Is Japan Doomed To Recession?

Today, I woke up and saw that Saizen REIT, one of my most substantial holding has fallen by quite a bit since I last checked. This was in part due to the recessionary reports about Japan. Abe-san has also called a snap election just two years into his term to garner new support for his economic policies. I am now wondering if the economy is ever going to get its act together. However, Abe-san is really someone to be admired. Decisive and strong, he looks like someone who can really change decades of deflationary pressure in the economy against the pessimism of the Japanese people.

Well, for now, I am still cautiously optimistic about Japan as there is just so much productive capacity in the economy that is not maximized to its fullest potential. However, the Japanese looks to be extremely complacent and they really need to get their act together before they are overtaken by other emerging economies. They are like an economy that is so risk adverse in guarding their wealth that they do not know that wealth is lost every day through a lack of vitality in the economy. Even a greying labour force can spur the economy. Just look at Singapore and the number of elderly who are still working past their retirement age.

For what its worth, it is time for the Japanese to start learning from other economies. If there is a lack of consumption, build the habits of consumption into the Japanese people. How do you do that when interest rates are 0 and people are still not consuming? Well, import labour, make expats consume, do whatever it takes to stimulate the economy. Without a strong economy supporting the country, public dissent will be much worse relative to the initial backlash from immigration friendly policies anyway.

In terms of business culture, break down the traditions. Decades of slowing growth has proven that the old Japanese way of working is not feasible. The world is in a stage of hyper growth and efficiency now due to technological advances, and working more is actually working less in certain situations. Give your employees more freedom and autonomy and rebuild the business culture. Learn from the Americans, and build more billion dollar companies.

In terms of QE by the Bank of Japan, simply increasing the money supply has proven to be ineffective in generating inflation. There has to be a corresponding policy to complement monetary easing and drive demand. The structure of the economy needs modification. Encourage spending through partnerships with businesses.

What about tourism? What happened to the Japanese pop culture? It used to be much stronger than the Koreans. What is the entertainment industry doing? If the Koreans work twice as hard, you work thrice as hard. That is what Japan did during the post war periods, and propelled itself from a manufacturing economy into a service and technological economy in just decades. Wake up, learn from the past, and do what you did. There used to be much more dreams in the nation.

At the end of the day, this is just some ranting by me after looking at how the NAV of Saizen fell from S$1.24 to S$1.14. I do know that everything that I just out-laid needs time to execute, especially in a hyper democratic and bureaucratic government like Japan. However, I feel that traditions are like chains sometimes, and disruption has to occur in order to bring a new age of hyper growth in an economy.

The question is: can the government and the people work together and push past recession into growth?

Work hard Japan, I am rooting for you. Please don't disappoint me, I am learning Japanese for the future, don't make my learning obsolete and redundant. Lol.

William Ackman: Everything You Need to Know About Finance and Investing in Under an Hour

For those who are interested, learn about Finance in less than an hour. This is a video contributed by Big Think and instructed by William Ackman, the man behind Pershing Square Capital Management. Learn about the 3 statements in very simple terms from one of the most successful hedge fund manager this year, who posted a close to 35% this year through his bets. This video is short and easy to understand.

Do enjoy the video and start taking control of your own finances. Financial planning is a skill that is never too late to master.

Death of Investment Banks

Recently, I saw this video by Anton Kreil, a former Goldman Sachs Sales Trader and thought it was quite cool. Well, I will not spoil the fun, so enjoy watching the seminar, its around 2 and a half hours and has five parts in total. I have only uploaded one part so feel free to continue watching the rest via YouTube. Afterall, the aim was simply to bring awareness.

Random Thoughts About China, Vietnam And The World

I do not usually like to touch on politics. However, politics and economics are very much linked together. A wise policy implemented at the right time can grow the economy while a poor policy established at the wrong time threatens the country's economy. Today, I would like to touch on my personal feelings about China after reading about Chinese ships provoking Vietnamese vessels to drill oil in the South China Sea (https://sg.news.yahoo.com/vietnam-chinese-ships-ram-vessels-near-oil-rig-134607409.html).

Before I delve into the topic at hand, I would just like to offer my honest opinions on
Vietnam. Vietnam is currently the 4th largest potential market in South East Asia, with over 90 million citizens. However, the country is declining at a fast rate. The core of the country is rotten and values are not inculcated rightly. Vietnam has the potential to be a huge economy if the right policies are adopted but its rampant corruption and severe income inequality issues continue to destroy the country's potential. In 2013, the per capita income of Vietnam stands at USD$2000, an embarrassing figure for its huge potential. To put things into perspectives, its per capita income is close to some countries in Africa! In the times of the Vietnam War, when great generals like Ho Chi Minh and Vo Nguyen Giap stood against the Americans, the sky was literally the limit when they won against the United States. However, decades of hedonistic indulgences has not moved the country forward. Please do not feel that I am against Vietnam or look down on Vietnamese. In fact, I love the country and its culture, but feel saddened by the continuous erosion of the country's potential by its government. I even learnt the language in my first year during university as I felt there was much potential for this country, studying hard enough to score an A. 

Now, why have I touched on this before going into the above topic? It is a very sad fact that as a communist country, Vietnam is unlikely to receive support from global superpowers like the US and other European superpowers like UK and Germany. Add to that the Ukraine crisis and you know that the various superpowers have their plates too full. Moreover, its severe poverty has led to a weak military force that is completely incomparable to China, where more and more reserves are currently being diverted to further develop its military might. The Vietnamese government have been taunted for days and yet no appropriate response has been sent from Hanoi. This is clearly an act of bullying and the national pride of Vietnam is at stake here. From this incident, I gained renewed respect for the Singapore government as the Singapore government was stern in its approach towards the haze incident last year and the naming of ships incident this year.  

Now where do I see things going forward? ASEAN. If the Vietnamese government is able to leverage on ASEAN to put pressure on China, the dispute might have a peaceful ending. However, any weakness on the part of the Vietnamese government will put a stain on its national identity. Most governments which have adopted the right policies have been able to move out of a manufacturing economy after some decades. Japan, Singapore, Hong Kong are some examples of successful transition. Yet, Vietnam remains a predominantly manufacturing economy.

Now where does the global economy fits into this picture? Firstly, if China is able to gain control of the South China Sea, it will become a major oil producer. This will give it unprecedented economic strength as huge reserves are expected to lie under the South China Sea. Next, China's strong current account surplus and huge foreign reserves gives it flexibility in gaining a stronger foothold on the global economy. In addition, its undervalued Yuan continues to offer it competitive edge in further growing its economy, giving it the best of both a knowledge based economy in certain cities like Shanghai and a manufacturing economy in other cities. Moreover, China is expected to become the largest economy in 2014, displacing US. 

Moving on, we know that China is getting increasingly assertive in their behaviours. There is really no knowing what China will next try to assert against if the taunt against the Vietnamese government goes unchallenged. The Philippines government has made a tough stance by detaining Chinese ships, which I felt was a clear message to China that they cannot be played with. Japan has ramped up its defences near the Diao Yu/Senkaku islands. Now, can Vietnam stand against China?

The fact is, in light of the global recovery, political issues in the region threatens the regional economy, and hence its recovery. However, I do doubt the possibility of a war as a war does not benefit any parties, but the threat of war is very real. However, as I am not a politician, my takeaway from this whole saga is to continue to invest prudently and steadily.

Japan's Economy Hiccup And Saizen REIT

With the raising of the sales tax from 5% to 8%, we are currently witnessing declining domestic consumption in Japan. Is this policy going to affect Japan's economic growth? I do believe that going forward, Japan has to start making real and suitable structural reforms to its economy before the worsening of its economy. Quantitative easing by the Bank of Japan and huge fiscal spending by the Japanese government can only aid the economy to grow to a limited extend, and the staggering public debt threatens the root of the Japanese economy. The fundamentals of the Japanese economy need to be fixed before it can escape from its decades of deflationary pressure.

However, Japan remains a largely closed society and that has prevented it from moving forward to a limited extent. With declining population and a growing old age problem, it would appear that opening its door up to migrant workers might make its economy competitive again. This is a structural solution to the Japanese economy but has never been put up for serious debates. Say what you will about Singapore, but our open door immigration policy has made the Singapore economy one of the most competitive in the world.

Next, a depreciating YEN has to be substantiated with a growth in current account surplus. However, the trade balance of recent months in Japan have been disappointing. The Japanese economy is now at a deadlock, and it has to tread forward carefully, before its internal debts materializes into external debts issues when more and more Japanese grow disillusioned with the country.

Structural reforms are the key to any economic policy. Throughout history, we have always witnessed changes to an economy when there is a crisis. For example, Singapore has repeatedly use its employer CPF contributions to withstand the effects of financial crisis in order to maintain a near full employment situation. China has carried out banking reforms and moderate its exchange rate to keep its economy competitive and grow its public and private holding of foreign assets. Japan is now at a crisis, the threat of decreased liquidity is real as market expectations change, and more easing by BOJ might dampen the economy and worsen its Current Account.

With that said, some of my readers might remembered that I have invested in Saizen REIT. Am I still confident of its growth prospects? The fact is, I foresee earnings to be relatively stable in the next 2 to 3 years. I will still be collecting my dividends regularly on time. I will not sell off this REIT unless exchange rate depreciates significantly against the USD. This is because of all the properties held by Saizen REIT, most are in relatively densely populated areas. However, if there is a clear sign that the Japanese economy can grow no longer and the YEN will never appreciate again and general prices and wages remain low, I will sell Saizen REIT. Even though I really feel strongly for this REIT, I want to be an investor who is rationale and profitable. Until then, a decreased price just presents more value for Saizen REIT.

Warren Buffett - Tackling Debt Ceiling, US Economy, Value Investing & Power Of Women

I recently watched this panel discussion conducted by Fortune with Mr Warren Buffett. This session is dated a while back, around 3 months ago. In this panel discussion, he talked about his beliefs that the US economy is going on a modest growth and is likely to continue to be the dominant economic power despite the high debts. He also disapproved political parties for sort of using the debt ceiling to create a motion against Obamacare etc.

He talked about the power of value investing and reiterated his investment style of buying great companies at a discount. As I study more about The Intelligent Investor, I found myself understanding more of his explanations of general market sentiments. Lastly, he also talked about being a proponent of female power. He felt that women are untapped talent waiting to be discovered and is adamant that females should stand equal opportunities as males.

This is actually one of the first panel discussion I have watched with Mr Buffett inside. I have watched documentaries about him before but seeing him react the way he did, thinking the way he thought and responding to queries simply make my respect for him grow exponentially. I will continue to follow his teachings, and will start reading his letters to shareholders as well for this is a man of legend.

Dying Of Proprietary Trading In Banks

Today, I went for a career fair organised by a bulge bracket bank. There were many divisions and booths that really interest me, but 3 particular booths caught my eye, namely:

1. Global Markets
2. Private Banking
3. International Personal Banking

For those of you who have been following me through this blog, I am sure you must be curious why I did not mention sales and trading specifically. The fact is, proprietary trading in banks are dying due to stringent regulations and many traders have moved on to form hedge funds. What is left now in banks for proprietary trading is just sell-side trading, market making etc. Speaking with a vice president from one of the booth, he acknowledged that proprietary trading in banks might completely disappear altogether in the coming decade.

To be honest, the whole ballgame for getting into trading is now much harder. Without the option of trading in banks, one can only turn to hedge funds, mutual funds or asset management firms like Fidelity Investments. But the fact remains that these firms are more competitive to get into than banks and many similar firms prefer someone with working experience in banks. This in turn creates a scenario where the undergraduate could be faced with too much choices.

After a tour in the career fair, I am now left more confused rather than more clear. I always wanted to do trading, but the fact is, I look towards the lifestyle of sales. Being a hedge fund manager would give me the best of both worlds. I do not even know what to apply for in my second year summer break. I am honestly quite tired, trying to juggle work, study, family. The road ahead is unclear but one has to keep moving forward regardless.

Herbalife, A Ticking Time Bomb?

I am sure people who follow the news must have noticed something pretty exciting going on lately in the world of hedge funds, the billion dollar bet made by Bill Ackman against prominent fund managers like George Soros, Carl Icahn and Robert Chapman. Indeed if anyone pays a close enough attention to Herbalife, one can see that Bill Ackman is outmatched. But the billion dollar question is: Does billionaire Bill Ackman has a case for shorting Herbalife shares? Is Herbalife really a pyramid scheme that has the potential to uproot lives of millions of people? Read the disclaimer first before reading this post, as this article simply expresses the opinions of one man's quest in search for the truth.

Seeing as to how Pershing Square Capital Management, L.P has compiled a list of reports, conferences and interviews, I will not be adding anything new. What I will offer instead is original analysis into the validity of this company and whether I feel that the share price of Herbalife will be heading up towards $100 mark or diving down back to the bottom. All information, evidence, articles, are derived from http://factsaboutherbalife.com/.

I actually side with Mr Bill Ackman's views on Herbalife. There are a few reasons why I side with Mr Ackman and I will henceforth carry out my analysis:

1. Herbalife is an MLM company
I have never been supportive of MLM comapnies since I was almost roped into one a few years ago. Their aggressive sales tactics, with their promise of insane riches and driving a luxury car in ones early twenties is like a shortcut to that possible million dollar dream. In my country, a few MLM companies like Sunshine Empire, and more have shut down once the market saturation point is reached. This means that there are no more downline for the uplines to take advantage of anymore. To be honest, I have never believed in the concepts of MLM as it is too heavily corrupted by greedy directors and founders. There are of course, a few MLM companies that I feel will bring riches to its distributors, when the products are actually able to be sold like Amway. However, since there are numerous news of overpriced Herbalife's products, I reserved my doubts about Herbalife's business model.

2. Its products have high margins, yet are not sold in stores and uncompetitive
29% of Herbalife sales come from Formula 1, a nutritional shake mix. However, there is no ready to drink offering of Formula 1, something that is highly unusual as industry peers all offer ready to drink offering for their nutritional shake. This shows a lack of competitive advantage by Herbalife yet it is able to have such high margins offering just 1 product without any competitive advantage relative to industry peers. Moreover, their products are not sold in stores, so where does all the sales and margins come from? From point 1 above, it could be a possibility that their main customers are the distributors themselves, and the distributors are left with the unsold stocks at their own homes.

3. It spends little on research and development
If Herbalife prides itself on providing quality products to their customers, why do they spend so little on research and development? That is also a reason why their margins are so high. Since that is the case, it really puzzles me why customers would choose an uncompetitive product with higher prices. The only explanation is that there is something else to be gained assuming that consumers make logical choices, which brings me back to point 1, the promise of insane riches and being your own boss (common in all MLMs) is a selling point that appeals to many.

There are many other more reasons that I believe should turn on an investor's red flag but personally, I will back away from investing in the company if it has these 3 factors. All the best Mr Bill Ackman, I am sure you are right about Herbalife, the only question is when will you be proven right. 

Inspiring Banker Saves 20,000 With Profits

Today, I am going to talk about something I came across Bloomberg this morning while reading the news. After reading the news, I am more encouraged as this is the few news that put bankers in a positive light. I will post the link up at the end of the post, but for now, let me talk about why I was so inspired by this banker.

Audette Exel is the director, owner and head of Isis (Asia Pacific) Pty, which advises companies for mergers and raises money for fund managers. What is inspiring about her story is that the profits from her company is channelled towards social causes, helping children and kids too poor and too ill from impoverished countries.

In today's world, where bankers are repeatedly labelled as the greedy and immoral in the media, it is refreshing to see Bloomberg featuring Audette Exel, who is not only a tough business leader, but also a true philanthropist. Therefore, I am further encouraged and I will definitely push myself to work harder. I have already thought about when I will start helping and it will be when my liquid cash reached $1,000,000.

For those who are interested to learn about this extraordinary woman, please click here: http://www.bloomberg.com/news/2013-07-30/banker-saves-20-000-from-nepal-to-uganda-with-her-profits.html