Warren Buffet talks to Evan Davis On BBC

More Shareholders Against Bankers Bonus!

Great!!

On UK Telegraph: Shareholders attack banks in bonus row

• Institutions want regulators to calculate the value of the state aid provided to Britain's lenders to ensure bonuses are only paid out of profits the bank has generated independently. Their demands echo angry comments made over the weekend by George Soros, the hedge fund manager, who described the industry's recent success as a "hidden gift" from the taxpayer that should not be used in payouts.
  
  Colin Melvin, chief executive of Hermes Equity Ownership Services, which represents about £50bn of assets, said: "From an incentivisation point of view, you want to establish the principle that bank performance based on guarantees or government support would not be part of a bonus calculation...

Now on CNBC website: Banks Taking Same Risks That Led to Crisis: ECB's Noyer

• European Central Bank Governing Council member Christian Noyer warned that banks are taking the same risks that led to the financial crisis and said they should preserve capital rather than pay it out to bankers and investors.
  
  His comments came as regulators around the world mull reforms to lower the risks that large banks can pose to the financial system and rein in the type of recklessness that fueled the credit crisis.
  
  Noyer said impressive bank profits in recent weeks were a result of public policies to combat the crisis, and did not mean the industry had recovered its balance or that further reforms were not necessary.
  
  "Nothing could be further from the truth. Indeed, one major risk in the period to come is the emergence of a business as usual mentality," Noyer said in a speech at a financial conference in Singapore on Monday.
  
  "There are signs that parts of the financial industry have resumed risk taking practices reminiscent of those which led to the crisis," he said, pointing to bankers' pay packages that appeared out of line with performance.
  

Hong Leong Bank's New Personal Loans

Low monthly installment from as low as rm133.33.

But is it as cheap as it suggest?

Assume you take the rm50,000 personal loan for 2 years.

Per month pay back payment is rm2583.33.

Or 30,999.96 per year.

Or 61,999.92 for two years.

Which means this loan will cost you 11,999.92 or a cool 24%!!!

How about 50,000.00 for 5 years?

Per month pay back payment is rm1,333.33.

Or 15999.96 per year.

Or 79,999.80 for five years.

Which means this loan will cost you 29,999.80 or a cool 60%!!!!

Good to be a banker, eh?

Still wanna test drive their loan for '30 days'???

oO

Some market comments

Not that it mattered but mentioned on Bob Pisani's posting: A Real Work of 'Art' — Cashin And Me

• On the uncertainty of new cash entering the markets:
  
  "The amount of cash in the mutual funds is going down. So they're driving the car and the gas gauge is going down. Nobody's adding gas to them. Nobody's coming up and saying, here— here's new cash. So you're absolutely right. And that raises the question, how much more gas do they have to give to this rally."

Should You Be Worried With All These Bank Failures

On CNN Money: Bank failures stack up: Now 106 for 2009

• NEW YORK (CNNMoney.com) -- The tally of bank failures easily broke past the No. 100 milestone on Friday night, with regulators announcing the year's 106th closure.
  
  That's more than four times the number that were closed in 2008, and the highest total since 1992, when 181 banks failed.
  
  Earlier on Friday evening the dubious honor of the 100th failure went to Partners Bank, of Naples, Fla., which had $65.5 million in assets, according to the Federal Deposit Insurance Corp.
  
  The 101st failure was American United Bank, of Lawrenceville, Ga., which had $111 million in assets.
  
  The 102nd failure was another Naples, Fla., institution: Hillcrest Bank Florida, which had $83 million in assets.
  
  The 103rd closure was Bradenton, Fla.-based Flagship National Bank, with $190 million in assets.
  
  The 104th was Bank of Elmwood, based in Racine, Wis., which had $327.4 million in assets.
  
  The 105th failure was Riverview Community Bank of Otsego, Minn., with $108 million in assets.
  
  The 106th failure was First Dupage Bank in Westmont, Ill., which had $279 million in assets.
  
  Customers of all seven banks are protected, however. The Federal Deposit Insurance Corp., which has insured bank deposits since the Great Depression, covers customer accounts up to $250,000. This is funded through premiums paid by member banks.

Holy Cow!

Seven banking failures in one day!!!!!!!!!!!!!!!

Yeah, how optmistic can one be for an economic recovery!

Highlighted earlier this month: Georgian Bank: Yet Another Failed Bank!

• Oct. 1 (Bloomberg) -- There was a stunning omission from the government’s latest list of “problem” banks, which ran to 416 lenders, a 15-year high, as of June 30. One outfit not on the list was Georgian Bank, the second-largest Atlanta-based bank, which supposedly had plenty of capital.

And as mentioned, it really makes one wonder. The bank was 'supposedly' have plenty of capital and it was not even on the problem banks list.

Now we have SEVEN more bank failures!

Which makes this posting Banks' Health Were Exaggerated! more relevant!

Mentioned in that posting was a CNBC article: US Officials Exaggerated Banks' Health: Watchdog

• Senior U.S. officials deliberately created the impression last year that banks receiving huge government cash infusions were healthier than was the case, a Treasury Department watchdog's report released Monday said.
  
  As a result, the government and the bailout lost public credibility when the financial crisis deepened.
  
  Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke said at the time that their dramatic force-feeding of $125 billion into nine banks in October 2008 was a program for "healthy" institutions.
  
  Privately senior officials worried about the health of some of those firms, Treasury's Special Inspector General for the Troubled Asset Relief Program, Neil Barofsky, said.
  
  "By stating expressly that the 'healthy' institutions would be able to increase overall lending, Treasury may have created unrealistic expectations about the institutions' condition and their ability to increase lending," the report said. Paulson won approval from Congress to spend $700 billion to repair the financial system.... (read the rest here )

Anyway, the article on CNN then continues.

• Why regional banks are failing. While larger financial institutions have received aid from the federal government, smaller banks have found themselves left adrift. Like their larger counterparts, many of these banks made risky loans to individuals and real estate developers during the boom years and are now facing large numbers of defaults as the recession drags on.
  
  Rising unemployment has made it difficult for many individuals to keep up with expenses, and businesses are feeling the crunch of consumers' reduced spending power. As a result, regional banks are left holding loans their customers can't repay.

The very last passage explains clearly why one the current so-called 'recovery' is clearly not sustainable if the unemployment problem persists.

No employment, how could these 'many individuals' keep up their expenses?

No employment, how about their housing loans (if any)?

No employment, how could they spend?

And if they do not spend, what then for America and the world? What then for the world largest consumer?

A consumer equals to a customer, no?

In a business, if customer spends less or if there is less customer, how optimistic can one be?

Remember Warren Buffett's Comments On US Economy

• The patient really went into the emergency room and it won’t come out of the hospital entirely for a while."

That the patient is STILL in the hospital.

That the patient is likely to stay in the hospital for a while.

The CNN article then continues.

• Problem banks list looms. The FDIC keeps a list of "problem banks," though it does not disclose the names to the general public out of fear that depositors at those institutions may prompt a "run on the bank."
  
  In June, the agency said 416 banks were at risk of failure -- the highest level in 15 years.
  
  It's a whopping figure, to be sure. But even as the pace of failures accelerates, 2009's numbers remain far from what happened during the savings and loan crisis two decades ago. More than 1,900 financial institutions failed from 1987-1991, peaking at 534 closures in 1989.

The problem bank list has 416 banks at risk.

But... but... but... one cannot even discount the banks NOT in the list.

Why? The US Banks' Health Were Exaggerated! as per CNBC article. Look at the example of Georgian Bank!

So what if there is MORE banks at risk?

And to make the matters even more worrying.

• Federal coffers running dry. An average of 10 banks have failed per month this year, and the federal coffer is thinning under the massive strain. The fund now stands at $7.5 billion, down significantly from $45 billion a year ago.
  
  When the FDIC factors in expected closures, the agency says the fund is in the red and will likely remain there through 2012. Bank failure costs are expected to total $100 billion over the next four years, leaving regulators strapped for cash.
  
  Last month, the FDIC discussed how to raise quick cash to replenish the fund. The agency proposed that banks prepay their deposit insurance premiums for the next three years.

Oops! The money is drying out really fast in FDIC!

How now?

Hmmm.. posted earlier this month: The Sustained Economic Rebound May Be Elusive!

What Do I Think Of NSTP Privatisation?

• The Contrarian said...
  
  Dear Moola,would u kindly do a review on NSTP/Media prima dealing, is it right to make deals like this anymore, and do u feel the price is justifiable?? how would u value such a deal, im clearly aware how illiquid assets can be but NAV of 4.50.. definely deserve more than 2 bucks and a few warrants.... Thank you very much

I have always argued AGAINST the privatisation of a LISTED SUBSIDIARY.

End results always remain the same.

The minority shareholders are always short changed.

Think outside of the box for a minute.

Why do companies get listed? Besides getting public funding so that the company can progress into a bigger company, the bottom line is that this is a profitable exercise for the majority shareholders. Now why do companies want to be delisted? If there is NO profit to be made, would any sane company wants to be a private company?

Same with listing and delisting of subsidiary companies.

Now in Media Prima case, if there is NO profit, why should it go through all the hassle to delist its subsidiary company, NSTP?

Does Media Prima have nothing else better to do?

Now let's look from a minority shareholder or an investor point of view.

Why does any sane person wants to 'invest' in another company?

Bottom line? They want to make money.

Now as everyone knows, investing in the stock market has MASSIVE risks.

Now the first big risk is the stock selection. Buy the wrong stock and the investor is most likely to be screwed.

The company could be good and the company could have a decent business economics. But then, business economics and business fortunes do changes and these changes sometimes are unavoidable. Worse still, many companies might even go under due to unforeseen changes.

What if there is a change of management and the new management shows total no respect to its shareholders and runs the company down?

And what about stock market crashes? Look at our Malaysian stock market history. How many local stock market crashes have we seen? And if you put in a ten-year time frame, how many stock market crashes have we seen per decade?

I could go on and on.

Ah, but then bull markets do happen too. Undeniable. Bull markets can make many rich! Yes, huge fortunes can be made and I'm sure many have made this round.

Which is why many take the RISK of investing in the stock market. They take the risk because they want to make big money and they are willing to take the risk despite the many possible risks involved.

However, one thing is DEAD certain.

It would make logical sense to these investors that they get FULLY COMPENSATED for taking the risk in investing in the stock market.

But what if there is NO FULL COMPENSATION?

What if the upside potential or the potential reward is capped?

Would you want to invest in an investment which has unlimited downside risk and has a possible reward capped at 20% or 50%? Is the 50% reward even guaranteed? Is it cast in the stone that the investor could gain that much?

It wouldn't make sense for such an investment, yes?

Which applies to the stock markets.

When one invest in a stock, one would like to be given the opportunity to make unlimited profit. They want to be given a chance to be fully compensated for taking the RISK in investing a stock.

Now put this into one's investment in a listed subsidiary. The same stock market risks exists as usual but once a listed subsidiary HAS THE OPTION of delisting its subs diary, then the investor is burdened by another extreme handicap. The investor does NOT know if the compensation is fair. Yes, the investor does not know if the privatisation offer is fair and judging from past history, privatisation of listed subsidiaries had been done at extreme low prices. Worse still the investor do not know when such a privatisation would even happen.

Now take NSTP privatisation offer.

Is it fair? Or is it grossly unfair?

One could argue and argue and argue using all the valuation methods proving the offer is unfair but would it matter?

Look around us.

Does anyone really care?

Here's one suggestion I can offer. In the future, try to forgo ALL OPPORTUNITIES when it comes to stocks which are listed subsidiary. Yes avoid them at all cost because as long as no one opposes the delisting of a listed subsidiary in Bursa Malaysia, then such privatisation will always happen and ultimately, the minority shareholders would be short changed!

Steep Market Declines Are Coming

Highlighted by Jesse.

Do You Feel Letdown By OUR Internet Services?

On today's Star: Internet services a let down

• If they promised Internet speed at 10 megabits per second, the public should not be experiencing a slow-as-tortoise service at one or two megabits - Datuk Seri Rais Yatim

Exactly!

If the consumer is promised speed at 10 megabits and if the consumer is paying for such service then the consumer should get what they pay for!

Experiencing internet services 'as slow-as-tortoise' service at one or two megabits is simply unacceptable!

• He said action must be taken against service providers who failed to meet expectations.

Fully agree too!

• The Government wants the Malaysian Communi­cations and Multimedia Commission to find out why the cost of Internet services in the country is high.

And ditto to that!

Here's a old youtube clip!