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wanderer
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Posting #1: Fri Jun 27th, 2008 14:23 |
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The price of oil has refused to budge. As China bites the bullet and raised prices of petrol-related products, as Saudi Arabia made a symbolic output increase, and as consumers feel the pinch, the price of crude oil continued with its merry rise. This oily resilience is pushing the entire global economy to very slippery grounds. While the energy resilience confirms a strong global economy, it is heading into levels and staying at levels where strength becomes weakness. For now, weakness will be strength.
In the last 5-6 years, one of the best confirming indicators that the global economy was expanding robustly was the sustained rise in crude oil price. The same holds true for 2008. While an endless number of people have said that the US economy is already in recession, GDP growth for the 1st quarter of 2008 was once again revised upwards. Business spending was stronger than expected, export growth was stronger than initially estimated and even Warren Buffett has revised his recession conclusion to a stagflation forecast. Japan’s exports remained strong as the 6 bln plus people in the rest of the world bought more Japanese products. At the end, the elevated oil price says it all. In contrast to all the doom and gloom views emanating from the US subprime issue, or the credit market freeze, US and global economic growth may be too strong. A full-fledged US recession may actually be good for the rest of the world. As i Capital advised previously, the strength in the price of crude oil has reached a level and intensity that will eat into global economic growth. The world economy may soft land or the global economy may face a hard landing. In the end, strength in crude oil price is becoming a weakness for the global economy. This brings us to the present state of Malaysia.
Many Malaysians have criticised Badawi for being weak, with many comparing his “weakness” with the supposed “strength” of the 4th prime minister. For Badawi, his apparent “weakness” will be Malaysia’s strength. For the 4th prime minister, his much touted, hyped up “strength” is Malaysia’s weakness, Malaysia’s undoing, Malaysia’s Achilles heel and Malaysia’s curse.
With his “strength”, the 4th prime minister single-handedly destroyed the Malaysian judicial system, one of the most important checks and balance institution in any democracy. He singled-handedly embedded the cancer causing money politics into UMNO.
With his “strength”, the 4th prime minister shoved down the throats of Malaysians, endless glamorous, non-viable, mega projects that used up precious and limited resources of Malaysia. Very few Malaysians realise that the KLIA has the honour of being the furthest airport from the city centre. Imagine the huge amount of expensive petrol and diesel (and time) that would be saved if the KLIA had been so much nearer. Why are Malaysian politicians, including those in the opposition, not asking why the KLIA has to be in Sepang ? Why are Malaysians paying so much subsidies for the KLIA to be located so far away ? With his “strength”, he repeatedly ignored warnings of Malaysia’s dangerously high external deficits in the Nineties and set the stage for Malaysia to suffer from the full impact of the Great Asian Crisis.
With his wellspinned “strength”, through a mass media that was forced into being one-sided, he was able, on the one hand, to “honestly” lecture the Malays for being lazy and on the other hand, insidiously made them more and more dependent on subsidies and a subsidy mindset. After 22 years of his “strong” rule, the Malaysian economy became more and dependent on subsidies, in whatever forms these may take. The Malaysian education system crumbled under the “strength” of the 4th prime minister who was also an education minister before that. His “strength” resulted in Malaysia scapegoating globalisation and ended up with Malaysia turning away from globalisation. In the end, Malaysia fell further and further behind the Asian Tigers and also quickly lost competitiveness against the many new competitors.
The “strength” of one man for 22 years caused the major weaknesses of Malaysia for generations to come. His “strength” destroyed many “weak” Malaysian prime ministers. Ironically, the “weakness” of Badawi will be Malaysia’s strength. His “weakness” allowed the voices of many suppressed Malaysians to be heard again after a very long time. His “weakness” has made Malaysian politics competitive and with a properly reformed judicial system, hopefully this will result in a more civil society and a more balanced economy. It is through his “weakness” that the Malaysian economy is still able to keep its persistent budget deficit from spiralling out of control. It is the “weakness” of Badawi that Malaysia is friends with every country instead of being a global pariah. From Badawi’s “weakness”, Malaysians can now transfer abroad their hard-earned money easily while the “strength” of the 4th prime minister resulted in our monies being forcefully trapped.
i Capital hopes that Malaysians will make use of Badawi’s “weakness” to make Malaysia strong, successful, and proud. This brings us to an email that we received from Tan Han Wooi on 17 Jun 2008. Tan wrote,
“i Capital's article dated 13 June 2008 title "DOING MORE HARM THAN GOOD" states that "The UK is also a net oil exporter".
According to US Energy Information Administration, the UK is a net importer for 2006 & 2007 ………… Is there any recent 2008 data show otherwise.
Please clarify the above.
As an i Capital subscriber I do expect i Capital to be independent and based on genuine facts and data.”
First, the UK became a net exporter of oil in 1981 but this subsequently changed. The UK nowadays slipps in and out of being a net exporter and importer. Recently, with the start-up of new oil fields, the UK has turned into a net exporter again, a situation which is likely to change again in the future.
Secondly, what is worrying to us is the meaning implied in the last sentence made by Tan Han Wooi. From us at Capital Dynamics, subscribers can expect i Capital to be independent and to be “based on genuine facts and data.” But can we expect the same from our subscribers and our fellow Malaysians ? We know that what we write in i Capital has often been taken out of context and twisted to suit whatever agenda the writers have. And when we express our independent views, we get criticised. This then brings us to a more important point and despite the possibility that we would be criticised again, we still have to say it.
The situation facing the UK applies to Malaysia as well. Malaysia will also become a net oil importer. Depending on the assumptions used, it could be even as early as next year. Indonesia has already become a net oil importer. For those who are against the recent increase in petrol and diesel prices, and argue that the prices of such products are cheaper in oil-producing countries, what happens when Malaysia becomes a net oil importer ? Why protest against something, which needs very careful evaluation, just for the sake of populist politics ? Why is the possibility of Malaysia being a net oil importer hidden from the protests ? This is certainly very irresponsible politics. It is actually bluffing Malaysians for selfish reasons.
Populist politics have very dangerous, harmful long-term consequences. They pawn the future for very short-term pleasure. The heart-breaking experience of Argentina is a classic example of why a government cannot implement economic policies based on populist politics. It is the guaranteed route to disaster. So once again, Malaysians need to protest on the right issues so that we can turn Badawi’s weakness into Malaysia’s real strength. And there are certainly many issues for us to be genuinely concerned with. While subscribers can expect i Capital’s analysis to be based on genuine facts and data, we hope our fellow Malaysians will do the same when it comes to assessing Badawi’s “weakness” and the 4th prime minister’s “strength.”
i Capital had expected crude oil price to correct. It has not really happened. As a result, the global equity markets are getting clobbered again with the NYSE almost in an “official” bear territory – depending on which index is used.
The last 8-9 months have certainly been turbulent as the fears of investors quickly shifted from a gigantic economic contraction to a global inflationary overheating. The level of confusion remains high, the level of uncertainty remains high too. In this context, i Capital would like to share the performance of the i Capital Global Fund since its launch in Jul 2007. The following figures, from 1 to 8 compare the Fund’s performance with the various stock market indices.
As can be seen, the i Capital Global Fund has beaten almost all the indices by a handsome margin (Hong Kong outperformed the Fund by about 1.5%). From Jul 2007 to May 2008, the Fund has beaten markets like SGX, KLSE, Sydney, London, New York, etc by a massive 12 to 18 percentage points. So, for those investors who do not know what to do, investing in the i Capital Global Fund may not be such a bad idea.
The KLSE
Meanwhile, the Great Global Confusion remains.
i Capital retains its immediate-term outlook of the KLSE at a range of 1,170 to 1,300. For the short-term, i Capital retains its outlook to a range of 1,150 to 1,400. For the medium and long-term outlook of the KLSE, i Capital still expects the KLSE CI to hit 2,000 points. With the 2008 election results now history, i Capital will review its medium and long-term outlook in another issue.
Last edited on Fri Jun 27th, 2008 14:43 by wanderer
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Don’t Try to Predict the Future / Be In Harmony with the Market / Don’t fight the Market ~Charlie Wright
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random
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Posting #2: Sat Jun 28th, 2008 02:43 |
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This article is contradictory in so many ways... I detect a great deal of insecurity of the writer.... I think "The Less Than Great Confusing Article" would be an apt title
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wanderer
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Posting #3: Sat Jun 28th, 2008 02:43 |
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____________________
Don’t Try to Predict the Future / Be In Harmony with the Market / Don’t fight the Market ~Charlie Wright
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Moolah
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Posting #4: Sat Jun 28th, 2008 02:51 |
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This brings us to an email that we received from Tan Han Wooi on 17 Jun 2008. Tan wrote, “i Capital's article dated 13 June 2008 title "DOING MORE HARM THAN GOOD" states that "The UK is also a net oil exporter".
According to US Energy Information Administration, the UK is a net importer for 2006 & 2007 ………… Is there any recent 2008 data show otherwise.
Please clarify the above.
As an i Capital subscriber I do expect i Capital to be independent and based on genuine facts and data.”
First, the UK became a net exporter of oil in 1981 but this subsequently changed. The UK nowadays slipps in and out of being a net exporter and importer. Recently, with the start-up of new oil fields, the UK has turned into a net exporter again, a situation which is likely to change again in the future.
Secondly, what is worrying to us is the meaning implied in the last sentence made by Tan Han Wooi. From us at Capital Dynamics, subscribers can expect i Capital to be independent and to be “based on genuine facts and data.” But can we expect the same from our subscribers and our fellow Malaysians ? We know that what we write in i Capital has often been taken out of context and twisted to suit whatever agenda the writers have. And when we express our independent views, we get criticised. This then brings us to a more important point and despite the possibility that we would be criticised again, we still have to say it.
I am truly baffled. What's wrong with what Mr.Tan wrote?
So what on earth is iCap takling about "We know that what we write in i Capital has often been taken out of context and twisted to suit whatever agenda the writers have."
Let's see... some one wrote about iCapital doing the classical double talk on the market: Maintaing a bullish outlook PUBLICLY while selling sells on the side.
Has this been taken out of context and twisted to suit the agenda of the writer?
Well what about Nasioncom initial buycall.
Comeon... tell us... was the buy call dubious despite the clear facts that the stock was not fundamantally sound?
Taking out of context?
LOL!
Is this a sneeky shot by iCapital against a certain blogger?
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Posting #5: Sat Jun 28th, 2008 02:58 |
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That's why I'm very much surprised at how insecure the writer seemed.. 
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Moolah
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Posting #6: Sat Jun 28th, 2008 03:11 |
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And seriously...
i Capital retains its immediate-term outlook of the KLSE at a range of 1,170 to 1,300. For the short-term, i Capital retains its outlook to a range of 1,150 to 1,400. For the medium and long-term outlook of the KLSE, i Capital still expects the KLSE CI to hit 2,000 points.
With such vague time frams and such massive KLSE target range, how coould iCapital ever be wrong?????
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Moolah
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Posting #7: Sat Jun 28th, 2008 06:13 |
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The following 2 articles caught my attention... wud u use them as yet another yardstick on what's happening globally?
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Saturday June 28, 2008
NZ on brink of recession
Its GDP down 0.3% in fourth quarter
WELLINGTON: New Zealand’s economy contracted last quarter, putting the country on the brink of its first recession in 10 years as record high interest rates damp domestic demand and a drought slows exports.
Gross domestic product (GDP) fell 0.3% in the three months ended March 31 from the fourth quarter.
“Current very tight monetary policy is inappropriate,” said Shamubeel Eaqub, economist at Goldman Sachs JBWere Ltd in Auckland. “We expect rate cuts from September, but July cannot be ruled out as the economy sinks into recession.”
The benchmark NZX 50 stock index fell 81.79 points to 3,210.18 at 3.30pm in Wellington, heading for its biggest slide since November 2002. The New Zealand dollar dropped to as low as 75.34 US cents from 75.52 cents immediately before the report.
Reserve Bank governor Alan Bollard, who has kept the benchmark interest rate unchanged since July last year, said on June 5 that it is “likely” he will reduce borrowing costs this year because slowing growth will stem inflation.
Adding to signs that the economy would not recover quickly, consumer confidence slumped to a 17-year low in the second quarter, and house sales fell in May to a 16-year low.
The first contraction in GDP in two years was led by a slump in consumer spending, home building and exports, the statistics agency said.
Household spending, which makes up 60% of the economy, fell 0.4% from the fourth quarter, the first contraction in four years. Purchases of durable items declined 3.4%, led mostly by cars, furniture and household appliances. Spending on alcohol, food and other so-called non-durable goods was unchanged.
A second report yesterday showed exports in May rose by less than economists had expected after dairy sales were the lowest in nine months.
The country’s annual trade deficit unexpectedly widened to NZ$4.81bil (US$3.6bil). Economists expected it would narrow to NZ$4.5bil. – Bloomberg
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Posting #8: Sat Jun 28th, 2008 06:14 |
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Saturday June 28, 2008
Inflation in Japan hits 10-year high
Household spending dips as job market stagnates
TOKYO: Japan's annual consumer inflation accelerated to a decade-high in May on surging energy costs, and household spending dipped as the job market stagnated, darkening the outlook for the world's second largest economy.
Industrial production rebounded during the month, but the government cut its assessment to say output was “slightly weak though it remains in a flat trend”.
Soaring oil and food prices have been blamed for dampening corporate profits and consumer sentiment as well as complicating monetary policy at the Bank of Japan, whose key policy rate is already low at 0.5%. Many analysts expect the central bank to keep interest rates on hold this year.
“If the Bank of Japan raises interest rates to beat inflation, that would further worsen the economy,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“As such, the central bank won't be able to hike rates until companies are able to pass on rising costs to consumers and earn enough to boost wages,” he added.
The Nikkei stock average fell 2%, but the yen was little moved, trading around 106.80 yen to the dollar.
The core consumer price index (CPI), which excludes volatile fresh food prices but not other food products or oil prices, rose 1.5% in May versus the same month last year, data showed yesterday.
It was the biggest annual inflation rise since March 1998.
Worried about rising food and energy costs, consumers kept tightening their purse strings. Household spending fell 3.2% in May from a year earlier.
“All in all, the data suggest that Japan's economy has entered a clear downtrend in the second quarter,” said Junko Nishioka, Japan economist at ABN Amro Securities.
Industrial output – a key gauge of the strength of manufacturers – rose 2.9% in May from a month earlier, slightly above the median market forecast of 2.7% rise. – Reuters
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Posting #9: Sat Jun 28th, 2008 07:58 |
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Are we going to see those "Inflasi Sifar" adverts again? 
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wanderer
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Posting #10: Sat Jun 28th, 2008 08:39 |
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[url=http://http://www.bloomberg.com:80/apps/news?pid=20601039&sid=aaFNbOUhA2DQ&refer=home]Harvard, Buffett Have Bad News for Asia Bulls: William Pesek
[/url]
Commentary by William Pesek
June 27 (Bloomberg) -- ``The worst is over.'' One hears some variation of this view constantly when traveling around Asia. (Siapa Kong?)
It's a comforting one, predicated on the idea that the U.S. economy will avoid the recession that markets have priced in for some time. It's also a view that could be in for some serious revision as the year unfolds, and not in a good way.
The latest sign comes from a Harvard University report. Growing foreclosures and tighter lending standards are creating an environment that ``is shaping up to be the worst in a generation,'' Harvard's Joint Center for Housing Studies said on June 23.
``The slump in housing markets has not yet run its full course,'' said Nicolas Retsinas, director of the center.
The U.S. market seems likely to remain mired in a recession. And as Retsinas pointed out, housing markets historically recover only after an economy contracts and prices fall enough to improve affordability.
That's a bigger problem for Asia than many investors may want to admit.
There's much relief that Asia is holding its ground as the U.S. economy slows and credit-market woes humble Wall Street's biggest names. While asset markets are heading lower from Tokyo to Jakarta and Shanghai to Mumbai, healthy economic growth has confounded the pessimists -- so far.
Knock-On Effects
The knock-on effects are coming, just more stealthily than many expect. Asia is unlikely to get off easy even if the U.S. skirts a recession. The region hasn't decoupled from America as much as some would say.
The worst-case scenario -- a prolonged U.S. decline -- could be devastating, particularly at a time when record oil and food prices are hurting Asian households. Billionaire investor Warren Buffett laid it out in a June 25 Bloomberg interview. He's unsure when the U.S. will recover.
``It's not going to be tomorrow, it's not going to be next month, and it may not even be next year,'' said the chairman of Omaha, Nebraska-based Berkshire Hathaway Inc.
The idea that Asia will continue to display an impressive immunity to U.S. events ignores how dependent China is on the American economy. It also ignores how reliant Asia is on China's 10 percent growth. Slowing U.S. demand will chip away at that country's export-driven expansion exponentially.
China's Limits
China is one of several Asian economies with negative real interest rates. With its annual inflation above the central bank's benchmark lending rate, China would be hard-pressed to stimulate growth with lower borrowing costs or increased government spending.
Monetary quandaries abound in Asia. Bank of Japan officials, for example, are making it clear interest-rate deliberations have become increasingly challenging over the last two months.
``At the time of the June meeting, both downside and upside risks had risen compared with when we met in May,'' BOJ policy board member Seiji Nakamura said yesterday in Asahikawa, Japan.
The credit crisis that began with U.S. subprime loans is just one force crimping U.S. spending. A new Bloomberg/Los Angeles Times survey shows most Americans are feeling the pain from rising gasoline prices and many are tightening their belts. Seven in 10 of those surveyed said higher gas prices have caused them ``financial hardship.''
Export Woes
That may mean less spending on cars, flat-screen televisions, cellular phones, name-brand clothing items and other goods manufactured in Asia. With U.S. consumers accounting for 70 percent of gross domestic product, any pullback would have an outsized impact on global economies. Housing is arguably the key to all of this.
The U.S. will expand 1.4 percent in 2008, the weakest performance since 2001, according to a Bloomberg survey. U.S. growth may be cut by a half to a full percentage point if consumers spend less and save more, according to Deutsche Bank AG economists. For Asia, that is decidedly bad news.
So is Harvard's housing report and Buffett's concern that the U.S. is heading for stagflation. Rising home prices and easy access to credit have been the major drivers of U.S. growth in recent years. If U.S. housing remains weak, Asia's export- dependent economies are particularly vulnerable.
Here, recent comments by Federal Reserve officials are both good and bad for Asia.
The Fed this week left its benchmark rate at 2 percent, saying ``uncertainty about the inflation outlook remains high.'' Further rate cuts seem unlikely, something that could disappoint some investors. The specter of continued rate moves supported optimism about Asia's export markets.
Yet easy Fed policies also cause problems in Asia. Much of the liquidity that U.S. officials create ends up in Asian markets, increasing so-called hot-money flows. That has made it harder for Asian central banks to control money supply and inflation. Taking a longer-term view, an end to Fed rate cuts isn't a bad thing. (an end to cut and the beginning of hike??)
The catch is that with Asia's most important customer in trouble, the region's growth outlook is dimming. Here, the U.S. housing market is more of a linchpin than many in Asia think. (What Asia? there are not that many in Asia)
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
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Don’t Try to Predict the Future / Be In Harmony with the Market / Don’t fight the Market ~Charlie Wright
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