Bubble ? Not a bubble ?

Marc Faber told CNBC on Friday he believes a "massive speculative bubble" has encroached on everything from stocks and bonds to bitcoin and farmland. He attributed the vast bubble to "symptoms of excess liquidity."

Faber said the market could still rise, "Yeah, it can go up even more, if you print money."

Click 'Marc Faber-Speculative Bubble' for details.

The founder of Oaktree Capital Management, billionaire Howard Marks said on the same day, "I think most asset classes are priced fully, in many cases on the high side of fair, but not at bubble-type highs."

 

Click 'Stocks are risky but no bubble yet' for comments from Howard Marks.

When the indices are in record territory the market is definitely on the high side and risk is getting higher with each record closing. So how high is high ? And how long the run can last ?

If I go by the chart and if Dow continues to behave nicely, within a month or two, Dow is likely to reach 17,000 to complete its wave (ix) of its major wave (5). And of course the actual route for wave (ix) changes with events. The wave can be extended and it also can fail and start to come down anytime. The only way is to monitor closely and see how well behaved is Dow.

I believe as long as liquidity is there, created by 'money printing', assets will continue to move higher, assets bubble will continue to grow bigger and bigger and bigger. But if one will to stop now he may miss out the final exponential surge that may last a few weeks, a few months or a few years. Your guess is as good as mine.


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Latitude Tree & FACB Ind Incorporated

Latitude Tree Holdings Bhd (Rm1.48)

Latitude Tree reported very strong earning for its latest Quarter ending 30th September. Earning per share for 3 months is 15.02 sens. NTA is Rm 2.57 per share.

Its stock price opened with a gap with high volume and closed the day at Rm1.48. It gained 14 sens (10%). With the surge today, it is forming the wave vii of its major wave 3 of its mega wave (3).

FACB Industries Incorporated (Rm 1.28)

FACB Ind previous Quarter (ending 30th June) earning is only 7.07 sens a share. Yesterday it announced an earning of 76.64 sens a share for its latest Quarter ending 30th September. NTA is Rm 2.61 a share. The high earning is due to gain from disposal of a piece of land with two factory buildings for Rm 97 millions

It is possible that this is the starting of its wave 5 of its major wave (3). Its price opened strongly with a gap and with high volume. But at the end of the day it gained only 4 sens (3%).

The interesting thing for FACB Ind is its cash in hand after the disposal of that property mentioned earlier.

It has about Rm 149 million of cash in hand.

Looking at its liability, it has no borrowing at all. If I divide Rm 149 million by the number of shares, 85 millions, I get Rm 1.75 of cash per share. Besides this Rm 1.75, it still has its other businesses in manufacturing and trading of steel pipes & mattresses (Dreamlands) with factories and assets in Malaysia, China and Hong Kong.


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Light and Easy

On the news that Singapore had help an intelligence group who were alleged to be involved in spying activities on Malaysia.

Our Deputy Prime Minister said, "Singapore must furnish proof that it is not involved in spying on Malaysia".

TEACHER:
George Washington not only chopped down his father's cherry tree, but also admitted it. Now, Louie, do you know why his father didn't punish him ?

LOUIS:
Because George still had the axe in his hand


TEACHER:
Clyde, your composition on 'My Dog' is exactly the same as your brother's. Did you copy his?

CLYDE:
No, Sir, it's the same dog.



TEACHER:   
Maria, go to the map and find North America.
 
MARIA:        
Here it is.
 
TEACHER:    
Correct.  Now class, who discovered America?
 
CLASS:        
Maria. 


WIFE:
I wrote your name on sand it got washed.
I wrote your name in air, it was blown away.
Then I wrote your name on my heart & I got Heart Attack.

HUSBAND:
God saw me hungry, he created pizza.
He saw me thirsty, he created Pepsi.
He saw me in the dark, he created light.
He saw me without problems, he created YOU.



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When will the assets bubble burst ?

Dow gained 164 points on Thursday and Friday to move above 16,000 level. It closed the week at 16064. My reading for Dow is as shown below.

It is forming the fifth wave of  its mini wave 3 of sub-wave iii of wave (ix).

I really don't know when the bubble will burst, but the chart says, "Not Yet", if my interpretation is right.

It may be good to look at the 2007-2008 crisis when Dow plunged 7,617 points (53%) from 14,164 to 6,547 in 27 months.

Before 9th October 2007, the turning point.

1. In August 2005, David Lereah,  former chief economist of the National Association of Realtors (NAR), distributed "Anti Bubble Reports" in respond to "irresponsible bubble accusations made by media and academics". Click 'Bubble Meter' for story.

2. Housing prices however continued to rise and finally peaked in early 2006. On 4th May 2006 Fortune Magazine reported, "The great housing bubble has finally started to deflate. .....".  Click 'Welcome to the Dead Zone (Housing Bubble - Fortune Magazine)' for story.

3. Merrill Lynch analyst had warned in 2006 that companies could suffer from their Sub-prime Investments.

And there were many more talks on US housing bubble and possible sub-prime crisis.

However, Dow Continued to rise

From mid 2006 to October 2007, Dow gained 3,458 points (32%) to peak at 14,164.

This Time Around

During the era of Paul Volcker and Alan Greenspan, Federal Reserve did not have 'money printing', they used interest rate and other economic policies to regulate the market.

This time around, Federal Reserve under Bernanke used an entirely untested new concept of 'money printing' to flood the economy with liquidity to get US out of the financial crisis.

Looking at the Federal Reserve Balance Sheet. Before 2008, the assets used to increase at about 27 billions a year. With the QE programs since 2008, the increase was about 600 billions a year on average. The latest QE is 85 billions a month.

A banker said to me recently, "The money has gone into all sorts of assets. In fact, the only way to absorbed the liquidity is to have assets value at higher level to reach an equilibrium state. My money in the bank is shrinking everyday when assets like stocks and properties is going higher and higher."

He was talking to me about buying a double storey linked house in Bangsar for Rm 1.6 millions, "Nobody knows when the bubble will burst, if it can drag on for a few more years (with all the central bankers keep on printing money), the price may reach Rm 3 millions. And when the bubble burst, will it come down to Rm 1.6 millions ?"

Well, nobody knows.

So, how high will Dow goes and how long it can last before the final plunge takes place ?  I go by the chart, hopefully it is well behaved and hopefully the one up there doesn't trick me.

Is there a pot of gold ?

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Dow - Is mini wave v about to start ?

Dow gained about 90 points after 90 minutes of trading on Thursday morning. It appeared to me that mini wave v has started.

After 2 days of correction the mini wave ii for FBMKLCI is about there. If the index can move up from this level tomorrow, then it is possible that mini wave iii is on the way.

Farms Best dropped to 58.5 sens today. The correction so far is too big to be a sub-wave ii. Another alternative is wave (ii) provided it won't go below 57 sens.

Once it goes below the 57 sens level then it is forming the major wave 3 of major wave E of mega wave (2). At best it will drop to the 50 sens level to form a double bottom reversal pattern.

After the market closed, PJ Development announced good 1st quarter earning of 6.71 sens per share. Its NTA is Rm 2.17 per share. PJ Development can be considered cheap at Rm 1.23

PJ Development closed at Rm 1.23 today to form its mini wave ii. Hopefully it can start its mini wave iii of its sub-wave 3 tomorrow.

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Sonders - Why the Stock Market Isn't in a Bubble

Liz Ann Sonders, Chief Investment Strategist at Charles Schweb, wrote in a note to clients, "It's premature to be calling this market a bubble".

She has 3 indicators to back up her thesis :

1. S&P 500 Rolling 10-Year Returns

2. S&P 500 Valuation at Bull Market Peak

3. S&P 500 Bull Market Performance-Duration Plot

To read her full report click 'Sonders - Why the Stock Market Isn't in a Bubble'.

After reading the report, I superimposed the Dow Jones Industrial Average for the same period on to the 'S&P 500 Rolling 10-Year Return' and I have the following diagram.

From 1960 to 1973, the 'S&P 500 Rolling 10-Year Return' was in a down trend, but from 1962 to 1966 Dow moved from 560 to 1000 for a 78% gain. From 1970 to 1973 Dow moved from 680 to 1000 for a 47% gain.

From 1988 to 1996, the 'S&P 500 Rolling 10-Year Return' moved side way but Dow moved from 2000 to 5500 for a 175% gain.

From 2003 to 2007, 'S&P 500 Rolling 10-Year Return' was having a free fall but Dow ran from 7590 to 13930, gained 83%.

Conclusion : I see no definite correlation between 'S&P 500 Rolling 10-Year Return' and the market direction based on Dow.

For the other two indicators, when the current reading is close to or slightly below the long-term average, it may be premature to classify the market a bubble but it doesn't mean the market won't change direction. In fact, whenever the current reading is close to long-term average, my thinking is that time is running out.

I have no doubt that the assets bubble is there and it is getting bigger with all the money printing. But with near zero interest rate and with so much liquidity in the market, I really don't know when the bubble will burst. The only thing I can do is to have some faith in my own wave count and hopefully that market is well behaved and hopefully I can see some signs from the chart and get out before the bubble burst.


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Teoh Beng Hock - Hearing of appeal adjourned to 23rd January 2014

The Court of Appeal has adjourned to Jan 23, the hearing of an appeal against the coroner’s court open verdict decision in the inquest into the death of Teoh Beng Hock due to incomplete record of appeal.

To read more, click 'The Boneo Post - Teoh Beng Hock'

FBMKLCI

It appeared to me that sub-wave 3 of wave v is on its way. Hope to see 1900 within a few weeks.

Same as FBMKLCI, PJ Development is also forming its sub-wave 3 of wave v.

Farms Best has two options. For Option 1, it should not drop lower from its current level and it should start moving higher.

If it continues to move lower from its current level, then the possibility of Option 2 is higher.
For Option 2, it may drop to 50 sens to form a double-bottom reversal pattern.

Keck Seng continues to move higher slowly and steadily.

The next surge can be the mini wave 5.

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Dow, Hang Seng, STI & FBMKLCI

Dow Jones Industrial Average

Dow managed to break its short-term upper resistance level and set 3 consecutive new record highs and closed the week at 15,961. It needs only 39 points gain to break the 16,000 level.

It should be able to break the 17,000 level by the time it completes its wave (ix) of its major wave (5). Other world bourses are expected to move higher in tandem.

Hang Seng Index

Hang Seng gained 383 points (1.7%) on Friday. Can this be the starting of its wave iii of its major wave 3 ? 

iii of 3 can be very dynamic.

Singapore STI

Major wave 5 can be on the way.

Bursa Malaysia FBMKLCI

After two days of sharp drops on Tuesday and Wednesday, FBMKLCI rebounded on Thursday and Friday, that can be the starting of sub-wave 3 of wave v. I am looking forwards to see FBMKLCI breaking the 1820 level within November and hopefully breaking the 1900 level before end of 2013.

Am I too bullish ? Have I make any mistake in my chart reading ?  Time will tell.

PJ Development.

PJ Development finally managed to close above the 1.20 level on Friday. Is that sub-wave 1-2 of its wave v ?

It is possible that wave v of its major wave 3 has not finished its journey yet.

Don't care lah, I have already jumped into its warrant on Friday like a gambler :)  If I can make some Kopi-O money then I will have to thank James. Hope that 2 sens gain on Friday is not a sucker.


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Bursa Malaysia - Farms Best

Farms Best closed at 62.5 sens today, down 5.5 sens. The magnitude of pullback is bigger than my expectation. My previous wave count for this stock is as shown below.

I have assumed the September's low as the end of wave E, it is also the end of mega wave (2). The magnitude of sub-wave ii may be big but it remains acceptable as sub-wave ii at this level.

 

However, if the price drops further next week, my alternative wave count as shown below may become more realistic, wave E has not yet completed.

The run-up since end of August is the major wave 2 of wave E.

Under this circumstances, major wave 3 of wave E may drop to 50 sens and below.

Farms Best is about to announce its 3rd Quarter earning. Its 1st & 2nd Quarters earning per share are 0.92 and 3.1 sens respectively, with NTA of Rm 2.77 per share I consider its current share price as very cheap.The only reason for it to go to 50 sens and below can be a very bad 3rd Quarter earning.

 In her confirmation hearing before the Senate Banking Committee on Thursday, Janet Yellen said there are no asset bubbles - Not in the equity markets and not in the housing market.

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Madness - 200% increase in assessment rate

Madness

All those that have property in Kuala Lumpur should have received by now the 'Notice Of Revision Of The Valuation List' from DBKL The revised valuation will take effect starting 1st January 2014. The new value proposed by DBKL is 200% higher than the old value. It is crazy.

The reasons given by the Minister in the Parliament were :
1. The assessment rate has remained the same for a long period and
2. The value of properties has appreciated.

In my opinion, the above two reasons are applicable to all properties in the whole of Malaysia, then the question is "Why only those in Kuala Lumpur are subjected to this revision? What about those in Petaling Jaya, Subang, Penang, Kuching, Johor Bahru, Kota Kinabalu & .......... ?"

 And the Minister said, "We give importance to the people's welfare first." Really vomit blood.

Some speculated that this is to punish those in KL for not voting for BN ? If that is the case, we really need to put in extra effort to choose the right party to run the government.


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