Chrysler Says No To Financial Aid To Protect Its Executive Pay

On MSNBC: Chrysler refused loan over pay limits

• WASHINGTON - Chrysler LLC’s financial arm turned down additional government aid after some top executives refused to accept new limits on executive pay, according to a government official with knowledge of the negotiations.
  
  The official said Monday that the Treasury Department denied Chrysler Financial’s request for more aid because some of its top 25 executives would not waive their rights to legal claims against the government and Chrysler Financial regarding new caps on executive compensation. The official did not want to be identified because the decision has not been made public.... rest of story here

Assuming this 'official' story is true, these top eexcutives would rather protect the executive pay than to accept government aid!!

Truly incredible!!!

Here is CNN version: Chrysler financing arm rejects U.S. aid

Investing: Willingness To Learn From Past Mistakes

Posted the other day: Mark Sellers: So You Want To Be The Next Warren Buffett?

• A third trait is the willingness to learn from past mistakes. The thing that is so hard for people and what sets some investors apart is an intense desire to learn from their own mistakes so they can avoid repeating them. Most people would much rather just move on and ignore the dumb things they’ve done in the past. I believe the term for this is “repression.” But if you ignore mistakes without fully analyzing them, you will undoubtedly make a similar mistake later in your career. And in fact, even if you do analyze them it’s tough to avoid repeating the same mistakes. (page 4)

I find this most interesting.

Everyone knows the importance of the willingness to learn from past mistakes.

However, many a times, I have witnessed that most of us simply cannot acknowledge the fact that there is a possibility that one is making a mistake in their judgement.

And many a times, they tend to blame poor market sentiments as the sole reasoning for their below par performance and they tend not to acknowledge the possibility of them making an error in their own judgement.

And so if one does not want to accept the possibility of being wrong, how then can one learn from one's past mistakes?

Alice Shroeder: Madoff May Have Been The Most Efficient Thief In History

Interesting writing from Alice Shroeder again.

• Madoff’s $200,000-an-Hour Beats Tiger Woods: Alice Schroeder
  
  March 27 (Bloomberg) -- “To the best of my recollection,” Bernard Madoff told the judge in his guilty plea on March 11, “my fraud began in the early 1990s.”
  
  He seemed detached, as if reading a statement about a stranger. Maybe that’s why his recollection was wrong.
  
  Prosecutors say Madoff was Ponzifying since the early 1980s, even the 1970s. By various estimates, Madoff netted $10 billion to $20 billion (the $65 billion cited in the guilty plea is adjusted for past distributions to clients). Yet the mind goes numb trying to grasp what the billions signify in these days of multitrillion-dollar bailouts and shareholder losses from Citigroup Inc.’s collapse into a penny stock.
  
  Let’s measure the numbers on a human scale. Even estimating conservatively, Madoff stole more than $1.6 million every workday of his criminal career. Based on my calculations, Madoff’s bilking rate topped $200,000 an hour, or almost 60 bucks a second. He may have been the most efficient thief in history.
  
  Compare that with the most expensive lawyer in the U.S., who, as of January billed at $1,260 an hour.
  
  Even Tiger Woods, the world’s priciest athlete, is a piker by comparison, earning in recent years about $60,000 an hour, based on 40-hour weeks. And Woods is no slacker, whereas Madoff was ripping off his clients while he did nothing.
  
  Money Is Gone
  
  True, concealing his sloth took bureaucratic skills and ingenuity. Keeping a straight face at the country club for decades while cheating his closest friends was an accomplishment in its own right. That no one knows what happened to most of his stash is beside the point. As far as his hapless victims are concerned, the money’s gone.
  
  Some are questioning whether it is fair to describe those swindled by Madoff as victims, saying that, in their naivety and blind ignorance, they failed to take precautions against fraud. But that only makes them all the more victimized. How much more vicious it is to prey on the clueless than on those who are equipped to defend themselves.
  
  In this cautionary fairy tale, Madoff’s unfortunate clients were the Hansels and Gretels of finance, enticed by the witch who lives inside a house covered with candy and sugarplums. Unlike Hansel and Gretel, though, they didn’t get out whole.
  
  One of the most persistent questions about Madoff has been why his clients weren’t more suspicious of why he managed their money outside the usual fee structure of a hedge fund. They should have been wary because his setup made him seem altruistic, as if he were passing on the chance to bilk them.
  
  Lower Fees
  
  He could have promised investors the same stable, low-risk, above-market returns from a multistrategy hedge fund, offering a little kicker: lower fees than a fund-of-funds.
  
  Ideally, he would have named this vehicle something more creative than Bernard L. Madoff Investment Securities LLC. Something appropriate, following the example of Amaranth Advisors LLC, the collapsed hedge fund (named after the herb also known as pigweed). Then, just lever that baby up to maximum size, rake in the fees and boom, done.
  
  True, as a real hedge-fund manager, Madoff would have had to invest his clients’ money. But having done so -- even with complete ineptitude -- think how smug he could feel after it all blew up, knowing that careful drafting of the offering document by his $1,260-an-hour lawyer had boilerplated the risk, thus keeping him out of prison.
  
  $5 Billion
  
  If only Madoff, 70, could work as a hedge-fund manager now. Under court-ordered supervision at his former $200,000-an-hour bilking rate over his actuarial life expectancy of 12.7 years, he could easily take more than $5 billion from the pockets of the rich, and give it to his formerly rich clients in partial recompense.
  
  Too bad, the era of 2-and-20-plus-expenses is over. The best we can do is find a more psychically satisfying punishment than watching Madoff rot in a prison cell or pick up trash along the highway.
  
  For his remaining 4,635 allotted days, therefore, I sentence Bernard Madoff as follows:
  
  He will work as a janitor at Yeshiva University and change bedpans at the North Shore-Long Island Jewish Health System hospitals. He will donate his bone marrow to the Gift of Life Foundation. He will swallow all the abuse his celebrity clients care to dish out, including slaps in the face from Zsa Zsa Gabor. He will work his little leg irons off doing whatever scut duties required of him. It’s the least he can do.
  
  So far, Madoff doesn’t seem to share any of the sorrow, remorse and shame exhibited by his prey. Maybe a stint on a window-cleaning platform will wring a little guilt out of his cold, hard, sociopathic heart. About once a month, he will spend a few hours washing windows on the 17th floor of the Lipstick Building. There, he can look inside at his former office, where he spun the sugar that enticed his investors into the trap.
  
  We should have no qualms about sending Bernard Madoff 17 stories up. Unlike his clients, it’s a safe bet he won’t jump.

ps: if you enjoy this piece, check out older postings.

• Interview On CNN: Alice Shroeder Talks About Warren Buffett
• Alice Shroeder Talks At University Of Virginia
• Jason Zweig Review Of Alice Shroeder's "The Snowball"
• Warren Buffett Buys Stocks, The Snowball Chapter 2 and J. Kyle Bass
• The Snowball: Chapter 1 - The Less Flattering Version

Mems Tech Directors Charged!!

Mems had been featured many times on this blog. In fact, the first posting ever made on this blog was based on this stock, way back in Oct 2005!! :D

If you would indulge with me, let's take a trip back in time.

1. Mems..
2. Mems: Part II
3. Mems: Part III
4. Mems: Part IV
5. Mems: Part V
6. Mems: Part VI

I had questioned the extremely bullish earnings expectations for the stock from folks like S&P, OSK, and CIMB. Hard to fault them entirely as the company itself was making extremely optimistic statements in press conferences. (see Mems: Part IV ).

And I highlighted very fact that the cash flow balances were so questionable! ( see Mems: Part VI )

Then on 21 November 2007, OSK Research did a rarity by making a warning on MEMS. Yes, it did and I was impressed with what OSK did. (See OSK comments on Mems )

Six days later, all hell broke loose! Update on Mems Accounting Issue

• In light of the above, and after due deliberation, the Board has resolved not to recognize revenue of RM19.72 million. As a result of this, the unaudited consolidated revenue for the financial year ended 31 July 2007 will be revised to RM53.7 million. This will consequently result in the unaudited profit after tax for the financial year ended 31 July 2007 to be reduced from RM21.47 million as announced on 27 September 2007, to RM13.45 million.

The amount was not HUGE at all but the implication was so crucial.

Without the disputed 8.02 million (Mems on that day said its earnings was reduced from 21.47 to 13.45 million), this would mean it changed the whole complexion for the stock.

The stock would HAD NEVER been branded as a GROWTH stock and with it, the higher earnings expectations (see initial posting on Mems on S&P high earnings expectations on Mems in the posting: Mems.. ) and the higher earnings multiple.

In layman terms, the stock should never had traded as high as it did!

And so I wrote on More on Mems Restating of Its Earnings and made another update posting, Regarding Mems Again...

And the point I made was..

• So if the market valuation now is about fair for a company making only 13 million, then Mems is worth only some 163 million. However, due to the overstated earnings, MEMS was valued as much as some 531 million!!!

All thanks to overstating of the earnings by a mere 8.02 million!

And a couple of months later, on 12 Feb 2008, I wrote Unnamed Sources Strikes On Mems!. The stock surged by an incredible 42% thanks to unnamed sources mentioned on the Edge article ( see The said article on Mems ).

• A business weekly reported last weekend, citing unnamed sources, that new information had surfaced that may soon get the company out of the problems it is in

But no OFFICIAL news was released by Mems itself! And on 25 Feb 2008, the stock fell back to 13 sen! See What now for Mems Technology?

And the most glaring issue during this period was AKN Equity disposing tons of Mems shares during this period! ( See Unnamed Sources Strikes On Mems! )

Here's the announcement posted on Bursa: Changes in Sub. S-hldr's Int. (29B) - AKN EQUITY VENTURES SDN. BHD. See the massive disposals made by AKN Equity from 11 Feb 2008 to 13 Feb 2008!!

And on 29th Feb 2008: Mems Technology Will Be Suspended!!!!!!!!

Suspended until further notice!!!!

By April MEMS Tech: Still Unable to Produce Quarterly Earnings!. I even made a review on Mems again. See Mems Technology Again!

A month later, Mems finally announced its quarterly earnings. See A Look At Mems Technology Again

And it was incredible that on 31 May 2008, Mems Asks For Support!!

• Executive director Tan Yeow Teck said its board of directors has explained all the circumstances of the accounting issues to the shareholders present at the meeting.
  
  "On hindsight, we believe this whole thing may not have happened if we've talked to the auditors up front," Tan said, referring to its external auditor KPMG, which raised concerns about certain transactions relating to the firm's revenue, property, plant and equipment last year.

A couple of months later, I wrote A Brief Look at Mems Latest Quarterly Earnings

It was astonishing! All the warnings signs were lit. Trade receivables were insanely high when compared to its sales revenue. Cash depleted to a mere 3.191 million and loans increased by 7.441 million to 50.796 million!

And finally today we read that Mems Tech directors charged!!

• Mems Tech directors charged
  Written by Sharon Tan
  Thursday, 16 April 2009 12:23
  
  KUALA LUMPUR: Mems Technology Bhd (Mems Tech) directors Ooi Boon Leong and Tan Yeow Teck separately pleaded not guilty in the Sessions Court here today to a charge of furnishing misleading statements to Bursa Malaysia Securities Bhd.
  
  The duo were charged by the Securities Commission (SC) under Section 122 of the Securities Industry Act 1983 for knowingly authorising the furnishing of a misleading statement concerning Mems Tech’s revenue of RM73 million for the 12-month period ended July 31, 2007 to Bursa Securities.
  
  Judge Rosbiahanin Arifin fixed the joint trial for Oct 5 to 9, 2009. If found guilty, Tan and Ooi can be fined a maximum of RM3 million each or jailed up to 10 years or both.
  
  The court set a bond of RM200,000 for each defendant with two sureties. Tan and Ooi were also required to surrender their passports but could make an application to the court for their passports if they were required to travel for business.
  
  Ooi, 48, a director of the Mesdaq Market company, was appointed to the board on Nov 30, 2000. As of Feb 13, 2000, he held a direct stake of 4.82% comprising 31.61 million shares in Mems Tech. Ooi is also a director and group chief executive officer of AKN Technology Bhd.
  
  According to the company’s annual report, Tan, 48, was appointed to the board on June 28, 2006. He is the executive director and also the chief financial officer of the company.
  
  Mems Tech’s substantial shareholders include AKN Equity Ventures Sdn Bhd with a 10.42% stake comprising 68.35 million shares and Lembaga Tabung Haji with a 9.95% stake or 65.25 million shares.
  
  Mems Tech, which is involved in microelectromechanical systems products, had failed to finalise the audited financial statements for financial year ended July 31, 2007 and quarterly report for the period ended Oct 31, 2007. The audited income statement for the year was later announced on April 24, 2008 containing a disclaimer by the company’s former statutory auditors, KPMG.
  
  On Dec 24 last year, Mems Tech announced that the suspension of trading of its securities and the commencement of the delisting procedures against it was deferred pending the decision on its application by Bursa Securities. It is asking for a waiver to submit a regularisation plan. The stock yesterday fell 0.5 sen to 8.5 sen with 1.67 million shares traded.
  
  Earlier in March, the SC charged Tan Chin Han, the former chief executive officer and executive director of Welli Multi Corporation Bhd, for knowingly authorising the provision of a misleading statement to Bursa regarding Welli Multi’s revenue.

Regarding Goldman Sachs Blowout Earnings.

Posted by Jesse: Goldman Sachs Buries Losses to Beat the Estimates

Here's a passage written byJesse.

• Goldman took this opportunity to realize some hefty writedowns in that December one month report, to the tune of approximately $1.3 Billion in pre-tax losses.
  
  So, to earn an impressive $1.8 Billion in the first quarter, Goldman disposed of their losses in a largely ignored December filing. This facilitated their share offering with the 'wonderful earnings news' which Matt Miller of Bloomberg referred to approximately every five minutes as "blowing away their numbers."
  
  However, this morning, Matt did mumble something about Goldman "maybe not blowing away their numbers."
  
  Goldman did nothing illegal in their management of their earnings, both in the way in which they parsed the losses into a 'stub month' which was ignored, or in their decision to time an early announcement of 'exceptional profits' with a stock offering. But the financial press handled this badly, and considering the huge debt and forebearance Goldman owes to the government and the public it was not befitting a major institution with strong ties to the Obama administration.
  
  The only thing getting blown away around here are the shareholders, taxpayers, and anyone else who buys what Wall Street in general is selling these days.
  
  The banks must be restrained and the financial system reformed before we can have a genuine economic recovery.
  

iCapial And Their Potential 12 Million Ringgit Paper Losss In Axiata

Blogged yesterday: iCapital's Investment In Axiata

Got two interesting comments from Kin Wing which I would like to highlight.

• Hi Moola,
  
  According to the ICAP internet subscription, it did recommend to buy 'TMI' at 24/4/2008 with price of 8.05 (or 8.50) if Im not mistaken. And subsequently it did an analysis report to rate TMI at a "Long Term Buy" at 4-July-2008 (at tat time TMI was dropping from 8 to 5.85).
  
  So last 2 weeks I wrote an email tat complained why Capital Dynamics (the company tat provide fund management service to ICAP n oso the ICAP magazine publisher) did not update TMI since its recommendation at 4-July-2008. Becuz the analyst should update his target company no more a quarter rite? Mb wat i wrote in the email seems not in a polite manner, so Capital Dynamics never reply my email's request to update TMI.
  
  So u guest wat, in ICAP internet subscription, there is no more TMI column which previously dated 24/4/2008 with a recommended price of 8.05 (or 8.50?). It could be becuz TMI has changed to be 'Axiata'. So when I further look at 'Axiata' column, it stated tat Capital Dynamics this shares at 24/4/2008 with a recommended price at 3.823...Wat!? So the recommended price has been revised from 8.05 (or 8.5) to be 3.823?
  
  There are 2 possibilities tat revising the price to 3.823. 1st possibility could be done purposely to lower the recommended price in order to cover their ass of making wrong investment. 2nd possibility could be tat ICAP has subscribed the right issue n average down the price...I think it could be the latter possibility. Anyhow, till today Capital Dynamic still no update to TMI but ICAP itself oredi buy the right issue...So i think im gonna write another lovely email to Capital Dynamics...XD
  
  Kin Wing

Oh my goodness!!!!

Now I am NOT a subscriber and if what you are saying is true, doesn't it appear that Capital Dynamics are fudging their recommended numbers on Axiata?????

How?

Any other iCapital subscribers got any comments?

And here is Kin Wing unanswered letter.

• Here is my complain email...XD
  
  Title: A Request to update TMI‏
  From: Kin Wing
  Sent: Wednesday, 25 Mar, 2009 11: 25 AM
  To: myaccount@icapital.biz
  
  Dear Sir/Madam,
  
  I am the i Capital's internet subscriber and am a shareowner of ICAP.
  
  i Capital's last mention about TMI and TM was at the same period, i.e. June of 2008 as I read them from the my previous subscription of the i Capital's printing version. And I was also informed during last year ICAP's AGM by the Capital Dynamics's Fund Manager, Mr. Tan Teng Boo, that ICAP has invested TMI.
  
  As far to my concern, however, only TM was updated for the last few quarters whereby TMI was quiet since last year June. Is this an indicator showing that TMI has been disposed by ICAP and thus it is not worth a time to make follow up for TMI? So the i Capital's magazine subscribers who might last time followed as per the ICAP's advice is left to make their own investment decision on TMI without referring to the i Capital's update?
  
  As you might notice that TMI's share price is going down sharply since the i Capital's recommendation due to the poor quarterly result as well as the announcement of right issue with a very low issue price which could harm the minority shareholders' benefit. I am concerned about this kind of progress that happened in TMI, so I feel very dissapointed that i Capital's does not act on this promptly by updating the subscribers with the TMI situation. Suppose every recommendation on a company's share should be updated quarterly?
  
  I appreciate you are taking your time to read this email and I hope my email will not be dumped like TMI without any response and update.
  
  Regards,
  Kin Wing

I fully agree with you.

For those that missed the earlier postings, here are the links again in order:

1. A Quick Look At iCapital's Quarterly Earnings,
2. iCapital.Biz Lack Of Disclosure In Their Quarterly Earnings,
3. iCapital.Biz Lack Of Disclosure In Their Quarterly Earnings II
4. iCapital.Biz Lack Of Disclosure In Their Quarterly Earnings III
5. A Quick Look At iCapital's Annual Report 2008

This is exactly why I made the comments on the lack of disclosure in iCapital's quarterly earnings.

iCapital's current exposure in Axiata was huge as disclosed in its most recent Annual Report.

They purchased some 2,200,000 shares in Axiata worth some 17.883 million. This should work to a cost of around 8.12 or so. Now with the share plunging to an incredible low of 2.50 (before Axiata went ex-date for its rights issue), surely from the minority shareholders of iCapital.biz would feel concerned.

It's only natural. For at 2.50, the 2,200,000 shares in Axiata would only be worth some 5.500 million. Which meant that IF iCapital was holding on to Axiata, its paper loss would be an insane 12.3 million.

How?

Should they have the right NOT to be concerned?

Without quarterly disclosure and with iCapital not replying to letters from shareholder like Kin Wing, what else can be done for the minority shareholder?

Do they have to wait till the next annual meeting to find out what action iCapital took with their investment in Axiata?

Did iCapital acknowledge their mistake in this investment by selling?

Is iCapital going to compound their mistake more by subscribing to more shares in Axiata via the rights issue?

How?

See why it's so important that a closed end fund like iCapital.biz fully disclose their investment holdings in each quarterly earnings?

ps: It's utterly shocking for me to read that Kin Wing's letter was unanswered. As a shareholder, Kin Wing fully deserves an answer from iCapital. Can iCapital understand that as a fund manager, it is actually working for Kin Wing? Without people like Kin Wing, would iCapital ever exist?

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

Regarding the Target Price of 8.05 or 8.50 as mentioned by Kin Wing.

jitseng said...

• This is the adjusted price.Right 5@4 at 1.12.Do the calculation will able to get the price.

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

Jasonred79 said...

• This fund manager... runs a hedge fund, very secretive in his methods, got a strong reputation of one of the best in his country... some people suspect some monkey business, but no investigations were done...
  
  No, not TTB, Bernie Madoff, actually.
  
  But, you can start to see cause for alarm, no?
  
  Personally, I would avoid Icap like the plague.

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

WY said...

• I’m not an ICAP investor. I think this topic is interesting and worth discuss.
  My 2-cent-worth opinion:
  
  Change on TMI/Axiata recommended price:
  Same opinion as jitseng, could be the revised price due to rights issue. The revision on price and how they calculate should be mentioned in the old report.
  
  Calculation of loss based on 2.2M shares, 8.12 to 2.5:
  I guess this calculation is not the whole picture yet.
  I-Capital would have got the rights, either:
  1. sold it for some money,
  or
  2. pay 1.12, have the shares and earning paper profit on this part.
  Calculate the overall may show a better picture.
  
  Amount and frequency of disclosure:
  For company like ICAP, disclosure too much + too frequent makes them vulnerable to punters.
  Too frequent disclosure may also encourage over-emphasis on short term profit, trading mentality, rather than long term value investment.
  I wonder what should the frequency of disclosure be.
  I guess Berkshire Hathaway didn’t do too-detailed and too-frequent disclosure too.
  Mutual funds disclosure is even less detailed, but mutual funds disclose NAV.
  
  ICAP IR:
  Maybe they can do it in a more tactful way, rather than non-reply.
  
  Timeliness of company analysis:
  On timeliness, I think Kin Wing has a point.
  Report is recommended to be regular, at least quarterly; when significant event; issue final report and inform if coverage discontinued. However, I think probably there is no hard rule on that.
  
  Arbitrage:
  Another point is if investor thinks the market price is overvalued or anything fishy, he can sell ICAP. Buy back its component stock (provided he knows) for arbitrage, if he wants.
  The other way round, if ICAP ppls think ICAP is undervalued, it may buyback from market. Much like share buyback.
  
  Buyers beware, always.

WY,

On the issue of calculation of loss. I stated it in a very simplistic manner, which is to count iCapital's potential paper loss when Axiata traded around 2.50 before it went ex.

I would be assuming that iCapital still held the stock.

Which obviously I could be wrong if iCapital had sold.

And as you had said, this might not be the true picture for iCapital has so many options on what it could do.

And this EXACTLY is the problem. If one is a minority shareholder, how will they know what is happening with iCapital's mega paper losses in Axiata when iCapital does not disclose their equity portfolio in their quarterly earnings notes.

Does one have to wait till the next annual meeting to find out? Would that be too late?

Regarding comparing with Berkshire again. Sorry but I will be frank with you. I am annoyed when there is an issue with 'a', folks uses 'b' as a comparison to try to justify the issue. It's like if 'b' does it, why not 'a'.

In iCapital.Biz Lack Of Disclosure In Their Quarterly Earnings II. As posted in there.

Well let's try google. Try look for Berkshire's quarterly 13-F SEC filings.
Better still let me give you an example link: Some Insights from Berkshire's Latest 13-F Filing. Let me just highlight the first two lines.

• Berkshire Hathaway (brk.b.B) (brk.a.B) recently filed its quarterly 13-F statement with the Securities and Exchange Commission. The filing revealed few significant changes in the composition of the firm's equity portfolio in the fourth quarter of 2008.

Yes, Berkshire does file every quarter and under the 13-F statements, Berkshire does announce its equity portfolio for all too see. :)

So how?

Since Berkshire discloses their equity portfolio every quarter, why doesn't iCapital disclose like how Berkshire does?

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

WY said...

• Thx for your insights.
  I understand more of your points now. I think requirement like quarterly Form 13F is what we need.
  
  By the way, for the part "sold it for some money", I mean "sales of the rights".
  
  There is indeed Form 13F.
  I used to check on Berkshire Hathaway’s website. I only know they have quarterly report (Form 10-Q) which doesn’t show much info on holdings. Annual report has holdings but a lot can be masked out by putting into “Others”.
  
  Thx for pointing out there is Form 13F. I just take a look at Form 13F description from SEC.
  http://www.sec.gov/answers/form13f.htm
  
  It is for institutional investment managers who exercise investment discretion over $100 million or more. It requires disclosure of the names of institutional investment managers, the names of the securities they manage and the class of securities, the CUSIP number, the number of shares owned, and the total market value of each security.
  
  I take a look at a typical Form 13F:
  http://www.sec.gov/Archives/edgar/data/750577/000103079809000053/hhc_13f-033109asci.txt
  
  I think requirement like Form 13F is what we need for listed investment stock like ICAP. However, I haven’t checked what it is like in M’sia’s SC regulations.
  
  Wonder whether ICAP is the only investment-type stock in Bursa.
  I think this loophole needs to be mended. A study on current SC regulations, then a suggestion of amendment is needed.
  
  Thx for the insightful reply.
  
  Just find out that my other points you may have replied in your other posts abt ICAP. Will read it slowly to understand your view

You are most welcomed. :)

iCapital's Investment In Axiata

Yet another freakingly boring post. :D

Last posted: A Quick Look At iCapital's Annual Report 2008

• Or how about Axiata (formally known as TM International (TMI))?
  
  iCaital mentioned in its annual meeting that it owned some 2,200,000 shares in Axiata worth some 17.883 million. (That should work to an average cost of some 8.12 or so). Due to the incredible rights issue, Axiata plunged to below 2.50 recently.
  
  And iCapital is a shareholder.
  
  Now for a share to have plunged to so low and with the upcoming rights issue, surely iCapital needs to disclose and inform its minority shareholders what it intends to do.
  
  That is only correct, yes?
  
  Why can't it mention this in its quarterly earnings notes?
  
  Doesn't the minority shareholder have the right to know?
  
  Don't you think it's rather silly to ask the minority shareholder to wait till next annual meeting to find out more?

Axiata is now trading at 1.80.

iCapital.biz has 2,200,000 shares.

Based at 1.80 the shares are worth only 3.960 million. iCapital.biz cost is 17.883 million!

Ahem!

Them paper losses ... OUCH!

Ouch!!!!

Axiata's right issue is 5 for every 4 at 1.12.

Now IF iCapital undertakes the rights issue, will get 2,750,000 new shares of Axiata and they would need to fork up an additional 3.080 million ringgit.

This would means that iCapital potential investment in Axiata would be a whopping 20.996 million!

How?

Is iCapital undertaking this Axiata rights issue?

How?

And again with the lack of disclosure in iCapital's quarterly earnings, how does one know?

Does one have to wait for iCapital's next annual meeting to find out?

Kind of silly isn't it?

Can see the point of why iCapital needs to disclose their investment portfolio in their quarterly earnings report?

Legendary Value Investing Fund Managers Getting The Sack!

Last August, Henry Blodget wrote, "Bill's not the first legend to get hammered by mean reversion, and he won't be the last" in his article, Legendary Fund Manager Bill Miller Fired By Client

• A few years ago, Legg Mason Value Trust manager Bill Miller was revered the world around for outperforming the S&P 500 15 years in a row. Now, after a couple of horrible years have wiped out almost all of that outperformance, he's getting fired by state pension funds:

Do see also Bill Miller Featured on WSJ: The Stock Picker's Defeat

Yup, how ironic is that Bill Miller isn't the last!

Last week, Grantham Fired by Massachusetts Pension After Losses

• April 8 (Bloomberg) -- The Massachusetts state pension system fired Jeremy Grantham’s firm as manager of $230 million in emerging-markets debt after losses from asset-backed securities dragged down returns.
  
  The pension system’s board voted at a hearing in Boston today to pull its money from developing-nation debt investments managed by Grantham, Mayo, Van Otterloo & Co. The firm continues to run a $500 million emerging-markets stock fund for the state....

And also gone was the legendary 'contrarian' David Dreman!

And NY Times columnist, Floyd Norris, wrote the following David Dreman, Contrarian Fund Manager, Exits Unbowed

• David N. Dreman was a star mutual fund manager. Then he bought bank shares and held on as the financial crisis grew.
  
  Now he has been fired from the flagship fund that bears his name, despite what remains a good long-term record. The fund’s name will be changed, and the fund will take fewer risks. A drab industry will become a little drabber.
  
  In the past, the firings of once-celebrated fund managers have sometimes provided a market signal of its own — that the trend that led to their poor performance was about to end. If that were to happen this time, there could be a revival for so-called value stocks, and particularly for the beaten-down and almost universally disdained financial stocks.
  
  “The success of contrarian strategies requires you at times to go against gut reactions, the prevailing beliefs in the marketplace and the experts you respect,” Mr. Dreman wrote in his best-selling 1998 book, “Contrarian Investment Strategies.”
  
  Mr. Dreman rose to fame in the 1990s, when the fund he began in 1988 amassed an impressive long-term record. But he had been preaching, and practicing, the gospel of investing in unpopular stocks with low price-earnings ratios since the late 1970s. He has been a columnist for Forbes Magazine.
  
  As the fund industry concentrated, the Dreman fund family was bought by Kemper, which was bought by Scudder, which was bought by Deutsche Bank. Last week the fund board installed by Deutsche quietly filed with the Securities and Exchange Commission a disclosure that Mr. Dreman’s firm would no longer manage what is now called the DWS Dreman High Return Equity Fund.
  
  On June 1, Deutsche will take over the management, and assign the job to a team of managers based in its Frankfurt office. The fund will become known as the DWS Strategic Value Fund. Mr. Dreman’s firm will continue to manage three smaller Deutsche funds, but don’t be surprised if those relationships eventually end.
  
  Mr. Dreman, who is 72, did not sound bitter when I spoke to him this week. “The board of directors is obviously entitled to do what they did,” he said. But neither was he repentant. “Low P/E has worked well over time,” he added. “There will be years that we are very out of favor, but we make it up.”
  
  You wouldn’t have known that the fund’s long-term record remained better than the market from reading what Deutsche officials had to say. “We had seen very weak performance for the fund over every major time horizon,” David Wertheim, the bank’s project manager for equities, told Bloomberg News. He declined to speak to me.
  
  Those time frames are one year, three years and five years, the periods that are used by fund raters like Morningstar and Lipper. Just now they are dominated by last year, which was a horrid one for the Dreman fund. Even so, it still has a superior long-term record.
  
  There are few celebrity mutual fund managers any more. Fund groups prefer to promote themselves rather than a manager who could leave to start a hedge fund. In an age when holding on to assets is the way for a fund family to profit, they may well prefer a fund that sticks close to its peers. The new fund managers plan to own more stocks, with less concentration in any one stock, and a broader definition of value investing. They are far less likely to stand out from the crowd.
  
  Mr. Dreman often stood out. I checked the fund’s last 14 annual reports, each of which showed its performance relative to Lipper’s group of equity-income mutual funds. In seven of those years, it was in the top quartile. In four of them, it was in the bottom quartile. Only in three of the years did the fund end up in the middle 50 percent of funds.
  
  The recent bad performance has been costly for Deutsche Bank, as well as the fund investors. Because of a combination of poor performance and investor withdrawals, the fund had $2.4 billion in assets on March 31, down from $8.3 billion in late 2007.
  
  What went wrong? You can get a hint from part of the fund’s most recent annual report, for the year that ended last November. “The cornerstone of our contrarian value investing philosophy is to seek companies that are financially sound but have fallen out of favor with the investing public,” it said.
  
  With too many financial companies, among them Washington Mutual, Citigroup and Fannie Mae, Mr. Dreman and his colleagues did not realize until too late that the companies were not financially sound, no matter what their books seemed to say.
  
  Buying stocks with low P/E ratios can make sense only if the earnings — the “E” — are real. “The E was much worse than anyone thought,” Mr. Dreman told me. “The banks themselves had no idea of how bad the E was.”
  
  He still thinks his strategy will work, and told me he thinks the market may well have hit bottom. As that last annual report put it, “The last few months have provided many opportunities to buy strong companies with good long-term prospects at the lowest prices we have seen in many decades, and we have taken advantage of what we regard as incredible bargains.”
  
  My suspicion is that Mr. Dreman could have saved his job if he had been more willing to bend with the times and go along with the current investment consensus. After all, this is a market where Citigroup and Bank of America could see their shares collapse after the government made it clear they would not be allowed to fail. How could any rational investor want to own a bank stock in that environment?
  
  Of course, what is obvious is sometimes wrong. In February 2000, George Vanderheiden retired at the age of 54 from Fidelity Investments, where his sparkling long-term record at the Destiny Fund had been tarnished by underperformance caused by his refusal to jump on the technology stock bandwagon.
  
  His successors knew a trend when they saw one. They managed to get in on the tech stock boom just before it ended. The fund lost big, when it would have done well had his successors stayed with Mr. Vanderheiden’s stocks.
  
  The people who run mutual fund companies, it turns out, are very much like other investors, something Mr. Dreman well understood.
  
  “The major thesis of this book,” he wrote in 1998, “is that investors overreact to events.”