1MDB Bank Negara Approval:Are They Barking Up The Wrong Tree?

Hantu Laut

Jho Low Claimed The “PM/ FM” Gave Approval To Keep Bank Negara In The Dark On 1MDB Loan

I 'll not doubt there is something rotten down in 1MDB and the goings-on, therein, may not be known to the PM.

As I have suggested earlier forensic audit of the account be carried out to detect any fraudulent transactions, such audit should be carried out by our Auditor-General together with a reputable international auditing firm, which has in-depth knowledge of the world of international banking and finance, the reason being our AG office may not be familiar with those complicated cobwebbed financial instruments.

What I am going to say here is not in support of Jho Low, 1MDB or the PM, it's purely my personal opinion.

I suggest you guys check out BN (Bank Negara) objectives and regulations before you freak out on this highly politicised issue.

Jho Low may be right about BN approval not required as it is an offshore to offshore loan in foreign denominated currency (no ringgit involved), which in all likelihood is outside BN jurisdiction, therefore, BN approval is not necessary. It also makes sense that only MOF (Ministry of Finance) approval is required as 1MDB is wholly owned by the Malaysian government under the jurisdiction and control of Ministry of Finance, therefore, the company's BOD approval is required and MOF being the sole shareholder of 1MDB, its consent is also required.

Being an entity under MOF, who else can give approval on the matter if not the Minister of Finance, who also happened to be the Prime Minister? Don't forget by virtue of being the PM, he automatically become the de facto CEO of all state-owned companies.

Bank Negara would be more concerned if there were going to be foreign exchange involvement, or if the loan originated or domiciled in Malaysia, or if proceeds of the loan remitted back to Malaysia, where there would be greater impact on the local currency, economy and financial well being of the country if things go wrong.

1MDB would only need to inform BN and gets its approval if it raised foreign loans or issued bonds and bring back the proceeds to Malaysia. Its borrowings from domestic banks must be reported to BN, who as regulator can block or vary the huge borrowings if it's worried of undue impact on the credit and monetary system. 

As it is, the ringgit had already gone deep down south due to comprehensive politicising of the issue that have created skepticism and distrust in the Malaysian economy. Today, the ringgit is 3.69 to US$1.00 due to highly speculative and effective rumoring rather than fact-based economic indicators. Malaysia, is now rated one of the most politically unstable countries among investors and fund managers and it will get worse if no effort is taken to stabilise the very fluid political situation.

Most of the blame should fall squarely on the shoulder of PM Najib Razak as he was more concerned in keeping his popularity and hold on to power within his own party rather than to revive and strengthen the party popularity among the populace.


If they are so sure of the BN regulation, why SR (Sarawak Report) not named the source in Bank Negara who says to them such approval is required?

I think, Sarawak Report, Rafizi and the rest of the gang are barking up the wrong tree on the issue of Bank Negara's approval.

If You Are Fundamentally Screwed Blame It On Mahathir

Hantu Laut

I am beginning to think Malaysians are not very smart lot, the very reason we are left behind countries like Singapore,Hong Kong,Taiwan and South Korea.

Malaysians are just too smart for their own good.

The government have provided more than basic infrastructures and opportunities for the people to grow with the time. 

As former Prime Minister Abdullah Badawi said "We have first world infrastructures but third world mentality" We are left behind the real tiger economies because of us, not because of the government.Government can only do so much. 

The greatness of a nation much depend on its citizens, the attitude and aptitude of the people.

Unfortunately, Malaysians are too slow or too lazy to change. 

They want the luxury and comfort of the Western's world standard of living but do not want to put in the effort and hard work, unlike the Taiwanese, South Koreans, Hongkees and Singaporeans, some working as long as 12 hours a day.

Today, these tiger economies of Asia are rewarded with higher wages and better standard of living. 

Malaysians, have become accustomed to the dependent mentality, the "teenage syndrome". Years of government subsidies have spoiled them as they yearn for more and more subsidy. It has the cheapest petrol price in the region yet they still complained to no end. 

Anwar Ibrahim has promised to reduce the price of petrol if Pakatan win the next general elections. Hanging the carrot, stupid Malaysians believe him. 

Pakatan have promised to reduce the prices of almost every conceivable consumables, it makes one wonder from where are they going to get the money. Unless, they increase the debt ceiling there is no way they can finance all that they have promised. Malaysia have set its debt ceiling at 55% of GDP and the present debt to GDP ratio is hovering around 52/53%.

If contradiction is the buzz word, it's surely in Pakatan, they have also promised to reduce the budget deficit. 

Malaysians have the habit of blaming their government for their failures and shortcomings.If they are civil servant stagnated in their positions they will blame the government instead of their own incompetence. 

It has become pivotal point to blame Mahathir for everything that have gone wrong with this country, but this beautiful country is far from being a beggar's state, we have yet to slide into the gutter. 

When it come to investing, the average Malaysians are just as clueless, either of poor judgment or insatiable greed.

Many of you  must have read the recent  debacle of some gold trading houses that have been caught operating without licences by Bank Negara. Some members of the opposition and the inimitibly stupid investors blamed Mahathir  for asking them to invest in gold ... accused Mahathir of saying it is better to invest in gold than keeping your money in the bank.

We all know Mahathir had never been an investment guru and would never be one, if stupid is as stupid can be, these investors should have known better,  politicising the issue will not bring their money back.

Some of the investors have set up Facebook account supporting the companies and demanding Bank Negara to stop its action against the companies.One such company called Genneva  has a Facebook set up by its subscribers and have the bloody cheek to blame Bank Negara for their dilemma out of their own stupidity. The Facebook here.

Every sensible investor should know the first mandatory requirement before you part with your money, if the companies are not accredited banks or investment institutions approved by Bank Negara, is to check on the background of the company.

What brings these people to such investment companies? It is greed,  because such companies offer high return that can tempt even those with a sliver of greed and most Ponzi schemes offer nonsensical guaranteed return that anyone who knows about money matters wouldn't touch them with a ten-foot pole. Any company that promised to pay monthly or quarterly dividends should be high on the suspect list of Ponzi scheme.

You can buy paper gold through most banks in Malaysia, why don't these people buy from these accredited banks? Simply because such banks don't guarantee return on your investment, be it gold, unit trusts or any other investment. The only guaranted return a bank can give you is time (fixed) deposit,  which currently pays miserable rate, hence, the attraction to Ponzi schemes.

Malaysians never seemed to learn their lessons from the past. There have been many cases of Ponzi schemes in the past that have defrauded investors of million of ringgits yet thousands still flocked to such schemes without second thought. 

The Swisscash Investment programme, an Internet based scam was one such bogus investment house that defrauded Malaysians of millions of ringgit. The investors learned a bitter lesson with this too-good-to-be-true scheme that promised 300 % return in 15 months. With SC and Bank Negara intervention investors managed to get back 20 cents to the ringgit of their money, which, otherwise, would have been naught.

These greedy Malaysians who think they have the midas touch again blamed the government for their bad judgement and rapacious desire to get rich quickly in a get-rich-quick schemes.

Phnom Penh

Malaysia, where are you on the global pay scale?

Hantu Laut

Following my post "Are Malaysians Too Lazy To Deserve Minimum Wage", I came across this rather interesting article, which, paradoxical, it may seem, actually makes sensible deduction of what would be the average income of every employed human being on the face of this earth, the hypothesis of which is as good as "laughter is the best medicine" cure for the sick.

It's just a meaningless academic figure.How nice if it can be a reality, we would not have poor souls on this earth.

The world's average salary is US$1,480 per month. Malaysia sits at No.48 out of 72 countries.Not so good standing compared to South Korea at No.10 and Singapore at No.14.

Carry on reading:

If there were no rich and poor, and everyone had an equal share of the world's total pay packet, how much would they earn?

The total value of world income is closing in on $70 trillion (£43.9tn) per year, and there are seven billion people in the world, so the average income is heading towards $10,000 (£6,273) per person per year. Easy.

But not everyone has a job and some of those seven billion are children. So another question you could ask is: "What is the world's average wage?"

That is more tricky to answer, but a group of economists at the United Nations' International Labour Organization (ILO) has had a go, though they have never gone public with this information. Until now.

Let's consider the scale of the Herculean task the number crunchers at the ILO set themselves.

First, they work out the total wage bill for every country in the world. To do that they get the average salary from each office for national statistics, and multiply that amount by the number of earners in each country.

Continue reading the main story

Data limitations

• The data (for 2009) covers 72 countries, and misses out some big ones, Nigeria for example
• Only wage earners are counted - not the self-employed or people on benefits
• In some countries the data is incomplete - in South Africa, for example, it leaves out public sector workers and agricultural workers, while in Uganda it covers only the manufacturing sector

In this way, they are able to give more weight to countries which have more workers in them. The average salary in China has more influence on the world average than the average salary in New Zealand, where many fewer people live.

Once they have the total wage bill for each country, they add them all together and divide by the total number of earners in the world.

That gives you the answer - the world's average salary is $1,480 (£928) a month, which is just less than $18,000 (£11,291) a year.

But these dollars are not normal US dollars. The economists use specially adjusted exchange rates - the average salary is calculated in Purchasing Power Parity (PPP) dollars. One PPP dollar is equal to $1 spent in the US.

Essentially, the PPP dollar takes into account the fact that it is cheaper to live in some countries than others. The idea is that we don't care how many actual dollars somebody is paid in, say, China, but we care about what sort of stuff those dollars can buy.Read more.

Do you earn more or less than the world's average wage? Type in your monthly salary and we'll give you the answer.

Go to the page here.

The average wage, calculated by the International Labour Organization, is published here for the first time. It's a rough figure based on data from 72 countries, omitting some of the world's poorest nations. All figures are adjusted to reflect variations in the cost of living from one country to another, and as Ruth Alexander of BBC radio's More or Less programme underlines, it's all about wage earners, not the self-employed or people on benefits.Read more.

Are Malaysians Too Lazy To Deserve Minimum Wage?

Hantu Laut

Can employers be trusted to pay fair wages to their employees?

Malaysia's salary structure at the lower end of the spectrum is unfair and invidious.Employers can't be trusted to pay fair wages to their employees. That's why Malaysia needs to introduce a minimum wage legislation to compel employers to pay minimum basic pay for workers to enable them to sustain a decent life for them and their families.

The plantation,construction and manufacturing industries are making too much money for themselves at the expense of the Malaysian workers.Most companies in Malaysia have poor or non-existence incentive schemes where employees get share of the profits.

Malaysian employers may not be the worst in the world but are still below par compared to countries like Hong Kong, Singapore, Taiwan and South Korea. Significant portion of our GDP still come from the sweatshops, where bigger chunk of the labour market and low wages are concentrated.

The are two conflicting schools of thought about minimum wage.The proponents say that it increases the standard of living of workers, reduces poverty, and forces businesses to be more efficient, while the opponents of minimum wage say that if it is high enough to be effective, it increases unemployment, particularly among workers with very low productivity. Former Prime Minister Tun Mahathir Mohammad was against minimum wage.

The absence of minimum wage in Malaysia has shied away locals from menial jobs or those they consider below them and attracted swarms of cheap migrant workers to this country.Our low wage is low for Malaysians but not low for these migrant workers.The construction and plantation industries are the two biggest employers of migrant workers.Send just half of them back home and you would see the collapse of these two sectors.

In 2006 Indonesian workers remitted a whooping US$2.7 billion back to their home country.The figure did not include foreign workers of other nationalities.Malaysia has almost 2 million registered foreign workers and possibly close to the same figure illegal foreign workers who came in illegally into the country, making Malaysia the biggest importer of labor in Asia.

Malaysians do not realise that over US$6.0 billion left this country annually as foreign workers remittances.If allowed to continue, this anomaly will eventually make Malaysian workers fall into the hardcore poor category and raising the unemployment rate as locals refused to take up these types of low paying jobs.

According to World Bank estimates, global remittances totaled US$414 billion in 2009, of which US$316 billion went to developing countries that involved 192 million migrant workers.In the Asean region, Philippines is still the biggest recipient of overseas workers remittances which stood at 13% Inflow and 0% Outflow in 2007.

Among the Asian tigers only Singapore and Malaysia do not have minimum wage policy. While Singapore let market forces set the minimum wage, Malaysia still allow sweatshops, utilising cheap foreign labour and victims of human trafficking to exist, resulting in the country being placed on the US Congress TVPA Tier 2 Watch List on human trafficking.

With minimum wage and wage increase there must be corresponding increase in productivity, locals taking up jobs previously held by migrant workers and the reduction of outflow of remittances.

Without these goals in mind and achieving them successfully, minimum wage would be disastrous and one that would put Malaysia in much bigger trouble.

Unless, the government can assure the goals are met, minimum wage would create higher unemployment, higher inflation and even bigger cash outflow out of the country.

The eventualities would be even grimmer than now if locals still refused to take up the jobs and migrant workers continue to stay, thereby, increasing the outflow of cash remittances exponentially.

There is a high likelihood that the minimum wage may failed to spur the nation to higher economic progress, because secretly the government knew the bumiputras, which form major part of the employment market are lazy and the man who knew better is Tun Mahathir Mohammad, hence his objection to its implementation.

Mahathir's Bashing Fever

Hantu Laut

Anwar Ibrahim was DPM and Minister of Finance from 1993 t0 1998.The question is why did Anwar continue to serve Mahathir even after the Bank Negara debacle. Why stay and serve a bad leader if you are so morally upright?

As finance minister wasn't it his job to advise Mahathir and if he refused to listen than Anwar should have, as a matter of principle, resign his position as finance minister.Now, he disclaimed everything, making Mahathir the sole badass.

Some are born great, some achieve greatness and some have greatness trust upon them.....(Shakespeare)

Unfortunately, Anwar has none of it, and he should know "God's mill grind slow but sure". If you are not yet fated to be prime minister, you'll never be, no matter how hard you try.

This excessive Mahathir's bashing may have negative effects on Pakatan.Mahathir is still a very popular man in spite of all the mud slinging against him.

Mahathir's Disastrous Financial Speculation

A murky and embarrassing case is closed, hiding top government officials’ involvement

Sometime over the next few days, a court in Kuala Lumpur will put the finishing touches to an agreement that allows Tajudin Ramli, the former head of Malaysian Airline System, not only to walk away from charges that he had allegedly looted the airline of tens of millions of US dollars but with an RM580 million (US$293.2 million) out-of-court settlement from the government.

It appears to be a settlement that the government would rather keep to itself. At the heart of the agreement with Tajudin is a convoluted story that began as long ago as the 1980s when Malaysia’s central bank, Bank Negara Malaysia, at the urging of then-Prime Minister Mahathir Mohamad, began speculating aggressively in global foreign exchange markets, at one time running up exposure rumored to be in the region of RM270 billion -- three times the country’s gross domestic product and more than five times its foreign reserves at the time.

Eventually, playing with the big boys came home to roost. In 1992 and 1993, Mahathir became convinced he could make billions of ringgit by taking advantage of a British recession, rising unemployment and a decision by the British government to float the pound sterling free of the European Exchange Rate Mechanism.

Mahathir ordered Bank Negara to buy vast amounts of pounds sterling on the theory that the British currency would appreciate once it floated. However, in what has been described as the greatest currency trade ever made, the financier and currency wizard George Soros’s Quantum hedge fund established short positions borrowing in pounds and investing in Deutschemark-denominated assets as well as using options and futures positions.

In all, Soros’s positions alone ac counted for a gargantuan US$10 billion. Many other investors, sensing Quantum was in for the kill, soon followed, putting strenuous downward pressure on the pound. The collapse was inevitable. Quantum walked away with US$1 billion in a single day, earning Mahathir’s eternal enmity and earning Soros the title “the man who broke the Bank of England.”

Mahathir and Bank Negara, on the other hand, walked away with a US$4 billion loss, followed by another US$2.2 billion loss in 1993, the total equivalent of RM15.5 billion. Although the disastrous trades destroyed the entire capital base of Bank Negara, after first denying it had taken place, the then-Finance Minister Anwar Ibrahim repeatedly reassured parliament that the losses were only “paper losses” and, now that he is Opposition Leader and head of the Pakatan Rakyat opposition coalition, has managed to skate free of the controversy.

Eventually, the Finance Ministry had to recapitalize the central bank, almost unheard of for any government anywhere. It is reliably estimated that Bank Negara lost as much as US$30 billion in this and other disastrous currency trades, costing the head of the central bank and his currency trader deputy their jobs.

It was at one with Mahathir’s unfortunate penchant for believing he could beat the global financial system in other ways. In the early 1980s, at his behest the Malaysian government attempted to corner the tin market through Maminco Sdn Bhd, a dummy company set up to buy tin futures and physical tin to push up prices on the London Tin Market. Malaysia at that point was producing 31 percent of the world’s tin.

However, the rising prices as a result of Malaysia’s action caused miners to increase production in the other 69 percent of the tin world. At the same time the US government released its tin stockpile. The price collapsed, costing Malaysia RM1.6 billon with the subsequent low prices wrecking Malaysia’s tin industry. Mahathir has repeatedly railed against western governments for rigging the rules against him.

The attempt to corner the tin market and the subsequent loss established an interesting precedent in terms of what would take place with the speculation in the pound sterling. Rather than acknowledge the losses in the tin speculation, the government set up another dummy company called Makuwasa Sdn Bhd, creating new shares supposedly reserved for ethnic Malays which were allocated to the Employee Provident Fund, the country’s retirement fund for private and public workers. The plan was to sell these cheaply acquired shares at market price for a profit to cover Maminco’s losses. Finally, in 1986, Mahathir was forced to admit that Makuwasa was created to recoup the government’s losses from the Maminco debacle and to repay loans to Bank Bumiputra.

Fast forward to today and the out-of-court settlement between several government-linked companies and Tajudin Ramli, in which the government quietly cancelled Tajudin’s debt of RM840 million. It is believed to be the biggest such sum awarded in Malaysian history. Read more.

Euro in danger, Europe races for debt solution

By GREG KELLER and PAN PYLAS and PAUL WISEMAN

PARIS (AP) - European leaders rushed Monday to stop a rampaging debt crisis that threatened to shatter their 12-year-old experiment in a common currency and devastate the world economy as a result.

One proposal gaining prominence would have countries cede some control over their budgets to a central European authority. In a measure of how rapidly the peril has grown, that idea would have been unthinkable even three months ago.

World stock markets, glimpsing hope that Europe might finally be shocked into stronger action, staged a big rally. The Dow Jones industrial average in New York rose almost 300 points. In France, stocks rose 5 percent, the most in a month.

More relevant to the crisis, borrowing costs for European nations stabilized. They had risen alarmingly in recent weeks - in Greece, then in Italy and Spain, then across the continent, including in Germany, the strongest economy in Europe.Read more.

Is The West Going Bankrupt ?

Hantu Laut

Be it an individual, a corporation or a nation, the consequence of over spending and over borrowing could be fatal.Many Western nations are now in deep financial trouble due to over spending.

Being highly geared is risky business.Many eurozone nations have debt to GDP ratio of over 100%, some as high as 400%.

Greece, the first victim of financial gluttony is having problems meeting its debt repayments. The financial debacle sent shock waves to members of the eurozone and financial institutions, which may have to give huge write downs and moratorium on repayments to keep the country afloat.The rescue plan announced in May by IMF and the European Union have not had its desired effect.The 110 billion euros rescue package came with expressed conditions of Greece cutting its public spending and boosting tax revenue.Plan to cut spending was met with violent street protests by unemployed youths.

Greece external debt is now at 182 % of GDP.Every man,woman and child in Greece now owed the rest of the world $53,984.per capita. Greece's trouble is not so much the debt to GDP ratio but more due to a stagnated economy, negative growth, living beyond its means (budget deficit) and rising debt level.In 2010 Greece showed a negative growth of - 4.5 %.Rising unemployment had contributed to violent and deadly street protests.

There is much talk that Greece's economic debacle would bring the demise of the euro currency club.Many US investment funds have taken flights pulling their money out of the eurozone to safer havens.S&P has downgraded Greece's debts to junk status.

Greece, is just tip of the iceberg, many European countries are in for much bigger trouble should they not able to service their debts.

Countries in the economic doldrums that may need lifeboats are Portugal,Spain,Ireland and Italy with Ireland faring the worst with current debt of 1382% 0f GDP.

In term of GDP the UK is at No.2 of the most indebted nation in the world, a whopping 413% of GDP and its every citizen owing the rest of the world $146,953 per capita.The country that wears the top hat for indebtedness is Ireland with a whopping per capita debt of $566,756.

With the exception of Japan, all 20 top debtors of the world are the highly industrialised countries in North America and Western Europe.

Surprisingly, the world's biggest debtor in term of value came out looking much healthier than most European countries.The US stood at No.20 for indebtedness and 101% of GDP and per capita debt of $48,258.It has raised its debt ceiling to borrow more money and its continuing deficit and slow growth rate would eventually render it a sick bill of health.If the US goes under the rest of the world goes with it.China and Japan hold $1.7 trillion of US debts.

It is not possible to foresee the next financial crisis, where it will originate from and how severe the impact on the world's economy.With available data, the low growth and highly geared Western economies appear to be likely candidates triggering the next financial crisis, probably bigger than the 2008 financial meltdown with some countries in the West going bankrupt.

The West have been living beyond its means for far too long at the expense of the poorer East.It's about time they trim their waistline.

Nowhere to run, nowhere to hide

Pessimism on the World Financial Situation

Written by Philip Bowring

Tuesday, 13 September 2011

Nowhere to run, nowhere to hide?

The present global financial situation is a reminder of the story of the German who in 1939 wanted to get as far away as possible from likely war in the west -- and went to Guadalcanal in the Solomon Islands, which would later become the scene of some of World War II’s bitterest fighting.

Supposedly much of Asia is now relatively safe with few real estate bubbles (China and Hong Kong excepted), fairly low public debt and more foreign exchange reserves than they know what to do with. The likes of Taiwan, Indonesia, Thailand and Malaysia are not full of excitement but they look healthy enough. And China continues to forge ahead despite inflation at 6 percent or so and rising doubts about the health of its financial institutions.

All in all it looks healthy compared with Europe with its wobbly euro and nearly-collapsing peripheral states with their outsize debts, or the US where the external deficit remains chronic, politics a dangerous standoff and unemployment at unacceptable levels.

However, take a closer look and Asia may not be so great after all. China’s latest export data shows year-on-year growth of 25 percent. But how much of this is due to currency factors? China expresses its trade accounts in dollars, not a slowly appreciating yuan. Yet most of its exports to Europe are in euros and some to other destinations in recently strong currencies such as the yen and Australian dollar. Allow for that and the numbers are less healthy – and that is before both the latest economic slowdowns in Europe and the US, and before the impact of rapidly rising wage costs on some industries where lower cost suppliers are now available.

Not that China is in much danger of seeing its trade surplus vanish, even if exports to the west stagnate or even fall. If current global gloom prevails, the next result must surely be a further decline in commodity prices, which have been so long boosted by a mix of Chinese demand, slow growth in supply and speculation financed by cheap money. All those have started to come to an end – though the process could be drawn out.

That should benefit Chinese consumption and bring down inflation but is just the news that the commodity exporters of Southeast Asia, Australia and the Gulf do not want. They are not going to be rushing to boost local demand if export prices turn sour. They have found it hard enough to grow fast even when external conditions have been very positive because domestic issues – politics in Malaysia and Thailand, skills shortages almost everywhere, stand in the way.

Meanwhile China’s problems are internal, not external, wedded as the government is reducing inflation while trying to achieve a growth rate which is unsustainable given zero manpower growth and past overinvestment in unproductive assets. The existence of a growing number of first-class Chinese companies, mostly from the private or semi-private sectors, cannot hide a macro picture in some ways reminiscent of Thailand in 1996. The big difference of course is that China is a creditor, not debtor. That precludes crisis but not a combination of inflation and sharp slowdown. It will shy away from strong efforts against inflation because the higher interest rates need would expose the over-borrowed situation of so many state enterprises, and put upward pressure on the Yuan to the distress of influential exporters. Read more

Economic Malaise: Will The Government 'Broke The Buck' ?

Hantu Laut

Reported in The Strait Times

MARCH 4 – The Malaysian ringgit could breach the psychological 3.80 to the greenback mark in the not too distant future, nudged by a deepening global recession and resultant flight to quality, plus a widening budget deficit.

Previously, few would have entertained the notion of the local unit tumbling back to 3.80 – the level at which it was fixed in 1998 during the Asian financial crisis before the peg was dismantled in 2005 – but it appears a distinct possibility now.

On the back of weakening exports and a growing budget shortfall, the ringgit climbed to within a 3.62/63 band a month ago.

Yesterday, it opened at 3.727/731 from Monday's close of 3.726/730. Full story here...

Read the one below:

Reduced corporate profits or losses would mean less income taxes going into government coffers, which among other things, would affect the government budget.New sources of funding would have to be found to finance the budget.Unless there is sudden upswing to the current gloomy global conditions the general economy will face serious contraction in the next few months which would affect the value of the ringgit.The ringgit may be traded at 3.80 to 4.00 range by 1st Quarter 2009 if no viable solution is found to stimulate growth. Read the full story here...

Read this one:

KUALA LUMPUR: The property market in Kuala Lumpur could depreciate as much as 10% to 15% going forward, while the prices of high-end condominiums in the Kuala Lumpur City Centre (KLCC) area may fall up to 30% in the next two to three months, said property consultant Rahim & Co. Full story here...

Now read this one:

Presently, there is notable forced sale and marginal decline in the prices of medium and lower scale properties in cities like Kuala Lumpur and Johor Baru.If the economic crisis deepen the next few months and continues into the middle of 2009 the prices of properties for all sectors would take a tumble.Upscale properties would fall between 20 t0 40% mainly in big urban areas.Full story here...

The Straits Times was right only few had the notion how bad things can get when the domino hits us. I was one of the crazy prophets of doom that have had all my forecasts and predictions hitting bulls eye.

Is the government still living in a state of denial?

They are going to announce the second stimulus package on 10 March 2009.Will have to wait and see what kind of package they have in store to rescue the economy.

Anything less than RM30 billion (inclusive the RM7 billion) may not do a good job. The problem is the government do not have the money and would not get enough money from its normal sources of revenue to finance its main budget, let alone finance the stimulus package.Its budget deficit is expected to grow to unhealthy level if the stimulus package could not revive the economy by the 2nd half of 2009. The longer the delay to implement the stimulus package the longer the sickness would stay.The country may be looking at unpleasant negative growth.

Unpleasant, as it may be, the government needs to borrow to finance the budget and the stimulus package. It has a number of options that it can take for its deficit financing.

1.Issuance of Treasury Bonds for domestic and international markets.....unlikely. Response from the international financial community may not be strong enough, which can downgrade the credit rating of the nation.

2.Foreign borrowing in foreign currency..... unlikely.Can become very expensive in the long run.

3.Liquidation of government assets..... not efficient in a downturn and possible diminution in value of assets.

4.Borrow from pension funds and government-controlled trust funds......very likely.The most efficient, cheapest, easiest and quickest way to raise the funds. Most likely candidates would be EPF and savings in ASN and ASB.

When the government announces the stimulus package it would be imperative and responsible on the part of the Prime Minister to tell Malaysians where the money is coming from.

Should the government decides to use money from EPF, the Board of EPF should not agree to a term loan between EPF and the government but demand for the issuance of medium term bonds with reasonable rate of interest.A term loan can be renegotiated and the terms and conditions can be varied from time to time by the lender (EPF) which is controlled by the government but government bonds must be paid in full upon maturity.

EPF funds were already badly managed giving poor return for many years and investments in low-yield government bonds or low interest loans are going to worsen the earnings of the fund.

The Blame Game Continues

Hantu Laut

What lessons have we learned from high-profile crooks like Bernard Madoff and Allen Stanford ? Are they any different from the gangsters and organised crime bosses that makes their money in similarly illicit fashion. Are they worse than the rats,flies,maggots, cockroaches and all the vermin that humans find awfully disgusting.They can cheat you for yonks without you knowing it.They live the high life at the expense of those they cheated.

This is the where they talk so much about high moral, transparency and accountability but are now caught with their pants down. The West, themselves, rotten to the core.These are the crooks and scoundrels of the financial world, the money mincing machines that not only bankrupted their own companies but other innocent individuals and countries.

Below are some articles that decried the unpleasant and unconscionable action of those people whom we placed our trust in.

Are executives villains or morons?
In the past few months, we've been riveted and disgusted by the exploits of scamsters like Bernard Madoff and Allen Stanford (characters who, if they didn't exist, would have to be invented by Tom Wolfe). It's both easy and convenient to hold them up as the ultimate symbols of the just-ended boom. But we shouldn't. While there was some crime in the mortgage industry, law-abiding, respectable, upstanding citizens caused the overwhelming majority of financial losses suffered thus far. Skeezy money managers and mobbed-up boiler rooms didn't create the economic catastrophe. Read more....

PHOTOS:

Who Is To Blame?

There are plenty of people who contributed to the sad state of our economy. But when it comes to bad decision making, these seven folks arguably deserve the bulk of the blame. (Want to add to this hall of shame? Follow the e-mail link at the end of this gallery.)

Is Wall Street Evil?

Americans have always hated the moneymakers, rather than hate themselves.

Crooks In Shining Armour

Hantu Laut

Money! The root of all evil ? It is also the root of all misfortunes.From Michael Milken, Ivan Boesky to Bernard Madoff, they all have the same weakness......GREED FOR MONEY and lots of it.

The man who should take the biggest blame for the biggest financial meltdown in history would have to be Alan Greenspan.The progenitor of the preponderance of deregulation.His deregulation of the financial system has brought mountains of credit mismanagement never seen before in the financial world.It will be a long and arduous journey to recover from these messy affairs.More dirt are coming out. More and more bankers and financiers have turned crooked trying to save their crumpling business empire.Some are just latent crooks that manifested over time.

The latest addition to the 'rogues gallery' is a Texan financial cowboy with the title of 'Sir', knighted by the island nation of Antigua and Barbuda, a dot so small on the world map you could hardly find it. With tons of money he probably paid for the knighthood.He practically bought half of Antigua and most of its politicians.This larger than life figure had donated substantially to sports and politicians including campaign funds for McCain and Obama.

Meet Sir Allen Stanford, big spender,financier, billionaire, con artist and fraudster. Here is his story.

Here are his sins:



Here are his victims:



The irony is everyone of them are philanthropists.So the next time you see a rich man donating to charity he may be donating other people's money.

Are there anymore safe investments left in this world?

On The Edge Of Financial Disaster: Taken For A Ride

Hantu Laut

Is the world on the edge of unprecedented economic catastrophe?

The world has not seen such financial mess since the 1930s Great Depression. It has been one depressing news after another.Many have though the collapse of Lehman Brothers and financial troubles at AIG, Freddi Mac, Fannie May and other less significant financial entities would be the end of the trouble.Than came another big shocker that the three big Detroit car makers were also in serious financial trouble and are asking the US government for bail-outs.The biggest of the three, GM claimed it would be bankrupted in three months time if the government doesn't throw a lifeline.

Just like in the 1930s the trouble eventually spreads to other part of the world before the whole financial and economic system collapsed and with it a long drawn recession leading to economic depression.At the moment the financial crisis are only confined to US and Europe.The impact has not hit Asian countries yet which usually takes between 6 to 12 months before it sank its teeth and announces its arrival.

Many Asian countries are also slow to open their books to reveal the true situation hoping the problem would go away .The only do so when the situation becomes untenable.

Are we heading for a complete collapse of the financial system?

Three days ago the most unexpected and most scandalous of all the bad news so far was the disclosure of huge fraud by respected financier and former Nasdag chairman Bernard Madoff.He stands accused of operating an elaborate Ponzi scheme to the tune of $50 billion.His list of clientele is like reading Forbes's rich and famous.The disclosure is a big slap to his clients who probably made the investments based on the cover of the book.Funds run by a well respected man? Who would have guessed he turned out to be a crook?

Former Prime Minister Mahathir Mohammad may be having the last laugh to know that he wasn't wrong about the Americans.

Below is a story of an investor who got completely wiped out by Bernard Madoff.

How I Got Screwed by Bernie Madoff

By Robert Chew

The call came at 6 p.m. on Thursday, Dec. 11. I had been waiting for it for five years. When the call finally arrived, it was my wife Sarah who answered. What the person said on the other end of the phone was both simple and devastating: we were financially wiped out.

Of course, I knew this instantly from the look on my wife's face. Her words to the caller, the person handling our financial matters, grew insistent: "You're joking? This is a joke, right?"

We didn't know it yet, but we had been playing in the Bernard Madoff Investment Securities LLC Fantasy Financial League. It began when we sold our home at the peak of the market, collected what was left from an old divorce, found other monies and then, with a combination of pleasure and trepidation, handed our bag of cash over to someone named Stanley Chais, the Los Angeles network organizer for a man named Bernard Madoff.

Of course, we never heard the name Madoff — which has a peculiarly Dickensian ring now — and had no idea how he achieved such fantastic returns over the past 40 years. All we knew was that my wife's entire family had been in the fund for decades and lived well on the returns, which ranged from 15% to 22%. It was all very secretive and tough to get into, which, looking back, was a brilliant strategy to lure suckers. Unlike the usual Ponzi mechanics, the fund even stopped investments into accounts a few years back, at least in our network. There were the usual warnings prior to investing — we all knew it was a risk, we were told to make sure we were diversified, blah-blah — but, my God, it had been going strong for so long and with such fantastic returns, we had to get in. The Securities and Exchange Commission even gave Madoff a clean bill of health several years ago, we now find out. Well, maybe not a clean bill, but it didn't shut him down either. In the topsy-turvy world of investment, we were quietly, richly safe. Until the call. (See the top 10 worst business deals of 2008.)Read more......

Derivatives:Hantu Was Right

Hantu Laut

On 2nd October I wrote about the state of the American economy and the likely causes of the financial meltdown in America under my posting "American Get Screwed".

One of the reasons leading to the financial crisis was the use of financial derivatives. These are very complex financial instruments that not many investors understand the workings and risk involved.They are supposed to reduce risk but in the wrong hand,greed and overexposure could be disastrous.

There are wide range of derivative contracts traded on the financial markets based on different kind of assets and indexes.You can even have derivatives on the weather.How all these different instruments work you may have to visit the investment gurus on Wall Street(where it was invented) to explain to you.

Below is a paragraph of what I wrote on 2nd October:

"Much of the troubles started from highly innovative and risky financial derivatives, over-extended credit,over-speculation of trading in stocks and bad financial management.Some of the top CEOs in America are undeservedly overpaid with some having pay packages running into hundreds of million.Their over-indulgence in highly speculative financial derivatives were the cause of the meltdown"

Many of you would still remember Baring Bank and its rogue trader Nick Leeson who speculated in derivatives trading that brought the centuries- old bank to its demise.That's what derivatives can do to banks,corporations or anyone who are greedy,careless or have no understanding of the mechanics of these complex instruments.Former Federal Reserve Chairman Alan Greenspan was a great believer and supporter of these beastly business tools.

Lehman Brothers and Merrill Lynch were creators of credit derivatives.These derivatives are the sweethearts of investment banks and brokerage houses by selling them and making huge upfront fees and premium payments.Another victim,AIG jumped on the bandwagon and went overboard in derivatives involving the sub-prime market.

Below is an article on the subject that appeared in the New York Times yesterday, 8th Oct:

By PETER S. GOODMAN

Published: October 8, 2008

“Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.” — Alan Greenspan in 2004

George Soros, the prominent financier, avoids using the financial contracts known as derivatives “because we don’t really understand how they work.” Felix G. Rohatyn, the investment banker who saved New York from financial catastrophe in the 1970s, described derivatives as potential “hydrogen bombs.”

And Warren E. Buffett presciently observed five years ago that derivatives were “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”

One prominent financial figure, however, has long thought otherwise. And his views held the greatest sway in debates about the regulation and use of derivatives — exotic contracts that promised to protect investors from losses, thereby stimulating riskier practices that led to the financial crisis. For more than a decade, the former Federal Reserve Chairman Alan Greenspan has fiercely objected whenever derivatives have come under scrutiny in Congress or on Wall Street. “What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so,” Mr. Greenspan told the Senate Banking Committee in 2003. “We think it would be a mistake” to more deeply regulate the contracts, he added. Read more....

The Asian markets are going to take a big tumble today because of what happened on Wall Street yesterday.The Dow was down 7.3% in yesterday's trading.

The whole world is in financial turmoil.Malaysia is still in a slumber.More concerned with politics than state of the economy.The KLSE is the only exchange that is not in sync with the other markets.Are we fundamentally strong or are we living in a state of denial.Watch the market next week.

Next post:'Where Crude Oil Heading For'