Discrepancy = Anomaly = Opportunity In IJM Land

I have blogged about why I like IJM Land:

http://malaysiafinance.blogspot.com/2009/08/why-i-like-ijm-land.html

Curiously, I have been monitoring the price trends and volume activity in IJM Land and IJM Land-WA. Stranger still was the strong pick up in buying activity in IJM Land-WA over the past 3 days. The discrepancy and anomaly was that IJM Land stayed relatively still throughout the whole thing. IJM Land-WA has gained more than 8 sen over the last few days with the mother share barely budging.

Looks like smart money are piling into the warrant probably ahead of a significant uptick in the mother share very soon. Just giving the heads up here.


p/s photo: Elanne Kong Yuk Lum

Market Commentary

Just looking at the markets today, some may not know what to make of it. Its like uncertain and the energy is misplaced and incoherent. Looking at the leaders board, Konsort has raced up the volume list, the stock that links it up is Pelikan. They have a mutual substantial shareholder, look it up. There are talks that Pelikan is being planned for a MBO or a private equity buyout (part of the reason why I highlighted it as a buy below RM1.00). Both should be OK for a swift trade. Not encouraged, only for smart and savvy traders who can move in and out quick by looking at volume and trends.

The other thing one can surmise from the gainers is that the realignment caused by the "new" FTSE-KLCI 30 index, which I have highlighted as "very important". The adjustment process favours certain stocks which takes out some of their free float capacity. Hence look for firm support for Tanjong and Commerce.

Some strategic accumulation can be seen in IOI Corp, which looks to me to be a good base building level, or some "substantial shareholder" thinking that this is the "right levels" to accumulate strongly. Fergetabout UEM Land or Tebrau, never liked their run up as the story is still wishy washy. No follow through, corporate plans all habuk, tarak api punya. I don't like many stocks now as I think markets do look tired, but if you point a gun to my head to force me to buy one stock to hold till rest of they year, I would probably say E&O.


p/s photos: Elanne Kong & Janice Man

China's Lending Explosion

Is there anything wrong with China's lending spree. The central bank basically "advised" banks to ratchet up their lending, and the banks followed dutifully for the past couple of quarters with amazing results.

First of all, you cannot suddenly find so many attractive "borrowers" to lend aggressively to. Secondly, not many will say no when you offer to lend them money.

To be fair, this strategy pulled the domestic economy from falling further along with the ill effects of a global economy in crisis, but at what price. As I have mentioned before, this has to play itself out, and will not result in a sudden correction in property or stock prices in China. The liquidity rush will soon find its way into higher equity prices in China (hence bullish for the rest of the year for Chinese equity), and some may trickle back into Chinese property mart as well. Brace for high default rates when the music stops, probably after Chinese New Year in 2010.

China’s new lending more than doubled in June from a month earlier, increasing concerns bad loans and asset bubbles will emerge amid a credit boom.

New lending was 1.53 trillion yuan ($224 billion), the central bank said on its Web site today, bringing total lending this year to 7.4 trillion yuan. The calculation for new loans is preliminary, the central bank added.

The government is countering an export collapse by flooding the economy with money to fuel domestic demand. Rapid credit growth poses a risk to the nation’s lenders and a concentration of credit in some industries and businesses may damage the stability of the financial system, the banking regulator said yesterday.

Excess liquidity is fueling speculation and that means asset bubbles and wasteful investment. Already China recently failed to complete a $4.1bn auction of one-year government bonds, which suggested that investors are positioning for higher inflation caused by the credit surge.

Just something more to chew on, in 2005 Ernst & Young published a survey estimating that the bad loans in the Chinese banking system equaled close to $900 billion. Since then there has been enormous speculation in both the stock and real estate market. The average urban residential property prices fell by 15 to 30 per cent over the next two years from their levels at the end of 2008. Of course, by the end of 2008 they had already fallen from there 2007 highs. You cannot have real estate fall that much without having bad loans. Here is the juicy part, according to the prospectus for the Commercial Bank of China, it is illegal in China to foreclose on residential property.So what are bad loans? Bad loans = immediate write downs? No, they are then carried as what??? ... long term assets??? The reality is that no one knows exactly how bad the situation is in any bank. Information has value and is not disclosed unless required by law or for consideration. Since the banks in China are owned by the state, there is no legal requirement.


Something's gotta give ... but let's have a bull run first...

p/s photos: Elanne Kong Yuk Lam

Economic Indicators On The Up - Fears Overblown

The Bank of Japan on Tuesday upgraded its assessment of the economy for the second straight month, encouraged by signs that the worst of the economic downturn may be over. The BOJ board also voted unanimously to keep the unsecured overnight call loan rate unchanged at 0.10% while it gauges the effectiveness of previous measures. The board last lowered the policy interest rate in December by 20 basis points.

Following its May meeting, when the BOJ raised its economic assessment for the first time since July 2006, the central bank confirmed Tuesday that the economy has continued moving toward recovery over the past month.

"Japan's economic conditions, after deteriorating significantly, have begun to stop worsening," the central bank said in a statement released together with the rate decision.

In May, the BOJ said "exports and production are beginning to level out," though economic conditions have been deteriorating. Still, economic upgrades alone don't necessarily mean the bank will change its easy monetary policy anytime soon, as economic conditions remain on the weaker side. Market participants are waiting for a news conference by BOJ Governor Masaaki Shirakawa for more details on the bank's outlook and whether or not its policy stance may change down the road.

WASHINGTON -- Home construction climbed in May far above expectations, with single-family starts rising a third month in a row and giving more evidence of stability in the housing sector.

Separately, U.S. producer prices posted their largest annual decline in 60 years last month, suggesting that the prolonged recession continues to take pressure off inflation.

Housing starts increased 17.2% to a seasonally adjusted 532,000 annual rate compared to the prior month, the Commerce Department said Tuesday. Building permits rose; apartment construction surged. The 17.2% increase was much bigger than expected. Economists surveyed by Dow Jones Newswires forecast a 7.0% increase to an annual rate of 490,000.

Toll Brothers Inc. recently reported its fiscal second-quarter loss narrowed a little. The nation's largest builder of luxury homes posted a loss of $83.2 million, compared with a year-earlier loss of $93.7 million. It recorded smaller write-downs. The company operates in 21 states and last reported a profit nearly two years ago. Toll Brothers said it expects to deliver between 2,200 and 2,800 homes during the year, compared with an earlier, March view of 2,000 to 3,000 homes.

Tuesday's report on housing showed building permits in May increased 4.0% to a 518,000 annual rate. Economists had expected permits to rise by 2.4% to a rate of 510,000. April permits fell 2.5% to 498,000. But the problems of the housing sector are not over. Inventories are way too high, in relation to new-home sales, a key measure indicates. The ratio of those for sale to property sold in April exceeded 10 months.

Layoffs and tight credit are holding back sales. And mortgage rates have started rising, pushed by rising government bond yields. Investors are concerned about inflation because of increased spending in Washington meant to pull the economy out of recession. Freddie Mac data showed the average on a 30-year mortgage loan was 5.59% last week -- 73 basis points higher than the average four weeks earlier of 4.86%, an advance that could hurt demand for houses.

A report Monday indicated builder confidence faltered in June, after going up two straight months. The National Association of Home Builders index on builder confidence in sales of new, single-family houses fell to 15 from 16 in May. "The issues in the housing market are going to take some time to play out and won't reverse nearly as soon as some would like," Dan Greenhaus, a bond market analyst at Miller, Tabak & Co. in New York, said in reaction to the NAHB report.

Tuesday's data said starts in April dropped by 12.9% to 454,000; originally, Commerce reported April starts fell 12.8% to 458,000. Year over year, housing starts were 45.2% lower than the pace of construction in May 2008. Single-family starts climbed 7.5% to 401,000, after rising 3.3% in April and 1.1% during March. Construction of housing with two or more units jumped 61.7% to 131,000; within that category, groundbreakings of homes with five or more units -- or multifamily -- were 77.1% higher. Regionally, housing starts climbed 16.8% in the South, 2.0% in the Northeast, 11.1% in the Midwest, and 28.6% in the West. Nationwide, an estimated 51,200 houses were actually started in May, based on figures not seasonally adjusted. An estimated 48,100 building permits were issued last month, also based on unadjusted figures.

German economic expectations in June rose to 44.8 from 31.1 a month earlier and experts predict a recovery will start by year-end, the Center for European Economic Research said Tuesday. It was the highest reading since May 2006. Economists in a Dow Jones Newswires consensus forecast had expected a reading of 37.0. The center, also known as ZEW, after its German initials, said the increase showed that economic optimism is becoming entrenched.

"The assessment of the experts indicates that the economic downturn dynamics are currently coming to rest. They further see tendencies for a recovery at the end of this year," said the president of ZEW, Wolfgang Franz, who also heads the council of economic advisers to the government.

Survey participants also revised their assessments of the current situation, which in June rose to -89.7 from -92.8 the month earlier, the center said.

"What we see now for the first time (in a while) is that also the assessment of the current situation is improving," said ZEW economist Peter Westerheide.

In tandem with the economy, many of the 271 survey respondents expect inflation to return. Prices in Germany were mostly unchanged last month on an annual basis, official data showed recently. "A deflation scenario is not really on the horizon," as of now, Mr. Westerheide said. "Just a small minority of respondents" sees further downside price pressures, he added.

The experts also expect the European Central Bank, which sets interest rates for the 16 countries using the euro, to hold its policy rate steady at 1% over the next six months. ZEW's survey also showed that expectations rose across a number of industrial sectors. The more optimistic assessment was most prevalent in banking and investment products, Mr. Westerheide said.

WASHINGTON - The U.S. economy is healing faster than anticipated but still at an anemic pace that's unlikely to soon produce either jobs or inflation, according to the International Monetary Fund. In its annual review of the U.S., the IMF forecast that the U.S. economy would contract by 2.5% this year, compared with the 2.8% decline the IMF predicted in April. For 2010, the IMF forecasts the U.S. will grow 0.75%, rather than the zero growth it predicted two months ago.

The IMF said the U.S. was benefiting from monetary and fiscal stimulus, and from some improved stability in the financial markets. The tepid growth rate was likely to keep inflation in check in the short term, with the consumer price index expected to decrease 0.5% in 2009 and increase 1% next year, the IMF forecast.

John Lipsky, the IMF's deputy managing director, interpreted the recent increase in Treasury bond yields as a positive sign. He said the rise reflected "the effectiveness of policy in reducing fears of really serious negative outcomes," and an increased willingness of investors to search out riskier investments.

Longer term, the IMF said, the U.S. needed to "develop and communicate" a strategy for withdrawing monetary stimulus and fiscal stimulus. Otherwise, such stimulus "may stoke concerns about inflation and rising debt, exerting upward pressure on interest rates."

But the IMF advised the U.S. to start cutting back only after a "sustainable recovery is under way." The IMF didn't expect that to occur shortly.

Mr. Lipsky said the IMF didn't expect U.S. unemployment to stop rising until the second half of 2010, even if the U.S. economy grows somewhat before then. The IMF also warned that U.S. debt may rise to 75% of gross domestic product by 2011, nearly twice what it was in 2008 -- and higher than the 70% of GDP forecast by the White House.

"Looking forward, such a rise in debt may put significant pressure on Treasury bond rates," the IMF said.

Calling the administration's economic assumptions "relatively optimistic," the IMF said the U.S. needed to cut spending or boost revenue by an additional 3.5% of GDP through 2019 to keep to the debt levels sought by the White House -- 70% of GDP in 2019.

The IMF laid out a number of possibilities for boosting revenues, including reducing the deductibility of interest on corporate debt and on household mortgages, and raising energy taxes. Any one of those proposals would be a tough political sell in Congress. The U.S. Treasury, in a statement Monday, said the analysis reflected the IMF's "independent judgment" of the U.S. economy, and that the U.S. supported its public release. The statement didn't comment on the specifics of the analysis by the IMF.

p/s photo: Elanne Kong Yuk Lam

The "Kong Luoi" Debate - HK Girls

Over the past year there have been a huge backlash and debate on the Internet and even mainstream media on the unacceptable attitudes of some HK girls. Girls who fit the description are called "Kong Luoi" (short for HK girls but with a derogatory sideswipe at them). Its a generalisation and not all girls will have all the attributes, but you will recognise them immediately.

"Kong Luoi" (KLs) phenomenon was started as the 63.8 incident. What started as a first date went horribly wrong when the couple went into a store, and the girl bought some stuff and it came to HK$63.80. The girl expected the guy to pay but he did not and she ended up paying HK$63.80. That was not the end of it. The girl recorded a video and uploaded it on You Tube ranting and bitching what an asshole and cheap the guy was for not offering to pay HK$63.80. Her berating video pissed a lot of guys off and started the HK guys compiling things that they find unattractive in certain HK girls.

Some of the common traits:
1) "ying fun" - girls who think that they are doing guys a favour by allowing the guys to date them, hence the guys should appreciate the opportunity, thus do not expect them to go dutch or pay for anything during the date. "ying fun" = deserved to be treated well. Did you know that the trend is for girls to never even bringing their wallets with them when they go on dates.

2) "ying koi" - girls who think that it is manners and politeness for the guys to foot everything on a date just because they are girls. Very close in meaning to "ying fun" but has an element of "should have" - i.e. guys should do those things without having the need to be even discussed.

3) "tiu tik" the girls are great critics on what the guys have, what he does not have, how he carries himself, whether he is a good conversationalist, not good looking enough if they don't like anywhere close to Andy Lau, making a summation of his prospects as a future boyfriend and provider by just looking at appearance, making a minor thing into a big character flaw, etc... thus relegating all guys as also-rans.

4) "hau but thoui sum" what she says never ties in with what she really wants. Ask her what she wants to have for dinner, she will say "Mow sor wai, see tharn le" (I don't mind, anything will do), but when you suggest Japanese, she will say too much raw stuff, you suggest Indian, she will claim its too spicy, you suggest Cantonese, she will say its too oily.. and still say "kei sart, ngor mow sor wai ke, mutt yeah thou tak" (Actually, I am quite easy, whatever is OK)... you suggests steamboat, she will say it is heaty and make her have pimples ... naturally for these kind of girls, I will tell them, "lei sick chee kei le" (Go eat yourself bitch!).

5) control - she always want to be in control of the relationship, once you move from dating to a steady relationship, one of the first question she will ask is if you would mind to give her all your pay for her to manage the finances when they get married. I think its only ok in Korea and Japan, but to even entertain such a question to me shows a complete wanting of control and to see how "far they can manipulate the guy to her liking". "Kong Luoi" justifies the line of questioning as that would allow them to see how much the guy sees them as a partnership and how much he trusts her. In my words, Bullshit Baby!!! Its a control issue.

6) KLs have a very strong penchant for branded goods and wouldn't want to be caught dead with last year's bags or shoes. They are never slim enough, even though guys keep telling them they are skinny enough. Its not enough for the guys to say so, its their fellow girlfriends that have to say that they are skinny enough, and baby, girlfriends will never ever say their fellow girlfriends are skinny enough. You are in a dead end cycle.

7) KLs are hard to court even though they do not come with great credentials. The usual 5Cs (car, cash, career, credit card, condo) as so basic that many girls would never ever consider going out with someone without at least 3Cs.

8) places too much importance on outward appearances. Ever wondered why there are so many slimming clinics in HK, and also skin whitening, tummy firming, breast firming, blemish reduction laser therapy, cellulite therapy, cosmetic plastic surgery to have double eyelids, botox... The girls will claim that a large part of why they are doing this is for the guys. Eeerrr, bullshit again, maybe so if the guy is very shallow, all these things to make up for outward inadequacies stem from a dire lack of self confidence and self belief, and that is one big character flaw in KLs. It has a lot to do with the culture and upbringing values instilled, either deliberately or unconsciously.

9) expect presents and celebrations with presents on these following days: her birthday, anniversary of the mundane kind, Christmas, Valentine's Day, some even chocolates during Easter, even New Year... and

In my view, its not just in HK but in many places as well. Its an equality issue whereby many females now can earn a good living and can dictate their own lives better. Before, girls grow up to be married off and thats that. However, with the desired equality status, in relationships, many still hang onto traditional roles of males and females. But the demands on those roles are so very different now. Everyone must come into a relationship knowing full well what each other's expectations are, if not they will never be met.

In HK, there is this quite silly phrase which sums up why girls in HK are generally very spoiled ("chung whai saei"). The phrase is "low pour hai lor farn lei sack" ( the reason to have a wife is to make sure she is well taken care of and loved). There does not seem to be much wrong with that phrase except when you think about it, its a passive thing for women, and it appears to be their divine right. My quibble is if I get married, am I marrying a loving partner or a passive piece of art for me to dust and vacuum and wipe. To take care as in taking up responsibility as a man of the house, yes, that I totally agree. Hope the nuances there is cleared up.

There is a limit to what is due care and concern by the guy, and what is absolutely reprehensible behaviour. Go to HK and you will see many guys carrying ladies purses and hand bags walking with their girlfriends on dates. I am ok, in fact I think its proper to carry the purses and hand bags if they have to go to toilets or have to go and try out some clothes when out shopping. But to have the guy carrying the stuff walking all over town, is demeaning. If a guy wants to carry a handbag, he should go and buy one himself. Its not a show of how much love and concern a guy shows the girl, its for the girl to show to everyone how much control she has of him. Why not make him wear a dress as well? Thats the crux, to the KLs, its always "if you love me, you will do it" mantra, always having to prove and reprove their affections.. "if you love me, you will buy it for me"... worse "if you love me, you will buy it for me without me having to tell you"... GAWD!!!

At the end, they morph into what I like to call "high maintenance" (HM) women. HM women are not just those who require a certain monetary sum to maintain their lifestyle. To me, HM women are HM because of how their minds torture you and in turn torture themselves. I will give you a classic HM woman, the wife will ask the husband just before they go to sleep "why did you give your 2nd uncle 3 boxes of mooncakes, but you gave my brother only 2 boxes"... that my friend, is HM!!!


p/s photos: Mandy Lieu & Elanne Kong

Fallen Idols

If you have been losing money over the past 12 months, fear not, you are in good company. People getting paid huge six figures have been performing just as badly, if not worse. This has been Wall Street's year of the fallen idols.

WSJ: Marty Whitman, the legendary septuagenarian who co-manages Third Avenue Value, has seen crises come and go. There are few you could trust more in a panic. But his fund has almost halved this year. Bill Miller, the famous manager at Legg Mason Value, has fallen by nearly 60%. And that's not even the worst of it. Miller's more flexible, go-anywhere fund, Legg Mason Opportunity Trust, is down by two-thirds since the start of the year.

Ron Muhlenkamp at Muhlenkamp, Wally Weitz at Hickory, Manu Daftary at Quaker Strategic Growth, Richie Freeman at Legg Mason Partners Aggressive Growth, Ken Heebner at CGM Focus, Christopher Davis and Kenneth Feinberg at Davis New York Venture Fund, Will Danoff at Fidelity Contrafund, Saul Pannell at Hartford Capital Appreciation: They've all lost about 40% or more. Some have nearly halved.

It is a shocking bloodbath. These are managers with some of the highest reputations on Wall Street. They have beaten the Street over many years, even decades. And even they got shellacked. What chance did you have?

Even most of those who anticipated a crash got pummeled. Bob Rodriguez at FPA Capital has been very bearish for years, and was holding large amounts of cash in the fund. But he's still down 36%.

The picture for Warren Buffett looks somewhat better, although he swung from $3 billion investment profits to $1.4 billion losses in the first nine months of the year, while net earnings more than halved. Shares in Berkshire Hathaway have fallen about 31% since Jan. 1.

Those who look good include John Hussman at Hussman Strategic Total Return, who is down just a few percent. And Jeremy Grantham at GMO, who predicted much of the meltdown. His GMO Benchmark-Free Allocation Fund, an institutional fund that has a pretty free rein on what to hold and what to avoid, has still lost 11% so far this year.

There are three long-term lessons here for ordinary investors.

The first is that if the smartest and best fund managers can't successfully anticipate a crash with any degree of confidence, you can't either. Time spent trying is time wasted.

The smart money rarely spends much time very bearish, and with good reason. In practice it is almost impossible to predict a crash. And even if you are right about the direction, you will probably get the timing wrong. That may end up compounding your losses instead of preventing them. John Hussman is among very few who have gotten this one right. I know at least two superstar managers who correctly anticipated a blow out, and moved heavily into cash… in the fall of 2006, a year too soon. Markets soared instead.

I also know of at least one portfolio manager who's been predicting the U.S. credit implosion for at least seven years. Prudent Bear has been betting on falling shares (and rising gold) for a long time. It's finally getting its reward: It's up about 37% so far this year. But investors actually lost money between 2003 and the end of 2007, while the rest of Wall Street rose 70%.

And remember that investing is a long-term game. This has been the worst financial bloodbath since 1929. Yet Ken Heebner (p/s: to me he is much better than Warren Buffett) is still up more than fivefold over the past ten years, even after factoring in this year's carnage. Mr. Daftary has more than doubled investor's money. Many others are up 50% or more over that time.

The best an investor can do is to look for value, prefer unfashionable assets over fashionable ones, and avoid chasing past performance.

As previously observed here, everything has now fallen. Inflation-protected government bonds. Munis. Gold stocks. The whole shebang. Eighteen months ago, every single asset class was expensive. Today it's possible that almost every single asset class – with the possible exception of regular Treasurys - is cheap.

p/s photos: Elanne Kong