Genting pays New York US$380m for parlor
Published: 2010/09/28
Genting Malaysia Bhd paid New York state US$380 million to develop an electronic slot machine parlor at New York City’s Aqueduct Racetrack, US$80 million more than the minimum specified by the state.
The payment by the Kuala Lumpur, Malaysia-based company arrived five days before the due date. New York state plans to sell US$250 million of bonds backed by its personal income tax to help finance the project, said Erik Kriss, a spokesman for the Budget Division.
“After almost a decade of delay, this project is finally becoming a reality and all New Yorkers will benefit,” Governor David Paterson said in a statement. The payment exceeded the US$300 million assumed by lawmakers in the state budget, which closed a US$9.2 billion gap. Similar assumptions in previous years were inaccurate.
The state expects the video-lottery machines will produce more than US$279 million of revenue annually after paying gambling prizes and other expenses, according to Jennifer Givner, a spokeswoman for the New York Lottery, which handled bidding for the project.
About 1,600 machines are to be installed within six months, followed within six months by another 2,925 terminals, a 2,100- space parking garage and a new pedestrian bridge to the Aqueduct subway station, according to the recommendation by the Lottery. Later, Genting will build a new covered entrance to the race track, which is in Queens.
The payment came almost two weeks after Genting’s stock rose to a two-year high in Kuala Lumpur when the contract was approved. -- Bloomberg
Read more: Genting pays New York US$380m for parlor http://www.btimes.com.my/Current_News/BTIMES/articles/20100928084600/Article/index_html#ixzz10pQtp846
Tuesday 28 September 2010
KL bourse 'rediscovered long-lost mojo'
KL bourse 'rediscovered long-lost mojo'
Published: 2010/09/28
Malaysia’s stock market has “rediscovered its long-lost mojo,” evidenced by rising trading volumes as a stronger ringgit and economy lure investors, Credit Suisse Group AG said.
“We have noticed a distinct shift in the tone of the market over the last few weeks,” according to a report by analysts led by Stephen Hagger. “Foreign funds have been attracted by a combination of a strengthening currency and economy, Malaysia being part of ‘hot’ Southeast Asia, it being under-owned, and increasingly Prime Minister Najib Razak’s economic reforms.”
Hagger, whose team was ranked second for Malaysian research in Institutional Investor’s 2010 Asian poll, favors so-called proxies for economic growth including banks, property companies, Tenaga Nasional Bhd and PLUS Expressways Bhd.
Malaysia’s government said on Sept. 21 it plans to develop a nuclear energy industry, build a mass rail network and create a shopping district to rival Singapore’s Orchard Road. The plans are part of the US$444 billion worth of potential projects it has identified to accelerate growth and transform it into a high-income nation.
The benchmark FTSE Bursa Malaysia KLCI index has surged 17 per cent since the May 26 low, surpassing levels before the start of the global financial crisis in 2008. Foreigners have become net buyers of the nation’s stocks since June, Hagger said.
‘Positive News’
“Up until recently, stocks did not react to positive news, and the market lacked a certain vibrancy,” Hagger said.
That’s changing as turnover increases, Hagger said. Trading volume on the stock market rose to 1.7 billion shares on Sept. 24, the highest level since Jan. 5, according to data compiled by Bloomberg. The daily average has risen to 843 million shares this quarter so far, from 788 million in the second quarter.
Malaysia’s economy expanded 8.9 per cent in the second quarter, close to the fastest pace in a decade, the central bank said on Aug. 18. Growth may exceed 6 per cent this year, Governor Tan Sri Dr Zeti Akhtar Aziz said then. That’s helped to boost the Malaysian ringgit by 10.8 per cent against the dollar this year, the best performance in Asia excluding Japan. -- Bloomberg
Read more: KL bourse 'rediscovered long-lost mojo' http://www.btimes.com.my/Current_News/BTIMES/articles/20100928132854/Article/index_html#ixzz10pPnMJpy
Published: 2010/09/28
Malaysia’s stock market has “rediscovered its long-lost mojo,” evidenced by rising trading volumes as a stronger ringgit and economy lure investors, Credit Suisse Group AG said.
“We have noticed a distinct shift in the tone of the market over the last few weeks,” according to a report by analysts led by Stephen Hagger. “Foreign funds have been attracted by a combination of a strengthening currency and economy, Malaysia being part of ‘hot’ Southeast Asia, it being under-owned, and increasingly Prime Minister Najib Razak’s economic reforms.”
Hagger, whose team was ranked second for Malaysian research in Institutional Investor’s 2010 Asian poll, favors so-called proxies for economic growth including banks, property companies, Tenaga Nasional Bhd and PLUS Expressways Bhd.
Malaysia’s government said on Sept. 21 it plans to develop a nuclear energy industry, build a mass rail network and create a shopping district to rival Singapore’s Orchard Road. The plans are part of the US$444 billion worth of potential projects it has identified to accelerate growth and transform it into a high-income nation.
The benchmark FTSE Bursa Malaysia KLCI index has surged 17 per cent since the May 26 low, surpassing levels before the start of the global financial crisis in 2008. Foreigners have become net buyers of the nation’s stocks since June, Hagger said.
‘Positive News’
“Up until recently, stocks did not react to positive news, and the market lacked a certain vibrancy,” Hagger said.
That’s changing as turnover increases, Hagger said. Trading volume on the stock market rose to 1.7 billion shares on Sept. 24, the highest level since Jan. 5, according to data compiled by Bloomberg. The daily average has risen to 843 million shares this quarter so far, from 788 million in the second quarter.
Malaysia’s economy expanded 8.9 per cent in the second quarter, close to the fastest pace in a decade, the central bank said on Aug. 18. Growth may exceed 6 per cent this year, Governor Tan Sri Dr Zeti Akhtar Aziz said then. That’s helped to boost the Malaysian ringgit by 10.8 per cent against the dollar this year, the best performance in Asia excluding Japan. -- Bloomberg
Read more: KL bourse 'rediscovered long-lost mojo' http://www.btimes.com.my/Current_News/BTIMES/articles/20100928132854/Article/index_html#ixzz10pPnMJpy
Khazanah targets 20pc return on new investments
Khazanah targets 20pc return on new investments
By Hamisah Hamid
Published: 2010/09/28
STATE investment arm Khazanah Nasional Bhd expects its newer investments, including the London-based carbon emission consultancy Camco International Ltd, to generate over 20 per cent in annual returns.
“We are hitting about 13 per cent, but I think for our newer investments, we are hitting over 20 per cent in terms of annual returns,” Khazanah managing director Tan Sri Azman Mokhtar told reporters on the sidelines of the World Capital Markets Symposium 2010 in Kuala Lumpur yesterday.
Khazanah bought 9.28 million Camco shares at 20 pence each, which gives it a 5.3 per cent stake. It will also partner to invest in the emissions-to-energy market in Southeast Asia.
Azman said Khazanah has paid a fair price.
“The amount is relatively small relative to our portfolio but it is an important investment in terms of understanding the technology and methodology in this area … and on top of that, we think that it’s financially viable,” he said.
Khazanah feels it needs to be in the area because under the New Economic Model, sustainable development covers carbon emission reduction.
He also said that currently, Khazanah’s gross portfolio is about US$35 billion (RM108 billion).
“If you were to take foreign holding of our key companies,
for example CIMB or Axiata, the foreign component is about 20 per cent.
“I think 80:20 (local:foreign) is about right at this stage of our development as we need region
Read more: Khazanah targets 20pc return on new investments http://www.btimes.com.my/Current_News/BTIMES/articles/20100928004513/Article/#ixzz10pN44kYw
By Hamisah Hamid
Published: 2010/09/28
STATE investment arm Khazanah Nasional Bhd expects its newer investments, including the London-based carbon emission consultancy Camco International Ltd, to generate over 20 per cent in annual returns.
“We are hitting about 13 per cent, but I think for our newer investments, we are hitting over 20 per cent in terms of annual returns,” Khazanah managing director Tan Sri Azman Mokhtar told reporters on the sidelines of the World Capital Markets Symposium 2010 in Kuala Lumpur yesterday.
Khazanah bought 9.28 million Camco shares at 20 pence each, which gives it a 5.3 per cent stake. It will also partner to invest in the emissions-to-energy market in Southeast Asia.
Azman said Khazanah has paid a fair price.
“The amount is relatively small relative to our portfolio but it is an important investment in terms of understanding the technology and methodology in this area … and on top of that, we think that it’s financially viable,” he said.
Khazanah feels it needs to be in the area because under the New Economic Model, sustainable development covers carbon emission reduction.
He also said that currently, Khazanah’s gross portfolio is about US$35 billion (RM108 billion).
“If you were to take foreign holding of our key companies,
for example CIMB or Axiata, the foreign component is about 20 per cent.
“I think 80:20 (local:foreign) is about right at this stage of our development as we need region
Read more: Khazanah targets 20pc return on new investments http://www.btimes.com.my/Current_News/BTIMES/articles/20100928004513/Article/#ixzz10pN44kYw
Monday 27 September 2010
Terengganu to introduce law on swiftlet farming
Published: Monday September 27, 2010
Terengganu to introduce law on swiftlet farming
KUALA TERENGGANU: Operators of swiftlet farming in Terengganu will be required to register their bird-houses with the Veterinary Service Department under a new law to be introduced soon.
State veterinary director, Dr Azizol Mohd Sharom, said a workshop was being held to review guidelines on swiftlet farming which had been introduced by the cabinet with a view of adapting them to the state's needs.
The guidelines issued by the cabinet were too general and they would be modified to meet local condition, he told Bernama here on Monday.
He said the three-day workshop, which began Monday, was attended by about 100 participants, comprising officials from the Health Department, the National Park and Wildlife Department, the local authorities and representatives from the swiftlet farmers association.
Dr Azizol said the department would also introduce a model swiftlet-breeding house that would be cheaper.
A model of the bird-house, costing about RM28,000, has been built at the Jerangau Veterinary Center in Dungun, he added. - Bernama
Terengganu to introduce law on swiftlet farming
KUALA TERENGGANU: Operators of swiftlet farming in Terengganu will be required to register their bird-houses with the Veterinary Service Department under a new law to be introduced soon.
State veterinary director, Dr Azizol Mohd Sharom, said a workshop was being held to review guidelines on swiftlet farming which had been introduced by the cabinet with a view of adapting them to the state's needs.
The guidelines issued by the cabinet were too general and they would be modified to meet local condition, he told Bernama here on Monday.
He said the three-day workshop, which began Monday, was attended by about 100 participants, comprising officials from the Health Department, the National Park and Wildlife Department, the local authorities and representatives from the swiftlet farmers association.
Dr Azizol said the department would also introduce a model swiftlet-breeding house that would be cheaper.
A model of the bird-house, costing about RM28,000, has been built at the Jerangau Veterinary Center in Dungun, he added. - Bernama
Monday 20 September 2010
Is a property bubble forming?
Saturday September 18, 2010
By ANGIE NG
angie@thestar.com.my
There has been some concern in recent months over an imminent real estate bubble in Malaysia. How real is this threat or is it merely confi ned to a few hot spots?
CONCERNS over whether the local housing market is overheating and will lead to an asset bubble are raising questions on whether there is a need for more tightening measures to curb speculative buying and ensure the market stays sustainable.
Dr Yeah Kim Leng ... ‘Anything can trigger a collapse. An economic slowdown, for example.’ Nevertheless, prices of landed houses in some popular areas in the Klang Valley, Penang and Johor have appreciated by 10% to 30% over the past six to eight months. Bank Negara is keeping a close watch on the mortgage loan market and is engaging with bankers on whether tightening measures such as capping the loan-to-value ratio (LVR) at 80% should be introduced. It will be unlikely that the central bank will impose the mortgage loan limit across the board but the measure will most likely be targeted at the critical sectors, such as the upper medium to high-end landed residential sector and non-owner occupied houses.
Purchasers who own multiple properties may also be subject to the new loan limit if it is implemented.
The RPGT factor
Industry observers say another measure at the Government’s disposal is raising the quantum of real property gains tax (RPGT), which is currently at 5% for all property sold within the first five years of purchase.
The Government has tweaked the RPGT on various occasions depending on market conditions.
From April 2007 until it was reintroduced in January this year, all gains from property transactions have been exempted from the tax. The exemption was granted as a support measure to reverse the flagging property sales during the market downturn.
Under Budget 2010, the RPGT was brought back in January, albeit at 5% for all property sold within the first five years of purchase.
Tang Chee Meng ... ‘The state of the property market is very much dependent on the state of the country’s economy.’ The maximum 30% is for disposal within the first two years; 20% within the third year; 15% within the fourth year and 5% within the fifth year. Profits earned from disposal in the sixth year and beyond will not be taxed.
How far the Government will go on tightening the noose on mortgage loans and the RPGT is still left to be seen. But some changes can be expected in the horizon if price increases become more prevalent and broad-based.
Consumer and industry groups are concerned that if the tightening measures are introduced, they will impact the affordability of property buyers and market sentiment.
Usually if a market is flushed with speculative buying and a bubble is imminent, property prices will spike sharply across the board of a certain market within a short time like what is happening in a number of countries in the region today.
A case in point – a 26-year-old government-built apartment of 420 sq ft in the Sham Shui Po area of Kowloon district was transacted at HK$1.98mil, or HK$4,714 per sq ft.
Fuelled by high liquidity and record low mortgage rates, Hong Kong, China and Singapore have implemented tightening measures to clamp down on property speculators as risk heightens that the sharp escalation of property prices will result in a market collapse if the bubble burst.
Reason for concern?
Is Malaysia facing a similar risk and is there worry of an imminent overheating or bubble?
Real Estate and Housing Developers’ Association (Rehda) president Datuk Michael Yam discounts the possibility of overheating or an asset bubble in the local market.
“Generally, the local property industry is chugging along at an even keel. We believe that prices are already peaking, and we are neither hot nor cold. The recent spurt in prices may be due to the effect of the earlier stimulus package and liquidity but that has stabilised and a plateau has been formed,” he relates to StarBizWeek.
Yam says that unless there are government incentives, there is generally no excitement or broad-based stimulation in property activities. For an increase in activities, the impact of the Economic Transformation Programme, Government Transformation Programme and the NKEAs and even Malaysia Property Incorporated as major catalysts has to come in.
“However, one must appreciate that the price a house commands (other than its location) is dependent on its built-up, specifications, value added renovation and unique features not normally available in a standard offering,” he points out.
Tackling structural issues
Yam says the industry and the Government need to accelerate supply and also review the causes and hurdles that either impede or slow down the delivery process. Areas that need to be examined include the cost of doing business and the efficiency and subsidies that affect delivery to avoid overheating due to pent-up demand.
He disagrees with new tightening measures. “As it is, the market is not exactly buoyant and is only driven predominantly by owner occupiers. Any additional regulations such as higher RPGT, capping loan amounts and imposing higher deposits, or increasing the cost of housing delivery such as making the build-then-sell system compulsory would be a disincentive to the industry,” he stresses.
Malaysia Property Inc chief executive officer Kumar Tharmalingam says the issue of a bubble is being overblown.
“Our data shows values are rising in the Klang Valley but they are within specific locations and projects sought by a special brand of investors who want exclusivity. The strong buying interest is not across the board but is mainly centred in the high growth markets of the Klang Valley, Penang and Johor,” he adds.
Kumar says concerns that the potential slowdown in the West will affect the local market are also overrated.
“Our banks are strong and have not buckled even during the global financial crisis in 2007/8. We have systems in banks that keep on fine-tuning the loan to equity ratio depending on the earning capacity of the borrower. Bank Negara is watching the situation and will call in loan to value ratios to change if the situation warrants.
“Our property purchase system from a primary developer is probably the most seamless in Asia. All the necessary checks and balances are built into place by the developers, bankers and solicitors to make sure that the developers have the right purchaser who has the necessary finances and affordability to purchase the property,” he says.
An imminent uptrend?
Meanwhile, developers are monitoring the sale of their products daily and any signs of weakness in the market will be felt by them “since they stand to lose the most if the buyer pays a deposit and walks away from the purchase later,” Kumar adds.
According to Mah Sing Group Bhd group managing director and chief executive Tan Sri Leong Hoy Kum, the property market is still in the early to mid-phase of an upcycle.
“We do not see a strong risk of a property bubble happening yet and there is no sign of overheating. The price increase in properties has not been broad-based, but demand driven and rather selectively in prime locations.”
Leong says certain locations and types of products are more resilient in terms of demand, capital appreciation and value preservation.
“A healthy property market is good for the economy and quality properties in prime locations are deemed to provide a good hedge against inflation. Barring any external shocks, we are cautiously optimistic that the property market should continue to do well in the short and medium term,” Leong says.
Kumar concurs with Yam that the Government’s stimulus packages are only filtering into the system now and are creating greater confidence and interest in the property market.
“There are not enough viable investment instruments around and that’s why investors are rushing to buy property. Generally, our financial market still lacks depth such as good financial planners and advisors on investment opportunities. There is still a preference for solid and secure investment instruments like property,” he adds.
Kumar says developers will slow down on their launches as they do not want a property overhang of unsold units.
“Over the next few years we are going to see smaller launches in the Klang Valley as our property market consolidates and developers are going to release property in batches to test the market.
“Developers are venturing into niche products with better quality finishings and designs, as buyers want the least fuss these days. This has driven developers to go into higher value residences,” he concludes.
http://biz.thestar.com.my/news/story.asp?file=/2010/9/18/business/7043925&sec=business
Related Stories:
A leaf from history
Reasons for this perceived bubble
What industry players say
Cooling down the market
Parents won't have wealth to pass on, report
Future generations should not expect to inherit wealth from their parents following the ravages of the worst financial crisis since the 1930s, a new report has warned. 
The report says few Europeans are likely to have made adequate provision for their retirement, let alone passing on wealth to the next generation. Photo: Alamy
Of 6,010 Europeans questioned, just 10pc said they were actively intending to pass on "significant wealth" to their children, according to a survey of consumer finances by Janus Capital Group.
A further 42pc said they had no intention of doing so, while the remaining 48pc said they were unsure.
The survey claimed the financial crisis has produced a generation of under-saving, risk-averse Europeans, which will challenge the future of "inter-generational wealth transfer".
The responses of adults from the UK, France, Germany, Holland, Spain and Italy, showed the financial crisis has "fundamentally challenged the norms of financial wellbeing", according to Ric Van Weelden, head of Janus Capital's European business.
"Specifically, the report highlights how few Europeans are likely to have made adequate provision for their retirement, let alone passing on wealth to the next generation. The financial services industry will have a very different landscape to serve going forward," he said.
Many who were relying upon returns from their long-term investments for later life and to pass down as inheritance have seen values wiped out, and extended life expectancy is placing additional pressure on finances.
Of the six nations that took part in the survey, French respondents were most likely to pass on wealth, while their Spanish and German counterparts were the least likely.
In the UK, 16pc said they intended to pass on significant wealth to their children, 44pc said they had no intention and the remainder said they were unsure.
David Bowers, of Absolute Strategy Research, which carried out the survey for Janus Capital, said: "Inter-generational wealth transfer is something we have taken for granted.
"This is one generation when it may not happen as smoothly."
The report said that at present in the UK, the average estate is worth £90,000 and divided five ways, but Janus Capital said that is likely to change, with those aged 45 to 54 unable or unwilling to save sufficiently.
"The financial crisis has exacerbated a tendency to under-save and to be risk averse.
"Europe's working population has yet to wake up to the fact that it will not be able to retire as early as it would like, and indeed may have to work a lot longer," Mr Bowers said.
http://www.telegraph.co.uk/finance/personalfinance/8010896/Parents-wont-have-wealth-to-pass-on-report.html
The responses of adults from the UK, France, Germany, Holland, Spain and Italy, showed the financial crisis has "fundamentally challenged the norms of financial wellbeing", according to Ric Van Weelden, head of Janus Capital's European business.
"Specifically, the report highlights how few Europeans are likely to have made adequate provision for their retirement, let alone passing on wealth to the next generation. The financial services industry will have a very different landscape to serve going forward," he said.
Many who were relying upon returns from their long-term investments for later life and to pass down as inheritance have seen values wiped out, and extended life expectancy is placing additional pressure on finances.
Of the six nations that took part in the survey, French respondents were most likely to pass on wealth, while their Spanish and German counterparts were the least likely.
In the UK, 16pc said they intended to pass on significant wealth to their children, 44pc said they had no intention and the remainder said they were unsure.
David Bowers, of Absolute Strategy Research, which carried out the survey for Janus Capital, said: "Inter-generational wealth transfer is something we have taken for granted.
"This is one generation when it may not happen as smoothly."
The report said that at present in the UK, the average estate is worth £90,000 and divided five ways, but Janus Capital said that is likely to change, with those aged 45 to 54 unable or unwilling to save sufficiently.
"The financial crisis has exacerbated a tendency to under-save and to be risk averse.
"Europe's working population has yet to wake up to the fact that it will not be able to retire as early as it would like, and indeed may have to work a lot longer," Mr Bowers said.
http://www.telegraph.co.uk/finance/personalfinance/8010896/Parents-wont-have-wealth-to-pass-on-report.html
Sunday 19 September 2010
Buffettologism and Malaysia
Save yourself from BN economic failure - embrace Buffettologism
The Minister Mentor may be dictatorial, but he uses it for the good of his citizens and transformed the country into a modern state and he will be loved more. You can always use your horse sense like what the Minister Mentor does but you didn't.
By 2partysystem
If you're poor and you think it is because of BN economic policy, you should consider Buffettologism seriously. I've had enough of living from hand to mouth since I started working 20 years ago. Then I embraced Buffettologism and it changed my life for good - richer, happier, and healthier. It works for me and I'm sad I came to know about it a bit late but I'm glad I can still share it with my fellow Malaysians.
I've never made any profit in the stock market in Malaysia even during a bull run; I only see my money grow in overseas stocks after embracing Buffettologism. When Bill Gates met Warren Buffett for the first time, the meeting lasted for ten hours and Bill Gates became his devotee. That's right, even Bill Gates became a devotee! Now that the price of essential items and cost of living have gone up, let's see this Sage of Omaha's philosophy and what we should do to save ourselves.
His advice to young people: Stay away from credit cards (bank loan) and invest in yourself and remember:
1) Money doesn't create man but it is the man who created money.
2) Live your life as simple as possible.
3) Don't do what others say, just listen to them, but do what you feel good.
4) Don't go on brand name; just wear those things in which you feel comfortable.
5) Don't waste your money on unnecessary things; just spend on them who really in need rather.
6) After all it's your life then why give chance to others to rule your life.
1) Money doesn't create man but it is the man who created money.
2) Live your life as simple as possible.
3) Don't do what others say, just listen to them, but do what you feel good.
4) Don't go on brand name; just wear those things in which you feel comfortable.
5) Don't waste your money on unnecessary things; just spend on them who really in need rather.
6) After all it's your life then why give chance to others to rule your life.
Warren Buffett has never borrowed a significant amount to invest or for a mortgage because living on credit cards and loans won't make you rich. To prevent yourself from servicing a bank loan, be careful when buying cars and houses. There are always arguments for and against owning a house in terms of investment. Unless you have lots of money to spare, buying an expensive home is not worthwhile for a wage earner because you will be overwelmed by debt. I started asking why should I give a chance to others to rule my life. Just see who gets richer and it is definitely not you.
From my experience of owning a low cost flat applied (I'm qualified) through the Penang State Government under BN and all the way to the High Court which I won due to a delay in completion, I'll never again buy any house or new cars even if I'm a millionaire. Winning is nothing because the developer knows how to go about the system to make you lose even more. There was hanky-panky going on and I've nothing good to say about our judicial system. You also need to deal with liquidators and the Insolvency Department. The poor Malay and Indian buyers have to suffer too and no thanks to the Penang State Government under BN for doing a lousy job - not supervising the project properly. You never hear this type of nonsense in Singapore. My self nature is quite similar to what he advices but because of listening too much to other people, I suffered financial loss.
Have you ever wondered why Warren Buffett didn't make quick bucks through property speculations? This is because he lives his life as simple as possible, avoiding endless migraines. One late tycoon in Penang who became famous for his motorbike business lived a life of unceasing litigations, according to one of his lawyers. Instead of enjoying his rich lifestyle, he was engaged with his lawyers going through legal matters and madness. Your land can be taken away by the Government at a low price on the pretext of building a school or hospital but later sold to commercial property developers at a high price to pocket the money. These bastards make a profit out of your land and all these freehold and leasehold tags are all bullshit. You can sue but you lose not only your money but also the case itself. Of course some can still argue that real property is a good investment because property appreciates but against the huge mortgage to pay off, house that cracks, legal fees and tenants who don't pay up, consider yourself lucky if they didn't pour cement into your toilet bowl.
Warren Buffett has gotten many heart-rending letters from people who thought their borrowing was manageable but became overwhelmed by debt. His advice is, negotiate with creditors to pay what you can, then when you're debt-free, work on saving some money that you can use to invest. Poor people frying goreng pisang or char koay teow can stop these corrupt politicians from spending on expensive goods from rich countries by embracing Buffettologism and investing rightly on the pittance they make and don't give chances to others to rule your life. The best defense in a tough economy is to add the most you can to society because your money can be inflated away but your knowledge and talent cannot. No matter the external circumstances, you are always in control of your talent, learning and passion for life and there will always be opportunities for talent.
His stand on integrity: Lose money and I will forgive you, but lose even a shred of reputation and I will be ruthless.
1) We will not trade reputation for money.
2) It takes 20 years to build a reputation and five minuted to ruin it. If you think about that you'll do things differently.
3) The most important thing to do if you find yourself in a hole is to stop digging.
4) In looking for people to hire, look for three qualities: integrity, intelligence, and energy. If you don't have the first, the other two will kill you. If you hire somebody without integrity, you really want them to be dumb and lazy.
5) Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
6) We celebrate wealth only when it's been fairly won and wisely used.
1) We will not trade reputation for money.
2) It takes 20 years to build a reputation and five minuted to ruin it. If you think about that you'll do things differently.
3) The most important thing to do if you find yourself in a hole is to stop digging.
4) In looking for people to hire, look for three qualities: integrity, intelligence, and energy. If you don't have the first, the other two will kill you. If you hire somebody without integrity, you really want them to be dumb and lazy.
5) Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
6) We celebrate wealth only when it's been fairly won and wisely used.
Wealth can always be recreated but reputation takes a lifetime to build and often only a moment to destroy. One Defence Minister said something nonsensical like if you damage the country's image, then you are a traitor. What kind of image and whose image was he talking about and why don't Pakistan's or India's nuclear warhead get stolen by a low ranking officer? In Altantuya's case, if it's true she died because of the USD500k commission, then who's going to trust Malaysia in business dealings involving bigger sums of money? The Government should honour its agreements with Chin Peng to allow him to return home and with the company that was not being paid for printing election posters. If you do think about your reputation, you would have done everything differently.
MACC was not aware that some people will not be easily turned around even when they are threatened. Teoh Beng Hock's martyrdom proved that he won't trade reputation and principle for money or threat. His death signifies that he is a man of honour and would never stoop to any form of deceit. If those who helm these institutions don't have integrity, according to Warren Buffett, you can expect them to be dumb and lazy. Just see what kind of stupid things they have done at the coroner's inquest and they still talk about "image" not to mention how many deaths in custody, the Perak putsch, etc.
In Anwar's sodomy II case, the powers that be is treating all Malaysians like stupid fools, not knowing what anal sex is all about. The powers that be is sending this message to whole world, "Look, we can treat our citizens as idiots". If you have the passion to learn, you can actually educate yourself about anal sex (see "Guide to Anal Sex by Marilyn Chambers" etc) and make a fair and logical judgment whether Anwar really committed the act. I strongly oppose censorship of the internet because it helps me obtain vital information and statistics to the case, like age and libido, sex process, tools and lube used, penetrating evidence, the anatomy etc to develop my belief systems.
Singapore placed integrity as an important criteria that eventually allow one of our casino companies to operate there. This company had been observed by Singapore for a very long time in terms of integrity, management, performance etc, otherwise they won't have to even dream of opening one there. And if this company finds Singapore a better environment to do business, decides to move their HQ there and pay their group corporate taxes to the island republic, with its tax incentives and effective tax rates as one of the lowest in the world, who is going to gain and who is going to lose from the DTA? Why didn't Singapore allow the opening of casinos in 70's and 80's to compete with us and why now? You know the answers.
Warren Buffett: Chains of habit are too light to be felt until they are too heavy to be broken.
Besides smoking, drinking, gambling and womanising, the worst of them all is the clinging to NEP, "Ketuanan" and "Hak Istimewa" addiction even when it is already empty and essenceless. Some people will still be shouting while grasping for air to soothe their souls. Of course it is a lucrative business for the kingpins, selling these drugs to the Malays and so they get hooked. Take away the drugs and there will be riots. The truth is the non Malays have nothing to lose if the addiction continues but will put the country in peril of bankruptcy. Why don't you just ask the rich non Malays to hide away their wealth so that it won't create so much jealousy and problems here? Rich people like Warren Buffett don't need status symbols, they would like to keep a low profile and enjoy their private life. So, instead of expensive fancy cars that most of us would like to pursue, rich people should have normal cars to prevent anyone knowing that a billionaire is inside. Our lives would be more peaceful if we follow Warren Buffett.
You can become a billionaire by saving RM5000 every month, invest your savings that give 15% or more return annually and compounded and do that for 55-60 years. In fact, everybody can become a millionare, just by reducing your savings to RM50 every month. By considering inflation, increases in amount saved and percentage return fluctuations and luck, there is nothing to be jealous about the non Malays having more money, because the Malays already have a good investment vehicle, the ASN to do that for them. When you first make money, you may be tempted to spend it. Don't. Instead, reinvest the profits. There is a legend that Albert Einstein once said that compounding interest is the the most powerful force in the universe.
Recently I saw some billings/demand for payment letters thrown in the rubbish area belonging to a few Malay civil servants in their early 20's and I was totally shocked. Their debts come to about RM50-60k and cellphone to the tune of RM500. These are cash loans, a product with an Arabic name from a local bank and they are not housing, car, study loan or credit card debts. I began to wonder how they are going to manage it and whether they need to repay the bank. Don't get me wrong, the non Malays too have debts but the impression is, what did the Government do to educate the Malays to be more prudent and thrifty? The Government is making the Malays poorer by employing them as civil servants unless there are hidden opportunities for rent seeking. Courage does not grow on its own if you did not learn how to deal with hardship in business by yourself. I've seen with my own eyes people around me who started as a rubber tapper, waiter, labourer, pump attendant, washer etc and are today multi-millionaires (some overseas based) and those who started as a civil servant retired with accumulated debts.
For every RM50k lost without collateral, the bank needs to have about 15 - 20 good RM50k loan to cover that one lost because of interests the bank needs to pay to these 15 - 20 depositors. Unless money drops from heaven, you would like to think a thousand times before giving out loans to these borrowers.
Warren Buffett: If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don't do that though.
He says the GDP would go up if he hires 10,000 people to do unproductive activities and these GDP, GNP, GNI, FDI data sometimes capture our interest without knowing that they can be manipulated. You don't get paid for activities, you only get your rewards for being right. The annual report of listed companies can be deceiving too for example their RM20mil inventory may be worth only RM3mil due to depreciation, overseas operational profits may not be accurate because we can't see their operation and fixed assets plus different system of accounting, forcing or bribing reporters to write good news about the company - to name a few. The worst I heard from a horse's mouth is that "many didn't have secretive information exchange from the top thus the poor are always the suckers". How are we going to challenge or compete with the rich particularly in this country? Buffettologism is a good way out for us, the poor.
Warren Buffett believes that in 20 years' time, all the cars on the road will be electric. He's already invested in a Chinese company working on the technology to make it happen. Buffett thought of the peak oil theory, that oil production has peaked and will only decline in the future and what he believed would replace carbon fuel. Actually, this Chinese company copied competitors' designs piece by piece. I wonder why he didn't invest in our local auto company because we also copy competitor designs car by car for some models. Seehttp://www.businessinsider.com/here-is-exactly-how-warren-buffetts-chinese-auto-company-byd-copied-competitor-designs-piece-by-piece-2010-2
Because of greed and arrogance, we damaged our reputation first then we tried to rebuilt it again.
Warren Buffett on US, China and other countries: Do not see the global economy as an "us against them" struggle: if China does well, or Russia, it won't make America any less prosperous.
1) The truth is, the Chinese will do better, because they're starting from a lower base, but they have learned a tremendous amount about business in the last 20 years, and about how to unleash the human potential, and that's something that the US learned earlier. And but they're picking it up very, very, very fast.
2) I know that 10 years from now, 20 years from now, China and India are going to be a long way ahead of where they are now. So I don't worry too much about whether there's going to be a sudden interruption or something.
3) He really believes the U.S. economy will recover and be strong for decades to come.
4) He said America has a great system and it has always worked, and it will keep working in the future.
1) The truth is, the Chinese will do better, because they're starting from a lower base, but they have learned a tremendous amount about business in the last 20 years, and about how to unleash the human potential, and that's something that the US learned earlier. And but they're picking it up very, very, very fast.
2) I know that 10 years from now, 20 years from now, China and India are going to be a long way ahead of where they are now. So I don't worry too much about whether there's going to be a sudden interruption or something.
3) He really believes the U.S. economy will recover and be strong for decades to come.
4) He said America has a great system and it has always worked, and it will keep working in the future.
We used to think that the Indonesians are poor and dirty, didn't we? They may be dirty because of their work but they're not poor anymore. Just go to their villages in Java and see what kind of houses they are living in and compare to ours in slump areaa. I knew one maid who was able to sent back RM25k just to build a house on her land plus buying a new motorbike and cash for emergency uses. Their investment comes in the forms of property and agricultural products like cows, seeds or fertilizers that could generate future income. They won't buy luxury goods like cars just to show off but they will buy cars that carry goods. They would rather travel by public transportation. Their President is working very hard to eradicate corruption although it is still rampant. We are still dreaming and think that we can hire them for RM500 per month.
Recently, I met and talked to one Indian manager attached to a US MNC based in Dubai about Indian workers. He said many penniless Indians went to Dubai to search for work door to door with the help of their fellow countrymen. Many became successful and managed to saved a lot of money. Besides money, they also gained experience and exposure, learn new things, see other parts of the world etc. When I was abroad, many Chinese nationals tried to get acquainted with me thinking that I'm their countrymen and this makes me feel that we lack acquaintedness (hopefully I had erred) which stemed from entrenched "us against them" struggle and distrust where people's views are polarized and narrowed down to racially-based perspectives.
People throughout the world migrated to the US is because they have a great system such as total freedom to unleash the human potential unmatched by any other countries in the world. Enhancing the human potential should not be controlled or managed by anybody, it should be left to one's liberty to choose what they want to do. Here we have a very lousy system such as having difficulty in choosing the courses we like to study even with good results and those assembling peacefully to celebrate an event will get arrested. Some choose to ship out and some only stick to "special privileged" civil service jobs that one could get rich only by rent seeking.
Today, China is developing the fifth generation stealth fighter jet the J-XX, moving and transforming away from a Third World country status of 20 years ago. What about us here? 20 years ago our engineers' starting salary is still the same as today's, with our maquiladora-like mentality and having foreigners as our cheap laborers. What have we done to improve our human potential? The whole fucking problem is I can't simply walk into our local universities to study or take courses of my choice and interest and the government failed to make high quality university education in abundance. In the words of John F. Kennedy, "A child miseducated is a child lost. Our progress as a nation can be no swifter than our progress in education. The human mind is our fundamental resource."
Know What Success Really Means: Despite his wealth, Warren Buffett does not measure success by dollars. In 2006, he pledged to give away almost his entire fortune to charities, primarily the Bill and Melinda Gates Foundation. He's adamant about not funding monuments to himself -- no Warren Buffett buildings or halls. "I know people who have a lot of money," he says, "and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. When you get to my age, you'll measure your success in life by how many of the people you want to have love you actually do love you. That's the ultimate test of how you've lived your life."
I want to ask Tun Dr. Mahathir, do you love us all equally as your Malaysian children or you only love some of your "selected" Malay and non Malay children? Remember Warren Buffett said "love trumps wealth" and if we children have to struggle through each day with 34% earning less than RM700 per month while you can live and spend like kings for yourself and for your "selected children" then we are going to be very suspicious of our father.
You said "Most of the wealth of the country belongs to the Chinese. It can also be said that the Chinese control the economy of the country, the NEP is about giving the Malays a fair stake .....bla bla bla ....bla bla...." and I ask why all these jealousy? You break up your children into classes, make them quarrel among themselves, those who did well in exams did not get the proper rewards prompting them to get out of the house. Is there anything wrong if your children go to different schools, learn different languages, have different friends and get different examination results but come home to you as the unifying father and speak the same language with you? In fact there are so many ways to help everyone fairly and enough wealth to be distributed among all your children who can theoretically enjoy better life, better education and better medical facility; the most important is that we don't quarrel among ourselves.
Or was it because you need to make all these money to overcome your inferiority complex to stand equally tall with Marcos, Suharto, Thaksin or the most "unbearable" the Minister Mentor down south when dealing with them in this region? Or was it because there might be a military intervention by the US or Chinese government in Malaysia because we have a lot of oil?
Your "selected" children will appreciate what you have given them and they can give good lip services but they actually don't love you. How can they love a leader who destroyed good governance, law and order, quality education, religious brotherhood, peace and harmony unless they themselves don't have good conscience?
If Hitler gave me tons of money or gold, I may appreciate what he had done for me but it is impossible for me to love him. I love Warren Buffett and many do so because he is willing to share his legitimate success secrets with all and get us out of financial mess. The Minister Mentor may be dictatorial, but he uses it for the good of his citizens and transformed the country into a modern state and he will be loved more. You can always use your horse sense like what the Minister Mentor does but you didn't.
We need to save ourselves from financial "doom".Friday 17 September 2010
Growth Stocks - When Should You Bank Your Profits?
By: James Woolley l Sep 16, 2010
Growth stocks can mean different things to different people, but I personally define a growth stock as being shares in a company that continues to increase both it's earnings and dividends each year (and has a long history of doing so). So with that in mind, I want to talk about when you should sell these stocks, because this is very important.
If you're lucky enough to have found some good quality growth stocks and are sitting on some decent profits, then it can be tempting to bank your profits and reinvest the proceeds elsewhere. However, as Warren Buffett will tell you, this isn't necessarily the best strategy.
The best strategy, provided that you're prepared to hold on to your shares for the long term, is to resist the temptation to sell and hold on for further gains. Yes there may be short-term fluctuations along the way, but providing that the company in question continues to increase both it's earnings and dividends each year, there is no need to sell because the share price will eventually rise to reflect this continued growth.
If you hold on to shares for as long as a company continues to grow and reinvest the dividends received each year, then you can be sure that you will be sitting on some substantial gains when you do finally decide to sell. This is something that Warren Buffett does to devastating effect. He simply looks for outstanding market-leading companies that continue to grow their profits each year, and holds on to these shares for years and years to benefit from both capital growth and dividends.
It requires a great deal of patience because in the short-term the share price can fall in line with the overall market, but in the long-term it rewards you with some fantastic profits. The difficulty is finding the right companies to invest in, but there are some obvious candidates amongst some of the large-cap stocks. For example here in the UK Tesco is a fantastic company because it has a long history of growing both it's earnings and dividends. Indeed I believe Buffett himself owns shares in Tesco at the time of writing.
So to answer the original question of when should you sell your shares in growth stocks, you should hold on to your shares for as long as possible to benefit from both capital growth and dividend reinvestment. The only time you should consider selling is when there is a danger that the company may stop increasing it's bottom line each year, maybe due to another major competitor gaining market share, for instance, because that will obviously mean that the share price is unlikely to continue rising in future years.
http://business.ezinemark.com/growth-stocks-when-should-you-bank-your-profits-1680a0ff66c.html
Growth stocks can mean different things to different people, but I personally define a growth stock as being shares in a company that continues to increase both it's earnings and dividends each year (and has a long history of doing so). So with that in mind, I want to talk about when you should sell these stocks, because this is very important.
If you're lucky enough to have found some good quality growth stocks and are sitting on some decent profits, then it can be tempting to bank your profits and reinvest the proceeds elsewhere. However, as Warren Buffett will tell you, this isn't necessarily the best strategy.
The best strategy, provided that you're prepared to hold on to your shares for the long term, is to resist the temptation to sell and hold on for further gains. Yes there may be short-term fluctuations along the way, but providing that the company in question continues to increase both it's earnings and dividends each year, there is no need to sell because the share price will eventually rise to reflect this continued growth.
If you hold on to shares for as long as a company continues to grow and reinvest the dividends received each year, then you can be sure that you will be sitting on some substantial gains when you do finally decide to sell. This is something that Warren Buffett does to devastating effect. He simply looks for outstanding market-leading companies that continue to grow their profits each year, and holds on to these shares for years and years to benefit from both capital growth and dividends.
It requires a great deal of patience because in the short-term the share price can fall in line with the overall market, but in the long-term it rewards you with some fantastic profits. The difficulty is finding the right companies to invest in, but there are some obvious candidates amongst some of the large-cap stocks. For example here in the UK Tesco is a fantastic company because it has a long history of growing both it's earnings and dividends. Indeed I believe Buffett himself owns shares in Tesco at the time of writing.
So to answer the original question of when should you sell your shares in growth stocks, you should hold on to your shares for as long as possible to benefit from both capital growth and dividend reinvestment. The only time you should consider selling is when there is a danger that the company may stop increasing it's bottom line each year, maybe due to another major competitor gaining market share, for instance, because that will obviously mean that the share price is unlikely to continue rising in future years.
http://business.ezinemark.com/growth-stocks-when-should-you-bank-your-profits-1680a0ff66c.html
Thursday 16 September 2010
Market report: HSBC could double dividend, say analysts
HSBC was in focus as City analysts suggested the banking behemoth could double the size of its dividend from its 2009 low.
"We think the rebound in profitability and confirmation of Basel capital requirements will allow the bank to step up its dividend materially," said Michael Helsby, an analyst at Bank of America Merrill Lynch.
Mr Helsby argued that even after factoring in a higher dividend, HSBC would have around $15bn (£9.6bn) of surplus capital by 2012.
"Investor perception of HSBC is dominated by the outlook for interest rates. Consensus suggests that HSBC cannot turn around its operating performance without an [interest] rates increase. We are more bullish," said Mr Helsby, as he raised his target price on the stock to 905p and reiterated his "buy" rating.He concluded: "The bank's risk appetite has recovered and in our view top line growth will respond."
HSBC shares edged up 0.4 to 676.6p.
http://www.telegraph.co.uk/finance/markets/marketreport/8005404/Market-report-HSBC-could-double-dividend-say-analysts.html
Chinese think tank warns US it will emerge as loser in trade war
A State Council think-tank in China has warned Washington that the US will come off worst in a trade war if it imposes sanctions against Beijing over the two nations' currency spat.
The US is considering legislation to punish Beijing for holding down the yuan Photo: AFP
Ding Yifan, a policy guru at the Development Research Centre, said China could respond by selling holdings of US debt, estimated at over $1.5 trillion (£963bn). This would trigger a rise in US interest rates. His comments at a forum in Beijing follow a string of remarks by Chinese officials questioning US credit-worthiness and the reliability of the dollar.
China's authorities seem split over how to respond to moves on Capitol Hill for legislation to punish Beijing for holding down the yuan. The central bank has ruled out use of its "nuclear weapon", insisting that it would not exploit its $2.45 trillion of foreign reserves for political purposes. "The US Treasury market is a very important market for China," it said.
However, the mood is hardening on both sides of the Pacific. The dispute risks escalating if China's trade surplus with the US climbs further and more US jobs are lost. US Treasury Secretary Tim Geithner, who has taken a softly-softly line in the past, said on Friday that China had done "very little" to correct the undervaluation of the yuan since ending the dollar peg in June.
Mr Ding reflects thinking among some in the Poltiburo, who seem convinced that the US is in decline and that China's rise as an exporter of goods and capital give it the upper hand.
"They are utterly wrong," said Gabriel Stein from Lombard Street Research. "The lesson of the 1930s is that surplus countries with structurally weak domestic demand come off worst in a trade war."
He described the implicit threat to sell Treasuries as "empty bluster" because Beijing's purchase of these bonds is a side-effect of its yuan policy. "Bring it on: it will weaken the dollar, which is what the US wants. The interest rate effect can be countered by the Fed."
"Some Chinese officials seem to believe that buying Treasuries underpins US public spending. In fact China's mercantilist policy is forcing the US to run large deficits against its own interest. China should be terrified of a trade war."
http://www.telegraph.co.uk/finance/currency/8002719/Chinese-think-tank-warns-US-it-will-emerge-as-loser-in-trade-war.html
Mr Ding reflects thinking among some in the Poltiburo, who seem convinced that the US is in decline and that China's rise as an exporter of goods and capital give it the upper hand.
"They are utterly wrong," said Gabriel Stein from Lombard Street Research. "The lesson of the 1930s is that surplus countries with structurally weak domestic demand come off worst in a trade war."
He described the implicit threat to sell Treasuries as "empty bluster" because Beijing's purchase of these bonds is a side-effect of its yuan policy. "Bring it on: it will weaken the dollar, which is what the US wants. The interest rate effect can be countered by the Fed."
"Some Chinese officials seem to believe that buying Treasuries underpins US public spending. In fact China's mercantilist policy is forcing the US to run large deficits against its own interest. China should be terrified of a trade war."
http://www.telegraph.co.uk/finance/currency/8002719/Chinese-think-tank-warns-US-it-will-emerge-as-loser-in-trade-war.html
China – How to prevent a housing bubble
China – How to prevent a housing bubble
Written by Standard Chartered Global Research
Tuesday, 14 September 2010 14:17
Key points
* Wealth management products offer higher rates than standard fixed-term deposit rates
* But real negative rates mean these products do not prevent asset inflation pressure
* We expect house prices to rise more; without rate reform, nationwide housing bubble is likely
KUALA LUMPUR: There is more interest rate freedom in China than meets the eye – but not enough to stop an asset bubble forming, we believe. Real People’s Bank of China (PBoC) base rates are super-low for an economy growing at 8-10% in real terms.
The real 1Y PBoC deposit rate is currently at -1.25% (using current CPI inflation to adjust the nominal rate). In other words, depositing money at the bank costs you money. For corporates, borrowing is super-cheap, at 1% for a one-year loan (using producer price index, or PPI, inflation to deflate the nominal 5.31% rate).
As a result, while the central authorities may occasionally roll out higher down-payment requirements for home purchases or build more low cost housing, we expect a nationwide housing bubble to form in the next few years if interest rates are left where they are.
Officially, banks can offer loans at rates as much as 10% below the loan rate, and at any rate above it; on the deposit side, banks can offer lower rates than the base, but not higher.
However, there is a lot more to interest rates in China than the official rates. For instance, short-term draft financing (via instruments such as banker’s acceptance drafts) is done below the PBoC base loan rate. A reasonably sized corporate can currently obtain a three-month draft at 3.2-4.0%, versus the 4.9% base rate for a three- to six-month loan.
A big, cash-rich company can on lend to a cash-poor company, via a bank, through an entrustment loan structure, and negotiate its own rates – at present, a large multinational can lend to another large multinational, all onshore, at a rate of 3.0-3.5% for up to six months, or at 4.0-4.5% for up to one year, compared with official rates of 4.9% and 5.3%, respectively.
Non-bank financial institutions with large deposits (more than CNY 30mn) can negotiate a higher-than-benchmark rate with their banks – the rate as of end-June was around 4% for a deposit of more than five years (compared with the 3.60% PBoC base rate). And for wealthy retail depositors, China’s banks have offered a feast of wealth management products (WMPs) in recent years which offer higher returns on retail deposits for a bit of extra risk.
We recently reported on the informal banning of one type of WMP – those offered by trust companies via banks.
These products were the packaged results of corporate loans extended by banks or trust companies. As a result, they could offer relatively high interest rates (around 3% on a trust loan in March 2010).
With the removal of these products, what is a wealthy Shanghai depositor to do with all her cash? Are the banks still able to offer enough through other structures to keep real rates above zero?
What can you get for your deposit now?
We asked this question of several branches of shareholding and city commercial banks in Beijing and Shanghai last week.
Smaller shareholding banks are more in need of deposits, since they lack the branch networks of the biggest banks. We wanted to find out which rates and structured deposit products were on offer. We also looked into whether trust products have been taken off the market entirely.
Our key findings:
• Banks are not offering floating deposit rates (as has been suggested in various media reports). PBoC benchmark rates are applied to all fixed-term deposits.
• Only one bank offered anything close to a floating-rate deposit. This small bank, which opened its first branch in Shanghai recently, offers attractive rates on demand deposits, basically paying a fixed-term interest rate for the period the deposit is with them. (In contrast, if you put your money in a standard term account and withdraw it early, you are paid the on-demand interest rate of 0.36%.) This small bank currently offers a 1.19% 1M deposit rate, for example. The downside is that it only has one Shanghai branch so far, so access is limited.
• There is an array of WMPs on offer, some very short-term and low-risk. One salesperson even told us, “Fixed deposits are so out these days!” We found three basic types of WMPs during our visits to the banks:
1. PBoC bill-based products. These are issued each day, the total amount depending on the bank’s asset-liability ratio (or perhaps even the branch’s, given that Beijing and Shanghai branches of the same bank were offering different rates), and are issued on an ad-hoc basis. Products range from 7-day to 1Y, with annualised rates ranging from 2.3% to 3.45%.
2. ‘Residual’ trust products. Most banks warned us that the bank regulator is now prohibiting them from selling trust products (as we reported) and new, stricter regulations are now in place for high-risk wealth products. Most banks we visited were not offering trust loans. In Beijing, though, a couple of banks were still offering trust products which had been launched before the regulator stopped them.
And one bank in Shanghai was selling a bundled quasi-trust product which included a trust loan along with bills, bonds, and FX. This product ranged from 1M to 6M, with annualised rates of 2.5% to 3.2% – well below the rates offered on trust products before the ban in April.
3. Banks marketing others’ WMPs. One major commercial bank in Shanghai was marketing a high-yield WMPs on behalf of a relatively new insurance company. This is a 5Y product with a 12.5% total yield at maturity. It also comes with additional perks: five annual bonuses based on the insurance company’s performance (at least 1.3%, we were told) and an accident insurance policy offering five times the standard cover. One bank in Shanghai was offering a one-off bonus on top of returns for customers who bundle their deposits, equity and fund investments together and entrust them all to the bank’s partner securities broker.
On average, we found that one can expect to receive returns of around 2.6% on a 3M WMP deposit, or 2.9% for a 1Y WMP deposit, compared with the 1.71% and 2.25% PBoC fixed rates, respectively. In other words, although WMPs offer significantly higher rates than standard deposits, given that inflation is running at 3.5% y/y, these rates are still negative in real terms. (The trust companies are still able to market and sell trust products to their VIP clients; rates in July were reported to be around 8.5%.)
Banks’ policies on principal protection seem to vary. In Shanghai, several banks told us specifically that they were no longer able to offer 100% principal protection on WMPs (which suggests that they were previously allowed to). In practice, the bankers we spoke to offered a verbal promise of principal protection. However, in Beijing, a number of city commercial and large commercial banks that we visited still offer 100% principal protection in the contract, as long as the deposit reaches the maturity date.
To conclude, while wealthy depositors have access to better rates on structured deposit WMPs, these rates are still not high enough to eliminate the negative real rate problem. At the same time, the real mortgage rate is low – a first-home buyer will pay about a 4.5% nominal rate (the PBoC benchmark 1Y loan rate discounted by 15%) for a 10-year mortgage.
This works out to 1% in real terms, using CPI inflation to deflate.
This means a property bubble will, over time, spill over in to the Tier 2 and Tier 3 cities. As soon as monetary policy is loosened, whether it is at the end of this year (as we expect) or later, or as soon as the central government signals even the mildest of loosening of housing policy, we worry that house prices will rise again – particularly outside the Tier 1 cities, where prices are already pretty elevated.
Comments from an official at Shenyang People’s Bank (a branch of the PBoC) on the need for interest rate reforms have attracted much interest in recent weeks. His idea is to allow banks to offer higher deposit rates, starting off in north eastern China.
We are unsure how much backing this idea has from the leaders of the PBoC, but the comments highlights a long-running and frustrated ambition of many at the central bank to liberalise rates and raise them to nearer to China’s nominal growth rate. As we have explained in this note, interest rate liberalisation has happened in the nooks and crannies of the market, but the base rate system still dominates, and it is unreformed.
It strikes us that allowing one region of China to raise rates would not be easy, given the ease with which money moves around the country. We also believe that, given the ‘no-change’ macroeconomic stance of the State Council, it would be hard to persuade other ministries of the rationale for raising rates, whatever the medium-term benefits (though, of course,there will never be a ‘good’ time for rate reform).
We believe that this problem needs to be solved if China is to prevent a debilitating asset bubble from forming over the next five years. Before the housing market existed, in the 1980s-1990s, liquidity had no choice but to sit idle in deposit accounts. Now a big housing market does exist, and deposits – even structured deposits – are not priced right.
http://www.theedgemalaysia.com/business-news/173483-china--how-to-prevent-a-housing-bubble.html
Written by Standard Chartered Global Research
Tuesday, 14 September 2010 14:17
Key points
* Wealth management products offer higher rates than standard fixed-term deposit rates
* But real negative rates mean these products do not prevent asset inflation pressure
* We expect house prices to rise more; without rate reform, nationwide housing bubble is likely
KUALA LUMPUR: There is more interest rate freedom in China than meets the eye – but not enough to stop an asset bubble forming, we believe. Real People’s Bank of China (PBoC) base rates are super-low for an economy growing at 8-10% in real terms.
The real 1Y PBoC deposit rate is currently at -1.25% (using current CPI inflation to adjust the nominal rate). In other words, depositing money at the bank costs you money. For corporates, borrowing is super-cheap, at 1% for a one-year loan (using producer price index, or PPI, inflation to deflate the nominal 5.31% rate).
As a result, while the central authorities may occasionally roll out higher down-payment requirements for home purchases or build more low cost housing, we expect a nationwide housing bubble to form in the next few years if interest rates are left where they are.
Officially, banks can offer loans at rates as much as 10% below the loan rate, and at any rate above it; on the deposit side, banks can offer lower rates than the base, but not higher.
However, there is a lot more to interest rates in China than the official rates. For instance, short-term draft financing (via instruments such as banker’s acceptance drafts) is done below the PBoC base loan rate. A reasonably sized corporate can currently obtain a three-month draft at 3.2-4.0%, versus the 4.9% base rate for a three- to six-month loan.
A big, cash-rich company can on lend to a cash-poor company, via a bank, through an entrustment loan structure, and negotiate its own rates – at present, a large multinational can lend to another large multinational, all onshore, at a rate of 3.0-3.5% for up to six months, or at 4.0-4.5% for up to one year, compared with official rates of 4.9% and 5.3%, respectively.
Non-bank financial institutions with large deposits (more than CNY 30mn) can negotiate a higher-than-benchmark rate with their banks – the rate as of end-June was around 4% for a deposit of more than five years (compared with the 3.60% PBoC base rate). And for wealthy retail depositors, China’s banks have offered a feast of wealth management products (WMPs) in recent years which offer higher returns on retail deposits for a bit of extra risk.
We recently reported on the informal banning of one type of WMP – those offered by trust companies via banks.
These products were the packaged results of corporate loans extended by banks or trust companies. As a result, they could offer relatively high interest rates (around 3% on a trust loan in March 2010).
With the removal of these products, what is a wealthy Shanghai depositor to do with all her cash? Are the banks still able to offer enough through other structures to keep real rates above zero?
What can you get for your deposit now?
We asked this question of several branches of shareholding and city commercial banks in Beijing and Shanghai last week.
Smaller shareholding banks are more in need of deposits, since they lack the branch networks of the biggest banks. We wanted to find out which rates and structured deposit products were on offer. We also looked into whether trust products have been taken off the market entirely.
Our key findings:
• Banks are not offering floating deposit rates (as has been suggested in various media reports). PBoC benchmark rates are applied to all fixed-term deposits.
• Only one bank offered anything close to a floating-rate deposit. This small bank, which opened its first branch in Shanghai recently, offers attractive rates on demand deposits, basically paying a fixed-term interest rate for the period the deposit is with them. (In contrast, if you put your money in a standard term account and withdraw it early, you are paid the on-demand interest rate of 0.36%.) This small bank currently offers a 1.19% 1M deposit rate, for example. The downside is that it only has one Shanghai branch so far, so access is limited.
• There is an array of WMPs on offer, some very short-term and low-risk. One salesperson even told us, “Fixed deposits are so out these days!” We found three basic types of WMPs during our visits to the banks:
1. PBoC bill-based products. These are issued each day, the total amount depending on the bank’s asset-liability ratio (or perhaps even the branch’s, given that Beijing and Shanghai branches of the same bank were offering different rates), and are issued on an ad-hoc basis. Products range from 7-day to 1Y, with annualised rates ranging from 2.3% to 3.45%.
2. ‘Residual’ trust products. Most banks warned us that the bank regulator is now prohibiting them from selling trust products (as we reported) and new, stricter regulations are now in place for high-risk wealth products. Most banks we visited were not offering trust loans. In Beijing, though, a couple of banks were still offering trust products which had been launched before the regulator stopped them.
And one bank in Shanghai was selling a bundled quasi-trust product which included a trust loan along with bills, bonds, and FX. This product ranged from 1M to 6M, with annualised rates of 2.5% to 3.2% – well below the rates offered on trust products before the ban in April.
3. Banks marketing others’ WMPs. One major commercial bank in Shanghai was marketing a high-yield WMPs on behalf of a relatively new insurance company. This is a 5Y product with a 12.5% total yield at maturity. It also comes with additional perks: five annual bonuses based on the insurance company’s performance (at least 1.3%, we were told) and an accident insurance policy offering five times the standard cover. One bank in Shanghai was offering a one-off bonus on top of returns for customers who bundle their deposits, equity and fund investments together and entrust them all to the bank’s partner securities broker.
On average, we found that one can expect to receive returns of around 2.6% on a 3M WMP deposit, or 2.9% for a 1Y WMP deposit, compared with the 1.71% and 2.25% PBoC fixed rates, respectively. In other words, although WMPs offer significantly higher rates than standard deposits, given that inflation is running at 3.5% y/y, these rates are still negative in real terms. (The trust companies are still able to market and sell trust products to their VIP clients; rates in July were reported to be around 8.5%.)
Banks’ policies on principal protection seem to vary. In Shanghai, several banks told us specifically that they were no longer able to offer 100% principal protection on WMPs (which suggests that they were previously allowed to). In practice, the bankers we spoke to offered a verbal promise of principal protection. However, in Beijing, a number of city commercial and large commercial banks that we visited still offer 100% principal protection in the contract, as long as the deposit reaches the maturity date.
Freeing up deposit rates is necessary to prevent a housing bubble
To conclude, while wealthy depositors have access to better rates on structured deposit WMPs, these rates are still not high enough to eliminate the negative real rate problem. At the same time, the real mortgage rate is low – a first-home buyer will pay about a 4.5% nominal rate (the PBoC benchmark 1Y loan rate discounted by 15%) for a 10-year mortgage.
This works out to 1% in real terms, using CPI inflation to deflate.
This means a property bubble will, over time, spill over in to the Tier 2 and Tier 3 cities. As soon as monetary policy is loosened, whether it is at the end of this year (as we expect) or later, or as soon as the central government signals even the mildest of loosening of housing policy, we worry that house prices will rise again – particularly outside the Tier 1 cities, where prices are already pretty elevated.
Comments from an official at Shenyang People’s Bank (a branch of the PBoC) on the need for interest rate reforms have attracted much interest in recent weeks. His idea is to allow banks to offer higher deposit rates, starting off in north eastern China.
We are unsure how much backing this idea has from the leaders of the PBoC, but the comments highlights a long-running and frustrated ambition of many at the central bank to liberalise rates and raise them to nearer to China’s nominal growth rate. As we have explained in this note, interest rate liberalisation has happened in the nooks and crannies of the market, but the base rate system still dominates, and it is unreformed.
It strikes us that allowing one region of China to raise rates would not be easy, given the ease with which money moves around the country. We also believe that, given the ‘no-change’ macroeconomic stance of the State Council, it would be hard to persuade other ministries of the rationale for raising rates, whatever the medium-term benefits (though, of course,there will never be a ‘good’ time for rate reform).
We believe that this problem needs to be solved if China is to prevent a debilitating asset bubble from forming over the next five years. Before the housing market existed, in the 1980s-1990s, liquidity had no choice but to sit idle in deposit accounts. Now a big housing market does exist, and deposits – even structured deposits – are not priced right.
Mortgages are cheap too. And that means money has no reason to stay at the bank, and every reason to continue flowing into the housing sector.
http://www.theedgemalaysia.com/business-news/173483-china--how-to-prevent-a-housing-bubble.html
Unfunded Liabilities And Cheap Stocks
Unfunded Liabilities And Cheap Stocks
09.15.10, 6:00 AM ET
Despite cries of "uncertainty" that reverberate through the financial markets, U.S. equities remain grossly undervalued. Risk premiums are exceedingly high. Too high!
In total, S&P 500 companies reported after-tax annualized earnings of $716 billion in the second quarter and had a market capitalization of $9.3 trillion. In other words, for every $100 in market value, the companies in the S&P 500 were generating $7.70 in after-tax profits--an "earnings yield" of 7.7%.
Comparing that earnings yield to the 10-year Treasury yield (currently 2.8%) reveals a gap of nearly five percentage points, the largest such gap since the late 1970s. And with profits expected to continue their upward climb, this gap is highly likely to increase even more in the next few quarters.
Relative to bonds, stocks are undervalued by a considerable margin. So what's holding investors back? Why are bond flows continuing to outpace equity flows?
One reason is fear of government spending. Current deficits and future deficits related to Social Security and Medicare are one reason. Every dollar the government spends must eventually be paid for by taxpayers. If these higher future taxes confiscate enough corporate profits, then the market will reflect that fact today with lower prices. So is the market discounting these costs accurately? Let's crunch the numbers.
The Trustees report for Social Security and Medicare estimates the present value of all unfunded entitlement benefits are roughly $50 trillion. On the same present value basis, this is equal to 3.8% of future GDP. In other words, rather than taxing 19% of GDP (as the Congressional Budget Office predicts for 2012-'13), total tax revenue would need to climb to 22.8% of GDP--an increase in tax revenues of 20% from everyone and everything that the federal government already taxes. In other words, a 10% tax rate will need to rise to 12%.
Of course everyone realizes that a 20% tax hike would never generate 20% more revenue. A dynamic model would forecast slower economic growth and more unemployment if the government hiked taxes by this much. This is why some are advocating benefit cuts. But, for our purpose here (analyzing the impact of paying for unfunded liabilities) we assume tax hikes are the only method used.
Don't take this the wrong way. We are certainly not advocating a massive tax hike to fix Social Security and Medicare. Raising tax rates will hurt the economy. Moving to private accounts would be our preferred solution. But the current level of fear about the costs of fixing these entitlement problems is out of proportion to reality. Things are far from perfect, but the stock market is grossly undervalued.
Brian S. Wesbury is chief economist and Robert Stein senior economist at First Trust Advisors in Wheaton, Ill. They write a weekly column for Forbes. Wesbury is the author of It's Not As Bad As You Think: Why Capitalism Trumps Fear and the Economy Will Thrive.
http://www.forbes.com/2010/09/14/equities-stocks-investing-opinions-columnists-brian-wesbury-robert-stein.html?partner=popstories
09.15.10, 6:00 AM ET
Despite cries of "uncertainty" that reverberate through the financial markets, U.S. equities remain grossly undervalued. Risk premiums are exceedingly high. Too high!
In total, S&P 500 companies reported after-tax annualized earnings of $716 billion in the second quarter and had a market capitalization of $9.3 trillion. In other words, for every $100 in market value, the companies in the S&P 500 were generating $7.70 in after-tax profits--an "earnings yield" of 7.7%.
Comparing that earnings yield to the 10-year Treasury yield (currently 2.8%) reveals a gap of nearly five percentage points, the largest such gap since the late 1970s. And with profits expected to continue their upward climb, this gap is highly likely to increase even more in the next few quarters.
Relative to bonds, stocks are undervalued by a considerable margin. So what's holding investors back? Why are bond flows continuing to outpace equity flows?
One reason is fear of government spending. Current deficits and future deficits related to Social Security and Medicare are one reason. Every dollar the government spends must eventually be paid for by taxpayers. If these higher future taxes confiscate enough corporate profits, then the market will reflect that fact today with lower prices. So is the market discounting these costs accurately? Let's crunch the numbers.
The Trustees report for Social Security and Medicare estimates the present value of all unfunded entitlement benefits are roughly $50 trillion. On the same present value basis, this is equal to 3.8% of future GDP. In other words, rather than taxing 19% of GDP (as the Congressional Budget Office predicts for 2012-'13), total tax revenue would need to climb to 22.8% of GDP--an increase in tax revenues of 20% from everyone and everything that the federal government already taxes. In other words, a 10% tax rate will need to rise to 12%.
Of course everyone realizes that a 20% tax hike would never generate 20% more revenue. A dynamic model would forecast slower economic growth and more unemployment if the government hiked taxes by this much. This is why some are advocating benefit cuts. But, for our purpose here (analyzing the impact of paying for unfunded liabilities) we assume tax hikes are the only method used.
A 20% increase in corporate taxes as well as taxes on capital gains and dividends, would reduce total returns to shareholders by roughly 11%. This would reduce the earnings yield (currently 7.7%) to about 6.9%--more than 4 percentage points above current 10-year Treasury yields.
Don't take this the wrong way. We are certainly not advocating a massive tax hike to fix Social Security and Medicare. Raising tax rates will hurt the economy. Moving to private accounts would be our preferred solution. But the current level of fear about the costs of fixing these entitlement problems is out of proportion to reality. Things are far from perfect, but the stock market is grossly undervalued.
Brian S. Wesbury is chief economist and Robert Stein senior economist at First Trust Advisors in Wheaton, Ill. They write a weekly column for Forbes. Wesbury is the author of It's Not As Bad As You Think: Why Capitalism Trumps Fear and the Economy Will Thrive.
http://www.forbes.com/2010/09/14/equities-stocks-investing-opinions-columnists-brian-wesbury-robert-stein.html?partner=popstories
Top Ten Dividend-Yielding Stocks
Dow 10,000. The market closed above this key level for the first time on March 29, 1999. Richard Grasso, then the chairman of the New York Stock Exchange and New York City Mayor Rudolph Giuliani broke out the Dow 10,000 hats. Now, more than a decade later the Dow sits at 10,463. Given the lack of performance of the Dow Jones Industrial Average, many investors might think this is the last place to look for solid investments.So, the Dow hasn’t moved in 10 years and treasury yields continue the descent that started in the early 80’s.
The lack of Dow performance has created an opportunity to buy blue chip companies that yield higher than treasuries and have potential upside in the stock prices. Of the 30 companies in the Dow, the 10 below represent the top dividend yielding stocks in the Dow Jones Industrial Average with earnings yields in excess of the 10 year treasury yield that are not overly levered. We sorted the companies by dividend yield and highlight some of the key trends for each company that investors may want to consider.
Merck (MRK) – Dividend Yield 4.15%
Not only does Merck pay a strong dividend, it’s earnings yield is near 12%. The company averaged over $1.4B a quarter in free cash flow over the last 10 years with profit margins consistently over 20%. Merck sports a PE Ratio under 9 and is trading at the low end of it’s historical multiple.
Kraft (KFT) – Dividend Yield 3.77%
Kraft’s stock price slid from it’s peak in the 40’s during the first quarter of 2002 down to the low 20’s in late 2008. During this time, Kraft’s book value per share rose dramatically and now represents over 70% of the stock price.
Special Offer: Forbes Growth Investor recommendations of Nvidia and Green Mountain Coffee created profit windfalls for subscribers. Click here for Forbes Growth Investor’scomplete Buy List.
Chevron (CVX) – Dividend Yield 3.5%
Chevron manages to grow revenue consistently in the 20% range with profit margins in the 7 to 10% zone.
Johnson & Johnson (JNJ) – Dividend Yield 3.35%
Look at the free cash flow for J&J. The trend is solid and the company is trading at a low multiple to revenues.
Intel (INTC) – Dividend Yield 3.34%
Intel’s cash on hand is a healthy $18 billion. The company consistently puts up mid 20% profit margins and is trading near all time lows on a price to sales basis.
Home Depot (HD) – Dividend Yield 3.10%
Home Depot trades at a far cry from the $130 billion it was worth back in 1999. Revenue growth averages 5% and the company has taken on a fair amount of debt in recent years. Home Depot’s PE Ratio is 17 which may be a little rich given the top line growth rate.
Procter & Gamble (PG) – Dividend Yield 2.98%
P&G is ranked No. 1 or 2 in almost all of its markets, and in many product lines it has huge market share. That makes it tough to grow. Sales for fiscal 2010 were $78.9 billion, up about 3%. Profit from continuing operations was essentially flat at $10.9 billion.
Coca-Cola (KO) – Dividend Yield 2.90%
Coke-Cola has traded sideways for the last 10 year but it’s valuation as measured by the price to sales ratio is at historical lows and free cash flow continues to rise.
McDonalds (MCD) – Dividend Yield 2.87%
McDonald’s has raised its dividend each and every year since paying its first dividend in 1976. MCD switched to quarterly payments in 2008. In 2009, the company returned over $5.1 billion to shareholders through share repurchases and dividends paid, bringing the three-year total to $16.6 billion under the Company’s $15 billion to $17 billion cash return to shareholders target for 2007 through 2009.
Exxon (XOM) – Dividend Yield 2.78%
Exxon’s market cap is over $311B with an earnings yield of 8.5% and a solid dividend yield. Exxon’s profit margins averaged 8% over the last decade with revenues increasing over 200%.
The Dow components represent large, stable companies with rich histories. The Dow hasn’t moved in 10 years, but many of the companies mentioned have increased their dividends and earnings significantly. Investors know that stock prices follow earnings over the long-term. So this may be the time to buy some of the Dow high yielders, and if the prices continue to flatline, at least you get paid to wait.
Subscribe to:
Posts (Atom)