A good company should have a long term view and vision, and then a strategies how to achieve the vision step by step. Therefore, decision on how to allocate capital expenditure should not be NPV or IRR priorities. Capital expenditure should be according to the step by step strategy planning to achieve the long term goal.
NPV and IRR are developed base on future cash flow forecast. Some project might generate very good NPV and IRR but will shift the path of the company long term direction and objective. And I think if a company, like a person, who don't have a direction, who just follow where the whatever opportunity that flash through their eye, will get confused and getting nowhere in the end. They are more likely to be conned since they will be very surface but not expert if they are involve in so many thing.
In order to achieve the long term goal, company need to be very focus and not distracted by other temptation investment opportunity. Sometimes the company work on smaller project to build foundation, sometimes the company work on big project to expand. This should be the way the company grow.
If a company just chase whatever investment opportunity that looks or in reality good just because the company has strong financial background, then I think the existence of the company is just to fulfill the shareholder and investor quarter to quarter value creation, but no meaning to a community as a whole.
Sunday, January 20, 2013
Wednesday, January 16, 2013
A Strong Reminder to myself
I would like to remind myself that if I only taking into consideration of my personal interest without taking into consideration other parties interest, it is quite impossible I can struck a deal. Only when I can create a win win situation, everybody happy and then the deal can more possible be done.
I would further like to remind myself that even if a win win situation is created, if the opposite party only has in mind his personal interest and don't care about other people interest, I may be pushed to the detrimental losing position if I am too soft hearted. The situation can be quickly turn from I am offering a good deal to other and to myself to a situation where other party get all the good deal while myself decline into losing end.
It is very easy to get into such a bad situation if it involve emotion like:
1. I am too desperate into the deal.
2. I am over optimistic about the long term benefit of the deal
3. I am over hopeful of the understanding of opposite party.
4. I am underestimate of the cunning of opposite party. (Opposite party pretend to completely ignore all the consequences of not entering into the deal and try to exploit all the advantages the deal that come to him.) I become an obvious dumb or "Sui Yu" to him.
End in end, I am too naive to believe that people will help each other to create a better environment for everyone.
I would further like to remind myself that even if a win win situation is created, if the opposite party only has in mind his personal interest and don't care about other people interest, I may be pushed to the detrimental losing position if I am too soft hearted. The situation can be quickly turn from I am offering a good deal to other and to myself to a situation where other party get all the good deal while myself decline into losing end.
It is very easy to get into such a bad situation if it involve emotion like:
1. I am too desperate into the deal.
2. I am over optimistic about the long term benefit of the deal
3. I am over hopeful of the understanding of opposite party.
4. I am underestimate of the cunning of opposite party. (Opposite party pretend to completely ignore all the consequences of not entering into the deal and try to exploit all the advantages the deal that come to him.) I become an obvious dumb or "Sui Yu" to him.
End in end, I am too naive to believe that people will help each other to create a better environment for everyone.
Friday, January 11, 2013
Malaysia at cross road
Malaysia stock market seems like will be continue to be very dull going forward. With the palm oil price continue to be depress, a lot of farmer wealth is threatened. They represent large part of domestic spending. With domestic spending also peaking after recent years of run up, we need to earn money abroad so further gear up our domestic spending. Further more, debt to GDP at all time high 55% means it is not good for us to further borrow and spend. The challenge ahead will be to export value added product out to earn more abroad money, so we can spend more.
But to be successful with that, we need to ask, what is our competitive advantage compare to Singapore and Thailand? Why most of the direct foreign investment gone to Singapore and Thailand but skip Malaysia in the middle?
But to be successful with that, we need to ask, what is our competitive advantage compare to Singapore and Thailand? Why most of the direct foreign investment gone to Singapore and Thailand but skip Malaysia in the middle?
Tuesday, January 8, 2013
A bit of Future dream
Dream about future these days. In my dream, I see the power of internet. I see if the search engine, through our communication with internet through what we search, who we chat, our conversation of chatting, our internet buying behaviour, our gesture in typing and etc, soon a ultimate perfect maid will appear, and it is computer hologram that understand us, provide solution to our problem whenever we need. Combine the hologram with Robot, we will have software and hardware combine. Soon these robot can interact with us not just working for us, fact telling but also emotionally.
Driverless car is under testing and so far has been very successful. Gradually, cities by cities, country by country, driverless car will become a must in city. We can switch to manual driving only on certain track. This reduce the road accident to almost zero in the world. Driverless car will be totally computer control that it will be very fuel efficient. The car can utilise every inch of the road. With those changes, all car will be redesign. Because it is so safe, less material is needed to construct a car, more space will allocate for the comfort of passenger as steering wheel and pedal can be eliminate. Manual driving will be like play station steering where the steering can be dismantle or keep in case. In the next development, wheel can be eliminate too as all the car will be float in the air. This reduction of friction improve fuel efficiency further.
With the community car sharing started in Europe country, it will become more prominent in the future. It is not necessary to own a car unless it is for your car collection hobby. Smartphone will become a must if you want to live in cities. You call a car using smartphone and the driverless car will arrive in minutes. Almost everything can be done by smartphone like scanning your smartphone to pay instead of wait for credit card processing, all your information, public information, is already store in the "cloud" that can be access by your smartphone. A lot of people is working to sell their knowledge and idea into the "cloud" platform and let the platform to resell their knowledge and idea to the world population. The scale is the world now. Because the market is so big and equal to everyone, a lot of people will work for their own and work at home. Suddenly, the world will become an idea trading platform. Anyone studying economy know that trading increase economy of pie. In today world, although trading is consider significant contribution to economy, there is still a lot of restriction by countries, industries and so on. Imagine in internet, idea trading is no restriction, buying and selling can become no restriction more easily. The economy pie will certainly improve. That is why unemployment rate will fall even though the advance country don't generate enough job. Those unemployed will find their way to contribute to the internet trading.
Driverless car is under testing and so far has been very successful. Gradually, cities by cities, country by country, driverless car will become a must in city. We can switch to manual driving only on certain track. This reduce the road accident to almost zero in the world. Driverless car will be totally computer control that it will be very fuel efficient. The car can utilise every inch of the road. With those changes, all car will be redesign. Because it is so safe, less material is needed to construct a car, more space will allocate for the comfort of passenger as steering wheel and pedal can be eliminate. Manual driving will be like play station steering where the steering can be dismantle or keep in case. In the next development, wheel can be eliminate too as all the car will be float in the air. This reduction of friction improve fuel efficiency further.
With the community car sharing started in Europe country, it will become more prominent in the future. It is not necessary to own a car unless it is for your car collection hobby. Smartphone will become a must if you want to live in cities. You call a car using smartphone and the driverless car will arrive in minutes. Almost everything can be done by smartphone like scanning your smartphone to pay instead of wait for credit card processing, all your information, public information, is already store in the "cloud" that can be access by your smartphone. A lot of people is working to sell their knowledge and idea into the "cloud" platform and let the platform to resell their knowledge and idea to the world population. The scale is the world now. Because the market is so big and equal to everyone, a lot of people will work for their own and work at home. Suddenly, the world will become an idea trading platform. Anyone studying economy know that trading increase economy of pie. In today world, although trading is consider significant contribution to economy, there is still a lot of restriction by countries, industries and so on. Imagine in internet, idea trading is no restriction, buying and selling can become no restriction more easily. The economy pie will certainly improve. That is why unemployment rate will fall even though the advance country don't generate enough job. Those unemployed will find their way to contribute to the internet trading.
Tuesday, January 1, 2013
Oil palm equilibrium
When the demand of palm oil increase, the oil palm price will be good. Follow up will be good cash flow of the oil palm company that pile up their cash. This will induce the company to expand and plant more oil palm. Later on the increase of supply will lower the oil palm price.
When the supply of palm oil increase, the oil palm price will be down. Bad cash flow will reduce the activities of expanding and replanting. Reduce supply will increase the oil palm price.
Because of the 3 to 5 year period for oil palm tree to mature, the delaying effect (slow respond to changing demand and supply) will cause the oil palm price to move in sinusoidal form. Of the volatile nature of the oil palm price, the center of the sinusoidal is the equilibrium of the oil palm price. And this price equilibrium only move according to the real demand, which ultimately depend on the growing of population and growing of wealth. These 2 are relatively stable factors.
Above mentioned is the natural self adjustment mechanism of oil palm price. However, artificial factors like excessive bank borrowing to expand and diversifying into oil palm business by other industry company (they can using their other business profit to support oil palm business expansion), can disrupt this self mechanism and further exaggerate the volatility of the oil palm price.
When the supply of palm oil increase, the oil palm price will be down. Bad cash flow will reduce the activities of expanding and replanting. Reduce supply will increase the oil palm price.
Because of the 3 to 5 year period for oil palm tree to mature, the delaying effect (slow respond to changing demand and supply) will cause the oil palm price to move in sinusoidal form. Of the volatile nature of the oil palm price, the center of the sinusoidal is the equilibrium of the oil palm price. And this price equilibrium only move according to the real demand, which ultimately depend on the growing of population and growing of wealth. These 2 are relatively stable factors.
Above mentioned is the natural self adjustment mechanism of oil palm price. However, artificial factors like excessive bank borrowing to expand and diversifying into oil palm business by other industry company (they can using their other business profit to support oil palm business expansion), can disrupt this self mechanism and further exaggerate the volatility of the oil palm price.
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