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U.S. hits Debt Ceiling on May 16, 2011

2011-06-21T00:33:00.000-07:00

U.S. National Debt as at 21/06/2011:-

U.S. hits Debt Ceiling on May 16, 2011. The difference between Greece Debt Crisis and recent U.S. Debt debate is, the Greece unable to pay the bills and the U.S. degress of willingness to meet its obligations.

What is Debt ceiling?

According to Sahadi (CNNMoney, 2011), debt ceiling is a cap set by Congress on the amount of debt the federal government can legally borrow. The cap applies to debt owed to the public (i.e., anyone who buys U.S. bonds) plus debt owed to federal government trust funds such as those for Social Security and Medicare.

What is the debt ceiling limit right now?

The Bureau of the Public Debt stated that the debt ceiling limit is set at $14.294 trillion now. However, the United States’ accrued debt hit that mark on May 16 this year.

How if Congress fails to raise the debt ceiling before Aug 2?

U.S. treasury would not have authority to borrow any more money. The alternative solutions to this situation are to raise the debt ceiling or to pay interest due to bondholders or to cut spending & raise tax. However, total income (government revenue minus government spending) is not enough pay interest to all of its bondholders. That means U.S. treasury will have to pick and choose who to pay and who to put off every day. Potential default is still assist because U.S. won’t be able to pay all the country’s bills & meet its debt obligations if the lawmakers do not increase the debt limit.

The Standard & Poor’s is threatening U.S. by downgrade the credit outlook from “stable” to “negative” if Congress fails to raise the debt ceiling limit by Aug 2. Currently, The U.S Debt is rated AAA by Standard & Poor’s, acknowledged as one of the safest investment in the world today. It is the reason why the rest of the world willing to buy the U.S. securities for 14.3 Trillion.

If U.S. default, the consequences are so great and even greater than the 2008 financial crisis & 1997 Financial crisis. Personally, I don't think the U.S. will let it happen. However, the deadline is approaching and Congress yet to finalise the decision. The tension is growing everywhere as the deadline is approaching.

Why the U.S. Treasury Bond is in high Demand?

The reason of the Triple A rating by S&P is mainly backed by the U.S Economy, still the largest in the world despite weak economic recovery, demands of US dollar in international market for trading purposes, the loose debt controlling policy, and the U.S. is still the world largest exporter in the world.

Why the Congress not just raise the Debt Ceiling?

The most recent time the debt ceiling was raised was in February 2010. In fact, debt ceiling was raised almost 10 times since 2001 & almost 100 times since 1940. The Congress is arguing on the alternatives whether to raise the debt ceiling again or to cut spending & raise taxes.

Some congress members urge to slow down the accumulation of debt by suggesting budget changes. They realized that if they raise the debt ceiling once again, the U.S economy will be a step further to the "black hole".

Budget changes can be cut government spending, raise individual and corporate taxes, reduce military funding, cut social benefit funding, etc.. By doing so, the government can increase its net budget position and reduce the dependence on borrowing by selling securities. But why the congress always chosen to raise debt limit instead of budget changes in the past 10 years?

Don't forget, political dispute is one of the factor to this problem. How the Republican and Democratic party reflects to gain votes in the coming election? The congress decision in either ways will definitely affected the next election result.

What are the impacts if Congress chosen to cut spending or to raise tax?

The weakening U.S. economy can't affords the decision either spending cut or tax raise. These actions will further bring down the pace of economy recovery in the U.S. or even turn the GDP figure into negative.

The U.S. federal spending mainly focus on medicare (23%), social security(20%) and defence department (20%). These 3 elements made up 63% of total spending. The Congress, either Republican or Democratic party, can't afford the consequences of cutting funding of medicare and social security. The U.S. people will not accept the reduce funding in these 2 areas. Moreover, the U.S. government also can't simply reduces the military funding, especially in this unstable world situation includes Libya political dispute, growing nuclear tension around the world and the military power in China. In order to keep it world No.1 position in the world, the U.S. will need to continuously spend money in its military department.

If the government chosen to raise taxes, in economy theory, the individual disposable income will be lessen and people have lesser money to spend in the market. The corporate will have lesser money for investment. The GDP figure will be affected badly. If the U.S economy slow down, the rest of the world economies will follow its footstep because being the world largest consumer cutting its spending, means decreasing demands of goods & services in interntional market. In conclusion, if the purchasing power of American reduces, the world economy will be affected badly, espeially for countries rely much on trading with the American.

Best Performing Public Mutual Funds

2011-06-11T22:29:00.000-07:00

Public Mutual Berhad is managing more than 80 funds today. However, which are the top performing funds can provide investors better returns in the medium and long term period? I have selected four P-series funds for further analysis, namely Public Smallcap Fund, Public Islamic Opportunities Fund, Public Bond Fund & Public Islamic Bond Fund.

Total return of funds from March 2006 to March 2011 (Part 1)

Total return of funds from March 2006 to March 2011 (Part 2)

1. Public SmallCap Fund

Public Smallcap Fund was the the best performing fund from March 2006 until March 2011. It managed to achieve 171.32% return within 4 years despite the economic downturn on mid 2008. The fund objective is to achieve high capital growth through investments in companies with small market capitalisation.

Public SmallCap Fund is categorized as Equity fund with Aggressive risk profile. Thus, the trend of this fund is much likely to follow Asian Stock Market performance. In other word, if KLCI falls, the tendency of this fund to fall is likely to be happen. However, this fund always outperformed its benchmark KLCI as explained by the following table & graph:-

Source: Fund Performance, Public Mutual Berhad (2011)

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Annual returns for Financial Years Ended August 31
Year	2006	2007	2008	2009	2010
P SmallCap %	11.42	55.6	-2.13	9.66	35.15
Benchmark Index %	4.88	32.96	-14.75	10.01	13.55

Source: Market review and outlook for April 2011, Public Mutual Berhad (2011).

The table above shows that Public Smallcap fund outperformed its benchmark,KLCI for 4 years with exceptional of year 2009, a slightly lower return than KLCI. In fact, P Smallcap managed to sustain it position with a slightly negative return of only 2.13% despite the heavily hit Global Financial Crisis in 2008 (KLCI dropped 14.75%).

As at April 2011, P Smallcap concentrated on Financial, Industrial and Communication sector, which these sectors are the driving force of economic gorwth, especially in Asian countries. Morningstar Rating gave a 5 stars to its overall performance. Moreover, Lipper Leaders gave scores of 5, 4 and 5 on Consistent Return, Preservation and Total Return respectively.

2. Public Islamic Opportunities Fund

Public Islamic Opportunities Fund ranked second in total 60 P-series Fund in term of total return from period of March 2006 to March 2011, recorded 115.91%. Objective of this fund is to achieve capital growth investments in companies with small market capitalisation which comply with Shariah Principles.

Public Islamic Opportunities Fund is categorized as Islamic Syariah Equity Fund with Aggressive Risk profile. Morningstar Rating gave it a 5 stars rating on its overall performance. Furthermore, Lipper Leaders gave scores of 4, 3 and 4 on Consistent Return, Preservation and Total Return respectively.

PIOF asset allocation concentrated on Malaysia market, mainly on Industrial, Consumer, Energy & Communication Sector

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*Source: Fund Performance, Public Mutual Berhad (2011)* Annual Returns for Financial Years Ended July 31
Year	2006	2007	2008	2009	2010
PIOF %	9.8	72.21	-15.2	6.59	24.47
Benchmark Index %	2.64	54.87	-16.72	-0.1	12.35

Source: Market review and outlook for April 2011, Public Mutual Berhad (2011).

The table above reported the annual returns of PIOF from period of 2006 to 2010. Again, this fund outperformed its benchmark index - FTSE Bursa Malaysia Emas Shariah Index for consecutive years. PIOF was affected by the 08' Financial Crisis too, recorded a negative return of 15.2% in that particular year. However, it managed to bounce back and gained a positive return of 6.59% & 24.47% in 2009 & 2010.

3. Public Bond Fund

Public Bond Fund (PBF) is categorized as MYR Bond fund with Conservative Risk profile. It managed to achieve 30.61% return within 4 years. Fund objective is to provide a steady stream of income returns through investment in money market and private debt securities.

Annual Returns for Financial Years Ended July 31
Year	2006	2007	2008	2009	2010
P Bond Fund %	2.9	8.75	-1.33	8.01	7.64
12-month FD %	3.77	3.75	3.71	3.09	2.49

Source: Market review and outlook for April 2011, Public Mutual Berhad (2011).

Public Bond Fund is one of the best alternative for conservative investors & Fixed deposit investors. P Bond fund could provides investors with higher returns than FD rate in the medium to long term period. For investors who want to invest for medium term, PBF will be a good choice compared to FDR.

4.Public Islamic Bond Fund

PIBD is another best investment alternative for conservative investors. This fund is categorized as Islamic Global bond with Conservative Risk Profile. Fund objective is to provide annual income to investors through investment in Islamic Debt Securities.

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Annual Returns for Financial Years Ended Oct 31
Year	2006	2007	2008	2009	2010
PIBF %	3.9	4.1	3.27	10.07	7.75
12-month GIA %	3.45	3.69	3.55	3.03	2.89

Source: Market review and outlook for April 2011, Public Mutual Berhad (2011).

PIBF was able to achieve positive returns for 5 consecutive years. Moreover, the annual return was much higher than the 12 month GIA rate or 12 month FDR rate. We only get 3% annual return if we invest in FDR today. Thus PIBF is much more attractive which also can provides you with sustainable return.

a. Investors are advised to diversify your investments into various alternatives (FDR, Stock market, Mutual Fund, etc) to achieve sustainable returns.

b. Investors should take note that there are fees and charges attached to these funds.

没榴槤吃的日子

2011-05-31T00:13:00.000-07:00

记得小时候, 每逢榴槤季節飄香, 肯定大量品尝 (有时候可以吃下两大粒), 很过癮! 当然隔天肯定喉咙痛.

直到近几年, 每公斤榴槤價格大約4至15令吉左右, 比起十年前昂貴了很多, 才减少吃榴槤. 不过, 对榴槤的热爱有增無減.

来澳洲的前一个星期, 叫老爸去帮忙选榴槤, 肯定要吃到过癮. 我知道在澳洲肯定买不到,如果有也只不过是冷冻榴槤.

果然, 在澳洲已经四个月了, 还是没看到它的踪影. 上个月, 中國總理到马来西亚進行兩天訪問, 首相赠送了榴槤, 这又钩起了我的食欲.

没榴槤吃的日子好难受.

U.S. National Debt reachs $14.384 Trillion ($14,384,527,000,000)

2011-05-18T22:40:00.000-07:00

Debt held by public : $9.6 trillion

Intragovernmental debt : $4.6 trillion

U.S. debt to GDP ratio already exceeds 85% in 2010. Higher debt increases interest payments on the debt and may cause US currency depreciate and slow economic growth.

Who owns it? China is the Largest Foreign Owner of U.S. Treasuries, holds approximately $1.2 trillion , following by Japan, holds approximately $885 billion.

China and Japan increased their holding of U.S Bonds in order to keep their currency low relatives to US dollar, to promote export prices competitive.

China and Japan lend huge money to the U.S. However, repayment ability of U.S. is not a cause of concern. The U.S.goverment can simply print the money to repay. However, printing money extensively and keeping interest low will cause currency depreciation.

When the time U.S. goverment pay back the debt using deprciated USD to China & Japan, will casue capital loss to China & Japan.

Gold Investment in Malaysia

2011-05-10T21:47:00.000-07:00

1. Gold Investment Account of Public Bank Berhad or Maybank

Investment account allows customers to purchase and sale of gold commodity (999.9 fineness) at daily prices in Ringgit Malaysia.
Transactions are recorded in the passbook for convenience of withdrawal & deposit.
Invest in gold without having to keep the gold physically.

Small difference between selling & buying prices.
Cheaper option compared to invest in gold jewellery as the jewellery shop will charge higher price due to workmanship cost.
Capital gain if the price of gold increases.
Affortable investment as initial purchase of 20 grams (20 grams X selling price on May 10,2011 at RM148.98 at PBB = RM2,979.60)
Transactions can be made during working days.

Gold price had been achieved 461% growth since 2001. With increasingly demands of gold commodity around the world (especially India & China), the tendency of central banks' decision to increase gold reserve, inflation pressure, unstable political & economics and terrorism issues, the gold price will certainly continue its growing trend in the future.

Most of the europe countries (Germany, Italy, France, Portugal, Greece) & United States hold more than 60% of gold as their national reserve. However, China, Japan, S.Korea, Taiwan, Singapore, Thailad, Malaysia are the world top 20 in national reserve in curreny & gold, only holds less than 5% as gold reserve, which means the reserve in these countries are mostly made up by Fiat Currency (paper money - value declared by goverment with no intrinsic value).

Thus, appreciation of Gold will certainly increase the wealth of the western nations.

For more information, please log on to www.maybank2u.com.my and www.publicbank.com.my

火星探测 - 美国国家航空航天局 || Mars Exploration Mission by NASA

2011-05-03T22:28:00.000-07:00

第一部火星漫游车 : 勇气号

勇气号是两部双胞胎火星车中的第一部，代号MER-A

主要任务 : 搜索火星上岩石和土壤以便探测水的历史

勇气号是一個六輪、太陽能動力車

勇气号于2003年6月10日发射, 于2004年01月04日在火星表面着陆

根據原本的設計，工作壽命只有三個月, 但是勇气号在火星表面工作到2010年3月22日才和地面失去联络

First robotic rover on Mars : Spirit rover (MER-A)

It was one of two rovers of NASA's ongoing Mars Exploration Rover Mission.

Mission: To search for and characterize a wide range of rocks and soils that hold clues to past water activity on Mars.

Spirit is a six-wheeled, solar-powered robot. Launched on 10 June 2003 & landed successfully on Mars on 04 January 2004.

Designed for about 92 earth days operation. However, Spirit rover managed to continue the mission until March 22, 2010 & since then no communication /signal from Mars to Earth.

第二部火星漫游车 : 机遇号 (代号MER-B)

在2003年從地球發射，並於2004年1月25日在火星子午高原表面着陆

原本設計的90個日子的任務時間, 不过已经完成2652地球日任务,而且任务还继续中

Second robotic rover on Mars : Opportunity rover (MER-B)

Launched on July 7, 2003 & landed on Mars on January 25, 2004 at Meridiani Planum.

Designed for approximately 92 earth days mission. However, the rover continues to function effectively more than 2,652 earth days.

Firsr colour panorama taken by opportunity

For more information on video: 5 years on Mars by National Geography Channel

For more information on website: http://mars.jpl.nasa.gov/

7 tips - How to get the Best Home Loan?

2011-05-01T22:57:00.000-07:00

1. Low interest rate isn't always Best

Nowadays, every lenders compete to claim that one interest rate is among the lowest in the country via advertisements. However, low interest rate does not means low early exit fee or flexibility of repayment. You have to understand that this is their marketing strategy to get your 1st impression on their home loan package.

2. Compare the Home loan packages

There are many different types of products on the market. Equal monthly instalment package is the most famous in the country. For under construction property, you must stress for monthly instalment to be commence immediately instead of upon full loan disbursement. The best side for this is you can service both interest & principle amount. You have to understand that service interest portion during construction period does not reduce your principle amount until you serve your 1st instalment upon completion of your property.

If you manage a current account, you can always ask for a better package that link your housing loan to your current account whereby the credit balance in your current account will be used to reduce the housing loan balance outstanding for interest calculation, thus resulting in interest savings. If you able to maintain daily credit balance in current account equals or more than your outstanding loan principle, the full amount of monthly instalment you pay will direct to set off the outstanding principle without paying any interest portion.

3. Take advantage of bank competition

Shop around before you accept any offers. Most of the terms & conditions and interest rate are negotiable as the banks will try their best to retain the customer.

4. Establish Savings Habits & Prudent Spending Behaviour

Banks like to see a record of good savings of their potential loan customers. Good savings habits & spending behaviour of a customer will lead to fast approval of loan application. It is encourage to have 20% of savings from the total loan amount.

5. Mortgage Insurance | Fire Insurance | Solicitor's Fee | Down payment

Many consumers don't understand the importance of issues like insurance & solicitor's fee. Mortgage insurance & solicitor's fee can be financed by most of the banks. The amount can be substantial based on the loan amount.

Some banks are offering zero entry cost & free legal documentation, which mean that the banks will pay for the legal documentation fee between consumer & the bank.

Mortgage insurance likes MRTA is a very important feature in a housing loan product. Paymaster of the loan account or the main income contributor of the family is strongly advise to take up the insurance to minimise the risk and to protect your loves one in any unforeseen circumstances. The insurance will cover the outstanding balance of loan amount (full insurance) when the insured person death or permanent disability.

6. Read & Understand the offers

Don't sign anything you don't understand. Remember to read and understand the terms & conditions, loan structure, repayment period, loan amount & insurance policy. You are advised to consult professional credit officer rather than marketing personnel or brokers.

7. Review your account regularly

Ask for a copy the offer letter for your safekeeping. Review your loan & seek for bank's officer to arrange your loan structure for best option regularly. Banks usually willing to arrange the loan structure/interest rate to retain their good customers.