"Harapkan pagar, pagar makan padi" - What do you know about BERNAS BHD?

An interesting article I have came across about - BERNAS BHD.

http://www.malaysia-today.net/2008/content/view/1630/46/

Xiao-Lung-Bao.. anyone?

It’s rough out there, as anyone within shouting distance will tell you. And make no mistake, there’s a lot of yelling going on. Politicians are barking at each other and there’s a heightened state of tension spreading throughout the world, from New York to Tokyo.

While it’s easy to get caught up in the doom and gloom, we must remember that the sword swings both ways. An ability to view obstacles as opportunities is the hallmark of human spirit and silver linings exist in this economic twist. The credit crunch is more pervasive than the dot.com and real estate crazes but we’ve been there and done that on both sides of the bubbles.

As the only difference between mistakes and lessons are an ability to learn from them, we would be wise to recall the past as we cast an eye towards the future. It will be a long hard road but as with any journey, it will be ripe with uphill climbs. And as always, the path that we take to get there is entirely more important than the destination we arrive at. I’ve been cautious on the big picture for quite some time. While it’s not a good idea to be a contrarian for the sake of swimming against the tide, there is certain utility in variant opinion. With a conscious nod that hope isn’t a viable investment vehicle, there still exist reasons for optimism as negativity swirls through the street.

No, it’s not going to be easy but nobody said it would be. We’ve got a long journey ahead, fraught with risk and littered with reality, but it’s the path we’ve chosen. We indeed live in interesting times. We’ve been through worse and we’ll get through this. Meanwhile...lets settle for a Xiao-Lung-Bao ! Ohh, by the way, don't just stare.. How many did she ate?

The Growing Gold Bubble.

With the equity market now likely set up for some sort of bear market rally in the wake of the Fed detonating its 75 bp "nuclear weapon" on Tuesday, the "fear of the margin clerk" - which has weighed on gold and gold shares over the past week or so - should now be removed, and that opens the door for both to release to the upside and make new all-time highs very shortly. My own near-term target for the yellow metal is USD$1000+, but that's just me.

Remember, the Fed is easing with gold at an all-time high. When has this ever happened in history? It hasn't, because never before has the threat to the financial system been so horrific due to all the leverage and financial engineering that has built up over the past 25 years. To allow this to "unwind" (as it should have been allowed to years ago) is now virtually impossible due to the dire consequences involved.

Faced with that prospect as stocks began to crash and the two largest credit insurers were teetering on bankruptcy, the Fed was forced to ease 75 bps in a single day on Tuesday (and promise more easing to come), even as the equal-weighted CRB Index was just a few percent off its all-time high and gold was at an all-time high. The result is going to be that Wall Street will now take that 75 bps and create more money and credit (i.e. "print money"), but the "liquidity" won't go where the Fed wants it to go (i.e. the US credit markets).

Where it will go, however, is into gold and certain other hard assets, because this time around "printing money" is not going to blow an asset bubble that will support the US economy, unlike in 1998 (when the Fed created the stock bubble) and 2001-2003 (when the Fed created the housing bubble). Now all we are going to get is a collapse of the world's fiat dollar-based monetary system, more inflation on top of a weak economy (i.e. stagflation), and a "bubble" in gold.

Predictably, the Fed has chosen to "run the printing press" and inflate its way out of the housing bust, and inflation is exactly what it will get for its efforts. If this thought process sounds new, it shouldn't be, because I've been talking about how the Fed would inevitably respond to the housing bust and what the likely result would be for over a year. And I feel things continue to unfold pretty much to script...

The Shifting Of Economic Center Of Gravity.

Economic historians may record that 2007 was the start of the credit crunch, as well as a crucial shift in the balance of power from the West to the East. The East here is metaphorical - including the Middle East and Russia, both flush with cash from higher oil revenues, as well as the more traditional East.

Ecologists identify three forms of symbiosis between competing species: commensalism (one species benefits); mutualism (both species benefit); parasitism (one species benefits, the other species suffers). It is not clear which of these three forms the current East-West money symbiosis represents.

It is a shift in power from borrowers (the West) to savers (the East). Even before the current credit crisis the vast current account surpluses and savings of the East were being recycled into investments in North America and Europe.

The credit crisis has accelerated and altered the reliance on eastern capital. Barclay's secured equity capital of up to 13.4 billion euros from China Development Bank and Singapore’s Temasek Holdings in support of its ultimately unsuccessful bid for ABN-Amro. More recently, banks and sovereign wealth funds from the Middle East, Singapore and China have invested $40 billion in Citigroup, UBS, Merrill Lynch, Morgan Stanley and Bear Stearns to help shore up balance sheets ravaged by losses from the credit crisis.

The economic center of gravity has also shifted east. In recent history, U.S. consumer spending buttressed by a strong dollar has been the primary engine of global growth. The current credit crunch has exposed the weaknesses of the U.S. consumption miracle. Markets are now looking to the emerging markets of Asia, Eastern Europe and the Middle East as the driver of the global economy.

How important is this shift in balance? In the 1980s, Western firms feared a takeover by gargantuan Japanese banks. In the 1990s, there were predictions of a new Asian century.

The jury is out on the merits of the recent investments in distressed banks. The investment rationale for many transactions is questionable. The flow of capital may also not continue at its recent rate. Citigroup is rumoured to have sought to raise $2 billion in capital from China Development Bank. There are suggestions that there is opposition to the investment within China's government. This appears to reflect growing backlash in China following the $3 billion investment in Blackstone that has decreased sharply in value (by about 30%).

There are also increasing signs that Western governments and public opinion is increasingly restive about the prospect of significant foreign ownership of key companies in strategically important sectors. Remember the fuss that ensued when CNOOC, the Chinese state oil company sought to purchase Unocal leading ultimately to the transaction being abandoned.

For the moment, the West and the East are like Siamese twins that share vital organs. Eastern capital and growth offers one of the few bright spots in a darkening global outlook. It is the lifeline that the U.S. and European economies and institutions that are clinging to.

Decoupling Myth Shatttered ! You hear that,..Yaacob!

Fears of a recession in the U.S. and further credit market disruption ripped through global stock markets and put over half the world's exchanges into technical bear markets – at least 20% down from recent highs. The bloodletting began Monday... " They called it a stormy Monday,..but Tuesday just as bad !"


On Tuesday Asian markets continued to reel as Europe stabilized somewhat :Pan-Europe -1.2% England -0.3% Germany -1.7% France -0.9% India -4.9% Hong Kong 8.6% China Mainland -7.2% Singapore -1.7% Japan -5.6% Korea -4.4% Australia -7.1% Thailand: -3.2%

The sell-off of the past two days has been broad, showing no sector or asset class is immune from the deflationary trend. Global stock markets are painfully beginning to price in a U.S. recession in and the resulting spill-over, and many questions whether emerging market economies are in fact 'de-coupled' from the United States. - " Learn something intelligent from here, Mhmd. Yaacob.. ! for crying out loud!! "

The root of the concern is at the same time economic, financial and political. How emerging market economies fare in the coming months – and years – will go a long way to settling the question of the extent to which American consumer demand still drives the world economy. As China and India led developing nations into the global market, many believed a slowdown in the U.S. would not matter as growth in Asia, Latin America and Central Europe would make up for slackened demand. Events of the past two days have shown investors are skeptical this theory will hold true.

Since last June, chaos has reigned in the financial markets. Higher than expected defaults on subprime mortgages and falling home prices in America kicked off wide spread dislocations in the capital markets and spurred central bankers into action. Major financial institutions have already written off have billions in bad subprime-related debt, yet many wonders if this may just be the tip of the iceberg.

And finally, markets do not seem confident that Washington is capable of righting the economic and financial ships. Debates rage as to whether the Fed has been too active, too passive, or just plain wrong since the summer, and in this, an election year, a fiscal solution is already in the works. $150 billion is around 1% of U.S. GDP, but as BNP Paribas economist Andrew Freris noted in the WSJ, "The Markets will look at the $150 billion figure and smile. They trade that in a morning."

Well, the Fed just cut, again..,by 0.75 pts. (just learned that from Bloomberg this evening) But one thing is for certain: tonite will not be for the faint at heart in the US mkts. Bring along your helmets, it's going to be wild out there.

Err..will "Stimulus Package" work ?

The pent-up deflationary forces in the US are such that deflation American-style figures to be far worse than deflation Japanese-style.

Then wat to reflate? Rising oil prices, rising gold prices, or rising wheat and corn prices will only make problems worse for cash-strapped consumers. Even if reflation did create jobs, it would not accomplish much other than to postpone the day of reckoning.

Differences Between Japan and the US:

1) Look for steeply rising unemployment in the US. One of the consequences of those debt writedowns in the US is that US corporations will be forced to cut expenses. The biggest expense for many companies is employees. Japan had far more loyalty to its employees than US corporations ever will.

2) Enormous consumer debt makes the problem the US faces far more severe than the problem Japan faced. Consumer debt that that cannot be repaid will be defaulted on. Rising unemployment will further exacerbate mortgage-related problems and credit card-related problems.

3) Consumption continued in Japan because of savings. The US will be forced to cut back on consumption and increase savings.

4) Global wage arbitrage is a far bigger economic force now than during the bulk of Japan's deflationary years.

5) Japan had the benefit of a global Internet boom followed by a global housing boom to help the economy. The US is facing a global contraction of the housing boom.

6) Most people in the US "own" their own home. The skew of those deep in debt is huge. 1/3 of Americans owe nothing on their homes. The debt is carried by those who can least afford to carry that debt in an economic downturn.

7) Japan had a huge valuation problem in real estate. The US not only has a huge valuation problem, commercial real estate is also woefully overbuilt.

Those who argue "it's different in Japan" need to weigh the impact of those differences. The pent-up deflationary forces in the US are such that Deflation American Style figures to be far worse than Deflation Japanese Style. Here is one similarity: Fiscal stimulus failed in Japan. Fiscal "Stimulus" Is Doomed To Fail in the US. The consequences to the US will be severe.

Goldilock In Intensive Care.

"Medic! Medic!” That’s the rally cry being heard across the Wall Street battlefield. With the market looking more like triage at a front line Mash unit, investors have to be asking where the morphine is. Even for Hedge Fund managers when every short works and every long doesn’t (wat's new!), it can become quite uncomfortable.

Yesterday there was no place to hide. There was no rotation from losers to the new winners. Nothing worked. Stocks at 52 week lows continued their slide and stocks near their highs began their fall from grace. The sick are infecting the healthy.

Pessimism is hitting peak levels and the market has crossed market lows first set last year. Add to that the high probability of an emergency rate cut and you have the ingredients for a massive oversold short covering rally. Nothing works ! Not the hopeful stimulus package. Not even the combine stellar results of GE and IBM. Shits just hit the fan, again..!

Nothing can cure the damage that has been done. Whether the economy is in recession or not is beside the point. It sure feels like one is in right now! The Fed will do their job despite the fact that this one seems to get its cues from the newspapers. No, the real cure is time. Over the long run the economy has been able to withstand shocks, recessions, terrorist attacks you name it. The US and the economy need to regroup and regain strength before the markets can truly recover. The fundamentals and the economic backdrop don’t have to start getting better but they do have to stop getting worse for a true bottom to be put in.

Know in advance that there will be many of these oversold rally’s and trust me during each one you will feel that this is it. The bottom is in.. and I am not going to miss the rocket to the moon. In deep corrections the biggest challenge we face is often psychological. We are more concerned about missing the rally than losing money and as a result overstay our welcome with long positions for fear of missing the big bounce. Let see what happens when Dow hits 11'989..

The Emerging Markets Party.

2007 is increasingly regarded as the year in which the credit crunch commenced, and it also marked the start of a fundamental shift in the balance of the global economy in favor of emerging markets.

For the last 15-20 years, developed economies have enjoyed a period of rising wealth, improving living standards and relative stability. Economic corrections have been comparatively mild and short-lived. This period was underwritten by three factors – low inflation, rapid growth in global trade and a remarkable growth in the availability of cheap debt (disguised as financial innovation).

The sub-prime problems have radically and abruptly reduced the supply of debt. As the oxygen of cheap and abundant debt is withdrawn, a key pillar of support for the economy and equity market disappears. Investors are now looking to the emerging markets of Asia, Eastern Europe and the Middle East for returns.

Emerging markets are being driven by substantial short-term capital flows fleeing developed markets and the U.S. dollar. The Indian and Chinese stock markets are like trompe-l’oeils - paintings designed to deceive the eye. They may provide a dangerous illusion of a modern economy for foreign investors.

Share prices are proned to being influenced by insiders and their associates. In the case of China, most traded shares are in government enterprises that continue to be controlled by the State. Some Chinese shares aren’t even really shares as they don’t convey full ownership rights equally to all shareholders.

The Indian and Chinese markets have been driven by a number of initial public offerings generously priced to provide investors (themselves privileged insiders) with large gains. A few shares contribute disproportionately to market performance. A handful of stocks drove the rise in India’s Sensex Index in late 2007 reflecting the lack of liquidity in many stocks. In China, restrictions on foreign investments by domestic investors and the lack of investment alternatives has contributed to the sharp increase in the price of Chinese stocks. Borrowings by corporations and individual investors have been channeled into the stock market creating dangerous levels of leveraged exposure to share prices.

De-coupling assumes that emerging markets will not be significantly affected by a U.S. slowdown. Exports account are significant for most emerging market economies. Russian and Brazilian growth depends on commodity demand and high commodity prices. A slowdown in the U.S. and Europe will affect growth.

The belief that domestic consumption can take over from exports as the growth engine in emerging markets is untested- tet's a whole lot of crab in my books..! The Indian, Chinese and Russian economies may be capable of becoming self sustaining growth engines but only in the longer term. Their ability to take over from the U.S. as the driver of the global economy in the short run is questionable – after all the Euro zone and Japan have never successfully fulfilled this role.

India and China face infrastructure constraints that will constrain growth. Inflation (higher energy and commodity costs and rising domestic costs) and rising local currency interest rates may slow growth. Both the Indian rupee and Chinese Yuan has appreciated against the U.S.dollar. Currency appreciation attracts capital flows but reduces local currency earnings and the competitive position of exporters.

It's a vicious cycle. Corporate earnings growth in developed countries assumes an increased contribution from sales to rapidly growing emerging markets. Commodity prices and the fortunes of commodity producers are underpinned by the emerging market growth story. A U.S. slowdown will lead to a slowdown in emerging markets which will lead to slowdown in the U.S. - "so, round and round it goes".

Some emerging markets are also dependent upon foreign capital inflows. For example, India is running a trade deficit of around 10% of GDP and a budget deficit of around 3%....Ermm, I am sure you can think of some Asean country very similar to this! This must be financed. To date, this has been financed, in part, by foreign capital – both portfolio investments and foreign direct investment. Changes in global financing conditions may adversely affect India and its growth prospects.

The additional risks of emerging market investments are also not being properly priced in. Enforceability of property rights, good corporate governance, equal access to timely, accurate financial information- like the overly deflated inflation data, deceptive subsidy schemes, corruption and political risks are all being ignored.

The sheer complexity of the global economy and the supporting financial system makes it impossible to know how this will play out. The dynamics of the interplay between global financial markets and the world’s economies may be in the process of fundamental change. Getting on the right side of these changes will shape investment success or failure in the coming years.

Investors need to be prepared for these changes and have the capital to take advantage of these opportunities. Thomas Edison once remarked: "There’s value in disaster. All our mistakes are burned up. Thank God, we can start anew." That wisdom may be more applicable than ever in 2008.

Here's the key to opportunities within the volatile week ahead.

A look at events of the week ahead and catalysts you should look out for to be one step ahead of the rest, here's the key to opportunities...

Tuesday January 15 - 8:30 Retail Sales: 0.1% cons
8:30 Retail Sales ex-auto: 0.1% cons
8:30 Retail Sales: 0.1% cons
8:30 PPI: 0.2% cons
8:30 Core PPI: 0.1% cons
8:30 NY Empire State Index: 11.5 cons
10:00 Business Inventories: 0.4% cons

Wednesday, January 16 - 8:30 CPI: 0.2% cons
8:30 Core CPI: 0.2% cons
9:00 Net Foreign Purchases
9:15 Capacity Utilization: 81.3% cons
2:00 Fed’s Beige Book

Thursday, January 17 - 8:30 Housing Starts: 1150 k cons
8:30 Building Permits: 1140 k cons
8:30 Initial Claims: 322 k prior
10:30 Crude Inventories: -6736 k
12:00 Philadelphia Fed:

Friday, January 18 - 10:00 Leading Indicators: -0.1% cons
10:00 Michigan Sentiment- Prel: 74.5 cons

S &P Index:
Broke below the all important 1404 support. Sinking lower..
Lower objectives : 1382, 1363 or even 1348(remote).

FTSE Index:
Slipping lower towards 6114.

DAX Index:
Drifting lower towards 7696, 7653.

HSI Index:
Breached below important 26952. Will face forceful sell down.
Setting course, due south towards 26293, 26091, 25685/632 (key objective area).

KOSP Index:
May have already found stability at 1777.

NIKKEI:
Dipping lower. No respite in sight... En route towards 13900.

SHANGHAI:
Big bull in Shanghai! Advancing towards 5609/43.

STI :
Trying hard to stabilise above 3322/17, but will eventually succumbed to gravitational-pull!
Below that, hello 3211!

Looks like it'll be a satisfying week, shorting... anything that bounce!

Smell the coffee dear...mmmmhh !

On Wednesday, the market carved out a climax reversal day. But it is a buy signal in a dangerous market? The last hour whoosh to the upside on Wednesday was a virtual mirror image of Tuesday's last hour spiral.

There are many who say the culprit for Tuesday's debacle was the fear that Countrywide was going down for the count. However, in reality, the S&P was solidly green going into the last hour or so when the plug got pulled. Ostensibly, the damage should be laid at the doorstep of the chairman of AT&T, who cited softness in business. So consumers are going to use less toilet paper, less toothpaste, and make fewer phone calls to those using less of the prior two items is the drill, apparently. In reality, the market has been sharply headed down since the closing minutes of 2007 when a market on close program ganged up on those scurrying out to festivities.

After all, as the weekly chart above shows, is it really so surprising with the most oversold condition by some measures since October 2002, that the market would find support at well, support?

And they say the market doesn't make sense. It doesn't make a lot of sense if you're mining for cause and effect in the news and the data points. It makes no sense if you're looking for reasons, fundamental or otherwise. Sure, eventually, the economy and the market will correlate with each other but "eventually" is a long time.

There is an old saying that it is the close that traders take home with them. Although the S&P broke the measured move support at the 1390 close, Wednesday's close was substantially above that level. Although the market reversed from its worst start in a new year since 1932, not all buy signals are created equal! In studying the behavior of the S&P since its inception, trade in the first quarter of a new year below the lows of December of the preceding year are inauspicious for the outlook of the overall year.

I believe there is a better than average likelihood that the bottom is in for the balance of the month and that the trend will be erratically up into the last week of the month. This will depend upon the ability of the S&P to recapture 1420 and hold it. If so, a rally to 1450 to 1470 may play out this month. A break of 1380 now on a closing basis could indicate that current levels are only the mid-point of a move lower.

If 1470 is offset and then 1500 S&P recaptured, I believe that there is even an outside chance of a new S&P high being made in the first quarter of this year. At the same time, my work suggests that the triple bottoms traced out on the S&P if a rally develops from here will be broken before the first half is over.

Whatever the cause, step on it and drive..!

A chapter of Malaya history that kids will never read about in schools today..

The ability not to trade may be more powerful than ability to trade.

I quote trading commandments often when I write as I truly do live by them (when I don’t live by them I have this nasty habit of being wrong). One of those commandments is simply ‘The ability not to trade may be more powerful than the ability to trade.’ Never get to tape it on my Bloomberg, even I wanted to..

I don’t give price forecasts because, after all, if I knew where the S&P 500 were going to be at certain dates in the future, I would not need to crack my brains, deal with uncertainties and would likely have a 125 foot yacht in the Mediterranean fully stocked with nice women and live like a P. Diddy. All kidding aside, making those sorts of predictions is foolhardy, in my humble opinion. Even if you were to give me every data point six months ahead of time, I still would not be at all comfortable providing anyone with a price target.

There are just too many exogenous factors at play. I have no problem answering the question "Do you think the market has a good or bad risk/reward ratio at present?"

Investing is an art, not a science, and knowing when to be in the game and when not to be in the game is more important than what play to call. So I will say this, which could possibly be a new trading commandment—‘The ability not to make a forecast is more powerful than the ability to guess at a forecast’. And when we are facing times that are truly unprecedented in the financial markets, the ability to not make a specific forecast, I believe, is more important than ever.

I have been saying for a long time that I am neither a bull nor bear, just a cautious observer with the responsibility of managing other people’s money, plus my own. I am admittedly cautious, but not just to be cautious, rather to be able to have capital available at the other side of the financial situation that I believe we are in.

All that glitter to start 2008.

Waving the old year goodbye with a few new records under the belt is no mean feat, but the real glitter for gold bullion is that most indicators seem to point to more good news down the line.

The first record is that the gold price recorded its first ever month-end close above $800 on Monday, December 31. Gold had only closed above this level on two days during its 1980 surge, namely $830 on January 18 and $850 on January 21. However, the end of January 1980 saw the price significantly lower at $659.

Looking at monthly averages, January 1980 was $675. This figure was equaled in May 2006 and exceeded for the first time in April 2007. A new record of $806 was established in November 2007, whereas December's average was slightly lower at $802.

It is, of course, true that in inflation-adjusted terms the gold price is still a long way off its euphoric days of 1980. If adjusted for movements in the US consumer price index, the $850 record would today be around $2,250 and the average for January 1980 around $1,790.

More importantly, the gold price is not only making headway in US dollar terms, but also in most major (and minor) currencies. This is a manifestation of increased investment demand, whereas the initial rise in the gold price from its low in 2001 ($250) until the middle of 2005 was mostly a reflection of US dollar weakness. The World Gold Council reports that identifiable investment demand during the third quarter of 2007 was nearly double year-earlier levels in tonnage terms.

Gold has now entered record territory in terms of most currencies other than the US dollar. This includes the currencies of the two largest consumers of gold, namely the Indian rupee and the Chinese renminbi. (China has just overtaken the US as the second largest gold consumer after India, according to the World Gold Council.)

The one situation that could be bad for gold is when deflation takes over and there is a panic for cash in order to stave off bankruptcy. A variety of assets, including gold, would then be sold in order to raise dollars. But this state of affairs is rather unlikely while central banks are at liberty to create money out of thin air.

I cannot help but conclude that we have not yet seen the last of the yellow metal’s new records and that more excitement lies ahead. For starters, I will not be holding my breath for the all-time high of $850 to be breached. After all, platinum, which often leads gold higher, has already recently recorded an historic high in US dollars.