SOS Mark Mobius - It is definite

Mark Mobius said on 30 May

"There is definitely going to be another financial crisis around the corner because we haven't solved any of the things that caused the previous crisis," Mobius said at the Foreign Correspondents' Club of Japan in Tokyo on Monday in response to a question about price swings.

"Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes."

MyView

I believe most of us agree, it is a matter of timing, after USD3 trillion being pumped into the world economy. Ask Gary Shilling, Michael Shedlock, Roubini, Icahn, Peter Schiff, Jim Rogers, Charles Nenner. So, it is DEFINITE. But, but even the Octopus got it wrong!

SOS the other side of China not many knows

Introduction (Excerpt)

More than a decade after the fall of the former Soviet Union and Eastern European communist regimes, the international communist movement has been spurned worldwide. The demise of the Chinese Communist Party (CCP) is only a matter of time.

Nevertheless, before its complete collapse, the CCP is trying to tie its fate to the Chinese nation, with its 5000 years of civilization. This is a disaster for the Chinese people. The Chinese people must now face the impending questions of how to view the CCP, how to evolve China into a society without the CCP, and how to pass on the Chinese heritage. The Epoch Times is now publishing a special editorial series, “Nine Commentaries on the Communist Party.” Before the lid is laid on the coffin of the CCP, we wish to pass a final judgment on it and on the international communist movement, which has been a scourge to humanity for over a century.

Throughout its 80-plus years, everything the CCP has touched has been marred with lies, wars, famine, tyranny, massacre and terror. Traditional faiths and principles have been violently destroyed. Original ethical concepts and social structures have been disintegrated by force. Empathy, love and harmony among people have been twisted into struggle and hatred. Veneration and appreciation of the heaven and earth have been replaced by an arrogant desire to “fight with heaven and earth.” The result has been a total collapse of social, moral and ecological systems, and a profound crisis for the Chinese people, and indeed for humanity. All these calamities have been brought about through the deliberate planning, organization, and control of the CCP.

As a famous Chinese poem goes, “Deeply I sigh in vain for the falling flowers.” The end is near for the communist regime, which is barely struggling to survive. The days before its collapse are numbered. The Epoch Times believes the time is now ripe, before the CCP’s total demise, for a comprehensive look back, in order to fully expose how this largest cult in history has embodied the wickedness of all times and places. We hope that those who are still deceived by the CCP will now see its nature clearly, purge its poison from their spirits, extricate their minds from its evil control, free themselves from the shackles of terror, and abandon for good all illusions about it.

The CCP’s rule is the darkest and the most ridiculous page in Chinese history. Among its unending list of crimes, the vilest must be its persecution of Falun Gong. In persecuting “Truthfulness, Compassion, Tolerance” Jiang Zemin has driven the last nail into the CCP’s coffin. The Epoch Times believes that by understanding the true history of the CCP, we can help prevent such tragedies from ever recurring. At the same time, we hope each one of us would reflect on our innermost thoughts and examine whether our cowardice and compromise have made us accomplices in many tragedies that could have been avoided.

The titles of the “Nine Commentaries on the Communist Party” are:

1. On What the Communist Party Is
2. On the Beginnings of the Chinese Communist Party
3. On the Tyranny of the Chinese Communist Party
4. On How the Communist Party Is an Anti-Universe Force
5. On the Collusion of Jiang Zemin with the Chinese Communist Party to Persecute Falun Gong
6. On How the Chinese Communist Party Destroyed Traditional Culture
7. On the Chinese Communist Party’s History of Killing
8. On How the Chinese Communist Party Is an Evil Cult
9. On the Unscrupulous Nature of the Chinese Communist Party

For those who really wanted to know the REAL Chinese Communist Party which is UNTOLD to many, please visit www.ninecommentaries.com

SOS Malaysian Housing Revisit

Recent article from The Star (last Saturday) posted an article of the rise in landed properties around Petaling Jaya. There was an average increase (link houses) about RM200K-400K in the last 1-2 years. Some example are, Bandar Utama, Mutiara Damansara, Kota Damansara, SS2, Tmn Tun, Damansara Jaya, Bangsar, Section 5 & 6 PJ etc..

Some of the opinions:

1. RAM rating agency in real estate and construction said that the affordability issue will continue for the landed residential units, are likely to increase this year at a slower pace than last year.




2. International Real Estate Federation (Fiabci), Mr Yeow said "We are in a situation where people are using the property market to GAMBLE."

The sharp increases (landed residentials) appears unprecedented. Who would imagine a semi-D at Mutiara Damansara launched around RM800K less than 6 years back is now RM1.8m. Some double storey link in Seri Utama (Kota Damansara) more than doubled in less than 10 years. The begging question is WHY? Same old explanations were, limited good location land, increase in construction cost, low borrowing rates, higher land cost, keen demand on prime locations.

MyView

Thanks to partial speculation, partial fear of scarcity of prime locations, partial fear of losing out, partial fear of continuous rise (will be out of reach), and the do no wrong herd mentality. Semi-D in Mutiara Damansara went up RM600K in 6 months from RM1.2m to RM1.8m, believe it or not. Of course, this is far from Desa Park City.

It appears to me the buying comes more from fear than genuine purchase (not under pressure). For the same "fear factor" when the collapse comes, it will over shoot as well. Of course, real estate is not as liquid as stocks, it takes 3-6mths for each transactions, hence, when the market is down, there is no rush.

It appears that a decent double storey link house in PJ is now around RM800K, easily 10-15 times the affordability ratio for the middle household income in PJ. So other than what they called in FAMA (father and mother) scholarships, it is beyond the reach of those just graduated or even 10 years in employment. A survey also shown that there are less than 5% in Klang Valley earned more than RM10K a month.

When will the music stop, no one can be sure, but the BUBBLE is definitely formed. Thanks again to easy credit, which more than double over the last 10 years, definitely faster than growth in household income.

SOS Most dangerous four letter word

DEBT, is the most dangerous four letter word in the financial world today. If you look at the third chart above, the credit creation vs the world industrial growth has grown out of proportion. Any we have not even brought in the weapon of the world destruction, DERIVATIVES yet. Ultimately, it all comes down to this 4 letter word, DEBT. Debt is wonderful, if it is wisely used. Many corporations and countries gone into bankruptcies and social upheaval due to over gearing. The temptation of DEBT is real. It did not only happens to the ASIANs in 1997s, but, look at the PIIGS now, same old thing, what about USA? China? Australia?

What happen when corporations overgeared, they have to deleverage, period. So, the next few decades, the world is going to be deleveraging. That is why Gary Shilling called his book Age of Deleveraging (he was referring more on USA and Europe).

Many will suffers, period.

SOS There are cracks in the BRICS

Oh, commodities, commodities on the wall, who is the greatest of them all.
Crude oil? Copper? Gold? Natural Gas? Sugar?

The answer is in China. China goes, commodities goes. So, what is the likelihood China going for a hard landing? Not much, looking at it credit growth for the last 10 years, and number of properties is more than its demand, hmmm, there is a very worrying factor.

MyView

Almost no countries can grow indefinitely on "drugs" or "debt". When the household affordability is above 10 times, I believe the risk is very very high. Doesn't matter the loan is not taken by owner, but it is taken by developer. Over gearing is over gearing, disregard, whether it is developers or household owners. Glut is glut, when you supply way above the demand, velocity will definitely drop.

Rental yield, affordability ratio, gearing in the industry don't lie. If it get to a historical high, one have to be careful. There is always reasons and logical explanations for the new high.

So CHINA, the ball is in your court.

SOS Ferrari, Bentleys with Marc Faber

May 25 (Bloomberg) Marc Faber : ..recession in China could be a technical recession , if you go and slow down from a growth rate of say ten percent to a growth rate of three percent then there is a recession , also I do not believe in the growth rate that China publishes , because if you had adjusted nominal GDP for the true rate of inflation then real growth is of course much slower , you know I want to tell you something that disturbs me in all emerging economies and in many other developed economies , from my taste , in front of far too many luxury hotels there are far too many Ferraris, Maseratis, Bentleys... I see a boom everywhere, except for the working class, except for the lower, middle class. But among the well to do people the wealth that is floating around and the prices you pay for high end properties is incredible, and I think that will come to an end, and a lot of people will lose a lot of money... I was in La Jolla, Laguna Beach, Newport Beach, I was in front of a restaurant smoking and I've never seen so many Ferraris, Maseratis, Bentleys and fancy cars anywhere in the world, and this is in America. I am not saying this is wrong, but there is an opulence among a small group of people that is huge when there are lots of people that are struggling. This gives me a bad feeling because I've seen so many emerging economies when they were booming, that was the time to get out." Marc Faber told Bloomberg

MyView

I believe China is going for a hard landing for its economy mainly due to the credit growth bubble. A lot of the borrowings went into fixed assets investments, especially properties. Properties developers tend to go in cycles, on occasion they made super normal profit, and during a bust, many went into bankruptcies. Although many Chinese buy properties with their high savings, the developers are gearing up to an unbelievable level. Instead of high gearing towards the households, in China, it was the developers. Yes, the bubble is slightly different, but, it is still a bubble, the only different, it is the developers that will suffer the most here, as a result of the MYTH that consumers will forever have enough money to buy the pricey properties. It will come to a stage that the empty cities in China cannot be filled up, and the cracks appears, then we it will be too late. Like most Americans are unable to see the housing bubble, it will happen to China as well. So will Australia. China treats the property investments like GAMBLING, period. In conclusion, like what Marc Faber said, a lot of people will lose a lot of money.

Just look at the chart above, make you own conclusion, is another credit driven economy. Don't believe the most expensive statement in financial markets, this time is different.

SOS What should USA worry about?

What US of A should worry about:

1. contraction of borrowing
   


2. excess inventory for housing (price will continue to fall)
   


3. education loan peak around USD900 billion (now) vs USD100 billion in 1997 and very similar to housing trend
   


4. unemployment remains high
   


5. social media bubble is building up
   


6. lowest dividend yield in history
   


7. too high gearing (causing lots of foreclosure and bankruptcy)

MyView

Not only USA is facing such problems, it is also the same in Europe, if not worst. China and Japan as well. The credit driven growth is now gradually reversing.

The PIIGS are nicely roasted. MENA is in a mess. Tension in Iran and Syria is not helping. Japan reconstruction fits the "broken window theory", it won't work. CHINA overstock every commodities available. Once the music stops, the suppliers for CHINA consumption will follow to collapse. This is real, it will unveil one by one (economic disasters), not to mention natural disasters and geopolitical disaster.

SOS Harry Dent says the economy will end up like Lindsay Lohan

MyView

Everyone has his methodology in assessing the financial markets. Some uses fundamental analysis (GDP, PE, Dividend Yield, Growth, etc), while others use technical analysis (Elliote waves, MACD, RSI), and also some uses cycles and Harry Dent uses demographics. There is no perfect measurement, because, financial markets is not physics, where it can be determined by complicated formula.

It involves rational and non-rational actions. For example, sometime a person buys a share based on some reports, only after that he did a detail research to justify what he bought. Some, listen to news (papers, megazines, internet write ups, TVs, etc) and some listen to tips. Some got it right, some got it wrong, but never a 100% accuracy. Some may uses rational to buy a share, like ABC, and have good track records, but still losses money as the company turn out to be a fraud (fake figures).

Lets think from the Company's perspective, the management must always show good results and the incentives is to get a good bonus. There are many ways to improve the paper earnings via creative accounting.

In short, the financial markets (assuming stocks) is very complicated. Good, average and bad stocks are all listed. Good can turn out to be bad (fraud or misrepresentation). Bad may turn out to be worst (window dressing). So many different types of buyers and so many types of sellers, all having different emotions.

So, best way is to understand all 3 methods (which has its pros and cons), to assess the future. But then again, if everyone sees the same thing (say 90% economists/experts say it is bull market) and it turn up to be a bear market, what happen next. Even expert in their fields is unable to assess it correctly, what more than a layman with no financial or economic experience or exposure? Rely on the expert? Well, one way is pay some student fee and learn and educate ourselves. But, what happen if the experts is another one of the 90% experts out there, back to square one, I guess.

One conclusion can be derived from this discussion is that, it is all predestined. Now, how are you going to explain predestination rationally?

Why did Harry Dent (an economist) said that the US economy will end up like Lindsay Lohan?

Ok, what happened to Lindsay Lohan in the first place. She went into rehabilitation? Exactly. The above charts is his WILD predictions (the years are erased, meant for subscriber only).

SOS What Meritocracy?

Minister in the Prime Minister's Department of Malaysia, Datuk Seri Nazri Aziz said:

Out of 1,500 scholarships:

1. 300 (20%) were allocated under the MERIT category;





2. 900 (60%) under the RACIAL COMPOSITION category;





3. 150 (10%) under Sabah & Sarawak bumiputera category; and





4. 150 (10%) under socially disadvantage category.

MyView

Sorry, can't help it. Read this statement from the Star on 25 May 2011. Is the government serious about developing this country? Forget about the ETP, NRKA, 1Malaysia, clean up all this "INEFFECTIVE" policies first before we can talk about doubling the per capita. I think, the government meant was to double their cronies' income, not the rakyat. Why can't the government treat all races fairly? Just call us MALAYSIAN citizens, period, no need for allocation for racial composition or Sabah & Sarawak.

How are we going to explain to our children. Sorry ah, your skin is not dark enough or too dark for the scholarship?

SOS One of Opposition Wish List in Malaysia

Wish List (banish corruption and prevent wastages or leakages).

Some of the high profile cases that has no closure:

1. Lumut naval dockyard (and some that does not work)




2. Submarine that cannot dive properly




3. Defence expenditure




4. Port Klang




5. Approved Permits on motor vehicles




6. Proton Saga




7. Tanjong Pelepas Port




8. Expensive trains




9. Melaka monorail that does not work




10. Rapid buses that does not work properly




11. ETP




12. NRKA




13. 1Malaysia




14. Subsidy for IPPs




15. Bailing out of Bank Bumi (twice)

MyView

The list will go on forever. Lately, scholarship problems. Not to mention, a weak education system. Ask all the ministers, how many send their kids to local universities or the local primary or secondary schools. At least the PM is proud that his daughter graduated in USA top university. All this reflect a NON PERFORMING (layman may call it ROTTEN) government, period. Sometime it make us wonder, who works in all these government agencies, who only destroy the future for their own children. One must take responsibility for their action. Refuse corruption and refuse non value added acivities (like working with government)

Don't forget, what goes around, comes around. In this wild animal kingdom, it is the mass that will be suffer for the elites. Slavery didn't end, it just evolved.

SOS Who is Slowing Down?

By Mike Shedlock

Economic Slowdown ListEconomic Slowdown in the US: Non-Manufacturing ISM Plunges Below Prediction of All 73 Economists, New Orders Collapse

Economic Slowdown in Europe: Huge Cracks in Global Recovery Thesis; Industrial Production Unexpectedly Drops in Germany, France; UK Weaker than Expected.

Economic Bust in Australia: Near-Record Corporate Bankruptcies, Employment Drops Unexpectedly; Rise in Bad Home Loans; Record Low Property Transactions

Add China to the global slowdown list.Bloomberg reports Chinese Manufacturing Index Drops to Lowest Level in 10 Months

Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com/

MyView

US of A - credit creation is contracting, so, is the economic growth. According to Gary Shilling, unsold housing still high i.e. 2 to 2.5 million units and unemployment is high as well around 9%.

Europe - PIIGS debt problem

Japan - Tsunami and nuclear problem

China - Running inflation and reliance on construction

Australia - Housing Bubble is

BRICS - the moment the C slow down, the rest resources countries are in trouble.

MENA - chaotic, revolution

It is no coincidence when so many "bad" news are happening at the same time. Is it the end of the world, no, just another hurdle to cross. Most of the problem arises from unstopable credit creation over the last few decades & couple with derivatives casino establishments (of course due to human greed and corruption). Until this two major issues are resolve, there is high probability the world will slowdown generally.

The only solution that can be offered is to gradually deleverage and let the too big to fail, fail, period. No two ways about it, either way, one have to go through a tough time. Most politician prefer slow death than a heart attack.

SOS I AM FINISHED - IMF

IMF is non regulated. Why allow it to issue SDR, which is supported by a few types of fiat money, another credit creation casino? I few rotten currency does not make one good currency.

In Argentina, the adults scare their children by saying, the IMF is going to get you. IMF only benefit the elites. Rob the poor and give to the rich, the reverse of Robin Hood. It allow financial predator to rob the poors and determine favourable prices for their cronies. They carried out in the name of last resort lender to heal the countries. It is just another fox in sheep clothing.

MyView

As usual, most international "regulatory" is established to serve a few oligarth.

SOS Free Education in USA?

Nope, but cheaper education in USA in the next 5-10 years. Refer Chart, the bubble will soon burst. Yahoo! for parents sending their kids to USA.

SOS Fiat Money, Precious Metals, Energy, Soft Commodities

Fiat Money arises from the supply of new paper money + credit creation by bankers. Over the past few decades, the credit creation or paper money created in far more than the last century (at least this is what I believe).

The question is what will happen next if most central bankers starts this CREDIT CREATION at an unprecedented rate? Credit creation is only good if it can result in additional economic benefit to the people. So, there is good and bad in credit creation, the good part is it helps businesses to expand (increase capacity in a manufacturing line) and eventually create employment. What BAD or not so good side is, easy credit will allow the consumers get hooked and result in borrowing. It is also BAD if the credit is given to hedge fund to speculate in the financial markets, which, technically speaking, the hedge fund manager does not create any economic benefit to the economy as compared with a car or phone manufacturer.

Over the last two decades, many hedge funds is established and highly unregulated and allow to leverage to the tilt until it becomes too big to fail. If we look at the issue from a VALUE ADDED perspective, most paper trading in financial markets is UNPRODUCTIVE i.e. does not bring much economic value to the people, other than creating a BIG BIG CASINO for more people to play in.

Of course, one of the ALL time legalised casino in the world is DERIVATIVES. This is the ultimate of credit creation without limit. And this is one of the most unregulated area in the "casino markets." Compared this with Las Vegas casinos, the real casinos is nothing but a drop of sweat in the ocean.

MyView

Nearly in every asset classes, there is a paper market for it, which are disconnected with the real demand and supply of such assets. You have precious metal, oil, sugar, cotton, copper, cocoa, orange, and anything we can name it, can be traded trough the financial "casinos" and can be leveraged should you enter the game.

This financial "casinos" have multiplied into a level that it is TOO BIG TO HANDLE. The question is can this phenomena continue indefinitely? The clear answer is no, it is a matter of time before it BURST. Wherever the money/credit created into productive or non productive sector, it will eventually deflate. Let just say, the money borrowed, went into speculative play in energy, and, if it eventually the price collapse, those involved in long energy will suffer. Same with share market.

SOS Interview of Falun Gong Practitioner

Do spare 10 minutes to have a look. Falun Gong is a type of qigong practice that can improve your physical (body) and mind.

For more information, do a visit to www.falundafa.org to find out more.

SOS Synchronised Fear

About a month or two ago, mentioned in my blog i.r.o. most asset classes up while US dollar was down, looks like the reversal is on the way.

US dollar is going up gradually while gold, silver, oil, copper, natural gas and other soft commodities is slidding down. Even Bloomberg reported most investors, analysts, fund managers is recommending to keep higher cash.

MyView

The reaction seems to be a synchronised fear. The entire world market is moving at the same direction. For a while, everyone thought the east and west were decoupled economically. This may continue for a while, so, be extra cautious.

Some experts already drumming the repeat of the 2007/8 crash. Only this time round, I think, it may be as severe as the last.

You may understand why after reading this blog for the pass few days. Sign of reversal or the Inflection Point is near. When everything goes to EXTREME, it will reverse violently. I believe this 2nd Tsunami will be far greater than the first one. Trillions will be wipe out from the financial market. No worries, after all, it is only monopoly or fiat money.

SOS Affordability Housing in Malaysia

HOUSING in MALAYSIA

This is only applicable to certain "pockets" of properties in URBAN areas in Penang and KL. The average urban KL residential properties is about RM485,000 which is 9 times its average median for urban household income is about RM54,000.

This is highly classified as severly unaffordable by any international affordability standard.

MyView

Certainly true for certain pockets of properties which are out of the league for many of the new generations. Example, condo near IKANO is selling about RM650 psf, it cost about RM455K for a studio of 700sf. Lets go to Mont Kiara, Solaris Dutamas Condo, completed, selling around RM530-600 psf for the 1000 sf type. Near Plaza Damas (Sri Hartamas), launching for condo also around RM650 psf. Mah Sing lauch one near Mont Kiara, around RM800-900 psf. Desa Park City (lets not talk about it). All these areas (I called it HOT SPOTS) is definitely out of reach for many. So, one have to settle for others (still available, takes time to find).

But these pockets does not represent the entire housing properties of Malaysia. The conclusion is simple, pockets that is way beyond the affordability will have greater impact during a financial crisis. Some Malaysians are very rich (not their fault), they are driving a RM300K-500K car around. Don't even have to talk about house, a car, can be 9-10 times an average urban household income.

Just calculate, 600,000 cars sold in Malaysia in 2010, take 10% as expensive car around RM300K per unit, total sale for luxury car alone is about RM18 billion a year. Malaysia is full of rich people.

One of the many culprit is the credit creation, thanks to the government policies and banks easy financing scheme. Of course, it takes two hands to clap.

SOS U.S. Dollar: What Will Happen if China Stops Buying U.S. Treasuries?

"There is no group more subjective than conventional analysts who look at the same 'fundamental' news event -- a war, the level of interest rates, the P/E ratio, GDP reports, the President’s economic policy, the Fed’s monetary policy, you name it -- and come up with countless opposing conclusions." said Prechter

Also, these experts rarely show you a chart. Which is too bad, because a simple chart can quickly put an end to a "fundamental" discussion of various "what ifs." See above.

MyView

It is true, lots of times conventional analysts look at the same "fundamental" indicators and yet comes up with OPPOSING conclusions. Like Prechter said correctly, a simple chart can quickly put an end to a "fundamental" discussion of various "what ifs."

Not many bother to go beyond the headlines. After all, all the headlines are copied from each other. In view of that, conventional analysts/experts are basically "GUESSING" and they have never, never done a research to support to their indicators by charts. Lets not talk entirely about the broad market, let talk about a company which the auditors' opinion was qualified over a going concern issue subject to new funds raised, guess what, the share price doubled.

What we see or hear may not be what we want it to be reflected in the financial markets, period.

SOS Six Secrets to Concensus

From Prechter:

Any individual can be wrong about markets. In the past when I have been wrong I realized in retrospect that either I was a member of a herd or I bet too early against one. But the fact remains that when representatives across an entire profession of exogenous-cause thinkers agree on the future trend of a market, it’s a signal.

The lessons are: (1) Any passionate consensus among economists is a terrific market timing signal, because it means that there is no one left to convince and therefore the market in question should have extreme difficulty continuing in the predicted direction; and (2) an alert analyst can learn to recognize these times and use them to advantage.

Prechter argues there are several themes out there right now that investors, economists, and markets all believe to be true just like they did with interest rates in the 1980s.

1.The dollar - everyone is bearish.
2.Interest rates - everyone thinks they're going to rise.
3.The stock market - everyone is bullish but corporate insiders.
4.Inflation expectations - everyone thinks it is going to go higher.
5.Economy - everyone is confident in 2011.
6.Oil - everyone thinks it is heading higher.

MyView

When did the Concensus make most of the money? This is a Casino Capitalism, the House always win.

Russia failed because of central planning. That does not Free Market is better.

SOS How Democracy Works

What you are also exposing is the truth about “democracy” which is an ideology that destroys itself by the practises demanded of it and the total lack of integrity of those elected to office.

1. Democracy elects its leaders from the “lowest common denominator” of society,

2. It elects those "elite" that want to be elected and stay elected,

3. Those that get elected are essentially those that have promised to give certain groups more of the collective pie – bribery,

4. Distributions of Government monies are targeted to supportive electorates that will assist in the re-election of those in Office,

5. Policies introduced by those totally untrained and incompetent in “governance” are designed to keep themselves in Office and not, for the true betterment of the Nation, as a whole,

6. The system of Lobby allows those in Office to strengthen their positions by strengthening the Lobbys’ position at the cost of the Nation. This is the symbiosis,

7. Democracy is a sure way to socio-economic destruction as shown by many writers and economists such as v. Hayek and v. Mises and Adams, et al,

8. People of the electorate are never questioning Government about transparency, they are all asking for a bigger share of the pie.

(extracted from comments in Steve Keen blog)

MyView

Self interest - is the motto for most government. Without self interest, there will be no government of the day. Self interest will top up with corruption, which make matters worst, having incompetent politician to set "sub-standard" policies. Sub-standard policies will continue to attract moret cronies and incompetent politicians. This is the political cycle, hard to stop this bad habit. Only when things go to extremes, will it change.

It is quite irony, the "corrupted" society will continue to vote the "corrupted" politician until one fine day, they are abandon (because all the money is squandered), hence, comes a new leader, who is inhereted with all the "worms" and a cleansing need to be done, and the entire nation has to suffer for it. Same old same old story, it happens in politics, it happens in corporation, it also happens in family.

In short, part of the society is morally corrupted. Until morality is emphasized, most knowledge will be misused. I am not against Ivy League graduates, they contributes, but as usual, some actually destroy wealth. We actually need less of those, but, what to do, morality will never be a subject that interest most, especially with such a material world.

A knife can be use for cutting meat or vegetables, and also use to harm others. It is not the knive that we need to change, it is the people moral value we need to cultivate.

SOS Malaysia Credit Creation Dangerous?

Between year 2000 to 2010

GDP current price = Approx RM380 to 730b (1.9X)

Domestic Debt (banking sector) over GDP = (1.7X)

M1 growth = 78-198b = (2.5X)

M2 growth = 356-996b = (2.8X)

M3 growth = 458 - 1025b = (2.3X)

Housing loan (2002-2010) = 71-219b = (3X)

Car loan (2002 - 2010) = 37-116b (3.2X)

Personal loan (2002-2010) = 2-21b (10.5X)

Household debt over GDP (2000-2010) = 40% to 65%.

Based on the figures above, GDP growth is primarily driven by credit. Malaysia is highly dependable on credit to finance its growth.

Average GDP growth(2000-2010) is about 5.7% except for 2001 (0.1%) and 2009 (-1.7%).

M1,2&3 growth is much higher than the GDP growth.

MyView

The above statistics mainly show the negative side of Malaysia growth story. One concern is the housing loan growth had grown 3X since 2000 and car loan 3.2X. This are fixed assets growth, which is not related to production or productivity. It is not very healthy if fixed assets growth constitute big portion of the GDP.

Other credit creation like derivatives is definitely not included. Public sector like Cagamas is also excluded. Of course, non banking sector also not included.

Some of the unhealthy practice on loan is even at the age of 40, one can take loan up to 30 years, which was not done previously. And the loan to value ratio went as high as 5/95 which was not hear many years back. These are easy CREDIT. And easy credit always cause INFLATION, the silent killer of value.

SOS Charts that will change your life?

MyView

Credit creation is the culprit over the last few decades. Think about it.

SOS China Hard Landing or Soft Landing

Read MISH dated 5 May 2011. Ponzi Financing Involving Copper Trade Gone Wild in CHINA. A very interesting article.

So, Chinese is catching up with the latest innovation from the Americans. Hoarding, Financing using Copper as collateral. This is Ponzi 101. The American is far better than China in Derivatives 101.

So, what are we talking Ponzi 101, write a book on it.

There are full of "Con" out there. Big and small. From million to trillion, you name it. Why are "smart" fellas from Harvard or Oxford doing such thing? It is sad and unfortunate. I suppose we have to go back the fundamental of education. Something went wrong in between. I am not referring only to the Harvards or Cambridge, but also those who did not go to school. Something important missing in their syllabus, human virtues. Don't go to chapter 2 unless you pass this chapter. It is intangible, and not convertible into dollar or sense.

MyView

I will bet on Gary Shilling's call. The Fed had tried 12 times to tame inflation, they failed for 11 times. What is the odd for China to get right the first time. Greed allow human to innovate. Who says innovation is bad. Remember, it is not the gun that kills a person, it is the one who pull the trigger.

SOS 5 factors USA growth will derail

By Gary Shilling:

1. HOUSING - unsold inventories of 2 to 2.5 milllion houses, will cause another 20% drop in prices




2. UNEMPLOYMENT - persistant high unemployment - reduce consumption, increase savings (12% in 80s to zero in 2008 and now is 6%), slow consumer credit demand (historically 65% debt to income, grow to 131% in 2008 and now is 116% due to foreclosures). High oil price will have not much effect due to high unemployment (high oil price is a tax to consumer, not inflation)




3. JAPAN DERAIL - need foreign debt to refinance due to export growth may slow and weak demographic population




4. EUROZONE DEBT CRISIS - PIIGS - USA has exposure of 28% debt in Europe




5. CHINA HARDLANDING - inflation of 12%, historically in USA Fed fail in engineering soft landing (11 out of 12 times), so will China

MyView

You cannot discount his view as he made 20% CAGR for last 30 yrs when he bought bonds at 15% yield and sold in late 2009 at yield of 3%. Unless all the 5 major factors can be debunked, then, he will be wrong.

SOS Stock Market is never logic or rational

The first picture shows the correlation of 88% for the last 18 months between S&P500 vs Goldman Sachs Commodity Index. Which is against the historical correlation, which is either negatively correlated or no correlation.

MyView

Market is irrational, period. It comprises so many different players, institutionals, speculators, day traders, long term investors, gamblers, substantial shareholders, government agencies. Institutionals normally is guided by consensus or follow the herd, and will always looking at the rear mirror for guidance.

Some shares in Malaysia:

I have seen that market prices goes up because a "branded" investment banker buy that stocks.

I have seen that market prices goes up even the accounts is qualified as going concern.

I have seen the market prices goes up because research forecast double digit growth in earnings, from RM3 mil to RM21 mil, when the actual result is actually a loss of RM31 million few years later.

I have seen market price goes up because of an announcement on a project that screwed the taxpayers.

I have seen CEO announces each the future quarter is better than the previous quarters for a few years and it never turn out to be true, and still there are lot of interest on that stocks.

It is inconclusive, but, for certain stocks, this is how the game is played. Different types of flowers attract different types of bees. Different game rules for different players, period. Only handful are doing genuine business, the rest, just another big casino.

So, don't spend too much time rationalising why certain stocks goes up or down. There is no logic. Some time it follow consensus, sometimes the consensus is too strong it reverse.

Stock market is never logic or rational, period. That is why, it always catch the majority with their pants down.

SOS USD5 trillion dollar question

Over the last 3 years, there is about USD5 trillion of liquidity being pumped into the market by the central banks, which represent about 8% of world economy.

In such a case, at the moment, the savers are the losers and the winners (banks bailouts, bank CEO gets super bonus for too big to fail, hedge funds making tonnes of money from zero funding costs). No one says the world is fair, this is call privatising profits and socialising losses.

One observation from the recent mergers in the name of reducing risk is actually a myth. When a bank become too big to fail, the risk is actually shared with the public. The profit will be taken by the bank, the losses, the poor taxpayers.

MyView

The society has really become more and more morally corrupted. No thanks to the corrupted government and its cronies. Vote them out, another comes in. No wonder there is revolution in MENA.

SOS Cycle for thoughts

For those who are appreciate cycles,

SELL AUD dollar

SELL Canadian dollar

SELL Copper

BUY Nikkei 225

Looks too good to ignore.

SOS One of the Secret Principle of share market

US dollar vs Yen

When all the experts and forecasts agree – something else is going to happenAs Sam Stovall, the S&P investment strategist, puts it: “If everybody’s optimistic, who is left to buy? If everybody’s pessimistic, who’s left to sell?” (by Bob Ferrell).

At the moment, 95% of the experts and forecasts agree that US Dollar is going to CRASH or become toilet papers.

MyView

If everybody's pessimistic, who is left to sell? In economics, to achieve equilibrium is a myth. Market will always either overproduce or underproduce, over consume or under consume, over save or under save, over expand or under expand, over price or under price.

At the moment, majority thinks that US dollar is over valued. But they did not say over valued against what? Euro, Sterling, Yen or Yuan?

SOS Parabolic Move on Silver Yet?

Jim Rogers, if it turn into a parabolic bubble (i.e. USD100 per oz within a year), it will pop. If it goes up gradually, then it is ok. It is not parabolic yet, at least at the moment.

All parabolic move in any assets, it will collapse. It will happen, hopefully for all commodities in the next 5 to 10 years. If it does goes up without the fall of the US dollar, then we have to be cautious. Jim Rogers shorted gold and silver during its parabolic move (in 80s), and make a lot of money.

MyView

The recent mania in Silver is quite worrying. In less then 6 months, it tripled. It soon become a parabolic move. Unless US dollar crashes, this parabolic move is a major concern, according to Jim Rogers, who makes money during the parabolic move in gold and silver.

So, those who are Silver bull, do be careful. Sell and replace it with gold, which the advance is more orderly.

However, if we observe it clearly, most precious metal, energy and soft commodities move up when US dollar goes down. It may reverse when it hit the extreme.