CHINA

China's GDP is about USD11 trillion (2014)

USA's GDP is about USD18 trillion (2014)

What will happen in 10 years time (if)

China average growth is 7% p.a. (1.97x) = USD22 trillion

USA average growth is 2.5% p.a. (1.28x) = USD23 trillion

FIGURES ARE ESTIMATE AND ROUND UP (FOR ILLUSTRATION ONLY).

Basically, China will become the economic power by 2025, and will overtake USA by 2026.  Well, this is merely mathematics.  The assumptions are linear, exactly like what the world said about Japan in the late 80s.  Japan will takeover USA by xxxx.  It never happened, even after 25 years later.  In fact, it fall behind much further than USA than in the late 80s.

Well, this is what economist good at, linear thinking.  Perhaps it will or not, but one thing we are sure, the assumptions is a TOTAL FLAW.  That is certain.  

BRIC(S)

Most of them are in deep trouble.  Over production.  Their currencies are hitting historical lows, Brazil is 10 years low, India is about 6 year low against US Dollar.  Russia, already collapsed economically.  South Africa? Not sure if it is doing well, but seldom heard about it.  China will be hit soon, mainly due to its PROPERTIES.  Lots of loans going to turn bad.  Chinese, like any other countries, wants to get rich in a quick way.  Only two feasible places, one is properties and the other is equity. 

However, 85% of investors/gamblers are retailers.  And only 8.8% of Chinese dable with equities. 

Lately the yo-yo on the Shanghai and Shenzhen stock markets is worst than any roller coaster ride.  I bet no one really know what is the ACTUAL INDEX NOW as some of the listed companies halted their trading.  And, the government seems encourage their people to gamble by their intervention such as no short selling, provide higher margin, allow halt trading, ease up on loan etc.

The markets is like a big CASINO.  Like properties, when too many speculators/gamblers/celebrities playing the stock markets, it reminds me of Malaysia in 1993.  No brainers, anything you touch goes up.  Of course, it depends how long can the gamblers last.

As we can see, Australia's currency is touching 6 years low (against US Dollar)

USA

How come US Dollar getting stronger against all the BRIC, Euro and Japan.  How come, when they printed so much, there is not much inflation, and I was told, with reserves in their bank now, it can cause an inflation of 1800% and yet, with all the QE and ZIRPs, nothing happen?  Instead of becoming "toilet papers", its currency soar.  Many economists predicted hyperinflation.

Well, that was linear thinking again.  The questions is, comparing USA with Euro, Japan, China and BRIC, who is the UGLIEST? BRIC is the manufacturer for USA, when USA in trouble, consumption will drop.  Many factories & raw material producers are OVERSUPPLIED.  USA is not obligated to continue to import further, because their private debt over GDP is 196%.  So, it got to slow down in imports.  Their oil and gas sector was also badly hit due to the collapse of crude oil price.

There was lots of money pumped in, but there was no velocity.  Most are stuck in the bank reserves or misallocated to the FINANCE SECTOR (hedge fund, pension fund, ETF, derivatives, carry trade and properties again).  The brilliant WALL ST gain the most from the QEs and ZIRP.

But bear in mind, some have come to an end.  Crude oil is one of them.  Those hedge funds betting on crude oil will have a pleasent shock of their life.

MALAYSIA

So, what is the impact of all the above to our lovely Malaysia, i.e. GDP of RM1.0 trillion (or today conversion at 3.81, USD0.26 trillion), not even consider a tiny fraction of Japan.  The last round of crisis, thanks to CPO and Crude oil, we are quite well protected.  CPO and Crude oil contribute about 30% to its GDP and it is significant.  

No worries, we are also helped by our exports in semi conductor, i.e. we have about 30% exports.  With the weaker ringgit, exports will improve.  Lets hope so.  Anyway, our ratings remain stable.

Not to mentioned, our political situation is not very stable.  Politicians spend 99% of their time to keep their job, do not have time to work out a PLAN B for the economic tsunami, which I believe it is needed.

BURSA MALAYSIA

Still in ICBC state.  Not going to be too great with CPO and Crude oil like this.  So, when they said Bursa is toppish, it is toppish.  So, be very selective and hold some savings for the financial tsunami.  Recently Insider Asia recommended DIGI.  DIGI gave 4.3% DY yearly.  The price needs to double in 7 years, then the compounded rate of return will be about 14.3%p.a. 

I still prefer to increase my capital slowly (I mean about 12-15% p.a.).  I can see some of the experts here are doing very well.  This expectation is realistic, for long term like 10, 20, 30 or 40 years.  Because, that is the timeframe I have in mind, rather than trading in and out.  The problem with trading (making huge profit in a year or two), it is very difficult to sustain consistent return for 10-20 years, because, if that person is so good, it would have done better than Warren Buffett and all the fund managers in town (I believe, there are not many).

So with a long horizon in mind, timing the market is no longer significant.  (However, I do advocate to keep some capital for rainy days, it may happen every 7 years due to global issues).  But I do advocate to have a plan an invest regularly (monthly or quarterly or half yearly or yearly).

UFUN

A friend asked me about it, makes 5 to 6x a year.  I congratulated him and told him, this UFUN will makes hundreds of millionaires in a few years time.  But I did hint to him, easy come easy go (short of saying it is another Ponzi scheme).  Where in the world can you expect such a return from a listed company in the long term.  This will outperform all the Warren Buffett in the universe.

NAIM

Another friend ask me about this counter, Naim Candera.  A property developer from Kuching.  Trading in a low PE of 4x.  During the peak, it trades >8X.  I told him, if he has holding power, minimum 3-5 years, and think they are capable to have growth, then go for it.

GADANG

I believe this counter is not bad.  Low PE, well diversified.  Decent ROE.  can consider.  However, this is not the theme for at least a few more years.