How To Work Inefficiently & Waste Resources

I don't know whether to laugh or cry ... yes, its over the proposed introduction of the new petrol scheme. We are supposed to show or scan our MyKad before we pump.

1) That is assuming the car is in our name - what if the hubby is driving the wife's car; or the maid is driving the car to buy groceries; of the grandfather is driving to pick up the grand kids??? So many people are driving somebody else's car - that is a big obstacle.

2) A person may have a few cars registered to his/her name (maybe a Kancil, a Camry and a Land Rover) - hence after scanning, somebody will still have to go and check which bloody car he/she is driving this time, very convenient I am sure for the kiosk attendants.

3) Then there is the need to have different pumps for different prices. Can you imagine the difficulty - now we have normal and premium unleaded, basically instead of 2 pumps, we will need 4 pumps for the pricing. Let's throw in the diesel as well, which means we will have less options for the same number of cars. It will create even more traffic jams and confusion at the kiosks as cars need to queue at the right pumps, etc.

4) For all the monitoring, the kiosks will probably have to hire at least one or two dedicated "verification attendant" - extra cost.

You just want to penalise high CCs car drivers. It is so simple. Just add 25% annual road tax on cars above 2,000cc, add 35% on cars above 3,000cc, and add 50% road tax on cars above 4,000cc - sooooooooo simple. At the same time, you can even drop the annual road tax for cars 1,500 -2,000 cc by 20%, and even smaller cars below 1,500cc by 30%.

As for foreign cars with foreign number plates, just whack a 50% surcharge on their petrol bills every time they pump. Petrol kiosks detected for failing to do so will be fined RM10,000 for first offence and RM100,000 for repeated offence, and/or license to operate be taken from them.

Save on the scanning, leakages, waste of resources, etc... unless of course some company has been marketing the new scanning system to be used for all petrol kiosks??!!


p/s photos: Kristy Yeung

The Million Dollar Question .....

It had to happen, and it did when Mr. Ooi asked the question that everyone in the financial markets industry dreaded.


Ooi Beng Hooi has left a new comment on your post "Buy Side Vs Sell Side Analysts":

I fail to understand why the calls made by various analysts are so different.

For example, after released of Public Bank quarterly result, some of the calls made by various analysts:

CIMB: Outperform, target price RM 11.10
AMResearch: Buy, target price RM 10.00
Inter-Pacific: Outperform, target price RM 9.75
Kenanga Research: Buy, target price RM 9.30
OSK: Buy, target price RM 8.60
Mayban Investment Bank: Sell, target price RM 7.60
Credit Suisse: Underperform, target price RM 7.50
UOB KayHian: Hold, target price RM 6.88
Citigroup: Sell, target price RM 5.77

Some have "BUY" calls, some have opposite calls and one have neutral position.

Even though Public Bank is considered a transparent listed company with high disclosure of corporate information compared to others, I am a bit surprised to see such wide range of target price, with the highest one almost double the lowest target price.

How can they be so different?

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Financial markets are like economics, its a lot of bullshitting and a small amount of substance. You put 10 economists in a room to come out with a paper on why and how the current global crisis came about, you will probably get a few people killed and still no conclusion at the end of a week.

Put the same issue to a group of scientists, and they will explore the various theories and categorise them accordingly. They will then set up the various testing hypotheses, hopefully they can result in some for of data, hopefully then they can regress the data into some for of equation, hopefully once they have the equation then they can draw a fucking line on a chart, and make the conclusions from the fucking chart. Gawd save them if they cannot get solid data, gawd help them if the data is all over the place, gawd save them if they can cluster the data into a regressed equation, no equation = no formula = no result, no no equation cannot draw line on chart = fucking hopeless study = watse of time.

The difference is if you give financial markets issues to a group of scientists, they will throw their papers and binders in the air after a few months and conclude that the "truth" is nowhere to be found, that you cannot conclusively determine anything from an empirical type of study or testing. Still, the economists, analysts and experts will continue shouting their views and opinions to each other - because in bull shitting you do not need substance, evidence or credibility.

Put 10 analysts in a room to analyse Public Bank, thats what you get. Its a hopeless profession that happens to pay well. Never has so much pay been given to so many for so little contribution!!! Parents now don't want their children to be doctors or lawyers... go be an analyst or fund manager and make 5x times more than the smartest kid who went to study medicine.

Analysts' views will almost always be different because their assumptions are not the same. Some may assume a NPL of 6% over the next 12 months, some just 4% while others may see it at 11%, and that will work its way into your earnings model and risk assumptions. There are many other important assumptions that one has to make in order to do projections: it could be growth, margins compression, staffing cost, local interest rates in 6 months time, in 18 months time, ..etc.

Then you have to make the more important arguments, which are more 'philosophical' and big picture: has Public Bank gone past the "easy growth" era; can Public Bank translate the "winning strategy" in other countries; what will happen after Teh Hiong Piau; are foreign funds holding too much of Public Bank (which means they can only be selling in the future, not buying more); etc...

I have mentioned this time and time again, look for consistency of results in the analysts and house strategy. Follow those who have argued well in the past, look for those who are focused on the more important factors correctly. And... always try to get hold of the extremes, in this case get a hold of: CIMB's which has a new outrageous TP of RM14.10, OSK's which has a TP of RM11.00 and the Citigroup sell which has the TP at RM5.77, and the UOB Kay Hian TP of RM6.88.

They all are different because they have chosen on different ways of interpreting what is good value, what is fair value, and which prevailing FACTORS will be dominating the share price going forward. OSK has held on to the notion that PB's strong loans and deposit growth and superior asset quality will be the focal points for the stock, thus allowing PB's to retain its premium rating and performance.

CIMB's outrageous TP basically affirms that no matter what the management is solid enough to counter and withstand any succession issues. CIMB thinks that earnings growth momentum will remain strong, supported by PB' superior ROE in the 20s, greater contribution from China and new avenue in bancassurance.

Maybank Investment has since upgraded the TP from RM7.60 to RM9.00, but still lagging the rest. They are negative because they see valuations having run ahead of fundamentals. They think that long term ROEs will be in the 15%-18% range rather than the 20s as was predicted by CIMB. The team also felt that beyond the present market rally, the economic recovery remains hazy.

If you ask me, I think CIMB is too fuzzy and trigger happy, all caught up with the partying mode. PB's current valuations have run way ahead. I am not seeing much upside at all, in fact I see it settling between RM8.50-RM10.50 for the next 12 months. The valuations and impressions I get is that it has "no room" for disappointment. It trades at a ridiculously high 80% premium in proice-to-book valuations against its peers - whether justified or not, it clearly show very little upside, unless you think it will trade at 120% premiums??!! My final say on PB, is that its not a stock you want to be holding in a market rally!!! Its a stock you want to be holding in a flat or negative market, its a fucking defensive stock.

So, Mr. Ooi, hope that clears it up a bit, not a defence by any means but hey... we have to remember that accounting is a modern day creation, so too is a stock market, we did not have both 150 years ago (I think). When its a man made thing (and not a natural science like physiscs or biology), it is very very hard to nail down what is the truth at any point in time. It becomes who can bullshit better.


p/s photos: Kristy Yeung Kung Yu

Latest US Economic Outlook By Roubini

July 16, 2009

STATEMENT ON U.S. ECONOMIC OUTLOOK BY DR. NOURIEL ROUBINI


The following is a statement from Dr. Nouriel Roubini, Chairman of RGE Monitor and Professor, New York University, Stern School of Business:


“It has been widely reported today that I have stated that the recession will be over “this year” and that I have “improved” my economic outlook. Despite those reports - however – my views expressed today are no different than the views I have expressed previously. If anything my views were taken out of context.

“I have said on numerous occasions that the recession would last roughly 24 months. Therefore, we are 19 months into that recession. If as I predicted the recession is over by year end, it will have lasted 24 months with a recovery only beginning in 2010. Simply put I am not forecasting economic growth before year's end.

“Indeed, last year I argued that this will be a long and deep and protracted U-shaped recession that would last 24 months. Meanwhile, the consensus argued that this would be a short and shallow V-shaped 8 months long recession (like those in 1990-91 and 2001). That debate is over today as we are in the 19^th month of a severe recession; so the V is out of the window and we are in a deep U-shaped recession. If that recession were to be over by year end – as I have consistently predicted – it would have lasted 24 months and thus been three times longer than the previous two and five times deeper – in terms of cumulative GDP contraction – than the previous two. So, there is nothing new in my remarks today about the recession being over at the end of this year.

“I have also consistently argued – including in my remarks today - that while the consensus predicts that the US economy will go back close to potential growth by next year, I see instead a shallow, below-par and below-trend recovery where growth will average about 1% in the next couple of years when potential is probably closer to 2.75%.

“I have also consistently argued that there is a risk of a double-dip W-shaped recession toward the end of 2010, as a tough policy dilemma will emerge next year: on one side, early exit from monetary and fiscal easing would tip the economy into a new recession as the recovery is anemic and deflationary pressures are dominant. On the other side, maintaining large budget deficits and continued monetization of such deficits would eventually increase long term interest rates (because of concerns about medium term fiscal sustainability and because of an increase in expected inflation) and thus would lead to a crowding out of private demand.

“While the recession will be over by the end of the year the recovery will be weak given the debt overhang in the household sector, the financial system and the corporate sector; and now there is also a massive re-leveraging of the public sector with unsustainable fiscal deficits and public debt accumulation.

“Also, as I fleshed out in detail in recent remarks the labor markets is still very weak: I predict a peak unemployment rate of close to 11% in 2010. Such large unemployment rate will have negative effects on labor income and consumption growth; will postpone the bottoming out of the housing sector; will lead to larger defaults and losses on bank loans (residential and commercial mortgages, credit cards, auto loans, leveraged loans); will increase the size of the budget deficit (even before any additional stimulus is implemented); and will increase protectionist pressures.

“So, yes there is light at the end of the tunnel for the US and the global economy; but as I have consistently argued the recession will continue through the end of the year, and the recovery will be weak and at risk of a double dip, as the challenge of getting right the timing and size of the exit strategy for monetary and fiscal policy easing will be daunting.


p/s photos: Kristy Yeung Kung Yu