Cheah Cheng Hye: Value Investing

This guy managing over 6 billion dolar fund at Hong Kong, investing in China and East Asia and South East Asia.



source: goodstockbadstock.blogspot.com

GOLD IS NOT A GOOD "INVESTMENT"

Gold is a lot of things to a lot of people.

To some, it is a threat. To some, it is a "trade". To some others, it is an "investment." And to yet others, it is a store of value, and - oh yeah - some people look at it as a currency, too.

The funny thing is that all of these are correct. Gold is indeed all of the above - but the question is: which function does it fulfill best?

We do know from history that gold has always been the ultimate store of value. We also know that gold has fulfilled its role as currency in a most admirable way - whenever it is allowed to do so without under or overvaluing it, and without government/banker interference.

We also know that gold is a most formidable threat to those who want to cement their power and control over populations by monopolizing the issuance of currency without full accountability to free-market principles.

But what we do not realize is that, as an "investment," gold absolutely sucks.

That may sound like a strange statement coming from me, a vocal gold-advocate. Maybe I am following the lead of Al Greenspan and have completely sold out for a few perks and a little bit of status and some power?

No. Sorry. Nobody has offered me any perks, nor status, nor any kind of power.

I haven't changed my mind on gold, either. I am still as pro-gold, pro-precious metals, and pro-freedom as I ever was. It's just that I have realized that gold is not a good "investment". And that is so not because there is something wrong with gold, but because there is something wrong with whatever it is you get back when you sell your gold "investment."

What do we do when we "invest"?

We exchange some paper (or computer-blip) cash for something else, and then we wait, in the hope that the demand for whatever it is that we bought with our paper will increase over time, or that a supply shortage will happen, or that some other event, like maybe a currency depreciation or planned devaluation will happen, so that we can then, at an opportune time, exchange our "investment" back into cash and make what we normally refer to as a "profit."

Profits are great, don't get me wrong. Everybody wants to make a profit - but what are we really doing here?

The focus of an "investment" is never the thing itself. The thing itself is just a medium, a vehicle for a (hopefully) bigger "return", of whatever we have put into it, at some time in the future. Maybe our return will be ten, twenty, fifty, even one hundred percent. We might even triple or quintuple our initial outlay in the process.

If that ever happens, we hold our heads up high and tell our friends and anyone who can't run fast enough at a dinner party that we "made a killing" on such-and-such in the blankedy-blank market.

But, in the end, we still want the cash. And that's okay. Nothing wrong with that in principle.

The problem is only that, if cash is no longer "king" because

* when your country's currency is rapidly declining in value compared to other currencies,
* and when it is the currency of "the" country that consumes everybody else's products, and for that reason cannot be tolerated by everybody else to so decline in value,

then your hoped-for cash-winnings can run into a bit of a challenge.

This problem gets especially protracted when your currency is also considered the reserve currency of the world, the one the other countries use to underpin their own issues. In that case, a falling value makes these other countries less likely to want to hold your currency on reserve.

Instead, since there is now an alternative, the euro, they prefer to exchange whatever amount of their reserves they can to the new euro currency that has no debt load and is not burdened by a trade and current account deficit like the US is.

This desire to hold euro instead of dollars is tempered by only two things, really:

* They still need dollars to buy oil and most other goods on the international markets, and
* If they export to the US, they cannot allow the dollar to fall too low, or they will lose their ability to get US consumers to buy their products, since a falling dollar makes foreign goods too expensive for Americans.

So particularly the Asian exporters like China, Japan, South Korea, Singapore, Malaysia, etc., are in a difficult situation. The whole world is moving toward the euro, and so are they, but the falling dollar makes it necessary for them to buy dollars and US treasuries to keep their own currencies from rising against the currency of their number one export market.

This creates the well-known phenomenon of "competitive devaluation". Even the EU will at some point be forced to join this game.

What is most significant is that the US itself, for purely structural reasons, currently actually likes it when the dollar drops. The US hopes its own exports will thereby become more attractive, cranking up manufacturing at home, and - hopefully - produce some job growth in the process, and better soon!

The problem: despite the rapid depreciation of the dollar since September, the current account deficit has not contracted. December's figures blew way past what the "experts" predicted ($42 billion, instead of 38, as they thought)

When will this process of competitive devaluations end?

Answer: When it's convenient for the US to support its own currency again.

And when will that be? When the US economy gets strong enough so that it can hold its own and produce jobs in sufficient numbers without a protracted, artificially low interest rate regime.

No sooner, and no later.

The trillion dollar question is: will that moment ever come, and if so, will it come in time?

In other words, is there any chance at all that this can occur before the dollar drops so low that prices start rising so fast and so obviously at homethat even the most carefully massaged domestic CPI numbers will no longer keep Americans carelessly borrowing and spending (and stock-buying) like there's no tomorrow.

The next trillion dollar question is: Even IF that moment comes in time, will it help at all with the US trade and current account imbalance? It doesn't look like it will. If the economy starts adding jobs and Greenspan can raise rates a bit, the dollar will get stronger, which means Americans will buy even more foreign stuff and rack up an even higher deficit. Problems, problems.

Sorry for the detour.

The point of all this is: gold-advocates all share a very dim view of these matters, and of the US' ability to eventually extricate itself from the past decades and decades of rigging and brow-beating of free markets.

So, from that vantage point, the question is: will the dollar ever recover? Will any currency be able to extricate itself from this web of competitive devaluations?

If your answer is "yes" - what are you doing looking at gold? Go and invest in stocks, instead.

If your answer is "no" - what are you doing "investing" in gold - for cash??

What are gold-advocates doing investing in gold, or even worse, trading in gold, when all they will get out of it is what they already know will soon be worth less?

Cash is trash. If you're angling for cash, you are asking to crash. (Do I sound like Dr. Seuss?)

If you "invest" (medium to long term) in gold, you'll get back trash.

If you "trade" (short term) in gold, you'll get back what soon will be trash.

Only if you buy and hold physical gold will you get value in exchange for trash.

Which one is the better bargain?

Yes, of course, cash is what we pay our bills with, so we all need it. But accumulating physical gold is the absolute best way to deal with the current (and future) situation. All currencies will depreciate against gold.

You work to make money. You spend what you need to spend, and the rest you use to buy gold. Do this every month, from now on. When you lose your job or need to liquidate some gold because you don't have enough trash to buy whatever you need in the future, liquidate only what you need, and keep building your "hoard" whenever you can.

By all means, buy some good gold and silver stocks, too - especially of companies that keep metal on reserve instead of cash. Maybe invest in a gold ETF. But make physical your mainstay. That way, you build value. If you don't trade gold, you deprive the enemies of gold of their number-one weapon.

And, what's more, you don't get wobbly knees every time gold dips a bit because some CB official somewhere is spitting hot air at the markets.

Currencies are in a downward spiral; even the "strong ones" will eventually follow. The dollar is no longer as pivotal to the world monetary system as it once was only a few years ago. Because of that, gold is no longer as "repressed" as it once was. It is still being "managed", to be sure, but the direction is now slowly upwards. It is no longer being suppressed at all costs.

That's why gold is not an "investment". It needs to be held for its own sake, not to make a stash of trash.

A suggestion: if your fingers are itchy, and you just have to trade something because it's so exciting, trade stocks. That way, at least you won't play into the hands of the bullion and central banks in their attempts to make gold look like trash - for the time being.

Then, if you're lucky and win in the stock-trading casino, take your winnings off the table and put them into gold. Physical gold, that is. But, when it comes to gold itself, the best advice is:

Don't trade it.

Don't "invest" in it.

Just buy it!

Got gold?

Source: http://www.gold-eagle.com/editorials_04/wallenwein022104.html

6 Mind-boggling Info about China That May Interest You

From stocktube.blogspot.com:

#1 » 40% of Chinese small businesses either went bust or almost went bust during crisis

A report mentioned that just after 9 months China claimed its small business sector was surviving the global recession, new figures surprisingly shown that about a whopping 40% of them either failed or close to failing between Nov 2008 and Mar 2009. This is indeed a big headache to the Chinese government who was considering withdrawing the huge stimulus packages late 2010.

While the Chinese Academy of Social Sciences reported 20% of small businesses had crashed and another 20 per cent went "to the brink of bankruptcy" during the climax of the global financial crisis, Chen Naixiang (economist and director of the academy’s research center) also reported that most of the 20% businesses on the brink of failure have been revivied thanks largely to the recovering economy.

#2 » Buy Chinese stocks if you wish to finance Chinese government

China has three main stock exchanges – Shanghai Stock Exchange, Shenzhen Stock Exchange and of course Hong Kong Stock Exchange. Of course unlike Hong Kong Stock Exchange, Shanghai Stock Exchange is still tighly controlled by the Chinese government. The Shanghai and Shenzhen Stock Exchanges have over 1,500 listed companies with combined total market capitalization of US$ 2,658.2 billion (2008) rivaling Hong Kong Stock Exchange (US$ 2,121.8 billion) as Asia’s second largest stock market behind the Tokyo Stock Exchange (US$ 3,925.6 billion).

However eight of the ten top largest stocks are state-controlled companies:

1. PetroChina (RMB 3,656.20 billion)
2. Industrial and Commercial Bank of China (RMB 1,417.93 billion)
3. Sinopec (RMB 961.42 billion)
4. Bank of China (RMB 894.42 billion)
5. China Shenhua Energy Company (RMB 824.22 billion)
6. China Life (RMB 667.39 billion)
7. China Merchants Bank (RMB 352.74 billion)
8. Ping An Insurance (RMB 272.53 billion)
9. Bank of Communications (RMB 269.41 billion)
10. China Pacific Insurance (RMB 256.64 billion)

#3 » China’s GDP may overtake U.S. as early as 2020

Deutsche Bank’s Chief Economist for Greater China, Jun Ma, told an investment conference in Hong Kong that China's growth will be underpinned by a rapid expansion in emerging market economies, which will account for about 70% of global GDP growth in the coming decade. China will "massively invest" in these emerging economies using its nearly $2 trillion in foreign exchange reserves, extend its leverage by extending loans to the International Monetary Fund and allow the yuan to appreciate in preparation for the currency's potential reserve status.

Jun Ma further added that by early 2020, China’S nominal GDP growth could surpass that of the United States within ten years, a period which will likely be accompanied by a gradual appreciation of the yuan. Ma also expect a final GDP recovery (quarter on quarter basis) to start by middle of 2010 (hopefully this fella is correct).

#4 » By 2025, China will have 10 New York-sized cities

According to a research done by McKinsey Global Institute (MGI) in “Preparing for China’s Urban Billion, China is projected to have a staggering 40 billion square meters of floor space by the year 2025. In another words China will be constructing 20,000 to 50,000 new skyscrapers of which each will be more than 30 floors. This is equivalent to a mind-boggling 10 (ten) New York Cities.



Also by 2025, up to 170 cities in China could meet planning criteria for mass-transit systems – more than twice the current number in Europe. Additionally, China will have up to 5 billion square meters of road and up to 28,000 kilometers of metro rail. China will also need to construct between 700 and 900 Gigawatts of new coal-fired power between 2005 and 2025.

#5 » By 2030, China’s cities will add 350 million people, more than the entire U.S. population

From the same research done by McKinsey Global Institute (MGI), it was projected that China’s urban population will expand from 572 million in 2005 to 926 million in 2025 – an increase of 350 million Chinese city dwellers which is larger than today’s United States entire population. By 2030, China’s urban population will reach 1 billion people.

Urban investment thus will reach over 24 trillion renminbi by 2025 or 93% of total Chinese fixed investment compared with about 79% in 2007. The urban consumption share of GDP will rise from 25% (or 3.9 trillion renminbi) in 2005 to 33% (or 32.7 trillion renminbi) by 2025. The township of Huaxi in the Yangtze River Delta is a great example of how the Chinese government embraced capitalism to lift 300 million people out of poverty during the last 3 decades.

From a farm community with bamboo huts and ox carts in the 1970s, Huaxi is now an industrial and commercial powerhouse with many live in mansions and most have a car with per-capita income of 80,000 yuan (US$ 11,700) making Huaxi the China’s richest village.

#6 » China has cash to buy 20% of S&P500

United States is still worry about China’s military strength. Of course there’s no way China will reveal her real (military) statistic since it’s so fun watching U.S. sending its intelligence gathering information. Can you still remember the detention of 24 U.S. crews after the collision of U.S. EP-3E Aries II spy plane with Chinese fighter jet over the South China Sea back in 2001? United States demanded the return of its spy plane but China said it would only do so after completing its own inspection and collection of evidence. China was having fun stripping the spy plane naked for whatever military technologies or knowhow that China could use.

But the strength of China may lies on its economy after all. Instead of engaging in wars, China may just start buying countries with its huge crates of cash. China’s central bank recorded foreign exchange reserves of US$2.399 trillion as of end 2009 (23% jump compared to 2008) and this was achieved during global crisis, mind you. With this type of money China can buy almost 20% of S&P500, if the Chinese government goes crazy.

Original post: http://stocktube.blogspot.com/2010/03/6-mind-boggling-info-about-china-that.html

47% of our Malaysia stock market is controlled by the Big Boys

From mystockfolio.blogspot.com:

I've recently made a study on the market value of Malaysia Bursa market. Forgot which date I did it, but roughly last few week. The total market capital of Bursa is 392.6b MYR. To my surprise, even not calculating the institutional buyers like funds, insurance companies,trust fund etc, the percentage of total market capital held by our government or government linked companies are around47% with total around 184.7b MYR.

Here is the breakdown:
LTAT-3.4B
KHAZANAH-66B
LTH-4.3B
EPF-98B
PNB-13B

Well, from the above you would have known, the biggest being EPF,KHAZANAH,PNB.
Let me further breakdown
LTAT held only a few shares,around16, the topholdings being Boustead,Affin,CSCSteel,Aeon,GBH

KHAZANAH, to my surprise, with 66B, it held only around18shares,the biggest being Axiata,CIMB,Tenaga,Plus,Telekom

LTH held around 91shares,the biggest being BIMB,TH plantation,KFC,Pelikan,HapSeng Plantation.

EPF held around 99shares,the biggest being SIME,RHBCAP,TENAGA,CIMB,PBBANK

PNB held around 47shares,the biggest being SIME,MAYBANK,UMW,SP SETIA,MMC CORP

Original post: http://mystockfolio.blogspot.com/2010/03/47-of-our-malaysia-stock-market-is.html