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Showing posts from November, 2008

Obama Ticking The Right Boxes

Paul Volcker, who helped tame runaway inflation in the 1980s during two terms as chairman of the Federal Reserve, has agreed to lead a new White House economic advisory committee, President-elect Barack Obama said Wednesday. He praised Mr. Volcker as one of the world’s foremost economic policy experts.“Paul has served under both Republicans and Democrats and is held in the highest esteem for his sound and independent judgment,” Mr. Obama said, as the 6-foot 7-inch Mr. Volcker towered nearby. “He has a long and distinguished record of service to our nation, and I am pleased that he has answered the call to serve once again.”Mr. Obama made the announcement at his third news conference in three days. The public appearances by the president-elect are intended to show Americans that his team is focusing on resolving the financial crisis, which Mr. Obama said Wednesday demands “fresh thinking and bold new ideas from the leading minds across America.”Mr. Volcker, 81, has been providing Mr. O…

Asia-Pacific Top Brands

Marketing Charts: Five of Asia’s top 10 brands are US-based companies, indicating the strong presence of US companies in the Asia-Pacific region, according to “Asia Pacific’s Top 1,000 Brands for 2008,” as determined by a TNS survey.The survey, which expanded on previous years to include responses from consumers in a total of 10 markets in the region, presents an overview of the local and global brands that consumers think most highly of across sectors and geographies.To determine the best brands in each of the product and service categories covered by the survey, participants were asked two questions:When you think of [product / service / category], which is the ‘best’ brand that comes to your mind? By “best,” we mean the one that you trust the most or the one that has the best reputation in [product / service / category].Apart from the brand that you have just mentioned, which brand do you consider to be the second-best brand in the [product / service / category]?Some 3,600 people w…

Rankings Of Yearly S&P500 Performance

As of the market close last Thursday, Nov. 20, the Standard & Poor’s 500-stock index was down 48.8% for the year to date.Had the markets called it a year at that point, 2008 would have gone down as the worst year in the history of the S&P index, which goes back (in one form or another) to 1926.The only year that even came close was 1931, in the teeth of the Great Depression, when the S&P lost 43.3%. Here are the 20 worst years in history, based on Yale’s NYSE index until 1925, and for the S&P from 1926 onward: 1941 -11.6%
2001 -11.9%
1893 -12.3%
1857 -13.2%
1837 -13.4%
1828 -13.6%
1831 -14.0%
1973 -14.7%
1920 -15.0%
1841 -16.1%
1917 -16.4%
1884 -18.5%
1839 -19.0%
1907 -21.8%
2002 -22.1%
1930 -24.9%
1974 -26.5%
1937 -35.0%
1931 -43.3%
2008* -48.8%
*Through Nov. 20.The closest carnage to 2008 was 1974 when the S&P500 lost 26.5%, the next closest was 2…

Temasek, Tide's Out, Skimpy Speedo

I usually do not bash Temasek (that much) except for when they irked the Thais and then the Indonesians. Temasek lost almost US$2 billion of a badly-timed US$3 billion in Shin Corp at a peak of 49.25 baht (Shin shares are now trading at around 15 baht) in 2006. The investment was not a bad one but the way they handled it (same in Indonesia) was appalling.

Being neighbours, Temasek should have known that certain assets will be viewed as sensitive and incursions will be seen as colonisation somewhat. You cannot stand behind the guise of being a professional asset manager when you are buying critical companies. Its the arrogance, its the attitude, we've got the money, so we can buy ... just like the way Singaporeans do not know how they appear in the eyes of their neighbours everytime they go traveling in the region ... we all cringe when some bloody tourists would exclaim "Waahhh, so Cheeaappp"... we know they have to be Singaporeans.

Its CEO, Ho Ching committed S$401 millio…

Roubini Likes Something

NEWSWEEK: What are your thoughts on the team Obama assembled?

Nouriel Roubini: The choices are excellent. Tim Geithner is going to be a pragmatic, thoughtful and great leader for the Treasury. He has experience at the Treasury and the IMF [International Monetary Fund], then the New York Fed. I have great respect for both Geithner as well as Larry Summers. I think both of them in top roles in economics in the administration were good moves. I think very highly of them both.

What are the first things they need to tackle?
R: First one is the fiscal stimulus, because the troubled economy is in a freefall, so we really need to boost aggregate demand, and the sooner and larger the better. The second thing they should do is recapitalize the financial system. Most of the $700 billion is going to be used to recapitalize banks, broker dealers, finance companies and insurance companies. To do it aggressively and fast is going to be important.

The plan Obama has talked about includes spending on infr…

Some Direction At Last, Some Market Leadership

Well, this post is written after the plan by FDIC and Treasury on Citigroup. So, where are we now? The first thing was Obama made the right choice in appointing Timothy Geithner (please reread posting on the new Treasury Secretary). The market basically rallied over 4% on Friday over the news. Can the appointment alone charge up markets? Yes, especially in the current market situation where there is little confidence, little direction, high volatility, basically no market leadership.

The best thing for Geithner to do is to grab the markets by the neck and tell them "This is the way ahead, follow me and I will guide you towards the light (no pun intended, obviously)".Geithner, as mentioned before is a market interventionist. He was critical in lining up the JP Morgan / Bear Stearns deal, he was instrumental in getting the funding for AIG, he tried to save Lehman but was dissuaded by higher powers ...

The market basically saw in Tim, a person who will not let things get blown ou…

Update On Fate Of Citigroup

This is probably not a politically correct joke, well not really a joke as it actually did happened, but hey....loosen up. A private banker called up a client telling him that Citi was a great buy below $5. The client half-jokingly said, "What, you kidding, I'd never buy an Indian bank". I guess its not just Vikram Pandit but a huge layer of the bankers at Citi happen to be Indians - I told you it was not politically correct!

Anyway, some updates on the probable fate of Citigroup. The shorts are doing it to Citi, make no bones about it. Will Citi go bust? Very unlikely. The bank has $2 trillion worth of assets, the question mark is how much will have to be written down. Hence even below $20bn in market cap, Citi may not find buyers for the whole bank unless they come with Treasury backing and guarantees.

Citi has kind of been off the radar when Lehman and Bear Stearns were collapsing because of their strong deposit base, in particular from outside of the US. It has some $…

What Should Happen & What Is Likely To Happen

General Motors

What Should Happen - Allow the company to go into Chapter 11 or what we call bankruptcy. Then the company will have real negotiation leverage and the unions will really have to listen and make concessions. The government can then step in with some funding but call the shots. Force the merger of General Motors and Chrysler. All outstanding car warranties will be guaranteed by the government via a separate vehicle. Following huge concessions made by the union, the selling down and dismantling of parts, the reworking of cost savings with the 2 companies... maybe, just maybe they can survive.

What Is Likely To Happen - Democrats will probably approve a US$25bn bailout when they return on December 8, but a viable plan is expected from the automakers. Expect Chrysler to quicken talks with GM to hash a merger to get the US$25bn bailout plan approved. Short term feel good, but without bankruptcy, the unions and their demand swill stay the same. Its the liabilities and claims by e…

The ONE PERCENT's Significance

In August consumer prices dropped 0.1% from the previous month. In September it was unchanged. The just released figure for October saw a 1% drop from September. This one percent month on month decline is very significant. Firstly, forget about inflation, we now have to seriously talk about deflation. We are only starting to see consumer prices feeling the effects of months of real estate price plunge and stock price decimation. A trend once established is hard to reverse. You people know how difficult prices take to come down. When it goes up, it goes up quickly.

When trade slows, when inventory builds up, consumer prices are very sticky in coming down. The fact that it did not just ease down is highly critical. One percent month on month decline has never been registered in the US, except during the Great Depression. Take a few seconds to reflect on that one percent now.

Proper tracking of consumer prices only started in 1947, and this one percent was the largest ever since tracking…


You heard it here first, the next biggest bank in the world, Citi-Morgan ... it makes a lot of sense for JP Morgan... but investment bankers on both sides will shudder because there is almost an exact replication, thus any merger will see at least 30%-40% of investment banking staff being cut. JP Morgan would value possibly the best global commercial banking franchise... provided the Treasury steps up and guarantee one or two hundred billions in losses (ala Bear Stearns). But I am getting ahead of myself, it may happen only.
$34.48 billionCitigroup’s current market capitalization. $126 billionCitigroup’s market cap in April 2008. $178.59 billionCitigroup’s market capitalization one year ago. $80 billionThe value of risky “legacy” assets that Citigroup is moving off its trading portfolio and into its investment portfolio or marked “available for sale.” These assets include collateralized debt obligations, leveraged loans, mortgage securities and auction-rate securities…

Why Ken Heebner Is Better Than Buffett

The best mutual fund manager around is Ken Heebner of Capital Growth Management. The statement above is a big one. Everyone worships Warren Buffett, I am not saying he isn't good, Buffett is very very good, right at the top. Unfortunately, Ken beats him in a poker heads-up match. Fortune:Just how good has Heebner been? We may well be witnessing the most dazzling run of stock picking in mutual fund history. Since May 1998, Focus has an average annualized return of 24%, the best ten-year record of any U.S. mutual fund, compared with only 4% for Standard & Poor's 500. Focus, which has $7.4 billion in assets, is already up 15% in 2008 (as of May 19), but it is 2007 that will be remembered as Heebner's pièce de résistance. Fueled by big bets on energy, fertilizer, and metals, Focus soared 80% last year, vs. 5% for the S&P 500. "I told Ken it was like he was walking between the raindrops," says CGM president Bob Kemp, who oversees sales and marketing at the fir…

Fallen Idols

If you have been losing money over the past 12 months, fear not, you are in good company. People getting paid huge six figures have been performing just as badly, if not worse. This has been Wall Street's year of the fallen idols.WSJ: Marty Whitman, the legendary septuagenarian who co-manages Third Avenue Value, has seen crises come and go. There are few you could trust more in a panic. But his fund has almost halved this year. Bill Miller, the famous manager at Legg Mason Value, has fallen by nearly 60%. And that's not even the worst of it. Miller's more flexible, go-anywhere fund, Legg Mason Opportunity Trust, is down by two-thirds since the start of the year.Ron Muhlenkamp at Muhlenkamp, Wally Weitz at Hickory, Manu Daftary at Quaker Strategic Growth, Richie Freeman at Legg Mason Partners Aggressive Growth, Ken Heebner at CGM Focus, Christopher Davis and Kenneth Feinberg at Davis New York Venture Fund, Will Danoff at Fidelity Contrafund, Saul Pannell at Hartfo…

Its New York, Baby

I made my first trip ever to USA, New York actually last month. Was waiting for the whole trip to sink in before I put up my trip experience on my blog. I wasn't looking forward to it as I had a disjointed view of USA. Love the culture and entertainment, but was miffed over its foreign policy. But I had to go there for a short conference, and after flying the whole day, I better extend my stay and give it a try.

Anyway, I found out that they had made a musical out of my #1 comedy film of all time, Young Frankenstein... so it couldn't be all bad. I am a big fan of musicals but I only get to see those in Sydney and Melbourne mainly. Plus I was going to see a couple of real Dalis for the first time, that can't be bad as well.

I went by ANA as I wasn't going to fly straight for 24 hours, and I spent a few days in Tokyo on transit. New York hotels must be the most expensive in the world. I searched high and low on the net and I needed a decent 3 star minimum and near Times Sq…

UBS Joins Goldman, Pressure On The Rest

IHT: UBS on Monday joined Goldman Sachs in saying its top executives would get no bonus this year, as public scrutiny of bankers' compensation intensifies amid the taxpayer rescue of the financial sector.UBS said its chairman, Peter Kurer, chief executive, Marcel Rohner, and other members of the executive board would receive only their fixed salaries this year and that all other employees would have their 2008 bonuses reduced. The bank, based in Zurich, received a Swiss government bailout of about $60 billion in October after losing nearly $50 billion since the the credit crisis began last year.UBS said that beginning next year, top executives would be paid according to a long-term compensation model that "rewards realized value creation and takes business risk into account." In profitable periods, the executives will be paid performance-based variable compensation, but in hard times, no bonus will be paid. In addition, it said, "a 'malus' can be deducted fr…

Roubini On Why US Consumers Are In For A Long Slump

20 Reasons Why the U.S. Consumer is Capitulating, thus Triggering the Worst U.S. Recession in DecadesToday’s news about October retail sales (-2.8% relative to the previous month and now down in real terms for five months in a row) confirm what this forum has been arguing for a while, i.e. that the U.S. has entered its most severe consumer-led recession in decades. At this rate of free fall in consumption real GDP growth could be a whopping 5% negative or even worse in Q4 of 2008. And this is not a temporary phenomenon as almost all of the fundamentals driving consumption are heading south on a persistent and structural basis. Consider the many severe negative factors affecting consumption. One can count at least 20 separate or complementary causes that will sharply reduce consumption in the next several years:

Goldman Sachs, The Hated Kid On Wall Street

Blankfein, presidents and co-chief operating officers Jon Winkelried and Gary Cohn, chief financial officer David Viniar, and three vice chairmen -- J. Michael Evans, Michael Sherwood and John Weinberg -- asked the board's compensation committee that they not receive a bonus, spokesman Lucas van Praag said. The compensation committee met and agreed, Praag said.

The executives will only be eligible for a base salary of US$600,000 (HK$4.68 million) each, the Wall Street Journal reported. Last year, Blankfein made US$68.5 million, Winkelried and Cohn got US$67.5 million, and Viniar got US$57.5 million.

Goldman Sachs, not being badly hit by the current financial turmoil, is now leading the way for the rest to follow. This will make everyone on Wall Street to hate them, especially the senior management at poorer performing firms such as Merrill Lynch and Citigroup - how are they going to be able to ask for a decent bonus now. Having said that the top guys at Goldman knows when to play t…

And Now For Something Completely Different ...

Something completely different, ... well not really. I don't have something substantive on financials to post but I thought this is important enough for the majority of readers of this blog. I would like to introduce to you the next hottest actress/model from HK, besides Elanne Kong (whom I have featured frequently already). Her name is JJ and started out as a model and has acted in her first big movie, probably the biggest HK cult movie for 2008, La Lingerie. The movie poster is included here in the post, I only know three out of the five girls in the middle, Janice Man, Stephy Tang and JJ. Anyways, have a good start to the week.

Emerging Markets Valuations

There are many ways to value a market. The usual suspects are dividend yield, price/ book value, p/ cash flow and PER. On average, for emerging markets as a group, dividend yield is 4.2, P/BV is 1.9, P/CF is 9.5 and FY1 P/E ratio is 9.5.In comparison, U.S. dividend yield is 3.14, P/BV is 1.76, P/CF is 6.93 and FY1 P/E ratio is 11.8. On balance we can see that P/BV for US stocks are still lower than emerging markets average. The other danger is that price / cash flow is more attractive in US stocks. In valuation terms, I would see P/CF as the MOST important out of the 4 indicators because its real cash. Dividend yield while good, can be dramatically lower in future periods if earnings get pummeled. Price / book value is a comfort indicator and would only come into play in a liquidation potential or buyout potential, for on going market valuation, its not that important.

Just from the indicators alone, those critics who say that the emerging markets have fallen as hard as the US markets…