Tuesday, January 31, 2012

Turtle, selling again?

Yes, I am selling again. It does not matter to me whether the market tops out tomorrow, next week, next quarter -- I will not regret this decision. No one knows tomorrow.

I have seen it so many times. It's hard to quit when you see the market continues to go up every time you sell something. That is why contrarian investing is so difficult. You have heard this before

Buy low, Sell High.

In reality when you buy low, it may go lower. Then you got smarter, buy at the first higher higher, etc.........that will make you hesitate and wait and wait till it almost tops out.

In exhaustion rally, it will tend to frustrate you. A lot of people keep buying on dips. Every time you sell something, the price will continue to run. Then you regret, you jump in and buy. That is why people ended up

Buying high and selling low.

When you are middle of it, it's hard to see whether today is a peak. A mistaken peak interpreted as a low will cause people to over stay in the market. The worst is they don't reduce their exposure and get 100% invested. When everyone rushing for covers, exiting a 3" door, you know where I am leading you.

The biggest mistake a person can do is having NO CASH when the market corrects/crashes. A lot of questions are lining up to shoot me. What if the market continues to move sideway to allow the earnings to catch up. What if foreign investors come back. What if syndicates decided to play up the penny stocks? What if liquidity has no where to go but stock markets?

It's all possible to those IFs questions. KLCI 1,500 selling around historical average 15X is not very compelling. Don't we think chances of we see KLCI 1,200 is higher than 1,700? Seriously.

Monday, January 30, 2012


Sold 10,000 shares MUI IND @ 0.26/share

KLCI = 1513.

Liquidity and value investing???

I did not realize that I did not post for almost a week. Writing ideas almost dried up. Thankfully a reader ask me this question.

To answer your question honestly. I don't know the answer especially from technical stand point.

I do understand the concern of the question especially those investing based on value investing principle. Patience is a virtual but sometimes it will cost an investor too much. Let me give you an example on a stock that I wrote earlier about Shangri-La.

Shang has been moving in a trading zone for the longest time after the dot com bust sold down! Six years, your money trapped for six years if you bought after the dot com bust!

If you apply on criteria of earnings quality, brand name, management, etc.......you will have every box checked. But why the hell the price moving sideway just like that?????

The stock is also owned by reputable institutional investors. See this?

Suddenly the stock would just shot up from 2006 to 2008 with increased volume? It was also breaking out from the trading zone?

Two simple explainations:

(i) general or overall market is approaching euphoria thus all boats got lifted up.

(ii) general economy booms -- earnings will keep beating expectations thus, higher and higher valuations tagged.

If you are looking for something actionable. Here is another one. TDM is a value stock that made a new all time high. The trading volume is pretty good. Plus this stock has what I called Mr. Koon's premium.

Caveat: internal momentum of KLCI is weakening. If you want to punt on TDM, please don't curse me when you lose money because you refuse to cut loss when you are wrong.






I earned my readers trust and loyalty because I made calls when the stocks are depressed and not when they are hot.

This is my simple view of this issue. We all can argue all we want about catalysts but the loudest of all is breaking a new all time high with good volume. Hope this helps.

P.S. I invite readers to post questions to help me a bit. But you should also know that the answer you see may not to your liking but I will assure you a candid answer. Thanks. :)

Wednesday, January 25, 2012

Stock markets up despite of bad news....all clear to jump in??

I reflected over the last two days during the Chinese New Year holidays on the market directions.

The European headlines faded from the front page despite of Greek bond write down negotiation impasse.

The Italian 10 year bond yield has receded from its all time high, for now.

IMF said they are cutting global growth forecast from 4% to 3.3%, the contraction is mainly coming from the Eurozone. 3 plus % is still a very good number.

Even the bearish guy like Hussman is changing his tone that at least taking some of the hedges off in view of economic data stabilization. The main logic behind that is formed on the basis of central bankers intervention.


The old argument of relative return is coming back. Equity yield is more attractive than government bond yield.

That will encourage speculators to come to play, at least at the very short term. The Dow Jones Industrial Average is about to challenge the last year's all time high. The strong counter-rally is a response of the stock markets acknowledging they were wrong. The world did not go into abyss and Lehman II scenario has been taken off the table, for now.

Even Dr. Doom, Marc Faber, echoed this view.

Stock markets have already discounted "some very bad news" and there is no reason to fear stocks will sink, despite gloomy prospects for the global economy, Marc Faber, publisher and editor of the Gloom Boom & Doom Report, told CNBC on Thursday.

"My view is simply: relax. I don’t think that equities will collapse. I think we have major support going back to August 2010 when the S&P was at 1010," Faber said.

Just over a year later, the S&P briefly dropped to a low of 1074 on October 4, 2011, he said.

"We have a lot of support around 1100, and if the S&P drops 200 points, I guarantee you the Fed will come in with QE3 and QE4 and so forth," he said, referring to a next round of quantitative easing by the Federal Reserve.


The cyclical sector like semiconductor, in many views, is likely to turn up due to low inventory level.

It was reported in the Star this morning too. The chip sector expect to recover by Q2 '12.

Am I ready to change my bearish stance? Not yet. Being bearish and bullish at the wrong time can be costly in a side way market. It has cost me 10 points gain when I turned very bearish in October, I was precisely wrong when I should have stuck to my bullish stance. Now that it has gone to the top of the next resistance, I should continue to maintain my bearish stance. I will move some money out in the next sell off.

Friday, January 20, 2012

Chinese New Year reflection ..... taboos

It's a long posting but mostly re-prodution of other people's works but with interjection of my thoughts. You may want to make a cup of kopi 'o' or grab a bottle of Tiger or Guinness Stout, before you read on leisurely.

Some superstitious things stick with you so deeply even though you know it's silly. It's funny that all the eight taboos described on this web page http://www.chinaculture.org/gb/en_focus/2005-01/24/content_65330.htm were instilled in us when we were young.

The events that occurred during New Year's Day may impact your life for the rest of the year. Be careful in your actions. Certain precautions are taken to insure that the New Year will be a good one.

1. The entire house should be cleaned before New Year's Day. On New Year's Eve, all brooms, brushes, dusters, dustpans and other cleaning equipment are put away. Sweeping or dusting should not be done on New Year's Day for fear that good fortune will be swept away. After New Year's Day, the floors may be swept. Beginning at the door, the dust and rubbish are swept to the middle of the parlor, then placed in the corners and not taken or thrown out until the fifth day. At no time should the rubbish in the corners be trampled upon.

In sweeping, there is a superstition that if you sweep the dust and dirt out of your house by the front entrance is to sweep away the good fortune of the family; it must always be swept inwards and then carried out, then no harm will follow. All dirt and rubbish must be taken out the back door.

2. Shooting off firecrackers on New Year's Eve is the Chinese way of sending out the old year and welcoming in the new. On the stroke of midnight on New Year's Eve, every door in the house, and even windows, have to be open to allow the old year to go out.

3. Nothing should be lent on New Year's Day, as anyone who does so will be lending all the year. All debts have to be paid by New Year's Eve.

4. Everyone should refrain from using foul language and bad or unlucky words. Negative terms and the word "four", or "si" in Chinese which sounds like the word for death, are not to be uttered. Death and dying are never mentioned and ghost stories are totally taboo.

5. Hair must be cleaned and set prior to the holiday, for to do so during the New Year season would invite financial ruin. On New Year's Day, hair should not be washed because it would mean washing away good luck for the New Year.

6. Care must be taken not to break any dishes or other things on the first day of the year.

7. The use of knives and scissors -- indeed any sharp instrument -- is to be avoided, for these things could augur bad luck in the coming year.

8. Wear brand new clothes -- preferably in red. Children should wear new clothes and new shoes. Red is considered a bright, happy color, sure to bring the wearer a sunny and bright future. It is believed that appearance and attitude during New Year's sets the tone for the rest of the year.

When we were young, we will surely kena wallop if we break any of these taboos. As we get older, it's funny that certain memories of elders are coming back. You miss them. In fact you feel like telling those stories that define who chinese are.

The old folks were thin strand that bond all of us. They were the reason, of no matter how far and difficult, all of us will make efforts to re-group. The empty wooden detached house will filled with smell of joss sticks and laughters. There was the place we learn about risk and money management. We were taught not to peep over our elders' cards or touching their shoulders while they were playing cards. Bad things will happen to us if we do that.

The aunties will exchange stories in the kitchen. They teased each other. Some are more guarded than the other especially the rich unties. I missed the kitchen with a big wok and the smell of burning rubber woods.

The common thread of DNA running through the whole family is money. Everybody talks about money. These folks were not educated, largely because grand pa and grand ma could not send them to school. They all will advise us to study hard so that we all can sit in an office. The life will be less "bitter". You get to enjoy air con and just sign a few papers a day. Those were their simple and naive impressions of a white colar job. Naive they may be, their sense of honesty and willing to sweat will beat anyone of us hands down.

They were willing to take a small job with paper thin profit and work almost 18 hours a day. They don't take a single day off during the year except in Chinese New Year. Many of these values were instilled in our godfathers in this country like Robert Kuok, Lim Goh Thong, Yeoh Tiong Lay, etc........The rise of these godfathers created a lot of economic value for people. But things have changed. That got me thinking what will future holds for our next generation?

There is another unspoken taboo....

Written by Dr Lim Teck Ghee

“What Chinese poor????

Soon after I returned to Malaysia in late 2005, I met with a former president of the country’s major Chinese party in his office. During the discussion which covered a range of issues, I expressed my concern at the failure of the Chinese political leadership to deal effectively with the socio-economic problems and challenges that the community was facing.

I had known the leader since the 1970s but especially in the late 80s and early 1990s when I was a panellist in the 150-member National Economic Consultative Council (NECC) which had been set up by the then Prime Minister, Dr Mahathir Mohamad, to come up with a post-1990 economic policy to replace the New Economic Policy (NEP).

The response of the former president to my concern shocked me. Besides defending his party and his leadership, he declared that the Chinese were very lucky to be able to live in Malaysia. “Where else in the world can you find a simple char koay teow seller become so rich and drive a Mercedes!??? was his rejoinder.

This view that the Chinese have done very well for themselves – and by extension, do not require assistance from the Government – is not uncommon. However, it is a gross generalization and erroneous on several counts. Taken to its logical end and juxtaposed with the fact that many of the country’s richest individuals are Chinese, such a simplistic view has provided the underpinnings for the racially biased public policies pursued in a wide range of sectors and over such a long period of time in the country.

Off the public radar

Let us consider some of these facts and figures of the Chinese poor, disadvantaged and marginalized.

Firstly, many of these Chinese individuals and households do not appear on the government’s listing of poor Malaysians because the Government has used an unrealistically low poverty line income to decide who comprise the poor. Should there be a readjustment of the poverty line to a more realistic figure, it is likely that several hundred thousand Chinese households (as well as a larger number of Bumiputera and Indian households) will fall into the ‘poverty’ category.

Secondly, income distribution within the Chinese community is worsening. In fact the gap between the Chinese poor and well-to-do has increased in the last two decades, for which data is available. According to the Gini coefficient of income inequality, income inequality within the Chinese community has increased from .423 in 1990 to .434 in 1999 and .446 in 2004. Incidentally, this is the same for all the communities, including the Malays.

The worsening income inequality points to an entrenched and worsening poverty problem within the Chinese community that is not discernible if we simply rely on the conventional statistical indicators used by Government.

Excluded from NEP

Why is Chinese poverty so entrenched and intractable? The answer is that, for the most part, the Chinese poor and lower classes have not benefitted from the NEP and other national policies in the way that the Chinese elites or even upper middle class have. Consider the following

1. They have not been targeted by any of the government’s anti-poverty programmes.

2. They have been disadvantaged by lack of mastery of English and Malay.

3. They have educated their children in Chinese schools which have been the victims of unequal treatment. More than a quarter of Chinese school kids drop out before the age of 17 with many coming from the poorer achieving and less endowed Chinese medium schools which we seldom hear or read about.

4. A large number of them live in New Villages or in geographically remote rural areas which have been cut off from the enclave of affluence located in the main cities and in the Klang Valley area.

5. Many come from the agricultural sector and are vegetable gardeners, fruit farmers or fishermen or engage in agricultural services. Unlike their Malay counterpart rural poor, they have had limited access to Felda, Felcra, IADPs and other federal and state schemes that have reduced landlessness and indebtedness and provided access to housing, infrastructure, utilities as well as enhanced incomes substantially. Even worse, they have been denied their legitimate land rights so that many remain squatters or operate on TOLs or short-term leases.

The recent report that the new MCA president, Chua Soi Lek, intends to meet with the Perak Menteri Besar, Dr Zambry Abdul Kadir to discuss matters pertaining to squatters, land premiums and discounts to new villagers and the issue of limited allocations shows how ‘lucky’ the Perak Chinese are to be able to live in the state and the ‘tremendous’ advances they have made after 50 years of Barisan rule.

6. In the discussions on the country’s brain drain and loss of talent, much has been made about the out-migration of Chinese educated and professionals. In fact, if the proper surveys are ever carried out on out-migration from the country (according to the Deputy Foreign Minister in Parliament recently, 304,358 Malaysians migrated to other countries from March 2008 till August 2009 compared with a out-migration figure of 139,696 in 2007), I will not be surprised if just as many less educated poor and lower middle-class Chinese are found to have left the country because of poverty and lack of opportunities for themselves and their children.

Chinese SMEs and other towkays

Much has also been made of the prosperity of the Chinese that comes from their domination of the small and medium enterprises (SMEs) in the country. However, not all SMEs are prosperous or can provide the secure and sustainable livelihood and incomes that others who are ignorant of the real conditions of these enterprises seem to imagine is the case with every SME.

Most Chinese SMEs are family-run businesses that are barely able to scrape a decent living through heavy self-exploitation of family member and extended family labour. Often working in dangerous and appalling conditions, they are ill-equipped to compete in an increasingly competitive and globalized environment.

The reality is that besides continuous harassment from government officials and politicians bent on extracting coffee money and beating them down for non-compliance with various local council rules and regulations, many SMEs are trapped in low productivity operations and lack access to technological know-how, larger markets and R&D capacity.

In the near term as regional and international competition heats up, many SMEs face a bleak future and are likely to go bust.

These small fry ‘towkays’ of micro-SMEs (over 90% of the SMEs in the country belong to this group) and their poorly paid employees, eking out a modest living in the country’s workshops and squatter areas, however, have never been on the government’s radar screen, except perhaps for taxation purposes.

How much (or rather little) budgetary support and other assistance has actually reached the SMEs – directly and not through proxies or parasitic agencies – in the last few Malaysia Plans would be an important question for the government to respond to.

Members of the National Economic Advisory Council (NEAC)will find that there is a whole generation of bad policy planning and implementation that needs to be undone with regard to the SMEs if they are serious about the objective of revitalizing this sector in the 10th Malaysia Plan and the New Economic Model.

No social safety net

There is one more important consideration that is seldom discussed when the issue of Chinese socio-economic well-being is raised. This is that arising from their self employment or work as employees in SMEs and the informal sector, only a small proportion of Chinese households are covered by the social safety net for health, insurance and old age that comes with employment either in the public sector or with formal private sector employment.

This absence of participation in a social safety net will increasingly make itself felt on the future well being of the Chinese as the community ages rapidly and with the loss of traditional safety nets provided by the extended and large nuclear family.

The trend of Chinese vulnerable elderly who are either abandoned in old folk homes or live in miserable conditions on their own is already gaining speed. This trend is unstoppable without major changes taking place within the community and at the macro level where the state is the key player.

Malaysia’s present, future and past

Will the ‘1Malaysia’ concept and New Economic Model remove the blinkers that stand in the way of assistance and resources being provided to the Chinese disadvantaged?

Will the Prime Minister’s promise of raising income levels of all disadvantaged and marginalized groups be kept? Will we see merit-based, transparent and needs-based policies targeting the bottom 40% of the country’s income strata, irrespective of race and region, implemented?

We will have the opportunity to assess if this new vision of development for the country is more political rhetoric or a genuine path-breaking initiative soon.

As for me personally, I am not so sanguine. I was a member of the five- person team that finalized the NECC report which was presented to the government after more than two years of acrimonious debate. The major recommendations of the NECC to dismantle the NEP were never implemented. The NEP remained in force for another 20 years after it was supposed to have ended in 1990.

Will history now repeat itself again?


Thursday, January 19, 2012

Like that also can-ah?

Rent a boy friend or girl friend during Chinese New Year? I was not sure whether to laugh or to shake my head. Like this also can! I suppose anything also can in China.

BEIJING - Are you in a relationship?

That's probably the most embarrassing question single people get asked during Spring Festival.

As young urbanites head back home for family reunions, their parents, especially those in small towns and rural areas, will try to talk them into, even pressure them to get married as soon as possible. According to Chinese tradition, parents of children of marriageable age who remain single lose face.

A girl cleans her boyfriend's ear in the waiting hall of a long-distance coach station in Yangzhou, Jiangsu province, on Tuesday. [Photo/China Daily]

To deal with the insistent parents, many single people find a simple solution - renting a girlfriend or boyfriend. This year, micro blogs, online shopping sites and group-buying websites have become the platforms of choice for tech-savvy young people to look for the right co-actor.

Search for "renting a boyfriend/girlfriend to go home during Spring Festival" on taobao.com, China's largest online shopping website, and 64 online stores will surface offering girlfriends for rent who can accompany the buyer back home during Spring Festival. And there's no shortage of men - 444 stores offer boyfriends for rent.

A 24-year-old man surnamed Chen is one of those who will be a temporary boyfriend for a price. The stock dealer left his village in Hunan province two years ago and is working in Shenzhen, Guangdong province.

Chen began offering the service two months ago and has already made three deals. He listened to his clients' worries and accompanied them to parties with friends. He might have to comply with sudden demands for hugs and kisses.

Chen said he expects brisk business during the Spring Festival. More than 20 women have contacted him, showing interest in his service, even though it costs 500 yuan ($79) a day.

Chen's got his inspiration for the business from his own experience of being urged to marry. People in rural areas usually get married younger than those from cities. Though Chen is still in his early 20s, his parents are busy arranging blind dates for him.

To avoid dating arranged by parents during Spring Festival, he has decided not to go home this year.

In his opinion, it's a win-win deal if he can rent himself out as a temporary boyfriend. "My customer can be freed from her parents' babbling about finding a boyfriend," Chen said. "I can make some money and have a warm festival instead of spending the long holiday alone in a city away from my hometown."

To assure customers of his sincerity, Chen will arrange face-to-face meetings in a public place and show them his ID card. Sometimes, he will also request the potential client to produce an ID.

"I'm also worried that I may get cheated or run into danger. After all, I have to travel to a new place together with a stranger," Chen said.
Chen is proud of his "work ethics".

"I'll turn down the deal if we don't look like a good match after seeing the customer's photo and talking to her. Because it would be impossible to convince her parents," said Chen, who is still choosing from nearly 30 potential clients.

Serena, 30, who prefers to give her English name, said on her micro blog that she wants to rent a boyfriend who can accompany her home and have dinners with her parents during Spring Festival.

Serena, a white-collar worker in Shanghai, sees nothing wrong with renting a boyfriend. But she said she has turned to this "troublesome" method only because pressure from her parents can accumulate to become unbearable.

"My parents may keep asking when my 'boyfriend' and I plan to get married after seeing the 'boyfriend' I rent. And they will be looking forward to meeting him next Spring Festival. It's unrealistic to rent a different boyfriend every year," Serena said.

Meituan.com, a group-buying website, launched a drawing on Jan 11, and the prizewinner can go home with a single employee from the website on a trip home sponsored by the website. More than 150,000 people have entered the drawing. A winner will be chosen on Friday.

Xu Jingxi contributed to this story.

Monday, January 16, 2012

Should we invest outside Malaysia? ...... Part II

People who want to manage their own money like to take control of their destiny. They don't trust the fund managers. They think fund managers are making themselves fatter each year while fund investors remain bamboo thin. I agree with those sentiments but I won't go into bashing fund managers on Monday morning. I think you can do a good job for that. Three or four important concepts to remember when investing in mutual funds in general. It's applicable to foreign fund investing as well.

The first concept we got to differentiate is fund performance vs investor performance.

A fund performance is calculated based on the date the fund was launched. The fund can be around for 10 years in this example and they can claimed that they have superior long term performance of how they can return RM 2,500 if you invested with them an initial sum of RM 1,000, roughly 9.6% CAGR. That sounds good. No dispute -- damn good in fact. Don't forget that if you invested with them when the fund was 8 years old with NAV of the fund was RM $ 2,300, your CAGR return is only roughly 4%. How come? 9.6% is a fund manager return and 4% is an investor performance. The base of gains/losses is set at the date of fund launching date for a fund manager. The date of investor making a purchase and gains/losses calculation belongs to his/her performance.

What I'm saying timing is everything. Timing is very closely related to sentiment. Most of us like to chase the girls with red mini-skirts -- hot. Well, who doesn't ???except you need to pay the price for it. I suppose no further elaboration needed with this visual.

Buy into foreign funds have no difference when that country or investment concept is depressed. China big cap funds for example are clearly very undervalued now except it is very testing because your money isn't growing! Do you dare to do dollar averaging now?

The second concept is diversification. Diversification is for birds, Warren Buffett would tell you. I would agree to certain extend if you are really super-competent in your area. Most of us will need to be humble, accepting that we score C across many categories. We need to diversify a little bit to prevent us making stupid mistakes. The rule of diversification is to make sure low correlation with what you are holding now.

The third concept is asset allocation. How much do you want to allocate for foreign assets? Personally, I have 80% invested in Malaysia and 20% invested in foreign mutual funds or ETFs(some sort of mutual funds that mimic an index).

The forth point is forex. Whether we like it or not, we need to pay attention to this. I was one of those who got impatient to venture out when our government liberalized the forex control. The feeling was like a bird being freed from a cage. It's the same reasons-lah: hopeless government, expensive Malaysian stock market, better investor protection, boasting about my investment skills, ego stroking, etc........A lot of my returns were eaten up by forex loss. From RM 3.80 to 1 USD to RM 3.05 to 1 USD, that and initial loading fees already put me in disadvantage situation. I do not think I lost money but after spending a lot of time and efforts, it's break even that I got forced me to be more realistic.

As usual, I hope my brutal honest views can help you a bit in your deliberation. I certainly have no intentions to put anyone down except force everyone to be naked in front of a mirror to make an honest assessment. After you have done that and if you think you are fit for it, don't hold yourself back. Just go for it! Happy investing and good luck!

Friday, January 13, 2012

Should we invest outside Malaysia?..........Part I

A reader left a comment asking me whether we should invest outside Malaysia such as Singapore or US markets directly. He thinks the Malaysian stock market is very over-valued and other markets are less expensive. The following views are purely my personal opinions and are for reference only, should never be taken as an investment advice.

1. Unless you have more than 2 - 3 million Ringgit, Malaysia market is big enough for us. 10 stocks should work up to RM 1 - 2 million, if we invest in blue chip companies.

2. The reverse is true, if we have less than RM 1 million, going outside Malaysia means we have less than USD 350 k or S 400 k to invest. If you are investing based on concentrated strategy, you get to invest up to 5 - 10 ideas only. Transaction fees are higher and that will prevent you to churn rapidly.

3. From a hedging point of view, what we are trying to do is to hedge ourselves from political, economic and currency risks. If a country has a history of nationalization or turning a free economy into a socialist economy, then all your assets will be nationalized and you will be down to nothing. This fear is very strong among the rich people in China. This motivates them to move theirs assets out of China. In Malaysian context, the risk of we turn into a communist country is low. This is a black swan event.

However, the chance of Ringgit depreciation is there if our government continues to delay their reform or set Big Hairy Audacious Goals but never achieving it. The persistent fiscal deficits are mind boggling -- for donkey years we have been running deficits. The history of 1998 taught us when people panicked sending the KLCI to 280 points proven to be one of the best opportunities in a life time to make a 4 to 5 fold gains.

4. To invest in the US stock market which is a more efficient market, we are competing with the best of the best in the world. Those guys are equipped with smartest analysts, powerful computer systems and etc, it will very tough to beat them, unless in a situational opportunistic buy. When that happen it is very likely that Malaysian market will also be badly affected and the opportunity to buy is also there. Unless you have a very proven track record in Malaysia, going outside is like learning to fly before you can run.

5. The big blue chips are over-valued and buying and selling among the big guys are driving up the markets are valid reasons. Historically, Malaysian market are selling at a premium compare to other markets. We ought to make sure we make apple-to-apple comparison. If Citigroup has been selling for 1.5X P/BV post-crisis, we cannot consider Citigroup is cheap if it is selling for 1.8X P/BV because our Public Bank is selling for 3X P/BV.

6. Expecting yourself to make a smooth 10-15% annual compound rate is just not possible. Smooth out by rotating in and out is nice on theory but I find it very difficult to implement. Some years you may just be content with 3% but some years you may have 30-40%. Over long term periods, we all should aim for 10 - 15% CAGR. Keeping yourself out of negative years over a period of 20-30 years will put yourself in the upper investment echelon class, in an environment of what Pimco coined as the new normal -- the era of de-leveraging.

It's not that I discourage people to go outside. Let me summarize it to avoid being mis-understood. Investing outside Malaysia directly is okay

- if you are rich(greater than 2-3 million cash, many think 5 million and above).

- special situational investment (if Thai index drop by 80%, buying an ETF from SGX will be a great idea). Another example is Mr. Koon Yew Yin took advantage of fear factor of people selling indiscriminately when Hong Kong was returned to China in 1997.

- if you can understand enough of the macro-economics and can understand enough of the forex direction. If you diversifying your stock picking in emerging economies you got more works, you got to do a bit of a politic analyst's work as well.

In part II, I'll share my views of investing outside Malaysia through mutual funds.

Thursday, January 12, 2012

Your Penang Chief Minister Net Worth

Our Penang CM and state exco members declare assets. You will never see this in the mainstream media. Based on what was reported in Malaysiakini(http://www.malaysiakini.com/news/186395), I attempted to summarize it into a table. He did not mention what funds he was invested in Amanah Mutual Bhd and Public Mutual Bhd, so I have to assign a range of low and high of NAV of funds offer by these two companies. The estimated net worth is between RM $ 680 - RM 740 k.

Your Penang Chief Minister, Lim Guan Eng will turn 51 in coming December, is a bachelor of Economics from Monash University, Australia. He is also a qualified accountant. This is what your Penang Chief Minister sacrifice for you. If he stays in private sector, he is easily a millionaire today.

Will Barisan people dare to do the same?

P.S. Between flooding you with depressed views of stock markets, I've decided to write something are more important than just talking money. I know many of you have been sticking with me through thick and thin whatever I write, I hope this will be beneficiary to you.

Wednesday, January 11, 2012

Hussman & Achuthan singing the recession songs?

First, read this article Leading Indicators and the Risk of a Blindside Recession from Hussman at http://hussmanfunds.com/wmc/wmc120109.htm

Hussman discussed about leading and lagging indicators. The ECRI and Hussman assembled a series of indicators that could warn them ahead of time.

In Hussman weekly update, he said that their Ensemble index, ECRI's weekly leading indicator(WLI) and the FED LEI have strong correlations with time, to warn a recession. Their studies found that Ensemble index and WLI give pretty good correlation -- 3 months into a recession. The stock market S&P is also able to give an advance warning(3 months ahead), albeit a much weaker one(0.4++). See the gray bar that I marked on the chart.

Hussman and ECRI's CEO Laksman Achuthan are calling for a recession since Q4 '11. Both of them still stick to their recession views. In the latest update in December 8, Achuthan still sticks with his call. He said if the US economy does not fall into a recession by June, then they are wrong!.

Both of them have pretty strong track records and wise -- they don't react on day to day as and when the data is being released. They connect the dots and I have great respect for them.

If they are right again this time, we should be able to see observable deteriorations within the first half of 2012, perhaps that will cross path with favorite Sell in May, Go Away period again.

I want to make clear that just because I am holding high cash does not mean I wish bad things to happen. My motivation of posting these views is simple. Respect risks. The thing get me more cautious when I see this headline in the local on-line newspaper.

Retail investors keeping the good run going


Tuesday, January 10, 2012

A small step

When contents on the web are increasingly getting under appreciated, read F.O.C., I finally decided to pay. I subscribed myself for 3 years subscription for MalaysiaKini.

It's a small step to support people who believe in


human rights,


freedom of speech

and good governance.

Have I turned myself into a rebel teen? A rebel without a cause? No, I'm a rational person and I don't like to leave money on the table. I'm also a person who would rather make myself fat by eating all the dishes on the table than sending it into a garbage bag. It's business.

It's an efficient business model actually. If you turn to the mainstream newspapers, most of them are filled with gossips and advertisements. What is making me even more sick seeing journalists tailing a group of politicians, trying to tell us either they are busy or doing something good for the country. Please-lah. Also, what's the point of maintaining a big group of people to run around to cover local happenings that will not interest people like me. What if you let a group of volunteers to do coverage for you? Then you focus your energy on big things, not the small things.

I find the columnists are well qualified and more importantly they write critically without fears. A number of them are highly successful and they care more of spreading the ideals and right things than the need to write the pleasing things to keep their jobs.

It's a small step to support media independent.

By the way, I concur with our Penang CM's view that the GE will be delayed slightly because of the latest development. He thinks the GE may be called in June or September. What does that means for the local market? I think the government has more to lose. Trying to take credit by spinning Anwar's acquittal story of judicial independent is like trying to make lemon juice out of lemonades.

The Felda listing met with resistance is also not going well for Najib's government. If they mis-manage that, they can kiss good bye to the grass root support. The longer they delay, the sweets in the mouths will melt fast. That will lead to increasingly stronger headwinds and uncertainties. I'll still opt to stay out of the market for a while though I've a shopping list of gems that I want to buy.

Monday, January 9, 2012

I'm finally vindicated, says Anwar

A good reason to cheer on Monday! Hoooooooraaaaaaaaaaaay!!!!!!!!!!

BREAKING NEWS In a surprising twist, Anwar Ibrahim was today acquitted by the Kuala Lumpur High Court of sodomising his former 23-year-old aide, Mohd Saiful Bukhari Azlan.

In discharging the 64-year-old PKR de-facto leader, Justice Mohamad Zabidin Mohd Diah cast doubt on the DNA evidence provided by the prosecution.

"After going through the evidence, I cannot be 100 percent certain that the evidence could have been compromised.

"Hence, the court is reluctant to convict on such corrobaration of evidence from SP1 Saiful."

On hearing the surprise verdict, the courtroom exploded in jubilation.

Anwar's wife Dr Wan Azizah Wan Ismail cried and hugged her elated husband.

In an immediate reaction, Anwar thanked his lawyers.

"I'm finally vindicated after the smearing of my character. I'm thankful to Wan Azizah and the team of lawyers led by Karpal Singh.

He also thanked the support of Pakatan Rakyat leaders.

"We want to continue on the reform agenda, fighting corruption, and freedom of the press."

Anwar was represented by a team of lawyers led by Bukit Gelugor MP and DAP chairperson Karpal. Outgoing solicitor-general II Mohd Yusof Zainal Abiden led the prosecution.

Anwar, a former deputy prime minister was charged with sodomising Saiful at the Desa Damansara condominium between 3.01pm and 4.30pm on June 26, 2008.




The possibility of Anwar going back to jail troubled me a lot. Just don't know why. His personal suffering is one thing, perhaps the future of Malaysia is truly troubling me. Time is running out for Malaysia.

Forget about the separation of powers. Forget about the judicial independent. Talking about pricing in? Just look at the picture of the crowd, taken yesterday night. They priced in 100% that Anwar is going back to jail today.

The recent RM 500 Bantuan 1 Malaysia and RM 100 for every student made me very angry. My face is like a cooked lobster -- very red with steam over my head. Talking about borrow "sword to kill somebody", this is it. I am not angry with the needy people but needy people got bribed and giving one vote to make the current ruling government stay made me angry. You and I are funding our own enemy, without ours consent.

Fortunately, they are still a few good men around. Unfortunately, these "young men" and "young lady" are already getting into 60, 70, 80 years old. I suppose they have seen what was Malaya look like. Those born after 80s can only hear the great old nostalgia stories.

I believe the educated camp needs no further selling. It's the grass root level needs to be converted. It's an uphill battle I know. Giving up is easy. Walking away is easy. Turning back is easy.

As I research more about Mr. Koon, my admiration and respect for him is growing stronger than ever. He is a good role model. Talking is cheap. Transforming aspirations into actions are very expensive. Stepping outside our comfort zone to do something is very uncomfortable but something has to be done.

By Koon Yew Yin

1. I am not a politician. But I know politics is very important because it affects you and your children. I want to help you win the coming election. I have already donated RM100,000 during your last dinner to celebrate Lim Kit Siang’s 70th Birthday, a few months ago. (Admin note: RM100,000 donated to DAP Perak)

I put my money where my mouth is. Many people would grumble and complain about BN government’s corruptions, abuse of power and Chinese cannot get university places and also employment in the civil services, etc but they dare not come forward to support Pakatan Rakyat to change the Government.

I hope my coming forward openly will encourage many people to show support. Your party needs money and I hope you all will donate as much as you can afford.

2. You must bear in mind that the population of the non Malays is relatively small, even all non Malays vote for the PR and without Malays winning some seats, Pakatan Ryakyat cannot control the Perak State Government or Putrajaya. After tonight’s dinner, I would like each of you to make a serious effort to make friend with at least one Malay and convince him to vote for PR.

3. I wish to remind you that in the last Gen Election, PR won control of Perak, but lost control because a few frogs jumped over to BN. On your table you will read my article ‘Restore democracy to Perak: appeal to Sultan Aslan Shah’, but the Sultan did not dissolve the State Assembly as I requested. In the next election, you must make sure we can win a lot more seats to regain control.

4. Many of you would have heard about UTAR in Kampar rejected my Rm 30 M donation offer to build hostels to help students because the MCA leaders who own the land outside the University campus do not want me to disturb their very profitable rental business. There are 12,500 students and each of them pays Rm 200 per month and the total monthly rental income is about RM2.5 million or RM30 m a year. They cannot build fast enough to cater for the yearly students increase. Remember the greedy MCA leaders will continue to suck your blood.

5. MCA has been in the BN government since Merdeka more than 54 years ago. Did MCA ever dare to criticise UMNO to protect non Malays’ interest? Now the World Bank has reported 2 days ago that a large number of non Malayshave migrated to Singapore, UK, Australia etc due to unfair treatment. 4 of my 5 children have gone out of the country to find work. I am sure some of you and your friends have children migrated overseas simply because we are called ‘PENDATAN’, visitors.

6. I have given scholarships to 80 poor students whose parents are earning less than RM2,000 per month. If you know of any poor parent who needs scholarships please contact my assistant Dr. Jeffrey Yee, 012-5286696. He graduated with a PhD from Cambridge, He will address you in Mandarin.

Thank you

Source: http://blog.limkitsiang.com/2011/05/07/rm30-million-donation-rejected-and-scholarship-for-the-poor/

Friday, January 6, 2012

Is investing hard?........Part II

In part I, the punch line that I wanted to get through was

face the reality.

Knowing the reality is so important. For what you may ask. Reality is the opposite of illusion or fantasy. The reality is many have tried and only a few succeeded.

The second punch line was

it is only meaningful when you can win over a long period of time.

At times when I met new converts(newbies), they will lecture me that the most powerful force in the universe is Compounding force. A 26,000 will turn into 1,000,000 if you can compound 20 years over 20% annual compound rate. Bless you bros.

What impressed me the most when I read Mr. Koon Yew Yin's essay was this. He began to invest in public listed companies seriously when he was 50 years old. I suppose he spent all his energies running businesses he co-founded before that. I was not sure what were his reasons of not "playing" in the stock market in his younger days.

In many cases, personal finance consultants are right, when you retire you should not take too much risks. What risks? Are risks associated with price fluctuations of blue chips companies or penny stocks? There are huge distinctions between the two.

He did not say it in too many words, he said he did not know how to read balance sheet. Most people who do not know how to read balance sheet will default to technical analysis camp. But certainly not him. I supposed he took efforts to do crash course like Finance for non-finance managers or a self-study for ACCA professional qualification.

What impressed me even more is this. He was like Chow Yuen Fatt, smiled charmingly and stylishly, GOING ALL IN. That must me around 1996/1997. How old was he? If he retired in 1983 at 50 years old, he could be around 63 or 64 years old. This old wise man really got big balls.

This lead to my third punch line

you can be in 5/100 club regardless of background or age.

A big BUT, this club is certainly not for the ignorant, lazy, lucky, tipsy-taker,.........(you fill in the rest).

Thursday, January 5, 2012

Is investing hard?..........Part I

I have not been dwelling in investing philosophy for a while. Wish to make one or two more entries, the so called popular by demand, before I move on to some other themes.

I made a statement that good investors are made, not born. For many of you who are in managerial positions, it's the same question, are good leaders made or born? To make it sounds even more text book-ish, is it nature or nurture?

To be even more screw up, let's talk about statistics.

In a natural distribution curve, in relative terms, most of us will fall right in the middle. Finding the extreme end of IQ 55 or 145 will be extremely difficult. If you don't have big enough sample size, you can't even find closer to one. You can only find rough about 1 in 1,000 people.

Let me go back to investing. Let say the super-investors can generate annual compound rate of return roughly about 20% and the super-idiot-investors will also generate about -20%(NEGATIVE 20, make sure you don't mis-read that), the big majority will generate about 0% return? A large percentage of will make money and a large percentage will lose money? You must be feeling very positive now that you can make money out of stock markets. From the normal bell curve, you must be thinking that you have 50% chance making positive return. 50% is a very good chance, so obvious right? You must be feeling very warm now.

You see I already fooled you into cognitive bias. I borrowed a concept that is so intuitive, so familiar, so logical yet so flaw? Eeeeerrrrrr. How?

According to many studies, this is how it is supposed to look like.

Only 10 in 100 will make money. We have not even talk about time horizon. Over 1 year, 5 years, 10 years, 20 years, 30 years? Try to stay above zero return over 5, 10, 15, 20 years. Do you have confidence of doing that? If not, put your money in fixed deposit?

I know many of my readers eat, sleep, shit and breath, not in oxygen, but in stocks. They are good enough to stay above ground ZERO, but can you at least beat FD rate over 10, 15, 20, 25, 30 years? My gut feel is may only 7 out of 100 can do that.

Then there are a few of my readers, who do not depend on luck, but something else(eeerrr don't know what) can at least beat the EPF number of 4.5%. 5 of out 100 can do that.

Then there are about 3 - 4 out of 100 can compound above 10% over a long period of time. The time period that I am talking about is 20 to 30 years.

May be 1/100 person above 15%.

And may be 1/1000 person above 20%, that person will be crown as a super-investor. Let me help you to visualize this.

Hey, I am seeing your aspiration is evaporating fast. Don't be like that lah. Investing is easy, very easy in fact. But to be in the club of 5-100? Try 5100 in coming 4D. :)

Tuesday, January 3, 2012

Self assessment

Read Mr. Koon Yew Yin’s write up posted by MalaysianFinance: Can you become a super investor?

He argued that we have nothing to lose if we aim to be a super investor. The bad news is you got to be genetically coded to be a super investor. But the good news is even we fail to be a super investor, we’re still going to be better than average Joe.

He said there are seven traits to be a super investor and I am going to rate myself as honest as possible. After having a pack of whisky certainly helps.

Trait #1: Be a contrarian investor. B to B+.

Making a big bet when an opportunity shows up. C.

Trait #2: Obsession in playing the game and wanting to win. B+

Trait #3: The willingness to learn from the past mistakes. C

Trait #4: An inherent sense of risk based on common sense. C+

Trait #5: Confidence B-

Trait #6: Clear thinking. B-

Trait #7: The ability to live through volatility without

changing investment thought process C +

Overall. B – or C ++

Remark: Hopefully this failed super investor will at least be a better investor. :)

Monday, January 2, 2012

Shangri-La Hotels -- Solid investment but no rush

Companies own by Robert Kuok are usually well run. His conservatism and down to earth leadership has strong root that can weather all kind of business conditions, especially cyclical ones.

Hotel business is cyclical in nature. This business can tell us a lot about the global economic boom and bust story. It's a place people conduct businesses to make a lot of money or to indulge themselves after making a lot of money. Keyword: a lot of money = boom. It's also a place many people will desert licking their wounds or get quarantine in their office in bad times. Deserted = bust! There are three bold lines that will tell it all.

The first line reminded us a lot about dot.com bust, 9-11, SARS, etc. Those were the truly difficult times. Right after 2004, the world has unprecedented global economic growth without realizing it would come to an abrupt end. Thank you Greenspan.

The second bold line told a story of the US housing bubble bust that led the world into recession and financial crisis. After the market bottomed out in 2009, everything looks fine for the last one and the half year. Thank you chairman Bernanke.

A little warning. Shangri-La stock price peaked out in October 2010 and has been in a down-trend for more than a year. This is the story of the third bold line but not sure who to thank.

The EPS trend is more or less telling the same story of the price chart. The world went out from the soft patch in 2003 and enjoying a nice long period of 4 to 5 years of prosperity. A little second warning. The yellow light is flashing, again. The earning appears to have peaked out in 2010.

To understand Shangri-La business, we need to understand two drivers. First, Shangri-La operates a group hotels, resorts and property management in Malaysia. In 2010, it had a total revenue of RM 422 million. The breakdown of revenue contributions can be found here.

Three of Shang's hotels contributing almost three-quarter to the group's revenue. The data point of occupancy rate is a contrarian indicator. No good times(2004-2007) or bad times(2001-2003) are going to last forever.

The occupancy rate in the first 9 months of 2011 is very high. Taking comfort in this lagging data is certainly not wise. The typical business segment of Shangri-La hotels like Shangri-La Kuala Lumpur and Traders Penang occupancy rates are very high. 70% occupancy of Shangri-La Kuala Lumpur is as high as 2004 - 2007 period. The Traders hotel's occupancy rate is even unusual, 85%, a new record for the last ten years. Do you think this is going to be sustainable?

On the resorts side of the business, first it will get hit by Rasa Ria because they are renovating and secondly a lot of their clients are Europeans and Aussies followed by Asians from the North.

The rest, Rasa Sayang and Golden Sands, look reasonable.

All in all, I would expect earnings of Shangri-La group to soften in anticipation of lower business volume and slower resort business. This is not a bad news to me because a well run business that being oversold at the bottom of the cycle is a good investment.

Disclosure: None.

Sunday, January 1, 2012

Turtle Portfolio Update - Jan 2012

To many 2011 can be a disappointing year. KLCI ended flat compared to beginning of 2011.

I managed to turn in 3.67% annual compounding return for Turtle portfolio that I started about 47 months ago. I was thrilled last year because I achieved my target of 10% annual compounding return. It was a good year for everybody for sure. I am falling short of my 10% annual compounding return this year. Blame it to a flat year? Noooooo....

I supposed there is no need to come out with a long list of reasons why I should be happy or to thrash myself. Kicking myself harder or shower with more gentle words on myself will not help me to achieve my target. I am man enough to accept that I did not reach my target this year. I should never lower my bar of 10% target. 10% means 10%.

Unlike many need to re-write their new year resolutions, my annual review is usually simple. All I need is to measure myself against long term objectives that I set.

I have set an expiry date for this blog since day one(you may want to check out my first entry). I have made a 15 years commitment or 180 months. This is what I called BEGIN with the END in MIND. By February 12, 2023 this blog will no longer be talking.

I have just completed about 26% of this journey. I still have three quarter to go. I also made a goal to beat professional investors of which I have no idea whether I have done that or not.

I have no idea what 2012 will bring. My attitude towards life is like Forest Gump. “Momma always said life was like a box of chocolates. You never know what you're gonna get.“

Just do one thing at a time. Keep walking buddy.