20 April 2009

Starting of a Bull-Run ?

For the past few weeks, Equities Market around the world had rally 20% in average.
Will it be sustainable?
Question in most of the investor's mind could be:
  1. Was Recession Ending?
  2. Should I Accumulate or Take-profit now?
  3. Then, what should I do instead?

And, I would say that: "Watch-out for the next few weeks!!!"

  1. Beware of Corporate Earnings. (Q1) / (FY08)
    - further write-down from banks/financial institutions
    - lower sales volume (etc. electronics, automobile, housing...)
  2. Beware of Deflation
    - high base effect set in 2008
    - lower CPI due to lower oil, commodities prices
    - deflation could happened in Q2/Q3 2009
  3. Beware of GDP contraction
    - not only no GROWTH, but Contraction "Again"

Anyway, Do Not be so disappointed with the facts.

The good news is this could be the last correction before pathing the way for recovery.

In other meaning, this could be the last chance for investor to accumulate shares at the most attractive price.

11 April 2009

The ONLY way towards Recovery

After some massive layoff of workers around the world, especially in the manufacturing, banking, automobile sector, the pain of economy seems unstopable. This could continue for weeks or months - hopefully not years.

As a "cure", governments around the world had come out with some brilliant ideas - though effectiveness still waiting - to combat the crisis. From bank bailouts, numerous stimulate programs, lowering interest rate, to share market stabilization/rescue plan. However, does this really works?

Let's take a look at the basic fundamentals of real economy. What I'm saying here is the Demand-Supply. Please do not forget, economy indicator like Gross Domestic Product (GDP) measures the national income and output. Take note: Output.

What we are preventing now is the contraction or decresing GDP. For your information, U.S and EU consumes > 50% of world's GDP growth. Since U.S and EU are facing wealth destruction problems, how are we going to prevent GDP contractions? Instead, we should ask ourself the following questions:

1. Are U.S and EU consuming less? --- YES
2. Are we keeps on producing to maintain the GDP growth, at least? --- YES
3. Then, who is going to consume the products that we are producing?

To answer the questions, or in other words, to offset the declining purchasing power of U.S and EU, we must have a substitute(s) here. The candidate should be having a huge domestic consumption power, enjoying wealth creation, and, still having the growth engine.

Potential candidates: Brazil, Russia, India, China
Best candidate : China

Undoubtedly, China is in the best position to withstand the current crisis, due to its strong fiscal position and healthy banking system. However, the domestic consumption of China still very much lesser if compare to U.S. So, China should find ways to spur their domestic consumption in order to consume outputs produced around the world. Instead of as an exporting country, China should became an importing country. If not, we could not solve the equation: Demand = Supply.

06 April 2009

Falling GOLD prices ???

Normally, Gold prices will advance whenever USD weaken. However, the scenario is different for the past one month.

And, WHY ?

As we all know, USD had weaken for the past one month due to lost of confidence arising from the credibility of U.S governement to revive their economy. Thus, questions on the ability of highly-debted U.S to trim down deficit in the medium-term arosed. Even though, President Obama's assurance to China that their investment in U.S treasuries papers are secured, people around the world seems had lost faith in USD for the short-term (if not long-term).

Instead of preserving their wealth by investing in gold, people are taking a higher degree of risks now. They are moving out from gold investment into equities around the world, especially Asia-Pacific. This could be proved by the evidence that gold spot price had fallen to around $870 from over $920 a month ago. And, in the same time, MSCI Asia Pacific Index had increased 23%.

So, should you invest in Gold or Equity now?
Pretty hard to answer, right?

03 April 2009

Staggering US unemployment rate


US are haunting us with its unemployment rate for March-09.
Guess, Guess, Guess... Its 8.5% !!!

Guess what???
This is not the end of the story, because April most likely would be the same (if not worse).

Anyway, this is not suprise for us as an investor. Even after annoucement, Wall Street still holding very well (for the time-being). For the past one week, Wall Street had shoot up 10% due to over-optimism on G20 summit.

However, I would like to remind everyone here. The 8.5% is meant for unemployment rate, not GDP growth (hahaha). Thats why nothing to celebrate. To make thing worse, we expect that US 1Q09 GDP growth would be in the red too.

Take care !!!