Categories
Economics

[1826] Of the stock market offers minimum risk?

In his speech unveiling a RM7 billion economic stimulus in the Parliament, the Finance Minister Najib Razak touched on the earlier injection of RM5 billion into ValueCap (translated):

In stimulating the capital market, I announced an additional RM5 billion fund for ValueCap for the purpose of purchasing equities of companies which are priced lowly due to uncertainty in the global equity market but yet exhibit strong fundamentals. The fund will be secured through a loan from the government-guaranteed Employees’ Provident Funds (EPF). Therefore, the loan not only guarantees higher returns vis-a-vis deposit rate offered by banks but it also poses the least risk to the EPF.[1]

Firstly, in the current climate it is hard to believe that the secondary equity market is able to provide better returns in the short run compared to even the dull fixed deposit account. In the long run, maybe but with the stated goal of stimulating the local capital market, surely the investment horizon is short.

Secondly, the equity market is not the least risky options available. In fact, it is probably one of the riskiest there are out there due to its inherent uncertainty. It is hard to imagine why the stock market with erratic prices would be less risky than a fixed deposit which offers stable income stream. Furthermore, if the EPF is interested in investing the least risky field with local context, it should consider investing in risk-free government bonds.

The second point on riskiness as said by the Finance Minister could either be an outright lie or a very, very ill-advised statement.

In any case, the intention behind the injection is suspect, especially, as reported by The Malaysian Insider, ValueCap is due to repay its RM5 billion loan to its three shareholders, Khazanah, the EPF and PNB.[2] Information at hand at the moment suggests that the RM5 billion would be used to pay back those lenders; it appears that the EPF would be the one financing the repayment.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — Untuk merangsang aktiviti pasaran modal, saya telah mengumumkan penambahan dana Valuecap sebanyak 5 bilion ringgit untuk pembelian ekuiti syarikat-syarikat yang mempunyai asas yang kukuh tetapi nilai pasaran mereka kini terjejas berikutan kesan pergolakan pasaran ekuiti global. Dana tambahan ini akan diperolehi melalui pinjaman daripada Kumpulan Wang Simpanan Pekerja (KWSP) yang dijamin oleh Kerajaan. Oleh itu, pinjaman ini bukan sahaja menjamin pulangan yang lebih tinggi daripada kadar deposit institusi perbankan, tetapi juga merupakan pelaburan yang mempunyai risiko yang paling minimum kepada KWSP. [Economic package unveiled (Updated with full text). The Star. November 4 2008]

[2] — KUALA LUMPUR, Nov 3 — State investment company Valuecap Sdn Bhd owes its three shareholders RM5.1 billion, which is due to be repaid in February 2009.

This debt, in the form of interest-bearing unsecured bonds, raises questions over plans for the Employees Provident Fund to lend RM5 billion to Valuecap to invest in the stock market.

In March 2003, Valuecap borrowed RM5.1 billion from shareholders Khazanah, Kumpulan Wang Amanah Pencen and Permodalan Nasional Bhd to invest in the stock market. At the time, world stock markets were bracing for a looming war in Iraq which followed on the September 2001 attacks on the US.

Valuecap’s bonds were due to be repaid in February 2006, but the company was given another three years to this coming February. At the end of 2006, the three shareholders each held RM1.7 billion in these bonds, according to documents obtained by The Malaysian Insider. [Question marks over Valuecap debt . The Malaysian Insider. November 3 2008]

Categories
Politics & government

[1825] Of the best America has to offer

He was a relatively unknown United States Senator candidate for Illinois when he delivered the keynote address of the 2004 Democratic National Convention in Boston. With a devastated summer coming to an end, I found myself lying forlornly on a sofa watching the DNC on television. I wanted to listen to Bill Clinton, Al Gore, John Edwards and John Kerry instead of a skinny black guy with a funny name as he called himself. The commentators on television however were discussing on how Barack Obama is a rising star in the Democratic Party, much like how the Michigan Governor Jennifer Granholm was except that he writes well. Maybe I should give him a chance and stay in front of the television, I thought to myself.

I cannot recall who introduced him to the podium but I remember me being impressed in a way I have never been. His words, especially when he spoke of how “there is not a liberal America and a conservative America — there is there United States of America”; how “there is not a black American and a white America and Latino America and Asian America — there’s the United States of America” moved me so much.

The next half hour was purely exhilarating that I as a foreigner in a little liberal fortress in the Midwest felt the urge to vote on November 4 even when I have no right to do that. I need not this speech to be partial to John Kerry but Obama’s address inspired me to participate in one way or another. It was hard to sit down while watching the crowd in Boston welcoming enthusiastically of Obama’s address. It was easy to be carried away by the spirit of the moment.

I keep track of him ever since that day in a July. The internet was buzzed with the possibility of Obama running for the Presidency sometimes in the future. The reason was simple: he outshone all speakers during the DNC.

The 2004 presidential race was easy for me. There was an illegitimate war in Iraq much to the disapproval of the majority in the world community. Fierce debates conducted within the hall of the United Nations Security Council and massive protests all over the world were evident to that.

Civil liberty meanwhile was under threat with the onerous Patriot Act passed. There were reports that telephone conversations were being bugged. Privacy was disrespected in the name of security.

As a Malaysian in the United States, I hated being profiled and pulled over by airport securities every time I took the airplane. That however was not as bad as some of fellow Malaysians had to suffer. They had to report to the some homeland security office all the way out of Ann Arbor in Detroit regularly.

Bush’s “either you are with us, or you are with the terrorists” speech made it all too angering that made it clearly, it was then anything but Bush. Well, actually, John Kerry was the only real option to George Bush. In the modern two-party system in the US, it is always between the Democrats and the Republicans.

But Kerry lost and Bush stayed in the Oval Office.

Four years later, the cycle begins anew and this time, it is between John McCain from the Republicans and Barack Obama from the Democrats, both being the US Senators. Choosing between McCain and Obama however is harder than it was between Bush and Kerry for me.

This is mostly because McCain, at least before he pandered to the base of the Republicans party for the upcoming Presidential race, has a mind of his own. He was, as others derisively called, a Republicans in name only; a RINO. He had the audacity to speak up his mind even if it is unpopular.

Who had the guts to tell off those farmers in Iowa that ethanol subsidy is wasteful, that it is far more efficient to import it from Brazil? Or facing off those automotive workers in Michigan that they need to compete fairly against their counterparts across the Pacific?

It is an unpopular but the right positions to take. Nobody who participated in the Democratic and the Republican primaries, save probably Ron Paul, has the guts to say that but John McCain.

What made McCain refreshing to me is that he is one of those blue green politicians which are so rare in American politics — he believes in free market and care for the environment. He sees the market economy and the environment as not something mutually exclusive.

In the fierce repeating debates to open the Arctic National Wildlife refuge in Alaska for drilling, he joined the Democrats in opposing it. In the early 2000s, he together with Joe Lieberman drafted a bill to do something about US carbon emissions through market-based mechanism.

McCain does however hold disagreeable political positions from my point of view. Some of them are issues on security and civil liberty, hawkish foreign policy, abortion, religion and teaching on evolution. While I was prepared to overlook these issues, they have unfortunately been amplified during the primaries. Instead of maintaining a centrist outlook, McCain’s journey to the right to join the religious conservative is disappointing. Having Sarah Palin as his running mate made it all worse.

Under Obama as the President, it is unlikely that the same social and civil liberty issues would disturb me as much. Democrats, after all, on average are conscious of civil liberty.

The best of all, having a black President would challenge the xenophobic tendency of the conservatives. At the end of the day, it is an effort at the creation of a United States less riddled with prejudice.

When McCain should have distanced himself from the policies of Bush, he made a u-turn to gain the favor of the socially conservatives within the Republican Party during the primaries, as he competed for votes with other candidates like Mitt Romney and the religiously conservative Mike Huckabee.

The Economist lamented McCain’s transformation months ago and recently, translated its disappointment by endorsing Obama. The disappointment is shared by many libertarians.

A number of libertarians are abandoning the Republicans by are migrating to the Obama camp. The Republican Party under Bush has betrayed the libertarians and there is a need for libertarians to make a statement.  There is a need to point out that libertarians as independents too can play the role of a kingmaker. The role is not unique to the socially conservatives or the evangelicals.

These libertarians are now hoping that Rubinomics would reign in spite of all the speeches that Obama gave, like the renegotiation of NAFTA or punishment for firms which outsource its operations outside of the US.

I am however unsure how wise that switch of camp is, especially so when the Democrats are controlling both the House of Representative and the Senate. With another Democrat in the Oval Office, there might be a tendency to take an overtly populist protectionist stance against trade, hurting the fuel of prosperity for people all over the world. The unnecessary expansion of the role of government seems inevitable with the Democrats controlling both the executive and legislative branches of government.

This is especially so given the current economic climate in the US where it is easy to make a scapegoat out of the idea of economic liberty. Short term but shape pain has a way in making people forget the cumulative net benefits reaped from the very idea which they scorn.

The worry should be typical of a centrist which has the ideal candidate conscious of civil and economic liberty. I want a candidate which believes in both civil and economic liberty.

In the United States the ideal candidate is hard to come by. The Republican Party represents the socially conservative but economic liberal group, sometimes with the tendency to trump civil liberty in the name of security. The inverse is true for the Democratic Party. Both sides have their strengths and both sides have their weaknesses.

In any case, both McCain and Obama are trying to blur the traditional separation line. Obama does take up some idea of economic liberty more than most Democrats and McCain does respect civil liberty more than most Republicans. Both are less divisive than say Howard Dean or Hillary Clinton or Tom DeLay or George Bush. Both are willing to reach across the aisle.

For this reason, especially when I do not have the right to vote in the election, I am one of those undecided individuals standing by the sidelines watching race intently. Though I cannot vote, I will be affected by the results of the election because after all, the US is a superpower with presence all over the world.

Whatever the outcome to the November 4 2008 Presidential Election, the winner will preserve, protect and defend the Constitution which guarantees the rights to life, liberty and the pursuit of happiness. Whatever the result will be, it will be the testament of the best America has to offer; liberal democracy.

I am unable to endorse either candidate because I like and dislike both. I however can endorse something larger and I endorse the system.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

A version of this article was first published in The Malaysian Insider.

Categories
Politics & government

[1824] Of the keynote address of the 2004 DNC

One of those great speeches.

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My favorite part has always been this:

Now, even as we speak, there are those who are preparing to divide us: the spin masters, the negative ad peddlers, who embrace the politics of anything goes. Well, I say to them tonight, there is not a liberal America and a conservative America — there is the United States of America. There is not a black America and a white America and Latino America and Asian America — there’s the United States of America.

The pundits like to slice-and-dice our country into Red States and Blue States; Red States for Republicans, Blue States for Democrats. But I’ve got news for them, too: We worship an awesome God in the Blue States, and we don’t like federal agents poking around in our libraries in the Red States. We coach Little League in the Blue States, and, yes, we’ve got some gay friends in the Red States. There are patriots who opposed the war in Iraq and there are patriots who supported the war in Iraq.

We are one people, all of us pledging allegiance to the stars and stripes, all of us defending the United States of America. [2004 Democratic National Convention keynote address. Barack Obama. July 27 2004]

Categories
Environment Science & technology

[1823] Of a important research on anthropogenic climate change

A research formally linked ice losses in the poles with human-caused climate change:

OSLO (Reuters) – Both Antarctica and the Arctic are getting less icy because of global warming, scientists said on Thursday in a study that extends evidence of man-made climate change to every continent.

[…]

The Arctic has warmed sharply in recent years and sea ice shrank in 2007 to a record low. But Antarctic trends have been confusing — some winter sea ice has expanded in recent decades, leaving doubts for some about whether warming was global.

The U.N. Climate Panel, which draws on work by 2,500 experts, said last year that the human fingerprint on climate “has been detected in every continent except Antarctica,” which has insufficient observational coverage to make an assessment. [Man-made climate change seen in Antarctica, Arctic. Alister Doyle. Reuters. October 30 2008]

According to the article, making that conclusion was not possible earlier due to insufficient data.

Categories
Economics

[1822] Of a golf course is the future of Penang!

Apart from busy adding more languages on road signs and jockeying to change road names, apparently the Penang state government is attracting foreign investors to invest in a very important project: a golf course.

PENANG, Nov 1 – Penang has welcomed a South Korean conglomerate commitment to build a US$100 million (RM360 million) golf course in Batu Kawan despite the global economic gloom, saying it is a testimony of Korean confidence in the island state’s future under the new government.

The project by DK ENC, which has built golf courses in South Korea and also one in Ho Chi Minh City in Vietnam, will be completed in 2013 and is the most expensive in Penang. DK ENC signed an agreement for the golf course with the Penang Development Corporation (PDC) during Chief Minister Lim Guan Eng’s visit to Seoul on Thursday.

“This project will not only give an opportunity for Koreans to indulge in their love for golf but also offer employment and business opportunities for Penangites,” Lim said in a press statement issued this afternoon.

He said the golf project also showed that Korean investors believe in the new government’s commitment to transforming Penang into an international city. [Penang gets RM360 million Korean golf course. The Malaysian Insider. November 1 2008.

I like it how the Chief Minister of Penang said “This project will not only give an opportunity for Koreans to indulge in their love for golf but also offer employment and business opportunities for Penangites“.

It sounds so shallow that is almost humorous. What kind of employment is that sir? Caddies?

Does Penang need another golf course anyway?