ZEROHEDGE ON LIQUIDITY TRAP

"A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in general price levels."

COMMODITIES WILL FURTHER DECLINE

I urge readers to read Gary Shilling's latest piece on commodiites trend in Bloombergview.com or TheEdgeMarket online (6 October 2015).  Nymex Oil today closes at about USD50 per barrel.

Iron Ore, Crude Oil, and Copper has dropped about or more than 50% since its peak in 2011.  Besides the supply and demand decline reason, there are other factors at force.  Since 2001 up to 2005/6, China increased increased its world consumptions from about 15% to 50% (for iron ore, sugar and copper), many industrial producers went into massive expansion in 2005/6 thinking that this growth will go on forever, and expanded their capacity in 2005.  Similarly for aluminium, zinc, nickle, and other agricultural commodities.

All this MASSIVE expansion takes 5-10 years to come online, some are too big to be aborted as the loss will be much higher than selling at a loss.  

He also said that his initial forecast that deleveraging will end in 2017/8 will most likely be extended looking at today's position.  His initial forecast is that deleveraging commonly takes 10 years to reduce significantly (i.e. from 2008 to 2017).  

In view of that, hence, it will be dragged for a few more years (most probably 2020).  So, in between today and 2020, higher volatility is expected.  

In conclusion, don't be suprise when Nymex Oil drop to USD20 per barrel or any other commodities.  Indirectly, sell on strength.

FBMKLCI

Sapura up about 9%.  UMW up about 13%.  Many others as well.  Air Asia X up 5%. RHB Capital up 5.9%.  So, most sector are up. KNM up 17% (secured big project in UK).  Air Asia up 5.6% on privatisation issue.  Almost all sectors is up at the same time.

LNG EXPORTS

LNG exports in August y-o-y declined 42.5%.  Not sure if it is good for MISC?

HAVE MALAYSIA ECONOMY FUNDAMENTALLY IMPROVED?

Oil & Gas sector, more retrenchments.  Shell is letting go 1,300 staff.  AffinHwang, investment bank, is also letting go more staff, including CIMB.  Was told BNM foreign reserve dropped another USD2 billion.  Property developers are also slowing down, based on new launches as compared with last few years.  So, negative for OIL & GAS, PLANTATION, AND PROPERTIES & BANKING.

Of course, the major sectors like SERVICES, and MANUFACTURING (semi conductors) & TELECOMMUNICATION, will be doing OK.

Going forward, 1-2 years, as we are the major partner of China, more negatives are expected.  Other risks areas one should be careful about:

1.  Further Yuan devaluation

2.  Further drop in Crude Oil price

3.  CPO decline will follow 

4.  Further decline in exports 

On a more objective view, 35% of the economy is negatively effected, while the 65% is doing reasonably OK.  Of course, no thanks to confidence issue created by our political leaders.  Longer run, tougher time ahead.

HOW CAN I LOSE SO MUCH MONEY ON THE STOCK MARKETS?

I am open to ideas, that is the reason I lose so much money in the stock markets.  I am not discrediting any expert here.  I was new in the i3 (started since late 2014), so, I thought I saw some experts in i3, very convincing write ups in fact, with great charts and writing skills.  Some of the "not smart" moves I made is buying:

JTiasa 

Mudajaya

MPCorp

Mulpha

Btw, I was just kidding when I said I lose so much money in the stock market, actually, I just follow one or two thousand shares, just to test out how good the ideas given by experts in i3.  For me, a good lesson learned.  It is very difficult to follow someone as they don't tell you the time frame, what to expect, when to sell.  They normally only tell you the positive ones (or on hindsight).  I do wish them well, for the valuable lesson.  Unlike unit trust, no one can actually independently measure their track records over a long run.  Very few people who will tell you how they lose money in the stock market, because, the issue of pride is at stake, whether they are rich or poor, young or old.

DIVERGENCE

The divergence between the real economy and the financial market gap is growing monthly.  Hence, volatility is inevitable.  There may not be another sub-prime housing bubble, but there are so many other bubbles out there.

DISCLAIMER

Invest at your own risk.  

www.sosfinancialplanning.blogspot.my - more updates before mid Oct.  Hopefully have some ideas to share.