Saturday, December 30, 2006

Happy New Year 2007

Wishing everyone a healthy and wealthy 2007. May 2007 bring happniess and joy to you and your family!

Saw this interesting piece from Michael Lewis posted at Bloomberg.

Here's some interesting comments:

  • The job of the private-equity investor is -- again, speaking loosely -- to exploit the idiocy of the ordinary investor, and the corporate executives and mutual-fund managers who purport to serve him. Private Equity Intelligence says this year private-equity firms have raised $300 billion, up from $283 billion for all of last year -- which is up from an ignorable $10 billion or so 10 years ago.


To exploit the idiocy of the ordinary investor...

Here's an example given:

  • The recent deal to buy, and then sell, the car-rental company Hertz Global Holdings Corp. nicely illustrates the current state of play in that relationship. In December 2005, a pair of private-equity firms, Clayton Dubilier & Rice Inc. and the Carlyle Group, bought Hertz from the Ford Motor Co. -- which is to say they bought it from the sorry souls who own shares of Ford. Eleven months later, in November 2006, they turned around and sold Hertz back to the proles in an initial public offering.
    In buying the company they put up $2.3 billion in equity capital. By the time they sold it they had gotten $1.3 billion of their money back, and held shares -- which they no doubt plan to get rid of as soon as they can -- valued at another $3.5 billion or so. In less than a year they had netted a fairly clean $2.5 billion profit.

Easy peasy huh?

Lewis concludes his article by saying..

  • In effect, the smartest, best-connected money has separated itself from the rest of the stock market, and has gone into the business of trading against that market. It seeks to buy from the stock market cheap, and sell to the stock market dear, and if you need evidence that this is possible you need only look to the returns on private equity, which have been running three times the returns of the public stock market.

    With the shrewdest and most sophisticated investors armed with essentially unlimited capital, any company that is available to the public is almost by definition an inferior asset, i.e., an asset that the private-equity people have no interest in. We may not have arrived at the point where the publicly traded shares in a company are a sure sign that those shares are a poor investment. But that's the obvious, ultimate destination.

    Which raises the question: Why do the proles continue to invest in publicly traded companies? And the obvious answer is: They have no choice.

    One day the private-equity markets may expand to the point where even proles are offered a little piece of the action. That will be the day the action is no longer worth having. Trust me. The ordinary investor is now and forever cast in the role of the peasant at the king's banquet. He's so happy to have any food at all that he fails to notice that bone between his teeth isn't the meal. It's the scraps.

And today CNN reported Legg Messon Value Trust performance. Ah, the legendary investor Bill Miller, whose fund has beaten the S&P for 15 straight years. Well, his streak has ended. ( Read more here )

Cheers and have a great holiday!


Wednesday, December 27, 2006

The Denials from Kencana

Here is an update to the blog posting I made on Is Tan Sri Quek Leng Chan buying Kencana?

The Denials from Kencana.

Posted on the edge

  • Kencana: No talks with Quek 26 Dec 2006 6:47 PM
    Kencana Petroleum Bhd said yesterday neither its directors nor any of its major shareholders were in talks with Tan Sri Quek Leng Chan for the sale and purchase of its shares.

Posted on the Bursa website.

22/12/06 Article Entitled : "Quek to emerge a major shareholder in Kencana?"

We refer to the above news article in the New Straits Times, Business Times, page 39, on Thursday, 21 December 2006, in particular to the following extract:

"… Tan Sri Quek Leng Chan….. emerge as a substantial shareholder of …. Kencana Petroleum Bhd….""Quek… buy between 12 and 15 per cent of the company's shares…"

The Board of Kencana Petroleum Berhad wishes to inform that as of todate, the Company has not received any notice of interest of substantial shareholder pursuant to Section 69 E (1) of the Companies Act, 1965 from Tan Sri Quek Leng Chan.

Article Entitled : "Quek to emerge a major shareholder in Kencana?"

  • Further to our reply to Bursa Malaysia Securities Berhad on 22 December 2006 in relation to the above news article, the Board of Directors hereby confirm that neither the Directors nor the major shareholders of the Company are currently in negotiation with Tan Sri Quek Leng Chan with regards to any sale and purchase of the Company's shares.


Now the story is denied.

So who are these sources supplying such news to our reporters?

Are they even real?

Did these sources ask the press to publish news so that they can profit from the news?


How do one rate the chances for our investors in Bursa Malaysia when they are fed with nothing but fake (can i use such a phrase since the story has been flatly denied?) news?

What chances do the investors have in such an environment?

Put this way, which investor would want to invest in a market when the game odds are totally against them?


Tuesday, December 26, 2006

Shocking Silver Bird?


Just saw Silver Bird's earnings:

Quarterly rpt on consolidated results for the financial period ended 31/10/2006

A lost of 51 million ringgit!!!

But the writings were on the wall already, wasn't it?

Back on Sept 2006, I last wrote the following post:

That Silver Birdie..

Silver Bird announced its earnings last night.

It was hardly a pretty sight.

All they had to show for their quarterly earnings was a net profit of 675 thousand from a sale revenue of 178.826 million.

Hardly a sign of an average business.

And it was just back in 2004 when Silver Bird proudly announced it was installing state-of-the-art equipment in its Shah Alam plant. A plant which cost a total investment of rm100 mil. And was touted as the single largest stand-alone bakery in Asean. Big plans, big dreams and as the saying goes no risk, no gain.

Well it's now 2 years since that grand plan unfolded....

This was Silver Bird's explaination of what happened.
  • The Group registered a loss before taxation of RM 52.7 million for the current quarter compared with a profit before taxation of RM 0.8 million in the preceding quarter. The unfavourable results for the this quarter were principally due to the provision of impairment loss of RM28 million, the written off of assets amounting to RM 7.8 million, share of start up losses of RM 6.2 million from the jointly controlled company and lower sales in Consumer Division.
Past blog postings:

Silver Bird
Silver Bird: Part II
Silver Bird: Part III
Silver Bird: Part IV
Silver Bird: Part V
Silver Bird: Part VI
Silver Bird: Part VII

Seasons Greetings & Looking back at 2006

FSO broadcast during Christmas weekend was absolute fantastic!

Click on the link below:

Saturday Broadcast, December 23
Financial Sense Newshour's 2006 Yearend Review in 2 Parts

10 Themes that Dominated the Markets this Year

  1. Inflation in goods reflected in rising commodity prices
  2. Rising global liquidity
  3. A good year for all asset classes
  4. Rise in leverage and speculation
  5. The rise and fall of U.S. interest rates
  6. A weakening U.S. economy
  7. The rise in energy and precious metals
  8. Change in the War on Terror
  9. The Bernanke Fed
  10. The U.S. Dollar


Yup, yup, yup... another year is just around the corner.

Aren't we all excited? Bursa Malaysia is now at 1078. Were you expecting the market to be that good?

So how has 2006 treated you?

Well I hope!

Perhaps now is a good time as ever to look back and perhaps by learnings from our success and our failures, we can even perform much better in the stock market in 2007.

Here's wishing a whole new year of happiness, joy and of course prosperity to all readers.

Merry Christmas and Happy New 2007!


Thursday, December 21, 2006

Is Tan Sri Quek Leng Chan buying Kencana?

One of my blog readers,UB, pointed out the following remarks.

  • Quek to emerge a major shareholder in Kencana? click here for article

    "...TYCOON Tan Sri Quek Leng Chan, owner of the Hong Leong Group, may emerge as a substantial shareholder of oil rig builder Kencana Petroleum Bhd, sources said." ...

    "Quek may buy between 12 and 15 per cent of the company's shares from existing shareholders, one of the sources said." ...

UB then went to say "For comparison purpose, I wonder whether other countries' newspapers also come up with reports based on citing unnamed sources?

In Singapore, Aussie, UK or US... do they come up with articles in this way as well? Is this a norm thing in financial news reporting?

Anybody with overseas experience care to enlighten us?

Actually this kind of reporting in our local dailies has been going on for as long as I started reading the financial news...I mean if the newspapers can tell us something without naming their sources, what is the difference between their information, and that given by the ah-soh buying vegetables at the market?

(I mean apart from... the ah-soh's rumours won't cause the stock price to move sharply the next day.. or trading session.. whereas that which is published in the newspapers will...)"

I fully agree with what UB is saying here.

The press should not be used as a mean to promote stocks!!

And if and when this article is denied then how?

Shouldn't the reporters be questioned who exactly these ssources are?

Are they, these sources, even real?

And what vested interest does these sources have on these stocks? Hmm...

Tuesday, December 19, 2006

Replies to Comments regarding Bashing of A Whistle Blower

Received a couple of comments to the blog posting: Correction And Bashing of a Whistle Blower?

Here are some my replies to some commnets posted.

  • Anonymous said...
    Moola asked : So does it matter who made the reporting first? Isn't it more important to have financial news with better integrity and not based on uncomfirmed sources?IT DOES MATTER, When you choose to defame one writer, and leave the other alone. It shows, Malfide INTENT. You are a racist. Dont think yourself as a whistle blower.This is the end of your can ramble all you want from now on, about barrock, fernandez ect ect. Nobody cares from a proven racist. Atleast we dont. Like the saying goes, if you dare defame them, than do it in the open, like people such as Rocky Bru and Jeff Oii. These are gentlemen bloggers, unlike your kind.

Mr.Anon. or should I call you Moolaracist or should I call you

Firstly, I accept a mistake in not noting that the MTD Infraperdana posted on the Bursa website was in reference to the news posted on the Sun. I have publicly acknowledged this error.

Now I do not expect that you accept this apology and neither do I want it.

And you have the absolute right to call me a racist. That's your opinion.

Now here's my opinion of you.

You are a gutless coward! You call me of not doing it in the open. How about being you being a gutless, hypocrite coward yourself?

Like I said, you can me attack however you like but what about your impersonation of my name in my chatbox and your spineless, vulgar attack of me, my mother and my grandmother?

Do you need me to attach more screen-shots? (Sorry, I do not think you longer earn this right!)

So how do you rate your own behavior of sending private gutless attacks via emails? How?

If you do not like my opinions, you can always voice your opinions. And I have always posted them. But the personal vandetta against me and my family proves that you are nothing but a coward.

And the issue of defaming?


Firstly I have hightlighted an important issue that our financial press have been constantly publishing articles based on unconfirmed sources and phrases like 'it is believed'. Now when these stories has been denied, how about questioning what the reporters have done? Or does it not matter?

Take the same MTD Infra issue yet again. Both the Sun and the Business Times article was written on Nov 17th. The Sun article stated 350Million. Why and how did Business Times get 460 million!??? Why?

Or perhaps I am rocking the boat too hard?

Or should I ask if you had bought these stocks based on these financial reports. LOL!!!

So instead of focusing on the issue, you decided to question me. Hey no problem! You then turned it into a racial issue.

Oh my gosh!

  • You are a racist. Dont think yourself as a whistle blower.This is the end of your can ramble all you want from now on, about barrock, fernandez ect ect. Nobody cares from a proven racist. Atleast we dont.

What planet are you from?

A proven racist!

Ho ho ho.

Aren't you really pathetic?

Have I mentioned anywhere and focused on the journalist's race?

You are really so pathetic!

Here are some comments from other readers for you.

  • Anonymous said...
    Defamation? I don't think so, not when facts and reasonings are clearly stated.Racism? This is even funnier and totally avoids the issue.This blog is clearly getting more and more popular. Keep it up.
  • Anonymous said...
    Wah, I didn't even think Francis Fernandez and Jose Barrock are Indians until Mr Anonymous #1 accused Moola of being racist. Come on la, Mr Anonymous#1 - you are the real racist! It's people like you that's running Malaysia down. Don't obfuscate the issue with a red herring racial claim!
  • And swifz said...
    This is a multi racial country. Anything can become racial. But I know Moola's intention is good.Maybe no need to mention names, just cut and paste the original article.Keep up the good job!

Did you read this blog posting, Privatisation of Scomi?

Hmm.. perhaps I was a racist in that blog posting too?

Again I remind the Dialog issue again: Is There An Intent To Decieve?

A story based on According To Sources. A story which has been denied by the Dialog. But what about the wrongly stated important financial data such as the earnings per share?

Does this all not matter?

Do we, Malaysians, want to see our financial press journalist writing news (or should I call them as stories?) after news after news after news based on 'According to Sources'?


By the way, Mr. Anon, Mr. MoolaRacist or Due to you turning this issue into a personal vandetta, you no longer earn the right to see your comments posted on this blog.

Monday, December 18, 2006

A tale of 2 Hiap Teck

Hiap Teck Ventures (rm1.32) just released its earnings last Friday.

Saw two different research reports on it.

RHB Research has an underperform rating on it. Target price of rm1.10.

  • X Hiap Teck’s has a dominant market position in the local bare steel pipe/structural hollow section industry, underpinned by its commanding market share. However, earnings risks are on the rise with the current upcycle in steel and steel product prices turning out to be short and fast slipping away. Valuation is rich with share price trading above our indicative fair value of RM1.10 based on 8x CY2007 EPS of 13.8sen. Maintain Underperform.

OSK has a target price of rm1.93.

Interesting, yes? The below is the screen shot taken of OSK write-up.

For me, the interesting point lies in the fy2007 numbers.

AS can seen from the above screen shot, OSK is estimating Hiap Teck net earnings (net profit) to be a very optimistic 69.3 million. Which as stated in their own table, this represent a growth (or change) of 76.6%!

RHB estimates?

Have a look at the screen-shot of RHB write-up below.

RHB's net earnings (net profit) estimates for Hiap Teck's fiscal 2007 earnings as seen from the above screen-shot if only 48.5 million.

Oh yes, an estimate is an estimate is an estimate.

But... in the case of Hiap Teck, don't you wonder why the estimates is varying by so much? RHB Research is estimating 48.5million while OSK is estimating 69.3 million.

I guess this explains why one's Target Price for Hiap teck is rm1.10 while the other is rm1.93.

Sunday, December 17, 2006

Correction And Bashing of a Whistle Blower?

Bashing out on howour financial news reporters uses the phrase 'it's believed' and 'according to sources', Iblogged the following post: Can Our Financial Reporters Report Facts And Not Heresay?

Well, I made a mistake when I wrote the following:

Again, its believed. How about some actual factual reporting and not it is believed or according to sources?

  • MTD Infraperdana plans RM460m capital payout
    By Francis Fernandez
    November 17 2006
    MTD Infraperdana Bhd, country's second largest toll road operator, is believed to be considering a proposal to return as much as RM460 million to shareholders, bankers familiar with the matter said yesterdayIt is believed that the proposal alongside a plan to raise fresh debts was submitted for consideration to the board this week.A capital repayment of 40 sen a share translates into a total cash payment of RM460 million, based on MTD Infraperdana's paid-up capital of RM1.16 billion.

And of course MTD Infra denies such proposal

  • We wish to clarify that the Company is always evaluating opportunities to enhance its shareholders' value but the Board of Directors has not deliberated on the capital repayment proposal

Made the error of not reading the message in full:


Error was the MTD reply was made in respect to the Sun article and not the Business Times article.

  • We refer to Bursa Malaysia Securities Berhad's ("Bursa Securities") query letter dated 17 November 2006 regarding the above titled news article which appeared in The Edge Daily on page 32 of theSun, on Friday, 17 November 2006.

Many thanks for correcting me.

Now here's an even more interesting issue. Both written on Nov 17th. The Sun article stated 350Million. Why and how did Business Times get 460 million!?

All this from a comment posted on this blog posting: How Now SC?

  • Wow, great investigative report moola, but sounds like you have twisted your facts. I checked the MTD Infraperdana story, and wow there was a query from Bursa Malaysia, but it was on a financial daily article, written by a CHINESE writer, one DAY before the Business Times article appeared. Same way I checked the Time DotCom story written by Mr Barrock. It seems to me that the Edgedaily had an article out, a GOOD day before Mr Barrock wrote it in the Star, by the SAME CHINESE reporter. But Moola, obviously you did not see it, the same way you did not see the Bursa Query on MTD. Or maybe you saw it that is why even though you took pains to post the Bernas reply in full, you somehow was a bit lazy to do so for the MTD story. Are you a racist, plain stupid or just incompetent? please let us all know. By the way, why hide behind your mirror site? Last I checked on the IJM-Talam story, you forget to mention that few CHINESE papers also carried it?.....Is it get the Indian reporters, so that chinese financial reporters can dominate again....Hey moola, we are all waiting for your comments on CS Tan's the world is the oyster for GP Ocean....where is it? Padi Beras up six sen? what is the commission for it?

Bashing of a whistle blower?

Turning this into a racist issue?

Incredbile but I am sorry if it's a fault that I do not read Chinese.

And does it matter who reported it first? As a financial journalist reporters, can they not confirm their sources? See this is the problem, yes? And on a broader perspective, is it not wrong to do wrong even though one is not the first to do so? Take for example, the case of rioters. A rioter is a rioter is a rioter. Does it matter if the rioter is not the first rioter? So does it matter who made the reporting first? Isn't it more important to have financial news with better integrity and not based on uncomfirmed sources?

Take MTD infra again. Both written on Nov 17th. The Sun article stated 350Million. Why and how did Business Times get 460 million!?

I guess I am rocking the boat too much that the only way you could attack me via turning this into a racial issue.


And posting in a chatbox under my name?

And this one?

*** snapshot has been removed due to the vulgar words posted ***

Are you proud of yourself?

Saturday, December 16, 2006

The MMM story.

The story about MMM (Malaysian Merchant Marine) dated as far back as 2004, when I chatted with a friend in a now closed forum about Arisiag (a fund which prided themselves about being a 'value investing' fund) investment in MMM.

Here is a snaphot of my comments on the discussion.

And one of my forum friends commented the following based on an Edge news report:

  • Caught with their hand in the cookie jar .....! MMM, Informatics, the shady deals with the HK company (insider trading) ...... yes, another fundmanager that I won't respect. There are still some good ones, though!


    29-04-2004: Arisaig disposes 1.78m MMM shares
    By Jimmy Yeow

    Singapore-based Arisaig Asean Fund reduced its stake in Malaysian Merchant Marine Bhd to 6.75% or 7.65 million shares after disposing of a 1.5% stake or 1.78 million shares.
    Filings with the stock exchange showed that the fund disposed of the shares over nine trading days from April 14 to April 26.
    The filings did not disclose the price at which the shares were disposed of. The counter was trading between RM1.54 and RM1.74 on those days.

And on July this year, i chatted with some friends about the grave danger in investing in companies with questionable corporate governance issue.

  • remember all the poor corporate governance issue regarding mmm? remember the issue of how one of them boss who Bought unashamed millions of shares in MMM from unexpected minorities in the open market, to sell them at more than 3 times the price a few weeks later to Maruichi (which deal later was cancelled). see how it's so important to avoid companies with poor corporate governance?

And back in July 2006, MMM's earnings was already rather poor.

This was its trailing earnings then. 4 Quarters of successive losses!

Rather poor, wasn't it? And the chart back then, said it all.

And if that wasn't bad enough, on October 2006, it posted the following shocker.

Quarterly rpt on consolidated results for the financial period ended 31/8/2006

It posted a quarterly loss of over 118 million! (total fiscal year loss amounted a whopping rm146 million!)

  • MMM's FY06 net loss at RM146.93m

    Malaysian Merchant Marine Bhd (MMMB) posted a net loss of RM146.93 million for the year ended Aug 31, 2006 againsts a net profit of RM5.6 million in FY05, mainly due to ageing vessels impairment and escalating dry-docking expenditure.

    Revenue for the year fell 30% to RM97.65 million from RM127 million. MMMB said on Oct 31 it would continue to sell underperforming assets and replace tonnage sold, and was looking at forming strategic chartering alliances at the regional level.

    It has engaged Grant Thornton to conduct a strategic review to develop a comprehensive plan and effect a sustainable operational turnaround within two years

Effectively the company was said the following:

  • The Group expects write downs in values of ageing vessels in this financial year resulting in further losses after the review of declined revenue and negative contributions from respective ships

This got me thinking.

Remember those comments from my forum friend? That one fellow had bought tons of shares and then tried to pawn it off at more than 3 times the share price within a few weeks to Maruichi back in 2004.

One and a half year later... MMM is being asked to write down the value of their ageing vessels.

So, don't you find it strange?

I mean, these vessels just do not age suddenly, do they? Surely someone knew right?

Today, 16th December, there is a write-up on Business Times: here

  • The bankers had to buy unsubscribed shares of MMM as they underwrote a rights issue that raised RM111 million for the firm last year. They claim the company did not disclose material information in the prospectus for the rights issue.

    Tunku Mahmood Fawzy Tunku Muhiyiddin, MMM's managing director and chief executive officer, declined to comment when contacted and told of the allegations.

    "It is inappropriate for me to comment regarding a discussion with the shareholders during an annual general meeting," he said.

    The shareholders are upset that the company had swung to a net loss of RM147 million in the financial year ended August 31 2006, after writing down some RM80 million in value of its ships.

    Other operating losses, including some RM3.8 million loss of deposits, RM5 million loss related to a subordinated bond and RM6 million of bad debt written off, also contributed to the loss.

    Shares of MMM has slid 75 per cent from the RM1 per rights share, which was issued in April last year, to 25 sen yesterday.

    "Marpol 73/78 rules state that certain type of ships will have to be phased out and the company has cited this ruling as the basis for the write-down," a banker said.

    "We are upset that this writedown has come out of the blue with no forewarning, when in fact such a ruling has been informed to the shipping industry since 2003," the banker said.


Poor bankers!

But they indeed have a valid point as they argued that the write-down ruling has been informed to the shipping industry since 2003.

So why didn't MMM do anything about it?

Now if the earlier chart of MMM stock price was terrible, this recent chart of MMM's current stock price performance is even more horrible!


I feel sad for the minority shareholders but somehow I feel that these investors could have probably done much better. The warning signs were there since 2004.

The insane earnings projections mentioned in 2004. And more especially with that funky corporate exercise in which that one fellow had bought tons of shares and then tried to pawn it off at more than 3 times the share price within a few weeks to Maruichi back in 2004.

That was one insane funky music being played.

The investor should have had headed for the exit doors right there and then!

Now? Too late to cry over spoilt milk, eh?

Insane Money

Saw this article posted on CNN.

  • Is John Mack worth $40 million?
    When a CEO takes home tens of millions, even after a great year, some critics wonder if it's worth it.
    By Rob Kelley, staff writer
    December 15 2006: 5:20 PM EST

    NEW YORK ( -- Morgan Stanley's John Mack has just taken home $40 million in stock and options - the largest bonus ever given to a Wall Street CEO - and it's expected that the record will be broken in coming days.

    And you can't say that Morgan Stanley, one of the nation's biggest brokerage houses, hasn't had an exceptional year - its stock has risen 40 percent so far and analysts surveyed by Thomson expect the firm to report annual earnings of $7.1 billion, up 45 percent from last year's $4.9 billion. (
    Full story)

$40 Million bonus?

Comeon. This is getting really absurb, don't you think?

A $40 Million bonus equates to a bonus of $109,589.04 per day.

Totally insane!

Friday, December 15, 2006

How Now SC?

It's here.

The other day I blogged on the following issue: Can Our Financial Reporters Report Facts And Not Heresay?. In it, I mentioned about how the reporter wrote a financial news based on 'it is believed' and 'according to sources' that PadiBeras Nasional was to taken private at a price of rm2.50.

Well, it's here.

ARTICLE ENTITLED : "Plan to take Bernas private nears completion"

The Querry:

  • We refer to the above article appearing in The New Straits Times, Business
    Times Section, page 40 on Thursday, 14 December 2006, a copy of which is
    enclosed for your reference.
    In particular, we would like to draw your attention to the following
    "Tan Sri Syed Mokhtar al-Bukhary is believed to be nearing completion of a plan to take private Padiberas Nasional Bhd (Bernas),..."
    "...the tycoon is close to finalising a proposal to offer RM2.50 a share for
    the shares they do not own in Bernas."
    In accordance with Bursa Securities' Corporate Disclosure Policy, you are
    requested to furnish Bursa Securities with an announcement for public release confirming or denying the above reported article and in particular the above sentences after due and diligent enquiry with all the directors, major
    shareholders and all such other persons reasonably familiar with the matters about which the disclosure is to be made in this respect. In the event you deny the above sentences or any other part of the above reported article, you are required to set forth facts sufficient to clarify any misleading aspects of the same. In the event you confirm the above sentences or any other part of the above reported article, you are required to set forth facts sufficient to
    support the same. Please furnish Bursa Securities with your reply within one (1) market day from the date hereof.
    Yours faithfully

    Head, Issuers
    Listing Division
    Group Regulations
    cc: Encik Chung Tin Fah, Securities Commission

The Reply from PadiBeras:

  • Reference is made to your query dated 14 December 2006, pertaining to an article appearing in The New Straits Times, Business Times Section, Page 40, on Thursday, 14 December 2006.

    We wish to inform that at this stage, the Company is not aware nor has any knowledge of the proposed exercise as stated in the said article.

    Meanwhile, we are making due enquiries with all the directors and major shareholders of the Company on this matter. The Company shall make the necessary announcement upon receiving confirmation from the said relevant parties.

I have shown in the posting Easy Money!! how such a story helped popped up the stock price.

Consider this. The day before the story was published, Padiberas last traded on the market at a price of r1.95.

Then the following day, the reporter came out with his guns blazing saying that PadiBeras will be taken private a price of rm2.50. A nice decent premium over rm1.95.

And what did the stock do the following day?

Well the stock rose as much as 20 sen before closing the day with a gain of 6 sen.

Highly impressive when that trading day was rather terrible for the general market.

Now the Security Commission has querried Padiberas and Padiberas has denied this privatisation issue.

So again, I ask who is these sources who keep churning out such stories?

Hey someone is making easy money from these stories based on these sources.

So how now SC?

Why don't you queery our financial reporters and ask them where on earth did they their sources?

Whatever happened to responsible journalism?

Whatever happened to the Integrity of Our Financial Press?

Easy Money!!

It's just unreal.

Money falling from the sky.

Easy Peasy!

Get the pen out and pen out stories based on what is believed and according to sources.

Make the story as sexy as possible. Fudge some facts here and there.

And viola.

Easy Money Dude!!!

Yeah.. so what gives these reporter such divine right?

Let me show you some proof to what I am saying. Take for example the stock Bernas I blogged on yesterday.

Have a look at the picture below.

See how the trading increased drastically on a terrible down day yesterday?

And the stock churned out a 6 sen gain?

ps when i blogged on it during yesterday morning, the stock shot up as high as 15 sen or 7.69%!!!!

See the opportunity to benefit from writing such articles?

Totally incredible!

By the way, do you know the Security Commission always querry public listed companies whenever there is such a story published? For example, in the alleged intention by Telekom to purchase TimeDotCom. Telekom was querried by the SC.

Now how about querrying the reporter instead?

Ask them where them to show us the sources?

How brown cow?

Or should we allow our financial reporters the divine right to publish as per their unknown and unconfirmed sources?

Thursday, December 14, 2006

Can Our Financial Reporters Report Facts And Not Heresay?

Should our financial reporters report financial news based on facts and not heresay?


Doesn't our financial news become very comical when the financial news reported are declared as misleading or as inaccurate (as witnessed in Telekom's case with TimedotCom)?

Here is another case of another financial reporter who does the same exact thing.

Have a look at these recent news articles by one Francis Fernandez, of the Business Times.

IJM said to be weighing plan to buy into Talam

  • IJM said to be weighing plan to buy into Talam
    By Francis Fernandez
    October 28 2006
    IJM Corp Bhd, the country's second largest builder by revenue, is believed to be studying a plan to possibly buy into Talam Corp Bhd, people close to the shareholders of the builder said yesterday.

    IJM may offer as much as 40 sen a share to gain a 30 per cent controlling stake in Talam, but the sources stopped short of saying if IJM will buy out the entire shares held by Talam's controlling shareholders.

Which was denied by IJM: Article Entitled: "IJM said to be weighing plan to buy into Talam"

  • We confirm that we are not studying or planning to buy into Talam Corporation Berhad ("Talam"), except that we would have an indirect interest in Talam should we complete the transaction for the proposed acquisition of 25% equity interest in Kumpulan Europlus Berhad, as last announced on 31 May 2006.

Same style. It's believed. Sources said.


Who are these sources really?

Do they even exist?

Or how about this one? Satang Jaya soars on talk it may acquire Airod

In which Satang said the statement is incorrect: ARTICLE ENTITLED : "Satang Jaya soars on talk it may acquire Airod"

  • Satang Jaya Holdings Berhad ("the Company") would like to clarify that the statement is incorrect.

And how about this one? MTD Infraperdana plans RM460m capital payout

  • It is believed that the payout proposal alongside a plan to raise as much as RM800 million in fresh debts was submitted to the board for consideration this week

Again, its believed. How about some actual factual reporting and not it is believed or according to sources?

  • MTD Infraperdana plans RM460m capital payout
    By Francis Fernandez

    November 17 2006

    MTD Infraperdana Bhd, country's second largest toll road operator, is believed to be considering a proposal to return as much as RM460 million to shareholders, bankers familiar with the matter said yesterdayIt is believed that the proposal alongside a plan to raise fresh debts was submitted for consideration to the board this week.

    A capital repayment of 40 sen a share translates into a total cash payment of RM460 million, based on MTD Infraperdana's paid-up capital of RM1.16 billion.

And of course MTD Infra denies such proposal

  • We wish to clarify that the Company is always evaluating opportunities to enhance its shareholders' value but the Board of Directors has not deliberated on the capital repayment proposal

So who are these sources that makes our financial reporters believing that even the moo-moo cow can fly?


If such reporting is to continue then for what and for whom does our financial news serve?

Think about it.

And today, the very same financial journalist penned the following article: Plan to take Bernas private nears completion

  • By Francis Fernandez

    December 14 2006

    TAN Sri Syed Mokhtar al-Bukhary is believed to be nearing completion of a plan to take private Padiberas Nasional Bhd (Bernas), the country's monopoly rice importer and distributor, bankers familiar with the matter said yesterday.

    Business Times was told that the tycoon is close to finalising a proposal to offer RM2.50 a share for the shares they do not own in Bernas.

    This means that the businessman may have to fork out more than RM800 million to buy out Bernas.

It is believed. Was Told.

Let's see what happens. Will Bernas deny this story?

And meanwhile, in regardles of whether the story is denied or not, the story is having a postive impact on the stock!

Yes, life is indeed wonderful.

Bernas is now up 15 sen or 7.69%!!!!

See what I am saying here?

If the reporter churns out stories based on un-confirmed sources, the story puts out a positive spin on the stock.

So who benefits?

And meanwhile, SC will surely querry Bernas.

Now, isn't this such a bother to our public listed companies? Surely they would have some more productive thing to do then to answer to such querries.

So first Jose Barrock. Now Francis Fernandez. I wonder who is next.

Wednesday, December 13, 2006

Is There An Intent To Decieve?

Last night I blogged on the issue where the financial reporter for Star Bizweek, has written yet another incrediblly, creative story based on his source. A source till this very day, has been proven time and time again to be rather lacking for the listed companies always deny the story alleged by Mr.Jose sources. (See here for yesterday blog posting: According To A Source )

This is getting extremely embarrasing for it just highlights the lack of integrity from our Malaysian financial journalists. Aren't they supposed to report based on facts and not heresays, rumours or sources?

Anyway I was told by a friend that the story itself had one huge glaring misleading fact.

Have a look at the news article again. Here is the link: Dialog Group to list unit in Singapore Stock Exchange

  • For the first three months of financial year 2007 (FY07) ended September, Dialog Group posted a net profit of RM12.8mil on the back of RM100.9mil in sales, which is a gain of about 56% and 29% respectively from a year ago. The company’s earnings per share gained by about 55% to 93 sen per share in the quarter under review.

What's so wrong?

Firstly, do remember the article is insinuating that Dialog Group plans to list its unit in the SES. News like this will generate interest to the stock. Now look at the above statement.

Earnings per share gained about 55%!!!

That alone paints another extremely rosy story.

And to put icing on the cake it states an earnings per share of 93 sen.

So what's so wrong?

Well here is the link to Dialog latest quarterly earnings : Quarterly rpt on consolidated results for the financial period ended 30/9/2006

Was Dialog earning per share 93 sen or 0.93 sen?

Could it be a mistake?

Take a step back again. The previous week he wrote about Timedotcom and Telekom. ( See ) Telekom had since came out blasting that the article was inaccurate and misleading!

Secondly, have a look here again:

1. Take the case of AV Ventures. The reporter highlighted the previous year earnings (which was ok) but failed gravely to mention that AV Ventures were losing money for its most recent 2 quarters when the article was published. Subtle attempt to mislead?

2. Take the case of Salcon. The Earnings Per share was quoted to be 30 sen. And then it was highlighted that Salcon's PE was 9.3x. Actual earnings? 0.3 sen. Another subtle attempt to mislead? Typo mistake? Hard to believe because the reporter ownself stated that Salcon earned 575 thousand only.

3. The example of Tradewinds. Tradwinds was a company whose debt issue was a known issue. First he insinuated that Tradewinds is BELIEVED to earn 100 mil for the year. That was in Feb 2005. This is the quarterly earnings reported back at that time: here . See how far off he was? And then the total debts was wrongly stated. He boldly stated that Tradewind had cut its debt from 2.5 bil to only 1.2 debt? Actual debts? 1.894 billion at that time. How nice. Tradewinds debts shrunk by some 600 mil with one stroke of the pen! Could it be a mistake? Again hard to accept for the reporter knows how to dig such facts out but yet when it comes to cruial points, and in this example, the total debts was wrongly stated. Another subtle attempt to mislead?

I could go on and on and on.

Time and time again, same style, according to source + occasional 'intellegent' mistakes being churned out by this reporter.

So I ask again...

Do you reckon that there is an intent to decieve by this reporter?

Or perhaps as Rob Kirby would call it, a subtle attempt to manipulate?

Tuesday, December 12, 2006

According to A Source..

On the weekend, there was this article on Star Bizweek: Dialog Group to list unit in Singapore Stock Exchange

  • OIL and gas player Dialog Group Bhd is planning to list one of its units on the Singapore Stock Exchange. The plan, if it materialises, may involve a sweet surprise for shareholders as the group may distribute special share dividends in the Singapore-listed unit.

    “The plans are looking good. The listing is likely to be pursued,” says
    a source close to the group.

IF it materialise. IF.

Says a SOURCE close to the group!

And guess who wrote such nonsense yet again?

One guess!

Yup. Jose Barrock!

Jose who?

This Jose..


    Contents :

    We refer to the query letter from Bursa Malaysia Securities Berhad ("Bursa Securities") to Dialog Group Berhad ("Dialog" or "the Company") dated 11 December 2006 on the news article that appeared on 9 December 2006 on page BW3 in the Bizweek section of The Star, which states that "…Dialog Group Bhd is planning to list one of its units on the Singapore Stock Exchange. " and "…the group may distribute special share dividends in the Singapore-listed unit.".

    We wish to clarify that in line with its business expansion regionally and globally, Dialog has continuously explore various options to fund these expansion. However, at this point in time, the Board of Directors has not made any decision in regards to a listing of any one of its subsidiaries on any stock exchange nor has appointed any consultant or adviser.

    As a responsible corporation, Dialog will make the appropriate announcement to Bursa Securities if there is any such development that requires an announcement to be made.

    Query Letter content :
    We refer to the above news article appearing in The Star, Bizweek, Page BW3,
    Saturday, 9 December 2006, a c


Same nonsense!

The writer pulls a source out of thin air and writes stories, creative stories based on these sources.

Do these sources even exist?

And time after time, the plc involved has to divert their attention from their daily business operations to answer to querries based on one man's incredible sources.

Oh, are they doing their own very bit to promote the stock market in the most creative manner?


For who?


Subtle Manipulation

In today's FSO write-up, Rob Kirby writes about Fundamental Vs. Technical Analysis and More. This section of his editorial is utmost interesting.



The Subtle Side of Molding Market Sentiment

Other times, manipulations are more subtle. An example is illustrated from my correspondence with this particular financial reporter just this past Friday. I make specific mention of this because this particular piece has actually made it onto the front page of the business section of one of Canada’s major daily newspapers today, December 11, 2006:

The piece in question was reported Friday by MarketWatch:

By Steve Goldstein, MarketWatch
Last Update: 8:50 AM ET Dec 8, 2006

LONDON (MarketWatch) -- Worries about the strength of the global economy pressured the metals sector in London share trading Friday, though a solid report on U.S. payrolls growth and speculation of banking takeovers helped lift shares of other top British companies.

Merrill Lynch downgraded the entire metals sector to neutral on economic-growth fears and concerns about the manipulation of metals prices. …

So I contacted the author:

Mr. Goldstein;
Could you elaborate on Merrill's comments about manipulation of metals prices?

"Merrill Lynch downgraded the entire metals sector to neutral on economic-growth fears and concerns about the manipulation of metals prices

Here was the response I got:

I'll quote what they said:

Our view is that spot metal prices have been pushed to over-inflated levels by hedge / investor fund manipulation (eg 1 investor holding >50% LME Al stocks), and that there is a much greater risk to the downside from spot prices than to the upside. With slower global demand growth likely in 2007, particularly in the US, and a likely de-stocking of metals inventory in the G7 after a very strong demand growth in 2006, the risks are that base metals prices could correct ~30% from current spot levels, and this would negatively impact the equities. We continue to believe in the super-cycle, that metals prices will be stronger for longer; however, this means stronger than long-term average prices, not stronger than current spot prices. History shows us that no matter how much we believe that weaker commodity prices are already factored into equity prices, if the commodity prices re-trace, the equity prices of leveraged stocks follow. Whilst metals prices have outperformed the equities on a 12-month view, over the last 6 months, global mining equities have outperformed the LME index. In fact, as seen by the Bloomberg World Mining index in the margin chart, equities have been moving higher in recent weeks and have recovered much of the sector pull-back that occurred in early November. The laggard has been the AsiaPac mining index. However, we remain convinced that if the metals prices do see a correction from current elevated spot positions, equity prices will also correct. It is amazing to us that despite statements that liquidity will continue to flow, when sentiment

So I replied with this;

I wonder if you bothered to question them about "a likely de-stocking of metals inventory in the G7 after a very strong demand growth in 2006."

The reality is that de-stocking of base metals HAS ALREADY OCCURRED!! - witness the all time critical lows of copper, aluminum, lead, zinc and nickel in LME warehouses.

Before "DE-STOCKING" can occur in the future - INVENTORIES HAVE TO FIRST BE REBUILT.

Rebuilding of critically low inventories would CONTRADICT this forecast - wouldn't it?

Rob Kirby

And Mr. Goldstein then replied with this;

You may well be right -- we pass on the news, leave it to you to accept or reject.
Cheers, Steve

The HUGE Issues Here

First, these "allegedly professional" mega financial institutions sometimes put forth fundamentally FALSE and often CONFLICTED research for unknowing, unsuspecting consumers and - Second - the media so often takes this false and / or conflicted research, asks few questions as to its veracity, and presents it to the public as "NEWS" and then – only if pressed / questioned or cornered – it’s like we’re "all free" to accept or reject what they report as news.

Whatever happened to responsible journalism where errant reporting led to a retraction and an apology?

I bring all of this to your attention for a few reasons. First, a general understanding of the differences between technical and fundamental analysis gives investors greater clarity in deciphering the blur or hype of economic reporting in today’s market place. Second, regardless of which discipline you’re an adherent of – your results will always be dependent on the quality of inputs or soundness of your assumptions. The lesson here is ‘be careful who or what you hitch your wagon to.’

Remember; there’s no such thing as a dumb question when it comes to your investments. Knowledge provides comfort and it’s the basis of power!

Because events like the ones described above have a great influence on what happens to your investments on a day to day basis, understanding what is affecting your investments and sometimes WHY – might just lead to a greater comfort level and a better night’s sleep!

Monday, December 11, 2006

Looking Back..

The following written by Business Times, senior correspondent, R. Sivanithy certainly caught my attention.

  • Fear, greed, and the fear of being left out


    WE'VE reached that time of year when investors everywhere must surely be wondering what the New Year holds in store for stock markets.

    Coming at a time when the interlinked emotions of greed and fear are at all-time high levels, it makes the business of objective prediction all that much more difficult - greed drives everyone to keep predicting prices will keep rising, while the fear lurking at the back of everyone's minds tells them that there is a slowdown to contend with, present prices are probably not supported by future earnings, and markets everywhere are becoming increasingly vulnerable to setbacks.

    There is also another facet of fear, that is, the fear of losing out. Anecdotal evidence from brokers is that retail clients have reached - or are close to reaching - their maximum frustration point over the past week.

    Angry at not having made enough money in the run-up this year but yet worried at the levels at which they are contemplating their entries, many are turning to 'junk' to ease their frustrations.

    Thus, it is that half-cent and one-cent counters are seeing massive daily volume, as are all those priced under 5 cents. Stockmarket apologists might defend this sort of activity as a sign of a healthy trading market, but we suspect it speaks volumes about rising speculative froth more than anything else.

    As for what 2007 might offer, much depends on the US economic outlook and interest rate expectations. All analysts agree that the US will suffer a slowdown next year, but not all agree on how bad this might be and the consequent implications for interest rates.

    Perhaps the most bullish is BCA Research, which in its Friday Global Investment Strategy report said equity markets around the world are still cheap, that re-ratings in multiples should dominate, and investment strategies should have a pro-equities, pro-growth bias.

    BCA's analysis is based on the 'soft landing' scenario, in which global economies - led by the US - enjoy moderate growth amidst low inflation, a scenario it says last played out in 1995-1996. It also looked at historical price-earnings trends and concluded that stocks are still a buy.

    (Investors who buy into BCA's 'history could repeat itself' argument should also be mindful of that other historical occurrence ten years ago, namely, the Asian currency crisis of 1997.)

    In the not-so-bullish camp are the likes of UBS Investment Research (UBSIR) and BNP Paribas. In a Dec 4 Global Economic Perspectives report, UBSIR said it believes 2007 will be characterised by 'sub-trend global growth and ebbing profitability, with a shift in the composition of growth away from the US and away from consumer spending'.

    This cautious view is mainly because of the US. 'The conviction we have in the global view is strong. We have a high conviction, for example, that US demand will become more handicapped by housing-related weakness over the months ahead, outcomes that are not, in our view, fully discounted by some US forecasters and policy makers.'

    BNP's Fixed Income unit, in the meantime, said in a report entitled 'Hard Landing' that the US Fed will probably have to cut interest rates aggressively in the first quarter because of downside surprises to growth coming from a collapsing housing market.

    So much for the broad outlook for next year. The week ahead sees the US Federal Reserve conduct its periodic Open Markets Committee meeting tomorrow at which it is expected to keep its federal funds rate fixed at 5.25 per cent.

    The local market should trade sideways until the meeting is over and done with, although property stocks could have to contend with residual selling left over from Friday, following the conclusion of the integrated resort bidding saga.

    The one thing we can say for sure is that fear, greed, and the fear of being left out will continue to drive stocks more than ever before, making for a volatile week ahead.

This reminded me of this posting i wrote last year: If ze Market continues to rise..

<<<<< ----- >>>>>

Read this interesting piece the other day...

Asset allocation and evaluation of results

  • “During the strong market of the 1990s, most investors who rode the wave ignored traditional ideas about valuation. Some money managers remained invested on the basis of a practical calculation: "If the market continues to rise and I'm not participating, I'll lose my job. But if it falls dramatically, I'll be in the same situation as everyone else." Others were conscious market cynics who thought they could successfully exploit the foolishness of others. Momentum investors didn't need an opinion about valuation. They were consciously saying, "The market may be overvalued-we don't know and we don't care. All we know is, it's been going up, and we're going to invest as long as it does-and get off the train before everyone else." The problem lies in executing the greater-fool theory. If you get off every time the market ticks down and then reestab­lish your position when the market starts to go up again, you're going to get killed, because even rising markets fluctuate on the way up. And if you wait, you risk going down with everyone else.

This got me thinking.. hmm... if the market continue to rise ... am i gonna miss Ze opportunity?

Should an investor's reasonings to invest and hold a stock be based on that particular stock's underlining fundamentals or should it be based on the prevailing market conditions?

What say u?

Me? I prefer doing it based on what i know best. If a stock is over-valued, i would sell. If a stock's fundamentals is deteriorating, i would sell. If a stock is fairly priced, it simply means it is fairly priced. And if a stock is worth investing then it is worth investing. And if the management or owner of the stock attempts any funky corporate manouveres to cheat me, ain't it a no-brainer to kiss the stock goodbye forever and ever?

To base my investment reasonings on the stock market? Should i invest in a stock because the stock market is going up? Gosh! It's simply beyond me because there is simply no way i could tell if the stock market is coming or going! Me pants would definitely be on fire if ever i told u i could. So where is the market heading? Issit bull or issit bear? I have simply no idea! I dunno lah. Do you?

Anywayyyy..... in short.... i would rather miss such opportunity.... and if the market goes flying, it goes flying... so be it.... as Ah Beng Kor would sing in his bath-tub.. Que Sera Sera mah... :D

err.... this is just me personal opinion lah... and if u dun agree, do feel free to leave ur comments, ya? :D

The last bit of that write-up is certainly a great reminder to all... i think... :D

  • Finally, there is the challenge of evaluating results. For stretches of time, a stock picker may outperform the market for reasons that have nothing to do with skill. He may simply be in sync with the biases of the market-favoring telecommunications stocks, for example, during a pe­riod when the market as a whole favors them. Or he may be lucky. The "random walk" theory posits that if a large number of monkeys pick stocks by throwing darts at stock tables, half will do better than the aver­age stock picker and half will do worse. If the winning monkeys then re­peat the exercise once each year for ten years in a row, one out of 1,024 will beat the average every year, merely on the basis of probabilities. A stock picker who beats the S&P 500 ten years running will almost surely be lionized as having a special genius-and some may-but others will do so merely as a matter of chance.”

Hmmm... doesn't it make sense? During 1999-2002 .... there were a lot of cheap stocks..... The underlining market was simply cheap and stock picking was simply easy then... .... so stay modest lah....dun get so big-headed lah... whatever good results achieved then... doesn't mean much really. The underlining market was simply cheap and stock picking was simply easy then... :D

Oh.... and.... if any stock picker(s) starts boasting their investment results based on these periods of time, say 1999-2002 or even 2003, and starts giving investing advice(s) based on their so-called excellent track take it with a pinch of salt! For these buggers might not be as geng as u thought, they were simply lucky to be investing in a period of time where stocks were simply cheap! So dun simply-simply call any1 sifu and dun simply-simply follow lor.

But then.... stock investment is not a game of follow you, follow me mah.... tiok boh?


<<<<< ----- >>>>>

Fast forward 11th Dec 2006.

Ze market has certainly moved up, up and away...


Will Big Name Funds Gurantee you Success?

Came upon this article posted on Bloomberg. It's about the performance of Goldman Sach's flagship fund, Global Alpha Fund. Mind you, we are talking about a hedge fund worth some US$10 billion.

Here is the link to the newsclip: here

  • Goldman Sachs Flagship Hedge Fund Falls 11.6 Percent (Update1)

    By Katherine Burton

    Dec. 8 (Bloomberg) -- Goldman Sachs Group Inc.'s $10 billion flagship hedge fund dropped 11.6 percent this year through the end of November, extending earlier losses as its managers misjudged the direction of global stock and currency markets, according to two investors.

    Goldman's Global Alpha Fund lost money partly on wrong-way bets that equities in Japan would rise, stocks in the rest of Asia and the U.S. would fall and the dollar would strengthen, the investors said. In August, the fund lost almost 10 percent on unprofitable investments in global bond markets. New York-based Goldman is the world's largest hedge fund manager, with $29.5 billion in assets.

    Global Alpha, managed by Mark Carhart and Raymond Iwanowski, both 40, is designed to make big, risky wagers, which can produce large returns as well as heavy losses. Other so-called macro funds that bet on global stocks, bonds, currencies and commodities are up an average of about 7 percent this year through November, according to Chicago-based Hedge Fund Research Inc. Last year, Global Alpha returned almost 40 percent, said the investors, who declined to be identified.

    ``The fund was anticipated to be volatile -- it has had volatile periods in the past,'' said Peter Rose, a Goldman spokesman in New York. ``Since inception it has delivered positive returns for investors,'' he said. Rose declined to comment specifically on the fund's performance.

Would I be wrong to say that it would appear that big names, top guns, top reputations do not neccarily gurantee one success.

Sunday, December 10, 2006

Money Talk from Dr.Doom

Dr. Marc Faber aka Dr. Doom had a dinner speach organised by CSLA last Monday in Singapore. Business Times' Teh Hooi Ling, who pens the Show Me The Money Column was there, and she gave a highly interesting write-up on the speach.,4574,217867,00.html?

  • Since 2002, the prices of everything have gone up. Now, art dealers are bullish about art, property dealers are bullish about property, and bond traders are bullish about bonds. Everybody is bullish about some thing.

    'But we will not have everything going up on a sustained basis,' said Dr Faber. 'Somebody is going to be wrong - and I think it's the bond traders. The worst thing to do now is to buy bonds.'

    The biggest risk, he thinks, is geopolitical. 'I believe the US will bomb Iran, or Israel will bomb Iran, or they will do it together. And I think Iran should have nuclear weapons. Singapore should have nuclear weapons as well. Either everyone has or no one has.'

    Then of course there is the risk of a flu pandemic, or disastrous fallout from global warming.

    'I think now is not a bad time to sell,' said Dr Faber, when asked whether investors should take some money off the table. Yet, as he said, while there will be short-term corrections, the long-term uptrend is inevitable.

Saturday, December 09, 2006

Friends and Foes of the US Dollar

Monty Guild from Guild Investment Management Inc has written a very interesting piece of editorial, called View from the Sandbox, in which Guild speculates on what the allies and the enemies of the US Dollar would do.

Here is a snippet from his editorial.



This means more bond sales by the U.S., more interest expense and bigger deficits. It also requires finding someone to buy the bonds.

Many friendly countries have been going through the following process for the last few months, and realizing that a balanced U.S. budget is far in the future.

  • Realizing that President Bush is militarily and economically overextended.
  • Realizing that the U.S. is in a very weak negotiating position, many countries are using the current opportunity to protect their big asset in U.S. dollar debt.

How will the friends of the U.S. do this?

  • By shifting their assets from the U.S. dollar to the Euro or some other currency.
  • By buying more gold to hold as an asset in their treasury instead of IOU’s from a free spending, heavy bond issuing country.
  • By stockpiling more base metals and oil.

They want to diversify out of the dollar, but want to do so without setting off a major rout of the dollar. It is a delicate balance, especially for the friends of the U.S.

The enemies of the U.S. have an even bigger goal. It is to destroy the U.S. as an international power. In this effort, they are being aided unwittingly by those who will spend public funds to a level beyond the means of the U.S. economy to support the expenditures.


Interesting eh?


What if you are just in it for the money?

What's the logical thing to do? And looking ahead, what lies ahead for the US Dollar.

Here's some suggestion and more commentary from Guild:


The dollar is falling because of the problems outlined in above.

What we see ahead is more of the same. But why?

How can the U.S. quickly correct the problem? I cannot think of a quick fix for this problem. All the solutions, even the most radical, will take at a minimum of several years. Many will take much longer.

A recent study by State Street Research points out that U.S. consumption of goods and services exceeds domestic income by 7 %. In recent years, people have borrowed against their assets to finance this spending. The study shows that asset values (mainly real estate) and household debt would have to rise forever in relation to incomes to keep the current U.S. growth rate trending at the same level.

I would now like to quote John Plender of the Financial Times who said in an article entitled, “The Waning Dollar and the Brave new World” published Dec 4 2006:

  • “Markets are adjustment mechanisms. When liberalized, as the capital markets have been on a global basis, they tolerate extremes for longer while retaining the potential to revert more brutally to the mean when policy fails to address economic problems.”

Most obviously, U.S. economic policy has failed to address the problem of our triple deficits. In my opinion, a REVERSION TO THE MEAN would send the dollar to much lower levels versus other major currencies. Part of the adjustment process could easily be the U.S. standard of living falling for an extended period of time. Not a pretty picture.




Live within your means, and vote for people who will have the U.S. live within its means. Own foreign currencies, precious metals and foreign stocks, which may hold their value much better than the U.S. dollar over the long run.

These are themes we have supported for a long time. The recent and continuing decline in the U.S. dollar brings them more into focus and should cause more investors to get serious about protecting themselves and beginning to act to solve the problem.