Allright, here are more signals that the global economy will neither skyrockets nor drops like a stone into the ocean. Basically people are convince that the U.S. economy will most likely crawling for years instead of months before the worst enemy – unemployment – is over. We, and to a large extent the Americans, may be lucky that this round of recession did not suffer the same fate as the 1929 Great Depression. But this recession may have created a new economy landscape that we have to live on for decades to come – the scale-of-employment model pre-recession is history and a new employment model may have emerged.
It’s true that layoffs have slowed, at least for now, and (hopefully) the housing problems have bottom. However jobs remain scarce and the economy will not stage a V-shape recovery anytime soon. The fact that the Federal Reserve holds the bank lending rate at zero to 0.25% speaks volume of the U.S. economy’s health. But who can blame Ben Bernanke and his boys when the figures still show consumer spending remains sluggish, hiring remains weak, wage growth is almost stagnant and the banking sector is not lending as much as Obama’s administration hoped they would.
Low inflation also means companies couldn’t raise prices of their products simply because the once fearless American consumers are not spending as they used to be pre-recession. Of course you shouldn’t blame some of the analysts who predict that 2010 will be an explosive year for the U.S. economy when everything will be back to normal, though I would take that as a new-year wishlist instead *grin*. In actual fact you don’t really have to go very far to ascertain the health of the U.S. economy. The financial sector will tell you whether what those good-for-nothing analysts’ “wishlist” that you should be buying stocks is a good advice.
The banking stocks are literally still in disarray as if they’re headless chickens moving without clear directions. Otherwise you wouldn’t see Citigroup Inc. (NYSE: C, stock) shares still trading at three bucks a share and the attempt to unload 5.4 million Citigroup shares at $3.15 share (8.7% discount). Heck, why sell at a discount (and at the current low price) if indeed everything is so rosy – get the picture? I would hold the shares if I know I can make many times the profit in another year or two, unless of course I’m not sure if the bright sky is in the horizon.
So, is Obama doing his job or at least his administration knows the formula to the economy problem? His critics said otherwise but let’s give him another year and we shall see if he was actually as clueless as Bush’s administration in tackling the problem. By then we can blame Obama - just like how Malaysian Prime Minister’s wife, Rosmah, blamed the “Men” as the source for the current global financial crisis. Naturally the smarty Rosmah thought she women should be the Prime Minister or President to ensure such economy crisis does not happen *WoW*.
Well, maybe Rosmah was right after all considering she has chosen the right man to marry; the highly intelligent Prime Minister Najib Razak who thinks the time is right to push for the GST (Goods and Services Tax) - scheduled to be implemented by the middle of 2011, never mind that the average-Joes are having difficulties putting food on the table. Thanks to former PM Mahathir’s cheap labor economic model which is obsolete by now, the fact remains that the proposed 4% GST will bring hardship to the poors due to inflation.
While it’s true that the current 5% to 10% service tax will be replaced with the lower 4% GST, the truth is the “comprehensive” coverage in 4% GST will sweep across every item you buy – like a tsunami. Directly or indirectly the chain effect of higher costs (raw materials or finished goods) will be be passed down to the consumers. Of course the ruling government wouldn’t care because they’re finding it equally hard to get monies to meet their growing appetite for “development projects” (or rather leakages). The country’s two main revenues - oil and income tax - are not growing as fast as Najib’s administration expenditure thus naturally extra money need to be “extracted” from the obedient people on the street.
Supposingly the economy fully recovers by 2011, do we have the same buying power like the Singaporeans whose government also implemented the GST?
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Thursday, December 17, 2009
Economy is Crawling - Scrap the 4% GST, Idiot
Stumble it!
Tuesday, December 08, 2009
Ong to Exit – 1Corruption, Together We Prosper
It’s easier to move a mountain than to change a person’s character – goes a Chinese saying. By the same logic, it is definitely many times harder to change the Malaysian ruling government’s policy of worshipping corruption. Whatever the result from the PKFZ multi-billion scandal, you can kiss your money (yes, part of the billions of dollars belong to you) goodbye simply because you won’t be able to see it again. And you can bet your last dollar that MCA Pesident Ong Tee Kiat would see his political career ends very soon.
If the government-control’s print and electronic coverage on three fighting factions is anything to goes by, you can actually smell that Ong Tee Kiat will be history while “sex actor” Chua Soi Lek and betrayal Liow Tiong Lai would most likely win this battle. Liow and Chua were given wide media coverage even before Ong’s sudden illness. From the beginning Ong Tee Kiat’s fate was written on the wall after his disclosure of PKFZ scandal. To pick a fight with politicians, new and veterans, who are flush with monies (from the scandal) is tantamount to poking Mike Tyson’s butt while laughing like Phua Chu Kang.
The ball is at Chua Soi Lek’s court now that he still commands huge supporters which in turns made him the kingmaker in this political comedy, sex scandal or not. Given a choice, Najib’s administration would prefer Chua than Ong to lead the ailing party simply because Chua is flexible to be nose pulled anywhere UMNO likes. But can a person who was caught with his pant down in sex-scandal become MCA President? If a person who was allegedly murdered a pregnant lady can become the Prime Minister, Chua’s sex scandal can be equate to a 2-year-old kid caught putting his hand in the jar stealing cookies so it’s perfectly fine.
Would it be better to have Liow as the new President with Chua as his running mate? Possible, but it would be too obvious on how the ruling government, present and the past tainted leaders, brokered and endorsed the plan in bringing Ong’s presidency down due to PKFZ scandal exposure. Either Liow or Chua becomes the new MCA president is fine with UMNO but definitely not the loose cannon Ong. On paper, Chua as President warming up the seat for Liow to take over looks like a good plan. Najib may wish to project himself as independent and to tell the Chinese that UMNO does not interfere in MCA’s internal affair but he did so through his deputy, Muhyddin, who openly support a new party poll, something which Liow has been fighting for.
Of course Ong’s sudden illness was insurance, just in case he officially instructed to pack his things. The standard way of telling someone you’re fired in Malaysian politics is to tell him to pretend he has health problem. But what does this tell of Najib’s administration about the corruption which always breaks the world corruption index record? Who cares? If former PM Mahathir who was allegedly squandered RM100 billion away during his 22-year-old iron-fist rule is still treated as a statesman, to hell with those criticisms about escalating corruption. Corruption is here to stay and has been part of the culture. If you’re not happy with it then you can migrate to other countries because the country only cares about losing brains of those who do not corrupt, otherwise voters won’t vote them in *grin*.
If everything goes according to the plan, UMNO together with MCA may set a new direction for the future leaders. Besides endorsing corruption, you would see more and more leaders such as Youth Chief Wee Ka Siong and Wanita Chief Chew Mei Fun who openly cried like a baby without shame the moment they were removed from MCA Presidential Council. Can you imagine what these two persons would do the moment they loose their current deputy ministry-ship? Guess the sight of losing all the perks and potential huge incomes are too much to bear for the politicians manufactured from Mahathirism’s built- factory.
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Monday, November 30, 2009
U.S. Subprime and now Dubai Subprime – More to Come?
Looking at how poorly Maxis stock price performs since it’s relisting in the local stock market, those who didn’t get it through the supposingly transparent IPO balloting and was sulking can now grin from ear to ear (didn’t I tell you so? *grin*). The stock didn’t get to touch RM6.00 a share (as I expected because at RM6.00 the stock would be trading at a whopping EPS of 20 times) and fortunately retailers didn’t chase the stock. As I’ve mentioned earlier the local stock market is probably already at its peak but most importantly Maxis is now a different animal. Faced with saturation in mobile telecommunication sector, investors need more than marketing talk to be convinced that it’s worth throwing more money investing the stock.
You may already know about this by now but the fact was retailers who applied for Maxis IPO via ATMs (automated teller machines) other than CIMB’s ATMs had pathetic low percentage of securing the shares. Hence if you wish to talk about transparency (in balloting) maybe this is a simple area to start investigating why the special preferences to CIMB, the banking company owned by none other than PM Najib’s brother which happened to be the main underwriter of Maxis IPO exercise. OK, let’s stop talking about Maxis IPO because there are more important issues that you should know.
The latest bombshell in the global financial market is definitely the crisis faced by once the mighty-booming Dubai. The United Arab Emirates’s investment and development engine, Dubai World, announced last week that it was seeking a six-month delay in paying creditors on nearly US$60 billion in debt. As a result Dubai’s stock exchange plunged more than 7 percent while share prices of Dubai World tumbled almost 15 percent when market opened early Monday (today). UAE’s central bank may did the right thing by instantly pledging to make funding available to all banks in the country (including foreign banking’s branches) but it didn’t promise any carrot to help Dubai World. This US$60 billion (some said US$90 billion or more) can potentially become the largest sovereign debt default since Argentina.
But why didn’t we see it coming? Actually I’ve written about this potential Dubai bubble some moons ago although I had refrained from exaggerate the matter. Dubai is one of the 7 Arab Emirates and the support thrown in by her brother, cash-rich Abu Dhabi, was sufficient to transform the country into a finance, real estate and trading hub of the middle-east. Unlike other cuntries in the region, oil contributes about 6% to Dubai’s US$80 billion economy. However when come to business Abu Dhabi made it clear to Dubai that it needs collaterals in return for financial helps and hence the Burj Dubai was one of the properties pledged to Abu Dhabi. On the surface Dubai continues to show off her tallest building, underwater hotels, indoor show skiing in the desert, most expensive hotel Burj Al Arab, Palm Islands and so on.
You see, Dubai has a population of only 1.5 million but only 20% are citizens while the remaining 80% are expatriates. Indian, Pakistani and Bangladeshi constitute to these so-called cheap labors in building the Dubai’s ambitious plan. Dubai has been ruled by Al Maktoum dynasty since 1833 and you don’t need to be genius to know what will happen when the current ruler happens to be the Prime Minister as well. The only difference from such monarchy-cum-dictator and Malaysian’s PM-cum-dictator is the former does not know what property bubble is until it burst. In Dubai, expatriates can purchase properties without much scrutiny or prove of financial capabilities as if they were buying vegetables from the bazaar. Properties were hot commodities and speculators (or rather gamblers) borrowed as much as possible from banks to maximize their units of ownership.
With rental of a studio unit fetching RM7,000 per month you don’t need to be a university graduate to bet your money on properties, including the labours coming from Indian, Pakistan or Bangladesh. You need to pay at least 6-months of rental downpayment, mind you. In fact if you’re working there as an expatriate and you did not borrow money from the bank to speculate the properties in Dubai, you would be laughed on (because of your stupidity). This is because you won’t get sued or thrown into prison if you can’t pay for the properties you bought. And now the bubble had burst, everyone sell like mad. Actually the bubble burst began about a year ago but it wasn’t reported as widely as the U.S. subprime crisis. Only those who were working there knew about the seriousness of the Dubai subprime.
So, supposingly big brother Abu Dhabi which has a whopping US$650 billion in wealth was to write a small cheque to settle little brother Dubai’s debt, won’t that solve the problem? But I supposed Abu Dhabi would not be so stupid as to pick up the bill without looking at the worthiness, brother or not. Why not you ask former PM Mahathir who was reportedly (Barry Wain) squandered RM100 billion under his 22-year iron-fist rule to help reduce the country’s current deficit? Get the idea? My goodness, Malaysia is so bankrupt that PM Najib has no choice but to implement GST (Goods and Services Tax) just to earn addition RM1 billion in tax revenue – at the expence of Average-Joes.
Anyway, the question is – would Dubai’s subprime crisis goes away tomorrow as if there’s nothing happens or would Abu Dhabi pick up the skeletons after it collapsed? Would there be similar subprime elsewhere waiting to explode before the U.S. economy can recovers? Some said Vietnam, Greece or even Russia may have fun in crafting their names as the next contributor in subprime crisis.
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Thursday, November 12, 2009
Didn’t get Maxis IPO Shares? Stop Sulking, Be Happy
Much has been written about how unfair it was in the Maxis relisting IPO shares allocation. To recap the horror story, existing Maxis shareholders (that’s Ananda Krishnan and his geng) agreed to give up 30% of their share for the purpose of the IPO of which a whopping 27.67% was to be allocated to institutional investors while Average-Joes were allocated a merely 2.33%. After the book-building exercise Maxis Berhad has set the price of the IPO at RM4.75 per share while institutional at RM5.00 a share – raising RM11.2 billion from the 2.25 billions shares to be floated in the local stock market this coming 19 Nov 2009.
Now, many are crying over the small retail portion allocated from this IPO, something which is understandable considering that it’s not everyday you have the opportunity to be part of the minority shareholders of such an established company. Many former Maxis shareholders still remember the huge profit they made (RM15.60 a share during Maxis privatization in June 2007) from their initial investment in Maxis’s first IPO hence they expect the same may happen from this second round of Maxis IPO.
Well, it’s hard to imagine Maxis were to re-privatise again in the near future but anything is possible considering political climate in Malaysia. If it’s alright to broker top judges’ appointment, kill innocent people before pushing them out of the building, plunder the nation of billions of dollars in project such as PKFZ and whatnot, you can’t blame investors when even local business owners lost confidence and relocated their monies elsewhere, what more with foreign investors. Hence it was hope that Maxis relisting will bring back the foreign investors’ confidence (and their hot money) into the country.
Anyway if you didn’t’ get any Maxis IPO shares due to the limited retail portion, do not get too sad and start crying like a baby who losses his / her pacifier. As have mentioned many times, Maxis today is a different animal and the upside is not the same as when it was listed the first time. Do I really have to re-mention the word “saturated” again? Sure, non of Maxis top management will tell you this and they will keep telling you there’re more spaces of growth (otherwise who in their right mind would buy their shares?). Underwriters told you the same story as if Maxis is another Apple Inc. (Nasdaq: AAPL, stock) and Ananda Krishnan is Steve Jobs. If the underwriters didn’t tell you such fairy tales then they need to take up the remaining unsubscribe shares so it was their job to tell you so.
Of course there’re still some upsides to the initial IPO price of RM4.75 upon listing because people who didn’t manage to get a single share would be chasing the stock because they’re buying for its dividend. The stock price may go up to RM6.00 a share easily because institutional investors are not about to sell on the first day of listing, at least not the so-called cornerstone investors who had promised not to sell within 6-months from the listing date. Funds such as EPF (Employees Provident Fund) and PNB (Permodalan Nasinal Berhad) who relies heavily on dividend stocks as their return to the members will not sell and this will contribute to price surge should retailers decide to chase the stock further.
Maxis IPO price of RM4.75 also means it was priced at 15.83 multiple times of the company financial year 2009’s 30 sen EPS. At RM6.00 a share the stock will be trading at an EPS of 20 times and this is expensive considering the saturation in the mobile telecommunication sector. The local and global stock markets are currently at the junction whereby the economy recovery is still questionable. Hence if you were to chase the stock you may be buying at the highest. Don’t try to buy for the sake of buying or out of revenge just to show that you’re also belong to the Maxis shareholders group. Take your time and wait for the right time to buy at a later stage (price consolidation). Hey, it could be blessing in disguise because you didn’t get a single share out of Maxis IPO. Who knows, maybe Maxis share price will not venture too far away from its’ RM4.75 a share. If you’re too loaded with cash why not go and invest in stocks such as Apple Inc.? Stop sulking and invest your hard-earned money another day.
Other Articles That May Interest You …
- Maxis Relisting – The Race for the Pathetic Limited Shares
- Maxis is Coming (back) to Town but are Investors Excited?
- The Rise of CELCOM Empire, Tales You Should Know
- It's RM15.60 for Your MAXIS Shares - Would You Sell?
- MAXIS Delisting – Good News for DIGI and TELEKOM Stocks
- Maxis Second Attempt To Buy India's Hutchison Essar
Monday, November 09, 2009
Why Stocks didn’t take cue from Jobless Rate?
Recession may be over, at least for now, but the same cannot be said about U.S. unemployment market. The jobless rate surprisingly surpassed analysts’ estimate (of 9.9%) to a staggering 10.2% in Oct, higher than Sep’s 9.8% jobless rate. Strangely enough the stock markets, both Dow Jones and Nasdaq, didn’t take much cue from the double-digit jobless rate which is the highest since early 1983. United States recorded jobless rate of 10.8% during the period of September 1982 to July 1983 while during World War II the country experienced 11% of unemployment. The latest data may send U.S. economists at MFR Inc. back to the drawing board since their prediction of hitting jobless rate of 11% by mid-2010 may come sooner than expected.
So what does this means? It only means that while we may not have the opportunity to witness yet again another 1929 depression, the recovery is definitely moving at a snail pace. Make no mistake about it – the U.S. economy didn’t dive to the like of 1929 Depression because of government’s stimulus package and it appears that Obama’s administration may has no other option but to get ready it’s second stimulus bill, in case of more surprises such as credit card burst. But there’s something more worrying about the economy model that is sending many economists cracking their heads.
The global recession sparked by U.S. subprime mortgages problem may be the turning point that will shape a new way of how business cycle operates. We may not be able to claim back the jobs destroyed during the recession because if the latest jobless rate is anything to go by – jobs will not necessary be replenished after the recession dust is over. Recession which ended in 1991 took a year before re-hiring resumed and the recession ended 2001 took two years before the jobless could find their job. So if we’re lucky the current jobless rate may take at least three years to recover, provided the old way of business cycle is still intact.
However we’re no longer living in the age of manufacturing, at least not United States, a country which inherited such business model when one-third of their workforce were in the manufacturing. Of course the new manufacturing hub now is China but in the meantime what shall the U.S. men and women who lost their jobs do? With automation, technology and the shift in the services sector as the new way of doing business, employers may just have found the excuses of not hiring as many as they did before the recession. Hence it's interesting to watch the next month's jobless rate data.
Back to the stocks, one of the reasons why the market didn’t tumble after the jobless rate data was release could be due to the bet that Federal Reserve has no reason to hike the banking lending rate so the record low rate or zero to 0.25% may stay for some time. Lower interest rate makes dollar unattractive and this would pump more liquidity into the stock market. So where will be new interests? Definitely you can short the dollar in currency trading; gold is still skyrocketing as if there’s no tomorrow and the Hurricane Ida may just create enough havoc in the Gulf Coast to push up oil prices.
Another reason why the stocks are still relatively bullish is due to the fact that holiday season is around the corner. Analysts are still waiting for the retailers’ earnings reports for clues if the consumers are willing to spend. Christmas may be used as an excuse to spend but otherwise the Dow Jones may drop to below 10,000 once the retailers’ earnings reports are not favorable.
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