Let's start with some history ...
More than two thousand years ago, Qin Shi Huang unified China, and became the first emperor of China. In between 213 to 206 BCE, he ordered burning of books, except those from his chancellor Li Si's school of thoughts. Hundreds of scholars were also buried alive. This incident is probably one of the earliest illustrations of how important it is to manage and control information and knowledge.
Now come back to 2009. Google Inc has a wonderful idea to scan and digitize books around the world to build a e-library online. This is exactly the opposite of what Qin Shi Huang did. In my opinion, this project matches that of Qin Shi Huang in terms of its scale and impact to the world, of course more towards the benefit of mankind in this case. Could you imagine any books at your fingertips? Could you imagine all knowledge being properly stored and managed generation after generation?
But of course, Google is still a profit-seeking entity, it does this for its own benefit. Just imagine when reading a book, all sorts of Google advertisements related to the content line up readily for you. That must be a cash cow for Google.
There are still a lot of legal and copyright issue to be addressed for the project to be successful. As a consumer, I wish Google all the best.
Sunday, September 13, 2009
Saturday, September 12, 2009
Right issue - What you see is not what you get
In some restaurants, live fish or crabs are displayed. Customers can pick the ones they like. The staff will weigh the live seafood in front of you, quote you a price, before sending it to the kitchen. Everything seems reasonable and fair. But have you ever wonder what happens in the kitchen? I heard that some unscrupulous restaurants would replace your chosen one with a frozen one. Of course, the frozen one is far cheaper than the live one. In other words, you are charged at the 'live' price, but actually what you get is the 'frozen' one.
Now come back to the investment world. Recently there are quite a number of companies issuing rights to raise cash. While each of them has their own reasons and merits, what puzzles me is the way that they promote the rights. They all claim to provide the shareholders 'an opportunity to subscribe for new shares at a discount'. Now the question is, is the per share value the same before and after the right issue? The share value will be diluted with the right issue! While you get the new share at a lower price, the value of your existing shares will be eroded.
The values are no longer the same, so how can you claim that there is a discount of the right share price as benchmark to current price? Isn't this an outright misrepresentation?
It somehow reminds me of the restaurants' trick, what you see is not what you get. Unfortunately in this case, the authority does not seem to be concerned of this misrepresentation.
** Quote from Genting Singapore's press release **
The Rights Issue will provide Genting shareholders with an opportunity to subscribe for new shares at a discount of 32.8 per cent to the closing price of S$1.19 yesterday.
Full press release here http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_EA9853457589A4744825762D00138631/$file/GSPLC_PressRelease.pdf?openelement
Now come back to the investment world. Recently there are quite a number of companies issuing rights to raise cash. While each of them has their own reasons and merits, what puzzles me is the way that they promote the rights. They all claim to provide the shareholders 'an opportunity to subscribe for new shares at a discount'. Now the question is, is the per share value the same before and after the right issue? The share value will be diluted with the right issue! While you get the new share at a lower price, the value of your existing shares will be eroded.
The values are no longer the same, so how can you claim that there is a discount of the right share price as benchmark to current price? Isn't this an outright misrepresentation?
It somehow reminds me of the restaurants' trick, what you see is not what you get. Unfortunately in this case, the authority does not seem to be concerned of this misrepresentation.
** Quote from Genting Singapore's press release **
The Rights Issue will provide Genting shareholders with an opportunity to subscribe for new shares at a discount of 32.8 per cent to the closing price of S$1.19 yesterday.
Full press release here http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_EA9853457589A4744825762D00138631/$file/GSPLC_PressRelease.pdf?openelement
Friday, September 4, 2009
Extreme Ice
The documentary on Channel Okto the other night gave me a real impactful impression. It was actually a Discovery Channel documentary, titled 'Extreme Ice'. In the documentary, it showed ice on mountain, at polars, melting.
Well, we all heard about global warming for a long time. But seeing the iceberg melting is far more convincing than all the theories on paper. I, for one, really feel the shock watching it.
It said that the ice is melting faster than previously believed based on scientists' models. And that at this speed, the sea level will rise by 1 meter in 100 years time, and many areas on earth would be flooded.
Just how is this going to affect our life? If this is true, we should see significant impact in next decade, maybe. This would really be a disaster. Imagine lands being flooded, millions being replaced, how is this going to impact the economy, the social stability, and eventually the investment and asset value?
A rise of 1 meter in sea level would almost spell a doom for island countries like Singapore. Talking about this, maybe there is reason for 99 years lease hold afterall.
p/s: please spend a few minutes checking out this
http://www.extremeicesurvey.org/
Well, we all heard about global warming for a long time. But seeing the iceberg melting is far more convincing than all the theories on paper. I, for one, really feel the shock watching it.
It said that the ice is melting faster than previously believed based on scientists' models. And that at this speed, the sea level will rise by 1 meter in 100 years time, and many areas on earth would be flooded.
Just how is this going to affect our life? If this is true, we should see significant impact in next decade, maybe. This would really be a disaster. Imagine lands being flooded, millions being replaced, how is this going to impact the economy, the social stability, and eventually the investment and asset value?
A rise of 1 meter in sea level would almost spell a doom for island countries like Singapore. Talking about this, maybe there is reason for 99 years lease hold afterall.
p/s: please spend a few minutes checking out this
http://www.extremeicesurvey.org/
Thursday, September 3, 2009
Nonconsequentialist Reasoning
I am reading the book 'Irrational Exuberance' by Robert J. Shiller, and come across this interesting term 'Nonconsequentialist Reasoning', originated by psychologists Shafir and Tversky. I quoted the description here, people cannot decide until the events actually occur.
I believe this psychological effect is experienced by many investors. In fact, in my blog, I have recorded at 2 such events.
One was when FSL reduced its distribution, and the price held up for several days before going south. The investors could not decide until they see the next distribution in sight is reduced. On the other hand, when Rickmers cut its distribution immediately, you see that the price went south immediately.
The other one is on Chartered Semiconductor. With the latest player Globalfoundries into the competition space, bloodbathing is logically expected. But the investors seems like cannot decide what to do, they may want to wait till they see blood.
On a bigger picture, I think this also explains why Technical Analysis is working in many cases. If market is efficient, and any information is digested immediately and fully reflected on the price, there is no way TA will work.
So, as an investor, we must remind ourselves to make rational decision ... timely.
I believe this psychological effect is experienced by many investors. In fact, in my blog, I have recorded at 2 such events.
One was when FSL reduced its distribution, and the price held up for several days before going south. The investors could not decide until they see the next distribution in sight is reduced. On the other hand, when Rickmers cut its distribution immediately, you see that the price went south immediately.
The other one is on Chartered Semiconductor. With the latest player Globalfoundries into the competition space, bloodbathing is logically expected. But the investors seems like cannot decide what to do, they may want to wait till they see blood.
On a bigger picture, I think this also explains why Technical Analysis is working in many cases. If market is efficient, and any information is digested immediately and fully reflected on the price, there is no way TA will work.
So, as an investor, we must remind ourselves to make rational decision ... timely.
Tuesday, September 1, 2009
DBS - Apparent Mistake
First of all, let's be clear, I am neither pro nor anti DBS. In fact, I think investors should bear some risks and responsibility in making any investment decision.
However, the way the lawyer representing DBS defended the case amused me a lot. In essence, the lawyer argued that, as there was such an apparent error in the document, anyone who read it carefully would detect it, and therefore 'turn on its head'.
My first intuitive questions are:
1) If the error is so apparent, shouldn't DBS employees, who sold the products, detected it when they went through the document with the investors?
2) And if they detected it, why didn't they inform DBS to correct it?
3) Or did they go through the document with the customers at all? If they didn't, isn't this the best evidence of mis-selling?
There is mistake, but it is not so apparent to me who made the mistake.
** Partial quote **
An obvious clerical error, says DBS of "credit event" calculation
By Cheow Xin Yi, TODAY | Posted: 01 September 2009 0633 hrs
SINGAPORE: There was an error in the formula that investors were told would be used to calculate any remaining value in their investments should there be a "credit event".
But, DBS Bank is arguing, this was such "an obvious clerical mistake", that it would be apparent to any investor who had read his or her documents thoroughly.
The bank responded on Thursday to a suit by more than 200 investors who had bought into the now-worthless Lehman-linked DBS High Notes 5 (HN5).
More on
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1002036/1/.html
However, the way the lawyer representing DBS defended the case amused me a lot. In essence, the lawyer argued that, as there was such an apparent error in the document, anyone who read it carefully would detect it, and therefore 'turn on its head'.
My first intuitive questions are:
1) If the error is so apparent, shouldn't DBS employees, who sold the products, detected it when they went through the document with the investors?
2) And if they detected it, why didn't they inform DBS to correct it?
3) Or did they go through the document with the customers at all? If they didn't, isn't this the best evidence of mis-selling?
There is mistake, but it is not so apparent to me who made the mistake.
** Partial quote **
An obvious clerical error, says DBS of "credit event" calculation
By Cheow Xin Yi, TODAY | Posted: 01 September 2009 0633 hrs
SINGAPORE: There was an error in the formula that investors were told would be used to calculate any remaining value in their investments should there be a "credit event".
But, DBS Bank is arguing, this was such "an obvious clerical mistake", that it would be apparent to any investor who had read his or her documents thoroughly.
The bank responded on Thursday to a suit by more than 200 investors who had bought into the now-worthless Lehman-linked DBS High Notes 5 (HN5).
More on
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1002036/1/.html
Sunday, August 30, 2009
Watch out, negative interest rate may be a reality
I think this news did not get the exposure it deserved here. Swedish Riksbank has introduced negative interest rate on bank deposit, a world first. Bankers around are watching and monitoring this closely.
The motivation of the Swedish bank is to force liquidity. Apparently many banks still do not want to lend out the money. This is quite different from the impression we have seen in Singapore, where money seems like flowing fearlessly, both in stock market and property market.
However, if the move is proven working, I believe many bankers would be ready to be a copycat, as reported in the article.
What would the impact to depositors? A negative interest would mean that you pay the bank to help keep the money. In other words, the time value of money becomes negative. Will it encourage immediate spending and booast credit growth? Will it bring inflation? Or will it be time that we keep money in MILO tin?
http://edition.cnn.com/2009/BUSINESS/08/27/sweden.subzero.interest.ft/index.html
** Partial extract **
Bankers watch as Swedish interest rates goes subzero
August 28, 2009 -- Updated 0352 GMT (1152 HKT)
For a world first, the announcement came with remarkably little fanfare.
But last month, the Swedish Riksbank entered uncharted territory when it became the world's first central bank to introduce negative interest rates on bank deposits.
Even at the deepest point of Japan's financial crisis, the country's central bank shied away from such a measure, which is designed to encourage commercial banks to boost lending.
The motivation of the Swedish bank is to force liquidity. Apparently many banks still do not want to lend out the money. This is quite different from the impression we have seen in Singapore, where money seems like flowing fearlessly, both in stock market and property market.
However, if the move is proven working, I believe many bankers would be ready to be a copycat, as reported in the article.
What would the impact to depositors? A negative interest would mean that you pay the bank to help keep the money. In other words, the time value of money becomes negative. Will it encourage immediate spending and booast credit growth? Will it bring inflation? Or will it be time that we keep money in MILO tin?
http://edition.cnn.com/2009/BUSINESS/08/27/sweden.subzero.interest.ft/index.html
** Partial extract **
Bankers watch as Swedish interest rates goes subzero
August 28, 2009 -- Updated 0352 GMT (1152 HKT)
For a world first, the announcement came with remarkably little fanfare.
But last month, the Swedish Riksbank entered uncharted territory when it became the world's first central bank to introduce negative interest rates on bank deposits.
Even at the deepest point of Japan's financial crisis, the country's central bank shied away from such a measure, which is designed to encourage commercial banks to boost lending.
Friday, August 28, 2009
NTU research on insurance
I read with interest on The Straits Times article that said NTU Associate Professor David Yee research showed that Singaporeans are grossly under-insured. I felt that the article did not come with sufficient details and data to support the claim, so I went to NTU website and did a search there. What I found was simply the Straits Times article again (NTU website: http://www3.ntu.edu.sg/CorpComms2/Documents/2009/Aug/ST_090821_B22_Sporeans%20grossly%20under-insured.pdf).
So I will make my comment on the article itself.
As a University report, I would expect that AP David Yee at least told us how he conducted the research, what are the underlying assumptions? How many people did he survey? How did he reach a conclusion that average Singaporean needs $495k insurance? What is the purpose of the research and who fund it?
Don't get me wrong, I think insurance is important. But without looking at individual needs and their actual situations and wealth portfolio, a blanket statement that $495k is needed is highly questionable. I am puzzled how the University allowed such under-research report be published? And worst still, put it on its website.
I suspect by now, most insurance agents in Singapore would already put that article in their briefcase ...
So I will make my comment on the article itself.
As a University report, I would expect that AP David Yee at least told us how he conducted the research, what are the underlying assumptions? How many people did he survey? How did he reach a conclusion that average Singaporean needs $495k insurance? What is the purpose of the research and who fund it?
Don't get me wrong, I think insurance is important. But without looking at individual needs and their actual situations and wealth portfolio, a blanket statement that $495k is needed is highly questionable. I am puzzled how the University allowed such under-research report be published? And worst still, put it on its website.
I suspect by now, most insurance agents in Singapore would already put that article in their briefcase ...
Pizza Hut pasta, anyone?
You must have watched the latest Pizza Hut advertisement. It is about a group of 80 diners tasting Pizza Hut pasta, without knowing it's from Pizza Hut. Many of them gave comments like, 'it is authentic', 'taste like that from xxx restaurant', etc.
Well, it is really a good idea by Pizza Hut to prove that their pasta is as good as any others, including those priced a few times higher.
Normally we would say that, well rental is a big part of the cost, so if you eat at a high class restaurant, obviously a big percentage of the price is towards paying the rental.
Let's look at it from demand side, and from a financial perspective. I believe many of us are aware of the term 'time value of money'. Basically what it means is that as money travels along the dimension of time, its value increases. In layman terms, money got to earn interest.
Now, think about it, what about 'money value of time'. As time travels across the dimension of money, does its value change? Put simply, at a particular point of time, does money change the value of that moment? Imagine you are in a romantic (and expensive) restaurant, would spending $30 for a plate of pasta makes you happy (value to you)? Or you rather just drink plain water and go for a $6 Pizza Hut pasta (proven just as tasty) later?
Well, it is really a good idea by Pizza Hut to prove that their pasta is as good as any others, including those priced a few times higher.
Normally we would say that, well rental is a big part of the cost, so if you eat at a high class restaurant, obviously a big percentage of the price is towards paying the rental.
Let's look at it from demand side, and from a financial perspective. I believe many of us are aware of the term 'time value of money'. Basically what it means is that as money travels along the dimension of time, its value increases. In layman terms, money got to earn interest.
Now, think about it, what about 'money value of time'. As time travels across the dimension of money, does its value change? Put simply, at a particular point of time, does money change the value of that moment? Imagine you are in a romantic (and expensive) restaurant, would spending $30 for a plate of pasta makes you happy (value to you)? Or you rather just drink plain water and go for a $6 Pizza Hut pasta (proven just as tasty) later?
Wednesday, August 26, 2009
Acceptance of cash offer through ATM?
The acceptance level of SPC shareholders to the cash offer by China National Petroleum has exceeded 90%, so a delisting is unavoidable. I have therefore decided to accept their offer. Quite a pity, I thought, it was bought for the dividend. At the price I bought, the trailing yield is about 7%.
So I have to fill up the pink form and mail it out, it has to be received no later than 28/Aug. I am wondering, why can't the acceptance be performed through ATM? Afterall, we have IPO, right subscription, EPS done through ATM. The advantage is fast and reliable. Well, I don't mind they charge me $1 or $2 for this. What do you think?
So I have to fill up the pink form and mail it out, it has to be received no later than 28/Aug. I am wondering, why can't the acceptance be performed through ATM? Afterall, we have IPO, right subscription, EPS done through ATM. The advantage is fast and reliable. Well, I don't mind they charge me $1 or $2 for this. What do you think?
Tuesday, August 25, 2009
Gold rush over?
Gold is viewed as a safe haven. Thus, it is interesting to see how gold behave in the past few quarters, when market fell off the cliff.
In the chart below, I plotted the worldwide identifiable gold demand from Q108 till Q209 in USD. They are jewelry, industrial & dental, and identifiable investment. In addition, I plotted gold price over the same period.
First we look at jewelry (yes, it is the gold chains, rings, etc, that ladies like). It maybe a surprise to many, but jewelry is actually the largest demand for gold. We see that jewelry demand peaked at Q308 and fell in Q408 and Q109. Since gold is a safe haven, I would thought that it should be in greater demand in Q408 and Q109 when market uncertainty was at its highest point. Apparently this is not the case.
However, if we look at identifiable investment, it shows a pick up over Q408 to Q109. Comparing this observation with that from jewelry, I would think that source of demand probably play a part. Comparing to the general retail jewelry buyers, gold investors are probably more sophiscated, more concern of uncertainty, and have more resources to satisfy its own demand.
Finally, we see that industrial and dental demand basically follows the trend of economy pretty well, bottom at Q408 and Q109 period.
In a bigger picture, we can see that the total gold demand starts to fall in Q209 to pre-crisis level in Q208. Is this an indication that market has shrugged off concerns over uncertainty? Maybe. But one thing strange is that the price did not correlate well with demand.
Is the gold rush over by now and market stability returns? Will the trillions dollar rescue packages lead to hyper inflation? It is difficult to draw conclusion now, but gold trend is certainly telling a lot of stories.
In the chart below, I plotted the worldwide identifiable gold demand from Q108 till Q209 in USD. They are jewelry, industrial & dental, and identifiable investment. In addition, I plotted gold price over the same period.
First we look at jewelry (yes, it is the gold chains, rings, etc, that ladies like). It maybe a surprise to many, but jewelry is actually the largest demand for gold. We see that jewelry demand peaked at Q308 and fell in Q408 and Q109. Since gold is a safe haven, I would thought that it should be in greater demand in Q408 and Q109 when market uncertainty was at its highest point. Apparently this is not the case.
However, if we look at identifiable investment, it shows a pick up over Q408 to Q109. Comparing this observation with that from jewelry, I would think that source of demand probably play a part. Comparing to the general retail jewelry buyers, gold investors are probably more sophiscated, more concern of uncertainty, and have more resources to satisfy its own demand.
Finally, we see that industrial and dental demand basically follows the trend of economy pretty well, bottom at Q408 and Q109 period.
In a bigger picture, we can see that the total gold demand starts to fall in Q209 to pre-crisis level in Q208. Is this an indication that market has shrugged off concerns over uncertainty? Maybe. But one thing strange is that the price did not correlate well with demand.
Is the gold rush over by now and market stability returns? Will the trillions dollar rescue packages lead to hyper inflation? It is difficult to draw conclusion now, but gold trend is certainly telling a lot of stories.
Wednesday, August 12, 2009
Rickmers - why the ship has not arrived?
I wonder why Rickmers results announcement this quarter Q4, 2009 is so late.
To begin with, Rickmers is not running some complicated business. Just collect the lease fee every month right? At least that's what the CEO told us. If so, why need such a long time to know how much they earn?
And indeed it is long, even by its own record. If you compared the announcement record since 2008, this is the longest it takes, 45 days into a new quarter. Q2 last year, it takes only 36 days.
I can't help but suspect that something big is coming. I have no idea what it is. But if Rickmers delays the results announcement for it, it must have something to do with the DPU. Otherwise, Rickmers could always announce it separately.
For now, we are just waiting for the ship to arrive ... but what's on the ship is a question mark.
QuarterxxxxxxAnnounced on......Days into new quarter
Q2,2009xxxxxAug 14.................45
Q1,2009xxxxxApr 24..................24
Q4,2008xxxxxFeb 09.................40
Q3,2008xxxxxOct 31..................31
Q2,2008xxxxxAug 05.................36
Q1,2008xxxxxMay 05.................35
To begin with, Rickmers is not running some complicated business. Just collect the lease fee every month right? At least that's what the CEO told us. If so, why need such a long time to know how much they earn?
And indeed it is long, even by its own record. If you compared the announcement record since 2008, this is the longest it takes, 45 days into a new quarter. Q2 last year, it takes only 36 days.
I can't help but suspect that something big is coming. I have no idea what it is. But if Rickmers delays the results announcement for it, it must have something to do with the DPU. Otherwise, Rickmers could always announce it separately.
For now, we are just waiting for the ship to arrive ... but what's on the ship is a question mark.
QuarterxxxxxxAnnounced on......Days into new quarter
Q2,2009xxxxxAug 14.................45
Q1,2009xxxxxApr 24..................24
Q4,2008xxxxxFeb 09.................40
Q3,2008xxxxxOct 31..................31
Q2,2008xxxxxAug 05.................36
Q1,2008xxxxxMay 05.................35
Tuesday, August 11, 2009
Readers Digested
I believe many of you have receive this invitation from Reader's Digest before. What surprises me is that they actually work with UOB this time. The letter is addressed to UOB credit cardmember.
All along I cannot understand why RD could run this program for so long. To me, it certainly looks like a form of gambling. In fact, RD themselves called it Sweepstakes.
To be fair, RD makes it a little bit different from normal form of gambling. Normally you just place the bet (in casino, 4D, Toto, etc) and wait for the results.
For RD, they make full use of every single step.
- For the prize money, it is authorized by the Finance Director. WOW!
- To receive the this notification, you are very lucky. WOW!
- Then you must make a very important decision, whether to take part or not. WOW!
- You need to reply early, because IF you win the top prize, you will receive a bigger prize. WOW!
- And if you subscribe to RD, you will win a bigger prize (IF you win the top prize). WOW!
- And you also must decide how you want to receive the prize. WOW!
By now, most of the readers should feel they have got much closer to the prize.
Well, yes, you don't really lose even if you don't win anything, except the money spent on subscribing the magazine. Just remember to terminate the subscription before expiry, otherwise they will continue to send you the magazine and of course the bill ... make sure your money is not digested ...
All along I cannot understand why RD could run this program for so long. To me, it certainly looks like a form of gambling. In fact, RD themselves called it Sweepstakes.
To be fair, RD makes it a little bit different from normal form of gambling. Normally you just place the bet (in casino, 4D, Toto, etc) and wait for the results.
For RD, they make full use of every single step.
- For the prize money, it is authorized by the Finance Director. WOW!
- To receive the this notification, you are very lucky. WOW!
- Then you must make a very important decision, whether to take part or not. WOW!
- You need to reply early, because IF you win the top prize, you will receive a bigger prize. WOW!
- And if you subscribe to RD, you will win a bigger prize (IF you win the top prize). WOW!
- And you also must decide how you want to receive the prize. WOW!
By now, most of the readers should feel they have got much closer to the prize.
Well, yes, you don't really lose even if you don't win anything, except the money spent on subscribing the magazine. Just remember to terminate the subscription before expiry, otherwise they will continue to send you the magazine and of course the bill ... make sure your money is not digested ...
Sunday, August 9, 2009
TSMC seeing danger
As I posted before, the presence of Glabalfoundries is a big threat to existing players in the market. (More details here http://mycroeconomics.blogspot.com/2009/07/if-you-are-shareholders-of-chartered.html)
In an investor conference call 30/July/2009, TSMC Chairman and CEO said that "We consider GF to be a formidable competitor. I really think that the battle will be a high casualty one. My job is to minimize the casualties on my side. Casualties will be represented by money."
Morris is a veteran in the industry, and I really respect him for his foresight, sharpness, openness to investors and readiness to fight the war.
Unfortunately here in Chartered, we see no such urgency. It is funny, considering that the most competitive, the strongest, and the healthest company in the industry is seeing danger. The company takes no effort to educate investors on imminent crisis. And the investors are probably still indulged in the recent bull run.
Time is not on your side.
In an investor conference call 30/July/2009, TSMC Chairman and CEO said that "We consider GF to be a formidable competitor. I really think that the battle will be a high casualty one. My job is to minimize the casualties on my side. Casualties will be represented by money."
Morris is a veteran in the industry, and I really respect him for his foresight, sharpness, openness to investors and readiness to fight the war.
Unfortunately here in Chartered, we see no such urgency. It is funny, considering that the most competitive, the strongest, and the healthest company in the industry is seeing danger. The company takes no effort to educate investors on imminent crisis. And the investors are probably still indulged in the recent bull run.
Time is not on your side.
Germany 1910 and 1920 notes
Today, let me share these 2 Germany notes.
The first one is Germany Reichsbantnote 1000 issed in 1910.
The second one is Bundert Mark 100 issued on 1920.
These notes are pieces of artwork by itself. Look at the complexity and details of the notes. Amazing.
The first one is Germany Reichsbantnote 1000 issed in 1910.
The second one is Bundert Mark 100 issued on 1920.
These notes are pieces of artwork by itself. Look at the complexity and details of the notes. Amazing.
Friday, August 7, 2009
Sports in shopping mall
I have not had the chance to visit the newly opened Ion Orchard yet.
Instead I went to JB last weekend. I was in its largest shopping mall, City Square, where I came across this most creative activity conducted in a shopping mall I have ever seen.
They had a volley ball competition in the shopping mall. For safety sake, they have nets covered up the place. And audience could watch the matches from almost 360 degree from near distance. It was a different experience compared to watching it in a stadium.
I think it was a smart move. The organizer of the match certainly had drawn a big crowd, and if their intent was to promote the sports, what other better ways? For the shopping mall, it gave the patrons a fresh experience other than the normal sales or food fair.
By the way I understand that GIC has a share in this shopping mall. Not sure if they participate in the management. But City Square is clearly a very successful mall in JB, and better than some of Singapore ones.
Instead I went to JB last weekend. I was in its largest shopping mall, City Square, where I came across this most creative activity conducted in a shopping mall I have ever seen.
They had a volley ball competition in the shopping mall. For safety sake, they have nets covered up the place. And audience could watch the matches from almost 360 degree from near distance. It was a different experience compared to watching it in a stadium.
I think it was a smart move. The organizer of the match certainly had drawn a big crowd, and if their intent was to promote the sports, what other better ways? For the shopping mall, it gave the patrons a fresh experience other than the normal sales or food fair.
By the way I understand that GIC has a share in this shopping mall. Not sure if they participate in the management. But City Square is clearly a very successful mall in JB, and better than some of Singapore ones.
Wednesday, August 5, 2009
Pay peanut and get monkey
This is a 1980 stamp issued by China, the first one in China Zodiac series. I bought 2 pieces at about $10 each in 1986. Three years ago, I sold one of them at around $500. That's a return of 50 times or 5000% in 20 year, equivalent to 21.6% compounded annual return. I think not many investments could beat this. I check eBay that current bidding goes as high as US600. A little regret to have sold one. But then again, I still have one more :)
On hind sight, this is obviously a very good investment. Had I threw in $10,000 to buy 1,000 pieces at that time, I would have US600,000 now! But then, actually it is very difficult to identify winners in stamp collection. More so nowadays, as the quantity issue is so large now. I was told that this particular monkey can fetch such a high price because a lot of them were scrapped due poor printing technology at that time. And I think it certainly benefits from the growing purchase power of Chinese stamp collectors.
Tuesday, August 4, 2009
Right issue - Right or Wrong?
We invest in stocks with expectation that we can collect dividend, or sell the stocks at a higher price in future. Thus it is a little disturbing when the company comes to you asking for money instead, under the name of right issue.
The right issue by itself has no meaning. Basically what it does is to create more shares so that everybody owns 'more' in terms of absolute share, but the same in terms of percentage. For example, imagine we have $100 here, and we split to 2 shares, you one share at $50 each, and I 1 share. Now, we split it to 10 shares, you 5 shares at $10 each, and I 5 shares. We own more shares now, but still the same $50.
So we need to understand why rather than giving us money, the company asks money from us. We can look at it this way. Buying stock is quite similar to buying a house and rent it out. Now imagine, after many years, your house needs some overhaul or maintenance, isn't it logical and reasonable to spend some money to fix it? And you may be able to increase the rental after that.
Absolutely. And that is the point I want to make. How the company going to use the money from the right issue is of paramount importance! If it is used to improve the earning capability, that's a good thing. Otherwise, you better think twice.
Of course, the companies will offer you good promises and proposals in the right issues. This is when you need to exercise your judgment. Look at their history.
If their stock price increases over the year, you have a good tenant, who helps you to maintain your house, and maybe build a swimming in it, and increase the value of the property.
If they pay you dividend, it is equivalent to the tenant paying you rental.
If they never pay any dividend, it is equivalent to the tenant refuses to pay you rental.
If the stock price drops over the year, you have a bad tenant, who damage your house, causing its value to drop.
If the stock drops in price, no dividend, and keep doing right issue, it is equivalent to a tenant who refuses to pay you rental, damage your house, and keep asking you money to fix the pipes that burst. What would you do in this case? Chase the tenant out? In real life, however, investors seems to tolerate this in stock market.
The right issue by itself has no meaning. Basically what it does is to create more shares so that everybody owns 'more' in terms of absolute share, but the same in terms of percentage. For example, imagine we have $100 here, and we split to 2 shares, you one share at $50 each, and I 1 share. Now, we split it to 10 shares, you 5 shares at $10 each, and I 5 shares. We own more shares now, but still the same $50.
So we need to understand why rather than giving us money, the company asks money from us. We can look at it this way. Buying stock is quite similar to buying a house and rent it out. Now imagine, after many years, your house needs some overhaul or maintenance, isn't it logical and reasonable to spend some money to fix it? And you may be able to increase the rental after that.
Absolutely. And that is the point I want to make. How the company going to use the money from the right issue is of paramount importance! If it is used to improve the earning capability, that's a good thing. Otherwise, you better think twice.
Of course, the companies will offer you good promises and proposals in the right issues. This is when you need to exercise your judgment. Look at their history.
If their stock price increases over the year, you have a good tenant, who helps you to maintain your house, and maybe build a swimming in it, and increase the value of the property.
If they pay you dividend, it is equivalent to the tenant paying you rental.
If they never pay any dividend, it is equivalent to the tenant refuses to pay you rental.
If the stock price drops over the year, you have a bad tenant, who damage your house, causing its value to drop.
If the stock drops in price, no dividend, and keep doing right issue, it is equivalent to a tenant who refuses to pay you rental, damage your house, and keep asking you money to fix the pipes that burst. What would you do in this case? Chase the tenant out? In real life, however, investors seems to tolerate this in stock market.
Sunday, August 2, 2009
Let's hope for a colorful future
Study by AkzoNobel, owner of ICI paint, shows that people generally prefer neutral colors such as black, white and grey for interiors, during economic downturns, while more intense colors when they are more confident.
This should serves as no surprise, as economic downturn definitely spoils our mood. Who has the luxury and mood to design a more colorful interior in a downturn? Whereas in a upturn, there is more room, and maybe budget, for more imagination.
You may apply this when you walk into a company's office in future. It may tell you something about how the company views the economic outlook.
** Quote **
Link between colour trends and economy
Tags: Akzo Nobel colour trends economy
Written by Edge Malaysia
Friday, 31 July 2009 17:07
KUALA LUMPUR: A study by AkzoNobel, the world's largest paint and coatings company, on colour trends during economic changes, showed a co-relation between the state of the economy with colour trends.
Although regional preferences can have an impact, "colour trends have been fluctuating in waves over the last few decades as the economy ebbed and flowed," said Jeremy Rowe, AkzoNobel managing director for decorative paints, South East Asia & Pacific.
"During an economic downturn, neutral colours such as black, white and greys are favoured for interiors while more intense colours are used when people feel more confident," explains Rowe at a breakfast meeting with the Malaysian media on July 31.
He added that in Western Europe at the moment, sober whites and off-whites are the most popular while in the US, beige and grey are dominant.
Asia, he added is definitely more colourful with fresh colours such a yellows and pink and light blue preferred.
In the months ahead, Rowe said, "colours will be lighter in mood and more optimistic in feel" as the world emerges from the current economic downturn.
AkzoNobel acquired Imperial Chemical Industries (ICI) paints last year. It is the manufacturer of the Dulux brand of paints.
ICI Paints (Malaysia) Sdn Bhd managing director Goh Cheok Weng said the paints and coatings sector has shown improvement in Q2 indicating a return in consumer confidence.
The Amsterdam-based AkzoNobel posted revenue of 15.4 billion euros last year. It expects to maintain Asia's 20% contribution to its total sales up till 2012.
ICI Paints Malaysia also launched a month-long nationwide roadshow to raise awareness on the need for sustainable, environment-friendly products and its commitment to produce low odour, low volatile compound (VOC) green certified paints.
It is the first decoration company to introduce the full range of low odour, low VOC interior emulsion paints with Singapore's Green Label accreditation in Malaysia.
http://www.theedgemalaysia.com/business-news/146300-link-between-colour-trends-and-economy.html
This should serves as no surprise, as economic downturn definitely spoils our mood. Who has the luxury and mood to design a more colorful interior in a downturn? Whereas in a upturn, there is more room, and maybe budget, for more imagination.
You may apply this when you walk into a company's office in future. It may tell you something about how the company views the economic outlook.
** Quote **
Link between colour trends and economy
Tags: Akzo Nobel colour trends economy
Written by Edge Malaysia
Friday, 31 July 2009 17:07
KUALA LUMPUR: A study by AkzoNobel, the world's largest paint and coatings company, on colour trends during economic changes, showed a co-relation between the state of the economy with colour trends.
Although regional preferences can have an impact, "colour trends have been fluctuating in waves over the last few decades as the economy ebbed and flowed," said Jeremy Rowe, AkzoNobel managing director for decorative paints, South East Asia & Pacific.
"During an economic downturn, neutral colours such as black, white and greys are favoured for interiors while more intense colours are used when people feel more confident," explains Rowe at a breakfast meeting with the Malaysian media on July 31.
He added that in Western Europe at the moment, sober whites and off-whites are the most popular while in the US, beige and grey are dominant.
Asia, he added is definitely more colourful with fresh colours such a yellows and pink and light blue preferred.
In the months ahead, Rowe said, "colours will be lighter in mood and more optimistic in feel" as the world emerges from the current economic downturn.
AkzoNobel acquired Imperial Chemical Industries (ICI) paints last year. It is the manufacturer of the Dulux brand of paints.
ICI Paints (Malaysia) Sdn Bhd managing director Goh Cheok Weng said the paints and coatings sector has shown improvement in Q2 indicating a return in consumer confidence.
The Amsterdam-based AkzoNobel posted revenue of 15.4 billion euros last year. It expects to maintain Asia's 20% contribution to its total sales up till 2012.
ICI Paints Malaysia also launched a month-long nationwide roadshow to raise awareness on the need for sustainable, environment-friendly products and its commitment to produce low odour, low volatile compound (VOC) green certified paints.
It is the first decoration company to introduce the full range of low odour, low VOC interior emulsion paints with Singapore's Green Label accreditation in Malaysia.
http://www.theedgemalaysia.com/business-news/146300-link-between-colour-trends-and-economy.html
Singapore 44th National Day - a peek to the past
One more week and Singapore will celebrate its 44th National Day.
44 years is long in a man's life. However, it is relatively short in a country's history.
Singapore was occupied by Japan from 1942 till 1945. During this period, Japanese introduced a new currency, Banana money. As expected, when Japan lost the war, the Banana money basically become stacks of worthless paper. As mentioned in previous posting (http://mycroeconomics.blogspot.com/2009/07/gold-for-alien-attack.html), unlike gold, the value of fiat money depends on the credibility and capability of the issuer government.
Other than the well-known Banana money, the Japanese also used military exchange note. See below. It guaranteed full value exchange, and warned heavy punishment for counterfeit.
While celebrating the National Day, it is important to know what exactly is the celebaration.
44 years is long in a man's life. However, it is relatively short in a country's history.
Singapore was occupied by Japan from 1942 till 1945. During this period, Japanese introduced a new currency, Banana money. As expected, when Japan lost the war, the Banana money basically become stacks of worthless paper. As mentioned in previous posting (http://mycroeconomics.blogspot.com/2009/07/gold-for-alien-attack.html), unlike gold, the value of fiat money depends on the credibility and capability of the issuer government.
Other than the well-known Banana money, the Japanese also used military exchange note. See below. It guaranteed full value exchange, and warned heavy punishment for counterfeit.
While celebrating the National Day, it is important to know what exactly is the celebaration.
Friday, July 31, 2009
FSL - will there be storm ahead?
In my previous posting (http://mycroeconomics.blogspot.com/2009/07/fsl-whats-in-their-mind.html), I concluded that cutting the payout ratio will depress the unit price while do no good to the company.
Now let's look at what happen.
The general market sentiment since the announcement (21/Jul) has been on the uptrend. In fact, FSL tracks ST pretty well few days before the announcement, and even 4 days after that. Then on 25/Jul, we observed an expected drop upon XD. However, after that we see a clear decoupling, and it goes against the general trend.
This is interesting as it shows that the market need time to digest information, or in other words it is not 100% efficiency. Were the investors blinded by the immediate distribution?
Now the other shipping trust Rickmers is going to announce its results next week. If it can sustain its distribution, will it encourage investors to switch boat? If it cut further its distribution, will it damage further the sentiment on shipping trust? Will there be storm ahead?
Now let's look at what happen.
The general market sentiment since the announcement (21/Jul) has been on the uptrend. In fact, FSL tracks ST pretty well few days before the announcement, and even 4 days after that. Then on 25/Jul, we observed an expected drop upon XD. However, after that we see a clear decoupling, and it goes against the general trend.
This is interesting as it shows that the market need time to digest information, or in other words it is not 100% efficiency. Were the investors blinded by the immediate distribution?
Now the other shipping trust Rickmers is going to announce its results next week. If it can sustain its distribution, will it encourage investors to switch boat? If it cut further its distribution, will it damage further the sentiment on shipping trust? Will there be storm ahead?
Thursday, July 30, 2009
STMicro first customer for Globalfoundries
As I mentioned in my previous post (http://mycroeconomics.blogspot.com/2009/07/if-you-are-shareholders-of-chartered.html), Globalfoundries was to announce its first non-AMD customer. And the answer is ... STMicroelectronics.
Globalfoundries does not need to be successful to create harm to Chartered. Its sheer existence will bring the burdens described in previous posting.
Furthermore, Globalfoundries announced that they will produce STMicro product based on 40nm (lower better) Low Power technology in 2010, while Chartered is currently at 65nm. Looks like Chartered would be lagging behind the technology race.
# Quote - Globalfoundries Press Release 29/Jul/2009 #
SUNNYVALE, CA – July 29, 2009 – GLOBALFOUNDRIES today announced a strategic customer relationship with STMicroelectronics (NYSE: STM). One of the world’s leading suppliers of semiconductor solutions, ST will partner with GLOBALFOUNDRIES to produce products based on 40nm Low Power (LP) bulk silicon technology. The 40nm LP process is ideal for the next generation of wireless applications, handheld devices, and consumer electronics, which require excellent performance and long battery life. First tape out and production of ST products by GLOBALFOUNDRIES is planned to start in 2010.
# Quote - Chartered Semicon Press Release 13/Jul/2009 #
SINGAPORE - July 13, 2009 - Chartered Semiconductor Manufacturing (Nasdaq: CHRT and SGX-ST: CHARTEREDSC), one of the world's top dedicated foundries, today announced the general availability of an enhanced version of its 65-nanometer (nm) low-power (LP) process, called 65nm LPe. The 65nm LPe process utilizes innovative leakage-reduction techniques to significantly improve system-on-chip (SoC) standby power consumption by up to 50 percent. The result is a lower-power process especially suited for battery-operated and cost-sensitive mobile applications that require active standby conditions, such as mobile handsets, multimedia players or personal internet devices. The process is also supported by a robust range of IP specifically optimized for the lower leakage capabilities.
Globalfoundries does not need to be successful to create harm to Chartered. Its sheer existence will bring the burdens described in previous posting.
Furthermore, Globalfoundries announced that they will produce STMicro product based on 40nm (lower better) Low Power technology in 2010, while Chartered is currently at 65nm. Looks like Chartered would be lagging behind the technology race.
# Quote - Globalfoundries Press Release 29/Jul/2009 #
SUNNYVALE, CA – July 29, 2009 – GLOBALFOUNDRIES today announced a strategic customer relationship with STMicroelectronics (NYSE: STM). One of the world’s leading suppliers of semiconductor solutions, ST will partner with GLOBALFOUNDRIES to produce products based on 40nm Low Power (LP) bulk silicon technology. The 40nm LP process is ideal for the next generation of wireless applications, handheld devices, and consumer electronics, which require excellent performance and long battery life. First tape out and production of ST products by GLOBALFOUNDRIES is planned to start in 2010.
# Quote - Chartered Semicon Press Release 13/Jul/2009 #
SINGAPORE - July 13, 2009 - Chartered Semiconductor Manufacturing (Nasdaq: CHRT and SGX-ST: CHARTEREDSC), one of the world's top dedicated foundries, today announced the general availability of an enhanced version of its 65-nanometer (nm) low-power (LP) process, called 65nm LPe. The 65nm LPe process utilizes innovative leakage-reduction techniques to significantly improve system-on-chip (SoC) standby power consumption by up to 50 percent. The result is a lower-power process especially suited for battery-operated and cost-sensitive mobile applications that require active standby conditions, such as mobile handsets, multimedia players or personal internet devices. The process is also supported by a robust range of IP specifically optimized for the lower leakage capabilities.
Wednesday, July 29, 2009
Interest of CFO
In this severe downturn, most of us would be happy to just keep a job. But not for CFO or Financial Controller.
In the 3 months from May-Jul 2009, a total of 27 of them left the jobs. This is equivalent to 9 per month.
Various reasons are given.
If you look at the pareto, almost half of them left the jobs to pursue other interests or commitment and personal reasons. Only 30% is to pursue better career opportunities.
I would think that CFO and FC are numerical, logical and probably boring people. But this results show that they do have a lot of 'interests' and 'commitments' to pursue. As to what really interests, or de-interests them, only they have the answer.
In the 3 months from May-Jul 2009, a total of 27 of them left the jobs. This is equivalent to 9 per month.
Various reasons are given.
If you look at the pareto, almost half of them left the jobs to pursue other interests or commitment and personal reasons. Only 30% is to pursue better career opportunities.
I would think that CFO and FC are numerical, logical and probably boring people. But this results show that they do have a lot of 'interests' and 'commitments' to pursue. As to what really interests, or de-interests them, only they have the answer.
Tuesday, July 28, 2009
Subsidy, sub and silly method?
Digitimes (28 July, 2009) reported that China Karaoke operators are buying LCD TV subsidy rights from farmers. To the farmers, LCD TV probably is not a necessity, and even with the subsidy, they still need to fork out a handsome sum of money. Therefore, trading the rights for some cash seems to be a good option. In other words, the benefit of the subsidy has been shared by the Karaoke operators and the farmers. Fair? Well, that's not the government intention. The government hopes to see improvement in the farmers' living standard. However, that's how market works, when 2 parties see different values on the item, in this case the subsidy, they can trade.
Closer to us, we also see recently a few employers were charged for hiring phantom employees to enjoy job credits from government. The intent of job credit, according to the government, is to save jobs by lowering cost of doing business here. Job credit is also a form of subsidy. In general, from economics point of view, wage subsidy is not good, as it may lead to various problems, including sustainability, effectiveness, and exploitation concerns. As job credit is a short-term measure, sustainability is not an issue. Effectiveness is a question mark. Will companies agree to cough out $100 in order to get back $12? We will probably never know the real answer, but that may not be important after all. In a deep crisis, confidence and hope have its value. Finally, we can see that exploitation does happen. The ones caught represent probably the tip of iceberg.
Closer to us, we also see recently a few employers were charged for hiring phantom employees to enjoy job credits from government. The intent of job credit, according to the government, is to save jobs by lowering cost of doing business here. Job credit is also a form of subsidy. In general, from economics point of view, wage subsidy is not good, as it may lead to various problems, including sustainability, effectiveness, and exploitation concerns. As job credit is a short-term measure, sustainability is not an issue. Effectiveness is a question mark. Will companies agree to cough out $100 in order to get back $12? We will probably never know the real answer, but that may not be important after all. In a deep crisis, confidence and hope have its value. Finally, we can see that exploitation does happen. The ones caught represent probably the tip of iceberg.
Monday, July 27, 2009
Dell - Lawsuit risk could propogate along the supply chain
According to report, Dell has mispriced some products on its online shop, and refused to honor it. The consumers in return sued it, and frozen its bank account temporary, thus affecting in turn affecting Dell's payment to its suppliers.
This is quite surprising, considering that the amount involved is pretty small. In Tech space, many companies are involved in multiple lawsuits, particularly in IP litigations. If the bank accounts could be frozen easily, it could mean that many Tech companies at the downstream of suppliers could be affected negatively.
Dell account frozen over pricing mishaps
Publication Date：07/24/2009
Source： China Times
U.S. Computer giant Dell Inc. reportedly faces a charge of price fraud with its Citibank account frozen temporarily by court order, sources said.
Dell’s online shopping Web site in early July mislabeled Latitude E4300 laptops and other products at very low prices. As a result, 26,000 consumers made orders via the Internet within a week, but Dell only agreed to compensate laptop buyers with coupons for NT$20,000(US$610) each, and purchasers of other products with coupons for NT$1,000 each.
This response dismayed several big consumers, who reportedly ordered computers and monitors worth a couple of million NT dollars at the mislabeled prices, and transmitted money to Dell’s bank account. They sued Dell for price fraud because the company would not fill the orders. The Chungli Criminal Police Bureau accepted the case and submitted it to the court, which then ordered a freeze on Dell’s Citibank account in Taiwan.
Compal Electronics Co. Ltd and Foxconn Technology Group, two major product suppliers for Dell, reportedly were affected financially by the account-blocking.
According to a local supplier for Dell, only a small part of Dell’s cash flow in its Taiwan account comes from online orders. Most of the capital is remitted by company headquarters to pay panel providers. Local provider companies, worried that they would not receive payment, reportedly called Premier Liu Chao-shiuan for help after they learned of the account-freezing.
Some argued that a consumer dispute should not be exaggerated into an online fraud case, especially when online orders for Dell products in Taiwan are usually at a very low volume.
Francis Huan, public relations manager of Dell Asia Pacific and Japan, would not comment on the account-freezing incident, but stressed “it has all passed now.” Dell’s operations in Taiwan have returned to normal, although Huan believes that “no ordinary consumer would place such a large order.”
Dell will refund money to all online purchasers who have already made payments, Huan said. But as many of them use pseudonyms to order and only leave cell phone numbers, it will take some time before all refunds can be made. (TYH-THN)
This is quite surprising, considering that the amount involved is pretty small. In Tech space, many companies are involved in multiple lawsuits, particularly in IP litigations. If the bank accounts could be frozen easily, it could mean that many Tech companies at the downstream of suppliers could be affected negatively.
Dell account frozen over pricing mishaps
Publication Date：07/24/2009
Source： China Times
U.S. Computer giant Dell Inc. reportedly faces a charge of price fraud with its Citibank account frozen temporarily by court order, sources said.
Dell’s online shopping Web site in early July mislabeled Latitude E4300 laptops and other products at very low prices. As a result, 26,000 consumers made orders via the Internet within a week, but Dell only agreed to compensate laptop buyers with coupons for NT$20,000(US$610) each, and purchasers of other products with coupons for NT$1,000 each.
This response dismayed several big consumers, who reportedly ordered computers and monitors worth a couple of million NT dollars at the mislabeled prices, and transmitted money to Dell’s bank account. They sued Dell for price fraud because the company would not fill the orders. The Chungli Criminal Police Bureau accepted the case and submitted it to the court, which then ordered a freeze on Dell’s Citibank account in Taiwan.
Compal Electronics Co. Ltd and Foxconn Technology Group, two major product suppliers for Dell, reportedly were affected financially by the account-blocking.
According to a local supplier for Dell, only a small part of Dell’s cash flow in its Taiwan account comes from online orders. Most of the capital is remitted by company headquarters to pay panel providers. Local provider companies, worried that they would not receive payment, reportedly called Premier Liu Chao-shiuan for help after they learned of the account-freezing.
Some argued that a consumer dispute should not be exaggerated into an online fraud case, especially when online orders for Dell products in Taiwan are usually at a very low volume.
Francis Huan, public relations manager of Dell Asia Pacific and Japan, would not comment on the account-freezing incident, but stressed “it has all passed now.” Dell’s operations in Taiwan have returned to normal, although Huan believes that “no ordinary consumer would place such a large order.”
Dell will refund money to all online purchasers who have already made payments, Huan said. But as many of them use pseudonyms to order and only leave cell phone numbers, it will take some time before all refunds can be made. (TYH-THN)
Sunday, July 26, 2009
Medtecs - to benefit from H1N1?
This announcement by Medtecs seems to be very important, it takes its Board of Directors to announce, and its Chairman to submit.
However, its content only tell us that it has received an order of 2 million pieces of gowns (from the title, we can guess that it is to protect against H1N1), from an unknown customer at a unknown country, to be delivered at an unknown date, and expected to bring some unknown profit at an unknown date.
This seems to fan more guess work.
However, its content only tell us that it has received an order of 2 million pieces of gowns (from the title, we can guess that it is to protect against H1N1), from an unknown customer at a unknown country, to be delivered at an unknown date, and expected to bring some unknown profit at an unknown date.
This seems to fan more guess work.
Friday, July 24, 2009
Chartered shareholders - watch out Globalfoundries!
If you are a shareholders of Chartered Semicon, I really think you should be concern of this development. Globalfoundries, a spin off of AMD, is going to announce its first non-AMD customer in a month time.
And it has huge implication.
Before Globalfoundries, the wafer foundry market is basically dominated by TSMC, with spill over to smaller wafer foundries, like UMC and Chartered. TSMC is leading at all aspects, it has the technology, and process capability, and is able to exercise customer selection. Strictly speaking it is very difficult for the remaining to survice. Luckily TSMC has not expanded too aggressively, and to some extents, large customers would not want to see a monopoly.
This will change with Globalfoundries. Well I believe TSMC will still be the number 1. However, Globalfoundries will clear preferred choice for the number 2 candidate. I would believe that the customers would like to see a worthy opponent for TSMC, and clearly UMC and Chartered have failed them in this aspect.
Specifically what does this mean to Chartered?
1) Lower ASP (average selling price) - With the announcement of Globalfoundries in a month time, you can expect many of Chartered customers would go to Chartered and threaten to move the business to Globalfoundries. I believe an erosion on ASP is unavoidable.
2) Higher cost of sales - With such a big competitor fighting for resources (raw material, equipment), the bargaining power of these suppliers will be enhanced significantly.
3) Lower utilization - Obviously when some of the business is pulled away, the utilization will be lower. And you must remember that Chartered is still struggling to meet their own goal of breakeven at 75% utilization.
4) Loss of good quality customers - The customers always like to have dual source. I cannot see any reason why they would not choose Globalfoundries. Yes, may not be immediate, but it is inevitable.
5) Harder to find technology partners with customers - When there is good solution out there, I suspect customers will be less likely to invest in technology partnership with Chartered.
In summary, shareholders please watch Globalfoundries with respect.
And it has huge implication.
Before Globalfoundries, the wafer foundry market is basically dominated by TSMC, with spill over to smaller wafer foundries, like UMC and Chartered. TSMC is leading at all aspects, it has the technology, and process capability, and is able to exercise customer selection. Strictly speaking it is very difficult for the remaining to survice. Luckily TSMC has not expanded too aggressively, and to some extents, large customers would not want to see a monopoly.
This will change with Globalfoundries. Well I believe TSMC will still be the number 1. However, Globalfoundries will clear preferred choice for the number 2 candidate. I would believe that the customers would like to see a worthy opponent for TSMC, and clearly UMC and Chartered have failed them in this aspect.
Specifically what does this mean to Chartered?
1) Lower ASP (average selling price) - With the announcement of Globalfoundries in a month time, you can expect many of Chartered customers would go to Chartered and threaten to move the business to Globalfoundries. I believe an erosion on ASP is unavoidable.
2) Higher cost of sales - With such a big competitor fighting for resources (raw material, equipment), the bargaining power of these suppliers will be enhanced significantly.
3) Lower utilization - Obviously when some of the business is pulled away, the utilization will be lower. And you must remember that Chartered is still struggling to meet their own goal of breakeven at 75% utilization.
4) Loss of good quality customers - The customers always like to have dual source. I cannot see any reason why they would not choose Globalfoundries. Yes, may not be immediate, but it is inevitable.
5) Harder to find technology partners with customers - When there is good solution out there, I suspect customers will be less likely to invest in technology partnership with Chartered.
In summary, shareholders please watch Globalfoundries with respect.
Chartered Semicon - a big cash outflow burden
Based on Chartered 2008 annual report, it has almost $3 billion contractual obligation over next 5 years.
Just how big is $3 billion? As a reference, GlobalFoundries is building a brand new 12" Fab in New York at a cost of $4.2 billion ($3.4 billion excluding construction cost), designed to ramp at 28nm and subsequently 22nm technology nodes, with a capacity of 35k 12" wafer per month.
Chartered total capacity per quarter is about 640k 8" equivalent wafer, or 213k per month, and that should equivalent to about 95k 12" equivalent wafer per month.
In other words, Chartered is carrying the cash outflow obligation equivalent to building 1/3 of its current capacity.
As of 30/June/09, Chartered has a current asset of about $1.25b, about $0.8b is cash or equivalent (remember the $0.3b cash call?). With the $800m obligation (see picture) and the latest $500 capex plan announced, it certainly seems very stretched for Chartered, even though it is expected to have positive operating cashflow.
We shall see how it resolves this ... very soon.
SGX CEO package - variable only on positive side
Many people certainly envy and maybe even jealous of Mr Magnus Bocker's package. Well you need to pay well to attract talent ... and I guess the justification can only be answered by SGX shareholders ultimately.
What catch my attention is how SGX presented the information. First of all, SGX must be commended for the transparency, very detail description is given. However, something puzzles me. In describing the short-term incentive, SGX says 'Minimum varible bonus of S$933,000'. Literally, this means that Mr Magnus Bocker will get a minimum sum of S$933,000. Err ... if this is minimum sum, doesn't it mean that this S$933,000 is fix rather than variable? And if this is minimum, what is the maximum? Or at least what is the formula?
It is regrettable that SGX, as a role model to other listed companies, uses this type of confusing wordings.
What catch my attention is how SGX presented the information. First of all, SGX must be commended for the transparency, very detail description is given. However, something puzzles me. In describing the short-term incentive, SGX says 'Minimum varible bonus of S$933,000'. Literally, this means that Mr Magnus Bocker will get a minimum sum of S$933,000. Err ... if this is minimum sum, doesn't it mean that this S$933,000 is fix rather than variable? And if this is minimum, what is the maximum? Or at least what is the formula?
It is regrettable that SGX, as a role model to other listed companies, uses this type of confusing wordings.
Thursday, July 23, 2009
Unknown note BC040022
Hi, I am a novice notes and stamps collector. I came across this strange note. Any experts out there know what is its origin country?
The only thing I can recognize there is 1917, which I believe is the year of issue of the note.
Thanks in advance.
An apple a day ... well what if you lose the apple?
It is reported that a 25 year old Chinese worker killed himself after he found a prototype of a new Apple iPhone model went missing. The worker worked for Foxconn, to which Apple outsources the munufacturing of iPhone. It was alleged that he was brutally treated and detained by Foxconn security. Apple is well known in the industry for the way they keep things secret, sometimes to the extent of leaking false information intentionally so to trace the source. You can imagine the pressure on Foxconn on having such a customer.
If the allegation is true, it is really sad that a young life is lost this way. Sometimes people or even organization sinks so much into the work or business that they forget there is life out there.
http://www.telegraph.co.uk/technology/apple/5885923/Chinese-worker-kills-himself-after-Apple-iPhone-prototype-goes-missing.html
If the allegation is true, it is really sad that a young life is lost this way. Sometimes people or even organization sinks so much into the work or business that they forget there is life out there.
http://www.telegraph.co.uk/technology/apple/5885923/Chinese-worker-kills-himself-after-Apple-iPhone-prototype-goes-missing.html
Wednesday, July 22, 2009
Maersk, can Rickmers depend on it?
Further to my research earlier on Maersk's stand on their shipping line business, I try to find out a little more. And to my surprise, the same CEO Mr Andersen, who vowed not to invest in the shipping line anymore (see previous posting), is the same guy who is committed to make the shipping line 'top priority' in Maersk Group just 2 years ago (see article below).
The flipflop in a short 2 years time makes me more convince that the fate of the shipping line could be questionable. I urge Rickmers management to seriously look into this, so that it will not be caught in surprise.
Publication date: 11/6/2007
New Maersk chief makes shipping line ′top priority′
Improving returns in its struggling container shipping business is the number one priority for AP Møller-Maersk, the Danish group's first externally appointed chief executive has said on his first day in the job.
Nils Smedegaard Andersen, who came to Maersk from Carlsberg, the brewer, said a team was developing plans to increase returns at the Maersk Line container shipping business, which has been losing market share in spite of being the world's largest container line and has had to slash its rates. Mr Andersen was speaking only hours after taking office yesterday morning. However, he admitted Maersk Line faced complex problems.
"Usually when you have a problem that cannot be fixed in a few months, it's because it's a composite problem," he said. "What we have to do is really focus on holistic solutions."
Mr Andersen comes to Maersk after a management shake-up in June saw two senior executives - Tommy Thomsen and Knud Stubkjaer - pushed out and Jess Søderberg, chief executive, advance his retirement by two years. The changes were seen as a response by Michael Prem Rasmussen, chairman, to the problems facing Maersk Line since it botched the integration of computer systems with P&O Nedlloyd, the former world number three container line, which it took over in 2005.
Mr Andersen is only the fourth chief executive in Maersk's 103-year history. Before Mr Søderberg, Arnold Peter Møller ran the company from 1904 until 1965 and Maersk McKinney-Møller, his son, ran the company until Mr Søderberg's appointment in 1993. Mr McKinney-Møller, 94, still has a major influence over the company.
The container shipping business is not growing fast enough and not making enough money, according to Mr Andersen. "I think improving returns at this point is the first priority" followed by, mid-term, creating more growth in the business, he said. The container division would have to concentrate on finding the right routes to operate and the right pricing mechanisms, he added.
"We just have to get better and better all the time," he said. "There's no way you can take a quick decision and everything is good. This is about improving the way we work day-to-day." Losses at the container division depressed last year's earnings at the group, which produced pre-tax profits for 2006 of $6.05bn on $44.5bn revenue.
Source: msnbc.msn.com
http://www.freshplaza.com/news_detail.asp?id=10576
The flipflop in a short 2 years time makes me more convince that the fate of the shipping line could be questionable. I urge Rickmers management to seriously look into this, so that it will not be caught in surprise.
Publication date: 11/6/2007
New Maersk chief makes shipping line ′top priority′
Improving returns in its struggling container shipping business is the number one priority for AP Møller-Maersk, the Danish group's first externally appointed chief executive has said on his first day in the job.
Nils Smedegaard Andersen, who came to Maersk from Carlsberg, the brewer, said a team was developing plans to increase returns at the Maersk Line container shipping business, which has been losing market share in spite of being the world's largest container line and has had to slash its rates. Mr Andersen was speaking only hours after taking office yesterday morning. However, he admitted Maersk Line faced complex problems.
"Usually when you have a problem that cannot be fixed in a few months, it's because it's a composite problem," he said. "What we have to do is really focus on holistic solutions."
Mr Andersen comes to Maersk after a management shake-up in June saw two senior executives - Tommy Thomsen and Knud Stubkjaer - pushed out and Jess Søderberg, chief executive, advance his retirement by two years. The changes were seen as a response by Michael Prem Rasmussen, chairman, to the problems facing Maersk Line since it botched the integration of computer systems with P&O Nedlloyd, the former world number three container line, which it took over in 2005.
Mr Andersen is only the fourth chief executive in Maersk's 103-year history. Before Mr Søderberg, Arnold Peter Møller ran the company from 1904 until 1965 and Maersk McKinney-Møller, his son, ran the company until Mr Søderberg's appointment in 1993. Mr McKinney-Møller, 94, still has a major influence over the company.
The container shipping business is not growing fast enough and not making enough money, according to Mr Andersen. "I think improving returns at this point is the first priority" followed by, mid-term, creating more growth in the business, he said. The container division would have to concentrate on finding the right routes to operate and the right pricing mechanisms, he added.
"We just have to get better and better all the time," he said. "There's no way you can take a quick decision and everything is good. This is about improving the way we work day-to-day." Losses at the container division depressed last year's earnings at the group, which produced pre-tax profits for 2006 of $6.05bn on $44.5bn revenue.
Source: msnbc.msn.com
http://www.freshplaza.com/news_detail.asp?id=10576
Tuesday, July 21, 2009
Maersk - Mixed signals for Rickmers
We were told by Rickmers CEO that Maersk needed the new ships badly, so I decided to do some research on this saviour.
From the article below, there are 2 mixed signals. One is that the group actually views the shipping line as a less profitable business and will not receive much investment in future. I think for a CEO to say this in public is a very strong statement. Will it lead to divestment? If so how will it impact Rickmers?
The good news is of course, if they do not want to buy new ships, the alternative is to rent. It will mean a good growth prospect potential for Rickmers.
For now, there is no clear answer.
No more ships for Maersk
The Maersk Group began on the back of its shipping fleet but now wants to invest in more profitable areas
Executive management in the A.P. Møller-Mærsk Group have indicated that the foundation stone of the company – its container shipping line – is not as profitable as other areas and will not receive as much investment in the future.
Maersk chief executive Nils Smedegaard Andersen told Berlingske Tidende newspaper that the heavy investment in Maersk Line over the last two decades meant that the company’s fleet simply can’t get any larger.
That, coupled with falling profits, means the Copenhagen-based group will focus its future investments in its oil and terminal activities.
‘We must spread our investments in the areas where we will get the best returns. Maersk Line has given bad yields in the last few years, and it is a complex area to make money in. Where investments are concerned, our main focus in the future will be directed towards oil and terminals, among others,’ said Andersen.
In recent years, the Maersk Group has invested up to 60 billion kroner in new ships and projects, but now wants better returns from areas of ‘great potential’.
‘Our oil business and terminals, together with other business interests, continue to grow significantly faster than the market,’ said Andersen.
The CEO confirmed that even when global economies stabilise again, the group does not intended to order new ships for Maersk Line, but rent vessels for varying periods to increase flexibility.
The Copenhagen Post
Edited June 22, 2009
From the article below, there are 2 mixed signals. One is that the group actually views the shipping line as a less profitable business and will not receive much investment in future. I think for a CEO to say this in public is a very strong statement. Will it lead to divestment? If so how will it impact Rickmers?
The good news is of course, if they do not want to buy new ships, the alternative is to rent. It will mean a good growth prospect potential for Rickmers.
For now, there is no clear answer.
No more ships for Maersk
The Maersk Group began on the back of its shipping fleet but now wants to invest in more profitable areas
Executive management in the A.P. Møller-Mærsk Group have indicated that the foundation stone of the company – its container shipping line – is not as profitable as other areas and will not receive as much investment in the future.
Maersk chief executive Nils Smedegaard Andersen told Berlingske Tidende newspaper that the heavy investment in Maersk Line over the last two decades meant that the company’s fleet simply can’t get any larger.
That, coupled with falling profits, means the Copenhagen-based group will focus its future investments in its oil and terminal activities.
‘We must spread our investments in the areas where we will get the best returns. Maersk Line has given bad yields in the last few years, and it is a complex area to make money in. Where investments are concerned, our main focus in the future will be directed towards oil and terminals, among others,’ said Andersen.
In recent years, the Maersk Group has invested up to 60 billion kroner in new ships and projects, but now wants better returns from areas of ‘great potential’.
‘Our oil business and terminals, together with other business interests, continue to grow significantly faster than the market,’ said Andersen.
The CEO confirmed that even when global economies stabilise again, the group does not intended to order new ships for Maersk Line, but rent vessels for varying periods to increase flexibility.
The Copenhagen Post
Edited June 22, 2009
FSL - What's in their mind?
Disclaimer: This is not an investment advice, purely my own opinion and I do own the stocks.
Ok, so FSL decides to cut the payout ratio to 50% in FY09 3Q. This is the second cut after the cut from 100% to 73% in FY09 1Q.
What we know here is the problem, the need to refinance, and we also know the outcome, the management decides to cut payout ratio. But we do not know why they make this decision!
First all let's see what are the options available and considerations:
By cutting the payout ratio, the management seems to have abandoned the option of raising fund from investors, unless they can get strong support from major shareholders or new stragic investors to inject funds.
However, at the same time, it is also hard to see how cutting the payout and prepayment can help in the other 2 options. FSL has an outstanding loan of $509 million. By cutting the ratio to 50% from 73% (FY09 2Q), it only saves about $4 million a quarter or $16 million a year, which is a mere 3%. It is clearly not a significant internal generated fund, and I can't see if any bankers would take this as good faith, and thus improve FSL credit rating. And even if for some reasons bankers like this, why didn't they do this earlier? How can the management suddenly wake up and say hey let's cut the ratio? The inconsistency is uncalled for in a relatively simple and predictable business model.
So in summary, I see this as a move with no clear direction.
Ok, so FSL decides to cut the payout ratio to 50% in FY09 3Q. This is the second cut after the cut from 100% to 73% in FY09 1Q.
What we know here is the problem, the need to refinance, and we also know the outcome, the management decides to cut payout ratio. But we do not know why they make this decision!
First all let's see what are the options available and considerations:
By cutting the payout ratio, the management seems to have abandoned the option of raising fund from investors, unless they can get strong support from major shareholders or new stragic investors to inject funds.
However, at the same time, it is also hard to see how cutting the payout and prepayment can help in the other 2 options. FSL has an outstanding loan of $509 million. By cutting the ratio to 50% from 73% (FY09 2Q), it only saves about $4 million a quarter or $16 million a year, which is a mere 3%. It is clearly not a significant internal generated fund, and I can't see if any bankers would take this as good faith, and thus improve FSL credit rating. And even if for some reasons bankers like this, why didn't they do this earlier? How can the management suddenly wake up and say hey let's cut the ratio? The inconsistency is uncalled for in a relatively simple and predictable business model.
So in summary, I see this as a move with no clear direction.
Monday, July 20, 2009
FSL - 3Q FY09 DPU guidance US1.50 cents
FSL release 2Q FY09 results.
Key points:
- DPU US2.45 cents, which 74% of net cash from operation, no distribution reinvestment scheme this round
- No surprise from the business side
- Allocation of 50% free cash flow for distribution (last quarter was 75%), so 3Q FY09 guidance is US1.50 cents (down 38%)
- The cash retained will be used to repay debt.
As I highlighted in a previous posting, distribution from depreciation undermines the sustainablity of the trust in the long run, and has immediate impact on the unit price. However, reducing the payout would hit the unitholders pocket immediately, especially retirees dependent on the distribution.
http://mycroeconomics.blogspot.com/2009/07/depreciation-noncash-non-concern.html
It is interesting to see how the market reacts to this today.
Key points:
- DPU US2.45 cents, which 74% of net cash from operation, no distribution reinvestment scheme this round
- No surprise from the business side
- Allocation of 50% free cash flow for distribution (last quarter was 75%), so 3Q FY09 guidance is US1.50 cents (down 38%)
- The cash retained will be used to repay debt.
As I highlighted in a previous posting, distribution from depreciation undermines the sustainablity of the trust in the long run, and has immediate impact on the unit price. However, reducing the payout would hit the unitholders pocket immediately, especially retirees dependent on the distribution.
http://mycroeconomics.blogspot.com/2009/07/depreciation-noncash-non-concern.html
It is interesting to see how the market reacts to this today.
China Kunda auditors - the more the messier
Learnt quite some new stuff here. To cut the story short, SGX found that while China Kunda group auditor is Ernst and Young, it uses different auditors for their China subsidiaries. China Kunda responds that while E&Y audits everything, including the subsidiaries, they have additional auditors to audit the subsidiaries local audit requirements.
Given benefits of doubt to everyone here, I infer that:
1) China regulation requires local auditor
2) SGX does not know that there is such a local audit requirement, otherwise they would not ask (all other China companies listed here never report this?)
3) China Kunda thinks that SGX already know, that's why they do not elaborate in the annual report
If you have the answers, please let me know.
For shareholders, one thing learnt is that, 2 auditors are paid to do the same job. That either gives you double comfort or double heartache.
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_120FE94E2A386F8C482575F9003C3876/$file/CHINAKUNDA_Responses_to_SGX-ST_Query.pdf?openelement
Given benefits of doubt to everyone here, I infer that:
1) China regulation requires local auditor
2) SGX does not know that there is such a local audit requirement, otherwise they would not ask (all other China companies listed here never report this?)
3) China Kunda thinks that SGX already know, that's why they do not elaborate in the annual report
If you have the answers, please let me know.
For shareholders, one thing learnt is that, 2 auditors are paid to do the same job. That either gives you double comfort or double heartache.
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_120FE94E2A386F8C482575F9003C3876/$file/CHINAKUNDA_Responses_to_SGX-ST_Query.pdf?openelement
Depreciation - Noncash, non-concern?
One of the key features of business trusts and normal stocks is that normal stocks can only distribute dividend from profit, whereas the trusts can do so from their revenue after deducting some necessary expenses and meeting compliance to loan covenants.
This has sometimes even been highlighted as an advantage as there is more cash to distribute. This prompts me to write something about it here.
One of the key components that makes up the delta between revenue and profit is depreciation. Depreciation is basically an allocation of upfront investment cost across its useful life. For example, we buy a ship for #30 million, and the useful life is 30 years, and further assume we use a linear depreciate method, the depreciation per year would be $1 million, ie $30 million divided by 30 years.
You may ask, since the money already paid upfront, why should I care about depreciation? After all it is just accounting profit and loss.
Well, remember the 30 years useful life? What happen after 30 years? Depreciation actually is a way that companies re-accumulate the capital needed to replace the asset when its life expires. If the company does not accumulate its earning, it would not be able to sustain it earning capability.
Now you may ask again, why should I care about what happen after 30 years? Well it matters. For instance, in discounted dividend flow valuation model, a finite dividend flow, and an infinite one will have very different values. In other words, what is projected to happen 30 years later will have impact on your trusts price today.
So make sure you understand what you get.
This has sometimes even been highlighted as an advantage as there is more cash to distribute. This prompts me to write something about it here.
One of the key components that makes up the delta between revenue and profit is depreciation. Depreciation is basically an allocation of upfront investment cost across its useful life. For example, we buy a ship for #30 million, and the useful life is 30 years, and further assume we use a linear depreciate method, the depreciation per year would be $1 million, ie $30 million divided by 30 years.
You may ask, since the money already paid upfront, why should I care about depreciation? After all it is just accounting profit and loss.
Well, remember the 30 years useful life? What happen after 30 years? Depreciation actually is a way that companies re-accumulate the capital needed to replace the asset when its life expires. If the company does not accumulate its earning, it would not be able to sustain it earning capability.
Now you may ask again, why should I care about what happen after 30 years? Well it matters. For instance, in discounted dividend flow valuation model, a finite dividend flow, and an infinite one will have very different values. In other words, what is projected to happen 30 years later will have impact on your trusts price today.
So make sure you understand what you get.
Sunday, July 19, 2009
TheEdge 200709 - 7-11 Biz opportunity in Shanghai?
I gather these points in Sunita Sue Leng's article.
1. Taiwan has highest density of convience store, 1 for every 2500 people
2. President Chain Store Corp controls 52% of it, ie 4,810 outlets.
3. In Beijing, there are 75; In Guangzhou 512. Shanghai? 4.
4. Map of control for 7-11 in China, North: 7-11 Japan, South: Dairy Farm HK, East: President Chain Store.
5. President took 7 years and 100 stores to break even in Taiwan. It estimates to take 3-4 years and 250 stores to achieve break even in Shanghai.
It certainly looks like there is a big potential market, and an experience and determined franchisor. Doing a franchise 7-11 was one of the many business ideas I considered once, but I dropped it when I saw it almost every corner, and don't forget NTUC Cheers. Anyone interested in running the business in Shanghai may consider it. :)
1. Taiwan has highest density of convience store, 1 for every 2500 people
2. President Chain Store Corp controls 52% of it, ie 4,810 outlets.
3. In Beijing, there are 75; In Guangzhou 512. Shanghai? 4.
4. Map of control for 7-11 in China, North: 7-11 Japan, South: Dairy Farm HK, East: President Chain Store.
5. President took 7 years and 100 stores to break even in Taiwan. It estimates to take 3-4 years and 250 stores to achieve break even in Shanghai.
It certainly looks like there is a big potential market, and an experience and determined franchisor. Doing a franchise 7-11 was one of the many business ideas I considered once, but I dropped it when I saw it almost every corner, and don't forget NTUC Cheers. Anyone interested in running the business in Shanghai may consider it. :)
Saturday, July 18, 2009
Gold, for an alien attack?
You must have heard from your parents or grandparents, in time of war, money has no value, only gold is acceptable in business transaction. However, for the new generation, a war probably is as distant as an alien attack.
There is some truth in what they said though. In fact gold has been used as money or currency for generations, directly or indirectly. Before 15/Aug/1971, the value of $35was fixed at one troy ounce of gold, under the Bretton Woods System (since 1946). On 1971 Aug 15, then US President Richard Nixon abolished this.
Since then, for the first time in human history, there is no official link between currency and real asset (eg: shell, copper, gold). Therefore, what you have today in your wallet does not have an intrinsic value by itself, it is call Fiat money. It is a form of IOU by the government, promising you that you could exchange the note for some values. Therefore its value is highly dependent on the credibility of the governments. Now you know, in time of war, the survival of the country, therefore the government is already a big question mark, who talks about credibility?
Will the greatest mankind invented wealth creation technology, called printing technology defeats the thousands year wisdom in pursuing gold? Will the aliens strike one day? This is a complicated topic, let me do more research.
There is some truth in what they said though. In fact gold has been used as money or currency for generations, directly or indirectly. Before 15/Aug/1971, the value of $35was fixed at one troy ounce of gold, under the Bretton Woods System (since 1946). On 1971 Aug 15, then US President Richard Nixon abolished this.
Since then, for the first time in human history, there is no official link between currency and real asset (eg: shell, copper, gold). Therefore, what you have today in your wallet does not have an intrinsic value by itself, it is call Fiat money. It is a form of IOU by the government, promising you that you could exchange the note for some values. Therefore its value is highly dependent on the credibility of the governments. Now you know, in time of war, the survival of the country, therefore the government is already a big question mark, who talks about credibility?
Will the greatest mankind invented wealth creation technology, called printing technology defeats the thousands year wisdom in pursuing gold? Will the aliens strike one day? This is a complicated topic, let me do more research.
Overview of shipping trust & panel discussion
The event was one of the many conducted in the Asian Investment 2009 in Suntec. Below I try to capture some of my observations and important points, by no means a comprehensive one. Please do you own research before any investment decision.
It started with individual talks by OCBC analyst Meenal Kumar, FSL CFO Cheong Chee Tham, PST CEO ALvin Cheng Yu-Dong, Rickmers CEO Thomas Preben Hansen, and finally a panel discussion.
Meenal basically presented some basics of what a shipping trust is. I am not very sure of the objective of her presentations. But certainly she did not use the opportunity to sharpen investors' ability to understand the business model, she also did not even attempt to question any of the 3 companies directly. I hope one day we can see analyst really playing their part.
Next come FSL CFO, Cheong Chee Tham. Nothing surprise or exciting, he kept highlighting that FSL is more like a bank specialized in shipping than a shipping operator, as they only involve in bare boat leasing. And very importantly, they have a Chief Risk Officer to assess customer (counter party risk).
The next presenter was PST CEO Alvin Cheng. He started with history, saying that the company is the first listed shipping trust, in May 2006, and other aspects of the company. He appears cool and calm, really the trusted CEO type. However, he made 2 statements that gave me some uneasiness. First, he mentioned that the management fee is 4% of revenue, and therefore the management interest is aligned to that of unitholders to grow revenue. However, revenue can grow in many ways, and may not necessary benefit unitholders, eg right issue for acquisition. While I believe Alvin has no intention to sacrifice unitholders' benefit, this type of sweeping statement somehow made me feel my IQ is insulted. Second issue I have is on his illustration of PST asset value. First he talked about BV at $0.38, conservative value at $0.26, and then 'value in use' (which he said is a cashflow model) at $0.54, from which he concluded the stock is undervalue. My point is this, if this is a cashflow model, then the discount rate would be determined by the market, and reflected by stock price. You can't fix your own discount rate and claim market undervalue it. Other than the 2 points, I think Alvin gave a good presentation, especially on PST effort to continuosly deleveraging, and that the company loan has no asset covenant.
Finally, we have Rickmers CEO Thomas. First thing that caught my mind was the difference in management fee structure. For base fee, it has a fix $1.6 million plus a variable of 0.9% of the revenue. No incentive for acquisition or disposal. Sounds good to me. Again Thomas concurred that counter party risk is the major risk in shipping trust, and Rickmers managed that with choosing on large and financially sound customers. He mentioned that even under current financial turmoil, none of the 3 shipping trusts have been affected in terms of revenue as of now, and this is certainly a big plus compared to REITs. I think yes, but does it mean that the market is inefficient? When the market cannot adjust freely, a collapse could be inavoidable. Well I certainly hope no. On bare boat vs time charter, Thomas insisted that time charter, which means having their own crew on the ships make sense to Rickmers. He recognized an operating cost is incurred (which is small compared to revenue), but that gave him the assurance that the assets are well taken care of. Thomas further touched on the upcoming challenges including the pending $800 million capex requirement, and loan repayment next year, which Rickmers is still exploring many options. While no solution is given, he is certainly giving a lot of transparency, which I think is a good strategy.
Roger (SIAS), Meenal (OCBC research), Thomas (Rickmers), Chee Tham (FSL), Alvin Cheng (PST)Okay, finally the panel discussion. The moderator Roger Tan from SIAS told the panel that, in order to encourage his wife to invest rather than to spend last year, he promised his wife to cover any loss if any. And expectedly they ended up in shipping trust. What could the panel offers? Well think longterm, look at the business model, look at the cashflow! Will globalization end? Will world trade end?
Next, a question from the audience thrown to Rickmers: What if there is no success in the $800 million capex financing or Maersk just don't want it? Thomas appears confident, firstly there is no way out for Maersk, secondly he knows that Maersk needs the ships badly to be compettive as the big new ships are more efficient. And even in the worst case when everything else fails, Rickmers last option would be not to take delivery. while there is contractual obligation, probably the impact is less than $800 million.
Second question addressed to PST, why not quoted stock in SGD? Well simple, the company asset and liability, revenue and expense, are all in USD. And many investors are USD based. Thomas made a good point when he suggested PST to keep it that way (Rickmers stock quoted in SGD), as he sees the industry will grow in Singapore, and differentiation in the different companies will offer investors choices that fit their needs best.
Finally, time's up, last question. Will the loan to acquire a ship fully paid by the time the first lease end. I think the question makes no sense. If the sum of the first lease is sufficient to fully pay off the loan, in other words the customers comitted a sum greater or equal to the price of a ship, why should the customers lease, they would just buy! To my surprise, PST says some of their ships met this criteria. Those are their IPO fleet, which understandably taking a lower loan. Rickmers and FSL just say said no.
Hope this summary helps for those did not attend.
Thursday, July 16, 2009
Zero interest? Zero interest!
Nowadays, many banks, including DBS, UOB, Citibank, etc have this zero interest personal credit program.
The telemarketer would tell, hey sir or madam, now the bank charges you ZERO percent interest rate for 6 months, do you want to take up the loan? blah blah blah and we only charge you a 2% admin fee.
Zero interest? 2%? Still sounds good?
Wait, 2% for 6 months is equivalent to 4% per year. See the trick now? And by the way admin fee is upfront payment, not monthly rest. In other words, if you repay the loan within 3 months, the interest rate is actually 8%!
Well, good deal or not depends on how badly you need the loan at that moment. Even 8% is much better than Ah Long Pte Ltd, right?
But key point is, if it is zero interest, banks will also have zero interest to loan you the money! Loan with your eyes open.
The telemarketer would tell, hey sir or madam, now the bank charges you ZERO percent interest rate for 6 months, do you want to take up the loan? blah blah blah and we only charge you a 2% admin fee.
Zero interest? 2%? Still sounds good?
Wait, 2% for 6 months is equivalent to 4% per year. See the trick now? And by the way admin fee is upfront payment, not monthly rest. In other words, if you repay the loan within 3 months, the interest rate is actually 8%!
Well, good deal or not depends on how badly you need the loan at that moment. Even 8% is much better than Ah Long Pte Ltd, right?
But key point is, if it is zero interest, banks will also have zero interest to loan you the money! Loan with your eyes open.
Rocking Wall Street
This is a very mind opening book, written by Gary Marks, who is a fund manager, and unexpectedly also a songwriter.
A weird combination maybe, but if the title of the book or his music talent makes you think that he is a risk taker, then you are totally wrong.
In fact, he is against risk taking, to an extent that surprises me. For example, he is against market timing, short term trading, equate these to gambling. He suggests long term trading only on good companies, treasury, and well-managed hedge fund or fund of funds.
He also look at investment from a bigger picture, from the perspective of life. You do not want to waste your life monitoring the market, worrying about your investment.
We probably do not have the luxury to invest in treasury or hedge funds, but the book certainly makes me have a different view on risk and life.
I strongly recommend every investor to read this book.
A weird combination maybe, but if the title of the book or his music talent makes you think that he is a risk taker, then you are totally wrong.
In fact, he is against risk taking, to an extent that surprises me. For example, he is against market timing, short term trading, equate these to gambling. He suggests long term trading only on good companies, treasury, and well-managed hedge fund or fund of funds.
He also look at investment from a bigger picture, from the perspective of life. You do not want to waste your life monitoring the market, worrying about your investment.
We probably do not have the luxury to invest in treasury or hedge funds, but the book certainly makes me have a different view on risk and life.
I strongly recommend every investor to read this book.
Wednesday, July 15, 2009
The Human Side of M&A
This book is on HR management during Merger and Acquistion, written by Dennis C. Carey and Dayton Ogden, both are veteran in top/senior management recruitment and advisors in M&A.
The reason I invested my time reading this book is to learn what makes a M&A successful, and what makes it not. I hope this can help me to make appropriate investment judgement and decision when a company is involved in M&A.
Unfortunately I do not gain the confidence after finishing the book. The authors advocate proper attentions and efforts taken to manage the transition and to keep the talents. However, exactly how? I suspect due to confidentiality, the authors did not disclose much details.
One thing I learnt though, be skeptical when a M&A is announced, the success is still pretty much a big question mark.
The reason I invested my time reading this book is to learn what makes a M&A successful, and what makes it not. I hope this can help me to make appropriate investment judgement and decision when a company is involved in M&A.
Unfortunately I do not gain the confidence after finishing the book. The authors advocate proper attentions and efforts taken to manage the transition and to keep the talents. However, exactly how? I suspect due to confidentiality, the authors did not disclose much details.
One thing I learnt though, be skeptical when a M&A is announced, the success is still pretty much a big question mark.
Asian Investment 09 - Suntec 18-19 July 2009
I plan to attend this exhibition this coming weekend. I think they have some very good programmes.
There are a number of talks and panel discussions, quite a number of them by the CEOs. I will try to catch some of the events. Stay tuned for my discovery.
More details here:
http://www.asiainvestment.com.sg/program_day1.htm
There are a number of talks and panel discussions, quite a number of them by the CEOs. I will try to catch some of the events. Stay tuned for my discovery.
More details here:
http://www.asiainvestment.com.sg/program_day1.htm
Mycroeconomics
Hello there,
Confused by my title? No, your eyes aren't playing trick, and neither is there a typo.
I name it this way intentionally. Why? Because, it is not macroeconomics or microeconomics that matters to me, ultimately I only care about what affects me, that is MYcroeconomics.
By the way, I can't find this word in Wikipedia. English teachers please do not scold me :)
Confused by my title? No, your eyes aren't playing trick, and neither is there a typo.
I name it this way intentionally. Why? Because, it is not macroeconomics or microeconomics that matters to me, ultimately I only care about what affects me, that is MYcroeconomics.
By the way, I can't find this word in Wikipedia. English teachers please do not scold me :)
Subscribe to:
Posts (Atom)