Wednesday, April 22, 2009

Avoiding the Bear Traps

People's emotions lead them to make bad financial moves in chaotic times. Here's what to look out for.

In a chaotic bear market like this one, it's easy for investors to fall into traps.

They might scramble to make trades based on the latest news reports. They might search for a miracle stock that will pay off big and let them recoup all their losses. Or they might go in the other direction -- and get so scared of the market that they don't make any moves at all.

"I believe that the frequency of irrational investor behavior goes up along with market volatility," says Chris Blum, head of the U.S. behavioral-finance group for JP Morgan Funds in New York, which studies how people's emotions affect their financial decisions.

Fortunately, a bit of logic and common sense will keep you clear of these pitfalls. Here's a look at some common missteps -- and how to avoid them.

The Value Trap
A chaotic market makes it easier for investors to convince themselves that because a stock -- or a sector or a market -- is cheap, it's a great value. Sometimes, though, there's a good reason that a stock or sector is cheap: It's in trouble. You need to look past the share price or valuation and examine the fundamentals of the company, the industry and the economy before you decide that something is a bargain.

"Within industries, not all companies are created equal; some will fare better than others," says Mr. Blum. It's through research, not instinct or stock price, that investors discover the real values, he adds.

The Risk Trap
One reason investors are so vulnerable to the value trap is that another force is at work -- the urge to recoup losses. Investors who are desperate to make back some of what they have lost and return to "normal" are more willing to take outsize bets on individual stocks or narrowly focused exchange-traded funds.

But that approach is even more unlikely to work in this market environment; the combination of the credit crunch and the recession have made the stock market dangerously volatile. A concentrated portfolio is especially risky, advisers argue.

Investors can't accept that individual stocks, or stocks overall, aren't likely to deliver a reliable stream of double-digit profits each year as in the past, says Bill Schultheis, a partner at Soundmark Wealth Management LLC, a financial-planning firm in Kirkland, Washington.
To combat the risk trap, Mr. Schultheis spends a lot of time preaching the virtues of investment basics like diversification and building returns steadily through compound interest and dividends.

The Scapegoat Trap
Like the children in humorist Garrison Keillor's Lake Wobegon, people believe they are all above average -- at investing. Overconfidence makes it easy to blame your financial adviser for your outsize losses last year, and to think you'd be better off making the big decisions yourself.
But that attitude ignores a basic fact: In this market, nearly everyone is in the same boat, more or less, regardless of who's managing their money. Ditching your professional help and going it alone is a bad idea.

"There are certainly some financial advisers out there who weren't good at what they did, but the worst mistake someone can make is to fire that individual and decide to do it all themselves instead of finding someone better," says Mr. Blum.

The reality, he says, is that few investors have the time, patience or expertise needed to develop asset-allocation plans and manage diversified portfolios. "Firing a specific adviser may be rational; deciding to be your own financial adviser probably isn't," he says.

The Paralysis Trap
The market debacle has left many investors too terrified to act at all, whether to sell portfolio holdings to limit losses or take advantage of what may be appealing long-term investment opportunities. Some advisers report clients in their 30s and early 40s shunning stocks altogether, when the real risk that they face is likely to be inflation -- which may eat up their money if they keep it out of riskier investments that are likely to trounce rising inflation rates over the next decade or two.

"The chance of suffering more pain is so intense that they can't imagine a world that will be better," says Joe Sheehan, a partner at Moneta Group, a wealth-management firm in St. Louis. "Two years ago, they would have jumped at the chance to buy more of stocks they already owned at these low prices; now they are frozen in place and won't respond."

Mr. Sheehan tries to persuade clients of a simple fact: The world hasn't changed dramatically enough to justify paralysis. "About 92% of Americans are still employed; the S&P 500 is not going to zero," he says.

Mr. Sheehan finds himself pointing to psychological studies showing that people tend to rely too heavily on what has happened in the recent past when it comes to predicting the future. "That's one reason we're in this mess in the first place," he says.

Among other things, he notes, investors and homeowners believed that housing prices could only go up -- leading to the bubble that got millions of homeowners in horrible financial trouble.

The Comfort Trap
"When people are fearful, Wall Street comes out with a product that tries to make you feel good by promising you safety," says Andrew Mehalko, chief investment officer of GenSpring Family Offices LLC in Palm Beach Gardens, Florida.

For instance, Mr. Mehalko expects one of the hottest-selling products this year to be principal-protected notes, just as they were after the bear market of 2001-02. While these vehicles -- which promise to preserve your principal investment -- may provide reassurance, they often also come with hefty fees and can sharply limit your upside potential.

As a general rule, a low-risk strategy will produce minimal returns. So, while you may feel the urge to lock up all your capital in ultrasafe strategies, you need to be prepared to invest some of it in riskier products.

Meanwhile, Mr. Sheehan reports that some of his clients have even developed an aversion to mortgages. That may be rational for people with no nest egg or a job that's at risk, but it's not something that everyone should be worrying about.

"It's not logical at all," he says, because some have relatively little mortgage debt relative to home value, hold long-term fixed mortgages at the relatively low rate of 5% or so and gain from the tax deduction for mortgage interest.

Yet "all they want to do is pay off that mortgage," to get rid of "this toxic thing -- a mortgage," he says.

The Chasing-the-News Trap
If you're a financial-news junkie, it's tempting to try to react to each twist and turn of the market. But the best thing you can do is turn off the news, put the remote control down on the coffee table and step away from your television set.

In times like these -- an almost unbelievably volatile stock market, a distorted bond market and an economic meltdown -- newshounds can do tremendous damage to their portfolios. Trying to judge exactly the right moment to get into the market -- and then jump out again a day or two later -- is likely to leave you with big headaches and outsize trading expenses.

An "atmosphere of constant, breathless hysteria" isn't conducive to making smart investing moves, says Carol Clark, an investment principal at Lowry Hill, a wealth-management firm in Minneapolis. "That's not what long-term investing is all about.

"Many of those [300-point] interday moves simply don't make a lot of sense in the first place, so how can it be sensible to try and respond to them?" she asks.

Instead of acting on every new development, it's better to look past the noise and invest small amounts regularly, an approach known as dollar-cost averaging. A strategy based on a solid asset-allocation plan and dollar-cost averaging is more likely to lead to sustainable gains over the longer haul.

Ms. Clark offers one final observation. Usually, investors find themselves in traps "because your emotions have run away with your logical thinking," she says. "You need to find ways to start thinking logically again."

Sometimes it helps to do something as simple as making a list of your investment goals and putting it on the refrigerator. Whenever you're tempted to act impulsively in response to something you see on television or hear from a friend at a dinner party, you can go back to that list and remind yourself that yanking money out of the market may not be the best strategy.

"Then, when you feel an urge to turn on CNBC, you train yourself to look at the list instead," she says.

Friday, April 17, 2009

KLCI: Riding Up The Hill

KLCI stage a mini bull rally in march after successfully taken out the resistance at 880 (50MA). Which bring the index touching 200MA at 970 level. I still positive on the curent trend as long as the index is hovering above 50MA level. A breakdown of below 50MA will bring KLCI to the new low which will hit below 800pts. At the meantime I see more upside potential for our market to move further up. Happy Trading!

[Previous KLCI Posting]
http://bursabulltrader.blogspot.com/2008/12/klci-1st-half-2009-rebound.html

Wednesday, April 15, 2009

'Glimmers' Of Hope: Obama

WASHINGTON (AFP) - - US President Barack Obama said Tuesday he saw "glimmers of hope" as America battles the deepest economic slump in generations but warned of painful choices and more deep job cuts to come.

"There is no doubt that times are still tough," Obama said in a sweeping survey of his attempts to piece together an economic rescue "puzzle" which also justified unpopular bailouts for the banking and finance industries.

"By no means are we out of the woods just yet. But from where we stand, for the very first time, we are beginning to see glimmers of hope," Obama said in a speech at Georgetown University.
Obama, three months into a presidency already dominated by the crisis, warned his efforts to restructure the once-mighty US auto industry and crippled insurance giant AIG would "involve difficult and sometimes unpopular choices."

And he forecast more job cuts and mortgage foreclosures before the economy turns around, in remarks balancing optimism for the future with a sober assessment of more rough times to come.

Obama said: "2009 will continue to be a difficult year for America's economy.
"The severity of this recession will cause more job loss, more foreclosures, and more pain before it ends," he warned.

"The market will continue to rise and fall, credit is still not flowing nearly as easily as it should.

"The process for restructuring AIG and the auto companies will involve difficult and sometimes unpopular choices," Obama said, in an address styled as a direct and frank economic update to the American people.

"All of this means that there is much more work to be done and all of this means that you can continue to expect an unrelenting, unyielding, day-by-day effort from this administration to fight for economic recovery on all fronts."

The president also walked a fine line between condemning corporate excess and justifying the expenditure of public money to save the crippled finance industry.

"I promise you, nobody is more frustrated than me with AIG," he said, referring to the insurance giant which has received more than 180 billion dollars in government cash.

"We've had to provide support for AIG because the entire system, as fragile as it is could be profoundly endangered if AIG went into a liquidation bankruptcy."

Obama admitted that a lot of Americans think taxpayer cash would be better spent going directly to families and businesses.

But he added "the truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth."

Obama spoke after Federal Reserve chief Ben Bernanke said Tuesday there were initial signs the US recession may be easing but warned of the need for financial stability for full recovery.

He noted "tentative signs that the sharp decline in economic activity may be slowing," citing data on home sales, homebuilding and consumer spending, including sales of new motor vehicles.

The president meanwhile cited the Bible and the parable at the end of the Sermon on the Mount to encapsulate his efforts to overhaul the US financial system, to head off future crises.

"We cannot rebuild this economy on the same pile of sand. We must build our house upon a rock," Obama said, in the address sandwiched between a trip to Europe which ended last week and a Latin America visit starting Thursday.

"We must lay a new foundation for growth and prosperity -- a foundation that will move us from an era of borrow and spend to one where we save and invest; where we consume less at home and send more exports abroad."

Obama also rebuked the media for its fixation on instant results and Washington politicians who seek short-term gain in times of economic blight.

"There's been a tendency to score political points instead of rolling up sleeves to solve real problems -- there is also an impatience that characterizes this town -- an attention span that has only grown shorter with the twenty-four news cycle, and insists on instant gratification in the form of instant results or higher poll numbers."

Despite the president's disdain for polls, the White House will likely welcome results of a new survey by CNN and Opinion Research, which showed 58 percent of Americans believe Obama has a clear plan to tackle the recession.

Monday, April 06, 2009

1Malaysia : The 6th Prime Minister

KUALA LUMPUR, April 3 — The following is the full text of Datuk Seri Najib Tun Razak’s maiden speech as prime minister, which was delivered over TV tonight:

“On behalf of all Malaysians, I would like to thank Yang Berbahagia Tun Abdullah Ahmad Badawi for his 31 years of exemplary public service to our country, his commitment to strengthening the institutions and fabric of our democracy and for his graceful example as our leader.

“I am grateful to Yang Berbahagia Tun for his confidence in proposing my name as prime minister to Duli Yang Maha Mulia Seri Paduka Baginda Yang di-Pertuan Agong, and I am honoured that His Majesty has consented to my appointment with this morning’s swearing-in ceremony. I feel a deep sense of humility at the opportunity to serve as your Prime Minister at an important time in our nation’s history.

“My life has been dedicated to public service.

“Growing up, I was inspired by the positive impact of public service in the example of my late father. Four decades on, I remain committed to the goals of tackling poverty, of restructuring our society, of expanding access to quality education for all, and of inspiring a new generation of young Malaysians to work on behalf of this great country.

“My own service in government has always been about getting results: To ensure a better deal for teachers, to improve conditions for our brave soldiers, and to strengthen our economy in defence of the people of Malaysia, as we deal with the outbreak of a global recession.

“In the coming weeks, I will be consulting with people around our country, as I begin to reshape the leadership and priorities of the Government. I am mindful that we should build on the successes and lessons of the past. It must be a government with new approaches for new times — a government that places priority on performance, because the people must come first.

“We must reach out to all parts of Malaysia... to all our diverse communities. In our national discourse and in the pursuit of our national agenda, we must never leave anyone behind. We must reach out to the many who may have been disaffected and left confused by political games, deceit and showmanship.

“We must draw on talented people across our nation, regardless of their position or background, to re-energise a passion for public service. We must sow the seeds of goodwill and understanding in every corner of this land, so that we continue to harvest the fruits of progress and prosperity for all Malaysians.

“We must seek to include and unlock the potential of our young people who will be the next generation of leaders, business people, engineers, scientists, teachers and doctors. We must give them wings to fly.

“And so today, I pledge that I will work tirelessly to serve all of you.

“In this spirit, I would like to announce that the government has decided with immediate effect, to remove the temporary ban on two news publications, release 13 detainees from ISA detention, and conduct a comprehensive review of the Internal Security Act. Additional details will be announced by the Ministry of Home Affairs shortly.

“These decisions are timely as we move to enhance the confidence of our citizens in those entrusted with maintaining peace, law and order, while recognising the need to remain vigilant of the very real security threats we continue to face as a young nation.

“I know that for every citizen, these are hard times and I remain focused in providing strong leadership to lead us out of this economic crisis and unleash our full potential as a nation. I will be steadfast in my commitment to meet the needs, aspirations and concerns of all Malaysians.

“So today I ask you to join me in this task of renewing Malaysia. I urge us to rise to the challenge of building a One Malaysia. People First. Performance Now.

“Let us begin this great journey together.”

Group Of Companies Which Are Closely Link To Datuk Seri Najib Razak

1. Najib’s milieu is Rohana Mahmood... Rohana sits on the boards of Paramount Corp Bhd, TH Group Bhd and Dijaya Corp Bhd.

2. Johan Holdings Bhd chairman and chief executive Tan Sri Tan Kay Hock is among the people said to be close to Najib. They have known each other for a long time and are also golfing buddies. He is also a chairman of GKent.

3. Najib’s father and Malaysia ’s second Prime Minister, Tun Abdul Razak, and Tun Hussein Onn, uncle and third Prime Minister, were good friends of Tan Sri Robert Kuok, their friendship going back to their school days ... Maybulk and his related group of companies.

4. Datuk Mohamed Azman Yahya, director of Khazanah ... Bolton, Pharma, MAS, PLUS & SCOMI.

5. Sapura’s Shahril and his family are also said to be close friends of Najib ... SapCrest, SAPIND, SAPRES.

6. Tan Sri Syed Mokhtar Albukhary's group of companies ... MMCCorp, AMtek, IRCB, MSC, BERNAS, KRAMAT, TWSCorp, TWSPlnt, Zelan.

7. Datuk Johari Razak, the second eldest, read law, like his father. He is a senior partner at Shearn Delamore & Co, a large law firm in Kuala Lumpur . Johari is also a non-executive director in several publicly listed companies including, being chairman of Ancom Bhd, deputy chairman of related Nylex (M) Bhd, and directorships in Hong Leong Industries Bhd, Daiman Development Bhd and TWRREIT. He is also a director of Deutsche Bank (M) Bhd.

8. The middle brother, Datuk Mohamed Nizam Razak studied politics, philosophy and economics at Oxford University in the UK and was a stockbroker, being CEO of PB Securities Sdn Bhd in the 1990s. At present (Dec 2008), he is also a non-executive director in several publicly listed companies including Hiap Teck Venture Bhd, Mamee Double-Decker (M) Bhd, Delloyd Ventures Bhd, Yeo Hiap Seng (M) Bhd and Waseong, Like Johari, Nizam is also a director of Deutsche Bank.

9. The fourth brother Datuk Mohamed Nazim Razak, who also studied in a British university, is an architect. His wedding in 2005 when he married to Norjuma Habib Mohamed, former host of TV3’s Nona show, was widely covered in the media. He is a director of HLCap & HLBank.

10. The youngest brother is the most well-known. Datuk Nazir Razak had studied at Cambridge University where he obtained a master of philosophy. A career banker, he joined CIMB Investment Bank almost 20 years ago, rising through its executive ranks to become its CEO in 1999. Following the merger of CIMB and Bumiputra-Commerce Bank to become Bumiputra-Commerce Holdings Bhd (BCHB).

Politicians Who Are Closely Are Link To Najib
1. Tan Sri Azman Mokhtar, the managing director of Khanazah Nasional Bhd;

2. Tan Sri Md Nor Yusof. An ex-banker, he was the former managing director of Malaysia Airlines and past chairman of the Securities Commission. He is currently director and chairman of Khazanah’s executive committee;

3. Datuk Mohd Nadzmi Mohd Salleh, chairman and MD of express bus operator, Konsortium Transnational Bhd. The former Proton boss was called upon by the Government in 1996 to revive the ailing public transport company; Datuk Shahril Shamsuddin of Sapura Group, which has interests in communications, information technology, and oil and gas;

4. Datuk Mohamed Azman Yahya, director of Khazanah, and founder and group chief executive of outsourcing firm Symphony House Bhd. He is also the ex-CEO of Pengurusan Danaharta Bhd; and

5. Dr Gan Wee Beng, the executive director of CIMB Group.

All above six have at one point or other played a significant advisory role in government agencies and strategic sectors. Some are still at it.

6. Datuk Seri Jamaludin Jarjis (Rompin MP and Pekan-born), Datuk Seri Shafie Apdal (National Unity, Culture, Arts and Heritage Minister), and

7. Datuk Seri Ahmad Hamidi and Datuk Seri Mohamed Nazri Abdul Aziz (both Ministers in the Prime Minister’s Department). These are the chaps in his inner circle as they go back a long way.

8. Two professional managers who have performed well in the institutions on Najib’s watch may also be poised for bigger things. They are Felda Holdings Bhd CEO Datuk Bakke Salleh and Lembaga Tabung Angkatan Tentera chief Tan Sri Lodin Wok Kamarudin. They have performed very well and are admirable managers. There may be bigger things in store for them.