Thursday, April 09, 2009

Best Places In The World For Coffee Aficionados


Hah! Try to start a war, ... do this. Debating the best places in the world for coffees. Do you try to define first what is good coffee. Its usually not manufactured or off the assembly line. Its aromatic and your first gulp will leave you going "aaahhhh ... nice...".

Some places on earth have a warped idea of what coffee is. For all its wealth, Japan serves pretty shitty coffee, and they don't give you fresh milk, just the artificial
"can-even-survive-Armageddon" UHT milk. In Austria, generally you go anywhere for coffee, they will serve you Nescafe.

An interesting fact that nobody will get right, I think. Which city on earth drink more coffee per head of capita than anywhere else in the world? Answer at the bottom of posting. Guess first la!

Why is it that certain countries do not strive to serve "really good" coffee? Why are we settling for instant coffee in some places, or blandly brewed coffee? I mean, if we have hamburgers, we will strive to find places that serves the best burgers. In the US, people will travel miles to go to certain locations that serve superior burgers... why is that kind of yearning missing for coffee in so many countries ... you name it, Japan, HK, Austria, China, Germany, Taiwan ..etc.. while some people will seek and search with a burning passion?


Malaysians as a whole are pretty keen on their coffees. While we still lack the "Italian cafes" in our midst, we have more than sufficient the plethora of very decent local coffee flavours. Coffee plants cover only 25,000 hectares or so in Malaysia (primarily in Kedah, Kelantan, Selangor, Terengganu, and Pahang states). What little coffee is grown in Malaysia is consumed here, and because there's no export dollars to be gained from the industry there's been no official emphasis on improving the crop's quality.

About 95% of Malaysia's coffee beans come from
liberica plants, a little-known variety that's also grown in west Africa and accounts for less than 2% of the world's coffee (most coffee comes from arabica and robusta beans). A liberica tree can grow as tall as 18 meters; its leaves are large and leathery, it produces big fruits and seeds, and it's extremely hardy. Professional tasters describe the bean's flavor characteristics as "undesirable" - thin, harsh, acidic. All of which means that you're unlikely to find a Malaysian bean or blend on offer at Starbucks or Coffee Bean anytime soon.


However, careful cultivation and skilled roasting can make even liberica beans shine. Some Malaysian roasters add sugar during the process, which lends a hint of caramel to the cup. Ipoh's famous 'white' coffee is roasted in butter (or, less desirably, margarine), which makes for one smooth caffeine hit. Besides the famous Ipoh's white coffee, there are other areas where the coffee taste and aromas stand out: Kemaman, Kluang ... Owing to the Western-commercialisation of our culture, younger Malaysians tend to gravitate towards the Starbucks and Coffee Beans. We need to rediscover our roots and heritage, Malaysian coffee is pretty good by global standards. Stand up and be proud.

Well, guess what, the many variety of local coffees in the pre-packaged bags sell very well in HK, Singapore and Thailand - ever wonder why there are so many varieties on the supermarket shelves just over the last few years??? For one, many of them have discovered the wonders of freeze-packaging and the ability for taste retention with good duration.... and that many foreigners love Malaysian coffees. Good and decent coffee must be made relatively fresh, which is why most Malaysian coffees are pretty much up there - the closer the establishment is to roasting the coffee, the better will be the coffee, hence smaller towns' coffee always win.

The natural winner has to be Italy where they have perfected it. It is so ingrained into their blood that they don't know how to make a bad cup of coffee, or rather they would never serve you bad coffee, its just not done. The French for all their outdoor cafes have no idea what good coffee is. Australia has a surprisingly vibrant coffee culture, thanks in part to its huge Italian and Greek immigrants and their great cafe culture.


HK is just like Japan, its pretty commercialised and crass. The UK is pretty bad, and surprisingly the US is pretty bland. The Indonesian civet cat droppings coffee seeds (
kopi luwak) is good but would you pay USD$30 for a cup? Coffee has to be affordable as serious drinkers would need at least a couple of shots a day. Vietnamese coffee is always pleasurable, but the fucking drip process takes so long, maybe all that wait is causing you to salivate and thus making the final drink more tasty. Thailand is a good too but pales a little whenever compared to Vietnamese coffee, plus Thai coffee has to be iced coffee only. The ones in Turkey are so thick it can make your spoon stand, an acquired taste. I heard its pretty good in Latin America as well. Costa Rica, Guatemala and Cuba are pretty exceptional too.






If we want to talk about commercial outlets, we have a few in Malaysia, and if I had to rank them it would be
Espressamente Illy, Dome, Segafredo Zanetti, San Francisco, Starbucks, Coffee Bean in that order... Gloria Jeans should just drop dead. Oh, btw, ice blended drinks are not coffee.

Really good coffee should be drunk espresso style or Americano style (just the shots of coffee or with some hot water). If you are going to add milk or make a latte/cappy, then please use very good milk. Go ask the commercial chains which milk they use? To me, the best tasting milk is Farm House from Australia. It adds layers of richness to your coffee.

You know how many people in HK and Malaysia love their yin-yeong (coffes-tea mix). There is also a distinctive Malaysian coffee-mix drink, when drinking kopi-o or nescafe, just add one teaspoon of Horlicks into it, its an enhancer for sure. Talking about mixed coffee drinks, I came across this stupid Malaysian coffee joke. Next time go to your kopi tiam and order the mixed drink of Horlicks, Milo, Coffee and Tea... better known as
LickMyKoTeh (foreigners need to ask their Malaysian friends for translation) - I told you it was stupid!!!

If you are in Malaysia and you see a dire lacking in Italian-type cafes, what can you do.... go and buy a Nespresso machine, then try out the various freeze-packed freshly ground coffee which Nescafe will sell and home-deliver to you - they are very very good, just bring along your own human Italian barista for decor and desired effect.


Below is one of the Nespresso machines (RM1,500 only). Please note I have not been paid by Nespresso.

https://secure.nespresso.com/precom/sima/nimg/machines/n_ess_c100_1.jpg

The Espresso range of Nespresso Premium Blend coffees have diverse characteristics and are best enjoyed in a small cup (1.35 oz/40 ml). The Lungo range of Nespresso Premium Blends are mild and intense coffees, which are developed especially to be enjoyed in a large cup (3.75 oz/110 ml).






p/s photos: Pat-Napapha Tuntrakul / answer: Wellington, New Zealand


The Children's Investment Fund Sat On The Wall ...


The famous and infamous hedge fund, The Children's Investment Fund, has made some huge bets. The $10bn hedge fund have recently placed huge bets that Japanese shares will fall. TCI's foray into Japanese equities is not without history. Last year TCI lost a bitter fight over corporate governance at J-Power. TCI held a 9.9% stake in J-Power. TCI wanted to raise its stake from 9.9% to 20%.

This time around TCI has accumulated huge short positions in Sony, Toshiba, Sharp, Bridgestone and Mizuho. Total short position came to $1bn. The biggest position was a short on Toshiba worth $397m or some 4% of Toshiba's outstanding shares. The move has more to what meets the eye. Toshiba is one of the largest corporate shareholders of J-Power. Much of the short position was made in March. The recent rebound in the Nikkei and yen weakness would have put TCI's short positions in jeopardy. Toshiba's current price is already some32% higher than on March 10 when TCI announced its short position rose to 4%.

TCI has just exited from its 10.2% stake in Deutsche Bourse. TCI funds lost more than 40% in 2008. Looks like the "children" won't be very happy.

p/s photo: Aya Sugimoto

Wednesday, April 08, 2009

What Can $150,000 Buy In Global Real Estate?

With the global credit crunch spiraling into an economic crisis, here’s what $150k can buy you right now around the world. Taken from www.matadorlife.com

http://matadorlife.com/what-can-150k-buy-in-real-estate-around-the-world/
Argentina: Centro, Buenos Aires

USD Price: $149,000

Bedrooms: 2 Bathrooms: 1

Notes / Link: This place is fully remodeled and right in El Centro,

2 blocks from Teatro Colon.

Chile: Villarrica, Region 9

USD Price: $110,000

Bedrooms: 3 Bathrooms: 3

Notes / Link: This house is in the town of Villarrica, and has world-class

back country terrain all around.

Russia: Chystye Prudy Area, Moscow

USD Price: $152,000 (approx.)

Bedrooms: 2 Bathrooms: 2

Notes / Link: Right in the center of Moscow.


South Africa: Jeffrey’s Bay, Eastern Cape

USD Price: $152,200 (approx.)

Bedrooms: 5 Bathrooms: 3

Notes / Link: This pad has a barbecue, garden, and you’re close to one of the

sickest surf spots in the world.

Australia: Deniliquin, New South Wales

USD Price: $144,400 (approx.)

Bedrooms: 5 Bathrooms: 3

Notes / Links A full on 27-acre farm near the town of Denliquin.


Portugal: Evora, Alentejo

USD Price: $150,500 (approx.)

Bedrooms: 2 Bathrooms: 1

Notes / Link: in sweet village of Viana do Alentejo.


Indonesia: Lovina, Bali

USD Price: $107,000 (approx.)

Bedrooms: 4 Bathrooms: 2

Notes / Link: A straight-up private villa on Bali with mature palms / banana trees

and some kind of ’split level swimming pool’. Ridiculous.


Croatia: Porec, Istria

USD Price: $150,700 (approx.)

Bedrooms: 3 Bathrooms: 2

Notes / Link: A 3-bedroom apartment with beach only 3 minutes away, along with

the yacht marine of Cervar village.


Czech Republic: Prosek, Prague

USD Price: $144,000 (approx.)

Bedrooms: 2 Bathrooms: 1

Notes / Link: A newly renovated apartment with 74 m2 of living space and a

6-minute commute via subway to the city center.

New Zealand: Foxton

USD Price: $125,500 (approx.)

Bedrooms: 4 Bathrooms: 2

Funky designed 4 bedroom home.


MALAYSIA

Suasana Loft, Kuala Lumpur
KL Sentral
Suasana Loft, Kuala Lumpur
RM500,000.00, RM556.79 per sq.ft. / RM3,200, RM3.67 per sq.ft.


QuikPro No: UP289859
Property Type: Condominium
Tenure: Freehold
Title Type: Individual
Built-Up: 898 Square Feet
Asking Price: RM500,000.00
Price psf RM556.79 per sq.ft.
Rental Price: RM3,200
Rent Price psf: RM3.67 per sq.ft.
Bedrooms: 1+1
Bathrooms: 1
Maintenance Fee: RM0.30/Month
Situated: Intermediate Unit
Occupancy: Vacant
Furnishing: Fully Furnished
Posted Date: 11/3/2009
Facilities: Barbecue Area, Covered Parking, Gymnasium, Playground, Sauna, Swimming Pool, 24hr Security

BKT SEGAR JAYA, Kuala Lumpur


Cheras
BKT SEGAR JAYA, Kuala Lumpur
RM550,000.00, RM255.81 per sq.ft.


QuikPro No: UP302763
Property Type: 3-sty Terrace/Link
Tenure: Leasehold
Title Type: Individual
Land Area: 20X70
Built-Up: 2150 Square Feet
Asking Price: RM550,000.00
Price psf RM255.81 per sq.ft.
Bedrooms: 6+1
Bathrooms: 6
Maintenance Fee: RM68.00/Month
Situated: Intermediate Unit
Occupancy: Owner Occupied
Furnishing: Partly Furnished
Facing Direction: South
Posted Date: 6/4/2009
Facilities: Jogging Track, Mini Market, Playground, 24hr Security


p/s To be fair, I would rank those properties that are in or near city centers to be worth comparing. The ones in Deniliquin in Australia and Foxton in NZ are so out in the woods - its like buying a place in Bidor or Yong Peng. The ones in Buenos Aires and Bali are execptional.

China's Scare Tactics & Longer Term Vision


Over the last few months China has been more vocal in asserting its voice in the economic wilderness. Beijing has openly blamed the excesses by the Americans as being hugely responsible in bringing about the current global financial calamity. Next Beijing further warned the US not to assume that China will always buy US Treasuries. As if that wasn't enough, Beijing went further to suggest that the US dollar has to be replaced as the reserve currency of choice. They cited the IMF's Special Drawing Rights as an option. Are these genuine concerns?

To me, its a lot like a mother nagging his son to get married. Its not like the mum is going to disown the son if he fails to get married. Its mainly nagging voices from Beijing. Why? The IMF Special Drawing Rights is a pie in the sky idea (please read my previous posting on the subject). Next, China will never be able to stop buying US Treasuries completely - the two nations are too interdependent on each other's economy to risk obliterating that relationship. If Beijing stops altogether, US interest rates will balloon, can you imagine what will happen if US interest rates rises from 3% to say 12% - US rates will rise sharply to continue to attract other funds to buy US Treasuries. That will stop borrowing and lending dead in the tracks, that will cause the stock markets to hit new lows because how are you going to find stocks that can better the risk free rate of say 12%.
The move will cause other central banks to be filled with fear and start dumping US Treasuries before the currency collapses further. So, the USD may fall to 60 yen to the dollar and imagine the 1 USD buying only 2.4 ringgit. Which might not be a bad idea at all because that will make US exports a lot more competitive and thus helping to address its trade deficit.

But all that is hype and snarls... what is really happening is that Beijing has shifted the bulk of their holdings and new purchases to just the short term Treasuries. They are staying away from the long term Treasuries because they probably forsee a sustained long term weakness of the USD judging from the quite massive printing of new money by the Americans.


Beijing knows it cannot stop buying Treasuries, so it is thinking outside the box by reducing the risk strategically by other means. There is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money. Hence the first priority is to GUARD AGAINST THE inflationary consequences of the US printing press - buy real assets, preferably denominated in a currency other than USD.

Chinese companies thirst for Rio Tinto, Fortescue Metals, ... is just the beginning ... they will buy and keep buying any and every kind of commodity producers.

The second strategy is to be nicer to countries other than the US so that they will be more open to Chinese companies expansion and acquisition strategy. Its more pragmatic but will strengthen China's economic hand at being able to dictate global economic direction, rather than being dictated now by the G-7. The one big issue which many have not brought up has to be the "currency swap lines". China has been very open and friendly to arranging these swap lines with many countries trying to defend their currencies during this financial crisis.
China has just signed its sixth bilateral currency swap arrangement with Argentina for CNY70bn ($10bn) . This follows five other earlier bilateral currency swap deals with:
Korea (CNY180bn last December)
HK (CNY200bn in January)
Malaysia (CNY80bn in February)
Belarus (CNY20bn in March)
Indonesia (CNY100bn March).

The CNY vs. local currency swaps, which total CNY650bn (US$95bn), will be valid for three years. More agreements with other emerging market countries are expected in the pipeline.
The bilateral swaps with China do not require an IMF program to access more than 20% of the swaps. In the short term, China’s bilateral swaps promote bilateral trade and investment (especially trade finance), helping Chinese slumping exports by making access to finance easier. In the longer term, it is China’s strategic economic and political interest to promote internationalisation of CNY. But that will require full convertibility of the CNY.

The most recent deal with Argentina has swamped the media in Latam. More importantly is what this could mean for other Latin American countries should China extend this further across the region. Bilateral trade with the region adds up to USD112bn for which the top three are Brazil, Mexico and Chile. These swaps can help internationalise the Chinese yuan, if there is to be a new reserve currency in 30 years, why can't it be the Chinese yuan, or so Beijing seems to be thinking. The swaps will increase trade financing and engineer a closer economic relationship between the said countries.

Looking at it from a geopolitical point of view, Beijing has been quick to help Asian countries to stabilise their currencies. Like it or not, Beijing knows that for China to lead the rest of Asia into the next 50 years to be The Decade Of Asia Rising, China will not be able to it alone, and will need all the Asian tigers and lions to prosper and be economic successes as well. Hence Beijing would be more than happy to extend economic help to the rest of Asia if it can.

p/s photo: Jojo Stryus


Monday, April 06, 2009

Emerging Markets Exposure



When should you have an exposure to emerging markets? Should you always have an exposure in emerging markets? If you are a global funds manager, you can only underweight or overweight or go neutral weighting on emerging markets. They are usually very small markets. No serious fund managers will be able to follow each and every one in detail. When the big picture is right, then its time to go into emerging markets. Can emerging markets rally on its own without foreign funds inflow,... unlikely. Because of the sheer weight of foreign funds flow, when they start to move in, its hefty. Another trait is that rallies will be superb but will not last. You will not get the 3 or 5 year bull runs like in the US. Its a hit and run. If you get a one year bull run, thank your lucky stars. Emerging markets are not for buy and hold players.

Emerging markets are your girlfriends, not wife material.

Looking at the top and bottom performers for each year, you will find themes such as export-driven markets, resources rich markets, BRICs play, Latam play, ... in the same way when the run is over, either resource dependent countries will get hit, or export contraction concerns, or currency misalignment issues, or mismanagement of government or corporate debt levels, or bubbles bursting in property... but the one prevailing "really bad factor" is political stability (or lack of). If there is political unrest or uncertainty, funds will shun your markets for a long time.

Which emerging markets will outperform in 2009. It has to be the ones least affected by the global banking crisis and the ones that can lead the way in sufficient stimulus. China and some of the Latam countries should be the outperformers. Export dependent nations will have to play catch up. Eastern Europe and Central Europe should be the worst performers as their problems will take a lot longer to unravel and fix.

Top 5 / Bottom 5 markets

2005
Egypt +161%
Columbia +107%
Jordan +73%
Russia +73%
Pakistan +63%
----------
Morocco +13%
Thailand +8%
Taiwan +6%
Malaysia +2%
Venezuela -24%

2006
China +82%
India +73%
Morocco +68%
Argentina +67%
Peru +62%
---------
Thailand +11%
Pakisatan +3%
Israel -5%
Turkey -7%
India -30%

2007
Peru +94%
Brazil +79%
Turkey +74%
India +73%
China +66%
-------
Hungary +16%
Columbia +15%
Mexico +12%
Taiwan +8%
Argentina -4%

2008
Morocco -11%
Columbia -25%
Israel -30%
Chile -36%
South Africa -38%
------------
Hungary -61%
Turkey -62%
India -64%
Russia -73%
Pakistan -74%

1. Top 10 Emerging Market Returns Chart (1993-2008):

click to enlarge

Morocco, Colombia and Israel were the three top countries in 2008.

2. The Top 5 Best and Worst Performing Countries Chart:

Last year Pakistan was the worst performer with a loss of 74%.


http://seekingalpha.com/article/126834-top-emerging-market-equity-performances


http://seekingalpha.com/article/126834-top-emerging-market-equity-performances


p/s photos: Tang Wei

Friday, April 03, 2009

FASB's Move & The Aftermath


OK, we can have our disagreements over what is fair value accounting. But since its been passed and will come into effect as soon as the second quarter, lets look at the real effects on companies and markets. The first area is to look at the Credit Default Swaps for the affected banks. CDSs are basically insurance one can buy to insure against a certain company going bust. Hence if I bought Bear Stearns, and it went bust, the writer/issuer will be paying me the full sum I insured/hedged.

Now, with the new FASB ruling, the CDSs of the banks will reflect whether there was real effect or just a cosmetic effect on these banks' risk of failing following the new rules.


- Citi is in about 40 bps but is just back to where it was on Tuesday
- Bank of America is lower by 50 bps

- Wells Fargo is lower by 30 bps

- JP Morgan is lower by 15 bps, all back to one week lows

-Morgan Stanley and Goldman Sachs are each in about 30 bps


Well, the effect is only minimal at best. The ones in real danger would be Citi and Bank of America, hence the narrowing of risk would be more pronounced there. Other banks which may have a lot less toxic assets in their books, would only see a very marginal reduction in risk. That means that the new rules DOES NOT really help to put the shaky banks out of the risk of possibly going bankrupt. It was the same level of riskiness as things were a few weeks ago.

That would be a correct consequence because the treatment of the "impairment" may be changed but the substance of the impairment is still in the books - hence the risk of failing should be the same or nearly the same as before.


The difference, the really big difference as I have mentioned yesterday is in the capital adequacy side. They will not need to hold so much capital or raise much new capital. That lightens the bank's dilution danger, and eliminates the big danger of failing badly should they fail to get a truckload of new funding over the near term.
The supposed new capital is to plug the hole in the toxic assets write downs, and will not actually help to fund business activities going forward. If they do not sell the toxic assets, they will not be taking the loss in effect - hence I like the amortisation rule of the losses. Thus the reduced need to raise new capital will NOT affect existing operations going forward.

Its not like the new capital will be used for expansion, it was dead money to plus a hole in the balance sheet.
Another consequence will be that many of the banks that received the TARP money will be looking to repay the sums back much quicker. Again, a confidence issue will work its way to boost optimism in the eyes of investors. You cannot imagine how much liquidity still resides on the bylines. Its a confidence issue and moving market back up by 10%-20% over a few weeks is not that strange in extreme market conditions.

Will the markets rally be shortlived? I think this one's got some legs. This bear market crisis was predicated on a significant loss of confidence in the entire financial system. What has come out of the G-20 and the new FASB ruling showed a more sobering and concerted view to address the issues. We are not out of the woods in terms of real economic activity, jobs will still be lost.

However, stock markets are forward discounting models, hence in the eyes of investors, the real economy are looking brighter 1Q2010 and 2Q2010, it is with that foresight that that the Dow Jones could scale above 9,000 and try to consolidate there over the next few weeks.
Will we revist the lows??? ... pretty unlikely.

p/s photo: Pace Wu Pei Ci

Revisiting The Yen Dollar Rate


The yen dollar rate is about to break through the 100 barrier. As crude as the rate is as a one dimensional factor in looking at risk, it has served my purposes well. My views stayed the same on the yen dollar rate. A revisit to my two previous postings on the yen dollar rate:


March 11, 2009 posting - Readers will be familiar with my views on the yen. Yes, its an indicator of risk aversion although many more seem to regard the present yen's correction from 89 to 98 as more a reflection on the economic slump within Japan. Prior surge in the yen was driven by carry trade unwinding, a substantial shrinkage in US-Japan rate differentials, as well as the explosion in U.S. money supply versus static money supply growth in Japan. Beyond the unwinding of the carry trade, the yen’s fall also reflects worsening conditions in Japan’s export-driven economy and fears that the Bank of Japan will start flooding the market with funds to ward off deflation. It is very clear that Japan cannot operate lower than 90 yen to the dollar as most of their exporters have budgeted around 102-104 for 2009-2010.


It appears that Japan's finance mandarins still expect the strong yen phase, which as far as analysts can determine was caused mainly by a massive JPY20 trillion reversal of the yen carry trade. The yen has been a low-yielding currency ripe for funding carry trade positions in other higher-yielding assets. Some might say that the yen is falling because carry trade unwinding seems to have come to an end, not because the world is a safer place. That is a bit unfair to think that the yen's movements is mainly dictated by the carry trade. There was plenty of opportunity to unwind the carry trade, and which did happened, when the yen was moving around 110-115. The sharp gains which propelled the yen to 90 was a reflection of a flight to safe havens rather than a dramatic unwinding of yen carry trades.

Judging from the very low rates globally, the yen carry trade might not be the only popular transaction going forward. The USD carry trade or Euro carry trade might be the way to go. Plus both currencies have a bigger propensity to be largely weaker further down the road - a required recipe for a solid carry trade.

Figures from the Tokyo Financial Exchange (TFX) revealed that as of February 6, leveraged Japanese retail investors are now net long of the yen, meaning there are more buyers than sellers, for the first time since July 2006, when the TFX started posting positioning data. With the JPY’s status as a safe haven seemingly at an end – at least for the time being – it remains to be seen just how far it can fall. However, USD/JPY’s recent completion of a double-bottom technical pattern points to a near-term target of JPY 102-105. It can spike lower in times of extreme risk aversion, it cannot stay below 100 for long due to Japan's declining financial home bias; 110 for USD/JPY makes more sense than 90 over the medium-term. JPY/USD may fall below 100 in event of a dollar crisis, but won't stay there in the long-term due to:
1) economic decline from demographic shift,
2) large interest rate gap
3) yen failing to become key reserve currency
4) declining home bias of baby boomers



January 16,2009 posting - The Japanese yen was rising as aversion to risk took hold, with the U.S. dollar dropping to ¥88.87, from ¥89.04 late in New York. When markets were rising for the first few days of January 2009, the yen rose steadily from 90 to 94. Have to say again that the yen dollar rate is the best indicator to follow.

The posting on following the yen rate:

Cheap valuations are a reflection of risk aversion, the rush to US Treasuries is a sure sign of risk aversion, the rush to USD and yen are a sign of definite risk aversion.

Gem #1: Markets will only start a genuine recovery when risk aversion subsides

Gem#2: Risk aversion reduction will be immediately reflected in weaker USD and yen

The fall in USD over the last two days is more due to the zero interest rate regime enacted by Federal Reserve, so that should not be a sign of risk aversion reduction.

The best guide for locating current markets' bottom:
WHEN USD and YEN BOTH STARTS TO FALL IN VALUE in a sustained pattern. When these two currencies fall, it show a willingness to move exposure into other currencies or assets, be it stock or bonds. Before they are reflected in the prices, the signal will be most apparent in the currencies.

However, even then we cannot really ascertain a buying trigger. So, my advice would be to break up you investing funds into 3 portions, get ready your list of stocks to buy.

Catalyst #1: When yen/usd rate moves back to 94, plonk down 1/3 of your funds

Catalyst #2: When the rate moves to 97, move the second portion

Catalyst #3: When the rate breaks 100, move the rest in

A point not missed here is that if yen weakens against the USD, the latter would be gaining in strength. However, I am using the yen/usd rate as a guide, as I believe when the yen starts to weaken, the USD would also weaken, but not by as much - i.e. the USD would gain ground against yen but at the same time lose ground against the euros and other major currencies. I use the yen/usd rate because that is most widely followed. The yen is used as the determinant because it was the most popular currency for carry trades, the unbelievable strength now is due to risk aversion as the Japanese exporters are basically losing money and cannot compete below 90.

p/s photo: Maki Nishiyama

Ask Your Mistress Not To Sleep Around Please

Maybe I have been too hasty in making comments about the two affected parties. Yes, what they did was not illegal and my comparisons were inaccurate. Here is what is galling:
a) Tang has another mistress as well, so he has two mistresses plus a living wife and kids
b) absolutely no sensitivity to how his real wife and kids would feel for having blown this matter out in the open
c) absolutely no remorse about having more than one wife and a few mistresses... absolutely no respect for the wife
d) this guy thinks he is a tycoon living in China during the 1800-1900 with tons of concubines and maidservants
e) morality and treating fellow human beings with basic dignity and respect are non-existent concepts to him
f) when you give presents or gifts, give with a willing and generous heart, where got gifts that come with conditions??? ... you may ask her not to sleep around and if she does, then don't give her gifts again la... where got such claw back provisions???

----------------
Real-life stories are so much better than the movies or television series, they are a lot more fun and astounding. If you are wealthy, and you want to fool around and have a mistress, you need to be prepared for the consequences. This guy had a mistress and bought her some properties, some in her name, some in the mode of a trust - she even had a kid with that asshole. Apparently she was told not to have any other affairs while being her mistress. She had more than an affair, now a full blown relationship with a former Mr HK and TVB actor.


Now the old man wants the properties back. OMG what an asshole. Old man, you had a mistress, that's not right in the first place. Its been on going for years and you even had a kid together. You verbally requiring your mistress not to sleep with other guys IS JUST SO PATHETIC & RIDICULOUS. Its like a rapist asking his victim not to tell her parents. You are doing something wrong and you ask the other person in it NOT to do something wrong??!!!

I wish she would counter sue him and seek for half his assets. Many men do become assholes after they become rich, or were they just latent assholes just waiting for wealth to unleash their assholeness on the world?!!!


The Standard, HK:
Thursday, April 02, 2009


A wealthy businessman wants his mistress to hand back property he bought her worth more than HK$10 million because he claims she broke their agreement that she would not have sex with anyone else.

Angry shoe tycoon Patrick Tang Kim-kwan, 66, claims Karen Lee Chi- ting, 39, breached the conditions under which he agreed to buy her a series of properties between 2002 and 2005.

In a writ lodged with the High Court, Tang, claims Lee had an affair with former Mr Hong Kong, Wong Cheung-fat - who at 23, is 16 years her junior - and as a result she should return the properties.

Married Tang runs a successful shoe business and is a shareholder and director of Priway Investments Ltd. He is the former chairman of KTP Holdings (0645), and is popularly known as the "King of Shoes."

The writ says Tang met Lee in 2002 and formed an extramarital relationship with her. The following year, he bought a unit in Metro Harbour View on Fuk Lee Street, Tai Kok Tsui, for HK$1.7 million in her name to be held in trust for him. Tang said it was intended as a gift but was turned into a trust to hide their relationship. When Lee became pregnant in the middle of 2003, Tang said they made a verbal agreement that he would buy her a property provided she did not indulge in affairs with other men.

The writ is not clear on whether the agreement extended to properties bought before the pregnancy.

The nine-page document goes on to say that her interest in the property would revert back to Tang i

f she breached the agreement.

The couple later bought a house in Marina Cove in Sai Kung for HK$6.13 million under their joint names. Their daughter was born on April 16, 2004, and lived in the property with Lee.

The same year, Tang bought a flat at Royal Peninsula on Hung Lai Road, Hung Hom, for HK$2.68 million.

The property was registered in Lee's name though Tang claims in the writ it was in trust for him. He also bought a unit at Cheuk Nang Centre on Hillwood Road, Tsim Sha Tsui, for HK$722,000, also in Lee's name and also in trust. Tang alleges Lee "wrongfully and in breach of the trust" and without his consent or knowledge sold the flat in Metro Harbour View for HK$2.1 million in December 2005.

He claimed he had been in the dark about the transaction until earlier this year when Lee's affair with Wong - who is also known as Francois Huynh - surfaced, prompting him to investigate the properties she held in trust for him.

The relationship between Wong and Lee received huge coverage in the media. In interviews at the time, Tang asked not to be identified and to only be referred to as "Mr T."

It is understood Wong fell in love with Lee at first sight when they met at a party last December.

Wong, who grew up in France, sent her messages, taught her French and spent most of his free time with Lee and her five-year-old daughter.

The relationship between Tang and Lee deteriorated further after Wong openly declared his love and gave up his career in show business.

Thursday, April 02, 2009

Mark-To-Market, The Wonders Of Accounting


I was an accounting and finance major, heck I even did honours in the driest subject ever created, accounting in my 4th year. Accounting is a made up subject. You just have somebody a hundred years ago devising a way of recording assets and liabilities by dividing a page into two columns. What started as a convenient way recording assets and liabilities morphed into this thing called accounting.

Accounting is very much like fung shui (there I go offending 90% of my readers again), its made up as you go along.

Now the market seems to be favouring the fact that there will be some accounting rule change tonight in the US which may actually add legs to the current rally. It centers on approving changes to "mark-to-market" accounting. I spoke to a very very rich man 3 months back and told him that one of the likely market catalysts will be changes to mark-to-market accounting. He was taken aback, and just like the MAJORITY of investors and readers, including the CFA association - almost everyone is condemning or has condemned changes to mark-to market accounting as stupid, silly cosmetic and ineffective.

I am in the minority I guess. I have been around accounting figures long enough to know that accounting numbers DO NOT fully represent what the truth is. Accounting is just an approximation to the truth. If accounting rules are the best approximations to the truth, then by all means we need to maintain the boundaries and stick to the accounting rules - so that things can be appraised fairly and consistently.


What I don't get is how so many hold onto accounting rules even stronger than the tenets in the bible. Change some accounting rule, its worse than blasphemy!!! Gee, its just accounting.


I fully appreciate why most would not want mark to market to be tweaked as that may be largely cosmetic and is seen as a move pressured by the banks and government on the Financial Accounting Standards Board. Why change now,... if the fundamental argument is sound to change mark to market, why not change it years ago??? Aha!!!


First, let's look at the proposed changes that are likely to be passed. Banks may not need to undertake impairment charges if the banks say that 1) they do not intend to sell the affected asset, and that 2) they probably won't be forced to sell before it recovers. The banks will only record the losses upon maturity of the investment (assuming they are paper assets / bonds / contracts / derivatives). Thats all fine and dandy, but the key phrase is the second part which says that the banks WON'T BE FORCED TO SELL before it recovers.

For a bank not to be forced to sell, the bank will have to show safe asset-liabilities ratios and decent tangible common equity.
Values of an asset may be destroyed temporarily and unfairly by:
a) a lack of liquidity

b) a temporary confidence crisis


Is this all cosmetic? No. Should the above rule be passed by FASB? Yes. My reasoning: If a bank were to hold a group of assets, and they all lost value, why the need to write off the impairment charges all in ONE YEAR??? These are assets which, if they do not sell, will be part and parcel of the company for 5, 10 or 20 years. I see them as being equated to buying an office building or installing a manufacturing line - good or bad, you don't ask the company to write down the entire cost of the building or manufacturing in the one year!!?? You AMORTISE it over the life of the asset.

In the same vein of thinking, while I am in agreement that there should be changes to the mark to market rule, I do think there is a better way.
If the bank holds a $1bn contract but its low liquidity over the past few months makes it trade at just 40 cents to the dollar, and the contract expires in 5 years - the current rule would force the bank to write down $600m in losses. This is severe as it whacks at the capital adequacy ratios immediately.

A fairer way is to look at the impairment charges over the life of the contract and amortise the known losses over that period. Hence the bank will only need to write down 600/5 = $120m of impairment charges this year, and remember to footnote how/why you did it in the reports. If the market improves the next year and the asset now trades at 60 cents to the dollar, then you do the necessary write back over the remaining life. Tell me if this is not a fairer way of reflecting reality.


A complete and sudden whack of impairment losses is not just a temporary accounting entry. Some may argue that they can writeback the gains when markets improve in the 3rd or 4th year - thats fine if the writedowns do not have a significant bearing on capital adequacy ratios. If you CAR drops from 11% to 1% because of a huge writedowns on assets (which you do not intend to sell until maturity), that bank will have to claw a huge amount of capital from somewhere else, raising new funds via placements or rights issue to satisfy the regulators. Two years on, the market improves and then they have excess capital now thanks to the writebacks. But raising $1bn in difficult times, and giving back $1bn in good times ARE TWO ENTIRELY DIFFERENT THINGS to the company and investors, they do not equalise each other out.

The yo-yo volatility effect on shareholders interest, especially dilution of minority interest, and more importantly, the way management is forced to run the bank with such extreme volatility NEEDS a complete rethink.


Hence its not a travesty to make changes to mark to market accounting. The thing is mark to market and the whole shebang known as fair value accounting is still a "work in progress". The current extreme crisis has basically showed its flaws and inadequacies. Fair value accounting today is inadequate and sub-standard, stop defending it as if its cast in stone and brought down by Moses.


Approval of changes by FASB will move the markets higher and add legs to the rally. Its really not just cosmetic or artificial as it will have a realistic effect on affected banks - they can delay raising capital in such difficult circumstances. I think I will send this as a premise for my Phd in accounting ...lol.

p/s photo: Deborah Priya Henry


Wednesday, April 01, 2009

Why The Surviving US Banks Are Worth A Punt Now


The surviving US banks are worth a punt now because of AIG. The US government now owns 80% of AIG (hands tied behind their back and you can drip candle wax on their naked bodies as well). AIG has been begging with their outstretched hands and for the fourth time in months, they got the most recent $30bn injection - add them all up AIG has taken $170,000,000,000 from the American public, and that does not even include the $85bn loan from Federal Reserve. There are so many zeros in that figure, imagine if you have a bank account with that kind of figure - it has to be an accounting entry, you cannot possibly transfer the sums via cash ... you CANNOT EVEN PRINT MONEY THAT FAST, if you wanted $170bn, you probably have to wait a few months to get your money. Hence it has to be an accounting entry, you credit AIG's accounts by $170bn and debit somewhere else... guess where... aahhh the Fed's debit entry. The biggest bank robberies cannot ever come close to robbing via an accounting entry. Its good to be the king! AIG already lost $40bn last year, so where did all the money go to?

Some $100bn went to banks. Yes, that right. We all know what CDOs are by now, and the banks have been buying many of these CDOs themselves, but at least most of them were smart enough to hedge some of those positions. They did so by buying Credit Default Swaps on these CDOs - i.e. if the CDOs fail then AIG will have to pay the banks. The following payments made to the banks largely consist of counterparty losses and Credit Default Swaps losses.


Among the biggest beneficiaries of the AIG's ATM was Goldman Sachs with $12.9 billion. Bank of America. But the bank that probably gained the most has to be Bank of America which together with Merrill Lynch got a collective $12bn.

Now do you you see why so many of these banks which got TARP money are now saying that they will now repay the money back.... so soon!!! ... after just a few months they can repay the funds back??? Suddenly things are so rosy.
SocGen got $11.9bn, Deutsche Bank got $11.8bn, Barclays got $7bn, even the municipalities got $12.1bn. Surprisingly, Citibank was not on the list.... hmmm.

These sums are nothing to be sniggered at. First it reduces the uncertain asset in the "receivables" and turning that into certain "cash". Secondly, without tooting the horn, it probably improves the cashflow for these banks for 2009 materially as even they probably thought they would not get the cash back from AIG so soon.


p/s photos: Eri Otoguro