On Saturday, Eurozone officials decided that a 6.75% levy would be imposed on all deposits under €100,000. Accounts over €100,000 would have a levy of 9.9%. The intention is to bring down the bailout cost. Although Eurozone officials insisted that this measure of imposing levies on deposit is limited to Cyprus. There are genuine fear among investors regarding Italy and Spain.
The global anxiety due to Cyprus are now heightened.
Monday, 18 March 2013
Santa Claus politics underscore Malaysia’s elections - the "sweeteners" will be paid for by the same voters who thought they got them for free
Santa Claus politics underscore Malaysia’s elections, says Singapore paper
As Election 2013 fever spurs Malaysian politicians from both sides to serve up expensive sweets to boost their bid. - file picKUALA LUMPUR, March 17 — As Election 2013 fever spurs Malaysian politicians from both sides to serve up expensive sweets to boost their bid, a Singapore paper reminded voters today that they would be the ones to pick up the tab.
“The intense fight for votes has led both the administration of Prime Minister Najib Razak and the opposition PR to promise more and more populist measures.
“You could call it Santa Claus politics,” Reme Ahmad, assistant foreign news editor in the widely-read Straits Times, wrote in an opinion piece for the paper’s Sunday edition.
He noted that Najib who leads the ruling Barisan Nasional (BN) has been dishing out more cash “gifts” to offset rising living costs that are the main concerns of a significant 40 per cent of the 13.3 million voters struggling with bread-and-butter issues; and signal there may be more to come if the coalition maintains power.
Among the billions of ringgit worth of sweeteners he listed were the second round of RM500 cash aid for each household, RM200 smartphone rebates for the hundreds of thousands of youths, the RM250 student book vouchers and just last week, pay hikes for the country’s 230,000 policemen and soldiers who are seen to form a core deposit in the coalition’s vote bank.
The writer noted that the Pakatan Rakyat (PR) opposition, which is seen to be a viable contender to take federal power for the first time, has also promised many goodies.
Among them, he listed free university education, cheaper utility bills, lower transport costs through cuts in car and petrol prices and highway tolls that formed the key proposals in PR’s manifesto launched last month.
“But here is one worry the politicians are downplaying.
“With all the goodies disbursed or promised, will the next government shift more public money towards productive activities such as upgrading ports and boosting worker education, or will it be forced to give yet more sugar and spice to voters fattened by everything nice?” the writer asked.
Reme said that the reality was that sugary deals and promises of more handouts will not necessarily reel in the votes, as several political observers here have said.
“The harsh reality is that the more you give, the more people want.
“A second point is that the freebies have to be paid for by somebody down the line,” Reme said.
He pointed that Malaysia is already into its 16th year of a budget deficit since the 1997 Asian financial crisis that the money to pay for the government’s spending came from taxes and “other piggy banks, such as national oil firm Petronas”.
He reminded that tax revenue that could have been spent to build new roads may instead be funnelled for other purposes to keep the political election pledges, like petrol price subsidies or compensating highway companies to remove their toll booths.
“In other words, they will be paid for by the same voters who thought they got them for free.”
http://www.themalaysianinsider.com/malaysia/article/santa-claus-politics-underscore-malaysias-elections-says-singapore-paper
Tuesday, 12 March 2013
Words of Wisdom on Dividend Policy From Big Tesco Backer Warren Buffett
March 7, 2013
If you're a U.K. investor just starting out, U.S. investing legend Buffett may be new to you -- perhaps your interest in the man has been piqued by reading about how he's taken a big stake in Tesco (LSE: TSCO ) (NASDAQOTH:TSCDY ) .LONDON -- Last week, Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) boss Warren Buffett released his annual letter to shareholders.
I can tell you that Buffett's annual letters never fail to educate, amuse, and enrich. You'll find abundant pearls of wisdom in his witty, colourful, and incisive commentaries -- as, indeed, will old hands.
586,817% and countingLet's start with why Buffett has captured the attention of millions of investors around the world. The bottom line is, his Berkshire Hathaway group has an outstanding record of increasing shareholder value over the best part of five decades.
Between 1965 and 2012, Berkshire's book value per share has increased by a mind-boggling 586,817%, representing a compound annual growth rate of close to 20%. Such gains over such a long period are unparalleled.
Successful businessesBuffett's strategy of wealth creation for Berkshire is something ordinary investors like us can learn from in weighing up companies we may want to invest in.
Successful businesses generate cash. Buffett is clear about what a company should do with that cash, in the following order of priority:
- First, examine reinvestment possibilities offered by its current business for increasing the competitive advantage over rivals.
- Second, look at acquisitions that are likely to make shareholders wealthier on a per-share basis than they were prior to the acquisition.
- Third, consider repurchasing the company's own shares to enhance each investor's share of future earnings.
- Fourth, by default, pay dividends to shareholders.
Reinvestment and acquisitionsBy reinvestment in the business, Buffett is referring to spending on projects "to become more efficient, expand territorially, extend and improve product lines or to otherwise widen the economic moat separating the company from its competitors."
When we, ourselves, are considering companies to invest in, we can check how intelligently management is reinvesting in the business by looking at such things as whether market share is being maintained/increased, and whether margins are being maintained/grown relative to rivals.
Buffett considers small bolt-on acquisitions that can easily be integrated into existing operations as part of the reinvestment in the business. The acquisitions referred to in stage two of his four steps are those that add something new to the company -- some form of diversification.
When we are considering companies to invest in, we can check whether management has a good track record of adding shareholder value through making such acquisitions.
Repurchasing sharesBuffett is strict about when it's right for a company to repurchase its own shares. Again and again over the years, he has stressed that the only time to do share buybacks is when the shares are available "far below," "well below," or "at a meaningful discount from" intrinsic value -- and "conservatively calculated" intrinsic value at that.
Last year, Berkshire spent $1.3bn repurchasing its own shares. At the moment, Buffett is prepared to pay up to 120% of Berkshire's book value for the shares.
So, if you're interested in buying shares in Berkshire yourself, you have it from the horse's mouth that 120% of book value represents a meaningful discount to conservatively calculated intrinsic value at the present time.
DividendsBerkshire doesn't pay dividends, but not because Buffett is against them per se. It's simply that he has always seen opportunities in steps one to three for employing Berkshire's cash flows more fruitfully for shareholders.
At the moment, the discount to intrinsic value is such that share buybacks are an efficient way for Berkshire to employ excess cash, but Buffett says that if things change materially "we will re-examine our actions."
Buffett is perfectly happy for the quoted companies in Berkshire's portfolio -- American Express, Coca-Cola, IBM, and Wells Fargo are his "Big Four" -- to use excess cash to make share repurchases "at appropriate prices," or to otherwise pay him dividends. He says: "We applaud their actions and hope they continue on their present paths."
Buffett no doubt feels the same about his big U.K. investment in Tesco, whose shares -- at 380p -- are currently trading on an historically low earnings multiple, and offer investors a healthy 4% dividend yield.
Berkshire's 415,510,889 shareholding in Tesco (5.2% of the company) should net Buffett a dividend payout of something over £60m this year alone.
http://www.fool.com/investing/international/2013/03/07/words-of-wisdom-from-big-tesco-backer-warren-buffe.aspx
Thursday, 7 March 2013
Investors’ Quandary: Get In Now?
By JEFF SOMMER
So is it too late for investors to join the party?
The stock market has already more than doubled since the dark days of 2009. Records are being set, and most indexes have risen nearly every week this year.
Nearly all strategists point out that it is much better to buy at a market bottom than to invest after a record has been set. Nonetheless, for those willing to accept the risk, there are strong arguments, based on history and on market fundamentals, for believing that the bull market may still have room to run.
Chief among them is the expansive monetary policy of the Federal Reserve. “The old song on Wall Street is ‘Don’t fight the Fed,’ and that certainly has been the case in this market,” said Byron Wien of the Blackstone Group, who is a veteran of many market rallies and slumps. “The Fed and other central banks have been driving the market, and there’s no sign that’s going to stop.”
Another critical factor is the flow of funds into the stock market, said Laszlo Birinyi, who runs a stock research firm in Westport, Conn. “There is still a lot of money sitting on the sidelines — and there are a lot of people who are still jumping in, and that, in itself, is a good thing for the market,” he said.
According to his calculations, the net inflow into domestic stocks over the last 12 months has totaled $76.7 billion, which helps to explain why the Standard & Poor’s 500-stock index has risen more than 13 percent in that period. Net inflows to stocks amount to $27.75 billion this calendar year, he said, and barring a big shock, they are likely to continue. “We’re in the fourth and last stage of a long-running bull market,” he said. “We think there’s a lot more to come.”
No one really knows whether history is a reliable guide, but the pattern of past bull markets also suggests that this one could continue to flourish. At the moment, according to the Bespoke Investment Group, the nearly four-year run of the United States stock market is the eighth-longest in the last 100 years, and it is the sixth-strongest in terms of the return of the S.& P.’s 500 index. And since 1900, when the Dow Jones industrial average reached a nominal high, as it did on Tuesday, the Dow has averaged a 7.1 percent rise over the next 12 months.
“We believe stock valuations are still reasonable, and that the momentum of the market will keep moving it upward,” said Paul Hickey, co-founder of Bespoke.
Because of the intervention of the Fed, even some longtime market bears are reluctant to bet against the current rally. “This is impressive, no doubt about it,” said David A. Rosenberg, the former chief North American economist at Merrill Lynch and now chief strategist of Gluskin Sheff in Toronto. “There are many major risks out there, but at the moment the central banks are doing a spectacular job of buffering them.”
Mr. Rosenberg has a reputation for being a “permabear,” and he has recently emphasized investing in high-yield bonds and corporate credit instruments over stocks. As far as the immediate future of the stock market goes, he said, “I think we’re overdue for a correction.”
Major problems on the horizon, he said, include a weak economy that is being hobbled further by the recent payroll tax increase and the indiscriminate federal budget cuts that have just been put in place. And the troubles in the euro zone, which flared last month in Italy, are far from over, he said, “There are problems everywhere you look.”
Yet he is reluctant to predict a sustained stock market decline. Precisely because the economy is weak, he said, the central banks will be forced to keep short-term interest rates low. “People seeking income have been fleeing other asset classes,” he said, “and they have been moving their money into the stock market.”
For the short term, problems in Europe may actually be helping the United States, said Michael G. Thompson, managing director of S&P Capital IQ’s Global Markets Intelligence. “The gridlock produced by the Italian election has been a catalyst for the United States market,” he said in a telephone interview from London. “It seems to have reminded people that Europe is unstable — and so it has given them another reason to move money into the United States.”
Mr. Thompson said that while earnings growth for the S.& P. 500 had slowed, a combination of low rates and “canny management by C.E.O.’s of big companies” made it likely that corporate profits would hit a record this year. “As long as the Fed keeps its foot on the gas and as long as we stay out of a recession, I think there’s a good chance this market will continue.”
Not everyone is sanguine, however. “It’s getting downright embarrassing to be bearish with all this exuberance around,” said Rob Arnott, the chairman of Research Affiliates, an asset management firm in Newport Beach, Calif. “With so many people eager to buy stocks, it’s a wonderful time for us to take some risk off the table.”
Mr. Arnott, who manages the Pimco All Asset Fund, said the economy was weak enough that there was a reasonable chance the United States was already back in an undeclared recession. An economic or financial shock could induce a sharp market decline, he said.
“My view is simple,” he said. “Could this rally continue? Absolutely. But do I want to take a risk on a rally that will at some point certainly reverse and leave a lot of people helplessly trying to de-risk in an unliquid market decline? No. I don’t want to be part of that crowd.”
In the logic of contrarian investing, this kind of pessimism encourages Mr. Birinyi. “Market sentiment has not reached irrationally positive levels yet,” he said. “That implies to me that the market is still grounded, and that it can keep on rising.”
http://www.nytimes.com/2013/03/06/business/investors-quandary-get-in-now.html?_r=0
Wednesday, 6 March 2013
Dow Hits All-Time High: What’s Next?
Dow Jones Industrial Average (^DJI) burst higher in early trading today, eclipsing the previous closing high of 14,164 set on October 9, 2007. As it stands, the DJIA is also trading above the record intraday high of 14,198.
These breakouts have the ability to run for a while and don't necessarily trigger an instant sell-0ff.
For now, the new record will usher in a moment of euphoria, a brief round of hand shakes, and a boatload of analysis as to which stocks and sectors will lead the way now and how much further this four-year old bull run can go.
http://finance.yahoo.com/blogs/breakout/dow-hits-time-high-next-lofty-stock-market-161851791.html
Tuesday, 5 March 2013
Warren Buffett Intrinsic Value Calculation
How do we determine the intrinsic value of a company?
"Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life." - Warren Buffett
"As our definition suggests, intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised. Two people looking at the same set of facts, will almost inevitably come up with at least slightly different intrinsic value figures." - Warren Buffett
Subscribe to:
Posts (Atom)