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Showing posts from January, 2008
Internet Coffee Shop Talk

Boon said...I never regard Lee Shau-kee as the Warren Buffet of Asia anyway. Lee Ka-Shing is the Warren Buffett of Asia.

Most Wall Street 'strategists' and fund mangers were calling for a year end target of more than 15,000 and some 17,000 for the Dow when the index broke 14,000. These guys are now at huge losses, and the media has been trying to put a very good spin on the bad news.

We should see the weakness spreading to sectors other than the financials in the future.

Best wishes
boon,nice to hear fm you ... been reading yr great calls for the past few weeks from yr blog ... lol agreed on lee shau kee, thats why the tongue in cheek writing and commentary, at least he stepped down from the pedestal before being pushed from itI agree about the sector spread influence, but a bigger worry should be the collateral damage from even good sectors - even gold and silver may get whacked ... the yen has been on a tear n I suspect the yen carry trade have not …
HK's Backdraft

Guru Lee Climbs Down From The Pedestal

HK's very own Warren Buffett has gone less bullish. OMG. When even the Supreme Venerable Grandmaster Lee Shau-kee tempers his enthusiasm for the stock market, it's time to pay attention.The Henderson Land Development chairman yesterday revealed a much more conservative attitude toward the market, lowering his previous lofty targets. He even asked his legions of loyal followers to knock him off his pedestal as the "God of Stocks."Said Lee: "I am not the genuine 'God of Stocks.' I am only a fake please don't call me that any more. I am just a simple investor." At least he is paving the way for a cushioned fall. The man known as "Asia's Warren Buffett" said he has changed to become more stable and calm. He told reporters the Hang Seng Index will only reach 27,000 to 30,000 points by March, then the market will ease its rise in the second quarter. Guru Lee had previously said on…
Volatility & Warrant

Question: In view of the high volatile market, do you think one should continue to invest in warrant as doing warrant will increase one's exposure to higher volatility in the already highly volatile market. I had a discussion with on friend on that but i disagree with him on the current situation that we should be buying the underlying instead of adding more volatility by leveraging on warrant. My view is that we cannot lower the volatility through warrant but we can control the risk exposure by lowering the trade value of warrant and yet achieve a comparable risk/gain/loss. Am i right to say that? An example would be a $20 share and a 10c warrant with June/July expiry, out of money warrant. Conversion is 10. A very vague guide but what i want to say is by varying the trade size, we can achieve good exposure with comparable risk.

Comment - Warrants trading in a down trend marked with intense volatility is not for the faint hearted, but to me, a genuine war…
Magic Man

If you thought that David Blaine was good, wait till you see Cyril Takayama. He is more inventive, casual and likes to do multiple tricks with one magic item. You will never view Lacoste polo shirts in the same way again. The second one shows why he will never go hungry. He is an American born of French-Moroccan-Japanese parentage: with those looks he could be in anything he wants. He is very very big in Japan, and should conquer the world next. Looking more likely to be the best magician ever.
Decoupling & Globalisation

bantersy said...dali,

that was a long post!!! good work with patience!

btw, i wish to bring the your attention to the following.

"Lukewarm - Rest of Asia will have to come to terms with inflationary pressures as local currencies may not rise enough to counter imported inflation, thus hurting outlook for local equities."

will asia currencies rise as much and pick up steam to match the rising inflationary pressure. bearing that asia export to US is not as dependence as before, the rise of asia currencies will hurt its export to US. although euros, yuan and other major trading partners in east asia, the rising trend in their currencies is seen, thus mitigating the effect of losing its export competitiveness.

You also mentioned oil will stay above 100 and probably settling in that range for year 2008. The thing is, with global economy coming to a slowdown, wouldnt you think it will cushion the consumption of oil though it is the basic neccessity of our …
What Follows A Credit Bubble Implosion

Some are now debating whether the earlier than scheduled rate cut by the Fed was prompted by the SocGen losses. More have been arguing that the Fed is kowtowing to Wall Street by cutting more than 50 basis points and earlier than planned. We must be be certain that the Federal Reserve is not there to ensure an always strong stock market.
Morgan Stanley's Stephen Roach counters that the decision was ``dangerous, reckless and irresponsible,'' and Nobel Prize winner Joseph Stiglitz says it resulted from ``bad economic management.'' To me, the Fed's aggressive rate cuts mirrors the mistakes Greenspan made the last few years by keeping rates low for too long and printing too much money.By easing aggressively on the basis of no new information, they're sending a message that they have to protect and defend the markets. Traders anticipate a further half-point rate cut at the Fed's meeting Jan. 29-30. That would put the o…
The Terrible TwinsLike many of you, I was glued watching the CNBC the last few nights and was amazed at how many are still looking at the wrong reasons why the markets are correcting. Some are still explaining that the US jobs data are still good and that a recession is not likely. The markets were already factoring in a 50 basis points cut end of January. Doing an additional 25 points a week earlier: is that sufficient? Downward property prices and impending foreclosure won’t be helped by a 75 basis point cut. This is a correction which aggressive rate cuts won't help, the correction has to play itself out. It’s not just a US recession, neither is it US jobs situation which are killing the markets. If you cannot get to the right reasons, you will mis-read the markets. If you have to put it down to one reason, it’s the implosion of credit bubble.If you want a secondary reason, it will be inflationary pressures due to the excessive money supply growth worldwide for the past 5…
Societe General, Old NewsA trader has stunned global financial markets by defrauding France's second-largest bank of €4.9 billion (US$8.2 billion) - potentially the largest fraud in financial history. Societe Generale, has announced a loss of €6.9 billion, the largest in European history. Lost in the exceptional loss was an important €2 billion write-down linked to the subprime mortgage crisis in the US.Putting it in perspective, British trader Nick Leeson, who defrauded Barings bank of £725 million, causing Barings to collapse in 1995. The young Paris trader used his position, plus a knowledge of the bank's security system, to construct "a scheme of elaborate fictitious transactions" on European equity markets. He had been dismissed and legal action will be taken against him, said the bank's chairman, Daniel Bouton - who offered to resign but whose offer was rejected by the board. Also fired were "executives, including leaders, responsible for the supervi…
The Best Instant NoodlesThe way the markets are headed, I thought it might be timely to feature my favourite instant noodles: some of us may be eating these for some time. Numero uno, beating the shit out of all has to be Ibumie's Har Mee. Friends from overseas having tasted the Har Mee buy packet-loads home with them. Don't worry, those not residing in Malaysia can order them from for instant delivery. Its the soup base, forget about the noodles, in fact get your own noodles, it will be even better. You know they have thought seriously about the product because they have 5 sachets of chilli oil, fried shallots, soup mix, spice and soy mix. The soup is damn close to the best prawn mee soup in Penang. Slice a hard boiled egg, some freshly boiled prawns and bean sprouts and you have 90% of the real stuff.

Next is the wonderful HK brand of Noodle King by Sun Shun Fuk Foods. The lobster flavour is number one, followed by the scallops and then the abalone &…
Getting The Right WHY

Been watching the CNBClast two nights and I was amazed at how many are still looking at the wrong reasons why the markets are correcting. Some are still explaining that the US jobs data are still good and that a US recession is not likely.The markets were already factoring in a 50 basis points cut end of January. Doing an additional 25 points a week earlier: is that sufficient? The markets recovered, and Asian markets went ballistic. Thank goodness Malaysia was closed, if not, many would have been sucked in buying, and would be staring and shaking their head later today.

Downward property prices and impending foreclosure won't be helped by a 75 basis point cut. Like I said before, this is a correction which aggressive rate cuts won't help, it has to play itself out.Its not US recession, neither is it US jobs situation which is killing the markets. If you cannot get to the right reasons, you will mis-read the markets. If you have to put it down to one reason…
Ice Cream After A Beating

Remember when you are a young kid, you did something wrong, your parents whacked you, and after they felt sorry and gave you ice cream. Well, thats close to why the Fed cut 0.75%. Is that enough? I have argued before, that won't be enough because this is not something a rate cut can rectify. It has to play itself out. If your property is heading for foreclosure, a 75 basis point cut will do nothing to save your home. Not in an era of slowing economy.The rate cuts is largely anticipated, though better than the 50 basis point but there is really not much the Fed can do now.

The entire movie has to play out on its own in entirety. I may sound like the ever bearish Marc Faber now cause I was never bearish for a long time, but this is pretty bad, and its pretty bad because the majority still are unsure why the correction is happening, and that is the killer blow.

Its a devious bursting of the credit bubble which had been engineered for the past 5 years, yes, Gree…
Who's Not A Bear Now
Suddenly everyone is a bear. Now we have George Soros saying that the world was facing the worst financial crisis since World War II and the United States was threatened with recession. "The situation is much more serious than any other financial crisis since the end of World War II," Soros was quoted as saying. He said over the past few years politics had been guided by some basic misunderstandings stemming from something that he called "market fundamentalism" - the belief financial markets tended to act as a balance. "This is the wrong idea," he said. "We really do have a serious financial crisis now."
Asked whether he thought the United States was headed for a recession, he said: "Yes, this is a threat in the United States." He added he was surprised how little understanding there had been on how recession was also a threat to Europe.
Things can look ok at 13,300. At 12,600 you want to buy on weakness. At 12,00…
Through-Train's SignificanceWSJ did a write up on the "through train" program which was hinted in August 2007, and was largely responsible for propelling the Hang Seng index from 24,000 to 30,000. Since November, the China markets (Shanghai and Shenzhen) have been on a substantial correction phase. Now Hong Kong's investors could use the Chinese government's help, but it isn't clear when that help may come. Last week, there was a report which cited that there could be a 2 year delay before the program will be implemented. That caused a panic among the retail investors thus explaining for the volatility in HSI over the past week.
Until that happens, one significant leg of support for last year's gains in Hong Kong shares is going to be increasingly wobbly. If that support is removed altogether, Hong Kong stocks could be in for a bigger bruising than they've already had. The move was proposed by the HK financiers initially to help create valves to let ou…
Ramunia Heart MISC
The Edge: MISC Bhd launched a reverse takeover (RTO) for Ramunia Bhd in a proposed deal valued at RM3.2 billion, where MISC would inject its heavy engineering business in exchange for new Ramunia shares. Ramunia told Bursa on Jan 21 that it had received an offer letter dated Jan 18 from MISC’s unit MSE Holdings Sdn Bhd offering to dispose of its entire stake in Malaysia Marine and Heavy Engineering Sdn Bhd to Ramunia. The total consideration of RM3.2 billion would be satisfied by the issuance of new shares of 50 sen each and new irredeemable convertible preference shares of Ramunia. Ramunia said MISC’s offer would lapse by Jan 21 or at such other time which might be extended by MISC.
Comment: Smart move. Saves on listing cost with Malaysia Marine & Heavy Engineering. MMH was supposed to be a hidden gem to be unlocked by MISC via a listing. In one fell swoop, MISC ends up with the facilities under Ramunia, major controlling stake in Ramunia, savings on listing cos…
Passing Commentary

Media / Hillary - Why is it that the media often put up "ugly" photos of Hillary, why the bias? I don't see other candidates being portrayed in a negative manner. Is it because the media is largely still male-dominated? The fact that she is now a likely candidate may be scaring these editorial teams who are actually fearful of having a woman leader? I thought journalism attracts those with integrity, but apparently not. This is not American Idol, its not a popularity contest. Where are your journalism ethics?

Hillary / Obama - Frankly I hope one of them will be the next President, we need a Democrat President. We need change. Change at its very core. You cannot have a more definitive change, in either having an African American or a woman at the helm, amalgamate the two you have Oprah Winfrey .... one step at a time, they say. The rise of younger voters should ensure that either Hillary or Obama once nominated, should win. The whole world needs a change…

Construction on new homes in the US fell 14% in December to a seasonally adjusted annual rate of 1.01 million, the slowest monthly building pace in more than 16 years, the Commerce Department reported Thursday. Housing starts for single-family homes in the West fell 16% to the lowest level since the data were first collected in 1959. Building permits fell 8% in December to a seasonally adjusted annual rate of 1.07 million, the lowest since May 1993. For all of 2007, housing starts fell 25% to 1.35 million, the lowest annual total since 1993. The question is whether one sector can bring down the economy. The property side is just playing out its excesses, to me, any rebound is and will be temporary in nature.

Then we had another conflicting signal, the seasonally adjusted number of people filing initial claims for state unemployment benefits in the US in the week ended Jan. 12 fell to 301,000, down 21,000, to mark the lowest level seen since Sept. 22. Initial claims have n…
Vikram's Hot Pot

Citigroup's shares lost US$2.12, or 7.3 percent, to $26.94 a five-year low, following its quarterly results. It wiped away almost US$10 billion in market value in one day on top of US$125 billion lost over the past year. The loss for the quarter totaled US$9.83 billion, or US$1.99 per share, compared with earnings of US$5.13 billion, or US$1.03 per share, a year earlier. Citigroup's revenue declined to US$7.22 billion, off 70 percent.

Citigroup's biggest hit came from a US$18.1 billion write-down in the value of its investment portfolio. But the bank also set aside US$4 billion Tuesday to cover anticipated losses on consumer loans.

The reasons the results caused more panic:
a) Though the write dow was substantial at US$18.1bn, that still leaves Citigroup with more than US$30bn in SIVs. Analysts anticipate more write downs in the coming quarter because of that.
b) The fact that the bank set aside US$4bn to cover consumer loans hints that the sub prime mess …
Another Positive Down The Drain

The HK market was supposed to be on the receiving end of a the "through-train" program which would have allowed individuals from the mainland to trade in all HK listed securities. The proposal back in August caused a dramatic revaluation in the HK market. However, owing to the corrective phase in Shanghai and Shenzhen, apparently the long-awaited through-train scheme will not start for at least two years. The program for individual mainland investors to put money directly into Hong Kong stocks has been held up because the mainland authorities want more time to make sure everything is running smoothly in the new system before opening it up to the public. Also, the authorities feel there is no need to rush the launch of the through- train program since mainland investors can already use the QDII program to invest their money overseas. BS, the reason why the program was delayed was due to the significant pullback in China stock markets. …
Welcome Feedback

bantersy said...hi dali,

what about those sovereign funds that are pumping in billions of dollar. aren't they digging their own grave as well? everything has a price, in midst of difficulty, if valuation is fair, shouldn't some counters be worth buying? talking about palm oil play, some of the counters have racked up 3x the value since 3Q last year. what is deemed fair in valuation? most stocks have came down. using a long term view, the valuation may work out to be quite a good buy. of course, market is sentiment driven and sad to say now it is quite bleak and sell seems to be the only call by everyone. citi has just released yet another set of result with more write down. with more info being released into the market, uncertainty is more certain now than months ago.Comment: My criticism of the BOA deal is not buying at low prices but that they made an earlier "purchase" just a few months back on Countrywide. On August 23, 2007 BOA announced a US$2 b…
Naive & Vulnerable

If you check out the last 30 minutes of yesterday's market in Bursa, you will find that it broke below 1500 for a while but was artificially lifted to close above 1500. Hmmm... , powers to be think they can manipulate the market's direction and sentiment?!! How naive and silly. The market is bigger than all of us. If we can "control" the market, why did we correct to below 500 in 1997/98 and spent a few years below 800?

Or is it that the people dishing out strategies to state funds think that the rest of investors are silly enough to believe that coming back above 1500 is a credible technical signal. Are investors that gullible? Maybe some are, but most are not. If you guys are trying to do a financial engineering, please be smarter la. This smacks of some guys playing with their Game Boy console. When the global equity scene is bleak, you don't try to counter the wave. If things were calmer, maybe you can lift the index and generate some pla…
Not-So-Top GloveBusiness Times - The world's
biggest manufacturer
of rubber gloves,
Top Glove Corp Bhd,
has set aside RM100 million this year to buy a rival and
expand its factories. Currently, TG produces 29 billion
pieces of gloves a year, which is about 24 per cent share
of the global market. It aims to capture 35 per cent by
December 2010. The estimated annual demand by then is 160
billion gloves. Cheong Guan, who is also the finance
director, said that TG expects to boost its net profit by
22 per cent to RM125 million for the fiscal year to
August 31 2008. TG is also confident that a slowing US
economy will not affect its business because rubber gloves
are a necessity.

1) A slowdown is a slowdown, how not to be affected. 30
per cent of TG sales comes from the US, rubber gloves.
2) Patent suit pending - Even though the company is
optimistic of winning.The reality may indicate otherwise.
On May 30 last year, the US-based Tillotson Corp filed a
complaint against all nitrile glove manufactur…
Property, CDOs, SIVs

Citigroup plans to announce a “sizable” cut in its dividend, a cash infusion of at least US$10 billion and a write-down of as much as US$20 billion in mortgage-related investments as part of its fourth-quarter earnings report Tuesday morning, the Wall Street Journal reported Monday. There is also a strong chance that some 20,000 jobs will be cut.

The unwinding of the sub prime mess exaggerated the correction that was needed in property. Let's re-examine how we got here. Property, largely commercial had new legs beginning 2000.

The spectacular performance by REITs from 2000-2006 was largely due to the property boom in the US. The property boom was largely ignited by the "invention" of REITs itself. The availability of REIT allowed many commercial property owners to unlock cash from their long term hold type asset. The unlocking of cash also helped charge up the rise and rise of private equity and hedge funds (where most of these excess cash went to…

Readers should reread my postings on "Macro Predictions 2008" and "Assessing Bursa's Run-Up". The rally looks temporary. Any sign of wobbling, one should get out. This looks like it. I have submitted a detail article for this weekend's column in BizWeekly, which is a bit more bearish on all equities. I cannot publish it on the blog before it makes the paper. Just a warning note.

p/s the photo is funny but its more than that, in playing stocks, we all get xxxxed one way or another, that's the reality, we just have to make sure we are not at the very end of the queue, we all need to try not to be the last in the food chain ...

Relative Returns By Asset Class

The above table clearly depicts the shifts in performance of different asset class. It is a very useful table to decipher the macro developments and how capital are being allocated to chase after various asset class.

The spectacular performance by REITs from 2000-2006 was largely due to the property boom in the US. The property boom was largely ignited by the "invention" of REITs itself. The availability of REIT allowed many commercial property owners to unlock cash from their long term hold type asset. The unlocking of cash also helped charge up the rise and rise of private equity and hedge funds (where most of these excess cash went to). If you chart the absolute rate of returns year by year (2000: 31% 2001: 12% 2002: 3.6% 2003: 36% 2004: 33% 2005: 14% 2006: 36%). The sub prime mess and the beginning of the property correction in the US also contributed to the negative 17% returns for 2007. Safe to say that from the above that there may be qu…