Google Makes its Way into Mainstream Dictionaries

Who had ever thought that Google, the internet search engine company formed by Sergey Brin and Larry Page, and the hottest stock in U.S. right now had its trademark name "Google" officially added to the Oxford English Dictionary (OED) on June 15, 2006, and to the 11th edition of the Merriam-Webster Collegiate Dictionary in July 2006 due to its popular usage. I was wondering why Yahoo! never reach this kind of pinnacle and popularity among netizens.

For instance, consider usage like this: -

Please Google (search) for me the stock price as well as the company information of Google Inc.

or

Please Yahoo! (???) for me the stock price as well as the company information of Google Inc.

Hehe...

Which one sounds nicer?

Google was last traded at Nasdaq at USD525.01 as of 28 June 2007.


(www.m-w.com)

Main Entry: goo·gle
Pronunciation: 'gü-g&l
Function: transitive verb
Inflected Form(s): goo·gled; goo·gling /-g(&-) li[ng]/
Usage: often capitalized
Etymology: Google, trademark for a search engine
: to use the Google search engine to obtain information about (as a person) on the World Wide Web

FBM30etf - A New Milestone for Financial Market in Malaysia

(www.theedgedaily.com, 27 June 2007)

Local investors will soon have the option to invest in a new type of instrument — Equity Exchange Traded Fund (ETF). The FBM30etf will be the first ETF, introduced by AmInvestment Bank Group, to be listed on the Bursa Malaysia next Monday.

What is an ETF?
An ETF is very similar to open-ended unit trusts. It's an instrument representing a basket of stocks that is most commonly designed to track the performance of all kinds of indices. For example, there could be an ETF to track the KLCI, the Second Board Index; a sector index, like the Property Index; or in this case, the FTSE Bursa Malaysia Large 30 Index. More innovative ETFs can track commodities like oil futures and gold.

Why invest in ETF?
ETFs, like unit trusts, offer investors the benefits of diversification. For instance, an investor buying the FBM30etf will gain exposure to the 30 largest companies by market capitalisation, all in one. In other words, they don't have to fork out a lump sum of money to buy each and every one of the 30 stocks — just the minimal one board lot (or 100 units) of the FBM30etf.

Better yet, ETFs usually has lower expense ratio than comparable unit trusts. Annual management fee for unit trusts usually range between 1% and 2%. By comparison, the annual administrative fees for FBM30etf are estimated to total around 0.65%.

The lower fees and expenses are, primarily, because ETFs are passively managed funds. That means the underlying portfolio of stocks and weightings simply mirror the indices they're tracking. In short, investors do not get the benefit of fund managers stock picking or timing the market. Having said that, it remains arguable whether actively managed funds do perform better over the longer term.

Unit trusts also have higher sales charge, typically 5% or higher, whereas the transaction costs for ETFs are similar to those for normal shares trading including brokerage commission (0.3% to 0.6%), stamp duty and clearing fees.

How to buy and sell ETFs?
Trading in ETFs is also a simpler and more convenient process — it's just like stock trading. Investors can buy or sell the ETF by calling their remisiers at any time during trading hours and using the same trading/CDS accounts. This allows investors to be more responsive to market changes. Transactions are settled in the usual way as stocks are, on T+3.

The price of an ETF is determined by demand and supply but shouldn't stray too far from the market value of its underlying portfolio. ETFs also normally have a dividend policy. The FBM30etf expects to distribute any dividends and interest income it receives semi-annually, after netting expenses.

In a nutshell...
ETFs offer investors a relatively low cost, passive way of investing in the market. Returns will more or less mirror the future performance of the underlying index. Under prevailing trading conditions, we suspect that the FBM30etf will do fairly well.

While sentiment for the broader market has been somewhat ambivalent of late, share prices for key blue chips have been inching higher. The FBM30 Index has risen some 47% since its creation just over a year ago, while cumulative gains year-to-date stand at roughly 25%.

Vietnam Excursion (23/12/07-05/01/08)

Finally, i have booked the air ticket to Ho Chi Minh City (HCMC) from Singapore, using the service of budget airline Tiger Airways. This is almost one month after i booked the return ticket from Hanoi to Kuala Lumpur. After comparing the fares of two Singapore budget airlines Jetstar Asia and Tiger Airways, i decided to go with Tiger Airways because of its lower airfare and more convenient departure time.

My tentative itinerary would be visiting HCMC, Mekong Delta, Dalat, Danang, Hue and Hanoi. Main mode of transportation between major cities would be using Reunification Express train.

HCMC - Notre Dame Cathedral, Reunification Palace, etc.
Mekong Delta - Mytho, Vinh Long, Cantho, the floating market.
Dalat - Cool mountain retreat.
Danang / Hoi An - China Beach.
Hue - Citadel (UNESCO World Heritage Site).
Hanoi - Old Quarter, Halong Bay, etc.

I attended a travelogue held in Kuala Lumpur a couple of years back about visiting Vietnam. The presenter of the travelogue opined that one should at least watch two movies before visiting Vietnam; these two movies titled Apocalypse Now and The Lover.

Apocalypse Now was directed by Francis Ford Coppola, starring Martin Sheen and Marlon Brando. It's set during Vietnam War. It tells the story of Army Captain Benjamin L. Willard (Martin Sheen) who is sent into the jungle to assassinate United States Army Special Forces Colonel Walter E. Kurtz (Marlon Brando), who is said to have gone insane. The film has been viewed as a journey into the darkness of the human psyche.

As for The Lover, it was a movie adapted from an autobiographical French novel L'Amant by Marguerite Duras. The movie version was directed by Jean-Jacques Annaud, starring Jane March and Tony Leung Ka-Fai. It's set against the backdrop of French colonial Vietnam during 1920's. The Lover reveals the intimacies and intricacies of a romance between a pubescent girl (Jane March), from a financially strapped French family and an older, wealthy Chinese man (Tony Leung Ka-Fai). This movie was one of the sexiest movie i have ever watched. Believe me.

One of the signature cuisine in Vietnam is of course the pho, a kind of clear soup noodle with beef or chicken variation. The other dish would be Vietnamese spring rolls. Would also like to taste their famous Vietnamese coffee.

Bonjour Vietnam!

Rule #1: An Investment Methodology

This investment book is written by Phil Town. It is essentially based on value investing and fundamental analysis with some modifications from the author.

The Excerpt

4M – Meaning, Moat, Management, Margin of Safety.

i) Meaning – Passion, Talent, Money.

View equity investment like buying into a company as if we depend on it for the next 100 years, not as just buying a share.

ii) Moat – The Big Five Numbers (Return on Investment Capital Growth Rate, Equity Growth Rate, EPS Growth Rate, Revenue Growth Rate, Free Cash Flow Growth Rate). Growth rate must be at least 10% per annum. Compare the growth rates for the last 10 years, 5 years and 1 year to see whether they are deteriorating. Lastly, debt must be within manageable level.

iii) Management – Read the previous year annual reports to see whether the CEO of the company has delivered what he had promised. Preferably a Level 5 (a term coined by Jim Collins) CEO.

iv) Margin of Safety – At least 50% discount to the sticker price.

Calculate the Sticker Price (Intrinsic value) & Margin of Safety (MOS)

After passing the 4M examination, we must determine the right price to buy. These steps are basically the essence of the entire book.

a) Get the current EPS.

b) Determine the Equity Growth Rate – either from historical data or from industry estimation, whichever is lower.

c) Determine the future P/E ratio – 2 x Equity Growth Rate of (b) or from historical data, whichever is lower.

d) Determine the minimum rate of return – 15%.

e) Determine the Sticker Price – ¼ of (future P/E ratio x current EPS).

f) Determine the MOS – 50% off the Sticker Price. Buy if it is less than 50%.

The 3 Tools (Technical Analysis)

i) Stochastic

ii) Moving Average – 10 days.

iii) MACD – Standard is 12-26-9, preferred is 8-17-9 version.

Even though the share price is at 50% off the sticker price now, individual investors should wait for the right moment. This means waiting for these 3 indicators to show positive signals. These indicators are used by institutional players to determine the right time to buy or to sell a stock. Individual investors should use these indicators to see whether the institutional players are buying or selling their holdings and thus making their own buy and sell decisions accordingly and timely.

Sell only when the share price has reached the sticker price (annually adjusted, roughly up 100% from MOS price). Or, when all the 3 indicators show negative signals. Buy back only when the price has dropped more than 20% from the selling price PROVIDED all the fundamentals are still the same and you had bought at 50% MOS price INITIALLY. Of course, don't forget the 3 indicators.

The author also ruled out the significance of dividend payment. He said it is better for the money to be retained in the company to grow the business than returning the profit as a way of dividend to you because this will save you from the headache of finding another company to reinvest the dividend received.

Although I must admit the author's way of calculating the intrinsic value is great (not many investment books teach you how to do this), it is always difficult to find a stock that is showing all the characteristics of Rule #1 investing. The journey of investing never stop. Seek and ye shall find.

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything

This is a book by University of Chicago economist Steven D. Levitt and New York Times journalist Stephen J. Dubner published in 2005.

The Excerpt

Morality represents the way people would like the world to work—whereas economics represents how it actually does work. Economists use data as a tool to determine the effect of any one factor, or even the whole effect.

The book based on a few fundamental ideas:

1. Incentives are the cornerstone of modern life – Cheating among school teachers and sumo wrestlers.

2. The conventional wisdom is often wrong – Ask the right question, you might find some interesting answers.

3. Dramatic effects often have distant, subtle causes – Legalized abortion in 1970s causes substantially drop in crime rate in 1990s.

4. Experts like real-estate agents use their informational advantage to serve their own agenda – Internet brings balance to information asymmetry.

5. Knowing what to measure and how to measure it makes a complicated world much less so – If you learn how to look at data in the right way, you can explain riddles that otherwise might have seemed impossible.

Regression analysis – By applying constant every variable except the two he wishes to focus on, and showing how those two correlated. Correlation indicates whether two variables move together, positively or negatively. Cold and snowing outside is positively correlated; but we are not sure whether the cold causes the snow or the snow causes the cold.

Parenting – It does matter who the parents are, not what the parents do in order to have positive influence on the children.

Two Bookstores - MPH and Borders

Used to patronize MPH bookstores but now I found out that Borders bookstores actually provide much better deal. MPH has been issuing MRC privilege cards to their loyal customers in order for them to accumulate points when purchasing. But the problem is the MRC card only valid for 2 years and the points accumulated doesn't worth the gift voucher (the rebate) they reward you. The rebate term and condition is really dreadful. Readers may refer these at the bottom. You also need to renew the MRC membership with RM100 purchase within 12 months from expiry date or pay with RM10.

Better is Borders. They straight away give 20% off to some of the latest and bestselling titles in town. After comparing both, I discovered that Borders saves me more money than the MPH reward program. Furthermore, the Borders 20% discount or even the selected 3 for 2 deal (choose three selected books and the cheapest one is free) provide instant gratification compare to those of MPH where you only get the gift voucher at later date. And, I don't even need a loyalty card for that.

Of course, MPH does have advantages over Borders. Their MRC cards can be used to shop online at http://www.mph.com.my and they also publish the periodic Quill magazine for their members. Frankly, I only received one issue of Quill magazine sent to my house in almost 2 years now.

As for me, my last few purchases were all done at Borders and still constantly looking for great books. Happy reading folks!

* Rebate

1. For every RM1 spent, members will be awarded 1 MRC point.
2. There are two point accumulation periods in a year - January to June and July to December.
3. At least 300 points must be accumulated in each of these periods to qualify for the rebate.
4. A 5% rebate will be awarded to MRC members who spend RM300 to RM999.99 and a 10% rebate will be awarded to those who spend RM1000 or more in each period.
5. Qualifying periods are independent of each other and points from one qualifying period cannot be carried forward into the next period. FOR EVERY NEW PERIOD, POINT ACCUMULATION WILL BEGIN FROM NIL.
6. Members are advised to keep all receipts for at least 6 months of each qualifying period in the event of discrepancies in the accumulated points.

Football - The Stake is High

Kinda miss some real football actions since European Cup final. Spanish La Liga is entering the final round of game. We could still see Real Madrid crowning champion if they beat Real Mallorca at home. Just like the case of Manchester United in English Premier League, I still feel some of the matches were fixed in order to allow Real Madrid to win the La Liga this year. Barcelona have been impressive with Lionel Messi coming out from injury. If Barcelona fail to win this season, we may see more of Messi's real talent and capability next season.

Anyway, football fans could still be treated with Copa America come end of June. Years in and years out, Argentina is still my favourite South American team. Not Brazil dudes. And I still think Argentina played the most spectacular and beautiful football during last year World Cup in Germany until they lost to host Germany in quarter final due to some questionable substitutions from the coach. Could that be another conspiracy behind the curtain? The stake is high in football these days. Don't rule out any possibilities. Not caught doesn't mean not there.

A Series of Unfortunate Events

I have been experiencing a spate of bad lucks recently. Last Saturday, a fish bone was stuck in my throat. Though not actually choking and life-threatening, it was kinda bad experience you won't really wanna try it at home. You feel something really annoying inside your esophagus.

Then yesterday, my ADSL modem, wireless router, desktop PC and Astro decoder were all fried and rest in peace because of a bolt of lightning that struck at the right (or wrong) moment. This definitely blows a hole in my pocket already. Hopefully, this consecutive run of bad lucks won't continue anymore.

Not to say superstitious, maybe this year my good luck astrological star is not shining bright enough. Or is this so-called divine intervention? Did I do something wrong recently???

Transmile - The Importance of Cash Flow Statement

Transmile Group Berhad's manipulation of its account receivables might have come as a big surprise to anyone who follows the news. It was reported that a huge chunk of its invoices issued could not be substantiated. Being one of the flagship companies of Malaysia richest man Tan Sri Robert Kuok, nobody had expected this to be happened. If the big boss has been screwed and deceived indeed, what else can you expect from the small investors? Can Security Commission (SC) do something to protect small investors? Or should we rely on ourselves when making investment decision?

My choice would be the latter. Instead of relying SC to protect us, we should better equip and protect ourselves from the bogus accounting practice. Most of the public companies can easily and legally manipulate their Income Statements but find it extremely difficult to manipulate the Cash Flow Statement. This is because the bank balance in a company account cannot lie. So, it would be advisable to look at the Cash Flow from Operating Activities section first in the Cash Flow Statement next time before looking at the profit figure in the Income Statement.


(Let's look at an article discussing this issue.)

Cash flow indicates company’s health

Smart investors look at the cash flow statement of companies first instead of the income statement to understand the actual financial health, says US-based fund manager Jay Taparia.

There were always cases of companies manipulating their accounts to make their figures “a bit rosier”, said Taparia, who is the principal of Sanskar Investments, a fund management company in Chicago.

He said on Aug 2 such manipulation was abetted by loopholes in accounting standards. The Generally Accepted Accounting Principles (GAAP) were more open for manipulation compared to simple cash accounting, he said.

“Small business accounting has always been on a cash basis and it is much harder to manipulate,” Taparia said at a luncheon talk in Kuala Lumpur on “Identifying Potential Financial Reporting Abuses”.

He said income statements are prone to manipulation, as there are multiple ways to account for every line item on income statements.

As for revenue, he cautioned that it could be recognised under three different scenarios – when cash came in the door, when contract signed but no cash received and when probability that contract will be signed is high.

For instance, revenue overstatement could occur via “channel stuffing” where companies place inventory on client sites and booked them as revenue even though the cash was not received, he added.

“Honestly, as an investor and money manager, I do not use the income statement anymore and I do not care about earnings per share or price-to-earnings ratios,” he added.

Taparia said he preferred to use the cash flow statement as it was relatively the same each time as the corporate cheque book had to be reconciled to cash.

“The bottomline is – if you see revenue and net income increase and cash flow from operations decrease, be suspicious about tomfoolery. Cold hard cash never lies,” he said.

He said that investors wanted ethical and motivated management whose main objective was to maximise cash flow and thus shareholder value alongside with their own.

“Shareholder-friendliness and management who care about how their employees are treated have always paid well to shareholders,” he said.

Companies under pressure to manipulate financials are:

• High growth (expectation) industries – companies under heavy pressure from competitors and shareholders – high-risk industries (for example technology and biotechnology companies;
• Management under fire to short-term results (for example, first net profit, turnaround, new management team, post acquisition);
• Managements that stand to gain short-term personal windfalls for “results”, i.e. share options;
• Companies inordinately dependent on high share price to support continuing operations (ability to get loans, acquisitions); and
• In a market of “irrational exuberance” – any company afraid of being left behind.
  

French Open - Roger Federer or Rafael Nadal?

In men's tennis these days, this is the only question that will be invariably asked by the fans. Roger Federer or Rafael Nadal? Well, I reckon both players have a good chance of winning the French Open this year in Roland Garros with Rafael Nadal slightly edges ahead considering their head-to-head records and Nadal's almost perfect results on clay courts recently.

The unique characteristics of the clay courts, notably the French Open had over the years prevent some great players like Pete Sampras and Roger Federer from crowning champion. The tennis balls tend to be bounced slower than other court surfaces like grass and Rebound Ace. Players must have patience. Normally they exchange shots at the baseline before going in for a kill.

Overall, Roger Federer is a complete player in terms of skills, footworks, service, composure and his ability to read the game so well. Rafael Nadal on the other hand has a great physique - his sheer brute force of forehand topspin is his best weapon in addition to his great court coverage. Of course, like many Spain and Latin American players, Nadal was groomed and trained on clay courts since young. This is shown from the nationality of previous champions for the past ten years in French Open were from Spain and Latin America with the exception of Andre Agassi.

So, Rafael Nadal is still the one to beat in this year French Open. But don't rule out Roger Federer. His win over Rafael Nadal in Hamburg Masters recently on clay court should serve as a timely reminder.