Recession

Subprime estimation loss is around USD 300 to 400 billion. The market become a seller market when everyone trying to cash out of the market.

What happen in the market is knee jerk reaction of the subprime crisis. Market try to reaccess how much losses incurred by the subprime crisis.

Then the chain reaction happen.

When market are selling, more and more funds around the globe need to sell because everyone trying to escape the fall. So the market fall.

Secondly, everyone are worried that USD will drop further. They started to sell and buy other currency. Some invest in bond and gold.

Then the oil price. When USD fall, it become cheaper for others to buy oil. The demand push up the price.

Back to the question recession. Common sense, if oil price is high, that show world market are growing. How can recession happen when world market is booming?

Subprime crisis is like NPL loan in Malaysia. 300 to 400 billion is very small figure for a market like US. Furthermore, the losses are incurred by financial institution and not whole market.

Have you heard of whole world financial institution collaspe. In a way, bank close shop. No one buy shares. No credit card to use. Sound insane right.

These FI will find their way to overcome the losses. Furthermore it is paper loss and believe it, they have the way to overcome it.

I don't believe recession will happen anytime soon as there is margin for US treasury to reduce interest rates in preventing recession.

Subprime crisis. Recession next?

Remember the dotcom crash happened a few years back. During that time, everyone were so bullish on dotcom companies that they invested in company that reach few hundreds in PE ratio. PE ratio stand for price earning ratio.

Lately, a few major financial group around the world are reporting write off on subprime mortgages. Who to be blame on this? Will it hurt the world economy?

Remember during our 1997 crisis when our currency was attacked by speculators. It lead to downfall of the stock market and economy as a whole. However, our government at the time was smart to use Danaharta and Danamodal to revive the banking industry and clean up the non performing loan.

I guess the world economy power should learn something from us on this. With billions written off by the financial giants, the liquidity in the market will be reduced and it will definately bring down the economy.

Fortunately something big is happening. China and India are the emerging economy power. We shall wait and see when the financial impact hit US, it will benefit the emerging economy power as more and more funds will flow into the new economy power. So for those who are worried if recession is just around the corner, my point of view is, it will happen in US but not the world. Cause mighty China and India are there to lend hand.

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PE ratio

picking of Low Pe stock. :-

GEARING = Asset vs Debt

Gearing below 0.5 ( U hv cash $1.00 vs debt of 0.50 )is considered healthy

0.5 to 0.8 ( Cash 1.00 vs debt of 0.50 to 0.80 ) considered normal n acceptable

U should avoid Low PE stock which gearing exceeded 1 !

gearing exceeded 1 means u hv $1.00 but u hv debt more than $1.00

One classical example := Megan

Megan was once stood at PE 2+ (50% return per annum ), in d same time its gearing almost touching 2, in short :- they hv one dollar in hand n also 2 dollars in debt .

If u r not from accounting back ground to find out what is its gearing stand from balance sheet, u can either find it from osk data base or the edge .

FYI, Plenitude is one of d million that having gearing of ZERO ! Low PE(7) plus high NTA >5.00 ( its current NTA 3.20 was calculated in year 2000, by now it should worth >5.00 at least ) ^V^

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