Showing posts from May, 2012

The Solution That Doesn't Exist

Europe's problems are simple: every country in Europe -- there are no exceptions, not even Germany -- borrows to pay for promises that their own economy hasn't got the resources to pay for. The same is true in the US, but it hasn't become front burner yet. It will. Ultimately, you run out of people willing to loan you the money to pay for things that you otherwise can't afford.

It's not as if the US and Europe are borrowing to build bridges. That might represent a legitimate reason to borrow. Instead the indebtedness is a result of current funding needs that will only escalate over time. When does social security and medicare get less expensive? This is the heart of the European problem. They are not borrowing to fund long term investments, they are borrowing to fund the welfare state.

Put another way, they are borrowing for current consumption. The consumption being funded is part and parcel of the way of life in Europe, as it is in the US. There is no real …

2012/2013 List of Unit Trust Funds for EPF Members Investment Scheme

Last week, EPF announced that it has published the revised list of Fund Management Institutions (FMI) and unit trust funds for 2012/2013 for EPF Members Investment Scheme (EPF-MIS). For the period of 2012/2013, a total of 223 active unit trust funds from 24 FMIs are offered under EPF-MIS, details of which are as follows:

"The list of funds under EPF-MIS is reviewed annually based on a set of evaluation criteria that focuses on the consistency of fund performance, as approved by the Ministry of Finance. The evaluation process is carried out together with the Federation of Investment Managers Malaysia (FIMM) which represents the unit trust industry," said EPF General Manager for Public Relations.
When would it be effective? The revised list will be effective for the period of 1 June 2012 until 31 May 2013. 
List of EPF approved funds from some of the popular Fund Management Institutions:

How about Public Mutual?
Because of too many funds, please click here for the list of funds from…

A Journalistic Coup

John Isner, the top seeded American in the French Open which begins play today in Paris, found himself trapped when I discovered him with his entourage of trainers and coaches in his hotel in Paris yesterday. Isner had agreed to a 9 PM phone interview and made the serious mistake of providing me with the name of his hotel. I wandered over to his hotel and found him in the hotel lobby conversing with his tennis buddies and he graciously granted me the exclusive interview that I sought.

You can read the resulting article in Sunday's Daily Progress at I may not be a great sports writer, but I am doggedly persistent. I discovered, among other things, that tennis players at the top of the world rankings live much better than I do. Isner's hotel put my poor fleabag of a hotel to shame. His hotel was just off the Champs Elysee in a neighborood that I know I could never find a restaurant that I could afford. C'est la vie.

Today, the French newspapers were di…

May in Paris

Greetings from Paris. It is another beautiful day in Paris where I find myself covering the French Open tennis tournament. This is my other job. The French Open starts tomorrow morning on the courts of Roland Garros. One of my favorite trivia questions is "who was Roland Garros?" You will be surprised. Guess before you google it and see how well you do.

 I am staying at a small hotel a block from the Tuilierries and around the corner from the Place Vendome in the heart of Paris. Wandering around this morning I discovered a parka for sale in a storefront, the price of which is equivalent to my extending my stay in Paris for another three weeks. Wonder who buys things like that? For a clue, I stood outside the entrance to the Westin Hotel to watch how the other half lives. One thing for certain, the other half smokes a lot -- at least they do in Paris. For the convenience of the wealthy tourists and locals in the area, there are conveniently placed receptacles on t…

The Jamie Dimon Saga

Jamie Dimon has made himself too visible.  He basked in the glow of a powerful Wall Street post and a left wing image.  Dimon was one of Obama's strongest supporters in 2008.  Like most of Wall Street, Dimon saw nothing wrong in loading up costs on employers, who had made the mistake of hiring workers.  After all, the workers that Dimon hires are high-end, highly skilled employees, who are largely unaffected by minimum wage laws, health care mandates, and a variety of worker protection schemes and union promotions (think "card check").  So Dimon, like Buffett, courted the media and made clear that he was a "caring" soul.  Now, Dimon is finding out, as Buffett will also, that this is not about "caring."  This is about a war on capitalism, waged from the White House.

Dimon had harsh words for Paul Volcker when the so-called "Volcker Rule" became part of the regulatory landscape.  Ouch!  Now, Dimon is getting blasted from the left.  See Simon Jo…

Europe’s Woes Flood Wall Street—But Not the Economy? (May 2012)

After months of buildup, Europe’s sovereign-debt crisis has finally wreaked havoc on the U.S. stock market, as a wave of anxiety has prompted a major sell-off on Wall Street. We’ve seen a dramatically “risk off” environment with the Dow Jones Industrial Average dropping 3.52% — the biggest one-week decline since November — and the S&P 500 falling 4.3%. Among the hardest hit stocks were small caps and tech, with the Russell 2000 and the Nasdaq Composite falling 5.4% and 5.3%, respectively. To further underscore the risk-off environment, the yield on the 10-year Treasury still appears to be searching for a bottom, finishing at 1.702%, but falling below 1.700% intraday this week — a modern-era low.

Spring Swoon?
History may not be repeating itself, but it certainly is rhyming. Like the spring of 2010 and the spring of 2011, investors’ fears are coming to fruition and we are once again experiencing a “spring swoon.” Stocks are selling off and junk-bond spreads are widening, as concerns …

The Fixed Pie Theory

Modern public policy in Western countries seems to be based upon the assumption that the economy is a fixed pie, waiting to be divided up "fairly." How else to explain the economic utterances of President Obama and the leaders of Western Europe? It's all about who gets what. Now "economic growth" is on their mind. Where has that been? Who thought about economic growth when politicians were busy saddling their economies with regulations and mandates?

The political leaders of the Western world seem to think that the government spending is the cure for what ails us. If that were true, would we be ailing? When did government spending not exceed revenues in any country in the Western world in the last three decades? Now we need more of the same? This is like the drunk, awakening with a hangover, asking for another drink to cure a hangover. Except, there is no more booze available.

Back when, western economies grew and provided rising living standards for t…

Was Genneva Gold Investment Scheme a Scam?

Lately, I have a long-lost friend calling me out for a drink. Without hesitation, I am more than happy to meet up with him, a successful businessman. Well, we started off with very casual conversation from politic to investment. Yes, investment is my all-time favorite topic and he knew it. Once my hot button was pressed, he share with me the Genneva Gold Investment Scheme.

With its headquarter situated at Kuchai Entrepreneurs Park, Genneva has evolved to become one of the leading and most innovative gold traders in Malaysia and neighboring countries. What I want to stress here is INNOVATIVE. Why? Please read on...
About the Scheme
Through Genneva's unique wealth sharing platform, you are not only the owner of the gold bullion in hand, you also will get 1.8-2.5% cash return (hibah) every month for 3 months under Genneva's Syariah principle-based product plan. (see picture below)

It is similar to placing your savings in Fixed Deposit. Whether the price of gold goes up or down, your

The G-8 as an Ostrich

The G-8 communique this weekend is more of the same. The communique calls for "growth measures" for the Eurozone and is an implicit slap at the austerity measures that were imposed, by Merkel and Sarcozy, as the price of bailouts for Ireland and Greece. No mention of the over-regulation and labor laws that have made the Eurozone, even in the best of times, an impossible place for anyone under the age of 25 to find a job.

The G-8 politicians accepted the Obama Administration view that you can put an enormous tax on labor and still expect businesses to be enthusiastic about hiring workers. By piling mandate upon mandate upon employers who make the mistake of hiring anyone, the government has effectively put a huge tax on labor.

Is it any surprise no one wants to hire anyone, when it is effectively against the law to fire anyone in Spain? The 25 percent unemployment rate in Spain has nothing much to do with austerity measures, since so far there haven't really been any in…

The Stock Market Swoons

The US equity markets have given up more than half of their 2012 gains in the last two weeks as the market has plunged more than seven percent in that short space of time. Why? Fear of a weaker economy in the second half is the answer. The economy still seems to be barely moving forward and, with major tax increases on the immediate horizon (January is not far off), a weakish economy could potentially roll into another recession. The odds are probably fifty-fifty.

 But, there is no set of circumstances favorable to a strong recovery. An anti-business White House has put so many roadblocks in the way of economic recovery, that the best hope is a muddling through and that is getting increasingly less likely. JP Morgan's travails will strengthen the hands of those bent on straightjacketing the finance industry.

Who loses? The average American seeking credit and small business seeking financing. The enemies that Obama has on his radar screen are, unfortunately, the only people w…

"Greece's Problems are Europe's Problems"

Alexis Tsipras is a 37 year old politician in Greece who is surging to the top of Greek political polls with the message that Greece should not be forced into austerity. I agree with that, but I don't agree with Mr. Tsipras's broader argument.

Tsipras believes that it is perfectly okay for the Greek government to make absurd promises to its citizens and provide no means of paying for those promises. He must have been watching the successful American politicians and following their lead. Tsipras believes that the rest of Europe should underwrite the lifestyle that Greece thinks it deserves and he intends to "call their bluff." Right.

 I suspect that German citizens do not share Tsipras's sanguine view of having other folks pick up the tab, since German citizens are the "other folks." So, what will happen? That's pretty easy to see by simply following the fortunes of Angela Merkel's party in the elections that are going on in various parts of …

Why Gold Behave Differently this Round? (May 2012)

When market sentiment was bearish, equities market would slump, just like what we seen for past few days. Global markets suffered yet another blow due to the uncertainties surrounding EU, where Greece may potentially exit European Union. Would Greece finally exit EU? This is an interesting yet important questions for investors.
The headlines have been on the EU crisis recently, overshadowing the highly speculated Malaysia general election's date. Well, now would be a tough time for our Prime Minister to call on an election amid the gloomy global outlook. Maybe, the best time to hold an election already gone!!!

Anyway, another interesting issue was the slump in Gold prices. Curiously, many investors questioning the different trend for gold prices. Normally, it will spike up along with the risk level of global equities market, together with USD. Theoretically, gold and USD would over-perform other asset classes during bad times. Yes, USD had already appreciated against a basket of cur…

Clawbacks for Politicians

Pundits and politicians are loudly proclaiming that Wall Streeters whose firms lose money should "give back" earlier compensation.  Why not apply this reasoning to politicians?  Since Jerry Brown misguessed the California deficity by $ 16 billion, why not have him cough up all of his assets (but no more than $ 16 billion).  Similar for Obama and other politicians who proudly announce their fiscal discipline and then quietly let the truth seep its way into public view when no one is watching.

If politicians had to personally make up the shortfall for their promises versus their funding of those promises, maybe they would have second thoughts about their duplicitous behavior.

Deposit Insurance Is The Problem

Why do we have federal deposit insurance for banks?  Today's federally guaranteed checking accounts, FDIC guaranteed, have their origin in a 1934 banking law designed to prevent runs on banks.  In practice, FDIC has always paid off all bank creditors, not simply those creditors who qualified legally under FDIC protection.  This is why so many banks are now "too big to fail."

The FDIC exceeded its statutory authority and thwarted the clear design of the 1934 Act.  Now, Dodd-Frank has codified this into a blanket guarantee for all "large" banks.

This creates two problems: 1) the government now thinks it should run all aspects of commercial banking; 2) banks have an incentive to gamble since the government guarantee means they can lose money with impunity yet still get low cost financing.

Every time there is a problem, like the recently revealed $ 2 Billion hit by JP Morgan, there is a call for more government regulation and new laws and restrictions on (all) banking…

Show Me The Money

Now German Chancellor Merkel is in deep political trouble after the election results in North Rhine-Westphalia in Western Germany.  Merkel's party, the Christian Democrats, had their worst showing in NRW since World War Two ended.  They received just under 26 percent of the vote, having received 35 percent two years ago.

That pretty much completes the cycle.  No political leaders that stood in 2010 are going to survive the Merkel-Sarcozy bailout and austerity program, including Merkel.  She is up next year and it is obvious that her political day in the sun is over.  Germans aren't interested in underwriting the Greeco-Spano-Italo-Portugo-French welfare states.  They won't do it and no government will survive that promises to do it.

The problem for all of Europe and really all of the western advanced economies is that they are out of chips.  Some can play a few more hands before it is over, but all of them are in the same boat -- no money.

Neither side of the Eurozone crisis …

California's Race to the Bottom

California's budget deficit is now estimated at $ 16 Billion, instead of the $ 9.2 Billion estimate that held sway as recently as January.  They kind of missed that one.  Maybe they "overestimated" the revenues they would get from the variety of new taxes that they have imposed.  So, what's the answer?  More taxes says Governor Jerry  Brown, referred to as Governor Moonbeam by most of his constituency.  According to the LA Times this morning, "...revenue in April ... fell far short of expectations, leading to a shortfall of at least $ 3 Billion in the current fiscal year.  The state has also spent $ 2.1 Billion more than expected..."

Huh?  Three months later, the deficit is $ 7 Billion higher than expected?  Was this an accident or the result of a calculated deception designed to fool the voters into believing that Governor Moonbeam and the Democratic Legislature had a balanced budget?  It increasingly doesn't matter whether Governor Brown is duplicitous…

Two More Wealthy Supporters of "Tax the Rich"

Facebook co-founder Eduardo Saverin, a staunch defender of the Buffett rule raising taxes on the rich, has renounced his American citizenship to become a citizen of Singapore.  That way, any tax increases on the rich won't apply to him.  I can't wait for his next "fairness" interview on why the rich should pay their fair share.

Meanwhile, Mark Zuckerberg, another advocate of Obama's "tax the rich" scheme has arranged a tax-avoidance trust to escape massive amounts of estate and gift taxes.  Zuckerberg's and a half dozen other Facebook "luminaries," according to today's Wall Street Journal's story, are all using "a perfectly legal maneuver" to avoid taxes.

So much for the various hypocrites like Warren Buffett, Mark Zuckerberg, Eduardo Saverin and others (including Bill and Hillary Clinton, by the way).  They know they won't have to pay the taxes that the "tax the rich" Obama crowd is pushing for, so they suppo…

Who Needs J P Morgan Anyway?

Another big loss in corporate America as Jamie Dimon announces a $ 2 billion loss at J P Morgan involving a trade that was designed to reduce risk not enhance it.  Interestingly, a loss like this becomes more of a political matter than a shareholder issue.  Even after a $ 2 billion hit, J P Morgan is still expected to earn more than $ 4 billion after tax this quarter.

The way the world should work is that JP Morgan announces the loss, it's stock falls briefly, changes are made at JPMorgan and life moves on.  But, in the modern world, don't expect such a simple and rational outcome.

Instead, we wait with baited breath for the Obama Administration to opine once more on how terrible capitalism is.  Surely, a mistake like this would never have been made by the ever frugal, watchdog folks in the Obama Administration.  So, expect more rules, more demonizing of Wall Street, more attacks by the Obama Adminstration on business.  That's their thing.

Meanwhile Americans are looking for …

New Fund: AmDynamic Allocator

Another new fund launched by AmMutual in a short period of time (barely few days), AmDynamic Allocator aims to achieve capital growth over the Medium to Long Term and at the same time provide income by investing primarily in collective investment schemes. This is a Fund-of-Funds, which means the fund is comprise of multiple funds.

The Fund will be managed with the aim of achieving positive investment returns over the Medium to Long Term regardless of market conditions. To achieve the investment objective, the Investment Manager applies a strategy that seeks to generate returns through investments in Collective Investment Schemes (CIS), which has exposure to various asset classes including but not limited to equity, fixed income securities and money market instruments. There will be no cross-holding between the Fund and CIS.

More about Investment Strategy
In selecting the asset classes for the Fund, the Investment Manager will adopt an active asset allocation process. The Investment Manag…

New Fund: AmAsia Pacific Equity Income

If you think that Asia Pacific will remain the main engine growth driver of world economy, then you should look into this fund launched by AmMutual. The Fund is a feeder fund, which will invest into the BlackRock Global Funds-Asia Pacific Equity Income Fund (the “Target Fund”), a sub-fund of the BlackRock Global Funds (BGF) domiciled in Luxembourg.

The Fund seeks to provide income and to a lesser extent Long Term capital growth by investing in the Target Fund which has an investment focus on Asia Pacific ex-Japan equities. The Fund seeks to achieve its investment objective by investing a minimum of 95% of the Fund’s NAV in the BlackRock Global Funds-Asia Pacific Equity Income Fund at all times. This implies that this Fund has a passive strategy.


BlackRock Global Funds (“the Company”) is incorporated in Luxembourg as an open-ended investment company under the laws of the Grand Duchy of Luxembourg and qualifies as a Part I UCITS (Undertaking for Collective Inve…

Semiconductor Sector Poised to Rebound? (May 2012)

According to the Semiconductor Industry Association (SIA), despite an annual decline of 7.9% in March, global chip sales increased 1.5% MoM to USD23.0bn as sequential growth resumed across all regions, especially in Europe and Japan. SIA expects seasonal moderate growth to continue in the 2Q and build momentum as 2012 progresses.

While there may be concerns on the sector’s outlook due to the EU’s descent into a recession and China’s economic slowdown, it was believe that the growth momentum of the semiconductor market is sustainable. In our view, the EU’s decline will be offset by the recovery in the US while chip demand from China should remain resilient, driven by the tech hungry consumers and the proliferation of the IT market.

Outlook for local players
Management of most companies under our coverage has turned more optimistic about the coming quarter as customers raised orders in March. Analysts do foresee some stability, although the sustainability will depend greatly on how the glo…

Next Stop -- Bond Auctions

Now that it is clear that political support for the Merkel-Sarcozy plan has disintegrated, the next step will be escalating bond yields across Europe.  For a while, Germany will be spared rising yields, but, in time, they will join their European neighbors.

Essentially, the political upheaval in France and Greece and earlier in Spain and Italy means there is no possibility of budget cuts and economic reform in these countries.  Their political leadership intends to sell the same discredited bill of goods to their fellow countryman that they have been selling them for decades.  You can have it all.  Essentially, the Obama plan.  Everyone can have everything and no one need put aside any funds to get it. 

But, the one group that isn't buying it anymore are bond buyers.  They will be departing in droves, which means declining bond prices and spiking bond yields across the Eurozone.  The one day reaction on Monday was the opposite -- bond yields actually dipped in Europe once the electi…

Elections in Europe are No Surprise

Why would voters support expanding debt levels combined with austerity?  Across Europe, voters tossed out the political parties that foisted the Merkel-Sarcozy plan upon them.  Now what?

Those replacing the bad guys in France and Greece are even worse.  This is the political nightmare to which the entitlement society ultimately leads. 

Francois Hollande promises to raise marginal tax rates to 75 percent and end the austerity being imposed in various European countries.  Raising marginal tax rates to 75 percent will lower tax revenues and make the French deficit even worse than it is.  Not to mention the chilling impact of 75 percent rates on business activity.  As for ending austerity, we are back to the same old question.  Who pays?

French citizens, on paper, have a great life.  Such are things in the entitlement society.  The only minor headache is who is out there willing to fund this great life?  Bond buyers have been the answer for the last two generations.  No longer.  So, who is o…

Greek Political Solution Unravels

Today's election in Greece seems to have created a majority for those opposing the austerity measures agreed to by Greek politicians in exchange for the bailout by the European Union.  Now what?

The real tragedy here is that if Greece abandons the austerity program, which frankly they should do, then they will be booted out of the Eurozone and forced back onto their own currency.  Some economists think this is great.  Now, Paul Krugman would say, Greece can simply deflate the heck out of their currency and prosperity will be just around the corner.  That, of course, is ridiculous.

The best solution would have been for Greece to do a structured bankruptcy while remaining in the Eurozone.  The Eurozone is a good thing not a bad thing.  The US has benefitted greatly from being a single currency union and the same beneficial effects have flowed to Europe.  Remaining in the Eurozone should be a completely separate issue from the question of dealing with Greek sovereign debt.  There is si…

The Big Corporations

The President continues to attack the "big corporations" and promotes his concern for the "middle class."  But who owns the big corporations?  When the big corporations make obscene profits, who gets them.  The answer -- middle class Americans.  Yes, middle class Americans own the big corporations, mostly through their pension funds.  So, an attack on "big corporations" is an attack on the retirement hopes and dreams of middle class Americans.

What the attack on "big corporations" doesn't do is reduce the excessive compensation of senior executives of the big corporations.  After all, these senior executives are mostly Democrats and support the President, so let them keep all the perks and obscene compensation that we can arrange for them.  Instead let's go after the big corporations' owners -- the middle class.  Let's chop them up.

This parallels the President and his allies approach to big financial institutions.  Let's make …

Sarcozy -- Another Conservative Flop

Nicolas Sarcozy was supposed to bring a return of free enterprise back to France.  To do this, you have to tackle two things: 1) the entitlements and the entitlement mentality; 2) the regulations that stifle commerce including the absurd laws that effectively prohibit the firing of employees.  Sarcozy did neither.

Sarcozy's strategy was to substitute smaller issues for the bigger issues and to join hands with Angela Merkel to promote an expansion of sovereign debt and force austerity on their fellow countries in the Eurozone.  In the waning moments of the campaign for the Presidency in France leading up to tomorrow's vote, Sarcozy has stooped to thinly-veiled anti-Muslim appeals to motivate far right voters.  Gone is any interest in free enterprise and promoting entrepreneurship.  All of that disappeared in Sarcozy's alliance with Angela Merkel, another conservative leader gone astray.

Meanwhile, the fruits of the Merkel-Sarcozy alliance are everywhere to see as the Eurozone…

The Real Issues in Europe versus The Smoke

The media pushes the notion that somehow there is a "political" problem in Europe.  The Euro, they say, was a bad idea in the first place and should be abandoned.  Conservative as well as liberal economists push this notion.  Why the Euro, they say?  That's what caused the current problem.

A parallel theme is the idea that if Germany would just "step up to the plate" and use government pump priming to get their economy going, all would be well and prosperity would return to Europe.

This is "smoke."  Abandoning the Euro is completely irrelevant to the problems in the Eurozone.  Switzerland is not doing well because it is not in the Eurozone.  Switzerland is not devaluing their currency as a pathway to prosperity.  Nope.  The Swiss Franc is doing just fine and so is Switzerland, other than the fact that the Swiss live in an economic neighborhood that is collapsing around them.

There is nothing virtuous about having your own currency.  If that idea made any…

Lipstick on a Pig

Today's employment numbers were pathetic -- 115,000 new jobs.  After a revision upward of 50,000 for prior months, the net-net is about 165,000 new jobs.  That won't keep pace with population growth.  The rate of unemployment fell from 8.2 % to 8.1 % only because more than 300,000 people simply gave up looking for work in April, reducing both the numerator and the denominator, causing the ratio to drop.

The key to the drop in the unemployment rate over the past two years is mainly that an extraordinarily large number of people no longer believe they can find jobs in the Obama economy.  They are probably right.

These numbers are the predictable outcome of a misguided and punitive economic policy that seems to have as its goal the paralysis of the US economy.  They are succeeding.

Outlook: SELL in May and Go Away? (May 2012)

Lackluster global markets. The Malaysian market sputtered in April after hitting a  record close of 1606.63pts early in the month. It then trended downwards together with most global markets, as political uncertainties in Europe sapped the strength of markets worldwide in the first half of the month, while political uncertainties at home dampened the KLCI in the second half of the month. This was indeed as per our expectations.

Outlook: Sell in May and Go Away?

We investigated the historical index performance over the months of May–Sept and Oct–April for the US and for Malaysia, Jakarta and Hong Kong to try and determine if there was any truth to the old adage. Analysis indicates that over the past 52 years in the US and 22 years in Asia, markets do indeed under-perform more during the months of May–Sept as compared to Oct–April, with the KLCI surprisingly emerging as a high beta market compared to the other three markets.

What goes up must come down
With the  historical trend speaking fo…