KUALA LUMPUR: Malaysian financial services group CIMB has asked its 36,000 employees to consider taking up to six months of unpaid leave as it aims to cut costs in the global economic slowdown, a top official said on March 30.
CIMB is the first major Malaysian company to ask staff to go on unpaid leave.
I know it does because nobody has discovered any major oil fields for 40 years. The number of acres devoted to wheat farming has been declining for 30 years. Only one lead mine has been opened in the whole world in the past 25 years. The last lead smelter constructed in the U.S. was built in 1969. There’s just no capacity and it takes a long time to discover oil fields or bring mines on stream.
The world has a long way to go in this particular bull market. That’s not to say there won’t be setbacks along the way and consolidation. There always are in every bull market, and that has been true in every market throughout the world and throughout history, so we can expect more consolidation. But, on the other hand, there is a secular bull market in commodities and it is one of the few, if not the only, bull market I know of right now.
SANTA BARBARA, California (Reuters March 05, 09) - Texas billionaire oilman T. Boone Pickens on Thursday said U.S. crude oil prices will hit $75 by the end of 2009.
Asked at a press conference where he expected oil prices to go, Pickens said, "Up ... $75 by the end of the year."
Pickens made similar comments in early February.
Oil settled on Thursday at $43.61 a barrel. Prices were also in the low $40s a month ago when Pickens made the similar comments, down from last July's record high over $147.
(AsiaOne Business By Chew Hui Min)
"If you were smart in 1807 you moved to London, if you were smart in 1907 you moved to New York City, and if you are smart in 2007 you move to Asia," investor Jim Rogers was once quoted as saying.
Voting with his feet, he did exactly that in 2007 when he moved to Singapore, where his two daughters can learn Mandarin.
When he spoke at the Global Forum on Intellectual Property (GFIP) on Jan 9, he was bullish about commodities and Chinese stocks, and pessimistic about the US dollar and US economic policies.
After the conference, he told AsiaOne what he was investing in and explained why savvy investors might want to start looking for farmland to buy.
Q: What are the commodities that you're buying?
A: I only buy indexes because my lawyer won't let me buy individual commodities. I write books about them, I talk about them all the time. If I say "you buy cotton" - and I own cotton - and it goes down, I'm going to get sued.
What I bought most recently is agriculture index and general (commodities) index.
Q: Do you see opportunities in alternative energy?
A: There are probably spectacular opportunities in wind power, in nuclear power and solar power and things of that sort if you can find the right entrepreneurs.
The problem is, everybody in the world knows that and thousands of people are racing in there - and you remember dotcoms.
Dotcoms had a fantastic future in 1996 and thousands of people went into it. Most of them turned out to be failures because you had too many people chasing the same things.
Q: How would you recommend a lay person invest in commodities?
A: No one should invest in anything unless they know a lot about what they're doing. It's better to put your money in the bank at very low rates of interest than to invest in things you don't know and lose money.
But if you decide that you want to invest in commodities, the study shows that the best way for most investors is to invest in an index.
Index investing has been proven repeatedly for decades to outperform active management, so most amateur investors should invest in an index fund.
Q: If I ask you to invest $10,000, what would you do?
A: I would go to the beach and I'd ask you to go with me. (laughs)
I've told you what I'm doing - I'm buying commodities, I'm buying Chinese shares. I would learn about selling short and I would learn about currencies, because some of the best opportunities in the next year or two or three are going to be in the currency market.
There may well be a currency crisis centred on the US dollar and, if there is a currency crisis, most stocks will go down.
Q: Why are you so down on the US dollar?
A: I don't like being down on the US dollar, but US is a horrible creditor nation, it's running up gigantic debts.
The United States government itself has tripled its own national debt in the last six months, the Central Bank in America has tripled the obligations on its balance sheet and has taken a lot of garbage, and they're printing a lot of money.
Throughout history, this has always led to a decline in the debasement of your currency. They actually want to debase their currency - that's their conscious policy.
But, even if it weren't their conscious policy, it has never failed to cause problems in the currency market and unless the world has changed somehow in the past 5,000 years, or the Americans are different - which I don't think at all - this is going to lead to problems with the dollar and the currency markets.
Q: Is yen the only currency you are buying?
A: Right now, because the yen is subject to the carry trade and has been beaten down unnaturally, so in my view the carry trade* will reverse and that's where the best opportunities are.
Once the yen goes up a lot - if it goes up a lot, like I think it will - then I will have to figure out what to do, as the Japanese have a serious fundamental problem down the road and unless they do something, I don't want to have anything to do with Japan in ten years.
*where a speculator borrows funds at a low rate and invests these funds into higher yielding assets
Q: Which other currencies would you invest in?
A: I don't know what I'm going to do when I stop buying the yen. I own the Singapore dollar, I own Canadian dollar, but if you look around the world, it's very very hard to find a sound paper currency these days.
Singapore philosophically is the strongest currency in the world. The problem with Singapore is, if everybody in the world debases their currency, we can't sit here with the only strong currency in the world, because we're not competitive, it puts us out of business.
I own renminbi. In theory, it's going to be a great currency down the road but even right now, the Chinese are trying to hold their currency down for a variety of reasons.
Q: Besides China, are there other Asian markets that you would invest in?
A: No, I was interested in Taiwan because of the peace, but it's such a regulatory nightmare to invest in Taiwan that I've sold my Taiwan shares.
And South Korea, I was interested too, but these countries they still regulate insanely the free flow of capital. Both of them want to become financial centres, but it's a bit ludicrous to think that you can be financial centres if people can't move their money in and out freely.
So while there may be possibilities, I've given up on Taiwan and South Korea.
Q: How about Singapore?
A: I've moved to Singapore, my biggest investment is obviously Singapore, my personal investment - we live here, we're permanent residents, my daughter goes to school here.
But we're not buying property here, not yet - we're not buying property anywhere in the world. I certainly own Singapore dollars, and here I am!
I can't make a bigger investment than to move to a country. We looked at all the countries in the world and we decided the one we wanted to live in the most was Singapore for a variety of reasons. We voted with our feet.
Q: Are you willing to buy a house here?
A: Right now, we're renting. If we found the perfect place in the perfect location... we do not know yet where we want to wind up.
We've looked at a lot of houses, we're learning more about Singapore. Right now, we have to live within one kilometre of Nanyang Primary, so that our daughter can go to that school.
If and when we find the perfect house, we'll probably buy it. If you know of the perfect house, please let us know.
But, I don't think this is a great time to be buying property in much of the world. It's a great time to stay away from property, unless you're going to buy farmland, timberland or if you can find some land near some mines. Or buy yourself a lake house where there are a lot of farmers, it'll probably be ok.
http://www.asiaone.com/Business/My+Money/Opinion/Story/A1Story20090119-115740.html
The details of the “Geithner Put” have been released. It has two parts: One to deal specifically with bad loans, the other to deal with other legacy assets (securitized yadda yadda). In this post I will discuss the first part, dubbed the “Legacy Loans Program”.
The Treasury helpfully provides an example, which I reproduce here:Step 1: If a bank has a pool of residential mortgages with $100 face value that it is seeking to divest, the bank would approach the FDIC.
Step 2: The FDIC would determine, according to the above process, that they would be willing to leverage the pool at a 6-to-1 debt-to-equity ratio.
Step 3: The pool would then be auctioned by the FDIC, with several private sector bidders submitting bids. The highest bid from the private sector – in this example, $84 – would be the winner and would form a Public-Private Investment Fund to purchase the pool of mortgages.
Step 4: Of this $84 purchase price, the FDIC would provide guarantees for $72 of financing, leaving $12 of equity.
Step 5: The Treasury would then provide 50% of the equity funding required on a side-by-side basis with the investor. In this example, Treasury would invest approximately $6, with the private investor contributing $6.
Step 6: The private investor would then manage the servicing of the asset pool and the timing of its disposition on an ongoing basis – using asset managers approved and subject to oversight by the FDIC.
Let’s flesh this out by repeating it 100 times. So say a bank has 100 of these $100 loan pools. And just by way of example, suppose half of them are actually worth $100 and half of them are actually worth zero, and nobody knows which are which. (These numbers are made up but the principle is sound. Nobody knows what the assets are really worth because it depends on future events, like who actually defaults on their mortgages.)
Thus, on average the pools are worth $50 each and the true value of all 100 pools is $5000.
The FDIC provides 6:1 leverage to purchase each pool, and some investor (e.g., a private equity firm) takes them up on it, bidding $84 apiece. Between the FDIC leverage and the Treasury matching funds, the private equity firm thus offers $8400 for all 100 pools but only puts in $600 of its own money.
Half of the pools wind up worthless, so the investor loses $300 total on those. But the other half wind up worth $100 each for a $16 profit. $16 times 50 pools equals $800 total profit which is split 1:1 with the Treasury. So the investor gains $400 on these winning pools. A $400 gain plus a $300 loss equals a $100 net gain, so the investor risked $600 to make $100, a tidy 16.7% return.
The bank unloaded assets worth $5000 for $8400. So the private investor gained $100, the Treasury gained $100, and the bank gained $3400. Somebody must therefore have lost $3600…
…and that would be the FDIC, who was so foolish as to offer 6:1 leverage to purchase assets with a 50% chance of being worthless. But no worries. As long as the FDIC has more expertise in valuing toxic assets than the entire private equity and banking worlds combined, there is no way they could be taken to the cleaners like this. What could possibly go wrong?
(Wikipedia)Occam's Razor, also Ockham's Razor,[1] is a principle attributed to the 14th-century English logician and Franciscan friar, William of Ockham. The principle states that the explanation of any phenomenon should make as few assumptions as possible, eliminating those that make no difference in the observable predictions of the explanatory hypothesis or theory. The principle is often expressed in Latin as the lex parsimoniae ("law of parsimony", "law of economy", or "law of succinctness"): entia non sunt multiplicanda praeter necessitatem, roughly translated as "entities must not be multiplied beyond necessity."
(WSJ -- By RICHARD S. LEFRAK and A. GARY SHILLING)The federal bailout forces taxpayers to subsidize overextended homeowners who bet on ever-rising house prices and used their abodes as ATMs, and it doesn't get to the basic problem -- the huge inventory of excess houses. We estimate that 2.4 million houses over and above normal working inventories are left over from the 1996-2005 housing bubble. That's a lot, considering the long-term average annual construction of 1.5 million single- and multi-family units.
Excess inventory is the mortal enemy of house prices, which have already fallen 27% since the peak in early 2006. We predict another 14% drop through the end of 2010 if nothing is done to eliminate the surplus.
Doing nothing to eliminate the excess inventory might well push the recession through 2010 and into a depression. Declining home values, for example, are eliminating the home equity that has funded oversized consumer spending for years.
(IHT)Unemployment may still be rising and the economy may be nowhere near a bottom, but Wall Street's manic mood bubbled higher on Wednesday.
Cheered by reports showing a surprising increase in home-building last month, stock markets climbed in the last half-hour of trading, with major market indexes rising to their highest levels since late February.
Construction companies like KB Home, the Centex Corporation and Toll Brothers paced gains in the broader financial markets after the government reported that new-home construction in February rose 22 percent from January to a seasonally adjusted annual pace of 583,000. It was the biggest percentage gain since January 1990 and the first increase since April.
Astro began its entry into the Indonesian market in March 2005 via a joint-venture agreement with Indonesia’s Lippo group. Under the agreement, Astro and Lippo group would operate a pay-TV business via the latter’s wholly owned unit, PT Direct Vision (PTDV). The original agreement was for a 51:49 shareholding interest between Astro and Lippo group in PTDV respectively. But this was derailed five months down the road when a new ruling by the Indonesian government for all broadcasters came into effect to limit foreign equity participation to 20%, compared to the initial 51%. Subsequent negotiations between Astro and Lippo group to restructure the venture were held but both parties could never reach a solution up to this day.
Nevertheless, the full launch of the satellite pay-TV business went ahead in early 2006 under a trademark licensing agreement between Astro and PTDV that allowed the latter to use the “Astro Nusantara” brand in Indonesia. On top of that, Astro would be supplying broadcasting services and technical support to PTDV.
1. Economists are armed and dangerous: "Watch out for our invisible hands."
2. Economists can supply it on demand.
3. You can talk about money without every having to make any.
4. You get to say "trickle down" with a straight face.
5. Mick Jagger and Arnold Schwarzenegger both studied economics and look how they turned out.
6. When you are in the unemployment line, at least you will know why you are there.
7. If you rearrange the letters in "ECONOMICS", you get "COMIC NOSE".
8. Although ethics teaches that virtue is its own reward, in economics we get taught that reward is its own virtue.
9. When you get drunk, you can tell everyone that you are just researching the law of diminishing marginal utility.
10. When you call 1-900-LUV-ECON and get Kandi Keynes, you will have something to talk about.
Engineers and scientists will never make as much money as business executives. Now a rigorous mathematical proof that explains why this is true:
Postulate 1: Knowledge is Power.
Postulate 2: Time is Money.
As every engineer knows,
Work
---------- = Power
Time
Since Knowledge = Power, and Time =Money, we have
Work
--------- = Knowledge
Money
Solving for Money, we get:
Work
----------- = Money
Knowledge
Thus, as Knowledge approaches zero, Money approaches infinity regardless of the Work done.
Conclusion: The Less you Know, the more money you Make.
1. Urban fixed-asset investment climbed a more-than-estimated 26.5 percent in January and February combined to 1.03 trillion yuan ($150 billion) from a year earlier, the statistics bureau said today in Beijing. Exports tumbled 25.7 percent.
2. Railway investment tripled from a year earlier, agricultural spending doubled, and coal-mining expenditure jumped 59.6 percent, the statistics bureau said. The number of new projects climbed 28 percent to 18,533.
As the world’s second-largest oil consumer, China has approved and started at least $35 billion of energy projects since the stimulus plan was announced in November, according to data compiled by Bloomberg. The nation last month began building the eastern section of its second west-east gas pipeline, valued at 93 billion yuan.
3. “China’s economic growth may rebound strongly in this quarter and the next because of the investment expansion prompted by the stimulus package,” said Xing Ziqiang, a Beijing-based economist at China International Capital Corp. “However, slumping exports may drag down investment by manufacturers, so that growth slows again in the second half.”
4. Surging spending outweighs a slump in trade because fixed- asset investment accounts for 40 percent of China’s economic growth, versus 7 percent for net exports, said Sun Mingchun, a Hong Kong-based economist at Nomura Holdings Inc.
In good years and bad, Charlie and I simply focus on four goals:
(1) maintaining Berkshire’s Gibraltar-like financial position, which features huge amounts of excess liquidity, near-term obligations that are modest, and dozens of sources of earnings and cash;
(2) widening the “moats” around our operating businesses that give them durable competitive advantages;
(3) acquiring and developing new and varied streams of earnings;
(4) expanding and nurturing the cadre of outstanding operating managers who, over the years, have delivered Berkshire exceptional results.
I made some other already-recognizable errors as well. They were smaller, but unfortunately not that small. During 2008, I spent $244 million for shares of two Irish banks that appeared cheap to me. At yearend we wrote these holdings down to market: $27 million, for an 89% loss. Since then, the two stocks have declined even further. The tennis crowd would call my mistakes “unforced errors.”
(Malaysia Kini) kemaskini 3.54pm Gerakan aktivis bahasa menentang dasar Pengajaran dan Pembelajaran Sains dan Matematik dalam Bahasa Inggeris (PPSMI) mencipta sejarah hari ini apabila turun ke jalan raya, mengulang peristiwa perarakan Keranda 152 beberapa dekad lalu.
Peristiwa bersejarah pada 3 Mac 1967 itu bagi membantah Rang Undang-undang Bahasa Kebangsaan di Dewan Bahasa dan Pustaka (DBP), dulu dijadikan lokasi kegiatan sasterawan dan intelektual Melayu. Nombor '152' merujuk Perkara 152 Perlembagaan Persekutuan yang menyentuh aspek bahasa Melayu.
Kira-kira 2,000 orang yang berarak dari Masjid Negara selepas jam 2 petang bagaimanapun dihujani serangan gas pemedih mata daripada polis di Kampung Attap, tidak jauh dari Istana Negara.
Perhimpunan itu, yang asalnya dibenarkan oleh polis di masjid tersebut, melanggar larangan polis yang tidak membenarkan sebarang perarakan.
Mereka berhasrat membawa memorandum kepada Yang di-Pertuan Agong bagi memohon campur tangan baginda dalam pemansuhan dasar kontroversi itu.
March 6 (Bloomberg) -- Warren Buffett and Jeffrey Immelt are among a handful of chief executive officers whose companies are rated AAA. Yet Buffett’s Berkshire Hathaway Inc. and Immelt’s General Electric Co. are being treated like junk in the market for credit-default swaps.
Contracts that protect investors against a default on bonds of Omaha, Nebraska-based Berkshire, which has $25.5 billion in cash, cost as much as those of KB Home, the homebuilder that lost money for seven consecutive quarters. Credit-default swaps on the finance arm of GE, which holds $45 billion of cash, are about as expensive as those for building materials-maker Louisiana-Pacific Corp., which posted nine straight quarterly losses.
March 6 (Bloomberg) -- 36 South Investment Managers Ltd., a New Zealand-based hedge fund firm set up by derivatives traders, will close its Black Swan Fund after it gained 236 percent in the last 12 months and start a fund that wagers on inflation.
I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our Nation impels. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.
In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.
More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.
Homes have been lost, jobs shed, businesses shuttered. Our health care is too costly, our schools fail too many, and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.
These are the indicators of crisis, subject to data and statistics. Less measurable, but no less profound, is a sapping of confidence across our land; a nagging fear that America's decline is inevitable, that the next generation must lower its sights.
Today I say to you that the challenges we face are real, they are serious and they are many. They will not be met easily or in a short span of time. But know this America: They will be met.
(APPLAUSE)
On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord.
Obama compared the daily market fluctuations to a tracking poll in politics and said he wouldn’t be adjusting his policies just to meet daily market expectations.
“If you spend all your time worrying about that, then you’re probably going to get the long-term strategy wrong,” he said.
The president also said that consumer confidence is “taking root” with enactment of the $787 billion package of spending and tax cuts he won from Congress last month.
“There are a lot of losses that are working their way through the system,” Obama said. “And it’s not surprising that the market is hurting as a consequence.”
March 3 (Bloomberg) -- President Barack Obama said falling share prices may mean bargains for investors with a “long-term perspective.”
Obama, who is seeking to boost public confidence in his strategy to pull the U.S. out of recession, spoke a day after stock markets tumbled. The Dow Jones Industrial Average yesterday dropped below 7,000 for the first time since 1997. The Standard & Poor’s 500 Index closed at the lowest level since October 1996.
“What you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you’ve got a long-term perspective on it,” Obama said at the White House today while meeting with British Prime Minister Gordon Brown on battling the global recession.
The Black-Scholes formula has approached the status of holy writ in finance, and we use it when valuing our equity put options for financial statement purposes. Key inputs to the calculation include a contract’s maturity and strike price, as well as the analyst’s expectations for volatility, interest rates and dividends.
If the formula is applied to extended time periods, however, it can produce absurd results. In fairness, Black and Scholes almost certainly understood this point well. But their devoted followers may be ignoring whatever caveats the two men attached when they first unveiled the formula.
It’s often useful in testing a theory to push it to extremes. So let’s postulate that we sell a 100- year $1 billion put option on the S&P 500 at a strike price of 903 (the index’s level on 12/31/08). Using the implied volatility assumption for long-dated contracts that we do, and combining that with appropriate interest and dividend assumptions, we would find the “proper” Black-Scholes premium for this contract to be $2.5 million.
To judge the rationality of that premium, we need to assess whether the S&P will be valued a century from now at less than today. Certainly the dollar will then be worth a small fraction of its present value (at only 2% inflation it will be worth roughly 14¢). So that will be a factor pushing the stated value of the index higher.
Far more important, however, is that one hundred years of retained earnings will hugely increase the value of most of the companies in the index. In the 20th Century, the Dow-Jones Industrial Average increased by about 175-fold, mainly because of this retained-earnings factor.
Considering everything, I believe the probability of a decline in the index over a one-hundred-year period to be far less than 1%. But let’s use that figure and also assume that the most likely decline – should one occur – is 50%. Under these assumptions, the mathematical expectation of loss on our contract would be $5 million ($1 billion X 1% X 50%).
But if we had received our theoretical premium of $2.5 million up front, we would have only had to invest it at 0.7% compounded annually to cover this loss expectancy. Everything earned above that would have been profit. Would you like to borrow money for 100 years at a 0.7% rate?
Let’s look at my example from a worst-case standpoint. Remember that 99% of the time we would pay nothing if my assumptions are correct. But even in the worst case among the remaining 1% of possibilities – that is, one assuming a total loss of $1 billion – our borrowing cost would come to only 6.2%. Clearly, either my assumptions are crazy or the formula is inappropriate.
