Fusion Investor

And The Spamming Blogger Strikes Yet Again

2009-06-03T03:18:00.002+08:00

This article did not really start out as an article. Originally, I just wanted to leave a comment in Moolah's blog here (http://whereiszemoola.blogspot.com/2009/06/and-spamming-blogger-strikes-yet-again.html), but seeing how long that comment quickly became, I thought it would be better to write it here instead.

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Dear Moo,

Even though I may not be actively trading nor blogging on the Malaysian market this year, your blog is still one of the few blogs I read regularly. Do keep up the good work!

As you know, the "spammer" (who goes under multiple nicks) is very well known by nearly everyone in Malaysian investing blogsphere to "spam" several blogs for a very long time now, for example, if they were to write articles that gives a hint of disagreeing with him, even if this is imaginary on his part. (and I use the word "spam" euphemistically here, as more often than not, they are often a poorly disguised form of public slandering, imaginary allegations and personal attacks).

In my case, he has done it hundreds if not over a thousand times as I indicated in my blog in the past. And when one has been sensatized, one is naturally more “in tune” when the same thing happened to others such as yourself, Dali, etc..

His case is very unique. There is really no one else quite like him over the Net. As I had the personal experience and opportunity to reflect on this, I am no longer surprised, because as human beings, our pains are unique to ourselves, and the result of a prolonged pain can give rise to certain irrational behaviors, and as unique beings, will tend to have their own unique signatures. (e.g. some people has been known to resort to alcohol under duress, whereas others resort to physically abusing wife/kids, others committing even murder / commit suicide under prolonged duress, etc.).

In his case, one signature is his chronic, recurrent, and long lasting spamming, regardless of what others say to him / of him. He simply ignores and continued his spamming.

Another signature is the content of his spams - e.g. the one you just quoted. The contents are typically delusional, imaginative and sometimes bizarre claims. As I mentioned earlier, it sometimes is a poorly disguised form of public slandering and personal attack on imaginary attributes.

For example, if we reflect closer on his last one - “Ha ha sour cow, feel the pain ? did my sifu sam 's achievement get you hurt ? ha ha cool it sour cow cool.”

Observe his signatures:
- Laugh for no apparent reason.
- Childishly, without real provocation, called you names such as "sour"
- Deluding himself of your pain (or is it his imagination of your pain?) instead of the true pain that he himself might be experiencing.
- Irrationally fear that others will forget about Sam's (or self?) achievement (or failure?) and so, acted on the urge to remind you constantly (via repeated spamming) of Sam’s achievement, whether real or imaginary (should one be so fearful of true and genuine achievements that it requires constant reminders?).
- Pathologically and constantly deny emotional responsibility when he asked you to "cool it".
- Repeated and end with childish name calling ("sour cow cool").

And observe the other typical signature – the rinse-repeat method.

The truth is -- even without me identifying it here and regardless of the nick, we all know immediately in our hearts that this is his signature (I am referring to the spammer himself whoever he is).

And when we take a step back, and reflect on the entire behavior from a detached viewpoint, what conclusions can a reasonable person make?

Even though we may not know who he is in real life, we can make some common sense and reasonable deductions. For simplicity, I will refer to the spammer as “he”, and I am quite certain that it is a “he” – I have yet to meet a female who behaves like this in the investment world – we can reflect on this later why is it that only males tend to behave like this but not females (who have a different way to deal with pain).

1. He clearly feels insecure. Insecure enough that he has this uncontrollable urge to attack you without real provocation repeatedly over the years without stopping. His insecurity is not limited to you, but includes others.

2. His clearly fears you. So much so that, he still sees the need to attack on the slightest hint of threat, even if it is not real but his own imagination.

3. He clearly felt a prolonged pain from something which was previously linked to you. He has no real reason to be jealous of you, since you don't publicly trade nor publicly disclose your trade results.

As I have plenty of opportunity to reflect on him in the past, I believe he has personally lost something meaningful or something large and important to him in the past. Whatever it is or whether the loss is real or perceived, is not really that important. What is more important is his own feelings towards that real / perceived loss – to him, it is very real. So much so, that he has to resort to this regularly and over a prolonged period.

4. Whatever it is, he still felt the Pain to this day. He is no longer in control of his Pain. Instead, his Pain controls him and drives him to do what he does, as an automatic reaction. He is like a Pavlov dog who salivates immediately as an automatic response whenever he hears the bell ringing. He is unable to let that Pain go. He still clings tightly to it, but for what beneficial purpose?

5. Sadly, over time, he has developed an intimate relationship with this pain which he still cannot let go even today. Most likely, he is unaware of the need to let that pain go. He is reasonably intelligent, so, I'm sure he has made past attempts to let that Poison go. However, I believe he felt an emptiness when he tried to do this, and so, the emptiness eventually brought him back to spamming you/me/others. It appears my absence in the past few months has seen him channeling his Pain to you and others as alternative outlets. It appears he still cannot let go of this root cause which is the Pain.

6. I believe his experience is not unlike someone who has lost a loved one, and unable to let that person go even though that person has already passed on.

7. Clinically, this happens more common than I originally thought. From society's viewpoint, he needs help, not more criticism. The root cause may relate to his strong attachment to his ego. It doesn’t help when others boost his ego to get tips. It is not dissimilar to giving the drunkard more alcohol to drink.

8. The other (less likely) possibility may be that he is merely doing his “job” when he blogs and spams. When things don't turn the way "it should be", you (or someone else or something else) had to become a convenient excuse, or a diversion. Either way, to cover up his own inadequacies.

9. His regular and chronic use of multiple Net names is indicative of this self-delusion. He doesn't appreciate that he cannot fool everyone all the time. Even the best get caught out when they do it long enough (e.g. Madoff), and in his case, he has been called out more than once. His signature is to ignore and continue.

10. Rationally, he knows it is self-delusion, but because it is a delusional act of perceived self-preservation, we cannot expect him to acknowledge this publicly. Ironically, healing for him would actually require him to reach out to someone in the real world and acknowledge that his past behavior is wrong so that he can heal and move on. But seeing how entrenched his behavior has become, this would be almost impossible for him to do by himself. I believe he will find it easier to heal when he reaches out to someone physically to break out from his habit (e.g. from not using multiple nicks, not publicly slander others on personal basis on the slightest hint of threat, to engage in reason, to be emotionally mature, and other signatures above).

11. As mydreamgetrich has suggested in the past, his chronic behavior is likely linked to isolation, coupled with lack of family/corporate/social/other meaningful network/relationship. He is most likely single, with no intimate / superficial connection/relationship in the real world. It doesn't help that he reinforces this behavior regularly in his blog. It has gotten to a stage where for years, he has not thought twice about lying to others over the Net. It had become habitual and second nature to him long ago. Hence, even if he were to try to stop by himself today, I’m not optimistic that it would be a permanent change, without some form of public acknowledgement or reaching out to a real life person or seeking the help of a medical professional.

12. So, as much as we like him to reflect on this article for his own benefit and hopefully see a permanent change in his behavior, the truth is statistically and from personal experience, it very rarely happens - don't be surprised if we don’t see that happening ... a strong and long lasting momentum like this is not likely to stop immediately and reverse …..

13. Going forward, if/when he spams again, I think the way you handled it (which is to remove it from sight after you've read it) is the correct way ....... there is no emotional benefit for you to hang on to it when it is clearly slanderous ........

And everytime when I receive such "spams", I would pause and reflect on his own pain, what drives him to do this, and reflect on his own inadequacies to find a better channel.

I reflect that since he is unable to deal with whatever that really bothered him, this became his outlet ….

I reflect that it's not dissimilar to an irresponsible father who drinks and come back home to physically abuse his wife/kid when he perceives (whether real or imaginary) that something didn't work out right at work/money/etc.

And then, I proceed to put that slander out of my sight.

14. And how should others respond when the "spammer" strikes again? Here, I think similar steps to 13 applies also. Read it ....... think about it ............ and reflect on the spammer's own pain ........... clearly he is in pain which drives him to do what he does .............. and because of hs own inadequacy, he does what he does and we should reflect on his inadequacy ................

So, in short the best thing that we can do for him as third parties - when he "spams" - is ironically to stay silent.......... Perhaps send a short note or show of support to Moolah .......... Tell Moolah tht you know that it has nothing to do with him ...... Acknowledge that it has nothing to do with us third parties ........... and acknowledge that it has everything to do with the spammer where regardless of what we say, it did not stop the spammer before ............

If the spammer has genuine friends and followers, they should continue to try to advise him to stop.

15. And when we are publicly slandered, we too should first reflect on our own egos – if the slander and allegations are untrue, why did we respond in a way that we later don't feel so good about our initial response? In my case, when I reflected long and deep enough on it – usually it boiled down to our own ego.

We may reason away that every human being usually have a limit that when pushed repeatedly over a long period of time – we simply snapped under duress and when under constant harassment.

But sometimes, we also need to reflect further on why we snap. Ultimately, for me, it comes back to my own attachment to my own ego ...... and I believe it is also true for many. The truth is, we don’t feel good when we’ve been slandered publicly. We fear others may start believing the slander to be true if repeated long enough. But when we fear, it reflects our inadequacies to deal with that fear.

16. And dear "spammer", as I know that you are reading this, my advice is try to let IT go …. Whatever IT is, decide and resolve to let it go ….. and then, let it go ……..

It is really not worth your emotional well being to be clinging on to it for so long …… The longer you cling on to it, the longer and worse the poison becomes.

You should not be too fearful of what others have written ........ whether it is TA vs FA ............ whether it is an article that points out the negative side of a stock .............. much has been debated before about TA vs FA, and much has been debated before about individual stocks good and bad points. All stocks have good and bad points ....... There is no need to resort to public slandering ........ there is no need to be fearful.

As I tried to allude to you long ago when you first wrote to me under a different nick, don’t let the fear (or loss or hatred) poison your heart ….. Don’t become the person you hate to be most ………

For what it is worth ......... in my own heart ........ I have forgiven you for EVERYTHING that you have done a long time ago, and no longer bear any hatred towards you …….

If my advice is worth anything, whatever IT is that you have been clinging on so strongly to your heart, “Let IT go”. It is not worth clinging on to.

Best wishes,

Seng.

PS. I am only a human being, so, don't take me too seriously too ......... and of course, you are always right ;-)

PS2. I have decided to disengage comment moderation. I am doing so because I trust in the Buddha seed and the goodness in the Spammer's heart. I realize what I said may appear harsh, and perhaps his response to my article would be a way for me to redeem my past karma ..........

Umno Youth angrily mobs Karpal in Parliament

2009-02-27T18:20:00.002+08:00

As a Malaysian, this is downright disgusting.

Here I am thinking and wondering why should Malaysian children look up to Malaysian Politicians (particularly those from Barisan Nasional) for moral compass and role model, when they are just samsengs in disguise and in power.

There is simply no need for any political party to mob an MP in Parliament. Just take a look at what transpired, as reported by a pro-government media here. If the pro-government media already paints such disgusting picture, what about hearing from the other side? http://nst.com.my/Current_News/NST/Thursday/Frontpage/20090226161456/index.pda

The drama started when Karpal was confronted by the 22-member group comprising Selangor Umno Youth members as the MP was making his way into the parliament's tower block at 2.45pm.

[Seng: Just imagine - it takes 22 Youth to confront 1 in a wheelchair. Real bravery by UMNO Youth!]

The group had been waiting for Karpal since 1.30pm.

Noticing the veteran politician, the group surrounded the wheelchair-bound Karpal and demanded that he apologise for remarks made against Umno Youth in the House on yesterday.

[Seng: Yes, real "bravery" by UMNO Youth - 22 *jantan* surrounding an elderly guy in a wheel chair and then make demands.]

However, Karpal refused to recant his allegation that the wing had sent bullets in the mail to him recently, as well as using the term “celaka” (damn) to berate the movement.

[Seng: UMNO Youth loyalist might argue that this is provoked by Karpal, but that argument simply doesn't hold water. Karpal uttered the words IN PARLIAMENT. I don't necessarily agree with his phrase celaka, and I can understand why he suspects it is UMNO Youth who sent it, but that's Parliament for you where Politicians on both sides frequently accuses the other side of doing certain things without proof. What is new in Parliament here? And more importantly, why bring this issue OUTSIDE Parliament? As Rakyat, I *jelak* when I see this physical "gangster" behaviour.]

Pakatan Rakyat MPs - Fong Kui Loon (DAP-Bukit Bintang), N. Gobalakrishnan (PKR-Padang Serai) and Lim Lip Eng (DAP-Segambut), who just came back from lunch, went to Karpal’s aid after being informed by parliament staff of the incident.

They claimed they were roughed up by the mob, with their bodies pushed and shoved by several Umno members. "One even pulled my tie. At one point, I nearly fell into the fountain," Lim claimed.

[Seng: When our Police and Parliament Security do not protect MPs in Parliament, this is very, very bad for Rakyat. I pity Ordinary Malaysians who voted for Barisan]

However, the trio manage to wheel Karpal into the House, while the Umno Youth group continued to heckle and shout at them.

Moments later, Liew Chin Tong (DAP-Bukit Bendera) tried to cool down the situation but he was greeted by more shouts."Who are you? Go away," shouted several members of the mob..Karpal's son, Gobind Singh (DAP-Puchong), who sprinted to his father's aid, traded verbal blows with the group.

[Seng: Just imagine this - UMNO Youth members who has NO RIGHT to even be present in Parliamentary buildings, telling and shouting to an MP "Who are you? Go away!". They might as well come to your house and shout at you "Who are you? Go away!" It should be obvious these Youths have no business in Parliament, yet, Who are they to tell the MPs "Who are you? Go away!"! ]

At one point, Gobind and a member of the mob had to be restrained by their respective members to prevent fisticuffs. The situation improved after BN Backbenchers Club (BNBBC) chief Datuk Seri Tiong King Sing appeared and urged the group to disperse. "Please go back and respect the House. We can't have such incidents happening here," he told them.

Gombak Umno Youth chief Megat Zulkarnain Omardin, who was part of the mob, told reporters that they are Umno members “willing to die defending the party.” "He (Karpal) must stop insulting the Rulers and the Malays," he said. “Our patience is running out.”

[Seng: What about willing to die to defend the Ruler and Rakyat? Yes, I hear you loud and clear when it comes to defending the Party, but what about the Ruler and Rakyat?

You see, this is clearly double-standards.

When PM Abdullah challenges the King publicly in early 2008, I don't see anyone sending him nor Najib live bullets. But Karpal got it, and not just once.

When PM Abdullah challenges the King publicly in early 2008, I don't see UMNO Youth storming into the PM's office or stalking Parliament waiting for him and then, ganging up on him to demand he stops using the mass media, the AG, and all other machinaries to influence the King to make Idris Jusof the Terengganu MB and not Ahmad Said. But 22 UMNO Youth members think it is their duty to die for the Party to gang up on elderly, wheel-chair bound Karpal Singh.

Wow. Real jantan.]

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It is obvious this is politics of the worst kind.

Khairy of course sees it opportunistic to champion UMNO Youth claims here - http://www.bizedge.com/edge-tv/864-umno-youth-wants-proof-on-karpals-bullet-threat.html

Doesn't matter if he has to unfairly label Karpal as he sees fit. Doesn't matter if he is being unfair to everyone else. The only thing that matter is his own personal image, and that he's seen as championing UMNO Youth. See the youtube and judge for yourself.

1. Khairy demanded that Karpal utters the same words outside Parliament.

(What on earth for? Karpal's behaviour inside Parliament is no different than any other BN politicians, who slander each other every single day they meet. As rakyat, I truly detest this, and I am completely disenchanted with all the slanders and politicking that goes on in Parliament. I definitely DON'T WANT to see this behaviour OUTSIDE Parliament. Of course, I don't want to see it inside parliament too, but that would be impossible due to the nature and character of these MPs in Parliament. Doesn't Khairy realizes our country have greater problems that the government urgently needs to solve?)

2. Khairy demanded that Karpal provides proof within 24 hours, slanders Karpal, blah-blah-blah

In short, I couldn't care less. There's no need for a 3rd Party like Khairy to throw more fuel to the fire. Besides being unfair to Karpal - he's the victim of a serious death threat which I find totally unnecessary - there are other more conciliatory ways to deal with Karpal's accusations that deals with UMNO Youth's name.

If Khairy didn't call for the press conference or UMNO Youth gang up on Karpal physically, I wouldn't even realized Karpal accused UMNO Youth.

At this time of great economic crisis, the country needs both sides to work together productively and efficiently.

It definitely doesn't need Najib to steal Perak to create all this chaos and to use Royalty.

For our future PM, this shows Najib is NOT serious about the Rakyat's welfare, but is clearly MORE interested in securing power - by hook or by crook.

So, going back to my first question - why should parents of young children encourages their kids to use these politicians as role model, when politicians behaves like this both Inside and Outside of Parliament?

Why can't our MACC be more Independent and more Professional too?

2009-02-25T07:10:00.004+08:00

This is complete defiance and total rubbish by the MACC as far as I am concerned - http://m.themalaysianinsider.com/articles.php?id=19095. Despite Mar 2008 GE results, it is clear NOTHING has really changed in Malaysia politics - if anything, things appear to be getting worse. Malaysians really have no choice come the next GE - even if all PR candidates were to be disqualified and they have to put up some monkeys against BN, there should be no contest.
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MACC defends public disclosure of Khalid case

By Neville Spykerman

KUALA LUMPUR, Feb 24 — The Malaysian Anti-Corruption Commission (MACC) defended today the public disclosure that there was “strong evidence” of abuse of power against the Selangor Menteri Besar.

MACC deputy commissioner Datuk Abu Kassim said his boss was acting within the law when he made the statement to the media.

Tan Sri Khalid Ibrahim is accused of abusing his powers to purchase cattle, which was distributed to mosques to his constituency, and to maintain his personal car.

The disclosure, which has been labeled as selective prosecution by Pakatan Rakyat (PR) was made by MACC chief commissioner Datuk Seri Ahmad Said Hamdan four days ago.

Abu Kassim said the Malaysian Anti-Corruption Commission Act 2008 provided the powers to Ahmad Said to make the disclosure.

Section 29 (4) states that a report shall be kept secret and shall not be disclosed by any person to any person other than officers of the commission and the public prosecutor until an accused person has been charged in court for an offence under this Act or any other written law in consequence of such report, unless the disclosure is made with the consent of the public prosecutor or an officer of the commission of the rank of Commissioner and above.

“My interpretation of Section 29(4) is that the disclosure was made according to the law.”

When asked by The Malaysian Insider if the law allowed for the MACC chief to express his personal opinion to the press, Abu Hassan said he was not aware that Ahmad Said Hamdan statement was a personal opinion.

However two days ago, Minister in the Prime Minster Department Datuk Seri Mohamed Nazri Abdul Aziz reportedly said (in The Star) that Ahmad Said Hamdan was only giving his point of view when he told the press they had sufficient evidence against Tan Sri Khalid Ibrahim and added that the Attorney-General’s Chambers will decide whether to press charges.

Meanwhile Abu Kassim said only new corruption cases will follow under the MACC Act, which came into effect this year.

Under the new procedures the outcome of all investigation will be forwarded both to the Anti-Corruption Advisory Board, which is made up of esteemed members of the public, and the Attorney-General's Chambers.

“All cases which are closed will have to be tabled before the advisory board, who represent the public and we hope this will put a stop to allegations of bias.”

However he said previous corruption cases which occurred before the MACC Act came into force will be investigated according to old Anti-Corruption Agency (ACA) procedures.

The MACC was officially launched by Prime Minster Datuk Seri Abdullah Ahmad Badawi, at the Putra World Trade Centre, this morning.

During the launch Abdullah said he was confident the restructuring of the previous anti graft agency which had evolved into the MACC, would increase its effectiveness.

”The MACC is modeled after some of the best anti-corruption agencies in the world such as the Independent Commission on Anti-Corruption (ICAC) Hong Kong and the Independent Commission Against Corruption in New South Wales, Australia.”

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Comments:

1. I am dissappointed that the press still doesn't ask the right nor critical questions.

The right and critical approach is to first appreciate that Section 29(4) contains 2 approaches - the "Normal" approach and the "Special" approach. This is very clear from above that the "Normal" approach is for MACC to NOT disclose and to proceed charging in Court, whereas the "Special" approach is to do what MACC Commissioner did.

So, it is important to appreciate that MACC have a choice in deciding which approach.

And so, for Rakyat to have greater confidence in MACC's professionalism and independence, it is critical for Rakyat to understand under what circumstances and under what "principles" are the "Normal" approach not used, and the Exceptional approach used.

So, is this because Khalid is an MB, and an MB is deemed to be very important?

If so, will MACC then apply consistent standards to all MBs in the States, including highr ranking officers such as the PM, DPM, etc.?

If not, then, what is the criteria? Is the criteria because Khalid is a Pakatan MB, and this exception only applies to Pakatan States?

What is the conceptual principle that decides when the Special clauses are invoked, and when the Normal approach is used?

Suka suka invoke the Special Clauses?

Is this the primary purpose of Parliament in drafting laws? Is it to give certain people God-like powers where suka-suka, they invoke?

2. I have lived in both Australia and Hong Kong for over 7 years, and never once have I seen the NSW and HK Commissioners expressing their personal opinion in the same manner as Ahmad Said did 4 days ago against Selangor MB.

3. Technically, I do not deny that just looking at Section 29(4), the Law appears to have given GOD-LIKE powers to the Commissioner to say ANYTHING he likes to the press.

Four days ago, Ahmad Said exercised his God-Like power.

MAYBE, it's within the letter of the law, but does it follow the spirit of the law? Does it make it RIGHT?

Is it PROFESSIONAL?

And after this episode, do you perceive MACC to be independent now?

4. As I understand it, it involves Khalid using his own personal car for State use and thus require maintenance to be done by the State. He also directed State Funds to the tune of $100k to sembelih cows for a Rakyat's consumption for a once a year celebration.

Let me ask this simple question - who benefitted from Khalid's so called "abuse of power"?

He used his own car for State business - doesn't this already save the State some money?

The cows are not even for his own personal consumption! - I mean - how much beef can a person eat ???

Is this really so serious that the MACC Commissioner must urgently invoke the God-like Section 29(4) to make an exception to disclose to all Malaysians that Khalid is guilty when he is not even charged yet?

Don't get me wrong -- I'm not suggesting Khalid be let of. Far from it. Continue to investigate Khalid or any MB suspected of corruption. But, if I were running MACC, I would PRIORITIZE. If it has BIG $$$, then, I would want to be closely involved. If it has SMALL $$$, then, maybe this is something one could delegate for staff development, and can afford the normal channels.

And the audacity to declare that the MACC is modelled after the HK and Australia's Commisions ...

This is not even accurate, and by any imagination, stretches the truth by a long mile. MAYBE Malaysia might have borrowed a few parts here and there in writing the MACC legislation, but to imply it is on par with HK and NSW is utterly and completely MISLEADING and IRRELEVANT. I wouldn't even print that if I was the editor.

Anyone who has lived overseas long enough in either HK or Australia will immediately recognize the HUGE differences in this type of cases, between HK/Australia and Malaysia's MACC!

5. Doesn't the MACC have more serious corruption cases to pursue? Ones that involves hundreds of millions of $$$ if not Billions of $$$ of taxpayer's monies like the Port Klang Free Zone, the $500 Million+ Submarine maintainance contract, etc?

Why not use Section 29(4) exception against really serious alleged crimes that apparently involves the future Prime Minister?

Is corruption in Malaysia seriously limited to one car and a few cows?

What is happening to the Auditor General's reports on corruptions that are far larger than a Car and a few Cows?

Sadly, I don't see an end to this.

The only chance Malaysians now have to reclaim their country is through the next GE.

Even then, it is not clear if it will stop the rot.

Why can't our Police be more Independent and more Professional?

2009-02-25T06:42:00.004+08:00

In the scheme of things and all the abuses that the Police are accused of being guilty of, this particular case appears minor. But looks can be deceiving. It speaks volumes of the lack of independence and the lack of professionalism of Malaysian Police force.

The article here - http://m.themalaysianinsider.com/articles.php?id=19109

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Bar slams police for questioning Perak Speaker

By Debra Chong

KUALA LUMPUR, Feb 24 – The Malaysian Bar Council has denounced the interrogation of the Perak state assembly speaker by the police.

Its president Datuk Ambiga Sreenevasan said yesterday's police questioning was “ill-advised” and “violates the doctrine of the separation of powers in the legislative assemblies”.

“It’s setting a dangerous precedent because the Speaker cannot be interfered with,” she told The Malaysian Insider today.

“He enjoys certain privileges and immunities under the Federal Constitution and certain enactments in Perak,” she added.

Ambiga explained that the implications of the police’s action is very dire, even if the questioning appears to be a routine procedure.

“Once it starts, no legislative assembly is safe anymore. No speaker will have the freedom to carry out his functions and duties as speaker if he is subjected to questioning by outside forces,” she said, noting that V. Sivakumar was called in for questioning in his official capacity.

“Unless respect is given for certain basic, core principles, if anything goes, it will not promote the rule of law,” Ambiga concluded.

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Comment: The concept of democracy, the concept of separation of powers, the concept of Parliamentary immunity and privileges are very clear in a true democracy. The Police have every right to question V Sivakumar in relation to say a murder investigation, or a robbery investigation, or any other criminal investigation, but they have ABSOLUTELY NO RIGHT to question V. Sivakumar in relation to his performance as the Speaker in Perak State Assembly. V. Sivakumar does NOT report to the Police, the Police simply has no jurisdiction in this area!

The obvious question is why does the Police do this? Why waste public funds and resources to question V. Sivakumar in relation to his role as the State Assembly Speaker? Why not go after the REAL criminals and solve real crimes?

Who directed the Police to do this?

Why intimidate the Speaker in this way?

Imagine if you are a businessman. Imagine one day, a gang of 100+ summoned you to visit their office for questioning. They did not send 100+ people, but just a couple, but you know they belong to a gang of 100+. They question you on your business. Wouldn't your first question be why are you questioning my business when it has nothing to do with you and I have not broken any law? The analogy is very similar to what's happening to V. Sivakumar!

Is our Police Force simply unaware that they need to be independent of politics?

This may seem like a minor issue - and those in Power wants you to think it's a minor issue - but when Rakyat continues to NOT stand up to defend the role of the Speaker, then, don't act surprised later when Malaysia loses its democracy. Every daily act like this - however small - chips away slowly but surely at our country's democratic system.

Some say, Malaysia has lost her democracy 2 decades ago. How will she regain her democracy, if this type of mentality continues?

Sigh.

Some facts, thoughts and statistics on Pre-Marital Sex

2009-02-24T14:13:00.002+08:00

This post is inspired by the recent controversy surrounding Ms Elizabeth Wong's resignation, where some strongly commented that it is morally wrong for her to engage in pre-marital sex, and so, she must resign.

My honest personal view is that such comments are full of assumptions and hypocrisy. And hypocritic leaders cause far greater damage to the society than the society care to admit publicly.

And as a parent today and a kid once a long time ago, I know that I disliked being brain-washed. The problems with brain-washing kids is that kids today are a lot smarter than that. They have far greater access to information today than 20 to 30 years ago. They have plenty of time and interest to discuss extensively with their peers, or to be pressured by their peers if they lack information. I believe the best thing that we can do as parents is to pro-actively encourage our kids to discuss the issue with us in a open, non-threatening and approachable manner, so that they can come to an informed view about this matter, before they are peer pressured. In reality, parents have no choice anyway -- all kids eventually grow to become adults, and the best thing that parents can do is to try to ensure that our kids grow up to become independent and responsible adults.

It is with this spirit and intention that I share the following information with you.

1. Pre-marital sex amongst adolescents in Malaysia
The study is reported here in 2006 - http://www.ncbi.nlm.nih.gov/pubmed/16752015.
Basically, this is a confidential study conducted on 4,500 students aged 12 to 19, in Negeri Sembilan, published in MEDLINE. The full report is also available in the Internet. The results are highly interesting:
* 8.3% of Males students aged 12-19 have had sex before.
* 2.9% of Female students aged 12-19 have had sex before.
* The average age of these group first having sex is ... 15!
* Of these 4,500 students, 20.8% had taken alcohol! 14% smoked cigarettes! 2.5% tried marijuana! 1.2% tried ecstasy pill! etc.
* As much as the society tries to pretend that this doesn't exist, the truth is they do, and an open and honest admission that these practices exist is the FIRST step that the society can take to tackling these issues.
* Also note that the study is on school kids up to the age of 19. Of course, kids can get married late, and there are some who don't get married until they are in their 40s.

2. Trends in premarital sex in the United States, 1954-2003
Link here: http://www.ncbi.nlm.nih.gov/sites/entrez?Db=pubmed&Cmd=ShowDetailView&TermToSearch=17236611&log$=activity. This is from a 2002 survey also reported in MEDLINE, and is a bit dated, but my own view is that it is still representative. The key result is that by age 44, 95% of respondents (94% of women, 96% of men, and 97% of those who had ever had sex) had had premarital sex.
* This should not be surprising.
* Notwithstanding what Christianity teaches that pre-marital is against the Bible's teachings (see here for example - http://www.allaboutworldview.org/premarital-sex.htm), the reality is that the American society engages in pre-marital sex.
* It is best not to be quick to jump into conclusion about anything, but just observe.

3. Premarital Sex in China
Link here: http://www.china.org.cn/english/2003/Oct/76980.htm
* Also a bit dated (Oct 2003).
* The key result here is that the ratio of premarital sex in China varied from region to region, ranging from the lowest 44 percent to the highest 90.75 percent. The bulk of the regions are in the 60 percent to 70 percent bracket.
* This is an incredible study - it analyzes 196 Research Reports conducted from 1990 to 2000.
* If the report is true, this study appears to be the right first step for China in formulating responsible public health policies. You cannot have truly successful policies without accurate data.

4. Malaysia Durex Survey on Teens Pre-marital Sex
http://thestar.com.my/youth2/talkback/tbadvice.asp?Catid=9&sid=107&page=1
* A bit dated, reported in 2003, and the survey probably done at the start of 2003, if not earlier.
* Key findings are 46% of Malaysian teens have pre-marital sex.
* Note that this figure is substantially higher than the Study in 1.
* The Durex study refers to "teens", and does not appear to include those in their 20s, 30s, 40s who also engages in pre-marital sex.
* It is difficult to pre-judge whether the Durex figure of 46% is more or less reliable - my feeling is that this seems to be higher than what I have personally expected (since we are talking about teens who are mostly not yet adult and independent), and the Study in 1. appears to be a little bit on the low side.
* Is 46% figure within your expectation?

So, what are we to make out of these statistics?

The American study showed that 95% of Americans engages in pre-marital sex. The China study shows that pre-marital sex is on the rise, and as early as 1990-2000, the ratio is already around 60%-70% of Chinese, and in some region, as high as over 90%. I have no doubt the figure today for China is rapidly approaching Americans, although my guess is say 80%-85%. The Malaysian Durex study showed that nearly half of our teens are already engaging in pre-marital sex. I have no doubt the true pre-marital sex in Malaysia (including adults in the 20s, 30s, 40s) are higher than 60%-70%, and maybe 80% would be one guess.

In short, there are very strong evidences to indicate that pre-marital sex is definitely the norm rather than the exception. I have no doubt that the majority of Malaysians today engages in pre-marital sex. I have no doubt that the trend is on the rise since the 1970s.

MAYBE we might engage it less than the Americans and the Chinese, but the truth is I'm really not so sure. The reason is because we are human beings, with needs, just like anyone else, and in traditional, closed, hypocritical cultures like Malaysia, more often than not, the under-reporting is usually a more prevalent problem.

But the thing to realize is that Malaysians have a choice. We don't have to choose to continue to be hypocritical. The majority does it, and the key is to be informed and be responsible. No one wants to have more single mothers and unwanted pregnancies in this world. No one wants more sexually transmitted diseases in this world. No one wants to create more emotional wreck amongst teens and young people in this world from irresponsible sexual practices. This is something we can all agree.

But the solution is not to pretend that pre-marital sex does not exist, when it clearly does and the majority engages in it.

The solution is not to create more guilt by bringing in religion and then demanding that we stop engaging in pre-marital sex. This just creates more emotional wrecks and psychopaths if pushed to the limits.

It would be naive for governments and political leaders to think that they can dictate our lives and our freedom of choice, and to dictate our moral values. These are individual human rights. Furthermore, public health policies that relies on closing our eyes and being blind to reality is extremely dangerous, and a complete waste of public funds. More often, corruption and personal gains are the norm.

No doubt it is a complex society issue. But as responsible parents, whilst our first plan is to not want our kids to engage in pre-marital sex, for many parents, not only would that be hypocritical, it would also not work and not be effective. We must remember that eventually, our kids will grow up and as parents, we have a role to play to ensure that they grow up to become a responsible and independent adult. It is futile to try to stop time, and to try to stop this growing up process.

And the truth is -- if I must choose role models for my kids - between Elizabeth Wong, and Khir Toyo/Syed Hamid, there is no doubt who I will choose.

Can you tell the difference?

2009-02-20T06:09:00.002+08:00

... between Samgoss and okating? *grin*

His comments are here - http://fusioninvestor.blogspot.com/2009/02/some-thoughts-on-stock-calls.html

My reply to him is also there as well, but I'll reproduce it here just to be clear.

Geeee ....

Why is it that I can't tell the difference between Samgoss and okating's comments?

Are you both twins?

Look.

If you don't like my blog, don't read. It's that simple.

When you insist to visit here and keep leaving comments that clearly shows to everyone how silly you are, that's your problem.

Not mine.

Anyway, why do you insist in reading my blog?

Are you financially hurt by my comments that a certain blogger is manipulative?

Is that it?

Or is it because your regulars no longer contribute as much as they did before, and your own pocket is hurting?

Look.

If your regulars are buying your stock calls off you, then, GREAT!

No need to act like a child and come here and whine.

Do I, Moolah, Dali, nexttrade, and every other blogger need to go to your blog and whine?

LOL!

Grow up please!

My thoughts on Elizabeth Wong

2009-02-20T02:02:00.006+08:00

Even though I don't live in Selangor, by all accounts, Elizabeth Wong is a great Yang Berkhidmat. Bukit Lanjan was very lucky to have someone like her as their YB.

And thus, the past week has been one hell of a shock! A lot has been written over the Net, thousands have commented, and I am simply aghast by comments made by Toyol, Syed Hamid and of course the numerous goons masquarading as normal people over the Net.

The facts were that the photos were taken without her permission whilst she was sleeping.

The facts were that I couldn't find a single nude photo or video of her in the Net. Personally, the photo I could find is one where it shows her wearing spectacles when she was sleeping -- my immediate thought was whether this is a fake, since one sees many "doctored" photos over the Net, that nothing surprises me anymore. And yet, I did not see anything offensive about Ms Wong at all, which makes me wonder whether there is such a photo, or not let alone a video.

However, I did find tons of videos at youtube - there were dozens with titles like Elizabeth Wong, Bogel, etc., but everyone that I clicked did not show anything offensive of Elizabeth Wong at all. Some were downright misleading, showing pictures of other women in compromising positions, but NOT Elizabeth Wong.

Which made me wonder - was there truly a photo/video, or did the Malay Mail/BN politicians merely claimed to have it in their hands in order to force Ms Wong to resign.

I am also surprised how Ms Wong can be quick to admit that it is her. A seasoned politician would have consulted her lawyers first before admitting. My only explanation is that she is young and green, and she is someone who tells the truth, hence, all the more reason why I feel Malaysians need more people like her, with energy and good character than someone like Toyol.

I am also extremely dissappointed that Elizabeth have had to resign her posts. In my opinion, she has done NOTHING wrong at all. She's clearly the victim, and it is very unfortunate that she had to resign for the party's interest. I can see the political benefit for her resigning (e.g. this should trigger a by-election, and the results of the by-election should send a very strong message at least to Toyol, Syed Hamid and everyone else connected with this gross invasion of privacy and malicious attack), but in a real developed country and society, she really shouldn't have needed to resign.

Let's be frank and ask ourselves - what WRONG did she really did?

Without seeing the photos, I can only ass-u-me what she did which is by most accounts, she slept in a sarong without underwear in her own bedroom, and apparently, there is strong suspicions that it could have been the ex-boyfriend who took some grainy photos of her in a rather compromising position.

If this is true, then, she shouldn't have resigned. The strange thing is the earliest press statement said she will continue to serve the constituency, but later on, one read in the press that she intends to resign, due to various pressures. Sadly, resigning only hand a temporary win to the perperators, and embolden them to continue this type of dirty politics, but I expect by-election should tell them loudly the Rakyat's wishes.

I kept asking myself why is it that Ms Wong needs to resign when she has done nothing wrong.

I scout around the Net, talked to various people, and it seems the strongest reason given is that the society cannot accept a political leader who has nude photos distributed in public domain.

And this has to be amongst the BIGGEST and STUPIDEST thing I have ever heard in my life.

First, I challenge any of the readers here to send me her nude photos, because I sure as hell cannot find one! Everyone that I spoke to haven't seen her nude photos. So, are we to ass-u-me that there are such nude photos?

Second, so what. So, what if there are nude photos of her. She's the victim! It was taken without her permission! It was a GROSS invasion of her privacy! Are our politicians so stupid to think that Rakyat cannot tell the difference? What is to stop BN with its vast riches and access to superior technology to spy on other PR politicians systematically in order to kill their political careers when the time suits them? Imagine offering RM $1 million to capture on picture or videos of PR politicians showering naked in their own bathrooms, or peeing in a public toilet, etc. (Or maybe BN already has a database and are just waiting for the opportune time - test it on the lower rungs first like Ms Wong, and if it works, then, escallate it to more senior ones like DSAI, Lim Kit Siang, Hadi Awang, etc.).

Thirdly, given the quality of our political leaders which starts from Abdullah, Najib and the rest, are we serious in expecting our children to look up to POLITICIANS for moral compass??? Seriously? I would never consider the idea of telling any of my children, nor those of my relatives and friends to use Abdullah, Najib or any of Malaysian's politicians as guidance. Perhaps Ghandi might be an exception, but never Malaysian politicians.

Fourthly, so what if Ms Wong is a single woman who engages in pre-marital sex? (Actually, I seriously wonder how on earth could an apparent claim of nude photos led one to conclude that she engages in pre-marital sex! For example, if this was in the court of law in a Western Country, the judge could NEVER conclude this on the basis of an apparent photo which cannot be produced in court!)

Anyway, so what if she engages in pre-marital sex? The truth is the majority of young Malaysians today engages in pre-marital sex. Ask anyone under the age of 40 who is married, and it is probably very rare for the couple to both be virgins when they get married. My rough guess is maybe only 10%-20%, i.e. the other 80%-90% or the majority are most likely NOT virgins on their wedding night!

If in doubt, do a confidential Merdeka Centre Poll and see if I'm right or not!

And also, not being a virgin at the time of marriage isn't against the law! And this is nothing to be ashamed about, because it is a fact of life!

Some prudish idiots claimed that religion does not promote pre-marital sex, and so, Ms Wong must resign! But the same religion does not condemn such persons indefinitely for life too. For example, talking about Buddhism, if a non-virgin were to go to the Temple and vows to become a monk/nun, the Temple will NOT reject him/her on the basis that he/she isn't a virgin! This is a fact of life. Buddhism does not condemn a person just because you are not a virgin when you get married! Which religion condemns a person to hell just because he/she is not a virgin at the time of marriage???

As for Christianity, well, just look at the Western Christian world and you will see that pre-marital sex is nothing surprising, but well accepted as part of real world. It is as natural as breathing, eating and drinking. Of course, the priest does not encourage it, with good reasons. And when one engages in any sexual activity, one must also respects others around them even in the Western World, but Ms Wong is not guilty of public sexual display. She is the victim, and the nude photos (if this exist) is not her idea nor her willing participation!

For BN / UMNO leaders - even if there's just one or two of them - to condemn Ms Wong and asking for her resignation is PURE and UTTER HYPOCRISY of the highest order! I am not a Muslim, but if this is what they demand because of Islam, then, I am sad to say that PAS is a lot more moderate than UMNO in this regard.

As parents, it is tough to tell our children why Ms Wong has to resign for something that she didn't actively nor intentionally do, but where it is obvious that she is a victim of a very unfortunate circumstance.

How will you explain to your kids? How will our teachers explain to our kids at school?

Another reason often advanced to support why she has to resign is that she was a poor judge of character in choosing her boyfriend.

Firstly, this isn't necessarily related to her work -- there are many leaders and professionals around the world who are divorced, married to psychopaths, etc. and yet are still very capable leaders and professionals. In other words, competency in the job and private life are 2 completely different things. And by all accounts, Ms Wong is a very competent YB.

Second, in which job interviews do employers ask you whether you are still a virgin or not? Did they ask you if you have had an affair before if you are married? If not, why should Ms Wong be asked to resign when she obviously has done nothing wrong in her capacity as a YB? Do anyone naively think Najib or his son does not engage in extra-marital affairs or pre-marital sex?

Thirdly, when one is in love, love does sometimes blind us to the weaknesses of our partners. Only time will open our eyes, and in Ms Wong's case, it appears that time did opened her eyes, and the ex-boyfriend is now rightly an ex-boyfriend. It is not wrong to be human and open ourselves to humanity, if we truly love someone, and Ms Wong's case appears to be a common one amongst lovers, where she trusted her boyfriend then. This is not a serious crime, and trusting our loved ones is one of the many things that makes us true human beings. Until they break our trust.

Are Malaysians not human beings too?

Anyway, this is a good article written by Brian Yap in the Malaysian Insider yesterday - http://mt.m2day.org/2008/content/view/18285/84/

He mentioned about 3 characters - Hishamuddin, Michael Phelps and Obama. The key points are Michael Phelps and Obama both publicly admitted that they both have smoked marijuana before. This to me is probably more serious than Ms Wong's pre-marital sex. But this hasn't stopped Michael Phelps from being one if not the greatest swimmers the world has ever known. Nor has it stopped Obama from being the first Black President of the United States. And who are we - to require a higher standard of Ms Wong - than what the world asks from Michael Phelps and Obama?

....

Toyol *bang head on wall*
Syed Hamid *bang head on wall*

Needless to say, come next election, I trust we all know what to do ...

"The Rumour of My Death have been greatly exagerated" grin

2009-02-18T12:52:00.002+08:00

I think it might have been Mark Twain who first said it, but the quote has been around for a long time. *smile*

Some of you will know that I've been away from this chatbox over the last couple of months because I have been trading the US markets on an intra-day basis during this time.

I've also been a prolific writer in my Fusion 2 blog, writing about Intra Day trading in the US markets, and US and global markets in general, mainly with lots of tables and charts. They are mostly copy and paste from a variety of sources for my own personal future reference.

I appreciate that as a result of shifting to trading US markets, this chatbox has been quieter in my absence.

Naturally, I do have some regrets, but at the end of the day, I really can't help it, since as it always have been the case since I started blogging, that the chatbox and this blog is always a secondary consideration. I've always viewed blogging and chatting as something fun and enjoyable thing to do, and perhaps, shares my own honest views with the investment community which I hoped may have been beneficial, basically trying to do something worthwhile and interesting whilst trading during Bursa trading hours. However, now that I'm trading the US markets with a completely different time zone, and I also do have other life priorities besides trading, something has to give, and I guess it is this blog by default.

However, not all is lost. Think of it like the old days before I had a chatbox and just a blog of articles. If I do find things of interest to write about, then, I will try to pen it here, although it might not be very frequent. The difference between this blog and Fusion 2 is that this blog is primarily on Trading/Investing in Bursa, whereas the latter is mostly focused on US markets and Day Trading.

My hope is that this place can continue to be a place where everyone will feel free to discuss investment matters in a mutually beneficial and constructive way. To a lot of extent, in my absence, it will become a reflection of the investment community, i.e yourselves. And if it's quiet, then, we all know that we are all generally shy Malaysians *smile*

Anyway, as always, good luck and best wishes in your trading and investing.

Until the next article!

Cheers,
Seng.

Some Thoughts on Stock Calls

2009-02-16T09:03:00.004+08:00

In general, I feel stock calls are over-rated.

There is often too much vested interest to emphasise "what to buy" than "when to buy".

To me, the WHEN is far more important than the What, although both are important. We have all seen the "anomalies" that:
- One can buy a good fundamental stock at the wrong time and lose money.
- One can buy a lousy crappy stock at the right time (usually, for a short time) and make an insane amount of money.
- And then, there is the trader who only trades one stock and lose money, and another trader who trades the same stock and made money.

The vested interest - when viewed over a fresh lens - is surprisingly prevalent.

Nearly everyone in the industry does it. They might do it with different intentions and extent. Some of the intentions are innocent (e.g. they just want to share), some as a service to their readers (e.g. with analysis of pros and cons), and they generally add some value although at a vastly different extent.

But the ones you have to watch out for are the one-sided recommendations that only tells you all the good stuff and none of the bad stuff. We all know that human beings are never perfect, and the same goes for organizations and stocks. Needless to say, the ones that employs manipulative tactics that rejoices in their new BMW, new house, shark fin soup and abalone and have dozens of fake supporters are best not touched even with a 10-foot pole *grin*

The skeptic's view (or is it the Wise View?) is that the only reason someone makes a stock call is because -- they already own the stock, and they want to sell it to YOU at a higher price. *grin*

This statement contains far more truth than you might think. *grin*

There are many types of stock calls. From a Net retailer perspective, you probably have seen
- "independent" professional stock calls like the S&P in Bursa
- "independent" stock broker reports like OSK, etc.
- personal advice from your broker/remisier
- bloggers from a wide range which includes remisiers, ex-analysts, etc.
- various websites and bloggers who explicitly recommend stocks especially during bull runs, but have rightly quieten during bear markets (partly, a reflection that timing or WHEN to buy is far more important than what stock to buy)
- And then, various blogs that shares with you publicly what they do, what stocks they buy, and of course, not to be left out ....
- the very dependent manipulator's stock calls whose primary objective is to make money at your expense (again, bring out the 10 foot pole please ... *grin*)

The best ones I find are the ones that explains his/her reasonings, and lay out the risks for all to see.

The reasonings are important - you want to know why the author thinks that the stock price will go up, the catalysts, the key drivers, and whether this is something important that the Market has mispriced.

The risks are important - you'll want to know why things will not pan out the way the author thinks it might.

Often, by reading widely (in the Net, it's very easy to Google for example), we will come across a broader range of ideas than what we might have if we were to only think things out by ourselves.

Viewed from this angle, reading widely and discussing with others have its merits, only so that we can form our own considered opinion later.

But even then -- with all its merits - even if you think you have gathered enough reasons to think that the stock price will eventually go up - my personal view is that it is still not enough.

There is still the issue of actual entry and exit timing which is so critical before you can actually bring home the profit.

And that is still - at the end of the day - the KEY issue. And entry and exits are something that you have to learn for yourself if you wish to be independent and successful in the long term. And as a trader, knowing what to do when things turns out wrong is equally, if not more important than knowing what to do when things turns out to be right. Make no mistake - the journey to financial independence through trading/investing in the stock market is not as easy as you might think for the vast majority. The only time it looks easy is during bull market runs when everyone makes money. *grin*

The New Hybrids

2009-02-10T16:34:00.003+08:00

It's not exactly new technology (the technology has been around for ages), but if Honda Malaysia can promote this, then, it's just a matter of time before the rest of the car makers globally do the same thing (give and take a year or two if not sooner).

What is most impressive is the 31 km per litre fuel consumption claim!

Whilst real life driving won't get this, apparently, you could get something like 15 km for every RM at current fuel prices. That's equivalent to 1,500 km for every RM$100!! For many, this is equivalent to at least 3 to 4 times improvement.

The technological improvement is simply fantastic!

Now, just imagine if just 10% of American drivers switch to Hybrid cars over the next few years. The fuel consumption impact globally could drop in a very significant amount.

The question - as always - is will the big oil cartels allow this? Or will we see this as one-off promotion which will die down over time as fuel prices stay low?

Looks like we do have the technology to defer "peak oil" for a few more decades yet.

Uncle Sam aritificially "goosing" the Data? lol

2009-02-04T00:13:00.003+08:00

I didn't say it. *grin*

Barry Ritzhold said it.

And I didn't pay him to say it *grin*

Here's what he says ....

Source: http://www.ritholtz.com/blog/2009/02/gdp-goosed-by-tarp/

________________

GDP Goosed by TARP (maybe)

Over the weekend, a hedgie friend added to our understanding of how bad GDP really was.

We already knew that the rise in inventory contributed 1.29% points to GDP growth. Without the inventory build, the GDP number would have been down 5.1%.And, it means that we are likely looking at a very ugly Q1 GDP.

What we also knew that the deflator fell 0.1% — the first decline since the 1954. If on top of inventories, the deflator had risen 0.4%, as consensus expected, GDP would have been down -5.6%.

What else was buried in the GDP report besides inventory and falling prices that was artificially goosing the data?

The answer? TARP. It turns out that the TARP money given to banks as recapitalization was a major factor in the total GDP number. (but see update below)

How? Uncle Sam buying a financial asset does not contribute to GDP under normal circumstances. But the Treasury purchased these assets at prices discounted to market prices. (Not as cheap as Buffett’s purchases, but still at somewhat of a discount).

...

So, besides getting a better understanding of how bad US GDP is, I now learnt a new meaning from Barry as to what the phrase "artificially goosing the data means" ...

lol

January Barometer

2009-02-03T21:34:00.003+08:00

According to Investopedia, the January Barometer is "A theory stating that the movement of the S&P 500 during the month of January sets the stock market’s direction for the year (as measured by the S&P 500). The January Barometer states that if the S&P 500 was up at the end of January compared to the beginning of the month, proponents would expect the stock market to rise during the rest of the year. " - http://www.investopedia.com/terms/j/januarybarometer.asp

Personally, I'm not a fan. I think it's a theory that the mass (i.e. generally ignorant public) can be easily duped with figures, but the reality is that it's not that simple, and probably does more harm than good if followed blindly. Just take a look at the table below:

At first glance, it seems to work - there are more years where the full year's returns are the same direction as January returns.

But a closer examination shows that there are at least 3 problems -- there may be more.

First, the full year returns include January returns. To be a predictor, it needs to separate out January, from the rest of the other 11 months (Feb to Dec), so, strictly speaking, January return should be EXCLUDED. So, in the table above, if January is down, it doesn't mean that the rest of the year is down. In fact, as shown below, in 6 out of 7 times that January is down, the next 11 months is actually UP! *grin*

Second, it doesn't work equally well when January is up versus when January is down. I leave this to you to study the table in detail, and to not blindly accept what Investopedia and any other newspaper columnist says about the January Barometer.

Consider the following years when January is negative.
- 1990 - Jan -5.9%, Year -4.3%, i.e. the rest of the year is actually positive!
- 1998 - Jan -0.02%, Year +16%, i.e. the rest of the year is actually positive!
- 2000 - same pattern - rest of the year is actually positive.
- 2002 - same pattern
- 2003 - same pattern
- 2005 - same pattern
- 2008 - this is the only year where the January Barometer actually works when January is a negative month!!!

In other words, when January is negative, history says that the rest of the year (i.e. the other 11 months) is 6 out of 7 times the OPPOSITE.

Third, such comparisons are far too simplistic, and ignores the high and lows that occurs DURING the year. For example, in 2008 --- yes, January 2008 was a negative month. Yes, entire 2008 was a negative year, and hugely negative too. But the S&P itself went up from March to May 2008. In other words, this January Barometer is far too simplistic to be of any use to the serious trader.

So, treat the January Barometer as something interesting for mass consumption, but don't let it influence your trades unnecessarily.

Some Thoughts on Trends

2009-02-03T16:28:00.002+08:00

One of my deep beliefs about financial markets is that trends exist all the time.

As a trader, trends are very important. Ideally, you want to identify trends "early" (and this definition of "early" might not be what you think), jump on it, and hopefully, the trend will continue in the same direction, allowing you to profit from it "before it bends".

But do trends exist all the time?

In my opinion, yes. But it doesn't mean that all trends are exploitable profitably to you as an individual, and we'll come to that later. But trends do exist everywhere and all the time - the secret to understanding lies in the time-frame selected, and finding the right instruments with large enough volatility and liquidity to make it good odds to trade.

For example, in forex, there is bound to be some currency pairs that will exhibit bull market characteristics -- if the currency pair you happen to be looking is bearish, simply invert that pair and you now have a bullish price *grin*.

Similarly, if the trend is going down, there are financial instruments overseas that will allow you to invert that, turning it into a bull market.

Even if the price appears range-bound -- say, moving in between trading channels -- if you split it into shorter time-frames, then, you have a smaller trend that goes up before it hits the upper part of the channel, and then, another smaller trend that goes down before it hits the lower end of the channel. In other words, trends do exist if you drill down deeper.

Whilst trends always exist, it is a completely different question on whether - YOU - as a trader - can profitably exploit it. If you have been trading for some time, I'm sure you understand what I mean.

But this article is NOT about reasons why one CANNOT exploit trends profitably. Actually, I believe this is an extremely important question - one which every trader must personally answer that question for him/herself. For me, it's too complex, and too long an answer to answer here, and it's not my reason for writing this article *grin*.

But a simpler question is do you know how to identify trends in prices? Actually, that's a possible trick question. If you see a price/volume chart, and you cannot tell from a quick visual inspection whether the price is trending or not, then, chances are there is NO trend in the time-frame given to you. (of course, if you drill down, there will be mini-trends as mentioned above).

One successful trader apparently decides whether to enter a trade or not by quick visual inspection of the charts. He used to say that he made his final decision -- after analysis -- by posting the chart at the other end of the room, and then, taking a quick look at the chart for confirmation. More often than not, that quick visual inspection turns out correct. Of course, he is a close student of the markets, and has personally examined millions of price charts over his lifetime.

So, if you're experienced, you can easily tell whether a stock / index is trending or not by quick visual inspection of the price/volume chart. But what if you're not? How do you tell?

Well, a simple rule is to look at the "lows" and "highs" of the price chart. When a stock is making a lower "low", and a lower "high", it suggests that price is trending down. And vice versa. That's one quick way. And in fact, when an experienced trader looks at the charts, he no longer need to consciously look for these lower / higher lows/highs - he merely, with a quick glance, subconsciously absorb whether the stock price is making a higher or lower "lows"/"highs", and is able to quickly determine - in a split second - whether the stock price is trending up or down.

But sometimes, when you look at a given time-frame on the screen -- prices might not fit in more than 3 to 6 months prices. Most traders use short-cuts, by plotting longer-term Moving Averages. Typically 200 day and 50 day Moving Averages or EMAs. When a stock is trading below the 200 day MA, it's generally regarded as bearish because the price is below the average of the last 200 day prices. Whilst these are short-cuts, they obviously have their limitations too. Ultimately, these Moving Averages are just tools created to assist one in deciding whether a stock has been trending in the past or not. These tools should be your servant, not your master.

Other traders uses Multiple Screens or Triple Screen approach, which is to consciously examine a longer-time frame chart such as weekly or monthly candles instead of daily. This would allow one a wider view, and you can see the last 5 or 10 years data in just one screen, to view the trend better.

And then, in the world of Technical Analysis, there are many people who thought a lot about this problem about finding trends "early", and have developed a large variety of technical indicators, generally classed as "trend following indicators". The Moving Average and EMAs are just one small example of a "trend following indicator". Another common one is MACD. You can google stockcharts.com to learn more about it. There are literally dozens (or hundreds of smaller variations) of such trend following indicators in the TA universe.

Personally, I - and a million other traders - like Trend Lines. These are lines drawn that connects the higher lows in a bull market (I call it Up Trend Line or UTL), and the lower highs in a bear market (I call it DTL for Down Trend Line). Trend Lines are a fascinating topic, where the breadth and depth are actually very interesting. For example, Bulkowski has done a lot of work studying this and many other fascinating topic. Not all trend lines are the same, some - with certain characteristics - are more reliable than others, and have more profitable impact than others. However, as a general comment, bear in mind that in recent times, there have been studies overseas done that shows that they have not worked as well as they used to work say 20 years ago. However, they still work enough time and to an extent large enough that it is still generally profitable for a disciplined trader to trade using these tools.

In practice, I use a variety of methods to establish trends, and whether trends is likely to continue or not. A visual inspection of the charts across various time-frames, Trend Lines, EMAs, MACD, Bollinger Bands -- these are the more common ones, and for me, it's more important to develop an excellent understanding on how these works over time. I don't necessarily always look at default parameters, the choice of parameters depends on the actual situation, usually in reference to what works in the past, or what works similarly, but not always.

Naturally, I also fuse what I observe and synthesized from the charts with what I know from the market/stock fundamentals, news, sentiment, etc. The ideal situation is of course when all these analysis matches. Even the risks/price falls should match as well. This is much harder to do in real life, and whenever I'm wrong, hindsight will show me that I've missed something. This is the learning process which I find thoroughly enjoyable.

As I alluded to earlier, knowing if a stock is trending in the past doesn't necessarily mean that the trend will continue. The general rule is that momentum will tend to push prices in the same direction, but this is only a general rule -- exceptions exist all the time, and blind adherence to this rule can be expensive.

So, say you're able to see past trends occuring. The key question is how likely will this trend continue in future, where the future is always an uncertain question?

This is where nothing beats personal and close observation of prices in my experience. You have support and resistance studies, and supports and resistance have many forms - such as past peaks, past valleys, trend line supports, fibonacci levels (and there are always more than 1 fibonacci levels usually), pivot calculations, etc. etc. etc. In fact, the entire study of support and resistance is a fascinating topic in itself too. A deep understanding and observation of how prices behave around these critical areas will tell you much about how prices are likely to develop later, although not in as reliable a way as an exact science. Sometimes, price reversals can happen faster too.

But at the end of the day, trends -- the ones that have happened in the past, and the ones that are "likely" or not continue in future -- means nothing to a trader, unless his money is in the trade.

And when he puts his money in the trade, his opinions cease to matter. What's more important is how prices behaves after he enters the trade. And he obviously must have clear ideas on how to exit the trade when it goes right and when it goes wrong, BEFORE he enters the trade. Trade long enough, and some will go right, and others will go wrong. It's not a matter of if, but when.

So ... what are your thoughts on trends? Is the KLCI going to go up, down or sideways? *grin*

Actually, this is probably one of the less useful but more common questions I've heard, because much depends on the time-frame. And even if KLCI is going to be higher/lower than today in a months time, it doesn't mean it won't go down lower/higher first. And of course, stocks and markets are 2 completely different things -- when markets go up, it doesn't mean your stock will go up by as much or if at all, and vice versa.

But it won't stop those who doesn't know from telling, and it won't stop those who knows from keeping it to themselves *grin*

And ultimately, to a trader, what's far more important is that his equity actually grows, rather than being right publicly or privately. *grin*

Tidying Up the Chatbox

2009-02-03T15:36:00.003+08:00

Just a short note to let you know that for this New Year, I have decided to tidy up the cbox users - there are far too many dormant members whom since registration, have never activated their accounts, so, I've just decided to delete all of them. This brings the number of users down to below 200.

Also, since the chatbox belongs to me, and I have a certain objective that I want to achieve with the chatbox before the subscription expires in 2010 -- and they primarily focus on encouraging a positive and constructive atmostphere -- I have also taken the liberty to remove a handful of chatters whom - in my opinion - do not reflect nor share the same positive values. The real world equivalent is like building a fence on one's house, or only letting guests whom you respect to enter your home. In the past, I have clearly been too generous in letting any Tom, Dick and Harry enter this cbox, and sadly, a small handful have chosen to abuse the privilege. Hence, the door.

Take care, be positive and constructive, and all the best wishes for your trading in 2009!

Gong Xi Fa Cai!

2009-01-25T16:53:00.003+08:00

Would like to wish you and your family a Very Happy and Prosperous Chinese New Year!

Best wishes,

Seng

Compound Interest

2009-01-16T15:30:00.002+08:00

Albert Einstein - in the early part of last century - once declared that "Compound Interest is the Most Powerful force in the Universe".

So powerful, that it's also been described as the 8th Wonder of the World. (which I think is an under-estimation - I would put it the 1st Wonder of the World *grin*)

Warren Buffett - one of the world's richest man living today, if not the World's richest man ever in the history of mankind - is a living example of what Compound Interest can do.

Yes, Compound Interest is that powerful.

But what is Compound Interest really? Do you really understand the mathematics behind Compound Interest?

Imagine this scenario.

Let's say you are a super-investor who can double your money every 2 years.

Yes, 100% return every 2 years.

And every time you doubled your money, you continue to do what you do, i.e. you let your interest work for you.

To me, this is a very, very tall order. Not impossible over the short term - from time to time, you hear of someone doing this. But almost never over a long period like 16 years. Even Warren Buffett himself doesn't do this throughout his nearly 6 decades of investing, and I doubt there is even a single 16 year period where Buffett achieved this. Sure, a year or two here and there interspersed with some lower years, but by and large, he falls short of this.

But let's say you have this ability to obtain 100% return every 2 years, over just a 10 year period, so, let's not talk about 16 years yet.

What does this mean?

For example, let say your living expenses 10 years ago was $50,000, or approximately $4,000 per month.

Of course, 10 years ago, $4,000 per month is not a bad sum, although probably not a terribly large sum.

If you live in KL, $4,000 per month 10 years ago is enough to survive.

Maybe not enough to drive an expensive BMW and live in a nicely renovated bungalow and to eat shark fin soup and abolone regularly, but $4k per month is enough to survive in KL if you watch your expenses.

But my question is what if - instead of spending $50,000 10 years ago, you had invested that in a money making machine that can double your money every 2 years.

How much would that $50,000 10 years ago be worth today?

$100,000?

$200,000?

What if I tell you $1.6 million? Yes, $1,600,000!

Why $1.6 million?

Well, in 10 years, this means that the money has doubled 5 times, if you can double your money in 2 years.

So, 2^5 = 32.

Which means every $1 becomes $32 in 10 years time.

Which means $50,000 becomes $1.6 million in 10 years time.

AMAZING ISN'T IT?

And that $1.6 million today is just from 1 year saving of expenses 10 years ago.

What about the saving from expenses 11 years ago? 12 years ago? 13 years ago? 16 years ago?

You'd think someone with this ability would be worth at least 8 digits, if not 9 digits today isn't it?

So, why is he wasting his time blogging, sending hundreds of emails, making hundrends of comments all over the Net, spamming every blog?

And worse, not even accepting my genuine business offer of $4 million to $8 million per year on the condition that he allows me to audit his trading records over the past 16 years?

LOL!

Anyway, as usual, I'm told that I don't know what I'm talking about ... *whistle* *wink* *grin*

Update on $4 Million proposal to Samgoss - A Second $8 Million Proposal

2009-01-12T10:53:00.005+08:00

Further to my $4 Million per year proposal to Samgoss, fellow blogger Moolah has also blogged on my Public Offer here - http://whereiszemoola.blogspot.com/2009/01/local-malaysian-blgger-claims-markets.html

Moolah's Comments

1. "An extremely profitable proposal that Seng has made."

[Seng comment: Yes, I want to emphasize that $4 Million EACH YEAR is a LOT of money to turn down.

Does Sam currently earns $4 Million EACH YEAR?

Seriously Sam, tell me HOW MUCH do you earn EACH YEAR in the last 5 years?

I can guarantee you more - MUCH MUCH MORE - than what you earned in the last 5 years.

Of course, you'll need to provide proof of you past 5 years income at the very least.]

2. "Of course it's a double sworded as this proposal also equates to a massive challenge for Sam to prove that he is not a fake."

[Seng comment: I want to emphasize that whilst it's a massive challenge, it's very simple action for Sam.

Why?

Because I am only interested in The Truth.

If the past results are there, I want to emphasize that he doesn't need to fear anything, or need to to do anything more.

Just let his past results speaks for themselves.

The audit will merely discover and report that truth.

You see, when you apply for a $40,000 per annum job (let's not talk about $4 Million per annum job), it is standard procedure for you to fill an H.R. form to state your name, your I/C number, your contact phone number, etc.

In this job, because it relates to a hedge fund investing, your track record is important. So, it's only standard procedure to audit your past claims, so, one needs to see your past trades and verify it with your both the securities firm and the banks. With audited data, we will then do more analysis and come to our own conclusion. Sam, you don't need to try to explain how you did it.

I have no doubt Sam will have made past withdrawals from his stock account (to buy property, car, eat abalone, shark fin soup, etc. as he claimed), so, I want to verify in the audit that money has been withdrawn from the stock broking firm to his bank. Everyone can lie about anything, but PAST financial transactions that has been filed to the regulators/Bank Negara - in theory - cannot lie.

All my request is basic standard info for this type of job. Nothing special.

For $4 Million PER YEAR contract offer, why doesn't Sam want to tell me BASIC, STANDARD data?

What is he afraid of?

What is he hiding?

What is he not telling us?]

3. To be honest, 1500% in 16 years is such a record to be proud off.

[Seng comment: Agree absolutely. I want to add that he is actually much better than that, because in that 16 years, he has withdrawn substantial amount of monies regularly and still achieve his 1,500%]

3. Perhaps iCapital, Tan Teng Boo, should hire Sam here to be the chief investment manager for his closed end fund.

[Seng comment: Yes, I must reluctantly agree. They are my competitors, because every fund manager with a little bit of smarts (doesn't need to be as clever as Buffett) will immediately jump to see if they can hire / create new positions for this super-investor, if his results are genuine.]

4. And if Sam record is as genuine as he proudly proclaim, won't you even want to invest in his funds?"

[Seng comment: Agreed. That's my original proposal, which is specially intended to let EVERYONE, including and ESPECIALLY Sam's followers to benefit from this proposal.

Currently, there are TOO MANY real life problems to follow Sam's call-
1. It takes a lot of constant monitoring and work to follow his convoluted blog timely.
2. There is time-lag from the time he buy/sell to the time he blogs.
3. By the time you want to buy or sell something, the time lag means price will have gone up or gone down.
4. Sam's backhand - which means you misses out.
5. Sam keeping his best ideas to himself.
6. 100 other reasons and too long to blog about it.

So, why should anyone - using Sam's own words in his blog - "like ck5354, Dylan, ccdev, newbies n ivtac" accept inferior method now?

So, I came up with this idea, so that EVERYONE now have a chance to get EXACTLY what Sam gets, and EVERYONE in his blog should be HAPPY and join my suggestion.

I really hope to hear from "ck5354, Dylan, ccdev, newbies n ivtac" that they like this idea.

Isn't this a good idea? If it's not good, why is it not good? Write to me, and tell me objectively and concretely why it's not a good idea.

You see, if we can pool Sam's own money TOGETHER with EVERYONE's, then, Sam's work is easier also.

He doesn't need to blog anymore. With his spare time, he can use my chatbox and my blog to continue to rubbish TA methods and to rubbish STOP LOSSES!

Yet, so many of Sam's "followers" are against this business proposal!

I am genuinely dissappointed that Sam's followers have not thought about Sam's BEST interest.

If they did, they all will be asking Sam to accept my business proposal.

Sam makes the Most Money out of my proposal.

His supporters will make MORE money than they did before.

Everyone here also Makes Money!

Win/Win/Win!

Isn't this logical?]

Jason Ups His Offer to $20 Million above my estimation

Jason responded with an even bigger offer than I estimated - https://www.blogger.com/comment.g?blogID=935072059836759128&postID=6590073621444877083.

1. "Put me on the audit team. I don't trust the majority of Malaysian audit firms. (having worked on their teams or with friends who worked there)

[Seng comment: No problem. I will also be on the audit team myself.]

2. If I like what I see, I will personally put another RM2 million into this fund. And will attempt to put RM20 million in from friends and family."

[Seng comment: Jason, I am sure ALL of Sam's followers will thank-you from the bottom of their heart for your support!

With your extra contributions, Sam can now look forward to $8 Million Income in 2009!]

Sam turned down my $4 Million Offer

1. See his blog here. http://samgang.blogspot.com/2009/01/v-wow-4-mil-offer-by-sour-seng-ah-seng.html

2. From a business perspective, I am extremely dissappointed with his childish response. There are MORE nonsense, and no serious consideration at all. No serious business man would respond like this in real life.

3. He responded by showing what he claimed to be his Public Bank pass book voluntarily to everyone.

a. How do we know this is his passbook and not someone else's without knowing his full name or his I/C number, and have this verified with Public Bank management?

b. Why show just one snapshot? Why not show everything continuously over the past 16 years to the external auditor in confidence? The external auditor can verify with Public Bank management.

Sam, do you see the problem with your response?

Sam's Compounded Annual Returns are MUCH higher than 1500%

You must remember that:

1. In 1992, Sam starts with $12k, as he said in his latest article above.

2. In 2008, Sam's fund is around $700k?

3. The yearly return = (700,000 / 12,000) ^ (1/16) = 28.93% per annum.

4. However, his true compounded yearly return would have been much higher than this, because over the years, he has withdrawn monies for the following purposes:

a. He purchased in his own words "properties". (Yes, he mentioned this more than once in his blog). KL properties - especially when renovated so nicely in his blog - is not cheap.

b. He purchased a BMW car, and very likely more than just one car over the last 17 years. BMW cars are not cheap like Proton cars ...

c. He withdrawn his fund to pay for his living expenses. Living in KL - even on poor taste - is not cheap.

d. He has expensive taste - just look at the food he boasts about.

e. Even if you conservatively estimate $4,000 per month to live in KL, which is EXTREMELY cheap, already, this is $50,000 per year, or $800,000 over last 16 years. Who pays for his living expenses? Is this from his investment earnings?

f. Conservatively, if you believe his blog, he would have spent additional $2 million to $3 million or even more just on items a., b., c., d., e. over the last 16 years.

g. What about sex? Do you think he pays for that or do you think he has a girlfriend or a wife? Add that to the expenditure.

h. Which means, he must have used just $12,000 to generate say $3 million to $4 million OR MORE at the least in the last 16 years.

h. But if he had compounded his returns, it would be much bigger than $3 million to $4 million at the least. Imagine if he had no spending? The monies saved in earlier years would have grown even more!!

i. So, my wild, rough guess is something like 100% per annum. He should be able to achieve this very easily, especially, when he has earned 299% over 26 months, or more than 115% per annum.

j. Do you see why this guy is MUCH BETTER than Warren Buffett?

Conclusion

This guy deserves to be investigated and audited in detail.

Seriously!

He claims to be THAT good, I don't know of anyone else on earth that comes close to his results.

All newspapers - not just Malaysian, but the Entire World - must know about him.

So, Sam, I am giving you a 2nd chance to have your results audited.

Why can't we deal like business-men?

I want to be your Manager.

Business-men don't need to rubbish each other.

I am not upset with you at all. I'm annoyed at your childish nonsense, but I'm never upset at you.

I just see a wonderful - once in a lifetime business opportunity - in you. If all your claims are true. We can make money together. I see GLOBAL OPPORTUNITY IN YOU!

My offer is genuine, because throughout my entire life, I have NEVER met anyone with a record like yours.

I have a close friend who is a Chief Investment Officer in a global financial organization based overseas (and his organization also has some investments in KLSE), and he has never heard of anyone with a record like you who managed to achieve what you did without leverage.

Conversely, he has seen, heard, and met far too many people who boasts like you, but in reality, are just "KOSONG", or are part of a syndicate.

So, if you are genuine, let's do business together, and let's start by having the results of yours audited.

Alternative Proposals If You don't want to work for me

With your talent Samgoss, I have MANY alternative proposals for you even if you don't like $8 Million PER YEAR!

Even if you don't want to work for me, but you can work for someone else, I also have MANY BUSINESS PROPOSALS for you! E.g. just look at the biography by Alice Schroeder on Buffett called "The Snowball". I want to get someone like Alice to write a biography on Samgoss life AFTER we audit!

We can discuss ANYTHING. But let's audit your results first. No need to fear anything if it's true. There's an English saying that says "Why would I want to kill the goose that lays the golden egg?" Samgoss - you ARE my Golden Goose!

I hope to hear a serious response this time.

Thank-you.

Samgoss outperforms Buffett over past 16 years? A $4 Million Proposal to Samgoss

2009-01-09T23:32:00.010+08:00

Further to my article on "The Enigmatic Blogger" here - http://fusioninvestor.blogspot.com/2009/01/enigmatic-blogger.html - "okating" sent me 3 more comments!

As usual, there is MORE childish nonsense - including one that threatens me - which is not worth repeating, but the bit that I find enigmatic is this one - according to him, Sam asked "how come u know my published results are all false?"

Actually, it's simple. Of course, not everything is false, but I will just mention one (out of many examples) which I trust experienced investment professionals can deduce for themselves. The rest should remain unmentioned.

Samgoss beats Buffett returns in Past 16 Years?

1. 16 years ago, Berkshire stock traded around $9,000 per share.

2. Last night, it traded at $94,000.

3. This means that Berkshire stock has grown by approximately 10 times, or 1,000% over the last 16 years.

4. And since Berkshire doesn't pay dividends, never sells his shares and has over 99.9% of his net worth in Berkshire, this means that Buffett himself has "only" managed to obtained approximately 1,000% returns over in the past 16 years.

5. Samgoss on the other hand - if I recalled correctly - claimed that over the last 16 years, his returns was 1,500%! Yes, the link is here - http://samgang.blogspot.com/2008/04/v-299returns-in-26-months-what-is-so.html

Doesn't this mean Samgoss' 1,500% returns beat Buffett's 1,000% return, yes? *grin*

Isn't that simply amazing? *grin*

What a super-fantastic result.

Really.

If an external auditor can vouch and certify that this is true, then, I will be most impressed.

Otherwise, it's all just backhand, forehand, left hand, right hand, side spin talk and childish nonsense from Samgoss only isn't it for the last 2 years? *grin*

Additional Reasons why Samgoss claimed his actual returns is higher than 1500%

1. Firstly, you must remember that many professional investors lose to Buffett, whether it is over 5 years, 10 years, 15 years timeframes. But our very own Samgoss claimed to have beaten all of them over last 16 years!

2. You must understand that Samgoss claimed to have taken monies out for various reasons over the past 16 years. In other words, he achieved 1500% returns by NOT compounding his returns!

3. Whereas Buffett compounded everything and still lost to Sam!

4. Buffett is a frugal person. He never sold his stocks. He compound 100% of his earnings. And he still lose to Sam by a mile!

5. Just imagine what Samgoss' returns might have been, had he compounded his returns over the last 16 years. I have no doubt it will be much higher than 1600%! 3,000% is very possible!

WOW!

So, do you seriously believe Samgoss' claims?

A $4 Million Proposal to Samgoss

Ok. Let's give Sam a chance to prove he is genuine.

If Sam is willing, then, let me make this simple business proposal publicly.

Allow me to hire an external auditor to audit Sam's trades over the past 16 years.

If certified true, then, I will not hesitate to make a business proposal to Samgoss that guarantees that he will not be dissappointed.

He will stand to earn $4 million or more a year in income if he repeats his annual performance over the past 16 years.

A monthly adviser fee of $20,000 per month is a definite insult!

I am firstly a business man, and I really couldn't care less about the past. All I care about is the future.

To kick start this, I only require Sam to do one very simple thing.

Even a teenage child can do this.

All Sam have to do is to write to me to let me know this:

1. His full name
2. His I/C number
3. His contact number
4. The names of the banking and security firms he traded with over the past 16 years that generated 1,500% return.
5. Be ready to sign a document that would authorize an external auditor to investigate and audit his investing record over the past 16 years. I expect 100% cooperation from Sam and no childish nonsense.

I will select the auditor. I will bear 100% of the external auditor costs. ZERO cost to Sam. (If substantial, I reserve the right to refund this from the fund later).

AFTER the external auditor certify and vouch that his results are true, I publicly promise to do the following things:

1. I will personally provide Sam with $0.5 million of my own money to invest.

2. I promise to undertake - on best effort basis - to have my family and friends to contribute another $4.5 million, making a total contribution of $5 million for Sam to invest on our behalf. With an investing record of 1,500% return over the past 16 years, I am confident in raising AT LEAST this much. Easy sale job.

3. I also promise to undertake - on best effort basis - to have everyone I know to contribute another $15 million for Sam to invest. With better than Buffett's record, another EASY job.

* I recalled "dylan" claiming that he just invested $100k into Citibank, so, I believe it should be an easy job to persuade "dylan" to sell that, and invest in Sam.

* I recalled "newbie" claiming that he bought houses and other properties worth millions, so, it should be easy enough to get newbie to come up with $2 million to $4 million for Sam to invest.

* Many other investors here like dorraidd, Dali, and others who would be more than willing to contribute funds to Sam to invest. Dorraiddd is easily worth 8 digits, so, getting him to commit a few million with 100% returns should be doable.

* Also, bullbear - I'm sure he can easily come up with another $0.5 million if not more personally at least.

* Jason ... $0.5 million from him should be doable, and another $5 to 10 million from his hedge fund family with almost a sure chance to earn 50%-100% return in 2009 ...

* mydreamgetrich ... I'm sure his family would consider contributing $0.5 million to $1 million after the auditor certify.

* And there's ivtac, starter, and numerous other chatters here. Many would be willing to contribute at least $100k each after the external auditor certifies Sam's performance in the last 16 years to be genuine and true.

* And let's not forget "rising" who claimed to personally know people with 9 digit net worth. I'm sure getting a few million from these people should be "kacang putih". In short, $15 million here, plus $5 million in 1. and 2. is easy job.

4. Sam does not need to worry about regulations, licensing and all legal stuff. I will take care of this. As usual, we will require business insurance policies on Sam's life - this is just standard business clause, and nothing to be concerned about - the premiums gets charged to the fund. Sam does not have to worry about back-office, compliance, accounting, reporting, etc. - all this will automatically be taken care of.

5. Raising $20 million of funds to invest, AFTER the external auditor certifies 1500% returns over the last 16 years is genuine and true is The Easy Part. We might end up with more funds to invest!

6. This is essentially a hedge fund. Sam can expect 20% standard profit sharing for returns exceeding a low minimum threshold.

7. If he repeats his performance of 100% return per annum, then, 20% x 100% returns x $20 million = $4 million yearly profit for Sam alone!

8. Everything will be legal, Sam will be required to sign a contract.

9. At the right time, AFTER the funds are fully invested, we will arrange for newspapers to interview Sam. We expect this to boost Sam's returns BEYOND 100%!

10. I reserve the right to publish Sam's life story in book and every form. Of course, if Sam wants to keep a low profile, this is negotiable. But everyone knows newspaper exposure helps one to invest easier.

So, this is an open and serious invitation to Sam.

Once I receive items 1. to 4., I will then contact him to arrange a face to face meeting with the external auditor.

I envisage the auditor to give Sam a form to sign to authorize them to contact various banks and security companies to disclose past trade details for their investigation, amongst other things.

This could take a while since we are dealing with 16 years of data, but I am willing to pay 100% for the cost to verify this.

Once everything is completely verified and certified by the external auditor, I will contact Sam again.

We will then proceed to discuss all the necessary details, and I will personally take care of the rest so that Sam can focus on his investing job. All Sam has to worry about is how to generate 100% return in 2009 on an asset base of $20 million, based on his so called FA stock selection methods.

Naturally, we will also hire a bodyguard for Sam - 24 hours per day, 365 days per year. Anyone who can generate 1500% returns in past 16 years is priceless.

And more importantly, once the auditors certify that it is true, we will not prevent him from rubbishing TA methods in the Net. In fact, I will personally lend MY BLOG and CHATBOX for Sam to continue to rubbish TA methods! That's a promise from me!

So, Sam, how?

$4 million profit to you every year!

ZERO concern yes?

Send me NOW your full name, your I/C number, your contact number, the name of the banks and security firms that you have traded over the past 16 years that generated your 1500% returns for auditing.

And to all of "Sam's supporters":

I don't want to hear any more childish nonsense on anything else!

All I want to hear from you is why your "sifu" did not accept my $4 Million proposal yesterday.

I look forward to hearing from Samgoss personally by Monday latest.

Otherwise, the entire world knows that Samgoss is a FAKE.

Everyone will be asking why Samgoss turns down a $4 million per year offer.

Sam's records say that his fund is less than $1 million today. Why would anyone blog so much like he does, but doesn't accept a $4 million per year offer?

He doesn't have to do anything different.

So, I sincerely hope Samgoss is genuine. Otherwise, that would be extremely dissappointing, because I'm also finding it tough to generate a fraction of Samgoss' returns ... so, for everyone's sake, let's pray that Samgoss is genuine and NOT a fake.

US Intraday Trading & Capital

2009-01-09T00:15:00.002+08:00

Dedication: This article is more a personal note to myself and to perhaps any Malaysian / non US Intra-Day traders who plan to do day-trades in the US markets.

This is a personal note to myself more than anything else. The key point is to NOT ASS-U-ME that the intra-day trading regulations works the same way in the US as they do in Malaysia. In short, they DON'T! *grin*

One of the things I'm still learning about intra-day trading in the US is its unique T+3 rules and Margin rules.

Unlike Malaysia, the US operates very differently in these areas.

In Malaysia, I'm finding that the local online brokers are actually relatively generous as a matter of default practice - compared to their US counterparts. (Their free trading tools might be lousier, but when it comes to financing, they are actually business friendlier). For example, with $100k cash, you might get 2 to 3 times multiple for trading. This means, there is potentially no practical limit to your daily turnover if you keep churning many times in a day. For example, you could put in a Buy/Sell for $300k in the morning, and then, in the afternoon, do the same thing again, and probably end up with a turnover that is - in this example - 6 times your cash of $100k. I haven't tried this before, but I think you could do say 5 round trips in a single day, and your broker will probably not complain (and be quite happy actually *grin*). And you could do this again tomorrow, the next day, etc. The T+3 rule does not apply to intra-day trading, as far as I understand.

However, in the US - or at least with TD Ameritrade - I am surprised to discover that this practice is completely different as a matter of default practice!

In the US, if your cash is $100k, and you've just traded $100k this morning in/out, you cannot put on another trade until 3 days later! The reason is because your last sale of $100k today will not be settled into your account until T+3 days later! So, you can't really do anything for 3 days, which is extremely frustrating for the intra-day trader who is so used to Malaysian rules!

A professional intra-day trader needs to be able to get in and out several times a day!

This US T+3 limitation is a serious limitation for the intraday trader, as it means that the size of his trade is much smaller than in Malaysia. For example, if you plan to do at least 2 trades a day, every day, then, the maximum trade size you can make is only say $16k, for $100k cash. Note that $16k x 6 times = $100k.

This is NOT ideal of course!

Reading more about the Margin Facility available, actually, it appears that whilst the above is the default practice, customers can actually apply to Ameritrade for a Margin Facility to allow him to trade bigger sizes. But it doesn't appear to be anywhere as generous financially compared to Malaysia. The process to apply appears straightforward, although it requires filling in a special separate and additional form, and reading and understanding a lot of unique US regulations. *phew* ?

There is also a waiting time for approval - I've been advised 24 to 48 hours. It appears that if the application is approved, then, the Margin Facility would permit one to at least double one's capital (Huh? Only double? So little.), but interest will be charged. (*shucks*). Still, the T+3 rules apply.

Furthermore, it appears there are special rules for the Intraday Trader. Interestingly, the US regulations defines who is an Intraday Trader and who isn't. The US term is called "Pattern Day Traders" and is defined as "... an account that makes four or more round-trip day trades within any 5 rolling business day period, provided the number of day trades represent 6% of the total trading activity during the same 5 business day period ..."

Huh? Let's try to go slower:

1. Need to make 4 or more round-trip day trades within any 5 rolling business day period.

2. The NUMBER of day trades must be at least 6% of total NUMBER of trades in that 5 rolling business day period.

(so, it's not based on contract size, but just NUMBER of trades ... what a strange requirement ... hmmmnn ...)

It then went on with a numerical example ... "An account that has a cash balance of $40,000 and no positions in the account could have access to $160,000 in day trade buying power."

"Be aware that accounts that have been flagged as Pattern Day Traders will have access to the greater of buying power or day trade buying power. Our systems will accept orders based on the higher of the 2 amounts. Since we have no way of determining whether or not you will hold the position overnight or just for the day, it is your responsibility to enter orders that remain within the buying power for the type of trade that you are placing. House and federal requirements apply to positions held overnight."

In addition, there is some rule to note about Minimum Equity size of $25,000 ...

"Day Trading Minimum Equity Call. If your account has less than $25,000 day trading equity and is identified as a Pattern Day Trading Account, a day trading minimum equity call will be issued. Pattern day trader accounts that fall below the $25,000 minimum equity requirement will NOT be allowed to day trade. If a day trade is executed when equity is below $25,000, your account will be restricted to closing transactions only for 90 days, or until the equity is brought up to $25,000. Funds deposited in an account to satisfy a day trading minimum equity call are subject to a 6 business day hold for checks and 3 business day hold for ACHs".

Get the last paragraphs? LOL! I guess to keep it simple, just make sure you have at least US$25,000 in your account if you don't want to understand this paragraph! kakakakaka

There are more rules than just these ... *gosh*

"Day Trade Buying Power Call" ... "If you account meets the minimum equity requirements for day trading and exceeds the day trade buying power on executed day trades, a day trade buying power call may be issued. ... " (huh?)

"Regulation T Restricted Accounts" ... "Pattern day trader accounts that are under a Regulation T restriction will have their day trade buying power limited in the following manner ... " (huh?)

"Prohibition on liquidating to meet a Regulation T call" ... "Clients may not make a practice of meeting Regulation T calls by liquidating securities ... " (huh?)

Did you understand all that? ... LOL!

Looks like it'll take me some time to really understand the full details ...

In the mean time, to keep it simple, just make sure to have lots of spare cash if one plans to to intra-day trading in the US, although if one's capital is limited, then, one must plough through the details to understand the detailed rules.

What strange and complicated rules they have in the US ....

Cheers!

Monitoring Crude Oil News vs Prices to a Trader

2009-01-08T19:27:00.003+08:00

This phenomena happens all the time, but just in case if you haven't seen this, or is not convinced, here's one (out of hundreds) of daily example where prices reflect news much faster than news can reach an average retailer like ourself.

Recall my earlier article last night at 11.45 PM last night(http://fusioninvestor.blogspot.com/2009/01/nymex-crude-oil-head-shoulder-formation.html), where I posted the Head and Shoulder formation, and when price breached the neckline at around $47.6.

I have just googled and found the news a few minutes ago (approx 7.30 PM today) which explained the sharp sell off in crude oil price from $48.x to $42.x.

The news is here:
http://www.newsday.com/classified/automotive/ny-bzoil08jan08,0,4347523.story

According to Google, this news was published apparently just 2 hours ago, or approximately 5.30 PM today.

Which means there is a time lag of approximately 18 hours.

Which means if you had decided to act on the basis of the news, you would be 18 hours too late.

18 hours is a long, long time. Current price touched a bottom of $42, and is now around $43 at the time of writing.

Which is why, I stick to my belief that current prices tells me everything that I need to know, for a deep and global market like Nymex Crude Oil.

Fundamental news like this - by the time it reaches an average retailer like myself - is simply too late. (The smart money of course pays for their news in order to get it sooner, but such paid subscriptions are usually too expensive for the average retailer, and you would still need to monitor such news. If you need to monitor news, why not monitor prices which is more direct?)

I know that by the time prices have settled down to a new level, the reason for the price fall will only be revealed later. For a move this size, I expect there to be a good reason of course, and in this case, the reason is due to new inventory figures showing increased stocks, which is bad for prices. But despite the good reasons, waiting for these type of news to come out - no matter how good the reason is - is simply too late.

In other words, whilst knowing the reason is useful lessons for the future, it is usually too late to act. The only real-time indicator that's important to a trader with open position is to monitor current prices, and to a lesser extent current news.

Prices are king, everything else is secondary.

For future reference.

An enigmatic blogger

2009-01-08T14:39:00.004+08:00

Enigmatic comes from the word "enigma", which means several things, one of which is "something hard to understand or explain".

Anyway, let me just show you the facts, you can then decide for yourself how to explain this enigmatic blogger.

1. Unsolicited email from "oskstaff".

"oskstaff" is one of his many and favorite pseudonames. From above, you can see that I have managed to archived at least 90 emails from him.

Actually, I have received more emails from him, but some I have deleted before I discovered the "Archive" tool. Just one click, and it is removed from my Inbox. As they say, out of sight, out of mind. And he obviously knows this, which probably explains why he keeps sending me emails around 7 to 8 a month. Quite regular as you can see.

My rough conservative estimate is that he's written at least 100 to 120+ emails to me. Probably more.

All of that is unsolicited, meaning, I didn't reply at all, save for perhaps a couple of times in 2007, when it became obvious that I wasn't going to obtain a reasonable response from him.

2. Unsolicited comments to my blog from "okating", "okachuan", "FA investor", "CPO trader", "peaceminded", etc. and just today, in my own email from "obbserver obbserver".

This one, I didn't manage to consistently archive his comments since mid 2007. Most of his comments via "okating" were deleted. But from the screenshot, you can see that I received approximately 6 comments in December alone. My own estimation is that it is fewer than oskstaff emails. I would put a conservative estimate at around 30 to 50 probably ... The nature of the comments were spam-like, as you can glean from the screenshot.

3. His numerous blog articles on me

I don't think you need a link from me here *grin*.

As a policy, I no longer visit his blog since last year, except very occasionally when it became a topic of discussion in my chatbox.

According to jason, something like 4 out of 5 articles that he writes are character attacks against me.

I have not counted. But suffice to say that he's written at least 10 to 20 articles about me since 2007? Say once a month? Or more?

4. The comments in his articles.

Again, you can make your own rough guess on how many pseudo names, multiple personalities, and the total number of comments and character attacks he's made on me in all his articles and blog since mid last year. I probably can't count, and you might count a bigger number, but would 100 be a smallish figure?

5.Comments in other chatboxes

In the past, it started with the lower unregistered investssmart chatbox ... I didn't keep tab on how many of such character attacks, but over 100 would be an extremely conservative estimate.

And I understand in other chatboxes as well, there have been similar attacks. Again, I don't know exactly how many, but my guess is 100 is probably a low figure.

Also, I suspect he has infiltrated my chatbox under various names, including Dylan being a recent one, and probably more. The number of veiled attacks by Dylan is say 10, although the total is probably more.

6. Total

Conservative estimate is around 100 (oskstaff) + 50 (my blog comment) + 20 (his article) + 150 (comments in his article) + 100 (investssmart chatbox) + 100 (other chatboxes) = 520 plus, to maybe 1000?

That would make that an average of at least one character attack every single day since mid 2007?

Does this guy believe in "karma"?

6. Interpretation

Here's my own observation and interpretation.

1. This guy is definitely much more persistent than the average individual by a long shot.

For comparison, if I want something from someone personally, I might send an email. If I receive no response, I might follow up to see if he has received it. After the 3rd time, I would probably give up.

I doubt any reasonable person would attempt 10 times to solicit a response.

In comparison, this guy tried over 500 times!

How do you explain such a character?

2. I do receive spam emails unsolicited, like everyone. However, when I compare the direct marketeers efforts, they really pale in comparison to this blogger.

Serious. In my entire life, I have never received so many spams, that comes close to this guy. In my book, if there is such a title as the Master Spammer, this guy deserves the award by far. Direct marketing companies should try to interview this guy to see what drives him to do what he does, to see if they can learn something useful from him.

3. What intrigues me is would Master Investors and Traders do what he does? What about the genuine bloggers?

For example, Buffett - would he do what Sam does? What about Charlie Munger? Peter Lynch? John Bogler? Jim Rogers? and thousands of the other Master Investors?

What about the world's top traders? Jesse Livermore? Nick Davies? Jack Schawager?
Mark Cook? Mark Minervini? Richard Dennis? Bill Eckhardt? Curtis Faith? Ed Seykota? Richard Donchian? and thousands of the other Master Traders? Do you know if even a single individual behaves like Sam?

What about our top investing bloggers here locally as well as overseas? Does Dali behaves like this? Moolah? Alex Lu from nexttrade? The Admin from Bursa Trading Ideas? Stocktube? The Admin from tradesignum? Boon? Bullbear? Ben from Wisdom Wise? Does any one of them behaves like Sam?

Yet, Sam claims to have an investing record that beats all of them by a mile!

Does the world's greatest investor and trader behave like this, to this extent, with at least 500 plus character attacks against a single individual like me?

Let me say this upfront. My own result does NOT match any of the master investors and traders that I have listed here. My blog is just a shared journey with like minded individuals. If I can assist others, I try. Sometimes, I may be happy and show my happiness like the rest. But why is this guy spamming 500+ times, and attacking a relatively insignificant and small fish like me? Even doraiddd has stated many times that we are all relatively small fish here in Bursa.

Although not the main reason, but one of the reason why I have recently stopped chatting in my own chatbox, and chatted perhaps a bit more at CPCB chatbox is due to this guy.

Honestly, it simply turns me off to have to deal with this guy daily.

And I'm sure it turns many of the others off too.

Ok, maybe that's an excuse - there are other reasons why I've been absent lately, including trading midnight and sleeping in as I experiment more with trading US markets - but it would be an easy reason to stay away from my own chatbox due to this guy.

...

Anyway, it feels good to share these with you. I have been keeping this away from you because it is really not relevant at all if you wish to improve you own personal investing results, but keeping it bottled up is also not a healthy attitude.

And then, there is this issue about having a moderated vs an unmoderated blog. I trust by now why you see the need to have a moderated blog. An extra hassle, but a necessity if one wishes to keep the spam away. Sadly, all his 500+ comments are not really related to the topic.

Anyway, my small wish for 2009 is that hopefully this guy - after reading this article - will take a step back, and re-look at what he's done over the past couple of years.

The true Masters have many strengths, including the ability to reflect and see the bigger picture.

They would be sensitive to the effects of losing emotional control on their trading results.

They would be the first to understand the impact of greed, fear, and other strong emotions such as hating someone to this extent, and how such emotions would impact their own personal results.

No,I'm not referring to his published result - that I know is not his true result but his job.

Definitely, my own results have been adversely affected by this guy as well. I would be lying to you and to myself, if I were to publicly say that this guy has not affected me over the past couple of years - there are definitely times when I shouldn't be thinking about him and focused on the trade instead and sometimes, I didn't manage to focus as well as I should. But the positive side is that he has actually and indirectly spurred me to become a better trader - my own pocket is always my first priority and focus. And looking back since 2007, I can see the improvement in my trades, although my own results have not reflected that potential - probably, this is similar to most people. We always have room to improve.

Anyway, do you think it is too much to ask that this guy take a step back, reflect and review his actions over the past 2 year? And then do the right thing?

Too much to ask I hear? *grin*

No bets please *grin*

But seriously, and sincerely, my daily wish to everyone is "May all beings be well, healthy and happy."

Crude Oil Update

2009-01-08T12:30:00.003+08:00

Good afternoon!

Oh my, what a spectacular fall in Nymex crude oil further to my earlier article - http://fusioninvestor.blogspot.com/2009/01/nymex-crude-oil-head-shoulder-formation.html.

Certainly, the fall is a lot more than my expectation last night ... after I sold my longs, initiate a short, and then closed my short position, I had only expected it to fall to around $46 or thereabouts, and certainly not as low as $42.x ...

In retrospect, I still had room for improvement with this trade .... but my only "defence" is that it was nearly midnight, I had been right to get out of my longs, I had been right in getting a quick short, so, why be greedy when one is physically tired also?

Still, what I will take out from this experience is that this large fall should havebeen semi-expected, since the Head and Shoulder formation is not measured in minutes, but nearly over 24 hours, after a substantial rise over a week. In other words, it had enough "buildup" to fall significantly. I knew this theoretically, but when it comes to implementation, it is still not "automatic" enough for me to note even when I'm physically tired. Will promise myself to remember this one for future reference.

The fall, had a pennant pause, and then, continued to fall, again another classical Technical Analysis chart pattern.

Note also the "Measured Rule", which provides expectation of technical price targets which is also another textbook stuff here.

Three very strong technical points to note at the least.

"If only" I had kept the short position open ... shucks ... *grin*

Ok, just kidding with the "if only" - don't take it too seriously. One of the most important rule of being a trader is to not be greedy and not having regrets on past trades. I should be thankful that I had closed my long position, and not suffer a loss, and I should also be thankful that I did initiate a quick short also which is also positive. Both are far more than what I should expect. Anyway, back to work.

Nymex Crude Oil: Head & Shoulder formation - Quick short trade

2009-01-07T23:45:00.004+08:00

This morning (US time, night time Malaysia), I closed my long crude oil position and went short after anticipating the Head and Shoulder formation.

As I'm still reasonably bullish over the long term from a fundamental perspective, my short position is just for a quick intra-day trade, which is now closed at a quick profit.

My initial thoughts is that if future technical set ups are right, I lean towards intra-day shorts, until I've seen a new bottom to go long again. Like most thoughts, this is extremely fluid. And of course, one needs to be prepared to jump back in at a higher price if situations reverse when I sleep ... *grin*

The chart that triggered the idea is below.

Fairly typical, textbook stuff. You have a nice run up since $34 over the past fortnight, and then, the Head and Shoulder formation reared its ugly head.

Probably, such opportunities seem a lot less in Bursa where the market is much smaller (contrast the Nymex crude oil market is GLOBAL), where presence of one or two large players in Bursa basically mean they can decide whether to move the price up or down at their own whim.

So far, my own limited experience with Technical Analysis indicates that it works wonderfully well in the US. I must say the trade opportunities with the right set-ups overseas are a lot, in comparison to Bursa. In a sense, whilst I hope this good run continues, I feel a deep sense of regret that Bursa market is not quite the same as the US markets, as it means a completely different type of trading hours to trade the US.

For future reference.

Monsanto

2009-01-07T23:11:00.004+08:00

First noticed it at around $78.x at pre-market. It actually made it to the Active List too, which is why I first noticed it.

Searched the news, and noticed Yahoo carried an article on it about how it doubled its Q1 earnings and raises its profit outlook - http://finance.yahoo.com/news/Monsanto-1Q-profit-doubles-apf-13990679.html.

Stock price has battered down too over the past year.

Despite S&P500 opening lower 1.5% this morning, the stock price continued to shoot up. It seems the US players don't really care so much about depressed markets, when there is such good earnings to be had.

Even if one had bought at $78.x after such a run up, it appears it is not too late to buy during pre-market, as the opening saw even more buying entries, to raise it to $85.x in just a few minutes.

This would be an extremely interesting play for the intra-day trader.

In hindsight, it paid off wonderfully, but do you think think this is an extremely high short-term probability trade?

Of course, such a price action is rarely seen in Bursa stocks.

For future reference.

Which is cheaper - Parkson at $6 or Parkson at $4?

2009-01-07T16:24:00.003+08:00

On the surface, the answer is obvious isn't it?

Who wants to buy something for $6, when you can buy it at $4?

But if you think $4 is cheaper than $6, what if I tell you that you are not necessarily right?

What if I tell you that the answer depends on what type of trader you are?

Take a look at this chart.

Imagine you are a mid-term swing trader who buys at the pivot point, and hold stocks anywhere from a few days to a few weeks.

You bought PARKSON at $6 at the pivot day 28 March 2008.

This is a wonderful timing, because it broke the downtrend line on that day, and easily exceeded $6. Any swing trader worth his salt whould have gotten approximately 5% to 10% return in a few days/weeks.

Yet, imagine if you bought PARKSON today at $4.

Of course, $4 is cheaper than $6 ...

Yet, the swing trader would probably not want to touch PARKSON at $4 today, but he is happy to buy PARKSON at $6 on 28 March 2008.

The question you have to ask yourself is which type of trader are you?

Are you happy owning PARKSON on 28 March 2008 at $6?

Or are you happy owning PARKSON today at $4?

Investing & trading are not absolute concepts.

Think about it.

Opening Gap Down - WCT and Parkson from an Intra-day trader perspective

2009-01-07T13:12:00.008+08:00

This article is for those interested in "quick screws" (i.e. intra-day traders mainly). If you are a longer term trader, or an investor, you may ignore this article as it would not fit your time-frame.

This morning, both WCT and Parkson opened with a gap down. They both followed fairly standard moves, where an experienced intra-day practitioner would have seen many, many times. The chart patterns are not unique, but have been repeated many times before. One of them is an ideal stock to trade very quickly with anticipation (in minutes). The other would have been clearly avoided. Do you know which one?

Well, if you did not, read on. And make sure you understand why one is a good prospect, and the other isn't.

PARKSON

PARKSON has been on a mid term uptrend in the last 2 months, since hitting the low of $2.55 on 28 October. Yesterday, it closed at $4.28, near its intra-day high of $4.30. The intraday low is $4.18. Due to its uptrend move, longer-term traders and some investors might have been tempted to purchase it.

This morning, PARKSON opened at $4.18. Would this have been a "sale"? A discount price in view of its steady uptrend the past 2 months?

For the experienced intra-day trader, the answer would have been a resounding NO. Not at $4.18. Even if you don't know any fundamental analysis of PARKSON, and even if you didn't check the news in the morning and learnt that PARKSON has lowered its growth guidance, the opening price alone is sufficient alert that something is amiss.

The experienced trader would pause for an instant and wait to see how prices behaved. And true enough, on third trade, price fell to $4.16, which is lower that yesterday's low. Already, Mr Market is SCREAMING at you to NOT touch this stock. It has all the makings of a falling knife. And if you even SUSPECT that it is a falling knife, DON'T touch it.

WCT

Now, even if you don't know what type of stock WCT is or what business WCT engages in, the price chart tells you all you need to know if you are an intra-day trader.

You see the rapid fall in prices in the 2 months (Sep to Oct), and relative sideways move.

Yesterday was a strong limit down move. This is huge alert by itself. A move like this with record volume shows extreme fear, and continued fall. Note that WCT closed from $1.67 to $1.29, which is the limit down price.

And this morning, the very first trade happened at $0.925, and then within the first minute, rose extremely fast. This alone is more than enough sign that Mr Market is SCREAMING at the intra-day trader to jump in at market price. WHY?

Several reasons:

1. Opening gap down near limit down price triggers alert watch.
2. Stock is clearly very oversold in past 2 days.
3. Very rapid price increase in the first minute of opening.

And if you screwed it, you could let go after a few minutes for a very nice quick trade.

Counter-intuitive isn't it?

Well, if you are an average investor, probably, you will have thought that Parkson is the better screw than this "WCT" stock. After all Parkson is probably better known, and many bloggers and investment advisers have talked a lot about Parkson. Heck, even Mr Tan Teng Boo was bullish on Parkson, so, $4.18 must be a discount right? And yet, what went wrong?

The answer is actually simple. An intra-day trader couldn't care less about fundamentals, for the simple reason that fundamentals are usually "longer-term" in its effects. Price action dominates his entry/exit decision, and these are governed by Technical Analysis. You may be surprised to know that the above chart patterns are actually "standard" chart patterns for the intra-day technical trader. These chart patterns repeat themselves with many different stocks. The key is to understand all the combined elements, and interpreting them correctly. One small difference in nuance, and the technical picture is different, with different market psychology.

Yet, you may ask - both gap down, but why is WCT the better intra-day trade than Parkson?

Again, the answer is rather simple. Parkson has been uptrending the last couple of months, and yesterday's candle was still bullish, with its story intact. Yet, this morning, something was amiss because it gapped down at the low of yesterday's price. Psychologically, it means that market fears something on Parkson, and this tells you to wait.

However, WCT limit down yesterday, and this is the crucial difference. The opening also gapped down, and again, it is near the limit price. It isn't enough to jump in yet. But the key difference is the price action IN THE FIRST MINUTE. This one ripped up so fast, that Mr Market says "technical rebound due".

Bear in mind ALWAYS that these patterns are:

1. Always repeated - just different stock name, different times, different stories, different reasons, but at the end of the day, it's the same price action.

2. Doesn't happen often - but when they happen, you must sit up and pay attention.

3. These patterns are primarily for the intra-day trader with time-frames that measures in minutes. Half a day is far too long.

Also worth bearing in mind that so far, all I've showed you are merely "chart patterns" and price actions. I have not talked about MACD or RSI or any other technical indicators. The reason is because these technical indicators are merely derivative of price. The primary factor is price because you only make a profit if you Buy Low and Sell Higher than what you buy. Never forget this fundamental point.

So, does this mean that fundamentals are irrelevant?

If you are an intraday trader, perhaps the most accurate answer is that they are important, but secondary to price action. For example, Parkson news announced last night at 7.35 PM is important one - the warning on SSS growth is already a critical news because 7%-8% is far lower than its high P/E multiple. A prepared fusion trader would take this piece of information and be alerted, and when he sees an opening gap down, it would confirm to him to stay away from Parkson at the opening.

WCT news on the other hand was not surprising - all the announcements yesterday on WCT were reflected in the limit down price - the only uncertainty is whether 30% drop in price is enough, or is there more to come, and he will not have the answers until 9.01 AM. And then, he sees a further huge gap down this morning which tells him Mr Market thinks there is more downfall. So, the prepared fusion trader would have been on the lookout for that strong upmove in the first minute of opening. And Mr Market tells him that someone out there really want to buy WCT at 92.5 sen this morning very, very strongly. And the first minute was so critical. Miss the first minute/s, and the bulk of the gains are more or less over. Fifteen minutes later, the professional intra-day trader would have already lost interest in WCT.

If you are an intra-day trader, all that I've mentioned here should be "standard stuff" to you. Nothing I mention here is surprising. WCT especially is a high probability set up that is bread and butter of the professional intra-day trader skill. Parkson set up is also equally high probability, except the message there does not help him make money, but merely helps him NOT to lose money. Knowing how to make money, and knowing how NOT to lose money are BOTH EQUALLY important to the professional intra-day trader.

Happy reading!

News will not make you money

2009-01-05T21:37:00.002+08:00

Just saw this on Bloomberg this evening - http://www.bloomberg.com/apps/news?pid=20601086&sid=a1Ab6lUay5TE&refer=news

Jan. 5 (Bloomberg) -- The steepest plunge in crude prices on record may be setting up oil investors for a rally this year, if history is any guide.

The so-called forward curve of futures contracts traded on the New York Mercantile Exchange suggests oil will rise 28 percent to $60.10 a barrel by December. The curve looks almost the same as 10 years ago, after Russia’s default and the collapse of the Long-Term Capital Management LP hedge fund raised concerns that a global economic slowdown would reduce energy demand. Crude prices fell 25 percent in the final quarter of 1998, the steepest drop in seven years.

Basically, Bloomberg is now saying - on January 5, 2009, and note the date - that because of the steep "contango", it's setting up crude for a nice rally ... lol

The contango was of course noticed earlier - I blogged on it at the end of Dec here - http://fusioninvestor.blogspot.com/2008/12/light-crude-oil-is-this-normal-contango.html

There, I noted that the contango was probably at its steepest on Dec 19.

And Bloomberg reports it 2 weeks later on Jan 5 ... lol

I have the highest respect for Bloomberg news, but if one were to blindly follow Bloomberg, do you think one can make as much money than if one were to follow one's own personal convictions and observations?

For example, will Bloomberg immediately report the steep contango to you when it first happen, or only after vested interests have taken position before Bloomberg announces the news?

Always learn how to fish for yourself, never rely on others to fish for you.

Best wishes!

Economist Interest Rate Predictions

2009-01-03T13:59:00.004+08:00

There are 3 things you need to know about Economist Predictions:

1. Their short term predictions are generally lousy. Witness the most recent Fed Rate cuts. Majority of the economists expect 50 basis point cut, some expect 25 basis point cut, even when futures markets were pricing in nearly 100% probability that the cut is going to be at least 75 bp. And of course, the Feds lowered interest rates so large that it clearly exceeded all the economist predictions! *grin*

2. Their long term predictions are better.

3. In the long run, we are all dead. *grin* Ironically, this last point is probably the least contentious point amongst the 3, and is actually uttered by the famous economist of all time, John Maynard Keynes.

Anyway, humour aside ... I want to show you this chart, which is based on a Bloomberg survey of 50 economists.

The current Fed Funds rate is 25 bp, and economists are expecting this to stay the same until Q3/09, when they think it will then be raised a little, and then more in 2010. They also expect the bond yields to steadily increase over the same period.

My own opinion is that in the long run, they are probably right. *grin*. In the immediate term, if you bet on 1., then, it might not be a bad idea, to bet against the economists on the bond yield, although bear in mind, since the economists got it wrong the last time, randomness alone will probably mean that they'll be right this time. *grin*

More Monthly Stock Market Predictions for 2009!

2009-01-03T12:42:00.004+08:00

Ok, more predictions for 2009 stock markets, not based on Feng Shui, but Statistics.

Like all statistical predictions, expect 50% of them to be right and the other 50% wrong! *grin* (personally, I think the odds are better than 50/50).

These statistics are for the US Dow Jones Market.

Summary of Prediction

Good months for 2009: Jan, Apr, Jun, Jul Aug, Oct.

Bad months for 2009: May, Sep.

Neutral months for 2009: Feb, Mar, Nov, Dec.

Basis
http://seekingalpha.com/article/112984-january-expect-gains

The rationale is that 2008 was such a bad year, that the author went back to history to look at what happens to the Dow the following year after a really "bad" year (bad defined as market having lost more than 20% prior). Data is since 1900. Read the article for more.

Happy New Year and Welcome to the Year of the Investor!

2009-01-01T16:00:00.005+08:00

Here's wishing you and your family a Happy New Year for 2009, and may all your wishes comes true!

As with all new years, this is the traditional time when people give some thought as to how they plan to improve their lives for the coming year. Personally, I don't have a fixed New Year Resolution, but rather, I prefer to implement change as soon as I am convinced that it is needed, rather than wait until the next year.

However, one area that I would like to rumble about is the era of being an investor versus a trader.

These are not mere labels, but different styles of trying to make money from the financial markets, such as the stock market. To me, they involve very different levels of risks, and different expected returns, and my own view is quite different from traditional investing textbooks.

My own personal view is that the ideal investor is a flexible investor who is largely an investor when markets are "low", and ride the bull all the way to the top. When valuations then becomes extended, he switches to become a trader, and would cut loss or hold cash as the bull markets crashes. Then, when it founds bottom or when valuations are compelling, he becomes an investor again. Such an approach is optimal and efficient, and involves minimum effort.

This contradicts traditional dogma, that says that you must choose either to become an investor or a trader, and not both. I don't know who first came up with such dogma, but presumably, like all rules of thumb, I'm sure initially, there's a good reason for it.

The biggest theoretical cricism levied on such changing styles which varies according to bull or bear markets is that no one can time markets perfectly. I have no wish to argue with the theoreticians. My own personal experience tells me that one can sense when one is in a bull market or a bear market. Not with 100% accuracy of course - this is the Holy Grail which can never be attained. But with 70%-80% of the time, and there are ways to manage ones portfolio if one doesn't get it perfectly right. In fact, one doesn't need to get it perfectly right to make money.

My general view is that if 2008 is the Year of the Trader, then, 2009 may be viewed back as the Year of the Investor.

In many sectors, valuations are attractive by long term historical standards. (Of course, what is cheap can always get cheaper, but from a long term risk/reward perspective, it borders on "cheap" than "expensive", as a general comment).

The fastest and most efficient way to greater wealth is now through an investing approach, rather than a trading approach. Theoretically, it doesn't make sense to cut loss when valuations are low and compelling, but rather averaging down. I also like to be a contrarian at this time, when news are bleak and everyone now says that Buy and Hold is dead.

In sophisticated financial markets such as the US, the participants are highly skilled in execution. I'm surprised to learn that something like up to 70% of the volume are attributed to program traders and robots. Recently, I have experimented day trading in the US markets and have found that trying to compete with them on an extremely short term basis (e.g. using 1 minute charts), is futile, when their execution is much faster than what retailers can even react manually.

So, I believe that the easiest way then to make the biggest buck with minimum effort is to go beyond the 1 minute trading horizon, and extend the time-frame to 3 to 5 years. For example, if one has a 12 month horizon, I've said that any price to buy crude oil below US$40 is considered cheap, and last night, crude shot up past $40 easily. There is no need to apply a minute-to-minute trading with stop loss, when an investing approach with averaging down at key pivot levels makes much more sense, and is also easier.

I think crude oil's recent performance in the last 2 weeks provides an early glimpse of what we can expect for the rest of 2009. There are still many markets which haven't yet rallied as much.

Averaging down is a highly skillful art, and can provide either FAST returns, or FAST loss. In terms of technique, it entails a HIGH degree of risk, with high rewards, when compared to stop loss. Averaging down commits increasing amount of capital into something, so, you BETTER be right, or else, you suffer HUGE losses, or it ties up your capital for a very long time, and this is the trader's greatest fear - the fear of not having enough capital to make future trades. Cut loss assumes that one does not have an idea of where the floor price is, and so, traders try to get out when they are uncertain of that.

For example, if a stock bought at $10 starts to fall to $8, do you cut loss, or do you average down? If you have no idea of where the floor price is, then, logic dictates that you cut loss, because to you, it is possible it could go down to $5 or even $2 say. But if someone else - through a careful study of the situation - personally believes that the floor is around $7, and maybe very very unlikely to be below $6, he may instead choose a different route to back up his view. For example, he would wait until he sees the price becoming closer to $7, such as $7.05. Then, he would start to monitor closely, looking for clues such as whether the support will hold at $7, and whether the price will bounce off $7 ... and be ready to average down when the price has bottomed, showed classical bottoming indicators, and then, average down at $7.20 when it is higher odds that it will bounce back up. And if it then goes down to $6.2, he does it again. And every move is preplanned before the word Go, before he entered at $10 originally. In short, by averaging down at $7.20, his average cost might be $8, and when it goes back to $8, he breaks-even. Whereas the trader who cut loss at $8, and still waiting to reenter might end up with a loss. Whilst the trader has peace of mind after cuting loss, and the investor in emotional turmoil as price fell below $8, and smart investor who knows his stuff and have a long term horizon, simply treats the same price fluctuations as merely "noise". And 3 years later, the stock price zooms to $20, and he's glad he kept the stock all these times and ignored the "noise". He doesn't need to stay glued to the 1 minute screen every single day. In this sense, it is very easy for the investor.

There are many reasons why I believe this year will be the Year where the Investor will match the performance of a Trader, and quite possibly beat them in the longer term.

When compared to the counter-trend trader, a strong up move like what crude oil did last night will leave the counter-trend trader with nothing in hand. They would have sold at resistance levels, and last night's move is so strong, it would have taken out most if not all their holdings.

When compared to a trend following trader, the trader would only have jumped in at a higher price compared to an investor.

These are just general comments of course, but personally, being an investor is easiest amongst the 3, during these times. Of course, when crude oil is $140+, when DJ is 14,000+, when KLCI is 1500+, it is not the same situation when crude oil is below $40, DJ around 8.5k, KLCI around 880.

There are MANY risks of being an investor too.

For example, one of the biggest risk is to appear to BE WRONG for an EXTENDED PERIOD of time. This to me is a time-frame issue, rather than an absolute issue, if practiced properly. When markets appear to have bottomed, and things appear to be relatively cheap when measured against long term historical average, it is appearance rather than true substance for the genuine investor.

Another risk is to be overcommitted too quickly. The counter-risk is to be less committed and the market shoots up. At the time of writing, I don't expect the latter to occur, so, better to err on a smaller allocation, than a bigger allocation in stocks. Cash is still king, although it's time for me to put my capital into work for the longer term.

Related to this is to average down too quickly. This one is an art. Lower fixed price is appealing because of its simplicity and can be executed mindlessly, but might not be most optimal. Averaging down based on Major Key Support levels, following by price action around these key support levels are technically more optimal, but requires more work and monitoring and you can always still be wrong. There are Masters of Averaging Down, and there are Amateurs of Averaging Down, and there is no short cut to knowing when to average down, and how much to average down. The general idea is to keep remember Buffett's maxim, that as an investor, when you think you have bought near the bottom, be prepared to see your investment holdings shrink by 50%. Well, maybe he didn't quite say it like this, but if one used Crude Oil as an example, I had earlier thought when crude first broke below $60, that $40 would be a floor. Well, I was proven wrong in that expectation, but here, being wrong is not catastophic because I then expect the floor to be $20 = 50% x $40. And if you are really unsure, plan for another 50% fall i.e. a floor price of $10. In other words, if you plan your averaging down so that the maximum worse case scenario is an extremely small probability of happening, then, you will always have cash to average down. The corrolary is that you won't be fully invested by the time bottom has occured and price starts to run upwards. This is the trade off.

Even more important is selling. Again, at bottom, the price run up can be fast and furious initially. This is evident recently, in many stocks in the US, such as DRYS (shipping sector), GS (financial sector), GM (auto sector), etc. Don't get me wrong - most analysts believe the financial and auto sector have not yet seen the worst and there is more downside, and individual stocks carry huge risks when compared to sector index funds, or a basket of carefully selected stocks to represent that sector. The main point is to be selective in selling when price runs up. Forget about selling at first resistance level, because the run up will be so fast, you will not have captured the most of the possible run. A fast run up means to balance the time to hold and the time to run. Most times, it means accepting the possibility that it could come down again after a small run up. You can't win all the time, but if the goal is to capture the BIG moves, then, when it's a bull run, the best course of action is to just sit tight.

The problem is that when prices are at the bottom, or at the lower 10%-20% of the cycle, news and analysts believe there is more worse news to come, and there is no one who rings a loud bell to say that the bull is coming. The truth is noone knows whether a bull is going to come in 2009. I also don't know.

But I am definitely alerted to the possibility that the bottom might have been found. There are more signs showing that the bottom is there, although all of these could end up being false bottoms (e.g. systemic reasons), in which case, I will still have my cash to average down below the last bottom. The goal is to not be greedy to try to have 100% shares when the bottom isn't clear yet.

For example, a crude oil recovery without a Baltic Dry Index recovery or other signs is somewhat meaningless, and is unlikely to be sustainable.

Another risk of being an investor is that you know for certain that market prices are going to show you that you are going to be wrong, and that in some time-frames, being a counter-trend trader would have given better returns. That is certain to happen. The question is will you have the discipline to execute your plan? Will you set aside a small portion of your funds for trading for pocket moneys, whilst keeping your eye on the long term Gold in 3 to 5 years time from now? One of the worst thing an investor could do is to sell off his permanent holdings too soon, in the first quarter of the long term bull leg, and not have any permanent holdings for the 2nd, 3rd and 4th quarter run which should run for years.

Why a time-frame of 3-5 years? Nothing scientific, but if you believe in a 7 year bear-bull-bear cycle (peak to peak, or trough to trough), and if now is close to the bottom, then, a peak should be around 3-5 years time. Long term cycles are not scientifically exact - e.g. there is a 10 year trough-to-trough cycle from 1987-1997-2007 for example, but 3-5 years should cover most of that long term bull run.

Another big risk of an investor who plans for the long term is that in the short term, he forgets and strayed away from his long term plans, and becomes say a shorter term trader. This is especially when he has changed to be a trader for the whole of last year. This change of behaviour and flexibility is very difficult to implement, even with awareness. This is what makes investing very challenging.

The choice of stocks and markets are very important for an investor. Personally, my thinking leans towards preferring US markets for investing reasons. Similarly, my thinking leans towards a basket of stocks / index funds for exposure to critical sectors, rather than a single stock to represent that sector. I have already decided what index and what group of stocks to buy. You have to make that decision yourself.

The arguments against US is often its currency which is expected to weaken. Most likely, I will enter the forex markets this year to hedge against that. One doesn't need a substantial exposure since forex markets are highly geared. Or I may end up trading forex for side pocket money. One of the good things about forex is that it lends itself to technical analysis very much. The charts is all you need to know and it's all that you need. And there is always a bull run in forex markets - just need to switch to a different currency pair. Naturally, stop loss is the only protection you have in forex, since averaging down indefinitely is impossible due to high gearing. You simply run out of capital eventually.

Another thing is I'm most likely to be less involved in running my chatbox in 2009 than 2008. Compromises have to be made, if I wish to pay more attention to US markets and to forex markets. For forex, I'm not in a rush to get in. I intend to try a demo account for a few months first, and I have just signed up with one last night. I have quietly ambitious goals with forex, but I want to make sure that I can substantially increase my demo account first before committing real monies. Apparently, many traders have doubled and tripled their accounts in months through forex, and strict discipline and strict adherence to entry/exit signals are the key. Anyway, these are just plans, random thoughts, call them New Year Resolution if you will, with nothing concrete to show for yet, and like all good plans, are flexible and can be changed when circumstances demand it - it doesn't have to wait for the next year.

Eventually, I expect to have only a small exposure to Malaysian stocks. However, I will continue to monitor on a macro basis, for a change in investor sentiment towards Malaysia. The key driver to pushing up our markets is foreigners - without them, our markets might not even break 1000 or 1100 in 2009. The recent drying up of volume and intra-day opportunities does not make our local market exciting at all, with less reason to spend all day monitoring our local stock market prices. Perhaps, this "drying up" and "quiet" period is a necessary period for our local market to consolidate and build base, so that after a prolonged period of consolidation, it then has the ability to go up again either later this year or after 2009.

In short, if you haven't made plans yet to be an investor, consider making one for 2009, at least with some of your capital like 50%. Split this into 3 portion, plan to enter around current / slightly below current levels, the 2nd third at prices below existing bottom, and the rest at below the lower bottom. For example, with crude oil, a third at below $40, another 3rd below $20, and another 3rd below $10 and you might split that into thirds or quarters further. You may fine tune it since 50% is a huge gap, and if you believe the chances of hitting $10 is almost nil, then, adjust your capital allocations accordingly. Be fluid, be flexible, but never forget the longer-term goals. Short term, it might not seem exciting, but over the longer term, I believe with the right approach, you should be well rewarded.

Best wishes for 2009 and beyond!

Gold to Oil Ratio

2008-12-31T02:34:00.005+08:00

Lately, this has become a relatively popular chart. Gold is usually priced in US$ per ounce, Light Crude Oil priced in US$ per barrel. The comparison is how many barrels of Oil can 1 ounce of Gold buy.

Firstly, some long term chart over the past 20 years ...

Key observations:

1. Gold is overbought when Gold/Oil ratio is around 22 or higher.
2. Gold is oversold when Gold/Oil ratio is below 10 say.
3. On average - over the past 20 years - the "mean" for Gold/Oil ratio is around 14-16 say.

A closer look over the past 3 years:

Key Observations:

1. When crude hit bottom (below $34) a fortnight ago, Gold/Oil ratio is locally highest, at 24, which suggests that either Gold is overbought, Oil oversold, or a combination of both. Or if Gold is priced normally, then, Oil is extremely oversold. Or if Oil is priced normally, then, Gold is extremely overbought. I lean towards Oil being oversold.

2. It is interesting, that during July this year, the Gold/Oil RSI was oversold, suggesting that either Crude Oil was overbought, or Gold oversold. As it turns out, July this year is when Crude Oil peaked at $147 per barrel.

3. It seems in Dec this year, the Gold/Oil RSI is now the reverse, i.e. overbought. Also appears to have coincided with the lowest Crude Oil price at below $34 on Dec 19.

Other Observations:

1. The Gold/Oil ratio is on a "bull run". As usual, a bull run can always run higher than 24. We now appear to have seen a "local peak" at 24 a fortnight ago. Is this "THE PEAK"?

2. Historically, when measured over years and decades, the Gold/Oil ratio has a tendency to revert to the mean. Personally, I have no doubt that it will revert, it's only a question of when.

3. In the last 6 months, the Gold/Oil ratio has gone very, very quickly from oversold, to overbought. This is the fastest move ever in the last 20 years.

Other Thoughts:

1. If you don't believe that you can time markets, then, around now might not seem to be a bad time to commence entry into Crude Oil if one has a long term horizon measured > 12 months. You won't be able to pick the bottom, but you should be able to scale in your entry over progressively lower prices. The practical problem is of course what vehicle, since crude oil futures are highly leveraged instruments, and you have the rollover / contango problem to overcome.

2. Index funds are interesting, but there are some detailed studies suggesting that the performance doesn't appear to match the actual Continuous futures charts.

3. Oil stock/s with huge oil reserves/inventories are possible prospects, but these require careful study of the stocks concerned. The general feel is that the stock prices have not yet factored in recent low crude oil price.

4. I will not personally consider Options on 1, 2, or 3, as they are more complex forms. And forget physically owning oil in barrels. *grin*

Light Crude Oil Breakeven prices: Personal Observations and thoughts

2008-12-30T16:44:00.006+08:00

From my own personal observations, most of the fundamental arguments as to why "crude oil can never fall below $x" is based on the reasoning that in the long term, the price of crude oil should not fall below the long term production costs.

However, the long term production costs seems to be a complex and ever-changing figure for several reasons. My own observation has shown that the number varies depending on who publishes it, when they were published, in addition to varying by country, types of oil extraction methods, by company, etc. Intrinsically, it is probably a "living figure", meaning it changes over time, and is expected to continue to change over time.

Unfortunately, without a perfect filing system, it appears I have missed past figures. So, this article is an attempt to link to these figures, based on a limited search recently.

1. IMF Oct 2008 Report (World Economic and Financial Surveys - Regional Economic Outlook - Middle East and Central Asia, 60 pages - http://www.imf.org/external/pubs/ft/reo/2008/MCD/eng/mreo1008.pdf):

MCD stands for Middle East and Central Asia with an average of $58.

GCC stands for Gulf Cooperation Council, and has a lower average of $47.

Both figures are based on IMF staff estimates and projections, based on 2008 Fiscal Accounts for the countries concerned. As crude oil price fell below $40 at the time of writing, my expectation is that some of the more prudent countries are probably preparing to rewrite their Fiscal Budgets if crude oil price don't rise soon ...

2. Seeking Alpha 25 Dec 2007 article - http://seekingalpha.com/article/58322-oil-price-predictions-and-break-even-prices

Note the GCC average in July 2006 is $38, which is lower than IMF Oct 2008 figure of $47.

If one wants to be prudent, then, one should lean towards the $38 figure since it is common for analysts to jack up the figure when crude oil prices are high, and they were definitely high when IMF produced the report prior to Oct 2008. Whilst there may be valid reasons as to why the cost of extracting crude oil has risen since July 2006 (or approximately 2 years ago) - e.g. inflation - there are also valid reasons as to why the same cost will come down due to deflation. You should have your own figure.

Note also that Canadian Oil Stands cost is also not very high - only $33. It is true that these costs have since then increased to around $50, but it would not be surprising if going forward, they will attempt to lower the production costs down due to deflation. Again, you should have your own figure.

3. 21 Oct 2008 Wall Street Journal article - http://blogs.wsj.com/environmentalcapital/2008/10/21/

Venezuela 2008 Budget based on $35.
Nigeria 2009 Budget based on $39 (down from $62).
Iran next 2 budgets based on $55 to $60 (down from very high figure prior)
Angola plans for $65.
Russia $70 (previously need $95 to break even)
Iraq plans for $80 (but IMF previously said it needs $111 to break even)
Iraq Plan B for $60.

It is obvious these are not static numbers, but fluid and will keep changing depending on how the world changes. Some may have been forced by circumstances (e.g. must tighten belts during tough times), others may be due to choice (e.g. artifically over-inflate during good times, etc). What I take out from this is that the so called "break-even" price is NOT a static figure, but a dynamically changing figure, and it is very important to understand the timing and underlying motive of such announcements.

4. Merill Lynch projects crude oil price to drop to $25. This is widely reported in Bloomberg and else where (e.g. http://www.thewashingtonnote.com/archives/2008/12/the_oil_floor/).

Bottom Line

If you are a true fundamental investor who believes that you can never time the market successfully, then, I still stand by my previous thoughts that any price below $40 is a decent entry price for the long term (> 12-36 months).

But must be extremely careful and beware of the effects of contango on futures rollovers and possible similar impact on passive index funds.

Personally, I lean towards shorter term market timing.

Light Crude Oil: More thoughts on futures, rollover, contango, index funds

2008-12-27T18:41:00.002+08:00

Just some notes to myself. If you don't understand this, just ignore it.

In the present environment in Nymex light crude oil, contango poses a real practical problem for the long term investor who chose to be exposed to Light Crude using futures (e.g. Nymex).

Take this Dec 19 as example, when current month futures price crashed to below $34 at expiry.

The "long term investors" who were long Jan 2009 contract on Dec 19 who left the rollover process to the last minute suffers huge losses in 2 ways.

First, on Dec 19, the sale price at closing just prior to expiry is terribly poor, as everyone else wanted to do the same thing and sell. Consequently, these "long term investors" got hit badly, when everyone else wanted out.

Second, on the same day, if this "long term investor" wants to roll-over into subsequent month contract, the price is much higher due to contango. For example, whilst Jan 2009 contract might sell at $33, Feb 2009 contract could only be bought at say $42.

In this sense, contango is a real practical problem if the "long term investor" didn't consider his rollover carefully, because he has suffered the price fall to $33, and by reentering at $42, since this price has now fallen to $35, he has suffered another price fall again, almost equivalent to $33 falling by another 16% or more.

In other words, an investor who doesn't pay careful attention to timing his rollover contract could suffer consistent deteriorating loss, simply due to contango and poor rollover, if light crude price doesn't rise after he rolls-over, but stays flat. For example, imagine that light crude stays flat at $35 for 6 months, but the market is in contango. So, every month, when he rolls-over at $42, he suffers $7 loss per month by month end because it dips to $35. After 6 months this way, he would definitely be wiped out. (in fact, for futures, just a single $7 loss in a month is often enough to wipe out some of the poorly capitalized, over-leveraged, over-bet players, let alone 6 consecutive months of $7 loss).

Interestingly, the current month contract also happens to be the most popular month contract.

The long only crude oil index funds which invests in such futures contracts could become risky in this sense, if their index mandate is to be invested in current month contracts, and if they mechanically rollover at each month end at expiry date. They would certainly fall into the category of "long" (as opposed to short) investor (since index fund, i.e. indefinitely long term) in crude oil by mandate, and some of these use a combination of cash and futures to maintain an equivalent net crude oil exposure. Those who does this will financially suffer from mechanical rollover at expiry date due to contango.

I believe we have actually seen this phenomena happening on Dec 19. Certain light crude oil long index fund price continues to fall from Dec 19 to Dec 26, even though futures current month contract appears higher (from $33 on Dec 19, to $37 on Dec 26).

Let's see whether similar effects will be observed next month.

For future reference.

Light Crude Oil - Is this a normal Contango Spread?

2008-12-27T06:31:00.002+08:00

As at Dec 26, light crude oil futures market is said to be "in contango", meaning, the price of crude is higher in future months than spot month, with an upward sloping forward curve.

The opposite is known as "backwardation" (downward sloping forward curve), which I am guessing happened with a rather strong effect about 6 months ago, when current month crude oil peaked at around $147.

Now, being "in contango" does NOT automatically mean that current month price will necessarily rise. This is because, "rational pricing" suggests that there is a "cost of carry" to hold the commodity today for future delivery. Such costs include storage fees (including security and insurance), as well as interest foregone on monies tied up. So, it is quite normal for light crude futures contract to be in contango since it is a non-perishable commodity which can be stored for years if necessary (unlike perishable commodities like pork bellies, etc.).

However, the question in my mind right now is is the size of current spreads rationale?

For example, from the above table, Feb 2009, 2010, 2011 crude selling at $37.80, $52.96 and $60.30 respectively, giving a 12 month spread of $15 (2009-2010) and $7 (2010-2011). Is this a rationale spread? Why is $15 so much larger than $7? And is this sustainable and exploitable?

Perhaps not for an average Malaysian retailer like me. However, what about from the eyes of a professional arbitrageur / hedge fund manager? Since, if he can, then, prices may converge over time, as fear reduces and they start smelling opportunities. And if they can move prices, then, can I take advantage of this expected move?

The size of the spread seems large. For example, the $15 spread represents nearly 40% return on $37.80 Feb 2008 contract. In other words, an arbitrageur can buy Feb 2009 contract and sell Feb 2010 contract (with zero NET crude oil exposure), and receives 40% margin (=52.96 / 37.80 - 1) to cover the cost of carry. Whereas doing this for another year (2010 to 2011) only provides 14% margin (= 60.3/52.96 - 1). If we ass-u-me the normal annual cost of carry is 14% (a big ASS-U-ME), then, there is another 26% marginal difference (= 40% - 14%) in the nearer term. And if we think that risk-free interest rates will rise in 2 years time, then, this difference appears even more irrational.

However, the size of the spread (40% margin) has actually declined since a week ago. Recall Dec 19, 2008 when Nymex Jan 2009 contract expired with a closing price of below $34. The same price on Jan 2010 contract on Dec 19, 2008 is $55, with nearly $21 spread, and far larger than $15 spread observed today. However, Dec 19 was a once-off event in that it was a Nymex light crude expiry day, and obviously, someone who was long that day just simply didn't want to take delivery and was forced to sell, regardless of price, which created an excellent opportunity for the other side to arbitrage/profit. And probably no similar opportunity for an average retailer like me to profit from this expiry event.

Where am I going with this?

Well, just rambling ... I also came across this article quite by accident - http://oiltradersblog.blogspot.com/2008/12/contango-scares-uso-and-dbo-investors.html - and found myself wondering if I agree with the writer, in particular, the first paragraph statement that says "This little monster (contango) is scaring investors off simple passive funds". After thinking a little about it, my feeling is that this writer probably confuses cause with symptom, since if contango is a normal phenomena, then, the observed contango is merely a symptom or the result of prices falling more on the spot month, rather than the cause. So, the fall in prices of these passive funds are probably due to something else, rather than contango itself. Using contango to explain price falling is rather like saying "the price falls because it fell" or "the price falls because it did not rise", which is a rhetorical tautology - it is true, but is redundant, and does not really convey any useful information. However, the overall article, and certainly the blog is interesting and thought provoking, even if one may not necessarily agree with everything that's written there.

For future reference.

Merry Christmas, Happy New Year, and Some thoughts for 2009

2008-12-24T14:02:00.002+08:00

As we approach the end of this year, it's this time of the year when we review and reflect how the current year has been, and our plans for the next year.

There is no doubt that 2008 has been quite possible, once-in-a-generation experience. I have never seen, in my adult life, how financial markets around the world has collapsed to the extent that it has. Dow Jones above 14k, and crashing to a low of 7.5k. Our KLCI shooting past 1,500, only to crash to 800 in the same year! Baltic Dry Index peak of over 11,000, now languishing at 800! Crude oil price running up to US$147 per barrel, only to come crashing down to below US$40, and still doesn't appear to have found bottom yet (at the time of writing). Commodities everywhere literally crashed. Financial institutions like AIG with AAA rating by various rating agencies, crashing down and losing 98%-99% shareholder value. Major institutions collapsing, gone bankrupt and blood literally everywhere. I am not sure - once this is over - that we will witness similar events to the same extent again in our own generation - these bubbles and busts that we've seen this year. Perhaps, it needs another generation to not learn the lessons of the past, so that mistakes this scale have a chance of being repeated ... call me pessimist, but based on history, we don't seem to learn the lessons of history e.g. after 2-3 generations ...

On the local political front, this year, we witnessed a most unexpected and a most amazing result this March, with BN losing an unexpected 5 states and Pakatan nearly coming into power. Sadly, things continue to deteriorate since then. Malaysia became an underweight country for foreign investors from the political uncertainty, and whilst things appear to have somewhat settled, many remain pessimistic that our country can be turned around from what appears to be heading towards the abyss. Our RM continue to deteriorate towards the end of this year, and foreign investors doesn't appear to be rushing into Malaysia to invest in our country again. Many is of the view that even when the global economy recovers, Malaysia will continue to lag and remain under-weight for some time, simply because our policies does not appear to be consistent, and investment friendly ... the Badawi administration likes to flip flop too much, and foreign investors simply hate flip flop behaviour to want to come in and invest in this country long term.

Personally for me, this year is definitely NOT a good year at all compared to prior years. I'm sure it would be the same for all of you with real trading accounts. If your trading account showed an even better result in 2008 vs 2007, then, you are an extremely rare individual, and I hope I have the chance to meet you in real life :-) Notwitstanding the absolute result, I most definitely feel that my trading has improved personally this year, than last year, but like all years, I still feel that I can continue to improve.

What are my thoughts for 2009? There are many, and predictions for 2009 always make one look stupid in hindsight, but it's an exercise worth doing every year simply because it forces one to look forward and learn ... So, at the risk of appearing stupid, the following are my own views:

1. US stock markets ... I am not expecting the same level of volatility in 2009, than what we've seen in 2008. Being an optimist, I think there's a 55% chance that we've seen "the bottom" in the Dow Jones. (It also means there is a 45% chance we might not, so, I'm not very confident here). I think we'll see 2009 being a consolidation year for US. There's no doubt that their problems are real, their economy will continue to register bad results everywhere, whether GDP growth, unemployment, prices, general economic activity, etc. but much of these were priced in when the Dow was 7.5k.

2. Baltic Dry Index ... I really cannot imagine the BDI staying below 1,000 for the entire 2009 year ... if it does, a lot more shipping companies are going to go bankrupt, and that itself will put some upwards pressure on shipping rates. So, I envisage the BDI to break above 1,000 in 2009, and perhaps heads towards 2,000 level sometime in 2009. It may not happen soon, but the odds of this happening is greater than 50/50 in my opinion.

3. Crude Oil price ... it is currently trading below US$40 at the time of writing, but I expect this to rebound in 2009. On a macro scale, inventories are at its highest today and there's fear it could stay that way for some time, and it probably would in the short term, but by the end of 2009, we should see significantly higher crude oil prices than US$40. Those with 12 months horizon will do well.

4. Global economic activity ... this is the key driver to asset prices everywhere, but China and India still needs to grow. Yes, there's a dampener, but I see these as short term effects. When things settle down as they appear now, I expect natural demand to reappear again, to stimulate the growth engine ... then, we'll see more manufacturing activities, more shipping trades, more lending by financial institutions, greater demand for energy sources and raw materials like crude oil, etc. which explains why I expect to see higher BDI and higher crude oil prices towards the end of 2009 ...

5. US Treasury ... worth mentioning that this is probably one of the last bubbles in financial markets that I'm aware of at the time of writing ... as you know, the Fed Funds rate has been brought down to 0%-0.25%, and bond prices has never been higher before in the US. The longer dated bonds are still yielding between 2%-3%, and I expect these to perhaps come down more in the first half of 2009. Expect to see the bubble bursting towards the 2nd half or the end of 2009 say, when US economic activities start to pick up again and perhaps inflation ... at the moment, it's still definitely deflation concerns.

6. USD/JPY ... this is prompted by Dali's writings on spotting market bottoms when risk aversion reduces. Over the next few years, I'm generally bearish on the USD for obvious reasons, but timing these are difficult. But when the USD starts to drop, we should see some of these funds moving to other countries such as Euro (traditionally, seen to be inverse to the USD) and AUD (being a resource rich country), not to mention other "riskier" countries. I expect to see the USD peaking in 2009, i.e. I think we may see lower average USD value in 2010 than in 2009 ...

7. Our local stock market will probably mirror US stock markets and perhaps lag a few months ... by that I mean it of course "tracks" it on a weekly basis, although with much lower volatility, but it needs at least a few months before foreign investors feel confident to return to Malaysia after global risk aversion reduces ... right now, we haven't yet seen that happening in a substantial way. So, consistent with my 1. above, I'm not expecting a rapid recovery to our local stock market in 2009 in a major way ... "ezi" mentions that 1,000 is a major resistance, and I tend to agree with him ... for this to happen, we need to see BDI rising to say 2,000 level, crude oil rising to above US$50-US$60, Fed Funds rate rise above present 0-0.25%, US$ falling, etc. etc. etc.

Anyway, it's been fun writing this article, and making all sorts of predictions about the future. But as usual, take EVERY predictions with a huge grain of salt. No one has a crystal ball that guarantees the future. And I certainly don't trade significantly based on my general and long term predictions like the above. Treat it as fun.

With that, I would like to take this opportunity to wish you and your family a Merry Christmas, and a Happy New Year for 2009!

And may 2009 be an EVEN BETTER year yet to you and your family!

Cheers!

Peak Oil and a call for Crude Oil CW in Bursa

2008-12-21T12:33:00.003+08:00

I like this article because of the balance that it provides. Short, simple, for future reference - http://gas2.org/2008/12/15/iea-chief-economist-says-peak-oil-will-come-in-11-years/

The thing for me to take out of this is that "peak oil" is a concept where many people have many strong and yet different views about it, ranging from "it's going to happen in 10 years time" to "it might never happen because the world will find new sources of energy through improvements in technology" ...

Even the IEA (International Energy Agency) chief changed his mind, that peak oil might hit in 2030, and brought that down to 2020, which makes it much sooner.

Obviously, "peak oil" is a highly important and highly critical concept simply because our world is so energy dependent, and if the world fails to address our long term future energy needs, then, some says "human civilization as we know it today" could come to "an end".

I tend to agree with the author that it is too important to NOT plan for it.

Even if it's going to happen in 30 years time or 50 years time, the possibility that it could happen in 10 years time means it's too important to do nothing.

So, I strongly lean towards the idea of taking out an "insurance policy". And like all insurance policy, only a small % of assets needs to be committed, not the entire portfolio.

And when crude oil prices is so low and potentially volatile, it would only makes sense to trade a significant portion of it. Note that the recent Nymex crude oil price is not across the board, but only to the expiring January contract on Dec 19. The February contract did not behave in the same manner.

Unfortunately, there isn't a really decent crude oil counter in Bursa that provides direct exposure, nor is there sufficiently large volume and liquidity that a single or a small group of players does not control the prices on a regular basis ... In my chatbox, I have expressed strongly ideas for Bursa and brokers to consider creating products that are linked to crude oil prices, such as a relatively simple, straightforward, call warrant based on crude oil prices. When crude oil prices are in a "lowish range" like it is now, it should be a relatively straightforward matter for the professionals to hedge their exposures, and to write such Call Warrants and introduce these to Bursa. The call warrant can be so designed so that it could be in the money, even if Crude Oil falls to USD20, thereby, making it a very low odds of having a zero value at expiry. At current price of $35-$40, if it goes back to $50-$60, the instrument will have doubled one's money, and $50-$60 might not be an unreasonable target over the next year or 2. An expiry date of 9 to 12 months would be excellent. If the introduction of such call warrant can be timed when crude oil is around $35, then, I believe such Call Warrant will be HIGHLY popular, especially when crude oil price starts to run back to above $40. Many traders would flock back to Bursa just from this CW alone.

If you support the introduction of such call warrants, don't be shy to drop a note in the comments section.

Let's hear your views!

Another con-job ... chatting with Ethan

2008-12-19T13:28:00.002+08:00

This morning, a long-time chatter and blogger who went MIA for most of this year came back to share a relatively simple "con-job-that-despite-its simplicity-almost-got-away" with us, further to my article on newbie. Apparently, the modus operandi is similar which involves instilling confidence amongst the chatbox readers, but completely different in approach in execution. Instead of recommending stock tips, his plan involves "managing funds" on behalf of others. Here's the gist of the actual exhange in my chatbox:

To keep it brief, I have removed some of the other chatters comments that are not strictly related to the conversation, and some minor typo corrections, as the conversation are many as usual ... Please note that the chatbox works from bottom-up, so, you'll have to start reading from the bottom.

_____________

19 Dec 08, 12:58 ethan: liar is here and there, and u should judge urself is it worth to earn a little more $$ by risking urself on losing 100%

19 Dec 08, 12:57 ethan: so be extra careful with ur money, especially in bad economy time.

19 Dec 08, 12:56 ethan: another example, remember madoff scandal? the owner also dunno what the fund is doing, so ends up ? really buy fund for fun only...thats bad...

19 Dec 08, 12:55 ethan: check it out urself ya wind as i am not lawyer.. hoho..but i read it somewhere at newspaper

19 Dec 08, 12:54 ethan: as the contract will void itself if it is for illegal stuff from legal point of view

19 Dec 08, 12:54 ethan: wind, as from what i know, if it is a private fund, which is illegal in malaysia, it seem contract doesnot make sense

19 Dec 08, 12:51 ethan: how can u trust somebody to take over ur fund as u are the one that will care it the most

19 Dec 08, 12:50 ethan: he may lost all previous client

19 Dec 08, 12:49 ethan: easy, he stil use his agent id to do biz, if we report to sc and futmc , he will be in deep ****..

19 Dec 08, 12:49 Windsurfer: ethan, how did u manage to make the con man give back the money ??

19 Dec 08, 12:48 ethan: seng, u are welcome to use it since it is good for everybody, but the figure is 4k, not 8k .:)

19 Dec 08, 12:46 Seng: Ethan, I assume you are okay for me to write something based on what you just said here?

19 Dec 08, 12:46 Seng: Yes, iv ... let me makan first and hopefully, the chatbox still have the history after lunch ... I'll see if I can do a copy and paste in another article if ethan has no objections ...

19 Dec 08, 12:45 ivtac: thanks for the warning ethan. hope more ppl read about it. perhaps seng, you can addedum to your posting below?

19 Dec 08, 12:44 Windsurfer: u guys treaten to report police ??

19 Dec 08, 12:44 Windsurfer: ethan, i mean how come the con man gave back the money to u all ..??

19 Dec 08, 12:44 ivtac: a lot of ppl just arent sceptical enough and accept a lot of what anonymous people say, at face value

19 Dec 08, 12:43 ethan: wind, i dont have to proof on the case, as what i say is purely for the benefit of everyone..

19 Dec 08, 12:43 Windsurfer: he scared of u all izzit ??

19 Dec 08, 12:43 Windsurfer: ethan, how come the guy gave back the money ar ??

19 Dec 08, 12:42 ivtac: when it comes to matters relating to markets/money...it pays to be sceptical. if its too good to be true, it usually is

19 Dec 08, 12:42 ethan: we learn from this case that no matter this net person pretend they are good, somehow they will show their face to con u sooner or later

19 Dec 08, 12:42 Seng: What more proof do you need in that situation (assuming the story is true of course).

19 Dec 08, 12:42 Seng: Wind, the poor girl is probably terrified to her wits when the conman didn't want to give back the $8k on her request.

19 Dec 08, 12:42 ivtac: good la at least get back your money. a lesson to be learn lor

19 Dec 08, 12:41 ivtac: but this sort, they will just go prowl another site and try another con

19 Dec 08, 12:41 ethan: and conman leave us forever...

19 Dec 08, 12:41 Windsurfer: now is how u prove he con ur friend ...

19 Dec 08, 12:41 ethan: yes...money is 100% get back

19 Dec 08, 12:41 Seng: But how did you get him to give back the money? Face to face meeting and give him an ultimatum?

19 Dec 08, 12:41 ivtac: so you did get back the money la

19 Dec 08, 12:40 Seng: At best, it's just a trace and a source of lead for further investigation ..

19 Dec 08, 12:40 ethan: so lastly we recover full sum and we ban him and less active in ethansoft ..as i feel sad..haha

19 Dec 08, 12:40 ivtac: of course, but that person would have to be an accomplice

19 Dec 08, 12:40 Seng: Yes ethan, good thinking.

19 Dec 08, 12:40 ethan: actually even i know we can use bank account to trace him, but guy, do u think can he use other people account to get that money

19 Dec 08, 12:40 Windsurfer: so wats ur plan now ??

19 Dec 08, 12:39 Seng: Err ... I think better to keep the name confidential ... I trust ethan has good intentions, but let's not mention it here in this cbox ...

19 Dec 08, 12:39 ethan: dunno where he live, but since we know his id and real name, he cant escape any more...

19 Dec 08, 12:39 ivtac: but as i have seen in many online con cases, its very hard to recover your money even if you make police report

19 Dec 08, 12:38 Windsurfer: where he live ??

19 Dec 08, 12:38 ethan: the way we ask him go out is we want to hand over the money to him

19 Dec 08, 12:38 Windsurfer: u know his name ??

19 Dec 08, 12:38 Seng: a licensed guy some more ... kakakaka

19 Dec 08, 12:38 ethan: that is his mutual fund agent id

19 Dec 08, 12:38 Windsurfer: yalor .. bank acc ..

19 Dec 08, 12:37 ethan: so me and another guy really met him another time, and tis time we get something really unique to indentify him

19 Dec 08, 12:37 Windsurfer: u know him name ??

19 Dec 08, 12:37 ivtac: ethan, bank account details

19 Dec 08, 12:37 Windsurfer: u met the guy no ??

19 Dec 08, 12:37 ethan: but even report police, we only got ip, then do u know how hard we can trace that guy

19 Dec 08, 12:37 Windsurfer: then how u plan to get back the money ??

19 Dec 08, 12:37 ivtac: ethan, its good idea on your part but just a reminder to you. this chatbox also many silent readers, your conman could be one as well

19 Dec 08, 12:36 ethan: since i have recorded all their pm and whatever ip in my server, report police is the last option

19 Dec 08, 12:36 Windsurfer: police report la ..

19 Dec 08, 12:35 ethan: the victim sms, call and do watever to get back the money but the conman just refuse to do so.

19 Dec 08, 12:35 Windsurfer: pls tell me u whack him ..

19 Dec 08, 12:35 ethan: since conman is stil active there, we talk with him as usual but just delay to transfer money , as we want to create honey pot and know more on him

19 Dec 08, 12:34 Windsurfer: whack him la ..

19 Dec 08, 12:34 ivtac: then did you all take any action to track the fella down? police report etc?

19 Dec 08, 12:34 ethan: and that time she know she is being con and ask conman to give back

19 Dec 08, 12:34 ethan: but later on she checkout with us that we have NOT transfer any single cents

19 Dec 08, 12:34 Windsurfer: siao !!

19 Dec 08, 12:33 ethan: then the joker ask her to transfer the money

19 Dec 08, 12:33 ethan: unfortunately , one of the member which didn't join the meet up thought we have transfer money to conman

19 Dec 08, 12:32 Windsurfer: then u all whack him ??

19 Dec 08, 12:32 ethan: and we actually on hold on the fund transfering and at the same time observe him more..

19 Dec 08, 12:32 ethan: after the discussion, that conman look suspicious to us

19 Dec 08, 12:31 ethan: we discuss and talk there..

19 Dec 08, 12:31 ethan: then some of the member show up and of course me too

19 Dec 08, 12:31 ethan: after that, we really have a real meetup at some place in kl area

19 Dec 08, 12:30 ethan: each people initially he want 8k

19 Dec 08, 12:30 ethan: then he invite to create a private fund and he will in charge of executing

19 Dec 08, 12:30 wen: ya, pro con man

19 Dec 08, 12:30 ethan: then he blah blah blah..and some of us interest as he talk like really pro

19 Dec 08, 12:29 mydreamgetrich: yaya... dun let other ppl effect ur investing decision.. if canot tahan just walk off

19 Dec 08, 12:29 Seng: Alamak ethan ... managing money for others is something I strongly advise against ...

19 Dec 08, 12:29 ethan: and he got special right to short from the broker..

19 Dec 08, 12:29 Windsurfer: ethan, y they bugger transfer money to the other bugger ??

19 Dec 08, 12:29 ethan: the case is like this..that guy initially claim he is good in TA trading

19 Dec 08, 12:28 ivtac: ethan you need to tell about the conman's modus operandi too...so that others are warned

19 Dec 08, 12:28 ethan: please be extra careful with net personalities...a lot of liar and cheater there ...so do ur investment and homework wisely

19 Dec 08, 12:28 ethan: the reason i need to recover the money as the member is the victim from my website and i am the site owner, so i really need to warn u all,,

19 Dec 08, 12:27 ivtac: what story did he use?

19 Dec 08, 12:27 ivtac: ethan what was his scheme?

19 Dec 08, 12:27 mydreamgetrich: y u give him ur money?

19 Dec 08, 12:27 ethan: and lucky another 8 -9 members didn't transfer the money to that guy

19 Dec 08, 12:27 ethan: mydreamgetrich, yes..it is a few k

19 Dec 08, 12:26 mydreamgetrich: recover ur money???

19 Dec 08, 12:26 ethan: and initially the conman gain our trust.. but lastly me and another member manage to recover the money by meeting with that conman

19 Dec 08, 12:25 ethan: that conman at my site actually con one of the member and the member transfer some money to him because member trust me

19 Dec 08, 12:24 ethan: as u know, i do setup a chatbox too last time at ethansoft.com, and i also found one conman using more or less the same tactic to manipulate and con other

19 Dec 08, 12:24 Seng: What happened this time?

19 Dec 08, 12:24 Seng: Oh?

19 Dec 08, 12:23 ethan: actually seng today i am here to actually warn and giving another real example on con man in the net

19 Dec 08, 12:23 ethan: just discover newbie naughty personality

19 Dec 08, 12:23 Seng: Hi ethan! Long time no see ... what brings you back here after such a long, long, long absence?

19 Dec 08, 12:22 ethan: long time didn't come here and chat already

19 Dec 08, 12:22 ethan: hi..seng and everyone..

_______________

As usual, don't blindly belief everything you read over the Net, including this article.

Always use your own discretion.

Many thanks to ethan for sharing!

Multiple Personalities in the Net

2008-12-18T17:22:00.003+08:00

I believe many of you know NEVER to blindly trust what you read from the Internet.

In the case of my blog and chatbox, ESPECIALLY stock tips.

Unfortunately, in an area where money is involved (e.g. stock or other financial markets), there are simply too many unscrupulous sharks around.

The unscrupulous operates in a huge variety of highly imaginative styles.

One such area is the con artists. Whether actual or wannabe syndicates. The basic name of the game is blind confidence. Inspire confidence from a few successful trades (whether imaginative or real), have "others" proclaiming "full confidence in you", and then, one day, with the right stock, or at the right time, distribute. Blindly follow the tips, don't be surprised to lose it all.

It is for this reason that I don't advocate multiple nicks for the same person in my cbox. However, be warned that there ARE multiple nicks in my cbox, some of them lying dormant. With nearly 250 registered members in my cbox, and yet, less than 10% chat regularly, and when someone out of the blue comes out, be immediately suspicious.

Anyway, today, I had a surprise to discover that one of the regular chatters employed a multiple nick. The first warning was provided by "ivtac" several weeks ago that newbie and "StockGod" doesn't seem to be around at the same time, yet, from the content of what they wrote, StockGod idolizes newbie and was rude to fellow chatter Moolah.

Anyway, this is the exchange that triggered the alarm.

Unfortunately for newbie, the IP address for both Stock God and "newbie" are the same.

And unfortunately again for newbie, when queried, his story is full of holes and inconsistency. Here are some of the exchanges:

18 Dec 08, 15:51 newbie: terry, he does not know that my nic is newbie

18 Dec 08, 15:50 newbie: sorry i gtg. Bye !!!

18 Dec 08, 15:50 newbie: Seng, my office is fully wifi and i have about 60staffs so he may use the same IP add with me lah

18 Dec 08, 15:50 Windsurfer: newbie, i'm disappointed at u man ...

18 Dec 08, 15:49 terryshannon: u told him about this forum, but he doesn't know u r his boss

18 Dec 08, 15:47 newbie: he will dissect a company account before investing and will not take risk

18 Dec 08, 15:46 newbie: bcos he does not know i'm his boss but now i think he knew

18 Dec 08, 15:45 newbie: Seng, bcos my tips was given to me by some politician mah

18 Dec 08, 15:45 Windsurfer: newbie, this stockGOD is one of ur advisor ?? how come he talk to u as if he dont know u??

18 Dec 08, 15:45 terryshannon: "earned my respect",

18 Dec 08, 15:45 newbie: he is a very wise man full of wisdom in investment

18 Dec 08, 15:45 Seng: newbie, how come SG in 15:40 doesn't know where YOU get the tips from?

18 Dec 08, 15:44 terryshannon: hey, newbie ur advisor too bad lar, pretend himself know nothing

Some of the problems and inconsistencies are:

1. StockGod isn't a regular chatter. He rarely appeared at all. And yet, out of the blue when he appeared, there is no "Hi everyone"... instead he immediately called newbie a "boy" and "Newbie Boy" ... alarm bells ...

2. newbie claimed SG doesn't know who he is in real life. Yet Stock God never wrote recommending stocks in my chatbox as far as I can recall, and I'm always in my chatbox. So, how does newbie come to the conclusion that StockGod is conservative? I didn't even sense that StockGod is conservative, but behaved rudely to other chatters especially to Moolah.

3. newbie claimed to recommend SG to my chatbox, and yet SG has no clue who newbie is? When SG is supposed to be advising newbie on stocks that newbie fu-yoh here in my cbox?

Anyway, there are dozens of other inconsistencies if I want to pick it out, but it's more than enough evidence that this is serious enough prank.

Initially, I thought of just de-registering StockGod's nick, since it is more than obvious to me that StockGod and newbie are the same person.

Also, at the same time, I am ass-u-me-ing that newbie's call in the past has not created any harm, although as I write this now, I did remember at least once that I also lost some small money (because I bet small) following his PROTON call last year when he went on and on about how PROTON was cheap at $5, and his "inside info" tells him it's going to be ramped up. (I cut loss when it was obvious the move was wrong, but I don't know how many of the silent readers did that, and I also don't know how many bet big) ...

And many of the other chatters have also picked up the negative vibes from newbie's fu-yoh ...

This is a real shame, because I noted some improvement to newbie's behaviour since the last 1 week suspension.

Anyway, the issue is trust, so, after penning this, I have come to the conclusion that to try to preserve the integrity of my chatbox, I need to implement 2 things.

1. Ban newbie to set an example to others that these sort of behaviour are simply NOT acceptable in my cbox.

2. No stock calls - as a policy - are permitted. Discussions based on reasoning is of course welcomed, and if one needs to quote examples, then, it is acceptable, and reasonable expression of being vindicated when the stock price then goes right is acceptable, but UNREASONABLE fu-yoh and UNREASONABLE expressions will not be accepted nor tolerated.

I realize this may seem subjective and arbitrary, but then, membership in my chatbox is not a right, but a privilege. I expect reasonable standards of behaviour, but not when warnings are ignored.

Anyway, enough about this. The main purpose of this article are two-fold. First to remind readers, especially novice readers, that in the Internet, don't blindly believe what you read. Always apply common sense and critical and independent thinking.

Second, to let everyone know that such behaviour - as that displayed by newbie since last year, since his recent 1 week suspension, and especially his behaviour today - is not acceptable in my book. It is a real shame, because since last year, newbie has built up relationships with the regular chatters.

It's not so much that his behaviour today is especially dangerous to new investors or traders, but his duplicity, and the completely unacceptable behaviour of "StockGod" in my book. Even though Moolah was not insulted, I - as a chatbox owner - was insulted by the way "StockGod" talked to Moolah. Should any individual be allowed to insult others using a 2nd nick? Isn't the person behind both nicks responsible? Of course, I am also very dissappointed to have been fooled by newbie.

Hence, thinking about this as I write this article, I think it's only appropriate that I also ban newbie from the chatbox.

And I will not be surprised to hear more character attacks against me over the Net.

Alt-A Loans - Is this the Next Big Fear for 2009?

2008-12-17T11:05:00.003+08:00

For future reference ... note the chart - http://seekingalpha.com/article/110919-alt-a-loans-spiraling-downward

Note that the size of the Alt-A Resets are about the same rough order of magnitude as the Sub-Primes, except they are deferred by nearly a couple of years, based on a cursory glance of the above chart.

With the Fed Funds Rate dropped to nearly zero now, will the Feds have enough Balance Sheet to even absorb half of these future Alt-A problems?

Citi targets KLCI to fall to 691

2008-12-16T08:41:00.002+08:00

In general, I tend to more often than not distrust analyst predictions as they are generally biased and often made with vested interests. However, at the same time, I believe there are many useful things that one can learn by reading such analyst reports to see if their reasoning is consistent with yours, so that deviations can be investigated in greater detail to see if you need to alter your own reasoning, or to dismiss the analysts conclusions.

For future reference:

http://www.btimes.com.my/Current_News/BTIMES/articles/citi15/Article/index_html

http://www.btimes.com.my/Current_News/BTIMES/articles/20081215121640/Article/index_html

Interesting extracts:

"MALAYSIA'S stock market may continue to fall for at least another quarter as earnings shrink and a possible drop in domestic spending threatens economic growth"

"The domestic market typically recovers from a slowdown during or after the worst quarter of economic expansion"

"In three of the last four recessions, the bear market ended in or immediately after the worst quarter of GDP growth"

"Corporate earnings in Malaysia will drop 11 per cent in 2009"

"Companies in the utilities sector are expected to see a 23.7 per cent decline in EPS, banks (-8.3 per cent), telecoms (14.4 per cent), plantations (-20.6 per cent) and tobacco (-10.5 per cent)."

"biggest losers will be media companies, plantation owners and utilities"

"valued at 9.8 times reported earnings, the highest among Southeast Asia's benchmark stock indexes"

"new target for the index is 691"

"now using our benchmark the average Asia P/B of 1.2 times - implying a further decline to 691 points"

"Malaysia's slowest growth in gross domestic product might occur in the first quarter of 2009, with expansion of 2 per cent"

"stocks trading at trough P/Bs or have strong earnings visibility are on our top buys list - AMMB (2.28), BCHB (5.85), IGB Corp (1.18), KLCC Property (2.61), Tanjong plc (13) and IOI Corp (3.2). Our top sell ideas are Public Bank (8.3) and Maybank (5.1)"

Reference prices at close of 15 Dec in brackets.

Some rumblings on next FOMC Meeting Tuesday, 16 Dec 2008

2008-12-12T00:53:00.003+08:00

Sometimes, it takes a while before "the obvious" becomes "obvious" and stares at you right in the face.

I don't know why I didn't see this earlier. Perhaps when one's mind is distracted, it is too easy to miss this reasoning.

I came across this article by Kathy Lien a couple of days ago - http://www.kathylien.com/site/federal-reserve/what-zero-yield-in-treasury-bills-signals-for-currencies. The interesting chart is this below:

Note that Fed fund futures are now pricing in a 98 percent chance that the Federal Reserve will cut interest rates by 75bp to 0.25 percent on December 16th:

98% chance! Fed rates cut to just 0.25%! And it seemed today, the same Fed Fund Futures are now pricing in 100% probability of a 75bp cut!

And then, there is the negative/zero yield on the 4 week US treasuries bills, and the 3 month US treasury bills which looks set to head to zero also soon ... Again, it should not be a surprise since markets are now "certain" that the Fed funds rate will be dropped by 75 bp. Fed funds rate drops, yields on US Treasury Bills and other instruments drop. Whilst it is tempting to short longer term US government bonds today since it's near historical high, the possibility of rates continue to drop next week could mean that what looks expensive today (the price of longer term bonds are inversely related to yields), can become even more expensive tomorrow.

And with interest rates at all durations look set to drop, it is no surprise that we could finally be seeing downward pressure on USD currency, quite possibly soon ... the USD has been on a fantastic bull run in the last 4 to 5 qmonths quite possibly "without wings" and recently, I've seen USD currency charts looking set to test 50 day Moving Averages and this is generally considered to be a critical signal. The immediate question is could next Tuesday's announcement be that catalyst that will confirm the start of the USD downfall? (obviously, it's never this obvious)

The impact on US stock markets is now "obvious" in hindsight. Lower rates, lower cost of doing business, generally regarded as a good thing for US stock markets. In fact, we've just seen S&P 500 rising well above 20% since the last bottom on 21 November 2008, technically, qualifying US markets to be in a bull run (due to the more than 20% gain in the index, just like a more than 20% fall in markets being declared to be a Bear market). Again, the general impression is that the real US and global economy is still in a rut, i.e. this bull market - like the USD - appears to be flying without wings too ... Again, the immediate question is - will next Tuesday's Fed announcement be the catalyst that would trigger profit taking, or even well before that? In other words, is what we are seeing an anticipation of 100% probability of a 75 bp rate cut, and when this becomes fact, will markets then correct itself like what it did with the most recent rate cut?

Global banks have been coordinating their rate cuts recently, and it seems a few countries have been actively cutting interest rates:

http://business.theglobeandmail.com/servlet/story/RTGAM.20081209.wrates1209/BNStory/Business - Bank of Canada Bank slashed its benchmark rate by three quarters of a percentage point to 1.5 per cent, a level not seen in Canada since 1958.

http://business.theglobeandmail.com/servlet/story/RTGAM.20081211.wswissrates1211/BNStory/Business/home - The Swiss National Bank slashed interest rates by half a percentage point on Thursday, the SNB cut its target band for the 3-month Swiss franc LIBOR for a fourth time within two months to 0.00-1.00 per cent.

http://business.theglobeandmail.com/servlet/story/RTGAM.20081211.wtaiwanrates1211/BNStory/Business - Taiwan cuts rates by most in 26 years

http://business.theglobeandmail.com/servlet/story/RTGAM.20081211.wkorearates1211/BNStory/Business - South Korea's central bank carried out its biggest interest rate cut ever Thursday, slashing borrowing costs by a full percentage point to a record low in a bid to stave off recession. The benchmark seven-day repurchase rate is now 3 per cent from 4 per cent.

And a nice picture showing various Central Bank key rates for this decade - all pointing south and in many instances, doesn't appear to have more room to go south further ...

So, bottom line - what does all this means to US stock markets and our own backyard KLCI? To me, definitely critical to monitor the US markets to see how it reacts to Fed's announcement this Tuesday. The past 2 Fed announcements was widely anticipated, and the beneficial effect on markets was getting shorter and shorter to the extent that the last announcement actually caused markets to fall on / just before the announcement day ... If markets continue to run after this Tuesday's announcement, other things equal, consider the possibility that we may be seeing another critical divergent signal that perhaps the bear market could be over ... However, if it doesn't, and if it tanks, then, we definitely need to see more divergent signals than what we are already seen so far from monitoring various stock markets around the world, VIX, bond spreads, commodity markets, shipping rates, copper prices, etc., before we can conclusively say the bull is truly around the corner ...

Some Value Investor Results for Perspective

2008-12-10T17:52:00.004+08:00

Windsurfer shared this article with us this morning - do give it a good read. The focus is on the famed value investor - Bill Miller's - recent results, who were not spared at all by the current global crisis.

http://online.wsj.com/article/SB122886123425292617.html

The diagram that got my attention is this one:

Even the famed Legg Mason Value Trust lost 58% over the past 12 months, and many other Value Investors are not spared either ...

The moral of the story?

To me, "what looks cheap CAN GET CHEAPER during the Great Bear Run ..."

I'm sure there are plenty of other lessons that one can learn from that article. To me, on top of my mind, a few other quotes comes in such as ....

"Timing is EVERYTHING"

"Don't rest on your past laurels - do your homework properly AT ALL TIMES"

"Don't continue to hold on to your mistakes when it becomes clear that your original reasoning is proven wrong"

"Don't bet big on your mistakes, and this includes not blindly average down on your mistakes."

Do share.

Cheers.

Some rumblings on Gold prices

2008-12-07T17:33:00.004+08:00

I'm not a Gold trader, I have never traded any Gold contracts in my entire life.

However, I do cast a glance from time to time at Gold prices as part of my personal monitoring of the global financial markets. I also noted that a few of the chatters in the chatbox have long positions on Gold, and was previously (and currently?) very bullish on Gold.

So, I was most interested to read this article on Gold in Seeking Alpha today. (want to see if I should jump on the Gold bandwagon or not). The title is "The Manipulation of Gold Prices". The link is here - http://seekingalpha.com/article/109210-the-manipulation-of-gold-prices?source=article_sb_popular

The article is rather lengthy, but what got my attention (and rang a loud alarm bell) is the most amazing claim by the author. In his own words ...

"... It is only a matter of time before gold is allowed to rise to its natural level. Assuming that about half of the current increase in Fed credit is eventually neutralized, the monetized value of gold should be allowed to rise to between $7,500 and $9,000 per ounce as the world goes back to some type of gold standard. In the nearer term, gold will rise to about $2,000 per ounce, as the Fed abandons a hopeless campaign to support COMEX short sellers, in favor of saving the other, more productive, functions of the various banks and insurers. ..."

Gold closed $752.2 per ounce last Friday, i.e. this author claims gold has the potential to rise 10 fold at the very least!!!

Anyway, I decided to take a look at the Gold charts to see if there is anything interesting there.

Here's a 3 year chart of Gold from stockcharts.com.

Some quick observations:

1. Price generally trending upwards (last 3 years), but with increasing volatility (this year). The latter is evidenced clearly from the daily price range which is clearly wider than in the past (and the widening MACD this year compared to prior years). The increasing volatility at the "tail's end" is not usually a good signal, as it signifies huge uncertainty.

2. Prices have fallen BELOW the 200 day Moving Average. In fact, prices dipped BELOW 50 day Moving Average as well. Unlike in November 2006 when the 50 day MA crossed below the 200 day MA only very briefly and then recovered, this time, the 50 day MA crossed below 200 day MA in September 2008, and does not appear to have the strength to cross over it again. The conventional TA interpretation is a bearish bias to Gold prices.

3. Since March 2008, the trend is bearish. You can see this from the lower highs in March 08, July 08, October 08. The most recent peak at end of November 08 is even lower. A series of lower highs is traditionally interpreted as having a bearish bias, not a bullish bias. The resistance level to watch is around $840 to $900.

4. There is also a series of lower lows in May, August, September, October 2008. Again, pointing to a bearish bias.

5. Bearish biased MACD - the black line just crossing below the red line.

6. The RSI reading is neutral at 44. Neither here nor there, and doesn't appear oversold yet.

In short, the technical view is that over the near term, the bias on Gold prices is bearish.

So, at this juncture, I would personally tend to ignore the author's claim of 10 fold increase in prices from today's levels. At the moment, it looks like a "grand dream". In fact, I just don't know how Gold can go to $2,000 in the near term. I don't have any gold trading positions (except for some family ornaments which are negligible holdings and definitely NOT for trading).

The other thing that's on my mind is the traditional view that Gold is often seen as a good storage of value during times of uncertainty. For example, I would say that this year is definitely a time of HUGE uncertainty. Everywhere I look, I see fear, whether this is in our local stockmarket, Asian stock markets, Global stock markets, commodities markets, the collapse of global shipping rates, the collapse of US interest rates and global interest rates following suit, etc. There's probably isn't a time of greater uncertainty globally like the one we are facing today in my adult life. (The last Asian Financial Crisis is not truly a global event, even though it was a huge uncertain period in Asia.) And yet, despite this huge global uncertainty, gold price DID NOT make a new high.

I don't know how to explain this.

Perhaps it's global gold price manipulation as the author suggested. Perhaps it's natural supply and demand, where miraculously, every time when there is pressure for demand to rise, supply miraculously appeared to reduce pressure on Gold price.

Anyway, my point is that technically, in the near term, Gold faces a bearish price bias.

Technically, support appears at around $650. I could be tempted to take a small position at $650 long, but more of a paper trade than an actual trade.

As someone who hasn't really monitored nor traded Gold before, I would be tempted to trust the charts a lot more than the so-called "fundamentals" of Gold written by one or a group of analyst. Superficially, it seems to me that in order to be a good gold analyst, one must truly understand a lot of factors such as history of gold price manipulation, the various Gold prices, products and markets such as spot and futures especially COMEX, the major gold reserves held by central banks around the world, and their policy and practices individually and collectively towards the release of such gold reserves (if any), the value differences towards gold in various parts of the world, the claim of manipulation involving CFTC (Commodity Futures Trading Commission) and various conspiracy theories, a good understanding of how margins actually work in various gold futures markets, the attitude of global insolvent banks towards gold in today's times of global crisis and how their attitude will change in future, the role (if any) of the Feds, US Treasury that could influence Gold prices, the relationship of the USD and Gold prices, the relationship between stock prices and Gold (if any), global Gold inventories, future technological usage of gold (?), in short, the entire topic of supply and demand of Gold that goes beyond superficial or general, widely available understanding, and how that ever changing demand/supply relationships influence Gold prices in the immediate, short, mid and long term.

In short, at this moment, I don't think I'm in that elite group of the world's Top 5% Gold analyst/players globally.

Maybe, I'll just stick to paper trades and general monitoring of Gold *grin*

Comments on Jason's Volatility System

2008-12-07T08:52:00.003+08:00

Jason from the Angry Investor blog has proposed a semi-mechanical volatility system in both my chatbox and his blog here - http://theangryinvestor.blogspot.com/2008/12/blog-capsule-my-dow-jones-futures-for.html

I thought it would be a good idea to comment on his system here than in the chatbox, since it is more enduring than a chatbox comment, and as he correctly noted, there is practically zero / minimal risk of moral hazard for Malaysians to comment on a global and highly liquid trading platforms such as the Dow Jones Futures.

The first thing to note is that the mechanical volatility system proposed by jason is appealing in its simplicity. Every night, note the DJ closing value (say C). Then, enter both a Limit Buy and a Limit Sell order which is C-75 points and C+75 points. Then, go to sleep and pray. The next day, hopefully, both trades - Buy and Sell are executed because of the high Dow Jones volatility. That's basically what jason described in his blog.

However, jason appears uncertain, because subsequently, he altered the parameters from C+/- 75 to C+/-100. This begs several questions:

1. Is this the final amendment, or will there be future amendments?
2. If there are future parameter amendments, under what conditions would such amendments be made? Is jason able to describe such conditions that would trigger such amendments?
3. Is this a genuine mechanical system, or is this a semi-mechanical system, "semi" since in reality, the system parameters requires jason's own discretion as time passes? For example, jason has not described how he came about with the new +/-100 points change from +/- 75 points change. For example, will future changes be larger or smaller? What conditions would trigger such a review?

On the system itself, jason did not describe what would happen if only one of the trade was executed but not both. For example, suppose Buy at C-75 points was executed, and the market subsequently tanks. A few questions arises:

4. At what point would jason set the stop loss? C-175? C-200? No stop loss?
5. When would jason excute his stop loss, since he has gone to sleep after entering the limit orders? The next trading day?
6. If jason has an open (losing) order such as the one described here, will he continue to trade with a second contract (i.e. requires extra capital) or put everything on hold until the first contract is closed? If he opens a 2nd contract, is there a limit to the maximum number of open contract should he encounters a string of losses, and if so, what is that maximum limit? Furthermore, since he uses Futures with margin calls, where is that final limit?

Another comment I like to make is that when jason's proposal is back-tested over the past couple of months, it looks impressive because it works and it is so simple! Just a quick glance at the DJ charts in the past 2 months, and jason's system works. However, the critical question is will this continue to work in the future? And does it really work when back-tested further back in time?

For example, imagine we are at the close of 19 May, 2008.

On 19 May 2008, DJ closed 13,028.

According to jason's proposal, set a Buy Limit at 13,028 - 75 = 12,953, which would have been triggered the next day.

At the same time, the Sell Limit at 13,028 + 75 = 13,103 would NOT have been triggered, because the High on 20 May, 2008 is 13,026 only.

The question now is a critical one, because the hypothetical trade on 20 May 2008 is one example of a trade that has clearly gone wrong. Jason had expected both Buy and Sell to be executed, but it didn't. Instead, only one trade got executed. The question is would he then liquidate this trade the next day regardless of the size of the loss (or profit) on 21 May, 2008? Or will he just hold and "hope" that the DJ would climb back to 13,103 to close his position at a profit? Is there an equivalent mechanical rule for trades that have gone wrong? Or when trades go wrong, discretion is required?

This is a critical and extremely important question, because if he continues to "pray and hope", then, he is guaranteed to be killed one day (it's just a matter of time), because as it turns out, 13,103 is not reached again, even as of today nearly 7 months later. And let's not forget that he would be pretty much wiped out if he continues to buy and hold until today, as the DJ has fallen to around 8k, or even lower at the lows of 21 Nov 2008.

In other words, if he only keeps one contract open at all times, jason would be out of trade for nearly 7 months. Furthermore, he would not have participated in subsequent volatility gains which are extremely significant.

On the other hand, if he cuts loss, he must set his stop loss level extremely carefully because on other days when volatility is high, he would also be stopped out as well, even if the trades turn out to be profitable later in the day. There is no free lunch - damned if you're stopped, damned if you're not.

In other words, markets are too smart to give someone a free lunch for too long a time. It doesn't mean that markets cannot be beaten - it can, but the truth is, by only a very small % of players consistently like Buffett. Jason's initial guess that this might work for the rest of December month might turn out to be correct, however, it still requires Jason's discretion to decide whether such a system will work at the start, mid or end of 2009.

Another thing that jason has to watch out for - when trading mechanical system - is that there is No Holy Grail. There is no system that gives a 100% win rate. You simply will have a loss / a string of losses one day. That statement is pretty much a certainty and a fact over the long term.

The critical question is whether jason will have the discipline to continue or stop trading his system after he has a string of such losses, or whether he will be tempted to "fine-tune" and alter his system. His article indicates that he is tempted to "fine-tune", and he needs to be aware that "fine-tuning" will then turn his mechanical system into something else - a "discretionary" system - in other words, the success/otherwise of his "evolving" system then becomes dependent on his skill / otherwise in fine-tuning his system. Markets have shown that only a very small % of traders are successful in such an approach, but the majority will probably get it wrong. (In other words, his originally simply described system can be thrown out of the window when it evolves).

Another suggestion which I would like to give jason, since he strikes me as a hardworking young man, is to keep a daily record of his profit and loss from trading this system. Identify the starting capital now, rather than look back and then find the ideal capital size that would give the highest % return retrospectively (this is called "back-hand"). By identifying the capital NOW, he can then calculate the % returns appropriately at a future date.

A real trading portfolio is almost certain to give different results than paper trading. On paper, it is very simple to show good results. But in day to day real life trading, emotions, doubts, fear, greed, trading costs, slippage in execution, lack of discipline, lack of emotional control (widely documented in trading literature), unexpected sickness (e.g. grabber's recent dengue :-)), personal problems (e.g. divorce, etc.), holidays (e.g. Seng's Taiwan holiday), etc. etc. etc.comes into play and actual results is certain to be different from paper trades. I have yet to see actual trades turns out to be identical to paper trades, especially after the system have been traded for an extended period of time. Hence, I believe jason should test it with an actual portfolio since he can afford it. *grin*

Anyway, hopefully, this is enough food for thought. I would like to take this opportunity to thank jason for sharing his ideas with us, and his open and positive attitude in welcoming comments to his thought provoking article in my cbox and his blog.

Following Stock Calls

2008-12-02T23:25:00.002+08:00

This evening, in an honest discussion with "dylan" who is a keen follower of "Samgoss" blog, Windsurfer chatted with us and shared his personal story and insights about following stock calls from Samgoss. The following are his exact words, and reproduced here with his permission. I have not edited any words (save for one minor spelling correction).

I am reproducing it here because I think it raises important and critical questions about following stock calls blindly, as well as very valuable lessons for any investors who has lost nearly everything, and does not learn how to fish for himself, and relies purely on others.

Windsurfer: i know Samgoss for long time ago ... actually it was through the OSK forum ... back then the website was stock188.com i think ... Samgoss appear in the forum preaching Fundametalist approach to picking stock ... i think i was in 2001 or 2002 ... back then the market was very slow ... i mean REALLY SLOW ....

Windsurfer: so back then i was just starting to invest (play) stock ... so alot of things dunno ... ask alot of stupid questions( i still do) ... so i started to follow Sam's pick ... because his reasoning was acceptable to me ... fundamental approach... looking PE ... things like that ... as he also made enemies in stock188 forum as well ... these are mostly TA people...

Windsurfer: I make some money from Sam's pick, some notible great calls was YTL-WB, IJM, PARKSON, JUSCO, LIONDIV( although this one i thin Tinglek made the call 1st) etc ... But i didn't really follow all his calls, and some of his calls didn't work out as well... Sam's appraoch is very simplistic, sometimes, even too simplistic ...

Windsurfer: I follow Sam's call blindly for sometime, some very good, some so so ... but i would say most is pretty good, but because i didn't follow all his pick, so i did not make the most money, but when i follow, the stock didn't perform quite as good. Maybe my luck not so good ... Anyway, the call to buy MIECO-WA was the most damaging .... i lost all of my gains for a few years and then some ...

Windsurfer: i was reduce to ZERO, after that, i realize i need to learn to invest by myself, i understand that learn to fish by myself. I believe that Samgoss is geniune, i believe that he has no intention or that he is manipulating anybody, most of his psycho fan follow him because his track record is very good ... but, when discover the investssmart blog, Dali's blog, and this chatbox, i find myself learning alot... especially from Dali ...

Comments

1. "when i follow, the stock didn't perform quite as good".

This is a very important issue that needs to be examined carefully.

Why didn't the stock perform as good as for the caller himself?

Is this because the follower didn't follow closely enough? Is it possible to ever follow closely enough? Is this because of inevitable time delay since prices can move up quicker than the blogger can blog or inform others? Or (heavens forbid) is this due to manipulative practices, i.e. you will never be able to get the same performance?

Very often, when stock calls are made, the price will usually have run up. This could be due to natural supply and demand, or price manipulation. The problem is for 99% of the followers, they will not be able to tell the difference. The risk is of course - are you buying off the caller's earlier buy? Then, you could end up taking the risk, with the caller having minimal risk. He doesn't need to sell all. Instead, he could buy a bigger amount first, and then distribute on the way up to his followers, thereby minimizing or zeroizing his own personal risk. And at the right time, he sells all.

Hence, I always believe that it is better to learn how to fish for oneself, than to follow stock calls. The benefit is that when you learn how to fish for yourself, then, you can be the first one to spot such bargains. Therefore, knowing the full reasoning is just as important, or more important than just knowing the stock call itself.

2. " i didn't follow all his pick".

This is a difficult issue. Normally, traders are encouraged to follow a constant and disciplined stock decision making process with a positive expectancy. And in this case, all stock experts will tell you to ALWAYS follow the signals generated with no exceptions. Why?

Because the positive expectancy is generated statistically, and have been proven from experience - e.g. it may even have been backtested against a large sample of stock trades before. Miss out some, and those trades which are missed out could turn out to be the really big moves that explains 80% of your potential returns or otherwise.

However, when it comes to blindly following stock calls, then, many additional problem arises.

For example, we cannot be certain that the stock caller always call when buy signal is generated. He might tell you 5 out of 10 times, and keep the other 5 to himself. This means that statistically, you may be at a disadvantage, because he may be keeping his best 5 trades to himself without necessarily having to disclose his best trades to you.

Another problem arises because we don't know the algorithm. What exactly is his decision making process? And for discretionary traders, the truth is sometimes, we can never know, because human decision making process which can be explained to others can never be 100%. We can explain some things, and others most things, but never everything, however much we try. In other words, for something as complex as trading stocks, we can never spoon-feed another. Like an infant learning to walk, eventually, the infant himself must force himself to learn how to walk. As parents, we can only assist and make the process perhaps a little bit easier.

Hence, again, I am a deep believer that it is better to learn how to fish for oneself.

3. MIECO-WA was the most damaging .... i lost all of my gains for a few years and then some

This is very important to understand. The nature of stock market is that all it takes is a single mistake, and it can actually wipe you out completely if you don't know what you are doing. Especially warrants.

Most people don't understand this. They think that if the past 5 calls works, and the next 10 calls work, and the 11th call doesn't work, they think they'll come out ahead.

But if the 11th call doesn't work, and if the guy is greedy and put 100% of his capital into that 11th stock, and if that turns out to be a warrant or a stock that goes to zero, then, all his past gains means nothing. Zero.

Buffett likes to say that when you take 25 x 24 x 23 x 22 x ... x 0, the end result is always ZERO. In other words, past gains means nothing if there is no prudent money management.

In the US, and overseas, this is a known manipulative tactic used by syndicates there. They know that statistically, greed in stock market is a relatively stronger force than prudence. So, they make sure the first few calls works in varying returns. And when most followers least expects it (usually, this coincides with the time when everyone is confident the next call will work, and there is huge volume), the next stock turns out to be the stock that the syndicates actually want to distribute.

Trying to prove beyond a doubt such syndicates in practice are almost impossible in real time. However, applying common sense is very easy. Hence, my position that I will never endorse nor promote another "stock call" service / blog unless I fully trust the service provider. The truth is - as you will have noticed from this blog - there is no such provider that I fully trust. Over the Net, it is important to never trust anyone, because you will never really know if the other person on the Net is genuine or not. Written words over the Net are cheap, if not free.

4. i was reduce to ZERO.

At this point, "dylan" asked Windsurfer this:

dylan: wind , yes miecowa is koyak.. but remember he asked us to swap to ijmwb @0.38 ? there we made kow kow to recover all yr losses ?

I don't know what transpired in the past. And it is probably worthwhile to explore this phenomena further specifically to better understand what actually transpired.

However, what I would say at this jucture is that it is actually quite common behaviour amongst investors/traders, that when one has built up substantial gains over a reasonable period of time (say months or years) by following others, only to see 100% of the gains lost, then, confidence in that person is completely destroyed.

Overseas syndicates knows this, and will make sure there is another trade that works ... "for you to swap to" .. in order to retain their clientele. The problem is that if you are a follower, then, psychologically, when ALL of your past gains is lost, you are devastated emotionally. You are usually in no position to be able to be objective about anything.

The next trade that works big (such as IJM-WB) is a known syndicate method of trying to retain their clientele for future followings, without having to start from scratch.

Again, I don't know if there are such syndicates here in Malaysia's stock market. And identifying them is usually very difficult for retailers. So, even if there is just 1 sign that I don't trust them, I don't follow them. Better be safe than sorry.

And it's always better to learn to fish for oneself. Initially, the results are less good, but after the first year, most learners should already aim to beat F.D. returns, and get at least market returns. And in a few years time, many of the dedicated ones will find that it's actually not too difficult to beat market indices. And by this stage, you should find your self with genuine financial independence, because you should then be able to fish for yourself, without having to rely on others. Isn't this a worthwhile goal?

Yes, it is not easy to learn how to fish for oneself. Initially, you will have to pay tuition fees to Mr Market. We all do. Even I and Samgoss did when we first started out, and even Windsurfer and Dali and everyone else did. Even Buffett did as well. No one can escape this "tuition fees".

Which is why, there are things in this world like investment groups, investment blogs, etc. for people to bounce ideas off each other for checks and balances. And hopefully, reduce some of the painful lessons.

Which is also why I decided to set up this chatbox 1.5 years ago so that honest discussions can be had without feeling fearful of discussing. The most important thing in discussing is one's own self-discovery process. Learning to trade/invest is much harder than it looks because one must be brutally honest with one's own strength and one's own weaknesses. Most of us are really unable to identify, confront, admit and accept our own weakness.

It is not to say that it is impossible to profit from syndicate activities, especially if there is a high win rate. For example, relatively straightforward strategies may be designed to come out ahead, but it requires constant discipline. And since you need constant discipline anyway, why not learn how to fish for yourself?

Some Concluding Remarks

Here, I want to raise the issue of trust. Trust and believe in the stock caller is important - in fact the single most crucial element - before one can follow another's stock call. To me, it should go well beyond "proven track record". Why? Because "proven track record" can always be manufactured, unless it is externally audited by a reputable external auditor (and even then, one still cannot escape the possibility of fraud such as Enron, Worldcom, etc.).

And how does one "trust" another? To me, trust comes from integrity, honesty, sense of fairness to oneself and to others, and develops over time. Trust must be earned, not given. And trusts comes from looking at the entire "package", not just focusing on one aspect (e.g. "so called proven track record") at the expense of ignoring others (e.g. arrogant behaviour, unfair comments, etc.).

When I was young a very long time ago, my mother always tell me to pay attention to the details, when judging a person. Don't just listen to what he says, but observe everything. If a person gossips about others to you, pay attention to that and ask yourself this simple question - what makes you think he didn't gossip about you behind your back?

Similarly, if a person does something that is unfair to another person, what makes you think that he is going to be fair to you? Can you really trust such a person?

And if I can't trust such a person, why should I allow such a person's stock calls and blog be endorsed and promoted in my own blog and chatbox?

Anyway, I am a deep believer that human beings are not all bad or all good all the time. Sometimes, when we are younger, we do things that we thought was right at the time, but years later, when we reflect, we realize how silly we were then, and wished we haven't done such things. I know, because I was young and was such a person once before. The smarter ones do change, but unfortunately, this usually takes an extremely long time. And things like trust must be earned over time.

Acknowledgement: I would like to take this opportunity to congratulate Wind for sharing his true story. If true, it is clear that Wind is indeed a courageous and responsible young man. Despite losing and being reduced to ZERO, he still does not blame Samgoss at all, and does not appear to have any malice or strong feelings against him. This is a mark of a responsible individual who takes full responsibility for his own actions. On that note, I salute him for his courage and keen observation.

US Recession

2008-12-02T08:00:00.002+08:00

I almost fell off my chair when I first read this ...

"WASHINGTON (Reuters) - The U.S. economy slipped into recession in December 2007, the nation's business cycle arbiter declared on Monday ..."

Full article here - http://biz.yahoo.com/rb/081201/business_us_usa_economy_recession.html

That Monday was December 1, 2008, or 12 months too late!

On 2 December 2007, the S&P closed 1505. Last night, S&P closed 816, or just a little over half of its value 12 months ago.

If you had waited until the US Government officially declares Recession, isn't this way, way, way too late?

If I recall correctly, Buffett called for a Recession last year, and a certain local fund manager lambasted Buffett for being a lousy economist earlier this year. *grin* I guess bloggers who called US recession last year should now feel vindicated that they were right!

For future reference.

U.S. Approves Plan to Help Citigroup Weather Losses

2008-11-24T17:46:00.004+08:00

For future reference - http://www.nytimes.com/2008/11/24/business/24citibank.html?em

Federal regulators approved a radical plan to stabilize Citigroup in an arrangement in which the government could soak up billions of dollars in losses at the struggling bank, the government announced late Sunday night.

The complex plan calls for the government to back about $306 billion in loans and securities and directly invest about $20 billion in the company. The plan, emerging after a harrowing week in the financial markets, is the government’s third effort in three months to contain the deepening economic crisis and may set the precedent for other multibillion-dollar financial rescues.

Citigroup executives presented a plan to federal officials on Friday evening after a weeklong plunge in the company’s share price threatened to engulf other big banks. In tense, round-the-clock negotiations that stretched until almost midnight on Sunday, it became clear that the crisis of confidence had to be defused now or the financial markets could plunge further.

Whether this latest rescue plan will help calm the markets is uncertain, given the stress in the financial system caused by losses at Citigroup and other banks. Each previous government effort initially seemed to reassure investors, leading to optimism that the banking system had steadied. But those hopes faded as the economic outlook worsened, raising worries that more bank loans were turning sour.

President-elect Barack Obama was also working over the weekend to shore up confidence in the rapidly faltering economy. Mr. Obama signaled that he would pursue a far more ambitious plan of spending and tax cuts than he had outlined during his campaign and planned to announce his economic team on Monday. Some Democrats in Congress, meantime, were calling for the government to spend as much as $700 billion to stimulate the economy over the next two years. Federal Reserve Chairman Ben Bernanke was involved during the discussions.

Mr. Obama’s expected choice for Treasury secretary, Timothy F. Geithner, the president of the Federal Reserve Bank of New York, played a crucial role in the negotiations on Friday but took a less active role once news of his appointment was circulated. While the initial focus of government officials was to help the embattled company, they may also seek to draw up an industrywide plan that could help other banks.

The plan could herald another shift in the government’s financial rescue. The Treasury Department first proposed buying troubled assets from banks but then reversed course and began injecting capital directly into financial institutions. Neither plan, however, restored investors’ confidence for long.

“By intervening, they are giving the market some heart to temporarily stave off some fear — but you can only push that so much,” said Charles R. Geisst, a financial historian and professor at Manhattan College.

Banking industry officials said the decision to support Citigroup, while necessary, could draw a firestorm of criticism from smaller institutions that were not big enough to be saved.

Under the agreement, Citigroup and regulators will back up to $306 billion of largely residential and commercial real estate loans and certain other assets, which will remain on the bank’s balance sheet. Citigroup will shoulder losses on the first $29 billion of that portfolio.

Any remaining losses will be split between Citigroup and the government, with the bank absorbing 10 percent and the government absorbing 90 percent. The Treasury Department will use its bailout fund to assume up to $5 billion of losses. If necessary, the Federal Deposit Insurance Corporation will bear the next $10 billion of losses. Beyond that, the Federal Reserve will guarantee any additional losses.

In exchange, Citigroup will issue $7 billion of preferred stock to government regulators. In addition, the government is buying $20 billion of preferred stock in Citigroup. The preferred shares will pay an 8 percent dividend and will slightly erode the value of shares held by investors.

Citigroup will also agree to certain executive compensation restrictions, which will be reviewed by regulators. It will also put in place the F.D.I.C.’s loan modification plan, which is similar to one it recently announced.

The government said it was taking the step to bolster the economy while protecting taxpayers. “We will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks,” the regulators said in a joint statement Sunday.

Inside Citigroup’s Park Avenue headquarters, the mood was tense. Through the weekend, Robert E. Rubin, the former Treasury secretary and an influential executive and director at Citigroup, held several discussions with Treasury Secretary Henry M. Paulson Jr.

Vikram S. Pandit, Citigroup’s chief executive, spoke to regulators and lawmakers. Mr. Pandit also met with Citigroup’s board on Saturday, and there was no indication that they would seek to replace him.

Once the nation’s largest and mightiest financial company, Citigroup lost half its value in the stock market last week as the bank confronted a crisis of confidence. Although Citigroup executives maintain the bank is sound, investors worry that its finances are deteriorating. Citigroup has suffered staggering losses for a year now, and few analysts think the pain is over. Many investors worry that it needs more capital.

With more than $2 trillion in assets and operations in more than 100 countries, Citigroup is so large and interconnected that its troubles could spill over into other institutions. Citigroup is widely viewed, both in Washington and on Wall Street, as too big to be allowed to fail.

Citigroup executives reached out to the Federal Reserve and the Treasury last week as they sought to stabilize the company’s stock. All major bank stocks have been battered in recent weeks, including those of Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley.

Citigroup’s shares have been hit particularly hard. A year ago they were trading at about $30; on Friday they closed at $3.77.

The plan under discussion is reminiscent of the one that Citigroup and the F.D.I.C. worked out in October with Citigroup’s proposal to buy the Wachovia Corporation. That deal fell through, however, when Wells Fargo swept in with a higher offer.

Under that plan, Citigroup agreed to bear a certain level of Wachovia’s losses, with the federal agency absorbing the rest. In exchange, Citigroup agreed to give the F.D.I.C. preferred stock.
It is also similar to an effort orchestrated by Swiss financial regulators for UBS, another big global bank. Last month, the Swiss central bank and UBS reached an agreement to transfer as much as $60 billion of troubled securities and other assets from UBS’s balance sheet to a separate entity.

_______________

So, basically, Citi gives out $27 Billion Preference Shares at 8% p.a. yield + initial tranche of losses (if any).

In exchange, Citi gets $20 Billion cash + a lot of guarantees by the US Government, US Treasury, FDIC and Federal Reserve for up to $306 Billion of these potentially toxic and uncertain assets.

Apparently, the dilution is "slight" according to the above article. Personally, I still don't have enough info to fully evaluate it. It seems much depends on how these losses turns out. If small, then, no problem. If up to $306 Billion, then, Citi's share is only $57 Billion say. Hopefully, it's not morethan $306 Billion. In which case in the worst case scenario, the impact on Book Value does not seem very large. Certainly, at $3.77 (market cap equivalent $20 Billion) and BV of $126 Billion, at least $10 looks like a fair value ...

At the time of writing this, the after hour price of Citi has shot up to $5.24!!! Those who punted last Friday would be smiling now ...

PS. Since this is in a different time-zone, I'm going to put a limit sell order tonight to take some profits, if Citi price shoots up substantially above say $10-$12 over the next few weeks.

Citi article

2008-11-23T13:30:00.002+08:00

Article for future reference:

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5212949.ece

IN THE dark hours after hearing 52,000 colleagues were about to lose their jobs last week, Citigroup traders awaited the axe with a little of the black humour Wall Street is famous for. Bankers joked that Somali pirates were offering 1 cent a share for the troubled bank, if staff agreed to wear eye patches. Those with any money left were betting on how much lower their employer’s shares would go. By Friday Citi shares had fallen 60% - in a week - to levels last seen when many of those traders were still in high school.

After one of the worst weeks in the bank’s history, Citi’s officials are spending the weekend drawing up plans to prevent a repeat. The government and big investors are being lobbied to make an investment that might soothe the markets. If they fail to find a blue chip backer, odds are that, come Monday, the slide will start again. It’s a frightening fall for a bank that was, until recently, the biggest, most powerful financial services firm in the world.

Citi boss Vikram Pandit started last week on an upbeat note, addressing the firm’s 350,000 staff worldwide via a teleconference, self-styled as a cosy sounding “town hall meeting”. “We will be the long-term winner in this industry,” he said. Then came the announcement of the job cuts. In New York the redundancies started in capital markets and investment banking but this is a global firm and thousands of jobs are going in India and Germany - and several hundred are on the block in London.

The sackings failed to appease the market and Citi’s share price kept falling. Even after Saudi investor Prince Alwaleed bin Talal, a big Citi backer, pledged his support for the bank and Pandit, the shares kept falling. They closed on Friday at $3.77, a price not seen since 1995. Last November Citi’s shares traded at over $30.

Even after last week there is no end in sight. Pandit said the last three months of this year would continue to be challenging and warned of more trouble in 2009. Mounting losses from mortgages, credit card loans, and complex debt instruments could cost the bank another $3 billion (£2 billion) in the fourth quarter, according to Fox-Pitt Kelton analysts.

Citi is hardly alone in its troubles. The stock markets have turned against the rest of the banking sector too, but critics argue Citi has made a bad job of handling a difficult situation.

Last month the company was left looking flat-footed in a bidding war for Wachovia, a financial services firm. Pandit was seen to have been outmanoeuvred by rivals Wells Far-go - further ammunition to critics who say he has neither the street smarts nor the experience to pull Citi out of a hole.

But even after this decline some analysts doubt Citi will go under. The bank has some $75 billion in liquid assets on its books. Unlike earlier victims of the credit crisis, Citigroup has access to the government bail-out programme. It also qualifies for bailouts from the Federal Deposit Insurance Corp (FDIC) and the Federal Reserve.

“We are not seeing anyone lining up to take their money out of Citibank. It’s not Northern Rock. Will counterparties trade with them? I haven’t heard any rumours to the contrary,” said Brad Hintz, analyst at Sanford Bernstein. Hintz said Citi was the victim of markets that are “relatively crazy”.

But if the likelihood of Citi going bust is small, so are its options for reassuring the market. One obvious option – a merger with another large bank – might be too much for regulators put off by the giants already created by the credit crisis. “You already have too many really large banks. Who would you merge it with? The other ones already have their own problems,” said Hintz.

Goldman Sachs is looking to grow its deposits but such a huge deal would fundamentally change its business. Would JP Morgan want, or be allowed, to swallow another bank after taking on Bear Stearns and Washington Mutual?

Hintz said regulators might simply advise Citi to “sell some things”. Citi’s back-office processing business or credit card division could go. The other option is to tough it out.

Citi has been toughing it out for some time. When Pandit took over last December he inherited a company in crisis. “If you want to blame someone, blame Chuck Prince,” said one Wall Street banker.

Prince, Pandit’s predecessor, was the appointed heir of Sandy Weill, the architect of Citigroup’s global ambitions. Through a series of ever larger mergers Weill built Citi into a financial behemoth spanning everything from credit cards to investment banking and wealth management. The idea was to create a company big enough to weather any storm. And if size was all that counted, Citi would be safe. Last year sales topped $124.4 billion, not far off the GDP of Morocco. The company operates in 140 countries and deals, in one way or another, with all of the top 500 companies in the world.

Prince, a lawyer by training, steadied the ship after Citi’s disastrous dance with World-Com, Enron and other notorious firms. But he failed to position Citi for the next boom while betting heavily on the next bust. Citi’s expenses got out of control, it failed to keep up with its rivals in the good times and still managed to make the same bad bets on sub-prime loans that have shaken the banking sector to its core.

The irony, not lost on the firm’s executives, is that in many ways the financial sector has swung back to Citi’s model of doing business. In the boom Citi’s rivals were smaller, more focused and nimble; Citi was a lumbering dinosaur. Now the credit freeze has acted like the ice age in reverse and left the dinosaur standing. Both Leh-man and Bear Stearns are bust and even Goldman Sachs has converted into a banking holding company.

“It may not be relevant to investors at this moment, but, ultimately, it will be recognised that the current executive team at Citigroup was not part of the decision-making group that got Citigroup into difficulty,” Ladenburg Thalmann analyst Richard Bove wrote ina note to clients last week.

He argued that Citigroup had done “quite a bit” to put its house in order. The bank was first to begin raising capital and taking writedowns to reflect the true value of its assets. “When the write-offs are over the strengthening of the institution will be evident,” wrote Bove.

Others are less kind. The betting on Wall Street is that Pandit is out in six months unless Citi’s fortunes change. “Prince failed to do anything except to get Citi into more trouble on the way up. Pandit doesn’t seem to have much ofa clue about what Citi should do on the way down. Where’s the leadership here? What is the plan?” said one rival banker.

He said the argument that stock markets were short sighted and missing Citi’s charms was “bogus”. “There’s a reason Citi is trading for a fraction of its old share price and it’s not all down to the credit crisis.”

______________

Quick impressions: Still more downside at $3.77 (the price fall simply ignored all the possible good news like 52,000 job slash cuts, Alwaleed's buy, and no bank runs on Citi's deposits yet). Since punt can go to zero, am waiting at $2 before I consider adding.

Some possible reasons why it could go to zero. Existing shareowners gets nothing as part of condition to rehabilitate Citi. Regulator actions have been shape shifting since the start of this crisis, and noone can guarantee they won't change their minds later when they realized the problem is different that what they thought.

Some possible reasons why it would not rise despite being beaten down. Citi decides to tough it out. Sell out the business processing division or credit card division. Or end up with nothing like the old Citi.

Some possible reasons why it could rise in the medium term. This is the strange part. So far, news have not yet reported exactly why Citi is in a huge problem. The share price has taken a dive (huge dive) - perhaps news will come out later.

Since we don't yet know, there is a small chance that it might be able to ride out this storm. Stress small. Mr Market is very rarely wrong. So, my own likely scenario is that Citi will be altered substantially, and existing shareowners affected big time. 80% haircut possible. So, if Citi fair value is $40, consider this to be equivalent to $8, i.e. don't look at entering at 50% of this figure. Or if target is $20, consider equivalent to be $4, i.e. don't look at entering unless it drops to $2.

Beware of averaging down. 1% capital at $8 will lose the most 1% capital, which to almost all traders is acceptable. Even to Graham as well.

Contrast 1% capital at $6, which then averaged down at $5 (1%), and then at $4 (1%), and then at $3 (1%). Average is $4.50, but has 4% capital invested. If it goes to zero, then, lost 4% capital. Borderline now whether it is acceptable or not.

Contrast 20% capital at $2. Average price is good, but if Citi goes to zero, lose all 20% capital. Can you withstand a loss of 20% capital in the worst case scenario?

Understand impact on Average Price. 1% capital at $8 can quickly go down to below $4.0 average price if averaged down at the right time and at the right price. For example, if price falls to $2, adding 2% capital will bring down the average price to $4. (1%x $8 + 2% x $2)/3% = $4.

Or 1% capital at $8 can quickly go down to $3 if add 5% capital since (1%x$8 + 5%x$2)/6% = $3. But then, have some chance that these 6% can go to zero.

So, final answer depends on your Risk/reward tolerance. A very individual thing. Remember, there is no certainty in the stock market. And "hope" is a very dangerous thing.

Low US Treasury Yields

2008-11-21T09:44:00.003+08:00

The article is here - http://biz.yahoo.com/ap/081120/wall_street.html

The interesting paragraph to me is this - "The yield on the benchmark 10-year Treasury note sank to 3.00 percent, the lowest point since 1958. The 30-year bond's yield fell to 3.46 percent -- the lowest since the government started issuing the bond in 1977. The yield on the 2-year note, meanwhile, fell to 0.97 percent -- the lowest since 1947, according to Global Financial Data in Los Angeles."

The question now is ... when (and not if) will it get lower?

New Christmas Carol?

2008-11-21T09:17:00.002+08:00

A friend sent me this a while ago, but I only got around to catching up my emails this morning. It brought a smile to my face, so, here's spreading it to every readers here ... Enjoy!

____________

You'd better watch out
You'd better not cry
You'd better keep cash
I'm telling you why:
Recession is coming to town.

It's hitting you once,
It's hitting you twice
It doesn't care if you've been careful and wise
Recession is coming to town

It's worthless if you've got shares
It's worthless if you've got bonds
It's safe when you've got cash in hand
So keep cash for goodness sake, HEY

You'd better watch out
You'd better not cry
You'd better keep cash
I'm telling you why:
Recession is coming to town!

Finance products are confusing
Finance products are so vague
The banks make you bear the cost of risk
So keep out for goodness sake, OH

You'd better watch out
You'd better not cry
You'd better keep cash
I'm telling you why:
Recession is coming to town.

Blog Capsule 6: Bought PROTON @ $2

2008-10-30T17:54:00.003+08:00

Ok. This is definitely a stock that EVERYONE hates. Everyone must have their own (long) list of why they hate this stock. I'll quickly list a few here, and you can add some more in the comments section:

CONS of PROTON

1. Generally lousy product quality. PROTON is so well known for its problems, to say its product quality is "below average" is being nice to PROTON.

2. Generally perceived (rightly or wrongly) below average management quality who are paid too much for doing too little.

3. Long record of being subsidized by the government in so many ways for so much and so long that it is still unsuccessful for such a long, long, long time.

4. Absolutely no reward to long term shareholders. Especially those that bought in the mid 90s when the stock price was well above $16 - $18 and the stock now trades at $2.

5. Everyone hates PROTON. Period.

So, why did I buy?

Here's a few reasons:

1. Stock price fell below $2 recently. The last time the stock price fell below $2 was in 1998. See chart below. This is the Asian Financial Crisis price.

2. Stock price of $2 is fundamentally cheap from Net Cash perspective. At $2, the stock is capitalized at RM$1.1 Billion. In other words, if you have RM$1.1 Billion, and if the stock price remains at $2, then, you could buy up the entire company. And what do you get in return?

Well, from a Balance Sheet perspective, based on the latest quarterly report at 30 June 2008, PROTON Cash alone is $1.4 Billion. Long term borrowings = $0.13 Billion. Short term borrowings = $0.11 Billion. Net Cash = $1.4B - $0.13B - $0.11B = $1.16Billion, which is bigger than the market capitalization of $1.1 Billion.

In other words, you get the rest of the coy fixed assets booked at $3.8 Billion for free effectively, since the Current Assets of $3.5 Billion is already greater than its total Liabilities of $1.9 Billion.

I'm being extremely lazy with my calculations here, but if you are diligent, then, you will find that the coy at $2 is dirt cheap from a fundamental perspective.

3. PROTON latest NA at 30/6/08 is $9.98 per share. So, buying at $2 is equivalent to buying at 20% of its Net Assets (= Total Assets - Total Liabilities). By traditional measures, it looks dirt cheap, but see cautionary statements below.

4. Q2/08 earnings reported at $52 M. Not large, but an improvement over same period last year which is a loss. Roughly speaking, annualizing this suggests possible earnings of say $200M per year, i.e. at $2, PROTON appears to be trading at a P/E of 5.5, which is not demanding at all. In fact, as long as PROTON does not make a loss, buying at $2 should have a limited downside for a long-term investor.

5. It is well known that TDM is a long time supporter of PROTON. At the moment, his son Mukhriz looks set to take the top job in UMNO Youth. It is obvious his chedet blog is extremely popular, with over 9 million hits in such a short period. The Malaysian Insider carries this article on TDM - http://www.themalaysianinsider.com.my/index.php/malaysia/11423-mahathir-is-back-with-a-vengeance. Personally, I am not a TDM supporter, and would never vote for him. However, at $2 PROTON, Mr Market is asking me to take a gamble with him to make money off PROTON. This is a pure speculative play, that should BN retains power and with greater Mahathir's involvement, we could see PROTON one day being in the forefront again.

6. At $2, the price appears to be capitulating, although volume is not large .... As chatter dorraidd says ... think also about those who are selling at $2. In other words, if this is capitulation, the people who are selling at $2 must have lost a lot of money. If you are anti-PROTON, buying it off the long time PROTON supporters at rock bottom price is not a bad way to get back at them, although bear in mind that they can get back at you by totally destroying this company too ... *grin*

7. EPF and Khazanah owns it at much higher prices than $2 or $4.

More cautionary statements

1. The market is still long term bearish say over the next 6-12 months, despite the current bear market rally at the time of writing. What appears cheap right now can get cheaper eventually. I will not be surprised if PROTON trades below $2 after this bear market rally is over. So, treat this Blog Capsule as an alert to cheaper prices ahead, but if I am wrong, then, I won't mind owning this at $2.

2. The car maker sector is still long term bearish, and worldwide, have taken great hits. Everywhere you look, the world leaders like GM and Toyota are taking huge beating to their share price. PROTON will also be hit as well. The future outlook for this sector is very bleak indeed.

3. Malaysia is politically unstable. Who knows what PROTON will become if there is a change in government policy to no longer subsidize the national car. It is clear PROTON would be need to be liquidated if by then, it is clear that it would be losing money. In other words, despite the Net Cash, we could see PROTON losing money and bleeding, and eventually, the coy would be liquidated. So, Net Cash today that is bigger than market cap, could turn out to be a Bankrupt coy in future in the worst case scenario.

My Strategy

1. In Graham terms, this is buying an average quality business at bargain like prices. The "cigar butt" approach to investing. So, since Graham diversifies across 100 of such stocks, don't bet the entire house and farm on PROTON.

2. Pure speculative Buy. I believe bear markets will eventually recover one day.

3. Don't invest more than say 3% to 5% Capital into this stock. I can bear losing these 3%-5% Capital.

4. This is the first out of say 5 possible buys. I spent less than 1% Capital at $2, and am waiting for lower prices.

5. I expect to make 100%+ return over the next 3 years, say by 31/12/2011. I need PROTON to get to $4 to make a 100% return. In return, I seriously doubt I will see PROTON trading at $1, with 50% loss over the next 3 years. But I could be wrong, since we are dealing with the future, and I don't have a crystal ball.

Disclaimer: I now own PROTON. I am still a trader at heart, although at very low prices, I shift towards being an investor since the latter is easier. If the prices rise too high, I will sell and trade, so, don't bid this stock price up.

Blog Capsule 5: Bought ICAP @ $1.22-$1.23

2008-10-29T06:34:00.004+08:00

Not the best price.

ICAP actually closed lower at $1.20, after touching a low $1.18 intra-day. :-(

Nevertheless, was extremely relieved this morning, since just saw US markets closed hugely positive , with the Dow posting +10.88% overnight gain, S&P500 posting +10.8% overnight gain and Nasdaq posting +9.53% overnight gain. I had expected US markets to be green this morning, but never expected it this strong. *phew*

Why yesterday, why ICAP?

To be honest, good luck probably played a bigger part than I would have liked to admit.

Most of you will know that I will be away for nearly 2 weeks on a holiday starting this weekend.

I am especially sensitive on this absence because as I have stated this before in the chatbox, even though I was not yet buying for investing since my outlook was still long-term bearish (e.g. see here - http://fusioninvestor.blogspot.com/2008/10/huaan-some-rumblings.html), one of the risks in staying in cash for too long is that when the markets rise, history has taught us that they tend to rise very fast. Worse, sometimes, we don't catch the upswing timely enough. Such points was also repeated by "V" in this article here - http://fusioninvestor.blogspot.com/2008/10/dont-dig-bigger-hole-2.html.

So, even though I have stayed largely in cash (except the small intra-day trades recently and also the occasional contra and short term-trades), I've also been thinking about positioning my stocks since the KLCI have broken below 850 and nearly touching 800 yesterday. Make no mistake, the markets have become deeply oversold when it fell more than 30% in less than 3 months. Another technical reason to consider buying around the 800 level is that I have been advising the chatbox my technical expectation that the market will test 800 (and not 850) last week, when the KLCI was trading near 900 last week and others were predicting 850 to be breached. The strong recovery intra-day yesterday after hitting a low of 801 prompted me to take position, and also prompted me to take profits in one other stock (TENAGA).

Furthermore, there is the saying "Sell in May, buy back in November", and we are now near the start of November. In a sense, the timing of my holidays is poor because it coincides with this November period where stock markets traditionally rise. Even though I personally attach less weight to this saying, at the back of my mind, the idea stuck. So, it's a matter of buying something during this timely period, certainly before the end of this week.

So, amongst the stocks that I thought might be good ideas to hold during this 2-3 week period would be ICAP. Actually, the attraction of ICAP is that it is "managed", as opposed to buying a stock like TENAGA (where it is not managed). Also, blogger "turtle" recently indicated in his blog that he purchased ICAP at $1.49 recently. Fellow blogger bullbear of course is a staunch supporter of ICAP, when the price fell from its peak of $2.81, down to $1.7x before his sabatical last couple of months. Fellow blogger Moolah is of course instrumental in alerting me the inconsistent behaviour of ICAP fund manager earlier this year. Of course, ICAP is a stock that I have invested before, as well as a stock that is followed by the chatbox from time to time. To me, ICAP is a stock to buy when the price becomes compellingly low. The only problem is when to buy, because what appears cheap almost always become cheaper during bear markets, if not next week, then, next month or next few months.

Ok, but why ICAP?

The "cheapness" struck me quite strongly yesterday. According to its latest weekly NAV report, on 23 Oct, ICAP NAV was $1.54. At the time when I saw the price, it had touched a low of $1.18, and $1.22 and $1.23 were available for sale.

I did some quick maths in my head. On 23 Oct, the KLCI closed 891.3. At the time when I bought it, the KLCI has recovered off its low of 801, and was around 820-825 iirc. A quick estimate suggests that I don't expect its latest NAV to drop below $1.42 since 23 Oct, by simple pro-ratio.

So, $1.22-$1.23 is equivalent to nearly 14%-15% discount from NAV. Historically, ICAP trades at a premium, and occasionally at a discount (say 3%), although I have never seen such a large discount before. Hence, it was very tempting strategically, and the only issue is always a tactical one, i.e. when to buy.

At the time, I felt this seems enough safety margin (even though what is cheap can get cheaper), hence, I took everything that Mr Market had to offer at $1.22 and $1.23 then, and left it there since this is a long-term investment.

This morning, I took a closer look, and realized that ICAP have approximately $57 million in cash as at 31/8/08, which translates to approximately 41 sen. So, its NAV of $1.54 on 23/10/08 comprised of say $0.41 cash and $1.13 equities. I expect this equity portion to fall since 23/10/08, and not the entire NAV. A revised estimate suggest that the NAV could well be higher than $1.42, say $1.46. A prudent estimate of the revised NAV may be say $1.40 to $1.45 say. In other words, the discount should still be around 15% say, when I bought at $1.22-$1.23.

I should sound a cautionary statement that buying on a discount is not necessarily always wise. Why? Simply because the discount can dissappear eventually if markets keep heading lower. However, if one manage to buy at close to the bottom and at a discount, then, this is ideal, because if the bottom is indeed reached and if it does bounce back up, then, this discount is a wonderful buffer and price to buy. So, whilst I'm generally to buy stocks at discounted prices (than at a premium), I would very much prefer to buy when the price has reached bottom, and is on its way up.

So, has the price reached bottom yet? No one knows for sure. Technically, it is still a long-term bear from the charts, although charts only shows the past clearly and the future is still uncertain. Fundamentally, the outlook is still bearish, even though in bear markets, we will have bear market rallies which can sometimes be quite strong and fast on the upside during these volatile periods - fortunes change hands very quickly too. My buy at $1.22-$1.23 is not the entire long term strategic position, but just say 1/5th of what I intended to accumulate by the time this bear market is over, which may well last until mid to end of next year (I could be wrong here very easily). So, think of this as just the first out of a few possible long term instalments, although I reserve the right to trade without informing anyone until after-the-fact.

Should long term investors buy now?

Again, traders should always follow their own timing rules, but what about investors? Well, at 800, the KLCI appears "cheap", although, as I have mentioned here and elsewhere many times, what we mustn't forget at the back of our minds is that what appears fundamentally cheap can always become cheaper later if/when markets eventually become more depressed.

So, since long term investors generally don't try to time the markets, a program of slowly accumulating at successively low prices would make sense. As I indicated above, I have spent 1/5th of what I intend to accumulate yesterday on ICAP. It is a bit bigger than what I would have liked for a long term investment, so, I may take some profits later if Mr Market is too bullish for my liking.

Has this changed my views of Mr Tan the fund manager?

No. I still think his track record and past results as a fund manager is still good, even in this current bear market. For example, when he started ICAP at end 2005, KLCI was above 900 and despite the market now being at least a good 10% below today, the NAV has grown from $1 to $1.4x. In other words, even though market is say 10% below, the NAV has grown at least 40%, suggesting an outperformance of at least 50% during the last 3 years. This would certainly beat - as a rough guess - 90%-99% of professionally managed monies in my humble opinion, so, there is no doubt in my mind that Mr Tan Teng Boo certainly has a superior investment track record. His integrity on the other hand remains the same to me, whether I own ICAP or not. As always, it is critical to always apply one's own independent and critical mind and not blindly believing in what anyone says, otherwise, you just simply expose yourself to possible manipulation by others.

Disclaimer: At the time of writing this, I now own ICAP. Do be aware that I can dispose ICAP at any time in future, without telling you so.

Breaking Problem Cycles in Trading

2008-10-26T18:08:00.002+08:00

With the stock market being as "bear" as they are right now, I thought some might enjoy or at least find it useful reading Brett Steenbarger's articles on trading psychology, especially this particular one here and the links below that article - http://traderfeed.blogspot.com/2008/10/when-good-trading-leads-to-bad-trading.html.

My own personal observations (including personal experience) in both trading and outside trading have convinced me without a doubt that problems tend to recur than not recur. I have no doubt that everyone - no matter how good a trader they are - will have their own problems recurring from time to time. The only difference between each of us is the type of problems we face and how frequently we face them. I believe trading is a lot like taichi, badminton or other specialized skills - there is no such thing as a perfect taichi practitioner, a perfect badminton player or a perfect trader. Everyone can always improve.

Novice often associate a trading problem with a loss. To a seasoned trader, a loss is not necessarily a problem. There are good losses to have (e.g. a stop loss well set and executed and part of the systems edge), and there are bad "unnecessary losses" to have (e.g. instead of executing the stop, the trader "averages down", and compounds the mistake, making the final loss much larger many times over than initially planned). Consistently and successfully executing the first category is not necessarily a problem (although this requires a proper review to make sure that the overall trading system is still okay to make sure it is a genuine non-problem), whereas the latter is almost always a problem.

Anyway, enjoy reading the linked articles. And best wishes as always.

Day-trading vs Holding Overnight

2008-10-26T17:11:00.003+08:00

Something interesting based on US statistics on the S&P 500. A bit dated, but useful to think about in local context:

http://marketsci.wordpress.com/2008/07/21/the-markets-are-nocturnal-daytime-vs-overnight-performance/

The main conclusion from this study is that "Markets are Nocturnal". In simple terms, this means that most of market returns are from holding overnight, as opposed to day-trading. In fact, just holding overnight alone accounts for MORE than total returns for S&P500 from 1994 to 2008 period, suggesting that intra-day trading is a "losing activity" where S&P500 is concerned.

Over that period, the S&P500 was in a generally rising market.

I have a strong suspicion that the corrollary is also true in a generally declining market, such as the bear market we are witnessing now. My own close observation has shown me without a doubt that holding overnight this year would have been very, very costly.

In summary, in strong bear markets that we've seen since the start of the year, unless you are an accomplished day-trader or contra-trader, better to just step aside and hold 100% cash. That way, you won't lose money from holding overnight, and you won't lose money trading intra-day.

And conversely, when the bear finally turns into bull one day, be prepared to be flexible in changing the trading style from intra-day to long-term investor.

Sector Snap: Shares of drillers slide with crude

2008-10-26T13:39:00.003+08:00

For future reference - http://biz.yahoo.com/ap/081024/drillers_sector_snap.html?.v=1. Expect similar trends with local O&G stocks.

*************

Sector Snap: Shares of drillers slide with crude
Friday October 24, 4:39 pm ET

Shares of oil drillers slide as crude prices tumble and broader markets fall on economic woes

NEW YORK (AP) -- Shares of oil drilling and exploration companies plunged Friday as the price of crude tumbled and the broader markets slid on concern about the global economy.

Light, sweet crude for December delivery fell $3.69, or 5.4 percent, to $64.15 on the New York Mercantile Exchange. The price has slid in recent weeks from an all-time high of $147.27 reached on July 11.

And natural gas for January delivery fell 13.9 cents, or 2 percent, to $6.747 per 1,000 cubic feet on the Nymex. Prices for the cooking gas had been above $10 per 1,000 cubic feet last summer.
When energy prices are high, oil and natural gas exploration becomes more lucrative. However as prices fall, generally so does the incentive to explore new areas, and with it potential new sources of revenue for the sector.

Shares of Diamond Offshore Drilling 1.15, or 1.6 percent, to $72.58; shares of Noble Corp. fell $1.84, or 6.6 percent, to $25.90; and shares of Ensco International Inc. fell $2.24, or 6.5 percent, to $32.34.

All three posted increases in their third-quarter net income earlier this week.

"Although uncertain commodity prices will lead to volatility in the daily stock prices, the long term outlook on all three companies remains very solid," Pritchard Capital Partners analyst Brian Uhlmer said in a note to clients.

Elsewhere in the sector, shares of Schlumberger Ltd. fell $4.52, or 8.7 percent, to $47.52; shares of Cameron International Corp. fell $1.63, or 7.1 percent, to $21.29; and shares of National Oilwell Varco Inc. lost $1.28, or 4.8 percent, to $25.50.

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Some stock charts for your reference:

Diamond Offshore Drilling (DO) - http://finance.yahoo.com/echarts?s=DO#chart1:symbol=do;range=1y;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Noble Corp (NE) - http://finance.yahoo.com/echarts?s=NE#chart1:symbol=ne;range=1y;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Ensco International Inc. (ESV) - http://finance.yahoo.com/echarts?s=ESV#chart1:symbol=esv;range=1y;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Schlumberger Limited (SLB) - http://finance.yahoo.com/echarts?s=SLB#chart1:symbol=slb;range=1y;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Cameron International Corporation (CAM) - http://finance.yahoo.com/echarts?s=CAM#chart1:symbol=cam;range=1y;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

National Oilwell Varco, Incorporated (NOV) - http://finance.yahoo.com/echarts?s=NOV#chart1:symbol=nov;range=1y;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Half Truths and Lies

2008-10-23T18:17:00.003+08:00

What is the difference between "half-truths" and "lies"?

Is half-truth not a lie?

For example, imagine this hypothetical scenario. You're away at work, and leave your wife alone at home with the kids. You came home, have a chat with your best friend neighbour (let's call him John), who hinted to you that rumour is your wife has been cheating when you are away with a neighbour. Your attention immediately turns to Mike, who is single and likes to flirt around with your wife before. You thanked John for the heads up, and later, at the right time, when the kids are asleep, you asked your wife this direct question - "Dear, have you been seeing Mike lately?", and your wife immediately said "No, why do you ask?". And because you have an honest relationship with your wife, you confided in her - "Well, I just heard a rumour from John that apparently said that you have been sleeping behind my back". And your wife looked at you in the eye, and in the most honest answer you've ever heard ... she said "Darling, I swear to God that I have never slept with Mike in my entire life, and I have no intention of sleeping with Mike ever despite his handsomeness and his past flirts". She further added ... "Darling, you can trust me on this.".

Would you feel reassured with this response, when she looked at you in the eye?

What if the reality is such that yes, she did not flirt with Mike, but actually, she's been sleeping with John, your best friend?!!!

She never lied!

She told a half-truth.

She didn't sleep with Mike at all.

But she simply didn't tell you that she's been sleeping with John!

Read the attachments here, and tell me whether Syed Hamid and The Star is telling the truth, the whole truth and nothing but the truth. Or whether the Government and the mass media are experts in telling half truths?

And more importantly, can a country prosper with its citizens, if the Government is only concerned with telling half-truths?

1. http://mt.m2day.org/2008/content/view/14176/84/ - "How Much Longer can the Government Lie to the Malaysian Public"

2. http://thestar.com.my/news/story.asp?file=/2008/5/27/nation/21368814&sec=nation - May 27 Star article consistent with May 26 Bernama article referred to in 1. above.

3. http://thestar.com.my/news/story.asp?file=/2008/7/14/nation/20080714124856&sec=nation - July 7 Star article referred to in 1. above.

4. http://thestar.com.my/news/story.asp?file=/2008/10/22/nation/20081022191045&sec=nation & http://thestar.com.my/news/story.asp?file=/2008/10/23/parliament/2354544&sec=parliament - - Syed Hamid's response claiming that he did not lie.

Don't dig a bigger hole! (2)

2008-10-21T08:05:00.003+08:00

Further to my first article on the above topic (http://fusioninvestor.blogspot.com/2008/10/dont-dig-bigger-hole.html), I have received several email comments and replies, but there is one email reply which stood out in its length, with thought-provoking contents, and may be interesting to retail investors, that I would like to share with you (after receiving the author's permission last night).

Please feel free to leave comments at the end of this article, or the chatbox, although, leaving a comment at this article would allow the original author to check the comments later.

**********

Seng,

I came across your blog accidentally and noticed one interesting topic, “Don’t dig a bigger hole!” I do agree with some points but not to others. Let me share some of my past experience, since I have went thru 1 bull market (1992-93), 1 bear market (1997-98) and recently bull run (2006-08). The question of digging bigger hole or not is all depend on which counters one buying or plan to buy. Record shows that at least 25% of company listed on bursa disappear after 10 to 15 years. Counters like Taiping, Tongka, Omega, Yaohan … and many others which famous at one time all disappear from Bursa today. So those own these kind of co. if not cut loss, had been making very severe loss.

However, if one choose a solid co. and have some sort of monopoly and can be sure that it will continue with it’s business for next 10 years, then the current weak sentiment would be a good time to buy. I will choose TNB as one of counter for this discussion. The reason why I choose TNB is because I have full history record, beside it meet above condition and also my friend was ex TNB staff who bought with Pink Form (IPO).

I was a Dealer during 1992 bull run market. Market was so hot until KLSE reach 1200 – 1300+ in one year time. TNB surged from $6.50 (IPO $4.50) to highest record of $20.00. Then suddenly one day it drop to $15.50 and I advice my friend to sell, but he refused as market rumours it may rise to $25 again. One week later, TNB closed at $10.00. (if one sold at $14 or $15 will consider good deal) My friend sold his TNB at $8, three months later after market drop significantly. However one year later, TNB trade between $7.00 to $10+ and this seem that the decision to sell at $8 was not good deal.

There was one client (Mr L), who started to buy TNB at $9.00 (only small portion). When TNB drop to $8.00, he bought some more. When it drop to $7.00 he bought again but with more lots than before. That time I don’t understand the pattern of this buying method, but later noticed he actually use Cost Average Down method. On 1994 to 1995, people seem to forget about 1993. TNB up to $12+ again and Mr L disposed all TNB after holding for 1 and half years. The question here, is Mr L buy at $9, $8 & $7 consider digging hole?

Now we look at 1997, it all started with currency crisis. On one day morning, rumours came from Thailand and spread over to all Asia countries. During that time, we noticed a group of fund managers start to create panic environment in the country by keep on selling and caused KLSE comp index drop 40 to 50 points in 2 days. We as dealer know what’s happening and their intention. One week later, market started to feel the panic and fall ever more. Add to the worse, Ringgit kept on falling against USD. Some of our clients were so panic, worry and start to dump shares at any price available. One of my clients called and ask if value of share can fall to Zero?

TNB started to fall from some where around $10+. Some clients start to collect at $8, some at $7. One month later, the closing price was $6.50. Then Mr L started his buying order at $6.50 with minimum lots. Some clients who started to buy at $8 or $7 start to give selling order. Still recall, I was told by them that they want to cut loss, as the market not moving in their favour. This was a very funny situation, you know, as a dealer, we saw someone buying and someone selling the same counter. Of course, I can not tell them Mr L started to buy, don’t sell. After all, we want more business to earn commission.

The following few months, Mr L continued place “buy till done order” at $5.50, $4.50, $4, $3.50. The last order I received was Aug 1998, where he put buy order at $2.50 and it was done with $200K, the most compared to previous order. On 1 Sep, 1998, ex PM Mahathir announced several action and economy stipulated package, including peg Ringgit at 3.80 / USD and arrested Anwar. Market suddenly reversed and surged 100+ points. TNB also surged from $4.50 to $5.60. The following day, it closed at $6.40. Very few clients who cut loss earlier bought it again at $2.50 or even $4.00. Also, they have no chance to buy back as the market turn was so unexpected and fast. Question here, is Mr L digging hole? Or if he did not do that, he had no chance to buy at $2.50 as none of us know when was bottom reached.

I am not sure what’s the trigger point for Mr L to buy at $6.50, in fact, I did check with him, but he say it’s just 6 sense. But base on the previous price, seem he actually started to buy when price fall below 50% or more, with Cost Averaging Down. On 2001/02, Mr L, started to disposed TNB with price range $10 to $12 after holding for 3 years plus.

Actually, among all clients who actually making money was less than 10%. Most of them are traders, especially day trade. We like those traders but don’t like Mr L, after all, Dealer want to earn commission as well. But Mr L seem to be in the top list and he do it in very relax way.

All the above happened 10 years ago and Mr L had agreed for me to disclose the above matter to others. However, don’t ask me if Mr L start his buy order today, as this is private and confidential. (Last week we noticed Warren Buffet made announcement say he started to buy America stock, I am not sure what the intention. If you announced to public that you intend to buy something, would you still get it cheap?)

The current market situation is more or less similar to 1997’s financial crisis except it trigger by US. The different I can see is More Internet Trading compare to 1997 and our Interest Rate did not surge to 11%. Also, now Composit Index Counters allow Short Selling and the change of political climate, which I think may give certain impact to overall market.

In the extremely bearish market condition, one should buy low and later (2 years or more) sell with handsome profit. If one would to follow Mr L, he must choose the right company. But we may not know when’s the bottom, that the difficult part, even TA is also hard to tell. The 1997 bear, we saw KLSE closed at lowest of 200+ points. Or one can wait till TNB fall to $2.50, but we don't know if this can happen or not.
Just share my thought.

Cheers!
V

**********

My quick comment:

My guess is that Mr L is probably not the typical chatbox "chatter" who chats here everyday, glued to the screen the entire day, and plays intra-day / contra.

For such a person where trading is not a full-time job, the risk of being out of the market when the stock market recovers is greater. The Asian Financial Crisis recovery was relatively fast, and if you hesitated too long, you run the risk of missing the upside move. Also retailer psychology is such that when the current price is higher than the previous low price, majority will hesitate. That hesitation is normally costly.

However, as a TA practitioner and student of past charts, there are always early warning signals for example, when one looks at the daily candles. You won't catch "the bottom", but you should still be able to catch say 40%-80% of the uprise depending on your skill and level of monitoring. This assumes an above average trader psychology too.

Mr L's approach is an investing approach with little monitoring. It is unclear if all his stock investments is in just 1 stock (TNB), or is diversified. It is unclear what proportion stocks are to his entire net worth. I seriously doubt someone like him would have put his entire net worth into just 1 stock, nor would I consider the latter a prudent practice. It is important to note that when you bet on just 1 stock, the choice of stock is super-critical, unless you don't mind losing money over a prolonged period. And the psychology of that investor, having first bought at say $6, only to see it drop steadily to $5.5, $5, $4.5, ... and finally down to $2.5 ... and still not panic ... - do NOT under-estimate what sort of mental toughness is required to see this happening on a daily basis, especially when we see our $1 million investment shrunk to just less than $0.5 million for example, or $10 million shrunk to just $5 million ... etc. These sort of mental toughness probably does not exist in abundance, although those who has made it to millionaire status and beyond would most likely have undergone similar test(s) to their mental toughness previously.

The author's letter contains many interesting snippets such as "Record shows that at least 25% of company listed on bursa disappear after 10 to 15 years. ", and "Actually, among all clients who actually making money was less than 10%. Most of them are traders, especially day trade. ". Personally, I haven't done the statistical studies myself on Bursa, so, treat these as "anecdotal" for the moment.

There are other parts of the article that is worth commenting, but as time is short, and trading is about to commence, perhaps we can discuss later.

Again, I would like to take this opportunity to thank the author for sharing.

HUAAN: Some rumblings

2008-10-20T20:20:00.006+08:00

Firstly, this is NOT an automatic BUY call for HUAAN.

The background is that today, we were chatting about steel stocks in my chatbox, someone mentioned HIAPTEK (a steel stock), I took a quick look at the Balance Sheet and noticed that it has significant borrowings that is larger than its inventory, I am then reminded of HUAAN and wondered if this could be something to watch out for LATER when the market has found "the bottom". Just to be clear, I am still long term bearish on the KLSE, so, let me talk first about my own bearish outlook on the KLCI.

Bearish KLCI Outlook

From the above chart, the important things to note are:
* KLCI is still making new lows as late as this morning (888.28).
* Obvious trend is DOWN since the peak at the start of this year.
* Both 20 day EMA and 200 day EMA are still pointing DOWNWARDS as of today.
* Today's price is well below both EMAs, which is BEARISH.
* Generally speaking, we have yet to see THE BOTTOM, even if this week turns out to be "a bottom".
* The odds are still against long-term investors "buying and holding", and they are better served to wait until they have clearly seen THE bottom.

So, why am I writing about HUAAN?

In two words - Preparation and Discussion.

The attractive part is that the share price has clearly taken a huge whack, since listing in March 2007. Take a look at HUAAN's price chart below.

HUAAN Price Chart

* WEEKLY chart since HUAAN's listing in March 2007.

* Opening price on listing day at $1.48 in Mar 2007.

* Found peak price 5 weeks later at $1.79.

* Since then, fallen steadily to close to $0.26 as of today (also new closing low). This is a huge fall, since 26 sen is only 17.5% of Opening Price of $1.48, and only 14.5% of Peak Price of $1.79. However, be careful about picking up stocks like this where the price just made a new low, since it is easy to cut one's fingers whilst trying to catch a falling knife, even if there appears to be a deceleration in the price fall.

* It is clearly OVERSOLD by any oscillators. For example, the weekly RSI shown above is oversold. It is important to note that oversold does NOT mean BUY, as evidenced by past oversold readings when the stock price continues to fall 4 times in the past in Aug 2007 (quick rebound), Nov 2007 (quick rebound), Jan-Mar 2008 (continued price fall), and June-July 2008 (continued price fall).

The key question is has it found bottom yet?

The prudent answer is "we still don't know". Superficially, support is seen at 25.5 sen, but if global markets makes a new low, it is obvious to me that this 25.5 sen is not going to hold. The odds are when a stock price makes a new low, expect more new lows to be made, until we've seen reversal signals, such as a new higher low subsequently.

So, even though price starts to look interesting, the bargain hunter might still want to wait a little bit longer.

Balance Sheet

This is the original reason as I recalled:

* No debts. No short term borrowings. No long term borrowings. Net cash position on 30 June 2008 of $76 Million, although the dividend paid on 13 Aug 2008 will have reduced this cash amount today by approximately $25 Million, leaving a Net Cash Position of say $51 Million, ignoring new cash flows since 30 June 2008.

* Current Assets of $275 Million compares favorably against Market Capitalization at 26 sen of $292 Million. If we adjust Current Assets down by $25 Million, this leaves $292 - ($275 - $25) = $46 Million, to own (Fixed Assets - Goodwill - Total Liabilities) = $571 - $107 - $44 = $420 Million. In other words, at 26 sen, HUAAN is fundamentally cheap by traditional Net Tangible Asset valuation.

* I personally don't like NTA because it can be overstated sometimes. For example, in the current global recession environment, and in the current soft global steel prices since mid this year, inventories are unlikely to be worth the stated values. For conservatism, better to mark these down by 50%. Similarly, receivables are unlikely to be worth the stated values - in times like these, even though we don't know exactly who HUAAN clients are, we should mark these down by 50% for conservatism. Only cash is worth its stated value. Goodwill is worth nothing in the event of liquidation. Total liabilities worth full value. So, what would be a realistic worth of HUAAN in the event of liquidation? My quick calculations showed that Revised Fixed Assets = $464M, Revised Current Assets = $150M, Total Net Tangible Assets = $464 + $150 - $44 = $570M, or say 51 sen per share.

* At 26 sen, from a valuation perspective, HUAAN appears cheap. At this price, it is *almost* giving away its entire fixed assets for very little amount. The concern of course is that what appears cheap can get cheaper in a declining stock market. In serious bear markets, I have seen stocks selling at cheaper than its Operating Capital.

Income Statement

* Net Earnings is around 6.5 sen in the last 6 months, roughly evenly distributed between Q1 and Q2.

* The major concern is of course huge increase in Revenue (Q2/08 vs Q2/07), and yet, Net Earnings only increase by a tiny %. The margin erosion is indeed serious.

* The earnings outlook is equally serious. As the coy has stated, "the metallurgical coke industry is largely dependent on the direction and growth prospects of the steel industry as
metallurgical coke is one of the critical raw material for the manufacturing of steel in China.". Since the steel industry is soft, we can expect serious deterioration to the metallurgical coke industry. The question is how serious?

* Q2/07 margins was 15.7%, it has deteriorated to 8.5% in Q2/08. Given the huge fall in global commodity prices, huge fall in Baltic Dry Index, huge fall everywhere, it is difficult to make a prediction on how low margins can get. The truth is I don't know if half of 8.5% is adequate or inadequate. I did remember that HUAAN - when compared to its competitors in China - is not exactly an "average coy", but more like a "below average" company, from Moolah's blog. How would a "below average" coy perform - from an earnings perspective - in a prolonged global recession?

* In 2007 Annual Report, the coy mentioned its expansion plans - "In mid 2007, we have also commenced the construction of our additional metallurgical coke ovens to increase our annual production capacity from 1.2 million tonnes to 1.8 million tonnes. The construction of the said new metallurgical coke ovens have been completed and are expected to be fully commissioned in June 2008." So, it seems we can expect greater output, but the question of course is what will be the profitability of these expanded businesses? Whilst the Directors are optimistic (in latest quarterly report) on continued profitability for the rest of this year, this doesn't speak anything at all for the next year.

* There is a high degree of uncertainty in calculating P/E, but some people like to take current price (26 sen) and divide that with an annualized earnings of 13 sen (6.5 sen for H1/08 x 2) , giving a superficially low P/E of 2 times. One is tempted to think that even if H2/08 earnings is nil, the P/E for 2008 is still 4 times. The question is - is this meaningful? For example, if Q3/08 earnings are zero, do we seriously think that HUAAN Price will not take another hit downwards? Yes, there are some cushion because it is trading below its realistic liquidation price, but in a credit crunch environment, will potential buyers be able to finance this acquisition, if liquidation occurs?

* It begs the question - has the huge price fall "priced in" zero earnings for H2/08, and half of 2008 earnings in 2009?

* HUAAN is in a Net Cash position. It has no borrowings. Probably, in a prolonged global financial crisis where credit is hard to find, it will probably survive better than its leveraged competitors, if it doesn't expand beyond where it is already, or do something else silly that consumes precious cash/capital. It is comforting to see no new capital commitment planned from the latest quarterly report, and the past capital spending just a tiny fraction of prior year. However, it needs to watch its inventories tightly, it needs to chase its clients for its receivables to make sure that they finally receive cash, because in this sort of environment, cash is King. But from above, it is concerning that both inventories and receivables have increased, suggesting that HUAAN management doesn't appear to be on top of this problem, as least judging by the past. One would want to watch closely these figures in the next Quarterly Report that is due next month. If there is further deterioration in these numbers, then, the price is unlikely to rally.

Major Shareholders

To date, there are no selling reported to Bursa this year by the major shareholders. Top 5 shareholders responsible for over 60% shares outstanding. The history of the listing is somewhat puzzling, since this is over 1.5 years ago, and at the time, China stockmarket was red hot. I will forever remained puzzled as to why the owners did not list the company in China where it would have obtained not only easy credit but also command huge share valuations in the red hot Chinese stockmarket then. I guess this will forever remain a mystery to me. Still, as time passes, I suppose it loses some significance over time, as long as the major shareholders don't sell, and to date, it is becoming less discomforting that no selling is announced so far. My guess is that since the stock price has taken a huge beating (fallen more than 80%-85%) of listing price and peak price, the major shareholders are unlikely to sell now at 26 sen. (But if they did, this would then become an extremely bad sign indeed). But what is equally glaring is that the major shareholders have not been adding their stake despite the low "bargain discount" price. Perhaps this may be one of the the catalyst needed to send the share price up again, when major shareholders buys more. What is interesting though is that we haven't seen the company using up its cash holding to buy back its shares, which to me is a good thing. However, if it did buy back its own shares, then, I would view it as generally bad, because in the current global credit crunch, cash is King until the global credit/business environment recovers.

Conclusion

So, what can we make out of this?

I have deliberately pointed out the pros and the cons.

I think my own conclusion so far is still unchanged.

If you are an investor who buys and hold, then, it doesn't seem like it's clear yet that we've found THE BOTTOM, and even if we've seen "a bottom", the Buy and Hold investor is unlikely to sell at a local peak, and it would be terrible if the price then dived to make another new bottom which is lower than 26 sen. So, Buy and Hold investors are advised to still stay aside and just monitor.

And of course, if one is a trader, then, you don't need me to tell you when to enter, when to exit, and when to cut your losses.

Anyway, this is my honest view so far on HUAAN. If you would like to add anything, please do not hesitate to drop me a comment here in this article.

And if you are considering other steel stocks, do give consideration to its balance sheet too, besides its future earnings prospects. My feeling is that in times like this, as the global economy deteriorates, a strong positive cash flow and a strong balance sheet will increasingly find a premium relative to the highly geared competitors with negative cash flow. Relative to its steel peers, Huaan balance sheet with its net cash and nil debt position appears to be above average, if not one of the best amongst the steel companies listed in Bursa. But steel future prospects at the present moment doesn't appear exciting yet.

In short: Investors - KIV. Traders - do your own thing, don't wait for me to call.

ValueCap Sdn Bhd

2008-10-20T19:33:00.005+08:00

This is one of the topics discussed in my chatbox this morning. It is also reported in various media here:

- http://www.bernama.com/bernama/v5/newsbusiness.php?id=365800 "Government Provides RM5 Billion In Additional Funds To Invest In Undervalued Stocks"

- http://www.nst.com.my/Current_News/NST/Monday/NewsBreak/20081020175413/Article/index_html "Valuecap would invest in undervalued stocks and protect investments in government-owned companies."

- http://www.bernama.com/bernama/v5/newsbusiness.php?id=365989 "Deputy Prime Minister/Finance Minister, Datuk Seri Najib Tun Razak announced that the government would provide RM5 billion in additional funds to double the size of Valuecap Sdn Bhd to RM10 billion to invest in undervalued stocks and protect investments in government-owned companies."

- http://afp.google.com/article/ALeqM5iInNgQ7ggUVplcGM109ox6W-S8Uw "Najib said the government will double the size of its state-run investment company Valuecap Sdn. Bhd, which was formed in 2003 to invest in under-valued, but fundamentally strong shares, by pumping in an additional 5 billion ringgit "

- http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_1808c204-cb73c03a-687ea900-8feee09d "20-10-2008:- Govt to pump extra RM5b into Valuecap "

Superficially, this news announced by our new Finance Minister seemed to have provided the market with some support this morning. Together with the spillover from regional recovery (e.g. Hong Kong +5.28%, Singapore +3.23%), and as can be seen from the KLCI intra-day chart below, the KLCI found a low of 888.28 just after 10 AM, before clawing back more than 21 points to close at 909.51. (+0.47%). Actually despite ValueCap, this is another "under-performance" of the KLCI relative to regional, although the comeback from the intra-day low is a slight improvement at +2.4%.

Someone asked if this is a good news. Obviously, something is better than nothing. However, we must note that the additional $5 Billion pledged is only a tiny 1% of KLCI market capitalization of nearly $500 Billion, i.e. in the longer term, probably little impact by itself, in terms of stopping the longer term bear. Note that ValueCap is one of Khazanah's portfolio (http://www.khazanah.com.my/portfolio.htm).