Friday, April 30, 2010

Marina Bay Sands Casino Opening

From opening accounts from the blogs, it looks like MBS is a few rungs up on RWS in terms of class, design and service. Looks spectacular.

Marina Bay Sands

MBS and RWS comparison

Marina BaySands / Resorts World Sentosa
Cost S$7.5 bn / S$6.6bn
Slots 1,500 / 1,300
Tables 670 / 530
Hotel Rooms 2,600 / 1,800
MICE floor 1,291,669 sq. ft. / 647,880 sq. ft.
Casino floor 161,000 sq. ft. / 161,000 sq. ft.
Retail space 800,000 sq. ft. / 330,000 sq. ft.
Restaurants 17 / 60
Non-gaming : Sands Skypark / Universal Studios Sg
Amenities: Helix pedestrian walkway / Marine Life Park

The $5.9 billion Marina Bay Sands, the world's No.2 most expensive casino after MGM Mirage's CityCenter in Las Vegas, has opened in Singapore.

Marina Bay Sands opening timeline
17-Apr Temporary occupancy certificate granted
25-Apr Casino license granted
27-Apr Marina Bay Phase 1 (Soft opening)
- 963 of 2600 hotel rooms
- Full casino (161K sq. ft.)
- Portion of MICE and retail space
- 3 celebrity, one 24hr. restaurant, 2 noodle bars
23-June Marina Bay Phase 2 (Grand opening)
- Remaining hotel rooms/suites (2,600 total)
- Additional retail and MICE space
- Entertainment pavilion
- SkyPark (exact timing subject to change)
August 2010 All restaurants should conclude opening
December 2010 Marina Bay Phase 3
- All retail should conclude opening
- Science museum opens
- Light and water show on Marina Bay debuts

Dealers at Marina Bay Sands

Thursday, April 29, 2010

Top Equity Strategists' Targets For S&P500

Bespoke Investment has managed to tally the top equity strategists' predictions for the S&P500 for the end of the year. Like them or not, a lot of big funds do listen to them. The underlying bullishness for the 2H of 2010 is still intact, but I think we will go a bit lower before moving back up. Whats surprising is that Goldman Sach's year end target has already been reached technically. Does that mean that they will adopt a more bearish stance from now till year end in their proprietary trades? Barclays, Citigroup and Morgan Stanley have year end targets lower than present levels - if they are right, we are in for a disappointing 2010.

The consensus year-end S&P 500 price target of major Wall Street strategists surveyed by Bloomberg now stands at 1,264, which is up 3.18% from the consensus of 1,225 at the start of the year. A move to the average year-end price target of 1,264 would represent a gain of 13.34% for the full year and a gain of 4.27% from the S&P's current level. UBS, Bank of America, and Credit Suisse are the most recent firms to up their year-end targets. So far this year, 7 of the 13 strategists have increased their estimates. As shown, UBS now has the highest year-end S&P 500 price target at 1,350, followed by Deutsche Bank at 1,325, and JP Morgan, Oppenheimer, HSBC, and Bank of America all at 1,300. Three strategists now have year-end targets that are lower than the S&P 500's current level -- Barclays (1,210), Morgan Stanley (1,200), and Citigroup (1,175).

Wednesday, April 28, 2010

The S Pellegrino World's Best 100 Restaurants

The World’s 50 Best Restaurant Awards 1-100 (2010)

Restaurant Region Awards

1 Up 2 Noma Denmark The S.Pellegrino Best Restaurant in the World, The Acqua Panna Best Restaurant in Europe
2 Down 1 El Bulli Spain Restaurant Magazine Chef of the Decade
3 Down 1 The Fat Duck UK The Chef's Choice sponsored by Electrolux
4 Up 1 El Celler de Can Roca Spain
5 Down 1 Mugaritz Spain
6 Up 7 Osteria Francescana Italy
7 Up 3 Alinea USA The Acqua Panna Best Restaurant In N.America
8 Up 33 Daniel USA The Highest Climber sponsored by Cocoa Barry
9 Down 1 Arzak Spain
10 Down 4 Per Se USA
11 Up 29 Le Chateaubriand France
12 Up 26 La Colombe South Africa The Acqua Panna Best Restautant in South Africa
13 Down 4 Pierre Gagnaire France
14 Up 2 L'Hotel de Ville - Philippe Rochat Switzerland
15 — Le Bernardin USA
16 Down 5 L'Astrance France
17 up 9 Hof Van Cleve Belgium
18 Up 6 D.O.M. Brazil The Acqua Panna Best Restaurant in South America
19 Up 10 Oud Sluis Holland
20 Up 29 Le Calendre Italy
21 Up 9 Steirereck Austria
22 Up 3 Vendome Germany
23 Down 2 Chef Dominique Finland
24 Down 4 Les Creations de Narisawa Japan The Acqua Panna Best Restaurant in Asia
25 Up 25 Mathias Dahlgren Sweden
26 Up 5 Momofuku Ssam Bar USA
27 Up 19 Quay Australia The Acqua Panna Best Restaurant in Australasia
28 Up 17 Iggy's Singapore
29 Down 11 L'Atelier de Joel Robuchon France
30 New Entry Schloss Schauenstein Switzerland
31 6 Le Quartier Francais South Africa
32 Down 20 The French Laundry USA
33 Down 4 Martin Berasategui Spain
34 New Entry Aqua UK
35 Up 7 Combal Zero Italy
36 Up 12 Dal Pescatore Italy
37 New Entry De Librije Netherlands
38 21 Tetsuya's Australia
39 New Entry Jaan Par Andre Singapore
40 New Entry Il Canto Italy
41 Re-Entry Alain Ducasse Au Plaza Athenee France
42 Down 10 Oaxen Krog Sweden
43 Down 29 St John UK
44 Re-Entry La Maison Troisgros France
45 New Entry wd~50 USA
46 New Entry Biko Mexico
47 Down 24 Germany
48 New Entry Nihonryori RyuGin Japan
49 New Entry Hibiscus UK
50 New Entry Eleven Madison Park USA
51 Maison PicFrance
52 Jean GeorgesUSA
53 L'Atelier de Joel RobuchonHong Kong
54 WasabiIndia
55 Robuchon A GaleraMacau
56 BrasFrance
57 De KarmelietBelgium
58 Marcus Wareing at The BerkeleyUK
59 Lung King HeenHong Kong
60 RougeCanada
61 EtxebarriSpain
62 TantrisGermany
63 AkelarreSpain
64 Gastehaus ErfortGermany
65 Bo InnovationHong Kong
66 ZumaLondon
67 Marque - Winner of Breakthrough Award 2010Australia
68 Ruscalleda Sant PauSpain
69 Chez PanisseUSA
70 Quique DacostaSpain
71 Ristorante CraccoItaly
72 PujolMexico
73 AtticaAustralia
74 Rust En VredeSouth Africa
75 VarvariRussia
76 La GrenouillereFrance
77 Langdon HallCanada
78 Les AmisSingapore
79 Can FabesSpain
80 La GazzettaFrance
81 Plavi PodrumCroatia
82 The River CaféUK
83 MirazurFrance
84 Gunther'sSingapore
85 Doce UvasRussia
86 ManresaUSA
87 Enoteca PinchiorriItaly
88 QuintessenceJapan
89 Restavracija JBSlovenia
90 AmberHong Kong
91 MasaUSA
92 Le GavrocheUK
93 Café PushkinRussia
94 SemifreddoRussia
95 Alain Ducasee at The DorchesterUK
96 Cepage by Les AmisHong Kong
97 La PergolaItaly
98 Le Louis XVFrance
99 Le Pre CatelaParis
100 AmadorGermany

Investors Say The Darndest Things

Many times, investors ask the stupidest question. Not to whack them but sometimes we have to sit back and think the context of our questions or comments. Some will sound absolutely silly, and it drives at our assumptions and fallacies in thought and logic. Investment is not a "you like, you play lor", it can ruin your finances. Its better for me to point them out than to have investors dumping tons of it without proper consideration.


The ones that make you roll your eyeballs:

So you think the stock you like can rise... aarrr?

Thanks for the tip, I made 10%, you think can hold on for another 5%?

Why my stocks go up so slowly but come down very fast one?

When a stock stays forever at 1.00 nobody wants it, when it moves to 1.30 they start to ask questions, when it runs to 1.80 they don't ask anymore, they just jump in. Herein lies most of investors' problems: why we cannot spot them earlier; there is a lot of danger in momentum investing without knowledge; there is no regard for what is fair value; we tend to let the market tell us what to speculate in; we have little regard for risk-return assessment; we probably don't know what the fuck the company does...


The really good ones:

The 4 most dangerous words in investing is 'This time its different' - Sir John Templeton

If you are stupid enough to believe in anything then I will be smart enough to be sell you whatever it is you desire.

Hope is someone who has a dream but no way of putting it together.

I wish everyone could get rich and famous and everything they ever dreamed of so they can see that’s not the answer. - Jim Carrey

If you can count your money, you don’t have a billion dollars. - J. Paul Getty

I leave you with this quote:

"I have enough money to last me the rest of my life, unless I buy something"


Marina Bay Sands Is Open, OMG... The Restaurants They Have!!!

Don't care much about casinos in general, but I like playing Texas Holdem poker when they have special rooms for the game. The most exciting part about Marina Bay Sands casino has to be the restaurants they have managed to lure to their premises. Mario Batali, Wolfgang Puck, Daniel Boulud, Santi Santamaria, Guy Savoy and Tetsuya Wakuda are all there. I am really looking forward to try all of them, especially my all time fav Tetsuya Wakuda.

SINGAPORE, April 27 — Las Vegas Sands, the world’s most valuable casino firm, expects to recoup its US$5.5 billion investment in its Marina Bay Sands casino in Singapore within five years, CEO Sheldon Adelson said today.

His comments came at the opening of Singapore’s second casino resort as global operators such as Las Vegas Sands and Steve Wynn’s Wynn Resorts seek growth in Asia, lured by the region’s growing wealth and Chinese passion for gambling.

“The Asian people see gaming as a form of entertainment. In the West, we have a different approach,” Sheldon said.

Las Vegas Sands said it hoped to attract 70,000-80,000 visitors a day to its casino and other facilities.

Marina Bay Sands is the world’s second-most expensive casino after MGM Mirage’s CityCentre in Las Vegas.

Adelson said the Singapore casino will provide credit to selected gamblers rather than rely on junket operators as is the practice in Macau.

Feedback from junket operators indicates most of them are not keen to operate in Singapore because of the disclosure requirements demanded of them by authorities, said Sheldon.

“We don’t have junket reps in Las Vegas,” said Adelson, who is also the firm’s founder and major shareholder. “It’s not a system that is seen worldwide. It’s uniquely Asian and primarily in Macau.”

Singapore legalised casino gaming in 2005, but not all Singaporeans welcomed the decision, fearing the casinos would attract crime and lead to problem gambling among it citizens.

The city state’s gaming rival, the former Portuguese enclave of Macau, crammed with over 30 casinos and the only place in China where casino gambling is legal, has already eclipsed gambling revenues seen in casino capital Las Vegas. — Reuters


Monday, April 26, 2010

Some Corrections On MYR & Bank Negara Strategy

My learned friend Hisham has rightly pointed out the "corrections" below:
Blogger hishamh said...

'Under the government’s exchange rate regime, the exchange rate of the MYR is controlled against “a trade-weighted basket of currencies.”'

This is plain wrong - Malaysia has not followed a basket of currencies approach since before the 1997 crisis. It's also inconsistent with...

"The upward trend in the ringgit against the U.S. dollar and the revival of capital inflows into the equity market have increased central bank intervention in the FX market to support exports."

...which implies a different sort of currency regime entirely.

In any case, watch changes in reserves as a signal of intervention. If trade and capital inflows were attracting central bank intervention to absorb upward pressure on MYR, then you would expect an increase in international reserves...which isn't there. Taking into account revaluation loss from the MYR's appreciation, then change in reserves for the year to date (2010) is a big fat zero.

11:50 AM


Goldman Sachs & God

In financial markets, Goldman Sachs is like a god. Goldman Sachs was about the only big investment bank that did well during the subprime financial crisis, JP Morgan did OK as well. But both went about doing alright in very different ways. Now people are complaining that Goldman Sachs cooperated (conspired?) with a hedge fund hustler in John Paulson (maverick or genius depending on whom you are talking to) to assemble and sell "synthetic collateralized debt obligations" that everyone involved, except maybe the purchasers knew would probably fail. The hedge fund hotshot made $1 billion.

I think Goldman Sachs did what a great investment bank should have done anyway. If you are smarter than the rest, you do the smart thing. Its a for profit entity, Goldman Sachs made most of its money by trading anyway, not by marrying trades.

Goldman Sachs is a convenient pinyata for those wanting to point out and punish those who behaved unethically and profited from the crisis. What GS did was not illegal but probably unethical. The basis for saying that is that most of the buyers of synthetic CDOs did not know the full extent of what they were buying - or did they? You don't go around buying billions of that stuff and then claim that you don't know what you were buying!!?? So what if GS knew that it was probably a bad trade for those who bought the CDOs. If you bought IOI Corp via GS, and then 6 months later IOI fell by 50%, is GS culpable?

GS, John Paulson, Steve Eisman, Mike Burry and the others in the brilliant new Michael Lewis book, The Big Short, basically got the right read on the subprime markets. Its never ethical to make money when you are short the markets, you can try to justify it but its not ethical. Its a profitable bet, its a calculated bet, its a knowledge bet, you are betting that the majority of the markets are wrong. In any crisis, its the majority who will suffer.

If you read The Big Short, you will fully understand how little GS and John Paulson knew of what they were doing. Those who were really the geniuses were people like Mike Burry and Steve Eisman, who were vilified and laughed at for a couple of years when they tried to short the subprime markets.

Dimon steered JP Morgan away from the subprime market early enough with an edict to his employees not to touch the stuff, but JP Morgan did not make bets against the subprime market. But then again, JP Morgan is not a big player in proprietary trading.

What was stupid was the GS CEO Blankfein saying that they are doing God's work. Just run GS as what we all know it is, a devil's playground where money is God. You do not need to make excuses on how you made money as no one expects you to be saintly or even ethical (really). Those who now trumps the word "ethical" as an absolute requirement for the character of the firm are deluding themselves. Ethics are just classes you take for GS to appease the lawmakers. It will never be allowed to conflict with money making motives. In fact, if you read The Big Short, you will know that GS was just like Bears Stearns, Citigroup and Merrill Lynch, holding the stuff on their books. It wasn't till late into 2006 that someone wised up at GS and said this was pretty stupid stuff if more than 7% of the loans defaulted - they actually went to 30% default rate in the end. Thats a risk they measured and a risk they acknowledged, the rest of the investment banks and AIG never put into their model that property prices could stop rising or that defaults could ever be higher than 3%.

If fact, if the subprime crisis imploded 6 months earlier, GS would have lost billions just like the rest. I guess, that is what people want, to have GS suffer alongside with all of them. Do any of those who shorted subprime (John Paulson, Mike Burry, Steve Eisman, GS, etc.) really have an edge - no, they just figured it was a better bet to go the other way. No one will know for sure that their bets will turn out exactly the way they wanted. We all buy and sell stocks with the information we have and the big picture beliefs that we hold. Some will be better at it but it does not mean they will be right. Just because they better correctly in a big way, is that a crime? Just be better consumers, be better investors - the only thing was that were some people DUPED, like in a Ponzi scheme? GS is not big enough to do that, and if you read the still excellent book The Big Short, you will know that GS was probably a bit lucky.

Can you really put in ethics into the mantra of an investment bank? Seriously folks, ... its a nice to have, but its never going to happen in reality. Should it be something we should work towards to, yes, by all means ... are we going to get there, I seriously doubt it, not when the people are paid by how much they bring into the bank and not by whether they had been ethical. Can we penalise them, probably, but will it be big and hurting enough to bring about a change in behaviour? I doubt that, not when people are making hundreds of thousands a year in bonuses or more.

Sydney Morning Herald, April 26, 2010

AS THE mortgage crisis in the United States gained momentum and many banks were suffering losses, Goldman Sachs executives traded email messages saying they would make ''some serious money'' betting against the housing markets.

The messages, released on Saturday by the US Senate Permanent Subcommittee on Investigations, appear to contradict statements by Goldman that left the impression the firm lost money on mortgage-related investments.

In the messages, Lloyd Blankfein, the bank's chief executive, acknowledged in November 2007 that it had lost money initially. But it later recovered by making negative bets, known as short positions, to profit as housing prices plummeted. ''Of course we didn't dodge the mortgage mess,'' he wrote. ''We lost money, then made more than we lost because of shorts.''

In another message, dated July 25, 2007, David Viniar, Goldman's chief financial officer, reacted to figures that said the company had made a $US51 million profit from bets that housing securities would drop in value. ''Tells you what might be happening to people who don't have the big short,'' he wrote to Gary Cohn, now Goldman's president.

On Saturday Goldman denied it had made a significant profit on mortgage-related products in 2007 and 2008. It said the committee had ''cherry-picked'' email messages from the nearly 20 million pages of documents it provided.

This sets up a showdown between the committee and Goldman, which has aggressively defended itself since the Securities and Exchange Commission filed a security fraud complaint against it nine days ago. Tomorrow seven current and former Goldman employees, including Mr Blankfein, are expected to testify at a congressional hearing.

Carl Levin, head of the committee, said the email messages contrasted with Goldman's public statements about its trading results.

''The 2009 Goldman Sachs annual report stated that the firm 'did not generate enormous net revenues by betting against residential related products','' Senator Levin said. ''These emails show that, in fact, Goldman made a lot of money by betting against the mortgage market.''

On October 11, 2007, a Goldman executive, Donald Mullen, predicted a windfall because credit-rating companies had downgraded mortgage-related investments, which caused losses for investors.

''Sounds like we will make some serious money,'' Mr Mullen wrote, and received the response, ''Yes we are well positioned.''

Documents released by the committee appear to indicate that in July 2007 Goldman's accounting showed losses of $US322 million on positive mortgage positions, but its negative bet - what Mr Viniar called ''the big short'' - brought in $US373 million.

Messages from as early as 2006 show Goldman executives discussing ways to get rid of the firm's positive mortgage positions by selling them to clients. In one, Mr Viniar wrote: ''Let's be aggressive distributing things.''

On December 14, 2006, he called Goldman's mortgage traders and risk managers to a meeting and concluded they would reduce overall exposure to the subprime mortgage market. This was largely done by making bets against the market to cancel out bets it had placed that the market would rebound. A day after the meeting Mr Viniar wrote to Tom Montan, co-head of the securities division, saying, ''There will be very good opportunities as the market goes into what is likely to be even greater distress and we want to be in position to take advantage of them.''

This typified exchanges on whether to continue to neutralise Goldman's exposure to subprime mortgages or expand investment in them well into 2007. By November 30, 2007, Goldman had largely cancelled out its exposure to subprime mortgages by increasing its bets that the market would continue to slide, according to the document.

Goldman also released statements for its mortgage trading unit which showed traders in what was known as the structured products group made a profit of $US3.69 billion as of October 26, 2007, more than covering losses in other parts of its mortgage unit.

Several traders from that group will testify tomorrow and their profitable short positions are likely to be of interest to the committee.

Thursday, April 22, 2010

Who Should Replace Alex Ferguson?

If you are a Chelsea, Liverpool or Arsenal fan, please stop reading and please forget about putting in suggestions - we don't need to hear from you lot. It was surprising to hear Ferguson saying that he wanted David Moyes to get his job. According to the bookmakers, they have Jose Mourinho as the favourite.

Well, what can you say about Jose, you will only love him if he's in your team, or he is with the team that helped beat your biggest rival.

David Moyes may be Ferguson's choice because of his Glaswegian roots, I don't know. Never know how close men in kilts are. Ferguson's choice could be shaped by him wanting a British to take over the reins. I do think that that is a critical factor - to ensure Manchester United being able to retain the culture and traditions befitting a great British football club, I think its vital that the manager remain a British.

As good as Arsenal became under Wenger, it lost a lot of its culture, just look at the mix of players they have. You can place Arsenal in the Bundesliga or Italian League and be none the wiser. You can be a pragmatic football club like Arsenal or Chelsea where results matter the most, or you stay a prominent football club because of traditions, because you want to maintain the roots, the legacy and the memory of how they got to where they are today.

While I recognise David Moyes' achievements with Preston and Everton, I think he lacked the "genius switch". Moyes is a grinder and a pragmatic strategist, he does not have that jenaisequa (pardon my Japanese) quality that I seek for to lead such an illustrious and special club like Manchester United.

Like it or not, Ferguson has that genius switch, so did Bill Shankley and even Mourinho - its the ability to assemble a team that clicks, its the ability to make 1+1 that equals more than 2. Its the ability to devise strategy that works brilliantly as though luck played a major part in it. Its that instinctive factor of knowing what works and how to manage over inflated egos, and maintain the strong club spirit.

My number one pick to replace Ferguson: Martin O'Neill. He has proven himself time and time again with a so-so side. I like his temper and his passion, I like his "longer than usual tenure" with clubs, his stick-with-it-ness. I think he is a brilliant football strategist and a perfect fit for Manchester United.

p/s On a separate note, I think its very sad that Lorena Ochoa of Mexico is leaving golf, and after playing professionally less than 10 years. I think she is the best female golfer... ever, and at the same time, the most under-rated female golfer ever as well. I get so pissed off the way mainstream media only focus on the American ladies, heck, even the Korea lady golfers get better coverage than Ochoa. If you look at her stats, she is the female Tiger Woods, but some things are more important to her. Best wishes Ochoa!!!

Wednesday, April 21, 2010

SGD Appreciation Bodes Well For Other Asian Currencies

Busy these couple of days, saw an interesting article, thought you all should read it:

RGE: On 14 April, the Monetary Authority of Singapore (MAS) made an aggressive policy tightening move. The MAS re-centered the SGD target band at the prevailing level of SGD’s nominal effective exchange rate and changed the band’s slope from a zero percent appreciation to one of “modest and gradual appreciation.” Judging from past experience, we believe the slope of the new target band is likely to be around 2% a year.

Source: RGE, Bloomberg

The MAS’s move reflected the growing confidence about the strength of the recovery as well as concerns about inflation risks associated with domestic demand later this year. The MAS has just revised its GDP growth forecast for 2010 from 4.5-6.5% to 7-9% and its CPI projection from 2-3% to 2.5-3.5%. RGE fully shares this view. Singapore’s growth and inflation have surprised significantly on the upside and the recovery is broad-based led by the rebound in manufacturing and services. RGE expects Singapore to grow 8.0% in 2010—the strongest performer in Southeast Asia—and inflation to average 3.0%.

Source: RGE

A rebound in economic activity, high food and commodity prices, closing output gaps, rising private demand and wage pressures will increase headline and core inflation in the coming months (see Figure 3). Upside surprises to growth and record low policy rates are leading Malaysia, Singapore and India to frontload monetary tightening into H1 2010 in order to contain inflation expectations. Capital inflows, potential CNY appreciation in Q2 2010 and slower growth at home and in U.S. and China in H2 2010 will lead EM Asia to maintain caution over the pace of rate hikes in H2 2010, but rely more on currency appreciation to curb inflation.

Source: RGE, Bloomberg

We started to track a “Long Asia” currency basket in December 2009 and formally introduced it in January 2010. “Long Asia” is an equal-weight long basket of four Asian currencies—CNY, INR, IDR and KRW—against JPY (see Figure 4). The basket appreciated by 9.1% (spot) since its inception.

Source: RGE, Bloomberg

As we noted above, our outlook on Asian FX is generally bullish, but we believe this is the right time to rebalance the ‘Long Asia” basket by replacing IDR with MYR. First, Malaysian GDP growth has surprised significantly on the upside. RGE forecasts Malaysia to grow 5.4% in 2010 as supportive private demand, commodity prices and exports to China, reviving global electronics cycle and Asian inventory cycle drive exports and industrial activity in the near term. The rate hike in March—which came earlier than its neighbors—will support capital inflows and the currency. Malaysia will hike rates by 25 basis points (bps) in May and by another 25 bps in H2 2010—more than what RGE initially forecasted—to contain speculative investment and lending to households. By contrast, there was little upside surprise to growth in Indonesia, while inflation is rising slower-than-expected and core inflation continues to ease. RGE also believes that Indonesia will delay rate hikes at least to Q3 2010—later than RGE’s initial forecast—amid political uncertainty.

Second, Bank Indonesia’s decision to phase out a 1-month certificate facility (SBI) by June can lead to a near-term IDR weakness. 1-month SBIs account for about 50% of all open-market operations. In addition, 1-month tenor attracts the bulk of foreign capital (besides SBIs, non-residents can also invest in government bonds). In the past, changes in foreign holdings of SBI had a noticeable impact on IDR. BI hopes that non-residents will switch into longer-term instruments, but this remains an open question at the moment.

As such, we choose to close our current “Long Asia” recommendation (long CNY, KRW, IDR, INR against JPY) and open a new “Long Asia” basket which tracks long CNY, KRW, MYR and INR positions (equal weights) against JPY.

An important caveat here is that unlike Singapore, the larger Asian economies will be more prone to use a sequence of policy measures—including credit curbs, raising reserve requirements and interest rates hikes—in addition to the exchange rates, as recovery and inflation risks gather momentum. Another key consideration is that growth and interest rate differentials will drive capital inflows, prompting further tightening (or at least no further liberalization) of real estate regulation, credit controls (such as margin requirements) and soft capital controls. The difference is of course that a very small, very open economy can do much less with these alternative routes to tightening than a larger, more closed one. Even though this will not be enough to reverse the general currency appreciation trend, it can increase volatility and limit or reduce risk-adjusted returns.

Monday, April 19, 2010

Possibly The Best Economist In Asia

Get this book and almost overnight you will find yourself a whole lot smarter about macroeconomics. Richard is highly logical and writes in a careful train of thought which allows the reader to follow his arguments, points and case building. He makes economics understandable, he is highly persuasive. I was at Nomura Securities back in the late 80s while he was at Nomura Research Institute (he joined in 1984), and even then he was already highly respected by everyone at Nomura. Till today, he is still at NRI. I am sure he could have gone anywhere if he wanted to but NRI allowed him a lot of room to do what he does best. He had been a significant advisor to the last 2 prime ministers on ways to get Japan moving again - he also elaborated why the understanding is there but the political will and vested interests made it hard for the then prime ministers to push things through (sounds familiar?!).

p/s I know many Malaysian readers reading will be wondering if Richard Koo is a Malaysian (aghast...another brain drain!!!) ... well, Richard is an American born in the US to Chinese immigrants to that country. Despite working in Japan for over 27 years, he is still an American citizen.

Koo believes that Japan's "great recession" of 1991-2005 contains useful lessons for interpreting and dealing with the subprime mortgage crisis in the United States and with the burst financial bubbles in China and Europe. His book reviews the key characteristics and policy developments of Japan during this troubled period, arguing that Japan suffered from a balance-sheet recession, during which firms struggle to repair their impaired balance sheets and are therefore reluctant to take on new business, even promising business, if that will delay improvement. Under these circumstances, economies respond very differently to new shocks, new opportunities, and new policies from how they would in normal recessions. In particular, monetary policy is much less effective, since demand for new loans is weak. Fiscal action, even including the injection of new capital into banks, is necessary to avoid prolonged Japanese-style stagnation. Not all readers will agree with all its analysis and conclusions, but this book is stimulating and thought provoking.


Chief Economist, Nomura Research Institute

Richard C. Koo joined Nomura in 1984 and is now the Chief Economist of Nomura Research Institute, the research arm of Nomura Securities.

Prior to that, he was an economist with the Federal Reserve Bank of New York (1981-84) and a Doctoral Fellow of the Board of Governors of the Federal Reserve System (1979-81).

Consistently voted as one of the most reliable economists by Japanese capital and financial market participants for nearly a decade, he has also advised successive prime ministers on how best to deal with Japan's economic and banking problems.

Mr Koo is the first non-Japanese to participate in the making of Japan’s 5-year economic plan and the only non-Japanese member of the Defence Strategy Study Conference of the Japan Defence Agency.

Author of four books on the Japanese economy, he recently released a book titled “Balance Sheet Recession – Japan’s Struggle with Uncharted Economics and its Global Implications”. He is also a columnist with the BusinessWeek Online.

He was awarded the Abramson Award by the National Association of Business Economics, Washington, D.C. for 2001. He is also a columnist with the BusinessWeek Online and the only non–Japanese member of the Defense Strategy Study Conference of the Japan Ministry.

Mr Koo holds BAs in Political Science and Economics from the University of California at Berkeley (1976), and MA in Economics from Johns Hopkins University (1979). Since 1998, Mr Koo has been a visiting professor at prestigious Waseda University in Tokyo.


Many experts have been claiming that they know why Japan had to go through its 15 years recession from 1991-2005, even the last couple of years saw only a mild pick up in economic activity. Many blamed the banks for not doing anything with bad debts. Richard's thesis was Japan had a balance sheet recession. He argued that bank lending was still ample, even as foreign banks were allowed to operate in Japan in 1997, there was no noticeable rise in borrowing. Richard saw the enormous wealth destruction affecting many listed companies. Over the past 22 years, real estate prices have lost almost 87% from its high to its low (2003) while a more candid example was the price of golf memberships which has plunged some 93% from its high.

The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession

When corporate Japan faced the 90s recession, they found their liabilities suddenly overtaking their assets by a big margin as the asset values have been knocked down enormously, including share prices. What was strange was that most Japanese products were still in good demand as they made superior and quality products which were still in demand overseas, but Japan's domestic demand shriveled up owing to the drastic wealth destruction effects on a personal level for every Japanese.

Here is why Japan's economy was in recession for 15 years - the Japanese corporates still made money from their products but most of the positive cashflow was used to pay down debt in order to narrow the assets-liabilities gap. Hence corporate borrowing took a nosedive in those 15 years, none was borrowing, everyone was repairing their holes in their balance sheet.

I would take that one step further in saying that these actions literally sucked the velocity of money out of the economy. The saying that $1 is worth about $8 in the real economy as money circulates, now imagine taking out billions year in year out, money just stopped moving. The housewives (who generally control the household finances) continued to save religiously, again sucking the velocity out of money in the system.

Thus the many stimulus projects implemented by various Japanese governments over the past 20 years, most in capital expenditure, failed to lift economy out of a recession - they did not get the Japanese people or the corporates to spend. Japanese corporates continued to hoard cash and paid down debts, and at the same time pulled back on research and capital expenditure.

That was also why in the 90s many Japanese companies began setting up offices overseas in a big way as much of the demand for their products came from overseas and not Japan anymore.

We all must read Koo's book The Holy Grail of Macroeconomics because we would be so much better off to know what type of macro policies to implement and which not to. There is also a need to place more emphasis to "engineer" consumer behaviour, consumer expectations, and how to force a speedy resolution to NPLs at corporate levels and personal levels. Get the updated version which includes Koo's analysis on the effectiveness of how the US/Fed has been in dealing with the subprime crisis.

Balance Sheet Recession argues that contrary to popular belief, it is this massive shift in corporate behavior, instead of structural problems, that is the root cause of both the deflation and the non-performing loan problems that have troubled Japan for so long. It argues that when the causality runs from the corporate balance sheet problems to deflation and banking problems, a highly unconventional policy response is needed to stabilize the economy. After all, the last time anything similar has happened was the 1930s in the US.

Koo defines a balance sheet recession as one that emerges

after the bursting of a nationwide asset price bubble that leaves a large number of private-sector balance sheets with more liabilities than assets. In this type of recession, the economy will not enter self-sustaining growth until private-sector balance sheets are repaired.

According to Koo, American consumers are suffering from a balance sheet problem and will not increase consumption until their personal finances are back in order. The banks are not lending mainly because nobody wants to borrow and, furthermore, the banks want to build their own balance sheets (raise cash) and get rid of toxic garbage.

Koo says it’s up to the government to make up for the private sector’s problems by spending and continuing to run deficits. Thus we would be “buying time” through government spending while the private sector has time to repair its balance sheets. He claims it is absolutely necessary for the government to spend and run deficits. If the government cuts back on its spending and stimulus, the U.S. economy will swoon and more money will be lost than was lost during 2008-2009.

Again, when asked what would happen if the government cuts back on its fiscal stimulus, Koo replies:

Until the private sector is finished repairing its balance sheets, if the government tries to cut its spending, we’re going to fall into the same trap Franklin Roosevelt fell into in 1937 (a crushing bear market) and Prime Minister Hashimoto fell into in 1997, exactly 70 years later.

The economy will collapse again and the second collapse is usually far worse than the first. And the reason is that, after the first collapse, people tend to blame themselves. They say, ‘I shouldn’t have played the bubble. I shouldn’t have borrowed money to invest - to speculate on these things.’

But a second collapse affects everyone, not just the bubble speculators, and it also suggests to the public that all the efforts to fight the downturn up to that point - all the monetary easing, the low interest rates, quantitative easing - have failed and even fiscal policy has failed. Once that kind of mindset sets in, it becomes ten times more difficult to get the economy going again. So the fact that Larry Summers was talking about ‘temporary’ fiscal stimulus had me very, very worried. That whole Larry Summers idea that one big injection of fiscal stimulus will get the US out of the recession, and everything will be fine thereafter, probably led to President Obama’s saying he’s going to cut his budget deficit in half in four years.

In summary, Koo’s message is that we will have an all-out recession if government spending and the budget deficits are cut back before consumers’ balance sheets have been restored and they start buying again. Does anybody still expect the economy to be coaxed back to recovery without pain?

There will probably never be a last word on the Japanese financial catastrophe of the 1990s but Richard Koo′s book may be the most significant analysis ever published. Agree or disagree, any analyst of the current United States situation must consider Koo′s arguments. – Lawrence H. Summers

Richard Koo does it again. By presenting a unique theory regarding the great Depression and Japan′s recession of the last 15 years. Koo offers a new understanding of current problems in the U.S. and other economies. With many pearls of analytical wisdom, The Holy Grail of Macroeconomics: Lessons from Japan′s great recession is a must–read for economist, policymakers and individual investors alike. – Nobuyuki Idei

His power point presentation just prior to the subprime crisis at ACI World Congress:

Looking For Mr Goodreason

Markets are dwindling not because of the Goldman Sachs issue. The markets were all waiting for a good reason to correct, they certainly found it in the Goldman Sach case, plus in itself will drag down financials, which makes up most of the gains in US markets. Its likely to be localised in the US, which will not hamper financials in other markets, but once the tide has turned, better to wait for a proper rally rather than to hope and pray that suddenly things will turn very bullish overnight. Ties in well with Sell In May & Go Away mantra.

Goldman Sachs is facing fraud charges for the first time in its history as a public company, setting the stage for the Wall Street powerhouse's biggest-ever showdown with the US government.

On Friday, the US Securities and Exchange Commission charged Goldman with hiding from investors the involvement of a prominent hedge fund manager in helping it structure a subprime mortgage debt product that he was betting against.

The incipient swoon in the synthetic collateralised debt obligation - created as a way for hedge fund manager John Paulson to bet against the housing market - cost investors more than $US1 billion ($1.1 billion), according to the SEC complaint.

Goldman vowed to vigorously defend itself against the charges and denied that it had structured a portfolio that was designed to lose money, claiming that the firm itself invested in the equity portion of the deal.

The news sent Goldman's shares tumbling and cast a shadow over the dominant Wall Street firm.

The charges follow a very profitable 15-month stretch for Goldman in the aftermath of the financial crisis. But the bank's prosperity during a period of wider economic pain has come at a cost: rising public anger over gold-plated bonuses even as the firm benefited from government rescue programs.

The charges filed against Goldman could take months or even years to be resolved. But here are some possible outcomes:

A quick resolution

Goldman may look for a quick resolution to its SEC problems.

A settlement within a few months, even one which could cost Goldman hundreds of millions of dollars, would be one way for Goldman to try to move on quickly and seek to avoid long-term damage to its brand.

Even if the firm seeks such a settlement, the authorities may not want to risk it given how much of a political hot potato Goldman has become. All parties will also be fully aware that a judge rejected an initial settlement between the SEC and Bank of America over the disclosure of bonuses paid in the bank's takeover of Merrill Lynch.

And, this will not prevent the potential for lawsuits from clients who feel they have suffered losses because of Goldman's actions.

Goldman fights and wins

Such vindication would likely take many months and probably years - and wouldn't be without damage to Goldman, its management and its brand. Media scrutiny would be even more intense over this period.

In a sign of trouble to come, British Prime Minister Gordon Brown on Sunday said he wanted Britain's financial watchdog to investigate Goldman, while in Germany, a government spokesman said its regulator would also seek information.

Goldman would not only face a big legal bill, and additional compliance costs as it sought to prevent any other problems from surfacing, but it might also impose more restrictions on its bankers and traders, which could reduce making money.

Jesse Derris, a crisis communications consultant with Sunshine, Sachs & Associates, said the charges are already "incredibly damaging."

"To me, it doesn't feel like a PR problem anymore," said Derris, who represents John Thain, a former Goldman executive and former Merrill Lynch chief executive whose stewardship of the firm during the financial crisis drew widespread criticism. Thain is now CEO of CIT Group, a commercial lender that recently emerged from bankruptcy.

"There is a structural problem that has led many people, including some in government, to think they weren't just actively trying to make money, but they were trying to do it on the backs of regular people who were invested in pension funds. You can't have much worse imagery."

Fighting a long battle could also expose Goldman to a greater extent to lawsuits from investors who feel they were wronged. It will create a public record of its transactions that could help would-be plaintiffs.

Goldman fights and loses

The worst case scenario is that Goldman fights the authorities, and investigators discover more problem transactions and charge more executives. Lawsuits from clients pile up and get very expensive to settle or fight. And while criminal charges are seen as unlikely they cannot be completely discounted.

In these circumstances, some question whether Goldman will be permanently damaged and lose a lot of its power and status, especially if it faces a major exodus of clients worried about the reputation questions.

Most think this unlikely but it can't be discounted.

"The $US64 million question would be is there some sort of unraveling of Goldman that will be coming down the pike, and I'd rather doubt it," said Joseph Battipaglia, a market strategist with Stifel Nicolaus.

Under the worst case, the future of CEO Lloyd Blankfein and other top executives would be in doubt. Veteran banking analyst Richard Bove, of Rochdale Securities, said on Friday that the charges could lead to Blankfein's resignation.

"People wonder how Goldman was able to make as much money in trading as they did at a time when nobody else was doing anything and maybe this is a reason why," said Malcolm Polley, chief investment officer, Stewart Capital Advisors. "How widespread this is, time will tell. If the SEC has brought charges on one instance my guess is it will open a can of worms."

Wider implications

The impact goes well beyond just Goldman - here are some of the implications for Wall Street as a whole and the broader financial markets:

- Advocates of tougher Wall Street regulations are already citing the Goldman fraud allegations to bolster their case for tighter oversight of derivatives and other financial products.

"That's the question," said Jason Tyler, senior vice president and part of the investment committee at Ariel Capital Management. "Will this fuel a fire and get a more aggressive form of financial reform in Washington? The timing of this works out well to get some legislation done ... it gives (lawmakers) another arrow in the quiver.

- Goldman could be just the first Wall Street player to be targeted in what could become a much larger investigation.

SEC investigators may see the Goldman case as a shot at redemption after they missed the boat on Ponzi-schemer Bernard Madoff and alleged swindler Allen Stamford. Indeed it hardly seemed like a coincidence that the Goldman charges were filed hours before - and largely overshadowed - a government watchdog's report excoriating the agency for failing to go after Stamford years earlier.

A resurgent SEC eager to restore its credibility could prove a major risk for Goldman and the rest of Wall Street in the coming months.

"The SEC is on the hotseat," plaintiffs Lawyer Jacob Zamansky said. "They missed Madoff ... It's a big moment for the SEC to see if they can stand up to Goldman Sachs and the best lawyers and experts on Wall Street."


p/s photos: Jessica C (of Wacoal fame)

Friday, April 16, 2010

29th HK Film Awards

Hard to look at stocks with good upside at current levels, so look at movie awards to be presented this weekend. My wish list:

Best Film: Bodyguards & Assassins
Best Director: Ann Hui, Night & Fog
Best Screenplay: Accident, Szeto Kam Yuen, Nicholl Tang
Best Actor: Simon Yam, Night & Fog
Best Actress: Zhang Jing Chu, Night & Fog
Best Supporting Actor: Fung Tsui Fan, Accident
Best Supporting Actress: Michelle Ye, Accident
Best Action Choreography: Ku Huen Chiu, 14 Blades
Best Asian Film: Departures

獎項 Awards
提名名單 Nomination List
最佳電影 Best Film
十月圍城 Bodyguards Assassins
Director: Teddy Chen
Actor: Donnie Yen, Leon Lai, Nicholas Tse, Tony Leung Ka Fai,
赤壁:決戰天下 Red Cliff 2
Director: John Woo
Actor: Tony Leung Chiu Wai, Takeshi Kaneshiro, Hu Jun, Chiling Lin, Zhang Feng Yi, Vicki Zhao Wei, Zhang Zh
竊聽風雲 Overheard
Director: Alan Mak, Felix Chong
Actor: Daniel Wu , Louis Koo , Sean Lau Ching Wan , Zhang Jingchu , Alex Fong Chung Sun
新宿事件 Shinjuku Incident
Director: Derek Yee
Actor: Jackie Chan, Daniel Wu, Xu Jing Lei, Takenaka Naoto, Fan Bing Bing, Kato Masaya, Chin Ka Lok
音樂人生 Kj [Music and Life]
Director: King Wai Cheung
Actor: KJ Wong
最佳導演 Best Director
最佳編劇 Best Screenplay
最佳男主角 Best Actor
最佳女主角 Best Actress
最佳男配角 Best Supporting Actor
最佳女配角 Best Supporting Actress
最佳新演員 Best New Performer
最佳動作設計 Best Action Choreography
最佳亞洲電影 Best Asian Film
南京!南京! City Of Life And Death
Director: Lu Chuan
Actor: Liu Ye,Gao Yuan Yuan,Fan Wei,Qin Lan Qin Lan
建國大業 The Founding Of A Republic
Director: Huang Jian Xin, Han San Ping
Actor: Tang Guoqiang, Zhang Guo Li, Leon Lai, Andy Lau, Jet Li, Ge You, Wang Xue Qi, Zhang Ziyi, Wang Wu Fu, Xu Qing, Chen Kaige, Feng Xiao Gang, Wang Jian, Aloys Chen, Liu Sha, Liu Jing, Vivian Wu, Jackie Chan, Vicki Zhao, Donnie Yen, Jiang Wen, Chen Dao Ming, Xiu Zong Di, Huang Xiao Ming, SHI XIN, Zhang Han Yu, Chan Hoi, Eva Huang
風聲 The Message
Director: Chen Kuo fu, Gao Qunshu
Actor: Zhou Xun, Li Bing Bing, Zhang Han Yu, Huang Xiao Ming, Wang Zhi Wen, Ying Da, Su You Peng
崖上的波兒 Ponyo On The Cliff By The Sea
Director: Hayao Miyazaki
Actor: Tomoko Yamaguchi , Yuki Amami , Joji Tokoro
禮儀師之奏鳴曲 Departures
Director: Yojiro Takita
Actor: Masahiro Motoki, Ryoko Hirosue, Kimiko YO, Masahiko Tsugawa
Copyright All Rights Reserved.

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