I am writing this post because of a special event that has just occurred in my life. Only those who are close to me will understand it. For those who are reading it, you would probably have guessed it.
It was very special indeed, began in an almost magical way and ended in a good way. I cherish the experience that we have gone through together, although short, was definitely something of to remember.
Although this could have ended in a better way, nevertheless it was special and I would want to remember it as something magical that happened at this certain point in my life.
Moving on, I wouldn't want to live in the past. Instead, I want to move on and experience new events, and trying the best I can to get the most out of life, for our time on earth is but a small speck in eternity.
Having that perspective, it would be honest to say that in time to come, hopefully I wont remember this event anymore, but being involved in something far more memorable and having a good time.
I still want to give the consideration to this event as it is special nevertheless. Thanks for all the good time we spent together, the meals, the travels, the shopping, the hanging out, the studying and finally, last but not least, the close time we had together.
Tuesday, October 14, 2008
Wednesday, September 24, 2008
The EIC Bowling event
Today we had the EIC Bowling Event! All in all, it was great fun. I came late because I had an interview, but then, was in time for bowling. There was about 15 of us there and I had to deal with the treasurial duties. We bowled 2 games, had 1 hour of arcade games, played a bit of pool and went home! The highest score in bowling was 120 I think. Some of our friends there are just pro bowlers! At least by my standards. We all didn't eat lunch today, so all of us were starving after that. Some of them went to eat lunch, I just went to safeway to buy bacon, for a delicious lunch we're cooking tomorrow. Good Wednesday indeed.
Sunday, September 21, 2008
The crisis of '07-'08
We are all in the middle of the world's worse financial crisis since history. The government has just agreed to the bailout so huge that it is about A$1trillion dollars, deemed the mother of all bailouts. Also we have seen the collapse of Lehman brothers, an investment bank in the US who survived 2 world wars, Asian crisis, Russian cold wars, tech wreck but unable to survive the credit crisis. There is a saying that goes "When the US catches a cold and sneeze, the rest of the world gets affected as well". It is true so far, as Australia faces their own credit crisis. However, the outlook here is much better, with the government rich, banks well capitalised and our country rich with resources fuelling the ongoing resources boom. The financial crisis has not taken its worst toll yet and there is more to see in the near future.
Thursday, July 17, 2008
The savings and loans business
I would like to voice out my views on the savings and loans sector. Its also known as the credit business. If you do not know what is savings and loan, it basically means businesses try to get money from depositors like fixed term deposit or some sort of funding from the reserve bank or related parties, they organise the monies and lend it out to other people, typically with a higher interest rate. That way they are able to make money from the spread, which is the difference between the interest rate they borrowed at and they lent at.
Typically such businesses require between a quarter of a percentage to a half to cover their operating costs. Hence, if they got their funds at a rate of 9%, they would have to lend out at 9.25 or 9.5% just to break even. This margin tends to change based on the particular circumstances at that time. If the money market(typically where bonds, bills and notes are traded) is fairly liquid, then the margin may be lesser and vice versa.
There are some businesses in the past who lent at a rate below what they borrowed at, hence locking themselves in at a loss. These kind of businesses do so in order to undercut their rivals or just for the sake of maintaining market share. Such moves render the bank to the brink of collapse and does not last for long. This condition was typically apparent in the 1980s long decade, where it was boom boom boom for the market till tuesday 20th October 1987 when the market suffered a 25% drop in one trading's session.
Typically, depositors want their money in the bank only for a short period of time, however, the borrowers of the bank's money want long term loans in order to rid themselves of liquidity problems. Hence, the bank has a funding risk. Good banks manage this risk effectively. There are also other kinds of risks such as counter-party risk, the risk of a borrower defaulting, and liquidity risk, the risk where the bank is unable to meet the depositor's call for money back from the bank.
A savings and loan institution are also divided into two types, mainly those who can receive money from the public and those who can't. Those who can have to be regulated by the Reserve Bank of Australia, and those who can't do not need such regulation. Those who can and those who can't get their funding mostly from the money market and then make loans at a higher rate to individuals or corporate clients.
In the past, banks have made silly loans to all kinds of clients. Those clients do not repay their loan, and most go bancrupt. Banks gives out loans in secured or unsecured basis. Those who are secured usually then get less in the dollar and unsecured, well, if they are lucky, they get anything at all.
Some bankers would go to great extents to make loans in order to boost their revenue and their profile to be as successful as possible. That is when credit crises happens, when there is a meltdown of loans because some people just aren't able to repay. Usually in boom times, everything is rosy and there is asset price inflation, stuff like this do happen. When the boom is over, only then do those who lent out such money will be penalised for their mistakes.
For an investor, invest in conservative banks who would grow steadily over time, despite booms or busts. They are the kind who does not get carried away with the crowd at any moment but maintains the momentum at which they are going at. In my personal opinion, the credit business hasn't changed much over the 100 years since it started. It's more a matter of management of the business. Certainly an area to look into.
Typically such businesses require between a quarter of a percentage to a half to cover their operating costs. Hence, if they got their funds at a rate of 9%, they would have to lend out at 9.25 or 9.5% just to break even. This margin tends to change based on the particular circumstances at that time. If the money market(typically where bonds, bills and notes are traded) is fairly liquid, then the margin may be lesser and vice versa.
There are some businesses in the past who lent at a rate below what they borrowed at, hence locking themselves in at a loss. These kind of businesses do so in order to undercut their rivals or just for the sake of maintaining market share. Such moves render the bank to the brink of collapse and does not last for long. This condition was typically apparent in the 1980s long decade, where it was boom boom boom for the market till tuesday 20th October 1987 when the market suffered a 25% drop in one trading's session.
Typically, depositors want their money in the bank only for a short period of time, however, the borrowers of the bank's money want long term loans in order to rid themselves of liquidity problems. Hence, the bank has a funding risk. Good banks manage this risk effectively. There are also other kinds of risks such as counter-party risk, the risk of a borrower defaulting, and liquidity risk, the risk where the bank is unable to meet the depositor's call for money back from the bank.
A savings and loan institution are also divided into two types, mainly those who can receive money from the public and those who can't. Those who can have to be regulated by the Reserve Bank of Australia, and those who can't do not need such regulation. Those who can and those who can't get their funding mostly from the money market and then make loans at a higher rate to individuals or corporate clients.
In the past, banks have made silly loans to all kinds of clients. Those clients do not repay their loan, and most go bancrupt. Banks gives out loans in secured or unsecured basis. Those who are secured usually then get less in the dollar and unsecured, well, if they are lucky, they get anything at all.
Some bankers would go to great extents to make loans in order to boost their revenue and their profile to be as successful as possible. That is when credit crises happens, when there is a meltdown of loans because some people just aren't able to repay. Usually in boom times, everything is rosy and there is asset price inflation, stuff like this do happen. When the boom is over, only then do those who lent out such money will be penalised for their mistakes.
For an investor, invest in conservative banks who would grow steadily over time, despite booms or busts. They are the kind who does not get carried away with the crowd at any moment but maintains the momentum at which they are going at. In my personal opinion, the credit business hasn't changed much over the 100 years since it started. It's more a matter of management of the business. Certainly an area to look into.
Wednesday, July 16, 2008
Our investments are going well! Except one
I am very proud of most of our investments in our partnership portfolio, which is intended to be held for the very long-term. I shall go through every one of them. And at the end I will cast my doubts over one of time.
JB Hi Fi: This fast-growing retailer is something to be proud of. Their low-cost business model, in my opinion, beats the rest in the industry. Despite recent weakenesses in the economy, JB has issued 3 profit upgrades in the past. They have also withstood 10 consecutive interest rate rises by posing never-ending record breaking profits. The management is very good, and despite this storm, JB seems to be weathering it pretty well. They have a 30% sales increase projection for FY2009 which is challenging and interesting to see if they can once again reach it.
Blackmores: This company won the best managed small company award in 2007. Their chairman Marcus Blackmore closely holds this company. This business, in my opinion, is outstanding because they have such high return on equity and low debt. They have been growing EPS at the high 10s rates while paying out 90% of their earnings as dividends. I believe they are in a pretty comfortable duopoly over the complementary medicine market with Nature's Own as their rival. A company with good prospects ahead indeed.
The Reject Shop: This is another retailer but not competing with JB Hi Fi. They operate within the discount variety market. Most of their competitors are single-owned businesses. They have a chain of stores across Australia that sells discount variety products mostly imported from China, and under The Reject Shop brand. Another high return on equity business, low debt, excellent management of the business and directors who have been with the business since it started. They are now implementing their IT systems across all shops as well as carrying on their accelerated store rollout program. The future looks good for this business.
Woolworths: This is a retailer as well but more diversified through Safeway supermarkets, Big W, Dan Murphy's, Dick Smith Electronics, hotels, and NZ supermarkets. They are what one would call a 'perferct' company. It is very stable like a blue chip, still growing very fast with net profit grown between 21-25% in FY2008, low debt, good duopoly position and a very good management team. I have to comment on their current CEO, Michael Luscombe. He started out as a store manager for one Safeway supermarket, worked his way up to Distributions manager and finally became CEO of the group. There is no better CEO to replace the recently retired managing director. When you think of value when shopping for groceries, you think of Safeway.
Westfield: They are the biggest shopping centre owner in the world by equity market capitalisation. Have you ever been to a Westfield shopping mall? They operate mainly in Australia, New Zealand, the United Kingdom and the United States. Already the size of almost a hundred billion, they still have many projects in their future development pipeline which can almost double their size in coming years. The recent market turmoil over property has seen the share price of this company drop, however, Westfield having raised $1.7b just before the crash has seen this company being flourished with ample liquidity now despite their rivals struggling to refinance their debts. Westfield is comfortably geared at 30%. Still headed by Frank Lowy and his sons, I believe this company will steadily grow into the future, withstanding booms and busts to come.
Saunders International: This is the smallest company in our portfolio with only a market cap of $50m. Despite that, their management team is highly experienced, low debt business, high return on equity and have great prospects for growth. They recently announced that their net profit was 50% higher than in the previous financial year. You can't find anything that good at such a low price as it is today. Their business is maintaining bulk storage tanks, quite a boring business, but highly profitable. And surely with their size being so small, it is overlooked by many institutional investors and analysts. A good exposure to a high growing company but of course with small companies there are inherently more risk. I no doubt believe in the growth of this company for many years to come.
Innamincka Petroleum: They are an oil explorer soon to be producer. The main reason for investing in this company is that they have no debt, adept management, highly undervalued by more than 50% and good outlook in that oil prices are set to rise into the future. This is the highest risk investment in our portfolio but it is justfied purchasing it due to the highly undervalued nature of the price it is selling for. Recently small cap producers have been knocked down to dismay levels because of the recent weakness but their businesses remain the same and still plenty of the growth story to come. I believe this is a value play which would play out nicely in a few years to come.
ASX: I reserved the review of this company for the last because I do not entirely believe in its story now. I bought ASX for their great historical story and well management of the company. The company still has the great management, however, their monopoly now may well have been uncertain because the government might just grant licenses to a syndicate of brokers so that they can bypass the ASX in order to save them some fees. With the future uncertain for this company, I feel that it is a gamble whether or not their monopoly will be broken. However, in the event that it is broken in the future, this business would still do fairly well with their strong recognition and brand, and that they are still the main share market operator in Australia. Many companies in need of capital would look for the ASX first, as the place to be recognised worldwide by other investors. It is to be looked into more deeply as time passes.
The longer term has never been better.
JB Hi Fi: This fast-growing retailer is something to be proud of. Their low-cost business model, in my opinion, beats the rest in the industry. Despite recent weakenesses in the economy, JB has issued 3 profit upgrades in the past. They have also withstood 10 consecutive interest rate rises by posing never-ending record breaking profits. The management is very good, and despite this storm, JB seems to be weathering it pretty well. They have a 30% sales increase projection for FY2009 which is challenging and interesting to see if they can once again reach it.
Blackmores: This company won the best managed small company award in 2007. Their chairman Marcus Blackmore closely holds this company. This business, in my opinion, is outstanding because they have such high return on equity and low debt. They have been growing EPS at the high 10s rates while paying out 90% of their earnings as dividends. I believe they are in a pretty comfortable duopoly over the complementary medicine market with Nature's Own as their rival. A company with good prospects ahead indeed.
The Reject Shop: This is another retailer but not competing with JB Hi Fi. They operate within the discount variety market. Most of their competitors are single-owned businesses. They have a chain of stores across Australia that sells discount variety products mostly imported from China, and under The Reject Shop brand. Another high return on equity business, low debt, excellent management of the business and directors who have been with the business since it started. They are now implementing their IT systems across all shops as well as carrying on their accelerated store rollout program. The future looks good for this business.
Woolworths: This is a retailer as well but more diversified through Safeway supermarkets, Big W, Dan Murphy's, Dick Smith Electronics, hotels, and NZ supermarkets. They are what one would call a 'perferct' company. It is very stable like a blue chip, still growing very fast with net profit grown between 21-25% in FY2008, low debt, good duopoly position and a very good management team. I have to comment on their current CEO, Michael Luscombe. He started out as a store manager for one Safeway supermarket, worked his way up to Distributions manager and finally became CEO of the group. There is no better CEO to replace the recently retired managing director. When you think of value when shopping for groceries, you think of Safeway.
Westfield: They are the biggest shopping centre owner in the world by equity market capitalisation. Have you ever been to a Westfield shopping mall? They operate mainly in Australia, New Zealand, the United Kingdom and the United States. Already the size of almost a hundred billion, they still have many projects in their future development pipeline which can almost double their size in coming years. The recent market turmoil over property has seen the share price of this company drop, however, Westfield having raised $1.7b just before the crash has seen this company being flourished with ample liquidity now despite their rivals struggling to refinance their debts. Westfield is comfortably geared at 30%. Still headed by Frank Lowy and his sons, I believe this company will steadily grow into the future, withstanding booms and busts to come.
Saunders International: This is the smallest company in our portfolio with only a market cap of $50m. Despite that, their management team is highly experienced, low debt business, high return on equity and have great prospects for growth. They recently announced that their net profit was 50% higher than in the previous financial year. You can't find anything that good at such a low price as it is today. Their business is maintaining bulk storage tanks, quite a boring business, but highly profitable. And surely with their size being so small, it is overlooked by many institutional investors and analysts. A good exposure to a high growing company but of course with small companies there are inherently more risk. I no doubt believe in the growth of this company for many years to come.
Innamincka Petroleum: They are an oil explorer soon to be producer. The main reason for investing in this company is that they have no debt, adept management, highly undervalued by more than 50% and good outlook in that oil prices are set to rise into the future. This is the highest risk investment in our portfolio but it is justfied purchasing it due to the highly undervalued nature of the price it is selling for. Recently small cap producers have been knocked down to dismay levels because of the recent weakness but their businesses remain the same and still plenty of the growth story to come. I believe this is a value play which would play out nicely in a few years to come.
ASX: I reserved the review of this company for the last because I do not entirely believe in its story now. I bought ASX for their great historical story and well management of the company. The company still has the great management, however, their monopoly now may well have been uncertain because the government might just grant licenses to a syndicate of brokers so that they can bypass the ASX in order to save them some fees. With the future uncertain for this company, I feel that it is a gamble whether or not their monopoly will be broken. However, in the event that it is broken in the future, this business would still do fairly well with their strong recognition and brand, and that they are still the main share market operator in Australia. Many companies in need of capital would look for the ASX first, as the place to be recognised worldwide by other investors. It is to be looked into more deeply as time passes.
The longer term has never been better.
Tuesday, July 15, 2008
Recommendation: The Remarkable Story of Risk by P. Bernstein
I recently 2/3 finished reading a book named Against the Gods: The Remarkable story of risk by Peter L. Bernstein. The story is actually really interesting, with it mostly being a history book about risk. It is actually, I believe, the first history book about risk to be documented listing down how risk actually evolved from its roots all the way back to Greek times.
The Greeks actually had advanced themselves in Mathematics by quite abit. But, however, their advancement was limited to geometry. The book tries to answer the question why, if there is a reason, did the Greeks did not advance probability theory. It has to do with their way of living and their religious views, that prevented them from thinking that things did not occur entirely by chance or by their gods. Time passed on, and pass the Greeks, many philosophers contributed to the finding of probability theory. There are at least 50 different characters who made their mark on history mentioned in this book.
By the way, the book also won various awards, mostly by risk management associations. Modern risk as we know it is mostly applied to portfolio risk management. However, the author continues to tell that risk is still a child compared to the physical sciences who are already like adults. It is interesting to read about the story of risk.
What have I gathered from this book? I have learnt much about how did risk come about, its measurement, the evolvement of techniques, what can risk be used for and where it is applied, why do people still take insurance or gamble when they know it is a losing bet(theory of utility) and much much more. Great book and I certainly recommend it to my readers. It also covers a few material on the sharemarket and about risk of investing.
Credit to the Intelligent Investor corporation for recommending to me this book.
The Greeks actually had advanced themselves in Mathematics by quite abit. But, however, their advancement was limited to geometry. The book tries to answer the question why, if there is a reason, did the Greeks did not advance probability theory. It has to do with their way of living and their religious views, that prevented them from thinking that things did not occur entirely by chance or by their gods. Time passed on, and pass the Greeks, many philosophers contributed to the finding of probability theory. There are at least 50 different characters who made their mark on history mentioned in this book.
By the way, the book also won various awards, mostly by risk management associations. Modern risk as we know it is mostly applied to portfolio risk management. However, the author continues to tell that risk is still a child compared to the physical sciences who are already like adults. It is interesting to read about the story of risk.
What have I gathered from this book? I have learnt much about how did risk come about, its measurement, the evolvement of techniques, what can risk be used for and where it is applied, why do people still take insurance or gamble when they know it is a losing bet(theory of utility) and much much more. Great book and I certainly recommend it to my readers. It also covers a few material on the sharemarket and about risk of investing.
Credit to the Intelligent Investor corporation for recommending to me this book.
Wednesday, July 9, 2008
The week with my dad in melbourne
Last week my dad was over in Melbourne. Have not seen him for half a year and he already has grown more white hair. Nevertheless, it was good to meet up with him. Hes the kind of dad who really cares but seldom talk about it openly. Hes not really talkative, more of an actions person.
It was good having Dad over. We spent a whole good week together. Even went to some places such as Point Cook and St. Kilda beach. The main reasons for his coming were to sort out the youth allowance thing for my sis and me, and to meet up with us. We did lots of shopping together, and finally our house looks re-stocked! So many things in our cupboard now. That only can happen when Dad is around.
When Dad was around this time, he also did alot of shopping, as in, tonnes of shopping. As usual the 3 of us consisting of Dad, sis and me went shopping at Myers and Chadstone. Sis and myself didnt buy anything. However, Dad bought hundreds of dollars of clothes. Never seen him buy so much before. He claims that he always wanted to buy it and it has been quite awhile already. So then the result is mega shopping spreee.
Good thing when Dad is around is that we always had a lot to eat and enjoy because he pays for everything. Of course, that is alot of cash for Dad, still, he insists on giving us a treat. And he always likes to say that he is in debt because of high fees to sustain sis and myself in Australia. Yet he treats us like he has alot of money, which makes me confused, is he in need of money or not. That is just some funny thoughts playing in my head.
The bad thing I guess when Dad is around is that I seldom get to see my friends alot, especially my close friends. I guess overall it was good to see my dad again. Now he is back in Malaysia, and probably wont be seeing him until next year January. A good visit from him it was.
It was good having Dad over. We spent a whole good week together. Even went to some places such as Point Cook and St. Kilda beach. The main reasons for his coming were to sort out the youth allowance thing for my sis and me, and to meet up with us. We did lots of shopping together, and finally our house looks re-stocked! So many things in our cupboard now. That only can happen when Dad is around.
When Dad was around this time, he also did alot of shopping, as in, tonnes of shopping. As usual the 3 of us consisting of Dad, sis and me went shopping at Myers and Chadstone. Sis and myself didnt buy anything. However, Dad bought hundreds of dollars of clothes. Never seen him buy so much before. He claims that he always wanted to buy it and it has been quite awhile already. So then the result is mega shopping spreee.
Good thing when Dad is around is that we always had a lot to eat and enjoy because he pays for everything. Of course, that is alot of cash for Dad, still, he insists on giving us a treat. And he always likes to say that he is in debt because of high fees to sustain sis and myself in Australia. Yet he treats us like he has alot of money, which makes me confused, is he in need of money or not. That is just some funny thoughts playing in my head.
The bad thing I guess when Dad is around is that I seldom get to see my friends alot, especially my close friends. I guess overall it was good to see my dad again. Now he is back in Malaysia, and probably wont be seeing him until next year January. A good visit from him it was.
Subscribe to:
Posts (Atom)
Posts
