USD300 billion disaster in Japan

The estimated cost to state is USD 300 billion for the 11th March Treble Disaster - earthquake, tsunami and nuclear fallout. Earth, Wind, Fire, Water, Nuclear. All those elements at full force.

Over 10 thousand lives were lost. The Japanese National Police Agency has confirmed 13,392 deaths, 4,896 injured, and 15,133 people missing] across eighteen prefectures, as well as over 125,000 buildings damaged or destroyed. The earthquake and tsunami caused extensive and severe structural damage in Japan, including heavy damage to roads and railways as well as fires in many areas, and a dam collapse.

300 billion USD is certainly a huge sum comparable even to Quantitative Easing 2 release by the United States to prop up the financial system. And that was a financial tsunami caused by greed, and manipulation of greed, and a system that was feeding problems into "Inception"-like levels and mazes of deeper intertwined problems, topped by a Madoff Ponzi illusion of profit and grandeur.

Here it is all natural. Japan is quake prone and had prepared all it could. All it's resources. No other country can prepare for such calamity.

Take Haiti Earthquake for instance. It was 2010. Just last year. 12th January. How many had died? 316 000 had lost their lives. That is 30 times the number of deaths. This impoverish nation requires even more aid and donation than Japan. Japan has the financial power, the human tenacity, and expertise. While Haiti is a far away poor country.

Hope those who have donated to Japan to think also about Haiti.

China tweaking 5 year plan in opposite direction

Recently China has declared a change in their financial planning for the next 5 years. As I wrote previously speculating or postulating this shift, the results will be progressive and finally will see a "be careful of what you wished for" scenario - especially for USA.

Instead of focusing GDP growth, this strategy and policy will go the opposite. Through the years since the invention and reliance on the "GDP factor" as an economic health indicator, countries around the world blindly followed this capitalist propaganda. Because the proof was sort of in the pudding. It is true, GDP growth means a better consumption rate, better disposable income, better life, more products, bigger homes, car ownership, expansion of the urban sprawl, creating of suburbs (because we can afford to drive an hour to work), better gadgets, improvement in IT products because of demand and thus competition. So on and so forth. And obesity!

So grab that last sentence: obesity. GDP growth if applied to a human body would be like this following short story.
A baby is born needs alot of nutrients, mother's milk, love, care, food, to grow. The cells will multiply. The baby's weight has a superb "GDP growth". Good because that is what a human baby needs. Growth. Then teenage more different types of growth - hormonal, physiological, psychological, mental. Language skills. But the body now grows in different manners. More muscles, more shape. Some acne. Bone growth slows but still growing. So during the 20s, the body literally doesn't grow anymore. If it did, imagine a humongous monster, devouring anything in sight!

Apply this to basic economics whether the experts agree or not. Growing just by GDP is a fallacy. You can grow in other ways. Manage the growth. Grow mentally. Grow the education and healthcare. Grow the mindset - self-sufficiency. Instead of unlimited multi-storey villas and five swimming pools. Do you ever swim like 12 hours a day, every day? And what is with the golf course. This resource intensive "sport" is a very big sin. Water is consumed in the value of 5 elephants per day. Plus maintaining the "green grass". Why not maintain green vegetables? And water for plants and animals? The space itself for a golf course, could have been a nice shady tree-filled park.

Many times I meet people from the First World Countries - and they have nice things to say about Asia. Then one or two times, they will say this. I find it strange Asian always thinking about "saving face". Well saving face is not a concept created in Asia. It was created in the West! Have you noticed that it is quite strangely white those people on TV (politicians, actors, etc) have - for their teeth?!! And bronze lobster-red body with a high potential of the big C - cancer - imprinted? And what about coats and ties, plus unbelievable prices for a dinner and alcohol?

USA is wishing and pressuring China to increase the value of the yuan. Reduce their exports and start importing. Reduce their GDP. So China has been thinking (and perhaps reading my blog and articles through the years) - yes, let us give them what they requested.

So the scenario will surely be good for USA. Or not?
These scenario will eventually happen:
1) The yuan (oh, and if you cannot pronounce it correctly, it is not "you-wan", it is yuan) will increase in value. Those who hold the yuan or earning yuan, will have a better and higher disposable income. Meaning more chance to buy products from another country, or more expensive, higher quality (maybe) products.
2) Treasury Bills will be slowly discarded and buyers will be few. Meaning a direct reduction in the demand for US Dollars. US policies that rely on these loans will be diminished. Meaning US influence and stranglehold (hegemony) will disappear throughout the globe. Military bases will have to be closed because of insufficient funding.
3) As opposed to completely-free democracy, whereby land/property is openly offered, and thus creating property boom and bubbles, such as in USA, UK, possibly Thailand and so on and so forth, China doesn't have such as system. Perhaps they will extend a hand to "overseas Chinese" - those with Middle Kingdom heritage can now purchase property in the motherland. So whatever happens, it will have a loyalty effect. Property will keep growing, wealth flowing into China. Chances are overseas Chinese from Singapore, Canada, French Reunion Island, Indonesia, Malaysia, Antigua - everywhere - could have a shot at buying and owning a property in China.
4) US Dollar would have dropped (gradually) 10%, maybe 40%. Low enough for middle and higher income investors from China to buy out corporations in USA. Or via Mergers and Acquisitions. Not that the anti-trust law will be rearing the protective nationalistic front. So perhaps not. China will instead invest in itself, and other commodity filled countries. Thereby reducing not just indirect investments in USA (T-Bills) and now direct investments - from stocks, corporations and even education.
5) It is possible to employ a maid from the USA for about 2% of your salary - in the year 2020.

Dangers of quantitative easing

Quantitative easing is an inefficient way to prop up the economy. In short, the process moves hot money into the economy directly, hoping it will generate jobs and have a multiplier effect. Jobs creating jobs.

The age-old example by Keynes is this: take all the gold bullion in the Treasury, get 50 trucks to transport them across the country, then use diggers to dig up 100 feet deep and bury the gold inside. Then seal it. Then get another group of contractors to use train or trucks to dig out the gold, and move them back into the Treasury vault.

The whole process is supposed to create jobs for the truckers. Jobs for managers. Jobs for insurance company to insure the cargo of gold. Jobs for coffee makers. Jobs for tyre. Jobs for petrol station. Jobs for burger flippers.

So fast forward to Quantitative Easing 2, in the year 2010. How will it be performed and why is it inefficient? This cartoon below will dispel the clouds. You will learn why QE2 is not that great for the US economy. Why the Fed is not being respected. Why Goldman Sachs seems to be untouchable as a financial institution in a very wrong sense.

What does breaking all time high suggests in SGX and Bursa?

Is breaking all time high in the index of Singapore and Malaysia a positive or a negative? A braking sign?

When does breaking constitutes and overly bought situation signalling a wrong valuation or wrong exuberance?

Mostly, whatever prices were before the 2008 GFC (Global Financial Crisis) has been attained. "Back to normal". So what is normal, and what does the future hold? The uncertainly of currencies especially USD may bring in more funds, meaning a bigger flow of money into equities and thus stock prices will generally increase. And those with strong fundamentals, will benefit.

US QE2 will not actually help their own economy simply because of that reason. The money released will flow out to better paying investments abroad. The investment could be merely currency. For instance, exchanging USD into Australian or New Zealand Dollars, and then parking there seeking term interests of over 5-6% minimum. And investing in commodities that are in demand - rubber, Malaysia or rubber equities will benefit. Palm oil. Minerals - Gold, Iron Ore, Australia will benefit.

The money released will not go much into the US economy. Simply because it is not consumption and what US is seeking is consumption by local (domestic) and thus trying to boost Gross Domestic Product value will not be achieved. These funds are managed and channelled in unit trust, trust funds, private banking investments - which are all based on very technical risk calculation models, by highly paid and highly intelligent financial analysts that have graduated from Harvard Business School and other top institutions - meaning they will seek out the best chance and best possible return. And not for the best of the nation as one might hope for. Eventually a higher return for the investor (US investor) is doing something best for the nation ironically - it is not going to be giving back or creating jobs in the US economy.

The natural or obvious solution thus is not shown from where the money is heading. Remember how the US dollar went up when the economy was choked by the housing foreclosure crisis? Which was caused by greed in "investing" in property priced out of one's means of paying. If you are not supposed to be eating dinner at a 5 star restaurant, then you are not supposed to because it cost you a week's salary. Yes, you may have that week's salary in your hands. And yes logically you can pay for a $300 dinner meal in the 5 star restaurant. But you should realise you cannot "afford" it. The end.

US system of trying to create jobs this way is actually going against what they have been trying to achieve for the last 50 years. Trying to go back into heavy industry, or making thousands of menial low paying jobs will not materialise. You cannot copy a cheap economy after you have attained a high paying economy. And because of rights and democracy and liberty, the working class unions will not be wanting to see a lower paying situation. That's also the problem with the media. Creating jobs is not just - here you have a task to perform in this car factory. Done. It is more than that.

The disparity between the illusion of attaining wealth and having a job is quite a dangerous way that the media has cooked up in mostly free-open market economy citizen's mind.

These two questions to connect the dots:
1) Have you travelled to a country (or if you never travelled abroad to another province or town) that will give you twice or even 5 times the value of your current cash? Meaning where $10 dollar can buy you a meal. Now $10 dollar can buy you 4 meals?

2) When you read jobs are being created in Asia, China, India, will you willingly swap your current job with a same folk there? Example you are a post-office clerk in Sweden. And many times I have met from travelling, the First World person will comment that it is so cheap in Asia. But you know it is expensive in Europe. So I suggested, ok why not you swap jobs and life with a similar person with similar job. Swap a post office job in Sweden with a post office job in Thailand.

That person will not be willing to accept this after considering many other things. Like health benefits. School. Medical. The power of the Swedish krone. At best, working in Thailand in the post office, he could perhaps have a holiday twice a year in the nearby beach or waterfall. While he knows the same Swedish job he has, can afford him a 5000 mile holiday at a 4 star resort in THAILANDE every year!

Impact of Quantitative Easing 2 by US

Palsm are jittery because of the coming QE2 - Quantitative Easing 2 by the US government.

What sort of impact will 500bil USD have on the world economy, and especially your stocks and portfolio?

Firstly, we read about "priniting money" and that could mean an easing and reduction in value and exchange rate for the USD dollar AND those currencies that are pegged to it. Such as the Hong Kong Dollar. In a way, this will flood "money" into the market, and a case of money seeking money, will make stock prices increase, at least in those economies. Secondly, it may also increase the stock values of other economies. Why? The USD is deemed to be heading south, so to safeguard the value, fund managers will be seeking higher yield currencies such as the Australian Dollar. Forecasted to be on parity with USD.

This in turn would mean mining stocks in Australia will get another boost. First from the demands of mining commodities, then now with this new money.

Now it is best time to plan ahead. What are the possible impact on your current investments. If you hold US stocks, their price could rise, even though USD is coming downwards.

Another situation that is in perpetual check is foreign reserves of US currencies and debt. China being pressured to revalue the yuan is holding vast amounts of US debt. What if the pressure is too great, and the imminent downturn of USD may even push China to do what US wanted. But not just merely revaluing the currency. But firstly, to protect national interest, China will sell off all US debt, US stocks, US T-bills. Why revalue and then still holding a loss-making interest in US stocks, currency, debt? So that could happen too and I have not seen any analyst thinking of this action.

Perhaps it seems impossible. But nothing is impossible. If China just raises the yuan, China will lose double. This is perfectly logic. So be careful of what you (US) wish for!