Sunday, July 27, 2014

Kaletsky Crushes Schiller In A Knockout

OK, its a WWF meant for financial nerds. Schiller has done very well for the knowledge base of financial economics, in particular in terms of assessing property price cycles. Not too long ago, actually, over the past 2 years, when share prices moved north, Schiller came up with his own share price "index", which is really a ratio with his selected denominators. It appeared to be very convincing that the current share prices (for the past 2 years already) sems to be way overvalued and he basically barks at us that we needed to revert to the mean, i.e. massive downside prolonged correction.

I have always considered Schiller's ratio to be too simplistic but I cannot put my finger on it. Thanks to Reuters' very own Anatole Kaletsky (previously he was the highly respected economics editor/columnist for The Times), the explanation for debunking Schiller's ratio is utterly complete. This of course in now way suggests that the present markets globally is NOT overvalued - that is a separate subject altogether.

Kaletsky's arguments are highly worthwhile to read and re read again as there are plenty of investing nuggets, and ways to look at the same thing called investments and shares.
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With the stock market continuing to hit new highs almost daily despite the appalling geopolitical disasters and human tragedies unfolding in Ukraine, Gaza, Syria and Iraq, there has been much head-scratching about the baffling indifference among investors. Many economists and analysts see this apparent complacency as a symptom of a deeper malaise: an “irrational exuberance” that has pushed stock prices to absurdly overvalued levels.

The most celebrated proponent of this view is Robert Shiller, the Nobel Prize-winning, Yale University economist who is often credited with predicting both the 2000 stock market crash and the bursting of the U.S. housing bubble. Shiller may or may not have deserved a Nobel Prize for his academic work on behavioral economics but as a practical guide to investing, his approach has been thoroughly refuted by real-world experience.
 
Shiller’s status as an investment guru owes much to the timing of his book “Irrational Exuberance,” published just days before the collapse of Internet and technology stocks in March 2000. What is less widely advertised, however, is that for decades, both before and after that predictive triumph, the stock market strategy implied by his analysis has turned out to be plain wrong.

Shiller’s argument that stock prices have been inflated to irrational levels is centered on a statistic called the cyclical adjusted price-earnings ratio, or the Shiller price-earnings ratio. Conventional price-earnings ratios divide the current level of share prices by the earnings estimated by analysts for the year ahead.

This ratio for the Standard & Poor’s 500 is now around 17. On this basis many conventional analysts, including Federal Reserve economists, conclude that U.S. stock prices are reasonably valued. A price-earnings ratio of 17 implies that if companies can sustain this level of profitability, they will provide investors with annual earnings of one-17th, or 5.9 percent, which compares favorably with long-term interest rates on government bonds of around 1 percent, after adjusting for inflation.

Shiller’s price-earnings ratio, by contrast, divides the current level of stock prices by their average profits over the past 10 years (after indexing for inflation). To judge whether stock valuations are reasonable, Shiller compares them not with the prevailing level of interest rates, but with the long-term average of the Shiller ratio.

Viewed against this yardstick, Wall Street share prices look grossly overvalued. The Shiller ratio on the S&P 500 is now 26.3, far above the long-term average of 16.1, calculated by Shiller’s painstaking research on the profits of leading U.S. businesses since the late 19th century. The implication is that Wall Street is grossly overvalued and that investors should prepare for a loss of at least the 40 percent retreat required to return the ratio to 16.

In fact, the expected fall from today’s vertiginous price level should logically be much bigger than 40 percent. For the definition of an average requires that a long period of prices far above average must be balanced by an equally long period of deeply under-valued stocks.

Why then are investors not panicking? There are many theoretical objections to the Shiller’s approach. His arbitrary 10-year averaging takes no account of the length and depth of business cycles and makes no allowance for accounting write-offs. The Shiller price-earnings ratio will continue to be upwardly biased until 2019 because of the longest recession in U.S. history and the biggest-ever corporate write-offs then suffered by U.S. banks.

Even more damning is Shiller’s failure to adjust earnings for accounting changes and the impact of inflation on inventory valuations, distortions that greatly exaggerated profits in the 1970s and produced understated price-earnings ratios.

The most fundamental objection embraces all these technical arguments: Any comparison of valuations covering long periods is meaningless if it fails to take into account vast changes in technology, economic policies, interest rates, social and political structures, and taxes. Why, after all, should the returns expected today on Wall Street bear any relationship to what investors earned in the agricultural booms and busts of the 1880s or the Great Depression of the 1930s or the great inflation of the 1970s?

But leaving aside the theoretical arguments, what about the practical usefulness of the Shiller ratio as an investment tool? Recent evidence is conclusive: For the past 25 years, the Shiller ratio’s signals have been almost uniformly wrong. Since 1989, the S&P 500 has multiplied eightfold, while total returns, including dividends, have increased the value of an average equity investment 12 fold.

Investors who followed Shiller’s methodology, however, would have missed out on almost all these gains. For the Shiller price-earning ratio showed the stock market to be overvalued 97 percent of the time during these 25 years. Even during the two brief periods when the Shiller ratio was below its long-term average — in early 1990 and from November 2008 to April 200 — it never sent a clear buy signal.

Instead, Shiller’s approach suggested that the valuations in 1990 and 2009 were only just below fair value — implying there was very limited upside at the beginning of two great bull markets that saw prices multiply fivefold from 1990 to 2000, and threefold from 2009 to 2014 (so far).

The Shiller ratio’s predictive performance would have been just as bad in earlier decades if it had existed. During the equity bull market of the 1950s and 1960s, for example, the ratio would have said Wall Street was overvalued for 96 percent of the 19-year period stretching from early 1955 to late 1973.

Only in January 1974 did the Shiller price-earnings ratio move below what was then its long-run average, implying it might finally be a “safe” time to buy stocks. Straight after the Shiller ratio sent this first “buy signal” in almost two decades, Wall Street crashed by 40 percent in 12 months.

Time will tell whether the new Wall Street records are evidence of irrational exuberance or simply a reasonable response to gradual economic recovery, as suggested by Federal Reserve Chairman Janet Yellen (correctly in my view).
But one piece of evidence we can safely ignore in making this judgment is the Shiller price-earnings ratio.

Friday, July 25, 2014

MAS Reboot

Starbiz had a decent article by K Sidhu today on where do MAS go from here, my comments in colour. Please note the effort to put in some soundtrack to the commentary:   
".. moving forward for a sustainable business model. Bankruptcy is an easy route, but contrary to popular belief, doing that will not change MAS’ rights to fly to destinations, as the right of routes lies with the Government. It’s also the prerogative of the Government as to who gets these rights.














The tougher job is in dealing with existing contracts, some of which are non-negotiable for several reasons. (Bankruptcy or a privatisation are the first steps to take. The government will want to "force pressure" on certain parties to renegotiate certain contracts. That is paramount BEFORE Tony Fernandes will even sit at the same table. AAX will probably not partake in any scheme whereby MAS is still burdened by staffing cuts restriction and some unreasonable contracts).
The corporate future of MAS seems to be attracting a flurry of speculation and opinions. The week began with talks of delisting, but by mid-week, there was chatter that a merger with AirAsia X was the best way to save the airline. But this is not viable, as both are different airlines and AirAsia X is also loss-making. Any merger would only make it worse for MAS. (This is where I disagree with Sidhu. I strongly believe AAX would be an excellent fit. Think of it as a code sharing of the intimate kind, where they have same owners - for this to work, Khazanah and Tony must hold shares in newco holding controlling stake in AAX and 100% of MAS. What MAS is getting is management structure and discipline from AAX, The consolidation of purchasing and aircraft maintenance could yield benefits. AAX's link up with Rakuten is amazing to me. The new launchpad will elevate AAX into the much desired routes to San Francisco and New York. Not to mention possible links from Tokyo to bigger domestic destination , if permissible. AAX's work is cut by half with the tie up with Rakuten, my most admired Japanese company. The status and reach of Rakuten's many online and social platforms will make for ease nich marketing and channels flow through. MAS will stay full service and maintain a 20% premium to AAX. They may even fly both planes if same routes have sufficient traffic. Management by yields will determine whether to just have one plane. The key is code sharing with MAS, this has to be worked out. Maybe they could resolve it via a 20% fee if an AAX client move to MAS flight and vice versa. This to me is the best viable option on the table.)
Major shareholder Khazanah Nasional Bhd, which has a 69.4% equity in MAS, had denied any possible merger with the long-haul, low-cost carrier yesterday.

The soundtrack for the MAS union group:


But there are other theories circulating as well – from the possibility of Petroliam Nasional Bhd emerging as a white knight to rescue MAS and a group of young turks being courted to take over the airline to an exco team of former MAS senior executives coming together to help the airline until it is fully restructured.
Amidst all this, the vociferous union – Malaysia Airlines System Employees Union – which claims to represent 13,500 employees, wants the top management of MAS out. Such a scenario is making many MAS employees jittery. Many fear that they will lose their jobs.
Apparently, the management of MAS has received the green light for a new business plan, which entails some drastic steps to to turn the airline around. They may involve job cuts of up to 30% of MAS’ current workforce of 19,800 employees and a salary reduction of 30%. If the plan is approved, who will decide which employee should leave and who should stay? (I don't quite understand why the union would stand in the way of a restructuring. You know very well it can no longer operate under such a ladened structure. What the union should be going for, in the best interest of their union members and the country, is arrive at a decent VSS for at least 30%. I think if VSS scheme is agreeable, the selection of and attrition will be manageable by AAX manegement. It also makes it less imponderable if it was executed by MAS own management. Nobody owes anyone a living. You do not get to work for your entire life in a job even though you may like it very much. There should be no guarantees in employment. Ask any remisier who joined in the 90s. The industry tanked for them with internet broking and variable rates, so... cry and whine? No, you move on, you did not forsee the problems within your company and industry consolidation. You did not move on. VSS is the best option.)
Currently, the critical areas in MAS are under-staffed and there is a lack of expertise in some areas. An exercise to trim the workforce in a highly-skilled industry may lead to more problems for the airline than it already has. (Err... whatever critical areas that MAS lack CAN & WILL BE EASILY COVERED FROM AAX side, I think. Don't you?
There should a special office called "shared services" between the two to cut out duplication and improve integration efforts plus savings.)

My Final Advice IN SONG to the MAS unions, Khazanah, the connected companies with out of order contracts, and even Tony Fernandes ...


If indeed shedding the workforce is the plan to revive MAS, then Khazanah does not need six to 12 months to come up with a plan for the national carrier.
In times of crises, the first thing companies tend to do is trim the workforce. This is a common phenomenon. But in the case of MAS, will job cuts solve its problems?
The airline has many issues besides manpower woes. The critical areas being a change in perception and ramping up sales.
Also, has it done enough to stop the leakages in the supply chain, or is it still paying above-market rates for its contracts? If so, why are these contracts not being renegotiated immediately?
There are some talented and dedicated people in the company. They have stuck with the airline through the good and bad times, to the extent of foregoing their increments and bonuses. 
Surely, there must be a better solution to resolve their predicament, rather than implementing measures that would force them to leave the company in big numbers. After all, they are blameless as far as those untoward incidents as concerned not only now but in the past too."

Thursday, July 24, 2014

Best Omakase Ever

Omakase in Japanese means according to the chef's wishes. What he/she sees fit and best to be served that best exemplify their skills and produce selection. 










A simple start, Japanese sweetened pickled barley on Japanese cucumber, refreshing. The beautiful colour of the uni indicates freshness laced with caviar. Plus a light vinegary sweet broth with some unique stems from a rare veggie which slips my mind for now.


A true test of any really good Japanese restaurant is to go sit at the main counter table and face the chef asking for omakase. I have had plenty of good Japanese dinners, even the renowned Ryugin and Kanda in Tokyo. However, my recent meal at Hanazen @ Jaya One tops the lot and that is no faint praise.













A palate cleanser of sorts, chilled young corn from Hokkaido, so sweet and crunchy like a fruit. This is only in season one month in a whole year, exceptional.


I have written about Hanazen before. They are eternally packed for lunch owing to their (not cheap) but very tasty and value for money bentos. But for the fix, go at night and ask for omakase. The omakase ranges from RM300-500 pp but let me assure you its value for money and is like a trip around Japan's loveliest seasonal bounty.


































The exquisite Okayama grapes, that package alone costs over RM120. I got to have 3 for my desserts plate ... lol. 


















This horrible looking fish from Kyushu, the Akamutze, but oh so sweet and delicate.

















Lightly seared Kagoshima beef on sushi rice, great. But next to it was the single best piece of sushi I have ever had, flounder belly, beyond words, much better than any tuna toro.

 















I love almond and Hanazen's home made almond jelly is to die for, plus the 3 miserable Okayama grapes ... and wait for it, the famous Shizuoka musk melon (its so sweet I thought it was syrup).



Make sure the chef owner is there, my nick name for him is Mun-Mun ...lol.

Wednesday, July 23, 2014

S&M Show Podcast

Dissecting Warren Buffett Quotes - Part 2



We try to get behind the reasoning of some of Warren Buffet's lesser known quotes. Plus, a commentary on SC's latest civil suit against Kenneth Vun and 6 others.

http://www.bfm.my/sm-salvatore-dali-malaysiafinance-dissecting-warren-buffett-quotes-20140723.html


SONG PICK:  Hello Stranger by Yvonne Elliman



Tuesday, July 22, 2014

We Are In The MAJORITY!!!

Since the last elections, we have been inundated with tragic news, a sometimes ineptness in certain sections of the government, and then many idiots in high places saying very stupid things which reveals their level of intelligence ... no need to mention names, we all know who they are. Then we have the disturbing trend in certain quarters trying to stoke fire where there was none to start with esp with regards to our religious space and attitudes. We all know deep inside there are more of us Malaysians who are NOT LIKE THEM.

We do not have to wait for very tragic events to occur before we Malaysians pull together and realise whats most important to us ... our family, friends, loved ones, our countrymen and our country. Hence I am so pleased to read a compilation of real news about real Malaysians, restoring our faith in humanity and in our fellow citizens.

We are in the MAJORITY ... remember that!!!
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http://cilisos.my/5-malaysians-who-restored-our-faith-in-humanity/

5 Malaysians who restored our faith in humanity


5-Malaysians-restored-faith-humanity-Featured-Image
With all the negativity surrounding our country recently, we at CILISOS think that it’s time for a short breather. Good vibes are in need.
Just last week we were heartbroken by the shock that was MH17 and its 298 passengers’ death, way before we could fully recover from the MH370 incident. But just a day before that, we got our feathers ruffled at Kiki’s racist remarks and violent behaviour, and played disciplinarian by commenting our thoughts, creating Facebook pages and even stalked her at her home.
And a short moment before that, we were enraged with Bung Mokhtar’s Hitler comment and his less-than-apologetic tweet. We hit back against Tengku Adnan’s orders to close down soup kitchens helping the poor and homeless, starting a kickass movement to nullify his words.
The list goes on, but let’s get back to the present.
This is undeniably a hard time to celebrate what should be a joyful and peaceful month of Ramadan, so let’s ease in the transition by remembering the good in people. Or rather, the good in these awesome Malaysians, who stand as one regardless of race and religion. Let’s remember the best of us.
We take a look at five outstanding acts of kindness which have restored our faith in humanity:

1. Abang Polis who helped change a girl’s tyres

Phyllis Kong's Facebook post which went completely viral in a day
Phyllis Kong’s Facebook post which went completely viral in a day
It’s in almost 6pm and your tyre goes bust in the middle of Federal Highway (for those of you who have no idea where that is, it’s one of the nation’s busiest highway. Also known for mysterious traffic jams at 10pm and ghostly encounters). You’re in a sweater, sweating away in the heat while angry motorists honk at you for creating yet another jam they have to endure. You try to change the tyre yourself with crappy stock equipment, but even with all your powers combined, the nuts just won’t loosen.
Lucky for Phyllis Kong, a traffic policeman came to her rescue when he stopped to check on her. While the first thing we’d think he’d say is a tacky I-scratch-your-back-you-scratch-mine offer, 26-year-old Syed Hazril Erza proved to be nothing like the Malaysian policemen stereotype.
In short, Abang Polis helped her change her tyre, realised it was out of air, escorted her to a petrol station to pump it up, realised there were more problems with it and escorted her to another petrol station with a tyre shop. Getting a police escort also gave her the feeling of being a minister, running a red light and stopping incoming traffic to let her pass. Bet you wish how that felt, right? Cos we at CILISOS are kinda a little super jealous right now.
Look, ma! I'm famous! Abang Polis Syed Hazril Erza is second from right. Photo from utusan.com.mu
Look, ma! I’m famous! Abang Polis Syed Hazril Erza is second from right. Photo from utusan.com.my
Well, Abang Polis didn’t go unappreciated for his deed in September 2013. Phyllis’ Facebook post went viral  to the point where her saviour in a suit even caught Najib’s attention.
PHWOOOAAAAAAAAARRRRR. Jib Kor impressed wor!
PHWOOOAAAAAAAAARRRRR. Jib Kor impressed wor!
Kind-o-meter: 5/10

2. Cikgu-of-the-year who gave a fasting cashier juice and biscuits

Tropicana Twister's PR team should be extreeeemely happy, too.
Tropicana Twister’s PR team should be extremely happy, too.
Who could forget the heartfelt story told by Raven Murugesan during last year’s Ramadan? The 50-something school teacher’s Facebook status narrated his experience when he offered a tired cashier some orange juice and biscuits for an express ‘buka puasa’ nom. The Chinese gentleman behind him ‘sportingly nodded’ in approval, giving the cashier a quick 30-second break under the counter before returning with tears in her eyes.
Gotta love a story like that.
The face behind the feel-good, no-nonsense 1Malaysia post
The face behind the feel-good, no-nonsense 1Malaysia post
In an interview with MSN Malaysia , Raven said that he reacted in that manner because it was a ‘built-in mode’ which came with his profession. Having raised in the olden days of unity, he recalls his childhood days: he would sleep over at his Malay friends’ house for nights (and vice versa), Indian weddings would see Chinese and Malay youths working together to decorate the house, children could mingle freely and without prejudice, everyone could peek into the lives of each other, he would call his friends’ Mak ngah as ‘Mak Ngah’, while his friends would call his uncle ‘Chittapa’… Now doesn’t that sound like something out of an advertisement? Like something you’d see in yet another dreamy, wishful-thinking 1Malaysia campaign?
But it ain’t. This shizz is the real deal.
“The excitement of friendship and the depth of unity were not moulded by advertisement or promotions,” he tells MSN Malaysia. “What we have now is a formally devised platform to integrate, which is not natural. It gives that ‘fake’ feeling. I personally feel that sections of our society have isolated themselves for various reasons.”
Want another fuzzy story?
“When I was in Year One in 1970, my shirt was accidentally torn because one of my friends pulled it. My teacher, a Malay lady immediately called me and gave a brand new shirt which she said she had bought for her son. I never saw her as my teacher after that. She was my hero, my mum. That is what we need amongst our young teachers.”
Seems like the 70′s were an awesome time to be a student. What ever happened to the quality of our teachers? That’s a story for another day.
Kind-o-meter: 7/10, we trust this guy ain’t a one-off kinda guy  

3. Lorry driver who risked his life to rescue a couple

A hero and a loving father. Photo from lanunsepet.blogspot.com
A hero and a loving father. Photo from lanunsepet.blogspot.com
In April 2011, after celebrating his 52nd birthday with his family, lorry driver Ong Kim Koon saw an accident involving two cars along the MRR2 at about 1am. After pulling over, he rushed to rescue a Malay couple who were trapped in their wrecked car. Whilst he managed to pull Rosamiah Hashim, 38, out of their Perodua Viva, he was hit by a Toyota Estima while trying to rescue Zainal Yusoff, 45. The driver who drove the MPV fled the scene. (Estima driver, if you’re reading this, do know that you’re a total jerk.)
Doctors planned to amputate his leg which was infected, but postponed the surgery because of his weakened condition. After 11 days of coma, he passed away.
We have our utmost respect for the man who risked his life to help strangers. Photo from lanunsepet.blogspot.com
We have our utmost respect for the man who risked his life to help strangers. Photo from lanunsepet.blogspot.com
Although it has been three years now, our thoughts are still with his family. For a man who risked his life to help another, Kim Koon was undoubtedly a hero in the disguise of an everyday man.
Kind-o-meter: Beyond heroic, really…

4. Cheras uncle who shared his water supply

A neighbourhood guard fills up the water tubs in Rizal's house. Photo from thestar.com.my
A neighbourhood guard fills up the water tub in Rizal’s house. Photo from thestar.com.my
Just a few days before the major water rationing campaign began in Selangor, houses in Cheras were already suffering from water disruptions for days. In fact, it is considered the worst water disruption to hit the area since 1998. Homeowner Rizal Mohamad and his immediate neighbours in Taman Damai Murni were one of the few lucky ones with proper water supply unlike the others who lived a few rows away.
Uncle Rizal was a total sweetheart, providing free water to his neighbours throughout the period. Two water tubs – which he’d constantly fill – were placed outside his house for people to use. He’d also allow the neighbourhood guards to enter the house to refill the tubs whenever they were dry. Three buckets were also laid out to help scoop water out of the tub.
Pretty easy for us to empathise, especially after we’ve gone through three and a half months of water rationing. Oh, the torture.
A new meaning to 'watering hole'. Photo from straitstimes.com
Good times, eh? Photo from straitstimes.com
Kind-o-meter: 7/10, can you just imagine how much he’d have to pay when the bill shows up?

5. Macha who gave his word… and honoured it well

Vaasu gets extra points for looking super macho.
Vaasu gets extra points for looking super macho.
Earlier this year, Only in Malaysia, a Facebook page highlighting everything in Malaysia (duh) posted up a story about how an Indian man came to the rescue of a motorist who ran out of petrol. Where did this happen? Federal Highway, again.
In this descriptive status, the driver was dangerously and helplessly stranded in the middle of the highway during the morning rush hour traffic. Shortly after calling her dad and sister for help on the phone, a Indian motorcyclist stopped and asked her about the situation. He asked her to pass him some money so that he could buy some petrol for her. Here’s what he said right before he left:
“You tunggu saya, I mesti balik punya.” (Wait for me, I’ll surely come back.)
After 25 minutes of waiting, she was down with doubt and disappointment. All of a sudden, the macha appeared right in front of her and helped refuel her car using a half-cut mineral bottle as a funnel. This macha damn clever.
In no time, readers who read the viral post identified him as Vaasu Thevan, who in an interview with THR Radio said that he would always help people despite being looked at suspiciously. He also recalled an incident where he tried helping a stranded motorist on Pantai Expressway, but was declined as someone else was on their way. At 3:30am, he was informed about an accident in the same area and found out that it was the very same person who declined his help. The motorist had died, leaving him troubled and sleepless for a week.
His takeaway?
Vaasu hopes that Malaysians would do more than staring and ignoring. Instead, they should spare some time to help their fellow countrymen in times of trouble.

.

Warms your heart, doesn’t it? While we endure the occasional racial fights on Facebook (among others), remember: it doesn’t reflect the rest of us. These little nuggets of positivity restore our faith in Malaysians humanity, rubbing our backs whilst saying, “Hey, maaaybe we’re not that bad after all.”
And you know what?
These are but five of the many, many, many other heartwarming incidents happening throughout our country. We darn well aren’t that bad, at all!

Monday, July 21, 2014

Taking A Walk Down Bursa Street

Many have been commenting that I do not write about stock picks that often anymore. Its a deliberate move because its quite a thankless task. Move up ...ok, move down ... I am an idiot or working with syndicates. Then there are the eyes of scrutiny by SC and Bursa - its not a lot of fun when you get "watched or monitored". Mainly its because I have started Murasaki which is a system that helps people to make better investing decisions and we have regular discourse on stocks there - I do not wish to cannabalise my business and short change my subscribers. (Mind you Murasaki is not an investing club or stock picking group, its a system where we get to analyse flow of funds, market energy of stocks in order to make better decisions).

Anyways, lets take a walk down Bursa Street and here are my commentary:

MAS - the recent tragic incident would probably hasten the privatisation process by the government; there are a few options as well, one is doing something with AAX, two sell a stake to Etihad (which has been buying everything) ... methinks any privatisation or sale would be in the region of 35-40 sen, but there are so many other better trades to make currently, hence not that keen to part my funds on something that MAY happen.

Sumatec - Not a big fan as assets are so far away, verification a bit tough, doubt any analyst has flown over to check things out. Plus so much shares were issued at much lower levels. Its too speculative for me.

SONA - Its rebound yesterday may perk up attention but its a rebound from a sell down from the earlier news. Confirmation of deal is just a relief bounce. Like I said before, not enough information is available to assess the profitability, the cost structure, the delivery and storage cost, the actual margins, are they forward selling, etc...

Hovid - When a stock has gone through hell and back, and there are houses willing to write about it, it should get a good run.

Ideal Jacobs, Goh Ban Huat, PDZ, Prestariang, Dnex - These are all dipping their toes into oil and gas albeit the smaller caps. Not all are created equal. One must do more research into the deals to get at the next Barakah or TH Heavy. Pointers: look at the structure of the deal. The deal must be clean and valuations fair  , i.e. no lumbering legacy issues from past businesses. The incoming O&G company must get absolute control, more than 50% of the listed company to properly reflect the potential and earnings of O&G biz. Next, not all businesses within O&G were created equal, some may just be agents representing products, which is a weak business model with low margins ... some may be just operating silos within the services side, an also ran kind of business model ... look for a more encompassing business model that has strong value-add element. Initially the RTOs were more asset heavy type, all good and fair as long as industry is booming. Thirdly, the person helming the company.It is critical in the vibrant O&G business that the person at the top is not just another beneficiary of the entitlement kind, that can only carry you so far esp when you are mid to small size. Look for astute CEOs with the ability to take the company to the next level with the better access to capital and funding.

Hear, hear ...


Wednesday, July 16, 2014

My Master, A National Treasure

Its been more than two years since I posted on my sifu. This is probably the most significant posting I had done thus far that does not involve business or politics. My circle of close friends and business colleagues have benefited significantly from his treatment.

My Master, Dr. Law Chin Han (from my iPhone)


Where shall I start? OK, just based on real life experiences of those who are close to me. The entire Tong family (Bukit Kiara Properties) absolutely swear that he is the master of masters when it comes to acupuncture (and dentistry as well). To me, you can probably find many great dentists, but to find a real Master in acupuncture, thats a whole different ballgame.


I am not big aficionado of Chinese medicine or acupuncture initially. I guess you have to go through the whole shebang to appreciate the real life changing effects from a master.


My business partner and very close friend went to him after 15 years of persistent gout problem, he will get his heavy attacks at least once a month, as regular as a woman's period despite being on the maximum daily dosage allowed on the whatchamacallit-purina thing. He has been to the best doctors over and over and still nothing. He had a few sessions and went off his medication, he has not had any gout problem now only a regular monthly visit to Dr Law.


Another friend of mine had a daughter around 8 years old but has never had appetite for food. She eats very little of everything, even candies or ice creams. Naturally, the parents have been to numerous specialists as well. She absolutely got her appetite back after a few treatments. yes, seemingly unbelievable but as parents you literally have tears running down your eyes to see that happen after years of frustration and heartaches.


A CEO friend of mine whose father was at terminal stage owing to long suffering diabetes condition, and losing a leg already to it, but has never been able to have a good night's rest for the longest time. A couple of sessions and he slept soundly and was very happy when he could finally sleep well. He passed away recently but at least he managed to get good rest every night in the final few weeks. The pain management by Dr. Law was probably one of the best gift his family could have given to the patient.






Before I share my own personal experience. Let's look at what acupuncture is. Acupuncture can treat respiratory threats such as acute sinusitis, acute rhinitis, common cold, acute tonsillitis, bronchial asthma and acute bronchitis. It is effective for the eye: acute conjunctivitis (pinkeye) and near-sightedness in children.


For treating gastrointestinal disorders: hiccups, gastritis, hyperacidity, ulcers, constipation, diarrhoea, paralytic ileus and colitis. 


Muscular and neurological disorders such as: migraine, headache, paralysis after a stroke, bladder dysfunction, pain in the ribs, frozen shoulder or tennis elbow, Meniere's disease, bed wetting and osteoarthritis.


Why is Dr Law a master? I call him that and many of his patients will call him that after benefiting from his skills. He is a master because he is precise. In 1985 he developed a computer program relating to acupuncture and the best time of the day to treat certain disorders. He has developed his own diagnostic machine that can tell him all he needs to know from your one ear and his needle hooked to the machine. He also uses the machine to detect the exact point on your body, marking them before putting in the needles. Many other acupuncturists rely on guesswork and estimation.


He has even managed to detect hepatitis using his machine with his needle at your ear. There are many other cases which are not the norm for acupuncturists, which he has managed to treat well: such as epilepsy, reducing cholesterol, lowering blood pressure to the extent of stopping Western bp medication, and even weight loss management.


Dr. Law is the founder and President of Malaysian Acupuncture Society from 1982-1993. He has successfully treated 60 drug addicts in 1982 during a stint at the Pudu jail, totally weaning them off drugs with acupuncture. The results were recorded in a research report "Using Acupuncture To Deal With Drug Withdrawal and Drug Addicts", which gained acknowledgement from WHO.


Dr. Law is a generous spirit, he devotes 3-4 hours for two nights a weeks to treat the under privileged at a certain center. In the past he has ventured to northern Thailand to treat the poor as well.


Well, who needs acupuncture? Everyone really. Dr. Law will basically get your vital organs to function much better. Owing to the largely sedentary lifestyles of most, we will get our usual aches and pains, kidneys and liver not functioning optimally. Instead of them operating at 60% or 70%, why not get them to be at 90% or better. Its certainly not just for old folks as I see plenty of people in their twenties and thirties coming to the center as well. Many of his patients fly in from overseas for regular treatments as well.


Dr. Law Chin Han, born in 1946, graduated from the National Defence Medical Centre, Taiwan with the degree specialising in Acupuncture in 1972. His office is located in Selayang. Its a very neat 4 storey corner shoplot and he occupies the whole thing. Ground floor is reception, there is a lift, 1st Floor is for Acupuncture, with 8 beds and 3 nurses. 2nd floor is for dentistry. He has his own farm where he grows organic fruits, you can sample his farm produce at the clinic, they are free for all, the durian ice cream is very good, sometimes you get rambutans as well and many other fruits.


The address: MERIDIAN ACUPUNCTURE & STROKE REHABILITATION CENTER / LAW DENTAL SURGERY (LASER CLINIC) 21, Jalan 3/3C, Sri Utara Batu 7, Off Jalan Ipoh, Batu Caves. Tel: 03-62518913, Mobile: 019-2157762
Mondays       9.15am-7.00pm
Tuesdays      9.15am-5.00pm
Wednesdays 9.15am-7.00pm
Thursdays     9.15am-1.00pm
Fridays         9.15am-7.00pm
Saturdays    9.15am-7.00pm
Sundays      9.15am-1.00pm


On Jalan Selayang, you will go past Taman Wahyu and see Tesco on your left, turn left just after Esso station, turn right and you will see Meridian Acupuncture.


My Own Experience: I have high blood pressure, much of it is hereditary, without medication my bp will be 150/110. For the longest time, even with medication, it will go to 130/90 at best. Seriously, after a few sessions, I have cut my medication in half, and my bp is steady at 122/82, how unbelievable is that. Dr. Law assured me that if I continue to monitor my bp at home, and keep reducing the medication, I should be drug free within 6 weeks. After that its just regular maintenance visit to his clinic once a month.


He has also been treating my inner body organ-fats, my kidney and stomach for better digestion, metabolism and reduction of gut size. The vain-pot in me also had him reducing my soon to appear double chin, he is amazing. There are other points he will occasionally take care such as reducing my appetite and improving my blood flow.


It is recommended that you take a blood test first at another clinic and show him the results. He needs the info on your cholesterol, LDL, HDL and prostate if possible. Be honest and tell him everything that bugs you. I had sinus that I didn't even know I had, which was why he said I slept with my mouth open, leading to loud snoring, dry throat, susceptible to cough. etc.  I must say the needles next to my nose were a bit of a pain, but now I sleep with my mouth close and snoring has subsided.


Once in the clinic, the doctor will ask you your history and then proceed to diagnose you with his machine, needle on your ear, from there he will be able to tell how healthy you are. He does not need more patients, he does not need more money, hence he is not the type that tries to drag out your healing process for his benefit.


This and many other reasons is why he is a National Treasure. If anyone is more deserving of a Tan Sri-ship, I know of no one other than Dr. Law. Its not only Chinese who come to his clinic, he has lots of Malay and Indian admirers as well, and a few Datuks to boot.


 He will then mark out the spots with his machine and needle on the points for the actual needles, telling you what each needle is for. Usually he uses 8 needles per patient but if you can withstand it, he can use more needles. The needles are then hooked to another small machine. The nurse will explain which button hooks to which needles, you yourself will turn on and control the electronic pulses to those needles. The higher the pulses, the better the treatment. Of course, its all up to your level of comfort, no one is pushing you to take stronger than what you are willing to take. You are supposed to increase the pulses every few minutes.


Is the entire process painless? No, but its not as bad as some people make them out to be. I do not have a high tolerance of pain at all, in fact after a while it can become addictive like massage. I now doze off after 15 minutes for the 30 minute treatment, it gets so comfortable, seriously.


Now, I have no aches or pains anywhere and feel more refreshed after each night's sleep, like someone pumped more oxygen into my bloodstream. The great thing about acupuncture is that you are not asked to ingest any medication, no invasive medication that leaves lots of bad stuff in your body, no invasive stuff that whacks ten other things around your body when trying to kill one alien object.


Do your self and your family a great favour, improve the functioning of our organs, rid of our body toxins, eradicate our aches and pains - what have you got to lose? seriously, Dr. Law does not need the money. One session is RM100, or you can sign up for a course of 5 sessions for RM400. The more loyal ones will sign up for the extended package of 21 sessions for RM1,200. 

Not only that, from his clinic hours, you'd find two days where he will close early ... for those two days he will go to a location near Genting to treat people for free. But please make an appointment or be prepared to wait for up to an hour.


Why isn't more people more aware of his existence? Maybe because its an Eastern treatment methodology, there are also good ones and not so good ones, and Dr. Law is one of the evry best for sure. For over 40 years, he has been doing wonders for many, and his charitable works as well. I and many who have benefited from his expertise, skills and generosity of spirit, applaud him.

S&M Show Podcast

Further Thoughts On The Banking Mega Merger



Salvatore Dali and the morning run crew look further into the barbs and bouquets surrounding the proposed banking mega merger deal.



http://www.bfm.my/sm-salvatore-dali-malaysiafinance-more-thoughts-on-the-proposed-mega-bank-merger-20140716.html



Thursday, July 10, 2014

CIMB, RHB & MBSB

 Grand developments, my views at the bottom:

RHB, CIMB, MBSB seek to merge




Just as the market was heading towards a period of listless trading due to the World Cup and prevailing cautious sentiments, trading in three financial institutions are being suspended today, paving the way for the formation of Malaysia’s biggest bank.

The trading of RHB Capital Bhd, Malaysia Building Society Bhd (MBSB) and CIMB Group Holdings Bhd are suspended today, all three told Bursa Malaysia separately yesterday.

It is learnt that the three banks will write to Bank Negara to seek permission to commence a corporate exercise which will result in a mega bank that will have a market capitalisation of more than RM90bil, assuming the deal is concluded at about 1.70 to 1.75 times book value.

“The deal is likely to be done at 1.75 times book value based on CIMB’s current valuation of almost 1.70 times book. It is unlikely to be transacted at anything less,” said a source.

At 1.75 times book value, RHB Cap would have a market capitalisation of about RM30bil, while MBSB’s total capitalisation would be about RM6.8bil.

“Together with CIMB’s market capitalisation, the merged entity would fetch a market value of more than RM90bil,” said the source.

The Employees Provident Fund (EPF) will play a significant role in this merger because it has significant stakes in all three entities.

It is the major shareholder in RHB Cap with a 40.76% stake. The other major shareholders of RHB Cap are Aabar Investments PJSC with a 21.43% stake and OSK Holdings Bhd with a 9.91% stake.

The EPF has a 64.73% stake in MBSB and 14.46% in CIMB. 

The eventual merger will see the EPF emerge as the largest shareholder in the mega bank, with a stake estimated to be more than 25%.

RHB Cap and CIMB closed four sen lower each at RM8.72 and RM7.24 respectively, while MBSB ended 12 sen higher at RM2.34 at yesterday’s market close.

At the close yesterday, CIMB was trading at 1.70 times book value, RHB Cap at 1.29 times book value and MBSB at 1.60 times book value. 

Sources said the exercise would possibly involve a share swap between CIMB and RHB Cap at a book value of 1.75 times and an outright buyout of MBSB.
MBSB is a building society whose loans are mainly for residential loans and commands a lesser premium. 

“But it is probably one of the most profitable financial institutions and has the fastest growing balance sheet. This is evident from the returns it has given to its shareholders in the last two years,” said an analyst.

A merger of the three financial institutions will result in a bank with the largest asset base, market capitalisation and earnings based on the latest published numbers.

Based on latest figures, the merged entity’s asset size is expected to be more than RM600bil and combined profits based on its last financial year will exceed RM7bil. It will surpass that of Malayan Banking Bhd (Maybank) that has a market capitalisation of RM91.1bil currently and asset size of RM578bil as of March 31 this year. 

Opinion:

a) The deal kinda saved MBSB and the people 'promoting' it as it was hit very hard by Bank Negara recent rulings (correctly), if you know what I mean. By keeping all the loans under a much bigger loan entity, somehow things will become very David Blainish. Will also save EPF from future blushes.

b) Kinda murky with Nazir becoming Chairman of CIMB, and probably elevated to a directorship at Khazanah, plus a significant role at EPF investment panel. Surely Nazir did not do anything to suggest such a merger. At least now we understand the rash and rushed move to resign as CEO and be made Chairman, plus the Khazanah's role better.  Hmm...

c) The deal is very good for RHB shareholders but the Aabar Group's block could still be tricky as their entry price was much higher. However there seemed to be more willingness by Middle Eastern big investors to finally take their losses and move on (e.g. recent Iskandar land deal).

d) This deal would be negative for Maybank and and negative for the rest of the smaller banks, by sheer size muscling through the industry. Hence Maybank is UNLIKELY to sit back and do nothing, but its common shareholder in this is EPF and that may be sufficient to be having a phone conversation along the lines "You do what you think is best for the company, but remember who you are going against ..."

 e) This deal will go through. Ong Leong Huat will be much richer. More IB staffers will lose jobs ... how they wished they could be part of the "bank tellers union".

f) At the end of the day, the merger is natural, necessary, plus can cover some blots (if you know what I mean) ... and prepare for the ultimate on the agenda list ... having an entity large enough to propose a merger with Public Bank in the end. EPF being the driver could do that deal, but not Maybank. Kapisch!


S&M Show Podcast

Nazir's Career Move & The Truth About Indices



http://www.bfm.my/sm-salvatore-dali-malaysiafinance-nazir-career-move-the-truth-about-indices-20140709.html

We analyse the reasonings behind Nazir's career move and their implications. Plus a look at FTSE indices.

The Experts (Are Way Off)

No amount of back data, simulation ... can predict future events accurately. All those who study statistical distribution and variance analysis can only guess at best. In much the same mould, are the experts' views and predictions about investments (mine included). Hence, take experts' views with a large bucket of sodium.

2014 WORLD CUP PREDICTIONS GROUPSTAGE

Wednesday, July 09, 2014

The Sporting World Is So Biased

OK, with Brazilian supporters reeling, my friend at BFM said Samba became Sambal after being pounded to a pulp ... with something fishy, oh, its belacan ... and it goes very well with frankfurters. I did not regard Brazil as a threat as was discussed in my previous World Cup posting, they are like many Penang hawker food stalls, easy to champion but generally over rated.

The sporting world is so biased. If you had switched the jerseys, and the same people played, ending with Brazil winning 7-1, the reaction by most watchers and the media would have been ecstatic. But no, just because they were Germans, they were referred to as clinical, well drilled ... Thats a load of bs, if they played under the banner of Brazil, they would have been referred to as magical, tearing the defence apart, making them look like schoolboys, etc...