Herd mentality costs investors dear

Herd mentality costs investors dear
Thousands of investors have missed out on the recent FTSE gains because they shunned equities.

Investors that follow the herd lose out 

By Paul Farrow, Personal finance editor 6:01AM GMT 13 Nov 2010

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Investors' habit of following the herd has cost them hundreds of millions of pounds in lost returns as the FTSE 100 continues to climb.

The blue chip index has returned more than 50pc over the past 20 months. Yet hundreds of thousands of investors will have missed out on those gains because they were busily withdrawing money from equity funds as the market fell.

Go back to the start of 2009 and investor confidence was at an all-time low after the banking crisis. The FTSE 100 had fallen sharply and investors sought sanctuary in bond funds and absolute return funds (which aim to deliver positive returns in falling markets). During the first three months of 2009 net sales of corporate bonds were £4bn, compared with just £200m in equities, official figures reveal.

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The timing of their run to safety couldn't have been worse. Since January 2009 the FTSE 100 has risen by 52pc – by comparison, the average corporate bond fund has returned 28pc, the average absolute return fund 9pc and the average cautious managed fund (another big seller) 23pc. The bestselling absolute return fund, BlackRock Absolute Alpha, is up by just 4pc – it is not designed to deliver bumper returns in a bull run.

Alan Steel of Alan Steel Asset Management asked: "Why is it the herd always piles into the wrong sector or investment at the wrong time?" One reason for a herd approach is that investors follow performance and this frequently sees them buy at the top of the market and sell at the bottom.

In 2000, for example, investors waded into technology funds when they should have been avoiding the sector. Those who bought at the peak soon saw the value of funds more than halve.

The 2006 commercial property phenomenon was another classic example. Many investors bought the funds as valuations reached unsustainable heights; the ensuing credit crisis triggered sharp falls in fund values.

Mr Steel said contrarian investors were often mocked, even though they can be proved right. "In February 2009 I suggested that stock markets were likely to rise imminently. I received comments from people who, anonymously, suggested I should be locked up or burned at the stake," he said.

"As doomsters on the telly continue the constant bad news with predictions that never come true, such as the double dip that's supposed to happen or the British economy that's supposed to collapse, I think it is better to share what's actually happened since the terrible days early in 2009. And it's good news."

Mr Steel is feeling smug with some justification, as the funds he recommended have soared. Neptune Russia and Greater Russia are up by 150pc, First State's Global Emerging Market fund has risen by 140pc, J P Morgan Natural Resources is up by 120pc and M & G Global Basics by 80pc, he says.

So what now? Investors will be chewing the cud, wondering whether they are at risk of buying shares at the wrong time again, given the FTSE 100's lofty rise to a 28-month high.

Mr Steel said he was expecting a correction, but insisted that investors should not avoid buying shares for fear of a setback. "We've been hoping for a little correction just to get a bit of common sense back into expectations for equities and it may still happen over the next couple of weeks. But we believe this is a time to embrace equities, not only in emerging markets and the Far East but in other places including Britain and the US," he said.

John Chatfeild-Roberts of Jupiter said the easy money made off the back of bombed-out shares had been made. But he believes that, as long as investors are selective about the shares and funds they buy, equities are still the asset of choice. UK funds he owns are Fidelity Special Situations, Invesco Perpetual Income, M & G Recovery and Jupiter Special Situations. "Government bonds are unlikely to provide a real return in the medium term, but many of the blue chips have not taken part in the rally and remain cheap," he said.

With clouds still hovering over the British economy, FTSE stocks that derive a significant chunk of their earnings from overseas have also been getting attention from fund managers.

"We are keen on UK companies with overseas exposure and the ability to raise profit margins from current levels," said Colin McLean at SVM. "British industrial companies such as IMI and Croda are still underrated relative to international peers, and could attract bids. Other leading global brands listed in the UK include British Airways and Burberry."

He added: "The risks in the stock market are in businesses more exposed to the British economy; consumer sectors and banks. Investors should focus on assets that have some protection against a weak pound and a sluggish UK economy."

Robert Burdett of Thames River agreed that the easy money in the UK had been made, but he still believes that shares offer good value and are cheap relative to most other asset classes. "Over a five-year-plus view I would not hesitate in putting equities first above bonds, property and other major assets," he said. Mr Burdett's favoured UK funds include Standard Life UK Opportunities, JOHCM UK Growth and Artemis UK Special Situations.

Many advisers reckon that UK equity income funds, which have not fared as well in the past three years, are also worth considering. Dividends are making a comeback after a disastrous two years and could be a useful contrarian bet.

Adrian Lowcock of Bestinvest said: "With stock markets reaching recent highs, a long-term approach to investing would be through companies with good cash flow, many of which pay good dividends. This is a long-term investment strategy and will provide some short-term protection should markets retreat.

"We recommend the Artemis Income fund in this respect."


http://www.telegraph.co.uk/finance/personalfinance/investing/shares-and-stock-tips/8129968/Herd-mentality-costs-investors-dear.html

Market PE and Ten-Year Forward Real Returns (S&P 500 Index)

“It’s time in the market, not timing the market that counts."

This gives rise to the all-important question: does one’s entry level into the market, i.e. the valuation of the market at the time of investing, make a significant difference to subsequent investment returns? 

This analysis strongly confirms the downward trend of the average ten-year forward real returns from the cheapest grouping (PEs of less than six) to the most expensive grouping (PEs of more than 21).

The second study also shows that any investment at PEs of less than 12 always had positive ten-year real returns, while investments at PE ratios of 12 and higher experienced negative real returns at some stage. 

A third observation from this analysis is, interestingly, that the ten-year forward real returns of investments made at PEs between 12 and 17 had the biggest spread between minimum and maximum returns and were therefore more volatile and less predictable. 

It is easy to understand why Grantham came to the conclusion that “the best case for caution and bearishness is value, which is a weak predictor of one-year returns, but a dynamic predictor of longer-term returns”.

http://investmentpostcards.wordpress.com/2007/06/05/us-equity-returns-what-to-expect/

Rational Value: Your Key to Contentment (Ellis Traub)

Rational Value: Your Key to Contentment

May 8th, 2009

Many of my posts have referred to rational value. And I’ve been remiss in not making a special effort to define this term for my readers—one I coined several years ago to try to help investors like us keep their minds on what’s important. The significance of this term is that it can keep our feet on the ground when the market is overvalued, and keep our head in the clouds when it’s in the tank. And, on an ongoing basis tell it will us what the reasonable (rational) value of our shares would be.

Rational Value Defined

Simply defined, Rational Value is the approximate value of a share of stock were it to be selling at its rational price—the price investors would pay for it if it were selling at its historical average multiple or “signature PE.”

If you have calculated either the Historical Value Ratio (HVR) or the Relative Value (RV), the simplest way to determine its Rational Price is to divide the current market price by either of those figures.

If, for example, the HVR or RV of XYZ company is 50%, and the current market price were $50, dividing the $50 by .50 would give you a rational value of $100—the price one would pay for it if one were “rational.” So, as you can see, the rational value is the value of your shares when the RV or HVR are 100%.

For those who have not been exposed to either RV or HVR, let me explain and define these terms for you.

Relative Value or Historical Value Ratio

Our methodology is based upon a very basic premise: “Real” investors—those who own stock as part owners of the businesses that have issued it—attach a value to their ownership that is related to the ability of those businesses to earn money and to grow. That relationship between a company’s earnings and the market price of the stock is recognized as the Price Earnings Ratio (PE). [For a more detailed discussion of this relationship and its importance, read "What's a PE and What's it To Me?"] For our purposes here, let’s define the PE simply as the unit price for one dollar’s worth of a company’s earnings.

You can tell if a gallon of gas is cheap or expensive because its price is under or over a “typical” or average price that’s fairly familiar to you. And an investor similarly knows if a share of stock is overpriced or inexpensive, based up what it has typically sold for. Because the price of the shares of a company will vary over time and the PE is relatively stable, we use the multiple of earnings it has sold for—its PE—rather than the price, itself, to judge its value. And that determination is what the HVR or RV provides us.

The RV is a comparison of the current PE with the historical (five-year) average and is calculated by dividing the current PE by that historical average PE. The HVR is similar, except it’s derived by dividing the current PE by the historical (ten-year) median. [The median is the middle value in a series of values and is not unduly influenced by wide swings or outliers.]

That mid-point, however you calculate it, becomes the stock’s “signature PE”—the multiple at which the stock would sell if it were purchased strictly for its earnings performance. By taking the longer term view, we effectively cancel out the short-term ups and downs of the price that are caused by the herd’s whims and guesses. These, of course, are measured—as if we care—by the amplitude of the distance betwen the high and low PEs either side of that mid-point.

It’s the amplitude of the swings either side of that signature PE or mid-point that measure the “rationality” of the price. If everyone were rational; i.e., if everyone were to buy or sell the stock based upon its underlying company’s earnings, the price would be “rational” all the time. However, in times like these, when “irrational despair” prompts the herd to panic and sell its shares, the price of those shares becomes irrationally low. Of course, in the opposite extreme, when the public is “irrationally exuberant,” as former Fed Chairman, Alan Greenspan labled the condition, the prices were irrationally high!

Therefore, the rational price of a share of stock is simply the price that would be paid for the stock if everyone were rational. And, the beauty of this concept is, because the “rational value” is derived from the midpoint of sales and purchases over time, it’s easy to be confident that we will see the price return to that point—and probably overshoot it—when those investors come back to their senses.

Application of Rational Value

The normal cycles in the stock market are caused, in large measure, by the herd’s overshooting in both directions. But, don’t knock it. That’s what makes for the bargains from time to time. It also provides us with an additional opportunity to improve our portfolios’ performances by replacing a position, when it’s so overvalued you can no longer expect a reasonable return on it over the next five years, with one of as good quality but which has a better potential for return.

To sum up, the “rational value,” therefore, is a value of a your holdings to which you can count on your shares returning when the herd comes back to its senses. And that’s the only value you need be concerned about as you perform your portfolio management tasks.

So, sit back, relax, and wait for that to happen. It may take a little longer than usual because the herd is more demoralized than usual; but the value is there, and it will continue to be. Someday soon, we’ll start to see the more intelligent of investors, satisfied that the market has shaken out the last few of its gamblers, backing up the truck and starting to cart off those bargains. And, not long after that, the herd will thunder back, wanting to get on the bandwagon.

http://www.financialiteracy.us/wordpress/articles/rational-value-your-key-to-contentment/

What’s Wrong with the Stock Market?

What’s Wrong with the Stock Market?
April 14th, 2009

The problem with the stock market started back before the end of the 18th century—in 1792 as a matter of fact. This was when the stock market as we know it was born under a tree in lower Manhattan. It was there and then that those who first bought and sold stocks as a business got together and formed what became the New York Stock Exchange. From those beginnings, an industry was born that has grown to be one of the most powerful and financially influential in the world.

Transaction-based Compensation – the Wrong Dynamic
Actually, the problem arose from the fact that these people made their money not from any appreciation in the value of the investments they bought and sold but rather from just putting buyers and sellers of those shares together. They profited from the transaction itself. To this day, the majority of brokers receive their compensation as a result of the purchase or sale. It makes no financial difference to them whether their customer gains or loses.

I don’t mean to imply that, just because these people fill a need and are compensated for doing so, they’re bad people. Certainly the existence of this industry is what makes the ownership of stock feasible for the average person. It’s responsible for elevating common stock to the level of liquidity that allows us to own it without fear of being stuck with it when or if we choose to sell it. And it certainly makes it much easier for us to buy those shares when we wish to. If we’re interested in putting our money to work for us in what is arguably the most lucrative manner possible for the least amount of risk, we can’t get along without this industry. But, the difference in perception and fact between what a broker does or is qualified to do and what the uninitiated think he or she is qualified to do is a major source of the problem.

In the beginning, the whole idea of shares was just that: sharing in the fortunes of an enterprise. Where it might be difficult for a company or individual to come up with enough money to finance all that was necessary alone, sharing the business with others in a fashion that limited their liability and exposure to only the amount of money invested was a great way to obtain the necessary funds. Anyone who wanted to participate in a business—sharing both the rewards and the risks—would buy shares and hold them as legal documents that vouched for their entitlement to a proportionate share in the fruits of that enterprise’s operations. Originally, therefore, folks bought shares because they thought the business would be profitable one and they wanted a piece of the action.

The formation of a ready market for stocks, while it performed a very useful service in terms of liquidity and convenience, had a serious side effect. So easy was it to trade that the perception of what a share of stock really was became obscured, giving way to the notion that the stock, like currency, had some intrinsic value that could vary for reasons other than the success or failure of the underlying enterprise.

Easy Trading changed the Nature of the Market
Moreover, the ability to manipulate the perceived value of those shares erected a persistent barrier between those that manipulated it and those that didn’t. It was de rigueur for unscrupulous traders to spread rumors appealing to the fear of the uninitiated, driving down the price of a certain stock, and furnishing an opportunity to pick up a large position at that favorable price. And then it was an equally simple process for those same individuals to spread favorable rumors that appealed to the greedy, drove up the price, and resulted in a great selling opportunity for those who then owned it. Not until well into the 20th century, after the devastating crash of 1929, was there a real effort to address that issue legislatively and make such activities illegal.

However, there was—and is—no way to legislate the greed and fear out of the stock market. Those are still its basic drivers. In fact, as recently as within the last decade, a young kid from New Jersey managed to make nearly a million dollars when he flooded the Internet with glowing stories about a penny stock he had selected for his venture. Unwitting investors bid up the price of the stock with no more to go on than his fiction; and he made a killing.

Disconnect Between Value and Price Creates Bubbles and Busts
The very same dynamics of greed and fear were responsible for an even more spectacular event that impacted millions of shareholders. The appeal of the dot.coms, most of them with no visible means of support—and the technology companies that depended upon them for their burgeoning customer base—inflated one of history’s biggest bubbles. Investors, eager to make a killing, continued to bid up the price of the stock in those companies with no regard for or even any understanding of the factors that comprised their underlying value. This was what the Street refers to as the Greater Fool Theory: “I may be a fool to buy this stock at this price; but I’ll find a greater fool to take it off my hands for more than I paid for it!”

The market of course collapsed when those companies—like Wiley Coyote racing off a cliff only to discover he had nothing under him—learned the hard way that a company had to earn money to live. The extent of that collapse went well beyond rational concerns about the profitability of the affected companies, being exacerbated in large measure by irrational fears growing out of the September 11th, 2001, attack on New York’s World Trade Center and our country’s bellicose activities following that tragedy.

http://www.financialiteracy.us/wordpress/articles/what%E2%80%99s-wrong-with-the-stock-market/

Take Stock with Ellis Traub

Food for thought

• Introduction to Successful Investing
• Investing: How Simple Can it Be? Part 1
• Investing: How Simple Can it Be? Part 2
• Investing: How Simple Can it Be? Part 3
• Making Money, Part 1: What does it really mean?
• Making Money, Part 2: It Started with Barter
• Making Money, Part 3: Why is Our Healthy Economy Vulnerable?
• OpEd article by Warren E. Buffett in the NYTimes October 16, 2008.
• Rational Value: Your Key to Contentment
• Six Really Simple Steps to Buying a Quality Company
• The Growth Cycle
• The Only Ten Terms You Need to Know
• What’s a P/E, and What’s it to Me? Part 1
• What’s a P/E and What’s it to Me? Part 3
• What’s a P/E, and What’s it to Me? Part 2
• What’s Wrong with the Stock Market?

There are only two things you need to learn about a company and its stock:
• Is the company a good company?
• If it is, can you buy it at a reasonable price?

There are only two things you need to know to determine if it’s a well-managed company.
• Is the growth of its revenues and its profits strong and stable?
• Can its current management sustain its successful track record?

Both of these issues can be determined by looking at graphs of readily available data that you can plot yourself.

How to determine how much to pay directors?

Friday November 12, 2010

How to determine how much to pay directors?
Whose Business is it anyway - By John Zinkin



IN my last article I wrote about the elements that have to be considered by the remuneration committee when determining the overall remuneration package of an independent non-executive director (INED).

The key factors are complexity; opportunity cost; roles and responsibilities; time spent; and experience, captured in the acronym CORTEX. Today's article will discuss how to structure such a package.

When deciding on the appropriate remuneration structure, two things must be considered: what can the company afford and what is the desired behaviour that the remuneration is designed to reward.

A start-up company may not wish to remunerate its directors on a fixed basis, preferring to keep payments variable and long-term so that the board package does not unduly burden the company when it is still short of cash.

Equally, a well-established company with ample cash flows will not be overly concerned about paying fixed fees to board members.

Any remuneration scheme must achieve the following six objectives:

·It must create a sense of responsibility for the long-term success of the business as opposed to encouraging thinking that all that is needed is for INEDs to merely attend meetings;

·It must reward any extra commitment and time spent during those times when the company is going through intense change or activity requiring a higher degree of involvement than usual – for example during a merger, acquisition or divestiture or a crisis that could destroy the company;

·It must encourage and recognise outstanding performance on the board;

·It must also create a sense of belonging to reinforce the idea that INEDs are stewards of the company and their contribution to the board of a given company really matters (this is particularly important for INEDs that sit on several boards);

·It must attract appropriate talent; and just as important (and often forgotten)

·It must also facilitate the departure of talent, whose presence on the board is no longer required because of changes in strategy or company circumstances.

Remuneration mechanisms

There are eight types of remuneration mechanisms identified in the recent PricewaterhouseCoopers report Performance Pays. Each has its own advantages and drawbacks, discussed below.

Fixed fees: These are paid regardless of the level of risk run by the INED or the number of meetings attended and time spent on the company's business.

They provide a base-load of income, but used in isolation may not adequately reward INEDs for the time they actually spend in meetings and preparing for them.

Moreover, currently in Malaysia, they do not represent a realistic return for the risk INEDs are exposed to.

Meeting fees: These are paid for the number of meetings attended, normally on a fixed rate per meeting.

They reward INEDs for the time and effort spent in preparing for and attending meetings and may encourage the use of too many unnecessary meetings to increase the fees paid.

More seriously, in isolation, attendance fees risk reinforcing the notion that all that matters is INEDs attending meetings.

This could lead to INEDs forgetting that they still bear the wider responsibilities for the business as a whole on an ongoing basis and to them not taking the time to become properly acquainted with the key people who matter for succession planning.

It could reinforce an aversion to visiting offices, factories or plantations and becoming familiar with the processes in the business that create value.

Performance loading: This is rather rare in Asia so it is not easy to decide what level of payment is appropriate.

Its advantages are that it rewards INEDs for temporary increases in time spent and is simple to administer and easy to stop when it is no longer appropriate.

Ex-post and ex-gratia payments: These are voluntary payments to recognise exceptional or long-standing service.

They send a message to other INEDs that such work is appreciated by the board, but because payment is not normally determined according to clear terms of reference or well-documented key performance indicators being met, they lack transparency and this can create its own problems of corporate governance.

Stock awards: These normally are paid in shares, often with specific conditions having to be met, such as minimum shareholdings and vesting periods.

They are supposed to foster a long-term orientation and have been defended as aligning INEDs' interests with those of shareholders.

They have the great advantage of reducing the immediate cash outlay, though they have been abused in the past by not being expensed.

Some have argued that stock options tie INEDs too closely to the fortunes of the firm and compromise their independence as a result.

They are also notoriously hard to administer and it is critical that they do not become a one-way bet, rewarding holders when options are "in the money" and being reset when they are "underwater".

The issue of options being abused and creating perverse incentives is at its most crucial in the case of executive directors and, in particular, the CEO.

If stock awards are to be given, the remuneration committee must consider very carefully how much is to be granted; the proportion of the total fees to be paid in stock; and the length of the vesting periods in order not to compromise INED independence.

Benefits-in-kind (BIK): These are payments in kind. They are normally medical expenses and insurance, use of company car and driver, secretarial support and discounted staff prices for company products or services.

The attraction of such payments is that they usually cost the company less than they are worth to the recipient, creating a win-win situation. However, if they become too closely identified with the INEDs' status and sense of self-worth, they can undermine independence of thought.

Sign-on and sign-off bonuses: These are one-off fees paid upon acceptance of the position of INED or agreement to leave the board.

The attraction is that they are one-time expenses that can be quite effective in achieving the desired objective, but they are cash payments and lack transparency.

Ninety per cent of the directors interviewed in the PwC study preferred a combination of fixed fees and meeting fees, and as long as the majority of the fees are fixed, this will not lead to a perverse desire to have board meetings for the sake of the fees.

Sixty per cent of INEDs of local banking groups were open to stock awards, though only 40% of directors of other financial firms were interested.

Once again 90% of INEDs were in favour of BIK payments, with medical coverage and insurance being unanimously identified as the benefits that were the most appreciated.

Admittedly these findings were limited to INEDs of financial institutions, but there is no reason to suppose that they do not represent a good guide to how INEDs in other industries would feel.

The point to remember is that the remuneration committee must look at all these tools, while recognising that there is no "one size fits all" solution.

The most appropriate structure for INED remuneration will always depend on the circumstances of the individual firm and the objectives the remuneration package is designed to meet.

The writer is CEO of Securities Industry Development Corp, the training and development arm of the Securities Commission.

http://biz.thestar.com.my/news/story.asp?file=/2010/11/12/business/7394429&sec=business

Overseas Property Investments: Do your homework

Do your homework — Png Poh Soon
November 12, 2010

NOV 12 — Signs of a slowdown in Singapore home sales showed in both the number of primary and secondary transactions following the government’s announcement of property market cooling measures on August 30.

The number of developers’ sales, subsales and resales fell by about 28 per cent, 52 per cent and 42 per cent, respectively, in September from the previous month.

While there has been a decrease in property transactions within Singapore, there has been a pickup in marketing efforts for overseas properties from as near as Malaysia to as far as the United Kingdom. There has been an increase in the number of advertisements in recent weeks inviting Singapore investors to exhibitions and road shows for overseas properties.

Investors here are increasingly attracted by potential opportunities overseas as the local market takes a breather. With the current low savings rates, they are looking for better yielding assets to park their money. Potential price appreciation, income guarantees, low mortgage rates and favourable exchange rates are some of the main factors attracting investors to foreign markets.

Based on recent Knight Frank research, Singapore investors formed the third-largest group of buyers from Asia, after those from China and Hong Kong, of prime London properties from July last year to June this year.

Before jumping on the bandwagon, potential buyers should not assume that the same institutional and legal framework that is applicable in Singapore will apply in other countries.

What should buyers look out for when investing in overseas properties? What are the risks and who should they consult?

Many often buy properties in countries that they are familiar with. Some might have studied in a particular country and have developed a fondness for it. Others feel safer if their investment is closer to home and, therefore, prefer to buy a property in neighbouring countries.

From experience, up to 20 per cent of buyers who purchased foreign properties during exhibitions had not visited the city and up to 70 per cent of buyers had not inspected the project site. As environments change and cities evolve, it is prudent to re-visit the site and not to rely solely on memories or gut feel.

For completed overseas properties, it is also advisable to seek an independent professional valuation. One may want to reconsider the purchase if there is a big difference between the asking price and the valuation. In any case, if bank financing is required, a valuation will be carried out by the bank. It may also be worthwhile to get a structural survey done, too. If significant problems are highlighted, one can either forgo the purchase or negotiate a lower price to account for the rectification cost.

Some projects offer purchasers rental guarantees, some as high as 8 per cent. A rental guarantee is a contract between the granter, usually the developer or the vendor and the buyer, where the latter is paid a fixed income based on a guaranteed rate on the purchase price.

For example, a guaranteed rental of 6 per cent on an apartment bought for £250,000 (RM1.25 million) in London amounts to £15,000 per year.

Most rental guarantees are on a gross basis where the buyer is still required to pay all outgoings, such as maintenance costs and property taxes. Because of this, the net return will be lower.

Properties with rental guarantees often also come at a higher price to compensate the granter for bearing the risk of not earning an income when tenants cannot be secured in time or higher vacancies during off-peak holiday periods. Buyers should note that the rent collected may drop significantly after the guarantee period.

It is important to engage reliable managing agents to look for tenants, to collect rent and to look after general repairs. Usually they charge a fee of 5 to 10 per cent of the monthly rent. An agent’s commission for securing a tenant is usually the equivalent of one month’s rent for a two-year lease, similar to the practice in Singapore. Total outgoings average between about 10 and 20 per cent of gross rental income per year.

There are other miscellaneous costs such as legal fees, stamp duties, valuation fees and bank processing fees. The amounts vary across countries and the prospective buyer should seek professional advice.

Potential buyers should also be aware of tax regulations, especially for mature markets such as the United States and Australia. In many instances, rental income is taxed at the progressive personal income tax scale in the country where the income is sourced. While capital gains tax does not apply in Singapore, it may be applicable in other countries. Buyers should consult tax advisers to ensure they understand all tax issues.

To guard against poor workmanship, the sale and purchase agreement should provide for a two- to six-month liability period for the developer to rectify the faults. In instances where there are delays in the completion, purchasers should be compensated or can opt to rescind the purchase with the money refunded.

The types of legal recourse available are subject to the terms and conditions in the sale and purchase agreement. Buyers are advised to read the document carefully before signing and paying the initial reservation fee, which is often non-refundable. They can engage lawyers to advise them on their rights if things go awry.

If a developer goes bankrupt during the construction stage, any monies paid directly to the developer rather than to a trust fund are usually not recoverable. Hence when buying properties off-the-plan or under construction, one should look at the developer’s reputation, track record and financial standing to reduce the risk of potential losses.

There are also other legal considerations to note. Some countries have laws that restrict resale property ownership. For example, in Australia, residential properties can be resold only to Australian citizens, permanent residents and foreign students or foreign companies that have obtained the Foreign Investment Review Board’s approval to buy for owner occupation.

In Malaysia, the government’s consent is required for the sale of freehold landed properties to non-citizens. In some instances, the property can only be sold to Bumiputeras.

In a nutshell, while there are many success stories, buying that overseas property is not as simple as some may think. One needs to look beyond the glossy brochures and the glitzy displays. Engaging competent and experienced advisers will help the process but at the end of the day, it is still caveat emptor (buyer beware). — Today

* The writer is senior manager, Consultancy and Research, at Knight Frank.

* This is the personal opinion of the writer or the publication. The Malaysian Insider does not endorse the view unless specified.

http://www.themalaysianinsider.com/breakingviews/article/do-your-homework-png-poh-soon/

“Singapore Seen Overtaking Malaysia 45 Years After Lee’s Tears”

Don’t be a sore loser, Dr M — Lee Wei Lian
UPDATED @ 10:06:15 AM 12-11-2010 November 12, 2010

NOV 12 — Really Dr Mahathir? Really? Singapore will overtake Malaysia just because it focuses on economic growth and has no fair distribution of wealth between the races?

Tun Dr Mahathir Mohamad’s cringe-worthy response to news that Singapore is poised to surpass Malaysia and become Asean’s third-largest economy by the end of this year really makes him look like a sore loser who makes excuses and won’t own up to shortcomings.

“Singapore will overtake Malaysia because its focus is just on economic growth,” Dr Mahathir had told Bloomberg in a story headlined “Singapore Seen Overtaking Malaysia 45 Years After Lee’s Tears”.

“There is no social restructuring goal such as fair distribution of wealth between races as we have in Malaysia.”

Two things really bug me here — why didn’t Dr Mahathir acknowledge Singapore’s world-class policies many of which are worth emulating and why didn’t he do a post-mortem on his own as a leader who is accountable for Malaysia’s past performance that contributed to the present situation? After 22 years in power, he should be able to come up with a better reason of why Malaysia is getting its ass whooped by Singapore than “they don’t have fair distribution of wealth between races”.

World Bank figures show that in 1980, the year before Dr Mahathir came into power, Singapore’s economy was less than half the size of Malaysia’s — US$11.73 billion vs US$24.94 billion.

By the time it was mid-way through his administration though, Singapore — with less than one-quarter our population and with very limited land and no natural resources — had already reached a stunning 87 per cent of Malaysia’s economy in 1991 — US$43 billion vs US$49 billion.

In 2002, the year before he left office Singapore’s GDP was at 87 per cent that of Malaysia’s — US$88 billion vs US$101 billion.

The ringgit, meanwhile, did a backward somersault in its spectacular dive from near parity with the Singapore dollar in 1980. By 1991, one Singapore dollar bought RM1.50. And by 2002, one ringgit was worth only about 50 Singapore cents. So basically, our currency shrank to half the value of the Singapore dollar during Dr Mahathir’s time. But that’s because they don’t have “fair distribution of wealth between races” right?

The toxic rivalry Dr Mahathir feels with Singapore in general and its former PM Lee Kuan Yew in particular is well known. The Bloomberg headline encapsulates the situation near perfectly — “Singapore Seen Overtaking Malaysia 45 Years After Lee’s Tears”.

Given the economic evidence, saying Dr Mahathir lost does not even begin to describe it. In more adequate gamer parlance — he got pwned and made to look like a noob. But still, that’s no reason to give excuses.

There is a saying — there is none so blind as those who will not see. Being asked the reasons for tiny Singapore overtaking Malaysia and replying that they don’t have “fair distribution of wealth between races” just doesn’t cut it.

I only hope Datuk Seri Najib Razak is capable of a better response.

In the meantime Dr Mahathir, enough with the excuses and try not to be a sore loser.

* Petaling Jaya-born Lee Wei Lian is a senior writer with The Malaysian Insider.

http://www.themalaysianinsider.com/breakingviews/article/dont-be-a-sore-loser-dr-m-lee-wei-lian/

Supermax

Date announced 8-Nov-10
Quarter 30/09/2010 Qtr 3
FYE 31/12/2010

STOCK Supermx
C0DE  7106 

Price $ 4.39 Curr. PE (ttm-Eps) 8.27 Curr. DY 2.00%
LFY Div 8.80 DPO ratio 23%
ROE 26.1% PBT Margin 17.6% PAT Margin 16.2%

Rec. qRev 235104 q-q % chg 0% y-y% chq -1%
Rec qPbt 41448 q-q % chg -10% y-y% chq -11%
Rec. qEps 11.24 q-q % chg -17% y-y% chq -7%
ttm-Eps 53.08 q-q % chg -2% y-y% chq 69%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5% Avg.H PE 9.00 Avg. L PE 7.00
Forecast High Pr 6.10 Forecast Low Pr 2.48 Recent Severe Low Pr 2.48
Current price is at Middle 1/3 of valuation zone.

RISK: Upside 47% Downside 53%
One Year Appreciation Potential 8% Avg. yield 3%
Avg. Total Annual Potential Return (over next 5 years) 11%

CPE/SPE 1.03 P/NTA 2.16 NTA 2.03 SPE 8.00 Rational Pr 4.25



Decision:
Already Owned: Buy Hold Sell Filed; Review (future acq): Filed; Discard: Filed
Guide: Valuation zones Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

Getting a DSLR camera

Cameras
DECIDE first on your budget and requirements for a DSLR camera, and the rest comes easy, writes IZWAN ISMAIL.

Play around with the cameras for a few minutes

AFTER years of using a compact digital camera, you finally want to get a supposedly "better" one, the digital single lens reflect camera, or dSLR.
You might have hundreds of questions - the foremost surely is which one to buy. And with a wide range of brands available in the market, choosing one is definitely tough.
Where to start?
If you are a beginner to dSLRs, the wisest thing to do is to get yourself a beginners´ model.
Having said that, this does not mean that these cameras take lousy pictures. They are all good cameras and capable of producing really nice pictures - anytime better than the compact cameras.
If you are not convinced, the next logical move is to invest in an intermediate model.
These intermediate models may cost a few hundred ringgit more than the basic model, but they make a worthy investment.
Trends among dSLR hobbyists over the years show that the majority of them would upgrade to a more advanced camera bodies only after a few months or a year of using their beginner models. Unlike compact cameras, once you start using a dSLR camera, you will grow into it, and many people will outgrow their beginner models faster than they ever thought.
Furthermore, because of their more advanced features, an intermediate dSLR camera may last you for a few years before you jump into the semi-pro side.
Selecting your dSLR
If you have the means, go for the best camera body you can buy as this will save you some upgrading cost.
A good mid-range dSLRs usually costs from RM2,500, including the kit lens.
Among the mid-range models that are worth considering are the Nikon D5000/D90, Canon 500D/550D, and Sony A380/A550.
When choosing a brand, bear in mind that you will also be buying into a range of lenses.
Survey the lenses available for a certain brand. In this case, Canon and Nikon have a lead in their choices of lens and third-party products.
Eventually, you will be spending more money on the lenses than on the camera body. That´s why it´s important to buy a brand that has a good range of lenses to choose from.
Selecting a dSLR is very subjective. Comparing models based on their features can be confusing sometimes.
Since the picture quality is the final thing you´d expect from your dSLR, why not look at the pictures taken from the camera models.
Flickr.com and Pbase.com are the best places to go if you want to look and compare pictures. There are hundreds of thousands of pictures submitted by dSLR enthusiasts from around the world in these digital photo banks, complete with the exif information.
Exif is picture information recorded by the camera when the picture is taken, including camera model, lens type, ISO, and white balance.
This can be a good guide to the camera model that you want as you know the type of picture different models produce.
I often use these sites as my guides when I´m buying camera body, lenses, filter, etc. At least I´ll know the end result I´ll get from certain cameras or lenses.
Other factors
People are often misled by the "megapixel" marketing used by camera makers.
Do more pixels make better pictures? The answer is, not necessarily so.
A dSLR with six-megapixel sensor is good enough if you do not plan to print billboard-sized pictures.
Unless a brand has a fantastic sensor technology that can cramp huge megapixels into the small crop sensor without making noise in the picture, it´s not always a must to go for the most pixel model.
But if you plan to do a lot of action shots or wildlife photography, which requires picture cropping later, then a camera with huge megapixels will be useful.
One final tip before you buy. At the shop, hold and play around with the camera for a few minutes. If it feels good in your hand -- grip, weight, buttons, etc - then go for it. There is no point buying a camera that you are not comfortable holding.


Read more: http://gadgets.emedia.com.my/tipslist.php?id=107/Article/index_html#ixzz151Tj8lZk

The Best U.S. Business Schools 2010

Working through the post-crash hangover, B-schools put new emphasis on job placement—and some hard lessons learned

http://www.businessweek.com/bschools/content/nov2010/bs20101110_255552.htm?chan=rss_topStories_ssi_5

Integrax wants to exercise option to acquire LMT

Published: 2010/11/12

PORT operator Integrax Bhd (9555) wants to exercise an option to take over Lumut Maritime Terminal Sdn Bhd (LMT) from Taipan Merit Sdn Bhd but the latter says it has no legal right to do so.

In a filling to Bursa Malaysia Bhd yesterday, Taipan Merit parent Perak Corp Bhd said the option belongs to the non-defaulting party.

Given the termination of a shareholders' agreement by Taipan Merit on October 28 this year, the non-defaulting party was Taipan, Perak Corp added.

Taipan Merit is wholly owned by Perak Corp, which in turn is 52.54 per cent controlled by Perbadanan Kemajuan Negeri Perak.

In its statement, Integrax said it did not recognise Taipan Merit's notice of termination of the agreement.

Integrax said it had made an offer to buy out Taipan Merit's 50 per cent plus one share in LMT under the purported option.

It gave Taipan Merit 30 days to transfer all its LMT shares and indicate a share sale price.

Integrax, together with subsidiary Pelabuhan Lumut Sdn Bhd (PLSB), has also served a notice to arbitrate the termination of the shareholders agreement.

In this regard, Perak Corp said it will inform Integrax of its choice of arbitrator in due course.

Meanwhile, Integrax director Harun Halim Rasip said the fallout between PLSB and Taipan Merit was centred on the Brazilian iron ore company Vale's request.

The latter had asked LMT to provide an interim port facility for a 10- year period at Lekir Island Satu, next to Vale's own jetty.

While Perak state officials saw it as a good deal, a majority of Integrax's board was against the move.

Read more: Integrax wants to exercise option to acquire LMT http://www.btimes.com.my/Current_News/BTIMES/articles/pinr/Article/#ixzz151NAP2Xd

Integrax offers to buy out Taipan Merit

Published: 2010/11/11

INTEGRAX Bhd has made an offer to buy out Taipan Merit Sdn Bhd at 50 per cent plus one share in Lumut Maritime Terminal Sdn Bhd (LMT), along with notice to arbitrate the termination of shareholders agreement by Taipan Merit.

The offer to acquire Taipan Merit's shares sees Integrax exercising its option under a shareholders agreement between the two parties which allows for the transfer of the shares, Integrax said in a statement today.

"At the same time, Integrax does not recognise Taipan Merit's notice of termination of the agreement," it said.

Taipan Merit, a wholly-owned unit of Perak Corp Bhd which in turn is 52.54 per cent controlled by Perbadanan Kemajuan Negeri Perak, been given 30 days to transfer all its shares in LMT to Integrax and to indicate a share sale price.

The submission of the notice to arbitrate cited three points, including notice of termination of shareholders agreement, the reappointment of Amin Halim Rasip as chief executive officer of LMT despite objections by Integrax and Taipan Merit's usurpation of the management of LMT.

Taipan Merit had terminated a shareholder's agreement with Integrax end-October which Integrax alleged was in breach.

-- BERNAMA

http://www.btimes.com.my/Current_News/BTIMES/articles/20101111185105/Article/index_html

A matter of time before Maybank woos OSK?

Published: 2010/11/12


Maybank has long wanted to grow its investment banking business regionally and OSK offers it the platform to do so

THERE are compelling reasons for top lender Malayan Banking Bhd (Maybank) to take over OSK Holdings Bhd (5053) and analysts wonder if it may just be a matter of time before Maybank officially starts courting the regional investment banking and brokerage group.

Maybank has long wanted to grow its investment banking business regionally and OSK offers it the platform to do so.

A takeover will also enable Maybank to go regional with its brokerage business.

Unlike its closest rival CIMB Group Holdings Bhd, Maybank does not have a brokerage business outside Malaysia.
OSK has quietly but aggressively expanded beyond Malaysia in recent years, and now has a presence in Cambodia, Singapore and Indonesia.

Maybank's investment banking business including brokerage, contributes less than 5 per cent to the group's overall earnings and this is something it needs to improve on.

Maybank has neither confirmed nor denied a recent report that it is keen to buy OSK, saying only that it is always on the lookout for opportunities to be a regional player.

OSK, meanwhile, said it had not entered into any serious or exclusive talks with any party on equity or strategic partnerships.

"This is still preliminary at this stage as there are no formal approvals to commence negotiations, but at face value, the deal looks compelling for Maybank if it intends to spruce up its broking business regionally," noted HwangDBS Vickers Research' banking analyst, Lim Sue Lin, in a report yesterday.

A takeover would also immediately catapult Maybank to become the country's top broker by value and volume.

OSK ranked top in terms of trading volume as at October this year with an 11 per cent market share, compared with Maybank's 5.5 per cent share.

OSK booked a RM112 million net profit last year, and while the earnings enhancement to Maybank would be relatively small, in terms of ranking and regional presence, "Maybank would be charting new territories," Lim noted.

Still, while there are strong reasons for Maybank to buy OSK, it remains to be seen if the latter's controlling shareholder and group managing director Ong Leong Huat, who has a 31.5 per cent stake, will want to sell.

Given that he has steadily built up the business and is grooming his son, who already works with OSK, to takeover and grow it further, indications are that he will not let go unless there is an irresistible offer.

If the transaction is priced at two times the book value, the total price tag for OSK would be around RM2.2 billion, said Lim. (OSK's book value as at June this year was RM1.68 a share.)

OSK's share price, which has been on the rise of late, surged 5.4 per cent to RM1.97 yesterday, its highest close in 39 months. Maybank fell 1.8 per cent to RM9.10.

The last investment banking transaction in Malaysia, in 2007, was done at one-time book value. This was when Hong Leong Investment Bank bought Southern Investment Bank from CIMB for RM65 million.

Investment banking transactions before that were done at between 1.2 times and 1.4 times book value, analysts said. But the targets, including Southern Investment Bank, were small whereas OSK is a regional franchise.

Apart from Ong's 31.5 per cent stake, OSK's shareholding structure is fragmented, with shareholders each holding less than5 per cent.

Analysts believe a hostile bid for OSK is unlikely. "It isn't Maybank's style. Also, it does not make sense to make a hostile bid for an investment bank as it is the people that you want, not the assets and liabilities," said one, pointing out that OSK's staff may leave in the event of a hostile takeover.

Read more: A matter of time before Maybank woos OSK? http://www.btimes.com.my/Current_News/BTIMES/articles/mayosk/Article/index_html#ixzz151Kl78z5

Integrax wants to exercise option to acquire LMT

Published: 2010/11/12

PORT operator Integrax Bhd (9555) wants to exercise an option to take over Lumut Maritime Terminal Sdn Bhd (LMT) from Taipan Merit Sdn Bhd but the latter says it has no legal right to do so.

In a filling to Bursa Malaysia Bhd yesterday, Taipan Merit parent Perak Corp Bhd said the option belongs to the non-defaulting party.

Given the termination of a shareholders' agreement by Taipan Merit on October 28 this year, the non-defaulting party was Taipan, Perak Corp added.

Taipan Merit is wholly owned by Perak Corp, which in turn is 52.54 per cent controlled by Perbadanan Kemajuan Negeri Perak.

In its statement, Integrax said it did not recognise Taipan Merit's notice of termination of the agreement.

Integrax said it had made an offer to buy out Taipan Merit's 50 per cent plus one share in LMT under the purported option.

It gave Taipan Merit 30 days to transfer all its LMT shares and indicate a share sale price.

Integrax, together with subsidiary Pelabuhan Lumut Sdn Bhd (PLSB), has also served a notice to arbitrate the termination of the shareholders agreement.

In this regard, Perak Corp said it will inform Integrax of its choice of arbitrator in due course.

Meanwhile, Integrax director Harun Halim Rasip said the fallout between PLSB and Taipan Merit was centred on the Brazilian iron ore company Vale's request.

The latter had asked LMT to provide an interim port facility for a 10- year period at Lekir Island Satu, next to Vale's own jetty.

While Perak state officials saw it as a good deal, a majority of Integrax's board was against the move.

Read more: Integrax wants to exercise option to acquire LMT http://www.btimes.com.my/Current_News/BTIMES/articles/pinr/Article/#ixzz151NAP2Xd