所谓“牛市”，也称多头市场，指市场行情普遍看涨，延续时间较长的大升市。所谓“熊市”，也称空头市场，指行情普遍看淡，延续时间相对较长的大跌市。
道·琼斯根据美国股市的经验数据，总结出牛市和熊市的不同市场特征，认为牛市和熊市可以各自分为三个不同期间。
牛市第一期。与熊市第三期的一部分重合，往往是在市场最悲观的情况下出现的。大部分投资者对市场心灰意冷，即使市场出现好消息也无动于衷，很多人开始不计成本地抛出所有的股票。有远见的投资者则通过对各类经济指标和形势的分析，预期市场情况即将发生变化，开始逐步选择优质股买人。市场成交逐渐出现微量回升，经过一段时间后，许多股票已从盲目抛售者手中流到理性投资者手中。市场在回升过程中偶有回落，但每一次回落的低点都比上一次高，于是吸引新的投资人入市，整个市场交投开始活跃。这时候，上市公司的经营状况和公司业绩开始好转，盈利增加引起投资者的注意，进一步刺激人们入市的兴趣。
牛市第二期。这时市况虽然明显好转，但熊市的惨跌使投资者心有余悸。市场出现一种非升非跌的僵持局面，但总的来说大市基调良好，股价力图上升。这段时间可维持数月甚至超过一年，主要视上次熊市造成的心理打击的严重程度而定。
牛市第三期。经过一段时间的徘徊后，股市成交量不断增加，越来越多的投资人进入市场。大市的每次回落不但不会使投资人退出市场，反而吸引更多的投资人加入。市场情绪高涨，充满乐观气氛。此外，公司利好的新闻也不断传出，例如盈利倍增、收购合并等。上市公司也趁机大举集资，或送红股或将股票拆细，以吸引中小投资者。在这一阶段的末期，市场投机气氛极浓，即使出现坏消息也会被作为投机热点炒作，变为利好消息。垃圾股、冷门股股价均大幅度上涨，而一些稳健的优质股则反而被漠视。同时，炒股热浪席卷社会各个角落，各行各业、男女老幼均加入了炒股大军。当这种情况达到某个极点时，市场就会出现转折。
熊市第一期。其初段就是牛市第三期的末段，往往出现在市场投资气氛最高涨的情况下，这时市场绝对乐观，投资者对后市变化完全没有戒心。市场上真真假假的各种利好消息到处都是，公司的业绩和盈利达到不正常的高峰。不少企业在这段时期内加速扩张，收购合并的消息频传。正当绝大多数投资者疯狂沉迷于股市升势时，少数明智的投资者和个别投资大户已开始将资金逐步撤离或处于观望。因此，市场的交投虽然十分炽热，但已有逐渐降温的迹象。这时如果股价再进一步攀升，成交量却不能同步跟上的话，大跌就可能出现。在这个时期，当股价下跌时，许多人仍然认为这种下跌只是上升过程中的回调。其实，这是股市大跌的开始。
熊市第二期。这一阶段，股票市场一有风吹草动，就会触发“恐慌性抛售”。一方面市场上热点太多，想要买进的人反因难以选择而退缩不前，处于观望。另一方面更多的人开始急于抛出，加剧股价急速下跌。在允许进行信用交易的市场上，从事买空交易的投机者遭受的打击更大，他们往往因偿还融入资金的压力而被迫抛售，于是股价越跌越急，一发不可收拾。经过一轮疯狂的抛售和股价急跌以后，投资者会觉得跌势有点过分，因为上市公司以及经济环境的现状尚未达到如此悲观的地步，于是市场会出现一次较大的回升和反弹。这一段中期性反弹可能维持几个星期或者几个月，回升或反弹的幅度一般为整个市场总跌幅的三分之一至二分之一。
熊市第二期。经过一段时间的中期性反弹以后，经济形势和上市公司的前景趋于恶化，公司业绩下降，财务困难。各种真假难辨的利空消息又接踵而至，对投资者信心造成进一步打击。这时整个股票市场弥漫着悲观气氛，股价继反弹后较大幅度下挫。
在熊市第三期中，股价持续下跌，但跌势没有加剧，由于那些质量较差的股票已经在第一、第二期跌得差不多了，再跌的可能性已经不大，而这时由于市场信心崩溃，下跌的股票集中在业绩一向良好的蓝筹股和优质股上。这一阶段正好与牛市第一阶段的初段吻合，有远见和理智的投资者会认为这是最佳的吸纳机会，这时购入低价优质股，待大市回升后可获得丰厚回报。
一般来说，熊市经历的时间要比牛市短，大约只占牛市的三分之一至二分之一。不过每个熊市的具体时间都不尽相同，因市场和经济环境的差异会有较大的区别。回顾1993年到1997年这段时间，我国上海、深圳证券交易所经历了股价的大幅涨跌变化，就是一次完整的由牛转熊，再由熊转牛的周期性过程。
Sunday, March 1, 2009
巴菲特判断股市长期走势的指标
巴菲特从不预测股市的短期波动，但是巴菲特却认为股市长期波动是可以预测的： “ 如果预期股市长期走势的话，我就觉得非常容易。格雷厄姆曾经告诉我们为什么会如此：尽管短期来说股市是一个投票机，但长期来说股市却是个称重机。 ”
巴菲特发现，股市的极端非理性行为是周期性爆发的。短期内，贪婪和恐惧在投票时扮演了重要的角色，会让价格过于偏离价值。但长期内股价总是会回归于价值。
想要在股票市场上取得更好的回报，就应该学会如何应对下一次股市非理性行为的爆发。巴菲特建议投资者进行定量分析，定量分析如同一针清醒剂，可以让你避免陷入大众的疯狂，而理性地把握过于高估时卖出和过于低估时买入的机会。
巴菲特认为，对于股市总体而言定量分析并不需要十分复杂。2001年他在美国《财富》杂志发表了一篇文章，提出一个非常简单的股市定量分析指标。
1.巴菲特用什么指标？
巴菲特的第一个定量分析指标是，上市公司股票总市值占国民生产总值（GNP）的比率。
GNP与GDP的关系是：GNP等于GDP加上本国投在国外的资本和劳务的收入再减去外国投在本国的资本和劳务的收入。我计算了一下，其实中国过去10年GDP与GNP差距很小，在-0.78%到1.63%之间，因此可以用GDP代替GNP进行计算。
巴菲特认为，上市公司股票总市值占GNP的比率，这个指标尽管非常简单，对于需要了解众多信息的投资人来说，这项指标提供的信息相对有限，但它仍然可能是任何时点上评估公司价值时的最佳单一指标。
巴菲特认为：如果投资人财富增加的速度比美国经济增长的速度更快，那么所有上市公司总市值占GNP的比率形成的曲线必须不断上升、上升再上升。如果GNP年增长5%，而希望市值增长10%，那么这条曲线必须迅速上升到图表的顶端。而事实上这是根本不可能的。
其实巴菲特对这个指标的涵义的理解可以概括为一句话：长期而言，上市公司股票总市值的增长速度与国民经济增长速度基本一致。换句话说，股市长期是一台称重机，称出的是国民经济增长。
2.巴菲特的股市指标在美国有效吗？
巴菲特分析了过去80年来美国所有上市公司总市值占GNP的比率，他发现的规律是： “ 如果所有上市公司总市值占GNP的比率在70%～80%之间，则买入股票长期而言可能会让投资者有相当不错的报酬。 ”
这项指标在1999年达到前所未有的高峰。1999年全年以及2000年中的一段时间，这个比率接近200%，这是一个很强烈的警告信号。巴菲特说，在这个时候购买股票简直就是在玩火自焚。
2000年，美国股市开始持续下跌。2001年网络股泡沫破灭，道琼斯指数从高点大幅回挫2000点时，很多人都在讨论重返股市的时机。但当时股市总市值仍相当于美国GNP的133%，所以巴菲特并未轻举妄动。
从2000年3月24日最高的1552.87点，到 2002年10月10日最低跌到768.63点,32个月下跌超过50%。巴菲特成功避开了股市大跌。
3.巴菲特的股市分析指标在中国股市有效吗？
我计算了1992年到2008年中国所有上市公司总市值占GDP的比率，发现这个指标与上证指数几乎完全同步。
2000年底股票总市值与GDP的比率创9年新高，达到48.47%，上证指数年底收盘于2073点，也创9年新高。
2005年股票总市值与GDP的比率创9年新低，仅有17.7%，上证指数年底收盘于1161点，也创7年新低。 2007年底股票总市值与GDP的比率创16年最高，达到127%，上证指数年底收盘于5262点，也创16年以来最高。
如果你看了巴菲特2001年的文章，知道股票总市值与GDP的比率在70%～80%之间是合理的，那么2007年高达127%肯定是过于高估了。
如果你看到了，也做到了，在2007年底退出股市，那么你就能避免2008年一年下跌66%的悲剧。
4.巴菲特最近入市了吗？
2008年巴菲特控股的伯克希尔公司开始大量买入股票。
2008年10月17日，巴菲特在《纽约时报》公开发表文章宣布，如果美国股市继续下跌，将用私人账户买入美国公司股票。美国股票总市值占GNP比率在1999年最高峰时达到190%，经过2008年大跌之后，目前下降到75%左右，给了巴菲特一个充分的入市理由： “ 如果总市值与GNP的比率落在70%到80%之间，进场购买股票可能会很有利。 ”
巴菲特对于总市值占GNP比率重返正常一点也不感到讶异，他告诉《财富》杂志说，这种变化让他想起他的导师对股市波动规律的描述，他说： “ 股市短期像是一台投票机，但长期像是一台称重机。 ”
那么巴菲特赚钱了吗？
2008年10月17日巴菲特在《纽约时报》发表文章时标准普尔500指数收于940点，到 2009年2月23日却跌到743点。过了4个月，股市又下跌了21%。
相信很多美国人疑问为什么巴菲特开始买入美股，美国股市还继续下跌呢？巴菲特的指标预测的是长期股市走势，短期未必准确。他做的也是长期投资，并不追求短期业绩。
请注意巴菲特在文章中说，如果美国股市继续下跌，他将会大量买入股票。巴菲特说他喜欢股市大跌，这让他能以更加便宜的价格买入更多他看中的好公司股票。
2008年底上证指数收盘于1820点，股票总市值为121366亿元，GDP按照大部分经济学家增长9%的共识为280464亿元，那么中国股市股票总市值占GDP的比率下降到43%，大大低于巴菲特认为70%～80%的合理区间。
中国股市却从 2008年10月28日最低的1664点开始反弹， 2009年2月16日最高冲到2389点，最大涨幅超过43%。如果你根据巴菲特的这个指标，短短3个来月会赚上一大笔。可能股神也没想到，他的文章没有唤来美国股市的春天，却唤来中国股市的一波小阳春。
如果你对中国经济有信心，那么意味着你认为GDP还会继续增长，那么股市越跌，股票总市值占GDP的比率越下降，根据过去17年的历史经验，你长期投资赚钱的概率越大。
这里要说明的是，运用巴菲特的股市指标，长期投资成功的概率更大，但短期未必。短期内股市波动无法预测，没有人也没有什么指标可以预测得准。
巴菲特发现，股市的极端非理性行为是周期性爆发的。短期内，贪婪和恐惧在投票时扮演了重要的角色，会让价格过于偏离价值。但长期内股价总是会回归于价值。
想要在股票市场上取得更好的回报，就应该学会如何应对下一次股市非理性行为的爆发。巴菲特建议投资者进行定量分析，定量分析如同一针清醒剂，可以让你避免陷入大众的疯狂，而理性地把握过于高估时卖出和过于低估时买入的机会。
巴菲特认为，对于股市总体而言定量分析并不需要十分复杂。2001年他在美国《财富》杂志发表了一篇文章，提出一个非常简单的股市定量分析指标。
1.巴菲特用什么指标？
巴菲特的第一个定量分析指标是，上市公司股票总市值占国民生产总值（GNP）的比率。
GNP与GDP的关系是：GNP等于GDP加上本国投在国外的资本和劳务的收入再减去外国投在本国的资本和劳务的收入。我计算了一下，其实中国过去10年GDP与GNP差距很小，在-0.78%到1.63%之间，因此可以用GDP代替GNP进行计算。
巴菲特认为，上市公司股票总市值占GNP的比率，这个指标尽管非常简单，对于需要了解众多信息的投资人来说，这项指标提供的信息相对有限，但它仍然可能是任何时点上评估公司价值时的最佳单一指标。
巴菲特认为：如果投资人财富增加的速度比美国经济增长的速度更快，那么所有上市公司总市值占GNP的比率形成的曲线必须不断上升、上升再上升。如果GNP年增长5%，而希望市值增长10%，那么这条曲线必须迅速上升到图表的顶端。而事实上这是根本不可能的。
其实巴菲特对这个指标的涵义的理解可以概括为一句话：长期而言，上市公司股票总市值的增长速度与国民经济增长速度基本一致。换句话说，股市长期是一台称重机，称出的是国民经济增长。
2.巴菲特的股市指标在美国有效吗？
巴菲特分析了过去80年来美国所有上市公司总市值占GNP的比率，他发现的规律是： “ 如果所有上市公司总市值占GNP的比率在70%～80%之间，则买入股票长期而言可能会让投资者有相当不错的报酬。 ”
这项指标在1999年达到前所未有的高峰。1999年全年以及2000年中的一段时间，这个比率接近200%，这是一个很强烈的警告信号。巴菲特说，在这个时候购买股票简直就是在玩火自焚。
2000年，美国股市开始持续下跌。2001年网络股泡沫破灭，道琼斯指数从高点大幅回挫2000点时，很多人都在讨论重返股市的时机。但当时股市总市值仍相当于美国GNP的133%，所以巴菲特并未轻举妄动。
从2000年3月24日最高的1552.87点，到 2002年10月10日最低跌到768.63点,32个月下跌超过50%。巴菲特成功避开了股市大跌。
3.巴菲特的股市分析指标在中国股市有效吗？
我计算了1992年到2008年中国所有上市公司总市值占GDP的比率，发现这个指标与上证指数几乎完全同步。
2000年底股票总市值与GDP的比率创9年新高，达到48.47%，上证指数年底收盘于2073点，也创9年新高。
2005年股票总市值与GDP的比率创9年新低，仅有17.7%，上证指数年底收盘于1161点，也创7年新低。 2007年底股票总市值与GDP的比率创16年最高，达到127%，上证指数年底收盘于5262点，也创16年以来最高。
如果你看了巴菲特2001年的文章，知道股票总市值与GDP的比率在70%～80%之间是合理的，那么2007年高达127%肯定是过于高估了。
如果你看到了，也做到了，在2007年底退出股市，那么你就能避免2008年一年下跌66%的悲剧。
4.巴菲特最近入市了吗？
2008年巴菲特控股的伯克希尔公司开始大量买入股票。
2008年10月17日，巴菲特在《纽约时报》公开发表文章宣布，如果美国股市继续下跌，将用私人账户买入美国公司股票。美国股票总市值占GNP比率在1999年最高峰时达到190%，经过2008年大跌之后，目前下降到75%左右，给了巴菲特一个充分的入市理由： “ 如果总市值与GNP的比率落在70%到80%之间，进场购买股票可能会很有利。 ”
巴菲特对于总市值占GNP比率重返正常一点也不感到讶异，他告诉《财富》杂志说，这种变化让他想起他的导师对股市波动规律的描述，他说： “ 股市短期像是一台投票机，但长期像是一台称重机。 ”
那么巴菲特赚钱了吗？
2008年10月17日巴菲特在《纽约时报》发表文章时标准普尔500指数收于940点，到 2009年2月23日却跌到743点。过了4个月，股市又下跌了21%。
相信很多美国人疑问为什么巴菲特开始买入美股，美国股市还继续下跌呢？巴菲特的指标预测的是长期股市走势，短期未必准确。他做的也是长期投资，并不追求短期业绩。
请注意巴菲特在文章中说，如果美国股市继续下跌，他将会大量买入股票。巴菲特说他喜欢股市大跌，这让他能以更加便宜的价格买入更多他看中的好公司股票。
2008年底上证指数收盘于1820点，股票总市值为121366亿元，GDP按照大部分经济学家增长9%的共识为280464亿元，那么中国股市股票总市值占GDP的比率下降到43%，大大低于巴菲特认为70%～80%的合理区间。
中国股市却从 2008年10月28日最低的1664点开始反弹， 2009年2月16日最高冲到2389点，最大涨幅超过43%。如果你根据巴菲特的这个指标，短短3个来月会赚上一大笔。可能股神也没想到，他的文章没有唤来美国股市的春天，却唤来中国股市的一波小阳春。
如果你对中国经济有信心，那么意味着你认为GDP还会继续增长，那么股市越跌，股票总市值占GDP的比率越下降，根据过去17年的历史经验，你长期投资赚钱的概率越大。
这里要说明的是，运用巴菲特的股市指标，长期投资成功的概率更大，但短期未必。短期内股市波动无法预测，没有人也没有什么指标可以预测得准。
花旗国有化 美国经济丧失灵魂
花旗的前掌门人桑迪韦尔在不断并购其他公司成就花旗帝国的时候，恐怕做梦也没有想到，今天会落到关门或者国有化的两难选择。
花旗事实上已经被国有化，美国政府救助的450亿美元，而目前花旗市值只有100多亿美元，花旗技术破产。中央财经大学中国经济与管理学院教授卜若柏（Robert H. Blohm）指出，鉴于美国联邦政府此前曾同意吸收花旗银行资产负债表上价值数千亿美元的不良资产损失，花旗集团已属政府。
现在，美国政府要求权利，第一步是债转股，从转为没有投票权只有利益权的优先股，到目前的要求大部分转为普通股，成为花旗控股股东，这意味着美国政府直接成为花旗的持有者，参与花旗的管理，已有消息传出，美国政府在谈判中将迫使花旗集团剥离其部分业务，并对该集团管理层的综合薪资事宜拥有否决权。与以往遮遮掩掩的救助式国有化大相径庭。失去援手的花旗现在惟一能做的就是讨价还价，要求政府减少持股量，但花旗这个没落贵族已经丧失发言权。
岂止花旗，其他金融机构也面临国有化的处境，8000亿美元的坏帐拨备没有解决问题，金融机构继续面临负债困境。美国财政部长盖特纳本月10日发布的第二轮金融救援方案。根据该方案，政府将很快对资产超过千亿美元的主要银行展开全方位 “ 压力测试 ” ，确定银行的健康状况，如果银行无法通过测试，政府将有条件地提供 “ 额外支持 ” 。政府已经全方位地介入金融机构拯救运动中，其结果与全部国有化仅有一纸之隔。如果说20世纪初期的大衰退是由JP摩根的慷慨缓解了金融、资本市场的危机，那现在是露出虎牙、打算惩治尾大不掉的金融巨鳄的美国政府。
市场对此的反应是美国金融机构股价暴跌，显示信心尽失。这源于几方面原因。
首先，国有化的先驱英国虽然在拯救初期取得了辉煌的成果，但现在英国首相布朗正在见证自己的失败，欧洲已将国有化当作压箱底的救命招术，不到万不得已决不动用，英国在尽力避免苏格兰银行国有化；其次，银行国有化还有无法解决资产泡沫破灭之后银行负债率过高的问题，政府总不可能救了银行不救基金，问题是如果大型基金垮台，银行同样会受到拖累；第三，根深蒂固的，美国人不相信政府的市场效率，虽然他们痛恨华尔街的肥猫，却同样不愿意看到经济国有化，自由市场，是美国人的灵魂，现在，灵魂失去，徒有虚名。
当然，美国政府不会把持着金融机构不放，他们意在让金融机构度过难关，不过，谁也不知道有了这第一步之后，经济模式会转到何处。今天国有化了花旗，明天国有化美国银行，后天就可以国有化基金公司，按此逻辑，政府会拥有整个金融市场。
另一个致命的疑惑是，美国政府救助花旗的资金已经打了水漂，如果不想让纳税人付出太多，美国政府就必须让国有化的金融机构能够赢利，靠什么呢？靠政府的管理，还是赋予这些机构特殊的政策优惠？这种想法让华尔街不寒而栗。
因此，有重量级经济学家集体撰文，在《纽约时报》上发布极为精简的广告，指出美国走出大萧条不是罗斯福新政的功劳。既然经济周期是不可避免的，就让萧条成为经济的消毒剂，政府无需过度介入，只要做好自己的公共服务和监管即可。肥猫让人痛恨，华盛顿那些放纵肥猫的人就没有责任吗？
美国救市之争实质上是路线斗争，主张救市者相信政府能够熨平经济周期，用反周期的手段可以帮助市场主体度过难关，信赖政府吧，他们说。而另一派人士则对此深恶痛绝，他们相信没有经济周期就没有自由的经济，美国立国至今经历无数经济周期的考验，只要相信市场的力量就能够应对，虽然需要代价，但代价是必须的，没有任何一次经济结构的转变可以轻松过关。
美国政府站在十字路口。是暂时抽掉自由市场的灵魂让经济度过难关，还是捍卫自由市场让经济承受巨痛？最可怕的是抽掉了灵魂之后还得承受巨痛，相对来说，国有化实在是风险最大的选择。
24日，美联储主席伯南克在国会作证时也否认了外界有关政府将以审查银行资产负债表为名，将大型银行国有化的猜测，他表示没有任何理由在不必要的情况下将银行收归国有。伯南克对美国国会金融委员会表示， “ 这并不是国有化，因为政府不会拥有全部或大多数银行股份。 ”
周一美国股市创下12年来的新低，周二在伯南克保证受援助银行不会被国有化后，市场出现反弹。
伯南克说，政府将对最大的，最困难的机构采取如下三个救助步骤：
压力测试。尽管财政部还没有详细披露压力测试的内容，但伯南克说，监管者执行压力测试的目的不是为了评出谁合格谁被淘汰，而是政府将判断各家银行需要从政府获得多少资金，这样可以在这些银行重组时给它们一个缓冲。
改变资本结构。在很多情况下，财政部向银行注资之后获得优先股或可转换股权。这些股权没有投票权，政府很可能无法插手银行的具体管理事务。此外，优先股也比普通股安全。因此，在情况恶化时，政府持有的优先股可以获得更多保障。
最终，当受困银行足够强大，勿需援助时，他们会偿还政府的资金，并募集私人资本。伯南克说， “ 当私人资本重新回来时，就是游戏的结尾。我也确信这会发生。当然越快越好。 ” 最理想的情况是，政府可以从现在的投资中赚钱。
如果政府参与管理式的国有化，说明美国气数到头了。好在只是政府直接参与监管，因为以往的监管太弱。
另一个消息是，工行一年的利润就能购买花旗。
花旗事实上已经被国有化，美国政府救助的450亿美元，而目前花旗市值只有100多亿美元，花旗技术破产。中央财经大学中国经济与管理学院教授卜若柏（Robert H. Blohm）指出，鉴于美国联邦政府此前曾同意吸收花旗银行资产负债表上价值数千亿美元的不良资产损失，花旗集团已属政府。
现在，美国政府要求权利，第一步是债转股，从转为没有投票权只有利益权的优先股，到目前的要求大部分转为普通股，成为花旗控股股东，这意味着美国政府直接成为花旗的持有者，参与花旗的管理，已有消息传出，美国政府在谈判中将迫使花旗集团剥离其部分业务，并对该集团管理层的综合薪资事宜拥有否决权。与以往遮遮掩掩的救助式国有化大相径庭。失去援手的花旗现在惟一能做的就是讨价还价，要求政府减少持股量，但花旗这个没落贵族已经丧失发言权。
岂止花旗，其他金融机构也面临国有化的处境，8000亿美元的坏帐拨备没有解决问题，金融机构继续面临负债困境。美国财政部长盖特纳本月10日发布的第二轮金融救援方案。根据该方案，政府将很快对资产超过千亿美元的主要银行展开全方位 “ 压力测试 ” ，确定银行的健康状况，如果银行无法通过测试，政府将有条件地提供 “ 额外支持 ” 。政府已经全方位地介入金融机构拯救运动中，其结果与全部国有化仅有一纸之隔。如果说20世纪初期的大衰退是由JP摩根的慷慨缓解了金融、资本市场的危机，那现在是露出虎牙、打算惩治尾大不掉的金融巨鳄的美国政府。
市场对此的反应是美国金融机构股价暴跌，显示信心尽失。这源于几方面原因。
首先，国有化的先驱英国虽然在拯救初期取得了辉煌的成果，但现在英国首相布朗正在见证自己的失败，欧洲已将国有化当作压箱底的救命招术，不到万不得已决不动用，英国在尽力避免苏格兰银行国有化；其次，银行国有化还有无法解决资产泡沫破灭之后银行负债率过高的问题，政府总不可能救了银行不救基金，问题是如果大型基金垮台，银行同样会受到拖累；第三，根深蒂固的，美国人不相信政府的市场效率，虽然他们痛恨华尔街的肥猫，却同样不愿意看到经济国有化，自由市场，是美国人的灵魂，现在，灵魂失去，徒有虚名。
当然，美国政府不会把持着金融机构不放，他们意在让金融机构度过难关，不过，谁也不知道有了这第一步之后，经济模式会转到何处。今天国有化了花旗，明天国有化美国银行，后天就可以国有化基金公司，按此逻辑，政府会拥有整个金融市场。
另一个致命的疑惑是，美国政府救助花旗的资金已经打了水漂，如果不想让纳税人付出太多，美国政府就必须让国有化的金融机构能够赢利，靠什么呢？靠政府的管理，还是赋予这些机构特殊的政策优惠？这种想法让华尔街不寒而栗。
因此，有重量级经济学家集体撰文，在《纽约时报》上发布极为精简的广告，指出美国走出大萧条不是罗斯福新政的功劳。既然经济周期是不可避免的，就让萧条成为经济的消毒剂，政府无需过度介入，只要做好自己的公共服务和监管即可。肥猫让人痛恨，华盛顿那些放纵肥猫的人就没有责任吗？
美国救市之争实质上是路线斗争，主张救市者相信政府能够熨平经济周期，用反周期的手段可以帮助市场主体度过难关，信赖政府吧，他们说。而另一派人士则对此深恶痛绝，他们相信没有经济周期就没有自由的经济，美国立国至今经历无数经济周期的考验，只要相信市场的力量就能够应对，虽然需要代价，但代价是必须的，没有任何一次经济结构的转变可以轻松过关。
美国政府站在十字路口。是暂时抽掉自由市场的灵魂让经济度过难关，还是捍卫自由市场让经济承受巨痛？最可怕的是抽掉了灵魂之后还得承受巨痛，相对来说，国有化实在是风险最大的选择。
24日，美联储主席伯南克在国会作证时也否认了外界有关政府将以审查银行资产负债表为名，将大型银行国有化的猜测，他表示没有任何理由在不必要的情况下将银行收归国有。伯南克对美国国会金融委员会表示， “ 这并不是国有化，因为政府不会拥有全部或大多数银行股份。 ”
周一美国股市创下12年来的新低，周二在伯南克保证受援助银行不会被国有化后，市场出现反弹。
伯南克说，政府将对最大的，最困难的机构采取如下三个救助步骤：
压力测试。尽管财政部还没有详细披露压力测试的内容，但伯南克说，监管者执行压力测试的目的不是为了评出谁合格谁被淘汰，而是政府将判断各家银行需要从政府获得多少资金，这样可以在这些银行重组时给它们一个缓冲。
改变资本结构。在很多情况下，财政部向银行注资之后获得优先股或可转换股权。这些股权没有投票权，政府很可能无法插手银行的具体管理事务。此外，优先股也比普通股安全。因此，在情况恶化时，政府持有的优先股可以获得更多保障。
最终，当受困银行足够强大，勿需援助时，他们会偿还政府的资金，并募集私人资本。伯南克说， “ 当私人资本重新回来时，就是游戏的结尾。我也确信这会发生。当然越快越好。 ” 最理想的情况是，政府可以从现在的投资中赚钱。
如果政府参与管理式的国有化，说明美国气数到头了。好在只是政府直接参与监管，因为以往的监管太弱。
另一个消息是，工行一年的利润就能购买花旗。
货币的海量增发为什么还有可能是通缩
我们现在中国政府大规模的救市，世界各国政府也是大规模的救市，美国政府的好几千亿美元的救市也通过了，世界的货币发行量海量的增长，而对应的经济危机在加剧，各种生产在萎缩，大家很自然的就想到了通货膨胀就要来临了，但是通过本人的认真思考，这样的情况很可能，但是通缩也是很可能的。
这里大家就很难理解了，发行货币多了，当然是通货膨胀，怎么可能是通缩呢？这要从危机的本质和现代货币发行的机制来说起。我们以前的经济是一个紧缺经济，包括世界其他发达国家在几百年前也是一样的，大家所需要的东西不足，生产力低下，而现在的危机是一个过剩的经济，过剩的产能造成危机，如果大家有通货膨胀的预期而拼命买东西的话，过剩的产能就发挥全部作用了，你要买入多少，就会有多少的东西卖给你，他们富裕的产能正好释放了，除非你购买的东西是绝对必需有无法大量扩大产能的，这在历史上是粮食，但是现在由于油价的降低，变成酒精的粮食和变成柴油的植物油正大大地富裕着呢！你因为通货膨胀预期的抢购拿那么多的东西不是能够消费的，或者是把以后几年消费的东西都买了，以后的消费还要更加萎缩，这萎缩一定就是通缩的背景。
而我们增发的货币，还有另外更加深入隐蔽的问题，在西方世界的货币发行是要依靠债券抵押的，我们的货币发行虽然不要债券抵押，但是我们为了加入WTO，也制定了限制政府滥发货币的《人民银行法》，该法律明确规定不允许政府向央行透支，也不允许政府直接把债券发行给央行，这样即使是印了钞票不能进入流通领域，就和冥钞没有什么区别，而我们的银行存款只是虚拟的账本游戏，在发钞行的账本上，他发行的在外流通的货币和他的银行存款没有什么两样。这一点在07年发行特别国债的时候已经被指违法，不得已这个一万五千亿的国债，还是委托商业银行承销。因此我们政府的加大投资所需要的资金，必须以发行债券和银行贷款来完成。而商业贷款必须有自有资金的投入，这投入只能是来自财政，但是危机使得财政收入降低，政府加大投资开支还大大增加，结果一定是财政赤字剧增，额外的赤字就只有来自债券，这样的海量债券的结果就是发行的债券要强行的从市场收走资金，而政府投资的银行贷款也是与市场竞争资金，结果市场中本来需要的资金血液反而被政府的投资抽走，这里政府人为的选择是否比市场的选择好呢？如果政府不进行这样的投资，让市场自行选择的话，效率经常是比政府人为的要好。
所以我们的政府投资只有把社会在场外观望不投资的钱吸引过来，才能够真正的带动经济的发展，因为这些资金投资股票和实业在经济危机的情况下风险大不敢，存银行利率低，所以会买入国债，而政府这样通过债券把资金集中进行投资，市场就活跃了。但是政府这样的投资造成了通货膨胀的预期，债券的发行就必须加大收益率，这样反而会吸引社会其他本来要投资和消费的资金进入，社会的资金反而是被抽紧了，政府加大财政投入的资金投放，结果社会上获取的这些资金会再次通过购买国债又回到政府的手中，政府的投入不但没有带动社会投资，反而白白的支付了利息。这样的结果政府就只有不断地加大财政投入，不断地发行债券，同时又不断地把社会的资金通过债券收回，最后这样的恶性循环就是大家都拿着债券，债券越来越多，政府的收入都变成了债券利息，政策最终出现了灾难。
同时政府在危机中偿还国债的来源由于经济的萎靡，投资的建设不可能有足够的价值产出，偿债只能是增加税收，而未来政府为了偿还国债而可以预见的税收增加的预期也会加重大家投资的谨慎，中国的名义税率已经太高了。还有的情况是社会的资金即使不进入债券，也进行囤积居奇的储备而不是投资到生产，很快就会把社会的资金全部收走，造成社会的货币流通严重不足，通缩就开始了，等到大家都感觉到通缩了以后，囤积居奇的商品再度流入社会，造成供应过剩，再次加重了通缩。
这样的情况在历史上也是有前科的，我们在98年后政府就采取了同样的扩大内需的积极的财政政策，结果是造成我们多年的长期通缩，人民币从贬值预期变成了升值预期。好在当初世界在处于泡沫的上升时期，中国的通缩问题被世界所消化，但是也落下向全球输出通缩的指责。但是现在全世界都在危机中，我们的石油、有色金属、房屋等等均价格腰斩，而有货币特性的黄金却逆势上扬，这样的情况从具体数据上也明确看到了通缩的到来。
而我们现在的世界美国的救市，也要依靠发行债券获得资金，但是在美联储的利率基本是归为零的情况下，政府救市赚取的钱也是依靠的债券，这些债券一定要吸收社会的资金，以前美国的国债是其他国家金融外汇储备的投资对象，吸取的资金不是美国内部的资金而是全球的资金，但是现在美国救市要买国货，当然其他国家就不买你救市的国债，而你要是政府投入使用进口，那么你刺激经济的效果就是针对全球，但是即使是针对全球，也要从全球吸取资金过来，这样照样可以造成通缩。
还有一点世界将进入通缩的背景就是我们现在实行的是泡沫的货币主义，危机造成金融衍生产品的萎缩，这样衍生出来的广义货币、虚拟货币就大量的消失，这等于就是减少了货币的流通供应量，这个减少比政府投入的那看似巨大的货币多多了，就如我们的股市，这样从6000多点到2000点以下，十万亿以上的市值没有了，大家炒股的钱都人间蒸发了，大家就都没有钱了，这样的没钱就是货币财富的蒸发，远远多于政府的那一点投入，而现在股票回涨了一些，市场上的钱就多了，很多人又开始买房了，可以看到楼市的成交量在放大。
因此我认为当今危机阶段和以后的萧条阶段均会以通缩为主，等到经济复苏了，才是通缩到通胀的反转时期，到经济高涨的时候，长期的通缩会迎来报复性的通货膨胀的。在通缩的背景下，各种商品的长期价格一定是低迷的，股票也一定是低迷的，而债券和黄金应当进入牛市。
通缩与通胀的投资理财操作的理念是根本不同的，很多的金融大鳄就是利用老百姓的通胀恐惧，一再的以通缩套死老百姓的资金赚取巨额的利润，在世界上经济学者均是服务利益集团的，中国怎样被忽悠的历史大家也该知道一些，当初说中国的付利率，现在美联储是零利率；当初说中国要财政收支平衡，结果美国政府早已经资不抵债；当初指责中国的政策市，现在美国也在大搞政策市！想想这些事情，很多东西就理解了。
这里大家就很难理解了，发行货币多了，当然是通货膨胀，怎么可能是通缩呢？这要从危机的本质和现代货币发行的机制来说起。我们以前的经济是一个紧缺经济，包括世界其他发达国家在几百年前也是一样的，大家所需要的东西不足，生产力低下，而现在的危机是一个过剩的经济，过剩的产能造成危机，如果大家有通货膨胀的预期而拼命买东西的话，过剩的产能就发挥全部作用了，你要买入多少，就会有多少的东西卖给你，他们富裕的产能正好释放了，除非你购买的东西是绝对必需有无法大量扩大产能的，这在历史上是粮食，但是现在由于油价的降低，变成酒精的粮食和变成柴油的植物油正大大地富裕着呢！你因为通货膨胀预期的抢购拿那么多的东西不是能够消费的，或者是把以后几年消费的东西都买了，以后的消费还要更加萎缩，这萎缩一定就是通缩的背景。
而我们增发的货币，还有另外更加深入隐蔽的问题，在西方世界的货币发行是要依靠债券抵押的，我们的货币发行虽然不要债券抵押，但是我们为了加入WTO，也制定了限制政府滥发货币的《人民银行法》，该法律明确规定不允许政府向央行透支，也不允许政府直接把债券发行给央行，这样即使是印了钞票不能进入流通领域，就和冥钞没有什么区别，而我们的银行存款只是虚拟的账本游戏，在发钞行的账本上，他发行的在外流通的货币和他的银行存款没有什么两样。这一点在07年发行特别国债的时候已经被指违法，不得已这个一万五千亿的国债，还是委托商业银行承销。因此我们政府的加大投资所需要的资金，必须以发行债券和银行贷款来完成。而商业贷款必须有自有资金的投入，这投入只能是来自财政，但是危机使得财政收入降低，政府加大投资开支还大大增加，结果一定是财政赤字剧增，额外的赤字就只有来自债券，这样的海量债券的结果就是发行的债券要强行的从市场收走资金，而政府投资的银行贷款也是与市场竞争资金，结果市场中本来需要的资金血液反而被政府的投资抽走，这里政府人为的选择是否比市场的选择好呢？如果政府不进行这样的投资，让市场自行选择的话，效率经常是比政府人为的要好。
所以我们的政府投资只有把社会在场外观望不投资的钱吸引过来，才能够真正的带动经济的发展，因为这些资金投资股票和实业在经济危机的情况下风险大不敢，存银行利率低，所以会买入国债，而政府这样通过债券把资金集中进行投资，市场就活跃了。但是政府这样的投资造成了通货膨胀的预期，债券的发行就必须加大收益率，这样反而会吸引社会其他本来要投资和消费的资金进入，社会的资金反而是被抽紧了，政府加大财政投入的资金投放，结果社会上获取的这些资金会再次通过购买国债又回到政府的手中，政府的投入不但没有带动社会投资，反而白白的支付了利息。这样的结果政府就只有不断地加大财政投入，不断地发行债券，同时又不断地把社会的资金通过债券收回，最后这样的恶性循环就是大家都拿着债券，债券越来越多，政府的收入都变成了债券利息，政策最终出现了灾难。
同时政府在危机中偿还国债的来源由于经济的萎靡，投资的建设不可能有足够的价值产出，偿债只能是增加税收，而未来政府为了偿还国债而可以预见的税收增加的预期也会加重大家投资的谨慎，中国的名义税率已经太高了。还有的情况是社会的资金即使不进入债券，也进行囤积居奇的储备而不是投资到生产，很快就会把社会的资金全部收走，造成社会的货币流通严重不足，通缩就开始了，等到大家都感觉到通缩了以后，囤积居奇的商品再度流入社会，造成供应过剩，再次加重了通缩。
这样的情况在历史上也是有前科的，我们在98年后政府就采取了同样的扩大内需的积极的财政政策，结果是造成我们多年的长期通缩，人民币从贬值预期变成了升值预期。好在当初世界在处于泡沫的上升时期，中国的通缩问题被世界所消化，但是也落下向全球输出通缩的指责。但是现在全世界都在危机中，我们的石油、有色金属、房屋等等均价格腰斩，而有货币特性的黄金却逆势上扬，这样的情况从具体数据上也明确看到了通缩的到来。
而我们现在的世界美国的救市，也要依靠发行债券获得资金，但是在美联储的利率基本是归为零的情况下，政府救市赚取的钱也是依靠的债券，这些债券一定要吸收社会的资金，以前美国的国债是其他国家金融外汇储备的投资对象，吸取的资金不是美国内部的资金而是全球的资金，但是现在美国救市要买国货，当然其他国家就不买你救市的国债，而你要是政府投入使用进口，那么你刺激经济的效果就是针对全球，但是即使是针对全球，也要从全球吸取资金过来，这样照样可以造成通缩。
还有一点世界将进入通缩的背景就是我们现在实行的是泡沫的货币主义，危机造成金融衍生产品的萎缩，这样衍生出来的广义货币、虚拟货币就大量的消失，这等于就是减少了货币的流通供应量，这个减少比政府投入的那看似巨大的货币多多了，就如我们的股市，这样从6000多点到2000点以下，十万亿以上的市值没有了，大家炒股的钱都人间蒸发了，大家就都没有钱了，这样的没钱就是货币财富的蒸发，远远多于政府的那一点投入，而现在股票回涨了一些，市场上的钱就多了，很多人又开始买房了，可以看到楼市的成交量在放大。
因此我认为当今危机阶段和以后的萧条阶段均会以通缩为主，等到经济复苏了，才是通缩到通胀的反转时期，到经济高涨的时候，长期的通缩会迎来报复性的通货膨胀的。在通缩的背景下，各种商品的长期价格一定是低迷的，股票也一定是低迷的，而债券和黄金应当进入牛市。
通缩与通胀的投资理财操作的理念是根本不同的，很多的金融大鳄就是利用老百姓的通胀恐惧，一再的以通缩套死老百姓的资金赚取巨额的利润，在世界上经济学者均是服务利益集团的，中国怎样被忽悠的历史大家也该知道一些，当初说中国的付利率，现在美联储是零利率；当初说中国要财政收支平衡，结果美国政府早已经资不抵债；当初指责中国的政策市，现在美国也在大搞政策市！想想这些事情，很多东西就理解了。
Buffett optimistic despite Berkshire's worst year, prospects for more economic turmoil
Warren Buffett remains optimistic about the prospects for his company and the nation even though Berkshire Hathaway Inc. turned in its worst performance in 2008 and the widely-followed investor says the economy will likely remain a mess beyond this year.
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Buffett used his annual letter Saturday to reassure shareholders that the Omaha-based insurance and investment company has the financial strength needed to withstand the current turmoil and improve after the worst showing of Buffett's 44 years as chairman and CEO.
Buffett wrote he's certain "the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond -- but that conclusion does not tell us whether the stock market will rise or fall."
In between the news of Berkshire's sharply lower profit and a thorough explanation of its largely unrealized $7.5 billion investment and derivative losses, Buffett offered a hopeful view of the nation's future.
He said America has faced bigger economic challenges in the past, including two World Wars and the Great Depression.
"Though the path has not been smooth, our economic system has worked extraordinarily well over time," Buffett wrote. "It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead."
Buffett's letter appeared to mollify the concerns of many who follow the company, but it's not yet clear whether that will help Berkshire's Class A stock extend its rebound from the new five-year low it set last Monday at $73,500. On Friday, it closed up $250 at $78,600.
"If anything, I feel better than I did before I read it," Morningstar analyst Bill Bergman said. Berkshire's results could have easily been worse, he said.
But Buffett estimates Berkshire's book value -- assets minus liabilities -- declined 9.6 percent to $70,530 per share in 2008 -- the biggest drop since he took control of the company in 1965. Berkshire's book value declined only one other time under Buffett, and that was a 6.2 percent drop in 2001 when insurance losses related to the Sept. 11 terrorist attacks hurt results.
Berkshire's Class A shares remain the most expensive U.S. stock, but they fell nearly 32 percent in 2008 and have declined 48 percent since setting a high of $151,650 in December 2007. That high came after an exceptionally profitable quarter that was helped by a $2 billion investment gain.
The S&P 500 fell 37 percent in 2008.
Within Berkshire, Buffett said the company's retail businesses, including furniture and jewelry stores, and those tied to residential construction, such as Shaw carpet and Acme Brick, were hit hard last year. Net income for those businesses slipped 3 percent to $2.28 billion, and Buffett said they will likely continue to perform below their potential in 2009.
But he said Berkshire's utility and insurance businesses, which includes Geico, both delivered outstanding results in 2008 that helped balance out the other businesses.
The Des Moines, Iowa-based utility division, MidAmerican Energy Holdings, contributed $1.7 billion to Berkshire's net income in 2008 thanks to more than $1 billion in proceeds from MidAmerican's failed takeover of Constellation Energy. That's up from the $1.1 billion utility profit that Berkshire recorded in 2007.
The insurance division, which also includes reinsurance giant General Re, contributed $1.8 billion in earnings from underwriting -- a drop of 17 percent from 2007. Buffett praised Geico CEO Tony Nicely's efficiency and his ability to increase Geico's market share to 7.7 percent of the auto insurance market last year.
"As we view Geico's current opportunities, Tony and I feel like two hungry mosquitoes in a nudist camp. Juicy targets are everywhere," Buffett wrote.
Overall, Berkshire's 2008 profit of $4.99 billion, or $3,224 per Class A share, was down 62 percent from $13.21 billion, or $8,548 per share, in 2007.
Berkshire's fourth-quarter numbers were even worse. Buffett's company reported net income of $117 million, or $76 per share, down 96 percent from $2.95 billion, or $1,904 per share, a year earlier.
Buffett devoted nearly five pages of his letter to shareholders to explaining the role derivatives played in the company's investment losses last year.
The derivatives Berkshire offers operate similar to insurance policies. Some of them cover whether certain stock market indexes -- the S&P 500, the FTSE 100 in the United Kingdom, the Euro Stoxx 50 in Europe and the Nikkei 225 in Japan -- will be lower 15 or 20 years in the future. Others cover credit losses at groups of 100 companies, and some cover credit risks of individual companies.
Buffett said he initiated all of Berkshire's 251 different derivative contracts because he believes they were mispriced in Berkshire's favor.
Analyst Justin Fuller, who works with Midway Capital Research & Management in Chicago, said he thinks the details Buffett offered about Berkshire's derivatives will help.
Fuller said two key things make Berkshire's derivatives different from the complex financial bets of the same name that other companies have used. Berkshire requires most payment upfront, so there's little risk the other party to the derivative will fail to pay. And Berkshire won't take part in derivatives that require the company to post substantial collateral when the value of the contract falls.
"I think laying those out as plainly and simply as he did with examples should calm investors' fears about derivatives," said Fuller.
Berkshire has received $8.1 billion in payments for derivatives which can be invested until the contracts expire years from now.
But Berkshire has to estimate the value of its derivatives every quarter. Buffett said he supports that mark-to-market accounting, but the Black-Scholes formula used to estimate that value tends to overstate Berkshire's liability on long-term contracts.
"Even so, we will continue to use Black-Scholes when we are estimating our financial-statement liability for long-term equity puts. The formula represents conventional wisdom and any substitute that I might offer would engender extreme skepticism," Buffett wrote.
Buffett said he made at least one major investing mistake last year by buying a large amount of ConocoPhillips stock when oil and gas prices were near their peak.
Berkshire increased its stake in ConocoPhillips from 17.5 million shares in 2007 to 84.9 million shares at the end of 2008. Buffett said he didn't anticipate last year's dramatic fall in energy prices, so his decision cost Berkshire shareholders several billion dollars.
Buffett says he also spent $244 million on stock in two Irish banks that appeared cheap. But since then, he's had to write down the value of those purchases to $27 million.
But Buffett also had several investing successes in 2008.
Berkshire committed $14.5 billion to fixed income investments in Goldman Sachs Group Inc. and General Electric Co. Those investments carry high interest rates and give Berkshire the option to acquire stock in those companies.
To fund those investments, Buffett said he had to sell some of Berkshire's holdings in Johnson & Johnson, Procter & Gamble Co. and ConocoPhillips even though he would have rather kept that stock.
"However, I have pledged -- to you, the rating agencies and myself -- to always run Berkshire with more than ample cash. We never want to count on the kindness of strangers in order to meet tomorrow's obligations," Buffett said.
In that regard, Berkshire should be OK because the company finished 2008 with $24.3 billion cash on hand. That's down significantly from the $37.7 billion the company held at the end of 2007, reflecting the investments Buffett made during the year.
Berkshire owns a diverse mix of more than 60 companies, including insurance, furniture, carpet, jewelry, restaurants and utility businesses. And it has major investments in such companies as Wells Fargo & Co. and Coca-Cola Co.
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Buffett used his annual letter Saturday to reassure shareholders that the Omaha-based insurance and investment company has the financial strength needed to withstand the current turmoil and improve after the worst showing of Buffett's 44 years as chairman and CEO.
Buffett wrote he's certain "the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond -- but that conclusion does not tell us whether the stock market will rise or fall."
In between the news of Berkshire's sharply lower profit and a thorough explanation of its largely unrealized $7.5 billion investment and derivative losses, Buffett offered a hopeful view of the nation's future.
He said America has faced bigger economic challenges in the past, including two World Wars and the Great Depression.
"Though the path has not been smooth, our economic system has worked extraordinarily well over time," Buffett wrote. "It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead."
Buffett's letter appeared to mollify the concerns of many who follow the company, but it's not yet clear whether that will help Berkshire's Class A stock extend its rebound from the new five-year low it set last Monday at $73,500. On Friday, it closed up $250 at $78,600.
"If anything, I feel better than I did before I read it," Morningstar analyst Bill Bergman said. Berkshire's results could have easily been worse, he said.
But Buffett estimates Berkshire's book value -- assets minus liabilities -- declined 9.6 percent to $70,530 per share in 2008 -- the biggest drop since he took control of the company in 1965. Berkshire's book value declined only one other time under Buffett, and that was a 6.2 percent drop in 2001 when insurance losses related to the Sept. 11 terrorist attacks hurt results.
Berkshire's Class A shares remain the most expensive U.S. stock, but they fell nearly 32 percent in 2008 and have declined 48 percent since setting a high of $151,650 in December 2007. That high came after an exceptionally profitable quarter that was helped by a $2 billion investment gain.
The S&P 500 fell 37 percent in 2008.
Within Berkshire, Buffett said the company's retail businesses, including furniture and jewelry stores, and those tied to residential construction, such as Shaw carpet and Acme Brick, were hit hard last year. Net income for those businesses slipped 3 percent to $2.28 billion, and Buffett said they will likely continue to perform below their potential in 2009.
But he said Berkshire's utility and insurance businesses, which includes Geico, both delivered outstanding results in 2008 that helped balance out the other businesses.
The Des Moines, Iowa-based utility division, MidAmerican Energy Holdings, contributed $1.7 billion to Berkshire's net income in 2008 thanks to more than $1 billion in proceeds from MidAmerican's failed takeover of Constellation Energy. That's up from the $1.1 billion utility profit that Berkshire recorded in 2007.
The insurance division, which also includes reinsurance giant General Re, contributed $1.8 billion in earnings from underwriting -- a drop of 17 percent from 2007. Buffett praised Geico CEO Tony Nicely's efficiency and his ability to increase Geico's market share to 7.7 percent of the auto insurance market last year.
"As we view Geico's current opportunities, Tony and I feel like two hungry mosquitoes in a nudist camp. Juicy targets are everywhere," Buffett wrote.
Overall, Berkshire's 2008 profit of $4.99 billion, or $3,224 per Class A share, was down 62 percent from $13.21 billion, or $8,548 per share, in 2007.
Berkshire's fourth-quarter numbers were even worse. Buffett's company reported net income of $117 million, or $76 per share, down 96 percent from $2.95 billion, or $1,904 per share, a year earlier.
Buffett devoted nearly five pages of his letter to shareholders to explaining the role derivatives played in the company's investment losses last year.
The derivatives Berkshire offers operate similar to insurance policies. Some of them cover whether certain stock market indexes -- the S&P 500, the FTSE 100 in the United Kingdom, the Euro Stoxx 50 in Europe and the Nikkei 225 in Japan -- will be lower 15 or 20 years in the future. Others cover credit losses at groups of 100 companies, and some cover credit risks of individual companies.
Buffett said he initiated all of Berkshire's 251 different derivative contracts because he believes they were mispriced in Berkshire's favor.
Analyst Justin Fuller, who works with Midway Capital Research & Management in Chicago, said he thinks the details Buffett offered about Berkshire's derivatives will help.
Fuller said two key things make Berkshire's derivatives different from the complex financial bets of the same name that other companies have used. Berkshire requires most payment upfront, so there's little risk the other party to the derivative will fail to pay. And Berkshire won't take part in derivatives that require the company to post substantial collateral when the value of the contract falls.
"I think laying those out as plainly and simply as he did with examples should calm investors' fears about derivatives," said Fuller.
Berkshire has received $8.1 billion in payments for derivatives which can be invested until the contracts expire years from now.
But Berkshire has to estimate the value of its derivatives every quarter. Buffett said he supports that mark-to-market accounting, but the Black-Scholes formula used to estimate that value tends to overstate Berkshire's liability on long-term contracts.
"Even so, we will continue to use Black-Scholes when we are estimating our financial-statement liability for long-term equity puts. The formula represents conventional wisdom and any substitute that I might offer would engender extreme skepticism," Buffett wrote.
Buffett said he made at least one major investing mistake last year by buying a large amount of ConocoPhillips stock when oil and gas prices were near their peak.
Berkshire increased its stake in ConocoPhillips from 17.5 million shares in 2007 to 84.9 million shares at the end of 2008. Buffett said he didn't anticipate last year's dramatic fall in energy prices, so his decision cost Berkshire shareholders several billion dollars.
Buffett says he also spent $244 million on stock in two Irish banks that appeared cheap. But since then, he's had to write down the value of those purchases to $27 million.
But Buffett also had several investing successes in 2008.
Berkshire committed $14.5 billion to fixed income investments in Goldman Sachs Group Inc. and General Electric Co. Those investments carry high interest rates and give Berkshire the option to acquire stock in those companies.
To fund those investments, Buffett said he had to sell some of Berkshire's holdings in Johnson & Johnson, Procter & Gamble Co. and ConocoPhillips even though he would have rather kept that stock.
"However, I have pledged -- to you, the rating agencies and myself -- to always run Berkshire with more than ample cash. We never want to count on the kindness of strangers in order to meet tomorrow's obligations," Buffett said.
In that regard, Berkshire should be OK because the company finished 2008 with $24.3 billion cash on hand. That's down significantly from the $37.7 billion the company held at the end of 2007, reflecting the investments Buffett made during the year.
Berkshire owns a diverse mix of more than 60 companies, including insurance, furniture, carpet, jewelry, restaurants and utility businesses. And it has major investments in such companies as Wells Fargo & Co. and Coca-Cola Co.
计算房产交易的费用
多亏现在有了网际网络，很多专业收费都是透明化了。律师和医生一样，都是属于专业人士，他们的收费都是要根据专业协会的准则来拟定的。由于大家的收费都是大同小异，所以我比较倾向于寻找自己信任的朋友来提供服务。
今天终于和一个律师朋友见面，得到了一些自己之前不了解的资讯。
在这里，先分享之前在网际网络找到的一些房产交易的收费。
假设我现在购买的房子是RM260，000。
Stamp Duty 1st RM100，000 X 1% = RM 1，000
RM160,000 X 2% = RM 3, 200
Legal Fees 1st RM 150,000 X 1% = RM 1,500
RM 110,000 X 0.7% = RM 770
其他的费用大约是RM1，000。
总数是RM7470。
如果银行批准的贷款是屋价的90%，贷款数额是RM234，000。
Loan Legal Fees 1st RM 150,000 X 1% = RM 1,500
RM 84,000 X 0.7% = RM 588
加上其他，大约RM300-RM500。
所以，整个过程大约要花费RM10，000。
目前，我看中的单位是土著单位。理由就是价格会比较低。
风险就是给了10% 定金后，不知道几时才能转换地契。
当然有机会不成功，不过10% 的定金是可以收回，只要在SPA 做一些特别条款既可。
之前问了一些人，大家都对土著单位却之不恭。而且有很多误解。
例如他们认为过后转手不容易。其实，这点不正确。只要你成功转换地契，那个单位将是可以公开卖给任何人。
举个例子，例如我成功以RM250，000成交。实际屋子的市价是RM280，000。
我就直接赚取了RM30，000 的价差。不过，记得风险就是10%的定金会被扣押和损失这笔资金的其他投资机会。
还有，购买屋子的时候，卖者之前用什么价格买，是不需要在意和加以考虑的。
举个例子，这里有些屋主叫价RM300，000。理由是以前的买价是RM265，000。加上银行利息和管理费，他们认为RM 300，000才是合理的。身为买者，我是不需要顾虑这些的。我只参考现在的市场状况和我愿意负担的价格。
今天终于和一个律师朋友见面，得到了一些自己之前不了解的资讯。
在这里，先分享之前在网际网络找到的一些房产交易的收费。
假设我现在购买的房子是RM260，000。
Stamp Duty 1st RM100，000 X 1% = RM 1，000
RM160,000 X 2% = RM 3, 200
Legal Fees 1st RM 150,000 X 1% = RM 1,500
RM 110,000 X 0.7% = RM 770
其他的费用大约是RM1，000。
总数是RM7470。
如果银行批准的贷款是屋价的90%，贷款数额是RM234，000。
Loan Legal Fees 1st RM 150,000 X 1% = RM 1,500
RM 84,000 X 0.7% = RM 588
加上其他，大约RM300-RM500。
所以，整个过程大约要花费RM10，000。
目前，我看中的单位是土著单位。理由就是价格会比较低。
风险就是给了10% 定金后，不知道几时才能转换地契。
当然有机会不成功，不过10% 的定金是可以收回，只要在SPA 做一些特别条款既可。
之前问了一些人，大家都对土著单位却之不恭。而且有很多误解。
例如他们认为过后转手不容易。其实，这点不正确。只要你成功转换地契，那个单位将是可以公开卖给任何人。
举个例子，例如我成功以RM250，000成交。实际屋子的市价是RM280，000。
我就直接赚取了RM30，000 的价差。不过，记得风险就是10%的定金会被扣押和损失这笔资金的其他投资机会。
还有，购买屋子的时候，卖者之前用什么价格买，是不需要在意和加以考虑的。
举个例子，这里有些屋主叫价RM300，000。理由是以前的买价是RM265，000。加上银行利息和管理费，他们认为RM 300，000才是合理的。身为买者，我是不需要顾虑这些的。我只参考现在的市场状况和我愿意负担的价格。
Friday, February 27, 2009
股市赢家十大铁律
股市中有无数先行者，他们的成败得失，值得后来者总结与借鉴。而其中的规律，对指导我们今后的投资，是大有裨益的。
一、以"我"为主，培养自己独立思考的能力
投资者首先需要修炼内功，并在股市的实践中逐步树立信心。我们在股市中经常看到这样的人：昨天还发誓要紧紧捂住某一只股票，今天却早已更换成另一个筹码，后日也不断改变主意，而后市个股走势却证明其原有思路无比正确。出现这样的结果，是投资者没养成以我为主、独立思考的好习惯所致，总是人云亦云，盲目跟风。
二、关注政策，决胜千里
实践证明，对股市真正起决定作用的仍是政策及国际环境的影响。例如2008年美国次贷危机全面爆发，并引起全世界金融市场剧烈动荡，而国内一系列经济刺激计划的出台，则带动相关板块和个股甚至整个市场大幅反弹。
三、深思熟虑，果断出击
投资者为避免盲目和仓促地追涨杀跌，应学会三思而行，在深思熟虑后，果断出击。如面对最近一个多月来沪深两市大盘触底反弹后的加速上行，以及诸多题材个股的大幅上扬，若不加思考地追涨，很容易成为套牢一族；而一旦选准了个股，在该股回落至自己的心理价位后，就可果断出手。
四、减少操作，力求全胜
在股市中并不是操作得越频繁收益就越大，多劳并非多得。如果自己不是短线高手，操作次数越多，失误也会越多；而失误越多，心态就越差；心态越差，操作失误就会更多，如此就形成恶性循环。若坚持每年进行少有的数次操作，准确出击，并注重低吸有序、高抛有节制的策略，自己的操作能力就会不断提高，而且收益也会放大。
五、持股勿贪多
我有一位朋友用近200万元的资金买了60只左右的股票，望着她那张整日忙碌得红艳艳的脸，我从心里为她着急。因为她的持股太多太分散了。我认为，持股太多首先表明投资者在投资前，没有做好必要的准备，诸如必要的学习、交流和研判；其次，在初次投资遭受损失后，没有选择正确规避风险的措施，误认为"大就是金，金就是好，好就是稳"，而不是缩回拳头，集中资金，集中精力，专注少数个股。每个人的精力有限，切不可作茧自缚，事倍功半。
六、掌握好买卖时机
投资者先要去掉"贪"字，静下心来，认真寻找和追踪可能的潜力股，准备介入；如果手中持有的股票不断攀升，应调整心态，平静心绪，理性思考，把握卖出时机。技术上，如拟买进，投资者应观察个股指标如RSI、KDJ等是否已在钝化区域，要确定之后，再结合其他因素考虑，方可耐心吸筹。如拟卖出，则应分析成交量的放大规模，关键指标是否高位钝化，放量时股价是否不升甚至调头。此时，若贪心大发，风险必大，赚钱梦必破。
七、劳逸结合，看不懂时就空仓
市场永远有机会，但风险无时不在。投资者久战股市，不注意休息，往往会失手。休整是为了以后更好地战斗，这也是理性投资的范畴。宁可空仓观望，去做些分析和研判的工作，也不可心神不定、坐卧不安地持股，那如同每日蚕食自身的精力。记住，空仓不是吃亏，是抢先规避风险、伺机行动前的必要准备。
八、少些凭空遐想，多些心理分析
许多投资者获利不知了结，套牢后不晓得及时止损，满脑子是一厢情愿式的单相思，总是自我安慰地认为，庄家还会拉升的。其实，这些投资者连震仓与出货都区分不出。这种幻觉变成幻想，从而演变成美妙的遐想，再由遐想真正落实到瞎想，结果被动得不可收拾。为了避免这种失误，辨别主流资金出没的真伪，就应该加大对管理层制定政策的心理研究，如政策出台的条件是什么？政策出台的根本动机是什么？主流资金是如何理解和判别管理层心理的？普通投资者又是如何想的？等等，还可以将此心理思维模式引申到板块、行业及个股当中，如此，将不难发现许多技术分析中难以得到的收获和惊喜。
九、自找麻烦
华尔街一位著名操盘手曾说："股市中赚钱很快，但亏钱也很快，而且，每次亏钱都是我赚了钱后，洋洋自得之时发生的。"投资者总沾沾自喜于一得之功，这是不可取的。但更重要的是失误后要善于总结，要自己给自己出难题，而不是简单地后悔，不是单纯地承认失误，要避免再一次摔倒在同一条河里的错误出现。
自我剖析，学习他人之长，补己之短，看似自寻烦恼，自找麻烦，其实是塑造成功的自我。记住，人不可妄自菲薄，更不可狂妄自大。
十、不求完美，只求收获
股市中不可能要求完美，而要有积小胜为大胜、积小赢为大赢的精神。永远记住，和你打交道的另外一个人比你聪明，这也是戒贪的一种方法。
一、以"我"为主，培养自己独立思考的能力
投资者首先需要修炼内功，并在股市的实践中逐步树立信心。我们在股市中经常看到这样的人：昨天还发誓要紧紧捂住某一只股票，今天却早已更换成另一个筹码，后日也不断改变主意，而后市个股走势却证明其原有思路无比正确。出现这样的结果，是投资者没养成以我为主、独立思考的好习惯所致，总是人云亦云，盲目跟风。
二、关注政策，决胜千里
实践证明，对股市真正起决定作用的仍是政策及国际环境的影响。例如2008年美国次贷危机全面爆发，并引起全世界金融市场剧烈动荡，而国内一系列经济刺激计划的出台，则带动相关板块和个股甚至整个市场大幅反弹。
三、深思熟虑，果断出击
投资者为避免盲目和仓促地追涨杀跌，应学会三思而行，在深思熟虑后，果断出击。如面对最近一个多月来沪深两市大盘触底反弹后的加速上行，以及诸多题材个股的大幅上扬，若不加思考地追涨，很容易成为套牢一族；而一旦选准了个股，在该股回落至自己的心理价位后，就可果断出手。
四、减少操作，力求全胜
在股市中并不是操作得越频繁收益就越大，多劳并非多得。如果自己不是短线高手，操作次数越多，失误也会越多；而失误越多，心态就越差；心态越差，操作失误就会更多，如此就形成恶性循环。若坚持每年进行少有的数次操作，准确出击，并注重低吸有序、高抛有节制的策略，自己的操作能力就会不断提高，而且收益也会放大。
五、持股勿贪多
我有一位朋友用近200万元的资金买了60只左右的股票，望着她那张整日忙碌得红艳艳的脸，我从心里为她着急。因为她的持股太多太分散了。我认为，持股太多首先表明投资者在投资前，没有做好必要的准备，诸如必要的学习、交流和研判；其次，在初次投资遭受损失后，没有选择正确规避风险的措施，误认为"大就是金，金就是好，好就是稳"，而不是缩回拳头，集中资金，集中精力，专注少数个股。每个人的精力有限，切不可作茧自缚，事倍功半。
六、掌握好买卖时机
投资者先要去掉"贪"字，静下心来，认真寻找和追踪可能的潜力股，准备介入；如果手中持有的股票不断攀升，应调整心态，平静心绪，理性思考，把握卖出时机。技术上，如拟买进，投资者应观察个股指标如RSI、KDJ等是否已在钝化区域，要确定之后，再结合其他因素考虑，方可耐心吸筹。如拟卖出，则应分析成交量的放大规模，关键指标是否高位钝化，放量时股价是否不升甚至调头。此时，若贪心大发，风险必大，赚钱梦必破。
七、劳逸结合，看不懂时就空仓
市场永远有机会，但风险无时不在。投资者久战股市，不注意休息，往往会失手。休整是为了以后更好地战斗，这也是理性投资的范畴。宁可空仓观望，去做些分析和研判的工作，也不可心神不定、坐卧不安地持股，那如同每日蚕食自身的精力。记住，空仓不是吃亏，是抢先规避风险、伺机行动前的必要准备。
八、少些凭空遐想，多些心理分析
许多投资者获利不知了结，套牢后不晓得及时止损，满脑子是一厢情愿式的单相思，总是自我安慰地认为，庄家还会拉升的。其实，这些投资者连震仓与出货都区分不出。这种幻觉变成幻想，从而演变成美妙的遐想，再由遐想真正落实到瞎想，结果被动得不可收拾。为了避免这种失误，辨别主流资金出没的真伪，就应该加大对管理层制定政策的心理研究，如政策出台的条件是什么？政策出台的根本动机是什么？主流资金是如何理解和判别管理层心理的？普通投资者又是如何想的？等等，还可以将此心理思维模式引申到板块、行业及个股当中，如此，将不难发现许多技术分析中难以得到的收获和惊喜。
九、自找麻烦
华尔街一位著名操盘手曾说："股市中赚钱很快，但亏钱也很快，而且，每次亏钱都是我赚了钱后，洋洋自得之时发生的。"投资者总沾沾自喜于一得之功，这是不可取的。但更重要的是失误后要善于总结，要自己给自己出难题，而不是简单地后悔，不是单纯地承认失误，要避免再一次摔倒在同一条河里的错误出现。
自我剖析，学习他人之长，补己之短，看似自寻烦恼，自找麻烦，其实是塑造成功的自我。记住，人不可妄自菲薄，更不可狂妄自大。
十、不求完美，只求收获
股市中不可能要求完美，而要有积小胜为大胜、积小赢为大赢的精神。永远记住，和你打交道的另外一个人比你聪明，这也是戒贪的一种方法。
Tuesday, February 24, 2009
Oil Primed for Quick Climb, But Don't Fantasize About Return to 2008 Highs
If any market qualifies as rockier than equities, consider oil. Crude prices have done a complete roundtrip from $40 a barrel, up to $147/barrel last summer, only to tumble back down to today's levels under $40/barrel. So what exactly happened?
As our guest James Cordier, president of Liberty Trading Group, explains, oil's recent adventure was the result of a "perfect storm" of many factors.
Global demand was rising, along with hedge fund speculation.
The dollar was falling, boosting all dollar-denominated commodities.
China and other major oil consumers were providing fuel-price subsidies that propped up demand.
But by the summer of 2008, when those subsidies were removed and the global economy sputtered, oil's unraveling began. So is the oil party over? Not exactly. Once the economy begins its recovery, expect oil prices to race up to the $60-$70/barrel levels, Cordier forecasts.
And gasoline prices at the pump, heading into the crucial summer driving season? Higher, Cordier says. While demand may flatten as the economy slows and unemployment climbs, refiners are making less refined products such as gasoline and diesel to improve profit margins. We likely won't see prices topping $4/gallon like last summer, but hovering instead in the $2/gallon range.
And the likelihood of a return to $147 oil? "A fantasy," Cordier says.
As our guest James Cordier, president of Liberty Trading Group, explains, oil's recent adventure was the result of a "perfect storm" of many factors.
Global demand was rising, along with hedge fund speculation.
The dollar was falling, boosting all dollar-denominated commodities.
China and other major oil consumers were providing fuel-price subsidies that propped up demand.
But by the summer of 2008, when those subsidies were removed and the global economy sputtered, oil's unraveling began. So is the oil party over? Not exactly. Once the economy begins its recovery, expect oil prices to race up to the $60-$70/barrel levels, Cordier forecasts.
And gasoline prices at the pump, heading into the crucial summer driving season? Higher, Cordier says. While demand may flatten as the economy slows and unemployment climbs, refiners are making less refined products such as gasoline and diesel to improve profit margins. We likely won't see prices topping $4/gallon like last summer, but hovering instead in the $2/gallon range.
And the likelihood of a return to $147 oil? "A fantasy," Cordier says.
BEST WORLD: Low capex, high cashflow business
BEST WORLD is like a beauty queen who becomes more attractive with time. Year in, year out, since its listing in 2004, the company has delivered strong profit growth, as reflected in the title of a recent press release, “Best World delivers fourth year of consecutive growth since listing”.
As I dig deeper into the financial figures and familiarize myself with the business, I discover how well this company has done for its shareholders. Since its IPO, total shareholder return (that is, capital appreciation plus dividends) has been more than 600% as at Feb 29 this year, according to Bloomberg.
The company has stepped up its dividend payment now (final dividend of 2 cents, interim dividend 1.212 cents a share) when many companies are reducing theirs in times of uncertainty. For FY 2007, Best World increased its payout ratio from 34.8% in 2006 to 45% of its net profit. Better still, the higher percentage is on a higher base, as Best World’s net profit rose 13.9%.
Best World chairman Doreen Tan is a co-founder of Best World along with Dora Hoan.
Despite its fabulous business and shareholder orientation, Best World is a stock that some people hesitate to invest in simply because it is a multi-level marketing (MLM) company. A lot of people wrongly perceive it as pyramid selling, which is illegal in Singapore and many parts of Asia.
There are dubious businesses in the MLM industry, which focus their efforts on recruiting “sales representatives” who end up buying products for their own use and for inventory.
The reputable MLM businesses, on the other hand, mainly employ part-time, or sometimes full-time, sale representatives who use personal relationships and one-on-one selling to market products. The evidence points to Best World being a reputable MLM business.
Its compensation program, called ENP, does not make millionaires out of ordinary folk. However, it enables sales representatives to make decent money to add to their family’s resources. At least, one aspect of a “pyramid scheme” is at work in the Best World compensation plan. Thousands of individuals become its sales distributors to simply buy products at the “wholesale” price in order to use the products.
That’s why there’s only one sales distributor who is making S$500,000 and a few more who are making S$100,000 per year. These super distributors have a full-time commitment to sales and recruiting. Best has an estimated 2,000 such full-timers. On average, Best World’s active sales distributors earn sales commission of S$2,000 to S$2,500 per year.
The commission of top earners (which Best World terms as Silver, Gold and Platinum Directors) ranges from S$70,000 to S$500,000 per annum.
Best World sets a low consumption hurdle for members to sustain their membership. This gives me confidence that reported sales are quite close to actual consumption. In contrast, some competitors have higher entry-level sales hurdles to encourage aggressive selling by the agents.
Although sales growth is superior initially, the structure would leave unconsumed inventory stuck within the distribution channels eventually. According to its latest update, Best World has 148,428 distributors, of whom only 2,000 are full-timers. Best World's distributors consume about 75% of the products they buy.
Their demographics provide telling information about its main target market – females above 30 years old. About 95% of the full-time distributors are business builders.
Gross margins of more than 75%
This business model is undoubtedly compelling. It enjoys gross margins in excess of 75% without any corresponding huge need for capex. The sales force is independent and self-managed. Best World usually enters a new market when existing distributors start selling Best World products in this new market.
Membership has grown rapidly in recent years.
These distributors seek the Company’s permission to set up a Lifestyle Centre (“LC”) at their own expense. This centre acts as a storage and distribution point for the sales distributors. A certain percentage of sales is rewarded to these aggressive distributors for setting up LCs. When sufficient sales volume has been achieved, the company would set up a Regional Centre to enhance the marketing efforts of the products.
Best World has minimum receivables as all products are paid before they are sold. But the company does provide credit terms for some of its best sales people in regional markets. Best World has minimum working capital requirements.
Because of this unique market penetration strategy and the minimum working capital requirement, the company can continue to scale up the business without substantial requirements for working capital, property, plant and equipment.
In FY2007, its cash conversion cycle (that is, the time between the purchase of goods and the collection of payment) was shortened to 115 days as the company tightened collection days and inventory control. This compares well with FY 2006’s 110 days and FY2005’s 147 days.
Notably, Best World generated free cash flow of about S$14 million in FY07, compared to S$10.3 million in FY06.
Best World makes product quality a key priority. It sources for innovative products from its pharmaceutical GMP-certified OEM suppliers which are mostly based outside Asia. It plans to launch 10 new products every year. Sales growth is less driven by the number of launches and more by the emergence of the next blockbuster. While there is no guarantee of future product success, I see an emerging success.
Its DR’s Secret sold 200 sets/month when it was first launched in 1990. Currently, more than 5,000 sets are sold every month. Dr’s Secret sells for $384 per set, placing it among the mid-high tier of skincare product segment. My girlfriends say SK II sells for S$500+. A blockbuster product, the Negative Ionizer, costing S$750 sold pretty well in Singapore over the past 2 years. This same product was launched in Malaysia in May 06.
Best World keeps its SKU (or Stock Keeping Units) below 100 to make the sale proposition relatively simple for their mostly part-time independent sales force.
Hardly any receivables
Best World’s business is attractive because it is extremely cash generative and scalable. In FY2007, Best World's debtor days were 45 days, compared to payable days of 14 days. Receivables are tightly controlled by Best World.
Best World’s gross margins are attractive at 70-78%. The company sells its products to the distributors at a fixed Distributor Price (“DP”). Its distributors can sell the products onward to non-members at a 20% mark-up or Retail Price (“RP”).
However, the majority of the products are consumed by its own members. The company only books revenue at DP and prices its products at about 4-7x cost of goods sold (COGS). Historical margins were around 75%, which are higher than Amway’s 27%, Nu Skin’s 28% and the margins of traditional retailers such as Robinson and Metro. This implies that Best World’s products are priced at the mid-high range. This premium pricing reflects the quality of its products.
SPRING chairman Philip Yeo visiting Best World's HQ at Changi.
Selling and distribution expenses are the biggest cost component for Best World. These expenses are largely commissions for distributors to motivate them but there is a cap to ensure that selling expenses do not escalate out of control. The ENP program ensures that the company does not pay out more than 50.5% of revenue at any point. Instances of 50% payouts are rare, occurring only if all the distributors within a downline become optimally productive.
The beauty of MLM is the low capex requirements. There is little need to spend on fixed assets to run the business. As such, Best World’s free cash flow should be pretty close to its reported earnings. In Best World’s case, FY2007 net profit of S$13.5 million is close to FCF of S$14 million – and this pattern has prevailed in the past. With strong free cash flow, the Company can support sustainable dividends payout. The management has a policy to pay out 30% of its net profit as dividends to shareholders.
In FY2006, the Company paid S$4.125 million, or 2.5 cents per share, as dividend. For FY 2007, the Company increased it to S$6.125 million, or 3.212 cents, per share. I am sure the company can pay more in the future as it has a cash hoard of more than S$35 million and capex plans can be financed by its strong cash flow.
Ideally, Best World should consistently pay out more than 50% of its net profit as dividends, similar to Eu Yan Sang. This would help attract more institutional interest to the company, just as Eu Yan Sang has Aberdeen Asset Management as its anchor investor.
Future Plans
The management looks pretty focused, having publicly stated the markets that it would be expanding to in future. South Korea and the Philippines will be the new markets in 2008, while Japan and India will be next in 2009/2010. Given its track record in Indonesia, Malaysia and other markets, I believe the company should be able to execute its plans – with, hopefully, no more than a few bumps here and there.
A lot has been said about Best World’s expansion into China, touted to be the largest consumer market in the next five years. While there is no doubt that China, with its 1.3 billion population presents enormous opportunity for the company, I also believe that this is not an easy market.
Challenges will come along with opportunities. Let the management execute its plans in China the next 1-2 years and we will see how it grows along. In the meantime, if you are able to shake off any prejudice that MLM companies are bad eggs, this company is worth a second look, at least.
As I dig deeper into the financial figures and familiarize myself with the business, I discover how well this company has done for its shareholders. Since its IPO, total shareholder return (that is, capital appreciation plus dividends) has been more than 600% as at Feb 29 this year, according to Bloomberg.
The company has stepped up its dividend payment now (final dividend of 2 cents, interim dividend 1.212 cents a share) when many companies are reducing theirs in times of uncertainty. For FY 2007, Best World increased its payout ratio from 34.8% in 2006 to 45% of its net profit. Better still, the higher percentage is on a higher base, as Best World’s net profit rose 13.9%.
Best World chairman Doreen Tan is a co-founder of Best World along with Dora Hoan.
Despite its fabulous business and shareholder orientation, Best World is a stock that some people hesitate to invest in simply because it is a multi-level marketing (MLM) company. A lot of people wrongly perceive it as pyramid selling, which is illegal in Singapore and many parts of Asia.
There are dubious businesses in the MLM industry, which focus their efforts on recruiting “sales representatives” who end up buying products for their own use and for inventory.
The reputable MLM businesses, on the other hand, mainly employ part-time, or sometimes full-time, sale representatives who use personal relationships and one-on-one selling to market products. The evidence points to Best World being a reputable MLM business.
Its compensation program, called ENP, does not make millionaires out of ordinary folk. However, it enables sales representatives to make decent money to add to their family’s resources. At least, one aspect of a “pyramid scheme” is at work in the Best World compensation plan. Thousands of individuals become its sales distributors to simply buy products at the “wholesale” price in order to use the products.
That’s why there’s only one sales distributor who is making S$500,000 and a few more who are making S$100,000 per year. These super distributors have a full-time commitment to sales and recruiting. Best has an estimated 2,000 such full-timers. On average, Best World’s active sales distributors earn sales commission of S$2,000 to S$2,500 per year.
The commission of top earners (which Best World terms as Silver, Gold and Platinum Directors) ranges from S$70,000 to S$500,000 per annum.
Best World sets a low consumption hurdle for members to sustain their membership. This gives me confidence that reported sales are quite close to actual consumption. In contrast, some competitors have higher entry-level sales hurdles to encourage aggressive selling by the agents.
Although sales growth is superior initially, the structure would leave unconsumed inventory stuck within the distribution channels eventually. According to its latest update, Best World has 148,428 distributors, of whom only 2,000 are full-timers. Best World's distributors consume about 75% of the products they buy.
Their demographics provide telling information about its main target market – females above 30 years old. About 95% of the full-time distributors are business builders.
Gross margins of more than 75%
This business model is undoubtedly compelling. It enjoys gross margins in excess of 75% without any corresponding huge need for capex. The sales force is independent and self-managed. Best World usually enters a new market when existing distributors start selling Best World products in this new market.
Membership has grown rapidly in recent years.
These distributors seek the Company’s permission to set up a Lifestyle Centre (“LC”) at their own expense. This centre acts as a storage and distribution point for the sales distributors. A certain percentage of sales is rewarded to these aggressive distributors for setting up LCs. When sufficient sales volume has been achieved, the company would set up a Regional Centre to enhance the marketing efforts of the products.
Best World has minimum receivables as all products are paid before they are sold. But the company does provide credit terms for some of its best sales people in regional markets. Best World has minimum working capital requirements.
Because of this unique market penetration strategy and the minimum working capital requirement, the company can continue to scale up the business without substantial requirements for working capital, property, plant and equipment.
In FY2007, its cash conversion cycle (that is, the time between the purchase of goods and the collection of payment) was shortened to 115 days as the company tightened collection days and inventory control. This compares well with FY 2006’s 110 days and FY2005’s 147 days.
Notably, Best World generated free cash flow of about S$14 million in FY07, compared to S$10.3 million in FY06.
Best World makes product quality a key priority. It sources for innovative products from its pharmaceutical GMP-certified OEM suppliers which are mostly based outside Asia. It plans to launch 10 new products every year. Sales growth is less driven by the number of launches and more by the emergence of the next blockbuster. While there is no guarantee of future product success, I see an emerging success.
Its DR’s Secret sold 200 sets/month when it was first launched in 1990. Currently, more than 5,000 sets are sold every month. Dr’s Secret sells for $384 per set, placing it among the mid-high tier of skincare product segment. My girlfriends say SK II sells for S$500+. A blockbuster product, the Negative Ionizer, costing S$750 sold pretty well in Singapore over the past 2 years. This same product was launched in Malaysia in May 06.
Best World keeps its SKU (or Stock Keeping Units) below 100 to make the sale proposition relatively simple for their mostly part-time independent sales force.
Hardly any receivables
Best World’s business is attractive because it is extremely cash generative and scalable. In FY2007, Best World's debtor days were 45 days, compared to payable days of 14 days. Receivables are tightly controlled by Best World.
Best World’s gross margins are attractive at 70-78%. The company sells its products to the distributors at a fixed Distributor Price (“DP”). Its distributors can sell the products onward to non-members at a 20% mark-up or Retail Price (“RP”).
However, the majority of the products are consumed by its own members. The company only books revenue at DP and prices its products at about 4-7x cost of goods sold (COGS). Historical margins were around 75%, which are higher than Amway’s 27%, Nu Skin’s 28% and the margins of traditional retailers such as Robinson and Metro. This implies that Best World’s products are priced at the mid-high range. This premium pricing reflects the quality of its products.
SPRING chairman Philip Yeo visiting Best World's HQ at Changi.
Selling and distribution expenses are the biggest cost component for Best World. These expenses are largely commissions for distributors to motivate them but there is a cap to ensure that selling expenses do not escalate out of control. The ENP program ensures that the company does not pay out more than 50.5% of revenue at any point. Instances of 50% payouts are rare, occurring only if all the distributors within a downline become optimally productive.
The beauty of MLM is the low capex requirements. There is little need to spend on fixed assets to run the business. As such, Best World’s free cash flow should be pretty close to its reported earnings. In Best World’s case, FY2007 net profit of S$13.5 million is close to FCF of S$14 million – and this pattern has prevailed in the past. With strong free cash flow, the Company can support sustainable dividends payout. The management has a policy to pay out 30% of its net profit as dividends to shareholders.
In FY2006, the Company paid S$4.125 million, or 2.5 cents per share, as dividend. For FY 2007, the Company increased it to S$6.125 million, or 3.212 cents, per share. I am sure the company can pay more in the future as it has a cash hoard of more than S$35 million and capex plans can be financed by its strong cash flow.
Ideally, Best World should consistently pay out more than 50% of its net profit as dividends, similar to Eu Yan Sang. This would help attract more institutional interest to the company, just as Eu Yan Sang has Aberdeen Asset Management as its anchor investor.
Future Plans
The management looks pretty focused, having publicly stated the markets that it would be expanding to in future. South Korea and the Philippines will be the new markets in 2008, while Japan and India will be next in 2009/2010. Given its track record in Indonesia, Malaysia and other markets, I believe the company should be able to execute its plans – with, hopefully, no more than a few bumps here and there.
A lot has been said about Best World’s expansion into China, touted to be the largest consumer market in the next five years. While there is no doubt that China, with its 1.3 billion population presents enormous opportunity for the company, I also believe that this is not an easy market.
Challenges will come along with opportunities. Let the management execute its plans in China the next 1-2 years and we will see how it grows along. In the meantime, if you are able to shake off any prejudice that MLM companies are bad eggs, this company is worth a second look, at least.
BEST WORLD: Insights from FY08 analyst briefing
DIRECT SELLER Best World had over a dozen analysts and fund managers at its FY08 results briefing last week, and its management shared candidly how it is meeting the challenge of the tough economic climate.
The consumer-discretionary company netted some S$10.6 million in earnings for FY08, had net margins of 11.1% and sits on some S$30.6 million of cash.
Best World’s revenues come from sales of skincare, health supplements and other lifestyle health and beauty products to its members.
Not only do the members use Best World products themselves, they are also provided with comprehensive sales training as well as commissions for recruiting other members and for promoting sales.
Best World’s successful member-get-member platform has grown its membership base to 186,759 (customers) in about 10 countries in the Asia Pacific region.
Indonesia, Malaysia and Singapore are its key markets.
Indonesia is its largest market, with revenue contribution of 46% in FY08. While Indon sales have been robust – growing 14.5% yoy, a weaker rupiah resulted in sales contribution falling by 3.6% in Singapore dollars.
Best World recently met a hiccup in obtaining licensing for direct selling in China. A proposal to acquire 51% in Chinese direct seller Joymain lapsed after the Chinese party failed to obtain approval from their Ministry of Commerce.
Below is a summary of issues addressed by Best World’s executive director, Mr Huang Ban Chin, and its group financial controller, Ms Chew Nam Yeo, at the briefing.
Sales
Q: What is your best-selling product category?
A: Skincare, as most of our distributors are ladies. This contributes about 60% to our revenues.
Q: What is your longest selling product?
A: Health supplements. Our products do not have a limit on its life cycle. The popularity of a product line depends on how much commission it can generate for distributors.
Q: What will your advertising & promo expense look like for FY09?
A: A&P expense is booked as part of distribution cost, which together with commissions and other sales related expenses is about 40% of revenue.
We are not planning any substantial increase in our A&P expense.
Our advertising is prudent; that is, media channels chosen are specific to audience target rather than blitzes. For example, we may advertise in Lianhe Zaobao to reach the Mandarin speaking community but not in the Straits Times.
Best World's negative ionizer is a big ticket item which sells for about S$700.
Q: Why are sales per member declining (from S$668 in FY07 to S$514 in FY08)? How do you deal with this?
A: Our product structure is such that members usually make big-ticket purchases at the point of recruitment. Subsequent purchases are usually to replace consumable supplies.
For example, selling prices of some products like our negative ionizer and water filter are in the high hundreds but these are not consumables that generate replacement sales.
Thus, as our membership base grows, the existence of earlier recruits who buy less than the new recruits for the year will average down sales per member.
To address this, we are constantly rolling out new product lines and phasing out the older models in response to changes in market trends, regulations and cost of ingredients.
In 2009, we have a new product - first milk (Colostrum) health supplement, and Pureflo - a new generation of our water filteration system.
We also smooth out revenue by providing installment payment schemes.
Q: Do members pay to join as distributors?
A: There is a nominal once-off membership fee of S$25. This is payable upon recruitment and is used to offset costs of sales kits which include product and price catalogues, CDs etc.
Q: In your membership structure, what is the proportion of ‘business builders’ versus passive consumers?
A: The number of business builders (members who actively recruit new members and generate high-volume sales) is growing. This is especially true in China.
In the pipeline is a 3rd generation water filtration system capturing form and function.
Indonesia
Q: Have you maintained retail prices in Indonesia?
A: We raised prices twice in Indonesia last year. The first was for passing the burden of value-added tax to customers. The second was to offset the foreign currency loss we would incur as a result of the Indonesian Rupiah’s depreciation.
Q: What is your cash conversion cycle in Rupiah?
A: About 5 months.
Q: How are you planning to offset a decline in revenue from Indonesia?
A: Taiwan is a very resilient market and its people are very solution oriented in hard times. It is one market where direct selling recruitment rises during recessions.
Relationships are very important in China, Hong Kong and Taiwan. For example, they would rather buy from someone they know than from a retail mall.
Taiwanese have a natural affinity for selling in China and we see potential in the Greater China market.
China
Q: What are your plans for expanding in China?
A: Joymain has been dropped but we are exploring other business partners. We are no longer considering joint ventures with Chinese direct sellers in order to sell under their license. Rather, we will apply for the license under the Best World corporate name.
Hong Kong is a tough market due to the relatively lower proportion of members who want to be business builders. However, it is important as an entry point to the China market.
Guangdong residents, for example, use established Hong Kong brands as a reference for product acceptance.
Q: Have you recovered your Rmb 20 million prepayment to Joymain for the acquisition?
A: Our prepayment is secured by Joymain’s unencumbered real properties independently valued to be worth about Rmb 40 million in April 2008. Currently we are going through the necessary procedures to recover the prepayment.
Group financial controller Chew Nam Yeo has a prudent cash control policy.
Outlook
Q: Have any of your competitors closed down?
A: A private company named WBG closed shop recently. The closure was due to a management problem rather than market conditions.
Q: Does this present opportunity for Best World?
A: Yes, we certainly see opportunity there.
Balance sheet and cash flow
Q: How did you achieve the improvement in receivables turnover (from 45 days in FY07 to 22 days in FY08)? Is that sustainable?
A: We had better credit management and receivables collection.
Q: Why did payables turnover fall (from 54 days in FY07 to 24 days in FY08)?
A: There are certain vendors with shorter payment terms.
Q: Are you holding your S$30 million of cash reserves in any structured products?
A: We are very prudent in cash management and mostly hold deposits in banks. We do not hold any stocks or bonds for speculation purposes.
A small proportion (S$3.5 million) is in principal-protected variable interest rate notes issued by banks.
We will need cash resources for our expansion as well as business opportunities that may arise in the course of the year.
The consumer-discretionary company netted some S$10.6 million in earnings for FY08, had net margins of 11.1% and sits on some S$30.6 million of cash.
Best World’s revenues come from sales of skincare, health supplements and other lifestyle health and beauty products to its members.
Not only do the members use Best World products themselves, they are also provided with comprehensive sales training as well as commissions for recruiting other members and for promoting sales.
Best World’s successful member-get-member platform has grown its membership base to 186,759 (customers) in about 10 countries in the Asia Pacific region.
Indonesia, Malaysia and Singapore are its key markets.
Indonesia is its largest market, with revenue contribution of 46% in FY08. While Indon sales have been robust – growing 14.5% yoy, a weaker rupiah resulted in sales contribution falling by 3.6% in Singapore dollars.
Best World recently met a hiccup in obtaining licensing for direct selling in China. A proposal to acquire 51% in Chinese direct seller Joymain lapsed after the Chinese party failed to obtain approval from their Ministry of Commerce.
Below is a summary of issues addressed by Best World’s executive director, Mr Huang Ban Chin, and its group financial controller, Ms Chew Nam Yeo, at the briefing.
Sales
Q: What is your best-selling product category?
A: Skincare, as most of our distributors are ladies. This contributes about 60% to our revenues.
Q: What is your longest selling product?
A: Health supplements. Our products do not have a limit on its life cycle. The popularity of a product line depends on how much commission it can generate for distributors.
Q: What will your advertising & promo expense look like for FY09?
A: A&P expense is booked as part of distribution cost, which together with commissions and other sales related expenses is about 40% of revenue.
We are not planning any substantial increase in our A&P expense.
Our advertising is prudent; that is, media channels chosen are specific to audience target rather than blitzes. For example, we may advertise in Lianhe Zaobao to reach the Mandarin speaking community but not in the Straits Times.
Best World's negative ionizer is a big ticket item which sells for about S$700.
Q: Why are sales per member declining (from S$668 in FY07 to S$514 in FY08)? How do you deal with this?
A: Our product structure is such that members usually make big-ticket purchases at the point of recruitment. Subsequent purchases are usually to replace consumable supplies.
For example, selling prices of some products like our negative ionizer and water filter are in the high hundreds but these are not consumables that generate replacement sales.
Thus, as our membership base grows, the existence of earlier recruits who buy less than the new recruits for the year will average down sales per member.
To address this, we are constantly rolling out new product lines and phasing out the older models in response to changes in market trends, regulations and cost of ingredients.
In 2009, we have a new product - first milk (Colostrum) health supplement, and Pureflo - a new generation of our water filteration system.
We also smooth out revenue by providing installment payment schemes.
Q: Do members pay to join as distributors?
A: There is a nominal once-off membership fee of S$25. This is payable upon recruitment and is used to offset costs of sales kits which include product and price catalogues, CDs etc.
Q: In your membership structure, what is the proportion of ‘business builders’ versus passive consumers?
A: The number of business builders (members who actively recruit new members and generate high-volume sales) is growing. This is especially true in China.
In the pipeline is a 3rd generation water filtration system capturing form and function.
Indonesia
Q: Have you maintained retail prices in Indonesia?
A: We raised prices twice in Indonesia last year. The first was for passing the burden of value-added tax to customers. The second was to offset the foreign currency loss we would incur as a result of the Indonesian Rupiah’s depreciation.
Q: What is your cash conversion cycle in Rupiah?
A: About 5 months.
Q: How are you planning to offset a decline in revenue from Indonesia?
A: Taiwan is a very resilient market and its people are very solution oriented in hard times. It is one market where direct selling recruitment rises during recessions.
Relationships are very important in China, Hong Kong and Taiwan. For example, they would rather buy from someone they know than from a retail mall.
Taiwanese have a natural affinity for selling in China and we see potential in the Greater China market.
China
Q: What are your plans for expanding in China?
A: Joymain has been dropped but we are exploring other business partners. We are no longer considering joint ventures with Chinese direct sellers in order to sell under their license. Rather, we will apply for the license under the Best World corporate name.
Hong Kong is a tough market due to the relatively lower proportion of members who want to be business builders. However, it is important as an entry point to the China market.
Guangdong residents, for example, use established Hong Kong brands as a reference for product acceptance.
Q: Have you recovered your Rmb 20 million prepayment to Joymain for the acquisition?
A: Our prepayment is secured by Joymain’s unencumbered real properties independently valued to be worth about Rmb 40 million in April 2008. Currently we are going through the necessary procedures to recover the prepayment.
Group financial controller Chew Nam Yeo has a prudent cash control policy.
Outlook
Q: Have any of your competitors closed down?
A: A private company named WBG closed shop recently. The closure was due to a management problem rather than market conditions.
Q: Does this present opportunity for Best World?
A: Yes, we certainly see opportunity there.
Balance sheet and cash flow
Q: How did you achieve the improvement in receivables turnover (from 45 days in FY07 to 22 days in FY08)? Is that sustainable?
A: We had better credit management and receivables collection.
Q: Why did payables turnover fall (from 54 days in FY07 to 24 days in FY08)?
A: There are certain vendors with shorter payment terms.
Q: Are you holding your S$30 million of cash reserves in any structured products?
A: We are very prudent in cash management and mostly hold deposits in banks. We do not hold any stocks or bonds for speculation purposes.
A small proportion (S$3.5 million) is in principal-protected variable interest rate notes issued by banks.
We will need cash resources for our expansion as well as business opportunities that may arise in the course of the year.
Paul Krugman on the Malaise of Nations
Nobel Prize-winning economist Paul Krugman discusses why the U.S.'s balance-sheet recession could lead to many years of deflationary malaise.
Paul Krugman Is in His Element. The Nobel Prize-winning economist in December put out an updated edition of The Return of Depression Economics, his prescient study from 1999 in which he laid out the risks to nations when recessions spiral into long-term malaise. Timely reading, indeed, and worth picking up, if you haven't already; a copy can be purchased online here. Krugman was kind enough to expand upon his thoughts regarding President Obama's stimulus package and what changes may be in store for the U.S. and world economies in coming years in an e-mail exchange with Barrons.com.
Barrons.com: What's the stupidest thing you've heard said about the current economic crisis and how to solve it? What's the smartest?
Paul Krugman: The stupidest is a very tough competition; I tend to think of whichever mind-numbingly stupid thing I've just heard, like [U.S. House of Representatives] Minority Leader [John] Boehner's statement that we shouldn't "reward" Fannie and Freddie by increasing their resources (he apparently doesn't understand the meaning of "government owned.") But I guess the statements from many players that the Obama plan is a spending bill, not a stimulus bill -- when spending is the whole point -- top the list.
The smartest thing probably comes from Richard Koo, [chief economist for Japan's Nomura Research Institute, part of Nomura Securities] who was one of the first to point out that this isn't just a housing crisis, or even a banking crisis -- it's a balance sheet crisis.
Barrons.com: You've written that the gap between the economy's potential shortfall in production over the next three years -- $2.9 trillion -- and the $800 billion in economic stimulus is a big problem. Why does this gap between production and bailout matter so much?
Krugman: My big concern here is that the economy digs itself into a deflationary hole, which is what can all too easily happen if you have a large, sustained output gap. Once prices start falling, and people start to expect continuing deflation, the balance sheet problems will become much worse than they already are, and much harder to resolve. Watching that happen in Japan is what led me to write the original, 1999 version of The Return of Depression Economics, and now the same thing is all too possible here.
Barrons.com: What's a worst-case scenario if this stimulus fails to kick-start a recovery, as you've argued?
Krugman: A lost decade or more. I don't think, even now, that we're headed for 20+ percent unemployment, Depression-style. But I can see a strong possibility of an economic and political trap: low investment and high savings thanks to deflation and a depressed economy, with effective government action blocked by a combination of concerns about debt and the widespread belief that we tried stimulus and it didn't work.
Barrons.com: Will the $80 billion in aid to holders of underwater mortgages make a material difference?
Krugman: It depends on the meaning of the word "material." It will help millions of families, and somewhat reduce the financial system's losses. It won't revive the housing market, nor will it end the banks' problems.
Barrons.com: Will we ever become a nation of savers again?
Krugman: Actually, we ARE becoming a nation of savers again -- which is part of the reason GDP is plunging. I think the asset wipeout will have a long-term impact on consumer behavior; remember, we had a 9% savings rate as recently as the 80s.
Barrons.com: There's been a dramatic collapse in asset values in the stock market, as measured by the decline in the P/E of the S&P 500. Do you think asset values will bounce back with an economic recovery, or has there been some fundamental long-term shift in asset values that will linger even after recovery?
Krugman: Believe it or not, housing prices are still above-normal, as measured either by the price-rent ratio or the price-income ratio. So housing prices won't bounce back. As for stocks, when I take [Yale University economist] Bob Shiller's data, which give prices relative to a long trailing average of profits, and update, I get a P/E right now of about 13, not so far from historical norms. So it's not clear how much bounceback we can count on, if any. Maybe the bull market was the aberration.
Barrons.com: You've advocated a stimulus for the U.S. along the lines of the Public Works project during the Depression. Assuming such a thing could produce another economic boom, what are the downside risks to a massive infusion of public money?
Krugman: Well, large-scale government borrowing does pose long-term fiscal risks; the U.S. has substantial room for additional borrowing, but it's not unlimited. Aside from that, I don't see big risks.
Barrons.com: One of the themes you explore in your writing is the notion that world economic relationships can change over the course of decades (e.g., from globalism to nationalism to globalism). What are a couple of the biggest economic changes you see playing out over the next ten years, and what might be their social impact in the U.S. and abroad?
Krugman: I think we're heading for a new regime of financial regulation, which might significantly reduce financial globalization, for both good reasons and bad: the good reason is that a lot of what looked like globalization was actually regulatory arbitrage, the bad reason is that governments that are bailing out financial system will tend to insist that the benefits stay at home. I don't think this will affect most Americans' lives much; but a lot of the highest incomes have come from finance, and the Masters of the Universe will definitely end up less masterful.
We're also, I think, going to see some significant reindustrialization, because the conveyor belt moving Chinese and other funds to America will be slowed if not shut down. This will mean a greater reliance on domestic production.
Mainly, though, how society changes will depend on the political response -- whether this really ends up being a new New Deal or just a slight course correction.
Barrons.com: What great books have you read recently that you can recommend?
Krugman: I just reread a good part of John Maynard Keynes's Essays in Persuasion, especially "The Great Slump of 1930," which is awesomely relevant right now. And while it has nothing much to do with the crisis, I'd highly recommend Dan Koeppel's Banana: The Fate of the Fruit that Changed the World, which tells you a lot about the history of globalization along the way.
Paul Krugman Is in His Element. The Nobel Prize-winning economist in December put out an updated edition of The Return of Depression Economics, his prescient study from 1999 in which he laid out the risks to nations when recessions spiral into long-term malaise. Timely reading, indeed, and worth picking up, if you haven't already; a copy can be purchased online here. Krugman was kind enough to expand upon his thoughts regarding President Obama's stimulus package and what changes may be in store for the U.S. and world economies in coming years in an e-mail exchange with Barrons.com.
Barrons.com: What's the stupidest thing you've heard said about the current economic crisis and how to solve it? What's the smartest?
Paul Krugman: The stupidest is a very tough competition; I tend to think of whichever mind-numbingly stupid thing I've just heard, like [U.S. House of Representatives] Minority Leader [John] Boehner's statement that we shouldn't "reward" Fannie and Freddie by increasing their resources (he apparently doesn't understand the meaning of "government owned.") But I guess the statements from many players that the Obama plan is a spending bill, not a stimulus bill -- when spending is the whole point -- top the list.
The smartest thing probably comes from Richard Koo, [chief economist for Japan's Nomura Research Institute, part of Nomura Securities] who was one of the first to point out that this isn't just a housing crisis, or even a banking crisis -- it's a balance sheet crisis.
Barrons.com: You've written that the gap between the economy's potential shortfall in production over the next three years -- $2.9 trillion -- and the $800 billion in economic stimulus is a big problem. Why does this gap between production and bailout matter so much?
Krugman: My big concern here is that the economy digs itself into a deflationary hole, which is what can all too easily happen if you have a large, sustained output gap. Once prices start falling, and people start to expect continuing deflation, the balance sheet problems will become much worse than they already are, and much harder to resolve. Watching that happen in Japan is what led me to write the original, 1999 version of The Return of Depression Economics, and now the same thing is all too possible here.
Barrons.com: What's a worst-case scenario if this stimulus fails to kick-start a recovery, as you've argued?
Krugman: A lost decade or more. I don't think, even now, that we're headed for 20+ percent unemployment, Depression-style. But I can see a strong possibility of an economic and political trap: low investment and high savings thanks to deflation and a depressed economy, with effective government action blocked by a combination of concerns about debt and the widespread belief that we tried stimulus and it didn't work.
Barrons.com: Will the $80 billion in aid to holders of underwater mortgages make a material difference?
Krugman: It depends on the meaning of the word "material." It will help millions of families, and somewhat reduce the financial system's losses. It won't revive the housing market, nor will it end the banks' problems.
Barrons.com: Will we ever become a nation of savers again?
Krugman: Actually, we ARE becoming a nation of savers again -- which is part of the reason GDP is plunging. I think the asset wipeout will have a long-term impact on consumer behavior; remember, we had a 9% savings rate as recently as the 80s.
Barrons.com: There's been a dramatic collapse in asset values in the stock market, as measured by the decline in the P/E of the S&P 500. Do you think asset values will bounce back with an economic recovery, or has there been some fundamental long-term shift in asset values that will linger even after recovery?
Krugman: Believe it or not, housing prices are still above-normal, as measured either by the price-rent ratio or the price-income ratio. So housing prices won't bounce back. As for stocks, when I take [Yale University economist] Bob Shiller's data, which give prices relative to a long trailing average of profits, and update, I get a P/E right now of about 13, not so far from historical norms. So it's not clear how much bounceback we can count on, if any. Maybe the bull market was the aberration.
Barrons.com: You've advocated a stimulus for the U.S. along the lines of the Public Works project during the Depression. Assuming such a thing could produce another economic boom, what are the downside risks to a massive infusion of public money?
Krugman: Well, large-scale government borrowing does pose long-term fiscal risks; the U.S. has substantial room for additional borrowing, but it's not unlimited. Aside from that, I don't see big risks.
Barrons.com: One of the themes you explore in your writing is the notion that world economic relationships can change over the course of decades (e.g., from globalism to nationalism to globalism). What are a couple of the biggest economic changes you see playing out over the next ten years, and what might be their social impact in the U.S. and abroad?
Krugman: I think we're heading for a new regime of financial regulation, which might significantly reduce financial globalization, for both good reasons and bad: the good reason is that a lot of what looked like globalization was actually regulatory arbitrage, the bad reason is that governments that are bailing out financial system will tend to insist that the benefits stay at home. I don't think this will affect most Americans' lives much; but a lot of the highest incomes have come from finance, and the Masters of the Universe will definitely end up less masterful.
We're also, I think, going to see some significant reindustrialization, because the conveyor belt moving Chinese and other funds to America will be slowed if not shut down. This will mean a greater reliance on domestic production.
Mainly, though, how society changes will depend on the political response -- whether this really ends up being a new New Deal or just a slight course correction.
Barrons.com: What great books have you read recently that you can recommend?
Krugman: I just reread a good part of John Maynard Keynes's Essays in Persuasion, especially "The Great Slump of 1930," which is awesomely relevant right now. And while it has nothing much to do with the crisis, I'd highly recommend Dan Koeppel's Banana: The Fate of the Fruit that Changed the World, which tells you a lot about the history of globalization along the way.
BEST WORLD: Trading at 1X PE ex-cash
Results announced last night.
BEST WORLD INTERNATIONAL’S revenue for FY08 declined 6% to $96.1 million while its earnings came in 20.7% lower at $10.6 million.
Notably, net earnings for 4Q dropped more than expected (80%) to $989,000.
Best World, which is a direct seller of various products in the region, said it experienced weaker consumer demand for its products in Malaysia, in particular.
The weaker demand was partly caused by price increases of its products in 4Q in several key markets due to the appreciating Singapore dollar against the local currencies.
Solid balance sheet
Distribution costs, which comprise commissions, advertising & promotion expenses and other sales related costs, decreased proportionately with revenue.
But administrative expenses increased 8.2% to $18.8 million in FY2008 because of a revision in remuneration from the previous year and an increase in headcount, an increase in lease expenses and higher asset depreciation and amortization.
It does seem that Best World’s administrative cost structure stands at around $5 million quarterly and remains pretty fixed.
The company also incurred $2.1 million in unrealized forex exchange losses in 4Q alone. This is something that we have to seek clarification on.
Among the positives, I note that the company has improved its credit management and this has led to accounts receivable turnover decreasing from 45 days as at end-2007 to 22 days as at end-2008.
The company had no bank loan at the end of 2008 and has approximately $30.6 million in cash and cash equivalents. Hence, providing for working capital requirements, the company appears to be in a good position to continue its cash dividend payout in future.
A final and a special dividend totalling 1.0 cent per ordinary share has been proposed. Including the interim dividend of 1.2 cents, the total dividends will amount to 2.2 cents per ordinary share for FY2008.
26% increase in membership
Overall, membership figures grew 26% from 148,428 in FY2007 to 186,759 in FY2008. In the past, I understand that only about 2,000 are active business builders – that is, consumers who take direct selling as a business.
In a poor economic environment like the current one, I believe more white-collar workers will turn to direct selling as a second source of income. This could be a new source of sales folks for Best World, especially in Singapore where most of the sales force is Mandarin-speaking.
People still need to purchase necessities and consumables in good or bad times. And who better to buy from than one's own trusted network of business partners, colleagues, family and/or friends?
For the next 12 months, I would be looking to see if the company can add a substantial number of new members to its sales force and also to evaluate how much of these members are business builders as compared to normal consumers.
China was a disappointment
Best World announced the termination of the JV with Joymain a week ago. This came as no surprise to me as the company had no updates to this JV after its initial announcement in Dec 2007.
What concerns me is whether the company will have to write down its RMB 20 million loan to Joymain.
I also wonder what the company’s China strategy now is. Does it have to do another JV to grow its China market or should it build China slowly via organic growth? The company already has nearly 3,000 members under its franchise-selling scheme in China.
Valuation: 1X PE ex-cash
For an 18-yar-old company with annual revenue of almost $100 million and profit of $10.6 million, one can hardly call it a fledgling company. Yet, the market is valuing it at only 3.8x PE. This is a company that has generated $50 million of profit over the past 5 years.
Ex-cash (remember, it has $30.6 million in cash and zero bank loan), the company is now trading at just around 1x PE.
BEST WORLD INTERNATIONAL’S revenue for FY08 declined 6% to $96.1 million while its earnings came in 20.7% lower at $10.6 million.
Notably, net earnings for 4Q dropped more than expected (80%) to $989,000.
Best World, which is a direct seller of various products in the region, said it experienced weaker consumer demand for its products in Malaysia, in particular.
The weaker demand was partly caused by price increases of its products in 4Q in several key markets due to the appreciating Singapore dollar against the local currencies.
Solid balance sheet
Distribution costs, which comprise commissions, advertising & promotion expenses and other sales related costs, decreased proportionately with revenue.
But administrative expenses increased 8.2% to $18.8 million in FY2008 because of a revision in remuneration from the previous year and an increase in headcount, an increase in lease expenses and higher asset depreciation and amortization.
It does seem that Best World’s administrative cost structure stands at around $5 million quarterly and remains pretty fixed.
The company also incurred $2.1 million in unrealized forex exchange losses in 4Q alone. This is something that we have to seek clarification on.
Among the positives, I note that the company has improved its credit management and this has led to accounts receivable turnover decreasing from 45 days as at end-2007 to 22 days as at end-2008.
The company had no bank loan at the end of 2008 and has approximately $30.6 million in cash and cash equivalents. Hence, providing for working capital requirements, the company appears to be in a good position to continue its cash dividend payout in future.
A final and a special dividend totalling 1.0 cent per ordinary share has been proposed. Including the interim dividend of 1.2 cents, the total dividends will amount to 2.2 cents per ordinary share for FY2008.
26% increase in membership
Overall, membership figures grew 26% from 148,428 in FY2007 to 186,759 in FY2008. In the past, I understand that only about 2,000 are active business builders – that is, consumers who take direct selling as a business.
In a poor economic environment like the current one, I believe more white-collar workers will turn to direct selling as a second source of income. This could be a new source of sales folks for Best World, especially in Singapore where most of the sales force is Mandarin-speaking.
People still need to purchase necessities and consumables in good or bad times. And who better to buy from than one's own trusted network of business partners, colleagues, family and/or friends?
For the next 12 months, I would be looking to see if the company can add a substantial number of new members to its sales force and also to evaluate how much of these members are business builders as compared to normal consumers.
China was a disappointment
Best World announced the termination of the JV with Joymain a week ago. This came as no surprise to me as the company had no updates to this JV after its initial announcement in Dec 2007.
What concerns me is whether the company will have to write down its RMB 20 million loan to Joymain.
I also wonder what the company’s China strategy now is. Does it have to do another JV to grow its China market or should it build China slowly via organic growth? The company already has nearly 3,000 members under its franchise-selling scheme in China.
Valuation: 1X PE ex-cash
For an 18-yar-old company with annual revenue of almost $100 million and profit of $10.6 million, one can hardly call it a fledgling company. Yet, the market is valuing it at only 3.8x PE. This is a company that has generated $50 million of profit over the past 5 years.
Ex-cash (remember, it has $30.6 million in cash and zero bank loan), the company is now trading at just around 1x PE.
Sunday, February 22, 2009
高盛：新台币韩元与新元对美元会续跌
高盛(Goldman Sachs Group Inc.)表示，新台币、韩元和新元对美元还会继续下跌。另外，澳元和纽元对美元汇率连续两周下跌，因担心东欧经济恶化导致市场抛售高收益资产。
高盛表示，新台币、韩元与新元等兑美元今年贬势将扩大。香港高盛分析员莱克（Fiona Lake）在研究报告中写道，新台币3个月内将贬至36元新台币兑1美元。新台币兑美元今年以来贬幅达5.3％，前天触及34.699元新台币兑1美元，创2003年6月以来低点。
高盛预估，韩元兑美元短期内将贬至1500韩元兑1美元；新元兑美元3个月内将贬至1.56新元兑1美元。韩元兑美元年初迄今贬16％，目前在1488韩元水平上交易。新元今年贬5.6％，目前在1.53新元水平上交易。
莱克表示，未来一年人民币汇价可能持稳。它年初以来贬0.2％。
另外，纽元对美元连续第二天下跌，纽西兰财政部表示，由于税收收入减少，预期现金预算赤字将大于去年年底预测。
高盛表示，新台币、韩元与新元等兑美元今年贬势将扩大。香港高盛分析员莱克（Fiona Lake）在研究报告中写道，新台币3个月内将贬至36元新台币兑1美元。新台币兑美元今年以来贬幅达5.3％，前天触及34.699元新台币兑1美元，创2003年6月以来低点。
高盛预估，韩元兑美元短期内将贬至1500韩元兑1美元；新元兑美元3个月内将贬至1.56新元兑1美元。韩元兑美元年初迄今贬16％，目前在1488韩元水平上交易。新元今年贬5.6％，目前在1.53新元水平上交易。
莱克表示，未来一年人民币汇价可能持稳。它年初以来贬0.2％。
另外，纽元对美元连续第二天下跌，纽西兰财政部表示，由于税收收入减少，预期现金预算赤字将大于去年年底预测。
金融海啸第2波 逼在眉睫
香港文汇报报道，金融海啸爆发以来，美国以至各国政府都出招救市、刺激经济，但仍无法改善市场的信心。受华府拟将部分银行国有化的传言影响，美国金融股的沽压沉重，华府需设法澄清。另外东欧国家经济表现差劲，汇率下跌、债台高筑，大有机会影响西欧国家，引发第二波金融海啸。
美国参议院银行业委员会主席多德接受彭博电视台访问，谈到有意见称将部分银行或需短暂国有化时表示：“我一点都不欢迎（这做法），但这有可能发生。我担心我们最终都要这样做，哪怕是一段短时间。”
花旗日泻22% 华府急澄清
多德这段讲话刺激投资者的神经，曾获注资共450亿美元（约3,489亿港元）的美银和花旗股价于上周五的纽约股市急泻，其中花旗的股价更于一天内急泻超过22%，跌破2美元，美银股价也一度跌穿3美元。花旗和美银的市值分别萎缩至106亿美元（约822亿港元）和242亿美元（约1,877亿港元）。有分析认为投资者已不相信两行的市值，忧虑华府随时接管两行。
为安抚市场，白宫和财政部先后表示会保持银行系统的私有制。白宫发言人吉布斯说，政府依然确信私有制银行系统是正确路向。财政部发言人则重申，华府将确保金融系统由私营机构拥有和管理。华府澄清后，稍为止住股市的跌势，不过道琼斯指数收市仍跌100点。
资金急撤离 东欧多国高危
美国和西欧国家受海啸影响，资金撤离东欧市场，东欧经济岌岌可危。世界银行警告，东欧今年的经济前景“黯淡”，非常不明朗。东欧失业率攀升，“末日博士”鲁比尼更指拉脱维亚、爱沙尼亚、立陶宛、匈牙利、白俄罗斯和乌克兰等国是高危国家。
骨牌效应将冲击西欧银行
东欧国家的经济与西欧国家的金融业有莫大关系，西欧银行因在本国发展空间有限，因此向东欧国家放债，数字显示目前西欧国家向东欧的借出贷款达1.5万亿美元（约11.6万亿港元）。
然而，近日东欧国家的货币汇率下跌，令以欧元和瑞士法郎等外币为结算的债务变得更加昂贵，另外多数借款短期内到期，今年就必须还款或者再融资4,000亿美元（约3.1万亿港元），但信贷渠道已关，东欧国家欠债的机会大增。穆迪投资上周便警告，东欧金融体系风险正在加剧，并可能造成骨牌效应，向西欧扩散，情况可能进一步恶化。
分析员警告，东欧可能发生与90年代末亚洲金融危机同等规模的经济动荡，重创本已脆弱的欧洲金融体系，甚至引发第二波金融海啸。
世银警告西欧国家要摒弃保护主义，才不致窒碍东欧国家的经济复苏。波兰已发起东欧各国于下月1日举行迷你峰会，向西欧国家发声，拒绝保护主义，欧盟委员会主席巴罗佐将出席。
美国参议院银行业委员会主席多德接受彭博电视台访问，谈到有意见称将部分银行或需短暂国有化时表示：“我一点都不欢迎（这做法），但这有可能发生。我担心我们最终都要这样做，哪怕是一段短时间。”
花旗日泻22% 华府急澄清
多德这段讲话刺激投资者的神经，曾获注资共450亿美元（约3,489亿港元）的美银和花旗股价于上周五的纽约股市急泻，其中花旗的股价更于一天内急泻超过22%，跌破2美元，美银股价也一度跌穿3美元。花旗和美银的市值分别萎缩至106亿美元（约822亿港元）和242亿美元（约1,877亿港元）。有分析认为投资者已不相信两行的市值，忧虑华府随时接管两行。
为安抚市场，白宫和财政部先后表示会保持银行系统的私有制。白宫发言人吉布斯说，政府依然确信私有制银行系统是正确路向。财政部发言人则重申，华府将确保金融系统由私营机构拥有和管理。华府澄清后，稍为止住股市的跌势，不过道琼斯指数收市仍跌100点。
资金急撤离 东欧多国高危
美国和西欧国家受海啸影响，资金撤离东欧市场，东欧经济岌岌可危。世界银行警告，东欧今年的经济前景“黯淡”，非常不明朗。东欧失业率攀升，“末日博士”鲁比尼更指拉脱维亚、爱沙尼亚、立陶宛、匈牙利、白俄罗斯和乌克兰等国是高危国家。
骨牌效应将冲击西欧银行
东欧国家的经济与西欧国家的金融业有莫大关系，西欧银行因在本国发展空间有限，因此向东欧国家放债，数字显示目前西欧国家向东欧的借出贷款达1.5万亿美元（约11.6万亿港元）。
然而，近日东欧国家的货币汇率下跌，令以欧元和瑞士法郎等外币为结算的债务变得更加昂贵，另外多数借款短期内到期，今年就必须还款或者再融资4,000亿美元（约3.1万亿港元），但信贷渠道已关，东欧国家欠债的机会大增。穆迪投资上周便警告，东欧金融体系风险正在加剧，并可能造成骨牌效应，向西欧扩散，情况可能进一步恶化。
分析员警告，东欧可能发生与90年代末亚洲金融危机同等规模的经济动荡，重创本已脆弱的欧洲金融体系，甚至引发第二波金融海啸。
世银警告西欧国家要摒弃保护主义，才不致窒碍东欧国家的经济复苏。波兰已发起东欧各国于下月1日举行迷你峰会，向西欧国家发声，拒绝保护主义，欧盟委员会主席巴罗佐将出席。
末日博士：黑暗中仍有投资亮点
“末日博士”认为在黑暗的经济中依然有投资亮点，曙光将来自黄金、商品、亚洲股市和石油关联公司。
准确预测1987年美国股灾和1997年亚洲金融风暴，有“末日博士”之称的麦嘉华（Marc Faber），昨天受邀为《商业时报》同瑞士私人银行宝盛银行(Julius Baer)联办的“金融危机：何去何从”论坛上发表演讲，并给予以上投资建议。
提到黄金，麦嘉华说：“如果美国继续印钞票来救市，美元将进一步趋软，使信贷吃紧的情况恶化。美元持续疲弱，人们就会找寻替代品，而黄金价格的上涨折射的美元超量发行。商品价值永远追不上印钞的速度。没有国家因为印钞票而发达，否则非洲的津巴布韦（Zimbabwe）早就是世界上最富裕的国家。”
麦嘉华：如果美国继续印钞票来救市，美元将进一步趋软，使信贷吃紧的情况恶化。
麦嘉华曾经表示，要走出目前的危机，全球应该转而使用一个黄金标准（gold standard）。
不过，他昨天回答有关询问时坦言，由于黄金在过去几年已从首饰和储值的工具变成了投资的工具，这个19世纪的作法应该行不通，但如果局势每况愈下，政府和央行再也无法有效控制，那么一些政府，甚至是企业本身也许会考虑采用某种形式的黄金标准来进行交易。
“市场并没有失效”
麦嘉华尝试解释这场环球金融危机，他说：“市场其实没有失效，失败的是政府的干预手段、政策变革以及金融产品的创新。”
另一名主讲者宝盛银行的亚太区投资主管阿南塔（V. Anantha-Nageswaran）也看好黄金。
阿南塔是宝盛银行内部公认的“末日博士”，于2007年预见前所未见的金融海啸可能发生。
他预测，黄金价格在12至24个月内可能上涨一倍。“人们在恐慌时总是会想到黄金。”
除了黄金外，阿南塔认为，在气候转变和中国及印度的崛起下，软商品(soft commodities）的前途无量，建议投资者趁现在进场慢慢积累这方面的投资。
石油关联公司或挂牌基金受看好
另外，考虑到石油开采公司因石油价格大跌而停止探索新油田，阿南塔也建议投资者考虑石油关联公司或挂牌基金（ETFs），等到经济复苏，需求回升，而到了2012年相信又会碰上石油短缺的情况，相信能从中获利。他指出，美国亿万富翁巴菲特（Warren Buffett）旗下伯克希尔哈撒韦公司（Berkshire Hathaway），近期就悄悄地挪用超过10％的资金，投资在能源公司上，包括ConocoPhillips, Burlington Northern Santa Fe等。
麦嘉华则认为，世界各地的政府如果无法解决眼前一系列金融问题，导致国际关系紧张，危机可能将演变成战争，到时候，拥有商品是最实际和最值钱。不过，他提醒，虽然长期下来商品将走高，但过程中将波动剧烈，价格上下50％相当平常。
展望未来两年，阿南塔相信，市场将在两个极端之间游走，不是过于悲观就是过于乐观，要进行投资就应该看中长期，投资期为6至10年。
他认为，商品的投资应该是中期性，而放眼长期则可考虑亚洲公司股票，但应该首先关注新加坡、韩国、台湾和日本等地的公司股票，之后才探讨中国、印度和印尼方面。
“中国、印度和印尼将是未来的增长引擎，而且有强大的国内经济做后盾，但这些地区的股市未跌至谷底，目前还不是进场的时机。欧美方面，除非能找到金融和房地产业以外的新领域制造新就业机会，经济要复苏相当困难，而美元将因此疲弱下去。”
麦嘉华也建议投资亚洲股市，药剂和酒店管理公司、印尼、马来西亚、拉丁美洲的种植场，白银等，但抛售美国国债，避免澳洲和亚洲主要金融中心的房地产。
希望持守现金者，阿南塔建议分散投资，买入挪威克朗、加币和新元，长期则应考虑人民币、巴西里亚伊和韩元。
准确预测1987年美国股灾和1997年亚洲金融风暴，有“末日博士”之称的麦嘉华（Marc Faber），昨天受邀为《商业时报》同瑞士私人银行宝盛银行(Julius Baer)联办的“金融危机：何去何从”论坛上发表演讲，并给予以上投资建议。
提到黄金，麦嘉华说：“如果美国继续印钞票来救市，美元将进一步趋软，使信贷吃紧的情况恶化。美元持续疲弱，人们就会找寻替代品，而黄金价格的上涨折射的美元超量发行。商品价值永远追不上印钞的速度。没有国家因为印钞票而发达，否则非洲的津巴布韦（Zimbabwe）早就是世界上最富裕的国家。”
麦嘉华：如果美国继续印钞票来救市，美元将进一步趋软，使信贷吃紧的情况恶化。
麦嘉华曾经表示，要走出目前的危机，全球应该转而使用一个黄金标准（gold standard）。
不过，他昨天回答有关询问时坦言，由于黄金在过去几年已从首饰和储值的工具变成了投资的工具，这个19世纪的作法应该行不通，但如果局势每况愈下，政府和央行再也无法有效控制，那么一些政府，甚至是企业本身也许会考虑采用某种形式的黄金标准来进行交易。
“市场并没有失效”
麦嘉华尝试解释这场环球金融危机，他说：“市场其实没有失效，失败的是政府的干预手段、政策变革以及金融产品的创新。”
另一名主讲者宝盛银行的亚太区投资主管阿南塔（V. Anantha-Nageswaran）也看好黄金。
阿南塔是宝盛银行内部公认的“末日博士”，于2007年预见前所未见的金融海啸可能发生。
他预测，黄金价格在12至24个月内可能上涨一倍。“人们在恐慌时总是会想到黄金。”
除了黄金外，阿南塔认为，在气候转变和中国及印度的崛起下，软商品(soft commodities）的前途无量，建议投资者趁现在进场慢慢积累这方面的投资。
石油关联公司或挂牌基金受看好
另外，考虑到石油开采公司因石油价格大跌而停止探索新油田，阿南塔也建议投资者考虑石油关联公司或挂牌基金（ETFs），等到经济复苏，需求回升，而到了2012年相信又会碰上石油短缺的情况，相信能从中获利。他指出，美国亿万富翁巴菲特（Warren Buffett）旗下伯克希尔哈撒韦公司（Berkshire Hathaway），近期就悄悄地挪用超过10％的资金，投资在能源公司上，包括ConocoPhillips, Burlington Northern Santa Fe等。
麦嘉华则认为，世界各地的政府如果无法解决眼前一系列金融问题，导致国际关系紧张，危机可能将演变成战争，到时候，拥有商品是最实际和最值钱。不过，他提醒，虽然长期下来商品将走高，但过程中将波动剧烈，价格上下50％相当平常。
展望未来两年，阿南塔相信，市场将在两个极端之间游走，不是过于悲观就是过于乐观，要进行投资就应该看中长期，投资期为6至10年。
他认为，商品的投资应该是中期性，而放眼长期则可考虑亚洲公司股票，但应该首先关注新加坡、韩国、台湾和日本等地的公司股票，之后才探讨中国、印度和印尼方面。
“中国、印度和印尼将是未来的增长引擎，而且有强大的国内经济做后盾，但这些地区的股市未跌至谷底，目前还不是进场的时机。欧美方面，除非能找到金融和房地产业以外的新领域制造新就业机会，经济要复苏相当困难，而美元将因此疲弱下去。”
麦嘉华也建议投资亚洲股市，药剂和酒店管理公司、印尼、马来西亚、拉丁美洲的种植场，白银等，但抛售美国国债，避免澳洲和亚洲主要金融中心的房地产。
希望持守现金者，阿南塔建议分散投资，买入挪威克朗、加币和新元，长期则应考虑人民币、巴西里亚伊和韩元。
Saturday, February 21, 2009
Warrants
We stumbled upon this advertisement in Singapore from a financial instituition and thought what great marketing material it was.
What they wrote seem to imply that their hedging strategies are perfect ( second paragraph) and any gain to the warrant holders are taken from the losses of the warrant issuers' counterparty whom they entered into positions with to hedge their warrant positions. Its not really right to state its a win-win situation between issuers and warrant holders since the issuers are still earning the premiums with no risk ( assuming perfect hedge) but risks still exists for the warrant holders who could still lose the premiums. Maybe this situation exists to " compensate" the warrant issuers for all the hardwork they have done to package such a derivative product.
And the truth of the matter is, in our opinion, its indeed a zero sum game since there is no such thing as a perfect hedge. When warrant holders win, warrant issuers still lose, although, the lost is just minimised. Refer to the following link where it is written :
"According to Financial Supervisory Service data, domestic brokerage houses posted a combined 55.4 billion won loss from equity-linked warrant trading between April and August last year, while foreign houses logged a 1 billion won loss. These warrant issuers failed to hedge adequately against markets moving against them as the benchmark KOSPI jumped 29 percent. "
Anyway, we stumbled upon this somewhere in the internet:
"For the covered warrant, the main concern of the issuer is how to attract the market investors to buy the issued covered warrant when the product is launched. In this consideration, the usual technique for the investment banker is to buy lot of the corresponding share at a low price and suddenly push up the stock price. It then issues the covered warrant at a strike price based on the high stock price. Often they will also support the stock price for a while, but when their warrant have been nearly sold to the market, the stock price will drop. As the strike price of covered warrant is normally quite high, the premium and leverage ratio are also quite high. The high leverage ratio is ideal for investment consideration, but the high premium is very risky, and the covered warrant can easily become "Wall-paper warrant" in bad market situation. Investors should always remember that the issuer of the covered warrant is an investment banker who is VERY EXPERIENCED in market manipulation. When a covered warrant is approaching its expiration date, the issuer will try to beat down the price of the stock, such that the issuer can buy back enough stock from the market to be later distributed to the warrant holders who are willing to exercise the warrant. In the extreme, the issuer may even try to drag down the stock price to make it lower than the strike price. The warrant thus becomes 'Wall-paper' and no warrant holder is willing to exercise it. The warrant issuer thus makes a neat big profit. This normally occurs to the weaker blue chips (there is only covered warrants for blue chip stocks in HK) like Cathay Pacific and Dairy Farm. There are some issuers who are very NOTORIOUS in killing their covered warrant investors! "
Directors' Trades
Insider pares stake in Cosco
Oct 5, 2006
The Straits Times
INSIDERS have almost stopped selling shares in Cosco Corp.
The only exception is Mr Zhou Xie Dong, director of its China unit, Cosco Shipyard Group (CSG).
Records kept by Shareinvestor.com show he sold 100,000 Cosco shares at $1.65 apiece on Sept 20 and another 43,000 shares at $1.66 each on Sept 29.
Following the two sales, his stake has now been pared to 257,000 shares.
Besides Mr Zhou, other parties who sold Cosco shares recently included Madam Mina Chan - the wife of independent director and former MP Wang Kai Yuen - and Mr Wang Zai Zhong, another CSG director.
But dealers have noted that their sales were easily absorbed in the market, as about nine million Cosco shares are traded daily, on average.
One dealer said that interest in Cosco has stayed red-hot because of the fresh issues of covered warrants on the stock.
'New warrant issuers are coming into the market and they are all chasing after the same few hot stocks like Cosco,' said a dealer.
And Cosco's share price may have been chased up by warrant issuers buying the mother shares to 'cover' the risks associated with issuing covered warrants on the stock, he added.
Yesterday, Cosco climbed four cents to a new high of $1.73 on a volume of 17.9 million shares.
The most actively traded Cosco covered warrant was one issued by Merrill Lynch
It ended 2.5 cents up at 26 cents on a hefty volume of 15.7 million units.
What they wrote seem to imply that their hedging strategies are perfect ( second paragraph) and any gain to the warrant holders are taken from the losses of the warrant issuers' counterparty whom they entered into positions with to hedge their warrant positions. Its not really right to state its a win-win situation between issuers and warrant holders since the issuers are still earning the premiums with no risk ( assuming perfect hedge) but risks still exists for the warrant holders who could still lose the premiums. Maybe this situation exists to " compensate" the warrant issuers for all the hardwork they have done to package such a derivative product.
And the truth of the matter is, in our opinion, its indeed a zero sum game since there is no such thing as a perfect hedge. When warrant holders win, warrant issuers still lose, although, the lost is just minimised. Refer to the following link where it is written :
"According to Financial Supervisory Service data, domestic brokerage houses posted a combined 55.4 billion won loss from equity-linked warrant trading between April and August last year, while foreign houses logged a 1 billion won loss. These warrant issuers failed to hedge adequately against markets moving against them as the benchmark KOSPI jumped 29 percent. "
Anyway, we stumbled upon this somewhere in the internet:
"For the covered warrant, the main concern of the issuer is how to attract the market investors to buy the issued covered warrant when the product is launched. In this consideration, the usual technique for the investment banker is to buy lot of the corresponding share at a low price and suddenly push up the stock price. It then issues the covered warrant at a strike price based on the high stock price. Often they will also support the stock price for a while, but when their warrant have been nearly sold to the market, the stock price will drop. As the strike price of covered warrant is normally quite high, the premium and leverage ratio are also quite high. The high leverage ratio is ideal for investment consideration, but the high premium is very risky, and the covered warrant can easily become "Wall-paper warrant" in bad market situation. Investors should always remember that the issuer of the covered warrant is an investment banker who is VERY EXPERIENCED in market manipulation. When a covered warrant is approaching its expiration date, the issuer will try to beat down the price of the stock, such that the issuer can buy back enough stock from the market to be later distributed to the warrant holders who are willing to exercise the warrant. In the extreme, the issuer may even try to drag down the stock price to make it lower than the strike price. The warrant thus becomes 'Wall-paper' and no warrant holder is willing to exercise it. The warrant issuer thus makes a neat big profit. This normally occurs to the weaker blue chips (there is only covered warrants for blue chip stocks in HK) like Cathay Pacific and Dairy Farm. There are some issuers who are very NOTORIOUS in killing their covered warrant investors! "
Directors' Trades
Insider pares stake in Cosco
Oct 5, 2006
The Straits Times
INSIDERS have almost stopped selling shares in Cosco Corp.
The only exception is Mr Zhou Xie Dong, director of its China unit, Cosco Shipyard Group (CSG).
Records kept by Shareinvestor.com show he sold 100,000 Cosco shares at $1.65 apiece on Sept 20 and another 43,000 shares at $1.66 each on Sept 29.
Following the two sales, his stake has now been pared to 257,000 shares.
Besides Mr Zhou, other parties who sold Cosco shares recently included Madam Mina Chan - the wife of independent director and former MP Wang Kai Yuen - and Mr Wang Zai Zhong, another CSG director.
But dealers have noted that their sales were easily absorbed in the market, as about nine million Cosco shares are traded daily, on average.
One dealer said that interest in Cosco has stayed red-hot because of the fresh issues of covered warrants on the stock.
'New warrant issuers are coming into the market and they are all chasing after the same few hot stocks like Cosco,' said a dealer.
And Cosco's share price may have been chased up by warrant issuers buying the mother shares to 'cover' the risks associated with issuing covered warrants on the stock, he added.
Yesterday, Cosco climbed four cents to a new high of $1.73 on a volume of 17.9 million shares.
The most actively traded Cosco covered warrant was one issued by Merrill Lynch
It ended 2.5 cents up at 26 cents on a hefty volume of 15.7 million units.
Saturday, February 14, 2009
How To Tell When The Economy's Getting Better
The stimulus package is finally finished. President Obama is promising a tough new bank-rescue plan to boost lending and limit outrageous pay. Troubled homeowners may even get some relief. All told, the government could spend more than $3 trillion to help end the recession.
So now all we have to do is sit back and watch the economy grow like a beanstalk, right?
If only. One risk of the unprecedented government intervention is that it won't do all that much to hasten the end of the recession. Another risk is that consumers, expecting a magic-bullet fix, could fail to prepare for tough times that still lie ahead. "This is going to be a difficult year," Obama himself said at his first press conference. "If we get things right, then starting next year we can start seeing some significant improvement."
Next year? Afraid so. Most economists agree that it will take that long, at least, before the biggest problems - mounting layoffs, the housing bust, the banking crisis, and plunging confidence - start to turn around. Here's what to watch for to tell whether the stimulus package is actually working, and when the economy might start to mend.
An improvement in the unemployment rate. Of all the economic indicators, this is probably the single most important. But you might want to avert your eyes for awhile.
Obama has talked about creating 3 to 4 million new jobs, and if the stimulus plan works, it might come close to that - over several years, combined. But it's almost certain that through this summer and into the fall, there will be a net job loss, not a gain. Most economists expect the unemployment rate, now 7.6 percent, to hit at least 9 percent by the end of this year. That represents up to 2 million more lost jobs. Many of those cuts are already in the works - just follow the recent layoff announcements from companies like Caterpillar (20,000), Boeing (10,000), SprintNextel (8,000) and Home Depot (7,000). But the pink slips haven't all gone out yet, so the layoffs haven't shows up in the official numbers.
The first sign of an improvement will be...corporate silence. As in no more draconian job-cut announcements. Once that happens (or doesn't), the unemployment rate will plateau. Then, companies might start hiring again, and a couple of months after that, the unemployment rate will start to fall. Three straight monthly declines would be a good sign that the economy is really on the rebound. That probably won't happen until 2010.
If you're wondering what's the point of the stimulus package if it won't do much to help workers in 2009, look to 2010. And 2011. That's where the plan will make a bigger difference. Moody's Economy.com estimates that by the middle of 2010, the unemployment rate will start to drift back toward 8.5 percent. But without any stimulus plan, it would have hit 11 percent. Viva la government.
More stable home prices. The realestate boom and bust is what torpedoed the economy in the first place, and the economy won't start to recover until the housing bubble fully deflates. The good news is that housing prices have already been falling for more than two years, with prices down more than 20 percent nationwide. And we might be more than halfway toward the bottom: Moody's Economy.com predicts that housing prices should stop falling nationwide by the second half of 2009. Overall, the forecasting firm predicts a 30 percent drop in home values from the peak values of 2006.
Others think it will take longer, but whenever it happens, an end to the housing slide will mark an important turning point. Hardly anybody thinks that prices will shoot back up or there will be another buying binge. But a boomlet, maybe. Once prices stabilize, buyers will stop worrying that they could be purchasing a costly asset that's falling in value. As they buy, other kinds of consumer activity - like shopping for furniture and kitchen upgrades - will follow. Slowly.
A consumer confidence rebound. Since consumer confidence closely tracks the job market, the dismal numbers of the last few months probably won't improve by much until late in 2009, or 2010. Homeowners have lost more than $3 trillion worth of value in their homes over the last three years, and investors have seen their stock portfolios shredded. So even people who feel secure in their jobs are dour.
A turnaround in the housing or stock markets would break the gloom and help some people feel better off. So would easier lending by banks, which would help solvent consumers buy a few more cars, appliances, and other goods. But consumer confidence won't really start to improve until workers start to feel more secure about their jobs and income. Think 2010.
A less volatile stock market. Every investor hopes that beleaguered stocks will come roaring back in 2009 and regain some of the ground lost since the peak in 2007 - when the S&P 500 stock index was nearly 50 percent higher than it is today. But a better indicator of economic health would be a steady recovery - without the manic swings that seem to come from every hint of undisclosed trouble at some big bank or rumor of new government intervention.
The stock market is harder to predict than most other parts of the economy, since it's deeply dependent on psychology and other intangibles. The market could bounce back by mid-summer. Or it could remain stagnant for years, like it did for most of the 1970s. The experts can't be any more sure than you or I.
One hopeful sign would be less market sensitivity to events in Washington. The biggest market mover these days is the federal government, since fortunes stand to be won or lost - mostly lost - depending on how deeply the government intervenes in the activities of megabanks like Citigroup and Bank of America, and how much federal spending will be available to stand in for plunging consumer spending. The markets will be back to their old selves when earnings reports, IPO announcements, and M&A deals are what send stocks up or down, and utterings from Washington amount to little more than an echo. Since the government seems to be the only institution spending money so far in 2009, it could be awhile before Wall Street returns to form.
Economic growth turns positive. By economic standards, the current downturn has already lasted longer than the typical post-World War II recession. Yet there's still a lot more pain to endure. A recent survey of economists by the Wall Street Journal found that the majority think the economy will continue to contract for the first half of 2009, with growth turning positive in the second half of the year. That outlook is much worse than a few months ago, and even when growth turns positive the economy could sputter along without many new jobs or bold moves in the private sector.
It's always possible that impatient consumers will get sick of holding back, and start running up their credit card balances once again (if the banks let them). The bank-rescue plan might spur more lending than expected, goosing businesses and consumers alike. Or the stimulus plan might spread goodwill and optimism throughout the land. If you get the urge to spend, that might be the strongest indicator of all. Call the economists.
So now all we have to do is sit back and watch the economy grow like a beanstalk, right?
If only. One risk of the unprecedented government intervention is that it won't do all that much to hasten the end of the recession. Another risk is that consumers, expecting a magic-bullet fix, could fail to prepare for tough times that still lie ahead. "This is going to be a difficult year," Obama himself said at his first press conference. "If we get things right, then starting next year we can start seeing some significant improvement."
Next year? Afraid so. Most economists agree that it will take that long, at least, before the biggest problems - mounting layoffs, the housing bust, the banking crisis, and plunging confidence - start to turn around. Here's what to watch for to tell whether the stimulus package is actually working, and when the economy might start to mend.
An improvement in the unemployment rate. Of all the economic indicators, this is probably the single most important. But you might want to avert your eyes for awhile.
Obama has talked about creating 3 to 4 million new jobs, and if the stimulus plan works, it might come close to that - over several years, combined. But it's almost certain that through this summer and into the fall, there will be a net job loss, not a gain. Most economists expect the unemployment rate, now 7.6 percent, to hit at least 9 percent by the end of this year. That represents up to 2 million more lost jobs. Many of those cuts are already in the works - just follow the recent layoff announcements from companies like Caterpillar (20,000), Boeing (10,000), SprintNextel (8,000) and Home Depot (7,000). But the pink slips haven't all gone out yet, so the layoffs haven't shows up in the official numbers.
The first sign of an improvement will be...corporate silence. As in no more draconian job-cut announcements. Once that happens (or doesn't), the unemployment rate will plateau. Then, companies might start hiring again, and a couple of months after that, the unemployment rate will start to fall. Three straight monthly declines would be a good sign that the economy is really on the rebound. That probably won't happen until 2010.
If you're wondering what's the point of the stimulus package if it won't do much to help workers in 2009, look to 2010. And 2011. That's where the plan will make a bigger difference. Moody's Economy.com estimates that by the middle of 2010, the unemployment rate will start to drift back toward 8.5 percent. But without any stimulus plan, it would have hit 11 percent. Viva la government.
More stable home prices. The realestate boom and bust is what torpedoed the economy in the first place, and the economy won't start to recover until the housing bubble fully deflates. The good news is that housing prices have already been falling for more than two years, with prices down more than 20 percent nationwide. And we might be more than halfway toward the bottom: Moody's Economy.com predicts that housing prices should stop falling nationwide by the second half of 2009. Overall, the forecasting firm predicts a 30 percent drop in home values from the peak values of 2006.
Others think it will take longer, but whenever it happens, an end to the housing slide will mark an important turning point. Hardly anybody thinks that prices will shoot back up or there will be another buying binge. But a boomlet, maybe. Once prices stabilize, buyers will stop worrying that they could be purchasing a costly asset that's falling in value. As they buy, other kinds of consumer activity - like shopping for furniture and kitchen upgrades - will follow. Slowly.
A consumer confidence rebound. Since consumer confidence closely tracks the job market, the dismal numbers of the last few months probably won't improve by much until late in 2009, or 2010. Homeowners have lost more than $3 trillion worth of value in their homes over the last three years, and investors have seen their stock portfolios shredded. So even people who feel secure in their jobs are dour.
A turnaround in the housing or stock markets would break the gloom and help some people feel better off. So would easier lending by banks, which would help solvent consumers buy a few more cars, appliances, and other goods. But consumer confidence won't really start to improve until workers start to feel more secure about their jobs and income. Think 2010.
A less volatile stock market. Every investor hopes that beleaguered stocks will come roaring back in 2009 and regain some of the ground lost since the peak in 2007 - when the S&P 500 stock index was nearly 50 percent higher than it is today. But a better indicator of economic health would be a steady recovery - without the manic swings that seem to come from every hint of undisclosed trouble at some big bank or rumor of new government intervention.
The stock market is harder to predict than most other parts of the economy, since it's deeply dependent on psychology and other intangibles. The market could bounce back by mid-summer. Or it could remain stagnant for years, like it did for most of the 1970s. The experts can't be any more sure than you or I.
One hopeful sign would be less market sensitivity to events in Washington. The biggest market mover these days is the federal government, since fortunes stand to be won or lost - mostly lost - depending on how deeply the government intervenes in the activities of megabanks like Citigroup and Bank of America, and how much federal spending will be available to stand in for plunging consumer spending. The markets will be back to their old selves when earnings reports, IPO announcements, and M&A deals are what send stocks up or down, and utterings from Washington amount to little more than an echo. Since the government seems to be the only institution spending money so far in 2009, it could be awhile before Wall Street returns to form.
Economic growth turns positive. By economic standards, the current downturn has already lasted longer than the typical post-World War II recession. Yet there's still a lot more pain to endure. A recent survey of economists by the Wall Street Journal found that the majority think the economy will continue to contract for the first half of 2009, with growth turning positive in the second half of the year. That outlook is much worse than a few months ago, and even when growth turns positive the economy could sputter along without many new jobs or bold moves in the private sector.
It's always possible that impatient consumers will get sick of holding back, and start running up their credit card balances once again (if the banks let them). The bank-rescue plan might spur more lending than expected, goosing businesses and consumers alike. Or the stimulus plan might spread goodwill and optimism throughout the land. If you get the urge to spend, that might be the strongest indicator of all. Call the economists.
Thursday, February 12, 2009
SMRT - Public transportation ridership
We raise our earnings by 9.4% and target price to S$2.00
SMRT continues to deliver steady earnings growth and a respectable yield of 5.3%. We expect FY10E earnings growth of 10.4% YoY supported by resilient ridership growth and cost savings from lower oil prices. We have raised our earnings by 9.4% in FY10E to account for our lower oil price assumptions. We raise our TP from S$1.95 to S$2.00 and reiterate our Buy recommendation.
Beneficiary of lower oil price, wage deflation, higher ridership and new rail
SMRT should benefit from: 1) a drop in oil prices, 2) lower staff costs, 3) resilient ridership growth and 4) rental income stability due to long leases. SMRT has also secured a contract to operate the palm monorail in Dubai. This contract is based on a cost plus model and could boost SMRT’s revenue by S$20m pa. Our cost assumptions are conservative and should provide further upside to our earnings.
Increase in rail and bus ridership to offset potential reduction in fares
Public transportation ridership could see stronger growth, underpinned by the reduction in transport fares and an increasing trend of moving towards public transport. We cut our assumptions for fares by 5% in anticipation of the potential fare reduction by the PTC at the end of Feb09. We expect the 5% potential rebate in fares to be more than offset by the increase in ridership for rail and bus.
Target price of S$2.00 implies a PE of 16.8x FY10E; risks
We raise our target price from S$1.95 to S$2.00 on our earnings upgrade and a change in our valuation from ROE/PB to DCF. We have used a COE of 7.5% based on a risk-free rate of 2.6%, ERP of 4.8% and a beta of 1.0 with a TGR of 1%.
Downside risks include: a strong rebound in the oil price, decline in ridership, sharp reduction in fares, intense taxi competition and disease outbreak.
SMRT continues to deliver steady earnings growth and a respectable yield of 5.3%. We expect FY10E earnings growth of 10.4% YoY supported by resilient ridership growth and cost savings from lower oil prices. We have raised our earnings by 9.4% in FY10E to account for our lower oil price assumptions. We raise our TP from S$1.95 to S$2.00 and reiterate our Buy recommendation.
Beneficiary of lower oil price, wage deflation, higher ridership and new rail
SMRT should benefit from: 1) a drop in oil prices, 2) lower staff costs, 3) resilient ridership growth and 4) rental income stability due to long leases. SMRT has also secured a contract to operate the palm monorail in Dubai. This contract is based on a cost plus model and could boost SMRT’s revenue by S$20m pa. Our cost assumptions are conservative and should provide further upside to our earnings.
Increase in rail and bus ridership to offset potential reduction in fares
Public transportation ridership could see stronger growth, underpinned by the reduction in transport fares and an increasing trend of moving towards public transport. We cut our assumptions for fares by 5% in anticipation of the potential fare reduction by the PTC at the end of Feb09. We expect the 5% potential rebate in fares to be more than offset by the increase in ridership for rail and bus.
Target price of S$2.00 implies a PE of 16.8x FY10E; risks
We raise our target price from S$1.95 to S$2.00 on our earnings upgrade and a change in our valuation from ROE/PB to DCF. We have used a COE of 7.5% based on a risk-free rate of 2.6%, ERP of 4.8% and a beta of 1.0 with a TGR of 1%.
Downside risks include: a strong rebound in the oil price, decline in ridership, sharp reduction in fares, intense taxi competition and disease outbreak.
Revisiting the REIT model
The REIT model works well in an environment where interest rates are low and the economy is booming, both for the REIT sponsors as well as investors. The value proposition to the REIT sponsors is that they are able monetize their developments and get the cash flow to fund new projects. For the investors, they get to receive regular dividend payouts akin to a fixed income instrument, and yet enjoy the upside potential of the share price.
Not too long ago, the foremost objective of REIT managers is to grow the portfolio size so that they can deliver increasing dividends to the investors. The issue then is the lack of acquisition opportunities. Fast-forward to today’s credit crisis, only a few REIT managers talk about acquisitions despite valuations being lower now. Ability to secure financing is the topmost worry.
In the last quarter, the REIT sector has been plagued by refinancing risk although some of the managers have proved otherwise as they secured new fundings. We believe that in the coming quarters, the market will be taking into consideration the sustainability of revenue and possible tenant defaults.
DPU maintenance or DPU erosion We believe the fundamentals supporting the entire landscape have turned 180 degree. REIT model works best when cost of funds is low and cash flow generated from rentals provides a steady and recurring dividend to investors. Today we are facing the opposite; high cost of funds and potential shock to rental income.
Commercial rents are softening According to the URA statistics, 4Q08 rental index of commercial property in the central area declined 6.5% from the previous quarter.
In our last sector update published in November 08, we presented a historical analysis and postulated the index to fall at least 30% from its peak. If history can be a guide, we should be looking at a trough reading of 145, which is 25% away from the current reading of 193. Vacancy is now at 9.3% as compared to the trough reading of 6.8% at 4Q07. The highest level recorded was during the SARS period in 2003 whereby vacancy was 19.0%.
Industrial rents tend to be more stable as the leases are longer Although industrial rents display much less volatility, we can observe that rents have softened in 4Q08, its first real decline since 2004.
Retail and hospitality Retail sales index fell two consecutive months from Sep 2008 to Nov 2008. Excluding motor vehicles, the index started its decline since Aug 2008 and on a YoY basis, retail sales declined by 3.4%. Excluding motor vehicles, sales declined by 2.2%. Although collection from tourist receipt set a new record in 2008 at $14.8 billion, the trends are not very optimistic. Our argument is that if tenants’ businesses are affected in this recession, landlords will not have it easy, even if leases are signed and locked-in. REIT managers will then have an even tougher job of preventing falling DPU.
Report Card We use a simple metric to see how the various REITs have performed in their stated objective of increasing DPU. We compile the gross revenue and DPU for the most recent announced quarter and compare the percentage variances on a YoY and QoQ basis. We expect percentage changes in revenue to affect DPU in the same proportion. Any deviation demonstrates the REIT managers’ efficiency. We caution that our compilation is not a be all and end all guide, as individual REIT will have its own merits.
From the above, six REITs have registered falling DPU over the year while seven have registered falling DPU over the quarter. The sectoral performance confirms our last view (see REIT update report in Nov 08), where hospitality sector seems to be the most affected, with both QoQ revenue and DPU registering negative growth and healthcare continues to be the most resilient.
We expect rental income to face increasing pressure as businesses implement cost containment measures. DPU will in turn be subjected to a double whammy from higher borrowing costs and management fees. In conclusion, we expect to see more DPU erosion in the coming quarters.
Not too long ago, the foremost objective of REIT managers is to grow the portfolio size so that they can deliver increasing dividends to the investors. The issue then is the lack of acquisition opportunities. Fast-forward to today’s credit crisis, only a few REIT managers talk about acquisitions despite valuations being lower now. Ability to secure financing is the topmost worry.
In the last quarter, the REIT sector has been plagued by refinancing risk although some of the managers have proved otherwise as they secured new fundings. We believe that in the coming quarters, the market will be taking into consideration the sustainability of revenue and possible tenant defaults.
DPU maintenance or DPU erosion We believe the fundamentals supporting the entire landscape have turned 180 degree. REIT model works best when cost of funds is low and cash flow generated from rentals provides a steady and recurring dividend to investors. Today we are facing the opposite; high cost of funds and potential shock to rental income.
Commercial rents are softening According to the URA statistics, 4Q08 rental index of commercial property in the central area declined 6.5% from the previous quarter.
In our last sector update published in November 08, we presented a historical analysis and postulated the index to fall at least 30% from its peak. If history can be a guide, we should be looking at a trough reading of 145, which is 25% away from the current reading of 193. Vacancy is now at 9.3% as compared to the trough reading of 6.8% at 4Q07. The highest level recorded was during the SARS period in 2003 whereby vacancy was 19.0%.
Industrial rents tend to be more stable as the leases are longer Although industrial rents display much less volatility, we can observe that rents have softened in 4Q08, its first real decline since 2004.
Retail and hospitality Retail sales index fell two consecutive months from Sep 2008 to Nov 2008. Excluding motor vehicles, the index started its decline since Aug 2008 and on a YoY basis, retail sales declined by 3.4%. Excluding motor vehicles, sales declined by 2.2%. Although collection from tourist receipt set a new record in 2008 at $14.8 billion, the trends are not very optimistic. Our argument is that if tenants’ businesses are affected in this recession, landlords will not have it easy, even if leases are signed and locked-in. REIT managers will then have an even tougher job of preventing falling DPU.
Report Card We use a simple metric to see how the various REITs have performed in their stated objective of increasing DPU. We compile the gross revenue and DPU for the most recent announced quarter and compare the percentage variances on a YoY and QoQ basis. We expect percentage changes in revenue to affect DPU in the same proportion. Any deviation demonstrates the REIT managers’ efficiency. We caution that our compilation is not a be all and end all guide, as individual REIT will have its own merits.
From the above, six REITs have registered falling DPU over the year while seven have registered falling DPU over the quarter. The sectoral performance confirms our last view (see REIT update report in Nov 08), where hospitality sector seems to be the most affected, with both QoQ revenue and DPU registering negative growth and healthcare continues to be the most resilient.
We expect rental income to face increasing pressure as businesses implement cost containment measures. DPU will in turn be subjected to a double whammy from higher borrowing costs and management fees. In conclusion, we expect to see more DPU erosion in the coming quarters.
Correction in the offing for Reits?
THE Straits Times Index (STI) has been trading sideways on thin volumes over the past one week and we do not expect the market lethargy to improve anytime soon. Judging by the constant stream of profit warnings, there is high probability that markets will remain in this comatose state for some time.
The collective $3.1 billion rights issue exercise by CapitaLand and CapitaMall Trust is also likely to soak up more liquidity from this cash-strapped market.
Despite positive price action in US indices, we believe this global economic crisis has not bottomed; investors are also likely keep their powder dry over the coming months. We surmise that the 500-point rebound in the Dow Jones Industrial Average towards the end of last week was primarily predicated on pure hope that the Senate approval of the US$780 billion rescue plan will do the trick.
Indeed, some optimists have even suggested that the combined prescription of lower interest rates and massive stimulus packages will spare us from a prolonged and deep recession and lead the world to a quick recovery.
However, it is worth noting that if such fiscal and monetary bailouts were an easy solution, then Japan would have emerged from its economic slump a long time ago.
Also, massive spending in the 1930s by then US president Roosevelt did not lift the US or the world out of the Great Depression.
As the dictum goes: A picture tells a thousand words and charts usually reflect the mood of the market. The recent market spikes in anticipation of good news coupled with light volumes provide the perfect recipe for a bull trap to occur.
For the mid-term, the STI has penetrated the base of its rising wedge pattern, pointing towards more downside risk. Reits are forming head-and-shoulder structures, suggesting that an impending correction is about to take place; investors can use KE CFDs to short the sector.
By KEN TAI
Senior Technical Strategist
KELIVE RESEARCH (Part of the Kim Eng Group)
The collective $3.1 billion rights issue exercise by CapitaLand and CapitaMall Trust is also likely to soak up more liquidity from this cash-strapped market.
Despite positive price action in US indices, we believe this global economic crisis has not bottomed; investors are also likely keep their powder dry over the coming months. We surmise that the 500-point rebound in the Dow Jones Industrial Average towards the end of last week was primarily predicated on pure hope that the Senate approval of the US$780 billion rescue plan will do the trick.
Indeed, some optimists have even suggested that the combined prescription of lower interest rates and massive stimulus packages will spare us from a prolonged and deep recession and lead the world to a quick recovery.
However, it is worth noting that if such fiscal and monetary bailouts were an easy solution, then Japan would have emerged from its economic slump a long time ago.
Also, massive spending in the 1930s by then US president Roosevelt did not lift the US or the world out of the Great Depression.
As the dictum goes: A picture tells a thousand words and charts usually reflect the mood of the market. The recent market spikes in anticipation of good news coupled with light volumes provide the perfect recipe for a bull trap to occur.
For the mid-term, the STI has penetrated the base of its rising wedge pattern, pointing towards more downside risk. Reits are forming head-and-shoulder structures, suggesting that an impending correction is about to take place; investors can use KE CFDs to short the sector.
By KEN TAI
Senior Technical Strategist
KELIVE RESEARCH (Part of the Kim Eng Group)
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