Wednesday, April 30, 2008

Lion Industries Corp disposed Parkson Holding Berhad

On one hand, Parkson Holding Berhad buys back shares regularly, on the other hand Lion Industries Corp disposed 7.5 million shares of Parkson Holding Berhad. The disposal was made on 23 April 2008 in the open market. On the previous day, 22 April 2008, Parkson Holding Berhad bought 1.2 million shares, paid in the range of $6.25 to $ 6.60. I am getting a confusing message, is the company undervalued or not undervalued? If it is undervalued, why the disposal? Or something else? Parkson Holding Berhad has promising growth prospects but why creating unnecessary doubts with this kind of actions? It is still on my buy list but a bit disappointed.

Tuesday, April 29, 2008

Shall Turtle Trade?

I received regular comments from a reader. After he read my post yesterday, The King of Buy and Hold-Warren Buffet, Myth or Reality?, he suggested that I should trade instead of going the turtle way.

This turtle journey is to generate annual compounding growth rate of 10%. By the end of 15 years, I just want to accumulate a sum of RM 350,000. See my first blog for more details: Can Amateurs Beat Professionals? It is also my intention to demonstrate how frustrated it is for a guy with such a small budget to achieve the target, only $888/month saving???. It is also very tempting to churn, see my entries on performance pressure and capital allocation III.

But don't, I am very clear, by the end of 2009, I should have around $ 27,000. Achieving this target will be quite satisfactory to me but NOT very glamorous though. The first few years is mastering the discipline of saving money, resisting temptations and not making mistakes. It is characters building to master Rule No 1, Never Lose Money.

I just wanted to demonstrate why many believe in compounding power but have no staying power to finally seeing the flat curve rise to parabolic shape. To do that, you need to make zero mistakes for a long time. I believe many have read the power of compounding in many personal finance books, drop me a comment if you wish me to write a short entry.

The point I was hoping to convey yesterday was: very good companies are very hard to come by especially those who can outperform an index for a longtime. If you can find it, sell at a reasonable price, put down a big bet and keep it forever. Five were simply good enough, that's why it constituted almost 61% of Buffet marketable securities holdings. Let's not forget Buffet kept a lot of main street businesses for more than 15 years. Many have wrote what to buy but not many have think it through when to sell to reinvest. I will spend some time to elaborate this point later.

Monday, April 28, 2008

The King of Buy and Hold: Warren Buffet - Myth or Reality?

We all have been advised to invest for the longterm. Warren Buffet declared that he doesn't need an exit strategy because the selling is never if you pick the right stocks! I've traced Warren Buffet's major holdings over a period of 26 years from 1982 to 2007. This is what I found:

In his significant transactions, he bought and sold a total of 48 companies, only 13% of his holdings are older than 15 years and he is still holding it: The Washington Post, The Coca-Cola Company, Wells Fargo, American Express, Gillette ( P & G) and Geico. He has taken Geico private, the remaining 5 companies that are still publicly traded, made up about 61% of his 2007 marketable securities.

From Yahoo chart, it is seems that most of his buy and hold forever companies managed to outperform S & P 500 with exception of the Washington Post.

The next finding is going to rock you, 27% of them are less than 1 year old and 43% of them are between 2 - 5 years. If you add these two categories together, it is close to about 70%. Does that change the way you look at Buy and Hold?

Have a great week ahead.

Saturday, April 26, 2008

Did iCapital walk the talk?

Moola posted an interesting topic for discussion: did iCapital walk the talk? iCapital calling himself absolutely bullish while selling out stocks? Since I have quoted iCapital several times and iCapital is on my buy list, it is about time I express my views.

Facts: iCapital raised RM 38 million cash by selling stocks in 9 months ended February 2008, TTB also bought RM 19 million of shares at the same time. I am in opinion he is just doing some house keeping. This lead to a question, is he a short-term trader or long-term investor? Generally, one should sell when you see another much more undervalued stocks or if you think sentiments are going much worse despite of very exciting fundamentals. It is not wrong to take advantage of Mr. Market. Holding time is a rough guide, no sacred cow in the world of investing. Turtle will not hessitate to sell MUI if Parkson drops to RM 3/share on Monday.

Cash/total asset ratio is 35% 9 months ended 2008 vs. 35% 9 months ended May 2007. One needs to understand that he is always sitting on a big pile of cash to exploit on cheap sales. That is the way he operates since day one, pretty consistent here. He always say that his approach is Top-Down especially comes to emerging market investing, no way you can do bottom up approach. The other observation I have: he is not a pure Graham or Buffet, he will buy technology stocks, small caps, big caps, growth, workout, etc. He will just continue to buy and sell as long as a stock is undervalued in his perspective.

I guess the only issue left is definition of bullish, does it mean one need to be 100% invested and not selling stocks?!. He knows the major open-ended funds weakness is funds need to be long all the time and force the fund managers sell out at the wrong timing, hence he came out with closed-end fund to give him that flexibility.

However, this is the most important point I want to make, we all need to use our own judgment no matter who says what, we all are human, we can screw up, could screw up big time. Having a good investment adviser will reduce the chances of avoiding accidents but no guarantee of not losing our own money. He also has many anchor bolt stocks calls that you can see in his 2nd chance portfolio. All his mistakes are right there.

Have a nice weekend!

Rates not the answer to high food prices?

Malaysia's central bank chief Zeti said interest rates are not the answer to curb high food prices? This is a structural problem that has be dealt with supply. Really? Or is she trying to tone down the expectation of rate hike to slow down hot money flows? If rate is not the answer, is exchange rate the answer? Well, it will depend our big brother, China.

If most think Yuan still undervaued by 10-15%, Ringgit will be heading to 2.8-2.9 esspecially most perceived both are moving in a lockstep? Does this means bond and equity market will continue to enjoy the rally?

The recent worldwide equities markets rally will put some pressure to those who have not participated. Is it too late to buy? The current rally is selling on the story of high inflation will stop Fed from keep cutting interest rate. This will lead to rebound in US $ therefore buy US $ asset. This is only a short term story but longterm could still looking pretty bleak when presidential election reaching its tail end by year end.

Turtle has more than 50% invested and will still maintain his stance of not buying at this point. Turtle is going to save more money, when the right opportunity arise, strike without fear! Turtle is willing to forego a small mini rally and do not think he is missing a superbull run!

KUALA LUMPUR(The Edge): Malaysia's central bank does not believe interest rates are the answer to curbing high food prices, central bank chief Zeti Akhtar Aziz said on April 25 .

Annual inflation hit a 13-month high of 2.8% in March, driven mainly by costlier food, prompting some economists to speculate that the central bank may have to raise interest rates, among Asia's lowest, by the end of the year.

But Zeti told reporters food-price inflation was being driven by structural problems with supply and that it would be better dealt with by boosting supply rather than adjusting rates.

"This increase in prices is due to structural developments that relate mainly to supply conditions that are not able to meet demand," she said after releasing a report on Malaysia's offshore financial centre of Labuan.

"Interest rates generally respond to changing demand conditions. In this situation, therefore, to address the issue of rising prices, we need to address it by addressing the structural issues...Therefore interest rates are not the answer in this kind of environment and under these conditions."

Malaysian inflation has crept up since late last year but remains among the lowest in Southeast Asia, thanks largely to price controls on essential goods such as flour and cooking oil.

These controls, combined with the enormous cost of energy subsidies, are putting a severe strain on government finances, which are already in chronic deficit.

The government, as a first step, has begun a campaign to boost agricultural production and announced plans to develop stockpiles of essential foodstuffs like rice and cooking oil. -- Reuters

Thursday, April 24, 2008

Speculating vs. Investing - Hua An, Part IV

I'm travelling today. Post will be short. iCapital rated Hua An as trading buy with target price of $ 0.90/share yesterday. This is strictly based on technical chart reading. The Chinese government cut trading stamp from 0.3% to 0.1% hope to revive the stock market again. Hong Kong stock market will get some boost but it is approaching 26,000. Not sure what is Hua Ann price today, odds are increasingly not attractive if price continue to rise.

My readers, I'm on record, this blog is not dedicated to trading but for long term wealth building. The entries serve as a purpose to capture my thoughts what will happen if I'm trading. Just to record events leading to rise and fall of prices. We will conclude over time whether such efforts worthwhile, spending too much time chasing a few hundred Ringgit a month?

Wednesday, April 23, 2008

US $ 150 Oil

In last December, people were calling for US $ 200 oil. Today, they've compromised a bit, calling for US $ 150, another 28% upside from US $ 117. Part of me being a little bit of a contrarian has turned cautious. There is almost no use of looking for facts in newspapers, government reports or investment research reports, all say the same thing: demand and supply are very tight. The global boom has created endless thirst for oil. I read somewhere saying Russia is running out of oil but no one seems react to news Brazil discovered a large oil field. In the short term, a little bit of hiccup like one Japanese ship being attacked in Nigeria will send price soaring. Overreactions? The latest I read in the Wall Street Journal says this:

"Next year, if all goes well, Saudi Arabia will turn the spigots on the largest oil field to come online anywhere in the world since the late 1970s.

The Khurais complex, sprawling across a swath of red dunes and rocky plains half the size of Connecticut, is expected to add 1.2 million barrels a day to an oil market caught between growing demand and a paucity of significant new discoveries. The twin forces have led to historically high prices for crude oil, which settled at a record $117.48 on Monday.

But the project also illustrates a darker point: Even in Saudi Arabia, home to more than a quarter of the world's known recoverable reserves, the age of cheap and easily pumped oil is over.

To tap Khurais, Saudi Arabian Oil Co., known as Aramco, has embarked on the most complex earth- and water-moving project in its history. It is spending up to $15 billion on a vast network of pipes, oil-treatment facilities, deep horizontal wells and water-injection systems that it calls "one of the largest industrial projects being executed in the world today."

Bottom line, supply will remain tight. It will come on line between 2009 and 2011 from Saudi which supply 6% of the worldwide demand.

Commodities gurus like Jim Rogers and Soros said be careful. "Value" guys like Mark Mobius of Templeton and Buffet own oil stocks now. This oil bull run took off strongly in 2003 but has not pulled back significantly except in Janauary 2007. The only guy that totally missed this bull run is Bill Miller and still refuse to participate, I am not sure why. I agree that oil price will remain high but what is the fair value? US $ 60, US $ 70, US $ 80, US $ 90, US $ 100, US $ 125, US $ 150 or beyond???? How much should we pay for the premium on top of geopolitical risks + US $ depreciation + exploration costs + extraction costs, etc? What is the price level that will eventually hurting the whole world?

BTW, oil hit a new record after I wrote this, US $ 120.

Tuesday, April 22, 2008

Speculating vs Investing-Hua An, Part III

Hua An closed at $ 0.75/share yesterday. Assuming a speculator bought 10,000 shares at $ 0.75/share, his principal is $7,563. Now is the fun part, if he is a speculator, the share price did not move as strong as he wants, he will have to face a choice of keeping it or selling it out at $ 0.75. If he opted to sell out, he will receive $ 7,437, $ 126 loss or 1.7% (inclusive of transaction costs). Despite of last three days favorable market conditions, he is still losing 1.7%? A speculator will have to figure out what the KLSE thinks today after Bank of America missed the estimates big time!

Avoiding pain is a natural instinct for human. Most will avoid taking 1.7% loss. He will switch position. No! this can’t be, I must listen to Warren Buffet. One must take a long view, this is a long-term investment. What the heck you have just said? There you go, a speculator has been converted. From greed, most will hang on to hope, hope things will get better each day, they will monitor price everyday, every hour, some even every minute? But they still have not set their stop loss yet, let’s set it at 10% for argument sake. We have just set up a potential loss of 11.6% or $ 877 to factor in transaction costs.

Soon, HOPE will turn into FEAR. FEAR into DESPAIR. I bet you a speculator will really want to sell at $ 0.60 later despite of the company is a C grade investment candidate but definitely not D or E grade. C grade investment may tie down your money for medium term to long term but may not necessarily losing your principal. From capital allocation point of view, why put your money into C grade while you can find A or B grade?

Most of the average speculator has no plan. Most will not quantify risk-reward. Again, for argument sake, let’s assume a speculator expect price will move to $ 0.8 in three days. That is a potential net gain of $370 or 5%. The risk-reward in this case: $370 if he wins, $126 if he loses.

5% gain vs. 1.7% loss. Do you like the payoff? Have you ever assigned some probability for your payoffs? Let me end my entry by quoting from one of my favorite books Mobs, Messiahs and markets:

“Actually, calling him a speculator is pure flattery. A real speculator has a realistic view of the odds and almost always operates on a simple premise-that the crowd underestimates the odds of discontinuity.

Take the case of the market that goes up every year for 10 straight years. What are the odds that it will go up again? There is no way to know. But mankind is a credulous beast…...And if the market has gone up for 10 years straight, a kind of sentimental momentum tells him it will keep going up. He is loath to accept pure chance as an explanation. He knows there’s a reason for it. Low inflation, record profits, favorable Fed policies: He reads the papers; he knows what’s up.

The real speculator may know no more than the common man. And he has an advantage-he knows the common man. And he knows you don’t win by predicting the future, you win by getting the odds right.”

Good luck, May the Force be With You!

Monday, April 21, 2008

Still on Credit Crunch

Most will get a temporary relieve and ready to pound this morning when KLSE opens. Turtle knows most have already reading the news every where. As Turtle is working on a longterm investment portfolio, i.e. not trading, news like last Friday is a non-event. Even KLCI move up to 1400, a potential 10% upside from 1267 will not matter because he may not want to take profit. However, if KLCI drop to 1150, that will be a good news because that is a 9% discount.

Is the worst over? There are signs of credit cruch begin to hit non-US businesses decisions. Credit costs become costlier. Some of Malaysian businesses already delaying their fund raising activities. They either perceived distressed assets have not reached to a very very cheap level or weakening of business outlook. YTL is very shrewd when comes to acquire distressed asset, remember Wassex deal when Enron fall?

Eventually, growth will be affected when people continue to wait for each other. Lending instituitions are still afraid to lend to each other.

Sunday, April 20, 2008

Speculating vs Investing - Hua An, Part II

Benjamin Graham gave a definition of speculation in relation to investment: "An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative."

May Turtle also add, it is also related to time horizon. Speculating is betting on sentiments for somebody who is willing to pay higher price. Since sentiments can go up and down pretty quickly, a skillful speculator hope to get in first and get out before things fizzled out. In short, timing is everything. A skillful speculator has a system, a plan and rules to get in and get out. Stop-loss target is a must because losses can be very big because sometimes there is nothing to rely on; or a speculator does not wish their capital sitting on opportunity cost. For a speculator, to make money: churn!.

Buffet advised us to have a stomach to hold on to an investment even falling by 50%. You can do that because it has passed through a series of vigorous tests, it can bounce back, just give it a reasonable period of time.

Most decision making in real life is grey, not black or white. I picked Hua An as a case study. Hua An is in a business of producing and selling metallurgical coke. This is a pure China play.

Revenue increased from RM 730 millions(2006) to RM 852 millions(2007), up 17%. The recent commodity booms drive coal prices to record highs. Average sell price of metallurgical coke increased about 17% also. This Implies volume is flat, no growth but exhibit some pricing power to pass on to customers. Price of metallurgical coke is generally moving in tandem with coal. Coal prices had tripped since 2003. The question is how sustainable is the price?

2007 Earning Per Share is 12.11 sen, trailing PE at 0.75/share is 6 times. Price/Book 1.2 times. Is our principal safe? Balance sheet looks clean, no debt. Feeling more positives? No signs of receivables danger but there is RM 100 million goodwill.

Cash flow statement, a question mark on making a non-cash adjustment of RM 31 million for income tax recognized in income statement. Depreciation/sales is about 2.3%, does not seems to be a capital-intensive business, based on 2007 average selling price(ASP). Ratio could go higher if ASP goes down. Pared down RM 68 million debts, gets funding of RM 200 million from shares issuance to fund RM 237 plant expansion. Display some signs of prudence management. Gross dividend yield 3%.

You can get a copy of financial details from and company information at

Two risks, sustainability of ASP and potential slow down of Chinese economy reducing steel demand. Turtle will leave it to you as a judge: can this company be qualified as an investment. Are you feeling comfortable to buy the whole company or spending at least 20% of your total portfolio? What is the probability of earnings growth visibility over next two to three years? We must be speculating, if we do not consider it as an investment.

The issue is consistency in one's investment philosophy. Different persons can buy and sell stocks for different reasons and make money but confuse lots are those who are buying without knowing whys, this is the only point Turtle is trying to make. You have speculators billionaires and investors billionaires but Turtle yet to find a billionaires that they don't know whether they are a speculator or an investor.

Saturday, April 19, 2008

Napoleon Hill's Principles of Success

Just to share with all something I found at Napoleon Hill's website.

1. Definiteness of Purpose

Successful people move on their own initiative, but they know where they are going before they start.

2. Mastermind

No man can become a permanent success without taking others with them.

3. Applied of Faith

You can do it if you believe you can.

4. Going for the extra mile

The most successful people are those who serve the greatest number of people.

5. Pleasing Personality

It is essential that you develop a Pleasing Personality - pleasing to yourself and others.

6. Personal Initiative

Today's employer usually is yesterday's employee who found opportunity waiting for him at the end of the second mile.

7. Positive Mental Attitude

Keep your mind on the things you want and off the things you don't. Remember an old Proverb:"Be very careful what you set your heart on, for you will surely achieve it."

8. Enthusiasm

To be enthusiastic, act enthusiastically.

9. Self Discipline

Direct your thoughts. Control you emotions. And ordain your destiny.

10. Accurate Thinking

Truth will be truth, regardless of a closed mind, ignorance, or the refusal to believe.

11. Controlled Attention

Keep you mind on the things you want and off the things you don't want.

12. Teamwork

Harmonious cooperation is a priceless asset which you can acquire in proportion to your giving.

13. Learning from Adversity and Defeat

REMEMBER: every defeat, every disappointment and every adversity carries with it the seed of an equivalent or greater benefit.

14. Creative Vision

The imagination is the workshop of the soul wherein are shaped all the plans for individual achievement.

15. Maintenance of Sound Health

"A sound mind in a sound body, is a short but full description of a happy state in the world." - John Locke

16. Budgeting Time and Money

Tell me how you spend your spare time and how you spend your money, and I will tell you where and what you will be in ten years from now.

17. Cosmic habitforce

You are where you are and what you are because of your established habits, thoughts and deeds.

Thursday, April 17, 2008

Shares Buy Back: Parkson

Shares buy back used to be interpreted as a proactive capital management. It is supposed to be a good practice, a shareholder value enhancing activity. But some have used it as a sentiment indicator, interesting isn't it?

One can see very clearly the highest number of buybacks transactions coincided with a dip. There is no guarantee however that is an absolute bottom though. One can more or less generalize that shares buy back is a signal of owners think their companies are undervalued but their voices are not loud enough to offset share prices fall.

Parkson has recently started shares buy back since beginning of April. Turtle is in opinion, the company will not or cannot absorb any selling pressures. Defending share price is a wishful thinking. On heavy selling days, the company shares buy back were less than 5-6%. Nevertheless, Turtle supports the management moves of reducing outstanding shares and sending signals the company share is undervalued. They can only doing so if they have spare cash. Nothing more, nothing less, period.

The direction of Parkson Holding Berhad is simply correlated with general sentiments except the magnitude of fall is deeper than HSI and Parkson Retail Group.

Switch subject. Of Late, Mark Mobious thinks the US financial crisis is almost over, he begins to buy China Mainland banking stocks. He thinks Malaysian stocks are getting more and more attractive too. Li Ka Shing bought shares of his own company - Cheung Kong.

Earnings from the US banking sectors were not out of expectations. Sub-prime write down did not shock anyone yet, however there are some signs of strains in the consumer credits. Citigroup will release their results tonight. Despite of the US negative economics news, about 10% plus of the earnings released so far have not been reflecting the weaknesses-some divergence. Signals are mixed, it is not all clear kind of situation, odds are 50-50. It is all depend on one's risk appetite. Turtle will remain as a turtle at this moment, though there is a premium to be paid later if worldwide stock markets rally.

Speculating vs. Investing - Hua An

China’s GDP Q1 08 grew 10.6%, down from 11.7% compared to same period last year. Everything were up, fixed asset investment up 24.1% and CPI was still high 8.3%, down slightly from February 8.7%. Food prices were responsible for bulk of high CPI, contributed 6.8%. Retail sales of consumer goods were up, 20.6%. The Chinese economy is still over-heating, there will be further tightening in the coming days.

Shanghai Composite Index and Hang Seng Index tumbled after the report was released at 2.30 pm today. Why? Professional traders understand the implications, they took profits, they cut losses. Poor buyers who either ignorant or anchor at the wrong price idea will continue to scoop up. If they lose money, they will pretend to be Warren Buffet one week later, swearing will hold stocks forever while watching their value dwindling.

Over in Bursa Malaysia, Turtle assumed there were some hot tips spread like hot fire around the Internet about Hua Ann - the hottest stock of the day. It was the number one active stock, 21 million shares changed hands. Some tempted to go for a quick punt i.e. hit and run since it has broken above its downtrend, heading RM $1.00, nice potential 40% profit. Of course, KLCI broke above 1250 psychological level pouring more fuel to fire. DJIA held up OK yesterday. The Wall Street Journal said Merill Lynch is probably going to write down another $ 6 – 8 billions but Asian markets were resilient. The setup was seems to be perfect. Many will be fearful of missing the party. More important is ego issue too, fear of their lunch partners will laugh at them of not acting on the tip. Many will still charge ahead, keep placing buy orders though some have turned cautious.

There is nothing wrong with speculating but do not acknowledge or unconsciously unaware they are speculating is a problem. If one acknowledges is speculating, one must accept the rules of engagement. One must takes responsibility for losing money is a result of own decision and not faults of others. One must understand if sentiments have gone South, one must quickly acknowledge, cut losses or take profits. Investing and speculating is like oil and water, they can never mix well. If one cannot read the market, no problem, just acknowledge one is not ready to speculate.

Wait a minute,Turtle, you are talking as if like buyers already losing money. Many transacted around $ 0.75 but fair enough, Turtle will shut up. Let’s review what happen to Hua Ann price on next Monday, T + 3 and one month and one year from today. Just a sanity check!

Wednesday, April 16, 2008

Taiwan market commentary I

Give me eight years, I will set the foundation for peace and prosperity for the next century, those were the words of Ma Ying-jeou. He finally won the presidential election, those speculated made a tidy profit, probably Jim Rogers too(if he takes profit). This is it?

How can his victory bring about the structural change and drives even a stronger Taiwanese economy?

Taiwanese economy has been doing fine for the last five years. Economic growths were decent, inflation was tame(though is going up), reserves were strong too, etc. Main exports destinations are China, Hong Kong and the US. It is hard not to feel positive.

Political tensions between China and Taiwan under the previous administration scared many foreigners from pouring money. Taiwan market has been underperformed significantly compared to Hong Kong market even though they have benefited from China robust growth for a while.

The uncertainty overhang is gone now. Ma Ying-jeou pledges to build closer relationships with China. He takes concrete steps. His administration wants to establish direct flights rather than going through roundabout, yes, Hong Kong. He is pushing for more mainland tourists arrival and convertibility between Renminbi and NT dollar.

With closer ties with China and increased domestic spending, I believe this market has legs to run. It is relatively cheap to access to China, trading at 12 times PE. I will continue with part II commentary.

Tuesday, April 15, 2008

Turtle, why are you so slow, not buying and selling anything?

One of the hardest things in investing is sitting still, especially if you have cash in hand. At least I bought one stock in two months, there are people not buying anything in the last four to six months. If Soros thinks he needs to be careful, who am I? It is so much better off to stay low profile, don't you agree?

Even professionals can get it wrong. Let me share with you what I found in the Business Times.

"SO, THEY guessed wrong. Friday's large push in Singapore, Hong Kong and in early European trading - which was undoubtedly aided by generous amounts of short-covering - came because traders in this part of the world guessed that Wall Street would end higher after its own Friday session and tried to position themselves accordingly. This was clearly an ill-conceived plan - US stocks on Friday plunged after the release of worse-than-expected earnings by General Electric and terribly poor consumer sentiment data.

Traders who bought on Friday might argue that at the time, it looked a decent bet - after all, prices were rising fast and the market had, over the previous fortnight, managed to shrug off bad news.

By the same token, you could also argue that bad news can always become worse news for which the market may be unprepared, and that the previous week's awful employment report already sounded a warning that the economic numbers for the next few months would point to a possible prolonged recession. If so, the smart money would have recognised this and should have sold into strength."

I have been publishing many stocks that I like but still not buying. One needs to understand that fundamentals and sentiments sometimes don't mix well. Good fundamentals do not mean one has to buy outright. Pessimistic sentiments will create even a better bargain, you get more discounts on top of the good fundamental value. Value or Technical camp can fall into problem of anchor and adjustment bias.

Let's take Shanghai A share as an example. At current index, its valuation has reverted-to-mean. However, it does not mean it will not overshoot on the downside, it can go as low as 15 times PE.

Some bought way too early anchored its valuation at 70 times, bought at 50 times PE hoping to go back to 70. Going for a quick flip-lah. There is no first mover advantage in investing, those move way too early will have a hole in their pocket.

Some are smarter, anchor at 40 times PE thinking valuation has gone back to mean already, they too will lose money if valuation goes down to 15 times PE.

However, those have great patience to wait for 15 times PE to arrive will have the last laugh. But then, one may need to wait for almost three years, do you have that kind of patience?

Coincidentally, yesterday, a research house call for a buy for Public Bank. Additionally, Public Bank released a fantastic set of results, 51% jump in Q1 08 earnings, year-on-year. The results came in about 29% of full year consensus' estimates, mildly surprise. Based on price to book value is still expensive, still 4 times but annualized return on equity is truly worldclass, 34%. Those looking at market valuatioan model, i.e. PE will find it cheap, 10 - 11 times earnings (annualized Q1 '08). I will surely buy but would not rush into panic buying yet.

Monday, April 14, 2008

Why don't we buy a solid blue chip like Public Bank Berhad?

Public Bank Berhad needs very little introduction. It is a very solid and well manage bank in Malaysia. To continue to fuel its future growth, it has expanded into overseas like Hong Kong, China and fast growing markets like Vietnam and Cambodia. We can a plenty of coverage, so financial data will be very minimum in this entry.

I find it funny watching CIMB's analysts keep calling for neutral or underperfom rating. They were too conservative for too long. Unfortunately or fortunately, Public Bank keeps surprises the market with upsides, till a point no surprise is a surprise. Analysts covering Public Bank behaved like driving by looking at the rear mirror at all times- keep making revisions trailing actual results. If anyone ignored what analysts called and bought in 2003, they already making almost 5 folds return. Why don't we buy this solid blue chip when it has neutral or even underperform rating back then?

Of late, everyone seems to know it is expensive, based on its 2006 and 2007 financial performance, people are paying almost 4 times book value, more expensive compared to the dizzy days of superbull run. Has Public Bank escalated too much expectations of analysts? Winson Ng of CIMB seems to be cautious in his call in 2007, his guts now grew tremendously, revised his call with much stronger convictions. He was justifying you and I should pay 4 times book value based on its superior ROE of 25%, revised his target from $ 12.7 to $ 14.6 per share. Will he get it wrong this time, putting a cart way ahead of the horse?

Why are people willing to tie their money down on "perceived" undervalued small cap stocks but not Public Bank? Shall we at least allocate small amount of money from our portfolio? Will this so call "limited upside" Public Bank prove everyone wrong again? Will Law of Reversion-To-Mean eventually creep in? I dare not predict the price will fall because it is just too popular. Many fund managers attracted by its good dividend yield and a good alternative to Maybank and CIMB. I am willing to pay for this wonderful business for $ 8-9/share and hold it for a long time.

A tale of two companies: Bear Stearns and General Electric

The stock markets around the world found comforts after the Fed rescued Bear Stearns in mid of March. Many thought worst days of financial troubles were over. Worldwide equities market rallied but Soros warned the rally will be a short-lived rally. True enough, the rally leg got snapped but not because of "financial sector". Many people were shocked when GE posted 12% earnings declined, year-on-year. GE was the gold standard in the Wall Street when comes to earnings guidance, right on the dot all the times. It is a barometer of the US and global economy health with its size. Interestingly, looking at the ETF losers, "financial sector" index did not show up but industrials and semiconductors took a beating. Did you get the picture?

When I first heard the news,GE dragged down DJIA 250 points plus,it must be serious. The first question came to my mind: is decoupling story dead? I was relieved when I gone through their analysts call presentation material. This confirmed my suspicion, this is a Wall Street problem affecting real estate, consumer and business spending. The sub-prime problem is "the US problem" and not a global problem. See some of the selected charts.

Strong infrastructure was not strong enough to offset the US weakness. Energy, oil and gas, aviations and etc were solid. Global business was still Okay.

Industrial segment: Asia you rock man! Up 57%

5% full year 2008 earnings cut is nothing, just a small hair cut.

The implication? Right here waiting to strike.

Saturday, April 12, 2008

Where did the saying ''win hands down'' come from?

(Reader Digest) To "win hands down," which means to "win easily" or "win with little or no effort," has its origins in horse racing. In a close, photo-finish race, a jockey typically strikes his horse with a bat or the reins to force it to maintain or increase speed. When the horse is leading by several lengths and a win is assured, the jockey will usually cease striking the horse or let the reins go loose: In effect, he puts his "hands down." The expression first appeared in the mid-19th century; by the end of the century, it was being used outside of horse racing to mean "with no trouble at all."

Where does the saying “once in a blue moon” come from and what does it mean?

Believe it or not, one of the reasons I am blogging is to improve my English. Friends, please stop laughing - I am serious. I sometimes feel very sad with my English weakness. I take part of the responsibilities of not working hard enough, however, I also want our government to bear part of it(just a very small part of it). There is no need for me to elaborate lengthily on reasons of Malaysian English standard is dropping.

I'm really admire those who are from the "old school" who can live up to the gold standard of English. For many of my friends who are in the same boat, let's try to improve ourselves. I will share some good stuffs that I can find. It will be published during the weekends.

(Reader Digest) The expression “once in a blue moon” means occasionally or rarely. For example, a less-than-active person goes to the gym once in a blue moon. The term “blue moon,” however, has had many different meanings over the centuries. Its usage can be traced back to a 1528 text in which it described something absurd. The term then evolved to mean never.

It is believed that at some point in the 19th century, “blue moon” took on a literal meaning: when dust from volcanic eruptions and/or smoke from forest fires in the air made the moon appear somewhat blue. These were fairly rare occurrences, hence the term “once in a blue moon” – the meaning of which has not changed.

Many people today believe that a blue moon is the second full moon in a calendar month and is part of folklore, and that it was behind the origin of the expression. However, “this is incorrect,” says folklorist Philip Hiscock of Memorial University in Canada. Unfortunately, “the false information spread with the popularity of the board game Trivial Pursuit, whose researchers took the description from a 1985 children’s almanac, which took it from a 1980 radio show, which, in turn, took it from a 1946 magazine article – where the mistake originated.”

The 1946 magazine article’s erroneous description of a blue moon was a misinterpretation of the Maine Farmers’ Almanac’s definition of a blue moon, which described a blue moon as the fourth full moon in a season that usually had three. The article’s writer wrongly assumed that if there was an extra full moon in a season, then there must have been two in one calendar month.

Friday, April 11, 2008

Dollar Slips Below 7-Yuan Barrier

Dollar slips below 7-Yuan is a welcome development. China will eliminate threats of trade war, cooling its inflation and setting itself free from liquidity trap i.e. slowly deflating the assets bubbles. This will be positive for "H" shares in Hong Kong. Oh Yes, my Parkson too. My good friend Jim Rogers is right, people will continue to flee dollar, Yuan and commodity are going to rock!

Wait a minute, don't get too excited. Many economists and analysts said they are not surprised, does it means this good news already priced in? Don't forget stock market is a big discount machine, under normal circumstances I must add a qualifier. Last month, Standard Chartered Bank already revised their forecast from 8% to 15% appreciations. Secondly, does it also means the coming inflation number will not be good, 8% again? Thirdly, there is going be some adjustments by exporters and may impact investments to some extend.

The volcano is still erupting. News like this will excite traders, they are concern with precision and speed - making money from minute fluctuations in a small window of opportunity - amplified gains with leverage. For guys without leveraging, they need to make money by riding at the back of a big trend, a big wave. Sit still, Turtle does not want to bombard readers with news to make them hyper-active.

SHANGHAI(the Wall Street Journal) -- China's currency breached a new milestone Thursday, as the U.S. dollar bought less than seven yuan for the first time in over a decade and as Beijing increasingly permits its exchange rate to reflect the continued power of its economy.

At the start of foreign-exchange trading in Shanghai, the People's Bank of China set the day's reference rate for the U.S. dollar at 6.9920 yuan compared with the closing exchange rate of 7.0017 yuan in the previous session. The central bank strictly controls the market and permits the dollar-yuan exchange rate to fluctuate 0.5% above and below that daily reference rate.

China's yuan has accelerated upward in recent months, gaining 4.5% so far this year against the U.S. dollar after pushing 7% higher in 2007.

"It's a normal trend based on economic theory," Ji Zhu, a global economics professor at Beijing Technology and Business University. China's economy is growing at double digits, while the U.S. is in the midst of a slowdown, he notes.

In July 2005, Beijing bowed to economic pressures at home and global calls to loosen its grip on the currency, ending a decade of locking the exchange rate around 8.28 yuan. Initially, further gains came slowly, as the authorities stressed the importance of building a functioning foreign-exchange rate system -- and brushed off threats of trade sanctions from the U.S. Congress and global trading partners. It took until May 2006 for the yuan to break the barrier of eight to the dollar.

Now, a stronger Chinese currency is considered an antidote to the growing inflation the world's fastest-growing major economy is experiencing, since it reduces the cost of importing commodities like crude oil that are critical to maintaining the pace of growth.

Yet the rising yuan is also a headache within China. It makes the country's exports more expensive to overseas buyers -- particularly Chinese companies that produce price-sensitive products that complain they are being hurt by the trend. There is also a widespread view among economists and China's own people that the yuan remains undervalued, which continues to encourage enthusiastic investment into assets such as real estate, based largely on hopes that as the yuan rises further, the assets themselves will be valued higher -- even if other factors suggest prices have become too high.

While the U.S. has continued to pressure Beijing to allow the yuan to rise, Washington is also concerned that the falling dollar might discourage China from accumulating Treasury bonds at a critical time for the U.S. economy.

U.S. Treasury Secretary Henry Paulson, who has tried face-to-face dialogue, rather than threats of sanctions, to encourage Beijing to liberalize the currency system, was in China earlier this month amid predictions the dollar would soon buy less than seven yuan. After meeting China's president, he noted the movement, telling reporters: "I acknowledged to President Hu (Jintao) the very material progress that they've made with their currency because they have a currency that more accurately reflects underlying economic fundamentals."

--Bai Lin contributed to this article.

Thursday, April 10, 2008

Oasis Hong Kong Airlines Closed Shop, Good Luck AirAsia-X

April 9 (Bloomberg) -- Oasis Hong Kong Airlines Ltd., the 17-month-old budget carrier that challenged Cathay Pacific Airways Ltd. on some of its most profitable routes, ceased operations, crippled by high landing fees and rising oil prices.

KPMG was appointed as provisional liquidator and the airline is seeking new investors, Chief Executive Officer Stephen Miller said at a Hong Kong press conference. Oasis was losing more than HK$1 million ($128,000) a flight, the Hong Kong Economic Times said earlier, citing unidentified people.

The airline was unable to sustain its low-fare model because of a 73 percent surge in fuel costs over the past year and competition from Cathay Pacific and four other carriers on direct London flights. The fourth airline shutdown worldwide in two weeks left thousands of passengers stranded in Hong Kong, the U.K. and Canada.



With Oasis gone down to the drain, Tony Fernandes will be the last man standing to prove to the world Malaysia Boleh!, making low cost carrier Xtra Long business model viable and profitable. His original destination was supposed to be London but has not been launched to-date. He launched Gold Coast Australia and China destinations instead. These flying routes seem to be under-serve by other airlines, avoiding direct confrontations, is he lucky or smart?

The US crude-oil consumptions declined had been much shallower during recent recession periods(see chart). The rest of the world will be able to offset easily at 3% consumptions decline by the US. High crude oil price will continue to be a sticky problem especially it is heavily subsidized in the emerging markets. Let's see how strong AirAsia-X pricing power is, to get through this tough operating environment. My best wishes to Tony Fernandes.

Wednesday, April 9, 2008

Forecasting, the Great Humiliating Job

I have been refusing forecasting index target. Not that I have no guts but I feel it is a thankless job. People will mock at you, spit at you when you are wrong. What for? Plus, 8/10 times forecasters are wrong.

Case in point, let me quote what Dr. Check wrote in The Standard Finance, "Commodity guru Jim Rogers thinks the US economy will take five to eight years to recover.

I remember he suggested Alibaba (1688) in early December when it stood at HK$40. Yesterday the stock hit HK$17.40, a 60 percent fall in four months."

Not very kind isn't it? Let's review this entry 5 to 8 years from today.

If you like philosophy and to be lectured, J.L has one for us, a recipe to lose money. He lost all the money he won from the bucket shops. Upon self examination, he concluded the failures were due to trading in and out of seasons, without considering market conditions were favorable or not.

Consider these two stories of smart money begin to be skeptical of Malaysian market especially small caps. Why? Sorry, I don't have answers.

(The Star) PETALING JAYA: Goldman Sachs International disposed of 1.85 million shares of RCE Capital Bhd from March 28 to April 1 in the open market.

According to a filing with Bursa Malaysia, it sold 1.2 million shares on March 28, 318,000 shares on March 31and 340,000 shares on Apr 1.

After the share disposal Goldman Sachs' equity stake was reduced to 41.18 million shares or 5.79%.

RCE provides loan financing to civil servants. Its share price hit a 52-week high on Oct 7 last year at RM1.14 while its 52-week low was 49 sen on March 21. It is trading at a price-to-earnings of 5.21 times.

(The star) KUALA LUMPUR: The Dubai Investment Group Ltd sold down its shareholding in beleaguered PECD Bhd, disposing of 28.28 million shares on March 26.

A filing with Bursa Malaysia showed the Dubai group disposed of the shares, representing a 5.56% stake, in the open market. After the disposal of the shares, it ceased to be a substantial shareholder.

PECD share price closed at 10 sen on March 26. Its 52-week low was five sen on March 17 this year while its 52-week high was 85.1 sen on Dec 4 last year.

PECD is involved in construction and property development. For the financial year ended Dec 31, 2007, it reported massive losses of RM1.11bil compared with net loss of RM118.21mil in FY06.

Buffet's acquistion: Kraft Foods

Buffet built a big position, taking 8% ownerships cost him US $ 4 billions in Kraft Foods in 2007. This position is as big as Burlington Northern Santa Fe, but 3 times plus bigger than his Coca-Cola and American Express 20 years ago. I decided to study Kraft Foods a bit more, hoping to learn something from him. I was a little bit surprised by Kraft's so so financial performance(see charts).

Shareholders return was lagging behind S & P 500 and peers. Return on Equity was in low 10%, shareholders' equity have been growing at single digit despite of retaining more than half of the earnings, signs of poor wealth creations. Operating margin was deteriorating from mid-teens to low-teens even though it has been recovering since 2004. It was pretty hard to relate what he always preaches: great franchise, strong economic moats, great pricing power and etc. None of these fit his criteria.

Based on US$ 33/share, implied intrinsic value must be more than US $ 55 billions. He paid almost 20 times 2007 earnings and 2 times book value. We know he is a very shrewd investor, based on his track records, he will not want to add anything below 21% annual compounding return to dilute his performance. He must saw something that others don't.

Since this is a very stable business, it is relatively easier to evaluate Krafts based on future cash flows, at 10% discount rate, 8% growth rate for next 10 years and 5% as terminal rate and net margin 11%, Kraft worth US $ 33/share. However, if the management is able to improve its margin to 15%, the company worth US $ 48/share(about US $ 80 Billion), giving him 45% margin of safety. He is likely to get greater than 15% annual compounding returns over the long haul.

I supposed what attracted him could be improvement efforts by the management since 2004 begin to bear fruits, margin has been recovering despite of huge run up of commodities prices. The company is able to execute growth strategies in four area: rewire organization, reframing product categories, exploit sales capabilities and push down cost without compromising quality. Growth via acquisitions has been satisfactory, they acquired Danone for US $ 8 billions in late 2007, adding US $ 3 billions to the top line. There is also a good chance that he is banking on international sales,though currently, contribute about 20% only.

Monday, April 7, 2008

Jazz, Abstract Arts and Investing

Kandinsky, Composition VII.

Among many kinds of music, I love Jazz the most, perhaps I am attracted by its philosophy of improvisation. Wikipedia summed up Jazz beautifully.

Wikipedia: "In jazz, however, the skilled performer will interpret a tune in very individual ways, never playing the same composition exactly the same way twice. Depending upon the performer's mood and personal experience, interactions with fellow musicians, or even members of the audience, a jazz musician/performer may alter melodies, harmonies or time signature at will. European classical music has been said to be a composer's medium. Jazz, however, is often characterized as the product of democratic creativity, interaction and collaboration, placing equal value on the contributions of composer and performer, 'adroitly weigh[ing] the respective claims of the composer and the improviser'."

Reading the markets is about the same, one needs to interpret a tune as the event unfolds, no same composition will be played twice.

What about abstract paintings? In abstract arts, the painter is trying to convey his message by depicting objects in a simplified way by colors and forms. The aim is to capture the immutable intrinsic value rather than external appearance. This will help us move away of being too mechanical like Renaissance's arts which is pure Graham equivalent. Abstract arts will allow the colors and forms to penetrate into viewers' souls, feel it, internalize it. In Kandinsky's Composition VII picked by me, you will feel the energy, movement, harmony and dynamism without being too mechanistic. Just let go, free your imaginations, it's spiritual.

Hello are you still with me? It is OK if you lost me, just a little bit of diversion after doing some heavy duty analysis over the weekend. Hope to talk a little bit about Surrealism's and investing one of these days. Have a great week ahead.

PS. Kandinsky is an expert in Law and Economics too.

Sunday, April 6, 2008

Commodity Play : LYXOR CMDTY 10 US$

George Soros recently said in an interview on CNBC said there is a general commodity bubble developing caused by flight of dollars. Guys that traditionally do not invest in this category begin to pour money. This bubble has not reached to a dangerous level yet.

Link: //

One of the most cost efficient and nearest for Malaysian investors to participate on commodity play is to buy an Index Fund in Singapore Stock Exchange: LYXOR CMDTY 10 US$. Buy just one index, you are holding a basket of 19 commodities, 41% in soft commodities, 39% Energy, 13% basic metals and 7% precious metals. Don't try this at home if one is not ready with an exit plan.

Saturday, April 5, 2008

Forget subprime. In Asia, the big fear is inflation.

The US banking crisis is probably behind us, months of argument and guessing whether the US in a slowdown or recession also probably will come to pass soon but a new threat is developing: inflation. I don't feel quite comfortable about this since beginning of this year, the voice begin to get louder. When those boys and girls on CNBC and Bloomberg begin to scream, it will scare a lot of people. Hope this article will help us to get a feel of what is coming.

(Fortune) Hank Paulson likes a packed agenda. The US Treasury Secretary’s two-day visit to Beijing, which concluded Thursday, was a blur of meetings with Chinese officials, with talking points ranging from financial deregulation to tariffs on American-made medical equipment, currency policy and unrest in Tibet. Notably, though, Paulson doesn’t seem to have spent much time talking with China’s leaders about the one economic issue they say concerns them most: rising inflation.

In his final speech here today, which was devoted mostly to energy and the environment, Paulson touched obliquely on the subject of inflation. Noting China’s efforts to combat rising energy prices with government price caps, he warned that such measures had backfired when tried by US officials in the 1970s, resulting in heating oil shortages and rationing.

“China, by setting price controls on fuel, is facing similar consequences today,” Paulson said. “And because market forces can never be completely eliminated, price controls often lead to smuggling and corruption.”

But China’s inflation fears run deep – and extend beyond just energy. The big concern is soaring food prices, particularly for such staples as cooking oil, milk, grain, vegetables and above all pork. In February, Chinese consumer prices leapt 8.7% over the same period last year, to their highest level in 12 years. Pork prices, hit by an epidemic of the deadly “blue-eared” virus, surged in some areas by as much as 65% - prompting waves of pig-jackings.

Shortages of pork and other basic food items prompted China’s premier Wen Jiabao, with whom Paulson met Thursday, to tell China’s national parliament last month that whipping inflation is his top priority.

Such sentiments put China’s economic planners at odds with counterparts in Washington where the Federal Reserve is slashing interest rates and pumping credit into beleaguered banks. But perhaps it’s the US that’s out of step. As my colleague Peter Gumbel has observed, policymakers in Europe remain far more concerned about inflation than the threat of a liquidity squeeze. (See Peter’s excellent survey of the view from Europe here.)

The story is the same elsewhere in Asia. On Wednesday, the Manila-based Asia Development bank warned that, throughout the region, inflation has reached its highest level in a decade. Ifzal Ali, the ADB’s chief economist, said the widespread use of government price controls suggests real inflation is probably a lot worse than the official figures suggest.

The World Bank recently estimated that 33 countries around the world “face potential social unrest because of the acute hike in food and energy prices.” Jim Adams, World Bank vice president for the East Asia and Pacific, argues that in East Asia, where the burden of higher food and fuel prices falls so heavily on the poor, inflation poses a far greater risk to stability than fallout from the subprime debt crisis. “While the subprime crisis will have its impacts — possibly on some countries more than others — the more immediate concern is that in virtually every East Asian country, inflation is climbing to uncomfortable levels,” Adams says.

Shortages and high food prices have generated social tension around the world in recent months, triggering food riots in Guinea, Mauritania, Mexico, Morocco, Senegal, Uzbekistan and Yemen, reports The New York Times’ Keith Bradsher. Rising food prices may even have contributed to riots in Lhasa.

The Washington Post’s David Ignatius, in a recent column, contends global inflation looms as the new danger to the U.S. economy. Inflationary pressures are “most worryingly in food prices, but also in prices for commodities, raw materials and products that require petroleum energy, which includes almost everything,” Ignatius writes.

Many economists dismiss the fuss about global inflation as overdone. Should investors worry that China is in the early stages of a tumultuous price spiral comparable to bouts of inflation it suffered in the 1990s? “Even the most superficial look at detailed figures leads to a fairly emphatic ‘no,’” declares UBS economic John Anderson in a recent note to clients. “The evidence suggests the current spike in prices will be temporary, fading away by the second half of 2008.”

Anderson contends that, unlike the 1990s, when inflationary pressures were broadly based, the current price spike is almost entirely limited to food items, which make up less than a third of urban household expenditure. When food is excluded, China’s core inflation rate drops to 1.6%.

Officials at China’s top planning agency, the National Development and Reform Commission, may be coming around to that point of view. Today, as Paulson decried the futility of price controls, the NDRC relaxed controls on dairy and cooking oil, suggesting that it believes that, in at least some sectors, inflationary pressures have peaked.

But Stephen Roach, Asia chairman at Morgan Stanley, insists the inflation threat is real. “I’ve seen this movie before,” he writes in this piece in the Wall Street Journal. “It takes me back to the early 1970s” when Fed chairman Aurthur Burns dismissed the significance of rising food and energy prices as external shocks, and focused instead on core inflation with disastrous consequences. Roach’s conclusion: “China cannot afford to ignore the lessons of America’s most painful policy blunder on the inflation front.”

Read also

Friday, April 4, 2008

Is Rice Heading US $ 1,000?

During dinner conversations with my friends from Thailand last week, they told me a farmer committed suicide after discovered his rice crop destroyed by bugs. The guy borrowed money from bank, hoping to harvest his crop to sell at a good profit and repay his loan. Unfortunately his dream dashed by bugs. What a tragic story.

They described to me their lunch box serving has been noticeably smaller as food vendors adopting pragmatic approach to cope with the rising costs. Even the professionals adopting the same solution, the Philippines government urging fast food restaurants operators to cut their serving by half to deal with their import bills.

The price of rice had soared from US$ 360 to US $ 750. A Thai minister said the price is heading North, US $ 1,000. With stock level at the lowest in 25 years, everyone are holding on to their inventory hoping to fetch a higher price, this is for sure a very sticky problem to deal with. Big rice importers like the Philippines, Indonesia and Iran are feeling the pains. If one look at most soft commodities charts carefully, the rally started around Q4 '07, right after the Ben Bernanke cut interest rate. Is this a coincident or the root of the inflationary problems that we are talking about?

Traders and landlords will be laughing but poor rural folks without land and poor city dwellers will be hard hit. The problem can cause social unrests if spun out of control - a big headache for many emerging governments. If the problem is partly caused by speculative money flows, I hope those guys will be merciful. I do not wish to go into moral and philosophical questions deeply, hope things will return to normal soon. If no good news emerge, inflations are something I have been feeling uncomfortable, a negative catalyst, even though it is cyclical in nature.

Thursday, April 3, 2008

Frugal Tony Fernandes

Buffet bought a company immediately when the company target CEO driving around looking for a free parking, tried to save himself 30 cents. I found an interesting story about Tony displays the same frugality. He may be the guy you can trust to run your company. He still stay in a double storey house(though he is in the process of building his dream house) since he first started work and drives to work with Ford Escape. The funny thing about life is people who are passionate about their works will find more successes and not the other way round. Hope my readers will enjoy the article.

The Wall Street Journal
March 28, 2008
Tony Fernandes has to pinch himself whenever he thinks about his multimillionaire status. "It's a bit surreal," says the 43-year-old founder of AirAsia, the region's largest budget airline.

He was born into a middle-class family in Malaysia. His father was a doctor; his mother, a former music teacher, started the country's first Tupperware franchise. After studying accounting at the London School of Economics, Mr. Fernandes returned home to head the local operations of Time Warner Inc.'s music business. He rose to head of the company's Southeast Asian operation before quitting in 2001 to go in the airline business.

"When I started looking at the price of airline tickets, it was a no-brainer. I thought, 'There's got to be a huge opportunity there in serving the masses,'" he recalls. "There's so much happening in Asia; the middle class is growing, but there's also huge demand at the lower end," including a migratory labor force. Plus, he says, people in Asia today want to go on vacations. "When I was a kid we never went on holiday. Television made people want to travel -- we've become much more Western in that way."

He bought AirAsia, then an ailing two-aircraft charter company based in Kuala Lumpur, for 27 cents, and agreed to assume $10 million in debt. Today, the no-frills carrier flies to 53 cities in 13 Asian countries. He's also set up AirAsiaX, a low-cost long-haul carrier currently flying from Malaysia to China, Bangladesh and Australia, and through a company named Tune Ventures, he has interests in a budget hotel, a financial-services company and a mobile-phone service provider.

Mr. Fernandes says he doesn't know exactly what he's worth, but his 48% stake in AirAsia is valued at about $170 million at the current stock price.

Despite his rapid rise to the ranks of the super-wealthy, he says his life hasn't changed much. "I think I'm a fairly simple person. I'm driving myself to work right now in a Ford Escape," he said in a recent phone interview. He and his family live in the same two-story house they had when he worked at Time Warner, and in a country where many upper-middle-class residents have drivers, he ferries his 8-year-old son and his daughter, 14, to school each morning. "I want them growing up in a real world," he says.

In other ways, his lifestyle has changed. Besides frequently flying his family to London to visit relatives, Mr. Fernandes, a self-confessed gadget freak, often indulges his desire for the latest mobile phone. "I would have thought twice about buying a new phone before. I must have bought 50 in the last two years," he laughs.

His one big indulgence is a vacation home in Bali. The one-story, five-bedroom bungalow currently under construction is perched on a cliff overlooking the Indian Ocean. "My dream has always been to have a beach house," he says.

Wednesday, April 2, 2008

The Fed The Supercop (not Superman)

Read an article in The Wall Street Journal. Paul Hanson presented his plan for greater power of The Fed as The Supercop. Of course he got blasted, many worried they will open up a can of worms.

Ben Bernanke's predessor, Alan Greenspan thinks it is difficult to prevent bubble. That was part of the mentality The Fed will always come in as crisis manager rather than playing prevention roles. What is this program anyway?

• What's New: The Fed would get a new role as the supercop in charge of financial-system stability under Treasury Secretary Paulson's plan.

• The Concern: It's hard for anyone to anticipate a crisis in advance, as regulators have learned recently.

• The Gamble: That a streamlined bureaucracy will be more effective than the current regulatory patchwork. Unquote

I always like pictures, always paint better than a thousand words. See the history of how the US regulators learned from every crisis. They will quickly admit mistakes, hit hard on issues, fix it and move on. If only Malaysia can do the same, I will be very happy.

Will we get a more stable financial world?

Quote Mr. Paulson said the plan wouldn't necessarily prevent future financial crises. "I don't think any regulatory system is going to change that. I think we rely very, very heavily on market discipline. Having said that, I still think we need a system that is more efficient and gives us a better chance, gives us more tools to try to solve problems." Unquote

Give these guys a chance, doing something is better than doing nothing. Let's see whether they can build a better mouse trap to catch up with the recent times of financial engineering and innovation. But I can sense hedge funds and bankers will not like it, too much power and too intrusive. Wall Street will never change, greeds and fears will always be there, this will only slow things down a little but accident is a by product of innovation, get out from the kitchen if you cannot stand the heat.

Turtle Portfolio Update - April 2008

Turtle probably shocked most people by buying MUI as his opening trade. The timing of the purchase was done in one of the most pessimistic environments. Turtle thought that was the end of his blog career if the portfolio tanked. The portfolio is still floating for now. MUI is up 25% for March. It was one of the most severe tests of independent thinking.

There have been fewer bad news for the last few days. As a result, many probably begin to feel better, pessimisms begin to wane. The US Q4 2007 GDP growth was still showing positive signs provide some comforts, hope and hopefully the animal spirits of greed will return.

Turtle had a choice of profit taking on the eve of the US final GDP announcement but elected not to do so. Time-in-the-market or timing-the-market? Turtle figured since the markets were chanting the end of the world, downside was probably will be limited. Another 5% Dow drop probably push MUI back to his cost.

Turtle received $ 888 for the month of April.

Tuesday, April 1, 2008