Sydney Confidential

I will be making a quick trip to Sydney, flying off tonight. It was kinda last minute as I had not planned to do so. However, my closest auntie just had a minor operation so I thought it was best to make the trip with the stretch of holidays this coming week. 

I used to go to Sydney every year but haven't been doing so as my last trip was some 3 years ago. The majority of my relatives are in Sydney and most do come back to visit anyway. 

Another reason to get away was that I can sense too many things happening around me all at once, most of them good stuff. Its good to get away and stand back and refresh, to look at things anew. Things couldn't be better at Murasaki ts, while its hectic, and while waiting for the office to be fully renovated, its my last chance to get away for sometime as I will be pouring myself back into the mix later on.

I thought I will try to do a travel blog for the next 7 days for this trip, see whether I can cut it as a travel blogger for a change. I kinda know Sydney very well as I was driving a taxi during my university days, all in I studied and worked there for almost 10 years. 

Yes, the first question everyone ask when I say that is why did I come back. I was too young and while I love Sydney, its not my backyard. I like the transparent and incisive newspapers, but most of the news articles were not about the people I really cared about. Maybe in my naive ways, I wanted to see what I can do for my country. 

Realistically, the bulk of the businesses in developed countries like Australia belonged to the big corporations. It is not entrepreneurial enough. In Malaysia, you can come up with a good idea and find funding relatively easily. Heck, you may even get to have an appointment with the CEO of most top 100 companies in Malaysia after just one or two layers of contact and networking, something you cannot possibly dream of doing in Australia.

So, in my rush, I packed packs of heong paeng (from Ipoh) and two packs of freshly ground almond powder. Its my second time bringing over the powder, I always like the look on the faces of the Customs and Immigration officers when I show them the packets of powder, so blatant, looking so much like cocaine...lol.

Why AES Should Be Halted

Getting to the Bottom of the Automatic Enrichment Scandal (AES)

by Koon Yew Yin

Slowly but surely, the ugly side of the AES is emerging and revealing itself to be yet another scam of the Barisan regime.  This one aimed at enrichment of a small group has been cleverly camouflaged in the name of public interest.

Fortunately, this time around the scope for undeserved enrichment is so overwhelming and the disregard for prudent principles of transparency and accountability so obvious that even some UMNO leaders are protesting.  These late protestors from Barisan are way behind the curve on the issue and are jumping on the bandwagon of opposition political and public protest to prevent damage to their own election prospects but it is an indicator of how unacceptable the current AES proposal is.   

I predict that the AES will be dead in the water before long.  But it is important that any suspension or abandonment of the system does not prevent the authorities and the public from having a full and open inquiry on how this particular scam has managed to get through all the responsible authorities, including the cabinet at the highest level. 

Such an inquiry is necessary to ensure that the full truth comes out, lessons are learnt and an appropriate speed deterrent system is implemented – a system that is not riddled with weaknesses and drawbacks, and does not enrich a few at the expense of the public.     

Who are responsible for the debacle?

Poor Minster of Transport, Kong Cho Ha must be having sleepless nights trying to defend the indefensible.  And he must be kicking himself for foolishly putting his job on the line in repeatedly pushing for the implementation of the system.

It is likely that Kong will be made the scapegoat for this debacle. But let us not forget that this scam was cooked up some time ago. Various other crooks, sorry - slip of the finger, I mean cooks – as yet unnamed – were involved in the preparation of this billion dollar dish.  According to federal estimates for the budget year 2013, the government expects an additional RM1.02 billion in revenue from AES enforcement – all this coming from the Malaysian road user.

The origins of the outsourcing of speed cameras and speeding tickets go back to the Abdullah Badawi administration – possibly during Dr. Ling Liong Sik’s time as Minister of Transport.  Apparently, despite objections from some ministers who argued that enforcement should remain within the government’s domain, the project was pushed through by the Transport Ministry during Chan Kong Choy’s tenure. 

After 5 years as the Transport Minister, Chan stepped down officially due to health reasons in the midst of the RM4.6 billion Port Klang Free Zone scandal. Following Kong Choy’s resignation, Ong Tee Keat was at the helm of the ministry, and the project was finalized during his time. Since Tee Keat has been dubbed Mr. Clean by his MCA supporters, he should come clean on the AES and provide an explanation on his role in it and answer the questions raised.

 

Why so much outrage?

Firstly, there is more than a strong whiff of cronyism about the project and the way in which it has been privatized which runs against principles of responsible government and common sense.

Allegations have been made that Ates Sdn Bhd and Beta Tegap Sdn Bhd which have been awarded the contract have strong political connections.  According to PKR assemblyman Chang Lih Kang, the major shareholder of Beta Tegap Sdn Bhd is the niece of a Johor Umno assemblyman and comes from a family of "renowned Umno political figures" whose parents were previously elected to the state legislative assembly.           

"With the extraordinary connection between the largest shareholder of Beta Tegap and Umno, another instance of sheer cronyism is evident. If this is not cronyism, how on earth does the government deem a dormant company without expertise in the related field is worth rewarding a lucrative AES contract?"  Chang asked at a recent press conference.

Secondly, the system comes embedded with an extremely lucrative revenue sharing arrangement to benefit the project concessionaires.  According to reports, the two companies can claim between RM600 million to RM800 million for the services and the equipment involved in installing 831 cameras in traffic hotspots nation-wide.

This disclosure has infuriated members of the public who strongly support road safety but are concerned at the opaqueness of the implementation process and are suspicious that the main purpose appears to be to benefit various cronies.

Claim for AES Compensation Coming Up Next

The two firms awarded the contract to implement the enforcement system claim to have spent between RM300 million and RM400 million each to set up and operate the system.  If the system is to be abandoned, they will insist on being compensated for their expenses to date. 

But how believable are their estimates of expenditure?   One skeptic has worked out in great detail the expenses involved in the establishment of the AES.  According to him a total of $24 million would be more than adequate in setting up the company, main office, staffing , maintenance and vehicles; establishing a roving maintenance team at 8 locations; setting up the server, monitoring and control system; and purchasing cameras for one year’s operation (see http://unofficialversion.wordpress.com/ for the full breakdown ) 

As a long time engineer and business man, I find the breakdown of expenses provided by the skeptic credible and believable and the concessionaires’ estimates incredible and unbelievable. 

Should Compensation be Paid

We can be sure that the two companies will have insisted on full compensation clauses built into the contract should the Government back out. They will have the paper evidence to show that they have spent hundreds of millions in setting up the system.  

So it looks like either way – whether the AES is implemented or not - the two companies could be laughing all the way to the bank with their bloated claims.

There is only one way to stop this daylight robbery.  This is for the Malaysian public to kick up the biggest fuss possible and to demand that the full truth of the Automatic Enrichment Scandal - including its real costs – emerge before any compensation is to be paid.      

Monday Musings.

Very soon the uncertainty as to who will guide America to bankruptcy will be over.  Some pundits are calling for a win for Romney and in the support of their prediction, they are showing the strength of the sectors which are supposed to be Republican friendly.  I suppose there is confirmation bias everywhere. I am sure Democrats are seeing signs of their victory as well. Irrespective of whoever wins, the market’s path has already been defined. If I may draw your attention to the fact that despite the sell- off of last Friday, the lows of September 26^th is still intact. SPX cash is grinding up and will most likely continue to grind up for till Op.Ex.

While we have an initial sell signal (not confirmed) the indices are oversold on s short term basis and odds are high that we will see a bounce.  We do not have a negative divergence yet for calling the top but we are coming close. The following chart shows the SPX position short term.

(H/T Lance Roberts).

Another 50-60 points melt up in the next 7-10 trading sessions are quite likely and possible but I am not risking my money to chase it.

NYSE Bullish Percent Index is showing a topping pattern.

As you can see, it takes time for this divergence to play out and therefore do not expect indices to roll over tomorrow. But warning signs are there.

While I am expecting a correction, I am not looking for the end of the world here, not yet. I expect a correction in the magnitude of 15%-20% between Mid-November to Mid-December.  If we get that, it will be time to get long again. And I have decided to stay out of Nat.Gas till this big correction plays out. The time to go long commodities will come by end of the year and that includes precious metal as well.

So right now I am in cash and cushy. I am not chasing the upside because I am not sure how far it will go. And it is better to wait out 7-10 trading sessions than to suffer heartburn.  Hope you guys are keeping your powder dry and doing your research.

Thanks for sharing my thoughts. Please remember to disable Ad block. We still have in-line text Ads and of course Amazon link, should you decide to shop Amazon in the coming holiday season.

One Swallow Of Fall.

While it is true that one swallow does not make a summer, we have been calling for this bullish action for quite a while. It will be foolish to say that from now on prices will go up and up but it does look like the making of a short term bottom which the cycles have been calling for. SPX closed above 1425 which earlier was acting as a resistance. Let us see whether it holds tomorrow. Only folks who seem to be unhappy today are from our beloved rant blog. I shudder to think about the plight of anyone who was short after reading / listening to those unending rants. Few more times like these and when the time comes to really short, folks won’t have any money left to trade. Only GS and JPM will be able to short the market then. Brilliant plan indeed!

Tomorrow is a NFP day. Few have any idea if at all about how good or bad it will be but in reality, it does not matter. Most likely, markets will go up anyway to test the highs in the next few days/weeks, with occasional dips in between. So it does not matter if tomorrow is red or range bound, which is very likely, so long the red is not huge red. Only fly in the ointment today was that US$ was higher which resulted in gold and silver selling off from their morning highs.

But the silver miners like SLW and CDE have started to breakout even in this weak market.  I think both gold and silver will also move higher and test their respective high of the year. And all these should happen in the next two weeks. We will have to wait and see if gold is able to break through $ 1800. If not, we will get out of PM sector for a month and re- enter by mid or end December.

The next two weeks will possibly be good for swing traders. So far as investors are concerned, it would be a good idea to reduce the long positions on any strength and reduce the risk. And the risks are real. The fiscal cliff will not be sorted out before next year and there is no clear indication as to who is going to win the election. These are known unknowns and in times like these, cash is king. 

But from the swing trade point of view, I would probably buy out of money November calls for SPX that are cheap and get out by 12^th-14^th November.  But everyone has own style of trading and no one size fits all. So please do your due diligence.

Today QQQ was up almost 1.5% while Apple was up only 0.2%. Yesterday I wrote that Apple most likely has bottomed short term. If that is indeed the case and Apple is to test its 50 DMA it would mean a move of about 7%. That would definitely positively impact the Qs and other indices. The last high was on September 14 which was almost 45 days back and yet we had a tiny 5% correction. So we did not miss much by staying in the sideline. Also in all of those 45 days, we had two up moves and three down moves without any clear direction.  I had suggested not to short and hopefully it would have saved you some money.

Thanks for sharing my thoughts on the market. I have been busy with studies and waiting for the market to show its hand. So far things appear to be on script. I hope it will be interesting going forward and you will be able to make some much needed money.

After The Storm.

After the devastation, the markets gave its best shot in a difficult situation. So far it is following the path written. If you remember, we expected the indices to move up and down this week and make a messy bottom. So far SPX has corrected only about 5% from its top but the downturn has persisted for over 40 days now. This in itself is something of a rarity. I see close similarity between now and last April.

And my call for a test of the high is consistent with that topping pattern.  Already some positive divergences are appearing.  Tradersu has forwarded the following link.

http://pialerts.files.wordpress.com/2012/10/techsmithworb9b2.png

However, it would be good to remember that this rebound is going to be short term in nature and unless we see 1480 taken out with conviction and SPX stays above that range for a while, I would consider that as a part of topping process.

For the near term, I would like to share a chart of Presidential Election cycle sent by Tom McClellan.

Again, this chart fits perfectly with my cycle and call. I think Apple is bottoming short term and will test the 50 DMA in the coming days. Gold and silver made some progress from the base. All in all, I am of the opinion that a base of some sort is being built for the next stage of the rally. But for that, we may have to wait till next week.

I hope all you readers are safe and secure. Our good wishes to those who have been badly affected by this storm. At least it gave us respite from the 24 hour politics.

Thanks for sharing my thoughts. Hope you are in cash and cushy and ready for the opportunities ahead of us. 

Messing Up With The Brain.

That’s what the market is doing with bulls and bears. The bottom is in sight but it is going to be a messy short term bottom. I would not be surprised at all to see the markets up one day down the next for the whole of next week.

So far the important support level has held but it is still too early to do bottom fishing. As I had mentioned in my email, till cash SPX closes above 1420 in a convincing manner, there is no reason to go long for even one day. Even after that, if you want to go long, I would recommend that you weigh all the benefits against risks.  Most likely we will see a retest of the earlier high and may even have a higher high but just. I would think that the risk is more to the downside, both fundamentally and otherwise.  We have been here before.

(H/T: Lance Roberts)

I do not normally believe in analogs. Analogs are fun while it works but we cannot make investment decisions based on analogs. But there are other factors like money flow through the banking system, the coming fiscal cliff and even cycles indicate that there are dangers ahead.

One of the respected chart analysts, Peter L Brandt has this chart to show:

The caveat is that this theory is invalid if SPX closes above 1480.

By Mid-November, I expect SPX to push above 1470 but whether it will stay above is the million dollar question.

We will take it one day at a time but now is not the time to be cute or smart. The topping process is on and even if the mid-November top comes by end November, it does not change anything.

That’s all I have for this rainy weekend. For those of you living in the path of the storm, hope you are well prepared. If we have to err, better be on the side of caution, be it a storm or stock market. Stay safe friends.

Apple Fell From Tree.

Story of the night is the earning miss by Apple. And the cherry on the top is the disappointing results by Amazon. SPX futures (/ES) again tested 1400 after hours and Nasdaq futures (/NQ) tested 2600. Both bounced back from the lows but we have to wait and see the action overnight.

Trading of Apple shares were halted in the after-market when it traded below $600. But the market was not expecting anything great from these two, if I have got the pulse correctly. Right at the point of writing this post Apple was trading at $ 607. There was no dumping as such.

I wrote in the past that once Apple closed below $640, it had more to fall. I think we will not see a trade-able bottom for Apple before the end of the year. This is consistent with my view of the general market. For now, despite the disappointing results, it is poised for a bounce soon. So are the futures.

Today the markets messed up with both the bulls and bears and end of the day both group were confused as hell. The short term cycles are all mixed up and it is going to be a messy bottom in a day or two.  

These days I look at 4 hour chart to get a little bigger picture. The 4 hour chart of /ES is showing 4/5 touches around 1400 level and bounce from there. Obviously this is an important support. As time passes and bears are unable to convincingly break this support, it becomes stronger. Having said that, market always surprises and inflicts maximum pain on maximum number of people. If folks did buy more puts of Apple, we can be sure that Apple will close higher. As per option pain calculator, November Max.pain for Apple is $ 635, which is higher than where it is now. Go figure.

I still think a short term bottom is around the corner. Let us see what the overnight actions and tomorrow bring. And I am still waiting to see whether Nat.Gas gives the sell signal. Today it broke below $3.40 but closed above that line. If there is no sell signal in a day or two, then it will be time to pile on to Nat.Gas.

Sentiments have turned south for gold and silver. Today one newsletter writer bailed out of gold and that may be a good contrarian indicator. My take is that we will see a re-test of the last high by mid-November and if the re-test fails, then we bail out and re-enter by end of the year.

That’s all for tonight. I made some changes in the Ad program. Now we only have Amazon link at the top and no other Ads except the in-line text ads. Hope you will remember the blog if and when you use Amazon.

Thanks for sharing my thoughts. Patience is required for few more days.