Ringgits versus Aussie dollars

A few months ago, in the post “The worst may be over”, I have mentioned this:

Perhaps now is the time, for those who have cashed out earlier, to look at investment opportunities and invest cautiously.

In February , when Aussie dollar went below RM2.40, I did advise some of my friends to look at the opportunity, predicting that it would go up once commodities prices go up since you need Australian dollars to buy those commodities.  

If you have invested 10,000 Aussie dollar then in a foreign curency account  , you would have made a very handsome profit. Yesterday, It touched RM 2.80. You would have made a profit of Rm4000 in just 3 months on a less than Rm 24000 capital. (with some crumbs as interest, too).

There are many other investment opportunities. But be cautious. Use only spare money and make sure you have enough cash to cover any emergency use

For those who look at the money market, they would have noticed that AUstralia currency has gone up since  and has hit Rm 3.10 to one Aussie dollars now.

If you have bought 10,000 Aussie dollar at 2.40 rate ( an investment of 24,000RM), you would have earned Rm7,000 now in a few months.That will give you an earning of 29.1%, in about 7- 8 months. That is excluding the interest rate that you earn. For those who invest big time, 240,000 will bring in 70,000 and 2.4 million will bring in 700,000.

Australia is also the the first country to start raising its rate. Last month, the Reserve Bank of Australia raised its cash rate to 3.25 percent from a 49-year low of 3 percent.

This is from Yahoo finance:

Australia, a G-20 member, has weathered the worst global downturn in decades better than other developed countries. It avoided slipping into recession — helped by stable banks, demand from China for iron ore and other minerals, and the government’s 42 billion Australian dollars ($37 billion) of stimulus spending.

Asia, a crucial market for Australia’s mineral exports, is rebounding from the downturn faster than the West and could face asset bubbles and a spike in inflation if governments wait too long to withdraw stimulus measures. Rising food prices are already becoming a problem in India. HBSC economists said in a report Tuesday that South Korea, Indonesia and the Philippines are also on the radar as countries particularly vulnerable to an inflation blowout.

Australia’s gross domestic product grew 0.6 percent in the second quarter, accelerating from 0.4 percent growth in the previous quarter. In September, consumer confidence surged to its highest level since July 2007. Since March, Australian shares are up 50 percent.

Australia has a lot of natural resources such as minerals, which has cushioned the economy well this time. But so has Malaysia.

Australia has gold, the price of which has gone up and up.. SO has Malaysia in the form of black gold, which has also gone up quite a bit in price.. Why they have not gone into recession while we have gone into a fairly deep recession with minus growh?

Why is their stimulus program working and ours not really felt by most of us? Our stimulus program is smaller no doubt , but so is our economy. So the question is whether  our stimulus program is targeted at the right groups and have we adopted the right strategy?

Now that the worse is over, we should seriously review whether we have adopted the right strategy and right stimulus.. It will give us invalubale lessons for future management of economy..

(For those who have not bought Aussie dollars, this may not be a good time now, as the up side of AUssie dollars is quite limited as compared to earlier this year. But do not discount Aussie dollar toovertake US dollar in par value, just as once in the 70s).

 

11 Comments (+add yours?)

  1. klm
    Nov 12, 2009 @ 11:49:33

    Dr. Hsu. Our black gold had been pre-sold for the next 10 years. It does not matter whether its is up.

    Like

  2. Dr Hsu
    Nov 12, 2009 @ 12:15:27

    IT is really dumb to sell a commodity that is depleting and non renewable at a precontracted price for the next 10 years or so.. If it is for the next few months, I can understand.

    A depleting source will fetch higher and higher prices..so the one who earns big is the middle man (or men) who buys at the contracted price and sells at market price.

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  3. klm
    Nov 12, 2009 @ 13:45:39

    Dr. Hsu. Where do you think the govt is getting money to spent? From the pre-sold oil. Ask your friends in Treasury. Yes. Ask Chor Chee Heung. But I think he is too dumb to understand. MCA useless fella.

    Like

  4. clearwater
    Nov 12, 2009 @ 13:57:33

    Dr Hsu,

    Pray tell us, who are the middlemen who so cleverly contracted to buy Malaysian oil at predetermined prices for the next 10 years? Are such long term forward contracts common in the oil industry or is it just unique to Petronas who answers to the PM and not Parliament? Whose oil is it anyway that Petronas reports to the 1Man?

    And of course, how does one become a member of the Petronas oil middleman’s club?

    Like

  5. klm
    Nov 12, 2009 @ 14:14:59

    clearwater. sometime it is a practice to pre-sell commodity ahead so that the price can be locked in. This usually done when the development expense is high like petroleum. The only catch is that one must be very good at gazing the crystal ball.

    I think one of the major buyers of Malaysia oil is probably Japan. Not sure if China is on the list.

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  6. Dr Hsu
    Nov 12, 2009 @ 14:38:49

    clearwater,
    it is normal practice to sell at a predetermined price, but the period varies..

    The oil company is a very well run company. However, not much is known abot its ‘books’ or its investments which i believe is considered state secret..

    Under such circumstances , there are a lot of rumours, and once even Jeffrey K. of Sabah commented that there were certain option holders.. We do not know whether such allegation is true. The best way is to open its books and let everything be transparent, since this company belongs to all Malaysians, and the black gold belongs to all Malaysians.

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  7. clearwater
    Nov 12, 2009 @ 14:56:46

    klm,

    I have no issue with forward sales of oil or other commodities for hedging purposes but…. for 10 years? Is it for all current production? Is that not extreme? Is it normal oil industry practice? If not normal, why? Who is doing the crystal ball gazing? When things are not transparent, you will do well to be suspicious.

    I recall reading something about the Petronas oil middlemen some time back but can’t recall the gist of it other than that big bucks and powerful interests are involved.

    Like

  8. clearwater
    Nov 12, 2009 @ 15:09:11

    Dr Hsu,

    I recall the Petronas oil option article by Jeffrey K. but thought it was too far fetched to be true. There were just no corroborating facts anywhere else. Besides, it is hard to believe a politician’s word; with a few exceptions, that is, your good self being one.

    Like

  9. Dr Hsu
    Nov 12, 2009 @ 15:30:55

    Clearwater,
    when the petroleum prices went to 140 per barrel, why should we need to increase so drastically the pump price, since we are a net exporter. SO logic tells us that it is probable that out oil is sold at a predetermined price and so we could not gain from the sudden and drastic increase in oil prices..

    Look at the case in AUstralia, it is the third biggest gold exporters in the world.. and when gold prices shoot up, the country gians, and that is part of the reason for the speculative forces to push their currency up.. Of course, anticipation of a rate hike is also pushing the aussie dollar up, but the perception that the currency is backed by gold has certainl a lot to do with it as one of the top 6 currencies (most traded) of the world..

    When petroleum prices go up to 140, by right our currency should go up since you need more ringgits to buy the same amount of oil…the fact that the currency remains static is another circumstancial evidence that our oil is sold at a pre determined contracted price..

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  10. clearwater
    Nov 12, 2009 @ 16:17:25

    Dr Hsu,

    Sigh… The end result of cheaply sold Petronas oil and a near invisible stimulus plan is a moribund Malaysian economy, a weak Ringgit and anemic business conditions. Many parents with children studying in Australia are aghast at the strong Aussie$ ; will cost them dearly.

    Like

  11. A true Malaysian
    Nov 12, 2009 @ 16:25:17

    You should know why our black gold sold at pre-determined price. Just look at the “Advisor”, just look at the ghost town Putrajaya, and you got the answer.

    What will happen if petronas cannot deliver the contracted amount of barrels of black gold or production run dry before the tenure of contract over?

    Same thing here, why MM Lee contracted raw water price for so long period?

    If it is because of ‘colour’ the basis of selection to an important position and not on merit, we Malaysia is going down south. By the time, maybe little red dot b-il……who knows?

    Like

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