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Showing posts from March, 2011

How US Housing Market fares lately? (30 March 2011)

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Indeed, there is a insightful write-up by RHB Research today on the US housing market. People are still very curious about the US housing market, but yet to have the courage to BUY. Herd mentality? And, why US housing market is catching the attention of the world? Oh, thanks to Rich Dad Poor Dad, and the world famous property tycoon, Donald Trump.

In fact, I am wondering how did Donald fares these few years? That's why Donald had teamed up with Robert Kiyosaki to publish a book last year? People stop buying property because they're buying books nowadays?
A Double-Dip in the US Housing Market?... by RHB Research (30 March 2011)
US home prices, as measured by the S&P/Case-Shiller composite index of 20 metropolitan areas, declined by 0.2% mom in January vs -0.4% in December, and dipped for the 7th straight month to the lowest since April 2009. Year-on-year, home prices in 20 major cities fell by a larger magnitude of 3.1% in January, the 4th consecutive month of decline and from…

Wages and Inflation

Those who see no inflation in our future usually rest their argument on slow wage growth. The argument is that if wage rates don't increase, then there is nothing to pass on in the form of higher prices. Would that it were so?

The real issue is not whether wages are rising. The real issue is whether or not labor costs are rising. Wages are only one component of the cost of labor to business and wages represent a declining portion of that cost. Ask Walmart.

As Walmart faces a potential multi-billion lawsuit, companies around the US brace themselves for massive copy-cat employee lawsuits. All large companies now have to factor in dramatically higher potential liability costs associated with the Walmart lawsuit. Don't believe that companies aren't watching the developments in the Walmart case -- they are.

As for Walmart, you can be sure that they will make every effort, over time, to pass their litigation costs on to their labor force. But, in the short run, the cost of …

Who would be the winner of POS Malaysia?

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It's been awhile since the government announcing its intention to divest its shareholding in Pos Malaysia last year. Through Khazanah Holdings, the government owned 32% stake in Pos. Let's re-look at the news with updated info, and hopefully we can have a better prediction on Pos in the near term.

While waiting for a new strategic partner, Pos has declared a one-off final and special dividend of 17.5sen, which provides a dividend yield of 5.7%. However, OSK is maintaining its fair value for Pos at RM4.12 with a BUY call. It closed at RM3.32 yesterday.
On 29th March 2011, Business Times reported unconfirmed sources said that Khazanah had just shortlisted 3 out of 5 parties bidding for its 32% stake in Pos.
Who are they? The 2 candidates that already failed are: Scomi BhdTricubes BhdThe 3 still-in-run candidates are: NationwideMPC-Amanah REITDRB-HicomThe shortlisted parties will make a final presentation today to Khazanah and McKinsey & Co, who is the adviser. Pos' book value…

Inflation is Picking Up

While Bernanke continues to look in the rear view mirror hoping to spot some deflation, the facts on the ground and the road ahead are clearly all about rising inflation. The February CPI numbers released today, an annual rate of five percent should give Bernanke and his QE2 activity a reason to reflect. It is true that in a world of no food and no energy the numbers look better, but who lives in that world?

What are the implication of rising inflation? Trouble in bond land. This means investor losses on bonds and headwinds for stocks. Unanticipated inflation is always bad news for stocks. Inflation reduces the value of the national debt, but inflation increases the deficit, offsetting the former effect.

One big plus: the housing market will benefit from increasing inflation, mostly because homeowners are big debtors and have fantastic tax advantages compared to the owners of any other asset (even better than owning oil wells!). Those who buy homes now and over the next year or t…

New Fund: HwangDBS Select Dividend Fund

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To further leveraging on the signature "Select" series of HwangDBS funds, HwangDBS Investment Management Berhad today added in HwangDBS Select Dividend Fund. Over the years, the Select series of funds have demonstrated strong performance, stability and consistency in meeting their objectives. Through this new fund, investors can access a diversified, yet focused portfolio of quality dividend yielding stocks in Malaysia and Asia-Pacific region.

The fund endeavors to provide a combination of regular income and capital growth over the medium to long term period. To achieve the primary objective of providing regular income, the fund intends to invest in high dividend yielding equities and equities that could potentially experience high dividend pay out growth. The fund's investments will be primarily focused in Malaysian equities with a minimum investment of 70% of the fund's NAV. The fund may also invest up to 30% of its NAV in Asia-Pacific region.


Two-part Approach? Stab…

Cost Is Not The Real Issue

You hear the President criticized over the cost of the new Libyan military adventure. Whatever the merits or demerits of the President's new military activities, they are not really that costly. That's why they are so easy to do. The cost restraint for military adventurism is not really binding anymore. We could fight a number of wars all over the globe for a pittance of what it costs to support Medicare, Medicaid, Obamacare, and Social Security.

War is cheap! The volunteer army did that for us. It replaced conscripts with folks that really wanted to do this. So we have fewer of them, pay them better, and they do a better job. Plus, war technology has improved.

So, Obama gets a push-button war on the cheap. Whether it's a good idea or not is an entirely different story, but cost is not the issue.

Bob Herbert on "Losing Our Way"

Bob Herbert is a hard left columnist for the New York Times. Normally, his columns are showers of praise for the Obama Administration (like most every other political column in the NY Times). Today, Herbert is on a different tack. He is criticizing the Administration for spending tax dollars in Libya (and other foreign adventures) while "...simultaneously demolishing school budgets, closing libraries, laying off teachers and police officers and generally letting the bottom fall out of the quantity of life here at home." Sounds compelling doesn't it.

This article shows the depth of the lack of understanding of the hard left for what is really going on in the US and Western Europe. First and foremost, there is absolutely no reason whatsoever for laying off any public employees. Were it not for the absurd work rules and legal restrictions, public employees would take compensation adjustments and there would be few, if any, layoffs.

In my own county of Albemarle County…

Earth Hour by Switching-Off TNB's Nuclear Plan(t)? (26 March 2011)

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In conjunction with Earth Hour today, would you do your part by switching off lights from 8.30pm to 9.30pm? I heard people are talking about earth hour since weeks before, and many shopping malls and hotels are organizing some amazing events during this special dark moment. Actually, the idea of Earth Hour came out as a way to showcase a growing global community's commitment to taking environmental action and protecting the planet we are living in.

And, this year, the one-hour is just like a moment for us to remember the lost lives in Japan earthquake and tsunami disaster, which killed more than 10,000 lives. Of course, the nuclear radiation treat are still looming in Japan, and we really needs to evaluate the effects.
But, isn't nuclear power GREEN?
As I know, nuclear power is much more environmental friendly than Coal/Gas power plant. Although Hydro power is renewable, it is devastating to the nature when construction by greatly changes the topography of the surrounding area an…

A Soft Economy Amidst a Sea of Liquidity

Some parts of the economy have returned to pre-crisis levels. The stock market for one. The stock market is now well ahead of where it was just prior to the collapse of Lehman Brothers. Prices of the best buildings in NYC and London are nearing the peaks reached in 2007, if not exceeding them. Luxury homes are on the rebound. Yet the overall US economy is moribund and headed nowhere. How can this be?

The simple answer is the Federal Reserve. The Federal Reserve is monetizing substantial amounts of US treasuries (buying treasuries, in other words). This is equivalent to printing money instead of selling debt from the point of view of government financing. This is QE2. This process, QE2, adds enormous amounts of liquidity to the financial system, available to whatever suits the fancy of the financial system. Normally, such excess liquidity feeds directly into asset prices -- stocks, bonds, high end real estate -- and that is exactly what has been happening.

Business is not real…

Portugal, Greece and More

Greek unemployment has now surged to 16.5 percent as it struggles to implement a half-baked austerity program. Greek's austerity program is an example of policy gone berserk. The austerity program that Greek politicians have pursued (with the support of the EU) is too little to have any impact on their spiraling debt problems and too much to permit the economy to avoid collapse. Why do this?

The Portuguese have rejected austerity. Others will follow. Austerity without at least a partial debt default is a foolish and unsustainable policy. The best historical precedent for the madness going on in the European union today is the reparations payments program foisted onto Germany by the Treaty of Versailles. We know how that experiment ended. Enough.

There is no reason to insulate bondholders from the folly of their investments. They should bear the brunt of bad decisions. Portugal, Greece, Ireland, Italy, and Spain should default, at least in part, on their sovereign debt. &q…

The Beat Goes On

Jose Socrates, Prime Minister of Portugal, failed this week to get his country to complete the fiscal austerity program designed to save Portugal from defaulting on their sovereign debt. The truth is that no one cares about Portugal. The big concern is Spain. Portugal is a relatively small economy and EU bailout fund could easily accommodate Portugal's needs (and probably will do so soon). But, that leaves Spain. Spain's problems are so immense that the EU has no serious way of dealing with it.

Thoughts of Portugal lead to the contemplation of Spain, in true domino-theory progression. It is hard to see what the EU will do when Spain is the headline. That could be game over (and we haven't even begun to speak of Italy).

All of this is a policy of wishful thinking by the EU, of course. It is simply a matter of time until all the PIIGS countries (Portugal, Ireland, Italy, Greece, Spain) default on their sovereign debt and are forced to nationalize their largest banks.…

New Fund: Avenue CARE Fund

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On 18th March 2011, Avenue Invest Berhad, a member of the ECM Libra Group, launched the Avenue Canada Australia Resources Economies (CARE) Fund.
CARE fund seeks to achieve capital growth over a medium to long-term period by investing primarily in securities of companies in Australia and Canada. The fund may also invest in equities and equity-related securities, fixed income securities, structured products and money market instruments.

Why Australia and Canada?
Due to their resource-based economies, the manager views Australia and Canada as two of the best-positioned countries in the developed world to benefit from the rapid growth of emerging economies such as China. Both economies have emerged largely unscathed from 2008's global financial crisis and are now buoyed by the resurgence of their resource-based industries.
How to achieve the fund's objective?
Generally, the fund will invest at least 70% of its NAV in Australian and Canadian markets and the balance of 30% in other ma…

Check out Matthew Klein's Piece in NYTime Today

Matthew Klein's article dubbed "Educated, Unemployed, and Frustrated," describes the plight of American young people looking for a job and a future. He notes that 21 percent of workers between ages 16 to 24 are unemployed. These, of course, are mostly not college graduates, although Klein strongly suggests that they are in a typical NYTimes manner. The truth is that college grads have a very low unemployment rate, less than 5 percent in the aggregate, while non college grads have five times that number. Klein doesn't bother to ask why?

Klein does note the burden of entitlements which systematically favor age over youth, but that doesn't explain why young folks are struggling so in the job market, especially those without a college degree. Perhaps, he should look at some of the other editorials that grace the NY Times -- the ones that support employer mandates, the ones that suggest that all business folks are crooks, the ones that support higher taxes for emp…

Smokescreens

Whatever your source of the news, you must feel bombarded by the headlines from Japan, from Libya, and from other troublespots around the globe. These headlines and news stories are obscuring the underlying facts about what is going on.

Oil is not going to spike to $ 200 -- no matter what happens in the Middle East. There is not going to be a nuclear conflagration in Asia or even in Japan resulting from the damage to Japan's nuclear facilities. And, yes, there is no one to blame for the earthquake and tsunami.

The news media is so preoccupied with finding people to blame about every possible difficulty that the world faces that it obscures the real facts about what is taking place. The real facts remain: the western economies are mired in one of the slowest economic recoveries in the history of the world, while Asian economies and some Latin American economies and Eastern European economies are booming.

Western economies have mortgaged their futures by massive transfer payments…

New Rules on Credit Cards: NO Credit for LOW Credit?

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New Measures on Credit Cards had been announced by Bank Negara Malaysia (BNM) to promote prudent financial management and responsible business practices. Summary on the announcement made: For new credit card holders, minimum income eligibility is set at RM24,000 p.aFor cardholders earning RM36,000 p.a and less, the following would be applicable:Cardholders can only hold credit cards from a maximum of 2 issuersAffected existing cardholders are given up to the end of 2011 to select their preferred issuers.Cardholders will also be given at least 2 years to service their outstanding credit card debt for the credit cards that have been canceled for the purpose of meeting this requirement.The maximum credit limit extended to a cardholder shall not exceed 2x their monthly income per issuer.For affected existing cardholders, a grace period of 2 years will be given to them to meet with the new requirement.
How about credit card issuers? Credit card issuers are required to adopt fair, transparent …

New Fund: RHB Dynamic Oil-Gold Capital Protected Fund

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Launched on 11th March 2011, RHB Dynamic Oil-Gold Capital Protected fund is investing in oil and gold, which have the potential to perform in both areas that have great bullish and bearish markets.

This is a 3 years capital protected fund. As usual, it will invests at least 85% of the NAV in zero-coupon negotiable instruments of deposits. Meanwhile, up to 10% of the fund's NAV will invest in an over-the-counter (OTC) option that gave investors returns (if any).

The OTC option will provide exposure to the performance of the Option Strategy, which is an index, maintained by the issuer of the OTC option and is subject to a dynamic risk adjustment linked to the realized volatility of the underlying.
Option Strategy This Option Strategy is a rules-based strategy computed and developed by the option issuer / counterparty. It aims to tap into the growth of oil and gold through the use of a "momentum" based strategy to capture the trends of the Underlying and also, volatility stabil…

New Fund: AmAustralia Fund

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Looking good on Australia, AmMutual is launching a new fund to capture the potential of Australia. The fund seeks to provide income and long-term capital growth by investing in Australian equities and Australian dollar fixed income securities.
Note: The fund's main focus is on income and to a lesser extent, capital growth.

"Australia's economy is resilient and has posted an impressive positive gross domestic product growth over the last 18 years, even outperforming all other advanced economies during the global financial crisis," said Datin Maznah Mahbob, CEO of Funds Management Division, AmInvestment Bank Group. (Business Times)
Investment Strategy
The fund generally maintains equity exposures within a range of 50% to 100% of the fund's NAV. Then, the balance may be invested in Australian dollar fixed income securities and liquid assets.  It will derive its income primarily through investments in relatively higher paying dividend stocks and bonds. However, it may…

Japan Will Get Through This

Don't count out the Japanese. They will get through this current crisis and find a way to deal with their difficulties.

The radiation leakage will likely be localized. The lingering problem will be energy shortages for the Japanese economy and for the needs of Japanese families. The market reaction in Tokyo is much overdone. The real financial problem in Japan is Japan's sovereign debt and Japan's unreasonable commitments to old age pensions and medical care. Sound familiar? The demographics are not helpful -- Japan is an aging and declining population -- but that is a problem that most of the developed world faces.

The earthquake is not good news, but it is by no means as catastrophic for Japan as much of the media assumes. The sell-off in American stocks, more muted, is more reasonable than the 15 percent decline in the Japanese market during the first two days of this week.

The media is not helpful in this crisis, which is usually the case in crises of any descripti…

Post-Japan Disaster: After Timber, it's Glove Sector?

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As per our previous posts (How Should Investors trade after the Japanese Disaster?), we wrote about timber counters, and it's proven the right sector investors should look at. And, below is the performance of those mentioned counters.

All of them outperformed KLCI, which recorded -2.20%. Why WTK outperformed its peers? Simple answer is its cheaper share price and better liquidity. In fact, TaAnn and WTK is the main focus because they export 80-90% of their products to Japan. This puts them in the limelight of stocks investors should look at for the moment.
Why should you look at Glove sector next? After timber, glove sector should outperformed the generally weak market sentiment. Investors are scared. Those who already bought was stuck-in there. Those who already sold was staying sidelined. And, those who dare to buy now is focusing on timber stocks only - and today glove.
Main reasons were: Demand for medical glove is expected to increase substantially. After the disaster, Japan sho…

How should investors trade after the Japanese Disaster?

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Special edition from Japanese Earthquake on 11/03/2011 (black Friday?).
Duped as Japan's deadliest disaster in more than a century, 10m high tsunami crushing on the coast line, and yet to be confirmed - world's worst nuclear disaster in 25 years. I'm sitting in front of computer screen, reading the news while monitoring the share market that Friday. The more I read, my heart is bumping faster, and the share market is going downhill.


In fact, KL is raining for whole day, signaling the bad situations would appeared somewhere, and it materialized in Japan shortly. In the morning session, KL market is rather quite. I asked myself: "Today, traders are still in bed due to the favorable sleeping weather?".
To recap, below is the performances of major market on Friday. What should investors do? And, how should investors trade going forward?

Personally speaking, I don't think this is a good time to accumulate. We never know the bottom. Catching the falling knife is very d…

What is Statutory Reserve Requirement (SRR)?

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Everyone is buzzing about SRR lately, since Bank Negara Malaysia's statement which stated its intention to raise SRR in the near future. Actually, what is SRR? And, what is the effect of higher SRR imposed? Why BNM using SRR right now? Finance Malaysia hopes to clear everyone's doubt and would appreciate if you can share this out.

What is SRR? Statury Reserve Requirement is a monetary policy instrument available to Bank Negara Malaysia (BNM) for the purposes of liquidity management. Effectively, banking institutions namely commercial banks, merchant/investment banks and Islamic banks are required to maintain balances in their Statutory Reserve Accounts (SRA) equivalent to a certain proportion of their eligible liabilities (EL), this proportion being the SRR rate.
Why BNM uses the SRR as its "tool"?
Since SRR is available to BNM to manage liquidity and hence credit creation in the banking system, it was used to withdraw or inject liquidity when the excess or lack of liq…

My First Home Scheme: Home of Trouble Ahead?

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Once again, to address the affordability issues of properties, MyFirst Home Scheme (My1st) was launched by government on 8th March 2011. Thanks for addressing the problem faced by young Malaysians working adults. But, does it really worth to even think about the scheme?
Of course, owning a house at young age is a good start to family planning. In fact, we're living in a society where buying a new house tights closely to starting a family. But, this is not necessary a MUST to everyone of us. We must do proper planning before committing for such a long-term loan with such huge amount. Buying a house is not buying an iPad or iPhone.
Highlights of My First Home Scheme... For those earning less than RM3,000 monthlyWorking in private sectorConfirmed employees with a minimum of 6 months in the jobJoint applications are allowed (both in private sector and are family members)100% loan financing for first house purchasingEligible houses: Between RM100,000 and RM220,000Both under construction…