Price is the matching between supply and demand.
Value is the fair price of the item.
Most of the time, price and value do not match.
When economy is good, price always shoot higher than value.
When economy is bad, price always drop below value.
When we buy, we see price.
But when we want to get cheap items, go for value buy.
Friday, December 26, 2008
CNBC .com
As a new year approaches, it is customary for journalists to make predictions about the future. This time around, CNBC.com has a collection of prognostications from CNBC bloggers on a special page: Predictions '09.
Last year around this time, Warren Buffett Watch offered its Eight Predictions for '08 .. and Beyond.
In keeping with Buffett's long-term way of looking at things, the eight predictions were intentionally on the 'timeless' side of the predicting spectrum.
Here they are again, with a little bit of editing. This could be the start of a new holiday tradition!
-----------------
Warren Buffett became one of the wealthiest people in the world by making predictions and putting money behind those predictions. Every time he buys a stock or a business or some other investment, he's forecasting the future.
Judging by the incredible returns of his holding company Berkshire Hathaway, Buffett and his colleagues are very good at making those predictions.
Of course, it helps when you can give your predictions plenty of time to come true. That's one reason Buffett's favorite holding period for investments in "outstanding businesses with outstanding managements" is "forever." After all, "We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely."
With that in mind, here are Warren Buffett Watch's 'timeless' predictions.
1. Recessions can't be avoided forever. As 2007 was coming to a close, Buffett told our Becky Quick that if unemployment picks up significantly, the "dominoes" will fall and the U.S. economy will fall into recession in 2008. He was right, but not alarmed. "It is the nature of capitalism to periodically have recessions. People overshoot." (He told Becky she's young enough to expect to see 6 or 7 or them.)
AP
The economic downturn takes its toll at the almost-empty Bayshore Town Center Mall in Milwaukee, Wisconsin.
--------------------------------------------------------------------------------
2. We'll survive current and future recessions just as we've survived past problems. As Buffett told us in August, 2007, (and repeated throughout 2008): "We've got a wonderful economy... There's never been anything like that in the history of the world. We live seven times better than the people did a century ago on average... We've had problems all along. If you look at the last century, we had that Great Depression and World War Two, we had the Cold War, we had the atomic bomb, but the country does well."
3. Recessions will create opportunities. "I made by far the best buys I've ever made in my lifetime in 1974. And that was a time of great pessimism and the oil shock and stagflation and all those sort of things. But stocks were cheap." Fast-forward to October, 2008, and Buffett's Why I'm Buying U.S. Stocks Now.
4. All stocks won't be cheap. Like Ted Williams waiting for the right pitch, a successful investor waits for the right stock at the right price, and it doesn't happen every day. "What’s nice about investing is you don’t have to swing at pitches. You can watch pitches come in one inch above or one inch below your navel, and you don’t have to swing. No umpire is going to call you out." You get in trouble, Buffett says, when you listen to the crowd chanting "Swing, batter, swing!"
5. The crowd will make mistakes. Buffett cites this piece of advice from his mentor Benjamin Graham: "You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else."
6. Investors will mistakenly think falling stock prices are bad. "If they reduce the price of hamburgers at McDonald's today I feel terrific. Now I don't go back and think, gee, I paid a little more yesterday. I think I'm going to be buying them cheaper today. Anything you're going to be buying in the future, you want to have get cheaper."
Walt Disney (1950)
Cinderella rushes for the exit as midnight approaches
--------------------------------------------------------------------------------
7. Good times will prompt bad decisions. In his 2000 Letter to Berkshire shareholders, Buffett compared the crowd that buys big when prices are high to Cinderella at the ball. "They know that overstaying the festivities - that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future - will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands."
8. There will be more dancing at another wild party followed by another painful hangover. Looking back at the Internet bubble, Buffett is quoted as saying, "The world went mad. What we learn from history is that people don’t learn from history."
Last year around this time, Warren Buffett Watch offered its Eight Predictions for '08 .. and Beyond.
In keeping with Buffett's long-term way of looking at things, the eight predictions were intentionally on the 'timeless' side of the predicting spectrum.
Here they are again, with a little bit of editing. This could be the start of a new holiday tradition!
-----------------
Warren Buffett became one of the wealthiest people in the world by making predictions and putting money behind those predictions. Every time he buys a stock or a business or some other investment, he's forecasting the future.
Judging by the incredible returns of his holding company Berkshire Hathaway, Buffett and his colleagues are very good at making those predictions.
Of course, it helps when you can give your predictions plenty of time to come true. That's one reason Buffett's favorite holding period for investments in "outstanding businesses with outstanding managements" is "forever." After all, "We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely."
With that in mind, here are Warren Buffett Watch's 'timeless' predictions.
1. Recessions can't be avoided forever. As 2007 was coming to a close, Buffett told our Becky Quick that if unemployment picks up significantly, the "dominoes" will fall and the U.S. economy will fall into recession in 2008. He was right, but not alarmed. "It is the nature of capitalism to periodically have recessions. People overshoot." (He told Becky she's young enough to expect to see 6 or 7 or them.)
AP
The economic downturn takes its toll at the almost-empty Bayshore Town Center Mall in Milwaukee, Wisconsin.
--------------------------------------------------------------------------------
2. We'll survive current and future recessions just as we've survived past problems. As Buffett told us in August, 2007, (and repeated throughout 2008): "We've got a wonderful economy... There's never been anything like that in the history of the world. We live seven times better than the people did a century ago on average... We've had problems all along. If you look at the last century, we had that Great Depression and World War Two, we had the Cold War, we had the atomic bomb, but the country does well."
3. Recessions will create opportunities. "I made by far the best buys I've ever made in my lifetime in 1974. And that was a time of great pessimism and the oil shock and stagflation and all those sort of things. But stocks were cheap." Fast-forward to October, 2008, and Buffett's Why I'm Buying U.S. Stocks Now.
4. All stocks won't be cheap. Like Ted Williams waiting for the right pitch, a successful investor waits for the right stock at the right price, and it doesn't happen every day. "What’s nice about investing is you don’t have to swing at pitches. You can watch pitches come in one inch above or one inch below your navel, and you don’t have to swing. No umpire is going to call you out." You get in trouble, Buffett says, when you listen to the crowd chanting "Swing, batter, swing!"
5. The crowd will make mistakes. Buffett cites this piece of advice from his mentor Benjamin Graham: "You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else."
6. Investors will mistakenly think falling stock prices are bad. "If they reduce the price of hamburgers at McDonald's today I feel terrific. Now I don't go back and think, gee, I paid a little more yesterday. I think I'm going to be buying them cheaper today. Anything you're going to be buying in the future, you want to have get cheaper."
Walt Disney (1950)
Cinderella rushes for the exit as midnight approaches
--------------------------------------------------------------------------------
7. Good times will prompt bad decisions. In his 2000 Letter to Berkshire shareholders, Buffett compared the crowd that buys big when prices are high to Cinderella at the ball. "They know that overstaying the festivities - that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future - will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands."
8. There will be more dancing at another wild party followed by another painful hangover. Looking back at the Internet bubble, Buffett is quoted as saying, "The world went mad. What we learn from history is that people don’t learn from history."
http://malaysiafinance.blogspot.com/
Overview – This strategy piece will probably be regarded as the more optimistic one you will ever come across in these turbulent times. I am quietly (or not so quietly) optimistic for 2009 and beyond for global stock markets. I believe we have seen the groundwork laid for possibly the mother of all bull markets over the next 3 years. It should be a gradual stop-start thing. It will be one which is loaded with inflationary pressures as well.
Expectations – The trouble with many investors is that we are always only able to perceive and view things within a certain perimeter. Back in January 2008, there were still many who viewed the global economy with a sense of bullishness, and that the real issue was higher commodity prices. We tend to feel and sense things happening around us at that point in time. Now we are surrounded by layoffs, that the many injections of liquidity are unstoppable, that the many rate cuts are insufficient, that the mother of all fiscal measures may not be adequate, that lending and risk aversion are still kings of the world – it is natural then to assume that we have a long way to go. As we sit in the middle of this crisis, it is also natural to hear experts proclaim that this is the deepest recessions the world has seen since the Depression. It is logical to conclude that we are in for the long haul. We let things around us shape the bulk of our investing decisions, when we should base our investing decisions on what things will be like 6-12 months down the road. Just like back in January 2008, we should base our investing decisions on things happening 6-12 months down the road, and not how things were like at that point in time.
The Recession – As announced a few weeks back, the recession started in November 2007, and as we stand now, its 14 months deep in recession. Prior to World War II recessions were more prolonged and deep usually 18-22 months. Mostly it’s that the tolls available to governments and central banks to deal with recessions and their effects were very limited then. The understanding of monetary and fiscal stimulus were in its infancy then. Post WW II till today, the longest recessions by ranking were:
November 1973 – March 1975: 16 months
July 1981 – November 1982: 16 months
December 1969 – November 1970: 11 months
April 1960 – February 1961: 10 months
The average being 11 months, and this present recession is already past the average at 14 months. Of course we cannot be satisfied just knowing it is already past the median. We cannot just imply that things are towards the end just based on averages, we are not in a baseball game.
Its Different this Time – This idea that things are different this time around will cost you your life savings. The more things evolve, the more things stay the same. This recessions’ fundamentals deterioration may be more widespread, but so are the measures doled out to rectify the patient. Its not really different, it just seems that way when you are in the midst of it. Business cycles are called cycles for many reasons. Things will peak and they will drop, they will boom and they will bust, each boom and bust will have their own stories to tell, but the cycle remains the same. The gravity of this crisis is matched by the unprecedented cooperation by all nations to work as one to rectify the problem. The amount of additional fiscal stimulus and the coordinated rate cuts are unprecedented. On November 9, China announced a $586B domestic stimulus package, more than triple the size of America's 2008 package. Australia announced a $10.4B package and Japan a $51B. Lump in the recent moves by EU, and the likelihood of a major one by Obama when he takes office, and you have a sense of its magnitude.
Confidence – The risk aversion mentality has taken strong roots, thus delaying the effects of the many measures being instituted. In fact, it is likely that we have already over-injected the required sums to revive many problem areas. It’s the confidence in the system that is wreaking havoc still. Confidence and risk aversion can also become a bubble condition – just look at the rush into yen and the rush into USD and US Treasuries. If those are not at bubble levels, I don’t know what it. Just like a pendulum, things will always sway to extremes before righting itself. I am not saying that the credit situation is over. I still think there are pockets of danger in credit cards.
Why Mother of All Bull Markets – We are seeing a readiness to go to zero interest rates in most major economies’ monetary policies. In a normal market situation, the rapid rate cuts will be balanced with a re-rating of stocks and yields, but they have not had that effect because the risk aversion mentality still rules. But that is OK, it just delays the “bull” not that the bull is not around. The bull will always surface when the right factors congregate.
The global economy has grown by nearly 70% in size from 2007 till mid 2008 before things imploded. Things imploded because of derivatives and capital issues. Yes those liquidity or multiplied liquidity was drained from the system, but it would be silly to think that they were responsible for the bulk of the 70% growth in global trade. What we have seen over the last 8 years was a huge rise in global middle class, in particular from the BRIC nations. This huge new middle class will still be consuming more resources as more emerging economies continue to pour resources to build up infrastructure. That is the inevitable “good” that comes from globalization. The demand on our resources was highlighted over the last 3 years when commodity prices went through the roof. Their price rises may have been exaggerated by the remarkable liquidity from hedge funds and specialized funds – but the underlying principle still remains. The implosion in commodity prices over the last 6 months was more due to the retraction of liquidity, rather than a rapid deterioration in demand fundamentals.
The secular bull in commodities was caused by perceptions of massive demand in emerging markets, particularly the BRIC nations - Brazil, Russia, India, and China - which were growing at unprecedented rates. As they became increasingly wealthy and industrialized, these economies represented growing new demand for energy, food and production inputs. The commodity price collapse since the summer of 2008 does not indicate inflation is out of the question - it indicates global economies are contracting deeply. The amount of new fiscal measures by the said nations will go some way to addressing the contraction slide. Mind you, all this while, we still have this new huge middle class in the global economy.
Inflation – Following on the above premise, it is safe to say that inflation will rise when confidence returns. Central banks will then have to drain liquidity from the system gradually. As the risk aversion was so strong, it is likely that most central banks will allow the markets to rise, and even allow inflation to seep in for the first 12 months. You do not want to ruin the hard work by tightening the noose so soon. Hence the first 12 months will be most vibrant and exciting.
Darkest Before Dawn - Investors were bailing out of mutual funds at record pace, the VIX set new highs, more than 90% of closed-end funds were trading at a discount that were much higher than the average. All these are signs of bottoming. As I have written before, it should be very useful to look for bottoms by looking at the yen/usd rate. You need risk aversion to reduce before investors are willing to get back into stocks.
Cheap valuations are a reflection of risk aversion, the rush to US Treasuries is a sure sign of risk aversion, the rush to USD and yen are a sign of definite risk aversion.
Gem #1: Markets will only start a genuine recovery when risk aversion subsides
Gem#2: Risk aversion reduction will be immediately reflected in weaker USD and yen
The fall in USD over the last two days is more due to the zero interest rate regime enacted by Federal Reserve, so that should not be a sign of risk aversion reduction.
The best guide for locating current markets' bottom: WHEN USD and YEN BOTH STARTS TO FALL IN VALUE in a sustained pattern. When these two currencies fall, it show a willingness to move exposure into other currencies or assets, be it stock or bonds. Before they are reflected in the prices, the signal will be most apparent in the currencies.
However, even then we cannot really ascertain a buying trigger. So, my advice would be to break up you investing funds into 3 portions, get ready your list of stocks to buy.
Catalyst #1: When yen/usd rate moves back to 94, plonk down 1/3 of your funds
Catalyst #2: When the rate moves to 97, move the second portion
Catalyst #3: When the rate breaks 100, move the rest in
A point not missed here is that if yen weakens against the USD, the latter would be gaining in strength. However, I am using the yen/usd rate as a guide, as I believe when the yen starts to weaken, the USD would also weaken, but not by as much - i.e. the USD would gain ground against yen but at the same time lose ground against the euros and other major currencies. I use the yen/usd rate because that is most widely followed. The yen is used as the determinant because it was the most popular currency for carry trades, the unbelievable strength now is due to risk aversion as the Japanese exporters are basically losing money and cannot compete below 90.
Comforting Data – Over the past 50 years, the S&P 500 tends to bottom:
One quarter before the GDP bottoms; 3 months before the ISM manufacturing survey bottoms; 7 months before the peak unemployment rate; 4 months before the largest decline in non-farm payrolls; and 4 months before the bottom in consumer confidence surveys.
Using that as benchmarks, we should expect a genuine economic recovery somewhere between March and June of 2009.
The Obama Factor – Just like investing, to move share prices you need catalysts to make things happen. Risk aversion does not just go away, they also need to have catalysts. Obama will take office in January 2009. Call it goodwill, call it anything you want. He has already assembled a group of very credible people to help him. He has shown a clarity and purpose in hiring the best, rather than just from his own circles. The key would be the stimulus package he will be announcing. What started off as a $350bn package has now ballooned to $600bn, and now its likely to top $1 trillion.
Its not just a hopeful thing. As mentioned, the groundwork has been laid: very low interest rates, very high risk aversion, stocks at very cheap levels, governments pumping fiscal stimulus like crazy… its like everyone is working towards an Obama effect.
Confidence is a strange yet important part of global finance. A basic re-rating of 10% jump from current levels will improve valuations for a lot of toxic assets as well and in turn relives the constant need to raise capital. Further jumps in markets will see a willingness to buy even toxic assets. Things that look like being worth just 20 cents to the dollar may now be worth 50 cents to the dollar. It’s a cumulative snowball effect. Injured banks may even be able to use the capital raise to actually repair balance sheet and do actual lending, instead of constantly having to write down every quarter. You would be amazed what 10%-20% jump in equity prices can do to the entire system.
I am looking for the Dow to reach 10,000 by February / March 2009 and to go back to 12,000 by June 2009. I cannot safely say what will happen for the second half of 2009. A lot will depend on what the central banks and governments do over the next 6 months. If they play their cards right, I think global equity markets could fully recover by end 2009 and go on a 2-3 year unprecedented bull run.
Expectations – The trouble with many investors is that we are always only able to perceive and view things within a certain perimeter. Back in January 2008, there were still many who viewed the global economy with a sense of bullishness, and that the real issue was higher commodity prices. We tend to feel and sense things happening around us at that point in time. Now we are surrounded by layoffs, that the many injections of liquidity are unstoppable, that the many rate cuts are insufficient, that the mother of all fiscal measures may not be adequate, that lending and risk aversion are still kings of the world – it is natural then to assume that we have a long way to go. As we sit in the middle of this crisis, it is also natural to hear experts proclaim that this is the deepest recessions the world has seen since the Depression. It is logical to conclude that we are in for the long haul. We let things around us shape the bulk of our investing decisions, when we should base our investing decisions on what things will be like 6-12 months down the road. Just like back in January 2008, we should base our investing decisions on things happening 6-12 months down the road, and not how things were like at that point in time.
The Recession – As announced a few weeks back, the recession started in November 2007, and as we stand now, its 14 months deep in recession. Prior to World War II recessions were more prolonged and deep usually 18-22 months. Mostly it’s that the tolls available to governments and central banks to deal with recessions and their effects were very limited then. The understanding of monetary and fiscal stimulus were in its infancy then. Post WW II till today, the longest recessions by ranking were:
November 1973 – March 1975: 16 months
July 1981 – November 1982: 16 months
December 1969 – November 1970: 11 months
April 1960 – February 1961: 10 months
The average being 11 months, and this present recession is already past the average at 14 months. Of course we cannot be satisfied just knowing it is already past the median. We cannot just imply that things are towards the end just based on averages, we are not in a baseball game.
Its Different this Time – This idea that things are different this time around will cost you your life savings. The more things evolve, the more things stay the same. This recessions’ fundamentals deterioration may be more widespread, but so are the measures doled out to rectify the patient. Its not really different, it just seems that way when you are in the midst of it. Business cycles are called cycles for many reasons. Things will peak and they will drop, they will boom and they will bust, each boom and bust will have their own stories to tell, but the cycle remains the same. The gravity of this crisis is matched by the unprecedented cooperation by all nations to work as one to rectify the problem. The amount of additional fiscal stimulus and the coordinated rate cuts are unprecedented. On November 9, China announced a $586B domestic stimulus package, more than triple the size of America's 2008 package. Australia announced a $10.4B package and Japan a $51B. Lump in the recent moves by EU, and the likelihood of a major one by Obama when he takes office, and you have a sense of its magnitude.
Confidence – The risk aversion mentality has taken strong roots, thus delaying the effects of the many measures being instituted. In fact, it is likely that we have already over-injected the required sums to revive many problem areas. It’s the confidence in the system that is wreaking havoc still. Confidence and risk aversion can also become a bubble condition – just look at the rush into yen and the rush into USD and US Treasuries. If those are not at bubble levels, I don’t know what it. Just like a pendulum, things will always sway to extremes before righting itself. I am not saying that the credit situation is over. I still think there are pockets of danger in credit cards.
Why Mother of All Bull Markets – We are seeing a readiness to go to zero interest rates in most major economies’ monetary policies. In a normal market situation, the rapid rate cuts will be balanced with a re-rating of stocks and yields, but they have not had that effect because the risk aversion mentality still rules. But that is OK, it just delays the “bull” not that the bull is not around. The bull will always surface when the right factors congregate.
The global economy has grown by nearly 70% in size from 2007 till mid 2008 before things imploded. Things imploded because of derivatives and capital issues. Yes those liquidity or multiplied liquidity was drained from the system, but it would be silly to think that they were responsible for the bulk of the 70% growth in global trade. What we have seen over the last 8 years was a huge rise in global middle class, in particular from the BRIC nations. This huge new middle class will still be consuming more resources as more emerging economies continue to pour resources to build up infrastructure. That is the inevitable “good” that comes from globalization. The demand on our resources was highlighted over the last 3 years when commodity prices went through the roof. Their price rises may have been exaggerated by the remarkable liquidity from hedge funds and specialized funds – but the underlying principle still remains. The implosion in commodity prices over the last 6 months was more due to the retraction of liquidity, rather than a rapid deterioration in demand fundamentals.
The secular bull in commodities was caused by perceptions of massive demand in emerging markets, particularly the BRIC nations - Brazil, Russia, India, and China - which were growing at unprecedented rates. As they became increasingly wealthy and industrialized, these economies represented growing new demand for energy, food and production inputs. The commodity price collapse since the summer of 2008 does not indicate inflation is out of the question - it indicates global economies are contracting deeply. The amount of new fiscal measures by the said nations will go some way to addressing the contraction slide. Mind you, all this while, we still have this new huge middle class in the global economy.
Inflation – Following on the above premise, it is safe to say that inflation will rise when confidence returns. Central banks will then have to drain liquidity from the system gradually. As the risk aversion was so strong, it is likely that most central banks will allow the markets to rise, and even allow inflation to seep in for the first 12 months. You do not want to ruin the hard work by tightening the noose so soon. Hence the first 12 months will be most vibrant and exciting.
Darkest Before Dawn - Investors were bailing out of mutual funds at record pace, the VIX set new highs, more than 90% of closed-end funds were trading at a discount that were much higher than the average. All these are signs of bottoming. As I have written before, it should be very useful to look for bottoms by looking at the yen/usd rate. You need risk aversion to reduce before investors are willing to get back into stocks.
Cheap valuations are a reflection of risk aversion, the rush to US Treasuries is a sure sign of risk aversion, the rush to USD and yen are a sign of definite risk aversion.
Gem #1: Markets will only start a genuine recovery when risk aversion subsides
Gem#2: Risk aversion reduction will be immediately reflected in weaker USD and yen
The fall in USD over the last two days is more due to the zero interest rate regime enacted by Federal Reserve, so that should not be a sign of risk aversion reduction.
The best guide for locating current markets' bottom: WHEN USD and YEN BOTH STARTS TO FALL IN VALUE in a sustained pattern. When these two currencies fall, it show a willingness to move exposure into other currencies or assets, be it stock or bonds. Before they are reflected in the prices, the signal will be most apparent in the currencies.
However, even then we cannot really ascertain a buying trigger. So, my advice would be to break up you investing funds into 3 portions, get ready your list of stocks to buy.
Catalyst #1: When yen/usd rate moves back to 94, plonk down 1/3 of your funds
Catalyst #2: When the rate moves to 97, move the second portion
Catalyst #3: When the rate breaks 100, move the rest in
A point not missed here is that if yen weakens against the USD, the latter would be gaining in strength. However, I am using the yen/usd rate as a guide, as I believe when the yen starts to weaken, the USD would also weaken, but not by as much - i.e. the USD would gain ground against yen but at the same time lose ground against the euros and other major currencies. I use the yen/usd rate because that is most widely followed. The yen is used as the determinant because it was the most popular currency for carry trades, the unbelievable strength now is due to risk aversion as the Japanese exporters are basically losing money and cannot compete below 90.
Comforting Data – Over the past 50 years, the S&P 500 tends to bottom:
One quarter before the GDP bottoms; 3 months before the ISM manufacturing survey bottoms; 7 months before the peak unemployment rate; 4 months before the largest decline in non-farm payrolls; and 4 months before the bottom in consumer confidence surveys.
Using that as benchmarks, we should expect a genuine economic recovery somewhere between March and June of 2009.
The Obama Factor – Just like investing, to move share prices you need catalysts to make things happen. Risk aversion does not just go away, they also need to have catalysts. Obama will take office in January 2009. Call it goodwill, call it anything you want. He has already assembled a group of very credible people to help him. He has shown a clarity and purpose in hiring the best, rather than just from his own circles. The key would be the stimulus package he will be announcing. What started off as a $350bn package has now ballooned to $600bn, and now its likely to top $1 trillion.
Its not just a hopeful thing. As mentioned, the groundwork has been laid: very low interest rates, very high risk aversion, stocks at very cheap levels, governments pumping fiscal stimulus like crazy… its like everyone is working towards an Obama effect.
Confidence is a strange yet important part of global finance. A basic re-rating of 10% jump from current levels will improve valuations for a lot of toxic assets as well and in turn relives the constant need to raise capital. Further jumps in markets will see a willingness to buy even toxic assets. Things that look like being worth just 20 cents to the dollar may now be worth 50 cents to the dollar. It’s a cumulative snowball effect. Injured banks may even be able to use the capital raise to actually repair balance sheet and do actual lending, instead of constantly having to write down every quarter. You would be amazed what 10%-20% jump in equity prices can do to the entire system.
I am looking for the Dow to reach 10,000 by February / March 2009 and to go back to 12,000 by June 2009. I cannot safely say what will happen for the second half of 2009. A lot will depend on what the central banks and governments do over the next 6 months. If they play their cards right, I think global equity markets could fully recover by end 2009 and go on a 2-3 year unprecedented bull run.
Thursday, December 18, 2008
13 days for 2009 and say goodbye to young adult life
Well, the countdown for 13 days begin.
Another 13 days I will no longer called 20 plus. My age will call
mid life. That is 30 and above.
Getting older day by day.
Time flies.
Wish my 20 plus a very good bye and well come my 30.
Suddenly recall the days when I was young.
Let hope and pray that 30 plus will bring more, more, more, more
happiness,
prospects,
career advancement,
health and also
$$$$$$$$$.
Another 13 days I will no longer called 20 plus. My age will call
mid life. That is 30 and above.
Getting older day by day.
Time flies.
Wish my 20 plus a very good bye and well come my 30.
Suddenly recall the days when I was young.
Let hope and pray that 30 plus will bring more, more, more, more
happiness,
prospects,
career advancement,
health and also
$$$$$$$$$.
Tuesday, December 16, 2008
We are blessed
We are blessed. Our country has been ignored since March 8 general election. When the crisis hit, we are not badly hit as those who want to sell has done it since 8 of March. Some projects cannot start due to change of state government. This is also a blessing. Due to the crisis, someone willing to do it with more competitive pricing.
Furthermore, most of our banks are well capitalised thus we do not have funding issues. The only issue is, bank are very selective on their customer base. I heard a few local and foreign bank in Malaysia are no longer extending high financing to their customer. They are reducing the risk by asking their customer to pump more cash in order to secured financing.
Due to the profit margin squezze on secured lending, bank are moving towards unsecured financing that enjoy higher profit due to higher risk involved. Among the products are personal loan, credit cards, revolving OD (unsecured type) and cash on call matching the credit card limits. These products enjoy profit spread of at least 3% up to 15% per annum. But the approval are strict as only selective customer are entitle for the facilities.
Our politician are also very mature. The power transaction are done gentleman way. No more street rally. All of us want to make a living only. We are moving towards first world mentality. Congratulation.
Furthermore, most of our banks are well capitalised thus we do not have funding issues. The only issue is, bank are very selective on their customer base. I heard a few local and foreign bank in Malaysia are no longer extending high financing to their customer. They are reducing the risk by asking their customer to pump more cash in order to secured financing.
Due to the profit margin squezze on secured lending, bank are moving towards unsecured financing that enjoy higher profit due to higher risk involved. Among the products are personal loan, credit cards, revolving OD (unsecured type) and cash on call matching the credit card limits. These products enjoy profit spread of at least 3% up to 15% per annum. But the approval are strict as only selective customer are entitle for the facilities.
Our politician are also very mature. The power transaction are done gentleman way. No more street rally. All of us want to make a living only. We are moving towards first world mentality. Congratulation.
Sunday, December 14, 2008
Fast Cash with cheap rates
EON Bank credit card allow cash withdrawal without cash advance fees and 0 percent interest.
However they charge a rates of 4.99% per annum upfront as processing fees.
Very cheap fund.
After one year, can balance transfer to Public Bank. Even cheaper. 2.50% processing fees also with no interest.
I have not survey other bank yet. Let me know if there is better deal from other bank.
However they charge a rates of 4.99% per annum upfront as processing fees.
Very cheap fund.
After one year, can balance transfer to Public Bank. Even cheaper. 2.50% processing fees also with no interest.
I have not survey other bank yet. Let me know if there is better deal from other bank.
Saturday, December 13, 2008
How Tan Sri Syed Mokhtar Albukhary made RM4.5bil
How Tan Sri Syed Mokhtar Albukhary made RM4.5bil on http://digizenblog.blogspot.com/2008/12/how-to-become-very-rich-in-malaysia.htmlSwiftlet Farming
“You put in RM500,000 and if your location is good, you can net RM1mil a year within four years. Where else in the world can you find such a business?”Source:
Friday, December 12, 2008
Desa Palma another good buy
Checking with iproperty show three units for sale at
RM 95,000
RM 101,000
RM 110,000
Insider news say, government has approved a medical school just next to Inti University. Hope to see rental increase to RM 1000 per month and value RM 130,000 in near future.
RM 95,000
RM 101,000
RM 110,000
Insider news say, government has approved a medical school just next to Inti University. Hope to see rental increase to RM 1000 per month and value RM 130,000 in near future.
Thursday, December 11, 2008
Lets make money for this coming Xmas
Selling real Xmas trees in Churches within next 2 weeks could be profitable.......What do you think?Since everyone talking about "going green"; real xmas tree should be good alternative to decorate your house or give it to friends as Xmas gift........
Articial Xmas tree are made of PVC that not-biogradable and harmful to earth, think about it..............
More information:
http://www.time.com/time/magazine/article/0,9171,1862449,00.html
http://www.treehugger.com/files/2004/12/how_to_pick_a_g.php
http://digizenblog.blogspot.com/2008/12/selling-xmas-tree-could-be-profitable.html
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