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.