China's US Treasuries Holdings Dipped?

Beijing’s long-feared dumping of US Treasuries, or the use and value of the PBoC’s central bank reserves was ignited again. The revelation that Chinese holdings of US Treasury obligations fell in December by $34.2 billion, to $755.4 billion, brought new fears. But are they justified?

In December 2009, China slipped below Japan to become the second largest recorded holder of U.S. treasuries, as it continued to unwind holdings of U.S. Treasury bills and Japan bought over US$11 billion in treasuries. China's recorded stock of U.S. treasuries has fallen from US$800 billion in July 2009 to US$755 billion at the end of 2009. China has been shifting back to purchases of longer-dated treasuries after buying more T-bills in late 2008 and early 2009. China's holdings of Treasury bills has fallen from a peak of US$210 billion in May 2009 to US$70 billion at the end of 2009. This shift implies that China may be purchasing some U.S. assets through intermediaries. China's net purchases of long-term Treasury bonds were US$4.6 billion in November.

In mid-2008, China surpassed Japan to become the largest single holder of U.S. Treasury securities. After a sharp increase in its T-bill purchases in late 2008, China gradually reduced its U.S. short-term debt holdings and shifted into long-term Treasuries in 2009.

China dropped its overall holdings , yes, but the article fails to mention the shift in holdings by other key countries that offset completely China's sell-off. In December, the UK and Japan jointly increased their holdings by more than China dropped its holdings, + $US 36.4 bn vs. -$US 34.2 bn. China's current portfolio is really not that difference from recent history. China's December share of US Treasury holdings, 20.9% (as a % of total foreign holdings), is barely off its 2007-2009 average, 21.4%. But Japan's holdings are way off, and could revert towards the average, 23.7%.

p/s photos: Padma Priya

Every Decade Sure To Have Their Very Own "Dr. Doom"

We usually will laud the bullish experts who got things right. Many will despise the naysayers, the bearish buggers who seem to be always pessimistic. However, some of them have been prescient in their big calls, and deserve to be applauded. You will find them being tagged as the Dr. Dooms, and every decade seems to have a major one. As a Dr. Doom, they will shout loudest when they feel strongly about something going wrong, but usually you will not hear from them when markets turn bullish - not that they do not like bull runs, but its their attention to detail and them usually having a very high disposition to fear that will cause them not to issue buy signals even they see them. Hence when its bullish, and they are quiet, its good. When its bullish and they keep getting louder, its bad.

Not all of them are as good as the title may hint at. I have rated them out of 10, 10 being excellent.

Dr. Henry Kaufman - Dr. Doom of the 1970s & early 80s (my rating 8.5/10)

He was well-known during the 1970s and early 1980s for the interest rate forecasts he wrote for Salomon, and for their bearish views, generally predicting that bond prices would decrease (interest rate would increase). Thus, he earned the nickname "Dr. Doom." Dr. Henry Kaufman is the president of Henry Kaufman & Company, Inc., a firm specializing in economic and financial consulting. He was previously a managing director at Salomon Brothers and was a member of the executive committee in charge of the firm's four research departments.

Dr. Kaufman was also a vice chairman of the parent company, Salomon Inc. Before joining Salomon Brothers, he was in commercial banking and served as an economist at the Federal Reserve Bank of New York. Unwittingly, this Dr. Doom also triggered a major market rally after years of doom and gloom predictions, Kaufman’s prediction on August 17, 1982 that interest rates would fall sparked a stock market rally that can be dated as the beginning of the 1980’s bull market.

Dr. Kaufman's book, On Money and Markets, A WallStreetMemoir, was published in June 2000. In 1987, Dr. Kaufman was awarded the first George S. Eccles Prize for excellence in economic writing from the Columbia Business School for his book, Interest Rates, the Markets, and the New Financial World.

Dr. Kaufman received his bachelor's degree in economics from NYU in 1948, an M.S. in finance from Columbia University in 1949 and a Ph.D in banking and finance from New York University Graduate School of Business Administration in 1958. He also received an honorary Doctor of Laws degree from New York University in 1982, and an honorary Doctor of Humane Letters degree from Yeshiva University in 1986 and from Trinity College in 2005.

Kaufman is known among the insiders in the financial community as a genius at contrarian investing. During the 1970s downturn in New York City he was the buyer of last resort for Con Edison bonds, which resulted in huge gains. Kaufman was buying Con Edison Bonds at 30 percent of face value when the city was told no help was coming from the federal government to keep the lights on in New York. Of course the bonds never defaulted, and the returns were in mega millions to Kaufman.

Kaufman was the largest shareholder of Apple Bank of New York along with many other holdings. He was the financial controller of all of the $320 million Maurice Kanbar received for selling Skyy Vodka and created $190 million in additional profits from this account. One of the investments was buying 32 percent of downtown Tulsa, Oklahoma, at distress prices starting in 2005. Tulsa is one of the few cities that has weathered the U.S. real estate crisis and actually has increased in value. He also was the funding source of capital for Heine Herzog (Mutual Shares which merged with Franklin Templeton), the largest over-the-counter market maker in the U. S. Kaufman also bought buildings in Soho at $30 square foot in the distress times of the 70s and became a legend in value investing when the market climbed to $200 a square foot. His latest venture was going big into Costa Rica real estate last year, let's see if its going to be another winner for him.

Latest Mantras: Kaufman thinks the banks should be broken up ... "A much better approach would be to prohibit any financial institution from remaining or becoming too big to fail. This would require that regulators downsize large financial conglomerates. In this process, the prime targets for divestiture should be financial activities that pose risk to the stability of the deposit function as well as operations that pose conflicts of interest.

Our financial system is at a crossroads. We can either succumb to the forces that are shifting markets toward greater government back-stopping and socialization. Or we can create a structure in which no institution is too big to fail, and a financial system that is supervised effectively by a modernized central bank."

"Why are we so poor at managing our key economic institutions while at the same time so accomplished in medicine, engineering and telecommunications? Why can we land men on the moon with pinpoint accuracy, yet fail to steer our economy away from the rocks? Why do our computers work so well, except when we use them to manage derivatives and hedge funds?"

Kaufman warns: "The computations were correct, but far too often the conclusions drawn from them were not." Why? Selfish, myopic politicians and bankers.

Dr. Marc Faber - Dr. Doom of the 1990s and present time (my rating 6.5/10)

Dr Marc Faber was born in Zurich, Switzerland. He went to school in Geneva and Zurich and finished high school with the Matura. He studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics magna cum laude.

Between 1970 and 1978, Dr Faber worked for White Weld & Company Limited in New York, Zurich and Hong Kong.

Since 1973, he has lived in Hong Kong. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK) Ltd. In June 1990, he set up his own business, MARC FABER LIMITED which acts as an investment advisor and fund manager.

Dr Faber publishes a widely read monthly investment newsletter "The Gloom Boom & Doom Report" report which highlights unusual investment opportunities, and is the author of several books including “ TOMORROW'S GOLD – Asia's Age of Discovery” which was first published in 2002 and highlights future investment opportunities around the world. “ TOMORROW'S GOLD ” was for several weeks on Amazon's best seller list and is being translated into Japanese, Chinese, Korean, Thai and German.

Latest Mantras: Marc continues his bashing of the governments of all developed and overleveraged nations, which he claims will sooner or later default on their obligations. This could be the most scathing critique of the fiat-money system to date, which is the primary cause for the facility with which governments have accumulated untenable debt loads.

"In the developed world we have huge debt to GDP, in terms of government debt to GDP and unfunded liabilities that will come due, and these unfunded liabilities are so huge that eventually these governments will all have to print money before they default."

Faber also said he is turning from a bull to a bear on stock markets in 2010 because there was too much bullish sentiment and whenever there’s a mid-term election then it becomes negative for stocks, “Everybody was looking for further gains in stocks.”

Marc Faber says "the average life span of the world's greatest civilizations has been 200 years ... Once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent ... overspends ... costly wars ... wealth inequity and social tensions increase; and society enters a secular decline."


Robert Shiller - Dr. Doom of 2000s (my rating 9.5/10)

Shiller received his B.A. from the University of Michigan in 1967, S.M. from MIT in 1968, and his Ph.D from MIT in 1972. He has taught at Yale since 1982 and previously held faculty positions at the Wharton School of the University of Pennsylvania and the University of Minnesota, also giving frequent lectures at the LSE. His book Macro Markets won first annual Paul A. Samuelson Award.

In 1981 Shiller published an article titled "Do stock prices move too much to be justified by subsequent changes in dividends?" He challenged the efficient markets model, which at that time was the dominant view in the economics profession. Shiller argued that in a rational stock market, investors would base stock prices on the expected receipt of future dividends, discounted to a present value. He examined the performance of the U.S. stock market since the 1920s, and considered the kinds of expectations of future dividends and discount rates that could justify the wide range of variation experienced in the stock market. Shiller concluded that the volatility of the stock market was greater than could plausibly be explained by any rational view of the future.


In 1991, he formed Case Shiller Weiss with economists Karl Case and Allan Weiss. The company produced a repeat-sales index using home sales prices data from across the nation, studying home pricing trends. The index was developed by Shiller and Case when Case was studying unsustainable house pricing booms in Boston and Shiller was studying the behavioral aspects of economic bubbles. The repeat-sales index developed by Case and Shiller was later acquired and further developed by Fiserv and Standard & Poor, creating the now famous Case-Shiller index. His book Irrational Exuberence (2000) – a NYT bestseller, and now you know where that phrase came from (no its not Greenspan) – warned that the stock market had become a bubble in March 2000 (the very height of the market top) which could lead to a sharp decline.

Writing in the Wall Street Journal in August 2006, Shiller again warned that "there is significant risk of a very bad period, with slow sales, slim commissions, falling prices, rising default and foreclosures, serious trouble in financial markets, and a possible recession sooner than most of us expected.” Robert Shiller was awarded the Deutsche Bank Prize in Financial Economics in 2009 for his pioneering research in the field of financial economics, relating to the dynamics of asset prices, such as fixed income, equities, and real estate, and their metrics. His work has been influential in the development of the theory as well as its implications for practice and policy-making. His contributions on risk sharing, financial market volatility, bubbles and crises, have received widespread attention among academics, practitioners and policy makers alike.

Latest Mantras: Even if there is a quick end to the recession, the housing market’s poor performance may linger. After the last home price boom, which ended about the time of the 1990-91 recession, home prices did not start moving upward, even incrementally, until 1997. Even the federal government has projected price decreases through 2010. As a baseline, the stress tests recently performed on big banks included a total fall in housing prices of 41 percent from 2006 through 2010. Their “more adverse” forecast projected a drop of 48 percent — suggesting that important housing ratios, like price to rent, and price to construction cost — would fall to their lowest levels in 20 years.

Remember a decade ago with "Irrational Exuberance?" Now he's warning: "Bubbles are primarily social phenomena. Until we understand and address the psychology that fuels them, they're going to keep forming. We recently lived through two epidemics of excessive financial optimism, we are close to a third episode, only this one will spread irrational pessimism and distrust -- not exuberance."


Nouriel Roubini - The Latest Dr. Doom, although he is not comfortable with the tag (my rating: 7.5/10)

Nourel Roubini is an economist and professor at New York University. He was one of the only people to accurately predict the current global economic crisis. Roubini started predicting a possible financial meltdown in 2004, and received the nickname "Dr. Doom" after a 2006 IMF meeting. Roubini, once an obscure economist, has become an in-demand analyst due to his uncannily accurate and pessimistic predictions.NY Times: Dr. Doom (August 15, 2008)



Roubini hasn't always been right in his predictions: In an August 2008 interview with Barron's, he said as many as 1,400 U.S. banks could fail. That number has been closer to 200, and it doesn't appear that the Federal Deposit Insurance Corp. and state authorities will have to shutter anywhere near the number he predicted.

He warned that the Federal Reserve and other government central banks are fueling a massive new asset "bubble" that -- while not in imminent danger of bursting -- will someday do so with calamitous consequences.

Here is Roubini's argument: The Fed is holding short-term interest rates near zero. Investors and speculators borrow dollars cheaply and use them to buy various assets -- stocks, bonds, gold, oil, minerals, foreign currencies. Prices rise. Huge profits can be made. But this can't last, Roubini warns. The Fed will eventually raise interest rates. Or outside events (a confrontation with Iran, fear of a double-dip recession) will change market psychology. Then investors will rush to lock in profits, and the sell-off will trigger a crash. Stock, bond and commodity prices will plunge. Losses will mount, confidence will fall and the real economy will suffer.

"The Fed and other policymakers seem unaware of the monster bubble they are creating," writes Roubini. "The longer they remain blind, the harder the markets will fall."

Like home values a few years ago, asset prices have risen spectacularly. Since its March 9 low, the Standard & Poor's 500-stock index has gained more than 50 percent. An index of stocks for 22 "emerging-market" countries (including Brazil, China and India) has doubled from its recent low. Oil, now around $80 a barrel, has increased 150 percent from its recent low of $31. Gold is near an all-time high, around $1,090 an ounce. Meanwhile, the dollar has dropped against many currencies. Half of Roubini's story resonates.

...... So, Roubini's new bubble remains unproved. But this doesn't invalidate his warning. We've learned that there's a thin line between promoting economic expansion and fostering bubbles. With hindsight, lax Fed policies contributed to both the "tech" bubble of the late 1990s and the recent housing bubble, though how much is debated.

“ I don’t believe in gold. Gold can go up for only two reasons. [One is] inflation, and we are in a world where there are massive amounts of deflation because of a glut of capacity, and demand is weak, and there’s slack in the labor markets with unemployment peeking above 10 percent in all the advanced economies. So there’s no inflation, and there’s not going to be for the time being.

The only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression. But we’ve avoided that tail risk as well. So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go. Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon.”

Latest Mantras: The shorting of USD is the “mother of all highly leveraged asset bubbles” now in progress. Shorts in the US dollar are being built up to unprecedented levels, and are being used to finance the purchase of every asset class, especially in energy, commodities, and precious metals. This bubble will be pricked by a huge snap back rally in the greenback, the exhaustion of Fed support measures, a growth surprise in the US leading to an early Fed tightening, or a real double dip recession. The inevitable collapse will make the last financial crisis look like a cake walk, and take all markets, especially equities, down to new lows.

Facebook Buys Malaysia's Octazen Solutions

(Excerpts culled from AllFacebook.com , techcrunch.com , gigaom.com )

Facebook has bought up under-the-radar Octazen Solutions in what the company says is a “small talent acquisition.”

Facebook spokesperson Larry Yu described the buy as a “talent acquisition,” saying Octazen’s two employees have joined Facebook as engineers. As he put it in a company statement on the acquisition he sent via email:

“We’ve admired the engineering team’s efforts for some time now and this is part of our ongoing effort to add experienced, accomplished technical talent to help drive the company forward in its efforts to be the central way for people to connect and share information.”

Octazen’s software helps sites like Facebook grow by making it easy for users to invite their contacts on other services. When Octazen receives an email address and password it fetches a list of contacts and puts them in an array for customers to use and store (and hopefully not abuse!). Octazen has taken down most of its site in light of the acquisition, but archived versions show it charged for software licenses between $39 and $200 per domain server plus a yearly update fee.

Octazen describes itself on its website as a “webmail contacts importer” and Facebook was already using the firm to “grow its number of users by encouraging them to invite their email contacts.”

This is Facebook’s first acquisition since it purchased social sharing service FriendFeed over the summer in a deal that was also described as mainly being driven by a desire to add talent.

However, unlike FriendFeed—which continues to operate separately seven months later—Facebook has already moved to shut Octazen down; an on the Octazen website says the company is winding down operations and will no longer accept new customers.

http://www.octazen.com/

What exactly has Octazen been up to? The company is mostly about above-board contact importing from one service to another – signing in to Gmail from Facebook, for example, to import your contacts there and add them as Facebook friends. Much of this is done via OAuth and APIs, but Octazen is known to dive much deeper for data.

One example – Octazen will sometimes collect and store user credentials directly, and sign into large social networks and other sites as if they were the user, say multiple sources. Then they’ll download the address book and social graph. A percentage of your friends on that service might be users of the service (now Facebook) paying Octazen, and you’ll be asked to friend them. But there’s a big question about what happens to the rest of the data as well, and if Octazen is storing a shadow social network in violation of terms of service to recommend user connections down the road. And they may look deeper at data than they should – at email header information, for example, to get a better understanding of who you communicate with the most.

But the most unnerving part of Octazen, say our sources, is the fact that they are very, very good at scraping data at scale without being detected. They may hit a service using lots of different IP addresses, for example, and remain undetected. Octazen could, they say, scrape very public sites like Twitter, where the social graph is on each profile, in a way that Twitter wouldn’t know it’s happening.

Facebook already uses Octazen to mysteriously determine your long lost friends and suggest that you re-connect with them (leading to scores of emails into our inbox that Facebook is somehow reading emails or otherwise getting data they shouldn’t be).

The big question is why Facebook would need to acquire a company located half way around the world if all they were doing is standard address book imports via OAuth and APIs, or proprietary but well documented protocols like Facebook uses. The implication is that these guys have serious expertise in data gathering at scale that may sometimes be in violation of the terms of service of the sites being harvested.

This is obviously just one side of the possible story, albeit based on hard evidence of Octazen’s shady prior practices and via multiple sources. But until Facebook explains this acquisition in more detail, we don’t have much more to go on.

Here are three reasons All Facebook wrote as possible reasons for acquiring Octazen:

Simple Talent Acquisition

Facebook needed a team which could constantly monitor changes to third-party email providers to ensure that they retain the ongoing viral growth. Octazen, a company Facebook has already been working with, provided this ability and will help ensure that Facebook’s contact importer will function through part of the company’s most critical growth phase: the race to 1 billion users.

While the company didn’t need to acquire the company, locking in the developers behind Octazen for at least a few years will ensure that Facebook has the developers’ full-time attention (despite not having oversight of the developers who are based in Malaysia and will remain there).

Protect Their Viral Growth

There is a small chance that Octazen currently has information which is extremely proprietary which helps ensure Facebook’s contact importer continues to function. In order to protect that knowledge, Facebook locked in the developers and bound them into an agreement in which their technology could not be used for any other organizations. That would explain the following statement on the Octazen Solutions website:

The Octazen team wanted to let you, our valued customers, know that the company recently received an offer to acquire most of the company’s assets and to employ those assets in a different direction. After carefully evaluating this offer, our team believes this is a wonderful opportunity of which we must take advantage.

As a result, effective immediately, Octazen will no longer accept new service contracts or renew existing service contracts, and will enter a transition period to wind down operations.

A Simple Present Value Calculation

Facebook may have been paying significant fees to the Octazen solutions company. Given that they knew they would be paying those fees for at least the next 3 to 5 years, Facebook decided to do a simple financial calculation and figure out the present value of the future outgoing cash flows to maintain the contact importer. Add a little on top of the present value and you’d get Facebook’s acquisition price which just made financial sense.

(I guess all Malaysians would like to know what price they paid the two guys. Its obviously a talent acquisition plus they probably have something they are doing which may be better exploited and protected at a place like Facebook. It would not be a big sum for sure or else, they couldn't tie the two down to work at Facebook. I am thinking in the region of US$10m, with contractual periods to work hand in hand with Facebook team of engineers).

p/s photo: Elanne Kong

Fed Raises Discount Rate

WASHINGTON (MarketWatch) -- The Federal Reserve announced late Thursday that it was raising its discount rate in order to push banks to borrow from the private market for short-term credit. In a statement, the Fed said it would raise its discount, or primary credit rate, to 0.75% from 0.50% effective on Friday. Fed chairman Ben Bernanke signaled last week that the Fed was mulling the move. Fed watchers had expected the move to come at the next Fed meeting in March. Today's action shows a sense of urgency on the part of the Fed officials. The Fed said the move is intended to "normalize" their operations as the financial crisis winds down. The change is not a tightening and does not signal any change in monetary policy, the Fed said.

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Fed Funds Rate Versus Discount Rate - the federal funds rate is the interest rate at which private depository institutions (mostly banks) lend balances (Federal funds) at the Federal Reserve to other depository institutions, usually overnight. It is the interest rate banks charge each other for loans.

The interest rate that the borrowing bank pays to the lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the federal funds effective rate.

The federal funds target rate is determined by a meeting of the members of the FOMC which normally occurs eight times a year about seven weeks apart.

Another way banks can borrow funds to keep up their required reserves is by taking a loan from the Federal Reserve itself at the discount window. These loans are subject to audit by the Fed, and the discount rate is usually higher than the federal funds rate. Confusion between these two kinds of loans often leads to confusion between the federal funds rate and the discount rate. Another difference is that while the Fed cannot set an exact federal funds rate, it can set a specific discount rate.

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

That said, the discount rate will effectively move the fed funds rate in the same direction. This move by the Fed was predicted back in January, and as argued, this is a bullish sign rather than a negative one.

Wednesday, January 20, 2010

Bernanke's Likely Weapon Of Choice

This is my prediction for Bernanke. He will raise fed funds rate very very soon. Just because of that, it does not mean that it will be bad for equity markets.

But lets go back to why it will happen very soon (by February I think). Most developed nations' central banks have been reluctant to move the low interest rates regime up because the Main Street has been showing nascent growth. What Bernanke wants to see are corporate spending on R&D and hiring - both not really evident yet. Despite the tons of liquidity being poured into markets, many banks are just sitting by idling.

The Fed has had to maintain a low fed funds rate for obvious reasons, but look at the chart, banks are earning very decent net interest margins by lending to the system, and not to clients. High ranking officials have been calling the banks to lend more aggressively, but that does not seem to be working.



Bernanke's hands are being tied a lot more now that many of the banks which received funds from the government are returning it - that means the government will have a lot less leverage to "move the banks" toward certain persuasions.

It looks like Bernanke will have little choice but to close the gap and raise fed funds rate. When net interest margins start to shrink, then the banks will have to put the money to work. The summary from all this deduction is that don't be worried when Bernanke raises fed funds rate, in fact it is a new bullish sign.

p/s photo: Erika Sawajiri

Marketocracy Portfolio Updated - February 15, 2010

Further updates to Salvador Dali Mutual Fund (SMF) at Marketocracy. Beating the S&P500 by 42.85 percentage points for the last 12 months.

Previous update: http://malaysiafinance.blogspot.com/2010/01/marketocracy-portfolio-update-6-january.html

price history
		SMF m100 S&P 500 DJIA Nasdaq
		Graph Period: [7 Days] [30 Days] [90 Days] [6 Months] [1 Year] [2 Years] [3 Years] [4 Years] [5 Years] [Since Inception]

recent returns
		RETURNS Last Week 1.40% Last Month -7.81% Last 3 Months 1.70% Last 6 Months 3.74% Last 12 Months 74.63% Last 2 Years N/A Last 3 Years N/A Last 5 Years N/A Since Inception 21.87% (Annualized) 13.55% RETURNS VS S&P500 Last Week 0.43% Last Month -1.85% Last 3 Months 2.83% Last 6 Months -4.48% Last 12 Months 42.85% Last 2 Years N/A Last 3 Years N/A Last 5 Years N/A Since Inception 32.97% (Annualized) 20.84%

alpha/beta vs. S&P500
		Alpha 25.15% Beta 1.13 R-Squared 0.76

turnover
		Last Month 0.00% Last 3 Months 37.05% Last 6 Months 88.44% Last 12 Months 405.81%

		Symbol Shares Value Portion of Fund Inception Return F 10,000 $111,200.00 9.13% 46.99% MGM 9,500 $104,785.00 8.60% 45.75% Details BDD 5,000 $68,849.50 5.65% 44.08% Details NYB 6,000 $93,600.00 7.68% 42.39% Details NVDA 5,000 $86,750.00 7.12% 29.91% Details QSII 1,500 $83,445.00 6.85% 12.51% Details MIDDLE NATH 5,000 $78,250.00 6.42% 8.30% PLD 8,118 $96,360.66 7.91% 7.59% GE 4,000 $62,200.00 5.10% 5.00% LOW 3,500 $77,560.00 6.36% 1.89% KBW 4,500 $120,240.00 9.87% -1.58% Details C 30,000 $95,400.00 7.83% 14.82% Details BAC 9,000 $130,050.00 10.67% 16.06% Details

Happy Chinese New Year To All

The exodus has begun .... have a healthy and prosperous New Year ... may all your dreams and good wishes come true!!! Drive safe & slow ...

Hing Ket Grill House

This is one of my preferred eating places. The reason why I have not featured it earlier is that this thing is too damn popular already, they do not need more publicity. As it is, if you go on Fridays or weekends, you better arrive before 7pm or you will walk away disappointed. Its comfort food. Its our very own kind of barbecue.

I am there at least once a month. Its in Klang but funnily many people from Klang have not been there. No, its not another bak-kut teh stall!!! Its an unpretentious grill house. Go with somebody who have been there, I beg you, its very difficult to locate.

I always sit outside the bungalow restaurant to enjoy the early evening alfresco dining. Nothing better than to go in shorts and T-shirt and sandals. Have a cool beer (plus dunk it in ice for that Malaysian-hawker-way of enjoying cold beer) and wait for the food. Plus, be prepared to eat with your fingers a lot, its a lot more fun.

Their number one dish is Grilled lamb chops. Its not a pricey place, and the lamb chops are not the best cut. A tip, ask them to cut it into bite size pieces, save you wrangling with fork and knife over the bones and tendons. Its the smokiness that makes it extremely tasty, and their remarkably fresh home made mint sauce. Aaahhh ...

Their next best thing to have is grilled fish, just ask for the best fish they have for the day. Again, its nicely grilled and the key is their wonderfully spicy chilli sauce that comes with a zing. The chilli is used to coat and grill the fish with - notes of belacan, killer chilli and a good dose of garlic and lime.

The other must have item is grilled crabs. My complaint here is they do not have terribly big ones, just small crabs, but its still wonderful if you like crabs.

Its not just grilled stuff they do well. They do a mean Marmite chicken wings and you should leave room for their mee dish using thoong-fun.

All in all, you will leave the place spending not more than RM50pp but what a wonderful way to have dinner. Now if the beach was right in front of the restaurant, then its paradise.

HING KET GRILL HOUSE
Lot 3569, Batu 3 1/4
Kampung Jawa, Klang
Tel: 33713913, 33710861
11.30am-2.30pm, 5.30pm-10.30pm

India's Economic Strength Compared To China

Why is China the “workshop of the world” when Indian labour is even cheaper and her entrepreneurs admired worldwide? There are many reasons, including (until recently) the anti-foreign-trade policies and small-scale industry reservation policies as well as poor infrastructure in power, roads, water and ports. Perhaps even more important are the restrictive labour laws and certain other regulations, which encourage Indian manufacturing units to “stay small”, thereby forgoing the classic industrial economies of scale and scope.

Both China and India have sizable population, both are seeing a growing middle class by improving the economic livelihood of those in the rural areas. Yet as an economic engine or superpower, India seems to be bogged down by certain factors. The biggest division is that one is state planned centralised economy while the other is probably to most democratised country in Asia with many "almost independently managed states". However, thats the big picture, the reality would show that India's economy is more powerful and resilient in many ways when compared to China.

As a percentage of GDP, China's domestic consumption is the lowest of all major economies, hovering at just 1/3 of GDP. Most of China's growth in 2009 had come from infrastructure spending or speculation in domestic assets. In India, the domestic consumption accounts for 2/3 of GDP - now that is food for thought. China's artificial suppression of the yuan restricts domestic spending. As great as the surpluses are, more than 3/4 of China's capital goes to the 120,000 state controlled entities. That being the case, most of the profits in China end up in state coffers.

The OECD’s Investment Policy Review of India says India has designed policies to encourage investment as part of market-oriented reforms since 1991 that have paved the way for improved prosperity.

“Restrictions on large-scale investment have been greatly relaxed. Many sectors formerly reserved to the public sector have been opened up to private enterprise. Import substitution and protectionism have been replaced by an open trade regime,” the OECD report notes.

But further reforms are needed. India’s policy framework for FDI still remains restrictive compared with most OECD countries. Meanwhile, its investment needs remain massive, with poor infrastructure holding back improvements in both living conditions and productivity.

India’s growth is led by domestic demand and growing incomes in the coming years will continue to boost domestic demand and industrial activity. Reforms, the growth of home-grown corporations and rising scale of foreign direct investment are also pluses. Large domestic savings (37% of GDP in 2007), both by households and corporations, have played a pivotal role in India's economic growth. High domestic savings and the development of homegrown corporations have boosted investment (39% of GDP in 2007), helped by cheap foreign capital. Combined with a large private consumption (55% of GDP in 2007) base and a low trade dependence (imports and exports account for around 20% of GDP), the Indian economy is perceived by foreign investors as a "domestic demand-led story".

Due to the economic slowdown in 2008, household savings in financial assets fell to 10.9% of GDP in 2008 from 11.5% in the previous two years led by the large decline in holdings of shares and debentures. Households also shifted their savings from mutual funds to bank deposits due to an increase in risk aversion in 2008. With the decline in risk aversion in 2009, households will slowly shift back to equities. India's gross domestic saving rate might have declined from 37.7% in 2007 to 31% in 2008-09.

Indis' middle class stands at a formidable 300m while China's figure is around 150m. Half of China's population is in rural areas while India still have 2/3 of them in rural areas. According to a recent study by MIT School of Management, China's absolute levels of poverty and illiteracy have doubled since 2000, while India's have been halved! In India, economic growth in rural areas have outpaced growth in urban areas by 40%. Rural India now accounts for half of India's GDP, it was 42% in 1982, and it contibutes about 2/3 of India's growth . Rural China accounts for only 1/3 of China's GDP, and contributed to just 15% of the country's growth.

Increasing the growth potential and attaining the Chinese type of economic growth is constrained by India's democratic set-up, which requires political consensus to implement economic reforms. Coalition governments in the recent years have slowed the approval of reform and liberalization-oriented legislations. However, policymakers argue that slow and sequenced reforms and liberalization over the years have in fact helped India achieve strong and sustainable economic growth and limited the impact of global cues on the Indian economy.

India's medium term challenges include reducing dependence on foreign oil, increase efficiency in oil consumption to reduce its impact on fiscal and trade deficits. Cutting down oil and agriculture subsidies to reduce unproductive fiscal spending and large budget gap. Structural reforms include improving agriculture yields, development of infrastructure, health care and education access to increase absorptive capacity of economy. Other challenges include: The stance on Foreign Institutional Investors (FIIs) and capital inflows, and managing their role in generating credit and asset bubbles. Balancing private sector and foreign investors' role with concerns about social stability. Reducing corruption, and income and wealth inequality, especially between states and between rural and urban areas. Boosting human capital development and job creation can raise consumer spending, especially for the lower and middle income groups and in rural areas. Liberalizing foreign investment caps, broadening and deepening the domestic capital markets, easing capital controls on companies to borrow from abroad, and improving financial intermediation of domestic savings can buoy investment.

We should reconsider India in relation to China in their path to dominating the global economic scene over the next 20 years. Both will be taking very different path and will have major consequences to the global competitive paradigm. China's still lags in a several areas and the rural dislocation and to a certain extent the "forgotten group" being left behind will have grave social and economic costs in the coming years, if not properly managed and improved on.

p/s photos: Asin

Country Stock Markets Performance - Markets Diverging?

The markets have been wrought with worries about a few EU countries and the Euro currency which have rattled global equity markets. Sovereign debt credit default swaps have been rising sharply for countries such as Greece and Portugal in recent days. Equity markets in Spain, Portugal, and Hungary are down more than 5% today alone.

Below Bespoke highlighted the year to date performance and performance since the 19 January 2010 peak for the major equity markets of 81 countries around the world.

Spain is down the most year to date with a decline of 13.45%. Greece is second worse with a decline of 11.13%, followed by Puerto Rico, Jamaica, Slovakia, and China. Italy, Germany, and France are down more than 5% year to date, while the UK is down 4.87%. The US is down 3.58%, but it has been the second best performing G-7 country year to date behind Japan. Thirty-eight of the 81 countries are still up year to date, so things haven't gotten that bad everywhere. Latvia, Lithuania, and Estonia are all up more than 20%.

What's interesting is to see where Malaysia is, we are right at the median. One can safely say that our correlation to major equity markets have been very mild - in other words we are still not a preferred destination for foreign funds. Can be good or bad, you do not see much whiplash action when these funds withdraw. Even though our KLCI index has tumbled, its mainly due to weakness in the big caps, if you had been in mid or small caps, your losses would have been muted.

Indonesia and Vietnam have held up even better as I did see some foreign funds preferring to have an exposure there. Usually in this type of correction, where macro factors and sovereign debt are involved, foreign funds in smaller emerging markets are quite OK to stay put. If they feared funds withdrawals, it is easier to get money out of HK, Taiwan and Brazil.

Some funds have certainly taken chips off the table, however I do not see this as a prolonged bear market at all. Where else will they put money to work? Treasuries?

p/s photos: Sowelu

iPhone Winning Corporate Users

Those who have the iPhone will know what I am talking about. Once you have it, you'd never want to use any other phone. I survived the Blackberry sentence for 2 years, its no fun. The iPhone is the best ever, its a lot of fun, and its like having an iPod as well. Buy the docker/player and you have a good sound system while charging your phone as well. The iPhone's strength is also its main weakness. As app downloads are managed exclusively through the iTunes Store, IT managers can't centralise installation and security updates as with other software. Unlike Blackberry or Windows Mobile devices, each phone must be updated by its end user, even if update prompts are pushed to the device. But, the pull factors of iPhone are so great that more and more senior execs are pushing their IT department to cave in.

Gartner: The uber cool iPhone is making inroads into the business market with new enterprise applications making it hard for IT managers to swim against the phone's popularity tide.

It is now deployed or being piloted by more than 70 per cent of Fortune 100 companies, according to Peter Oppenheimer, Apple's chief financial officer.

“We're continuing to see a rapidly growing number of enterprise CIOs who have now added the iPhone to their approved device list. This penetration has doubled since the iPhone 3GS first shipped this past (US) summer,” he said at the company's first quarter results presentation on Jan 25.

Yellowfin's iPhone app for business.

According to Gartner, the iPhone operating system is now the third most popular in the world commanding 17 per cent of the smartphone market, behind Nokia's Symbian with 44.6 per cent and Research in Motion (RIM) with 20 per cent.

Glen Rabie, chief executive of business intelligence software maker Yellowfin, says corporations are surrendering to the iPhone's appeal.

Apple's OS share rose 4.2 per cent in the year to October 2009, behind RIM's 4.9 per cent, at the expense of Symbian and Microsoft's Windows Mobile which lost 5.1 and 3.2 per cent respectively. Google's newcomer Android managed to capture 3.5 per cent market share in its first year.

Much of the rise of Apple's share stems from consumer uptake; nevertheless its use in enterprise environments is rising.

“We've certainly seen a massive uptake of the iPhone by the enterprise. Executives just want it and are telling the IT people to just make it work. There are cases where all executives have iPhones and the rest of the staff have Blackberries. Slowly it filters down,” Rabie says.

Yellowfin counts Telstra, Levi's and government agencies as clients. It recently joined the likes of Salesforce.com in launching an iPhone app to allow access to it server-based business intelligence packages.

“The iPhone has built a mindset to make everything simpler. Each app only does one thing, which is good because people just do what they need to do,” Rabie says.

Apps v Security

The iPhone's strength is also its main weakness. As app downloads are managed exclusively through the iTunes Store, IT managers can't centralise installation and security updates as with other software. Unlike Blackberry or Windows Mobile devices, each phone must be updated by its end user, even if update prompts are pushed to the device.

“In my view that's the only thing that is holding it back,” Rabie says.

At the same time, RIM which has a strong enterprise foothold precisely because of its security and all-in-one infrastructure is not letting the app fever pass it by. It recently launched its own app store App World, allowing Blackberry users to search for and download apps directly from a central website, rather than having to search through software vendors' sites or wait for their IT managers to do it.

Small business no brainer

David Campbell, owner for David Campbell Building in Sydney, has a fleet of seven iPhones which staff use on construction sites. They are trialling a “Tradies App” developed by the company to aid onsite supervisors to compile a daily site diary, document variations and issue sub-contractor agreements and purchase orders on the spot. He hopes the app will be available through iTunes soon, maybe even bringing in some extra revenue.

“We had Blackberries and Treos before, but they don't stack up in the ease of use for the guys,” Campbell says.

Enterprise Requirements

While end users and small businesses value user experience more, enterprise IT managers have a different wish list. Anthony Petts, sales and marketing manager, HTC which manufacturers Windows Mobile and Android phones, says they want:

- email exchange functionality

- centralised security

- calendar and contact synchronisation

- keyboard input

- a range of hardware models to suit different staff levels/requirements

“When I ask people why they want an iPhone they say because it's the latest. There's hype, buzz and a notion of status affecting the buying decision, but in the enterprise when they look at security and functionality (other phones) become a real consideration for them,” Petts says.

Predictions

Gartner predicts it's Android, not iPhone, that will overtake RIM as second biggest smartphone OS in the world by 2012. Windows Mobile will manage to maintain its market share although suffering greater pressure from open source despite the Marketplace app store launch.

However, Petts believes Microsoft will strengthen its grip on the Australian smartphone enterprise market with Windows Mobile 6.5 and HTC's own HD2.

He says the phone combines the finger-sensitive (capacitive) screen that iPhone and Android users prefer with the accuracy of stylus-driven (resistive) screen the enterprise demands.

“We've had very strong enterprise coverage with Windows Mobile predominantly from a security and infrastructure point of view. If companies have Microsoft Exchange set up, there's nothing else they need to do and they'll have all the security that comes with that. No additional investment, no need for another server and they can add Microsoft Sharepoint and Office to it to keep it in the family,” Petts says.

Top smartphone hardware vendors, Asia Pacific (unit sales)

Nokia - 75.3 per cent market share (down from 79.9 per cent in Q1 2009)

Apple - 8.1 per cent (from 3.8 per cent)

HTC - 6 per cent (from 4.6 per cent)

RIM - 3.6 per cent (from 2.9 per cent)

Samsung - 2.9 per cent (from 2.4 per cent)

Source: Gartner, Q3 2009.

p/s photos: Christina Chan Hau Mun