Penentang PPSMI dihujani gas pemedih mata

(Malaysia Kini) kemaskini 3.54pm Gerakan aktivis bahasa menentang dasar Pengajaran dan Pembelajaran Sains dan Matematik dalam Bahasa Inggeris (PPSMI) mencipta sejarah hari ini apabila turun ke jalan raya, mengulang peristiwa perarakan Keranda 152 beberapa dekad lalu.

Peristiwa bersejarah pada 3 Mac 1967 itu bagi membantah Rang Undang-undang Bahasa Kebangsaan di Dewan Bahasa dan Pustaka (DBP), dulu dijadikan lokasi kegiatan sasterawan dan intelektual Melayu. Nombor '152' merujuk Perkara 152 Perlembagaan Persekutuan yang menyentuh aspek bahasa Melayu.

Kira-kira 2,000 orang yang berarak dari Masjid Negara selepas jam 2 petang bagaimanapun dihujani serangan gas pemedih mata daripada polis di Kampung Attap, tidak jauh dari Istana Negara.

Perhimpunan itu, yang asalnya dibenarkan oleh polis di masjid tersebut, melanggar larangan polis yang tidak membenarkan sebarang perarakan.

Mereka berhasrat membawa memorandum kepada Yang di-Pertuan Agong bagi memohon campur tangan baginda dalam pemansuhan dasar kontroversi itu.

(Klik di sini untuk membaca seluruh artikel ini)

Sudah sangat lama saya tidak menggunakan Bahasa Melayu selepas saya mula berkerja. Walaupun Bahasa Melayu saya sudah berkarat, saya akan tetap akan mencuba menulis catatan saya dalam Bahasa Melayu pada hari ini. Apakah tujuan saya? Anda akan faham selepas membaca catatan seterusnya. Adakah menulis catatan dalam Bahasa Inggeris pada hari-hari lain mengurangkan kesetiaan saya kepada negara tercinta ini Malaysia? Adakah menulis dalam Bahasa Melayu bermakna saya menderhaka bangsa saya sendiri, bangsa Cina??? Apakah penggunaan Bahasa Inggeris pada hari hari lain melumpuhkan keupayaan saya berkomunikasi dalam Bahasa Melayu? Perlukan kita mengadakan perarakan untuk memberitahu seluruh dunia kita menentang kerana kelemahan kita tidak dapat menguasai Bahasa Inggeris?

Kita perlu sedar bahawa bursa Malaysia sebelum 8 Mac 2008 mempunyai premium yang lebih tinggi, anggaran saya lebih kurang 20% premium berbanding dengan pasaran lain. Pelabur asing membayar premium ini kerana kestabilan politik and socio-ekonomi Malaysia. Apa yang berlaku sekarang ini amat merunsingkan pelabur tempatan and asing. Kalaulah pihak pemerintah(kerajaan) and pembangkang tidak mengamalkan pemikiran rasional untuk menyelesaikan isu-isu, kemorosotan quality pengurusan negara pasti akan menjatuhkan negara kita sendiri.

Saya amat bimbang pada suatu nanti pelabur - pelabur enggan melabur di Malaysia walaupun P/E dinilai dengan amat murah PE 5 - 7 X sahaja. Bukankan kita memusnahkan kemakmuran ekonomi kita sendiri ? Dari PE 15 X ke PE 5 - 7 pada masa akan datang? Apakah kita mahu menjadikan Malaysia yang disanjungi dalam arena antarabangsa pada suatu masa dahulu digolongkan sama seperti Filipina atau Thailand? Apakah maksud say? Sebelum 2008, pelabur-pelabur sanggup membayar RM 15 untuk setiap RM 1 keuntungan per saham, kemerosotan Malaysia akan menyebabkan pelabur sanggup bayar mungkin dalam lingkungan RM 5 - RM 7 untuk setiap RM 1 keuntungan per saham. Ini bermakna, kita memusnahkna nilai kita sebanyak 53 - 67%!!!! Kita perlu faham implikasi ini.

Kalaulah Pelabur Kura-Kura boleh menguasai Bahasa Malaysia and Bahasa Inggeris, bukankan setiap anak Malaysia mempunyai keupayaan yang sama?

(To international readers, today is a special day I made an entry in Malay language to make some points. I will resume with English in the next entry)

From under pricing risk to over pricing risk

Two headlines caught my attention today.

1) AAA rated companies are no different from junk in credit default swap market.

March 6 (Bloomberg) -- Warren Buffett and Jeffrey Immelt are among a handful of chief executive officers whose companies are rated AAA. Yet Buffett’s Berkshire Hathaway Inc. and Immelt’s General Electric Co. are being treated like junk in the market for credit-default swaps.

Contracts that protect investors against a default on bonds of Omaha, Nebraska-based Berkshire, which has $25.5 billion in cash, cost as much as those of KB Home, the homebuilder that lost money for seven consecutive quarters. Credit-default swaps on the finance arm of GE, which holds $45 billion of cash, are about as expensive as those for building materials-maker Louisiana-Pacific Corp., which posted nine straight quarterly losses.

(click here to read the whole article)

Do I have any comment? No, I'm speechless. I have reasons to believe Credit Default Swap market or safe haven assets has entered euphoria stage -- bubble for lack of a better word.

2)This is the first time I heard about 36 South Investment Managers. They made 236% in last 12 months(very nice) and plan to closed it down[very smart move]. They were betting on black swan by buying long dated options in global currencies, fixed-income, equities and commodity market. If hedge-fund is taboo to you, don't worry - I don't know that well and not qualified to invest in them too. The point is they know lightning will never strike twice within a short span of time -- it is highly improbable that we will see the same magnitude of decline across assets. Deleveraging will still on going but it will be in much controlled manner.

March 6 (Bloomberg) -- 36 South Investment Managers Ltd., a New Zealand-based hedge fund firm set up by derivatives traders, will close its Black Swan Fund after it gained 236 percent in the last 12 months and start a fund that wagers on inflation.

(Click here for more)

For someone to bet on inflation, I would interpret that there is a good chance of economy recovery in later part of the year. Regular readers should know that I am waiting at maximum pessimism of anti-inflation assets to be trashed between now and end of 2009.

There is this chart I want to show you - Federal Reserve balance sheet has no doubt gone through the roof, passed well beyond 2.3 trillions but that is not the point. The balance sheet begin to contract which is a good sign of liquidity stress is improving. The wild card is the impact of bank recapitalization and bad assets write down(this is the grand finale that I have been waiting patiently). Let's see whether Fed balance sheet will continue to contract or expand. Contraction is a good sign and expansion will give us some clues how bad the inflation will show up.

To cheer or not to cheer?

Should you listen to CEO talk about their company outlook? Or the President of the United States about stock market? I am sure many leaders will find themselves in a dilemma - to cheer or not to cheer?. If you talk down economy you will get a down economy, if you talk down your stock market you will get a down market. Is it true?

President Obama and his team have been warning all over since they took over the office. The message I am getting, we are doing something but don't hope for a quick turnaround - the worst is yet to come. He may be honest with his assessment but is it necessary to keep reminding us? Or can he says the fear is fear itself? Perhaps he is afraid to look silly to call for a market bottom.

Going back to history book. During the Great Depression, DJIA bottomed out on the week of Jun 27, 1932[DJIA closed at 48]. FDR made his famous speech Fear Itself on March 4, 1933 on the day he was sworn in as the President of the USA, nine months after stock market lost almost 85%. DJIA was around 60 on that day and 25% higher than the Jun 27 low. The point of maximum pessimism already behind him by the time he made that speech. Here is the speech.

I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our Nation impels. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.

In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.

More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.

(Click here to read the whole speech)

Putting Obama and FDR inauguration speech side by side. Obama speech looks far less desperate.

Homes have been lost, jobs shed, businesses shuttered. Our health care is too costly, our schools fail too many, and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.

These are the indicators of crisis, subject to data and statistics. Less measurable, but no less profound, is a sapping of confidence across our land; a nagging fear that America's decline is inevitable, that the next generation must lower its sights.

Today I say to you that the challenges we face are real, they are serious and they are many. They will not be met easily or in a short span of time. But know this America: They will be met.

(APPLAUSE)

On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord.

(read the whole speech here)

Two days ago, he came out to address the nation fearing the market continue to fall after DOW broke below 7,000. Our usual cool guy got even cooler, he is expounding Benjamin Graham philosophy - in the short run the market is a voting machine but in the long run it is a weighing machine.

Obama compared the daily market fluctuations to a tracking poll in politics and said he wouldn’t be adjusting his policies just to meet daily market expectations.

“If you spend all your time worrying about that, then you’re probably going to get the long-term strategy wrong,” he said.

The president also said that consumer confidence is “taking root” with enactment of the $787 billion package of spending and tax cuts he won from Congress last month.

“There are a lot of losses that are working their way through the system,” Obama said. “And it’s not surprising that the market is hurting as a consequence.”

I believe Obama is realizing that he needs to shore up confidence.

March 3 (Bloomberg) -- President Barack Obama said falling share prices may mean bargains for investors with a “long-term perspective.”

Obama, who is seeking to boost public confidence in his strategy to pull the U.S. out of recession, spoke a day after stock markets tumbled. The Dow Jones Industrial Average yesterday dropped below 7,000 for the first time since 1997. The Standard & Poor’s 500 Index closed at the lowest level since October 1996.

“What you’re now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you’ve got a long-term perspective on it,” Obama said at the White House today while meeting with British Prime Minister Gordon Brown on battling the global recession.

(click here to read the source)

Right after FDR made his famous fear itself speech, he launched The New Deal programs with full of Alphabet soup agencies[NRA, SEC, PWA, NYA, etc] to get things done. I am seeing Obama administration is lack of boldness or ability to get things done. It's very unAmerican too me. I am very weary that his dream team will spend more time talking rather than doing, despite of Obama relentlessly demanding time for action is now. Will he end up being a leader with no followers? Will Obama's vision of hope and change turn into no hope and no change? This is what the market is telling him. I like Obama's ideals but he must show the world he can get things done.

Why Public Mutual China Select Fund?

I believe the curiosity is not why buy Public Mutual China Select Fund but why March 2, 2009 after DOW went under 7,000. I don't have perfect answers.

The room for stock to decline 50% when DOW at 12,000 or 13,000 is very high. But the probability of DOW to decline 50% at 7,000 is somewhat smaller.

Just a small stake to test out timing, I will not put in another dime until this $1,000 shows some promise not to lose more than 15%(excluding loading fees of 5.5%). Shanghai Composite Index closed 2,093 today. The recent Shanghai Composite Index high(before correction) was 2,403, if it decline by 20% - below 1,920 - it will tell me this is a false bull start, then I will not put in more money.

2,100 is the approximate target zone that I planned to put in some money.

In case I am wrong on the timing, I still have cash left to buy more if I am convince quality stocks are getting cheaper and long-term fundamentals are not impaired.

KLCI : 868

Turtle bought RM 1,000 Public China Select Fund

More update later.

Reflection on Warren Buffett letter to shareholders

Reading Warren Buffett letter to shareholders makes me feel like going to church listening to sermon. He preaches the same sermons over and over again. Like church, you will see multitude of real greenhorn(new convert) or retirees(guys(gals) that finally mature after graduated from hard-knock school) keep nodding their heads agreeing to the gospel “truths”. Rebellious teenagers will flee finding the preacher is very preachy and boring. They like to prove the old chap is wrong, obsoletes and irrelevant to financial engineering innovation. The can’t even use computer properly except yelling for help - hapless. Their tools belong to Stone Age and Greek illiterate. I was one of those rebellious teenagers but humbled by “Society University” and finally return to the root and a home called Kampung Intelligent Investing.

Ever since I can get his letters on-line, I always spend time thinking over what he says in his letters. I don’t like to turn my reflections into an essay competition about Warren Buffett. I am sure countless of articles already flying around the Internet over the last few days. My inner contrarian normally will prevent me writing a guy that already very popular. But for Warren Buffet, it’s always a pleasure. So let's get started.

Intrinsic Value. Berkshire Hathaway 2008 book value fell by 9% vs. S & P 500 37% but share price of Class A lost almost 31%. Seems like some mis-match here. Warren Buffett finally openly talk about how to value Berkshire.

per share investment ( Bond, Equity and cash equivalent) + per share earnings from other sources(operating units)

2008 Intrinsic value of Berkshire = 77,793 + 39,210 ( 10 X EPS) = 117,003 or 3,900 per Class B share.

In my opinion, Berkshire is undervalued now.

Derivatives. Yes the multibillion put option contract he wrote. Since he explains better than I do, I will reproduce the whole explanation here:

The Black-Scholes formula has approached the status of holy writ in finance, and we use it when valuing our equity put options for financial statement purposes. Key inputs to the calculation include a contract’s maturity and strike price, as well as the analyst’s expectations for volatility, interest rates and dividends.

If the formula is applied to extended time periods, however, it can produce absurd results. In fairness, Black and Scholes almost certainly understood this point well. But their devoted followers may be ignoring whatever caveats the two men attached when they first unveiled the formula.

It’s often useful in testing a theory to push it to extremes. So let’s postulate that we sell a 100- year $1 billion put option on the S&P 500 at a strike price of 903 (the index’s level on 12/31/08). Using the implied volatility assumption for long-dated contracts that we do, and combining that with appropriate interest and dividend assumptions, we would find the “proper” Black-Scholes premium for this contract to be $2.5 million.

To judge the rationality of that premium, we need to assess whether the S&P will be valued a century from now at less than today. Certainly the dollar will then be worth a small fraction of its present value (at only 2% inflation it will be worth roughly 14¢). So that will be a factor pushing the stated value of the index higher.

Far more important, however, is that one hundred years of retained earnings will hugely increase the value of most of the companies in the index. In the 20th Century, the Dow-Jones Industrial Average increased by about 175-fold, mainly because of this retained-earnings factor.

Considering everything, I believe the probability of a decline in the index over a one-hundred-year period to be far less than 1%. But let’s use that figure and also assume that the most likely decline – should one occur – is 50%. Under these assumptions, the mathematical expectation of loss on our contract would be $5 million ($1 billion X 1% X 50%).

But if we had received our theoretical premium of $2.5 million up front, we would have only had to invest it at 0.7% compounded annually to cover this loss expectancy. Everything earned above that would have been profit. Would you like to borrow money for 100 years at a 0.7% rate?

Let’s look at my example from a worst-case standpoint. Remember that 99% of the time we would pay nothing if my assumptions are correct. But even in the worst case among the remaining 1% of possibilities – that is, one assuming a total loss of $1 billion – our borrowing cost would come to only 6.2%. Clearly, either my assumptions are crazy or the formula is inappropriate.

I’ve written about how shrewd and innovative he is when come to generating float. In this case, you are loaning him money at 0.7% compounded annually. Even his bets gone soured, he is paying at a maximum of 6.2% financing cost. Let's say this old tiger lost its hunting skill, say, he can only generate 10% annual compound return for next 100 years, still you are letting him grow his net worth at very cheap financing rate. In 100 years later that 2.5 million will grow to 71 million (worst case), 18 billion (1% chance of 50% decline below agreed index) or 34 billion (99% chance of not paying anything)

Back to his real money bet. 4.3 billion premiums he received so far on put contract, he is likely to create additional 25 billion wealth and not like what most believe that is the beginning of the end of Berkshire Hathaway. Honestly, do you believe that S & P will go from 900 to 450 or 0 on 31 December 2028(I pick the date from the air of European style settlement in 20 years time)? It is always frightening when you hear the media report he has 14.9 billion losses on derivatives(based on mark-to-market).

Enough of hard stuffs? Now you know the old man that you know is a complex man. He is just too humble and decided to come down to our level. Give him that respect. Will be back soon on his other subjects soon. Stay tuned……….

Portfolio Update - March '09

(Click on Image to enlarge)

There are two components to grow our net worth. The first component or first bucket is our personal earning - our day job, business, parents, etc. The second component is shifting our first bucket to second bucket (investments that consist of equity, bond, cash and etc) and hoping it will grow over time.

During this downturn, both buckets are hurting. Turtle got to cut saving from $ 888 to $ 620 / month for the next six months. If things don't improve, $ 620 will be extended to another six months. This is the reality that I have to accept.

God, grant me serenity
to accept the things that I cannot change;
the courage to change the things I can;
and the wisdom to know the difference.