Fed's Fisher: No need for QE3

By Felicia Taylor, CNNI anchor/correspondent @CNNMoneyJune 1, 2012: 5:56 PM ET

NEW YORK (CNNMoney) -- The elephant in the room - QE3 - is stomping around again thanks to that deeply disappointing jobs report. So, will the Federal Reserve open the floodgates and throw more stimulus into the market? Or will it remain on the side lines, jawboning that "policy options are available ... should it be necessary."

Sometimes words are enough to calm the markets, sort of like a lullaby. Other times, you need action - as we've seen via QE1 and 2 and Operation Twist. The answer, of course, depends on who you ask.

Traders clearly want more QE. Ken Polcari, managing Director at ICAP Corps, said from the floor of the NYSE Friday that one way to avoid the global economy falling back into recession and prevent real panic is through stimulus. Economists are less certain. Tom Porcelli, chief economist at RBC Capital Markets, said he thinks the odds are high for QE3, but pointed out that more bond buying would just be a "sugar high."

Another round of stimulus won't necessarily result in job creation and that's what this economy needs to start real growth again. The consumer won't get out there and spend until they are sure they can find, keep or secure full time employment.

Job numbers are dismal

But at least one Federal Reserve president is indicating he's not in favor of more QE. Richard Fisher, president of the Federal Reserve in Dallas said, "there is already surplus liquidity sitting on the sidelines. Nearly $1.7 trillion in excess private bank reserves are on deposit at the 12 Federal Reserve Banks, lying fallow."

Fisher pointed out that long-term bond yields are already low as investors flock to the dollar and away from the euro.

"It helps to be the best looking horse in the glue factory! Monetary policy has done all it can, in my view," Fisher said.

Does the Fed have any bullets left?

Fisher is a well known inflation hawk and has consistently warned about the risks of too much stimulus. However, he is not a voting member of the Fed's policy-setting committee this year.
Still, he had some pointed words for politicians about how they, and not the Fed, should get the economy moving again.

"It is up to fiscal authorities to incent the private sector to get on with job creation and stimulate economic growth and final demand, using the ample and cheap funds the Fed has made available."

Petronas posts 61.7pc profit rise in Q1

Published: 2012/05/31

Malaysia’s state oil firm Petroliam Nasional Bhd (Petronas) posted a 61.7 per cent increase in first-quarter profit today, saying the rise was mainly due to higher margins and the company’s sale of its stake in Centrica Plc.

The unlisted company said its net profit for the three-month period ended March 31, 2012 rose to RM20.7 billion (US$6.5 billion) from RM12.8 billion a year ago.

Revenue in the three months climbed 14.6 per cent to RM75.2 billion year on year.

Petronas said the outlook in the coming months was challenging as political instability in the Middle East and the protracted European crisis weakened demand for oil.
“We do not see much improvement from the first quarter going forward,” Petronas’ President and CEO Shamsul Azhar Abbas told reporters.

The company is facing diminishing oil and gas reserves in Malaysia and plans to spend 300 million ringgit over the next five years to step up its deep-water exploration activities as well as re-exploring marginal fields.

Shamsul said Petronas will announce the award of the next round of risk services contracts (RSC) for the development of marginal oilfields in Malaysia in a few days.

Petronas awarded the first RSC to a consortium, comprising UK-based Petrofac Ltd and SapuraKencana Petroleum Bhd , for the development of the Berantai marginal field, off Terengganu state in January last year.

Meanwhile, Shamsul said the halt in its Sudan production is expected to cost Petronas some 3 billion ringgit in earnings to be reflected starting from the second quarter.

“We are lucky we have additional production in gas coming from Turkmenistan,” he said, adding the production of the gas will be higher in the second quarter. Petronas is part of Chinese-Malaysian oil firm Petrodar.

South Sudan said in February it had expelled the head of Petrodar, which is the main oil firm in the country, after accusing Chinese firms of helping Sudan to seize the southern oil. Oil from Sudan accounts for about 20 to 30 percent of

Petronas’ international oil production, making it the single largest contributor.

Shamsul said Petronas is requesting a cut in the annual dividend it pays to the Malaysian government to 28 billion ringgit this year from 30 billion in a move to preserve cash to help shore up production.

“Mind you, the government is fairly aware of Petronas’ need to have our own funding for growth, they respect that and they will agree to our request,” he said.

Shamsul said the time could be ripe for mergers and acquisitions as oil prices are expected to trend lower.

“We are doing opportunity scanning now and building cash for it,” he added. - Reuters

Malaysia targets RM53b from timber exports

Published: 2012/05/23

JOHOR BARU: Malaysia has targeted RM53 billion in earnings from the export of timber and timber-based products in the next eight years.
Deputy Prime Minister Tan Sri Muhyiddin Yassin said the government was confident that the figures could be met through the National Timber Industry Policy (NATIP).

"Among the wood and timber products, furniture export accounted for RM6.5 billion last year, making Malaysia the third largest exporter among Asian nations and eighth in the world.

"I hope that the Plantation Industries and Commodities Ministry will continue to develop the country's furniture industry, so as to help the country become world's top three exporter by 2020," he said at the opening of the Galeri Glulam in Jalan Tampoi here yesterday.

Muhyiddin believedt hat steps taken by the ministry via NATIP would see a shift in wood-based industries towards Own Equipment Manufacturing (OEM), Own Design Manufacturing (ODM) and Own Brand Manufacturing (OBM).


 

Petra Energy to triple capex this year

Published: 2012/05/30


Integrated oil and gas services provider, Petra Energy Bhd, will more than triple its capital expenditure to RM32 million this year to enhance services.

Chief Executive Officer Datuk Anthony Bujang said the amount was significantly higher than last year's RM10 million allocated for the similar purpose.

"The allocation includes the acquisition of a Labuan fabrication yard in January for RM16 million, upgrading works at the newly acquired yard and at its Shah Alam facilities," he told reporters after the company's annual general meeting.

He said further enhancement in asset capabilities would be determined in the next few months.
To date, Petra energy has an order book of RM797.45 million and the company has submitted tenders to the tune of RM2.43 billion, Anthony said.-- BERNAMA

Banks, builders, gaming stocks upgraded

Published: 2012/05/30

Nomura Asia-Pacific Research raised its call on Malaysia’s banks, construction and gaming sectors to “bullish,” saying political risks from upcoming elections had been factored in to prices and that earnings were primed to rebound.

“Our upgrades are premised on the idea that the earnings of these sectors have bottomed and are likely to surprise on the upside,” Nomura said in a research note on Wednesday.

Nomura said after a 14-month downward trend, consensus earnings measured by Institutional Brokers’ Estimate System (IBES) finally turned positive on Malaysia’s earnings in February 2012.

The upgrade cycle could continue for at least 12 months, boosting the country’s stock market on an 6-9 month upward trend, it said.
“After more than six months of discounting, most of the market risks associated with the 13th General Election should have dissipated, in our view,” said Nomura.

Nomura kept its bullish rating on the plantation sector despite recent weakness, and lowered the telecoms sector to neutral. -- Reuters

 

The death of equities: Here we go again

May 25, 2012 8:21 AM

By

Larry Swedroe

(CBS/iStockphoto)

(MoneyWatch) Perhaps the most infamous of all market forecasts is "The Death of Equities," the cover story of the August 13, 1979 edition of BusinessWeek. In it, the magazine argued that "for better or for worse... the U.S. economy probably has to regard the death of equities as a near-permanent condition." The article's timing could not have been worse -- over the next 20 years the market returned about 18 percent a year.
A May 14 editorial in The New York Times, headlined the "End of the Affair," echoed the earlier article. It marshals some facts in making a similar point about the state of the financial markets:

• "Investors are shunning the stock market, and who can blame them?"
• "As serial bubbles have burst, faith in the market has been rewarded with shattered retirements."
• "Trust has been destroyed by scandals and the slow, uncertain pace of financial reform."
• "Trading volume is down. Going back to 1960, trading had never declined for three consecutive years, let alone four and counting."
• "Since the start of 2008, domestic stock mutual funds were drained of more than $400 billion."
• "If the trend continues, the result could be a less robust market, with fewer companies opting to raise money by issuing shares and fewer investors willing to put their retirement savings into stocks."
• "Investors are not merely reacting to tough conditions, but rather are staying away because they don't trust the market, it's unfair to individual investors -- citing rebates from the stock exchanges that provide incentives for brokers to search for the biggest rebate rather than the best price for their client."

Whenever there's a doomsday story in the financial media, I often get requests for comments. My first reaction to this piece was to recall the "Death of Equities" story, and how wide of the mark it proved to be. I then noted the great irony in the Times editorial -- fear and lack of trust had led investors to withdraw over $400 billion from the market at the same time that the market had more than doubled! In other words, investors who ignored this new "death of equities" were the winners, while those who "paid attention" missed the greatest bull market since the 1930s.

The evidence is clear that individuals have the bad habit of investing as if they were driving forward while watching the rear view mirror, selling after periods of poor performance and buying after periods of strong performance. They're what financial economists call "noise traders," becoming overly optimistic in bull markets and overly pessimistic in bear markets.
While the winning strategy is to ignore the noise and adhere to a well-developed investment plan, if you can't resist paying attention to the noise, the evidence demonstrates that you would be far better off being a contrarian, doing the opposite of what the herd is doing. In other words, follow Warren Buffett's advice to "be fearful when others are greedy and greedy only when others are fearful." And remember that articles like this editorial are more likely to be yet one more contrarian indicator than they are to have value (other than as fodder for my blog).

And if you're concerned about broker rebates, the simple answer is to do what you should be doing anyway: avoid trading individual stocks. In general, stocks should be owned via investments in low-cost, passively managed mutual funds. That's the best way to achieve the broad diversification required to minimize the uncompensated, idiosyncratic risks of individual stocks.

The bottom line is this: If you insist on reading The New York Times for investment advice, limit yourself to reading Carl Richards' Bucks Blog.

Are gold, equities the safer bets?

OSCILLATING CURRENCIES: Cash-is-king mentality may not work
Published: 2012/05/26



FOR two years, Greece has, as one might say, held a gun to the head of the global financial system, and now in the eleventh hour, Germany is holding a loaded gun to Greece's head.

On Wednesday, Germany's central bank called for a suspension of financial support to Athens, while eurozone finance ministries duly agreed to draft contingency plans for a Greek exit from the euro.

Explosive times indeed. Armies aren't being lined up in the borders yet, but if wrong bets are placed, a financial collapse is more than a probability.

After that, who knows what will happen. Will there be a blame game on why the European project did not pan out as planned, or why the European dream turned out to be a painful one?
Perhaps it's time to dust off the old rockband R.E.M.'s music CD, and start playing over and over again: It's the end of the world as we know it!

The experts warn that a Greek exit will lead to untold consequence, and panic, including for those a safe distance away from European shores.

France's Societe Generale estimates a Greek exit could mean more than US$1.1 trillion (RM3.49 trillion) in loan and currency losses in the US and Europe.

The domino effects will be credit defaults, investors lining up to take their money out of banks which they feel might not stay solvent, joblessness, and steeper borrowing costs.

Already in Spain and Italy, the jobless rates are worrisome. The unemployment rate in Spain is more than 24 per cent, while in Italy, which is suffering its fourth recession since 2001, the rate is almost 10 per cent.

Can Asia face double- digit unemployment rates for a prolonged period where social security rights are not so ingrained?

Against this backdrop, it's surprising the eurozone now has second thoughts on the implications of a Greek exit, claiming a Greek withdrawal would be disruptive but "manageable".

This is a world apart from what Greece's radical anti-austerity leader Alexis Tsipras would like us to believe - that Europe would not dare pull the trigger.

Either way, we could be getting closer to the straw that broke the camel's back, with either Greece getting its way, Germany walking out of the eurozone or Greece being shown the door, and with real efforts being made to save Spain and Italy.

Chances of Germany leaving its beloved European Union or the euro, for the nostalgia of the deutschemark is remote.

A German exit will lead to a weaker euro, which is good news for the rest of Europe.

A strong deutschemark will, however, be bad for the German export machine.

So, is it safe to say that the two-year long game of poker will reach its climax sooner rather than later?

Don't be surprised to see equity markets after the impending steep drop building a base from the aftershocks.

This of course is all based on anticipation that a solution to the euro problem is just around the corner.

A few weeks ago, when the markets were on the go, I wrote that stocks might take a turn for the worse.

Many anticipate the bear will continue abusing the bull, but don't be too shocked if the tables are turned around.

With currencies poised to oscillate due to the euro problem, the cash-is-king mentality might not work out for the modern-day investors.

Gold and then equities (the longs and the shorts) look like the next safe bet.

Am I correct? Time will tell, though I take comfort in the knowledge that the last book I recall reading in my hazy, lazy university days was Edward de Bono's "I Am Right You Are Wrong".

****************
Note: Personally I look into long term. To me, cash is king unless you know how to make more of it better than than the FD interest rate to cover the inflation rate !  Today I rather lose now, but hoping it will grow at later time !  Short term pain, long term happiness and security ! I am busy accumulating shares to do cost averaging, and I do not hesitate to say I am having "unrealized loss" position. But you need to question.....did I make money from 2008 recession until April 2011 ? When did the new portfolio is created ? I am using the winning to buy more shares.....money makes money ! Let the people laugh at you for losing, but I am turning the negative power into "positive power" ....time will tell !



 

Analysts remain upbeat on banks

Published: 2012/05/26

KUALA LUMPUR: Analysts largely maintained their recommendations on the stocks of the country's top two banks following their first quarter results.

Bloomberg data shows that of at least 31 analysts that track Malayan Banking Bhd (Maybank), the bulk (or 14) had "buy" calls, while nine had "hold" and the rest, "sell".

Maybank on Thursday turned in a better-than-expected 18 per cent growth in profit to RM1.35 billion.

On the same day, CIMB Group Holdings Bhd reported a 10.3 per cent rise in net profit to about RM1 billion, which was within market expectations, if not slightly short.
Of the 29 analysts that track the group, the bulk (or 13) had "hold" calls, while 10 had "buy" and the rest, "sell".

Analysts said it was not a bad start to the year, considering that the first quarter tends to be a slow one for banks.

Both banks faced pressure on net interest margins.

Both maintained the targets that they had set for the full year, including a return-on-equity of 15.6 per cent (for Maybank) and 16.4 per cent (for CIMB).

Hong Leong Investment Bank Research (HLIB) noted that even though CIMB's first quarter fell short of its annual targets, the group remained confident of meeting them on the back of strong investment banking deal pipeline, stronger corporate loans growth and foreign exchange markets, among others.

It kept a "hold" call and target price of RM7.78 on CIMB, adding that risks include non-interest income falling short should capital markets soften.

Its investment banking income stands to get a boost from the second quarter onwards from several large equity deals like the initial public offerings of Felda Global Ventures Holdings, Integrated Healthcare, AirAsia Thai and Formula One.

"The key risk lies in a potential collapse in the capital market as CIMB will be the most impacted by any collapse ... given its relatively high investment banking non-interest income contribution, with a non-interest income to total income ratio of 36 per cent versus the industry average of 24 per cent," OSK Research said in a report yesterday.

Meanwhile, analysts said Indonesia's upcoming ruling on the maximum stake a single shareholder can own in its banks somewhat caps the upside potential of the stocks of Maybank and CIMB.

Maybank's shares, which have shed 0.6 per cent so far this year, lagging the benchmark FBM KLCI's 1.3 per cent gain, closed three sen higher to RM8.53.

CIMB's shares, which have eased 3.2 per cent this year, added one sen to RM7.20.