Update - Murasaki ts

Some readers must be wondering why my blog has not been updated with the normal frequency. Yes, been busy with Murasaki ts. Since this is my blog, I think I should also chart the journey of starting up a company.



Since the soft launch two weeks back, we have been inundated with a surge in trial users, much more than we anticipated. I was hoping for 200 but we had more than 800 and counting. As for paid subscribers, I was hoping to hit 30-40 by now and the actual figure is doubled that, so I am cautiously optimistic. For all that and my office is still being renovated which is why we are having to hold the Masterclass at cafes.

To have over 800 trial users, I would expect at least a 10% conversion ratio to paid subscribers. We discovered that it is imperative for users to at least attend one Masterclass before deciding whether to sign up for the deal. It appears that the user guide may not be able to provide sufficient grounding on how to use the system more effectively. The classes have been highly successful, in fact some even attend multiple classes as I also share with them how to use the system and naturally the top picks.

Some of you may have had issues with the system. If its response time and user friendliness, it is probably due to the computer you are using. As Murasaki requires quite a bit of CPU and memory, it is imperative that the notebook or PC be less than 3 years old and have at least 2M in memory. It is also critical that you have High Speed Broadband or Unifi to fully tap our system effectively.

While the user guide is a start, most will not be able to appreciate how to use the data effectively without attending a live Masterclass (which are free to all paid and trial users). All our Masterclasses are full (max 10-12 per session). The interesting thing is that more than half will immediately sign up as paid subscribers after the Masterclass. Hence it is our strong belief that one has to attend a Masterclass to fully appreciate how it works.

People who have attended our Masterclass all go away with a strong foundation and ability to interpret and read the data and signals. For the last two weeks, the system has been turning out the following strong signals in stocks such as:

Tiger Synergy (16-17 sen)

TH Heavy (56-56.5 sen)

Mieco Chipboard (43 sen)

Sealink (41.5 sen)

As some of you have mentioned that the location for the Masterclass was a bit out of the way, we have decided to add new locations for Masterclass this coming week. The venues are as follow:

5th Nov 2012, Monday 12:30pm- Starbucks Coffee Cheras Leisure Mall

6th Nov 2012, Tuesday 12:30pm- Starbucks Coffee Empire Shopping Gallery, Subang Jaya

7th Nov 2012 Wednesday 12:30pm- Starbucks Coffee Setia City Mall, Klang

10th Nov 2012 Saturday 12.30pm- Dr. Cafe Solaris Mont Kiara

 

           Please contact us at our toll free number 1800 88 3788 to reserve your seat as we can only take about 10 pax for each session, first come first serve.

Alternatively, you can go to www.murasaki.co to get a free 5 day trial to use the system. Again, it is imperative that you attend one of our Masterclass to get the full benefits. We will be uploading videos of past Masterclass (by 6pm today). We are confident of our product and know that its a real game changer, there are dates and times of the videos so you can counter check on the previous readings to see if they perform as well as expected.

Plunge Protection Team - Urban Legend?

Some may be wondering if they even exist. Well, they do. The Plunge Protection Team is officially known as the President’s Working Group on Financial Markets – was created after the 1987 crash.

It appears to have powers to support the markets in a crisis with a host of instruments, mostly through buying futures contracts on the stock indexes (Dow, S&P 500, Nasdaq and Russell) and key credit levers. And it has the means to fry “short” traders in the hottest of oils. The team is led by Treasury chief Hank Paulson, ex-Goldman Sachs, a man with a nose for market psychology, and includes Fed chairman Ben Bernanke and the key exchange regulators.

PPT was created by Ronald Reagan to prevent a repeat of the Wall Street meltdown of October 1987. Its members include the Secretary of the Treasury, the chairman of the Federal Reserve, the chairman of the SEC and the chairman of the Commodity Futures Trading Commission.

Modus Operandi Of PPT

According to John Crudele of the New York Post, the PPT modus operandi was revealed by a former member of the Federal Reserve Board, Robert Heller. Heller said that disasters could be mitigated by “buying market averages in the futures market, thus stabilising the market as a whole.”

This appears to be the strategy that has been used. Former-Clinton advisor, George Stephanopoulos, verified the existence of The Plunge Protection Team (as well as its methods) in an appearance on Good Morning America on Sept 17, 2000. 

Stephanopoulos said: 

“Well, what I wanted to talk about for a few minutes is the various efforts that are going on in public and behind the scenes by the Fed and other government officials to guard against a free-fall in the markets ... perhaps the most important the Fed in 1989 created what is called the Plunge Protection Team, which is the Federal Reserve, big major banks, representatives of the New York Stock Exchange and the other exchanges, and they have been meeting informally so far, and they have a kind of an informal agreement among major banks to come in and start to buy stock if there appears to be a problem.

They have in the past acted more formally. I don’t know if you remember but in 1998, there was a crisis called the Long Term Capital Crisis. It was a major currency trader and there was a global currency crisis. And they, with the guidance of the Fed, all of the banks got together when it started to collapse and propped up the currency markets. And, they have plans in place to consider that if the markets start to fall.” 

Stephanopoulos’ comments have never been officially denied.

Robert McHugh, PhD, has provided a description of how it works, which seems consistent with the comments of Robert Heller. “The PPT decides markets need intervention, a decline needs to be stopped, or the risks associated with political events that could be perceived by markets as highly negative and cause a decline; need to be prevented by a rally already in flight. To get that rally, the PPT’s key component – the Fed – lends money to surrogates who will take that fresh electronically printed cash and buy markets through some large unknown buyer’s account. That buying comes out of the blue at a time when short interest is high.”

Critics of PPT

If a secret team is interfering in the stock market, it presents serious practical and moral issues. For one thing, it disrupts natural “corrections” which are a normal part of the business cycle and which help to maintain a healthy and competitive slate of equities. More importantly, outside intervention punishes the people who see the weaknesses in the stock market and have invested accordingly. Clearly, these people are being ripped off by the PPT’s manipulations. They deserve to be fairly compensated for the risks they have taken. Moreover, artificially propping up the market only encourages the over-leveraged to continue to believe that the grossly-inflated market will continue to rise. Rewarding foolishness only stimulates greater speculation. The tinkering of the PPT is sure to erode confidence in the unimpeded activity of capital markets.

Where is the “free market”? The “free market” is merely a public relations myth with no basis in reality. Saving the system will always take precedent over ideology. Trust in the free market is wavering. Whatever happened to the idea of completing the “market cycle” and allowing markets to self-correct, whether that meant belt-tightening or not? What about the ethical question of whether government manipulation should be allowed in a “free market”? Also, by what authority do the government and the banks interfere in the futures’ markets and shift momentum from the prevailing trend?

Pragmatism vs Idealogy

The argument is based on the fact that free markets should be allowed to exist. Why? Why is that necessary? Different times in history and financial markets have different roles to play. Fifty years ago a financial collapse is likely to be a localised event, not now. What used to be a self-contained localised event has now gone on to have major global repercussion. Over the last 20 years, markets have not really decoupled but rather in crisis, we have witnessed stronger inter-connectedness and collateral damage.

As a politician, bureaucrat and/or steward of good governance, nobody in those positions would want a total collapse of financial markets, as the rebuilding process may take decades. Maybe there is too much leveraged instruments out there – but that’s a separate issue altogether. It is easy to be critical – to call for total free market movement when there are so many inherent faults within the financial system is simply highly irresponsible. Maybe there is too much leverage now and to allow for unmanaged falls could lead to catastrophes that many economies may not be able to recover from.

We have to acknowledge that there is a herd mentality among certain fund managers and hedge funds even, and collectively they can take huge advantage over the rest of the markets by playing the trends together – who is to say that they are not acting in cahoots sometimes? Hence we do need a power player, to bring sanity back, and not allow any big domination or excessive manipulation by the one group of funds. The existence of PPT also signals as a threat to diminish any potential plans to corner or misguide the markets with criminal intent.

We need PPT

Targeting the Americans for having PPT is very silly. The US has military and global economic leadership, I would expect them to have some sort of PPT. Capitalism yes, but free markets have to be redefined according to the times. The ones who call for total free markets need to broaden the bigger picture. It’s idealogical but not practical. Just like most things in life, who practises pure communism or pure planned economy anymore?

Capitalism, free markets, planned economy are all models based on theories, not absolutes based on religious fervour.

Not many people know that Malaysia has one of the highest GDP percentages being listed, it’s in the high 80s. Other developed countries range from 50% to 70%.

What that means is that many countries’ economic performance have a moderate to very high correlation to financial markets. Say, we have totally free markets and let’s go back to the LTCM 98 debacle. Nobody would have stepped in as the KLSE was languishing in the 500-700 range after the 97 implosion. Now you get another round of financial free markets correction. It would have decimated demand and assets globally. That would caused many stuttering companies and even whole industries to completely be wiped out. The KLSE might even have collapsed to 300, who knows. So we need to think of repercussions, because unguarded corrections could kill off more than we could rebuild.

Yes, the shorts might be dealt a bad deal but its a “lesser evil” kind of scenario here. It’s not just in saving major correctional phases, the PPT could also come in to deflate excessive liquidity by exhorting various central banks to tighten policies or soak liquidity. What we want is to lessen the pendulum swings on both extremes.

Sometimes things are not as bad as they seem.

What About The Subprime Crisis?

Well, the subprime crisis was way too big to even contemplate a PPT operation. Because you were dealing with confidence and the credit markets as we know was seizing up. Lehman Brothers and Bear Stearns were falling like bricks. The Fed was trying to ask any bank to buy them out, but all were knee deep in trouble as well, they couldn't just save one. They tried with Bear Stearns but they had to let Lehman Brothers go, there was no one else willing to buy unless they had a strong guarantee from the government. There was only so much the Fed and Paulson could do. Mind you, there was also implosion with AIG and Fannie and Freddie, it was just too big to save everyone.

It looks like we have reached the zenith for PPT to be workable. It also looks likely that any future crises will also be "too big" for PPT to be effective. Call it what you may but the derivatives side of things have grown so large and cumbersome that the real "exposure" carried on any banks or investment banks have gotton so way out of hand.

To roll back the regulations on "capital requirements" and trading positions now are a must, and stricter regulations, but there are always new fangled instruments and off balance sheet agreements that people are so ingenious to side step the rules.

Thus, the financial markets are not going to get any safer despite more regulations, because we never remember our mistakes. The next bubble or rally comes along and everybody is so well paid in the system that we are not going to be bothered with it (again).

Malaysia

Over the last 10 years, our indexed stocks have been increasingly "owned" by local funds. To a large extent it gets easier to "manage" the index. You and I know that when that happens, we may be tempted to "manage" any untoward events. Not being allowed to correct properly will only mean that we will not be addressing the "gaps in valuations properly", it will also mean we will sweep the "inefficiencies and mistakes" under the guise of a managed index. Beware.

Giving Customers What They Want

The headline is seemingly an easily understood concept but one which is rarely practiced by most companies, even big ones. Was on a flight on AirAsia, did you know you can get Chatime on the plane? What a surprising yet decisive move ... To me it tells of the strategy and mindset of Tony and his crew, to continually get the customers what they want. Yes, we still bitch about many things about AirAsia, but overall its a bloody great way to fly cheap.

An example of a company that does not give customers what they want is 7-11 Malaysia, and only Malaysia. 7-11 franchises in Thailand and HK are amazing. You do not just go there because its late and nothing else is open. You go there cause they have things you want 24-7.

Its so obvious that 7-11 Malaysia mostly stocks stuffs that "they can get a very long credit period". Am I wrong here? They probably operate as a cash flow cow, rather than investing in "real products consumers want", we only get to choose stuff whose "manufacturers can tolerate long periods without payment because their products are not so in demand in the first place". Naturally some things they cannot do without such as top tier soft drinks.

Just look at other competing 7-24 operations, they go the extra mile, heck one of them even has vegetables.

 

 

 

 

Companies Buying Back Shares

It looks like share buybacks is back in the headlines again. My blogging life began officially in September 2005, and share buybacks was my very first posting. Seven years on, and the conclusions are still the same.
September 2005: Share Buybacks' Posting
What should investors’ opinion be of these share buybacks? Should companies make known their intentions?

We need to understand first why there is a stockmarket in the first place? First and foremost, it is there to allow companies to raise cheap funds to fund their growth strategies. Secondly, it is to allow for individuals and other entities to participate in the growth of these companies. Other reasons are secondary in nature. A company raises funds to facilitate corporate strategies, hopefully they will make money, preferably higher than the prevailing interest rate (if not, all funds should put money in the bank and close shop). Successful companies may keep accumulating profits to prepare itself for two general reasons: market down cycles, or in order to take advantage of opportunities when there is a market/industry correction/sell-down.

Companies should only indulge in share buybacks when accumulated funds are in excess for the above two reasons. This is because share buybacks will deplete reserves and may not be easily convertible to cash when there is a down cycle or market correction – the time when funds may be needed for those two purposes. Companies doing share buybacks must and should consider this aspect before embarking on the said exercise. Even then, the company can still decide on other options to do with the excess cash – give back to shareholders in the form of dividends or bonus – especially in a matured industry.



Companies raise cash for investing in growth, if they find no good investing opportunities after a prolonged period and cash flow is healthy, the funds should be returned to shareholders. Companies doing share buybacks are basically saying that that is the best way to spend their excess cash. To arrive at that decision, they must be convinced that their share is undervalued compared to their company's prospects. A company’s share price may not reflect its true potential – who knows the company’s fundamentals better than the people running them.

Then we have to look at why management is doing this – is it to improve share price via reducing the free float; and/or improve the earnings per share (but that only happens when they cancel the shares). If a company has to resort to improving their share price by reducing free float, it is usually not successful – a simple glance at the past 2 years' price performance of most of these companies will tell you that. By reducing free float, it is a futile exercise as the company will have to accumulate a significant amount to prop up the share price – that seems artificial no matter how you look at it as the only group really keen to own the shares is the company themselves.

Of course, share buybacks can successfully engineer higher share prices by massively reducing free float but they will have to meet regulations for minimum free float in the market place. The danger is that share buybacks can be taken advantage as “insider trading” by management as it involves market timing – hence the authorities must be more vigilant when it comes to the timing of share buybacks. If a company buyback the shares and do not cancel them, are they waiting to unload when price is higher? That is tantamount to trading in their own shares or having an investment portfolio. Is that part of the company’s normal course of business? Can this activity account for a substantial amount of profit for the company? How should analysts regard this profit – probably not enthusiastically as it is considered as a “one-off.”

It is safe to say that companies should make their intention known to the public when doing share buybacks – is it for future placements to institutions; to be cancelled, if so please state a time frame; not to be cancelled, but to be sold back into the market when price is higher; or to be disbursed as bonus. To me, that is vital information and I believe investors will rate the stock accordingly with the new information.



Bottom line, if it is not going to be cancelled, share buybacks are not really that big a positive in rating the company. Most times, companies who do share buybacks will not see significant improvements in their share price – investors do not rate a company higher because of that as investors are not buying the stock in the first place for various other reasons, and the free float is not really a major reason. Any worthy share buyback has to be cancelled for it to be effective.

Companies not doing that, need to ask themselves more questions as to why their share price is not at a level where it should be – are investors not happy with the management’s vision; is the company not communicating its plans effectively; has the company not been able to chart a credible track record; have the financial results for the company been haphazard or inconsistent; is the company too unfocused or too diverse that nobody even wants to follow/research the company; how is the management track record been in treating minority shareholders; have transactions or deals been really fair to all shareholders or been forced down investors’ throat (oops, getting too specific here) – chances are the stock will be rated properly if the above concerns have been addressed. Hence most share buybacks will not be entirely successful as it is fighting against the “enemy” when the “enemy” is really internal not and not external.

Cairo Confidential

Wanna feel like Indiana Jones? Here’s just the place for you ....

A diversion from the norm. Four years back I had the opportunity to go to Cairo. It was part business and some post-conference partying. That was when I still had a 9-5 job. Well, after the uprising in Egypt and ouster of Mubarak, no one should be visiting Cairo anytime soon till things settle down. I am so glad I was there before the whole thing blew up.
 
The long ride from the airport to the hotel was an eye opener. If you thought the drivers in Malaysia and Thailand were nuts, wait till you get in a car in Cairo. They cannot drive without their horns for sure. Cars slide in and out of lanes like well oiled machines. After ten minutes, I found a way to de-stress myself, just keep looking out the side windows, don't look ahead.

Crossing the roads would be a cinch for Malaysians as we are so used to dancing and weaving through the traffic – Malaysia's national sport? The difference being, its less stressful crossing the roads in Cairo than in KL. At least motorists in Cairo do not accelerate just as they have spotted you trying to cross the road. I have always wondered why Malaysians do that – do we really want to kill or scare the daylights out of pedestrians?

The buildings are in all shades of brown. I asked a colleague why is that and he explained that the buildings were brown, not by design, but as a result of the dust from the desert. Eventually, all the buildings ended up looking the same.

Egypt is an Islamic nation but you can easily find good places to drink yourself silly. Most hotels have a small casino (ten tables or less) but they are opened to foreigners only – still an interesting fact. And it has a fair share of dancing – there's dancing during dinner and at hotel lobbies, people simply break out in song and impromptu dancing in celebration. Extremely refreshing, to say the least. 

Walking around on the tourist trail, visiting the pyramids, the sphinx and museums can easily delude one into believing he or she is having an Indiana Jones moment. You almost feel like stealing some treasure or rescuing some maiden. 

The first impression, like most first impressions of things so widely talked, written and read about ....  is that the pyramids are much smaller than what you had envisioned in your mind. They are barely 10-12 stories high. 

The highlight of my trip was the camel ride. Its not the pussy 5-10 minute camel ride, mind you.

When the bus pulled up to this group of 70 camels and their drivers, I thought it was only going to be a five-minute joy ride and photo opportunity. But hey, it was the real deal. Imagine riding in a huge pack of 70 camels for 45 minutes traversing across the desert. Imagine Lawrence of Arabia leading a band of troopers to conquer some tribe.

In the distance you get to see the setting sun and images of the pyramids as well. That was golden. Many of my friends have warned me about the ruthless camel drivers who will try and fleece you for huge tips at the end of the ride. I was prepared for that.

My guide was a boy, probably 15, or 16 tops. The funny thing was he tries his best to “connect” with his customer with his limited English.

Here was the best memory from the trip. He kept asking me “Are you happy?” ... the first couple of times, I gave my polite short answers. When he gave me the same drivel for the tenth time, I lost it. He was like an old zen master disguised as a young camel driver. For the first few times, you'd answer “Yes, I am happy” but when continuously prodded on, you start to ask yourself “Am I really happy?”
You laugh out in sheer frustration, but against such a glorious backdrop you cannot help but marvel at the same question. 

Here I was on a camel ride watching the sunset, feeling a bit like Lawrence of Arabia, in the historical land of Moses ... seeing the sphinx and the pyramids in a distance ... If you are not happy NOW, right here, when will you ever be? 

But isn't happiness a lot more than just that? Do I have a happy soul? Am I really content? The temporary grandeur and material comforts fade into obscurity. Wow. It was more than just a camel ride (which in itself was excellent). Thanks to my “zen master”, I now “know” that I AM happy.

If you get the chance to go to Cairo, book yourself into one of 3 better hotels on the Nile (the Four Seasons, Hyatt and Sofitel). The room rates have not exploded yet and are about the same as in Malaysia. Funnily, there are about 5 casinos within 5 hotels in Cairo. They are not huge, open only to foreigners. Only 10 odd tables per hotel, but its fun to be in a casino (half empty) with table all to yourself.

Naturally you should go to any one of their museums, its incredible but go to one is more than enough unless you are a big historic buff.

One should also go on a dinner cruise on the Nile. It's frightfully romantic and serene. To think that things existed centuries ago in this exquisite historic city added layers of connectedness and warmth to the experience.

Not all things are wonderful, many of the retail outlets operate much like Petaling Street – you have to bargain like hell. Taxi fares are highly negotiable and many of the tourist destinations will be full of “modern day pirates” – plenty of people dressed in ancient Egyptian garbs wanting to take photos with you for free. But it's never free. 

In that sense the Egyptians are actually fighting with Malaysian taxi drivers for the trophy as the worst place on earth to get a cab. Not a place for two ladies, go in a group of 3-4 for safety in numbers.

 It was a unique experience to go to one where it is still very Egyptian and very local. I was never one to go abroad and clamour for McDonalds or KFCs but honestly, I found myself dying for some KFC after the fourth day. As it turns out, there is only so much of hummus, chickpeas, kebabs and bread one can consume. Can't wait for things to get better to go back to Cairo again.

Possibly The Best Indian Mamak Rojak

Trying not to say this or that is the best anymore ... taste is so subjective. However, many of you would swear that this ROJAK place is the tops. No need to argue, the queue says it all. Be early (3pm) and the queue will always be at least 5-6 people deep, be late and you will enjoy an even longer line.

Rojak is rojak, it all comes down to the "fried stuff", how crunchy and flavoursome, and their keropok is something else ... its thin and when you dip into the sauce, its magic. The other main ingredient for a good rojak is the sauce, not too sweet with the right chilli kick.

In Life, How Many Decades Do You Have?

The smarter ones (who knows Cantonese) will know that the headline is a famous phrase from a very popular TVB series a couple of years back. How many decades does one have in their lifetime? We can sometimes waste 10 years pining for someone, or unwilling to change for 10 years because of a grudge with a family member or close friend.... why waste 10 years, its not like we have so many 10 years to waste things on regret.

That is why I always think of my longevity in terms of how many more World Cups I will get to watch. Guys, when you put it in that frame of reference, its very sobering. How many more World Cups will you get to watch??? Less than 10 or 15? If something is less than 10 or 15, shouldn't you be more "concerned", maybe you should really watch one LIVE at the venue ... and it is sobering because, we may not have that much time on earth to really do all that we want. 

Sidetrack to investments, below shows a comparison of how asset classes have performed over the last 10 years. If its commodities, thing can go up and down a lot, even over a few months. But when you talk about normal business industries, its a reflection of a trend, do not go against it because they reflect a paradigm shift. If steel is bad, it is unlikely that somehow steel will stage a 200% rebound in the next 5-10 years.



Oil and maybe silver  may be because of the rise of consumerism and the rise of middle class populations in emerging countries, and I do not see that abating. Gold is a reflection on the real value of floating currencies and I also do not see printed money increasing in value anytime soon, will central banks be buying back most of the stuff they printed recklessly over the last 10 years???

Japan will be dead for as long as I am alive I think because for the last 20 years they have not addressed the crux of their problems and not likely to do so with their structured way of business relations and politics.

You can see that consumer stocks are up and up and that should continue. Financials may bounce back eventually but you will be better off to bet elsewhere for the next couple of years. Telecommunications is going through what airlines went through 20 years ago, they get bigger but they make it harder for themselves to make money by undercutting and buying subscribers, leave them alone.

Surprisingly healthcare was weak,probably only in the US which had many reforms to bring them back down to earth. As this is a US index, I think healthcare in developing nations are still good. I would still favour energy, material, technology and consumer staples for the next 5 years.