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C I M B

Tiger Airways [TP S$0.54]

During the analyst briefing, management gave little details over future plans. In view of larger losses in 2Q12, we have lowered our FY12-FY14 estimates.

We reduce TP from S$0.71 to S$0.54.

Apart from a poor performance, we are also concerned on Tiger's yield management and a potential cash call from a weak balance sheet. Downgrade from TRADING SELL to UNDERPERFORM.

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Working in an office is bad for your brain

LONDON

Scientists found that open plan offices create unwanted activity in the brains of workers that can get in the way of them doing the task at hand.

Having a clean and sterile desk can also leave employees with smaller brains, they claim.

The findings are revealed in a programme for

Neuroscientist Jack Lewis said: “Open plan offices were designed with the idea that people can move around and interact freely to promote creative thinking and better problem-solving.

“But it doesn’t work like that. If you are just getting into some work and a phone goes off in the background, it ruins what you are concentrating on. Even though you are not aware at the time, the brain responds to distractions.”

Modern offices which refuse to allow personal decorations on walls or desks may also not be helping employees.

Dr Craig Knight, a psychologist at Exeter University, said:

“In the experiments we have run, employees respond better in spaces that have been enriched with pictures and plants.”— Working in an office is bad for your brain, according to a study that found that the hustle and bustle of modern offices can reduce productivity by 15 per cent and lead to a 32 per cent drop in the worker’s well-being.Channel 4 called The Secret Life of Buildings, to be broadcast today.

THE DAILY TELEGRAPH

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The world needs another reserve currency

Dollar scepticism places spotlight on the yuan

nOt YEN ? ? ? ?

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Lessons from Singapore

British High Commissioner Anthony Phillipson on why his posting here can help Britain to fix its economy

Paul Gilfeather

gilfeather@mediacorp.com.sg

What’s interesting from a British perspective is that there is a sense of ambition here which is hugely impressive and when you consider our own challenges, generating growth in the economy, there is a lot we need to look at here at how they’ve done it.

British High Commissioner to Singapore Antony Phillipson

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Credit steroids got us where we are

In the wake of the hugely disappointing budget deal and the Standard & Poor’s debt downgrade, maybe we need to hang a new sign in the immigration arrival halls at all United States ports and airports It could simply read: “Welcome. You are entering the United States of America. Past performance is not necessarily indicative of future returns.”

THE NEW YORK TIMES

Thomas L Friedman won the 2002 Pulitzer Prize for commentary, his third Pulitzer for The New York Times.

Thomas L Friedman

Only way out of this hole is for United States to

rebuild its muscles of growth the hard way

Because our country is now finding itself in the worst kind of decline — a slow decline, just slow enough for us to keep deluding ourselves that nothing really fundamental needs to change if our future is to match our past.

Our slow decline is a product of two inter-related problems.

First, we have let our five basic pillars of growth erode since the end of the Cold War — education, infrastructure, immigration of high-IQ innovators and entrepreneurs, rules to incentivise risk-taking and start-ups, and government-funded research to spur science and technology.

We mistakenly treated the end of the Cold War as a victory that allowed us to put our feet up — when it was actually the onset of one of the greatest challenges we have ever faced.

We helped to unleash two billion people just like us — in China, India and Eastern Europe. For us to effectively compete and collaborate with them — to maintain the American dream — required studying harder, investing wiser, innovating faster, upgrading our infrastructure quicker and working smarter.

Instead of doing that at the scale we needed — that is, building muscle — we injected ourselves with massive amounts of credit steroids (just like our baseball players). This enabled millions of people to buy homes they could not afford and to fill jobs in construction and retail that did not require that much education.

Our European friends went on a similar binge.

All this debt blew up in 2008 in the US and Europe, and that led to the second problem:

Homeowners, firms, banks and governments are all now “de-leveraging” or trying to — meaning that they are saving more, shopping less, paying off debts and trying to dig out from mortgages that are under water.

No one better explains the implications of this than Professor Kenneth Rogoff, a professor of economics at Harvard, who argued in an essay last week for Project Syndicate that we are not in a Great Recession but in a Great (Credit) Contraction:

“Why is everyone still referring to the recent financial crisis as the ‘Great Recession?’” asked

Prof Rogoff. “The phrase ‘Great Recession’ creates the impression that the economy is following the contours of a typical recession, only more severe — something like a really bad cold ... But the real problem is that the global economy is badly over-leveraged, and there is no quick escape without a scheme to transfer wealth from creditors to debtors, either through defaults, financial repression, or inflation ... ”

“In a conventional recession,”

Prof Rogoff noted, “the resumption of growth implies a reasonably brisk return to normalcy.

The economy not only regains its lost ground, but, within a year, it typically catches up to its rising long-run trend. The aftermath of a typical deep financial crisis is something completely different ...

It typically takes an economy more than four years just to reach the same per capita income level that it had attained at its pre-crisis peak ...

“Many commentators have argued that fiscal stimulus has largely failed not because it was misguided, but because it was not large enough to fight a ‘Great Recession’.

But, in a ‘Great Contraction’, problem No 1 is too much debt.”

Until we find ways to restructure and forgive some of these debts from consumers, firms, banks and governments, spending to drive growth is not going to come back at the scale we need.

Our challenge now, therefore, is to de-leverage the economy as fast as possible, while, at the same time, getting back to investing as much as possible in our real pillars of growth so our recovery is built on sustainable businesses and real jobs and not just on another round of credit injections.

Regarding de-leveraging, Prof Rogoff suggests, for example, that the government facilitate the writing down of mortgages in exchange for a share of any future home-price appreciation.

Regarding growth, we surely need a much smarter long-term fiscal plan than the one that just came out of Washington. We need to cut spending in areas and on a time schedule that will hurt the least we need to raise taxes in ways that will hurt the least (now is the perfect time for a petrol tax rather than payroll taxes) and we need to use some of these revenues to invest in the pillars of our growth, with special emphasis on infrastructure, research and incentives for risk-taking and start-ups. We need to offer every possible incentive to get Americans to start new businesses to grow out of this hole.

If juggling all these needs at once sounds hard and complicated, it is.

There is no easy, one-policy fix.

We need to help people de-leverage, cut some spending, raise some revenues and reinvest in our growth engines — as an integrated strategy for national renewal.

Something this big and complex cannot be accomplished by one party alone. It will require the kind of collective action usually reserved for national emergencies. The sooner we pull together the better.

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JUNK BOND STATUS
Another symptom of the frivolity of the European political class is that the European Central Bank is being urged to intervene in the Italian bond market to restore stability.
Standard & Poor’s and Moody’s do not produce ratings for the ECB, but if they did, it would be given junk bond status, or worse.
The ECB is bankrupt and this would be evident for all to see but for the fact that it has grossly overvalued the practically worthless Greek, Irish and Portuguese bonds in its portfolio. At some point, euro zone states will be asked to fill the massive holes in the ECB’s balance sheet and matters will then get messy. Some may plead poverty others will point out that the constitution of the ECB specifically prevents it from purchasing national bonds and that its market operations must have been ultra vires.
Furthermore, it is unclear to whom the ECB — whose dodgy accounting, reckless investments and contemptuous disregard of banking standards make even the most irresponsible Mayfair hedge fund look like a model of propriety — is ultimately accountable.
The idea that it can step effectively into the Italian bond market, whose total value of around 1.8 trillion euros makes it larger by far than Greece, Portugal and Ireland [PIG] combined, is a joke.
Wake up: The euro zone is very close to collapse.
It will come as no surprise if some Italian and Spanish banks are forced to close their doors in the course of the next few weeks. An economic firestorm is heading our way, and Britain will be doing very well just to survive.
THE DAILY TELEGRAPH

Peter Oborne is the Daily Telegraph’s chief political commentator.

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wOrld lead-ers are LEAD-ED

they cAn Only LEAD

bUt cAn't leAd

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The coming economic firestorm

In this grave crisis, the world’s leaders are terrifyingly out of their depth

Certain years have gone down in history as great global turning points, after which nothing was remotely the same: 1914, 1929, 1939, 1989. Now it looks horribly plausible that 2011 will join their number. The very grave financial crisis that has hung over Europe ever since the banking collapse of three years ago has taken a sinister turn, with the most dreadful and sobering consequences for those of us who live in European democracies.alance sheets were in reasonable shape. In Britain, for example, state debt (according to the official figures, which were, admittedly, highly suspect) stood at around 40 per cent of GDP. This meant that we had the balance sheet strength to step into the markets and bail out failed banks.

The events of the past few days have been momentous: The euro zone sovereign debt crisis has escaped from the peripheries and spread to Italy and Spain parts of the European banking system have frozen up US Treasuries have been stripped of their AAA rating, which may be the beginning of a process that leads to the loss of the dollar’s vital status as the world’s reserve currency.

There have been warnings that we may be in for a repeat of the calamitous events of 2008. The truth, however, is that the situation is potentially much bleaker even than in those desperate days after the closure of Lehman Brothers. Back then, policy-makers had at their disposal a whole range of powerful tools to remedy the situation which are simply not available today.

First of all, the 2008 crisis struck at the ideal stage of an economic cycle. Interest rates were comparatively high, both in Europe and the United States. This meant that central banks were in a position to avert disaster by slashing the cost of borrowing.

Today, rates are still at rock bottom, so that option is no longer available.

Second, the global situation was far more advantageous three years ago. One key reason why Western economies appeared to recover so fast was that China responded with a substantial economic boost. Today, China, plagued by high inflation as a result of this timely intervention, is in no position to stretch out a helping hand.

But it is the final difference that is the most alarming.

Back in 2008, national bal

Partly as a result, national debt has now urged past the 60 per cent mark, meaning that it is impossible for the British government to perform the same rescue operation without risking bankruptcy. Many other Western democracies face the same problem.

The consequence is terrifying.

Policymakers find themselves in the position of a driver heading down the outside lane of a motorway who suddenly finds that none of his controls are working: No accelerator, no brakes and a faulty steering wheel.

Experience, skill and a prodigious amount of luck are required if a grave accident is to be averted. Unfortunately, it is painfully apparent that none of these qualities are available:

Western leaders are out of their depth.peter oborne

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sIngApOrE

dOOmEd ? ? ? ?

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A Mighty Few

COUNTRY BILLIONAIRES

February 2011

2010 G.D.P.

In U.S. billions

NET WORTH

In U.S. billions

NET WORTH

As a percent of G.D.P.

India’s 55 billionaires command nearly $250 billion in wealth — a staggering sum relative

not only to the country’s gross domestic product, but to peers in bigger economies.

India

United States

China

Japan

Germany

Britain

Brazil

Russia

55

413

115

26

52

32

30

101

$247

1,518

230

76

246

94

131

433

14.3

10.0

3.9

1.4

7.4

4.2

6.3

29.0

$1,729

14,582

5,878

5,497

3,309

2,246

2,087

1,479

%

Sources: Forbes, International Monetary Fund THE NEW YORK TIMES

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In India, Tycoons Fuel Economic Growth at a Price
By JIM YARDLEY and VIKAS BAJAJ
MUNDRA, India — India is increasingly turning to the private sector to deliver the electricity needed to maintain rapid economic growth into the future. The country’s economy is growing at more than 8 percent annually, but is badly constrained by an inadequate power supply after years in which the government dominated the power sector and failed to keep up with demand.
The private sector is also playing a greater role in other areas once controlled by the state like telecommunications, ports, airports, banks and infrastructure.
This contrasts sharply with China, where huge state-owned enterprises dominate strategic industries and lead the country’s global expansion.
Within India, though, the success of private tycoons has created a paradox:
India’s moguls are essential to the country’s success. Yet their staggering wealth is made possible in part by their coziness with powerful politicians who help arrange environmental clearances and land use rights, and solve other difficult issues, leading to accusations of cronyism.
India’s billionaires control a considerably larger share of the national wealth than do the superrich in bigger economies like those of Germany, Britain and Japan. And India has 55 billionaires whose aggregate wealth of $250 billion is equivalent to almost a sixth of the nation’s annual economic output.
“There is an oligarchy developing that has an enormous amount of influence,” said Arvind Subramanian, an economic adviser to the government. “That is a matter of great concern. But in India, these are also the guys who are performing.”
Gautam Adani is India’s sixthrichest person, with a fortune valued at $10 billion. In 2009, his plan to build a power plant and coal mine in Maharashtra state was opposed by environmentalists, because the proposed mine site was in a forest near a reserve for endangered tigers.
India’s Ministry of Environment and Forests blocked the project.

The dispute underscored how often important national priorities — environmentalism versus expanding electricity — collide. India has the fifth-largest coal reserves in the world and depends on coalfired power stations for electricity, yet much of India’s coal lies beneath forests in areas populated by tribal groups. Rare is the project without protests, controversy or violence.

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In Debt-Ridden Italy,

Challenges to Prosperity

By LIZ ALDERMAN

PISA, Italy — Six years ago, the Swedish retail giant Ikea planned a 60-million-euro megastore just a few kilometers from where the Tower of Pisa leans into the earth.

Backers said the huge construction project, new roads and wave of shoppers would bring hundreds of sorely needed jobs to this bucolic corner of Tuscany.

But things got tangled — as they often do in Italy, where bureaucracy and politics can easily overwhelm economics.

Each application that Ikea filed seemed to require yet another. Each mandatory impact study begat the next. By May, when a local mayor had still not decided whether the company could get a building permit, Ikea put out word it would abandon the plan.

As Italy teeters on the edge of the European debt crisis, it can ill afford more debacles like that one. Otherwise, despite having the world’s seventh-largest economy, Italy may have little hope of outgrowing the staggering debt load that could threaten its financial future — and that of the euro monetary union.

As higher interest rates make it even harder for Italy to reduce its debt, the main recourse would seem to be faster growth.

“This is the only major issue for Italy now — to resume growth,” said Francesco Giavazzi, an economics professor at Bocconi University and a research fellow at the Center for Economic Policy Research in London.

Italy must not only encourage big corporate investments like the Ikea project, experts say, but it must also remove impediments that stifle growth in the thousands of small and medium-size companies in its economy.

One small-business man, Mauro Pelatti, says he has given up on expanding his business in Florence, an hour east of here. “Bureaucracy is so strong, and taxes are so high, that it’s virtually impossible,” said Mr. Pelatti, whose privately held company, Omap, makes parts for steel-stamping machines used on products like Vespa scooters.

Italy’s economy experienced paltry growth starting in the late 1990s, when the country’s manufacturing was overtaken by competitors in Asia. Then came the global financial crisis in 2007, which shrank Italy’s economy by more than 6 percent.

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American policy makers might learn a thing or two from Canada’s patient, hysteria-free pruning.

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A Way to Overcome Debt: Pruning for Economic Growth

Judicious Spending Cuts May Help Foster New Growth

By CATHERINE RAMPELL

A

It’s called economic growth. No need to raise taxes. Just get the economy growing the way it used to. Good luck with that.

Growth is in short supply these days.

“The basic issue is that the u.s. is on an unsustainable fiscal track,” says Dean Maki, the chief united states economist at Barclays Capital.

“From that point, none of the choices are fun.”

The most obvious choices, Mr. Maki says, are a painful reduction in spending, unpalatable tax increases, higher inflation or default.

None of that would be necessary if we could indeed restore economic growth.

Citizens would become richer and pay more taxes.

Et voilà! — a painless paying down of debt.

Before its economy crashed, Ireland was a star of this sort of debt reduction. In the 1980s, Ireland’s debt dwarfed its economy. Over the next two decades, though, that debt shrank to about a quarter of gross domestic product, largely because the economy was very strong.

“Ireland went from being, you know, the emerging market in a European context, to a very dynamic economy,” says Carmen Reinhart, a senior fellow at the Peterson Institute for International Economics and co-author of “This Time Is Different,” a history of debt crises.

But if spending must be reduced, it should be done with future growth in mind. The paragon of thoughtful, growth-minded fiscal consolidation is Canada, according to Paolo Mauro, a division chief at the International Monetary Fund and editor of “Chipping Away at Public Debt.”

Canada in 1994 undertook a comprehensive, McKinsey-style review of all of its federal spending to determine “where they were getting value for their money, rather than just doing across-the-board cuts,” Mr. Mauro says. Policy makers subsequently pared down Canada’s debt level from one of the highest in the Group of Seven to the lowest. Since Canada cut federal fat judiciously, it reduced its debt without much harm to growth.HAPPy soLu-TIoN To the debt troubles plaguing so many nations today does exist — in theory.

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Leaders move to reassure that US downgrade will not impact economies

NEW YORK

Australia Prime Minister Julia Gillard said yesterday that the Australian economy has “strong fundamentals” and could look forward to “strong economic growth”, reported the

France’s Finance Minister Francois Baroin said his country has complete faith in the US economy, even as the Group of Seven’s (G7) finance ministers and central bankers convene this weekend to discuss the global financial turmoil.

S& P’s downgrade to AAPlus on Friday drew an immediate lash-out from the US government, with a Treasury Department spokesman saying the firm’s analysis contained a US$2 trillion (S$2.4 trillion) error.

This was disputed by S& P, which said the change in calculation did not affect its decision to lower the credit rating.

“The primary focus remained on the current level of debt, the trajectory of debt as a share of the economy, and the lack of apparent willingness of elected officials as a group to deal with the US medium term fiscal outlook,” the firm said.

“None of these key factors was meaningfully affected by the assumption revisions to the assumed growth of discretionary outlays and thus had no impact on the rating decision.”

The S& P cut is likely to eventually raise borrowing costs for the American government, companies and consumers.

By calling the outlook “negative”, S& P also signalled that another downgrade is possible in the next 12 to 18 months.

A senior European diplomat said yesterday the G7 will confer by telephone, noting the need for international coordination.

Elsewhere, a senior Bank of Korea official said he saw no major short-term impact from the downgrade. The Finance Ministry said the downgrade will be on the agenda of an emergency meeting today of ministry officials, central bankers and regulators on the global financial turmoil.

In India, the Prime Minister’s Chief Economic Adviser said the country’s economic growth would not be affected— World leaders moved to play down the impact of the United States losing its top-tier AAA rating from Standard and Poor’s (S& P), saying the move — which had been expected for some time — will not affect their economic growth.Sydney Morning Herald.

“I don’t think India will be much affected beyond the temporary market jitters and we should still grow at 8.2 per cent (this fiscal year),” said Mr C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council.

However, the US “has to show that they have a credible plan of fiscal consolidation and clearly the recent deal is not enough”, he added.

A Japanese government official said on condition of anonymity that it saw no problem in the level of trust in US Treasuries.

China blasts US over debt problems, calls for dollar oversight by the cut, although the Finance Minister called the situation “grave”.AGENCIES

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China blasts US over debt problems, calls for dollar oversight

China roundly condemned the United States for its “debt addiction” and “shortsighted” political wrangling and said the world needed a new stable global reserve currency.

In a harsh commentary by the official

The “good old days” where the US government could “borrow its way out of messes of its own making are finally gone”, and further credit downgrades would very likely undermine the world economic recovery and trigger fresh rounds of financial turmoil,

British Business Minister Vince Cable on

Asian investors are likely to retain their US Treasuries holdings for now, with options limited by the region’s foreign-exchange rate policies.

“At least Treasuries have been doing well and they aren’t holding on to distressed assets,” said Mr Sean Callow, a senior currency strategist at Westpac Banking in Sydney.

Singapore-based chief economist at OSK-DMG Thomas Lam said the downgrade could “potentially quicken the likelihood of more diversification out of the US-dollar assets”, but given Asia’s currency interventions, portfolio investments by central banks will continue to head to Treasuries.

Xinhua news agency yesterday, China urged the US to cut military and social welfare expenditure.Xinhua wrote.BBC TV backed China’s call for a new stable global reserve currency, but said that for the moment the US dollar remained key.AGENCIES

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How Much is a Cruise Line Worth?

By Paul Motter

Published August 05, 2011

| FOXBusiness

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Norwegian Cruise Line, commonly referred to as NCL or Norwegian, filed for an initial public offering (IPO) last month and hopes to start trading on the Nasdaq sometime this year under the symbol NCLH. The cruise line will form a new company, NCL Holdings, to be traded as the holding company for the cruise line.

The company says it hopes to raise $250 million -- not a lot considering that its newest ship, Norwegian Epic, cost an estimated $1.2 billion. The line is also planning a new “Project Breakaway” to build two more new ships at about $850 million apiece.

NCL filed for an IPO last year, but changed its mind in March 2011, citing the effect of the Japanese earthquake on its Asian partner, Genting HK, a Malaysian company that runs the Asian cruise line Star Cruises and owns a 50% stake in NCL.

Genting previously acquired 100% of NCL in a dramatic bidding war back in 2000. At the time, there was already an NCL Holding trading on the New York Stock Exchange that went public in 1999 it owned both Norwegian Cruise Line and the smaller Orient Line. In 1999, Carnival Corp. launched a hostile bid for NCL Holding, offering shareholders a higher price than they could get on the open market. The bid was equal to $900 million at the time, and it looked like Carnival would win the day.

But a few days later a surprise player emerged: Star Cruises of Malaysia. The company acquired 20% of NCL Holdings overnight, and quickly increased its stake to 39%. It was not clear whether Star was working in concert with NCL to ward off Carnival, but in the end it didn’t matter since enough shares had been taken off the table to stop Carnival’s hostile takeover.

Once Star Cruises had sway with the board of directors and it took NCL Holdings private again to ward off future hostile takeovers. But then in 2007, Star Cruises sold 50% of NCL to Apollo Management, led by Leon Black, for $1 billion. Apollo had also just acquired Oceania Cruises (also for $1 billion) and would also gobble up Regent Seven Seas in 2008 (again for $1 billion). Apollo subsequently sold 12.5% of its stake in NCL to TGP Viking Fund.

Today, Apollo and TGP have a majority on the NCL board of directors and they want to take it public again. According to the S-1 prospectus, the managing partners of the new NCL Holdings only have to hold their shares for 180 days before they can sell them on the open market.

Will Carnival be waiting in the wings again? Carnival also tried to take over NCL in 1996 in a scheme to acquire $101 million in NCL junk bonds that paid 13% at the time. Carnival hoped the company might default on the bonds and place assets on sale. But NCL sold two ships before the bonds matured and managed to make good for the bondholders.

Even though it has tried twice before to acquire NCL, Carnival has grown dramatically since its earlier efforts. NCL only represents 11% of the cruise market, but Carnival Corp. -- which owns Carnival Cruise Lines, Cunard, Holland America, Costa, Seabourn, Princess and P & O Cruises -- already controls more than 51% of the worldwide cruise market. Royal Caribbean Cruises Ltd. owns most of what is left.

If either Carnival or Royal Caribbean tried to take over NCL now, it is most likely that U.S. or European regulators would raise antitrust issues.

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THE ENERGY STOCKS I BOUGHT THURSDAY/FRIDAY - AND WHY

So what do we retail investors do now?

Gut wrenching volatility in the markets due to gut-less politicians has left investors dazed – do we still buy the dips or this 2008 all over again?

I was a buyer on Thursday and Friday of my favourite oil producers and energy services companies. I see this steep market downturn as a crescendo of fear that had been building up in the markets over politics mostly – NOT as any kind of actual drastic economic downturn.

Now, I didn't waste all my bullets as I may be able to buy them lower in the next month, i.e. there could be a reset of valuations (Lord, please let there be a reset so we can get on with making money again!) but the many investors with lots of cash around would welcome that.

And the reality is that in my specialized sector, junior oil and gas valuations were already hit so hard in June that many of the stocks that I follow barely moved, telling me the reset in this sector is almost complete.

I'll tell you more about these purchases in a minute.

But first, I see that the economic numbers – especially when you look globally – are not that bad.

Credit Suisse reports that global emerging markets now account for 49% of global GDP – and with estimated trend growth of 9%, 7.5% and 4% in China, India and Brazil, those three economies alone would add 1.8 percentage points to global GDP if they grow at trend.

You don't read stuff like that in our financial pages. Our financial media is very biased towards shrill negative US and European bad news. (And most news reporters have never spent any time in business, doing real business – never forget that as you read the media. They are unionized staff who have not been trained to think like entrepreneurs so they don't see solutions, only problems. My degree is journalism -).)

US GDP is still positive, and most forecasters are now just calling for reduced growth, not recession. Of course, there could be another recession in the US, though I think investors will do better than workers as this will guarantee North American interest rates stay at zero for another 18 months. The market loves cheap money as much or more than a strong economy, and this will fuel stock market participation.

I think it will also help fuel corporate growth, and here's why – now corporate debt is more attractive than sovereign debt. So cheap corporate debt – already very cheap with 10 year + notes going out at 3% - will continue to allow whatever low cost growth consumer spending will support.

This mini-crash was mostly due to investors' uncertainty that political leadership and un-elected autocrats could contain the European debt problem.
(Being a politician isn't easy as you are elected on your integrity (or your party leader's integrity) but your job is to be a professional compromiser. Whether it's getting a business deal done or passing laws, you have to compromise with the other side to get a win-win. But the people who elected you don't see you that way. When was the last time you saw an election sign saying " I'll compromise for you!" ).

I find it funny that the common man has reduced his credit and increased his savings over the last three years (especially in the US), but big banks have continued to lend weak states like Greece et al hundreds of millions or billions of dollars. They remain vulnerable to collapse and as a result will likely have to reduce lending to their customers even more.

A perfect example of this is The Royal Bank of Scotland (RBS), whose collapse in 2008 sent junior market darling but heavily indebted Oilexco (a $20 stock at the time) into bankruptcy. Greece owes RBS just under US$1 billion.

This reduced bank lending in the coming year will reduce consumer spending, but it won't kill it. I believe a good chunk of that is now priced into the market (worst case we're at 9x PE for the S& P 500, now is 11.7x).

To me, worst case is that austerity measures in the western world remain a drag on overall equities for several years - but emerging markets continue to be strong, which will keep the oil price at a level that will reward growth in both producers energy services companies.

The market just wants clarity. Short term, it doesn't even care if it's the perfect solution. It knows everybody has to take a haircut on this debt, so just tell us the number for each party and let's get back to business. The global economic backdrop is strong enough that I believe these political crises that spill into the stock market are buying opportunities - though I confess I'm a lot more selective than I was six months ago.

I see two possibilities out of this week's drama, and both are positive for investors who bought stock the last two days. One is that the European debt problem here is so big and so immediate and so PUBLIC that some kind of concrete, credible action will be taken to resolve the issue. That would create a positive shift in market sentiment, even if it meant significant short term economic pain.

But some kind of action must be taken now, and even if it's NOT completely credible, I see that action (Italian PM Berlusconi's promise of a balanced budget and tackling welfare and labour reform would count as this) being rewarded by the market.

This would mean the index charts will look like a bouncing ball from these levels, and you use these instances to buy stock in your favourite companies.

So let's talk about my favourite companies – what did I buy this week?

I bought two types of stocks. One was energy services – these are the companies that do the drilling, the fracking, supply most of the hardware that producers need. The global shift to shale oil and gas production and horizontal drilling is still in its infancy. In North America it's really only become mainstream in the last 5-7 years.

And the energy services sector is still catching up to producers' demand for their products and services. Calfrac (CFW-TSX) is one of Canada's largest fracking companies, (but was NOT a company I bought or own), and they announced their Q2 numbers this week and they beat The Street's consensus cash flow by 74%! Canadian brokerage firm Raymond James says Calfrac is growing its capacity 48% this year – the demand is so strong for fracking by the energy producers. Their main growth was in the US, in the face of a very weak US economy. That's very bullish for the sector. Service companies also have pricing power – sometimes by as much as 5% per quarter Raymond James said in a report earlier this year.

The technology innovation that is coming out of the energy services sector -- steadily -- is astounding. There are companies that have technologies or tools that can get more oil and gas out of the ground or reduce time and costs, which increase profits and stock prices for producers.

These companies have huge sales backlogs now, and strong pricing power. Even if oil goes to $50/barrel (which it's not, it's going higher folks), the demand for these innovative services would not decrease.

The second type of stock I bought has yield. Both producers and service companies pay dividends, and with all this negative economic chatter, I believe interest rates will stay near zero for another two years, insulating yield stocks. Many dividend stocks dropped 10%-20% in intraday swings, and I was able to scoop up a juicy 10% yield! I missed another because I couldn't end my phone call at the time! Even big companies like Pembina Pipelines (PPL-TSX) had a 20% swing Friday.

The market may not have bottomed yet. Interbank lending rates are spiking (the TED spread) and PE levels for the S& P 500 are still, at 11.7x, above what they are at market bottoms (8-9x). Political indecision in Europe and the US could endure.

But this is not 2008. And there are great companies growing quickly with HIGH profit margins that went on sale this week which I believe I will profit from handsomely in the coming quarters.

P.S. In my newest video, I explain why the Global Shale Revolution has the new energy services sector booming… and why energy services stocks aren't actually dependent on the price of oil or gas to deliver huge profits for investors (unlike most oil & gas stocks). Click here to watch.
http://www.youtube.com/watch?v=PDXhGV3g2kE

-Keith

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THE ENERGY STOCKS I BOUGHT THURSDAY/FRIDAY - AND WHY

So what do we retail investors do now?

Gut wrenching volatility in the markets due to gut-less politicians has left investors dazed – do we still buy the dips or this 2008 all over again?

I was a buyer on Thursday and Friday of my favourite oil producers and energy services companies. I see this steep market downturn as a crescendo of fear that had been building up in the markets over politics mostly – NOT as any kind of actual drastic economic downturn.

Now, I didn't waste all my bullets as I may be able to buy them lower in the next month, i.e. there could be a reset of valuations (Lord, please let there be a reset so we can get on with making money again!) but the many investors with lots of cash around would welcome that.

And the reality is that in my specialized sector, junior oil and gas valuations were already hit so hard in June that many of the stocks that I follow barely moved, telling me the reset in this sector is almost complete.

I'll tell you more about these purchases in a minute.

But first, I see that the economic numbers – especially when you look globally – are not that bad.

Credit Suisse reports that global emerging markets now account for 49% of global GDP – and with estimated trend growth of 9%, 7.5% and 4% in China, India and Brazil, those three economies alone would add 1.8 percentage points to global GDP if they grow at trend.

You don't read stuff like that in our financial pages. Our financial media is very biased towards shrill negative US and European bad news. (And most news reporters have never spent any time in business, doing real business – never forget that as you read the media. They are unionized staff who have not been trained to think like entrepreneurs so they don't see solutions, only problems. My degree is journalism -).)

US GDP is still positive, and most forecasters are now just calling for reduced growth, not recession. Of course, there could be another recession in the US, though I think investors will do better than workers as this will guarantee North American interest rates stay at zero for another 18 months. The market loves cheap money as much or more than a strong economy, and this will fuel stock market participation.

I think it will also help fuel corporate growth, and here's why – now corporate debt is more attractive than sovereign debt. So cheap corporate debt – already very cheap with 10 year + notes going out at 3% - will continue to allow whatever low cost growth consumer spending will support.

This mini-crash was mostly due to investors' uncertainty that political leadership and un-elected autocrats could contain the European debt problem.
(Being a politician isn't easy as you are elected on your integrity (or your party leader's integrity) but your job is to be a professional compromiser. Whether it's getting a business deal done or passing laws, you have to compromise with the other side to get a win-win. But the people who elected you don't see you that way. When was the last time you saw an election sign saying " I'll compromise for you!" ).

I find it funny that the common man has reduced his credit and increased his savings over the last three years (especially in the US), but big banks have continued to lend weak states like Greece et al hundreds of millions or billions of dollars. They remain vulnerable to collapse and as a result will likely have to reduce lending to their customers even more.

A perfect example of this is The Royal Bank of Scotland (RBS), whose collapse in 2008 sent junior market darling but heavily indebted Oilexco (a $20 stock at the time) into bankruptcy. Greece owes RBS just under US$1 billion.

This reduced bank lending in the coming year will reduce consumer spending, but it won't kill it. I believe a good chunk of that is now priced into the market (worst case we're at 9x PE for the S& P 500, now is 11.7x).

To me, worst case is that austerity measures in the western world remain a drag on overall equities for several years - but emerging markets continue to be strong, which will keep the oil price at a level that will reward growth in both producers energy services companies.

The market just wants clarity. Short term, it doesn't even care if it's the perfect solution. It knows everybody has to take a haircut on this debt, so just tell us the number for each party and let's get back to business. The global economic backdrop is strong enough that I believe these political crises that spill into the stock market are buying opportunities - though I confess I'm a lot more selective than I was six months ago.

I see two possibilities out of this week's drama, and both are positive for investors who bought stock the last two days. One is that the European debt problem here is so big and so immediate and so PUBLIC that some kind of concrete, credible action will be taken to resolve the issue. That would create a positive shift in market sentiment, even if it meant significant short term economic pain.

But some kind of action must be taken now, and even if it's NOT completely credible, I see that action (Italian PM Berlusconi's promise of a balanced budget and tackling welfare and labour reform would count as this) being rewarded by the market.

This would mean the index charts will look like a bouncing ball from these levels, and you use these instances to buy stock in your favourite companies.

So let's talk about my favourite companies – what did I buy this week?

I bought two types of stocks. One was energy services – these are the companies that do the drilling, the fracking, supply most of the hardware that producers need. The global shift to shale oil and gas production and horizontal drilling is still in its infancy. In North America it's really only become mainstream in the last 5-7 years.

And the energy services sector is still catching up to producers' demand for their products and services. Calfrac (CFW-TSX) is one of Canada's largest fracking companies, (but was NOT a company I bought or own), and they announced their Q2 numbers this week and they beat The Street's consensus cash flow by 74%! Canadian brokerage firm Raymond James says Calfrac is growing its capacity 48% this year – the demand is so strong for fracking by the energy producers. Their main growth was in the US, in the face of a very weak US economy. That's very bullish for the sector. Service companies also have pricing power – sometimes by as much as 5% per quarter Raymond James said in a report earlier this year.

The technology innovation that is coming out of the energy services sector -- steadily -- is astounding. There are companies that have technologies or tools that can get more oil and gas out of the ground or reduce time and costs, which increase profits and stock prices for producers.

These companies have huge sales backlogs now, and strong pricing power. Even if oil goes to $50/barrel (which it's not, it's going higher folks), the demand for these innovative services would not decrease.

The second type of stock I bought has yield. Both producers and service companies pay dividends, and with all this negative economic chatter, I believe interest rates will stay near zero for another two years, insulating yield stocks. Many dividend stocks dropped 10%-20% in intraday swings, and I was able to scoop up a juicy 10% yield! I missed another because I couldn't end my phone call at the time! Even big companies like Pembina Pipelines (PPL-TSX) had a 20% swing Friday.

The market may not have bottomed yet. Interbank lending rates are spiking (the TED spread) and PE levels for the S& P 500 are still, at 11.7x, above what they are at market bottoms (8-9x). Political indecision in Europe and the US could endure.

But this is not 2008. And there are great companies growing quickly with HIGH profit margins that went on sale this week which I believe I will profit from handsomely in the coming quarters.

P.S. In my newest video, I explain why the Global Shale Revolution has the new energy services sector booming… and why energy services stocks aren't actually dependent on the price of oil or gas to deliver huge profits for investors (unlike most oil & gas stocks). Click here to watch.
http://www.youtube.com/watch?v=PDXhGV3g2kE

-Keith

x 0

-- Japan intervenes in foreign exchange market to push down yen

-- Finance minister says action was needed to stop " one-sided" moves in market

-- Dealers estimate amount at Y500 billion in the morning session

JAPAN JQE will spend 10 Trillion Yen in 2011

WHY wAstE S$34 million [peAnUts to JAPAN ? ? ? ?] in JAPAN and nOt spend on the pOOr sIngApOreAns ? ? ? ?

pharoah88 ( Date: 05-Aug-2011 14:03) Posted:

S’poreans give S$34m for Japan

WAY NE CHAN

waynechan@mediacorp.com.sg

SINGAPORE

The Singapore Red Cross (SRC), which has been appointed by the Ministry of Foreign Affairs as the lead agency to coordinate the Republic’s relief efforts to Japan, has so far received about S$34.5 million in donations from the public, including S$500,000 from the Singapore Government.

The SRC said this is the second largest amount it had collected for relief efforts and the largest for a single country.

The largest amount it has collected for disaster relief was S$84 million for the victims of the Asian tsunami in 2004.— A multi-purpose hallcum-evacuation centre. A temporary hospital. These are among recovery projects worth about S$34.4 million that will be launched by Singapore to help survivors of the earthquake and tsunami disasters in Japan’s Tohoku region.