Something Different ...

there are so many soppy sappy heart wrenching videos on fb, so much so when we look at the screen shot capture, we begin to NOT see them... we think its ppl preying on human weakness to get hits and viewerships ... we numb ourselves, we distant ourselves ... I saw this video, and its a wonderful message, yes achingly sad at the same time but wonderfully crafted ... one sister has cerebral palsy ... we all can dance in our dreams ... be thankful, being empathetic is not human weakness but strength of our soul.

Shiller on Investment Banking

Following on from an earlier post on investment banking, below is a lecture by Nobel laureate Robert Shiller on Investment Banking.

How GST affecting our Share investment?

This is another topic on GST awareness. This time we talk about share market investment, your share trading account and transaction costs. Every share investor should read this article. Let's start here...

Many share investors already started their "wait and see" approach since last week because many of us don't know how GST is going to impact our share investment after 1st April 2015.

Basically, each transaction consists of the following 3 types of charges:

1. Brokerage fee
   Normally, the charge is 0.42% (online trading) and 0.60% (offline trading). Some of you may find it to be as low as 0.10% (intraday trading). Yes, this fee is subject to 6% GST. After 1st April, it will become 0.4452% (online trading) and 0.636% (offline trading).
   
   
2. Clearing fee
   This fee is basically charged by Bursa Malaysia and it was fixed at 0.03% of the transaction amount. Yes, this fee is also subject to 6% GST and it will become 0.0318% after this.
   
   
3. Stamp Duty
   This is calculated as RM1 stamp duty for every RM1,000 trading value. Since this is another form of tax by government, stamp duty is NOT subject to GST. Remained unchanged.

In order to have a clearer picture, let's take an example of a 1,000 share of Maybank RM9.25 currently. The total trading value will be RM9,250.

• Before 1st April, the total cost will be
• Brokerage fee 0.42% = RM38.85
• Clearing fee 0.03% = RM2.775
• Stamp duty = RM10
• Total transaction cost = RM51.625

• After 1st April, the total cost will be
• Brokerage fee 0.4452% = RM41.181
• Clearing fee 0.0318% = RM2.9415
• Stamp duty = RM10
• Total transaction cost = RM54.1225

• So, the different for this example before and after GST is around RM2.50 and in terms of percentage, it's just a mere 4.8% more.

Then, how about capital gains from share investment?

Many investors sold their holdings before 1st April, thinking that any profit earned from share trading will subject to 6% GST. This is not the case. As usual, any capital gains from share trading in Malaysia are not subject to any tax including GST. Meaning, capital gains will remained as tax-free. No need to panic selling.

How about share dividend payout?

For dividend, it will remained the same unless you are using a nominee CDS account, in which there might be some administration fees involved that will be subjecting to 6% GST charge. Better switch to direct CDS account if you want to avoid these charges.

Conclusion

Yes, GST definitely will impact the overall share trading market, but the sentiment will be faded away very fast due to its minimal impact. GST aside, it's the emotional impact of the economy that will dampen our share investment. Happy trading !!!

A Primer on Investment Banking

The Bank of England in their recent Quarterly Bulletin have a great primer on investment banking which should be read by anyone who wants to understand modern finance - click here. The article explains the role played by investment banks, the systemic financial stability issues posed by them, and the role of the regulatory authorities in addressing these systemic stability issues. A video interview with the article's author is below.

Remember This Guy

When I last visited New York a couple of years back, I read quite a bit on this guy Cory Booker, I even went on air at BFM saying that he will one day be the President of America. This is one of the reasons why ... His sentiments is more a belief and passion, something we all MALAYSIANS must read and re read again and check themselves.

Cory Anthony Booker (born April 27, 1969) is an American politician and the junior United States Senatorfrom New Jersey, in office since 2013. Previously he served as Mayor of Newark from 2006 to 2013. Booker was born in Washington, D.C. and then raised in Harrington Park, New Jersey. He attended Stanford University, where he played college football and received a Bachelor of Arts in political science and a Master of Arts in sociology, before earning a Rhodes Scholarship to attend the University of Oxford. Upon returning home, he received his Juris Doctor from Yale Law School.

Booker began his political career as a Newark City Councilor from 1998 to 2002. He ran for Mayor in 2002, but lost to incumbent Sharpe James; he ran again in 2006 and won against deputy mayor Ronald Rice. During his tenure as Mayor, his priorities were reducing crime and encouraging economic development projects. He gained a national reputation for his personal involvement in public service, particularly through his use of social media tools such as Twitter to connect with constituents.

Considered one of the most prominent Democrats in New Jersey,^[1] he became a candidate for the United States Senate in the 2013 special election to succeed Frank Lautenberg, who died in office. He won the Senate Democratic primary on August 13, 2013 and then won the general election against Steve Lonegan on October 16, 2013, becoming the first black U.S. Senator from New Jersey. Booker subsequently won the next regular election for the Senate seat against Jeff Bell in 2014.

[GST] Car Prices will Drop? (March 2015 Update)

It's been hotly speculated by all Malaysian since the day one goods and services tax (GST) being announced. Malaysia being one of the highest car ownership country in the world, anything to do with car prices definitely will become the nation's topic. Here, we look at this topic as a whole with the latest updates:

Why everyone speculating that car prices will drop?

Currently, there is a 10% vehicle sales tax on each vehicles sold. With the implementation of GST, which is charging 6% as announced, this will replacing the existing sales tax. In other words, the 10% sales tax will be abolished on April 1. A straight-forward calculation means there is a saving of 4% effectively.

But, that's not the case.

Practically, we need to take into considerations below factors also:

1. Logistic costs which subject to 6% GST
2. Currency fluctuation for imported cars or components

Based on current situation where Ringgit keeps on depreciating in value, it will definitely increase the import cost. That's why after some estimation, it will be 2% - 3% cheaper only for Japanese car, but even a more expensive European or US imported cars. Are you going to buy Japanese car because of this reason?


How about those cars which already paid the 10% vehicle sales tax?No worry. The Customs said they will reimburse the 10% sales tax once car dealers produce documented proof that they have paid the tax but had yet to sell the vehicle as at 31st March. So, all the new car prices could be standardize and become cheaper because of this after 1st April.

How about second hand car?
For used cars, it will still subject to GST but the calculation is a bit different. The GST will only be imposed on the dealers based on the profit from a sale. In another term, we called this as "margin scheme". For example, if a used car dealer buys a car from an individual with RM100,000 then sells it out for RM150,000. The GST will applies on the profit of RM50,000 only.

My Favourite Posting - LKY = Singapore, What About HK?

 Colin said...

I wonder then who we eulogise for Hong Kong's success. The Hong Kong jockey club? They didn't have a LKY but they did have a lot of hard working people. If you track the growth of both they were almost mirror images until around 2010 when Singapore decided to emulate Monaco and become a tax haven and gambling centre to boost GDP. That was because Minister's salaries were pegged to GDP and maybe LKY was already fading.

During the BFM interview a couple of years back, there was this question on which was my favourite blog posting. Looking back now, The Missing Legacy  still is my favourite posting other than the other two more recent ones (My Life's Aphorisms and Let The Man Be The Man He Is).

 

How Can Just 2 Persons Change HK?


I am proudest with my piece on 2 HK gwailos who died within a couple of months in early 2006 of each other. More so when their passing were only mentioned in passing by all HK media. OMG, I am not from HK but at least I know "kacang mesti jangan lupakan kulit".

I love HK movies and there had been plenty made about corruption, the ICAC and the rocking 70s in HK. In the 60s and 70s, HK was probably many times more corrupt than Malaysia and Indonesia combined now. I was always fascinated about how HK came to be where it is now. Even as early as in my Economic History classes in UNSW, I picked the same topic for my second year essay submission. When John Cowperthwaite died in February 2006... there was an eerie silence in HK papers. I was totally disgusted, I mean these HK people were reaping the benefits of a structured "free economy" without acknowledging the person behind it.

Then to my surprise Jack Cater also passed away two months later, again, no front page news, not even page 5 or 6 or 7... OMG, without these two gentlemen, well, HK would be like ... KL or Bangkok or a more robust Shenzhen, I guess.

The very essence and vitality of HK's business reputation today was largely due to these two gwailos ... I wonder if they teach that in HK schools?

The lesson here is plain and staring us in the face, if we wish for a 2020 vision or a 1Malaysia vision ... just hold true to the two pillars of sustained brilliant economic development: open market economy (no subsidised industries), and corruption free (transparency). The latter has the effect of attracting talent, capital, entrepreneurship and rewarding performance, without fear or favour.

We need the 2 Pillars ....

------------------------------------

The Missing Legacy

Recently, a gwailo passed away without much of a mention in HK papers. Now, I have to say that I am biased as I think the majority of the bunch of British expats being posted to HK basically had a holiday for the past 50 years. HK did become a financial center and its citizens benefited enormously for the last 30 years. It put HK on the map. Property prices went through the roof. HK became an international city. However, HK would NOT be where it is (economically) if it were not for a guy name John Cowperthwaite (JC). JC was HK's financial secretary from the crucial formative years of 1961-1971. He passed away on January 21, 2006 at the ripe old age of 90.

The sad thing is that HK media and HK people in general, failed to give due credit to this man. Sure, HK people worked hard to get to where they are, but as we all know, the structure and gameplan must be there to allow "good things" to happen in an economy.

In his first budget speech he said: "In the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralised decisions of a government, and certainly the harm is likely to be counteracted faster." JC, very much a disciple of Adam Smith and not a modern monetarist, put in the structure and rules to promote HK's now famous laissez-faire economics.

Britain at that time was moving towards a more socialist and welfare state, and it would have been very easy for JC to replicate that for HK. Can you imagine that - having a bunch of whinging "me,me", unionised, welfare dependent Chinese in Asia!? Instead, JC took it upon himself to do "less" by eliminating tariffs, lowered the tax rate to a maximum of 15%, cut the bureaucratic red tape that stifles business. He called his policies "positive non-intervention".

To have the courage and political will to do that for HK - that should mean the world to the people of HK. In 1960, the average per capita income in Hong Kong was 28 percent of that in Britain; by 1996, it had risen to 137 percent of that in Britain. Now the per capita income of HK almost mirrors that of the US.

From The Telegraph:
"From 1961 to 1971 Cowperthwaite exercised almost complete control of the colony's finances under successive governors, Sir Robert Black and Sir David Trench, who were sympathetic to his philosophy and content to give him his head. Among his peers in the Hong Kong government, it was said that only Claude Burgess, the colonial secretary, could keep him in line. "His brilliance and argumentation prevailed, and he thus made policy by ruling on all items of expenditure," said one colleague. But Cowperthwaite summed up his part in the colony's success over the decade with some modesty: "I did very little. All I did was to try to prevent some of the things that might undo it.

The measure of that success was a 50 per cent rise in real wages, and a two-thirds fall in the number of households in acute poverty. Exports rose by 14 per cent a year, as Hong Kong evolved from a trading post to a major regional hub and manufacturing base."

Sir John Cowperthwaite was knighted in 1968, and what he did for HK should be taught in schools and universities in HK. I wonder how many roads, libraries, scholarships or university halls are named after JC?

After the Asian financial implosion in 1997, HK suffered and stuttered particularly when compared to Singapore. It looks like Singapore has taken a leaf from the handiwork of JC - less is more. Instead, HK powers to be have put in more legislation and rules, which combined, have put HK on the backfoot. Two examples, the rise and rise of hedge funds in Asia - Singapore has managed to attract a lot more of them than HK, ask any fellow professionals why. The other is the rise and rise of REITs, and though HK has had a headstart, Singapore is putting in the right moves, making REITs dividends non-taxable. Again, we can expect more international REITs to come to list in Singapore in the months ahead.

HK has to learn from its mistakes but also gain lessons on things it did right before. A good way to start is to fully appreciate the things Sir John Cowperthwaite did for HK's economy, and replicate that. The fact that his passing was largely ignored in HK says a lot about where HK's economy is headed.



Sir Jack Cater's Legacy

The Missing Legacy was first written in a blog of mine dated 7 February 2006 - it was on the passing of Sir John Cowperthwaite, the person most responsible for HK's reputation as the freest economy/capitalism in the world. Cowperthwaite's passing did not get much press coverage at all in HK media, and that kinda pissed me off because a group of people who can forget so easily their "roots" and "how they got here" are doomed to lose the blueprint set by Cowperthwaite.

Now another old gwailo died, and his contribution to HK is no less than Cowperthwaite. Sir Jack Cater died on Guernsey on 14 April 2006 aged 84. He was the founding head of HK's infamous Independent Commission Against Corruption (ICAC), which took radical steps to combat graft in the police force in the 1970s. Cater went on to become HK's Chief Secretary, Acting Governor and Commissioner in London. Bribery had long been endemic in Hong Kong's police and civil service, but was thought of as being confined to the Chinese lower ranks, rather than expatriate officers. Calls to eradicate it were largely ignored by governors before Maclehose, who arrived in 1971. Maclehose lacked the political will to tackle the problem despite strong urgings by Cater .

If you were to do a net search, you will find Jack Cater's passing only being solemnly mentioned within the HK's government admin portal at www.news.gov.hk ... how soon we forget!

Cater even threatened to resigned in 1973 when trying to bring down Chief Superintendent Peter Godber. Godber fled HK while under investigation for amassing a fortune of several million pounds, much of it banked in Vancouver. Cater needed to strike at the top, even at one of his own, to further reinforce the dire need for eradication of corruption in HK. The developments forced the hand of Maclehose. Jack Cater was asked to form an independent anti-corruption unit with the support of a former Special Branch officer, John Prendergast.

The establishment and independence of ICAC is crucial to HK's economy. While Cowperthwaite had eradicated bureaucracy, you still needed "pure meritocracy" in the financial economic system to uphold its integrity and transparency. Only with those factors can HK gain an ever growing reputation as a true financial center - attracting professionals and companies to invest.

Cater's reputation for determined leadership had been established during the period of civil unrest in Hong Kong in 1967. He cared deeply about his work and about those closest to him, and he encouraged the careers of talented young officials - including women, who in earlier days had generally been denied promotion.

In the first year of its operation, 1974, the ICAC handled 1,798 complaints of police involvement in bribery and extortion. It was said that more than a third of all Chinese policemen were members of triad gangs which controlled prostitution, drug-running and gambling across the Territory - rackets which, as Cater pointed out, raked in more than three times the profits of the Hongkong & Shanghai Bank.

By October 1977 the Commission's uncompromising methods (it acted on anonymous tip-offs, and allowed no presumption of innocence) had caused such anger in the Police Force that 2,000 officers marched through the streets to present a protest petition, and a group of CID men stormed the ICAC's offices. Fearing a breakdown of order, Maclehose felt forced to declare an amnesty for all but the most heinous offences.

In spite of this setback, the ICAC's work continued with unflagging determination. Investigations proceeded into other government departments, notably public works, education (parents were often asked for bribes to enrol children in schools of their choice) and health (hospital patients were forced to pay up for bedpans). It was indeed a cradle-to-grave system, with bribes demanded even for burial sites. Among those most grateful for the clean-up were the drivers of Hong Kong's battered fleet of minibuses, whose fares had for many years been preyed upon by bent policemen.

The ICAC was often accused of heavy-handedness, but its intervention provoked a culture change which still stands Hong Kong in good stead while corruption remains rife in other parts of Asia. Though Cater moved on in 1978 to the top civil service post of Chief Secretary, it was at the ICAC that he made his most significant contribution. Cater was Chief Secretary from 1978 to 1981. With a rapidly growing economy, it was a golden era for HK. Cater was several times Acting Governor, and was in line to succeed Maclehose in 1982; but Margaret Thatcher was persuaded to appoint a senior diplomat, Sir Edward Youde, to commence negotiations for the eventual handover to China.

Instead Cater became HK's Commissioner in London until 1984. He then returned to Hong Kong to work in the private sector, joining China Light & Power Co - the electricity generator for Kowloon and the New Territories - and becoming head of Hong Kong Nuclear Investment Co, which was China Light's participation with Beijing in a nuclear power station venture at Daya Bay in Guangdong province. He was president of Hong Kong's Agency for Voluntary Service, a member of the Court of the University of Hong Kong and an international director of the United World Colleges, participating in the foundation of Hong Kong's own College at Shatin in the New Territories.

Again, another passing of an important gwailo being largely ignored by HK's media. Is it a gagging issue; were media companies trying not to agitate China's political HQ by not bringing up the "glory days" of British colonial influence? How many more "important gwailo septua/octo-generians" must die before HK people recognises its roots, and pay the according tributes and gratitude that are due.

One can just imagine the gulf between HK and Singapore as financial centers if "true meritocracy" did not prevail in HK. Will Cater and Cowperthwaite ever make the books of HK's recent history. The Chinese have an oft-quoted saying, "when drinking water, one must never forget its source", how they got here. Just because some of them involved people who are not Chinese does not matter, and should not matter.

Jeremy Clarkson and Central Banking

TopGear is one of the BBC's top export franchises. Its successful format involves three grown men talking about cars and engaging in college-like antics with cars. Jeremy Clarkson, the lead presenter, is brilliant at his job, but he is often a controversial character. Recently he was suspended by the BBC for punching a producer - story here. 

The Mumbling and Stumbling Blog has a fantastic post which compares central banking and Jeremy Clarkson - click here. The key issue for central banks is whether they should obey rules or be given discretion. This is also the key issue for Jeremy Clarkson - should he be given discretion to punch people or a rule 'don't punch people'? If it is the latter, Stumbling and Mumbling point out that he would have never have hit Piers Morgan, which would be a sub-optimal outcome! Rules for central banks can also produce sub-optimal outcomes.

[Credit Card] What are the Changes after GST implementation?

For credit card holders, there is confusion on how GST is being charged. Over here, we are talking about the service tax and annual fee. Currently, there is a RM50 service tax on principal card holder and RM25 service tax on supplementary card holder. After 1 April 2015, this service tax will be abolished due to the implementation of GST.

How about the annual fee?

However, 6% GST will be imposed on the credit card annual fee which ranges from RM50 up to RM500, depending on the type of card. For example, for a RM50 annual fee, there will be an extra RM3 GST charge on it, resulting to a total of RM53 when renew.

Anyway, most of the banks will waive the annual fee if card holder meet certain minimum requirements, or card holder can utilized their loyalty points or rebates to offset the 6% GST.

How about late payment or finance charges?

Late payment charge means card holder fails to pay at least the minimum monthly charges when due. Meanwhile, finance charge means charges imposed on outstanding balance which has not been settled. The good news is BOTH of these charges will NOT be burden by the 6% GST charge.

Do I have to pay GST each time I swipe my card?

Be it debit or credit card, there is NO additional GST charge each time you swipe. For example, if the bill is RM100, the amount swipe is still RM100 instead of RM106 as being speculated.

But, I saw 10% service tax.

What's that? Will it be abolished also?

We need to be clear over here. The normal 10% service tax stated in many bills such as restaurant and hotels booking is actually a form of tips for their employees who serve us well. In order not to make everyone confuse, government already started to instruct all business operators to change the word "service tax" to "service charge". Since this is not a form of tax, customers are not obliged to pay service charge. Just bear in mind, that's actually a form of tips. If you think that the service is not good, why paying them?

LKY's Living Room

This was Lee Kuan Yew's actual living room. I think most HDB flats have better furnishings and decor than his. It speaks volumes of the priorities of the man. He was not ensnared by the trappings of wealth and hence was not greedy for the dollar. Greed will inevitably result in compromising principles and ideals, which may put him on the path of making "wrong decisions". Someone who lives in this room ... I'd trust him whole-heartedly with public finances and the country's resources, don't you! Hence the room is not so much a reflection of his frugality but a showcase for his definitive values in life.

How to Become a CEO - An Infographic

Source: MBACentral.org - thanks to Chrissy Gomez for passing this on.

The Pinnacle Among Great Leaders

I always like to taruh Singapore for its idiosyncracies ... when I say its over controlled, I mean a station like BFM probably would never be allowed to broadcast in Singapore. However, Lee Kuan Yew was a great leader and visionary at that. You can be a master strategist but he can execute them well. I though he was too over powering with opposition members and foreign publications, and that was a big blot in my book.

However, he has done things only very very few could have. Some speculated that he can do so cause Singapore is so small. Think for a moment. For the size and population of Singapore from 1950 till today ... you look at Singapore today, was it ever possible to get from A to B? Given what he had on his plate, he has already exceeded the most optimistic of all predictions for their economy, living standards and competitiveness.

Many younger Singaporeans still do not realise the gravity and breadth of his efforts. Choosing instead to whine and whinge about mundane things.

One key factor in his efforts was the blueprint and DNA instilled in the leadership which permeates right down the civil service. The fact that Singapore continued on its merry way after he stepped down (yea, I know he was the Senior Minister) was testament to the solid foundations he built.

Like him or not: nation above self; pragmatism over most things.


One wonders what he would have achieved with a slightly bigger country? Don't we all... don't we all ...

Must Watch This - Little Big Master

Did not even plan to see this movie but there were a lot of dogs at the pet shop and had to drop my dog off for grooming, so got a couple of hours to kill. Always liked Miriam Yeung and Louis Koo but the synopsis indicated that it was a heartfelt small movie about 5 kids and a kindergarten about to be shut down. Wasn't expecting much but no choice ...

This movie simply was spectacularly written, tight and no nonsense. It was crafted so well that you felt for each character deeply by the time it got only halfway. But boy you do cry ... but those were somehow "good tears", they were tears of empathy, hope,

deep human kindness, all wrapped in a rare level of honesty not seen in most movies.

It has to be the most meaningful movie I have seen for a very very long time. Everyone from 6-106 should watch this. It brings out the best in us, it explores what we all need is to open up and lend a helping hand, and that everyone no matter how small, have their own story to tell.

Amazingly, the wonderful storyline was based closely on real life events. You will see pictures of all the "real people" with the actors playing them during the credits. The kindergarten is still on going today and its enrolment has risen from 5 to nearly 60.

Young ones will benefit enormously from watching the film as they will be asking questions which all parents will gladly answer as they all point towards the goodness in human kind.

A+

Further Supply Coming To Dampen Oil Prices

(Bloomberg) -- The next big threat to oil prices isn’t from OPEC or Bakken shale. It’s Russian samovars, or teapots. 

Simple refineries that process crude into fuel oil are scaling back, because when oil prices slump, the government reduces the discount that these refiners -- known as teapots to those in the industry -- get for exporting fuel. They use less crude, freeing it up for sale abroad, which in turn adds to the global glut. 

Russia may increase oil exports by as much as 250,000 barrels a day this year, according to James Henderson, a senior research fellow at the Oxford Institute for Energy Studies who’s followed the country’s energy industry for more than 20 years. That would equate to 5 percent growth in shipments, the most in at least a decade. 

“The pain Russia is feeling from low oil prices has made more crude available for export,” Henderson said by phone March 18. “Quite a few of Russia’s simple refineries could reduce their runs.” 

Rising shipments from Russia, which ranks with Saudi Arabia and the U.S. as the world’s biggest oil producers, would put more pressure on crude, already down more than 50 percent from last year. Falling energy prices and U.S. and European Union sanctions imposed last year in response to the Ukraine crisis have pushed Russia to the brink of recession, damping demand for refined fuel products in the country. 

Rattling Teapots 

Brent was up 74 cents to $55.17 a barrel at 3:26 p.m. in London. It slid 2.7 percent to $54.43 on Thursday. Crude loadings from Russian ports are 9.5 percent higher in the first quarter year over year, according to shipment schedules obtained by Bloomberg. 

Teapot refineries processed as much as 800,000 barrels of crude a day last year, Igor Dyomin, a spokesman for Russia’s state-run pipeline operator, OAO Transneft, said by phone March 19. A teapot refinery is one that produces mostly fuel oil rather than more premium fuels, according to Dyomin. 

Seven simple plants with a combined capacity of 1.2 million barrels a day are most at risk in the current price environment, according to Henderson. 

Maintenance Cuts 

There could be sporadic cuts to refining of 400,000 barrels a day during the next few months’ maintenance season, with much of the unused oil exported, putting more pressure on crude prices, according to JBC Energy GmbH, a Vienna-based consulting company whose clients include OPEC. 

The additional barrels would arrive as the Organization of Petroleum Exporting Countries, whose 12 members produce about 40 percent of the world’s oil, sticks to plans it announced in November to maintain its own output in response to the global supply glut. The move has yet to lead to a drop in production by the biggest non-OPEC countries. 

U.S. output, fed by growth in hydraulic fracturing and horizontal drilling in the Bakken and elsewhere, has soared to 9.42 million barrels a day, the most in more than 30 years, even as oil companies scale back investment and the number of active rigs drops to the lowest since 2011. 

When crude prices slide, so too does the size of Russian tax discounts for exporting fuel oil that’s used by ships, power plants or further processing. Refiners save about $25 a ton selling the product instead of crude at current prices. The saving would be about $62 a ton if crude was at its 2014 average of about $100 a barrel, according to data compiled by Bloomberg. 

Downstream Agenda 

The possible growth in exports may be reversed because the refineries hurt by the current duty system are trying to get it changed. 

Igor Sechin, chief executive of OAO Rosneft, the world’s biggest publicly-traded oil producer, told Russian President Vladimir Putin in February that this year’s tax changes had changed the economics of refining, and sought state financial support for a refinery project. 

Russian crude exports averaged 4.84 million barrels a day last year, a 6.1 percent drop compared with 2013. The biggest annual increase in the past decade was 3.6 percent in 2009. 

Rosneft said in a January presentation that simple refineries that produce a high percentage of fuel oil are only marginally profitable at $85 a barrel and start losing money with Brent crude at $50. 

“When oil prices were high, it was profitable to sell fuel oil abroad and get a big tax discount,” Transneft’s Dyomin said. “We called it ‘spoiled crude’ because the product they produced was less valuable than the oil they used to make it. Now, the tables have turned.” 

Ownership and Control: Part III

Along with three of my colleagues, I have paper on ownership and control in the Victorian era forthcoming in the Economic History Review. The QUCEH working paper version of the paper is available here. In this paper, we find that corporate ownership was much more diffuse in the Victorian era than previously believed. The paper's abstract is below:

Using ownership and control data for 890 firm-years, this paper examines the concentration of capital and voting rights in British companies in the second half of the nineteenth century.  We find that both capital and voting rights were diffuse by modern-day standards. However, this does not necessarily mean that there was a modern-style separation of ownership from control in Victorian Britain.  One major implication of our findings is  that diffuse ownership was present in the UK much earlier than previously thought, and given that it occurred in an era with weak shareholder protection law, it somewhat undermines the influential law and finance hypothesis.  We also find that diffuse ownership is correlated with large boards, a London head office, non-linear voting rights, and shares traded on multiple markets.

Japan Should Be Buying $300 Billion Treasuries

This is a timely article. Yes, Japan looks to be on track to buying another $300bn of Treasuries this year alone. Largely thanks to the almost zero yield on Japanese government bonds. That will further support USD strength and depress the yen. But more importantly, it will actually give room for further QE and may actually delay the raising of rates by Fed, particularly should China follow in Japan's strategy.

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Bloomberg - Yields on Japanese debt have been pinned near zero ever since the Bank of Japan embarked on its latest attempt, in April 2013, to end the two decades of stagnation that followed those go-go years. Europe isn’t much of an option, as yields turned negative this year on the region’s own quantitative easing. 

So why the U.S.? For one, with the Federal Reserve poised to raise interest rates, Treasuries offer the highest yields among debt from the world’s most-industrialized economies. Then there’s the dollar, whose meteoric rise against virtually every currency has made U.S. assets even more appealing. HSBC Holdings Plc says Japanese investors may funnel $300 billion into Treasuries over the next two to three years, double the pace of the nation’s purchases since 2012. 

“The BOJ is crowding out private investors,” said Yusuke Ito, a fund manager at Mizuho Asset Management, which oversees $33 billion in Tokyo. “They have to find alternatives.” 

Mizuho’s overseas bond unit, which stepped up buying of Treasuries in mid-2014, has signed up more clients looking for higher-yielding alternatives to Japanese debt, he said. 

Japan first began to exert its influence in the U.S. government bond market more than three decades ago, when its booming export-driven economy produced trade surpluses that it then plowed into Treasuries year after year. 

Creditor Nation 

Japan has since built a stake of $1.23 trillion, making it America’s second-largest overseas creditor, just behind China’s $1.24 trillion. 

For the U.S. government, maintaining Japanese demand in the $12.6 trillion market for Treasuries is more important than ever, particularly after China pared its own holdings last year by the most on record and as the Fed prepares to raise rates. 

The good news is that Japanese purchases are poised to accelerate. Of the $500 billion that investors will pull from Japan’s debt market to put abroad through 2017, about 60 percent will flow into Treasuries, said Andre de Silva, HSBC’s Hong Kong-based head of global emerging-markets rates research. 

Much of the allure has to do with the U.S. tightening monetary policy at a time when more than a dozen nations around the world are cutting rates or increasing stimulus to boost growth. The European Central Bank this month followed Japan in buying government bonds to pump money into its economy. 

Yield Premium 

As a result, 10-year Treasuries yielded as much as 1.2 percentage points more than the average for Group of Seven countries last week, the biggest premium since 2006. 

Compared with German bunds, the advantage reached the most in more than 25 years. The U.S. 10-year note yielded 2.09 percent as of 7:20 a.m. in New York. 

“U.S. Treasuries are more attractive than other markets,” Yoshiyuki Suzuki, the head of fixed income at Fukoku Mutual Life Insurance Co., which oversees about $52 billion, said from Tokyo. Fukoku has lifted its foreign bond holdings, composed mostly of Treasuries, to more than 20 percent of assets at the end of December, from about 18 percent a year earlier, he said. 

And it’s not as if investors in Japan have much choice at home. Under Governor Haruhiko Kuroda, the BOJ is buying 80 trillion yen ($659 billion) of debt a year, pushing down yields and constricting available supply. 

The BOJ already owns more than 20 percent of Japan’s government bonds. At least 60 percent of the $8.28 trillion market, including notes due as far out as a decade, yield less than 0.5 percent, data compiled by Bloomberg show. 

Forced Out 

“They are forcing everybody out of JGBs and into something that’s higher yielding,” John Gorman, the head of dollar interest-rate trading for Asia and the Pacific at Nomura Holdings Inc., Japan’s largest brokerage, said from Tokyo. Treasuries will be among the biggest beneficiaries, he said. 

Japan Post Holdings Co., the largest owner of the nation’s bonds after the central bank, and Government Pension Investment Fund, are already making the shift. Together, they hold about 218 trillion yen of local debt, equal to $1.8 trillion. 

The banking unit of state-owned Japan Post increased its holdings of dollar-denominated debt more than 40 percent to 7.12 trillion yen in the fiscal year ended March 2014. 

GPIF plans to boost overseas bonds to 15 percent of its 137 trillion yen in assets from 11 percent to boost returns, and trim its allocation to Japanese debt. Spokesmen at both companies declined to comment on their holdings of Treasuries. 

Buying Power 

Hideo Shimomura, the chief fund investor at Mitsubishi UFJ Asset Management, which oversees $66 billion, says he’s not about to dump his Japanese bonds for Treasuries. That’s because the central bank’s bond buying will cause prices to appreciate and more than make up for the low interest payments. 

“The BOJ purchases are powerful and will completely support the market,” he said from Tokyo. “People may come back to JGBs. I don’t think the market will become bearish.” 

Japanese government bonds, which have fallen in March and February, posted their biggest annual returns since 1999 last year, index data compiled by Bank of America Corp. show. 

The Fed’s rate increases, which traders anticipate will start by September, may also leave Treasury investors vulnerable to losses. Forecasters surveyed by Bloomberg say 10-year yields will rise to 2.7 percent in the coming year as the Fed boosts borrowing costs, based on the median estimate. 

If that happened, it would result in a loss of about 2.4 percent for note holders, data compiled by Bloomberg show. 

Dollar Yen 

The dollar’s advance against the yen may far outstrip the losses from any rise in yields. 

For yen-based investors, the U.S currency’s appreciation boosted returns on Treasuries to 17 percent over the past six months, the most among 26 bond markets tracked by Bloomberg and the European Federation of Financial Analysts Societies. 

The greenback is forecast to climb 4.6 percent further against the yen in the coming year. 

“Investors will buy high-yield and high-quality bonds,” Hideaki Kuriki, a fund manager at Sumitomo Mitsui Trust Asset Management, which oversees $40 billion and bought U.S. 10-year notes this month, said from Tokyo. “That’s Treasuries.” 

Ownership and Control: Part II

In my previous post, we briefly discussed the separation of ownership from control in the sense that the controllers (managers) of a company are not its owners. However, what if a nation sells off it public and private assets to overseas companies? This has been happening at an alarming rate in the UK according to Will Hutton in this Guardian op-ed. One of the problems for Hutton is that British companies cannot compete with their global rivals because "the enemy of enterprise is the unowned, purposeless British company in thrall to myriad uncommitted, myopic shareholders". According to Hutton, Tata and BMW are successful "because they are family-controlled with long-term, committed owners who have a clear vision and purpose".

Ownership and Control: Part I

Questions about ownership and control occupy a lot of my cognitive energy. They are also important questions within finance, law, management, and economics. Is separating ownership and control a good idea? Most of modern finance is premised on the idea that it is a bad idea and that the resultant agency problem needs addressed using all sorts of incentives. However, Colin Mayer in Firm Commitment suggests that separating ownership from control may have been a helpful innovation in the evolution of the corporation in that third parties are more likely to enter commitments and contracts with firms which don't have a dominant owner. Along with two co-authors I argue in this article that the ability to separate ownership from control is one of the rationales for the corporation.

"The Best Cake In Town" Has A Sibling

I am not even a cake person, heck I am usually the one shying away from ordering desserts at restaurants. 

Hence it will take a lot to convince me to eat a cake, even harder to like it, and even harder to rave about it.

Anyways, in one of my previous posting 3 years ago, I came across a cake that deserved to be called the best cake ever that I have tasted ... its called the La Joconde, or Mona Lisa @ the eccentric Tommy le Baker ...
http://www.tommylebaker.com/Tommy_Le_Baker/Welcome.html



the Mona Lisa, it is simply possibly the best cake I have ever tasted. Its layered, it may not look like much but its divine. Each of the layers presented different textures to the whole cake and yet somehow each contributed exquisitely to the whole experience. There is the soft cream, the ice cream smooth moose, the delectable rich chocolate holding the whole cake together ... its just a wonderful cake experience. I am not exaggerating if I say this is 10/10 for a cake.

Now there is a cake I had recently which blew my mind away ... go to Bangsar Shopping Centre 3rd Floor, and you will see a place that is actually a little piece of heaven on earth named appropriately, Just Heavenly.

 Most of the cakes are wonderful, but its the Red Velvet that yields orgasmic groans.

 Don't bother with how it looks. I was rushing to cut me a slice (this is my third Red Velvet cake in a week) with their plastic knife, hence it looks a bit "not nice". 

But believe me, it is so moist and the icing is the proverbial icing on the cake. Some of the other Red Velvet cakes and cupcakes have this kind of slight sourish tinge that does not completely gel with the texture and fast, which comes from buttermilk but the tangy-ness here is somewhat reduced in a very nice way. There has to be some cocoa powder as well cause you kinda feel that there is something chocolatey as well. 

The icing here is perfecto ... the ingredients are all there, so its a matter of using the right source of sugar, vanilla, butter,  mascarpone cheese, buttermilk and milk. And you can taste when people use premium products.



Nothing much to look at, but when you are that good, looks does not matter much anymore.

p/s as per usual, I do not know who owns the place, and have not been paid in any form or manner by the outlet/owner ...