bull market "shrugging off," "ignoring," and "making a distant memory" of the event.
For one, "gloom" hasn't "seized" the U.S. stock market in quite a while; from its March 2009 low, the Dow has risen more than 50% to above the psychologically important 10,000 level. For another, the mainstream experts insist that today's financial animal is unrecognizable to that of 1987, and especially 1929. In their eyes, it's a completely different -- i.e. safer, smarter, and sounder system.
We beg to differ.
(A "Serious Event" Ahead: In the brand-new October 19 Elliott Wave Theorist, Bob Prechter reveals several reasons why the U.S. stock market is primed for a major move. Act now for the full story.)
See, while the usual experts want to put as much mental distance between today's market and those that facilitated the 1987 recession and 1929-1932 Great Depression -- the physical similarities are impossible to ignore; more so, in fact, to the latter scenario.
Here, the October 2009 Elliott Wave Financial Forecast presents the following news clip from the October 25, 1929 New York Daily Investment News.

Now, take a look at these headlines from the week of October 12-17, 2009:
"The Great Recession Is Over." (Reuters) --- "80% of Economists Say The Worst Is Behind Us." (CNN Money) --- "The Bull Is Back" (AP) --- "The Economic Recovery Is Well Underway" (Wall Street Journal)
They're interchangeable -- Eighty years later.
Along with a similar extreme in bullish sentiment, the performance of stocks between now and the 1929 situation is cut from the same cloth. After an initial plunge from August 1929 through late October 1929, the US stock market enjoyed a powerful rally well into the following year. NOW: After a steep freefall from its October 2007 peak, the US stock market is once again enjoying the fruits of a powerful rally back to new highs for the year.
Also, on closer examination, the October 19 Elliott Wave Theorist (EWT, for short) uncovers an even deeper parallel between the 2009 rally and the 1929-30 one. Here, EWT presents the following snapshot of the Dow during the Depression-era advance:

As Bob Prechter points out -- in 1930, stocks rallied to the level of the preceding year's gap. Bob then reveals that the same level has been reached now.
So, we all know how the 1930 rally ended. The question is whether the 2009 advance will experience the same fate. As Bob explains in the Theorist, the only way to know for certain is to "look at the reality of the situation."


Posted by Mr Thx 0 comments

When prices in a financial market go from Sea Level to Outer Space in a relatively brief time, two scenarios are at work -- and they both start with the letters “B-U.”
When a precious metal goes from being a popular long-term investment of buy-and-holders to the quick, get-away “vehicle” of day-traders, two scenarios are at work -- and they both start with letters “B-U.”
And when the majority of mainstream pundits see a "new paradigm" in which prices continue to rise indefinitely, two scenarios are at work – and, you guessed it, they both start with the letters “B-U.”
Enter: the recent Gold Rush of 2009, when ALL of the above conditions apply. Everyone from hedge funds to housewives now hustle to hitch their asset wagon to the rising gold star. Which begs this question: Which of the possible two scenarios are at work: B-U-ll
--- Or B-U-bble?
Here’s the difference: A genuine bull market is driven by a self-sustaining internal dynamic that's reflected by a host of technical indicators. A Bubble, on the other hand, is the result of untenable psychology that could shift at any moment and bring prices plummeting down.
It goes without saying into which category the mainstream experts put Gold: namely, a new bull market that has years, if not decades more to soar. “Gold Will Hit $2,000 an ounce,” reads an October 8 Market Watch. And -- “Gold Has More Upside… The metal’s bull run is just getting started,” adds a same day Barron’s.
(Is Gold A Safe Haven? The current Financial Forecast Service takes the precious metal rally apart piece by piece to see whether a genuine bull exists underneath. Get the entire story today, absolutely risk-free)
I found hundreds of news items which agree about the long-term potential for gold’s uptrend. But not a single one could tell me why the rally would continue, other than because the experts say so.
To know whether a diamond is real, it must cut glass. And, to know whether the bull market in gold is real, it must encompass at least one of these FOUR traits:
  1. A surge in demand that outpaces supply
  2. A falling stock market, which raises the “safe haven” appeal of precious metals.
  3. A real (not imagined) threat of inflation
  4. An increase in value relative to major foreign currencies
Right now, the Gold market can NOT check off a single one of these items. Case in point:
Supply: Demand for gold from jewelry makers – which comprises 60%-70% of the market – has plummeted to its lowest level in 20 years.
“Safe haven” appeal: From its March 2009 bottom, the U.S. stock market has soared 50% right alongside rallying gold prices.
Inflation: As the October 2009 Elliott Wave Financial Forecast (EWFF) notes: An increase in money supply is only inflationary if it is used to RAISE the total amount of credit. This is NOT happening, as both bank credit and consumer credit levels are contracting for the first time since World War II.
A gold rally in other currencies: Again, the October 2009 EWFFpresents the following close-up of Spot Gold prices VERSUS Gold denominated in foreign currencies such as the Canadian dollar, the Australian dollar, the euro, franc, pound, and yen since 2007.

The major non-confirmation between these two markets is clear, as is the overlying message: IF demand for gold truly outweighed supply, then its value as measured in other currencies would increase.
The rise in gold is primarily the result of speculation and a falling U.S. dollar. These are exactly the “untenable” forces that contribute to a Bubble, not a genuine Bull market. The difference is only a matter of time.


Posted by Mr Thx Tuesday, October 13, 2009 0 comments

* Middle East: Thursday, July 03 - 2008 at 13:13

In the middle of June UK gilts had their biggest sell-off for years as markets digested the thought of what higher interest rates to tackle inflation might mean for bond prices. Inflation is bad news for bonds. Inflation tends to push up interest rates so fixed interest rate instruments decline in value. In the Gulf that means sukuks.

Sukuks have become very popular in the region, combining the ethical appeal of Islamic banking with exposure to local currencies which are thought likely to revalue upwards.

And international banks have rushed to join the sukuk issuance bandwagon over the past couple of years, sometimes displacing the local banks, even the Islamic ones.

Investors have, from time to time, wondered about the return on offer from sukuks. Earning 2.5% above Eibor on sukuk from the Dubai Electricity and Water Authority does not look like a great return: 4.5% 'profit' as interest on sukuk is termed, despite the geopolitical risk of the Gulf, is not a great deal.

Indeed, with UAE inflation above 10% - some say as high as 20% this year - this is a negative real rate of return on this investment. A few years of inflation roaring at this kind of level and your sukuk is going to be worth a lot less in real terms than you paid for it.

Likely Eibor rise

It gets worse when you think Eibor is likely to rise eventually to combat inflation. Admittedly because of the dollar peg this will be dictated by the policy decisions of the Federal Reserve in the US and not the local Central Bank.

But eventually the US economy will recover sufficiently from recession to allow the authorities to tackle inflation by raising interest rates from their present very low 2% level.

Then Eibor will go up and the price of sukuks, with their fixed margins above Eibor will fall in value. All the local sukuk are listed, so the price falls will be clearly visible on the big board of the Dubai Financial Market or Dubai International Financial Exchange.

Really sukuks are no more or less than US treasury-related corporate bonds tailored to an Islamic format. So if inflation and high interest rates make life tough for T-bonds then it is also going to be equally tough for the sukuk market.

Disastrous bond investment

The celebrated analyst Dr Marc Faber has written many times that he thinks 30-year treasury bonds may turn out to be a historically bad buy and, for what is supposed to be an ultra-safe investment class, prove to be a disastrous investment.

Of course nobody can be quite sure what the Fed has planned. Probably even chairman Ben Bernanke is not working to a fixed plan. It could be that the US recession proves to be longer and more intractable than anybody thinks and he is forced to keep interest rates very low despite problems of imported inflation from commodities.

Then sukuk may retain investor appeal as a defensive alternative to cash paying low deposit rates. But if interest rates go up, then sukuk values will go down.


Posted by Mr Thx Tuesday, October 6, 2009 0 comments
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Sekapur Sirih Seulas Pinang

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