Another Recession Due Circa 2012: Jim Rogers

A new recession would be due around 2012 but central banks will not be able to throw cash at it anymore, Jim Rogers, chairman of Rogers Holdings, told CNBC Tuesday.

India's central bank raised its interest rate on Tuesday, joining other monetary authorities such as the Canadian and Norwegian central banks in hiking rates to stem inflation.

"We do have inflation in the world… most central banks should resign," Rogers said.

There has always been a recession every four to six years in the US "since the beginning of time," and that would mean another one is due around 2012, according to Rogers, a hedge fund pioneer who started the Quantum Fund with George Soros in 1970.

"When the next one comes the world is going to be in worse shape because the world has shot all its bullets," he said.

"Is Mr. Bernanke going to print more money than he already has? No, the world would run out of trees," Rogers added.

The fact that second-quarter earnings have been better than expected does not necessarily mean that the recovery is stronger than anticipated, he said.

"I'm sure some of it is expectation management… but remember what the comparison is. We are talking about the second quarter of 2009, when we thought the world was coming to an end," Rogers said.

"Worry about next year, don't worry about the second quarter now. That's history," he added.

(Source: CNBC)

Asian markets strong outlook from 2nd half 2010 - 1st half 2011

After the financial crisis hitted the bottom in March 2009, global stock markets have experienced a strong rebound and some of the markets are breaking the pre-crisis high. If we observe and analyse in detail, we are able to easily notice that the rebound was not across the board but it may apply to certain good fundamental stocks only. Those weaker stocks especially the 2nd & 3rd liners are struggling to perform as they have been badly affected by the financial crisis and may encounter a financial problem which may not be able to survive at the end. These are the stocks without strong fundamental financial support, and I strongly advise you never try to speculate or invest into this kind of lousy stocks due to the high risk exposure which potentially leads you to loss all the hard earn money!

Due to the global markets' strong and long run for the past 15 months ago, the global economies started losing steam and heavy profit taking kicks in at the moment. You may notice the market is pretty tough to move up as most of the retailers & investors prefer to stay sideline to observe the market trend. Some of the global markets like China, United States, European markets have experienced heavy sold down since May 2010 due to the slow down in the economy growth. Although the particular economy or stock may still achieving good number of yearly growth rate, but the slow down may happen in the month-month basis. That is the reason sometimes you may notice a stock price down while reporting good yearly growth percentage. This is one of the important skill to pick up in order to avoid mistake in chasing good stocks at the wrong timing with wrong interpretation.

No doubt some of the global markets are struggling to move forward but hovering in the tight range with little investors and retailers participation. There are many strong countries especially in Asian like Singapore, Hong Kong, Korea, Thailand, Indonesia, India and Malaysia are holding pretty strong near the 52-weeks new high level at this moment. Of course not all the stocks are aligned with the market's index movement as it varies between the good stocks and lousy stocks. Please to note that this might be the Prefect Timing for you to easily catch the good stocks as they will be in the "positive region" or "top gainers" list while most of the other counters are in the "negative region" or dropping. From here, you must deeply analyse the good stocks you catched to avoid some speculating cases.

Referring the strong growth in Asian countries, I am confident that we are going to have strong growth in stocks prices in the next 12 months ahead! Nevertheless, it is not recommended to chase an overvalue stocks blindly! In order to make the maximum Return On Investment (ROI), I would strongly suggest to accumulate and invest in good fundamental stocks when markets dip! You may question how to find the good fundamental stocks? I have shared with you one of the easiest way above and will try to share others in the coming post!

Similarity & the comparison between 1929 and 2008 financial crisis

Dow May Crash to 7,500 If 10,600 Not Breached
Published: Thursday, 15 Jul 2010 1:29 AM ET

This article was retrieved from the CNBC contributor, Mr.Daryl Guppy reviewing his technical analysis view about current market trend and the comparison between 2008 financial crisis with 1930 financial crisis.

Seeing there's been quite a bit of interest in his recent comments on CNBC about the historical parallels between the Great Depression and the recent financial crisis, I thought it may be appropriate to elaborate further on the chart technicals behind the observation.

The causes may have been different, but the collapse of the U.S. markets in early 2008 followed the same behavioral patterns as the collapse in 1929. The recovery pattern seen in 2010, is also very similar to that developed in 1930.

The crash of the Dow Jones Industrials in 1929 was signaled by the development of a well defined head and shoulder pattern, seen most clearly in its monthly chart. It is a reliable pattern that captures the behavior of investors who are becoming increasingly disillusioned about the future prospects for economic growth.

The downside pattern targets in the 1929 Dow were exceeded with a fall of around 49% before the market recovered in 1930. The 2008 dow pattern targets were also exceeded with a market fall of around 52%.

In 1930, the market developed an inverted head and shoulder rebound pattern recovery that led to a 46% rise in the market. The Dow rebound in 2009 also developed from an inverted head and shoulder pattern. This was a powerful rise of around 69%.

The historical development of the recovery in the DOW in 1930 ended with a new head and shoulder pattern. This was followed by a rapid market decline that created the first part of a long term double dip pattern. This retreat also exceeded the pattern projection targets with a fall of 28%.

Fast forward to today, we're seeing the Dow is developing a new head and shoulder pattern which indicates a beginning of a bear market. The rally peaks in the Dow appear in January and May and June. The downside projection taken from the neckline of the pattern sets a target at 8,400, or a 25% decline.

A very bearish analysis using the pattern of retreat behavior in 1930 suggests the Dow could retreat to around 7,500 in 2010.

The head and shoulder pattern in the Dow and its downside targets, are invalidated with a sustainable rise above 10,600. A move above this level does not signal a resumption of the uptrend, but it does reduce the probability of a double dip.

It must be noted that while the behavioral patterns in 1930 and 2010 are similar, they don't necessary point to the same result. But it does sound a warning that markets could continue to stand on the edge of a precipice.

(Source: CNBC)

Market trends - Bull/Bear/Consolidation

In stock market investment, identifying market trends is very important as it may directly impact the ROI performance. We can categorize the market trends into 3 different cycles:

• Bull market: Economy sentiment good (Optimistic), market volume increase as market moving up


• Consolidation market: Market consolidating and waiting economy news to drive it to Bull/Bear market trend, it is also called Profit taking/Filtration process

• Bear market: Economy sentiment bad (Pessimistic), market volume decrease as market moving down

Bull market:

During Bull market, everything seems to be so positive until we are trying to neglect the negative news. The easiest way to confirm it is in the Bull market is by just simply dropby to visit anyone of the broker house to check the crowd, normally it would be fulled of retailers inside the broker house until you can't even find an empty seat there. Remember the cheerier the crowd & the higher the capacity of the crowd showing the "Danger" is just around the corner! It is simply because most of the retailers like to see the stocks moving higher and "Chase" to grab it, they are purely looking at the stock price moving up without analyse the fundamental of the stocks. This process may eventually push the stocks overvalue, subsequently the profit taking & selldown will happen when they realise the fact that they have bought at the high side which it is not worth at all.

The other way is to do some home work studying the fundamental & technical data. You may easily retrieve most of the details of a stock by checking through the company profile & company financial statements. In order to ensure you understand a company well, you must always updated with the news announced by the company. For ex: The cash flow, balance sheet & the profit & loss statements shown in the financial reports are very important as it is showing you the "wealth & health" condition plus the business potential of the company. It means you better be clear about what makes you invest in the company! Besides, the other few important data which you must understand are PE ratio, Earning per share, Dividend per share, etc... In an ideal Bull market, you will definitely detected most of the fundamental & technical data are so bullish & in growing stage. Most of them should be in positive growth region.

The last method is to identify the market is in Bull trend is by looking at the technical chart. The most common pattern of Bull market is there will be "Higher Low" means the trend is started with moving up 10 steps, follow by profit taking which happen in consolidation stage with a little downward pressure - may drop 3-5 steps, then bargain hunting happen again to push to price move up again and break through the previous high - may move up another 10 steps again. This process created few "Higher Low" until reaching the "Top" that the stock is tired & no energy to move up anymore. This is where the top volumn comes in as well! Again, it is the "Demand & Supply" philosophy! The stock price and market volumn should move in the same direction to moving up in the Bull market.

Consolidation market:

In a Consolidation market, the prices are moving sideways when the buyers are fighting with the sellers, or the Bull is fighting with the Bear! This condition normally happen when the market is resting after moving up or down for a certain period, or building the top or bottom of the market. Futher to the consolidation market, the price will breakthrough and move into either up or down direction. This is when most investors are staying sideways and waiting for fresh market news to drive the direction. Any breakup from consolidation market is a buy call, and vice versa when a breakdown happen.

Bear market:

The Bear market can be easily recognised when everything is seems to be so negative, it is the total reverse to Bull market sentiment. For instance, most of the financial data such as GDP is negative growth, unemployment rate increase, consumer spending decrease, etc... I will not spend much time into this as if you understand the Bull market, it is very natural you would know the Bear market the best!

KLCI daily chart analysis - 04072010

KLCI movement commentary

KLCI was moving lower from 1326 and closed at 1307 level last friday, the sold down was mainly due to the weakness from US & EU markets. Most of the data like consumer confidence drop, new home sales plunge 30%, umemployment claims increase again indicating the global recovery is losing steam after governments stimulus packages ended. However, the Asian markets like Singapore, Hong Kong, Korea & Malaysia were holding quite well over the profit taking. There was a surprise our government increased the tax rate from 6% to 8% for the gaming sectors, this directly diluted the earning of the gaming companies like Tanjong, Bjtoto, MPHB. The market sentiment has changed to bearish immediately after KLCI index dropped below 20day & 50day moving average lines.

Technical analysis

The KLCI index dropped below middle Bollinger line, it stayed below 20day & 50day moving average lines, MACD is forming Rounding top.

Strategy

Bearish, wait for next bargain opportunity. Set and prepare to cut loss, sell on strength.