Betting the unknown

I am talking about investment as a tiny minority shareholder:

If we done our homework, by reading news, forum or company annual reports, most of us knows the fundamental of a company or industry. No matter how well you dig into detail related information, there is always somebody else knows better and act faster. And that somebody is really a lot of experts, and the experts comes from all over the world. It is almost impossible to outrun their wit.

If you want to outperform the market, what you can do is betting the unknown. The unknown is really the unknown, either is a breakthrough, secret innovation, future business, where even the top executive is unsure of the success. Or you can form your own believe or idea where majority of people will not believe. That means you are silly in the eye of public. Most of the time, you are. Even you are proved right, it is hard to turn around people view of your silliness. If you got it correct once or twice, you may be lucky. If you got it wrong, it is expected. So between the 2 ways: betting the unknown, and be a contrarian, which way is better to outperform the market?

Anyway, i believe its better to continuously learn, dream, set your own trend and believe, refine it. It is better worth to bet your own idea and prove it right. Investment is just one of an exciting process for me to learn about the world.

Timing dilemma again

While waiting for Malaysia election approaching, I notice that the interest of stock seems to be diverse. The investor don't favour any of stock. Sitting sideline become obvious. And the market become highly sensitive now. Any election movement, news, rumours can move the market. Looking at the level of index which is over 1600, it is still at high point. I believe most of other investor thought the same. This high index certainly make a lot of people uneasy. There are certainly a lot of uncertainty in market right now.

But looking fundamentally, it is getting cheap in someway. More and more company is having free cash flow to equity above 10%, some even is in the grow industry. Although now the term is "cheap", it may get "ridiculously cheap", and even "insanely cheap". The timing issue always come back to hunt me when decision to buy is so tempting and I sometimes may act irrationally too quickly.

Housing price reality

To maximise the selling price of malaysia property, property developer strategy is to push the affordability of Malaysian to its limit, but in the same time, emphasis on quality and lifestyle to attract foreign buyer from Hong Kong, China, Singapore, South Korea, Japan etc. In their homeland, the house is so expensive which easily 2 to 5 times more expensive than Malaysia most expensive house. If Malaysia property developer can offer similar quality but lower price, they will likely to take up this bargain.

Now consider every property developer in Malaysia, Thailand, Indonesia is doing the same strategy to attract rich foreign buyer. It is hard for a single government to control price of housing (by building houses that are truely affordable to different class of income range,) if all other regional countries in neighborhood isn't doing the same. Because it is just not worth building: not profitable, letting go foreign investment to other countries, lower GDP.

So, fellow Malaysian, we are competing against the rich from countries all over the world now. Even if our salary fail to keep up, the trend and force of globalisation will keep the housing price high in foreseeable future. Unless, our salary keep up, or there is another serious crisis happen here in Asian countries, or less people is viewing house as an investment and more view house as purely a place to live, I don't think house will become affordable for most Malaysian.

Capital spending of a company

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.

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.

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?

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.