Bluechips to own

"baojia" sgx stocks, good growth and stable dividends

Singapore Exchange
ST Engineering
SMRT
Singpost
Singapore Press Holdings
Cityspring


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Poor man's gold

This will b d next real asset to fly. Since my last post on gold, it has broken the 1000 mark and stayed that. Silver has been pretty quiet. Not much big moves. If u google enuf u will see tat silver is continually consumed and supply is not catching up


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I am back...haha

Technology is simply amazing. Now I can blog straight from my iPhone.

A view from my house.


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Sakae Sushi - Extending their reach to the world... McDonalds of Sushi

Yet another offensive move towards McDonalds of Sushi !
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Apex-Pal to expand outlets by 15% globally next year

It cites Vietnam, Mongolia, Hungary and Dubai as new markets for its brand
By LYNETTE KHOO

APEX-PAL International is staying on a fast-track expansion path despite an earlier blotched attempt to take over Thai Village this year, and now wants to grow its food and beverage network of 70 by 15 per cent next year both locally and overseas.

In an interview with BT, Apex-Pal chief executive Douglas Foo cited Vietnam, Mongolia, Dubai and Hungary as new markets where it hopes to introduce its Sakae Sushi brand to tap mid to high-end consumers. 'Last year, we opened an average of two outlets a month. Next year, we are looking at four, then eight and then subsequently about 16 (per month), so in five years' time, we hope to see that we are able to roll out a shop on a daily basis everywhere we go,' Mr Foo said, laying out his ambitious plans.

In Mongolia, Apex-Pal has signed a memorandum of understanding (MOU) with a local partner for a joint venture, while in Vietnam, it hopes to make a direct investment as the country's entry to the World Trade Organization will ease rules on foreign ownership. As for Dubai and Hungary, Apex-Pal is looking for potential merger and acquisition (M&A) targets and has spoken to a few establishments in each of the markets.

'We were looking at doing a quick M&A in Hungary, that's why we have spoken to two to three outlets there,' Mr Foo said. 'We were exploring the whole eastern Europe market as well as the EU market and we foresee that as we progress further, we need to find local partners because it's a market that we are not too familiar with.'

Apex-Pal's outlets are currently spread across Singapore, Indonesia, Thailand, China, Malaysia, the Philippines, Hong Kong and the United States. At the same time, it is looking to introduce its other brands to existing markets where it is already selling Sakae sushi.'In the next 12 months, we will be seeing more Sakae outlets being introduced locally and overseas - in the overseas markets that we are already operating in and the new overseas markets that we are looking at. We might bring Nouvelle food catering to existing markets that we are operating in,' he said.

To cater to consumers' fine-dining needs, the company is opening its Hibiki outlet at the Singapore Flyer to cater to the high-end segment and is keen to open another one or two outlets in the two integrated resorts that are due to open from 2009. Together with the opening of new outlets, Apex-Pal's headcount of about 1,200 locally and some 300 overseas would grow in proportion to the 15 per cent growth in outlets next year, Mr Foo said.

While these plans are set to bolster its earnings going forward, Apex-Pal's profit for this financial year could see a dent from increased overheads and substantial professional fees of a few million dollars incurred from its takeover bid for Thai Village.

For the first half of this year, Apex-Pal saw its net profit dipped 8.7 per cent from a year ago to $2.17 million as operating expenses and professional fees for the Thai Village deal shaved off the 26.2 per cent jump in revenue to $38.78 million.But strong fundamentals will likely take over going forward, as the company puts the unsuccessful takeover attempt behind it, Mr Foo said.

Apex-Pal has also not given up hopes to gain a quick access to the Chinese restaurant market through M&A, he added, as it remains in talks with some Chinese food players.

Sakae Sushi - "McDonalds of Sushi"

Sakae is going places - First outlet in the US!!
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Sakae Sushi takes a bite of the Big Apple
Poised for the big time, the home-grown chain snags a swanky location and beefs up its menu.
By Huang Lijie Nov 01, 2007 The Straits Times

HOME-GROWN sushi chain Sakae Sushi is opening its first United States outlet in New York City next month on the ground floor of the iconic Chrysler Building.

The chain is expanding into the United States and Apex-Pal International, which runs the chain, invested an initial S$2 million to set up the fully owned subsidiary, Apex-Pal USA Inc, last year.
Of this amount, an estimated six-figure sum was spent on renovating and equipping the 3,000-sq-ft, 70-seat conveyor belt sushi restaurant in Manhattan.

Chief executive officer Douglas Foo told Life!: 'Our venture into the US is in line with our vision of becoming the top recall brand for Japanese casual dining.'When people think of sushi, we want them to think 'Sakae Sushi' in the same way people think of Starbucks for coffee and Pizza Hut for pizza.' The company, which has opened Sakae Sushi outlets in Malaysia, Indonesia, Thailand, the Philippines, China and Hong Kong, is exploring other possible locations in the US for more restaurants.

Mr Foo said that the network of business associates in the US that the company had been cultivating for some two years helped him secure Sakae's swanky New York City address. The lease will last more than 10 years. The 77-storey Chrysler Building was built in 1930 by the automobile magnate Walter Chrysler and it houses both offices and retail outlets. It is currently owned by US real estate company Tishman Speyer Properties.

Mr Foo acknowledged that competition in the restaurant industry in New York is stiff but said that the chain's ability to 'offer good quality Japanese food at the best value consistently' in all its 60 outlets worldwide is a 'formula that will win the hearts of New Yorkers'. The restaurant will serve sushi, sashimi, Japanese bento box meals and kaminabe, or paper hot pot.

Conveyor belt items will cost US$1.90 (S$2.75) for regular sushi rolls, US$3.90 for items such as chawanmushi, a Japanese egg custard, and US$6.90 for premium items such as uni or sea urchin. In Singapore, diners pay $1.90 to $6.50 for its conveyor belt items. The New York City restaurant will also open for breakfast, so new items such as the Sakae muffin - an English muffin stuffed with grilled sliced beef in yakiniku sauce - and a green salad wrap served with an apple sauce dip will be debuting there. There are also plans to operate a 24-hour delivery service soon.

Gold has crossed USD$800!!!

Gold has crossed US$800!!, highest levels since 1980. The highest it had ever reached was around US$850 in the 1980s. A couple of days like this and we will cross the highest record....

Of course, if you are savvy enough to realise that USD$850 record was in the 1980s, adjusted for inflation, it would be around USD$2000 in today's money. We have a long way to go in this gold bull run!

Any more rate cuts and printing of fiat currency will only send gold skyrocketing much further. Don't let your hard earned money be vanquished by the rate cutters, inflationists and irresponsible investment bankers who invest in toxic subprime, start building your GOLD BUNKER!

Do you smell a lot of fear in the market?

As I write, Hangseng index is down 1000 points, Nikkei about 400points, STI about 100 points, DJ was down 366 points last Friday. Do you smell a lot of fear, "blood" in the market?

If you are vested in the market, are you feeling fearful, ready to stampede for the exit and sell at the low point?Remember Aug where the subprime caused the market to tank but recovered miraculously? Think again, we are approaching again the last qtr of 2007, where in the last qtr, markets are known to "chiong". Of course it may not happen this year as a caveat.

If you have ample reserves, perhaps you may want to look at stocks that you may take a shot at . I am.
Firers, load and ready, at your own time own target carry out!

Ever wondered where does the $$$ in your bank comes from?

Finally, long time since got a bit of time to blog....
Ever wondered if the money in your bank is just digits? Those digits that you slogged for with your time, sweat and sometimes "blood", where do they come from?

This is just my personal reflection from the recent subprime collaspe in US and the Northern Rock bank crisis in England where there was a run on the bank. Found a 3-part video that is interesting, it enabled me to make the connection to monetary theory in Economics lessons in JC. Read no further, here is the 3 part video...

Part 1

Part 2

Part 3

An interesting turnaround story - Informatics...

Informatics is a leading education provider in Singapore some years back where you can see advertisements about its courses every day on the papers. It was a star education provider until 2005 where the chairman overstated its profits. After that informatics went into negative equity area and went into a long slumber trying to recover from that financial scandal.

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Recovery seems to be on track - Share prices dived all the way into the sub-10 cent region and has stayed there since then. The current chairman Vincent Tan who took over after the incident has managed to cut losses by more than 75% and has cut more in this financial year. He is also a majority shareholder of informatcis. During this recovery period, Informatics has carried out issuing of Rights to bring its NTA back into positive territory, with the recent one done early this year.

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Started to engage the media and arouse public interest again -

On primetime news : Adding to positive news, with the proceeds from the rights issues, Informatics yesterday was featured briefly on News @ 8 on its new product on mobile-learning. It was slated to be the pioneering as it allows students to really learn on a variety of gadgets including iPods, mobile phones, PDAs, laptops and not just restricted to a PC/Laptop with an internet connection.

Full page Adverts : It has also featured a full page advertisement on todays Straits Time (look out for it! ) second time for a very long time....

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How to invest in it?

Most direct way would be through its shares, which is priced at $0.075. Or you could go for the warrants. My favourite is the 2011 warrants. You have virtually 5 years before the warrant expires, good enough for mid-long term investors, gives you more leverage as it costs only $0.045 (it is 1-to-1 convertible to the mother shares)

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My take on this: This is an investment not for the faint-hearted. Turnaround stories are exciting and if they happen, the investment can be a multi-or even 10 bagger. Of course it may not even turn around and instead go for a longer slumber. If you have some loose change (couple of $K), you may want to do a small bet on it. Same caveat, buy at your own risk, this is only my opinion, not a recommendation.

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P.S. will be posting a full study (like the previous stocks) on this soon. Vested at $0.04 since 5 months ago.

Dr. Doom speaks .....

Famous for his contrarian approach to investing, Marc Faber does not run with the bulls or bait the bears but steers his own course through the maelstrom of international finance markets. In 1987 he warned his clients to cash out before Black Monday in Wall Street; he made them handsome profits by forecasting the burst in the Japanese Bubble in 1990; he correctly predicted the collapse in US gaming stocks in 1993; and he foresaw the AsiaPacific financial crisis of 1997/98 and the resulting global volatility. He is the Dr. Doom of investors. If you like mroe information on him, you can refer to this site: http://www.gloomboomdoom.com/

Below is the interview that was done with him last year. In this interview he speaks of the direction of markets and the investments he favour. Gold incidentally was one of them.

Part I

Part 2

GOLD Investing - Finally, after all the Why?, now How?

The final instalment on Gold Investing, bundled with the how in investing gold. The video below summarises some of the why of gold investing, pretty interesting as it speaks of a conspiracy theory against gold. More info on this conspiracy theory can be found with the Gold Anti-Trust Action (GATA) committee website :http://www.gata.org/

There is basically four main methods in investing gold , namely through:

METHODS OF INVESTING IN GOLD. Personally I like physical bullion since you would want the security of gold. In the unlikely case of hyperinflations, physical gold is your best bet, other options would result in the holding of paper assets that becomes worthless.

• Physical Bullion (real gold). This form is where you buy gold coins (American Eagles, Singapore Lion Coins, Canadian Maple Leafs)or bars (if you have the $$$, cost over S$33k). In Singapore, the only bank where you can do this is with UOB Bank and only their main branch in Raffles Place handles this. Purchase can be done over the counter. Cost incurred for this is mainly storage and also from the buy/sell bid spread that the bank imposes. Typically it is around 10%, meaning when the bank sells to you at 10% above the spot market price but buys back from you only at the spot market market price. If you are adventurous, you may try pawn shops for buying gold. More info available in the UOB link below: http://www.uob.com.sg/pages/personal/investments/treasury/preciousmetals/index.html
  

• Paper Gold. This comes in 2 forms, where either you buy gold certificates or get a gold savings account. The former is exchangeable for physical gold, the latter is not exchangeable for gold. The charges incurred for the savings account are in terms of gold, around 0.12grams of gold per year.


• Gold Exchange Traded Fund (ETF). This essentially works like a fund where the fund managers uses funds pooled together are used to purchase gold bullion and stored in a safe secure vault somewhere out there. In Singapore the Streettracks Gold fund is available for purchase like a normal stock in SGX. The stock sysmbol is GLD US$. Charges incurred include you brokerage cost and also an annual management fee that like the gold savings account, chips off a certain portion of your holdings.

In case you are wondering the 4th method, it is gold futures, I personally would not classify this as investing, it is more speculating, so I will skip this part.

CASH OR CPF

You can employ your CPF savings for the purchase of the gold savings account, physical bullion and also gold certificates. Point to note for physical bullion is that if you use CPF $$, you will have to store it with the bank and also incur storage charges. In addition, this gold can only be drawn out at age 55. For the Gold ETF only cash is allowed.

SECURE STORAGE

If you like physical bullion, you probably would not want store the hard earned gold under your pillow or mattress. A robber can wipe you clean of all those gold. You may either store it in safe deposit boxes with banks or with CISCO. I prefer to store with CISCO. Their safe deposit boxes are accessible 7 days a week from morning till late night, whereas for banks you are constrained to their operating hours. You can check out CISCO safe deposit services in http://www.cisco.com.sg/

Thats all I have on this series of gold investing, as always, the caveat applies, these are not recommendations, only my personal opinion, buy at your own risk! :-)

GOLD prices - History & Going forward

Lets take a look at Gold prices and see how major events impact its trend. The chart below showing the nominal GOLD VS USD price history for the past 30 years is extracted from wikipedia and I overlayed it with the major events that took place in the past 30 years.
We can see that during major economic crisis gold prices have the tendency to rise. The only exception was during the Asia financial crisis, where instead of going up it went down. One plausible explanation that I can offer is that the Asia financial crisis is one that afflicts countries in Asia like Indonesia, Thailand, etc, US is more or lesss insulated from that crisis, furthermore, it is experiencing the Internet / Technology Boom at that time

Hence if we were to compare the price of GOLD VS Indonesia or any Asian country, that will probably give us a consistent conclusion that during economic crisis or uncertainty , Gold price goes up. The dotcom crash, Sep 11, Fed lowering of interest rates to close to 1%, Iraq war in 2003 , SARS in the past 7 years have brought gold prices to almost triple from a low US$250 to the current of US$650.

Go forward, with the world economy in a euphoric state of rapid growth resulting from a high of liquidity sloshing around in the markets, it is likely that we will see gold prices coming down before going up when the "party" ends sometime around 2008/ 2009. I am of the opinion that Gold is likely to be in a long term bull market. With that window of opportunity open, it is good to buy now to accumulate while prices dip before the Gold bull starts charging up.

Of course the usual caveat applies, the above forms my opinion and not any recommendation to buy, buy at your own risk! :-)

Investing in GOLD

The first question that everyone is likely to ask, Should I buy gold?? Isn't investments into the stockmarket, mutual funds enough? After all you may not get the skyrocketing gains that a hot stock will give you. The long and short answer is YES! .Why?

Reason 1 - Gold is the best store of value
Gold for centuries has been used as currency and medium of exchange which only recently (in the history in mankind) has its usage diminished. This happened after the Bretton Woods System was ditched in 1971. However, though usage has decreased, its value has not. It is always the best store for value.

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What basis do i have to say this? Consider the increasing price of a barrel of crude oil which has risen from the US$40s to US$60s, increase of 50% in the past 3 years. But if consider that pricing using GOLD, 1 Oz of gold can buy you 10 barrels 3 years ago, 1 Oz of gold can also buy you 10 barrels of crude oil Now.

Reason 2 - Continually depreciating USD

"Printing" of USD to pump prime the economy all serves to devalue the currency and with these huge amount of money sloshing around the economy, consumers spend (esp on imports) and all this money goes into the foreign reserves of other countries who in turn plough it back into US treasuries. Check out the deficit the US is facing, it is the world largest debtor at over $800 trillion in terms of current account balance. It is comforting to know that Singapore's current account balance is within the top 10 nations.

http://www.safehaven.com/article-7677.htm

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The money supply for USD has been increasing for the past 40 years, this can be found in the M3 data that the Federal Reserve publishes regularly. However recognising that people can see how much money the Fed is "printing", they have discontinued with the publishing of this M3 money supply data.

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Recognising this trend countries Syria, Kuwait, and many countries have already started to ditch the peg to the USD. Hongkong, in 2002 also considered ditching the USD peg when it was under attack by "sharks" but ultimately decided against it.

Reason 3 - US$1 trillion China reserves looking for places to park

China would certainly not want to go down with the US. If you read the recent news, you would have known that China has the intention to acquire more Euros to augment its USD reserves. In addition, recognising that they need to diversify their sources of foreign reserves and also get better returns on those huge reserves, they have placed a sum of US$3 Billion (puny when compared to their US$1 trillion) with private fund manager Blackstone based in the US for management. Will they consider Gold as part of the reserves?
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If it wants to be a world economic power, it needs to have a very strong reserve that is independent of the fates of other powers. Gold has this property that China needs. And with China legalising ownership of gold by individuals, we can expect Gold prices to shoot up as 1.3billion people demands for gold.

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"Bad money drives out good money".

During periods of recession, interest rates are lowered to the bottom to encourage spending. They may not be printing money literally, but if you know a bit of economics, lowering interest rates is in effect increasing the money supply as you create money by lending out. And when they increase the supply, what happens, presto! all prices go up, the money that you have becomes less than what it is worth. Bad money is our paper currency, whereas good money is GOLD. Since the Bretton Woods, central banks have been selling the gold bullion that they store. Savvy private investors who recognise that gold is the ultimate currency, has been hoarding gold while the central banks sells. When more and more people realise that the value of their money is constantly eroded by inflationary fiscal policies, more and more people will start to hoard GOLD in their own safe deposit boxes.

"Put 10% of your assets into GOLD and pray it does not work."

Finally as a parting note I am not about to say that we should turn all our assets into gold. Currencies still work in the monetary system that we have today. I am just saying that we need to hedge the risk of hyperinflation with Gold, i.e. buy some insurance. In addition, with the macro picture seemingly favouring the steady rise of gold prices, Gold can be indeed another profitable investment when people start to notice its value again.

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P.S.

I bought some 1 Oz Canadian Maple Leaf gold coins recently from UOB, the feeling of holding a couple of this in your hands is simply magical. Try it!

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Did some research into Gold investment lately, Below are some links that you may want to read up on GOLD

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Great information on GOLD

www.goldprice.org

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GOLD Investment Discussion in ChannelNews Asia forum

http://forum.channelnewsasia.com/viewtopic.php?t=61168&postdays=0&postorder=asc&start=0&sid=0f2683e463fa6912bc3945c17eed9a89

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Gold Wikipedia

http://en.wikipedia.org/wiki/Gold_as_an_investment

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Apex Pal / Thai Village - Emerging Value OR Arbitrage Opportunity OR Both!?

APEX-Pal International Ltd - owner of the Sakae Sushi chain - is making a bid to buy over Thai Village Holdings, a restaurant group best known for its signature braised shark's fin soup. Disclosing the proposed offer yesterday, Thai Village said Apex-Pal has informed the company its intention to make a voluntary conditional offer for the remaining shares it does not already own. The controlling shareholders of Thai Village - Lee Tong Soon, Lee Tong Kuon and Kok Nyong Patt - as well as major shareholder Tee Yih Jia Food Manufacturing Pte Ltd, will be offered 0.6 new Apex-Pal share for each Thai Village share they own. The three controlling shareholders, who collectively hold 68.6 million shares or approximately 33.01 per cent of the company, have already agreed to accept the proposed offer, Thai Village said.

APEX PAL will offer to all shareholders for each Thai Village share held either of the following consideration: (i) 0.6 Apex-Pal share;
(ii) $0.201 cash;
or (iii) 0.2 Apex-Pal share plus $0.134 cash.

Rationalizing the offer with current price of Thai Village @ $0.19 & Apex Pal @ $0.365, there appears to be some opportunity for arbitrage, 2 ways to go about it:

Option 1 - Almost guaranteed free $$: Buy Thai Village shares at $0.19,and wait for the offer to endand exercise to complete to earn the additional $0.011 per share (prob need to hold at least 3-6 months). This is likely to go through as the major shareholders have expressed agreement to Apex Pal's proposal. Low Risk option

Option 2 - Go for the Apex Pal shares: With the conversion from TV shares to AP shares, it is easy to calculate that you are paying effectively only $0.317 per Apex Pal share. Given the current price of $0.365, you are netting $0.05 per share. Of course, you still need to wait for 3-6 months for the deal to go through, during this time, there may be market fluctuations that gobbles away your arbritage profits. Riskier option

My View :)
Its your choice!, I like option 1, almost risk free anyway.
For investors who like Apex Pal , Option 2 should be fine also , it gives you Apex Pal shares at only 8 times historical 2006 PE, a value not found in today's white hot market. Either way, this looks like an great opportunity. Only one caveat to watch out, if the deal does not go through, then you have to contend with the TV shares in your pocket.

孙子兵法Sun Tzu on Investing : Chpt 4 - Tactics 形篇

I went thru Chapter 3 谋攻篇, can't get any enlightenment on investment yet.... sigh, but never mind, lets move on to Chapter 4 first, Part I
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四：形篇
孙子曰：昔之善战者，先为不可胜，以待敌之可胜。不可胜在己，可胜在敌。故善战者，能为不可胜，不能使敌之可胜。故曰：胜可知，而不可为。不可胜者，守也。可胜者，攻也。守则不足，攻则有馀。善守者，藏于九地之下；善攻者，动于九天之上，故能自保而全胜也。……
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Those adept in warfare would first place themselves in an invulnerable position (i.e. invincible) before they would wait to seize some favourable opporunity of defeating the enemy. Securing oneself against defeat depends on one's own efforts, while the opportunity of victory is afforded by the enemy. Victory can be discerned, but it cannot be manufactured. Thus, the defense of own forces must be completed before one can commence on offensive tactics.

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Ideas for Investing / Financial planning

"...先为不可胜，以待敌之可胜..."

In financial planning, before planning to invest, one must consider the protection of one's capital carefully before awaiting a golden opportunity to make $$. One should ensure that your capital is well defended against losses (defense first). The first to cover would be via insurance for yourself, loved ones and parents. Why is it not sufficient to cover just yourself? Your dependants depend on your support when something happens to them. When you decide to start a business, the vehicle(private limited/partnership/sole proprietorship) you decide also determines the amount of protection you receive against your personal assets.

"...善守者，藏于九地之下..."

So how do you become invincible/ invulnerable? Insurance is like a form of hedging you place against LIFE itself, it is good that you do not use, but when you need to use it, it better be there. In insurance, you must seek to cover the 3 main areas (for you and your dependants)

• Life. Make sure you have sufficient assets to cover this, less you meet any mishaps, the dependants you leave behind are still able to maintain their current lifestyle, term of life, it is you call.
• Accident. Traffic accidents, workplace/ job accidents are areas that you must ensure that you are insured for, as your ability to work is your most valuable asset.
• Health. This is the 3rd area, at the very basic level, make sure you are covered against critical illnesses as this sap at your capital the most and takes energy off you/your dependants to care for you/your dependants. Once you have the basic level, you should seek to cover those minor surgeries that are not covered by the critical illnesses/ major ops.

If you intend to start business, the private limited vehicle offers you the most protection against your personal assets, as only the paid-up capital is at risk. The SP and Partnership, puts your entire personal assets at risk against claims by creditors and lawsuits.

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If we want to go into stock market investing, how to we protect our capital? I have been mulling this over a long time, but I do have an idea how we may be able to execute this. To guard against market falls and also gives us sufficient time to exit without losing money, index put warrants with a timespan of 3-6 months offer a reasonable level of protection of your capital in the market. You would need to purchase a small qty of these warrants probably worth 5% of your capital (in the stocks) to guard against a 10% fall in the general market.This probably can give you some level of protection.

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This tactic should likely be most useful in current market climate where you have possiblility of rocketing gains, but at the same time, the market sentiment is edgy. Of course the risk is the warrants (your insurance) you hold, it becomes worthless after its expiry, hence the insurance should always remain a small amount. I will do a mini-study on this an post this subsequently, probably will even try this strategy myself, afterseeing my stocks fly once I sold out.

孙子兵法Sun Tzu on Investing : Chpt 2 - Planning 作战篇

二. 作战篇
孙子曰:
凡用兵之法，驰车千匹，革车千乘，带甲十万，千里馈粮。则内外之费，宾客之用，胶漆之材，车甲之奉，日费千金，然后十万之师举矣。

其用战也生，久则钝兵挫锐，攻城则力屈，久暴师则国用不足。夫钝兵挫锐，屈力殚货，则诸侯乘弊而起，虽有智者，不能善其后矣。故兵闻拙速，未睹巧之久也。夫兵久而国利者，未之有也。故不尽知用兵之害者，则不能知用兵之利也。

善用兵者，役不再籍，粮不三载。取用于国，因粮于敌，故军食可足也。国之贫于师者，远输。远输则百姓贫。近于师者，贵卖。贵卖则百姓财竭，财竭则久于兵役。力屈财殚，中原内虚于家，百姓之费，十去其七。公家之费，破车，罢马，甲胄，矢弩，戟殚，蔽橹，丘牛，大车，十去其六。

故智将务食于敌，食敌一锺，当吾二十锺，葱杆一石，当吾二十石。故杀敌也，怒也。取敌之利也，货也。故车战得车十乘已上，赏其先的者，而更其旌旗，车杂而乘之，卒善而养之，是谓胜敌而益强。故兵贵胜，不贵久。故知兵之将，生民之司命，国家安危之主也。

What This Chapter means in short (....very short)
In the actual conduct of war, there may be in the field as many as thousands of chariots and carriages, tens of thousands of men. Provisions may be transported thousands of lii .Without expending 1,000 taels of gold per day, moving an army of 100,000 is not possible. Protracted war improverishes the state treasury, exhaust the fighting strength and dampen's the army's morale. Thus allowing enemy to exploit such weakened conditions,where even the most resourceful cannot do anything.

Those adept in warfare will not conscript for additional troops and replenish supplies more than twice, they forage on the enemy supplies. One measure of provision seized from the enemy is worth 20 times that transported by own. The long transportation and protection required from one's country to the enemy lines makes it extremely expensive. When we can live off the enemy, this allows us to grow stronger while achieving victory. In warfare, we value victory not the length of fighting.

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Key Ideas for Financial Planning + Investing

"日费千金，然后十万之师举矣...久暴师则国用不足..."

To invest for appreciable gains, there needs to be a significant capital base that is built up first. Putting in small money like $10, would not get you anywhere. A capital base at least in the magnitude of thousands is first required. To get there, savings is the first step and you must live within your means, then seek to expand your means through investing.

"... 役不再籍，粮不三载。取用于国，因粮于敌，故军食可足也..."

Those adept in financial planning and investing knows how to use debt prudently and do not use leverage on high risk instruments such as stocks and derivatives. They do not used earned income for investing, they take advantage of passive income (dividends, rentals, interest income, etc..) to invest (foraging on the enemy - $$ making more $$). The substantial passive income that they earn will take care of their financial needs.

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"...务食于敌，食敌一锺，当吾二十锺... 胜敌而益强。故兵贵胜，不贵久。"

For every dollar of passive income that you have, it is worth many many times that of earned income, very simply because of time. Passive income is still making money even when you are asleep, it allows you to leverage your time. So how much capital base you require to earn sufficient passive earned income. A good guide is to accumulate a capital base of 20 times (eh.. concidence to the Art of war number) your annual expenditure. Why 20? If you consider a risk free return of 5%, which is the norm, a capital base 20 times your annual expenditure will meet your needs. Finally remember, investing is about earning money, that should always be the chief aim.

孙子兵法 Sun Tzu on Investing : Chpt 1 - 计篇Deliberation

Recently I have been reading up on SunTzu Art of War, and see how we can apply it into the realm of investing, it is quite an interesting book. I have read both Chinese and English (translated) and nothing really beats the orginal Chinese version!

Lets take a tour thru the 13 chapters of the greatest military classic and apply it in our financial / investing journey! Here goes:

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Chapter 1 key excerpts:

"孙子曰: 兵者, 国之大事,生死之地, 存亡之道, 不可不察也,
故经之以五事,校之以计,而索其情,
一曰道, 二曰天,三曰地, 四曰将, 五曰法 ... ... ... "

War is a matter of life and death to the State, rise and fall of a country.Therefore a most careful study of it must be done. 5 matters must be considered carefully and studied in depth in the conduct of war:

1. The MORAL cause

2. The CLIMATIC conditions

3. The TERRAIN conditions

4. The GENERALSHIP of commanders

5. The ORGANIZATION and DISCIPLINE

.

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My Interpretation on Investing

To every single person, investing and financial planning is a matter of life and death. Whether you lead a prosperous and rich life (in the broad sense, not just $$$, health and harmony in human relations constitue riches too) , financial planning and investing plays a crucial and important role. Very seldom do we see successful people with a messed up financial health. The five matters which we need to take into consideration and study deeply is as follows:

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1. MORAL Cause. Only wealth and riches that are built on justice, truth and integrity will be eternal and lasting. When we invest, we should seek to invest in businesses / stocks that bring value and increase wellbeing to the people and world at large. Lets take a few examples, tobacco companies have been facing multi-billion lawsuits over cancer-causing chemicals in their cigarettes. Fast food chains such as KFC and MacDonalds have previously faced lawsuits over causing health problems and obesity to their customers, and they have recently tried to advocate healthier choice foods in their menus as well. Consider the dot-com bubble where we have tech companies being measured by the number of "eye-balls" to their web sites, all of which do not create any value to anyone at all, and we all know, they crashed and went bankrupt shortly.

'

2. CLIMATIC Conditions - Political/Economic Conditions. Prevailing political, economic, social conditions must be considered when we invest. A stable political and social environment creates a pro-business atmosphere that gives investor confidence that their money is secured. Consider the Thai political environment now and we can see that inconsistent changes in fiscal policy throws the market into a nervous wreck. A prevailing recession and depression may also discourage investment since people are not willing (though these are the best times to look for bargains in investment) to spend.

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3. TERRAIN Conditions. Specific to the field that we are interested in investing, due consideration must be given to the Laws governing the operation of businesses. The local infrastructure of roads, telecommunications, utilities will determine the speed of flow of information, goods and services. Study into the dominant businesses in the area will also give us an idea of the small and business enterprises that are supporting these big businesses.

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4. Generalship of Commanders - Competency of Management. Regardless of whether you are planning to set up a business or investing in a company, the competency of the management is key to ensuring consistent and growing profits. It would be desired if the management's interests is aligned with the shareholders as this actions ensure that decisions taken are not myopic in nature to fatten their paychecks and bonuses. This is evident if the management hold a significant of their wealth in the company's shares. At the individual level, for yourself if you are starting out as an investor, do not forget or neglect on investing first on gaining a solid education on investing before plunging in. If not you will have to learn your lesson the hard way, and pay much more.

'

5. Organization and Discipline . In the investment of companies, we must look into the system of the business. Issues like cashflow and inventory management, debt levels and also system of rewards (bonuses, stock options) must be studied carefully. High levels of debt, bad cashflow and inventory management can cripple a company and even bankrupt it. Consider the scandal of China Aviation Oil, where one man wielded so much power in trading of oil futures that eventually led to the collaspe of the company. There is a lack of system of checks and balances that could have halted the eventual collapse. At the individual level, do you have a system for management of your individual cashflow and debt levels (such as monitoring your expenditure, assessing your overall net worth, keeping bad debt in check)? Do you have a system and discipline of paying yourself first to increase the amount of investment dollars ?

'

I hope I have shared something useful in this first chapter and not gibberish... I will continue to refine this and sharpen it, with more and more details... Enjoy! until the next chapter comes!

Update on Food Empire Holdings - 26 Mar 07

Since posting in 26 Dec 06 on Food Empire, the stock has risen more than two thirds (about 80%) from $0.585 to $1.05. With the latest results and acquisition of another coffee company, let us re-assess the value of the company and see if it is over-valued.

1. Blistering FY2006 results

From the chart, we can see that Food Empire has once again did it, another year of record growth. Revenue rose by about 46% and net profit rose by 30%, impressive growth! ROE for FY2006 was also wonderful @ 19%

2. Acquisition of potential rival

Food Empire acquired the popular brand of instant coffee mixes Petroskaya Sloboda. This brand commands a 22% market share in Ukraine and 6% in Russia. With its orginal market share of 49% with the MacCoffee brand in both Ukraine and Russia, Food Empire now controls about 71% of the entire Ukraine and 55% of the entire Russia instant coffee market, giving it a very dominant market position. Definitely a very strong competitive advantage enough to deter potential competitors from entering !

3. Instrinsic Valuation

Taking a risk free yield of 5%, and giving it a 20% growth rate with zero terminal value, the net present value (NPV) of the earnings over 10 years is estimated to be $1.23. The current price of $1.05 represents only a 15% discount over its intrinsic value. If we consider a more conservative growth rate of 15%, the value is $1.05, no discount at all based on current price.

Decision

No doubt the growth engines of the company are at full steam, however, based on Benjamin Graham's approach of buying only when the safety margin is at least 50%, current prices warrant a HOLD approach, re-entering only when we see price of the stock coming down. In addition, current price places the PE at about 16, not exactly very cheap (though not expensive either). I personally have sold out all, but waiting at the sidelines to re-enter.

Reality Check on Mr. Market

Since I posted on the expensiveness of the STI last year, lets do a reality check after 2 months, with the STI index reaching historic highs of 3253 and above.

Reality Check No. 1: STI PE Ratio - Inching up to be slightly expensive
Basing on the derived previous earnings index of 199.7, the current PE ratio we are deriving is about 16.2, an increase in 1 from december 06. This translates to an earnings yield of 6.1%,a drop of 0.5% from my previus post. The PE ratio has just inched from 15 to 16,1 step closer to the risk free yield of 5% (or PE of 20)

Reality Check No. 2: Tom Dick and Hary Joins in the stock market

When we have students, aunties and everyone throwing caution to the wind, thats a good indicator of how much irrational exuberance is in the market. If you have read this article in the Sunday times, you know what I mean.

Reality Check No. 3: Long Queues for Property Launches, Ridiculous price

As a norm, the property market is the last to boom in a bull market. Reason is that as wages and bonuses rise, stock markets rise, people are buoyed with a sense of optimism (may be false or real), and what is the last big ticket item you would want to plough your money into? A piece of your dream property, be it a condominium, bungalow or sea front property. We have been reading news of long queues , new launches transacted at ridiculous prices (imagine a square feet in excess of $1500!). If you recall, in 1996/1997, the property market was peaking just before the crash came, will we have a same situation this time?

All being said, there is still some scope for investing in the market, as it always pays to be in the market, as the most rises came only in 10% of the time, miss this periods and your returns becomes average. I am in favour of the approach of selling some shares each time it hits a new high to lock in some profits and I do apply this approach. As the STI approaches the next 100pts @ 3300, I will lock in some more profits. Meanwhile, MAKE HAY WHILE THE SUN SHINES.

Is the STI index getting expensive?

To answer the above question which was burning inside me for quite some time, I compiled earnings from the companies which make up 92% of the total market of the STI, annualized them and accorded weightage to the earnings according to the individual company's market capitalization.

I only managed 92% (or 28 companies out of the 48 index stocks) of the market cap as it is a very tedious process to labour into each and every one of the company's quarterly reports, but nevertheless, I think 92% would give us a good feel how expensive the index is now.

So here is the conclusion..... (drum roll......)
(a) Earnings Index - 199.71
(b) STI Index caa 17 Jan 07 - 3037.66
(c) Price-to-Earnings (PE) of STI = (a) / (b) = 15.21
(d) Earnings Yield = 1/(c) = 6.6%

Ok, so the stock market is not quite cheap nowadays, but not terribly expensive either. Most important when the STI inches towards the 5% earnings yield point (equivalent to PE of 20) or about 3900 points, that would be a red light signalling SELL SELL SELL.

We should target to get out even before that, that leaves us with a couple of hundreds points to go before alarm bells sounds, so tread carefully now, ...

HG Metal

HG Metal Manufacturing Limited was founded in 1971 as a small retailer of steel products. Today, we are one of the leading steel stockists in Singapore, and arguably the first local steel stockist to provide state-of-the-art manufacturing capabilities. At HG Metal’s extensive "one-stop supermarket" stockyard and manufacturing facility, they carry more than 2,000 types of steel products, of various dimensions and for a wide range of industrial and engineering applications. HG Metal source their steel products from cost efficient producers in Turkey, Russia, Ukraine, and other Eastern European countries. While the primary market is Singapore, they also export to Malaysia, Indonesia and other Southeast Asian countries.

In 2000, the Group diversified into the manufacturing of steel products through their wholly owned subsidiary, Oriental Metals. HG Metal started with the manufacturing of customized flat steel bars and mild steel lip channels, commonly used as roofing support. In mid 2003, we expanded our manufacturing capacity to include pipes and hollow sections through the installation of a new pipe line. HG Metal Manufacturing Limited was listed on SESDAQ on 21 March 2002 and was upgraded to SGX Main Board on 07 May 2004. First look is that HG Metal is a steel manufacturer with its products targeted mainly for the construction sector.

Step #1: Strong consistent sales & earnings growth that looks predictable into the future...

HG Metal’s sales have risen steadily over the past 5 years with most of it attributable to demand from China (rapidly growing economy) and Middle East. Just recently, for FY2006, demand from growing marine sector of Singapore and construction sector, sustained the demand for its steel products.

Taking a closer scrutiny on FY06 results, a one-time investment gain of about $6m on FerroChina shares coupled with a 20% lower operating catapult the PAT to $13.8m, a 122% gain. Stripping out the one-time investment gain, earnings would remain relatively flat from $7.8m, actualizing about 56% gain. The compounded average growth rate over the past 5 years would average about 22.7%.

Overall for the past five years the PAT growth rate is not too consistent and not in line with revenue growth.

Step #2: Conservative Financing with total debt less than a single year's net earnings...
As at Nov 2006, the total long term debt for HG metal stands at $14.7m, only slightly lower than 2005’s $14.9m. The debt is slightly higher than 2006’s profits, and if we strip out one time extraordinary gains, the debt is 2 times a single year’s net earnings.

Step #3: Consistently high ROE, above 15% each year...
HG Metal ROE’s for the past 5 years successively has not been consistently above 15%, often a see saw ride.
FY 2006 ROE of 23.2% (only 11.6% if exclude one time gain)
FY 2005 ROE of 9.9%
FY 2004 ROE of 35.3%
FY 2003 ROE of 12.4%
FY 2002 ROE of 14.2%

Step #4: Intelligent Capital Allocation, where retained earnings are used for growth not maintenance...
HG Metal invested in FerroChina who is principally engaged in the manufacture of heavy gauge galvanized steel coils based in Changsu, China. It is also listed on the Singapore Exchange Main Board. The investment proved to be synergistic too, when a few months later, they were appointed as FerroChina’s sole distributor of galvanized steel coils for the Singapore and Indonesia markets. There are plans to increase this distributorship to other countries in South-east Asia.

In the quest to create a better balance between their trading operations and the more cycle- resistant manufacturing activities, they stepped up value-adding activities by venturing into sandblasting for ship plates. HG Metal’s subsidiary, Oriental Metals, has begun construction of a new factory that will house a sandblasting plant. Expected to cost approximately $3 million to construct and equip, the plant will commence operations in the second half of the next financial year. It is being funded with internal cash reserves and bank loans.

Step #5: The Business is easy to understand, and Management is open, honest and competent...
HG Metal principally manufactures steel products for the construction industry. Margins typically are not high for the construction industry, ranging from 10%-15%. As evident from the profit margin of HG Metal, is typically very low, less than 5%, this implies that any gains can be wiped out by increasing steel prices (supply) or fluctuating demand from the construction sector.

The directors are substantial shareholders of Food Empire holdings with holdings from 3% to 7%.

Step #6: 2x5y= Business/Industry Prospects indicate Earnings could Double in 5 years...
With its primary market being Singapore (approx 50%) and Malaysia (approx 25%), the prospects for the next 5 years would be the upcoming Integrated Resorts, new Financial downtown in Marina and the recently proposed South Johor Economic Region (SJER), all of which are expected to gobble up significant construction resources.

Step #7: Sustainable Competitive Advantages are in place...
HG Metal is almost similar to a commodity supplier (steel plates, bars, beams, etc) where it trades steel products and manufactures primary construction products, high volume, low margin business. There is limited barrier to entry (only initial capital outlay as what the company espouses in their website under strengths) , and the company has little pricing power as there is little product differentiation and branding power to talk about. This is evident from 2005 results where glut of steel products from China and falling steel prices reduced the margins of HG Metal.

Step #8: Attractive Valuation...
Based on a growth rate of 10% (based on tepid growth rates and low margin business) and zero terminal value for 10 years, the estimated discounted cash flow from the business is $0.69. At the current price of $0.49, the value of the business represents a 40% discount from the DCF value of the business.

Decision: Prospects (IR, downtown Marina and SJER) and valuation (at undemanding 8.8PE + 40% discount from DCF), HG Metal is alright. However, the company does not quite meet a few counts of the analysis namely on lack of sustainable competitive advantages, low margin business, relatively high debt to earnings per year and inconsistent growth rates(for profits) and low ROE. Personally I would not be keen to purchase this share.

The D.I.Y. investor - Creating your own capital guaranteed fund

Want to have the best of 4 worlds? That is to have capital guaranteed returns, while having the ability to benefit from riskier investments such as stocks and yet retaining the flexibility of zero lock-in periods of years typical of capital guaranteed retail funds and also no sales charges of 3-5%. Sounds like too good to be true, perhaps not, if you are willing to do some legwork.

What do capital guaranteed funds offer you? They usually guarantee that you will get back your capital after a fixed period of time. Some of these funds also provide a structure of providing a periodic return every year. However, these funds often have a lock-in period and will require investors to incur some expenses if the investor wants to switch out of the fund in question. The periodic return or absolute return varies and usually, the minimum promised returns are low. In addition, if the investor chooses to pullout of the fund before the fund matures, the capital invested is usually not guaranteed.

So how do you do it? Allocate a percentage of your capital to be invested (typically about 85%) to SGS bonds and S'pore treasury bills, with the remaining 15% invested in riskier instruments such as stocks and equity funds.

How do the returns look like?
- Assuming a constant 3% yield on your bonds and T-bills, the 85% invested capital will return back to 100% in about 6 years time (85% x 1.03^6 = 101.5%). The yield is obtained from the fixed rate coupons paid out by the bond.
- Assuming a compounded 20% return on your the remaining 15% of your capital, this riskier part gets you 44.8% (15% x 1.20^6 = 44.8%)
- Total, you get back 146.3% which equates to 6.5% compounded annual growth

Of course, if you increase the percentage in riskier instruments, your capital needs a longer period to be guaranteed but you may get a higher rate of compounded annual return, all depends on your risk appetite. This also explains why capital guaranteed funds have a lock-in period, this is to ensure that the guaranteed portion can be recouped and return back to the retail investor.

Apex Pal branding efforts pays off

I came across this article from ST recruit yesterday (pls do not be distracted by the lady) and thought it is very interesting. It spells out the aspirations of Apex Pal to take its flagship brand Sakae Sushi to another level which is to make it the Mac Donald's of Sushi where kids always drag their parents for a snack or two. It has taken concrete steps to build its brand even with children!

The Sakae Sushi's Junior Club that it has set up aims to do just that, with a membership of over 3000 kids! For a mere $10 to join (paid by parents), kids get to go on educational trips to farms, Yakult factories and after these trips they get to enjoy a complimentary Bento lunch. They sure know to target the kids as it is the surest way to parents' pockets.

If you are interested to read, just copy this article down and read it.

Reviewing the results of Apex's branding efforts, it has won the Singapore Promising Brand Award (SPBA) in 5 Dec 2006 where the requirement is to have established a presence in at least five foreign markets and be either past winners of SPBA or SPBA heritage winners. This is alongside established brands such as the Axe medicated oil, Skylight (the abalone), and Breadtalk as well.

Food Empire Holdings

26 Dec 2006 Tuesday

The company's history can be traced back to 1982 when Future Enterprises Pte Ltd (FESPL) was incorporated to market and distribute PCs and peripherals in Singapore. Since the early 90's, the Group has been a food and beverage company that manufactures and markets instant beverage products, frozen convenience food and confectionery. It also has a wholesale business that trades in frozen seafood.

Its principal activity is that of manufacture instant beverages and food products, such as frozen convenience food and snacks under its proprietary brands MacCoffee, Klassno, FesAroma, OrienBites, MacCandy and Kracks.Its products are exported to more than 50 countries in major markets, such as in Russia, Eastern Europe, Central Asia, Indochina, Southeast Asia, Australia, Middle East and USA.

The exports are marketed and distributed through its 18 offices (liaison and representative) in Russia, Ukraine, Kazakhstan, Uzbekistan, Turkey, Iran, Poland, Belgium, Bahrain, Mongolia and others. It has four manufacturing facilities in Asia and Russia.

Step #1: Strong consistent sales & earnings growth that looks predictable into the future...

Food Empire has demonstrated consistent and impressive growth over the past 5 years (2000 – 2005). The compounded average growth rate for sales and profit during this period is a whopping 22% and 34% respectively. There is only a blip during the SARs period where sales and profit dipped, but nevertheless still registering a net profit.

For the year of 2006, the sales and profit up to 3Q has already matched up to the levels of 2005. We can definitely expect growth to break through the ceiling for the whole of 2006.

Step #2: Conservative Financing with total debt less than a single year's net earnings...
As at Nov 2006, long term loan stands at $6.2m, well below the net profit of $22.4m at 3Q, definitely healthy. The company also holds $40.47m in cold hard cash in the bank, which is sufficient even to meet all its current liabilities.

Step #3: Consistently high ROE, above 15% each year...
Food Empire Holdings has achieved consistently high ROE for the past 4 years successively.
FY 2006 ROE of 21% (projected)
FY 2005 ROE of 20%
FY 2004 ROE of 21%
FY 2003 ROE of 16.9%

Step #4: Intelligent Capital Allocation, where retained earnings are used for growth not maintenance...
Food Empire Holdings’ primary strategy is on growing strong global brands, with its flagship brand Mac Coffee being a highly recognized and established brand in Russia and Ukraine. Depreciation of fixed assets stands at a miniscule $1.799m for the FY 2005. Cash expended in purchase of fixed assets stands at $3.799m. The opening of a plant in Russia was officiated by Defence Minister Teo Chee Hean in Sep 06 to take advantage of its rapid growth in Russia and Central Asia. This serves to also reduce import taxes imposed, which potentially could reduce costs and raise profits.

Step #5: The Business is easy to understand, and Management is open, honest and competent...
Food Empire is an F&B company focused in building strong brands in the manufacture of instant beverages and food products, such as frozen convenience food and snacks under our proprietary brands MacCoffee, Klassno, FesAroma, OrienBites, MacCandy and Kracks. Food Empire’s extensive portfolio of brands has become household names in many lands.

It has a foothold firmly established in Russia where its flagship MacCoffee 3-in-1 coffee is the best selling in the market. To date, Food Empire has sold more than 2 billion servings of serving around the world.

All the directors are substantial shareholders of Food Empire holdings with holdings from 2.57% to 14.41%. We can be assured that their interest are aligned as owners of the company.

Step #6: 2x5y= Business/Industry Prospects indicate Earnings could Double in 5 years...
Central Asia is a rapidly growing region with rising affluence after rising out of communism. Markets such as Russia, Ukraine are not as developed as those in US and UK. Other than the growth story of China, India and Vietnam, Central Asia is unchartered territory where little information is known. The growth potential of Russia should not be underestimated given its large land mass and also huge population of 144 million with Ukraine’s size of 47million, presents a huge market for Food Empire. The growth rates for Russia for the pas 4 years has been consistently above 5%, though nowhere near China’s staggering 9-10%, is still pretty impressive.

2003 – 7.2% GDP
2004 – 7.4% GDP
2005 – 6.4% GDP
2006 – 7% GDP

If the economy of Russia takes off, the prospects could potentially be mind boggling - Russia could be the next China story.

Food Empire has been awarded the Top15 Most Valuable Brands Award in Singapore for the 4th year running (2003 – 2006), ranking alongside giants such as SIA, Creative, DBS. It is rated 14 place, ahead of Creative who is in 15th place. In Ukraine, Food Empire’s MacCoffee 3-in-1 Coffeemix wins "Choice of the Year 2006" again for the 5th year running (2001 , 2002, 2003, 2005, 2006) as the best 3-in-1 coffee. We can see that Food Empire has successfully created a strong brand in the minds of the consumer.

Step #7: Sustainable Competitive Advantages are in place...
Food Empire has 2 moats built around its business, the first being the strong brand it has established as evident from the array of awards and ratings it had obtained. The 2nd is the barrier to entry in doing business in Central Asia. Food Empire has established a first mover advantage in doing business in this region and this will certainly give it headstart against potential competitors interested in doing business there.

Step #8: Attractive Valuation...
Based on a growth rate of 15% and zero terminal value for 10 years, the estimated discounted cash flow from the business is $0.863. At the current price of $0.575, the value of the business represents a 33% discount from the DCF value of the business.

Decision: The business is good and fundamentally sound, with lots of growth potential as it operates in a relatively unchartered region where few dare to venture. Management manages the business in a transparent fashion. At $0.575, the stock will provide a net safety margin of 30%. I just bought substantial shares of this company, and will buy more if it falls.

Update on results for UNISTEEL

Unisteel's 3rd quarter results is on track for another record year. Revenue has grown by 33.1% for the 9 months for 2006 compared to 9 months for 2005. Net profit has also increased by 22.7%., with a corresponding EPS increase by 21.3%. Looks like another good year is inevitable.

With consumer devices such as Apple iPods, Mircosoft Zune preparing for intense battles, it appears that these component suppliers (screws for diskdrives) have the last laugh.

Singapore Treasury Bills as an alternative savings ?

POEMS is now offering a Singapore Treasury Bills as an investment instrument. For those who have spare funds or "reserve" funds, this is an attractive alternative instrument compared to fixed deposits. Below is an extract from the POEMS website, check it out if you are interested at www.poems.com.sg

Treasury Bills gives you higher interest compared to fixed deposits, at lower risk.

How do Treasury Bills (T Bills) work?

- T Bills are really a savings product that have never been available to retail investors until now. This security is issued by the Singapore Government.

Example: You purchase (ie. deposit) a T Bill for $990.00. At maturity 3 months later, you collect $1,000.

You know you want to buy T Bills if you are……..

• Not willing to risk losing your capital

• Looking for liquidity while investing.

• Making sure that you generate interest income even if you terminate

your contract at any time

• Seeking to diversify your investment portfolio, hedge against

higher-risk investments.

• Thinking of investing a modest principal amount

• Keen to cash in on current higher interest rates in the market

T Bill Launch Promotion!

Instrument – 3 month S’pore Govt Treasury Bill.

Minimum Size - $1,000

Interest Rate range – 3 % & above for a limited promotional period only

Commission charges - none

Never too late to start building your Noah's Ark

1. Do you have at least six months of expenses in cold hard cash?

2. Does payment for debt every month take up more than 30% of your take home pay?

3. Do you have insurance to cover 10 times your annual pay?

.....

The list goes on and on, the depression that I mentioned in the article may never happen, but it always pays to be prepared so that when the "tsunami" hits, you will not be caught without a buoy.....

Part IV (last part) - Great Depression No. 2 coming ?? Prepare your Noah's Ark

Therefore, it is clear that China travels today the road to Depression. How severe this depression will be, will critically depend on two developments. First, how much longer the Chinese government will pursue the inflationary policy, and second how doggedly it will fight the bust. The longer it expands and the more its fights the bust, the more likely it is that the Chinese Depression will turn into a Great Depression. Also, it is important to realize that just like America’s Great Depression in the 1930s triggered a worldwide Depression, similarly a Chinese Depression will trigger a bust in the U.S., and therefore a recession in the rest of the world.

Unless there is an unforeseen banking, currency, or a derivative crisis spreading throughout the world, it is my belief that the Chinese bust will occur sometime in 2008-2009, since the Chinese government will surely pursue expansionary policies until the 2008 Summer Olympic Games in China. By then, inflation will be most likely out of control, probably already in runaway mode, and the government will have no choice but to slam the brakes and induce contraction. In 1929 the expansion stopped in July, the stock market broke in October, and the economy collapsed in early 1930. Thus, providing for a latency period of approximately half a year between credit contraction and economic collapse, based on my Olympic Games timing, I would pinpoint the bust for 2009. Admittedly, this is a pure speculation on my part; naturally, the bust could occur sooner or later.

While I base my timing of bust on the 2008 Olympic Games, Marc Faber, the foremost Austrian authority in the world on Chinese economic development, believes that the bust will occur sooner. According to him, the U.S. is due for a meaningful recession relatively soon, which in turn will exacerbate already existing manufacturing overcapacities in China. This, coupled with growing credit problems, makes him believe that China will tip into recession sooner than the Olympic Games. In other words, Dr. Faber believes that a U.S. recession will trigger the Depression in China. Indeed, that very well may be the trigger, but if so, it still remains to be seen whether the Chinese government will let the bust run its course or choose the route of a “crack-up” boom, come hell or high water.

We should also consider another possible trigger for a bust, namely trade surpluses turning into trade deficits due to the accelerated rise of prices for resources, such as commodities, which China must import. Faced with trade deficits, China may decide to dishoard surpluses by selling U.S. government bonds, or it may decide to abandon its peg to the dollar. In either case, this will exacerbate the problems of the ailing U.S. economy, which in turn will boomerang back to China.

Finally, the bust may be triggered by a worldwide crisis in crude oil supplies. Peak oil supply is around the corner, if not already behind us, and Middle East or Caspian instability could sharply cut oil supplies. Historically, oil shortages and their concomitant rise of oil prices have always induced a recession. China’s growing dependence on oil ensures that should an oil crisis occur, it will slip into recession.

To summarize, the likely candidates for a trigger to the Chinese depression are (1) a worldwide currency, banking, or derivatives crisis, (2) a U.S. recession, (3) the containment of runaway inflation, (4) the disappearance of Chinese trade surpluses, and (5) an oil supply crisis.