FCPO - Futures Crude Palm Oil

A Fool's Mate?

2010-08-27T12:16:00.000+08:00

It's already to late to surrender. I'll probably hang on there until Mr. Margin calls. Very much with the idea that I would want to take bigger risk trading counter-trend, I've probably blew it that turning back don't seem like an option anymore.

So, for now, it looks like it's a double or nothing scenario. Unrealized losses are being absorbed. And the fight continues for whatsoever reason. The emotions were so high before, yet it has ceased to be a factor anymore. I just wanted all these to end quickly. Foolish, eh?

Druckenmiller’s Motto

2010-08-18T23:34:00.002+08:00

It takes courage to be a pig.

Will I Be Able To Make A Comeback?

2010-08-16T17:10:00.000+08:00

The market has not been kind to me lately. Though I had been in a worse situation (a lot worse), what's happening now has been demotivating not to mention all the time wasted spent on waiting (I've waited a lot longer too).

Losing is part of trading and perhaps my time may be up soon?! Who knows what's going to happen in the future? So, as part of my 'let-go-and-move-forward' plan, I have moved a-third of my money for Hang Seng trading (mini). Not to say I'll make money for sure from it, but at least it's worth a shot than waiting here in our dear'ol FKLI and FCPO. Genting soaring is definitely not within my expectation and I bow to that on the part of my fallibility.

The wait here in BMD (Bursa Malaysia Derivatives) is here to stay for now. God knows how long. It's still bearable (hopefully bear-able, LOL). One thing for sure, with the current plan that I'm executing now, money is more well utilized as compared to the time I chose to play safe and under-utilized.

Will I be able to make a comeback? Or my money just got burnt for nothing?!

It's A Good Time To Switch A Little

2010-08-13T16:34:00.000+08:00

Look at the 5-year chart below for HKD/MYR. Maybe it's time to phase out a little to Hang Seng!?

Euro-Region Jitters To Return

2010-08-13T16:19:00.000+08:00

The tensions with the euro zone could be about to return. This could force the market back to focusing on solvency concerns, Ireland and Portugal will be back in the spotlight next week.

On Thursday, the Irish central bank warned that costs for issuing bonds are too high, with the governor saying premiums that investors demand to hold Irish debt are "ridiculous."

German yields are too low given pace of growth, Bunds are expensive. With Ireland I wonder whether the market is willing to keep believing things remain OK when we are facing major austerity measures.

~~ Steven Major, the head of fixed income research at HSBC

Russian Roulette With Genting

2010-08-13T15:41:00.000+08:00

It was a russian roulette affair with Genting today. Genting +6%, GenM +1.5%.

~~ The sheriff was shot, but not the deputy. Deputy can still be promoted though...LOL

Bond Pointing To Bear Market For Stocks

2010-08-11T16:03:00.001+08:00

In the latest battle over who does a better job of forecasting market movements, bonds are nearing a strong signal that a bear market for stocks is right around the bend.

Since hitting its most recent high yield of 4.01 percent on April 5, the 10-year Treasury bond has slid nearly 1.20 percentage points, a metric that signaled in 1990, 2000 and 2007 that a steep drop in stocks was only two months away, according to research from Gluskin Sheff strategist David Rosenberg.

With the 10-year yield at 2.82 percent in early Tuesday trading and the bond market still red-hot despite continued predictions of its demise, the big bear indicator is looming large.

"Declines of this magnitude very often presage the onset of bear markets and recessions," Rosenberg says. "Typically, equities and then economists are late to the game...What is key to note is that the bond market is the tail that wags the stock market's dog—it leads."

Whether the bond market again is foretelling a bear market—a 20 percent drop in stocks from the most recent high—is part of a long-running debate over who does a better job forecasting—stock or bond investors.

Conventional wisdom is that bond investors tend to be more conservative and thus less influenced by fear and greed. That's cited as the reason by some that the bond market does a better job of getting the economy right.

"With all due respect to the stocks guys, the bond guys, when it comes to the economy, tend to sniff things out a little earlier and eventually get things right," says Mike Larson, analyst at Weiss Research. "Bond yield levels have given you key insight into what's going on in the economy. The verdict in my mind is pretty unmistakable."

~~ CNBC

What Jobs Data Tells Us

2010-08-10T10:29:00.000+08:00

What the jobless claims numbers should tell us is that employers lack the confidence to expand their production because they’re uncertain how much momentum is out there. Businesses are interested in maintaining margins because they are not sure about the strength of future top-line growth.

~~ Alan Gayle, senior investment strategist at RidgeWorth Capital Management

Some Careless Whisper With Seether's Rendition

2010-08-06T17:18:00.000+08:00

This rendition will change anyone's perception of the old version by George Michael

US Exporting Deflation

2010-08-05T22:16:00.000+08:00

The dollar is getting weaker- that's really the U.S. exporting deflation to the rest of the world. This comes at a time when the yen has hit an eight-month high against the dollar. As the dollar falls against currencies like the yen and euro, it would make it even harder for Japan and the Euro Zone to increase output.

~~ John Makin, chief economist at Caxton Associates

Fully Stocked Up

2010-08-05T14:04:00.000+08:00

Many economists are forecasting a further slowdown in the second half of the year, perhaps to an annual rate as low as 1.5 percent. That is largely because businesses have refilled the stockroom shelves that were whittled down during the financial crisis, and there will not be much need for additional orders.

Keynesian Beauty Contest

2010-08-03T18:58:00.000+08:00

Keynes described the action of rational agents in a market using an analogy based on a fictional newspaper contest, in which entrants are asked to choose a set of six faces from photographs of women that are the "most beautiful". Those who picked the most popular face are then eligible for a prize.

A naïve strategy would be to choose the six faces that, in the opinion of the entrant, are the most beautiful. A more sophisticated contest entrant, wishing to maximize the chances of winning a prize, would think about what the majority perception of beauty is, and then make a selection based on some inference from their knowledge of public perceptions. This can be carried one step further to take into account the fact that other entrants would each have their own opinion of what public perceptions are. Thus the strategy can be extended to the next order, and the next, and so on, at each level attempting to predict the eventual outcome of the process based on the reasoning of other rational agents.

“It is not a case of choosing those [faces] that, to the best of one’s judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees.” (Keynes, General Theory of Employment Interest and Money, 1936).

Keynes believed that similar behavior was at work within the stock market. This would have people pricing shares not based on what they think their fundamental value is, but rather on what they think everyone else thinks their value is, or what everybody else would predict the average assessment of value is.

~~ Wikipedia

Soybean Update: Higher By The Day

2010-07-31T14:40:00.001+08:00

November soybeans rallied to its highest level since early January today, surpassing the $10 level. Traders said that the soaring wheat prices triggered buying by most segments of the market today.

Weather is expected to be favorable to crop development this weekend in the Midwest, but hot and potentially stressful for soybeans in the Delta. Forecasts into next week and later are potentially a bit more stressful in the Midwest according to traders. Excessive soil moisture in the western Midwest could cause some spot problems according to one analyst with scattered dry spots doing the same in the eastern Midwest.

In India, rainfall has increased in central and western growing areas, but sources there report that more rain is needed.

That's All You Need

2010-07-30T10:09:00.002+08:00

All you need is to push these two stocks (PetGas, PLUS) to keep the cash market in the green. Especially on PetGas which traded on such a low volume and carry pretty high market capitalization. Easily manipulated market, I agree. Does it mean the market won't fall with all these efforts? Think of this:

"Say, we fund managers want to turn short due to ... So, we build our shorts in FKLI (Futures Kuala Lumpur Index), So, we begin our short sell adventure and the whole idea is to sell from a price as high as possible. So, we begin by buying these PETGAS, BAT and etc. for 100 units (or maybe higher at times) at anytime of the market, especially during 4.50pm. in order to create the idea of a strong cash market thus lifting FKLI. Then the moment we build enough shorts, we let go of those PETGAS and BAT even at a loss, and sell the others which we really intend to sell like CIMB, Maybank, Sime and etc. (the more liquid ones). After all, the 'investment' in those PETGAS and BAT aren't a lot. And when the cash market tumbles due to our selling, futures will follow, in which we may plan to take profit from our previous short selling."

What I can say is that, it's damn easy to manipulate the cash market up ... yet, it does not mean they don't have plans and tools to stage a fall too.

Common Sense Bill Failed

2010-07-30T10:09:00.000+08:00

(Bloomberg) -- Senate Republicans blocked a measure that would cut taxes and ease credit for small businesses, saying they objected that Democrats refused to consider their amendments to extend expiring tax breaks.

The Senate voted 58-42 today to end debate on the bill, falling short of the 60 votes required to consider the legislation for passage.

“Once again a common-sense bill that would help Americans is being held hostage by political calculation,” Senator Patty Murray, a Washington Democrat, said in debate before the vote.

Low Rate May Be Detrimental

2010-07-30T08:41:00.001+08:00

Federal Reserve Bank of St. Louis President James Bullard, a voting member of the Federal Open Market Committee this year, said using Fed communications to pledge rates will stay near zero may prove to be detrimental. While some people say rates near zero will accelerate inflation, such an interest rate policy may also cause a broad-based decline in prices, he said.

“Under current policy in the U.S., the reaction to a negative shock is perceived to be a promise to stay low for longer, which may be counterproductive because it may encourage a permanent, low nominal interest rate outcome,” he said in a paper released by the St. Louis Fed.

Is it Still Turkey Or What?!

2010-07-28T17:41:00.000+08:00

This market is more like a turkey and not a bull or a bear.

I Am Doomed?!

2010-07-27T08:46:00.002+08:00

I think I have got to be one of the most stubborn bear in the market. The local market KLCI has hit a fresh new high and yet I still hold short as price broke out from a bounded area as some traders may perceive. Am I a stupid bear in the market?

The cash market never see red for real in days. Dow kept adding triple digit points and perhaps getting stronger in weeks ahead with all the beatings in profit estimates, not to mention the 'bad-but-not-totally-screwed' economic data. Even worse, some economic data had an upside surprise which often see a knee-jerk reaction to the north.

Now, am I just adding onto a bunch of losing positions which time will tell when I'll bust? Am I shaken now? What is my next course of direction? Lets just see next month.

It's Turkey Actually

2010-07-25T12:00:00.000+08:00

There's a constant struggle between the bulls and the bears when in fact the answer is in the middle ground. This market is more like a turkey and not a bull or a bear.

~~ Brian Jacobsen, chief portfolio strategist at Wells Fargo Fund Management

They Know More Than We Do?

2010-07-23T16:29:00.000+08:00

(Bloomberg) -- Investors are exiting the oil- futures market at the fastest pace since the collapse of Lehman Brothers Holdings Inc. amid evidence the global economic recovery is slowing.

Bets on West Texas Intermediate crude slumped 13.2 percent in the 60 days through July 20 to the lowest level since November, data from CME Group Inc.’s New York Mercantile Exchange and London’s ICE Futures Europe exchange show. The last time open interest fell more was the 13.7 percent decline over the similar period through Oct. 7, 2008, three weeks after Lehman filed for the biggest bankruptcy in U.S. history.

“There’s very little conviction among our customer base in terms of where we are in the global economic cycle,” Sabine Schels, a commodity strategist at Bank of America Merrill Lynch, said in an interview in London. “The flows are very low, and I think it has to do with the fact that the macro environment is very uncertain right now.”

Is It Time To Be Bold, Or Chicken Out?

2010-07-22T22:21:00.000+08:00

Fortune befriends the bold.

~~ John Dryden, English poet

A Song Dedicated To FCPO

2010-07-22T16:02:00.000+08:00

It's amazing, with the blink of an eye you finally see the light.

2010 Outlook For General Investment

2010-07-21T14:50:00.001+08:00

History also is not on the side of a market rebound for the remainder of 2010. When the S&P 500 is negative for both January and the first half, it usually finishes lower for the year. Now, investment advisers are turning cautious and focusing on yield

A bad January often portends a poor full-year return, but when that bad start is compounded with a loss for the first six months, the odds get even worse for a positive 12-month return, according to research released Monday by Standard & Poor's.

Since 1900, when the market is negative for both January and the first half, full-year returns have been negative 77 percent of the time, with a median loss of 11.7 percent.

For a market grappling with high unemployment, sovereign debt worries and growing belief that economic growth will be considerably less than earlier estimates, the quest for a strong 2010 just got a little tougher.

With no such economic resurgence likely on the horizon, the odds are stacking against a full-year stock market gain.

We're having a major tug of war between the earnings and the economic data, and the economy seems to be far more sluggish than the earnings. That tells us the economy may be staggering some.

Indeed, if one were to look only at earnings the numbers so far have been stellar: Positive net surprises are at 76 percent, while positive revenue surprises are at 71 percent. But with investors looking more towards outlook, the strong second-quarter numbers haven't been enough to boost the market.

The reason why the earnings season isn't generating sustained optimism is because these are backward-looking numbers and the incoming data are flashing a serious loss of momentum as the second quarter drew to a close. What little we know thus far about the third quarter from much of the weekly indicators and regional manufacturing surveys strongly suggests that a further slowing in the pace of economic activity is in motion.

There are no easy solutions for investors in such an environment, particularly considering that the bond market appears to be pricing in a very slow recovery and sector losses are broad-based.

In an otherwise-rosy second-half outlook, Boston-based LPL Financial said the market would weigh a series of headwinds and tailwinds that would result in both volatility and churning in the major averages. At best, revenue will be mid- to single-digits area whereas earnings are up 40 percent plus, mainly because we’re seeing companies are doing a lot of cost-cutting.

The U.S. economy faces a period of “protracted sluggishness” as consumers are wary to spend. The U.S. is probably in the early stages of what is a very protracted sluggishness of domestic internal demand.

The U.S. economy grew at a 2.7 percent annual rate in the first quarter, less than previously calculated, reflecting a smaller gain in consumer spending and a bigger trade gap, data showed last month. Consumer confidence slumped in July to the lowest level in a year, signaling that the biggest part of the economy is losing momentum, according to the Thomson Reuters/University of Michigan preliminary index of consumer sentiment published on July 16.

The U.S. housing market took another step back in June as construction and purchases dropped, and a gauge of the outlook for growth signaled the expansion will lose steam, economists said before data due to be published later this week. Housing’s inability to maintain a rebound is one reason the economic recovery is not gaining speed.

President Barack Obama said on July 15 that his economic-stimulus program is gradually pulling the U.S. out of its deepest recession in decades. Republicans have said the stimulus is wasteful, hasn’t reduced unemployment and has added to the record budget deficit.

The president is walking a fine line between stimulus and budget cuts. What the markets are ultimately going to want is far more specificity and credibility on deficit reduction and normalization of Fed policy. Federal Reserve policy makers last month restated a pledge to keep the benchmark lending rate at around zero for “an extended period.”

Meanwhile, Morgan Stanley cut its full-year economic growth forecast for China by about 1 percentage point to around 10 percent. Roach expects economic growth will hold at around 10 percent over the next couple of years. Per capita gross domestic product in China is still a real laggard. It will take China at least 50 years before China’s gross domestic product per capita catches up to “anything close” to that of the developed world.

A surge in imports and slower consumer spending reduced U.S. economic growth in the second quarter, according to economists at Goldman Sachs Group Inc.

The world’s largest economy grew at a 2 percent annual pace from April through June, down from a previously estimated 3 percent pace, according to revised estimates by Goldman economists. Forecasts for the second half of the year remained at an average 1.5 percent pending the government’s annual revisions to gross domestic product due July 30.

At that point, we may need to make downward revisions, judging from the relentless run on disappointments in recent weeks. While it is conceivable that the slowdown will prove fleeting, several factors strongly suggest otherwise.

Among the issues that will damp growth in the second half are the loss of support from fiscal stimulus and inventory replenishment, the excess supply of vacant housing, state and local budget constraints, a lack of credit, and weak employment gains.

~~ from CNBC and Bloomberg

Oil Pipeline Explosion In Dalian

2010-07-20T09:47:00.000+08:00

At the port in Dalian China, an explosion at an oil pipeline has caused the closing of 80-90% of the shipping berths including iron ore and agricultural imports.

8 May Not Be That Lucky

2010-07-20T00:20:00.001+08:00

A lot of bloggers blogged about the amazing 8-day winning streak by FCPO (Futures Crude Palm Oil). I am impressed too but with all the rosy and blossoming news regarding the impact of La Nina and recent inventory level, not to mention the coming festive demands, perhaps time is about to come when FCPO may take a sharp turn once all these come to pass. Except the fact that La Nina may trigger flood worries as we near the end of 2010, I sincerely doubt a sustainable rally above RM 2550.

Did you guys notice that open interests had plunged to the level of 68K at the time of writing. It has been dropping ever since the rally began which led me to conclude that the rally is triggered by short-covering. Of course, we may not know how the future events will unfold, but current news which you guys heard, sorry to say, is exaggerated by 'big guns' .

As of now, I hold no position in FCPO. To avoid being slammed by another wave of buying, I'll stay aside first and see if the current rally is for real or not.

The Case Of Palm Oil Price Rebound

2010-07-19T09:52:00.001+08:00

~~ All the news below come as CPO (Crude Palm Oil) price rebounded sharply, nearly RM180 in 7 days. The market always have a fundamental story for every move. Anyway, we cannot ignore or reject the idea that "market participants' future expectation can actually influence the outcome of price". Expectations cannot be totally capricious. Somehow, they are rooted in something other than themselves which fulfill the logical aspect.

Morgan Stanley's Review
Forecast for average cash CPO prices over the next two years by 1.9% to $815 a metric ton, about MYR2,612, due to the potential for lower production and tighter stock-to-usage ratios. It added that the initial impact of La Nina could be slightly negative as fresh fruit bunch collection would be hampered by rain, leading to possible supply tightness. Given the larger-than-expected El-Nino related decline in CPO yields this year, stock-to-usage ratios may narrow to 13.6% from 14.3%-14.9% over the next two years. The rebound in prices may accelerate in the September-December period as CPO would regain competitiveness if China and Argentina resolve a trade spat over soyoil.The ending of the dispute will be positive for soyoil imports and hence prices of soy and rival vegetable oils.

Slower Output, Better Exports
Slower output growth this month due to lower yields in Sabah and Sarawak states has prompted trade participants and growers to cue forecasts for the on-month supply increase to 5% from a previous prediction of 10%. In its weekly weather outlook report, The Malaysian Meteorological Department said the country's top palm oil-producing state of Sabah is expected to receive more rain, ranging between 10mm and 100mm during the July 21-31 period, and crop production in that region may be affected. Greater-than-expected exports of palm oil from in Malaysia, the second-largest producer, pared June stockpiles to a 10-month low of 1.45 million tons, the country’s Palm Oil Board said this week.

India's Monsoon
India may need incremental supplies to meet domestic demand since there’s lack of supplies locally due to lower rainfall. India’s monsoon rains were 24 percent below normal last week, and 14 percent below average since the season began on June 1.

Buffett's Example To Obama

2010-07-19T09:21:00.003+08:00

... the housing market, where about 1.2 million households are formed to buy a house each year. That's been the historic trend. But we went through a span of time, four or five years, because of the bubble and sub-prime lending and all the shenanigans that were going on with the mortgage market, when we were building two million homes a year. Now we're building 500-thousand ... we're going to get back to 1.2, but right now we're soaking up a whole bunch of inventory.

What Is Deflation And Deflationary Spiral?

2010-07-18T15:09:00.000+08:00

Deflation
In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the annual inflation rate falls below zero percent (a negative inflation rate), resulting in an increase in the real value of money – allowing one to buy more goods with the same amount of money.

Deflationary Spiral
A deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price. Because the price of goods is falling, consumers have an incentive to delay purchases and consumption until prices fall further, which in turn reduces overall economic activity. Since this idles capacity, investment also falls, leading to further reductions in aggregate demand. The Great Depression was regarded by some as a deflationary spiral.

~~ Wikipedia

BP's Victim Fund

2010-07-16T14:30:00.000+08:00

Last month London-based BP agreed to deposit $20 billion in an independent account to pay compensation to victims. BP said it would sell $10 billion in assets to pay for damage from the disaster, which has already cost the company more than $3.5 billion.

Louisiana Treasurer John Kennedy has said the total cost of the oil spill may be as high as $100 billion. Oppenheimer & Co. analyst Fadel Gheit last month put the financial damage from the environmental catastrophe as high as $60 billion.

While BP could survive a $60 billion liability, “I am less certain they can survive $100 billion or more,” Gheit said in a phone interview.

BP generated $30 billion in cash flow in the last four quarters and had $5 billion in available cash, another $5 billion in credit lines and $5 billion in standby loans as of June 4, said spokesman Toby Odone. BP has said it won’t file for bankruptcy.

~~ Excerpt from Bloomberg

The Case Of Price-to-Earnings Ratio

2010-07-16T09:15:00.000+08:00

I am not a big believer in price/earnings measures as they move in regimes. This means that the average can be 15 for 20 years and then 8 for the next 20. Unfortunately you don't know in what regime you are until after the facts, which makes comparisons difficult is not outright impossible.

~~ Philippe Gijsels, the head of research at BNP Paribas Fortis Global Markets

Japan Also Capped

2010-07-15T16:56:00.002+08:00

The Bank of Japan kept interest rates unchanged and predicted growth in the world’s second- largest economy will slow next year as fiscal stimulus evaporates worldwide and overseas demand loses steam.

Prime Minister Naoto Kan, whose government lost its upper- house majority this week, may put pressure on the central bank as he seeks support from smaller parties wanting to end deflation.

~~ Bloomberg

Come November, Very Tough Political Battleground For Obama

2010-07-15T09:10:00.000+08:00

(Bloomberg) -- Americans disapprove of U.S. President Barack Obama’s handling of almost every major issue and are deeply pessimistic about the nation’s direction, offering a bullish environment for Republicans in the November congressional elections.

A majority or plurality disapproves of Obama’s management of the economy, health care, the budget deficit, the overhaul of financial market regulations and the oil spill in the Gulf of Mexico, according to a Bloomberg National Poll conducted July 9- 12. In addition, almost 6 in 10 respondents say the war in Afghanistan is a lost cause.

Almost two-thirds say they feel the nation is headed in the wrong direction, an even more sour assessment than in March when 58 percent felt that way. Two-thirds of independent voters are pessimistic, while just 56 percent of Democrats offer a vote of confidence.

Is There Any Recovery?

2010-07-15T08:25:00.000+08:00

Demand for loans to purchase U.S. homes sunk to a 13-year low last week, and refinancing demand also slid despite near record-low mortgage rates, the Mortgage Bankers Association said on Wednesday.

Requests for loans to buy homes dropped 3.1 percent in the week ended July 9, after adjusting for the Independence Day holiday, to the lowest level since December 1996, the industry group said.

Refinancing applications fell 2.9 percent, and the mortgage market index that reflects total loan demand also fell 2.9 percent.

Deserted Cowboy Town

2010-07-14T15:00:00.000+08:00

I follow several local futures blogs. It seemed like some had turned into a dead cowboy town.

Tough Love

2010-07-13T13:14:00.002+08:00

The (Chinese) government isn’t likely to relax tightening measures (reining in real estate speculations) as it wants to transform the country’s growth model to focus on consumption rather than investment.

~~ Zhang Qi, an analyst at Haitong Securities Co. in Shanghai.

IPhone 4 Has Hardware Flaw

2010-07-13T10:13:00.002+08:00

(Bloomberg) -- Consumer Reports said it isn’t recommending Apple Inc.’s iPhone 4 following tests confirming the handset has a hardware flaw that causes signal quality to degrade.

“The problem seems to be a design flaw, and it is significant,” Mike Gikas, senior electronics editor for Consumer Reports, said today in an interview. The publication has recommended the three previous iPhone models.

Tests were conducted in a room designed to eliminate radio- frequency interference, he said. The results showed that when a user covers the phone’s lower-left side, where two parts of the external antenna meet, the loss of signal strength may lead to dropped calls in areas where AT&T Inc.’s coverage is weak. The tests suggest AT&T’s network, often criticized for spotty iPhone coverage, isn’t responsible for the signal problems.

Oh My Gosh!?

2010-07-12T21:51:00.000+08:00

Palm inventories fell to a nine-month low due to slower output growth. MPOB estimated palm oil inventories at 1.45 million tons, down 7.1% from end-May, compared with market expectations of an increase to around 1.59 million tons. Palm oil output rose only 2.5% in June to 1.42 million tons, below market expectations of a 5%-10% rise.

~~ The above report is a jaw-dropper. Perhaps a residual effect from El Nino?

Crunch Year 2011

2010-07-12T11:01:00.001+08:00

The number of U.K. companies missing sales and earnings targets may increase as the government’s spending cuts to reduce the budget deficit hit the “fragile” recovery. While the number of companies issuing profit warnings fell to 45 in the second quarter, the lowest in seven years, from 54 in the previous three months, warnings may increase later this year. The crunch year is 2011. It is then that the first major wave of fiscal tightening will probably coincide with the first rises in interest rates. It’s then that we’ll find out how strong the recovery really is.

~~ Ernst & Young

Hedge funds slashed bets that oil would rise last week to the lowest level in more than a year just before crude began its biggest advance since May. So-called long positions on the New York Mercantile Exchange dropped 31 percent in the seven days ended July 6 to the lowest level since April 2009, according to the weekly Commitment of Traders report from the Commodity Futures Trading Commission.

~~ Bloomberg

Mediocre Returns, Limited Upside Ahead

2010-07-10T02:59:00.000+08:00

Returns are standing at the threshold of mediocrity as growth in G10 economies will be disappointing. Debt overhang, unmet fiscal challenges; and central bank exit strategies and the usual policies may add up to mediocre returns.

Corporate profits may grow at the slowest pace of the year in the third quarter as an economic recovery that’s short on jobs and consumer demand curbs income at companies.

Unemployment a Leading Indicator and the 'New Normal'

2010-07-09T11:37:00.001+08:00

Unemployment has shifted from a lagging indicator to a leading one and is warning government policymakers to confront problems in an economy mired in slow growth.

The consideration of unemployment as a lagging indicator is a favorite mantra among economists who believe the rate primarily looks at the past rather than what is to come.

But the internal details of current trends paint a different picture: More than half the labor force out of work for more than 26 weeks, the average length of unemployment at greater than 35 weeks, and the unemployment rate of 25.7 percent for 16- to 19-year olds.

Stock prices are getting toward fair value. We're not quite there yet because I don't think analysts quite understand what the new normal looks like in terms of lower growth and lower top-line revenue growth, but we're getting there.

We find it striking that consensus, which used to romance a 'V' (recovery) is now moving toward what we've been calling the new normal, and some people are going right through the new normal and romancing a double-dip and a depression. What you're seeing is a move in consensus that has repriced the bond market and is repricing the equity and credit markets.

~~ Mohamed El-Erian, Pimco co-CEO

In Paul We Trust

2010-07-08T10:25:00.000+08:00

You have to!!

Machine Orders Point To Weak Recovery

2010-07-08T09:33:00.000+08:00

(Bloomberg) -- Japanese machinery orders fell more than economists estimated in May, a sign that any rebound in business investment may be too weak to drive the economic recovery.

Orders, an indicator of capital spending in three to six months, slid 9.1 percent from April, the Cabinet Office said today in Tokyo. It was the first decline in three months, and exceeded the median 3 percent drop in a Bloomberg News survey of 24 economists.

World Economy Continue Having Problems

2010-07-07T22:06:00.000+08:00

Investors should sell bonds and buy commodities like silver and rice as a “refuge” as the world economy may continue having problems.

~~ Jim Rogers, chairman of Rogers Holdings

New China Tax

2010-07-07T19:04:00.000+08:00

(Bloomberg) -- China plans to impose a new tax on coal, oil and gas extraction in western provinces, raising funds to develop its most restive region in a move that will reduce profits for PetroChina Co. and rival resource producers.

What Is Negative Real Interest Rate?

2010-07-07T17:51:00.001+08:00

If there is a negative real interest rate, it means that the inflation rate is greater than the interest rate. If the Federal funds rate is 2% and the inflation rate is 10%, then the borrower would gain 7.27% of every dollar borrowed.

Still More Tightening On The Belt?!

2010-07-07T16:42:00.000+08:00

(Bloomberg) -- The People’s Bank of China signaled it remains focused on reining in liquidity and stemming inflation even after evidence of slowing growth in the world’s third-biggest economy contributed to a global stock sell-off.

A surfeit of cash is still the main problem facing monetary policy, and PBOC should at an appropriate time use interest rates to address it, Yang Guozhong, director of the bank’s business management department, wrote in China Finance magazine. Zhang Jianhua, director of the research bureau, wrote in the China Daily that the PBOC must “deal with” excess liquidity.

Job Market Seen Bleak

2010-07-07T13:42:00.004+08:00

Job growth would be less than the rate of growth of the population. In six months, the U.S. would be facing a labor market that’s getting worse not better.

We are, I think, sliding into a situation where we’re likely to see several bad years ahead. Given what I see in the political process, the odds are against us avoiding a really prolonged bad period.

~~ Paul Krugman

Not Much Strength In Demand And Better Weather

2010-07-07T11:12:00.000+08:00

China's soybean sees softer price due to weaker demand from pork producers. Also, rain over the past few days in drier areas of northeast China helped mitigate some output concerns. On the other hand, India monsoons have also help boost oilseed production prospects.

Meanwhile, Argentina officials plan to raise the minimum blending requirement for bio-fuels in gasoline and diesel to 7% and are considering moving to a 10% mix soon. The current mix is at 5%.

Gaming Sector May Cap Rise

2010-07-07T11:05:00.001+08:00

The duty hike for NFO (Number Forecasting Operators) is viewed as negative as the man in the street was not expecting any such measures especially when the trend was seemingly for liberalisation with football betting being allowed initially.

Now, NFO operators (BToto, Magnum and Tanjong) would lobby the Finance Ministry to reduce the 4D first prize payout by RM200 to RM2,300 (4D Big) and RM3,300 (4D Small). Some analysts share concerns of the possibility of more tax or duty increases in the 2011 budget in October.

Apparently, the Malaysian Government appeared to be signaling that the sin sectors, and gaming in particular may just be in for a round of unfavorable reforms.

The Bargaining Idea

2010-07-07T08:42:00.000+08:00

Shares are no bargain as the recovery fades.

~~ Mohamed El-Erian and Bill Gross of Pacific Investment Management Co.

Shorters Taught A Lesson

2010-07-06T16:36:00.001+08:00

Short covering (mainly stop-losses been triggered) of many unsuspecting bears, especially those freshly established short positions, sent prices in FKLI (Futures Kuala Lumpur Index) soaring from the low of 1287 to 1313! What a 26-point range!? Before anyone comes up with ideas like a bullish engulfing candlestick on the daily chart, do remember that we ain't living on any significant trend thus far. More like a trading range, still. So, it is negligible to a certain degree and limited to short-term effect.

~~ Lesson to be learned: Don't get too excited and establish a position which is already overstretched. Matters can really turnaround rather quickly.

I Know What You Did Just Now!

2010-07-05T15:48:00.000+08:00

They started short selling on the FKLI (Futures Kuala Lumpur Index). Price went down below 1300, but yet KLCI (Kuala Lumpur Composite Index) remain stable.

But literally speaking, they have already 'cornered' the market. Moments later, they started heaving selling noticeably on Sime, Genting, MISC, GENM and BAT.

Palm Oil Monologue For H2 2010

2010-07-05T15:00:00.003+08:00

High Output To Pressure Price

Palm oil production in Indonesia and Malaysia may increase next year as the La Nina weather pattern, which brings wetter-than-usual weather, boosts productivity, potentially hurting prices. On the other hand, it may cause flood that can send price shooting to the sky.

Palm oil prices may decline in the third quarter on increased supply of the tropical oil and its substitute, soybean oil. Supplies of soybeans have become ample and soybean stocks will be substantial until August.

Crude palm oil production in Indonesia and Malaysia may rise further in the second half of the year. Southeast Asia's total palm oil stocks are likely to be around 3.6 million tons now as output in June would have risen significantly. Unofficial projections put current Indonesian stocks around 2 million tons. According to market participants, output in Malaysia would have risen some 15% in June while in Indonesia the gain was as much as 20% on month. Though output will increase in the second half, (overall) growth in CPO output may be muted in 2010 due to the residual effect of El-Nino.

The outlook for palm oil is poor because beans could head towards $8.50 to $8.75 through the second half although disruptions caused by the weather may contribute to a speculative rally.

Rapeseed/Canola May Lend Minor Support

Rapeseed output in China, the largest user, may be as much as 15 percent smaller than estimated, which will help support soybean oil. The reduced output in China may help push rapeseed stockpiles below the 2007-2008 level, as Canada, the largest exporter, was forecast to lose 2 million tons of production in the 2010-2011 season on persistent wet weather.

India's Import Duty

Solvent Extractors’ Association of India (SEA) has reiterated its demand for imposition of a 10 per cent import duty on crude palm oil as well as raising the duty on refined oil to 17.5 per cent to protect the industry from excessive import of edible oils.There are fears that the area under soybean may drop substantially this year on the back of falling prices and large carryover stocks, pulling output way below last year’s level of around 10 million tonnes.

India has four million tonnes of soybean stock lying due to poor crushing. Still, at the moment, soybean crushing earns more margin than palm oil refining and consumption volume growth will hence be tilted towards soybeans/soybean oil more than palm oil. India, being a very price sensitive market, saw an 18% drop in palm oil imports over the first five months, while soyoil imports rose 59% as processors substitute more palm oil with soyoil.

India's Better Monsoon

Pickup in sowing in Maharashtra, Madhya Pradesh, top two soybean producing states due to arrival of monsoon. The weather is perfect for sowing and we may expect a good crop.

Weak China Demand Set Shipping Rate Plunging

2010-07-05T12:36:00.000+08:00

The Baltic Dry Index is sharply down. This has little to do with overall shipping trends, but is due to a sharp slump in Chinese imports on which global shipping depends.

The Baltic Dry Index (BDI) has fallen from 4,074 points in the beginning of June 2010 to 2,482 points on Monday, 28 June 2010. The shipping index has dropped significantly due to the slowdown in iron ore imports.

There is excess steel capacity, therefore, China will now need to stabilize and not continue steel production like it has been producing in the past two months. It will either look at lowering its utilization or shut-downs. This has caused a fall in iron ore demand, affecting the Capesize Index and the BDI in turn.

China had been producing steel at a significantly high rate, until last month. It recorded its highest-ever steel production in the past two months. However, this growth momentum in Chinese steel production has come to a halt due to weak steel prices and China’s internal economic issues, leading to lower demand for iron ore.

In addition to the current global steel production scenario, China has also scrapped its rebate policy on imports. This in turn has made Chinese steel lose its low-cost advantage. There is no significant cost-competitiveness left. China’s cap on real-estate prices has also depressed the country’s steel demand from the real-estate segment. The Chinese government, in one of its measures to curb inflation, is trying to curb real-estate prices.

The Government has already banned Chinese traders importing low-grade coal, in order to arrest the rise in steel prices. Baosteel Group Corp, the nation’s second-biggest mill, was quoted in an international daily, saying that steelmakers in China may cut output next quarter, because of weak demand from auto and appliance makers.

Both iron-ore and grain shipments from South America have been difficult to come by and the excess tonnage is beginning to build rapidly. Until more iron ore stems appear, it is likely that freight will continue to drift.

All in all, going forward, Chinese iron ore demand is expected to be weak. Not much movement is expected on China’s iron ore demand. There is also not much clarity on how long will the ban on Chinese traders continue.

~~ Excerpt from MoneyLife.in

Accept Uncertainties

2010-07-05T11:00:00.001+08:00

You have got to make decisions even though you know you may be wrong. You can't avoid being wrong, but by being aware of the uncertainties, you're more likely to correct your mistakes than the traditional investor.

Being aware of reflexivity, I am often overwhelmed. Genuinely, I am actually overwhelmed by the uncertainties. And I'm constantly on the watch, being aware of my own misconceptions, being aware that I'm acting on misconceptions and constantly looking to correct them.

~~ George Soros

Interest Rate Hike In India

2010-07-05T10:33:00.002+08:00

(Bloomberg) -- India’s central bank signaled it’s set to raise interest rates again after an unscheduled increase last week, on concern that increased consumer spending and higher fuel prices will stoke inflation.

The Reserve Bank of India, led by Governor Duvvuri Subbarao, on July 2 boosted the reverse repurchase and repurchase rates by a quarter point each, to 4 percent and 5.5 percent, and added it will “take further action as warranted.”

Subbarao may follow with another quarter point at the bank’s next meeting on July 27, Royal Bank of Scotland Group Plc and Barclays Plc said. India is acting ahead of counterparts in Asia from South Korea and Indonesia to the Philippines and Thailand as dangers from the fastest inflation among the Group of 20 nations outweigh risks from Europe’s debt crisis.

Don't Cry For Me Argentina

2010-07-04T15:35:00.000+08:00

80% accuracy in 2006 Finals and 100% so far in 2010 Finals.

Time To Chill Out A Little

2010-07-01T08:45:00.000+08:00

Out on holiday. Any position updates will not be prompt at FCPO and FKLI Signals.

Foreclose Still 'Rampant'

2010-06-30T21:08:00.001+08:00

Homes in the foreclosure process sold at an average 27 percent discount in the first quarter as almost a third of all U.S. transactions involved properties in some stage of mortgage distress. The discount will probably stay between 25 percent and 30 percent as lenders carefully manage the number of new foreclosure actions in order to avoid flooding the market. It is deemed that more properties will be sold at distressed prices than the market is absorbing. Home foreclosures set a record for the second straight month in May, with increases in every state, as lenders stepped up property seizures.

~~ RealtyTrac

A Staged Drama?!

2010-06-30T15:08:00.000+08:00

When it comes to end of H1, it is undoubtedly time for one of the greatest show in KL. We'll see window dressing, opera dressing, salad dressing and macam-macam lagi in KLCI (Kuala Lumpur Composite Index).

Roubini Shares His 'Armageddon' Comments

2010-06-30T00:46:00.000+08:00

Economic woes in Europe could spread to the U.S. and lead to a further correction in stock prices.

The weaker euro will affect US exports, the widening of credit spreads will push up bond yields, risk aversion has been rising and bank spreads affect the euro-dollar Libor rate.

A double-dip recession looks likely in the euro zone, it looks like Japan right now is falling off the cliff and now there is evidence of a slowdown in economic growth also in China.

Because of economic problems in Europe and Japan, there is a risk of a further fall in stock prices.

I'm a little bit worried about stocks, because half of the profits of S&P 500 companies come from abroad.

Slowdown at home, slowdown abroad, in my view there is a risk of a further correction.

I do not expect a double-dip recession in the US, but economic growth is likely to fall to 1.5 percent by the second half of the year, and when growth is so low, "everything is uglier."

The budget deficit will be higher, unemployment will keep rising and home prices will keep falling in such a weak scenario.

It's going to feel like a recession even if technically we are not going to be in a recession because 1.5 percent growth is dismal, anemic.

Final demand is not growing in the US, there's risk of a severe economic slowdown.

Companies, on the other hand, "are flush with cash because they became lean and mean by cutting costs" but by laying off staff, they reduced demand which in turn has left them with overcapacity.

~~ Nouriel Roubini

Possibility Of Reflexivity In The Works?!

2010-06-29T15:58:00.000+08:00

The Bank for International Settlements said yesterday that European banks may struggle to refinance their debt if investor sentiment remains negative. There are concerns that banks may have to pay higher borrowing costs at funding renewal, possibly hurting their profitability.

~~ Bloomberg

Protests Come Again

2010-06-29T15:01:00.000+08:00

(Bloomberg) -- Greek unions today hold their fifth general strike of the year, halting ferries, public transport and other state services to protest government plans to cut pension benefits and loosen labor laws.

Calculation Error!?

2010-06-29T12:07:00.000+08:00

(Bloomberg) -- The Conference Board corrected its April gauge for the outlook of China’s economy, saying its leading index for the country rose the least since November, rather than registering the biggest gain in 14 months.

The gauge compiled by the New York-based research group rose 0.3 percent in April, less than the 1.7 percent advance that it reported on June 15. The Conference Board said in an e- mailed statement today that the previous release contained a “calculation error” for total floor space on which construction began.

~~ That is a huge miscalculation

Slowing Economy In World's Second Biggest

2010-06-29T11:07:00.001+08:00

(Bloomberg) -- Japan’s industrial production and household spending slipped in May and the unemployment rate unexpectedly increased, in signs that the recovery of the world’s second-largest economy may slow.

The figures underscore Japan’s reliance on exports to propel its rebound.

“Today’s reports show Japan’s economy is clearly slowing down” after growing at an annual 5 percent pace in the first quarter, said Kyohei Morita, chief Japan economist at Barclays Capital in Tokyo. “Consumer spending is weakening because the impact from government stimulus measures is fading.”

Expectation of Slower Economy

2010-06-28T15:47:00.000+08:00

(Bloomberg) -- The percentage of corporate bonds considered in distress is at the highest in six months, a sign debt investors expect the economy to slow and defaults to rise.

The number of speculative-grade companies worldwide with yields at least 10 percentage points more than government bonds climbed to 399 this month, or 16.7 percent of the total, the highest share since December, according to Bank of America Merrill Lynch index data. The ratio compares with 9.2 percent on April 30, which was the lowest since November 2007.

Pessimism In Exports May Be Justified

2010-06-28T09:20:00.000+08:00

(Bloomberg) -- China’s pledge for a more flexible yuan will slow the nation’s exports this year, adding to difficulties that include the European debt crisis and rising costs, a Chinese government official said.

“I’m not optimistic about the exports this year,” Yu Jianhua, a Ministry of Commerce director general, told reporters on the sidelines of Group of 20 meetings in Toronto yesterday. “It’s essential for exporters to cut cost and keep their share in the world trade market.”

Catch 22 In G20

2010-06-25T14:17:00.000+08:00

European policy makers fear failure to patch up public finances (executing austerity measures) now risks reviving a bond market selloff that required a bailout for Greece last month, while President Barack Obama says deficit reduction could hurt economic growth and employment.

'Shady Activity' In Morning Trade

2010-06-25T11:06:00.000+08:00

Some 'shady activity' rollover by big guns helped triggered most anchovies and shrimps' stop-losses up to the level of 1326.

The Struggles Still Exist

2010-06-25T09:15:00.003+08:00

Home refinancing in United States are being suppressed because more than 23 percent of homeowners with mortgages owe more than their houses are worth. Borrowers also face tougher underwriting standards at lenders selling debt to Fannie Mae and Freddie Mac.

Bulls Probably Won't Fly Too High

2010-06-24T08:55:00.004+08:00

The cost of insuring against losses on Greek government debt soared to the highest in more than a month, and yields on the country’s 10-year securities rose above 10 percent for the first time since May.

Purchases of U.S. new homes fell in May to the lowest level on record after a tax credit expired, showing the market remains dependent on government support.

~~ Bloomberg

P:S tax increases are likely to hit businesses and investors in 2011.

Toppings On Top Of Sweet Chocolate

2010-06-23T17:00:00.000+08:00

There were several last minute 'hanky-panky' in KLCI. Among the clear cuts:

1. BAT
2. HLBANK
3. PETDAG
4. DIGI
5. SIME

Jobs Market Must Recover To Lift Housing Sales

2010-06-23T08:40:00.000+08:00

(Bloomberg) - Sales of U.S. previously owned homes unexpectedly fell in May, a sign demand was probably pulled into prior months before a June tax-credit deadline.

The decline raises the risk the retrenchment following the expiration of the tax credit will be deeper than anticipated. A slump in builder shares since late April has exceeded the retreat in the broader market on concern the damage from the end of government stimulus, mounting foreclosures and unemployment may cause renewed weakness.

Sales “will be pretty soft for the next few months,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, whose sales forecast was the closest among economists surveyed. “Ultimately, you’re going to need job growth to see a sustainable recovery in housing.”

Baltic Dry Index Tumbles

2010-06-22T23:45:00.000+08:00

Baltic Dry Index tumbled to a low of 2600 from a previously 4200 set in late May. Economic activity seemed slowing down as demand for iron ore slow down in China?!

The Water Is Still Murky

2010-06-22T12:50:00.000+08:00

The Obama administration's flagship effort to help people in danger of losing their homes is falling flat. More than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out. A major reason so many have fallen out of the program is the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

Meanwhile, there is speculation that European banks will struggle to raise money amid the debt crisis leading to worries over European banks’ funding pressures. ECB’s Noyer did note that some banks have started facing increasing funding problems.

World Cup Correlation Not Correlated

2010-06-21T16:54:00.000+08:00

Assuming the market (KLCI - Kuala Lumpur Composite Index) opens at 1299 in conjunction with World Cup's June 11 and that we are nearly half way the Finals, many 'pundits' are definitely quiet on their bet that the market generally (some wrote with certainty, though) will tumble, or at least fall. They may have to eat their words back for now. Finals haven't finish yet, so let us not judge yet.

But who can blame them?! Italy, Germany, Spain and France were shocked as well!

Bull Attack On China Policy

2010-06-21T15:41:00.000+08:00

A bull attack on a pool of 'shorters' left many lifeless on the street. Thanks to China's relaxation on Yuan. Will bear be able to find refuge in times like these?

Window Dressing Stress Test

2010-06-20T18:29:00.000+08:00

The EU's move to present stress-test results is only adding redundant regulation. Do banks not present quarterly accounts, are there not stock market regulators and banking regulators, why do we not know what's on their balance sheets? Because there was complicity at the top to hide the problems two years ago.

I think this is window dressing. I don't see what's in this that's not in existing regulation, which should have been applied not just to the banks but to every other company.

~~ Sean Corrigan, chief investment strategist at Diapason Commodities Management

Jobless Benefit and Tax Bill Rejected

2010-06-18T19:10:00.000+08:00

A Democratic bill to extend jobless benefits and raise taxes on investment fund managers failed a key vote in the U.S. Senate Thursday, dealing a blow to President Barack Obama's push to boost the economy.

Grand Closing Explains The Big Premium

2010-06-18T17:01:00.001+08:00

It was a grand closing in FBM KLCI, jumping more than 5 points in the closing. Tenaga's last minute spike gave the lift. Well, at least we now know all the fuss with the 'extremely-extra-premium-command'.

Some Excitements But Still Somber

2010-06-18T12:32:00.000+08:00

There were some excitements in price action in both FCPO (Futures Crude Palm Oil) and FKLI (Futures Kuala Lumpur Index) in the early going. Price rose and tested resistance, but not much to shout about so far. Uneventful morning anyway which also apply to overnight Dow Jones and Asian markets. Dow is expected to be volatile tonight as there are quadruple expiration of futures and options today.

What An End!?

2010-06-17T17:17:00.000+08:00

FKLI (Futures Kuala Lumpur Index) roared towards a near-9-point premium over FBM KLCI. What an end as short-covering slam prices up.

Spain Faces Jump In Borrowing Cost

2010-06-17T14:56:00.000+08:00

(Bloomberg) -- Spain faces a jump in borrowing costs at bond auctions today as growing investor concern the country may need external help to ease a credit crunch forces the government to pay more to finance its budget deficit.

Spain plans to sell as much as 3.5 billion euros ($4.3 billion) of 10- and 30-year bonds, the Treasury said. The yield on the country’s benchmark 10-year bond rose to 4.939 percent, the highest in almost eight years and 89 basis points more than the 4.045 percent it paid at the last 10-year auction on May 20.

Purr-fect FKLI and FCPO

2010-06-17T11:57:00.000+08:00

Volatility in FKLI and FCPO is just fantastic! Only 4 points in FKLI and 9 in FCPO as of 11.57 AM. Wonderful!

No Tax Incentive Drag Soyoil

2010-06-17T11:51:00.000+08:00

News that the U.S. Senate failed to revive a $1-per-gallon government tax incentive for the biodiesel industry saw price of soyoil 1% lower during Asian time.

Soybean To Trend Lower In H2 2010

2010-06-17T10:48:00.000+08:00

Soybean prices are likely to average around $9.00 a bushel in the July-September period, and $8.75/bushel in the fourth quarter. With around 53% of the South American soybean crop yet to be sold, and U.S. planting conditions favorable, the outlook shows a large buildup in global soybean stocks for the season ending Sept. 30 and in U.S. stocks in 2010-2011. The current U.S. new crop supply scenario, combined with record South American production, should see prices trend lower into the U.S. harvest period, while stronger competition among soybeans exporters may increase the pressure on prices.

~~ Rabobank International Assistant Manager Oscar Tjakra told a grains seminar held by the American Soybean Association International Marketing in Singapore.

Germany's Most Important Market

2010-06-17T09:06:00.000+08:00

Greece’s near default has prompted governments from Berlin to Madrid to implement budget cuts to convince investors they can tame deficits, threatening to damp demand and hurt the region’s economic recovery. While the euro’s 15 percent drop against the dollar this year may boost exports outside the currency region, the 16-nation bloc is Germany’s most important market.

Housing Starts Biggest Decline Since March 2009

2010-06-16T21:48:00.000+08:00

(Bloomberg) -- Builders broke ground on fewer U.S. homes in May than anticipated after the expiration of a government incentive.

Housing starts fell 10 percent, the biggest decline since March 2009, to a 593,000 annual rate, from a revised 659,000 pace in April that was less than previously estimated, Commerce Department figures showed today in Washington. Building permits, a sign of future construction, unexpectedly fell to a one-year low. Single-family starts suffered the largest drop since 1991.

Builders focused less on starting new projects and more on completing houses for those seeking to qualify for the tax credit, which required contracts be signed by April 30 and closed by the end of this month. Growth in sales and construction will now depend more on job gains and a drop in foreclosures, which have pushed down prices and created competition for builders.

Economic Figures Are Past Tense

2010-06-16T17:24:00.000+08:00

Market participants who talk about economic figures and corporate figures still being strong, which are, to a large extent, rational arguments.

The only problem with these figures is that they give a rear view mirror perspective. They give us a valuable inside about the past, but fail to answer the question how much the economies in the US and even more so in Europe will slow down in the second half of the year and going into 2011.

If we compare the price earnings valuations with the recent past, markets look attractive. However, when we look at stock market history, we see that valuations follow a regime switching pattern. A P/E of 15 can be the average for 15 years and it can drop to an average 8 for the next 15 years.

Unfortunately you never know in what regime you are investing. And if people start to use bond yield/earnings yield arguments as an argument to buy this market, I invite them to look at this indicator in Japan over the last 20 years.

~~ Philippe Gijsels, the head of research at BNP Paribas Fortis Global Markets

Stock Level Guesstimate

2010-06-16T11:39:00.001+08:00

A grower at an major plantation company in Indonesia said the country’s palm inventories at the end of this month will likely rise to around 1.75 million tons from about 1.65 million-1.70 million tons at the end of last month.

Stocks in Malaysia will likely increase slightly from 1.56 million tons at the end of last month.

Dead Man Sitting

2010-06-16T11:08:00.001+08:00

You can keep dead bodies alive, can’t you? You prop them up in a chair, and pretend they’re alive. But everyone knows they’re not.

~~ Roger Nightingale, strategist at Pointon York on Euro Zone

Canola Issues Lift Grains and Oilseed

2010-06-16T10:52:00.001+08:00

Wet conditions could cut Western Canada's oat harvest to its smallest size in decades and leave millions of canola acres fallow, in a crop disaster felt on Monday everywhere from the farm gate to futures and equity markets.

The canola industry is bracing for a 2-million-acre, or 23 percent, cut in Saskatchewan's canola acres to 6.6 million acres, from Statistics Canada's April estimate.

~~ Reuters

Weather Giving Bearish Signs

2010-06-16T09:45:00.003+08:00

Moderate rainfall next few days should favor oil palm in Malaysia, Indonesia; around 5 inches of precipitation in growing regions last week positive for reproduction and harvesting.

In general soil moisture levels are adequate in most major growing areas.

India may buy less palm as monsoon progress normal.

Soybean Crop Progress Thus Far

2010-06-16T09:20:00.000+08:00

Good Progress But Not Perfect

The weekly crop progress report, released after the close, showed that 73% of the soybean crop was rated good/excellent compared to 75% last week and 66% last year. The 10 year average for this time of year is 64%. While down from last week's record high level this early in the season, yesterday's reading is still the highest percent rated good/excellent since 1999 when there was 69% good to excellent.

Traders are concerned about excessive rains over the past week and into the start of the current week. This is raising some concern over some lost production due to ponding in lows spots, and that may have contributed to minor gains by new crop soybeans. Potential lost canola acres in Canada are also said to be providing minor support.

Soyoil Update

Lower crush caused soybean oil stocks to come in smaller than expected. Soyoil also found some support from ideas that the Senate may vote this week on the reinstatement of the bio-diesel tax credit.

~~ CME Group

Large Stocks At Port In India Too

2010-06-15T14:50:00.000+08:00

India's vegetable oil imports during May fell about 26% from a year earlier to 558,765 metric tons due to higher imports in the last few months and large stocks at ports.

~~ Solvent Extractors' Association of India

No Good No Good

2010-06-15T10:34:00.001+08:00

Malaysia June 1-15 palm oil exports up 1.5% only on month according to Intertek. No good no good.

Argentine Strike Called Off

2010-06-14T22:35:00.000+08:00

Argentina grain workers canceled a strike set for today as talks continue on money issues.

On a separate note, Argentina soybeans crushed in April reached 3.62 million tonnes, up 14.4% from last year and this was the first increase after posting nine consecutive months of lower than year earlier crush.

Funding Squeeze May Depress Region

2010-06-14T21:06:00.000+08:00

(Bloomberg) -- European banks at risk of writedowns from the sovereign debt crisis face a funding squeeze that may depress earnings, curb lending and imperil economic recovery in the region.

Investors are shunning bank securities on concern Greek, Portuguese and Spanish bonds held by the lenders will plunge in value. Bank bond sales slowed in May to the lowest since Lehman Brothers Holdings Inc.’s failure in 2008 as the extra yield buyers demand to hold the securities over government debt soared to the highest this year. Firms are wary of lending to each other, depositing record funds with the European Central Bank.

Short Covering Lift FCPO

2010-06-14T18:00:00.000+08:00

In a relatively quiet-to-moderate trading, FCPO (Futures Crude Palm Oil) price climbed back above 2400. Previous day's open interests rose above 78K and all these may seem like a temporary correction after a long but not-so-steep ride down the hill.

Argentinian port-worker strike gave some near-term tightness in supply of soybean. Nevertheless, the Ringgit's strength capped much of the expected rise in FCPO. Besides, what could you possibly expect when China's closed for holiday?

Soyoil Import From Argentina May Resume

2010-06-14T09:43:00.002+08:00

Although some Chinese officials have indicated that there is no need to import soyoil from Argentina during the remainder of 2010, we strongly believe that it is in the own interest of China to find a solution quite soon.
China is obviously more dependent on a resumption of soyoil imports from Argentina than Argentina depends on a recovery of exports to China. We expect that China will resume large-scale purchases of soyoil and step up imports already in the July/Sept 2010 quarter because Chinese imports of other vegetable oils as well as soyoil output from domestic crushing of imported soybeans will be insufficient to cover the rapidly expanding requirements.

~~ Oil World Ista Mielke GmbH