Sitting here wishing it was a long weekend but no complains because Tuesday is also a holiday. One has to be contented with the little breaks which the government gives us because work life is one long journey.
Did any of you see the phenomenal rise of Artivision Technologies over the past 8 trading days? Ever seen a stock move up 400% in a matter of 8 short trading days? If you can ride on a few more of these stocks, you will shorten your retirement period by quite a few years. How many of these stocks are there? There was absolutely no sign of this stock delivering the returns it just did.
Listed on Catalyst in 2008, Artivision was a stock that promised plenty but did not deliver any. On average, the company has lost 4.5 million per year since listing and burning through its cash horde at record pace. It is currently sitting on 1 million cash and that will not last long. If Artivision does not place out shares any time soon, it will really be a shocker to me. The company has recently announced that it was in talks with a large social network company who is looking to monetize its assets. That has caused the share price to move so drastically. Considering Artivision is dealing mainly in video technology, it would only make sense for social networks to look to using Artivision's products but it is just madness that a stock that was only $0.05 a couple of weeks ago and it hit a high of $0.27 and closed at $0.25 on Friday. Hahaha. You cannot deny that stocks are just so unpredictable and lovely. This is not a solicitation for you to buy this stock, in fact I would caution on this because the price looks attractive for the company to finally raise money through equity placement. Just wanted to show how interesting things can get. Although I still like the Malaysian market more, but it is always nice to see a Singapore company show such interesting movements.
So what happened this week? Commodities staged a shortlived rally. If you bought silver at $34 like I called for it, you would have been able to sell it at $39. Now its back to its $34 level. You have missed the first rebound, not to worry, there will be more to come. Just allow the USD to continue its rebound. Like I said, the USD is the best gauge of whether the market is going to do well or not. Since it was so oversold, you can expect it to do well for at least a couple more weeks.
The same old stories are sill being told about how Greece is going to default and it is really playing like a broken record, repeating the same note over and over again. Greece is not the problem, trust me. So don't even bother wasting your time reading about it. I am more concerned with the US fiscal position and how long it can continue to maintain such a deficit and high debt levels. The debt ceiling in the US will be hit this monday and only has room over the next ten weeks before they run out of money. If they do not raise the debt ceiling, government spending will have to be cut in many places and the cost of debt will only rise when creditors wonder whether there are any default risks in the US govt. Pressure on interest rates will not do well for the country. That is just the beginning.
In recent weeks, I have been thinking more on the size of the Federal Reserve balance sheet and the bubbles that it is creating through the liquidity pumping into the system. The size of the U.S. Federal Reserve's balance sheet reached another record in the latest week, due to the central bank's plan to spur economic growth, Fed data released on Thursday showed.
The balance sheet - a broad gauge of Fed lending to the financial system -- expanded to $2.729 trillion in the week ended May 11 from $2.703 trillion the previous week. The central bank's holding of U.S. government securities
grew to $1.466 trillion on Wednesday from last week's $1.442 trillion total.
The Treasuries purchases were part of the Fed's second phase of quantitative easing, dubbed QE2, a $600 billion purchase plan meant to stimulate investment and growth. The central bank has signaled it will complete QE2 at the end of June, but will continue to reinvest proceeds from the bonds as they mature. Which means QE2 continues to linger on albeit at a slower rate.
The Fed's ownership of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and the Government National Mortgage Association (Ginnie Mae) totaled $927.02
billion. Mind you, these are not exactly credit worthy securities considering Fannie and Freddie are not in their best shape.
What I am trying to prove here is the size and quality of the portfolio within the Fed's balance sheet. Size is just gargantuan and quality is totally questionable. If you think Treasuries are high quality, then you must be the most ignorant investor in the world. US treasuries are probably the biggest ponzi scheme in the world. Using new money to pay old money, yet people are still willing to give them new money.
Do you know how much money is USD$2.7 trillion? How about we put this in perspective? It is equivalent to 794 DBS banks or 1897 SIAs or how about 660 Singtels. 332000 Heng Longs. Ok lets stop the math and just look at the sheer amount of money in the system. Do you know that amount of money in the system coupled with the money multiplier at work, that could double the Dow Jones Industrials given enough time. There are bubbles somewhere being formed right now and should they burst, what can the Fed and Treasury do? It is scary to think of it but we cannot ignore it. The good thing is, if we can figure out where the bubbles are being formed, we may be able to profit from them. Or if not we can also avoid them to prevent ourselves from being burnt.
Did anyone out there buy Heng Long after I called for it? Looks like the stock is going to continue its move up. It broke out of the $0.40 mark and it will continue to move because valuations are still quite reasonable and the company is still not operating at full potential. Look for it to test $0.50 and above. This is a company that will be able to price itself at a premium due to the niche nature of the business. Book value wise is $0.32 but it will definitely be priced at more than 1.5 times book value should the acquisition come through. Note that this is already considered very prudent on my part.
Personally, I wish I bought more of the stock but sad to say, resources are not the only thing that is limited in this world, apparently money is limited in my world too. Well all I can do now is to sit back and watch another value pick go straight up. There will be more to come, trust me. Too many good stocks out there, it is only whether you have the patience or not.
Enough for this week, lets hope I come back with a nice stock to talk about next week.
Have a great Vesak day holiday!
Best,
SVI
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