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As we enter a new month (and a new quarter) David Rosenberg points out the mounting risks to equities as investors begin to price in very optimistic outcomes after a 70% rally in stocks. Attached are his 7 near-term risks to the market:

1) Last week’s bond auctions did not go well. It seems that Japan and China did not show much interest. The lack of bids was no better underscored than in the 7-year Treasury note auction where the median yield was 3.29% versus 3.05% a month earlier. April is a cruel month for the U.S. Treasury market, with 10-year yields rising in each of the past 4 Aprils and in 6 of the past 7, and by an average of 25 basis points. (As Alan Greenspan said on Bloomberg News last week, higher yields are “the canary in the mine”.)

2) That, in turn, could spook the equity market since another 25bps of upside pressure could then generate a fund-flow spiral as was the case in the summer of 2007 — 3.85% (where we are now) ostensibly is a trigger point for selling of mortgage bonds. As rates rise, homeowners are less likely to pay their mortgages early, which extends the life of the mortgage and that in turn encourages mortgage investors to neutralize the duration of their portfolios by selling T-bonds and notes. We have seen this happen before and while it will likely provide a nice buying opportunity given the deflationary headwinds the economy now faces, the prospect of a spasm in the Treasury market is worth considering. Every equity market correction in the past — 1987, 1994, 1998, 2000, and 2007 — was preceded by what turned out to be a brief but significant runup in yields. And, the more overvalued the equity market is, the more the downside risks if bonds begin to provide greater yield competition in the near-term. Jeffery Hirsch over at the Stock Trader’s Almanac is in today’s NYT predicting a 20-30% correction ahead. he notes the modest number of stocks hitting new 52-week highs with every new interim peak being reached by the overall market.

3) The leading indicators are all pointing to a slowdown, and this could show up in a critical data-release week in mid-April with retail sales on the 14th, industrial production on the 15th, and housing starts, as well as consumer sentiment, on the 16th. The broad money supply measures are contracting again as the Fed is no longer boosting its balance sheet at a time when both the money multiplier and money velocity are showing no signs of turning higher.

4) Greece will be put to the test in April when €15 billion of bonds have to be rolled over (through the end of May).

5) The Fed ceases to buy mortgage securities on Wednesday and this is happening at a time when mortgage rates have already climbed back above 5% and the housing market is showing signs of rolling over again. See Spike in Treasury Yields Jolts Mortgages on page C2 of today’s WSJ. There is also pressure from within the Fed (Plosser the latest) to soon begin to sell securities outright. One thing that is very likely on its way again is another 50bps hike on the discount rate — has anyone noticed the TED spread beginning to widen ahead of this? The banks, going forward, will not have easy access to the window and will have to rely on each other for funding.

6) April 15 looms as a critical day from a geopolitical standpoint. It is the day that the Treasury Department will issue its report concluding whether or not China is a currency manipulator. If it is viewed as such then trade sanctions are likely to ensue and very likely some bilateral tensions. This could be very good news for the bullion market (as well as the Bloomberg News report today stating that gold imports in India are surging right now — up six-fold from a year ago — as there are an expected 1 million marriages planned for April and May).

7) Speaking of geopolitical risks, President Obama has allowed U.S. relations with Israel to deteriorate to such an extent, and is handling the Iran nuclear situation with such a kid-gloves approach, that disturbing columns like this are now popping up in newspapers like the NYT, the National Post, and the WSJ. Even the prospect is enough to underpin the energy stocks, which are currently priced for $69/bbl on WTI.

When it comes to equity analysts Teun Draaisma is a must-read. The European equity analyst famously called for investors to sell stocks in June 2007 when the markets were flashing a “full house sell” signal. He then flipped bullish in November of 2008 as the markets were pricing in a much more severe situation than Draaisma saw unfolding.

He’s one of the few investors who actually got the downturn and the upturn correct and was able to connect the dots between cause and effect. In his latest strategy note Draaisma is saying the rally has gotten ahead of itself and that we’re due to for a correction as good news becomes bad news. In addition to being bearish about 2010 (see here), Draaisma says the better than expected growth in the near-term is putting more pressure on the Fed to raise rates and will lead to tightening measures sooner than most investors suspect:

“The rally since 5-February is nearing its end, we believe. Our thesis is that good growth will lead to tightening measures and struggling equity markets this year, just like in 1994 and 2004. The recent rally was larger than we expected, and in our eyes was due to:

1) there have been no positive payrolls or Fed language change yet (we even saw some loosening rather than tightening
measures last week, with the Greek bailout, the ECB keeping its wide collateral pool for longer and the Obama plan for troubled
mortgage borrowers).

2) sentiment had turned quite cautious in early February. Nevertheless, we do think the market peak associated with the start of tightening is near, and expect 2010 to show a volatile whipsaw pattern in equities. We expect good payrolls (April 2) and a Fed language change (April 30), some leading indicators are rolling over from multi-decade peaks (ECRI leading indicator for the US, OECD leading indicator for the world), and some sentiment surveys have turned more bullish.”

Draaisma believes the market will decline 11% in the next 3-6 months:

“The 3-6 month outlook: tactical caution. The last 12 months have been characterised by record stimulus and rising economic leading indicators. We think the next 6 months will be characterised by some stimulus withdrawal (as a reaction to good growth in Asia and US), and softening leading indicators. We reduced our equity exposure two months ago. We recommend selling into strength, and we think MSCI Europe will reach 1030 at some point later in 2010, down 11% from here.”

On a longer time horizon Draaisma says the markets remain entangled in a bear market and that investors should not be fooled by the cyclical bull within a secular bear:

“The multi-year outlook: the secular bear market that started in 2000 is not yet complete (pages 11-13). We believe the secular bear market is incomplete for a variety of reasons, including that banking crises and bailouts tend to precede debt crises; that the amount of debt has not been reduced yet (it only changed hands to the government); that equity valuations never reached end of bear market levels; and our historical analysis that equities tend to struggle for longer in the aftermath of secular bear markets. When the next earnings recession hits, perhaps in 2012, we expect equities to complete the bear market that started in 2000.”

Draaisma’s outlook isn’t exactly consensus, but then again, it never really has been. And that makes his research a breath of fresh air on Wall Street.

source HERE

Saya terpanggil untuk membuat artikel ini setelah mendapat idea daripada artikel Tom Dyson : How to build extraordinary wealth in the coming market chaos. Beliau mencadangkan strategi yang menarik yang mungkin kita dapat ambil iktibar. Strategi tersebut ialah

Dyson: Well, I still recommend keeping a large portion of your investment funds – say 70% or so – in the very safest things, like cash and the cash-like investments I mentioned earlier. Then I'd put about 25% into a basket of the safe dividend stocks that I've been recommending that pay an average of 9% or so. That leaves about 5% for speculating – short positions, small aggressive trades, and those kinds of things. Finally, I recommend a portion of your income from your dividend portfolio or your job go into blue chips. This can be as much or as little as you feel comfortable with… the most important thing is just to start building a position. And using this dividend strategy is the easiest and most inexpensive way I know to do it.

Disini, cadangan di atas dapat kita sesuaikan dengan suasana pelaburan negara kita, contohnya

70% - ASB (pulangan lebih 7%)
25% - Unit Amanah Public Mutual@CIMB (pulangan 9% - 20%)
5% - Saham BSKL (pulangan 10%-100%)

Bagaimana pula dengan simpanan KWSP?

Kita boleh gunakan strategi yang sama iaitu memperuntukkan jumlah pelaburan yang lebih tinggi ke atas pelaburan berisiko rendah. Contohnya, jika jumlah yang dibenarkan untuk kita membuat pelaburan dari simpanan KWSP ialah RM10,000 maka pecahan pelaburan adalah seperti berikut;

70% - ASW2020@ASD = RM7000
30% - Unit Amanah Public Mutual@CIMB = RM3000

Strategi ini mampu mengurangkan risiko kerugian dari segi jangka panjang terhadap wang simpanan KWSP yang dilaburkan apabila ekonomi negara dalam keadaan tidak menentu berbanding dengan memperuntukkan kesemuanya pada satu-satu unit amanah saja. Anda boleh semak kelayakan anda untuk mengeluarkan wang KWSP di http://www.kwsp.gov.my serta http://www.asnb.com.my






ASW2020


ASD

The Daily Crux: OK Tom, the last time we talked you recommended buying only the absolute safest companies because most stocks were too expensive. Well, they've become even more expensive now… But we just heard you're recommending blue-chip stocks to your readers.

Have you changed your mind? Are you bullish on stocks now?

Tom Dyson: Well, I can see why you'd think that, but the short answer is no – I haven't changed my mind.

I'm still quite bearish on stocks – but I have been recommending blue chips to my readers. This may sound counterintuitive, but I've got an interesting story that can help explain.

Earlier this month, I came across an unpublished memo from Sir John Templeton that just recently resurfaced. For those who don't know, Templeton was one of the original titans of Wall Street and the mutual fund industry. He passed away in 2008, but prior to his death, Templeton wrote a fascinating memo that basically was extremely pessimistic on the future of the U.S. and the whole world economy.

He had intended for the memo to be published, but it was lost after his passing until it was recently discovered in a filing cabinet.

In the memo, Templeton used phrases like "financial chaos," "the peak of prosperity is behind us," and "there have never been more dangers in my entire life than there are right now." I believe he lived into his 80s, so that statement goes back to the era of Great Depression.

So it was a bearish statement with a lot of gloomy predictions. And I thought it was interesting because not only were many of Templeton's predictions on target, but they also agree with much of what I've been telling my readers. So it really caught my attention.

Templeton saw big problems because there was just so much debt in our system – more than any other time in history. He also saw extreme overcapacity in almost every industry in the world. He thought this combination was a recipe for some very nasty problems.

He also predicted governments would aggressively try to bail out and fix these problems – especially the companies that made all these bad loans and held all these bad debts.

All that has happened is much like Templeton predicted in 2005 in this memo.

Another thing he talked about was that there's so much liquidity in the world that yields on money markets, bank accounts, cash investments, and bonds would be extremely low.

With the likelihood that governments would be printing money, bailing out, and basically devaluing their currencies, Templeton thought it would be almost impossible to protect oneself. He believed it would be very hard to find a safe place to keep money that offered a meaningful return.

Crux: That sounds a lot like what you've been saying in your 12% Letter…

Dyson: Absolutely. This is basically the same story that I've been telling my readers for months now.

And my approach has been to encourage my readers to invest in only the safest cash and cash-like investments, but I've had to work really hard to find cash-like investments that actually pay decent yields.

For instance, I've found some stocks that have huge cash balances, which basically makes them trade kind of like cash. They have very low volatility in their stock prices - even during 2008 these companies were rock solid and didn't see the big declines most of the market did.

Meanwhile, they pay solid yields. One I can think of pays an 8% dividend. Another pays a 4% dividend that's been rising every year and is likely to continue to rise.

So those were some of my favorite ideas to play what is likely to be a lot of financial chaos still to come.

Crux: Did Templeton have any thoughts on what might be safe? Did he provide any recommendations?

Dyson: He did, but they weren't what you might expect. His favorite investment to handle this financial chaos was not gold, not cash, not bonds. Templeton actually liked the stock market, which I found quite incredible.

But he didn't like just any stocks – in his memo he mentioned two specific characteristics.

He liked stocks with large profit margins that are likely to continue to have large profit margins, and stocks that sell their products to many different markets around the world.

I interpret that to mean that he thought the best place to be is in the very best quality blue-chip stocks. I would imagine he was talking about companies like Coca-Cola, Johnson & Johnson, Procter & Gamble, ExxonMobil, Intel, IBM, and Microsoft.

These are companies that have large profit margins, low debt, tons of cash, they're extremely well managed, and they do business all around the world with very entrenched market positions.

So that was something I found really interesting. This idea that in crisis, you want to have your money in stocks… it's something that not many people would think of naturally.

But I really like the idea. It offers a different approach to protecting your assets. You protect yourself from whatever shenanigans the government does with its currency, you protect yourself from bankruptcies and whatever crises hit the banks and the lending companies and the consumers, and you diversify yourself away from the USA – which may not be the epicenter of the crisis, but it's not far away.

So I really like the idea of owning blue-chip stocks, but I have major reservations about recommending them now.

As we're all aware, the stock market has risen substantially in the last year. It's been one of the best stock market rallies in history. And of course, blue-chip stocks have also risen a lot. In fact, readers who were with me during 2008 and early 2009 own many of the stocks I mentioned. We bought them in the heart of the crisis and we're showing fantastic gains on all of them.

But I see the potential for a significant short-term correction and maybe something more, so I'm not advising readers to take new positions in these stocks now. They've run up too much and are vulnerable to a pullback.

So where does that leave us? How can we get exposure to the stocks Templeton mentioned without putting our money at risk?

Fortunately, there's a way to do just that.

There's a dividend strategy that many investors aren't aware of that allows you to slowly build positions in the world's best blue-chip stocks.

Of course, you could just buy a few shares on a regular basis through your broker, but you'll end up spending a small fortune on commissions that'll eat up a big chunk of your potential return.

The great thing about this strategy is you can avoid the commissions and fees that you normally pay to buy these stocks. In fact, many times you can actually buy these stocks for less than the current market price. These savings can really add up over time.

So you're getting exposure to the best companies in the world. But you're building it slowly, so it's not as important that stocks are expensive today, and you're not at great risk from a big correction in the market.

In fact, corrections are actually a benefit with this strategy, because it allows you to take advantage of what's known as “dollar-cost averaging,” meaning you'll be lowering the average cost of the stock you own.

So over time you're able to build up enormous positions in companies like Templeton recommended – with fantastic profit margins that raise their dividends every single year, and have done so for decades and will continue for decades.

Obviously, this only works if you're a long-term investor. But it's one of the best ways to take advantage of the compounding effect of dividends, and is probably the surest way to build a fortune in stocks.

Templeton expected this financial crisis to last many years. Because of the nature of this strategy, you're likely to come out on the other side of these problems with a big portfolio of the best stocks in the world, without putting this money at undue risk.

Crux: That sounds great, but how does it fit in with your other recommendations?

Dyson: Well, I still recommend keeping a large portion of your investment funds – say 70% or so – in the very safest things, like cash and the cash-like investments I mentioned earlier.

Then I'd put about 25% into a basket of the safe dividend stocks that I've been recommending that pay an average of 9% or so.

That leaves about 5% for speculating – short positions, small aggressive trades, and those kinds of things.

Finally, I recommend a portion of your income from your dividend portfolio or your job go into blue chips. This can be as much or as little as you feel comfortable with… the most important thing is just to start building a position. And using this dividend strategy is the easiest and most inexpensive way I know to do it.

Crux: Sounds good, Tom. Thanks for talking with us.

Dyson: Thank you. My pleasure.

source Email.

Is war just around the corner? While in theory it would make perfect sense to distract Americans from the long road to US insolvency, and other more pressing issues such as the endless criminality all around us, in practice we have so far heard merely rumors.

The Herald of Scotland, however, may have credible proof that a US-led attack on Iran approaches and could be just days away. The newspaper has procured proof of an arms shipment to Diego Garcia, which consists of "of 195 smart, guided, Blu-110 bombs and 192 massive 2000lb Blu-117 bombs...put in place for an assault on Iran’s controversial nuclear facilities."

Additional insight comes from Dan Plesch, director of the Centre for International Studies and Diplomacy at the University of London: “They are gearing up totally for the destruction of Iran. US bombers are ready today to destroy 10,000 targets in Iran in a few hours." Is war imminent?

And will Obama repeat Bush's mistake with Iraq, resulting in a huge spike in oil, coupled with a rush to safety in dollars and/or gold? If inflation will not start on its own, its has to be kindled: preferably by a Blu-117 bomb. Is the relatively long period of market stability and low volatility about to come to a sudden end?

More from the Herald:

Hundreds of powerful US “bunker-buster” bombs are being shipped from California to the British island of Diego Garcia in the Indian Ocean in preparation for a possible attack on Iran.

The Sunday Herald can reveal that the US government signed a contract in January to transport 10 ammunition containers to the island. According to a cargo manifest from the US navy, this included 387 “Blu” bombs used for blasting hardened or underground structures.

Experts say that they are being put in place for an assault on Iran’s controversial nuclear facilities. There has long been speculation that the US military is preparing for such an attack, should diplomacy fail to persuade Iran not to make nuclear weapons.

Although Diego Garcia is part of the British Indian Ocean Territory, it is used by the US as a military base under an agreement made in 1971. The agreement led to 2,000 native islanders being forcibly evicted to the Seychelles and Mauritius.

The Sunday Herald reported in 2007 that stealth bomber hangers on the island were being equipped to take bunker-buster bombs.

And it gets worse, when one considers the eerie similarities with Operation Desert [blank]. We all know how that whole fiasco ended.

Contract details for the shipment to Diego Garcia were posted on an international tenders’ website by the US navy.

A shipping company based in Florida, Superior Maritime Services, will be paid $699,500 to carry many thousands of military items from Concord, California, to Diego Garcia.

Crucially, the cargo includes 195 smart, guided, Blu-110 bombs and 192 massive 2000lb Blu-117 bombs.

“They are gearing up totally for the destruction of Iran,” said Dan Plesch, director of the Centre for International Studies and Diplomacy at the University of London, co-author of a recent study on US preparations for an attack on Iran. “US bombers are ready today to destroy 10,000 targets in Iran in a few hours,” he added.

The preparations were being made by the US military, but it would be up to President Obama to make the final decision. He may decide that it would be better for the US to act instead of Israel, Plesch argued.

“The US is not publicising the scale of these preparations to deter Iran, tending to make confrontation more likely,” he added. “The US ... is using its forces as part of an overall strategy of shaping Iran’s actions.”

According to Ian Davis, director of the new independent thinktank, Nato Watch, the shipment to Diego Garcia is a major concern. “We would urge the US to clarify its intentions for these weapons, and the Foreign Office to clarify its attitude to the use of Diego Garcia for an attack on Iran,” he said.

For Alan Mackinnon, chair of Scottish CND, the revelation was “extremely worrying”. He stated: “It is clear that the US government continues to beat the drums of war over Iran, most recently in the statements of Secretary of State, Hillary Clinton.

“It is depressingly similar to the rhetoric we heard prior to the war in Iraq in 2003.”

The British Ministry of Defence has said in the past that the US government would need permission to use Diego Garcia for offensive action. It has already been used for strikes against Iraq during the 1991 and 2003 Gulf wars.

We are confident that the administration's diplomatic core is wildly spinning in advance of a possible incursion, and fully expect that Tehran will be exposed as a poison nest full of dirty, smelly CDS speculators who have been controlling the spreads on global credits ever since the late 70's, about the time Iran ceased being a most favored nation (forget that CDS did not come to the scene until the late 90's, at least Ollie North may get a cameo appearance as head CDS Novator). At worst, the Administration will coin a new term for the incursion's target, recycled appropriately from none other than the Oracle of Omaha: Weapons Of Mass CDS-based Destruction and Other Types of Mass Destruction that Speculators Do Good Too.

source HERE