Monday, December 31, 2007
Sunday, December 30, 2007
Saturday, December 29, 2007
An Important "Inch"
"A timetable for obtaining universal suffrage has been set," Tsang said. "HK is entering a most important chapter of its constitutional history." Beijing will allow HK to directly elect its leader by 2017 and all its lawmakers by 2020, the territory's chief executive said Saturday, immediately sparking criticism from democracy activists who sought a faster timetable.
Many had feared it would stop short of allowing full democracy in the booming financial capital, and the decision caught some political observers by surprise. But the decision did not please opposition democratic leaders, who have called for direct elections in the date of the next leadership race. "We are extremely disappointed, you could say we are furious, about this decision in ruling out 2012," Democrat Party chairman Albert Ho told government-run RTHK radio station. "The wishes of the Hong Kong people have been totally ignored."
The news is likely to be greeted positively by HK stock markets. Some battles cannot be won completely, even I am flabbergasted that Beijing would even give a proper date for full democratic elections. One should be wary of how much one is asking for - giving an inch is already a big thing if one were to consider the full spectrum of things China. It could have been a lot worse, much much worse. The economy of HK over the last 5 years showed how much HK is dependent on China - think before shouting from the rooftop.
Thursday, December 27, 2007
Iran Oil Deal & Malaysia
Iranian National Oil and Malaysia's SKS Ventures signed a US$6 billion contract to develop the Golshan and Ferdows offshore gas fields in Iran, which contain an estimated 60 trillion cubic feet of gas. A second part of the deal to build plants to produce liquefied natural gas worth US$10 billion would soon be ready for signing. The initial project was expected to be completed by 2014, with Golshan delivering 2.5 billion cubic feet of gas a day,and Ferdos producing more than 880 million. SKS Ventures is a privately held company of Syed Mokhtar AlBukhary. The announcement came just two weeks after China's Sinopec announced a US$2 billion contract to develop the Yadaravan oil field in south-west Iran.
The deal is not so straight forward as it seems. The US government have tried very hard to discourage foreign companies from investing in Iran over concerns that the money could be used to support a nuclear weapons program in the country. Following China, now Malaysia is thumbing their noses at the US.
Iran's oilfields are no small potato. After Russia, Iran is estimated to have the world's second-largest natural gas reserves, though due to US and United Nations-imposed sanctions, Iran has been having problems developing their oilfields.
Energy companies such as Royal Dutch Shell, France's Total and Austria's OMV, have remained involved in operations in the country despite political condemnation. Over the weekend Iran said that it was close to signing an agreement with Italian power company Edison to pump 4.5 billion cubic feet of gas to Europe. Malaysia, like China, has strong business links with Iran, including through Pertonas, which has a 10% stake in the Pars Liquified Natural gas project, led by Total.
There are two ways of looking at Iran, the more belligerent the attitudes towards a country, the less they have to lose. To engage them is a better way. Most global problems can be traced to a lack economic power. Hence helping Iran develop its economic prowess can be argued as a better long term solution. The existence of "allies" to Iran will also help in future negotiating tables. To isolate and demand changes usually backfires.
Wednesday, December 26, 2007
Some Insights From Buffett's New Deal
Warren E. Buffett agreed on Tuesday to buy a 60% stake in Marmon Holdings, the industrial holding firm owned by the wealthy Pritzker family, for US$4.5 billion with the goal of eventually owning the entire firm. As part of the deal, Buffett, through his Berkshire Hathaway investment vehicle, will gradually increase his stake in Marmon over the next five or six years until he owns the firm. The final price will be determined by Marmon’s revenues.
#1 The deal represents one of the largest acquisitions Buffett has made in recent memory, especially for a non-insurance company. Buffett has been targeting only insurance and rail companies over the last 5 years, hence the purchase across a number of industries under Marmon is interesting.
#2 Maybe we all should learn from Buffett. The deal was done just the way the Pritzkers and Buffett wanted – no consultants or preliminary studies. I am all for due diligence but not market surveys, cost-benefit analysis, etc. ... you either read the industry/markets correctly or you didn't. You either overpaid or you didn't. No amount of paperwork will help to cushion your views.
#4 The Pritzkers are very wealthy, however, they have been selling off their assets in recent years to settle some squabbling inheritance issues. In 2005, the family settled a lawsuit by two grandchildren of Jay Pritzker concerning their family trust. In August, the Pritzkers sold a US$1 billion stake in Global Hyatt, the hotel company they control, to a group of investors including Goldman Sachs.
#5 Who wouldn't want to sell to Buffett? If Warren wants your company, almost everyonewill think your company is grossly undervalued. Hence, you want Buffett in, but also leave some cake for yourself. Hence the 40% stake still resides with the Pritzkers.
Saturday, December 22, 2007
Show Me The Money (Again)
Even though most Asian economies are still robust, it would be political suicide anywhere else in Asia, except Singapore - can't remove them there. The government patted themselves on the ir backs and gave themselves another raise, the SECOND major fillip in 2 years.
Singaporean ministers and civil servants, already by far the highest-paid public servants in the world. The increase will push Prime Minister Lee Hsien Loong’s salary to S$3.7 million, or US$2.53 million, more than six times that of US President George W. Bush.
This was after another huge bump that gave Lee a 25.5 percent increase, to S$3.1 million. At the very top of the salary pyramid is Singapore President S R Nathan, whose salary will rise to S$3.8 million (US$2.6 million). The Public Service Division’s revised salary package gives starting-grade ministers a salary of S$1.94 million (US$1.32 million).
UK Prime Minister Gordon Brown receives the equivalent of US$170,556 and his cabinet ministers receive the equivalent of US$146,299. Newly elected Prime Minister Kevin Rudd in Australia receives US$284,333.
You convert that for cabinet ministers to RM4.42m. Now, even the very top players at top MNCs do not get that in Malaysia, or even most places in Asia. I think if you paid RM4.427m to Malaysian cabinet ministers - ... how to say this without incriminating myself ... Let's say that corruption is more prevalent in most Asian countries. I think RM4.42m would go a long way to "compensate" for unexpected windfalls.
So, is that the way Singapore tries to ensure that their ministers do not HAVE TO practice corruption? Because even at S$1 million, it should be more than enough to compensate for most top MNCs top dogs. Or is it to compensate for forgoing business opportunities or striking out for themselves? How are we to determine that that would automatically be profitable for the cabinet ministers?
Or has Singapore finally discovered the mathematical formula for eradicating corruption? So, are we to say that for countries that do not come close to that formula, that they are inept and probably corrupt ... even in developed nations such as UK, US and Australia?
Friday, December 21, 2007
A Blessed Christ-mass & My Alma Mater
Its that time of the year again, and my thoughts go back to my school days, where for most of us, were the best days of our lives. You made great friendships that lasts the longest, you did not need to think too much about the future. You learn to grow as a person, the place where you hone your character. Great teachers do influence us greatly, I still think fondly of my two favourite teachers, Mrs. Foong and Mr. Timothy Chee - late 70s period. I am still struck by the tenacity, vision, dedication, devotion and leadership of Brother U Paul and Brother Vincent.
Merry Christmas everyone ... drive safely.
What are fad foods? Those are the things we go absolutely ga-ga over initially and somehow, we kinda get weaned off them. Certain popular food stuff, when they are first introduced to the market, will get near euphoric reaction, and people don't mind waiting for an hour or so just to be part of the mania.
Its very much like the stock market - I must have them at all cost, you actually wanted 2 but end up buying 10 (kiasu and kiasi). Remember the days of Roti Boy, how we gush over the bun... now when was the last time you bought Roti Boy (the original one la)? It does not mean Roti Boy (original) is no good, its just that we don't need to have it so often now. The over the top euphoric scenes for Roti Boy can be seen in Thailand and is still going strong - I somehow think Roti Boy would do even better in Thailand as the taste/flavour suits our Thai friends more. Hence I think Roti Boy will be more prospserous in Thailand.
Fads can be fanned by limited outlets, just like the J & Co in KL. Another faddish food is Ramly Burger, we know its very good, beats the shit out of McD or Burger King anytime, but we don't go ga-ga over them anymore in Malaysia. Unlike our Singaporean friends, who devour Ramly Burger like its the best thing on earth every time they cross the causeway. Why - because cannot get Ramly Burgers in Singapore (some health / food certification issue). Sigh!
Fads come and go, it does not mean the food is no good after a while, it just means it reverted back to normal food. I think when McDonalds was first introduced in any country, people would queue for hours just to get some. I think John King tarts would become a fad food somewhat as well, but even John King and Roti Boy is no match for J & Co - the unassuming donut franchise owned and operated by Indonesians.
Its obvious they copied Krispy Kreme but hey, they know Asian taste buds better, and Krispy Kreme had been playing hard to get over their Asian expansion (they wanted the biggest, best capitalised partner), thus allowing first mover advantage to J & Co. Oh, the donuts, they are very good, despite all the different creams and toppings, its the glazed which tastes the best. But there will come a time (probably 6 months down the road) when the queues will get a lot shorter at J & Co.
Currently it takes 1 hour to get your donuts (non peak) and 1.5 hours during weekends. It could be worse, you could be standing in line at J & Co. in Singapore, you are looking at 2 hours there - but they are more used to standing in line in Singapore anyway. The funny thing is that there are more than a hundred outlets of J & Co. in Jakarta, but there are no queues. But there are long queues at Bread Talk in Jakarta - FAD FOODS! Sigh... even as I know this and write this, I cannot help but to queue for my donuts at J & Co... its herd mentality ... so long queue, must be good one ...
Fad foods come and go. For a food/brand to truly make its mark, it must still have queues after a few years - then its really good. That's why I love my Ah Sang Bak-Kut-Teh at Sungai Way, PJ (531, Jalan SS9A/12, Seri Setia, near the Indian temple)... almost there every weekend.
Thursday, December 20, 2007
Morgan Stanley Needs Better Fung Shui
We have Citigroup being carved up for Asian owners, then it was Bear Stearns, followed by UBS, and now Morgan Stanley. This wave would gain momentum and we should see even more financial giants having a rich Asian sovereign wealth fund or cash rich Asian company as a substantial shareholder - the new affirmative action policy?? Financial giants are sought after because of their global footprint and ease with leverage. Plus it brings the shareholders access to "certain unique technology, up to date financial innovations" thus bringing them access to global best practice in possibly the most influential sector in the business world.
Morgan Stanley shares closed up US$2.01 at US$50.08 on the New York Stock Exchange, even as Morgan Stanley executives offered a sobering outlook and warned that its credit and mortgage business would slow.The bank would suspend buybacks as it reviews its capital levels and investment plans. Mergers and leveraged buyout activity also is expected to slow. The slowdown in some businesses means Morgan Stanley, which announced 900 layoffs in recent weeks, may cut more jobs and shift resources to other, faster-growing areas.
The newly set up China's sovereign wealth fund, CIC, has snapped up a $US5 billion stake in Morgan Stanley, one of America's biggest investment banks. China Investment Corporation (CIC) would gain around a 9.9% shareholding in the storied US bank and securities firm which announced a net loss of US$3.59 billion for its fourth quarter.
CIC grabbed a US$3 billion stake in the Blackstone Group, a large private equity firm, earlier this year and China's CITIC Securities Co Ltd bought a 6% shareholding in Bear Stears for US$1 billion in October.
Morgan Stanley's quarterly loss amounted to US$3.61 per share compared with the same period a year earlier. The bank also reported negative quarterly revenues of US$450 million compared with US$7.85 billion. Last month, Morgan Stanley said traders betting the bank's own capital had incurred US$3.7 billion in losses on U.S. subprime
Wednesday, December 19, 2007
Bonuses On The Street
Despite the subprime mess and exit door shown to many CEOs, Goldman Sachs still did very well. Bear Stearns top management decided not to take any bonus this year, and will try instead to pay some decent bonus to keep performing staff from leaving - at least they are doing something right. Below are the projected year end bonuses payable within the first week of January 2008 as reported in WSJ. How was your bonus? (amounts in USD)
Best Egg Tart Ever?
Try and start another fire by discussing the best egg tart ever? I'm from Ipoh (if you do not know that by now) and the dim sum places make pretty good tarts, be it Ming Kok or Fohsun. I even think the Tong Kee ones are pretty good, right up there with the best. When I was in Singapore, the ones at Tong Heng was an adequate substitute (better than nothing). Had the ones with the flaky pastry or fluff pastry and the other one with the butter flavoured shortcrust pastry. I prefer the flaky ones as it is "soong chooi" (loose bitey) and when you reach the wobbling creamy egg tart center, it gives a very good contrast.
I have also patronised Patten's favourite Tai Cheong Bakery's egg tarts in Central, HK, before and after they moved locations - they are pretty damn good too. A few steps away in Wellington Street is another place for very delicious egg tart as well, the Lok Heung Yuen - they come in tiny bite size. For this exercise, let's not talk about Portuguese tart - its a separate matter.
Hence, I always thought that such delicate stuff like egg tarts can only come from a dedicated kitchen, and never from a franchise. How wrong was I! For those who have visited The Pavillion KL, you may have walked past the silly sounding pastry place called John King, supposedly from HK and established since 1965. Am quite familiar with HK but I have never come across John King. But with such a weird sounding English name as a brand, it does resembles a HK invention (ala Kim Gary). They sell possibly the best ever egg tarts I have ever eaten. Some may say that their crust is a bit rich, hey, egg tarts should be an indulgence , not a health/diet food! Enjoy la.
Surprisingly, the butter shortbread pastry is even better than the flaky ones, and I thought I would never like the shortbread pastry types. Forget about the durian egg tart, its a lie and con job. Go for the original or the even-better seoung-pei lai egg tart (whitish egg tart, double-skin-milk egg tart).
Its a lot saying they possibly make the best egg tarts, especially having tried so many good ones in so many places. Is it better than sex???... well, you will be making the same noises and exclamations though - "OMG"! Go John King or whatever your name is, its the best thing that I can afford after shopping at The Pavillion!!!
Tuesday, December 18, 2007
The AftermathI write on Hinduraf also don't get so many comments. But I flame Fung Shui and its like pulling pubic hairs from certain readers. Below are the passionate responses. Please note that I use profanity NOT in the form of a personal attack but rather for emphasis and clarity, and cause that's the way you speak when speaking passionately, or being pissed off. No apologies cause its my blog and should not adhere to any writing standards imposed by others. Anyway, great to hear from the readers below, no hard feelings - hey, we may disagree on one thing, that's very small in the whole scheme of things. Cheers...
Monday, December 17, 2007
Warren Buffett was at a fundraiser for Hillary Clinton in San Francisco last Tuesday. Here are some excerpts. My comments in blue.
Q: Your views on the US Dollar?
A: The most important question to ask in economics is "X happens, and then what?". We are living prosperously, but every day we are sending 2 billion dollars overseas because we consume more than we purchase. It is similar to if we owned, say, a large farm in Texas. We are extremely wealthy, but every year we mortgage a little bit of that farm in order to enjoy more of the present. And it is gradual, but then at some point you have to spend an hour or maybe two hours a week of your work to go towards servicing this debt. The problem is at some point either foreign investors will stop financing our consumption, or our future generations will be burdened with debt and have to work some X hours towards servicing the debt of the earlier generation. But the present over-consumption is unsustainable.
The persistently weak USD over the last 9 months is a reflection of central banks and governments moving away from holding pure US Treasuries (funding US deficit directly). Buffett had been bearish on USD for more than 5 years, only the USD really started to move the way Buffett (and most of the global view) predicted this year. Some governments holding large trade surpluses have set up Sovereign Funds to invest in large caps, a masked way of getting better returns from the surpluses or petrodollars. That trend will accelerate next year, hence we can probably see at least another weak year for USD. The rebalancing act has already started to work its way into lower deficits for the US, but we are not there yet, but its certainly working. The rebalancing has just started, we are probably one-third in the cycle to rebalance the USD.
Q: Your views on new products such as derivatives, SIVs, etc. ?
A: There's utility in securitizations. But the problem is these have become complex and the originators and investors have been stretched so far in part in the whole process.
Q: On Taxes.
A: In the U.S., 2 trillion out of 2.5 trillion in taxes come from income and payroll taxes. Of those, 60% is income taxes, and 40% is payroll taxes. I [Buffett] did a survey at Berkshire HQ and the average worker paid 33.2%. I paid 17.7%.
The worth of the Forbes 400 was 220 Billion in 1987, and for 2007 it is 1.5 trillion. A seven-fold increase. During the same period, wages went up only 80%.
Basically Buffett is saying the rich pay a lot less taxes, and he has been keeping quiet for a long time. Now that he has made his money and kept most of it from the government (or that he has pledged a substantial sum to the Gates Foundation), Buffett appears to be magnanimous in saying the government should close the loopholes which allow the rich to pay less taxes. I wonder why he did not say this 10 years ago?!!
Q: Sense for the future of our country, Warren?
A: In the 20th century, real standard of living increased seven-fold. That was unprecedented, and included the Great Depression and other scares. The American system has unleashed the greatest potential of its citizens. Back in 1790, China had 290 million people, and America had 4 million. But today look where we are at. We will be better off in the future, the real question is how it will be shared.
Basically we are at the starting edge of a new paradigm. Economic leadership will be going through the most turbulent of changes in terms of economic ownership, economic power will shift gradually, but overall economic leadership should still reside in the US, provided they play their cards right. Still, they will lose a huge portion of economic ownership, and some of the economic power.