VirtualPot Folio As At 8th April 2011

After a month of chaos due to the spillover panic effects in Libya and Japan tsunami disaster, things are again moving in a healthy direction. No matter how much sense there is to hold your holdings, some people will succumb to the pressure and sell, hence widely known as profit taking or cut stop loss measure. Nevertheless, I chose to hold on foreseeing no major incident that could have a big enough huge impact in derailing the global economy. 

Contrary to the believes of others, I did not pick up any shares over the last month. Some portion of my reserves are going into house improvements and into a new endowment plan to complete my conservative portfolio over the next 5-10 years time frame. Anyway portfolio gains are up from 12.4% to 17.9% boosted by the holdings of FREIGHT and GENTING. Both remains my top two favourites for long term investment horizon. Because the current holdings in the portfolio are not even 1 year old, the gain is the total return for a given year. Once they move ahead of the 1 year time frame, I will adjust to use the compounded annual growth rate.

There were some verbal comments regarding my P&L history like the timing and astounding profit figures. First the timing: it was crisis time and the best time to load up if you hold cash, note that I use cost averaging method for TopGlov. Second, profit figures: Simply said I sold TopGlov too early thinking it would sink under the overvalued pressure while for DLady I decided to hold on much longer learning from my previous mistake in TopGlov. To further add on, the reason I chose these two is simply because I started off with them and there were names that are synonymous with quality and good reputation, during a crisis almost everything will look cheap to buy. I hope this clears the air of everything :)

Disclaimer: The reports, analysis and recommendations in this blog are solely my personal views. I do not link to any investment body or company. As such, I will not be responsible of any of your investment decision. Consult your investment adviser or come to your own conclusions before making any investment decision.

A Probe Into The Opposition's "Orange Book"

I've spent my Sat morning reading the "Orange Book" while having breakfast and watching CNBC, talk about multi-tasking haha. Why orange book? For those who are not familiar in the realm of PC games, game developer Valve came out with the Orange Box. It was called this way for a couple of reasons and mainly to create curiosity. It did work very well for the gaming company as it rises very high on the google search engine list.

1. It's not something which is similar to a past or present.
2. People who have a preconceived notion of what it is by the name of it.

Unfortunately Malaysia's Orange Book was written in the Malay language only..sigh. Fortunately I'm writing in English for you :) The theme for the book is "Change Now, Save Malaysia" and was drafted by the opposition Pakatan Rakyat or People's Coalition. I shall highlight a few main but important points as well as my point of view:

Country In Crisis

1. For 12 years in a row we have been running a deficit budget.
2. For 10 years in a row we have missed our target of economic growth.
3. In the last 4 years, PETRONAS has been dishing out RM325 billion, RM81.25 billion per year.
4. 2.6% average wage rise in the last decade compared to 3.2% in the world (including poor countries)
5. 40% of Malaysian household earns less than RM1500 per month and 75% of them are Bumis.
6. 4 million or 34% of workers earn less than RM700 per month.
7. 62% of the RM40 billion used for subsidies are for the corporate sector!
8. RM466 billion of personal debts owed by Malaysian to banks is the highest in Asia.
9. RM28 billion loss due to corruption and leakages which is 3x the amount of oil subsidy.
10. Only 68.7% of Malaysians finish high school education, even Brunei is higher at 88.2%.

PR is Poised To Fix This Shit

1. Establishing several council of experts in main national issues such as economy, political and social. 
2. Maintaining a more balanced subsidy structure for the "rakyat" by revising the subsidy structure to the corporate sector.
3. Setting a target to push those with household income level from RM1500 to the minimum RM4000 in the first 5 years. Certain tasks include implementation of min wage level, work from home laws to women and training schemes.
4. Restructure four infrastructure and public utilities that is being monopolized or have great concessionaire advantages: water, electricity, tolls and the internet.
5. Resolve outstanding PTPTN loans currently at RM46 billion by reduction of interest rates and allowing auto deduction of installment after 6 months of full employment. 
6. Open tender policy.
7. National integration of Sabah, Sarawak with Peninsular Malaysia to ensure fair power sharing.

Separation of powers whereby too much power in the executive during Mahathir tenure, back to legislature and judicial. More press freedom. Malaysia needs to have a clean and fair elections and one way is to have automatic enrollment of citizen into the electoral system for 18 years and above. GST to wait until the rakyat is ready for such a tax system, minimum wage system to all workers. Social protection in the form of a pension system to all workers in the private sector, unemployment work fund for those unemployed and retraining of workers. Housing goal as One family, One house, more low cost or medium cost housing development. Transportation: Abolish toll system within 7 years, 1/2 price for young and old citizens for all public transportation mode. Environment: Recycling culture and ensure controlled activity for lumbering, move towards alternative energy source. Social justice: Increase social welfare to the natives and minorities. Education: Fair enrollment to higher national eduction institutions to all races. Women: 30% allocation for women in all political position and government posts. Security: Community policing. Health: To ensure that our national health policy remains and health privatization is shelved.  


What I like to know more is their stand on NEP's 30% equity target, how they plan to attract overseas Malaysians back to our country, certain protectionism policies like our automobile sector and how to fix the race disparity in civil service. BUT it is good to know they have thought that much already, it has to get the ball rolling first.

100-Day Manifesto
Reformation of SPR (election commission), SPRM (anti corruption agency), attorney general's chamber (law & justice) and PDRM (the police).
I don't know how PR is going to reform this in details but I just know something needs to be done and the process of reforming this is going to be long and tedious. Definitely not within the reach in the first 100 days.

Abolishment of ISA (internal security act).
For the love of god, please abolish this GESTAPO crap. Would you like to have the SWAT team banging your door down without needing any reason when you making love with your wife at home?

Asking Khazanah, KWSP (epf) and other govt bodies to take over tolls with the sole purpose of abolishing toll.
Actually EPF is not as transparent as it should be with meager returns like 5.8%, even I can earn 3x that returns given the chance not to put my money into EPF. I also think it will not be abolish but like Singapore MRT it will be run by a company that charges reasonable price. With 19 concessionaires it will cost a lot of money like RM50-60 bil to take them over. Will see how it goes.

Restructure national subsidy to reduce subsidies given to the private sector.
This is actually a double edge sword, you have a problem of balancing socialism and capitalism but I will agree that the current subsidy structure is heavily skewed to corporate sector and must be restructured by all means as the first and right step.

Immediate pay rise of RM500 to teachers and gradual revision of other civil servant salary.
I do not agree on the first portion, you don't fix our education system simply by giving more money. It should be done on merit basis, in China they fixed the exams to be difficult and give incentives via bonuses to teachers who made sure students get good grades.

Nationalize water management in the country.
Fully behind this. It is better to rely on a system that has greater direct accountability.

Free WIFI service to all citizens in major cities and semi-urban areas.
Unless you can get public-private partnerships, getting this done within the first 100 days is difficult and not to say prohibitively expensive. This should be your first 1-3 years goal.

Cancellation of FELDA plantations and open current fields to 2nd and 3rd generation Felda settlers.
FELDA was meant to benefit the people more than the company but it seems that the administration treats them more like cheap labour and slaves. Cancellations of the plantations is the right direction to move from profit optimization to poverty alleviation.

Increase oil royalty by 20% to Sabah, Sarawak, Terengganu and Kelantan.
Agree. These states should enjoy some share of the profit of their natural resources. The current 5% is too low. Heck even the 6% govt tax is higher.

Establishing a RCI (royal commission inquiry) to solve the influx of illegal immigrants and citizenship in East Malaysia. 
This is real and a serious problem. Why?

If you cross the North Korean border illegally                           
You get 12 years hard labour.                                             
                                                                           
If you cross the Iranian border illegally                                 
You are detained indefinitely.                                           
                                                                           
If you cross the Afghan border illegally                                 
You get shot.                                          
                  
If you cross the Saudi Arabian border illegally                           
You will be jailed.                              
                        
If you cross the Chinese border illegally                                 
You may never be heard again.              
                              
If you cross the Venezuelan border illegally                             
You will be branded a spy and your fate will be sealed.      
            
If you cross the Cuban border illegally                                   
You will be thrown into political prison to rot.               
         
If you cross the British border illegally                                 
You will be arrested, prosecuted and sent to prison and deported         

If you are an Indonesian and cross the Malaysian border illegally         
You will get:                                                             
  -  PR (Permanent Residence)                                             
  -  A driving license                                                   
  -  Voting rights                                                       
  -  Job reservation                                                     
  -  Special privilege to be consider as a bumiputera                     
  -  Credit cards                                                         
  -  Subsidized rent or a loan to buy a house                             
  -  Free education                                                       
  -  Free healthcare                                                     
Oh Malaysia ! What a great country!

Conclusion

There is a great amount of work to be done or rather fix in our country and I am extremely glad that most of them have been pinpointed by the opposition. It is not surprising those most of the items in the manifesto are socialist in nature rather than capitalism. Both DAP and PAS are very socialist and I am 100% sure that they will uphold "Rakyat Didahulukan, Pencapaian Diutamakan". This spell good news for the "rakyat" but I am willing to bet some corporate players will surely make some noise particular those GLCs. The purported cost for these implementation is RM19 billion as estimated by the coalition. Frankly if you ask me I do not think it is going to cost that little but the cost for such fixes in our country's damaged structure is worth more than our poor GTP.                      

Revisiting The Blue Camp

Seriously time flies in the tech world, in just a matter of months netbooks seems to decline while tablets and smartphones are picking up like hot cakes. In addition we can clearly see that Intel's Atom is not making inroads either in the Consumer Electronics (CE) market: smart TV.

Then we see that Intel's Ultra Mobility boss leaving the company after a long tenure of 24 years! With the growing interest of tablets and smartphones these days, long gone are the glory days of the Atom. Smartphone market is mostly dominated by ARM processors and the tablet market is going to be trampled by AMD's Bobcat fusion line of processors when they are finally out this summer'11 after some delay.

"AMD Brazos has been a big hit with OEMs as nearly every major manufacturer is producing machines based around it, particularly the extremely popular E-350 APU."

It is rather obvious that Chandrasekher had to go because of Intel's failure in the mobility segment of tablet/smartphone. Perhaps he was fired since the announcement made was so brief without much explanation. According to tomshardware, it wasn't even seven lines long. So much of disrespect for someone who has served Intel for so long.

So what is Intel going to do with Atom? Some of my thoughts:

• Heading towards making it more energy efficient and cheap to compete with ARM. "Moorestown" is rumoured to be offering a x10 power reduction during idle state.
• Bringing it into the low-power server space because ARM has openly said they are going up the pyramid and tackling low end/low power servers with its architecture. This has been confirmed recently. News here.
• Competing with Bobcat in which Intel responded a YES they can but with what? Lol. The current iGPU in Pineview is inadequate (fails @ HD flash and HD video encoding) and has been no word on further technical roadmap to combat AMD's upcoming and real threat.

Thus it remains extremely gloomy for Intel to penetrate yet another new market, they have to be content with their microprocessor product line which is doing very well (fast refresh), thank god they command this market strongly. Intel in this segment is a free frag until AMD's fusion Llano and Interlagos is out in Q3'2011 to provide some competition.

 

Though critics may argue that Intel in 2010 generated revenue profits, it did not translate to share performance, it is mainly due to low base effect in 2009. Low base effect in economics is the tendency of a small absolute change from a low initial amount to be translated into a large percentage change. I am certain that in 2011 it will not fair higher nor close to 2010 profit.

The last time (27 Nov 2010 posting) I placed a sell call near USD 21.50 was justified as the share is now at USD 20.37, a 5.2% depreciation while buy call for AMD has gained 20.32% from USD 7.38 to USD 8.88 (nice digits!)

I still maintain my sell call for INTC above USD 20 (and buy some other equity) and buy call for AMD as long below USD 10.

Here is my previous analysis on INTC: Blue Machine - Intel Corporation