What's Up MNRB?

Published on Business Times.

• MNRB mulls RM30m provision for equity investment losses
  By Rupinder SinghPublished: 2009/03/31
  
  REINSURANCE firm MNRB Holdings Bhd (6459) said it may have to set aside up to RM30 million in provisions in the current fiscal year, which ends March 31 2009, to cover losses in equity investments.
  
  President and group chief executive officer Anuar Mohd Hassan said MNRB was forced to make the additional provisions for diminution in the value of investments as it took a hit from the dismal performance of the equity market over the last one year.
  
  In the last 12 months, the Kuala Lumpur Composite Index (KLCI) has fallen by 29.6 per cent.
  
  He estimates that losses on its equity investments to be between RM20 million and RM30 million. The group holds less than 10 per cent in equities.

The following is MNRB's last reported earnings on Feb 2009. Quarterly rpt on consolidated results for the financial period ended 31/12/2008

Here is the snap shot from the earnings notes.

The very smallish quoted securities purchased at cost was some 979k. Current market value is only 625k. Ouch!

From the balance sheet.

The article continues....

• "We expect the figure to come down," Anuar told Business Times in an interview.
  
  Anuar said the company is in the process of making the provisions for the current fiscal year.
  
  "The exercise is still ongoing. We are now restructuring our existing investment portfolio," he said.
  
  Currently, almost half of the group's investment is in cash, some 24 per cent in Malaysian Government Securities (MGS) and the balance in private debt securities.... (do read rest of article here )

Half of the group's investment is in cash, some 24% in MGS and balance in private debt securities.

And MNRB is mulling a 30 Million loss provision!!!!!!!!!!!?????

Don't you think that MNRB should be more transparent and explain where and how these losses came about?

Green Packet Again

Green Packet has been on a run lately. Sadly, it is running the opposite direction.

Perhaps the following recent postings might help.

• A Look At Green Packet Quarterly Earnings.
• About Green Packet (recommended)
• What Is Green Packet Saying Here?? (recommended)

ps: Here is a nice old forum posting to follow Green Packet (see posting #72 )

Glimmer Of Hope From Japan's Survey of Production Forecast in Manufacturing???

We all knew how bad Japan's industrial production numbers announced on Monday, Japan's industrial production falls for fifth month.

Especially when the seasonally adjusted index was down some 38.4% from the previous year.

Pretty darn scary!

• TOKYO (MarketWatch) -- Industrial production in Japan fell for a fifth month in a row, down 9.4% in February from the previous month, to stand at 68.7, according to data released Monday from Japan's Ministry of Economy, Trade and Industry. The seasonally adjusted index was down 38.4% from the previous year. Shipments were at 70.9, down 6.8% from a month ago. However, production is expected to increase 2.9% in March and to rise 3.1% in April, according to the Survey of Production Forecast in Manufacturing, the ministry said

However, the last line of that news clip, offered some hope. Survey of Production Forecast in Manufacturing said that production is expected to increase 2.9% in March and to rise 3.1% in April.

The Australian Business offers more insight with their article, Japan industrial production expected to rise

• JAPAN'S industrial production slumped 9.4 per cent in February, but for the first time since October manufacturers expect their outputs to rise.
  
  A Ministry of Economy Industry and Trade survey shows Japanese manufacturers expected industrial production to rise 2.9 per cent this month and by 3.1 per cent in April.
  
  Hopes that manufacturers are beginning to feel the bottom of the worst slump in 60 years were boosted by evidence of heavy inventory rundowns -- the inventory index fell 4.2 per cent, the sharpest month-on-month reduction on record.
  
  However, with monthly industrial output having fallen by 35 per cent since September, and the International Monetary Fund forecasting Japan's gross domestic product would shrink by 5.8 per cent through this year, the Tokyo Government is not ready to call a bottom.
  
  Releasing the February surveys, the ministry maintained an official view that Japanese manufacturing is still "rapidly declining".
  
  "The global economy is fraught with uncertainty," a ministry official told reporters. "We cannot say our country's production has bottomed out."
  
  And confirming the trend, new figures released yesterday showed output from the auto industry, a mainstay of export manufacturing, was still in precipitate decline.
  
  The Japan Automobile Manufacturers' Association reported that domestic vehicle production in February was down 56.2per cent, year-on-year.
  
  Exports, which account for more than half of Japanese auto production, were down almost 64 per cent in February -- and were 66 per cent lower to North America, Japan's biggest export market.
  
  The 212,107 Japanese vehicles shipped abroad in February was the lowest total in 34 years.
  
  At the same time, the METI survey showed inventories of small cars dropped 33.8 per cent in February and stocks of LCD television screens shrank by almost 26 per cent.
  
  Economists cautioned yesterday that inventory rundowns did not signal even the beginning of recovery, without evidence yet of any lift in US final demand for autos, electronic goods and components.
  
  Daiwa Institute of Research senior economist, Hiroshi Watanabe, yesterday questioned whether manufacturers' positive projections for March and April were too optimistic.
  
  However, the quickening improvement in inventories since January, when manufacturers began coming to grips with the huge stockpiles left by the collapse of export markets in the December quarter, is the closest thing they have seen to a green shoot in the past six months.
  
  "It seems some positive factors are emerging from Japanese industries after experiencing such severe export market shrinkage," said JP Morgan Japan senior economist Masamichi Adachi.
  
  "I don't think we can say industrial production has bottomed out yet, but now we are starting to see the bottom.
  
  "The inventory index has improved for machinery, and the same can be said for transport equipment and electricals. I would also add the steel industry," he said.
  
  "So it is fair to say the Japanese economy is starting to come out of its worst situation, although this is not yet a strong trend."
  

Baltic Dry Index Reverses Yet Again

Yes, the Baltic Dry Index has fallen for twelfth straight days. I do hope that you are aware of the current sharp reversal again.

The following article published on InvestorsChronilce, almost two weeks ago, offers some insight on what's happening, Baltic Dry awaits iron verdict

• Created: 18 March 2009 Written by: Julian Hofmann
  
  The haggling over iron ore prices between the mining giants and China will dominate the outlook for key shipping indicator the Baltic Dry Index over the coming weeks, with an agreement the key to the index's long term recovery.
  
  The index, now at 1,974, has staged something of a recovery since January when the it fell as low as 925, technically below the cost of shipping, but remains a pale shadow of last year's 11,793 all time high. Nevertheless, at the current level ships are transporting goods at a profit. In the short term, the negotiations between Australian miners BHP Billiton and Rio Tinto and major Chinese steel producer Baosteel could have a profound effect. The market expects that Bao Steel will demand sharp price cuts of between 40 and 50 per cent to reflect the declining demand for steel products, with stockpiles rising in China. Bao's rates will be used as the benchmark for all other Chinese steel mills.
  
  An agreement is usually concluded around Easter but the threat of lengthy talks this year is weighing down the index. Ship owners have used the interim period to scrap ships to help maintain rates as scrap metal prices have stayed relatively stable at around $300 per tonne. The scrapping rate for the first three months of this year has already exceeded the entire total for 2008.

MARC downgrades Englotech

MARC downgrades Englotech RM50m debt notes

• Written by Joe Chin
  Friday, 27 March 2009 20:33
  
  KUALA LUMPUR: Malaysian Rating Corporation Bhd has downgraded Englotechs Holding Bhd’s RM50.0 million Murabahah Medium Term Note Programme (MMTN) rating to DID­ from BBID.
  
  MARC said on March 27 the rating action was based on the cotton glove manufacturer’s failure to meet its profit payment of RM1.7 million due on March 26 this year as confirmed by OSK Trustees Bhd.
  
  In connection with the missed profit payments, Englotechs was seeking an extension of time to meet its profit payment until April 30.
  
  “Irrespective of whether the extension is obtained, MARC considers a default to have occurred where the failure to make the scheduled payment is due to the issuer being under financial stress,” it said.

Posted before: Englotechs Trade Receivables and Update on Englotechs

Oh Comsa!

Was reading the following article: Tipping point – the fall after the rise

• A sell-down often takes a spiral course. When the share price dives, many shareholders are compelled to sell, further depressing the price. And on it goes.
  
  It gets worse when investors borrow to buy shares. When the market value of the shares drops drastically, the banks or brokers will seek to limit their exposure by making margin calls. If the investors fail to pay up, the assets will be sold, typically at way below the purchase prices.
  
  “There’ll be a run on the stock when there’s a forced sale of pledged shares. It will all fall like a house of cards,” says Datuk Kour Nam Ngum.
  
  He went through exactly this when he was CEO of poultry company Comsa Farms Bhd back in 2006. When the stock was in the doldrums, a bank sold his pledged shares. That played a part in pushing Comsa to the brink. It failed to extricate itself from PN17 status and was delisted in April 2007.

Oh, I do remember why COMSA Farms the stocks was in the doldrums.

It's a bit harder to find the old articles but not impossible.

• Comsa Reprimanded, Directors Fined For Publishing Inaccurate Results
  
  (KUALA LUMPUR) Bursa Malaysia Securities Bhd has reprimanded Comsa Farms Bhd for failing to take into account various accounting adjustments in the quarterly results for the period ended 31 March 2005 before releasing them for public announcement. Bursa Securities also required Comsa to engage its external auditors to carry out a limited review of the company's next four quarterly results prior to their announcement. In addition, Comsa's chief executive officer Datuk Kour Nam Ngum was fined RM100,000 and two other directors Tan Sri Ahmad Mustaffa Babjee and Ku Hien Liong were fined RM25,000 each for breaching the listing rules. Comsa's other directors Chia Yam Kung, Datin Heng Chui Koon and Datuk Sapari Amir were publicly reprimanded. ~ source: here

Bursa website: COMSA-Public reprimand

• COMSA had breached paragraph 9.16(1), in particular paragraph 9.16(1)(a) of the Bursa Securities LR for failing to take into account the adjustments as explained in the Company’s announcement dated 5 April 2006 in the Company’s 4th quarterly report for the financial year ended (“FYE”) 31 March 2005 (“QR March 2005”) which was announced on 30 May 2005. The adjustments were only taken up in the Company’s annual audited accounts for the FYE 31 March 2005 (“AAA 2005”) which was announced on 5 April 2006 resulting in a deviation between the unaudited profit after taxation and minority interest of RM12.58 million and the audited loss after tax and minority interest of RM195.92 million for the FYE 31 March 2005.

Weekend Charts 28th March 2009

The Ringgit.

• MALAYSIA'S ringgit rose for a third week, logging its best winning streak since April 2008, as speculation a global recession will ease spurred demand for emerging-market assets.... the ringgit gained 1 per cent for the week to 3.6100 per dollar as of 4.50 pm in Kuala Lumpur, the highest since February. 16, according to data compiled by Bloomberg. The currency pared this year’s decline to 4.4 per cent. (source: Business Times )

The six month chart of USDMYR (chart from yahoo.finance)

Gold.

Friday's opening gold price for Gold was at USD934. Gold closed at 925 last night. The selling/buying rates for the Kijang One Oz were at MYR 3572/3456.

The 3 month chart of Gold in MYR.

Daily chart of Gold in USD last 100 days.

Oil.

Daily chart for Crude Oil.

Baltic Dry Index

The Baltic Dry Index lost another 36 points to close at 1678! (Do read this: Eyes On The Baltic Dry Index Again )

Malaysian Loan Sharks Hire Women to Shame Defaulting Debtors

Malaysian Loan Sharks Hire Women to Shame Defaulting Debtors

• March 27 (Bloomberg) -- Malaysian loan sharks have a new weapon in their growing struggle to get borrowers to repay debts: beautiful women.
  
  “They go to your office or house and sit there” to shame you into paying, said Michael Chong, 60, who has worked for two decades as a mediator between the illegal lenders and their debtors. “If it’s your house, they will wait outside and make lots of noise, and you cannot wallop the girl.”
  
  That’s in addition to the traditional incentives such as putting debtors in a cage, splashing their houses in red paint or breaking their limbs, said Chong, head of the Public Services and Complaints Department of the Malaysian Chinese Association, the second-biggest political party in the ruling coalition.
  
  The shortage of bank credit is pushing more people to loan sharks and causing a growing number to default, said Chong, who negotiated a record 56.6 million ringgit ($15 million) of debts last year and expects this year’s total to be higher. That’s forcing the lenders to look for new ways to recover the debts, he said.
  
  Job losses jumped 67 percent in the final quarter of last year to 24,033 as the global recession pushed bankruptcies to a three-year high. The government this month announced a 60 billion ringgit ($16 billion) stimulus plan, predicting that the economy may contract this year for the first time in a decade.
  
  Loan approvals by banks slid for a fifth month in January.
  
  “When there’s a shortage of supply, people will look at other avenues,” said Nazir Razak, chief executive officer of Bumiputra-Commerce Holdings Bhd., Malaysia’s second-biggest bank.
  
  ‘Big Earhole’
  
  Chong said gamblers traditionally made up about 80 percent of clients for loan sharks, known in Malaysia as Ah Long, from the Cantonese phrase “daai ji lung,” meaning “big earhole.” Now, the economic slump is driving more businesses, such as building subcontractors, to seek illegal loans, said Chong, whose arm was dislocated in 1990 by a loan shark that resented his interference.
  
  More than 10,000 civil servants are “trapped” by the loan sharks, state news agency Bernama reported last month, citing Ahmad Shah Mohd Zin, the secretary-general of the Congress of Unions of Employees in the Public and Civil Services, a national trade union.
  
  Chong has built a career dealing with public complaints over trafficking, missing persons, land scams and loan-sharking. In 1987, the party created a department for him with five assistants to ease a backlog. He has dealt with 30,000 cases since then, he said.
  
  In 2004, he had a 20-episode television series called “Michael Chong’s File” to warn the public of crimes.
  
  Repeat Offenders
  
  Police say efforts to curb unlicensed money lending are hampered because many borrowers are repeat offenders without access to other funds. Loan sharks typically advertise by sticking their cards or posters on phone booths, public toilets, lamp posts, and on the walls of shops and factories.
  
  “We are aware what the loan sharks are doing,” Inspector General of Police Musa Hassan said in an interview. “The problem is the people are still going to seek help from them.”
  
  Most borrowers turn to these lenders because they need the money fast, while bank loans can take months to approve, said Chong.
  
  “They can bank the money directly into your account,” he said. “You don’t have to see them and they can have the money within 10 minutes.”
  
  Some banks are trying to take some of the business by speeding up approvals. Bumiputra-Commerce’s CIMB Bank Bhd. formed CIMB Express, where personal loans of 3,000 to 50,000 ringgit can be approved within 24 hours, said Nazir. Rates start from 3 percent per month for a 5-year repayment schedule, the bank’s Web site says.
  
  10% Per Week
  
  The illegal lenders charge 10 percent interest per week for some loans, said Nadzim Johan, executive secretary of the Malaysian Muslim Consumer Organization, who had 100 cases referred to his consumer movement in 2008 and expects that to double this year.
  
  “It’s a huge social problem now,” Nadzim said. “It has created a lot of broken homes.”
  
  In one case, a South Korean businesswoman borrowed 100,000 ringgit and ended up paying 11 million ringgit over a few years because she couldn’t transfer funds in time, he said.
  
  “She started very small,” Nadzim said. “Most things start very small. Then it snowballs.”
  
  Borrowers include owners of small businesses, contractors, doctors, lawyers, gas-station owners, politicians, former senior civil servants and even the police, he said.
  
  Some loan sharks make 12 million ringgit a day, he said. “It’s become part of the infrastructure in society.”
  
  Harder to Collect
  
  A loan shark who gave his name as Loh, said it is getting harder to collect debts because of the slump. “They don’t follow” the payment schedules, he said.
  
  Chong said he has advised some debtors to run away and seek work in another country, and only return after a few years to pay their debts.
  
  “I’ve had cases where they chain them and put them under a cage,” Chong said. “They will throw paint, put up posters to shame you, take a microphone outside your house. Only the stupid ones will use violence.”

Prem Watsa: The 2 Billion Dollar Man!

On Toronto Life : The $2-Billion Man

Prem Watsa is the richest, savviest guy you’ve never heard of. He predicted the crash of ’87, the Japanese collapse of 1990 and last year’s meltdown, which he parlayed into a huge payoff. Now he’s gobbling up shares at rock-bottom prices. What he knows and why you should pay attention By Alec Scott

• Two years ago, in April 2007, the Dow Jones Industrial Average hit 13,000 for the first time ever. It was the culmination of six months of record highs— a whopping 38 in total. Traders were drunk on their own optimism, investors were still making unprecedented returns, and there seemed to be no end to what had been dubbed the “Energizer Bunny Economy.” When it comes to investing in the stock market, groupthink often prevails, and there were plenty of cheerleaders—from analysts to economics professors to business journalists—in the unrelenting pep rally.
  
  A few weeks after the Dow Jones record, a soft-spoken Toronto insurance and investment company executive named Prem Watsa stood before a crowd at the board of trade and delivered a buzz kill of a speech. The conference was one of the first major events hosted by the Ben Graham Centre for Value Investing at Western’s Ivey School of Business, for which Watsa, an Ivey graduate, had been a lead donor. But his mood was far from celebratory—he didn’t spend any time patting himself on the back. Instead, he issued a dire warning. “There’s a possibility of a one-in-50- or a one-in-100-year storm coming,” he said. “When the music stops, it stops very quickly.”
  
  Near the end of July came one of the first signs of the storm Watsa had predicted: the Dow had its first mini-meltdown, losing about 400 points in one day. Watsa had already protected himself. He’d moved the bulk of his company’s $16-billion (U.S.) portfolio out of the stock market and into relatively recession-proof treasury bonds and cash. Although he hadn’t participated in the market’s champagne swilling, he was determined to avoid the brutal hangover. In addition to moving his investments to higher ground, he used credit default swaps to wager that the U.S. credit market would go belly up. His bet: $341 mil­lion. His take-home when the house of cards came tumbling down: more than $2 billion.
  
  After such a win, many would have sat on the sidelines, cash in hand, smugly watching as the world’s financial systems collapsed. Yet Watsa’s company, Fairfax Financial Holdings—named for its “fair and friendly” acquisitions strategy—has recently waded back into the beleaguered market, spending $2.3 billion buying equity shares in troubled companies.
  
  Watsa is something of a puzzle—he was relentlessly bearish in the bull market, and now he’s bullishly throwing his weight around in what looks like one of the worst bears in history. The man who not only called the crisis but profited from it may be Bay Street’s savviest investor.
  
  Watsa’s rags-to-riches narrative stretches over two generations. His father, born in Mangalore, India, in 1910, was orphaned young and rose to become a respected principal of the posh Hyderabad Public School, India’s Upper Canada College. Watsa was born in Hyderabad in 1950 and eventually attended the elite school, where he was an outsider, one of the few boys who didn’t come from a rich or aristocratic family.
  
  After high school, Watsa gained admission to the prestigious chemical engineering program at the Indian Institute of Technology. (While studying there, he met his wife, Nalini, with whom he has three children—two daughters and a son.) He didn’t want the plodding life of a chemical engineer, so his father encouraged him to take his chances in Canada, where his brother was already working. Watsa decided to move to London, Ontario, where he enrolled in the MBA program at Western, selling air conditioners and furnaces to pay his way through. “I went to the Ivey not because it was good, though it turned out it was, but because it was near where my brother lived,” he says. Following business school, he worked for almost a decade in the investment wing at the now defunct Confederation Life, a department famous for its rigorous research. “There were four people selected for a second interview,” he once said. “The reason I got the job was that the three other guys didn’t show up.”
  
  It was at Confederation that Watsa had what he calls a “road to Damascus moment,” when his boss handed him a book by a Columbia business school prof and investment manager named Ben Graham. Graham was the original value investor. After losing almost everything in the 1929 crash and the Great Depression, he devised a risk-averse approach to playing the market, one that distinguished between investment and speculation. Generally, a value investor makes medium- and long-term investments in thoroughly investigated, demonstrably well-run companies. Analysis and discipline are key, and if there’s no margin of safety, you don’t invest. “You have to turn your back sometimes,” says Watsa.
  
  Perhaps it was his conservative upbringing, or simply a function of his personality, but Watsa was drawn to the relatively safe and steady (if unsexy) approach of value investing. He became a Ben Graham disciple.
  
  The richest and most famous value investor in the world is Warren Buffett—the Omaha, Nebraska, news­paper boy who grew his fortune from nothing to $62 billion. Watsa (who’s been called the Buffett of the North) tracks almost every move his American counterpart makes. Buffett, for instance, gave his elder son the middle name Graham, after Ben Graham. Watsa named his son Ben. Both Buffett and Watsa have based their fortunes on a bedrock of insurance: Buffett’s company, Berkshire Hathaway, has for years had a huge stake in GEICO, which spins tidy profits for him to invest elsewhere. Watsa began acquiring insurance companies in the mid-1980s. (Collectively, Fairfax subsidiaries constitute the largest property and casualty insurer in Canada, and they have a significant presence on the U.S. market.) More recently, after the Oracle of Omaha backed the ailing Goldman Sachs, the Oracle of Ontario came to the rescue of Toronto’s GMP Capital—no Goldman Sachs, to be sure, but a medium-sized presence on Bay Street. And Berkshire and Fairfax recently announced their first co-investment, buying significant shares in Chicago’s building materials company USG: $100 million from Watsa, $300 million from Buffett.
  
  Like Buffett, Watsa draws a salary that is modest for the field ($600,000) but owns a controlling stake in the companies he’s building. (Watsa’s net worth is difficult to establish, but estimates run as high as $4.16 bil­lion.) Both Berkshire and Fairfax have offices staffed by skeletal crews, and spacious libraries with extensive archives of corporate annual reports. The most significant difference between the two men is that Buffett is a garrulous cable news commentator, conference keynote and commencement speaker. For years, Watsa wouldn’t talk to the media, wouldn’t even speak to analysts to discuss quarterly results. “Buffett you can get on the phone. He’s available, he’s on MSNBC,” says Ira Gluskin, the head of the Toronto firm Gluskin Sheff. “Prem loved cultivating the image of not being available, that he was all about the work.” The image fits with descriptions of Watsa. According to one visitor, he wanders about his messy office like an absent-minded professor.
  
  Value investors buck the creed that has governed market regulation for the past two decades: that the market is efficient; that share prices will right themselves, accurately reflecting the health of companies even if individual shareholder behaviour is erratic. Buffett and Watsa believe the market is inherently inefficient and unruly, that it often overvalues or undervalues companies, that it panics beyond need or else talks itself into believing in a bubble. Watsa describes the stock market as manic depressive: “Sometimes it buys at a high price and sells at a low price. Don’t ever think that it knows more than you.”
  
  At the core, Watsa’s approach evinces a funda­mental distrust in the rationality of investors. Shareholders, after all, are overwhelmingly propelled by two emotions: fear and jubilance. Usually, both of them—in response to a headline, say, or an annual report—are simultaneously at play as stocks are bought and sold. It’s when one becomes dominant that everyone gets into trouble. But it’s not only emotion that scares value investors, it’s the corresponding bandwagon effect. At about the time that everyone comes to a consensus over something in the market, the consensus usually turns out to be wrong. And by then, a vulnerable company could be sunk.
  
  Professor Andrew Lo, the director of MIT’s Laboratory for Financial Engineering, studies the psychology of the market. While Lo believes the markets are capable of rational behaviour, he says they become irrational when investors’ animal instincts take over and their pleasure or fear receptors are activated. “That period of extended prosperity we had [before the crash] acted like a drug, stimulating the same pleasure centres in the brain that cocaine does. [The euphoria] removes inhibition; we forget that it’s possible to lose money,” he says. When the market showed signs of turning, another instinct took hold. “After the bubble burst,” he says, “the violent flight kicked in—another level of irrationality.”
  
  Lo believes that individuals who, like Watsa, got out of the market before the crash likely have a more highly developed instinct for fear. They can sniff out trouble well before the average unsuspecting investor. They might be naturally temperate (a kind of market ascetic), but they are also a more highly evolved animal. “Either he has experienced this before, so he has a memory of pain or loss,” Lo says, “or he has developed certain models or forecasts that trigger in his brain the potential for pain.”
  
  In Watsa’s case, it’s a bit of both. He’s not only a long-time student of crashes; he also has first-hand knowledge of what it means to almost lose it all.
  
  In the late ’90s, Fairfax acquired a troubled New York–based insurer, TIG, for $847 million (U.S.). The company turned out to be more of a dog than Watsa realized: it took years for Fairfax to integrate the few profitable parts of TIG into its other, healthier subsidiaries, and to shut down the many unprofitable sectors. After 9/11, Fairfax’s insurance group was hit with millions of dollars in claims: the company posted its first ever annual loss of $346 million. To raise funds, Fairfax listed its shares on the New York exchange in December of 2002, but within a week, two million shares were sold short—a harbinger of Fairfax’s tumultuous relationship with American hedge funds. In the summer of 2003, the company took public a large portion of its profitable subsidiary, North­bridge Financial, earning $200 million on the markets. (Watsa prefers not to be at the mercy of the market and recently bought back the shares, reprivatizing the company.)
  
  Certain hedge funds, not satisfied that Fairfax had done enough to deal with its losses, continued to short-sell its shares, betting that the company would nose-dive. Contributing to the short-selling was a report released in January 2003 by a Memphis-based broker, Morgan Keegan, claiming Fairfax had insufficient reserves to cover its outstanding insurance policies.
  
  A short-seller promises to supply shares to a buyer at a certain price, although the actual shares are not in hand. The seller later secures the shares, preferably once the price has dipped, profiting from the difference. (Of course, if the price goes up, a loss occurs.) In this high-risk and often predatory practice, the short-seller has a vested interest in seeing the company’s shares go down. There are plenty of scandalous stories of short-sellers allegedly planting false rumours to score fat profits, and among the most scandalous is one involving Fairfax.
  
  The precise facts will become known at a trial in New Jersey later this year, but the outline is not pretty. Fairfax alleges that a group of hedge funds conspired to drive down its stock price. Through mid-2003, negative stories about Fairfax’s supposed financial weakness were rampant in the financial press. Among the headlines on the popular on‑line business publication thestreet.com: “Fair­fax’s Buffett Pose Falls Short,” “Fair­fax Walks the High Wire on Rates,” “Fair­fax Fog Only Thickens.”
  
  From there, things got a little weird. According to court documents, the hedge fund companies allegedly retained an obscure operative named Spyro Contogouris to drive down Fairfax’s share price, a task he went about with alacrity. In 2005, he’s said to have approached the company’s former CFO, claiming (falsely) that he’d been deputized by the FBI to obtain evidence of financial improprieties. He is thought to be the author of a widely circulated 30-page letter that, among other things, compared Watsa to the convicted fraud­ster Martin Frankel. (It was even sent to the priest of Watsa’s church, St. Paul’s Anglican on Bloor.) In 2006, several false rumours began circulating: one claimed that the RCMP were pursuing Watsa; another said that they were about to raid Fairfax’s office; yet another claimed he’d placed his assets in his wife’s name and fled the country. By then, the company’s stock had tumbled from highs in the $400 range to less than $100 a share.
  
  At first, the intensely private Watsa wasn’t sure how to respond. But he ultimately countered with a PR offensive of his own, speaking to Forbes and other business publications in an effort to set the record straight. In the summer of 2006, he filed a $6-billion lawsuit against the hedge funds. (The SEC is investigating the charges; the hedge funds have denied any wrong­doing.) Many of Watsa’s largest investors stuck with Fairfax, which had made them a lot of money. With this support, and the com­pany’s continuing good results, Watsa gradually restored Fairfax’s reputation—and its tarnished stock price.
  
  Throughout the bull market that preceded the crash, Watsa was most concerned about the secondary credit market, in which groups of loans made by primary lenders were bundled and sold. Of course, in hindsight, the signs of trouble are obvious. But Watsa first grew wary way back in 2003, well before anyone else, and four years before his warning at the board of trade. The now infamous speech was posted on YouTube, where it has since gained a cult following among avid students of the market. In flat tones, with a slight Elmer Fudd lisp, Watsa outlined both the macro and micro of what would come to pass.
  
  And he continues to go against the grain. “Prem spends a lot of time trying to disagree with the conventional wisdom,” says Gluskin. “He’ll go out of his way to say, ‘If this is what everybody believes, it’s probably wrong, and the opposite is the way to make money.’ ” But there’s more to Watsa’s success than his contrarian streak. For one thing, he’s not entirely risk-averse—unlike Buffett, who doesn’t buy into companies where there’s been a whiff of controversy. “Buffett doesn’t like trouble,” says Wade Burton, a portfolio mana­ger at Mac­kenzie Cun­dill, a long-time Fair­fax watcher and investor. “Prem doesn’t mind mucking about in the mud, so long as the price is right.” In this, he more resembles yet another role model: John Templeton, the small-town Tennessee boy turned poker-playing buccaneer who made very good on the markets. Having met—and charmed—the eminent financier in the late ’70s, Watsa visited him at his palatial digs in the Bahamas once a year. He even keeps a bust of Temple­ton in his boardroom.
  
  Watsa’s recent buying spree is all Temple­ton. When the legendary investor died last summer, The Economist wrote, “At the point of maximum pessimism, he would enter and clean up”; or, to put it more bluntly, he bought when there was blood on the streets. When investors fled the New York market after the Second World War was declared, Templeton borrowed $10,000 to scoop up stocks priced at less than a dollar, often in companies that were near bankruptcy. In four years, he sold the stock, paid off the debt and pocketed $40,000—the seed money for Templeton Growth Fund, a market beater for many years.
  
  Similarly, Watsa has lately been buying stakes in unlikely companies in troubled industries: from newsprint purveyors and media companies (AbitibiBowater, Torstar and Canwest) to commercial real estate (H&R); from building materials (Chicago’s USG) to coal (International Coal Group) and computers (the out-of-favour Dell). Fairfax is betting that soon enough, with the help of the government cash being spread about, fundamentally solid companies will bounce back. The timing of the investments suggests Watsa thinks the bottom has been reached, or that it’s close enough. “Trees don’t grow to the sky,” Watsa likes to say, “and markets don’t fall to the floor.”
  
  Fairfax has just enjoyed its best year ever; it was Canada’s most profitable corporation in 2008. Just as Watsa avoided the irrational exuberance of the boom, he’s kept his head about him in the aftermath. It turns out the more evolved investor, with his heightened fear receptors, is also able to keep his fear in check. By most accounts, Watsa is an unemotional man. As one of his investors says, “There’s little amplitude to him. He’s never too high, never too low. If he ever had that tendency, he’s trained himself out of it.” There’s no flash to Prem Watsa, and this has served him well.

Prem was featured in this blog before:

• Prem Watsa Explains Why This Will Be A Long And Deep Recession Globally!
• Prem Watsa: The Man Who Beat The Shorts
• Prem Watsa Gives An Investment Tip: Buy Now!
• Prem Wasta Warns Investors To Be Very Wary

Ten Trillion And Counting!

On PBS Frontline: Ten Trillion And Counting! (you have to go there to see the whole video!)

• The journey begins as FRONTLINE correspondent Forrest Sawyer takes viewers to a secret location: the Treasury's debt auction room, where the U.S. government sells securities backed by the "full faith and credit of the United States." On this day, the government is auctioning $67 billion of Treasury securities. The money borrowed will be used to fund services and programs that the government cannot pay for through tax revenues alone.
  
  Observers warn that the United States' reliance on borrowing to fund essential programs is a dangerous gamble. For the first time, investors are beginning to question the ability of federal government to meet its growing financial obligations, and fading confidence can have dire consequences. "You might have a situation where there is one day when the government says we need to sell several billion dollars of bonds, and nobody shows," Economist reporter Greg Ip tells FRONTLINE. "No money to pay the Social Security checks, no money to give to the states for their Medicaid programs. Cut, cut, cut, cut, cut."
  
  Yet more borrowing is exactly what the Obama administration plans to do: hundreds of billions to bail out the banks and other financial institutions; tens of billions more for the auto industry; $275 billion for homeowners and mortgage lenders; and a giant $787 billion stimulus package to jump-start an economy spiraling downward. Just like the Bush administration before it, Obama and his team are going to borrow big.
  
  "That's the paradox of the situation that we're in now," observes Matt Miller, author of The Tyranny of Dead Ideas. "Government has got to run big deficits to stimulate the economy, deficits that would have been unthinkable ... because government's the only entity with the wherewithal to prop up a demand in the economy when businesses and consumers are all pulling back."

Here is a mini clip on youtube!

V-Shape Economic Rebound For Malaysia

Erhm... published on Business Times: 'Economic rebound will be V-shaped'

• 'Economic rebound will be V-shaped'
  
  Published: 2009/03/26
  
  ECONOMISTS are optimistic that Malaysia's economy will quickly rebound this year after it shrinks, or an event commonly known as a V-shaped recovery.
  
  Bank Negara Malaysia's newly-appointed assistant governor Dr Sukhdave Singh said at worst, Malaysia's economy will contract by 1 per cent when it feels the full brunt of a global recession.
  
  HSBC economist Robert Prior-Wandesforde expects Malaysia's economy to shrink 3.5 per cent this year.
  
  "It will be a difficult first half but we should see recovery as soon as in the second half of this year."
  
  They were speaking to reporters after participating in a seminar organised by the Malaysian Economic Association and Universiti Malaya's Economics Faculty in Kuala Lumpur last night.
  
  Prior-Wandesforde said Asian banks were better off than their peers in developed nations.
  
  "The US banks had cunningly sold toxic assets to many other banks in Europe. Asian banks, however, had wisely avoided buying these toxic assets in the form of sub-prime property loans," he said.
  
  Also, in the last decade, Malaysia has shifted more exports to China, India and Southeast Asia.
  
  "V-shaped recovery is normal in Asia," he added.
  
  The HSBC economist said Malaysia should start seeing growth in the first quarter of 2010 because interest rate cuts by central banks across the region will promote trade and growth.

V-shaped recovery is normal in Asia??

Sure?

How IS Japan doing all these years?

And how same is this time compared to last time?

Don't Blame Greed For The Financial Crisis!

It’s the Leverage Stupid!

• March 23 (Bloomberg) -- Economist Horace Wood Brock spends his days advising money managers and his spare time rummaging around 18th- and 19th-century Europe.
  
  Brock, called Woody by friends, has loaned a portion of his collection of French and English furniture, decorative objects and Old Master drawings to Boston’s Museum of Fine Arts for an exhibition on view through May 17.
  
  The 63-year-old Brock, president of Strategic Economic Decisions, an advisory service that he started in 1985 for hedge and pension funds, endowments and other investment groups, blames the current economic crisis on the lack of regulation, not on excessive executive pay.
  
  “Where was the government?” Brock, dressed in khakis, loafers and gold-rimmed eyeglasses, asked in a recent interview at his Park Avenue apartment in Manhattan. “Where were the overseers?
  
  ‘‘We are blaming greed and incompetence,’’ he said. ‘‘Those things can’t be changed. They are human nature. It’s the leverage, stupid. That’s my mantra.”
  
  The exhibition includes 160 items, such as a rare Louis XIV 17th-century French tortoiseshell clock by Andre-Charles Boulle, an exuberant swirling Louis XV 18th-century gilt console table and a muscular anatomical study by Peter Paul Rubens.
  
  “People, whether or not they are great lovers of Old Master drawings or antique furniture, can come and be wowed by this astonishing assemblage,” said George T.M. Shackelford, the museum’s chair of European art. “If you’re turned off by gold, you might not want to come.”
  
  Stodgy Taste
  
  Brock said he doesn’t care if his taste is considered stodgy among contemporary-art collectors.
  
  “If you want to be hip, you buy a Warhol,” he said as he paced around his apartment. A blue Childe Hassam seascape hung above a wooden cabinet. “I am the least hip guy.”
  
  Brock’s consistency is paying off. Last week at the European Fine Art Fair -- the world’s biggest art and antiques show known as Tefaf -- in the Dutch city of Maastricht, collectors favored Old Masters over some modern works, dealers said. Prices for Old Masters have held steady, defying the bad economy.
  
  His collection is usually installed in the Manhattan apartment and a home in coastal Massachusetts. Some French furniture is on long-term loan to the J. Paul Getty Museum in Los Angeles.
  
  Brock says he wasn’t motivated to buy for status.
  
  “I march to my inner drummer,” he said.
  
  Math Theory
  
  In the 1980s he devised a mathematical theory to explain the fuzzy field of aesthetics. His theory shows the balance between order and disorder, which creates beauty in three dimensional objects.
  
  The Boston museum reproduces Brock’s theorem in the show’s catalog. The graph’s axes measure the theme of a piece and the transformation of this theme.
  
  “He’s not trying to trumpet the quality of his collection,” curator Shakleford said. “He’s trying to give people a framework for understanding, in his opinion, why we find things visually appealing.”
  
  Brock has donated 20 objects to the museum, six of which are included in the show. A gallery of English Regency furniture and decorative objects will be named after him as part of the museum’s continuing construction project.
  
  He considers his collection money well spent.
  
  “The dividends in terms of beauty is constant and increasing, if you own the best,” Brock said. “Unlike other assets.”
  
  “Splendor and Elegance: European Decorative Arts and Drawings from the Horace Wood Brock Collection” is at the Museum of Fine Arts, 465 Huntington Ave., Boston. Information: +1-617-267-9300; http://www.mfa.org.
  

What A Trading Day For TMI

Blogged this morning: Hello Bro, This Is TMI Calling

In loving memory, this is TMI's performance for today.

Some newsclip:

• TMI skids in early trade, down 28 sen
  Written by Joe Chin
  Wednesday, 25 March 2009 09:30
  
  KUALA LUMPUR: TM International’s share price fell sharply in early trade on March 25 when it resumed trade after a one-day suspension to announce its rights share price.
  
  At 9.22am, the KL Composite Index fell 2.32 points to 875.6. Turnover was 40.24 million shares valued at RM63.79 million.
  
  TMI was down 28 sen to RM2.33. There were 7.96 million shares done.
  
  Other decliners were Tenaga and Public Bank, down 10 sen each to RM6.10 and RM7.40.
  
  On March 24, TMI had fixed the issue price of its rights offer at RM1.12, with an entitlement ratio of 5-for-4.
  
  OSK Investment Research said the EPS dilution was significantly higher at 49%-52% of FY09/10 EPS (vs the indicative 34% dilution earlier).
  
  However, they said this was not unexpected given the delay in fixing the price and the fact that TMI’s shares have fallen 29% since the proposal was announced on Feb 26.
  
  “We downgrade our recommendation to Take Profit from Trading Buy following the 20% rally over the past three trading days. We expect the market to react negatively to the larger-than-expected dilution.
  
  “On an ex-rights basis, its FY09/10 PERs are not particularly attractive at 10.2-12.7 times given the challenging outlook for its overseas businesses,” it said.

• Path cleared for TMI to begin anew
  Written by Cindy Yeap
  Wednesday, 25 March 2009 10:11
  
  KUALA LUMPUR: TM International Bhd (TMI) shareholders approved all eight resolutions, including a RM5.25 billion rights issue and name change to Axiata Group, at a meeting that lasted over four hours yesterday, but it was not smooth sailing all the way.
  
  Approval for the renounceable five-for-four rights issue, fixed at RM1.12 apiece just ahead of the EGM yesterday, came by a show of hands after lengthy deliberations. But its proposed performance-based employees share option scheme (Esos) involving the issuance of up to 7% of its share capital met resistance from minorities.
  
  TMI chairman Tan Sri Azman Mokhtar was prompted to ask for vote via a poll, where one’s vote is based on respective shareholding, to see the three resolutions on the Esos through.
  
  The poll was called after he could not determine a conclusive outcome despite calling for a show of hands three times. This was again met with some protest by minorities, but the company’s legal adviser said the request for poll was allowed, citing Article 76 of TMI’s articles of association.
  
  To be fair, the Minority Shareholders Watchdog Group (MSWG) CEO Rita Benoy Bushon described the proposed Esos structure as “exemplary”, given that several performance thresholds for the company and the employees had to be met to determine eligibility. She called for greater transparency in its implementation.
  
  TMI Group CEO Datuk Seri Jamaludin Ibrahim told shareholders that it would be in a position to consider paying dividends to shareholders when the group’s cash flow “starts” turning positive “towards end-2010”.
  
  TMI Group chief financial officer Datuk Yusof Annuar Yaacob expects the whole TMI Group to be cash flow positive in 2011.
  
  But that was not enough to satisfy some minority shareholders, who wanted TMI to first show results and deliver shareholder returns, before considering the Esos.
  
  They voiced dissatisfaction about how TMI’s share price had tumbled from RM7.85 last April to the RM2 levels currently, wiping out RM20 billion in market capitalisation.
  
  Of those present, shareholders holding 7.7% of the company’s equity voted against the proposed Esos, while over 92% voted for it.
  
  Khazanah Nasional Bhd owns 44.51% of TMI. Employees Provident Fund board (EPF) has 15.76%, while Permodalan Nasional Bhd’s Amanah Raya Nominees Sdn Bhd holds 8.52%.
  
  Meanwhile, TMI said in a statement it had entered into underwriting agreements with CIMB Investment Bank, RHB Investment Bank and Maybank Investment Bank for the 55.49% or 2.6 billion of the rights shares, excluding Khazanah’s entitlement.
  
  Khazanah has undertaken to fully take up its portion and commit to subscribe to another 20% of the rights issue.
  
  EPF owns 57.55% of RHB Capital Bhd while PNB controls 52% of Maybank. Some RM85 million is estimated as the cost of the rights exercise, including the underwriting.
  
  TMI shareholders also approved that Khazanah be exempted from making a mandatory general offer (MGO) if one were to be triggered from the rights issue.
  
  The rights issue, expected to be completed around the first week of May, will see each TMI shareholder forking out an average of RM1.40 (RM1.12 per share multiplied by five rights shares then divided by 4 TMI shares) for every TMI share he owns.
  
  Any renounced rights entitlements are expected to be traded mid-April (T+13 days), Yusof said.
  
  The RM1.12 issue price represents a 50.9% discount to the five-day volume weighted average market price (VWAP up to March 23) of RM2.28 and 31.7% discount to the theoretical ex-rights price of RM1.64 (based on RM2.28 VWAP). TMI shares, suspended yesterday, closed at RM2.61 on Monday.
  
  Based on TMI’s last closing price of RM2.61, TMI’s theoretical ex-price is RM1.78.
  
  Kenanga Research maintained a buy call “on an ex-basis”. “Short-term weakness could be expected given the recent 20% uptick from the low as well as the larger-than-expected share issue”, Kenanga Research said in a note yesterday. TMI added 45 sen in three days prior to its suspension.
  
  “For traders, we would be looking at the rights-to-the-rights for opportunities. Based on the theoretical ex-rights price of RM1.78 versus the rights of RM1.12, the rights-to-the-rights shares should be priced around 66 sen maximum,” Kenanga said.
  
  TMI expects to see at least some RM240 million per annum in interest savings from the repayment of RM5.15 billion debts from the rights proceeds. Half or RM10.5 billion of TMI Group’s RM20 billion debts is at the holding level.
  
  RHB Research estimates TMI’s FY09-FY11 net debt/Ebitda (earnings before interest, taxation, depreciation and amortisation) will fall to between 2.2 times and 2.6 times from 3.1 times and 3.6 times pre-rights issue.
  
  Based on a theoretical ex-rights price of RM1.78, RHB estimated TMI’s FY09 and FY10 price-to-earnings ratio (PER) would rise to 11.2 times and 10.6 times, respectively, versus 8.4 times FY09 earnings per share (EPS) and 7.9 times FY10 EPS currently, as its share base balloons from 3.75 billion to 8.4 billion shares.
  
  RHB yesterday lowered its fair value for TMI to RM2.72 from RM3.45 after imputing a higher discount to reflect the dilution from the rights exercise, and retained its “market perform” call.
  
  Yusof also told shareholders that TMI intended to pay Telekom Malaysia Bhd (TM) “quickly over the next couple of weeks”, earlier than the April 25 deadline because there was an immediate interest savings, given that the RM4 billion due to TM carried a 6.5% interest rate per annum, higher than TMI’s average borrowing cost of 4.67% per annum.
  
  Yusof said it would invest between RM15 million and RM25 million in brand promotion for its new name Axiata. This is RM5 million to RM10 million more than the RM10 million to RM15 million it would have cost the company to continue spending to build the existing TMI brand.
  
  A new name that bore no resemblance to TM was chosen to eliminate any “confusion” in the branding between the demerged companies. Jamaludin said the new logo for TMI would be unveiled in “mid-April”.
  
  
  This article appeared in The Edge Financial Daily, March 25, 2009.

• OSK Research: Take profit on TMI
  Written by Joe Chin
  Wednesday, 25 March 2009 10:51
  
  KUALA LUMPUR: OSK Investment has downgraded TM International to Take Profit from Trading Buy after the company fixed the issue price of its rights offer at RM1.12 with an entitlement ratio of five for five.
  
  It said in a research note on March 25 the earnings per share (EPS) dilution was significantly higher at 49%-52% of FY09/10 EPS (versus the indicative 34% dilution earlier), which is not unexpected given the delay in fixing the price.
  
  The research house also said TMI’s share price had fallen 29% since the proposal was announced on Feb 26.
  
  “We downgrade our recommendation to Take Profit from Trading Buy following the 20% rally over the past three trading days. We expect the market to react negatively to the larger-than-expected dilution.
  
  “On an ex-rights basis, its FY09/10 PERs are not particularly attractive at 10.2-12.7 times given the challenging outlook for its overseas businesses,” it added.
  
  OSK Investment said based on the proposed five-for-four rights issue, the level of dilution would be significantly higher at 49%-52% for FY09/10 EPS (interest savings net of tax) versus the circa 35% it would have recorded had the rights price been fixed much earlier.
  
  TMI’s share price fell by up to 30% from the level when the rights issue was proposed on Feb 26. With the 4.69 billion rights shares to be issued, the issued share capital will balloon some 125% to 8.44bn.
  
  OSK Research said the net gearing would ease to 0.6 times from 1.3 times currently, with the RM5.15bn proceeds used to pare debts. “Our target price is maintained at RM2.50 (RM1.73 ex-rights basis),” it said.
  
  The research house also said there could be a potential impairment from its acquisition of a 15% stake in IDEA in 3Q 2008.
  
  “We had previously excluded IDEA in our SOP valuation on TMI. We believe that should the impairment charges be accounted for, TMI may have to write off some RM3.8 billion for its 15% stake given that IDEA’s share price has fallen by some 70% since the acquisition was announced at end-2Q08,” it said.
  
  
  
  

Hello Bro, This Is TMI Calling

Posted the other day, Hello TMI, What's Up Bro?

Let me highlight that one section again.

So in the second set of news we have TMI saying..

• Dominant fixed-line phone company Telekom Malaysia Bhd (TM),(4863) which posted a 73 per cent fall in 2008 net profit, said it will return RM3.51 billion cash to shareholders after sister company TM International Bhd (TMI) agreed to repay a debt it owes in the next quarter. .........
• "There's no reason for us to keep the excess cash ... By returning cash in excess of its requirement to shareholders (98 sen a share), TM is providing immediate value enhancement,"

What do we have here? First it wants to do a US$1 billion rights issue (this is about rm3.6 billion or so) because bank borrowings too much. It also wants to pay back TM rm3.51 billion because it has excess cash.

How now brown cow?

On today's papers: TMI to sell shares at 57pc discount

• TMI to sell shares at 57pc discount
  
  Published: 2009/03/24
  
  TM International Bhd, Malaysia’s state-controlled mobile-phone operator, offered to sell stock at a 57 per cent discount in a rights issue to raise RM5.25 billion (US$1.4 billion) and help pay off debt.
  
  Shareholders will be able to buy five new TM International shares for every four owned, the company said in a filing to the stock exchange in Kuala Lumpur today. TM International is offering RM4.69 billion new shares at RM1.12 each, less than half the stock’s closing price of RM2.61 yesterday on the Malaysian stock exchange.
  
  TMI, which has assets in Asian countries, including Indonesia and India, is seeking to raise funds to repay RM4 billion of debt to former parent Telekom Malaysia Bhd next month, and refinance about US$2 billion of loans used to invest in a mobile-phone operator in India.
  
  “Times are not good, business is quite tough, so to entice the shareholders, it has to be a big discount,” said Lye Thim Loong, who helps manage about US$500 million including TMI shares at Avenue Invest Bhd in Kuala Lumpur.
  
  Kuala Lumpur-based TMI said on March 11 it planned to offer the rights shares at as much as 40 per cent discount to their ex- rights price, or the price it estimates the stock will trade at after the offer.
  
  Bigger Discount
  
  The discount is “bigger than expected,” said Izz Al-Din Maslan, an analyst at AmSecurities Holdings Bhd in Kuala Lumpur who rates TMI stock “sell.” While the issue could lead to a 45 per cent dilution to the company’s earnings per share in 2009, investors should take up the offer to avoid bigger losses following the drop in the stock price, he said.
  
  TMI follows Malayan Banking Bhd in selling shares to raise funds as the global economic slowdown and the tightening of the credit market have made it increasingly difficult for companies to obtain loans.
  
  Malayan Banking, the country’s biggest lender, is raising RM6 billion selling new shares to existing investors at a 43 per cent discount to shore up its capital after making acquisitions last year.
  
  TMI had tumbled as much as 30 per cent since February 26, when the company announced the rights issue plan. The stock recouped some of the losses in the past three days after analysts said the declines were excessive.
  
  The shares were suspended from trading today for the sale announcement. The company is holding a meeting with shareholders to approve the rights offer. The stock added 11 per cent to RM2.61 yesterday.
  
  Malaysia’s state investment agency Khazanah Nasional Bhd, which owns 45 per cent of the company, has said it is prepared to subscribe to as much as 65 per cent of the rights offer. The country’s Employees Provident Fund, which controls about 20 per cent stake, has also said it will take up its portion in the rights offer, TMI has said. - Bloomberg

How?

TMI does the rights issue because this is what's owed to its parent TM.

How nice of TMI to settle this godzilla sized debt in the midst of a global financial crisis.

And after receiving this money, TM, as promised, would give a bumper dividend to its shareholders.

How bro?

Hard to fault this issue because this was promised earlier and a known fact but if you are a TMI shareholder and you are not aware of this arrangement, it does feel a little awkward because the money that you subscribe these rights issue will be the money used by TM to pay the dividends.

How bro?

Here is a report from KN.

And this is what RHB folks has to say.

Eyes On The Baltic Dry Index Again

The Baltic Dry Index has closed down yet again.

Here is the daily chart from stockcharts.com.


Last December the Index hit the low of 663 points and recovered to a high of 2298 in early March.

Since then the index has retreated to 1773 down some 22%.

Posted last Thursday, China Shipping Warns Bleak Outlook For Baltic Dry Index, China Shipping Development warns about falling volume and over capacity.

Also do read some of the comments posted on The Glimmer Of Hope As Baltic Dry Index Soars.

Published March 9th 2009. Baltic Dry Index Reaches Highest Since October on Grain Cargoes. Some comments..

• “Grain cargoes and large volumes out of especially South America” are supporting panamax rates, Lars Erich Nilsen, an Oslo-based analyst with specialist investment bank Fearnley Fonds ASA, said in a phone interview. “On the other hand, the iron-ore market, which is the underlying driver for capesizes, is not in a particularly” good shape, he said.
  
  Iron-ore stocks in China, the world’s biggest steelmaker, have jumped 1.2 percent this year while domestic prices for hot- rolled steel sheet, a benchmark steel product, fell 7.7 percent.
  
  The steel industry globally accounts for almost half of all dry-bulk cargo, according to shipper Golden Ocean Group Ltd.
  
  Steel Producers
  
  Producers including ArcelorMittal, the world’s biggest steelmaker, have cut output in response to slumping demand and a slowing world economy. Global growth is likely to shrink for the first time since World War II and trade decline the most in 80 years, the World Bank said today. That may further curb demand for steel and iron ore.
  
  “With steelmakers looking to cut production again, iron ore purchases have been reduced and there are reports of distress sales and offers by iron-ore traders,” Jim Lennon, a London- based analyst with Macquarie Group Ltd., wrote in a report. “We would expect exports from India to contract once again in coming months.”

Is it possible to see this 'correction' turn into yet another sharp downtrend?

Do you reckon it's possible?

Hope I am not wrong but I am afraid that I do think so.

Here is an editorial: Baltic Dry Index Down 20% in 5 Days: This Clearly Signals the End of Days

IOI Properties?

I peeped and I saw Dali talking about IOI Properties: Judging The VTO Of IOI Properties :p3

Errr....

Jan 10th 2008: IOI Prop unit buys Singapore land for condo project

• IOI Properties (S) Pte Ltd (IOIP), a wholly owned unit of IOI Properties Bhd, together with its joint venture partner, Ho Bee Investment Ltd, have successfully tendered for a 5.3-acre land parcel in Singapore’s Sentosa Cove, for S$1.097bil cash.


• Going by the existing market price of between S$2,000 and S$3,000 per sq ft for recent condominium projects in Singapore, the Pinnacle Collection project can expect to generate a gross development value of close to S$2bil while the Seaview project will gross around S$1.25bil.


• “Our association with luxury landmark developments in Sentosa Cove will enhance the IOI Properties brand name and reputation as a luxury quality homes developer not only in Malaysia and Singapore, but also in the larger South-East Asia region,” it added.

Jan 15th 2008: No plans to take property unit private: IOI Corp

• SHARES of IOI Properties Bhd rose as much as 8.3 per cent or RM1.10 yesterday, fuelled by a privatisation rumour which was promptly denied by the company. There was speculation that IOI Corp Bhd, which holds about 70 per cent of IOI Properties, could take its subsidiary private, offering RM15 a share. At that price, it would cost IOI Corp about RM1.5 billion to buy the remaining shares it does not own."It's not true. There's no such thing going on in the company," said a company spokesperson when contacted.

Feb 12th 2008: IOI Properties set to unveil project in IDR

• He said the project, on a 101.171ha, would have 2,000 residential and commercial units. Of the land, 20.2ha will be allocated for light industrial buildings. “It is timely for us to have a project in the Johor Baru district after our success in the ongoing Bandar Putra Kulai project,’’ Heng told StarBiz in a telephone interview. He said the location of Taman Kempas Utama in the Kempas-Tebrau growth corridor within the Iskandar Development Region (IDR) augur well for the company. Heng said the project was easily accessible from the NSE after the Skudai toll plaza, Jalan Kempas Lama and Jalan Senai-Seelong.
  He said the Kempas-Tebrau corridor was currently the hottest spot for property development in south Johor with more than 10 ongoing projects. Heng said the outlook for the property sector in south Johor was promising and some of the biggest names in housing development were launching projects there.
  He said IOI Properties was still working on the gross development value of the project, adding that it would take between eight and 10 years to develop the scheme.

26th Feb 2008: IOI Properties announced a rights issue ( IOI PROPERTIES BERHAD ("IOI PROP" OR "COMPANY") (I) PROPOSED SHARE SPLIT; (II) PROPOSED AMENDMENTS TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY; AND (III) PROPOSED RIGHTS ISSUE (COLLECTIVELY REFERRED TO AS THE "PROPOSALS") )

27th Feb 2008: IOI Properties to raise RM932m

• PROPERTY developer IOI Properties Bhd plans to raise up to RM932 million from a rights issue to part-fund its projects in Singapore.
  
  It will also use part of the money to refinance existing debt, it said in a statement to Bursa Malaysia yesterday.
  
  IOI Properties has total debt of RM225 million.
  
  In January, the company, a unit of IOI Corp Bhd, won a bid with its partner to buy land on the resort island of Sentosa, Singapore, for S$1.097 billion (RM2.5 billion).
  
  This followed its first successful bid in March last year. Then, it won a tender to buy land on the island for RM1.1 billion.
  
  "IOI Corp, being the controlling shareholder of IOI Properties, will give its irrevocable and unconditional written undertakings to subscribe in full for its entitlement," IOI Properties said.
  
  IOI Corp holds 71.15 per cent of IOI Properties as at February 15, 2008.
  
  Before the rights issue, IOI Properties will split its shares into two, to boost trading in the stock as it becomes more affordable.
  
  As at February 15 2008, IOI Properties has a paid-up capital of RM333.52 million comprising the same number of shares. After the split, the number of shares will double to 667 million.
  
  Then, it will offer investors one new rights share for every four existing shares held after the split. The rights are priced at RM5.50 apiece.
  
  Shares of IOI Properties closed at RM12.70 yesterday down 40 sen from Monday's close.

5th May 2008: IOI Properties in for steady flow of earnings

15th May 2008: Quarterly rpt on consolidated results for the financial period ended 31/3/2008

IOI Properties made 70.741 million for the quarter.

6th June 2008: Company was still active with their buybacks. Here is one such announcement Notice of Shares Buy Back - Immediate Announcement

18th June 2008: Rights Issue and Important Relevant Dates for Renounceable Rights were announced by IOI Properties

2nd July 2008: IOI Properties heading towards privatisation?

• IOI Properties heading towards privatisation?
  
  By Francis Fernandez Published: 2008/07/02
  
  IOI Corp can choose to privatise IOI Properties at a minimum price of RM4.85, says a research analyst with Credit Suisse
  
  IOI Corp Bhd, Malaysia's second most valuable firm, may take its property arm private, make fresh purchases or give its convertible bondholders treasury shares, three foreign investment firms speculate.
  
  Credit Suisse said in a report that there was a high chance of IOI Corp privatising IOI Properties Bhd (IOI Prop) if the latter's rights issue was grossly undersubscribed.
  
  In February, IOI Prop said it planned to raise as much as RM932 million, with its parent underwriting the issue.
  
  "As IOI Corp is underwriting the deal, then IOI Corp may end up with more than 75 per cent of IOI Prop. Although there are other options, IOI Corp can choose to privatise IOI Prop at this juncture, at a minimum price of RM4.85," wrote Tan Ting Min, a research analyst.
  
  Doing so would cost its parent some RM1.1 billion and improve its earnings next year by as much as four per cent, the research house said.
  
  In the year to June 30 2007, IOI Corp made a net income of RM1.48 billion.
  
  In another report, Citigroup said that IOI Corp was on the lookout for new investment opportunities.
  
  Over the past eight years, IOI Corp has pumped in more than RM3 billion to take IOI Oleochemical Bhd private, buy the India-based Aditya Birla's edible oil and oleochemical units in Johor, and acquire 100 per cent of Loders Croklaan BV and its related businesses in the US, Canada and Egypt from the Unilever group.
  
  The purchases have made IOI Corp the world's largest oleochemical group.
  
  Merrill Lynch expects the group to use its treasury shares, stocks bought under buyback exercises, to enhance value. In the first half of this year, IOI Corp paid some RM1.2 billion to buy its own shares.
  
  "The highest form of value-enhancement would be to cancel the shares bought back, or it could issue shares to the CB (convertible bond) holders via the shares bought back, thus mitigating any dilution arising from the conversion," Merrill Lynch's Andrew Lee wrote in a report.
  
  IOI Corp currently has a US$360 million (RM1.2 billion) convertible bond due in 2011, with a conversion price of RM4.70 a share, and a US$600 million (RM2 billion) convertible bond due in 2013, with a conversion price of RM11 a share.

24th July 20o8: Announcement on Bursa

• Aseambankers Malaysia Berhad (“Aseambankers”), on behalf of the Board of Directors of IOI Prop (“Board”), is pleased to announce that as at the close of acceptance of and payment for the Rights Shares under the Rights Issue at 5.00 p.m. on 21 July 2008, the total acceptances and excess applications received were for 170,866,635 Rights Shares over the 162,537,250 Rights Shares available for subscription under the Rights Issue, which represents an oversubscription of 8,329,385 Rights Shares or approximately 5.12%.

18th August 2008: Quarterly rpt on consolidated results for the financial period ended 30/6/2008

IOI Properties made 148.5 million for the quarter.

7th November 2008: Quarterly rpt on consolidated results for the financial period ended 30/9/2008

• IOI Properties 1Q Net Profit Dn 31% On Weak Demand,High Costs
  
  KUALA LUMPUR (Dow Jones)--IOI Properties Bhd (1635.KU) said Friday first-quarter net profit fell 31% on year due to weaker demand and higher construction costs.
  
  Net profit in the three months ended Sept. 30 declined to MYR55.5 million from MYR80.1 million a year earlier, while revenue slipped to MYR158.8 million from MYR205.5 million.
  
  "The decline is attributable to the softer property market and the margin reduction due to higher construction costs during the quarter," IOI Properties said in the notes accompanying its results.
  
  Property development accounts for the bulk of the group's income, although it receives contributions from plantations, property investments and other operations.
  
  The company expects its full-year operating performance to be lower than the previous year as the property market is expected to remain soft until the second half of the fiscal year.
  
  Overall performance should remain "satisfactory" in the current market environment as lower building material prices will enable it to accelerate construction activities and achieve better margins when the property market recovers, the company said.
  
  It added that properties in the Puchong township are still seeing steady demand.

5th Feb 2009: IOI Corp to buy out property arm

• By Chong Pooi Koon Published: 2009/02/05
  
  Planter IOI Corp Bhd (1961) plans to pay RM506 million, or RM2.60 a share in a cash-and-share deal to buy out IOI Properties Bhd before taking it private, the company said yesterday.....

---------------

Here is what has happened marked down in the chart.

The bigger picture.

Maybank Again

Huge articles on Business Times on Maybank.

I was hardly impressed.

The article is published AFTER Maybank announced formally its rights issue dates.
First let's roll back what has happened so far. The following are the postings written on Maybank; Maybank Has Lost 24.1 Billion In Market Capital Since BII Deal!!!, More On Maybank PNB Is Saying Maybank rights a good buy

On today's business times: Maybank sees key businesses growing

• Maybank sees key businesses growing
  
  By Adeline Paul RajPublished: 2009/03/23
  
  Top lender Malayan Banking is counting on growth in consumer, Islamic and commercial banking to see it through the worsening economy
  
  Top lender Malayan Banking Bhd (Maybank) (1155) is confident it can grow its key businesses this year and the next despite a worsening economy, its chief said.
  
  President and chief executive officer Datuk Seri Abdul Wahid Omar said he was counting on growth in consumer, Islamic and commercial banking to see it through these troubled times.
  
  The group's insurance and investment banking businesses, however, are expected to falter given the weaker capital markets.
  
  "We're actually entering this recession, or crisis, with a strong balance sheet and strong asset quality. Even if our non-performing loans (NPLs) were to deteriorate further, we think we should still be profitable," he told Business Times in an interview.
  
  Wahid has warned, however, that the group's net profit in fiscal year ending June 30 2009 will be lower than last year's RM2.9 billion given the more challenging environment.
  
  He said the bulk of profit will continue to come from Maybank's traditional commercial banking franchise.
  
  The group, which is dominant in consumer banking, should also be able to continue to lead in this area.
  
  "No doubt, in some segments, we might see some increase in NPLs, but I think those increases will be manageable. If you look at our current net NPL ratio of 1.8 per cent, even if that doubles to 3.6 per cent it would still be manageable," he said.
  
  The industry's net NPL ratio is now about 2.2 per cent.
  
  Loan growth should be able to come in at about 6 per cent to 7 per cent this fiscal year, which is still "very good" considering the current environment, he said.
  
  Maybank's share price has fallen of late as investors worry that its move to raise RM6 billion via a rights issue will dilute earnings. It fell below RM4 last Monday, but has since been on the rise.
  
  Wahid said the move to strengthen Maybank's capital base was necessary
  
  and formed a key part of the group's ambition to become one of the top five banks in Southeast as well as South Asia come 2015.
  
  The group expanded last year, buying three banks in Asia for RM11.5 billion.
  
  "When we look at our requirements for the next three to five years, we felt that RM6 billion would be an appropriate amount. This is actually very much pre-empted and, with that, Maybank will be one of the best capitalised banks in this region.
  
  "Once we have enough capital, then there'll be no issue to be able to grow in the market, so that means that we'll be able to capture some loan growth, with much better margins," he said.
  
  Investors are also concerned that Maybank's dividends will now come in at a much lower level, but Wahid has given the assurance that the bank intends to stick to its long-term dividend policy of paying out between 40 per cent and 60 per cent of net profit.
  
  "For the current year we will have to review this indication, but for the long term we are committed to the 40-60 per cent range," he said.
  
  Banking analysts, like Fiona Leong of AmResearch, believe it may come in at as low as 25 per cent of net profit this year. Last year, it paid out 61 per cent.
  
  OSK Research's Keith Wee said Maybank was likely to conserve a large portion of its capital for potential impairment losses on its bank buys in Indonesia and Pakistan.
  
  These factors - lower dividends, potential impairment and the rights issue - continue to weigh on Maybank's stock. It has shed 15 per cent this year.
  
  Most analysts are recommending either a "sell" or "hold" on it, but at least two have called a "trading buy" as they believe it may have bottomed.
  
  While the group's three new bank purchases will provide it with a new source of income from this year, it will take a while yet to be earnings accretive given the higher interest incurred on the RM9.1 billion of capital that the group raised over the last six months, Wahid said.
  
  For now, Maybank, which is present in 14 countries, is taking a break from making further acquisitions and focusing on maximising organic-growth opportunities.
  
  It still wants to increase its stake in Vietnam's An Binh Bank by another 5 per cent to 20 per cent as per the subscription agreement, but is in no hurry to do so.
  
  As and when the Vietnamese government approves such a move, Maybank will be ready to act as the funds are already in place for it.
  
  Wahid also said that he was not overly concerned about Maybank's lower market capitalisation, adding that he would rather focus on fundamentals.
  
  "At this moment, given volatile markets, we're less concerned in terms of market capitalisation. We believe that if you focus on the fundamentals and deliver the results, your share price will take care of itself."
  
  Maybank, with a market capitalisation of some RM21.3 billion currently, saw its shares close at RM4.36 last Friday.

First let me repeat what's needed to be repeated.

Before the BII fiasco, Maybank's market capitalsation was some 43.6 Billion!

Now it is only some 21.3 billion.

Anyway, the group CEO said this:

• "We're actually entering this recession, or crisis, with a strong balance sheet and strong asset quality. Even if our non-performing loans (NPLs) were to deteriorate further, we think we should still be profitable,"

I wonder. If Maybank's balance sheet is truly really strong, why the rights issue is needed? Maybank had overpaid for the banks and isn't this why the rights issue is needed?

And since the recession and crisis was known way back last year, why did Maybank overpay for their purchases? Doesn't make sense right? Since it was a crisis, why couldn't Maybank bargain?

Now a rights issue is needed.

A rights issue which would see Maybank's share base increase from 4881million shares to 7077 million shares. And if earnings do not increase, the earnings would be diluted.

And what did Wahid warn?

• Wahid has warned, however, that the group's net profit in fiscal year ending June 30 2009 will be lower than last year's

Lower net profit is already expected.

And with lower net profit, how could investors logically expect more in dividends?

The CEO then said.

• "For the current year we will have to review this indication, but for the long term we are committed to the 40-60 per cent range," he said.

And what about the impairment losses?

Yeah, Maybank closed at 4.38 last Friday. When I first blogged Maybank Has Lost 24.1 Billion In Market Capital Since BII Deal!!!, Maybank last traded at 4.00. LOL! :p2

And here is the other article on Maybank:

• Longer wait to realise earnings-accretive BII
  
  By Adeline Paul RajPublished: 2009/03/23
  
  Malayan Banking Bhd's (1155) chief says it could take a longer-than-expected four years for its RM8.2 billion investment in Bank Internasional Indonesia to be earnings accretive.
  
  Maybank, which owns 97.5 per cent of BII, had told analysts when announcing the acquisition last year that it expected BII to start enhancing its earnings in the fiscal year ending June 30 2010.
  
  "With the RM8.2 billion that we paid, it will take a longer period for that investment to be earnings accretive. As to when, it very much depends on how fast we can grow the earnings, so it will not be within four years," Maybank president and chief executive officer Datuk Seri Abdul Wahid Omar told Business Times in an interview.
  
  For the deal to be accretive, earnings contribution from BII has to be higher than the cost of funding.
  
  Maybank's stock took a tumble upon the company announcing plans to buy BII last March, and again later when it concluded the deal in November.
  
  Banking analysts viewed the deal as being too expensive and said the timing was not right. It had, after all, bought 15 per cent of Vietnam's An Binh Bank and 20 per cent of Pakistan's MCB Bank earlier in the year.
  
  Today, BII shares are trading at some 44 per cent below the tender offer price, while MCB's market price is around 70 per cent lower than the acquired price.
  
  Keith Wee, an analyst at OSK Research, said Maybank might have to make a further impairment of between RM1 billion and RM1.9 billion this fiscal year for its investments in BII and MCB.
  
  "It's a drag on the stock," he remarked.
  
  Maybank had already made an impairment to the tune of RM242 million on its MCB investment earlier in the first quarter.
  
  Wahid, however, said Maybank was confident of continued profitability and that any further impairment would not lead to a loss in the group's net earnings for the current fiscal year.
  
  He is aware that he has an uphill task in making good on Maybank's three bank purchases last year, especially given the bleak outlook analysts are painting amid the weaker global economy.
  
  Its RM11.5 billion acquisition trail has had its share of challenges and criticism.
  
  "At the end of the day, from Maybank's and my personal perspective, we would like to move forward. We're not about to look back and try to justify at what prices the deal was done."
  
  He pointed out that his main challenge this year would be to follow through on the new bank buys and realise value from them.
  
  "Obviously, the primary focus of the three will be on BII given that it cost us RM8.2 billion out of the total RM11.5 billion that we spent on acquisitions," Wahid remarked.
  
  His first priority at BII is to assemble a strong management team.
  
  The new appointments, comprising new and existing talent, were announced last Friday.
  
  Ridha Wirakusumah, a former American International Group Inc (AIG) executive, was made the new president director of BII, subject to approval from Indonesia's central bank. He was AIG's head of Asia-Pacific consumer finance.
  
  Maybank has identified four immediate focus areas for BII's new team to improve on: credit-risk underwriting processes, its trade finance capability, the remittance business and Internet banking.
  
  In addition, it wants to support Malaysian and Singaporean businesses that have invested or intend to invest in Indonesia.
  
  Wahid said Indonesia was an important market with much potential for growth as the banking penetration rate was still low at less than 30 per cent compared with Malaysia's 98 per cent and Singapore's 102 per cent.
  
  "We expect to grow BII's branch network from the current 250 branches to something more sizeable," he said.
  
  Media reports last weekend quoted him as saying that he expected to increase the number of branches to as many as 450 in the next three years.
  

Inflation Adjusted Chart Of S&P 500 Earnings

The following is from Inflation Adjusted Chart Of S&P 500 Earnings

• It's no secret that it's bad out there. Today's chart helps provide some perspective as to the magnitude of the current economic decline. Today's chart illustrates that 12-month, as-reported S&P 500 earnings have declined over 80% over the past 18 months, making this by far the largest decline on record (the data goes back to 1936). In fact, real earnings have dropped to a level not seen since the 1930s and 40s – the back end of the Great Depression. While earnings have been struggling since Q3 2007, it was the latest quarter (Q4 2008 the first full quarter following the financial meltdown), where the real damage was done. During Q4 2008, the S&P 500 came in with its first negative earnings quarter ever and the amount lost during the quarter was more than the index has ever earned during a single quarter.

Eliot Spitzer: The Real AIG Scandal

Just in case you miss the editorial: The Real AIG Scandal

By Eliot Spitzer

Everybody is rushing to condemn AIG's bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG's counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?

For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman's collapse, they feared a systemic failure could be triggered by AIG's inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG's trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.

It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG's counterparties are justified with an appeal to the sanctity of contract. If AIG's contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.

But wait a moment, aren't we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes—income taxes to sales taxes—to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won't be laid off. Why can't Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn't we already give Goldman a $25 billion capital infusion, and aren't they sitting on more than $100 billion in cash? Haven't we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn't they have accepted a discount, and couldn't they have agreed to certain conditions before the AIG dollars—that is, our dollars—flowed?

The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.

So here are several questions that should be answered, in public, under oath, to clear the air:

• What was the precise conversation among Bernanke, Geithner, Paulson, and Blankfein that preceded the initial $80 billion grant?
  
  Was it already known who the counterparties were and what the exposure was for each of the counterparties?
  
  What did Goldman, and all the other counterparties, know about AIG's financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn't they bear a percentage of the risk of failure of their own counterparty?
  
  What is the deeper relationship between Goldman and AIG? Didn't they almost merge a few years ago but did not because Goldman couldn't get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG's business model was not to pay on insurance it had issued.
  
  Why weren't the counterparties immediately and fully disclosed?

Failure to answer these questions will feed the populist rage that is metastasizing very quickly. And it will raise basic questions about the competence of those who are supposedly guiding this economic policy.

Looking Back At Berjaya Land: Part II

It's now Feb 2008.

05-02-2008: BLand raises stake in BToto to 48.96%

• KUALA LUMPUR: Berjaya Land Bhd (BLand) has raised its stake in Berjaya Sports Toto Bhd (BToto) to 48.96% as of yesterday from 48.76% on Jan 21, mainly due to the acquisition of one million BToto shares by a BLand subsidiary and BToto’s recent share buyback of three million shares.
  
  In a statement yesterday, BLand said the number of shares that had been bought back and retained as treasury shares was 93 million, while the number of shares with voting rights was 1.26 billion. BToto’s paid-up capital now stood at RM135.1 million comprising 1.35 billion shares of 10 sen each.
  
  BLand said several other subsidiaries of Berjaya Corporation Bhd (BCorp), the holding company of BLand, also had a total interest of 1.11% in BToto.
  
  “As BCorp group’s interest in aggregation with BLand group’s interest in BToto is now more than 50%, BToto will be deemed as a subsidiary of BLand,” the statement said.

20-02-2008: BLand unit places out ICULS to Goldman Sachs at RM250m

• KUALA LUMPUR: Berjaya Land Bhd’s (BLand) unit, Immediate Capital Sdn Bhd (ICSB), has placed out 50 million units of irredeemable convertible unsecured loans stocks (ICULS) 1999/2009 to Goldman Sachs International at RM5 per ICULS or a total of RM250 million cash, said BLand in a statement yesterday.
  
  The placement, which was carried out through a direct business transaction, would result in a gain of RM200 million, said the company.....

The company continued wheeling and dealing.

27 Feb 2008: BLand unit buys more stake in Piccolo owner

24th March 2008: Quarterly rpt on consolidated results for the financial period ended 31/1/2008, Berjaya Land announced a net profit of 115.057 million.

• ... pre-tax profit of the Group was mainly due to the recognition of gain on disposal of investment properties (KL Plaza properties by Noble Circle (M) Sdn Bhd and Sinar Merdu Sdn Bhd) amounting to RM140.0 million.

Yeah, despite being aided by the extra gain in disposal of property amounting to 140 million, Berjaya Land's net earnings was only 115.057 million.

And the wheeling continued. 30th April 2008: Berjaya in RM11b joint venture

20th June 2008: Quarterly rpt on consolidated results for the financial period ended 30/4/2008

Berjaya Land earnings soars to 627 million. Again it was NOT impressive! As stated by Berjaya Land in its earnings.

• The significant increase in pre-tax profit of the Group was mainly due to recognition of the gain on placements of 150 million units of 5% ICULS 1999/2009 amounting to approximately RM598.9 million and the recognition of negative goodwill amounting to RM34 million arising from several business combinations.

Gains made by Berjaya Land from its ICUL and the negative goodwill was already more than its quarterly earnings. What about Berjaya Land own core business? No contributions at all?

Let's look at the chart now.

July 2nd 2008: Vietnam project set to boost BLand property division

• HO CHI MINH CITY: Berjaya Land Bhd (BLand) expects its property segment to contribute up to 50% of total earnings in about four years.
  
  This will be backed by its largest overseas project, the US$7.5bil Vietnam International University Township (VIUT)....

Market now reacted negatively. Berjaya Land went from 4.28 to close at 3.98 on 2nd July 2008.

What to do now?

Share buybacks were the answer according to Berjaya Land.

31st July 2008: Notice of Shares Buy Back - Immediate Announcement. Berjaya Land paid between 4.36 and 4.40 for the first of its many buybacks. Do look where this spot is marked in the chart later. (do note the conversion of ICULS is still happening all this while)

Sept 16th 2008: Berjaya Land in US$2b Libyan foray

Sept 19th 2008: Quarterly rpt on consolidated results for the financial period ended 31/7/2008

Net earnings was only 683 thousand! Stock closed at 4.00 on the 19th. All quiet from ECM Libra and SJ Securities.

21st October 2008: BLand may put projects on hold

• KUALA LUMPUR: Property company Berjaya Land Bhd may put some of its projects on hold due to the current bearish market sentiment but is still confident of generating some RM350mil in property sales in its financial year ending April 30, 2009, said chief executive officer Datuk Francis Ng.
  
  But the company’s huge projects in Vietnam would not be affected, Ng said, pointing out he expected the property slowdown in Vietnam to be short term.
  
  “We will proceed with our Vietnam ventures because it is a long term investment,” he said, adding that the company’s four property development projects in Vietnam were worth about US$2.5bil in gross development value (GDV)....

I do understand the rational to put these projects on hold.

3 November 2008 Berjaya Jeju Resort slated to be launched in first quarter 2009

• BERJAYA Jeju Resort, which will be developed into a world-class integrated tourism and recreational destination on the honeymoon island of Jeju, will mark Berjaya Land Bhd’s (BLand) entry into South Korea’s property market when the project is launched in the first quarter of next year...

3 November 2008 High growth in BLand overseas ventures

• ....While cautious of the impact of the global financial meltdown on the property market, chief executive officer Datuk Framcis Ng said: “We are invested in these countries for the long term and we have confidence that these countries are resilient enough to weather the downturn and recover when the global economy picks up in time.”He does not discount the need to slow down or defer some of the company’s projects if the demand is not there....

Berjaya Land shares is now worth only 3.62...

17th December 2008: Quarterly rpt on consolidated results for the financial period ended 31/10/2008

• 18-12-2008: BLand posts RM48.5m 2Q loss
  
  KUALA LUMPUR: Berjaya Land Bhd (BLand) slips into red in the second quarter ended Oct 31, 2008 (2QFY09), posting a net loss of RM48.5 million in a sharp reversal from a net profit of RM325.4 million a year earlier.
  
  At pre-tax level, its profit fell 85% to RM49 million from RM329 million a year earlier.
  
  This was mainly due to lower progress billings and rental contributions from the hotels and resorts division, as well as additional impairment in value of investments in an associated company as well as certain quoted investments arising from the stock market downturn.
  
  Additionally, the previous year’s results included a total exceptional gain of RM378.8 million arising from the placement of 170 million 5% ICULS 1999/2009, disposal of Berjaya Corporation Bhd ICULS 2005/2015 and the divestments of Berjaya Hotels & Resorts (Mauritius) Ltd and Berjaya Mahe Beach (Cayman) Ltd.
  
  Revenue came in at RM1.06 billion versus RM175.6 million previously mainly due to the consolidation of Berjaya Sports Toto Bhd (BToto) as a subsidiary company effective February 2008.
  
  For the first half ended Oct 31, its net loss stood at RM47.82 million versus a net profit of RM363.5 million a year earlier. No dividend was declared.
  
  BLand said its directors took recognisance of the prevailing global economic conditions arising from the financial meltdown in the West and its contagion effect on the regional and Malaysian economies.

By now, Berjaya Land was trading around 3.28.

And Berjaya Land still continued its share buybacks...

Here's one announcement dated 27th Feb 2009. Notice of Shares Buy Back - Immediate Announcement. Price paid was between 2.98 and 3.00.

Remember back on 31st July 2008, Berjaya Land initial buyback was between 4.36 and 4.40!

Ouch! Ouch! Ouch!

Last night Berjaya Land announced its earnings.


And Bernama decides to talk about pretax profit.....???

• Saturday March 21, 2009
  
  Berjaya Land Q3 pre-tax profit down
  
  BERJAYA Land Bhd (BLand) says its pre-tax profit in the third quarter ended Jan 31 fell to RM78.9mil from RM122.3mil in the previous corresponding period.
  
  The lower pre-tax profit was mainly due to lower progress billings from the property development division and lower rental income from the property investment division, it says in a statement.
  
  In addition, the group recorded an exceptional gain of RM97.6mil from the disposal of the KL Plaza properties in the previous corresponding quarter, it says.
  
  BLand, however, reported a big jump in revenue to RM1.16bil from RM181.18mil, which it attributes mainly due to the consolidation of Berjaya Sports Toto Bhd (BToto) as a subsidiary company effective February 2008.
  
  For the nine months ended Jan 31, its pre-tax profit fell to RM211.6mil from RM484.8mil in the previous corresponding period while revenue rose to RM3.18bil from RM506.9mil previously.
  
  BLand expects the prevailing global economic conditions to affect the group’s hotel, resort and property development business in the remaining quarter of the financial year ending April 30.
  
  However, the numbers forecast operator business under BToto is expected to remain resilient, it adds. – Bernama

And I end my story on Berjaya Land for now with the chart of Berjaya Land since 2007.

Yeah, Berjaya Land last traded at 2.93. (see Looking Back At Berjaya Land: Part I )

Looking Back At Berjaya Land: Part I

It's great fun to read the chain of news and events following a stock over the years.

No joke.

Take the Berjaya Land story.

Let me say this again. Anyone who had purchased this stock early in 2007, would have been laughing all the way to the bank by end Dec 2007.

It was a bull market and Berjaya Land was simply a winner.

Oct 17th 2007, I wrote on Berjaya Land: Berjaya Land Is A Growth Story?

I questioned the growth story mentioned in the local papers. It featured ECM Libra incredible declaration that Berjaya Land was a growth story.

I questioned the claim and in the blog posting, I loaded the picture of the chart depicting Berjaya Land past earnings record and it was crystal clear for me that it was not a growth stock!

As per the table showed in the article, Berjaya Land Is A Growth Story?, one would have noted that ECM Libra DID NOT bother to mention what Berjaya Land earned for 2003 and 2004. Coming from a research house, I was amazed that ECM Libra did not bother to show the bare minimum of at least a five year track record. How could one declare a growth story based on a three-year track record?

Well Berjaya Land earned 134 million in 2003 and only 94 million in 2004 and if I lined these facts up, Berjaya Land's 5 year track record would had looked like this.

In 2003, it earned 134 million
In 2004, it earned 94 million.
In 2005, it earned 67.5 million
In 2006, it earned 89.1 million.
In 2007, it earned 32.3 million!

Would one declare this as a growth stock? The earnings DECLINED from 134 million in 2003 to only 67.5 million in 2005.

Anyway Berjaya Land closed at 3.32 on Oct 17th 2007.

Now I would note the sale of KL Plaza by Berjaya Land in Aug 2007. BLand sells KL Plaza for RM471m and of course Berjaya Land places out RM170m ICULS to UBS, Goldman Sachs (disposal would would result in a gain of about RM340 million )

And other research houses started to jump on to the bandwagon. Here is a snippet from an article on the EdgeDaily (url is broken since the Edge has changed server)

• 19-10-2007: BLand ripe for re-rating
  
  BERJAYA Land Bhd (BLand) deserves a re-rating based on its venture into Vietnam, which is currently enjoying a property boom on the back of rapid urbanisation and strong average gross domestic product growth of 7.2% over the last decade, according to SJ Securities Sdn Bhd.
  
  “In Vietnam, the current demand for property far outstrips supply. Thus, the group’s move into Vietnam to capitalise on this opportunity is indeed timely,” said the research house.
  
  In a research note yesterday, it placed an Overweight call on the stock at RM3.32 and expected to re-rate its realised net asset value (RNAV) valuation to RM10.16 per share based on a two-stage valuation of BLand’s local and overseas ventures.
  
  BLand is the first Malaysian com-pany to be granted with investment licence to undertake mixed development property project in Hanoi — a joint venture with a total gross development value (GDV) of RM1.7 billion over five years....

A RNAV valuation of 10.16?? LOL! Mind you that on 3rd January 2007, Berjaya Land was only trading at 70 sen (!) and at that moment of time when SJ Securities was looking at Berjaya Land trading at 3.32!

Huge news continued to flow for Berjaya Land. BLand, Jeju to build US$500m complex (a rm1.7 billion project in South Korea!)

31st Oct 2007, it was Kenanga's turn to blow the trumpet : BLand sees growth in property sector and Kenanga gave Berjaya Land a target of 7.61. The small little chart on that Star article is reproduced.

See how Berjaya Land was only 0.70 sen at the start of the year? See how ot was 4.30 on Oct 2007 (up an incredible 514.3%!)

There was no stopping Berjaya Land.

November 14th 2007. BLand Purchases luxury hotel in Vietnam from Tradewinds ( Deal was worth some US75 million or 253.3 million ringgit)

And all these while, loan stocks were converted. Shares were high and it was a good reason to convert them into ordinary shares. ( Here is one such announcement of many posted on Bursa ( Bbjland conversion ))

And Berjaya Land continued to hog the limelight. In December 2007, Berjaya Land to buy Faber Labuan for RM226.5m and BLand aims big in Vietnam property sector and 13-12-2007: BLand in RM8.4b Vietnam JV project

• 13-12-2007: BLand in RM8.4b Vietnam JV project
  By Gan Yen Kuan
  
  HANOI: Berjaya Land Bhd (BLand) has teamed up with Hanoi Electronics Corporation (Hanel) to undertake a US$2.5 billion (RM8.4 billion) integrated residential, commercial and industrial township project in Long Bien district, Hanoi.
  
  The latest project increases the total gross development value (GDV) of BLand’s projects in Vietnam to about RM40 billion, said Berjaya Corporation Bhd (BCorp) chairman and chief executive officer Tan Sri Vincent Tan Chee Yioun.
  
  BCorp, which is the parent of BLand, signed the agreement of cooperation with Hanel here yesterday. The joint-venture company Berjaya-Hanel Co Ltd is acquiring 405 ha of land from Hanel for the township project...

17th December, Berjaya Land's Quarterly rpt on consolidated results for the financial period ended 31/10/2007

The Edge quickly trumps on Berjaya Land 'success': Berjaya Land chalks upRM325.4m net profit in 2Q.

• KUALA LUMPUR: Berjaya Land Bhd’s (BLand) net profit soared to RM325.4 million in its second quarter (2Q) ended Oct 31, 2007, compared with RM8.6 million a year earlier, after it registered exceptional gains of RM339.2 million.
  
  Announcing its 2Q results yesterday, BLand said revenue for the quarter increased 44% to RM175.6 million due to higher sales in its property development business, in spite of lower revenue recorded from its hotels and resorts division, which completed the disposal of Berjaya Le Morne Beach Resort & Casino, Mauritius and Berjaya Mahe Beach, Seychelles last August.
  
  The group said it registered the exceptional gains from the placement of 170 million 5% BLand irredeemable convertible unsecured loan stocks (ICULS), the disposal of the hotels (gain of RM26.7 million) and the disposal of 100 million Berjaya Corporation Bhd ICULS (gain of RM12.9 million)....

A profit of 325.4 million boosted by exceptional gain of 339.2 million? ... ? :p

And folks from SJ Securities continued to be bullish about Berjaya Land despite Berjaya Land now trading at 5.60 on 21 Dec 2007. 21-12-2007: Better earnings outlook for BLand

• SJ SECURITIES has revised upwards its estimation of Berjaya Land Bhd’s (BLand) financial year ending April 30, 2008 (FY08) results and maintained an overweight call at RM5.60 on the property developer’s stock.
  
  The research house said its revision was based on exceptional gains reported in BLand’s second quarter ended Oct 31, 2007 (2QFY08) results.
  
  It said the gains comprised RM339.2 million from the placement of 170 million 5% BLand irredeemable convertible unsecured loan stocks (ICULS), RM26.7 million from the disposal of the Berjaya Le Morne Beach Resort & Casino in Mauritius and the Berjaya Mahe Beach Resort in Seychelles in August and RM12.9 million from the disposal of 100 million ICULS of parent company, Berjaya Corporation Bhd.
  
  “We are also revising our fair value for BLand to RM6.44, after imputing the contribution of its first Hanoi project, Thach Ban New City, into our valuation. We believe the revision is timely as our recent visit to Vietnam convinces us that the group is on track to launch this project by 1Q of 2008,” it said.

Then came January 25th 2008. Berjaya Lands announces it will abort its Vietnam project and I blogged on it the next day: What's to happen to Berjaya Land's Growth Story?

• BERJAYA Land Bhd's plans of developing residential and commercial properties in Vietnam's Nhon Trach district has fallen through.
  
  In an announcement to Bursa Malaysia yesterday, Berjaya Land said it will not proceed with its co-development plans with Tin Nghia Co Ltd, a leading state-owned enterprise in Dong Nai.
  
  The property development is inclusive of its transportation and infrastructure network.
  
  "The board wishes to inform that after much discussion and consideration, the parties involved have decided not to proceed with the project based on the findings of the feasibility study report," Berjaya Land said.

I was amazed. Despite this setback in Vietnam, the company came out strongly defending the company's growth potential.

See the following two articles Major projects set to push BLand ahead and Group has projects worth RM60bil in Asia-Pacific.

On the 29th January, Kenanga and SJ were both unfazed and I wrote Everything's Ok for Berjaya Land, so says ...

What were to happen to Berjaya Land???

To be continued...

Looking Back At Berjaya Land: Part II

Wood Says It Ain't Gonna Work

It Ain't Gonna Work III

Here is a snippet:

• ...In any event, in the wake of this news the equity markets surged, the dollar sold off and commodities rallied. Hip, Hip, Hurray. Hip, Hip, Hurray. It’s 2007 all over again, or is it?
  
  In my opinion, this re-inflation effort is ultimately not going to work any better than any of the previous efforts. The technical damage that has been done over the last couple of years is not something that can be fixed by some stimulus package. The equity markets are still operating within the context of a massive secular bear market and the bounce that is currently underway is nothing more than a bear market rally. The commodity bubble is a thing of the past, even though this counter trend bounce still likely has further to run and the decline in the dollar was totally expected based on my cycles work. So, at this time I’m not seeing anything out of the ordinary or that wasn’t expected based on my cyclical work.
  
  Also, with the average American consumer tapped out, ask yourself a common sense question. How, are these bailout plans going to stimulate aggregate demand? Did the balance in your checking account increase because of any of these efforts? Did the liability side of your balance sheet change? Do you suddenly feel the urge to go borrow more money or to make a major purchase? As I see it, these efforts are not reaching the consumer and therefore, this is not going to stimulate demand. What it is doing is saving the financial institutions that made the bad loans. I feel that not only should the over-indebted consumer pay the price, but so should the responsible institution for making the bad loans. Printing money out of thin air and/or using tax payer dollars to bail out financial institutions that made poor business decisions to make loans to high risk consumers is wrong and will not ultimately fix the problem. At best, this may temporarily re-inflate equities and commodities.
  
  

Another Sad Day For Corporate Malaysia As MMC's Senai Airport Deal Is Approved!

When you own shares in a listed company, there are issues that you can vote for.

If you see a listed company comes up with a proposal and you think it stinks so bad, it is your right to vote. And when you don't vote, these stinking deals will pass. It's so simple.

The very least you can do is attend the EGM and voice out why you think the deal is not fair to you, the minority shareholders. It is your right. It is your money.

And when you do not attend then most likely than not, these unfair deals would repeated over and over again.

And that is why the minority shareholders get the short end of the stick.

Unless you are the smarter ones and you had already voted with your feet!

Yesterday, it was voting day for MMC and it's rather absurd Senai Airport deal.

• MMC shareholders say Yes to Senai Airport deal
  
  By Adeline Paul Raj Published: 2009/03/21
  
  MMC Corp Bhd's (2194) shareholders approved its controversial plan to buy Senai Airport Terminal Services Sdn Bhd (SATS) for RM1.7 billion despite strong objection from minorities.
  
  At an extraordinary general meeting (EGM) yesterday, which dragged on for four hours, minority shareholders were vocal, making it clear they were against MMC paying such a hefty price in the related-party deal.
  
  MMC is owned by Tan Sri Syed Mokhtar Al-Bukhary, who is also a shareholder in SATS.
  
  "The minorities were very unhappy and almost wanted to stage a walkout. But we managed to tell them not to do so, and vote," said Minority Shareholder Watchdog Group (MSWG) chief executive officer Rita Benoy Bushon, who attended the EGM.
  
  Bushon said the MMC chairman had invoked his discretion to have a poll instead of a vote by hands and, in the end, 97 per cent voted in favour of the deal.
  
  This was because minority shareholders were few in number. The majority of the non-interested parties who could vote on the deal comprised institutional investors.
  
  MMC is to pay RM580 million for SATS' loss-making Senai Inter-national Airport and RM1.12 billion for land which will be developed as an "airport city".
  
  "I'm not against them buying SATS; it's just the price. It's a valuation argument, that's all," a minority shareholder said.
  
  He, and others, was irked that valuations were based on projected values rather than the current value.
  
  Some felt that MMC, which has some RM20 billion debt, should be preserving its cash now that the economy was slowing down. Others felt that it should wait for a better price.
  
  For MMC, the buy enables it to exploit SATS' potential to become a regional cargo and logistics hub.
  
  MMC chief executive officer Hasni Harun did not face the press yesterday, but in a statement reiterated that the SATS purchase was commercially viable and in the long-term interest of the group and stakeholders.
  
  "With this, MMC will own the only privatised airport in the country and it will create value to the group's transport and logistics business," he said.
  
  Asked if she was happy the deal would go through, Bushon replied: "I had expected that the board would have somehow looked at the valuation again."
  
  She said the board had given assurance, however, that it would be accountable for the purchase. The deal is expected to be accretive in two years.

Another sad day for corporate Malaysia.

Past postings:

• Hwang-DBS Advises MMC Shareholders To Vote For SATS Purchase??
• MMC And Its Senai Airport Terminal Purchase!
• More On MMC And Its Senai Airport Terminal Purchase!

Footy: Champions League Draw 2009

Quarter-finals

• Villarreal v Arsenal
• Manchester United v Porto
• Liverpool v Chelsea
• Barcelona v Bayern Munich

First legs will be played on April 7/8.

Second legs will be played on April 14/15.

Semi-finals

• Manchester United/Porto v Villarreal/Arsenal
• Barcelona/Bayern Munich v Liverpool/Chelsea

First legs will be played on April 28/29.

Second legs will be played on May 5/6.

-----

Not a bad draw.

United really has to start playing if they want to win again. For me, they pale in comparison when compared to what the team did last year.

Some Comments On Pelikan Holdings

Pelikan Holdings.

A rather branded corporate listed in Malaysia.

This is how the stock would have looked on March 10th 2009.

Yes sir, the stock had a high of 5.80 in July 2007 and in March 2009, this stock could be purchased for under 65 sen!

I was curious.

Monday February 9, 2009: Slower sales for Pelikan this year

• PETALING JAYA: Pelikan International Corp Bhd expects slower sales this year owing to the global economic turmoil which would inevitably erode demand.
  
  It does not help matters that its largest market, accounting for close to 40% of total group sales is Germany, which slipped into recession in November.
  
  Despite this, senior vice-president (corporate planning) Ng Cheong Seng remains cautiously optimistic.....

27th Feb 2009. Pelikan reported its earnings: Quarterly rpt on consolidated results for the financial period ended 31/12/2008

Pelikan lost 43.420 million!

Company said the following.

On the 16th March CIMB wrote some bullish notes on Pelikan and it was published on the Edge, CIMB upgrades Pelikan to trading buy

• CIMB upgrades Pelikan to trading buy
  Written by Financial Daily
  Tuesday, 17 March 2009 11:14
  
  PELIKAN’S recent fourth-quarter (4Q08) results came as a shocker and raised the spectre of worse to come, said CIMB Research in a note yesterday.
  
  While the RM43.4 million net loss for the quarter was a worry, the bigger concern is the 29% year-on-year (y-o-y) top line compression, which is a sign of just how bad the recession in Europe is, particularly in Germany, CIMB Research added.
  
  “The dismal results clearly show that we had underestimated the economic downturn in Europe. A few months back, we had sliced 10%-12% off our FY09-FY10 revenue forecasts in anticipation of weaker sales growth. Clearly, it was not enough. There is no sign of relief on the horizon as IMF projects a 2% economic contraction in Europe in 2009, after 0.7% growth in 2008. More than 80% of Pelikan’ revenue comes from Europe,” it explained.
  
  Pelikan’s share price has lost 90% of its value from the 2007 peak and it looked like the market is pricing Pelikan to go bust. However, CIMB felt that this was unlikely. “Net gearing as at end-08 is 0.5 times and with no major capex plans this year, net gearing should fall to 0.3 times. Valuation is at distressed levels, at only 0.4 times price-to-book value (P/BV).”
  
  CIMB maintained its earnings forecast for Pelikan but slashed its target price to 78 sen from 92 sen as it widened the discount to the 13 times sector target price earnings (PE) to 40% from 30%. However, it upgraded the stock to a trading buy from an underperform.
  
  “The wider discount reflects earnings worries for Pelikan if European economies lose more ground in the next few quarters. However, after the stock’s sharp 38% price decline this month, we believe most of the bad news has already been reflected in its share price,” said the research house.
  
  Pelikan was flat at 59.5 sen yesterday.

However if one looks at the shareholder transactions, one is likely to be confused on what's happening.

Changes in Sub. S-hldr's Int. (29B) - PBS Office Supplies Holding Sdn Bhd

And look at the following transactions from Executive Chairman Loo Hoo Keat.

Changes in Director's Interest (S135) - Loo Hooi Keat

Look at all the buy and sell transactions on the same days!!!

What's up doc???

And then there are share buybacks done on 3rd March to 11th March which lapse with some of Mr. Loo's transactions!!

How doc?

But CIMB has a trading buy!!!

See the Edge article again. Stock was flat at 59.5 sen on 16th March 2009.

Today? Pelikan last traded at 70 sen!

More Focus On AirAsia's Exceptional Losses Again

This morning I posted How Now AirAsia? Oil Prices At Highest This Year and I got an interesting set of comments from Maverick.

• In the 3rd quarter Air Asia booked a loss of 215m exceptional item. In Note 16 there is no mentioning of cost for Thai AirAsia or PT Indonesia AirAsia on this matter. Amount due from these two companies in the balance sheet are 101m and 143m.

This is AirAsia's Q3 earnings. Quarterly rpt on consolidated results for the financial period ended 30/9/2008

Here is a screen shot of Note 16.

Maverick then continues.

• In the 4th quarter Air Asia had an exceptional item of 426m. In note 16 suddenly there are amounts of 222m and 207m "apportionment of derivative unwinding cost". The amount due from the two daughter companies in the balance sheet increased to 313m and 332m.

This is AirAsia's Q4 earnings. Quarterly rpt on consolidated results for the financial period ended 31/12/2008

The following shows what Maverick is talking about.

And the balance sheet showing how amount due from associates jumped!


Maverick then continues.

• It looks like "suddenly" Air Asia realized that the losses from their hedging activities were getting too high, and they decided to shift parts of it to their two daughter companies.
  
  The way they account for these daughters is that they dont equity account any more losses there, since their initial investment has been written off. So what is increasing is the amount due from these companies
  
  I find this all rather fishy, this whole way of accounting for the two daughter companies.
  
  By the way, from their 2008 annual report, interview with Tony:
  
  ==============================
  Q: Has your appetite for risk changed as a result of a more challenging economic climate and higher fuel price?
  
  A : The definitive answer is “no.” AirAsia has long pursued a disciplined, consistent and prudent approach to business risk management. This means our risk appetite remains consistent whether the economy is growing or slowing. It’s an approach that delivers better and more predictable returns for our shareholders.
  =============================
  
  Dude, are you sure? Better and more predictable returns to the shareholders?

How?

I feel that there is indeed justifications in what's highlighted by Maverick here.

What say you?

How Now AirAsia? Oil Prices At Highest This Year

Oil prices at highest for this year

• NEW YORK: A weakened dollar and evidence that OPEC has significantly slowed production sent oil prices soaring to new highs for the year Thursday.
  
  "I think we'll see higher oil prices for a while," said Michael Lynch, president of Strategic Energy & Economic Research.
  
  "There's an expectation that the market has bottomed out."
  
  Benchmark crude for April delivery surged $3.47, or 7 percent, to settle at $51.61 a barrel on the New York Mercantile Exchange.
  
  Oil prices hit $52.25 earlier in the day, a price last seen on Dec. 1.
  
  Crude prices have increased 11.6 percent since OPEC ministers met in Vienna on Sunday.
  
  The group said it would not cut production again immediately, but there is growing consensus that the millions of barrels taken off the market already each day are starting to balance a supply and demand picture that has been skewed for months.
  
  With the April contract set to expire Friday, most of the trading had shifted to the contract for May delivery, where prices jumped $3.14 to settle at $52.04 a barrel....

Weakening US Dollar and rising oil.

I wonder what AirAsia is thinking right now?

Itching to hedge the rising oil prices now???

And the US Dollar weakening, what did AirAsia do the last time round?

*whistle*

FedEx Earnings

FedEx Profit Hit by Global Downturn, Outlook Dim

• Package delivery giant and U.S. economic bellwether FedEx reported a 75 percent drop in profit due to the global recession, gave a low quarterly outlook and said it was taking fresh actions to cut costs.
  
  Our financial performance was sharply lower during the quarter due to the global recession," Chief Executive Fred Smith said in a statement Thursday. "While we are gaining market share in all of our transportation segments, the downturn in our industry and the severity and expected duration of the recession require that we take additional actions."
  
  The Memphis-based company reported net income for its fiscal third quarter, ended Feb. 28, of $97 million, or 31 cents a share, down from $393 million, or $1.26 a share, a year earlier.
  
  Analysts had expected 46 cents a share, according to Reuters Estimates.
  
  "FedEx's results are not much of a surprise given the current environment," said Dan Ortwerth, a research analyst at Edward Jones. "But this is a wake-up call for us that things are not going to get better any time soon."
  
  "It's a fairly clear indication that the recent stock market rally better have a strong foundation than merely a positive near-term outlook," he added......

See also More job and pay cuts at FedEx as 3Q profit sinks and FedEx 3Q Net Down 75%; To Cut More Jobs, Sees 4Q Below Views

China Shipping Warns Bleak Outlook For Baltic Dry Index

China Shipping boss warns markets will continue to be bleak

• Keith Wallis, Hong Kong - Wednesday 18 March 2009
  CHINA’s tanker and dry bulk markets will continue to come under pressure as a result of falling cargo volumes and over capacity, the head of one of the country’s largest shipping companies has warned.
  
  China Shipping Development chairman Li Shaode said global oil demand was forecast to average around 84.7m barrels of oil per day this year, down by 1m barrels per day compared with 2008.
  
  At the same time 70 very large crude carriers were due to be delivered this year, boosting carrying capacity by around 8%.
  
  He said that as a result of this imbalance “it is expected that the international tanker shipping market will face downward pressure in 2009”.
  
  In the dry bulk sector, Mr Li said CSD had already seen a 39.2% year-on-year fall in freight rates on new contracts of affreightment signed this year for domestic coastal coal shipments. This drop in demand for vessels on China’s domestic coal trade would come at a time when capacity would increase.
  
  Mr Li added that the overall impact on the company of this decline is that although cargo volumes are likely to rise by a forecast 10.4% to 253.4bn tonne nautical miles, turnover is set to crash 44% to Yuan9.8bn ($1.4bn) this year.
  
  This would coincide with a 10.8% rise in group shipping capacity to 8.4m dwt as the company took delivery of 19 vessels comprising 14 tankers totalling 2.3m dwt and five bulkers of 460,000 dwt.
  
  Offsetting these deliveries will be the planned scrapping this year of 11 vessels totalling 309,000 dwt.
  
  Mr Li said currently China Shipping Development has 69 ships of 9.5m dwt under construction for delivery between now and the end of 2012 at a capital cost of Yuan21.1bn.
  
  In an effort to tackle the crisis in the shipping sector, he said the company would continue to enhance strategic co-operation with major customers and maintain long-term strategic relationships.
  
  He cited the signing of joint ventures in the first half of last year with Shanghai Puyuan Shipping and Baosteel Resources to expand the firm’s iron ore transport business as examples of this co-operation.
  
  The company also planned to enhance its tanker business by building on its relationships with Chinese oil majors including PetroChina, Sinopec and China National Offshore Oil Corp.
  
  Mr Li was speaking after the company announced an 18% rise in net profit to almost Yuan5.4bn last year, up from nearly Yuan4.6bn in 2007. Revenue soared 38.9% to Yuan17.2bn, against Yuan12.4bn a year earlier.
  
  He said the biggest rise in revenue was from the coal business which rose 29.1% to almost Yuan6.8bn. By comparison, revenue from tanker operations climbed 21.7% to close to Yuan6bn, while revenue from other bulk operations increased 15.9% to about Yuan2.5bn.
  
  He said the record figures followed a renewed focus on China Shipping’s core businesses of domestic coastal coal shipping and oil transportation that were buoyed by a rise in coastal coal freight and international tanker rates last year.
  
  Mr Li added that the volume of dry bulk shipments rose 5.2% to 125.3bn tonne miles, while oil transport volumes rose 21.7% to 104bn tonne nautical miles.
  
  The company also benefitted from its 50% stakes in three shipping subsidiaries — Shanghai Times Shipping, Zhuhai New Century Marine and Shanghai Friendship Marine — after it saw a massive 221% rise profit to Yuan532m from the three firms.
  
  The three companies carried 35.6m tones, a 2.6% increase over 2007. Mr Li said the offshoots own 28 bulkers with a total capacity of 1.2m dwt while a further 13 newbuildings totaling 850,000 dwt are under construction.
  
  On China Shipping’s own newbuilding programme, Mr Li said the company ordered 12 vessels totalling 912,000 dwt last year, while two 44,000 dwt oil tankers were delivered in 2008.
  
  He added that 18 ships, comprising five small tankers, eight bulkers and five box ships, were sold to generate Yuan389.5m in profit on sales revenue of Yuan624.4m.

The BDI index is showing some corrections after its impressive rebound.

Gold Price Soars After Fed Announced Plans To Buy Treasuries!

On Financial Times: Gold prices rise on Fed plans to buy Treasuries

• Gold prices surged yesterday after the Federal Reserve announced plans to buy $300bn in US Treasuries as the central bank expanded its efforts to counter the financial crisis.
  
  The Fed's plans sparked concerns about the outlook for the dollar and inflation, pushing gold sharply higher.
  
  Gold leapt from its session low of $884.10 a troy ounce to a high of $942.90, a jump of 6.6 per cent.
  
  Later in the session, gold eased back to $939 for a gain of 2.7 per cent on the day.
  
  Prior to the Fed's move, Alan Heap of Citigroup said government policies of quantitative easing (increasing money supply to combat deflation) could have a strong impact on the gold price.

Let's see what happened!

Can China Lead The World Out Of Recession?

I chuckled as I read the following article China to lead the world out of recession.

• BEFORE the bear market started in 2007, many were worried that the New York Stock Exchange (NYSE) was priced for perfection. (comment: back in 2008, some folks arrogantly insisted Dow could even hit 18k! guess who? :p2 ) In such a situation, any disappointment can cause the market to trip as everything is going smoothly and expectations are high.
  
  Now, the opposite is happening – the NYSE is priced for massive destruction. In such a situation, a series of positive surprises can cause the market to reverse its bearish trend as everything is going wrong and expectations have gone down the drain.
  
  So, for those who are market-timers and top-down followers, what should one be watching for? What can cause the NYSE to reverse its trend?
  
  The current pessimism in the US is very severe. This is not surprising, given the persistent problems facing the large US and European financial institutions.
  
  The basic reason for this deep level of pessimism is that many of those who are bearish see the current US economic problems as being a balance sheet problem – too much leverage and plenty of bad assets – as opposed to the more usual excess inventory, monetary tightening-type.
  
  Those who based their pessimism of the US economy and thus the NYSE on this approach are not wrong. The excess leverage undertaken by the households and financial intermediaries and the declines in asset prices have caused the balance sheets of many economic units to be out of whack. There is thus the adjustment process going on now.
  
  Some of those who are bearish do not see the US economy growing in 2009, 2010 or even beyond. This is already like the Great Depression. Where i Capital differs from the perma-bears is on the severity and duration of the current economic contraction.
  
  i Capital would agree with the perma-bears if the global economy had only the US, Europe and Japan as sources of growth.
  
  The global economy in the 21st century is undergoing its biggest transformation ever, led primarily by China. While 30, 20 or even as recently as 10 years ago, the US economy could ignore the rest of the world, nowadays, it cannot. The US economy has become very integrated with the rest of the world.
  
  Before the Lehman Panic hit in September 2008, the US economy was still growing decently, thanks to its billions of exports to the rest of the world. Since memories are so short, i Capital shows this dependence by the US on the global economy

Memories.

It was just a year ago that Tan Teng Boo declared that Warren Buffett is a lousy cconomist!. I really wonder if iCapital views were truly consistent?

Look at where we are now. Ouch! So much for that cheap shot fired at Warren Buffett for being a lousy economist!

Anyway the article then continues.

• The most important component of the i Capital Long Boom is China’s once-in-a-millennium transformation. This is still going on despite the US-led financial crisis.
  
  Many are calling a recession for China in 2009. i Capital does not buy into this extreme pessimism. As China and its hundreds of millions of consumers spend their way out of the global recession, this will ensure that China enjoys another decent year of GDP growth.
  
  More importantly, this will benefit the rest of the world, particularly CLEB (China-led economic block), directly or indirectly.
  
  This China-led global recovery will substantially help the US export sector but more importantly, it will provide great confidence to the rest of the world that the decoupling theory is more than still alive.
  
  This new-found confidence in the global economy will permeate many levels and many sectors of the global economy. What is important about this renewed confidence is that it will allow the current vicious cycle in the US financial markets and economy to be broken. Once this negative cycle is broken, a decent and sustained round of economic expansion can begin. Once this happens, the drag from the balance sheet woes will be offset and subside.
  
  Drops in asset prices can be bearable. Not having regular income from having regular jobs is not. The balance sheet recession can be mitigated substantially if the income flows continue.

How I am so confused? When did China became a nation of consumers?

And of course, I have no idea what icapital meant by 'This China-led global recovery will substantially help the US export sector ..'

Since when US export sector was ever an issue? Isn't US a nation of consumers???

Did I get up from the wrong side of the bed this morning?

Can China really spend their way out of global recession??????

I really do not know what iCapital is talking about once again.

I would agree with Professor Walden Bello comments on The Coming Fury In Asia!!!.

• The Illusion of "Decoupling"
  For several years China has seemed to be a dynamic alternative to the U.S. market for Japan and East Asia's smaller economies. Chinese demand, after all, had pulled the Asian economies, including Korea and Japan, from the depths of stagnation and the morass of the Asian financial crisis in the first half of this decade. In 2003, for instance, Japan broke a decade-long stagnation by meeting China's thirst for capital and technology-intensive goods. Japanese exports shot up to record levels. Indeed, China had become by the middle of the decade, "the overwhelming driver of export growth in Taiwan and the Philippines, and the majority buyer of products from Japan, South Korea, Malaysia, and Australia."
  
  Even though China appeared to be a new driver of export-led growth, some analysts still considered the notion of Asia "decoupling" from the U.S. locomotive to be a pipe dream. For instance, research by economists C.P. Chandrasekhar and Jayati Ghosh, underlined that China was indeed importing intermediate goods and parts from Japan, Korea, and ASEAN, but only to put them together mainly for export as finished goods to the United States and Europe, not for its domestic market. Thus, "if demand for Chinese exports from the United States and the EU slow down, as will be likely with a U.S. recession," they asserted, "this will not only affect Chinese manufacturing production, but also Chinese demand for imports from these Asian developing countries."
  
  The collapse of Asia's key market has banished all talk of decoupling. The image of decoupled locomotives — one coming to a halt, the other chugging along on a separate track — no longer applies, if it ever had. Rather, U.S.-East Asia economic relations today resemble a chain-gang linking not only China and the United States but a host of other satellite economies. They are all linked to debt-financed middle-class spending in the United States, which has collapsed.
  
  China's growth in 2008 fell to 9%, from 11% a year earlier. Japan is now in deep recession, its mighty export-oriented consumer goods industries reeling from plummeting sales. South Korea, the hardest hit of Asia's economies so far, has seen its currency collapse by some 30% relative to the dollar. Southeast Asia's growth in 2009 will likely be half that of 2008

And in another posting China's Stimulus Strength To Drive Decoupling Theory???

Can China really consume all that they produce?

Mentioned in Chinese And Indian Shoppers Can't Substitute Missing US Shoppers

• Bank of China vice president Zhu Min forecast that Chinese domestic consumption will grow at about 20 per cent in 2009, the same pace as last year.
  
  On the other hand, he noted that US consumer spending is set to plunge 10 per cent, or US$1 trillion (US$1 = RM3.61), due to the financial crisis, as consumers are hit by falling home values and a credit drought.
  
  Americans normally spend about US$10 trillion domestically a year, or about 70 per cent of the US gross domestic product, estimated Zhu.
  
  In comparison, Chinese spend just US$1.5 trillion worth on goods and service, about 38 per cent of GDP.

Can China Adjust To The Lack Of Spending From US?

• Given that the US economy is about 3.3 times the size of China’s, and China’s trade surplus is roughly equal to one-half to two-thirds of the US trade deficit, the increase in Chinese demand needed to equilibrate the increase in US household savings is equal to roughly 10-15 per cent of China’s GDP. With consumption accounting for less than 50 per cent of China’s income, Chinese consumption will have to rise, in other words, by more than one-quarter. This is clearly unlikely.

Can the new infrastructure projects create enough job and wealth to substitute the missing US orders? Can it offer new jobs to the 20 million rural workers who lost their jobs? Yes 20 million people!!!! Ever wonder how small 20 million is? See 20 Million Rural Workers Lost Their Jobs In China!

Here are some excellent editorials from some really smart people.

• China Nears Recession Point As GDP Slumps
• China's Manufacturing Sector Continued To Contract In January
• All but the kitchen sink?
• Hooray! China has bottomed out.
• On China's Plunging Imports
• What ABout China's Drop In Export Numbers?

A couple days ago, Professor Pettis wrote the following Did China experiencing January hot money outflows? ( His website is blocked in China! Go figure!) Here are two important passage from his write-up.

• Where does that leave us? There are about $40-50 billion in unexplained outflows and however you look at it there it is hard to believe that we haven’t seen at least $20-30 billion of hot money outflows in January. From my many years experience in developing markets I should say that the informational content of hot money flows is often wider than many people at first think. Much of the discussion about whether Chinese businessmen are bringing in or taking out money hinges on their perception of whether or not the currency will appreciate or depreciate (and in spite of the popular view of evil foreign speculators masterminding the flows, the truth is that the vast majority of this money is likely to be controlled by local businessmen).
  
  But I would argue that usually a much bigger driver of hot money flows is the local perception of risk in the country experiencing the flows. If hot money is flowing out of China, it could be because local business owners believe the currency will depreciate, but I think it is more likely that the flows represent their concern that local investment opportunities – for example their businesses – have become increasingly risky and uncertain. Hot money flows tell us at least as much about risk perceptions as they do about profit opportunities, especially when the world is in trouble.
  
  

CIMB Investment Recommends H-Shares, HSBC, Goldman Sachs And JP Morgan

On Business Times: CIMB Investment upbeat on China stocks

• Global stocks may start to rebound towards year-end and investors should begin nibbling on China's H-shares to ride the recovery, CIMB Investment Bank Bhd said.
  
  "It's a matter of liquidity right now. Once the liquidity comes back to the market, I believe the H-shares will be the first to benefit," Carolyn Leng, the co-head of CIMB Private Banking, said.
  
  "A rebound is likely towards the end of the year, from the technical standpoint. Our first priority is the H-shares and Hong Kong, followed by Singapore to a lesser extent."
  
  However, she is less certain of a domestic stock rally anytime soon.
  
  "If we can get through June or July, we will be okay. That's when corporates are reporting the numbers for May, and the country will see the leadership transition. People will look for some kind of stability," Leng said of Malaysia. "But I suspect that these two months will be very trying times for us."
  
  All eyes will be on the cash flow of companies, whether they have enough funds to pull through the next two years in crisis, since banks are tightfisted. Companies that are highly leveraged will be closely watched too, Leng said.
  
  She is convinced that China's massive stimulus plan will be successfully executed and thus driving the recovery in stocks, particularly the H-shares, or China firms listed in foreign markets.
  
  Investors, who have been staying on the sidelines as the economic crisis continues to play out, are sitting on piles of cash just waiting for the right opportunity to go back into the stock markets, she said.
  
  "We see a switch in mentality from our clients. About eight months ago they were only interested in fixed deposits for six or nine months. Today, they are asking for one month."
  
  "Investors were edgy and short on stocks, which means that they are ready to go back to the market at any time. It's just a matter of getting a bit of clarity," said Leng, who helps manage RM3.9 billion at the CIMB unit that caters to high net worth clients.
  
  In Hong Kong, she said, investors may look at battered financial stocks like HSBC, and shares of infrastructure companies.
  
  For longer term investors who can hold for over five years, she recommends the US market and even the financial stocks there which are considered highly risky now.
  
  "You've got to really look. Like Goldman Sachs ... I strongly believe in the company's strength, its management, and the kind of core business it has been doing," Leng said.
  
  US bank Goldman Sachs' strong corporate finance team will benefit from a future merger and acquisitions boom in the US as industries consolidate, she pointed out.
  
  JP Morgan, another solid US institution, is also worth considering, she added.

Footy: Reaction From The Enemy

Time for some footy talk. :p2

Posted on RoM by Scott the Red: Reaction From The Enemy

• Following our humiliating defeat, I’ve had a few words with Liverpool fan Jaimie Kanwar from Liverpool Kop, to balance the opinion of Liverpool fans we have on this blog over the past few days. Guaranteed he will not mention Munich once and his opinions may surprise you.
  
  RoM: So, after Saturday, how do you rate your title chances?
  JM: As great as the victory was, Liverpool’s title chances have not improved. This is not pessimism, it is realism, and the euphoria of an almost perfect footballing week should not obscure the fact that this year’s Premiership title was there for the taking before Liverpool spectacularly blew it. United started badly; Chelsea and Arsenal were both in transition and Liverpool were quickly flying high. Predictably though, Rafa Benitez’s ultra-cautious approach, nonsensical team selections, needless public griping and spurious personal agenda conspired to derail the club’s forward progress. In short, Benitez is the reason Liverpool are out of the title race yet again. The Premiership is still United’s to lose, and barring an absolutely catastrophic collapse, the title is regrettably heading back to Old Trafford.
  
  RoM: Who was your man of the match (other than Vidic, obviously!)?
  JM: Fernando Torres without a doubt. The Spaniard produced a masterclass of devastatingly effective forward play and was a constant threat to the best defence in the league. Special mention also to my favourite player, Sami Hyypia, who continues to produce outstanding performances at the heart of Liverpool’s defence. A true legend and a true gentleman.
  
  RoM: Liverpool fans sarcastically sung “He’s crackin up!” back to us before the final whistle. Are they right to back him?
  JK: I’m sure many fans see it as their duty to back the manager irrespective of the problems surrounding the club, and that is, of course, their prerogative. In public, many fans will put on a united front, but I know that privately, many fans – myself included - have serious doubts about Benitez’s ability to bring the title back to Anfield. In my case, I have maintained since the day Benitez was appointed that he was the wrong man for Liverpool in terms of winning the title, and thus far, I have been proved right. I do not hide the fact that I am in favour of managerial change at the end of the season. Benitez’s selfish personal agenda, constant public politicking, endless moaning in the media, appalling treatment of players (and damaging favouritism for certain players), inexplicable rotation policy and depressingly cautious approach have conspired to stunt the club’s forward progress on the pitch.
  
  RoM: What did you think about Rafa’s ‘facts’ speech?
  JK: Utterly ridiculous, self-indulgent, completely pointless, cretinously ill-timed and totally unbecoming the conduct expected of a Liverpool manager. Nothing positive came from Benitez’s rant and Liverpool’s form on the pitch suffered as a result. Furthermore, Benitez displayed his incredible naiveté by basically falling into Fergie’s mind-games trap, only he didn’t fall, he jumped in head first!
  
  RoM: Steven Gerrard kissed his badge after he scored the penalty. How does it make you feel when you see him do that?
  JK: If I felt it was genuine and heartfelt, then I would feel good about it, but considering he’s spent the best part of his Liverpool career selfishly pointing to the name on the back of his shirt when he scores, I’ll take his sincerity with a pinch of salt.
  
  Perhaps I’m being a little harsh – I suppose the fact that Gerrard has stayed with Liverpool for another four years after the dual Chelsea debacle of 2004/2005 counts for something. His stunning lack of loyalty during those two Chelsea approaches has changed my view of him forever, hence my cynicism above. I mean, here was a 23 year old Liverpudlian, blessed with the ultimate privilege of captaining his hometown club, something millions of fans could only dream of achieving. All we heard from Gerrard was how much he loved the club and blah blah blah. Yet as soon as Chelsea flashed some cash, his head was turned, not once but TWICE. Once is understandable, if not condonable; twice is unforgivable, and makes a mockery of his apparent love for the club. Bottom line: Someone who genuinely loves the club, does not try and leave twice.
  
  RoM: Who do you hate more - us or Everton?
  JK: I don’t hate either club. I know this will be anathema to most Liverpool fans but I have a healthy respect for both Man United and Everton. Of course, this means I cannot be a proper fan. In order to be a proper fan I should be slagging off Fergie, Ferdinand et al and cursing Moyes and coming up with all sorts of offensive nicknames. For me though, such behaviour is the mark of the lowest common dominator type of fan. Friendly banter is one thing, but nasty yob-like personal attacks are pathetic. In my view, real fans respect the opposition; criticise when it is necessary, give praise where it’s due and have the ability to assess contentious issues objectively, instead of being unfairly biased toward the club they support. If Gerrard dives, fans should have the balls the admit it. Same goes for Ronaldo. If Liverpool get a penalty at Goodison that is blatantly not a penalty, the fans should admit it, not just accept it because it gives the team an advantage.
  
  If I had to choose though, I’d say United, purely because of the never-ending succession of unlikeable players you seem to attract, i.e. the likes of Ronaldo, Rooney, Ferdinand, the Nevilles etc.
  
  When it comes to Everton though, I have lots of time for David Moyes, who I believe is one of the best managers in the league.
  
  RoM: What would Liverpool have to do this season for you to class it as a good one?
  JK: Drop the cautious approach and ridiculous team selections that have blighted much of this season and go for broke in every game from now on. This means no more playing ‘not to lose’, no more league draws (10 already – unacceptable), and no more taking the foot off the pedal during games. Bottom line: Champions League final and second in the league, culminating in Rafa taking his tiresome roadshow to Madrid and Liverpool appointing Martin O’ Neill.
  
  RoM: Would you like Wayne Rooney at your club (if he didn’t ‘hate’ you)?
  JK: Absolutely not. Rooney is as far away from a ‘Liverpool-type player’ as it is possible to be. His attitude on the pitch is a disgrace and he is a terrible role model for youngsters hooked on football. For me, talent is not enough – a footballer’s character and attitude are just as important, which is the principal reason I have such a problem with Gerrard. Rooney is incompatible with Liverpool FC’s Shankly-led, socialist philosophy, the very thing that drew me to the club in the first place.
  
  RoM: How do you feel about the possibility of us matching your 18 titles this season?
  JK: Sick to the stomach. It should never have been allowed to happen but, regrettably, it seems like it will happen very soon. Despite this impending dark day in Liverpool’s history, I have nothing but respect for Alex Ferguson and his tenure as United boss. His aim all along has been to smash Liverpool’s dominance and he has certainly achieved that. Rivalries aside, he is quite simply the greatest club manager in world football today. Still only the 4th best manager in British history though, after Bill Shankly, Bob Paisley and Kenny Dalglish
  
  RoM: Would you seriously consider emigrating if we win all five
  JK: I won’t have to consider it because it’s never going to happen!
  

Want Bailout money? Tell Your Employees No Bonus First!

Here's a simple suggestion.

" Want bailout money? Tell your employees, no bonus first! "

Not acceptable?

Then no bailout money!

And the CEO and all the executives can cry a trillion tears about their bonus as stated in their contract obligations.

The Credit Card Issue

Posted on Macro-Man's blog: A Popular New Year's Resolution: "Stop Paying My Credit Card Bills"

• 
  
  
  Macro Man doesn't do single name stocks, and frankly has no idea (or at least one that's he's prepared to make public) whether C is a buy, sale, or hold. But the underlying dynamic, one of rising non-performing loans (and concomitant non-performance of structured credit products that bundle them together) is far from bullish. Stories are beginning to ciruclate that the Fed is struggling to find many interested parties to participate in the TALF. If that goes down like a lead zeppelin, the risk must be that equities swiftly follow.

See also the following article posted earlier: Whitney Says Credit Cards are the Next Credit Crunch

• As credit-card companies continue to rapidly cut credit lines, consumer spending may risk impairment, potentially aggravating an already fragile economy.
  
  Prominent financial analyst Meredith Whitney, the CEO of Meredith Whitney Advisory Group, warned Tuesday in The Wall Street Journal that without the careful attention and collaboration of regulators and leading lenders, “unintended consequences could occur” to the economy.
  
  She warned that the reduction in credit lines is inevitable, but the velocity must decline.
  
  The fourth quarter of 2008 showed the beginning of this rapid decline of available lines, as $500 billion of lines was expunged in that three-month period alone.
  
  Whitney estimated only six months ago that by 2010, $2 trillion in credit lines would be expunged -- however, after evaluating fourth quarter losses, she warns this could occur as soon as this year. She predicts that in 2010 the number could be as high as $2.7 trillion, an overall contraction of 57%.
  
  A survey conducted by Credit.com last week indicated that 33.7% of consumers said that their credit card company has in some way changed their account.
  
  According to the survey, 15% of consumers said that their interest rates were increased while 11% indicated that their minimum payment due was increased. Another 9% said that their due dates were changed, with the remainder indicating that either their limits were lowered, rewards program reduced, or accounts closed. Consumers suffered from one to all of these alterations.
  
  Whitney attributes this rapid declination to four factors including misguided lending, “hot-potato” lending, and possible changes to the Unfair and Deceptive Acts of Practice [UDAP].
  According to the analyst, “lenders became overly reliant on FICO scores that have borne out to be simply unreliable” adding that overly optimistic underwriting standards, in a time when unemployment was well below 6%, may have deceived the creditworthiness of borrowers.
  
  Now that underwriting standards are becoming more realistic, some borrowers may not “appear worth the risk” and may see their lines dropped, Whitney said.
  
  Another contributing factor is that “home price depreciation has been a more reliable determinant of consumer behavior than FICO scores.” Due to this factor, lenders have overly relied on Zip codes while determining risk, potentially hurting reliable borrowers who live in riskier Zip codes.
  
  Whitney said that “while a mortgage loan is largely a ‘monogamous’ relationship between borrower and lender, an individual has multiple relationships with credit-card providers.”
  
  No lender wants to be the last one standing, or holding open credit lines -- therefore as lines are cut and risk switches to the next biggest lender, that lender may also pull their lines, exemplifying a sort of domino-like effect.
  
  Whitney advised that since there are only five main lenders controlling two-thirds of the market, they must work together “to protect one another and preserve credit lines to able paying borrowers.”
  
  Potential changes to UDAP may “restrict re-pricing of risk, which could in turn restrict the availability of credit,” according to Whitney.
  
  This regulation, set to be effective by mid-2010, may cause lenders who can’t re-price to “simply not make the loan,” she said.
  
  According to Whitney, over the past 20 years Americans have used their credit cards as a way to budget cash-flow and save for future liquidity. In most cases, Americans will not max out their credit cards, using the extra balance for just-in-case scenarios.
  
  Whitney warns, however, that this scenario has the potential to change dramatically. She said that although cutting credit lines is unavoidable, taking credit away from an able borrower may seriously weaken their financial position, in turn weakening the economy.
  
  Two-thirds of the U.S. economy depends upon consumer spending and with the role of credit-cards playing an imperative role, action must be taken immediately, according to Whitney.
  

PNB Is Saying Maybank rights a good buy

On Business Times: Maybank rights a good buy: PNB

• PERMODALAN Nasional Bhd (PNB) will buy new Malayan Banking Bhd (Maybank) shares set aside for it under a rights issue as it is a good buy, president and group chief executive Tan Sri Hamad Kama Piah Che Othman said yesterday.
  
  "Of course today there may be concerns (about Maybank) here and there. But as a long-term player, we want to make sure we get long-term returns," he told reporters after a briefing in Kuala Lumpur.
  
  Maybank has set the price for its proposed RM6 billion rights issue at RM2.74 per share. The stock closed at RM4.02 yesterday.
  
  Maybank told Bursa Malaysia earlier that PNB and the unit trust funds it manages will buy their portion, or 55.7 per cent, of the new shares. PNB has also offered to buy another 20 per cent.

Yeah, they are indeed real concerns.

Maybank Has Lost 24.1 Billion In Market Capital Since BII Deal!!!

How could the minority shareholders be happy?

Maybank had been overpaying for banks here and there.

And now there is a rights issue.

How?

Is the rights issue needed to pay for Maybank's gross mistake in overpaying for those banks?

AIG: Are You Ashamed Of Your Utterly Disgusting Greed??

Blogged the other day: AIG, Your Bonus Plan Is Obscene!

AIG can argue their justification to pay the bonus due to contract obligations but let's think for a moment.

Without the tax payers bailout money, would AIG have any money to pay these bonus out?

Yes?

Whose money is this, huh?

And since it's the tax payers money, they damn right have an excuse to be piss like hell on what is happening!!

It's simply ludicrous and scandalous!!!

And to all you AIG employees, are you even ashamed of what your utterly disgusting greed?

And one of the better developments is Congress vows to tax back AIG bonuses

• WASHINGTON — Democratic leaders in the U.S. Congress, brimming with anger over $165 million U.S. in bonuses paid to executives at American Insurance Group, vowed Tuesday to recover the funds with a special tax unless recipients returned the money voluntarily.
  
  Senator Harry Reid, the Democratic majority leader, said lawmakers plan to introduce legislation as early as Wednesday to claw back up to 90 per cent of the retention bonuses awarded to employees at the giant U.S. financial company, which has received more than $170 billion in federal assistance to stay afloat.
  
  "When a child breaks his curfew, he should get grounded. When someone commits a crime, he should be punished. And when an employee brings his company and our economy to the brink, he's not rewarded with multimillion dollar bonuses paid by the taxpayers," Reid told reporters on Capitol Hill.
  
  In a letter to AIG executives, congressional Democrats asked the company to renegotiate the bonuses and said refusal to co-operate would be met with "severe tax penalties."
  
  New York Senator Chuck Schumer, in a speech on the Senate floor, said: "We plan to tax virtually all of it. To those of you getting these bonuses: be forewarned, you will not be getting to keep them."
  
  The tax ultimatum came amid new revelations that the bonuses included payments exceeding $1 million each to 73 top AIG employees. The controversy has become so heated that one conservative Republican senator, Iowa's Charles Grassley, suggested the AIG bonus recipients commit suicide out of shame.
  
  AIG executives need to follow the "Japanese example and come before the American people and take that deep bow and say, 'I'm sorry,' and then either do one of two things: resign or go commit suicide," Grassley told a radio station in Cedar Rapids, Iowa.
  
  AIG spokesman Nick Ashooh called Grassley's remark "very disappointing." The GOP senator on Tuesday explained his comment was "rhetoric," and said that his preferred option was to use taxes to recoup the bonuses.
  
  "From my standpoint, it's irresponsible for corporations to give bonuses, at this time, when they're sucking the tit of the taxpayer," Grassley said.
  
  Congress has had its sights trained on AIG since last fall when it received $85 billion in emergency loans from the Federal Reserve — the first of several bailout instalments. It was later learned the company paid for executives to take a $440,000 corporate spa retreat, and an $86,000 partridge hunting expedition, even as the firm was being rescued from collapse.
  
  The company recorded a $61.7 billion loss in the fourth quarter of 2008, amid fallout from the collapse of its business in risky financial derivatives such as credit-default swaps.
  
  In a letter Tuesday to congressional Democrats, New York state Attorney-General Andrew Cuomo revealed that 73 employees of AIG's financial products unit — the division responsible for the bulk of the company's losses — had been rewarded with bonuses in excess of $1 million.
  
  The top seven bonus recipients received cheques of more than $4 million each, while 22 executives were paid of $2 million or more. The top payment was $6.4 million. Of those employees who received more than $1 million in "retention" bonuses, 11 are no longer working for AIG.
  
  AIG says it was legally bound to pay the bonuses because of contracts negotiated before the company received aid from U.S. taxpayers. But the company's lawyers failed to recognize "it is only by the grace of American taxpayers that members of Financial Products even have jobs, let alone a pool of retention bonus money," Cuomo said.
  
  Outstanding questions about how the bonuses were negotiated will be the focus of a congressional hearing on Wednesday, when lawmakers will question AIG's chief executive officer, Edward Liddy, about the payments.
  
  At the same time, the Obama administration is facing growing scrutiny as critics questioned whether Treasury Secretary Timothy Geithner did too little to try to scuttle the bonuses before they were disclosed publicly last weekend.
  
  After learning of the pending bonuses, Geithner sought to negotiate reductions with AIG executives, but ultimately agreed the company was legally bound to make the payment. President Barack Obama has since instructed Geithner to explore "all legal avenues" to block the bonuses.
  
  "What I want to ask, where was the secretary of the Treasury before this money was paid out?" asked Senator Richard Shelby, the ranking Republican on the Senate banking committee. "He either knew or should have known about what was going on (because) Treasury is deeply involved in this bailout."
  
  White House press secretary Robert Gibbs said later Tuesday that Obama continues to have "complete confidence" in Geithner.
  
  In addition to planning legislation specifically taxing the AIG bonuses, Democrats are also weighing a broader bill to impose a surtax on all bonuses paid to Wall Street firms receiving a federal bailout. One proposal would place a 60 per cent tax on bonuses exceeding $10,000 at companies in which the government has more than a 79 per cent equity stake. Currently, only AIG meets that threshold.

Taxpayers vent against AIG bonuse

• For many Americans who could use a bailout just to balance their checkbooks and make it through the month, the thought of their tax dollars going to million-dollar bonuses for AIG executives is enough to make them furious.
  
  "It's difficult to comprehend how screwing up gets you rewards," said George Padilla, a teacher in El Paso, Texas. "I tell my students that if they don't put in the effort and get passing grades, I will not pass them." He added: "I use the old `In the real world ...' line to point out that you would be fired if you didn't do well in your job. Well, I guess `the real world' proved me wrong."
  
  Workers, business owners and taxpayers interviewed across the country this week fumed over the $165 million payout, with some questioning whether the government should even be in the business of bailing out Wall Street — an attitude that could dangerously undermine further efforts by the Obama administration to prop up the economy.
  
  "Wasn't Obama supposed to fix this?" said Maria Panza-Villa, a mother of two in Hillsboro, Ore. She said she has lost three jobs since November as one employer after another folded.
  
  The intensity of the populist fury became plain when a member of the Senate, Iowa Republican Charles Grassley, actually suggested AIG executives should follow the Japanese warrior example and resign or commit suicide.
  
  While many ordinary Americans said Grassley's comments were out of line, others weren't so sure.
  
  AIG executives are "not going to bleed to death because I'm not sure that they've got blood. I think it's ice water that runs through their veins," said Gary Jarvis of Herron, Ill., who lost his job as a forklift driver in a factory closing two years ago. "To me, it's just stunning to think they're not even ashamed of their disgusting greed."
  
  AIG — teetering on the brink of collapse because it insured many of the toxic mortgage-backed securities at the vortex of the financial crisis — has mostly been an unknown quantity to the general public, in part because its business is so complex.
  
  But paying bonuses to people responsible for nearly bringing the company, and the economy, to its knees may be even more incomprehensible to nearly anyone who runs a business or tries to balance a household budget.
  
  Among those frustrated is Everette Clark, mayor of Marion, a town of about 7,000 in western North Carolina. The town has one of the highest unemployment rates in the state, at 12.2 percent.
  
  Marion's biggest industries, textiles and furniture, have shed thousands of jobs over the last few years. The people who used to work in those plants are struggling to pay their bills without any kind of a bailout or bonus.
  
  Giving tax dollars to AIG to pay bonuses is "atrocious," Clark said. "You don't reward people in the private sector for doing a bad job."
  
  David Ziegler, a long-distance trucker finishing breakfast at the Mother Load Diner in the old gold mining town of Idaho Springs, Colo., said the AIG bonuses had convinced him that the U.S. should stop bailouts altogether.
  
  "I don't think they should be pumping more money to AIG. I don't think they should flush any more money down the Citibank toilet. I don't think they should flush any more money down any of these toilets. Tell them to 'sink or swim,'" said Ziegler, who is from Thornton, Colo.
  
  Others interviewed were reluctant to place political blame and signaled continued support for efforts to fix the economy.
  
  "We've created this mess. Everyone's responsible for allowing executives to receive these bonuses," said George Ayoub of Toronto, Canada, an American who was visiting Los Angeles. "Probably every company needs to be nationalized, and the government will own the corporations instead of the corporations owning the government."
  
  Tess Beauchamp, 58, owns Stein's Coffee House, a small restaurant in Lubbock, Texas. She understands the insurance business, having worked for years in maritime coverage as a broker for fleets of ships. But that does not make her inclined to cut AIG any slack.
  
  "I think this country has a serious problem with executive entitlement," Beauchamp said as she awaited the arrival of Tuesday's lunch crowd. "I think it's outrageous. I think this country could stand a redistribution of wealth and not to AIG executives or corporate execs, for that matter."

Visit msnbc.com for Breaking News, World News, and News about the Economy

Whitney: Banking Woes Likely to Get Worse in 2009

Comments from Whitney on banking sector.

Whitney: Banking Woes Likely to Get Worse in 2009

• A surge in borrower defaults and unemployment pressures will make 2009 an even uglier year for banks than last year, analyst Meredith Whitney said.
  
  She predicted "breakups and M&As on a grand scale" as the industry seeks to remake itself in the face of all its capital pressures.
  
  "I don't think this year is going to look any better than last year," Whitney said in an interview Tuesday on CNBC. "In fact it will look worse because there's so much credit coming out of the system."
  
  Whitney, a former analyst at Oppenheimer who recently opened her own firm, is renowned for calling out the problems with banks' toxic assets before the issue became widespread.
  
  As some have been predicting the worst may be over for the banking sector, Whitney countered that many of the statements about some of the big banks showing profits ignore the burden that additional writedowns will pose through the year.
  
  Consumers also will face pressure as unemployment grows and banks and credit card companies start calling in credit lines to avoid getting stuck with even more bad debt.
  
  "The probability of more people going into default is higher, so the banks are going to have a tough time," she said.
  
  As a solution to some of the banking system's woes, Whitney said the government should focus less on ever-changing rescue plans and instead start helping smaller institutions ramp up their community lending to local businesses and homeowners.
  
  "You can re-energize the local lending scene and then supercharge those banks," she said. "You supercharge those so they're able to gain critical mass and start getting loans on a super-regional basis to businesses, to homeowners that qualify. At least that mitigates some of the capital that's surely going to come out of the market."
  
  Whitney predicted that some of the largest institutions will be remade this year in a way not seen before. Those mergers and acquisitions will see companies come together to create unique syynergies--she used a blending of Citi and American Express [AXP 12.50 -0.16 (-1.26%) ] as a hypothetical case where one business' strength could compensate for another's weakness.
  
  "You're going to have some growth vehicles that come out of it but they're not going to look anything like today's version of these gobbledygook banks," she said.
  
  In addition to the natural activity that will take place, Whitney said banks also will need help from Washginton. She urged policy makers above all to be consistent.
  
  "Any game that you want to plan as a corporation, the rules are changing all the time," she said. "You can't function as a business operator if the rules are changing."
  
  Displaying leadership and managing expectations will be the key.
  
  "They need to show leadership by saying, 'OK, what's the world going to look like in five years?' and look backwards from that," Whitney said. "In five years you know that the big banks are going to have a lot less control and power than they have now. We have to disaggregate, dislodge that market share dominated by five main players."
  
  "Let's invigorate and supercharge some of the smaller players to get them to a medium-enough size so they can start making loans and they can start moving the needle."
  
  And she called on government leaders to harness the American spirit to rebuild the economy, similar to the way so many people come together to wear the color of the Irish on St. Patrick's Day.
  
  "There's a spirit that can't be dislodge by the economic turmoil," she said. "Now is a great opportunity to capture that spirit as opposed to set expectations too high which is what (Treasury Secretary Timothy) Geithner did with the original plan and then just disappoint. People will give you the benefit of the doubt until you keep disappointing them."
  
  

Citigroup's Pandit Paid US$11 Million As Citigroup Took Bailout Money

Yet another news that would displease many!

Are you reading Singapore?

Pandit paid $11m as Citigroup took $45bn bailout

• Vikram Pandit was paid almost $11 million (£7.8 million) to lead Citigroup in a year that the troubled US bank required $45 billion in handouts from the taxpayer.
  
  A regulatory filing by the company showed that Mr Pandit, who was hired as chief executive in December 2007, was paid a basic salary of $958,333, stock awards valued at $8.2 million and options worth $1.6 million.
  
  Most of the stock award was a $7.7 million signing-on bonus for taking the job at a time when the bank was struggling.
  
  Mr Pandit's other compensation included $2,393 for "ground transportation" and $13,800 in pension contributions. But he paid the company for his personal use of Citigroup's aircraft — a sensitive issue following recent criticism by President Barack Obama over the bank's plan to buy a new corporate jet.
  
  The revelations come as executive compensation is under unprecedented scrutiny from lawmakers and voters infuriated at the multibillion dollar bailouts handed to banks that continue to pay huge bonuses to workers.
  
  AIG is under fire for paying $165 million in bonuses yesterday to executives at its stricken financial products business, despite needing $170 billion from the Government to survive.
  
  Mr Pandit, who was not paid a performance bonus last year, agreed to work for a base salary of $1 and no bonus this year.
  
  Citigroup, which promised following its most recent government bailout to clean out its boardroom, today announced four new board nominees.
  
  Jerry Grundhofer, former chief executive of US Bancorp, Michael O'Neill, former chief executive of Bank of Hawaii, William Thompson, former chief executive of Pimco, and Anthony Santomero, former president of the Federal Reserve Bank of Philadelphia, have been nonimated as directors.
  
  Shareholders will vote on the appointments at an annual meeting on April 21.
  
  Richard Parsons, who replaced Sir Win Bischoff as Citigroup's chairman in January, said at the time that he would inject new blood into the board. He reiterated his plans last month when the Treasury took at 36 per cent stake in the bank to shore up its capital base.
  
  The Treasury had demanded a more independent board in return for its support of Citigroup.
  
  Sir Win and Robert Rubin, the long-time director and adviser as well as director Roberto Hernandz Ramirez said that they would not stand for re-election at the April meeting. Board members Franklin Thomas and Kenneth Derr said that they would retire.

More On Maybank

Blogged on Friday night: Maybank Has Lost 24.1 Billion In Market Capital Since BII Deal!!!

Mentioned was the impairment losses issue.

On today's Edge. PAC report: BII buy may impair Maybank results by RM300m in FY09

• KUALA LUMPUR: Malayan Banking Bhd (Maybank) may make impairment losses of about RM300 million in Bank Internasional Indonesia (BII) for its financial year ending June 30, 2009 (FY09), a Bank Negara Malaysia (BNM) official told the Parliamentary Public Accounts Committee (PAC) last November.
  
  According to BNM assistant governor Nor Shamsiah Mohd Yunus who was called to appear before the committee chaired by Datuk Seri Azmi Khalid (Padang Besar-BN) then, Maybank’s impairment losses in BII could be in the region of RM300 million, based on Indonesia’s risk-free rates at that time.
  
  “The outlook is for Indonesia to reduce the interest rates further but based on our current assessment, the impairment could be in the region of RM300 million.
  
  “But if the interest rate were to come down further, that is likely to be the case based on what the (Indonesian) governor has said because of the impending slowdown, then we think that there may not even be any impairment when it comes to the June 30 account,” Nor Shamsiah told a panel of 11 PAC members.
  
  The published transcript of three panel hearings last November on Maybank’s takeover of BII was handed to Members of Parliament at the Dewan Rakyat last week.
  
  The hearings were held in the midst of the controversy surrounding Maybank’s purchase of BII due to the high cost.
  
  According to a copy of the transcript obtained by The Edge Financial Daily, Nor Shamsiah said Maybank would have to make an annual impairment assessment according to the accounting policy.
  
  “They (accountants) would look at the future cash flow and they will do a present value. So you look at the height of the crisis when we imposed the condition, the discount rate was very high and that is why your present value will be smaller and they could be very big impairment. That was why we imposed the condition,” she explained.
  
  Nor Shamsiah was referring to BNM telling Maybank to obtain a new agreement on a purchase price that would not result in it making substantial impairment under international reporting standards and impacting the fundamental soundness of Maybank. Maybank had since obtained a RM759 million discount from Temasek on the purchase price of BII.
  
  Nevertheless, she said with the discount and the decrease in Indonesia’s discount rate following the interest rate cut, the impairment that Maybank might need to book for the current financial year would be “something that the bank could absorb”.
  
  Commenting on Tony Pua’s (Petaling Jaya Utara-DAP) remark on the concept of a “high value in use” that resulted in a minimum impairment in BII, Nor Shamsiah said it was because BII was a long-term investment for Maybank and as such, it would look at its growth perpetuity in determining impairment losses. She added that it was a standard methodology used in industries.
  
  Meanwhile, the PAC report also revealed that BNM officials believed the Maybank president/chief executive officer transition plan was also a factor that might have adversely affected the deal.
  
  Nor Shamsiah said Maybank was caught off-guard by the sudden departure of its president and CEO Tan Sri Amirsham A Aziz who was appointed a senator and then made a minister in the Prime Minister’s Department.
  
  She said the plan was for the new CEO, Datuk Seri Abdul Wahid Omar, to assume his role on June 1 while Amirsham would stay on for one month to ensure a smooth transition.
  
  “Suddenly that plan could not be followed because the current CEO was appointed a senator. So that was something that was not foreseen by Maybank when it was managing this acquisition. So, looking back, one area that Maybank could have managed better was the transition,” said Nor Shamsiah.
  
  She explained that the management had given the mandate to the president to undertake the acquisition and when Amirsham was made senator half-way through the deal, the bank was caught unawares.
  
  “It did not have a contingency plan in place to deal with that immediately. Its contingency plan was to have the current and new president to overlap for one month. When you are caught with unanticipated development, the outcome is not as good as what you could have hoped for,” she said.
  
  The report also revealed that BNM was unaware that Maybank was the only bidder after HSBC Holdings plc and Bank of China Ltd withdrew their bids.
  

AIG, Your Bonus Plan Is Obscene!

On Bloomberg News. Summers, Lawmakers Call AIG Bonus Plan ‘Outrageous’

• Summers, Lawmakers Call AIG Bonus Plan ‘Outrageous’
  By Timothy R. Homan and Margaret Chadbourn
  
  March 15 (Bloomberg) -- Obama administration officials and lawmakers lambasted plans by American International Group Inc., the insurer rescued by the government, to dole out $1 billion in bonuses and retention pay to employees.
  
  Lawrence Summers, director of the White House National Economic Council, called the payments “outrageous” in an interview on ABC’s “This Week” program. AIG is “abusing the system,” Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, told “Fox News Sunday.”
  
  AIG, which has received $170 billion in taxpayer money, succumbed to demands from the U.S. Treasury to scale back the payments. AIG agreed to reduce some retention payments in 2009 by 30 percent and tie bonuses to the company’s recovery. The New York-based insurer still plans to hand out about $165 million on March 15 because of legally binding contracts, according to a person briefed on the matter.
  
  Public anger has been stoked by revelations of bonuses paid by firms at the center of the financial-market meltdown that has plunged the U.S. into what may become the deepest recession since World War II. New York Attorney General Andrew Cuomo is investigating $3.6 billion in bonuses paid by Merrill Lynch & Co. shortly before it was acquired Jan. 1 by Bank of America Corp.
  
  “There are a lot of terrible things that have happened in the last 18 months, but what’s happened at AIG is the most outrageous,” Summers said today on CBS’s “Face the Nation.”
  
  Safeguarding Taxpayer
  
  Summers said the Obama administration’s priority is safeguarding the U.S. taxpayer. “No one cares about the shareholders of AIG. No one feels the slightest obligation to people who led us into these difficulties.”
  
  Even so, the administration can’t abrogate existing contractual obligations without shaking confidence in the legal system, Summers said.
  
  “The easy thing would be to just say, you know, ‘Off with their heads,’ and violate the contracts,” he said. “But you have to think about the consequences of breaking contracts for the overall system of law.”
  
  Frank said that starting when the Federal Reserve initiated the AIG rescue last September there should have been stricter rules on executive compensation and clearer guidelines for major financial institutions getting a government bailout.
  
  “Clearly there was a mistake at the beginning,” Frank said on Fox. “These people who were receiving this should have been given much stricter rules at the beginning.”
  
  ‘Abusing System’
  
  AIG is “abusing the system,” said Frank. “Any bank that thinks we’re being too tough on compensation, or trying to get foreclosures reduced, or stopping some of the lavish entertaining, they can give the money back.”
  
  “With AIG, I would just say we need to find out, one, are they legally recoverable,” Frank added. “But I do want to find out at what point these illegal obligations were incurred, who said, and at what point, we’re going to give these bonuses no matter what.”
  
  Senate Minority Leader Mitch McConnell, speaking on ABC’s “This Week,” said the example of AIG might be followed by other companies lining up for government assistance.
  
  “The message here, I’m afraid, to any business out there that’s thinking about taking government money, is let’s enter into a bunch of contracts real quick, and we’ll have the taxpayers pay bonuses to our employees,” the Kentucky Republican said. “This is an outrage.”
  
  Treasury Secretary Timothy Geithner was “really upset” by AIG’s plan to distribute the $165 million, Austan Goolsbee, a top White House economist, said on Fox. “You worry about that backlash” from the public, “but you’re also angry,” he said.
  
  ‘Not Sensible’
  
  “I don’t know why they would follow a policy that’s really not sensible, is obviously going to ignite the ire of millions of people,” Goolsbee said. “And we’ve done exactly what we can do to prevent this kind of thing from happening again.”
  
  AIG Chief Executive Officer Edward Liddy, who was recruited by the U.S. to run the insurer after the bailout, has vowed that the company will repay “every penny” to the U.S. of its bailout package by selling subsidiaries, and said the retention pay for talented people helps taxpayers by making the units attractive to buyers.
  

Cramer vs Stewart: The Saga Continues

One of the hottest issue is centered on the video-rama on Jon Stewart and Jim Cramer. See Jon Stewart Tells Jim Cramer F*** You!

And it now seems that Patrick Byrne, CEO of Overstock, is sending emails to his clients. The following is the content as posted here: Overstock CEO Calls Jim Cramer a “Criminal.”

• Dear Honored Client,
  
  We take seriously our duty to save you money. We know the current financial crisis is of concern to many of you. If so, you may find this interesting. Otherwise, please just enjoy your shopping.
  
  In recent weeks, “The Daily Show”’s Jon Stewart has exposed TV personality Jim Cramer as a liar (see these recent clips, 1 2 3). But I think he’s worse: I think he’s a criminal.
  
  If that sounds hard to believe, please see this video (which Jim did not expect to reach the public) of Jim Cramer bragging about using the press to manipulate the stock market illegally. For a full analysis of the career of Jim Cramer, please read my essay: “Jim Cramer is a Complicated Man.”
  
  Warren Buffet says that, “If you ever sit down at a poker table and in 15 minutes haven’t figured out who the pigeon is, you’re the pigeon.” Similarly, if you are getting any advice from Jim Cramer or CNBC, you are the pigeon. CNBC is a 24/7 hedge fund infomecial designed to trick you into making bad investments for the benefit of hedge funds. Again, watch the tape of Jim. Then read the critique. Then turn off CNBC.
  
  Or else, just ignore this message and enjoy your shopping.
  
  Most respectfully,
  
  Patrick M. Byrne, PhD
  CEO, Overstock.com
  patrick@overstock.com

The critique titled Jim Cramer is a Complicated Man should be read in full. For it details in length what Cramer has done!

And here is the famous Stock Market Manipulation video again. As the person who hosted the video wrote "A candid Jim Cramer talks about the lies he uses to manipulate the market on TheStreet.com TV. "

And do read the following: Cramer vs. Stewart: Post-Fight Analysis and Stewart vs. Cramer: A One-Sided Smackdown

• Jon Stewart wasn't trying to be funny.
  
  Jim Cramer wasn't trying to be obnoxious.
  
  The result was riveting, if not particularly hilarious, television, with Stewart dominating all the way.
  
  In their much-anticipated, much-ballyhooed faceoff on last night's "Daily Show," Stewart became "Crossfire Jon," the avenging media critic, demanding to know why CNBC failed so badly in warning us, the investing public, of the looming meltdown. He was mad and loaded for Bear Stearns.
  
  "CNBC could be an incredibly powerful tool of illumination," Stewart declared, but instead was selling "snake oil." (So was he, said Jon, but he wasn't promising to make people money.)
  
  The odd thing was that Cramer, a confident ex-trader who bows to no one in the bombast department, barely defended himself or his network. He said he'd made mistakes. He said he wished he'd done a better job. He pointed out that CNBC has some good reporters but never really made the case for how they've reported aggressively on Wall Street.
  
  "I am trying to expose this stuff. . . . We could do better. There are shenanigans and we should call them out."
  
  Cramer was playing rope-a-dope while Stewart swung away. Jim seemed more concerned with being liked than justifying what he does for a living.
  
  It was a mismatch.
  
  Stewart got him on the defensive by playing a 2006 tape in which Cramer explained how traders gamed the system and seemed to say he had used such techniques in his Wall Street days.
  
  Cramer maintained that he himself had been the victim of deception. "I had a lot of CEOs lie to me on the show. It was very painful," he said.
  
  "You're pretending you're a dew-eyed innocent," Stewart shot back.
  
  Cramer said he had a Wall of Shame. He said he had called Hank Paulson a liar. He said there was a market for an entertaining business show like his.
  
  The Mad Money man refused to get mad. Each time he tried to sound reasonable, the Comedy Central man ratcheted up his level of indignation.
  
  "You knew what the banks were doing and were touting it for months and months," Stewart said. "It was disingenuous at best and criminal at worst."
  
  Actually, Cramer didn't know. Neither did most financial journalists. They should have been more aggressive in challenging the highly leveraged banks, the credit default swaps, the Washington regulatory cops who slept on the beat. But they were as stunned as anyone when Bear and Lehman went under and AIG and Citi had to be rescued.
  
  Finally, Stewart hurled a charge that I was sure would prompt a rousing defense from Cramer, who views himself as the former insider looking out for Joe Investor. Stewart suggested that CNBC was catering to its Wall Street audience. "Which side are they on?" he demanded.
  
  Cramer remained meek. He had been "late" in blowing the whistle. He agreed to improve and they shook hands. The lecture was over.
  
  Perhaps Cramer's goal was to avoid being further ridiculed, to escape with his dignity intact. Perhaps he thought Stewart would overreach and come off like a scold. But the bottom line was that Stewart, on his home court, was in control the whole way. Cramer never landed a punch, not even a good-natured jab.....

Do read the rest of the above article from Washington Post here

Don Harold reckons Jon Stewart was too kind.

This was the recommended video from Don on Jim Cramer.




And the following clip shows Cramer whining about Stewart and insist that Stewart is nothing but a commedian!





However, after seeing the face-off between Cramer and Steward (I'm also amazed that Cramer did the show too!) , Don posted another video-clip!

Marc Faber : Do not Underestimate the Power of Printing Money Mar9 2009 !!

Jon Stewart Tells Jim Cramer F*** You!

The Daily Show With Jon StewartM - Th 11p / 10c

Intro - Brawl Street: Get Ready to Buy Low! And Sell Die

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

The Daily Show With Jon StewartM - Th 11p / 10c

Moment of Zen - Jim Cramer's Advice

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

The Daily Show With Jon StewartM - Th 11p / 10c

In Cramer We Trust

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

Now this blog has featured Jim Cramer before.

March 18th 2008: The Market, The Bear and Jim Cramer!

June 26th 2008: Yet Another Reason Why Many Don't Like Jim Cramer

And here is the face off between Cramer and Jon Stewart!!!


Part 1.

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Unedited Interview Pt. 1

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

Part 2

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Unedited Interview Pt. 2

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

Part 3 - love this the best!

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Unedited Interview Pt. 3

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

Maybank Has Lost 24.1 Billion In Market Capital Since BII Deal!!!

March 27th 2008: Maybank pays 4.6 times price-to-book for RM4.8b acquisition of BII

• “It was for strategic reasons and the financial rationale was extremely compelling.The acquisition will transform our growth prospects in Indonesia and is a huge step forward in our strategy to regionalise our operations through investments in selected high growth markets,” he said.

Business Times article on that day carried the following article, which can be read here

• BII deal pricey, but worth it
  
  Is BANK Internasional Indonesia (BII) an expensive deal for Malayan Banking Bhd (Maybank)? On the surface, yes it is. The offer prices BII at 4.6 times book value, while the top five Indonesian banks now trade at around 3.8 to 3.9 times book. However, there are compelling reasons why it is a price worth paying.
  
  The main one is that there are not that many banks that are up for sale in the Southeast Asian region. The first window opened in early 2000 when Indonesia opened its doors to foreign investors to buy its financial assets. Maybank tried in 2004 but its group lost out to the UK's Standard Chartered. This time around, a smaller window opened. Indonesia introduced a rule that prevented a foreign investor from owning more than one bank.
  
  Only Khazanah Nasional Bhd and Temasek, Singapore's investment arm, are affected by this rule. Khazanah owns Lippo Bank directly and Bank Niaga through Bumiputra-Commerce Holdings Bhd (BCHB). Khazanah wants to merge Lippo and Niaga. This leaves Temasek, which owns Bank Danamon and BII. As such, the price tag, apart from a premium for control, also reflects a scarcity premium. "I think it's an acquisition of wanting to be in the market, against price. Otherwise, you might not get an opportunity," said Mushthaq Ahmad Ibrahim, chief investment officer of MIDF Amanah Asset Management Bhd.
  
  It can also be argued that Maybank is paying more for Indonesia's potential. The world's fourth-most populous country has an economy that chugs along at an annual growth rate of about six per cent. Maybank officials revealed yesterday that Indonesia's loan-to-gross domestic product ratio is 24 per cent, compared with 75 per cent in Thailand and 90 per cent in South Korea. This means that there is plenty of room for BII to grow.

Sept 16th 2008. Business Times published the following article.

• Jakarta rejects Maybank's appeal
  
  By Goh Thean Eu Published: 2008/09/16
  
  Now that the Indonesian regulators have shot down Maybank's appeal, it is almost certain the pact to buy BII will lapse by September 26 and Maybank risks losing its RM480 million deposit
  
  INDONESIA'S capital markets regulator has refused to relax rules for Malayan Banking Bhd, putting its RM8.8 billion deal to buy PT Bank Internasional Indonesia (BII) closer to collapse while a RM480 million deposit risks being forfeited.............
  
  Maybank shares have taken a beating since it announced the acquisition on concerns that it is overpaying. Its shares have fallen by 12.3 per cent, from RM8.95 each to RM7.85, since the deal was announced. (you can access to article here )
  
  

Maybank used to be 8.95 but thanks to BII it fell to 7.85.

The next day on the 16th Sept 2008, Maybank fell 45 sen and on the stock fell another 50 sen the next day to close at 6.90.

Some 'news' on the 17th Sept 2008: Bank Negara reinstates nod for Maybank-BII deal

Research house, CIMB, defended the BII deal: Maybank’s potential trading loss from BII capped

Points to note.

• "However, the market is likely to react negatively to this turn of events given the concerns over the high valuation and capital commitment for the BII deal,” it said.
  
  The research house said while it was pleased that the deal would go ahead, the flip-flops in the past two months underscore the high policy risks of operating in Indonesia.
  
  “Furthermore, the potential BII loss may be an earnings overhang in the next few years,” it added.

High valuation and high capital commitment and future impairment losses!!!

A few weeks later, blogger Dali wrote, Petaling Street Hawkers Calling You Back With Deeper Discount!

• When Maybank was faced with the embarrasing situation of losing the deposit for having to walk away - the sellers DID NOT offer a way out for Maybank, knowing full well that Bank Negara was making life hell for Maybank with the additional clause inserted by the Indonesian authorities. Maybank was getting slammed (correctly) for not tightening the deal terms (e.g. deal off if approval is not gotten from the Indonesian authorities, or if there are conditional "changes" to the deal when being approved by the Indonesian authorities).
  
  Make no mistake, i am not siding with Maybank here - in fact the people responsible for the deal should sent back to school.
  
  So to the buggering sellers offering the 480 million ringgit discount - go fly my wau! Too little too late.
  
  Maybank, take your medicine and walk away, lose 400 million ringgit OK what... but surely SOME BLOODY heads must roll - who were the advisors, who were the legal advisors, who were the managers in charge of negotiating the deal???

Why didn't Maybank just walk away and lose that 400 million ringgit?

When Mayban was at 8.95, before BII deal was formally announced, Maybank's market capital was some 43.6 Billion.

Blogger Dali was also quick to point out a few weeks later on 21st October that FinanceAsia reported that the Hongkong and Shanghai Banking Corporation, through its wholly owned subsidiary HSBC Asia Pacific Holdings (UK), will acquire 88.9% of PT Bank Ekonomi Raharja for $607.5 million in cash. HSBC will fund the deal through its own resources.

Dali was quick to pen Say Sorry To Maybank?!!! and commented the following.

• It is interesting to note that Bank Ekonomi has a Shareholders' Funds of Rp1.121 Trillion (RM392 million), which means that HSBC is effectively buying Bank Ekonomi at a Price to Book multiple of 6.1 times! This is much higher than the Price to Book multiple of 4.6 times that Maybank will be paying to acquire Bank Internasional Indonesia ('BII') [before subsequent discounts granted by the sellers]. The different in size may account for the higher multiple demanded by the sellers in the Bank Ekonomi deal as compared to the BII deal, as part of the purchase price must include the price of the banking license itself. Nevertheless, one may wonder why does HSBC want to pay such a high premium for this bank since it already has a foothold in Indonesia?
  
  Here we have to be fair to Maybank. For those of us who criticised Maybank for over-paying, HSBC would be doing even worse. The trouble is that we tend to whack our local buggers more readily, and would give big foreign players more benefit of the doubt in almost any transactions. Let's be honest here. HSBC paying 6.1x ... we were screaming of collusion and calling for the board to be sacked for Maybank buying at 4.6x...
  
  There can only be so many possiblities: both Maybank and HSBC overpaid ..... Maybank may have been smarter to buy first as HSBC also bidded for BNI against Maybank ... maybe now HSBC had to overpay even more for not being aggressive in their bidding for BNI... Thanks to HSBC's move, Maybank executives had their prayers answered... they now have something to defend their acquisition with. Even if both Maybank and HSBC overpaid, Maybank will say they overpaid much less. Time for those of us who critiqued to again re-look into the "intrinsic value" of Indonesian banking.
  
  Fair is fair, maybe I have pre-judged Maybank's strategy and misjudged its "valuation techniques". It does not mean I agree with HSBC's strategy, but if an old woman is running very fast, there's bound to be something fishy.

And I would also like to point out that Tunku said...

• There is a big difference between paying a premium for license vs paying a premium for franchise. HSBC is paying a premium for a license THAT does not impact its balance sheet. Maybank is paying a premium for a franchise THAT is a huge part of its balance sheet.
  
  NOT all acqusition is the same analysis and price to book does not tell you everything...

Oct 30th: Risk of impairment losses for Maybank’s acquisitions abroad

• “They were untimely acquisitions. Maybank committed to buy the banks when the world was already in turmoil. The subprime loan issue had surfaced in the west. If it could have waited, the RM10bil would have bought a lot more now that the market is dirt cheap,” said a fund manager.
  
  He added that Maybank paid at the top end of the range even at that time. The price it paid for BII is close to four times the bank’s book value and about 5.1 times the book value per share of MCB Bank.
  
  Banks in the region are now trading about equal to their book values but of course, a higher valuation has to be offered in a takeover or a strategic stake.

Last month, on 27th Feb 2008, MALAYAN BANKING BERHAD ("MAYBANK" OR "THE COMPANY") PROPOSED RENOUNCEABLE RIGHTS ISSUE ON THE BASIS OF NINE (9) ORDINARY SHARES OF RM1.00 EACH IN MAYBANK (“RIGHTS SHARES”) FOR EVERY TWENTY (20) EXISTING ORDINARY SHARES OF RM1.00 EACH HELD IN MAYBANK (“SHARES”) and a few days later, Maybank fixed it's rights issue price MALAYAN BANKING BERHAD ("MAYBANK" OR "THE COMPANY") PROPOSED RENOUNCEABLE RIGHTS ISSUE ON THE BASIS OF NINE (9) ORDINARY SHARES OF RM1.00 EACH IN MAYBANK (“RIGHTS SHARES”) FOR EVERY TWENTY (20) EXISTING ORDINARY SHARES OF RM1.00 EACH HELD IN MAYBANK (“SHARES”) (“PROPOSED RIGHTS ISSUE”)

Dali was quick with his update: Maybank's Not-So-Right Rights Issue!

• This is where the crux of the matter lies, Maybank bought and invested late into regional banks, at highish prices. The crisis has basically set Maybank up to need to write down substantially on their acquisitions. NOTE THAT NO IMPAIRMENT CHARGES WERE RECORDED for the latest quarter - hint, its coming over the next couple of quarters!!!.
  
  Final thoughts, sell first ask questions later. The rights will be an uphill exercise. If you still want to buy Maybank, look for when the rights are traded, they could be "very cheap". Even when you get the rights cheaply, remember you will have to tolerate a few quarters where there will be substantial writedowns on the regional banks' acquisitions.

Well done! Sell first ask questions later was the advice given by Dali on the 5th of March. (see Maybank closes at fresh lows of RM4.54 )

Do note: Maybank share base before the rights issue was 4,881,123 million shares. After rights issue, Maybank shares would balloon to 7,077,628 million shares!!!!

Do see also financeAsia article: Maybank sets rights issue price

And on today's Edge: Maybank market cap down RM6.5b over 11 days

• KUALA LUMPUR: Malayan Banking Bhd (Maybank) saw RM6.54 billion erased from its market capitalisation over 11 days of losses, the longest losing streak in 22 years, on investors’ concerns that rising bad debts and capital-raising plans would erode its earnings.
  Maybank closed at RM4.06, down 28 sen yesterday, which was a decline of RM1.34 or 24.8% from Feb 24 when the share price closed at RM5.40.
  
  The market capitalisation was reduced from RM26.35 billion on Feb 24 to RM19.81 billion as of yesterday.
  
  Last month, Maybank announced a RM6 billion rights offer to boost capital.

The market capitalisation was interesting!

Maybank today closed at 4.00.

Market capital is now only 19.5 billion.

Remember, before BII deal, Maybank's market capitalisation was some 43.6 billion!

Some 24.1 billion in market capitalisation has gone into thin air!!

Is BII deal really worth it?

How?

Look at Maybank's stock price.

It has fallen off the cliff!

Maybank had bought banks at a rather high prices and despite many quarters questioning the wisdom of the deal, Maybank held firm with their acquisitions. And now, a rights issue is needed!!

Surely Maybank shareholders aren't happy.

Overpaying for banks here and there. And most of all, the share price is down a lot and since BII deal, Maybank has lost a whopping 24.1 Billion in market capital!!! And if they want to continue to be a shareholder, they have to fork out more money and with the impairment of losses issue, the future is not looking bright at all. (ps. would you want to invest in Maybank right now at 4.00?)

And other Bursa Malaysia shareholders aren't happy either!

How can they ever be happy?

The continued weakness in Maybank is dragging down market sentiments.

Lastly, I have to point out the question raised by Dali last Sept, why didn't Maybank just walk away and lose that 400 million ringgit? Justified? Just eat humble pie and just walk away.

Look at the mess now.

I repeat once more, 24.1 billion wiped of from Maybank's market capital since BII deal was announced last year!

And losses could even mount!

OUCH!!!!!!!!!!!!!

Berkshire Ratings Has Been Cut By Fitch!

Hot from Bloomberg.

Buffett’s Berkshire Has AAA Debt Rating Cut by Fitch

• By Erik Holm
  
  March 12 (Bloomberg) -- Billionaire Warren Buffett’s Berkshire Hathaway Inc. had its top-level AAA credit rating cut by Fitch Ratings, which cited concern about the potential for losses on the insurer’s equity and derivatives holdings.
  
  Buffett’s role as chief investment officer also puts the company at risk if he becomes unable to do the job, Fitch said in a statement. Fitch cut the so-called issuer default rating on Berkshire to AA+, and senior unsecured debt to AA. The insurance and reinsurance units kept their AAA status, with a negative outlook for all entities, Fitch said.
  
  “Fitch views this risk as unrelated to Mr. Buffett’s age, but rather Fitch’s belief that Berkshire’s record of outstanding long-term investment results and the company’s ability to identify and purchase attractive operating companies is intimately tied to Mr. Buffett,” Fitch said. Buffett is 78.
  
  Berkshire joins General Electric Co., which was downgraded by Standard & Poor’s today and lost its status as one of the remaining AAA companies in the U.S. Berkshire stock fell 35 percent in 12 months on concern that Buffett’s bets on derivatives -- instruments he has called “financial weapons of mass destruction” -- will crush profit at the firm.
  
  The downgrade isn’t surprising because the deteriorating economy is leading to increased uncertainty about all financial companies, said Michael Yoshikami, chief investment strategist at YCMNet Advisors.
  
  An Abundance of Caution
  
  “Triple-A in the end is probably going to be left for the Treasury when it’s all said and done,” said Yoshikami, whose Walnut Creek, California-based firm oversees $800 million and owns Berkshire Hathaway shares. “You’re seeing the rating agencies taking an abundance of caution at this point.”
  
  S&P and Moody’s Investors Service assign the top credit grade to Berkshire. Buffett’s assistant, Carrie Kizer, didn’t respond to a message left after normal business hours in Omaha.
  
  Berkshire has outperformed the S&P 500 Index in 38 of the 44 years Buffett has run the firm and handled its investments, according to the Omaha, Nebraska-based company’s 2008 annual report. The company is backing derivatives pegged to corporate junk bonds, municipal debt and the performance of stock indexes on three continents, with liability of more than $14 billion as of Dec. 31.
  
  Buffett said in an e-mail in November that collateral calls from the institutions on the opposite side of his derivative bets are “under any circumstances, very minor.” In a Bloomberg Television interview conducted last week, Buffett said he plans to sell more derivative contracts, which he personally negotiates. Some investors have said the derivatives may saddle the insurer with billions of dollars in losses.
  
  Making Money
  
  “Oh, we’ll continue,” Buffett said. “We do anything that I think I understand and where I think that the odds strongly favor making money, which doesn’t mean you make money every time.”
  
  The $37.1 billion in equity puts tied to four of the world’s stock markets -- the largest portion of the derivative contracts -- have “no collateral posting requirements with respect to changes in either the fair value or intrinsic value of the contracts and/or a downgrade of Berkshire’s credit rating,” said the company’s latest annual report, released this month.
  
  Buffett will “likely make money on at least the index put contracts,” said Jeff Matthews, author of “Pilgrimage to Warren Buffett’s Omaha” and founder of hedge fund Ram Partners LP. “Even if he didn’t, his balance sheet would in no way be as weak as GE’s.”
  
  Insurers depend on high credit ratings to keep down the cost of raising capital and reassure policy holders that their claims will be covered.
  
  “If Berkshire isn’t triple A, I’m not sure which company would be,” Buffett said in a Bloomberg interview at last year’s annual shareholders’ meeting.
  
  Matthews said investors may ignore the Fitch rating change because they give more weight to analysis by S&P or Moody’s. He added, “Buffett’s true believers won’t believe it.”

On CNBC: Fitch Cuts Berkshire's Rating on Investments, Buffett Role

Here is one early editorials questioning the justification of the downgrade. Fitch Downgrades Berkshire Hathaway, But Is It Justified?

For example on the derivatives exposure issue..

• Derivatives Exposure Cited
  
  Fitch specifically cites Berkshire’s derivatives contracts as a factor in the downgrade. I believe that Berkshire’s derivatives exposure is widely misunderstood and poses no liquidity concern whatsoever due to the nature of the contracts. The vast majority of Berkshire’s derivatives carry no counterparty risk, cannot be exercised by counterparties for over a decade, and are being valued by a model that recognizes mark to market gains and losses but no cash flow consequences. Nevertheless, the Fitch analyst is concerned:
  
  With respect to BRK, Fitch views the company’s potential earnings and capital volatility derived from its large, unhedged market exposures as inconsistent with the stability required at the ‘AAA’ level. Such exposures include large, concentrated equity investments, as well as exposure to the equity and credit markets through various derivative contracts. Fitch views BRK’s investments in a wide variety of retail, service and manufacturing companies as mitigating this exposure somewhat, but Fitch does not view BRK’s degree of diversification as sufficient to offset these concerns at the ‘AAA’ level.
  
  While this initial statement seems to indicate significant concern and misunderstanding, it is interesting to note that later in the report, the analyst does outline the actual terms of the derivatives and the nature of the contracts:
  
  While the contracts’ recent mark-to-market losses are large, the agency believes that the ultimate economic effects, while uncertain, are likely to be significantly less than indicated by the marks. Favorably, the equity index put contracts were generally written with strike prices equal to the then current index value, had a weighted average maturity of 13.5 years at YE 2008, and are exercisable only at maturity. The CDS contracts appear to be well-managed with reasonable contract and per issuer limits. Additionally, few of the contracts have collateral positing requirements. At YE 2008 BRK had posted $550 million of collateral related to these contracts, a small amount for a company with BRK’s liquidity profile.
  
  It is difficult to reconcile the analyst’s concern about the derivatives noted early in the report with the later paragraph that indicates a clear understanding of the true nature of the derivatives risk.

That last passage by Ravi questioning Fitch's analyst issue on Berkshire's derivative is rather valid, yes?

Ravi then writes..

• My overall impression from reading the Fitch report is that the logic supporting the downgrade is highly suspect. All of the ratings firms have taken a beating in terms of reputation given the very high profile cases where AAA ratings were kept on securities that clearly were impaired. The most famous recent example involved the senior tranches of mortgage backed securities that received AAA ratings and suffered impairments. The rating firms are struggling to stay relevant in this environment. While the ratings firms were blind to risk during the boom years, it seems that they are now equally irrational in terms of risk aversion. It will be interesting to see whether the other ratings firms follow Fitch and downgrade Berkshire in the coming days.

And What ABout China's Drop In Export Numbers?

On The Financial Times on 11 March 2008.

China hit by massive drop in exports

• By Geoff Dyer in Beijing
  
  Published: March 11 2009 03:30 Last updated: March 11 2009 14:27
  
  Chinese exports slumped 25.7 per cent in February as the collapse in global demand caught up with the country’s exporters and overshadowed a sharp rise in domestic investment.
  
  China’s exports have decreased since November, but until last month the rate of decline had been much slower than in other Asian countries with large export sectors.

There some optimistic comments included in that article.

• Andy Rothman, economist at CLSA in Shanghai, said that government spending on infrastructure was likely to accelerate further over the next few months. “We expect this program to gain economic traction in March or April when project offices will have been established,” he said. “By late March, it is warm enough to dig holes and pour concrete across most of the country.”
  
  As well as dramatic increases in bank lending in recent months, the government said cement output increased 17 per cent in January and February and car sales rose 11 per cent in February according to JD Power, encouraging some observers to predict that domestic demand was already recovering.
  
  “China will still have one of the highest, if not the highest growth rate of any major country in 2009,” said Richard Yorke, chief executive of HSBC in China. Although a lot of the fiscal stimulus measures announced by the government were already in the budget for the next two years, “that is one reason why the Chinese economy will be able to implement the stimulus package so rapidly, because many cities and provinces had already planned for infrastructure projects over the next few years”, he said.

In John Mauldin's Outside The Box article posted on InvestorsInsight.Com

China: Exports Drop

• China's exports in February fell by 25.7 percent from a year earlier, dashing expectations that the country's crucial export sector would hold up better after January's 17.5 percent slowdown in export value, according to China's customs bureau on March 11. The sudden and sharp drop reveals that China's most critical source of business and government revenues are far from recovery and are running dry due to depressed global demand.
  
  In the past few weeks, the Chinese government and state press have drawn attention to signs that the domestic economy is improving. Bank lending increased substantially in January and February in support of struggling businesses and consumers, as well as government-prompted development projects. The purchasing managers index (PMI), a rough measure of overall manufacturing activity, climbed for the last 3 months to a reading of 49 in February, and the government is predicting positive growth of 54 percent in March. (A reading above 50 indicates growth, while one below 50 indicates contraction.) Even in the February export news released March 11, the losses are allegedly offset by a 26.5 percent increase in January's and February's fixed asset investment, slightly over the 2008 growth rate of 26.1 percent, possibly indicating that fiscal stimulus policies are having an effect.
  
  Nevertheless, exports are vital for the Chinese economy, comprising about 40 percent of gross domestic product (GDP). By means of robust trade surpluses, China manages its day-to-day expenditures and puts away foreign currency reserves in case things get worse. February's trade surplus, however, fell to a mere $4.84 billion, down from $39.1 billion in January. China still retains its nearly $2 trillion in reserves to resist the economic downturn, but it is reluctant to tap this last resort and prefers to rely on trade surpluses — which are now dwindling.
  
  February's export numbers do not bode well for China's recovery — the similarly drastic 24.1 percent drop in imports also indicates how badly domestic demand has been struck, especially given the vast amount of effort Beijing has devoted to trying to increase that demand. China's latest trade data, while not complete, reveal the increasingly high toll that the global recession is taking on the Chinese economy. Ultimately, the pain in China's export sector will contribute to social problems that are already bubbling up from unemployment. This in turn will increase the heat on the Communist Party as it steps up security efforts and tries to maintain order.

Professor Michael Pettis commented the following on his write-up, Trade, CPI and other numbers came in this week

• I have always believed that the fact exports were dropping much more rapidly in the rest of Asia than in China was clearly not sustainable, and that it was just a question of (very little) time before we began to see Chinese exports hit much more sharply. I do not believe the process is over.
• It’s probably not a good idea to announce a drive to increase China’s share of the global export market, especially since for the last several months, while the world has suffered a collapse in demand, China’s share of exports has risen dramatically, but this may have been said primarily for domestic consumption.

On China Economy Watch

• Certainly some sectors of the economy are suffering badly and China’s trade surplus plunged in February on the back of a record drop in exports. The trade gap narrowed to $4.8 billion - roughly one eighth of the amount registered in January, according to data from the customs bureau. China's trade surplus hit a record $40 billion in November. Exports dropped sharply in February - down 25.7 percent from a year earlier (following a 17.5% fall in January), while the collapse in imports slowed, falling by "only" 24.1 percent following January's record 43.1 percent decline.

Comments: Exports dropped 25.7% - imports dropped by 24.1% and this is followed by a drop in cpi.

• Meanwhile China announced earlier this week that its consumer inflation fell for the first time in more than six years in February, suggesting we might now be entering a period of price deflation - the consumer price index fell 1.6 per cent from a year earlier in February.

Comments: And the issue of loan 'expansion' is clearly spelt out. Only 'quadrupling' in Feb 2009!

• Huge Loan Expansion
  
  So the big question is to just what extent will the government investment programme help restructure the economy? Certainly it won't kickstart it, since the export sector is dependent on demand elsewhere, and that is unlikely to move in the near tyerm. However the emphasis in Chinese economic activity might be able to switch towards domestic consumption, and that is the big question we now face. Certainly bank lending has increased, with China’s new loans more than quadrupling in February (from a year earlier) as the government pressed banks to support a 4 trillion yuan $585 billion). The problem is, just how much of this lending can turn bad?
  
  Banks extended 1.07 trillion yuan of local-currency loans in February and M2 climbed 20.5 percent from a year earlier, the fastest pace in more than five years, after growing 18.8 percent in January. The lending, which is in addition to a record 1.62 trillion yuan in new loans in January has given rise to concerns that the pace of new lending may be unsustainable and endanger the overall health of the financial system. Lax credit assessment now may lead to an upward surge in delinquencies in the months and years to come.”
  
  Central bank Governor Zhou Xiaochuan said earlier this month that loans and money supply may have grown too quickly, since Premier Wen Jiabao announced a whole year target for lending of 5 trillion yuan, so that the banks are already halfway through their target with 10 months still to go. The surge in credit has also triggered concern that some of the money is being pumped into the stock market. The Shanghai Composite Index which tracks China’s largest stock exchanges is now up by 17 percent since the start of the year.
  
  The worries about bad debts are being taken seriously, and China’s banking regulator have told banks to boost provisions to 150 percent of their outstanding non-performing loans, according to an article in the 21st Century Business Herald. The bad loan ratios of the country's five biggest banks -- Industrial & Commercial Bank of China Ltd., Agricultural Bank of China, China Construction Bank Corp., Bank of China Ltd., and Bank of Communications Ltd., is to be raised to 150 percent from 130 percent at the end of 2008, while the requirement for smaller national banks remains unchanged at 150 percent.
  
  Liu Mingkang, chairman of the China Banking Regulatory Commission, has described such moves as "prudent", and in line with the regulatory decision to carry out spot checks on bank loan books to “ensure quality of growth”.

Some Outlook On Palm Oil Prices For 2009

Some outlook on the palm oil sector.

• Palm Oil Prices May Gain Near-Term; Fall In 2H 2009
  
  KUALA LUMPUR (Dow Jones)--Global vegetable oil prices may find support during the next quarter as palm oil stocks fall in Southeast Asia and soybean production remains low in south America, but the outlook is bearish for the second half of 2009, according to analysts.
  
  Three of the five analysts who gave their forecasts at the conclusion of a three-day vegetable oils conference here said palm oil prices could potentially fall to around MYR1,500/ton despite the current euphoria over dwindling stocks.
  
  Prices are hovering around MYR1,920/ton now.
  
  But a major worry for most participants was the narrowing gap between the prices of palm olein and crude soyoil, as palm oil prices rose in recent months amid falling stocks and strong demand.
  
  Malaysian palm oil stocks are estimated to have fallen to a 14-month low of 1.56 million tons at the end of February.
  
  London-based analysts, Dorab Mistry and James Fry said palm olein may briefly sell at a premium to soyoil but this will result in a shift in demand away from palm oil.
  
  The global economic slowdown that will result in an overall decline in demand will also weigh on prices, they said.
  
  "This year, we must pay attention to demand rather than supply," noted Mistry, the London-based director of India's Godrej International.
  
  Edible oil demand growth may be no more than 2.0 million tons this year compared with the usual rise of 4.0 million tons to 5.0 million tons, he said.
  
  Demand for vegetable oils to make biofuels, which had pushed up prices to record highs during the last two years, may remain unchanged or register a very modest growth of less than 500,000 tons, he said.
  
  Fall In Production Seasonal, Won't Last
  
  Fry said the fall in palm oil output in Malaysia is only seasonal while the stock-output ratio is still not very tight.
  
  In neighboring Indonesia, strong production and large stocks may continue to weigh on prices, said Richard Kastilani, director of Tropical Oil Products Ltd., an exporter of palm oil.
  
  He said Indonesia started the year with a large stockpile of 2.7 million tons of palm oil and is heading for another year of record production which may hit 22.4 million tons in 2009.
  
  By the end of the year, Indonesian inventories may surge to 3.3 million tons, he said.
  
  Kastilani said prices are likely to move between MYR1,550 and MYR2,000 during the next four months.
  
  According to Mistry, while prices may test MYR2,100 during the next few weeks, they can fall to MYR1,500 during the second half of 2009.
  
  Fry had an even more bearish forecast, predicting CPO could fall to MYR1,400-MYR1,500 this year.
  
  Lower Soyoil Output May Support Prices
  
  However, some have pegged their hopes on a sustained drawdown in stocks during the April-June quarter and a smaller soybean crop in South America.
  
  That could help CPO rise by $70-$100/ton to an average $640/ton, cost and freight Rotterdam, in the first half of 2009, said Thomas Mielke, editor-in-chief, Oil World, a Hamburg-based industry publication.
  
  Mielke said palm olein prices may even rise to $670/ton, free-on-board Malaysia, from the current level of $615.
  
  He said South America's soybean production this year will likely be around 106 million tons, down from 115 million tons last year and way below earlier expectations of around 118 million tons.
  
  The tight supply of soyoil will have to be offset by higher exports of palm oil, said Anne Frick, New York-based vice-president of Prudential Bache Commodities.
  
  Frick said CPO prices are likely to move between MYR1,700/ton and MYR2,300/ton for the rest of the year.
  
  Several traders argue that if freight cost are taken into account, palm oil will continue to be the cheaper alternative in most Asian markets despite the price gap with soyoil narrowing considerably.
  
  "In times of recession, when buyers are more price-sensitive, they will buy the cheapest oil which is palm oil. The narrowing difference in prices doesn't take into account the freight and refining costs of soyoil," said an executive at a global trading company.
  
  He said palm oil also has a captive market in India where duty waiver on CPO imports is likely to push inflows to an all time high of more than 5.5 million tons.
  
  That could boost prices to MYR2,200/ton by June, Kuala Lumpur-based analyst M.R. Chandran said.

More..

• CPO Prices May Fall To MYR1,500/Ton - Analyst Mistry
  
  KUALA LUMPUR (Dow Jones)--Crude palm oil futures on Malaysia's derivatives exchange may rise towards MYR2,100 a metric ton in the next few weeks but are likely to fall during second half of this year to MYR1,500 during a slowdown in demand and higher global supply, London-based vegetable oils analyst Dorab Mistry said Thursday.
  
  He said soyoil prices may fall to $500/ton, free on board, Argentina from April, if the upcoming U.S. soybean plantings turn out to be higher on year. Wednesday, soyoil was offered at $615.
  
  He also said soybean prices on the Chicago Board of Trade are likely to fall to $7 a bushel. CBOT March soybeans settled 14 cents lower Wednesday at $8.75.
  
  RBD palm olein prices may fall to $500/ton, fob, Malaysia in the second half of this year from the current levels of around $610.
  
  Mistry said investment funds are no longer very active in commodity futures.
  
  "In the macro-economy, world trade is shrinking, credit availability is scarce. Output is falling, prices are falling, and there is a very real threat of deflation. These are troubled times," Mistry said, addressing an international conference on vegetable oils.
  
  It is likely that there will be a tightening of palm oil stocks in Malaysia during the first half of 2009, but production will start to recover from August onwards due to recent better use of fertilizers, Mistry said.
  
  He said beyond April and May, palm oil will become uncompetitive against South American soyoil and will lose market share.
  
  "For the second half of the year, CPO prices may come under pressure from soyoil and also higher production and weaker demand," noted Mistry.
  
  He said this will weigh on palm olein prices and lauric oils will follow palm olein downward.
  
  Soyoil prices are also expected to fall, but due to weakening of local currencies, the impact on exporters in Brazil and Argentina will be cushioned.
  
  He said global supply of vegetable oils is likely to rise by 4.7 million tons during the current marketing year to September 2009.
  
  Global demand may increase during the same period by only 2.5 million tons, including 2 million tons for food and about 500,000 tons to make biofuels, he said.
  
  As a result, incremental supply will exceed demand by around 2.2 million tons. This is the second successive year that supply will exceed demand.
  
  Mistry, whose forecasts on demand, supply and prices are tracked worldwide, said food demand for vegetable oils generally increases by anywhere between 4 million and 5 million tons annually.
  
  But the global economic recession can badly affect demand, he noted.
  
  He said more importance may have to be given this year to issues relating to the macro-economy rather than the market fundamentals of vegetable oils alone.
  
  Soybeans and Rapeseed
  
  There are also several bearish factors for soybeans and rapeseed, Mistry said.
  
  The weakening of the La Nina weather phenomenon has improved the prospects for soybean crop in Argentina, which is likely to be 43 million tons in 2009 in addition to the carry-forward stocks of six million tons from the previous year.
  
  Brazilian soybean crop is also likely to exceed expectations and be around 58-59 million tons. There is a possibility of soybean acreage expanding in the U.S. as reserve area may be released for cultivation.
  
  Soybean production may be better than earlier expectations while demand for soymeal is likely to be affected by recession.
  
  Rapeseed crop has been bigger than expected in Canada and Australia. China has harvested close to 12 million tons of rapeseed, apart from importing record volumes while India's rapeseed crop is likely to be around 6.4 million tons.
  
  Rapeseed oil production may rise by 1.4 million tons this year while sunflower oil output too may increase by 1.5 million tons.
  
  

Thanks A Lot CNBC!

The following video is truly, truly fantastic!!

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Economic Crisis

* video thanks to Kathy: http://www.kathylien.com/site/forex-tv/cant-miss-television

Madoff: Scandal Of A Centrury Ends With Whimper Of The Century?

The following article on UK Telegraph really sums it all for me.

• Scandal of a century ends with a whimper
  That’s it? The biggest alleged financial swindle in history wrapped up faster than you can say ‘bezzle’?
  
  By Rob Cox, breakingviews.com
  Last Updated: 5:56PM GMT 11 Mar 2009
  
  As hard as it may be for Bernard Madoff’s $65bn worth of victims from Israel to Colombia and Milan to New York’s Upper East Side to accept, the scandal appears to be a case closed.
  
  Madoff is expected to plead guilty this week in a Manhattan court to 11 felony charges, which come with a 150-year prison sentence.
  
  Madoff provided the exclamation point to the panic of 2008. The peaceful conclusion to the tale is almost a let-down. When Charles Ponzi’s eponymous scheme crashed in 1920, defrauded investors stormed the gates of his house. Madoff’s Park Avenue abode is quiet. His well-heeled clients will be caught in a mostly meaningless legal debate over “forfeiture calculations” – meaningless because the money has vanished.
  
  A long, hard-fought trial would have been welcome entertainment. But no, Madoff will not take off where Enron bad-boys Ken Lay and Jeff Skilling, or Tyco’s Dennis Kozlowski left off. No pleas of innocence or rationalising of shower curtain purchases. And there will be no crusading prosecutor to exploit the publicity. Of course, some New Yorkers may see that –no new Rudy Giuliani – as a blessing.
  
  Madoff’s tearful alleged confession was a private affair – no public drama. That’s a deviation from the standard con-man behaviour. Think of Samuel Israel. Not only did he defraud the clients of his Bayou hedge fund, he faked his own death and went on the lam for three weeks.
  
  It’s not quite over yet. Prosecutors might turn up some smoking-gun document. But it looks like the world will have to do without titillating tales of, say, crooked associates, unlikely accomplices, connections to the Mossad or vengeful Russian mobsters.
  
  Madoff’s alleged fraud set new standards for scale, duration and the reputation of the victims. But his drama is set to end with a whimper. A 70-year old man in a Barney’s overcoat will probably soon check in to a corrections facility, where he will quietly spend the rest of his life.

And do consider the issues raised by Jesse: Madoff is Pleading Guilty Without a Deal.

Grantham: Do Not Let Fear Terrify You From Investing!

Published on 10th March 2009: Grantham Urges Shift to Stocks Before ‘Rigor Mortis’

• Grantham Urges Shift to Stocks Before ‘Rigor Mortis’
  
  By Sree Vidya Bhaktavatsalam
  
  March 10 (Bloomberg) -- Jeremy Grantham, who oversees $85 billion as chief investment strategist of Grantham Mayo Van Otterloo & Co., urged investors to start moving money from cash to stocks before “rigor mortis” sets in.
  
  “Typically, those with a lot of cash will miss a very large chunk of the market recovery” because they are paralyzed by fear, Grantham wrote in a March 4 commentary posted today on the Boston-based firm’s Web site.
  
  Grantham, who last year reversed his decade-long bearish stance on stocks, maintained his view from January that the Standard & Poor’s 500 Index may fall below 600 before rebounding. The benchmark U.S. index dropped yesterday to 676.53, the lowest since September 1996, before gaining 6.4 percent to 719.60 today in New York. Based on his estimate of fair value, the S&P 500 should be valued at 900.
  
  “Remember that you will never catch the low,” wrote Grantham, one of the co-founders of GMO. He expects stocks to return 10 percent to 13 percent after inflation in the next seven years.
  
  The S&P 500 Index has declined 20 percent this year as the global economy worsened, raising concern that corporate earnings would be slashed and major U.S. banks would need to be nationalized. Today, stocks rallied after Citigroup Inc. said it is having its best quarter since 2007.
  
  Grantham told investors to make the shift from cash to stocks in a “few large steps” instead of all at once. GMO started reinvesting in stocks in October, and has a schedule for more moves based on future market declines, Grantham wrote.
  
  Grantham, 70, nicknamed a “perma-bear” by colleagues because of his grim view on stocks for more than a decade, said in April 2007 that the world was in the middle of a “global bubble,” and by July that same year said he had never been more bearish.
  
  In January 2008, Grantham advised a shift to cash. By October, stock prices had fallen so far that he recommended buying them

Here is the link to the article on GMO website: http://www.gmo.com/websitecontent/JG_ReinvestingWhenTerrified.pdf

• Reinvesting When Terrifi ed
  Jeremy Grantham
  March 2009
  
  It was psychologically painful in 1999 to give up making money on the way up and to expose yourself to the career risk that comes with looking like an old fuddy duddy. Similarly today, it is both painful and career risky to part with your increasingly beloved cash, particularly since cash has been so hard to raise in this market of unprecedented illiquidity. As this crisis climaxes, formerly reasonable people will start to predict the end of the world, armed with plenty of terrifying and accurate data that will serve to reinforce the wisdom of your caution. Every decline will enhance the beauty of cash until, as some of us experienced in 1974, ‘terminal paralysis’ sets in. Those who were over invested will be catatonic and just sit and pray. Those few who look brilliant, oozing cash, will not want to easily give up their brilliance. So almost everyone is watching and waiting with their inertia beginning to set like concrete. Typically, those with a lot of cash will miss a very large chunk of the market recovery.
  
  There is only one cure for terminal paralysis: you absolutely must have a battle plan for reinvestment and stick to it. Since every action must overcome paralysis, what I recommend is a few large steps, not many small ones. A single giant step at the low would be nice, but without holding a signed contract with the devil, several big moves would be safer. This is what we have been doing at GMO. We made one very large reinvestment move in October, taking us to about half way between neutral and minimum equities, and we have a schedule for further moves contingent on future market declines. It is particularly important to have a clear defi nition of what it will take for you to be fully invested. Without a similar program, be prepared for your committee’s enthusiasm to invest (and your own for that matter) to fall with the market. You must get them to agree now – quickly before rigor mortis sets in – for we are entering that zone as I write. Remember that you will never catch the low. Sensible value-based investors will always sell too early in bubbles and buy too early in busts. But in return, you may make some important extra money on the roundtrip as well as lowering the average risk exposure.
  
  For the record, we now believe the S&P is worth 900 at fair value or 30% above today’s price. Global equities are even cheaper. (Our estimates of current value are based on the assumption of normal P/Es being applied to normal profi t margins.) Our 7-year estimated returns for the various equity categories are in the +10 to +13% range after infl ation based on an assumption of a 7-year move from today’s environment back to normal conditions. This compares to a year ago when they were all negative! Unfortunately it also compares to a +15% forecast at the 1974 low, and because of that our guess is that there is still a 50/50 chance of crossing 600 on the S&P 500.
  
  Life is simple: if you invest too much too soon you will regret it; “How could you have done this with the economy so bad, the market in free fall, and the history books screaming about overruns?” On the other hand, if you invest too little after talking about handsome potential returns and the market rallies, you deserve to be shot. We have tried to model these competing costs and regrets. You should try to do the same. If you can’t, a simple clear battle plan – even if it comes directly from your stomach – will be far better in a meltdown than none at all. Perversely, seeking for optimality is a snare and delusion; it will merely serve to increase your paralysis. Investors must respond to rapidly falling prices for events can change fast. In June 1933, long before all the banks had failed or unemployment had peaked, the S&P rallied 105% in 6 months. Similarly, in 1974 it rallied 148% in 5 months in the UK! How would you have felt then with your large and beloved cash reserves? Finally, be aware that the market does not turn when it sees light at the end of the tunnel. It turns when all looks black, but just a subtle shade less black than the day before.

Short Them Stocks, Buy Them Dollars!!

So said Hugh Hendry.

I'm Short Stocks, Buying Dollars: Hugh Hendry

• The stock market is still an unsafe place for investors as quantitative easing, by which central banks boost the supply of money attempting to kick-start economies, is unlikely to work, Hugh Hendry, Chief Investment Officer at Eclectica, told CNBC.
  
  Hendry also disagreed with Warren Buffett's view, recently expressed to CNBC, that inflation is likely to be as bad if not worse than in the 1970s.
  
  "I've honestly never known a time of near-universal conviction that we have to worry about inflation today," Hendry told "Squawk Box Europe."
  
  "For quantitative easing there's no successful precedent. It has never, ever succeeded," he added.
  
  He is buying government bonds, shorting stocks and "can't buy enough dollars." Taking the contrarian view to the majority of speculators creates opportunities, Hendry added. "Gold, silver, I'm shorting them right now."
  
  Inflation will become a reason to worry for authorities again at some point, but they should think about combating deflation right now, Hendry said.
  
  "It is coming back in the future. All I'm saying it is just an unprofitable proposition at the time," he said. Betting on inflation is as if "we got a new book and we've read the last page. But if you read the entire novel, it's a different journey."
  
  Despite Tuesday's strong rally in the stock markets, shares are not a good investment, said Hendry, who continues to bet on government bonds.
  
  "I dare you to touch an equity today. Tell me you're making money on equities," he said.
  
  The unravelling of the crisis is likely to continue as world economies re-adjust after the cheap credit bubble has burst.
  
  "We were deluded by easy finance and as that easy finance is being removed, we're shocked," Hendry, who said his investment fund made a 32 percent return last year and is up 10 percent this year, said.
  
  The market has grown for about 30 years and for a long period, it will be "going nowhere," Hendry said, likening this period with the one after the crash of 1929 and with the crisis in Japan at the beginning of the 1990s, despite claims that this time it is different because the world has evolved.
  
  "I am saying that we are no different. Here we are, surrounded by technology and computers, and we are no different."
  
  

Hwang-DBS Advises MMC Shareholders To Vote For SATS Purchase???

Blogged previously: MMC And Its Senai Airport Terminal Purchase! and http://whereiszemoola.blogspot.com/2008/12/more-on-mmc-and-its-senai-airport.html

On today's Star Business: Hwang-DBS advises shareholders to vote for SATS purchase

• Wednesday March 11, 2009
  Hwang-DBS advises shareholders to vote for SATS purchase
  By YEOW POOI LING
  
  PETALING JAYA: Hwang-DBS Investment Bank has advised shareholders of MMC Corp Bhd to vote in favour of the company’s controversial proposal to buy Senai Airport Terminal Services Sdn Bhd (SATS).
  
  Last August, MMC proposed to buy SATS for RM1.95bil via issuance of shares but the offer was revised downwards in December to RM1.7bil, to be paid with internally-generated funds, disposal of assets and external loans.
  
  The exercise, however, has fallen under scrutiny due to the present economic climate and the nature of the transaction, which involved a common major shareholder and parties related to Tan Sri Syed Mokhtar Al-Bukhary.
  
  In a circular to shareholders last Friday, MMC attached a recommendation letter from independent adviser Hwang-DBS, which deemed the overall terms of the SATS acquisition as “fair and reasonable,” and not detrimental to the non-interested shareholders of MMC. “There are sufficient merits to the rationale of the proposed SATS acquisition and it is in the long-term interests of the company,” Hwang-DBS said.
  
  SATS operates the Senai International Airport in Johor and holds 100% of Enigma Harmoni Sdn Bhd (EHSB), which owns 1,098.1ha designated for development into Senai Airport City.
  
  The investment bank said SATS was envisaged to play a key role in the transport and logistics segment of MMC given the strategic location to become the country’s southern logistic hub.
  
  It added that the discount rate of 10% to 12% used by Ernst & Young to value the Senai International Airport operations was within range of the cost of equity of companies involved in airport business.
  
  The implied price per passenger of the Senai International Airport of RM395 was significantly lower than other airports’ average price of RM700 from 1986 to 2006, Hwang-DBS said.
  
  Based on the price consideration of RM1.12bil for EHSB and its adjusted net asset of between RM1.18bil and RM1.35bil as at June 30, 2008, it translates into price over net asset of 0.83 times to 0.95 times, which were within the range of its peers of 0.26 times to 1.67 times.
  
  Hwang-DBS also said the valuations of EHSB’s land by IPC Island Property Consultants Sdn Bhd and Knight Frank Ooi & Zaharin Sdn Bhd were within Ernst & Young’s adjusted valuation range.
  
  IPC estimated the land at RM2.2bil while Knight Frank valued it at close to RM2bil. Knight Frank’s appointment as the second valuer complied with the Minority Shareholders Watchdog Group’s request for an alternative opinion on the valuation.
  
  The proposed acquisition of SATS would lead to MMC’s earnings in the current fianancial year being negatively impacted by RM44.06mil, or earnings dilution of 1 sen per share, assuming that the acquisition was funded entirely by bank borrowings.
  
  However, it would contribute positively to the future prospects of the enlarged MMC group.
  
  “As the Senai International Airport is already operational, there is no financial commitment required from MMC to put the existing airport business on stream,” Hwang-DBS said.
  
  SATS has stayed in the red in the past five years due to additional capital expenditure, high operating costs and financing payments.
  
  For the six months ended Dec 31, its revenue fell 3% to RM12.8mil from the previous corresponding period while losses almost doubled to RM7.9mil year-on-year. This was due to lower revenues generated and higher depreciation charges arising from the revaluation of the lease of the airport land in 2008.
  
  The MMC board, however, has forecast SATS to report a profit after tax of RM93.3mil for the 14 months ending June 30, 2010 on the back of property and sublease contracts sales as well as the success of SATS’ application for a 100% investment tax allowance.

Implied price per passenger?????

Holy cow great yardstick!!

Let me loook back at the following list of issues highlighted on the local papers.

• Based on the announcement, MMC has undertaken to advance RM417.2 million which is owed by SATS to the vendors. The vendors in the deal are Semarak Sestu Sdn Bhd and Suria Kemboja Sdn Bhd which own SATS. Both companies are believed to be linked to MMC’s major shareholder Tan Sri Syed Mokhtar Albukhary....
• In the first place, does MMC need more land? Even if it does, why must the deal be done now, especially in cash? Is it necessary for MMC to undertake the deal at this juncture when asset prices are fast coming down?
• When will Senai Airport and the land around it contribute to the bottom line of MMC positively? Also, what is the true valuation of Senai Airport and land that comes together with it?
• The unaudited net tangible asset (NTA) of the SATS Group and loss after tax as of June 30, 2008 are RM295.5 million and RM24.8 million.
• The proposed purchase of the 2,718 acres for RM9.45 per square foot (sq ft) is also questionable.Based on previous reports, the land was acquired from Lee Rubber at less than RM3 per sq ft. Now it is sold for three times the amount transacted less than two years ago.
• Why does it need more long term assets?
• Without strong cash flow, MMC will be sitting with a lot of assets but no cash to develop them.

Let me try to understand hor.

On the back of global financial crisis that is bringing companies down to their knees, MMC wants to buy SATS, a company that is losing tons of money, in a CASH deal??? Cash??? Only rm1.7 Billion!!!! And yeah, SATS so happened to be owned by MMC boss also!!!!

And this is good for MMC shareholders???

And what's Hwang-DBS advice again?

In the Star Business article there is a chart.

Can you see all the years of loss making?

And 2010.. the incredible forecast is a profit of 93.3 million.

LOL!

Life is good.

Highlights Of Malaysia's RM60 Billion Stimulus Plan!

Highlights of RM60b stimulus plan

Published: 2009/03/10

Measures to boost economy:

# RM15 billion fiscal injection;

# RM25 billion guarantee funds;

# RM10 billion equity investments;

# RM7 billion private finance initiative and off-budget projects;

# RM3 billion tax incentives;

# unemployment rate in 2009 to jump to 4.5 per cent from 3.7 per cent in 2008;

# RM700 million allocated to create 163,000 new jobs;

# Housebuyers given tax relief on interest paid on housing loans up to RM10,000 a year for three years;

# Additional RM200 million for public low-cost housing scheme for low-income earners;

# RM1.6 billion fund to promote investments;

# RM200 million to repair and maintain roads and drains;

# RM150 million for renovation, maintenance and repairs to welfare homes, fire and rescue stations, firemen living quarters and public toilets in mosques,suraus and tourist spots;

# Government to issue syariah-compliant Savings Bonds amounting to RM5 billion this year;

# RM1.95 billion to build and upgrade facilities in 752 schools, particularly in rural areas, Sabah and Sarawak of which RM300 million will be used to improve facilities in government-aided religious schools, Chinese and Tamil schools and mission schools;

# RM230 million allocated to increase electricity supply coverage and water supply in rural areas particularly in Sabah and Sarawak.

# RM350 million allocated for rural road construction

Dr Doom: Recession Could Last Much Longer!

More Warnings from Dr. Doom

US Recession Could Last Up to 36 Months: Roubini

• "We could end up ... with a 36-month recession, that could be "L-shaped stagnation, or near depression," Roubini said. He puts the chance of a severe U-shaped recession at 66.7 percent, and a more severe L-shaped recession at 33.3 percent.
  
  Roubini listed a litany of negative omens: Capex spending down 20-30 percent for investment grade companies, self-perpetuating deflation, all making a bad situation worse.
  
  "If you expect prices to be lower tomorrow, why would you buy today?", asked Roubini. He says it's easier to break out of am inflationary cycle than a deflationary one, and while a year of deflation "is okay," longer would be "a disaster."