Tuesday, March 31, 2009
People who can laugh at life and at themselves are fun people. Death is a serious thing, but you can pass on with character and wit, or any way you want as long as you have sorted out your afterlife during your lifetime. Some might say grave humour is in bad taste, ah, shaddup already, go dig a hole and plant yourself. My favourite is the last one... I told you so... so many times!!!
At least when your family and friends visit your grave, they smile and remember what a character you were.
Monday, March 30, 2009
Special Drawing Rights have captured the market's imagination in recent days. Behind the scenes, Chinese and Russian officials have harping on it, and the head of China's central bank posted a report suggesting that SDRs should have an expanded role in global finance, including as a super-reserve asset. In a presentation to the Council on Foreign Relations, beleaguered US Treasury Secretary Geithner appeared to some to initially be open to such proposals.
Governor Zhou Xiaochuan. In it Governor Zhou argues that the world needs a new and better reserve currency, one not dominated by a single country, and that it is in the best interest of the world that this reserve currency be created by a body like the IMF.
Many people are unfamiliar with SDRs. Special Drawing Rights were first issued by the IMF in 1969, as Bretton Woods was straining and fears there was not enough gold and dollars, the main reserve assets, were growing. SDRs are a basket of existing currencies. The basket gets reset every 5-years. The last reset was in November 2005. The US dollar accounts for 44% of the SDR basket. The euro's share is 34%, while the yen and sterling's shares are 11% each. The SDR is a basket of existing currencies not a single currency like the euro, but rather more like the old European Currency Unit. The value of the SDR is calculated and posted by the IMF daily. It is currently worth about $1.51.
There have been two allocations of SDRs. The first was in 1970-1972 for 9.3 billion SDRs and the second one was in 1979-1981 for another 12.1 billion SDRs. In 1997, there was a proposal to double the SDR issuance to 42.8 billion (roughly $64 billion). One hundred and thirty one members endorsed the proposal and they had a weighted vote of 77.7%.
Approval requires 85%. The US has a 16.75% vote share, and has not approved the proposal. If there was a signal in Geithner's remarks is was that the Obama Administration may reconsider the US stance. Here is why it is necessary: Roughly the fifth of the IMF members which have joined since 1981 have never received an SDR allocation. Of course that inhibits their ability to participate in the SDR system. Moreover, given the depth and magnitude of the financial crisis and economic downturn—anticipated to be the first time in more than half a century that the world economy will likely contract—an new allotment of SDRs may be compelling.
We have heard these kinds of arguments many times before over the course of the 20th century, and usually in response to a global balance of payments crisis. Is there anything new about this proposal? It looks likely to be a purely political move.
A number of people including Columbia University’s Joseph Stiglitz, are supportive of the idea, arguing that the status of the US dollar as the world’s reserve currency creates unnecessary problems for both the US and the rest of the world.
Most importantly for the US it means that it is very difficult for the Fed to manage domestic monetary policy because the US financial system must accommodate not only conditions in the US but also distortions introduced by the use of the US dollar as a reserve currency, and these distortions can be massive. The most obvious example is the way over the past decade systematic industrial policies mainly in China and East Asia aimed at running trade surpluses and the accumulation of reserves meant that the US economy and its financial and monetary systems were forced to adjust in ways that created large and serious imbalances, which only now are we resolving.
At least four months ago George Soros (and others) proposed an increase in SDRs to help provide sufficient liquidity to arrest the deflationary forces that were growing. Ironically, China and Russia, apparently inspired the by famous speculator, have gone even further.
For one thing liquidity is key, and I think not even the euro – and certainly not SDRs or alternatives to the SDR – can ever hope to achieve anything like the level of liquidity implicit in the US dollar market. For another thing, for a currency to achieve reserve status there must be some systematic way of delivering the currency to central banks and other players who want to acquire it, and the US does so by its ability and willingness to run persistent trade deficits. How will the IMF or whoever controls the SDR create and assign reserves?
A new issuance of SDRs is not the same thing as diluting the role of the dollar. The sums are a pittance, especially given the magnitudes of world trade, cross border movement of capital or the holdings of currency reserves. SDRs have been around for 40 years, but they are not really money. Money, as economists understand it, is a means of exchange, a store of value, and a unit of account. SDRs are not a means of exchange. As a basket of already existing currencies, it might appear more stable and hence a better store of value, but what is the metric? The purchasing power of fiat currencies individually and collectively has generally been eroded by inflation. The SDR is not a fiat currency, but a basket of fiat currencies. For the most part SDRs are relegated to a unit of account for the IMF and a few other international organizations.
Some observers suggest that SDRs are the IMF's money (sometimes referred as paper gold), but that reflects a misunderstanding. Issuing SDRs is not the same as the IMF printing money. The IMF doesn't do that. An increase in SDRs simply boosts each member’s claims on the composite currencies. The IMF is not a central bank.More specifically, if the SDR is indeed a true reserve currency, and not simply an accounting entry that allows central banks to pretend that they are not holding dollars but whose value ultimately rests on its convertibility to the US dollar, who will determine the global money supply and how do we prevent this from becoming a horribly politicized process? After all the Fed has an interest in seeing stability in the value and use of the dollar, and so it can be counted on more or less to act in the best interest of the reserve currency, but why should anyone care about the value of the SDR over the long term and, more importantly, how can prudent behavior be enforced? More worryingly, if Europe has had so much trouble managing monetary policy among a group of neighboring countries with fairly similar social and economic conditions, how do we manage monetary policy on a global scale?
Perhaps the SDR is a covert way of getting back to something resembling the gold standard by creating a fiat currency with very strict rules about its expansion. If that is the case, the SDR almost certainly won’t last long.
a) the ramblings by China was interesting but its an airy-fairy idea at best, its motive is likely to "scare" the US officials to think harder about their macro and monetary policies going forward
b) the move will never happen unless IMF becomes more representative of the global financial system, that could take years of appointments to change the racial and country mix of IMF
c) there are a lot of countries that does not agree with IMF's policies
d) SDR needs to get liquidity to a substantial level before it can be an alternative, that is like asking Malaysia's economy to move into the global top 10 biggest economies in 5 years, possible but improbable
e) a saner proposal will be akin to the Euro currency - it can be started by getting ASEAN members to throw all their currencies into the hat together with HK, China, Japan and India... the rest can join later and the new currency can be called AZO... but even that proposal will be extremely difficult, in fact many times more difficult than for the the European Union/ Euro Currency to be formed because of the various differing political platforms each country has, and that each country basically have to give up on having their own monetary policies - if your country unemployment is very bad, but the rest are OK, there's nothing you can do to your monetary policies to loosen the purse, etc...
So, SDR, a pipe dream...
p/s photos: Lara Dutta
For all the anger being lashed out at bank employees compensation. Bank CEOs have been grilled, even Greenspan has been lambasted (rightly). But what about the ratings agencies?? They were mostly responsible for the growth of CDOs, rating them AAA when only a small component of those CDOs consist of AAA borrowers. Without their implicit approval, the investment banks could not have managed to lure so many investors to buy these so called triple A rated papers. Just a notch below AAA would have seen these CDOs growth cut by a substantial amount. Its not the first time ratings agencies have "helped" to create troubles for the global financial markets. You can name Enron, Worldcom and now CDOs. These buggers get their rating fees upfront and not even a slap on the wrists. I would suggest that Moodys, Fitch and S&P be fined the sum of all fees received from rating the CDOs for 2004-2008. There has to be punitive action. I certainly hope that the upcoming G20 meeting will see some "action" on these ratings agencies.
Sydney Morning Herald: Ratings agencies such as Moody's Investor Services, Standard & Poors and Fitch rule the roost. They decide who is risky and who is safe. But how scientific are these ratings? Who is on the judging panel? And how accurate are they? Let's start at the last question. In terms of accuracy, their record is nothing short of appalling.
These are the are people who brought you Enron, who claimed the biggest corporate scam in US history was a fabulous investment opportunity just a few weeks before it collapsed. And not just Enron. The agencies gave the nod of approval to a whole range of dotcom darlings, including Worldcom, which lost billions of dollars in shareholder funds and where executives found themselves before courts and in jail.
But if you thought they'd learnt from that horrible and hugely embarrassing experience, you'd be dead wrong. Because around the time they were copping a shellacking over the dotcom collapse, in 2001, the ratings agencies were sowing the seeds for the downfall of the Western capitalist system as we know it
A huge number of unscrupulous participants played a role in the American real estate boom that has since brought the system to its knees. But it was the ratings agencies that provided the legitimacy for America's investment banks to pump up the market, to sell collections of high-risk loans to vast numbers of unsophisticated investors around the world, and all under the mask of a gold-plated AAA rating.
Just in case you missed the point, you had subprime loans to home buyers - which by definition were loans to people with a history of default - being packaged up, diced and spliced and repackaged as low-risk investments. The "mortgage-backed securities" were repackaged into "collateralised debt obligations" and Wall Street investment bankers sold them as safe investments to dentists in Norway, country councils in Australia and anyone else with more dollars than sense. Those who tipped in their money thought it was a terrific deal: a huge return on a AAA-rated investment. If only they'd known those selling them laughingly referred to them as "the cream of the crap".
So what is wrong with the ratings system? For a start, it involves an enormous conflict of interest. Those with the product - not the client or the investor - pay for the rating. From the ratings agency's perspective, it's easier to make money that way.When it is just companies or governments issuing debt, the potential conflict is bad enough. To get a decent rating, you have to pay all three of the main agencies. And not just for the initial rating. There is an ongoing annual fee that gets levied so you can maintain your rating. And guess what happens if you don't pay that fee? Well, the ratings agency decides it doesn't have quite enough information and it downgrades your debt, which in turn raises the interest you pay to the lenders. What would you do in that situation? You'd pay up, that's what.
The whole thing smacks of extortion. But if the situation was bad with governments and corporations, when it came to the brave new world of "structured finance", the ratings agencies lost all control and all respect. As the US property boom took off, a huge number of organisations were issuing a vast array of property-related investments. The agencies began clambering over each other to rate the CDOs - the toxic products into which the Obama Administration is now forced to tip trillions of dollars to save the American banking system - as AAA.
Investors who bought those loans on their coveted AAA clearly did not want them downgraded even when the economy began to tank. And, as it transpired, the ratings agencies had never even contemplated factoring a property downturn into their calculations. Instead of providing a sobering influence, the ratings agencies pumped up the boom. So far, their role in the global financial crisis has been largely overlooked. A US Senate committee last October subjected the heads of the three main firms - all of whom had earned megamillion-dollar salaries through the boom - to an embarrassing grilling. But now they are back at it, as though nothing has happened. It is business as usual.
p/s photos: Kathy Chow Man Kei
Sunday, March 29, 2009
Li Ka Shing says it is time to buy. Let's not be so cynical on his opinion. At least he didn't ask all to buy 2 months ago, or 4 months ago or even 6 months ago. Hence I would view his opinion with some merit.
New York Times: The oracle of Hong Kong has spoken. And his message: it’s time to consider buying stocks and real estate. Li Ka-Shing reported on Thursday that his companies had severe profit declines in 2008, but he said that “if you buy in a slow market, in the medium term you get good returns,” The New York Times’s Bettina Wassener reported.
The proclamation on Thursday by Li Ka-Shing, the self-made billionaire who controls some of Hong Kong’s largest companies and carries enormous sway among investors throughout Asia, was made at a rare public appearance. Exuding confidence, Mr. Li joked with reporters and looked anything but depressed about the sharp fall in profit his companies reported Thursday.
Whether Mr. Li is proved right about stocks and property — and he certainly has a lot to gain personally if he is right — his comments come at a time when stock markets have rallied on hopes that the economic slump may be bottoming out.
“If you have money in your pocket,” Mr. Li said, consider buying into stocks. As for the property market in Hong Kong, he said, “history tells us that if you buy in a slow market, in the medium term you get good returns.”
Mr. Li advised against borrowing to invest in what remains a shaky and volatile environment. Even though couched with caution, Mr. Li’s comments were enough to echo around the investment world and helped send the Hang Seng index up 3.6 percent Thursday. Mr. Li is the man the local media call “Superman” and liken to the investor Warren E. Buffett, who controls Berkshire Hathaway. Considered one of Asia’s most powerful men, Mr. Li is also one of the continent’s most generous philanthropists.
In the last year, as the economic crisis has dragged on and deepened, Mr. Li has jumped in from time to time to try to restore confidence.
Last September, shortly after the collapse of Lehman Brothers caused the world financial system to convulse, savers in Hong Kong lined up outside the Bank of East Asia, one of the territory’s best-known and biggest banks, responding to rumors that the bank was in trouble. Mr. Li let it be known that he had been buying shares in the bank, an expression of confidence that quickly helped put an end to an old-fashioned bank run.
And this month, HSBC was trying to raise $18 billion in a rights offering, prompting the bank’s shares to fall sharply. A majority of local residents here own shares in the bank, which is now based in Britain but has its roots in Hong Kong. When it appeared that the rights offering might falter, Mr. Li — along with several other Hong Kong tycoons — pledged to put about $300 million of his own funds into the issue.
Still, it has been a difficult year for Mr. Li, and the Superman title sat a little awkwardly on him on Thursday, after Cheung Kong Holdings and Hutchison Whampoa, the flagships of the property-to-ports-to-electricity conglomerate he controls, both reported declines in net profit of more than 40 percent for 2008.
Small wonder, given that the rapid slowdown in the global economy had tipped Hong Kong, along with the United States, Japan and others, into a recession and put a damper on the breakneck growth of neighboring China. Rental and property prices in the territory, a mainstay of the conglomerate’s earnings, are expected to tumble further this year, hitting developers hard.
But the Cheung Kong group is not just any Hong Kong company, and Mr. Li is not just any Hong Kong company chairman. Thursday’s event was not just any annual news conference, but the pinnacle of the Hong Kong earnings season, complete with a boisterous media scrum that regularly lends the bespectacled and affable Mr. Li the aura of a pop star.
The complex network of companies Mr. Li controls — three of them members of Hong Kong’s benchmark Hang Seng index — epitomize the hustle and bustle of entrepreneurial Hong Kong and its roller-coaster economy. And Mr. Li himself has the kind of rags-to-riches history that inspires every Hong Kong resident. The Cheung Kong group and its various interlinked companies grew out of the humblest beginnings imaginable: a plastic-flower manufacturing business the young Mr. Li set up in the 1950s.
Five decades later, Mr. Li is now one of Hong Kong’s leading developers of residential, commercial and industrial properties — about one in seven private residences here were developed by the group. Hutchison Whampoa, of which Mr. Li also is chairman, operates businesses as diverse as ports, hotels, supermarkets and drugstore chains, and is a major telecommunications operator in Hong Kong and abroad.
Cheung Kong Infrastructure, headed by Mr. Li’s son Victor, and HK Electric, one of the territory’s dominant power companies, also belong to the Cheung Kong/Hutchison stable of businesses.
Together, these businesses are a cross section of Hong Kong’s economy and reflect more than any other company the territory’s boom-to-bust character: riding the wave of Asia’s breakneck growth in recent years, and now suffering in line with the slowing global economy.
Mr. Li’s personal fortune has fallen as well, having slipped to 16th in the Forbes annual ranking of the world’s richest people, down from 11th in 2008, with a fortune now worth $16.2 billion — down from $26.5 billion a year ago.
p/s photos: Keiko Kitagawa
Thursday, March 26, 2009
Every time recession hits, its the MNCs who will be the first to retrench workers. Yes, you can argue that on an export destruction platform, but that is just part of the real story. Generally, local companies "are not as quick" to fire or retrench staff than say MNCs.
If you look at what has been happening around the world, almost all listed companies have enforced some sort of retrenchment or cost cutting exercise. From the GMs to the Sonys to even pharmaceuticals and construction firms. No industry is spared.
Don't you find it interesting that Malaysian companies, in general, list and unlisted, are not quite so trigger happy. Companies in developed markets tend to follow the mantra that the CEO is responsible for the fortunes of the company. The big movement over the past 15 years to tie CEOs compensation (and those of senior management) to the share price returns has produced a magnifying glass effect on management's behaviour and financial figures.
Everybody knows that American and some European companies are the quickest to retrench and downsize at the slightest hint of uncertainty or diminished orders coming in or inventory piling up.
The biggest culprit is the emergence of the quite silly Quarterly Earnings Results and the subsequent Quarterly Earnings Guidance. Needless to say, this kind of short term managing will result in a very difficult operating environment. Long term objectives and strategy will be compromised to attain short term goals and targets. QEG will not just affect the top layer of management, but will work itself down to the nuts and bolts of every organization, especially sales and marketing. Constantly doing, re-doing, re-working, re-stating QEGs will create a damaging focus on meaningless short-term performance and undermine a company's ability to manage for the long term. This re-working, re-stating, re-doing will have to be re-communicated down the line re-peatedly. Re-diculous!
Wall Street's relentless focus on whether companies hit or miss quarterly earnings targets encourages balance-sheet manipulation and discourages long-range planning. A consensus is growing among CEOs, regulators and analysts to go against QEGs. Many CEOs despise giving such guidance but are afraid to stop because they think they would be punished by Wall Street analysts and shareholders.
The unfortunate consequence of these excessive focus on short term numbers is that retrenchments and downsizing are textbook plays when things are starting to look bad. When things are bad, the management is EXPECTED to quickly do SOMETHING, and firing and downsizing are the quickest to pacify the markets.
In many ways, we should be glad that Malaysian companies are not there yet. We do not yet have that magnified focus on quarterly numbers every few months. We do not see CEOs being fired every now and then for not meeting numbers (maybe we should fire more CEOs actually). Is that good or bad? But of course the local CEOs payscale and reward structure are nowhere close to those of the Western world.
I think companies should be managed not quarter by quarter but rather based on a 3 or 5 year plan with visible and measurable milestones being communicated to all. At the moment probably less than half of all companies have a proper strategy going forward - they have little idea of how their industry will pan out 3 years or 5 years down the road, and how they are positioning themselves. They do not know where their critical strengths are (if they had any) and where they have critical competitive advantages in order to leverage on them. They have no idea on scalability, organic growth strategy and growth via acquisitions. But I digress...
p/s photos: Linda Chung Ka Yan
Even with such an exceptionally bad year like 2008, many regular top hedge fund earners still make their billions. James Simons will always stay near the top because of his patented trading software which spots the oversold and overbought areas and ekes out the differences. Still, we should feel sorry for James Simons because he made only $2.5bn in 2008 compared to $3.7bn in 2007. Simons' fund does not take in any more new funds for a number of years already, they manage funds that have stayed invested with them in the first few years of inception and now mainly manages their own employee funds. I think the trading software was so reliable that they can charge a 40% share of profits compared to the usual 20%.
John Paulson continues to make real dough by shorting the mortgage lenders and banks. Soros is still there, great investor indeed. Surprisingly Druckenmiller also made the top ten in 2008. He was Soros' right hand man before striking out on his own.
2007's top earners
p/s photo: Han Chae Young
Tuesday, March 24, 2009
Below are some sites which offer scholarship programs. Maybe the young ones will find them useful. Do pass on to your nephews and nieces.
MARA Scholarship Programs
Yayasan Proton Scholarship
PTPTN Education Loan
The Star Education Fund
Astro Scholarship Award
PETRONAS Education Scholarship Programs
2007 MNRB Scholarship Fund
OCBC Bank Scholarship
Bank Negara Scholarship
ABM 50th Merdeka Scholarship
Curtin Sarawak Scholarship
The High Achievers Scholarships
HELP University College
Adelaide Achiever Scholarships International (AASI)
Curtin University of Technology Scholarship
Charles Darwin University Scholarship
Kolej Disted-Stamford Degree Scholarships
Leeds University Scholarships
Loughborough University Human Science Scholarships
MAAC Scholarship - 2006
NUS / Asean
UCL Pathfinder Scholarships
University of Sheffield Scholarship
Nanyang Technological University Scholarship
Tasmanian International Scholarships
University of Malaya Fellowship Scheme
Universiti Malaysia Sarawak Scholarship
Universiti Malaysia Sabah Scholarship
p/s photos: Aum Patcharapa Chaichua
Monday, March 23, 2009
The under-pressure Tim Geithner, in probably his last ditch effort to save his career, will bring out his toxic asset plan today. From available information, I am optimistic and I believe markets will see it that way as well. This could sustain the rally for another couple of weeks. What is important is that the plan will start to "move" the toxic assets. Questions over the pricing will be secondary in my view as once things get transacted, it will eventually find a proper pricing level. The fact that reputable outside managers will be involved is a good start.
Brad de Long did a quick FAQ on the new Geithner plan to be unveiled today. The plan will be buying as much as $1 trillion in troubled mortgages and related assets from financial institutions. The plan is likely to offer generous subsidies, in the form of low-interest loans, to coax investors to form partnerships with the government to buy toxic assets from banks. To help protect taxpayers, who would pay for the bulk of the purchases, the plan calls for auctioning assets to the highest bidders. Industry analysts estimate that the nation’s banks are holding at least $2 trillion in troubled assets, mostly residential and commercial mortgages.
Q: What is the Geithner Plan?
A: The Geithner Plan is a trillion-dollar operation by which the U.S. acts as the world's largest hedge fund investor, committing its money to funds to buy up risky and distressed but probably fundamentally undervalued assets and, as patient capital, holding them either until maturity or until markets recover so that risk discounts are normal and it can sell them off--in either case at an immense profit.
Q: What if markets never recover, the assets are not fundamentally undervalued, and even when held to maturity the government doesn't make back its money?
A: Then we have worse things to worry about than government losses on TARP-program money--for we are then in a world in which the only things that have value are bottled water, sewing needles, and ammunition.
Q: Where does the trillion dollars come from?
A: $150 billion comes from the TARP in the form of equity, $820 billion from the FDIC in the form of debt, and $30 billion from the hedge fund and pension fund managers who will be hired to make the investments and run the program's operations.
Q: Why is the government making hedge and pension fund managers kick in $30 billion?
A: So that they have skin in the game, and so do not take excessive risks with the taxpayers' money because their own money is on the line as well.
Q: Why then should hedge and pension fund managers agree to run this?
A: Because they stand to make a fortune when markets recover or when the acquired toxic assets are held to maturity: they make the full equity returns on their $30 billion invested--which is leveraged up to $1 trillion with government money.
Q: Why isn't this just a massive giveaway to yet another set of financiers?
A: The private managers put in $30 billion, but the Treasury puts in $150 billion--and so has 5/6 of the equity. When the private managers make $1, the Treasury makes $5. If we were investing in a normal hedge fund, we would have to pay the managers 2% of the capital and 20% of the profits every year; the Treasury is only paying 0% of the capital value and 17% of the profits every year.
Q: Why do we think that the government will get value from its hiring these hedge and pension fund managers to operate this program?
A: They do get 17% of the equity return. 17% of the return on equity on a $1 trillion portfolio that is leveraged 5-1 is incentive.
Q: So the Treasury is doing this to make money?
A: No: making money is a sidelight. The Treasury is doing this to reduce unemployment.
Q: How does having the U.S. government invest $1 trillion in the world's largest hedge fund operations reduce unemployment?
A: At the moment, those businesses that ought to be expanding and hiring cannot profitably expand and hire because the terms on which they can finance expansion are so lousy. The terms on which they can finance expansion are so lazy because existing financial asset prices are so low. Existing financial asset prices are so low because risk and information discounts have soared. Risk and information discounts have collapsed because the supply of assets is high and the tolerance of financial intermediaries for holding assets that are risky or that might have information-revelation problems are low.
A: So if we are going to boost asset prices to levels at which those firms that ought to be expanding can get finance, we are going to have to shrink the supply of risky assets that our private-sector financial intermediaries have to hold. The government buys up $1 trillion of financial assets, and lo and behold the private sector has to hold $1 trillion less of risky and information-impacted assets. Their price goes up. Supply and demand.
Q: And firms that ought to be expanding can then get financing on good terms again, and so they hire, and unemployment drops?
A: No. Our guess is that we would need to take $4 trillion out of the market and off the supply that private financial intermediaries must hold in order to move financial asset prices to where they need to be in order to unfreeze credit markets, and make it profitable for those businesses that should be hiring and expanding to actually hire and expand.
A: But all is not lost. This is not all the administration is doing. This plan consumes $150 billion of second-tranche TARP money and leverages it to take $1 trillion in risky assets off the private sector's books. And the Federal Reserve is taking an additional $1 trillion of risky debt off the private sector's books and replacing it with cash through its program of quantitative easing. And there is the fiscal boost program. And there is a potential second-round stimulus in September. And there is still $200 billion more left in the TARP to be used in other ways.
Think of it this way: the Fed's and the Treasury's announcements in the past week are what we think will be half of what we need to do the job. And if it turns out that we are right, more programs and plans will be on the way.
Q: This sounds very different from the headline of the Andrews, Dash, and Bowley article in the New York Times this morning: "Toxic Asset Plan Foresees Big Subsidies for Investors."
A: You are surprised, after the past decade, to see a New York Times story with a misleading headline?
A: The plan I have just described to you is the plan that was described to Andrews, Dash, and Bowley. They write of "coax[ing] investors to form partnerships with the government" and "taxpayers... would pay for the bulk of the purchases..."--that's the $30 billion from the private managers and the $150 billion from the TARP that makes up the equity tranche of the program. They write of "the Federal Deposit Insurance Corporation will set up special-purpose investment partnerships and lend about 85 percent of the money..."--that's the debt slice of the program. They write that "the government will provide the overwhelming bulk of the money — possibly more than 95 percent..."--that is true, but they don't say that the government gets 80% of the equity profits and what it is owed the FDIC on the debt tranche. That what Andrews, Dash, and Bowley say sounds different is a big problem: they did not explain the plan very well. Deborah Solomon in the Wall Street Journal does, I think, much better. David Cho in tomorrow morning's Washington Post is in the middle.
Wednesday, March 18, 2009
Many friends will ask me to take them back to Ipoh for a food trip. Its silly to compare Penang food with Ipoh food, they are so different. When I was growing up, there were ZERO bak kut teh stalls in Ipoh, except for one sole coffee shop that brews one large pot only on Sundays, and I still remember buying back for my grand-dad almost every other week. You need to be in Ipoh for 2 full days to sample the important eateries. I cannot quite provide exact directions to all, the city is so small, just ask and you will get there in no time. Had to steal the photos from the many wonderful food bloggers cause I don't really go around snapping photos. So here are my top must-go spots:
1) This coffee shop called Xin Quan Fang sells Ipoh famous dry curry mee. It’s located at 174 Jln Sultan Iskandar Shah, Ipoh. Business hour: 7am to 2pm. The very thick curry sauce comes in a small extra bowl if you ask for it that way. Its the heady mix of siu yoke, char siu and chicken and...
2) Once you have found Xin Quan Fang, walk ten steps to the corner shop and sample the best Hakka mee and taufoo. The chilli and garlic sauce is a dream. Also for break-fast only.
3) Now walk back up the road towards the police station, turn right and you will spot Yong Suan coffee shop. Go for lunch for the infamous nasi ganja, apparently it was so good and addictive that the rumour was that they sprinkled ganja into their sauces. Get the deep red dry curry slathered chicken pieces. This nasi kandar is really different from what you get in KL or Penang, just the many differing curry sauces they guy lathers onto your rice will be enough to make your taste buds dance, and get the juicy tender huge beef slices are magnificent too.
4) The Aun Kheng Lim Salt-Baked Chicken Restaurant is not your regular restaurant. There are no tables or chairs for anyone to dine in, it is in fact a 100% takeaway restaurant! You have to be good operating a coffee shop sized restaurant with no sit down diners and selling just one item! Aun Kheng Lim Restaurant is famous for producing the best salt-bake chickens to date. Opens around 5pm onwards till the chickens all sold out. The chickens are smallish and not overly salty but packed with the necessary herbs, meat tears off the bone like a good lamb shank. Good to tapau for the trip back.
5) Head to old town and ask for Nam Heong or Sin Yin Loong coffee shops - the best white coffees are served at these outlets. The many stalls selling food here are very good as well. In particular, the charkwayteow at Nam Heong and the chue cheong fun stall. Oh, get the memorable nostalgic tarncha (egg tea) as well.
6) The usual Lou Wong nga choy kai, although there used to be a much better one at Cowan Street but they open when they feel like it.
About 20 steps away from Lou Wong is the hugely popular Funny Mountain, the best taufoofar and soya bean in town. They are only open during late afternoon around 3pm till sold out. I guarantee you one bowl not enough. Be a local and ask for hak-park, ... soya bean mixed with leongfun... or be even more local and ask for a park-park,... soya bean mixed with taufoofar.
7) At night, ask for directions to Main Convent the school. Opposite is a long row of hawker stalls. The second or third stall sells the best ngau lam, ngau yoke yuen, ngau gun mee and the over the top chilli sauce. Cannot miss cause the lady and her daughters are all very very very skinny.
8) Further down the stalls, there will be many curry mee stalls but don't go for the mee, go for the liu, ask for foochook, foopei, sarkot etc served in curry soup.
9) The popiah at Kong Heng. Its good because of the crispy dried prawns and shallots.
10) Breakfast at Ming Kok for dimsum. Matches the best on offer in HK or Sydney. To me, its better than Fusan.
11) Have lunch at Wong Koh Kee, situated in a narrow romantic looking alleyway. Its better known as yeelaihorng (concubine's lane). Just ask the boss to name their top 5 dishes and have them with rice. Too good to name all.
12) While many go to Ipoh for the white coffee, it amazes me that many never mention the good old kopi-o, its always good at any coffee shops. Be a local and ask for kopi-shuet, not kopi-ping, the latter is used everywhere but not in Ipoh.
There are plenty more spots for good food but these are top of my list. Enjoy.
Well, we have two Marks. Marc Faber, the famous Dr. Gloom and Mark Mobius, the Yul Brynner wanna-be from Templeton Emerging Markets. Surprisingly, both sounded pretty similar this time around. I generally agree with both, but 20% in 2009 is a bit low to me.
Marc Faber: China and other emerging markets offer value over the next two years as growth picks up, investor Marc Faber said. Investors should buy stocks and other assets in China after the market falls to its 2008 low to profit from an expected recovery, Faber said in an interview with Bloomberg Television. China is the world’s best-performing stock market this year.“Rapidly growing countries have setbacks from time to time,” Faber, the publisher of the Gloom, Boom & Doom report, said in Hong Kong. “I think we’re going to test the lows again, but over the next two years, it’s probably a good time to invest.”
The MSCI World Index has retreated 18% this year, extending last year’s record 42% slump, amid concern the widening financial crisis and global recession will sap corporate profits. The Shanghai Composite Index, which tracks the larger of China’s two mainland exchanges, has gained 16% in 2009.
China is betting that a 4 trillion yuan ($900 billion) stimulus package and interest-rate cuts will help it reach its 8% growth target this year. The global economy is expected to expand at a 0.5% expansion, according to the International Monetary Fund. Industrial and precious metals are attractive investments after the Reuters/Jefferies CRB Index of 19 commodities “collapsed,” Faber added. The CRB Index has dropped 8% this year, adding to the 36% retreat in 2008.
“Asset markets have already discounted a lot of the bad economic news,” he said. “ Some assets like commodities are very, very inexpensive.”
Faber had advised buying gold at the start of its eight-year rally, when it traded for less than US$300 an ounce. The metal topped US$1,000 last year and traded at US$932.78 an ounce today. He also told investors to bail out of US stocks a week before the so-called Black Monday crash in 1987, according to his website. He continues to favour gold, which has gained 19% in the past six months because currencies including the US dollar are “not desirable”. Stock markets are “not particularly expensive” and investors should consider buying them in anticipation of a recovery, Faber advised. The MSCI global index is valued at 11 times reported earnings, half its 10-year average multiple of 22.
“We also have a lot of equities that are not particularly expensive because they’ve collapsed,” Faber said. “These are relatively sound companies and whenever the recovery will come, they will be in a strong position.”
Mark Mobius: Veteran fund manager Mark Mobius sees a potential 20% rise in emerging market stocks in 2009 and views extreme investor pessimism as a signal to gradually start buying equities. "The danger we face now is being too pessimistic," Mobius, the executive chairman of Templeton Asset Management, a division of San Mateo, California-based Franklin Templeton Investments, said in a telephone interview with Reuters.
“We are seeing that slight bottoming out, that we have to be cautious of because if we are caught with too much cash, specifically when we are looking at very good bargains, then we are going to be in trouble with our investors,” he said.
Mobius manages roughly US$20 billion in emerging market assets out of the firm’s US$377 billion assets under management. Asked how high emerging market stocks might go by year-end: “If you really press me I would say 20% would not be unlikely, and the reason I would say that with some degree of confidence is that we have already come up.”
MSCI’s emerging markets stock index fell 54.48% in 2008. While the index is down 9.46% year-to-date, it has risen more than 15% from its four-year low in October. The Templeton Developing Markets Trust, the main US registered fund Mobius manages, is down 11.44% so far this year after dropping over 57.77% in 2008, according to Reuters data. Cash levels for his portfolio fluctuate between the preferred level of zero and 7% he said. He characterises them as “normal, or certainly not higher than normal”. During the 1997–98 Asian financial crisis, cash levels in his funds reached 20%.
While market volatility may not be over, a market bottom could be in place, Mobius said when asked at what point in the next 12 months investors might claim they’ve cleared a hurdle. “I’m saying that now. I'm feeling that now because of the incredible pessimism that you see everywhere. That usually is a pretty good sign that we are over the hump,” he said.
“Almost universal pessimism is usually a very good time to be buying equities because equities lead the economy,” by six months to a year he said. Famous for his globe-trotting and “on the ground” research, Mobius said of a recent trip to Latin America that while companies were preparing for the worst, customer orders were still coming in and “a lot of them” are maintaining steady investment programmes. On the ground things look OK but with a slower pace. That is on the investment side. The valuations now are very very attractive, even if we do a big markdown on earnings,” he said.
p/s photos: Nia Ramadhani
Monday, March 16, 2009
Readers of this blog will be aware of how much I adore Jim Cramer (not). Hence when news leaked that Jon Stewart was doing a full show with just Cramer, I know it would be merciless on Cramer. As much as I think Cramer is an idiot on markets, I think he does not deserve the full whacking by Stewart. Cramer is first and foremost an entertainer, then a market commentator, he then tries to pick stocks. If you watch his antics, he is more of a momentum trader - if it swings down he will turn very bearish and vice versa, all in a matter of days, I seriously don't know why people will watch him - but because its America, out of 100 million viewers, you will still be a hit if only a fraction of people watches you.
If you click on the link you can watch the entire Daily Show episode. What Jon Stewart tries to do is to be the layperson savior as he lays blame on the financial experts trying to hoodwink the rest of the world. His strongest point was that the financial industry (analysts, mutual funds, commentators, traders, CEOs, investment bankers, etc.) is playing an elaborate game whereby they use the "capital" provided by everyday people to create an elaborate financial game to lull the rest of the world into "investing and trading" the rigged markets. To a large extent, I subscribe to his theory. The financial industry is like a club, once you are part of it, you pick a role and play it according to the monopoly rules of the game - if you play it well, you will be rewarded with supernormal pay, you will be incentivised by moving the "capital" up and down and getting a cut from the movements and volatility. Nobody really cares whether they are creating real value or productivity.
The layperson by buying shares, putting money in unit trusts, subscribing to IPOs are basically giving capital to allow the financial industry practice the shenanigans. The mantra that is always touted to lure investors is that "stocks will be the best investing vehicle over the long term, that it is still the best way to invest your money to ensure that you keep ahead of the pack". As the 80s and 90s were prime examples whereby bull markets dominated the era, that mantra basically was elevated to tablets handed down by God to Moses, nobody questioned its fallibility.
The other mantra is blue chips which is supposed to provide long term steady outperformance - well, blue chips investors really saw their values being wiped out just like the rest, imagine having HSBC, General Electric in your portfolio... There was supposed to be some sort of "unwritten guarantee" but hey, it does not exists.
Life is tough enough, investing is even harder. Bull markets make normal people think they are smarter than they really are. Nobody is smarter than the markets. Once you think you are, you will make your biggest losses. Markets are fluid, we can only try to minimise the damage when its bad, and we hope to make some money when its good. Don't try to beat the markets all the time. Get 6 out of 10 calls right, and you are golden.
p/s photo: Cut Tari
Sunday, March 15, 2009
Since the private photos were uploaded early last year, I have basically not commented even once on them. I have been reading the news and developments, and have just finished watching Gillian's recent interview with Stephen Chan on Be My Guest. There are a few certainties here:
1) the photos were private and what people do in private should be their business, even celebrities have the right to privacy
2) hence the leaking or distribution of the photos through the internet is a crime by the person who copied and posted the photos, the people in the photos did not commit any crime
3) there are many who condemn the celebrities who were in the photos, why the rush to judge, who has the right to judge, let him/her who is without sin cast the first stone, who are we that can stand on a pedestal and cast judgments and make degrading remarks on them
If this was in western media, most people would have shrugged them off after a few days, but because we are in Asia, dignity and moral decency seems to be everybody's business. It shouldn't be. We must learn to respect one another, and we must give each other "space" to make mistakes - we are not God, and neither are we angels. In Cantonese, each society's essence and maturity can be found in whether they have the capacity to "pau yoong" (the capacity to forgive, the capacity to accept and work together) the mistakes, failings of one another... and not to rush to condemn those who make mistakes and failings to seemingly eternal damnation and oblivion.
Even if you do not like the characters of some of those in the pictures, that should only be a secondary consideration, ... reflect on what's really important. Some would add that as celebrities they have a certain responsibility in portraying a certain healthy image - nobody intentionally tries to portray an unhealthy image, nobody really tries to sabotage their own image, yes they may have been naive and silly, they did something in private which in hindsight probably they shouldn't have. If you don't want to support them as fans anymore, its cool, but let them get on with their lives.
How forgiving a society is reflects on their upbringing, their sense of values, their maturity in dealing with human frailties. We can be religious and throw the bible or Koran at them and say they were wrong - but they know they were wrong already... sometimes God has already forgiven while some of us still have not??!!!
I will leave you with some final thoughts:
a) If you are religiously inclined, after all that has happened, and after the immense pressure and suffering plus the countless apologies.... ask yourself if God would have forgiven them already... if He has, why haven't you?
b) Ask yourself this, what if Gillian was your younger sister, how would your attitude and comments be different, why is that? Remember, she is somebody's sister, she is somebody's daughter. Enough is enough, let everyone get on with their lives.