The goal of an economic stimulus check is to give money to individuals, who will then go out and spend the money. But how effective is a check to every American toward stimulating the economy?
Lame Duck Session
In the few remaining weeks of this Congressional session and the Bush Administration, under consideration is a $100 billion bill which would extend help to states that have cut spending, increase food stamps, and allow extra unemployment benefits (Uchitelle & Calmes, 2008).
Democratic congressional leaders suggest the passage of two bills, one in this lame duck session, and a second larger bill after the inauguration for $150-$200 billion (Lightman, 2008).
The Effectiveness of a Stimulus
According to the Economist, the $92 billion in tax rebates which Americans received in July led to a growth in consumer spending of 1.7%.
This growth took place even as consumers managed high gasoline prices, unemployment, and tightening credit.
Without the stimulus, consumer spending may not have grown at all (Economist, 2008).
Limitations of a Stimulus
Macroeconomic Advisers, an economic forecasting firm, estimates that consumers spend only 30% of their checks, applying the remainder to debt or savings.
Other options include investment in infrastructure (such as roads, bridges, tunnels, etc.), assistance to state and local governments who may have to cut services to balance their budgets, and direct help for Americans through extension of unemployment, heating assistance, and food stamps.
However, the Congressional Budget Office estimates that the money for infrastructure development is generally spent at a rate of less than 30% per year, and funds given to states may also be saved by those states.
Therefore, it may be as effective to increasing consumer spending to give funds directly to the individuals (Economist, 2008).
Obama’s Stance
Even before Barack Obama was elected president, he supported the proposed economic stimulus.
He has also suggested an “emergency energy rebate”, $500 to every worker or $1000 for every family, paid for by a tax on the oil companies.
As reported by the New York Times, the economic stimulus would require at least $200 billion dollars.
Obama’s representatives want the checks to arrive before tax returns are filed in April (Uchitelle & Calmes, 2008).
Conclusion
An economic stimulus appears likely, as it has the support of the president-elect and the outgoing and incoming Congress. If it can stimulate consumer spending as the July stimulus did, it may have its intended effect of helping to stave off further recession.
source
Economist. (2008). The Economy: In Need of More Band-Aids. The Economist.
Available:
http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=12066188 [2008,
November 9th]
Lightman, D. (2008). Can a $100 Billion Stimulus Save a $14 Trillion Economy? McClatchy
Newspapers. Available: http://www.mcclatchydc.com; [2008, November 9th].
Uchitelle, L., & Calmes, J. (2008, November 5th). A Towering Economic To-Do List for Obama.
New York Times. Available: www.nytimes.com/2008/11/06/business/06challenges.html [2008,
November 9th].
Read more at Suite101: Economic Stimulus 2009: A Priority for US President-Elect Obama http://www.suite101.com/content/economic-stimlus-2009-a77542#ixzz18333TFh9
2010 Stimulus check
The 2010 stimulus check is set to help over 90% of Americans, but how will this affect you? The changes operated after the implementation of the stimulus have shown themselves clearly in 2009 by way of the stimulus check a high percentage of citizens have received, but its continuation in 2010 will be a bit different. The way in which the stimulus will work consists in a decrease in federal taxes, which will manifest itself through increases in average Americans’ paychecks.
But how do you know you qualify for this generalized federal tax deduction that is part of the government’s stimulus package and how should you go about receiving what the government is offering you, like a 2010 stimulus check ? First of all, in order to qualify, you must be paying social security; this means you have to be employed (or self-employed), i.e. you must be working and paying taxes. You must also make sure that your income does not exceeded the amount of $95,000 per year, or, if you are married and wish to submit a joint stimulus consideration request, then the joint income of the two applicants mustn’t exceed $190,000 per year. You must also keep in mind that certain restrictions to the federal tax cut the stimulus will grant you apply if your annual intake exceeds $75,000 or if you and your spouse’s joint annual income exceeds $150,000.
The federal tax deduction comprised in the stimulus will put in (or rather, not take out of) your pocket the sum of $400 (or for a joint application a total of $800). This is money the government normally would have taken out of your salary that you are now allowed to keep. It’s the same amount you will receive in 2009, only divided along 12 months instead of 9. This, in case you meet all the requirements and benefit from the full tax deduction. The amount of the deduction will be smaller depending on where you stand on the annual income chart. You will not be receiving a check in the mail or a check from your employer to mark the stimulus tax cut, but rather, you will be receiving an extra few dollars every month on top of what you’ve been earning so far. Those with maximal benefits from the stimulus will cash an extra $33 every month for the duration of the 2010 stimulus check thanks to the stimulus plan. That means that if you are filing for the federal tax deduction with someone else, together you will receive $66 every month.
If you are working two jobs and qualify for the federal tax cut, you will probably need to be extra careful. As it turns out, you stand to get a tax deduction on both paychecks, which means that you that you have double benefits, which unfortunately isn’t possible. Even if you are working two jobs, you only qualify for one share of the stimulus plan, which means that if you receive the something extra on your paychecks from both jobs, you will either have to notify one of your employers instructing them to desist, or you will be required to return the extra money after the end of the fiscal year.
The tax deductions that accompany the stimulus plan are meant to make it easier to navigate through the economic crisis, for the hard working Americans who find themselves having difficulty keeping up with the ever changing economic climate. While it might not seem like much on a grand scale, the federal tax deduction comprised in the 2010 stimulus check can make things a lot easier for many of those who are struggling to make ends meet.
But how do you know you qualify for this generalized federal tax deduction that is part of the government’s stimulus package and how should you go about receiving what the government is offering you, like a 2010 stimulus check ? First of all, in order to qualify, you must be paying social security; this means you have to be employed (or self-employed), i.e. you must be working and paying taxes. You must also make sure that your income does not exceeded the amount of $95,000 per year, or, if you are married and wish to submit a joint stimulus consideration request, then the joint income of the two applicants mustn’t exceed $190,000 per year. You must also keep in mind that certain restrictions to the federal tax cut the stimulus will grant you apply if your annual intake exceeds $75,000 or if you and your spouse’s joint annual income exceeds $150,000.
The federal tax deduction comprised in the stimulus will put in (or rather, not take out of) your pocket the sum of $400 (or for a joint application a total of $800). This is money the government normally would have taken out of your salary that you are now allowed to keep. It’s the same amount you will receive in 2009, only divided along 12 months instead of 9. This, in case you meet all the requirements and benefit from the full tax deduction. The amount of the deduction will be smaller depending on where you stand on the annual income chart. You will not be receiving a check in the mail or a check from your employer to mark the stimulus tax cut, but rather, you will be receiving an extra few dollars every month on top of what you’ve been earning so far. Those with maximal benefits from the stimulus will cash an extra $33 every month for the duration of the 2010 stimulus check thanks to the stimulus plan. That means that if you are filing for the federal tax deduction with someone else, together you will receive $66 every month.
If you are working two jobs and qualify for the federal tax cut, you will probably need to be extra careful. As it turns out, you stand to get a tax deduction on both paychecks, which means that you that you have double benefits, which unfortunately isn’t possible. Even if you are working two jobs, you only qualify for one share of the stimulus plan, which means that if you receive the something extra on your paychecks from both jobs, you will either have to notify one of your employers instructing them to desist, or you will be required to return the extra money after the end of the fiscal year.
The tax deductions that accompany the stimulus plan are meant to make it easier to navigate through the economic crisis, for the hard working Americans who find themselves having difficulty keeping up with the ever changing economic climate. While it might not seem like much on a grand scale, the federal tax deduction comprised in the 2010 stimulus check can make things a lot easier for many of those who are struggling to make ends meet.
Basic financial statements (Profit and Loss Account)
By RAYMOND ROY TIRUCHELVAM
FOR a non-finance person, evaluating a company's financial can be daunting, let alone understanding it to form an opinion. The most basic form of financial statements comprises the Profit & Loss Account or sometimes referred to as Income Statement and the Balance Sheet.
Another two statements that make a complete financial information for reporting purposes comprise the Statement of Retained Earnings and Statement of Cash Flow.
The objective of a financial statement is to provide information about the financial position, performance and changes in the position of an enterprise.
The Balance Sheet represents the financial position or net worth of a business entity on a specified date. The presentation is based on a fundamental accounting equation of Assets = Liabilities + Shareholders Fund. The main categories of assets are usually listed first, usually in order of liquidity. Next follows liabilities, short and long term, which represent payables and borrowings held by the entity.
The difference between the assets and liabilities (Assets Liabilities = Shareholders Funds), is known as Shareholders Funds, or sometimes referred to as owner's equity, that entails the company's capital plus retained earnings. Borrowings (liability) or owner's money (owner's equity) are the two means used for financing an asset.
Mathematically, over a period of time, if the assets grow bigger than the liabilities, it would mean that the entity has made a profit (which represents the essence of the Profit & Loss Account); this is reflected via an increased asset base (taking shape in many forms from cash, inventories, accounts receivable, fixed assets or investments).
Reverting to the Balance Sheet equation, the Shareholders Fund will reflect the increment. Since the entity's capital remains constant (unless the new assets are caused by new share issues), the increment is credited to a special account called Retained Earnings, as the name denotes.
Next, the Profit & Loss Account represents summarised transactions of an entity's performance over a given period, showing its profitability (or losses). Acting as the management's scorecard, it identifies the revenues and expenses undertaken which results in either a profit or a loss, based on the fundamental accounting concept of: Revenue Expenses = Profit (or Loss if expenses exceed revenue).
This in return will drive the direction of the Shareholders Fund (in particular Retained Earnings sub-category), for good (profit) or for worse (loss).
The particulars of a regular company's Profit & Loss Account would look as in Table 1.
There is also a category of item to be on the lookout called Unusual Item, which represents non-recurring non-revenue based transaction undertaken by the entity that results in a profit or loss. Examples of MAS selling aircraft, discontinuing a business line, incurring losses from natural disaster, writing down of investment value, are a few, which should be evaluated separately from the results from operations.
Due to its importance, EPS or Earnings Per Share is also required to be disclosed at the end of the Profit & Loss account. It presents the earnings divided by the total ordinary shares outstanding.
This single measure differentiates the efficiency in the earnings between companies, and represents the most important criteria in determining the price of the entity's shares and is used as a component to derive the all important PE or Price to Earnings ratio.
A large Retained Earnings balance as compared to the total Shareholders Fund, will denote a profitable company (accumulation of profits over the years), and a negative Retained Earnings (or Retained Loss) reflects the opposite. In extreme cases, the Retained Loss (debit balance) can overtake the Share Capital (credit balance), thus resulting in a negative Shareholders Fund. One surely would not want to invest in such a company.
Some listed companies, when the Retained Earnings gets so large (coupled with other factors such as inability to pay out dividend), reward the shareholders via Bonus Issue exercise, whereby part of the retained earnings are converted into new shares, accruing to existing shareholders.
This not only represents a short cut of the dividend payout, but also a tax free option via capital returns.
Raymond Roy Tiruchelvam, who has problems reconciling his gross habits with his net income is a financial planner with SABIC Group of Companies.
FOR a non-finance person, evaluating a company's financial can be daunting, let alone understanding it to form an opinion. The most basic form of financial statements comprises the Profit & Loss Account or sometimes referred to as Income Statement and the Balance Sheet.
Another two statements that make a complete financial information for reporting purposes comprise the Statement of Retained Earnings and Statement of Cash Flow.
The objective of a financial statement is to provide information about the financial position, performance and changes in the position of an enterprise.
The Balance Sheet represents the financial position or net worth of a business entity on a specified date. The presentation is based on a fundamental accounting equation of Assets = Liabilities + Shareholders Fund. The main categories of assets are usually listed first, usually in order of liquidity. Next follows liabilities, short and long term, which represent payables and borrowings held by the entity.
The difference between the assets and liabilities (Assets Liabilities = Shareholders Funds), is known as Shareholders Funds, or sometimes referred to as owner's equity, that entails the company's capital plus retained earnings. Borrowings (liability) or owner's money (owner's equity) are the two means used for financing an asset.
Mathematically, over a period of time, if the assets grow bigger than the liabilities, it would mean that the entity has made a profit (which represents the essence of the Profit & Loss Account); this is reflected via an increased asset base (taking shape in many forms from cash, inventories, accounts receivable, fixed assets or investments).
Reverting to the Balance Sheet equation, the Shareholders Fund will reflect the increment. Since the entity's capital remains constant (unless the new assets are caused by new share issues), the increment is credited to a special account called Retained Earnings, as the name denotes.
Next, the Profit & Loss Account represents summarised transactions of an entity's performance over a given period, showing its profitability (or losses). Acting as the management's scorecard, it identifies the revenues and expenses undertaken which results in either a profit or a loss, based on the fundamental accounting concept of: Revenue Expenses = Profit (or Loss if expenses exceed revenue).
This in return will drive the direction of the Shareholders Fund (in particular Retained Earnings sub-category), for good (profit) or for worse (loss).
The particulars of a regular company's Profit & Loss Account would look as in Table 1.
There is also a category of item to be on the lookout called Unusual Item, which represents non-recurring non-revenue based transaction undertaken by the entity that results in a profit or loss. Examples of MAS selling aircraft, discontinuing a business line, incurring losses from natural disaster, writing down of investment value, are a few, which should be evaluated separately from the results from operations.
Due to its importance, EPS or Earnings Per Share is also required to be disclosed at the end of the Profit & Loss account. It presents the earnings divided by the total ordinary shares outstanding.
This single measure differentiates the efficiency in the earnings between companies, and represents the most important criteria in determining the price of the entity's shares and is used as a component to derive the all important PE or Price to Earnings ratio.
A large Retained Earnings balance as compared to the total Shareholders Fund, will denote a profitable company (accumulation of profits over the years), and a negative Retained Earnings (or Retained Loss) reflects the opposite. In extreme cases, the Retained Loss (debit balance) can overtake the Share Capital (credit balance), thus resulting in a negative Shareholders Fund. One surely would not want to invest in such a company.
Some listed companies, when the Retained Earnings gets so large (coupled with other factors such as inability to pay out dividend), reward the shareholders via Bonus Issue exercise, whereby part of the retained earnings are converted into new shares, accruing to existing shareholders.
This not only represents a short cut of the dividend payout, but also a tax free option via capital returns.
Raymond Roy Tiruchelvam, who has problems reconciling his gross habits with his net income is a financial planner with SABIC Group of Companies.
Madoff trustee sues HSBC for nine billion dollars
NEW YORK, Tuesday 7 December 2010 (AFP) - The trustee charged with recouping assets for victims of Wall Street fraudster Bernard Madoff is suing British banking giant HSBC and related entities for at least nine billion dollars.
In a statement issued Sunday, Irving Picard accused the firms of enabling Madoff's massive Ponzi scheme by creating, marketing and supporting "an international network of a dozen feeder funds based in Europe, the Caribbean and Central America."
HSBC and the related funds led investors to direct over 8.9 billion dollars into Bernard L. Madoff Investment Securities LLC (BLMIS) -- Madoff's fraudulent investment advisory business, according to Picard.
"The defendants also earned hundreds of millions of dollars by selling, marketing, lending to and investing in financial instruments designed to substantially assist Madoff by pumping money into BLMIS and prolonging the Ponzi scheme," despite being aware of the fraud, he added.
Italian bank UniCredit, Austrian banker Sonja Kohn and her Bank Medici are among those accused of helping the former Nasdaq chairman expand his scheme.
"Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars and countless victims sooner," Picard said.
"The defendants were willfully and deliberately blind to the fraud, even after learning about numerous red flags surrounding Madoff."
Last week, Picard said he was seeking 6.4 billion dollars from JPMorgan Chase for supporting the scam and he has filed a suit against Swiss bank UBS seeking two billion dollars in damages for its part in the massive fraud.
Madoff, who touted himself as one of New York's most successful money managers, was arrested in early December 2008 for running a pyramid scheme. He was sentenced in June 2009 to 150 years in prison.
Madoff's victims, including charities, major banks, Hollywood moguls and savvy financial players, handed him tens of billions of dollars over more than two decades.
The crime rocked Wall Street, where Madoff was a pillar of the New York and Florida Jewish communities.
Madoff's right hand man, Frank DiPascali, and his accountant, David Friehling, have since pleaded guilty in an investigation that has yet to fully unravel the crime or compensate the approximately 16,000 direct victims.
Even the amount of money stolen remains elusive: Madoff originally claimed to have been managing 65 billion dollars, but in October the court-appointed liquidator said the real bottom line was 21.2 billion dollars.
Madoff has insisted he acted alone, but a handful of others, including an assistant, two executives, computer experts and a bookkeeper have also been arrested.
Madoff, who rose from a humble start as a lifeguard in New York to become one of Wall Street's most trusted and powerful money managers, is incarcerated in North Carolina.
His luxury watches, piano and other personal items were sold at auction to raise money for his fraud victims on November 13.
MySinchew 2010.12.07
In a statement issued Sunday, Irving Picard accused the firms of enabling Madoff's massive Ponzi scheme by creating, marketing and supporting "an international network of a dozen feeder funds based in Europe, the Caribbean and Central America."
HSBC and the related funds led investors to direct over 8.9 billion dollars into Bernard L. Madoff Investment Securities LLC (BLMIS) -- Madoff's fraudulent investment advisory business, according to Picard.
"The defendants also earned hundreds of millions of dollars by selling, marketing, lending to and investing in financial instruments designed to substantially assist Madoff by pumping money into BLMIS and prolonging the Ponzi scheme," despite being aware of the fraud, he added.
Italian bank UniCredit, Austrian banker Sonja Kohn and her Bank Medici are among those accused of helping the former Nasdaq chairman expand his scheme.
"Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars and countless victims sooner," Picard said.
"The defendants were willfully and deliberately blind to the fraud, even after learning about numerous red flags surrounding Madoff."
Last week, Picard said he was seeking 6.4 billion dollars from JPMorgan Chase for supporting the scam and he has filed a suit against Swiss bank UBS seeking two billion dollars in damages for its part in the massive fraud.
Madoff, who touted himself as one of New York's most successful money managers, was arrested in early December 2008 for running a pyramid scheme. He was sentenced in June 2009 to 150 years in prison.
Madoff's victims, including charities, major banks, Hollywood moguls and savvy financial players, handed him tens of billions of dollars over more than two decades.
The crime rocked Wall Street, where Madoff was a pillar of the New York and Florida Jewish communities.
Madoff's right hand man, Frank DiPascali, and his accountant, David Friehling, have since pleaded guilty in an investigation that has yet to fully unravel the crime or compensate the approximately 16,000 direct victims.
Even the amount of money stolen remains elusive: Madoff originally claimed to have been managing 65 billion dollars, but in October the court-appointed liquidator said the real bottom line was 21.2 billion dollars.
Madoff has insisted he acted alone, but a handful of others, including an assistant, two executives, computer experts and a bookkeeper have also been arrested.
Madoff, who rose from a humble start as a lifeguard in New York to become one of Wall Street's most trusted and powerful money managers, is incarcerated in North Carolina.
His luxury watches, piano and other personal items were sold at auction to raise money for his fraud victims on November 13.
MySinchew 2010.12.07
APM Insider Trade
Dato Tan Heng Chew sold 2.165 million shares
APM AUTOMOTIVE HOLDINGS BERHAD
Real returns with smart investment strategies
Successful investing is not about taking big risks, but more about being able to balance risk and return by investing in a meaningful portfolio.
Use investment strategies that do work: a balanced allocation of your portfolio’s assets among securities that suit your individual needs, the use of Cost Averaging (CA) to lower the cost of overall investments and dividend reinvestment programmes, and a well disciplined, long haul approach to investing.
Most important factor you have in reaching your goals is time. The more time you have, the more chance you have of success. If you’re thinking of embarking on an investment strategy like CA, know your facts first.
For example, CA involves the regular purchase of units in a managed fund or shares over a period of time. It can be done automatically via an investment plan and you may reduce the risk associated with market fluctuations while giving your portfolio the best chance of long term profitability.
Here are options for you to choose from when it comes to investing in your future:
1.Direct investing
You invest directly in the share market, property or real estate investment trusts (REITs). The downside is that it generally requires market knowledge, plus regular monitoring of market trends, tax and legal changes. Many working adults don’t have access to the right market information or expertise to do direct investing well.
2.Buying bonds
The general principle of bond investing is that when you buy a bond, you are lending your money for a certain period of time to the issuer, be it a listed company or not. It’s a good choice for investors who require fixed horizon and steady income.
However, investing in bonds are usually for the high- net-worth and institutional investors as bonds are usually offered at a high entry cost, in hundreds of thousands or millions of ringgit.
Additionally, investors are advised to pay attention to total return, not just yield as bond prices fall when interest rates rise. An option for the retail investors to access the asset class will be to invest in unit trust bond fund due to its low entry cost and diverse holdings which allows for diversification.
3.Stocks/equities
Historically the best, but most volatile way to grow your money is through the stock market. On a short-term basis, stock prices fluctuate based on everything from interest rates to investor sentiment, to the weather. But on a long term basis, you could potentially make (or lose) a lot of your money in stock market. Bear in mind that risk and return come hand-in-hand.
4.Managed funds
If you only have a small sum to invest, a good option is to put your money in a managed or unit trust fund. These are funds which pool the investments from a number of investors, enable you to access markets and assets that may be expensive or difficult to buy directly into, such as the China’s restrictive A-share market, emerging markets and even the fixed income space such as government bonds.
Additionally, unit trust funds are a good alternative to buying individual stocks, where in exchange for a small fee you will have the advantage of participating in several stocks within a fund. What happens is that the fund manager trades the fund’s underlying securities, realising capital gains or losses, and collects the dividend or interest income. The proceeds are then passed along to the individual investors. Most funds require only moderate investments, ranging from a few hundred to a few thousand Ringgit.
This article is brought to you by HwangDBS Investment Management, your Asian Financial Specialists. Log on to www.hdbsim.com.my or call 1-800-88-7080 to find out how you can cost average your investment via the HwangDBS Smart Save Plan.
Use investment strategies that do work: a balanced allocation of your portfolio’s assets among securities that suit your individual needs, the use of Cost Averaging (CA) to lower the cost of overall investments and dividend reinvestment programmes, and a well disciplined, long haul approach to investing.
Most important factor you have in reaching your goals is time. The more time you have, the more chance you have of success. If you’re thinking of embarking on an investment strategy like CA, know your facts first.
For example, CA involves the regular purchase of units in a managed fund or shares over a period of time. It can be done automatically via an investment plan and you may reduce the risk associated with market fluctuations while giving your portfolio the best chance of long term profitability.
Here are options for you to choose from when it comes to investing in your future:
1.Direct investing
You invest directly in the share market, property or real estate investment trusts (REITs). The downside is that it generally requires market knowledge, plus regular monitoring of market trends, tax and legal changes. Many working adults don’t have access to the right market information or expertise to do direct investing well.
2.Buying bonds
The general principle of bond investing is that when you buy a bond, you are lending your money for a certain period of time to the issuer, be it a listed company or not. It’s a good choice for investors who require fixed horizon and steady income.
However, investing in bonds are usually for the high- net-worth and institutional investors as bonds are usually offered at a high entry cost, in hundreds of thousands or millions of ringgit.
Additionally, investors are advised to pay attention to total return, not just yield as bond prices fall when interest rates rise. An option for the retail investors to access the asset class will be to invest in unit trust bond fund due to its low entry cost and diverse holdings which allows for diversification.
3.Stocks/equities
Historically the best, but most volatile way to grow your money is through the stock market. On a short-term basis, stock prices fluctuate based on everything from interest rates to investor sentiment, to the weather. But on a long term basis, you could potentially make (or lose) a lot of your money in stock market. Bear in mind that risk and return come hand-in-hand.
4.Managed funds
If you only have a small sum to invest, a good option is to put your money in a managed or unit trust fund. These are funds which pool the investments from a number of investors, enable you to access markets and assets that may be expensive or difficult to buy directly into, such as the China’s restrictive A-share market, emerging markets and even the fixed income space such as government bonds.
Additionally, unit trust funds are a good alternative to buying individual stocks, where in exchange for a small fee you will have the advantage of participating in several stocks within a fund. What happens is that the fund manager trades the fund’s underlying securities, realising capital gains or losses, and collects the dividend or interest income. The proceeds are then passed along to the individual investors. Most funds require only moderate investments, ranging from a few hundred to a few thousand Ringgit.
This article is brought to you by HwangDBS Investment Management, your Asian Financial Specialists. Log on to www.hdbsim.com.my or call 1-800-88-7080 to find out how you can cost average your investment via the HwangDBS Smart Save Plan.
At the end of these 700 words you will all be able to value your business, your shares, your investment property, even your spouse.
YOU may have heard of a discounted cash-flow valuation. You should have. It is core to life, the financial industry and everything else. But, of course, half of us haven't and the other half are too afraid to ask.
So in a mild attempt to educate you, let me take you gently through it so you'll never have to nod cluelessly again. At the end of these 700 words you will all be able to value your business, your shares, your investment property, even your spouse.
Let's start with this. What is the value of a dollar? Well it's a dollar, of course. OK. So what is the value of a dollar in a year's time? Ah, well, it's not a dollar. And this is the issue. Thanks to inflation, a dollar in a year's time is only worth about 97¢ because, by the time you get the dollar, prices will have gone up by about 3 per cent, so the dollar in a year's time will only buy you about 97¢ worth of the goods that you could buy today.
We can now use this to value a company, an asset or an individual. All you have to do is work out how much money they are going to earn and, using inflation, turn those future dollars back into today's money, add them all up, add in the value of any other assets they have and that's what they are worth.
Here's the root calculation: A dollar earned in a year's time is worth $1 divided by 1.03 (1 plus the inflation rate). That's 97¢ in today's money (97.08¢, actually). To work out the current value of a dollar earned in two years you divide by 1.03 and divide by 1.03 again. Which gives us 94.26¢. So 94.26¢ is all you would want to pay for a dollar someone is going to give you in two years' time. So to bust a bit of jargon, the net present value (NPV) of a dollar earned in two years' time, discounted at the rate of inflation, is 94.26¢.
So now let's value a company.
So you can see that by forecasting future profits and discounting the value of future profits back to today's money you can value almost any income-producing company, asset, property, or person. You can even work out what your own net present value is. If you spend more than you earn, it's zero.
So this is what research analysts do with shares. They forecast profits, discount those profits back to today's money, add them all up, account for any other assets, divide by the number of shares on issue and come up with what a share is worth. A lot of them call that a ''target price''.
Of course, it's not quite this simple. In the real world they don't use inflation. They calculate a ''discount rate'' and the arguments over what discount rate to use are endless, but basically, rather than inflation, it is what you could have earned investing your money somewhere else. It is the opportunity lost, not the inflation cost. So if you could have put the money in a bond for 10 years and earned 5.5 per cent you'd use that instead of inflation.
So that's it. How to value a company or share. Nice concept.
But before you go out and value your spouse you should know that it's all complete bollocks. Of course it is. Because, in the end, there are so many forecasts, assumptions and subjective opinions integrated into the calculation of value that it ceases to be a science and ends up an imperfect art. A basis for the negotiation of price at best. A starting point for an argument between buyer and seller. May the best negotiator win. And that's the sharemarket.
Marcus Padley is a stockbroker with Patersons Securities and the author of sharemarket newsletter Marcus Today. For a free trial visit marcustoday. com.au
His views do not necessarily reflect the views of Patersons.
http://www.theage.com.au/business/doing-the-sums-is-is-easy-but-its-still-a-value-judgment-20101210-18swe.html
So in a mild attempt to educate you, let me take you gently through it so you'll never have to nod cluelessly again. At the end of these 700 words you will all be able to value your business, your shares, your investment property, even your spouse.
Let's start with this. What is the value of a dollar? Well it's a dollar, of course. OK. So what is the value of a dollar in a year's time? Ah, well, it's not a dollar. And this is the issue. Thanks to inflation, a dollar in a year's time is only worth about 97¢ because, by the time you get the dollar, prices will have gone up by about 3 per cent, so the dollar in a year's time will only buy you about 97¢ worth of the goods that you could buy today.
We can now use this to value a company, an asset or an individual. All you have to do is work out how much money they are going to earn and, using inflation, turn those future dollars back into today's money, add them all up, add in the value of any other assets they have and that's what they are worth.
Here's the root calculation: A dollar earned in a year's time is worth $1 divided by 1.03 (1 plus the inflation rate). That's 97¢ in today's money (97.08¢, actually). To work out the current value of a dollar earned in two years you divide by 1.03 and divide by 1.03 again. Which gives us 94.26¢. So 94.26¢ is all you would want to pay for a dollar someone is going to give you in two years' time. So to bust a bit of jargon, the net present value (NPV) of a dollar earned in two years' time, discounted at the rate of inflation, is 94.26¢.
So now let's value a company.
- Step one: Forecast how much profit it will make each year between now and eternity.
- Step two: Use our calculation to ''discount'' all those future profits and price them in today's money.
- Step three: Add up all those discounted profits.
- Step four: Add any other assets (cash and buildings). That's the current value of the company and what someone buying the company should be prepared to pay today.
So you can see that by forecasting future profits and discounting the value of future profits back to today's money you can value almost any income-producing company, asset, property, or person. You can even work out what your own net present value is. If you spend more than you earn, it's zero.
So this is what research analysts do with shares. They forecast profits, discount those profits back to today's money, add them all up, account for any other assets, divide by the number of shares on issue and come up with what a share is worth. A lot of them call that a ''target price''.
Of course, it's not quite this simple. In the real world they don't use inflation. They calculate a ''discount rate'' and the arguments over what discount rate to use are endless, but basically, rather than inflation, it is what you could have earned investing your money somewhere else. It is the opportunity lost, not the inflation cost. So if you could have put the money in a bond for 10 years and earned 5.5 per cent you'd use that instead of inflation.
So that's it. How to value a company or share. Nice concept.
But before you go out and value your spouse you should know that it's all complete bollocks. Of course it is. Because, in the end, there are so many forecasts, assumptions and subjective opinions integrated into the calculation of value that it ceases to be a science and ends up an imperfect art. A basis for the negotiation of price at best. A starting point for an argument between buyer and seller. May the best negotiator win. And that's the sharemarket.
Marcus Padley is a stockbroker with Patersons Securities and the author of sharemarket newsletter Marcus Today. For a free trial visit marcustoday. com.au
His views do not necessarily reflect the views of Patersons.
http://www.theage.com.au/business/doing-the-sums-is-is-easy-but-its-still-a-value-judgment-20101210-18swe.html
Don't Be Misled By the P/E Ratio. It's actually growth that determines value.
By Nathan Slaughter Thursday, March 25, 2010
You might know the name Bill Miller. Aside from Warren Buffett, he could be the closest thing the investment world has to a rock star.
Every year, millions of investors set out with one goal in mind: to outperform the S&P 500. Miller's Legg Mason Value Trust did that for an impressive 15 years in a row.
That streak was finally broken in 2006, but his reputation was firmly cemented at that point. From his fund's inception in April 1982 until 2006, Miller steered his fund to annualized gains of +16%. That was good enough to turn a $10,000 investment into $395,000 -- about $156,000 more than a broad index fund would have returned.
After a long overdue slump, Miller's fund is back on top of the charts again. In fact, his fund's +47% gain during 2009 was 1,200 basis points ahead of the S&P 500.
Here's what you might not know. Miller achieved stardom and ran circles around other value fund managers by taking large stakes in companies like eBay (Nasdaq: EBAY), Google (Nasdaq: GOOG), and Amazon.com (Nasdaq: AMZN) -- highfliers that value purists wouldn't touch because of their high P/E ratios.
The message is clear: If P/E ratios are your only value barometer, then get ready to let some profits slip through your fingers. In fact, Investor's Business Daily has found that some of the market's biggest winners were trading at prices above 30 times earnings before they made their move.
All too often, novice investors buy into preconceived notions of what's cheap and what's expensive. A stock with a P/E below 10 may be a better deal than another trading at a P/E above 20. But then again it might not. These figures might get you in the ballpark -- but biting hook, line and sinker can cost you big.
Putting aside the fact that earnings can be inflated by asset sales, deflated by one-time charges, and distorted in other ways, let's remember that today is just a brief snapshot in time.
The point is, when you become a part owner in a company, you have a claim not just on today's earnings, but all future profits as well. The faster the company is growing, the more that future cash flow stream is worth to shareholders.
That's why Warren Buffett likes to say that "growth and value are joined at the hip."
You can't encapsulate the inherent value of a business in a P/E ratio. Take Amazon, for example, which has traded at 66 times earnings on average during the past five years. On occasion, the stock has garnered multiples above 80. Many looked at that figure and immediately dismissed the company as exorbitantly overpriced. And for most companies that would be true.
But as it turns out, the shares were actually cheap relative to what the e-commerce giant would soon become. In fact, the "expensive" $35 price tag from March 2005 is only about 12 times what the company earns per share now -- and guys like Bill Miller that spotted the firm's potential have since enjoyed +230% gains.
Digging into the annual report archives, I see where CEO Jeff Bezos applauded Amazon's sales of $148 million in 1997. Today, the firm rakes in that amount every 2.2 days. Clearly, that type of hyper-growth deserves a premium price.
And that's exactly why price-conscious value investors shouldn't automatically fear growth stocks -- growth is simply a component of value.
Let me show you an example. The table below depicts the impact of future cash flow growth assumptions on Company XYZ which trades today at $10. For the sake of consistency, we will keep all other variables constant.
If free cash flow climb at a modest +6% annual pace during the next five years, then your $10 investment in Company XYZ would be worth about $13.30 per share or a +33.0% return. If cash flow grows even faster, its projected value quickly ramps up to returns of +46.9%, +101.1% or even +148.8%.
We've been taught to believe there's an invisible velvet rope separating value stocks from growth stocks. But as you can see with Company XYZ, it's actually growth that determines value. So don't be blinded to the possibility that the market's most promising growth stocks can sometimes be the cheapest.
Many analysts choose to use the Price/Earnings to Growth (PEG) ratio in addition to the P/E ratio. PEG is a simple calculation -- (P/E) / (Annual Earnings Growth Rate).
The PEG ratio is used to evaluate a stock's valuation while taking into account earnings growth. A rule of thumb is that a PEG of 1.0 indicates fair value, less than 1.0 indicates the stock is undervalued, and more than 1.0 indicates it's overvalued. Here's how it works:
If Stock ABC is trading with a P/E ratio of 25, a value investor might deem it "expensive." But if its earnings growth rate is projected to be 30%, its PEG ratio would be 25 / 30 PEG.83. The PEG ratio says that Stock ABC is undervalued relative to its growth potential.
It is important to realize that relying on one metric alone will almost never give you an accurate measure of value. Being able to use and interpret a number of measures will give you a better idea of the whole picture when evaluating a stock's performance and potential.
http://www.investinganswers.com/education/dont-be-misled-pe-ratio-1115
You might know the name Bill Miller. Aside from Warren Buffett, he could be the closest thing the investment world has to a rock star.
Every year, millions of investors set out with one goal in mind: to outperform the S&P 500. Miller's Legg Mason Value Trust did that for an impressive 15 years in a row.
That streak was finally broken in 2006, but his reputation was firmly cemented at that point. From his fund's inception in April 1982 until 2006, Miller steered his fund to annualized gains of +16%. That was good enough to turn a $10,000 investment into $395,000 -- about $156,000 more than a broad index fund would have returned.
After a long overdue slump, Miller's fund is back on top of the charts again. In fact, his fund's +47% gain during 2009 was 1,200 basis points ahead of the S&P 500.
Here's what you might not know. Miller achieved stardom and ran circles around other value fund managers by taking large stakes in companies like eBay (Nasdaq: EBAY), Google (Nasdaq: GOOG), and Amazon.com (Nasdaq: AMZN) -- highfliers that value purists wouldn't touch because of their high P/E ratios.
The message is clear: If P/E ratios are your only value barometer, then get ready to let some profits slip through your fingers. In fact, Investor's Business Daily has found that some of the market's biggest winners were trading at prices above 30 times earnings before they made their move.
All too often, novice investors buy into preconceived notions of what's cheap and what's expensive. A stock with a P/E below 10 may be a better deal than another trading at a P/E above 20. But then again it might not. These figures might get you in the ballpark -- but biting hook, line and sinker can cost you big.
Putting aside the fact that earnings can be inflated by asset sales, deflated by one-time charges, and distorted in other ways, let's remember that today is just a brief snapshot in time.
The point is, when you become a part owner in a company, you have a claim not just on today's earnings, but all future profits as well. The faster the company is growing, the more that future cash flow stream is worth to shareholders.
That's why Warren Buffett likes to say that "growth and value are joined at the hip."
You can't encapsulate the inherent value of a business in a P/E ratio. Take Amazon, for example, which has traded at 66 times earnings on average during the past five years. On occasion, the stock has garnered multiples above 80. Many looked at that figure and immediately dismissed the company as exorbitantly overpriced. And for most companies that would be true.
But as it turns out, the shares were actually cheap relative to what the e-commerce giant would soon become. In fact, the "expensive" $35 price tag from March 2005 is only about 12 times what the company earns per share now -- and guys like Bill Miller that spotted the firm's potential have since enjoyed +230% gains.
Digging into the annual report archives, I see where CEO Jeff Bezos applauded Amazon's sales of $148 million in 1997. Today, the firm rakes in that amount every 2.2 days. Clearly, that type of hyper-growth deserves a premium price.
And that's exactly why price-conscious value investors shouldn't automatically fear growth stocks -- growth is simply a component of value.
Let me show you an example. The table below depicts the impact of future cash flow growth assumptions on Company XYZ which trades today at $10. For the sake of consistency, we will keep all other variables constant.
If free cash flow climb at a modest +6% annual pace during the next five years, then your $10 investment in Company XYZ would be worth about $13.30 per share or a +33.0% return. If cash flow grows even faster, its projected value quickly ramps up to returns of +46.9%, +101.1% or even +148.8%.
We've been taught to believe there's an invisible velvet rope separating value stocks from growth stocks. But as you can see with Company XYZ, it's actually growth that determines value. So don't be blinded to the possibility that the market's most promising growth stocks can sometimes be the cheapest.
Many analysts choose to use the Price/Earnings to Growth (PEG) ratio in addition to the P/E ratio. PEG is a simple calculation -- (P/E) / (Annual Earnings Growth Rate).
The PEG ratio is used to evaluate a stock's valuation while taking into account earnings growth. A rule of thumb is that a PEG of 1.0 indicates fair value, less than 1.0 indicates the stock is undervalued, and more than 1.0 indicates it's overvalued. Here's how it works:
If Stock ABC is trading with a P/E ratio of 25, a value investor might deem it "expensive." But if its earnings growth rate is projected to be 30%, its PEG ratio would be 25 / 30 PEG.83. The PEG ratio says that Stock ABC is undervalued relative to its growth potential.
It is important to realize that relying on one metric alone will almost never give you an accurate measure of value. Being able to use and interpret a number of measures will give you a better idea of the whole picture when evaluating a stock's performance and potential.
http://www.investinganswers.com/education/dont-be-misled-pe-ratio-1115
Price to Earnings Ratio (P/E)
What It Is:
A valuation method of a company’s current share price compared to its per-share earnings.
How It Works/Example:
The market value per share is the current trading price for one share in a company, a relatively straightforward definition. However, earnings per share (EPS) may not be as intuitive for most investors. The more traditional and widely used version of the EPS calculation comes from the previous four quarters of the price-to-earnings ratio, called a trailing P/E. Another variation of the EPS can be calculated using a forward P/E, estimating the earnings for the upcoming four quarters. Both sides have their advantages, with the trailing P/E approach using actual data and the forward P/E predicting possible outcomes for the stock. Calculated as the following;
Price-to-Earnings Ratio (P/E) = Market value per share / Earnings Per Share (EPS)
Moving on from the basics, let us do a sample calculation with company XYZ that currently trades at $100.00 and has an earnings per share (EPS) of $5.00. Using the previously mentioned formula, you can calculate that XYZ’s price-to-earnings ratio is 100 / 5 = 20.
For more explanation of how to use the P/E ratio in conjunction with other valuation ratios, please read our educational article Don't Be Misled By the P/E Ratio
Why It Matters:
The price-to-earnings ratio is a powerful, but limited tool. For investors, it allows a very quick snapshot of the company’s finances without getting bogged down in the details of an accounting report.
Let us use our previous example of XYZ, and compare it to another company, ABC. Company XYZ has a P/E of 20, while company ABC has a P/E of 10. Company XYZ has the highest P/E ratio of the two and this would lead most investors to expect higher earnings in the future than from company ABC (which possesses a lower P/E ratio).
As noted earlier, the P/E ratio is limited. It does not paint the entire picture for the potential investor; rather it is a complementary tool in your financial toolbox. Be wary of forward EPS measures, (remember, EPS is an essential aspect of calculation of the P/E ratio) as they are matters of prediction and are only estimates of projected earnings. Further, trailing P/E ratios can only tell you what happened to a company in the previous time periods.
http://www.investinganswers.com/term/price-earnings-ratio-pe-459
A valuation method of a company’s current share price compared to its per-share earnings.
How It Works/Example:
The market value per share is the current trading price for one share in a company, a relatively straightforward definition. However, earnings per share (EPS) may not be as intuitive for most investors. The more traditional and widely used version of the EPS calculation comes from the previous four quarters of the price-to-earnings ratio, called a trailing P/E. Another variation of the EPS can be calculated using a forward P/E, estimating the earnings for the upcoming four quarters. Both sides have their advantages, with the trailing P/E approach using actual data and the forward P/E predicting possible outcomes for the stock. Calculated as the following;
Price-to-Earnings Ratio (P/E) = Market value per share / Earnings Per Share (EPS)
Moving on from the basics, let us do a sample calculation with company XYZ that currently trades at $100.00 and has an earnings per share (EPS) of $5.00. Using the previously mentioned formula, you can calculate that XYZ’s price-to-earnings ratio is 100 / 5 = 20.
For more explanation of how to use the P/E ratio in conjunction with other valuation ratios, please read our educational article Don't Be Misled By the P/E Ratio
Why It Matters:
The price-to-earnings ratio is a powerful, but limited tool. For investors, it allows a very quick snapshot of the company’s finances without getting bogged down in the details of an accounting report.
Let us use our previous example of XYZ, and compare it to another company, ABC. Company XYZ has a P/E of 20, while company ABC has a P/E of 10. Company XYZ has the highest P/E ratio of the two and this would lead most investors to expect higher earnings in the future than from company ABC (which possesses a lower P/E ratio).
As noted earlier, the P/E ratio is limited. It does not paint the entire picture for the potential investor; rather it is a complementary tool in your financial toolbox. Be wary of forward EPS measures, (remember, EPS is an essential aspect of calculation of the P/E ratio) as they are matters of prediction and are only estimates of projected earnings. Further, trailing P/E ratios can only tell you what happened to a company in the previous time periods.
http://www.investinganswers.com/term/price-earnings-ratio-pe-459
New Blogs For 2nd Year
Hello anyone who reads these things!
Just thought I'd let you know, I'm starting some new subject blogs for the impending school year. I'm going to be making one for
-PSYC 207 (Contemporary Topics in Darwinian Approaches to Mental Health and Psychological Disorders with Dr. Wehr)
-PSYC 314 (Health Psychology with Dr. Perrino)
-PSYC 217 (Research Methods with Dr. Brenner)
If you're taking any of these classes, I encourage you to check out my subject blogs, as they may be a useful resource for studying and learning the material (it's always good to consider the same information from someone else's perspective). If you followed along with me for Econ or Sociology (two subjects which I enjoyed, but no longer have room for), I would definitely encourage you to start up your own subject blogs, either as an individual, or as a collective. I found these, personally, to be a great learning tool, as well as a great way to take on some academic leadership...
Feeling inspired?
Other than that, I just wanted to wish everyone best-of-luck for the fall session. Have an awesome year, everyone!
Just thought I'd let you know, I'm starting some new subject blogs for the impending school year. I'm going to be making one for
-PSYC 207 (Contemporary Topics in Darwinian Approaches to Mental Health and Psychological Disorders with Dr. Wehr)
-PSYC 314 (Health Psychology with Dr. Perrino)
-PSYC 217 (Research Methods with Dr. Brenner)
If you're taking any of these classes, I encourage you to check out my subject blogs, as they may be a useful resource for studying and learning the material (it's always good to consider the same information from someone else's perspective). If you followed along with me for Econ or Sociology (two subjects which I enjoyed, but no longer have room for), I would definitely encourage you to start up your own subject blogs, either as an individual, or as a collective. I found these, personally, to be a great learning tool, as well as a great way to take on some academic leadership...
Feeling inspired?
Other than that, I just wanted to wish everyone best-of-luck for the fall session. Have an awesome year, everyone!
When Stock Prices Drop, Where's the Money?
by Investopedia Staff
Monday, March 16, 2009
Have you ever wondered what happened to your socks when you put them into the dryer and then never saw them again? It's an unexplained mystery that may never have an answer. Many people feel the same way when they suddenly find that their brokerage account balance has taken a nosedive. So, where did that money go? Fortunately, money that is gained or lost on a stock doesn't just disappear. Read to find out what happens to it and what causes it.
Disappearing Money
Before we get to how money disappears, it is important to understand that regardless of whether the market is in bull (appreciating) or bear (depreciating) mode, supply and demand drive the price of stocks, and fluctuations in stock prices determine whether you make money or lose it.
So, if you purchase a stock for $10 and then sell it for only $5, you will (obviously) lose $5. It may feel like that money must go to someone else, but that isn't exactly true. It doesn't go to the person who buys the stock from you. The company that issued the stock doesn't get it either. The brokerage is also left empty-handed, as you only paid it to make the transaction on your behalf. So the question remains: where did the money go?
Implicit and Explicit Value
The most straightforward answer to this question is that it actually disappeared into thin air, along with the decrease in demand for the stock, or, more specifically, the decrease in investors' favorable perception of it.
But this capacity of money to dissolve into the unknown demonstrates the complex and somewhat contradictory nature of money. Yes, money is a teaser - at once intangible, flirting with our dreams and fantasies, and concrete, the thing with which we obtain our daily bread. More precisely, this duplicity of money represents the two parts that make up a stock's market value: the implicit and explicit value.
On the one hand, money can be created or dissolved with the change in a stock's implicit value, which is determined by the personal perceptions and research of investors and analysts. For example, a pharmaceutical company with the rights to the patent for the cure for cancer may have a much higher implicit value than that of a corner store.
Depending on investors' perceptions and expectations for the stock, implicit value is based on revenues and earnings forecasts. If the implicit value undergoes a change - which, really, is generated by abstract things like faith and emotion - the stock price follows. A decrease in implicit value, for instance, leaves the owners of the stock with a loss because their asset is now worth less than its original price. Again, no one else necessarily received the money; it has been lost to investors' perceptions.
Now that we've covered the somewhat "unreal" characteristic of money, we cannot ignore how money also represents explicit value, which is the concrete worth of a company. Referred to as the accounting value (or sometimes book value), the explicit value is calculated by adding up all assets and subtracting liabilities. So, this represents the amount of money that would be left over if a company were to sell all of its assets at fair market value and then pay off all of liabilities.
But you see, without explicit value, implicit value would not exist: investors' interpretation of how well a company will make use of its explicit value is the force behind implicit value.
Disappearing Trick Revealed
For instance, in February 2009, Cisco Systems Inc. had 5.81 billion shares outstanding, which means that if the value of the shares dropped by $1, it would be the equivalent to losing more than $5.81 billion in (implicit) value. Because CSCO has many billions of dollars in concrete assets, we know that the change occurs not in explicit value, so the idea of money disappearing into thin air ironically becomes much more tangible. In essence, what's happening is that investors, analysts and market professionals are declaring that their projections for the company have narrowed. Investors are therefore not willing to pay as much for the stock as they were before.
So, faith and expectations can translate into cold hard cash, but only because of something very real: the capacity of a company to create something, whether it is a product people can use or a service people need. The better a company is at creating something, the higher the company's earnings will be and the more faith investors will have in the company.
In a bull market, there is an overall positive perception of the market's ability to keep producing and creating. Because this perception would not exist were it not for some evidence that something is being or will be created, everyone in a bull market can be making money. Of course, the exact opposite can happen in a bear market.
To sum it all up, you can think of the stock market as a huge vehicle for wealth creation and destruction.
Disappearing Socks
No one really knows why socks go into the dryer and never come out, but next time you're wondering where that stock price came from or went to, at least you can chalk it up to market perception.
http://finance.yahoo.com/focus-retirement/article/106739/When-Stock-Prices-Drop-Where
Related:
Monday, March 16, 2009
Have you ever wondered what happened to your socks when you put them into the dryer and then never saw them again? It's an unexplained mystery that may never have an answer. Many people feel the same way when they suddenly find that their brokerage account balance has taken a nosedive. So, where did that money go? Fortunately, money that is gained or lost on a stock doesn't just disappear. Read to find out what happens to it and what causes it.
Disappearing Money
Before we get to how money disappears, it is important to understand that regardless of whether the market is in bull (appreciating) or bear (depreciating) mode, supply and demand drive the price of stocks, and fluctuations in stock prices determine whether you make money or lose it.
So, if you purchase a stock for $10 and then sell it for only $5, you will (obviously) lose $5. It may feel like that money must go to someone else, but that isn't exactly true. It doesn't go to the person who buys the stock from you. The company that issued the stock doesn't get it either. The brokerage is also left empty-handed, as you only paid it to make the transaction on your behalf. So the question remains: where did the money go?
Implicit and Explicit Value
The most straightforward answer to this question is that it actually disappeared into thin air, along with the decrease in demand for the stock, or, more specifically, the decrease in investors' favorable perception of it.
But this capacity of money to dissolve into the unknown demonstrates the complex and somewhat contradictory nature of money. Yes, money is a teaser - at once intangible, flirting with our dreams and fantasies, and concrete, the thing with which we obtain our daily bread. More precisely, this duplicity of money represents the two parts that make up a stock's market value: the implicit and explicit value.
On the one hand, money can be created or dissolved with the change in a stock's implicit value, which is determined by the personal perceptions and research of investors and analysts. For example, a pharmaceutical company with the rights to the patent for the cure for cancer may have a much higher implicit value than that of a corner store.
Depending on investors' perceptions and expectations for the stock, implicit value is based on revenues and earnings forecasts. If the implicit value undergoes a change - which, really, is generated by abstract things like faith and emotion - the stock price follows. A decrease in implicit value, for instance, leaves the owners of the stock with a loss because their asset is now worth less than its original price. Again, no one else necessarily received the money; it has been lost to investors' perceptions.
Now that we've covered the somewhat "unreal" characteristic of money, we cannot ignore how money also represents explicit value, which is the concrete worth of a company. Referred to as the accounting value (or sometimes book value), the explicit value is calculated by adding up all assets and subtracting liabilities. So, this represents the amount of money that would be left over if a company were to sell all of its assets at fair market value and then pay off all of liabilities.
But you see, without explicit value, implicit value would not exist: investors' interpretation of how well a company will make use of its explicit value is the force behind implicit value.
Disappearing Trick Revealed
For instance, in February 2009, Cisco Systems Inc. had 5.81 billion shares outstanding, which means that if the value of the shares dropped by $1, it would be the equivalent to losing more than $5.81 billion in (implicit) value. Because CSCO has many billions of dollars in concrete assets, we know that the change occurs not in explicit value, so the idea of money disappearing into thin air ironically becomes much more tangible. In essence, what's happening is that investors, analysts and market professionals are declaring that their projections for the company have narrowed. Investors are therefore not willing to pay as much for the stock as they were before.
So, faith and expectations can translate into cold hard cash, but only because of something very real: the capacity of a company to create something, whether it is a product people can use or a service people need. The better a company is at creating something, the higher the company's earnings will be and the more faith investors will have in the company.
In a bull market, there is an overall positive perception of the market's ability to keep producing and creating. Because this perception would not exist were it not for some evidence that something is being or will be created, everyone in a bull market can be making money. Of course, the exact opposite can happen in a bear market.
To sum it all up, you can think of the stock market as a huge vehicle for wealth creation and destruction.
Disappearing Socks
No one really knows why socks go into the dryer and never come out, but next time you're wondering where that stock price came from or went to, at least you can chalk it up to market perception.
http://finance.yahoo.com/focus-retirement/article/106739/When-Stock-Prices-Drop-Where
Related:
Focus on Lifelong Investing
K-Star expands footprints in China
KUCHING: K-Star Sports Ltd (K-Star) announced that it was expanding its footprint in China by setting up six new wholesale outlets in Northern China through its wholly owned subsidiary, Fujian Jinjiang Dixing Shoes Plastics Co Ltd (Fujian Dixing).
According to its executive chairman and chief executive officer, Ding Jianping, “We have started developing the Northern China market since the middle of this year and as at the end of October this year, K-Star has successfully set up 19 wholesale points, in which six are new outlets located in Urumqi situated in Xinjiang, and the remaining in Russia.
“This marks the recognition and expansion of K-Star products to all the neighbouring countries. K-Star will further leverage on its current wholesale base and identify qualified distributors to operate and manage the point of sales,” he added.
Since its listing in June 2010 on the Main Market of Bursa Malaysia Securities Bhd, K-Star has been actively expanding its business in its quest to achieve its objective of being a long-term key player in the business.
Fujian Dixing, which was initially engaged in the production of shoe soles and canvas shoes, has broadened its business by venturing into the design, manufacture and distribution of sportswear besides its core business of canvas shoes.
Ding added, “K-Star has always believed in the promising export potential of China. This confidence propelled us to begin our first venture of setting up internal wholesale spots in Northern China.
“We have confidence this will help promote our sportswear brand for the export market and capture a greater market share in the country. The new wholesale platforms are expected to prosper alongside the flourishing economy churned by the development of the West and North China markets. ”
K-Star currently has overseas distribution networks in Russia and Eastern European countries including Finland, Ukraine, Belarus, Poland, Finland, Romania, Hungary and the Czech Republic, among other nations.
Fujian Dixing currently generates over 700 designs annually and manufactures approximately 7.9 million pairs of quality sports footwear, out of which 4.3 million pairs are distributed to their retail outlets in the PRC market in 2009.
http://www.theborneopost.com/?p=76159
According to its executive chairman and chief executive officer, Ding Jianping, “We have started developing the Northern China market since the middle of this year and as at the end of October this year, K-Star has successfully set up 19 wholesale points, in which six are new outlets located in Urumqi situated in Xinjiang, and the remaining in Russia.
“This marks the recognition and expansion of K-Star products to all the neighbouring countries. K-Star will further leverage on its current wholesale base and identify qualified distributors to operate and manage the point of sales,” he added.
Since its listing in June 2010 on the Main Market of Bursa Malaysia Securities Bhd, K-Star has been actively expanding its business in its quest to achieve its objective of being a long-term key player in the business.
Fujian Dixing, which was initially engaged in the production of shoe soles and canvas shoes, has broadened its business by venturing into the design, manufacture and distribution of sportswear besides its core business of canvas shoes.
Ding added, “K-Star has always believed in the promising export potential of China. This confidence propelled us to begin our first venture of setting up internal wholesale spots in Northern China.
“We have confidence this will help promote our sportswear brand for the export market and capture a greater market share in the country. The new wholesale platforms are expected to prosper alongside the flourishing economy churned by the development of the West and North China markets. ”
K-Star currently has overseas distribution networks in Russia and Eastern European countries including Finland, Ukraine, Belarus, Poland, Finland, Romania, Hungary and the Czech Republic, among other nations.
Fujian Dixing currently generates over 700 designs annually and manufactures approximately 7.9 million pairs of quality sports footwear, out of which 4.3 million pairs are distributed to their retail outlets in the PRC market in 2009.
http://www.theborneopost.com/?p=76159
Vietnam: Stock market keeps falling, stocks dirt cheap
Securities investors say the stocks are now as “cheap as vegetables”. 105 out of 603 share items listed on both the bourses have market prices below the face values.
T, a securities investor earlier this week came to a securities company to reconsider his investment portfolio. In the first quarter of the year, T purchased a large volume of shares on credit. Now, as the stock prices keep decreasing, he has to put more money into his account, or the security company will have to sell his stocks to take back money.
“I cannot sleep for the last month. This is for the third time the securities company threatened to sell my stocks,” T said.
T’s investment portfolio was once worth five billion dong. However, as stock prices have been decreasing, the values of stocks have decreased by a half. T said he has “blue chips” – the stocks of big insurance companies and banks, but it is very difficult to find buyers nowadays, when the stock prices have become “as cheap as vegetables”.
“The shares are now like waste-papers. The dividends are just 3-4 percent per annum,” he said. Twice T had to put more money into his account (more than 400 million dong) in September in order to keep his investment portfolio.
Trinh Hoai Giang, Deputy General Director of the HCM City Securities Company (HSC), also said that stocks are now dirt cheap. 105 out of 603 share items listed on both the bourses now have the market prices below the face values.
On the HCM City bourse, for example, BAS is now selling at 5800 dong per share, CAD 6500 dong, HVX 5900 dong, MHC 5700 dong, while PRUBF fund certificate 5100 dong, TRI 5100 dong. On the Hanoi bourse, SHC is trading at 6500 dong, SVS 7700 dong, TTC 6300 dong and VTA 4200 dong.
According to stox.vn, 280 share items are being traded at the prices lower or equal to the book values, including blue chips.
Le C, a big stock investor said that he and many friends of his are “meeting troubles” because of the stock price decreases. They do not want to put more money into the accounts, and also do not want to sell stocks to take back money. They decide to “nourish” the investment portfolios, hoping stock prices may increase one day.
Head of the brokerage division of a securities company has revealed that the number of repo contracts of his company has been decreasing sharply.
“They have withdrawn money to make bank deposits. Instead of asking me to give advices on stock prices, they ask me to help update gold and dollar price information,” the broker said.
He added that securities investors do not make transactions these days. They just keep the wait-and-see attitude.
According to Le Dat Chi, MA, a securities analyst, the average trading value has been very low since the beginning of November, at 700 billion dong per trading session. This shows that the majority of investors have been staying out of the market.
Analysts say the stock market remains gloomy because investors still cannot see positive signs of the macro economy, while there are signs showing that the cash flow will be tightened towards the year end. Securities investors have been advised to keep cash until the signs about development become clearer.
Giang said that HSC has been mostly selling its stocks since the beginning of the year. It continues selling stocks now to keep cash and hopes that it will not take a loss.
According to Le Dat Chi, securities investors now feel insecure. The cash flow is still running into gold, foreign currencies and bank deposits as the deposit interest rates have been increasing.
Securities investors are awaiting information about CPI in November to decide what they have to do next. If the CPI keeps increasing, the cash flow will keep away from the stock market.
Source: Saigon tiep thi
http://english.vietnamnet.vn/en/business/1656/stock-market-keeps-falling--stocks-dirt-cheap.html
T, a securities investor earlier this week came to a securities company to reconsider his investment portfolio. In the first quarter of the year, T purchased a large volume of shares on credit. Now, as the stock prices keep decreasing, he has to put more money into his account, or the security company will have to sell his stocks to take back money.
“I cannot sleep for the last month. This is for the third time the securities company threatened to sell my stocks,” T said.
T’s investment portfolio was once worth five billion dong. However, as stock prices have been decreasing, the values of stocks have decreased by a half. T said he has “blue chips” – the stocks of big insurance companies and banks, but it is very difficult to find buyers nowadays, when the stock prices have become “as cheap as vegetables”.
“The shares are now like waste-papers. The dividends are just 3-4 percent per annum,” he said. Twice T had to put more money into his account (more than 400 million dong) in September in order to keep his investment portfolio.
Trinh Hoai Giang, Deputy General Director of the HCM City Securities Company (HSC), also said that stocks are now dirt cheap. 105 out of 603 share items listed on both the bourses now have the market prices below the face values.
On the HCM City bourse, for example, BAS is now selling at 5800 dong per share, CAD 6500 dong, HVX 5900 dong, MHC 5700 dong, while PRUBF fund certificate 5100 dong, TRI 5100 dong. On the Hanoi bourse, SHC is trading at 6500 dong, SVS 7700 dong, TTC 6300 dong and VTA 4200 dong.
According to stox.vn, 280 share items are being traded at the prices lower or equal to the book values, including blue chips.
Le C, a big stock investor said that he and many friends of his are “meeting troubles” because of the stock price decreases. They do not want to put more money into the accounts, and also do not want to sell stocks to take back money. They decide to “nourish” the investment portfolios, hoping stock prices may increase one day.
Head of the brokerage division of a securities company has revealed that the number of repo contracts of his company has been decreasing sharply.
“They have withdrawn money to make bank deposits. Instead of asking me to give advices on stock prices, they ask me to help update gold and dollar price information,” the broker said.
He added that securities investors do not make transactions these days. They just keep the wait-and-see attitude.
According to Le Dat Chi, MA, a securities analyst, the average trading value has been very low since the beginning of November, at 700 billion dong per trading session. This shows that the majority of investors have been staying out of the market.
Analysts say the stock market remains gloomy because investors still cannot see positive signs of the macro economy, while there are signs showing that the cash flow will be tightened towards the year end. Securities investors have been advised to keep cash until the signs about development become clearer.
Giang said that HSC has been mostly selling its stocks since the beginning of the year. It continues selling stocks now to keep cash and hopes that it will not take a loss.
According to Le Dat Chi, securities investors now feel insecure. The cash flow is still running into gold, foreign currencies and bank deposits as the deposit interest rates have been increasing.
Securities investors are awaiting information about CPI in November to decide what they have to do next. If the CPI keeps increasing, the cash flow will keep away from the stock market.
Source: Saigon tiep thi
http://english.vietnamnet.vn/en/business/1656/stock-market-keeps-falling--stocks-dirt-cheap.html
MAAKL holds ‘Wealth Talk’ on market outlook
KUCHING: The recently concluded ‘Wealth Talk’ on December 4 at Grand Continental Hotel was an inaugural event in the city organised by MAAKL Mutual Bhd (MAAKL). The talk aimed to help the public to make informed investment decisions entering the year 2011.
INAUGURAL EVENT: (From left) Senior general manager of MAAKL, Patrick Nge, Ng and Devadason. The ‘Wealth Talk’ is an inaugural event in the city organised by MAAKL.
MAAKL invited two professionals from the investment and financial planning fields who briefed participants on the stock markets’ outlook for 2011 and explained how good financial planning would help achieve short and long term financial goals.
Chief executive officer of Meridian Asset Management Sdn Bhd, Nicholas Ng, presented the talk on ‘Stock markets supported by liquidity but entering high risk zone’.
Ng stated, “What we are seeing since November for the US dollar was a technical bounce. The US really needed to sort out its economy and the huge amount of borrowing and printing of money is actually very bad for the US.
“There’s very little justification for a strong US dollar due to the recent rebound which is attributed to the weakness of the euro. At some point in time, the US economy will go back down to a weaker half next year and that’s where I think it will be a real challenge for the US dollar,” he added.
In response to where the FTSE Bursa Malaysia KLCI (FBM KLCI) would be heading in the upcoming year, Ng commented that, “We have an index of roughly 1,643 and I think it will have an eight per cent upside next year.”
He pointed out that investors could still make money in Malaysia but relative to North Asia, the risk would go up and ratio would be higher next year. Nonetheless, he opined that growth in the merging market would not be an issue and Malaysia would be recording roughly 5.2 to 5.4 per cent growth in 2011.
“North Asian countries like China would probably come down a little bit but will be at seven to maybe 8.2 per cent. Generally, in Asia, growth will not be a major concern,” viewed Ng.
On the topic of investment options, Ng expressed that Sarawakians were more localised that they focused only on local markets.
He stated, “Ideally, the way going forward is to diversify their investments especially into Pacific Mutual funds.”
He proposed Malaysians to look beyond national equities and go offshore to diversify their investments.
When queried on what stocks would have more importance in the future, he said that the election theme would be one area that could be focused on. Investing in large caps, goodwill and high dividend stocks would continue to do well even if markets were to correct in the first half of next year.
The second speaker, Rajen Devadason, chief executive officer of RD WealthCreation Sdn Bhd, a Certified Financial Planner and a Securities Commission-licenced financial planner with MAAKL talked on ‘Financial planning, asset allocation and the future of your wealth’.
Devadason said, “Based on the world wealth report published by Capgemini and Merrill Lynch, there are five asset classes that the very wealthiest put their money into. These are equities, investment real estates, fixed income such as bonds, cash in the bank and alternative investments.”
“The smartest thing a normal individual can do is to see what the wealthiest people in the world are doing and learn their skills from them,” he added.
To answer whether foreign companies’ investment in FBM KLCI would have a positive effect, Devadason said that “If foreign companies come in and just pump money into Bursa Malaysia in a hurry, what happens is the market would take off like a rocket and this is hot money. So, Malaysians as serious investors should track and know the stocks. If we get to the point where the valuations are excessive, to get rich, you must buy low and sell high,” he enthused.
“If foreigners coming in pumped in lot money and our stock prices start to escalate, maybe it’s time for us to take some money off the table and to re-allocate. However, if the trend reverses, investors can get hurt badly. So, it can be a double-edged deal,” he pointed out further.
In conclusion, Ng noted that for higher risk-taking investors, alternative investments were good options. They included derivatives, options, futures or even arbitrage funds and commodities funds.
“There are lot of options and the most common with a cheaper entry cost is the exchange traded fund (ETF) that has also grown tremendously. There are many avenues now whereby new investors can take higher risks and at the same time use some of these instruments to hatch their underlined investments.”
INAUGURAL EVENT: (From left) Senior general manager of MAAKL, Patrick Nge, Ng and Devadason. The ‘Wealth Talk’ is an inaugural event in the city organised by MAAKL.
MAAKL invited two professionals from the investment and financial planning fields who briefed participants on the stock markets’ outlook for 2011 and explained how good financial planning would help achieve short and long term financial goals.
Chief executive officer of Meridian Asset Management Sdn Bhd, Nicholas Ng, presented the talk on ‘Stock markets supported by liquidity but entering high risk zone’.
Ng stated, “What we are seeing since November for the US dollar was a technical bounce. The US really needed to sort out its economy and the huge amount of borrowing and printing of money is actually very bad for the US.
“There’s very little justification for a strong US dollar due to the recent rebound which is attributed to the weakness of the euro. At some point in time, the US economy will go back down to a weaker half next year and that’s where I think it will be a real challenge for the US dollar,” he added.
In response to where the FTSE Bursa Malaysia KLCI (FBM KLCI) would be heading in the upcoming year, Ng commented that, “We have an index of roughly 1,643 and I think it will have an eight per cent upside next year.”
He pointed out that investors could still make money in Malaysia but relative to North Asia, the risk would go up and ratio would be higher next year. Nonetheless, he opined that growth in the merging market would not be an issue and Malaysia would be recording roughly 5.2 to 5.4 per cent growth in 2011.
“North Asian countries like China would probably come down a little bit but will be at seven to maybe 8.2 per cent. Generally, in Asia, growth will not be a major concern,” viewed Ng.
On the topic of investment options, Ng expressed that Sarawakians were more localised that they focused only on local markets.
He stated, “Ideally, the way going forward is to diversify their investments especially into Pacific Mutual funds.”
He proposed Malaysians to look beyond national equities and go offshore to diversify their investments.
When queried on what stocks would have more importance in the future, he said that the election theme would be one area that could be focused on. Investing in large caps, goodwill and high dividend stocks would continue to do well even if markets were to correct in the first half of next year.
The second speaker, Rajen Devadason, chief executive officer of RD WealthCreation Sdn Bhd, a Certified Financial Planner and a Securities Commission-licenced financial planner with MAAKL talked on ‘Financial planning, asset allocation and the future of your wealth’.
Devadason said, “Based on the world wealth report published by Capgemini and Merrill Lynch, there are five asset classes that the very wealthiest put their money into. These are equities, investment real estates, fixed income such as bonds, cash in the bank and alternative investments.”
“The smartest thing a normal individual can do is to see what the wealthiest people in the world are doing and learn their skills from them,” he added.
To answer whether foreign companies’ investment in FBM KLCI would have a positive effect, Devadason said that “If foreign companies come in and just pump money into Bursa Malaysia in a hurry, what happens is the market would take off like a rocket and this is hot money. So, Malaysians as serious investors should track and know the stocks. If we get to the point where the valuations are excessive, to get rich, you must buy low and sell high,” he enthused.
“If foreigners coming in pumped in lot money and our stock prices start to escalate, maybe it’s time for us to take some money off the table and to re-allocate. However, if the trend reverses, investors can get hurt badly. So, it can be a double-edged deal,” he pointed out further.
In conclusion, Ng noted that for higher risk-taking investors, alternative investments were good options. They included derivatives, options, futures or even arbitrage funds and commodities funds.
“There are lot of options and the most common with a cheaper entry cost is the exchange traded fund (ETF) that has also grown tremendously. There are many avenues now whereby new investors can take higher risks and at the same time use some of these instruments to hatch their underlined investments.”
K-Star eyes dual listing prospects
KUCHING: K-Star Sports Ltd (K-Star) announced recently the company’s proposals to implement a sponsorship of a Depository Receipts Programme (DRP) in Taiwan.
Executive chairman and chief executive officer of K-Star, Ding Jianping commented, “The dual listing will also help promote public awareness towards K-Star in Taiwan, strengthening our international brand image and providing an alternative source of funding for the company.”
“Under our proposed TDR programme, the 100 million K-Star shares forming the underlying shares for the issuance of the TDRs shall comprise of up to 75.6 million new K-Star shares to be issued pursuant to the proposed share issuance and up to 24.4 million existing K-Star shares by certain existing shareholders,” he added.
The TDRs would be offered to potential investors in Taiwan by way of placement to identified third party investors and would be offered to the investing public in Taiwan.
The principal parties that would be involved in the Proposed TDR Programme included K-Star; Bank SinoPac, a financial institution based in Taiwan; Citibank NA Hong Kong, and Citibank Bhd and SinoPac Securities Corp as the underwriter for the offering of TDRs to investors in Taiwan.
The maximum gross proceeds to be raised from the proposed share issuance was expected to amount to approximately RM77.87 million, based on the indicative issue price of RM1.03 per new share, of which RM19.5 million would be used to expand K-Star’s production capacity.
The company also stated that RM15 million would be utilised for expansion of sales and marketing network; RM9 million to continue to boost the company’s branding and advertising efforts; RM3 million to enhance product design and development capabilities.
The balance of the fund would be allocated for general working capital and expected expenses for the Proposed TDR Programme and the Proposed Share Issuance.
“We are very optimistic about our prospects.
“Our company has recently expanded its footprints in the People’s Republic of China (PRC) and Russia and has successfully set up 19 wholesale points,” Ding said.
“We are pleased to continuously report sustainable growth for K-Star and we believe that K-Star is established and resourceful enough to venture into a dual listing. K-Star is eager to share its profit to a more diversified shareholder base through our dual listing,” he concluded.
http://www.theborneopost.com/?p=77531
Executive chairman and chief executive officer of K-Star, Ding Jianping commented, “The dual listing will also help promote public awareness towards K-Star in Taiwan, strengthening our international brand image and providing an alternative source of funding for the company.”
“Under our proposed TDR programme, the 100 million K-Star shares forming the underlying shares for the issuance of the TDRs shall comprise of up to 75.6 million new K-Star shares to be issued pursuant to the proposed share issuance and up to 24.4 million existing K-Star shares by certain existing shareholders,” he added.
The TDRs would be offered to potential investors in Taiwan by way of placement to identified third party investors and would be offered to the investing public in Taiwan.
The principal parties that would be involved in the Proposed TDR Programme included K-Star; Bank SinoPac, a financial institution based in Taiwan; Citibank NA Hong Kong, and Citibank Bhd and SinoPac Securities Corp as the underwriter for the offering of TDRs to investors in Taiwan.
The maximum gross proceeds to be raised from the proposed share issuance was expected to amount to approximately RM77.87 million, based on the indicative issue price of RM1.03 per new share, of which RM19.5 million would be used to expand K-Star’s production capacity.
The company also stated that RM15 million would be utilised for expansion of sales and marketing network; RM9 million to continue to boost the company’s branding and advertising efforts; RM3 million to enhance product design and development capabilities.
The balance of the fund would be allocated for general working capital and expected expenses for the Proposed TDR Programme and the Proposed Share Issuance.
“We are very optimistic about our prospects.
“Our company has recently expanded its footprints in the People’s Republic of China (PRC) and Russia and has successfully set up 19 wholesale points,” Ding said.
“We are pleased to continuously report sustainable growth for K-Star and we believe that K-Star is established and resourceful enough to venture into a dual listing. K-Star is eager to share its profit to a more diversified shareholder base through our dual listing,” he concluded.
http://www.theborneopost.com/?p=77531
Cocoaland’s new product line to be postponed
Cocoaland’s new product line to be postponed
Posted on November 23, 2010, Tuesday
KUCHING: Candymaker, Cocoaland Holdings Bhd (Cocoaland) postponed its proposed Cocopie and Gummy line of products as it was still scouring for a new plant to accommodate the additional lines.
In its research report, TA Securities Holdings Bhd (TA Securities) said the lines were expected to be completed and up-and-running in a year’s time.
On another note, Cocoaland was still in the trial-testing stage for original equipment manufacturers (OEMs) with big multinational corporations (MNCs) and thus, none would be reflected in its earnings this year.
In addition, the company which had begun marketing its own brands Fruit Ten and Cha in the market had been met with mundane response.
This was probably expected, as Cocoaland’s brand name was still relatively new in the Fraser and Neave Holdings Bhd (F&N) and Yeo Hiap Seng (M) Bhd (Yeo’s) dominated market, according to the research house.
It also mentioned that product and brand recognition traditionally took two to three years, but with Cocoaland’s synergistic relationship with F&N, it might allow Cocoaland’s products a shorter time to achieve that milestone thanks to F&N’s wide distribution network.
Furthermore, the research firm also commented on the company’s skyrocketing costs. The average price of sugar had increased more than 30 per cent year-to-date, cocoa powder by more than 20 per cent, packaging by more than 10 per cent and glucose by more than 15 per cent.
This was only partially mitigated by the weaker US dollar since 40 per cent of its sales were denominated in US dollars. TA Securities stated that trends were moving towards passing the costs to the consumers in the form of increasing selling prices by five per cent to 10 per cent.
Given the current circumstances, the research house expected net profit to be less than RM10 million on the back of weak first half of the year results in addition to operating losses of its beverage plant.
http://www.theborneopost.com/?p=76611
Posted on November 23, 2010, Tuesday
KUCHING: Candymaker, Cocoaland Holdings Bhd (Cocoaland) postponed its proposed Cocopie and Gummy line of products as it was still scouring for a new plant to accommodate the additional lines.
In its research report, TA Securities Holdings Bhd (TA Securities) said the lines were expected to be completed and up-and-running in a year’s time.
On another note, Cocoaland was still in the trial-testing stage for original equipment manufacturers (OEMs) with big multinational corporations (MNCs) and thus, none would be reflected in its earnings this year.
In addition, the company which had begun marketing its own brands Fruit Ten and Cha in the market had been met with mundane response.
This was probably expected, as Cocoaland’s brand name was still relatively new in the Fraser and Neave Holdings Bhd (F&N) and Yeo Hiap Seng (M) Bhd (Yeo’s) dominated market, according to the research house.
It also mentioned that product and brand recognition traditionally took two to three years, but with Cocoaland’s synergistic relationship with F&N, it might allow Cocoaland’s products a shorter time to achieve that milestone thanks to F&N’s wide distribution network.
Furthermore, the research firm also commented on the company’s skyrocketing costs. The average price of sugar had increased more than 30 per cent year-to-date, cocoa powder by more than 20 per cent, packaging by more than 10 per cent and glucose by more than 15 per cent.
This was only partially mitigated by the weaker US dollar since 40 per cent of its sales were denominated in US dollars. TA Securities stated that trends were moving towards passing the costs to the consumers in the form of increasing selling prices by five per cent to 10 per cent.
Given the current circumstances, the research house expected net profit to be less than RM10 million on the back of weak first half of the year results in addition to operating losses of its beverage plant.
It pegged Cocoaland’s target price at RM2.14 per share based on financial year 2011 price earnings ratio of 16 times.
http://www.theborneopost.com/?p=76611
Vietnamese Stock market: are there any opportunities for long term investments?
Stock market: are there any opportunities for long term investments?
VietNamNet Bridge – The sickly stock market has been testing stock investors’ patience for many months. Other stock markets have recovered but when will Vietnam’s stock market bounce back?
PVGas could only sell 64 percent of the volume of shares it offered at the IPO (initial public offering) on November 17. The IPO average price of PVGas’ share was 31,000 dong per share.
Becoming shareholders of the enterprise which is leading Vietnam’s gas industry, the key industry in Vietnam’s national economy which decides the development of other industries such as power, fertilizer and steel, is really the dream of many investors. Andy Ho, Investment Director of VinaCapital, said that becoming the “owners” of state-owned general corporations is a golden opportunity which does not come regularly.
However, contrary to previous thoughts, the shares were not selling like hot cakes. Of the 1057 investors who successfully bought the stakes, 12 institutions and 1045 individuals bought 4.244 million stakes out of nearly 61 million of stakes sold.
Money exhausted
A lot of companies reported they could sell only 6-10 percent of the volume of stakes offered. At a recent auction of 7.32 million stakes of a LPG firm in the north, only five individual investors registered to buy 0.6 percent of the volume of shares.
According to Huynh Anh Tuan, General Director of SJC, as money is becoming scarcer investors are becoming more cautious with their investment decisions.
Cash is not flowing into the stock market because of many reasons. Tuan said that there are not many expectations on medium term investments, because the market is still awaiting macroeconomic problems to be solved, including the gold and dollar price fever, and it is still awaiting information about the consumer price index (CPI) in November. The increasing bank interest rates have been creating difficulties for enterprises while investors dare not borrow money and mortgage their shares for the loans.
Many enterprises have licenses to issue shares to increase their chartered capital. However, the enterprises still cannot fix the list of shareholders, because shareholders do not want to spend more money on stakes.
Are there any opportunities?
According to some securities companies, institutions and funds have planned for the disbursement. In October, for example, VF1 fund disbursed, lowering the cash proportion from 10 percent to 7 percent of NAV, and sold all the bonds in its investment portfolio. VF4 also disbursed, while the proportions of cash and other assets have decreased from 7.2 percent to 2.4 percent.
According to Tuan, domestic institutions have disbursed because of the cheap stocks, but they also can see the uncertainties.
“At this moment, they dare not spend too much money. The main force in the stock market is individual investors who account for 80 percent of the trading volume,” he said.
So far this year foreign investors’ net sale has reached over 10 trillion dong or 500 million dollar. According to Au Viet Securities Company, the figure is not big, because in the first quarter of 2008 alone, they incurred a loss of up to $1.3 billion.
Why do foreign investors keep purchasing? According to AVSC, foreign investors always target long term investments (3-5 years), and it is still early to explain their investment strategies.
The advice for investors is to maintain high proportions of cash. However, some analysts believe that if investors have idle money, they should think of medium term investments, because they can expect opportunities when the cash flow of $600 billion is pumped into the US economy and a part of the sum may flow to Vietnam.
Source: Saigon tiep thi
http://english.vietnamnet.vn/en/business/1805/stock-market--are-there-any-opportunities-for-long-term-investments-.html
VietNamNet Bridge – The sickly stock market has been testing stock investors’ patience for many months. Other stock markets have recovered but when will Vietnam’s stock market bounce back?
PVGas could only sell 64 percent of the volume of shares it offered at the IPO (initial public offering) on November 17. The IPO average price of PVGas’ share was 31,000 dong per share.
Becoming shareholders of the enterprise which is leading Vietnam’s gas industry, the key industry in Vietnam’s national economy which decides the development of other industries such as power, fertilizer and steel, is really the dream of many investors. Andy Ho, Investment Director of VinaCapital, said that becoming the “owners” of state-owned general corporations is a golden opportunity which does not come regularly.
However, contrary to previous thoughts, the shares were not selling like hot cakes. Of the 1057 investors who successfully bought the stakes, 12 institutions and 1045 individuals bought 4.244 million stakes out of nearly 61 million of stakes sold.
Money exhausted
A lot of companies reported they could sell only 6-10 percent of the volume of stakes offered. At a recent auction of 7.32 million stakes of a LPG firm in the north, only five individual investors registered to buy 0.6 percent of the volume of shares.
According to Huynh Anh Tuan, General Director of SJC, as money is becoming scarcer investors are becoming more cautious with their investment decisions.
Cash is not flowing into the stock market because of many reasons. Tuan said that there are not many expectations on medium term investments, because the market is still awaiting macroeconomic problems to be solved, including the gold and dollar price fever, and it is still awaiting information about the consumer price index (CPI) in November. The increasing bank interest rates have been creating difficulties for enterprises while investors dare not borrow money and mortgage their shares for the loans.
Many enterprises have licenses to issue shares to increase their chartered capital. However, the enterprises still cannot fix the list of shareholders, because shareholders do not want to spend more money on stakes.
Are there any opportunities?
According to some securities companies, institutions and funds have planned for the disbursement. In October, for example, VF1 fund disbursed, lowering the cash proportion from 10 percent to 7 percent of NAV, and sold all the bonds in its investment portfolio. VF4 also disbursed, while the proportions of cash and other assets have decreased from 7.2 percent to 2.4 percent.
According to Tuan, domestic institutions have disbursed because of the cheap stocks, but they also can see the uncertainties.
“At this moment, they dare not spend too much money. The main force in the stock market is individual investors who account for 80 percent of the trading volume,” he said.
So far this year foreign investors’ net sale has reached over 10 trillion dong or 500 million dollar. According to Au Viet Securities Company, the figure is not big, because in the first quarter of 2008 alone, they incurred a loss of up to $1.3 billion.
Why do foreign investors keep purchasing? According to AVSC, foreign investors always target long term investments (3-5 years), and it is still early to explain their investment strategies.
The advice for investors is to maintain high proportions of cash. However, some analysts believe that if investors have idle money, they should think of medium term investments, because they can expect opportunities when the cash flow of $600 billion is pumped into the US economy and a part of the sum may flow to Vietnam.
Source: Saigon tiep thi
http://english.vietnamnet.vn/en/business/1805/stock-market--are-there-any-opportunities-for-long-term-investments-.html
Subscribe to:
Posts (Atom)
