By: Julie Crawshaw

Economist John Hussman says stocks are seriously overvalued and that they are poised for a painful correction.

Hussman says that, at current valuations, the S&P 500 is priced to deliver a total return of only about 5.7 percent annually over the coming decade.

But, because stocks are seriously overvalued now, returns will probably be 2.97 percent once the market corrects itself.

"Wholly on the basis of current valuations, stocks are priced to deliver unsatisfactory returns in the coming years — a situation that is worsened by strenuous overbought conditions and upward yield pressures here," Hussman writes in a note to investors.

“This outcome is not dependent on whether or not we observe a second set of credit strains, but is instead baked into the cake as a predictable result of prevailing valuations. The risk of further credit strains simply adds an additional layer of concern here.”

Investors, Hussman notes, have chased risky securities during the past year to the point where the risk premium for default risk has eroded to the levels at the peak of the credit bubble in 2007.

“My sense is that this is a mistake that will be painfully corrected,” Hussman notes.

“Investors now rely on a sustained economic recovery and the absence of any additional credit strains — and even then would be likely to achieve only tepid long-term returns from these levels.”

At today's level, about 1,210 on the S&P, stocks are trading at a cyclically adjusted price/earnings ratio that’s about 30 above the long-term average, says Business Insider CEO Henry Blodgett.

“We've just descended from the longest period of extreme overvaluation in history, suggesting … that the next multi-decade cycle is likely to be below average,” Blodgett says.

source HERE

Posted by Mr Thx Friday, April 23, 2010 0 comments

Today, I would again like to focus on words of investment wisdom that are timeless and especially appropriate as investors grapple with the difficult juncture at which stock markets find themselves at this stage.

Wall Street “gurus” come and go, but in the case of Bob Farrell legendary status was achieved. He spent several decades as chief stock market analyst at Merrill Lynch & Co. and had a front-row seat at the go-go markets of the late 1960s, mid-1980s and late 1990s, the brutal bear market of 1973-74, and the October 1987 crash.

Farrell retired in 1992, but his famous “10 Market Rules to Remember” have lived on and are summarized below, courtesy of The Big Picture (August 2008) and MarketWatch (June 2008).

1. Markets tend to return to the mean over time
When stocks go too far in one direction, they come back. Euphoria and pessimism can cloud people’s heads. It’s easy to get caught up in the heat of the moment and lose perspective.

2. Excesses in one direction will lead to an excess in the opposite direction
Think of the market baseline as attached to a rubber string. Any action too far in one direction not only brings you back to the baseline, but also leads to an overshoot in the opposite direction.

3. There are no new eras – excesses are never permanent
Whatever the latest hot sector is, it eventually overheats, mean reverts, and then overshoots. Look at how far the emerging markets and BRIC nations ran over the six years prior to the crisis, only to plunge by more than 60%.

As the fever builds, a chorus of “this time it’s different” will be heard, even if those exact words are never used. And of course, it – human nature – is never different.

4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
Regardless of how hot a sector is, don’t expect a plateau to work off the excesses. Profits are locked in by selling, and that invariably leads to a significant correction eventually.

5. The public buys the most at the top and the least at the bottom
That’s why contrarian-minded investors can make good money if they follow the sentiment indicators and have good timing. Watch Investors Intelligence (measuring the mood of more than 100 investment newsletter writers) and the American Association of Individual Investors Survey.

6. Fear and greed are stronger than long-term resolve
Investors can be their own worst enemy, particularly when emotions take hold. Gains “make us exuberant; they enhance well-being and promote optimism”, says Santa Clara University finance professor Meir Statman. His studies of investor behavior show that “Losses bring sadness, disgust, fear, regret. Fear increases the sense of risk and some react by shunning stocks.”

7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names
This is why breadth and volume are so important. Think of it as strength in numbers. Broad momentum is hard to stop, Farrell observes. Watch for when momentum channels into a small number of stocks.

8. Bear markets have three stages – sharp down, reflexive rebound and a drawn-out fundamental downtrend
I would suggest that the reflexive rebound is nearing maturity. We have yet to see the long-drawn-out fundamental portion of the bear market.

9. When all the experts and forecasts agree – something else is going to happen
As Stovall, the S&P investment strategist, puts it: “If everybody’s optimistic, who is left to buy? If everybody’s pessimistic, who’s left to sell?”

Going against the herd, as Farrell repeatedly suggests, can be very profitable, especially for patient buyers who raise cash from frothy markets and reinvest it when sentiment is darkest.

10. Bull markets are more fun than bear markets
Especially if you are long only or mandated to be fully invested. Those with more flexible charters might squeak out a smile or two here and there.

source HERE

Posted by Mr Thx 0 comments

Malaysia’s exports have been paralysed by the “nightmare” chaos caused by the European volcanic ash cloud and would hurt the nation’s economic recovery, a hauliers’ spokesman said today.

Southeast Asia’s third largest economy, which relies heavily on exports, is tentatively emerging from the global downturn as global trade picks up.

But Walter Culas, chairman of the airfreight forwarders association of Malaysia, told AFP that with the ash cloud forcing the closure of European airspace for almost a week hundreds of tonnes of cargo are not being delivered.

“As of today about 400 tonnes of cargo are stranded at the airport. The volcanic ash has paralysed valuable cargo movement to Europe from Malaysia,” he said. “The total losses could snowball to billions of ringgit,” Culas said.

He added that a sizeable portion of the cargo holed up were electrical and electronics products, which as a sector contributes significantly to the economy in terms of export earnings, manufacturing output and employment.

“The stranded cargo will hurt the Malaysian economy which is coming out of a recession. We just came out of a steep hill and run into a ditch,” he said.

Mukhriz Mahathir, deputy minister of international trade and industry said the government would try to find a quick solution to resolve the backlog cargo.

Culas described the shutdown across Europe as “my worst logistic nightmare in my 39-year career as a haulier”. “Most of the logistics hubbing for global trade are based in Europe — London, Paris, Frankfrut and Amsterdam. The airtraffic shutdown has crippled the logistics industry,” he said.

He hit out at Malaysia Airlines Cargo (MASkargo), the air cargo subsidiary of Malaysia Airlines, for a lack of leadership in dealing the crisis.

“MASkargo, the terminal operator which handles cargo to Europe has not communicated with hauliers. The situation is worsening by day with no solution in sight. The terminal operator is not providing any leadership,” he said.

Culas said some urgent goods were transported to Singapore by road Tuesday before being flown to Lisbon — which has avoided the ash cloud — and then driven to their final destination.

However, Culas said it could take up to a month to clear the backlog of cargo. -- AFP

source HERE

Posted by Mr Thx Wednesday, April 21, 2010 0 comments

KUCHING, April 20 (Bernama) -- Permodalan Nasional Bhd and CIMB Bank on Tuesday unveiled CIMB Clicks Amanah Saham Nasional Bhd (ASNB) Funds Top Up Facility at the 11th Minggu Saham Amanah Malaysia (MSAM) here.

The online facility allows all registered ASNB investors, who have a CIMB Clicks account to make additional investments in five fixed-price unit trust funds managed by ASNB.

The five funds are Amanah Saham Bumiputera (ASB), Amanah Saham Malaysia (ASM), Amanah Saham Didik (ASD), Amanah Saham Wawasan 2020 (ASW2020) and Amanah Saham 1Malaysia (AS 1Malaysia).

"As the ASNB funds are very well received by the public, including many of CIMB customers. The bank feels that it can provide more value-added services to its customers by offering hassle-free online investment top up facility," PNB President and Group Chief Executive Tan Sri Hamad Kama Piah Che Othman said at the launch here.

Deputy Prime Minister Tan Sri Muhyiddin Yasin officiated the launch, after the official opening of the 11th Minggu Saham Amanah Malaysia.

To enjoy the online service, ASNB investors just need to register with CIMB Clicks and have active ASB, ASM, ASD, ASW2020 and AS1M membership numbers.

Hamad said third party top up is also accepted under this service, thus allowing family members or guardians to invest for their loved one.

Minimum investment through CIMB Clicks is RM1 and the maximum is subject to the investors' purchase limit and funds available in the customer's accounts.

He said a service fee of RM1 will be charged for every transaction regardless of the amount.

However, unit holders may only update their passbook at all ASNB offices, CIMB Bank, RHB Bank, Maybank and Pos Malaysia branches nationwide the next working day after the validation is done.

All transactions performed on Saturday, Sunday and Public holiday will be processed on the next working day.

The online facility also available at Maybank2u, he added.


source HERE

Posted by Mr Thx 0 comments

"Be fearful when others are greedy, and be greedy when others are fearful."

– Legendary investor Warren Buffett, one of the world's richest men

Now, my friend, is a time to be fearful.
It is the opposite of a year ago. Back then, it was time to be greedy – and we were...
Almost exactly a year ago in DailyWealth, I wrote an extremely bullish story, called "The Great Rally Before the Great Inflation."

At that time, investors were downright scared. But I said stocks would have one of the greatest bull runs in history. What I wrote turned out to be exactly right. But today, things have changed...

I believe we're near the end of that great bull run. Take a look at what I wrote a year ago for perspective... then let me share with you where I think we are now.
From DailyWealth, April 24, 2009:

Stocks could rise dramatically over the next 18 months or so. I believe stocks could have one of the greatest bear market rallies in history.
...The market is telling us the bill for the government spending isn't due yet. Risk is subsiding... And the recession will possibly end sooner than anyone thought.
...I spent the last two issues of my newsletter, True Wealth, recommending speculative positions in stocks good for 12 to 18 months. I expect we'll see rallies of 50% in all the things I've recommended.
...What we're seeing now will turn out to be one of the greatest bear-market rallies in history. I know the bill for the government spending will come due some day. But for now, as long as Bernanke is juicing the economy and keeping interest rates at zero, stocks can run. Take advantage of it.

We took full advantage of that opportunity in my newsletter, staying invested for a very long time – even after the market had soared by record amounts. But times are totally different now...
Since the March 2009 lows, U.S. stocks have nearly doubled. The price of oil is up over 100%. The price of copper is up over 100%. The list goes on.

It's just gotten silly. And NOW investors are ridiculously optimistic... AFTER the 100% gain.
Folks, the time to buy was BEFORE the 100% gain!
In March 2009, investor sentiment was at an extreme of pessimism. THAT was the time to buy.

To put specific numbers on it, "Dumb Money" confidence, as measured by my friend Jason Goepfert of SentimenTrader, hit a low extreme of 21 in March 2009. Today, it sits at 75 – it hasn't been higher than that in years.

After weeks and weeks of a "safe" bull market, investors are downright greedy these days.
Don't fall for it.
To succeed in investing, you must do what Warren Buffett advises: "Be fearful when others are greedy, and be greedy when others are fearful."

source HERE

Posted by Mr Thx Tuesday, April 20, 2010 0 comments

UBS called the bottom of the recent downturn to the exact day on February 9th (see here). They’ve been bullish since then, but are now warning of extreme risks in the market. According to their Risk Appetite Indicator, risks are surging as the market advances and investors turn increasingly complacent:

“Our Risk Appetite Indicator edged higher last week, moving up to 1.21 from 1.15. After briefly dipping into negative territory in early February, the indicator has risen 5 out of the last 6 weeks (with one week unchanged) and is nearing the +1.30 level, which we define as extreme risk seeking territory. Last week, each component ticked marginally higher as the MSCI AC World index was up 1.9%.”

Their index has proven quite timely. Based on UBS data going back over a decade the market’s have returned about 1% over the following 12 months after a “sell signal”. 12 month returns following a “buy” signal were over 6%.

“When the index is greater than +1.3 standard deviations from its mean, the index is showing investors are very willing to take risk, which is when historically the index has given its best “sell signal”. Equity returns 12 months on from such high risk appetite are typically very poor, just 1% on average.”

source HERE

Posted by Mr Thx Sunday, April 11, 2010 0 comments has disclosed something interesting. According to the Greek website, an account, allegedly a large US bank, has been dumping, in what it classified as "panic selling", its holdings of a 10 Year GGB maturing on April 20, 2010, or in 11 days. What is unclear is whether the bank has been trading for its own account or for a client. What is clear, is that the seller is certainly not too convinced that the bond will see a repayment of principal when it matures, in other words believes that Greece will go bankrupt before April 20th.

From the source:

It is clear that this move is panic.

The seller believes that in the next 11 days Greece will go bankrupt, there will be default or anything else to sell a bond expires in 11 days.

Who sold under a sign is a large U.S. bank.

The only thing that has not been established is sold on behalf of a client or on their own behalf?

Both are negative developments ...

We did some snooping of our own and uncovered one bond issue that is due on April 20, however it is a 5 Year, not a 10 Year as claims. The 5 Year bond in question is a €8.22 billion in size, issued at 100.037, and was trading at 99.9008x99.9058.

continue HERE

Posted by Mr Thx 0 comments

Robert Prechter of Elliott Wave International thinks between now and May is the 3rd best selling opportunity to sell stocks over the past 10 years. First in 2000, second in late 2007 and third "between now and a few weeks from now". What do you think, will there be a third wave down from the 2007 peak (Wave C)? Prechter thinks we're in for another deflationary episode, even after the trillion in stimulus.

"I think you can short just about everything, somewhere between now and May we're going to have a real rollover. Think about this progression. In October the bond market topped out. In November the Dollar bottomed. In December Gold and Silver and the utilities average, go figure that one, topped out. In January the CRB Index of commodities topped out. The US stock market is the last domino holding up. The best trade on the board, the one I've been bullish on for the past six months has been the US Dollar....."

source HERE

Posted by Mr Thx Wednesday, April 7, 2010 2 comments
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Sekapur Sirih Seulas Pinang

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