Gold Mania

The Sifu of Gold, Marc Faber said :

One year ago, on 20th August 2010, Marvin Clark wrote an article "will the price of Gold reach $5,000 ?"

He said, "the inflation-adjusted price today for gold is more than $2,200 an oz. There are models with gold reaching $5,000, $6,000 and $8,500 an oz. One outlier has gold pegged at $36,000 an oz."

Click 'Will Gold Reach $5,000' for the article that was published a year ago on 20th August 2010.




Yesterday he wrote another article "Gold still on its way to $5,000", 11 reasons were given on why gold would rise to $5,000. Click "Here" to read.




In my yesterday's post, I mentioned that 'I don't think it (the price) will crash down from here ($1,909 level)'. My statement was based on my wave count for gold as shown above. There may be a wave 4 correction but not a crash.

The current run-up is the wave 3 of major wave (III), the 3 of (III), that is why it is so dynamic. An expected pullback ( say to $1,600 ) as mentioned by Marc Faber will complete the wave 4 before the last euphoric wave 5 surge (Mania Phase) to complete the major wave (III) if there is no extension.

It is important to note that the major wave (II) side-way "Complex A-B-C-D-E" correction lasted 20 years (a shallow and long correction), by the 'Rule of Alternation', major wave (IV) is expected to be a "Simple 5-3-5 zig-zag A-B-C" correction (a sharp and short correction). Theoretically major wave (IV) can drop until the top of major wave (I) of around $850. If gold can really reach $5,000, a drop to $850 is a 83% decline, a worst case scenario.

This is highly possible if the major wave (IV) decline takes only 2 to 3 years to complete instead of the 20 years of major wave (II). It has to happen in this way if it is a Gold Mania.

This is only an academic exercise on my part, it is not a recommendation to short or to buy gold. Don't forget, I can be wrong. Please consult a gold investment expert before taking any position.


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Gold Bubble ?

I do not know how high gold will go

Many investment advisers are recommending Gold

Many theories on why gold can only go up

Gold touched a high of $1909 per ounce yesterday. Looking at the chart above, Gold has reach the exponential phase in its surge, how much higher can it go ? I don't know but I am very sure it is a bubble. I don't think it will crash down from here, people has not gone crazy yet.

Looking at the silver 34-year chart, don't you think it looks like a bubble is developing ?

Look at the sharp drop in 1980, silver price dropped from $48.70 to $10.80 within 3 months for a 78% plunge.


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Asian Markets

Singapore STI's intraday low of 2680 is 30 points away from its support level of 2650. In the final two hours STI rebounded 51 points to closed at 2731. It may form a 'Head and Shoulders' with 2650 as its neckline.

Same as STI, Hang Seng rebounded strongly in the last two hours of trading and managed to recoup 440 points to close with a gain of 86 points. Both the indices are at their early stage of major wave C.

Korean KOPSI is going for an expanding A-B-C, 3-3-5 formation, major wave C will have to close much lower than major wave A.

After setting a historical height in year 2000 during the dot-com bubble run up, Taiwan TWII appears to form a major A-B-C-D-E waves. Major wave E has started.

Nikkei 225 of Japan has been moving along its own course since the collapse of its asset price bubble in 1989. Its current price of 8628 is 30,288 points below its peak at 38,916.

At the height of the bubble, the total Tokyo stock market capitalization represented 44% of the world's equity capitalization and the total real estate values of Tokyo Prefecture (2187 sq. km) was higher than the whole US real estate values.

In 1991 the total land in Japan was valued at about 5 times that of the US. Land prices were highest in Tokyo's Ginza District that fetched over US$139,000 per square foot (US$1.5 million per sq. m. or US$1.5 trillions per sq. km.)

From the above, one can see that even in 2000 (10 years after the Japanese assets bubble), land in Manhattan sold for only $2300 per square foot.

Since the 2007's high, Nikkei has been forming its major wave E.

A Little Bit on Politics

Brigadier General, Datuk Mohd Arshad Raji

"The NEP formulated following the aftermath of the May 13, 1969 racial riots was aimed at resolving the economic imbalances among races and improving upon the economic and social well being of the Bumiputra. But till today the government is still stuck with the same rhetoric that priority is to better the economic and social prospect of the Bumiputera. Do we need another 50 more years before the Bumiputera can come out of its predicament? I honestly doubt we can, given another 100 years without a drastic change in the mindset of governance of our present and future political leaders."

Click 'Muhyiddin - 50 years too late' for full article.

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Major wave C in progress

As shown in the 5-year chart, Dow is at the early stage of major wave C that has an estimated duration of 15 to 20 months. It will drag until the last quarter of 2012, a good time to fish for some cheap commodity or financial stocks

The cumulative drop in the last two trading sessions of 593 points has taken me by surprise. I was expecting a more gradual drop with a smaller magnitude for this minor wave 2 pullback. I always feel uncomfortable whenever Dow does not behave as what I have expected. the sharp pullback at this stage has triggered me to look for other possibilities besides what I have in my mind originally as shown below as 'Possibility 1'.


Originally I was thinking of a 200 points pullback over 3 to 4 days before another surge to complete the sub-wave iv as shown above (Possibility 1).


With the sharp drop of close to 600 points in the last two day and Dow is only 98 points above the sub-wave iii, 10719 level, the question now is whether it will break the 10719 level. If there is another drop of more than 100 points next Monday, my 'Possibility 1' can be thrown out of the window and I will then have to focus on 'Possibility 2' where sub-wave iv has been completed, even though the magnitude is rather small and duration is rather short but based on the 'form', it is possible.

The next possibility, 'Possibility 3', which is the worst case scenario, is as shown below.


In this scenario, the sub-wave iii has not yet completed. Dow has only completed the mini wave (i) and (ii) of sub-wave iii, Dow is in the mini wave (iii) of sub-wave iii, the (iii) of iii, that is why the last two days drop has a magnitude of close to 600 points. I hope by next week I can zoom down to only one likely possibility.

For my not so technically inclined friends, just remember the followings:
a) Dow has started its major wave C.
b) Major wave C is likely to end below 6000 level. (My rough estimate at this moment. Should be able to have a better projection by mid 2012)
c) This down trend (bear) is likely to end before end of 2012. (Last quarter of 2012?)

As usual, when Dow goes to 6000, other world markets including Bursa Malaysia will go to a level that matches the 6000 level of Dow.


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A Black Thursday ?

A bad day. After 45 minutes of trading, the drop is about 5%. It is going to be a sharp mini wave 2 of sub-wave iv.



My friend emailed me the following photos titled 'Spring in Holland', it has to be Keukenhof Garden.

Click on the photo to enlarge

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KL Kepong and Batu kawan

After 2 hours of trading all the three indices remain in the positive side. It is possible that Dow may move side-way to lower in the next few days to complete its mini wave 2 as shown below.


It is likely that Dow is forming its sub-wave iv currently.

My friend has emailed me KLK's latest quarter (ending June 30th) earning with a heading
'KL Kepong Q3 Profit leaps 78%'

That prompted me to have a look at its announcement and its chart



It is likely that the strong earning has already been factored into the price. I will sell off all my KLK if I have in view of my pessimistic opinion on the markets - a double dips scenario. It has completed 5 waves with a 'Double Tops' on the way, another reason to sell.

Quarterly earning at 40.64 sen;
NTA at Rm 6.37;
Share price at Rm 21.34
It is not cheap

Whenever I talked about KL Kepong, I always like to mention Batu Kawan that holds 47% of KLK. The Number of Batu Kawan share is about 440 millions but it is holding 480 millions share of KLK. It means in every 1 Batu Kawan share, there is 1.1 KLK shares in addition to its other operation and assets.

When I asked my daughter why KLK's share price is always higher than Batu Kawan ? The answer from her is,"all the money earned is with KLK."



To me, statistically Batu Kawan is in a stronger position than KLK.

Quarterly earning at 50.33 sen;
NTA at Rm 8.44;
Share price at Rm 16.02
It is not really that cheap.

It is interesting to note thast Batu Kawan has been buying back its own shares consistently since 2009. All its announcements were 'Notice of Share buy Back'. Are they going to take Batu Kawan into private? This can be interesting .



FIMA Corp has also announced a strong quarterly earning.

Quarterly earning at 33.4 sen;
NTA at Rm 5.09;
Share price at Rm 6.02
(FIMA)

I would say FIMA is value for money when it is compared to KLK

Quarterly earning at 40.64 sen;
NTA at Rm 6.37;
Share price at Rm 21.34
(KLK)



FIMA has also completed 5 waves but the magnitude is too low for its major wave (III) as the wave 5 is not much higher than the top of major wave (I). Is it possible that major wave (III) may have 9 waves. Watch out for price breakout at Rm 6.50.

But with the 'double dips' in mind, there is no buying for me.



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The Price of Green Power

A large wind turbine requires up to 2 tonnes of neodymium for the production of it's alloy magnet.

To produce 1 tonne of rare earth using High Temperature Calcination Technique, the process will generate 9,600 to 12,000 cubic metres of waste gas (containing dust and acidic gas), 75 cubic metres ( approximately 75 tonnes) of acidic waste water and 1 tonne of radioactive waste residue that are usually being discharged into tailing ponds, lakes or wetlands.





In Inner Mongolia, rare earth plants have turned grazing greed fields, wheat and corn farmlands into polluted radioactive wetlands and miles of dusty wastelands.



A five-mile wide 'tailing' lake near Bautou, Inner Mongolia, has killed green productive farmland for miles around the lake.



The population of Baotou permanently wear face masks, has high cancer rate, weak teeth, high rate of osteoporosis, severe skin and respiratory diseases. Children were born with soft bones.

Toxic radioactive waste poisons land, plants and people. It destroys environment and ecosystem.

Very soon Kuantan is going to be as famous as Baotou.
Thank you Lynas
Thank you the Pahang State Government
Thank you Barisan National


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