Possibly The Best Business Person In Malaysia

Many might think I will be talking about Chia Song Kun of QL Group. I must say Chia Song Kun is an outstanding business builder. If you look at his pattern of business building it is remarkably similar to the path charted by Charoen Pokhpand (CP Group). Someone whom I think is slightly better at overall business building is Goh Nan Kioh. A name not many are familiar with, I am sure. 

There's very little publicity or news about him but his track record has been sterling. Started as bank teller, he was so good at his job and dealings with clients that he was roped in to Ipoh Gardens Corp rising swiftly to being Executive Director. Ipoh Gardens Corp was too "small" for Goh. He needed to work for himself and not be just an employee making money for others.

Goh was an founding investor of Cambrew Asia (the foreign investing vehicle for Carlsberg). If only you know how successful Cambrew Asia was. He finally exited his remaining stake to Carlsberg a couple of years ago. That is why it is so hard to calculate his net worth as quite a bit of it was privately held.

A rare photo of GNK celebrating the final sale of his stake in Cambrew Asia

The reason why I am partial to his CV was that I had "consulted/worked" for him after being hired for 6 months by one of his key lieutenants to turnaround and "upend" Rock Chemicals (which was in turned owned by Mega First then when Goh took over MFCB). I wished I had stayed longer to be one of his generals but did not get enough face time.

Goh was also known to be a very shrewd "share price management facilitator" back in the 80s and early 90s. Enough said. That brought him easy wealth but was not the kind of wealth he wanted. He wanted to build great businesses.

Back to MFCB. If you had invested along with him, you needed to go in for the long haul. As investors, you have to think in terms of employing someone of his calibre to work for you. We will not be able to pay him well enough, hence the next best thing is to stay invested in his shares.

To only talk about MFCB would be too limiting. We needed to know the driver behind the vehicle and his prowess and thought process. Only then you can feel "safe" investing in it.

When I was working indirectly for him, it was only a a few months into him buying into MFCB. To see his building blocks for the conglomerate of the future was fascinating. He would never rush to a decision, but he will make a decision and stick to it. At teatime he was poring over the hydro dam project in Cambodia - so many to's and fro's to lock in as much of the contingencies. Only after I left, it was another couple of years before the deal was struck for the dam.

We never really have a very good track record when Malaysian companies invests abroad. Chen Lip Keong did very well with Nagaworld but he rooted himself there and worked with all levels of officials to push things through, and he stayed put there to make it work. Goh with his early investing in Cambrew Asia would have networked well within Cambodia. Still a business deal is only words and figures on paper - to execute well is a bigger task. 

He has few meetings at his residential house office. His office is littered with annual reports of local and foreign firms. His idea of spending his spare time is to peruse the annual reports. He said, all you need to know is there in the reports - the potential, the tricks, the shenanigans, all in the figures.

Looking at MFCB business make up, the power project is already a bedrock. His latest venture into Stenta is another example of deep study, and knowing the business so well inside out first. Packaging films are a natural subset to Cambrew's packaging needs. The uses and usage of packaging films are so varied and is in store for brighter prospects over next 5-10 years at least.

Now that Goh has assembled his building blocks, I can only see a sharp trajectory to value building and share price path ahead. It is better than being invested 15 years ago. To build the base can take years, that's done. Now reap the rewards as he steps on the gas.

BTW, his other listed vehicle D&O is also on the same trajectory path. But I understand why he would leave the company business separate from MFCB as I see the business there being more volatile and require constant reinvention, reengineering and staying ahead of the "product upgrade cycles". In terms of valuation, D&O seems way overvalued or should I say challenging. 

For someone to control two listed companies, one RM4bn and the other is RM5.2bn... that's pretty amazing.

Looking At Bitcoin's Other Nuanced Factors

It has been said that the more you know about investments, the less likely you are going to buy Bitcoins and the related new fangled stuffs. We can argue for or against buying Bitcoins. But let's look at the prevailing nuanced factors which most do not talk about.

THIS IS NOT A BUY OR SELL CALL, just an opinion.

a) A growing proportion of protestations over the amount of electricity needed
(and wasted) to mine Bitcoins. This negativity can only get louder as more special interest groups get into the act.

b) Who are the biggest holders/owners of Bitcoins? Let's look at the known individuals. Somehow there have been numerous tabulations with different people at the top. To consolidate somewhat:

(from medium.com)

c) It has been speculated that one of the biggest Black Swan for Bitcoin is for Satoshi to appear out of nowhere. While some might say it could lend "explanatory positives" or even a "Messiah effect", the real impact is that the "invincibility is gone" - what you don't know actually fuels the insanity. If he/she appears, SELL first ask questions later.

d) You should be a bit shocked looking at Bulgaria and FBI, but the more the "regulatory & government" arms use the same network to look for crooks and money laundering, you can expect more discoveries and arrests. Can this be a positive or negative for Bitcoins? I think it is a positive. The more you have "hidden regulatory powers" at work, the more will the financial powers and governments be willing to "accept" Bitcoins.

e) Looking at the other compilations below, which are more believable. The key is that other than Satoshi, no one really "controls the float". Even the funds that buys/invests as a collective force cannot really move the markets. Why? You can look at the swings for the past 2 weeks. The liquidity is there. The panic selling and the bottom fishing people are there in droves. This a major point - Bitcoin can take the blows, as much as I dislike saying this - its a long term positive for Bitcoin. The only maverick wreaking havoc has be Elon Musk, whose tweets and jokes can move the price up or down appreciably. Elon should stop tweeting. But that tells you a lot about Bitcoin, to move in a volatile manner based on one person's tweets, what kind of asset are you really??? I mean, if Elon says something positive about GOLD or a specific stock, I doubt it would have an impact as great. Which is to say Bitcoin is baseless (as in not based on anything other than perception and supply/demand). As the rate of new coins has slowed to a crawl, the demand side can and will only get greater. 

IF YOU ASK ME, what are the chances of Bitcoin hitting USD100,000 or USD10,000 by 2022 ... my answer is it is more likely to hit USD100,000.

f) CAVEAT: I do see a big Black Swan II that could derail Bitcoin, if certain governments come out and ban all trading and buying or holding of Bitcoins for their citizens. Not all countries can do that. But imagine China and another one of the top 5 OECD countries do that, it could be end of story.

Crypto Pundit

Missing Crypto news

Reality Check For Malaysia

 I am wondering if Malaysians are aware of just how bad the situation is on the pandemic front. I think many are still not fearful. We still think India is in a really really bad place. We probably also think there must be other countries struggling way above us. 

No wonder the Indonesians are saying "beware or else we end up like Malaysia". Look at the tables below. The key is the number of doses per 100 people (from CNN's site). I can't even do the whole table before reaching Malaysia. There are countries whose vaccination rates are low like South Korea, Australia and even New Zealand - that's because they have a very low infection rate. Our vaccination rates should be at least in the top 20.

- Government should liberalise vaccination. Let the states bring in vaccines. Let the private hospitals bring in vaccines. If people want to pay for vaccines, we must let them.

- The rollout should be expedited. Forget about the commissions. Some things cannot play-play.

AZ Vaccination - Malaysia

 I think my experience matched 99% of those who went for their AZ vaccination thus far. It was by far the most well organised, staffed by pleasant and polite staffers... plus knowledgable and patient doctors to chat with you for however long you wanted to. Everyone there knew their responsibilities, everyone there knew what to do. They were helpful, swift, highly efficient, armed with more than adequate information and downright professionalism at it best.

WHY CAN'T ALL OUR GOVERNMENT OFFICES BE LIKE THAT??? Ok, I think we will even accept 50% of that level of competence.

Why did I immediately signed up for AZ? Read as much as I could on the vaccines. Bottom line, all the top 6 vaccines will have different efficacy BUT key factor is if you take the vaccine and you get COVID19, you probably/surely will not die from it. Isn't that the key? Vaccines may not protect you 100% but anything above 60-70% is better than nothing. Another key point, if you get COVID19 after vaccination, it is likely to be mild.

Lastly, we need to get to herd immunity ASAP. So what if I am not getting "the best vaccine". Let's all do our part to get there. Its like a war, some will go into it with hammer and tongs, some will get guns, some will get AK47s... but let's all do our part.

I am not referring to us as a sinking ship per se, but when there is a crisis on a ship... you don't ask for what colour the lifejackets you want, would you??!!

Already we know how the developed nations have secured and hoarded the vaccines. We get ours depending on how the global forces "discriminate against less developed countries" ... We can cry and whine, but let's get out of this mess first.

I see no reason not to take AZ. Unless you are someone who has been taking birth control pills for sometime in the past (then wait for the other vaccines). For a whole host of reasons, some we should have taken swifter initiatives to counter, some which were beyond our ability to counter (big pharma, developed nation status, patent issues) - our rate of vaccination is very very low and if you wait, we will only get there in 2-3 years time.

There will be side effects, my friends who went all had mild fever to being feverish for half a day or so but came out well after some panadols/actifast. Some had mild headaches fr a day or so, no big issue. All subsided by first, second or third day. I just had very mild fever for a couple of hours on the first night, that's it.

Oh, and bring a PEN or two (to lend to others) when you are going for vaccination.

Rich countries with 14% of the world’s population have secured 53% of the best vaccines. Almost all of the Pfizer/BioNTech vaccines will go to rich countries. The Moderna vaccine will go to rich countries exclusively; it is not even being offered to the poor. In fact, nine out of 10 people in  countries may never be vaccinated at all. Washington is sitting on vaccines, making sure no one gets any while the US needs them. The European Union has exported 34m doses to, of all places, Singapore, Saudi Arabia and Hong Kong – countries that have no problem sourcing or paying for vaccines. In fact, the EU sent about 9m doses to the UK, a country which, no longer in the EU, also has what amounts in practice to an export ban of its own, official denials notwithstanding. 

It’s unlikely that Moderna’s chief executives feel badly about the unvaccinated poor. The company forecasts sales of over $18bn for 2021, pushing Moderna into profit for the first time since its founding 11 years ago. Pfizer hasn’t done too badly either; they’re expecting a cool $15bn in sales.

The wealthiest western nations have wiped their hands of any responsibility to slow a pandemic they helped spread

South Africa, Africa’s worst-hit country, is buying Oxford’s AstraZeneca vaccine at nearly two and a half times the per-unit price of European countries. AstraZeneca’s French division told the press in November 2020 that it was capping the price per dose at €2.50, but somehow European countries are buying doses below the cap and African countries far above it. Canada has bought more doses per head than anyone else – enough doses to vaccinate every single Canadian five times over. But the entire continent of Africa – home to 1.3 billion people – has been allocated a total of 300m doses. As of the last week of January, in all of sub-Saharan Africa, only 25 vaccines had been administered. Twenty-five. The director general of the World Health Organization warned that the world was on the brink of a “catastrophic moral failure”. But the west has passed the brink a long time ago.

Israel, administering over 150,000 doses of vaccine a day in the dawn of the new year, leading the world in vaccine rollout, is pointedly, purposefully, not vaccinating the Palestinian people it occupies. When asked about it, the Israeli health minister sniffed that Israel had no legal obligation to vaccinate Palestinians. What then were the obligations of the Palestinians, he asked, to look after dolphins in the Mediterranean? It is a statement too stupid – too cruel – to answer. Yes, you have an obligation to the people you occupy; yes, you have an obligation to “the sea”. Israel wants to gift its surplus supply of Moderna vaccines to countries that moved their embassies to Jerusalem (or have promised to), such as Hungary, the Czech Republic and Honduras. A virus, for some, is manna. Let the Palestinians die.

While western countries were barging ahead, stockpiling vaccine doses for themselves, China and Russia were practicing vaccine diplomacy. China offered free doses of their vaccines to 13 countries; between the two of them, China and Russia have supplied more than 800m doses to 41 countries. No one imagines they do this out of charity, but it’s a clear, resounding sign of the changing world order. Eight hundred million to the EU’s paltry 34m. The US and UK have given nothing at all. This petty vaccine nationalism is irreparably damaging the west, betraying their claims to magnanimity, inclusive global leadership and concern for global health.

Why Short Shares

The first response to come timing has to be to make money as investors expect the stocks to fall in the future. The local bourse allows some shorting but only selected counters.Considerations were given to being Main Board, well capitalised, sufficient liquidity. You can't short second or third liners.

 There is a sense or morality or ethics here. Some feels that you shouldn't be profiting on a stock when it is behind hammered. It is just not right, so they say.

If you are that type, you shouldn't be trading stocks. That's because you have attached "emotions" to stocks, and worse, you have attempted to humanise stocks as "darlings", "my favourite", "love of my life", etc.

For local shorts, investors can use it for trend comparison. Collect and monitor the list and note trends of up or down. Moreimportantly, note the upcoming "events" that could impact share prices (corporate exercises, quarterly results, etc.)

Stocks are emotionless. They don't have memories of what prices they were traded at in the past. THEY WILL ALWAYS BE THERE, up or down... will you be?

For every seller, there has to be a buyer. You cannot see things from just one perspective. If by selling you are being morally wrong, then is the buyer clueless? Everyone makes their decisions based on their assumptions and risk assessment. 

You could short stocks to protect your portfolio, or to extend your gains (e.g. if I think Supermax is better than Topglove, I buy one and sell the other... being in same industry I only want exposure in same industry).

Short selling strengthens the market by exposing which companies' stock prices are too high. In their search for overvalued firms, short sellers can discover accounting inconsistencies or other questionable practices before the market at large does. This does not imply that all stocks shorted may have those characteristics - but some usually do.

There is the belief that the practice represents profiting off others' misery or that it depresses successful companies' share prices, both academic studies and real-world experiments have shown that short sales improve market efficiency. Locally usually there is no massive collusion at work to push down certain stocks.

I do have a quibble when there is a collective effort to discover "faults", do massive PR campaign and promote sell research

 a taste of the techniques used by a “Short selling activist”, for example:

• Make itself a Research company, not a short seller
• Target Asian (especially Chinese) companies listed in Hong Kong & Australian companies.
• Make a report, especially an attractive & negative title
• Publish the information !

In fact, it’s not a new trick. In an article published by Reuter, companies listed in Hong Kong are targeted because:

- poor regulation, weak enforcement and small public floats means there are more stocks overvalued in the territory than in other major markets.

- China’s strict investment rules make it all but impossible to take short positions in individual domestic-listed Chinese stocks from overseas.

- Chinese companies alleged to have committed accounting tricks, market manipulation and fraud are being increasingly targeted by short sellers.

You can short based on publicly available information, but when you are short by doing extra research to obtain negative information, and you are part of an organised group to whack down the company - that's collusion even though it is based on "facts". A collusive grouping can caused a herd mentality to sell. Here is where the regulators need to be more vigilant. All said, it is fair game if you do shady  or false accounting.

There also has been sell research not based on facts but false accusations. It appears that there has been no penalty for these type of sell research groups yet.

p/s: The lovely Farah Ann Abdul Hadi, Malaysia's top artistic gymnast for many years. 

Cheap Shots & Expensive Decisions

Why The USD Is Likely To Prick The Bubbles

There are almost bubbles everywhere you look but you also cannot see them bursting anytime soon. The massive liquidity injected by almost every single central bank to stave off the economic ill effects from the pandemic has ensured a superfluous liquidity situation.  It is well known that the US dollar is the most important currency for central banks with the US dollar accounting for about 59% of Forex reserves. The US dollar is involved in about 85% of all Forex transactions and is therefore the most important currency for international trade. 

Plus there being large sums of corporate debt in US dollars internationally while US corporate debt is nearing $10 trillion. One could also add that US Treasury paper is considered globally to be one of the safest investments. China has even recently bought more US debt and still owns a large amount of US Treasury paper, more than $1 trillion.

The global demand for US dollars will thus continue for several years due to there being so much debt denominated in the American currency. The global demand for US dollars will thus continue for several years due to there being so much debt denominated in the American currency.

It is therefore clear that the US dollar has a dominating position in relation to all other currencies. This domination will continue for at least some years.

Current US Financial Policy

The current US federal debt is over $28.2 trillion and will soon hit $29 trillion at the current rate.

The Biden administration is continuing the deficit spending of the previous administration and has proposed still more spending programs. The deficits have to be funded by Treasury debt, and a large portion of this debt is absorbed by the Fed, which now has a balance approaching $ 8 trillion.The question that should be asked is how the US can have such a huge trade deficit without the US dollar collapsing. The logical result of such a deficit should have been devaluation of the currency. With the Fed creating money at such a fast rate, devaluation should follow.

A look at the dollar index shows that there is variation in the value of the currency. The subprime mess 2007 and the ensuing few years brought the dollar down to below 80, and it is now around 91 and weakening. Despite the trade deficit, the Administration has continued creating huge sums of money, thus increasing the amount of money in circulation. 

Safe to say, there has been grand plans by many to reduce the usage of USD in global transactions. The reserve status for USD has allowed that country to issue papers with impunity (exemption from punishment or freedom from the injurious consequences of an action). China is working hard to make the yuan the next global currency. The yuan can’t upstage the U.S. dollar unless the following scenarios happen:

• Central banks around the world choose to keep a total of at least $700 billion worth of yuan in foreign exchange reserves.
• The PBOC allows free trade of the yuan and relaxes its peg to the U.S. dollar.
• The PBOC becomes straightforward about its future intentions with the yuan.
• China’s financial markets turn transparent.
• Chinese monetary policies are perceived as stable.
• The yuan acquires the U.S. dollar’s reputation of stability, which is backed by the enormity and liquidity of U.S. Treasurys.

On December 1, 2015, the IMF announced that it awarded the yuan status as a reserve currency.2 The IMF added the yuan to its Special Drawing Rights basket on October 1, 2016. This basket currently includes the euro, Japanese yen, British pound, and U.S. dollar. In August 2015, it became the fourth most-used currency in the world. It rose from 12th place in just three years. It surpassed the Japanese yen, Canadian loonie, and the Australian dollar.

Prior to the Eurozone crisis, the euro was becoming a serious challenger to the dollar for global reserve supremacy. In particular, the possibility that some Middle Eastern oil producers might start invoicing in euros made holding euros attractive. However, the Eurozone crisis highlighted the euro’s fragility: although the European Central Bank promised to do “whatever it takes” to preserve the euro, the possibility remains that one or more countries might leave, triggering a disastrous exchange rate fall.

 

Despite this, the possibility of the euro replacing the dollar as the currency principally used in oil trading has been rising again. But there is another obstacle to widespread adoption of the euro as reserve currency. The Eurozone currently produces insufficient safe assets for the euro to replace the dollar as the principal currency for the world’s safe savings. Partly, this is because the legacy of the Eurozone crisis is that the debt of many Eurozone countries is no longer considered “safe.” But it is also because those countries that do produce safe debt, notably Germany, don’t produce enough of it.

Special Drawing Rights is an international reserve asset which the IMF allocates to its member countries. However, it is not at present a currency in its own right. Rather, it confers upon the holder a “right to draw” currency issued by any of the IMF’s member countries.

 

Originally linked to gold, SDR’s value now is determined by a basket of five currencies—USD, the euro, the Japanese yen, the British pound, and the Chinese renminbi. Since SDR is a reserve asset, not a currency, it also bears interest. The interest rate on SDR is determined in relation to the interest rates on safe assets denominated in the currencies of SDR’s basket.

 

Recently, there has been a proposal to make SDR an international currency. This would mean a change in the status of the IMF. Currently, it can’t create money, it can only distribute funds it has been given by its member states. But if SDR became a tradable international currency, the IMF would become the world’s central bank, at which other central banks would hold reserve accounts denominated in SDR. Supporters of this scheme say that a principal benefit of using SDR as the world’s reserve currency would be greater stability in the international monetary system, since it would no longer depend on U.S. monetary policy. However, a move to SDR from the dollar would need to be carefully planned to minimize swings in the dollar exchange rate and U.S. interest rates.

There is also the demand for US Treasury paper as a safe haven for investments. It would therefore seem that it does not matter what the Administration in Washington does and how much federal debt there is and how large the Administration’s budget deficit is or how large the trade deficit is. 

As long as there is a demand for dollars, the Treasury can keep on issuing bonds and the Fed can keep on creating as much money as it wants until the demand slackens.

Investors should be aware that very little is entirely certain in finance. Should demand for the US dollar weaken, then the currency would suffer devaluation. Investors should therefore pay attention to factors that could weaken the dollar and/or decrease demand for the dollar. On the one hand, dollar debtors, including sovereign funds and corporations, would be happy to see a devalued dollar since that would mean that servicing their dollar debt would cost less and the principal to repay would be much less as wellThe economic recovery now underway in the US is not going to change the penchant for deficit spending, and the Fed is planning on keeping interest rates low. One real problem that has to be faced is the growing inflation in the US. That may well lead to de facto dollar devaluation.

The bottom line for investors is that they should carefully follow developments in the increase of federal debt and of corporate debt besides keeping an eye on inflation. It will also help to consider the size of the trade deficit.

The Fed has nearly doubled its balance sheet in response to the pandemic – it has swollen from $US4.2 trillion to $US7.7 trillion – and is still growing at $US120 billion a month, pumping US dollar liquidity into the US and global financial systems.

There’s probably at least a year and $US1.5 trillion, if not more, of further Fed bond and mortgage purchases to come unless the Fed is forced into a change of policy stances by a sustained and threatening burst of inflation.

The other big factor at play is the massive blowouts in US debt and deficits and in the US trade deficit. Since the outbreak of the pandemic the US has enacted or announced nearly $US9 trillion of spending, about $US6 trillion of it by the Biden administration. The US trade deficit is at record levels.

Last Words: The USD is ebbing at the moment. The bazookas used by the Fed has pushed debt levels to delirious levels. Inflation and higher interest rates will be inevitable. Coupled with a weaker USD, it is bound to happen soon. I believe it will be one or both catalysts for an unwinding of a few bubbles. Sub prime corporate debt and housing debt should be the first to feel the pressure. Corrections happen slowly, one by one and then all at once - read that line again. 

p/s:Jelita Septriasa or better known as Acha Septriasa is an Indonesian actress and singer of Minangkabau descent.