Value & Risk

pureland said...

Mr Dali

What say U ? Market sentiment U turn and KLCI looking pretty good.

A time to ' re-rate ' your target to enter or still sideline waiting for subprime bubble full blown out?

Care to give some advise.

Comment: It doesn't make sense for local stocks to stage such a decent rally after falling 10%. If you are buying now, you are buying into the story that nothing much will change with the new political landscape. How can things not change? The state governments have the upper hand and can delay force renegotiation on many things. Things that has to do with land and infrastructure will be affected. The market should see zero participation by foreign funds for now, its all local funds support. Maybe they were instructed to shore up the index for reasons which you and I should easily surmise - but that is not creating a balanced valuation, it creates a skewed valuation on many stocks. The risk and value ratio does not add up at present levels. I believe the "wayang kulit" is only meant to last a few days so as to ease the pressure on a couple of people to resign. I believe the proper correction will resume and I still maintain my generous entry levels (i.e. buying on the high side of fair value) of 1100-1130.
pureland said...

Mr Dali

Since USD is running a huge massive budget deficit, I cannot understand how FED can able to create USD200 b for the market?

Does this mean this USD200 b is actually paper money that they are busying printing now?

If this is their action to ease liquidity, I believe in longer term they are inviting even greater trouble. Instead of detox the current problem, they are pumping in more toxin into the system.

What say U?

Comment: The Fed can print money but that is not backed by anything. They lend to banks, which the banks have to pay back, so when the banks pay back, the Fed can write the sums off. Hence when there are situations where the Fed writes off a huge sum of debt owing, which means they had been pumping banana money into the system, and then not requiring the banks to pay back - that could result in massive selling in USD and reduces its perception of the currency as a good store of value. Countries that do that, you can find in Africa a lot, where you will also see inflation in the 100% to 1,000% p.a. So by lending to banks in huge sums, the Fed is delaying the pain for the banks. Somebody has to pay back the money to the Fed - the process gets drawn out more as the Fed tries to sell more US bonds to fund these transactions. You can see that that's what has been happening for the past 20 years. USA has been living on borrowed money and borrowed time, just paying interest to bond holders to finance their lifestyle. Imagine America as someone who has not one or two credit cards, but literally hundreds, when one is maxed out they apply for another one. The last 4 years have seen the rest of the world saying enough is enough - you don't discipline yourself, we will. The last 4 years to date has seen the USD lose 40%-45% of its value against most currencies.


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