Average investors cashing out

In a matter of 10 days, two friends CPC and ALE liquidated their stock holdings and held on to sweet old cash. It was simply sentiment-driven, you know, the momentum driven action of "sell and ask question" later. There was a huge element of fear of losing profits (or losing more), greed of sell now/ buy at better prices later and some crazed feeling in between all these.

I asked a couple of people at the investment/brokerage houses and most said they were reducing their exposure to the equities in a substantial manner. Most were comfortable taking their money off the market. With all the volatility spanning the global financial market and uncertainty of direction of the local bourse, I guess it was simply too stressful on the brain and taxing on anyone's physique to stock pick and remain calm.

What's the best thing to do now..? That's the question everyone asking.. buy precious metals or bonds or stay in cash..? Well, do something that will assure you a good night rest and sleep.. by this I mean, lean towards cash position till month ends..

In your waiting for the dust to settle, you may opt to dabble in currency option swap which can potentially earns you weekly gain, annualized at 6 to 11 %... Happy investing.

Horrible days are here to stay

What a sell-down in the stock market of blue chip companies...! Huge losses were registered as share prices plunged within days. Below are some of the common favourites with their losses over a week:
Maybank from RM 8.70 to 7.60 ( down 13 % ). Public Bk from 13.00 to 11.70 ( - 10 % ). GenM from 3.50 to 3.00 (- 14 %). IOI from 4.70 to 4.30 ( - 9% ). MPHB from 2.50 to 2.20 ( - 12 % ). Boustead fr 5.30 to 4.60 ( -13 % ).

My current interest is in the plantation sector so I'm watching HS Plant currently at 2.30, TH Plant at 1.90, TDM at 2.70
It would be nice to nibble in HSP at 2.00, THP at 1.50, TDM 2.00

Spot gold at USD52/gm (1,617/oz) or AUD53/gm (1,648/oz) or RM165/gm (5,131/oz)

World market plunges again

AUD/MYR plunges to multi-weeks low of 3.07 with more than 3 % loss from 3.16 within 24 hours in the midst of sell-off in Aussie and in stocks. The AUD also dipped below parity with USD, falling to as low as 97.2 US cents.

KLCI suffered another blow on heavy selling across the board with the index closing at 1388 ( - 31 points, - 2.2 %): there were 801 losers and 85 gainers. I'm watching the plantation sector to buy later at steep discounts... Nothing else really interest me, well maybe I'll day-trade Boustead, Maybank, GenM, QL, MPHB, IJML, MahSing, etc if opportunities avail...

With FTSE, DAX and CAC registering losses of approx 5 %, I guess tomorrow will be a red ocean day again... Will you be courageous enough to trade in times like these..?

Glut dampens market value and rental of condos

SINCE the high-end condominium market took a beating following the global financial crisis in 2008, their values have been left pretty much battered even today. Investors who got into the market around the peak must still be quite disheartened by the market's lethargy.

The big supply coming onstream has also been a dampener on property values and the rental market of these residences. There are now many condominiums in need of tenants and the net rental yields are in the range of 3% to 5%, depending on the location.

But despite this, the speculative fervour in the upper-medium to high-end landed residential sector has not abated. There are signs that it is spilling onto the latest craze small sized, and more affordable, commercial cum residential accommodation known as SoHo's, and service apartments

The fact that even analysts are concerned and have downgraded the property sector pretty much indicates the party is coming to an end and it is time to be cautious. UOB Kay Hian Research has downgraded its grading for the property sector to “market weight” from “overweight” citing that the property valuation cycle has peaked.

A global double-dip recession, coupled with the European debt problems, would certainly have spillover effects on the domestic economy, including the property sector. If the world economy is hit by a recession, the property market will not be spared either. Deputy news editor Angie Ng, The Star

KLCI under intense pressure again

Most of the guys I asked today said that they're going to sell, sell, sell despite holding onto defensive blue-chip companies stocks. This seeem to be the prevalent sentiment that's striking terror in the hearts of even those who a fortnight ago were not even agitated by the Euro crisis.
So it seems like even the brave hearted are now striken by fear of losing their gains.

For some who are considering into buying into Tenaga shares (nta 532, QQ 9/ 16/ 14/ -8 sen), I say, be cautious until there is some glimpse that electricity tariff gets another hike. With the cost of fuel (coal and gas) on the high side, this will erode the financial bottom line further.

Instead why not buy TM shares at below RM 4..? Its earning (QQ 12/ 11/ 5/ 4 sen ) is still not that fabulous but there's the growth story of the HSBB (high speed broadband) which is partially paid/subsidised by the Gov't.. With a guaranteed minimum of 13 sen (9.8 sen net) dividend paid out every six months, this is one to have as your core investment.
Punt and trade on this one below RM 4 if ever it plunges... Happy investing...

Average Investor's Allocation

CPC invest in the stocks market since March 2009.
In June 2011 he holds RM 289 k in stocks + RM 133 k cash (which includes profit + dividends of RM 102 k). Todate he has sold and reduced his stocks to RM 234 k. His total gain incl. dividends is RM 117 k (ROI = 117/320 = 36 %). Approx. ratio stocks 2 : 1 cash

ALE holds RM 160 k + RM 80 cash (which includes profit + dividends of RM 42 k).
Recent selling saw the stocks holding at RM 152 k. Total profit incl. dividends slid to RM 39 k (ROI = 39/198 = 20 %). Approx. ratio stocks 3 : 1 cash

In comparison, my return incl. dividends = 25 % cf. to 33 % in June. Ratio stocks 2 : 1 cash

AUD under pressure

Mon 12th Sept... Aussie fell to weeks low of 3.14 agst. Ringgit on fresh worries on euro zone debt crisis that prompted a sell-down in riskier assets and buying of Treasuries..
Strangely, Australian shares slid more than 3 % though the commodities-based economy is more aligned towards China rather than the US or Euro market.. Is the market factoring a slow down in the growth of the Chinese economy as China tightens credit to rein inflation..?

Want to learn how to trade the market..?

For those who want to learn the basic of Technical Analysis, here's a blogger who can offer you some help. Go visit http://www.cpteh.blogspot.com/. Fees are reasonably charged by dividing RM150/ hour over the number of person and spread over weeks of guidance.. I personally reco this guy..!

Don't be fooled by others who claim to be be able to teach you in hours.. I know of someone who paid RM 2,000 to a forex trainer to tutor his daughter for a two hours lesson just on basic of technical analysis alone and it doesn't even include an understanding of forex. For crying out loud, how does one comprehend TA in merely two hours of exposure, let alone the girl is just 20 years old.. I get furious when I hear scam like this, capitalizing on the unprepared gullible public. C'mon you don't impose thousands in two hours. Who the heck you think you're, one of the gambling gods..?

It doesn't take much time to get yourself acquainted with Fundamental Analysis and Technical Analysis, given the massive information available on forex trading websites, blogsites, youtubes and trader's webpage via the internet, mostly free of charge.
The only time you should consider parting with your hard earned cash, is when you actually take up a time/session with an experienced investor/ trader or trainer/tutor who preferably has minimum 3 years of exposure in the financial market (3 years is fair period to ride thru market peak and trough).

DiGi to return RM509m to shareholders

DiGi.Com Bhd, Malaysia’s third- largest mobile phone operator, plans to return cash to shareholders including Norway’s Telanor ASA after receiving a RM509 million (US$170 million) payment from a unit.

The company also said investors will receive 10 shares for each one they currently own in a proposed split to make the stock more affordable and boost liquidity, according to stock exchange filings today.

DiGi, 49-percent owned by Telenor will make the payment to shareholders by the first half of 2012 as it depreciates more than 1 billion ringgit of equipment and upgrades its network.

The Fall of Pseudo Safe Havens

Gary Gibson, Minneapolis, Minnesota (of Whiskey & Gunpowder)...
The Swiss franc as a safe haven? Not so much anymore...
The Swiss National Bank believes that the Swiss franc is massively overvalued. And they're simply not going to tolerate it. In fact, they are going to fight this overvaluation aggressively. They mean to keep the franc to under 1.20 euros and they are "prepared to buy foreign currency in unlimited quantities" to do it.

But why is the Swiss National Bank so upset about a strong currency? Well, just think about the poor export market. People the world over may love the Swiss franc and want to buy it...but a strong Swiss franc means relatively expensive Swiss goods. People in other countries would be less keen on buying those expensive goods. So the export market could suffer. Tourism could take a hit too.

Why wait for messy market when you can settle for quick, neat political solutions that will guarantee great pain down the road? Want to bolster exports and make unemployment your neighbor's problem? No problem! Just devalue your currency...
Bolstering the export market has often been trotted out as one of the very best reasons for having a "flexible" currency in the first place. But it's a zero sum game with only temporary advantages.

Country A devalues and makes its exports cheaper and more attractive, essentially exporting unemployment as well... Country B, however, doesn't need to stand for that because it too has a flexible currency that it then devalues. And so and so on, countries chip away at the value of their currencies for short-term gain. In a world of unbacked currencies, this beggaring of neighbors and buggering of savers can go on till everyone is at the bottom.

These days the franc is often included in the same sentence as gold when pundits talk about "safe havens." We've never really agreed with that. No matter how often the Swiss central bank acts kinda cool, we never forget that it is in fact a central bank. The soundness of the currency it issues has the same guarantees as other untrustworthy unbacked currencies...like the U.S. or Zimbabwe dollar.
Buying the Swiss franc as a safe haven makes little more sense than buying U.S. debt as a safe haven. Investors are still under the delusion that they can trust U.S. treasuries, but they may be starting to understand that the Swiss franc's stability is as reliable as a politician's promise.

Of course gold is still the ultimate safe haven, something that the world is slowly remembering as yet another "safe haven" falls. Even though gold is no longer the bargain it was just a few years ago, it's still looking like just about the best bet.

Below Simon Black examines the Swiss franc devaluation, gold, and what you can do right now to make these new circumstances work for your bottom line.

Whiskey & Gunpowder
by Simon Black
September 6, 2011
Cairo, Egypt With Immediate Effect The Swiss National Bank has just announced that it is putting a ceiling on the franc's appreciation against the euro... effectively abandoning its economic sovereignty and putting its future in the hands of woefully corrupt and incompetent bureaucrats. On the news, the franc fell off a cliff, dropping almost 10% INSTANTLY. Gold priced in Swiss francs jumped from 1497 to 1620 per troy ounce, all in about 45 seconds. Precious metals are now all alone as the only forms of sound money that are truly safe havens.

Just 6-weeks ago on July 27th, in a letter entitled"Should I buy gold at its all-time high", I wrote: "Even stronger currencies like the Swiss franc have limits to their appreciation. At some point, the Swiss National Bank will impose capital controls to thwart the rise of its currency...

[Y]ou'll probably feel like a sucker for not buying gold at $1600 when you still had the chance." Since then gold has soared roughly 20%, and as of this morning, the SNB has imposed capital controls to thwart the rise of its currency. This is just the beginning. The Swiss government has basically told the world that they will print as much money as it takes, and buy up as much crap sovereign debt as they can, to competitively devalue the currency This essentially puts Switzerland in the same sinking boat as Italy, Greece, and Portugal... with one key difference: Switzerland has 0% interest rates. In other words, you can now borrow in francs at 0% and buy government-backed euro garbage yielding 5%, 10%, 30%.... with absolutely no downside currency risk.

Here's a practical example you can do -- opn a FOREX trading account and borrow Swiss francs at 0.5%. Buy the EURCHF cross and simply hold euro cash, paying 0.65%. At 100:1 leverage (quite common in FOREX trading), that translates into a 15% return simply for HOLDING CASH with no downside currency risk. It's free money, courtesy of the Swiss National Bank. I'm just waiting for the next wave of margin hikes. Needless to say, this is utter madness and will absolutely hasten the end game for Europe.

A few other points to make: 1) Big Swiss exporters like Novartis and Nestle are dancing a jig right now as this will surely boost their sales in the short-term. Also, banks in Switzerland and Austria who had heavy exposure to Eastern Europe are breathing a sigh of relief right now. You see, Swiss interest rates have traditionally been lower than in Europe's emerging economies.

For example, many Hungarians took out mortgage loans in Swiss francs because the borrowing rate was so much cheaper. Once the Swiss franc began to rise, however, borrowers had a difficult time paying back the loan; suddenly their mortgage payment and balance were much higher than before, and default rates soared. Banks in Austria, Germany, and Switzerland who wrote most of the loans were sitting on huge potential losses... and this destruction to the financial system has been mitigated thanks to today's move. I have to imagine this had some influence in the decision.

2) For all the talk of a pullback in gold, this is only further reason for a rise in precious metals. It's true that nothing goes up (or down) in a straight line, but given that the world just lost nearly its last remaining safe haven currency, there are few other asset classes to turn to.

3) Markets are not functioning properly. Competitive devaluation means that governments are all striving to out-print each other... Europe is printing as much as they can to bail out the PIIGS, Switzerland just signed up to join then, Japan and China are not far behind, and QE3 is set to launch soon in America. With so much money sloshing around the financial system, there is absolutely no sense of value anymore; people cannot invest with confidence given all the massive bureaucratic intervention

4) In the Swiss National Bank's brief statement, they said"With immediate effect, [the SNB] will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20. The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities." The three key words here are 'WITH IMMEDIATE EFFECT'. This is just another example of a government making instant changes that pose dramatic risk over people's lives and livelihoods........ ...... Regards, Simon Black

Currency devaluation is all the rage. All the cool currencies are doing it. So today Switzerland moves from the boring, sober lifestyle of its buddy gold to hang out with the cool, hard-partying currencies from the U.S. and Zimbabwe. And so...yet another currency falls to the false promise of currency devaluation..

This move by the Swiss gives investors one less inflation hedge to use in their arsenal. Albeit the Swiss Franc was still paper money and therefore inherently a poor choice, it, like the one-eyed man in the land of the blind, was better than most. But not better than gold. Gold doesn't represent anyone else's liability. It can't be conjured up by competitively devaluing, bankrupt governments. Gold continues to shine even as we type this morning it's up $15 and change. So what do you do to protect yourself from the unending line of governments willing to debauch their own currency.?..... .....

Regards, Gary Gibson
Managing editor, Whiskey & Gunpowder
ggibsonagora@gmail.com

European stocks fall 5.0% on fear of recession, debt risks.TM Chart.

European stocks plunged by about 5.0 percent in mid afternoon trading on Monday, hit by acute tension over the risk of recession in leading economies and over eurozone debt.

Bonds issued by Greece and Italy fell, and the cost of insuring against default by Italy and France, as indicated by the market for credit default swap (CDS) instruments, rose sharply. The euro fell below 1.41 dollars. The price of gold jumped back above $1,900 an ounce on demand for a safe haven investment.

The head of the ECB Jean-Claude Trichet warned of an immediate and imperative need for enactment of a second debt rescue for Greece, and for tightened discipline in the management of eurozone economies. He also spoke of an eventual "confederal" disciplined management of eurozone national finances. And the head of the IMF Christine Lagarde repeated her warning that banks in Europe need extra capital to withstand any contagion from the eurozone debt crisis.

The move against stocks was exacerbated by a decision by US authorities to take legal action against 17 leading international banks over trading in securitised mortgage trading at the heart of the 2008 financial crisis, traders said. Bank shares fell heavily in Europe.

German stocks were down by nearly 6.0 percent, while in London, the FTSE index fell by 3.06 percent to 5,129.97 points. The Frankfurt stock market was showing a fall of 5.55 percent from the closing level on Friday to 5,230.84 points on the DAX index with Deutsche Bank shares down 9.59 percent. In Paris the CAC 40 index was down 5.10 percent to 2,987.96 points and in Milan, the FTSE Mib index was showing a fall of 5.30 percent to 14,263 points.

The US legal moves are aimed at recouping billions of dollars lost in the financial crisis. "The US decided to drop a bombshell on the banking sector ahead of their extended weekend by announcing a $200-billion (141-billion-euro) lawsuit across the whole industry for the miss selling of mortgage backed assets, the dreaded subprime loans," said Simon Denham, head of London-based trading group Capital Spreads.

US firms targeted in the suits included Bank of America, Goldman Sachs, Citigroup, JPMorgan Chase, Morgan Stanley, General Electric, Ally Financial and First Horizon. The foreign banks were Deutsche Bank, HSBC, Credit Suisse, Barclays, Nomura, Royal Bank of Scotland and Societe Generale.

Traders also continued to digest weak US data from late last week. The jobs data for August were the worst since September 2010, when the economy shed more than twice the number of jobs it created. The pace of job growth remains far below the numbers needed to reduce the high unemployment rate.

Telekom Malaysia Chart

KLCI Chart

The local index must hold above the crucial pivot low support at 1,423.47 on August 9, which is reinforced by 1,420, the 50 per cent Fibonacci Retracement (FR) of uptrend from the 1,243 low of May 27 2010 to the 1,597.08 record high of July 11, to prevent a deeper correction to 1,378, the 61.8 per cent FR, with next significant retracement support at 1,327, representing the 76.4 per cent FR.

Immediate upside hurdles stays at 1,490 and 1,510, the respective 38.2 per cent FR and 50 per cent FR levels of the sell-off from the 1,597.08 record high to the recent extreme low of 1,423.47, with the formidable hurdle staying at 1,530, the 61.8 per cent FR matching the 200-day moving average.
Read more: KL bourse brace for renewed downside pressure http://www.btimes.com.my/Current_News/BTIMES/articles/marketoutlooksept5/Article/index_html#ixzz1X3M6JSye

Banks downgrade. Hedging. Telco.Gold.

Despite the pretty good earnings of the banking sector in Malaysia, there is a general downgrade on the banking sector by most analysts. While I'm still upbeat on some of the bank stocks that pays pretty good dividends but I can't help noticed the selling pressure on CIMB which has influenced share prices of other banks. So I have conceded to the trend of Mr. Market and reduce my holding of banking stocks.

It's darn tough to trade in this treacherous condition but here's what I think you can do if you're experiencing some monetary losses in your current position and looking to recoup a loss (by hedging) and/or are looking for a potentially rewarding trade, on a SHORT TERM strategy or a LONG TERM one.

1.)... Look for stocks that're trending upwards and buy on dips... The only sector that's on my list is the telecom sector.
You may even have your own idea of sectors and stocks that're on the uptrend. You may check with your financial consultant, brokers for some recommendations but the decision to buy remains YOURS, and yours alone.. If in doubt, DON'T buy. Coz you cannot lose money further if you don't buy in..

You may buy stocks that're tanking, pray for a technical rebound. That's your prerogatives but never my liking (I've learned by paying my dues/ for my lesson to Mr. Market ). It make more sense to buy blue-chip stocks that're rising in share prices than dumping more money in losing stocks.

The idea is to hedge yr current losing trades by taking a position in several potential winning trades. And if your winning trades equalise your losing trades in monetary terms, it's time to quit the market... The idea is not to make big gains but minimise your losses and quit the market. Repeat --- Quit when trades equalise...!

2.)... Exit the stock market and invest LONG in precious metals IF you seriously believe we're in for a crash/collapse in the financial market.

I'm not the smartest gold investor around but this is what you can consider. Set up a precious metals fund equivalent to 10 - 20 % of your portfolio. Start by taking a small position, say 10% of your intended precious metals fund, at around this time, with prices hovering around USD 1,800/oz. Buy with another 40% of yr precious metals fund if gold price dips to USD 1,500 within one month and another 50% if it plunges to USD 1,200/oz within three months..

Patiently hold yr investment to 4 - 5 years and dream on for a USD 3,600/oz by 2015...? I guess it would be fair for me to take a position and post my gold investment gain/loss on a three month basis up to 2015. It would be interesting to prove the "gold bugs" story...
Forgotten are my minute gold investment in physical Gold Maple Leaf 1 oz in 2009 (?) when price of gold was at its highest hovering around RM3,300 and my 1 oz silver American Eagle was purchased at USD 16..
Happy investing...