Another Recession Due Circa 2012: Jim Rogers

A new recession would be due around 2012 but central banks will not be able to throw cash at it anymore, Jim Rogers, chairman of Rogers Holdings, told CNBC Tuesday.

India's central bank raised its interest rate Tuesday, joining other monetary authorities such as the Canadian and Norwegian central banks in hiking rates to stem inflation.

"We do have inflation in the world… most central banks should resign," Rogers said.

There has always been a recession every four to six years in the US "since the beginning of time," and that would mean another one is due around 2012, according to Rogers, a hedge fund pioneer who started the Quantum Fund with George Soros in 1970.

"When the next one comes the world is going to be in worse shape because the world has shot all its bullets," he said.

"Is Mr. Bernanke going to print more money than he already has? No, the world would run out of trees," Rogers added.

The fact that second-quarter earnings have been better than expected does not necessarily mean that the recovery is stronger than anticipated, he said.

"I'm sure some of it is expectation management… but remember what the comparison is. We are talking about the second quarter of 2009, when we thought the world was coming to an end," Rogers said.

"Worry about next year, don't worry about the second quarter now. That's history," he added.

Rogers reiterated his view that the pan-European stress tests into the health of banks were just public relations and said he still owns the euro.

why 80% of investors lose money in stock market?

I guess this is how most of the 80% investors/traders react to stock market. They buy high and sell low. Bravo!!!

In my humble opinion, one of the way to gain in stock market is to buy stocks when everyone is avoiding it and sell the stocks when everyone is fighting hard for it. It is really a simple strategy.

When people shout at you for buying stocks and you are a lonely investor----BUY signal.
When all uncles and aunties are putting their hard-earned money into stock market and coffee shops are filled with stock-market related chats------SELL signal

The right thing to do is to buy low and sell high. Does it sound easy? I don't know.

Calculate put warrants premium

Above is the information I get from my online broker. As we can see that the premium for Axiata-ha is -2.71% (which is a discount of 2.71%). Besides, the exercise price is RM3.40, expiry date is 25/8/2010 and gearing is 10.35.

With a discount and the market is decreasing, axiata-ha looks like a good potential trade. The joy is varnished as soon as I try to double check the information especially the premium of axiata-ha.

The correct formula to calculate put warrants premium is as below.







The calculated axiata-ha premium is = [(0.075 x 5)+ 3.88 - 3.40 ] / 3.88 = 22%

The calculated axiata-ha preimum of 22% is very different from the premium I get from my online broker of -2.71%. It is really misleading.

I try to check the put warrant premium and information at Bursa Malaysia and CIMB Warrant website too. To my disappointment, Bursa Malaysia doesn't get the premium correct too. However, CIMB  Warrant does a good job by calculating the premium correctly.

That's why we must always double check the information we get.

Ok, good luck.

GOon

Dow Jones Industrial forming head and shoulders pattern, part 2

I wrote about "head and shoulders Pattern" on 21st and 23rd of June 2010. I was expecting this pattern to be formed. I was right. We can noticed clearly than it is actually formed in Dow Jones Industrial (DJI). For your information, the "head-and-shoulders" pattern is believed to be one of the most reliable trend-reversal patterns.

Basically, most of the investors/traders do their research based on the fundamental analysis and technical analysis. For technicians/chartists, it's gonna be downside bias for them. The head and shoulders pattern is definitely a real concern to them. For fundamentalist, things are not looking good either. US, Europe, Japan and China, all these economy power houses have been releasing lots of negative news.

As we can see from the chart above, there was a very short term rally from 8th to 18th June 2010. What makes me worry was the trading volume was not increasing as the rally was happening. I did not buy into the rally, in fact I was clearing my call warrants and started buying put warrants.

After 18th June 2010, when DJI was starting to decrease, the volume increased. The volume is increasing as DJI keeps moving down. If DJI fails to hold on to the support level of 9759, I really think we will see a major tanker in July 2010. This will not be an ordinary tanker! Some people might argue that we should buy whey they are trading near support and sell when they are trading near resistance. I am not objecting that, but this time round, I really think that DJI 9759 support is not going to hold on much longer. It is gonna to be broken.

Even though I trades in KLSE, sometimes I do my research based Dow Jones Industrial, S&P 500 and NASDAQ to determine the major trend of KLSE.

I am happy that I finally gains some new experiences in trading in KLSE. I start to buy put warrants. Before this, I never had the chance to do so as the uptrend was intact. The feeling is actually quite cute. Since I have bought put warrants, I am happy when the market drops while I used to be getting worry when the market drops.

For your information, most of the put warrants premiums are not correctly calculated by my online broker. I guess it is wise for us to double confirm the premiums before we trade on these put warrants.

Ok, good luck.

GOon

Read more on "Head and Shoulders Chart Pattern"
http://cathoon.blogspot.com/2010/06/head-and-shoulders-chart-pattern.html

"Dow Jones Industrial forming head and shoulders pattern"
http://cathoon.blogspot.com/2010/06/dow-jones-industrial-forming-head-and.html