Dark Towers Bring Forth Crisis

As we prepare to move to a new decade, a quick look back to another turning point, 1999, saw the creation of the “Skyscraper Index” by Andrew Lawrence, research director at Dresdner Kleinwort. Since Mr. Lawrence developed it, he can call it whatever he likes but from what I’ve read, it seems more like an indicator than an index.

Here’s why: the theory behind the index is that the desire to build the world’s tallest building is usually a precursor to an economic downturn in the place where the building is located.

Examples include: the Singer and Metropolitan Life buildings before the Panic of 1907, the Chrysler and Empire State Building and the Great Depression, the World Trade Center and Sears Tower before the stagflation of the 1970s and the Petronas Tower in Kuala Lumpur before the East Asian Crisis.

Further proof of the index’s effectiveness is the Burj, currently the world’s tallest building located in that creator of palm tree shaped islands, Dubai. Construction was completed in 2007.

With all of the fantasy surrounding some of Dubai’s development projects it should not come as a surprise that Francis Matthew, the editor-at-large for the “Gulf News”, the largest English-language daily in the U.A.E., has created a “style guide” for his reporters instructing them to avoid the words “bailout”, “default” and “debt-crisis” while encouraging the use of “financial consolidation” and “fiscal support”. When asked about the new rules, Mr. Matthews said, “We’re trying to restrict people from using financially incorrect terms.”

Given that logic, the whole issue with Dubai World’s debt could probably have been avoided if they would have described the Burj as “least vertically challenged” instead of the world’s tallest building thus avoiding the scenario described by Andy Lawrence.

It should also be noted that the next “world’s tallest building” is being built in Shanghai and is scheduled for completion in 2012. It will be called Shanghai World. Given what just occurred on the banks of the Persian Gulf, if they can’t stop construction maybe they can at least change the name.

Not showing any signs of impending doom, the National Bureau of Statistics in Beijing announced last Friday that the Middle Kingdom’s GDP for 2008 was 31.405TN Yuan ($4.6TN), about 4.5% higher than the previous estimate of 30.067TN Yuan putting YoY growth at 9.6% vs. the 9.0% original estimate.
These numbers also appear to be “cleaner” than earlier thought with regard to the nation’s carbon footprint as the same agency said that energy use was 5.2% less per unit of GDP than previously reported.
Services also seemed to gain as a proportion of total GDP with the revised number equal to 41.8% vs. the 40.1% originally reported. This is still a bit away from the 70% of GDP that services comprise in many Western economies.

With that type of growth, it could be possible for China to surpass Japan as the world’s number two economy as early as 2011.
Speaking of “11”, Li Yizhong, China’s Minister of Industry and Information Technology, said that the target rate of growth for industrial production is 11% for next year which should allow China to maintain the nation’s growth at 8%. Some experts believe 9% growth in 2010 is well within the realm of possibility.

Jim Delaney

KL Stocks - Apex & Salcon

China at Copenhagen - 恶人先告状

Getting Ready For 2010

KL Stock - Keladi

KCPO:- Watch Out for the Bear - 28/12/09

Last week I was uncomfortable with the up moves as it was not accompanied by the indicators at the same time and I advised of taking profit if prices go 5 points below the previous day low.

The indicators have now turned ugly as the MACD continues its descent while the Stochastic has crossed down again and it is going towards its 50's signal line. The ADX which is above both the D+ and D- has now started to fall. This is usually a signal telling us the prior trend has ceased, at least for the moment now. You should also start to take note that the MACD has formed a bearish divergence. This is telling us the big boys in this market have been faking their bullishness, they may be just luring more fools in so that they can sell off their positions at a higher premium. But since the MACD is still relatively "high" above its zero line, I would suggest you keep an eye on this one as they may put in a few more attempts on the same tricks by pushing prices higher. Until MACD forms a higher peak then its last peak, thus erasing this divergence, then you may go back and rest easy.

If you had shorted the market when it broke below  the upper Bollinger Band, then place a stop at 2530.

 

The weekly chart remains bullish as prices maintain above the upper Bolliner Band and the MACD is still rising. The Stochastic has now entered into its "overbought" zone. But since the ADX has been rising and now has crossed up a falling D- which is usually a more bullish buy signal. So I would emphasize more on the MACD .

So again as like the previous week, the weekly chart remains bullish while the daily chart has shown signs of weaknesses. So like as in the case when we are unsure of the market - either we stay out or we trade small. But I would be more cautious now as the USD has been strengthening which is usually unkind to most commodities.

FKLI - This Market May Be Getting Ready For a Big One- 28/12/09

The daily ADX continues to descend lower and now it is at a miserable 14's. Though last week triggered another new short signal, but price has not gone down. But neither it was  stopped out.

An usually more reliable signal to handle such difficult market situation would be to watch out the D-. It would need to expand outward to go above its prior peak (as marked out) in order to get a confirmation for another sell signal. On  the other hand if the D+ is to expand outward and go above the prior peak of the D-, then it would be taken as a new buy signal. But you should take note the MACD has already crossed down its zero signal line, so a bearish inclined mentality would be more prudent.

The weekly chart is getting increasing bearish as prices are unable to climb back up above the upper Bollinger Band while the negative MACD continues its descent. The Stochastic has crossed down its 80's signal line which offers an initial sell signal.

Overall this market's readings are continued to deteriorate as its daily and weekly indicators are negative. But since we are now at the end of the year and with holidays abound, the market has not taken any directional moves yet. So I would think  you should also leave this market for the time being and come back after the new year . But having said that, it does not mean you should ignore this market completely,  with the extremely lowly ADX and the multiple time period bearish divergences, I would say an excitable and profitable time would  arrive soon.

If you are still in the earlier short positions, keep 1269 as stop.

KCPO - Be ready to take profit - 21/12/09

This market staged another up move by breaking above the upper Bollinger Band . Take note  that though the Stochastic has only confirmed the buy on the next day, but so far the MACD has not offer a similar confirmation. But at least we have the ADX rising again.

It is now within striking distance of our next target of 2650. So I would NOT be engaging a large position at around here. Place stop at 2560 or 5 ticks below last day's low to protect your profit.

The weekly chart is still as bullish as ever. Prices remain above the upper Bollinger Band and both the MACD and the  Stochastic remain positive and continue to rise. Maybe you would have to watch out would be the Stochastic has now gone into the overbought zone. The weekly ADX has also been rising which may cross up the falling D- soon. I usually take this type of crossing up as a more bullish signal than other types of cross ups.

Summary:- the weekly chart is getting even more bullish than ever, but the daily chart does NOT look so as it is already near its next target. So I would get ready to take whatever profit on the table and wait for the next signal which may offer more assurances for the bull to continue onwards.

FKLI - Watch out for new sell signal again 21/12/09

The flat ADX and the oversold Stochastic last week kept the market inside the range as marked out by 2 horizontal lines. Now we are having another classic confirmation of a range bound situation as the MACD has started falling again while the Stochastic is rising. As the MACD is now almost fallen to its zero signal line, I think you should maintain a bearish stance on this market.

Last week our stop was hit , so the earlier shorts were closed. Some of us may had engaged some new long positions as prices closed above the lower Bollinger Band which I usually take as an initial trading signal. And these long positions would had been stopped out when prices went below the lower Bollinger Band on Thursday. This kind of frustrating trades usually happen when the ADX is flat or low.

I would re-engage some new shorts position at 1258 as when price goes below the lower Bollinger Band again next. Of course I would prefer to see the Stochastic to fall again to confirm the new weakness. Another confirming signal I would be watching will be the D- should break above its previous peak as marked out a horizontal line at the chart. With that, we could be having the first signal that a trend is back in the market. Place stops at 1267.



The weekly chart is getting more bearish as price is unable to climb back above the upper Bollinger Band. Both the MACD and Stochastic are continuing to fall. The Stochastic may cross down its own 80's signal line which I would call it as an initial sell signal.

The US Dollar has made its bullish comeback as I had been forewarning for the past few weeks. A strong USD is usually bad news for stock markets. And you should not forget the existence of the multiple bearish divergences found in this chart, so you should watch out for any new sell signal that may come out from this market.

KL Stocks - D&O and Fitters

KCPO - Let's Wait For More Signs 14/12/09

My last week's "overbought" observation seems to be a fair opinion as this market started to retrace. It closed below the upper Bollinger Band and took out our stop in the process. I would take the closing below the upper Bollinger Band as an initial sell signal. The Stochastic has also crossed down its 80's signal line which is complimenting my sell decision. The MACD has also crossed down. But as it is still relatively "high" from its zero signal line, I would continue to monitor its descent for a more reliable signal. The ADX has turned flat and since it is now at above both the D+ and D-, I would call that as an end of the prior trend.

Again the weekly chart does not support any selling. Both the Stochastic and the MACD remain positive and rising. Prices manage to stay above the upper Bollinger Band. The ADX is still maintaining its upward movement, all of which are telling us the bull is still in control.

So since the weekly chart does not support the daily bear yet, I would want to wait for more sign before deciding the next cause of action. Meanwhile I would be a little bit cautious. Place your stop at 2550.

FKLI - Waiting For a Big Bash Down ? 14/12/09

  With the ADX has been lying flat at 18's which is telling us there is no trend in the market, prices generally remain within the range  within 2 horizontal lines as marked out last week.  We would have to pay more attention to the Stochastic which is now got a bit oversold. There is some possibility that we will get some minor rebound on the strength of the overnight DJIA . On the other hand you should pay attention to the MACD which has now almost fallen through its zero signal line.  I usually take that as a more bearish sign. So I would place my stop at 1258 just in case the market reverses but add on more shorts at 1250.

 

The weekly chart has deteriorated as price has closed below the upper Bollinger Band for the first time since  the bull commenced  its current run on April.  Both the MACD and the Stochastic  are negative and falling. Another early sell signal would be when the Stochastic crosses down its 80's signal line. The weekly ADX is also flat as its daily's which is not confirming any strong trend.

So now we may have the weekly chart backing the already bearish daily chart, you should tune your mental state from a bull to a bear. As I have been forewarning on the return of the USD's bull which has already  been confirmed last Friday , you should start to be cautious on stocks side.

BRIC ? How About The PIGS ?

Portugal, Italy, Greece and Spain (PIGS): Cracks in the European Union
Cracks in the European Union are getting alarmingly obvious.

First, the news:

LONDON (MarketWatch) -- Greece on Tuesday [Dec. 8] became the first country in the 16-nation euro zone to see its debt rating cut to below single-A ... sending Greek shares and government bonds sharply lower...

And here's an excerpt from a study titled "Cracks in the EU" published four days ago, on December 4, in the new issue of our monthly Global Market Perspective:

The recent earthshaking announcement from Dubai World indicates that the U.S. is not alone in dealing with an overleveraged economy. In fact, many countries are in more dire straits than the U.S. As with real earthquakes, the financial aftershocks of Dubai World’s semi-default will be felt far and wide, particularly farther to the north in Europe.

Some of the weakest European countries have their own acronym, which runs counter to the positive overtone of the BRIC economies (Brazil, Russia, India and China). They are collectively called the PIGS (Portugal, Italy, Greece and Spain). Each of these economies has problems, but none more so than Greece. It has the least-loved bond market in the EU, as evidenced by its having to offer the highest interest rates. It also has the lowest bond rating in the union and the highest debt-to-GDP ratio at over 91%.

Many of Greece’s problems stem from problem banks. Greek banks poured money into the capital-starved Balkans to take advantage of the higher earnings potential. However, now that the Balkan economies have stopped growing, the potential for losses is staggering: Banks have extended loans to the region equal to 20% of Greece’s GDP. So, in 2008, Greece followed virtually every other nation as it bailed out its banks that weren’t smart enough to see a recession coming.

The Greek bank bailout cost 28 billion euros, which is equal to 10% of Greece’s GDP. Was it enough to prevent further bank problems? The President of the National Bank of Greece thinks so, as he recently stated that the naysayers are wrong and that the “rumors [of default] are exaggerated.” It reminds us of Bear Stearns CEO’s comment, “There is absolutely no truth to the rumors of liquidity problems,’’ six days before Bear Stearns was acquired before it had to declare bankruptcy.

Further problems are on the horizon for Greece with its budget deficit projected at 12.7% of GDP this year (4 times the EU limit). Greek businesses are hurting from a stronger euro, which has crimped tourism. Construction and shipping, of which Greece claims 20% of the world’s fleet, have also been slow due to the global recession. Add to these problems the fact that Greece needs $75 billion this year to meet expenses and for debt repayments. This leaves higher taxes and loans from the IMF or EU as the only likely stopgaps.

Both the stock and bond markets in Greece suggest economic weakness is dead ahead. The Greek stock market has rallied in corrective three waves with two equal legs up from its March low. And it’s already fallen 25% from its October 15th high. Investors in the Greek bond market demand almost 2% more from Greece than they do from Germany on a 10-year bond; investors see a fracture in the EU. The EU has stated that it won’t let Greece default, but it’s clear that investors have concerns.

U.S. investors should remember that Greece is simply one nation of many that are likely to produce further shocks to the global economy. Therefore, capital safety still seems to be the best option for most investors, while speculators may want to focus on the PIGS, and Greece specifically, for downside opportunities.
 
By Vadim Pokhlebkin

KL Stock - Gadang

KL Stock -Choobee

China, stop bitching !

By Michael Pettis

Mainland China's foreign reserves surged to a record US$2.13 trillion at the end June2009, confirming concerns that speculative capital is flooding into the nation to bet on rising asset prices and a quick economic recovery. Reserves rose US$178 billion in the second quarter, the biggest quarterly increase on record and up from the US$1.95 trillion yuan at the end of March. Most of the increase was driven by the very large trade surplus and smaller but still high net FDI inflows, plus of course returns on the existing portfolio. However, there is the unexplained portion of the increase in reserves, which serves as a proxy for hot money, has turned from negative in the first quarter to very positive in the second.

Hot money is pro-cyclical, and its effect will be to intensify growth in the short term, even as it increases volatility and makes monetary policy more difficult. China's central bank must recycle the net surplus on the current account and the capital account, and with the very high current account surplus, China would be creating a huge amount of domestic money just from that source. The fact that it is also running a large capital account surplus makes the central bank's monetary management that much more difficult. As long as this fiscal-stimulus-induced boom continues, hot money inflows will heat things up even more.

Does the fact that China has huge reserves mean that they will be buying loads of US Treasuries? Is China still funding the US deficit? Most people will not be differentiating between the US fiscal deficit and the US current account deficit. China is mainly funding ONE of them, not both of them altogether. When we take things and argue, we must be clear on the details because we end up revealing how shallow and little we know of the subject matter.

Goldman Sachs Group Inc. estimates that US government borrowing may total US$3.25 trillion in the year ending Sept. 30, almost four times the US$892 billion in 2008, to finance the budget deficit. Here is an example of warped thinking and a poor grasp of economics : “China’s reserves will allow the U.S. to run a higher fiscal deficit than other nations,” said Bilal Hafeez, the London-based global head of currency strategy at Deutsche Bank AG.

That is incorrect and flawed. The fact that China’s reserves have surged will in no way make it easier for the US to fund its fiscal deficit even though China has no choice but to invest these additional reserves in US Treasury bonds. Besides valuation changes and interest income, there are two reasons for the increase in the reserves – the very high trade surplus and net capital inflows into China. Take the second reason first. If money flows into China for investment purposes, it must flow out of somewhere else, and that somewhere else for the most part means the global pool of dollar savings which would anyway have been available to fund the US fiscal deficit directly or indirectly. China is acting like a unique bank that takes risk-seeking money and funnels it into low-risk assets. The USA profits from this intermediation while China runs a significant negative carry.

What about the dollars generated from the trade surplus and invested into US Treasury bonds? Won’t that help the US fund its fiscal deficit? Again the answer is no. The US government is not borrowing for abstract reasons, but rather is borrowing in order to spend locally to generate domestic employment. The amount of borrowing it needs to generate a fixed amount of domestic jobs is correlated with the US trade deficit, because it is through the trade deficit that domestic consumption “leaks out” to create jobs abroad. The higher the trade deficit, in other words, the more the US government needs to borrow to generate a fixed number of American jobs, and so the fact that China is reinvesting the dollars generated by the trade surplus with the US does not make it easier for the US to borrow since it simultaneously requires the US to borrow more. China does not fund the US fiscal deficit. It funds the US current account deficit, and it has no choice but to fund it. If the US wants China to buy US$1 trillion of new bonds every year all it has to do is ensure that the US runs a US$1 trillion trade deficit with China every year.

China may continue to bitch and scream about the Fed's printing press and the plethora of US Treasuries, but they will have to continue to buy and fund the US because the flip side of the coin does no one any good.

Will the USD Bull Kicks "Experts" In The Teeth ?

I have been a USD bull since early September which firmly places me among the world's smallest minority of market players. I must say it is sometime not very pleasant as some would ridicule me for my views. This is especially so when gold has been rallying in such a dynamic fashion. But I  stick to my chart readings and kept my faiths.

The day when the Dubai World broke its default news, I had my "Spiderman sense" tingling that USD may be finally coming back. As the USD is always considered as a risk currency. Friday it tried for another upside break which went to test its prior fractal high. The next few days would be extremely interesting to watch. The 'experts' put the Friday's upside action on the US bullish employment figure. But I personally would think it could be more to do with a possible meltdown at the North Korea due to its government's daylight robbery of its people'. It could trigger a rebellion which would be a havoc for the South and China. (refugees, civil war, lawlessness etc) 

Of course those are the "fundamentals" side of the story, technically the USD Index daily chart is getting more interesting as the earlier mentioned (1)testing its prior fractal high of 75.88. If we can see a daily closing of above this level, then I would think the bull is back in business. As at now, (2) it is already closed above the upper Bollinger Band. The Stochastic is rising. (3) Crossing the 50's signal line would be another bullish confirmation. The MACD has also turned positive and rising. I would (4) like to see it crossing up above its zero line for a more reliable confirmation of the bull. (5) Another bullish item would be the D+ which has now crossed above the D-. If we can see a higher high on the coming days, it would meet Wilder's extreme rule for a buy. In both the Stochastic and the MACD, a bullish divergence has already formed and maybe acting it out its effect now.

The only " missing link" is the flat ADX which is also 'died' on 12's. This is telling a trend is not confirmed. I would like to see (6) a rising ADX crossing up the falling D- for a confirmation of a new trend. You should watch this one closely.

 
 
The weekly chart MACD has finally turned positive. But it remains 'far' from its zero signal line thus it would be a less reliable buy signal. And take note that it does not register any bullish divergence. The Stochastic has just crossed up its 20 signal line which may be taken as an initial buy signal. And it comes with a bullish divergence. With this in place, I would think the new up move should has much meat to chew on.

Price has also closed up above the lower Bollinger Band for the first time since May this year. This can be taken as another initial buy signal. An item that I would very much to see turning positive is the DMI, but at this moment, the D- is still above the D+ which should be read as bearish. But the ADX is now located above both the D+ and D- and has turned flat since mid October. I would read this as an overbought situation and the prior bear has now lost its momentum.

I am getting ever increasing bullish on the USD bull and I think this bull run would kick many 'experts' in the teeth.

KCPO - Stay with the bull, for the time being -7/12/09

This market did not go any place until on Friday when it gained 84 points. There is nothing much to say about this except maybe the ADX has risen to 37 which is sometime considered by technicians as overbought. But as I have always say here - market may be 'overbought' but they can remain so for days/weeks to come.

If it had not able to break above 2521 ,this market would have been doing a  potentially double tops (26/11 and 13/8/2009) . But since it has successfully closed above that level, its next resistance will be at 2650 and 2799.

The weekly chart is nothing but bullish. The MACD and the Stochastic both continue to rise. Prices stay above the upper Bollinger Band. And most encouraging item would be the rising ADX which is telling us a trend is in place.

So stay with the bull as long as  prices stay above the upper Bollinger Band. Place your stop at  2490.

FKLI - A storm brewing ? - 7/12/09

Though we have most of the sell signals activated last week, I noticed the ADX was falling so I was thinking that we should  not engage in more selling positions yet. And as expected in a falling ADX situation, the market did not continue its prior trend of falling but instead it just holds on.

Now we have the Stochastic turning positive while the MACD continues its fall. This is again a classical sign of a sideway market where 2 indicators contradict each other. Since the stop of 1278 was not triggered last week, so we remain in the short positions. This week I would again place my stop at 1278 . I have drawn 2 horizontal lines marking out its recent range, any breakup or breakdown would be meaningful.

Please pay attention that the and the ADX has already fallen below 20's and Bollinger Band has started to squeeze, both are warning us that a major violent move should come forth soon. Since there is the multi periodical bearish divergences at the MACD, so the more logical opinion  would be to pay more attention to the sell side.


Again the weekly chart is not supporting the sell side story at the daily chart yet. Price is still able to hold above the upper Bollinger Band and D+ stays above the D-. Though the MACD has turned negative but it is still relatively "high" above its zero line, thus rendering it as an unreliable sell signal. The Stochastic is also able to hold above the 80's signal line which is not offering  a sell signal. Since the ADX has already turned flat , all I can say is the bull is currently taking a rest.

Summary - since the weekly chart is NOT supporting the daily chart's bears, so I would not engage too big a position, yet. But you should stay alert as the Band squeeze and low ADX may be just be the beginning of a new phase.

And I am getting more convinced that the USD will have a merry Christmas which if so, will surely bring tears to the equities market.

I think the US Property Market has fully recovered

In Malaysia when we buy certain property, the developer may give you free this and free that (usually furniture/kitchen equipment etc) to sweeten the deal. No sir, not in America. There they only give  away a can of pork and bean. Indirectly confirming how strong is their property market now. "You want to buy, buy lah. Otherwise there will be others who are hard up on our can of bean ! And it is for  a limited time only"

Will Islamic Financing able to stand up to Test?

Dubai Crisis Tests Laws of Islamic Financing

By HEATHER TIMMONS

NEW DELHI — The debt crisis in Dubai is about to test one of the fastest-growing areas in banking, Islamic finance, and put the city-state’s opaque judicial system on trial, according to bankers and experts in finance.

The Dubai International Financial Center. Financiers were surprised when the emirate moved to freeze some debt payments.

Many loans and bonds that comply with Shariah, or Islamic law, were issued in recent years by Dubai World, the investment arm of Dubai, and other Persian Gulf companies as oil-rich Middle East nations increased spending, and the global credit crisis fed debt investments in emerging markets.

But, because there have been few major defaults in this market, there is little precedent for arbitrating the unique terms of these instruments.

That is likely to create many legal issues for investors in Dubai World, which sent jitters through global markets by seeking to delay payments on $59 billion in debt. Abdulrahman al-Saleh, director general of Dubai’s finance department, said Monday that Dubai World was not guaranteed by the government, and the creditors would need to “bear some of the responsibility” for the company’s debt.

Shariah-compliant investments prohibit lenders from earning interest, and effectively place lenders and borrowers into a form of partnership. Yet there are no consistent rules about who gets repaid first if a company defaults on such debt, said Zaher Barakat, a professor of Islamic finance at Cass Business School in London.
The first test of what that means for investors may happen around Dec. 14, when payments on a $3.5 billion Shariah-compliant bond owed by Dubai World’s real estate subsidiary, Nakheel, come due. If Nakheel defaults on its payment, legal proceedings may be initiated.
It is unclear what may happen next. Nakheel bondholders have formed a creditors’ group representing more than 25 percent of the outstanding debt, a legal adviser to the group said Monday.
Holders of these bonds “are going to argue that they are in the secured position on the underlying asset,” said one bank investor involved in the issuance of some of Dubai’s Shariah-compliant debt. That means that bondholders could insist on being repaid before banks, upending the traditional bankruptcy hierarchy.
“No one has tested the legal system or the documentation,” a lawyer briefed on the situation said.

The 237-page prospectus for the Nakheel bond provides little clarity. In the case of a bankruptcy by Dubai World or Nakheel, bondholders have no guarantee of “repayment of their claims in full or at all,” it said. Under Dubai law, it added, no debt owed by the ruler or government can be recovered by taking possession of the government’s assets. 

A default would also pose a major new test for Dubai’s courts, which have never handled a major bankruptcy of one of the government’s own companies, lawyers and bankers said.
Unlike its neighbors, Dubai has kept its judiciary system separate from the United Arab Emirates Federal Judiciary Authority. The decisions of the Dubai courts, which are controlled by the emirate’s ruling family, can be fickle, say lawyers in the region.
For example, in order to bring a court case against a government-owned or government-run entity, a corporation or individual needs to get permission — from the government. In the prospectus for Nakheel bonds, investors are warned that “judicial precedents in Dubai have no binding effect on subsequent decisions,” and that court decisions in Dubai are “generally not recorded.” 

Global issuance of Shariah-compliant bonds and loans grew 40 percent in the first 10 months of 2009 from a year ago, Moody’s Investors Services said in a November note to clients. The total amount of Shariah-compliant debt outstanding is estimated at about $1 trillion, up from $700 billion just two years ago. About 10 percent of Dubai’s $80 billion debt load complies with Shariah, bankers and analysts estimate.

Malaysia was traditionally the hub of Islamic finance, but much of this new activity has been centered around Dubai, and foreign and local law firms and banks there helped the emirate raise much of its debt. Dubai even has a school that turns students into “certified Islamic finance executives,” whose stamp of approval is required for an instrument to be deemed Shariah-compliant.

The surge in Islamic finance has led to hiring sprees at banks, and given rise to a series of new financial indicators like the Dow Jones Islamic Market index. Hoping to appeal to the Middle East’s huge sovereign wealth funds, even non-Islamic institutions have started to raise money using Islamic finance.

In October, the British Treasury drew up rules that would soon allow Britain to issue Shariah-compliant government debt. The same month, the World Bank issued $100 million in Shariah-compliant bonds.

KL Stock - Karyon

KCPO - It should hold -30/11/09

Last week if you had applied the Yesterday's Low Minus 5 points to take profit method, then you would take not your profit on last Friday. Otherwise, use the upper Bollinger Band of 2430 as your stop.

At the daily chart, there is actually nothing yet to tell us to sell as MACD and ADX still continue to rise. The only item is the overbought Stochastic which if it start to fall and crosses down its own 80's signal line, there may a correction.



The weekly chart is also bullish because the Stochastic is rising above its 50's signal line while the MACD is crossing its own zero signal line. Price is maintaining above the upper Bollinger Band and the D+ is still expanding. Perhaps the most promising item is the ADX which is rising. I think CPO may be going to do its final bullish minor cycle before calling its end.

Like all other commodities, you should watch the USD closely as it may affect CPO's prices.

FKLI - There is NO Black Swan in Technical Analysis 30/11/09

Did I foresee the collapse of Dubai World ? Yes and no. Yes in the sense every time when a government and their GLCs or politically well connected crony companies get overheated in their ambitions, we should expect troubles of crisis proportion to follow soon. And history just keep on repeating itself. Just think back what Dr. Mahatir's administration did (build and build and they will come policy) before the 1997 financial crisis. Dubai World is no different this time. Any fundamental analysts that worth their education should able to foretell the investors to take cover long ago.

And no, in the sense that even though I knew about what is brewing in Dubai, I am not able to tell you when it is going to blow up in our face. BUT, applying technical analysis, the multiple periods bearish divergences have warned me against adopting an overly bullish stance. So I did NOT buy the 'recovery" stories that the fundamental analyst crowds have been peddling for the past few months.

One thing you would have noted again by the current fiasco is that many of big name banks are getting hurt again. Among them are HSBC, RBS etc. Many small business men would tell you how difficult for them to borrow a few dimes from these banks for their REAL businesses. And yet these big boys seem to be so stupid (I actually would call them idiotic) to get burnt again and again by those fairy tales loans.



In the daily chart (I am using the next month chart as November chart expired by the time you read this) , the Stochastic has just falling below its 50's signal line which is another major sell signal. And the negative MACD is continuing its fall and also just gone below its prior trough which I usually take it as another major sell signal. Another damaging confirmation is the D- has just crossed above the D+ which is telling us the bull cycle is gone. But of course we need the coming Monday's bar to do a new lower than Friday's low (Wilder's extreme point trading rules) , seeing what happened last Friday on overnight DJIA , this should not be a problem. So if it does that, there is another sell signal. But having saying all that, we would need to see the currently falling ADX to rise again to confirm a new trend in this market.

Any breaks below the daily Bollinger Band of 1253 would flash another major sell signal. 1253 is a very important number as it is also the weekly upper Bollinger Band which upon breached is usually taken as another major sell signal. Other major sell signals would be MACD crossing down its zero signal line. Meanwhile place your stops at 1278.


The weekly chart still has not confirmed a new sell signal yet as the Stochastic , though negative is still above its 80's signal line. But if it is crossed down , then you may take it as an initial sell confirmation. The other item to watch out for will be a weekly closing of below its upper Bollinger Band of 1257. The ADX has turned flat for the past few weeks which I had interpreted as the market has lost its momentum. If it is to start falling, then I would read it as the end of the prior trend. So maybe you should keep an eye on this item too.

This market may be finally playing out the numerous bearish divergences it has been registering in its daily chart. If that is to be, then market may really see its pants drop.

And you think everyone is hating America

Debt Problem? What Debt Problem?


The United States may be hurtling headlong into a debt disaster, but that didn't seem to bother creditors today.

Sure, the national debt now exceeds $12 trillion, and simply servicing that mountain of IOUs is going to cost almost $1 trillion a year in a decade. Still, bidders today drove down the price of two-year Treasury notes to an all-time low, as though the U.S. isn't facing a fiscal reckoning of seriously unpleasant proportions.

KL Stock - Whitehorse

Gold at 5,000 - A modern Day Children Story ?

No One is Buying Real Gold, They’re Just Betting On Higher Gold Prices

Remember all those articles came out when crude oil was going up ? Things like the end of the oil reserves/oil peak/world is running out of oil ? Remember how they suddenly disappeared when crude oil crashed ? Do you see the similarity with "gold - the ultimate hedge against hyperinflation/demise of USD etc" stories that have been going around these days ? If when USD is to rally as I "predict", these gold children stories will disappear like the morning dew:-

This is a remarkable story:-

The LA Times offers us an interesting look at the divergence between the activity of gold speculators and that of the buyers of real gold, be it coins or jewelry. The data is based on the third quarter 2009 versus Q3 ‘08…

>From the LA Times:

Data from the World Gold Council show that the surge in the metal’s price to record highs ($1,146.40 an ounce as of Friday) hasn’t been accompanied by record purchases of the real thing.

The council’s report put total global purchases of gold in the quarter that ended Sept. 30 at 800.3 metric tons, down 34% from the 1,205.6 tons bought in the third quarter of 2008.

Buying was down in the third quarter versus a year earlier in every major category of gold consumption, including jewelry (the biggest single source of demand), industrial use, coins and purchases by exchange-traded funds.

Now this can be a price-demand issue, higher prices for the raw material keeping buyers away at the retail level…

Gold bought as jewelry, for example, reached 673.3 tons in the third quarter of 2008, when gold’s price was mostly below $900 an ounce. In the third quarter of this year, with the price mostly above $900 and on its way to $1,009 by the quarter’s end, the amount of the metal bought as jewelry totaled 473.5 tons, down 30%.

Surprisingly, while the US Mint is continuing to produce, some major mints around the world are holding back:

Interestingly, the Austrian government mint is betting otherwise, at least in the near term: The mint, the world’s biggest producer of gold coins, recently said it planned to cut output by 32% in 2010, figuring that an improving global financial system will slash gold demand from investors.

An analyst from Kitco Metals is calling the rally in gold entirely speculative in the article. At some point, either the real buyers of physical gold come in to chase these speculative bets or the spec guys see their castle made of clouds dissipate.

Either way, the action going into the end of the year will be interesting.

Communists love Capitalism !

In today Sunday Star's numerous essays on the Malaysian Communist leader Chin Peng, this is the most interesting to me and I think it says it all - Capitalism, though with its many flaws and extremes, is the still best system in the world. Not only Mr. Chin Peng depends on it for his old age, his political masters - China is now probably the world's current greatest capitalistic nation:-

Asked how he managed financially, his answer is wonderfully ironic:

“Several of my close comrades and I pooled the money we received after the Peace Accord and dabbled in the Hong Kong stock market. Our funds were managed by a trusted former guerilla who was meticulous and good at making money from the stock market.

“We used some of the money to rebuild our lives and reinvested the rest in stocks and investments funds.

“I am not good in business but my friends are. We managed to avoid losses even when the market crashed in 1997 and during the current recession period. The returns have been good enough to see me through in life as an independent person.”

In other words, a group of die-hard communists were saved from a life of penury by the most capitalistic of instruments, the stock market!

FKLI - It is getting hideous ! 23/11/09

Last week I mentioned that we should dump the long when the market opens. It was not a bad move as the market has been falling continuously for the next 4 days. By Thursday it even triggered a new short when it closed below the upper Bollinger Band. And the daily chart is getting more and more hideous as another bearish divergence has just completed, adding one more to the previously already multiple bearish divergences. The Stochastic has turned negative and next to watch out for is when it crosses down the 80's signal line which may be taken as another sell signal. The MACD has also crossed down and begin falling. But it is still relatively "high" above its zero line , and so is the D+ which is still above the D-. Both of these are making the sell signal not too attractive YET.



The weekly chart finally see the MACD turned negative. But the rest remain positive as prices stay above the upper Bollinger Band, the Stochastic is still above its 80's signal line and the D+ remains above the D-. You should keep an eye on a possible weekly closing of below the upper Bollinger Band at 1255 which can be taken as another initial sell signal.

Meanwhile keep a stop at 1278 for your shorts position.



Despite helps from the newly incoming Maxis, FKLI is getting increasing perilous. The multiple bearish divergences found at its daily chart will have to be resolved soon and by that I would think a fall to 1180, 1110 or 1060 is expected. The longer the government is delaying this correction, the worst it would become when the dam gives way. I would suggest you should keep an eye on the USD, as long as it is going down, the equities market should be able to hold up. But the moment the USD is back on its feet, then equities should see its end of story. And I have been very bullish about the USD for some weeks now.

KCPO - Market blows up as anticipated - 23/11/09

Unlike fundamental analysis, the beautiful aspect of applying technical analysis to the market is that it can usually foretell you what is likely to happen next. I have been taking about a possible new violent move for the past few weeks on - " The beautifully squeezing weekly Bollinger Band is signaling that a major move may be forthcoming ." This market just blown upward on last Monday and made a tiny gain of 150 points within a week.

The Stochastic and the MACD continue to rise. The MACD is above its zero signal line which make t more bullish. And the most important item is that the previously sleepy ADX has now risen and crossed up the falling D-. It has now reached the 20 signal line which is confirming the trend. But the toppish Stochastic would probably mean this market see some retracement or consolidation in the coming week. I would place my stop now at 2330 or last bar low minus 5 to take profit.



The weekly chart is also bullish as the MACD has just turned positive and crossed up its own zero signal line which is a more solid buy signal. The Stochastic remains upward. Prices has now closed above the upper Bolliner Band. The D+ has also crossed up the falling D- which may be interpreted as another buy signal. The previously falling ADX jas now turned flat, signaling a possible reversal of the trend.

There could be a possibility that this market may go back to test its previous peak of 2799, but somehow I doubt it as the currency markets do not seem to support this scenario. If my reading that the USD should strengthen soon, equities and commodities market would soften. Since the picture is not too clear on the magnitude of its next move, I will just ride it and keep a very clear mind on my stops.