A Malaysian Turtle Investing Diary...By Amateur for Amateur

Sold MUI IND

2012-01-30T20:40:00.001+08:00

Sold 10,000 shares MUI IND @ 0.26/share

KLCI = 1513.

Liquidity and value investing???

2012-01-30T07:51:00.010+08:00

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.

THIS IS THE SINGLE MOST IMPORTANT KEY SUCCESS FACTOR OF A MOMENTUM PLAYER. IF YOU ARE THE TYPE THAN CANNOT CUT LOSS.

CUT LOSS!

CUT LOSS!

CUT LOSS!

I REPEAT. IF YOU CANNOT CUT LOSS. DON'T TRY THIS METHOD.

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. :)

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

2012-01-25T14:01:00.012+08:00

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.

http://hussmanfunds.com/wmc/wmc120123.htm

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.

http://www.cnbc.com/id/46055852/Marc_Faber_Relax_Stocks_Will_Not_Collapse

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.
http://biz.thestar.com.my/news/story.asp?file=/2012/1/25/business/10263369&sec=business

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.

Chinese New Year reflection ..... taboos

2012-01-20T07:37:00.007+08:00

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?

http://english.cpiasia.net/index.php?option=com_content&view=article&id=1904:chinese-poor-and-lower-class-in-msia-how-well-off-are-they-&catid=141:lim-teck-ghees-contribution&Itemid=93

Like that also can-ah?

2012-01-19T12:41:00.003+08:00

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.

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

2012-01-16T07:35:00.012+08:00

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!

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

2012-01-13T07:29:00.018+08:00

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.

Your Penang Chief Minister Net Worth

2012-01-12T20:13:00.008+08:00

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.

Hussman & Achuthan singing the recession songs?

2012-01-11T07:43:00.004+08:00

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

http://www.btimes.com.my/Current_News/BTIMES/articles/20120111010325/Article/index_html

A small step

2012-01-10T12:42:00.008+08:00

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

justice,

human rights,

democracy,

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.

I'm finally vindicated, says Anwar

2012-01-09T10:29:00.002+08:00

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.

http://www.malaysiakini.com/news/186058

Negara-Ku?

2012-01-09T07:31:00.007+08:00

http://www.youtube.com/watch?v=Z51N0mjn3kM

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/

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

2012-01-06T07:43:00.010+08:00

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).

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

2012-01-05T07:24:00.007+08:00

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. :)

Self assessment

2012-01-03T21:54:00.005+08:00

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. :)

http://www.malaysiafinance.blogspot.com/2012/01/can-you-become-super-investor.html

Shangri-La Hotels -- Solid investment but no rush

2012-01-02T15:13:00.013+08:00

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.

Turtle Portfolio Update - Jan 2012

2012-01-01T09:37:00.004+08:00

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.

Year End Reflection

2011-12-30T07:22:00.015+08:00

To all readers and "friends". Aheem....trying to clear my throat before I make a year end speech. Pretty serious-huh?

Tuan-tuan dan puan-puan sekalian. Thank you for taking interests in my blog for another year. I must say that I am the one that benefited the most out of blogging because writing keeps my brain muscles moving. Brain exercise is one thing but my heart is also get to exercise as well. Writing with honesty and revealing what I feel on a particular issue certainly help me emotionally. I think you have seen it all here -- funny, sarcasm, wit, anger, nag, sad, regret, hope, care, boast, greed, fear, etc.

The third part is my writing skill. I have been struggling with it for years. Can't get my tenses right, mixed up singular with plural nouns, typical school boy English with out of tuned, out of tempo conjunctions(but, however, subsequently, etc). English has cost me dearly. After I came out from school, I flung so many professional job interviews whenever written English is required. I was trying to psycho myself with all kind of positive thinkings, yells it aloud I CAN, I MUST, I WILL. I wanted it to make it happen badly, very badly I am telling you. I was trying to read. I was trying to impress with flowery language and bombastic words but it made others' hair stand on end. I CAN, I MUST, I WILL got me no where but to the land of broken hearts.

I am grateful for my bosses who sacrificed their precious times to flood my drafts with red inks. The first few red inks papers made me felt almost crippled by snake venom. I felt immobilized, paralyzed and lost the ability to feel -- waiting to be taken HOME. You see your colleagues composing masterpieces and yet you are still working on your mechanics and techniques. How frustrating is that? You feel that you are so small that you are regretted to be born into this world. Your analytical skills, business acumen, ability to relate others are literally destroyed by English. English does not only cost you your career advancement but it can affect your self-esteem. My heart beats will be drumming every time I send in my drafts for review. You know how an insecure person feel when he is waiting to be criticized. Don't play play-ah!

I am grateful that I can write in simple English to communicate with you today. I am sure my "teachers" will still leave some red inks circles and a few arrows here and there(if I show them my draft). It's too bad that one of them had gone back to heaven and the other one retired already.

So what is the moral of the story today? Don't be offended if I sound like treating you like a student. Investing is like English, it is not a nice-to-have but a must-have. Like grammars, there are rules. Like painting or music, some endow with a natural gift but many will struggle. I can go on and on but what is my punch line? Punch line? Here you are:

Good investors are made, not born!

Investing is a journey, not a destination!

See you in 2012!

While I was away

2011-12-29T07:18:00.004+08:00

I was on Internet and TV free for a week. It was a truly quiet week, almost doing nothing. Nothing glamorous for our first Christmas at our new home. I discovered something, when you stop to be hyperactive, your family members will also become less active and sitting around you and start talking.

While I was away, our KLCI cracked above 1,500? That was amazing, think again, where will it go? The fund managers are busy doing window dressing, telling their clients their funds at least are not losing money for 2011. Their life depends on it, ours are not.

Since I have done very little efforts to catch up with market analysis, this update will be very brief, no charts, no data -- which is almost a capital crime for me. But I tend to break rules once in a while. So, only hypothesis this morning.

Many things made me unsettling. The Chinese and Indian stock markets were making new lows coincide with negative macroeconomic news made me felt that the theory of emerging economies are going to be the next Hercules begin to look shaky. Can emerging economies hold the sky from falling?

The Europe. The fiscal compact is the right things to do but it has many short term consequences.

To prevent the holes from getting larger, the European Union members will have to limit their budget deficit no larger than 3% of GDP going forward or face penalty. This will establish some accountability but sticking to the plan means less growth(likely to contract) and accept market pricing of higher interest rates. Italian 10 years bond yield persistently on high end of 6% and occasionally above 7% means less money to spend on more productive policy. I would not use a stronger word like spiralling down but the cleansing process will need longer time.

The fact that they let IMF to handle the money which operates based on one tranche one reform, we should see things get worse before it gets better. The sunny side is we will see true reformation. They will emerge stronger later on.

If the ECB is truly independent, they should not print money. But some doubted that because they recently launched an operation to loan banks a big sum of money, 400 billion plus hopefully they will do carry trade, borrow cheap money and buy higher yield assets like government bonds. As of this point of writing, there are no signs of them doing carry trade because the banks still parking money with ECB, close to about 452 billions Euro, up from 411 billions Euro before Christmas. If there is no trust among banks, are we not going back to square one?

There is no doubt that the European markets(DAX, CAC 40, etc) had suffered more than 30% declined from peak lead to many to argue that lower earnings should be expected in 6 - 9 months down the road. Though it has recovered a bit somewhat, these markets are selling close to 10-12 PE. Fair valuation unless the markets are expecting a much more serious deterioration. This lead to some to believe it should fall another 10% from here, in the latter scenario.

The US. The economic data is like stock market -- sending mix signals. People are reacting to those news offer no significant meanings really. To me, it is still bouncing around the bottom. The last two pieces that brought some hopes to the market were better employment figure(of which I doubt a true picture) or a start of housing recovery(but dashed by the latest home price declined again), leaving us wonder where is the market heading. My take is South bound, S & P 950 +/- 50 points. People are keep chasing dividend yield stocks are telling us they are nervous and they don't buy into a a picture the world is my yummy oyster.

Our home, KLSE. If you go drive around kampung, the noisy tar tractors are very busy. They drive me sick because those nice conditions roads are being resurfaced but NOT our old Georgetown roads which full of pot holes. That is the price to pay when you go against the government. But I rather be poor than selling my soul to the government. Even they sell me into a whore house, you can have my body but not my heart, just like an actress line in those old black and white movie.

Mind you there is a judgement will be made for Anwar case by Jan 09, 12. Will he go back to jail? It does not take much intelligence to figure out the general election is around the corner. While the market appears to be robust for now, the risk is also equally high. Gradual sell down could happen prior to general election should not be ruled out.

Not a short update after all? :)

Happy holidays

2011-12-22T07:39:00.008+08:00

To a lot of people, Christmas is $$$.

Gifts. Shopping. Dining. Restaurants. Alcohol. Bar.

But one word is missing.

Love.

For us who believe, 2000 years ago, God came to this world. Downgraded himself and turned himself into one of us. He died on the cross for sins he did not commit. All innocent men will want to be heard and justified, telling the world that he/she is innocent. They will appeal to highest court on this earth to seek justice. But not Jesus. He remained silent when he was mocked and accused of things he did not do. He was born to fulfil his mission. A mission to spread the gospel of love.

Catching A Falling Knife, part 2 coming?

2011-12-21T07:05:00.006+08:00

This article that I about to feature is about 9,000 words. It's a long story but once you start reading it, it's hard to stop. This is a story of many suspected to be ex-CEO of Fibrechem, an S Chip company or a typical small Chinese company that listed in Singapore Stock Exchange. The confession of this CEO dated sometime in late 2008 or early 2009.

The motive of the confession may not seem to be as innocent as it appears because you never know what is in his heart. In part he could be trying to "redeem" himself and to help the investing public. But there are certainly some elements of black mailing too -- threaten to expose the rich and powerful. Remember this, the Chinese in China are very different from the overseas Chinese, more than once I was cautioned. They are not like majority of Malaysians Chinese, behind Singaporeans Chinese, who are typically "more stupid" than the rest of other overseas Chinese(particularly Taiwanese and Hong Kee). But in this story, some of the law fearing Singaporeans appeared to be equally corrupt.

Regardless of his motives the risks element in his story serves very good reminders.

Why am I highlighting this? I saw many of these Chinese companies listed in KLSE hit new lows last week. The property correction and sharp manufacturing deceleration in China may expose a few skeletons in the closet. Beyond technical rebound, the risks of buy and hold in these counters, you know lar.........

Let me tell you the story. By the time you read this article, it would reached have hundreds of investors, bankers, regulators and journalists. My purpose was to shed some light on the “dark sides” of the business of S-Chips (Chinese companies listed on Singapore Stock Exchange), so as to help prevent more financial losses in the future hurting the ordinary people on the street. From this angle, I wish to redeem myself somewhat………

It all started some 6-7 years ago. My colleagues and I were just a few of the million of entrepreneurs in China struggling to make ends meet at the textile fibre factory that we bought from the government. Some of our older colleagues had laboured for more than 20 years before having the chance to “privatise” the state-owned textile fibre factory in Fujian Province that we have worked for since the day we left school under the Premier Zhu’s “government retreat, private sector advance” scheme, literally at a song. We thought we were going to be very rich very soon. Little we knew that when the local governments of the various counties and villages decided to “retreat”, we end up! with thousands of “privately-owned” textile fibre spinners that competed ever more aggressively. Despite ever rising revenue, margins were disappearing fast……. Sometime, we just wonder why we have worked so hard only to earn next to nothing. Perhaps, our only reward was meant to be “the master of our own destinies”…… But we never really gave up hope…… One day, we shall strike gold…….

1990, the year after the TianAnMen Incident, was really a very difficult year. Many of our clients, the textile manufacturers who were enjoying the initial euphoria of the burgeoning export demand, went belly-up within a short 2 years of economic contraction. However, we pulled through all the vanishing receivables and anguish cashflow-balancing exercises.

By 1993, we were off for the biggest boom ride of our life-time. Our textile fibre business blossomed as China becomes the clothing factory of the world, benefiting not least from the one-off Renminbi devaluation that the Chinese government engineered in 1994. Those were the good old days, where sufficient numbers of our competitors were eliminated by the TianAnMen-induced recession, and the world began to look to China for every piece of garments stretching from the heads to toes.

Money was easy……and we expanded our production capacity as quickly as we could, limited only by the fact that the state-owned banks were not really very keen to lend money to private enterprises like ours, and we just have to borrow from our villagers at some 15% interest rates!!! Nevertheless, we did good business and our leader, the general manager of the factory, could even afford a chaffer-driven Santana. In any case, he was too old to learn new trick, even as simple as driving itself. I was the rising star which had to bide my time, as I was the only person who speaks decent English. I was meant to be the tongue of the company in dealing with the external world. But I am getting impatient. For while the company was booking increasing profits, we never seems to have cash to be distributed as any excess cash generated from the business was never enough to cover the capital expenditure needed to expand the production .

We just owned an ever-growing production business. Unfortunately, good profit margins never last in China. Good demand quickly attracted new entrants into the business as the barrier of entry is relatively low. At the same time, some of the so called “obsolete capacities” came back from the grave and soon, we found ourselves struggling to churn our profit. It was like working for free again……lots of revenues but just no profit!!!

By the middle of 1990’s, we were doing great business selling to our customers in different areas of the coastal areas. In 1995, we suddenly found ourselves having to deal with fast rising cost pressure. However, the market was buoyant enough for us to raise our product prices to pass on the cost increase to our customers. Then, we realized that we must move ahead in term of technology and product offering. Like everyone else around us, we took advantage of the tax concession offered by the government to the so-called joint venture companies. We recycled our “cash” to Hong Kong, set up a “foreign company”, which in turn pumped back the cash to Fujian in the form of a joint venture entity, using the cash to purchase some second-hand German equipment to produce the chemical fibre! s needed in all kinds of fabrics and artificial leathers.

However, luck did not really favour us, at least thus far. Soon, we were told that our economy was experiencing very high inflation rates and soon, the then Premier Zhu Rongji stepped a hard brake on the economy, cutting the bank credit to many state-owned enterprises which were producing things that no consumers wanted. While as private enterprise we did not enjoy the benefit of bank credit, its sudden massive contraction hurt us as bad as the state-owned enterprises who received such reckless loans. We were entangled like the other enterprises in what we called the “triangular debt” problem, where everyone owes the next person money and there was just no money at the source for anyone to get paid…….!!! The situation last for quite sometime as we lived from hands to mouths, sometimes having to send out local thugs to chase for receivable payments from cash-strapped clients. Then again, what else can we do? We had so much or our friends’ and relatives’ money with us investing in all these machinery now that the only road for us is to struggle forwards……turning back would have made us the “outcast” of the village……. By the time the rest of the Asian economies cracked in 1997 amidst the so called Asian Financial Crisis, we were already becoming numb to bad news. I remembered there were days that I wished I had not joined the textile industry, or any industry at all……for making money out of making something is so darn difficult……. I thought I might have just wasted my youth. Somehow, we managed to pull through as a group. The general manager of the factory, who is now getting seriously old, made his sacrifice along the way by selling his Santana in order to keep more mouths fed. We all had no where else to turn to but to continue pushing hard to sell our new product, the chemical fibres.

Finally, by year 2000, the economy began to recover. Our hard work and persistence were also beginning to get paid off handsomely as China had become the centre of all textile, shoe and furniture manufacturing in the world, and all these products required some forms of chemical fibres. We were beginning to rake in cash beginning 2002!

Then my life-changing incident took place. One fine day in late 2002, I was introduced over the dinner table to one Singapore “Deal-maker” who was to become one of the richest men in his country in the next 5 years. Mr D was still a “relatively” poor deal-maker at that time. Just like many so called “deal-makers” running around China at that time, they hope to make small fees introducing companies to capital, or vice versa. Mr D claimed that he had successfully engineered a number of private equity transactions in China, helping companies with so called “mezzanine” financing to prepare the companies to be listed in stock exc! hanges outside of China. He was fully aware of the psychology of Chinese entrepreneurs and their deep dissatisfaction with the bias of the Chinese government in allowing only state-owned enterprises to list on the local stock exchanges. To us, having a listing status in China is like having acquired the right to print money. One just has to cook up a nice investment story and he could get Chinese investors to subscribe to the right issues of a listed company at any price. It was so much more an elegant way to make some money, rather than to have to toil for a few cents selling chemical fibres……. Mr D went further to claim that he had taken some of the invested companies public in both Hong Kong and Singapore Stock Exchanges and given his investors had made some money, he always have a group of ready-investors willing to back all his “stock picks”. He went on to ask quite a number of detailed questions on the operating conditions of our companies over the dinner, jotted them down carefully on a small note book along the way. Later on, we adjourned up-stair the restaurant for a KTV session. I must admit that I remembered clearly Mr D was a good Chinese song singer, having sung some hot-off-the-chart songs that I heard my niece hummed sometime shortly before the incident. His smooth handling of the KTV girls, which he asked for two concurrently, also showed that he had been around………

The next time I met Mr D was three months later, quite unexpectedly as I had thought he could have decided to give our company a miss given our relative small size. He requested for a factory visit which, after having consulted our old general manager, I accompanied throughout. As usual, no serious business until after dinner and getting slight tipsy after a few drinks forced down by the KTV girls in the evening. I must admit that Mr D is a seasoned operator. He was quick to recognise that I was an impatient young man to take over the operation from my older colleagues. Throughout the entire evening, he was trying to convince me to move the gear one notch faster to accept some private investors into the company, beyond which he was confident to help us to get the company listed in one of the foreign stock exchanges, where everyone will be able to cash out their profit if they so ! chose. I pretended to be sceptical while deep in my heart, I need no convincing as I have known many Fujian entrepreneurs shot to fame and riches, 2 of them by turning large tracts of collective land into vegetable farms and the other bending float glasses he bought from state-owned factories into auto wind-screens and sell them to car manufacturers. I never doubted that one can make a lot of money from car wind-screen, but I could have never imagined striking it rich planting vegetable…….!!!

Mr D and myself both agreed later that we need to convince the other older colleagues of mine to approve such a scheme, and over time, move them aside to allow someone young and dynamic person like myself to be the face of the firm to cater to the likings of the investors, who were mostly English speaking. In the meantime, my task was to convince the existing shareholders to allow a group of Mr D’s friends into the shareholding first, while paying Mr D a “structuring and introduction” fee along the way. The easy part was, as Mr D coached me on how to present to the rest of the shareholders, his fees will not be in “cash” but rather in equivalent value of “shares”. He said that was to assure everyone that he could only make money should he be able to engineer an eventual listing of the company on a stock exchange, after another year of lock-up period for promoter shares aft! er listing. All interests would be aligned, as he put it.

Mr D was indeed an experienced operator. He had anticipated all the concerns of the “older” colleagues of mine, who feared that this was another one of those “leather-bag-company” deal-makers that was trying to make money out of no commitment. So he got through the first “hurdle of trust” after my carefully orchestrated presentation to the “board” of the company.

However, there was still one important issue we could not resolve amongst the board members. The finance manager correctly pointed out that the company indeed, did not need substantial amount of cash at this moment as we were not expanding aggressively anymore. The market place for our products was relatively stable right now with demand and supply growing organically. We will not be able to drive higher sales without sacrificing our margins by cutting prices. In short, we can only grow organically at around 10% ! per annum, which was probably not the most exciting story for the investors. In fact, the board members did not see the need for new capital. However, the idea of getting listed did appeal to them. They too had many friend who had become “paper millionaire” after the companies got listed. They too were looking for the big-pay-off day. So I was tasked to come up with a solution. In other words, there was a “green-light”! I did not expect my luck! Almost immediately after the board meeting, I called Mr D to tell him the outcome, as well as the issues raised. Again, I thought he must have expected the outcomes. As he explained calmly over the phone, the first round investors (which he called angels) will not put in a lot of money so that they would not dilute the existing shareholders very much. These angels are the “connected persons” that will come in with their own money (through Mr D’s personal vehicle) that will help cement the way for some of the well known direct-investment funds to step in at a slightly later stage, which would provide the company with the credibility, other than funding, to convince the stock exchanges to allow the company’s listing, and the subsequent active participation of other institutional investors during the IPO. Mr D went on to explain that the process of getting a Chinese company list! ed was in fact, an art. There were not many people like him that could have the trust of many influential people to conceal their names behind his vehicle to invest in a company, not unless they have been working on other cases together before and having developed deep working relationship. These angels will see the company through the process from getting “restructured” to “listed”, rendering their helps in one way or another through exerting subtle influences on counter-parties, bankers, regulators and other investors. Mr D’s vehicle will participate in the shareholding of the company first, where they will invest up to 5% at book value. In other words, they demand for very cheap entry. Mr D will only take his fees later after having brought in the money from direct investment funds, in larger quantum, in the form of shares of the company at book value before the entry of new capital. He wanted 2% worth of the amount of money he would bring in from the funds in such shares. Subsequently, he went on to explain that this was the modus operandi these days as he could introduce us to the senior executives of the companies who had done business with him for further due diligence on his reputation. In particular, he emphasized that my colleagues should not be worried at all given the fact that it was going to be his and his friends’ money that will be in their hands, rather than the other way round. My older colleagues did find some solace in this argument later on.

As for the use of money, Mr D simply pointed out that we will have 6 month to a year to come up with a new plan on spending the proceed of investment, in the form of new technology and new products. “Aren’t you guys always looking for money to upgrade production machinery to produce new stuff for the market? It the same bunch of the customers anyway……”, so he quipped. So the decision process took a few months, where in between, Mr D sent in some accountants and lawyer to conduct some checks on our operation and accounts. We had nothing to hide then as we had no reason to fake anything. Everything was ours…….then. Subsequently, the “angels” came in, followed by, indeed, a number of reputable direct investment funds a few months down the line. We got a whopping US$20mn to put up a new plant to produce a new type of artificial fibre, the machinery of which was to be imported from Germany. The new product was in fact, attractive to a lot of customers. However, none of them were going to buy a lot of it at the beginning as they were not sure their customers were going to like the new types of yarns made of this new fibres. Business was not as brisk as Mr D had! hoped for…….

On the other hands, Mr D seemed quite keen that we could move forward in our listing process. He began to educate us the process and requirement of the stock exchanges for listing. We paid visit to Hong Kong and Singapore, talking to bankers and exchange officials, attending seminars, as organised by Mr D. We were all psyched up to be a rich millionaire once the company is listed. However, there was just this little problem…..our new products were not accepted by the market as fast as we had wished for. Most of our customers operate under very tight cash flow situation. They only have working capital to provide for the acquisition of raw materials to produce the yarns ordered by their customers. No one was going to spend a lot of money buying our new fibres, prod! uce large quantity of products to purvey them in trade shows, despite they all fed back with good comment on the potential of the new fibres. Very quickly, Mr D came up with an idea. In order to boost our sales numbers fast, he will raise another US$20mn of money from all the direct investment funds in the name of working capital need. As he explained, they often did the same tricks with those companies they listed before. They will raise new capital to produce the new products to sell to customers, encouraging them to help push the new products by offering them more favourable and longer payment terms. With the increased sales and profitability number, he could get the company to list very quickly to get more money to help push for more sales……. He claimed he had done it many times before and it had always worked out. The economy was recovering quickly in 2003, nothing was to going to go terribly wrong. When I asked whether that would be considered “artificially inflating sales number”, he laughed and quipped, with the capital markets on your side, you can engineer self-fulfilling prophesies!” Of course, this article cannot be complete, at this juncture, without citing Mr D’s favourite quotable quote. “Water enough money into any company, even a fake one could become real some day.” He believed so much in this that I thought one day, this could cause his downfall. So we went ahead, sold the new shares at higher valuation to another bunch of investors Mr D arranged. He took another round of commission in the form of shares. We were beginning to admire Mr D. Money flows through his hands like water and he did it so effortlessly.

We were no less impressed by his connection to some of the richest and most influential people, particularly in Singapore. You see, he was viewed as a successful Singapore entrepreneur made good in the vast land of the North. Through diligence and perseverance, he carved a niche for himself identifying promising Chinese companies to groom for listing on the Singapore Stock Exchange which was losing out in race to Hong Kong Stock Exchange as the Chinese! state-owned enterprises were encouraged to list in Hong Kong. Mr D was their hero, directing promising private Chinese enterprises to list in Singapore and along the way, enriching many “angels” and local investment banks in Singapore. I chanced upon many of these angels as well.

There were occasions Mr D would have called me to help arrange for some transport and accommodation in Xiamen for groups for “secret” visitors. They are usually small groups of 4-8 people. I would generally put them in comfortable Buick mini vans, receiving them from the airports, ferrying them to golf courses, restaurants and night clubs. They would usually visit one of two factories invested by Mr D. From my impression, these were the angels behind Mr D, which for obvious reasons, he had to please. There were bankers, lawyers, other deal makers, stock brokers, fund managers and people that do not have a job, simply because they were so rich already. Occasionally, there were ex-CEOs or Chairmen of large government controlled enterprises in Singapore. Once, I even met a supposedly ex-member of parliament in Singapore.

It was obvious to me that Mr D entertained them in separate groups at separate times, taking pains in ensuring that some of them were not aware of the involvement of the others, for some reasons. I was always invited to all these golf and night entertainment events for a simple reason: I speak English and Mr D wanted to be seen as having someone like me to watch over his investment in this part of the world and helped him to tap into different kinds of local relationship. The other Chinese entrepreneurs may not be comfortable in dealing with the whole bunch of English speaking Singaporeans.

One common trait of all these trips was that all these guys from Singapore seemed to love the night clubs in China. The daily programme always ended in some night clubs, where these guys would party till the wee hours, every night they were there. Mr D would sometime, when he was half drunk, tell me that he had again “nailed” some key relationship and one of the travellers in the group would soon be in his “Club”. He would whispered that someone in the group was the senior partner of an investment fund, or someone in another group was connected to the so-and-so in Singapore, or someone was closely associated with the chiefs of some Singapore banks, or someone had “influence” over the listing approval process of the stock exchange, and some would just be some new investors that he was trying to woo to invest in his pre-IPO projects or the shares in the companies that he sponsored the IPOs.

When I asked why they were all so tireless in their nocturnal activities, Mr D laughed, “This is what I call pent-up demand. You know these people cannot even come 100-meter close to any KTV in Singapore because of their social status. The opening up of China is probably the best thing that happened to all these Singaporean men, for they can at least release their “valves” once in a while…….. Do you know how boring Singapore is? I have a permanent KTV room booked up in one of most posh KTV in Singapore, costing me half a mill ion Dollar at the minimum every year. Guess what, the only important guests I have using that rooms are from China!” Watching Mr D in action, I finally understood the true meaning of “club”. He had managed to combine the “social club of friends” and KTV clubs so well that I thought every successful Chinese businessman should learn. And in so many ways, the “club” in Singapore is really not that different from the “club” in China…….. So finally, we got our act together to attempt a listing towards the end of 2003, after much of the financial twisting and engineering to make our company look like a well-funded high-tech textile fibre company on the verge of experiencing explosive sales take-off. In truth, we produced a lot of the new fibre products and literally give them to our customer to produce new fabric for marketing purposes, with the promise that we will not collect money until their products are sold. Nevertheless, we book these as receivables.

To the dismay of Mr D, my older colleagues had insisted on listing the company on the Hong Kong Stock Exchange, rather than the Singapore one, where Mr D has greater control on the process. They felt that the company would probably be accorded higher valuation in Hong Kong. Besides, they were not comfortable with Mr D’s influence in Singapore fearing the ultimate loss of the control of their company. Mr D went along grudgingly, helping to smooth the way to facilitate the IPO. We got a small investment bank to underwrite the IPO. The big ones were really not interested in this small piece of business. We went on to file the application to list to Hong Kong Stock Exchange, who was equally high-handed as Hong Kong was flushed with quality large size state-owned enterprises queuing up to list there. Being relatively uninterested in small size listing and more experienced in evaluating the quality of smaller Chinese private enterprises, they were quick to notice the sudden expansion of account receivables on our accounting statements. They followed up with a number of questions with the clear purpose of delaying our listing, probably to see how these receivables will behave given longer period of time. In short, there would be no quick IPO for us.

Mr D was quick to use this delay to his advantage. He hinted to everyone on the company board was that one of the reason for the stock exchange delay was due to the lack of a convincing younger manager helming the company, and that our senior colleague was already too old to project a “dynamic” image to the Exchange and the investors subsequently. He wanted me to be promoted to the CEO position while our existing GM to become the Chairman of the board. With his insistence, my appointment was pushed through the board, which made one of my older colleagues very angry as he was supposed to be the next-in-line in seniority. But heck, he should have spent some time learning English! Mr D, being truly worried about the age of the receivables on our book that would become increasingly dubious as days go by, pushed us to shoot for a Singapore listing where he feel, with his broad relationship will help a smooth IPO. This time round, my older colleagues obliged grudgingly. So we quickly filed an application to list in Singapore. It proceeded relatively smoothly and we went through an initial hearing very quickly. The market was in relatively stable conditions and we felt we could get the IPO proceeds quickly at the turn of the year. With lot of money, like Mr D’s famous words, a fake company can become real……. To be fair, ours was not really a fake company. We were just doing what the Chinese proverb describes: Accelerating the growth of the seedling by pulling it up a little everyday…… To our surprise, we got a letter very soon from the stock exchange questioning us the reason for the failure to disclose to them we had applied to the Hong Kong Stock Exchange earlier. They asked whether we had been rejected previously and on what ground we had been rejected. Just as we wonder how they found out so quickly since one could safely assume due to competitive relationship, these exchanges should not be talking to each other on micro matters like this, Mr D came storming in over-night. “Someone wrote a poison letter to the stock exchange”, so he explained. “Someone who knows the situation very well and who is not very happy with the whole thing”, he concluded. We were fortunate, he went on to exclaim, as he felt that given the Hong Kong Stock Exchange never really rejected our application, he could still salvage the situation using his relationship and influence. While there was no hard evidence, we nevertheless took the precaution of asking for the early retirement of the senior colleague who was passed over for the post of CEO as we suspected him to be the whistle-blower. We made sure he was well compensated in monetary terms as we thought that would sooth his anger, with promises to allocate more of the shares to him so that he would share our desire to see a successful IPO. Then we went on to reply to the stock exchange disclaiming the fact that we were previously rejected, citing our need to access capital markets fast as ours business was expanding rapidly. Hong Kong was just going to be too long a wait for us.

On the other hand, Mr D worked his network and “club of friends” to sooth the nerves of the exchange officials, who were working hard to promote Singapore as the “second board for China” The launch of “second board of China in Shenzhen” hit a snag when the National Peoples’ Congress decided that the Chinese investment public was still too unsophisticated to handle investing in non-State-controlled enterprises that even the Chinese government may not be able to police effectively. So after 3 month, we were informed that we manage to secure the final hearing. Mr D and some young lawyers and accountants spent a few days preparing me to handle the questions “correctly”. I saw the signs of satisfaction on the faces of the officials during the hearing. One of them even went on to comment on the fluency of my English…… Mr D was right again. My Chairman could have fumbled and rumbled on just like any other Chinese CEO during such occasions. They were just the hardworking mulls that built the foundation of the Chinese’s manufacturing might. I belong to the generation that would take the company to soar higher as we understand and speak the language of high-finance, in English! The battle to IPO was hard won. We got listed in 2004 and to our pleasant surprise, some of our customers came back to pay down the receivables and asked for more of our new chemical fibres. By now, China has become the “factory of the World” that churned out all kinds of consumer and industrial products so cheaply that the Americans and the Europeans were so addicted to. The stock markets and physical property markets in the world were becoming buoyant and everyone was beginning to feel wealthy and began to spend more. Our new fibre products found more commercial uses and we bought more machines using the IPO proceeds to produce more products to cater to the booming demand.

Again Mr D was right. Pour more cash into the business and you will get a real company………just like the pig-farmers l! isted on the stock exchange…….as he put it. Sensing potential to make a lot of money out of the good performance of the company and the buoyant market conditions, Mr D descended into town one day and asked me out for a dinner. As usual, we headed to his favourite KTV after dinner. After a few drinks, he leaned over and whispered to me, “Hey, this is your chance to grow really big very fast. The IPO proceed was not enough to fund your growth. Now that we are listed, we can place more shares out to raise more money to accelerate the business expansion to capture more customers before the competitors in China could replicate our capabilities, which always happen in every industry and business in China.” I was reluctant to agree to help sell the idea to my old! er colleagues as their shares were still in lock-up period and I imagined they would hate to see any dilution of their interests further at this juncture. Mr D went on, “I really needed your help as I need to get the shares placed out to some of those who helped us through the difficult times just not too long ago. We need to let them make some money as we are entering a bull market soon. In any case, the issuance of more new shares will give us more power to cement your position as the number one man in your company as we all support you rather than your older colleagues.” As usual, we kind of half forced the issue through the board with my older colleagues grudgingly approved some kind of convertible issue to assuage their fear that the new institutional investor would not be able to sell before they were allowed to.

In Mr D’s effort to consolidate his hold of the board further, a new director from the institutional investor group was appointed to the board. I had known him earlier as one of those that visited our plant before the IPO, when Mr D was just beginning to restructure the company shareholding where this new director was once introduced to me as an “angel” investor. Apparently, they were good friends that “make money together”. By 2005, the Chinese economy had entered into another “boom era” and our business was literally flying, just like any other businesses in China. Profit margins were good while sales expanded quickly, and our share prices rose more than 3 to 4 times from the IPO price. Many of older colleagues sold their shares and retired happily into the sunset in 2006, only to regret to see the shares they sold almost doubled again in 2007. Being the new helmsman, I could not easily sell my shares as it would have been construed as management not having confidence in the business. By then, Mr D had become one of the richest men in Singapore. Leveraging on his experience and the capital he accumulated from earlier successful IPOs he conducted, where in some case he made more than 50 times his capital, he exploited his new reputation as the “preferred deal-maker in Singapore” to the maximum. His “club” became increasingly larger as many people with money and “influence” joined the “club” to participate in this unprecedented “Chinese feast”. He doled out hot IPO share allocation through investment banks to repay old favour and to cultivate new relationship. Success begets success and money begets money. It all seemed so easy and so natural. Everyone got what they wanted. The Chinese companies got their money to expand their business (which at a later stage, no one is really sure which company really had any business to start with), the entrepreneurs were handsomely rewarded for the risks they undertook, the deal makers got their fees, the angels made their killings, the bankers collected their fees and dished out new loans, the lawyers and accountants recruited more young graduates to cope with the record work volume, the stock exchange got their “new mandate as the second board of the Chinese companies”, the investors got their hot-and-sizzling China concept stocks and above all, the rich and the influential members of the “invisible clubs” were all happily enriching their own pockets……

The reason why Mr D was successful, I realised, was that he always try to help the people who helped him in one way or another to become richer. Despite the fact that I could not sell my shares, I got the help of one of his banker friends to obtain some financing by securing my stake in the company to join in the biggest “Chinese feast in Singapore”. Just like all the Chinese entrepreneurs Mr D helped, I became one of his “angel investors”, taking stakes in promising new companies through his vehicles, got allocated hot IPO shares and reaped substantial gains within short span of time. I too, was becoming not only asset, but also cash rich. I took advantage of the Singapore immigration rule and got myself a per! manent resident by purchasing a property in Singapore. I wanted my son to study in the English school in Singapore and grow up as part of the establishment there. In any case, I would be able to help him join the “club” and he will be taken care of the rest of his life.

As for Mr D, he was purchasing properties in the form of “tracts of land” as he moved to diversify his assets from stock holdings to land holdings, with a sight to become a serious property developer. The Singapore property market was getting sizzling hot by the middle of 2007 and it seemed nothing could go wrong, particularly when 2 casinos were being constructed in an otherwise very conservative society. For myself, Mr D was going to be my role model. I went on to fund entrepreneurs and Chinese companies directly, hoping one day to bring these companies to someone like Mr D, and make more than the Singaporean deal-maker, at least equal…….. Oh, I forgot to mention that the Chinese local stock market went through the roof as well. To take advantage of this, I needed no advice from Mr D. My friends in the local banks helped me secure the capital easily just like what they did for thousands of state-owned enterprise officials. They took the company’s cash as “invisible lien” to lend money to the managers of these companies to punt in the stock markets. The profits of such stock market speculation go directly into the pocket of the managers.

However, only in hindsight after the stock market collapse at the end of 2007 that it became obvious a lot of Chinese companies’ cash in the bank vanished into thin-air alongside the stock market bubbles. Our worlds began to unravel at the end of the third quarter of 2007. By then, the Sub-prime Crisis, as we knew it now, had hit the U.S. economy. We were still busy feasting in the spoilt of the capital market excesses, unaware of the impacts of such a crisis that originated from the housing bubbles in a country so far away. We were blind-sighted by the ease of making money from stock markets and at the peak of the markets in the middle of 2007, we all felt like the “masters of the universe”.

The first sign of trouble amongst the Singapore listed Chinese companies appeared when the share price of a Chinese steel company got sold off aggressively. In good times amidst a vibrant economy, this company presented to the investing community a story of their ability to turn in good profit margins by buying hot-rolled steel coils, coating them in zinc and sell them to car and consumer durable makers. One analyst, whom everyone ignored when the stock prices were rocketing, did question its business model as firstly, such production method is highly inefficient as most modern steel mills produce zinc-coated plates in one continuous process, and secondly, the investing world also knew that the prices of hot-rolled coils became excessively expensive as there was a preponderance of such downstream ! processing plants who got squeezed by the few integrated steel giants who have the capability to smelt iron-ore. Then there was the rumour of the company being privatised by a foreign steel giant seeking easy entry into the China market and its stock prices shot up before the trading of this steel company was suspended one day.

Rumour had it that it had been reporting fake profits, an official report of which the investing community is still awaiting after a few months. It was so obvious an insider job to cash out their position to the retail investors and apparently, the company management was not contactable anymore! By the second half of 2008, I believed many Chinese company CEOs were having tough times struggling to keep their business afloat amidst the most serious and swift crisis in memory as the credit situations around the world got frozen up. Worst, many of us were facing more serious issues in our personal finances. All our investments in stock and property markets were plunging in values amidst the so-called sub-prime crisis. Worse, we could not sell our stocks and properties as the transaction volume of these investments just vanished quickly together with the confidence of the investors globally.

While we busy feasted in the spoilt of the capital market excesses over the last 2 years, we did not realise that we were piling on quite a fair bit of leverages as we secured our investments for more bank loans to attempt to reap more profits, when it all seemed so easy. We never thought we could have any problem of repaying any of our borrowing as we were sitting on a lot of gains on our investment holdings. There was only one easy way out for all the Chinese company CEOs and that was to dip into the honey jugs. We all understood the importance of having our closest allies to be the finance managers of our companies so that any small “problems” could always be ironed out. In this case, I just “borrowed” some cash from the company accounts to fill some of the “margin calls” from the banks outside of China, which financed my “investments” in the stocks listed on Singapore Stock Exchange, as these foreign banks were ruthless in coming to seize the underlying security when the “margin calls” were not met. In some cases, I just pledged more of my personal assets to the foreign banks. I was becoming very stressed by all these happening and was not sleeping well.

Mr D was not having a good time either. He too was suffering from exactly the same problems as we were just emulating his investment styles and leveraging activities. I heard of incidents where he turned to some of other more cash-rich companies that he invested in to “borrow” some cash to bridge through some “margin calls”. He sold down quite a fair bit of his investment holdings to some “friendly hands” in a series of stock placements. At this moment, the goodwill and friendship he built over the years came to his rescue in these moments of “illiquidity” as the market transaction volume just dried up almost completely. However, the market prices of the stock holdings we used to secure our financing continued to drop by the days. Some of our friends and fellow “angels” were selling their holdings……..and may just be in the same kinds of troubles as well. No one trus! ted each others at moments like these. Those that were selling their investments would not pre-warn their “fellow investors” as everyone would rush to sell at the same time! It was a time where everyone was for himself! My anguish did not escape the attention of the “director” on our board that Mr D posted in earlier. He flew over one day and was visibly concerned about the situation of my finances and of course, more importantly, that of the company. He sensed troubles as he knew that I too, had quite a fair bit of personal investments that were vanishing into the thin air in values.

By now, at the end of 2008, I was becoming desperate. Our company was going into the “audit season” and obviously, there was a large cash deficit that we would not be able to explain to the auditor. In the past, we could have just “arranged” for some cash to be credited into the bank account for a brief period to satisfy the auditors’ check. However, there was no such “temporary cash” to be found at any price as the sub-prime crisis had now developed into a full blown credit-crisis around the world. China was not spared in the process. With no where to turn to and the audit dateline closing in, I took the risks to “brief” the director of the true situation and asked for his help. I was surprised that he was not shocked by my confession. He had probably guessed it! In any case, the director asked me to remain calm while he would consult Mr D to seek some kinds of new financing to help bridge this difficult period. He asked that everything remained confidential as the last thing we wanted the world to know was the “missing cash” in the company accounts. H told me that quite a number of the S-chip CEOs were on the same boat and some of the “funds” that used to backed their IPOs have been able to extend some credit directly to them ease the pressure from the foreign banks, secured by again, stock holdings of the CEOs. Little did he know that my assets had almost been entirely secured by all kinds of creditors already!

Then the irreparable damage struck. I had borrowed some money from the local Chinese banks to punt in the local stock markets. The arrangement was such that I had to return such cash to the Chinese banks at the end of the year because they too, were subjected to annual audit. I had carefully maintained sufficient cash in our company accounts, which served as the “collateral to the conscience” of my friends in the Chinese banks. As I began to use them to fund the “margin calls” of the foreign banks and the amounts got further depleted by operation losses of the company amidst the worst economic crisis the world was now facing, my “friends” in the local Chinese banks were not going to take a chance on their own fate. They were definitely not “friends in need”. They simply deduct the amount I owed personally from our company accounts two days before their auditors came in, w! hich was of course, a few days before our company auditors came in. The rest was history……………….

The auditor, which was an international firm, was not going to take a chance with their reputation. They formally informed our board of directors in early 2009. In other words, they were warning the board that the financial statements they were going to publish would be “disastrous” and could cause a serious enquiry by the regulators. I think some insiders proceeded to sell some of their shares before any official announcements were made but most of us were warned not to do anything with our holdings as that would be considered “insider trading”. Of course, all my older colleagues and company directors hated me as a consequence. I was asked to absent myself from all their meetings as they attempted to come up with a solution before the mandated result announcement date stipulated by the Stock Exchange. I was very scared. I had no one to turn to as even Mr D had stopped answering my phone calls. Everyone was trying to distance himself from me and it became obvious that I was going to be the “scapegoat”.

To protect myself, I seek the advice of some lawyers in China who in turn, consulted their friends in Singapore. To my relief, I was advised that should I be found guilty in the Singapore courts for misappropriating company assets, there was no established bilateral treaty as yet for Singapore court to extradite me from China. The China Securities Regulatory Commission, the securities regulator in China, had never once recognised their responsibility to regulate the S-chip companies listed in Singapore. In fact, the Hong Kong Stock Exchange had faced similar issues for decades in their attempt to regulate the P-chips, which were Chinese private enterprises listed on Hong Kong Stock Exchange, to no avail. In other words, as long as I refrained from stepping my feet on Singapore soil, nothing could be done to me. In any case, I thought given the hatred I faced from all my older colleagues and friends in the hometown, I should be taking some long overdue holidays. I relocate my family to a Chinese seaside town.

Although I was now an ordinary citizen, I was glad that my wife kept quite a far bit of the money I gave her along the way and that should be enough to last us a life time, at least in China. Through internet, I came to know that the company finally disclosed the incident to the Stock Exchange and the stock was suspended. They appointed an investigator but I was no where to be found. So it would be interesting on how the story could turn out post the investigation report. In fact, a number of S-chips suffered from the same problems and were suspended from trading soon after us. Inevitably, there were cases of over-stated revenues, fathom receivables, missing cash, over-leveraged financial positions of the founding entrepreneur who mortgaged away their own stocks, as well as outright manipulation of stock prices. In many cases, I suspected the irregularities had begun right from the very beginning, before the companies were even listed. Many were not real companies at the first place. My friends in the know told me that a few more had been discovered as suffering from “missing cash” and jokingly commented that the Exchange had to arrange for a smooth sequence of announcements just like the way they schedule result announcements of listed companies. With all these irregularities exposed and more promised to appear, the stock prices of all S-chips have literally collapsed. All my friends and their “club members” must have suffered tremendous losses. Some dealmakers and their syndicate members apparently were facing margin calls on daily basis and some even declared themselves bankrupt. It must have been a very trying period for everyone. However, I did not seem to have much sympathy to all these people. I witnessed how some of them became filthily rich in a short span of time without having to work hard, while other enjoyed a good ride in fortune just because they (or their friends or relatives) were in position of influence.

I was the only one that would be made a “scapegoat” and had to live a life of “exile”, while these guys could still just lick their wounds secretively and continued on with their life. I do not sym! pathize those institutional investors who lost their money as if they did, they were simply either incompetent or someone had benefited personally along the way in having committed their funds’ money in such investments. Curiously, I wonder who will speak on behalf of all the many ordinary people in Singapore who came to believe the investment potential of these S-chip companies after all the beautiful “packaging” the dealmakers and entrepreneurs wrapped around them, and went on to invest their life savings in the S-chips, only to find out one day that all these were worthless! So when dust finally settles one day, we shall all look back and evaluate what had gone wrong and who are to be blamed. I am sure all fingers will be pointing at the Chinese entrepreneurs such as myself, who are usually labelled as “greedy and unscrupulous”.

There is a ring of truth to that accusation and I admit I am guilty. But how about those dealmakers, who taught us how to cook the books? How about those angels, who hid their identities behind some dealmakers and exerted influences to assist them to succeed in their schemes? How about those institutional investors who trifled with the money entrusted to them? How about those intermediaries and professionals who were not vigilant enough to protect the interest of the investing public? I would like to end with a comparison. The Ming Dynasty collapsed only after the General (Wu San Gui) they sent to defend the border against the Manchurians opened the gate voluntarily to allow the Manchurian’s army to come into the Great Wall. General Wu did that probably out of a promise to be made a king later on and be endowed tremendous amount of riches by the Manchurians. Of course, the historians would like to add that he also needed the help of the Manchurians to defeat another general that had taken his favourite concubine. In short, the thieves and robbers are only usually allowed in by the insiders……….

If you have read the story till this part, I am sure you are either a victim or someone who is deeply interested in the development of the S-chips going forward. Please help to forward this email to any many such interested parties as possible. We need to put an end to all these irregularities lest more ordinary people on the street suffer unnecessary losses. In the process, you will help me to partially clear my name…… For I am not the only one to be blamed……………..

Note: 1. Not everything is true in this story that I have just presented in order to protect some friends that still remain friends. In particular, the story before 1995 was inserted in only to give you a perspective of the difficulties that most Chinese entrepreneurs went through, and how they eventually all came to resent the ease and ruthless manner in which people like Mr D made great fortunes leveraging off their hard work.

2. At the same time, I sincerely hope that the investigation report that was pending in the case of my company comes out being at least “fair” to me. Otherwise, the more “real truths” will follow in subsequent emails……… hahahaha, the power of internet……..

Additional reporting: Goh Eng Yeow on Straits Times

http://www.martinlee.sg/confession-of-an-s-chip-ceo/

http://singapore-ipos.blogspot.com/2009/04/confessions-of-s-chip-ceo.html

Doing business in China ....... I

2011-12-20T07:18:00.012+08:00

I have been posting a series of my thoughts on topics of China for a while. I have been pressured to grow our presence there because growth else where muted. Does that means China is immune from the on-going in the Europe? If the world is slowing down, how can you grow? The answer is the cake may be getting smaller however the opportunity is still there. Everyone, I mean literally everyone, flags from the US, Taiwan, Japan, South East Asia countries like Singapore, Malaysia, Thailand, etc are flying on the companies poles. The reduced cake is still larger than anywhere in the world. So, it's a question of how can you win market share in a slower growth environment.

Doing business in China can be difficult. Having raised in a conservative Chinese background helps but is still difficult. One of the difficult concepts for a westerner to understand is guanxi. At the surface, it sounds like something like a brotherhood bond. It may sound so noble and thinking of these people are so nice but at the business level, it's much deeper than that. A lot of people understand guanxi means reciprocal, giving face, not offending them, pleasing them but ultimately means money or help them to rise up in power.

The Chinese government is portraying an image that they are fighting very hard on corruptions. Yes, I believe they are but the followers may not. They have been inventing creative ways. I was told that people who buy Maotai usually won't drink it, and people who drink Maotai usually don't have to buy it. Maotai is like gold. It's a currency, they can resell it and turn Maotai into cash.

I thought it was a joke, when I goggled this, this is what I found.

This year so far we have seen eight rises in the price of Maotai. The potent Chinese liquor now costs four times what it did five years ago.

According to the overjoyed manufacturers and the press, the rocketing price, fueled by a booming demand experienced by no other commodity in the world, is just another manifestation of China's booming economy. But surveys show that only 10 of every 100 smokers of Zhonghua brand cigarettes buy the cigarettes they smoke, and only 1 in 100 drinkers of Maotai pay for their own drinks.

Liquor culture is an essential part of traditional Chinese civilization. In Chinese, the expression for government "review and approval" sounds very similar to "cigarettes and liquor", and in reality approval often requires the giving of cigarettes and liquor.

In other words, by bribing officials with cigarettes and liquor, one can avoid troublesome bureaucratic formalities and obtain approvals and permits with ease and speed. The popular Chinese sayings "no cigarettes and liquor, no approval or permit", and "buyers of Maotai don't drink it, drinkers of Maotai don't buy it", lay bare the hidden rules for dealing with government officials.

Nowadays an increasing number of officials puff only on Zhonghua and nip nothing but Maotai. It's not uncommon for officials at municipal and county levels to keep a store of cartons of Maotai at home, which, one cannot fail to figure out, are gifts from people who have approached them for help. As to how much Maotai they have consumed on public money, we will never know.

It's said that every year the mayors of many mid-sized cities assign their most trusted subordinates to travel to the Maotai distillery to source precious liquor, as it is an indispensible drink at banquets staged for important guests. The task is glorious but arduous, as it is neither easy to secure the amount required, nor to ascertain that every bottle is genuine. For this task, funds are not an issue at all. With their best efforts, some manage to secure 2 tons or 4000 bottles for their cities, but that is far from enough. On average, a typical municipal government holds 5-10 banquets every day of the year, and at each such banquet, 3-5 bottles of Maotai are drunk.

Since liberation, Maotai has been the designated liquor for state banquets. But in line with China's reform and opening up, it has also become the liquor of choice at banquets organized by provinces, cities, counties, towns and even villages. For officials to treat their guests, toady to the higher-ups, favor their subordinates and socialize, Maotai is absolutely indispensible.

It is common office gossip that a lack of capacity for liquor is equivalent to a lack of capacity for work. Therefore, in order to demonstrate their capacity, some officials drill themselves to acquire the capacity to pour two bottles of 53 percent alcohol Maotai down their throats at one sitting without getting drunk. Some of them become so addicted that they don't feel themselves if, for some reason, they don't get their daily fix.

The leading group of a city usually comprises 10 people including the party secretary, the mayor and vice mayors. For them, 4000 bottles are far from enough. As a result, the number one man usually assigns an aide to manage the precious store of Maotai and ensure that his demands take precedence over those of the other leaders.

At a Party meeting the number one man might extend some words of consolation to his subordinates: "Comrades, it's not that I set out to abuse my position to monopolize the Maotai. It's just that the supply is too low. Consider the annual supply of 25000 tons a year, equivalent to just half a billion bottles. How can that meet the rising demand from all over China. And our buyers are below par. Once again they have failed to lay their hands on enough."

Our army officers have a special fondness for Maotai liquor, reflected in the oft-told tale of former premier Zhou Enlai engaging in a drinking contest with General Xu Shiyou.

For a civilian, to be able to drink a whole bottle (or half a liter) of Maotai at dinner is something to boast about. But many army officers are not satisfied with drinking only one bottle, which cannot fully demonstrate their heroic mettle. Also, they disdain to drink in the same manner as civilian officials. Consequently, Maotai liquor has begun to appear in liter bottles, produced specially for the enjoyment of our army officers. As to what proportion of our military expenditure is actually spent on drinking Maotai，nobody has the guts to try to find out, as it is undoubtedly a military secret.

People may say that I am out of date to regard the consumption of Maotai as the epitome of corruption in today's China. Though high, the price of Maotai has not yet gone above 1,000 yuan a bottle, and even the strongest drinker can drink no more than two bottles during one meal. Now, we have entered the age of ice liquor, of which high-end brands can cost 1,500 yuan a bottle. A person with a good capacity for drink can consume 8-10 bottles during one meal.

Friends, don't be shocked by this, as the era of consumption of Lafite is approaching. This well-known wine is made in France, and costs about 20,000 yuan a bottle. A capable drinker can drain 3-5 bottles at one sitting！

It sounds absolutely inscrutable. But the point is who the buyers of these liquors are. If they are owners of private enterprises, it does not matter too much, as all that is lost is some state assets to which we ordinary people have no access at all. However, if they are government officials or army officers, the tax payers of China can do nothing but lament, as what is wasted is their hard-earned tax money.

Mr. Chunyu Jinzhang, president of a well-known stationary company in China, has been working as an amateur teacher of English for over 30 years and was the first man in China to promote the Queen's English.

http://www.china.org.cn/opinion/2010-11/03/content_21266688_2.htm

China watch update

2011-12-19T07:28:00.007+08:00

On this trip to China, people I met just like the weather -- bitter cold. They turned cautious.

Airports I went pretty much like my two months ago visit, almost empty on my way in and some life on my way out. Some still do a little bit of year end travelling but the way they dressed -- these are people who can afford to throw money at any economic conditions.

Housing was still a big topic. Stock market was still a huge topic. But not in bullish tones. These people did not think they are in the bargain level. Chinese are unique when come to anchoring, they don't anchor at the top but they anchor at the previous bottoms. If everyone waits for a bottom, it is has some way, some time, to go.

Copies of China Daily delivered to my rooms daily without fail. One headline had my attention.

http://www.chinadaily.com.cn/china/2011-12/16/content_14273617.htm

BEIJING - Foreign direct investment (FDI) fell almost 10 percent last month from a year earlier, the first drop in 28 months, as Vice-Premier Li Keqiang called for a boost to domestic consumption on Thursday.

Amid the "grim and complicated" global outlook, China needs to strengthen market capacity and growth by encouraging private investment, increasing investment in affordable housing projects and accelerating urbanization, Li said.

This update is rather short. I'm badly lagging behind many of my duties. Just done shopping for coming school re-open. The school uniforms are getting very expensive. I don't think I will do more shopping for coming Christmas and New Year despite of many offers have been dangled in front of me. Just don't feel like throwing money on stuffs I don't need. I just hope for a quiet and restful holidays. I also hope to spend some time to think about 2012 -- it's certainly not a year of Four Horsemen calling like in the movie but I certainly expect to see more volatility ahead.

Watch China

2011-12-14T06:40:00.003+08:00

I've been watching the A Share Index for months. It was hitting a new low yesterday. That made me nervous. I was undecided whether to use a dramatic phrase like the last bolt on the world’s engine growth is about to give way. This is our last hope. If this last engine is giving up hope, our hope for some global economic growth will be dashed. Growth will gravitate to center. Pretty close to zero.

I will be out of town for a few days on a business trip, to China.

A Time for Everything

2011-12-12T07:32:00.005+08:00

1 There is a time for everything,
and a season for every activity under the heavens:

2 a time to be born and a time to die,
a time to plant and a time to uproot,

3 a time to kill and a time to heal,
a time to tear down and a time to build,

4 a time to weep and a time to laugh,
a time to mourn and a time to dance,

5 a time to scatter stones and a time to gather them,
a time to embrace and a time to refrain from embracing,

6 a time to search and a time to give up,
a time to keep and a time to throw away,

7 a time to tear and a time to mend,
a time to be silent and a time to speak,

8 a time to love and a time to hate,
a time for war and a time for peace.

Ecclesiastes 3

My last entry received one of the highest hits. I normally get this kind of hits when I write about companies, actionable information so to speak. The amount of time visitors spent did not decrease either. What does that tell us?

A couple of things I conjecture:

1. Our lives are not define by a few hundred thousands, millions or even billions Ringgit. We are not things but make up of spirit, mind and body. Missing one of them is called zombies -- walking dead men.

2. Many of us have made a lot of promises that we break it a thousand times. Promises to spend time with love one, to walk in a park, to feel the breeze, or what ever that is good for spirit, mind and body. We can be a man or lady of honor when come to business dealings, you make good of every promise you make but you fail to make good on promises to yourself, wife/husband, parents, lover or kids, why???

3. We are fear of death. We hope this will never happen to us. I am no insurance sales man or a will writer. Betting against certain risks are not worth it.

4. You identified with what I wrote, the camp that we are in. Demanding multinational companies that put you in a circle cage, forcing you to run in a rat race. We don't have to quit. We just have to learn know when to jump out from the cage and when to jump back in.

We have been conditioned that every stimulus follows by a response in classic Palov's theory. Somebody has discover that there is a space between stimulus and response. That space is called C-H-O-I-C-E. You have a complete freedom to chose. You have a choice not to get sad, not to get angry, not to feel or to be happy, to be compassionate or to feel.

If our brains are big enough to plan for multi-million perhaps multi-billion projects with huge success, why are we not smart enough to plan to for a few hours a week to refresh our mind, body and soul?

5. Money is not everything but everything is money. I don't disagree with that but there is

A TIME FOR EVERYTHING.

Our number One wealth: Health

2011-12-09T08:22:00.006+08:00

Two to three persons I know died of heart attack. The most recent one was yesterday. He died of heart attack, one day after his daughter wedding in overseas. He was in his late fifties. A few years ago, a husband of a person that I know suddenly collapsed in a shopping mall. [He was] in his early thirties. He did not make a will, left my friend scrambling because his assets were frozen. I can’t write much more in details but I think you can imagine the rest of the plots. About a year ago, a young and bright engineer that I know died of heart attack while playing badminton with his friends.

I was supposed to take a break but sad feelings creeping in driving me to reach out my keyboard slowly to write something as a reminder. Not a reminder perhaps, to reflect may be, a therapy may be, aahhh……whatever…….no justification needed.

As an investor, we are quite ruthless demanding this company and that company to deliver results. We demand them to beat quarterly results years after years. If there is anything that we don’t like to hear, we dump shares. We rant. We ridiculed the CEO. Sometimes, we get what we want, a tough, inspiring, charismatic leader will show up……we pay them in million(s). They drive. People working behind those high performance organizations for whatever reasons, in the name of challenging the mission impossible, love for money, taking care of stomachs, etc……they labour harder than those slaves serving Pharaoh. Lots of companies set up nice gyms but soon you see dust and rust. Beer belly and cellulite. They design nice landscape but they get to enjoy it as fast they pass by to and fro their parking lots or maybe they were not even looking because their panda eyes were fixed on the road to think of something.

Shareholder is the king, I was once told, even though I am a small fly. Everyone needs to deliver. If you can’t stand the heat; get the hell out of the kitchen. Everybody is a kiasu-kia(sons/daughters of kiasu). We can lecture them/ourselves a thousand times -- live a balanced life but……Always but. The fear of being left behind is so strong. You don’t like to be labelled as bottom 20s performers. There is no time to think when you are spiralling in a whirlpool.

You swear to yourself this is the one last Italian job that are going to do. Buy a piece of land. Build a humble house. Stop squeezing your brains. Stop pumping up your testosterone level -- to fight like a man. Just you, your love ones, your pet. Nice wish but………….the last job????

This entry is dedicated to rest of us who work like shit, spinning in a whirlpool hoping to make our shareholders richer, customers happy and a hell for our competitors. When we earn enough, learn to lose, learn to live. When we don’t earn enough, pray one day your CEO will be willing to take a lower pay and learn to share…….If our wish does not come true, just a RM 50 wreath flowers…..you are our greatest asset, we’re going to miss you. Signed. Your loving CEO and Chairman.

Myth of General Elections and Stock Market

2011-12-08T08:27:00.004+08:00

The general belief among the

uncle--untie--abang--adik--kakak--punters--investors is

The Stock Market Will Go Up because the government is pumping in money.

When I went back to the last three elections, the data says otherwise. The government is generally wanting to call for a GE after the market peaked out from a bottom recovery.

In 1999, one year after the big wash of 1997/1998 financial crisis. GE was called after some signs of market recovery exhaustion.

2004 GE was called after exhaustion of 2001 dot com bust recovery.

2008 was unique, Pak Lah was kind of unseated by Dr. M from behind the scene. He was lucky because the sub-prime was still brewing nicely. Najib got the shits.

Now we have European crisis and a slow down in China, I do not think the trend is going to be up anytime soon.

The last 3 - 6 months to GEs were generally on a down trend, NOT UP.

It's a bit of fortune telling this morning.

I will only be back to post on next Monday. Have a nice day/weekend ahead.

最佳拍檔

2011-12-07T12:17:00.005+08:00

You got to be at least 40 years old and above to remember this kind of movie. Some people are so funny that make you hold on to your stomach, laughing and rolling on the floor. Will try to go around to hunt for this series over the weekend. That means I will not be able write serious stuffs for a while.

My fears

2011-12-06T07:52:00.006+08:00

This is a continuation from what I wrote yesterday. I thought it will be good that I write with a bit more clarity so that I don't confuse anyone.

My greatest fear is people take my writing seriously, take action and lose money. If I come to know that, I will feel pretty bad.

The other fear is people mis-interpreted what I write and take the wrong action. Again, I will feel very bad. That could be due to either I have written too little or certain things are just too public to disclose or unintentional omissions, or too bullish or too bearish, or this and that. I don't mind to lose my own money because it's my money. But if it's other people money.....then I'll feel very bad. Putting a disclaimer that you should consult your investment advisor is merely covering my ass technically. A three years old kid would know that!

Having said that, I wish to tell you two things more explicitly:

1. My bearish view still stand and it is crystal clear that I have sold at the wrong time. Period. My fear is my readers take my timing mistake and imprint them into their unconscious mind......the bulls are in control forever. If I am right on the direction but wrong on my timing and my readers get caught at the wrong time, I will feel very bad.

2. Three things that I should tell you about TDM after I re-think about it.

One - There was a leadership change in TDM in 2008. I was not sure whether it was due to political pressure or some other issues. The fruits that the current management is enjoying probably due to the old management team's efforts. I was not too sure whether the old management was good in getting things done but probably reach its limit to bring the company to the next level, which is growth. If it's the latter, I will feel better.

Two - The current CEO made an aggressive target to achieve 20 MT/hectare in 2008. Obviously he missed his target and kept quiet about it. The acreage did not expand but the FFB fell in 2009 and 2010. That was the reason I have to estimate the yield for that 2 years. There is a small crack line in characters as I took an X-Ray on them again.

Three - I do not know who is Mr. Koon Yew Yin. I am aware of this person when a friend of mine send me an e-mail regarding his write up on the great Malaysia's brain drain. I published his writing on my blog a while back. From what I read he is a humble and simple man. He is one of the a few good men around. I do not wish to take advantage of his reputation of owning this stock to influence your opinion.

Turtle Portfolio Update - Dec '2011

2011-12-05T11:35:00.010+08:00

I keep reminding myself on two things

1. how to fall safely and
2. get back up gracefully.

My brain is probably weighs around 1,300 gms. Small isn't it? It's so small that I cannot afford to store less than 1 byte four-letter-word called: Q-U-I-T.

I was too conscious of my public performance, keep looking at scoreboard, causing me to keep missing my moves. I hope one day, everything in the world will just disappear - in complete silence. I'm completely free, nothing to fear. It's just me and my stage. Just moves, dance and dance and dance...............

TDM.....Fair is fair

2011-12-04T13:32:00.008+08:00

I think Badawi is a cleaner among the dirtiest shirts. The GLC transformation that he started in 2004 did bear some fruits. Some of the results were visible in 2007 and 2008. I believe it was too late for him because people ran of patience and could vote for anybody as long as it was not a blue colour. It was that desperate if you could recall. When Najib took over the ruling government after the aftermath, 'till today, I think hapak pun tadak nampak.

Don’t get me wrong. I’m not running a goodwill campaign for the present government but I felt that no matter who they are, when they did a good job, just give them the credit. Pak-lah did something and TDM is his witness today.

Don’t count on the present ruling government, they have good experience of running the country but their superlative corruption experience is also easily one of the top notches in the world. Net of that equals to going no where if not backward! I could recall one of Guan Eng’s speeches that sound something like this: yes we have no experience to run the country but neither have we had the experience to corrupt. Well said Guan Eng. Net of that equals to progress.

A clean officer who refused to participate in an en-mass graft sharing program will certainly be murdered brutally, so don’t count on the old system. We need an alternate new system. Don't expect the final product will look different if it's coming out from the same mold.

Back to money matters, TDM indeed is a very undervalued stock. This company started their journey to reform in 2004 under Badawi's GLC reformation initiative. The first thing that you may notice from the below table is --- their yields were below the industry efficient players which is around 20 MT/hectare.

The yields, as you can see, were certainly crawling upward after they put in more efforts to improve their productivity, replanting, better fertilizing program and etc.

Luck was on their side too, rising commodity price lifted the CPO price. When the twin-turbo(rising CPO price and rising FFB(due to productivity improvement)) is super-charging, any idiot also can make a conclusion that this is a no brainer stock to buy.

I believe Mr. Koon Yew Yin thinks this stock is so undervalued that he does not want to stir the market when he was accumulating. How do I know? I deduced this by looking at how he bought this stock. His public records revealed that he bought through 4 stock brokers. 4 brokers? Yes, using 4 brokers to accumulate speak volume of his convictions. No need to prove beyond reasonable doubt.

OSK 894,400 shares
TA 599,400 shares
HLG 593,000 shares
Maybank 445,800 shares

TDM has a plan to have 40,000 hectares presence in Indonesia. You can sense what they said will come true because they already acquired 25,000 hectares. And by 2014, these 25,000 hectares will be fully planted. If CPO prices stay between 2,500 - 3,000/MT, they can easily double their earnings in the next 7 - 10 years. TDM is currently managing 12 palm oil estates with about 33 k hectares planted.

Disclosure: None.

Denominator or numerator?

2011-12-03T08:23:00.007+08:00

The US jobless rate dropped to 8.6%. A big improvement especially the number stuck in the high level of 9%. The US market did not rocket. Muted, probably confused by the number. Employers did add 120 k jobs while the market expect to add 175k and think unemployment rate should remain at around 9%.

If the numerator did not grow fast enough then it must be the denominator that shrunk faster. How could that be, I mean employers cannot just blow up people. Did employers just let their workers retire?

The next subject: the strength of the US consumer. Marc Faber noted this

The American consumer went shopping but it’s not supported by income growth. If you look at the share of labor income or salary as a percent of GDP going down, what is happening is that people are again borrowing and diminishing their savings rate and I don’t think that is very sustainable. - in GuruFocus

Wow man, the recent generation of Americans are really serial debts addict!

Let me give you the visual. See that?

It's a beautiful Saturday morning. Don't let my bearish views spoil your day, I could be wrong. Please enjoy the rest of the weekend. Cheers man, lady too! :)

Interesting twist

2011-12-01T07:42:00.007+08:00

Got to be quick this morning.

The stories developing in the markets place is getting more and more entertaining, far more interesting than reading a thriller novel.

Whenever I see Central Bankers draw a line in the sand, they will get my attentions. The line that they drawn revealed something. It's almost like a bribe to vultures so that they can stop circling the dead bodies.

China Central Banker has been talking tough not to loosen its monetary policy but will tweak its fiscal policy. Guess what?

BEIJING -- The People's Bank of China, the country's central bank, said Wednesday it will lower banks' reserve requirement ratio (RRR) by 50 basis points for the first time in three years in order to replenish liquidity in the country's banking system as inflation eases.

The latest cut, effective on Dec 5, drops the RRR to 21 percent for large commercial banks and 17.5 percent for mid- and small-sized banks. An estimated 396 billion yuan ($62.38 billion) in capital will be released into the market.

The move signals that the government is set to stabilize economic growth after easing inflationary pressures, although it is not yet known if the change will bring about a full-on move toward a looser monetary policy, analysts said.

"The RRR cut is a signal for stabilizing growth, making the central bank's fine-tuning of the country's monetary policy more explicit," said Zhuang Jian, a senior economist with the Asia Development Bank

http://www.chinadaily.com.cn/china/2011-11/30/content_14192216.htm

Then we have Ben Bernanke announcing a coordinated efforts globally.

U.S. stocks advanced, driving the Dow Jones Industrial Average up the most since March 2009, after six central banks took action on Europe’s debt crisis by making it cheaper for lenders to borrow in dollars

http://www.bloomberg.com/news/2011-11-29/stock-futures-in-u-s-decline-after-bank-ratings-cut-by-standard-poor-s.html

Popping 490 points on the Dow does not concern me. Desperate central bankers are masking something that many of us do not want to hear --- the "bungee jump slow down", recession, liquidity crunch, unsustainable high borrowing costs, or whatever.

My best strategy is just like dealing with a kid. All you need is just sit there patiently and listen to a kid keeps on explaining himself 'till he runs out of story. He will tell you the truth eventually. Just don't punish them. The more you punish them the more they will lie.

It's now or much later.........

2011-11-30T07:37:00.013+08:00

I've been wanted to capture my thoughts on plantation stocks over the weekend but there have been a lot of interruptions......some baby snails were literally ruining my plants so I've to harden my heart to get rid of them with a loaded pesticide water gun. Hasta la vista, baby!

The sector(plantation index) had a huge run prior to sub-prime collapsed and the Humpty Dumpty had a great fall. All were not lost, the market managed to stick back the pieces(with some help of all king's horses, all king's men and some luck of course). Since then it had a very successful recovery. The sector appeared to have been topped out in the early of 2011 and trapped in the downtrend for last 10-11 months.

The CRB index appears to have a similar pattern. It has been on the downtrend as well since the beginning of the year and the Baltic index is clearly looks like a Vietnam veteran having bad dreams, screaming at nights.

A main competing commodity to palm oil, soya beans, got hammered in September. They said they worry about global growth. They might be right, for once, I agreed with these traders. Damn! did I just shake my hand with them?????

Back to our KLSE, our top guns, i.e. heavyweight like Sime Darby, IOI Corp and KLK have been getting expensive. The valuation has caught up with price pretty fast. There are some issues and worries with these stocks(a story to be told in another day). Those market cap stocks between RM $ 5 - 10 B are also getting expensive. The valuation gap in fact had almost been eliminated. A lot of stocks with less RM 1 B had their days, justice had been served -- the valuation is also appear to be rich too. There are 2-3 more stocks like TDM is waiting for a handsome prince to kiss them. Don't let me stay like a frog forever, she said with her beautify winky eyes. Kiss me please.

Dividend yields are not that generous, on the average of 3+%, are indications of prices had surged too much. Some are even worse - less than 2% - telling us players are willing to go after capital gains only.

A few of the undervalued stocks have only a window of about 6 months, it's now or much later. The logic drives behind this premise is CPO price can still be firm due to the lower harvesting yields caused by heavy rainy seasons. When all stocks slide under water slides, pumping adrenalin will not equal to making money.

Take care all my friends.

Has Toyota lost its mojo?

2011-11-29T11:40:00.012+08:00

What is mojo?

It's a noun. I know stupid. Be more serious.

It's something related to a magic charm when I looked up in Oxford dictionary.

Okay.

Has Toyota lost its mojo?

I would like to answer a question with a question. Why Toyotas' chiefs frequently shed tears?

http://youtu.be/OItBnWHjlFM

A doctor says it's got to do with biology.

Explain.

It's got to do with the level of testosterone.

How?

The higher the level of testosterone, the higher the level of aggression.

That makes sense, when the level of testosterone drops -- especially when they grow older -- they become more compassionate. Don't send them to kill a lion or else they........use your imagination to figure that out.

I see. When Toyota announced their withdrawal from F1, it's all about giving up something that they really passionate in exchange for something "bigger than my Alpha male ego" mission. It's painful you know. The future is not about something who can make a "beast" louder, stronger but about something is more friendly to our earth.

You mean there is a quiet revolution going on?

Yeah....check this out.

Can you feel the ice, not heat?

Driving L badge that starts at 168 k?

Yeah, it's very cool but you still have not answered my question.

Is it important?

Yeah.

Young man, young man. You don't like what you hear, don't you?

The young man had just turned into a classic stonewall. Muted.

All you care is UMW, isn't it young man?

Grin.

Drive carefully, don't flip like a turtle

2011-11-27T23:05:00.007+08:00

It's fun to watch these World Rally Championship(WRC) pros flipped their cars like turtles. Most of them are rarely hurt because those cars were equipped with roll cages. A normal car is not, a driver will not survive any crashes like those in the video. Please drive carefully, especially it's a raining season now. Like investing, most people tend to think their driving skill is above average. I know you are good but there are many factors are not within your control - cows, snakes(yes, I met them once), elephants, dogs, spilled oil, rocks, other people lost control, etc......Live to drive another day people. Take care.

Christina's World

2011-11-25T23:01:00.005+08:00

I love Andrew Wyeth's works. So much so that I was dreaming to buy one of his prints but my minister of finance stops me. He is one of the most celebrated American artists in the 20th century. His works were mostly contemporary realism, expressed in tempera and watercolor mediums. He has been referred as the people's painter because he painted mostly everyday's subjects around him, that kind of make an average Joe like me feels at ease.

One of the most famous piece is Chritina's world painted around 1948. I do not know what comes to your mind when you see this painting. Feminist would probably want to shoot him and me for promoting sexual objectification -- the curvy lady that you see. It's not what they think. They think we think women are weak and submissive, and an object of sexual pleasure. I do not wish to start a battle of sexes and I maintain that the world will be a wonderful world(less breakup or divorces) if a man behaves like a gentleman and a woman behaves like a lady, just like the old fashion way.

If you get to know the real story behind it, you probably will grab some tissues. Again, it's not what you think ............ you need it to wipe your tears.

Andrew Wyeth's world was shattered when his father met with an accident. His father was struck and killed at a railway crossing. My imagination could be too rich, I heard the rushing train, the scream and the smell of the blood. I felt my heart had just been pierced as I typed. The unspoken grief must be terrible. That was the turning point in his life at the age of 28. I felt it when I see the landscape was barren and his palettes was muted........the emptiness and tasteless world.

Something inspired him. He saw his neighbour Christina Olson sprawled on a dry field facing her house in a far distance. It broke my heart actually when I see her skinny hands. She suffered from an unknown disease, suspected to be polio, caused her unable to walk. Imagine that you were there, watching her crawling back to her house. It's a gigantic efforts. That was what inspired him. In his word, Christina "was limited physically but by no means spiritually." Wyeth further explained, "The challenge to me was to do justice to her extraordinary conquest of a life which most people would consider hopeless."

Added another link

2011-11-25T07:48:00.008+08:00

I sometimes wonder investors really care about Corporate Governance(CG). Our actions do not seem to match with our words. They will only care when they lose money. From an illiterate, they suddenly will dress up something like this

They suddenly can argue so eloquently that everybody will be hypnotized, nodding their heads, screaming yeah GUILTY, GUILTY and GUILTY -- condemn those son of the bitch to hell. They forgot one point, it takes two hands, not one, not two left and right fingers, to clap. Yes, it takes two hands to clap!

Everybody knows the risk of having many fucking partners will have high chances of contracting AIDS. When they fuck, they don't even put on a condom. Be smart-lah. When they finally contracted with AIDS, they will argue the society is at fault, religion institutions have collapsed, law enforcement is zero and the list will go on and on..........

Have you visited a mad house? If you have not, I suggest you do. It will give you the best investing lessons in your whole life. Those people will argue so logically that you will begin to doubt that whether you are crazy or they are crazy. The best part is everybody is at fault but not them.

My "friends", ask ourselves, do we really care about CG? My gut feelings tell me otherwise. Why?

A "friend" of ours spends hours of his free time to write about CG but it has less than 200 clicks a day. For such a good blog, I think he deserves better than that. It ought to be on the link of every financial blog out there.

My blog is not that popular, [I can't help him to spread the fire -- added 10.30 am] but at least I voice out. I wish him the best of luck. Keep charging, keep up the good work.

P.S. Don't ask why I suddenly put up Demi Moore today.

Happy Thanksgiving Day

2011-11-24T07:41:00.006+08:00

The US market will be closed tonight to celebrate Thanksgiving Day. It's a remembrance of the pilgrims rendered their thanksgiving to All Mighty God for his blessings. They were giving their whole-hearted thanksgiving to the Above for his guidance to see them through in the whole struggle and succeeded. But they remained humble, they did not pump up their fists, yeah I did it my way - unlike the Americans we see today. Instead they gathered men, women and children, probably have tears rolled down their cheeks, said it gratefully -- Thank You Lord.

I too want to thank you Lord for your mercy, kindness, blessing. I pray for other too that they will receive your love and kindness. Amen.

Market Commentatry

2011-11-23T13:17:00.003+08:00

You may have noticed that I have been writing a lot about individual stocks lately. That's a preparation to wait for opportunity to show up. I find that the market participants are still a little too optimistic. They have not gone more bearish. I ran a list of FBMKLCI 30 and found that 20/30 stocks are below 200-day MA and another 10 stocks are abover 200-day MA.

Stocks below 200 MA
1. Tenaga
2. Genting
3. KLK
4. MISC
5. IOI Corp
6. MHB
7. YTL
8. YTL Power
9. HLB
10. CIMB
11. PCHEM
12. PBBANK
13. PPB
14. UMW
15. SIME
16. Gamuda
17. RHB Cap
18. Maybank
19. MMCCorp
20. AMMB

Stocks above 200 MA
1. HLFG
2. GenM
3. PETGAS
4. Maxis
5. Digi
6. Axiata
7. BAT
8. PLUS
9. PETDAG
10. TM

Upon closer examination, I found a lot of people still believe that they can find some kind of safe heaven. I would like to see these holders to be really be shaken. Then only, I think there is enough fear in the market that qualifies as blood on the street.

A lot of people are making references or anchoring 2008/2009 crisis. I do not believe S & P will make 666 or KLCI goes down to 800+ points. But I do believe S & P 500 ought to go down to about 950 +/- 50 points or KLCI to be around 1,250 +/- 50 points in another 3 - 6 months time.

2008/2009 was about credit crisis. It was about the whole world went into Matrix frozen moment. Can you imagine real business cannot get credit? Ships were grounded because nobody can get a Letter of Credit(LC)??? That was because the world did not how deep the derivatives hole was. European hole is known but they are just playing chess with one another - calling each other bluff. They may go to the extend of "manufacture crisis". I believe if they continue to play that game, the market participants will ask them to fly k***(wanted to use stronger words but points already got through, no dramatic words needed!).

This time is about a slow down or a low grade recession. We just have to shake off a little bit of optimism and bulls ought to charge!

P.S. Got a nice day off today. Had a nice morning hike and I felt extremely good. I need get back in shape -- and I have a plan to get up to Mount Kinabalu. Will make public announcement once I feel I'm fit enough. Have a good day everyone.

Eat to live or live to eat?

2011-11-22T17:11:00.003+08:00

This entry is dedicated to kampong boys and girls.

My blog don’t talk a lot about foods because I’m kind of a guy who eats to live and not lives to eat. Given a choice, between going to a hawker center or a fine dining restaurant, I’ll choose hawker center anytime. It’s not about money or class but it’s about personal preference and a place that I can feel at ease — to be myself. It’s a place that nobody will give you satu macam kind of stares when you're screaming while making a bullish or bearish arguments, jeers or cheers for friends.

At times, I’m required to be completely civilized, a complete gentleman. I can’t really remember when my first time of doing fine dining was. All I remembered was my b**** shrunk by half. It was much more complicated than solving this equation

If 1/2x +1/2(1/2x + 1/2(1/2x +1/2(1/2x + ... = y,
then x = ?

No, perhaps it’s more difficult to solve a problem like how to prevent an European debts contagion. Or do I bet whether ECB will print infinite amount of money to bailout all the guys? Just kidding. :)

Back to the topic, I kept staring at the silverware. SOB, a fork is a fork, a spoon is a spoon, a glass is a glass but why so many????

Boy, I tell yea --- that dinner made me felt like trapped in an eternal hell.

I hope some of my young “friends” who read this blog may find this survivor tips handy in the future.

The general sequence is starter, main course and end with dessert.

That makes perfect sense, you will have to use your tools from farthest first for starter, slowly coming to inside for main course and end with desert. Hope this picture helps you.

Red wine or white wine? A wine is a wine but why ask me red or white. Most Asians will only care or heard so much about drinking red wine will help you to cut down their heart attack risks. Damn it, if we sit on our fat asses, red wine or coffee will not be able to save us.

I later found out it’s rather intuitive actually. Red meats like steak or lamb are heavier should match better with red wine which tastes heavier. As an Asian, I find that the smell of beef or lamb is stronger and red wine helps me during the meal. If I pair red wine with “lighter” food like seafood, cheese, fruits and etc…..it will overpower the food and just kill the taste. That’s why white wine works better.

Read more here if you want to know more about “civilized dining”. Good luck.

http://www.etiquettescholar.com/index.html

It's who you know, not what you know

2011-11-21T18:08:00.002+08:00

Guys, gals – it’s story telling time because the markets offer no good news. Please donate a dollar to your favorite charitable organization if you like my story. If you don’t like it, buy yourself half can of coca-cola to relax yourself. Half? Yeah, no kidding – inflation-mah.

I can’t recall exactly how I got into stock market. It was described to me as a very mystified place -- a place that makes a man richer in a very mysterious way, if you have got some gold. In my time, those men driving 280 can shout the loudest. All men will listen to them attentively. Just hang on to every words of these prosperous gods have to say. They all said, it’s all about who you know and not what you know. Who you know will make you richer. A word from who you know will make you 10 times richer. Stock price don’t fly. They rocket. It was that fast, no exaggerations. What you know will only make you rich spiritually but poor materially. Choose carefully, my son, happiness or one-pack stomach filled? So forget about being a book worm, go and rub shoulders.

Poor man cannot “play” in a stock market. All they can afford was playing imaginary numbers game, taking mental notes, counting “paper” gains. Father will tell his son, if I have bought this stock and that stock, we are already living in a bungalow, driving 280 and “rinse” our mouths with shark fins.

They can only dream that one day they can bump into someone who will invite them to their exclusive club. In my time, all we know was price. Newspaper was only stock quote that we can get. It’s hard to even see a stock price trend unless we plot it on a piece of graph paper. I never heard of such thing called research paper. I thought it was probably a piece of 41/2 x 3” pink paper of ampat-ekor betting paper from illegal operators that my grand parents or parents asked me to buy. Every stock is pretty much like that, somebody will pay you money when your number strikes.

Such was my faint memories about stock market many years ago. Come to think of it, it’s still pretty much the same today but only in slightly different forms.

Dutch Lady

2011-11-19T22:17:00.019+08:00

Until today, it remains as an unsolved mystery to me – why have I not bought this stock? I can keep piling justification upon justification until my reasoning breaks down. Enough of I know, I know, I should, I should….. Procrastination is a great thief of time.

I thought my conservatism worked against me. I thought I was worried that Dutch Lady’s sales growth will eventually slow down. I thought I was worried that PE was too high, etc. Upon reviewing my own writings, I found that I was my worst enemy, I was playing double standards, etc….. why was I sitting on dead money on Parkson for example – I was hanging on to the stock while earnings did not catch up fast enough with valuation. I finally told myself, enough is enough, if the industry dynamics is long term favorable and earning has caught up with valuation, just lock down the target and shoot!

One more point, I think I want to tweak my style a bit. I want to make it like writing letters to “friends” or write the way I’ve written in my diary rather than thinking of myself as an analyst or a preacher.

When I was looking at the stock way back in 2007 ~ 2008, the stock sold for 12 to 16 times PE. The stock was selling for 20 times PE in 2009 and 2010. It was clearly expensive in 2009 and 2010 and many other stocks were cheap. I did allocate some money in many other beaten down stocks. I was churning stocks during that period with around 60-70% return but Dutch Lady probably returned close to 100%. Ouch……why was I going the hard way? Why was I climbing the coconut trees top to pluck the fruits while I can sit back and relax -- let the monkeys to do the job??

The following is the EPS/PER history

2007/0.74/13X
2008/0.67/16X
2009/.944/19X
2010/.998/20X
2011/1.6(E)/14X

The earning jumped by 34% but the stock jumped by 135%, from 2007 to 2010. The last 2 year PE expansion has built in a lot of growth expectation. It was a no brainer to buy in 2007, still ok in 2008 but it was getting really expensive in 2009 and 2010. What about now?

The YTD EPS is RM 1.24, let's add another .36(latest Q3 ’11 result) to Q4 ‘11 and 2011 EPS will be roughly RM $ 1.6. The earning has caught up so much that the stock valuation is getting cheap again.

Given Malaysian lifestyle, I feel that the society will adopt more western style living as we get richer. Milk consumption is likely to go up in the future. Tell that your little boy/girl that he/she can get taller by drinking milk…..he/she will drink in barrels. Our per capita milk consumption is still low, the data is a bit outdated but it's the best I can find(2006). It's direction that I'm looking for.

I think the industry is not that fragmented. Since it’s a concentrated industry, the revenue will likely to go up if the overall industry is favorable. My daughter and I went around doing a bit of Sherlock Holmes’s work and we found that Nestle and Dutch Lady are pretty strong. If we buy Dutch Lay and Nestle, we are in a business to supply to almost to the whole country.

Supermarket and hypermarket operators play an important to nurture this industry. We can see Tesco, Carrefour, Jaya Jusco, Giant, the Store, etc are mushrooming. It has reached a tipping point for many Malaysia to expose to modern shopping and this will reach more and more people – beyond the city dwellers.

One of the things that worried me is the milk powder cost, it’s cyclical in nature. The cost has been going up after it bottomed out in 2009 and now is appearing to have peaked. We have been lucky that Ringgit was strong to offset some of the rising cost. However, if it goes the wrong way – weak ringgit, slow economy, rising milk powder cost – it can be negative catalysts sell off.

One of the more recent moves by new Dutch Lady’s management was to rationalize their product mix. They have been focusing on higher margin products and dropping the lower margin products. They did not give much details but I hope their higher margin products are not sensitive to economic conditions. That’s the reason why their 2011 financial results elevated to higher ground, both revenue and gross margin are expanding. I hope they can hang on, despite of a potential negative consumer sentiments ahead.

Disclosure: none

Hi

2011-11-19T08:50:00.003+08:00

This entry is going to be short.....just to say hi.

I realize that reading and writing blog has evolved to a new level. I started to blog with a simple idea .....transition my paper diary into a digital diary. A personal diary(paper) of course will enable us to brutally honest to express our inner most thoughts. A digital diary will be less detail because I'm still too conservative to do nude sun bath.

Now I've came to realize a "virtual" bond or "friendship" begins to develop. Whenever I open up my favourite blogs, the "un-updated" page will give me some kind of uneasy feeling...are our "friends" doing well? Has he or she been too busy lately? That's why I'll always try to let "them" know how long I will be away.

It's funny that we are more connected "digitally" than we originally thought.

Got to go now, tons of stuffs are waiting for me. Take care.

A weekend stock to write

2011-11-16T20:09:00.009+08:00

This stock drives me crazy. The nature of the business appears to defensive and do not think it will be affected by the European crisis. It has a lot of qualities that I like. The stock price is on a rising trend and beating KLCI flat. A rising trend without fundamental will not survive my 5 seconds test. It's an instinct that I developed over the years that I know it's a bullshit stock when I see one, in a matter of 5 seconds. And I don't waste more time on it. I have been following this stock for the last 5 years but have not made a single purchase. The reason main reason? The stock is always fully valued based on the current earnings. The stock that I'm talking about is Dutch Lady.

This cannot go on forever. I cannot allow hung jury. Over the weekend, I hope to put my thoughts in print, electronically of course, why I like this stock.

Buffett's inflection point?

2011-11-15T10:50:00.007+08:00

On the road again. One of the things that I enjoy traveling on Singapore airlines is this. Like a first time middle class traveller on the plane who would cast spells on those nice knife, fork and spoon -- magically dissapeared, I would cast sapu-spells on all the reading materials on the plane - the WSJ, the Financial Times, the Economist, the Reader Rigest, homes and gardens, etc. It's a good time to think about a lot of things. Some are trivial, some are serious one. One of the more serious one is this.

Is Warren Buffett travelling trajectory approaching an inflection point?

2002 - bought Petrol China
2008 - bought BYD
2009 - all in wager for America. bought Burlington
2009 -- written S & P derrivatives bets
2011 - Repurchased own company shares. Bought IBM, Intel shares

Over the last 10 years or so, he did not put in more money in financial sector except in preferred shares like Bank of America that more of less guarantee his return . My opinin is he is taking it as a fixed-income investment than anything else. Is that a sign of banking business is a difficult space to make money for a long time?

Over the last 10 years or so, he bought into China story. He invested stocks outside the US. But his also bullish on the long term prospect of the US economy. Does that means that our grandchildren are going to live better than we are? Improving emerging economies will certainly benefits the US? At some point of time, the US people are going to make things/stuffs that emerging economies: need? --- use? --- eat? He is also seems to be concerned about energy issue.

He bought back his own company shares. Are there any other reasons beyond the simple fact of his company is undervalued? Is that a sign of too much money chasing too little return?

And now he is going into tech area. My question is did he made the decision or he let his potential sucessors made the decisions? The same question is did he already let his potential successors made many decisions over the last ten years, or may be even longer? If yes is the answer, I believe Warren Buffett is truly a person that doesn't carry a calculator but a telescope. While most people are crunching numbers he is looking beyond the numbers -- far far away in the galaxy! You get to see what your potential sucessors in actions(and validate them?) while you are alive and not when you are dead?

A return to the age of innocence

2011-11-14T07:15:00.013+08:00

My adventure experience into e-book is proven to be good. The first thing I learned, I got to download an e-reader. e-Pub is a popular platform. Okay, that was the first thing I did, downloaded an Adobe Digital Editions at http://www.adobe.com/products/digitaleditions/

The next step was to hunt for a book. Amazon, Barnes and Nobles and etc. But then being new to this area, I did not want to pay before I was sure that this thing works. So, I went around search for free stuffs. No free lunches were proven to true, I hit into problems of virus after I downloaded free e-books from some of the free sites, read illegal download sites. Luckily it was not on my working notebook or else it's going to be embarrassing. Explaining I was trying to be frugal will not get a single sympathy vote.

After I cleaned up my mess, determined and not giving up, I stumbled into this site: http://www.booksonboard.com/index.php?BODY=under-five

Some of the books are really cheap but I think if we're willing to spend time shopping I think we can get even cheaper e-books. I downloaded The Adventure of Sherlock Holmes at free of charge, to kick start this adventure. The title Adventure attracted me because I was in the middle of an adventure then. I'm quarter way through the book now. The experience was good. So I decided to hunt for more free books. Then I found this site

Wow, there are 95 free books. http://mphonline.com/offers/free_ebooks.aspx

These books are what I called the return to the age of innocence. Yeah, it's kids' books. But my experience of drinking teaches me one or two things, we can drink the most exotic, most expensive stuffs in the world, at the end water taste the best. Pure and uncomplicated.

My thoughts on cigarette operators

2011-11-12T18:10:00.013+08:00

This is an amoral investment write up. If it bothers your conscience, please skip.

Tobacco industry is one the very controversial industries. Smoking can cause lung cancer and other related diseases. This sin industry is always targeted by the governments around the world on the premise it can kill people. However, this is also a big and profitable business. It’s almost a RM 10 billion industry in Malaysia. Whenever our government needs money, they will just go to these guys and shake the so called money trees.

There are several risks in investing in cigarette companies. If Malaysian government decided to get as tough as Singaporean government one of these days, it’s going to be a long day. In 1970, 42% of the Singapore’s men and 4.5% of its women smoked. Today, this number has shrunk to only 14%. The consolation is the players seem to be die-hard, Singapore still got double digits of people smoke. You may want to read this paper of what the Singaporean government had done go here http://tobaccocontrol.bmj.com/content/13/suppl_2/ii51.full

Look the price in Singapore, you will almost pengsan.

http://www.imperial-tobacco.com/files/financial/presentation/190906/Asia.pdf

But don’t worry, it’s a different picture all together in Malaysia. Over the period of ten 10 years from 1996 to 2006, the number of smokers reduced merely by 3%. The cigarettes operators in Malaysia seem to be able to lobby our government to work with them in a friendly manner. Despite of more and more roadblocks are being put up. As you can see the below table, the freedom of promotion is as tight as Singapore but they seem to be surviving well.

The operators had done an excellent PR job demonstrating they have high standards of corporate governance. BAT for example won many awards from KPMG and Minority Shareholder Watchdog Group and enjoy endorsement from big fund like Aberdeen Asset Management. The cigarette operators were so proud of their success working with Malaysian government and often produce it as a case study in international conferences.

The real headache is the price difference between legal and contrabands. The price difference between legal and illegal is almost double. A pack of legal 20’s sticks cigarettes cost minimum of RM 7 vs. RM 3.5 for contrabands. I don’t care how efficient these legal cigarettes operators operate, there is no way they can close the price gap because a big chunk of them will go to tax. That drives the contrabands market share to record high of 38%. What it also means if the industry players behave irrationally to gain market share in the legal segment at the expense of others, profit margins can suffer.

IF, a big IF our custom officers will be as serious and effective comparing to their counter parts in Singapore, this industry suddenly will have big windfall. But you know the answer already-lah. Read here how aggressive the results shown by Singapore’s custom. These guys are talking about almost 40% reduction of contraband!

http://www.seatca.org/index.php?option=com_content&view=article&id=671:singapore-sees-40-fall-in-supply-of-illegal-cigarettes-250110&catid=1:regional-updates&Itemid=57

The major players are very similar internationally, dominated by the same multi-nationals. BAT has the highest market share of close to 60% and 15% JT International and 15% Philips Moris. Capital gains from BAT is fairly muted but JT International delivered a fantastic 50-75% share price appreciation.

The explanation is fairly simple, BAT revenue was flat while JT International delivered revenue growth year after year. If you already have a lion share of 60%, it’s very difficult to increase further. On the other hand, when your market share base is smaller, it’s much easier to grow. The big funds of course may have prejudice against JT International as a smaller player, despite both have about 5-6% yield. When I’m ready to place my chips again, I’ll park it at JT International.

If you happen to be able to invest in Indonesian stock market, Gudang Garam will be a far more attractive investment.

Disclosure: None

Are our necks still intact?

2011-11-12T08:13:00.013+08:00

If our necks continue to be whipsawed -- up 3% one day, down 5% another day, I'm not sure our necks will still remain intact after a while. An environment like this is a heaven for speculators. Most of market players feel that the markets cried wolves too many times. The politicians are well trained to say the right things to soothe the players. Market events as if has become a TV commercial break, so just go to the toilet , our favourite TV show will resume after the pee.

The speculative on low liner stocks activities in the KLSE is very unusual. In fact some new terms have been invented, they called it PUNTA-MENTAL. I think I used pretty strong language yesterday like orgies. The way some of these guys behaved like totally disconnected from the world. They operate by just looking at charts. I pull three of the top volume stocks for you to see. The common patterns

1. decline for a long time
2. form a base and rebound with nice volume
3. no fundamentals or what so ever
4. they probable will use all kind of technical indicators like moving average, Fibo retracement, resistance, etc......to set their target price.

The return is seductively inviting. It's like a supermodel lifting her skirt very slowly. She promised you fun with no string attached. You are salivating, your heart is pumping and head is clouded, will you take her offer?[It's a trick question, think carefully. Added @ 4.03 pm]

Ayrton Senna - The Right to Win

2011-11-11T07:45:00.009+08:00

It's approaching the weekend again, time to do things I like to do. Enough of the European headlines. The KLSE market activities hardly display any sign of depressions. 2.6 billion shares changed hands? There are so many of them are trading false hopes and pretty much enjoying themselves in orgies. Enough of bashing, otherwise, people think I'm jealous and having sour grapes.

There are so many things to do in life beyond making money. I watched a movie documenting Ayrton Senna's life while I was on the plane the other day.

Senna is the kind of the guy will inspire you. This kid had a crystal clear vision what he wants to be. He wanted to be a formula 1 driver which predominantly rules by the ang mo.. A guy from Brazil wants to be a F1 driver? Yeah right, not only was able to race in F1 but he was far better than that. He won three times world drivers' championship. As we all knows that Brazil is still at large a poor country especially in the early/mid nineties. His sheer determinations and achievements inspired many others for mission impossible.

He is a genius driver in the rains. His precision and ability to dance with the car in the rains will leave you in awe. Mind you, cars in those times were not assisted by computer. It's pure driving skill. He is the kind of the guy can produce jaw-dropping, eye popping moments, leaving you in awe -- how did he did it????

He hates the politics in the racing business. He is a guy with tremendous character. Read his legacy here http://en.wikipedia.org/wiki/Ayrton_Senna. He reminds us he is a human too, though he fought for improved safety but he was far willing to put other in danger to go for that gap.

I hope you can enjoy these two clips.

The Italian job?

2011-11-10T11:38:00.004+08:00

I wanted to post this yesterday but I did't want to trigger a false alarm. There have been rumours swirling around once the Italian 10-yr bond yield crosses 7%, it will trigger the panic button -- it will rise like a hockey stick. It was 6.76% on Tuesday. The equity was still cheering on Tuesday after they heard the news of the Italian PM planned to step down after he gets his Italian job done -- meaningful austerity budget he promised. I heard that bond traders are a lot smarter than equity traders. The yield did not fall on news of Italian PM's plan. I took that a NO from bond traders. They were not convinced the problem will be solved just changing guards.

The government debt/GDP ratio of Italy is almost same like Greece. But in absolute value, Italian debt is 2.7X bigger than the combined debt of Greece, Ireland and Portugal. 1.9 trillions debt could inflict much bigger damage if it's not well contained.

But Marketwatch reported their fiscal position is better than the rest of bailout countries. Read the rest here http://www.marketwatch.com/story/margin-boost-pushes-italy-yields-to-brink-2011-11-09

The concern is debt roll-over by early of next year.

“You can have a minimal debt/GDP ratio, but if you need to roll over any debt and nobody will lend to you and you cannot print your own money, then you are bust,” Jenkins said. “Italy’s debt is far from minimal.”

The 10-yr yield is finally crossed 7% yesterday. That's certainly flashes red alarm.

Catching up with the trend.......e-Book

2011-11-08T12:28:00.010+08:00

Imagine one day we have to pay a lot of money to enjoy the paper tactile feel, the smell of the printing ink and the dog-eared pages. It's funny that I suddenly felt so old in the world of Einstein. It's relativity stupid. Having living in the paper world for so long, it's hard to move on. But then there is no point to resist something about to pass a tipping point. A point that passes a threshold that spreads like wildfire.

http://www.ifbookthen.com/wp-content/uploads/2011/10/research.pdf

e-book market has surpassed US $ 500 million mark in the US. The trade related to e-book is passing US $ 2 billion. e-book penetration rate is reaching about 20%. Give it another a few more years, Star Trek generation will be here.

Most of the books that we read in English probably are coming from the USA. The train is coming, it's either I learn to adapt or I'll have nothing to read or pay a lot more money as a luxury indulgence. The writing is on the wall!

I resolute to read at least one e-book before 11:59 pm, December 31, 2011.

Good night.

China Updates

2011-11-06T09:43:00.011+08:00

I was not sure whether my bearishness will change the way I see China for the next 2 years. I'm trying to avoid biasness as much as I can. When I arrived in Shanghai, the check out from the immigration counter was fast, unusually fast in fact. When I departed from Shanghai the last Friday, the check out was even faster. It was so fast that I felt eerie. I used to get a nice copy of Financial Times or Wall Street Journal on the planes but that was missing, budget cut I supposed. The planes were not full. These are very telling signs.

There is no doubt that the Chinese economy is slowing down. Q3 '11 GDP slowed to 9.1% and many expect it to slow down further to 8.5% next year.

The Chinese government understands credit is a double-edges sword. It can build an economy but it can also annihilate an economy. The chart below shows the dramatic increase of China's credit as a % of GDP since 2008. Even though the Chinese leadership has hinted they will fine tune their monetary policy to assist small and medium businesses after their outcry of credit crunch -- a few bosses abandoned their homes, businesses, committed suicides, borrowed from loan sharks, visiting pawn shops, etc. But I think it is unlikely that they will loosen its grip across the board.

The credit tightening effect was not only felt by SMEs but now spreads to property market. The property prices have finally fell dramatically and the new homes demand fell off the cliff. Chinadaily reported that new houses demand in Beijing fell 46% year over year. They slashed prices by 20-30% in response to mounting pressure to push out inventory. Read more here http://www.chinadaily.com.cn/bizchina/2011-11/05/content_14043826.htm

A dramatic price drop has a huge impact to new buyers. They will wait for the prices to come down even more, reinforces the downward spiral. Retail demand reduction is one thing but the other problem is many of the SMEs companies have ventured into properties will see their portfolio decline substantially. I hope the cold will not turn into pneumonia. The Chinese government had done a stress test indicating the Chinese banks can withstand property price decline up to 40%. I can buy into that but there will be a few scars here and there.

There has been a lot of talk that the Chinese local governments have been overburdened with debts. As of end of 2010, the local government debts stood at 10.7 trillions yuan or almost 30% of GDP. If it gets closer to 50%, I think the game will be over and they are over-extending themselves --not much room to expand their infrastructure projects.

When it rains, it pours. The problems just do not seem to stop. There will be another fresh problem will show up at the door. The EU. China is doing a substantial business with them and in fact this is their number 1 export destination. With PMI flashing below 50 across EU, I think contraction is a done deal. What does this means to China?

I'm not trying to depress you till a point to reach out a few Panadols or Prozac. What I'm saying this slowing is more problematic than 2008/2009. The dry gun powder inventory is dwindling down fast. I believe they will act a lot more rationally and will not turn on the money printing press to continue to over-extend themselves. They should allow the cleansing process to clean up the toxic from their economy so that they can emerge stronger after this crisis.

A reflection on charity

2011-11-05T08:48:00.003+08:00

This is my first entry on this subject. This is a very complicated subject because it involves multi-disciplines. It’s like beauty – it’s in the eyes of the beholder. It’s also very difficult to break it down to a manageable level or deploying my favorite problem solving method by looking at problems from helicopter views, giving up many details and to focus on one or two things that matter the most.

My religion in Christianity has a strong influence on me. First, I agree completely with Jesus that “The poor you will always have with you…….” We can’t be the super-hero to the mankind. You can’t solve all problems. You can’t make all mankind happy. Absolute happiness only exists in heaven and I don’t believe and expect heaven on earth. I accept that we are living in an upside down world. I accept momentous of happiness, sadness, suffering, desolation, solitude, turbulence, peace, etc. It’s just the total package and non-negotiable, we just have to deal with it as best as we can as a human.

Secondly, my thought is also heavily influence by Darwin. Each of us has the survival instincts. We are tougher than we think we're. Or else how two people multiply to 7 billion plus today? The moment we’re born into this world, we’re already a winner. We defeated millions of other sperms to reach an egg. With that premise, I believe strongly that God will help those who want to help themselves. I don’t believe in giving away money to those appear to be very weak or pitiful. Just talk about NEP, that’s enough to light up the fire crackers in me. I can rant for hours, days, months, years, 'till the end of my life. Show me that you want to progress, I will invest in you.

Thirdly, I am also a strong believer of charity begins at home. Invest time with our kids. Coach them in their homework. Teach them to be money smart and street smart. Make them feel secure so that they can be self-confident. Nurture the goodness in them and at the same time teach them enough moral values to defeat or to contain the dark side in us.

Fourthly, this is a follow up on my point no. 3. The world has enough of its problems, just don’t add more problems to it. I’ll live as responsibly as I can while I still breathing on this earth. Do our job well. If our company doesn’t perform, they will fold. When it folds, hundreds dependents will suffer.

Fifth, this value is influenced by Warren Buffett. Everyone has his or her calling. Not everyone has a calling of mother Teresa. Investing is my passion and it’s one of my strengths. I want make highest impact with my money that I’ve grown at reasonable rates. I don’t want to give away fishes but I want to invest my money with fisherman. I don’t want to give away bread or rice but better seeds. The world wasted too much, pissed away too much money because of leakages. There is no point to give away money to churches that will install better sound systems or air-conditioners. I will invest my money in foundations that will fight corruptions, companies that pour money in R & D that can produce more food, companies that can make better medicines, foundations that will invest in education, etc. They got to have good governance.

Six, to be involved personally we must be prepared and trained. We cannot go into the “battlefield” with empty headed. We can be consumed by the “dark forces” and we can die for nothing. Involving in domestic social problems like(alcohol, gambling, domestic violence, etc), disaster relief, war torn victims, etc…

Lastly, give unconditionally. If we don’t want to give, it’s okay because it’s our money. If we elected to “give away” money, do it silently without the need to tell anyone. I mean it, not even to my wife.

KFCH. Finger lickin' good?

2011-10-30T21:35:00.008+08:00

What attracted me to this company is the India growth story.

This market has its own uniqueness because of a big majority of them are vegetarian, no-no to beef, very diverse cuisines and fast food is considered as “junk food”. Eating out begins to get popular because of urbanization. People begin to accept eating out because lack of time. The targeted market segment is middle upper class.

A lot of eateries are run by mom-and-pop shop just like many Asian countries. Modern fast food chains begin to gain tractions when Darshini, Food Court as well as international chains like KFC, McDonald, Barista Coffee begin to become popular with office goers and students. For more detail you can read this in Wikipedia here
http://en.wikipedia.org/wiki/Indian_fast_food

McDonald has about 170 outlets and KFC is lagging behind, 105 outlets only. KFC entered the Indian market in the early 90s after the economic liberalization policy. McDonald entered the market later, in the mid 90s by joint venture with two local companies, Hardcastle Restaurants Pvt. Ltd. and Connaught Plaza Restaurants Pvt. Ltd.

Judging from a big market with almost 1 billion people, the number of outlets are way too small. The growth rate has been very slow though the growth potential is enormous. I don’t have all the information on year by year growth evolution, so I will have to go for simple average. Average store opening/year for McDonald is 11 and KFC was even more pathetic, 5 only. It takes a long time for them to breakeven – some say 10-14 years but some say you need about 30-40 outlets to breakeven.

Let me go back to KFCH. Based on a research report by RHB research, the average revenue per outlet for an outlet in Malaysia is about RM 3.5 million but in India is only about RM 600 k. Geez ….. tough market. Indian market has always been tough, perhaps even tougher than China market. They crushed prices down to the ground with Nano Tata car, less than US $ 50 tablet, etc. I certainly do not want make a mistake by projecting the same revenue per outlet in Malaysia to Indian market.

KFCH has about 10 outlets there and here are their growth targets

end 2011 – 15 to 17 outlets
2012 – 25 outlets
2013 -30 – 35 outlets

Judging at their aggressive target, I would think KFCH will not be a dividend yield play but rather a growth play. KFCH’s EPS has been growing at the rate of 9-10%. I think we are looking at about 0.20/share for 2011. If we are willing to roll over the valuation to 2012 which is about 0.22 and peg it at about 15X PE(since contribution from India is negligible), the stock worth about RM 3.3/share - RM 3.5 with dividend yield of about 1.6 ~ 1.7%.

Guys, gals, time’s up. I got to go bed now because I will need to wake up very early to catch a flight to middle kingdom. I will be there for a week which means I will not be able to post anything. Take care.

Disclosure: None

A sad note for Thai friends

2011-10-29T19:50:00.008+08:00

I have to put off my write-up on KFC because of a headline that I saw. For most of the times, headlines of natural disaster will bother a little bit but this headline of flood in Thailand bothers me a lot.

I have friends over there. I have been following their updates from time to time. Each update is worse than the previous update. Looks like inner Bangkok defence is also breaking down.

One of my friends lost his whole factory. All his production equipment submerged under the water. His years of blood, sweat and tears went under, just like that………just like that. I felt very bad for him.

Another friend of mine would probably have no income for next few months because his customers went under! He told me he has saved up a bit to face unexpected rainy days like this. Though he was cheerful when I talked to him on the phone, I know he was crying inside.

Another friend of mine told me the property loss is sad but that was not his greatest concern. What is killing him and others are the psychological torture. The stress level is unbearable. You feel so helpless, sitting and watching the water level to rise……either to decide to evacuate or not to evacuate…..or……watching your properties get damage bit by bit like a slow death. You fear that you might be out of job because of permanent factory or business closure(excellent excuse, for people sitting in ivory tower, to consolidate factory when demand is weak). You worry about hungry snakes and crocodiles want their shares of retribution!

These are heart wrenching stories. All I can offer was to listen. Listen emphatically. But I suppose by just listening is not good enough.

A while back, Al Gore was care enough to warn the world that we got to do something. He was trying to raise public awareness through his documentary film An Inconvenience Truth. The very sad part is there are whole bunch of people threatened to sue to him. They accused him the creator of global warming hoax. Watch this.

They accused him of anti-progress, pedalling backwards. All I can say to those people is FUCK YOU! Increased of CO2 will have NO impact on weather or what so ever? Warming and cooling of earth planet is just a natural cycle? FUCK YOU one more time, this time with two middle fingers UP!!!!!!

We got to reduce our carbon foot prints. Period!

If you mess around with the mother nature, they will come back to haunt you bunch of so called professional scientists aka idiots. They sad part is, innocent people paid the price for the sins that they did not commit.

Pre-Market Open Posting

2011-10-28T08:18:00.002+08:00

I like to post before the market open. That way, my thoughts are not affected by the movement of the stock markets. I can concentrate purely on my thinking.

Bears got drowned by good news. I enjoy myself very much watching the best poker game on earth. No detail announcements by EU leaders but they starved off a melt down by merely threatening the market players with the old poker game strategy. Going-All-In. Till today, we have not seen what was the card but the opponents already folded their cards.

What is the probability of 9 planets in the Milky Way aligns in one straight line?

That lady's luck is so good. In the midst of ole..ole...ole partying, the US GDP came in with 2.5% growth. The economists have adjusted their numbers for the last few sessions as they see the improvement of the economic data. As a result, Dow closed at 12,208, S & P 1,284 and NYA 7,813.

With the financial markets turnaround, people making easy peasy money, that may improve consumer sentiments and hopefully people will spend a bit more money during coming Christmas seasons. I do hope the demand will improve because I have seen businesses turned sour beginning of this month. I just got back from the US and customers are telling me inventory are very high. If the demand does not take off, it will be a disastrous 2012.

It takes balls to play in the next leg of rally. As I grow older, my balls shrink. Instead of keep guessing when the markets are going to top, I can sleep soundly every night with lots of cash under my pillow.

Winding down

2011-10-27T20:13:00.003+08:00

It's time for me to rewind. Nothing more satisfying than enjoying Johnny Walker Blue Label. I like it on the rocks - just one pack with 4-5 ice cubes. Shake the glass a little like what James Bond like his Martini -- Shaken, not Stirred. Watch the ice intermingling with the whisky. Then take a sip. Hold it a little while in my mouth before letting it flowing down to my throat. Aaaaaaah..........heavenly.

Enjoy the rally. Good night.

YTL Power

2011-10-26T17:36:00.016+08:00

I told you that I'm going to spend more time to look into company reports. YTL Power is on my list. YTL Power hit a 3 year low at the beginning of the month. Stock price going back to depressed level of 2008/2009 was really mind boggling. What the hell is happening to this company? Yeah, we have some problems at the macro level but do we need to over-exaggerate the problems as bad as 2008/2009?

I sent Mr. Nosey to go sniff around the neighborhood. Well, well, well. 4G network program was the culprit. As of June 30, their mobile network unit has RM 280 million losses. 280 million losses is a big number babe! I almost wanted to hit shut down button on my computer, have a few packs of whisky and call it a day.

May be not so soon. I decided to give it a second chance since the price has come down by almost 30% and at one point it was almost 40% way down. Found a piece of old news that mentioned YTL is going to spend as much as RM 3 billion over the next 5 years. They probably have spent close to RM 1 billion already.

A lot people have expressed that the mobile internet is getting very crowded. How big is the market? It's kind of difficult to find out the market size as not many analysts talk about them. So, I'll have to put together the jig saw puzzles from various annual reports from TM, Axiata, Maxis, Digi. Digi mentioned there are 4 million mobile internet users. When I added up the numbers from Celcom(857k), Digi(??), Maxis(594k), it was well short. May be they referred to fixed broadband as well. TM has 1.68 million subscribers which I presumed most of them are fixed line broadband users. Adding TM subscribers to mobile broadband is getting closer to 4 million users. Assuming APRU of RM 60/month, the estimated market size is about RM 3 billion. Broadband penetration is about 50% now and assuming we go to 100% in 5 years time, this is probably a RM 6 billion market.

YTL Power plans to get about 400 k subscribers, that will translate to about RM 326 mln revenue based on APRU of RM 68/month. That will be almost 10% market share. Yes I know what you are thinking this is a growth market. Let's assume they capture 20-25% market share 5 years down the road, the revenue will be around 1.2-1.5 billion. At that kind of revenue, it may be able to make a decent margin of 20%. A quarter million 4-5 years down the road? Long gestation, big risk, hyper-competitive market, worth the troubles? I can understand why most people dump their shares. But wait.

Don't the market participants know that YTL Power has a very diversified stream of earnings? Earnings from Malaysia, UK, Indonesia, Singapore, Australia come to nothing? Together, it has about RM 13 billion revenue and RM 1.3 billion net profit before they launch the broadband business. Even we build in the losses, the company will still have RM 1 billion net? I don't see how their dividend of RM 0.12 - RM 0.13/share is going to affected.

Now, putting the bad news aside, how much YTL Power is worth? CIMB tagged a price of RM 2.8/share but RHB thinks it's only worth about RM 2/share.

The key difference is CIMB assigned higher value to Wessex operations -- 1.5X EV/RAB(Enterprise value/regulated asset base). They argued that market is around 1.4X. This premium may be easier to justify during good time. Let's say we don't assign any premium like what RHB did, RM 2/share would be a very fair price.

Disclosure: None

Happy Dwali

2011-10-25T21:59:00.011+08:00

Wishes Hindu friends a Happy Dwali.

It's a day to remember goodness thrashed darkness. It's a remembrance day that good guys will always win at the end, just like the nice ending in the super hero story.

Dwali has something for non-Hindus too. I want to take today as an opportunity to say something --- to spew out something has been cloaking inside my heart. Before I proceed, I want you to read this.

MIDDLE EAST, INDIA, March 28, 2011 — After twenty centuries all that can be said of Christianity is that it is the world’s largest religion with over 2 billion followers. Its influence on men’s hearts and minds as the truth is highly debatable.

Mahatma Gandhi is perhaps the best example of someone who was discerning enough to reject Christianity not Christ. He was deeply hurt by his experiences with apartheid and “Christians” during his time in South Africa, and it obviously stymied his relationship with Christ.

Like Gandhi millions have been unable to see the Christ obscured by Christianity.

Gandhi was shrewd enough to tell missionaries, “I like your Christ; I do not like your Christians. Your Christians are so unlike your Christ.” When asked why he did not embrace Christianity, Gandhi said it offered nothing he could not get from his own religion, observing, "…to be a good Hindu also meant that I would be a good Christian. There is no need for me to join your creed to be a believer in the beauty of the teachings of Jesus or try to follow His example."

Read the rest here: http://communities.washingtontimes.com/neighborhood/no-2-religion-yes-2-faith/2011/mar/31/gandhi-glimpsed-christ-rejected-christianity-false/

I'm not going to make a case of salvation by works or salvation by faith. I'm no theologian. The relevant point that I want to make is to remind everyone not to be fooled. Beware of wolves in sheep's' clothing, someone who will call you brother or sister. Someone who you will invite with open arms into your house. Someone who you will never raise any sign of suspicion without realizing he has a knife at the back ready to stab you. The wolves are driving people away from Christ.

It does not mean that we need to snatch the knives from the wolves and start a gladiator fight. Gandhi is a wonderful student of Christ. He hit the nail right on the head.

Forgiveness.

Voila!

That's the heart of Christianity. F-O-R-G-I-V-E-N-E-S-S.

That was how the passive resistance philosophy was born. No wonder Gandhi is considered as a genius in Steve Jobs's book. You let the other person to continue to beat you up to a point his conscience tells him that is the wrong thing to do. Gandhi truly forgives his enemy up to seventy-seven times. Hopefully, the violence will stop. When violence stops, verbal or physical, the world will be a much more serene place to live.

Market Outlook

2011-10-25T07:45:00.002+08:00

Before I left for my business trip, I made a watch list that I thought the stocks were mispriced. Here are a few of them(counter/price at that time)which I thought it was mis-priced between 10-12%.

1. YTL Power. $ 1.72
2. KFC. $ 3.31
3. JTI. $ 6.16
4. Boustead. $ 5.21

Since then, the prices keep surging and narrowing fast. Another 5-7% jump from yesterday closing will get back to the level of pricing before the market brokedown. The incentive for me to get back to the market is really very little. I cannot get back to the market just because I've missed the boat on the first week of October. If I jump back with both feet, it's like making a mistake that I sold a huge block of my holdings 3 weeks ago.

I believe the market is overbought now. Even the sleepy stocks from the forbidden city surged? Give me a break!

The rational thing to do is DO NOTHING and wait for the next boat. The boat may come tomorrow, next month, six month or even one year later. I'll sit here and wait.

Side Trip Notes

2011-10-22T15:20:00.013+08:00

My buddy knows I love to drive. He rewarded me with all new American driving experience. Holy cow I said when they told me that I am going drive this SOB.

This is a big f****** son of the gun. I kept shaking my head in disbelief that I was going to drive a real SUV on the American soils. It's a 5.3L V8 engine. Big engine!!!! Forget about the guilt of polluting the green mother earth. Step on the gas, the sound of Vroooooom.....Vrooooom.......................... will drive you absolutely nut. It's a pure joy of driving. Though V8 engine sounds impressive(350 plus hp with 300 plug lb-ft torque) but I did not feel it was quick enough. Granted, it's a car to tow boat, ferry a big family, etc. It's not a race car.

My next follow up trip? It's kind of like my bucket list, I hope to complete as many drives as possible on this National Geographic Drives of a lifetime.

My next trip is to conquer California's Pacific Coast Highway. Yeah, the description of the twisting and cliff-hugging sounds extremely thrilling to me. But then, the trip is meant to be driven leisurely. Well, may be I can drive with short burst of devilish raw power of a car. Well what car shall I pick?

Possibly a Boxster.

Casual entry

2011-10-21T07:39:00.005+08:00

Don't get me wrong that I've gone into hibernation mode. I've been in the United States since beginning of the week and will only be back to Malaysia next week.

It's beginning of fall here. Trees chlorophyl production begin to shut down in preparation of winter. Streets filled with dry maple leaves. Chilled and strong winds sweeping through the leaves can transmit some kind homesick waves into my spine. But thanks to a bunch of American friends here. They're still jovial though the world is not so bright. They never complaint about life. They'll keep on debating and finding solutions to many problems. They really put a lot of pressures on you. They want you to confront the reality and find solutions to problems or how you can make things better. They will force you to move out of your comfort zone to make difficult decisions.

Americans are pretty tough people. Will they ever get out from this mess? I mean this is a country that has great education institution and dynamic global companies. This was a country with high saving and invested very prudently the past. Every where I go, I see people will hold a book or iPad, notebook or whatever reading materials. I find that Americans are hardworking. I remember during my junior days working with the Americans colleagues, I have to wake up late nights to call them. Now that they know the growing Asia importance, they did the other way around. They answer your e-mails too, over the weekend. These people move very fast and very pragmatic.

They, however, for being too pragmatic and compromised certain principles got them into troubles again and again. I hope they can really fix the issues because the capitalism of America in the recent years do not seem to work. The income gap is growing. Their middle class income has been stagnant. Their country fiscal position and unfunded liability is getting larger.....They don't like Obama but the alternatives are no good either. My friends have been making comments like the circus can't operate without animals. There are whole bunch of animals out there now. They think it's pretty scary but then this country has been able to overcome adversity and came out on top. I hope America will reinvent themselves, one more time.

Portfolio Update

2011-10-14T07:41:00.009+08:00

Recent market rebound added 1.3% gains to portfolio. Now stood at 9.3% gains through Oct 13, 2011. At the peak of the market, my Turtle portfolio gain only 20%, so I am not upset about it. I estimated that I can pick up another 2 more points when market is having less bad news.

I guess I shocked many from time to time but this time would be a Richter 8 quake shocked. Some reacted more than others but I believe these are good people. Those care enough will voice out their opinions. Thank you for everyone concern. I have not lost my minds nor I have been capitulated.

I see a number of stocks got bashed down a lot more than the index got bashed down. I know I have sold many strong fundamental stocks. I am thankful for that because it is precisely they are strong I did not suffer much, not like 50-60% down from the peak.

I believe a lot of people regretted that they sold their stocks two weeks ago, when they saw the markets accelerated sharply right after the hair pin turn, the got panic and rushed back to buy crazily.

Bad macro news from time to time will flush out the weak holders. With plenty of cash now, I am going to focus on my next few steps. It is time to identify the most mis-priced stocks now. Don't get me wrong that I want to jump back to market now. All I am saying is our time now should be devoted to look at companies rather than macro pictures. Macro big picture is a done deal, it will continue to drift for a while.

Have a nice weekend.

Sold PIE and CIMBC25

2011-10-13T17:16:00.005+08:00

KLCI 1444.87

Sold 1,000 shares of PIE @ 3.45
Sold 4,000 shares of CIMBX25 @ 0.83

Two more dogs to go.

50-50

2011-10-13T07:50:00.008+08:00

Not going to talk about charts, big pictures and other stuffs today. I rarely use charts unless we have come to critical turning points. A time when it reaches all time high or all time lows. The higher a market goes, the sharper and the faster the market falls. A breakdown of a new low is something I pay attention because when people are giving up hope, they become unpredictable. Other than that, I leave them alone.

I was wondering if people ever consider risk and reward other than thinking of going for a quick flip. It's like going to Jenting casino. I'm going to do the last bet, if I win I will go home. Most people rarely stick to his/her promise and end up going home empty handed with sappy eyes.

I have a quiz question for today:

I assign the targets and probability arbitrary but I think they are right directionally. I cannot understand why people want to take a small pay off of 1-5% for 50-50% chance.

The pay-off is a better at higher targets but the odds are less than 50% in short term(1 year or less). Some may want to challenge me saying I assign low probabilities in the latter scenarios. I am sure many can agree with me that the economic conditions are going to be weaker, 3-6 months from today, why should we then assign higher probabilities for less favourable conditions?

I rather step aside when risk and reward situation is not compelling. Why risk our money for a small gain but with larger downside potential?

Very Susah

2011-10-12T07:57:00.003+08:00

People say we should not read newspaper because people who read newspaper are whole bunch of depressive lots. So are reporters, professional or community are alike. I don't mean to depress you, certainly not in the morning. I also don't mean to run my bad news press, after all I have no short positions. However, running good news for the sake of good news is not a good policy.

More headwinds ahead of us.

1. Indonesia cuts interest raise is an act of acknowledging of slowing down. The rest of South East Asian countries are launching stimulus spending. I applaud their efforts. It is good to be proactive.

http://www.bloomberg.com/news/2011-10-11/indonesia-unexpectedly-lowers-interest-rate-to-bolster-economic-expansion.html

2. US is acting stupidly but hopefully in a more controlled manner. The senate passes a bill allowing them to raise import duties from China. Protectionism is bad for global trade. Childish act!

http://www.bloomberg.com/news/2011-10-11/u-s-senate-passes-bill-allowing-duties-to-offset-china-s-undervalued-yuan.html

3. Alcoa is missing the analysts' estimate. Not a big deal and nothing wrong with Alcoa, just the stupid analysts are being too optimistic.

http://www.marketwatch.com/story/alcoa-misses-a-low-target-2011-10-11?link=MW_story_investinginsight

I noticed local retail investors made up almost 30% of daily trading in the recent weeks. This number is high by historical standards.

Surprisingly

2011-10-11T08:35:00.011+08:00

Surprisingly number of readerships surged right after I raised cash. I suspect the level of anxiety and excitement are very high among retail investors.

Surprisingly too the markets are zooming up Fast and Furiously. Changing my stance now will make me look like a clown.

It's a powerful counter rally is going on now. There are truly a number of contrarian indicators in favor of bulls.

(1) The capitulatation indicator done by BCA Research shown that they are pretty close to the past market bottoms but no where near to extreme events or extreme bearish market like '74.

(2) Equity dividend Yield is better than 10-year yield. I mentioned this anomality before.

However, despite of all the rallies here and there, the markets are still stuck in a range bound. London FTSE and German DAX to represent European markets are in ping pong bounce.

S&P has not reached the resistance level of the upper range bound. May be still has a bit more to go.

I need to see a breakout from the range bound to be convinced to participate in the short term. Or else we will be like a dog chasing its own tail, keep chasing the wrong direction. Bought at the resistance level and sold at the support level.

Links Update

2011-10-10T07:48:00.007+08:00

Links housekeeping. Added An Undomesticated Blogspot to my links. I've bookmarked this blogspot sometime ago and reading it very frequently. Thought of just adding it to my links so that I can access to it more easily.

She writes every piece beautifully and thoughtfully. The English is superb. I like her writing styles. She writes like a novelist, poet, philosopher and Freud psychoanalyst.

Her writings will stimulate your minds to think a lot. About many things. She questioned a lot about the purpose of our existence. In school of philosophy, we called it existentialism. To understand more about this subject click on this link

http://en.wikipedia.org/wiki/Existentialism

She has another advantage, being a woman, she can express more openly compared to men. She will expose your irrationality, your fantasies, your dark secrets, etc. She can peel layer by layer of your defensiveness and travel deep inside your subconscious level. Understanding your subconscious minds will help you to deal with a lot of problems. A lot of times, many problems are solved by itself, by just surfacing the unconsciousness.

My track record of picking blogspot has been terrible. She thought of closing her blog many times but I hope her blog will be in business for a longtime.

Explain it again, one more time.

2011-10-09T11:07:00.000+08:00

This blog was born around the beginning of 2008, after the market topped out. The market continued to slide down while I continued to stay bullish for a while but I turned bearish starting around Sept/Oct '08. At that point of time, the portfolio was young and I have not much to lose because the portfolio was small, only about $ 10,000 through October '08. The damage would not be great if I were to mis-read the market.

This time round, the portfolio stood at $ 44 k. If I were to get it wrong. If the markets were to drop another 15-20%, this portfolio can suffer losses of $ 8 - 9 k. It will make it more difficult for me to recover or improve my return.

The following chart show 2 obvious stages for bull run after bottomed out in March 2009. The first stage delivered almost 50% gain within 5-6 months before went sideways to make way for the second phase of bull run. The second stage delivered additional 30% gain but went sideways for most of the time. To win big, I must make sizable bets after the market has a huge decline. The window is quite small and that is why I am willing to forgo some technical rebounds and prefer cash instead.

There are a few developments concerned me. Hang Seng Index entered bear market around August 2011 and suffered about 30% decline when it topped out from 25,000 level. Usually the index can fall by another 20-30% after it entered bear market.

Our market usually lagged behind more risky markets about 2 - 3 months due to the perception of safe haven.

There are a lot of people argued that about the US market is just short of 1% to enter bear market and followed by key reversal day have caged the bears, for now. But I believe these bears will not give up easily. It's a matter of time they will revisit the previous low again.

Two. Huge breakdown in the copper market really concern me. It's a strong indication of China market is slowing down.

Three. The European sovereign debt issues have stolen the limelights. The worry of slowing down or possible of a recession was not discussed much by the media yet. Soon, instead of watching political theatrical plays in Opera London, people will buy a few tickets to watch Broadway shows in New York.

Four. I believe the authorities are running out of policies options to tackle anaemic growth problem. The emerging economies have to slow down so that it can reduce growth in exchange for friendlier commodities price. Falling commodities price will lend to slower inflation rate. Taming inflation will, then, only giving them some rooms to ease their interest rate.

Five. The big bears are not out there yet. When these big bears start to appear on TV regularly. When big bears running their bad news windmill at full speed. That will reinforce the downward spiral.

Six. Possible Malaysia GE may bring some cheers but it's a double edges sword. If they lose in next GE or deliver some nasty negative news post GE. The downside risk will be tremendous.

Seven. This is not a concern but I think the possibility of year end Santa rally will make people feel at ease, cheering the bull markets are here to stay. The bears are dead. The complacent market participants may get slaughtered later. Will Santa rally turns into a Trojan Horse troy?

Budget comments

2011-10-08T09:22:00.000+08:00

Malaysia boleh. We can achieve 5-6% GDP growth in 2012, our PM said.

Malaysia boleh. As your responsible gomen, we will cut our defit to 4.7% of GDP. Errr.........How?

We keep our expenditure roughly the same like this year and raise our revenue assumption and GDP growth. What if they are wrong? Despite of having a good year for 2011, yet our deficits have gone up to 5.5%. I believe 2012 deficit will stay at elevated level of 5-6%.

I won't forget his promise to reduce our budget deficit by 50% by 2015 when he took over the PM office. 2.8% he promised. It's fast approach 3 years. Are you still on track, Mr. PM? Or you wish I don't have such a good memory?

Our hero Teh Hong Piow echoed that GDP growth of 5-6% is achievable. Come on Dato. I believe you must be reading canned script prepared by our gomen. You just want to do a bit of PR sucking up to the gomen. If this is true, you make me feel less worry. If not, my knees are growing weak. How can I count on you to take care of Public Bank when you talk like that one? Sell Public Bank, buy Hong Leong is increasingly getting louder to me now.

Read the rest here

http://www.btimes.com.my/Current_News/BTIMES/articles/20111008002811/Article/index_html

On a second thought, may be it is good to let the gomen to have their own delusions. When the slow down is here. And they are in the middle of election. The heat of discontent will add more tailwind to already growing momentum for opposition party to take over. That will be game over for our gomen.

Portfolio Update -- Correction

2011-10-07T15:10:00.001+08:00

Double Entry accounting is one of the greatest invention of mankind. It's a great way of recording transactions and can detect our slightest mistakes, up to decimal points.

I felt very strange when I looked at my earlier scorecard. How come my book value was 50 k but but my portfolio gain was only 3 k plus. It's either I overstated my assets or I under-recorded my investment gains. Tried to trace my records but finally gave up. I resorted to rebuild the whole portfolio from ground up by using old fashion way -- Double Entry. Finally got the book balanced. See this trial balance. A lot of works but worth it. Very satisfied now.

Since it's only involving a few simple accounts, I can do it with Excel. If I can get accounting software will be great but I think it's quite costly.

Never I anticipated this simple tracking has evolved into more and more complex as time grow. Not sure how my cash was overstated by almost 7k. Luckily the rest of the stuffs were correct. My cash now stood at 33 k.

Portfolio Update - October 2011

2011-10-06T22:32:00.001+08:00

Added $888 saving for October 2011.

Okay, it's time to tally score. My portfolio stood at 8% gain through 6 October 2011. Cash is now around $40,000 on book value of $51,000. Almost 80% cash. The remaining stocks are still up for sales and hopefully I can salvage some of these dogs during counter rally.

The big pressure now is how to deploy $ 40,000 cash. My goal is get a 25% return on this $ 40,000 cash. This will put my portfolio back on track to achieve 10% return per annum. I hope my readers will understand me better now. It's no point to dwell in a decision I made. Yeah, looks pretty stupid when I got trapped by the market turnaround after hitting a new low. When the trigger alarmed, I have to act mean I have to act no matter how stupid I look. I have a plan and I have to stick with the plan.

The mission now is to get a 25% return on $40,000. I still need to wait very patiently before swinging my bat.

Just a thought

2011-10-06T08:52:00.000+08:00

Just leave you this thought today:

Just because we have sold some stocks, we should not wish the bear market is here.

Just because we have bought some stocks, we wish the bull market is here.

Financial market is not a place to prove we are right or wrong.

Neither is a place to prove we are macho.

It's a place to make money.

KLCI 1361. Sold Many Stocks

2011-10-04T17:10:00.000+08:00

I am travelling this week. The timing has been very, well what shall I say ? Very untimely. When I woke up this morning, I saw the DJI already flashed red. I knew I have to do some selling today. I think the stock markets around the world are breaking down. It has been a long time that I don't have this discomfort level. I believe selling wave is brewing.

I sold these stocks to raise cash.

KSL 1,500 shares @ 1.31

Boustead 1,000 shares @ 4.84

BAT 100 shares @ 44.12

Amway 500 shares @ 8.55

iCapital 4,000 shares @ 1.98

SOP 1,000 shares @ 3.85

Tried to sell these stocks today but the prices are not good/poor liquidity......PIE, CIMBX25, MUI and EAH. Already lining up for sale.

Will update more over the weekend.

All bets are off

2011-10-04T07:27:00.000+08:00

The DJIA broke below previous low 10,719. All bets are off.

Selling is inevitable. Take care.

V market.

2011-10-01T18:11:00.000+08:00

The only certainty in the market is V.

V for volatility.

I follow Mark Hulbert column regularly.

In his latest write up he discovered a very unusual phenomena.

Since 1958, dividend yield of DJI has never gone below 10-treasury yield. Since 2008-2009 financial crisis, this is the second time dividend yield is higher than 10-yr treasury yield.

This phenomena was a norm from 1929 crash to 1957. The market volatility was a lot higher prior to 1958 because there was persistent memories of Great Depression, two world wars, etc…… Investors are/were demanding for a lot higher dividend yield during high volatility period.

If you want to read this article, click here

http://www.marketwatch.com/story/market-undergoing-huge-change-2011-09-30?link=home_carousel

After read this article, it prompted me to consider the following strategies:

1. Make friend with volatility. Buy on support and sell on resistant.

2. Never fully invested. I am contemplating to raise cash for my Turtle portfolio(long term portfolio). Cash will not earn me money but when opportunities arise, it can be very useful.

3. Buy high dividend yield stocks. These companies preferably make things that people use everyday.

4. Invest in hard assets but invest sparingly in property counters.

5. When commodities stocks are depressed, don’t be gun shy, pull out some money and BUY!

Double track investment strategy clarified

2011-09-29T08:11:00.000+08:00

In my yesterday entry, I talked about Double Track Investment Strategy. I wish to make a follow up to clarify further because I do not want to mislead/confuse my readers.

Working on two investment strategies are very difficult for a lot of people. It is very confusing because most people will find excuse to flip flop between short term and long term investment strategies. That is how people really can screw up their total return, sitting on heavy losses on speculative investment while taking profit too soon on their long term investment portfolio that is finally delivering.

Even though I am coming out here to share for free of charge but it does not mean I can talk anything I like. I still need to try my very best to maintain high level of ethics and reasonable care.

Why I do double track investment strategy?

I will not talk so much about he long term investment strategy because the benefits and merits are quite clear.

I guess the question is why do I do short term trading.

To confirm my hypothesis. This will force me to keep in touch with market psychology and macro development analysis. I will put a small sum of money to test out my theory.

My most recent hypothesis is Greece default can be contained.

You will be a lot more serious with what you are doing if you have real money on the line.

I cannot tahan when I see over-sold situation. When I see stocks or markets are in very oversold territory. It will be foolish if I don't exploit the situation.

How frequent I do that?

Just may be about 10 trades a year. Remember over trading is bad! I normally consider the money I make as bonus.

How long I hold on to trading positions?

Normally no longer than 4 days.

How much do I commit to this strategy?

Small sum, very small sum. I never commit any serious money to this strategy. It is just for fun.

Why don't I publish this portfolio?

I have no idea whether I have been influencing my readers with what I have written with my Turtle Portfolio. If those readers were to act on what I write, I do not think they will lose money so far.

However, if I put up a short term portfolio, when I really cut losses to minimize damage, and they don't. That will do tremendous damage to their wealth for 2 reasons. First they may get the sizing wrong(placing a lot bigger per bet). Two, they cannot pull off the cut loss trigger. So, it is best I keep this private.

All clear?

2011-09-27T21:02:00.000+08:00

I mentioned in my commentary that we need to watch Dow 10,719. Why? It's because the market was hanging by a thread. Surprisingly the market made a big U turn after tested it twice and closed above that level. Can I explain? Nope. Do I need to explain? Nope. I've almost given up hope to explain why markets go up or down. I think we need to give Greece a break. It has been the beating boy whenever people are running out of reasons to explain things.

Some smart people have finally try to estimate how big will be the problem if Greece was to default. The IMF estimated the default cost about 400 billion. This does not look like a big number but the financial markets have become so complicated with derivatives, swap and etc... worst still if these instruments were chopped and diced and sold to investors all over the world. I doubt people can quantify it and the only historical reference was 2008/2009 CDS fiasco. That's why people were so freaking paranoid. Why haven't I figured this out? Damn, by the time people like me can explain this in English, I have reasonable reasons to believe we are almost at the end of this European fiasco............

I do monitor my own level of bearishness. I remember my mood was very bearish around March 2009 , I was expecting Public Bank to go down a lot. This time, I noticed that I was very bearish about Tenaga and expect it to go down to 4.5 level. Below 5 but not very close. I also noticed that almost 29/30 FBM KLCI stocks were down yesterday. That was a sign of people throwing towels.

When the market opened this morning, the spread between buy an sell was totally unrealistic. The buyers were expecting people to sell them at lower than yesterday closing price. That's extreme. When I saw stocks like Genting Malaysia got beaten down to less than $3, SP Setia down to less than $ 3. To be honest, even a bull like myself was also shaken. Dare not publish a word on my blog. That is a sign that blood is on the street. These are signs of capitulation.

Under environment like this, I devise a two-track-strategy. One track is for buy and hold strategy like Turtle portfolio with almost zero turnover and another track is market-timing strategy. After this U turn, my market-timing strategy is telling me to watch Dow 11,500 level. Dow went into free fall(twice) when it failed to crack above this level. That is why you see the split personalities in me, if you have not noticed it already.

The 6 million dollar question is did I buy stocks last two days? :-)

Found good gardening resource

2011-09-25T14:52:00.000+08:00

A couple of months ago, a reader asked me what would I recommend to have a garden with minimum maintenance. Unfortunately, this does not exist in the world of gardening. If you really like to have a garden but do not have knowledge or time for it, you will have to compensate with the weakness with money. You may have to cough out about $ 200 - $ 300/month to get some services from a nursery. They will perform maintenance routine like pruning, fertilizing, treating diseases and lawning. Even you are prepared to spend money, the very minimum task you have to perform is watering. Worse still, if you abandon your garden half way, it will turn into a jungle and that will really make you depress. I'm not trying to scarce you but it really demands commitment.

I found a lot of ideas from

http://www.thaigardendesign.com/

What I like the most is the BEFORE and AFTER effects of each project. There are a lot of things we can learn from each project. This is an example of low maintenance garden. I would not recommend the waterfall though(it's high maintenance actually).

The other blogspot that I found was

http://rosegrowing.blogspot.com/

The blogger has stopped blogging but he left a lot of tips on growing rose. Check it out.

Market commentary

2011-09-22T22:47:00.000+08:00

Watch Dow 10,719 diligently.

The market tested these lows and survived. We are just couple points away to re-test this low again. As I entered this entry at 10.53 pm in Penang, Dow stood at 10,796. Breaching this low, program selling is going to send this index and other stocks lower. I saw a couple of analysis that pundits/investors were capitulated twice over the last 2 months. The sentiment is pretty depressed now. But then, I will not argue with the market. Only time can heal. Give the market a bit more time.

Market volatility is affecting business and consumer confidence. Talked to a few friends in the industry. Yes, there is no doubt that we have slow down but the slow down was not like 2009. It was seems like a normal pause to us to allow the overshoot to correct itself. But the feeling I'm getting is like people are expecting great depression.

Also saw this chart.

A lot of people said after Q2 ended, there is no liquidity support to fuel more speculation in financial assets. Not true. If we look at the chart, M1 YoY% growth is getting stronger.

Many also draw the parallel comparison between Greece and Lehman Brother. When the Fed allowed Lehman to belly up, it dragged the whole world with it -- to hell. Will the Euro members want that? Probably not. There is obviously some political maneuvers here and there but those leaders in charge know the consequence.

KLCI fundamentals have not changed much but sentiment is. Most of the stock leaders are throwing in towels. We have not got any meaningful correction for at least 3 years. Even the index retraced back to 1,350, it's only 15% pull back which I think it's a healthy correction.

Congratulation to those managed to jump out around 1,500-1,600 ++ but just remember not to get overly bearish like expecting KLCI to go down to 1,000 points or below. When the tide turns, it could happen very quickly in the next leg up.

To hire or not to hire a property agent ?

2011-09-20T08:37:00.000+08:00

Let me cut the chase and go straight to pros and cons.

For hiring a property agent

1. These guys/gals are doing it for a living, hence they are much more specialized and knowledgeable. They are also supposedly to be a good negotiator. Though this is not a rocket science or required by law that you must sell through an agent, having an expert around to handle a large sum of money will help us to avoid silly mistakes.

2. When money is involved, especially for a large sum, we tend to be emotional. They will be able to advise us in much more objectively(I hope) to come up with a more accurate valuation of the property that we wish to sell. Like investing in share, we tend to anchor or make reference to something that is familiar to us. In this case, we tend to make reference to new launches. But often times, unless you are sitting on hot area, second hand house will tend to be valuated at transacted price. There are owners will not want to let go simply that they perceive that they have lost too much on realizable value. 20% discount to a new house is common.

3. They can access to a larger pool of legal resources and also financial institutions. This will help the buyer a lot in getting legal advice or a loan. This certainly makes the transaction can go through much faster.

4. They help us to screen through the genuine buyers or information seekers. The will make all the arrangement to view our house. If we were to sell it ourselves, then we will have to attend to every potential buyer.

5. If you don’t have time, it’s better to forgo 2% of commission expense and they will do all the works like advertising, taking phone calls, distributing flyers and etc for us.

Against hiring a property agent

1. Why don’t we save the money ourselves? 2% commission on 200 k is 4k, 300 k = 6k, 500 k = 10 k and 1 million = 20 k?

2. A potential buyer will perceive that they paid for the commission. A potential buyer will also suspect the property agent will mark up the price from the minimum value a seller is willing to let go. Some of them will want agent to be eliminated.

3. A property agent may not be familiar with the house and unable to sell the strength of your “product” especially if your house is heavily renovated. Unless the agent is familiar with your area, they may not know where the school, market, mini market, hardware shop, banks, etc……

4. They may want to push the easy sell – good location, high $$$ value, etc. If your house is in the disadvantage situation, it’s the last one they will recommend. This is especially true if you let some of more established property agents to handle them. I contacted one of the very reputable agents and they don’t even return my call after I briefed them my property.

5. In some extreme case of they are motivated by greed (maximum commission), they may push the price to the highest and may reach to a level of not saleable.

6. Online advertising is getting more and more common nowadays. It can reach wider audiences. You can also start to communicate with them via e-mail or cellphone and exchange a few photographs to screen through the potential buyers. If you feel they are genuinely interested in your house, then you can arrange a physical viewing.

7. You are in-charge of the negotiation. You can see all body language and can decide how hard you want to push your selling price. In other words, you are getting all the first hand information.

Tips on selling your old house

2011-09-19T07:42:00.000+08:00

I sold my house in a pretty short time. I've done a couple of things on my own based on my common sense like

First impression counts. I repainted outside of my house six month before I moved out. That clean look would have probably created a very powerful halo effect. I also left a nice pot of palm tree at the entrance. That created a much more inviting welcome.
Repaint the house interior with white color. It's not expensive, the material cost was less than RM 100 but the effect was good. The other price that I have to pay was myself. I just have to roll up my sleeve and do the job. Always go for neutral color. There is no need to show your personality. Let's the new owner to decide what color they want.
Mop the whole house to keep it sparkle clean. I did it once a week and luckily I do not have to do it for too long.
Remove most of the things out of the house. I am sure that you have tonnes of old things that you left in your old house when you moved out. Forget about the sentimental value, just ship it out. If you can't get somebody to do it.
I removed the Cross from the old house. I know many Christians brothers and sisters may want to condemn me that I sometimes live like a pagan. Unless you want to narrow your potential buyers to your own religion, remember this is a commercial decision. Just pray in our heart that Our Lord will bless the new owner and hope some day the whole family will be converted.
Bought a big bottle of ceramic cleaner. Get rid of the tiles stain in your bathroom. Just try to make it as "new" as possible.
I left the house lighting on. A bright house will go no wrong. RM 20 electricity bill will not kill you. Also remember to fix all the faulty bulbs.
The only accessory that I left was the curtain. This will create a homely feeling.
Fix the leaking tap.........minor things like this can create a wrong impression. A tap costs RM 10 only.
Do not do unto others what you do not want others do unto you. Try to put yourself into others' people shoes. People will feel better if you have tried your best to handover a good property to them.

I will share with you more later: whether you should sell the house yourself or go through a property agent.

Connect the dots . .

2011-09-17T00:19:00.000+08:00

Can you connect the two dots?

BE CAREFUL WITH HIGH FOREIGN HOLDING STOCKS

Shall we bet on Tenaga?

2011-09-14T20:36:00.000+08:00

First let's look at the chart. Well it has not even reached extreme fear of 2009 yet which was at the low end of RM 4 and still very far from 1998.

Then let me take you back all the way back to 1997/1998.

How not to dump share to RM 1++ when you see Tenaga lost almost RM 2 billion plus? If I'm not mistaken that they got hit due to depreciation of Ringgit that had a huge impact on interest expense which dominated in foreign borrowings. For some reasons they were able to get themselves out of the trouble after that.

This time round, the gas shortage is the culprit. It is going to hit them hard, very hard. In quarter 3 ended May 31, they lost almost half a billion. Their chief said, they have spent this much on alternative to gas:

TNB president and chief executive officer Datuk Seri Che Khalib Mohamad Noh said the company had spent close to RM2.1 billion from January 2010 to August this year to substitute gas with distillates (diesel) as a temporary measure.

Read more: TNB: Gas shortage may force us to borrow http://www.btimes.com.my/Current_News/BTIMES/articles/jrtnb/Article/index_html#ixzz1XvvQQDPh

2.1 billion?? the number seems to be very big. He expects there will be an additional spending of 900 million from September - December, wow that is almost 225 million/month. He also expect this will last until next July, which mean another 1.5-1.6 billion expenses on distillates? If what he said is true, Tenaga can report as much as 2 billion losses over next 12 months? I am not really sure investors get the message and able to swallow this huge loss.

I know analysts are still reluctant to cut their rating citing the valuation is cheap.

Agree if you have a long term view and very long term view. I also know their profitability can recover but I want to see how investors react when they see Q4 '11 results. Let say they can make 2 - 3 billion profit per year. Their annual depreciation is about 4 billion and their capex is about 3 - 4 billion. So they can generate Free Cash Flow about 2 - 3 billion per year. They should be able to get themselves out of this mess in 1 to 1.5 year.

BUT..........I doubt many have that long term view. So.............

I will want to wait for a while and see whether 2009 low will be tested before place some chips.

What the hell happened to you Turtle?

2011-09-12T20:40:00.000+08:00

Just in case you are wondering what had happened to me, I'm here just to say a few words to tell my readers that I'm still alive. I decided to keep my big mouth stop talking for a while because the market is very confusing and I certainly don't want to add more fuel to the burning bush.

I was thinking whether I should write a piece of serious entry like value investing, ROE here and there. Moat moat here and moat moat there but had decided to save my breathe for another day. Everybody is yawning and waiting for the market for more attractive entry.

Furthermore, most of my visitors are pros. They probably can quote almost any gurus at back of their palms. Just give them the names.

Then I was thinking to scold some of these corporate taikors on their recent corporate exercises but then my fingers were too slow. Most of the exciting and hot news already commented by others. Aiyah, too slow lar, too old but hey I'm still competitive man. Seriously, these taikors are just like crazy Malaysian drivers. Their bad habits seem to be impossible to kick. Like crazy motorists, they seem to take every traffic rule as suggestion only. Nothing seems to work. You fine them, counsel them, blacklist them and now they talk about teaching kids in the school to be a polite driver. Well, when they see their father and mother potong Q from emergency lane, go 100 to 180 km in 3.4 seconds(in Myvi some more) to beat yellow light, do you think these kids will apply what they learn in school? Diversion pulak, why am I talking about this topic? Entah lar. May be some Myvi potong my Perrari from left side leaving me in dust!@#

Seriously, I think we should re-introduce short selling to keep these buggers honest. If you allow them to short to zero, then I think this process will clean up half of these walking deadman on the bursa. Just let these vultures circling those poor fundamental companies and they will kill dishonest management. If you reward those guys that can analyze bad things, I am sure they will a superb job for investors. So no need our SC to issue UMA, query our big shots why do RPT on a willing buyer and a willing seller basis, etc......

But then being uniquely Malaysian, later when we have some small guys lose money(kena short and shot) and after a few demonstrations di sana sini or complaining to a few big guns who are very well connected politically -- short selling rules will be banned again. Here you go again, Malaysians like to drive round and round of a roundabout. This bad habit that we inherited from our old British masters seem to be difficult to kick. Memang first class Opium. That is why divide, confuse and conquer work. The taikors keep screwing and small guys keep get screwed. Sons, stop gambling in bursa Malaysia. Give your money to your mama. She can beat the KLCI benchmark. Wow, how???!!!

FD ma, son. That is how you do it!!!

Should you close both eyes and buy ?

2011-09-03T09:56:00.000+08:00

When a company declares big dividend, should you close both eyes and buy? One of the examples is Opcom.

They declared 22.5 sen special dividend recently. And stock price shot to the moon.

However, if you look at the lower chart, the indicator points to distribution immediately. Shit, someone has been accumulating prior to the announcement.

Those rush in and buy are really stupid. Why I said that? When the stock go ex, it will come back to 80 sen. So what is your gain? ZERO, absolutely ZERO. Worst still, after paying 1.4% to broker and I hope it is income tax free, you might even suffer a minor loss.

I think the chance price of this stock to higher is slim. Wrong you said, the company has 72 million cash sitting nicely on its balance sheet. After minus 29 million of this special dividend, it still has about 42 million cash. That will translate to cash per share of 0.33. May be they will pay another round of special dividend?

Well, we will have to take a look how robust is their business. Opcom is in manufacturing of fiber optic. Their business depends a lot on one single customer that is Telekom Malaysia. A few years ago they lost some parts of their business to Leader cable. O Yea, being Mahathir's son was not been able to help. The got to compete on a level field. Their margins suffer when they have to compete. But it has bounced back strongly in FY 2011.

The question is why their revenue doubled in 2010? They said their shipments had doubled. Why it is so? Digging into their annual reports, they said Fiber to Home program has gone up from 350,000 homes to 800,000 homes from 2009 to 2010 and they expect to add another 500,000 homes by 2012. The growth potential seems to be fantastic but end markets growth does not equal to Opcom's top line growth, why ? We got to differentiate installed capacity and utilization. Telekom could have invested way ahead while the utilization is low. Unless, I can get a good data and understand this factor, I will not be able to forecast what will be their growth potential for the next 3 years. It may grow or it may not. If one were to commit fund to it without proper understanding on this key success factor, it's merely gambling.

Turtle Portfolio Update: August 2011, A Terrible Month.

2011-09-01T08:52:00.001+08:00

What a terrible August month Turtle Portfolio had. Portfolio shrunk by about 6% comparing August to July. The gain through August 31 is now stood at 13.94%. Portfolio is now 91% invested. I hope the Portfolio will recover in September a bit but again, traditionally this is a very weak month.

Pu Chai rue Pu Yin?

2011-08-31T00:19:00.000+08:00

I begin to catch up with a new revolution. I believe sooner or later, TV or paid TV like print newspaper, will suffer stagnation or decline. It's because most people will spend more time on YouTube or online entertainment. Found something interesting today. Let me take you to Thailand.

Thailand is no stranger to me because I worked there for a couple of years. I speak a little Thai too. I hope we can put religion or morality issue aside today. The subject that I want to talk about today is Kathoey. Though Thais has a lot higher tolerance about Kathoey but they are still being discriminate in employment as well as their legal right. Thais believe Kathoey is a third sex, neither lady nor man. Their Buddhism belief has led them to believe that they become Kathoey because of their past transgressions. So they deserve pity rather than blame. It's something beyond their control.

They work as hard as the rest of us. They too have compassionate heart. Bell Nuntita did not win Thailand got talent but her tremendous will and passion to do what she likes to do is truly inspiring. In her own words, initially, even her father find it very difficult to accept his son has turned into Kathoey. But she did not expect anyone to accept her. She continues to send money home for her sister education by entering Miss Tiffany and her job as DJ and entertainer.

In terms of originality, I would give her high marks but it's too bad her own society may have discrimination against her. That I believe was part of the reason she did not win. Things could have been different if one day, on-line vote can be introduced.

Nong Bell, chok dee na krup.

I do hope we can take off our judgmental lens regardless of what happen afterlife. Honestly I really don't have answers what will happen after that. Not that I want to be a champion of Kathoey but just treat them with a little respect and dignity. After all, we all are human being.

Independent's day is truly a meaningful day. Freedom is something we all should appreciate. We should also continue to liberate our minds and free ourselves from any kind of prejudice.

Selamat Hari Raya to Muslim friends and to Malaysia Selamat Hari Jadi.

What's up Vincent Tan?

2011-08-29T21:20:00.000+08:00

I was once told by a friend to avoid investing in companies own by Vincent Tan. He said chances of you get screwed is high. Take this injection of Starbucks into Berjaya Food for an example. Read this one first.

So, Vincent Tan will get RM 79 million by unloading his 50% equity in Starbucks to the rest of us. That 79 million he said was very fair because he sells to us for 13.5 X PE. It is very fair because when you want to buy Starbucks directly from the US market, you will have to pay for US $ 37.92 for estimated 2011 EPS of US $ 1.52 and that is translated to about 24X PE.

Starbucks operate about 115 stores throughout Malaysia with revenue of RM 140 million sales for FY 2011 ended 30 April. The revenue has been growing at 10% plus for the last 3 years and I seriously doubt the growth can continue as I believe the saturation is setting in. That is the reason why he wants to unload this to the rest of us????

Second point: the dilution if people exercise their rights.

Let's jump straight to the last page of their proposal. Under this scenario, equity will jump from 50 million to 162 million. I think the earning will increase from 7.9 million to about 12.9 million. ROE before taking Starbucks is 15.8% and post Starbucks injection is 7.96%. Thank you Vincent Tan for being so kind by destroying shareholder value. I don't argue the brand value that Starbucks bringing in but he makes Berjaya Food shareholder overpaid is something difficult to swallow.

EPS before Starbucks injection is 7.9/141=0.056 and post is 12.9/386 = 0.0334. You do the rest of the math on the multiple.

What if he decided to inject McDonald? Will the shareholders get screwed further? Let me borrow this from Patrick Teoh.

NIAMAH!!!!!!

What's up Khoo Khay Peng?

2011-08-26T22:53:00.000+08:00

Khoo Khay Peng group of companies offer to buy the remaining of 44.17% of shares in Pan Malaysia Industries for 0.045/share. Prior to this announcement, he is already owns about 31.75%(558k) out of 1,263kk PMI outstanding shares. He bought some more about 300 k shares in the open market between Aug 24 - Aug 26 between 0.04 - 0045/share. That gives him 55.83% interest to make this GO. He paid roughly 2.84X book value when making this offer. I was not sure what he was really going after.

Digging into 2011 Annual Report.

It has 10 million worth of freehold land and another 39 million investment property(13 million land and 26 million building). Those land are located in prime area of around KLCC or Jalan Ampang. They acquired this around 2009 time frame. They paid around 480 - 615 per sq feet. Today could have shot up to 1,500 - 2,000 per sq ft? If that is the case, the land alone worth between 65 million - 86 million. Adding back 26 million building, properties could have worth between 91 million - 112 million.

Their 9%(after dillution) in MUI could only fetch 41 million based on 0.23/share. The way they derive 127 million on their investment in MUI was not based on market price. To go back to this 127 million, MUI share price would have to triple.

Adding up all these assets, it could worth only about 132 - 153 million.

But then it has a liability of close to 150 million. Net of that, he would have nothing left. Unless he believes MUI is worth substantially higher(than what?).

I was not sure whether those bought MUI hoping for corporate exercise will be disappointed. What is clear to me, he is still trying to unlock the value but it will takes time. Those hope to flip it for a quick profit could be disappointed.

Coincidentally, 0.23 is a strong horizontal resistance. Do exercise cautiousness if you want to punt for contra or playing very short term, etc.

Anyway, if I'm PMI shareholders, I will take his offer rather than continue to suffer.

The Best Buy Signal in 53 Years

2011-08-26T08:04:00.000+08:00

(Investment U)

In the first half of the twentieth century, investors found that if you bought stocks only when the market's yield exceeded the yield on 10-year Treasuries, you would have been in for every single major rally.

.......As I write, the 10-year Treasury is yielding 2.07 percent. The S&P 500 yields 2.16 percent. Of course the S&P 500 Index was only created in 1957. It was the Dow that investors used in the first half of the last century. And the yield on the Dow is more than 50 percent higher at 3.24 percent.

If history is any guide, that means stocks are a terrific long-term "Buy" right now and Treasuries - which have become a complete bubble and a table-pounding "Sell" in my estimation - are due for a long period of underperformance.
True, GDP growth is likely to be anemic in the months ahead. But - shocking and surprising most investors - stocks (and especially dividend-paying stocks) should do exceptionally well.
There are no guarantees in the world of stock market investing, of course. But as Patrick Henry famously said, "I know no way of judging the future but by the past."
Good investing,
Alexander Green

Thanks, Steve Jobs

2011-08-25T13:23:00.000+08:00

My relationship with Apple's products started way back to 30 years ago. I still remember the Apple II that I was using it during my school day. I also remembered the Commodore and Atari days. I was begging my father to buy one Apple computer for me but unfortunately we cannot afford it. Since then, I was keep on thinking one day, I am going to be a programmer for Apple but that did not happen.

I was divorced from the products for a while when IBM compatible rules the world. Since then, Apple has been trying to portray its image as rebel and as someone who is different. The following is the extract from one of its commercials.

Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.

This is another very provocative commercial on how the sledgehammer whack the boring and conformist crowd.

They also trying to portray Apple guys are good guys while the rest of PC users are bad guys in this Mission Impossible.

Well, I was crazy enough though I was a grown up man to believe those commercials. I spent my whole month bonus to get an iMac. I was also trying to convince my boss to allow me to use Macbook Pro in the company though there were many incompatibility issues. I still remembered that I paid for the software and the company paid for the hardware because I was stretching the allowable budget. Such an Apple fanatic I was.

Since then Apple rules the world, I kept a bit of distant because I felt it has became the mainstream. I was not sure whether Apple will be the same again after Steve Jobs steps down. Thanks Steve for making technology personal, intuitive, beautiful, fun, "hook" and fanatic..........

(WSJ) Steve Jobs, the ailing tech visionary who founded Apple Inc., said he was unable to continue as chief executive of the technology giant and handed the reins to Chief Operating Officer Tim Cook.

Steve Jobs has spent his career challenging conventions about personal computing. He's transformed an industry and changed the way we think about technology. A look back at the accomplishments of an American business icon.

Apple said Mr. Jobs submitted his resignation to the board of directors on Wednesday and "strongly recommended" that the board name Mr. Cook as his successor. Mr. Jobs, 56 years old, has been elected chairman of the board and Mr. Cook will join the board, effective immediately, the company said.

"I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple's CEO, I would be the first to let you know," Mr. Jobs said in his resignation letter. "Unfortunately, that day has come."

http://online.wsj.com/article/SB10001424053111904875404576528981250892702.html?mod=WSJ_Home_largeHeadline

Short one

2011-08-24T12:33:00.000+08:00

Just some observations on markets.

The US financial stocks are almost as depressed as financial crisis 2008/2009. That does [NOT] really making sense to me. Bank of America hit US $ 3.95 in Feb 2009 but today is selling for 6.30/share. If you go back to good bank and bad bank strategy, I am sure you can extract much better value than this. All I can say, this is crazy!

Stock market is typically pricing a recession about 6 - 9 months ahead. The stock market is also will price in a recovery 3 - 6 months ahead too. If we believe the former, we will be in recession by Q1 or Q2 of 2012. So are we there yet? Does it mean that we should stay out of market for another 9 - 12 months?

If oil price were to continue to slide, is this the only hope that have now?

Going back to the same story of liquidity, I think there is a lot of liquidity on the side line.

If bond, treasuries and etc are junks, don't you think equity dividend yield of 5 - 10% is nice?

Buying individual stocks could be tough if you are not a stock picker/trader under this environment. I think buying an index fund could be a good option.

Final Analysis

My personal speculation, hear that? Speculation. My speculation is we still can catch this last train before the big storm come in. In other words, sell in May and go away should end anytime now and buying into Q4 '11 and reduce exposure by early March and see what happen is what I had in mind now.

Turtle bought 1,000 shares Boustead @ $ 5.25/share

2011-08-22T20:50:00.000+08:00

KLCI = 1,472

3 Amazing find

2011-08-21T21:54:00.000+08:00

I was spending time with my family today watching quite a lot of our favorite Christian songs on youtube. Found Elvis Presley, Susan Boyle and Whitney Houston......sang some of our very old favorite hymns. We felt so relax and really sensing deep peace manifested around us.

This video made by Deborah in memory of Micheal Jackson. The embedding was disabled by request. So you have to click on this link to watch. I was almost in tears............it's touching. Going to play Micheal on my car stereo on the way to work. I hope you will enjoy as much as I do.

http://youtu.be/Ahq2BQ5ZW8g

P.S. Don't get me wrong that I turn to religion in the midst of market volatility. BTW, I think volatility is part of the bottoming process........May the peace be with you.

3 Stocks to investigate

2011-08-18T20:45:00.000+08:00

I don't have much time to write lengthily based on latest batches of companies quarterly result. There are a few stocks that I think it's worthwhile to investigate further:

1. Boustead Holding Berhad - Acquisition of Pharmaniaga begin to contribute positively and other segments shows significant improvement in revenue. Trading at single digit PE for such a defensive business is not very justifiable.

2. Deleum - A lot of energy related stocks talk more than it can deliver. This stock is performing solidly but very quietly. They pay very consistent dividend.

3. Dutch Lady - Despite of rising milk cost, one would think it will destroy demand. But on the contrary their revenue soared. Their bottom line too. The only thing is I am not sure is whether they can continue to grow their top line.

Disclosure: I have positions in Deleum but no positions in Boustead and Dutch Lady.