Thursday, 28 February 2019

When Is Too Much Personal Debt A Problem?

If you are questioning about your debt level, it is probably true that you have too much!
Latoya Irby ( from “the balance”) suggested 10 signs that you have too much debt to handle. But here I will paraphrase and list the top five.

1. No idea of how much you owe! Running away from a debt crisis does not make it go away. So decide to make a list and devise a plan to settle it. But more importantly, stick to it.

2. Bills paid late because you don’t have cash flow. If outflow is more than inflow you definitely have too much debt. Look at monthly spending and adjust lifestyle and expenses.

3. Phones are not answered because you fear bill collectors. When debt collectors are calling you, your debt is delinquent and you are probably in the unaffordable range. So don’t estimate them but you need a simple work-out scheme and some financial discipline.

4. Borrow money to pay immediate bills. If you are borrowing from family or friends, you have too much debt. This is not a reservoir to tap. Family or friends who also invest must have a perspective that their money may never be returned. If not, it will cause unnecessary tension in a relationship.

5. Financial situation stresses you up. You can’t sleep at night? That’s a sure sign of too much debt or expenses exceed income. Stress will then lead to medical problems with more bills to settle. A vicious cycle begins.

The best way out of the situation is to face it squarely, list the outflow, work-out a realistic scheme and follow through rigorously. That is best said than done! A better way perhaps is to have a professional consultant or mentor and a friend to assist and monitor the work-out plan.

Wednesday, 27 February 2019

Are Some Hotels in KL Closing?

Some have claimed that 21 hotels are going to close down in KL. The rumour list goes like this:

1)         Swiss Garden Hotel – closing down March 31, 2019 for renovation
2)         Royale Bintang Bukit Bintang – up for sale. Closing down March 31, 2019
3)         W Hotel Kuala Lumpur – up for sale. Potential china buyer has been identified
4)         Sheraton Petaling Jaya – up for sale
5)         Grand Season Hotel – closed down
6)         Holiday Inn Glenmarie – rumored may close too
7)         KL Journal – up for sale
8)         Pullman Putrajaya – closing down for renovation
9)         Travelogue Hotel, 3 stars. aka Geo Hotel, 203 rooms, f/hold, RM130million
10)       Ibis Hotel, 3 stars, Jln Yap Kwan Seng, 684 rooms, 3 stars, RM500 million
11)       Renaissance Hotel, 5 stars, 912 rooms, f/hold, RM1. 2 billion
12)       Holiday Inn Express, 3.5stars, 386 rooms, f/hold, RM365 million
13)       G Tower, 5 stars, Jln Tun Razak, 32 storey commercial, f/hold, RM1. 2 billion
14)       TRX 5 Stars Hotel, 4 stars, 480 rooms, 26 storeys, complete by end 2021,                           RM1. 25 million per room key
15)       Four Points by Sheraton, 4 stars, Jalan Petaling KL, 4 stars, f/hold, 318 rooms,             opening in Apr 2019, RM 280 million
16)       Verdant Hill Hotel, 223 rooms, 4 stars, f/hold, 20 storeys, RM180 million
17)       Maya Hotel, Jln Ampang, 4 stars, boutique urban hotel, 207 rooms, f/hold,              RM 235 million
18)       W Hotel, 5 stars, Jalan Ampang, 25 storeys hotel, 150 rooms, f/hold, USD                100 million
19)       Four Season Mall, high end mall, KL, 6 storeys, f/hold, Robinson Shopping                     Mall as anchor tenant, RM550 million
20)       Colonial Beach & Spa Resort, 4 stars, 176 rooms, f/hold, RM 55 million
21)       Hotel Sentral Group (10 properties)

Not all of the above can be confirmed but Grand Seasons, KL will cease operations by end February 2019 owing to prolonged financial challenges and issues. The President of Malaysia Budget Hotel Association views the golden years for hotels was 2008 to 2012 and it has been downhill thereafter.

Tourism is a major revenue earner for Malaysia. According to Tourism Malaysia, total tourist arrivals has dropped 6.5 million from 25.9 million in 2017 to 19.4 million is 2018. Tourists are also spending fewer days in Malaysia. Inbound tourists  from China dropped 30-35% in October 2018. In addition, Airbnb-like accommodations have outpaced expansion in tourist arrivals. Coupled with that, increase in minimum wage and electricity tariffs have made hotel operations difficult to remain positive.

Perhaps, the Government through Tourism Malaysia (or the Ministry) need to re-strategise operational issues and come up with a solid blueprint for market development.

1. Over 20 KL hotels claimed to be closing due to low tourists,

2. As age catches up, Grand Seasons KL to halt operations,

Tuesday, 26 February 2019

Should Huawei Be Banned?

Huawei is the Chinese telecoms giant intending to roll-out 5G mobile networks. The company began by making equipment for mobile phone networks. It has eclipsed the likes of Nokia and Ericsson. It now sells smartphones as well and is the third largest supplier after Samsung and Apple.

The firms’s founder Ren Zhengfei (pic below) was a former PLA officer. The firm is based in Shenzhen with 180,000 employees.

Several governments have blocked their own indigenous telecom companies from using Huawei’s 5G mobile networks. This is probably at the behest of the U.S.

What is 5G?

The fifth-generation mobile broadband that is coming within a year or so promises downloads and browsing speeds of 10-20 times faster the present 4G networks. It will power the “internet of things” enabling connected machines from traffic lights to driverless cars communicating with each other.

So is Huawei a threat?

The U.S. thinks so – why? The founder is of military background, there is “collusion” between the firm and the government and the technology that sits at the heart of vital communications network has the capacity to conduct espionage or disruption.

In December 2018, Canada arrested Meng Wanzhou, Huawei’s chief financial officer and daughter of the founder. Why? Because she allegedly committed fraud by lying to the U.S. banks about her firm’s ties to business in Iran. This is a breach of U.S. trade sanctions on Iran. Huawei denies any wrongdoing.

The real problem for the U.S. is that Huawei sells to about 170 countries worldwide and has a lead time over U.S. manufacturers by a year or so in 5G. This is perhaps an attempt to slow or stop China’s technology outstripping the U.S. Huawei therefore has to bear the brunt for being faster and cheaper than others.

Is That Fair?

Created with Poll Maker

1.           Huawei: Should we be worried about the Chinese tech giant? – BBC News, 18 Feb 2019
2.           Banning Huawei might hurt Europe’s plans to roll out 5G – Emily Price, Fortune, 4 Feb 2019

Monday, 25 February 2019

Triple Danger to the World’s Population

Kate Ryan of Thompson Reuters Foundation reported (27/1/19) that, the Lancet Commission on obesity needs a $ 1 billion fund and action strategies targeting food policy and production. This is to assist health, the environment and economic well being of the world’s population. The biggest threats to the world population are obesity, undernutrition and climate change. This is linked by profit motives and policy inertia, a top commission official said on Sunday.
The approaches to agricultural production, urban design, transport and land are connected with the three issues of obesity, undernutrition and climate change. This will take a colossal toll on the planet and population, the commission said.
“What we’re doing now is unsustainable,” said William Dietz, an author of the study and public health expert at George Washington University. “The only thing we can hope is that a sense of urgency will permeate,” he said on a conference call with reporters. “We’re running out of time.”
Subsidies of $500 billion to beef, dairy and various food industries worldwide, given by governments should instead, be used to fund sustainable, healthy farming. Fossil fuel subsidies of $5 trillion should be moved to sustainable transport and renewable energy, the commission reported.
 These dangers are linked by mass production of nutrient-deficient food that not only contributes to obesity and malnutrition but plays a major role in greenhouse gas emissions that is a major cause for climate change, the report said. The production and distribution of agricultural products burn fossil fuels that contribute to rising global temperatures, drought and extreme weather, it said. The International Food and Agricultural Organization has said agriculture, forestry and other land uses are responsible for 25% of the greenhouse gas emissions heating up the planet. These issues are further aggravated by inaction by policy makers, influence by profit-thirsty food companies over public policy and insufficient public outcry for change, the report said.
As illustration, it said that in 2016, companies making sugar-filled beverages spent almost $50 million to lobby against U.S. government initiatives to reduce consumption of  beverages thought to contribute to poor nutrition and obesity. “With market power comes industry power, said Tim Lobstein, a commission author and the director of policy at the World Obesity Federation, a British-based professional group. “Even willing governments struggle to get policies implemented against industry pressure,” he said. Approximately 815 million people are severely undernourished and 4 million deaths are connected to obesity, the commission said.

The commission said a permanent international agreement, parallel to that reached on global warming in 2015, is needed to address and improve food production and distribution.

Friday, 22 February 2019

Kalman Filter in Finance Application

Ever wondered of how rocket trajectory was tracked?  Or how your GPS navigation works?   One of the key algorithms in modern navigation, guidance and control technologies is the Kalman Filter!  Kalman Filter is an algorithm that uses a series of measurements observed over time, containing statistical noise and other inaccuracies, and produces estimates of unknown variables that tend to be more accurate than those based on a single measurement alone, by estimating a joint probability distribution over the variables for each timeframe. The filter is named after Rudolf E. Kálmán, one of the primary developers of its theory (Read more here).

Kalman Filter is also popular in time series analysis, especially in noise filtering application.  One could use the Kalman Filter to track the trend of stock market index, instead of using conventional moving average indicator (MA), which is subjected to period determination (MA of 8 days, 14 days or etc.).  The following chart shows the KLCI daily closing price and the Kalman Filter.  The blue curve is the daily KLCI closing price from Jan – Dec 2018 while the orange curve is the Kalman Filter.  The Kalman Filter is computed in conjunction with Maximum Likelihood Estimation (MLE) algorithm.  This helps to estimate the “true” price level of the underlying index instead of relying on human selection in MA application.

Kalman Filter could be implemented using MatLab, Python, R or Excel (with solver add-on).

The video below shows some basic illustration of Kalman Filter.

Thursday, 21 February 2019

What More do Malaysians Want?

“ Apa lagi orang Malaysia mahu? ” That could be the basis for discussion with various interest groups, communities and religious leaders. We have a myriad of issues running from a macro level on economics or politics to micro level on lack of response from local councils to cost of living or unemployment.
Expectations and reality are too wide to bridge and what are some of these? An informal survey of the “common man on the street” suggests the following:
Possible Remedy
High-growth economy
- Slow growth (4.5 - 4.7%)
- Every sector seems impacted by tariffs, prices or business outlook.
- FDI and / or private sector initiative.
- Government needs feedback from top 200 companies, and small businesses to formulate new strategies.
Wages Rising
- Statement (flat) for over 10 years.
- Minimum wage below RM 1,500.
- Institute fair minimum wage.
Unemployment lowered
- Graduates and youths find difficulty in getting jobs.
- Skill sets not suitable.
Use HRDF or other funds to improve skill sets for employment.
Cost of Living Reduced
- Retail price of petrol lowered but not low enough ( RM1.50?)
- Toll rates still not abolished.
- PTPTN loans not waived.
- Price of essentials on the rise?
The NEAC may have fresh ideas but essentially, transport, food and shelter costs need focus.
Corruption zerorised (?)
- A new plan to eradicate corruption was launched.
- Many previous politicians have been charged.
- Many more to go (?)
- A Truth, Transparency and Reconciliation Commission to close all previous corrupt practices (?).
- RCI for the judiciary (?)
Education – Quality Now?
No real changes except for black shoes, socks and shorts.
- Listen to parents, former students, teachers to set short and long term steps.
- Give autonomy to schools and PTAs to pursue curriculum within a broad framework.
Religious Harmony
- Unnecessary conflict creation with intolerance
- Harmony Act (?)
- Use existing laws for “troublemakers”
Political Landscape Changed
- Not significantly different.
-Race and religious issues remain key divisive topics.
- Political leaders of previous regime seem to be “footloose and fancy free”.
- Integrity issues
- Missing persons: Pastor Raymond Koh and others.
-Deaths in custody: Teoh Beng Hock, Kugan and others.
- Pakatan Harapan has to be clear on what is acceptable or not.
- Previous leaders need to be detained under “ house arrest” , otherwise they are changing the narrative.
- No compromise on integrity.
- Resolution on their status.

- Closure by RCI on these cases. 

Maybe, we need a permanent body with a “revolving” set of commissioners to secure feedback, facilitate and act. There is an existing Public Complaints Bureau of the civil service. This needs to be restructured into a “Commission” that could call on various groups / individuals for open or closed door sessions.
Malaysians need an outlet to express their grievances, perspectives and hopes. Yes, there are other feedback loops including social media, agency-related bodies, committees and so forth but a “visible” Commission is helpful to the common man.
As listed above, issues range from rising cost of living, urbanisation, unemployment, religious sermons, discrimination of minorities, or new affirmation policies for the majority, and perhaps direction for business to pursue.
Output of this Commission could be useful for the new National Economic Action Council (NEAC) 2.0 and others for long-range planning.

In the end, will our gross national happiness be improved? Please vote below!

Will our gross national happiness be improved? free polls

Wednesday, 20 February 2019

Samurai Bonds : What is the Risk?

It was announced last year during the tabling of Budget 2019, that Japan has agreed on the issuance of JPY 200billion (about RM7.4b) Yen – denominated bonds for Malaysia, to settle partially over 1MDB debts.

You’re probably wondering what Samurai bonds are.  This the nickname for bonds issued by a non-Japanese party using the Yen as the denomination. They are usually issued in Tokyo and the issuing parties have to follow Japanese rules and regulations. These bonds give issuers like Malaysia access to Japanese capital for investments or funding operations locally.  This I-O-U is over a 10 year tenure guaranteed by the Japan Bank of International Cooperation. 

One of the perks of this bond is that the coupon rate is only 0.65% compared to the dollar coupon rate of 5.99% for 1MDB. So we pay less in terms of coupon rate. The other comforting fact is that, the Japanese market is not heavily affected by the volatility of the European or United States markets. This provides stability for issuers during an economic downturn. But the key question is the currency exchange rate: is it fixed for the duration of the bond? This was not mentioned at the Budget tabling. Otherwise we could run an exposure risk which is detrimental to Malaysia in a worst case scenario.
The new debt (replacing an earlier debt) will improve cashflow and retain our good record in meeting debt obligations. We are not the only ones tapping into the Samurai bond market. From 1970, several countries in Asia and Australasia such as Singapore, South Korea, China, Thailand, Hong Kong, India, Philippines and New Zealand have done the same.

References: Samurai Bond, by James Chen, Investopedia.
Samurai Bond, Financial Dictionary, Investing Answers.
“What is a Samurai Bond and Why It May Be the Only Way to save Malaysia”, Caitlyn Ng, Loanstreet.
“Asian bond structures in Tokyo : History, Structure and Prospects”, by Fumiaki Nishi and Alexander Vergus.

Tuesday, 19 February 2019

Biggest Risks in 2019 for the World

“Of all risks, it is in relation to the environment that the world is most clearly sleepwalking into catastrophe,” so says the World Economic Forum’s Global Risks Report.

The report offers a rare perspective on the threats facing our world, by not only regarding the most probable risks, but also those that would have a sizeable impact.

Image: World Economic Forum

The report says: “The results of climate inaction are becoming increasingly clear. The accelerating pace of biodiversity loss is a particular concern.”

Other big concerns in terms of likelihood and impact include, increased technological dependence, along with risks that stem from the global economy, society, and geopolitically.

Image: World Economic Forum

Cyber-attacks feature in both top 10s, at number five for likelihood and seven for impact, while data fraud is at number four for likelihood, reflecting an overall trend as technology shapes the risk landscape.

The vast majority of respondents (82%) predicted the risk of cyber-attacks leading to theft of money and data to increase in 2019, with 80% believing they would disrupt operations. The survey says this “reflects how new instabilities are being caused by the deepening integration of digital technologies into every aspect of life”.
The report also warns of the macroeconomic risks we face as we head into the third month of 2019.

The majority of respondents expect increasing risks this year, related to “economic confrontations between major powers” (91%) and “erosion of multilateral trading rules and agreements” (88%).

Financial market volatility and slowing global growth through 2018 are highlighted by the authors and by the latest International Monetary Fund forecasts.

As a result, the possibility of an asset bubble in a major economy is 10th most likely.
These risks are interconnected and each has the potential to affect the others. Consider for example the loss of biodiversity in the human food chain. This affects health and socioeconomic development, with implications for areas from productivity to regional security.

Image: World Economic Forum

The Global Risks Report 2019 was released ahead of the World Economic Forum’s Annual Meeting in Davos and surveyed leaders on potential dangers facing the world in the coming year. The report compels governments and organizations to address the impact of specific threats and make preparations to curb potential disasters should they occur.

* Reference: “ These are the biggest risks facing our world in 2019” by the World Economic Forum.

Monday, 18 February 2019

Trump’s State of the Union and Integrity

The New York Times on February 5, 2019 fact checked Trump’s remarks at the joint session of Congress and here is how some of his remarks stacked up against the facts (reproduced selectively).

1. The economy

“The U.S. economy is growing almost twice as fast today as when I took office, and we are considered far and away the hottest economy anywhere in the world.”
This is false. The American economy had grown at an annual rate of 3.5 percent in the third quarter of 2018. Growth in Latvia and Poland was almost double the rate. Same for China and India. In fact, the turbulent Greek economy recorded stronger growth. A wide range of economic analysts estimate that the growth of the American economy slowed in the fourth quarter, and further decelerated in the first month of 2019.

“We recently imposed tariffs on $250 billion of Chinese goods — and now our Treasury is receiving billions and billions of dollars.”
This is true. Since tariffs were imposed by Mr. Trump on certain imports from China along with, imported steel and aluminium from around the world, the federal tariff revenues have increased. Custom duty revenues, which include tariffs, increased by $13 billion in the third quarter of 2018 compared with a year earlier, as reported by the Commerce Department. Technically, that money is paid by Americans who bring the goods across the border, and it is often passed in the form of greater prices to American Consumers.

“My administration has cut more regulations in a short period of time than any other administration during its entire tenure.”
This is false. The Trump administration has reduced the speed of adopting new rules, and it has moved to nullify some existing or proposed federal regulations. This is particularly in the area of environmental protection. The White House claimed that as of October, a total of $33 billion worth of future regulator costs had been removed. But experts say the scale of the nullification in the Trump era still does not surpass the extensive cuts in federal rules during the Carter and Reagan administrations, when rules governing airline, truck and rail transportation were wiped off the books, among other changes.

“We have created 5.3 million new jobs and importantly added 600,000 new manufacturing jobs — something which almost everyone said was impossible to do, but the fact is, we are just getting started.”
This is false. The Bureau of Labor Statistics reports that since January 2017, when President Trump took office, the economy has added 4.9 million jobs, including 454,000 jobs in manufacturing. Far from being “impossible,” that is closely comparable to the pace of job creation during some two-year periods during the Obama administration, and significantly sluggish compared to the rate of job creation in manufacturing in the 1990s.

Wages were “growing for blue-collar workers, who I promised to fight for. They are growing faster than anyone thought possible.”
This is true. Wages are increasing faster for workers in construction and manufacturing industries compared to those working in service occupations, according to the Labor Department.
“More people are working now than at any time in our history.”

This is misleading or false. While the total number of people working in the United States is unprecedented, it is not because of the president’s policies. It is because more people than ever live in the United States.
2. Immigration
“The border city of El Paso, Tex., used to have extremely high rates of violent crime — one of the highest in the entire country, and considered one of our nation’s most dangerous cities. Now, immediately upon its building, with a powerful barrier in place, El Paso is one of the safest cities in our country.”
This is false. El Paso was never one of the most dangerous cities in the United States, and crime has been declining in cities across the country, not just in El Paso alone. This is for reasons that have nothing to do with border fencing.

“San Diego used to have the most illegal border crossings in our country. In response, a strong security wall was put in place. This powerful barrier almost completely ended illegal crossings.”
This is misleading. Border apprehensions decreased by 91 percent in the San Diego sector between the 1994 fiscal year, right after the original border fencing was completed, to the 2018 fiscal year. But, according to the Congressional Research Service, that fence alone “did not have a discernible impact” on immigrant numbers crossing the border into the United States illegally.

“As we speak, large, organized caravans are on the march to the United States.”
This is exaggerated. At the end of January, a new caravan of thousands of migrants from Central America was headed north, and some intend to cross into the United States. However, thanks in part to policies introduced by the new Mexican government, many in the caravan have said that they plan to remain in Mexico. President Andrés Manuel López Obrador has made it easier for Central Americans to get visas and work in Mexico. President Trump’s warnings of a fast-approaching invasion from new caravans is exaggerated.

“I hope you can pass the U.S.M.C.A. into law, so we can bring back our manufacturing jobs in even greater numbers, expanding American agriculture, protecting intellectual property, and ensuring that more cars are proudly stamped with the four beautiful words: Made in the U.S.A.”
This is exaggerated. The revised trade deal with Canada and Mexico, known as the United States-Mexico-Canada Agreement, does include provisions that are intended to bring manufacturing jobs back to the United States. For instance, minimum wage provisions for some auto manufacturing. Yet, some economists have said those provisions could ultimately push more manufacturing and jobs outside North America. The deal does allow American farmers to sell more dairy products to Canada. But the trade pact has yet to be approved by Congress, and both Democrats and Republicans say that is unlikely to happen without serious changes.
3. Foreign policy
"When I took office, ISIS controlled more than 20,000 square miles in Iraq and Syria. Just two years ago. Today, we have liberated virtually all of the territory from the grip of these bloodthirsty monsters.”
This is true. The Defence Department reports that the Islamic State now dominates only around 20 square miles of territory in Syria, down from 34,000 in 2014. But many of the gains against the Sunni extremist caliphate began under President Barack Obama, with the Trump administration continuing the previous administration policy. The top American military commander in the Middle East told a Senate hearing that the Islamic State could return if the United States and its allies abandoned the fight. In December, Mr. Trump announced he was withdrawing American troops from Syria.

“We condemn the brutality of the Maduro regime, whose socialist policies have turned that nation from being the wealthiest in South America into a state of abject poverty and despair.”
This is misleading. This has become a popular point of discussion among American conservatives. It is true that under President Nicolás Maduro, Venezuela has been brought to economic ruin. Inflation is at colossal rates, and ordinary people are struggling to get basic food and health supplies. Three million citizens have fled. Some of the collapse can be traced to Mr. Maduro’s economic policies, which do fall under the broad label of socialism. But analysts say that corruption, the lack of rule of law and the absence of democracy, all the hallmarks of a dictatorship have played equivalent or larger roles. Then, we have U.S. sanctions imposed for regime change. What has that resulted in Libya, Iraq and Syria? Chaos and anarchy.

“If I had not been elected president of the United States, we would right now, in my opinion, be in a major war with North Korea."
There is no evidence and pure propaganda. In 2016, at the end of the Obama administration, there was no sign that the United States and North Korea were about to go to war, despite Pyongyang conducting nuclear tests and the previous administration’s continued economic sanctions. In Mr. Trump’s first year in office, he increased tensions with North Korea by attacking its leader, Kim Jong-un, in a series of Twitter posts, which prompted hostile statements from Pyongyang. Mr. Trump wrote that North Korea’s actions would be met with “fire and fury” and called Mr. Kim “Little Rocket Man.” Analysts said within that period , the chances of war between the two nations had grown because of these exchanges.

Heart of the Matter?
The heart of the matter is integrity, the quality of being honest and having strong moral principles. Politicians need to have integrity as they serve society not themselves. People also view their statements from a moral, ethical perspective and reflects the character of an individual.

What about in Malaysia?
We have three politicians in power with questionable degrees. No matter what is said and done, this is a reflection of the previous administration and we have had enough of that!
* This article has been adapted from “State of the Union Fact Check : What Trump Got Right and Wrong”, by the New York Times.