Palm Oil may be in trouble

The Edge Malaysia weekly magazine also reported that the EU may have regulation that would effectively stop shipments of palm oil based products. The chances are notably slim, but that just illustrates the dependencies Malaysia has on foreign countries.

Like I said before, we need to have the ability to divert our own palm oil feedstock supply into the local market. Our government hasn't been able to initiate effective biodiesel policy. We need the downstream infrastructure to support the palm oil industry. We need to be able to use our own palm oil.

Politicians need to stop jockeying for votes and lining their pockets and make intelligent economic decisions for Malaysia. Not only that, they should implement it fast as well. The downstream alternatives are lacking and if a demand shock such as the US or EU stops importing biodiesel, Malaysia will be in trouble. Malaysia is such an advanced country, but we lack the foresight compared to a country such as lower ranked Brazil which has their infrastructure in place.

TM mulling over EPL TV rights, country upgrade from CIMB for Malaysia, and thoughts on the effects of recent years' tax cuts

I mentioned last month that Telekom was possibly planning on offering television services with its HSBB infrastructure that it is currently deploying. It seems like this has come true with the possible bidding for English Premier League broadcasting rights for Malaysia as mentioned in the Edge Weekly this weekend.

Hardline infrastructure has so many advantages over wireless infrastructure that it's a no brainer Telekom Malaysia will have a leg up over the competition. For one, wireless signals can get interrupted by bad weather and weak transmission. Hardline or cable television will have no such problems. People will always get a near perfect picture with hardline televsion technologies.
The same goes for internet as well. But at the same time, I hadn't fully considered that TM would have to spend a lot of money in starting up its media division, buying rights, etc. I do expect the government to give TM a lot of support in forcing Astro give up exclusive TV channels like the Star channel, similar to what Indonesia did. After all, the government owns TM.

I'm not expecting the dividends to stay where they are now. The dividend payouts and policies are quite generous at the moment. I believe they will have to cut it soon as they start ramping up the HSBB and televsion divisions. They will most certainly take a hit to their stock price if they were to cut dividends.


I think the CIMB upgrade of Malaysia is silly. Moving to cyclical stocks will amplify profits and losses in stock returns. Yes, in that case for the short term, it might be a good idea as the market has been rebounding. But if the markets turn south, cyclicals will take the worst beatdown. In the longer term outlook of 6 months to a year, It's simply way too early to move into cyclical stocks.

We are only 9 months in this stock bear market. 9 months ago is when the markets really began to collapse by just looking at charts of the nasdaq and dow. And we're at a bottom already? Give me a break. The stock bear market in 2000 lasted for at least 2.5 years until 2003. And guess which recession is worse? Just because GDP may turn positive doesn't mean anything if growth is weak. In this case the markets will still deteriorate, albeit at a slower rate.

One of the things I've been mulling over is the effect of tax cuts from the government over the past few years. In my opinion, tax cuts can be used as an effective monetary instrument. Because the government cut taxes over the last few years during the good times, most of the money went back into the economy and people spent more as shown by gdp. During bad times, people will save money from tax cuts. But when things get better they have more options.

So, if taxes stay where they are now, we will recover in sync. If taxes go up, our recession will be more severe. Anyways, I believe the tax cuts are all done and won't be lowered anymore. So we had a chance if we didn't cut taxes a few years ago to cut taxes now and get out of this recession a bit faster or in better shape. So I think it was a bit of a failure from a view of fiscal responsibility. If we cut taxes now instead of then, we would not have had as much growth, but at the same time we would be in a good position when the recession ends. Anyhow, there are other things to consider, but that is my general view. But we are not alone, the US did the exact same thing. They aren't that much better.

Recent thoughts on the rally in the world markets

Malaysia has underperformed the recent rally to much avail. While markets in the US have rebounded nicely, why hasn't Malaysia done so?

The short answer is that the market is extremely illiquid. Malaysia has a very anemic stock market due to the investors generally shunning Malaysia as there are more vibrant markets in the world. It will take nothing short of genius for the world to see Malaysia as a fantastic place to invest. Clearing red tape is not enough. I'm talking about doing something really innovative for Malaysia to be a fantastic place to invest again.

But do not despair at the current market rally. It is a bear market rally. People are jumping the gun at thinking the economy will see the bottom. We have seen the explosions and smoke coming from the volcano, but the lava has yet to flow all the way down. Unemployment will continue to increase in the US. GDP will remain negative for this whole year as nonresidential investment gets trashed (it hasn't yet as long projects are still being completed). And if we get growth, it will be slow. It won't make up for inflation.

We are only some 9 months into this bear market. The stock markets only started collapsing about summer of last year. This bear market is being billed as one of the biggest recessions of all time so I think recovering in 9 months is slim. The odds look in favor of another bear market downturn off this rally.