The Lurking Dangers For Malaysia

It is easy to be over-cautious. It is better to be safe than sorry. I have written before that we need to balance the need to curtail the pandemic and minimize the economic fallout from the situation. It is all well to come out from the pandemic with minimal lives lost ... but there can be massive repercussions on wealth and careers destroyed. We have to be cognizant of the need TO HAVE SOMETHING TO COME BACK TO.

Lives lost to COVID-19 is a bad thing, but many livelihoods and families could be destroyed as well in the process. As we are well aware, Malaysia IS NOT a country full of safety nets. Luckily we have some sort of unemployment insurance kicking in last year, but it is not a prolonged solution at all unlike in many developed nations.

UOB Kay Hian came out with a timely report on "Grave Consequences Of Covid-19 Prescriptions". Some of the more pertinent points, to which I am in full agreement:

The plight affecting the F&B, entertainment outlets and mall tenants have been well discussed. The cashflow ramifications for the majority of SMEs have not been fully appreciated by the government, I feel. The number of jobs lost when we come back from the brink will be worse than any economic recession we have ever seen, and that includes the PanElectric debacle in the late 80s and the Asian financial crisis in the late 90s.

What will be the number of jobs lost? 1 million, 2 million? How many will be able to find employment after 6 months? Maybe, at half their old pay? How will they service their home mortgage, car loans, children's education ... Knowing full well that most Malaysians are already supporting their parents. That will take a hit as well. 

The economic and social displacement costs have not been fully analyzed and accounted for.

Wealth destruction is a major issue. During good times, pump-priming economics will generate a multiplier effect. Every RM100m of new projects or injections can result in an 8-10x effect on the real economy. Called the velocity of money i.e. in simpler terms, every ringgit spent will travel round the economy 8-10x. In the current situation, its the deflation effect that is in play. For every ringgit diminished from the system, it has a deflating effect as well.

Tourism, Airlines ...

Just these two industries alone should give us an insight into how bad things can be. Malaysia Airlines will have to be sold off or merged with AirAsia/X. As if that is not bad enough, oil prices have gone off the charts literally. Our much-revised budget will have to be revised again. USD35, forget it, maybe more like USD25 for the rest of the year.

While our Covid-19 case management figures have been solid and improving. We also may see some trepidation with respect to our testing capacity. If you only test 100 people a day, you are not going to get a high figure of positives to Covid-19. As things stand, we have tested less than 0.5% of the entire population.

What is more worrying is that the Singapore experience tells us that more testing is required for our foreign workers. Singapore has only 300,000 odd foreign workers. Malaysia has 2 million documented foreign workers, and probably another 2 million illegals. That is more than 10x Singapore's figure.

Please note that the higher infection rate for foreign workers is largely due to the cramped dormitories or housing facilities they are usually housed in, and not a slight on their jobs or cleanliness.

As Of April 21, 2020:

For every million of its population, Singapore has tested 16,203 or 1.66%.

For every million of its population, Malaysia has tested 3,344 or 0.33%.

Total tests done: Singapore 94,796; Malaysia 108,216.

Is it a damned if you, damned if you don't situation? Malaysia already has one of the LONGEST countrywide lockdown imposed thus far. However, the level of testing leaves a lot to be desired. I am sure it has to do with obtaining sufficient supplies, and also a matter of cost (i.e. we cannot afford to get everybody tested).

Hence, come May 14, we MUST remove some of the lockdown measures for the greater economy. We must also be vigilant with potential new clusters, which are bound to occur. For those clusters, they should be immediately lockdown, controlled, and tested.

We can no longer afford to lockdown 100% of the population for the sake of possibly an infected 1%. It will be more prudent and pragmatic to loosen MCO but be wary of new clusters. Increase our capacity for testing immediately, otherwise we look like dummies at home as we still don't know who and where are infected.

Some of the social distancing measures should still be imposed for another two months or so: diners only every other table; cinemas should still be shut; MITI to be more proactive to approve SMEs wanting to reopen; shipping and logistics ops should be prioritized for clearing and delivery purposes; important exam years students to start school first; all malls to restrict the number of shoppers to 50%-60% of capacity; face masks mandatory; all offices and factories to implement twice daily temperature testing of all employees and other additional precautions. 

Biggest Threat

Its the Ramadan effect. Though I believe we should lift the MCO come May 14, we have to be very wary of the Indonesia link. Indonesia, where the population is a lot bigger, and where decent testing of cases is grossly limited. Compounded by the vast ness of the country. Hence there should be very restrictive TRAVEL to and from Indonesia for the next 3 months at least. Travelers coming back should be quarantined immediately. 

The trouble is that our borders are so porous. Our navy and police will have to be more stringent and vigilant to stop any form of illegal ferrying of passengers from Malaysia to Indonesia over the next 3 months.

Things To Do During Lockdown

All local councils, utility companies, construction firms (those with permission) and city planners in Malaysia should take the opportunity during the lockdown to:

- repair roads
- lay your lines 
- finish your towers
- change faulty lightbulbs
- speed up construction projects that creates congestion
etc ....

Basically try to finish up things that would disrupt traffic.

Why I Think Markets Are Too Optimistic

Bastardisation Of Currencies

When governments keep throwing money at the problem, some succeed while others are restricted by their fiscal constraints and prudent financial management. There's only so much budget deficit you can stomach. Not the US and Eurozone, they can literally print their way out of the problems at hand, with no need for any asset backing, particularly from the USA. The rest of the world, we can't do that. Our printing capacity has to correlate with our foreign reserves, government debt to domestic and international bodies, our GDP, etc...

What that does is that at every major financial crisis, involving the big guns, its the smaller guys that get whacked. The big guys has printed more monopoly money, get the money circulated, pay down debt, give people money to spend, and spend trip way out of the issues. The smaller nations just have to tighten our belts and compete ever harder to maintain status quo. Its colonialism in the financial age.

Just when you think colonialism is over, in financial markets, the masters still get 10x, 20x, 30x more than the slaves earnings per day. Even when the master make mistakes, its still the saves that kena.






The Horny Black Swans That Keep On Reproducing

That rant aside, have a look at the video. You will begin to appreciate why swiftness, preparedness and commitment to curtail were so important. Just look at China, South Korea, Singapore and HK. Compare that to the top 4 European countries, plus UK, Iran and USA.

Looking at the trajectory alone, the latter countries have not even peak yet, although Italy has shown positive signs of peaking. USA at near 277,000 confirmed cases, and the equity markets there seemed to have rallied. All markets are forward discounting machines. I want to know how many cases has the US markets discounted thus far, taking into account the substantive trillions of dollars worth of stimulus: 300,000 ... 500,000 .... one million or 2 million? Mind you, China and South Korea seem to have peaked at 80,000 and 11,000 respectively.

How can you discount something that has not peaked? You cannot take the statistical distribution for China or South Korea and extrapolate because: the level of preparedness were different; the "more authoritative governments" have better deployment and effectiveness in curtailment strategies; the level of resources and testing are different ... hence it is likely the trajectory will be pushed out higher and further than the former group.

Look at the above statement from US White House (reported in CNBC)... 93,000 deaths, at 1% mortality rate = 9.3 million cases. OK let's take a 5% mortality rate (which is very worrying for the public) = 1.86 million cases. Look at those figures for a while and compare China's 80,000 and South Korea's 11,000. Even if you double both those figures: 160,000 and 22,000 ... compare that to 1.86 million.

OK, let's not even look at those figures, let's halve that further from 1.86 million to 930,000 cases to deal with say over 2-4 month period. There is no way the US system can take it. There are only 924,107 hospital beds. Other illnesses may require at least 50%-70% of those beds.

So, you still think the US equity markets have discounted the fallout from the virus? If its 1 million cases over 4 weeks .. I think US cities will descend into a state of anarchy ... making handguns very handy indeed.

The Latecomers

Has anyone looked at Japan? Its about to boil over.  Last Thursday the prime minister's plan was no lockdown and everyone gets 2 cloth masks. Look at the table above. On 2nd April  Tokyo had 97 new cases, still hunky dory. That's just Tokyo, in Japan the total has surged past 340 cases.  Ueno Park was only closed on 24th March to the public.

Well, everyday in March 2020 till they closed the park, the scene was like this everyday:

Now imagine the scene below being played out 20 hours a day in every major city in Japan with no lockdown:

... at schools, Disneyland, malls, cinemas, etc...

Japan is a time bomb.

There are other latecomers as well, places where "proper testing" had been insufficient, masking the real numbers. Consider Indonesia and Pakistan to start with.


The Bigger Time Bomb For Us

Unfortunately, Ramadan is just around the corner. Will Malaysia allow the 1 million legal and 1 million illegal Indonesians and other foreign workers to go back for Ramadan. Do we have the resources to check, test/quarantine them when they come back. What about illegal channels of entry? Will we have another wave after Ramadan?

Why The Government MUST Implement These To Save SMEs

The government tried to assuage the fears faced by SMEs by directing a lot of help in credit and financing. This shows very clearly there is very little understanding of being an entrepreneur by the government.

Why would SMEs take loans to pay salaries and rental when they don’t have any income to sustain their businesses?

Do you know how much SMEs contribute to the local economy? If we end up with about 200-500 people dying from the virus after two months, that might be deemed as "successful". The rest of the workforce can look forward to a 20%-30% closure and/or bankruptcy by the SMEs as things stand.

At that rate, we can look forward to a loss of some 800,000 to 1.3m jobs. We have to balance between being cautious, and having "something to come back to after the storm".

Look for "calculated ways" to introduce a 50% work rate for as many businesses as possible, taking into account the need to control the spread of the virus.

MITI must be more accomodating and take on a more empathetic advisory role in dealing with companies requesting to restart working at 50%. Rather than reject if conditions weren't met, do advise them on how to get approved - be it cleanliness issues, sanitizing, testing, etc...

UK and Canada have rolled out a 75% subsidy for the salaries of SMEs' employees. While that would be a bit debilitating for Malaysia to consider, I think we should strive harder. Maybe not 75%, but maybe 35% for a 3 months period? Whatever it is the present situation is insufficient.

Clearance of goods from ports, the SST to be paid should be delayed for 6 months and/or Companies be allowed to retain 10 % of SST payable for the next 12 months.

All commercial electricity bills to be reduced by 50% for the next 3 months.


A moratorium of interest payments for the next 6 months.

All EMI’s to banks and NBFC to be put on hold for 6 months with no levy of interest or delayed payment.

Employer share of the EPF not to be paid by the companies but to be borne by the government for a period of 6 months.


Property tax for FY2020-21 to be reduced to half for all commercial properties.

Whodunit

Forced-selling doesn’t kill investors. 

Investors who go max on margin buying kill themselves. 

Why blame the system when the rules and conditions are there for all to see before they signed up?

What Kind Of Bear Market Are We Talking About Here

Well, its official, its a bear market. We somehow still cannot call it a crash but a correction. I don't mind this bear market at all cause it is "within reason" and "within grasp". Let's look at how different the current bear market is from the 2008 crash and 1998 Asian crisis.

1998 - This one you can feel it in your bones. Once it happened, there was an immediate domino effect on all emerging markets' currencies. Our currencies were suddenly seeing 20%-35% drop in value in a matter of days. That sobering crash allowed us to see the extent of the mess that easy credit had on everyone, and how everyone geared to the hilt. 

I immediately knew I would be out of a job within a few weeks. You know very well that the whole Asian emerging markets' economies will shrink, the effect was close to 20%-30%. Companies were trying their hardest to park loans and renegotiate terms, but it was inevitable, we needed these companies and these loans to fail. The longer we stave them off the longer the contraction and slower the recovery.

That was a big lesson from Japanese markets. Since the correction in 92/93 in Japan, all listed companies there refrained from facing the music. Even banks dared not collect. The whole taichi movement last 12-15 years.

2008 - This was scary cause it involved the very existence of the top 5 banks. If they failed, the whole capitalist system could unravel, and that could unravel the whole financial infrastructure for all markets and capital flows. 

It was a lot scarier because financial markets and its derivative instruments (in particular) have dwarfed the real economy. Hence any big missteps will be amplified in a bad way to the real economy.


2020 - This one has to do with the virus morphing into a pandemic. Oil prices has shock value but not much to do with the real bear market. Saudi Arabia wanted Russia and the rest of OPEC to toe the line. Russia wants lower prices in order to kill off Americal shale/fracking producers. At most, the US producers will file for bankruptcy. The top 5 banks in the US only has between 1%-3% of the loans exposed to shale/fracking companies. No big deal.

The good thing about this bear market is that it has very little impact on the integrity of the financial markets and liquidity. The prolonged impact is what everyone is looking at. But just on the fact that it has little systemic effect on the financial system is a huge load of relief. In that way, this bear market IS NOT SO SCARY.

Looking at China, where the outbreak has peaked, we saw economic activity dropping by 30-40% over a 2-3 month period. HK had a longer tough run with the protests over democracy reforms and almost immediately by the corona virus - companies on the frontline are failing by the droves. Nobody will sympathize with the mall or commercial property owners. The lack of business will not be able to counter 50% discounts to rentals.

These frontline industries (retail shops, f&b outlets, airlines, etc..) will feel the brunt very fast, as soon as 1-2 months. Subsequently, the contraction will be felt via employment cutbacks. By 4-6 months, significant job losses will be next. Followed by defaults on mortgages and subsequent forced sales and personal bankruptcies.

Governments can step in to address the situation: no mortgage payments for 3 months or personal tax cuts... but business failures will overwhelm and job losses at smaller firms will be more pronounced than bigger ones.

The markets are now trying to discount a substantive contraction in their economies by 20-30% over a 1-2 month period. If it drags on, the equity markets will dive again later.

For now, we are reaching a good level for a quick buyback during tomorrow's weakness. Trade, don't hold as the situation is still fluid.

https://andropausesuccor.com/

https://andropausesuccor.com/

Irrational Market Blue-Black

There are black swans and there are Black Swans... but this swan somehow can give birth to many little black swans. The world is already trying to come to terms with Covid 19. Central banks have cut rates, governments have put through fiscal packages to alleviate the economic effects. Now suddenly we have the oil plunge. 

Let's be sober here, Saudi Arabia is cutting its nose to spite the face. Even though their cost of oil production is a lot less than Russia, its not that cheap. The strategy is to get Russia to come kowtowing for the March 18th meeting. NO ONE affiliated with OPEC wants the current situation, no one wants USD25 to prevail. Would you keep going to work if you KNOW FOR A CERTAINTY you have to pay the employer RM1,000 a day??!!

Hence it is a short term strategy, but I would still avoid oil & gas stocks for the time being because sentiment is bigger than facts now.

Last time I heard: low oil prices is good for the global economy, generally. Why are we reacting this way??? Are the OPEC countries a substantive consumer of global goods??? Rhetorical indeed.

If G7 and G15 can come together so quickly to address Covid 19, don't you think calls will be buzzing across continents to say WTF ... we don't need this shit now?!!

If you are among the lucky ones who are not exposed that much to the markets, and can take a 1-3 months view at least, you should put your money to work, even in some local stocks.


That's because there are some great second liners that have been hammered 15%-30% over the last few days alone. Just look for the ones with least exposure to disrupted supply chains owing to the virus and not entirely correlated to oil prices, plus they are profitable and cash flow positive.

The list is meant for readers to go and do their own research and not a call to buy blindly.


MYEG - (Recent high 1.38, today 1.03) How da hell is oil prices important here? Slowdown in economy, ok a bit, but you know our we have car registration, etc... that is humdrum transactions but must go one.

NOTION VTECH (Recent high 1.38, today 72.5 sen) - Last quarter made net profit of RM14.2m, bonus issue coming up soon. Chairman reiterated that they are actually benefitting from the breakdown in supply parts.  Project Nixon (EMS codename)  need 600k pieces of aluminium tubing for vacuum cleaners worth RM4.5 mil sales per month from June 2020 onwards. Project Stingray (Extrusion solutions codename) is a major expansion of the extrusion business from 200 tons per month capacity to 1000 tons capacity and billet furnace for upstream recovery of aluminium leftovers. Mainly for external customers. Notion is transforming the group into an aluminium total solutions company more than precision machining or fabrication.

DIALOG - (Recent high 3.45, today 3.03) This company stands to benefit as an oversupply of oil will require companies to find storage space. Probably at Pengerang SPV1.

Quarterly Reporting Must Stay

The Edge:

The Singapore exchange is about to make life easier for listed companies -- the safer ones, at least.

The bourse’s regulatory arm plans to end quarterly earnings reporting requirements that currently apply to all companies with a market capitalization of at least S$75 million ($56 million), according to Tan Boon Gin, the chief executive officer of Singapore Exchange Regulation.

When the rule change takes effect on Feb. 7, only riskier companies will need to report earnings every three months, Tan said at a press briefing. SGX RegCo will also tighten other disclosure rules and introduce a new whistleblowing policy as part of efforts to protect investors, Tan added.

Other global exchanges have moved away from mandating quarterly reporting for all their companies. The European Union ended its requirement in 2013, while Hong Kong only applies the rule to companies on its small-cap exchange. The U.S. Securities and Exchange Commission is currently reviewing the issue.

”Internationally, there’s a shift away from quarterly reporting and this is to allow companies to focus on the long term,” said Tan. About 75% of the local market currently reports on a quarterly basis, according to SGX RegCo.

Under Singapore’s new policy, a listed company will have to report each quarter in circumstances including when it receives a qualified report from its auditors, or when they express concern about the company as a going concern. The requirement can also be imposed if SGX RegCo has regulatory concerns about a company regarding disclosure breaches, for instance.

Additional disclosure requirements will be introduced for rights issues
    Acquisitions that reduce net profit or net asset value by 20% or more, or where the target is loss-making or in a net liability position, will be subject to listing rules.
    Companies will need to appoint an independent valuer for significant asset disposals.
    Firms will be asked to disclose material price- and trade-sensitive information, and any changes to near-term earnings prospects.


(Sept 19): AirAsia Group Bhd chief executive officer Tan Sri Tony Fernandes said he agrees with US President Donald Trump's call for companies to issue financial reports just twice a year, rather than four times, as it drives analysts to make short-term decisions.

"One of the few things I agree with Donald Trump is quarterly reporting is null and void. Should be six months. Analysts driving to much short-term decision," he said via Twitter today.

My View:

a) QR should stay. Any listed company, big or small, should have the discipline of being able to look at their financial status at ANY TIME, be it monthly or quarterly at the bare minimum. Half-yearly leaves too much room for things to happen. A company's management should have the desire to be able to close their books at a week's notice. Financial discipline is paramount to any company that rides on sound management and have a close eye on deviations. If a company needs to have that, investors should be just as eagle-eyed.

b) QR may be lighter in its requirements. Just the basic financials BS/CF/IS, plus commentary on substantive changes to Debtors and Creditors, or any revaluations/disposals of significance. Keep it to the bare minimum.

c) QR does not and should not add much financial burden on listed companies. As mentioned, all companies should be able to close their books within a week. Are you to tell me monthly meetings obtain figures for discussion that are 6 months past? These are things all listed companies should be doing already.

d) QR would also "help to reduce the leeway" for the massaging of earnings. Enough said.

e) There is already insufficient information pertaining to the company's fundamentals. The sector's prospects and outlook are not being highlighted sufficiently by basic financial media. Only the top 40 stocks in Malaysia get any form of decent analyst coverage, what about the other 900? There is a dearth of "credible information" for local investors on local stocks. If The Edge can find a willing audience on a daily basis, shouldn't that tell you investors need better information flow?

f) Half-yearly reporting also gives rise to "insider knowledge". The longer the reporting period, the higher the "value" that is accrued to insiders. Owners, board members, CFOs, accountants, corporate lawyers, industry followers, insider share movements, etc... all will benefit more from Half-Yearlies than QR.

g) If you were a substantive shareholder, would you be happy to only get a half-yearly update on your invested company? No. Why should normal investors be deprived of that information?

h) Does QR limits a company's long range planning? No. Why should short term price gyrations affect your company if your fundamentals are strong. Eventually all QRs will even out positively if your long term fundamentals are good. Yes, stocks will react to QRs, but these are the norm of a market, a daily market place that tries to forward discount a company's prospects. 

If you argue for long term reporting, why not report all earnings in one month and then close the market for one year, then report again... that is as preposterous as eliminating QRs.

Asian Gaming Traits & Extrapolations To Business and Markets

Go to any casino in the world, be it Perth, Sentosa, Vegas, Seoul, London, ... and you are likely to hear occasional shouts of "Picture". Mind you, the shouts will largely come from groups of Asian gamblers from various countries, most of who will not be able to pass English at O Levels.

I have often wondered how the locals (those in non-Asian countries) viewed these Asian gamblers. Should you classify them as rude, boorish, madcap, poor appreciation of math and house margins', "should be in gamblers' anonymous", class-less, "does not know the value of money", etc...

As in any generalizations, there are more truths in these generalizations rather than pure myths. 


The Game

Ask a group of diverse people, you can easily separate true gamblers from amateurs:  the last 4 games of baccarat showed the PLAYER winning ... will you bet, and if you do, what will you bet on?

Normal Gamblers: BANKER, even though each game does not rely on past events, it is more unlikely that a fifth game will be won by PLAYER

Real Gamblers: PLAYER, a trend is hard to find, and when you find a trend, it is not just your friend but a best friend ... the fact that its 4th time in a row does not mean it more unlikely to be PLAYER, it just reinforced the momentum of the PLAYER going forward ... FOMO (fear of missing out)... this might be the only trend to run more than 10x tonight ... for every time it hits PLAYER you are just going to get a more religious group of converts shouting catchphrases like true believers .. they do not think of the negative but only positive, they visualize the 10th or 15th time it hits PLAYER

Conservative Gambler: Wait for the trend to turn, then bet. Thinking that they missed out on 4 of the runs, they just don't think it is worth it. These people want to catch it all rather than a tiny bit of it


Fate vs Destiny

To most Asians, gambling is more than just a past time activity. It is a means of challenging your own fate against destiny. Destiny is the bigger over-riding preordained feature for oneself. Fate is the inevitability of a usually adverse outcome. Like the saying goes, you won't know you are lucky unless you gamble. It sounds more like a gambler's epithet. 


Risk-Taking Nature

Asians by nature are ranked higher in risk-taking. The same argument can be made for early migrants to foreign shores as that must have been a massive risk-taking. It is also said that owing to that "genetic predisposition", you will find most migrants in foreign shores having a strong predisposition towards gambling. Not just Asians, in fact, you can include Greeks, Lebanese, Italians, etc... Generally, it takes one or two generations before that "genetic predisposition" is tamed (lol, need further study).

https://andropausesuccor.com/

Trend Is Your Friend

This is probably the most correlatable trait. Most Asian gamblers did not even know that they were master chartists even before they were born. Never go against a trend, even if there is a slight aberration, you can more easily explain it away to continue riding the trend. This is why history has shown consistently that Asian bull runs have been more vociferous and boisterous than Western bull runs. Part of the reasoning may be due to a larger market participation rate by individuals in Asian bourses compared to no-Asian bourses. Nonetheless, robust market activity in a bull run will be heightened on this "trend factor" or FOMO (fear of missing out). 


Math Is For Business

Will a smart business person be a good gambler. well, a truly smart business person will not be a reckless gambler. If I were to survey the Chinese company owners in Malaysia, there are just as many who are avid casino players and also as many who rather shun the place. Hence a good business person is and should not be a reckless gambler. 

Of course, there have been cases aplenty where company owners have gambled away their companies. As in anything, if you give in to excesses in life, be it gambling, drinking, sex or drugs ... there's no way your business life will be untouched.

Surely smart business people know the odds are stacked against them at casino games. Here, math matters only a little. However, one should know the odds margin that the casino holds against you in all games. Baccarat and blackjack have the smallest margins favouring the house. The more exotic the games become (e.g. 3 cards poker, 5 cards Carribean, ...) the margins are higher to the house. Don't even get me started on slots.






Control and Strategy

In gambling as in business, there must be a strategy, control factors and exit plan. Going in without them will almost guarantee "play till you lose it all".


Gambling Highs vs Business Highs - The Dopamine Effect


Research has shown that the drugs most commonly abused by humans (including opiates, alcohol, nicotine, amphetamines, and cocaine) create a neurochemical reaction that significantly increases the amount of dopamine that is released by neurons in the brain's reward center. 

These highs can be achieved in a smaller way via good companionship, regular exercise, a bit of alcohol and jolly friendships. People will tend to seek out the "darker evils" for dopamine when they cannot find them in their normal lifestyles. 


Advice

If you are going to gamble, first find something you are good at, or you like passionately. At the crux of it all its betting red or black, player or banker. If you are going to do that, do it where there are more variables involved, such as trading forex ... but you have to be good at reading economic variables, be on top of major business developments, read trends in economic figures, as well as be cognizant of chart movements and volume spikes ... then you may have a better than 0.5 chance of winning ... pick the best instrument that you are familiar with e.g. sgd/usd, or aud/usd, or yen/usd ... only do cross rates when you are really good.

If you are going to gamble, again find things that have more variables like stocks... earnings projections, aberrations and anomalies, learn to read financials, read industry trends, judge market sentiment, monitor shareholding changes, read charts for entry and exit points, etc... then if you are good at it you may have a better than 0.5 chance of winning.

Another safer way, go play Texas Poker among your friends, with a controlled budget. Even then, I doubt your chance of winning is 0.5.

London Biscuits - The Only Value Left Is In The Name

Let's look at the demise or downhill run by London Biscuits. We may then be able to see the various permutations involved and announced. How investors should react and so on.

Timeline

2019 February, London Biscuits’ external auditors Nexia SSY had expressed a qualified opinion on the group’s financial statements for the financial year ended Sept 30, 2018 (FY18). It had raised concern on the group’s physical inventories held at Sept 30, 2018, which were stated in the statements as RM26.89 million at the group level and RM20.79 million at the company level,
(LESSON: any kind of qualified opinion, one should sell first... our professional accountants are loathed to qualify anything unless its really necessary ... sell first then do research later, a lot of time to buy back if you were wrong)

On July 8, London Biscuits slipped into PN17 status after it defaulted on a RM9.8 million in loan payment to Bank of Nova Scotia Bhd,

(July 3), London Biscuits said that its executive director Datuk Ranjeet Singh Sidhu and its chief financial officer Loo Seng Kit had voluntarily resigned. Both had taken on their roles only on June 17,
(LESSON: when top management or board members resign suddenly, another big red flag... this one more so as these two were less than one month into their jobs)

https://andropausesuccor.com/

 (July 8), London Biscuits updated in a fresh filing with Bursa Malaysia that it was now a PN17 company due to the payment default,
(LESSON: PN17 generally will yield a shock selldown, PN17 is not all that bad, you have to assess how bad are the books as any potential asset injection or white knight to come in will have to judged on its viability... London Biscuit with just a cursory glance on numbers may require too much debt forgiveness and capital reduction to work for existing shareholders and creditors)

(Aug-Oct) Meileelanusa S/B disposed 5.9%, as of Oct 15 the company has only 7.35% from 13.8% in July,

 (Sept 24): Johor-based confectionery maker London Biscuits Bhd has been slapped with a lawsuit by Kuwait Finance House (Malaysia) Bhd (KFH) for RM5.06 million in outstanding debt,

(Oct 23), wind up petition and court-appointed PWCoopers Advisory as interim liquidators,

(Nov 12), MembersOne Ventures Fund, a Sydney based fund, has acquired 11.35%,

(Nov 15), in total London Biscuits has defaulted on RM285m

So who would buy now? Who are MembersOne Venture Fund? Only set up in 2017? Those who are cynical may say that the controlling shareholders, having sold at much higher levels, may have a reason to buy now to still "control" future firesale and/or white knight's

emergence. It is well known that most of the machinery in the company needs replacing or upgrading, hence you may even write that asset off altogether. SC needs to be more vigilant here looking at how volatile the changes have been to the company over the past 6 months. Too many things have happened, too many questions have surfaced.

Any value left in the company. The latest quarterly showed a Net Asset per share position of RM1.28. If you multiply by the number of shares 291m = RM372.5m. That is only slightly more than the loans being defaulted of RM285. Naturally net asset value would have already taken into account the loans, hence there should be a lot of vultures buying! But wait, they lose about 30-35 sen each quarter in net asset value. Looking at that trend alone, you would have avoided the stock 6 months ago. Judging on the qualified opinion and swift resignations of new management, one may suspect that the figures may not be reliable at all.

https://andropausesuccor.com/

Hence it is prudent to ignore the net asset value altogether, thus the only value left is the brand name London Biscuits. People who buy biscuits are usually not share investors.

My Own Comics

A few years back, on the official Dilbert site, you could pick any strips and put in your own words to create your own comic strips. I did quite a few. Hey, maybe I could make a living writing for a good cartoonist. Sadly the site does not allow "user creativity" anymore.

https://andropausesuccor.com/

Understanding The HK Situation

I have HK friends who cannot sit at the same table for dinner because of differing opinions on the way the protests have descended to. Even back in Malaysia, I have close friends who keep posting how the rioters should be handled, locked up and punished.


I don't think that the majority understand fully why the protests are ongoing; why it has descended into rioting and mayhem ... and many people in HK are still in support.

Anyone who is outside of HK would find it easy to question and condemn the silliness, naivety, and futility of the rioters' efforts.

This is by no means an apologetics diatribe to justify the protesters and (maybe even) the rioters. Rather, it is an attempt to understand the thinking and makeup of most Hongkongers.

First, let's look at why a lot of foreign people dislike the protesters/rioters:
- a complete disregard for rule of law
- the HK police force has been too 'lenient' and the "rules of engagement" too humanist as to limit the powers of the police to counter the protesters
- doesn't HK belong to China anyway?
- in less than 30 years HK will go back to China whether you like it or not
- to go against Beijing is almost a truly futile effort in the end
- doesn't HK people know how dependent their economy and business future is on China?
- there's nothing much that HK is good at other than shipping, logistics, property (domestic) and as a financial center.

To try and blame foreign sources for funding and influencing the rioters and protesters is exactly why the local people in government and Beijing to a lesser extent fail to appreciate the depth of the discontent among the majority of HK people. Let's put that aside and try to understand the whys'.

https://andropausesuccor.com/

ANGST Section 1 - Historical & Political Apathy

- most of the older people in HK now FLED China, now let that sink in a bit. FLED, past tense of FLEE. The younger folks who were born in HK only knew of their colonial master, as a dominion of the British empire
- hence we can appreciate the political apathy for much of the past 100 years, there wasn't a call for universal suffrage because it was a British colony and to my knowledge, there was never a substantive call or formation of a movement to declare that the population wishes to form a separate country or government
- when the Brits agreed to sign back HK to China in the 1997 agreement
- on June 9, 1898, the British under Queen Victoria brokered a 99-year lease agreement for the use of Hong Kong after China lost a series of wars fought over the British trade in tea and opium
- in 1984, British Prime Minister Margaret Thatcher and Chinese Premier Zhao Ziyang negotiated the underlying plan for the lease to end, such that Hong Kong would remain a semi-autonomous region for a 50-year period after the lease ended
- the lease ended on July 1, 1997, and since then tensions between the democratically-minded Hong Kong population and the PRC have continued, although Hong Kong remains functionally separate from the Chinese mainland
- the perceived increased  of Beijing influence over the past 15 years have left many HKers shaking their heads
- most HK people did not feel the need to ask for universal suffrage under the British because the latter allowed HK to flourish under the laissez-faire economic system, backed by ICAC for corruption eradication, the independence of the judiciary and legal system, and the relative independence of the police force ... all hallmarks of good governance of a capitalistic economy


ANGST Section 2 - Culture/Displacement

- way too many Chinese from the mainland has been invading HK in various means: shopping, buying up properties and stocks to start with
- thousand of kids from southern China take the long train ride to go to schools in HK, causing a strain on resources and places for HK kids
- the mass buying of baby powder and a plethora of other stuff to trade back in China
- the huge surge in the number of Chinese women from the mainland to have their babies in HK, straining resources and places further
- these are more than just tourists' troubling behaviour; it is considered intolerable to the extent that HK's culture is being eroded, their rights and privileges are also being eroded, their home is no longer the home they were used to, HK is more dependent on Mandarin in a way that is unsettling for most, and most ironically most HK people no longer can afford to live in HK while many of the rich mainland Chinese can and do so with aplomb.


ANGST Section 3 - Affordability Gap

- unless you already paid-up on your unit in HK, you are basically the majority of them striving to carve out 60-70% of their monthly pay for the mortgage or to save enough for a down payment
- even you daily existence is paying homage and duties to the landlords via higher rents, higher food prices, higher everything really because rents, space, and buildings are all owned by the elite few and cost more than an arm and a leg
- the cosy relationship between the ruling elite and property barons has led to a stifled release of land for public housing over the past 30 years; is it a wonder that more than 70% of HK land has been gazetted as reserves (for environmental protection, or other altruistic reasons) ... I am all for being green but not when the majority of your citizens are suffering indirectly due to these political moves
- despite years of schooling and using loads of funds for education, many of the youths find the future bleak - rising costs and property affordability gap and lack of freedom, all were a recipe for an uprising ... mixed that in with undisguised contempt for the influx of mainland Chinese into many things in HK, you have a fire morphing into a fireball
- Hong Kong has also set world records in home prices and has a glaring income gap. In 2016, it had a Gini coefficient – a measure of inequality – of 0.539, which Oxfam said was the highest in 45 years.

ANGST Section 4 - Trust Deficit With Beijing

- remember that the bulk of HKers were made up people who chose to flee to HK, now you want them to go back to be governed by the motherland
- while Beijing does a lot of things well, it has a very different way of doing things when it comes to dissent, political opinions that differ from the "official stance" ... and that translates itself to overbearing laws for "control" purposes and to stifle and the lines of control from the courts to the police to the army act as one machinery for the good of the party (I mean, how to trust a state prosecution process that has a 99% conviction rate??!!)
- the Legco was set up as a mouthpiece for Beijing, even though some seats were available for election by the masses, the entire setup was such that there was no way to overthrow or even pass legislation without Beijing's approval
- the extradition bill was just the straw that broke the camel's back, hence even when the bill was finally withdrawn and killed off, it was too late to stop the protests.


ANGST Section 5 - Trust Deficit With Local Government

- In many ways, the distrust with local government is greater than with Beijing although both are similar in the eyes of most HKers
- By being appointed, and by inference cosying up to the richest in HK and Beijing, the entire Legco has to go

https://andropausesuccor.com/

- for those who say the protesters could have gone about their protests in the proper way... that is exactly the point of protests breaking out into riots, there is no way for any "voices" to be heard or to lead to substantive changes in the current political ecosystem.


A WAY OUT? - HK is important to Beijing but not as important as say 20 years ago. There is no way for Beijing to grant independence, even the protesters know that. But why force a group of people to be back into your system when they clearly don't want your ways.

If I was Beijing, I would extend the 50 year agreement of two systems to 100 years. Next, I would revamp Legco to allow for absolute universal suffrage. To have 100% seats being elected by the people. Much like a federal government and a state government structure. Absolute no question on wanting independence will be tolerated.