Category Archives: News & Politics

News & Politics, Science

Recent Interesting Science Articles (July ’09)

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Three articles this month and all of them are related in some way to the study of human nature. The first article touches on an explanation of why depression occurs from the perspective of evolutionary psychology. The second one demonstrates that humans really are that irrational when it comes to making economic decisions. The last one is on how caffeine might hold the key to curing Alzheimer’s disease.

The first article is from The Economist and covers a theory by Randolph Nesse of the University of Michigan. Dr. Nesse thinks that depression can be thought of as being analogous to physical pain. Just as pain serves to dissuade us from doing things that cause us physical harm, so depression serves to dissuade us from doing things that cause us mental harm. By this, he means specifically the pursuit of unreachable goals. Since pursuing goals that are ultimately unreachable wastes precious time and energy, he theorizes that depression exists as a mechanism to inhibit doing so.

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News & Politics, Science

Of bandwidth caps and pay as you go Internet

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Maybe I’m easily amused, but I had fun reading through this huge troll of a thread on LYN yesterday evening. It was clearly posted from a dupe account made for the specific purpose of starting that thread, but the inspiration came from a comment by the real Fikri Saleh during an online interview with the Malaysian Minister for Science, Technology and Innovation Datuk Dr. Maximus Ongkili organized by The Star:

I am an Electrical Engineering undergraduate from the University of Melbourne, currently majoring in telecommunications. In Australia they charge you for download quotas, where the more you download, the more you will have to pay, say 100 GB @ $100 versus 20 GB @ $20, after which the speed is throttled down (slowed). By charging more for more quota, this can improve overall connection quality. The heavy downloaders can still download, but now they have to pay more. Thus we normal users do not have to put up with the network being bogged due to these heavy downloaders, because there will be fewer of them.

Regards,
Fikri Saleh

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News & Politics

Index funds again

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I’m feeling lazy today, so here’s a cut and paste response that I posted to a question in LYN:

Can someone recommend some unit trust fund managers for KLCI INDEX fund? Is the OSK KLCI Tracker the only KLCI index fund around? I cannot believe this. Why other fund managers don’t setup an index fund? Why let OSK monopoly? I can’t even find two to compare and see which is cheaper.

Late reply, but this is something that I’ve wondered about in the past on this very forum as well. If you read a lot of general investment advice that comes out of experience in the US markets, the general consensus you should get is that most ordinary people should just buy index funds and forget about everything else. The rationale is that research has definitively demonstrated that over the long run, index funds in the aggregate outperform actively managed funds once you account for the higher costs associated with the managed funds. While it is possible for managed funds to beat the index, research has shown that it is not generally possible to predict in advance which particular managed fund will beat its benchmark index in any particular year. Research has also shown that the simple strategy of choosing the best performer of last year to invest in every year is a losing one.

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News & Politics, Personal Life

Thinking of investing in REITs

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So I’ve been thinking recently about opening a stock trading account for the first time and buying some shares on the Kuala Lumpur Stock Exchange. Granted, I already have money in various unit trust funds and insurance saving products, so I’m already indirectly invested in the markets, but I’ve never actually purchased shares for my own account before. What prompted the current interest is what looks to me like ridiculously attractive dividend yields on many of the REITs being traded here and the intense discussion this has generated on the Low Yat forums.

According to a popular blog on the subject that I’ve been folllowing on and off for the past couple of months, the average yield on the REITs based on current prices is a delicious 8.84%. One of the REITs most popular with the LYN folks, Axis, is listed as having a yield of 10.4%. Even better, Axis has a policy of redistributing 95% of its income and has recently moved to a quarterly distribution policy, meaning you get a nice fat cheque every 3 months.

In theory, investing in a REIT should be approximately similar to investing in property yourself, except that in return for a management fee, you are spared from the hassle of actually scouting for good properties, arranging to buy them and finding and managing tenants for them. Since the REITs are all at least partially funded using loans as well, this means that their yields are inflated by leverage, just as an individual investor’s yield would be in buying a property personally using a mortgage.

Being the pessimist and financial conservative that I am, however, I’m still somewhat wary of something that looks too good to be true. For one thing, the yields looks so good and the size of the REITs so small (Axis is worth by my calculations a mere RM 380 million or so, Atrium, another popular REIT is worth only around RM 120 million in total) that I don’t understand why institutional investors don’t just snap the whole thing up. I see that the Employee’s Provident Fund is already the largest shareholder of Axis, at 7.59% of total issued units, but what’s stopping the big players from just taking over such a sweet operation?

As always, I suppose there’s the risk of property prices dropping, tenants leaving or not paying rent (I understand Atrium gave everyone a scare when it announced a lawsuit against a big tenant over rent arrears earlier) and the value of the REITs dropping due to the general market sentiment, but it still looks like a stupidly good buy to me. Am I wrong? I’d appreciate it if anyone has any interesting comments on this before I pull the trigger on this.

News & Politics

Private banking is for suckers

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I read with some amusement today’s article in The Malaysian Insider on plans by the Royal Bank of Scotland to target rich women in Singapore as clients for its private banking arm. Granted, I’ll never have enough money to even be considered as a client for a private bank, so I’m open to charges of writing out of spite and envy, but in general, my impression is that private banking is getting a lot of bad press at the moment.

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News & Politics

Index funds in Malaysia

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Since I got into, well, not exactly an argument, but at least a rather heated discussion over this topic on the LYN forums, I thought it might be interesting to write down a summary of my posts there and also what I’ve learned from that thread. Please note that all of this mostly applies only to Malaysia.

Now I’m just a neophyte investor and I don’t make any claims to exceptional knowledge or skill. But I do take care to read through the basics and try to educate myself in whatever it is I’m getting into. One of the most basic and well known ways to invest your money is through the stock market. You can either do it yourself, picking stocks that you personally believe will do well and pray, or you can entrust it to “professional” mutual fund managers and pray. I’m guessing that most working people don’t have the time or inclination to actually do their own research and will opt for the latter. That’s what I did and this is where things get interesting.

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News & Politics

Is Atlas Shrugging?

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I meant to post this earlier but my net connection, along with it seems that of a large number of other Malaysians, was down for the better part of Friday and Saturday. Here’s a link to an amusing article that I read on The Economist. Apparently one unexpected side effect of the current financial crisis has been a boom in the sales of books by Ayn Rand. The publication finds that there is a correlation between announcements of government intervention in the markets and spikes in the sales of Rand’s magnum opus, Atlas Shrugged.

The apparent cause is that current news seems to be echoing events in the novel, with Alan Greenspan’s admission of a flaw in the financial system being particularly seen by Randites as a cowardly capitulation reminiscent of a character’s rejection of reason in favour of faith in the book. More significantly, there seems to be a phenomenon called “Going Galt” going around in the U.S., named after John Galt, a major character in the novel.  The idea is that taxpayers should stop subsidizing the government’s wasteful bailout policies and opt out of the financial system by simply choosing to produce less wealth than they could or even choosing not to work at all or closing down their businesses.

For what it’s worth, even though I call myself a libertarian, I don’t identify with this movement at all. Tax increases are to be avoided whenever possible, but in this case are absolutely necessary for the long-term health of the U.S. economy. I’m never happy with bailing out failed businesses or borrowers who took on more liabilities than they could comfortably handle, but I cannot agree that the U.S. government should simply do nothing. I’d have preferred for example, that the U.S. government went ahead and nationalized any banks that are found to be insolvent, but it’s pretty obvious that this is going to entail an extremely large increase in short-term government expenditure that will eventually need to be paid for in the form of higher taxes. I certainly won’t pretend that doing it my way would be any cheaper.

One thing about this movement particularly irks me is that many of them don’t seem to understand the concept of marginal tax rates. There are stories, for example, about people going around finding ways to make sure their income doesn’t exceed US$250,000 because they seem to believe that the higher tax rate for that bracket would be applicable towards the entirety of their income, rather than just the specific amount that exceeds the ceiling. Not very smart for a bunch of folks claiming to espouse rationality and reason.