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.
Saturday, December 29, 2012
Year end holiday
In the year end, everybody go holiday. Activity reduced including stock market. Everybody prefer to pass this year with a relax mood after a stressful 2012 market. So many things had happened like the survival series of Europe, elections of so many countries. Those events had altered my portfolio mix of stock significantly. At glance my portfolio look messy, seems like no significant bet on any sector. I think hard but don't know what to bet and what to expect going into 2013. Is it oil and gas, transportation, oil palm, electronic sector, property, Islamic insurance, retail? Which one should I bet on giving the most return in 2013?
So I gave out thinking and cruise through 2013 and relax with empty thought.
So I gave out thinking and cruise through 2013 and relax with empty thought.
Monday, December 17, 2012
Which story do you prefer?
1st:
The world is in a long term volatile state. The global imbalance is getting more serious each day as US tries to depreciate their currency but in China and other part of the world keep buying the US debt to keep their currency low. US people has no chance to correct their spending habit because there is so much liquidity or cheap money for them. Further more, China is making its reform too slowly and muddling through because of new leadership conservatism. As the structural problem go on, the world will not find grow as US and Europe continue to drag down the whole economy. The world will facing another shock, time by time, and the next should not be too far away.
2nd:
The stagnant and possibility of shock from the economy of the US and Europe, cause the people in US and Europe to more depress. Less people is born there and more is migrating to Asia causing population to shrink. With this, consumption sink. With the flood of migration to Asia, structural unemployment rise in Asia causing temporary chaos. US and Europe major demographic change cause the economy to in recession for years and years, may be 5 years or more (the period can be longer than you think). Finally because of smaller economy and Asia rise, the economy size balance between US, EUrope and Asia become more balance and even. From then on, the world economy grow resume.
3rd:
Nothing major change from US and Europe, the US continue to print money out of economy dire strait but nothing major fundamental improvement. The world is in chaos time to time, but China will be doing steady just like never been harm by asia financial crisis or early 90s bank crisis in US. It is because of China successful reform of encourage their people to consume more rather than save. South east asia have ever stronger balance sheet and reserve suffer less and lesser impact from the chaos from the west each time. Their reliance on export shifted bit by bit to China protected by China consumption and have less and less impact from the west. In fact, because of the consumption from China, and southeast asia, Asia region continue to prosper despite the stagnant of US and Europe economy.
4th:
In Malaysia next general election held early next year, Malaysia is having its first in its history of political control party change since its independence. The country is in complete chaos again and protest is rage. Street demonstration and violent is hunting and seriously hurt the economy. The losing side of the supporter is to be said to organised the protest and violent. Business is interrupted, every major project and development plan is suspended for review. Because of that, the economy slipped into recession and short term foreign fund seeking every single way to leave the country further exacerbate the problem. KLCI stock market plunge 50% to 800 range. Although the in charge political party assure of the future, lack of experience and outside confidence cause the recovery process to be slow.
5th:
In Malaysia next general election held early next year, Malaysia is having a change of political parties in its first time since independence, the opposition party agree to continue every current running project and make review at the back operation and make changes step by step slowly to avoid any drastic shock. This fare well for foreign investor confidence and they believe Malaysia is heading to a more transparent and less corruption country. Although there is protest from the losing party supporter and member, the chaos is under control to be not interrupt the business activity. Instead of coming down, the stock market shoot up to record high.
6th:
In Malaysia next general election held early next year, the reigning political party continue their reign. Whether its by majority or not, the stock market react dully. Whatever the outcome, the stock market follow the region stock market performance. No doubt the long term economy prospect will be promising because of the economic transformation plan initiate by the prime minister. Malaysia which has better planning and execution administration now is poise to moving its way to economy prosperity or development country status by 2020.
The world is in a long term volatile state. The global imbalance is getting more serious each day as US tries to depreciate their currency but in China and other part of the world keep buying the US debt to keep their currency low. US people has no chance to correct their spending habit because there is so much liquidity or cheap money for them. Further more, China is making its reform too slowly and muddling through because of new leadership conservatism. As the structural problem go on, the world will not find grow as US and Europe continue to drag down the whole economy. The world will facing another shock, time by time, and the next should not be too far away.
2nd:
The stagnant and possibility of shock from the economy of the US and Europe, cause the people in US and Europe to more depress. Less people is born there and more is migrating to Asia causing population to shrink. With this, consumption sink. With the flood of migration to Asia, structural unemployment rise in Asia causing temporary chaos. US and Europe major demographic change cause the economy to in recession for years and years, may be 5 years or more (the period can be longer than you think). Finally because of smaller economy and Asia rise, the economy size balance between US, EUrope and Asia become more balance and even. From then on, the world economy grow resume.
3rd:
Nothing major change from US and Europe, the US continue to print money out of economy dire strait but nothing major fundamental improvement. The world is in chaos time to time, but China will be doing steady just like never been harm by asia financial crisis or early 90s bank crisis in US. It is because of China successful reform of encourage their people to consume more rather than save. South east asia have ever stronger balance sheet and reserve suffer less and lesser impact from the chaos from the west each time. Their reliance on export shifted bit by bit to China protected by China consumption and have less and less impact from the west. In fact, because of the consumption from China, and southeast asia, Asia region continue to prosper despite the stagnant of US and Europe economy.
4th:
In Malaysia next general election held early next year, Malaysia is having its first in its history of political control party change since its independence. The country is in complete chaos again and protest is rage. Street demonstration and violent is hunting and seriously hurt the economy. The losing side of the supporter is to be said to organised the protest and violent. Business is interrupted, every major project and development plan is suspended for review. Because of that, the economy slipped into recession and short term foreign fund seeking every single way to leave the country further exacerbate the problem. KLCI stock market plunge 50% to 800 range. Although the in charge political party assure of the future, lack of experience and outside confidence cause the recovery process to be slow.
5th:
In Malaysia next general election held early next year, Malaysia is having a change of political parties in its first time since independence, the opposition party agree to continue every current running project and make review at the back operation and make changes step by step slowly to avoid any drastic shock. This fare well for foreign investor confidence and they believe Malaysia is heading to a more transparent and less corruption country. Although there is protest from the losing party supporter and member, the chaos is under control to be not interrupt the business activity. Instead of coming down, the stock market shoot up to record high.
6th:
In Malaysia next general election held early next year, the reigning political party continue their reign. Whether its by majority or not, the stock market react dully. Whatever the outcome, the stock market follow the region stock market performance. No doubt the long term economy prospect will be promising because of the economic transformation plan initiate by the prime minister. Malaysia which has better planning and execution administration now is poise to moving its way to economy prosperity or development country status by 2020.
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