Archive for February, 2010|Monthly archive page

MU: Green & Gold not Red & White

In Uncategorized on 28/02/2010 at 10:46 am

Guardian reports:

“Instead of the usual bank of red and white, United’s end of the stadium will be green and gold – with 30,000 coloured balloons sent skyward. Thousands of Manchester United fans will also be wearing green-and-gold scarves distributed by the Manchester United Supporters’ Trust (Must). Must is campaigning for the removal of the American Glazer family, which bought the club in a debt-leveraged buyout in 2005. Intended as a symbolic rejection of the Glazer family’s ownership, the green-and-gold theme harks back to Newton Heath, the club founded in 1878 that then became Manchester United in 1902.”

“Football finance expert Keith Harris claims he has £1bn in place to buy out the Glazers, but fans need to boycott matches and merchandise to force the Glazers to sell. “They have to be prepared to take the pain of not watching their club in order to achieve a long-term gain,” he said last week

After today’s Wembley protest, there is even speculation that United fans and those of their arch-rivals Liverpool are considering joining forces against their respective American owners when the two teams meet on 21 March. Liverpool are owned by Americans Tom Hicks and George Gillett – who are felt by fans to have saddled the famous club with soaring debts and interest payments, and failed to deliver on the promise of a bigger ground.”



EPL: Did you know?

In Uncategorized on 28/02/2010 at 5:52 am

What happens when EPL club goes into receivership?

Other than the automatic nine points deduction, this happens.

No more automatic 4th place qualifier

“The Premier League is considering a proposal to introduce a play-off for the fourth Champions League place.

‘The top four currently enter the tournament but the new idea would mean the teams from fourth to seventh playing in a mini-knockout competition.

‘Any change would need the agreement of at least 14 of the 20 top flight clubs, but there will be no changes for three years as the next TV deal is in place.” BBC Online article

EPL in India: MU is favourite team

From BBC Online article:

“In a dimly lit café recently opened by English Premier League Club, Manchester United, in Mumbai, hundreds of fans are crammed in to watch a match.

‘Covered head to toe in red team colours, their passion for the game is abundant.

‘Each win is eagerly cheered and every miss equally jeered. This Indian fan following consider Manchester United their team.

‘Manchester United is India’s most popular English Premier League club with over 17 million fans.

‘There are as many as seven more Manchester United cafes & bars planned to be opened across India by the end of the year.

‘The goal for Manchester United is no doubt to build their brand and boost merchandising sales across the country.

And, because of the growing popularity of football in India, it’s only a matter of time before more European clubs also expand their presence in the region.

‘Liverpool, which recently secured a sponsorship deal with Standard Chartered Bank, has already partnered the opening of a football training camp in Pune.

‘The deal was signed because the bank is looking to leverage Liverpool’s overseas fan base, especially in markets like Asia.

‘And according to agency Total Sports India, the Merseysiders may soon get more deeply involved in the country.

‘But if there are so many football fans out in India, why aren’t they watching Indian football?

‘One Manchester United supporter in the café, who referred to himself only as the Red Devil, tells us: “People watch only English Premier matches.

‘”No one watches local football leagues because it is not telecast and… I don’t know, the players are not that famous.”

‘Another supporter explains: “I just think the exposure is very less, the quality of football is very less.

‘”I think India should shift its focus from cricket to football a little more but right now the media is only behind cricket.”

ESC Report: an innovative way of turning patents into $

In Uncategorized on 27/02/2010 at 5:43 am

“‘Making innovation and R&D a priority, for instance, needs to go beyond pumping investments into research, to commercialise outcomes,” SM was quoted as saying after the latest ESC report called for more R&D spending. Here’s an idea (courtesy of NYT) that S’pore Inc. should think about.

“Nathan Myhrvold wants to shake up the marketplace for ideas. His mission and the activities of the company he heads, Intellectual Ventures, a secretive $5 billion investment firm that has scooped up 30,000 patents, inspire admiration and angst.

‘Admirers of Mr. Myhrvold, the scientist who led Microsoft’s technology development in the 1990s, see an innovator seeking to elevate the economic role and financial rewards for inventors whose patented ideas are often used without compensation by big technology companies … Mr. Myhrvold describes the patent world as a vastly underdeveloped market, starved for private capital and too dependent on federal financing for universities and government agencies [ a “charity model” ], which is mainly aimed at scientific discovery anywayhe foresees patents being valued as a separate asset class, like real estate or securities.”

But then since S’pore likes to work with big- name MNCs there will be a problem.

“His detractors see a cynical operator deploying his bulging patent trove as a powerful bargaining chip, along with the implied threat of costly litigation, to prod high-tech companies to pay him lucrative fees. They call his company “Intellectual Vultures.”… His antagonists, he says, are the “cozy oligarchy” of big technology companies like I.B.M.,Hewlett-Packard and others that typically reach cross-licensing agreements with each other, and then refuse to deal with or acknowledge the work of inventors or smaller companies.”

S-Chips: A warning on the prospectus?

In China on 26/02/2010 at 5:56 am

SIAS presient was reported in Wednesday’s ST as saying, “If ever a China company is listed in S’pore which has got business in China, management in China and money in China — please think 100 times before you put your money into the company.”

This should have been put on the prospectus of all S-Chips. But don’t you think it is too much to ask SGX to make this warning mandatory? It needs new listings, even tiny ones. At a time when there is talk of a billion dollar China co wanting to list here, HK is preparing for a US$20bn listing of AIG’s Asian life insurance operations. It could come as early as April this year.

But maybe responsible IPO managers should include this in bold lettering on the cover of future S-Chips IPOs?  And with the appropriate changes, for any IPO where only the listing is here?

Sino-E’s board are powerless/ SIAS needs to growl louder

In Accounting, China, Corporate governance on 25/02/2010 at 5:31 am

I’ve always wondered why SIAS had been quiet on the lack of news from Sino-E’s board on what was being done to protect the assets and business of the company. I had tot that maybe company had quietly assured SIAS that things were in motion but that publicity could cause problems.

So I was surprised to read in Wednesday’s papers that SIAS had gone public on Tuesday, saying it had asked asked questions since December, but had been ignored. ST also reported that Sino-E had responded in a sense. No wonder it didn’t earlier reply or inform shareholders, the news is not reassuring. Bugger-all has been done other than reconstituting the board and appointing a CEO. Production has ceased, and the cash has not been secured.

Though to be fair, the board is S’pore-based, while business, assets are in a faraway district in a faraway province from Beijing or Shanghai in China.  And the board could could argue that since the shares are still suspended, there was no need to upset shareholders with the bad news.

Let’s hope that SIAS has learnt that a nicely, nicely approach could be taken as a sign of weakness and impotence.  More and louder growls, pls. If nec, howls pls. Wolves are feared: lap dogs and toothless mutts are not.  As MM has said, S’poreans needed to be spurred.

S’pore’s arts strategy: NYT

In Economy on 24/02/2010 at 5:33 am

S’pore’s arts strategy at work  in the context of the ESC recommendations of  “entrenching ourselves deeper into the Asia markets” and “seizing opportunities”.

“The plans for the FreePort [a free-trade zone dedicated to the storage of high-value art and collectibles, is scheduled to open in May. The high-security facility, which is expected to store at least $3 billion worth of assets when complete, could help attract new wealth management services to the region, like art lending. Christie’s Fine Art Storage Services has leased 40 percent of the first phase of FreePort’s storage space] and Art Stage fair come on top of more conventional efforts by the city to develop a vibrant cultural scene. Since 1989, the government has invested more than 1 billion dollars to create such facilities as the Asian Civilizations Museum, a new National Library and the Esplanade Theaters on the Bay, a large performing arts complex. It is planning a National Art Gallery, whose cost is estimated at 300 million dollars, to present the collection of modern Southeast Asian art that the government has been building for years.”

This “dovetails with the Economic Strategies Committee’s suggestion that the government shift away from the growth-at-all-costs model it has pursued, which resulted in average expansion in gross domestic product of 5 percent annually over the past decade but also led to a sharp increase in the number of low-wage foreign laborers, leading to social tensions.

‘The panel recommended that officials refocus on a productivity-growth model and aim for annual G.D.P. growth of 3 percent to 5 percent over the next decade. Productivity, as measured by G.D.P. per worker, has grown at a rate of 1 percent per year in the past decade, and the committee urged the government to set a target of 2 percent to 3 percent a year over the next 10 years.”

NYT article

SingTel: African indirect approach is best

In India, Telecoms, Temasek on 23/02/2010 at 5:19 am

I read a media report that some analysts were querying when it didn’t invest in Africa direct, rather than allow Bharti to buy Zain’s African assets.  My tot,” what weed are these analysts on?”

Well for starters, the Indian govt would not be impressed with SingTel, Temasek and the S’pre govt if SingTel used its32% in Bharti to flow Bhart’s African ambitions which have the Indian govt’s blessing. Remember India thinks it has to counteract China’s grow influence in Africa.

And Bharti wants Africa. It made two attempts to merge with MTN,Africa’s largest telco.

If SingTel tried to use its 32% stake in Bharti to kill Bharti’s African ambitions,  SingTel, Temasek and the S’pore govmin would be the losers, just like us footie fans because the EPL bid has caused FIFA to raise the price of World Cup footie for us.

Then also SingTel’s mgt expertise is in developed couuntries — Little Red Speck and the Lucky Country.  Its ventures in India, Indonesia, Thailand, the Philippines, and Bangladesh: countries which once in trlco terms are like Africa today are thru associates where mgt are in the hands of experienced local mgrs who are not SingTel employees.   Zain is selling out partly because it can’t make serious $ in Africa. Africa generated about 45% of group revenues in the first nine months of last year but only 10% of net profits. Its managerial experience like that of SingTel is in developed telco mkts.

And would straight-laced, conservative SingTel be able (or want to or would we want it) to deal with cowboys in chaos. Example:   The privatisation of Nitel, Nigeria’s former state telecoms monopoly, is in a mess.  The Nigerian government found itself arguing with some of the preferred bidders over whether they had, in fact, bid at all. China Unicom – named as part of the winning consortium – said “it had not started any negotiations with respect to any substantive and legally binding agreements. It said its unlisted parent had not had any direct discussions with parties to the proposed privatisations. It said the European arm had been “in contact with potential bidders” for Nitel but did not name them,” according to the FT. At first, Unicom said it knew nothing of the bid.

Nope better for SingTel to let Bharti do the work. With all its experience, its share price is 11% down since the annc. of the Zain deal.  Clearly there is some concern.

If we don’t get to see the World Cup, SingTel will have a massive PR crisis on its hands in its home mkt. It doesn’t need Africa to add to its woes.

Temasek: the significance of Seatown

In China, Investment banking, Temasek on 22/02/2010 at 3:45 am

Seatown is Temask’s new toy: an absolute return fund. But with a reported US$3 billion available for playing in the pen:in the context of Temasek’s reported US$120 billion in assets, and the world’s biggest hedgies, US$3 billion is”Peanuts,” as Mrs Goh Chok Tong might say. Seatown doesn’t even make it to list of 100 biggest hedgies: the smallest of which manages US$4 billion +

So what is Seatown’s significance?

Since Ho Ching became its CEO, Temasek has done a series of big deals, taking controlling or strategic stakes in high profile companies like Shin, Merrill Lynch, Barclays, ABC Learning, Bank of China, China Construction Bank , Hana, ICICI Bank, NIB Bank, PT Bank Danamon Indonesia, and Standard Chartered.

Some were real dogs, others were good performers, and the balance were average performers.% of those still in its portfolio.

But whatever they were, the size of the investments meant that they could not be done discreetly. When things went badly, S’poreans knew, and knew whom they blamed.

It could be that Temasek will slow down Buffett-size deals, using Seatown to do lots of smallish deals that will not appear on the radar, and depending on rapid turnover (i.e trading) to make $. And if Seatown comes a cropper, US$3 billion is a rounding error. But if it does well, financial engineering will magnify its returns: supposing if Temasek funds Seatown from the proceeds of its recent bond issues, the cost of the capital could be “peanuts”, leading to great returns when calculated using the cost of these bonds. Or so I’ve been advised by the same people who tell me that SingTel should have taken an impairment charge (at least A$3 billion) for Optus and SIA for Virgin Atlantic (sum unknown but sure to be in billions whether in US$ or sterling).  And no they are not members of SDP, they are accountants’ accountants.

Moral of the story: don’t do a Buffett, unless you got a brain to match. Scholars, SAF generals, or FTs from top biz schools do not a Buffett make.

Maybe Temasek thinks that a Soros or John Paulson can appear from one of these  scholars, SAF generals, or FTs from top biz schools, though based on the exit from BoA (that bought ML), “Dream on baby”. John Paulson was buying as Temasek was selling.

And maybe the Chinese can teach Singapore Inc something. FT reports: “China Investment Corp, Beijing’s sovereign wealth fund, has agreed to invest $1.5bn in the private equity secondary market through custom accounts with three of the biggest specialists in buying second-hand buy-out and venture capital fund interests.

‘Lexington Partners, Goldman Sachs and Pantheon Ventures have each agreed to manage $500m for CIC through special accounts, which are to be kept separate from their main funds … The move is the biggest injection of capital into the secondary market.”

“It underlines how CIC is using its size to win special terms from private equity groups, including lower fees and transfer of knowledge on specialist markets … The era of big public pension funds and sovereign wealth funds accepting the same terms as smaller investors is over,” David Rubenstein, founder of the Carlyle Group, said.”

Outsource to the best, using wagga to get good terms.

But then the S’pore govmin is as mercantilist as the French.

Sino-Environment: Still waiting for reassurance or bad news

In China, Corporate governance on 21/02/2010 at 6:02 am

Just before CNY, Sino-Environment annced that one of the directors had become CEO.

Well and gd that co has a CEO.

But if I were a Sino-E investor, I still want to know the state of the businesses, whether the assets are still there, and  if the assets are being looked after properly. In short whether the new board is in control on the ground in China.

On this silence.

EPL: Recession, what recession?

In Uncategorized on 20/02/2010 at 6:54 am

“Football is a funny old game, or so the saying goes. But as a business, it is also more than a little eccentric.

‘It is an industry in which the key players generate enormous wealth, yet many continually walk a financial tightrope – and inevitably, some fall off.

‘The English Premier League is one of the richest sporting series in the world. Since its inception in 1992, it has generated ever greater riches for its members.

‘At the heart of the League’s earning power is the sale of TV rights.

‘In the UK alone these are worth £1.8 billion over three years. Overseas TV deals, internet and mobile phone rights add another £1bn.

‘But clubs have many other income streams as well, including sponsorship, ticket revenues and the sale of branded goods. The top teams can also expect to reap substantial rewards from European competitions.

‘What is remarkable is how little those revenue streams have been affected by the economic downturn.”

Full article

Now you know why SingTel had to sabo StarHub to provide us with EPL footie. And why FIFA is demanding the amount it is demanding for World Cup footie.

CapLand: Time to buy?

In China, Property, Temasek on 20/02/2010 at 6:52 am

I read in the media yesterday that Credit Suisse analysts are saying that China’s property stocks, trading at the cheapest level among Asian peers, may be “worth another look”. Today reports that they “have underperformed the MSCI China Index by almost 30 per cent since July and are trading at a 7-per-cent discount relative to the region based on a model that values companies’ net assets and return on equity,” quoting Credit Suisse.

As CapitaLand’s 11% fall from its January highs can be attributed to its mega China deal coming just before China tightened its credit policies; since the US$2.2bn deal giving it seven sites located in Shanghai, Kunshan and Tianjin, takes the group’s Chinese portfolio to 36% of assets from 28%; and since it wants to increase its China exposure to 45% of assets:  Shouldn’t CapitaLand be on the buy list of China- property bulls?

Worried abt inflation?

In Economy on 20/02/2010 at 4:57 am

Now that George Soros is buying more gold, you might like to know that Walmart’s  same-store sales in the United States dropped 2% in the quarter ending in January compared with a year earlier, the company said Thursday. This is largely because of price declines on food items and consumer electronics. Deflation has affected its sales for more than a year.

Inflation may pick up. For example, stimulus efforts are raising the prices of commodities. And Wal-Mart’s customers will eventually have more to spend. But using Walmart as a consumer bellwether, serious inflationary pressure could be further off than the inflation vigilantes are ranting abt. For the short-term, one very impt driver of inflation, consumer spending, has gone AWOL, what with unemployment and US consumers repaying their loans.

Soros: Doubling into a gold bubble

In Uncategorized on 19/02/2010 at 7:11 am

(Update 15 June

And Soros’s bet was not wrong. Gold is the flavour of the month appearing in NYT. Hmm will Soros take profit soon|?

He is buying gold, having called it a bubble a few weeks ago. He is quoted as saying, when he sees a bubble, “I rush out and buy”.

Buffett he is not, but the gods of investing are nothing if not polytheistic. The investment universe would not suit the Rony Tans and Osamas of this world.

Wealth Mgt HQs — giving S’pore miss

In Uncategorized on 19/02/2010 at 5:15 am

One in the eye for S’pore. Not what the ESC report meant when it parroted about “entrenching ourselves deeper into the Asia markets” and “seizing opportunities”.

There are int’l media reports (of course not reported in our MSM) that HSBC and JP Morgan Chase  are planning to relocate their global heads of private banking to HK, that not so well-known wealth mgt centre, though Credit Suisse bases its regional private banking HQ there.  But it is close to China, Taiwan and South Korea, where there are many newly rich people.

Bit strange  that they didn’t come our way. S’pore has Citibank’s top private banking guy here, and UBS has stationed a top Swiss banker here.  And wannabe private bank Standard Chartered bases its global HQ here.  But then Citi and UBS are tainted gds.


HSBC’s and JP Morgan Chase’s private banks, are among the world’s largest.  The former managed assets of US$352 billion as of the end of 2008, according to the company, while the latter managed US$350 million as at Sept last yr according to a Barron’s report.

Casino tots

In Uncategorized on 18/02/2010 at 4:43 am

Sands China and Wynn Macau, with existing cashflows in the largest gaming market in the world, trade below 11x 2010e EV/EBITA forecasts.  Genting, despite the fall from January’s highs, trades at 14X forecasted EV/ EBITA.

Harrah’s is one of the few major US casino companies without a presence in Macau and its chief executive has indicated he would like to open there.  Here’s a way: via buying the 32% stake in Melco Crown Entertainment (traded on Nasdaq) owned by James Packer-controlled Crown. Crown could get an offer for its $US600 million stake —  article from an Oz newspaper, from few weeks back.

The price spiked up then before coming off sharply. But it is spiking up again.  A better punt than the doomed optimism at any gaming table at Sentosa.

And placing yr bets, like the government on the IRs at Sentosa and Marina?There are other gaming places where it is much easier to be anonymous, launder money and obtain credit. If you are wondering why S’pore is being so toffee-nosed abt these things, do remember that among the leading global financial centres, it has two major public casinos. New Yorkers have to go to Atlantic City to gamble, Hongkies and Tokyoites to Macau. And the gaming clubs in London are private ones.

And remember that the IRs are places where you can gamble, not merely resorts you visit in order to gamble.There are plenty of other places around the world where you can spend your tourist dollar in a similar fashion: Las Vegas and Macau and Monaco.

S’pore’s casinos face tough competition.

SingTel: During the hols

In India, Temasek on 17/02/2010 at 5:19 am

After twice failing to merge with MTN, Bharti (32% owned by SingTel) has finally found a way into Africa: by buying the African assets of Zain.

At US$10.7bn in cash, this is not cheap. Zain’s African businesses are expected to earn US$1.3bn this year before interest, tax, depreciation and amortisation; Bharti has offered about eight times that. Vodafone paid a similar multiple for South Africa’s Vodacom.  Eight times EBITA seems to be the norm where telco services are underdeveloped but with potential:  Vivendi paid this multiple for a stake in a Brazilian telco last year.

Why buy? Africa is undeveloped and poor: Bharti knows how to run a low-cost, high-growth business.  More importantly, India’s biggest mobile phone operator needs a new driver for earnings: in India,  it has 11 competitors and price wars.

So why is Zain a seller? The usual reasons that allow a deal to be made

Some of Zain’s shareholders need the money.

The Kuwaiti company cannot make serious wagga in Africa. Africa generated about 45% of group revenues in the first nine months of last year but only 10% of net profits.

Bharti’s shareholders are nervous, with prices falling 9% on Monday, afraid that despite its experience in India, Bharti will fail in Africa.

But for SingTel, it will have via Bharti a presence in Africa: a place with potential for explosive growth.

Even the rich should use index funds

In Financial competency on 16/02/2010 at 6:14 am

Burton G. Malkiel* of “A Random Walk Down Wall Street,” fame has just published “The Elements of Investing” with Charles Ellis, an investment consultant. He argues that wealthy people lose out by chasing the latest, greatest investment: they should be index funds, ” the economy cars of the investing world”.

“His assertion that even the wealthiest investors should use indexes is intriguing” and this article from NYT examines “his main arguments in favor of indexing and the rebuttals from advisers who earn their livings doing the opposite”.

And no, I’ve not forgotten that I promised that I would blog on rebalancing a portfolio that uses index funds.


“Mr. Malkiel, a professor of economics at Princeton University, has long advocated index funds … He has long said that no one can consistently pick winning stocks and bonds. He argues that index funds are the best, low-cost ways to invest money you will need … This is still a strategy that is good for people of all income levels,” he said. “If I took all the mutual funds that existed in the early 1970s and asked the question how many really beat the market through 2009, you can count them on the fingers of one hand.”

Don’t play play

In Uncategorized on 15/02/2010 at 5:13 am

Social gambling is a CNY tradition. But for anything more serious, visit a casino.

And: Don’t treat investing or trading as entertainment in the Year of the Tiger. As John Micklethwait, editor in chief of The Economist argues when speaking at a private equity conference, it’s time for “paranoid optimism” about the economy as the world finds a new balance. The new balances of power were still being defined. And the right dose of paranoia would help members of the private equity industry prepare for possible downturns.

I think his remarks applies to all investors, not juz PE investors.

The fragility of everything

In Uncategorized on 14/02/2010 at 5:21 am

Here’s a  sobering story to chase away the hols revelries of the Lunar New Year, and temper the natural optimism for a better new year.

“But the thing that most impresses me is how quickly a life can go utterly off the rails, spiralling from stability to disaster in only a few years. A bit of bad luck, a couple of bad decisions, and a person such as Mr Shaikh can suddenly lose everything, including his life.” The writer was describing what happened to a British man who was executed by the Chinese authorities for drug trafficking.

Reading this one, can understand how the likes of MM perceive the world: one wrong step (say Opposition wins one more vote) and it’s downhill on the steepest of  a slippery slope.

Sigemund Warburg, another control freak and visionary genius, was described thus: “He walks through life like a character in a Greek tragedy, forever expecting the worst to happen, the last man in the dead centre of a hurricane, continually amazed that he is still alive. The frightful sound of the Erinyes [ancient Greek personifications of Fate] is always in his inner ear — especially when all goes well. That, he feels is the moment when one must watch out for the danger signs. ”

And who are we to say that congenial pessimists like MM and Sigemund Warburg are wrong?

Thirteen years after his death, SG Warburg, the UK merchant bank Sigemund Warburg founded was sold to Swiss Bank for a pittance.  When he was running it, it was the top UK investment bank. It was not as though he had dumb successors, the place was a meritocracy.

The world of finance had changed, and his successors had a run of bad luck when carrying out their chosen strategy. This is not to say that the strategy was right: in hindsight they should have become a boutique, not a full service, investment bank.

The ironical thing is that the rich-kid cousin he looked down on as a dilettante and bum did better than he. Two investment banks connected to the cousin (one he co-founded, one he returned to) are independent, thriving and still retain the Warburg name.

Luck is all.

Innovation — It ain’t juz abt R&D & $

In Uncategorized on 13/02/2010 at 5:14 am

“Making innovation and R&D a priority, for instance, needs to go beyond pumping investments into research, to commercialise outcomes,” SM was quoted as saying after the latest ESC report called for more R&D spending.

The report repeats the wish to raise the total expenditure on R&D across various industries. The view is that the increment in expenditure on R&D should naturally increase the quality of S’pore’s exports,  giving us a reputation (like the Japanese and Germans: the Axis allies in WWII)  for good quality high tech products; and services.

If R&D expenditure goes to 3.5%, as recommended, this will be in line with the expenditures in USA, Japan and Europe.

But as this NYT article by ex-Microsotfer shows, having good R&D and $ to spend doesn’t mean much if the institutional framework or corporate culture, or both, are wrong.

More than a decade ago, Dick Brass’s team in Microsoft worked on a a tablet PC: think iPAD.  It turned out to be a dog with fleas.

He claims that Microsoft’s corporate culture killed the project. At Microsoft, internal competition created a corporate culture where ” big established groups are allowed to prey upon emerging teams, belittle their efforts, compete unfairly against them for resources, and over time hector them out of existence. It’s not an accident that almost all the executives in charge of Microsoft’s music, e-books, phone, online, search and tablet efforts over the past decade have left.”

“Internal competition is common at great companies. It can be wisely encouraged to force ideas to compete. The problem comes when the competition becomes uncontrolled and destructive.”

Another problem, “Timing has also been poor — too soon on Web TV, too late on iPods.”

I would add that Microsoft did not have the institutional check and balances to ensure that its internal corporate culture of competition did not run riot.

UBS: This shld worry us

In GIC on 12/02/2010 at 10:28 am

US hanging tough, playing rough,unwilling to re-enter talks to alter the deal struck with Switzerland to end a damaging tax case against UBS, the U.S. ambassador in Bern was quoted saying in a Swiss Sunday paper.

Other recent postings

The link between Shin and Temask’s new toy

In Uncategorized on 12/02/2010 at 5:43 am

Bloomberg on our investment holding company’s latest venture: an absolute return fund that’s not a hedge fund presumably because it will not have the gearing of a hedgie. S’pore Inc hates  debt despite the recent and expected debt issues.  But then one Buffettt has been borrowing too.

The Temasek executive heading Seatown is the same person who went on sabbatical after the Shin investment went wrong. Remember that mangy dog? He was believed to be the point-man on that deal.  There is absolutely no link between the two events (him going off- the- radar and Shin being a disaster) unless one is a conspiracy theorist or one who practice the art of guessing what is going on behind the scenes: dietrologia in Italian, literally “behindologypoint”. BTW I’m neither.

Global (& Chinese) demand is growing: Time to be bullish?

In Uncategorized on 11/02/2010 at 4:58 am

China said on Wednesday that its exports were up 21% in January from a year earlier, while imports were up 85.5%. This suggests that global demand for Chinese made goods is continuing and Chinese consumers are still spending too.

Time to buy equities until it hurts?

Remember the story about the Chinese emperor who sighed when told things were very, very good. He said things can only get worse after they reached their zenith. Remember the view that markets are priced for perfection i.e. nothing will go wrong?

We know markets have a way of confounding conventional wisdom, don’t we? And the whis-kids, scholars, and ex-SAF generals.

Remember that Temasek exited BOA juz as mkts were turning, cutting its losses at the wrong time. Just at the time, John Paulson, the man who bet big against sub-prime mortgages, was buying BOA and other banks.

UBS: That dog with fleas

In GIC on 10/02/2010 at 3:39 pm

The good news you can read in our MSM.

The bad news, that you may have missed, is that outflows from UBS’s wealth management and Swiss banking operations nearly doubled to SFr33bn compared with the previous quarter, and SFr12bn flowed out from the US wealth business. Like their rival Credit Suisse, and the smaller Swiss private banks, wealth management and Swiss banking operations are at the heart of UBS’s operations and profitability.

The ongoing problems with the US tax authorities are not going to help staunch the outflow in these areas. The US accused UBS of hiding nearly US$15bn in assets of US customers, and is seeking the account details of some of UBS’s US clients.

For what its worth, UBS  said they were confident that the long-running dispute with US tax authorities would be resolved.

Wondering why I blog so much on UBS? Two reasons.

One, is that UBS are a fascinating case study in what can go wrong in a super blue chip. When S’pore Inc bought into Merrill Lynch, Citi and UBS, I had concerns about the investments in the first two.  But UBS? Tot it was a no-brainer, dunk slam investment.

The other is that GIC manage our reserves: this is one major balls-up.

So easy meh?

In Corporate governance on 10/02/2010 at 6:42 am

Catalist-listed furniture and beauty products firm Novena Holdings sold off the last bit of their  furniture business.   Novena said they “will now focus on building a new core business in the offshore and marine sector”, and that they are “exploring strategic options to grow its business via synergetic merger and acquisitions.”

Novena weren’t that successful in the furniture business, nor in beauty products. So what makes the same managers think they can make it in the offshore and marine sector? Or grow “via synergetic merger and acquisitions”.

I’m reminded of what a Hongkie friend said when he heard that the ex-CEO of NTUC Income was trying to get 100,000 people to sign a petition asking the ex-CEO to stand for the presidency, “So easy to be S’pore president meh?”

Why my “obsession” with TLCs in China

In China, Investments, Temasek on 09/02/2010 at 5:12 am

No, I’m not a member or covert supporter of Dr Chee’s SDP, always looking to run-down S’pore.

I try to be a “special situations” investor: looking for situations where the conventional wisdom is wrong. At present, the conventional wisdom on China is “Short-term bear, long-term bull”. So CapitaLand is punished by the market for their US$2.2 billion deal while, the seller, OOIL’s share price is stable in a weak market.

But CapitaLand and DBS already big in China, want to be bigger: and KepLand are rumoured to be thinking of doing a big( S$186 million) property deal. Temasek have big direct investments too. They are big investors in several private equity funds and have big holdings in two Chinese banks: 4% of Bank of China and 6% of China Construction Bank*.

They are going against the consensus view that the least one can do is to be cautious in China.

If the listed TLCs get China right, they could be 20-baggers.  Hence my interest in whether they are right. As for Temasek getting it right, Temasek, as its CEO says, belongs to us S’poreans.


Additional tots — 15 Feb 2010

But what are the odds of them getting it right?

Adam Smith (the economist. not the great US financial commentator of the 80s) wrote, “the chance of gain is by every man more or less overvalued”.

This more or less explains why great investors (defined here to include traders) like Buffett, Soros, Paul Johnson, Jim Rogers, Peter Lynch, Anthony Bolton and the old Kuwait Investment Office are so rare. They are better at judging the odds of getting things right.

And why the smart people in Temasek and GIC make mistakes. They are just like the other ordinary smart people managing money in SWFs, endowments, collective funds, pension funds, insurance companies and other institutional investors.

And why the smart people in CapLand and KepLand could be wrong. They could be like the smart managers in Time Warner that decided to merge Time Warner with AOL, or the managers at Sembcorp when they decided to go into property and Delifrance.


Incidentally, a BBC Online article examines what is driving the  Chinese property market:

Demand for housing

Louis Kuijs, an economist at the World Bank in Beijing, says China still needed more houses, despite several years of fast-paced building, “In a rapidly growing country like China that still has a low stock of housing, there is a fundamental demand for new homes.”

Developers looking for sites

“In Beijing the search is still on for new sites for development.”

People still buying hses as an investment

One man  says he has accepted an offer to relocate. He already has two apartments in Beijing and he is going to use the compensation to buy a third.

Full BBC online article

CapLand (and KeplLand?) could be right abt China.

*’We work really closely with Sasac, the state-owned enterprise regulator in China, and there are literally trillions and trillions of renminbi of frankly defaulting loans already in China that no one is doing anything about,’

Neil McDonald, a Hong Kong-based business restructuring and insolvency partner with Lovells LLP, said at an Asia-Pacific Loan Market Association conference last week. ‘At some point, there’s going to be a reckoning for that.’ — quote from BT.

TLCs in China: Groupthink or Mastermind at work?

In China, Property, Temasek on 08/02/2010 at 5:32 am

“The property investment arm of Morgan Stanley is in final talks to sell a Chinese apartment complex to a unit of Singapore’s Keppel Land … The overall value of the luxury apartment property is estimated at about 900 million yuan (S$186 million) and Morgan Stanley has owned it for about five years,” from a BT report last week.

So KepLand are super bullish on China, just like fellow-TLC CapitaLand.

And DBS is  ranked among the top three foreign banks, in terms of assets (2009 KPMG Research China Banking Industry), said DBS CEO Piyush Gupta. The bank expects to open 12 more branches over the next five years in China, he added. It currently has eight branches and seven sub-branches in eight cities across China.

One wonders if  groupthink is at work in the Temasek group. In addition to the investments of these two property companies, and DBS, Temasek are big in China.  They are big investors in several private equity funds and have big holdings in two Chinese banks: 4% of Bank of China and 6% of China Construction Bank.

Talk of a mega bet on China if all these are aggregated.

Or could there be a mastermind directing that investments be made in China? Temasek and the government have consistently denied that the government direct Temasek’s actions and that Temasek direct the actions of the companies where they have controlling interests.

Still the many S’poreans (I’m not one of them) who are  conspiracy theorists  or who practice the art of guessing what is going on behind the scenes — dietrologia in Italian, literally “behindologypoint” –would say, “They would say that, wouldn’t they?

And point to three pieces of “evidence” that there is a controlling brain that wants to bet big in China.

One is that in the late 1990s, when the government exhorted Singapore cos to go abroad, SingTel and DBS made very expensive acquisitions in Ozland and HK respectively.

Then there is MM Lee’s remark when asked why he intervened in an SIA dispute between its mgt and pilots. He is reported to have said,”We own it,” or words to that effect.

Finally, PM, SM, MM and other cabinet ministers are bullish on China.

USA: Oldies (like MM Lee) are back in fashion

In Uncategorized on 07/02/2010 at 10:45 am

“Youth, flair and intellect can only get you so far. As the worst recession since the 1930s grinds the nation into political disillusionment and economic hardship, America is turning for inspiration to grizzled veterans with a proven store of age, wisdom and experience.”

Paul Volcker, George Soros and Warren Buffett are celebrated in the US today. This Guardian article explains why.

MU: Mgt “clarifies”finances but bond investors are sceptical

In Uncategorized on 07/02/2010 at 5:40 am

The CEO  stressed that United’s debts of £500m are a “misconception” because the club has about £140m in cash available, over half of which was generated by Cristiano Ronaldo’s world record £80m transfer from United to Real Madrid last summer.

And he confirmed manager Sir Alex Ferguson can spend all £80m on new players, should he wish to expand the squad.


Err but how come the price of the junk bonds that MU issued recently have collapsed? Days after they were were issued they fell five percentage points.  Buyers are looking at a loss, if they sell.

Previous posts on MU

On Pool

Want more creativity? Let the Dark Side in

In Uncategorized on 06/02/2010 at 5:54 am

The Economic Strategies Committee report repeats almost parrot-like the call for more creativity. Have the committee  (and the government) wondered why we have problems in this field?

Could it be that we are too santisied a society to be creative? I juz read this NYT article on a Chinese hacker and his environment. If he was in S’pore, he would be in jail, and if the US had its way, the key thrown away. But China is different for all kinds of reasons. Some gd, some bad but in the main because China is a big country.

BTW, I explored the issue of the dark side of creativity in a Today article, a few years back. As a link to the article no longer exists, I’ve reproduced parts of it it below.  Hopefully I’ve not broken any law or contract, and if I’ve done so, I hope MediaCorp don’t take legal action etc. But then if they do, then it proves my point about the dark side of creativity being stifled, neh?


[A]rchitect … William Lim said that we need to have chaos to have creativity. .History is on his side. Throughout history, bursts of creativity occur during turbulent times.

“In Italy, for thirty years under the Borgias, they had warfare, terror, murder, bloodshed — they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, five hundred years of democracy and peace, and what did that produce? The cuckoo clock, ” says the anti-hero in the movie, The Third Man.

In China, there was a flowering of Chinese culture during the Sung Dynasty. It was so weak that it had to acknowledge that its emperors did not have the right to rule China alone. Power was shared with two nomadic dynasties. Then there is Russia after the collapse of communism where fortunes were made by creatively manipulating the system. And China and Taiwan are showing how entrepreneurship and the arts can flourish amid chaos.

This link should not surprise us. Creativity is about the individual using imagination to take advantage of opportunities, and chaos throws up opportunities galore.

Individualism leads to creativity in the arts (Rolling Stones, Doors) and sciences (Watson and Crick, the discoverers of DNA) and entrepreneurship (Bill Gates). But it can also lead to behaviour that the authorities, and decent, law-abiding and moral majority disagrees with. The Rolling Stones and Doors in their younger days took illegal drugs, while Bill Gate’s Microsoft gets sued by governments and competitors regularly.

And an individualistic society has a dark side — people can be less civic minded and responsible. Compare what happened here during the SARS crisis. In Montreal and Taiwan, there were problems in getting people to co-operate, something that Singapore didn’t have.

EDBI replacing Temasek? Is CWT a gd bet?

In EDB, Logistics, Temasek on 05/02/2010 at 5:16 am

(Update on 1 December: See link to November 2010 post at end of article)

Remember last yr when Temasek revised its charter and took out something about “growing our own companies” (my words, not theirs)?

The local MSM, bloggers and various chatter-boxes moaned and wondered who would replace Temasek in its nurturing role?

Well last week, we may have gotten an answer: though based on the silence of the  chatterliterati, they did not know, or care, that their question might have been answered.

EDB Investments (EDBI) took around 2.7% of CWT’s enlarged capital, paying S$12.6 million.

According to a CWT statement, the investment arm of the  Economic Development Board subscribed to 16 million new shares in the company at $0.788 per share. The issue price represented a discount of nearly 10%  to the counter’s weight-average price of $0.875 the previous  Friday.

Net proceeds from the sale would be used to finance CWT’s long-term expansion.

For those not familiar, CWT offers integrated logistics services to commodities and chemical companies, in addition to providing international freight forwarding. It claims to have the largest container yard capacity in Singapore with four container depots.

Now all these activities are activities that the EDB wants to promote here. So you can the fit.

The transport and storage industries account for 9% of Singapore’s GDP (gross domestic product) and employed about 182,000 people in 2008: quite a contribution neh?

And, as BT said “the competitiveness of Singapore’s trading and export-orientated manufacturing industries depends on a strong logistics industry that can offer high value, integrated supply chain services to connect Singapore with the global markets.”

Other good reasons to invest in CWT Read the rest of this entry »

Cutting and pasting — the ESC report

In Economy on 04/02/2010 at 5:38 am

What are the differences between the Economic Strategies Committee (ESC) report, the  February 2003 report by the Economic Review Committee (ERC), and the Economic Committee report in the 1980s?

Well the last two were chaired by one Lee Hsien Loong, the latest was by  Mr Tharman Shanmugaratnam, Minister for Finance.

As Lee went on to become PM, could Tharman be the anointed PM in waiting? Could S’pore finally be ready for a non-Chinese PM, despite the recent influx of PRC people.  Remember the sage of Singapore, one LKY, told us that the present chairman of Temasek would have made a gd PM in the 1990s: the problem was that the Chinese majority was not prepared to have a non-Chinese as PM.

I never thought much of MM’s comments because many S’poreans thought (and still think) that the boss is one LKY.  Anyone else is irrelevant.

Sorry for this aside, back to the reports. What are similar? Same old issues abt productivity, seizing opportunities, lowering costs: you get the picture.  The civil servants  must be glad that in the 80s, there was already software programmes that allowed docs to be cut and paste.

So what shld we conclude?

One way (and a very generous way) of looking at these reports is that these issues will always be with us.  S’pore like the Red Queen in “Through the looking glass”, has to run to keep in the same spot. Life is tough.

Another take is that the governing party are incompetent. They  can’t solve issues that they flagged in the 1980s by 2003 and 2009, despite the chairman of two committees becoming PM. An example is the tinkering with the CPF system, not radical reform.  One could presume (not me) that SM’s comments about execution could be taken to mean that the PAP ministers, and civil service are incompetent.*

Yet another way of looking at the reports is to conclude that the government’s premises for prosperity have to be rethought. In New York city, home of Wall Street and mega-bonuses, housing is subsidised for middle class renters in certain areas. In fact GIC’s recent loss was the result of the courts overturning rent increases.

And below find something on how the most capitalistic country in the world has a socialist model in one of its favourite sports.

Now I am not suggesting we go socialist like the Americans. What I’m suggesting is that the premises of our prosperity have to be rethought. Now for all I know, we are like the Red Queen; we have to run to remain at one spot. In fact, I think this is the case.

But until S’pore is prepared to rethink its assumptions, we wouldn’t know would we?


American football is socialism that works

I mean if in the most capitalistic country in the world: “There are only 32 professional football teams in the United States and strict rules about who can own a team”,  the teams share at least half of their revenue from lucrative TV rights, merchandising and ticket sales; have salary caps etc

“As one NFL owner put it ‘we are 32 fat cat republicans who vote socialist’.”

As the BBC report goes on to say, “[I]n other sports leagues the burden of rapidly rising player salaries has broken smaller clubs, leaving larger ones to dominate the landscape. Think of Premier League football in the UK or US professional sports such as basketball, baseball and ice hockey.”

*This sentence was added on 5 February at ant 10.30 am.

CapLand: What price the mega China deal?

In China, Property, Temasek on 03/02/2010 at 6:19 am

The ace, veteran journalist from MediaCorp’s freesheet praises CapitaLand for the US$2.2 billion ($3.09 billion)  purchase of Orient Overseas Development Ltd’s (OODL’s)  assets comprising  seven sites totalling 1.48 million square metres in Shanghai, Kunshan and Tianjin. OODL is the Chinese property arm of  HK-listed OOIL, controlled by the family of former Hong Kong chief executive Tung Chee Hwa.

We are told of why it is a gd deal despite the subsequent curbs on property speculation by Chinese authorities (“a blessing in disguise”)  and how CapLand’s CEO won a high stakes poker game by refusing to bid higher.

Gee wiz, the CEO sounds like some super hero in action.

The problem with this analysis  is the share price of CapLand, down 13% from its high when the deal was announced and close to its  October lows in last year.  Meanwhile OODL’s parent is trading a lot higher than its October 2009 price, and the fall in HK, has affected it slightly.

Conclusion: mkt thinks CapLand got its timing wrong

And trumpets pls

On a more serious note, the ace journalist had to concede that ” despite CapitaLand’s connections in China, it doesn’t wield the same clout as the Tung family in that country … The Orient land bank was acquired over some time, noted a China property source. He pointed out that on its own, CapitaLand wouldn’t probably have been able to accumulate this prime parcel on its own.”

Waz this? I tot we had MM Lee, the adviser to Chinese leaders? And didn’t S’pore Inc pay a treasure in Suzchou etc to be an “old friend of China”?  Or is all these nothing but spin from our MSM? Or the fantasy of the S’pore government?

Three risks

In Investments on 02/02/2010 at 10:36 am

These three risks apply here too especially the earnings and valuation risks. Note  that they are not the same.

As to political risk, the risk here is not in Singapore but in Malaysia and Indonesia.

If religious tensions escalate; or the Malaysian government cracks down on dissidents or is seen as weak, then foreigners will sell their Malaysian shares, and S’pore will be caught in the backwash.

In Indonesia the issues are the corruption and the unhappiness about it. Thousands of demonstrators have taken part in anti-government protests. Protesters say President Susilo Bambang Yudhoyono has not delivered on his promise to eradicate corruption during the first 100 days of his second term.

These issues could affect the perception of investors about Indonesia (a darling of emerging market investors), again causing spillover effects here.

LUV-shaped recovery

In Economy on 01/02/2010 at 6:39 am

Forget abt L, U and V shaped recoveries.

Like Gaul, the world economy is now divided into three parts.

An L-shaped long-term low growth recovery in Europe; a U-shaped slow growth recovery in the United States; and a sharp “V” in emerging economies like India, Brazil and China.

As Singapore exports to all three, but esp to the first two (“ang moh tua kee”), we will have a “L” and “U” shaped recovery at the same time, depending on the sector.

Translated to listcos, those who export to the US (say Latitude. a furniture maker) will have gd prospects, while those that depend on Europe (can’t think of any) will stagnate.