10:26 am - Market Report by Bill Wermine

Dear Traders,

We may be soon reaching an inflection point. Shanghai is trading at 35 times earnings while Shenzhen is at 45 times while both indexes are up over 90 % this year. Advise to take profits on your China Fund positions and move into gold.

These indexes are in an expanding bubble as sheep investors chase these indexes ever higher like sharks in a feeding frenzy. China markets are prone to sudden meltdowns- last week there was an 8 % drop at one point before recovering later in the week.

Should there be a savage 20 to 30 % correction in China this will pull down world stock markets including the Dow and to a minor extent the high flyers in the KLSE.

How do we preserve our capital in these dangerous times ?

Some talking heads with expensive suits on Bloomberg and CNBC say buy the US Dollar . These fellows are front running for their insider clients who are on the sell side. Remember any information that is free is suspect.

Unfortunately the Dollar Index is in liquidation mode having broken a major support @ 77 on course to a mutiyear low of 66. A few weeks ago I recommended you exit US Dollar currency positions- the advice still holds and buy gold and AUD . You may buy the GDX ETF fund or Am Precious Metals Fund.

George Bernard Shaw advised in 1928 " You have to choose between trusting the natural stability of gold and the honesty and intelligence of members of the government. I advise you, as long as the capitalist system lasts, to vote for gold, "he said.

This advice still stands.


Gold is propped up by ultra low interest rates around the world and massive amounts of money injections by central banks into the global money system.

Hedge funds such as Man are borrowing USD at interest rates close to zero and buying, the AUD at 3 % as well as commodities and stocks. This puts more pressure on the USD.

Do not be afraid of the KLSE corrections and shakeouts that are a natural act. They are the friend of the smart money as they allow ownership to transfer from sheep investors to market tigers. In my managed accounts am maintaining 20 %cash to exploit any shakeout. Will continue to hold our super blue chip dividend payers and Man AHL which is our port in the storm.

For those with Ameritade accounts you may buy the DBA - a grain comodities ETF fund. Soybeans have fallen over 30 % from the highs- and soybean stocks are historically low. With a weakening US dollar, there is limited downside but room on the upside.

This is a simple play- nothing complicated about buying corn, wheat, soybeans, palm oil, rice- no worry about a fraudulent balance sheet
and mulitmillion bonuses to crooked bankers. In fact futures contracts for grains on the CBOT are highly regulated, simple to understand and transparent unlike most other investments available to the investing public. This is also a hedge against currency volatility and stock market collapse.

Have a profitable week,
Bill

10:16 am - Market Report - Bill Wermine

Dear Traders,

While in Singapore for a business trip last month, I picked up a book Investing Against the Tide by Anthony Bolton, Bolton was head of Fidelity Asset Mgt in London before recently retiring. He is a humble low key individual who does not like public exposure and his book is his parting gift.

His performance for the fund he managed averaged over 20 % per year over 19 years which rivals Warren Buffet. His performance was steady and consistent with a maximum volatility of 18 % meaning his worse
loss was 18 %

He also used technical analysis to filter his fundamental picks. He said he was only right 60 % of the time and remember he had access to the best research, technology and business contacts. He also always established an exit plan on all his investments both for profit or loss.

What is interesting is a statement he made related trading to golf. In golf there is a term called Mulligan. Mulligan means you get a second chance after making a bad shot. In the stockmarket there are plenty of mulligans. Rarely do you only get one chance. If you miss the chance for a good entry it is likely you will get another chance. In otherwords it is a bad idea to chase a trade. Just be patient.

Presently the KLSE is extreemly overbought. The crowd is super bullish. All the news from CNBC, Bloomberg, The Star, The Edge etc. is bullish. The world wide recession is over proclaims most stock broker houses. In fact my seminar indicator tells me a different story. We have a full house for our Master the Markets Foundation Course Monday. This was without advertising or holding previews. In fact we have to turn people away because the room is full.

We are getting calls from previous preview attendees as far away as Penang/ Sabah and Johor, who have finally committed to attending after months of soul searching and worrying about paying our very reasonable seminar fee.-

My seminar indicator means we are close to the top. When we only get 5 or 6 attendees we are close to the bottom.

My advice is focus on high quality dividend payers and buy tests of recent supports on any bad news and carefully define an exit plan.

There is more risk on the downside than reward on the upside so you need to carefully manage your trades.

For our Wrap account holders, our AUD currency Man investments are earning good currency gains while the fund has had some losses. Should trends emerge the Man Fund should do well both from the AUD side and the fund performance.

The AUD/ RM rate appears ready to break the RM 3.00 level on course to RM 3.26. I also like the EWA, the Australian Sock market ETF as the Australian market has a lot of swing freedom for another 16 % rise but: Remember to wait for your Mulligan.


Have a profitable week ahead,
Bill

10:19 am - Market Report II by Bill Wermine

Dear Traders,

Saturday, I had the pleasure of attending the mid year market outlook by Jupiter Securities held at the Sime Darby convention center.

Pong Teng Siew, head of research gave an objective, common sense KLSE market outlook. He targets 1180- 1200 for the KLSE by end of August seems achievable as funds go out of US Dollar assets and into Asian equities. Foreign funds are currently accumulating quality blue chips and index heavyweights.

He feels Malaysia, Singapore, Thailand and Indonesia are in the beginning stage of a grinding recovery. Non performing loans in Malaysia as reported by Bank Negara are at 2.2 % while in the US are at 6.5 %. Malaysia has almost a zero exposure to sub prime mortages and derivatives and credit is available to worthy borrowers. This is also business positive and supportive for the KLSE

The Asian economies are on much sounder footing as compared to Europe, UK and USA and should recover faster from the world wide recession. Savings rates are also high and that provides a cushion.

He favors consumer goods companies such as Pet Dag- the petrol station operator that pay generous dividend- currently 5.3 % for Pet Dag. In my opinion Pet Dag is the best run petrol station business in Malaysia. I like the business cluster model that includes a Mac Donald, 7-11, Bank ATM machines, and high margin cash businesses that surround each Petronas.

These contribute to their bottom line. Sales and earnings continue to increase and they are due to raise their dividend again.

Why would anyone in their right mind hold an FD paying only 2 % interest with absolutely no chance for capital growth with companies such as Pet Dag are on offer at only a PE of 11.

Disclosure: (Am holding Pet Dag for myself and all managed and EPF accounts)


Here is a reply from my adviser Dr Dorn in reply to my flash alert to liquidate all holdings of the US ETF GLD: Here advice is not as blunt as mine but the message is the same.


Hi Bill,
These rumors about GLD have been circulating for some time. No one knows the truth except whoever is in charge at the ETF. Since they won’t tell us, they likely have something to hide. In these cases of uncertainty and lack of transparency it is always the better part of valor to err on the side of caution.
Regards

Dr Dorn www.thetradingdoctor.com

Martin and I are holding our Master the Markets foundation course next Monday and Tuesday 27 28 July- start at 10 AM- my office at Phillip Capital.

We have 8 sign ups and room for about 7 more. Any graduates are FOC to resit - notes if you do not have are RM 50. if you have any friend who wishes to attend we offer the rate of RM 588- pay at the door. (This is a generous discount from the published in rate of RM 788)

As seats are limited please inform Dolly 03 4252 4149 - if you or friend wishes to attend . On the 2nd day Martin will review his blog recommendations, Metastock filtering and CPO/CI futures backtest results.

Have a prosperous week ahead
Bill

10:16 am - Market Report - Bill Wermine

Dear Traders,

Excuse me from being paranoid- but it is better to a bit mentally unbalanced than lose money.

Those who bought GLD ETF on my recommendation, time to sell and move on. I don't care if you have a profit or a loss


Please read this insightful article below. GLD ATF Fund could blow up in your face like Bernie Madoff.

They may not have the physical gold to back up their positions and because of the way JP Morgan/HSBC structured the fund they are able to avoid the SC and CFTC regulations and compliance. They will not even allow an audit of their gold holdings - I ask what are they trying to hide ?

In Contrast:

GDX or Am Precious metals are made up of legitimate gold mining companies that produce real gold/ real sales and real earnings that can be audited unlike GLD. As these are listed companies they are subject to SC audit.


This is just another example of how the mom and pop sheep investor gets the shaft by the vested interests. I think Obama would be happy to let this happen. He would shed crocodile tears as gold is not the friend of the politicians who debase our currency.

It may not happen for a few months or years but I see problems here and better sell before a rush to the exits. If we are offered a VSA short selling opportunity it could give us windfall profits

GDX or Am Precious Metals is OK because that consists of mining companies and come under SC regulations and offer investor protection unlike GLD.

My investing philosophy is examine the facts and act accordingly at any hint of danger. I would rather have a wrong opinion or be accused of being paranoid than lose money.

I have no trust in big American, UK and European institutions and investment banks who maintain a front of respectability but in the back room are nothing more than gangsters running a high pressure boiler room operation designed to cheat and swindle the innocent under the protection of the regulators and powerful politicians who arrogantly thumb their noses at the electorate.

Take heed
Bill

Are GLD and SLV Legitimate Investment Vehicles? 49 comments
by: J. S. Kim July 16, 2009 about: GLD / HBC / JPM / SLV
J. S. Kim By this author:

First, let me preface this article by stating that it contains my opinions and speculation based upon no concrete evidence, but primarily upon information contained within the SLV and GLD prospectuses, and secondarily upon instincts cultivated over a decade of research into gold and silver markets. While there is no smoking gun regarding some of the issues I raise in this article, there is plenty of smoke.

Ever since the launch of the US gold ETF, GLD, in November, 2004 and the launch of the US silver ETF, SLV, April 2006, a debate has raged in analyst circles regarding the legitimacy of these two investment vehicles as a proxy for physical gold and physical silver. Though all evidence against investing in these two trusts has been entirely circumstantial, plenty of red flags exist in both the GLD and SLV prospectuses that should steer any logical, rational human being that wishes to own gold and silver away from these two investment vehicles.

Conflicts of Interest
Let’s begin with the obvious. Is it not a huge conflict of interest that JP Morgan (JPM), a bank that perpetually ranks among the largest short positions against silver on the COMEX, is the custodian for the iShares Silver Trust (SLV)? According to silver analyst Ted Butler, JP Morgan is consistently among the one or two U.S. banks that hold more than 80% to 90% of the entire commercial net short position in COMEX silver futures. If you have positioned yourself to make huge profits from drops in the price of silver, is it reasonable for you to simultaneously desire investors to buy more physical silver (if indeed the SLV holds the amount of physical silver it claims)?

Is it also not a conflict of interest that HSBC (HBC) bank, a bank that allegedly holds some of the largest short positions against gold on the COMEX, is the custodian for the SPDR Gold Trust (GLD)? If these banks profit when gold and silver drop, and they manage the largest ETFs in the US regarding these respective metals, is it unreasonable to state that these two banks should be barred from acting as custodians of the GLD and SLV? In fact, how is this situation any different than Goldman Sachs’s (GS) actions in the past when they originated CDOs and then made a fortune by shorting them, actions that back then, were apparently unknown even to the firm’s own traders? On the surface, it certainly appears to be another classic case of the fox guarding the hen house.

Alice in Wonderland Prospectuses

I have maintained for a long time now, ever since I carefully read the GLD and SLV prospectuses, that any investor that buys the GLD and the SLV and believes that these two investment vehicles are as risk-free and as sound as purchasing physical gold and physical silver is highly delusional. I call the prospectuses of the GLD and the SLV “Alice in Wonderland prospectuses” because it is literally impossible to ascertain what information contained within them is fact or fiction. Of course, investment advisers that sell their clients the SLV and GLD depend upon their customers not reading the prospectuses, or perhaps even reading them, but not understanding them. Some may say that the word delusional is a harsh term, but a mere glance at the GLD and SLV prospectuses explains my use of this term. Both the GLD and the SLV prospectus contain the following two statements:

“Neither the Securities and Exchange Commission [SEC] nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense” (emphasis mine); and

“The trust is not an investment company registered under the Investment Company Act of 1940. The trust is not a commodity pool for purposes of the Commodity Exchange Act, and its sponsor is not subject to regulation by the Commodity Futures Trading Commission as a commodity pool operator, or a commodity trading advisor.

Furthermore, the SLV prospectus additionally states, “As an owner of iShares, you will not have the protections normally associated with ownership of shares in an investment company (emphasis mine) registered under the Investment Company Act of 1940, or the protections afforded by the Commodity Exchange Act of 1936.”

Does anyone else besides me not find it ludicrous that both the SEC and the CFTC have not examined either the GLD or SLV prospectus to determine if it is truthful or complete, and that in fact, any claims that the prospectus is truthful and complete is a “criminal offense”? So with nothing in the marketing materials of how these trusts operate or what exactly they buy on behalf of shareholders vetted by an independent third party, how is it that both of these respective trusts are still allowed to cumulatively sell tens of billions of dollars worth of shares to shareholders based upon a prospectus that could possibly be a complete fabrication?

Would you buy a house if you were handed a report that stated the house was structurally sound, there were no harmful gases leaking from the ground, the water source was safe, and no murders were committed inside or on the house grounds within the past year, but were then subsequently handed a disclaimer that stated: “No one has determined whether the information contained in these reports is truthful or complete. Any representation to the contrary is a criminal offense”? If you answered no to this question, then there is absolutely no way that you should believe that buying the gold ETF and the silver ETF is the same as buying physical gold and silver, or even a proxy for buying physical gold or silver.

Multiple Claims on the Physical Gold and Physical Silver Held on Behalf of GLD and SLV Shareholders?

The appointed custodians of the SLV and the GLD, responsible for safekeeping the silver and gold bars owned by the trusts, respectively are JP Morgan and HSBC Bank USA. The GLD prospectus states, “Gold held in the Trust’s unallocated gold account and any Authorized Participant’s unallocated gold account will not be segregated from the Custodian’s assets.” Only Authorized Participants, and no shareholders, have the right to redeem shares for actual gold.
In my opinion, there are several potential huge problems with this arrangement. Physical gold held by the GLD should be held in allocated accounts specifically for the trust. The fact that physical gold held for the GLD may be held in unallocated gold accounts where gold is not segregated from the Custodian’s assets may mean that multiple entities have claims on the same gold bars. In theory, the gold held in the Custodian’s vaults may be used for delivery against shorts they hold in the futures markets if necessary even though GLD shareholders have a claim on this gold.

A mechanism to apply the fractional reserve banking system to physical gold, an action that many thought impossible to execute with physical gold, may actually be occurring through the gold ETFs. While the prospectus states that “Authorized Participants Unallocated Accounts may only be used for transactions within the trust”, it does not specify how the custodian may use this gold.

In analyzing the SLV prospectus, the following statement can be found: “The trust does not trade in silver futures contracts on COMEX or on any other futures exchange. The trust takes delivery of physical silver that complies with the LBMA silver delivery rules. Because the trust does not trade in silver futures contracts on any futures exchange, the trust is not regulated by the CFTC under the Commodity Exchange Act as a ‘commodity pool’, and is not operated by a CFTC-regulated commodity pool operator.”

Elsewhere in the SLV prospectus, the following claim is also made: “Accordingly, the bulk of the trust’s silver holdings (emphasis mine) is represented by physical silver.” If the bulk of the trust’s silver holdings is represented by physical silver, what constitutes the “remainder”? Clearly, the SLV prospectus states that there is a “remainder”. If you read this statement carefully, the statement clearly refers to the “trust’s silver holdings.” Thus, this statement implies that some of the SLV’s funds are allocated to something else other than physical silver. So what is the rest of the trust’s silver holdings? Paper silver future contracts, air, or something else?

But even were the bulk of the SLV’s holdings physical silver, remember that this claim could be false and still contained in the prospectus due to their qualifying statement at the beginning of the prospectus that:

“Neither the Securities and Exchange Commission [SEC] nor any state securities commission has approved or disapproved of the securities offered in this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.”
Perhaps this is the reason why the prospectus warns: “Investors in the trust do not receive the regulatory protections afforded to investors in regulated commodity pools, nor may COMEX or any futures exchange enforce its rules with respect to the trust’s activities. In addition, investors in the trust do not benefit from the protections afforded to investors in silver futures contracts on regulated futures exchanges.”

The very structure of the GLD and SLV ETFs has always bothered me as the structures of these trusts are reminiscent of Vatican City, a completely sovereign entity subject only to its own laws and rules that operates in relative secrecy. I have always believed that the opacity of the operations of the GLD and the SLV would allow the custodians of these trusts, if they so desired, to execute manipulative schemes harmful to the trusts’ shareholders in much the manner that Goldman Sachs shorted subprime mortgages at the same time it was selling CDOs backed by subprime mortgages to its clients.

Where is the Gold?

Furthermore, more suspicion should be raised by the prospectus description of where the gold that is purchased on behalf of GLD shareholders is held. The prospectus states that “the Custodian has agreed that it will hold all of the Trust’s gold bars in its own London vault premises except when the gold bars have been allocated in a vault other than the Custodian’s London vault premises” (emphasis mine). This stuff is too good even for a skeptic like myself to make up. The prospectus then goes on to explain that other vaults allowed may reside at the Bank of England, Brinks Ltd., Via Mat International, and LBMA (London Bullion Market Association) market making members, and that in turn, these sub-custodians may appoint further sub-custodians to hold the trust’s gold if they so desire.

In regard to ensuring that the gold actually exists, the prospectus then states that “the Trustee may have no right to visit the premises of any sub-custodian for the purposes of examining the Trust’s gold bars or any records maintained by the sub-custodian, and no sub-custodian will be obligated to cooperate in any review the Trustee may wish to conduct of the facilities, procedures, records or creditworthiness of such sub-custodian.” In other words, the gold reputedly held by the GLD on behalf of shareholders may be held on the moon and no one would have a right to know this but the custodian.

In fact, given the entirely suspicious elements of these prospectuses, were every investor to liquidate their positions in the GLD and SLV and take their cash and buy physical gold and silver instead, I would speculate that the price of gold and silver would rise substantially, though according to the prospectuses, this is an event that should not happen under any circumstance. Now, according to a GATA report by Adrian Douglas, it appears that there may actually be grounds for my past speculations regarding the fact that the GLD and SLV funds may actually be used to help suppress the price of gold and silver on the futures markets.
Alchemy: Turning Physical Gold into Paper

According to a July 11, 2009 article titled “The Alchemists”, Douglas states: “delivery notices at the COMEX cannot be reconciled with movements of metals from and into the warehouse. Clearly these are not going to match on a daily basis, just as orders into a factory will not match shipments out on any given day, as there is a time lag. But when averaged over a month, the “flow” of metal inventory should be comparable to the delivery notices issued. This is just basic accounting. But I have observed that reconciliation is almost impossible with the COMEX data. The only explanation I could think of is that settlement of contracts must be bypassing the warehouse. But how could this be possible, as I thought all contracts had to be delivered via a COMEX registered warehouse?”

In an attempt to reconcile this discrepancy, Douglas asks the all important question of what qualifies as “physical gold” according to COMEX guidelines. Douglas believes he has found a loophole in Exchange Rule 104.36, which governs exchange of futures for physicals (’EFP’) transactions on the COMEX Division. Exchange Rule 104.36 “refers to a ‘physical commodity’ as one of the required components of an EFP transaction but also indicates that the physical commodity need only be substantially the economic equivalent of the futures contract being exchanged.”

Exchange Rule 104.36 further states, “The purpose of this Notice is to confirm that the Exchange would accept gold-backed exchange-traded funds (’ETF’) shares as the physical commodity component for an EFP transaction involving COMEX gold futures contracts, provided that all elements of a bona fide EFP pursuant to Exchange Rule 104.36 are satisfied.”
An EFP transaction is an Exchange of Futures for Physicals [EFP] whereby the buyer or seller may exchange a futures position for a physical position of equal quantity. EFPs may be used to either initiate or liquidate a futures position. Thus, quite incredulously, Douglas has discovered that COMEX allows for paper ETF gold shares to pass as “physical gold” in EFP transactions that are allowed to close out futures positions.

Again, if I understand Douglas’s assertion correctly, this could conceivably allow a firm like JP Morgan to open up massive shorts against gold in the COMEX markets and to close out their own short positions by delivering shares of a gold ETF in an EFP transaction. If this has indeed occurred in the past, then this loophole would easily explain why, in the past, gold ETF inventories have curiously risen or remained virtually steady during periods when the price of gold futures contracts on the COMEX was plummeting. As Douglas stated in his paper, this would indeed be the ultimate alchemy of regulating gold prices by turning physical gold into paper. Instead of purchasing a long futures contract to cancel out a short futures contract, gold ETF shares could be purchased to achieve the same effect.

The CFTC Should Investigate the GLD and the SLV, Audit their Holdings, and Report Their Findings to the Public

Thus, if the new CFTC Chairman Gary Gensler is truly sincere in his public comments about increasing transparency in the commodity markets, I suggest he begin with an investigation of the unregulated SLV and GLD ETFs to
(1) Determine the exact composition of the holdings within these trusts; and
(2) Determine if the custodians of these ETFs are engaging in activities outside of those stated in their prospectuses to unduly influence and / or manipulate the price of gold and silver markets.

It is entirely ludicrous to allow the custodians of these two ETFs to operate with zero outside regulatory oversight given the numerous troubling statements in both of their prospectuses, the tip of which I’ve explored within the realm of this article. If these trusts are operating according to the statements made within their respective prospectuses, then they should have nothing to hide and therefore should welcome an independent audit of their vaults to dispel all naysayers. Of course, since there is a complex web of custodians, sub-custodians, and sub-custodians of the sub-custodians, perhaps it would be impossible to conduct such an audit.

The latest data reported on July 8, 2009 by the SPDR Gold Trust, the GLD, states that 1,109.81 metric tons of gold are being held on behalf of GLD shareholders. In some manner, an independent auditor should be allowed to confirm that the custodian of the GLD holds 1,109.81 metric tons of gold that have no claims on it other than the GLD shareholders. If this happens, then all speculation regarding the GLD ETF will disappear into the sunset.
Until then recall this 2005 story about silver custodian Morgan Stanley:

NEW YORK, June 12 (Reuters) – Morgan Stanley plans to settle a class-action lawsuit, brought by clients over the purchase and storage of precious metals, in a deal worth $4.4 million, according to a court filing. The proposed settlement, which still needs to be approved by the federal court in Manhattan, includes a cash component of $1.5 million and economic and remedial benefits valued at about $2.9 million, according to the filing on Monday.
The lawsuit, filed in August 2005, alleged that Morgan Stanley had told clients it was selling them precious metals that they would own in full and that the company would store. But Morgan Stanley was actually making either no investment specifically on behalf of those clients or making an entirely different investment of lesser value and security, according to the complaint (emphasis mine).

Morgan Stanley was not immediately available for comment. But it has argued that there were no violations of law and no default or failure to perform or deliver precious metals, according to the filing. The suit was filed by Selwyn Silberblatt, on behalf of himself and others, who bought precious metals — gold, silver, platinum and palladium in bullion bar or coins — from Morgan Stanley DW Inc. and its predecessors and paid fees for their storage, according to the filing.
The suit covers investors who did so between Feb. 19, 1986, through Jan. 10, 2007. Silberblatt, a resident of Maine at the time of the complaint, bought silver bars from Morgan Stanley during the period.

Owning the GLD and SLV is Not the Same as Owning Physical Gold and Physical Silver
In the end, as long as the GLD and SLV prospectuses are allowed to contain misinformation if it so desires according to the words contained within their own prospectuses, then GLD and SLV shareholders may find themselves holding nothing but a bag of hot air just like Selwyn Silverblatt. Furthermore, as long as the issues I broached in this article remain unresolved I imagine that the debate will continue onward about the legitimacy of the GLD and SLV ETFs.

Undoubtedly, given the opinions I presented in this article, I would be highly curious to see the outcome and effect upon gold and silver prices were every shareholder of the GLD and SLV to exchange their shares for physical gold and physical silver instead.

There will always be vast amounts of paper gold and paper silver available to be sold, but only a limited amount of physical gold and physical silver. Perhaps this is why the real thing is becoming increasingly difficult to come by these days. On Tuesday, the US Mint once again reported that it has temporarily suspended minting of nearly all its gold uncirculated and proof coins and nearly all of its silver uncirculated coins due to very limited availability of blanks. As the saying goes, with gold and silver, “Get it while you can!” Just ensure that the gold and silver you buy clanks, not floats, when you drop it.

10:52 am - Market Outlook by Bill Wermine

Dear Traders,

Last week, I shared some research on Dopamine by Dr Dorn, a psychaitrist and trader from Arizona. www.thetradingdoctor.com.

Dopamine is the chemical that is released in our brain when our greed is stimulated

Dopamine is a powerful drug perhaps like cocaine and we need to be awaire of its dangers and affects that can cause us to lose our reason and lose our money in the markets. It can cause us to buy the high because of greed.

This week will share Dr Dorn's research on Serotonin, the fear chemical. Our brain releases this chemical when we experience fear- it is so powerful that it can cause us to panic and sell at the low. If we have a period of losses it can cause us to withdraw from the market into a shell and we miss good trades because we are afraid to pull the trigger.

I am not a medical professional but I know this is true because I have suffered the effects of these powerful chemicals. Through long and costly experience, I have found ways to overcome the problems of dopamine and serotonin and I share with you that having a trading plan and a mechanical system with fixed backtested rules are 2 ways. Maintaining your good health by diet, exercise and taking frequent holidays is another.

Below is Dr Dorns answer to me and her research. If you have any psychological issues you should subscibe to her service.
as trading in my opinion is 90 % psychology. Her website is below. If you wish me to send you the attachments supporting her research please let me know.

Serotonin is a chemical whose levels in the brain are decreased in the presence of depression. Studies have shown low levels of serotonin in people who are suicidal or who have committed suicide. In other words, in the presence of low serotonin, people tend to retreat. They become either depressed or anxious or both. Small stimuli are magnified and there is a general sense that something is not right and that an otherwise-innocuous stimulus is something to be feared.
VERY very simply—the way that serotonin decreases in the brain is this: Ordinarily serotonin is released at nerve endings in parts of the rat brain and also in other parts of the brain. Brain cells communicate electrochemically. The first attachment shows a two nerve cells—a sender and a receiver. The serotonin is relapsed into the space between the nerve cells. This space is called a synapse as shown in the second attachment. There are as many synapses in the brain as stars in the known universe, so showing just one is pretty simple—but you get the point!)

In a normally-functioning brain, t serotonin released into the synapse by the sending neuron, taken up by the receiving adjacent nerve cell and the transmission continues. This serotonin transmission from sender to receiver ensures a high degree of “normal” mood control.


When something happens ( say loss of money, death of a loved one or something related to loss), the serotonin from the sender sell does NOT get taken up into the receiver cell. Instead, it get taken up by the sender cell! In other words, there is serotonin “reuptake” by the sender cell and the receiver cell never gets the message. Smooth transmission along serotonin nerve cells stops. Depression, sadness, anxiety and fear results from this. It is a failure of what is called “serotonin reuptake.” Many medications prescribed for depression ( Prozac, Paxil, other anti-depressants) are called SSRIs. This means that they are :Selective Serotonin Reuptake Blockers. In other words, they prevent the REUPTAKE of serotonin by the sender cell, and allow the serotonin to get into the synapse, be taken up by the receiver cell and the smooth transmission to proceed.

Also, it is good to know that the majority of both dopamine and serotonin transmitting neural nets are in the primitive rat brain and its connections. Additionally, we believe there are more than 300 brain chemicals ( so-called neurotransmitters) so serotonin and dopamine, although the best studied so far, may be just the tip of the iceberg re: mood control by our most powerful trading tool—the human brain!

So- in the presence of fear, anxiety or depression, serotonin transmission essentially crashes. To make matters worse, it is believed that the dopamine transmission also crashes—a double whammy as it were!IF you would like me to expand on this further, or to write something special for your group, please let me know, Bill?Otherwise, please feel free to use this with a mention of me and my site: www.thetradingdoctor.com.

The KLSE has been resilient in the face of a 10 % drop in the Dow and the onslaught of bad news, pessimism and currency volatility. What is Malaysia doing right that the US is not doing ? Obviously, large funds such as Aberdeen Asset Mgt and Fidelity who are slowly moving into the KLSE must know something that the crowd of pessimists and doom sayers do not know.
Continue to focus on only the highest quality blue chip dividend shares and carefully manage your risks on these positions.

We recently took profit on all our F & N positions and I plan to reestablish should supports be tested. I like their dividendand that stimulates my Dopamine. By the way it is OK to be greedy but manage your positions.

Avoid all speculative shares that have risen quickly in the last 2 months. I know the media has been hyping many lower quality shares lately as smart money is offloading their low quality inventory to the sheep. Remember the media is the tool of the smart money. In the US it is CNBC and CNN. - Jim Cramer is like the hungry wolf who leads the crowd of retail sheep traders to the slaughter house.
Have a prosporous week,
Bill

9:33 am - Market Outlook by Bill Wermine

Dear Traders,

Expect a 300 to 400 drop in the Dow and a drop in UK European markets and a short rally in the USD in the short term as fear grips the markets - perhaps to mid August. Use this rally to offload any US Dollars or US assets - central banks around the world will use any rally to offload their USD.

The US economy has not bottomed despite the talking heads on CNN/ CNBC and Bloomberg. Unemployment is at a 26 year high, the average work week in June fell to 33 hours, the lowest on record since 1964, house prices are still falling, foreclosures are up, California is bankrupt, the government has nationalized the auto companies, Citi Bank, AIG, Fanny Mae and may soon pass a cap and trade bill which will increase taxes, create a huge new bureaucracy and raise the prices of energy-


My brother just retired and took a holiday accros America. He told me of boarded up shopping complexes and a mood of uncertainty-

The US is moving to socialism the same as Europe. It will mean more regulations, less freedom and slower growth.

The KLSE is holding up well and use this opportunity to sell all your speculative shares- especially those that have had a good run. Only hold super blue quality dividend shares.

For CPO and CI futures traders, I wish to share some advice from Dr Janice Dorn, Trading Psychaitrist and writer of the Trading Doctor.


When I first started trading grain futures 20 years ago, I noticed a pattern in my trading. Every time I made a big profit- I would give most of it back on the next trade.

This happened several times and cost me a lot of hard earned profits and I never knew the reason. I finally committed to taking a holiday every time I made a big winner and stop trading for at least a couple of weeks. My account grew after this but even so I never knew the reason until reading Dr Dorn's blog about a month ago.

The reason is that we have a chemical in our brain called dopamine. The word dope comes from this word. Dopamine is the greed chemical. A big winner will release this chemical and in order to get another dopamine fix we will aggressively get back into the market to make another kill. Emotion will blind us. We will disregard our trading plan. We will forget about position sizing.
and we all know the result.

The reason Genting casino has all the lights, and 3 million dollar jackpot signs, Mercedes S class cars waiting to be won is to stimulate player's dopamine. The world class entertainment are all designed to release dopamine and get us to lose all our money at the tables.

There is another chemical in our brain called serotonin. This is the fear chemical. It happens after a big loss and can cause us to crawl into our shell and make us afraid to pull the trigger. I am not sure how this chemical works and will ask Dr Dorn to clarify.

If you wish to subscribe or wish information contact her at support@thetradingdoctor.com . She is the real deal.

Have a profitable week ahead
Bill

11:16 am - Market Report by Bill Wermine

Dear Traders,


What happens to the AUD effects what happens in Malaysia, as Malaysia is weighted heavily in the commodity sector

Attached is the AUD chart showing a strong stage 2 advance with a near term target of 8600 vs the USD and support at 7500.
The RM/ AUD should soon breech the 3.00 resistance.

Most of the talking heads on CNBC and Bloomberg are bearish the AUD even though the technical chart has a bullish message.
Remember the media is a tool of the smart money who use news to manipulate the sheep. Why should they want the public to push up the price against their own buying ? This is bad for business

In contrast to the bearish comments about the AUD , Kevin Rudd, PM of Australia said Australia is doing better than most economies during the worst global recession in 75 years.

The IMF and OECD released reports yesterday upgrading its Australia growth forecast for 2009 to 0.5 % from a decline of 1.4 %

Rudd said that the governments early and decisive action had helped cushion the Australian economy from the worst of the global recession.

In and of itself I would ignore comments from politicians but in this case the technical chart of the AUD confirms his comments
and shows demand is stronger than supply. It reflects demand for the products Australia sells including gold, iron ore and commodities. Remember charts are the truth of the market. Everything else is an opinion or a lie.

In contrast growth in the US/ Europe/ UK and Japan according to the IMF will be negative and this should cause capital outflows into Asian currencies.

The KLSE should benefit. In fact there has been an uptick in foreign funds flowing into Malaysia to take advantage of beaten down companies. Buying quality dividend shares on dips is a reasonable strategy according to Pong Teng Siew, head of research for Jupiter and I whoeheartedly agree.

Have a profitable week ahead ,

Bill

11:14 am - Market Report by Bill Wermine

Dear Traders,


What happens to the AUD effects what happens in Malaysia, as Malaysia is weighted heavily in the commodity sector

Attached is the AUD chart showing a strong stage 2 advance with a near term target of 8600 vs the USD and support at 7500.
The RM/ AUD should soon breech the 3.00 resistance.

Most of the talking heads on CNBC and Bloomberg are bearish the AUD even though the technical chart has a bullish message.
Remember the media is a tool of the smart money who use news to manipulate the sheep. Why should they want the public to push up the price against their own buying ? This is bad for business

In contrast to the bearish comments about the AUD , Kevin Rudd, PM of Australia said Australia is doing better than most economies during the worst global recession in 75 years.

The IMF and OECD released reports yesterday upgrading its Australia growth forecast for 2009 to 0.5 % from a decline of 1.4 %

Rudd said that the governments early and decisive action had helped cushion the Australian economy from the worst of the global recession.

In and of itself I would ignore comments from politicians but in this case the technical chart of the AUD confirms his comments
and shows demand is stronger than supply. It reflects demand for the products Australia sells including gold, iron ore and commodities. Remember charts are the truth of the market. Everything else is an opinion or a lie.

In contrast growth in the US/ Europe/ UK and Japan according to the IMF will be negative and this should cause capital outflows into Asian currencies.

The KLSE should benefit. In fact there has been an uptick in foreign funds flowing into Malaysia to take advantage of beaten down companies. Buying quality dividend shares on dips is a reasonable strategy according to Pong Teng Siew, head of research for Jupiter and I whoeheartedly agree.

Have a profitable week ahead ,

Bill

10:15 am - Market Outlook by Bill Wermine

Dear Traders,

Today we held our Traders Club meeting in Penang at the Evergreen Laural Hotel with a reasonable response and an insightful market outlook from Mr Pong of Jupiter Securities.

His outlook was mildly bullish and he forecasts an L shaped recovery in months ahead. The US banking problems are being worked out. Sentiment is gradually improving. Weekly US unemployent numbers are dropping. The KLSE stockmarket climb will be slow with many bumps and will correlate with the Dow Jones recovery. He is not in the camp of the doomsters that the March lows will be tested

He recommended just as I and Martin to deal in high quality dividend shares and manage risks.

Of the 17 graduates who attended our club meeting today only one is taking advantage of the 0.05 % commission rates that Jupiter charges. Some are paying 0.6 % which is 12 times higher than the Jupiter commission and some 0 .42 with some on line brokers. Wake up and get real. Call Julian at 03 2034 1888 to open a Jupiter on line account and start adding to your bottom line

Trading is a business and to succeed we need to manage our costs. We must pay wholesale(tiger) rates not retail (sheep) rates.

With Jupiter if you trade size you only need 1 tic to make a profit.

Despite the doom and gloom, Penang locals, like Singaporeans are resilient. The have high savings rates, are very thrifty, are motivated to gain trading knowledge and based on those who came to our presentation today are optimistic for a brighter future down the road.

For those who wish to actively manage and diversify their assets, Man has launched a new AHL capital guarantee fund which will close on 3 July. It is in AUD which is in a recovery mode so you have the potential to make money on the currency as well as fund performance.

Performance on AHL was mildly positive in May after 3 months of losses however the AUD has made a dramatic recovery versus the RM so we gained overall. Attached is the fact sheet and give me or Martin a call if you wish to invest.

Have a profitable week
Bill

9:55 pm - Market Outlook by Bill Wermine

Dear Traders,

Our next Traders Club meeting will be on Saturday 20 June in Penang at the Evergreen Laural Hotel from 10 to 1 PM.

Mr Pong, Head of Research for Jupiter Securities will present his market outlook for the KLSE and commodities , Martin will present his gold timing system for futures, physical gold and Am Precious metals fund.

I will play a video clip on bull riding, the most dangerous sport on the planet- (no rules, no steroids, no referee, and sometimes the result is death or crippling injuries to the rider) and we will have a group discussion as to how trading compares to bull riding.

If you have any questions or concerns about the markets, trading: please bring them to the meeting

When I started in this business in the 1970s, GM was the lead indicator for the stock market. GM' s direction was the direction for the economy and stock market. GM was the biggest and most influential company in America employing 10s of thousands of workers. Now GM is bankrupt and nationalized by the government.

It is a tragedy that bureaucrats will now keep GM on life support with taxpayer assistance and more bailout money.

Why can they not cut their losses and move on ?

GM is yesterday's story as manufacturing in America is now in decline.


Today's story is Goldman Sachs. Goldman Sachs is the King of Wall St. Goldman Sachs controls the levers of finance for the US and much of the developed world with tenticals reaching into the Federal Reserve and US Treasury. They have unlimited resources and political power. Even Obama will not challenge them.

As Goldman goes so goes Wall St and the rest of the world markets including the KLSE.

Goldman is channeling high-powered money into crude oil, commodities and stocks in concert with the Federal Reserve who is monitizing US debt. Other central banks in the world including the UK, Japan, Switzerland, the Euro Zone are all engaged in a money printing orgy as traders bid up the price of copper, gold, silver and any commodity that can not be printed by a central bank.


For now I like RSX, the Russia ETF which has many resource companies, DBB , the base metal ETF and SLX, the steel ETF fund.

Also for the local market be very vigilant with your positions and continue to focus on quality dividend issues. AND I MEAN QUALITY ! Make sure you define your risk and profit objectives with these.

Attached is an article I wrote for Malaysian Business about commodities last month. It still applies.

Have a profitable week
Bill

10:10 am - Market Outlook from Bill Wermine !

Dear Traders,

Martin and I just returned from Singapore this weekend where we held a 1 day investment program for a group of investors/ traders.

Sentiment appears to be improving frrom our last Singapore visit 3 months ago. Customer traffic at the malls is picking up. Financial institutions are hiring again. More tourists are visiting the zoo and other attractions.

Because the culture of Singapore is a culture of thrift and saving rather than debt and spending, it appears that Singapore will emerge from the economic slowdown without much damage. Singaporeans are resilient and self reliant as opposed to the US which has a culture of dependency, welfare, food stamps and entitlement.

Combine this with a socialist such as Obama who appeals to the populist crowd, it will take much longer for the US to recover.

I would manage my exposure to the AUD and switch into Euro/ Canadian dollar. The SGD also is a safe haven.

Support on the AUD is .775 while my profit target is 86. My rational is that interest rates in the US may rise to protect China's USD exposure to China. The Chinese are not happy to see their 3 trillion US dollar holdings erode due to financial mismanagement by the Obama wealth distruction team. In order to stop the Chinese from dumping their USD bonds, treasury secretary Geithner made a trip to Bejing to reassure the Chinese government that their USD were safe.

Do you think the Chinese have confidence in Tim Geithner or Obama ? Remember if a monkey wears an Armani suit, it is still a monkey .

One positve point about Singapore is the emphasis on self improvement. Bookshops are filled with investment books

By luck, I found a book called Investing Against the Tide by Anthony Bolton. Bolton recently retired as a fund manager with Fidelity investments in London. His performance rivals Warren Buffet- over 20 % average annual returns for 25 years in his special situations fund. He appears to be a very low profile humble man and willing to share his knowledge.

Imagine for SGD 49, the price of the book, you can have a fireside chat with a mutimillionaire investor. That is why reading quality books is a great value. Do you think you could ever meet this man in real life ?

Bolton combines fundamentals with technicals and has a team who use quantatative models for timing and risk management.

One of his most profitable investments was a long term holding of Man Group listed on the FTSE . He invested in Man because of the steady rising dividends, solid management and AHL focus on quantatative trading.

His insights as to how he gets an edge with fundamental and technical research can definitely help you increase your performance. His style is concise, informative, and simple and if you have investing/ trading experience you will appreciate the value of his advice.

I highly recommend this book.

Our traders club event in Penang on 20 June is a go. We have decided not to have a cover charge for the event. FOC and It will be held at the Evergreen Laural Hotel from 10 to 1 pm.

Get your questions ready, - Mr Pong head of research for Jupiter Securities will give his market outlook which is supportive the KLSE/ Gold and commodities. Martin will share a powerful gold timing system and show his backtesting results.

I will be very glad to meet you loyal Penang members who attended our courses and we will explore ways to better support you.

Please let me know if you wish to attend. Martin and I will be coming up on Friday afternoon.

CDs/ DVDs/ books for our recent graduates of Master the Markets are ready for pickup. Call me for pickup. I will be in my office at 2 PM today.

Have a profitable week

Bill
012 685 1207

10:17 am - Market Report II by Bill Wermine

Dear Traders,

Continue to run your long gold position as the US Dollar Index broke major support at 80.00 Friday and appears to be in freefall. Use an ATR risk on futures/ ETF/spot gold which is at USD 865. If gold breaks USD 1000 we will raise our stop again. To hold our position we must give at least USD 110 stop. Any less than that the natural volatility will take you out.

You can use this risk benchmark for your purchases in the Am Precious metals fund

Sir charts, my research service run by Gary Dorsh a former CME floor trader reports the Russians/ Chinese are quietly selling their long dated US T bond holdings.

The US treasury is denying this so it must be true. If the Chinese/ Japanese / Russians/ brazil slows funding the US deficits, higher interest rates are the result and Dow collapse is in the cards.

The bond market vigilantes are trying to pull the plug on Quantatative Easing and impose discipline on Obama and his free wheeling democrats.
in Washington. If Obama does not heed this warning it could leed to Sharply higher interest rates which can choke off the recovery and cause world stock markets including the Dow Jones to collapse and break the March lows.

Other headwinds are sharpy higher crude oil/ grain and precious metals prices. These markets are not fooled by the Obama smokescreen and the propaganda from CNN/ CNBC/ .

For our KLSE positions we deal in consumer/ plantation/water and power shares and high quality dividend shares. Avoid manufacturing , property and banking issues.

We must maintain our defensive strategy and lock in profits as our shares reach resistance areas such as Dutch Lady . I took profit on F & N and added Guiness,JTI tobacco and Nestle- all dividend payers for our managed accounts.

Do not get caught up in the media/ stckbroker hyping machine.


Our shares are defensive as people will drink beer and smoke when they are depressed. In fact studies show that tobacco and alcohol consumption goes up when the economy slows down.

The AUD is also well supported and that helps our Man investments. I anticipate a positive performance from Man in the next reporting period- their models support catching the US Dollar collapse and rise in commodities.


Have a good week and stay the course.
Bill

9:51 am - Market Outlook by Bill Wermine

Dear Traders,

Many of you who invested in Man are concerned about the Australian Dollar. We should be as the our capital guarantee is in AUD government bonds and the Man funds are denominated in AUD.

Tan Teng Boo, CEO of I Capital who has a solid track record as a fund manager and analyst shared his AUD research in the latest issue of I Capital and it may answer your concerns about the AUD versus the RM.

The foreign exchange rate between the Ringgit and the AUD is determined substantially by 2 key factors.

The first is Malaysia's political and economic future while the second is Australia's economic prospects.

1st quarter GDP in Malaysia was a steep 6.2 % contraction and the 2nd quarter should also show contraction. Positive growth should emerge in the 4th quarter as well as the Australia, China, Japan and most Asian economies.

Short term recovery should not be a problem; what is the problem is long term growth which means sustained productivity gains- this might be difficult as the Malaysian economy needs to urgently implement many reforms to restructure the Malaysian economy. There are many uncertainties here. Australia does not face these problems.

At the same time the economic prospects for Australia look bright. The long term prospects of this huge country are tied to the longer-term prospects of China and the rest of Asia. The key drivers of recovery in the short term are the relatively resilient Australian economy, a credit crunch which is much less severe, the ability to undertake fiscal stimulus, an undersupplied hou sing market and the commodities demand from China and the rest of Asia.

Although China has been expanding rapidly for the last 30 years, she still has a long way to go to catch up with the developed economies. There is huge potential demand for refigerators that remains untapped for the 100s of millions of Chinese and that will take plenty of iron ore and coal. A torrent of demand for commodities will be unleashed. Australia who is physically nearer to China compared to Brazil or Canada will be the competitive supplier of these commodities.

Over the course the AUD should be a net gainer. Since 1983 the RM has traded between 1.60 to 3.10. The trend over the last 25 years is up for the AUD/RM cross. Yes there are gut wrenching corrections as we have just experienced but the up trend is clearly defined. Relative weaking periods are shorter than the strengthening periods. Who said it is easy ?

In the current US Dollar collapse and the rush to commodities including gold and crude oil coupled with China, Russia, Brazil and Japan cutting back their purchases of US Treasury bonds there is a chance the AUD will break out above the 3.10 rate and move into unchartered waters.

If this happens, you who hold Man AUD Diversified will be very happy.

Also for those who hold KLSE plantation, rubber and commodity shares as well as long CPO futures should also benefit.
The rich diversity of natural resources in Malaysia will always support the RM versus most world currencies including the US Dollar/ UK Pound/ Euro and Yen. The AUD and SGD should outperform based on my currnent trends.

I hope this answers the many questions I have been asked about the AUD/ RM exchange rate.

If you should have any others please feel free to ask me.

Have a good week,
Bill

9:54 am - Market Report by Bill Wermine

Dear Traders,

We just completed our 3 day Master the Markets Workshop last weekend . We did not advertise this round but had a reasonable turnout. Most guests were referals and I really appreciate your support.

Due to the Star continuing to raise advertising rates in the face of an economic slowdown , it is not cost effective for our team to advertise. I think the Star News is shooting itself in the foot. There were 7 resits. We noticed an overwealming bullishness among the guests and this worries me.

Suggest lightening up on all speculative shares and only keep the high quality dividend payers with risk to below support.

Martin and I plan a holiday/ traders club in Penang on 20 June for our Penang graduates. We will be holding it in the Evergreen Laural Hotel. I will stay for 3 days with Dolly to recharge my batteries, network with our graduates and , enjoy the great Penang fresh seafood. For our Penang friends please let us know if you wish to attend. Small cover charge of RM 20.

"It is really important to take holidays and breaks from our trading routene to come back to the market with a fresh perspective."

Janice Dorn, M.D., Ph.D.
www.thetradingdoctor.com
Consultations/Media: +602.870.0524
FAX: +602.944-0904
Technical/Website Support: +480.325.0230

If you have any emotional issues I suggest you contact her. She is a is a trading psychaitrist and has a solid track record.

Those who subscribed to Am Precious metals are sitting on an 8 % gain in 2 weeks. This is an abnormal return but the trend of gold is up on course to reach 1200 should the 1000 USD level break. This fund is beginning to move and there is still time to get a seat on the train. Call Isma at 2783 0300 at Phillip for s ubscription form. Minimum investment is only RM 1000 and this seems like a better investment than buying a flat screen TV.
Gold is a solid hedge against inflation and stock market turmoil as well as US Dollaer collapse.
Corrupt politicians in Washington and their chronies , the banking elites, greedy CEOs of Citibank/ Bank America/ GM and AIG not repeal the law of supply and demand just as they .can not repeal the law of gravity .

Evidence is in the US Dollar collapse

On Friday the US Dollar plunged and 10 year treasury bonds values dropped as the US government is having a difficult time selling its bonds. See attached chart of the DX. The US governement prints bonds and sells them to create more cash out of thin air to satisfy the ruling financial elites.

These favored interests and many more coming to the feeding trough need ever more bailouts and massive CEO bonuses. Even the state of California is broke needing a mutimillion dollar bailout. Combine this with the AIG bailout, the GM and Chrysler bailout and now bailout of foreign banks by US taxpayer money- ( foreign banks bought Fannie May and toxic subprime mortages.)
These foreign banks in Germany, UK are part of the world wide banking elite and must be rescued at the expense of the homeless, medically uninsured and unemployed workers in the US who do not have a voice. I read in an undergroud report on Alpha alerts that many US hospitals are turning away emergency cases for those who are uninsured or can not pay. Many US hospitals are going bankrupt. They are the ones who morally and financially need assistance- not the multimilliaire Wall St fat cats. The Lehman CEO Feldt comes to mind- who earned 100s of millions of dollars while his company sunk like the Titanic.
This will never happen in Malaysia and I thank God I am in Malaysia.
Unfortunately the law of supply and demand will force the US treasury to raise interest rates and this will result in more US Dollar collapse and more hardship for those with no savings, gold and high debts

I advise to avoid credit cards, expensive consumer goods, buying on time payment. If you can not pay cash do not buy.
Buy hign quality dividend shares to weather the storm and get more than the fixed deposit rate. Consider using your EPF account 1 to directly buy these quality shares- contact me or Martin if interested.

I also advise selling any shares/ bonds you hold in the US Market. Look for short positions. Continue to hold GDX/ GLD and FXA= add DBA (Fund invested on corn wheat and soybeans futures) The US government can not print corn/gold or borrow it from another planet.
Here is part of a letter from my brother who is a successful businessman in Maryland/ USA. This is from a man on the ground who can see the truth and not the propaganda and hype from the media and politicians. Ignore this at your peril.

Philosphically our views are the same but I do not know the correct way to invest in this market. There will be higher and higher unemployment despite what the media "experts" predict. High inflation seems to be on the horizon. Historically and presently our governments make things worse while promising rosy outlooks. It is apparent to me and anybody that has opened their eyes that things are getting much worse but are not reported. More and more "For Lease" signs at shopping centers. New housing starts hit new lows. No reservations required at most restaurants. As you mentioned tens of thousands of jobs to be lost in the automotive business. So--fewer people working-- fewer people buying. The whole world will eventually notice that this is not just a temporary recession--- this is an economic meltdown.

Our Man investments are a bright spot - they stabilized in the last 2 weeks after 3 straight months of small losses. Should the world stock markets and US Dollar collapse, gold and grains soar, Man will be well positioned to exploit these trends for a handsome 2009 return. The AUD is getting stonger and that will add to our returns.

In any case, be on guard and be thrifty-
Bill

9:54 am - Market Report by Bill Wermine

Dear Traders,

We just completed our 3 day Master the Markets Workshop last weekend . We did not advertise this round but had a reasonable turnout. Most guests were referals and I really appreciate your support.

Due to the Star continuing to raise advertising rates in the face of an economic slowdown , it is not cost effective for our team to advertise. I think the Star News is shooting itself in the foot. There were 7 resits. We noticed an overwealming bullishness among the guests and this worries me.

Suggest lightening up on all speculative shares and only keep the high quality dividend payers with risk to below support.

Martin and I plan a holiday/ traders club in Penang on 20 June for our Penang graduates. We will be holding it in the Evergreen Laural Hotel. I will stay for 3 days with Dolly to recharge my batteries, network with our graduates and , enjoy the great Penang fresh seafood. For our Penang friends please let us know if you wish to attend. Small cover charge of RM 20.

"It is really important to take holidays and breaks from our trading routene to come back to the market with a fresh perspective."

Janice Dorn, M.D., Ph.D.
www.thetradingdoctor.com
Consultations/Media: +602.870.0524
FAX: +602.944-0904
Technical/Website Support: +480.325.0230

If you have any emotional issues I suggest you contact her. She is a is a trading psychaitrist and has a solid track record.

Those who subscribed to Am Precious metals are sitting on an 8 % gain in 2 weeks. This is an abnormal return but the trend of gold is up on course to reach 1200 should the 1000 USD level break. This fund is beginning to move and there is still time to get a seat on the train. Call Isma at 2783 0300 at Phillip for s ubscription form. Minimum investment is only RM 1000 and this seems like a better investment than buying a flat screen TV.
Gold is a solid hedge against inflation and stock market turmoil as well as US Dollaer collapse.
Corrupt politicians in Washington and their chronies , the banking elites, greedy CEOs of Citibank/ Bank America/ GM and AIG not repeal the law of supply and demand just as they .can not repeal the law of gravity .

Evidence is in the US Dollar collapse

On Friday the US Dollar plunged and 10 year treasury bonds values dropped as the US government is having a difficult time selling its bonds. See attached chart of the DX. The US governement prints bonds and sells them to create more cash out of thin air to satisfy the ruling financial elites.

These favored interests and many more coming to the feeding trough need ever more bailouts and massive CEO bonuses. Even the state of California is broke needing a mutimillion dollar bailout. Combine this with the AIG bailout, the GM and Chrysler bailout and now bailout of foreign banks by US taxpayer money- ( foreign banks bought Fannie May and toxic subprime mortages.)
These foreign banks in Germany, UK are part of the world wide banking elite and must be rescued at the expense of the homeless, medically uninsured and unemployed workers in the US who do not have a voice. I read in an undergroud report on Alpha alerts that many US hospitals are turning away emergency cases for those who are uninsured or can not pay. Many US hospitals are going bankrupt. They are the ones who morally and financially need assistance- not the multimilliaire Wall St fat cats. The Lehman CEO Feldt comes to mind- who earned 100s of millions of dollars while his company sunk like the Titanic.
This will never happen in Malaysia and I thank God I am in Malaysia.
Unfortunately the law of supply and demand will force the US treasury to raise interest rates and this will result in more US Dollar collapse and more hardship for those with no savings, gold and high debts

I advise to avoid credit cards, expensive consumer goods, buying on time payment. If you can not pay cash do not buy.
Buy hign quality dividend shares to weather the storm and get more than the fixed deposit rate. Consider using your EPF account 1 to directly buy these quality shares- contact me or Martin if interested.

I also advise selling any shares/ bonds you hold in the US Market. Look for short positions. Continue to hold GDX/ GLD and FXA= add DBA (Fund invested on corn wheat and soybeans futures) The US government can not print corn/gold or borrow it from another planet.
Here is part of a letter from my brother who is a successful businessman in Maryland/ USA. This is from a man on the ground who can see the truth and not the propaganda and hype from the media and politicians. Ignore this at your peril.

Philosphically our views are the same but I do not know the correct way to invest in this market. There will be higher and higher unemployment despite what the media "experts" predict. High inflation seems to be on the horizon. Historically and presently our governments make things worse while promising rosy outlooks. It is apparent to me and anybody that has opened their eyes that things are getting much worse but are not reported. More and more "For Lease" signs at shopping centers. New housing starts hit new lows. No reservations required at most restaurants. As you mentioned tens of thousands of jobs to be lost in the automotive business. So--fewer people working-- fewer people buying. The whole world will eventually notice that this is not just a temporary recession--- this is an economic meltdown.


Our Man investments are a bright spot - they stabilized in the last 2 weeks after 3 straight months of small losses. Should the world stock markets and US Dollar collapse, gold and grains soar, Man will be well positioned to exploit these trends for a handsome 2009 return. The AUD is getting stonger and that will add to our returns.

In any case, be on guard and be thrifty-
Bill

9:43 am - Market Outlook by Bill Wermine

Dear Traders,

I would like to thank all of you for your support at our Gold Conference today. It was a rousing success ! We had a full house and ran out of chairs.

For those who were unable to attend. Let me give you a recap.

First Speaker: Pong Teng Siew, head of research of Jupiter Securities shared his views on the US Dollar which is inversly correlated with gold. He showed a recent Bloomberg chart showing a gradual exodus by central banks from the US Dollar- something that has not happened for over 50 years.

He showed a chart of centralbank holdings of physical gold. China is dramaticlly increasing their physical gold holdings and cutting back on US T bonds.

These are real numbers and real charts: Charts are the truth and the truth is that world investors are losing confidence in Obama and his socialist agenda.

He is long term bullish on commodities and gold as well as CPO.

Mr Pong in my opinion is one of the few objective equity analysts in Malaysia who takes a big picture world approach.
His rates at Jupiter On Line are 0.05 % the cheapest in Malaysia. To tap into his research all you need to do is open an on line account with Jupiter- call 03 2034 1888 and ask for Julian.

His team also gives 2 or 3 hot share recommendations every day with entry and risk levels for quick trades.

Second Speaker: Goh Aik Leong Director of Deutsch Bank Asset Management in Singapore. He presented the case for gold equities. His fund,Am Precious metals deals only in high quality blue chip gold mining companies. His is the only precious metals fund available in Malaysia.

He made the case that gold mining shares are undervalued by 30 % to the gold price a have been recovering due to the world equity rally. If you hold a gold mining share unit trust you participate in the rise of the gold price as well as the sales and earnings of gold mining companies. as well as dividends. Leverage to gold is at least 2 to 1.

Third Speaker: Martin Wong Futures Broker with CIMB shared the technical outlook for gold. He spotted the inverse head and shoulders pattern projecting a rally to USD 1200 per ounce should the USD 1000 level break. He also shared his powerful backtested system for timing which works for physical gold, Am Precious Metal Fund and Futures Gold.

It is a moving average crossover system- on the weekly chart using the 10 and 50 SMA. Buy and sell the golden cross.
Call him for info on this as well as CPO/ CI Futures. 012 207 8633

Fourth Speaker: Isna, Director of Phillip Mutual- if you wish to subscribe to Am Precious Metals give her a call at 03 2783 0300
Minimum investment is only RM 1000. Less than the cost of a good camera or suit of cloths and guess what you have a growing asset as well as a hedge against inflation

I was the MC of the event and showed my Roman gold coin which was minted at the time of Ceaser. At that time you could buy a horse with that coin. 2000 years later you could sell the coin to a dealer and with the proceeds buy a fast horse.

This is proof that gold is a store of value and should continue to be. Paper currencies are doomed to lose value.

We also shared info on the gold scams going around Malaysia. If it is offshore, over the internet, and looks too good to be true
avoid at all costs. You will be fleeced like the lamb.

Only deal with licensed brokers or banks. or established gold dealers. Also avoid individual gold mining companies especially the smaller ones. Many are run by crooks, scam artists. Only deal with a well established gold unit trust such as Am Precious metals.

If you have any questions on any gold investment, I am happy to answer them and can run them through the Phillip Securities Compliance Arm. This might save you from substantial losses.

Weekly chart of Comex Gold showing accumulation by smart money and reverse head and shoulders with Martin's golden cross system which recently triggered long.

Have a good week

Bill

7:51 pm - Market Report by Bill Wermine

Dear Traders,

Warren Buffet made an insightful statement in a CNBC interview about the financial crises. He compared it to the Hawaii Pearl Harbor attack by the Japanese which killed several thousand Americans and sunk several battle ships. This was similar to the October 2008 Lehman collapse which almost froze the world financial system. The Lehman financial shock according to Buffet is the catalist for recovery just like Pearl Harbor being the catalist for America to consolidate their forces and defeat the Japanese.

In the meantime, you need to have an exposure to gold.

On Sunday 10 May- Mothers Day- we are holding our gold conference at Armada Hotel from 2 to 5 PM. Cover charge RM 25, pay at the door. Please let me know if you wish to attend.

This time we will have a Gold Fund Manager present his outlook and strategy for gold and commodities. I have arranged for one of our staff to escort this man as he is coming from Singapore. I promised that a gold Fund Manager would present at our traders club last week. He did not show up and his excuse was he could not find the venue.

That was a lame excuse. It would be like a local not knowing where is the KLCC Towers or a New Yorker not knowing the location of the statue of Liberty.

Martin will present his Gold Timing Technical system with backtest results. This will help if you to time futures gold, a gold ETF or a gold unit trust.

A gold shop dealer will man a table outside if you wish to buy a gold bar or chain for your mother

I will play Kiyosaki / Jim Rogers video clips which explains how the US government are debasing the US Dollar and why you need an exposure to gold and commodities. Gold is the only real money.

For Man AUD diversified account holders we are now on the right side of the trade.

On the attached chart, the AUD has broken out from a 7 month congestion and closed last night at 7305 to the US dollar.

Demand is coming in and if you believe Warren Buffet- recovery is slowly taking hold. This will push the AUD to the next target of 8000- a 12 % boost to our Man investments not counting performance of the fund itself.

I know it has been painful waiting but I congratulate those who kept the faith and did not lose your objectivity.

Some of you were worried that the Australian banks/ would collapse and you would lose your capital guarantee.

I am under the understanding that the Aussie Banks are more prudent and more regulated than the US banks and have only a minimal exposure to toxic assets. The US banks have been pulled down because of massive fraud, corruption, cronyism with cover from the crooked politicians - the foundation set by George Bush and his band of robbers.

However; when emotions come into play- logic and commen sense goes out the window.

Below are the facts which fly in the face of emotion. This report is a fact.

Here is a report from Reserve Bank of Australia who underwrites our capital guarantee: 4 Australia banks are rated in the top 50 of world banks. Only 1 bank in the US is in the top 50. NAB is our underwriter and NAB is rated 11 in the world out of thousands of banks.

Australia
National Australia Bank (#11 Worldwide)Banking Industry as of 3/09Size of Banking Industry: $2,674 billion AUKey interest rate: 3.25%Number of commercial banks: 15Other Banks in Top 50Commonwealth Bank of Australia Australia & New Zealand Banking Group Westpac Banking Corporation Down under, the safest bank on the rankings is the National Bank of Australia, with a market cap of 34.28 billion AU. Three other banks in the country also make the list.Source: Reserve Bank of Australia



The KLSE is recovering and look for a target of 1050 in days ahead. For managed accounts our quality share portfolio with dividends have protected us and I will continue to persue this strategy.

We bought some more Pet Dag shares last week at 7.70. It has a beautiful chart which shows a gradual up trend and a target of 10.10. Risk is 6.60.

The 6.2% Pet Dag dividend is supported by their free cash flow and strong balance sheet reflecting increased sales and earnings. (even in 2008)

I have always liked PetDag. They are expanding their mini marts and business clusters around their stations which increase their cash flow. PetDag also has very clean toilets and well trained staff compared to some petrol operators.

They have also expansion plans for more stations in strategic locations.

Have a good week
Bill

8:53 am - Market Report by Bill Wermine

Dear Traders,

Today we held our Traders Club, at the CIMB auditorium, Nigel Foo, Head of research for CIMB gave a realistic analysis of the KLSE. He feels the KLSE will move ahead to the 1050 level in the next 2 months. He suggests to be defensive should the KLSE hit this level. Be ready to quickly lock in profits.

The top is in if:

News flow is extremly bullish and price stalls out
Retailers are jumping in and volume reaches unusual high levels but price refuses to advance- it means lack of demand from smart money. In fact smart money is selling to the herd of sheep investors.

Positives include a more business friendly PM, lifting of the 30 % Bumi quota for selected industries, and a resurgance of world markets.

Underlying the bullish world stock environment is unprecedented liquidity flowing from central banks- with interest rates at historical lows and an all out push to get credit flowing again. Never underestimate the power of the US Treasury and Federal Reserve. They can create currency out of thin air and they are.

Unfortunately, at some point the piper must be paid.

There will be a black swan event. An event that can not be predicted and the house of cards will collapse.

That is why we shared the ways of investing in gold. Gold is the ultimate safe haven and every investor should have exposure.

I apoligize to all of you who came to hear from the gold fund manager from Am Bank who was scheduled to come. He never even had the courtesy to call me that he could not come.

Luckily we had a film clip from hedge fund manager Michael Covel with comments from Jim Rogers and George Soros who in my opinion carry weight. All 3 are recommending gold exposure of 5 to 10 % should the currency printing bubble explode.

Also Martin and Nigel shared some excellent research to support holding gold.

In any case, we will hold our gold conference at the Armada Hotel on 10 May Sunday from 2 to 5 PM.
Cover charge is RM 25. This will be in more depth than what was presented today.

Let me know if you wish to attend as seats will be limited. You may pay/egister at the door.


Martin will share a powerful gold trading system for you technical traders. He will share the backtesting results which prove the system has positive expectation.

This system is medium term and works in timing Gold Unit Trusts, Gold ETFs. and gold futures.

I have done some research on the various gold scams perpetuated on local investors that you need to be awair of. I will speak on this. In times of uncertainty and volatility fraudsters are very active and we need to know how to protect ourselves.

Bottom line, only deal with locally regulated dealers. This also applies to FOREX trading.

Attached is an article on gold I wrote for Malaysian Business last month.

Have a good week ahead
Bill

6:26 pm - Market Outlook by Bill Wermine

Dear Traders,

Attached are 4 charts which signal recovery. The AUD is correlated with demand for commodities and the impressive recovery in the AUD shows more gains in weeks ahead.

Soybeans have broken USD 10 per bushel and should resume their bullish trend. CPO and plantation shares should continue to benefit.

Our Man investments have weathered the storm of currency and stockmarket volatility and are well positioned for a fruitful 2009 no matter what happens to currencies or equities. My recommendation is the AHL Diversified Fund which was ranked 20 out of over 9000 hedge funds in 2008. Should beans, CPO, copper, gold, crude oil and base metals rally, Man will capture chunks of these trends. If the AUD moves on course to the RM 3.00 / 1 AUD we are due for windfall profits.

Martin and I hired a booth at the MCA job fair last Wednesday to recruit some futures brokers for our team. If any of you are interested in becoming a licensed FBR contact Martin.

Many companies were hiring staff including Resorts World/ Air Asia, OSK, Public Mutual, Great Eastern and IBM. Every booth was taken up showing the high demand for quality employees

If things were so bad as reported in the press why are all these companies hiring staff ?

With the political uncertainty removed with the new prime minister taking office expect a run to at least 1000 in the days ahead.

There is evidence of foreign funds moving into the KLSE. The foreign funds are buying quality issues and so should you.

Our plans for the Traders Club on 25 th April at CIMB auditorium from 10 to 12 AM is on course as well as the Gold Conference at the Armada Hotel on the 10th of May.

For 25 April Nigel Foo head of research for CIMB will give his outlook for shares. Also a fund manager from Deutsh Bank will present his precious metals outlook.

Have a good week ahead
Bill

9:45 am - Market Outlook by Bill Wermine

Dear Traders,

I need your assistance. Due to unforseen circumstances we have rescheduled our gold conference to Sunday 10 May at the Armada Hotel from 2 to 6 PM. We need someone involved in the physical trade of gold such as a gold shop owner/ dealer to give a short presentation on the local supply and demand situation.

If you know of someone who is willing please let me know. Or if any of you have any valuable information on gold and are willing to share please let me know. This would be for the 10 May event as well as our Traders Club.

We will also hold our traders club on 25 th April Saturday from 10 AM

to 12 30 at CIMB auditorium and gold will be on the agenda.

I would like to congratulate all of you who bought Man Fund investments over the last 1 1/2 years. In the last quarter the AUD has made a recovery and is on course for furthur gains. The AUD formed a W bottom, a powerful pattern which is confirmed by price and volume. Initial target is another 15 % upside. You will get this as well as the opportunity for gains in the Man fund.

Only two investors out of 105 closed their accounts because of fear that the world economy would collapse. The rest of you held through the adversity maintaining your objectivity inspite of bank collapses, Bernie Madoff scandle, flight to the safety of US Dollar,
and the constant pessimism, doom and gloom trumpted on CNN, Bloomberg, CNBC and the popular press.

Because of the negative publicity and the focus on many hedge funds that cheated their investors and collapsed I received many calls from worried clients. The main question was - is Man a Ponzi scheme ?

I made a personal trip to Singapore to meet with the Man executives to get to the bottom of these issues.

I also have my own money with Man which is my wife's legacy. She is younger than me so I assume I will go before her so I want her money in good hands so I can rest in peace

On return I relayed to all of you that your funds are safe and earning a reasonable return.

Being a fund of funds with over 115 fund managers operating all over the world it would be impossible for them to run a fraud.

Also, Being listed on the FTSE, Man is under scruteny by London regulators- their books are open unlike 98 % of hedge funds who operate in secrecy and many are a one man show.

Attached is a PDF document of an interview of of Tim Wong who is the CEO of Man AHL fund . As traders you will appreciate why his fund was # 20 out of over 9000 in 2008 in terms of performance. His strategies are the keys to being a profitable trader.

Change in outlook.

I am short term bullish for world equities.

The Plunge Protection team(US Federal Reserve, Treasury) has unleashed its most powerful weapon killing the FASB # 157 engaging in nuclear quantatative easing, devaluing the US Dollar, and arranging a Ponzi scheme to allow banks to offload 1 trillion of toxic assets to taxpayers- with the goal of arresting the slide of the Dow Jones Industrials and attmpting to lift the Dow to the target of 9000- a top priority. A sustained breakout above 8000 would signal the end of the bear market- an extended sideways trading range or a bull market recovery.

Crude oil, gold, base metals will be boosted as well as CPO and are poised to move higher in weeks ahead.

The KLSE should also benefit. The new prime minister in my opinion will be a better manager than the last one and that should benefit stocks.

Of course we must manage our risks no matter what is our opinion.

Have a good week
Bill