Rogers, Malaysia, Enforcement and Volatility

According to this article in The Sun Daily, Jim Rogers made a 180 degree turn regarding investing in Malaysia:

Famed investor and co-founder of Quantum Fund, Jim Rogers (pix), took to the stage at Invest Malaysia 2013 yesterday to say that he is now back in Malaysia to invest and believes that the "positive dramatic changes" undertaken by Prime Minister Datuk Seri Najib Abdul Razak have put Malaysia on the right track.

"Malaysia is making positive dramatic changes. I am extremely optimistic about Malaysia and Asean. In fact I don't see any countries in Asean going the wrong way,'' he told a packed ballroom here yesterday.

.... Rogers had once said that he would never return to invest in Malaysia after getting burnt during the 1998 Asian financial crisis.


The problem with Malaysia is, that one can never be sure if changes are for real, or if it is all mere "sandiwara" (shadow play). Enforcement has been increased over the last 15 years, but hardly any big fish has ever been caught.

However, there might be some change lately. KiniBiz reported: "SC fines Naza brothers for Jetson affair":

The Securities Commission (SC) slapped a RM500,000 fine on SM Nasarudin SM Nasimuddin, SM Faliq SM Nasimuddin, and Ahmad Ibrahim last month, for failing to “carry out a mandatory offer for the remaining shares in Kumpulan Jetson Bhd”,

The article (full version only for subscribers) continued:

"The penalty is believed to be related to the brothers’ 2010 exit from Jetson, reportedly due to disagreements with other shareholders. The exit came a year after buying into Jetson via their private vehicle Superior Pavillion in August 2009."

"....This is not the first instance of failure to undertake a mandatory offer at Jetson, and ironically is preceded by a case involving Teh himself. In 2008, the Commission directed Teh [Managing Director and co-founder of Jetson] to disgorge his profits to a charity of his choice after failing to make a mandatory offer for the remaining shares in Jetson after acquiring control in the group."

Hopefully for the minority shareholders of Jetson it will be third time lucky.


I can't find any other link in the media to the above fine and reprimand, the link on the website from the Securities Commission can be found here.

It is very rare for Malaysia that VIP's like the Naza brothers are reprimanded and fined. So may be there is still hope for Malaysia after all, this looks like a step in the right direction.

If the fine itself (only a fraction of the company valuation) is sufficient is another matter. Punishment for blue collar cases are notoriously light.

The timing of Jim Rogers' bullish speech might however not be the best. In developed countries markets go up through the escalator and down through the lift. In emerging countries this is even much more true. "Hot money" can be reversed in an instant and both equity markets of emerging markets and their currencies will suffer. There is a lot of volatility lately which seem to indicate outflow of funds and heightened risk.

Bursa Malaysia was hit by six (quite good quality) counters that went limit-down this Friday at or near the close:

Bursa Malaysia responded that the orders were "valid and genuine", but who in his or her right mind would dump shares like this?

"Where is Ze Moola" finds it nonsensical trades and I have to agree with that. Even stranger is that 2 other counters (The Star and JCY) were traded up that day.

Monday will give a more clear picture what is going on.

Rogers, Hendry and Edwards fight it out

Jim Rogers, Hugh Hendry and Albert Edwards are three people I have a lot of respect for. So if the three disagree about a subject, that means we are in interesting but conflicting times. In this case Rogers claims there is no hard landing for China, contrary to Hendry and Edwards. I tend to side with Hendry and Edwards, based on anecdotic evidence from China, Singapore's GDP shrinking and Western economies doing badly.

Article from investmentweek:

Rogers: Why Hendry and Edwards are wrong on China
23 Jul 2012, Katie Holliday

Jim Rogers has dismissed fears of a hard landing in China, saying slowing growth is simply proof the authorities are managing the economy as they intended.

Rogers’ bullish views on China’s long-term economic prospects place him at odds with well-known China bears Hugh Hendry of Eclectica and SocGen’s Albert Edwards.

“Hugh has been dead wrong about China for three years now and China has not collapsed as he predicted, loudly, verbally and widely,” said Rogers.

“Albert has been bearish on everything for a long time. So if you are telling me he is bearish on China and bullish on everything else that would be different. But no, he is bearish on everything, including you, me and Mother Teresa.”

Hendry, who runs the CF Eclectica Absolute Macro fund, has refuted claims China will act as the main driver for global economic growth and is extremely bearish on Asia as a whole, while SocGen’s Edwards expects China to suffer an extreme hard landing which will prompt stocks to collapse.

China’s benchmark index hit its lowest level in three and a half years last week, and the region’s slowing growth continues to fuel investor concern. The Shanghai Composite index closed at 2,147 on Monday – its lowest level since March 2009 and 40% down on August 2009 highs of 3,471.

In March, Rogers told Investment Week he was banking on a sharp sell-off of Chinese shares as an opportunity to buy back in, and last week’s price falls have caught his attention.

“The lower they go, the more interested I become,” he said. A full blown share price collapse could be triggered by any kind of shock event, according to Rogers, from a bankruptcy in Spain, Italy or the UK, to rocketing inflation or a natural disaster.

Gold: a Buy or a Sell?

Gold trades currently above USD 1,600 per ounce. The previous bull run ended in 1980 at around USD 850 per ounce, after which a 26(!) year bear market followed. The following chart is not adjusted for inflation:

There are four people I admire.

Warren Buffett:

“Gold gets dug out of the ground in Africa, or some place. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

“Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn’t produce anything.”

Charlie Munger:

“I don’t have the slightest interest in gold. I like understanding what works and what doesn’t in human systems. To me that’s not optional; that’s a moral obligation. If you’re capable of understanding the world, you have a moral obligation to become rational. And I don’t see how you become rational hoarding gold. Even if it works, you’re a jerk.”

Jim Rogers:
"I own gold and silver, because paper money all over the world is being debased.  In a few years we will probably all have our money in physical assets, because nearly all paper money is being debased at a rapid rate by politicians who have learned how to buy votes.  It is the wrong thing to do, but they don't care.  They're worried about the next election."

Marc Faber:

“And so the question is, you know, where do you put your money if you and I go away to an island or to jail for ten years and we can’t make any transactions and we come back in ten years’ time? I think if the objective is the maintenance of purchasing power, in other words, you just don’t want to wake up in ten years’ time when you come out of jail and what you have is worthless, then I would say that probably gold is the best alternative. If the question is how do you maximize profit, probably there may be more profit in equities because, you know, we have abysmal performance of equities in the last ten years. And particularly in the US, as a result of the decline in the value of the US dollar, equities would seem to me to be not particularly expensive. I think what would be dangerous for you and me would be to put all our money in US dollar cash and in US government bonds for ten years and then come back and maybe find out that we can buy with a hundred thousand dollars just a cup of coffee — or not even that.”

He said that longer-term gold can only go higher because of negative real interest rates. Even a deflationary collapse is unlikely to hurt gold because the Fed will simply debase the dollar to get nominal prices higher.

"If the Fed gets it right and successfully re-inflates asset prices, then inflation will be in the double-digits, which would be bullish for gold," Faber pointed out.”

Marc Faber argued the following in his "Gloom, Boom and Doom" newsletter:

It took the US government about 80 years (between 1920 and 2000) to devalue the USD by 95%. In other words, it would take $20 in 2000 to buy the same item that cost $1 in 1920. The US government will again devalue the USD by 95%, but this time they will do it much faster. Paper currencies can be printed at will, they don’t even need a physical printer, they can add money electronically. The only money they can’t print at will is money supported by real items, like Gold.

For me, if these clever people have such a different opinion, then what can I add? I simply find it fascinating, such a difference of opinion by such clever people.

For me, I own some gold and some gold miners (through Blackrock World Gold Fund), I don’t intend to buy nor sell at this moment. Other good long-term inflation hedges are land, property and to some extend shares. The best is to spread risk by investing in different asset classes.