Bursa Malaysia: Share Prices Expected To Be Higher Next Week

KUALA LUMPUR, Feb 6 (Bernama) -- Share prices on Bursa Malaysia are likely to be higher next week as the coming Chinese New Year celebrations will provide a catalyst to the market, dealers said.

However, cautious sentiment will still prevail with interest confined to lower liners, said OSK Research head Chris Eng.

Analysts said that concern over the pace of global economic recovery due to a string of bearish economic data will continue to haunt investors.

They said the rising unemployment data in the United States and rising sovereign debt woes in Europe prompted investors to shun riskier investments.

"As for Malaysia, sentiment will also be cautious in the midst of the former deputy prime minister Datuk Seri Anwar Ibrahim sodomy trial. Besides that, political developments will also be closely watched," said an analyst from a local stockbroking company.

During the week, Bursa shares kicked off at the beginning of the week on a high note as gains on Wall Street and positive US economic news helped to lift market sentiment.

However, the shares drifted lower on Thursday after two days of gain as weaknesses on Wall Street and regional bourses weighed down sentiment.

Global concern that the pace of global economic recovery could be derailed following an unexpected slowdown in Australia's retail sales and the high level of unemployment rate in New Zealand also rattled market sentiment.

On Friday, share prices on Bursa Malaysia ended the week lower with the key barometer falling to its lowest point since Nov 4 last year, dragged down by losses in heavyweights with sentiment affected by sharp losses on Wall Street and regional bourses.

For the week just ended, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) dropped 11.2 points to 1,247.9 from 1,259.16 last Friday.

This week, the Finance Index lost 136.06 points to 10,942.73 from 11,078.79 last Friday.

The Plantation Index fell 39.08 points to 6,149.05 from 6,188.13 last Friday while the Industrial Index was 10.36 points lower at 2,575.68 compared to 2,586.04 last Friday.

The FBM Emas Index went down 78.47 points to 8,405.53 from 8,484 last Friday.

The FBM Top 100 declined 76.01 points to 8,173.31 from 8,249.32 last Friday while the FBM ACE Index lost 67.2 points to 4,314.63 from 4,381.83 previously.

Total turnover dropped 3.332 billion shares worth RM4.99 billion from 5.23 billion shares worth RM7.66 billion last week.

Volume on the Main Market declined to 2.781 billion shares worth RM4.896 billion from 4.14 billion shares valued at RM7.5 billion last week.

Call warrants volume went down to 137.595 million units worth RM22.408 million from 193.12 million units worth RM37.04 million last week.

The ACE Market volume fell to 336.747 million shares worth RM49.165 million from 558.8 million shares valued at RM93.18 million last week.

-- BERNAMA

Even the Best Investors Make This Huge Mistake... Make Sure You Don't!

By Dr. Steve Sjuggerud

Personally, I have just one rule: Avoid big mistakes.

If I do that, I know I'll be fine. I know I won't "blow myself up" in my investments. Knowing that gives me peace.

I can't believe how many brilliant, successful people fail to do this one simple thing... and lose what they have... or even lose everything.

Look, if you do nothing else, remember this: Avoid big mistakes. And the biggest of the big mistakes is STILL DANCING when the music stops.

Get the heck out of there, my friend! If you're a little late to realize it, then STILL get out. Better late than never. Let me show you what I mean...

Chuck Prince, the former CEO of Citigroup, is a perfect example of a guy who kept on dancing...

In the summer of 2007, just as the banking crisis was getting underway, Chuck actually told the Financial Times he was "still dancing."

About the banking business, Chuck said, "When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing."

But the music had already stopped when he was speaking. Shares of Citigroup are down 93% since he said that... just a year and a half ago. And Chuck lost his job less than four months later.

I've also seen it close to home...

Most of the wealthy investors where I live made their fortunes in local real estate – that's Florida real estate.

The music stopped in Florida real estate a few years ago... But even today, they're STILL dancing. If they had acknowledged the music stopped early, they might have been able to keep much of their wealth.

I could go on, with examples throughout history... from Sir Isaac Newton in the 18th century South Sea Bubble to George Soros in the 2000 tech bubble.

The message today is incredibly simple...

When the music stops, STOP DANCING.

Get off that dance floor... and do it fast. Do NOT allow small mistakes to become big ones.

It sounds simple. But as I briefLook, if you do nothing else, remember this: Avoid big mistakes. And the biggest of the big mistakes is STILL DANCING when the music stops.

Get the heck out of there, my friend! If you're a little late to realize it, then STILL get out. Better late than never. Let me show you what I mean...

Chuck Prince, the former CEO of Citigroup, is a perfect example of a guy who kept on dancing...

In the summer of 2007, just as the banking crisis was getting underway, Chuck actually told the Financial Times he was "still dancing."

About the banking business, Chuck said, "When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing."

But the music had already stopped when he was speaking. Shares of Citigroup are down 93% since he said that... just a year and a half ago. And Chuck lost his job less than four months later.

I've also seen it close to home...

Most of the wealthy investors where I live made their fortunes in local real estate – that's Florida real estate.

The music stopped in Florida real estate a few years ago... But even today, they're STILL dancing. If they had acknowledged the music stopped early, they might have been able to keep much of their wealth.

I could go on, with examples throughout history... from Sir Isaac Newton in the 18th century South Sea Bubble to George Soros in the 2000 tech bubble.

The message today is incredibly simple...

When the music stops, STOP DANCING.

Get off that dance floor... and do it fast. Do NOT allow small mistakes to become big ones.

It sounds simple. But as I briefly showed, even the smartest people succumb to it.

We are all vulnerable to the risk. So you must make a conscious choice here... you must tell yourself you will never let a small loss become a big one.

ly showed, even the smartest people succumb to it.

We are all vulnerable to the risk. So you must make a conscious choice here... you must tell yourself you will never let a small loss become a big one.

You can use whatever "system" works for you to reinforce this idea: stop losses, trailing stops, NOT averaging down a losing position, NOT taking too big a position in anything.

I actually use all of the above.

Whatever works for you, do it. The important thing is, do NOT let a small loss become a big one.

Want to be just fine, forever, in your investments? Then don't forget my one rule... Avoid big mistakes!

When This Crisis Will End

We're out of the woods with this financial crisis...

That's my best guess at least, based on a study of the major financial crises through history.

The recent book This Time is Different: Eight Centuries of Financial Folly, by Kenneth Rogoff and Carmen Reinhart, takes a look at the history of major financial crises...

Boiling the book down to its simplest conclusions, here's what happens after a banking crisis:

Home prices and stock prices collapse dramatically over the course of several years.
The economy tanks and unemployment rises dramatically.
Government debts soar.

The book gives specific timelines based on history... It tells us how far things fall and how long these things last. And it gives us a pretty good idea of what to expect going forward.

Let's look at a few of their conclusions more specifically, starting with stocks...

Stock Prices

The authors found that real stock prices typically fall 56% over three and a half years, on average. In the current financial crisis, stocks already fell a bit more than that, in a much shorter period of time, bottoming in March 2009. Then they rallied dramatically.

Is the worst over in stocks? Or is another leg down coming?

I personally believe the worst is over.

At first, the crisis blindsided us, so the effect was dramatic. Now we're aware... more sober... So I think the lows we saw in March 2009 will be the ultimate lows for this crisis in stocks.

Home Prices

The authors found real home prices typically fall 35% over six years. This time around, home prices (like stocks) fell a bit more than the authors' average in a much shorter period of time.

Like stock prices, home prices have been recovering.

Is the worst over? Or did the recent home-buyer tax credit prop prices up?

I think the worst is over. I think we've seen the lows. But home prices may do basically nothing for many years.

Unemployment

According to the authors, unemployment typically rises by seven percentage points in a banking crisis... and unemployment stays "bad" for four years. So far, unemployment has risen by about five percentage points, and we're two years into this thing. So if the authors are right, unemployment could hit 12% and last two more years.

Government Debt

The authors state that government debt explodes by 86% above pre-crisis levels, on average. In the current crisis, quite frankly, I have no idea how much government debt has REALLY exploded. Nobody can know that answer... with all the creative things going on at the Federal Reserve and the Treasury Department.

So where does that leave us?

This crisis has been worse in magnitude than most, according to the authors' numbers. It's also been devastatingly quick.

The good news here is that we may already be out of the woods... Stock prices and home prices have been recovering for months. And unemployment has leveled off in the 10% range.

The bad news is the government's explosion in debts. But risks associated with that won't likely come home to roost in the next couple of years. That's a topic for another day.

In short, based on past crises, it's easy to make an optimistic case that the worst is behind us in the economy.

Click here to know more about this book!

Stimulus: Secret sequel in the budget

NEW YORK (CNNMoney.com) -- They're not calling it Stimulus 2, but the Obama administration wants to extend the life of several Recovery Act provisions by building them into the federal budget.

The president's $3.8 trillion budget for fiscal 2011, unveiled Monday, calls for giving states more money for Medicaid and infrastructure projects, as well as renewing tax breaks for workers, small businesses and municipalities issuing bonds. It also requests additional funding for Obama's educational reform initiative, Race to the Top.

All these were key provisions in the $862 billion American Recovery and Reinvestment Act, a massive two-year stimulus program enacted last February. Many of its measures are set to run out this year.

But none of Obama's budget measures will take effect unless Congress incorporates them into legislation. And, at the moment, "stimulus" is not the most popular word on Capitol Hill.

By including the provisions in the federal spending plan, the administration is able to keep the Recovery Act alive without having to pass a separate measure, which will likely spark a lot of controversy. As long as they make it into the fiscal 2011 budget, they will be allowed to continue in the future despite a promised cap in federal spending.

"These are all things that had expiration dates and now they have new life," said Deniece Peterson, manager at Input, a market research firm focusing on government contractors. "It's not surprising, since these are areas Obama has said over and over are his priorities."

Extending stimulus
Much of the budget calls for providing more help to the states. This money is desperately needed since state officials are contemplating massive spending cuts to close yawning budget gaps.

The federal budget measures involve propping up state budgets by covering additional Medicaid costs, while spurring the economy through infrastructure spending.

"It's very critical that state and local governments receive assistance from the federal government," said Sujit CanagaRetna, senior fiscal analyst at the Council of State Governments. "If you don't, you run the risk of states being a drag on the national economy."

--Medicaid assistance for the states: The budget calls for giving states $25.5 billion to help states maintain their Medicaid programs, adding to the $87 billion allocated in the Recovery Act.

Medicaid has been a source of major concern for state officials. The national economic downturn has swollen the pricey health program's rolls, forcing states to contemplate scaling it back or slashing spending elsewhere.

--Infrastructure: The administration wants to build on the stimulus-fueled spending for infrastructure, which it believes is a great way to create jobs.

Among the measures the budget calls for is making permanent the Build America Bonds initiative, which subsidizes state and municipal bond issuances for capital construction projects such as schools and roads. The subsidy on the taxable bonds would be reduced to 28% from 35%.

Also, the budget would add $418 million to the $7.2 billion in the Recovery Act to expand broadband services to rural communities. And it would add $1 billion to the $8 billion being spent on high-speed rail.

--Tax breaks: Obama's budget proposes extending for another year the Making Work Pay tax credit, which will increase the deficit by $61.2 billion. The refundable credit provides up to $400 per person and up to $800 for couples who file jointly.

The administration also wants to extend the deadline to apply for the 65% subsidy for COBRA health insurance benefits by 10 months, and send another $250 to Social Security recipients.

Small businesses, which are the focus of the administration's latest job creation push, would also see a tax break continue. The budget calls for extending through 2010 a Recovery Act provision that allows these firms to immediately expense up to $250,000 of qualified investments.

--Education reform: Schools would see an additional $1.35 billion to continue the president's $4 billion Race to the Top challenge and allow school districts to apply directly. The initiative calls for states to submit applications outlining how they would improve student performance, reward and retain teachers, and turn around low-performing schools.

While Republicans say that another year of stimulus won't help create jobs, supporters contend that it's crucial to maintain these initiatives as long as the economy is on the rocks.

"We should be continuing the Recovery Act measures because we still have high unemployment and growth is uncertain," said Michael Ettlinger, vice president for economic policy at the Center for American Progress. "We shouldn't take our foot off the pedal."

The Only Way to Buy Stocks for 500% Gains

By Frank Curzio, editor, Penny Stock Specialist

Ninety-nine percent of stocks under $10 a share are purchased because people love to "swing for the fences."

People love controlling 1,000 shares for less than the cost of a sofa. And they love having the chance to make thousands of percent on a single stock. The feeling comes from the same part of the brain that craves a visit to Las Vegas... or at least a $1 lottery ticket.

Most financial advisors and mainstream authors will tell you not to join this "99% club." They'll tell you it's too risky. They'll say you might as well go buy that lottery ticket.

I'm writing to you to say forget both schools of thought. Throw the gambling mentality in the garbage. Throw the mainstream advice in there as well. You see, I know you can make a lot of money with under $10 "swing for the fences" stocks.

In today's essay, I'll show you how.

Before we get into the nuts and bolts, let's define what makes for a "swing for the fences" stock. It's small – typically under $500 million in market cap. It often carries more risk than your normal stock. But it offers incredible upside, often as much as 500%, 1,000%, even 2,000%.

For example, one of my biggest "swing for the fences" winners was a chemical company called Ashland...

In late 2008 and early 2009, Ashland fell on tough times. Demand for its goods had collapsed in the recession. Plus, it had taken on over $2 billion in debt after acquiring one of its largest competitors at the top of the market. Management was forced to cut the dividend by 75%.

Shares dropped from a high of $56 to under $10.

Now, even at $7 a share, where my readers bought, Ashland carried a lot of risk. If the economy didn't stabilize, the company would likely default on its debt... and wipe out shareholders.

But if the economy did stabilize, that debt wouldn't be a huge problem. Plus, Ashland's acquisition, while expensive, would end up saving the company a ton of money.

Take a look at how things worked out...

In mid-2009, the economy did stabilize. Demand for all of Ashland's business segments surged and the company aggressively paid down its debt. If you bought at $7, you'd be up nearly 500% in less than a year. We swung for the fences... and hit one out of the park.

What if it hadn't worked out and we'd lost everything? Well, that wasn't going to happen. I told my readers to put a 30% stop on their position. And I told them to keep their position size to less than 3% of their trading capital. That's the only way to be a winner over the long term when you're trading in this kind of situation...

You must be willing to cut your losses. Remember, these stocks are risky. If you're the kind of stock buyer who ignores stop losses and says, "Oh, it will come back eventually," then this strategy isn't for you. (Actually, if that's the case, no trading strategy is for you. Stick your money in a savings account and back away from the market.)

You must keep your positions small. I have a friend who owns shares in a tiny company looking for oil in Northern Iraq. It's a hugely risky play. But his position is small. As he says, "It's money I can afford to lose." If it doesn't work out, no problem. But three years from now, he might wake up to find the company has hit it big... and his shares are up 2,000%.

If you follow these rules, you'll experience what I call the "Babe Ruth effect." Babe Ruth struck out a lot. But when he connected, the ball left the park... his team won games... and it more than made up for small mistakes.

With "swing for the fences" stocks, you don't have to be right every time. That's impossible. But by keeping your losses small and focusing on high-potential positions, you'll come out with tremendous gains.

The Bull Market has Turned, Take Profits: Investor

By: Robin Knight

After correctly calling the stock market rebound after the lows of March 2009, Michael Browne, portfolio manager from Sofaer Global Research, is changing his bullish stance and selling stocks.

"It's time to take exposure off the table. Am I going bearish? No, but I am no longer a bull," Browne said.

"It's going to be desperately slow growth in the stage two, post-inventory rebound phase and there are two causes of that and they're both financial," he said.

Browne thinks uncertainty about financial regulation from governments and stagnant bank lending is going to prove a major drag this year.

"The disconnect between the banks and politicians is leading to complete disarray in policy making," he said.

Secondly, the uncertainty surrounding financial regulation is discouraging banks from lending, Browne said. As banks fail to increase lending, it will be the politicians that bear the brunt of anger from the private sector, he said.

"If the banks can't lend, the economy can't grow," he added.

Banks have been encouraged to buy government bonds instead of lending to the private sector, Browne pointed out.

Browne, who was described as a long-term bear before turning bullish in March last year, thinks 2010 will bring a "muddle-through economy."

"That's going to have a very major effect on the cost of money and the supply of money to the private sector. Governments don't produce growth, the private sector produces growth," he said.

Browne thinks there will be "no inflation, no interest rate rises and gentle employment growth" in 2010. Housing markets will not weaken, but not strengthen either, he added.

Browne recommends buying "old-fashioned GARP stocks" (Growth at Reasonable Price), "with a touch of cyclicality."

He likes airlines, gambling stocks, specialist financials and luxury stocks. Browne is also buying Phillips, Deutsche Post and Experian.

Beware the 4 New Asset Bubbles

By Shawn Tully

NEW YORK (Fortune) -- Here we go again.

Less than two years after the housing market collapsed, the U.S. economy is threatened by a new bubble in asset prices. This time, four billowing balloons are hovering: two commodities -- gold and oil -- stocks, and government bonds.

Don't be fooled into thinking that last week's 5% drop in the S&P, and the recent sell-off in oil, remotely makes them fairly valued, let alone bargains. Equities and commodities, as well as Treasuries, which actually rallied as stocks dropped, still have a long way to fall. The reason: They've already seen huge run-ups that put their prices far above their historic averages, and far above the levels justified by fundamentals.

Two examples: Most companies can't possibly grow earnings fast enough to support their lofty valuations, and oil and gold are so expensive that we'll see what high prices always bring, a surge in new supply. That makes a price-pounding glut inevitable.

Since the start of 2009, oil has returned to the danger zone by jumping 63% to $75 a barrel, and gold has risen more than 20% to set astounding new records by climbing above $1,100 an ounce. After briefly returning to historically normal valuations in March, stocks are now selling at price-to-earnings multiples 40% above their historic range of 14, and 10-year Treasuries are so pricey that they yield 1.5% less than they did in 2007.

What's causing this resurgence of speculative fervor? One view blames the same policy that caused the real estate rampage -- incredibly low interest rates that are flooding the banks with cheap funds that, in theory, are available for loans. (The current Fed target rate is between 0 and 0.25%.)

"Investors can borrow at extremely low rates to buy assets," says Brian Wesbury, a monetary specialist at mutual fund manager First Trust. "So they're using cheap debt to bid up prices. The Fed's expansionary policies are making assets look a lot less risky than they really are."

Other prominent economists dispute that we're in bubble territory, at least right now. Allan Meltzer, the distinguished monetarist at Carnegie Mellon, argues that even though banks are loaded with cheap money, they aren't lending -- which is why we have a credit crunch. "I would be a lot more concerned if loan demand were higher," says Meltzer.

The one asset that definitely isn't bubbling is housing. There, prices have fallen to a level where new buyers buy a house for the same total monthly cost as rental. That's gravity operating.

So how do you spot a bubble? My view is that we're now seeing the same signs that exposed the frenzy in real estate: prices flying far above their historic averages, measured either in inflation-adjusted dollars (commodities) or as a ratio of the income they produce (stocks and Treasuries). Watch for gravity to take over, just as it did in housing.

Treasuries

The rate on the 10-year Treasury bill is now a mere 3.6%, well below the 5.5% rate that it averaged between 1993 and 2007, a period where inflation ran at an annual 3% clip, meaning that the "real rate" after inflation, stood at about 2.5%.

So let's assume that future inflation also averages 3%, about where it stood in the second half of 2009. At today's prices, Treasuries are offering a real yield of just 0.6% -- 1.9 points below our 14-year average.

But as the economy recovers and the threat of inflation causes the Fed to tighten monetary policy by raising rates, the yield could rise to 5.5%, handing investors a big loss. Reminder: When yields rise, bond prices fall.

Yet even that scenario is optimistic. Given the huge deficits from the bailouts, it's likely that investors will want a far bigger cushion for expected inflation -- which suggests, says Wesbury, that the yield on 10-year bills could go over 6% in 2011.

Oil

At around $75 a barrel, oil may look like a bargain compared to the record $148 in mid-2007. But we've simply moved from an immense bubble to a moderate one.

For oil, as in all commodity markets, the highest-cost unit that customers are willing to buy to "clear the market" sets the price. Indeed, prices can go far above cost for short periods, since it takes time for producers to drill new wells or because they hoard inventories.

So how much are oil companies paying to produce the world's most expensive barrels of oil? A good estimate is $55 to $60 a barrel. That's what it costs Anadarko Petroleum (APC, Fortune 500) to extract oil from deep wells in the Gulf of Mexico, according to Anadarko CEO Jim Hackett.

Hence, the world's highest-cost producers are now earning 30% to 40% margins. It won't last; to take advantage of the prices, oil companies will ramp up production, and that extra supply will cause prices to fall back into the $55 range, or even lower.

Gold

Investors are rushing to gold, because they rightly fear far higher inflation in the next couple of years and want to hedge against both rising prices and a declining dollar with a commodity that, they claim, has a fixed supply.

Since early 2009, the price has jumped to $1,100 an ounce from $875, triple its average price between 1990 and 2004. Yet the supply of gold is far more fluid than the gold bugs admit, partly because mining companies are investing heavily to increase production.

The real threat: Prices are so high all over the world that people who once treasured their gold jewelry are now rushing to sell it. Swiss refiners are offering irresistible prices for bracelets and brooches, "cash-for-gold" stores are in Chicago malls, and suburbanites are hosting Tupperware-style parties where neighbors show up to hock their gold teeth.

When this happened in the early 1980s with silver, prices plummeted from $50 to $15 in less than a year. Look for gold to end up below $500 an ounce within two years.

Stocks

Let's assume that investors want a 10% return from stocks (a 7% real return plus 3% gains from inflation). But at current prices, there is no way that the S&P can deliver those kind of gains in future years.

Here's why: Think of the S&P as one company that provides a total return in two components, a dividend yield and a capital gain. Together, the two should equal 10%. But the two are inversely correlated. The lower the dividend yield, the higher the earnings growth rate must be to get you to that 10%. When yields are extremely low, those growth rates become mathematically impossible.

Right now, the P/E multiple for the S&P is an extremely high 20, based on a formula developed by economist Robert Shiller that removes the constant gyrations that can under or overstate the ratio, and the dividend yield is just over 2%. So to hit that 10%, earnings must rise 8% -- assuming 3% inflation, 5% annually in real terms.

But earnings tend to track GDP, which rises about 3% a year over long periods, though far more slowly in a recession. So 3% real GDP growth isn't nearly enough to lift profits 5%. That implies that stock prices must drop sharply: A fallback to their historic P/E of around 14 would require a 29% correction, taking the S&P from its current level of 1,092 to around 770.

"Stocks will disappoint us if we buy them when they're expensive and delight us if we buy them when they're cheap," says Rob Arnott, chief of asset manager Research Affiliates. Now, they're extremely expensive, and destined to disappoint.