Accounting Problems in China Make a Comeback

Chinese companies accounting scandal is back! Big companies are getting hit this time.

Reporting season in Hong Kong is exposing a number of problematic Chinese companies with audit issues.

Hong Kong-listed Ports Design Ltd. said KPMG needed more time to audit its accounts.Three companies halted trading in Hong Kong on Thursday, including Shirble Department Store, which didn’t provide a reason for its suspension. However, the stock has dropped 26.5% since Mar. 21’s close, when the company said it would postpone its full-year results to Mar. 30 from Mar. 22, as its auditor needs more time to finalize its accounts.

Another company, Ausnutria Dairy Corp. Ltd., said in a statement to the stock exchange on Thursday morning it would also delay the publication of its results.

High-end fashion retailer Ports Design Ltd. also said on Thursday it would postpone its annual results report as auditor KPMG needed more time to audit its accounts.

The suspensions come after Daqing Dairy Holdings Ltd. and Boshiwa International Holdings Ltd., a children’s apparel maker, both said earlier this month that Deloitte had resigned as their auditor. Boshiwa shares had fallen 35% before being halted from trading on Mar. 22.

Dow hit a new high

I think Dow hit a new high yesterday. I'm still feeling very uncomfortable because of contradictory evidences that I have seen. I like this piece written by John Hussman. It's a long article but I will just extract the charts for you. For more details, please visit http://hussmanfunds.com/wmc/wmc120326.htm. He has done a great job to refute some of the popular beliefs.

Evidence #1: Valuation wise, we are no where near a secular bull market. His valuation model says the return of the next 10 year is only 4%. Sucks!!!!!



Evidence #2 : The stock is cheap. Yeah but profit is seems to be out of norm. Reversal to mean will make stock valuation expensive.



Evidence # 3: The consumers are doing fine. How would they are doing fine if wages disbursement have not shown any improvement?



Evidence # 4: "The Fed is creating huge amounts of money, and all of that money has to go somewhere."

My comment on evidence # 4: Probably Keynes is correct. We are all dead in the long run. Things are absolutely not making sense to me empirically but what can I do? The bloody Fed force everybody to spend and borrow.

SPEND!!!!!! and BORROW!!!!!!

They export the similar model to the rest of the world as well. Trichet was making a comment of what he called behavioural contagion. His successor Daghi seems to prescribed the exact same medicine. (http://globaleconomicanalysis.blogspot.com/2012/03/trichet-warns-of-behavioral-contagion.html)

This kind of investment environment is absolutely disastrous. You can get caught at the wrong end very easily.

Market watch

The biggest news of this week was

BEIJING (Dow Jones)--The preliminary HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, fell to 48.1 in March compared with a final reading of 49.6 in February, HSBC Holdings PLC said Thursday.

The fall in the PMI could exacerbate market concerns over a slowdown in the world's second-largest economy amid weak exports and a declining domestic property market.

http://online.wsj.com/article/BT-CO-20120321-718449.html

Whatever equities sold off were short lived. Bulls are still in control. It would need a few more bad news to make a small leeway for bears to march an inch forward.

On the local front, it's all dominated by the local fund managers. Retail participation were still healthy but foreign participation were tepid. This trend may continue all the way to general elections.



One of the indicators that I followed closely: The US weekly leading indicator seems to keep ticking up.



The lagging data such as job data seems to be doing fine too.

Bottom line: top down is seems to make some sense but bottom up i.e. stock picking seems to be getting more difficult.

A little bit of diversion. It's about women in senior management

Go here if you are interested: http://www.gt.com.my/press_release_8Mac2012.html




I am happy to see Malaysia to be in the top 10 economies with highest women participation in senior management. It's quite surprise that emerging economies have more women in senior management positions as opposed to advanced economies.

At first I thought it has more to do with trust. From my personal experience, I find that it is easier to trust women managers than men in these emerging economies. I have seen when life is hard especially in the Philippines, Thailand, China, Vietnam, etc, I find that women have stronger motivation to do well for the sake of their family. The fact they don't spend time on golf course or karaoke will enable them to focus more on works than being swayed into wrong directions. They are also more meticulous when come to compliance and more ready to blow whistle whenever they feel uncomfortable.

In my professional life, I was/have been lucky to work with a few of them who are truly smart, dedicated, high level of integrity and upholding high level of professionalism. I just want to make a public acknowledgement of their contributions. Thank you!!!

Market watch

A couple of things are diverging.

1. A sell of in the US bond market. See this 10 year treasury yield




2. Reversal of some short term funds from emerging markets

(Bloomberg)Asian currencies had a second weekly decline as an improving U.S. economy and the Federal Reserve’s decision not to embark on further monetary easing boosted demand for the dollar.

Malaysia’s ringgit led losses after the government reported factory production rose the least in six months in January following data last week showing the smallest increase in exports since 2010. The rupee posted its worst weekly losing streak for the year after policy makers left interest rates unchanged, citing inflation risks caused by higher oil prices.

http://www.bloomberg.com/news/2012-03-16/asia-currencies-slide-in-week-as-fed-stance-boosts-dollar-demand.html


3. High crude oil price is finally transmitted into gasoline price



http://www.marketwatch.com/story/gasoline-prices-rise-for-9th-straight-day-2012-03-18?siteid=rss

4. Low trading volume

(WSJ)Trading volumes are at historic lows this year, which could show that some of the country’s biggest investors still aren’t sold on equities.

http://blogs.wsj.com/marketbeat/2012/03/16/trading-volume-abysmal-but-corporate-buybacks-supporting-stocks/?mod=WSJBlog&mod=

I will be on the road for a week without blog access. See you soon.

Independent thinking?

One of the values that most value investors cherishes is independent thinking. It's a sacrosanct of value investing. What exactly is independent thinking? Let's talk about the opposite first. Dependent thinking is the opposite of independent thinking. We can take a lot of comforts when we have somebody to depend on -- rightly or wrongly. Two heads are better than one surely is right. We however could not escape the universal principle of ying and yang.

Be aware of downside of combining forces. Reciprocal, trust and loyalty are the forces that bind a partnership. Reciprocal could cause a person to compromise their principles. You see how people can give up things irrationally when they feel indebted to certain person. Far more worse, if one of them decided to break that force, the feeling of betrayal will bring far more pains than comforts that they receive.

Herd thinking is not about stupidity but it's about you are trusting somebody or some concept so deeply that you not wish to question. You may thought that it's completely unacceptable to question your partner may get it wrong. You are too afraid to question because it's tantamount to shaking up the foundation of trust, without knowing both of you plunging into a cliff.

It can be scary when you have no one to depend own. You are on your own. You are taking a road less travelled. Thinking of travel in a road less travelled can be frightening. You just pray that you don't get injury. You hear only your own voice when when you scream for help. It's not because of no one will extend a pair of helping hands, it's just because there is NO ONE there. Simply, NO ONE.

Taking a road less travelled will also reveal who you are. You are pushing your limit because nobody is there to push you. It's either you keep going or making a U-turn. Victory or defeat belongs to you alone. No one is there to ridicule you. If you go far enough, you will discover a true principle of FREEWILL. You are doing it voluntarily. You are accountable to no one but yourself. You are free to question everything. You may discover E=MC2 or Everything equals to Mong Cha Cha.

Just some record updates

I realize that, whether I like it or not, my readers feel that they are "betrayed" whenever I start to talk about technical analysis or speculative investing techniques. They like it when I talk like a value investor. I suppose a big number of my readers are calling themselves as value investors.

To be honest, I do not really know whether I'm a value investor. Not that I'm a fickle minded person. The way you invest is very closely related to who you're as a person. May be it's a good idea to talk a little bit about myself.

I do have a few characteristics that could fit into value investing school. I like to get my hands dirty to find investing ideas. I will dig into annual reports, trade magazine, etc.

I like to stay away from the limelight - professionally and personally. This allows me to think for myself without succumb to public opinion or peer pressures.

I dislike parties, dinners or networking(rub shoulder) sessions. Neither I'm an anti-social person nor a geek. Not that I do not have social skills but I just don't like it. In those networking sessions, everybody knows that everybody is taking advantage of everybody. Everybody thinks it is acceptable because they get something in return of what they want.

Long ago, I realize that the Bible is right, a man can never serves two masters. We got to choose one of them: God or money. It's not my contention to debate whether we should abandon one of them. It's not the question of abandonment but it's a question of priority. What is your priority #1. When you fell into a well of dilemma, which one would you give up?

A fire test will reveal who you are. If your house is on fire, what is the one thing you would like to save? A woman will come out with an answer quite easily. They will run straight into their kids. That's what a mother's instinct is. It's a natural automatic trigger for a mother without the need to think. Love is their priority #1.

I just realize that I care more of what other thinks of me when I start to blog. I did not realize this until recently. How can I walk down to a path that I've tried hard to avoid all these years? I was trying hard to stay away from this setting so that I'm not a subject to public scrutiny. I actually hate to see the number of readerships to grow because it will become more public, less private. I like things are small. Small is beautiful to me.

I was thinking to quit to reclaim my "private" space. It's too late for me to quit now. I made a promise to keep this blog alive for 15 years and I can't break this promise. I do not know how things will turn out. It is also not easy that I can say this is my blog. Therefore just say what I want. No, it's easy to say it out casually but not easy to do in reality. I already allow another "force" born. The battle will be on-going but I hope my original intentions of sharing knowledge and blessing will prevail.

Good Morning. 3rd year of bull run

Source: http://www.ritholtz.com/blog/2012/03/bottoms-up/

The market marked the third year of bull run a few days ago. As you can see in the chart, valuation wise is not expensive and looks reasonable. I still have my worries though.

I did a bull run study a while back(http://turtleinvestor888.blogspot.com/2009/07/study-of-bull-markets.html). An average bull run is about 3.89 years. I do not how much longer it will continue to run but I'm still waiting for a significant pull back (10-12%) before moving some funds.

Thank You

From the feedbacks, I want to thank people who genuinely concerns about my Turtle portfolio return. This is a new experience for me since I’m playing this game publicly. Never, I felt so much public pressure to perform. Since my portfolio is subjected to public scrutiny, I really felt the gravity of expectations is pressing down my spine. Concentrating on the game is hard enough, with additional voices coming from the side line, it will cast even more doubts on what I’m doing/thinking.

I know this day will come. The consequence of not able to achieve 10% CAGR or outperforming benchmark index will invite comment, criticism, judgement or encouragement.

This is one of the most difficult moments that I need to breakthrough. This is the moment that I need to overcome self-doubt. This is the moment I need to have faith in myself. I believe I can make it.

To friends that have faith in me, I thank you because even I did not achieve my objectives by end of 15 years, I found something more precious than winning this game. Take care.

The Empty Mind

"Sometimes we will hit the target

...... but will miss the self"

Onuma Sensei Kyudo

It's is absolutely beautiful to watch the Sensei in perfect posture, balance and stillness. The arrow flew gracefully carrying deadly force finding its target. It's an absolute perfection moment.

The goal is not ultimate detachment(running away) to achieve target or happiness but rather to be selfless. ZERO. Many of us clinging on to many things that we are not willing to let go. It's absolutely counter intuitive to lose in order to win. It's absolutely not making sense of losing yourself to find yourself. It's absolutely bullshit to many, to be poor in order to be rich?

It was not easy for me to sell off everything an wait for right time to draw my bow again. I might miss it again again but I do hope I will be able to hit the target without missing myself.

It's not how many times I have lost or win that matter to me. It is the joy of investing that make me happy. That's right, I like to do it because I really enjoying doing it! Cheers.

Turtle Portfolio Update - March 2012

It's time for some portfolio records update again.

Cash = 46,830
Book value = 50,643
Return on Capital = 10.38%

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Why Singapore is way ahead of the rest of the world? It's because they ask correct questions and looking into the future way ahead of the rest of the world. Can you see how far out the Housing Development Board of Singapore look? It's almost 40 years ahead.



In 40 years from today, they recognize the shifting trend of ageing population and they also recognize the challenge of these 'old folks' will be battling. Recognizing facts are not good enough, it's only meaningful if you are able to turn analysis into actions. The HDB is so thoughtful when comes to life-cycle needs planning.



When young couples got married, they are qualified to buy a flat. As the couples have steadier and bigger incomes, they help them to upgrade. Finally when the kids grow up and leaving the house, it's time to adjust again -- downsize.

I like the idea of downsizing by selling a bigger house and move into a smaller house. Then you can use the surplus to finance your retirement. This way you don't have to burden your child or children.

In Malaysia I think we can be a bit more lucky because we can also sell our house in the city and move into rural area, by the hills or seaside. I believe a lot of people would like the idea of fresh air, sea breeze, serenity, quietness but not many willing to give up their current life-style. It will be even more complicated if it's involves your the other half, both of you must be able to agree too. The biggest hurdle I think it's mental and ego. It's not easy for somebody to renounce the materialistic world and reduce it to only oxygen, shelter, RM 50/day and food. If you are willing to change for a lighter yoke, you will feel less burdensome and be happy.

You may want to read more here: http://asiaforum.tsaofoundation.org/pdfDownloads/Day1/D1_plenary/plenarySession_1/Housing%20developments%20for%20ageing%20population%20in%20Spore%20-%20yap%20chin%20beng.pdf