Is it Entirely a Free Labor Market?

Adam Smith talks about perfect markets.

Huh!

He can't be entirely wrong! In 1759 he wrote about "...expounding upon how rational self-interest and competition can lead to economic prosperity."

So my people or workers yeah MD's, CEO's inclusive. Works for their own economic interest. There's no selflessness here.

So therefor:-

1. In a mutual benefits environment an employer & employee match so full employment

2. Reasonable demand is a wage that adds to production - meaning employer hires at a wage demanded but still (as always) has some spare extra output for a bigger profit to the employer.

3.  Employer will not hire at a wage that's larger than an employee's production output thus incurring a lost

4. So employment only takes place when a worker take a lower wage thus leaving room for the employer to make a bigger profit - its abusive here

5. Unemployment is then a temporal situation whereby the equation between employee & employer is not match

6. A new dimension has began since the last decade and its growing - permanent unemployment as workers find it not economical to be hired as they are not paid enough 

So why is there UNEMPLOYMENT?

 Here's the crunch of it all:-

1) a worker - like I said be it MD's, CEO's, COO's, is unable to find a job cause they felt that the offers don't match their skills or in other words don't pay them enough

2) most likely employers don't seem to think that they should hire as there 'mind-sets' are such... "Workers always insist for a higher pay package" thus workers production does not lead to a bigger profit for them as employers 

True or true?

So people my questions:

(i) What's the use of a career with great potential? When you can't get employed.

(ii) What's the use of dying with a career of great potential with out realising it?

(iii) What's your next course of action?

As always do the right thing. The trend is now pointing to self-employment. How can one get out of the labor market or so called rat-race?

It's not rocket science here!

Get hold of me now and let's explore.

Cheerios

#OilCrisis Near its End or Heading South to US$ 20/bbl? Your Guess!

Its time to restore our own confidence, as scores of investors sitting on the side line has now dive into the market.

Markets has recovered. Some major makers recovery since the 16th December 2014 dip as follows:-

1) HSI @ 2,267 gain +8.19%

2) KLSE @ 1,674 gain +8.2%

3) N225 @ 16,756 gain +5.33%

4) TWII @ 8,952 gain +4.95%

5) STIN @ 3,215 gain +6.82%

6) AXJO 5,152 gain +12.37%

While the world panic amid the oil and Russian crisis last year we have seen the pull back in "safer" asset class. However and never fall into the wrong side, while the rest of the world panic a group of investors has being buying stocks according to data. At discounts between 10% to 12%. Like wise for investments at that point in December 2014 that was the discount. However that window has began to shut down and the discounts are now between 4% to 5% as the market continue it uptrend. It's okay for one to wait till its recovered to its pre crisis days and then lock in and hope for that 10% to 12% new highs, while those whom has taken position in December would have gain their 10% to 12%.

There's always two groups.

One that's so fearful and driven by the 'herd mentality' - are having a sentiment that's so fearful thus selling on fear driven emotions was the order of the day. While the other group is nibbling and buying stocks thus the recovery in the markets shown above. There are also other markets that has since 16/12/2014 recovered and they will continue to buy when the others sells on fear rather than fundamentals.

Some key points in the coming days that will shape the market behaviour:

• Latest OPEC report saying there's a silver lining

• CITI bank claims that crude oil will dip to US$ 20.00/bbl 

• Oil price has begun to show some improvements and dips on the next few days

• Goldman forecasts Brent at $42, $43 and $70 a barrel, on the next 3 months, 6 months and 12 months

What ever happens the Great Depression in 1929 will not visit us again. If ever the next big dip would be one that will wipe out all debts the institutions and governments has created with their mortgages, bonds, fancy structured loans etc. If it ever materialise! 1929's were days of the great Keynesian theroy and today it's the QE theroy of the 'invincible arm of the economy'.

But nevertheless 2012 has past and gone. The Aztec calendar ends and the world was suppose to end!!! We are still around and we don't decide all this except God. So let's stop play God and do what's right to create wealth.

So people 2014 has gone by and now in less than 39 days 1st QRT of 2015 is over. My question is what have you done or will you still be sitting on the side-line watching the world go by!!!

Till then and make it count or else you will be counted soon! "No-Action" also forms a statistic whereby if you fail into that "No-Action" group and  you will be counted as one.

Cheerios.

EUROPEAN CENTRAL BANK - Quantity Easing €1.1 Trillion.

It was decided on 22nd January '15, a €1.1 trillion or € 60 billion per month bond purchase to deal with deflation.

Deflation is the opposite of inflation!

In an inflationary situation level of prices for goods & services are rising. Therefore the purchasing power falls as inflation increases - meaning that there are more money chasing lesser goods. So Central Bank's will attempt to stop severe inflation by mopping up money through getting banks to increase their Required Statutory Reserves, increase interest rates etc. So it's an attempt to keep the excessive growth of prices to a minimum, as there will be less money circulating.

Recently the EU Central Bank (ECB) in January this year, after some deliberations, decided that it will do the noble thing of bond buying as a QE - right through to 2016 or in their well worded statement; ".. for as long as it takes to reign in deflation".

The effects are immediately felt as euro has dip against th US dollar. Same scenario as when US started their QE. The dollar kept dipping against all currency.

Some key things may manifest as the ECB QE kick-off. Mainly these questions:-

1. As bonds are bought will it effect EU nations like Germany bond yields?

2. With the 'cheap' source of monies what's gonna happen to the cost of conducting business?

3. Where will these €60 billion flow into on a monthly basis; commodities, equities, precious metals etc?

So many unanswered questions but like always a lot will be watching from the sidelines. Yeah these are the same group of people whom has being watching from the side lines since the Sub-Prime Loans Crisis.

My guess is as good as yours, the window of opportunity has begin to dilate and open.

Let's not miss this one again!

So till then and happy hunting - the season has started.

TJLim

Crude Oil - OPEC Wins & US Shale Horizontal Drillers Losing Out.

No wonder the shroud and crude wins whenever it comes to Crude Oil...

Yeah OPEC weather you like it or not are winning with their decision of holding on and maintaining  their production levels. U.S. horizontal drillers rigs are shutting down. In six weeks its was reported by Bloomberg that 209 rigs has shut down by the U.S. shale drillers. The total reported now stands at 1,366. This shut downs are expected to peak by mid year in June 2015. Hopefully crude oil price will stabilize by then.

However the contango effect - a relatively new 'exotic' term coined. A situation that futures crude oil price is higher than current spot crude oil price. It's argued that these hedgers are 'willing' to pay more for something in the future solely based on storage cost. So it's not indicative that crude oil price will pick up and head towards north again soon after June 2015. How far it's true! Crude oil are now stored in Ocean going super tankers are mind blowing.

Non OPEC producers has already cut production ie China, Malaysia etc. These numbers may not reduce the excess stockpile but should reduce further increases in global excess. Having said all this, on our plate is the scenario that's is certainly a certainty.

(a) Shake drillers has to shut down temporary.

(b) Shale drillers have to go back to their drawing board and look for technology (maybe Japanese techs will be handy here) to further reduce production cost of shale drilling to start pumping crude oil again.

(c) shale drillers cost per barrel must dip below US$ 40

This may happen and mostly likely within this decade but not the near future.

Good or good!

Till then & Cheerios 

Investors Portfolio - don't be Spooked by the Crude Oil Price decline!

Warren Buffet has always said these "... be greedy when others are fearful!"

Generally sentiments are clocking a very high on "FEAR" as the equities market are volatile now. However if we remove emotions and also hearsay, and perhaps pause for a moment. The largest and biggest concern is not in the crude oil price but it's the related industries of O&G. So as we pause to take a closer look the volatity is seeking its own recalibration and perhaps also a rebalancing in currencies owing to the impending US rates hikes.

The upstream and down stream of O&G will see a consolidation thus the swings in the equity markets. As revenue and earnings of O&G related companies suffers I am of the opinion that we can find potentially good bargains. Having said this, investors should not be fearful as the bargain hunting season is now open! Currently with a small window of opportunity the sentiment out there now for investors are that the are generally fearful. Thus we need to be greedy!

This scenario of low oil price will not last for long. Cobweb Theory on supply and demand on fluctuations of price will explain how crude oil price will seek its own equilibrium fairly soon. This was from the 1930's and unless you are that brilliant and can PROVE it wrong, don't you dare challenge it - making your self a fool is fine with others, but missing out on a good bargin is shear stupidity when it comes to your own wealth.

See chart below.

So taking us back to Warren Buffet, his second part of his famous quote "...when others are greedy we be fearful". Now the general sentiments are that others had turn fearful thus as investors we must be greedy and start our bargain hunting!

Having this very correct view which is based on an ever green or ever right Mr. Warren Buffer, let's do our cherry picking. Ask the correct advisor for the correct pickings.

The End is Near - Crude Oil Price is Expected to Bottom Out Mid January 2015

The January 2015 delivery from WTI is at $57.81 a barrel. Rigs are shutting down after price fell below $60.00/barrel. Shale oil producers are beginning to hurt at current price levels while it wasn't so when it was $100.00/barrel.
See price chart attached for the price dip.
Thus production output decline is seen after what OPEC has decided in Nov 2014 - OPEC on 27th November 2014 decided to maintain production. Repeated statement on 10th Dec 2014 "...why should I cut production" Ali Al-Naimi. OPEC supplies 40% of global consumption.

2015 Oil producers budgets are streaming out and less are allocated or none at all for CAPEX. As price dips below $ 60.00 into the $ 50.00 range per barrel. These shale oil producers in US are hurting. They are now shutting down US oil rigs. So the war has taken its effect. The total effect will stabilize and we may see a stop in price drop by mid January 2015 or earlier.

However the effects on global economy is more of an after thought rather than an eminent recession, nothing to the effects of the 2008/2009 Sub-Prime loans issue that grounded global economy to a halt. Sentiments of fear of the unknown after crude oil price dip below $ 70.00 was an after effect. Oil related nations or companies incomes will be affected in 2015. The up stream and down stream petroleum industries too will see same fate. Having said this, travel industries, retail sectors and even non consumables are the beneficiaries of a dip in gasoline or crude oil price dip.
Never the less, sentiments should improve as no one is talking about the oil price dipping till its historical lows to the levels of $32.00 per barrel as this type of price range would see OPEC oil producing nations breaking up as none - OPEC nations, would want to carry such hurt... yeah people hurting their own pockets.

If ever it happen OPEC will see its end days as a 'cartel' manipulating oil price. May also see a Middle East war among these nations. Believe the middle eastern will not take it too kindly if ever price has to dip till the historical lows - a middle eastern war among the so called 'brothers' will shapely increase oil price to the levels of $ 140.00.

As always till then and the sun has set on the current oil price war, and sunrise on it  is now on the horizon for this ⛽️episode.

TjLim

  

Ringgit Malaysia on the Slide!!!

Ringgit Malaysia Selling.

It's on a downward spiral. Looks like the down south trend is just the beginning leading to the impending raise in US, as early as 1st QRT 2015 from its near zero rates. The Ringgit may bottom out at RM 3.40 to RM 3.50. Some currency experts claims it may hit RM 3.60 to USD 1.00. However Central Bank of Malaysia may intervene to address the slide. See the history ringgit to USD chart below.

The recent Ringgit Malaysia selloff maybe triggered by the followings:-

1. Flight of funds from money market class back to USA from years of almost zero cost of fundings - a beneficiary of US QE's.

2. Currency traders selling thus locking in profits.

3. Bonds holders of MGS sold ringgit and converted to UDS.

4. Foreign investors has being selling and last week it shot up to almost close to RM 840million.

As always when the selling is well and over the bargain hunters will be back.

So till then let's also do our own cherry picking now.

The lesson learned from the past, as fast as it plunge the recovery is equally fast if not faster.

Cheerios

TJ Lim