1st Quarter Window Dressing

KLCI Daily Chart

Looks like KLCI is going to be moving between 830-930. My analysis after March 27, 2009 shows that the plantation sector will be the strongest sector:

Malaysia	Longterm	Midterm	Shorterm
KLCI	Down	Down	Neutral
Finance	Down	Down	Neutral (+)
Construction	Down	Neutral (+)	Up (+)
Plantation	Down	Neutral	Up (+)
Property	Down	Down	Neutral (+)
Mesdaq	Down	Down	Neutral (+)
2nd Board	Down	Down	Neutral (+)

For the rest of the world, Asian markets are stronger than Europe while US market continues to rebound. However, current upward movement, based on my opinion is not strong. This movement could be the 1st quarter window dressing. So, at any time, everything can come down quickly.

World	Longterm	Midterm	Shorterm
S&P500	Down	Neutral (+)	Neutral
DJI	Down	Neutral (+)	Neutral
NasdaqComp	Down	Neutral (+)	Up (+)
Nikkei 225	Down	Neutral (+)	Up (+)
Kospi	Down	Neutral	Up
SSECI	Down	Up (+)	Up
HSI	Down	Neutral (+)	Up (+)
TWII	Down	Neutral	Up
STI	Down	Neutral (+)	Up (+)
SENSEX	Down	Neutral (+)	Up (+)
FTSE	Down	Down	Neutral
DAX	Down	Down	Neutral

Coming back to KLSE, the following warrants should be monitored closely as they are in the money and the mother share may move up some more:
AMMB-CC, AMMB-CD, IOICorp-CJ, KLK-CH, Sime-CF, Sime-CG.

The Quiet Coup

An interesting article from the Atlantic:

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

Scenes from the recession

Photos on the effect of the financial crisis around the world. 

The Geithner Toxic Plan

What I have read from the blogs, such as from Mish, it seems that Geithner's plan will work if the taxpayer don't mind getting screwed. 

Anyhow, what we are seeing now is that stocks are rallying up. The bears are in hiding, waiting for the next strike when the plan eventually fails. The question is how long will the stocks keep going up? With this latest event, it seems that KLSE may be making a tripple bottom, thus invalidating the rising wedge interpretation. If this is a triple bottom, KLCI may go to 950-1000 region. I see this as a good shorterm trade for 1-2 months. We still need to remember that the month of May may be the start of another bear move. Stocks have move up very fast. The plan is to wait for a pullback, that is when the contra players take their profit, to enter. 

AMMB

AMMB Daily Chart

AMMB may have broken out from a symmetrical triangle. Looks like there is a rising channel. Will it become a rising flag eventually? Upper channel is at around 3.00. The downtrend line is at around 3.20. I think that AMMB-CC is a good vehicle to ride this if I can get a good entry position.

Weekly Analysis

KLCI Daily Chart

KLCI shows a rebound in progress. If it can go above 880, then the rising wedge formation may be invalid. If the rising wedge formation is invalid, it could mean that KLCI is trap within the trading range 830-930. Situation keeps changing, with the higher probability of breaking 800.

Looking at the various sectors in KLSE:

Malaysia	Longterm	Midterm	Shorterm
KLCI	Down	Down	Neutral (+)
Finance	Down	Down	Down
Construction	Down	Down	Neutral (+)
Plantation	Down	Neutral	Neutral
Property	Down	Down	Down
Mesdaq	Down	Down	Down
2nd Board	Down	Down	Down

Pay attention to the plantation sector. It may stage a rally if the cpo breaks above RM2,000. Is commodity price going to improve in this recession climate? Logically, I don't think so. But we cannot say on what the irrational traders will do. Anyhow, IOICorp and KLK CW can be a good play if the rally happens.

Looking at worldwide markets:

World	Longterm	Midterm	Shorterm
S&P500	Down	Down	Neutral
DJI	Down	Down	Neutral
NasdaqComp	Down	Down	Neutral
Nikkei 225	Down	Down	Neutral
Kospi	Down	Neutral (+)	Up (+)
SSECI	Down	Neutral	Up (+)
HSI	Down	Down	Neutral
TWII	Down	Neutral	Up
STI	Down	Down	Neutral
SENSEX	Down	Down	Neutral
FTSE	Down	Down	Neutral
DAX	Down	Down	Neutral

I'm not sure yet whether the market will plunge when the new toxic plan is unveil next week.

The Obama Deception

I always like conspiracy stories. The X-files contains lots of conspiracy. This is why it is one of my favorite. Now we have the Obama conspiracy! Enjoy.

Downward Spiral

Looks like everything (stocks and politics) is going into a downward spiral again. Hopefully the recession does not turn into a severe one. The 2nd stimulus package has been announced. From my view, I think it is better not to have one. This is because the money is mostly going to be squandered away. The government will overpay for everything. Most probably the rakyat will be left with crumbs. It is better for the government to give food directly to family in need. Make sure that every poor child do not go hungry. Anyway, since the stimulus lack any other details, it's better for me not to comment too much. I only want to say that my perception of the government is so bad that I don't trust any cabinet minister or those in power.

Looking at KLCI chart, we are on the way of testing 800 and if it breaks, 600 will be the next potential target. The daily chart indicates an oversold condition. A rebound is expected but in a strong directional market, the rebound can be very brief and the oversold condition can persist for a very long time.

KLCI Weekly Chart

Looking at my sector analysis, only the plantation sector that is still holding:

Malaysia	Longterm	Midterm	Shorterm
KLCI	Down	Down	Down
Finance	Down	Down	Down
Construction	Down	Down	Down
Plantation	Down	Neutral	Neutral
Property	Down	Down	Down
Mesdaq	Down	Down	Down
2nd Board	Down	Down	Down

For the rest of the world, almost all experience a strong rebound:

World	Longterm	Midterm	Shorterm
S&P500	Down	Down	Neutral (+)
DJI	Down	Down	Neutral (+)
NasdaqComp	Down	Down	Neutral (+)
Nikkei 225	Down	Down	Neutral (+)
Kospi	Down	Down	Neutral (+)
SSECI	Down	Neutral	Neutral
HSI	Down	Down	Neutral (+)
TWII	Down	Neutral	Up
STI	Down	Down	Neutral (+)
SENSEX	Down	Down	Neutral (+)
FTSE	Down	Down	Neutral (+)
DAX	Down	Down	Neutral (+)

Everyone is still looking for a bottom. My chart indicates that another downward test will be coming soon. If this happens, it may effectively bring KLCI under 800. Let is what Mr Market will do.

Panics and Booms

An excellent blog entry about an article written in 1897 concerning boom and bust.

I highly recommend everyone to read it.

Look Out 800!

KLCI Weekly Chart

Hmm...still no panic. US is going down each day, but the fear is still not like the October 2008 level. Will this be the case of the "boiling frog"? A bit by bit drop will not cause so much fear as to a sudden drop. Looking at the KLCI weekly chart, it looks like it will be revisiting the 800 level. Based on the broken rising wedge formation, I believe that the KLCI got the potential to go to 600! My friend just asked me whether he should buy Genting. My answer is "I will not buy anything." For me, if it ain't going up, why buy?

If you feel that your money is sitting idle in the bank earning a miserable interest, consider yourself lucky! At least you don't have to keep it under the mattress. Putting your money to "work" in the stock market is dangerous now. Nobody knows where is the bottom except after the fact. Those that make bottoms calls are just fools (of course, when you make so many bottom calls, eventually, the last one will be correct).

So, lets look at the various Malaysian sectors:

Malaysia	Longterm	Midterm	Shorterm
KLCI	Down	Down (-)	Down (-)
Finance	Down	Down (-)	Down (-)
Construction	Down	Down (-)	Down (-)
Plantation	Down	Neutral	Neutral
Property	Down	Down	Down
Mesdaq	Down	Down	Down
2nd Board	Down	Down	Down (-)

Every sector except plantation is now pointing downwards. For the rest of the world:

World	Longterm	Midterm	Shorterm
S&P500	Down	Down	Down
DJI	Down	Down	Down
NasdaqComp	Down	Down	Down
Nikkei 225	Down	Down	Down
Kospi	Down	Down	Down
SSECI	Down	Neutral	Neutral
HSI	Down	Down	Down
TWII	Down	Neutral (+)	Up (+)
STI	Down	Down	Down
SENSEX	Down	Down	Down
FTSE	Down	Down	Down
DAX	Down	Down	Down

We can see that only SSEC is now joined by TWII. Both are still holding up. But, any stimulus is like Viagra/Tongkat Ali/Kacip Fatimah. Its effect is only temporary. You just can't replace the disappering consumer demand overnight. This crisis takes years to develop, it will also take years to solve it. Every government has its limits to stimulate the economy. Eventually, it is the free market forces that will set the direction.

Long Term Investment

I do occasionally read the writings of Ooi Kok Hwa in the Star. Some I agree, some I do not. Anyhow, this week's article is interesting as I was looking for the data that he published. The table given shows the annual compounded return for various period. You can read the original article from the Star.

His conclusion:

.....we need to hold stocks long term. We may not need to hold them up to 10 years.

However, we need to understand that we will face very high volatility on returns if we invest only for one year.

Besides, we need to make sure that we are buying good fundamental stocks in order to avoid poor quality stocks that are not suitable for long-term investment.

First we must be cleared of the following facts:

1. The return is based on a one-lump sum investment at the beginning period.
2. The return ignores dividend received.
3. The return ignores transaction fees (commission and tax).
   

I would like to add a few more things that we can say about the table:

1. If your luck is not good, you are screwed. Why? The table only shows an investment for 10-year period. Usually, we start to invest around 30 years old (when we have enough excess money) and this goes on to 55. That means a 20+ years of investment. You can see from the table that your return varies wildly depending on when you start and stop investing. If you are lucky, you are able to withdraw your retirement fund during the bull market. What happens when you retire during the bear market? Yes, you are screwed! This means that timing is very important! Even Warren Buffett has admited that his timing for purchasing ConocoPhillips was terrible in his latest letter.
   
2. Take your money out of the market when you have a windfall profit. For a 10-year period, the average annual compounded return is 8.1%. This means that your original capital has appreciated 118% in this 10-year period. So, if in a good year you have 100% profit, take it because statistically, the average return is only 8% compounded. This means that you do not always have to be invested in the market! If you do, you may lose most of your gains due to the "regression to the mean" effect.

Wall Street Meltdown - Redux

Breakdown Week?

KLCI is still within the rising wedge formation. Will this week mark the start of another downward spiral? The property sector index has started to turn down again. Finance, construction and plantation is still holding on. My interpretation is:

Malaysia	Longterm	Midterm	Shorterm
KLCI	Down	Neutral	Neutral
Finance	Down	Neutral	Neutral
Construction	Down	Neutral	Neutral
Plantation	Down	Neutral	Neutral
Property	Down	Down (-)	Down (-)
Mesdaq	Down	Down	Down
2nd Board	Down	Down	Neutral

For the rest of the world, only SSE is still holding on. The rest are moving downwards:

World	Longterm	Midterm	Shorterm
S&P500	Down	Down	Down
DJI	Down	Down	Down
NasdaqComp	Down	Down	Down
Nikkei 225	Down	Down	Down
Kospi	Down	Down	Down
SSECI	Down	Neutral	Neutral
HSI	Down	Down	Down
TWII	Down	Down	Neutral
STI	Down	Down	Down
SENSEX	Down	Down	Down
FTSE	Down	Down	Down
DAX	Down	Down	Down

To Nationalize or Not To Nationalize

KLCI Daily Chart

So, will the US government nationalize Citibank and Bank of America in this weekend? Whatever that is going to happen, it looks like KLCI will be testing its lower boundary of the rising wedge next week. I expect it to break and a test of 800 in this month or early next month.

Finance, construction, plantation and property have been downgraded based on this week's action:

Malaysia	Longterm	Midterm	Shorterm
KLCI	Down	Neutral	Neutral (-)
Finance	Down	Neutral	Neutral (-)
Construction	Down	Neutral	Neutral (-)
Plantation	Down	Neutral	Neutral (-)
Property	Down	Neutral	Neutral (-)
Mesdaq	Down	Down	Down
2nd Board	Down	Down	Neutral

For the world, SSEC is still strong, but an analysis estimates that 1/3 of the loan in January has been diverted into the stock market! No wonder SSEC has such a good performance. For Europe and US, they are still going down. Be prepared for the next wave of financial crisis where western Europe banks have overlend the eastern Europe countries which may default on their loan.

The summary of my analysis:

World	Longterm	Midterm	Shorterm
S&P500	Down	Down	Down
DJI	Down	Down	Down
NasdaqComp	Down	Down	Down (-)
Nikkei 225	Down	Down	Down
Kospi	Down	Down (-)	Down (-)
SSECI	Down	Neutral	Neutral (-)
HSI	Down	Down	Down (-)
TWII	Down	Down	Neutral
STI	Down	Down	Down
SENSEX	Down	Down (-)	Down (-)
FTSE	Down	Down	Down
DAX	Down	Down	Down

So, I will stay away from going long in any market. Do not believe in any analyst that suggest to you to buy "defensive" stocks. When the market goes down, everything will go down. It is just a matter of percentage. Of course, "defensive" stock may go down less, but why should you lose your hard earn money? Put your money in the bank better, but don't be greedy for the high interest rate fixed deposit ;)

Stimulus Package

Failed bond sale was hightlighted here. 

South Korea has failed to meet its bond sale for the 2nd month.

Germany has also failed to meet its bond sale. 

It seems that at the moment, it is not easy to raise new money.

Well...our Prime Minister in waiting is going to announce the next stimulus package. The question is whether will it be effective?

As I understood, boom and bust is part of the business cycle. So, why are we trying so hard to avoid recession? Look at USA, they tried to avoid recession, and now what has happened? The recession becomes a deep recession that may turn out to be a depression.

I think the best analogy is forest fire. Every now and then, small forest fire clears out the dead shrubs and branches, regenerating the forest floor and supply new nutrient to the trees. If you always put out small fires, the dead material will get piled up. Next time, the regular small fire may be so big that it will just burn down the whole forest.

So, why can't we just let a recession runs it course? Let it weed out the badly run company and the unprofitable industry. Of course there will be suffering. But suffering is part of life. It makes us stronger. It forces us to change for the better. We do not want bad companies to survive in an artificially created environment because they may grow so big that when they failed, the consequence will become a catastrophe. A good example is General Motors.

If government wants to provide assistance to the people, then just make sure that every single Malaysian has 3 meals per day and they are able to send their kids to school. Let's suffer in the short term for the benefit of long term.

A stimulus program will provide the benefit for the short term but suffering in the long term. Politicians will prefer the short term program because they know that they will not be around in the long term, and it is easy to push the problem to the future politicians. That is why I think that Tengku Razaleigh is crazy for wanting a big stimulus program. Who is going to pay? Japan pump in 6.3 trillion USD and it didn't work. The only result is more debt!

Anyway, if the government still wants the stimulus package as it is a "politically right thing to do", then I hope that the government will not raid my money in the EPF. That is my hard earned money. It is not going to be easy to raise money at this time. So, please leave EPF money alone. Why not take Petronas money? It is money from the earth. It is free money. Since I have no access to it, I don't mind you go and raid it. 

Weekly Analysis

KLCI Weekly Chart

KLCI still trapped within the rising wedge formation. Various sectors show short term uptrend:

Malaysia	Longterm	Midterm	Shorterm
KLCI	Down	Neutral	Up (+)
Finance	Down	Neutral	Up
Construction	Down	Neutral	Up
Plantation	Down	Neutral	Up
Property	Down	Neutral	Up (+)
Mesdaq	Down	Down (-)	Down (-)
2nd Board	Down	Down	Neutral (+)

For the rest of the world, China and Hong Kong still showing some strength. However, US, UK and German market indicates the possibility of going down again. DJI has indicate the break down of a triangle formation. The weakest link over there is still the financials. President Obama has turned out to be not different from the Bush administration. The solution to the crisis is obvious, but they choose not to take the obvious route. Whatever they are doing now is just prolonging the crisis. Come on, nationalize the insolvent banks and get over it! A sharp pain is better then a long time suffering.

World	Longterm	Midterm	Shorterm
S&P500	Down	Down	Down (-)
DJI	Down	Down	Down (-)
NasdaqComp	Down	Down	Neutral
Nikkei 225	Down	Down	Down (-)
Kospi	Down	Neutral	Up
SSECI	Down	Neutral	Up
HSI	Down	Down	Neutral
TWII	Down	Down	Neutral
STI	Down	Down	Down
SENSEX	Down	Neutral (+)	Neutral
FTSE	Down	Down	Down (-)
DAX	Down	Down	Down (-)

Chneah Hoay

Last night was Tua Pek Kong's turn to make the prediction for 2009. Well, it is not good. It took them extra effort to start the flame.

What about the prediction for last year? Malaysia's GDP growth for 2008 was 7.1% (1Q), 6.3% (2Q) and 4.7% (3Q). Well, it was not really accurate since Tua Pek Kong foresee some pickup in the June to Sept 2008 period.

Believe in what you want. This is just for fun.

Trapped within a rising wedge

KLCI Daily Chart

Looking at the KLCI, we can see that it is still trap within a rising wedge. So, don't get excited if it moves up to the upper resistance of around 945. For the sector analysis, finance, construction and plantation indicates a short term upward movement:

Malaysia	Longterm	Midterm	Shorterm
KLCI	Down	Neutral	Neutral
Finance	Down	Neutral	Up (+)
Construction	Down	Neutral	Up (+)
Plantation	Down	Neutral	Up
Property	Down	Neutral	Neutral
Mesdaq	Down	Neutral (+)	Neutral
2nd Board	Down	Down	Down

For the rest of the world, Obama's false hope/change may push stocks up:

World	Longterm	Midterm	Shorterm
S&P500	Down	Down	Neutral (+)
DJI	Down	Down	Neutral (+)
NasdaqComp	Down	Down	Neutral (+)
Nikkei 225	Down	Down	Neutral
Kospi	Down	Neutral	Up (+)
SSECI	Down	Neutral	Up
HSI	Down	Down	Neutral
TWII	Down	Down	Neutral (+)
STI	Down	Down	Down (-)
SENSEX	Down	Down	Neutral
FTSE	Down	Down	Neutral
DAX	Down	Down	Neutral

If you are afraid that you have missed the Shanghai train, don't worry. I'm not. Please note that the computation of the GDP for China is different from the western countries (it doesn't make sense to me, so Google yourself for the difference). My wait and see strategy remains unchanged.