9:16 am - Market Report by Bill Wermine

Dear Traders,

The consensus of most traders and investors continues to be overwealmingly bearish and pessimistic. We held a CPE course for a group of fund managers and remeisers at CIMB Saturday.

Only one out of 50 raised their hand when I asked how many were bullish.

In my opinion this is irrational pessimism the opposite of irrational optimism and is a sign of a near term bottom.

The irrational optimists were super bullish when the KLSE hit 1500. Now they are irrational bearish when the KLSE hit 800.

One of our graduates Tony Cheong who is a remeiser with Kenaga shared his trading record for February and showed that through disciplined application of price and volume trading it is possible to earn reasonable profits even in a bear market. His method is short term contra trading.

If you are looking for a remeiser who trades with a disciplined strategy and you do not have time to trade on line . It is worth paying a little extra for service that can save you from disaster. An on line platform will not remind you to manage risk.

I would recommend him. His email is : cth6328@hotmail.com .

The Man AUD Capital guaranteed fund closed on Friday and for those who invested or invested in previous Man AUD funds the outlook for the AUD has turned positive. The yield carry over the US Dollar is 3 % and Australia last week signed a free trade agreement with the ASIAN group. Total exports to this group are more than their exports to the US and Europe.

Australia has problems but the impression is that commentators who are dwelling on them have lost perspective that the problems of the US may be worse. The AUD looks relatively well placed.

Attached is a chart of the AUD showing a shakeout last week before a substantial rise. Insiders are heavily accumulating the AUD under cover of extreme bad news. Most CNBC talking heads are still bearish the AUD as they run cover for their insider friends that run the hedge funds.

You may still invest in the AUD Man Diversified Fund which invests in a basket of managed futures as this is an opened ended fund. This is a good hedge should stock markets underperform in 2009. Man is actively managed and profits in both upand down markets as opposed to stock unit trusts which only profit in upmarkets.

I am very wary of scenario trading- a fund which is long only is a scenario trade. It is based on the premise that stocks just like property only go up over the long term. Tell that to California home owners who have seen the value of their houses drop an average of 40 % or buy and holders of shares around the world have lost upwards of 50 % of their share investments.

In time buy and holders may recover their money but unfortunately we live in the now and have needs now that must be satisfied. Active management that allows trading trends in both sides of the market solves this problem. Unfortunately those with opinions and ego problems have a difficult time facing reality- and unfortunately they may pay the price. Bias in the news is always to buy share unit trusts as the unit trust companies support the newspapers with large ad revenue unlike Man who does not advertise


I suppose I am biased to the risk management trading approach but that is because my main focus for my clients is capital preservation during difficult times.



Have a good week
Bill