Friday, December 30, 2016

Passengers - Go Watch It



Passengers. Brilliant story telling. Visionary yet believable. Like Martian, only better. Space travel, science, romantic, desolation, philosophical, mortality n its devastation, spectacular imagery. Being human n humane. 9.7/10






Wednesday, December 28, 2016

Casinos In Japan - An Assessment

This was considered unimaginable 15 years ago, but a group from LDP finally managed to push through the new bill. The new bill proposes allowing large-scale projects that will combine casinos with hotel, shopping and conference facilities. Attracting tourists is one of the key economic policies of Japan's Prime Minister Shinzo Abe and supporters say these developments will bolster the country's flagging economy and help support tourism after the 2020 Tokyo Olympics. The law urges the government to prepare legislation within one year to deal with problems connected with casino resorts, including gambling addiction and ways to prevent the involvement of organized crime groups.


Likelihood To Go All The Way: Despite a 2-1 disapproval by the public, the likelihood of this plan to come to fruition is very high. As you know to even get passed the Lower House would have required a lot, a lot of stamp signatures and collusion. Hiroyuki Hosoda, head of the main pro-casino parliamentary group and one of three casino proponents recently named to top LDP spots - is the key reason why as long as LDP is around and in power, this will get through. Japan's international tourism arrivals was 19.7m in 2015... compared to 30m for Macau and 15m for Singapore - so safe to say, the tourism angle will push the deal through.

Beneficiaries: Although the top operators' share prices went up slightly on the news, there are really only two serious contenders for the two casinos. Sands and Genting, fullstop. Why? Balance sheet strength (very important to the Japanese).GENS has cited potential passing of the Japan integrated resorts bill as one of its main reasons to sell its Jeju casino stake and get back S$588 million ($413.60 million) of capital. The other reason has to be the "Singapore experience" - which the Japanese can see, watch and follow. They would have liked the detailed planning, great execution, good rules to govern and restrict local population from over-gambling. They will probably frown on the Vegas experience - too gaudy, too bawdy and anything goes. They would have frowned at the Macau experience as well - uncontrolled chaos, overbuilding, soul-less, not family oriented enough, only bringing in "real hard core gamblers" (when they really want a more holistic family thing).


Local Beneficiaries:  Fuji Media, Tokyotokeiba, machine makers Sega Sammy and Konami Holdings Corp, as well H.I.S. Co Ltd  - a major travel agency jockeying to develop a casino in southern Japan. Property developers such as Mitsui Fudosan and Tokyo Tatemono.

The KEY:  In things like these, it is what ISN'T said that is more important. In order for Sands and Genting to nail the deal - its the partners they go with. The committee will have a handful of "important enough" local partners on their list, but will probably not enunciate them. It is up to the two to guess. It is always important for the Japanese to "balance the scales", i.e. who loses out in this new development should be "compensated somewhat. Currently the pachinko gaming has the biggest pull in gambling plus horse racing. Will need to "appease" the two. How big is pachinko gambling you say ... in 2015 it was approximately US$190bn.



The other key is selecting the location/partner - should not be near major cities, but accessibly via bullet trains/express rail because with 19.7m annual tourists a year, this will boom towards 30-40m a years when it actually opens, hence the need to divert. Plus it should not be near Disney's two resorts.




Friday, December 09, 2016

Covered Warrants - The Not So Silent Killer

One should never never punt on warrants with less than 1 year to expiry, especially covered warrants. I can safely bet that anyone who trades in covered warrants in the course of a year will have a 90% chance to sustain losses. 

Unfortunately, our markets have been in the doldrums for the past 6 months or so and that has caused some die hard players to only consider covered warrants, esp those index covered ones, in particular the highly volatile HSI covered (which kind of acts as a proxy to the even more volatile China exchanges).

Just have a look at the daily volume rankings, its always the covered warrants for the past few months. Strange as it may seem, if things continue, our local exchange will be trading mostly other countries' covered index warrants for the longest time - esp if the big guys introduce the Nikkei covered as well.

Why investors will lose big in the long run:

1) Time Value - These covered warrants are usually short in terms of time to expiry, usually less than 12 months. Investors are usually lured into covered warrants when their absolute price are less than 30-40 sen because they think they get a lot of leverage. But to get to 30-40 sen, it also usually meant that there is less than 6 months to expiry, and trust me, the time value diminishes rapidly. Even if the linked product stays stationary, you will find the price of the CW dropping.

2) Your opponent - Unlike a company's warrant, in CWs there are teams of experienced traders (issuers) with sophisticated models fighting you on the other side. If you think the role of issuing house is to MANAGE their gammas and betas, YOU'D be very wrong. The safest way to make money for issuers is just to manage and capture the premium, manage free float, and make sure you are well hedged. MUCH LIKE THE CASINOS - they almost never ever lose... so guess who wins and loses in the end. Better to go Genting, seriously.

Even when you keep wanting to buy, they will keep giving you the volume to buy. They can keep throwing new shares at you as long as the equation is right. What you see on the screen being offered is never what they "really can sell" to you.

3) Volatility - The die hards will say they trade only the highly volatile CWs such as HSI. Yes, thats a better strategy but I can also tell you that the higher the volatility, the higher the premium that is priced into these CWs, and it will take a hefty whack in movement to erase the premium before you see good gains.

4) One Sided - You know very well the issuers KNOW you can only take ONE SIDE of the equation. So overtime you show up on the screen, either you are buying or buying. At any point in time, they know how many people are long or short out there. Imagine playing black/red, but you can only bet red and the odds are always 0.7 to one instead of 1 to 1.

5) Timing - The nature of the product necessitates the need to TIME your entry point accurately. So, unless you are the type that can walk between raindrops to avoid getting wet - fergedaboudit.

The next time you think of trading a CW... just picture the trading/hedging teams at the banks, you can almost invariably see them laughing and chuckling to themselves at how easy it is to make money from the market (that means you and me).


p/s my first 8 years of my career was spent placing, trading and managing the house book on Japanese corporate warrants for Nomura and James Capel




How Far Should The Bloodletting Go

Euromoney came up with an article which questioned how far should the "bloodletting" continue in finance in Malaysia. I bring this...