New Game

J suggested that we should have a game of analyzing annual reports to identify trading ideas, instead of wasting our idle time on Boggle and Scrabble. I don't know how he would think that is as fun as Boggle and Scrabble for him, especially he is always winning at the two games.
He also wanted to steer my attention from the property market, which I had a larger exposure than to the stock market.
I don't think he would succeed.
My current exposure to stock market is only 23 percent of what I have in properties. No little game will distract when I have too much at stake and entire early retirement plan is dependent on how long the U.S. Subprime will roil the markets.
In this bloodshed, my property investment is still holding up well. My equity investment (bonds are only for accredited investors: I don't have US$2 million of assets yet.) has lost 10 percent of its value. I have liquidity risk in one, and mark to market risk in the other. In a volatile market, I am most affected by the mark-to-market risk. With leverage, that mark-to-market risk is damaging my cash flows. But, I am not making provisions in my P/L statement as yet.
Is there a bubble?
Someone said that the boom has just begun. It can't end that soon.
Asia's equity market has been rising for the last 3.5 years. But, other emerging markets have done better. MSCI rose 128 percent since end of 2003. Latin America and Eastern Europe rose 289 percent and 212 percent so far.
Potential for more growth? Let's wait and see. But my eyes are roving.

Those Lizards!

N said that the world is controlled by a group of lizards and I half believe
him. At least I believe that a group of people is manipulating the world and
shaping the world the way they want it. I am seeing it in the financial markets
I am close to.

And these lizards are more powerful than the central banks, which have access to
liberal use of their countries' foreign reserves to assuage problems within the
markets that could degenerate into a recession.

If not, I can't explain why all the banks worldwide overnight decided in
concerto that they didn't want to lend any more short-term money, causing the
overnight rates to soar to the highest in six years. Rates jumped while
Singaporeans were busy celebrating their little country's independence day, not
they have much to celebrate about. There was no freedom from slavery or
something significant, unless they considered association with our biggerbrother across the causeway a bondage worse than slavery.

European Central Bank pumped in $130 billion and it said it would provide
unlimited cash as banks decided to retreat from short-term money markets. Bank
of Japan followed, injecting the financial system with 1 trillion yen ($8.5
billion) and delay raising its 0.5 percent overnight rate, the lowest among
major economies. The Federal Reserve added $24 billion in temporary reserves.
Australia's central bank loaned A$4.95 billion, the most since at least January
2003.

Shares fell, bond risk increased. The most powerful bank with their cash
couldn't move or shake the markets. What did? Lending 100 percent of the home
value, not verifying borrowers' income and lower credit scores did. It wiped out
1.3 trillion from the stock markets alone.

The world moved, ignoring Ben Bernanke's assurance that the U.S. subprime
mortgage defaults won't hurt economic grow. Now the Fed rate is trading at 5.5
percent, higher that the Fed target of 5.25 percent. For once, after Alan
Greenspan, the world did not stop to hear Bernanke's breathe. After all, he said
in March that he didn't see any spillover of defaults into safer mortgages. It
more than did that. It is everywhere.

Bernanke's wrong. Henry Paulson's wrong. The $2 trillion market for
mortgages is seriously contagious.

The credit rout spreads to other mortgages, to other securities, to Europe,
to Asia, to poor little Vietnam, which is still trying to grow and has so much
potential. It spreads sending Vietnam's debt cost soaring by 20 percent compared
with the 1.41 percentage points in the beginning of this year.


We still have, after all these, about $900 billion of the riskiest subprime
loans in the U.S. If these people fail to pay their interests due this year and
next, we are in deep, deep trouble. The lizards are laughing. You hear them?

And last of all, I know Mahathir is not part of the lizard clan.