Various Investing Methods

After the seminar, someone said that maybe what Koon Yew Yin said about investments and what I said about investing do not quite gel with what Glen Arnold had been talking the whole time.



Well, the seminar was about the gurus of investing, what they did and why they did what they did. Koon Yew Yin shared how he make his investing decisions. They may not be an exact replica of most of the investment methods of the guru but the essence of it remains.


I don't think Mr. Koon or I must follow these methods exactly. We learn from experienced teachers, we take what we think its suitable for ourselves. We may be wrong, so can the gurus. Who is to day Mr. Koon or I may not be able to generate even greater returns than the gurus?


If we were to follow the Fischer or Buffett methods religiously, we might as well just invest in Berkshire Hathaway, why bother learning. Time tested investment methods are tools we can use to our advantage. I do not see Mr. Koon or myself violating much of the principles touted.



Readers of my blog will know I am more of a value-momentum person. Maybe I should write a book, but I do not intend to be a guru. I just write about what I like. If you want me to follow the Grahams and Fischers to the letter, then read their books or invest in funds that religiously do that.


Mr. Koon and I think that it is a good seminar to get more investors to discuss more about the concepts and investment thinking of gurus. You may choose to take as much of it and apply to your investing decisions, and may need to research a bit more diligently.


Nobody is owing anyone a living here. You want to follow what Mr. Koon and I are buying, fine, you don't want to, fine also. You want to be Malaysia's Warren Buffett, go ahead, its all out there the information and tools you need. Good luck to all.

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New IPOs

Following the Mclean debacle (which is still drifting to neverneverland), we have a slew of IPOs coming through. Funnily, during such a difficult period like May/June, we have these IPOs trying their luck.



UOA Development - Its not a REIT, let's get that clear. I would not look too closely on their assumed dividend yield. Its a mid-sized property developer, and a pretty decent one too. A large part of the weightage is on how successful Bangsar South will be. Some 65% of new projects will be in Bangsar South, and they are planning some RM8bn in new projects, you do the math.

Brand wise, its strong and formidable for a mid sized player. Its a lot better managed than some family owned property developers. IPO price RM2.52, should have been a bit higher.

Its a simple equation really, Klang Valley, strong brand and delivery. RNAV RM3.57. It should not reach RNAV. I think fair value will be between RM3.10-3.20.



XOX - IPO price 80 sen. Its a MVNO, it basically has zilch assets. To me, this is a business model that crumbles easily. Its barriers to entry are flimsy. Its hard to do proper verifcation of subscribers. Its hard to maintain subscribers. Which is to say, subcribers may be easy to grow but there is no certainty that they will be loyal. There is nothing that ties them down. For example, if DIGI comes in with a free 200 minutes for every RM100, there is no safety net for them.

The light may be that of XOX managed to pull in sustainable numbers, Celcom could very well buy them out. Verdict: dodgy. Maybe volatile on day one which may afford some trading opportunities but I wouldn't be holding on anytime soon. 80 sen is a very high price for a 10 sen par services based company with almost zilch hard assets.


NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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US Long Term Outlook Downgraded

U.S. stock indexes fell sharply Monday after Standard & Poor’s revised its long-term outlook on the U.S. to negative from stable. “Because the U.S. has, relative to its ‘AAA’ peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating,” the ratings agency said in a release.

The rating agency effectively gave Washington a two-year deadline to enact meaningful change, just days after House Budget Committee Chairman Paul Ryan and President Barack Obama each outlined their plans for slashing debt. S&P nonetheless kept its best rating, AAA, on the U.S.

Relative to Triple-A-rated peers, the U.S. has very large budget deficits and rising government indebtedness, and the path to addressing those issues is unclear, S&P analysts said.

My View: Well, isn't this common investing knowledge? The very same people who rated those subprime loans as AAA right up to when they collapsed, are now being seen as smart experts? I am not debating whether the ratings agencies are correct, and in this case they are. Surely this should not surprise anyone. To be fair, the US markets have to weaken in sympathy with the news even though everybody knows that to be the case.

To me, it should be seen in a positive light. China and Japan are not going to sell Treasuries, even though as an investment pro they should, but they have a lot more to lose by doing that. The ratings downgrade basically gives the US government a fixed 2 year deadline to come up with something instead of just printing and warbling some more. This will give Obama more ammunition to push through tough policy choices.



The writing was on the wall weeks ago when Bill Gross of Pimco dumped all Treasuries from its portfolio. Mind you, Pimco is the world's largest bond fund as well. Pimco has moved their assets to non-US debt, real estate and commodities.

Next was Loomis Sayles, manager of the $19.9bn bond fund, they have moved from Treasuries to high yield bonds (corporate convertibles more likely to be the case). Black Rock, another mega fund manager, has shifted to shorter term Treasuries. Even Warren Buffett has shifted his portfolio at Berkshire Hathaway, for securities maturing in less than a year from 16% of total portfolio to 23%.

What they are all doing is getting out of most Treasuries, especially the longer dated ones. This is in anticipation of a massive climb in interest rates for longer term Treasuries in the coming months and years. This implies that the US will find few takers the next few times they try to sell their long bonds to raise funds, thus forcing them to hike the interest rates for them to find takers.

That means the US dollar will be on a downtrend for the longest time and will not find takers of US denominated debts unless the interest rates are more appealing. This is also good as it forces them to come to terms with their deficits and reckless quantitative easings.

How will it affect stocks? Well, US stocks will have a kneejerk reaction but not much. The indebtedness is largely on the government side and not from the corporate side. Technically, the dollar will weaken which will be better for most US products and services.

Now, this will have a massive potential effect on the HKD peg. Its pointless to say that almost everyone is in agreement that the HKD is undervalued enormously. If the value of USD drops significantly and persistently over a long period, the HKMA may be able to brush it off. But when US rates start to rise appreciably, thus importing inflation significantly into HK's economy, something's gotta give. The longer HKMA does nothing, the more hot money will pour into HK in anticipation of an appreciation to the peg or free floating it (possibly a 10%-15% increase if they were to float the HKD now, the longer it goes on, the higher the quantum and hence the pressures).

The ratings downgrade will be good for emerging markets, well good in the shorter term (6-12 months), but bad as it will exacerbate the already excessive liquidity in many emerging markets. We should see a continued surge in US funds getting more exposure into non-US securities in the coming weeks and months.



Thankfully, the USD is not as important as it was to most Asian economies as it was maybe 10-20 years ago. More importantly for us, its the Chinese yuan. Thankfully again, most emerging markets are doing more business with each other and not just Europe or the US. Hence the macro calamities in Europe and the US would mean more funds moving to "performing emerging markets". That said, emerging markets will now have to deal more effectively with hot money and excessive liquidity running up assets of all kinds.

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