Selling could be as big a gamble as holding out for bigger gains.

Gold and shares are booming, so is it time to sell?
The Coppock Indicator, which has signalled past rallies, points to the bull run continuing. Selling could be as big a gamble as holding out for bigger gains.

By Paul Farrow
Published: 10:52AM BST 12 Oct 2009


Asked if he was selling gold, a leading fund manager said: 'Absolutely not. I think everybody should have a bit of gold' I'd imagine it was a dilemma for Sir Alex Ferguson, the Manchester United manager, last summer: wondering whether it was time to cash in on his biggest asset, Cristiano Ronaldo, or to hang on to to him for another season.

He cashed in to the tune of £80m and so far it looks like a shrewd decision. Knowing when to sell is arguably more crucial than knowing when to buy.


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Is the first-quarter rally sustainable?

It's a conundrum that may be on many people's mind right now. The economy is on the up, shares are up, gold is up and even house prices have returned to late 2008 levels. Yet you get the feeling that everyone is expecting a reality check sooner rather than later and that the rises will turn out to have been froth.

The fear is that underlying problems that manifested themselves during the recession will linger long after the growth figures have turned positive and that these problems will drag us back down.

As one property consultant proclaimed last week: "For anyone considering selling their home, now is the time to do so. It is a window of opportunity that may soon shut." Well, he would say that, wouldn't he, but the pessimistic property commentators outnumber the optimistic ones by some margin.

The steep rise in share prices will also get investors asking themselves whether now is the time to take some profits. However, a couple of reports suggest that the market may yet prove resilient.

The Coppock Indicator, which is less about selling and more about buying, might dissuade investors from taking profits now. The story goes that in the early 1960s the Episcopalian Church in America asked Coppock, an economist, to come up with something that might spot long-term buying opportunities.

Coppock thought the stress caused by a bear market was comparable to bereavement. He asked the church how long, on average, a period of mourning might last; the answer, apparently, was between 11 and 14 months.

The indicator (a 10-month weighted moving average of the sum of the 14-month rate of change and the 11-month rate of change in the relevant index, if you really want to know) produces a buy signal when it is both below zero and turning upwards from a trough.

It does not have a 100pc success rate but in recent times the indicator signalled rallies in 1988 and 1994. The indicator started to turn a couple of months ago and is now rising.

Meanwhile, Ned Davis, a well-known investment research firm based in the US, reckons the bull market, although slowing, still has legs. Its latest bulletin concludes that "with the global economic recovery in its early stages, and absent threatening levels of interest rates and valuations, the six-month horizon does not include another bear market".

Its calculations suggest the climb over the next six months will be more gradual than the humdinger of a run the markets have experienced since the March lows.

Gold investors are another bunch who have enjoyed rising values. When it comes to gold, it would appear the bears are in hiding, but the endless queue of bulls insist the case for holding gold remains intact. Ian Henderson, one of Britain's leading fund managers, is not one of the pundits with a vested interest, but he is a firm believer in the asset's diversification qualities.

He does not think the gold price is going to storm ahead but ask him whether he is looking to liquidate his exposure to gold and the response is firm: "Absolutely not. I think everybody should have a bit of gold."

The upshot is that Man United couldn't afford to turn the record £80m offer for Ronaldo down but I doubt the recent gains will be enough to tempt home owners and investors to cash in. For most it will be as big as gamble to sell as it would be to stay put.

Tory baby bond plan misguided
Labour promised to turn us into a nation of savers; now the Tories have promised to do the same. They want to reverse the effects of Gordon Brown's pensions tax raid and get the country saving again.

All very commendable, although George Osborne's speech was thin on the detail of how he hopes to persuade the masses to salt more of their money away. One measure he did mention will mean we actually save less for our future. Mr Osborne wants to ditch child trust funds (CTFs) for all but the poorest children because "handing out new baby bonds to the rest of the country is a luxury we can no longer afford".

He's right, of course; we can't afford them. Besides, CTFs benefit only those families that have enough spare cash at the end of the month to put some aside for their children. But if the Tories go so far as to scrap CTFs for the majority, they might just as well get rid of them altogether.

The party says it "will fight for the poorest" but, if it wants to help in any meaningful way, child trust funds are not the answer. These funds will end up being an almost worthless pot if the only contribution has been the Government's free handout of £500. If the full £500 was invested and grew at 5pc year a CTF would be worth around £1,000 after 18 years.

That would barely cover the fees for a term at university, let alone be enough for a deposit on a first home. It might be enough for a second-hand banger and a year's insurance – but it won't make an iota of lasting difference to an 18-year-old when they venture out into the adult world.

http://www.telegraph.co.uk/finance/personalfinance/comment/paulfarrow/6305438/Gold-and-shares-are-booming-so-is-it-time-to-sell.html

Dow breaks through the 10,000 barrier

The Dow Jones broke through the critical 10,000 mark for the first time in a year last night – raising hopes that a fully-fledged bull market is now in train

By Edmund Conway, Economics Editor
Published: 8:03PM BST 14 Oct 2009

Things are looking up on Wall Street. Shrugging off warnings from economists that Britain and the US could fall victim to a W-shaped recession, markets hit their highest levels since the height of the crisis just over a year ago. London's benchmark FTSE 100 index rose by almost 2pc, while in Wall Street the Dow Jones Industrial Average pushed briefly above the psychologically important 10,000-point barrier.

The FTSE was 101.95 points higher at 5,256.10, more than reversing Tuesday's 1.1pc slide. The index has now rallied by 52pc since hitting a low in March, and is almost a fifth higher than at the start of the year. The Dow Jones was up by 1.1pc in late trading at 9979.74 points.

It came after the Office for National Statistics reported that although UK unemployment is still on the rise, recent months have seen the smallest increases for a year. It said the jobless total in the three months to August rose by 88,000 – smaller than any quarter since last summer, before the Lehman Brothers' collapse. The news helped the pound to a rare increase against other leading currencies, rising more than a cent against the dollar to $1.5953. However, the market's strength owed less to domestic news than an overarching sense that the global economy, having emerged from recession in the summer, is now powering ahead to a full-blooded recovery.

One theory, that growth will be delivered by emerging market powerhouses such as India and China, was underlined by new official data on Chinese exports. It showed that with Chinese investment continuing to increase, its appetite for commodities soared in recent months, while data on exports to neigh-bouring countries suggested that the broader Asian economy is gaining traction.

The news pushed shares in commodity producers sharply higher, among them Rio Tinto, Vedanta, BHP Billiton and oil groups BP and Shell.

International corporate news generated a further boost. JP Morgan's announcement that its profits rose by a phenomenal 581pc in the third quarter to $3.6bn (£2.3bn) lifted financial shares both in the US and the UK. Barclays, Royal Bank of Scotland and Lloyds Banking Group rose amid hopes that they too will report improved activity in recent months, when they update investors.

Analysts said that although the economic forecasts for the coming years, including those issued by the International Monetary Fund earlier this month, remain downbeat, earnings figures from leading companies tell a different story. Philip Gillett, trader at IG Index, said investors had been better-than-predicted third-quarter earnings news.


http://www.telegraph.co.uk/finance/markets/6329242/Dow-breaks-through-the-10000-barrier.html


Comment:  Beware the bull market.  Embrace the bear.

Shares: the winners since April

Shares: the winners since April
Over the last six months the FTSE 100 has risen 31pc, but which companies have fared the best?

Published: 4:16PM BST 12 Oct 2009


Nick Raynor, investment adviser at The Share Centre, reviews the index's performance, highlighting this year's biggest winners and losers and identifies a company with future potential.

BIGGEST WINNERS:
Vedanta up 194pc
Vedanta Resources is a metals and mining group with annual sales of $1.9bn. The company primarily produces aluminum, copper, zinc and lead. Since its low of 743p back in March, Vedanta's share price has increased nearly three-fold to 2191p. The company's performance has been boosted by the weak dollar, coupled with the resurgence in minerals and commodity prices, which has lifted the whole sector.


Barclays

Barclays up 138pc
Barclays' share price has rocketed over the last six months currently trading at 376p, not far off the price levels it was trading before the collapse of Lehman Brothers. The bank chose financial independence over government support and as a stand-alone bank has outperformed its rivals. As a result Barclays' shares were not diluted and therefore rose faster as confidence returned to the market. The old saying, "sell in May and stay away until St Ledger's Day" would certainly have proved costly to Barclays investors. Collectively, from 1 March up to mid-August, banking shares went up over 300%.

Rentokil up 120pc
Rentokil is known as the royal rat catcher, but has many other strings to its bow i.e. the laundry group, Initial. Following a disastrous 2008, Rentokil decided to reorganise its business operations. The company has since delivered better than expected cost savings and its share price has increased almost more than doubled from 53p to an impressive 116.8p. More recently, Rentokil made a surprise return to the FTSE 100.

BIGGEST LOSERS
United Utilities down 9.7pc
United Utilities share price has slowly been falling as investors move from steady performing shares to snap up down beaten shares for value. As a result, United Utilities share price has dropped from 495p back in April to 451p. There are also concerns of OFWAT's forthcoming review, which is likely to have a negative impact on the water sector as a whole. United Utilities may well be forced to cut its dividend, but the company has strongly suggested that no cut will be needed. On the plus side, United Utilities' shares are currently yielding over 7pc.

Reed Elsevier down 7.6pc
Reed Elsevier, provider of journals and textbooks, has seen a large fall in profits over the last six months. Its share price has dropped from 498.5p back in April to 463p, which is believed to be the result of spending cut backs in education publications and increased debt pressure. More recently, the publisher surprised the market by placing 110m new shares in the market. As a result, of this announcement its share price took a 15% hit. Funds raised by the placing will be used to pay off debts acquired from Reed Elsevier's takeover of ChoicePoint.

Thomas Cook down 7.2pc
The travel sector has not had the best year as consumers continue to tighten their belts. Thomas Cook's August trading statement confirmed it was suffering and that swine flu had impacted the tour operator much worse than its rival TUI. Tough conditions in the global travel market have forced Thomas Cook to abandon its operating profit target of £480m for next year, a goal established in the happier times of 2007. Since April Thomas Cook's share price has dropped from 250p to 233p.

http://www.telegraph.co.uk/finance/personalfinance/investing/shares/6308268/Shares-the-winners-since-April.html

HLG cool on insurers, but likes LPI Capital

HLG cool on insurers, but likes LPI Capital
Published: 2009/01/30

HLG Research is not too excited about the insurance sector, but it is telling investors to buy LPI Capital Bhd (8494) because the stock is a "sustainable yield play".

"LPI Capital continues to be well managed even during difficult times and is an attractive investment for yield-seekers and index outperformers," HLG wrote in a report.

The broker continues to like LPI due to its strong management, favourable insurance portfolio, income-protected investment assets, on-going capital management, further industry consolidation and index outperformance.

HLG has maintained a "buy" call on LPI shares with RM12.50 target price. The stock closed flat at RM10.30 yesteday.

LPI is expected to maintain its 8 per cent gross dividend yield, among the highest in Malaysia, from its relatively safe investments, HLG Research said.

"Its investment income is not expected to be significantly eroded by the 100 basis points cut in Overnight Policy Rates since November 2008," the report said.

LPI's management had also committed to sustaining over 100 per cent dividend payout ratio, the research said. The shares have outperformed the benchmark Kuala Lumpur Composite Index by 21 per cent over one year, HLG said.

HLG likes LPI's well-managed insurance portfolio with the strong risk and underwriting management.

"LPI has prudently trimmed exposure to the motor segment with only 60 per cent retention ratio for motor compared to 90 per cent for property insurance," the report said.

Property insurance continues to contribute the highest underwriting surplus due to the attractive pricing structure in Malaysia compares to the motor segment, it added.

LPI's investment returns will also stay resilient since 75 per cent of its investments is held in safe haven instrument that are shielded from the equity market, HLG said.

http://www.btimes.com.my/Current_News/BTIMES/articles/ciho/Article/

Reforms, better earnings boost Malaysia finance stocks

Reforms, better earnings boost Malaysia finance stocks
Published: 2009/08/21

Bank stocks are still a 'buy' but investors have to be selective, says the chief investment officer at Kurnia Insurans

BETTER than expected earnings and the initiation of government-led reforms have given Malaysian bank stocks a big lift, helping the leading ones in the sector outperform the broader market.

Bumiputra-Commerce has risen 77 per cent so far this year, AMMB is up 65 per cent and Maybank has climbed 40 per cent. That compares with the main index's 33 per cent rise and Singapore-based DBS's 50 per cent and Oversea-Chinese Banking Corp's 57 per cent gains.

But recent economic indicators have been mixed. Central bank data show non-performing loans may have bottomed, staying at 2.2 per cent in June for the seventh month in a row, but loans growth has decelerated to 8.3 per cent year-on-year in June from 8.9 per cent in May.

"Bank stocks are still a "buy" but we have to be selective," says Pankaj Kumar, who manages about US$540 million (US$1 = RM3.53) of assets as chief investment officer at Kurnia Insurans Bhd, a local insurance company.

Kumar said he would buy shares of Bumiputra-Commerce, the holding company of Malaysia's No.2 lender and top deal maker CIMB, but avoid Maybank as the lender still faces headwinds from its acquisitions in Pakistan and Indonesia.

"We still see value in bank stocks as the (deal) pipeline continues to be big for fund-raising," said David Ng, who helps manage about US$1 billion of assets as chief investment officer at HwangDBS Investment Management.

Analysts said bank stocks have jumped as earnings expectations ratcheted up in tandem with the recovering capital markets, with most banks delivering April-June results that exceeded expectations due to healthy loan growth and a moderate bad-debts increase.

Bumiputra-Commerce posted a net profit of RM663 million for the second quarter, exceeding forecasts by 15.3 per cent, while AMMB's first-quarter net profit of RM258.2 million was 21.1 per cent above estimates.

BNP Paribas expects the Malaysian government to announce "more favourable policy initiatives" in the second half of 2009 and 2010, after foreign investors shunned the country, and in particular the banking sector.

The Malaysian government has lifted equity ownership restrictions in a bid to inject life into capital markets and draw in foreign investment as well as liberalised sections of the banking and fund management industry.

"As more regulatory impediments are removed, we expect more foreign direct investments," said BNP analyst Ng Wee Siang.

"(We are) still negative on Malaysian banks. The ongoing deceleration of loans growth reinforces our negative view on the sector," said Tan See Ping, analyst at Cazenove Asia.

Tan expects loan and fee income growth to slow sharply and provisions for bad debts to rise as the economy contracts in 2009.

Malaysia's government has forecast that the economy may shrink as much as 5 per cent in 2009. A Reuters poll of 11 economists in July forecast a contraction of 3.2 per cent.

"Our top sell is Public Bank. The current economic contraction and slowdown of loan growth looks particularly negative for (the bank)," said Tan. - Reuters

Comment:  What can one say.  Often the analysts' forecasts are just that.  No one can predict the future with certainty.

Survey: Investors to stick to mainstream investments

Survey: Investors to stick to mainstream investments
Published: 2009/08/26

In the retail space, asset managers believe that clients will focus more on capital protection rather than returns they can potentially earn.

POST financial crisis, investors worldwide will likely stick to simpler and safer mainstream investments for a long time to come instead of blindly chasing high returns, a global survey of asset managers shows.

"Retail clients are likely to display stronger behavioural changes than other segments. Loss aversion will be rife for the foreseeable future. Priorities will change," said Barbara McKenzie, the chief operating officer of Principal Global Investors, which commissioned the study.

"The memory and impact of the recent financial crisis will last longer this time."

The research sought to assess industry sentiment and how the global asset management industry will evolve after the crisis. The survey was conducted on 225 asset managers and pension funds in 30 countries, responsible for US$18.2 trillion (US$1 = RM3.51) of assets as at April this year.

In the retail space, asset managers believe that clients will focus more on capital protection rather than returns they can potentially earn.

Institutional clients, meanwhile, are expected to stress on expected risks instead of the expected returns, the survey showed.

"Simplicity, safety and quality are now the watchwords underpinning clients' investment goals," McKenzie said in a media briefing in Kuala Lumpur yesterday.

Datuk Noripah Kamso, the chief executive of CIMB-Principal Islamic Asset Management Sdn Bhd, said syariah-based investment management will gain momentum riding on this shift in investors' behaviour.

The values of Islamic asset management, which filters out risky investments and stress on the fair distribution of wealth, fit well with investors new priorities, she said.

CIMB-Principal Islamic Asset Management, which manages US$1.3 billion at the end of June, expects to pull in another US$400 million by the end of the year, Noripah said. The company is a partnership between Principal Global Investors and CIMB Group.

http://www.btimes.com.my/Current_News/BTIMES/articles/prinpo/Article/

UMW may reapply for O&G unit listing

UMW may reapply for O&G unit listing
By Francis Fernandez
Published: 2009/09/09

The assembler of Toyota Motor Corp cars in Malaysia will likely submit a fresh IPO application to the Securities Commission by end-month

UMW Holdings Bhd (4588), the assembler of Toyota Motor Corp cars in Malaysia, will likely submit a fresh initial public offer application to the Securities Commission (SC) by month-end to list its oil and gas (O&G) subsidiary, TA Research said in a report yesterday.

The research house, which held discussions with the UMW management recently, said that the group has to update and make several key amendments to the new application in tandem with the changes seen in the group's O&G division over the past year.

UMW, which started its oil and gas business in 2002 currently has projects in 12 countries including Singapore, Thailand, China, Indonesia and the Middle East.

For the year ended December 31 2008, UMW's O&G division posted RM754.66 million revenue, making the third largest contributor to the group revenue, which was dominated by the automotive division, raking in sales of RM10.03 billion.
UMW have been looking to raise as much as RM425 million by selling shares of its O&G unit to the public. It had announced the listing plans in February last year, but stalled on the floatation plan due to weak market conditions.

"The exercise has since been postponed twice, with the second extension from the SC valid till September 30 2009. Although UMW now has less than 30 days to list its O&G unit, the group has not provided investors with any new updates on the status of the listing," TA said in the report.

It speculates that UMW could bid its time, and possibly list the O&G unit by as early as the second half of next year, when market conditions are expected to be much better than now.


http://www.btimes.com.my/Current_News/BTIMES/articles/umwz/Article/

FBMKLCI rises to new high

FBMKLCI rises to new high
Published: 2009/10/14

THE FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) jumped to the year's new high as investors snapped up banking-related stocks today.

The benchmark index closed 13.33 points higher at 1,246.84 after hitting an intraday high of 1,248.14.

Dealers said the Malaysian Institute of Economic Research's forecast that the country's economy would shrink at a slower pace of 3.3 per cent this year, an improvement from 4.2 per cent projected earlier, provided some support.

Rising buying interest in penny and small cap stocks with the return of risk appetite was also evident, they said.

"Follow-through buying by foreign funds in key banking-related stocks such as Maybank and CIMB Group helped the FBM KLCI extend its gain," a dealer said.

At the close, the FBM Emas Index gained 97.57 points to 8,393.58, the FBM Top 100 increased 91.98 points to 8,171.25, the FBM 70 jumped 111.23 points to 8,257.70 and the FBM ACE Index advanced 48.30 points to 4,269.02.

The Finance Index surged 171.58 points to 10,528.24, the Plantation Index gained 43.75 points to 6,031.33 and the Industrial Index added 13.85 points to 2,667.12.

Gainers outnumbered losers by 574 to 174 while 208 counters unchanged and 338 others untraded.

Turnover increased to 1.261 billion shares valued at RM1.655 billion from 939.925 million shares worth RM1.005 billion yesterday.

Among active counters, KNM Group rose four sen to 84.5 sen, SAAG Consolidated added three sen to 23.5 sen and Silk Holdings advanced 5.5 sen to 50 sen.

Time Engineering inched up 1.5 sen to 38 sen, Hubline Bhd-OR added one sen to 11 sen and Green Packet-Warrants gained 5.5 sen to 42.5 sen.

Conglomerate Sime Darby rose seven sen to RM8.69 while finance heavyweight Maybank gained 22 sen to RM6.96.

CIMB Group advanced 16 sen to RM12.32, Tenaga Nasional rose two sen to RM8.25, IOI Corp edged up six sen to RM5.33 and Genting gained seven sen RM7.39.

The Main Market turnover jumped to 1.173 billion shares worth RM1.633 billion from 820.767 million shares worth RM982.236 million yesterday.

The ACE Market volume, however, decreased to 49.662 million shares valued at RM11.937 million from 100.747 million shares valued at RM18.028 million while warrants increased to 28.860 million units worth RM7.071 million from 14.911 million unit worth RM3.664 million.

Consumer products accounted for 51.489 million shares traded on the Main Market, industrial products 284.396 million, construction 59.883 million, trade and services 368.269 million, technology 100.543 million, infrastructure 63.492 million, finance 76.327 million, hotels 4.486 million, properties 145.674 million, plantations 15.498 million, mining 92,200, REITs 2.852 million and closed/fund 133,000.

Bernama

Nestle aims to double out-of-home market share

Nestle aims to double out-of-home market share
By Zaidi Isham Ismail
Published: 2009/10/14


FOOD and beverage (F&B) maker Nestle (Malaysia) Bhd (4707)aims to double its share of Malaysia's out-of-home market worth RM11.2 billion to 70 per cent in the next five years.

Out-of-home business refers to F&B-related businesses that take place out of the home such as buying fast food, teh tarik, coffee and snacks at supermarkets, mamak stalls or five-star hotels.

Nestle executive director Zainun Nur Abdul Rauf said the goal is achievable, in line with an increasing affluence of Malaysians.

"Malaysians spend 35 per cent of their income for in home business such as buying instant noodles and 65 per cent outside of the home on food and drinks.

"The 65 per cent ratio is likely to increase in the future as more and more Malaysians become affluent and eat out," Zainun told reporters at the launch of its Nescafe Professional branding initiative in Kuala Lumpur yesterday.

Zainun said for the past 15 months, consumer trend has been eating at home due to the global economic slowdown, but this is likely to change in the near future, in line with a recovering economy.

"We will also work closer with our food partners such as hotels and mamak stalls by providing new innovative coffee concoctions, Milo and Maggi," said Zainun.

Nestle Malaysia is part of Swiss group Nestle, which is the world's largest food company, marketing more than 8,000 brands and 30,000 products with 500 factories spread over 80 countries and employing 250,000 people.

http://www.btimes.com.my/Current_News/BTIMES/articles/NESDOU/Article/

Top Glove optimistic of good dividends

Top Glove optimistic of good dividends
Published: 2009/10/14

TOP Glove Corp Bhd's shareholders can expect better dividend income going forward based on the company's optimism of continuing to record double-digit growth for at least 1-2 years more based on strong demand for rubber gloves and its expansion.

For financial year ended Aug 31, 2009 (FY09), the world's largest rubber glove manufacturer paid a dividend of 22 sen, a 100 per cent increase from 11 sen previously.

Its chairman Tan Sri Lim Wee Chai said the company, which targeted to pay 30 per cent dividend annually, would consider a special dividend if it continued to record strong performance.

"The chances are always good for us to achieve growth of more than 10 per cent, at least for the next one to two years and this will translate into a possible high dividend.



"With good earnings and strong cash, we should also be able to pay a good or even better dividend in the coming years," he told a media briefing on the company's performance for 2009 financial year in Kuala Lumpur today.

As at Aug 31, 2009, Top Glove's cash in banks stood at RM197.2 million and total borrowings at RM20.5 million.

Lim said the global demand for rubber gloves grew at between 8-10 per cent annually.

He said Top Glove had enough cash to pay dividend and the land for expansion.

The company, which has been on expansion mode with the opening of a new factory every year, is enthusiastic about increasing its capacity either through organic growth or acquisitions.

Currently, it has the capacity to produce 31.5 billion pieces of gloves annually, but that will be increased to 34.5 billion next year with the operation of factory number 20 in February next year and factory number 21 somewhere in the middle of next year.
Each factory has the capacity to produce 1.5 billion pieces annually.

At the moment, it has 17 gloves factories and two latex concentrate factories and its target is to capture 30 percent of the global market by 2012 compared to 22 percent now.

Lim said the company's capital expenditure for FY2010 was RM70 million.

He said the company would continue to expand its manufacturing plants in Malaysia, Thailand and China.

"We have the land to build one or two more factories every year to meet the increasing demand," he said.

The company has 7.2 hectares in Klang for future development, 8.4ha in Thailand and six ha in China.

He said investment in China was a challenge as many companies had suffered losses.

Top Glove's venture, however, is profitable, he said.

On acquisition, he said, although Top Glove was receptive it would be careful as not all acquisitions would be successful.

He said money alone would not ensure the success of the acquisition as there were also a need for adequate resources in areas such as human resources and marketing.

For FY09, its pre-tax profit rose by 65 per cent to RM221.5 million from RM134.6 million in the same period of 2008.

Revenue surged 11 per cent to RM1.53 billion from RM1.38 billion previously.

The record profit has been achieved on a high EBITDA (earnings before interest, tax, depreciation and amortisation) margin of 18.7 per cent in FY2009 compared to 14.4 per cent in FY2008.

Executive director, Lim Cheong Guan, said the 18 per cent plus margin was on the high side and did not expected a repeat in the near term.

Lim, however, still expected the margin to be in 16-17 per cent range going forward based on strong demand for rubber gloves.

Meanwhile, another executive director, Lee Kim Meow, said the prospect for the rubber glove industry was bright given its resilience to recession and rising demand due to increase awareness among the governments on global health threats.

"We expect government allocations for healthcare-related products such as gloves, to increase in future and this will boost our business," he said.

China and India, including Malaysia spent about 4.5 per cent of their gross domestic product on healthcare compared with the US at 15.3 per cent.

Top Glove rose 24 sen to close at RM8.40 on Bursa Malaysia today. -- BERNAMA


http://www.btimes.com.my/Current_News/BTIMES/articles/20091014190121/Article/index_html

Strong Earnings Push Wall Street Higher

Strong Earnings Push Wall Street Higher

By JACK HEALY
Published: October 14, 2009

For Wall Street, the news was sweet: a major bank turned a $3.6 billion profit, earnings were up at a major computer-chip maker, and retail sales held up better than expected.

And so investors around the world went shopping, lifting stock markets from London to New York to Mexico City. On Wall Street, shares touched their highest levels of the year, and the Dow flirted again with retaking 10,000.

Many investment experts dismiss the significance of such big, round benchmark numbers, and say that no sophisticated investors or hedge funds make investment decisions based on whether a stock index’s total value can be measured in four or five digits.

The Dow Jones industrial average, one of the most-watched measures of the financial markets, surged at the opening and was up 73 points, or 0.7 percent, at about 10:30 a.m. The broader Standard & Poor’s 500-stock index and the Nasdaq were about 0.9 percent higher.

The major stock indexes have rebounded by 50 percent or more in a scorching rally that began in early March and galloped higher through the summer and early autumn, as the economy stabilized and once-bleeding companies began to report better profits and rising revenue.

That optimism got louder on Wednesday.

Investors rushed to take positions on companies and commodities that could benefit from a broad upturn in corporate profits and the global economy. Crude oil prices hit their highest levels since last October, topping $75 a barrel. Safety bets like the dollar and government bonds got creamed.

Financial stocks surged after JPMorgan Chase announced a third-quarter profit that trounced expectations. JPMorgan was the first major financial company to announce earnings, and the sight of rising revenues and stabilizing losses at one of Wall Street’s most powerful banks lifted expectations that the financial sector was back on its feet, a year after its near-implosion.

Shares of JPMorgan climbed 3 percent in early trading, and its rising tide lifted shares of other banks like Goldman Sachs, Wells Fargo, Bank of America and Citigroup, which are all scheduled to report their own quarterly results in the days ahead.

Even regional banks shared in the hoopla, despite lingering problems with their mortgage portfolios and worries that the smaller banks are more exposed to losses in the commercial real estate market.

Investors swept up shares of computer companies, search engines and software makers after Intel reported profits that surpassed Wall Street’s expectations and foreshadowed a return to global growth. Shares of Intel, which reported a profit after markets closed on Tuesday, were up 3 percent.

Shares were also higher in Asia and Europe. The FTSE 100 in London rose 1.7 percent while the DAX in Frankfurt was 2 percent higher. The CAC-40 in Paris rose 1.7 percent.

In Asia, the Shanghai index rose 1.2 percent, while Hong Kong’s Hang Seng index increased 2 percent. Japan’s Nikkei index slipped 0.2 percent.

http://www.nytimes.com/2009/10/15/business/15markets.html?hpw

Smart guys started going to Wall Street

Op-Ed Contributor

Wall Street Smarts

By CALVIN TRILLINPublished: October 13, 2009

“IF you really want to know why the financial system nearly collapsed in the fall of 2008, I can tell you in one simple sentence.”

The statement came from a man sitting three or four stools away from me in a sparsely populated Midtown bar, where I was waiting for a friend. “But I have to buy you a drink to hear it?” I asked.

“Absolutely not,” he said. “I can buy my own drinks. My 401(k) is intact. I got out of the market 8 or 10 years ago, when I saw what was happening.”

He did indeed look capable of buying his own drinks — one of which, a dry martini, straight up, was on the bar in front of him. He was a well-preserved, gray-haired man of about retirement age, dressed in the same sort of clothes he must have worn on some Ivy League campus in the late ’50s or early ’60s — a tweed jacket, gray pants, a blue button-down shirt and a club tie that, seen from a distance, seemed adorned with tiny brussels sprouts.

“O.K.,” I said. “Let’s hear it.”

“The financial system nearly collapsed,” he said, “because smart guys had started working on Wall Street.” He took a sip of his martini, and stared straight at the row of bottles behind the bar, as if the conversation was now over.

“But weren’t there smart guys on Wall Street in the first place?” I asked.

He looked at me the way a mathematics teacher might look at a child who, despite heroic efforts by the teacher, seemed incapable of learning the most rudimentary principles of long division. “You are either a lot younger than you look or you don’t have much of a memory,” he said. “One of the speakers at my 25th reunion said that, according to a survey he had done of those attending, income was now precisely in inverse proportion to academic standing in the class, and that was partly because everyone in the lower third of the class had become a Wall Street millionaire.”

I reflected on my own college class, of roughly the same era. The top student had been appointed a federal appeals court judge — earning, by Wall Street standards, tip money. A lot of the people with similarly impressive academic records became professors. I could picture the future titans of Wall Street dozing in the back rows of some gut course like Geology 101, popularly known as Rocks for Jocks.

“That actually sounds more or less accurate,” I said.

“Of course it’s accurate,” he said. “Don’t get me wrong: the guys from the lower third of the class who went to Wall Street had a lot of nice qualities. Most of them were pleasant enough. They made a good impression. And now we realize that by the standards that came later, they weren’t really greedy. They just wanted a nice house in Greenwich and maybe a sailboat. A lot of them were from families that had always been on Wall Street, so they were accustomed to nice houses in Greenwich. They didn’t feel the need to leverage the entire business so they could make the sort of money that easily supports the second oceangoing yacht.”

“So what happened?”

“I told you what happened. Smart guys started going to Wall Street.”

“Why?”

“I thought you’d never ask,” he said, making a practiced gesture with his eyebrows that caused the bartender to get started mixing another martini.

“Two things happened. One is that the amount of money that could be made on Wall Street with hedge fund and private equity operations became just mind-blowing. At the same time, college was getting so expensive that people from reasonably prosperous families were graduating with huge debts. So even the smart guys went to Wall Street, maybe telling themselves that in a few years they’d have so much money they could then become professors or legal-services lawyers or whatever they’d wanted to be in the first place. That’s when you started reading stories about the percentage of the graduating class of Harvard College who planned to go into the financial industry or go to business school so they could then go into the financial industry. That’s when you started reading about these geniuses from M.I.T. and Caltech who instead of going to graduate school in physics went to Wall Street to calculate arbitrage odds.”

“But you still haven’t told me how that brought on the financial crisis.”


“Did you ever hear the word ‘derivatives’?” he said. “Do you think our guys could have invented, say, credit default swaps? Give me a break! They couldn’t have done the math.”

“Why do I get the feeling that there’s one more step in this scenario?” I said.

“Because there is,” he said. “When the smart guys started this business of securitizing things that didn’t even exist in the first place, who was running the firms they worked for? Our guys! The lower third of the class! Guys who didn’t have the foggiest notion of what a credit default swap was. All our guys knew was that they were getting disgustingly rich, and they had gotten to like that. All of that easy money had eaten away at their sense of enoughness.”

“So having smart guys there almost caused Wall Street to collapse.”

“You got it,” he said. “It took you awhile, but you got it.”

The theory sounded too simple to be true, but right offhand I couldn’t find any flaws in it. I found myself contemplating the sort of havoc a horde of smart guys could wreak in other industries. I saw those industries falling one by one, done in by superior intelligence. “I think I need a drink,” I said.

He nodded at my glass and made another one of those eyebrow gestures to the bartender. “Please,” he said. “Allow me.”

Calvin Trillin is the author, most recently, of “Deciding the Next Decider: The 2008 Presidential Race in Rhyme.”

http://www.nytimes.com/2009/10/14/opinion/14trillin.html?_r=1

FTSE 100 back above 5,200 as gold hits new record high

The FTSE 100 rallied back above 5,200 as investors took heart at strong US corporate results and encouraging economic news from China and a weak dollar pushed gold to a fresh record high.

Published: 3:42PM BST 14 Oct 2009

FTSE 100
London's index of leading shares rose 1.7pc to 5241 as investors ploughed back into the market, lifted by positive results from US bank JP Morgan and chipmaker Intel.

The dollar slumped to a fresh 14-month low against other major currencies as investors' appetite for risk increased, sending gold to another record high of $1,072 an ounce.

Oil prices rose above $75 a barrel in New York for the first time in a year.

Miners surged in London after China said its slump in exports eased in September, offering a further sign that global trade is improving. Kazakhmys, up 8.4pc to £12.78, was the leading riser in the blue chip index.

Rio Tinto (up 4pc) fuelled this view after it raised full-year production targets on the back of continued strong demand from Chinese steelmakers.

Barclays , Royal of Scotland and Lloyds Banking Group got a boost from a sevenfold rise in third-quarter profits to $3.6bn at JP Morgan.

The bank's bumper profits and a better-than-expected 5pc fall in Intel's third-quarter profits to $1.9bn pushed Wall Street back toward 10,000. America's blue chip index was up nearly 1pc at 9954 in early trading.

http://www.telegraph.co.uk/finance/markets/6327173/FTSE-100-back-above-5200-as-gold-hits-new-record-high.html

Time for rate increases is approaching

Near-zero policy interest rates are powerful. If the claims of financial economists are to be believed, they are holding up economic activity and bank balance sheets. But their magic isn’t only beneficial. They also distort behaviour in dangerous ways.

By Edward Hadas, Breakingviews.com
Published: 1:13PM BST 14 Oct 2009

The US Federal Reserve, still the world leader in central banking, has kept its overnight policy rate at 0pc-0.25pc for 10 months and is in no hurry to change. Ultra-low rates will be needed for an “extended period”, says Donald Kohn, the Fed’s vice chairman.

Most central bankers don’t think zero is actually low enough to deal with weak economic activity, high unemployment, low confidence and a still fragile banking system. In the standard calculation, current conditions are so dire that people and companies should be paid to spend money. But zero rates are better than nothing, so to speak. Central banks are at least not doing anything to impede lending.

That’s the theory. But with the financial system still in post-traumatic shock, it’s not certain that the ultra-low policy rates are getting through the banks and into the real economy. Business lending remains weak.

Even if the aggressively low rates are helping activity, the gains come with losses. The financial infrastructure is being undermined. Central bankers think almost entirely about the incentive to borrow, but non-zero rates also create an incentive to save. When the policy rate is zero, so is the incentive. A prolonged period of nearly free official money makes it hard to recreate a much needed culture of savings in the US and UK.

Also, whether or not the transmission from policy rate to real economy is working well, financial markets seem to respond all too strongly. Commodity prices have risen sharply and the dollar and pound – the currencies of the central banks most committed to ultra-cheap money – are dropping.

Ultra-low rates were justified, despite the risks, when GDP and trade were in freefall and banks were gasping for support. But conditions are now more stable. The risks are starting to outweigh the rewards. Central bankers should put rate increases back on the agenda.

http://www.telegraph.co.uk/finance/breakingviewscom/6325982/Time-for-rate-increases-is-approaching.html

"Four Bad Bears" comparison.

Bear Turns to Bull?


October 13, 2009 updated each market day

The S&P 500 closed the day 58.6% above the March 9th low, which is 31.4% below the peak in October 2007.

http://dshort.com/articles/2009/bear-turns-to-bull.html

A Rising Tide Lifts All Boats

When the economy is doing well, most companies do well as a result. This is the reasoning behind this old adage. If you ignore rising tides in economies, industries, and sectors, you could miss out on big profits. Missing out on these types of profits can hurt you because trend following is one of the easiest and most reliable investing strategies (as long as you're not the last one that follows).

If you see trends forming early on in any market, and invest in that market, you can make a very nice profit. The important part again, is to do your homework to identify the most credible trends and take advantage of them before anyone else. The earlier you get in on an upward trend, the better off you'll be.

But also be aware of the other adage: "the financial genius in a rising market."

What is the most important question for a stockmarket investor?

What is the most important question for a stockmarket investor?

Whether the market is undervalued or overvalued? No!
Whether interest rates will go up or down? No!
Whether a particular company is undervalued or overvalued? No!
Whether you should buy ABC or XYZ? No!
Whether Joe Bloggs, the famous analyst, says it is a great buy? No!

Tempting as it is to look for answers to these, we will soon see that they are misleading.

Yet, there are whole office buildings full of people pumping out answers to these questions. From their side they are not trying to mislead you. They are just trying to supply answers to these questions because people keep asking them and are willing to pay large amounts of money for the answers.

Even if they could be answered, the answers will not help you reach your financial goals. Why? Because they are the wrong questions.

Warren Buffett said that he has no idea what the market is going to do and whether it is undervalued or overvalued, whatever that may mean. What is more, he is not interested in knowing.

The same applies to interest rates. Buffett once said, "If the Federal Reserve Chairman Alan Greenspan were to whisper to me what his monetary policy was going to be over the next two years, it wouldn't change one thing I do."

There is only one question. Underneath it all, there is only one question. What is my profit rate or percentage return going to be?

The core activity of an investor is to estimate with confidence the percentage return over a specified holding period when buying stock in a company. And you want to be able to do this based on reliable numbers and information.

http://myinvestingnotes.blogspot.com/2009/08/hidden-desire-of-investors.html

Multi-baggers

"The majority of the multi-baggers owe their stellar returns to the market “re-rating”, rather than an impressive expansion in their earnings."


The above statement is probably true for the short term.  However, over the long term, multi-baggers are the result of their long term earnings growth.

Investing for the long haul: Sell the losers, let the winners run.

This is the time people should review their holdings, keep the stocks with the best potential, sell the losers (not those with the depressed prices but those whose revenues and earnings aren't capable of growing adequately), and buy others with better potential while they're selling cheap.

Sell the losers, let the winners run.  But you shouldn't jump into any "hot stock" without knowing what you're doing.


Read also:
The Ultimate Hold-versus-Sell Test
http://myinvestingnotes.blogspot.com/2009/09/ultimate-test.html

Let Your Winners Run, Cut Your Losers

When you invest, it is easy to sell your successful investments and keep your failing ones. This is what comes intuitively to most investors but can end up costing you a lot of potential profits. By selling your winners too early, you could miss out on huge gains. By keeping your losers too long, you could realize many losses. This isn't always true, but it makes mathematical sense; if you keep your money in losing investments instead of winning ones, you'll more likely end up losing money.

If you have an investment that has been performing consistently well, there is no good reason to sell it. As the adage states, it is important to let your winners run. By selling too early, you could miss out on a lot more than holding onto a losing investment for too long. When holding onto a losing investment too long, you can only lose the money you initially spent. If you sell too early, you could lose many times the amount of money you initially spent. By letting your winners run, and cutting your losers, you can do much better than doing the opposite. As with all investments, it is still important to do your homework.

Be an intelligent investor through financial education

In day to day conversations, one can easily gauge that the MAJORITY of "investors" in the market are not intelligent.  An intelligent investor is as defined by Benjamin Graham in his book, The Intelligent Investor.

How can these investors acquire the financial education to guide them through the stock market investment minefields?  How can they acquire the investing philosophy and strategy to help them over many years (or decades) of their investing lifespan?  Above all to ensure that they do not lose their money in the stock market while seeking for a reasonable return.

Inevitably, this will involve acquiring a set of RELEVANT knowledge through their reading, their interactions with the other investors, their interactions with investment professionals and the market.  From personal experience, there is a huge core knowledge that has to be acquired.  This is probably too overwhelming for many potential investors. 

Therefore, though it is good to attend an hour's presentation on investment here and there, or even pay a small sum for a half day session on investment talk, this is not going to transform one into a intelligent investor.   At best, these are introductory sessions to highlight areas of investments where you may wish to explore further. How much knowledge can be acquired in a half day presentation that you cannot acquire from a good book?  At worst, you are "convinced" that you know investing when in fact the small amount of new knowledge you acquire is in fact very detrimental to your long term investing.

There is no substitute to hard work.  You would need to acquire the necessary core financial and investment knowledge.  You do not need very high power investment or financial knowledge.  However, you do need to acquire some simple knowledge in the relevant important fields to guide your investing.  Above all, you will also need to understand behavioural finance to guide your emotions.

By the way, with blogs springing up everywhere, you too have another avenue to observe investing by various individuals.  Learn their good and bad habits.  You will probably find some benefit reading this blog too. 

Good luck in your investing.

http://myinvestingnotes.blogspot.com/2008/12/investment-philosophy-strategy-and.html

http://myinvestingnotes.blogspot.com/2009/09/investing-for-beginners.html

http://myinvestingnotes.blogspot.com/2009/08/learn-to-invest-in-10-steps.html

http://myinvestingnotes.blogspot.com/2009/08/8-signs-of-doomed-stock.html

Characteristics of ideal stock you plan to purchase

Some thoughts on Analysing Stocks

Ideally a stock you plan to purchase should have all of the following charateristics:

•A rising trend of earnings, dividends and book value per share.
•A balance sheet with less debt than other companies in its particular industry.
•A P/E ratio no higher than average.
•A dividend yield that suits your particular needs.
•A below-average dividend pay-out ratio.
•A history of earnings and dividends not pockmarked by erratic ups and downs.
•Companies whose ROE is 15 or better.
•A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.

Keep It Simple and Safe.


Also read: 
8 signs of doomed stock
http://myinvestingnotes.blogspot.com/2009/08/8-signs-of-doomed-stock.html

Buffett's focussed investing

According to Buffett, his results follow not from any master plan but from focussed investing - allocating capital by concentrating on businesses with outstanding economic characteristics and run by first-rate manager.

It is the Business that Matters

Over the long haul, stock prices tend to track the value of the business. When firms do well, so do their shares, and when business suffers, the stock will as well. Always focus on the company's fundamental financial performance.

Analyst upgrades and chart patterns may be fine tools for traders who treat the stock market like a casino, but they're of little use to investors who truly want to build wealth in the stock market. You have to get your hands dirty and understand the businesses of the stocks you own if you hope to be a successful long-term investor.

P/S: Look at Hai-O to learn that price tracks the value of the company's business.

Great Opportunities to buy companies with durable competitive advantage

a) Correction or panic during a bull market:

Any company with a durable competitive advantage will eventually recover after a market correction or panic during a bull market.

b) Bubble-bursting situation:

But beware. In a bubble-bursting situation,during which stock prices trade in excess of 40 times earnings and then fall to single-digit PEs, it may take years for them to fully recover.

After the crash of 1997, it took until 2007 to match the 1990s bull market highs. There are still companies trading today at below their last decade high price. On the other hand, if you bought during the crash, as Warren Buffett often did, it didn't take you long to make a fortune.

Stock market creates buying opportunities

The bull/bear market cycle offers many buying opportunities for the selective contrarian investor.

The most important aspect of these buying opportunities is that they offer the investor the chance to buy into durable-competitive-advantage companies that have nothing wrong with them other than sinking stock prices.

The herd mentality of the shortsighted stock market creates buying opportunities.

One buys in a bear market and sells in a bubble.

One of the interesting differences between bubbles and bear markets is that in a bear market, there are plenty of bulls and bears. In a bubble, the few bears are drowned out by the loud and almost universal bullishness.

It is natural to like momentum and money, but if investors have no disciplines and no sense of bubbles, then they are headed not for the big money, but for quite the opposite.

With bear markets, one wants to use buy and sell disciplines and buy when prices and fundamentals would dictate that.

There are market bubbles once in a great while, perhaps once in a life-time, but individual stock bubbles are more common. All bubbles have some similarities that concern how perceptions, emotions, and a lack of accurate information combine to set an investor trap.

Beware of individual stock bubbles

With bubbles, there is an element of mystery. To cope with that, start with the first step, knowledge, and combine that with your disciplined buy and sell strategies, since in a bubble it is likely that the beliefs of the crowd cannot be supported by real knowledge.


Yet the entire crowd thought in this way about many companies because of incorrect and incomplete information. Emotions temporarily filled that void. A disciplined buy and sell strategy helps you control your emotion.

Behavioral economics supplies a framework for investing

Behavioral economics has gone beyond just trying to provide explanations for why investors behave as they do. It actually supplies a framework for investing and policy making to help people avoid succumbing to emotion-based or ill-conceived investments.

“Adhering to logical, rational principles of ideal economic choice may be biologically unnatural,” says Colin F. Camerer, a professor of behavioral economics at Caltech. Better insight into human psychology gleaned by neuroscientists holds the promise of changing forever our fundamental assumptions about the way entire economies function—and our understanding of the motivations of the individual participants therein, who buy homes or stocks and who have trouble judging whether a dollar is worth as much today as it was yesterday.

http://www.scientificamerican.com/article.cfm?id=the-science-of-economic-bubbles

Market bottoms

A market bottoms when we reach what is known as the "point of maximum pessimism". This means that investors have lost so much money they completely throw in the towel - and shares correct to an undervalued level.

Don't Let a Market Crash Hit You at the Finish Line

Don't Let a Market Crash Hit You at the Finish Line
by Jason Zweig
Tuesday, October 13, 2009


Can you make the risk of stocks go away just by owning them long enough? Many investors still think so.

"Over any 20-year period in history, in any market, an equity portfolio has outperformed a fixed-income portfolio," one reader recently emailed me. "Warren Buffett believes in this rule as well," he added, referring to Mr. Buffett's bullish selling of long-term put options on the Standard & Poor's 500-stock index in recent years. (Selling those puts will be profitable if U.S. stocks go up over the next decade or so.)

As the philosopher Bertrand Russell warned, you shouldn't mistake wishes for facts.


Bonds have beaten stocks for as long as two decades -- in the 20 years that ended this June 30, for example, as well as 1989 through 2008.

Nor does Mr. Buffett believe stocks are sure to beat all other investments over the next 20 years.

"I certainly don't mean to say that," Mr. Buffett told me this week. "I would say that if you hold the S&P 500 long enough, you will show some gain. I think the probability of owning equities for 25 years, and having them end up at a lower price than where you started, is probably 1 in 100."

But what about the probability that stocks will beat everything else, including bonds and inflation? "Who knows?" Mr. Buffett said. "People say that stocks have to be better than bonds, but I've pointed out just the opposite: That all depends on the starting price."

Why, then, do so many investors think stocks become safe if you simply hang on for at least 20 years?

In the past, the longer the measurement period, the less the rate of return on stocks has varied. Any given year was a crapshoot. But over decades, stocks have tended to go up at a fairly steady average annual rate of 9% to 10%. If "risk" is the chance of deviating from that average, then that kind of risk has indeed declined over very long periods.

But the risk of investing in stocks isn't the chance that your rate of return might vary from an average; it is the possibility that stocks might wipe you out. That risk never goes away, no matter how long you hang on.

The belief that extending your holding period can eliminate the risk of stocks is simply bogus. Time might be your ally. But it also might turn out to be your enemy. While a longer horizon gives you more opportunities to recover from crashes, it also gives you more opportunities to experience them.

Look at the long-term average annual rate of return on stocks since 1926, when good data begin. From the market peak in 2007 to its trough this March, that long-term annual return fell only a smidgen, from 10.4% to 9.3%. But if you had $1 million in U.S. stocks on Sept. 30, 2007, you had only $498,300 left by March 1, 2009. If losing more than 50% of your money in a year-and-a-half isn't risk, what is?

What if you retired into the teeth of that bear market? If, as many financial advisers recommend, you withdrew 4% of your wealth in equal monthly installments for living expenses, your $1 million would have shrunk to less than $465,000. You now needed roughly a 115% gain just to get back to where you started, and you were left in the meantime with less than half as much money to live on.

But time can turn out to be an enemy for anyone, not just retirees. A 50-year-old might have shrugged off the 38% fall in the U.S. stock market in 2000 to 2002 and told himself, "I have plenty of time to recover." He's now pushing 60 and, even after the market's recent bounce, still has a 27% loss from two years ago -- and is even down 14% from the beginning of 2000, according to Ibbotson Associates. He needs roughly a 38% gain just to get back to where he was in 2007. So does a 40-year-old. So does a 30-year-old.

In short, you can't count on time alone to bail you out on your U.S. stocks. That is what bonds and foreign stocks and cash and real estate are for.

In his classic book "The Intelligent Investor," Benjamin Graham -- Mr. Buffett's mentor -- advised splitting your money equally between stocks and bonds. Graham added that your stock proportion should never go below 25% (when you think stocks are expensive and bonds are cheap) or above 75% (when stocks seem cheap).

Graham's rule remains a good starting point even today. If time turns out to be your enemy instead of your friend, you will be very glad to have some of your money elsewhere.

Write to Jason Zweig at intelligentinvestor@wsj.com

http://finance.yahoo.com/focus-retirement/article/107943/dont-let-a-market-crash-hit-you-at-the-finish-line.html?mod=fidelity-readytoretire

Investing: When to bet the farm

Our own personalities add complexity to high-risk situations.

Bill Gurtin of Gurtin Fixed Income Management in San Diego points out the risks associated with overly emotional reactions.

"What you don't want to happen is for people to get emotional with the market," he says.

The more emotional we get, the more likely it is we will make a mistake, Gurtin explains.

A company's business prospects can be measured and evaluated statistically, but there is no easy measure for mood swings.

Before making any moves, people contemplating high-risk investments should come to grips with their emotional makeup and know how they are likely to react.

Yet successful investors take major risks all the time. They succeed because

• they do their research,
• can afford to lose the money they invest in high-risk schemes and
• are able to make up any losses they incur with other investments, which frequently involve complementary or counterbalancing risks.

Whether considering an investment in a stock, a privately held startup or a hedge fund -- all high-risk propositions -- investors should start by digging through the details of the business case to figure out how the return on investment is likely to be generated.

• How big a payoff might the investment produce?
• And how likely is success?

Successful investors look hard at the downside as well.

• What would the price of failure be?
• And how likely is that?

Professionals, even the most seasoned, have the same emotions as everyone else. Learning the ropes professionally does not eliminate human emotion, nor does it elimate urges to buy or sell emotionally. Faced with uncertainties, the tide of emotion surges. How can one resist the surging tide of emotion? Only if one has a framework of disciplines and knowledge within. Controlling emotions and replacing them with the elements of this framework are the secret.

http://myinvestingnotes.blogspot.com/2008/08/investing-when-to-bet-farm.html

Different PE ratios

Price = estimated EPS x PE

Estimated EPS is based on a number of assumptions about the behaviour of revenues and costs. The reliability of the EPS forecast hinges critically on how realistic are these assumptions.

The other half of the valuation exercise is concerned with the price-earnings ratio which reflects the price investors are willing to pay per cents of EPS. In essence, it represens the market's summary evaluation of a company's prospects.

We will generally use the PE ratio based on current year's expected earnings.

http://myinvestingnotes.blogspot.com/search/label/different%20PE%20ratios

Buy low, improve your chances

The most common investing mistake is throwing good money after bad. (This refers to buying a lousy company.)

The second most common investing mistake is finding and buying a great company (with growth, intrinsic value, supporting fundamentals, and intangibles all there), but paying too much for it.


http://myinvestingnotes.blogspot.com/search/label/buy%20low

Investment merit at a given PRICE but not at another

PRICE: is frequently an essential element, so that a stock (and even a bond) may have investment merit at one price level but not at another.

______________________________________

Having selected the company to invest based on various parameters, the next consideration will be the price we are willing to pay for owning part of its business.

Price is always an important consideration in investing. At a certain price, the company can be acquired at a bargain, at a fair price or at a high price. Each scenario will impact on our investment returns.


http://myinvestingnotes.blogspot.com/search/label/investment%20merit

KLSE STOCK MARKET PERFORMANCE IN 2008

STOCK MARKET PERFORMANCE IN 2008

Q1, 2008
The strong performance of the local stock market in the fourth quarter of 2007 continued to rally into 2008 with the Kuala Lumpur Composite Index (KLCI) touching a series of record highs before closing at the peak of 1,516.22 points on 11 January 2008. It had climbed 4.9% to emerge as the top performer in Asia. However, a sell down in regional and global market due to the lingering fears of a US triggered global recession with its origins in the US subprime and credit crunch problems, brought the KLCI to lower close of 1,357.40 points as at the end of February 2008.

Undoubtedly the biggest news in 2008 was the 12th general election held on 8 March 2008. With the ruling Barisan Nasional returned to power with only a simple majority and a total of five states falling into the opposition rule, the market reacted extremely negatively. The KLCI plunged by a hefty 123.1 points or 9.5% on 10 March 2008 on a heavy volume of 1.18 billion shares traded,recording its biggest daily losses. The recovery of regional and global equity markets, however helped to mitigate the situation. KLCI managed to close higher at 1,247.52 points as at the end of March 2008, down 13.7% for the first quarter of 2008.

Q2, 2008
While the rise was in line with the recovery of regional and global equity, it was still 1.3% below the pre-general election closed of 1,296.33 points on 7 March 2008. The KLCI continued to edge higher in early May 2008, reaching a second quarter high of 1,300.67 points on 16 May 2008. In mid May till end of June 2008, it came under further selling pressure due to many factors, led by cost push inflationary pressure from higher petrol prices and increase in electricity tariffs that dampened economic growth. Consequently, the KLCI slipped into an extended period of bearish sentiment and ended the first half of 2008 at 1,186.57 points, a drop of 258.80 points or by 17.9%.

Q3, 2008
The downward trend continued into the third quarter of 2008 amidst the contagion fears following concerns of the financial crisis in the US and Europe. Much of the weakness in the global equity markets was caused by the uncertainties over the health of US economy. The string of highly published failures of large financial institutions in the US sent shock waves through the global financial markets and further aggravated the market sentiments. The KLCI fell below 1,000 points on 18 September 2008 to close at 991.66 points. Although it recovered slightly to record at 1,018.08 points at the close of third quarter, it shed 14.1% for the quarter.

Q4, 2008
At the start of the fourth quarter, KLCI retreated further in tandem with the sharp fall of the global and regional equity markets. Despite the corrective measures introduced by Governments and Central Banks worldwide to cut interest rate and inject massive liquidity into the financial system, the dysfunctional global credit market continued to generate fears of global recession. The KLCI reacted adversely falling into a four year low of 829.41 points on 29 October 2008. It however, recovered when US Federal reserve cut interest rate by 50 basis points to 1.0% on 29 October 2008.

The KLCI continued to recover following the US and regional equity market and closed the fourth quarter at 876.75 points, recording again of 5.7% from 829.41 points on 29 October 2008.

The year 2008 was indeed a roller coaster year. The outlook for the stock market in 2009 remains challenging. Fears of a global recession will continue to pervade in the first half of 2009. The US economic downturn along with falling commodity and oil prices is expected to have a negative effect on Malaysia’s export. Combined with a lower GDP growth outlook for 2009, the current consensus is only for a 3.6% upside for the KLCI.


http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/a758a3f552e9dc30482575450025f6ca/$FILE/LPI-AnnualReport2008%20(2.3MB).pdf
(Page 81/217)

Rubber Glove Companies

Latexx appears to be succeeding in its aggressive growth plan. It is expected to post strong growth until 2012 as it ramps up current production capacity of 5.2 billion pieces a year to six billion pieces by the end of this year, 7.5 billion by 2010 and nine billion by 2012.

Latexx and Adventa have seen the most aggressive capacity expansion (as a percentage of current capacity) among rubber glove companies.  Nevertheless, Latexx is confident of selling the additional capacity as it currently cannot meet its customers' demand.  All its facilities are located in Kamunting, which ensures better quality control and lower operating costs. 

Adventa has a 15% share of the global surgical glove market.  As it is operating at close to full capacity, Adventa is planning to aggressively expand its surgical glove production from 250 million pieces a year to 350 million by early 2010 and 450 million by end-2010.

From the edge newspaper:  Focussing on FY 2010 valuations, the rubber glove companies are still cheap in an industry where Malaysia is the dominant player and where pricing power exists.  Adventa is the cheapest rubber glove company with a prospective FY2010 price-earnings ratio (PER) of only 7.5 times. 

Rubber glove companies offer a rare combination of being defensive and offering growth.  Investors would be familiar with those like Top Glove, Supermax, Kossan Rubber and Hartalega, but there are some smaller ones like Adventa, Latexx and Singapore-listed Riverstone that operate in interesting niches and perhaps offer better growth prospects as they start from a lower base.

Company Share price Market Cap
Top Glove 8.11 2409.8 m
Hartalega 5.45 1320.6m
Kossan 4.64 741.8m
Supermax 2.80 727.2 m
Latexx 2.27 443.0 m
Riverstone Holdings 0.44 331.0m (Singapore)
Adventa 1.73 218m
Medi-flex 0.09 103.3m (Singapore)
Shun Thai Rubber 1.60 81.0m (Thailand)

Fraser and Neave

Fraser and Neave Ltd:  Its Malaysian Unit expects to double its revenue in Thailand and countries in Indochina to RM 2 billion within five years.  Bernama reported, citing the unit's CEO Tan Ang Meng. 

Reviewing LPI CAPITAL BHD share price performance in 2008

http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/a758a3f552e9dc30482575450025f6ca/$FILE/LPI-AnnualReport2008%20(2.3MB).pdf
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LPI CAPITAL BHD SHARE PRICE PERFORMANCE IN 2008

Q1, 2008
LPI Capital Bhd share price rose from RM12.10 as at 31 December 2007 to a year high of RM12.70 on 14 February 2008 following the announcement of its 2007 results on 13 February 2008. With its improved results, LPI Capital declared a final dividend of 55 sen per share less 26% income tax and a special dividend of 25% per share less 26% income tax. With the interim dividend of 30 sen less income tax of 26%, the total gross dividend declared for the year was 110 sen per share. The ex-dividend price was RM12.20 traded on 15 February 2008.

A sell down in regional and global equity market triggered by the sub-prime and credit crunch problems in US and coupled with results of the 12th general election held on 8 March 2008, LPI Capital share price fell to close at a low for the first quarter of 2008 at RM10.80 on 10 March 2008. This was the lowest price recorded for the first quarter of 2008.

The share price of LPI Capital remained at this level for the next two weeks before gradually improved in line with the general up trend of the KLCI to reach RM11.20 on the close of the first quarter.

Q2, 2008
The early second quarter saw LPI Capital share price hovering around RM11.30 and began to edge upward reaching RM12.30 on 13 May 2008. In line with the decline in local and regional equity markets on concerns of the rising inflation rate due to the increase in crude oil prices, LPI Capital share price corrected to RM11.80 at the close of the second quarter.

Q3, 2008
When the improved second quarter results were announced together with an interim dividend of 30% less 26% income tax on 10 July 2008, LPI Capital share price traded upwards moderately. After the payment of dividend the share prices consolidated to RM11.00 and this level was maintained till the middle of September. Thereafter the string of highly published failures of large financial institutions in US began to hound the equity markets and LPI Capital share price started to trend downwards in the last weeks of the third quarter. The share price closed at RM10.40 shedding a 9.5% in value.


Q4, 2008
In the last quarter of the year share prices in the regional and global stock market experienced sharp decline on the concerns of the fallout of the global financial crisis and global recession.

In tandem with the lower KLCI, LPI Capital share retreated to a year low of RM8.20 on 29 October 2008 before recovering and closed at RM9.45 for the year ending 31 December 2008.

In 2008, LPI Capital’s value in terms of market capitalisation declined by 21.25% or RM353.7 million to RM1,310.9 million compared to the decline of 39.3% of the KLCI. Based on the closing price on 31 December 2008 of RM9.45 and on the total gross dividend of 110 sen paid during the year, the shareholders would have enjoyed a gross dividend yield of 14% for 2008.

KNM adds RM155m to order book

KNM adds RM155m to order book

Tags: Borsig Boiler Systems GmbH | Jebel Ali Free Zone | KNM Group Bhd | new orders

Written by The Edge Financial Daily
Tuesday, 06 October 2009 00:29

KUALA LUMPUR: KNM GROUP BHD []’s wholly owned units in Malaysia, Germany and Dubai, have collectively secured RM155 million worth of new orders from Sept 24 to Oct 5, the company said on Oct 5.

KNM said FBM-KNM FZCO, a unit incorporated in Dubai’s Jebel Ali Free Zone, won a contract from Danieli & C Officine Meccantiche SpA for reactor vessels for the Gulf Steel Plant project in Egypt; KNM’s Germany-incorporated Borsig Boiler Systems GmbH won an order for the engineering, supply and installation of steam boilers at Chemelot Industrial Estate in Geleen, Netherlands, from EdeA VOF; while KNM Process Systems’ contract was from Technip Italy SpA, for shop assembly columns for the Jubail Export Refinery project in Saudi Arabia.

KNM expects the orders to contribute positively to its earnings for the years ending Dec 31, 2009 and 2010.
KNM added 1.5 sen to 76 sen with 19.05 million shares done on Oct 5.

http://www.theedgemalaysia.com/business-news/150666-knm-adds-rm155m-to-order-book.html

Secretive gathering of ships off coast of Malaysia

Secretive gathering of ships off coast of Malaysia
Written by South China Morning Post
Monday, 05 October 2009 12:25

HONG KONG: In the soupy green tropical waters that lap the jungle shores of southern Malaysia, a lone Indian officer in a peaked cap glares anxiously down from the 280-metre-long deck of a towering container ship anchored alongside countless other idle vessel.

As our ramshackle wooden fishing boat bobs up and down on the waves, perilously close to the ship, he shoos us away and then, spotting the photographer, scurries back into the echoing vastness of the vessel he has been left to look after almost by himself.

Navigating a precarious course around the hull of the Panama-registered ship, we reach its bow and notice something else extraordinary. It is tied side by side to a container ship of almost the same size. The mighty sister ships sit high in the water.

Nearby, as we meander in searing midday heat and dripping humidity between the hulls of silent ships, a young European officer peers curiously at us from the bridge of an oil tanker owned by Maersk, the world's biggest container shipping line. We ask to go on board, but are waved away by two Indian crewmen. "No one is supposed to be here and they are very frightened of pirates," explains our captain.

Here, on a sleepy stretch of shoreline, we have tracked down what might count as the biggest and most secretive gathering of ships in maritime history. Over the past year, as the global economic crisis has deepened, hundreds of container ships, bulk carriers and oil tankers have congregated, drawing an iron curtain along more than 30 kilometres of Johor state coastline.

With its palm-fringed sandy beaches and lush hinterland, this could be an enticing destination for tourists. Instead, a forbidding armada of steel has sailed quietly in from around the world to transform it into a last resort for the global shipping industry.

Offshore from the bamboo huts and fishing villages, between 300 and 500 vessels, equivalent to the United States and British navies combined, have gathered. It's a remarkable sight and one that shipowners and government economists would prefer you not to see. This vast "ghost fleet" - which, in better times, would have been steaming fully laden between China, Europe and the US to stock shops ahead of Christmas - is symbolic of the depths of the sickness still ravaging the world's economies.

"We know the ships are anchored out there somewhere but we aren't sure exactly where," an officer from one of the sailors' unions in Singapore told us. "People have flown over the area and talked of seeing a massive number of ships off the coast of Malaysia, so that's probably the place to look." And it is.

With the waters of Singapore already teeming with ships paying hefty anchorage fees, idle vessels are instead being anchored in shallow international waters between the southern coast of Malaysia and the Indonesian island of Batam.

Fisherman Ah Wat, 42, who lives in Sungai Rengit, Johor, says: "Before, there was nothing out there - just sea. Then the big ships suddenly came one day, and every day there are more of them. Some of them stay for a few weeks and then go away. But most of them just stay. You used to look from here straight over to Indonesia and see nothing but a few passing boats. Now you can no longer see the horizon."

The size of the idle fleet is so great you can only begin to guess at its number when the ships' lights are switched on after sunset. Seen from the shore, a blaze of light stretches from one end of the horizon to another. Standing in the darkness among the palm trees and bamboo huts is a surreal and disorienting experience, making you feel as if you are adrift on a dark sea staring at an illuminated city.

"We don't understand why they are here," says Ah Wat. "There are so many ships - there must be nearly 500 out there - but no one seems to be on board. When we sail past them in our fishing boats, we never see anyone.

"They are like real ghost ships and some people are scared of them. They believe they may bring a curse with them and that there may be bad spirits on the ships."

Tim Huxley, chief executive of Wah Kwong Shipping in Hong Kong, says: "A couple of years ago, those ships would have been steaming back and forth, going at full speed, but now you have got something like 12 per cent of the world's container ships currently doing nothing."

Shipowners choose to anchor vessels in waters close to Singapore because it is well positioned for key global trade routes when the economy revives, Huxley says. It is also seen as a safe haven because of the region's benign climate and relatively low typhoon count.

Business for bulk carriers has picked up slightly in recent months, largely because of the mainland's revived appetite for raw materials such as iron ore, says Huxley, but this is a small part of international business, and the prospects for the container trade remain bleak. Some experts believe the ratio of container ships sitting idle could rise to 25 per cent within two years in what Maersk calls a "crisis of historic dimensions". Last month, the company reported its first half-year loss since it was founded, 105 years ago.

Martin Stopford, managing director of Clarksons, London's biggest ship broker, says: "In 2006 and 2007, [container] trade was growing at 11 per cent. In 2008, it slowed down by 4.7 per cent. This year we think it might go down by as much as 8 per cent. Yet at the same time, the supply of container ships is growing. This year, supply could be up by around 12 per cent. Twenty per cent spare is a lot of spare of anything - and it's come out of nowhere."

Trade is slowing because retailers in the West are running on very low stock levels, not only because they expect consumer spending to be down, even ahead of Christmas, but also because their levels of credit have shrunk, so they are unable to keep large stockpiles.

Stopford explains: "Globalisation and shipping go hand in hand. Worldwide, we ship about 8.2 billion tonnes of cargo a year. That's more than one tonne per person and probably two to three tonnes for richer people like us in the West. If the total goes down by 5 per cent or so, that's a lot of cargo that isn't moving.

"We will find out at Christmas whether there are enough PlayStations in the shops or not."

About 4,800 kilometres northeast of the ghost fleet of Johor, the shipbuilding capital of the world rocks to an unpunctuated chorus of hammer guns blasting rivets the size of dustbin lids into shining steel panels that are then lowered onto the decks of massive new vessels.

As the shipping industry teeters on the brink of collapse, the activity at boatyards such as Ulsan and Mokpo in South Korea looks like a sick joke. But the workers in these bustling shipyards, who teem around giant tankers and mega-vessels the length of several football pitches, have little choice; they are trapped in a cruel time warp.

A decade ago, South Korean president Kim Dae-jung issued a decree to his industrial captains: he wished to make his nation the market leader in shipbuilding. By 2004, his vision had been made real. His country's low-cost yards were winning 40 per cent of world orders. Japan was second, with 24 per cent, and China accounted for 14 per cent.

But shipbuilding is a horrendously hard market to plan. There is a three-year lag between the placing of an order and the delivery of a ship. With contracts signed, down payments made and work under way, stopping work on a new ship is the economic equivalent of trying to change direction in an oil tanker travelling at full speed towards an iceberg.

The labour in Korean shipyards represents the completion of contracts ordered in the fat years of 2006 and 2007. Those ships are doomed to sail out into a global economy that no longer wants them.

Maersk announced last month that it was renegotiating terms and prices with Asian shipyards for 39 ordered tankers and gas carriers. Maersk's Kristian Morch told the global shipping newspaper Lloyd's List: "It is a perfect storm. You have a contraction of oil demand, you have a falling world economy and you have a contraction of financing capabilities - and at the same time a lot of new ships are being delivered."

Demand peaked in 2005, when, with surplus tonnage worldwide standing at just 0.7 per cent, shipowners raced to order, getting in before docks and berths at major shipyards were fully booked. That spell of panic buying has heightened today's mismatch between supply and demand.

Keith Wallis, East Asia editor of Lloyd's List, says: "There was an ordering frenzy on all types of vessel, particularly container ships ... fuelled by consumer demand in the UK, Europe and North America, as well as the demand for raw materials from China."

Most orders to be delivered within the next six to nine months will be honoured, Wallis predicts, and the ships will go into service at the expense of older vessels, which will be scrapped or anchored off places such as southern Malaysia.

"Some shipowners won't be able to pay their final instalments when the vessels are completed," says Wallis. "Normally, 50 to 60 per cent is paid on delivery."

South Korean shipyard Hanjin Heavy Industries says it has had to put up for sale three container ships ordered at a cost of US$100 million by Iran's state shipping line after the Iranians said they could not pay the bill.

"The prospects for shipyards are bleak, particularly for the South Koreans, where they have a high proportion of foreign orders," Wallis says. "Whole communities in places like Mokpo and Ulsan are involved in shipbuilding and there is a lot of sub-contracting to local companies.

"The problems will start to emerge next year and certainly in 2011, because that's when the current orders will have been delivered. There have hardly been any new orders in the past year. In 2011, the shipyards will simply run out of ships to build."

Christopher Palsson, a Sweden-based senior consultant at Lloyd's Register-Fairplay Research, says: "Some ships will be sold for demolition but the net balance will put even more pressure on the freight rates and the market itself. A lot of shipowners and operators are going to find themselves in a very difficult situation."

The current downturn is the worst in living memory and more severe even than the slump of the early 1980s, Palsson says.

"Back then the majority of the crash was for tankers carrying crude oil. Today we have almost every aspect of shipping affected - bulk carriers, tankers, container carriers ... the lot," he says. "It is a much wider-spread situation that we have today. China was not a major player in the world economy at that time. Neither was India. We had the Soviet Union. We had shipbuilding in Europe. But then, back in those days the world was a very different place."

Nowhere are those stark economic realities being felt as keenly as in the waters off southern Malaysia. Singapore port chaplain Christian Schmidt says that for the sailors stranded at sea, the pressures are immense.

"There will be a skeleton crew of maybe six to eight people. Some vessels stay that way for one, two or three months. For the crew, it's a tremendous psychological strain. You are stuck with the same small group of people and you have no idea how long it will be for," he says. "It's a very difficult situation. Seafarers tend never to make a big deal out of the hardships they suffer. They say this is what you expect when you go to sea. But in their current situation, many of them cannot keep in touch with their families and relatives. It is as if they are chained up in a prison."

On the shore, the strain is showing as well. "We just want them to go away," says retired fisherman Ha Heng, 62. "They are destroying our livelihood. Fishermen can't cast their nets because there are so many ships and the oil that washes up on the beaches is killing the fish. We've had enough.

"One day, we would like to be able to look out and see the horizon again." - South China Morning Post