Wednesday, 31 July 2013

Urban Renewal -- The Big Government Way

Having spent the past four days wandering the neighborhoods of Washington DC, it is clear that this city is a prosperous, booming area.  Wonder what business enterprises are sparking this growth?  Big government.

Years ago, when I was a newbie intern for the US Treasury, walking a couple of blocks from One Washington Circle (where I lived back when it was an apartment complex) was a dangerous undertaking.  No More.  For miles around, there are now leafy suburbs with casually dressed joggers and dog walkers.  The homes are well maintained and coiffed and the comfortable residents seems at ease with their plush surroundings.

Who lives here?  The new "protected" class.

These are the people that work for the federal government or the numerous so-called private businesses that devote their endeavors to providing services to government or lobbying to gain a share of government largesse.  These are the folks that view people outside the beltway as moronic environment-destroyers and homophobes.  They are comfortable in the knowledge that they are doing God's work, protecting the environment and defending the minorities and the poor from the caprices of the evil private sector.  These are the regulators, the tax collectors and the righteous -- living high on the taxpayer.

Out in the hinterland, struggling Americans are laboring with massive unemployment and stagnant economies and providing the tax revenues to support this ruling class that lives in modern luxury in much of Washington DC.  No real products are produced here. Indeed, the primary function for most of these Washington upper income folks is to find ways to restrict the private sector and to increase the flow of resources into their own pockets.  This is the new "European prosperity" for the ruling classes.

You wonder how much longer this can continue.  A dwindling private sector carries this elite group on its backs.  Meanwhile the poor in DC are shunted off into ghettoes with some of the worst public schools in America.  But, those folks are out of the view of this elite.  This elite lives in safe neighborhoods with protected jobs.  Even folks who take the fifth amendment before Congress, when they are asked about what they are doing, continue to prosper at full pay with zero work responsibilities.  This is the liberal dream, right here in Washington DC.

Understanding the Habits of the Rich

Fancy getting rich? Here are the rich man’s habits.



Seminars, webinars, Social events/ gatherings, book launches... These right here are some of the main events circled on the rich people’s calendars!

Ever wonder why?

At one of the many book launches I have been to I had a chance to chat up the local best-selling author Azizi Ali, brilliant mind I must say. He told me that the number of books published in a country mutually relates to the wealth of the citizens.His explanation therefore was the more publications per annum, the more the development countrywide hence increase in the wealth of the individuals.


Not so long ago while I was at a luncheon with this brilliant friend of mine, he mentioned that “rich people seldom eat alone”. I was quite ecstatic because this is a habit that I unknowingly practiced for quite a while now. What he said is totally true come to think about it. Its quite funny that there is an entire book dedicated to this subject “Never Eat Alone”. If you read this book, you will learn a thing or two and where you have been going wrong all his while.

According to the above scenarios, did you notice the common customs of the rich people?

Ask yourself why the rich become richer, the poor become poorer and the “Average” stay stagnant?
THE RICH ENJOY READING. TREMENDOUSLY!
In this dynamic era, the rich still find time to read despite the diverse media. They have plenty to choose from that is to say magazines, books, newspapers, and  of course the internet which is the most dominant of them all.

In this world we live in, you have got to spend money to make money. I know it may sound cliche but take a look at the those thousand dollar seminars and courses, they are always full to the bream! They never go unattended, why? Simply because the rich love to learn. If you fancy an opportunity to meet all these filthy rich people all congregated in one room, I suggest you attend one seminar or course in the area near you. Trust me.

Now I understand not everyone has a couple of thousands of dollars at their disposal that is why I advise you to get familiar with the term webinars. This term is a derived from two words that is to say web and seminar. Thanks to technology we now have webinars which you too can enjoy from the comfort of your couch. They are always scheduled to happen at some stipulated time over the internet. Usually there is a number of slots available depending on the organiser of the webinar. Guest speakers and renowned financial consultants are the people that run these webinars. 

Are you rich yet?

NO! Me neither. So until we all regard ourselves rich, let us acquaint ourselves with the these terms below:
     Seminars
     Book launches
     Webinars
     Courses
     Social events/ gatherings

This way, we will keep track of the rich and hey we could be involved in their circles.
Thank me later!


This is a guest post by KCLau. KCLau is the best selling author of Top Money Tips for Malaysians. His popular personal finance blog is one of the most visited websites in the financial blogosphere with thousands of email subscribers. He also hosts regular and free online financial training featuring different financial experts. You can follow his latest updates by visiting www.KCLau.com

Friday, 26 July 2013

Guilty Until Proven Innocent

I carry no brief for people that break laws, but, in the securities industry, indictments destroy businesses and innocent shareholders are usually left picking up the tab.  That was the result when Drexel Burnham was indicted in 1988.  Many of Drexel employees who trudged silently in the back office found their retirement hopes and dreams destroyed when Rudolph Guliani's over-zealous indictment caused Drexel to go bankrupt overnight -- long before anyone produced any evidence to a judge or jury to peruse.  Most of the folks who lost their life savings by the indictment of Drexel were innocent and had no knowledge of any wrongdoing.  That's what happens when you indict corporations, as opposed to individuals.

This same theme plays out in the litigation and settlement arena.  Pension funds who trumpet their lawsuits against corporations are really only suing themselves and enriching the legal profession.  The wrongdoers go unscathed, while innocent shareholders get hammered.  This is what happened in the tobacco settlements, in the BP settlement, and on and on.  Shareholders, who often have no idea that they are really shareholders, find their own retirement hopes and dreams crushed by breast-beating righteous souls who run these pension funds involved in all of this litigation.  The lawyers love this as they salt away fortunes.  It's simply a transfer from working class people to wealthy lawyers, while pension executives proclaim that they are fulfilling their fiduciary duty.

In the SAC case, why doesn't the government indict individuals?  How can a corporation get inside information without an individual being involved?  Could it be, they can't prove their case.  By simply indicting SAC, they destroy the business and, presumably, a lot of Stevie Cohen's net worth.  But, what if Cohen is innocent (and I am not saying that he is).   We may never know.  What we do know is that SAC is done for, whether innocent or guilty.  The indictment will destroy SAC's future and much of Stevie Cohen's net worth, regardless of guilt or innocence..  At least in this case there are no public shareholders being looted -- just Mr. Cohen as far as I can tell.  But, still.

What happened to the rule of law?

How to Become a Financial Planner?

After the two series of article on Financial Planning and Financial Planner. Some of you may asked: "Is it difficult to become a Financial Planner? What's the requirement needed?"


Hmmm... Good news is it is not difficult, but the bad news is it's not easy either and the requirements for sure will be raised in the future.

So, how?
In Malaysia, those who practice as Financial Planner must pass any one of below examinations:
  1. Registered Financial Planners (RFP) issued by Malaysia Financial Planning Council (MFPC)
  2. Certified Financial Planners (CFP) issued by Financial Planning Association of Malaysia (FPAM)

After you have passed the said examination, it doesn't mean that you're a Licensed Financial Planner straight away. Why? It's just serves you an entry passport only. Once you have accredited the qualification, you must apply the required licenses with Bank Negara Malaysia (BNM) and Securities Commission (SC) before you can carry out financial planning activities.

By then, you can claimed the following title:
  • Financial Adviser Representative (FAR) by BNM
  • Licensed Financial Planner by SC
Please take note that passing the said examinations doesn't carry you the titles, getting the licenses does. If not, you're deem to have convicted an offence which can land you in jail or subject to hefty fine.

Other requirements include:
  • Must be a Malaysian citizen
  • At least 21 years old
  • Have minimum 3 years related experience
  • Must be a FULL time practitioner
  • Then, you must fulfill the minimum hours for personal development programs every year

Next, we will talk about "The Challenges Faced by Financial Planning Industry in Malaysia"

This article was contributed by Alex Yeoh, a licensed financial planner with a reputable financial planning firm. Finance Malaysia blog will work together with Alex in bringing more interesting articles on personal financial planning. You may reach him via email alexyeoh@vka.com.my

Thursday, 25 July 2013

New Fund: Kenanga Asia Pacific Total Return


After merging with ING Funds Berhad, Kenanga Investors Berhad launched its first new fund of the enlarged family. In this uncertain global economic environment, how much return can a fund generated was the main concern for many investors. Want to get higher return? Then, we cannot runaway from higher volatility! Are there any balance in between?


Yes. To cater for such investors, this new fund aims to provide a compounded rate of return of at least 10% per annum over market cycle (5 years) by investing in a diversified portfolio of Asia Pacific equities.


3 Reasons WHY it benefits you:


Well... Unlike others, this fund DO NOT has any benchmark constraint. This allows flexibility in identifying and implementing the most optimum investment strategy. Picture below shows the differences between Absolute and Relative return:

Still not yet convinced? How about the proven track record?



Source: Kenanga Investors Bhd

Monday, 22 July 2013

A Guide To Home Loan Refinancing

For those who have never been exposed to the concept of “refinancing”, home loan refinancing may seem like a baffling notion.  After all, what good could possibly come from getting a new home loan… just to pay off your old one? Wouldn't you just go back to square one after the whole process? These could be some of the questions you’re asking yourselves, and understandably so.



In reality, home loan refinancing is a widely-adopted practice with many potential benefits. Home buyers far and wide undertake it in order to lower the interest they’re paying on their home loans, reduce their monthly loan repayment amounts, and generally alter their loan terms to better suit their financial needs.  In fact, some even refinance to free up cash riding on the inherent values of their properties!



Want to refinance your home loan in Malaysia?
Click here to compare different rates by different banks.
Courtesy of: iMoney.my

Same Ole; Same Ole

So what is the New York Times offering up this morning.

First, European sovereign debt continues to skyrocket to new levels -- both in absolute terms and as a percentage of GDP.  Guess the bailout is working, if more debt is the goal.  Meanwhile the long running recession in the Eurozone continues unabated with no end in sight.

What about the US?  Economists are now busily reloading their economic forecasts, according to the NY Times this morning, to accommodate much slower economic growth in the US than they anticipated previously.  The latest consensus forecast -- 1.5 percent.  That's barely a pulse.

Meanwhile the same article puzzles over why this is such a jobless recovery.  They should be reading my blog.

Here's what they are missing:  employers do the hiring.  The Times (and the Obama Administration) don't seem to get that.  Along with their main cheerleader, Paul Krugman, the Times believes that government borrowing and spending is all it takes to convince someone to hire employees.  After five years of this, you would think they would see the folly of their ways.

The coup de grace this morning is, of course, the NY Times' coverage of Detroit.  Think of Detroit as a snapshot of the American future -- promises abandoned, hopes crushed, politicians running for cover, unions screaming for justice, and no money left in the till.  NY Times can't seem to figure out how Detroit came about (especially while the auto industry's profits are soaring).

Same ole NY Times.

Saturday, 20 July 2013

Denial in Detroit

Detroit's problems are not the fault of the decline of the auto industry -- an industry that is, in fact, on a bit of a roll these days.   Detroit's problems are the same problems that plague Illinois, California and the US Treasury -- promises paid for with ever increasing levels of promises and debts.

Detroit's problems were compounded by corrupt and incompetent politicians, which are a staple of modern big city government in the US.  Citizens vote for these folks, so there is some justice in the fact that these cities are all collapsing fiscally.  The absurd notion that taxing a few rich people can solve a city's problems simply matches a similar absurd notion at the national level.  (Taxing a few rich people is mainly a way of having rich people move to friendlier places).

No defined benefit pension plan is ever going to survive.  Social security is a defined benefit system .  It won't survive either.  Any system that makes future promises without any means of payment is not going to make it.  Detroit is just the beginning; Chicago can't be far behind.  And yes, Virginia, you will have your day in the bankruptcy court as well.

All of those defenders of defined benefit systems forgot to ask what happens when there is no money to pay the benefits.  Is the great advantage of a professional investment process worth much when the system can't pay the benefits?  Even bad investments by individuals in defined contributions systems would have been way better for Detroit pensioners than the outcome that is headed their way.

By the way, it is worth noting that it is not possible to be on a financial loss if you own a typical index fund.  Not possible.  How's that?  Well, as of Thursday's close, the stock market has never been higher. 

For all of the villification of Wall Street by the Obama Administration and the media, it turns out that a simple buy-and-hold strategy by ordinary investors is a ticket to wealth that has been and is available to everyone.  I bet a lot of Detroiters now wish they had had the opportunity to opt out of the defined benefit system and invest their own money, their own way.

Not to mention that if you have a defined contribution plan and you die, your children can inherit the assets, something that cannot happen with defined benefit and and its twin -- social security.

Just like ObamaCare, promises are made that politicians have no intention of keeping.  But, the media pretends that these promises are true.  Detroit shows us the reality.

Friday, 19 July 2013

[Property] 3 Critical Factors to Watch Out by Year End (July 2013)

Ever since the property boom started in 2009, right after the global financial crisis, investors were laughing to the bank. But, can these sustain until next year? Many analysts doubt so. Why?


The most crucial determining factors might uncover itself in the next few months, approaching year end. In short, we have summed out to the below 3 critical factors:
  1. Banning of DIBS
    This is not a secret anymore. Speculation rife up recently, saying that BNM may ban the Developer Interest Bearing Scheme (DIBS) by year end. BNM is studying the implications of DIBS which benefiting speculators more than serious buyers. Note: Singapore already banned such scheme few years back.

  2. Interest Rate hike
    BNM also may revised the Overnight Policy Rate (OPR), which determine the cost of financing in the country including Base Lending Rate (BLR) for mortgage loan. A 25 basis points hike was expected. This will affect all type of loans, except fixed interest loans. Let's get prepare for higher monthly loan installment amount.

  3. Higher RPGT
    Coming this 2014 budget to be tabled on 25th Oct, watch out for higher Real Property Gain Tax (RPGT). Currently, it was 15% for first two years and 10% for disposal from 3rd year to 5th year. Note: RPGT was much higher before 2008.



In our view, once DIBS was banned, developer no need to bear the interest, financier no need to bear the risk, new launching properties should be selling at lower price. Then, this is bad news for existing property, especially bought under DIBS before?


Example, phase one selling at RM500k under DIBS, phase two selling at RM500k without DIBS. No effect?


Think again... More supply now releasing for secondary market, assuming phase two also selling at same price, which is very good already. Right?


Wednesday, 17 July 2013

The 1970s Without the Inflation

We are now entering a long term period of economic stagnation that is reminiscent of the 1970s.  The only real difference is that inflation is subdued today.  The term "stagflation" came to prominence as a description of the 70s economy, as inflation soared toward the end of the the 1970s.  Ronald Reagan rescued us from all of that after his election in 1980.  How soon we forget.

Inflation, of course, is only temporarily subdued.  The only way to retire our absurd debt levels is to inflate our way out of them.  That's coming.

For now, we live in world of never-ending promises of things that cannot possibly come to pass -- medicare, social security, ObamaCare, state and local pension funds.  All of these things will run out of funding within the lifetime of those now reaching adulthood.  As politicians dream of even more things to promise the citizenry, the funding for the existing promises is rapidly drying up.

Meanwhile, a dwindling percentage of Americans are actually working these days.  While records are being set every day in the percentage of Americans on welfare, on food stamps, on disability, the percentage of the economy devoted to the free market is shrinking. 

The culture is following suit.  Think of the last time that you watched a television show where the bad guy wasn't a businessman or woman -- polluting the environment, stealing from unwitting investors, or fleecing someone in a novel way.  Who are the media heroes?  -- the government or the non-profit world (or media).

Making a profit is viewed with suspicion in our modern American culture.  Unfortunately, that means creating wealth and hiring folks is tainted with the same brush.  There is a certain consistency here, since working for a living is losing its hold on the American lifestyle.

Tuesday, 16 July 2013

"We're Recovering"

It is now mid-July of 2013, more than 4 1/2 years since the financial collapse and still we hear the phrase: "we're recovering."  How long are we going to hear that?

Below 2 percent economic growth and almost 8 percent unemployment means that the US economy is paralyzed.  The Obama Administration seems to have thrown in the towel on the subject of growing the economy.  Right they should!  The Administration policies, piled on top of the policy history of the past fifty years, virtually guarantee that the vibrant economy of the Old USA is not in our future.

There are bright spots -- autos, housing, energy -- but there are always bright spots.  What is missing is small business vitality.  That's gone and not coming back until folks figure out how to get around the mass of regulations and taxes that bedevil the American economy.  Other than outsourcing, it is not clear how to avoid the strangling effect of American regulatory policy.  As for employment, hiring anyone seems downright irrational, given current tax and regulatory policies.

The Obama Administration has reduced the expectations of most Americans to the kind of future that Europeans now have -- stagnation, limited opportunity for the young, guarantees for the oldest demographic that are coming apart at the seams, and debts that no one has any intention of honoring.

So the phrase "we're recovering" is getting tiresome.  We're not recovering, we're changing.  The quasi-socialism that has supplanted free enterprise is preventing a serious recovery like the one we had in the 1980s.  The "bad old days" were actually "good old days" as Americans are learning to their dismay.

Thursday, 11 July 2013

New Fund: AmAsia Pacific REITs Plus

Do you remember the AmAsia Pacific REITs fund? I'm sure you have heard about it. Yes, backed by its success story, AmInvestment Management Bhd has launched a new version called AmAsia Pacific REITs Plus. The word "Plus" is used as a continuation of the AmAsia Pacific REITs and the fund may invest in listed equities in the real estate sector.


The fund aims to provide regular income and to a lesser extent capital appreciation over the medium to long term (at least 3 years) by investing in real estate investment trusts (REITs) and equities in the real estate sector.

What's the strategy?
Minimum 70% in REITs and a maximum of 29% in listed equities in real estate sector, which are in the Asia Pacific region. This is the asset allocation of the fund. Diversification in terms of country and different REITs sub-sectors (etc. residential, commercial and industrial) is expected.


An active allocation strategy will be employed by fund manager, based on macroeconomic trends and REITs market outlook of respective countries in Asia Pacific region. Meanwhile, bottom-up security selection strategy will be used for equities, with focus on undervalued companies.


Who is suitable for this fund?
  • Those who wish to have investment exposure in real estate sector through a diversified portfolio of REITs and real estate equities in Asia Pacific region.
  • Those seeking regular income and to a lesser extent capital appreciation over medium to long term
What's AmInvest aiming?
4% payout on yearly basis, which AmInvest said is achievable and is higher than fixed deposit rate offered by banks. AmInvest favors Australia, Singapore and Japan for REITs and China, Indonesia and Thailand for listed equities.

Tuesday, 9 July 2013

"X"pensive AirAsia X IPO ?

Slate for its debut trading tomorrow (10th July 2013), can AirAsia X follows the footsteps of its sister company AirAsia? What would happen tomorrow pretty much depends on the fair value given by various research houses.


AirAsia X is a leading long haul low cost carrier since operating on Nov 2007, primarily in the Asia Pacific region. Currently, it serves 14 destinations acorss Asia, Australia and the Middle East, with 11 A330-300 planes.


Investment analysis:

  1. Benefits from synergies as part of AirAsia group
  2. Strong brand name
  3. Operate in the fast growing aviation market in the world
  4. Lowest unit cost base in the region
  5. Strong ancillary income at RM141/pax and expected to grow further

How about the risks?

  1. High jet fuel price
  2. World crisis i.e. war, terrorism, epidemic outbreak
  3. Slowdown in world economy
  4. Emergence of other long-haul LCCs
  5. Delaying of KLIA2 which may hamper its growth prospects
  6. Strengthening of USD against MYR, because 79% of its debt is denominated in USD

So, what's the fair value?
Either Rm1.40 or Rm1.20 given. Seems like this is not an exciting IPO for investors. Anyway, tomorrow debut most likely will remain in positive territory because there is a "king card" in hand. Yes. Maybank Investment Bank will be the stabilizing manager who can purchase up to 15% of the total number of shares offered under the IPO. No worry.


Saturday, 6 July 2013

New Fund: Eastspring Investments Target Income Fund 2

In the current low interest rate environment, investors continue to chase for yields which resulted in strong demand for close-ended bond funds that potentially offers higher return than fixed deposits. Keeping this in mind, Eastspring Investments is launching a new fund.


The fund endeavors to provide regular income during the tenure of the fund (3 years), by investing in local and/or foreign debt securities.

Investment Strategy
A minimum of 70% will be invested in local and/or foreign debt securities, while the remaining of not more than 40% may be invested either in non-rated debt securities and/or debt securities rated below investment grade rating.

  • lower than BBB3 rating by RAM; or
  • below investment grade rating by other rating agencies

Although the fund is expected to invest up to 40% in non-rated issuers and/or issuers rated below investment grade, there is a risk that this limit may be exceeded as issuers of investment grade debt securities held within the portfolio may be downgraded by rating agencies and thus resulting in the fund's over exposure in such category.


Additionally, up to 30% may invested in money market instruments, and worth to note that the fund may exercise Early Repayment. As such, this is a moderate risk fund, instead of low risk.

The fund is suitable for investors who:-

  • seek regular income distribution;
  • have 3 years investment horizon; and
  • have a moderate risk tolerance.


Friday, 5 July 2013

The Real Message in Egypt

The Egyptian economy has collapsed.  This was a process that began with the 'Arab Spring' and accelerated with the election of Morsi, deposed over the weekend by the Egyptian military.

What this shows is that the average Egyptian, Islamist or not, prefers to have food, shelter and safety to political ideology.  Democracy doesn't mean much of anything if there are no free institutions.

The US foreign policy is not helpful here, because the US government is busily dismantling free institutions as a cornerstone of its own domestic policy.  The US can hardly be expected to promote free institutions -- a free press, for example -- if it doesn't believe in free institutions on its own home turf.

A rule of law would be helpful as well, but current American domestic policy -- witness, the recent suspension of the employer mandate in the Affordable Care Act until elections are safely over -- is mainly a retreat from the rule of law.    Actions speak louder than words and the world is plugged in these days.

The right to start a business and provide for your family is all that the average Egyptian wants and the demonstrations that crushed the political power of Morsi were a testament to that desire.  Perhaps the Obama Administration should take notes.

The Next New Thing

Are you ready for this?  How about "unlimited vacations for all."  Paid for, of course. 

Check out the NY Times editorial page today.  These folks have launched their latest job-killing, economy-crushing plan -- unlimited paid vacations.

That should really entice employers to increase their work force.  The new idea from the left is to have employees on the payroll who, in reality, are always on vacation.

Check out today's NYTimes editorial page if you think this is a mirage.

Latest BNM measures to Curb Excessive Household Debt (July 2013)

Hot from oven. Bank Negara Malaysia (BNM) today announce some measures to address the alarming household debt among Malaysians. As reported, household debts have continued to increase at a strong pace, averaging at an annual rate of 12% over past 5 years. While this has been supported by positive income and employment conditions, in the more recent period, there has been a growing trend in the offering of financial products that are not in the long-term interest of consumers.


What does this mean?
This includes extended financing tenures of up to 45 years for house financing and 25 years for personal financing!!! Wow... Is it too long the tenure? While this may reduce the monthly repayments, in the long run, this increase the overall debt burden of households. If we don't stop this kind of practice, it will encourage excessive debt accumulation by households and increase the vulnerability of this sector.

Hence, BNM has to take actions...
The implementation of a set of measures aimed at avoiding excessive household indebtedness and to reinforce responsible lending practices by key credit providers. These measures, which take effect immediately, complements the earlier measures introduced since 2010 to promote a sound and sustainable household sector.



What are the measures?
  1. Maximum tenure of 10 years for financing extended for personal use;
  2. Maximum tenure of 35 years for financing granted for the purchase of residential and non-residential properties;
  3. Prohibition on the offering of pre-approved personal financing products.


Who will be affected the most?
For sure, borrowers (excessive one) will be short-handed. However, those good quality borrowers will not be affected. Meanwhile, the hands of financial institutions once again being tighten further. It will definitely impact the loans growth, but with a more quality growth. Property sector will face some minimal impacts, given most of the loan approved is within 35 years of financing.


For Finance Malaysia, this is good news for our country's financial sector. Excessive household debts, coupled with poor quality loans, will endangers the financial system. Worth to highlight here is the pre-approved loan is being banned now. Long time ago, Finance Malaysia is very uncomfortable with such offerings, with the intention to "indulge" bank clients to borrow. Now, we are relieve. Do you agree?

Thursday, 4 July 2013

Affordable Health Care?

The truth on ObamaCare is gradually unfolding.  Two things are becoming increasingly clear: 1). Health care provision in the United States is going to deteriorate dramatically in the future because of the 'Affordable Care Act'; and 2). Health care costs in the US are going to escalate dramatically because of the 'Affordable Care Act.'.

You would think that the above two facts are inconsistent, but they aren't.  There are a number of parts of the Act that are driving 1) and 2), but they can all be summarized by the following:  The "Affordable Health Care Act" promises services but provides no real means of payment.   Sound familiar?  The same truth is why medicare and social security (and public pension funds) are on a pathway to insolvency.

The Obama Administration's decision to postpone enforcement on the 'large employer' part of the "Affordable Care Act" is an open admission that they don't want the public to see the true costs of the new laws and regulations.  Once the elections are past, then, they say, they will enforce the law.  The "Act" itself does not provide the Obama Administration with the wiggle room to postpone enforcement, but in the new Obama world of 'selective enforcement' of American law, the Obama Administration announced (in a blog message, no less) that they do not plan to enforce the large employer provisions until elections in 2014 are safely over.

The best health care system is a free market health care system.  The insurance industry should be free to offer whatever health insurance plans they wish, to whoever they wish to offer them to.....period.

Concern about the uninsurable can be dealt with in the same manner as is done with auto insurance for drivers that are not normally insurable.

There is no reason for the government to take over the health care industry in the US.  Just as with public pension funds and social security, the government promises to take care of its citizens, but, in reality, has made no plans to honor those promises.  Ditto for the Affordable Care Act.

Wednesday, 3 July 2013

Political Unity Collapses in Portugal

Enforcing austerity doesn't win much popular favor as the politicians in Portugal have discovered.  The center right government in Portugal has pretty much collapsed over the weekend.  Greece is also back in the news as it struggles to implement its own version of austerity.

No European government backing austerity will survive.  Germany's Angela Merkel will be the most prominent casualty as she faces the electorate next year.  Gone already are the political leaders of Greece, Spain, Italy, and France.  It won't be long before their successors are under siege as well.

The EU-ECB plan of increasing debt and forcing austerity on their populations has been a failure from day one.  The political unraveling of Europe was easy to predict and not at all surprising to watch.  The fear is that extremists of the far left will eventually assume power and Europe will become a different place.

Monday, 1 July 2013

New Fund: OSK-UOB Capital Protected Essentials Fund

As the world population continues its growth led by the emerging countries coupled with the higher purchasing power, the demand for the essentials or basic commodities (i.e. those that we use daily such as cotton for clothing, corn and sugar for food, crude oil for energy) have significantly increased. Further, with the imbalance of increase in demand and slower growth in supply, this has also resulted in a situation where consumers now and going forward have to pay more for fuel, clothing and food.



With the expectation of further increase in the prices of these essentials or basic commodities, OSK-UOB has established a fund that will capitalize on the price movements of these essentials or basic commodities, which is OSK-UOB Capital Protected* Essentials Fund.

Fund Asset Allocation:

Indicative Asset Allocation


Over The Counter (OTC) Option:
A 4-year option whose underlying reference is a basket of 4 commodities, i.e. Brent Crude Oil, Cotton, Sugar and Corn, and each commodity is represented by a listed futures contract.


Why it also called "Memory Option" ?
This is because the option is structured to provide 4 annual coupon payments during the tenure of the fund, if at the relevant observation date, all of the 4 underlying reference commodities prices are greater than or equal to their initial reference prices determined at the commencement date of the fund. It has a "memory" component i.e. the annual coupon payable can be carried forward if it failed to met the conditions for a particular year.

103% Capital Protection?
Yes. The capital protection covers the investors' capital investment and includes the 3% sales charge payable by investors.

Hence, the fund is suitable for investors who:


  1. have a low risk tolerance;
  2. seeks capital protection*;
  3. seek potential returns from commodities essential to our daily lives;
  4. have a medium term horizon; and
  5. seek income




Source: OSK-UOB Investment Management


* Investors are advised that the fund is not a guaranteed fund. Capital protection is provided through investments in ZNIDs and not by a guarantee. Consequently, the return of capital is SUBJECT TO the credit/default risk of the issuers of the ZNIDs and may result in losses.

China Slows

Asia is beginning to weaken.  Given the stagnation in the western economies, this is not good news.  Unemployment in the Eurozone remains above 12 percent and US unemployment rates have fallen only because of the massive shift of workers out of the work force.  Growth in the West is so slight as to be within the margin of error for measuring the data.  The only real global economic strength has been Asia and that may be ending.

Granted there are bright spots in the US -- fewer in Europe.  US housing is stabilized and there are pockets of feeding frenzy here and there in the residential market.  But, overall, there is still weakness.  Now with Obamacare looming and the unleashing of the EPA, things could easily deteriorate in the US.

While everyone watches the Fed, the real story is a micro story.  The mass of regulation, rules and additional costs that businesses face, even if demand were to increase, will keep a lid on economic expansion.  Debt problems will also limit the future of Western economies.  Too many promises, too few resources to deliver on those promises.

Fed activity is mainly important for inflationary expectations and pressures.  With a sick economy (made sick by federal policies since 2008), there isn't much inflation.  But there will be.  That's what the recent uptick in treasury rates is all about.