The Star Online > Business
Published: Thursday December 18, 2008 MYT 7:57:00 AM
Oil tumbles below US$40 for first time since 2004
PHOENIX: Oil prices tumbled below $40 for the first time since the summer of 2004 Wednesday despite an announcement from OPEC of a record production cut of 2.2 million barrels a day.
Markets had already priced in a vastly reduced flow of oil and traders focused instead on troubling economic data that points to a long and severe recession.
Light, sweet crude for January delivery tumbled 8 percent, or $3.54, to settle at $40.06 on the New York Mercantile Exchange.
Benchmark crude prices fell as low as $39.88, a price last seen in July 2004.
"There's just so much oil in inventory out there right now,'' said Michael Lynch, president of Strategic Energy & Economic Research.
"Nobody wants to buy this stuff.''
Crude prices have fallen so low, producers have leased supertankers to store the oil at sea, hoping that oil will rebound.
U.S. gasoline inventories continued to rise, the government reported, providing further evidence of a major pullback by American motorists.
Demand for gasoline over the four weeks ended Dec. 12 was 2.7 percent lower than a year earlier.
OPEC had already announced cuts totaling 2 million barrels earlier this year, also with little effect.
The unprecedented production cuts and the market reaction show just how fast energy demand has fallen during the worst economic downturn in at least a generation.
"You've got a commodity that people are buying less of because they can't afford to buy more,'' said Phil Flynn, an analyst at Alaron Trading Corp.
"People are fearful. They have a lack of confidence in the economy. They're closing their factories.''
Grim economic news radiates out of the U.S., Europe and Asia almost daily as consumers and industries pull back on spending.
The Cooper Tire and Rubber Co. said Wednesday it will cut 1,300 jobs and close a plant in Georgia.
Newell Rubbermaid Inc. is reducing its salaried work force by as much as 10 percent.
The Atlanta-based company slashed its fourth-quarter and full-year profit guidance Wednesday.
In Detroit, General Motors Corp. put the brakes on construction of an engine factory trying to hold on to the cash that it has left.
Meanwhile, the dollar suffered its biggest one-day decline against the euro after the Federal Reserve cut a key lending rate target to historic lows.
That would typically lead more investors into the crude market because oil is bought and sold in dollars and you can get more bang for the buck.
But investors in this harsh economic climate are holding onto their wallets like never before, betting there's not enough global demand to support higher crude prices, said Gene McGillian, an analyst at Tradition Energy.
"Oil prices should be a lot stronger,'' McGillian said.
The last time oil prices dipped below $40 a barrel was July 21, 2004.
Prices settled that day at $40.09, according to Peter Beutel, an oil analyst at Cameron Hanover.
Many analysts believe oil prices will continue falling next year with agencies ranging from the U.S. Department of Energy to the International Energy Agency forecasting weak demand.
IHS Global Insight Chief Economist Nariman Behravesh was among the industry experts forecasting lower prices for oil.
"Oil prices will (easily) fall below $40 per barrel in the next year, and could tumble all the way to $30,'' Behravesh said in a research note.
"With the economic outlook deteriorating by the day, futures markets for commodities have not priced in the full extent of the 'demand destruction' taking place.''
Doubts also remain about the willingness of some OPEC members to adhere to price-boosting production quotas.
"OPEC has lacked credibility for a long time on discipline,'' said Gerard Rigby, energy analyst at Fuel First Consulting in Sydney.
"OPEC is going to have to show they are committed to the cut, that it's not just talk.''
U.S. crude inventories rose slightly last week despite expectations for a drop, while gasoline reserves increased as demand stayed below year-ago levels, according to government data released Wednesday.
Analysts had expected a drop of 900,000 barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
In London, February Brent crude rose 97 cents to settle at $45.53 a barrel on the ICE Futures exchange.
In other Nymex trading, gasoline futures fell 3.45 cents to settle at $1.0055 a gallon.
Heating oil fell 1.77 cents to $1.4425 a gallon while natural gas for January delivery fell 15.2 cents to settle at $5.619 per 1,000 cubic feet.
Thursday, December 18, 2008
Thursday, November 6, 2008
Remote Chance Malaysia Will Enter Into Recession
The Star Online > Business
Thursday November 6, 2008
Remote chance Malaysia will enter recession
KUALA LUMPUR: Like many other nations, Malaysia is dependent on exports to the US for economic growth but the risk of the country going into a recession is quite remote, said Malaysian Rating Corp Bhd (MARC) chief economist Nor Zahidi Alias.
“Malaysia’s direct dependency on the US as a major export destination has steadily declined in recent years,” he said.
However, he noted that Malaysia’s exposure to the US had actually increased, taking into account “indirect exports”, which was why “growth in China is paramount.”
“Whatever we export to China is being repackaged and sent to the US. If you consider all these factors, our exposure to the US has increased,” Nor Zahidi said at the CEO breakfast talk on Current Global Economic Challenges yesterday.
Including indirect exports, Malaysia’s exports to the US constituted 32% of its total exports in 2006, up from 25% in 2000, he added.
Nor Zahidi forecast Malaysia’s gross domestic product growth to moderate to 3.5% next year “based on the US economy contracting by a maximum 1.5% in 2009”.
“If the US economy contracts by more than 2% next year, the forecast would have to be revised,” he said.
The economist said Malaysia’s economic growth next year would be constrained by weakness in private investments as risk aversion heightened among investors.
Both exports and private investment were expected to bear the brunt of the global slowdown, he said.
Meanwhile, MARC chief executive officer Mohd Razlan Mohamed said slower economic activities would have a bearing on corporate bond issuance in 2009.
He estimated corporate bond issuance in 2009 to be in the range of RM25bil to RM30bil.
“The number of foreign entities that sought to issue in the ringgit bond market to capitalise on the lower financing cost, particularly between the second half of last year and the first half of this year, has diminished in the wake of significant spikes in corporate yields.
“The 3-year AAA yield that averaged 4.08% in mid-2007 has moved up to 4.70% by the third quarter of this year,” Razlan noted.
He said the gap between what investors were willing to pay and what they were seeking had created an incompatible situation for bond issuance.
Thursday November 6, 2008
Remote chance Malaysia will enter recession
KUALA LUMPUR: Like many other nations, Malaysia is dependent on exports to the US for economic growth but the risk of the country going into a recession is quite remote, said Malaysian Rating Corp Bhd (MARC) chief economist Nor Zahidi Alias.
“Malaysia’s direct dependency on the US as a major export destination has steadily declined in recent years,” he said.
However, he noted that Malaysia’s exposure to the US had actually increased, taking into account “indirect exports”, which was why “growth in China is paramount.”
“Whatever we export to China is being repackaged and sent to the US. If you consider all these factors, our exposure to the US has increased,” Nor Zahidi said at the CEO breakfast talk on Current Global Economic Challenges yesterday.
Including indirect exports, Malaysia’s exports to the US constituted 32% of its total exports in 2006, up from 25% in 2000, he added.
Nor Zahidi forecast Malaysia’s gross domestic product growth to moderate to 3.5% next year “based on the US economy contracting by a maximum 1.5% in 2009”.
“If the US economy contracts by more than 2% next year, the forecast would have to be revised,” he said.
The economist said Malaysia’s economic growth next year would be constrained by weakness in private investments as risk aversion heightened among investors.
Both exports and private investment were expected to bear the brunt of the global slowdown, he said.
Meanwhile, MARC chief executive officer Mohd Razlan Mohamed said slower economic activities would have a bearing on corporate bond issuance in 2009.
He estimated corporate bond issuance in 2009 to be in the range of RM25bil to RM30bil.
“The number of foreign entities that sought to issue in the ringgit bond market to capitalise on the lower financing cost, particularly between the second half of last year and the first half of this year, has diminished in the wake of significant spikes in corporate yields.
“The 3-year AAA yield that averaged 4.08% in mid-2007 has moved up to 4.70% by the third quarter of this year,” Razlan noted.
He said the gap between what investors were willing to pay and what they were seeking had created an incompatible situation for bond issuance.
Tuesday, November 4, 2008
UBS AG Sees Malaysia Achieving Zero Growth Next Year
Tuesday November 4, 2008
UBS sees zero growth for Malaysia
KUALA LUMPUR: UBS Ltd, a subsidiary of Zurich-based UBS AG, sees Malaysia achieving zero growth next year in view of weakening demand from G7 countries.
Managing director for global economics Paul Donovan said exports growth would be negative for Malaysia.
“Asian governments, including Malaysia, are expected to continue applying fiscal and monetary stimuli to offset slower growth,” he told a media briefing yesterday.
He expects Malaysia to cut the overnight policy rate by 50 basis points to 3% as early as this month in line with monetary measures being taken by governments globally.
Donovan said unemployment in the country would rise gradually to 4% by 2010 in view of the slowdown in exports.
“Although Asia will recover faster than Europe, there’ll not be any above-trend growth until early 2011 while export-driven economies will have to wait for the rest of the world to recover before exports grow again,” he said.
He added that global growth would be slow for the next 18 to 24 months.
“This sort of weak growth normally follows a banking crisis because banks are reluctant to lend due to weak balance sheets while corporate debt, especially in Europe, have risen by 40% in the last four years,” Donovan said.
He said weaker borrowing and consumer spending would continue until the debt-to-income ratio went back to 2002 levels.
“It’ll take time to return to that level and will need a change in policy with lots of interest rate cuts and governments may need to encourage banks to pass on the lower rates to consumers in the form of lower commercial lending rates.”
Import orders by the US would be turning negative in the next few months while car sales there had slowed down, Donovan said, adding: “There will be no way to limit the impact in Asia while China will not be able to replace the lost car sales in the US.”
Among the Organisation for Economic Cooperation and Development (OECD) countries, he said, there would be negative growth next year except for Japan, which would see a slight growth. “Overall, the global economy is experiencing its weakest growth in 25 years,” he said.
The poor performance of most of Asian currencies was due to investors reassessing the fundamentals of growth in the region because the idea that Asia and Europe would decouple from the US economy did not hold true anymore, he said.
“The ban on short selling in the US and Britain had unintended consequences on these currencies because hedge funds had to sell some of their investments to cover short positions in Asia as well as Latin America.”
On a more positive note, Donovan said Malaysia’s inflation rate was set to come down rapidly next year to below 1% due to the lower energy and food prices.
“Semi-skilled labour costs, which are the main driver of food prices, are likely to be relatively stagnant, which means food prices will be lower,” Donovan said.
Statistics show that 80% of food price inflation in OECD countries was driven by semi-skilled labour costs, while in Asia, it was 40% to 60%.
He said crude oil price for next year would average US$60 to US$65 a barrel from US$120 this year.
UBS sees zero growth for Malaysia
KUALA LUMPUR: UBS Ltd, a subsidiary of Zurich-based UBS AG, sees Malaysia achieving zero growth next year in view of weakening demand from G7 countries.
Managing director for global economics Paul Donovan said exports growth would be negative for Malaysia.
“Asian governments, including Malaysia, are expected to continue applying fiscal and monetary stimuli to offset slower growth,” he told a media briefing yesterday.
He expects Malaysia to cut the overnight policy rate by 50 basis points to 3% as early as this month in line with monetary measures being taken by governments globally.
Donovan said unemployment in the country would rise gradually to 4% by 2010 in view of the slowdown in exports.
“Although Asia will recover faster than Europe, there’ll not be any above-trend growth until early 2011 while export-driven economies will have to wait for the rest of the world to recover before exports grow again,” he said.
He added that global growth would be slow for the next 18 to 24 months.
“This sort of weak growth normally follows a banking crisis because banks are reluctant to lend due to weak balance sheets while corporate debt, especially in Europe, have risen by 40% in the last four years,” Donovan said.
He said weaker borrowing and consumer spending would continue until the debt-to-income ratio went back to 2002 levels.
“It’ll take time to return to that level and will need a change in policy with lots of interest rate cuts and governments may need to encourage banks to pass on the lower rates to consumers in the form of lower commercial lending rates.”
Import orders by the US would be turning negative in the next few months while car sales there had slowed down, Donovan said, adding: “There will be no way to limit the impact in Asia while China will not be able to replace the lost car sales in the US.”
Among the Organisation for Economic Cooperation and Development (OECD) countries, he said, there would be negative growth next year except for Japan, which would see a slight growth. “Overall, the global economy is experiencing its weakest growth in 25 years,” he said.
The poor performance of most of Asian currencies was due to investors reassessing the fundamentals of growth in the region because the idea that Asia and Europe would decouple from the US economy did not hold true anymore, he said.
“The ban on short selling in the US and Britain had unintended consequences on these currencies because hedge funds had to sell some of their investments to cover short positions in Asia as well as Latin America.”
On a more positive note, Donovan said Malaysia’s inflation rate was set to come down rapidly next year to below 1% due to the lower energy and food prices.
“Semi-skilled labour costs, which are the main driver of food prices, are likely to be relatively stagnant, which means food prices will be lower,” Donovan said.
Statistics show that 80% of food price inflation in OECD countries was driven by semi-skilled labour costs, while in Asia, it was 40% to 60%.
He said crude oil price for next year would average US$60 to US$65 a barrel from US$120 this year.
Monday, November 3, 2008
Downward Pressure On Malaysian Exports Expected
Monday November 3, 2008
Downward pressure on Malaysian exports expected
By EILEEN HEE
Growth likely to be 3% next year
MORE downward pressure on Malaysia’s export performance is expected due to the current weak global economy and slump in commodity prices, say economists.
Aseambankers Research chief economist Suhaimi Ilias said full-year gross export growth was expected to slow sharply to 3% next year from 10.5% this year.
The plunge in commodity prices, especially the 60% decline in oil and crude palm oil (CPO) prices, since their peak this year, would have a severe impact on Malaysian exports.
Light crude oil was trading at US$63.58 on Friday, down 56.7% from its peak of US$147 per barrel in July while CPO closed at RM1,515, down 66.2% from its March peak of RM4,486 per tonne.
About 75% to 80% of the (16%) export growth in January to August this year came from exports of pure commodities (petroleum, CPO, liquefied natural gas and resource-based products (refined petroleum products, wood and rubber products, chemicals, steel).
He said the impact was already being seen, especially in relation to the fall in commodity prices, as gross exports slowed to 10.6% year-on-year growth in August from the average of 22% year-on-year growth per month between April and July.
He expected import growth to be dragged as well. “With imports of intermediate goods - primarily inputs for the export-based manufacturing sector - accounting for 70%-75% of total imports, we can expect overall import growth to be affected. Moreover, the prospect of slower investment activities will also hit imports of capital goods,” he said.
Suhaimi said since exports growth was declining due to the slowdown in major economies like the US, Europe and Japan - which account for one-third of Malaysia’s exports - the Government should focus on shoring up domestic demand.
“We expect the upcoming Economic Package to address this issue with measures to boost consumer spending and the enlarged public sector spending (Federal Government and GLCs), support key growth sectors/areas like tourism, as well as raising the competitiveness and attractiveness of Malaysia as a foreign direct investment location,” he said.
Meanwhile, MARC chief economist Nor Zahidi Alias said although Malaysia had, to some extent, managed to diversify its exports to ASEAN markets, the anticipated weakness of these economies would eventually affect demand for Malaysia’s products.
Not only was the US economy likely to contract this year, the other major economies including the EU and Japan were on the brink of a recession, he said.
According to estimates by the International Monetery Fund, Malaysia’s total trade exposure, including indirect exposure to the US, measured as exports to the US as a share of Malaysia’s GDP was 31.7% in 2006, as against the direct exposure of 22.7%. For the EU market, total exposure was 25.4% as against 13.8% for direct exports share.
“This will definitely affect demand for Asian products, including Malaysia.
“It is also important to note that in the past one year or so, Malaysia’s export performance had been supported by strong commodity prices, namely from oil and CPO-related products,” he said.
He said the value of these exports might decline especially when commodity prices continue to remain soft.
Meanwhile, imports are expected to shrink as producers tend to be extra cautious about the outlook of external sector in the near-term.
“However, the good news was the falling ringgit against the USD may act as a buffer against a very sharp decline in export performance.
“With the USD expected to continue its uptrend following a continuous flight for safety, the ringgit may not experience a sharp rebound in the near-term. The weakness in ringgit will be a positive factor for exporters,” he said.
Rating Agency Malaysia economist Kristina Fong said that in the first seven months of the year, Malaysia’s gross exports expanded by 17% while imports grew by 9.3% to boost the country’s trade balance by 59% to RM82bil.
“Assuming the pace of growth drops by a quarter for the remaining months due to the more pronounced global economic slowdown, Malaysia’s gross exports for 2008 is projected to expand at a still healthy 11.2% and imports at 8.0%, yielding a sizeable trade balance of more than RM120bil,” he said.
For 2009, Fong said the anticipated downturn in several of the advanced economies, particularly the US, UK and some EU countries, would dampen growth of Malaysian exports and imports significantly, which was forecast at 2-3%.
“Akin to the export slowdown in 2007, GDP growth is expected to sustain at 6.3% due to strong domestic demand, particularly private consumption and investment,” he said.
Downward pressure on Malaysian exports expected
By EILEEN HEE
Growth likely to be 3% next year
MORE downward pressure on Malaysia’s export performance is expected due to the current weak global economy and slump in commodity prices, say economists.
Aseambankers Research chief economist Suhaimi Ilias said full-year gross export growth was expected to slow sharply to 3% next year from 10.5% this year.
The plunge in commodity prices, especially the 60% decline in oil and crude palm oil (CPO) prices, since their peak this year, would have a severe impact on Malaysian exports.
Light crude oil was trading at US$63.58 on Friday, down 56.7% from its peak of US$147 per barrel in July while CPO closed at RM1,515, down 66.2% from its March peak of RM4,486 per tonne.
About 75% to 80% of the (16%) export growth in January to August this year came from exports of pure commodities (petroleum, CPO, liquefied natural gas and resource-based products (refined petroleum products, wood and rubber products, chemicals, steel).
He said the impact was already being seen, especially in relation to the fall in commodity prices, as gross exports slowed to 10.6% year-on-year growth in August from the average of 22% year-on-year growth per month between April and July.
He expected import growth to be dragged as well. “With imports of intermediate goods - primarily inputs for the export-based manufacturing sector - accounting for 70%-75% of total imports, we can expect overall import growth to be affected. Moreover, the prospect of slower investment activities will also hit imports of capital goods,” he said.
Suhaimi said since exports growth was declining due to the slowdown in major economies like the US, Europe and Japan - which account for one-third of Malaysia’s exports - the Government should focus on shoring up domestic demand.
“We expect the upcoming Economic Package to address this issue with measures to boost consumer spending and the enlarged public sector spending (Federal Government and GLCs), support key growth sectors/areas like tourism, as well as raising the competitiveness and attractiveness of Malaysia as a foreign direct investment location,” he said.
Meanwhile, MARC chief economist Nor Zahidi Alias said although Malaysia had, to some extent, managed to diversify its exports to ASEAN markets, the anticipated weakness of these economies would eventually affect demand for Malaysia’s products.
Not only was the US economy likely to contract this year, the other major economies including the EU and Japan were on the brink of a recession, he said.
According to estimates by the International Monetery Fund, Malaysia’s total trade exposure, including indirect exposure to the US, measured as exports to the US as a share of Malaysia’s GDP was 31.7% in 2006, as against the direct exposure of 22.7%. For the EU market, total exposure was 25.4% as against 13.8% for direct exports share.
“This will definitely affect demand for Asian products, including Malaysia.
“It is also important to note that in the past one year or so, Malaysia’s export performance had been supported by strong commodity prices, namely from oil and CPO-related products,” he said.
He said the value of these exports might decline especially when commodity prices continue to remain soft.
Meanwhile, imports are expected to shrink as producers tend to be extra cautious about the outlook of external sector in the near-term.
“However, the good news was the falling ringgit against the USD may act as a buffer against a very sharp decline in export performance.
“With the USD expected to continue its uptrend following a continuous flight for safety, the ringgit may not experience a sharp rebound in the near-term. The weakness in ringgit will be a positive factor for exporters,” he said.
Rating Agency Malaysia economist Kristina Fong said that in the first seven months of the year, Malaysia’s gross exports expanded by 17% while imports grew by 9.3% to boost the country’s trade balance by 59% to RM82bil.
“Assuming the pace of growth drops by a quarter for the remaining months due to the more pronounced global economic slowdown, Malaysia’s gross exports for 2008 is projected to expand at a still healthy 11.2% and imports at 8.0%, yielding a sizeable trade balance of more than RM120bil,” he said.
For 2009, Fong said the anticipated downturn in several of the advanced economies, particularly the US, UK and some EU countries, would dampen growth of Malaysian exports and imports significantly, which was forecast at 2-3%.
“Akin to the export slowdown in 2007, GDP growth is expected to sustain at 6.3% due to strong domestic demand, particularly private consumption and investment,” he said.
Wednesday, October 22, 2008
Great Depression versus now
The Star Online > Business
By OOI KOK HWA
Wednesday October 22, 2008
Great Depression versus now
As much as there are similarities between the two crises, the damage caused by the current turmoil is likely to be less severe given the swift actions of central banks.
AS a result of the recent financial tsunami, some experts have started to ponder whether we are headed for a depression.
The current credit crunch and the meltdown in some financial institutions were quite similar to what happened during the Great Depression in the 1930s.
In this article we will analyse the reasons behind the 1929 Wall St crash, which kickstarted the Great Depression and compare it to the current situation to identify any signs that a depression is approaching.
Milton Friedman, the leading advocate of monetarism, argued that every great depression had been accompanied or preceded by a monetary collapse.
According to Ben Bernanke, the US Fed chairman, the main reason behind the Great Crash of 1929 was due to the tight monetary policies adopted during that period.
He said the high interest rates back then caused the US economy to fall into a recession that led to the great market crash in October 1929.
As the US dollar was backed by gold, the acute selling of dollars for gold resulted in a run on the dollar.
The Fed continued to increase interest rates in an effort to preserve the value of US dollar.
As a result, high interest rates caused bankruptcies for many companies.
At the peak of the Great Depression, the US unemployment rate hit 25%
To rub salt into the wound, massive withdrawals of cash by panicky depositors were the last straw that brought about the total collapse of financial institutions.
In that period, bank deposits were uninsured and the collapse of the banks caused depositors to lose their savings.
And due to the economic uncertainties, the surviving banks were reluctant to give out new loans.
Another culprit in the 1929 crash was margin financing which caused excessive speculation in the stock market.
Investors needed only to put up 10% capital and borrow the rest from the bank to invest in the stock market.
The collapse of stock prices led to margin calls and further selldowns.
Coming back to the 2008 crash, the banking and credit-market crisis was mainly due to the property boom and subprime bust.
The collapse of subprime loans sparked the credit crunch, which dragged some financial institutions into trouble.
As a result of the securitisation and the creation of innovative financial products like collateralised-debt obligations and credit-default swaps, the collapse of one financial institution had a domino effect, leading to the collapse of other financial institutions.
Now, the pertinent question is whether we are in a long bear market and heading for a depression.
We believe a depression like the one in 1929 may not happen exactly the way it did before.
Given the fast actions taken by central banks around the world, the damage caused by this crisis will be less severe than the one in 1929.
Central banks around the world have been putting in concerted efforts to make sure the global economy will not fall into a depression.
The rescue packages being implemented throughout the world will help stabilise the financial system.
We believe the reduction of interest rates and the increase in money supply will help cushion the impact of the credit crunch.
Besides, deposits placed with most financial institutions are guaranteed by central banks.
Even though the US unemployment rate may rise to 10% from 6.1% currently, it is still far below the peak of 25% hit during the Great Depression.
In the 1929 crash, the Dow Jones Industrial Average took about three years to reach bottom in July 1932 from its peak in September 1929.
From the peak to the trough the Dow lost about 90%.
The Great Depression in the US started in August 1929 and ended only in March 1933.
The stock market started to recover eight months before the US economy ended its depression.
At present, the Dow has already dropped for a year from its peak in October 2007, currently down about 37.5% against its peak of 14,164 points on Oct 9, 2007.
In view of the possible economic recession in most developed countries, we think the Dow will drop further from current levels.
Nevertheless, we believe it will recover much faster and the magnitude of the fall will be far less severe than the one in 1929.
Lastly, we believe the stock market will eventually recover.
At this point, to be more prudent, we may take a “wait and see” approach until things stabilise.
> Ooi Kok Hwa is an investment adviser licensed by Securities Commission and the managing partner of MRR Consulting
By OOI KOK HWA
Wednesday October 22, 2008
Great Depression versus now
As much as there are similarities between the two crises, the damage caused by the current turmoil is likely to be less severe given the swift actions of central banks.
AS a result of the recent financial tsunami, some experts have started to ponder whether we are headed for a depression.
The current credit crunch and the meltdown in some financial institutions were quite similar to what happened during the Great Depression in the 1930s.
In this article we will analyse the reasons behind the 1929 Wall St crash, which kickstarted the Great Depression and compare it to the current situation to identify any signs that a depression is approaching.
Milton Friedman, the leading advocate of monetarism, argued that every great depression had been accompanied or preceded by a monetary collapse.
According to Ben Bernanke, the US Fed chairman, the main reason behind the Great Crash of 1929 was due to the tight monetary policies adopted during that period.
He said the high interest rates back then caused the US economy to fall into a recession that led to the great market crash in October 1929.
As the US dollar was backed by gold, the acute selling of dollars for gold resulted in a run on the dollar.
The Fed continued to increase interest rates in an effort to preserve the value of US dollar.
As a result, high interest rates caused bankruptcies for many companies.
At the peak of the Great Depression, the US unemployment rate hit 25%
To rub salt into the wound, massive withdrawals of cash by panicky depositors were the last straw that brought about the total collapse of financial institutions.
In that period, bank deposits were uninsured and the collapse of the banks caused depositors to lose their savings.
And due to the economic uncertainties, the surviving banks were reluctant to give out new loans.
Another culprit in the 1929 crash was margin financing which caused excessive speculation in the stock market.
Investors needed only to put up 10% capital and borrow the rest from the bank to invest in the stock market.
The collapse of stock prices led to margin calls and further selldowns.
Coming back to the 2008 crash, the banking and credit-market crisis was mainly due to the property boom and subprime bust.
The collapse of subprime loans sparked the credit crunch, which dragged some financial institutions into trouble.
As a result of the securitisation and the creation of innovative financial products like collateralised-debt obligations and credit-default swaps, the collapse of one financial institution had a domino effect, leading to the collapse of other financial institutions.
Now, the pertinent question is whether we are in a long bear market and heading for a depression.
We believe a depression like the one in 1929 may not happen exactly the way it did before.
Given the fast actions taken by central banks around the world, the damage caused by this crisis will be less severe than the one in 1929.
Central banks around the world have been putting in concerted efforts to make sure the global economy will not fall into a depression.
The rescue packages being implemented throughout the world will help stabilise the financial system.
We believe the reduction of interest rates and the increase in money supply will help cushion the impact of the credit crunch.
Besides, deposits placed with most financial institutions are guaranteed by central banks.
Even though the US unemployment rate may rise to 10% from 6.1% currently, it is still far below the peak of 25% hit during the Great Depression.
In the 1929 crash, the Dow Jones Industrial Average took about three years to reach bottom in July 1932 from its peak in September 1929.
From the peak to the trough the Dow lost about 90%.
The Great Depression in the US started in August 1929 and ended only in March 1933.
The stock market started to recover eight months before the US economy ended its depression.
At present, the Dow has already dropped for a year from its peak in October 2007, currently down about 37.5% against its peak of 14,164 points on Oct 9, 2007.
In view of the possible economic recession in most developed countries, we think the Dow will drop further from current levels.
Nevertheless, we believe it will recover much faster and the magnitude of the fall will be far less severe than the one in 1929.
Lastly, we believe the stock market will eventually recover.
At this point, to be more prudent, we may take a “wait and see” approach until things stabilise.
> Ooi Kok Hwa is an investment adviser licensed by Securities Commission and the managing partner of MRR Consulting
Sunday, October 19, 2008
Time To Invest In Bond
The Star Online > Bizweek Saturday October 4, 2008
Malaysian Bond Market
DURING this holiday-shortened week in Malaysia, much has happened in the western countries. In the US, a revised US$700bil rescue package incorporating increase in bank-deposit-insurance limits and tax breaks has been approved by the Senate, and is scheduled to be re-voted by the House of Representatives. Despite the increased possibility of this rescue package being passed, the credit market is getting increasingly jittery. Banks are hesitant to lend to each other, causing spikes in interbank rates which threaten to bring the credit market to a halt.
Warren Buffett summed it up aptly with his statement: “In my adult lifetime I don’t think I’ve ever seen people as fearful, economically, as they are right now ... they are not wrong to be worried.”
With the significant stress in the global credit markets, and the rapidly deteriorating global economic conditions, the Malaysian economy will not be insulated from the turmoil. Falling manufacturing and commodity exports, coupled with slowing domestic consumption due to poor sentiment, mean that we are likely to go through a rough patch in the coming quarters.
In this environment where almost every asset class is falling in value, local bonds especially MGS and high-grade PDS stand out as defensive investments for investors. Cooling inflationary pressure and growing possibility of rate cuts by global central banks mean that not only is unlikely to be raised, but there may be room for rate-cuts going forward. The lack of investment alternatives and improving interest rate outlook provide the upsides for local bonds.
The recent concern of oversupply of MGS following the Government’s revised fiscal deficit target is mitigated by the shrinking PDS issuance pipeline.
Meanwhile, there is still a deep pool of liquidity to underpin the demand for local bonds, with close to RM300bil of excess liquidity in the banking system, and steadily growing pension funds, thanks to our high saving rates. The need to generate real investment return amid the current negative real interest-rate environment should support the buying interest and cap any major downsides of local bonds.
While interest rate and demand & supply conditions bode well for local bonds, the same cannot be said about credit outlook. The impending economic weakness will lead to lower corporate profitability and heightened financial risks €“ two major recipes for higher credit risks. Therefore other than MGS and sovereign-related or supranational credits, investors still need to be very selective on credits in general.
Trading volume is subdued during the week as most market players are away. Nevertheless, the MGS market remains bullish with most benchmark bonds closing 8-10 bps lower. The 3-year benchmark MGS’9/11 contributed bulk of the trades and dipped 10 bps lower to 3.87%, while the 10- and 20-year benchmarks fell 8 and 10 bps to 4.57% and 5.05% respectively. The 5-year benchmark was not traded.
Trading was light in the PDS market, with the bulk of the trades coming from the AAA segment, largely on sovereign-related and supranational credits. Nevertheless, with strong buying interest pushing down MGS and IRS yield curves considerably, credit spreads are now approaching their 5-year highs, raising the prospect of buying interest spilling over to this segment.
MYR Interest Rate Swap
During the week, MYIRS saw better receiving interest on the back of the bullish bond market. As we write, the curve dipped 5-15 bps on week-on-week basis albeit in thin trading. Bullishness in the US bond market on economic concern and expectation of rate cuts supported the local receiving theme as well. We expect to see some volatile movements in MYIRS, tracking bond performance closely in the coming weeks.
US Treasury Market
US Treasuries performed strongly throughout the week as the market was plagued by uncertainties on the US$700bil rescue package. As increasingly the effectiveness of the rescue package is questioned, expectation of rate hikes by the Fed is gaining steam.
The UST yield curve bullish steepened during the week. As at market close on Thursday, yields on the 2 and 5-years UST dropped 48 and 39 bps from last Friday to 1.62% and 2.67% respectively, while the 10 and 30-year UST closed 23 bps and 22 bps lower at 3.63% and 4.15% respectively.
Foreign Exchange Market
Forex movements of late have been largely affected by risk aversion and the US rescue package. During the week, the USD surged against the major currencies on expectation of the approval of the rescue package. We expect more market volatility ahead as nations ponder measures to stabilise the global financial markets.
European currencies fell against the greenback amid growing signs of economic slowdown in Europe. With prospect of recession in the Eurozone and the UK, the outlook for EUR and GBP has turned bearish. We expect a lower trading band of 1.36-1.41 for EUR/USD and 1.74€“1.80 for GBP/USD in the coming weeks.
Yen is firm as risk aversion continues to be the dominant theme. Given the prevailing negative sentiment, USD/JPY is expected to be range-bound within 102€“107 with downside bias.
USD/MYR touched a high of 3.4750 on broad USD strength and the bid tone in the pair will likely persist amid the global financial turmoil. We expect a trading range of 3.4400€“3.4800 in the following week.
Global Economy
Economic data released in the US were largely negative last week. Consumer spending in the US was stagnant in Aug-08, despite a 0.5% m/m gain in personal income as higher income was mainly driven by unemployment insurance and social benefits. In Sept-08, ADP report showed employers cut 8,000 payrolls while Challenger reported a 32.6% y/y increase in job cuts.
Manufacturing activities contracted by the most since 2001 in Sept-08 amid weakened overseas demand. Factory orders fell 4.0% m/m in Aug-08, the most in 2 years. Meanwhile, the housing slump is showing no sign of bottoming, as house prices continued to fall in July-08 by 16-18% y/y.
In Europe, the ECB kept its benchmark interest rate unchanged at 4.25% but signalled the possibility of rate cuts going forward as both growth and inflation were dampened by the credit turmoil.
More pessimistic data were also seen in Asia. In Japan, the Tankan Index showed that large manufacturers turned pessimistic for the first time in 5 years in 3Q08. Japan’s jobless rate rose to a 2-year high of 4.2% in Aug-08. Elsewhere, India and Thailand reported slowing export growth.
CPI readings continued to show cooling price pressures in Asia. In Sept-08, CPI in South Korea and Thailand slowed to 5.1% y/y and 6.0% y/y, from 5.6% and 6.4% a month earlier. Nevertheless, food-price inflation in Thailand was still on an upward trend, increasing 15.7% y/y in Sept-08 vs 14.3% in Aug-08.
For enquiries, please contact:
Ng-juan-hui@ambg.com.my
Melissa-yong@ambg.com.my
Ooi-liang-wu@ambg.com.my
ฉ 1995-2008 Star Publications (Malaysia) Bhd (Co No 10894-D)
Malaysian Bond Market
DURING this holiday-shortened week in Malaysia, much has happened in the western countries. In the US, a revised US$700bil rescue package incorporating increase in bank-deposit-insurance limits and tax breaks has been approved by the Senate, and is scheduled to be re-voted by the House of Representatives. Despite the increased possibility of this rescue package being passed, the credit market is getting increasingly jittery. Banks are hesitant to lend to each other, causing spikes in interbank rates which threaten to bring the credit market to a halt.
Warren Buffett summed it up aptly with his statement: “In my adult lifetime I don’t think I’ve ever seen people as fearful, economically, as they are right now ... they are not wrong to be worried.”
With the significant stress in the global credit markets, and the rapidly deteriorating global economic conditions, the Malaysian economy will not be insulated from the turmoil. Falling manufacturing and commodity exports, coupled with slowing domestic consumption due to poor sentiment, mean that we are likely to go through a rough patch in the coming quarters.
In this environment where almost every asset class is falling in value, local bonds especially MGS and high-grade PDS stand out as defensive investments for investors. Cooling inflationary pressure and growing possibility of rate cuts by global central banks mean that not only is unlikely to be raised, but there may be room for rate-cuts going forward. The lack of investment alternatives and improving interest rate outlook provide the upsides for local bonds.
The recent concern of oversupply of MGS following the Government’s revised fiscal deficit target is mitigated by the shrinking PDS issuance pipeline.
Meanwhile, there is still a deep pool of liquidity to underpin the demand for local bonds, with close to RM300bil of excess liquidity in the banking system, and steadily growing pension funds, thanks to our high saving rates. The need to generate real investment return amid the current negative real interest-rate environment should support the buying interest and cap any major downsides of local bonds.
While interest rate and demand & supply conditions bode well for local bonds, the same cannot be said about credit outlook. The impending economic weakness will lead to lower corporate profitability and heightened financial risks €“ two major recipes for higher credit risks. Therefore other than MGS and sovereign-related or supranational credits, investors still need to be very selective on credits in general.
Trading volume is subdued during the week as most market players are away. Nevertheless, the MGS market remains bullish with most benchmark bonds closing 8-10 bps lower. The 3-year benchmark MGS’9/11 contributed bulk of the trades and dipped 10 bps lower to 3.87%, while the 10- and 20-year benchmarks fell 8 and 10 bps to 4.57% and 5.05% respectively. The 5-year benchmark was not traded.
Trading was light in the PDS market, with the bulk of the trades coming from the AAA segment, largely on sovereign-related and supranational credits. Nevertheless, with strong buying interest pushing down MGS and IRS yield curves considerably, credit spreads are now approaching their 5-year highs, raising the prospect of buying interest spilling over to this segment.
MYR Interest Rate Swap
During the week, MYIRS saw better receiving interest on the back of the bullish bond market. As we write, the curve dipped 5-15 bps on week-on-week basis albeit in thin trading. Bullishness in the US bond market on economic concern and expectation of rate cuts supported the local receiving theme as well. We expect to see some volatile movements in MYIRS, tracking bond performance closely in the coming weeks.
US Treasury Market
US Treasuries performed strongly throughout the week as the market was plagued by uncertainties on the US$700bil rescue package. As increasingly the effectiveness of the rescue package is questioned, expectation of rate hikes by the Fed is gaining steam.
The UST yield curve bullish steepened during the week. As at market close on Thursday, yields on the 2 and 5-years UST dropped 48 and 39 bps from last Friday to 1.62% and 2.67% respectively, while the 10 and 30-year UST closed 23 bps and 22 bps lower at 3.63% and 4.15% respectively.
Foreign Exchange Market
Forex movements of late have been largely affected by risk aversion and the US rescue package. During the week, the USD surged against the major currencies on expectation of the approval of the rescue package. We expect more market volatility ahead as nations ponder measures to stabilise the global financial markets.
European currencies fell against the greenback amid growing signs of economic slowdown in Europe. With prospect of recession in the Eurozone and the UK, the outlook for EUR and GBP has turned bearish. We expect a lower trading band of 1.36-1.41 for EUR/USD and 1.74€“1.80 for GBP/USD in the coming weeks.
Yen is firm as risk aversion continues to be the dominant theme. Given the prevailing negative sentiment, USD/JPY is expected to be range-bound within 102€“107 with downside bias.
USD/MYR touched a high of 3.4750 on broad USD strength and the bid tone in the pair will likely persist amid the global financial turmoil. We expect a trading range of 3.4400€“3.4800 in the following week.
Global Economy
Economic data released in the US were largely negative last week. Consumer spending in the US was stagnant in Aug-08, despite a 0.5% m/m gain in personal income as higher income was mainly driven by unemployment insurance and social benefits. In Sept-08, ADP report showed employers cut 8,000 payrolls while Challenger reported a 32.6% y/y increase in job cuts.
Manufacturing activities contracted by the most since 2001 in Sept-08 amid weakened overseas demand. Factory orders fell 4.0% m/m in Aug-08, the most in 2 years. Meanwhile, the housing slump is showing no sign of bottoming, as house prices continued to fall in July-08 by 16-18% y/y.
In Europe, the ECB kept its benchmark interest rate unchanged at 4.25% but signalled the possibility of rate cuts going forward as both growth and inflation were dampened by the credit turmoil.
More pessimistic data were also seen in Asia. In Japan, the Tankan Index showed that large manufacturers turned pessimistic for the first time in 5 years in 3Q08. Japan’s jobless rate rose to a 2-year high of 4.2% in Aug-08. Elsewhere, India and Thailand reported slowing export growth.
CPI readings continued to show cooling price pressures in Asia. In Sept-08, CPI in South Korea and Thailand slowed to 5.1% y/y and 6.0% y/y, from 5.6% and 6.4% a month earlier. Nevertheless, food-price inflation in Thailand was still on an upward trend, increasing 15.7% y/y in Sept-08 vs 14.3% in Aug-08.
For enquiries, please contact:
Ng-juan-hui@ambg.com.my
Melissa-yong@ambg.com.my
Ooi-liang-wu@ambg.com.my
ฉ 1995-2008 Star Publications (Malaysia) Bhd (Co No 10894-D)
Tuesday, October 7, 2008
There will be no new refineries. Oil Moving Up Soon?
There will be no new refineries by Giuseppe Marconi - 2008/07/23
Oil companies won't be building more refineries, because there won't be enough oil left to refine by the time new refineries could pay for themselves.
There hasn't been a new refinery built in the US since 1976. In 1982, there were 301 operable refineries in the U.S and they produced about 17.9 million barrels of oil per day. Today there are only 149 refineries, and they're producing 17.4 million barrels. This increase in efficiency is impressive but not a miracle. As with everything these outputs are carefully calculated to optimize profitability. Let me explain.
Truth be told, new refineries require tremendous financial commitments which take anywhere from 15 to 25 years to amortize. With record oil prices it would make perfect sense to invest in a few refineries today, except... for the lack of oil to be refined 20 years from now.Trends have predicted that peak oil production, where the production of oil starts to decline, will be reached around 2007-2010. After that, there will be less and less oil to refine no matter where drillers look. In this context, building expensive new refineries does not make a lot of sense as existing ones will be sufficient to process whatever little oil is left. So forget about new refineries, except for a few in the northern midwest to process the heavy oil from Canada.
Crude oil is a finite resource more and more depleted. As such, an increasing demand put on this finite supply necessitates careful management in order to stretch its lifespan and profitability.
Oil companies won't be building more refineries, because there won't be enough oil left to refine by the time new refineries could pay for themselves.
There hasn't been a new refinery built in the US since 1976. In 1982, there were 301 operable refineries in the U.S and they produced about 17.9 million barrels of oil per day. Today there are only 149 refineries, and they're producing 17.4 million barrels. This increase in efficiency is impressive but not a miracle. As with everything these outputs are carefully calculated to optimize profitability. Let me explain.
Truth be told, new refineries require tremendous financial commitments which take anywhere from 15 to 25 years to amortize. With record oil prices it would make perfect sense to invest in a few refineries today, except... for the lack of oil to be refined 20 years from now.Trends have predicted that peak oil production, where the production of oil starts to decline, will be reached around 2007-2010. After that, there will be less and less oil to refine no matter where drillers look. In this context, building expensive new refineries does not make a lot of sense as existing ones will be sufficient to process whatever little oil is left. So forget about new refineries, except for a few in the northern midwest to process the heavy oil from Canada.
Crude oil is a finite resource more and more depleted. As such, an increasing demand put on this finite supply necessitates careful management in order to stretch its lifespan and profitability.
Friday, October 3, 2008
CPO falls below key RM2,000 level
KUALA LUMPUR/SINGAPORE:
Ballooning vegetable oil stocks and fast-declining interest from funds in volatile commodities may hold off a recovery in palm oil prices until next year despite its fall to a level much lower than rival soyoil.
Palm oil's discount to soy oil has more than doubled to US$450 (RM1,553) a tonne in just six months as palm has lost half its value since hitting a historic high in March, triggering market talk that palm might have gone too low too soon and would bounce back.
But analysts said rising output in Malaysia and Indonesia and bumper crops in China and India would boost supplies and reduce export demand. And with a worsening financial crisis, funds are fleeing assets that have seen wide price swings recently.
"Panic has forced funds and investors to sell out palm oil," said Martin Bek-Nielson, executive director of United Plantations Bhd "Cash is now king in an environment when stocks are ballooning, exports are dwindling and the global economy is getting shattered."
Rising use of soyoil to make biodiesel in the United States and concerns over production in Latin America could help soy oil which is down about 13% this year, to claw back some gains to 45-48 cents a pound in coming months.
But palm oil would hover in the RM2,000-RM2,400 a tonne range until the second quarter of next year, when the lean production season will start.
Palm oil, used as a cooking oil and in products from cosmetics to biofuels, has lost 55% since hitting an all-time-high of RM4,486 on March 4. More recently, palm sales have suffered because of defaults.
Sliding palm oil prices have hit shares of Southeast Asia's plantation industry, once most sought after by investors.
Sector bellwethers such as IOI Corp have dived about 47% ever since palm oil prices fell from record highs. Astra Agro Lestari Tbk, Indonesia largest listed planter, has slumped 60%, while Singapore-listed Wilmar International has tumbled almost 40%.
Indonesia and Malaysia, which together account for the bulk of global palm oil production, are expected to produce around 38 million tonnes of the commodity in 2008, around 8%-10% higher than earlier estimates, analysts said.
The expectation of a surge in production comes at a time when appetite for the commodity is waning and top vegetable oil consumers, China and India, are cutting purchases.
This would leave the two countries with tank-bursting stocks of more than five million tonnes by December, the highest ever.
India, the world's second-largest edible oil importer after China, is looking forward to a bumper harvest from summer-sown crops. China is awash with palm oil supplies, with state reserves expected to last until the end of the year.
"A solid soybean crop is coming in full stream," said BV Mehta, executive director of the Solvent Extractors' Association of India. "We will see decline in palm oil demand from November."
India's soybean output is likely to reach a record 12 million tonnes this year, while China is expected to produce a record soybean crop of nearly 18 million tonnes.
China, Europe and other countries normally reduce their intake of palm oil in winter months because the tropical product solidifies in cold temperatures.
"If you look at the figures, palm oil end-stock will shoot, to five million tonnes, we have never seen something like this," said S Paramalingam, executive director of Malaysian brokerage Pelindung Bestari. "The bigger concern now is the drop in exports, October will be equally bad, as September." Exports of Malaysian palm oil products for September slumped by nearly a fifth to around 1.2 million tonnes, data from cargo surveyor SGS showed.
Biofuels, responsible for lifting palm oil out of obscurity a few years ago, are not likely to lend support in the near term.
Even though palm prices have dropped to a point that it makes economic sense to burn it either in a vehicle or a generator, margins are still too low to propel any large scale conversion.
Palm-based methyl ester or biodiesel is quoted around US$790 a tonne in Malaysia, while gas oil -- against which the biodiesel competes -- is selling at US$815 a tonne in neighbouring Singapore.
In addition, a lack of government mandates for blending in Malaysia will prevent investors from reviving their business plans.
"You can't just jump into the biodiesel business just because crude oil prices are falling, it's too volatile for comfort," said Velayuthan Tan, chief executive of IJM Plantations, which has deferred construction of its 90,000 tonne plant indefinitely.
"We prefer to be cautious because Malaysia has made no decisive move to implement the biodiesel policy."
And if the crisis on Wall Street leads to a recession, leading to weak energy consumption, biofuels will take a backseat and won't be a top priority for governments and investors.
"Governments are continuously looking for the right mix of variables such as high oil prices and ample feedstock supplies," said Nathan Mahalingam, managing director of Australia-listed Mission Biofuels "We had this for a time but now oil could be falling faster and palm biodiesel may get unattractive."
Soybean oil, which competes with palm oil, is also not expected to pull up palm as it is enjoying a premium for its increasing use in making biodiesel and output woes.
"In Brazil, they are experiencing severe shortage of moisture and in Argentina you have the drought," said MR Chandran, a vegetable oil industry analyst. "Soyoil is getting a better price also because more of soyoil is getting used in biodiesel."
Unlike soyoil, the share of palm oil in producing biofuels is relatively smaller at less than 5% of global output of 40 million tonnes. In the United States, more than 20% of the soyoil produced is turned into biodiesel. -- Reuters
Ballooning vegetable oil stocks and fast-declining interest from funds in volatile commodities may hold off a recovery in palm oil prices until next year despite its fall to a level much lower than rival soyoil.
Palm oil's discount to soy oil has more than doubled to US$450 (RM1,553) a tonne in just six months as palm has lost half its value since hitting a historic high in March, triggering market talk that palm might have gone too low too soon and would bounce back.
But analysts said rising output in Malaysia and Indonesia and bumper crops in China and India would boost supplies and reduce export demand. And with a worsening financial crisis, funds are fleeing assets that have seen wide price swings recently.
"Panic has forced funds and investors to sell out palm oil," said Martin Bek-Nielson, executive director of United Plantations Bhd "Cash is now king in an environment when stocks are ballooning, exports are dwindling and the global economy is getting shattered."
Rising use of soyoil to make biodiesel in the United States and concerns over production in Latin America could help soy oil which is down about 13% this year, to claw back some gains to 45-48 cents a pound in coming months.
But palm oil would hover in the RM2,000-RM2,400 a tonne range until the second quarter of next year, when the lean production season will start.
Palm oil, used as a cooking oil and in products from cosmetics to biofuels, has lost 55% since hitting an all-time-high of RM4,486 on March 4. More recently, palm sales have suffered because of defaults.
Sliding palm oil prices have hit shares of Southeast Asia's plantation industry, once most sought after by investors.
Sector bellwethers such as IOI Corp have dived about 47% ever since palm oil prices fell from record highs. Astra Agro Lestari Tbk, Indonesia largest listed planter, has slumped 60%, while Singapore-listed Wilmar International has tumbled almost 40%.
Indonesia and Malaysia, which together account for the bulk of global palm oil production, are expected to produce around 38 million tonnes of the commodity in 2008, around 8%-10% higher than earlier estimates, analysts said.
The expectation of a surge in production comes at a time when appetite for the commodity is waning and top vegetable oil consumers, China and India, are cutting purchases.
This would leave the two countries with tank-bursting stocks of more than five million tonnes by December, the highest ever.
India, the world's second-largest edible oil importer after China, is looking forward to a bumper harvest from summer-sown crops. China is awash with palm oil supplies, with state reserves expected to last until the end of the year.
"A solid soybean crop is coming in full stream," said BV Mehta, executive director of the Solvent Extractors' Association of India. "We will see decline in palm oil demand from November."
India's soybean output is likely to reach a record 12 million tonnes this year, while China is expected to produce a record soybean crop of nearly 18 million tonnes.
China, Europe and other countries normally reduce their intake of palm oil in winter months because the tropical product solidifies in cold temperatures.
"If you look at the figures, palm oil end-stock will shoot, to five million tonnes, we have never seen something like this," said S Paramalingam, executive director of Malaysian brokerage Pelindung Bestari. "The bigger concern now is the drop in exports, October will be equally bad, as September." Exports of Malaysian palm oil products for September slumped by nearly a fifth to around 1.2 million tonnes, data from cargo surveyor SGS showed.
Biofuels, responsible for lifting palm oil out of obscurity a few years ago, are not likely to lend support in the near term.
Even though palm prices have dropped to a point that it makes economic sense to burn it either in a vehicle or a generator, margins are still too low to propel any large scale conversion.
Palm-based methyl ester or biodiesel is quoted around US$790 a tonne in Malaysia, while gas oil -- against which the biodiesel competes -- is selling at US$815 a tonne in neighbouring Singapore.
In addition, a lack of government mandates for blending in Malaysia will prevent investors from reviving their business plans.
"You can't just jump into the biodiesel business just because crude oil prices are falling, it's too volatile for comfort," said Velayuthan Tan, chief executive of IJM Plantations, which has deferred construction of its 90,000 tonne plant indefinitely.
"We prefer to be cautious because Malaysia has made no decisive move to implement the biodiesel policy."
And if the crisis on Wall Street leads to a recession, leading to weak energy consumption, biofuels will take a backseat and won't be a top priority for governments and investors.
"Governments are continuously looking for the right mix of variables such as high oil prices and ample feedstock supplies," said Nathan Mahalingam, managing director of Australia-listed Mission Biofuels "We had this for a time but now oil could be falling faster and palm biodiesel may get unattractive."
Soybean oil, which competes with palm oil, is also not expected to pull up palm as it is enjoying a premium for its increasing use in making biodiesel and output woes.
"In Brazil, they are experiencing severe shortage of moisture and in Argentina you have the drought," said MR Chandran, a vegetable oil industry analyst. "Soyoil is getting a better price also because more of soyoil is getting used in biodiesel."
Unlike soyoil, the share of palm oil in producing biofuels is relatively smaller at less than 5% of global output of 40 million tonnes. In the United States, more than 20% of the soyoil produced is turned into biodiesel. -- Reuters
Tuesday, September 23, 2008
Short Story for Teaching Time Management
A Beautiful Story I came across on Time Management and Setting Priorities.
A professor stood before his class and had some items in front of him. When class began, wordlessly he picked up a large empty jar and proceeded to fill it with rocks right tothe top, rocks about 2" diameter. He then asked the students if the jar was full? They agreed that it was.
So the professor then picked up a box of pebbles and poured them in to thejar. He shook the jar lightly. The pebbles, of course, rolled into the open areas between the rocks. Thestudents laughed. He asked his students again if the jar was full? They agreed that yes, itwas.
The professor then picked up a box of sand and poured it into the jar. Ofcourse, the sand filled up everything else.
"Now," said the professor, "I want you to recognize that this is your life.
The rocks are the important things - your family, your partner, your health, your children -anything that is so important to you that if it were lost, you would be nearly destroyed. The pebbles are the other things in life that matter, but on a smallerscale.
The pebbles represent things like your job, house, or car.
The sand is everything else, the "small stuff." "If you put the sand or the pebbles into the jar first, there is no room forthe rocks. The same goes for your life. If you spend all your energy and time on the small stuff, material things, you will never have room for the things that are truly most important.
Pay attention to the things that are Important in your life and spend time on the Important. Some of the Important's are:
Spend time with your Family.
Spend time with your People.
Spend time for your Customers.
Play with your children.
Take time to get medical checkups.
Take your partner out once a while.
Take time to renew yourself.
Find time for maintainance.
Spend time on Preventing than on Solving Problems
***** Take care of the rocks first - the things that really matter.
**** Set your priorities, the rest is just pebbles and sand.
Believe in yourself, know what you want, and make it happen! Whatever your mind can conceive and believe, it can achieve ~ Napoleon Hill ~
A professor stood before his class and had some items in front of him. When class began, wordlessly he picked up a large empty jar and proceeded to fill it with rocks right tothe top, rocks about 2" diameter. He then asked the students if the jar was full? They agreed that it was.
So the professor then picked up a box of pebbles and poured them in to thejar. He shook the jar lightly. The pebbles, of course, rolled into the open areas between the rocks. Thestudents laughed. He asked his students again if the jar was full? They agreed that yes, itwas.
The professor then picked up a box of sand and poured it into the jar. Ofcourse, the sand filled up everything else.
"Now," said the professor, "I want you to recognize that this is your life.
The rocks are the important things - your family, your partner, your health, your children -anything that is so important to you that if it were lost, you would be nearly destroyed. The pebbles are the other things in life that matter, but on a smallerscale.
The pebbles represent things like your job, house, or car.
The sand is everything else, the "small stuff." "If you put the sand or the pebbles into the jar first, there is no room forthe rocks. The same goes for your life. If you spend all your energy and time on the small stuff, material things, you will never have room for the things that are truly most important.
Pay attention to the things that are Important in your life and spend time on the Important. Some of the Important's are:
Spend time with your Family.
Spend time with your People.
Spend time for your Customers.
Play with your children.
Take time to get medical checkups.
Take your partner out once a while.
Take time to renew yourself.
Find time for maintainance.
Spend time on Preventing than on Solving Problems
***** Take care of the rocks first - the things that really matter.
**** Set your priorities, the rest is just pebbles and sand.
Believe in yourself, know what you want, and make it happen! Whatever your mind can conceive and believe, it can achieve ~ Napoleon Hill ~
Oil up US$25 a barrel, biggest one-day gain ever
Tuesday September 23, 2008 MYT 9:34:55 AM
Oil up US$25 a barrel, biggest one-day gain ever
NEW YORK: Oil prices briefly spiked more than $25 a barrel Monday, shattering the record for the biggest one-day gain as unease about the U.S. government's US$700 billion bailout plan pummeled the dollar and spurred investors to buy safe-haven assets.
An expiring crude contract added fuel to the frenzied rally.
Light, sweet crude for October delivery jumped as much as $25.45 to $130 a barrel on the New York Mercantile Exchange before falling back to settle at $120.92, up $16.37.
The contract expired at the end of the day, adding to the volatility as traders rushed to cover positions; the October price began accelerating sharply in the last hour of regular trading, a common occurrence when a contract is about to go off the board.
Still, the rally, which shattered crude's previous one-day price jump of $10.75, set June 6, showed the intensity of emotion in the market.
The Nymex temporarily halted electronic crude oil trading after prices breached the $10 daily trading limit.
Trading resumed seconds later after the daily limit was increased.
The November crude contract, which became the front-month contract at the end of Monday's session, settled at $109.37, up $6.62, still a very sharp gain.
The severity of the price move shocked veteran market participants and prompted the U.S. Commodity Futures Trading Commission to launch an investigation into whether illegal manipulation was to blame.
Acting CFTC Chairman Walter Lukken said the agency's surveillance and enforcement staff was analyzing the price spike "to ensure that no one is taking advantage of the current stresses facing our financial marketplace for their own manipulative gain.''
Phil Flynn, analyst and oil trader with Alaron Trading Corp. in Chicago, said the late-session surge in oil appeared to be the result of a large investment fund scrambling to cover their short positions, or bets that prices would fall.
"When people sense that someone is short, it's like blood on the streets. It just accelerates the rally,'' Flynn said.
In other trading, gold prices shot up more than $44.30 to settle at $909 an ounce, and other safe-haven commodities also rallied, underscoring investors' uncertainly about the direction of the economy and their fear of more turmoil ahead.
"We're off to the races again,'' said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
"There's a renewed scramble for commodities because of a general weakness in the dollar.''
Crude has gained about $30 in a dramatic four-day rally that has at least temporarily halted oil's steep two-month slide below $100.
At this rate, crude is within striking distance of its all-time record of $147.27, reached in July.
Oil's sharp gains came as energy traders grappled with the implications of the government's proposed initiative to stem the U.S. financial crisis by absorbing billions of dollars of banks' bad mortgage-related securities.
Anxiety over the plan also sent stocks sharply lower Monday; the credit markets were calmer than they were last week, but still showing the effects of investors' nervousness.
Investors fear that the government will have to dramatically ramp up borrowing to pay for the mammoth rescue effort, an inflationary move that could further devalue the dollar and trigger another wave of safe-haven buying in investments like commodities.
"They're going to have to continue auctioning off a whole lot of Treasurys to finance these projects, so the dollar is going to suffer,'' said Matt Zeman, head trader at LaSalle Futures in Chicago.
"Right now it's fear and anxiety driving people who want tangible assets.''
The 15-nation euro rose to $1.4824 in afternoon trading, up from the $1.4470 on Friday.
A weak greenback was a catalyst for the commodities boom of the past year, and analysts said large investment funds were expected to pour money back into the sector.
"That trade was very successful in past so if the dollar keeps weakening, a lot people are going to want to own hard assets like crude,'' said Andrew Lebow, senior vice president and broker at MF Global in New York.
But there is still much uncertainty about what impact the U.S. rescue plan will have on energy demand.
Oil's run-up near $150 a barrel in July and a weak U.S. economy has forced Americans to cut back on their driving and led business to scale down operations.
Though U.S. gasoline prices have eased from record levels above $4 a gallon ($1 per liter), they remain expensive, and more softening in the economy would likely further curtail energy use in the world's thirstiest consumer.
Given the dire economic outlook, some analysts questioned whether oil prices would keep rising.
"We've already seen that the world can't afford oil at these prices. If it keeps going up, demand will drop off again,'' Flynn said.
However, he cautioned that oil's future direction hinged on the outcome of the government bailout plan and its effect on the U.S. economy.
"If the dollar keeps getting whacked and everybody panics, then we are going up again,'' he said.
U.S. congressional leaders endorsed the plan's main thrust, saying passage might occur in a matter of days.
But they also want independent oversight, protections for homeowners and constraints on excessive executive compensation, House Speaker Nancy Pelosi said Sunday.
Treasury Secretary Henry Paulson pushed lawmakers, who received the package on Saturday, to approve the proposal as soon as possible.
The Federal Reserve also announced late Sunday it granted a request by investment banks Goldman Sachs and Morgan Stanley to change their status to bank holding companies, a move that will allow the two institutions to open commercial banking subsidiaries, greatly bolstering their resources.
In other Nymex trading, heating oil futures rose 14.52 cents to settle at $3.043 a gallon, while gasoline futures rose 10.41 cents to settle at $2.7038 a gallon.
Natural gas futures rose 9.5 cents to settle at $7.943 per 1,000 cubic feet.
In London, November Brent crude rose $6.43 to settle at $106.04 a barrel on the ICE Futures exchange. - AP
Oil up US$25 a barrel, biggest one-day gain ever
NEW YORK: Oil prices briefly spiked more than $25 a barrel Monday, shattering the record for the biggest one-day gain as unease about the U.S. government's US$700 billion bailout plan pummeled the dollar and spurred investors to buy safe-haven assets.
An expiring crude contract added fuel to the frenzied rally.
Light, sweet crude for October delivery jumped as much as $25.45 to $130 a barrel on the New York Mercantile Exchange before falling back to settle at $120.92, up $16.37.
The contract expired at the end of the day, adding to the volatility as traders rushed to cover positions; the October price began accelerating sharply in the last hour of regular trading, a common occurrence when a contract is about to go off the board.
Still, the rally, which shattered crude's previous one-day price jump of $10.75, set June 6, showed the intensity of emotion in the market.
The Nymex temporarily halted electronic crude oil trading after prices breached the $10 daily trading limit.
Trading resumed seconds later after the daily limit was increased.
The November crude contract, which became the front-month contract at the end of Monday's session, settled at $109.37, up $6.62, still a very sharp gain.
The severity of the price move shocked veteran market participants and prompted the U.S. Commodity Futures Trading Commission to launch an investigation into whether illegal manipulation was to blame.
Acting CFTC Chairman Walter Lukken said the agency's surveillance and enforcement staff was analyzing the price spike "to ensure that no one is taking advantage of the current stresses facing our financial marketplace for their own manipulative gain.''
Phil Flynn, analyst and oil trader with Alaron Trading Corp. in Chicago, said the late-session surge in oil appeared to be the result of a large investment fund scrambling to cover their short positions, or bets that prices would fall.
"When people sense that someone is short, it's like blood on the streets. It just accelerates the rally,'' Flynn said.
In other trading, gold prices shot up more than $44.30 to settle at $909 an ounce, and other safe-haven commodities also rallied, underscoring investors' uncertainly about the direction of the economy and their fear of more turmoil ahead.
"We're off to the races again,'' said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
"There's a renewed scramble for commodities because of a general weakness in the dollar.''
Crude has gained about $30 in a dramatic four-day rally that has at least temporarily halted oil's steep two-month slide below $100.
At this rate, crude is within striking distance of its all-time record of $147.27, reached in July.
Oil's sharp gains came as energy traders grappled with the implications of the government's proposed initiative to stem the U.S. financial crisis by absorbing billions of dollars of banks' bad mortgage-related securities.
Anxiety over the plan also sent stocks sharply lower Monday; the credit markets were calmer than they were last week, but still showing the effects of investors' nervousness.
Investors fear that the government will have to dramatically ramp up borrowing to pay for the mammoth rescue effort, an inflationary move that could further devalue the dollar and trigger another wave of safe-haven buying in investments like commodities.
"They're going to have to continue auctioning off a whole lot of Treasurys to finance these projects, so the dollar is going to suffer,'' said Matt Zeman, head trader at LaSalle Futures in Chicago.
"Right now it's fear and anxiety driving people who want tangible assets.''
The 15-nation euro rose to $1.4824 in afternoon trading, up from the $1.4470 on Friday.
A weak greenback was a catalyst for the commodities boom of the past year, and analysts said large investment funds were expected to pour money back into the sector.
"That trade was very successful in past so if the dollar keeps weakening, a lot people are going to want to own hard assets like crude,'' said Andrew Lebow, senior vice president and broker at MF Global in New York.
But there is still much uncertainty about what impact the U.S. rescue plan will have on energy demand.
Oil's run-up near $150 a barrel in July and a weak U.S. economy has forced Americans to cut back on their driving and led business to scale down operations.
Though U.S. gasoline prices have eased from record levels above $4 a gallon ($1 per liter), they remain expensive, and more softening in the economy would likely further curtail energy use in the world's thirstiest consumer.
Given the dire economic outlook, some analysts questioned whether oil prices would keep rising.
"We've already seen that the world can't afford oil at these prices. If it keeps going up, demand will drop off again,'' Flynn said.
However, he cautioned that oil's future direction hinged on the outcome of the government bailout plan and its effect on the U.S. economy.
"If the dollar keeps getting whacked and everybody panics, then we are going up again,'' he said.
U.S. congressional leaders endorsed the plan's main thrust, saying passage might occur in a matter of days.
But they also want independent oversight, protections for homeowners and constraints on excessive executive compensation, House Speaker Nancy Pelosi said Sunday.
Treasury Secretary Henry Paulson pushed lawmakers, who received the package on Saturday, to approve the proposal as soon as possible.
The Federal Reserve also announced late Sunday it granted a request by investment banks Goldman Sachs and Morgan Stanley to change their status to bank holding companies, a move that will allow the two institutions to open commercial banking subsidiaries, greatly bolstering their resources.
In other Nymex trading, heating oil futures rose 14.52 cents to settle at $3.043 a gallon, while gasoline futures rose 10.41 cents to settle at $2.7038 a gallon.
Natural gas futures rose 9.5 cents to settle at $7.943 per 1,000 cubic feet.
In London, November Brent crude rose $6.43 to settle at $106.04 a barrel on the ICE Futures exchange. - AP
Tuesday, September 16, 2008
My 18 hours under the ISA
Malaysia Terrorist Law Used To Protect Journalist?... read more. Judge It !!! Do you want this happend to you & family? Show your disapproval, Click here to vote againts it.
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By TAN HOON CHENG
WHILE enjoying my yew char koay (fried dough stick), I was worried about the show-cause letter issued to Sin Chew Daily, and anxious about the days ahead for my newspaper.
Suddenly, a group of plainclothes policemen appeared in front of my gate. A woman police officer started to identify who they were and the purpose of their visit. She was also the only one in uniform.
She told me I had to follow them to the police station. I said would not open the gate unless they had a warrant of arrest.
I immediately rang the legal adviser of our company and my direct superior to seek their advice. Later, the woman officer told me they were arresting me under the Internal Security Act (ISA) and therefore a warrant was not required. Upon hearing that, I immediately prepared for the worst.
I had to act calm, comforting my parents and reassuring them that my colleagues would be waiting for me at the police station to render assistance. When I was taken away, my parents reacted strongly and they kept on asking the police to accord me proper treatment.
I was brought to the Seberang Prai Tengah district police station. I was placed in a cold room while waiting for the police to begin their paperwork.
I was accompanied by a woman officer who seemed to be shivering because of the low room temperature. To break the silence, I initiated a conversation. She told me: “You seem to be very calm.”
I told her: “I am arrested under the Internal Security Act and even though I am scared, I have to face this reality. But I am worried about my parents, friends and relatives, they must be very worried about me.”
To be frank, I was very cool-headed. I believed there must be a lot of people out there supporting me and giving me the strength I needed. So, I had to stay strong for them.
The police recorded all my personal belongings which were later taken away from me. After that, I was considered ready to be sent to the police contingent headquarters in Penang.
When I was brought out of the police station, I realised a lot of my media colleagues, representatives from different parties and groups were already waiting outside the police station to show their support.
Seeing this, I was deeply touched, I could no longer hold back my tears.
When the police car arrived at the entrance, my superior, Puah Eu Peng, our Northern Region Manager, tried to stop the car with his body and to slow it down.
He knocked at the window, to make sure I was in the car and gestured to show his support. I instantly wiped off my tears.
After taking my thumbprints, I was given dinner and arranged to spend my night in remand. I did not know that people had gathered outside the station to show their support.
I requested the woman officer to keep the lights on. She told me not to worry, she would not switch off the lights.
The police also informed me I would meet my parents at 8am tomorrow morning. I spent a very long time, thinking of everything that I had to tell my parents.
I lost touch with the outside world and since it was my only opportunity, I had cherish it. To clearly explain everything to my parents.
After clearing my mind, I tried to sleep on a wooden bed with the company of mosquitoes and the noise of water dripping. I had no idea what tomorrow held for me, but I knew I had to be in perfect condition to handle everything.
I have never suffered from insomnia but this very night, I finally experienced it.
Deep down in my heart, I know those who cared about me would also be experiencing the same and my heart ached thinking about that.
When I was about to wash up at 6am, the woman officer passed me clothes brought by my parents. I was surprised; everything was new, the toiletries, T-shirts, shorts, panties.
I later discovered that the “parents” the police officer was referring to were a bunch of colleagues. While waiting outside the Penang police contingent headquarters, they had prepared them for me.
They were uncertain when I would be released, but told themselves they had to get these items ready in the shortest time possible.
I met my parents and said goodbye.
The police informed me they would bring me to the Bukit Aman police headquarters in Kuala Lumpur. My heart sank. I told myself this was the beginning of it, I must brace myself for everything.
I was eventually brought to the Perak police headquarters in Ipoh. After a brief interrogation session, I was brought back to Penang police headquarters again.
I was interrogated further. I told myself to keep my mind clear, I must tell them the truth, and respond appropriately.
After the interrogation, I was brought to see another higher-ranked officer, he told me: “We can both go home now!” Both of us turned to the clock on the wall. The time was 2.25pm.
These were my 18 hours under the ISA. I have gone through a lot.
After being released, I received a lot of messages, telephone calls and bouquets.
My colleagues in the press, representatives from political parties, society leaders, schoolmates, classmates, friends and relatives visited me at home. Of course, not forgetting the readers and members of the public who called up or visited Sin Chew Daily’s office in Penang or the head office in Petaling Jaya.
To all of them, I express my deepest gratitude. During those 18 hours, which was filled with a lot of uncertainties, I felt there was some unknown strength that supported me through it all.
I knew it must be from you all, those whom I knew or have not met!
I realise our journey is still full with challenges and obstacles, so we have to continue with the same righteous spirit and courage that we have all shown this time! Our society needs this spirit. To build a better tomorrow.
I have finally been freed, but I hope Teresa Kok and Raja Petra Kamarudin and all those detainees under the ISA can be released as soon as possible.
If the authorities think they have broken the law, they should be brought to a court of law to stand transparent and fair trials.
This article is reproduced, with permission, from http://www.mysinchew.com/.
© 1995-2008 Star Publications (Malaysia) Bhd (Co No 10894-D)
Oil closes below $100 for first time in 6 months
Oil closes below $100 for first time in 6 months
By STEVENSON JACOBS, AP Business WriterMon Sep 15, 4:58 PM ET
Oil prices closed below $100 a barrel for the first time in six months Monday, tumbling in another dramatic sell-off as the demise of Lehman Brothers and the sale of Merrill Lynch deepened worries about the U.S. economy.
Crude prices shed more than $5 a barrel and have now given up virtually all their gains for the year, extending a steep, two-month slide from record levels above $147 a barrel.
Oil's pullback also came as early signs suggested that Hurricane Ike delivered less damage than feared to the Gulf Coast energy oil and gas infrastructure. But pump prices jumped above $4 a gallon in parts of the country as a precautionary shutdown of Gulf refineries caused gasoline shortages.
The latest sell-off in oil began Sunday and accelerated Monday as traders digested a day of dramatic upheaval on Wall Street: Lehman Brothers Holdings Inc., a 158-year-old investment bank, filed for bankruptcy after failing to find a buyer and Merrill Lynch & Co. agreed to be bought out by Bank of America Corp.
Lehman, Merrill and other big institutional investors were major participants in the commodities boom of the past year, helping push the price of oil, precious metals and grains to historic highs until a slowing global economy helped bring a halt to the rally.
Analysts said investors feared that the upheaval in the financial sector could trigger another round of commodities liquidation — especially with Lehman likely to unwind its holdings. Other investors may also unload commodities, fearing that the deepening economic crisis will further reduce demand for energy and raw materials futures.
"I think this is giving the bulls further reason to exit the market," said Stephen Schork, an oil analyst and trader in Villanova, Pa., who said the pullback could reflect selling by Lehman or possibly a hedge fund struggling to raise capital. "When you see price drops of this size, it reeks of someone being in trouble."
Light, sweet crude for October delivery fell $5.47 to settle at $95.71 a barrel on the New York Mercantile Exchange — oil's first settlement under $100 since March 4. Earlier, prices dipped to $94.13, the lowest trading level in seven months. The sell-off gained momentum in aftermarket trading as prices fell more than $6.50.
Crude has fallen more than $50 — or 35 percent — from its all-time trading record of $147.27 reached July 11 as a global economic slowdown continues to weigh on demand for energy.
Other commodities traded mixed Monday, with energy futures down but gold, silver and most grains trading higher.
Investors were also awaiting damage assessments to Gulf energy infrastructure after Ike's passage.
U.S. officials said Sunday that Ike destroyed at least 10 oil and gas platforms and damaged pipelines in the Gulf of Mexico. But that represents only a small portion of the 3,800 production platforms in the Gulf and pales in comparison to the catastrophic damage to energy infrastructure doled out by Hurricanes Katrina and Rita three years ago.
"Fears of widespread refinery damage have been allayed considerably and a number of facilities are coming back up in a timely fashion," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
Still, power outages along the Gulf Coast were slowing efforts to restart some refineries. Meanwhile, virtually all oil production in the Gulf and about 94 percent of natural gas output remained shut-in Monday, according to the U.S. Minerals Management Service.
The shutdown of Gulf refineries sent wholesale gasoline prices spiking last week and pushed pump prices back above $4 a gallon in South Carolina, Alabama, Georgia and other states. Gasoline shortages were reported in Maryland, Virginia and North Carolina.
On Monday, a gallon of regular rose half a penny overnight to a new national average of $3.842 — up 16.7 cents from Friday, according to auto club AAA, the Oil Price Information Service and Wright Express.
Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J., said supply shortages caused by Ike and Hurricane Gustav should last at least another two weeks.
"That means we're looking at close to $4 a gallon for the rest of September," Kloza said. "People are going to observe more of this disconnect where retail prices move higher even though crude oil is trading below $100 a barrel."
Also adding to the selling pressure Monday was a slightly stronger dollar. A rising greenback encourages investors to unload commodities bought as a hedge against inflation or weakness in the U.S. currency.
Oil fell despite reports that militants have launched another attack Nigeria's oil infrastructure in a third day of violence.
In other Nymex trading, heating oil futures fell 14.79 cents to settle at $2.7912 a gallon, while gasoline prices dropped 20.82 cents to settle at $2.5614 a gallon. Natural gas for October delivery rose about a penny to settle at $7.374 per 1,000 cubic feet.
In London, October Brent crude fell $5.20 to settle at $92.38 a barrel on the ICE Futures exchange.
___
Associated Press Writers Louise Watt in London and Alex Kennedy in Singapore contributed to this report.
Copyright © 2008 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of The Associated Press.
By STEVENSON JACOBS, AP Business WriterMon Sep 15, 4:58 PM ET
Oil prices closed below $100 a barrel for the first time in six months Monday, tumbling in another dramatic sell-off as the demise of Lehman Brothers and the sale of Merrill Lynch deepened worries about the U.S. economy.
Crude prices shed more than $5 a barrel and have now given up virtually all their gains for the year, extending a steep, two-month slide from record levels above $147 a barrel.
Oil's pullback also came as early signs suggested that Hurricane Ike delivered less damage than feared to the Gulf Coast energy oil and gas infrastructure. But pump prices jumped above $4 a gallon in parts of the country as a precautionary shutdown of Gulf refineries caused gasoline shortages.
The latest sell-off in oil began Sunday and accelerated Monday as traders digested a day of dramatic upheaval on Wall Street: Lehman Brothers Holdings Inc., a 158-year-old investment bank, filed for bankruptcy after failing to find a buyer and Merrill Lynch & Co. agreed to be bought out by Bank of America Corp.
Lehman, Merrill and other big institutional investors were major participants in the commodities boom of the past year, helping push the price of oil, precious metals and grains to historic highs until a slowing global economy helped bring a halt to the rally.
Analysts said investors feared that the upheaval in the financial sector could trigger another round of commodities liquidation — especially with Lehman likely to unwind its holdings. Other investors may also unload commodities, fearing that the deepening economic crisis will further reduce demand for energy and raw materials futures.
"I think this is giving the bulls further reason to exit the market," said Stephen Schork, an oil analyst and trader in Villanova, Pa., who said the pullback could reflect selling by Lehman or possibly a hedge fund struggling to raise capital. "When you see price drops of this size, it reeks of someone being in trouble."
Light, sweet crude for October delivery fell $5.47 to settle at $95.71 a barrel on the New York Mercantile Exchange — oil's first settlement under $100 since March 4. Earlier, prices dipped to $94.13, the lowest trading level in seven months. The sell-off gained momentum in aftermarket trading as prices fell more than $6.50.
Crude has fallen more than $50 — or 35 percent — from its all-time trading record of $147.27 reached July 11 as a global economic slowdown continues to weigh on demand for energy.
Other commodities traded mixed Monday, with energy futures down but gold, silver and most grains trading higher.
Investors were also awaiting damage assessments to Gulf energy infrastructure after Ike's passage.
U.S. officials said Sunday that Ike destroyed at least 10 oil and gas platforms and damaged pipelines in the Gulf of Mexico. But that represents only a small portion of the 3,800 production platforms in the Gulf and pales in comparison to the catastrophic damage to energy infrastructure doled out by Hurricanes Katrina and Rita three years ago.
"Fears of widespread refinery damage have been allayed considerably and a number of facilities are coming back up in a timely fashion," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
Still, power outages along the Gulf Coast were slowing efforts to restart some refineries. Meanwhile, virtually all oil production in the Gulf and about 94 percent of natural gas output remained shut-in Monday, according to the U.S. Minerals Management Service.
The shutdown of Gulf refineries sent wholesale gasoline prices spiking last week and pushed pump prices back above $4 a gallon in South Carolina, Alabama, Georgia and other states. Gasoline shortages were reported in Maryland, Virginia and North Carolina.
On Monday, a gallon of regular rose half a penny overnight to a new national average of $3.842 — up 16.7 cents from Friday, according to auto club AAA, the Oil Price Information Service and Wright Express.
Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J., said supply shortages caused by Ike and Hurricane Gustav should last at least another two weeks.
"That means we're looking at close to $4 a gallon for the rest of September," Kloza said. "People are going to observe more of this disconnect where retail prices move higher even though crude oil is trading below $100 a barrel."
Also adding to the selling pressure Monday was a slightly stronger dollar. A rising greenback encourages investors to unload commodities bought as a hedge against inflation or weakness in the U.S. currency.
Oil fell despite reports that militants have launched another attack Nigeria's oil infrastructure in a third day of violence.
In other Nymex trading, heating oil futures fell 14.79 cents to settle at $2.7912 a gallon, while gasoline prices dropped 20.82 cents to settle at $2.5614 a gallon. Natural gas for October delivery rose about a penny to settle at $7.374 per 1,000 cubic feet.
In London, October Brent crude fell $5.20 to settle at $92.38 a barrel on the ICE Futures exchange.
___
Associated Press Writers Louise Watt in London and Alex Kennedy in Singapore contributed to this report.
Copyright © 2008 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of The Associated Press.
Wednesday, August 27, 2008
Thursday, August 14, 2008
MAN
One of the more successful international trading companies is 3M. It is one of 30 companies in the Dow Jones Industrial Average and is also a component of the Standard & Poor's 500 Index. 3M’s sales for 2007 touched US$24.462 billion while its net income was US$4.096 billion. 3M used to be called Minnesota Mining and Minerals before its name was shortened to 3M.
3M’s success is in its training program. It is said to have the best training module for its salesmen and it is also said there is nothing a 3M salesman can’t sell. For example, the salesmen are taught, to successfully close a sale, you must sell to the MAN. MAN here means: Means, Authority and Need. The person making that decision to buy must have the means (money or budget), authority (power to make that decision to buy) and need (they require the item you are trying to sell). If one of these three ingredients is missing then you will never be able to close the sale.
So, if you are a salesman and you want to successfully close that sale, go look for the MAN. Only the person who has the three ingredients of the MAN will make, or be able to make, that decision whether to buy from you or not.
Raja Petra Kamarudin's 3M="Money Motivates Man (man as in humankind rather than gender description)". Yes, money is the greatest motivator of man. Nevertheless, there are also other motivators; sex and power. However, once you have money, then these others can come easily and naturally.
Ever wondered why wealth, power and sex always seem to come together? In fact, you can exchange one for the other. If you have money you can buy power or if you have power you can make money. And sex can also be used as a ‘commodity’ to ‘sell’ for money and power -- or, if you have money and/or power, you can buy sex easily.
3M’s success is in its training program. It is said to have the best training module for its salesmen and it is also said there is nothing a 3M salesman can’t sell. For example, the salesmen are taught, to successfully close a sale, you must sell to the MAN. MAN here means: Means, Authority and Need. The person making that decision to buy must have the means (money or budget), authority (power to make that decision to buy) and need (they require the item you are trying to sell). If one of these three ingredients is missing then you will never be able to close the sale.
So, if you are a salesman and you want to successfully close that sale, go look for the MAN. Only the person who has the three ingredients of the MAN will make, or be able to make, that decision whether to buy from you or not.
Raja Petra Kamarudin's 3M="Money Motivates Man (man as in humankind rather than gender description)". Yes, money is the greatest motivator of man. Nevertheless, there are also other motivators; sex and power. However, once you have money, then these others can come easily and naturally.
Ever wondered why wealth, power and sex always seem to come together? In fact, you can exchange one for the other. If you have money you can buy power or if you have power you can make money. And sex can also be used as a ‘commodity’ to ‘sell’ for money and power -- or, if you have money and/or power, you can buy sex easily.
Sunday, August 10, 2008
Commodities slowdown could last months, longer
Sunday August 10, 2008 MYT 9:15:09 AM
NEW YORK (AP): The commodities boom that just weeks ago looked unstoppable may have finally burned itself out.
Sudden plunges in the price of everything from crude to copper and cotton suggest commodities soared too high, too fast _ and analysts expect even steeper declines in the months ahead as the U.S. economic slowdown spreads overseas and saps demand for energy, construction supplies and consumer goods.
Though commodities could swing higher again if the U.S. economy bounces back or world oil supplies suddenly become scarce, experts consider neither scenario appears likely for several months or longer.
"The downward pace still has a way to go,'' said Edward Meir, senior commodities analyst at MF Global in New York. "People are now coming around to the fact that growth is slowing, both in the U.S. and overseas, so demand for commodities will decline.''
At least some of the falling prices in commodities trading pits are likely to filter back down to consumers. Lower oil prices make it cheaper to ship food around the globe, and ease the burden on consumers when they fill their gas tanks and heat their homes. Falling prices for corn and soybeans should also have some impact on what shoppers pay in the supermarket.
Highlighting the spiral, the Jefferies-Reuters CRB index, a global commodities benchmark, plunged 10 percent in July, its biggest monthly drop since 1980, when the U.S. was in a recession.
"There was a commodities bubble and it has burst,'' said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com.
The stark change in sentiment marks a stunning turnaround for the once-sizzling commodities sector, which only months ago seemed on a relentless march higher amid a global scramble for natural resources and a weak dollar that made them cheaper to overseas buyers. No longer.
In a sign of just how much the euphoria has faded, investors who thronged futures markets earlier this year seeking juicy, double-digit returns now can't sell gold, silver and cocoa futures fast enough. Gold, for example, is now selling for $864 an ounce _ down from a record of $1,038.60 an ounce on March 17 _ and lately has been falling $10 or more a day.
"Everybody is scrambling to get out of the ship before the guy next to them,'' said Nathan Golz, a commodities researcher at Wachovia Securities in St. Louis. "It's amazing how fast commodities have become the last place people want to have their money.''
Davide Accomazzo, managing director of trading at Los Angeles-based Cervino Capital Management, said his firm doesn't see good buying opportunities in commodities "for at least the next three to nine months.''
"The conditions just aren't right,'' said Accomazzo, whose firm trades options on metals, natural gas and soft commodities.
The downturn in commodities gained momentum after crude began tumbling last month, dragging down precious metals, grains and other commodities as traders raced to dump positions. Oil has lost about $32, or 21 percent, from its record high of $147.27 a barrel hit last month, as $4-a-gallon ($1.05 a liter) gasoline forced many Americans to abandon fuel-guzzling SUVs and skip vacations.
As the busy U.S. driving season enters its last month, oil market speculators have shifted their investment strategy and are now shorting crude _ or betting prices will fall _ for the first time in 17 months.
"It looks like the bulls have run out of ammo,'' said Stephen Schork, analyst and oil trader in Villanova, Pennsylvania. "With poor demand prospects ahead ... there's not a lot of reason to be buying commodities right now.''
And here's another reason: Many commodities investors who got burned buying into the rally just before it turned likely won't have the stomach to get back in anytime soon, analysts say.
"I don't see them with their scorched fingers coming back into the market. That money is gone for a while,'' said Cordier, who said a "herd mentality'' pushed a wave of first-time commodities investors into the market, including some large fund managers who had never experience a boom in futures prices.
So what could bring commodities back up? Analysts say the biggest factor is the ailing U.S. economy. If growth picks up, unemployment falls and consumers start spending again, demand for energy, building materials and other goods will increase, straining world supplies again.
"But we're not expecting that to happen for at least a few quarters,'' said Cordier.
China could also be a catalyst. The country has restricted driving and closed factories to reduce pollution during this month's Beijing Olympics, and some people expect a bump in demand for gasoline, coal and other material once the Games finish.
Others say the same thing that sparked the boom will likely spur its revival: Burgeoning population growth and rising income levels in developing countries that will eventually add to pressure on world supplies of food, fuel and other goods.
Jon Nadler, a precious metals analyst with Kitco Bullion Dealers Montreal, said commodities could be seeing a pause now, "but the question is how intense is it and how long will it last?''
"People haven't stopped multiplying, so at some point you'd expected prices to go up again,'' he said.
(C) 1995-2008 Star Publications (Malaysia) Bhd (Co No 10894-D)
NEW YORK (AP): The commodities boom that just weeks ago looked unstoppable may have finally burned itself out.
Sudden plunges in the price of everything from crude to copper and cotton suggest commodities soared too high, too fast _ and analysts expect even steeper declines in the months ahead as the U.S. economic slowdown spreads overseas and saps demand for energy, construction supplies and consumer goods.
Though commodities could swing higher again if the U.S. economy bounces back or world oil supplies suddenly become scarce, experts consider neither scenario appears likely for several months or longer.
"The downward pace still has a way to go,'' said Edward Meir, senior commodities analyst at MF Global in New York. "People are now coming around to the fact that growth is slowing, both in the U.S. and overseas, so demand for commodities will decline.''
At least some of the falling prices in commodities trading pits are likely to filter back down to consumers. Lower oil prices make it cheaper to ship food around the globe, and ease the burden on consumers when they fill their gas tanks and heat their homes. Falling prices for corn and soybeans should also have some impact on what shoppers pay in the supermarket.
Highlighting the spiral, the Jefferies-Reuters CRB index, a global commodities benchmark, plunged 10 percent in July, its biggest monthly drop since 1980, when the U.S. was in a recession.
"There was a commodities bubble and it has burst,'' said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com.
The stark change in sentiment marks a stunning turnaround for the once-sizzling commodities sector, which only months ago seemed on a relentless march higher amid a global scramble for natural resources and a weak dollar that made them cheaper to overseas buyers. No longer.
In a sign of just how much the euphoria has faded, investors who thronged futures markets earlier this year seeking juicy, double-digit returns now can't sell gold, silver and cocoa futures fast enough. Gold, for example, is now selling for $864 an ounce _ down from a record of $1,038.60 an ounce on March 17 _ and lately has been falling $10 or more a day.
"Everybody is scrambling to get out of the ship before the guy next to them,'' said Nathan Golz, a commodities researcher at Wachovia Securities in St. Louis. "It's amazing how fast commodities have become the last place people want to have their money.''
Davide Accomazzo, managing director of trading at Los Angeles-based Cervino Capital Management, said his firm doesn't see good buying opportunities in commodities "for at least the next three to nine months.''
"The conditions just aren't right,'' said Accomazzo, whose firm trades options on metals, natural gas and soft commodities.
The downturn in commodities gained momentum after crude began tumbling last month, dragging down precious metals, grains and other commodities as traders raced to dump positions. Oil has lost about $32, or 21 percent, from its record high of $147.27 a barrel hit last month, as $4-a-gallon ($1.05 a liter) gasoline forced many Americans to abandon fuel-guzzling SUVs and skip vacations.
As the busy U.S. driving season enters its last month, oil market speculators have shifted their investment strategy and are now shorting crude _ or betting prices will fall _ for the first time in 17 months.
"It looks like the bulls have run out of ammo,'' said Stephen Schork, analyst and oil trader in Villanova, Pennsylvania. "With poor demand prospects ahead ... there's not a lot of reason to be buying commodities right now.''
And here's another reason: Many commodities investors who got burned buying into the rally just before it turned likely won't have the stomach to get back in anytime soon, analysts say.
"I don't see them with their scorched fingers coming back into the market. That money is gone for a while,'' said Cordier, who said a "herd mentality'' pushed a wave of first-time commodities investors into the market, including some large fund managers who had never experience a boom in futures prices.
So what could bring commodities back up? Analysts say the biggest factor is the ailing U.S. economy. If growth picks up, unemployment falls and consumers start spending again, demand for energy, building materials and other goods will increase, straining world supplies again.
"But we're not expecting that to happen for at least a few quarters,'' said Cordier.
China could also be a catalyst. The country has restricted driving and closed factories to reduce pollution during this month's Beijing Olympics, and some people expect a bump in demand for gasoline, coal and other material once the Games finish.
Others say the same thing that sparked the boom will likely spur its revival: Burgeoning population growth and rising income levels in developing countries that will eventually add to pressure on world supplies of food, fuel and other goods.
Jon Nadler, a precious metals analyst with Kitco Bullion Dealers Montreal, said commodities could be seeing a pause now, "but the question is how intense is it and how long will it last?''
"People haven't stopped multiplying, so at some point you'd expected prices to go up again,'' he said.
(C) 1995-2008 Star Publications (Malaysia) Bhd (Co No 10894-D)
Wednesday, August 6, 2008
Oil Drops To US$118 Today
This eventful day has been fulfilled! Note my previous post (http://life-exchange.blogspot.com/2008/07/is-oil-coming-down.html ) that oil will dropped to this level.
Oil falls as low as $118 on demand concerns
By MADLEN READ, AP Business WriterTue Aug 5, 4:24 PM ET
Oil traders sent crude prices tumbling as low as $118 a barrel Tuesday on the growing belief that a U.S. economic slowdown and high energy costs are curbing consumer demand for gasoline and other petroleum products.
Crude oil finished the day just above $119 a barrel — its lowest settlement price since early May.
Crude's decline is giving Americans more relief at the pump. A gallon of regular gasoline on average fell another penny overnight to $3.871, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas prices have fallen four straight weeks for the first time since December; prices are off 5.9 percent from their July high as U.S. motorists cut back on their driving to save money.
A day after plunging as much as $5 a barrel in a dramatic sell-off, crude continued its downward trend. Gasoline and heating oil prices also fell, while natural gas ended unchanged after Monday's steep drop.
Light, sweet crude for September delivery fell $2.24 to settle at $119.17 a barrel on the New York Mercantile Exchange, the lowest close since May 2. During trading, the contract dipped to $118 — nearly $30 below the trading high of $147.27 reached July 11.
"The market psychology has finally shifted," said Stephen Schork, an analyst and trader in Villanova, Pa., adding that "$4-a-gallon gasoline has clearly killed demand."
Some analysts say oil has the potential to jump back up.
There are many factors that could keep oil from descending further, said Mike Fitzpatrick, vice president of energy and risk management at MF Global LLC. Those include political tensions in Nigeria and the Middle East, the potential for a big hurricane along the Gulf Coast, and global demand that is still growing — just not at the same pace that it had been.
"Even if it seems as though China's economic demand run has slowed some, those changes at the margins still make them a huge consumer of crude products," Fitzpatrick said.
Still, the Federal Reserve, which issued an economic assessment statement along with its decision to keep interest rates stable, said that along with tight credit and the housing contraction, "elevated energy prices are likely to weigh on economic growth over the next few quarters."
The dollar's six-week highs against the euro also contributed to oil's decline Tuesday. The euro fell to $1.5464 from the $1.5587 it bought late in New York trading Monday, making oil and other commodities less attractive to investors seeking a hedge against inflation and dollar weakness.
Natural gas futures finished unchanged at $8.726 per 1,000 cubic feet, after swinging into positive and negative territory during trading. On Monday, natural gas plunged 66.3 cents, or 7 percent, to $8.726 per 1,000 cubic feet, its lowest level in nearly six months. Prices have closed lower in eight of the last 11 sessions and dropped 36 percent from the contract's all-time trading high of $13.752, reached July 2.
The pullback is double the size of crude's recent slide. That has fed speculation on Wall Street that a large hedge fund or something like it may be near collapse and has dumped a vast amount of natural gas contracts to free up cash. Last month, SemGroup LP, based in Tulsa, Okla., folded after losing $2.4 billion in bad bets on oil futures. SemGroup's collapse came amid a massive sell off in the oil market.
"Anytime you get that kind of violent price action in a short amount of time, it reeks of someone big being in trouble," Schork said.
Investors on Tuesday ignored continued tension over Iran's nuclear program. Representatives of the five permanent members of the U.N. Security Council and Germany agreed Monday to seek new sanctions against Iran after the country failed to meet a weekend deadline to respond to an offer intended to defuse the dispute, State Department spokesman Gonzalo Gallegos said.
In other Nymex trading, heating oil futures fell 6.81 cents to settle at $3.2820 a gallon, while gasoline prices dropped 4.38 cents to settle at $2.9564 a gallon.
In London, September Brent crude fell $2.98 to settle at $117.70 a barrel.
___
Associated Press writers Stevenson Jacobs in New York, Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.
Oil falls as low as $118 on demand concerns
By MADLEN READ, AP Business WriterTue Aug 5, 4:24 PM ET
Oil traders sent crude prices tumbling as low as $118 a barrel Tuesday on the growing belief that a U.S. economic slowdown and high energy costs are curbing consumer demand for gasoline and other petroleum products.
Crude oil finished the day just above $119 a barrel — its lowest settlement price since early May.
Crude's decline is giving Americans more relief at the pump. A gallon of regular gasoline on average fell another penny overnight to $3.871, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas prices have fallen four straight weeks for the first time since December; prices are off 5.9 percent from their July high as U.S. motorists cut back on their driving to save money.
A day after plunging as much as $5 a barrel in a dramatic sell-off, crude continued its downward trend. Gasoline and heating oil prices also fell, while natural gas ended unchanged after Monday's steep drop.
Light, sweet crude for September delivery fell $2.24 to settle at $119.17 a barrel on the New York Mercantile Exchange, the lowest close since May 2. During trading, the contract dipped to $118 — nearly $30 below the trading high of $147.27 reached July 11.
"The market psychology has finally shifted," said Stephen Schork, an analyst and trader in Villanova, Pa., adding that "$4-a-gallon gasoline has clearly killed demand."
Some analysts say oil has the potential to jump back up.
There are many factors that could keep oil from descending further, said Mike Fitzpatrick, vice president of energy and risk management at MF Global LLC. Those include political tensions in Nigeria and the Middle East, the potential for a big hurricane along the Gulf Coast, and global demand that is still growing — just not at the same pace that it had been.
"Even if it seems as though China's economic demand run has slowed some, those changes at the margins still make them a huge consumer of crude products," Fitzpatrick said.
Still, the Federal Reserve, which issued an economic assessment statement along with its decision to keep interest rates stable, said that along with tight credit and the housing contraction, "elevated energy prices are likely to weigh on economic growth over the next few quarters."
The dollar's six-week highs against the euro also contributed to oil's decline Tuesday. The euro fell to $1.5464 from the $1.5587 it bought late in New York trading Monday, making oil and other commodities less attractive to investors seeking a hedge against inflation and dollar weakness.
Natural gas futures finished unchanged at $8.726 per 1,000 cubic feet, after swinging into positive and negative territory during trading. On Monday, natural gas plunged 66.3 cents, or 7 percent, to $8.726 per 1,000 cubic feet, its lowest level in nearly six months. Prices have closed lower in eight of the last 11 sessions and dropped 36 percent from the contract's all-time trading high of $13.752, reached July 2.
The pullback is double the size of crude's recent slide. That has fed speculation on Wall Street that a large hedge fund or something like it may be near collapse and has dumped a vast amount of natural gas contracts to free up cash. Last month, SemGroup LP, based in Tulsa, Okla., folded after losing $2.4 billion in bad bets on oil futures. SemGroup's collapse came amid a massive sell off in the oil market.
"Anytime you get that kind of violent price action in a short amount of time, it reeks of someone big being in trouble," Schork said.
Investors on Tuesday ignored continued tension over Iran's nuclear program. Representatives of the five permanent members of the U.N. Security Council and Germany agreed Monday to seek new sanctions against Iran after the country failed to meet a weekend deadline to respond to an offer intended to defuse the dispute, State Department spokesman Gonzalo Gallegos said.
In other Nymex trading, heating oil futures fell 6.81 cents to settle at $3.2820 a gallon, while gasoline prices dropped 4.38 cents to settle at $2.9564 a gallon.
In London, September Brent crude fell $2.98 to settle at $117.70 a barrel.
___
Associated Press writers Stevenson Jacobs in New York, Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.
Tuesday, August 5, 2008
CRB Commodity Index Caps Biggest One-Day Decline Since March
Tuesday, 05 August 2008 12:32
(Bloomberg) -- Plunging prices for cocoa, natural gas and sugar sent the Reuters/Jefferies CRB Index of 19 commodities to its biggest one-day decline since March.
The CRB index fell 3.4 percent to 401.98, which marks the largest slide since March 19. The gauge dropped to the lowest level since May 2 today, as did the UBS-Bloomberg Constant Maturity Commodity Index.The CRB slid 10 percent in July, the most in any month since March 1980, when the U.S. economy was in a recession. A worsening global growth outlook and prospects for increased supply sent raw materials such as crude oil, soybeans and gasoline tumbling from records in the past month.``Speculation had been driving these markets and they were due for a correction as so many prices had gotten overdone,'' said Peter Sorrentino, who helps manage $16.7 billion at Huntington Asset Advisors in Cincinnati. ``There are moderating growth expectations that are going to hurt industrial commodities. Going forward, you have to be very selective.
Cocoa was today's biggest loser, dropping as much as 9.5 percent to a six-month low of $2,712 a metric ton on ICE Futures U.S., the former New York Board of Trade. Natural gas fell as much as 8.3 percent to $8.616 per million British thermal units on the New York Mercantile Exchange, and sugar was down as much as 6.5 percent to 13.21 cents a pound on ICE Futures.Economy SlowsThe U.S. economy shrank at the end of the 2007 and grew less than forecast in this year's second quarter, signaling that the country is in worse shape than investors had anticipated, the Commerce Department said last week. Manufacturing in China, the world's fastest-growing major economy, contracted in July for the first time since a survey began in 2005.Slowing global growth will mean ``there won't be a tide to lift prices,'' Sorrentino said. ``Before, you could look at commodities and buy across the board. Now, you have to be much more nimble.''The CRB posted its best first half in 35 years, gaining 29 percent in the first six months of 2008 as investors stocked up on raw materials as an alternative to stocks and bonds and as a hedge against the weakening dollar.
Commodities are at the beginning of a long-term bear market,'' after rallying the past seven years, Michael Aronstein, chief investment strategist at Oscar Gruss & Son Inc. in New York, said last week.Aronstein correctly said in June that prices for raw materials would start to decline. The CRB index has lost 13 percent since June 30.Oil, Copper, GoldCrude oil lost as much as 4.5 percent to $119.50 a barrel on the Nymex, the first drop below $120 since May, amid speculation that Tropical Storm Eduoard won't cause disruption to most offshore oil facilities as it approaches the coast of Texas.
"Crude is leading everything down,'' said Hector Galvan, a senior market strategist for RJO Futures in Chicago. People have that fear of not wanting to be the last one on the boat -- it's `abandon ship' for the short-term.
Copper tumbled as much as 4.3 percent to $3.426 a pound on the Comex division of the Nymex, the lowest price since Feb. 8. Inventories monitored by the London Metal Exchange reached the highest level since February. Aluminum, nickel and other industrial metals also fell. Platinum capped the biggest two-day decline in 22 years.Falling prices may hurt profit for producers including BHP Billiton Ltd., the world's biggest diversified mining company, and Anglo Platinum Ltd., the world's largest producer of the metal. The Bloomberg World Mining Index of 139 companies tumbled 13 percent in July. The gauge lost as much as 4 percent today.Grain SlumpCorn and soybeans both fell more than 5 percent, dropping as much as the daily limit allowed on the Chicago Board of Trade, as favorable weather may boost the crops.The grains may continue to fall as demand from China, India and other emerging economies slows, said Daryll Ray, the director of the Agricultural Policy Analysis Center at the University of Tennessee in Knoxville.
There has been much more optimism about China and India and the export market than facts support,'' Ray said. Prices may fall through 2009, he said.Gold, wheat, coffee and orange juice also declined. Hogs were the only commodity monitored by the CRB to gain today.
(Bloomberg) -- Plunging prices for cocoa, natural gas and sugar sent the Reuters/Jefferies CRB Index of 19 commodities to its biggest one-day decline since March.
The CRB index fell 3.4 percent to 401.98, which marks the largest slide since March 19. The gauge dropped to the lowest level since May 2 today, as did the UBS-Bloomberg Constant Maturity Commodity Index.The CRB slid 10 percent in July, the most in any month since March 1980, when the U.S. economy was in a recession. A worsening global growth outlook and prospects for increased supply sent raw materials such as crude oil, soybeans and gasoline tumbling from records in the past month.``Speculation had been driving these markets and they were due for a correction as so many prices had gotten overdone,'' said Peter Sorrentino, who helps manage $16.7 billion at Huntington Asset Advisors in Cincinnati. ``There are moderating growth expectations that are going to hurt industrial commodities. Going forward, you have to be very selective.
Cocoa was today's biggest loser, dropping as much as 9.5 percent to a six-month low of $2,712 a metric ton on ICE Futures U.S., the former New York Board of Trade. Natural gas fell as much as 8.3 percent to $8.616 per million British thermal units on the New York Mercantile Exchange, and sugar was down as much as 6.5 percent to 13.21 cents a pound on ICE Futures.Economy SlowsThe U.S. economy shrank at the end of the 2007 and grew less than forecast in this year's second quarter, signaling that the country is in worse shape than investors had anticipated, the Commerce Department said last week. Manufacturing in China, the world's fastest-growing major economy, contracted in July for the first time since a survey began in 2005.Slowing global growth will mean ``there won't be a tide to lift prices,'' Sorrentino said. ``Before, you could look at commodities and buy across the board. Now, you have to be much more nimble.''The CRB posted its best first half in 35 years, gaining 29 percent in the first six months of 2008 as investors stocked up on raw materials as an alternative to stocks and bonds and as a hedge against the weakening dollar.
Commodities are at the beginning of a long-term bear market,'' after rallying the past seven years, Michael Aronstein, chief investment strategist at Oscar Gruss & Son Inc. in New York, said last week.Aronstein correctly said in June that prices for raw materials would start to decline. The CRB index has lost 13 percent since June 30.Oil, Copper, GoldCrude oil lost as much as 4.5 percent to $119.50 a barrel on the Nymex, the first drop below $120 since May, amid speculation that Tropical Storm Eduoard won't cause disruption to most offshore oil facilities as it approaches the coast of Texas.
"Crude is leading everything down,'' said Hector Galvan, a senior market strategist for RJO Futures in Chicago. People have that fear of not wanting to be the last one on the boat -- it's `abandon ship' for the short-term.
Copper tumbled as much as 4.3 percent to $3.426 a pound on the Comex division of the Nymex, the lowest price since Feb. 8. Inventories monitored by the London Metal Exchange reached the highest level since February. Aluminum, nickel and other industrial metals also fell. Platinum capped the biggest two-day decline in 22 years.Falling prices may hurt profit for producers including BHP Billiton Ltd., the world's biggest diversified mining company, and Anglo Platinum Ltd., the world's largest producer of the metal. The Bloomberg World Mining Index of 139 companies tumbled 13 percent in July. The gauge lost as much as 4 percent today.Grain SlumpCorn and soybeans both fell more than 5 percent, dropping as much as the daily limit allowed on the Chicago Board of Trade, as favorable weather may boost the crops.The grains may continue to fall as demand from China, India and other emerging economies slows, said Daryll Ray, the director of the Agricultural Policy Analysis Center at the University of Tennessee in Knoxville.
There has been much more optimism about China and India and the export market than facts support,'' Ray said. Prices may fall through 2009, he said.Gold, wheat, coffee and orange juice also declined. Hogs were the only commodity monitored by the CRB to gain today.
Thursday, July 31, 2008
Oil jumps more than $4 after gasoline stock draw
Wed Jul 30, 3:38 PM ET
NEW YORK (Reuters) - Oil rose more than $4 a barrel on Wednesday after U.S. government data showed an unexpected drop in gasoline stocks as suppliers facing weak consumer demand cut production and imports.
U.S. crude settled up $4.58 at $126.77 a barrel after falling to $120.42 on Tuesday, the lowest level since May 6.
But energy market analysts offered mixed views on whether prices would swing back toward record levels above $147 a barrel hit earlier this month or if Wednesday's big rally was just a temporary bump.
NEW YORK (Reuters) - Oil rose more than $4 a barrel on Wednesday after U.S. government data showed an unexpected drop in gasoline stocks as suppliers facing weak consumer demand cut production and imports.
U.S. crude settled up $4.58 at $126.77 a barrel after falling to $120.42 on Tuesday, the lowest level since May 6.
But energy market analysts offered mixed views on whether prices would swing back toward record levels above $147 a barrel hit earlier this month or if Wednesday's big rally was just a temporary bump.
Friday, July 18, 2008
OIL, Commodities & Stock To Tumble
Below is a news report at the Star Online confirming what I said in my Blog for the last 2 days:
Friday July 18, 2008 MYT 1:19:04 PM
KLCI stumbles, plantations slide at midday
By JOSEPH CHIN
KUALA LUMPUR: The fall in crude oil and crude palm oil futures dragged plantation stocks into the red and the losses pushed the 100-stock KL Composite Index into the negative zone in the morning session Friday.
The KLCI was the second worst performer among all the major Asian markets after Taiwan, as Malaysia was also weighed down by domestic issues including the political developments.
At 12.30pm, the KLCI had fallen 15.57 points to 1,105.6. Turnover was 166.41 million shares valued at RM451.2mil. There were 106 gainers, 352 losers while 194 counters were unchanged.
Taiwan’s Weighted Index fell 103.42 points or 1.48% to 6,871.09, Singapore’s Straits Times Index fell 1% to 2,835.53, Japan’s Nikkei 225 0.55% lower at 12,817.47, Hong Kong’s Hang Seng Index 0.12% lower at 21,709.52 but Shanghai’s A Share Index bucked the trend to rise 0.28% to 2,823.92.
Crude oil fell to US$130 per barrel while crude palm oil futures skidded RM70 to RM3,365 per tonne.
Plantation stocks led the losers’ list with KL Kepong falling RM1.20 to RM14, Batu Kawan 50 sen to RM9.25, Sime Darby and Asiatic declined 40 sen each to RM7.70 and RM6.35, Kulim 35 sen to RM7.95 and Kulim-WB 40 sen to RM5.60.
IOI Corp was the most active with 14.94 million shares done and it tumbled 50 sen to RM5.60.
Telekom rose six sen to RM3.40, Resorts four sen to RM2.57 and AirAsia two sen to 91.5 sen in active trade. Maybank rose 10 sen to RM7.0 while BAT added 25 sen to RM41.50.
Friday July 18, 2008 MYT 1:19:04 PM
KLCI stumbles, plantations slide at midday
By JOSEPH CHIN
KUALA LUMPUR: The fall in crude oil and crude palm oil futures dragged plantation stocks into the red and the losses pushed the 100-stock KL Composite Index into the negative zone in the morning session Friday.
The KLCI was the second worst performer among all the major Asian markets after Taiwan, as Malaysia was also weighed down by domestic issues including the political developments.
At 12.30pm, the KLCI had fallen 15.57 points to 1,105.6. Turnover was 166.41 million shares valued at RM451.2mil. There were 106 gainers, 352 losers while 194 counters were unchanged.
Taiwan’s Weighted Index fell 103.42 points or 1.48% to 6,871.09, Singapore’s Straits Times Index fell 1% to 2,835.53, Japan’s Nikkei 225 0.55% lower at 12,817.47, Hong Kong’s Hang Seng Index 0.12% lower at 21,709.52 but Shanghai’s A Share Index bucked the trend to rise 0.28% to 2,823.92.
Crude oil fell to US$130 per barrel while crude palm oil futures skidded RM70 to RM3,365 per tonne.
Plantation stocks led the losers’ list with KL Kepong falling RM1.20 to RM14, Batu Kawan 50 sen to RM9.25, Sime Darby and Asiatic declined 40 sen each to RM7.70 and RM6.35, Kulim 35 sen to RM7.95 and Kulim-WB 40 sen to RM5.60.
IOI Corp was the most active with 14.94 million shares done and it tumbled 50 sen to RM5.60.
Telekom rose six sen to RM3.40, Resorts four sen to RM2.57 and AirAsia two sen to 91.5 sen in active trade. Maybank rose 10 sen to RM7.0 while BAT added 25 sen to RM41.50.
Thursday, July 17, 2008
Impact Of Inflation On Kuala Lumpur Real Estates
Oil Has Indeed Falls Below US$135 Today. I expect oil and commodities prices to fall continuously. As mentioned yesterday, oil may stage a rebound To US$160/barrel after falling to US$118/barrel. This is the economic cycle where bond & stocks will also be drag down due to inflation worries.
Inflation will prevail, causing economic downturn. Jobs loss will increase. Due to high margin of financing given by banks during the last fews years and considering property value has not appreciate much, bankers will panic to execute forecloser for residential properties for location out of the 20km radius from KL, especially for those pricing below RM300k.
As spare production capacity is high and income of the average or poor are greatly reduced, both office space, industrial and retailing outlet will also be affected not with standing where these are located .
As most of the residential properties sold during the last 4 years are mainly for own-use, prices for residential within the 20km city radius will hold or soften slightly, with some forecloser by banks giving great bargains. It will be a scenario where property price won't drop much in this location, but with occassional good bargains from banks' auctions. However, properties below RM300k will be slow to dispose (if no good bargains is offered), especially financing from bank will be tightened with buyer having to cough high initial deposit. As for high-end properties within this location, selling will be easier with lots of good bargains as buyer in this category remains afordable.
Developers will face challenging times. They really need innovative building designs plus value-for-money package to capture buyers' hearts. And this policy is good only with branded developers, as fear of non-delivery by less known developer will rings in the minds of buyer.
If the economic down turn is a long one, it may change permanently the lifestlye of the mass population. This means also change in the way we live and work. This dictates changes in housing design, community concept, etc that may result in the house currently we stay being out of date and hence drop in demand and value by the time recession is over.
So What Now? Hold Or Sell Or Buy?
Inflation will prevail, causing economic downturn. Jobs loss will increase. Due to high margin of financing given by banks during the last fews years and considering property value has not appreciate much, bankers will panic to execute forecloser for residential properties for location out of the 20km radius from KL, especially for those pricing below RM300k.
As spare production capacity is high and income of the average or poor are greatly reduced, both office space, industrial and retailing outlet will also be affected not with standing where these are located .
As most of the residential properties sold during the last 4 years are mainly for own-use, prices for residential within the 20km city radius will hold or soften slightly, with some forecloser by banks giving great bargains. It will be a scenario where property price won't drop much in this location, but with occassional good bargains from banks' auctions. However, properties below RM300k will be slow to dispose (if no good bargains is offered), especially financing from bank will be tightened with buyer having to cough high initial deposit. As for high-end properties within this location, selling will be easier with lots of good bargains as buyer in this category remains afordable.
Developers will face challenging times. They really need innovative building designs plus value-for-money package to capture buyers' hearts. And this policy is good only with branded developers, as fear of non-delivery by less known developer will rings in the minds of buyer.
If the economic down turn is a long one, it may change permanently the lifestlye of the mass population. This means also change in the way we live and work. This dictates changes in housing design, community concept, etc that may result in the house currently we stay being out of date and hence drop in demand and value by the time recession is over.
So What Now? Hold Or Sell Or Buy?
Wednesday, July 16, 2008
Is Oil Coming Down?
I have been expecting oil price to come down since June 15 when it was only about US$138, but instead it short up to new heights to US$149 in July. Now looks like this expectation is coming true. The last few days oil price slide more than moving upward. If it falls below US$135 the next few days, it will be on its way down to US$118, then it may move to US$160 by early next year.
It is indeed difficult time for us here in Malaysia, especially politically. I am real fed-up, just wish the politicians thinks and work more for the citizens than just whacking like ducks. Blessed with many resources, we should be able to make it even the world is at it worst .... provided the right government is in place.
With oil price moving up for long term, one thing for sure, lifestyle need a change to basic. Basic? Say is easy but must try. Like to comment on living a basis lifestyle? Suggest some ways!
It is indeed difficult time for us here in Malaysia, especially politically. I am real fed-up, just wish the politicians thinks and work more for the citizens than just whacking like ducks. Blessed with many resources, we should be able to make it even the world is at it worst .... provided the right government is in place.
With oil price moving up for long term, one thing for sure, lifestyle need a change to basic. Basic? Say is easy but must try. Like to comment on living a basis lifestyle? Suggest some ways!
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