The Angry Investor

Samudera aka Genneva Gold Ponzi scheme.

2011-03-14T17:03:00.004+08:00

I've more or less left this blog inactive, but I'm returning momentarily just to blog about this scam/ scheme which recently caught my attention. Of course, it's old news to some people, but then again, some other will not have heard of this at all.

This Ponzi scheme is done by the company Genneva Gold Sdn. Bhd.

What the deal involves is: They will sell you gold bullion at a marked up price. Say 1 kilo of gold costs RM130,000 today. They will sell 1 kilo of gold to you for RM170,000.
Now, here is the interesting bit. They also offer you a buyback guarantee at your initial buying price of RM170,000 in 6 months time. On top of that, they also give you a MONTHLY rebate of between 2% and 2.5%. That's 24-30% per annum! Sounds too good to be true?

That's cause it IS. I have double checked with several agents from Genneva aka Samudera, and they have replied that this gold trading is the sole source of revenue for the company.

Here is the basic problem in a nutshell: Effectively, Genneva is borrowing from customers at 24% per annum, with gold bullion as collateral, with a term of 6 months. This is pretty ridiculous, seeing as how bank borrowing rates are at around the lowest in history. It makes no sense for them to borrow from the public at grossly inflated prices.
The thing is, these agents are (stupidly) saying that Genneva is generating profit, because their cost price for the gold was RM130,000 and they sell to you at RM170,000. They are completely WRONG, and are complete idiots. Let me illustrate to you. Let's say, for example, you have a Proton car, which you bought for RM50,000. You sell it to me for RM1 million. Then you pay me interest of RM 20k a month. Then at the end of 6 months you buy it back from me at RM1 million. Do you think you made a profit? ... no, OBVIOUSLY. You have made a spectacular loss of RM 20k x 6 = RM120k.

In other words, what we have here is a company that does nothing but borrow money, it pays out super high interest rates using said borrowed money.

This is the very definition of a Ponzi scheme in action.

Honestly, there are a lot of very gullible people out there.

The trouble is, just like any other ponzi scheme, they are still paying out their "investors" right now. And boy are those investors crowing about their fabulous returns.

It's actually a very interesting pschological exercise. You can see how cocky and confident all those current investors are now and how they tell non-believers that they are being foolish for not taking the offer. I'm watching with bated breath to see what will happen when the scheme eventually collapses.

BTW, the company is under investigation by Bank Negara, changed itself to Samudera to resume operations, now it's changing back to Genneva, and is now operating under shariah regulations from BNM.

Urban Barns Foods - Scam?

2009-12-15T04:21:00.003+08:00

Well, well, well... I'm making a brief return, to comment on this company.

I was very very interested... stock is slightly above $1... they claim it will hit $14... all based on the strength of it's product. Admittedly, the product looks good... they claim to grow vegetables organically, in 1/4 the time and 1/100th the land area.

http://www.stockmoversdaily.com/alerts/urbf-featured-alertq.html

Looks good doesn't it?

Now, how about the annual report?

http://www.faqs.org/sec-filings/091113/Urban-Barns-Foods-Inc_10-K/

...

OH MY DOG.

We have a total of 100,000,000 authorized common shares with a par value of $0.001 per share with 43,400,000 common shares issued and outstanding on July 31, 2009. Subsequent to July 31, 2009, on August 19, 2009, our 7 for 1 forward stock split, approved by the Board of Directors on July 22, 2009, became effective resulting in there being 43,400,000 shares of common stock issued and outstanding. Cash provided by financing activities for the period from inception (May 21, 2007) through July 31, 2009 was $72,000 consisting of 1,600,000 shares of common stock that were issued to our director, Mr. Hassan, in exchange for $8,000 US, or $.005 per share and 3,200,000 shares of common stock that were issued to twenty six investors for $64,000 or $0.02 per share pursuant to our Registration Statement on Form SB-2. An additional 1,400,000 shares were issued to Mr. Hassan in exchange for $7,000 in mineral property costs that he paid on behalf of the company.

Acquisition costs of the potential business 12 months $80,000

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has had no operation since inception and generated a net loss of $77,150, which raises substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

TOTAL ASSETS $ 3,098

TOTAL STOCKHOLDERS' EQUITY $1,850

WHEE!!!

WTF???

That's not $1.8 million... that is 1.8 thousand dollars!

By the way, guess what the market value of the company currently is, at around $1?

Slightly over $43 million, since they have 43,400,000 shares floating around.

...
...
...

I am an ANGRY INVESTOR!!! HEAR ME ROAR!!!

This is absolute absolute absolute bullshit!!!!

$14 a share???

This isn't even worth it's original $0.001 a share!

Run! Run! It's POISON!

...

I suppose they might turn it around and actually try running a business with it, but, currently, it is NONSENSE! RUN I say, RUN!!!

Barclays: CLOs? Being used to raise capital? ... geez.

2009-04-21T15:19:00.003+08:00

http://www.thestreet.com/story/10487846/1/barclays-massive-loan-pool-eludes-notice.html
(apologies to thestreet.com... forgot to quote them in my unedited post. Sigh. unintentional plagiarism...)

A more than $30 billion pool of corporate loans managed by Barclays (BCS Quote) has slipped by virtually unnoticed, but merits close scrutiny as it sheds light on central bank lending standards loosened by regulators' fight against the global economic downturn.
The transaction, dubbed Newfoundland and rated triple-A by Moody's Investors Service looks to be the largest collateralized loan obligation ever issued, by a large margin. Most CLOs are in the $300 million range and anything over $1 billion is considered large, according to Bill May, an analyst at Moody's.
"It's certainly the biggest CLO I've ever heard of," May says.
Its purpose is almost certainly to allow Barclays to use its corporate loan portfolio as collateral to obtain short-term funding from a central bank, according to May and other analysts and economists. They are divided, however, on whether the European Central Bank or the Bank of England is the more likely lender. Neither central bank responded to requests for comment.
Barclays declined to discuss the transaction, which it does not appear to mention in its public regulatory filings and the existence of which was unknown even to close followers of the company like Sandy Chen, analyst at Panmure Gordon.
"The more light that can be shed on this, the better," Chen says.
Further, Tavakoli worries the central banks could be stuck with assets worth far less than they think. "It's kind of disturbing that the Fed and the ECB have decided to take on this kind of collateral, and they're really not equipped to scrub it," she said in a follow-up phone interview.
Collateralized debt obligations -- a broader category that includes CLOs and collateralized bond obligations -- are probably the best example of the so-called "toxic" securities at the heart of the current crisis. They have led to hundreds of billions in writedowns over the past year, wreaking havoc at once-proud institutions like Merrill Lynch, UBS (UBS Quote) and Citigroup(C Quote).
Since the crisis began, buyers for these instruments are scarce to non-existent. However, some banks have created so-called balance-sheet CLOs like Newfoundland in order to use their troubled loans as collateral to obtain short-term financing from central banks. The best-known example of such a transaction is a $2.8 billion CLO, known as Freedom, issued last year by Lehman Brothers.
How many other banks are creating balance-sheet CLOs to borrow from central banks is difficult to know. Morgan Stanley analyst Vishwanath Tirupattur says there are others, though he is not aware of any that rival even Freedom in size, much less a $30 billion giant like Newfoundland. Such information is hard to come by, however. Even though he specializes in CLOs, Tirupattur was unaware of the second $16 billion issue from Newfoundland last month.
"Some of these balance-sheet deals are not broadly distributed. I mean they're not distributed at all," Tirupattur says.
That's because investors are too spooked to buy them, for now. Whether they will ever return to the market for such highly complex products remains to be seen. It is ironic, however, that banks are now creating new structured securities like Newfoundland to extract themselves from the very mess such securities created in the first place.
The Moody's report explaining the triple-A rating given to Newfoundland last month is highly technical, referring to a "Correlated Binomial Expansion Technique," and a "weighted-average rating factor of 1040."
While there may not yet be a market for these securities, the fact that banks are still producing them is an ominous sign to people like John Kanas, a consultant to private equity investors and the former CEO of North Fork bank, bought by Capital One Financial Corp. (COF Quote) in 2006.
"There should be a loud and clear voice demanding us to go back to simplicity and away from these esoteric products, but frankly I may be a lone voice in the wind because the creation and sale of these products is a very profitable business," Kanas says.

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What do I have to add here? ... all that needs to be said has been said.

Basically, we not only have Barclays creating a HUGE *potentially* toxic asset... it's a NINJA asset! Hidden and kept as secretive as possible.

And no one is worried about this? ... oh really?

...

Now the hope is that these ninja assets do not really act like ninjas. You know... remain hidden, and then kill the target at the most opportune/inopportune moment!

...

Still, one lesson that has been drummed in lately. Capitalism might have many flaws, but one principal seems to be very very important: Lack of transparency is a cause for alarm. Corporate dishonesty is a sign to run and not get involved.

Sarah Palin... dumb bimbo.

2009-04-16T21:59:00.002+08:00

Meh... I would not invest in anything that has too much of Palin's touch on it... she's clearly a bit of an airhead.

BTW, all those people who swallowed her no-abortion propoganda? ... Her daughter is now a single mother. Levi Johnston has broken up with Bristol. The marriage and happy ending that they were going on and on AND ON AND ON about throughout the presidential campaign? ... that turned out to be... duh, propoganda.

And Bristol is STILL being *USED* by her useless mother, who keeps claiming to be a FAMILY oriented woman... Bristol is being forced to advocate avoiding birth control and advocating abstinence. ... in her school. I mean, come on, the girl is trying to go through college life, can't you let her just put the matter behind her and try to live as normal a life as she can salvage now? MUST you turn your daughter into a "you should do the right thing or you will end up like me" case, Sarah Palin?

Isn't that a little heartless?

....

Personally, I think Palin is a moron. There are actually so many political issues in the world, it's really more sensible to just pick some others and reduce exposure to the whole sex and pregnancy issue for the time being... maybe possibly forever.

Anyhow, Alaska does not seem the greatest place in the world to put your money, as long as the person in charge is Sarah Palin!

General Growth Properties Files for Bankruptcy

2009-04-16T21:51:00.002+08:00

http://dealbook.blogs.nytimes.com/2009/04/16/general-growth-properties-files-for-bankruptcy/?ref=business

General Growth Properties, one of the largest mall operators in the nation, filed for bankruptcy early Thursday morning in one of the biggest commercial real estate collapses in United States history.
Despite bargaining for months with its creditors, General Growth faced dwindling options for handling its more than $25 billion in debt, largely in the form of short-term mortgages that will come due by next year.

-----

http://www.scribd.com/doc/14277534/General-Growth-Properties-Bankruptcy-Filing

THIS is the really interesting bit.

Number of creditors: over 100,000. Amount of liabilities: over 1 billion. Huh. They ran out of checkboxes. Interesting...

As someone commented, with the size of the bankruptcies these days, they need new forms... sigh...

Najib made a rather blatant statement which shows political favoritism

2009-03-30T21:19:00.006+08:00

Before you say i am making up stories or slandering people, *I AM ONLY REPEATING WHAT WAS PRINTED IN THE NEW STRAITS TIMES!!!*

And NST is directly quoting Najib himself. So, I am not accusing Najib of anything. I am just repeating what was said by Najib, Bernama, and NST.

http://www.nst.com.my/Current_News/NST/Sunday/National/2517798/Article/index_html
Or, for those who want a physical copy of this, New Sunday Times, March 29, 2009, Page 5 of News Section. (under the picture of 2 cranes)

Having telephoned NST, they pointed out that they are only quoting Bernama, so they take no responsibility either.

Najib disclosed that a website to keep tabs on spending of the stimulus packages would be launched within the next two weeks.
He said RM1.5 billion would be spent up to the end of next month and RM2.5 billion by end of May.
"They involve about 32,000 projects, which would involve class F contractors, who are also loyal supporters of Umno."

Rm4 billion in 3 months. 32,000 projects.

And ALL OF IT IS GOING TO these *loyal supporters of UMNO*.

AFAIK, some of those projects have not even been tendered yet. And nonetheless, we already know the result beforehand. All of it is only going to loyal supporters of UMNO!

...

You're not really allowed to do such things. If you are going to be conducting such gross favoritism for UMNO supporters, that leaves all non-UMNO supporters 3 choices: convert to UMNO supporters, try to survive in a political and economic environment which is grossly skewed against you, or just give up on the country and leave.

It has been pretty much an open secret that there is a lot of money politics and government projects given based on political favoritism, so this is hardly anything new. In fact, when I called up NST and Bernama to investigate, the editorial staff informed me that "corruption is quite normal, so why do you sound so surprised?". Not my opinion, merely repeating what was said to me.

What is a bit much is the fact that Najib proudly admitted to this fact to our local media.

I mean, consider if the Obama made a statement that the bailout package was being given exclusively to Democrats. There'd be public, possibly international outcry!

At the very least, he would be forced to retract or amend his statement, but in a civilized country, any minister who made this sort of statement might end up having to step down.

...

It gives a poor impression of the country's transparency issues. And makes economic growth look rather difficult.

In a country where State Governments can change hands without reelections, and where billions can be assigned to party loyalists, with the PM to be boasting about it... this is all rather unethical. Not very good stuff at all.

All in all, I wouldn't advise anyone to hold any long term investments in Malaysia... sell and cabut. In any case, the drop here was much less than in other countries, so when the economy does rebound, you can expect other countries to post much bigger percentage gains than Malaysia.

Abortion... rape... and saving lives? (non investment post)

2009-03-28T21:29:00.003+08:00

Excerpt from
http://www.nytimes.com/2009/03/28/world/americas/28brazil.html?hpw=&pagewanted=all

Weighing just 79 pounds and barely four feet tall, the 9-year-old girl, from Alagoinha, a town in the northeast, underwent an abortion when she was 15 weeks pregnant at one of the 55 centers authorized to perform the procedure in Brazil. Abortion is legal here only in cases of rape or when the mother’s life is at risk.

The doctors’ actions set off a swirl of controversy. A Brazilian archbishop summarily excommunicated everyone involved — the doctors for performing the abortion and the girl’s mother for allowing it — except for the stepfather, who stands accused of raping the girl over a number of years.

“The law of God is above any human law,” said José Cardoso Sobrinho, the archbishop, who argued that while rape was bad, abortion was even worse.

Doctors there said the girl’s uterus was too small to support one baby, let alone two.
Doctors said the girl would die if she carried the babies to term.

-----------

This has nothing to do with investments. Forgive me. But it just really pisses me off. I mean:

José Cardoso Sobrinho excommunicates basically everyone involved... EXCEPT for the guy who raped his 9 year old stepdaughter?

Abortion is worse than rape? Oh really? Big words coming from an old man... God should turn him into a 9 year old girl, and have him raped, pregnant, and told that he/she is going to die during the pregnancy.

And there's the practical side too: Seriously, which makes more sense, having 2 lives lost... or 3 lives lost?

...

Bloody idiot. Fortunatly, the president of Brazil and some of the Vatican overturned the ruling. But there's a split in the catholic church over the whole abortion issue.

Bah... economics and religion... the two biggest causes of war in history. Feh.

Global compensation consultant Towers Perrin should be shot!

2009-03-28T06:30:00.002+08:00

http://www.thestreet.com/story/10478287/3/five-dumbest-things-on-wall-street-march-27.html

Furniture Brands(FBN Quote - Cramer on FBN - Stock Picks) paid CEO Ralph Scozzafava $3.8 million in total cash compensation last year, including a 7% salary increase, according to trade magazine Furniture Today.

Scozzafava pocketed the hefty pay package despite sales falling 16.3% at the St. Louis-based company to $1.74 billion in 2008, and a net loss of $415.8 million on continuing operations, a mere eight times its 2007 loss. In December, the company eliminated 1,400 jobs, or about 15% of its remaining U.S. workforce

Scozzafava joined the company in June 2007 when the company's stock was above $14. The once-proud manufacturer of name-brands like Broyhill, Lane and Thomasville now trades for around 80 cents, and the company sports a piddling $40 million stock market value.

In a story about Scozzafava's bonus deal in Wednesday's Wall Street Journal, a company spokesman said "executive compensation decisions are made by an independent committee of the board of directors, which has been advised by global compensation consultant Towers Perrin."

That answer had us scratching our heads a little -- OK, a lot -- so we rang up Furniture Brands International and asked them who hired those fair and impartial consultants. To which they kindly replied, "the board."

And who is the chairman of said board? You got it. Ralph Scozzafava.
Don't blame Scozzafava, though. He just hired the people who overpaid him.

----

Er. In what way is this "fair and independant". Or impartial?

This... this is one of the most disgusting pay increases I have ever heard of... I'm surprised no lawsuits are being filed. Or maybe there are, just not big news considering other current events.

Let's summarise:

Sales fell 16% in 2008, losses increased 800% from 50 million to 400 million, share price fell 94%...

And these compensation consultants, Towers Perrin, who ultimately receive their paychecks and negotiate their contracts with Ralph Scozzafava...

Decide to award Ralph Scozzafava, CEO, with a 7% salary increase for the year.

...

Whee.

I feel like puking. WTF, looks like ANY MORON CAN BE A COMPENSATION CONSULTANT. This is apparently some global firm, and they give out horseshit like this... by contrast, I'm sure that people like you and me must be much more qualified than this bunch of imbeciles.

Retrenchment - Malaysia vs Overseas

2009-03-26T17:00:00.002+08:00

As some of you might know, I am a regular follower of Dali at http://malaysiafinance.blogspot.com/
His recent piece compared how Malaysian local companies did not really bother to retrench, compared to MMCs and foreign companies.

My point of view?

I am SURE that the price of labour has a lot to do with the difference in policy... for local firms, salaries a a much lower percentage. Take Tenaga, Proton, MayBank... what % of the annual revenue/profit do salaries make up? Compare that with General Motors, AIG, Goldman... where even 10% layoffs translated to pretty HUGE savings.
In the UK, an accountant get's like RM240,000 a year. In Malaysia, they get like RM 48,000 a year. So, in order to make the same amount of savings, a malaysian company needs to fire of 5 times the number of workers.
Or take General Motors. According to various reports, the cost of employing a GM factory worker, including wages and fringes, would not be in excess of $72 per hour. A FACTORY WORKER. Our local factory workers are getting RM1000 - RM3000 a month, but these guys are getting RM40,000 a month. Yes, dear dog, no wonder GM is in trouble.

One more thing. A lot of hiring that was going on was due to "optimism". Due to the length of the training cycle, companies have to prepare early for future growth, if you expect business to grow 40% in 2 years, you need to finish hiring 30% extra staff in 1 year. In fact, it wouldn't take a big fall in business for layoffs... in recent overheated job market environment, all it would have required would have been for revenue levels to stagnate for 2-3 years. That would already have been enough to have plenty of idle workers.

The stupidity of Malaysia's FUPO adventure.

2009-03-20T17:28:00.001+08:00

OMG.
I happened to go to my futures broker today, and I suddenly decided to dip my toes into FUPO.

But... Buy queues. for ALL months... ZERO
Sell queues, for all months... ZERO.

We had 5 trades on the first day, and it only got worse.

I tried to make some outlandish bids anyhow, on the hopes someone might decide to take me up on it.
...
My broker made some phone calls... he wasn't certain how the procedure went, since he had never done a FUPO contract before.
10 minutes later, told me it couldn't be done today.
I decided to forget it.

This is a chicken and egg scenario.
There a lot of shares that no one trades/ speculates on (long term investment only) because of low liquidity.
And because no one trades on them, there is no liquidity.
Vicious cycle, chicken and egg.
FUPO is like that now.

Furthermore, FUPO is CASH SETTLED not physically settled. So, it's ONLY useful as a speculative tool, an actual company which deals with palm oil products would not really be interested.
Overall, I was interested in doing a little speculation here, but I have lost interest in it too.

On top of everything else, the fact of the matter is that FUPO is redundant... the FUPO price will be solely determined by FCPO price and USD-MYR.
FUPO is effectively a derivative product, which has price controlled by two other products.
If I wanted to speculate on MYR-USD, I would do so directly. If I wanted to speculate on FCPO, I would do so directly.
Why would I waste my time doing FUPO contracts?

Another Ponzi scheme??? By GOLDMAN SACHS???

2009-03-17T14:44:00.005+08:00

Ok, ok... so, technically, this isn't a Ponzi scheme... but it reeks of something rather unethical...

Excerpts from http://www.nytimes.com/2009/03/17/business/17wall.html?_r=1&ref=business

"Working at Goldman has long been regarded as a sure path to riches. But Goldman’s employees are losing money on their personal investments — particularly in Goldman’s own elite investment funds, which have been considered one of the perks of working at the bank.
At least one of the vehicles, in a group known as the Whitehall funds, sank more than 50 percent last year. Another let its investors withdraw their money this year — at a significant loss.
But one former Goldman partner estimated that a quarter of the bank’s roughly 100 partners are now worth $5 million or less because of losses on their company stock and other investments.
The funds periodically require investors to add more money, and late last year, Goldman’s most senior management and board began to realize some employees might have trouble living up to this obligation after receiving low bonuses, according to a person briefed on the situation.
Employees in the funds are contractually obligated to meet requests for more capital. Several funds have such capital calls scheduled for April. Employees who fail to make the payments risk losing their jobs, according to a person familiar with the situation.
The new loans at Goldman are being offered to help employees meet capital demands from the internal funds and cannot be used for other personal needs, according to people familiar with the matter.
Goldman raised $20 billion in its most recent private equity fund and some $9 billion in the Whitehall real estate funds in 2007 and 2008.
About a third of the money in the funds typically comes from Goldman and its employees, and since 1991, the bank and its employees have accounted for $7.5 billion of the $26 billion in the Whitehall funds.
Others who borrowed against their stock holdings have been forced to sell at losses or put up more collateral against their loan. Goldman is one of many banks that has issued margin calls on its employees."

Those lines in red are very significant. Give the employees a large paycheck... then FORCE them to funnel it back into the company.
Suspicious?

In the 2nd place, these Goldman Sachs fellas are looking rather stupid, IMHO. Personally, I would NEVER sign up for some deal that contractually obligates me to pay in money over and over and over, over the years. Unless it's something like insurance, in which case I might consider it.

The thing is... what happens if disaster strikes and you can't afford to continue making payments? Actually, that's how most insurance companies make money... their clients lose their jobs, or some other misfortune occurs, which is non-claimable. And they are forced to terminate their payments and forfeit everything they've paid in up to that point.

Anyhow, basically, this is what has happened. Except, this is much worse. Terminating insurance is a "continue payment, or you will lose most of what you have invested so far". This Whitehall fund is "you've already lost most of what you have invested. Continue payment, or we will sack you"

...

Oh, and I'm wondering which idiots are going to take this deal to take these loans... this seriously smells of loan sharks... there is a LOT of unethical odour in this "you need to keep putting money into our special fund... no money? Well, do we have a deal for you... special (low or high interest i wonder) loans... we won't actually give you the money though, it'll go straight back into our coffers... trust us it's in your account... it will make both of us lots of money..."

So... so... dodgy!

Another reason why foreclosures will rise in America

2009-03-15T03:05:00.003+08:00

Well... not ALL parts of America... but certainly in states like Arizona and California.

"Some states have laws that may specifically prohibit lenders from pursuing borrowers for the balance of many mortgage loans after foreclosure, though the particulars vary. Arizona and California are among these states, according to Steven Bender, a professor at the University of Oregon School of Law. It’s best to talk to a lawyer to determine your state’s rules."

In other words, for those who bought a house and do not live in it, who are underwater, they can go through foreclosure and are DEBT FREE at the end of it. The only damage they take will be mental and also a hit to their credit rating. But overall, this will EASILY be their best choice from a financial standpoint.

And even the credit rating might not be strongly affected:

http://www.nytimes.com/2009/03/14/your-money/mortgages/14money.html?_r=1

Turns out FICO has decided to discount the affect of foreclosures in 2008 and 2009 in their credit ratings... the logic is fair enough, in short: it's not that these guys are deadbeats, it was the bubble bursting that did it.

Some lenders aren’t waiting that long to initiate their own foreclosure destigmatization programs. The Golden 1, one of the nation’s largest credit unions, now has a mortgage repair loan for people who have lost a home to foreclosure but want to buy a new one.

That's massive. In other words, you can put your home into foreclosure, which you bought for $500,000 and is currently worth $300,000 market price, which you are paying say $3000 a month on mortage. You make no further loss on this, and immediately turn around get a mortage and buy a house JUST LIKE THE ONE YOU JUST FORECLOSED for $300,000. If you're really sneaky, you might even be able to buy back your newly foreclosed house, thus moving back into your own home! and... wow, your new mortage payments have dropped to $2000 a month, since your total mortage just dropped from $500,000 to $300,000.

In other words, the bank just ate almost the entire fall in value of your home (you still lose any payments you made to date). And in fact, this means that EVEN IF YOU WERE NOT IN TROUBLE IN THE FIRST PLACE, aka even if you didn't lose your job, even if you CAN STILL AFFORD TO MAKE PAYMENTS.... it is financially the best choice to foreclose your house.

In affect, If you bought a house at the top of the market in California, and you paid $500,000.... and it has now dropped in value to $300,000... you should REJOICE and CELEBRATE.

No, I'm serious.

In effect, this current situation means that those fellas who bought when the market was too high can in affect basically wipe their slate clean, and just buy a similiar house for the much cheaper current prices.

...

Now I'm thinking of Malaysia and Bukit Antarabangsa. Ha. In comparison, in Malaysia, those who lost their homes in the landslide were informed that they "would be given 3 months grace from housing instalments" by the banks.

If they were under california laws, they could just foreclose, and the banks would have to eat the ENTIRE LOSS, since after foreclosure in California and Arizona, the banks can't chase after you for any balance after foreclosure.

Under Malaysian law though, I think those poor fellas are having to still pay for a RM1 million housing loan despite the fact that the house is now non-existant aka worth ZERO.

Comments, please.

MMC Senai Airport purchase... CROOKED AUDITORS AND ACCOUNTANTS!!!!

2009-03-11T16:01:00.003+08:00

This is the forecast from MMC corps regarding the SATS purchase.

Look at 2010.

... .... ... How can they deliver this sort of utter bullshit? How how how how how???

As I said, audtiors and accountants in Malaysia are paid peanuts, because they are useless piles of shit who don't understand the meaning of Accounting Standards, Intergrity, Transparency, or any other tenets of accounting.

What the bloody hell is this nonsense??? 6 years of average almost 15 million a year losses, and in 2010, they project 93.3 million profit? Where did they pull that figure from, huh???

Yeah, I know that they have to put in some large profit numbers to justify the buying price of Rm1.7billion, but this is just madness. (BTW, hearsay is that they pulled the number 93.3 million because they needed to arrive at over 5% return on equity.... 93.3 divided by 1700...)

And, as everyone knows, MMC is buying SATS from Tan Sri Syed Mokhtar Al-Bukhary. In CASH TERMS.

This... this is so fundamentally crooked, I know that other people also do RPTs, but at least they have the decency to at least TRY to make it look legit... this is really daylight robbery... geez....

I'm... I'm so disturbed by this, that I can't even muster the strength to be angry... good grief....

Malaysia's Foreign Reserve

2009-03-09T23:15:00.005+08:00

We had some local morons talking about how Malaysia has a "strong" and "comfortable" foreign reserve of USD91billion, which would stop the Ringgit from sliding.

...

Er.

Complete and utter morons. And VERY LAZY to boot.

http://www.bnm.gov.my/index.php?ch=12&pg=293&sdate=2008-10-31&lang=en

A 1 minute google search brought me to the bank negara website. Let me summarise:

Month vs Foreign Reserves.

July 2008: 125b
Aug 2008: 122.5b
Sep 2008: 109.7b
Oct 2008: 100.2b
Nov 2008: 97.7b
Dec 2008: 91.5b
Jan 2009: 91.3b

Hmm... ok, they seem to have stopped the slide in January... is it temporary or will it last? ... based on current economic conditions: IT WON'T LAST. DUH.

Anyhow, the gist of it is: our foreign reserves fell 34b in 6 months. BEFORE the recession has even really hit Malaysia.

Does that 91b look so big now?

This sort of reporting shows either lack of transparency(honesty), or stupidity. Or both.

It's bad enough when the country is in the hands of stupid but honest people. It was actually doing ok in the hands of the dishonest genius (Mahatir). But now, being run by people who are both stupid AND liars... that's no good, is it?

Why did government create valuecap?

2009-03-08T16:41:00.002+08:00

Let me summarise Valuecaps existance:

EPF is under mandate to balance a certain % of it's assets in equities, and a certain % in bonds, some in foreign currency, certain % in commodities... etc etc etc. All very UNtransparent, but the rules DO exist.

But during 97 crisis, EPF hit their upper ceilings for equity allocation. But government instructed them to buy up shares to support the KLCI. How?

In order to support the sharemarket, they created Valuecap.
All money that goes into valuecap is written into EPF as BONDS. (with all the associated risk profiling and stuff in the accounts). Despite the fact that Valuecap puts all the money into equities.
Nevermind. Anyhow, this is government's "clever" way of getting around EPF risk allocation mandates.

Buggers. They think that those asset allocations were put there just for fun? They're supposed to protect MALAYSIAN PENSIONS by diversifying out the risk!

One more thing.

IMHO, EPF itself should not exist. It is a massive Ponzi scheme, like Bernard Madoff's hedge fund.

Let's be frank here. EPF does NOT earn 8% per annum. BUT, it pays out 8% dividends. How does it manage this? By taking in "new" money to make payments on "old" money.

Everyone knows: if too many people were allowed to redeem their EPF money at once, EPF would collapse and go bankrupt.

There seems to be a very VERY good reason why Malaysian accountants and auditors are among the lowest paid in the world: They are useless. Yes, all a bunch of useless bookeeping staff who do not actually do their job of handling the accounts properly and providing transparency and information to all stakeholders. Frankly, they don't really do much of anything that a High School accounting graduate could not do. Sad. (and, yes, I have a degree,training, and job experience in Accounting)

If you had a bunch of high level accounting firms from overseas come in and go over Malaysia's biggest companies and government bodies, and exact international accounting standards and practices... I think 80% of the board of directors will end up in court/jail.

Bloody third world country with 3rd world accounts...

China and it's 8% growth.

2009-03-06T10:07:00.003+08:00

Surprisingly, due to the definition of GDP, it actually IS possible, even quite likely that China will experience very good growth figures for 2009.

This is because GDP is includes +exports, - imports. Basically, when exports go up, GDP goes up, when imports go up, GDP goes down. Not immediately intuitive, but it makes sense if you look at the diagrams.

Anyhow, because China's Exports dropped 18%, but it's IMPORTS fell by 43%, that means that China's GDP is rising.

Of course, this isn't going to help the rest of the world overcome recession, that 43% drop in imports means A LOT... in fact, this means that a lot of countries that were relying on China to buy their products are now getting slaughtered.

China's Textile Business in serious trouble.

2009-02-28T18:00:00.003+08:00

http://www.nytimes.com/2009/02/28/business/worldbusiness/28textile.html?ref=business

SHAOXING, China — This was a city that globalization built.
Not long ago, 20,000 textile and garment factories were bustling here.
The warning from Beijing last December was dire, too: As many as two-thirds of the country’s textile and apparel companies could go broke.
few sectors are as crucial to China’s economy as the $450 billion textile and apparel industry
Last year, the industry accounted for $153 billion of China’s $300 billion trade surplus, far more than any other industry.
The head of the Jianglong Group, one of Shaoxing’s biggest dye factories, ran off in November, leaving behind 4,000 workers and more than $200 million in debts.
Shen Ye, the owner of the Jinyu Textile Import and Export Company, whose orders are down as much as 80 percent, said some struggling factories were desperate but were afraid to seek bankruptcy. “If a factory files for bankruptcy, it has to pay back taxes to the government, salaries to the employees or money owed to the bank,” he said. “What’s left goes to private lenders. How much can be left? None! In order not to be beaten to death, they have to run.”

Typical of Chinese Businessmen and Chinese loan sharks! "Beating to Death" and "owners running away"!

This is rather large news... since imported textiles are largely discretionary spending, they are VERY strongly affected in a recession. When you get right down to it, even for electronics like Plasma TVs, there is a lot of pricing difference due to difference in quality and value... for clothes, a lot of similiar products are only differentiated by brand name... and about 700% mark-ups.
In any case, if textile exports fall badly, so will China's Trade Surplus... and if it's trade surplus falls, watch it's purchase of US treasuries fall as well.

What is the USA trying to accomplish with GM?

2009-02-19T02:53:00.004+08:00

GM has revealed it's super strategy to make itself turn around:

Borrow a LOT of money... lower production.... sack all it's workers.

Tadaa.

Negotiations to lower it's non-production related costs? (bondholders, UAW, Executive salaries, DELPHI...) ... not needed!

... I thought the whole point of the USA bailing out the autos was to save jobs?

Turns out that the USA would probably have saved more jobs if they had just let GM go into receivership, or even better, just NATIONALISED GM, by making a mandatory public offering for it's outstanding shares. Would have only cost it 2-3 billion, as I said before.

... What nonsense about "no one will buy a car from a company about to go bankrupt"?

GM is now persona-non-grata for the nonsense it is performing now.

This whole bailout issue and Rick Wagoner's dishonesty (his claim of a turn-around, his prior claims to only need 15billion turning into 30billion), the claims that bailing out GM would save a million jobs, then turning around and firing 47,000 workers...

WTF???

You think that anyone will want to buy your stupid General Motors cars now??? Your entire brand name is POISON!!! .... Seriously, at this point, far far better just to declare bankruptcy, and repackage the cars under a new brand name... like... errr.... ok, I will admit that I fail at coming up with creative/ popular names... the only thing going on through my mind is Marshal Motors or Corporal Cars. ... sigh.

Look, the amount going into the mortage bailout is 80 billion.

You think that stopping GM from going bankrupt is 40% as important as stopping the rash of home foreclosures?

GM needs 2 billion a month just to stop itself going bankrupt!

OK... 2.6 billion in April, actually. (2billion Febuary)

...

The entire business is doomed and flawed. If Obama and his team do not realise this, they are just being obstinate/stubborn.

Rick Wagoner and his big talk.

2009-02-16T13:01:00.002+08:00

Rick Wagoner, CEO of General Motors, SAYS that GM will turn around and repay it's loans.

Well, let him put his money where his mouth is, and I bet you he will tell a different story.

Ask him to put in 75% of his networth into GM as a loan... which will be BELOW the American taxpayer in seniority, of course! In fact, the US should make this loan on of the lowest in terms of seniority.

Fact of the matter is, it is now becoming a certainty that GM bondholders will be making huge losses on the loans they gave GM. So, why would we assume that any other creditors would not?

The ONLY way GM can turn around is if everyone that GM owes money to forgives a huge bulk of those loans.
It's essentially insolvent.

Fed Calls Gain in Family Wealth a Mirage

2009-02-14T21:31:00.003+08:00

From:

http://www.nytimes.com/2009/02/13/business/economy/13fed.html?em

*********************************

WASHINGTON — The leap in wealth that Americans thought they were enjoying over the last several years has already turned out to be a mirage, according to new estimates by the Federal Reserve.
In its triennial survey of consumer finances, released Thursday, the Fed found that the median net worth of American households increased by a seemingly healthy 17 percent between the end of 2004 and the end of 2007. But the gains were wiped out by the collapse in housing and stock prices last year. Adjusting for those declines, Fed officials estimated that the median family was 3.2 percent poorer as of October 2008 than it was at the end of 2004. The new survey offers one of the first glimpses of how American families were positioned financially as the roof fell in on the economy, and it provides some sense of how much wealth has been destroyed since then. Indeed, the destruction of wealth is still in full swing: housing prices are still falling, more than two years after the bubble peaked.
The survey suggests that the boom years were not all that wonderful even before the crisis set in. And it indicates that many households will have to greatly increase savings rates, which were below 1 percent, to make up for some of the lost wealth.
Adjusted for inflation, the median household income actually edged down slightly over the three years ending in 2007. The mean, or average, household income jumped by a respectable 8.5 percent.
But a growing share of that income came from investment profits rather than from wages and salaries. And the wealth that Americans were building was overwhelmingly in the form of paper profits that vanished as quickly as they had appeared.
Fed analysts estimated that 35.8 percent of the average family’s assets in 2007 were in “unrecognized capital gains,” such as gains in the market value of houses that people had yet to sell. Slightly more than half of those unrecognized gains came from real estate, and the second biggest source was increases in the value of business assets.
The Fed’s estimates, which are based on a survey of 4,422 households, are in line with estimates that economists have made about the aggregate plunge in wealth since the housing bubble began to deflate in 2006.
Dean Baker, co-director of the Center for Economic Policy Research, estimated that the United States had lost $6 trillion in housing wealth since the peak of the bubble.
The Case-Shiller index of housing prices in 20 major cities, considered one of the most accurate barometers of such prices, has declined about 25 percent since mid-2006. On top of that, Mr. Baker estimated, an additional $6 trillion evaporated as a result of the plummeting stock market, for a total loss of $12 trillion since 2006.
“I’m actually surprised that you didn’t see higher values on stock holdings,” Mr. Baker said, noting that the median value of household stocks, adjusted for inflation, was slightly lower in 2007 than it was in 2001.
“Even when we were near the peak of the bubble, things didn’t look that good, and they’re looking worse today,” he said.

**********************************

Ok... article is self explanatory... but let's look at MALAYSIA now, for those of you who think this problem is confined to USA.

Let's take the, for instance, the working professionals between 20 and 35. What do you think the networth for these individuals is?

On average: slightly above 0.

Yes, you heard me right... slightly above ZERO.

But, look, you will say to me, they've got jobs and make quite a decent living, they live in their own houses, how can their average networth be so low?

Let me ask you this.

Most of these guys... let's liquidate all their assets. And use these proceeds to pay off all their debts. How much do you think that will come to?

...

It's going to be slightly above zero. Sure, you will have those who have some savings, but it won't be all that much. Their is the insurance too, but that hasn't reached a very high figure yet. You know that car that they bought? It has actually lost 30% of it's purchase value.

The major gain for most people in Malaysia for this agegroup is their houses/ apartments, actually. Like, how they bought it for 200k and it's worth 250k now.

I would estimate that the average household networth for Malaysians in the 20-35 agegroup would be under 100k.
And I would estimate that is under current market housing prices. Out of that 100k, I would say that 40k is from UNREALISED CAPITAL GAINS. We've got around 40%, compared to America...

Of course, I have absolutely no official figures to back me up on this, but, this is Malaysia, we don't have any government bodies which conduct this sort of stuff.... nor would our government want it so!

Malaysia Boleh... except when it comes to Transparency, in which case, it is very very much a case of Malaysia Tak Boleh!

New EVEN TIGHTER restrictions on executive pay.

2009-02-14T20:59:00.002+08:00

Excerpts from:

http://www.nytimes.com/2009/02/14/business/economy/14pay.html?_r=1&hp

"The provision, inserted by Senate Democrats over the objections of the Obama administration, is aimed at companies that have received financial bailout funds. It would prohibit cash bonuses and almost all other incentive compensation for the five most senior officers and the 20 highest-paid executives at large companies that receive money under the Treasury’s Troubled Asset Relief Program, or TARP.

The restriction with the most bite would bar top executives from receiving bonuses exceeding one-third of their annual pay. Any bonus would have to be in the form of long-term incentives, like restricted stock, which could not be cashed out until the TARP money was repaid in full.

In addition, the Congressional rules would affect not just a bank’s top management, but also star traders, investment bankers, fund managers and commission-based sales representatives. They have traditionally received multimillion-dollar payouts based on their year-end results. "

....

Wow. Just... wow.

The fact that these restrictions affect the 20 highest paid executives means that actually effects ALL the executives... as far as pay number goes anyhow. Since if you used to be number 21, earning 800k, and suddenly the top 20 drop to 500k, and you are now number 1, putting you under these rules. Get it? Basically, everyone drops to below 500k a year.

A lot of the top CEOS were getting over 10 times their annual salary as cash bonuses... now that's dropped to 1/3. Wow.

Secondly... talk about a loss in disposable income... they basically cannot spend their bonus until TARP is repaid. You know how you normally get your annual bonus and spend it all pretty fast? Imagine having to wait several years to use your bonus!

However.

They talk about the risk of a brain drain.

On the other hand, they should consider something:

Their might not be much of a brain drain, after all.

There is a LOT of negative goodwill attached to some of these big TARP receiving companies. And their management has gotten quite a rotten public opinion.

If you were running a hedge fund, and actively trying your best to convince people to entrust their money to you, are you SURE you would want to hire one of the most despised and distrusted money managers in America? I mean, sure, he USED to have a brilliant track record, but nowadays, a lot of these guys' names are like poison to the American public...

They talk about how this might cause the banks to try to pay back TARP early...

Well...

I got news for you...

That is EXACTLY what the American public wants! Those who don't need TARP, give it back, and maybe the American government will do something MORE USEFUL with the money... like start up a new government bank and give loans DIRECTLY to the public instead of this indirect (and currently nonworking) method.

Why I hate Bank Stocks.

2009-02-11T05:50:00.004+08:00

Why do I hate bank stocks?

Summary: Neither A borrower nor a lender be.

Banks basically make money thru borrowing and lending. And through buying and selling financial instruments, hur hur hur.

All activities which I'm not really all that fond of.

Banks assume that if you give 100,000 loans, 97% of them will repay their debts.

... which I am rather skeptical of!

Call me a cynic, but I think that if you or me went around giving loans, we would not be surprised to find 2 out of 10 people giving us problems collecting. That's 20% NPL.

And frankly, do you think would be more stringent in lending criteria, us or the banks?

Frankly, these banks are giving loans to any tom dick and harry! And large ones too!

Even my cleaning lady can get a 25k loan, with no collateral!

So, when banks announce that they only have 3% or 5% non-performing loans, I am SKEPTICAL.

...

As for the financial instruments... hahaha, no need for me to speak on that subject, right?

The Bailout Game!

2009-01-19T12:18:00.001+08:00

http://www.thebailoutgame.us/

Now you too can be a Paulson or Bernanke! Good luck!

It's a fun little game. :)

Another way of looking at oil prices.

2009-01-19T11:33:00.003+08:00

Well, now people are wondering why oil price climbed so high, then fell so low. They blame it completely on speculation.

Which is definitely part of the problem.

The thing about crude oil is: demand has dropped a LOT very suddenly. And supply cannot contract by the same amount.
...
Let's take a look at the underlying "psychology" or game theory behind oil prices. Let's take 2 players in a game. In the first game, both sides know that the BUYER requires 100 Oil, on pain of death, no matter what price. The seller, from a position of strength, charges $150 per oil.

2nd round, the buyer announces that he only wants to buy 90 oil. The seller then reveals that he MUST sell 100 oil, on pain of death. Oh dear. Of course, we now see this reversal causes the buyer to massacre the seller, at $30 per barrel.

Admittedly, this is not actually how it works, there is some long complicated mechanism to it... but this is just another way of looking at the overriding forces of demand and supply, simpified to extreme levels.
Cause at the end of the day, though there may be a lot of traders in between, let us not forget that at the end of the day, the oil starts from the producers and ends at the consumers. There's just a lot of stuff in between.

Let's go back to basic economics, shall we?

Remember your demand and supply graph? Let's draw those.

Unfortunately, looking at the graph, we suddenly realise that the DEMAND is extremely price inelastic! No matter what the price, if the economy is overheated, price barely make a dent in demand.
Now, the Arab nations have revealed that SUPPLY is also price inelastic! Their economies depend on oil so much, they MUST sell at near maximum output, even at a loss!

So, when you have these extremely inelastic demand and supply lines, what happens when the demand line is shifted to the right or left? (reflecting total rise/fall in demand)
You have rather ridiculous shifts in price, that's what.

Very very basic economics.

Mahatir has gone senile. Or mad. Or both.

2009-01-18T00:25:00.003+08:00

When we were hit by the 1997 crisis, Mahatir got us out of it.

He's not Prime Minister now though.

And apparently, THAT is a good thing. Cause he's gone absolutely bonkers in his old age!

http://chedet.co.cc/chedetblog/
http://chedet.co.cc/chedetblog/2009/01/boycott.html

"1. I would like to have the Malaysian Armed Forces attack the United States and Israel."

"4. We could blockade the United States and deny it food and medicine."

....

OH... MY... DOG!!!

WTF is wrong with our former PM???

Worse yet, it makes me really have to wonder if we have any other lunatics in our parliament thinking the same things!

If you read our newspapers, sadly, it shows that Mahatir is not alone in his views... A lot of other political leaders are getting very vocal about how they should make a stand against Israel and America... Scary. But not surprising. At the end of the day, even the international Muslim community regards Malaysia as being tending to extremist.

Malaysia??? Go to war with Israel, or worse, America???

...

If that even LOOKS like it might happen, I am going to short sell the KLCI for every ringgit I can leverage, and take the next flight to Australia. ... Watch as yet another "Muslim Terrorist" country gets smashed by the American army.

Islam might be a great religion and all, but for those who think Allah will grant victory to Malaysia against America, in an offensive attack on American soil... well, let me summarise: I disagree.

...

My investment advice? ... consider taking assets out of Malaysia and moving them overseas... make sure your passport is current... well, I guess it's unlikely to happen, but then again, it is starting to look more and more likely with each passing day, that Malaysia will start up something very VERY stupid concerning America and Israel...

Malaysia was downgraded for political instability.

Now it can get downgraded again for political STUPIDITY.

Coca Cola vs Malaysia... and Mahatir vs US dollar!!!

2009-01-11T02:19:00.003+08:00

http://news.my.msn.com/regional/article.aspx?cp-documentid=2022931

A boycott of US-made goods and firms including Coca-Cola and Starbucks has been called by Muslim groups who are planning a protest Friday at the National Mosque in the capital Kuala Lumpur.

Former Malaysian premier Mahathir Mohamad has also called for a global boycott of the US dollar and US products in protest over Washington's support of Israel.

...

OMFG... boycott of the US Dollar?

... Well... in theory... companies could write their contracts in EUROS or DINARS... but somehow I don't think it's gonna happen. lol.

Seriously though, I think that if our entire Muslim population boycotts American goods for 1 month, there will be 2 affects:

1) America barely notices or cares.
2) 1/4 of the shops in Malaysia close shop for 1 month.

...

Idiots.

Malaysian quick ability to forget bullshit.

2009-01-10T22:53:00.002+08:00

Was looking up stuff related to theme parks in Johor and found this blast from the past.

http://forums.vr-zone.com/showthread.php?t=200643

Sat Nov 3, 2007 1:30am EDTKUALA LUMPUR, Nov 3 (Reuters) - Walt Disney Co (DIS.N: Quote, Profile, Research) is looking to build a theme park on a 500-acre (202-hectare) site in southern Malaysia, a business weekly reported on Saturday.

Citing unnamed sources, the Edge said the theme park, to be located in Bardar Nusajaya in the Iskandar development zone, would be ready six years after a deal was signed, according to early proposals.The proposed Disneyland theme park and resort is slated to be bigger than Hong Kong Disneyland and about the size of Tokyo Disney Resort, it said.

The government unveiled a $105 billion blueprint late last year to transform the southern tip of Johor state, which neighbours Singapore, into a regional economic zone for industry, logistics, trade and leisure.

Although the talks with Disney are progressing fast, discussions with other theme park operators, including Warner Bros Entertainment and MGM (MGM.N: Quote, Profile, Research), have not ceased, the Edge said."However, a deal with Walt Disney looks most promising as it has expressed its seriousness and has come out with specifications on its requirements," it quoted a source as saying.

If the talks with Disney are successful, a deal is expected to be signed by the middle of next year, it added.Malaysia's state-controlled UEM World (UEMW.KL: Quote, Profile, Research) is developing Bandar Nusajaya, a township in southwest Johor.The 2,200 square km (850 sq miles) Iskandar zone has so far clinched at least $6 billion in investments, including a $4.7 billion maritime park proposed by Dubai World and Malaysia's infrastructure-to-energy group MMC Bhd (MMCB.KL: Quote, Profile, Research).

How did this turn out?

A PACK OF LIES!!! ... funny.

Yet another "UNNAMED SOURCE". What is it with Malaysia and it's unnamed sources? ... Blatant market manipulation. Freaking 3rd world country... Since when does a supposedly reputable business weekly rely on "unnamed sources"? In modern countries, even the TABLOIDS will reveal their sources most of the time.

Sad.

Talks progressing fast? hahahaha.... now we found out that there WERE NO TALKS. sad!

American Unemployment: the hidden figures.

2009-01-10T21:57:00.003+08:00

Think 7.2% unemployment doesn't sound too bad? ... think it sounds really bad? Well, whatever, it get's WORSE. Facts and figures from:

http://www.bls.gov/news.release/empsit.nr0.htm

"In December, the number of persons who worked part time for economic reasons (some-times referred to as involuntary part-time workers) continued to increase, reaching 8.0 million. The number of such workers rose by 3.4 million over the past 12 months. This category includes persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full-time jobs. (See table A-5.)"

In America, if you are employed part-time, you are not unemployed! BTW, 8 million is around 5%, and 3.4 million is about 2.2% of the labour force. So, from another perspective, this can be seen as a hidden 2% jump in unemployment.

"About 1.9 million persons (not seasonally adjusted) were marginally attached to thelabor force in December, 564,000 more than 12 months earlier. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weekspreceding the survey. Among the marginally attached, there were 642,000 discouraged work-ers in December, up by 279,000 from a year earlier. Discouraged workers are persons not currently looking for work specifically because they believe no jobs are available for them. The other 1.3 million persons marginally attached to the labor force in December had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities. (See table A-13.)"

That's not too bad in a way: only another 0.2% unemployment jump there. On the other hand, it means that discouraged workers went from 363k +279k = 642k. That's a huge percentage change. Still, it's only to be expected...
In fact, what that means is, when Obama's stimulus comes in, you might see unemployment go UP temporarily... since a large number of these 642k people will probably try to secure some of these newly created jobs, they will on paper change from "not trying to find employment" to "unemployed" (temporarily) before becoming "employed"

"In December, average hourly earnings of production and nonsupervisory workers on private nonfarm payrolls rose by 5 cents, or 0.3 percent, seasonally adjusted. This followed gains of 8 cents in November and 6 cents in October. For all of 2008, average hourly earnings increased by 3.7 percent and average weekly earnings rose by 2.2 percent. (See table B-3.)"

This, however, is a sudden positive, a huge light in the middle of darkness. It means that the average worker's pay was still going up! It might not seem like a lot, but it's better than being stagnant, trust me.
The gap between +3.7% per hour and +2.2% per week is because The index of aggregate weekly hours of production and nonsupervisory workers on private nonfarm payrolls fell by 1.1 percent in December and 4.0 percent since peaking in December 2007.
That means people were working less but earning more. That's good! More free time, and more money!

Though of course, it's not so good for company cost:production ratio. Oh well. It's always workers vs company profits, I guess.

...

Now, let's jump to Malaysia and Singapore.

Well, in most Asian countries... we don't have unemployment benefits. However... Singapore appears to be trying to get around that, by telling companies to put workers on paid leave, and Singapore government will cover 75% of their salary. VERY interesting...

So, what does so much paid leave mean? ... IMHO, it means that you're going to get a number of people with money in their pockets and a lot of free time. ... very interesting. Personally, I think that gambling income will go up, and perhaps travelling will increase too... hmm. Hard to say how people will react. I suppose they will be happy in the short term, but start getting worried for job security in the long term.

Anyhow, paid leave is the current solution because Malaysia and Singapore are hoping for a V-shaped recovery. However, it looks like American firms are looking at an L-shaped recession, based on their hiring/firing policies.

Personally, I think that Malaysia is being overly optimistic. As usual.

BTW, to update on that Legoland Johor idea: ... I'm going to HK in March. And I noticed, after checking on Wiki: Disneyland HK has NEVER made a profit... it has eaten up government money, year after year after year. (because Disney is smart, they knew the enterprise was not a good idea, so they let HK government be the main shareholder)
HK, prosperous as it is, simply cannot sustain a theme park the size of Disneyland. It's annual visitors is far below projected levels.
Disneyland in Japan and America? They're doing GREAT.

How about Legoland in the rest of the world? ... doing BAD. All losing money.

What does that say about Legoland Malaysia? ... ... ... Er... Personally, I think that this is one of those "no way in hell will it work" sort of ideas. According to some figures we were discussing, Legoland in Johor would need over RM75million a year in revenue just to breakeven. Or about RM200k per day. Which would be... maybe they are hoping for 2k visitors a day, and charge them RM100 each?

...

Anyhow, I don't think it's going to work. Frankly, Lego DOES NOT SELL WELL in Malaysia. I don't think Lego itself generates annual sales of RM75 million in Malaysia, though I could be wrong there.

Israel war in Gaza... to balance Malaysia's one-sided view.

2009-01-09T04:44:00.003+08:00

You must realize something. The mass media in Malaysia is VASTLY different from the mass media in USA. We get entirely different content from them.

Over there, they have been told for YEARS about how palestinians have been harassing Israel with rocket launchers and missiles.

For us, it is being made to seem as if Israel is making these completely unprovoked assaults to conquer Palestine.

http://www.jcpa.org/JCPA/Templates/ShowPage.asp?DBID=1&LNGID=1&TMID=111&FID=283&PID=0&IID=2049

Prior to 2006, the number of Palestinian rocket attacks rarely reached 50 per month. By early 2008, Palestinian organizations displayed a capability of launching 50 rockets per day!!!

Israel is not that big a nation, in terms of land mass, BTW.
Imagine that Brunei or Singapore was launching 50 rockets a month in to Malaysia. For the past 8 years.

What do you think our leaders should do in this situation? Sit quietly on their backsides and still not resort to declaring war?

...

If Palestine was REALLY in that bad condition, they would have AGREED TO THE TERMS OF THE CEASEFIRE. There are no surrender demands, it is merely request for a ceasefire.
Of course, I am also possibly not looking at this carefully from both sides of the coin... some further research required here...
War sucks. It always does. But I think that there is a danger of falling for Malaysian brainwashing and one-sided commentary here.

Remember... LOOK AT YOUR MALAYSIAN PASSPORT, page 2.

There is only ONE country in the world that Malaysia really hates: Israel. Malaysia has hated them for YEARS... for religious reasons!

So... our TV and newspapers are hardly unbiased.

Seriously, where have all the photos and videos of victims of rocket and Palestinian attacks gone... for the past 8 years?

Truth is, Malaysian press have been very happy to totally ignore any suffering in Israel for years... after all, it was Jews being killed by Muslims, so they said nothing. For 8 years.

The minute that Israel declares war, and worse, actually starts winning... by a large margin... Malaysia makes a LOT of noise about it.

...

One way of getting a more unbiased opinion is to search for views OUTSIDE your own country... see what the MAJORITY say... especially in this environment.

Overall, I would say everyone thinks this war sucks, but the situation for the past 8 years is also untenable. War is always unpleasant, but seriously, sometimes, THERE IS SIMPLY NO CHOICE. Especially when dealing with religious extremists who do not listen to reason.

Well, anyhow, to make this look more like an Investment Article and not a political blog, discussing the affects of this war:

It won't have that much affect. The possibility of this turning into a multi-nation war is pretty low... unless Malaysia does something stupid like declare that they are sending troops against Israel... which they won't, fortunatly. Even these boycott calls will fail, I have SERIOUS doubt that the Muslim community will actually listen to these calls to boycott American goods... I doubt even the fellas who made the calls in the first place will give up their luxury American pharmaceuticals and clothing and such. All talk, no substance.

This was looks like it's going to be protracted. Basically, this is not the first time this has occured. "While it is often forgotten, Israel completely withdrew from the Gaza Strip in August 2005". The result? In August 2005, Kassam rocket attacks were dramatically reduced so that they would not get in the way of Israel's Gaza pullout. BUT THE ATTACKS RESUMED SHORTLLY AFTER THAT. The number of rocket strikes in the year 2006 shot up to 946 - a five-fold increase. Israel got fooled once. They are unlikely to make the same mistake again.

An 8 year war does not get solved overnight.

Well, whatever. As long as Malaysian politician KNOW THEIR PLACE, and do not try instigating trouble with America, we should not be adversely affected. ... BTW, notice that Malaysian EXPORTS to America are under no threat to be cut off? lol. Looks like our politicians don't have the guts to threaten to cut off the Oil or Rubber or electronic components exports to America... which are actually war components, btw! Unlike Coca cola. Hahaha.

Malaysia boleh?

Malaysian Politicians always think they are damn "big".

2009-01-08T15:26:00.003+08:00

PUTRAJAYA: Malaysia has given the United Nations Security Council a one-day “deadline” to come up with a resolution on Israel’s aggression against Palestine before it would go “full steam ahead” to call for a special session of the General Assembly. He said the ultimatum was necessary because one had to exhaust all avenues first before petitioning for a special General Assembly sitting
PUTRAJAYA: Malaysia has given the United Nations Security Council an ultimatum to come up with a resolution to condemn Israel on its brutal aggression against Palestine.
KUALA LUMPUR: More than 2,000 Muslim restaurants in Malaysia will remove Coca-Cola from their menus as part of a boycott of American products in protest against Israel's bombardment of Gaza, officials said Wednesday.Some 2,600 restaurants under the Association of Muslim Restaurant Operators will stop selling Coca-Cola from Friday, he added.

...

Malaysian politicians think that Malaysia will have like 2% less growth than 2007. While other nations across the globe are looking at 6% falls in growth.

Malaysian politicians think that they can issue "ultimatums" and "one-day deadlines" to the UN.

Malaysians think that they can declare Boycotts on American goods.

...

Seriously, Malaysia boleh is one thing, but are Malaysian politicians smoking mushrooms or something stupid? Maybe they are taking ganja now that they can't be caught drinking alchohol. (and don't tell me nonsense about Muslim politicians not drinking alchohol, we all KNOW this is bullshit... Malaysian politicians and businessmen drink much more than I could ever do)

Malaysia boycott American and Israel goods? ... er... well, I think that Malaysians cannot really survive without American goods... But I think that Americans can easily survive without Malaysian goods. BTW, I think if America boycotts Malaysian goods, Malaysia can pretty much expect unemployment to double...

Malaysia's ultimatum is to... petition for a special assembly? ... haha. First of all, I doubt malaysia could carry it out. Secondly... it's not much of a threat is it? It's like... going up to my neighbour and telling him to stop playing loud music at 2am... or I will write him a letter telling him to stop. ... pathetic. WEAK.

And everyone notices that Malaysia did not join in operation desert storm... or any other wars. There are wars all over the world, ALL THE TIME. Obviously, the only reason why Malaysia is making noise is over the religious issue. Duh. How many countries does our Malaysian passport NOT allow access to? huh.
The only reason that the rest of Middle East isn't declaring it a Jihad is that they're in a really weak position now due to oil prices.

...

Anyhow, basically, waiting for malaysian politicians to realise the meaning of REALITY.

American Twilight?

2009-01-07T03:03:00.002+08:00

In a way, this is possibly the most negative article I have read so far... it's not a far flung doomsday article, more like... stating the obvious... IMHO. Still, his conclusions may or may not come true...

Ladies and gentlemen, I present an excerpt from Christopher Grey's article: Opinion: Is It Twilight in America? http://www.thestreet.com/story/10456268/1/opinion-is-it-twilight-in-america.html

"The most fundamental economic problem we face is not a credit crunch, or unemployment, or falling home prices, or a stock market crash. All of those things will naturally correct themselves over time. The most serious economic problem we face is a severe lack of private savings and sustainable income generation to support the expenses of our government and the private standard of living for our citizens.
Even with historically low interest rates, the ratio of our consumer debt payments relative to income is at an all-time high. The Bureau of Economic Analysis reported in December that savings from current income for most Americans may be zero or negative when financial outlays are financed by borrowing.How bad would things get if interest rates were to rise? This will eventually happen since rates can't go below zero.

We have been avoiding the consequences of too much debt, too much spending, too little income and too much speculation for many years due to increasing leverage and appreciating assets such as homes and stocks.

Now that these and other financial assets have been falling for the past year because of deleveraging, we are only beginning to realize how weak and fragile our economy is without constant asset inflation. This is a very scary thought for most people to comprehend, and politicians don't want people to think about it. But the problem is not going away, and it is getting worse every day that we ignore it.

The Fed is basically printing so much money that it is staying ahead of what would naturally be a short-term deflationary period as the economy tries to adjust from years of rampant asset and commodity inflation.
After this downturn runs its course -- probably over the next few quarters -- all of this excess liquidity created by the Fed is going to cause a tremendous surge in inflationary pressure. At that point, the Fed will either need to dramatically raise interest rates to fight inflation or allow a collapse in the purchasing power of the dollar and a stampede out of U.S. assets by foreign investors.

The current government policy of free money combined with encouraging Americans, who largely have no savings and spend more than they earn already, to borrow and spend even more seems too bizarre not to be intentional.

The Fed's real objective here is to promote a combination of fear mongering about deflation to justify keeping interest rates at zero, while at the same time promoting as much inflation as possible in an attempt to orchestrate a massive stealth devaluation of the U.S. dollar and short-changing of all foreign investors in U.S. assets.

It is a con game of epic proportions, and it could work if foreign investors are dumb enough to allow themselves to get pennies on the dollar for their dollar denominated investments. However, if it doesn't work and foreign investors wise up to this game, the U.S. will face an economic Armageddon that will make the past year look mild.

Why would that happen? The U.S. economy needs to import several billion dollars a day from abroad just to keep the light on. If foreigners turn off that spigot of cash, even if they don't dump their existing U.S. assets, our economy will collapse. An even more extreme possibility is that there is an international revolt from the dollar as the world's reserve currency.

If that happens, we could no longer just print as many dollars as we want with minimal consequences. We could ultimately have to default on our debt like Argentina, Russia, or Ecuador. I do not predict that happening because the U.S. is too big for the world to allow it to default, but my point is that we are entering a world that will no longer allow us to make believe that printing dollars is free. There will be a cost to all of this money printing, and that cost is going to increase.

As President-elect Barack Obama tries to channel Franklin Delano Roosevelt with his recent statements, he should remember that this is not 1933. At that time, America was the world's largest creditor nation. We are now the world's largest debtor. Also at that time, Europe and Asia were both in the process of disintegrating as a result of revolutions, fascism, socialism, and ultimately World War II. This situation left America as the strongest country in the world.

If you look at when the stock market actually ended its bear market that began in 1929, it was actually within a month after Pearl Harbor. Of course the market bottomed back in 1933. But if you look at when the new bull market began, it wasn't until January 1942 and coincided directly with the entry of the U.S. into the wars in Europe and Asia. I do not see any similar circumstances globally that will benefit America, nor do I see the benefit of being the world's largest debtor instead of the world's largest creditor.

Obama today faces a much more serious challenge than FDR ever did. Hopefully, his administration will rise to that challenge, and maybe America will somehow get lucky. I don't know. What I do know is that it is not helping for our nation's political and financial leaders to keep writing checks that they can't cash and lying to the American people about the financial solvency of our nation and how we're going to turn things around.

We aren't going to save ourselves economically with more borrowing and spending and speculating. That much should be clear to everyone at this point. History will judge our current leaders very harshly if it turns out that they presided over the twilight and ultimate decline of our great country because they were either too afraid or too ignorant to face up to our real problems and take action to start correcting them."

Summary, and to stress which points are pretty much well-known FACTS:

Too much borrowing, lending, and printing money got us all into this mess. Fact of the matter is, it just went on and on and on... but no one noticed, because the autos, property, and stock market were on the UP cycle. But, as we all know, all these are cyclical.
As soon as the downturn went on for any length of time, the shit hit the fan.

I view the problem as a bunch of doctors who are in fact drug abusers. They're all off in happy happy land every day. One day a few top doctors find that they are all getting unhealthier. So, one of them decides to they have to quit... the other doctors agree this is the right thing to do, so they all vow, no more drugs. (No more bank rescues! Let Lehman go!)

The next day, they are all wracked with withdrawal pangs and collapse on the floor, unable to function!

And then declare that they are going to prescribe drugs to themselves. Some doctors admittedly attempty prescribic alternate drugs. Some doctors swap drugs with each other. In a horrible moment of clarity, some doctors realize that their "normal" amount of drugs is NOT SUFFICIENT, so they need rather ridiculous dosages to keep themselves in happy happy land! (Bailouts and stimulus packages of rather unprecedented size)

At the end of the day, none of them can face the hard decision: sooner or later, they are going to have to face this horror that they have brought upon themselves.

Seriously... living on drugs/debt... and enjoying yourself for a few years... and at the end of it, you expect to somehow manage to avoid any negative consequences???

... I don't think so.

Idiots.

GMAC Bond-Equity sorta flops... but they get the money anyway.

2009-01-06T06:38:00.003+08:00

http://www.bloomberg.com/apps/news?pid=20601087&sid=am4IwraGSAW0&refer=home

"Dec. 31 (Bloomberg) -- GMAC LLC, the auto lender that’s getting a $6 billion federal bailout, completed a debt swap designed to bolster its capital after falling short of its $38 billion goal.
About 59 percent of its old notes eligible for the swap and 39 percent of the debt from its Residential Capital unit were tendered, according to a statement from Detroit-based GMAC today. The goal was 75 percent. "

"GMAC and Residential Capital had some of their debt rated SD, or “selective default,” by Standard & Poor’s to reflect results of the swap. The downgrade from CC was made because bondholders that signed up for the exchange received less than their original investment, and the swap “left untendered bonds in a subordinated position to the new notes,” S&P said today in a statement. "

"GMAC, responsible for financing about 35 percent of GM’s retail customers last year, said it will now lend to vehicle buyers with credit scores of 621 or higher, compared with a previous standard of at least 700. The higher threshold had excluded about 42 percent of U.S. consumers. "

"GMAC ran short of cash this year after $7.9 billion of losses over five quarters, mostly from record defaults on subprime mortgages, which are made to homebuyers with the worst records. The lender was shut out of credit markets and had to limit lending only to people with the top repayment histories."

...

Well... now GMAC is an investment bank. Question is, what lunatic would deposit money into GMAC now? ... other than government bodies of course.
Still, if the government just keeps giving it money, that's more than good enough, right?

Heh. Looks like GMAC management were not satisfied with getting defaults from subprime loans... they are aiming to get defaults on their car loans too? ... lowering lending standards... well, of course that was part of the Terms and Conditions of that TARP loan, so, they can't help it... but... geez.

... 42% of US consumers have credit scores below 700? ... ok... I need someone to translate to me what that means exactly.

Anyhow... bottom line is:

Problem: US car industry needs people to buy cars. And pay for them.
Problem: Cars are cyclical. And we're entering a natural downturn, even without the recession.
Problem: How many cars does one family need, really?

FED is setting precedents. Bad ones.

2008-12-19T22:05:00.004+08:00

Time to test your parenting skills. Ok now, you have 5 children. One day, your 2 eldest childred are caught shoplifting in a candy store, which you disapprove of. What do you do?

a) Punish them and make sure to do a better job teaching your kids the difference between right and wrong.
b) Take money from your other 3 kids and give it to the first 2, so they won't have to steal so much.

Evidently, America thinks that the correct answer is b).

Yes, essentially, those who commit crimes are being rewarded, to the detriment of those who behaved themselves.

...

This is rather short sighted of them.

If the American government were TRULY confident in a recovery, they would have let all those big corporations go bankrupt... after all, it would only be a temporary delay in recovery, not something permanent, right?

...

BUT... doing things like these bailouts IS PERMANENT. Or it has a very very long lasting effect...

Essentially, they are creating the next set of problems, 5-10 years down the road, or even sooner, there will be another mess caused by companies taking on too much risk. Because America has stupidly more or less announced to Wall Street: No matter what you do, no matter how big a mess you get in, we will bail you out... and the MORE damaging the mess you make is to America, the MORE likely that the FED will be forced to bail you out using taxpayer money.

None of those high flyers who created this mess have been punished, penalised, or suffered significant losses.

The moral of the story? You can and SHOULD do as much of this funny business as possible... because history has shown that you can and will get rich... and you will not have to face any consequences whatsoever.

...

Yeah yeah, the current argument now is that "these businesses are too large to fail", and "it will make the economy collapse even further".

... I got news for you:

It won't.

In fact, a business collapsing will cause a new equilibrium to be reached. As long as there is demand for a service, the supply will be filled. It's a truism of capitalism.

Letting a COMPANY collapse does not necessarily mean the collapse of the BUSINESS TRANSACTIONS of the company... like energy, this business is not destroyed, it merely changes form/ company. Other companies will prosper in the wake of rival companies closing down.

Whether or not the corporations are bailed out, the amount of investment banking, mortages, and auto sales will generally remain unchanged. The only difference is that workers, customers, and money will all flow from the liquidated companies to the stronger companies.

Whether or not the corporations are bailed out, staff layoffs will occur, output will be reduced, branches will be closed... and it will follow the rule of EXPECTED DEMAND for services... it in fact has only a tiny correlation with whether individual companies are saved or go bankrupt.

So, what is the point of this entire bailout exercise?

Seriously, these bailouts are not saving jobs, or creating liquidity (which is another debatable issue), or generating growth... the only achievement is propping up Wall Street, and keeping certain politicians rich with ill gotten wealth.

What is with all these terms of the bailouts anyhow??? America is talking rubbish now about "not wanting to nationalize too many companies" and "history has shown that the government does not run businesses well".

Er... you know what? At the moment, that is REALLY obvious... in fact, at the moment, the FED is showing it's stupidity by not accepting CONTROL over the companies... not demanding a share of REWARDS for these companies... but it is accepting a huge share of the RISK!!! You know... refuse to partake any of the good stuff, but accept to share all the bad stuff?

Anyhow, I don't see any CEOs being forced to put their own personal wealth into loans into the companies involved. Now... THAT would make me have confidence in GM recovering... if you could get Rick Wagoner to invest 90% of his networth into General Motors... with lower seniority than any bondholders and taxpayers! Yeah, that's right... if Rick Wagoner agreed to sink 90% of his networth and he would only be paid back after everyone else is paid back, that would make me absolutely certain that he has confidence in his own company.

The truth is, Rick Wagoner knows that GM is doomed. He would never agree to such a deal. Heck, he would not even agree to put 90% of his networth into a loan which would only be behind the American taxpayer. He KNOWS that any taxpayer money put in will be at huge risk, very likely to go up in smoke.

...

They are setting a VERY bad example and precedent. The motivation is now HUGE for anyone to do repeat exactly what caused this current crisis. America is in fact REWARDING THE IRRESPONSIBLE and PUNISHING THE RESPONSIBILE.

Mark my words... in 10 years time, the FED is going to look back at this current period and say, "We shouldn't have done all those bailouts... they went against the very principles of free market, capitalism and democracy. They set a bad precedent, which is causing history to repeat itself."

General Motors Bankruptcy

2008-12-13T13:08:00.003+08:00

Hard to tell, at the moment, but my personal bet is that General Motors is going to declare bankruptcy.

TARP aid? You must also realize something... when they say the autos might get TARP aid, they mean they might get it after Obama comes into power. Cause there isn't much money left in TARP currently.

Anyhow, at this point in time, it has come to the stage where it DOESN'T MATTER whether they get bailed out or not. And I think that some people realize this.

GMAC is pretty much dead, and without GMAC, GM can barely make sales. GMAC has always provided inventory funding to the tune of 80% of all new GM vehicles.

GM is going to cut production in the first quarter of 2009 by an additional 30%.

GM has stated that it is over-represented at the dealership level and needs to cut back around 2,000 dealers

It's pretty obvious at this point that GM is basically a failing business, and all their talk of a turnaround is rather far fetched.

They think that declaring bankruptcy will not endear them to car buyers? ... Do they think that taking taxpayer money to cover their own mistakes will make people fall in love with their cars???

Anyhow... this is looking more and more like a big huge delaying tactic... pass the buck onto the new administration, wait for GM to fall apart... BTW, by 5pm GMT we will watch as GMAC's attempt to become a bank fails. At which point, extending a loan to GM will be pointless. Truly truly pointless. Because it will become UNABLE TO SELL CARS, as there will be NO FINANCING.

The first recipient of the stimulus package in 2009?

2008-12-11T04:20:00.003+08:00

Taken from: http://news.yahoo.com/s/nm/20081205/us_nm/us_economy_california_shortfall

"SAN FRANCISCO (Reuters) – California is on track to run out of cash in February or March and faces a $15 billion cash shortage by the end of its fiscal year in June unless officials plug an $11.2 billion budget gap, according to the state's budget director"

Well... there you go. Obama, there's your first request for that stimulus package.

As Obama said, America will have to spend hundreds of billion in this stimulus package to create new jobs/ protect existing jobs.

Looks like California wins the race to request the first USD15 billion in order not to have to cut back on state government spending...

Or is Obama going to spend ADDITIONAL money on top of the bailout? Well, guess if Detroit starts asking for money for the state budget too... if every state asks for their fair share... looks like this is going to be a very VERY VERY expensive year for America... watch their Deficit go from below 1 trillion to 4-5 trillion in 18 months, maybe?

GMAC's bank holding plan = FAIL

2008-12-11T01:08:00.002+08:00

Condensed from: http://www.thestreet.com/story/10452422/1/gmac-extends-deadline-for-tender-offers.html

"NEW YORK -- GMAC Financial Services, the financing arm of General Motors, said Wednesday that it hasn't raised enough capital to become a bank holding company and qualify for aid under the government's $700 billion bank rescue plan.
In a last-ditch effort to raise the needed cash, GMAC extended the early delivery time for its private exchange and cash tender offers by three days, to Friday and warned that a failure to convert to a bank holding company would have a "material adverse effect" on its business.
Wednesday's move marked the third time that the New York-based company, which is majority owned by the private equity firm Cerberus Capital Management LP, has extended the deadline in hopes of drumming up the needed funds.
In order to approve GMAC's application to become a bank holding company, the Federal Reserve has said the company needs at least $30 billion in regulatory capital. In order to meet that requirement, GMAC said it would have to have about 75% participation on its offers.
So far, only about $6.3 billion, or 22%, of the outstanding GMAC notes have been tendered and about $2 billion, or 21%, of the outstanding ResCap notes have been tendered, GMAC said.
If the offers aren't successful, GMAC said it will withdraw its application to become a bank holding company and it's unclear what its next move would be.
GMAC said that if it's unable to transform into a bank holding company and complete the GMAC and ResCap offers by the end of the year, it would have a "near-term material adverse effect on GMAC's business, results of operations, and financial position."
The company, which is 49% owned by GM and provides both home-mortgage and vehicle loans, has been hemorrhaging money this year, hurt by both the crisis in the mortgage lending industry and slumping demand for vehicles.
Last month, GMAC warned that ResCap could fail. The business accounted for about $1.9 billion of GMAC's total $2.52 billion third-quarter loss.
GMAC has also slashed its costs in an attempt to stem the losses. In September, the company said it would close all of its 200 retail offices and lay off about 5,000 employees, with the bulk of cuts coming at ResCap. "

Summary. They've extended the deadline 3 times already... and this 3rd time they only got 3 days?
They need 30 billion and only got 8.3 billion so far...
Somehow, I don't think they will raise the other 22 billion in 3 days. How about you?

The point is, if they could raise 30 billion, they wouldn't need a 10b bailout effective immediately, would they? !!!

So, yet another "clever scheme" unravels.

FAIL.

Scomi's Right Issue.

2008-12-09T11:25:00.003+08:00

http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/all/48256E5D00102DF4482575160036B04F/$File/Announcement.pdf
http://www.klse.com.my/website/bm/listed_companies/company_announcements/announcements/historical.jsp

Moolah has been blogging about this coy for quite a while...

Too bad I was too late in joining this blogger community. Would have saved my family a packet... we got suckered a bit by scomi back in the bull.

Anyhow, summary is:

Scomi is selling a 1 for 2 rights issue. Through some financial hocus pocus, they have managed to do this despite that no bank is willing to underwrite this rights issue!
Furthermore, Shah Hakim, Dato’ Kamaluddin and their PACs will seek an exemption from the Securities Commission from the obligation to undertake a mandatory offer under the Code in the event the subscription for the Rights Shares by the SPV (as defined in the attachment) results in the triggering of the mandatory offer!!!

Why are they doing this?

Because Scomi is INSOLVENT!!!

Their net cash is -22 million!!!

Their business model is terrible... their net cash from operating activities was -44 million for 9 months ended 30th September!

WAH!!!

What a horrible horrible mess.

This company, definitely want to avoid like the plague. PN17, Holland, here we come.

Credit Market -> Currency Market

2008-12-08T04:05:00.002+08:00

Er... I was waiting for someone else to write about this... but it seems either it hasn't occured to anyone else... or everyone is dismissing this... or... who knows.

Anyhow.

Governments are wondering when credit is going to unthaw. Well, on the consumer level, I guess it'll unthaw once everyone has cleared all their existing debts, or at least reduced them to manageable levels. If the average citizen was a company, no one would buy this coy. I mean, average short term debt would be around 6 months cashflow, long term debt is around 20 years cashflow, net current assets is a MASSIVE negative number, total assets - total liability is also bad...
For your information, I was asking my grandparents... during their time, debt levels were much MUCH MUCH lower compared to income/ cashflow/ expenditures.

On the corporate level... er... hello. Due to US Dollar being fiat money, and due to the RIDICULOUS uncertainty that America's bailout policies, deficit spending, world trade, etc etc have caused... no one dares to borrow or lend in USD anymore! I mean seriously, you might borrow/lend AUS 1 million today denominated in USD and find that it's turned into AUS 1.2 million/ 800k in 6 months time!

The American government does not understand something very very simple:

Volatility and uncertainty is bad for business.

Yes yes, this "shock and awe" technique seems to be propping up the market well and is stopping bankruptcies.

But in reality, America is causing a LARGE amount of global uncertainty, as everyone is wondering how all this national debt, printing money, interest rate cuts, bailouts, 0.1% yields on US Treasury notes... everyone is waiting for the next big movement to happen.

This is why, for decades upon decades, people LET inefficient companies go under, and did not prop up everything artificially. There always was a lot of damage done, but in truth, it allowed the TRUTH to come to light, and the rebuilding could begin.

In this case, we have near zero transparency. It's reached the point where no one knows what is going on anymore.

To use Buffet's analogy of the athlete who's collapsed... the current solution seems to be the star's manager putting a splint on his leg and letting him take part in a marathon.
Whereas normal logic would be to bring him to a hospital, get it x-rayed, set in a cast, and give him 3 months of rest and 3 months of physio.
Right now, the entire audience is waiting to see whether the bone is going to snap under the strain of being thrown back into competition.
Oh, and of course, the athlete's manager is screaming that his star athlete is perfectly fine, why won't anyone agree to sign up for this year's sponsorship deals, yada yada.

... gee. I wonder why.

Dumbasses.

Misadvantures in Dow Jones Futures experiment

2008-12-06T10:54:00.011+08:00

Edit: This system has now expired, since it has hit my exit criteria.

OK... this isn't a tip. I wouldn't recommend this trading method to anyone, since it's so stupid.
Nonetheless, I thought it up myself, and I am using it to trade Dow Jones Futures at the moment.

My technique for this month of December (Edit: my exit strategy will be when the dow futures go 1 full trading days without going from green to red.) is:
EDIT: The dow has gone 2 full trading days without going from green to red and red to green, which is my signal that it's time to stop this strategy. The end.

Every night, I look at Dow prior day closing. Then I queue to buy at -75, and I queue to sell at +75.
Then I go to sleep/ go out/ whatever.

When I wake up in the morning, I look at my profits. (hopefully)

Why this weird technique? Well... cause I notice that the dow will go +100 and -100 just about EVERY SINGLE DAY. So... just taking advantage of the pattern.

Edit(5/12/08): Change in technique:
Every night I will look at dow prior day closing, then queue to buy ONE MiniDowFutures CONTRACT at -100, queue to sell at +100. I might do some "flexible" trading too, but this one will be my "fixed" aka "bread and butter" aka "Jason thing"...
Reasoning: I'm not being disciplined in my trading methods. Not sticking to the gameplan, the laid out formula. Got scared cause I opened up positions larger than I was comfortable with. So, time to buckle down. I shall use this to test what happens when I strictly enfore rules upon myself... I shall still do some other trades, but this will be my callsign this month.

In the event that the trade fails, I will "ignore/forget" my original buy/sell price, and will use this system to find my price to close the contract the next day. So if I get stuck with a long position on monday, I will short it on Tuesday at +100 to prior day closing.

How has this been working so far?

Will blog capsule and update this in the form of 3 numbers and 1 statistic: intraday low, previous day closing, intraday high, and whether it worked or failed. Update: Now including results of my mechanical vs flexible trades, for performance comparison.

4/12: 8274, 8591, 8630 failed ---- got lucky since I was awake that night, first day trading dow. I bought at 8510 and chickened out at 8610. Mechanical +$500.
5/12: 8122, 8376, 8660 success ---- unfortunatly, I was awake tonight! Chickened out again. Bought at 8270.... sold at 8390. Mechanical +$600, flexible -$200!
Sigh. Gonna try some formula modification. Have editted my post to reflect this.
8/12 8800, 8753, 9026 MASSIVE failure. Sold at 8753 during pre-market. Got stuck with 1 short position from mechanical. Stuck with 2 short positions from flexible, 8850 and 8970.
8->9/12 Closed 3 short positions during pre-market at 8832. Mechanical $-395. Flexible $+780. My system failed on Black Friday, and today too. Pretty lucky that the cut loss portion of mechanical system saved me, and saved my flexible trades too. From now on Mechanical Trades will be denoted by M, Flexible by F.
9/12 8667, 8934, 8913 Massive failure today too. This signals that my system has reached the end of it's usefulness. At least to me. Am now cutting off all trades on Dow using this system. The final update will be how much damage today did to me. Bought 2 at 8834, 1 at 8805.
10/12: Closed off at 8755. That's the end of that.

How Long Will the Recession Last?

2008-12-02T06:02:00.002+08:00

http://www.thestreet.com/story/10450705/1/jpmorgan-to-cut-9200-wamu-jobs.html
"NEW YORK -- JPMorgan Chase said Monday it will cut a total of 9,200 jobs at Washington Mutual, which it acquired Sept. 25 after Washington Mutual became the nation's largest bank to fail amid the ongoing credit crisis.
Of the 9,200 jobs being eliminated as JPMorgan integrates Washington Mutual, 4,000 will be cut by the end of January, a JPMorgan spokesman said. The remaining 5,200 employees will remain with JPMorgan through a transition period, but will lose their positions by the end of 2009.
Those 5,200 employees who stay on as transition workers will receive double their salary retroactive to Oct. 1 until their last day on the job, and be entitled to severance packages, the spokesman said.
Washington Mutual had between 41,500 and 42,000 employees nationwide when JPMorgan took over the bank at the end of September."

So there you have it. JP Morgan is planning on cutting jobs, a LOT of them. All the way to the end of 2009.
And they are so desperate to get rid of these people, that they are willing to put them on double pay for a year on top of normal severance packages, as compensation.
I don't know about the share market, but it is looking like unemployment will continue to build until 2010... or further.

You have to realise something. Due to the nature of unions and the size of the penalty for layoffs, in the form of severance compensation, companies do NOT conduct layoffs unless they really REALLY need to.
Furthermore, this means that JP does not foresee needing to rehire any of these workers until 2012. How do I reach this conclusion?
Well, if JP had decided to leave these 5200 workers alone, they would have had to pay them salaries of 5200 x A per year.
The amount JP has to fork out to these 5200 as compensation for firing them will be around 5200 x 2A + severance package.
That means, from a financial standpoint, it would be cheaper to keep these people onboard, rather than to fire them in 2009, and rehire them (or their replacements) in 2011.
In other words, the forecast by JP is for a 3 year slump in business.

People, firms, and economists can claim whatever figure they like for how long the recession will last, but look at what the big corporations are doing. They are battening down their hatches for a multiyear downturn. And what the big corporations can often turn into a self-fulfilling prophecy.

Citibank Buys Spanish Highways!

2008-12-01T22:40:00.004+08:00

http://www.thestreet.com/story/10450542/1/todays-outrage-citi-takes-cash-to-spain.html
http://www.marketwatch.com/news/story/citi-fund-buying-spanish-highways/story.aspx?guid=%7BC58D2714-519F-4995-98EA-3CFBA8BF1681%7D&dist=TNMostRead

"Citi Infrastructure Partners is buying most of Itinere Infraestructuras from Sacyr Vallehermoso (ES:018287021: news, chart, profile) , a Spanish construction group eagerly trying to shed debt as the Spanish housing market weakens. "

Oh man oh man! Is citi TRYING it's level best to make the American public angry with it???

Bad enough when taxpayer dollars were going to big banks, and they bought out the little American Banks...

Now Citi is taking that bailout money and using it to bailout a struggling Spanish Highway company? (Itinere)

I've said this once, and I'll say it again. Paulson should have criminal charges pressed against him.
America's bailout money, approved by congress to help the average American and his debt, is going to shore up Spain's failing infrastructure.

I'm ANGRY... and I'm not even American! I wonder how they are taking it?

Ooh. Citigroup shares just fell 10%... I guess we have our answer right there folks.

Big 3 turns into 1, 1 and 1.

2008-12-01T18:09:00.004+08:00

I knew it couldn't last.

According to this article:

http://www.nytimes.com/2008/12/01/business/economy/01auto.html?pagewanted=1&hp

the Big 3 have decided to abandon the image of camaredie and save their own skins.

Basically, since the government is asking for viable plans... they are each going to submit their own plans. And be judged on their own personal merit.

It's every man for himself now! OOH.

In fact, it is very likely that someone will ask: so... if we can only bailout 2 of you and the weakest has to declare bankruptcy... which one is the weakest?
And then... it will turn into the biggest pile of backstabbing ever. Ha. Actually, Ford might encourage that, since Ford is apparently in the strongest position.
Truth be told, the smartest thing Ford could do now is let the bailout fail entirely.

That would save Ford. If GM and Chrysler cease operations, and Ford scoops up all their customers who love American Cars... yes. That would pretty much put Ford firmly in the black, I think.

I think.

In fact, I would go so far as to say this: If GM and Chrysler go bankrupt, I would put 20%-40% of my total networth into buying Ford shares. And I would expect a 250% return on my investment in 5 years.

At the moment, though, I'm not touching any of the 3.

India and Thailand: This isn't good for the economy...

2008-12-01T17:58:00.003+08:00

Question on my mind: what is the condition for foreign trade in ASEA right now?

I mean, look. The airport in Thailand there is basically unusable. How do you perform any trade with a country in this sort of situation?

At least India isn't that bad, but if military operations begin against Pakistan, all bets are off.

And I heard that they aren't keen to be trading with Malaysians, due to "suspicious ties". Bah. I'm pretty certain that Malaysians have no potential to be terrorists... that's exactly why they chose to impersonate Malaysians. We're the "safest" Muslim country in the world, IMHO.

For Thailand, at least, it looks pretty certain that they will not be experiencing any significant economical growth for a long long time, no matter what the final outcome is here.

If India and Pakistan begin skirmishes, that's going to be a HUGE mess.

Anyway, my thoughts and prayers go to everyone, Malaysian or from any other nationality, who is trying to get out of these places and come home. Good luck guys.

Jdimytai Damour -> Trampled to death by Wal-Mart shoppers, Friday.

2008-11-30T21:06:00.004+08:00

Jdimytai Damour ... died 28/11/2008.

He was a temp worker working at Wal-Mart for Black Friday. Was trampled to death by maddened shoppers. Paramedics complain that their efforts to save him were hampered by shoppers who refused to slow down their insane charge for bargains. Apparently, paramedics and the victim were trodden on during the resustication process.

"Mr. Damour, who lived in Queens, went into the store sometime during the night to stock shelves and perform maintenance work.
On Friday night, Mr. Damour’s father, Ogera Charles, 67, said his son had spent Thursday evening having Thanksgiving dinner at a half sister’s house in Queens before going directly to work. Mr. Charles said his son, known as Jimmy, was raised in Queens by his mother and worked at various stores in the area after graduating from high school.
Mr. Charles said he had not seen his son in three months, and heard about his death about 7 a.m. Friday, when a friend of Mr. Damour’s called him at home. He arrived at Franklin Hospital Medical Center an hour later to identify the body. Mr. Charles said he was angry that no one from Wal-Mart had contacted him or had explained how his son had died. Maria Damour, Mr. Damour’s mother, was in Port-au-Prince, Haiti, but was on her way back to the United States."

What did Wal-mart do? Nothing. They were open for business the next day.
(oh, wait, I'm sorry. What they did do is refuse to disclose the victim's name, or even contact his relatives, as they tried to hush the matter up. BASTARDS!)

What did the police do? Why didn't they close up the shop, place yellow tape cordons, that sort of thing?

Corporate America... he might have been just a temp worker, but he was still a living breathing human once. He had friends and family, just like you. Was his life and death really so meaningless to you?

And you BLOODY Wal-Mart shoppers! You guys responsible are no longer human beings. I mean, I just watched some zombie movie lately. You know, where the zombies are pressed up against the glass, there is someone desperately trying standing behing the glass doors as they start to strain under the pressure... then they burst, and the man is killed by the maddened mob of creatures.

That scenario might sound far fetched, but that is EXACTLY what happened to the poor guy.

Not only that. Customers REFUSED to vacate the store and allow it to close due to the man's death. Yeah that's right... they insisted that they had lined up all night to shop, and they would therefore shop.

http://www.startribune.com/nation/35262584.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aUUF

http://bitchpie.wordpress.com/2008/11/29/black-friday-indeed/

http://www.belfasttelegraph.co.uk/news/world-news/walmart-worker-trampled-to-death-by-bargainhunting-shoppers-14086448.html

http://www.jackandjillpolitics.com/2008/11/wal-mart-shoppers-trample-and-kill-jdimytai-damour-keep-shopping/

http://arizona.typepad.com/blog/2008/11/jdimytai-damour.html

http://www.nydailynews.com/money/galleries/walmart_stampede_captured_in_pictures/walmart_stampede_captured_in_pictures.html

Oh, yeah, on a related topic:

And these two men who shot each other to death over a brawl between their wives in Toys "R" Us. Everyone is being very tight lipped about the matter, I can't find much info on the subject, other than the article below.

http://news.yahoo.com/s/ap/20081129/ap_on_re_us/toy_store_shooting

Malaysia and Singapore's alternative to unemployment: Some Projected Effects.

2008-11-30T16:32:00.004+08:00

Due to falling consumption, firms are cutting production capacity... it's an unnecesary cost. In other words, reducing the amount spent on labour. For UK and US, this means layoffs.

But for Singapore and Malaysia, we don't have social welfare programs. So the consequences of losing your job here is VERY bad compared to the USA. Especially if you can't find a new job in this environment.

The current "solution" to this is to reduce salary per person, instead of reducing number of people employed. This is good because unemployed people would default on debts, possibly turn to crime, etc etc... whereas spreading out the pain, ie instead of 10 unemployed people, you have 100 people who take a 10% pay cut... you instead get a much larger group of people who are still solvent and make enough to eat, who merely cut back on spending a little.

OR, possibly cut back on spending A LOT. In fact, it is possible this "solution" will cause consumer spending to drop even more than layoffs would. Why is this? It's because the average consumer is burdened with debt. Far more debt than their grandparents or great-grandparents would ever dream of saddling themselves with. And also fixed payments, like insurance and EPF contribution.

Well, I'd better just draw out how this works with an example. Let's take a company with 1000 workers. Each has RM3000 salary. They have over RM100,000 in loans ie housing, car, credit cards, for which they pay around RM1000 monthly. Their insurance, EPF and other monthly fixed expenses around RM500. They spend around RM1000 on necessities like FOOD, water, electricity, phone bills, petrol... leaving them with RM500 disposable income to be spent on things like clothes, outings, and other non-day to day essentials.
So consumer spending is around RM1500 per person=RM1.5million total.

1st scenario. 100 people are fired. 900 people remain. The effect would be: 90 people more or less maintain similiar spending habits. 10 people declare bankruptcy, or just sell everything and move to some cheaper locale and get a lower paying job... let's say they will on average end up with RM1000 incomes... enough to survive, basically. So, overall consumer spending= RM(1500x900) + (1000x100) = RM1,450,000. A drop of 50k. In other words, the fall in employment salary was borne mainly by the loan, property, insurance and EPF.

2nd scenario. 1000 people take a 10% paycut. The likely effect would be: 1000 people take a RM300 cut in disposable income. Overall consumer spending drops 300x1000 = 300k. In other words, this fall will be 100% borne by those who sell non-essentials.

...

In other words, for Malaysia and Singapore, under this "solution"... this is going to be a really terrible time to be selling luxury goods, or basically any non-essential items.
These sort of figures mean we're looking at a possible fall in sales of over 50% for all those clothes boutiques, shoe shops, computer shops, entertainment outlets...

These groups of businesses are always the hardest hit during a recession, so poor sales from them would hardly be a surprise.

However, my point is that these businesses will be utterly smashed by this technique of "spreading out the pain". Instead of losing 10% of their customers outright, they will face 100% of their customers reducing business by 50%. Pain.

Oh, BTW. This is going to be a huge blow for the auto-industry. When people take a pay cut, they definitely postphone buying a new car. You just become unable to make the monthly installments.

I think that Supermarkets like Tesco and Giant will do well in this environment, as people will be shopping for the cheapest deals. Also, more people will be choosing to cook their own meals. It's cheaper, and hey, after all, they so much more free time, due to all the shorter working hours, right?

US Bond Market is FAILING. BADLY. $2 trillion fails to deliver???

2008-11-30T15:51:00.003+08:00

Excerpts from:
http://www.euromoney.com/Article/2054070/The-US-treasury-market-reaches-breaking-point.html?LS=EMS224393

"There is an even more pressing concern for many participants in this increasingly swollen market: the settlement system has broken down. Following the collapse of Lehman Brothers in September, fails to deliver among the 17 primary dealers in the US treasury market have rocketed to more than $2 trillion over a period of weeks and still lie above $1.3 trillion. Broker/dealers have stopped delivering bonds. Holders of US treasuries are now scared to lend into the repo market in case their bonds are not returned, and potential buyers sit on the sidelines fearful of handing over their money to a counterparty that at best might not deliver a bond on time, and at worst might go under. "

"Fails to deliver in the treasury markets are not a new phenomenon. There is data for fails for treasuries, agencies and mortgage-backed securities as far back as 1990, says Susanne Trimbath, an economist, and former employee of the Depository Trust Co, a subsidiary of Depository Trust and Clearing Corp. "

"Back then, though, there would be $50 billion of fails in a whole year, she says. That figure has grown enormously. Failures in US treasuries were 8.6% of all treasuries outstanding in the first five months of this year, compared with 1.2% in the first five months of 2007. That has ballooned further over the past three months, hitting more than $2 trillion for almost the entire month of October – more than 20% of the daily treasuries trading volume"

...

Failure of the Bonds market?

I know that most Malaysian have never touched a bond in their life. So let me just sum it up: The bond market is more integral to the world financial system than the stock market. It ranks right up there with the much talked about credit market. (not surprising since they basically deal with the same thing: financing debt. And they are both rather ridiculously huge)

Fails among 17 primary dealers in US treasury market shot to 2 trillion... That brings up a very important question: how about the OTHER dealers? How many failures among the smaller dealers? ... possibly higher? I mean, considering that these 17 primary dealers are the big guys, the ones who presumably would be in better shape than the little guys... what sort of fails to deliver are occuring amongst the smaller dealers?

What sort of fails are occuring in the non-US Treasury bonds?

The worst case scenario here is that the entire bond market seizes up. No rollovers??? Heaven forbid! ... seriously, I cannot even imagine what damage would be caused by this sort of chaos.

Why do some people think that there is any possibility that the crisis has been solved?

Credit market is still not working properly whatsoever... interbank credit might be looser, but it's still even TIGHTER at the consumer level!

Bond market is at it's worst level ever, as seen above.

Global Trade is frozen. Look at the BDI, or visit the docks one day. Goods are not moving. Part of this is due to tight credit. Part of this is due to lower demand for goods.
Those Pirates are not helping either. Who wants to ship stuff if there's a higher chance that you'll make huge losses from paying ransoms?

Property is dropping. In fact it is only beginning to drop in the less developed nations, who think they might be spared... understand guys. Events unfold slower for underdeveloped nations, but they eventually do hit you too. I'm looking at you Malaysia!

Employment and consumer spending are going into a vicious circle spiralling downwards. For Malaysia, our local consumption is nowhere near enough to sustain our production, so our factories are going to get killed by UK and US unemployment figures.

To make matters worse, terrorists have proven themselves to be smart and are acting at the worst(for us) /best(for them) possible moment. I am unsure what their real objectives are, but what they have managed to accomplish is they've caused political tension between a number of nations.

The only good news? Well, fuel prices are dropping. Housing prices are falling too. That means: this is a good time to look at relocating. Tired of your current neighbourhood? This might not be a bad time for a total change in lifestyle.

Who says that there are no FFM in Malaysia now?

2008-11-28T16:09:00.001+08:00

http://www.klse.com.my/website/bm/market_information/market_statistics/equities/downloads/trading_participation_investor2008.pdf

There are still plenty of foreign investment funds in Malaysia... it's just that the HEDGE FUNDS have moved out... most of them anyway.

Basically, foreign participation is still the BULK of our Malaysian share trades.

CIMB desperate for Unit Trust infusions -> Launches FD "trick" to increase purchases.

2008-11-28T14:28:00.005+08:00

I went to CIMB today... there was a new deal that they are offering:

48% pa interest on your 1 month Fixed Deposit! (T&C apply)

Sound too good to be true? ... duh. Of course it is.

The way their deal works is, you deposit 100,000 into their account. Out of this, 40% will go into this special Fixed Deposit. 60% will go into UNIT TRUST.

40% and 60% ???

WHAT THE HECK???

Is there anyone out there seriously stupid enough to fall for this?

hmm.

By the way, for those of you who are too lazy to work out the maths:

You deposit 100k with CIMB.

You will earn RM1,600 interest in 1 month.

Because of the 5% initial charge, you will be charged RM3,000 just for buying Unit Trust.

Oh... by the way... if your unit trust falls 10%, that is going to cost you RM6,000.

So, is this a good deal?

Summary: IT'S a TERRIBLE DEAL!!! AVOID LIKE THE PLAGUE!!!!

Malaysian exports dropping fast... recession looking BAD for Malaysia

2008-11-28T01:09:00.005+08:00

http://biz.thestar.com.my/news/story.asp?file=/2008/11/27/business/2654048&sec=business

"Federation of Malaysian Manufacturers (FMM) president Tan Sri Yong Poh Kon said there were factories reporting slower demand, with some saying exports had dropped 20% to 30%."

The focus of the article was about how they've managed to avoid rentrenchment.

But... a 20%-30% drop in exports should be a cause for panic!

Seriously, do you know how much of malaysian income is derived from exports? It's huge...

We'd better hope that the fall of 20% is limited to only certain select sectors. Because... if that 20% is across the board... all other factors taken in, I would have to revise my projection of 12% GDP contraction upwards... it is starting to look like a 15% contraction in GDP. (possibly less, depending on exchange rate of USD to RM)

... Even I feel these numbers are looking rather ridiculously high. I'm quite possibly projecting too high... however, even if I'm wrong, I can say that Malaysia is going to be hit with a far far worse recession than these developed nations.

At the end of the day, Malaysia has ALWAYS relied on Foreign Investment for growth. And we are a net exporter. Basically, whatever the government claims, Malaysia is completely NOT self sufficient. We rely BADLY on foreign trade and cash inflows. VERY badly. We won't even have enough rice for our people if this situation in Thailand continues. We can't afford to continue our decades long fuel subsidy.
When the global recession hits, it will hit Malaysia HARD. And if it continues for more than 3 years, I expect the state of our economy to be TERRIBLE. ... of course, who knows, things might get better by the middle of 2009.

Have any of you given thought to what happens if it DOESN'T get better, though?

Seriously, everyone is, of course, hoping that the economy will turn around relatively soon.

But.

What if.

Just consider... what if... however unlikely you might think it....

What if this turns out to be a 5 year depression?

... I have made back-up emergency plans. Which I hope that I will not have to actually fall back on.
I mean, basically, everyone is hoping Plan A will work, which is "place your trust in the buggers who got us into this mess in the first place"... everyone is hoping Plan A will work. (it isn't working so far, BTW... but they keep saying that they are hopeful it will start working anytime SOON)
But my point is: IF... IF IF IF... if this turns out to be worse than the governments claim it will be...
Everyone should start preparing PLAN B. Just in case Plan A fails. What are you going to do if the governments and banks and insurances and big companies fail to save us?

... In fact, having back-up Plan C isn't a bad idea either.

Summary: Start preparing yourself for a recession. A severe one. Don't panic. Don't do anything silly. But make sure that you have a plan which will keep you safe in the event that things turn out worse than what the governments and corporations have been telling us. Even if things turn out ok, a little precaution never hurt anyone.

IOI Corp’s RM73m deposit for Menara Citibank forfeited

2008-11-28T00:58:00.002+08:00

http://biz.thestar.com.my/news/story.asp?file=/2008/11/27/business/20081127190735&sec=business

"KUALA LUMPUR: IOI Corp Bhd’s RM73.36mil paid to the vendors of Menara Citibank was forfeited after the plantation heavyweight aborted its proposed acquisition of Menara Citibank for RM586.73mil.
IOI Corp told Bursa Malaysia on Thursday that the share sale and purchase agreement dated Aug 29 for the proposed acquisition became unconditional on Oct 31.
The due date for payment of the balance purchase price was on Nov 11.
However, due to the recent sudden adverse developments in the global economic environment which have spread to this region and impacted negatively on business sentiments, IOI Corp decided not to proceed with the proposed acquisition.
IOI Corp it had received a letter from the vendors’ solicitors dated Nov 26 that they were terminating the agreement and had forfeited RM73.36mil paid earlier by IOI Corp.
The plantation company said it was seeking legal advice on the quantum of the forfeiture."

That's how bad the recession is getting. IOI would rather forfeit RM73 million than to pay up the remaining 513 million.
That's a 12.5% deposit. Forfeited.

In other words, IOI expects that it would take a BIGGER than 12.5% loss if it had continued the deal!

There you go.

Basically this (probably) means that IOI expects property prices... or at least the property price for Menara Citibank... to be drop by over 12.5%

Probably over 20%, actually, considering that doing this thing generates a lot of bad publicity for them, and damages their business relationships.

It might mean something else... but whatever the case is, this is definitely bad news. The exact form of this bad news is still unfolding though.

Genting Lost RM40million last quarter.

2008-11-28T00:15:00.004+08:00

http://www.btimes.com.my/Current_News/BTIMES/articles/20081127191006/Article/index_html

GENTING Bhd, Asia's largest listed casino operator, posted a quarterly loss of RM40.4 million (US$11.2 million) compared with a profit of RM275.2 million a year ago, after taking charges related to its Chinese power plants and casinos in the UK.

Genting, which gets two-thirds of its sales from hotels, gambling and theme parks, has invested in businesses that include power generation and palm oil to manage swings in casino revenue. The Kuala Lumpur-based company expects the rest of the year to be “challenging.” “The group’s prospects for the remaining period of this year will be challenging, in view of the global economic slowdown and lower commodity prices anticipated,” Genting said.
“The slowdown in the local economy could impact consumer sentiments and may affect visitations to Genting Highlands Resort. "

"Pre-tax profit at the plantations unit, its second-biggest earner, fell to RM130.8 million from RM131.3 million.
Profit at its power division plunged 96 per cent to RM5.5 million." (previous year 137 million!!!)

Well... Genting... well done. Obviously, Lim Goh Tong's son has not been doing quite as well as his dad did.

Something important to look out for. Genting's outlook for 2009 is going to be EVEN WORSE than 2008. For the simple reason that pre-tax profit for plantations for Genting in 2009 is projected to be between RM20million loss and RM20 million profit, based on projected Crude Palm Oil prices.

How will it's power plants in China do?

Well... China is planning to build 12 Nuclear Power Plants... how do you THINK Genting's power business is going to do???
Obviously very very badly, since china is basically going to have much much cheaper power once these plants are running, you can expect Genting's power business in china to drop to RM 1 million once those nuclear power plants are up.

As for the gambling and hotel and theme park business... EVERYONE is assuming that gambling will be ok. But look at UK, US, Macau... every single country's gambling businesses are in trouble. You think that Genting will be fine? ... somehow, I think that if other country's gambling business is in trouble, malaysia's will be in EVEN MORE trouble.
As for hotel and theme park... meh. Airflights have dropped 20% in America for this thanksgiving season... I don't hold out much hope for the whole tourism sector.

Summary: Genting is in deep DEEP trouble.
That's what happens when you leave your core business of CASINOS,(which frankly was the most incredible deal ever, and just about everyone knows that Lim Goh Tong's greatest achievement in his life was getting the monopoly on casino license in Malaysia) and try to dabble in other areas which you don't understand, Lim JR.

Brands, Valuing of Brands, and weird Malaysians.

2008-11-27T23:56:00.004+08:00

Let's talk about Brands. There's all this talk nowadays about Malaysia's 30 most valuable brands award. Which I find I totally disagree with, since the judging was based on outlandish and abstract concepts. The problem seems to be that a lot of Managers and CEOs in Malaysia are morons, and do not understand how brands are supposed to work.

Which is ridiculous of them, since you can just look at "Kopitiam" and "Kluand" and "penang" and "ipoh" and "station" being placed in numerous eatery names. You see, even these small time (small compared to KLSE top 10 coys) fellas recognize the power of brand name recognition!

The only proper way to value a brand, in my opinion:
Try to estimate how much damage would be caused if that brand name was taken away, eg some patent lawsuit or similiar barring use of the brand name for 3 years.

Would AirAsia suffer much loss in revenue if they had to call themselves FernandezAirways? ... I think it would cause maybe 1month of lower revenue, but things would recover immediately.

Would Digi suffer much loss in revenue if they had to rename themselves to SmartPhones? ... IMHO, they would suffer VERY badly.

Would Coca-Cola suffer badly if they were forced to rename themselves Cola-Coca? ... It is common knowledge that losing that brand name would be a DISASTER.

Would Proton lose much sales if they were forced to rename themselves as Malaysian Motors? ... Actually, I think their revenue might GROW... lol.

As for Petronas, they could name themselves Barisan Oil Bank and I am pretty sure that their revenue, sales, and profit would remain pretty much unchanged. The big players out there don't really care much about your brand name, your advertising policy, your corporate vision, logo, etc etc. They just look at whether it's profitable to do business with you. Anyhow most of their revenue is just arranged directly by our government.

Compare that to say, Polo Ralph Lauren or Louis Vitton. If you carefully remove off the label from their product and slap on a generic brand name, the product becomes PRACTICALLY WORTHLESS.

To me, that is the ultimate test of whether a brand has value. Try to estimate the results of "with the brand" vs "without the brand"... ceterus parabus style.

A lot of companies have very very valuable brand names. If you replace their label with a generic name, they would lose hundreds of millions in sales. In this case, I would just directly say: this brand name is currently worth $100 million a year.

No ranking, no subjectiveness. After all, even the "contest" calls itself "most VALUABLE brands". And for a company, value is measured in MONEY / dollar/ ringgit terms... not based on whatever weird aesthetic or semi-mystical intrinsic things.
Heck... buying a brand creates an entry in the account books called "goodwill". (IIRC. My accounting can be shaky at times)

I'm not 100% certain, but I think that in developed nations, it is pretty much possible to find some high level financial whizzes who will be able to calculate for you how much each Brand in a company should be valued at, in dollar terms.

They should have someone do that in Malaysia too.

Michael Lewis interviews.

2008-11-27T09:11:00.002+08:00

http://money.cnn.com/video/#/video/news/2008/11/26/news.michaellewis.112608.cnnmoney

FYI, it's the Liar's Poker guy again.

I tend to agree with him, actually.

Watch the video. More comments later. (and edits)

Citigroup bailout is an outrage!

2008-11-27T01:41:00.002+08:00

http://www.thestreet.com/story/10449706/1/todays-outrage-citis-not-worth-45-billion.html

"Now Citi's the latest bailout story, with the U.S. government donating $20 billion to the cause. That's on top of the $25 billion in taxpayer funds Citi received last month.
So why doesn't the government own all of Citi now? For $45 billion, it should -- the bank was only worth about $20 billion at Friday's closing share price of $3.77. (For what it's worth, Wachovia's trading above $4.) "

Yup... even at the price of $6, citi is still worth less than $45 billion.

GEEZ. The American government is psychotic. GM is set to be next.

The GM bailout is looking like it's going to be using 10 billion to bailout a company worth 2 billion.

Yeah, they're talking about potential earnings, and damage, and blah blah blah.

Imagine if your rich, fat, lazy, neighbour got a loan for RM50 million from the government, at 5% interest. Your neighbours job? He's the kampung moneylender. Oh, and BTW, his enforcers just came by your house yesterday to inform you that you now have 1 month to pay back your loans (at 25% annual interest)

Yeah, no wonder Americans are really angry with the rubbish going on there right now.

What the FED? TALF Credit Card Bailout is NONSENSE!!!

2008-11-27T01:14:00.003+08:00

Excerpts from: http://www.thestreet.com/story/10450220/1/what-the-fed-talf-makes-me-ralph.html

"Treasury and the Federal Reserve on Tuesday said they will provide $200 billion in financing to investors buying a variety of consumer debt, including credit card loans. The program, called the Term Asset-backed Securities Loan Facility, or TALF, is supported by $20 billion in credit protection from the $700 billion Troubled Assets Relief Program, or TARP, approved by Congress last month.
In theory, the TALF program is intended to provide liquidity to the system, allowing big pocketed investors like hedge funds to buy up debt and allow lenders will make more loans. Moreover, the government loans are non-recourse, meaning if anything happens -- if the borrower goes bust -- taxpayers are on the hook.
Not a bad deal for the lenders. They make more loans and collect more interest from borrowers, and the government shoulders the risk. But as the lenders get sweetheart deals from the government, they are playing games with their customers.
Citigroup recently informed customers -- even those in good standing -- that it would jack interest rates from 9.99% to 24.99%, according to a letter one recipient shared with TheStreet.com. The customers can reject the higher interest, but that means they can't charge any more on their cards and must pay off the current card debt.
You'd think a company that just received a $20 billion bailout from the government -- in addition to the coming TALF aid -- might be more mindful of customer service
The TALF loans are for one year, but the Fed said it would extend the term, if necessary. The loans are also not subject to mark-to-market accounting. If you take in collateral without pricing it, you are buying it. Read between the lines -- there is no "lending" happening here.
Wouldn't it be nice if while the Federal Reserve was making all these deals to help our banks and credit card companies they forced them to do a little something for consumers? Couldn't the Fed force the banks to limit the interest rates they are charging? Force them to cap late payment fees?
Yes. The Fed could do all this and more. But the Federal Reserve is not helping taxpayers. The Federal Reserve is helping badly run banks. "

Oh geez, where to start?

This is really really looking to be a big huge RIP-OFF of the American public.
In my opinion, they should freeze Paulson's bank accounts and suspend his travel documents.
I am almost CERTAIN he has been accepting enormous bribes at this point.

The 700 billion bailout was voted YES by congress... to help MORTAGE HOLDERS and the American Public! ... and AS SOON as it was approved, Paulson decided not 1 cent would go to American citizens... he gave half of it to the banks! Who then used it to pay bonuses (until Goldman showed that you COULD refuse to give bonuses and somehow retain your staff, proving the previous claims to be a pack of lies) and also to buy up other ailing banks in a predatory vulture style of behaviour.

Now, this TALF was meant to help out Credit Card debtors (ie 99% of americans), students, and auto loan applicants.
Instead, WTF??? This has turned into a massive gift to credit card companies... and these companies have turned around and basically frozen credit to their existing cardholders, and raised interest rates too???
Hello??? This plan is obviously to enrich credit card companies at the expense of the consumers AND the taxpayers!!!
Let's look at the details of this loan again... it is non-recourse??? In other words, the borrowers can just declare "oh. We are short on cash this month. Therefore we are defaulting. Sorry." and you basically can't do ANYTHING???

Secondly, the loans are non marked to market. NOT MARKED TO MARKET! Yes! That means that even if the credit card debt used as collateral for this deal becomes 100% non-performing loans, ie there is 100 billion worth of loans and ALL of it becomes bad debts... it is still going to show up as 100 billion worth in book value!
Heck, non-marked to market means that you could use an uninsured HOUSE worth USD1million as collateral... and when the house burns down (uninsured), you would still list it as worth USD 1 million even though there is nothing but a pile of burning timbers!

Obviously, this is insanity.

Paulson should go to jail for this. I am not joking. I am not joking whatsoever. There are laws about this sort of thing, go look up the rules about Accounting Practices, Paulson. There are rules about duty and agreements and such, and Paulson has clearly ignored the rulings that Congress made regarding the bailout. This is a travesty.

Update: http://www.nytimes.com/2008/11/26/business/economy/26tarp.html?ref=business

FINALLY, it's time for an AUDIT and OVERSIGHT COMITTEE to go submit a report on the bailout effort thus far.

3.5% Growth my butt.

2008-11-23T23:41:00.002+08:00

http://www.themalaysianinsider.com/index.php/malaysia/12812-nor-mohamed-confident-of-35pc-gdp-growth-next-year

"However, he said, Malaysia managed to gain an edge during the current global financial crisis by promoting Islamic finance as an alternative system."
The Anglo-Saxon financial system is crumbling because its architecture is unsuitable, incomplete and unfair. We warned the world about this in the financial crisis 10 years ago but we were ignored,” Nor Mohamed said.

Er. Has he even taken a look at what shape the Islamic Bank stocks are in right now? The Islamic model of economy seems to be: depend on oil. If oil sinks, you are all doomed.
... I could be wrong though. Still, watch the utter havoc in Middle East economies if oil stays at this level.

As for Malaysia, here is my forecast of the damage to our GDP:

First off, our GDP roughly consists of: agriculture: 8.6%, industry: 47.8%, services: 43.6% (2007 est.)

Palm Oil exports likely to remain stable, maybe even increase. But the fact that price per ton has dropped over 60% means that we will lose at least 3% GDP.
Oil... we don't really export that much, relative to our local consumption. Still, we can expect to take a hit of around 2% GDP from oil related exports.
As for local consumption, I would say it's a hit of another 3% GDP. (though in real terms, a fall in fuel prices locally means that real cost of living drops and thus GDP in purchasing power parities will go up to balance this)
Electronics: I have no idea what the drop in international sales here would be next year. I admit that I am only throwing a wild guess when I say 10% fall. Which would come to another 2% drop in GDP I guess? Really not sure here.

So far, I have not even talked about local consumption, effects of employment falls, and so forth, and we're already looking at a drop of 10% in 2009... I expect, in sum total, for the 2009 recession to be worse than 1998, and my own personal guess is a 12% contraction in GDP for 2009, and a further 6% contraction in 2010.

Well... we shall see what the results turn out to be... I could turn out to be wrong of course. But remember: during 1998, industrial demand was still high. This time around, industrial demand is falling really badly. Furthermore, it looks likely that China will undercut Malaysia in industrial supply. BADLY undercut Malaysia, in fact. So I expect this crash to be much much worse than 1998. Incomparably worse, in fact.

Still... the housing prices have not really moved yet. So, looks like I might be jumping to conclusions. My opinion is definitely to watch those property prices and employment figures.
BTW... the profit figures for companies are now beginning to turn sour. And remember that our country does not have unions which grant huge severance packages to laid-off employees, like America does. So it's not that difficult for a company to dump a huge number of workers in a short amount of time... they can always rehire them easily if the economy picks up again, after all.

Summary: Regardless of what our government claims, everyone knows that Malaysia is headed into a recession. The only question is the depth of it's severity. BTW, I seem to recall them projecting a 5% growth in 1998, which turned out to be a 7.5% contraction. Lunatics.

Some stuff I saw today.

2008-11-23T20:36:00.007+08:00

"We demand that your governments give us 100 BILLION DOLLARS, or terrors will be unleashed upon your country, devastate it's economies, the people will suffer!"

Sound familiar?

Well, no wonder, you must have just watched IGOR today, like me! Watch as the Evil Scientists blackmail the world into giving into their demands for cash, in order to enrich themselves!

Oh, what, you thought I was talking about America's Banks and Auto Industry?

...

Nah. Those guys are Truly Evil, Igor is PG rated... I mean corporate America is blackmailing/ demanding hundreds and hundreds of billions, otherwise the damage will push the whole world into years of recession and blah blah blah.

Also, I watched Quarantine today. Scary. But there's a very important lesson that people can learn from it:

Sometimes, you can't save EVERYONE. When you have someone who is guaranteed going to die, you can't go risking all these healthy people's lives.

If someone had stood up and culled out the infected while they were still catatonic, everyone else would have been fine.

Instead, they tried to save everyone. And in the end, everyone dies. It's that OVEROPTIMISM thing I keep talking about. In an ideal world, everyone would be wealthy, and no one would be unemployed or homeless... but in fact, this is not such an ideal world as you might hope.

You know what? It's become painfully obvious that in this economic crisis, YOU CAN'T SAVE EVERYONE. There's just too much damage, and not enough resources. At the end of the day, you gotta make some tough decisions. Who will live, and who will die, so to speak.

At the end of the day, everyone knows this. But, sometimes the heart rules the head, and some decisions are just too painful to make all at once.

Recession Advice

2008-11-23T02:34:00.002+08:00

All sorts of useful advice. Not really necessary in Malaysia... for the moment.

http://www.thestreet.com/story/10447544/1/the-unemployment-survival-guide.html
http://www.thestreet.com/story/10444088/1/how-to-sell-a-house--fast.html
http://www.thestreet.com/story/10445644/1/faith-popcorn-vigilante-consumerism-emerges.html

This one isn't for Malaysians, as our mortages don't work like this http://www.thestreet.com/story/10443382/3/so-where-did-my-mortgage-go.html

Derivatives Damage not over yet. --> World's Largest Casino

2008-11-22T22:16:00.004+08:00

Excerpt from http://www.nytimes.com/2008/11/22/business/22bank.html

"Then, on Tuesday, a report about imminent defaults on two large commercial mortgages sent the price of bonds backed by those loans tumbling. The first $209 million loan was backed by two Westin hotels in Arizona and Hilton Head, S.C., and the second was a $125 million loan backed a shopping complex in Southern California"

Obviously, we haven't hit bottom yet.

It looks like the damage from the mortage market is still coming in.

Fannie and Freddie postponing foreclosures until January is going to just delay things... then the explosion will hit all at once. BOOM.

I mean come on. Westin and Hilton are defaulting on their mortages for crying out loud. What chance does an unemployed American have? ... none, that's what.

Remember, there's 1.4 quadrillion, aka USD1400 trillion of derivatives out there. A mere 1% write off in this figure is 14 TRILLION.
Some people are saying that a lot of these derivatives offset each other.
Well... you know what that means? It actually means that there is a possible outcome that some people are going to collectively profit 700 trillion, some people will lose 900 trillion, and 500 trillion will just rollover.
That will be rather chaotic, actually.

You know what? A lot of people have been claiming that there's a ton of financial institutions that stand to lose billions if the CDO market is allowed to collapse. Er... can we start naming those who stand to make the corresponding billions?

No?

Maybe there isn't as much "offset" and balance as you guys think!!!

Look, here's the deal. Casino's are regulated. Because everyone, EVERYONE knows that uncontrolled heavy gambling can cause ridiculous damage to many people. (while greatly enriching others). At the end of the day, gambling is a zero sum game. It doesn't actually create value, it just redistributes wealth. (though it does have some economic stimulation benefits that come with it... I'm just talking about gambling itself)

Similiarly, the derivatives market is nothing but a big huge casino. Yes you can say it's necessary for hedging, but you forget that the opposing side of the contract is a gambler then. The derivatives market is the WORLD'S LARGEST CASINO.

Even Buffet, who claimed to be against derivatives, and called them financial WMDs, got into the act. The lure of gambling pulls even sane men in...
http://www.capmag.com/article.asp?ID=2531
http://www.bloggingstocks.com/2008/05/03/what-was-berkshire-hathaway-doing-with-derivatives/
http://thestar.com.my/news/story.asp?file=/2008/11/8/apworld/20081108122407&sec=apworld
http://www.reuters.com/article/ousiv/idUSTRE4AK6XX20081121

"Warren Buffett's Berkshire Hathaway Inc provided details to the U.S. Securities and Exchange Commission on how it values what has so far been a money-losing $37.04 billion derivatives bet, after the regulator asked for better disclosure."
"The company obtained about $4.85 billion of premiums upfront, which Buffett may invest as he wishes.
Buffett has said he expects the contracts to be profitable. But falling equity values had by September 30 forced Berkshire to write down $6.73 billion on the contracts. Losses have almost certainly mounted since then as stocks worldwide tumble."

Summary: People have been frequenting the casino for years, making large bets. Even with the odds in their favour, an eventual huge loss is no big surprise to some.
Also, Buffet has not been the paragon of honesty in the recent past. I think that comes partially from his shift from "I manage other people's money. My greatest virtue is my honesty, integrity and investment acumen" to his current focus on being CEO of many businesses, such as INSURANCE, financial etc etc, where the key to success seems to be "screw the shareholders, screw the customers, screw the company, the honest and prudent man makes lower profits"

Capitulation in US Housing coming: Malaysia will come later.

2008-11-22T20:04:00.005+08:00

Here is what people THINK capitulation means: they think it means a large fall in the market, due to sentiment, after which the dust will settle, and everyone will jump in with all the cash they've laid by the sidelines, allowing a huge rebound.

Here's what I think capitulation will mean this time around:

Some people will realise they don't have as much cash lying by the side as they thought, and will be FORCED to sell. Unit Trusts been telling you not to liquidate, the bull will return? Your neighbours insisting that this is just a temporary housing glut?

Well, for some people, they are realising that they need cash, and they need it now, and they CANNOT AFFORD TO BARGAIN. They have to take buyers price, no matter what it might be.

It looks like the first to be hit are looking to be the Elderly.

Excerpt from:

http://www.nytimes.com/2008/11/22/us/22home.html?pagewanted=1&hp&adxnnl=1&adxnnlx=1227355470-Zlmge3SmDxUILDK2CQ8lIQ

Sooner or later, if things don't improve, these people are going to keep lowering their prices until they do find a buyer. They have little choice. It's come to the point where they either sell their home at a loss, or they sell their 401k plan at a loss... basically, they just have to sell their assets and take a loss.

As for our own markets... we are currently nowhere near capitulation. There are far too many people who are saying, "If I sell at this level, I will lose money!"

Get it through your head people. You have ALREADY lost money. Not admitting it is not helping.

Still, it's just human nature to delay the inevitable. Look at GM, AIG, Fannie, Freddie...

Capitulation in our markets will appear when everyone; (and by everyone I mean the 95% of the population who do not have enough in Fixed Deposits for them to live comfortably for the rest of their lives), when everyone realizes that times are getting tough, those properties they own are not getting rented out or resold, and those shares are not giving out dividends, their credit cards have been maxed out, and their company has begun to layoff workers...

My forecast is that the order of events in Malaysia will be this: Layoffs will be announced (first hit). Then layoffs will be implemented. Looking at the distribution of employment, I would say that the worst affected area would be Klang Valley. Effect of layoffs: many people will move back to their home states, selling their homes, or ceasing to pay rent. The housing fall will trigger another fall in shares.
As cheap foreign workers leave Malaysia, businesses will start to founder. Both due to lower revenues, and also because of lack of cheap labor. Some will close, some will have no choice but to sell blue-chip shares in order to keep their companies running.
When High Wage foreign expatriates leave, you can watch those high end properties shed ridiculous amounts of value. Those construction companies are going to be in serious cashflow problems. This of course will flowover to the banks which are doing financing.
At some point, banks will tighten their debt policies. At which point, you will really see a selloff of shares and "excess" investment property as people fight to keep their businesses, their homes, and their daily lifestyle expenses.
How about the return of our own workers who are abroad? I know for a fact that we have a decent number of Malaysians in America... I am uncertain of their policies over there, but I have my suspicions that there will be a bias to give American jobs to American people. Then again they have laws against that sort of thing, so who knows? Anyhow, I would assume that a lot of High Income (by malaysian standards) people overseas will lose their jobs and will probably end up coming back to Malaysia and liquidating some assets.
Sooner or later, we are going to see those "amatuer" shareplayers exit the market... I'm talking about those guys who don't even talk to a remisier, the ones who just get an online trading account, and have no idea what a PE ratio is... what's worse is that this group of people usually have shaky financials in the first place.

According to an advisor of mine in Australia, Australian economy is delayed behind America a couple of months. In other words, if consumer demand drops in America and layoffs occur, you can foresee layoffs in Australia a few months down the road. I have my suspicions, but no confirmation, that the same is true of Malaysia. A country which exports so much, has absolutely no need for so much production capacity during an economic downturn, and even less need during a global recession. ... I strongly suspect that we have at least 30% more labor than necessary for production, at the moment. (but again, I have no numbers. I don't think anyone has these figures, in fact, due to unfathomable hiring policies, foreign workers, inefficiencies, delay factor in hiring/firing...)

Summary: Capitulation. Look up a dictionary. It means total surrender. It does not mean "temporary retreat".
The elderly and unemployed will be the first to capitulate. This is why, after all, this is a world where the rich get richer and the poor get poorer. The rich will be the ones who will lead the rebound, and profit from it. The poor will be the first to cave in to the buyer's market, and will lose out most.

Great Recession?

2008-11-21T10:39:00.005+08:00

http://www.thestreet.com/story/10449144/1/kass-times-running-out-for-a-rally.html

1. Six trillion dollars of wealth has been lost in home prices over the last year and a half.
2. Eighteen trillion dollars of wealth has been lost in global equities in only seven weeks.
3. Deleveraging continues to restrict accessibility to credit.
4. Job losses are accelerating.

And I would like to add:

5. Economic data has been revised, it looks like the worst is yet to come.
6. Still waiting for the losses from derivatives to come in... they've been held in check by US policy, but they haven't actually disappeared.
7. The recession has spread GLOBALLY. Local recessions are relatively easier to solve... just do more business with the rich nations, albeit at slightly disadvantageous terms. Global recession... what are you going to do?
8. Earnings figures are definitely going to be down. Price Earnings ratios are currently based on historical values... ie the earnings are based on an unrealistically high figure! At this point in time, US companies are trading at 20 times PE. But if their earnings drop in 1/2 next year, that means they are trading at 40 times! Companies that have historically given good dividends are going to cut or eliminate these dividends.
9. It has been overlooked, but the shipping industry is in trouble. And logistics problems invariably lead to supply problems. Apparently some shipments are getting stuck at ports. I think that the effect from this will not be TOO huge... probably just a few billion or so... might seem like a lot, but nowadays we're talking about trillions, 3 orders of magnitude, dude.
10. Bad Debt. It might seem like a lot now. But what do you think happens to bad debt during a recession/ depression? It BALLOONS. You think those debts look toxic right now? It's going to be like wading through Sarin Gas a few months down the road, if all those jobless people don't get rehired. ... BTW, just to be clear... most of them won't.
11. Russia. And other troubled economies/ financials. If they start defaulting, I have no idea what sort of financial disaster that would be... who knows what derivatives have been tied to Russia's default. Speaking of that, what happened to Iceland?

Palm Oil Exports forecast

2008-11-20T21:02:00.006+08:00

Taken from the Star at http://thestar.com.my/news/story.asp?file=/2008/11/20/nation/2591347&sec=nation

"SHAH ALAM: Despite a worsening global economic outlook, the Malaysian plantation industry is expected to achieve export earnings of RM100bil compared with last year’s figure of RM89bil.

Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said at the opening of the 2nd International Plantation Industry Conference and Exhibition here on Tuesday that the government has announced measures to stabilise the situation such as the mandatory use of biodiesel and promoting the oil palm replanting programme."

http://www.mpoc.org.my/main_mktstat_export.asp

The trouble is that current CPO prices are even lower than in 2007. And now they are talking about lowering production by encouraging replanting. (replanted fields give zero yields for quite a while)

So, the forecast for 2009 is that our palm oil export revenue will be Rm50b or below.
BTW, that's enough to wipe out next year's forecasted 3% growth in GDP...

Ouch?

Pretty obvious Malaysia is going into recession in 2009...

A bit shameless to try and make it look as if palm oil industry is recovering... in reality what he's saying is that the last 3 months of the year will not overcome the incredible windfalls from earlier in the year.
Palm oil is still going downhill next year...

Airlines went Bankrupt... and prospered. Why shouldn't the auto industry?

2008-11-20T02:01:00.002+08:00

http://www.thestreet.com/story/10448813/1/airlines-could-show-big-three-the-way.html
Basically, the logic is that bankruptcy actually DOES allow you to keep working or running the business, and it also is a very good way to shed a lot of debt and obligations.

Of course, there are SOME penalties.

But in the case of Delta, and other airlines, it turned out that the benefits of bankruptcy were what allowed them to turn around. In fact, the argument is that declaring bankruptcy was the sole reason that they managed to cut costs and turnaround so drastically.

I hear it works for individuals too...

Why is everyone so scared of bankruptcy anyhow? They're afraid of tarnishing their reputation? Well, I got news for ya. Nowadays, news spreads far and fast, thanks to the new medias. So it's not like these guys don't already have a reputation as failures, deadbeats and debtors... why not wipe it all off and start with a clean slate?

Vivid Videos vs YouPorn

2008-11-19T00:57:00.003+08:00

Article from http://www.portfolio.com/culture-lifestyle/culture-inc/arts/2007/10/15/YouPorn-Vivid-Entertainment-Profile

Basically, Today, YouPorn is the No. 1 adult site in the world; Vivid.com, a pay site, is ranked 5,061. Vivid however has a LOT of income due to being one of the top Porn Companies in the world.
So this guy, the owner, Stephen Paul Jones , wants to sell youporn to vivid.

What's so interesting about this? Well for one, it's interesting to see how PAID porn deals with FREE PORN eating up it's market share. By buying it out? ... Is this going to be like the internet bubble? This is going to be the porn bubble?

Will this mean that Muslim countries like Malaysia will miss out?

Evidently, not completely:

"Jones told the men that he and one other executive, a young Malaysian man living in Australia, were the owners of YouPorn." His name is Zach Hong and he lives in Australia.

Oh yes. We Malaysians have something to be proud of. Malaysia Boleh! This guy should be in the Malaysian Book of Records... he might even be eligible for a Datukship!

FYI, Malaysia has decided to fight back by blocking streamyx access to youporn.com, so http://www.programming-is-fun.com/2008/09/accessing-yourpon-from-malaysia.html will teach those who want to see what a Malaysian guy managed to create.

Ok, actually, this all turned out to be old news, but I just found out about it and I think that it's interesting...

Liar's Poker: The mini-sequel

2008-11-19T00:36:00.002+08:00

Anyone remember Mark Lewis? The writer of Liar's Poker?

The guy is part of a team of people who are making an absolute killing from holding some short positions in mortages via Credit Default Swaps from several years ago.

Anyhow, he wrote a really really really brilliant article, if you've got any interest in the finance world whatsoever, you simply have to read it. It's seriously better than Liar's Poker, in the sense that, from his writing, you can tell that the corruption and loss of integrity and rise in stupidity is far far greater than what it was years ago, back when Mark Lewis first got famous from his book.

http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom

It 9 pages long, and a long long wall of text. But it is WORTH IT. Trust me.

The guy foresees this as the destruction of Wall Street, and that things will never be the same quite again after this.
I don't think it's quite THAT bad, but I do agree that the damage done is simply catastrophic, and government intervention has not ELIMINATED it... in fact it is not possible to eliminate these sort of horrors. What the government has done is simply delay it's effects and slow down the process.

IMHO, this is just being stupid. But then again, when I go to the dentist, I tell them to fix everything in one sitting, no matter how painful it is... I'd rather get it all done then get on with my life than to have to spend the next 3 months coming in and out trying to spread the pain out.

Obama should put these guys on on his team... in a world of overoptimism, these guys are realists.

I'm not saying that he should ONLY have nay-sayers on his team. But it always makes sense to have someone of both sides of an argument. To balance everything out. To make sure you are getting, if not an unbiased opinion, then 2 biased opinions from both sides of the coin.

These guys... very smart. Yes, I can call people smart too. Shocking huh? They could recognise the weaknesses of other people and exploit them. ... that doesn't sound like a complement when I put it that way, does it? hahaha.

Seriously. In this day and age, everyone is all "polite" and says things like "everyone has a right to their own opinion" and "no one is stupid... it's rude to call people stupid"
The reality is: Some people have an opinion and it's wrong. Some people really are stupid. And if you know someone is very very stupid, you can benefit by just doing the opposite of whatever they're doing.

Summary: Read the article:
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom

Unemployment accelerating

2008-11-18T08:23:00.006+08:00

Citibank is dumping an additional 25,000 staff, making a total of 50,000 this year, and a total of 75,000 since the end of 2007.

http://news.my.msn.com/topstories/article.aspx?cp-documentid=1790234
http://www.nytimes.com/2008/11/18/business/18citi.html

And it's worldwide, so don't expect your country to be spared just because it's outside USA. After all, 12500 jobs came from India and 5000 from Germany.

As for the banking industry in general? Expect job cuts. LOTS of them. The banks are now starting to buy each other up in mergers and acquisitions. And we all know what that means: closing down of redundant branches, and laying off in overlapping departments.

What this also means for the rest of the world is: there's going to be a lot of experienced bankers with strong credentials, desperate for a job. Many of them will be willing to take a foreign job offer.

Also, looking in Melaka and all over Malaysia, there were some mergers back in recent years. For instance CIMB bought Southern Bank. However, times were good, so I noticed that there was any closing of any branches. EVEN branches side by side or within 10-20 meters of each other.
... Obviously, this has a good chance of changing.
So, expect some layoffs in Malaysia's banking industries as well.

Speaking of Malaysia, I noticed from our government website: http://www.mpoc.org.my/envo_150908_01.asp

that Palm Oil contributes 5-6% of our GDP and employs 1.4million workers. Palm oil exports in 2007 was Rm45billion.

Palm Oil has dropped from an average of RM3500 last year to below RM1500.

How do you think that will affect our GDP and employment? Well, I can't talk about employment figures (further complicated by foreign and illegal workers), but I can safely say that Palm Oil prices ALONE will cause us a drop in GDP of almost 3%. Our loss in export revenue will be over RM20billion.

BTW, Malaysia's largest export is Electronic goods. The market for electronic goods has really been hit hard and painfully. So expect horrific earnings drops and job cuts in this sector as well. Less efficient companies can expect to close down.

Overall, I am projecting Malaysia to go into a recession of worse than -10% in 2009. I think even -20% is quite definitely possible.

Yes, that looks rather horrifically bad, doesn't it? Don't believe it? We shall see.
But the top analysts in the world seem to agree with me. Even the most optimistic analysts who advocate buying Asian stocks for long term investments, (Morgan Stanley amongst them) all advocate dumping Malaysian shares, as they are among the worst in the region.
So who is more trustworthy? Me and the most reputable analysts in the world? Or our "trustworthy" leaders in government?
We shall just have to see, won't we?

For me though, I have advised all my friends and family to dump Malaysian stocks and not to come back in for the next few years. Keeping Malaysian stocks is a big risk, and a low possible reward at the moment. In fact, I have advised those running their own business to sell those too, as I feel that the Malaysian economy, and in fact Malaysia in general, is sliding downwards.

Warren Buffet: Charging in Blindly -> massive revision!

2008-11-18T07:23:00.004+08:00

MASSIVE EDIT AND REWRITE TIME:

As it turns out, I did not realise something about Buffet's Goldman Sachs purchase.

Namely, it turned out not to be a purchase whatsoever.

In fact, what Buffet did is he gave Goldman USD5 billion in exchange for USD5billion of perpetual preference shares (which are not shares at all btw), and warrants allowing him to purchase USD5 billion worth of Goldman Sachs at USD115, with 5 years expiry.
Info from http://www.istockanalyst.com/article/viewarticle+articleid_2653370.html
http://bigpicture.typepad.com/comments/2008/09/i-got-75b-but-i.html

These preference shares basically mean that Goldman Sachs has to pay 10% dividends every year(500 million) to Buffet. (actually to Berkshire). And, since this is a preferred, it gets paid out of net income in after tax dollars dollars!!! So it's actually equivalent to 15% aka 750million per year.
However Goldman Sachs is allowed to redeem these shares aka cancel this deal by paying Buffet USD5.5billion. Not bad not bad.
And as everyone says, they're pretty sure that he made a deal with Treasury that would ensure that Goldman would not be allowed to go bust. (which explains the shift in policy from bailing out mortage holders to bailing out banks)

Risk? I'm sorry, I have to eat my own words. Buffet's deal here is pretty much as risk free as he can get, as he cannot lose unless Goldman goes under, and even then I think he gets his money back as preferenced shares are pretty high up the repayment plan.

Buffet's only exposure to Goldman Sachs price is those warrants (that he essentially got for free). And that's only positive conditional exposure, he actually has nothing to lose from goldman's price, but he can gain a bonus if it goes above USD115.

Well done Buffet.

He HAD made some stock purchases that were a little early, but, hey, I've decided to take a little closer look at the picture before calling my shots now...

My earlier post is also here.

Early on in this crisis, Buffet started on a buying spree, saying that he was buying American stocks, and that everyone should follow him.

Buffet has already proven himself wrong. Those who jumped in when he did have gotten SLAUGHTERED.
And they have a lot less disposable income than he does.

Buffet has been very inconsistant with his normal behaviour in this case. I seriously blame it on his being a patriot, and pressure from his pals in the US Treasury.
Normally, Buffet exercises caution and prudence. This time, he's thrown it all to the winds.

Normally, a prudent investor would spend his bullets in stages. Sometimes, you are too slow, and you still have unfired bullets when they bottom has passed.Sometimes you guess too fast, and you run out of bullets too far off from the bottom.

However, Buffet seems to have projected the slide to only occur for a month or two, judging on his market timing. IMHO, he has run out of bullets FAR too early in this war.

I basically liken him to normally being a general, a military strategist. He controls the field of battle with his words and actions.

His buying spree some time ago was more like a berserk Norse Warrior. Or Rambo. Or GI Joe charging into enemy lines.

The thing is... his argument seems to be pretty much that different times advocate different tactics. And Buffet admits that he has NEVER in his adult life come across a situation like the current crisis.

I think that if you have had a winning formula your whole life... why change it? Buffet has always been more of a "slow and steady" "rule number one is preserve your capital, rule number 2 is remember rule number 1". He has done so spectacularly well his whole life by AVOIDING MASSIVE LOSSES through being prudent and cautious.

Oh, I have no doubts that someday, SOMEDAY, his investments that he made this time will make money.

But it sure looks like he would have made a lot more if he had staggered out his purchases a bit more.

Furthermore, he's completely changed his allocation of assets by using his PERSONAL funds... he's kept those in bonds all this time. I don't recall him switching out of those at the bottom of the tech bubble... what's so significant about this point in time? Seriously, I know that he made some purchases at the bottoms of the other bubbles, but I've never seen him quite THIS aggressive before... and certainly not so early on in the cycle. Normally he steps in AFTER consumer sentiment is jarred by unemployment figues. Or perhaps he begins quietly buying small amounts throughout the bear cycle.

This is the first time I've heard of Warren Buffet whanging everything at one go and announcing to the whole world to follow his lead.

It's seriously all very strange. It's like he's thrown away his old concepts of prudence and is advocating long term investment, short term gambling. I'm pretty sure that he KNOWS that the average American has taken some heavy losses, and simply cannot afford to lose any more money in the SHORT TERM... whatever the long term results are.

The old Buffet that I know of would have warned the everyday American not to put themselves in short term danger.
The old Buffet I remember would have put in some warnings, some disclaimers. Some stuff to disuade those people who are already in a hole from digging themselves even deeper.

Er. What happened to the old Buffet?

Weird.

Nonetheless... I'm not The Angry Investor today. Though I criticise his recent bizarre change in personality and investment technique, I can't quite get angry with the Oracle of Omaha. A lot of what I learnt comes from him... well, the old him, at any rate.

Sometimes, I worry that Warren Buffet has actually had a heart attack and passed on, and the American Government got worried and replaced him with a lookalike. ... That would explain a lot, and I'm sure you could see the rationale behind such an action. Frankly, I think that Buffet dying at this point in time would cause a worse damage to world ecnonomics and financials than an assasination of their president.

Hahaha. But who wants to listen to conspiracy theories anyhow?

In any case:

Summary: Warren Buffet is not behaving like his usual self. Those who have been his followers all this time, better start treating what he says with a pinch of salt, and a lot of caution.

Bankruptcies rising in America

2008-11-17T00:38:00.004+08:00

Excerpts from: http://www.nytimes.com/2008/11/16/business/16consumer.html?pagewanted=1&_r=1&hp

"The number of personal bankruptcy filings jumped nearly 8 percent in October from September
Filings totaled 108,595. That translated to an average of 4,936 bankruptcies filed each business day last monthFilings totaled 108,595
A recent study found that the typical family who filed for bankruptcy in 2007 was carrying about 21 percent more in secured debts, like mortgages and car loans, and about 44 percent more in unsecured debts, like credit cards and medical and utility bills, than filers in 2001. Their incomes, meanwhile, remained static over those six years.
Some people are trying to rescue their homes through bankruptcy proceedings, but many are just as relieved to walk away, shedding layers of debt that otherwise would have taken decades to pay off."

Why does the US think that lending will stave off bankruptcy proceedings. In the first place, is it in fact a healthy business practice to lend money to people who are already drowning in debt and on the verge of bankruptcy? Well, obviously not.
Would it be charitable to do so? Well, yes, of course. So, maybe America should start up some non-profit banks, which make losses every year, and are supported by donations.

In the 2nd place, these guys still don't get it.

Look, sooner or later reality always sets in. Sooner or later, people realise that they have been living outside their means, due to overoptimism. Sooner or later, the DEBTS GROW TOO LARGE compared to their incomes.

Decades to pay off? Actually, a lot of people who are going bankrupt have realised something: those debts they have are NEVER going to be paid off. It's a case of 2 steps forward, 3 steps back. Their debts have been growing larger and larger every year, and their incomes have remained stagnant, or are growing far too slow to ever catch up.

...

It's sad to say this, but some people were just asking for trouble. Let's take the example of the couple quoted in the New York Times:

"Tony and Carrie Forsyth, both 30, chose not to walk away from their house in Florida. The couple said they thought their financial situation would improve in 2006, when Mr. Forsyth accepted a promotion from his employer, a Michigan food distributor, that required them to move to Florida. But they could not sell their home in Ypsilanti, Mich., so they decided to rent it out.
In June 2006, the couple headed south and bought a house for $220,000 in Tamarac, Fla., with no money down. Five months later, their tenants in Michigan stopped paying, and the family had to carry two mortgage payments, just as the adjustable-rate mortgage on their Michigan home reset to a higher interest rate. They lost the Michigan home to foreclosure in February 2007. "

...

Hello. Does anyone else see the problem here? This couple were in financial difficulty in 2006. They didn't sell their home when they moved. They claimed they "couldn't". Actually it just means they were OVEROPTIMISTIC and hoped for a better price.
"no money down". A sign of the very loose credit controls in the market. $220,000? That's a little on the pricey side for people who were in financial trouble just one promotion ago. Overoptimism at work again.
2 houses. 2 mortages? No no no no no. This is just being silly. It's clear at this point that this couple has no sense of caution at all, and in case you didn't notice, the article made no mention of how much Mr Forsyth's salary was before and after his promotion, or whether his wife had any forms of income or not.

The point is that whoever wrote the article didn't think that such information was important enough to include.
But the fact of the matter is, that when looking at debt, bankruptcy, and paying loans, the level of income is the most important fact of all. NOT how much credit is available. 2nd most important would be interest rates. In fact, total amount of debt sort of comes 3rd place. ... okok, actually, all 3 are important. But basically, ignoring any of the 3 is just stupid, and this is what is happening here, they are ignoring #1: income.

I've always sniffed at financial planners, but I'm starting to realise that there are many people in the world who aren't so intuitively good at balancing their finances. These group of people should go to a financial planner early on in their careers and ask them to plan their finances in great detail, including how much is healthy to spend on their house, how much to borrow, how much to spend on their car, entertainment... in fact, asking your financial planner to advise you on these facts will help much much more than asking them how much to put in Fixed Deposits, how much in unit trust, how much in EPF, etc etc. Ask them how much to spend, as well as how much to save. Cause, let's face it, most people spend more than they save, right?

Summary: It's always best not to be overoptimistic. Don't borrow more than you can repay COMFORTABLY. (don't borrow the maximum, borrow what is comfortable, there's a huge difference).
Increasing lending liquidity is ridiculous, these people are declaring bankruptcy because they have too much debt, you want to give them even more debt?
Ask your financial planner to plan your SPENDING for you. It's even more important than your SAVINGS plan.

Petronas Investment in Uzbekistan

2008-11-16T17:29:00.003+08:00

Excerpts from http://thestar.com.my/news/story.asp?file=/2008/11/16/nation/2564337&sec=nation

"Prime Minister Datuk Seri Abdullah Ahmad Badawi, who begins a three-day official visit to Uzbekistan today, is expected to announce new investments of up to RM700mil by Petronas in the republic’s oil and gas sector"

"Malaysia made several investments in post-independent Uzbekistan, particularly in the banking, hotel, mobile services and the distribution of oil and fuel industries. However, almost all the investments failed, owing mainly to the Asian regional economic crisis in 1998."

...

They never learn, do they?

Make investements just before an economic crisis hits. Watch investments fail. Repeat every couple of years?

Anyhow, a mere RM700m is nothing to Petronas. After all, we're talking about lunatics who spent RM128 billion in 2008 alone!

hmm: extra food for thought: http://en.wikipedia.org/wiki/Economy_of_Uzbekistan

"According to EBRD transition indicators,[13] Uzbekistan's investment climate remains among the least favorable in the CIS, with only Belarus and Turkmenistan ranking lower. The unfavorable investment climate has caused foreign investment inflows to dwindle to a trickle. It is believed that Uzbekistan has the lowest level of FDI per capita in the CIS. Since Uzbekistan's independence, U.S. firms have invested roughly $500 million in the country, but due to declining investor confidence, harassment, and currency convertibility problems, numerous international investors have left the country or are considering leaving"

...

You know what? Don't blame the Asian Economic Crisis for investments in Uzbekistan... it's a lousy economy there.

Pakistan is a messed up country

2008-11-16T17:09:00.002+08:00

Excerpts from:
http://thestar.com.my/news/story.asp?file=/2008/11/16/apworld/20081116132745&sec=apworld

"Pakistan's decision to borrow $7.6 billion from the International Monetary Fund to stabilize its economy at a time of rising militant violence could lead to a public backlash"

"their nation's front-line status in the fight against al-Qaida and Taliban militant "

"ordinary Pakistanis, two-thirds of whom live on $2 dollar a day or less."

"However, nuclear-armed Pakistan's strategic importance in the U.S.-led war on terror makes its financial and political stability of particular concern to the international community"

Pakistan is a seriously messed up country. They're fighting an expensive war, they spent who knows how much on nuclear weapons... and 2/3 of their people live on less than USD 700 / RM2500 a year.

The IMF is willing to send them money... to repair the money supply?

WTF?

No wonder people are angry. Yeah, I know that IMF does not consider people's LIVES as part of their agenda, but... it does seem rather insensetive doesn't it?

Makes you realize that your own country is pretty good after all, doesn't it?

HUGE Fire Sweeps South California

2008-11-16T09:53:00.005+08:00

http://www.thestreet.com/story/10448211/1/wildfires-imperil-southern-california.html

This has a lot of implications. Firstly, for people's lives and livelihoods. (fatalities appear to have been kept to a minimum, as the fire didn't spread sslowly but steadily and strongly, giving people time to evacuate) This is really really terrible for them...

Especially if their insurer was AIG.

Oh, they probably will all get their payouts. But I am sure that they are very very worried about the possibility that they might NOT receive their compensation. There is still a small possibility that they won't though. After all, nowadays even bank deposits have some small risk of default. (during the recent bank foreclosures, several dozen billion were paid out, but several hundred million was lost by depositers... a good average, but utterly devastating to those minority who lost several hundred million)

... how about those who didn't have insurance... or have not been keeping up with payments?

As for property prices... how will this affect property prices in South California? Perhaps this might help property prices recover, as those people will eventually need new homes... and some of them are wealthy people, who used to live in mansions.

What does it do to toxic mortages? What are the implications when a bank is contemplating forclosing a policy... and the house burns down?

...

In this environment, is it possible that some people with loose morals, large mortages, and low incomes, will be merrily pouring petrol (which is half the price it used to be!) around their homes? (after removing anything of worth from the premises)

Well... I hope that the US government will accept a helping hand to these victims. After all, this is something that they are supposed to protect their citizens from. They pay tax every year to support the Fire Department, don't they? So, it's only right that the US government compensates those who lost everything. Well, maybe not 100% compensation, but, don't leave them with nothing... right?

This is really Murphy's Law hitting hard. Each hit to the economy and world SEPARATELY would have been a disaster of large proportions on it's own. GM going down would have caused a share market crash even in a strong global economy. Oil Prices at this level would have caused a recession in Malaysia, even without factoring in a drop in global consumer spending. Which is worse, mass unemployment and economic woes, or this credit squeeze and the financial woes? (well the last selection is actually feeding upon each other in a vicious interconnected cycle to some extent) In the end, I think if a few more disasters hit, the whole world is go from deep deep trouble to International Emergency.

George Soros supports Regulation

2008-11-16T00:38:00.003+08:00

Story from http://www.news.com.au/business/story/0,27753,24650136-14334,00.html

"Mr Soros, who reportedly earns more than $100,000 an hour as a hedge fund manager, said the large, high-risk hedge funds will be "decimated" by the financial crisis."

"Mr Soros urged President-elect Barack Obama to make regulating finance a priority, so all new financial products would be approved by regulators"

George Soros isprobably one of the highest paid hedge fund managers in the world. It is VERY likely that he would in fact be rewarded by NON-regulation, or loosening of controls.

However, George Soros, like Warren Buffet, is one of those people who can afford to be idealistic. He himself is advocating regulations.

It's just too dangerous leaving hedge funds and investment banks with almost unlimited power over so much of other people's money, and barely and rules, regulations or oversight from the governments!

I'm very glad that George Soros was honest enough to admit this. His freedom in constructing his own portfolios would be adversely affected, but he is man enough to say that regulation is necessary.

...

Of course, this doesn't mean I completely forgive him for what he did to Asia during the 1997 Currency Crisis. ... I lost 70% of my investment capital during that disaster! AARGH... the bad memories are coming back... The market did recover eventually though, but one thing I learnt from that... in a bear market, SELL. Don't be afraid to turn a paper loss into a real loss. What you sell today, you can buy back tomorrow. Or next month. Or next year. In fact, you don't lose anything by selling, other than your PRIDE. Well, there's a small broker's comission too, but that's rather inconsequential when the market is so volatile.

Fed Got Scammed

2008-11-15T21:31:00.004+08:00

The FED thought wanted to increase liquidity by increasing lending.

Instead of just doing this themselves, they decided to lend a lot of money to the banks, which they thought would then turn around and lend to consumers and corporations. The whole "borrow at 3%, lend at 5%" thing.

Unfortunatly, Warren Buffet and top analysts have been going on and on about how this is a WONDERFUL opportunity to buy into the stock market if you have spare cash.

So, the banks make a quick calculation:

"Let's see... I've got USD 30 billion in my pocket now... I could lend it to people at 6% per annum... but then again, Warren Buffet is saying that I could make over 10% per annum annualized if I buy stocks, or even better buy over an entire bank...
Lending to consumers is looking risky... Buffet just said that buying stocks right now is really safe...

hmm... which shall I choose..."

Which option do you think they chose?

Keep in mind that unlike the the Fed, or Jesus, or a church or charitable organization, these are Public Traded Companies and their directors get sizeable bonuses based on profit...

Yeah. It seems fairly OBVIOUS in hindsight, doesn't it?

And that's why Treasury is now switching to a different plan of what to do with the remaining 350b from the 700b.

IDIOTS.

Warren Buffet... you have to stop giving naive advice. My personal opinion is that Buffet is a very kind and philanthropic man. Which is precisely why he should stop trying to analyse this economic situation.
He does not understand that PEOPLE ARE NOT THE SAME AS HIM.
Normal humans are... only human.
Warren Buffet is practically a demi-god, in some ways.
This actually has some negative effects. For instance, he has forgotten that in a crisis, people will look after their own interests first, that people are greedy and fearful, that people generally earn money in order to EAT not to grow their portfolios then give it away to charity.

Warren Buffet is the sort of man, if you gave him 700b to save America, I am sure he would do his greatest effort to save America.
These bank CEOS... are the sort of people... if you give them 700b to save America, they will happily start looking for the ways to make sure as much of that 700b goes into their own pockets as possible.

Basic human nature.
Frankly, if you gave ME 700b, I do not think I could... no. I admit it. I could not resist temptation completely. Whether it be giving myself a high salary, or a contract saying that I take some of the profit if it succeeds, or a huge expense account organizing "business trips"... I don't think I could resist it. Do any of you think you could?

Warren Buffet probably could. Heck he manages billions upon billions and yet the bulk of his income comes from his own investments, not yearly bonuses or salaries. He drives his own car, lives in a small house...
The trouble is... Warren Buffet has risen above human materialism. But he's unfortunatly forgotten that normal humans HAVE NOT.

The FED forgot this too. And got scammed big time. 350b to the banks, and not much of it going to help American citizens or corporations. Why doesn't the Fed hold a gun to citi's head and force them to buy General Motors, or force citi to extend credit to them?

Taking huge amounts of cash, and giving it to Profit Orientated Corporations, in the hope that they will "do the right thing"...

FED is DUMB.... and rather naive.

Confidence Crisis? WRONG, MORONS!

2008-11-15T13:01:00.000+08:00

USA is saying that the current mortage problem is a confidence crisis.

They are saying that it's just fear.

They are also refusing to put 2 and 2 together, and realise that maybe, just MAYBE toxic troubled debts, and mortages, and foreclosures, are all connected?

It's is NOT a confidence crisis that is causing the mortage market to collapse.

It is the simple simple unescapable fact that a very large number of people bought houses that they cannot afford! And that number is in fact INCREASING every day. Mortage rates are going up. Credit card rates are going up. Employment is going down. How are people with no income supposed to pay a rising mortage?

The stupid American government is choosing to pretend that this group of people does not exist.
MADNESS.

Instead, they are trying to revive the mortage market by saying "look, there are plenty of people who are not in trouble, why don't we give mortages to these guys?"

Er... yes. You can give them mortages. This is a good idea.

But...

It's not going to solve the problem of the other section of the population who ARE in trouble!

These idiots are only trying to look at aggregate figures, instead of segmenting the mortage market.

They think that all they need to do is look at total mortages, total good mortages, and total bad mortages. At the moment, the ratio of good:bad is too low. So their theory is, to fix this problem, just raise the number of good mortages.

...
...
...

Yeah, I know that it seems to make some sort of sense, but you can tell that theres some big flapping holes in this logic.

Unfortunatly, these morons haven't realised that.

Sooner or later, you HAVE TO restore the ratio of good:bad mortages by reducing bad mortages. You can't shuffle them around. You HAVE TO foreclose. Just like bankruptcy.

Also.

The fact of the matter is:

The mortage market is saturated.

The mortage market simply grew too fast, furious, and recklessly in the past few years.

The mortage market NEEDS to correct itself.

There are simply too many mortages in existance, with too high amounts attached to each mortage, compared to the earning power required to pay them back.

If America doesn't realize this, the depression is going to last for the next 20 years... basically, it will last until someone realizes that you in fact have to STOP giving out so much easy credit.

The analysts are saying that this problem was caused by too much easy credit...
And now the world banks are trying to solve this by giving out trying to make it EASIER to borrow and lend?

Are they STUPID?

Why, yes of course. Obviously. In fact I have pretty much confirmed that fact some time ago in this blog.

It's like a surgeon who bought a $7.5billion house and property. Obviously, he can't afford something like THAT. But he goes to the bank and says, "hey, you know... i'm a world famous surgeon. My fundamentals are still strong. I am one of the best paid doctors in the world... I earn $15million a year, you should have faith in me. Invest in me!" So... the bank doesn't want to take the pain of foreclosing so they try and help him refinance and refinance and take more loans and...

Well, obviously, what is not going to work cause due to being too expensive... simply cannot work because it is too expensive! NO AMOUNT of refinancing and juggling of debt will solve this problem. Because at the end of the day, you simply cannot run away from the simple fact that:

His income might be freaking high, but his debts are even higher. So, he just has to reduce his debts. Which means moving into a smaller house. Everything else is just delaying the inevitable.

The fact of the matter is, the market is and should be a self-correcting mechanism.
Too much borrowing and financing occured in the last decade. It MUST be wiped out. The market must correct itself. Basically, for the system to return to normal, this cancer must be purged through chemotherapy. Trying to avoid the pain and agony that would occur is only making things worse.

Diamonds from Tequila

2008-11-15T11:05:00.000+08:00

http://www.physorg.com/news145255770.html

...

Well, this is very interesting, and it looks like it's true, not some weird rumor. And it has some financial implications and business applications, so I guess it's legit to blog about it here.

...

I've searched and done some detective work, and here's roughly what happened, the insider story, so to speak:

Javier Morales, Luis Miguel Apátiga, and Víctor Manuel Castaño were doing labwork at National Autonomous University of Mexico, experimenting with creating diamonds from organic solutions such as acetone, ethanol (aka drinkable alchohol), and methanol. As some of you postgrads and researchers might know, most research projects are tedious, boring, and yield very few interesting results. So the researchers find ways to occupy their time while bored. Eating, drinking, playing games...

So, anyhow, one day, Luis Miguel Apátiga buys a bottle of tequila from the campus shop. (he admitted this part to the press)
The part he didn't admit, IMHO, is that he and his buddies bought it for drinking purposes, not research. :)

Anyhow, a few shots of tequila later, or maybe a LOT of shots later, you have a bunch of slightly tipsy mexican researchers, experimenting with creating diamonds industrial alchohol, and a bottle of tequila next to them. And eventually, one guy there says "why not?"
Well other than the fact that you've got some liquid with who knows what impurities in it (it's not just tequila, it's CHEAP tequila), and that's some expensive lab equipment... well I guess it's easy to clean equipment and hard to damage considering it's usage, so it's safe, but... actually, if I was there I would probably say "why not?" too. If I was drunk. And if my supervisors/ boss/ etc weren't within earshot...

Anyhow... it worked.

Well, they admit now that they had doubts it would work since tequila contains a LOT of things other than ethanol and H20 in it. Then again, I would like to point out that most chemical reactions require some catalysts in some form or another...

But seriously, my theory is that they did it because they were drunk at the time.

...

Can I get these guys to buy some shared lottery tickets with me? hahaha.

Wait. Does this mean that these new diamonds and diamond film, possibly having applications in cutting tools, high-power semiconductors, radiation detectors and optical-electronic devices, are HARAM, since they are derived from Tequila?
Sort of like how some people were calling muslims to stop using products containing pig lard?
...
Interesting. Not my position to judge. Will wait to see how International Islamic Council votes.

FDIC+ Mortages

2008-11-15T01:32:00.001+08:00

Excerpt from: http://www.thestreet.com/story/10448026/1/stocks-fall-as-investors-rush-to-lock-in-gains.html

"The FDIC released details of a plan to use $24.4 billion to guarantee 2.2 million mortgages, thereby helping some 1.5 million Americans stay in their homes."

...
...
...

WTF?

A LOT of people are going to just look at this and say "oh how kind of them, they'll save all those people". But let's take a look at the Maths here...

How much does the FDIC think a house costs in America? Well, perhaps we are dealing with subprime. Or really small mortages. But seriously, 24.4billion divided by 2.2 million = USD20,000 per house.
Are they sure about that? ... And... my rough estimate is... let's see... assuming 20k mortage at 7% for 15 years... USD180 per month. You're telling me that the people living in those homes cannot afford to pay this? ... these are VERY sub-prime quality loans then. In fact these are so toxic, you might die from glancing at the balance sheet. It means that you are basically guaranteeing the mortages of people who don't have a real job. In reality, these folks are probably better off just declaring bankruptcy and freeing themselves from these debts, then starting over with a clean slate. Seriously, you should NEVER underestimate the power of starting out all over again when your life is in a mess. It can be a MUCH less painful choice than a long, painful and possibly ultimately failed uphill battle to turn your life around with large debts in your path. The bankruptcy laws are not to just to protect lenders... they're there to help the BORROWERS. Check your nearest government body for a free consultation. (if your government provides one. In malaysia it is http://www.akpk.org.my/)

Secondly. Er. Did anyone else notice? 2.2 million homes... 1.5 million Americans?
YEAH, there's a gap of 0.7million there... around 1/3 of those homes do not fall into this category?
No wait... in fact many of those homes will in fact have 2 or more Americans living in them. Families, as you know, would have more than 1 person living in a home.
So... dum de dum dum de dum estimate guesstimate.... They want to guarantee 2.2million homes. 1.2 million of which are not occupied by Americans?
So are they occupied by foreigners, or are those homes unoccupied, ie some fellas were just buying homes for INVESTMENT purposes and never intended to live there... it was a just a punt/ gamble on property going up?

...
...
...

Something not looking quite right here. I have no idea what is going on, but I do smell something fishy.

hmm... will do more research and update blog later.

Summary: this mortage guarantee sounds like a nice idea, but the numbers are looking weird! Something is wrong somewhere...

Government is making things worse

2008-11-15T00:46:00.000+08:00

http://www.thestreet.com/story/10440625/1/government-made-the-mess.html

"The total derivatives market, which is the real source of the turmoil in credit markets, is $1,400 trillion."

Geez... even more than I thought it was!

"The most recent and most disturbing proposal that is being promoted by lenders and politicians is an attempt to abolish fair value accounting. What this means is that lenders do not need to mark their assets to what those assets could be sold for in the market. Both regulators and auditors oppose this plan to eliminate, or water down, fair value accounting. "

Anyone who has learn about accounting knows that this is pure insanity and is totally ignoring the tenets of conservative accounting! It's would allow NONSENSE like saying that the General Motors stock that you bought for $100 dollars is worth $100 today... so the bank should take it as $100 worth of collateral! Why even bother having an annual report for shareholders if you are allowed such shenanigans???

People Never Learn...

2008-11-14T22:57:00.001+08:00

People never learn, do they? Not in the stock market at least.

EVERY SINGLE major crash of the past, every has always ALWAYS quoted the previous crashes, looked at their current situation, and said "this time will be different"

Well, admittedly, of course the JE and birdflu outbreak really did turn out to be a very minor crash compared to say, the Great Depression, but, duh, that much was OBVIOUS from the start. A minor problem will create a minor crash. A major problem will create a major crash. Simple.

This current crisis... why is everyone calling it a financial crisis anyway? It has turned into an ECONOMIC crisis... which has far deeper implications, IMHO. Anyhow, a lot of people have been calling it the biggest crisis since the Great Depression. Some people are saying it is WORSE than the great depression. Personally, it looks impossible to tell for sure. But what is certain is that this crisis is pretty freaking serious. Much more serious than say, the Internet Bubble.

Yes, this is much more serious than the internet bubble. Anyone who thinks otherwise is just dreaming. Frankly, the internet bubble was small change compared to this. If the entire IT industry had been wiped out entirely and restarted from a clean slate, the world would recover in under a year. When all the "false value" built up was wiped out, it was a lot of wealth destruction, but in reality, people generally survived.

This Derivatives Bubble? If the entire derivatives industry is wiped clean and restarted from a clean slate, the world would be crippled for at least a decade. If all of this "false value" from derivatives is wiped out at once, everyone admits that the entire world will not just grind to a halt, but crash and BURN.

However... here is the bad news. That false value HAS to be written off. It is FALSE VALUE. The banking industry, quite frankly, has been growing it's asset sheets under false assumptions and false intentions. From what I hear, it's possible under the current system for $100 of mortages to have something like 5 separate CDOs on it for $80 each. That is... just stupid. From a different perspective, when an American family took out a loan on his house, 3 other people/banks across the globe took out a loan of equal value on his house too. And the global cash available jumped up by $500 based on a house worth $100.

Basically, what I am trying to say is, if everyone pays off all their debts today, this very day... it will show that the planet earth is NOT as rich as the balance sheet totalling up all the assets on every country would have us think.

http://www.larouchepac.com/news/2008/10/09/derivatives-hyperinflationary-bomb-crushing-international-fi.html

http://www.bestcyrano.org/THOMASPAINE/?p=1071

http://www.informationclearinghouse.info/article21071.htm

... basically. The networth of the entire planet Earth put together is estimated to be around 100,000,000,000,000 = 10^14 = 100 trillion.

The estimated value of derivatives flying around is 1,000,000,000,000,000,000 = 10615 = 1 quadrillion.

FALSE WEALTH??? No WONDER the banking and financial industry has been reporting huge earnings this decade! (and their board of directors have been receiving ungodly bonuses in their paychecks) Remember, these guys get a portion of the sales of derivatives as profit!

Why is this an ESTIMATED figure? Because, unbelievable as it sounds, this amount of ten times the value of the entire planet is UNREGULATED.

... Are they insane???

Of course, everyone is claiming that this number is not as bad as it sounds, because most of the positions offset each other. They THINK. Of course, they aren't quite certain, but they certainly assume that this is a logical conclusion... but they aren't really sure, since after all, this is UNREGULATED.
By the way, someone estimated that only 10% of total derivatives do not offset each other. Oh well... so that's only 100 trillion then. Erm, ok, so that's only the networth of the entire planet earth then instead of 10 times Earth!!!

AARGH!!!! The... the stupidity of it all! I... my head hurts...

The excuse? "If we don't do it, someone else will". Yes. It is true. If Citi hadn't packaged and sold derivatives, Wachovia or BofA would have.

Btw, a warning for everyone currently looking to buy bank stocks.
To those who are valuing banks based on projected amount of losses and future income... the losses will probably be greater than you think. Perhaps more importantly, these derivatives have PROVEN themselves to be dangerous. It would be totally irresponsible for the governments to not regulate and limit them to a greater extent.
So... my question is... guess how much that Citibank's earnings will be if it's derivatives sales are cut by 95%?
Yeah, you heard me correctly, 95%. It has become VERY apparent that CDOS and derivatives in general are being oversold to a ridiculous degree. I mean, Lehman Brothers was worth, what, 47billion in market cap? On October 21, 2008, creditors of Lehman Brothers who had acquired CDS in order to hedge them against the risk of a Lehman bankruptcy were scheduled to settle those accounts. This event appears significantly to have affected AIG which issued many of the Lehman CDSs. The amount of the settlement was estimated to be between $100 billion and $400 billion. The amount of global losses involving derivatives involving Lehmans was many MANY other billions.
In a regulated market, I would assume that you would not allow people to sell more than, say, 25% of the face value of Lehmans?

There is a REASON why companies with only $1million capital are not allowed to borrow $5billion! It is only sensible to not attach a huge amount of risk to a very small enterprise!

Similiarly, it is stupid to take a VERY large enterprise, and attach VERYVERYVERYx1000 large risks to these entities! Even if the entity is huge, that doesn't mean it should be allowed to take INFINITE risk, it should still be given a limit which is balanced with it's size!

Unfortunatly, even back then, people considered AIG and Lehman and such "too large to fail". So they just let them do whatever they liked. They were safe after all, weren't they? They were, after all, too large to fail...

Summary: Some idiots made some huge mistakes. And there WILL be a reckoning day, the only question is who is going to receive the pain of the eventual punishment?
This crash is like every other in history... people will keep saying that it won't be that bad, the governments will step in and solve the problem... the trouble is, these guys have not realised something very very critical. In fact, fiscal policy and such can NOT solve problems. They can't make REAL assets appear out of thin air. It's like conservation of mass and energy in physics. They can only change one kind of problem to another type of problem. Which they are hoping will be less severe. They're also hoping to spread it out over the next 10 years instead of dealing with it quickly and letting recovery begin.

Idiots.

Freeing up the capital markets

2008-11-14T01:06:00.000+08:00

Let's go onto a very very basic fundamental here... that I am trying to argue against!!!

Basically, world banks all over have been fighting a MASSIVE battle to free up liquidity. Unfreeze credit markets. Which they seem to think (as I said, they are basing from theories cooked up after the Great Depression) will solve the financial crisis and let the healing begin.

Er.

Um.

Will I sound stupid if I ask WHY everyone is so caught up about lending?

...

Cause, you know. I don't REALLY see that much people trying to BORROW money.

So... if no one is desperate to borrow, why is everyone fighting so hard to make sure that the banks are going to lend?

...
...
...

No, seriously, consumers who are not in deep financial straights are not eager to increase their debt. Nor should they... in fact, that is what everyone has been educating everyone, for the past few decades, that having too much debt is a bad thing! duh!
Corporations are now cutting costs, not borrowing money to expand their businesses. With a few exceptions. Said exceptions who are making tidy profits are having no problems getting loans whatsoever, actually.
In fact the only people who I think should be getting increased credit facilities are those individuals who have been retrenched, and need a line of credit to support themselves until the economy picks up and they can get a job again. Which, frankly, the Fed could do with a much much smaller bailout package. There's no need to give billions and TRILLIONS to the big financial companies!

...

These idiots are going to wake up one day and realise that by the time credit markets are unfrozen, the economic climate will be so bad that NO ONE wants to borrow... except for those people who want to borrow but would be unable to service the loan whatsoever ie they need zero % loans for say 5 years. And NO bank will offer this to them. It has to be the government, pure and simple.
Whatever rate the government lends at to the banks... THE BANKS WILL LEND AT A HIGHER INTEREST RATE TO THE BORROWERS. DUH. Banks are PROFIT MAKING ENTERPRISES. If Fed lends to the bank at 3%, the banks will lend to consumers at 7% or 8% or in fact as high as they can possibly go.

Very good, America. Give out "altruistic non-profit loans" to the big corporations. So they can give out "greedy bloodsucking loans" to your American people.

You dumbasses.

You big big bunch of big big dumbasses.

The worst part? The worst part is, by the time they're done chasing ghosts solving the credit markets, they will realize that UNEMPLOYMENT has gone up to 10% or higher, consumer spending has reached new lows, as everyone is afraid of losing their job AND has also lost faith in the pension funds and hedge funds and investment funds BUT BUT BUT... due to the efforts of the Fed, have regained faith in the safety of the banks...
Can you guess it?
Your people then take their money and put it in their bank accounts saving money in case they lose their jobs! They don't put it into other asset classes which might generate higher returns, they put it in the bank.
Which is giving them probably 0% interest at this point. Thanks, once again to IDIOTS IN THE FED.
But it is no longer about the interest at this point!!! It is about security! All other forms of savings are failing, and income security is at a low, what else would they do???

So starts the vicious cycle where consumer spending drops, savings increase, companies cut more jobs, spending drops, savings increase etc etc etc and you've basically got a 2nd Great Depression.

Except it's even worse this time.

And internationalised too. Thanks to OTHER dumbasses outside of America.

Dumbasses.

Treasury Bailout has Changed yet AGAIN!!!

2008-11-14T00:17:00.000+08:00

Excerpts from:

http://www.usnews.com/usnews/politics/bulletin/bulletin_081113.htm

Treasury Secretary Henry Paulson's announced changes to the $700 financial bailout plan -- to focus on shoring up financial institutions that offer consumer credit

The Politico, for example, reports Paulson's "announcement was a public acknowledgment by the administration that the hundreds of billions of dollars spent thus far to buy up complex mortgage-related assets were not solving the economic crisis

the government would continue flooding financial institutions with cash, but would also try to increase the availability of student loans, auto loans and credit cards

...
...
...

OK, no wonder Dow is dropping. Essentially, FED has just pumped 1 trillion into Wall Street... and it took this long for everyone to suddenly realise that they were only rewarding the board of directors and such, but not actually solving anything.

This guy says it very well. Better than I can, actually:
http://www.blueoregon.com/2008/11/henry-paulson-b.html

This is good too:
http://www.latimes.com/news/nationworld/nation/la-fi-paulson13-2008nov13,0,6205412.story
"Illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit cards," Paulson said during a speech in Washington. "This is creating a heavy burden on the American people and reducing the number of jobs in our economy."

...

The problem is that Paulson is wrong AGAIN. He doesn't know it yet though. Well, I guess student loans are a good idea. It's REALLY going to mess up your countries economy if a large section of your population who should have been able to complete their education did not go to college.

But... car loans?

People are worried that they might not have a JOB next month! Look at the ridiculous number of lay offs! Frankly, you talk about restoring confidence? How can you have confidence when just about EVERYONE who has felt job security working for a major corporation is now suddenly in fear of being retrenched... and with no new job offers in sight for possibly years to come???

You... think they're going to put a down payment for a new car, do you?

Really?

... see, this is why I keep calling these so called experts dumb. I'm not REALLY that eager to be insulting (ok ok maybe I am) but seriously, these guys are just BEGGING for me to point out their idiocy.

It has taken this long for the rest of America to realize it too, but I think that it is starting to become rather clear that the Treasury has no idea what they are doing...

As I said. They are trying to fit a round peg into a square hole. They are putting their GREAT DEPRESSION EMERGENCY PLAN into action... but the situation now and 1929 is actually rather different!

They are trying to fix the short term (liquidity)... which frankly, left to it's own devices would simply blow up. Not blow over, but blow up. Like explode. Into a million pieces. Leaving the financial world in tatters. Something like the Tech Bubble, in fact. But... the world rebuilt after the tech bubble. Everyone acknowledges that it HAD to pop, in fact a lot of people insist that the tech industry was in fact more streamlined and grew more efficiently after the bubble burst.

Why won't they let this Derivatives Bubble pop? well... cause all their good buddies are working in that line, for one...

Instead of looking at the FINANCIAL world, they should be looking more at PRODUCTION.

Do you know how they ended the Great Depression? Look it up.

No, I am not suggesting another World War. Duh.

I am suggesting that America pumps money into the PRODUCTION sector. Only instead of war production, it's got to be something... more long term beneficial.

Ideally, the finished products should be something that the government can buy and use, since consumers won't be buying much. But something that gives back to the people too.

Er... actually, this is actually one case where the fact that America has good infrastructure is working against it.

See... China has quite neatly done exactly this. I didn't realise it until now, but basically constructing 10 nuclear reactors in China (assuming they don't mess up and create a 2nd Chernobyl... or even 10 Chernobyls!)... this creates a lot of jobs, industry, AND unlike America's clever quotes about paying 10 men to dig holes and 10 men to fill them up, or someone else's quote about building 1000 homes, and then burning them down... China will have their cake and eat it too! Assuming nothing goes wrong, China has just launched on some very large projects that will keep the construction industry going strong, AND it will give cheap clean power for generations to come!

Assuming they don't blow up of course. That would be bad.

... Frankly, I've never really been a fan of China. That was my grandfather's favourite though. Personally, I never forgave them from going from the most educated, most advanced culture, to some lazy country going nowhere. But it looks like they are more than redeeming themselves again now.
Seriously, China. A system where the SMARTEST and MOST EDUCATED and MOST QUALIFIED became the leaders. Not the MOST POPULOUR, MOST CHARMING ones.
Well, of course that was the intention of their government exams, but having poetry be the deciding part of the exam might have nixed the entire thing. Still, IMHO, that is the best system of choosing your leaders. Have them take an exam. The CONTENT of the exam... well, I assume that a Finance Minister should know something about economics, finance, etc etc. You know that sort of thing.

Or if you still want democratic elections, that's fine too. But I think EVERY candidate should be forced to take an exam in the related areas to doing his/her job... and the results should be made public.
And if your citizens decide that they want to vote for someone who thinks that the Russia is next to Alaska, doesn't know that what a bank run is, doesn't know how a stock's value is related to it's growth, earnings, and dividends... etc etc... then you deserve whatever you get. (ok, 1 cheap shot at palin there.)
BTW, thanks American voters for restoring my faith in your country. Well done.

Back onto topic:

To summarise: Henry M. Paulson. You and your team obviously have no idea what you're doing. Passionately begging for the 700b bailout package to save mortage owners. Then abandoning that to buy shares in banks (which was not what congress voted to allow!!!). And now abandoning that halfway to help offer more loans to the American public??? (which in fact used the STIMULUS PACKAGE... to pay off their existing debts!!! They don't WANT to increase their debts you idiots! ... except for the ones who can't afford to service their currents debts, who are in fact so desperate that they are willing to dig themselves into a bigger hole. Basically, anyone who WANTS to increase their debt, should not be allowed to do so.)

Henry M. Paulson and team. You are all a bunch of idiots. Please resign. And please admit that you are stupid on National TV too.

Petronas might become a LOSS making company!!!

2008-11-13T12:32:00.001+08:00

Let's look at the company which contributes 44% of Malaysian government's revenue in 2008:

http://www.petronas.com/internet/corp/centralrep2.nsf/Src/WebDoc*Investor+Relations+Default/?Open

In 2007, Petronas revenue was RM184billion, expenses 108b, profit before tax 76b.
In 2008, Revenue RM228b, expenses 118b, profit before tax 95b.

FY2008 FY2007 FY2006 FY2005 FY2004
Revenue 223.1 184.1 167.4 137.0 97.5
Profit Before Tax 95.5 76.3 69.4 58.0 37.4

Not included in annual report but easily calculated:
(Expenses) 127.6 107.8 98.0 79.0 60.1

You can see that expenses are going up 10billlion each year.
You also notice that Petronas is cunningly leaving out the expense section in their annual report, hoping to exploit the fact that many people have poor mental arithmetic.
This is not surprising, since our malaysian governments entire BUDGET 2008 was 177 billion. And these champions in Petronas expenses in 2008 was 128 billion.

If we assume that last year they were selling oil at USD120 (which is cheap considering that it was over USD 155 for a while)
If we assume that they will be selling oil at USD 55, their revenue for 2009 and will be HALVED to RM110b (their revenue in 2004 was only 97.5billion. So this is not unrealistic)

In other words... Assuming expenses for Petronas stay constant (no lay offs, no cancelling of projects, etc). (In fact the way they are trying to expand, expenses are projected to go up yet another year, to over 120b! )
Petronas is expected to go from a profit of 95B to a loss of RM10billion in 2009!

Edit: Btw, for those who have been saying that expenses might drop accordingly... wrong. Normally, for a company, when revenue drops in half, it means that SALES in UNITS have dropped in half. So it is expected that costs would drop accordingly, since production has halved. In this case, it is SELLING PRICE that has dropped by over 60%.
For an easier to understand example, imagine if you have an accounting firm, and the government announces: Effective immediately, ALL accounting fees charged will be cut by 60%. Losses to be borne by the firms themselves.
Having your final sale price for your product cut by half is far far far worse than having your sales figures cut in half. It's a DISASTER of epic proportions.

This is a complete disaster for our country, if there isn't some sort of huge mistake here. Checking with some other independant analysts, my projected figures appear sound, so it is looking more and more likely that this will materialize.
I'm really really surprised that Lim Kit Siang hasn't got his people investigating this.

Maybe the accountants and analysts see something that I don't. Maybe Petronas has a lot of long term oil contracts. Which actually brings out a whole other barrel of fish, but whatever...
I DEMAND that Petronas provide some transparency!

Remember, as I said, Petronas contributed 44% of government revenue in 2008.
http://thestar.com.my/news/story.asp?file=/2008/11/12/parliament/2518320&sec=parliament

Abdullah talking about our fundamentals still being strong. How strong will our fundamentals be if government income is reduced by 44%?
How will our economy handle the shock of around 100billion in income just disappearing?
If this is true, Malaysia will not only go into a recession next year... it will be SEVERE. Our GNP is less than RM800billion. So... 100billion lost revenue by petronas would be a recessionary drop of 12%. That's rather ridiculously large!

EDIT: Everyone has been asking why government has not reduced our Petrol Prices.
It's BLARDY OBVIOUS when looked at it from this angle.
We Rakyat are subsiding Petronas. If gov drops petrol too much, Petronas is gonna lose too much money. Therefore, it is up to us, the Rakyat, to bear the burden. By paying USD90 for our oil, from our own BLARDY GLC Petronas.
I am an ANGRY INVESTOR!!!!

Bankruptcy

2008-11-13T10:08:00.001+08:00

Charlie Rose gave a very very good interview:

http://www.charlierose.com/view/interview/9498

His point partway is: America, and in fact the whole world, ALREADY has a very very good and very very established way to deal with an individual or corporation that has debts that it simply cannot afford to handle. It's called BANKRUPTY.

People panic when they hear the word. But in actual fact, bankruptcy is not "death". Bankruptcy in fact is the beginning of the entire healing process. It stops the bleeding.
Of course bankruptcy also comes with some pretty stiff penalties attached, but it also has benefits. And very often, the benefits actually outweigh these penalties.

Agent Zero/Rocket Rod

2008-11-13T01:11:00.000+08:00

Excerpts taken from http://www.thestreet.com/story/10447426/1/analyst-does-a-u-turn-on-gm.html

A Deutsche Bank analyst recently came out with a price target for General Motors: zero

Who was this man? Rod Lache

Let's take a lo0k back to a few years ago.

In July 2005, when automobile sales hit a record thanks to heavy promotional activity, Agent Zero was quoted prominently in a New York Times story. "'The industry is on fire,'" Lache said.

Less than a year later: "Dow Reaches 6-Year High After Analyst Upgrades G.M." "G.M. rose $2.25, to $25.80, after Rod Lache, an analyst for Deutsche Bank, raised the stock one notch to hold, citing progress with its revamping and recent moves to generate liquidity."

February of 2007, Deutsche Bank analyst Rod Lache raised his rating on GM and Ford to buy from hold, saying that there is an 'increasingly high probability that U.S. automakers will be able to restructure and settle their retiree healthcare obligations at a discount"

September 2007, "Deutsche Bank analyst Rod Lache reiterated to clients in a note that if GM is able to reach a deal to shed billions in retiree health-care liabilities and shield itself from future health-care inflation, the stock could break into the $50 range."

January 2008: Agent Zero/Rocket Rod was quoted as saying that automakers had already priced in a recession, and said General Motors was a safe investment.

November 2008: Rod Lache declares that General Motors has a Target Price of ZERO.

Conclusion: Rod Lache. You SUCK. You suck ASS.

Treasury Bailout is FAILING

2008-11-13T00:48:00.000+08:00

http://www.thestreet.com/story/10447356/1/treasury-mulls-private-role-in-tarp-report.html

Some excerpts:

"Treasury also is unlikely to conduct any auctions to purchase bad loans and other troubled assets -- the original intention of the $700 billion rescue plan. Instead, Treasury is expected to continue focusing on injecting capital directly into the financial sector, the Journal reports."

"Treasury has just $60 billion left in its rescue fund, and either the current or next administration will have to turn to Congress to request the second half of the promised $700 billion, the Journal reports. Treasury has so far committed $250 billion to banks and is spending an additional $40 billion to buy preferred shares in American International Group"

...
...
...

These IDIOTS are running out of money.

A LOT of people said 700b was a lot of money. A LOT of people said that 700b was not enough.

Looks like they were right.

Well, DUH, it's not enough, when you totally disregard the initial purpose of the bailout and use it in ways it was never meant to be used!!!

It is starting to look VEEEEEERY suspicious to meeee.... If I was American, I would request that someone starts looking at the PERSONAL BANK BALANCES of all those decision makers for Treasury/Fed. Is it coincidence that the money is going to really really rich fellas that can afford to pay whopping huge bribes?

...

You know what? ... all those homeowners with their mortages and loans? Who were cheering and celebrating when this 700b bailout was announced?

They are crying right now. They are going to lose their homes and they are well and probably going to go hungry the next few years. And declare bankruptcy.

Cause the money that was meant to go to them is going to go to America's BANKS. The Large Rich Banks. Specifically, it is going to end up paying for CEO bonuses for their "wonderful" job performance.

Too Large to Fail? That's the catchword going around lately.

Too BIG to be allowed to Fall?

How about: Too small to fail?
As in... the little fellas. The many MANY little fellas. Who are in fact the FOUNDATIONS of your country compared to the corporate figureheads on the top.
If American Government does not help them, who will?
Seriously, why can't Goldman Sachs go and get a 10b loan from China, 10b from Brunei and 10b from selling bonds internationally?
But poor Joe Six Pack... no one outside the USA is going to save him!

Which do you think hurts the country more:

5000 multimillionaires losing 10 million each?
Or 1,000,000 Average Joes losing 50,000 each?

I don't know the answer myself... but I do have my suspicions!
My theory is... the rich can afford to lose a lot of money. They'll still keep their homes, have enough to eat, and frankly, you know that a few years after the recession ends, they'll have earned it all back.
Those million upon millions of low-middle income citizens? They are going to SUFFER. And their children will feel the lingering effects as they will likely not be able to recover from these losses before their children are born and working.

America. Fed. Treasury. You DUMBASSES

Genting

2008-11-12T23:54:00.001+08:00

VERY IMPORTANT EDIT HERE:

At this moment in time, I have some small amounts of short positions in Genting, made via CFD via POEMS, Singapore. (phillips online e-mart)
I was reminded by a friend that it is only ethical to state that I have a personal stake. However, I would like to clarify that I am a long term investor not a trader, and thus do not really care whether Genting drops in the short term or not. I am going to wait until the profit figures come in before closing my position. However, considering the current economic climate, I think I'll be holding onto this position for quite a while....

___________________________________________________

Genting shares have been spiking upwards lately. Some say it is a recovery. Partly true. Part of it was the recent worldwide rally. Another factor is: Las Vegas Sands> Singapore.
Sands had seemed in danger of liquidity issues. So, there was speculation that they would be selling off their stake in Marina Bay. The likely buyer? Genting, of course! This would have been a big boost, as Genting’s own resort on Sentosa is considered inferior.
But Sands seems to be fine now. And they are closing many other projects, but NOT MARINA BAY. Which they are going to push aggresively as soon it is ready at the end of 2009. Which will give them time to set up a loyalty base before Sentosa complete in 2010.
The question now is: If you were a bigshot VIP. Would you want to go to Sands Marina Bay, Genting Sentosa, or Genting Highlands? … yeah, me too. So, in other words, you can expect some pretty UGLY financial figures coming out for Genting in the coming years.
Considering how cheap AirAsia is now, with fuel surcharge dropped, I think even the smalltime gamblers are going to be abandoning Genting Highlands for Marina Bay.
Seriously, the last time I went up to Genting, their casino was looking really seedy and low class. Even the small time gambler wants a bit of AMBIENCE… you know?
Genting also chose a rather poor time to expand very very aggresively. They’ve probably overstretched themselves and also paid far too much in return for far too little. Genting. The fellas who set up a well-run casino are NOT STUPID. There’s a reason they were willing to sell to you. There’s probably some nasty little problems that they were in a better position to know than you (since they live in that area every day, and you live in freaking Malaysia).
Basically, I always used to like holding Genting for one reason, and one reason only: Genting had a very strong monopoly. It had the only casino in the area. Even though, frankly, Genting casino is on a mountain. In the jungle. In the middle of nowhere. It still had a monopoly!
Now… the monopoly is threatened. By Sands Marina Bay (and AirAsia cheap flights).
My recommendation: dump Genting like a rock. Having a rival casino that is newer and fancier and everything means that it’s long term prospects are bad. And the economic crisis means it’s short term prospects are bad too. Dump Dump Dump!

Refinancing Credit Cards

2008-11-12T23:53:00.000+08:00

We were just discussing on Fusion Investor’s Chatbox…
What would happen if the USA decided to do the same with Credit Card debts as they are doing for mortages?
Well, THAT would end the recession instantly! Watch as Consumer Spending shoots through the roof!
…
Until the next quarter when credit card companies announce that their new delinquency rate has shot up to 90%. I dunno, maybe they will announce that their plan is successful beyond their wildest dreams? hahaha.
Yeah I’m imagining now… if those idiots negotiate with American Express and tell them that a condition of the bailout is that they extend similiar facilities as FanMaeFedMac. … American Express declares that they will allow refinancing and will lower interest rates for everyone who is unable to pay them for 3 months.
…
IDIOTS!!!!

Refinancing mortages

2008-11-12T23:52:00.000+08:00

Well, that’s all well and good. It’s totally necessary in fact.
I would like to remind people that refinancing a mortage at lower interest rate is going to cut into profits though! (duh. If your customer was meant to pay 1000 a month and he now only pays you 500, your bottom line is in DEEP trouble)
Furthermore, it’s quite easy to refinance downwards, but you can’t later say “the economy is picking up, let’s raise your mortage rate arbitrarily!” … in other words, these refinancings will slow down recovery in the mortage sector for… oh, say the next 20 years until the mortages complete? So… refinancing 1/3 of your existing mortages at lower rates. Ok.
And, BTW, they are saying that payments STILL need to be made. So, those who just lost their jobs and can’t get new ones are still in deep trouble anyhow. … BTW, citi is not doing this for the sake of the homeowners. They are just trying to avoid/ delay a spiralling vicious cycle of property collapse + even more foreclosures.
My projections are: those mortages? They’re going to turn VERY toxic very soon. Why?
Cause Citi has just basically announced: If you stop paying your mortages, we’ll drop your mortage rate.
YEAH. If you look at it like that, suddenly their announcement doesn’t look so smart, does it?
Basically, how are you supposed to separate those who NEED the refinancing from those who don’t? Citi thinks they can do it based on their analysis department I suppose. Unfortunatly, they haven’t learnt the lesson that their risk analysts haven’t been doing a very good job lately.
Their offer to reduce rates for 1/3 of their mortages will probably end up causing them to lower rates for 100% of their mortages.
There is a VERY good reason why the previous system was in place people. You know, previous credit syatem, you make all your payments on time, your credit rating is good, you are charged lower interest, so the incentive is to pay on time? … Now it seems that when your credit rating goes SOUR, your interest rate is going to fall.
Hello. You don’t have to be a rocket scientist to figure out that, in this situation, if Person A,B and C look and sees Person D stopped paying his mortage… and his interest rate got dropped, and he then resumed paying his mortage… Person C will also delay payments and request a reduction. Then B joins in. Eventually your mortage system goes to hell. Oh wait, aren’t American mortages ALREADY in trouble?
UPDATE:
http://www.thestreet.com/story/10447292/1/feds-streamlining-homeowner-aid.html
“To qualify, borrowers would have to be at least three months behind on their home loans, and would need to owe 90% or more than the home is currently worth”
HELLO!!!! HELLO!!!! You guys… are warning bells not going off in your heads right now? Seriously???
Hello??? Again, america is rewarding failure. does america understand??? you are giving INCENTIVES to FAIL. Giving out bailout money without requiring red tape OR punishments to Director renumeration… INCENTIVES TO FAIL are a blindingly obvious bad decision.

Malaysia Bloeh???

2008-11-12T23:51:00.000+08:00

(this is from Nov 12 2008, when KLCI was stubbornly green ignoring the entire rest of the world)

This is hilarious. Dow is -176. Crude Oil is falling. CPO will fall. Regionals all down.
KLCI is GREEN.
Why? … I suspect that KLCI is taking heart from Singapore being green. The thing is… Singapore, they just had good news that Las Vegas Sands casino project is still going through.
Btw, this means that Genting shares are looking worse and worse.
Waiting for many people to get badly burnt by their overoptimism. As Dali pointed out, world property prices are crashing, but only Malaysian sellers are (foolishly) refusing to sell unless they get better price offers. In fact, this has really put a freeze/gap on our secondary property market. Malaysian property BUYERS however are being much more cautious… this situation will go on until the sellers get into serious financial difficulties. Which won’t be long more, I suppose. I advise everyone who is considering selling their excess/investment properties to just take sellers price. Better a 10% loss than a 30% loss. The finance charges on that apartment get sold along with the property, you know?
Malaysia boleh???

General Motors

2008-11-12T23:48:00.000+08:00

Summary at the end as usual.

Well, basically, everyone knows about General Motors, right?
A bailout would require probably USD50billion, I guess. You might think my figures are wrong, but let’s face it, look at AIG, it is obvious that even the best economists and financial guys have no idea what a bailout will end up costing. But, I’m basing this on the fact that they burnt through 6.9b in 1 quarter. It looks like the automobile industry might take years before recovering. As I said, it’s just a guess on my part.
However, letting GM go under is not really an option either. They are estimating (maybe overestimating) that GM going bust would mean a loss of 2.5million jobs in America. Oh dear. That’s not good at all, especially in a recession! … The thing is… it has been stated that EVEN WITH a bailout, many many jobs will be lost. There’s just too much excess production capacity.
Anyhow… there is a 3rd option that I have come up with. It’s cheap, and it’ll save the most jobs too!
Nationalize General Motors.
Why not? It’s practically a household American name anyhow. It’s not really doing that well profit wise. Most importantly, at the current share price, IT WILL ONLY COST USD1.6BILLION.
Yeah. We’ve reached the point that a bailout for GM, instead of being like 10% of the company’s value, or even 50%, is in fact more than 10 times.
So, it is the cheapest and most effective measure at this point for US government to just force a mandatory purchase of GM. Heck, they can even afford to give current shareholders a 50% premium on the market price. It’ll still cost under 3b, which is WAY WAY WAY cheaper than any bailout could ever be for GM.
Everyone in Malaysia talks about taking companies private when the share price is too low. In fact, GM is currently the best candidate to be taken private. But ONLY if it’s by the American Government. Unless… well, maybe Warren Buffet used up his warchest too fast? hahaha, but he’s still got plenty of money left. Buffet, put your money where your mouth is and BUY AMERICAN. This is the patriotic thing to do!

Summary: US goverment should just buy up all outstanding General Motors shares, and nationalize the company. It’s CHEAP and EFFECTIVE!

OK, the INAUGURAL POST!!! Let’s discuss… the world markets and LENDING.

2008-11-12T23:44:00.000+08:00

For those of you with short attention spans, just skip to the SUMMARY at the end. I think I will try to maintain this format in future posts too.

OK. Let's start my blog then.

First, off, let's look at the Great Depression.
http://en.wikipedia.org/wiki/Great_Depression
We can see from here that everyone blames CREDIT FREEZES and lack of EMERGENCY LENDING by the FED for the disasterous recession. It is extremely obvious that the international banks have all agreed that they are going to focus on increasing lending, in order to avoid a second Great Depression. They probably have some textbook gameplan just for such and such an event, actually.
WRONG, GUYS.
Yeah, it might seem really arrogant of me to just contradict all these so called financial experts. But let me point out that these current steps are not something they've really thought out clearly. They are just trying out what they didn't get a chance to do back in 1929.
Now. WHY won't it work?
It's all really simple, if you sit down and think about it.
What is the FIRST step to surviving a recession, for an individual? Basically, what should an individual do to maximise his chances of seeing it through and eventually being on strong grounds when the economy eventually does clear up?
First, you need a stable job. (so Kennedy's nonsense about paying people to dig holes and others to fill them in doesn't work. You need to provide JOB SECURITY too.)
2nd, you need to reduce your debts! This is elementary school people. Those who are debt free will be in a MUCH stronger position than those who are heavily in debt. BUT... the governments are trying to encourage increased borrowing! ... Actually, anyone with eyes can see that the current corporate bailout plan is going balls up. Seriously people, it is a simple simple basic financial management principle: you should borrow at 3% in order to generate 4% returns. You don't borrow at 3% when you are expecting to generate -2% returns!
Do these stupid governments think that being able to put themselves deeply into debt will increase/ preserve consumer spending? ... obviously, these financial whizs and government folk have not spent enough time BEING POOR. For those who are familiar with the feeling, you will realise that being jobless, your home and in fact your total networth just dropped in half, your government is going BADLY into debt and is spending taxpayer money bailing out corporations... enthusiasm to spend money? ... are you MAD???
HOWEVER... I am very much in favor of repacking current debt. It makes a LOT of sense for those who have credit card debts to be able to pay those off and shift them into mortage debts. Basically, you would want to reduce monthly debt payments by shifting from higher interest to lower interest charges.
UNFORTUNATLY for the banks... this means that bailout of the banking industry is a failed enterprise from the get go. The will be banks runs. There SHOULD be bank runs. ... Why? Well... it's a simple next step extrapolation:
The FED has reduced their interest rates to a mere 1%. Even a really stupid person will look at his bank savings account gaining a lousy 2%, and look at his mortage at 3 times that, 6%, and realise that they should really break those fixed deposits... This is even more so for credit cards. And those who do not come to this conclusion themselves, if they go to a financial planner, the financial planner would definitely tell them this. It would be STUPID to have $10,000 earning you $20 a month interest in savings account, and at the same time you have a $10,000 credit card debt costing you $200 a month.
SO. Conclusion. America is bailing out banks with it's left hand. The world is creating bank runs with the right hand. Reaaaaaaal smart. You morons.
So, how long will this recession last? It took a world war and wartime industry to end the last Great Depression. Will it get that bad? Who knows. Ok. More realistically? This recession will end when consumer spending increases. Consumer spending will increase when consumer INCOME increases. UNFORTUNATLY, the stupid world governments (except for China, who is being applauded by everyone, despite being the odd man out... which should say a lot! China=smart, the rest of you=stupid. And I'm glad all of you nations recognise this and say so too), are totally ignoring RAISING GDP. They are not looking at helping out the people by creating jobs and job security and by making sure that the bottom 30% of the population will be ok. NO. They stupid Americans are bailing out the top 0.01% of their citizens!!! Who are throwing parties, BTW. Look at AIG. In AIG's case, they got caught, so they tried making it SECRET parties. Nonetheless, they got caught again. People are... *angry*...
You know what the big difference here is? ... I am ashamed to admit it, since I am an avowed capitalist. But... seriously there is something to be said about communism... they really make it a priority to protect the poor, not the super ultra rich and powerful! (though the controlled economies tend to fail spectacularly at the slightest hint of corruption since the system is non-self regulartory... communism means there is no policeman to catch the corrupt policeman)

SUMMARY:
Look, when the citizens and corporations are losing income/ have NO income/ have LOSSES... and they also have outstanding debts, which are causing them to suffer... you do NOT throw even MORE debt on them! Repacking debt is a good idea though. Not like AIG's case, however, since that is essentially not repacking debt but is a DONATION from TAXPAYERS to AIG. You should be concentrating on REDUCING expenses, and INCREASING revenue. Very basic. Very simple. So, do it, world governments.
To investors and shareholders: The governments are making an even bigger mess of things. STAY OUT of the market. In fact, I would recommend that you take your investments, your 401k plan, your savings accounts in banks which are rated C or lower, withdraw them all. and put them in banks with guarantees, which are rated as A to A+. Trust me even the A rated banks are not as safe as they might seem. Also, get out of banks that just bought over a failing bank. TRUST ME, there is a very good reason why those banks failed, they have some pretty toxic assets there, you do NOT want to one day read headlines that consumers had lost faith in the bank you are using and the bank has policemen outside refusing to allow customers to withdraw their deposits. Preventation is better than cure. Seriously, why not just put your money in the most secure bank possible? Do you REALLY love your current bank so much?

Moving to Blogspot

2008-11-12T23:17:00.000+08:00

Financialblogs has terrible layout and stuff... it might be cause they are inexperienced and still in the teething stage. But I haven't been there long enough to feel any loyalty to them, so I'm taking the better option now. Transferring all my posts too.