Corruption As A Way Of Life

In a land far, far away, they worked hard to stop corrupt practices. They set-up an Anti-Graft Agency. They had Parliamentary Committees to examine transactions. They had Integrity Units in every organisation. They increased penalties including death sentence for some. They taught in schools “Moral Studies” and why corruption will drain an economy. They had religious leaders giving sermons on the wayward ways which is not right in the sight of their Creator. They had award ceremonies for those who “saved” an organisation from corruption. They implemented “Whistle Blowers Act” but many who blew their whistles ended up in jail or exiled like Edward Snowden.

 

Source: https://globalriskinsights.com

 

Their leader committed the biggest heist on the nation. But he claimed it was a donation from a very friendly leader. His supporters said it was not corruption because the funds were for the poor and needy, including designer handbags and jewellery for his wife. Poor wife, what tribulation? The courts were told to find ways to drop the charges.

What would they do now? They thought hard and said, “Let’s embrace corruption”. It increases domestic consumption if goods are purchased like a Bentley or a Rolls Royce. The crime is to keep it (corrupt funds) in a bank. Money laundering is only applicable if for some reason funds obtained are kept in banks or saved in a suitcase or safe deposit box. If it is spent then there is economic growth. That is economic theory 101.

It is better than “helicopter” money – printing and distributing currency to the poor. Because if printing is required, then it is better to give the printing machines to the poor. That whole process may end up like Zimbabwe. So, that’s not on! Hyper-inflation is not for us!

So they went ahead with a campaign on corruption, why it is so good! Everyone wins! We will have corruption awards and even a “Corruption Day Holiday”, so everyone enjoys the benefit. The land moved up the ranks to be No. 1 corrupt nation on the planet. Many other leaders came to learn the “joys of corruption”. And everybody lived happily ever after.

 

(The above article is entirely fabricated. Any resemblance to the truth is purely coincidental and not intended to be or construed to be as facts. As the purpose is to entertain or amuse, no malice is intended on anyone or anything.)

  

Hedge Fund: Larger Doesn’t Mean Better

Hedge funds continued to face performance declines for a second consecutive month in October. The tough Q1 of the year and the past two months have left the industry at only +1.20 per cent return year to date (16 Nov 2020). The S&P500 return year to date in contrast is +10.97 per cent.

Source: Hedge Fund Research (as at 16 Nov 2020)

Size matters. Large hedge funds have traditionally been more stable in down markets. But as measured by HFRI’s asset weighted index, large hedge funds showed negative return of -4.34%. The sheer size of some funds makes them harder to react by switching in and out of bets. So, when volatility roiled stocks, bonds, currencies and commodities earlier this year, many giant players lost record sums of money.

According to Nishant Kumar from Bloomberg, not all large hedge funds have disappointed. Multi-strategy firms such as Citadel, Balyasny Asset Management and Millennium Management, which rely on dozens of traders to generate profits, are having one of their best years. Such funds are typically dominated by trading-oriented strategies and volatility tends to create more opportunities for them.

One reason why smaller funds are doing better is that they’re jumping on very niche trading opportunities.

“The irony is that the hedge fund industry was built on investing with small, nimble managers who could exploit esoteric investment opportunities,” said Andrew Beer, founder of New York-based Dynamic Beta investments. “The last several years have shown that sometimes big might be too big, especially when fees consume most performance.”

Stepping into Q4, PivotalPath notes that presidential elections have historically removed uncertainty from the markets, no matter which party wins. Hedge funds’ performance could be better in this quarter as generally, the funds outperform in the three months after an election compared to their performance in the three months before the election. Nonetheless, staying nimble is the way forward.

 

Reference:

1.     Nishant Kumar, Hedge Fund Giants Lose Their Appeal as Havens in Global Turmoil, 26 Oct 2020, Bloomberg

2.     Jacob Wolinsky, Smaller Hedge Funds Are Outpacing Their Larger Rivals, 23 Oct 2020, Forbes

3.     Hedge funds see second consecutive month of average performance decline, 12 Nov 2020, www.hedgeweek.com/

 

 

Organic Food: Really? Or Just a Marketing Ploy?

Organic food is the fastest growing area of the American food industry, and its price is just too high. Many buy organic because they want to avoid pesticides. But organic systems in fact cannot ensure that their products are entirely free of pesticides.

According to the National Standard, “by themselves, organic practices cannot ensure that organic products are entirely free of residues of prohibited substances and other contaminants, since exposure to such compounds from the atmosphere, soil, ground water and other sources may be well beyond the control of the operator.”

Most organic growers rarely use natural or biological pesticides, preferring to mitigate pests and disease with mechanical and cultural means, such as insect predators, use of disease-resistant plant varietals, and beneficial soil micro-organisms. However, a study found that some pesticides used in organic farming could have a bad effect to our health. According to genticliteracyproject.org, the most used pesticide in organic farming (about 90%) is Bt (the bacterium Bacillus thuringiensis) which could attack the cells in our gut, piercing holes in our intestines. Another insecticide that is also very commonly used is Spinosad which can cause irritation.

The studies on health benefits in consuming organic food show mixed results. Some studies have found that biological food can contain a small amounts of vitamin C and omega-3 fatty acids, while others do not show significant differences. In fact, a Danish study in 2018 found that the risk of insecticides was like drinking a glass of wine every three months. The toxicity of any substance usually depends on its concentration, it does not matter whether it is natural.

Some support organic because they believe organic is more environmentally friendly. Organic systems use less energy, but greenhouse gas emissions are similar with conventional farming. Despite using fewer pesticides, more land is needed for organic farming to produce the same output of crops.

Despite all the cons listed so far, organic food is still believed to be more beneficial to our health than conventional produce given the lower level of pesticide residues contained. Sometimes, what you eat is more important than how it is produced. If you want to eat healthier, eat a balanced diet. Or, pick the food with lower pesticides as shown below: 

Choose the clean 15 or live dangerously with the dirty dozen?

Reference:

Ashutosh Viramgama, Reality About Organic Food – Healthier Or Just A Scam? https://ashutoshviramgama.com/

Susan Safyan, Organics: Hype or Hope? https://www.alive.com/

Malaysia To Remain A Middle-Income Nation?

Dr Sukhdave Singh, former Deputy Governor of Bank Negara Malaysia was quoted on TheEdgeMarkets.com (22 Nov 2020) on “Malaysia risks not being a high-income economy even over the next 20 years”. Dr Sukhdave gave an incisive exposition of why negative trends keep eroding our desire to be a high-income nation. Since the Asian Finance Crisis (AFC) we are growing at a pathetic 4-5% p.a. compared to above 8% before AFC.

The fall in growth is mirrored with fall in exports-to-GDP ratio. Is that because domestic demand is now the engine of growth? Overall trade has been on a long-term decline. Manufacturing sector to overall GDP has declined to 21% in 2019 from over 30% just after AFC. We are hollowing out our manufacturing sector. Will the RCEP reverse the trend? Unlikely, if we are uncompetitive compared to Vietnam or Indonesia.

 

Source: TheEdgeMarkets.com, 22 Nov 2020

 

So is productivity being destroyed?

 

·       Female labour force participation (in Malaysia) is lower than Singapore, Thailand or Vietnam;

·       Dependence on cheap foreign labour holds down any wage increase, or investment in higher-value added activities;

·       Failure of education system to produce “employable” graduates;

·       Creation of more “rent-seekers” than genuine entrepreneurs;

·       Large civil service that has increments and bonuses even in Covid-19 pandemic (when others are losing their jobs);

·       An ageing population to be felt by 2030 and beyond;

·       Weak fiscal management – revenue has stagnated while expenditure has ballooned; and

·       “Leakages” or poor governance tolerated with little accountability.

 

And beyond the above, one could list other “brakes” for a decent growth:

·       Rise of race and religious issues over last 20 years;

·       Toxic politics and political chicanery that threatens stability;

·       Flip-flop investment policies (e.g. cabotage exemption being revoked);

·       Lack of courage to make effective change;

·       Weak implementation of plans or master plans; and

·       Little R&D for innovation and change.

 

Can we allow the above malaise to continue? Are we happy with sedentary, placid growth? Why can’t we unleash the innovativeness of the private sector?

 

References:

1. Malaysia risks not being a high-income economy even over the next 20 years, Dr Sukhdave Singh, TheEdgeMarkets.com, 22 Nov 2020

2. Tech giants plead with PM over Wee’s “abrupt” move, flag monopoly, Emmanuel Samarathisa, www.thevibes.com

3. Malaysia: Slow-paced, stumped, stuck in the past, Dato M Santhananaban, www.theindependent.sg

 

SMEs Shut Down – 30k or 100k?

The SME Association of Malaysia President Datuk Michael Kang said some 100,000 SMEs may have closed down since MCO in March. This is three times the figure available at the CCM, which showed 32,469 SMEs have wound-up between March and September.

Kang says official statistics belies the actual number shuttered down, as some are in the process of winding down. A random survey by the Association showed that about 20% intend to cease operations. Food and beverage is one of the hardest hit.

The local Mak Cik stall is struggling to survive. She doesn’t mind if you want some extras for the same price. It is better than to throw the food away as sales has dropped by at least 40%. The same goes for other F&B outlets. Also true for those in the hair salon or gym business. Not enough revenue to cover fixed costs.

 

Source: https://www.malaymail.com

 

Most businesses do not want to get rid of their employees or impose a salary cut. They are well aware of the cost of rehiring, and the brutal decision of taking away the livelihood of someone you care about. But if you, as a business leader, have wrestled on how to diversify your income stream and nothing has come into fruition, you start to become desperate. You may even start to beg. That goes for professional consultants, lawyers or others in the services sector. Payment is slow and clients look for discount upon discount!

Many friends in the big banks are already seeing a pattern of increasing bankruptcy cases. Some companies are looking at retrenchment and further salary cuts. Many friends see darker days into 2021.

The Finance Minister Tengku Zafrul Abdul Aziz’s Budget 2021 must be seen in this context. Lacklustre and unhelpful. Almost no one from the small business community has anything good to say about it. Businesspeople have long accepted the fact that most politicians do not understand how businesses operate and what is ailing them. This explains why the Budget 2021 portrays a conceptual or theoretical picture of getting small businesses back to their feet, but nothing of substance.

The worst part of the budget is its overly optimistic gross domestic product (GDP) growth of 7.5 percent for 2021. This shows not just a lack of understanding of how businesses work, but a detachment from reality. And that is from someone formerly from the corporate world.

Why is it so difficult to hold “race and religion” in suspense during this Covid-19 period? Is the Malaysian economy driven by one, select group? Where is the leadership for a united, resilient plan to recover?

 

References:

1. The end of Malaysian Small Business, James Chai, Malaysiakini, 17 Nov 2020

2. 100,000 SME put out of business, Kong See Hoh, The Sun, 11 Nov 2020

3. Bombshell-recession now bites harder than Covid-19- Over 30,000 SMEs, the lifeblood of any vibrant economy, have shut down since MCO-while Muhyiddin plays politics & bails out the GLC, Malay Mail, 10 Nov 2020

EPF: Retirement Scheme or Emergency Fund?

EPF has been too flexible for withdrawal of its funds by members. Account 1 has been rarely available for purposes of meeting immediate needs. It has been allowed up to 30% of total amount in excess of basic savings for Members Investment Scheme. Account 2 is to be used for purchase of life insurance and Takaful products for critical illnesses under Budget 2021.

Is EPF a retirement scheme or an emergency fund? Political masters seem to have no moral compass to suggest use of both Accounts 1 and 2. Based on 2018 Annual Report, average savings of those aged 54 was RM107,561. Of this, 38% or about 94,260 members are active. The inactive members have only RM43,938. Minimum benchmark amount for retirement is RM240,000 (survive to age 75). Over 93% of active members have less than the minimum amount.

 

Why the insufficient savings?

·       Not everyone is employed by the time of entry into labour force;

·       Salaries are just too low (or contributions need to be increased? – from 24% to that of CPF in Singapore at 37%); and

·       Discipline of keeping funds beyond age 55 is not there (by members).

EPF must return to its original objective as a retirement scheme and not a “piggy” bank for a rainy day. It has to cover somehow the unemployed and self-employed individuals. Otherwise, the fund will be depleted with net withdrawals exceeding contributions. Many are losing faith on the retirement fund as it continues to indulge in “fancy” schemes of a Government that is morally bankrupt.

 

Reference:

EPF-the withdrawal syndrome, Pankaj C. Kumar, The Star, 21 November 2020

EPF’s Big Sell-Off!

The Employees Provident Fund (EPF) will be forced to liquidate its assets and rebalance its portfolio to make billions of ringgit in funds available to depositors in need of cash to buffer the economic impacts of the Covid-19 pandemic.

The EPF is estimating that both its i-Lestari and i-Sinar emergency schemes will see roughly RM45 billion pulled out by the end of next year, as eligible members are granted early access to their retirement savings.

Additional reductions in the contribution rate over the past eight months have seen the EPF lose another RM8 billion in opportunity cost for 2020 and a further RM9 billion estimated for 2021, bringing the total cash flow implication on the pension fund to RM60 billion.

EPF CEO Tunku Alizakri Raja Muhammad Alias did not provide details about the liquidation plan but said the fund would look at assets that “best suits” its long-term strategy.

Chief investment officer Rohaya Mohammad Yusof said the asset sell-off plan had been put in motion since March to ensure that the EPF had sufficient funds early on.

 

Source:www.sinarharian.com.my

 

In 2019, the EPF declared total dividends of RM45.82 billion of which RM41.68 billion (5.45% dividend) was for conventional savings and RM4.14 billion (5%) for shariah savings. This was lower than the RM47.3 billion declared for 2018 and the RM48.13 billion announced for 2017.

It has been suggested that the EPF would need at least RM46 billion in investment income to keep dividends above 5% for 2020 when it announces the annual payout in February or March next year.

Meanwhile, P. Gunasegaram in the theVibes.com on 19 November 2020, suggested it as a RM60 billion scam.

“It is highly irresponsible for the government to use funds from the EPF to stimulate the economy because the vast majority of employees in Malaysia have not lost their jobs, it will lead to erosion of retirement earnings, and may cause structural problems in the financial system by forcing the EPF to sell assets”.

 

Chronology of events:

1.         February 27, 2020 - It was announced that with effect from April 1, employees’ minimum statutory contribution to EPF was reduced to 7% from 11% of salary, a reduction of over one third. If you want to contribute the 11% anyway, you need to fill up a form, skewing the choice towards the reduced contribution.

2.         March 23 - The so-called i-Lestari withdrawal facility from account 2, which is the discretionary withdrawal account (30% of total contribution) which allows a maximum RM500 per month to be taken out from here. It’s effective for a year from May this year.

3.         November 6 - The i-Sinar, allowing, for the first time ever withdrawals from Account 1 which is for retirement, ahead of retirement. Generally, eligible members will have access to 10% of their savings in Account 1 subject to always having a minimum balance of RM100.

For those who have RM90,000 and below in Account 1 they have access to any amount up to RM9,000 subject always to a minimum of RM100 left in the account. The amount paid will be staggered over six months. Those who have above RM90,000 can withdraw up to 10% of their Account 1 savings with a maximum of RM60,000.

Let’s look at how much EPF will pay out from all these. According to EPF’s report, EPF will end up paying over RM60 billion, or some 7% of its total assets of around RM870 billion. It has to sell assets to make available that kind of money to its members.

According to Gunasegaram, two per cent of RM60 billion, or a mere RM1.2 billion at the maximum, need to be withdrawn from EPF for those impacted by Covid-19 and are unemployed. So what is it? RM1.2 billion or RM60 billion?

But if you are an EPF contributor, please keep your money in EPF to ensure higher retirement savings – the returns are better than bank interest rates. It has declared dividends of 4% to 8.5% annually over the last 60 years.

So, is it a scam as Gunasegaram suggests? EPF needs to provide a more detailed clarification on its asset sales to meet potential withdrawals by contributors in 2021. That will be helpful to calm fears.

References:

1. The RM60 billion scan at EPF, P. Gunasegaram, theVibes.com, 19 Nov 2020

2. EPF to sell off assets to get cash upfront, Alifah Zainuddin, The Malaysian Reserve,
17 Nov 2020

U.S.: 8 Jobs That Can Make You a Millionaire (before Covid-19!)

 

Can you get rich by working for someone else? Emil Anton lists 15 Jobs where you can earn your millions! We list the top 8 – remember it is before Covid-19!

Billionaire is the new millionaire, so how difficult is it today to become a millionaire? Shouldn’t be that hard should it? Based on research before Covid-19 in the United States, here are 8 jobs (in the U.S.) that can make you a millionaire:

Number 1: Plastic Surgeon & Specialized Doctors

Salary of plastic surgeons: $250,000 and up.

Highest paid doctors: radiologists, cardiologist and orthopaedic surgeons: Average $400,000 per year. As you may expect, Neurosurgeons, the brain doctors, also get paid close to $400,000 per year.

Number 2: Corporate Lawyer

Salary: $200,000 and up.

If you are good, you can be a millionaire 5 years into your corporate job. All you need is to be productive for the corporation you work for. Out of all the specializations here are the 3 most lucrative:

·       Mergers & Acquisitions

·       Intellectual Property

·       Patent lawyers

Basically, you need to be a lawyer for a large financial or tech company. The higher the value you can bring to them or save them from having to pay, the higher your salary.

Number 3: Architect

Average salary: $100,000

Good architects earn over $250,000 per year.

Source: https://frugalexpert.com

Number 4: Pilots & Air Traffic Control

Average salary: $100,000

Average time to $1 Million: Less than 10 years

But now with Covid-19, this may not be possible.

 

Number 5: Cyber Security

Application Security Engineer: $250,000 per year

Everybody else: around $100,000 per year

We are living in the most connected time in history, everything about you that makes you, you is online; which means, there’s a lot of money to be taken out of the system.

Last year, the personal data of over 140 million Americans was stolen from a credit score company called Equifax. Names, addresses, social security numbers, banking information, everything you would need to steal someone’s identity.

Big tech companies would not recover after a breach like that so they’re paying really good money to anyone who can bulletproof their tech.

The same goes with big pharma companies as well as anything that has to do with intellectual property, patents, research & development. A hack could cost the company billions. Even at an individual level it’s never been more important than now to protect your information.

Number 6: Marketing managers

Average salary: $150,000

Chief Marketing Officer: Over $250,000

A great marketing executive can make or break a great company. Just look at the rise of Old Spice. The company raised from the ashes through a smart marketing campaign. A 75 year old company, more than doubles sales in a single year.

But marketing isn’t all just about advertising, it’s about the way the product is designed, the way people perceive it, the way it fits in the market and how it differentiates from the competitors.

A typical Marketing director for companies like Pepsi or Coke earn ballpark of 250,000 dollars per year.

 

Number 7: High-End Sales

Average salary: $200,000

If you can sell, you’ll do great anywhere. A good salesperson will always find work. Those who are really good at what they do may choose to move towards high ticket items.

Why bother selling cars in a dealership when you could be selling property in Monaco? The % might be smaller, but the pie is definitely bigger.

Here’s how much you can earn if you know what you’re doing:

·       Real estate sales: Over $250,000 per year

·       Pharmaceutical sales: Over $200,000 per year

·       Software sales: Over $150,000 per year

 

Number 8: Software Developer

Average salary: $150,000
Stock on the company

The age of start-ups has cooled down a bit. A few years ago everyone seem to be starting a tech company, may have failed and got back to working corporate jobs now.

But that period put the emphasis of just how valuable someone who can make things happen actually is. Jobs wouldn’t have been Jobs without Wozniak.

Software developers have a unique advantage where they can ask for a percentage of the company in exchange for their services. If the company does well, the developer gets rich in the process.

Then there others like investment bankers, hedge fund managers and new media developers. These people have high bonuses, reward schemes that massive emoluments. But talent and ability are key to higher returns. Tell us what you think for Malaysia, especially in the Covid-19 crisis.

 

Reference:

15 jobs that can make you a millionaire, Emil Anton 6 April 2020 (www.alux.com)