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Showing posts from February, 2012

Selective Enforcement Once More

Prosecutors are now quietly leaking that they don't see any criminal activity in the demise of MFGlobal. Recall that MFGlobal fraudently looted $ 1.6 billion from customer accounts that were, by law, supposed to be segregated from the firm's own assets. Now, it turns out, prosecutors are leaking that this all seems to be an innocent mistake.

Interesting, after Goldman Sachs has been blistered over and over again by the SEC and by state prosecutors for activities that no one had ever considered anything other than ordinary market-making. In the brave new Obama world, Attorney General Holder and his cronies in state law enforcement invented new criminal activities where there were none, in order to make political headlines at the expense of Goldman Sachs.

But now, when former Democratic Senator and Governor John Corzine is the one whose hands appear to have dipped into the cookie jar, this all is being washed up as simply an innocent mistake. Never mind that innocent customers…

The Price of Energy

As gas prices careen toward $ 5 per gallon, we are reminded that fossil fuels are the only game in town. For all of the waste and corruption of the Obama energy policy, it is good old drill, drill, drill that provides any hope of slowing the increase in gas prices at the pump.

Obama seems perplexed. He notes that energy consumption is down. So, why are prices up? Is he aware of China and India? They use energy too. Guess what? They are going to keep pushing the demand for energy higher and higher. Even with oil at $ 300 per barrel, one wonders if Solyndra would have made it. This is the most naive administration regarding fundamental economics in the past hundred years. Somehow, they think a few windmills will get it done. It won't.

Sooner or later, even the Obama crowd will realize that the US must tap its fossil fuel reservoir, potentially the largest such reservoir in the world.

Higher prices at the pump has a partial offset in profits and jobs in the US energy sector. …

Buffett as Buffoon

Becky Quick and Joe Kiernan took Warren Buffett to task this morning on CNBC for his hypocritical stance on income taxation. Joe suggested, as has Governor Christie recently, that if Warren is so intent on paying more in income taxes why doesn't he write a check. Buffett's response: his writing a check would not solve our deficit problem.

Interesting answer. Neither would putting a surcharge on "millionaires and billionaires." Raising taxes on the rich would not put a dent in the deficit problem that the US faces. It doesn't matter whether just Buffett pays up or whether he is joined by his rich buddies. It won't move the needle.

So, why won't he write a check and show the way if he believes that is the "right thing to do."

Why? Because, Buffett is a hypocrite. He wants to appear to be the good guy, knowing full well that all he has to do to avoid income tax is shift his assets around and have no taxable income at all and pay no taxes wha…

Is it Viable for EPF to support Subprime Loan? (Feb2012)

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In 2008, we have seen the catastrophic effect from the subprime mortgage loan in US. Even now, US is still struggling to fully recover from their worst financial crisis since Great Depression. The problems doesn't build in one day, in fact, it took years to snowball the problem. And, yet Malaysia seems like wanting to catch up with them by supporting the subprime loan. But, the unique part of our version is "using EPF monies"?

When news first broke out last month that EPF would be channelling RM1.5bil for a special public housing scheme, alarm bells sounded off for many contributors. Maybe EPF already knew the result for last year performance, it announced later that contributors are getting a decade-high dividend rate of 6%. Salute to EPF. Since EPF are doing so good even without the said "loan", then, why EPF have to take the risk to loan out to this scheme?
Afterthat, EPF published a statement claiming that the money is loaned to the Government, not to individ…

"The Rich are Bulletproof"

So spoke Meredith Whitney, bank analyst of some note this morning on CNBC. As Ms. Whitney described our current economic plight, she marched through one set of new regulations after another that are roadblocks set up to thwart the economic future of middle and lower income Americans, while noting that the rich are unaffected by all of the new Obama Regulatory regime.

Dodd-Frank and the Consumer Protection Agency are open assaults on the American middle class. It has now become much, much harder to get any kind of credit -- be it a mortgage, a home equity loan, a credit card, a pay day loan, whatever. The nanny state has decided that middle and low income Americans should take their business to the loan shark community. We've seen all of this before.

In the name of protecting middle and low income Americans, the Obama Administration has put middle America into an economic straight-jacket. Credit is the life blood of any economy, but by declaring war on those who issue credit to …

TheEdge - Lipper Malaysia Fund Awards 2012

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The highly regarded The Edge-Lipper Malaysia Fund Awards 2012 was held at the Kuala Lumpur convention Centre on 20 February 2012. This award is given out to honor the unit trusts and asset managers that have excelled in delivering consistently strong risk-adjusted performance, relative to peers.


For those who missed out the show, below is the list of awards and its recipients.

Wait... Where is Public Mutual?
Please read the full article below.


A Silly Deal

The Greek bailout announced overnight is ridiculous and will not avert plunging the Greek economy into chaos. It will only be a matter of a few months until this deal will create political conditions in Greece that will shake up the Eurozone. There is simply no way the Greek citizenry will abide this deal.

Meanwhile Merkel and Sarcozy will take a victory lap for nothing. Note that on the bailing side is the IMF, of which the biggest single donor is the US taxpayer. So, Obama has stepped the US into this quicksand and dragged the US taxpayer in with him.

No one wins with this outcome. But, it will look like a win to the politicians ... for a while.

The only apparent winners are the French and German banks. But, their victory is only temporary until this deal unravels as it smacks up against reality.

Who can Save GREECE? (Feb 2012)

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It's the time again for Greece to convince its counterparts that they are serious in cutting budget deficits. By doing so, Greece was to put on the lifeline (bailout) by European Union (EU) once again. The discussion of whether to save or not to save Greece had been dragging for one week time now. Why?

In Chinese, we say "we cannot see people die by not lending our hand". That's why China said they will help when the time arrives. The question is when is the right time? Until Greece go bankrupt? Or,  until Greece left EU?
Who can save Greece? The answer to this very important question is very obvious. In Christian, they always emphasize on "we should take responsibilities on what we did", right? So, the solution lies in Greece hands. Not the country, but, the citizen, the people of Greece. It's time for them to come back to reality. Let's take Malaysia as a benchmark, they are working fewer hours than us, yet they are earning much better than us. GDP p…

Myopia Reigns

A "Greek Deal" will be cheered by stock markets as taking the Greek issue off the table. But, does it? Will Greece honor the severe austerity embodied in any Greek deal? Not likely.

Politicians love situations like this. A patchwork solution that makes the long run problems far, far worse than simply ignoring the problem and letting nature takes it's course.

Greece needs a "workout," not a debt expansion and extension and austerity.

The Eurozone needs policies that promote economic growth and economic opportunity. European politicians are supporting policies that do the opposite. Default is not a bad thing. "Extend and pretend" is not a policy. It is a cop-out.

What is needed are two things: 1) a recognition that the high levels of debt in the Eurozone are not only unsustainable, they are unpayable; 2) the absurd "protection" and "entitlement" programs that characterize the European welfare model are inconsistent with economic …

Hopelessness for the Young in Europe

The New York Times has an excellent article today detailing the plight of youth in England. But, English youth are better off then the rest of European youth. Staggeringly high levels of youth unemployment, reaching 50 percent in some Eurozone countries, are creating a generation of drifting, aimless young Britons and Europeans with no economic future.

This is the natural outcome of government policies that guarantee the good life. The good life has to be paid for. The youth are victims of all of this. By making it virtually impossible to fire anyone, Europe has guaranteed mainly that no one wants to hire any young people. Why? If they don't work out, you can't fire them. So, why hire them in the first place?

Those who thought that the European model was the way to go or that every country in the world can "afford" health care for all of its citizens (and other "affordable" things that government can do), should take a good hard look at Europe today. …

Romney on China

President Obama is likely to be re-elected by default. Mitt Romney, the most likely Republican nominee has penned an article on China in today's Wall Street Journal that is an embarrassment to good sense. Far from appreciating the significance of a China that has turned hard in the direction of free markets and away from the communist model, Romney has once again given voice to the know-nothing crowd.

Blaming China for American economic weakness guarantees that Romney really doesn't understand why the American economy is faltering. America's problems have nothing whatever to do with China and pretending that it does eliminates the possibility of promoting the necessary reforms to get the US economy back on track.

It becomes increasingly more difficult to see any real difference between Romney and Obama. That favors the re-election of the President.

New IPO: Sentoria Group

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Sentoria Group Berhad (Sentoria) is principally involved in two complementary core business divisions, namely property development and leisure and hospitality. Its property development business division specializes in township developments and resort city developments, while the leisure and hospitality business division owns / leases, manages and operates the hotels / resorts and theme park facilities and attractions.



Its Bukit Gambang Resort City (BGRC) leisure and hospitality facility in Kuantan is the largest integrated resort city in Malaysia that resides on a 547-acre land area and features multiple attractions in a single location.
The Listing Exercise

Future Income Generating Plan...
Looking ahead, Sentoria plans to enhance its recurring income stream from BGRC, by adding new attractions such as Safari Park, Aquarium Park, Adventure Land, and expand the MICE division by constructing a grand ballroom with 3,050 pax capacity to increase the average revenue and length of stay per visi…

Fair and Balanced Trade with China

Once again, President Obama has shown a lack of understanding of the simplest of economic fundamentals. Yesterday he reiterated his argument that Chinese trade policy is what causes our balance of payments problems. Nothing could be further from the truth.

The problem that the US has is that we have no domestic savings, but we do spend a significant amount on investment (plant and equipment spending, for example). Where do the funds come from to fund our domestic investment, since every beginning economics student understands that savings must equal investment?

If we don't save, then we must "import" savings from other countries. China has a private savings rate that exceeds, by some estimates, forty percent. Since China has an excess of savings and we have a dearth of savings, Chinese savings are "imported" to the US. This is the balance of payments problem, not some issue with currency valuation or Chinese import controls.

No amount of China bashing will e…

Higher Credit Card Financing Rates Effective March 2012

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Attention to all credit card holders (especially for the following mentioned banks), interest rates for outstanding credit card balances, and late payments will be revised higher. At least 3 banks, namely Hong Leong Bank, Ambank and Citibank already published the rate revision effective March 2012 on respective website.

What did Bank Negara Malaysia (BNM) said? According to The Star Newspaper, a spokesman from BNM said the repricing of rates was not due to directive from the central bank, explaining that it was done by the banks. "However, the new rates are withing the range stipulated in Bank Negara's credit card guidelines," he told The Star.
Rationale behind the revision
Beautifully, banks said the revision was done to promote sound financial management by saying that the move would encourage card holders with outstanding debts to pay them off. But, what we understand is that for those who are in debt right now, they were being slapped with a higher finance charges plus l…

The Volcker Rule -- Another Bad Idea

The Volcker Rule -- the idea of banning proprietary trading by investment banks -- is a terrible idea. This rule is designed as a response to the 2007-09 financial crisis. But, proprietary trading made no contributions to the financial crisis. This is simply one more punitive attack on Wall Street with unfortunate side effects for average Americans.

The problem is that in order to ban proprietary trading, you must define what you mean by market making and therein lies the problem. Market making is faciliting the purchases and sales of investors. The Volcker Rule requires no trade unless the other side of the transaction can be found. The bank itself is not permitted, under the Volcker Rule, to participate in any way on its own account to facilitate the transaction.

This is ridiculous.

The impact would be increased volatility and terrible transaction outcomes for traders and investors.

This reduced liquidity will adversely affect everyone.

Volcker's response: liquidity is a bad t…

Sentiment is Changing

It's interesting how much people's views of the market's future is so dependent upon its recent past. There is not much new in fundamental news from last summer until today, but the stock market is up nearly twenty percent over that period and you can see the shift in sentiment that has taken place. People now see less risk in the stock market and better prospects for higher prices than last summer when prices were much lower.

So, what's new (other than higher stock prices). Europe is in worse shape than last summer. The US fiscal situation continues to deteriorate and the political environment has become even more toxic. The future of the bond markets looks worse than ever. There is a threat of war in the air in the Middle East. Unemployment is still above eight percent and employment growth is still the slowest on record for an economic recovery.

But, prices are higher, so everyone extrapolates.

My guess is that stocks will continue to go higher. Stocks are sti…

The $ 1.6 Billion Example

When you regulate everything, you regulate nothing. The recent MFGlobal disaster is just one more example of the failure of the over-regulation of the financial services industry.

Nothing could be more important than making certain that customer accounts are not commingled with their broker-dealer's accounts and looted in the interests of protecting the rich and powerful. Nothing! This is the most important regulatory function that the CFTC performs. And, how did it do? Total and complete failure, bordering on a lack of interest.

Meanwhile thousands upon thousands of new regulations proliferate. These new,stifling, regulations serve only to increase costs to consumers and protect the largest banks in our midst at taxpayer expense without adding one iota of protection for the hapless customer. The spirit of Sarbanes-Oxley and Dodd-Frank is punitive. Barney Frank is finally getting his revenge on the capitalist system. Who cares if the average American is the victim.

Meanwhile,…

They Won't MakeThat Mistake Again

Several states led by California and New York (two states whose irresponsible spending is spiraling the states toward bankruptcy) have gleefully announced a settlement amounting to $ 26 billion from banks that made the mistake of lending money to prospective home buyers in the last ten years. That is pretty evil, I suppose. Imagine the temerity of providing a loan to someone who was buying a home. That deserves a whopping fine.

One thing for certain, banks won't make that mistake again. From now on, these banks will take care to lend only to those who they are 100 percent certain will pay them back, which means mainly people who don't need the loan in the first place. For the rest of the borrowing public, this settlement will make it much more unlikely that they will be able to borrow to buy a home in the future.

It is worth noting that the most irresponsible states in the US led the charge to tag the banks. Next they will complain that banks don't loan enough to und…

New Fund: Pacific ELITE Global Dividend Fund

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The Fund aims to achieve capital growth and income in the medium to long term by investing in a portfolio of global equities with a consistent long-term track record of paying dividends. Having said so, the focus will be on income, derived from a mix of dividends and interest/profit sharing income. Capital appreciation will be a lesser focus.


The Fund is suitable for investors who are seeking to invest in a portfolio of dividend type equities that have shown a good track record of paying dividends; investors who seek capital growth and income; and investors who have a medium to long-term investment horizon.
Strategy
The Fund will invest predominantly in a portfolio of global dividend type equity securities with a track record of consistent and attractive dividend payouts. In addition to attractive dividend yields, the Manager will take into account the existing fundamentals of companies and their medium to long-term ability to continually grow their business and hence, dividend payout po…

Startup Act Is a Non-Starter

Republic Senator Jerry Moran and Democrat Senator Mark Warner have introduced another way of cluttering up the US Federal Tax Code -- the "Startup Act." (See their editorial in today's Wall Street Journal). This is another "targeted" tax measure that puts more pages in the federal tax code, is another bonanza for tax lawyers, is another way to pick winners and losers by using the tax code.

Warner, who never saw a tax he couldn't support or a new regulation that he couldn't back, is always positioning himself as a moderate. In fact, he and Nancy Pelosi think alike on everything of substance. Who knows how Senator Moran got duped into supporting this? But, Moran is from Kansas, after all.

Like all good ideas that get inserted into the tax code. This one promises major tax benefits to rich people like Mark Warner without any real hope of moving the needle for the unemployed or those at the bottom of the economic pile.

What is needed is true tax reform an…

Thinking About Debt

Lurking behind the good news of last Friday's employment numbers is the long running concern over sovereign debt problems in the developed world. Europe, the US, and Japan have unsustainable levels of national debt that get worse daily and there are no plans anywhere to deal with growing debt levels. There is conversation, but only conversation. No politician anywhere is willing to risk their political career by providing an honest assessment of the spiraling debt situations that the developed world faces.

Does this mean we are doomed and we should be storing up canned food in nearby caves?

The fear, of course, is that much of this sovereign debt will prove worthless and the collapse in values of the debt will be disastrous for the developed world.

Imagine the collapse of a stock market. In that case their is a real wealth loss of significance (just as a market bubble can create, if only temporarily, a real wealth gain).

But, debt is different. Debt is a zero sum game in a way …

Outstanding Employment Numbers for January

Big numbers for January! Plus 240,000 jobs for January plus 60,000 more jobs in revisions for December. This is a strong number. This is the kind of number that you would normally expect in an economic recovery. It's the first strong number of the recovery. Let's hope this continues!

OSK Strategy and Outlook (Feb 2012)

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Global Rally ex Malaysia. While global markets rallied in Jan 2012 to post their best January performance since 1994, Malaysia languished as an exception among all the major markets in East Asia, thus strangely validating our Sell call on the Malaysian market in January. Globally, the economic outlook in the US remained stable with 66% of companies that reported earnings thus far beating estimates. While the situation was different in Europe with the European Financial Stability Fund (EFSF) losing its AAA rating with S&P, nonetheless, the slush of liquidity unveiled by the Long Term Refinancing Operation (LTRO) allowed European markets to rally accordingly as bond yields in Italy declined dramatically.


Takeover spare continues. While December saw the privatization offers for KFC, QSR and YTL Cement as well as rumours of Proton’s stake sale by Khazanah, January saw more of the same including:
DRB-Hicom acquiring Khazanah’s 42.7% stake in Proton for RM5.50 a share.Can One acquiring a …