How 2 pop OILies GOLDies

OILies GOLDies r going nuts because the markets believe that the central banGers are NOT doing their jobs in controlling prices via interest rates or more fancy name called monetary policies. The ONLY, yes, the ONLY way stop such astounding jump is to hike rate HIGH HIGH to choke off economic growth. I know this is beri counter intuitive but it is the ONLY way.

IF central banGers don't do OUTsize hike like 1% or 2% in 1 hike, this OILies GOLDies just won't let up.

The markets are ALREADY sending beri beri clear signals to the central banGers: IF u don't act and HIKE rates high high to STOP this frenzied rate of global growth, the markets WILL do it themselves by pushing UP all the materials needed for growth. The main problem is that growth is just too high for supplies to catch up. The ultimatum has been thrown into the banGers' face, will they take up the challenge? Answers coming yr way in July when Mr. Tricky set rates! Hang on to your hats!!

Waking up 2 INFALTION?

Over this past week, we have both central banGers : Mr. Tricky + Benny sounding the alarm on INFLATION and runaway inflation expectation! WELCOME to the REAL world. for god's sake, I have been saying so for over the last 1 or 2 years!! Your ineptness make me so SICK!

We still have to see if they r talking down the inflation expectation or they will ACT! OILies GOLDies will hold or go higher to dare them to hike. I will be watching very closely as to what these SICK banGers will DO not say! because it will affect my view on looney Aussies.

IF they REALLY act on hiking and indicate MORE hikes on the way, then get the hell out of all assets classes n hold CASH! for the time being please UP your CASH position. I have been saying for so long that the market wants higher rates. HIGHER rate means lower present value of future cash flow, ALL equities should correct DOWNwards. I will hold my view n wait for the SICKapore market to go DOWN to 2,000!!!

SICkapore $ is a SELL!

I have already talked about Y SICKapore $ has to go down. Here is a recap:

SM Lee already told us that SICKapore cannot be more expensive than HungKees. But, SICKapore $ had already appreciated 25% against HungKees. Meaning SICKapore already 25% LESS competitive. How much longer can the SICKapore garment stand aside n see such eroding of competitiveness?

SICKapore is a SMALL island with NO natural resources. That is a FACT and NOone should dare to challenge such simple fact. The MAIN reason for such a big gain in SICKapore $ to ALL time high was because the garment want to counter the IMPORTED inflation. SICKapore IMPORT lots of stuff, esp. food. Garments all over the world will be more critical of the doubling and trippling of rice and other essentials and WILL bring them down. So, SICKapore should face less inflation pressure going forward.

US slowED, EU slowing, Chindia following to cool, SICKapore being a BERI OPEN economy will make OUTsized gain on the way UP and it will make OUTsized loss on the way DOWN as well.

The show MUST go on = INFLATION

Benny + Mr. SEX will continue to INFLATE the US housing assets in order to stablise the price. Given that with ALL their enormous efforts ALREADY done and housing prices still FELL, we could only imagine what it would have been had they NOT INFLATE so dramatically.

I believe they will CONTINUE to INFLATE till prices stop falling.

Jim Rogers was shouting on CNBC that Benny "was waving a flag that he wants INFLATION" Sorry, I think Benny NEEDs INFLATION NOT want, because there is NO way out!

A Tale of 2 OILies?

So much has been written about how biodiesel from OILY palms will deforest the world and create environmental disasters. Want to share a document I found on the web by greenergy. Pretty up to date also, data from as recent as 2006. http://www.greenergy.com/perspectives/Palm.pdf

ONLY 2% of ALL OILY palm is "expected" to go to biodiesel. Where are all the others going?? mostly FOOD!! others will go to soap and detergent and what not. OILY palm is actually good for your heart according to research done.

So, dear extreme environmentalists, do u want to EAT and stay alive? OR u don't want to EAT and let the rainforest thrive? hehehe.... pick your choice.

Wah... more dirt to dig up on OILY palms. Biodiesel is NOT the reason for the run up in OILY palm. SO much misconception! It is an added bonus but NOT the reason. Human population growth and higher disposal income is the reason lah. As long as human want to have sex and populate, as long as Benny and Mr. SEX continue to put employment before everything else, hehehe.... I stupid now expect OILY palm to stay buoyant. hehehe...

Money Trees Revisited

Grace brought our attention to OILY counters once again. So, I decided to dig deeper into the OILY palms! To my surprised, I found something new: 93% of all OILY palms goes to food processing! Biodiesel (a fuel that can be extracted from OILY palm) is INsignificant.

This struck me like lightning. It means that the run up of this OIL palms was due to food demand more than the much hyped alternative fuel demand. Also, from my research, Cheena is only consuming about 21kg per capita compared to HungKees of 44kg or so. I suspect India also quite low still. Meaning that 2 BILLION more people will still need quite a few more million tonnes of OILY palms.

All this talk about alternative fuel is not likely to happen so soon since at current OILY palms prices, biodiesel is a loss making business. Biodiesel is only feasible when OILY palms drop to US$700 (RM 2,200 at 3.15 FX). OR when price of BLACK OIL is much more expensive. This gets me thinking.... will BLACK oil go up to US$200 or more as some Leeches & Sexes (L&S) claims? I don't know when that will happen but I am quite sure that that price will be reached and breached some day, 50 years? 100 years later? I don't know, but I do know that hydrocarbon like BLACK OIL is limited in supply and one day it will be exhausted! BLACK oil is not renewable, unless u can wait for a few million years to use the carbon matters that u bury today... hahahaha.... so wat is the implication for OILY palm then?

Well, I suspect that OILY palm will be use to feed automobiles and humans after the BLACK oil is gone. hehehe... so many more automobiles are place on the roads everyday in Cheena and India. So many more hungry "mouths" to feed these OILY palm to.

Then, the negative news all over the internet, deforestation. Many greenpeace of friends of earth, etc claims that the clearing of rainforest do more harm than the good of using OILY palm. hehehe... What I want to know is that when BLACK oil runs out, will these environmentalist ride bicycles and walk on feet to buy n carry things? IF they want to drive an automobile to reach their destinations, OILY palm is probably their best alternative. Because OIL palm is the most effective oil producer per hectare planted compared to soybean or corn. This brings me to the next question that has been bugging me in my mind. Y are the Ang Moh so against OIL palm growing in Malaysia (MY) and Indonesia (ID)???

Do you know that MY and ID together controlled over 85% of all OILY palm produced! Y? The climate just suitable lor. hehehe... They are probably afraid that after the middle east they have to deal with another group of islams! hehehe...

For wat is worth, I got back into some OILY palm today. hehehehe....

Markets want HIGHER rates

Mr. Spanny may find it quite a conundrum that mortgage rates are not coming down with such DRASTIC cut in FED funds rate. But, when has the market started to take orders from the regulators? It is normally the other way around - regulators (such as FED) taking orders from the markets. Since LIBOR and mortgage rates are not responding to the cuts, I suspect the markets are signaling to the regulators that they are missing the point (INFLATION) in their efforts to save the world by trying to prop up the employment rate. However, it should be noted that previous rate cuts, in the aftermath of 911, the markets DID respond. How come markets are not responding this time around? I would argue that in 911, inflation was NOT an issue. That was why the rate cuts achieved what the regulators want.

HIGHER market rates SHOULD discourage businesses to invest in low internal rate of returns projects, which in turn should lower the demand for commodities, which in turn should deflate the current boom in commodities prices. Current Market rate seems to be WANTING that scenario because it will lower future INFLATION. HOWEVER, in their effort to secure jobs for everyone, the central banGers are LOWERING rates.

Something is wrong! Policies are now set like a socialist economy! And these central banGers are all from the so call FREE capital markets of the world. Capitalists becoming more socialists, while the socialists/communists are becoming more like capitalists. They will meet somewhere in between.

But, if history is of any guide, central banGers usually give in to the markets demand. hehehe... I stupid for one expect much higher interest rate on my deposit with all the banGs. heheheh...

Get Rid of REITs

It is well known now that credit has been tighten. Property companies with high leverage are finding it hard to refinance, such as Centro Properties and Allco Reits. However, I was surprised to see some L&S still asking retailers to buy into Real Estate Investment Trusts (REITs).

MOST REITs are highly leverage on their balance sheet to generate "recurrent" income for the unit holders. Because they are so highly leverage, the change in financing costs will cut into their net profit margin significantly. Stock markets have correctly repriced REITs in recent months by slashing the share price. But, this doesn't mean that they won't keep falling. Stock markets may have priced in the interest expense part in chopping the net profit, but have they priced in the revenue part?

During recession times like the one in 1998 - 2000, Rental in most SICKapore properties FELL. YES! rental rate can fall when demand fell because of bankruptcy due to the recession. What makes u think that this won't happen again?

So, when would be a good time to accumulate REITs? I would feel more comfortable holding a BIG CAP REITs when it is trading way way below its NTA. Because this will give a good margin of safety. Looking through most of SICKapore listed REITs, I just can't find BIG capitalized REITs that are selling below NTA.

So, my conclusion is to stay away if u r not in. OR, sell off if you can afford to take the losses NOW!

Price of DISobedience

Looking back at various events, I find that markets have ignored authorities' warnings in MANY MANY instances and suffer from such disobediences! Followings are some examples:

2001: Tech bubbles: Mr. Spanny said stock markets are exuberance n a few months later, stock markets tumbled.

2006-2007: Mr. Spanny and Benny warned of credits too loose, risk is way too low and beri umcomfortble. Now in 2007 to 2008, subprime dent all markets.

There is still one warning that has fallen on deaf ears: OIL is well supplied, inventories are all in record levels. But, people still piling into them... hmmm.... are we going to see the same thing play out? disobedient boys n girls will get canned later?

Of course, there are political and so on reasons for the price premium of oil. but is it warranted? A bit of premium may be reasonable but 50%?? I don't know, time will tell us. OPEC has time and again tell us that the world market is WELL supplied. Do u want to take heed or ignore? The choice is yours.

You are welcome to add more tales of warnings NOT heeded and the players got burnt. Properties in SICKapore in 1993?

Solving Moral Hazard

Much has been said about how the compensation of CEO led them to make RISKY decisions for short term gain. Once, they pocket the gain from high share price, they wipe their behind clean and leave the poo to the next CEO to clean up the mess.

Compensation based on SHORT TERM performance is the problem. Within a short time frame, many would risk it all especially when the $$ came not from their own pocket but from the shareholders. Hence, the question is how to align the CEO's interest with the LONG TERM interest of the shareholders.

I heard on TV that one Bear Sterns employee said her saving plans of past 17 yrs disappear over night. Evidently, she must have got lots of Bear Sterns' options. But, something is NOT right. Y is she being a "lower" paying employee got stucked with such losses while "HIGHLY" paid CEO or management, got off the hook with millions in CASH for salary in addition to options??

I propose a change. Put a CAP on the MAXIMUM that any CEO or management level employees can take home as CASH salary, eg. $1million. By the way, Warren Buffet got paid ONLY $100,000 per year, and u want to tell me that $1million is low?? The rest of the package will be made of options with exercise date upon the retirement of the CEO or managers. Yes, they can only convert to cash when they retire! That will make sure that any decisions from them are for the LONG TERM gain of ALL stakeholders, including their own.

Should they demised before their retirement, the option should be made transferable, to wife, or children, who will only be allowed to convert they option on the stipulated date of the original holder's retirement date.

In order to protect their retirement nest egg, they will like most of us, make decisions based on what is best for the LONG TERM till they retire. They will also have to pick their successor very carefully. Because any decisions made by the new successor will impact their own pocket! This will ensure continuity of good stewardship of the company.

I welcome any criticism of my proposal. Best, if any1 of u can relate my idea to the business community or law setting bodies in US or worldwide.

Lowering of interest rate will do NOTHING to resolve such moral hazard and reckless risk taking behaviour. I urge CLEVER people to take a long term approach to solve this issue for the good of ALL mankind.

Cut And Print

In their quest to save the falling value of housing prices in US, Benny + Mr. SEX keep on cutting n printing more paper money. This is bad of US Dollar and I for one won't be at all surprised to see USD fall to 50 from current 73 on the dollar index.

Their objective is to INFLATE everything, including house prices, to prevent further decline in the value of those loans taken out on houses when their prices r sky high. I am sure that if even a stupid person like me can see through what they r trying to do, just imagine all the smart people out there. No wonder u see Euro shoots through the roof at 1.55, I won't be surprised to see Euro goes to 2. But, by then European will have massive unemployment issues and my dear Mr. Tricky (trichet) will have to cut n cut rates... hahahha....

Goldies will probably go through the MOON, IF we see B+S continuing their path of paper printing, for which I don't see them changing at all. Well, at least their actions so far did not indicate they r changing their track. U heard the machinery order from JAPAN went up? FED was placing big big orders to purchase print machineries from JAPAN to print more paper money? hahahaha...

SICKapore dollar might actually go to parity with USD as this cut n print policy keep on growing. ALL other Asian $$ will RISE to NEW high!

US equities cheap. REALLY?

Much has been said about how cheap the US markets are trading, using P/E and the fact that they have fallen so much. But, is US REALLY cheap?

For one, the US Dollar is depreciating and KEEP depreciating thanks to the CLEVER policies of Benny and Spanny! Will this policy change? I don't think so. They have already made their choice of employment OVER inflation. Action speaks louder than words. Even though Benny PROMISES that he will attack inflation AFTER employment is fixed, those are just words. The FACT is that he lowered rates. Such falling currency will deter investors because even if the equity goes up, when converted back to their home currencies, they might be WORST off than parking at their own local banGs. Since SICKapore banGs give such pathetic rate, I can understand y Auntie HO wants to buy so many US banGs. Put in SICKapore also no interest, right? hehehe.....

Second, the ANALysts are still predicting beri rossy outlook in the second half. So, the P/E is predicated at that happening. What if that didn't materialise? hehehe...

HIGH interest rate. CRAZY?

I watched a few financial broadcasts and ALL (yes, 100%) of them said it is crazy to call for higher interest rate in the face of such "difficult" times. But, please look at the oil crisis in the 70s. What did Paul Volker do? U telling me he is crazy? Look at the prosperity of the 80s and 90s. Was he crazy? We need to burst such vicious cycle of ever ESCALATING commodities prices and stablise the USD. Why is that crazy? Please tell me. I am just too stupid too understand.

Everyone said rates MUST be lowered. But, the FACT is that no banGs is willing to lend even if interest rate fall to 0% because of risk aversion. They are scared that the borrowers will DEFAULT. If you burst the bubble, people scared their houses will go down in value further in the future, these people will SELL no matter what price they can get. This will clear the system of all these bad debts or decisions. And we can all start anew and move on.

Yes, it will be beri difficult for many many people. But, if this drags on, we will be facing not just recession but depression because people continue to hold onto their over-valued assets in the believe that prices will go back up because FED will lower nominal rate to negative to force the lender to send their $$ out to save these people.

The conclusion is : Do we want short-term pain for long-term gain? or short-term gain for long-term pain? Clearly FED has voted for the latter.

CASH is KING

Commodities surging like no tomorrow, yet central banGers see no evil. There WILL be a point where the manufacturers can NO LONGER absorb the hike and be forced to hike prices of their products! Nobody knows where is the tipping point when this will happen. I am the first to admit it. But, with raw materials going up in such HUGE % even in dollar terms, that point is getting nearer NOT further. Actually, commodities out run ALL paper currencies. This is a reflection of poor money management skills of the banGers who prefer to have inflation rather than unemployment.

Once the tipping point happens, ALL manufactured goods price will move UP. non-core inflation moving into core inflation. By that time, I bet that the central banGers will have to take a lesson from my favourite FED chairman, Paul Volker, and hike rate till 15%!!!

So, raise your holdings in CASH and get ready for the NEXT big thing, HIGH interest rate!!!

And of course, CASH comes in many forms, like USD, SICKapore dollar, Loonie, Aussie, Euro, etc. Pick those currencies whose host do not have large account deficit, show large surpluses, strong balance sheet as a country lah. So, USD is OUT! Euro is frankly in fairy land (I still believe Jean Trichet will CUT when he sees what the strong Euro will do to the employment rate). SICKapore dollar is not that bad a choice to me.

ChIndia Will NOT be spared

There are lots of talk about the domestic demand of China and India. But, these countries' consumers' spending is not even 20% of the US! Even granted that they have so called domestic driven demand, where are their employment coming from? India got lots of outsourcing from US software firms, China got lots of manufacturing jobs from US Multinational corporations. When the US consumers cut down spending, do u think the demand for the services/manufactured goods from ChIndia will still be in big demand?

Call me stupid, I just don't buy the argument that ChIndia can "save" the whole world.

$ Grows on Trees?

Palm Trees?

I am ABSOLUTELY dumb struck when I look at the chart of the CPO futures, from RM2,000 zoomed to now almost RM4,000 in about 12 months!! Malaysia is having election, could it be that the garment there pushing UP to make the citizens feel good and hence vote for the ruling party?? Unlikely. The more plausible reason is the skyrocketing soybean oil! They track very closely to each other.

The recent snow storm in China will definitely make soybean oil even more expensive as China is quite a big producer of the crop. Brazil will benefit as it has planted HUGE HUGE acreage of this crop.

Such HUGE price surge SHOULD benefit the 4 heavenly palm kings listed on SGX, Wilmar, Golden Agri, Indofood Agri, and First Resources. But, there are some concern that such high price will deter consumption and some EU regulations want a better management of palm plantation, so call sustainable palm trees cultivation? hehehe....

Many people in Ang Moh countries criticized the palm oil industries for the destruction of rain-forest. But, it should be noted that Malaysia's palm trees as a % to the country's land mass is smaller than the British farms as a % of Britain land. And they still got the balls to tell us what to do with our land? If they are really so "concerned" about rainforest destruction, then perhaps, they should PAY us for NOT planting palm trees. Let's call it palm credit, should we? Since we now have carbon credits for NOT producing carbon.

Talking about carbon credits, don't u think that palm plantation should get lots of carbon credit? I mean they are plants afterall, and absorb carbon dioxide!

A Number Game

MOST of these days garmen's statistics agencies are publishing INFLATION running ABOVE or at the high end of their inflation target. YET, most of them don't care, at least their actions tell me that they don't care and they expect inflation to come down. ECB noted high inflation, but printed additional 500BILLION pieces of paper. Benny KNEW that US is running high inflation but give priority to growth and CUT rate and PRINT more $$. BOE also CUT.

The Question is WHY are these CLEVER people so CERTAIN that inflation WILL come down? It is a number game. Let me give you an example. IF an egg cost 50cents last year and $1 this year, that is a 100% inflation. IF next year it stays at $1, the inflation is ZERO, 0%. They will bring everyone's attention to the fact that INFLATION has STOPPED and no longer a problem. BUT, is it? Just taking a simple average, over the 2 yrs, inflation would have gone up 50% per annum. The expectation of inflation may moderate or so called no longer an issue, but the REAL REAL inflation HAD already happened. We have to pay 50cents more for every single egg that we consumed while wages and interest from bank deposits simply won't cover the rise of 50% per annum inflation. Even if the price of egg held steady for the next 10 years, that is still a 10% inflation per year. So, what's up with the so called future inflation. Unless you tell me that your wages go up 10% per annum, then no issue to you. But, please tell me what kind of work you do hor. hehehehe.... most likely u have to be a L&S (Leeches & Sexes) to get that kind of above inflation increment in wages.

But, then again, CLEVER people look forward and completely forget about the past. And as always STUPID people like me will peep back and see where we came from even after 10 years!

A Liar Too Many

No, I never had sex with her... No, we will NOT cut our dividends ...

Later, we found out that he did have sexual contact with her and certain company did cut dividends. It is extremely difficult to be honest when reputation or money is at stake.

After experiencing first hand the liars amongst us during my University years, I become extremely cautious when dealing with human beings around me. Recalling the number of liars during my school years, about 98% of them cheated. These people go on and graduated from the school and entered the work force. They might become head of huge and powerful corporation or nation.

So, please stay alert and distrust those around you till they have shown you otherwise many many times! Especially when money is concerned.