Warning Sign On LCL As It Misses Deadline To Submit Audited Reports!

Hmm.. on Star Business LCL misses deadline to submit report

• Friday May 1, 2009
  
  LCL misses deadline to submit report
  
  PETALING JAYA: LCL Corp Bhd missed yesterday’s deadline to furnish its audited financial statements for the financial year ended Dec 31, 2008.
  
  The company informed Bursa Malaysia yesterday the report was at “finalisation stage” and that “the company is working closely with the auditors to finalise the audit expeditiously.”
  
  “LCL will submit its audited financial statements 2008 as soon as the audit is completed,” it added.
  
  Under listing regulations, LCL had to submit the report not more than four months after the end of its financial year, which was on or before Apr 30.
  
  Companies that fail to submit their financial reports on time face suspension or delisting, according to Bursa rules.

Huge worry sign.

Here's why. Let's go back in time. 28th January 2009: LCL down 20% on credit tightening woes

• KUALA LUMPUR: LCL Corp’s share price fell as much as 20.3% or 10.5 sen to a low of 41 sen in mid-morning on Wednesday on concerns about the impact on its projects in Dubai arising from tightening of credit facilities.
  
  Its share price opened at 51 sen, down 0.5 sen from last Friday’s close. At 11.30am, its share price was down five sen to 46.5 sen. It was the second most active with 4.42 million shares done.
  
  LCL Corp’s Dubai chief executive officer Hakim Asmaun was quoted as saying the group needed government support to weather the global economic slowdown. The current economic slowdown was disrupting the group’s plans as local banks were tightening their credit facilities.
  
  Hakim was also quoted as saying the group needed the Malaysian government’s support and added that five to six big Malaysian companies in Dubai were also affected by the tightening of credit facilities.
  
  CIMB Equities Research said LCL Corp was not alone in facing a liquidity squeeze. Local banks had been under fire recently for pulling credit lines on listed and private companies as they took a cautious view amidst the global slowdown.
  
  “Local banks need to understand that the interior-fit-out (IFO) business remains a viable business in Middle East, even in Dubai.
  
  That said, IFO companies must have established and credible clients who are good paymasters,” it said.
  
  The research house had lowered its target price at RM1.95. It was maintaining its earnings forecasts for now while noting that there is downside to our numbers if there are delays in the announcement of new projects or if the credit squeeze does not ease.
  
  “However, our target price is reduced from RM2.35 to RM1.95 as we widen the discount to the construction sector’s 11 times P/E target from 40% to 50%, in line with WCT’s target valuation. The large discount reflects LCL’s small market cap and worries about the Middle East,” it said.
  
  CIMB Research said LCL remained an outperform on the potential re-rating catalysts of success in landing major IFO contracts in other countries, probably Abu Dhabi or Singapore first; listing of its Dubai operations and trough price-to-earnings and price-to-book value valuations. Furthermore, dividend yields are almost 10%.

Now Dubai is a worry. See Dubai's House Prices Drop 41% In Q1!! ( also No Longer The Same Dubai As Global Economic Crisis Hits Dubai Hard. )

The next following day, 29 January 2009 LCL sees no potential impact from credit tightening

• PETALING JAYA: Interior fit-out (IFO) works provider LCL Corp Bhd, whose shares have been slipping on concerns over funding problems arising from tighter credit facilities, says it sees no potential impact on any of its projects.
  
  The company said its Dubai operations chief operating officer Abdul Hakim Asmaun was misquoted in an earlier report as saying the group needed government support to weather the global economic slowdown.
  
  “Hakim was speaking in his capacity as a member of the Malaysia Business Council and was talking about Malaysian companies in general and not referring to LCL,” chief operations officer Michael Tan said in a statement to StarBiz yesterday.
  
  He added that LCL’s credit facilities were in the form of project financing and were secured during the award stage of the contracts.
  
  “It (the loan) is non-revolving and will be retired gradually towards the last stage of IFO works as the project progresses.
  
  “Therefore, banks tightening their credit facilities is not an issue as the repayment is secured against the assignment of contract proceeds whereby the banks will receive payment directly from the customers,” Tan said.
  
  Yesterday, LCL’s shares fell 5.5 sen, or 11%, to 46 sen, an all-time low.
  
  Currently, about 75% of LCL’s business is derived from Dubai. Tan said the group was looking to diversify into other countries in the Middle East, namely Abu Dhabi, Bahrain and Qatar.
  
  “We strongly believe that these countries are good markets as they have some of the highest oil reserves in the world.
  
  “They also have a very good track record in terms of GDP (gross domestic product) growth in the past five years,” he said.
  
  On the outlook for the IFO business in the Middle East amid the current economic climate, Tan said: “There is no doubt the Middle East is also affected by the global economic situation. However, our projects are still progressing, albeit at a slightly slower pace.
  
  “Even though there is a slowdown in construction, IFO comes in at the very end of a project and we strongly believe that our clients will not forfeit the entire project so close to completion.”
  
  Closer to home, Tan said the group was looking to expand its IFO business into Singapore.
  
  “We are currently actively bidding for projects in Singapore and one of our main targeted projects is the Singapore Marina Bay Sands Integrated Resort.
  
  “With Singapore being so close to home, the mobilisation cost will be much more effective and we can also accommodate our current workforce should downsizing of operations in the Middle East be required,” he said.
  
  Tan said the group was adopting a cautious approach in taking on new projects.
  
  “We are more selective about whom we work with and we are negotiating for better conditions with enhanced payment terms as a measure to mitigate risks,” he said.
  
  LCL currently had an outstanding order book of RM454mil which would last the group another year, Tan said.

The next day on the Financial Edge.

• 30-01-2009: Foreign hands suspected in LCL selldown
  by Tony C H Goh
  
  KUALA LUMPUR: The selldown of more than six million shares that pushed LCL Corp Bhd shares to an all-time low of 46 sen on Wednesday, following reports that the company was facing financing problems and turned to the government for assistance, was probably the work of foreign institutional investors.
  
  Foreign shareholdings in the company stood at 13% before the selldown, and some of the largest foreign investors include JP Morgan Co Ltd, NT Assets Co and Morgan Stanley Co Ltd, said LCL chief operating officer Michael Tan.
  
  The selldown by the foreigners is said to be related to a report earlier this week that LCL is seeking government assistance to help overcome tightening credit conditions in implementing its projects in the Middle East. Since then, the company had refuted the report and clarified that its financing for projects was intact and they needed no government assistance.
  
  After clearing the air over its credit lines, LCL's priority is now geared towards managing its borrowing levels besides eyeing new markets in the Middle East and around this region to secure additional contracts
  
  According to Tan, going forward, LCL would also be mindful of the interest of its stakeholders and was working on reducing its gearing levels to ensure a healthy balance sheet.
  
  Tan added that LCL is in the midst of securing new contracts in Abu Dhabi and Singapore's Marina Bay Integrated Resort project worth S$46 million (RM110 million), expected to be finalised by next month.
  
  "In addition, we are also hopeful of securing the Dubai Metro-Green line (the second underground Metro line in Dubai) worth RM600 million, and the Al-Reem Island in Abu Dhabi valued at RM15 million to RM20 million.
  
  "We are also bidding on smaller scale projects, worth about RM5 million to RM10 million locally. In total, we are tendering for more than RM1 billion worth of projects both locally and around this region," Tan told The Edge Financial Daily yesterday.
  
  Tan said LCL is working on reducing its gearing level due to the deferment of its proposed rights issue that was supposed to raise RM70 million and bring its gearing level to below 1.5 times from more than two currently.
  
  "Some of the options that we are exploring is the possibility of foreign equity partnership or strategic alliance with developers and property players based in the Middle East. This is to enable us to secure jobs without incurring high borrowings," he said
  
  LCL, which specialises in the interior-fit out (IFO) industry, had outstanding projects worth about RM1.15 billion as of Nov 8, 2008. Among the ongoing projects that will keep the group busy until the end of the year are the Dubai Metro-Red Line, consisting of 14 stations worth RM312.6 million and a RM33 million contract from Bank Negara Malaysia.
  
  Projects in the Middle East, in particular Dubai, are affected by poor sentiment rather than actual credit issue, so there are still plenty of jobs available in the region, Tan said. He clarified that every project undertaken by the company has its own financiers, and all the funding arrangements were actually finalised in Malaysia.
  
  Clarifying the report citing an LCL official in Dubai stating that they sought government assistance to complete the projects, Tan said that the company official was speaking in his capacity as a member of the Malaysia Business Council, during a dialogue in Dubai about Malaysian companies in general, and was not referring to LCL.
  
  "All the bank borrowings for our projects have been secured, and cooperation from banks is still good, as the company is not facing any problem in securing additional funds to finance its future projects," said Tan.

A month later, LCL reported its earnings: Quarterly rpt on consolidated results for the financial period ended 31/12/2008.

LCL reported losses of over 17 million for the quarter!!

It makes you wonder about the sell down a month earlier, eh?

Anyway, in that quarterly earnings, classic investment warning flags were all over the place. Massive debts and the surge in trade receivables to more than 300 million is a massive worry.

And today LCL has missed the deadline to submit its audited financial statements for the financial year ended Dec 31, 2008!

Caveat!

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Anthony Bolton: This Is Not Bear Market Rally - It's The Start Of A Bull Market!

Monday, October 06, 2008: Anthony Bolton : Why Now's The Time To Buy!

• When he warned in November, 2006, that the bull market was long in the tooth and share prices seemed unsustainable, the FTSE 100 traded at around 6,000. It went on to top 6,600 before beginning the long decline to where we are today.
  
  More importantly, for an army of investors who follow the "British Buffett", Mr Bolton added that he has been buying shares for the first time in two years because some valuations are the cheapest he has seen in a lifetime.
  
  Speaking at his offices in the shadow of St Paul's Cathedral – where, incidentally, this multi-faceted man has had his choral compositions performed – he said: "Investors who sell now are making the great mistake of being shaken out when markets are low.
  
  "They are probably the same people who bought when markets were high. If you are panicky by nature, you should not have invested in shares in the first place.

Sunday, April 12, 2009: 'We've hit the bottom' says Anthony Bolton

• Bears remain convinced the rally was little more than a "dead cat bounce" or bear market rally.
  
  But Mr Bolton remains unfazed. His beliefs were underlined by a survey from his firm that found investing when consumer confidence is at a low point, such as now, can generate an average of 13pc more in annualised returns.
  
  He did, however, concede that conditions would remain bumpy for the next few months. "The market recovery won't necessarily be in a straight line and we'll still see some ups and downs, the pattern we have seen recently."

Thursday, April 30, 2009: All Things in Place’ for Bull Market

• April 30 (Bloomberg) -- Anthony Bolton, president of investments at Fidelity International, said a bull market in equities has already begun and financial shares are poised to drive recent gains higher.
  
  Low valuations indicate advances that began in March are the start of a bull market, Bolton said. He favors financials, consumer cyclical, technology, and “value stocks,” such as retailers, automakers and construction-related shares.
  
  “All the things are in place for the bear market to have ended,” Bolton said in an interview with Bloomberg Television in Hong Kong. “When there’s a strong consensus, a very negative one, and cash positions are very high, as they are at the moment, I’d like to bet against that.”
  
  The MSCI World Index has dropped 3.2 percent this year, extending last year’s 42 percent slump, the worst annual performance since at least 1970. Shares plunged as a collapse in U.S. consumer spending and a freeze in credit markets sent the U.S., Europe and Japan into their first simultaneous recessions since World War II.
  
  The declines dragged the gauge’s price-to-book value, or the ratio of stock prices to company assets, to 1.5, down from 2.4 at the beginning of 2008.
  
  Bolton, who is based in London, said that in September he started putting money into Fidelity’s China-focused fund, which invests in Hong Kong-listed H shares of Chinese mainland companies, and into Japanese stocks.
  
  Not Bear Rally
  
  Investments in money market funds in the U.S. have reached a record and could fuel a bull market during the next two to three years, he said.
  
  Bolton’s view contradicts that of Nouriel Roubini, the New York University professor who predicted the financial crisis. Roubini said last week he was “still bearish” and that an economic recovery is going to take “longer than expected.”
  
  “Nearly all the broker research I read says ‘bear-market rally,’ that’s one of the other things that makes me think it’s the beginning of a bull market, not a bear-market rally,” Bolton said. “When everyone is extremely negative, I want to bet against that. If you wait for things to get better, you’ll miss the rally.”
  
  Fidelity International managed about $157 billion as of January, according to Hong Kong-based spokeswoman Megan Aitken.

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A Conversation About The Economy

Another great video.

Charlie Rose talks about the economy with Joseph Stiglitz, Bill Ackman, Andrew Ross Sorkin and Kate Kelly

ps: If you like Bill Ackman, do give the following article a read: The Optimist

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Why This Is Still A Bear Market!

The following editorial is from Andy Xie, Bulls, not Bears, May End in Tears

• Stock markets have roared back since their early March lows: by April 17, the S&P 500 was up 23.7 percent, FTSE 100 16.5 percent, HSI 37.5 percent, Shanghai A 20.8 percent and Nikkei 26.3 percent. Even American banks, the epicenter of the financial crisis, are reporting good earnings. The U.S. president is talking about silver linings. Fed Chairman Bernanke is seeing “green shoots.” Japan just announced another fiscal stimulus package. The market is expecting a second Chinese stimulus. Suddenly, it feels like you must get in now or it will be too late.
  
  But this is a bear market bounce that will end in tears. What will bring it down will be the likely torrent of new issues. Banks that report good earnings and speak about recovery will probably try to raise massive amounts of capital, taking advantage of the market rally, to weather the long winter ahead. IPOs will swamp emerging markets. Money flowing from bullish investors will become the winter clothing for distressed banks and companies.
  
  Indeed, the placement torrent may have already begun, and this bear rally may end within a month or two. There could be another bear rally in the fall due to the encouraging economic news. That rally will end when (1) the economic recovery proves unsustainable and economic indicators dip a second time, and (2) inflationary pressures tick up, forcing central banks to tighten despite weak economic conditions. Asset prices will hit their final bottom, probably in the second half of 2010, when fiscal stimulus funds are exhausted and central banks are unable to print more money.
  
  In the beginning of 2009, I predicted a bear market rally in the second and third quarters. Revising that prediction, I now see two bear rallies in 2009. We are in the middle of the first. Private placements and IPOs will bring it down. Improved indicative economic news in the third quarter may spark another rally. In my previous article, I expanded my economic outlook to predict the second dip in 2010.
  
  Fear has dominated financial markets since the sub-prime crisis began in the summer of 2007. Rallies were brief, mere backdrops to deeper market plunges. The latest rally, in the past five weeks, has been the longest. As it went on, it pulled in more and more skeptics. But I sense desperation among the bulls. The other day a CNBC host in the U.S. nearly kicked out a bearish guest who expected “waves of financial crises to come.” When I told an acquaintance that Hong Kong property prices will drop substantially, he furrowed his eyebrows and said emphatically that Hong Kong people had holding power. Faith rather than evidence is what’s keeping the bulls going.
  
  But the big test for the market will come when companies begin to issue stocks for cash. It began with Goldman Sach’s US$5 billion offer of common stocks right after its ‘good’ earnings announcement. The odds are that other global financial institutions would do the same, all in the good name of repaying the government. (But if they are in good shape, why would they need to raise money to repay the government?) In emerging markets too, IPOs will begin soon, ending nearly two years of drought. IPOs are what emerging markets are all about, as their underlying economies are hungry for capital.
  
  When the IPOs hit the markets, investors should think about why businesses want to raise money. The global economy is unlikely to be strong in the foreseeable future. Businesses shouldn’t need capital to expand. The likely answer is that they are preparing for lean times ahead. I suspect businesses making optimistic noises in public are, in fact, still bearish about the future. As long as the market remains buoyant, they will take advantage of the opportunity to raise money. The supply of stocks will eventually overwhelm the market.
  
  The bull case is built on three assumptions: (1) the market decline is already deep enough; (2) the global economy is either recovering or about to; and (3) more government stimulus money is coming, should there be more trouble. The bear case rests on: (1) this is a debt crisis, the debt levels are still too high, and the global economy can’t resume growth until debt levels recede to normal; (2) the world economy is still shrinking, though at a slower pace; and (3) government stimulus can’t start another growth cycle as the global economy must restructure itself first.
  
  I am in the bear camp. The bull case is really based on comparing the current recession with other recessions in the past half-century. However, this is a once-a-century recession. The only comparable one was the 1930s Great Depression. For a new growth cycle to begin, two conditions must be met: (1) debt levels, relative to income, in consuming economies (U.S., U.K., Australia, Ireland, Spain, etc.) must return to levels prevailing two decades ago, and (2) the manufacturing export economies (China, Germany, and Japan, etc.) must become significantly less production-oriented.
  
  The debt crisis is far from over. Just look at the U.S. financial sector debt – the source of all problems in this crisis. It has not come down, despite all the talk about deleveraging. It stood at $17.2 trillion at the end of 2008, higher than $15.8 trillion in September 2007, when the crisis began. Even though it can’t borrow from the market like before, it is borrowing from the Fed and the government. How could we say that the crisis is over when the U.S. financial sector’s leverage hasn’t declined?
  
  The economic fallout of the debt bubble bursting is just beginning. By the end of 2008, households’ net wealth in the U.S. had declined by $13 trillion or 20 percent from its peak in 2007. U.S. property prices are still declining. The odds are that the value of all residential properties in the U.S. would decline by another $5 trillion or more before stabilizing. On the other hand, U.S. household debt has not fallen. It stood at $13.8 trillion at the end of 2008. For the first time since the 1930s, aggregate household debt would exceed the value of the property that households own in the U.S. Obviously, borrowing against property to fund consumption is no longer possible.
  
  Income prospects look very poor. Unemployment is rising rapidly in the U.S., Europe and Japan. As the credit-funded portion of global demand vanishes, the labor force behind it loses their jobs. As the unemployed curtail their consumption, the multiplier effect pushes unemployment even higher. This vicious cycle is yet to reach its natural peak. The impact of rising unemployment on demand may last through 2010.
  
  Many who argue for a bull case are actually hoping for another bubble. The thinking is that if enough people believe in the bull case, their money keeps it going, rising asset prices support demand growth, corporate earnings improve, and the bull case is validated. The hope for another bubble is widespread in the world today. Even policymakers are secretly hoping for another bubble. They all remember how good life was during the bubble. The crisis has weighed down on everyone’s spirits. It seems that “doing the right thing” is just too hard.
  
  Bear rallies emanate from psychological leftovers of bubbles. When a bubble stays around too long, most begin to view it as the norm. When the bubble bursts and the pain becomes unbearable, most pine for the “good old days.” Their collective action causes a rally that creates the illusion that the bubble has returned. But a bubble, after bursting, can never be brought back. If you blow air into a balloon with a hole, it can puff up if you blow hard enough but as soon as you stop blowing, it deflates again, to nothing.
  
  Governments and central banks are trying hard to stop asset prices from falling. The hope now rests on government bailouts. Interest rates are near zero and budget deficits are at scary levels. When inflation rises, it will close the door on more government bailouts. When the last hope is gone, asset prices will truly bottom. I think this will happen in 2010.
  
  Some argue, why can’t we revive the old bubble or start a new one? The problem is that after a bubble has lasted several years, its bust leaves so much rubbish around that a new bubble cannot take root. For example, high levels of existing debt make further debt growth difficult. Without debt, a new bubble would have no legs. The economy needs time to recover before it can support another bubble. If you are waiting for another bubble to bail you out, I am afraid it’s going to be a long wait.
  
  Human psychology is surprisingly susceptible to a collective change in mood. Herd mentality is a well recognized but unproven psychological phenomenon. A person is more likely to believe in something if people he or she knows already do. The safety-in-numbers behavior is often observed in the animal kingdom. While crossing the African savanna, migrating wilder beasts cross crocodile infested rivers together. The idea is that the crocodiles can eat only one wilder beast at a time. When many cross at the same time, only one will be eaten, and the rest can cross safely. It seems that many succumb to the herd mentality to handle risk in the financial world. Bubbles appear repeatedly in human history, despite the setbacks they cause, because the herd instinct remains deeply rooted in our brains and takes control when the environment permits.
  
  When wilder beasts cross a river together, the advantage is real. If they cross separately, they give more time to crocodiles to eat them. For this advantage to be realized, a herd of wilder beasts needs a leader, someone who begins the rush. The first one to go has a higher probability to be eaten. Hence, in this case, irrational behavior, though not advantageous for individuals, is good for the group. The evolutionary advantage of such irrational behavior for the collective well being is the reason it is so prevalent in the animal, as well as human, world.
  
  Similarly, some bubbles are actually advantageous for economic development. For example, the IT bubble created and perfected technology that is still benefiting the world today, even though those who invested in it lost their money. Those who thought IT would make them rich are like the head of the wilder beast herd, unknowingly sacrificing themselves for the common good. Most technology-driven bubbles are like that: good for the world but bad for investors. Joseph Schumpeter’s theory of creative destruction is about such bubbles. Because so many bubbles are not harmful, governments and central banks have taken a cavalier attitude towards it.
  
  From time to time, a huge bubble of productive assets builds up. In most cases its consequences are devastating. The global property bubble falls into this category. Derivative products – another class of unproductive assets – hid leverage behind the property boom and made it bigger than any other in history. The debt accumulated for building unproductive assets caused widespread bankruptcies (e.g. the U.S. in the 1930s), hyperinflation (e.g. Germany in the 1920s), or massive government debt (e.g. Japan in the 1990s). It takes a long time, and a productive debt bubble, to heal the wound.
  
  The pain so far is acute but not depression-like. The reason is government stimulus measures are helping businesses and households stay afloat despite their insolvency. As governments exhaust their fiscal and monetary firepower, they are trying to verbally improve investor confidence, hoping that asset markets will improve and economies will follow. Such verbal stimulus is indeed having an impact.
  
  For example, the U.S. government is conducting a stress test on the banks. The test is a scenario analysis, i.e. whether banks can survive the downturn under different possible scenarios. I am sure most banks would ‘pass’ the test with flying colors, but this is self-deception. The U.S. financial system is technically bankrupt. The strength of a banking system reflects the strength of the economy it serves. Just look at the balance sheet of the U.S. household sector. How could U.S. banks survive when so many of their customers have negative equity?
  
  Such confidence tricks are significantly impacting sentiment and financial markets, but they can’t reverse the trend. Property prices are falling and unemployment rates are rising across the world. Temporary euphoria in financial markets cannot reverse that. Reality will eventually extinguish the irrational euphoria. Once inflation rises, it will close the final door of hope – the government bailout. Interest rates can and will rise despite badly performing economies. Only then will asset prices truly bottom out.
  
  The false hope today may feel good but it only delays necessary reforms. It actually makes things worse. As governments spend money to revive the past, they won’t be left with money required to ease the pain caused by structural reforms in the future. The world is behaving like a bankrupt drug addict, spending welfare checks to feed an addiction. Once the checks are all spent, the addict has to go cold turkey to kick the habit.

ps: Estimates Of Economic Costs Of A Flu Pandemic

Hmm... with most global markets having had their huge rallies recently, would this be the catalyst for the next leg down that the bears are waiting for?

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Dubai's House Prices Drop 41% In Q1!!

Early last month, I highlighted No Longer The Same Dubai As Global Economic Crisis Hits Dubai Hard.

In that posting I had highlighted the crash in Dubai's real estate!

In fact, George Soros too had called Dubai as the biggest real estate bubble in the world.



On Forbes, the following article caught my attention Research firm: Dubai home prices drop 41 pct in 1Q

• Home prices in the once red-hot Middle East boomtown of Dubai plunged 41 percent in the first three months of 2009 as the global economic slowdown raised concerns about job security and dried up financing, according to figures released Tuesday that suggest nearly two years of gains have evaporated.
  
  The drop in the home price index compiled by real estate consultancy Colliers International marks the first consecutive quarterly decline and the first year-over-year slide since Dubai's property boom began earlier this decade.
  
  "The heat has gone out the market completely," Colliers Middle East Chief Executive John Davis said in an interview.
  
  Dubai has staked much of its reputation on attention-grabbing property developments including the world's tallest skyscraper and a near-empty archipelago resembling a map of the world. Many of the city-state's real estate developers have strong ties to the government and rely on foreign workers, who send billions of dollars back home to families in Asia each year.
  
  Colliers' index, compiled with six local and international banks, measures prices in parts of Dubai where foreigners have been allowed to buy since the market was opened in 2002. Those areas were largely responsible for Dubai's real estate boom.
  
  The 41 percent drop from the previous quarter is the second decline in a row. Colliers reported an 8 percent drop in the last three months of 2008, which the company described as likely the first decline since the boom began.
  
  The research firm cited several reasons for the decline, including some such as a lack of financing and worries about job security that have become common throughout much of the world.
  
  Other factors were more specific to the Dubai market, where citizens account for only 10 percent of the population and typically already own their homes.
  
  Colliers noted that a number of developers failed to provide sufficient details about their projects, creating an "information void (that) was quickly filled with negative market rumors."
  
  At the same time, investors enticed by low down payments in earlier years rushed to sell their holdings before final payments of as much as half the purchase price came due. People looking to buy homes to live in - known in the industry as "end users" - are now largely staying on the sidelines.
  
  "We're dealing with a completely different market," Davis said. "The speculators have all gone. The end users are extremely limited. ... The expatriate community is extremely concerned about employment prospects."
  
  Developers have responded to the downturn by slashing staff, renegotiating contracts and shelving scores of projects. The Dubai government last week said it has distributed about $5 billion worth of loans to state-affiliated developers to help them cover unpaid bills.
  
  Nakheel, the government-run developer best known for its manmade island developments, declined to say whether it received any of the government loans but did say it is "reassessing" business objectives to "accommodate the current economic climate."
  
  Emaar Properties, builder of the world's tallest building in central Dubai, said this week none of its projects are on hold and that it is offering "several options" to help customers, including allowing buyers to transfer purchases of unbuilt projects to those nearing completion.
  
  At least one developer hopes to turn the slump to its advantage. Deyaar Development Co. CEO Markus Giebel said the company plans to launch a number of funds, including one for 500 million dirhams ($136.1 million) focused on buying up some of the developer's distressed properties.
  
  Year-over-year, Dubai home prices dropped 34 percent in the first quarter. Collier's index is now about where it was in the second quarter of 2007, and little higher than in the first part of that year.
  
  Davis said prices are likely to continue falling, though not as sharply as in the first quarter. He said it was too soon to predict when the market would hit bottom.

Here is the link to Collier's report: here

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Retract them claws

In case you’ve been living under a rock for the past six months and have missed the close to shameless advertising campaign, X-Men Origins: Wolverine is out tomorrow. Yes, I realise tomorrow is a Wednesday (April 29 to be precise) and new movies usually only ever come out on a Thursday. But Hugh and the team are trying to do The Dark Knight thing and get a bit of extra business by opening a day earlier. Don’t mistake me, The Dark Knight and X-Men Origins: Wolverine are both movies adapted from popular comic-book characters and I did mention them in the same sentence. HOWEVER I’m not expecting the Wolverine movie to be anything close to the brilliance of The Dark Knight which, in my personal opinion, is one of the best movies ever made (send me angry letters later folks). I’m looking forward to X-Men Origins: Wolverine because I love the X-Men comics, I love the idea of starting at the origins of an iconic character and it looks like a frolicking good time at the movies. Plus, unlike the X-Men movie franchise this film features my favourite X-Man: Gambit in a starring role (hooray!) For those of you, like myself, who are trotting on down to see the first of what is sure to be many X-Men Origins movies, I hope we get what the trailer promised: a fun, action-packed, adventure film with little to no depth. In times like these I think a bit of escapism is just what the pointy-clawed mutant called for. X-Men Origins: Wolverine is screening everywhere, literally everywhere, tomorrow.

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Dr. Doom Calls Himself Dr.Realist!

I enjoyed the following newsweek interview on Dr.Doom, Nouriel Roubini.

• Weymouth: What do you believe is happening to the economy today?
  Roubini: The rate of economic contraction you have seen in the last two quarters—6 percent annualized—is going to slow down. The optimists are already talking about the "green shoots" of spring, about economic activity becoming positive. [They say] we will have positive growth in the third quarter, and in the fourth quarter we will grow 2 percent over the previous quarter. They expect that next year, growth will go back to above 2 percent.
  
  Compared with this optimistic consensus, I believe that the rate of economic contraction is going to slow from minus 6 percent in the last two quarters to minus 2 percent by the fourth quarter. Next year, I believe that the growth rate is going to be 0.5 percent for the U.S. average. Even if we are technically out of a recession, we are going to feel like we are in a recession. The bottom of the economy is not going to be in three months, but rather toward the beginning or middle of next year.
  
  So you are still Dr. Doom?
  No, I am not Dr. Doom. I am Dr. Realist. I don't believe we are going to end up in a near depression. Six months ago I was more worried about an L-shaped near depression. Today, after the very aggressive policy actions taken by the U.S. and other countries, the risk of that near-depression L has been reduced from 30 percent to 15 or 20 percent. We are instead in the middle of a U.
  
  You think the Obama administration is on the right track?
  I have to give credit to the administration. Within 30 days of coming to power, they did an $800 billion stimulus package, a new program to deal with mortgages and foreclosures, and also a bank plan that when Treasury Secretary Tim Geithner came with details, made the markets rally sharply. Each one of these three programs has some flaws. The fiscal stimulus could have been more front-loaded. For the mortgages, eventually you are going to need a reduction of the face-value principal of the mortgages. And on the banks, I believe after the stress tests it is going to be obvious that even some of the largest banks are so fundamentally in trouble that you cannot buy their toxic assets. You need to take over these banks on a temporary basis, clean them up and then sell them back to the private sector.
  
  You have to nationalize these banks?
  Yes. If you do not like the dirty N word, you can call it a "temporary takeover."
  
  How about the deficit the banks are building up?
  In the short term I am supportive of it, because if we didn't have these fiscal deficits, the recession would become a depression. On the other side, I do agree that this is not a free lunch. We are going to add trillions of dollars to our public debt, which is going to go from 40 to 80 percent of the GDP. There are only a few ways in which you can finance that extra public debt. If you rule out default and a capital levy on wealth, you either have the "inflation tax" or you have to painfully cut spending or raise taxes, and either one is not going to be politically palatable.
  
  What is going to fuel the next growth cycle?
  That is a difficult question. The periods of high growth in the United States in the last 25 years have been characterized by an asset and credit bubble. Whatever the future growth is going to be, this time around it needs to be sustainable and not bubble-prone because we are running out of bubbles to create. We had the real-estate [bubble], tech bubble, housing bubble, hedge-fund bubble, private-equity bubble, commodities bubble, even the art bubble—and they are all bursting.
  
  What makes you different from the other economists?
  We think usually that crowds—on average—can be wiser than individuals. In this case, most people got it wrong because whenever we are in an irrational, exuberant bubble, people fail to think correctly.
  
  Do you believe this is a bear-market rally or do you think it is the market anticipating an economic recovery?
  As we reach newer lows, we may be closer to a level of the market that is fundamentally right. A year ago we were not as close to a true bottom. Today we are closer to it. As we become closer to the bottom of the economy, the stock market looks ahead and sees the light at the end of the tunnel and rallies. In spite of these caveats, I would argue that even the latest market rally is a bear-market rally.
  
  Do you worry about China getting tired of holding our bonds?
  In the short run, China has no option but to accumulate more reserves and dollar reserves. Why? Because if they stop doing that, their currency would appreciate sharply while their exports are plunging. So in the short run, they are going to keep on accumulating. But I have seen a huge number of new initiatives in the last month that suggest [the Chinese] are pushing for the yuan to become an international currency and a reserve currency. They are doing bilateral deals with countries like Argentina and half a dozen others in yuan, not in dollars.
  
  They are moving away from the dollar?
  Yes, slowly they will. First they have to establish their own currency as an international currency. That will take years, but already in a month they have done more than in the last 10 years.

Source: http://www.newsweek.com/id/195053

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Like a two-leaf clover with swine flu

When it comes to movie-making, you would think luck wouldn’t have much to do with the success or failure of a film. After all, you make sure you have great subject material, a well-adapted script, plenty of money in the budget for marketing, sturdy actors and most importantly an awesome director and crew. If the film turns out like Gigli, odds are you fucked up on one of the principle elements along the way. However, there are a handful of films who, due to no fault of their own, have been released on the worst dates. Like the little girl crushed to death by a piano which has fallen of a two-storey building, some people (or films) are just in the wrong place at the wrong time. Below is a list of films I’ve put together that have been released on the worst possible days.
Collateral Damage Ahh yes, who could forget this oily, sweaty Arnie vehicle? Everyone apparently. And why is that you ask? The aptly title Collateral Damage had a September 11, 2001 release date. So you can imagine why audiences didn’t really feel like going to see a movie while arguably the largest terrorist attack of our time was occurring. If, by chance, they did want to go to the movies for a bit of escapism on said horrific day, I don’t think a film titled Collateral Damage would have been the pick. Then there’s the whole iffy plot issue about Arnie’s character who is trying to bring down international terrorists after they killed his family in a dramatic bombing scene. Several bombings of important government buildings ensue baring an errie resemblance to the actual events and trauma of 9/11. At the last minute studio execs managed to delay the release of the movie and pump it out a few weeks later accompanied by a press release preaching the anti-terrorism slogan of the film. Needless to say, Collateral Damage ddidn’t damage the box office, just the investors pockets.
World Trade CentreParamount studios had a splash of bad luck on the day they announced they would be making the first Hollywood dramatisation of 9/11. Ready and politically corrected as they were back in July 2005, unfortunately the day they announced World Trade Centre would be made starring Nicholas Cage, the London bombings occurred. Lets just say it didn’t exactly warm everyone to the idea.
Disaster Movie Admittedly Hollywood spoof movies are never going to be a major critical or commercial success but the following situation didn’t help. Lionsgate copped a back lashing (or 12) when they announced Disaster Movie would be released on the anniversary of Hurricane Katrina. Maybe they thought the coincidence/unfortunate timing would slip under the radar or maybe it was intentional and therefore like most of the jokes in the film – tasteless.
GlitterOkay, I know this is possibly the most hated movie of all time and my tireless efforts to defend it and Mariah Carey are futile BUT (and there is a but) did I mention Glitter was released on September 11, 2001? Oh no, unlike Collateral Damage Glitter didn’t get the chance to reschedule a release date thus giving it a chance to gain an actual audience and a warmer critical response. I’ll stop now.

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Would Transportion Sector Be Impacted By The Swine Flu?

On Business Times. Air travel to stay strong

• AIRASIA Bhd (5099) does not expect the swine flu outbreak to slow down air travel.
  
  "If anything, we may see a shift towards more short-haul travel around this region. I am gloomy about the economy, but I'm not too worried about the swine flu. We have been through this before and we are prepared for pandemics," AirAsia group chief executive officer Datuk Seri Tony Fernandes told reporters in Kuala Lumpur yesterday.
  
  He was speaking at the rollout of AirAsia's acceptance of American Express (Amex) cards for bookings online and through call and sales counters.
  
  "Signing on with Amex proves that low fares do not mean low quality and that we can reach out even to the very premium of customers," Fernandes said.
  
  AirAsia saw 21 per cent year-on-year increase to 3.1 million passengers in the first quarter of the year. This was despite a 25 per cent increase in seat capacity in the last quarter.
  
  "We are confident that this number will grow now that Amex card members are able to easily book seats with us," Fernandes added.
  
  Amex officials declined to reveal the number of cardholders it has in the country.
  
  Amex recently won the Best Brands in Premium Payment Cards in the Brand Laureate Awards.
  
  AirAsia saw a 400 per cent jump in corporate customers in the last three months as more companies cut down on premium travel expenses.
  
  Almost 5 per cent of its customers now are corporate travellers.
  
  Fernandes expressed his confidence that the figure could increase to 10 per cent, but did not state when it was likely to reach that target.

Hmm... for the record, TF is saying that he is gloomy about the economy and not on the swine influenza A/H1N1, eh? :D

Well many might be nervous about the possible pandemic caused by it. ( See also Estimates Of Economic Costs Of A Flu Pandemic )

On today's Financial Sense Market Observation, the following editorial
Don't Let the Flu Get You Down focused on the previous impact of SARS and Avian influenza on Dow Jones Transport. Do give it a read. :)

• The past two outbreaks, SARS and the Avian flu, had little affect on the transports during those times. The damage to hotel occupancy in Asia during SARS was more attributed to the WHO travel warning than news of the outbreak. Until it can be proved that this outbreak can be transmitted by air or the WHO makes any additional travel warnings, as far as financial investments are concerned, don’t let the flu get you down

Two charts from the editorial, Don't Let the Flu Get You Down

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Estimates Of Economic Costs Of A Flu Pandemic

* The World Bank estimated in 2008 that a flu pandemic could cost $3 trillion (£2 trillion) and result in a nearly 5pc drop in world gross domestic product. The World Bank has estimated that more than 70m people could die worldwide in a severe pandemic.

* Australian independent think-tank Lowy Institute for International Policy estimated in 2006 that in the worst-case scenario, a flu pandemic could wipe $4.4 trillion off global economic output.

* Two reports in the United States in 2005 estimated that a flu pandemic could cause a serious recession of the US economy, with immediate costs of $500bn-$675bn.

* SARS in 2003 disrupted travel, trade and the workplace and cost the Asia Pacific region $40bn. It lasted for six months, killing 775 of the 8,000 people it infected in 25 countries.

Source: http://www.telegraph.co.uk/health/healthnews/5228878/Estimates-of-economic-costs-of-a-flu-pandemic.html

Comments:

Hmm... with most global markets having had their huge rallies recently, would this be the catalyst for the next leg down that the bears are waiting for?

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The Beautiful Game

Flashback..



My favourite stike partnership for United was Yorke/Cole and here is THEIR goal once more.

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Comments On YTL's RM3 Billion Broadband Venture

On Business Times, YTL in RM3b broadband push

• YTL in RM3b broadband push
  
  By Goh Thean Eu Published: 2009/04/24
  
  YTL e-Solutions Bhd (YTLE) (0009), a subsidiary of YTL Corp Bhd, plans to pump in almost RM3 billion to set up a wireless broadband network in Peninsular Malaysia over the next five years.
  
  It will spend one-third of that in the next 12 months as it seeks to play catch-up. Out of the four firms licensed to provide high-speed wireless Internet access, it is the only one that has yet to launch its service commercially in a big way.
  
  YTLE, which will spend RM2.5 billion on the network, is tying up with South Korean electronics giant Samsung Electronics Co.
  
  The company will use its own money for the investment, managing director Tan Sri Francis Yeoh said in Kuala Lumpur yesterday.
  
  "We will start rolling out (the wireless infrastructure) immediately. We have identified 2,000 sites. We have mapped it. We know where we are going to put all the base stations already," he added.
  
  Unlike its rivals which have launched their wireless services in geographical stages, YTL will commercially launch its wireless services, comprising voice and data, only when it has nationwide coverage.
  
  "If you do it in stages, it won't work and it's not fair. This kind of technology doesn't work like that. It just won't work. Not enough equipment maker is going to support you. Not enough network people are going to support.
  
  "And then you are killing yourself. How many people are going to have this experience? For example, I go out of Kuala Lumpur. I cannot use (the service) already. Who are you kidding? Just KL for KL? It's not right to me," Yeoh said.
  
  When the government awarded the WiMAX licences, the four companies were expected to expand their network to cover 25 per cent of the population by end-March this year.
  
  However, it is unclear if any of them met the target.
  
  "At the end of the day, it's about achieving the national broadband objectives. Actually, our programme is ahead of the government's programme in terms of nationwide coverage," Yeoh said.
  
  In 14 months, YTLE will launch its wireless broadband services nationwide covering 70 per cent of the population.
  
  Yeoh was speaking to the media after the signing ceremony between YTLE and Samsung Electronics. Samsung has agreed to supply network equipment and handsets to YTLE.
  
  YTLE is one of the four companies awarded the licence to offer wireless broadband services using WiMAX technology. The others are Packet One Networks (M) Sdn Bhd (a unit of Green Packet), REDtone International Bhd and Asiaspace Sdn Bhd.
  
  WiMAX, short for worldwide interoperability for microwave access, is a telecommunications technology that provides transmission of data. It works like the current popular WiFi technology.
  
  A WiFi hotspot can cover a radius of tens of metres. In contrast, a WiMAX base station can cover several kilometres. The technology also promises the ability to surf the Internet from laptops while in a park, on a bus during a traffic jam, or anywhere in a residential neighbourhood.

Firstly, I am impressed with what's said by the boss. Yes I am.

However, I am not a WiMax fan because I simply believe that this is an extremely difficult business venture to profit from. This is my flawed view. And if I am wrong, what's new? :p2

Many have tried WiMax already. Have you?

If you have, how impressed are you?

Are you happy with the upload/download speeds? Are you happy with the connectivity?

Ok, so how good is WiMax as a business?

Yeah, from a business perspective, how good is WiMax? :D

Take the more recent news. Like for example, early this month, on FT.com Nokia dismisses WiMax prospects

• “I don’t see that WiMax is taking hold anywhere in a big way,” said Anssi Vanjoki, Nokia’s head of sales and manufacturing, at a Nokia launch event in San Francisco.
  “I don’t think the future is very promising [for WiMax]. This is a classic example of industry standards clashing, and somebody comes out as the winner and somebody has to lose.

Clearwire is one of the leader in US and some are extremely impressed with what Clearwire has to offer.

Ok, le't go back in time a bit.

A year ago, on Washington Post, Whatever Happened To Sprint's WiMax Venture?.

Sprint then had to merge with Clearwire: Sprint, ClearWire merging WiMAX operations.

Clearwire has agreed to merge with Sprint's wireless broadband division in a new, as yet unnamed, joint venture. The deal has financial support in the form of $1.05 billion from cable giant Comcast, $1 billion from chip champ Intel, $650 million from Time Warner Cable and its subsidiaries, and $500 million from search Brobdingnagian Google. That's a grand total of $3.2 billion of outside investments, plus whatever cash Clearwire and Sprint might bring to the table.

Don't expect Sprint itself to bring a fat dowry, though. The company has about $2.4 billion in cash equivalents, but also a staggering $20.5 billion debt load. Sprint is trying to sell off its Nextel unit, which was acquired for $35 billion in 2005, but reports on that effort say that Nextel is only worth about $5 billion today. And ClearWire is in a similar situation of more debt than cash, albeit on a much smaller scale.

Ahem.. big money business. :D

SmartMoney had the following article WiMax Venture Gets Weak Reception From Market

• There's a lot to take in at first glance, and there's no simple explanation for Wednesday's early rise and late-in-the-day drop. This is a complex project that's failed to get off the ground, and that accounts for plenty of investor skepticism. A WiMax deal last summer between Sprint and Clearwire was agreed upon, but never signed.
  But you don't need to be Alexander Graham Bell to understand that a 9% one-day pop in a stock that has nearly one-fifth of its shares held short can create a classic short squeeze, even if it's a squeeze of short duration.
  
  Philip Solis, an analyst at ABI Research, sees short-term profit taking at work, but says the implications for the new Clearwire go well beyond Wednesday's trading.
  
  "Sprint chose WiMax in 2006: it had the vision, and it pulled together an ecosystem of chipset and equipment companies. But there was one missing piece: money," he wrote in a Wednesday report. "They needed financing and the confidence of the investor community. The formation of this joint venture completes the picture."

Here is the two year chart of Clearwire or CLWR on yahoo's finance. Not impressive at all.

And if you click the Income Statement on that yahoo finance, you would understand the reasoning of the poor performance.

So how?

Capital expenditure is massive in this business and yet the return is lacking.

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And The Baltic Dry Index Reverses Yet Again

The recent downtrend had been noted many times on this blog.

A month ago..

• China Shipping Warns Bleak Outlook For Baltic Dry Index
• Eyes On The Baltic Dry Index Again
• Baltic Dry Index Reverses Yet Again
• Some Comments On The Shipping Sector

Note the BDI chart posted on the posting

• Weekend Charts: 4th April 2009

Baltic Dry Index closed last night at 1897.

And according to Bloomberg news article on 20th April, Baltic Dry Index Rises to Highest in Almost a Month on Grains demand in iron ore and grains were the driving factor.

• “Grain is a big driver of the market,” Steve Rodley, a London-based director of shipping hedge fund manager M2M Management Ltd., said by phone today. Some ships are sailing from Southeast Asia to collect the grain cargoes and iron ore is still shipping to China, even as stocks there grow, he added.

*stocks grow or inventory build-up. Do not discount this issue. :p2 *

In another article.

• Dry bulk market back on track
  Tuesday, 21 Apr 2009
  
  Hellenic Shipping News reported that market analysts said that what the shipping industry needs at this point is a steady and sustainable rebound of the world economy. At the same time, the huge order book in almost all segments of the market will have to be substantially trimmed. Then one can state that all pieces of the puzzle will be put in place for a new growth cycle to be established in shipping. Until all of the above occur, freight markets will be suffering. Despite that, the week ending today seems to be recuperating some of the losses occurred in the dry bulk market during the past month.
  
  The Baltic Dry Index leaped by another 70 points to reach 1,604 points, with all sectors gaining ground. Once again the panamaxes were the big stars, with the relative index gaining 132 points at 1,413. But, the fragility of the sector is more than obvious, with high volatility being the norm. Nevertheless, average daily charter rates have reached USD 11,331, up by USD 1,066 on a day to day basis.
  
  In its weekly report, Fearnley’s appeared optimistic as to the fortunes of the capsize market, stating that it’s poised to go upwards, with Brazil/China route showing signs of firming, while the same but to a lesser extent is being reported for West Australia and China. Fearnley’s also shed some light behind the rise of the Panamax market, by saying that due to Easter, owners and charterers seemed to cover their requirements before entering holiday, which boosted rates. Also, "South America grain was the driving factor for front haul business, with charterers still taking tonnage from the oversupplied east Indian ocean market."
  
  According to the weekly report from Weberseas, there is good news for the various dry bulk owners looking to buy vessels since, because there is an acceleration of tonnage coming out from Japan. Up to now we have seen many buyers in the market but correspondingly fewer deals being concluded due to the gap in sellers buyers prices. However, as more and more vessels come out in the market the increase in supply should in theory suggest lower prices. Despite that, prices are holding. Buyers are out there to pay levels that many sellers find acceptable even though the freight market does not necessarily support such prices by the poor average returns. (source: here )

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More On The Rumours Of Proton Divesting Edar To EON.

First they write that according To Sources: Proton to divest Edar to EON.

• Sources said that Proton will get EON shares in return for divesting Proton Edar. This would result in both Proton and DRB-Hicom controlling the distribution of the national automaker’s vehicles.
  
  It also effectively puts EON back to its original position as the sole distributor and authorised servicing agent of the national car.
  
  It is not clear how much equity Proton will end up having in EON. At the moment, DRB-Hicom controls 79.05% of EON while Kualapura Sdn Bhd, the private vehicle of Rin Kei Mei, holds 12.1% in the auto distributor.

( those three passages were rather funny in my opinion. On one hand, they have their sources telling them a massive scoop that Proton will be divesting their Proton Edar. On the other hand, they are not clear exactly how much Proton will get. How can their sources be so inefficient? LOL! )

Since it was written by Jose Barrock, the financial reporter who has an incredible history of reporting based on incredible sources in recent years, it surprised me not that Proton and EON denied this corporate exercise.

See blog posting According To Dunno What Rumours: Proton Is NOT .. and Proton says not selling retail arm to EON

On today's Edge Financial Daily, another article was published: Proton in the spotlight

The following passages was rather interesting.

• That has been reflected in the near-doubling of the company’s share price to RM2.99 on Monday from the trough of RM1.53 on March 30 — a 95% jump in three weeks. The stock hit a 12-month low of RM1.50 on March 19. Proton added another 13 sen to close at RM3.12 yesterday, with nearly three million shares done.
  
  The Edge Financial Daily reported yesterday that Proton was looking to inject its distribution arm Proton Edar Sdn Bhd into Edaran Otomobil Nasional Bhd (EON) in return for a stake in the latter.
  
  It also reported that the rationalisation exercise was part of a bigger automotive consolidation exercise with a possible merger between Proton and the second national car project under Perusahaan Otomobil Nasional Kedua Sdn Bhd (Perodua).
  
  In reply to queries by Bursa Malaysia Securities yesterday, Proton said it had signed a memorandum of understanding (MoU) with EON in May last year to rationalise the national car’s sales and service network. Proton said the parties were still in discussions to finalise the deal.
  
  Proton was silent on the speculation of a possible merger with Perodua.
  
  “Further, the board of directors of Proton wishes to inform that as a proactive business entity, Proton and its subsidiaries will continue to initiate and consider various business opportunities and arrangements,” it said.
  
  EON, in a separate statement, said it was not aware of any plan for it to acquire Proton Edar. However, it also pointed to the MoU with Proton on the rationalisation of the sales and service network, adding that an announcement would be made as and when necessary.

Some issues for me.

• That has been reflected in the near-doubling of the company’s share price to RM2.99 on Monday from the trough of RM1.53 on March 30 — a 95% jump in three weeks. The stock hit a 12-month low of RM1.50 on March 19. Proton added another 13 sen to close at RM3.12 yesterday, with nearly three million shares done.

Makes one wonder when the stock had already jumped so high and yet the Edge Financial Daily decided to publish an incredible rumour based on 'sources'.

Makes one wonder the intention of the article, yes?

Market is now closed for lunch session.

Proton is now down 3.8% and DRB-Hicom is down 5.5%.

How?

What if one bought based on what was published on the Financial Edge article, Proton to divest Edar to EON?

Do we call these share buyers as foolish and gullible?

What about the author and its sources?

How?

• The Edge Financial Daily reported yesterday that Proton was looking to inject its distribution arm Proton Edar Sdn Bhd into Edaran Otomobil Nasional Bhd (EON) in return for a stake in the latter.

Today's article was written by Thomas Soon.

I am curious lah.

Since Proton is now in the sportlight and the spolight is caused by the one reporter who is also from the Edge Financial Daily, why can't Mr.Soon ask Mr. Barrock what happened to the news told by his sources?

Now wouldn't that be grand?

Simple solution no?

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Monish Pabrai: A Sustainable Rally Won't Start Until Mid-2010

On Bloomberg: Stocks Recovery Won’t Start Until 2010, Pabrai Says

• April 21 (Bloomberg) -- U.S. stocks won’t begin a lasting rally until at least mid-2010 because the economy will be mired in a recession for the next two years, predicted Mohnish Pabrai, founder of Pabrai Investment Funds.
  
  The hedge-fund manager, who produced annual returns exceeding 28 percent between 1999 and 2006, is betting commodity producers will gain after the U.S. government’s $12.8 trillion pledge to boost the economy spurs inflation. He also recommends investors stick to companies such as Wal-Mart Stores Inc. and Costco Wholesale Corp. that sell goods people need as unemployment rises and consumer spending weakens.
  
  “The market can’t really go anywhere until the economy is clearly back on track,” Pabrai, 44, said in a telephone interview from Irvine, California. “Where I’m positioning my portfolio, given the next two years of morass, is on the essentials.”
  
  The Standard & Poor’s 500 Index, still down 5.9 percent for the year, has surged 26 percent since reaching a 12-year low on March 9. Pabrai’s outlook is more dismal than the median economist estimate in a Bloomberg survey, which calls for economic growth in the fourth quarter and a 2.5 percent drop in the consumer price index, a gauge of inflation, followed by a 1.9 percent increase in 2010.
  
  Pabrai, burned last year by his concentrated equity holdings, says he’s shifted to a strategy of owning smaller stakes in a greater number of stocks. The investor, whose prior goal was to own only about 10 stocks in a fund, now targets positions as small as 2 percent of his assets.
  
  ‘Swimming Naked’
  
  “Buffett has this saying that only when the tide goes out do you know who’s been swimming naked,” Pabrai said, referring to billionaire investor Warren Buffett. “I don’t think I was swimming naked, but I had my shorts a little bit lower than where they should have been.”
  
  In June 2007, Pabrai and fellow money manager Guy Spier spent $650,100 to win a charity auction for lunch with Buffett at New York’s Smith & Wollensky steakhouse.
  
  Pabrai declined to give performance figures for his funds, except to say returns in last two years were “very low.” His funds were once the second-largest owners of Delta Financial Corp., a specialist in fixed-rate subprime mortgages that sought bankruptcy protection in 2007.
  
  The Pabrai Investment Fund 3 Ltd., which managed $51 million as of February, sank 61 percent in 2008, compared with the S&P 500’s 38 percent loss, according to data compiled by Bloomberg. Equity hedge funds have lost 22 percent in the past 12 months, according to Hedge Fund Research Inc. in Chicago.
  
  Inflation Trades
  
  Pabrai, who oversees $200 million, has purchased shares of Teck Cominco Ltd., a Vancouver-based copper producer, and Pittsburgh-based Horsehead Holding Corp., which makes zinc, on the prospect inflation will surge as efforts by federal agencies to unfreeze credit markets boost money supply. The $12.8 trillion spent, lent or committed by the government and Federal Reserve to end the recession works out to $42,105 for every man, woman and child in the country, according to data compiled by Bloomberg.
  
  Food makers and discount retailers will maintain profits in the recession, while sellers of luxury goods struggle to cope with decreased spending from unemployed consumers, Pabrai said.
  
  The U.S. jobless rate climbed to 8.5 percent in March, the highest in 25 years, and is projected to rise to 9.5 percent in the fourth quarter, according to the median estimate of 59 economists surveyed by Bloomberg.
  
  ‘Serious Problems’
  
  “I wouldn’t say I’m completely confident that by 2011, we’re out of the woods,” said Pabrai, who seeks investments that are cheap relative to their earnings or assets. “The economy has serious problems.”
  
  Still, even as companies like Charlotte, North Carolina- based Bank of America Corp. forecast rising loan losses, Pabrai said there are “fantastic” opportunities to buy financial stocks. Record low interest rates from the Fed and decreased competition among lenders will drive shares of some banks up as much as 10-fold by 2014, he estimated.
  
  He favors Wells Fargo & Co. and Goldman Sachs Group Inc. because they have few rivals and widely known brands. Wells Fargo, located in San Francisco, and New York-based Goldman Sachs rallied more than 16 percent in March as both reported first-quarter profit that beat analysts’ estimates.

Previous posting on Pabrai: Interview With the Man Who Paid $650,100 for Lunch With Buffett!

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Why Pullback Is A Good Bet

On CNBC: History Says Pullback From Stock Market Rally a Solid Bet

• History Says Pullback From Stock Market Rally a Solid Bet
  By: Albert Bozzo, Senior Features Editor 21 Apr 2009 09:39 AM ET
  
  There's more where that came from.
  
  That's what some market watchers are saying about the sharp selloff in stocks Tuesday, following a stunning—yet, some say, suspect—run-up of well over 20 percent from the standing bear market low of March 9.
  
  "Whenever you get that kind of move in that short a period when news is still mixed, you're vulnerable to a setback," says money manager Jim Awad, managing director at Zephyr Management. "We've gone from the bear market to the never-never land."
  
  Caution and skepticism has been building in some quarters recently, particularly as the Dow Industrials hugged a 200-point trading range over the 11 sessions going into Monday.
  To some, however, the writing was already on the wall late last week, even as the major indices edged to new highs Friday in their spring sprint.
  
  "This thing is due," veteran market watcher and UBS floor operations director Art Cashin told CNBC early Friday. "I'm betting we're going to see that pullback in the rally."
  
  Cashin, among other things, cited the narrow nature of the rally and how many of the stocks attracting interest were "low-priced stocks," often a sign of indiscriminate bottom fishing.
  
  Sam Stovall, chief investment strategist at Standard's & Poor, says technical data and historical trends pointed to an April 17 high, followed by the typical retreat and retesting of the bear market low.
  
  In his March research note, Stovall said the S&P 500 could post a rally in which it recovered some 22 percent of what it lost during the bear market in a 39-day period, the historical rule.
  
  "If history repeats itself, we would probably go through a retest," said Stovall. "We're just at the beginning of the retest today."
  
  Over the years, that retest has averaged about 20 days from the recovery high and knocked 7 percent off the market.
  
  This time, Stovall says, the indicators point to "a correction of some magnitude," perhaps along the lines of the 14-percent hits suffered during the 1973-75 and 2001-2002 bear-market periods. The S&P, for instance, could fall back to 750 after traveling from its March 9 low of 660 to just under 870 last Friday.
  
  Others see a more moderate pullback. Hedge fund manager Doug Kass, for instance, recently told clients to expect a decline of 5-6 percent after the recent rally.
  
  "I can understand why people could be concerned about jumping back into this rally," says Stovall. "They were lulled into thinking there was a bottom in March '08."
  
  A quick look at recent history might suggest why this rally may be too good to be true.
  
  In the 2001-2002 period, there were major bear market rallies in a roller coaster pattern. The Dow, for instance, fell from from 9,808 in early May to 7,702 in late July. By late August, it was back up to 9,053 before quickly spiraling down to 7,286 in the second week of October.
  
  That's not all. By late November, the blue-chip index was at the 9,800-level, only to drift back down again to the 7,500-level in March 2002. The bear market technically ended in October of that year and the Dow reclaimed the 10,000-level by mid December.
  
  The timing of this rally also does not bode well for what lies ahead, says Jeffery Hirsch, editor of the Stock Trader's Almanac, who notes the market's traditional bullish period runs from November-April.
  
  "Some of the old seasonality may not be in effect; that in itself is a negative indication," says Hirsch. "We've stalled at that 8000-ish resistance level and we’ve got the bad season coming on."
  
  Hirsch notes that the Dow has had only four up months in the 17 dating back to Nov 2007--right after the record highs of October--and that the market has posted gains on only two Mondays since early December, suggesting investors don't want to jump back in after the weekend when they are traditionally loathe to be long.
  
  That sort of bearishness does not mix well with seasonal performance, especially when investors remember the two previous major false bottoms of this bear market.
  
  "With people burned as much as they have been, they get out when they can," says Stovall, referring to those who may now be exiting the market after a huge run.
  
  Uncertainty, says analysts, remains the dominant factor, from earnings to the economy to the government rescue package.
  
  "It's unlikely anything in the real world can justify any sustainable move up in stock prices from here," says Awad. "We're likely to go through a period of great confusion, where the bulls and the bears tug it out and the real world is somewhere in between."
  
  Right as earnings season swings into high gear this week, the Treasury will be releasing the first round of highly anticipated information on the bank stress tests this Friday, followed by the second installment May 8.
  
  "This week will tell the story," says Awad. "You have a lot of excuses for the market to correct and go down."

In another article, Roubini: 'Suckers Rally' to Fade Amid Economy Woes

• Well-known economist Nouriel Roubini, one of the few experts to foresee the current global crisis, said Tuesday a recent "suckers rally" in stock markets would fade as the U.S. economy continues to wither and the financial system suffers unexpected shocks.
  
  Hopes the world economy will stage a faster recovery this year have fueled a six-week rise in global markets, with major benchmarks on Wall Street and in Asia up more than 20 percent over just six weeks.
  
  But Roubini, a professor at New York University's business school and former adviser at the U.S Treasury Department, was doubtful and predicted markets would test the lows seen in March.
  
  "For people who say there are green shoots, I seen only yellow weeds frankly," Roubini said at a conference in Hong Kong. "It's not a true recovery. It's just a bear-market rally, it's a suckers rally."
  
  That's because the U.S. economy won't grow again until 2010 after contracting by 2 percent this year, he said. Unemployment will hit 11 percent next year and corporate earnings will come in worse-than-expected, he predicted.
  
  Troubles in the financial sector, meanwhile, are far from over and will be worse than many expect. The results of the government's "stress tests" will show even the biggest 19 American banks don't have enough capital to cope with the huge losses they'll inevitably suffer on souring loans.
  
  "The losses are much more than people are predicting and (the banks) have not reserved enough," Roubini said.
  
  "It looks ugly for every one of those 19 banks.

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Warren Buffett Talks About Wells Fargo

This is truly a great investing classic posted on Fortune.

Warren Buffett on Wells Fargo

• Fortune: How is Wells Fargo unique?
  
  Warren Buffett: It's sort of hard to imagine a business that large being unique. You'd think they'd need to be like any other bank by the time they got to that size. Those guys have gone their own way. That doesn't mean that everything they've done has been right. But they've never felt compelled to do anything because other banks were doing it, and that's how banks get in trouble, when they say, "Everybody else is doing it, why shouldn't I?"
  
  What about all the smart analysts who think no big bank can survive in its present form, including Wells Fargo?
  
  Almost 20 years ago they were saying the same thing. In the end banking is a very good business unless you do dumb things. You get your money extraordinarily cheap and you don't have to do dumb things. But periodically banks do it, and they do it as a flock, like international loans in the 80s. You don't have to be a rocket scientist when your raw material cost is less than 1-1/2%. So I know that you can have a model that works fine and Wells has come closer to doing that right than any other big bank by some margin. They get their money cheaper than anybody else. We're the low-cost producer at Geico in auto insurance among big companies. And when you're the low-cost producer - whether it's copper, or in banking - it's huge.
  
  Then on top of that, they're smart on the asset size. They stayed out of most of the big trouble areas. Now, even if you're getting 20% down payments on houses, if the other guy did enough dumb things, the house prices can fall to where you get hurt some. But they were not out there doing option ARMs and all these crazy things. They're going to have plenty of credit losses. But they will have, after a couple of quarters of getting Wachovia the way want it, $40 billion of pre-provision income.
  
  And they do not have all kinds of time bombs around. Wells will lose some money. There's no question about that. And they'll lose more than the normal amount of money. Now, if they were getting their money at a percentage point higher, that would be $10 billion of difference there. But they've got the secret to both growth, low-cost deposits and a lot of ancillary income coming in from their customer base.
  
  Insurance revenues for example, which had double-digit revenue growth in 2008.
  
  And I would say that most of the critics of Wells don't even know they've got that business. That business alone is worth many billions of dollars. And their mortgage business, as you can imagine in this period, I mean, the volume that is poring through there, is huge. The critics have been right on other big banks, so I think they're inclined to sweep Wells in as well to some extent. And if you've been right on Citi and you've been right on BofA, it gets easy to say, well, they're all going to go.
  
  We own stock in four banks: USB, Wells, M&T, and SunTrust. SunTrust I don't know about because South Florida is going to be the last to come back, and they've got a concentration down there. The other three, they're going to have a lousy year, but they'll come out of it with far more earnings power. The deposits are flowing in. The spreads are wide. It's a helluva good business.
  
  Dick Kovacevich specifically told me to ask you your views on tangible common equity.
  
  What I pay attention to is earning power. Coca-Cola has no tangible common equity. But they've got huge earning power. And Wells ... you can't take away Wells' customer base. It grows quarter by quarter. And what you make money off of is customers. And you make money on customers by having a helluva spread on assets and not doing anything really dumb. And that's what they do.
  
  Incidentally, they won't lend Berkshire money. They're not interested in national credits or any of that stuff where the spreads are narrow. We did a big deal about six or seven years ago on Finova, which we did jointly with Leucadia. And what was then the old First National of Boston sort of headed the deal up, and people would come in for $500 million or $200 million. Wells wasn't interested. There wasn't enough money in it, basically. I got a big kick out of that because that was exactly how they should think. Everybody else wanted to be in it, and they were doing it for 20 basis points or something of the sort. And they'd make commitments for all kinds of credit for 6 or 8 basis points, and the ones that were in the underwriting business, they would do it just get the underwriting.
  
  But back to tangible common equity...
  
  You don't make money on tangible common equity. You make money on the funds that people give you and the difference between the cost of those funds and what you lend them out on. And that's where people get all mixed up incidentally on things like the TARP. They say, 'Well, where'd the 5 billion go or where'd the 10 billion go that was put in?' That isn't what you make money on. You make money on that deposit base of $800 billion that they've got now. And that deposit base I guarantee you will cost Wells a lot less than it cost Wachovia. And they'll put out the money differently.
  
  They'll have to work through a lot of this stuff that they inherited from Wachovia. Those option ARMs, they explained exactly how they break them down, and in the end they may lose 3 or 4 billion more. Nobody knows exactly. But I would say that California residential real estate is not deteriorating. It hasn't moved up. But it has flattened out with good volume recently. So my guess is that the option ARMs will work out about as they guessed.
  What if the Treasury imposes new capital requirements? Will it hamper their earnings power?
  
  I don't think it'll hamper their earnings. But if you make them sell a lot of common equity it would kill the common shareholder. It wouldn't increase the earning power in the future, and it would increase the shares outstanding. Wells, if they want another $10 billion in common equity or something like that in Wells, they'll have it in a very short period of time at this dividend rate. [In March, Wells cut its dividend by 85%.] Wells will be piling up the equity while they're paying nominal dividends. They could afford to pay the old dividend. But since they won't be paying the old dividend, that's $4 billion a year or something that they'll be adding to equity.
  
  I would have been fine if they had just said, 'Look it, we'll quit paying any common dividend until our equity has gone up by whatever it might be, 10 or 15 billion.' And they'd get there in no time. Then they could pay the regular dividend. They elected to do it this other way because everybody seems to be kind of doing it. The idea of forgoing all or most of the dividend for a year to build the common equity ratio up, if that's what the government wants, that's fine. But that isn't really the key to the future of Wells, unless the regulators make it the key to the future of Wells. The key to the future of Wells is continuing to get the money in at very low costs, selling all kinds of services to their customer and having spreads like nobody else has.
  
  How is Wells differentiated from the banks you own and the ones you don't?
  
  Wells just has a whole different attitude. That's why Kovacevich calls them retail stores. He doesn't even like the word banking. I mean, he is looking to have a maximum enduring relationship with many, many millions of people. Tens of millions. And at the base of it involves getting money in very cheap. When you do that that's a helluva start in the business. The difference between getting your money at 1-1/2 % and 2-1/2% on a trillion-dollar asset base is $10 billion a year. It's hard to overemphasize that. He thinks more like Sam Walton than he thinks like J.P. Morgan. I'm talking about the individual there. He's a retailer. He's not trying to influence Washington or be the most important guy on the scene or anything like that. He's just trying to do business with millions of people every day and make a few bucks off of them.
  
  Now that you mention it, Kovacevich has done a pretty good job of annoying Washington, wouldn't you say?
  
  That's hard to tell. There's an advantage to being that way too. He's not going to cozy up or be sycophantic toward his regulator, and I would say most bankers probably are now. They need to be. But his strong point is retailing not diplomacy. I kind of like that. It's hard for a guy that knows his institution forward and backwards to have somebody come in that really may be working off a check list or something and is telling him what to do. And I'm sure that Dick gets antagonized by that sometimes. In the end, he's got the record. And he's got the business to back up what he's doing.
  
  To the extent that his tangible common equity is low, a) nobody was even talking about that a year ago. And b) they should be talking about earning power. But it comes about in part because he saved the FDIC's bacon on Wachovia. I mean they had a deal on Citigroup (C, Fortune 500) that had big assistance involved in it, and the FDIC moved about what would have been about 5% of the deposits in the United States without a dime of expense to the taxpayer or the FDIC to Wells. And Wells took it over. And if they'd gone to Citigroup a) they would have looked like idiots, and within a very short period considering what happened to Citi. So to penalize them because they solved the FDIC's problem without cost to the FDIC would be a little crazy. And I imagine that's what gets Dick a little riled up.
  
  So what is your metric for valuing a bank?
  
  It's earnings on assets, as long as they're being achieved in a conservative way. But you can't say earnings on assets, because you'll get some guy who's taking all kinds of risks and will look terrific for a while. And you can have off-balance sheet stuff that contributes to earnings but doesn't show up in the assets denominator. So it has to be an intelligent view of the quality of the earnings on assets as well as the quantity of the earnings on assets. But if you're doing it in a sound way, that's what I look at.
  
  How confident will you be in Wells when Kovacevich retires?
  
  Well, John [Stumpf] is in charge. Dick is a terrific help to John. I play bridge with John on the Internet. He plays under the name of HTUR. His wife's name is Ruth. My bridge partner, who I probably play bridge with four times a week, developed online banking for Wells. A woman named Sharon Osberg. And she's worked with those people. And she told me about John Stumpf ten years ago. I've had some insight through her on these people. But the real insight you get about a banker is how they bank. You've got to see what they do and what they don't do. Their speeches don't make any difference. It's what they do and what they don't do. And what Wells didn't do is what defines their greatness.
  

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