Thursday, 22 September 2011

Correction of credit risk rating

Italy had just been downgraded by S&P by one notch. Yesterday, many of the major banks' debt credit rating also been downgraded before the Fed announcement. Who will be the next one then?

Recently a lot of downgrading has been done by the agencies. Instead of downgrade, we can say this is the correction of their credit risk rating.


Sunday, 18 September 2011

Current Condition if warrented

Despite U.S recent dropped in consumer confidence, it has shown an increase in export activities. Deficit figures had been improving lately. Although retail sales in June and July had shown an increase in consumer spendings, the result in August was disappointing.

Will consumer be revived once more to support this giant market at the end?

Thursday, 15 September 2011

Part of US life style that would contributed to the Impact of US economy.

We understand that the lifestyle of the people living in the country does make an effect on the economy of the country. Based on the supply and demand chart, if there is no spending power, there will be no demand. 

Many of the people in the States are servicing their high study loan, this is one of the factors that cause the reduction of their spending power. 

In the nature of human, we have needs to be fulfill. However, when they are unable to satisfy their needs, other alternatives are being search for. In this case, cheap price items will have an advantage, therefore in order to sell cheap item and have a high profile margin, domestic market loses it's stand. This partly contributes an impact to the economic in US.

Our thinking:

Should education fee be that high? As we know the higher the loan is the more cash the people need to services. If fees is not that high, people are able to contribute to the domestic market as they doesn't need to look for replacement  which will diversify the risk as there will be demand in domestic market which will support part of the economy in the country.

What do you think?


Tuesday, 13 September 2011

Holy.... Look at the amount for Greece Credit Default Swap

Folks, if anyone out there is going to believe every words the politicians are going to say about Greece, why not take a look at the credit default swap before listening.

Sovereign Credit-Default Swaps

Just to let you all know, Greece CDS is at $4732...

That is ridiculous for a financially healthy country, if it is.


Sunday, 11 September 2011

Face it! Inevitable is coming

We wrote an article last week regarding the possibilities of Greece defaulting. It somehow came true. Not that we cursed the country's fate, but the facts are in front of everyone with selective perception. Come on let's face it, it going to happen someday or somehow, and there is no chance if they can escape it when their biggest donor is making plans to prepare for Greece's default.

Let see how the Euro Zone going to embrace it when the French banks are at risk of further downgrades by Moody's.


Thursday, 8 September 2011

Stimulus coming along the way...

We are coming to a point that this month will be packed with excitement of upcoming stimulus packages and formula introduced to spur up the overall economy. The first of its kind is the $447 billion job packages introduced by US President Mr Obama to spur up it's employment situation in the biggest economy. This package will start the engine rolling for players to start exiting safe haven assets, and spur up the sentiment for a bigger risk appetite. Of course, this is not the most anticipated package which we are looking for. QE3, or stimulus 3, which ever we call it, is the total program needed to entice players to get back into business. Today's G7 meeting may crave out some clues on the overall view from the G7 community. Hence, this September maybe a different September altogether.

But of course, do not get too excited if there are really many stimulus rolling out, it may prove to be another way to stall the explosion to be happening so soon.


Tuesday, 6 September 2011

Long term view vs short term view

A number of investors and traders will be questioning on the recent volatility in the market whether is it safe to go in and invest or trade. Gurus and experts had been shouting and screaming different perspective on the overall outlook of the economy. However, if we step back and think, most of them are talking rubbish. Why rubbish you may ask? It is because they did not fully clarified what is their true definition and explanation of their long term or short term view in a particular investment.

What is long term investment then? Long term investment is of a view of a particular assets or equities that have the potential for future gains over a long period of time. For a long term perspective, investors will tend to pick up stocks and assets which had their prices beaten down over a period of time. This method is known as 'cherry picking' for some of you. By purchasing it at different price level to average it out, investment profit tends to gain over a long period of time, but not guarantee. Long term investment maybe a method imposed by some well known fund managers, but does it also benefit fully for retail traders and investors? I do not agree with that because not alot of us really know how to apply it. Basic terminology on long term period is defined as a period at least 5 years and beyond. Do you have the patient to wait that long? No. Price actions and volume sometimes shown very clearly people act upon emotion and any immediate news to determine their trading and investment strategy. There are some who term it as very long period and long term should be anything above 1 year.

What about short term? Of course it means anything that is short time or period. You may term it to be just 1 week, 1 month, 3 months, 1 year, or even 2 years. Short term view tends to attract investors into buying assets that may enjoy a relief rally. This is quite dangerous, especially if you do not understand the underlying meaning from the price action, volume and sentiment. Of course some methods like 'cherry pricking' can be perform for short term, but to us it is purely suicide. Anything can happen every minute in the market to derail any bullish rally or any bearish move. There will be some who will enter the market based on 'expects calling'. This is the point which will cause people to be stuck as those experts did not clearly define their calling. End game, we called these experts lousy. That is an unfair statement. The problem is not with the forecast itself, but the implementation by investors incorrectly. Without clearly understand the need to set entry targets and exit strategies, you may end up stuck in the market, and inevitably transform into a long term investors.

Back to basic, market is operated by supply and demand law. Basic supply and demand law teach us that when supply goes up and demand goes down, prices have to drop in order to sustain the demand. If demand diminish at a certain price level, price will inevitable drop to another lower level to entice people to buy. Growing number of investors and traders concentrated more in daily news than understanding the current dynamic and sentiment that moves the overall market. Remember, there are many big time players in the market that move with volume, and hence there are seen sometimes as those who can manipulate the overall outcome. Even if you follow closely with their analysts calling, you may not get the same results as they does. By understanding your own risk level and investment logic, and also gauging for yourself the true investment horizon, you then can formulae out a set of strategy that suits your lifestyle and personality. With that, you can set entry and exit strategy for your investment and protect your capital, hence minimising the loses over time. Remember, market is still reacting based on demand and supply law, and the sentiment of the market force will act as a pushing or pulling effect.

Many of the retail investors have basic fundamental knowledge of how the market operates and their basic terminologies. They know very clearly on when to perform a trade or scoop up an asset at a low price. How many successfully did it? If many performed it well, we should have tons of billionaires out in the world, and inflation should have sky rocket to another dimension, which will kill people who are poor. In addition, No forecast in this world is 100% accurate, and there maybe event risks that derail these forecast away. That is nature. No choice. This is life.

Finally the saviour is here.......

In an unprecedented move the Swiss National Bank (SNB) has announced a commitment to set a base on the Eur/Chf exchange rate at 1.20 in an effort to aggressively protect the economy from the effects of rapid franc appreciation in recent years. However, to me this is an expected move long time ago. With the deteriorating situation in Swiss economy ever since the Euro crisis started, money have been flowing into Chf, causing it to be the most expensive currency currently. With it's safe haven reputation, investors and traders rushed into Chf to protect their investment in Europe. With today's pegging, this mark the start of the downtrend for Chf. 

Those who read our article on the 16 August on the possiblity of Chf pegging, you should have rip some good profit today after the crazy moves in the forex market. There will sure be some experts out there to argue that market forces will still flush into Chf given with the on going problem in Euro area. Please, step back and think, do you think SNB does this out of fun?


Wednesday, 31 August 2011

Monday, 29 August 2011

Something motivation

Nice tagline to motivate you for another exciting week ahead.

Opportunity rarely knocks until you are ready. And few people have ever been really ready without receiving opportunity’s call.

— Channing Pollock


Sunday, 28 August 2011

For entertainment - Economic Freedom

What is economic freedom?

Below is a short clip illustrating it.



Friday, 26 August 2011

Back to Basic - Gresham's law

Gresham's law stated that "which states that when government compulsorily overvalues one money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation." This is explained in simplicity by "Bad money drives out good", but is more accurately stated: "Bad money drives out good money if their exchange rate is set by law."

His theory is based on the argument on the current practise of legal tender coin issued by various sovereign states that shows little difference between its nominal value (the face value of the coin) and its commodity value (the value of the metal of which it is made, often precious metals, nickel, or copper.) On the other hand, "bad" money is money that has a commodity value considerably lower than its face value and is in circulation along with good money, where both forms are required to be accepted at equal value as legal tender.

Something to ponder about over the weekend on the true intrinsic value of your wealth


Thursday, 25 August 2011

Rumor of take over?

There is unconfirmed rumor circulating in wall street that Bank of America is on the verge of be taken over by JP Morgan, in a deal supported by the government. Below is the article;

JP Morgan may take over Bank of America

If that is true, history has repeated itself again. It will be the same deal in march 2008. You should know what follows after that.


Today's recommended reading: Market crash 'could hit within weeks', warn bankers

Telegraph reported an article stating that market could hit by a crash in weeks to come.

Market crash 'could hit within weeks', warn bankers

At least there are some bankers that are willing to face the truth. However, is there any agenda?

Trade with care, invest with brain


Back to Basic - Interesting Logic: Inflation

A famous tag line to explain inflation by Mike Maloney;

True inflation is the inflation in money supply

Rising prices are the symptom

Really true. Do you folks realised cost of living is forever rising? The above tag line explained its all.


Beware of Bull Trap in Equity Market

If any of you were following the recent financial news, some of the analysts are making bullish call again on buying stocks and shares which had dropped off their highs for the past few weeks since July. Beware! It maybe a bull trap to trick retail investors into buying off stocks and shares which big time players are looking to offload once more.

If you pull out the chart on Dow and S&P 500 during the 2001 tech bubble burst and also the during the 2008 financial crisis, you will realised that there was an initial sell off and slight recovery before a full blown market crash that came well coordinated between different assets and instruments. Most of the time history had shown us that it is at the point where many were thinking this time maybe still a good chance to make more money, they ended up losing more, or losing everything. My friends use to crack a joke about the"superman syndrome", often happened whenever people lost their money or total wealth from a market crash, they will commit suicide by jumping off the building. Many of you were not born during the great stock market crash in 1929, where people lost their wealth overnight and committed suicide.

As we had explained on the bubble theory before, herd behaviour and the insanity often blinded us in making reasonable and rational investment decisions. These few weeks of sell off in the equity markets may still recover from the extreme price actions, be it will there be QE 3 or any optimism shown by market forces. It maybe a bull trap. Do not think simply think that the price will still recover to another high. It maybe a relief rally to it's designated mean variation before a major change in the trend to the downside.

Remember, fundamental still plays a major part in investment. When there is a lot of uncertainty in the market, it may signal a major change of trend soon. Do not make the same mistake as everybody does.

Be different, invest with brain.


US Corporate CDS is rising

US corporate credit default swap recently has climbed up substantially. Although it is still much lower than before 2008 financial crisis level, but the pick up in momentum does signal us to be cautious over investment instrument.


For entertainment: Guess who got the most gold reserves?

Guess which country have the most gold reserves in the world? Below is a slideshow by CNBC.

The World's Biggest Gold Reserves



The likelihood of a default is real

We at Renomic has concluded that the likelihood of an European country is real now. The possible candidate will be Greece. We not saying that it will be soon, but as pointed out recently by some experts and economist, the likelihood of default for the next 5 years is highly possible. Yes, we know that ECB and IMF, as well as some European countries are trying their best to savage the situation. Of course the second rescue package for Greece was agreed in July, and it should ease the tension of an immediate default by Greece. However, we have to face the fact that it is really quite impossible to service your debt if you have to pay higher interest, as well as paying a premium to get your debt insured. Looking at the 2 year and 10 year bond yield, you know that it is insane to borrow at that kind of interest out in the open market. Market forces seem to be ignoring their rescue packages and rather position it at its reality. Also, the problem is no longer isolated in Greece, but rather had spread to other member countries. See the effect of it now after it had spread?

Let say they need to pump in cash into the rescue package, and should be contributed by member countries in European Union. Presuming that they decide to print more money. As a result, money supply will definitely increase. For those who studied Economics during their academic journey, you should know that increase of money supply will increase the likelihood of inflationary pressure and indirectly devalued your currency since we no longer have gold standard accordance to the Bretton Wood Agreement in 1971. There was an article few months ago stating that one of the solution for Greece debt woes is to devalue the currency and print more money. They cannot do that since they are part of a member group which share the same currency.

Another interesting point noted was that ECB has recently bought some of it's members' bond in the open market in view to keep interest rate pressure down. Think about it, how long can they do it? How far do they expect this to go? The problem originated from Greece now had evolved into a group problem in the region. As far as Euro as a whole, the main solution should be beneficial to the overall stability of European Union, and not seen as a lifeline saver for a particular country. In this way, Greece may not be the main priority in future. Although the Greece had taken harsh austerity measures to curb the rising deficit in exchange for a second bailout, this will for sure cause the country into a long term recession and will further damage their fragile economy. In any view you see it, chances of Greece bouncing back is getting even impossible now.

Back to basic, when you have high deficit and decide to cut your spending, as well as unemployment, revenue will be hit since people are jobless and are unable to pay their tax. People will cut their spending too. Without spending and coupled with other factors, country may face long term recession.

Whether or not they will default, three of the biggest rating agencies had rated Greece the lowest possible grade before default. Seems like they are not convinced too.


Wednesday, 24 August 2011

Gold tumble down yesterday was the worst

Gold price tumble down yesterday was the worst. Possible reason by some experts was due to natural correction. But from the volume of the gold futures, and the new margin requirement, most of the players that enter into gold trade these few days may have met with margin calls, resulting in the offloading of gold contract.

Of course from the movement of gold price recently, it should be bound for a correction soon if the overall financial uncertainty ease down.


Today's Recommended reading: Economic letter by Federal Reserve Bank of San Francisco

Today's Recommended reading will be an article from Federal Reserve Bank of San Francisco.

Historical data indicate a strong relationship between the age distribution of the U.S. population and stock market performance. A key demographic trend is the aging of the baby boom generation. As they reach retirement age, they are likely to shift from buying stocks to selling their equity holdings to finance retirement. Statistical models suggest that this shift could be a factor holding down equity valuations over the next two decades.

Here is the link
Boomer Retirement: Headwinds for U.S. Equity Markets?


FX Knowledge: "Fading A Move"

Found this article that mention about

"Fading A Move"

Perfect example stated by the author of this article.


Tuesday, 23 August 2011

Another victim of rate cut

Japan has emerged as the latest victim for rate cut. Moody's Investors Service on Wednesday cut the rating on Japan's government debt by one notch to Aa3, blaming large budget deficits and the build-up of debt since the 2009 global recession. What a way to spoil the relief rally.

We guess next victim should be an European country.


What is wrong with this guy?

What is wrong with this guy? You maybe thinking who am i saying this time? Banking analyst Dick Bove, who a month ago rocked the markets with his call to sell everything in sight, has changed gears. After whatever had happened, Bove is advising to buy. That was quick to change your words after what had happened.

Stock market had tumbled down more than 16% since late July because of fear on US rating downgrade, and debt woes in European area. Investors and traders had sold off their shares and causes safe haven like precious metal to rise substantially. Just yesterday, Gold had crosses the $1900 mark, but reversed it's gain after a better economic result from China, resulting in risk inflow again. In addition, there are speculation that Fed may introduce another QE package to save the overall economy and is expected to mention something along that line in this week's Jackson Hole Symposium. Central bankers from around the globe will meet up at the Jackson Hole Symposium to discuss on the economic events and issues.

All in all, i do not know what had caused the banking guys to change their view. Perhaps it is on the persuasion from market forces, or expectation on Fed to issue a new QE program to save the economy. What i know is that do not pin too much hope on what to expect, especially in this kind of uncertainties. Remember the last Fed meeting, Fed's Chairman did mentioned to lower the interest rate further till 2013, and also may implement further easing program if needed? If you guys did not forget, Fed's Message to Markets: 'Stand on Your Own' Now.

Get it?


Today's Recommended reading

Folks, Today's recommended reading will be on whatever is happening to drive this crazy volatile market.

Bank Stocks Getting Worst of Fears Recession Is Back

Job Cut

Gold tumble the worst

Should you be Bearish or bullish on the over outlook? You folks gauge yourself.


Thursday, 18 August 2011

Today's Recommended reading: Something serious that you should read

Folks, today's bloodshed in the market tell us one thing; We should wake up and observe the trend carefully, and not commit the same mistake that most did in 2008. Below are 2 articles that will let you understand more on why.

Is Gold the Only 'Safe-Haven' Investment Left?

Fed Eyes European Banks

Get the hint?


Wednesday, 17 August 2011

Beware of Fixed Exchange Rates and Currency Pegs

Folks, here is an article written in 1999 from The New York Times regarding on the danger of pegging currencies.

Beware of Fixed Exchange Rates and Currency Pegs

As we had already knew that the SNB declined to peg their currency to Euro. Whether is that a wiser choice, intervention nowadays can proved to be useless in a time where sentiment and directions are not organized. We feel that even with the peg, it may create bigger problem for the swiss economy in future.

Hence, next move to take note of is from Bank of Japan. Be sure they may act to it.


Today's Recommended reading: Chinese Yuan; A new world reserve currency?

Today's recommended reading is an article about Chinese Yuan as a new world reserve currency.

Chinese Yuan; A new world reserve currency?

Perhaps the Yuan is the next big thing, or rather the next revolution to our damaged economy?

You decide for yourself


Tuesday, 16 August 2011

For entertainment: Greatest Trade of all time

Here is a slideshow by CNBC showing the Greatest Trades of All Time.

Greatest Trade of All Time



The pegging of CHF to EUR

Will the Swiss National Bank agree to peg the CHF to EUR? Guess this will scare a number of speculators off for the moment. Since the idea first float into the market, players had been covering their short positions, pushing the CHF lower across the board.

What if they do not peg it? Guess your imagination can tell you how CHF will react to that news then.


No expected solutions for Euro crisis; no Euro bond

I guess some of you folks maybe anticipating the outcome of the dialogue between German Chancellor Angela Merkel and French President Nicolas Sarkozy will including the creation of Euro Bond backed by all Euro members. The conclusion was quite disappointing as they firmly disregard the creation of Euro Bond. German Chancellor Angela Merkel noted that the Euro Bond idea will be 'last resort'. That is quite sad to hear.

In addition, the EFSF bailout fund may not be big enough to cover any future unforeseen crisis, and risk moving the sovereign crisis into the banking system.

Below are some of the key points;

  • France and Germany propose European Union President Herman Van Rompuy to head a “Euro-council.”
  • France and Germany will propose a financial transaction tax in September.
  • Aim is to reduce debts and deficits among Euro-area member states.
  • France and Germany aim to harmonize corporate taxes from 2013.
  • Stronger Euro needs stronger economic ties among member states.
  • Debt brake to be anchored in French, German law.
  • European Union debt rules must take priority.
  • European Union structural funds must focus on boosting growth.
  • Euro Bond idea is good but not for the moment.
Guess we have live with these measures for the time been.


Boring Market

Remember all the excitment that happened for the past 2 weeks? Although stock market is still bottoming, today's market is pure boring.

Perhaps this is the calm before another storm?


Reserve Currency Curse: Idea China to Stop Buying Treasuries After S&P Downgrade is Fallacious; US Would Welcome China Not Buying US Treasuries!

Will China stop buying US debt? Earlier last month we posted a video clip explaining why China will still continue to purchase US Debt. Here is an article to argue why US hope they will stop
Reserve Currency Curse: Idea China to Stop Buying Treasuries After S&P Downgrade is Fallacious; US Would Welcome China Not Buying US Treasuries!


Today's Recommended reading: Is Arctic another rich source of raw material

Folks, guess our north pole Arctic maybe valuable in the eyes of those who explores for new raw material.

Russia's Arctic 'Sea Grab'



Sunday, 14 August 2011

Today's recommended reading: go Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold

Today's recommended reading will be an article about trade imbalance and gold by Hugo Salinas Price and Michael Pettis. Below is the link

Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold


A Penny of My Thoughts

After numerous movement in the hectic market, let's take a breather and think about something else before we get back on track with the market.

This thought suddenly strikes me in the middle of the day, “What is the concept of the company?”; the growth of a company would normally go throughout these three stages namely the, High Growth, Normal Growth and the No Growth stage. During the high growth stage, the company will incur with high debt as more of the borrowing actions has been executed. When the company is unable to service the debt, it will be defaulted.

Does this sounds familiar?


Thursday, 11 August 2011

Guess who is the victim of today? GOLD!

Guess who got a beating today? Yes, GOLD. It hits $1817.50 high before falling on margin requirement hike and heavy profit taking.

Spot gold -$38.70 at $1756.70


Wednesday, 10 August 2011

Today's Recommended Reading

Today's recommended Reading will be an article from Investopedia to recap on the 10 timeless rules for investors. In a time of uncertainty, it will be recommended to recap on the basic to avoid unnecessary mistake.

10 Timeless rules for Investor


Correction for European Equity Market

European equity markets are officially in correction mode. This was due to increasing uncertainty on the overall outlook of the European zone, as well as persistent sovereign debt problem with no immediate long term solutions. Today's drop in overall market was due to France been on the limelight for it's high debt problem, signalling that the contagion have spread beyond Italy now.

Any further drop of more than 20% will signal a change of the major recovery trend, confirming that equity market had crashed.

Remember the panic before Lehman Brothers Bankrupty?

Do you still remember the panic before Lehman Brothers Bankruptcy? Lehman Brothers were frantic looking at different solutions to shore up their capital in bid to remain solvent, including the options of getting foreign sovereign wealth fund to buy over the bank. Today, after 3 years of that horrified experience, Bank of America is facing the same issue here. Reports from Reuters mentioned that the giant bank is looking for sovereign wealth funds to sell its $17 billion China Construction Bank stake, especially after these 2 weeks of drop in it's share price listed on NYSE. As posted in Zerohedge, rumors spread was that it's urgent in need of cash to beef up it's capital, as well as the bank's capitalization may be urgently strapped soon.

So folks out there, if you can recall the stages that led to Lehman's bankruptcy, Bank of America currently situation is a little too similar with comfort.

Perhaps any Too Big to Fail might happen again. Those who still believe that the backlash in the equity market maybe temporary, think twice.


What is Impossible?



Which means, impossible is actually implying that you are possible to achieve the results. Same thing for folks out there who are trading this crazy market; Nothing is impossible.


Another Fantastic Jeff Gundlach Presentation About Our Train-Wreck Economy And Crushing Debt Load

Folks, take a look at this chart from Business Insider presented by Jeff Gundlach. This is how bad the non farm payroll has been in all the recession. 2008 recession is the worst among the rest of the recession. Guess we might face a hard reset on our economy soon. Maybe not that bad. I don't know.


Gold Broke $1800 mark!

Gold Futures had just reached a record $1801 an ounce on COMEX in New York trading. Confirmation of safe haven instruments sorted by all areas. Beware of this bubble.


France the next victim?

As usual, the effect of the euro debt problem had spread to France. The credit default swap (CDS)rose to a high this week. It is the same level as Italy's CDS in July. This may prompt a possible downgrade for their credit rating.

Imagine France also lose it's AAA rating, it's will be a big problem for European members.


Tuesday, 9 August 2011

Today's Recommended Reading

Folks out there, here are some interesting articles from elsewhere which are useful.

  1. Recovery Lost: Why the U.S. and Europe Are Back at the Brink
  2. A small discussion on what will Fitch do since it's counterpart had downgraded US to AA+

11% drop recorded on Korean KOSPI index yesterday

If you folks had not realised, the Korean KOSPI index recorded a drop with more than 11% during yesterday's session.

This week had been an incredible rollercoster ride for most indexes.


Fed's Message to Markets: 'Stand on Your Own' Now

With Federal Reserve signalling another 'sad' news of maintaining low interest rate till 2013 shows that the economy still have a long way before standing up by itself. In addition, an unforeseen message to the markets on Tuesday sparks the debate on whether the Federal Reserve will start a new version of Quantitative Easing to spur up the economy, or is the Federal Reserve running out of patient with the economy? The statement: "We'll keep interest rates low as long as you want, but outside of that you're on your own", really will let you start to ponder if there are really no more solutions to the high unemployment and how to repair the fragile economy.

Perhaps the message they trying to send is to signal to all the Too big to fail companies, that the 2008 bailout program may not happen this time.

Again, which is too big to fail? Corporation or the country's economy? You decide for yourself.


CHF/YEN - What a big W

If you are trading FX, you may notice that the focus for these few weeks have been on EURO. In the recent article that we wrote, we pointed out the weakness on EUR/CHF and noted the trend may continue to go downwards. However, another pair which has been borrowing the weakness is the CHF/YEN. This pair had rally up to record high of 108.689 before retreating back to 106.700 as players took profit out since its impressive run up from 17th June.

                               *Chart ploted using MetaTrader 4

Although the Swiss National Bank did intervene, but their intervention with interest rate near zero rate proved to be rather weak in response to huge inflow of purchasing power. Browsing through the chart from 2007 onwards, you may see that this pair crashed down to 74.682 on 11th December 2008. Since then, it had tried to make higher highs. No doubt this time round, CHF has been sort out to be rather safe in a time where there were so much of uncertainty. If you notice from the chart below, this pair had craved out a big W since then and broke out of its last resistance @ 105.041.

                               *Chart ploted using MetaTrader 4

What we are trying to explain is that the rally in this pair is quite impressive recently, and the fact is that both currencies are safe haven category. Since that is the case, CHF is the only winner and the currency that players are more interested in. But on the other hand, it will be prudent if players who wanted to chase the price at this point to think twice on the underlying reasoning for its rapid rise, and to look over at different indicators, as well as follow through action before making any decision to buy up this pair. We view the rally as impulsive rally with technical stating very clearly that once the momentum reverse, it will be a symmetry drop in price as compare to the sharp rally. Of course, for this pair to crash down will be quite impossible at a time like this, but if big players decided that this is oversold, they may switch over to YEN as it is still not at record low against EUR.

Anyway, trade with care, invest with reasons.


Are we in a new tech bubble?

Did we really learned the lesson in 2001 internet dot com bubble, or should i say we just ignore the cruelty of crash. Recent years, there were many tech companies launching their companies' product and services, which some may had become household name. Facebook, Linkedin, etc were some tech services names which had become part and parcel of life for most. 

Below is a clip by The Economist that debates on whether are we facing another tech bubble.

Here is another video on digital gold rush that had happened for the past few years

Whether or not we are indirectly fueling up another new tech bubble, one has to be fearful when others are crazy over the trend. Musical chair will always end with someone without a chair. SO, DO YOU THINK YOU ARE THAT LUCKY?


Recommended Reading - Default More Than 400 Years Ago Leaves Scars: Christophe Chamley

Most of the time during our research and studies, we will try to post some of the interesting link of articles from other sources. This is to allow more variety of information for you folks out there whom spend time browsing our blog.

Here is an article about a default more than 4 centuries ago still leaves scars until today.
Default More Than 400 Years Ago Leaves Scars: Christophe Chamley


Market Correlations 101: Stocks, Bonds, & Forex

Wonder whether does all the investment instruments corelate with each other? Below is an article by Adam Rosam, 4xLounge.

Here is the link to his article;
Market Correlations 101: Stocks, Bonds, & Forex


Monday, 8 August 2011

For entertainment - Who say certification and qualification are important?

Today we will divert away from market for now. Let's look about investment in YOURSELF in order to secure a better future. A number of people that i known tends to believe to succeed and climb the corporate ladder, one must hold a minimum qualification in order to be successful in future. Who say certification and qualification are the MAIN important ingredient to one success?

Let's take a look at this slide show by CNBC to understand some of the big founder of certain household corporations and their qualification.

Who say certification and qualification are important?

Inspired by them?


What happen after insanity?

Do you ask yourself what will stop the continuous insanity that fuel the market to continue its upward march without fundamental and what happen after that?

Ans: Anxiety

The anxiety and panic felt by traders and investors these few weeks had stop the continuous march of the market, and return everything back to reality.


Sunday, 7 August 2011

Speculators beware, G7 may haunt you once more.

Speculators beware! G7 had signal their intention of combine intervention in the currency market if needed. The outcome of joined intervention maybe stronger than what we had seen last week by Swiss National Bank and Bank of Japan.

ECB had signal that it will begin its purchase on Italy and Spain bond to try to curb the rising borrowing cost, and prevent a contagion to spread to these economies.

Below is an article by CNBC regarding on G7.
G7: Commited to Ensure Liquidity, Support Markets

Below is another article by Bloomberg regarding on G7.
G-7 to Inject Liquidity as Needed

Take note if you are going with the wind. You maybe caught off guard this time.


Any alternative for Safe haven currencies?

Found some analyst citing on the prospect of Norwegian krone and Singapore dollar to be rather safe.
Whether is it true or not, the currency strength of both had been quite resilent from what had happened.

Perhaps they maybe the true safe haven which we had overlooked?

Worth to ponder about.


Deficit and Debt, whats the difference?

For those who do not really understand the true difference of Deficit and Debt, we found a video by Khan Academy which will explain them.


Is 2008 a prelude of the bigger crisis.

If we noticed what had happened to our world economy these few months, we will realised that Euro zone are having members that chalk up high sovereign debts. They had faced the blunt of downgrading, and the consequences of high risk borrowing from international credit market. Indirectly, they had spread it among their members countries like an infectious virus. No doubt the ECB and IMF had tried to savage the situation by pouring extra funds and monetary support.

When we turn our focus to US, we realised that they themselves are facing this sovereign debt and risk of default. However, they managed to avoid default by 2nd August, but still unable to avoid a downgrade of its AAA rating. Unemployment is still high, and slashing of job is still on going. No doubt companies were reporting quarterly earning, but is it the true earning that we should see from US since it is a domestic economy that supported by domestic spending?

Next, turning the attention to Asia, China is facing the possibility of hard landing in their economy, especially with their asset bubble looking to burst soon. Australia itself is not that good either. With the strong demand from their currency, this will indirectly hurt their export and increase the risk of inflation also. With the heavy debt burden, Japan maybe running out of ways to bring their economy back to life.

If you can understand the trend here, you maybe disillusion by the recovery that had taken place since later part of 2009. But is it a real recovery supported by growth and employment? It is not. US is still having high unemployment, Spain has 20% unemployment among the Euro zone, and some other countries too. Growth in certain market is not well supported too. The stimulus packages introduced by different countries may not be effective to lift confidence and assurance to our economy.

We believed that there were no true recovery in our world economy. Some of the emerging markets maybe in a better position than others, but there are not entirely safe either. If companies decided to cut cost and foreign investment, they may have to pull out of the overseas venture to focus more on their domestic market. Job will be lost at a time when job lost will mean less spending in their own market. For countries that are shifting to domestic play in their economy, this will impact themselves too. Even if they depend on credit to sustain, this will reflect out the origin of all credit crisis; bad borrowing and irresponsible borrowing. In the time of panic, cost of borrowing and cost of insuring the borrowing will rise to ridiculous rate. That boils down to the question of whether these borrowing can be sustained and the ability of repayment by these countries.

2008 economic crisis had shown us the total impact and destruction of this world's economy. Nevertheless, the crisis started from private entities. This time round, if you notice, safe haven has been the talk of the town. Everyone is trying to dash into safe haven. How safe is it? How great the impact will be if we face another recession? Let's put it in this way, if 2008 is just a prelude, the possiblilty of another crisis in making is the real world economic depression that we will never imagine. Good luck with prudent investment.

Below is an article reasoning out why the world economy may not had recover also.

Analysis: World poorly placed to meet new economic crisis


For entertainment - Recap to our credit crisis 2008

Let's take a chance to recap on the credit crisis in 2008. Below is an interesting illustration.
Take note of the similarity as compared to now.



|The Economist| Economics focus: Why the tail wags the dog

We were doing research in emerging markets and wanted to write something about it. The Economist had a step in advance of us by having this article talking about the emerging economies that having better potential and prospect to overcome future economic crisis.

Economics focus: Why the tail wags the dog The Economist

However, some arguments will include whether the continuous growth in certain emerging economies will continue despite whatever is happening, and whether the growth had emerged into a bubble in certain areas which is fuel by future expectation. Nevertheless, we should not discount the fact that our world economy is interlinked.


Mother of all bubbles

If you had read up history on most of the major crisis in the 20th century, the mother of all bubble is CREDIT.

Hence, spend within your means. Credit may turn bad when you borrow without responsibility.


Saturday, 6 August 2011

Where is the AAA country now?

If you had realise, US had been downgraded to AA+.

Which means, Germany is one of the remaining AAA country.

Notice something here? Something for you to ponder about.


For entertainment - CNN news on S&P downgrade of US AAA

At last, the truth is there. S&P had downgraded US AAA rating to AA+. It was not surprising for the agency to do this. Here is a CNN news discussion on the downgrade.
There maybe possibility there will be another downgrade for US if their fiscal policies are not working well to cut down the huge deficits.

Moral of the story; Maintain your saving, spend wisely and smartly.


For entertainment - Interesting cover page of this current issue of Time Magazine

Folks, here is a very interesting cover page for this issue of Time Magazine.,16641,20110815,00.html

Enjoy your weekend.


Poll: Do you think the latest downgrade of US credit rating by S&P will cause a credit crunch and liquidity problem that we faced in 2008?

Every week, we will try to post a question to get your opinion on some current issues. This week golden question is;

Do you think the latest downgrade of US credit rating by S&P will cause a credit crunch and liquidity problem that we faced in 2008?

Please vote etiher yes or no opinion. The poll is on the right side of this blog, above the blog archive.

We will welcome other opinions and comments. Your views are valued. 



Friday, 5 August 2011

A little thinking session here.

As we know that in the past till now, the reserve currency ranking were the; dollar, euro, Japanese yen, Pound Serling then follow by Swiss Franc. 

Golden question : Is all these signs showing us the start of new reserve currency?


Thursday, 4 August 2011

For entertainment - Sudden thought

Just a sudden thought, have you folks wonder why are there so much bad news that dampen investors sentitment?

Perhaps, maybe, possibly, its a sign of something big?

Time will tell.


|The Economist| - Emerging vs developed economies: Power shift

Found an interesting article out there, which some of you folks maybe interested.

Emerging vs developed economies: Power shift The Economist


Gosh, what happen to our market

If you were looking at the US market, you may wonder what on earth had caused such a move downwards? Actually, if you have notice, commodities had dropped, equities mostly were in the red zone for most regional stock markets, and treasury are still up as many were dashing into safe investment like T-bonds and bills. Gold still made record high, but the advancement had stall as reports mentioned of profit taking by some to cover their losses incurred in equities.

FX market is very obvious, all currencies pair against safe haven currencies were down. There is almost no logic in some of the movement like CHF/YEN when both are considered safe currencies. CHF is still making record high against YEN and EURO after Swiss National Bank intervention. Japan Finance Ministry made the same moved like their counter part, flooding the market with YEN, just left with Bank of Japan to support the market. However, both country's movement seems to be meeting with heavy resistance, as most players are rushing into the safe currencies as deem to be 'bomb shelter in a timing of heavy bombardment'.

Most likely both central bank will still intervene for one more time again, and this time if it still not working at all, god knows what is the correct move.

If you think that these 'bomb shelter' may last, perhaps its time to think twice. Ultimately, no bunker may withstand any destruction, unless sentiment changes. That maybe our biggest protection.


Wednesday, 3 August 2011

Bloomberg - Indonesia’s GDP Likely Grew Despite Moderation

Here is an interesting happening in Indonesia by Bloomberg. As we discussed a little bit on Indonesia's economy in an earlier article, we continue to believe that this country will continue its modest growth as compare to other ermerging market in the region, with its strong domestic demand.

Remember, the key point here is domestic. Here is the link.



Poll: What do you think will happen to our global economy?

Every week, we will try to post a question to get your opinion on some current issues. This week golden question is;

What do you think will happen to our global economy?

Please vote based on the 4 possible opinion. The poll is on the right side of this blog, above the blog archive.

We will welcome other opinions and comments. Your views are valued.



US credit rating, now at the agencies mercy

Fitch had retained the AAA rating for US and maintained a negative outlook. Moody's yesterday mentioned they are convince indirectly by the debt plan. Now we are left with Standard and Poor.

Looking at what they said in July that there is a 50% chance of downgrading regardless of debt ceiling outcome, US economy is at these agencies' mercy.

And if you can remember, our whole world economy is at stake too.


US 30 years Bond will hit the hardest if US gets downgraded

US 30 years Bond will hit the hardest if US gets downgraded.

Watch this clip and see whether you are convince.


3-months LIBOR rate? Finally reinforcement is here for Swiss Franc.

Remember the article that we discuss about Swiss CHF as a safe haven, and we at Renomic did mentioned that Swiss National Bank (SNB) will intervene. Finally they are here!

The SNB targets the 3 months LIBOR rate, and mentioned that rally in CHF is not good for the country.

As widely expected, the central bank knew what is good for the country and made decisive action to curb the upward pressure. Will Bank of Japan fellow suit? Best guess is 'Yes'.

We shall see.


Tuesday, 2 August 2011

Forex @ DailyFX - Ever Try to Catch a Falling Currency Pair?

Found this interesting article that relates to the most common scenario which a FX trader may face. Courtesy of DailyFX.



The Big Mac index: Currency comparisons, to go |The Economist|

The Big Mac Index is an interesting way to view which country's currency is over or under valued. It has been a gauge by some experts to argue on whether is the currency too expensive, or cheap?

Whether cheap or expensive, judge it yourself.

The Big Mac index: Currency comparisons, to go The Economist

Renomic - Economic Data for 196 Countries

Came across this website that have all the economic data for 196 countries. Perhaps may help in your research or for information purposes. - Economic Data for 196 Countries


Monday, 1 August 2011

South Korea FX reserves rebounded...

South Korea Central Bank has reported their FX reserves rebounded strongly to record high of $311.03 billion. In addition for the first time in 13 years, Bank of Korea had bought gold to enhance the investor confidence in korea market.


Is India economy losing the giant path?

India has been a country where many regard as the next emerging market. Based on the IMF report, India's economy is the tenth largest in the world by nominal GDP, and the fourth largest economy in terms of purchasing power parity (PPP). It is also one of the world's most populous country. The economy is growing rapidly for the past decade, especially after free market principles were introduced in 1991, the economy is still facing problems like income imbalance, high unemployment and poverty in certain areas of the country, including the growing trade and current account deficit. All these are showing sign of it slowing down, losing the advantage over its neighbouring countries. 

Recent years, many foreign banks around the globe have been flooding into India, hoping to gain a foothold in this upcoming emerging economy. Of course, India has the potential, with its vast amount of population and the deep industrial potential ahead. Not to forget about the country's successful advancement and development in the information technology field. Many in the past see the potential and have been setting up companies in the region, making it to be possibly the next Silicon Valley of Asia. With its vast amount of labour force, the potential of the money market will be enormous, especially from the prospect of credit market will be required. In addition, India dependence on its service trade has helped to sustain its economy.

During the 2008 global financial crisis, the strength in India's domestic demand had reduced the effect and impact on its economy. However, this also increased the needs for import, which create the trade deficit until today. Latest trade balance reported in The Economist reported a negative $112 billion dollars, with its current account balance reported a negative $33 billion dollar lost. India's deficit has been growing every year.

Source: IMF, World Economic Outlook Database, April 2011

Source: IMF, World Economic Outlook Database, April 2011

Source: IMF, World Economic Outlook Database, April 2011

Net exports had slowed. The results also show that the deficit is not financed by Foreign Direct Investment (FDI), but rather short-term capital inflows, as noted from a report from Tushar Poddar of the Goldman Sachs. In June this year, Reserve Bank of India (RBI) did a rate hike of 50 bps, in addition of 125 bps hike since May 2011. The RBI is setting a high expectation of the core inflation in the country. With its latest rate hike, it hopes to add pressure to prevent a surge in its currency and also current account deficit. However, some experts view this move indirectly killing its export competitiveness.

Some possible solutions which could see India to advance is to be more involved in intra-regional trade and be more integrated with the economies within the region. The country still have a long way to reach the booming stage as long as their manufacturing export do not increase to increase the country's competitiveness in the region. This was shown in their domestic manufacturing industrial which is under-developed for a long time. Of course, with development in the country industrial, more investment in equipment and manufacturing plants will be needed. In addition, job market will be opened up for its vast amount of ready labour force, which increases productivity output and income. With the increased income, additional investment generally increases economic growth. Investment in education can bring the country forward with homegrown talent, without dependence of foreign talent. Their people can move out to other parts of the world to learn new skills and knowledge, which can bring back new strategies and solutions to their country's prosperity. With its vast domestic market potential, financial stability can be achieved with constant saving habit, and also opens up opportunities for financial institutions to offer financing solution for India's private industries. Which is why we view the moves of some major banks around the world, wanting to enter into the India market in the early stage to gain a foothold and establish themselves as one of the major financing solution to the growing private industries.

India's trade imbalances will continue for long until it can offer local alternatives of the same quality at competitive prices in the international arena. India's growing deficit is really a serious threat to its future advancement. If it is not dealt with in the early stage, the huge reserves that the country saved over the years will soon be depleted. As we have seen in the past, some economies fell off the grace and depleted their huge reserves when fiscal actions were not taken appropriately. Whether India economy will experience a slowdown in its growth due to lack of investment in the industrial, or losing out to its neighbouring countries, India's economy will still have the potential which is yet to unleash.


Sunday, 31 July 2011

Australia's economy in 3 minutes

Found this clip from The Economist talking about the Australia's economy, and its rich source of minerals that benefited its trade. This was especially true with the vast development and the high demand for coal and iron in the Asia region. Watch and enjoy.

                                           Source: The Economist.

Please take note that the latest AiG Performance of Manufacturing Index for July is at 43.4, previously at 52.9. It seems like the manufacturing sector is experiencing a slowdown from the global economy impact.


The Impulsive buyer

Everyone i believe had ever read a book that was bought from the nearest friendly book store. We will always be excited about our new book, eager to find out the content inside. Some will always read the description at the back of the book, while some i call it 'the impulsive buyer'; do not know what they are buying into.

In our financial world, it is also the same scenario. An investor will always be out fishing for investment vehicles and instruments. Informative and intellectual individual will do their own research, while less informative individual will depend on others for expertise. In today's world, there is a third category of people emerging fast into the financial space; 'the impulsive buyer'. Similar with the scenario we quoted earlier, this group of investor do not really know what they are buying in after all.

Everyone will dream of buying their first dream car, the first grand house, having the best wedding, traveling around the world, and of course to build wealth and be rich one day. Of course, it is everyone dream to be rich. There are many ways of making wealth, either you find yourself climbing the corporate world, or setting up a business empire, or the easiest way is to be invested into an instrument that will yield constant profit annually. If you take a look at different methods of building your wealth, there is a similar ingredient or factor that is embedded inside; that is risk.

Let's take a step back to history and revisit the great stock market crash in 1929, the stock market bubble that causes the US stock market crash. It was fueled by a time of peace and prosperity, build on by the growing industries, most of the people has a job. When the credit is available, and market is soaring to new high, everyone realised that stock market is a good place to make their wealth. As credit was available in for the form of margin for investors, people started flocking to the stock exchange to participate in the soaring market. Money was easy to make. It was a time where dream can be realised. The main problem here is that information available about the investment they are making were not comprehensive and available. People do not really gain access to a number of information that are vital to their judgement. Risk component were not explained carefully to this group of 'the impulsive buyer'. The focus on the goal of money making had virtually made the stock exchange a 'casino'. Even casino as we known constitute a very high risk involved.

In the earlier article about bubble, we explained that bubble are created primarily indirectly from human behaviour. The insanity in us drives the market one last time to its peak, and when the momentum fails, the consequences must be endured. Market crashes down, and marks the start of a new trend, which is down. Wealth were lost, dreams were trashed. Everyone faces the same consequences. The group that will take the hardest blow will always be the group with impulse. They bought their stocks without much consideration, without research on the companies they invested in, or understanding the dynamics of how the stock market and the economy function together. The most important factor they disregarded is risk.

Impulse action normally happen without thoughts. Many of the investors today are more intellectual. Information technologies are much better than old times. In addition, there are many more factors that will affect our economy, and of course the stock markets. There are also invention and creation of more sophisticated instrument that not all experts understand them. The only factors that will always remain the same is risk involved and sentiment bias. Impulse buying into something normally start off by not thinking through the whole dynamics and fundamental factors of the investment action. Puring thinking that overall market will grow, and the fact that news and articles that influence the decision of the investor, generally will cost risk to be ignored partially. Why partially? The other part which show the factor was part of the consideration is due to the thinking process of lower risk selective process. However, risk is not totally eliminated if investment process is not think through from a macro to a micro perspective. In today's world, stock markets and other investment from different economies are inter-dependence of each others. With majorities of investors investing in different part of the world, no doubt and event risk at certain part of the world will affect the rest of the other economies.

Just like buying a book, you do not wish to buy a book with when you realised the content is not as exciting and informative as it was, resulting in wastage of money. Many may think they know all this, but past actions and results have shown that risk were not minimised, resulting huge losses. Companies and individuals are alike. If they do not take the correct prudent approach, both fate will be the same. Like a movie i watched and i like the tag line that was mentioned, "If you ask the scientist why, he will say it is unprecedented".


The mystery of Komodo Dragon. (Part 1)

In the 1970s, the oil industrial starts to boom and leads to an average 6-8% high growth of economic of Indonesia per year. Countries in southeast Asia developed their economiess progressively. Stable  economic growth was supported by political stability, internal security control, confidence from foreign and domestic investor.

In the 1980s, Indonesia's government accounted for 70 percent of total revenue were contributed by their oil and gas industries. As a decade passed, the oil price fell. The government faced a decline in their export revenue. This prompt the government to do a series of adjustment to reduce the decline of total revenue.
The series of reform include trade reforms and liberalization of investment to integrate Indonesia into the international financial markets. Stock market exchange reflected their structural problems, which resulted from the government's regulatory framework.

To rectify these problem, the first macro and banking policy was implemented in 1983. The first act was to raise the interest rate, to increase the freedom for banks to support new lending. In 1998, in order to enhance local financial industries and increase the availability of long-term debt, banks were encouraged to drive competition, and promote the local capital market. Although they have make these changes, but serious weakness in the system were not answered.

In 1997, Asian Currency Crisis hit them, causing them to lose 55% of the value against the US dollar. Comparing to other ASEAN currencies, which is within the range of 11-41%. Further impact on their economy was seen with the 20% inflation rate. The crisis slowed down the growth of the local economy that resulted the decrease in export demand, causing numerous industries to shut down. This crisis was triggered by both internal and external factors.

According to IMF calculation on 1998 economic growth in Indonesia would be -5% compare to year 1997 which was +5%. These figure show decline rate rather than growth rate. Government attempts to recover the economy by introducing market operation which was known as "Operation of Sembako" ; which sembako means the basic commodity needs. The situation got worse when speculative distributors store their goods in their warehouse, resulted in the increase in inventory. They then sold it in the open market when the commodity prices goes in their favour. As a result, government requested financial help from IMF. A loan of US$3 million was issued to Indonesia with a total of 55 condition to follow, and they insisted to send their permanent executives in Jakarta. The purpose is to monitor and control the recovery package.

30 years of growth had collapsed in just a few months of time. Whether is it the mishandling of fiscal policies, or capitalism goes unregulated, there are many lesson we can learn from them. The only question now is will this economy emerge again, to compete with the rest of the emerging market? This will be seen soon.


Starting over: Coining a new dollar

Found this article to share with everyone. Is it time to change the dollar and start all over again?



Saturday, 30 July 2011

For entertainment - How much is US debt?

Found a website that illustrated a visualization of US Debt Problem.

US Debt Problem (Visual)

Enjoy Your Weekend


Signing Off.....

Friday, 29 July 2011

Poll: What do you think will happen to our global economy?

Every week, we will try to post a question to get your opinion on some current issues. This week golden question is;

What do you think will happen to our global economy?

Please vote based on the 4 possible opinion. The poll is on the right side of this blog, above the blog archive.

We will welcome other opinions and comments. Your views are valued.




US and Canada GDP were both reported lower than expectation. In the juncture, we are on the tipping point of the recovery, and must be prepare for downfall ahead.

In terms of opportunity out there, safe 'haven' asset will be a temporary solution to preserve wealth now. Remember, market can build wealth, can also destroy wealth overnight. Invest and trade with caution.


For entertainment- Debt Based Economies are Collapsing fast

Are the debt based economies really collapsing fast because of the heavy debt burden? Watch this clip which was posted in YouTube during 2008.

Moral of the story, 'When Capitalism get unregulated, you will see the consequences....'


Business Insider - A fantastic overview of where the economy and the market stands now

I find this article from Business Insider very interesting. It really illustrate all that had happened for the past few weeks and the facts to support it. Read and find out more whether is it doom or bloom.

Below is the link




For entertainment- Hyperinflation

Qn. If you ask a doctor what is hyperinflation, what will be the answer?

Ans: Congrats, you are suffering from food poisoning.


Hyperinflation, a dream or a disaster

Earlier we did post an interesting clip on Germany's 1923 hyperinflation and the effects of it on it's economy during that period. What is hyperinflation then?

Hyperinflation is like inflation, except it is out of control. Remember the joke that we crack on inflation yesterday? We mentioned that inflation is like continuous consumption of food without shitting. Imagine that hyperinflation is 10 times, or even 100 times worst than inflation. Economy that experience hyperinflation will see that their local currency loses their value very rapidly. Hyperinflation is seen as a twentieth-century phenomenon. Germany experienced it during 1923, Hungary experienced after world war 2, and some economies almost faces it.

What is the underlying reasons for hyperinflation? If you google the reasons, you may find that the most creditable answer you may find is due to the over extend of 'supply' of paper money into the economy. By printing and flooding more supply of paper money into the economy is really killing the 'real' value of the currency. This action is done in order to finance the expenditure of some nations. However, by doing that, increase supply of paper money will still need to find a place to land in. Some will invest it overseas in other economies in order to maintain the imbalance occurred due to trade imbalance. Some others will make sure that the extra 'supplies' will in terms 'stimulate' it's own economy.

These action maybe useful to a certain extend, but bear in mind it's like diluting a glass of orange juice. The more water added, the sweetness taste will be lost. Remember, paper money in today's world are regard as fiat money, without gold backing. This maybe a reason to explain the huge drive of gold prices and other commodities like silver to record high. It seem that investors are picking up this point of paper money losing its 'true' value over time of actions. Since that is the case, can we view it as an awareness of a bubble growing to an unstable state, and transferring it to another sector/asset class to fill another new bubble? Remember we mentioned in our articles on bubbles; it's the human action that causes this, and so the insanity must continue in order to satisfy the needs.

Another issue that may cause hyperinflation is also perhaps a small part on the imbalance between the rich, the middle and the poor. Over the years, there were many people that became millionaires, or even billionaires. However, if we take a close look on wages, most of the developed countries wages did not increase in correlation with the increase of asset prices. The number of rich individuals are growing every year. We cannot disregard the fact that the pie is only this small. If everyone is becoming millionaires, or even billionaires, the wages taken by the middle class will not be able to afford for most of the goods and services as inflation kicks in.

No matter how much fiscal policies authorities of the nation does, the issue on hyperinflation is still deem as 'man made' consequences. Think about it, without inflation, asset prices will not increase over time, businesses cannot raise their margin if commodity prices are still low, and people cannot make real wealth fast enough to counter the lost of 'true' value on the paper money over time. Hence, the transition of inflation to hyperinflation is the process that will make wealth super fast, and also the steps to reset the economy back.


Global Deflation

Are the signs from around the world showing that we are facing a global deflation period after a long time of boom?


Thursday, 28 July 2011

Where to find the real Text Book for Economics?

All along in the path of our academic life, we have been reading through our text book, memorising the theories and arguments inside the text book, and hoping to score. When we base the theory on to the real world, some time it just don't work out, or even don't make sense.

History is for us to learn and not for us to commit again, and it also serve as a stepping stone into the real world.

Golden question : Where can i find the best economic text book?

Ans : The real economics text book is all around the world because it is the news that is on going 24/7. The main point of this answer is : Economics is EVERGREEN


Why a downgrade on US credit rating will not be as harsh as it seem?

A downgrade on US credit rating will probability be embedded in our mind now. Most of the people will think that this will eventually lead to a pro long downfall for US economy. Think twice, this may not be 100% true. A downgrade will normally cause the currency of the country to drop against others, but with US dollar as a reserve, this may not be much of the effect. During April when S&P put US credit outlook on negative, there isn't much effect on US dollar; rather risky assets were sold off as reflected by the US indexes, and because of that pushes up the US dollar.

Next, US market is always the most liquid market in the world. We cannot disregard the fact that the world reserve is still the US dollar. The possible outcome will be a quick sell off of risky assets around the globe after the rating agencies downgrade US credit rating. If risk appetite declines and investors fly toward 'safe haven', the dollar will still be the good place to hide from the risk-off trade.

Risk appetite will be the stake in this game. Most people will think that US dollar is no longer safe. Yes, to a certain extend it is showing sign of cracking. However, if we go back to basic, eventually we will realise that it will be useful one day.


For entertainment - Margin Call

Found this interesting trailer...

You may not know what you are selling after all.


For entertainment - Another meaning for inflation?

Qn. What is another way to explain inflation?

Ans: Continuous consumption of food without shitting.


Giant Banks slashing jobs.

Report from Bloomberg illustrated that Credit Suisse Group AG, the second- biggest Swiss bank, plans to cut about 2,000 jobs after second- quarter profit fell 52 percent on lower earnings from trading. In another news from Yahoo, HSBC will slash more than 10,000 jobs as part of the global banking giant's recently announced cost-cutting drive.


Euro Zone confidence level show sign of dropping

The Euro Zone services, industrial, economic and consumer confidences are showing a drop in level. These could possibly deem as a signal that the Euro market is crumbling down after its sovereign debt crisis. Expect sign to show an outflow of investment away from the zone. Will these cause the Euro Zone to show failure after 50 years of legacy?


For entertainment - Why China will still buy US Bond

Why do you think China will still buy US Bond even they knew that the US economy maybe coming down soon? I found this video from The Khan Academy.

Enjoy the lecture


Who you think may end up worst?


Do you believe

The current financial problem have spread from Wall Street to Main Street around the world. It seem there will not be any 'safe haven' after all.


Wednesday, 27 July 2011

Updates on Market

Current US stock market is still bleeding

  • Dow at -1.40%
  • S&P 500 at -1.82%
  • NASDAQ at -2.54%
Expect this to continue until decisive decision is made in Main Street.


For entertainment - Gold Bubble

Since our earlier article talks about bubble, lets take a look at this interesting clip on Gold Bubble.

I truly believe gold has its own true intrinsic value. But is the current price justifiable? For you to decide...


For entertainment - US Debt Crisis = How serious?

Wonder how much and how serious the US debt crisis is? Found this clip that explain why and how much is it. Enjoy

If no deal is made before the deadline, our world economy will suffer again. Who say housing crisis and banking default crisis during 2007/2008 is the depression? It may just be the begainning.


Sea of red

As expected, the battle over at main street is still on going, resulting wall street in a sea of red. Dow, Nasdaq and S&P is still down. USD is slightly up. This onslaught is killing everyone. Hopefully they will find a truce for this, to save wall street from bleeding further.

Bottom line, risk-off, low sentiment. Bad bad day ahead.


Greatest Insanity

Have we ever wonder why assets prices are chase upward, sometimes off its true asset value, derailed off the course to reach record high price, which set the traders and investors to a jolly good ride, usually end with the crashing of the price downwards when people starts to realise that the price is way to high? Some experts called it the Economic Bubble, or you may call it the price bubble, market bubble, etc. While i call it the Greatest Insanity of Human Behaviour that destroy hope.

What is an economic bubble? If you google it out, you may get tons of simple explanation on these terms. some economists till date still can't explain the reasons for bubble to occur because every insanity has its own complex underlying explanations. Some can blame Hedge Funds and institutional traders for driving the asset to deviate strongly from their intrinsic values, while there will always a minority that may blame on the luck and timing. Whether is it luck, or experts in the field pushing it upwards, we have to take into account that all these are boil down human behaviour. Google it out and we will find that this behaviour is know as herd behaviour in stock market today. As quoted in the wikipedia, "Many observers cite these episodes as clear examples of herding behavior that is irrational and driven by emotion—greed in the bubbles, fear in the crashes. Individual investors join the crowd of others in a rush to get in or out of the market".

We can depict a scenario of stock market making higher highs. When stocks make new highs, experts can it the bullish market scenario when sentiment is high, and wealth are created as a result. When it continues to make new high, sometimes higher than its Net Asset Value (NAV) and Book Value (BV), we can also relate it to the fact that retail investors are come in to chase the price because of the herd behaviour theory. From these, the ingredient added are simple; Greed. "Fortune favours the Bold"; if you can recall from history, Alexander the Great did said before to his generals and his troops. This make sense to the point that investors make trade together with the crowd, greedy for more returns. Whether is it some collaborations of fund houses, or certain groups of investors decide to take profit for their expensive holidays, naturally the stock market halted and cannot move higher, same situations for currencies. Eventually, what goes up must come down, everything is just free falling the next day. This is the same situation we seen during 2008 before Lehman Brothers bankruptcy. The US stock market went crushing down and sent a wave of sellers into a frantic selling mode.

The next question is how many economic bubbles do we have since the born of the economy, or should i narrow it down to after industrialisation? There are a number of economic bubbles or asset bubbles that happened way back centuries ago. Of course some academic study will show the most famous asset bubbles of all time is the Tulip Mania back in the 16th Century. We living in these modern times have only witness the Internet dot com boom, and the housing bubbles in 2007 that were so destructive; almost bring down the whole world economy. There are also some small asset bubbles which were easily forgotten as it was recovered and did not do much of the damage. There are a couple more asset bubble story that happened, which were long forgotten. Lucky that i found a kind soul that able to gives a perspective on what is a bubble in 'layman' form for us to learn. Chris Martenson produced a clip which i will share with you folks. Remember to watch finish the 2 parts of the series.

                                                     *A great thanks to Chris Martenson

From his explanation, we can learn that economic bubbles does occur a number of times in history. The human behaviour will never change as we have seen from history till now whatever that had happened. To make things worst, derivatives were 'invented' to manage the risk, but only to see it has been 'abused' in the end; using it to make money rather than its original purposes of managing risk and hedging. We will talk about derivatives more in our next article.

All in all, we live in a time where we need to re adapt to our economies again and again. Reflecting back in history, we can learned numerous ways to avoid or minimise the risk of bubbles growing. But how many are willing to do that. We maybe living in a time where history is going to be made again. After all, there is no bubble that was formed, it is the insanity in us.


Swiss KOF Leading Indicator for July

Swiss KOF Leading Indicator for july is lower than previous month and is the lowest since Feb 2010. As we mentioned in the earlier article on Swiss CHF as a safe haven yesterday noted that the expensive currency will eventually hurt it's own economy. The reading today really show signal that the overall economy is really hurt and damaged by their own expensive currency. We do expect the Swiss National Bank to intervene anytime soon before it gets out of hand.


Aussie at all time high!!!

Aussie Dollar had hit all time record high against USD after a very hot inflation expectation report today. Last read at $1.107.

Since AUD hit all time high, with recently Kiwi dollar hitting record high, there maybe a chance we have reach the peak for carry trade. Much of it should be seen supported by the previewing US Debt issue at main street that cause the two commodity currencies to press on.


Tuesday, 26 July 2011


Apple tops $400 per share price and has successfully become the one of the biggest company that reverse its fortune from the almost collaspe in the 90s before its successful makeover, to become the most innovative company in the world in terms of its products and marketing strategies.

Congrats to Apple and Steve Job.