Where do you think we are now?

Off to the USA

Hi Fellow readers, I will leaving for the US today for my school stuff.

Though I will be in the US, I will still continue to update this financial blog. And hopefully I will be able to get a non bias evaluation of the US economy as I see it.

I will be in Los Angeles for the next 3 weeks, after which I will be traveling to San Fransisco and Las Vegas for a week.

*Btw, the economy has a few bad signals.. rallies are not strong, and oil is rising...

What is Bankruptcy Chaper 11?

On June 1st, General Motors filed for bankruptcy.

They filed for voluntary chapter 11 bankruptcy protection. I am sure many of us have seen these this in many articles in recent months. But what exactly are is it?

Chapter 11

The chapter of the Bankruptcy Code providing (generally) for reorganization, usually involving a corporation or partnership ( Wikipedia).

This is different from the normal kind of bankruptcy that we know, i.e company closes down and sell all its assets. This kind of bankruptcy code can be found in Chapter 7.

Chapter 11 allows the company to continue running, even though its bankrupt. But of course under the 'care' of the court. It also allows them to continue getting refinancing and money from from different sources (but usually the company have to give some assurance to the money lenders like first priority to business earnings etc.) Its like giving the company a 2nd chance to reorganize itself, and hopefully pull through.

In the process, there will also be this 'automatic stay' clause that states that no debtor to stop collecting money from this bankrupted company. (So good! Bankrupt already can still borrow $$)

Frankly, after reading up more on chapter 11, I personally find that this law a little crappy (no offense, just that I can't think of politically correct word to use) I mean if a company fails, does it seriously deserve a second chance? By giving them a second chance, you are being unfair to the other companies who are doing well. What incentives do companies then have to work hard?

I can understand the reason for saving such big companies (because a lot of people depends on them for their jobs!)..but in the world out there, sometimes its inevitable. By 'rewarding' the bad, there is no point being good. Its like finding a quick way out but creating more problems in the future.

Looking at all these recently Chapter 11 cases, I really feel that USA is going to have bigger problems in the future with their businesses. There is really no more incentive to do things right because there is always a safety net, but at the expense of the tax payers money.

Oil and Singapore

Sorry readers for the lack of updates. Have been rather busy lately with work and stuff. Will be going to the US in a few weeks for a project, so am preparing for all the required adminstrative stuff.

Anyway, I saw this page in The Straits Times, money section on Wednesday May 27 2009. It is basically a page fully dedicated to oil/energy.

These are the 3 head lines

1. S'pore set to boost status as energy hub
2. Oil and Gas firms face difficult year
3. PetroChina out to be price-maker with SPC deal

All which are oil related.


S'pore set to boost status as energy hub

• This is more of converting Singapore into a leader in energy TRADING hub. Currently we are 3rd in the world. ( This will defintely help our economy in the long run. Imagine if SGX is the exchange that is used for these transactions. Its stocks will run like crazy if Singapore becomes Asia's trading hub!)

• Having a commodity exchange based in Asia and catered to Asian's need and specifications will increase trading activity in Asia, as the time zone will be catered to us, and not follow America's one. ( I think this would encourage traders to in Asia to increase trading!)

• The Singapore Mercantile Exchange will make its debut later this year. Offer essentially all the commodities and futures contracts. ( However I feel that if it were not publicized effectively to all the Asians countries, it will definitely fail. As the Singapore market is not big enough to provide the liquidity for such trades. And only a few more popular commodities like oil, gold will succeed. I can't imagine myself trading 'pork' just yet.)

• Singapore Government is gather all the leading companies in trading over here. Some examples are
  

1. Opet Trade
2. Sahara Internate Koc Group
3. Socar Trading
4. Tricorona
5. BP ( oil giant has also recently set up a carbon trading team )

Oil and gas firms face difficult year

• Estimated 100 million barrels of crude may be stored on sea tankers
• Lower demand as there is low growth
• Price volatility
• HOWEVER, assuming population and economies to grow, its expected the oil price to go up to US$70-US$90

Seems like a very pessimistic article. Implying that the present market rally will not be able to sustain, as most people expect the economy to be weak.


PetroChina out to be price-maker with SPC deal

• PetroChina is bidding for SPC with US$2.2 billion
  
• SPC is a major source of fuel supply where most of Asia's oil prices are determined.
• SPC owns half of Singapore Refining Company (SRC) while the remaing is held by US major Cheveron
• PetroChina has already long term deals to supply fuel to regional importers like Vietnam and Indonesia
• With all this 'control' of fuel, they will have more say in setting the price in the market

We are looking at the new oil leader in Asia if PetroChina is able to follow through with its plans. However I feel that things will not be as simple. This is because its refining capacity of 2.6 million barrel per day lags behind rival Sinopec 4.3 million barrel per day. What makes you think that Sinopec will sit back and not do anything to protect its best interest. Its just a speculation of mine, but I think Sinopec will come up with new policies to challenge PeroChina once its profit margin is at risk.


Conclusion
Having PetroChina leading the price of oil and Singapore as the leading energy trading hub will definitely help Singapore's economy. However that is provided everything goes as plan. With the tough economic conditions presently, and my speculation of Sinopec's possible actions. We can never be too certain!

Temesak lose BILLIONS!

The market has been exceptionally bullish for the last few days. And sadly to say, if I had actually shorted as I mentioned for my previous posts...I would had made a really big lost.

Anyway, lots of things has happened for the past week. The biggest one being Temasek selling its stake in Bank of America, with a staggering lost! Singapore news reports it as US$3 billion, while other online sources reported it as US$4.6 billion. Either way, its really a HUGE loss.

However, we cannot deny the fact that the whole world in general took a huge hit. But losing so much of the people's money is still painful to see.

Some reasons behind the sale was that Bank of America's vision is not inline with that of Temasek. Initially Temasek was suppose to be a major shareholder in Merrill Lynch, which is an investment bank. However, after Merrill Lynch was taken over by Bank of America (which is out of their control), Temasek essentially is now a minor share holder in a bank that does simple home loans etc. With such a big change in company philosophy, it wouldn't be surprising that they would eventually sell off their stakes in Bank of America if they initially bought into Merrill Lynch for its business.

In other news, Market rallying seems to be unstoppable recently. I guess that many people who were sidelined are actually now trying to inch their way into the market. Buying into any small drops, hence supporting the market. However I am still skeptical, because I feel that the situation is not really getting any better. People are still focusing on every little bit of good news to give them a reason to let the stock market rally and denying all the bad news. Logically, this should not be happening.

Also, I just read that south Korea has lifted the ban on short selling. With this, I think more countries are going to start lifting the ban. Which would mean.....if the market were to turn bearish, it will be a VERY quick process. So I would suggest to people who are trading the Singapore market to be wary once Singapore lifts the ban on short selling. I personally think Singaporeans love to be 'shortists'. I.e they like to short the market.

75% chance to make $$ tomorrow according to my TA

If you followed my post 2 days ago and buy the STI put warrants just before the market closes today(because the STI is below 2128), according to my analysis, you will have a 75% chance of making a profit tomorrow..

These are the probability according to my statistics.

Today (Day 1) : STI closes below 2128
Day 2: 75% chance STI will close below day 1
Day 3: 50% chance STI will close below day 2
Day 3: 74% chance STI will close below day 3

Lets see how it will be like over the next few days..

STI to GAP down tmr?

There is a high chance for the STI to gap down tomorrow, due to the formation of a shooting star today. ( These are candle sticks trading terms)

Pardon the recent increase in technical analysis posts. This is because I believe that it is really time to start trading the market. Signals that I have observed so far are relatively accurate (not 100%, but good enough to earn $$).

If you would like to discuss any possible trades and stuff, do post comments on my posts, or my shout box on the right.

Time to earn $$! *But do be careful..$$ will be lost in the process. TA is never 100% accurate! But if done right, profits should come in, in the long run.