FinTips - Jan 2012

HAPPY CHINESE NEW YEAR!!! Well, here we are at the start of the year of the “Water Dragon”. And true to its name, it seems to be all gloomy and wet in Kluang. However, I don’t see that spoiling the festivities. Spirits are still soaring high and celebrations are still taking place all over the neighbourhood. It certainly is good to be back home after quite a while. 

The Year of the Water Dragon….Let’s start of by knowing what the dragon actually means. The dragon, in the Chinese astrology chart symbolizes power. It was also the symbol of the emperor. The dragon is known for its unpredictable and temperamental nature. But it is also known to bring luck and fame to many, as it is surrounded by “mystical forces”.

So what does the year 2012 entail for us in terms of the economy? Well, it certainly is going to resonate with the essence of the dragon by being very unpredictable in the macro sense. But on the micro sense, it is time to make money on the short term market gains. Granted that we are not going to experience a market boom like that of 2010, but there are going to be little spikes here and there that will benefit the investor. The market’s unpredictable nature will be due to the new skeletons emerging from the first world closets.

With the Eurozone having already met 5 times since the start of the year with sound financial decisions yet to be made, the Eurozone slump is going to dampen the global market as a whole. This, like I have been saying since last year, is going to enable Asia to recapture glory. And some of the countries in the Asian region have indeed taken excellent steps (some way ahead of the others) in addressing the potential crisis that looms in 2012.

Indonesia was one of the first to act on it. Having reduced their interest rate around the 3^rd quarter last year, Indonesia had generated funds to provide liquidity in the market to urge more investment spending within the country. With more money for investments within the country and the strengthening of their local demand and supply, Indonesia has gone the distance where many might reach, only after a VERY long time. As cost of production weighs down the many countries as their market demands aren’t met, it seems to be more feasible to outsource production to countries where the cost is just but a fraction of their actual production cost. And here is where the Asian region jumps into the front lines. 

Besides Indonesia, there are other countries that are looking at growth this year. Truth be told, anything beyond the national inflation is a very reasonable rate of growth at this point in time. The countries that might be experiencing such growths will be those like Indonesia, Malaysia, Sri lanka, India and China. Well, I’ve already spoken on Indonesia and I bet many would have had a mixed feeling upon noting Malaysia’s name in the lineup.

Truth be told, Malaysia actually has excellent room for growth. But that potential would only be reached when the penned plans are put into action. Malaysia has rather blatantly announced of a reduction in

interest rates. Chances are many may have missed it (or did you?) Before the end of the year, the Malaysian National Bank @ Bank Negara Malaysia (BNM) had introduced new notes to the public. Many had gotten excited and had made tedious efforts towards getting their hands on the first print of these new notes and coins. They had announced that this money shall be coming into circulation by the middle of this year. So naturally, they are going to be printing more money. When more money is being printed, there will be more supply of money than demand which would decrease the interest rate; but this would only be temporary. This would urge more investment spending in Malaysia. However, where these funds are going to be channeled would determine the rate of growth in the nation. The reduction in interest rates would affect the fixed deposit rates in the banks. As it would cost lesser for banks to acquire loans from BNM, there will be a lesser demand for public money; which would negatively affect the fixed deposits. Loans are going to be available but banks are going to be very stringent as they are still very weary of the global financial crisis. 

As for the political scene being able to boost the national economy, it is going to end up being an old maid’s tale. As the postponement of the elections have been feverishly taking place since last year, the corporations funding these campaigns and corporations expecting funds from the political parties are growing faint. It is only going to be a matter of time in which they (the corporations) would decide to practice detachment. So basically, the Malaysian market is not going to be severely affected by the elections.  

As for a country like Sri Lanka, the rebuilding of the nation has become priority for the nation as they need to be able to generate their own funds to sustain in this currently sloppy market. Laden with natural resources and excellent investment opportunities for the many different sectors, Sri Lanka has become an interest to many investors globally. Of course, with the emotional stigma still existing due to the civil war, it has given the perfect opportunity to certain countries and races, which do not have much of an emotional connection with the populace of Sri Lanka, to pour in their funds. To be honest, it is these countries and individuals who are going to reap the best gains available. 

As for India and China, they have the population and the supply. So the market is pretty self sustainable. But they still have their drawbacks. India, with its political turmoil might be facing a little bit of a stagnant growth in certain sectors. And these sectors might drag the general economy of the country. China, still being moved by the US, is going to have restricted growth too. That is why; these countries have been actively channeling their money to other countries to reap gains from them. 

That’s the gist of the global economic scene for now. So, I would personally advise investors to partake in the continuous growth by staggering their investments and making a continuous stream of investments throughout 2012. Do take note, the best time to make money is to ride the markets when they are down, not when they are high. So let’s ride the dragon people! 

By,

Ashveen Chakravarthy Sekaran

Jan 24^th, 2012

Economic Transformation Plan

So much has happened throughout this year that it has left quite a number of us utterly flabbergasted and with so little to say. As the life span of “the truth” shortens with the unveiling global scenarios, making concrete statements is rather difficult. And that is probably the reason why we see a lot of statements being made today, revoked tomorrow or even politicians today, layman tomorrow…. And politician again the day after… Let’s switch gears now shall we?

About a month back, I got an invitation to attend a programme organized by Ernst & Young Malaysia. It was called Decoding the DNA of the ETP (Economic Transformation Programme) with the caption – Bringing Your Idea to Fruition. With strong government support and HUGE financial allocations, it is, I quote “ driven with the desire to create new jobs and drive GNI (Gross National Income) growth”. But before I proceed further, please read the following disclaimer:

Disclaimer: This article will be presenting my personal views on several issues and is NOT written with the ideology of conforming to the general youth fashion of scrutinizing everything that is happening. 

Directly under the Prime Minister’s wing, the ETP is aimed at putting Malaysia in the forefront of the global economic scene. Being creative, innovative and daring does give this plan a certain edge (on paper) . So with the 16 chapters of the booklet and handbook, plus the 54 page executive summary read, I went to decode the DNA of this ETP with much renewed enthusiasm! And here is my executive summary… There is much retardation in the gene pool… To be honest, they need to decode the DNA of the ETP again… and this time, with genetic engineers who have a business ideology, who are not just a bunch of number crunchers! 

While Dato Idris Jala was talking on stage about the ETP, I should say, things did look very promising. Geared at promoting the local industry while creating more job opportunities for Malaysians, the ETP did indeed show ways of making Malaysia a high income nation by the year 2015.  One of the main ways, according to Dato Idris Jala, was to create healthy competition in the market place. Knowing that competition in the market place is the only way to boost any economy, I was excited that the ETP is going to be the catalyst of it. He also went on to say that this is one of the key indicators that is going to drive Malaysia towards the global scene, as the competition would be conducted while implementing “ceteris peribus” in the market . The latin phrase Ceteris Peribus means “while all else is held equal”. That’s went I went “BRAVA!” But the excitement came to a premature end when he said that a special key indicator was created to focus on developing the Bumi SMEs in Malaysia. And my immediate reaction was “ceteris peri-what?!”

Don’t get me wrong by thinking I am racist in any level, but if market competition is to be created, the idea of equality needs to be a key player. THE MALAYSIAN RACE needs to be looked at rather than the ethnicities when it comes to driving our economy.  When a particular group is given a certain privilege compared to other groups, it tends to help that group for a short period of time. However, when the same group reaches its comfort zone, productivity would reduce and by then it would be too late for anyone to expect anything from that group. This is the same thing that has happened in many countries around the world which has led to quite the havoc in recent times. With so much happening in the world, I felt rather dumb founded that Malaysia would still focus on such issues when “the man” a.k.a the PM, is driving the 1Malaysia concept, is diligently advocating equality in Malaysia. I bet he would not have allowed this if it was directly under his wing… Oh wait… it is… *sigh*. Please read the following disclaimer:

Disclaimer: By the comment made above, I am NOT pledging my support to the oppositions. I reserve my right to remain impartial. As a matter of fact, I do not have time for parties/groups/movements that bicker on petty issues while there is a bigger picture that needs tending to. Fecal matter, covered in candy, is still fecal matter.

If Malaysia is aiming at becoming a high income nation, we need to level the playing field to allow more business ideas (despite ethnicity/class or creed) to flow through the system or basically apply liberal scrutiny. Liberal scrutiny (a term I just coined while writing this) would mean that the freedom of ideas is encouraged to flow through the system without taking into consideration race, class or creed while carefully analyzing (in this case) these ideas PURELY on the business and financial aspects. Otherwise, we would only know that Malaysia is a high income nation when our cattle farms are established in multimillion dollar condos and service apartments and sending these cattle on a half a million dollar vacation to Bali in order to increase productivity.  

Anyway, back to the ETP… The event went on with an exclusive forum with some of Malaysia’s prominent business and semi government entities. While many were voicing their strong opinions on the ETP and how Malaysia was conducting itself when it came to the implementation of the ETP, a particular entity baffled my brains by the “infinite wisdom” he displayed during the Q&A of the forum… The  CEO of TALENT CORP. Here is what happened:

He was sharing with the crowd, the ideas of Talent Corp in addressing the issues in the workforce in Malaysia. Here is what baffled me… They are going to spend millions and millions to bring back the Malaysian talent working overseas. And here is how they are going to do it:

a)      Match their pay in Malaysian ringgits (obviously it has to be more)

b)      Tax rate @ 15% (while we pay 28% personal tax or 20% company tax)

c)       2 Tax free cars / Tax reduced cars

d)      And other perks to keep them in….

And here is what I thought… While you are going to be spending millions and millions on bringing these diasporas back to the nation, you would be losing the many talented individuals and potentials within the country to other nations(and trust me, there are loads of them); they are going to be running out the back door (or if these guys are too blind, the front door). As an individual who made a conscious decision to come back to Malaysia, despite being offered various good positions in the US and Europe, I feel that I (and many others like me) have been taken for granted. If there is not going to be tax alterations and unnecessary spending of tax money, I don’t see the need to re-print money in Malaysia anytime soon.

Here’s the thing, by reprinting money, the value of the Malaysian ringgit will reduce as there will be more money supply. This could be a method that Malaysia is implementing to attract foreign investors to invest in Malaysia. One of the things they might be failing to take into consideration is the fact that these external investors might be running out of money due to the lack of money in the countries of the investors. Plus, the major economies in the world like Indonesia, China and India are looking at internalizing their markets to improve their global standing in the economy. With the “power house” title up for grabs, all the countries are off on the global economic rat race! (With the exception of the US as they are still deciding on who is going to run the race, and Europe as they are still discussing on the rules with the umpire (IMF).)

The ETP, like I first said, is an EXCELLENT plan… But the execution is rather questionable. Malaysia has to leverage on the strength of the MALAYSIANS as being ethnocentric is not going to get us moving anywhere; as a matter of fact, we might still be stuck behind at the refreshment tent, eating our santan (coconut milk) laced snacks while the rest are running the race. And when the winners are announced, we might just die of a heart attack – still at the refreshment tent!

By,

Ashveen Chakravarthy Sekaran

Dec 22, 2011

2012… A practical joke? Or impending catastrophe?

These things in the 10^th generation shall come to pass. The earth shall be shaken by a great earth quake that throws many cities into the sea. There shall be war. Fire shall come flashing forth from the heavens and many cities burn. Black ashes shall fill the great sky. Then know the anger of the gods.

                                                                                                           

                                                                                                             -The Sybilline Oracles.

The Mayan, Indian and Chinese calendars talk about it. Nostradamus, the Greek prophecies and oracles have all mentioned it. Even our modern day scientists and computer softwares have predicted it. So the question remains, when will we be facing doomsday or rather the bigger question, how is it going to happen? Over the past years, speculations have risen on the many ways our world may end. Ranging from a virus out break to an asteroid collision or even an alien invasion, many scientists and speculators have come up with plausible and implausible ways to our demise.

I had started this research and completed it over the course of one year and have gotten it validated by the various scientific communities out there. As we go along, we will see that these events, although being three separate events, could actually turn out to be a chain reaction of one single event.

Let us first start by looking at the earth. The earth’s land masses are made and separated by tectonic plates.  These tectonic plates are constantly moving and colliding with each other which form the earth’s landscape. 

For example, the Himalayan mountain range is formed by the collision of the Indian Plate and the Eurasian Plate. It is this continuous collision between these two plates that has been causing the mountain range to be growing over time. It is the same movements of these plates that also cause earthquakes. When the earth plates move against each other, the plate with more solidity tends to move downwards while the other is forced to move upwards. It is this friction caused by the forced movement that causes tremors and if forceful enough, earthquakes. But occasionally certain glitches occur.

 About 200-300 years ago, the Indo-Australian Plate (the subducting plate) which was colliding with the Burma Sub-plate (over-riding plate), part of the Eurasian Plate got stuck to each other due to high amounts of friction. The part of the plate which got stuck started moving inwards with the other plate while the major portion of it was still moving against it. This had caused a “spring like” effect on this plate. Just as how a spring lets go with such force after being tightly wound to its maximum point, the Burma Sub-plate had popped back up, raising the sea bed to about  41ft along the coast of Sumatra for about 3100 miles, causing the Dec 24^th, 2004 tsunami. So you may ask, why should we worry about something which has already passed? Well, around the same time the previously mentioned plates got stuck, there were two other plates which did the same. This “sister” plate is located in the west coast of the Americas where the Pacific and North American plates meet. The problem is, not only is this plate still stuck, it has a larger land mass and is also situated in the Pacific ocean. When these plates let go, not only would it take 15 minutes for giant waves to wipe out North and South America, but it would generate waves that would travel across the Pacific and hit the Asian region too, creating a global catastrophe. These waves would be much larger than those of 2004 because of the volume of water it would travel through, the Pacific Ocean and the South China Sea. 

    Another problem which would arise from this earthquake is massive shockwaves. Shock waves travel in a circular direction. When these shock waves travel downward, they would cause tremors in magma chambers, causing the magma rivers to rise, triggering active volcanoes. Conveniently enough, the Ring of Fire, the region in which the largest portion of the world’s active volcanoes are situated in and connected by magma streams sits right under the collision point of the Pacific and North American Plates. 

So, large enough shockwaves would cause these streams in the Ring of Fire to activate.

 A similar incident had occurred back in August 26^th, 1883 in the islands of Indonesia. When two colliding plates sent shockwaves to the magma streams, it had caused the magma to rise with immense force through a volcano called Krakatoa that it exploded with the force of 200 megatons of TNT, eventually blowing the whole island off the face of the earth. The explosion had also generated waves which were 120ft in height which raced across the globe even as far as the English Channel. Dr. George Pararas, a geologist, had stated that the eruption had produced ashes and smoke which blocked out the sun for 3 years and sent shock wave to travel the earth thrice. 

But these are not even close to what scientists and geologists fear might happen when the current mega volcanoes were to erupt. The current most volatile mega volcanoes are currently situated in the same place

 – the Yellowstone National Park. Geologist Dr. Bob Christiansen, who has been researching the Yellowstone National Park for decades has noticed that since a major earthquake in August 17^th, 1959, Yellowstone National Park has recorded an average of 25 earthquakes a week, showing great signs of seismic activity. Geologist Dr. Bob Smith and leading volcano expert Dr. Bill McGuire, when trying to measure the size of the magma chambers were flabbergasted by their find. 

The first magma chamber was 50 miles long and 25miles across while the second magma chamber was 60 miles long and 30 miles wide. To help up visualize the devastation these would create, Dr. McGuire compares it to the eruption of Mt. St. Helens in the US.

 When St. Helens erupted in May 1980, it had spewed 7billion tons of rock and enough debris to cover Manhattan in 55ft of ash. And the force of the explosion was 500 times greater than the atomic bomb dropped on Hiroshima. Dr. McGuire, after spending months calculating, said that when these mega volcanoes erupt, the first would erupt with a force 1000 times greater than St.Helens while the second chamber would erupt with a force 2500 times greater than St. Helens. Prof. Mike Rempino of New York University had stated that when the Tambora volcano in East Java, the only thing which was remotely close to a mega volcano ever recorded, blew in 1815 the ashes which had clouded the Stratosphere blocked the sunlight sending US and Europe into a mini ice age right up to 1816. Dr. Rempino went on to say, that calculating the amount of ash and debris from the Yellowstone eruption would not only cover half the US with ash but would send enough ash and debris to the stratosphere to block out the sun and plunge us into an actual ice age killing billions of people.

 If the ice age doesn’t reek enough havoc, scientists at Harvard University have discovered that the debris from volcanic ash, which is made of rocks and glass shards, which is easily carried by winds, would cause something called the Maurice’s disease. When living beings breathe in the ash and debris, it would cause their lungs to bleed and as a natural reaction, the body would tend to grow new bones on top of the old ones, which translates to a slow and very painful death.

Besides these two death threats, the increase in seismic activity, which would cause shock waves to travel through the earth would cause huge land masses to collapse. When the vibration travels through solid masses, it would vibrate it causing to have internal shifts and if it shifts enough, it could dislodge a huge mass. Prof. Derek Elsworth of Pennsylvania State University demonstrated that when there is water trapped between two huge masses, 

 the water would tend to act like a lubricant. And this could make it easier for land masses to fall apart. This had happened in Alaska in July 9^th 1958 at Latuya Bay, when a small earthquake had caused a part of the mountain to fall into the waters. What scientists in Switzerland discovered, having built the most advanced model in testing the effects of landslides found out that when a huge mass of land thrusts itself into a body of water, the water would be displaced by the same amount of land mass causing what scientist now call a mega tsunami. When the mountain had collapsed in Alaska, it had cause huge waves which were almost 150ft in height, destroying quite a prominent amount of the surrounding landscape. Now, the problem is, volcanoes have a common property of being able to trap water within their walls.  Dr. Elsworth states that when this water trapped within the volcanic walls heats up, it produces steam which would cause pressure to act within the walls. So now, these walls would be lubricated and would have immense pressure working within forcing this already volatile chunk of land to collapse. And one particular volcanic island has caught the attention of scientists - The island Le’ Palma in the Canary Islands. 

Le’ Palma is made of two volcanoes, one dormant and the other active called the Cumbre Vieja. An eruption in 1949 had caused the dormant portion of the volcano to slide 13ft away from the Cumbre Vieja. Following this slide, scientists and geologists have swarmed the island to find out what would happen to this island in the long run. What they found was that the volcanoes were separated by walls of water stored in tank like columns within. If there were to be a substantial eruption, it would heat up the water, causing pressure to rise, which would dislodge  a part of the island measuring 13miles in length and weighing ½ trillion tons into the Atlantic. This would cause such displacement in the water that the initial wave would be 12200 ft in height and 98000 to 130000 miles in length, racing across the Atlantic at speeds of 480mph towards the east coast of America. This wave would destroy everything from New York right up to Miami traveling 13miles inland.  And this would take 8 hours to reach the USA.

So when is all of these going to happen? It could be today, tomorrow maybe a few thousand years from now. Or it could very well be Dec 21^st 2012, a date which has become synonymous to global apocalypse.  Why did the many ancient civilizations, prophets and oracles predict not just the same date but almost the same events which were going to happen on this day? Could it be mere coincidence that they all predicted the same things when they hardly had any means of corresponding with one another or the fact that most of their predictions had come true along the course of time? 

The Mayans had calculated that on this very day, the Sun, the moon, the earth, the planets and the black hole in the middle of the Milky Way (our galaxy) would be in a perfect alignment.  Something which Albert Einstein in 1955 further confirmed. Princeton University, which further undertook this study to further understand how this would affect the earth were mortified when they found out that during this alignment, the magnetic fields would be so strong that it would literally shift the earth’s mantle plate in just a matter of days. This event had been predicted to occur only every 800,000 years. True enough; 800,000 years ago, the earth’s mantels had shifted, altering the earth’s north and south poles. To give a clearer picture, scientists said that before the shift, Alaska was at the Earth’s equator. This will cause the poles to shift which could shift the earth’s rotation, possibly pushing the earth off its axis.

So, it is not a matter of whether these things are going to happen or not. They are going to happen. They question is, when?

By,

Ashveen Chakravarthy Sekaran

Dec 21, 2009

Eurozone Update - Nov

 I guess this month’s Eurozone update rolls in in a relatively timely manner. With tensions building around the globe and the economic scene at an utter unrest, the global markets have pretty much gone on a strike!  I guess it’s a good thing that the government has no prerogative to ban such strikes… or maybe they do and they are just checking if it is constitutional… The entertainment just seems to be in the headlines these days… Now, to more pressing matters… 

Germany’s recent attempt at auctioning its bonds (or bunds as they call it) was nothing but disastrous. Unable to auction off what it had targeted (35%) had inevitably proven a case and point on the global stance towards the Eurozone’s recovery. Germany, the strongest economy of the region was rather perplexed of its failure to lure finance towards its “appealing” 10-year bunds which were aimed at giving approximately 2%. But Germany’s failure was none of its own. With the recent downgrade of Portugal’s and Hungary’s bonds to “junk” bond status, the crawl towards the end of the tunnel, to see just a shimmer of light for the Eurozone, is bordering hopelessness. 

Most of the EU strongholds have already started showing signs of distress.  UK, with its daily payout of £50 million towards the eurozone’s recovery has made the country to finally feel the pinch. With France, Finland, the Netherlands and Austria having to pay more for their bonds than just a few months ago, the risk within the region is pretty much spiraling out of control. It is for these collective reasons that Germany has not been successful in reaching its target. But that’s not all. There are many layers of icing on this cake.

Fitch Ratings has recently issued a warning of a possible downgrade of France’s AAA bonds if there were to be sharper downturns, which trust me, is VERY likely. Downturns have been happening all over Europe. It’s like the indices got sick of the eurozone volatility and decided to throw up all over the region. (Yup, it’s that messy!) To put it in numbers, the FTSE 100 ( the share index of the 100 most capitalized UK companies listed on the London Stock Exchange) had recorded losses  amounting to £ 104 billion in just 8 days. Italy, also one of the larger economic contributors or the region, with bond issuances more than that of Greece, Spain and Portugal combined, is on the verge blowing the horn. With more uncertainties looming around the region, it is hard to say what would save the eurozone from this predicament.  Trust me, Angela Merkel (the German Chancellor) is not the only one having her hands on her forehead.

So how is this affecting asia? Well, Japan is not in the best of shape as it is already showing signs of a downgrading of its bonds. However, Fitch Ratings (the guys who have been on the bond downgrading spree) have stated that, “the impact of the Eurozone debt crisis should “manageable” due to an increase in regional trade and greater reliance on regional banks”. But this statement was based especially due to the increase in economic activity in China, India and Indonesia. So, when it comes to investing, look into such markets as they are bound to perform in the coming years. 

By,

Ashveen Chakravarthy Sekaran(Nov 26^th, 2011)