Thursday, July 17, 2008

Decoupling


Yes, I'm being naughty with the title-caption. I did realise that, taken in the context of current affairs hitherto, decoupling will be taken to be a pejorative word that describes certain political leaders extricating themselves from the non-gender-specific nether region of their erstwhile partners. But that is not the thrust of this blog entry (stop it! stop the puns!).
What I want to highlight this time around is the hallucenogenic effect that financial analysts and financial writers can have on investor sentiments. In this case, the example is the myth that Asian economies were in a position to elect whether, or not, to decouple from the ailing and moribund US economy even way back in December, 2007.
Will the following categories of persons please read the link that immediately follows the list; amnesiacs, selective amnesiacs, voluntary amnesiacs (i.e. those who choose to forget because the memory was too painful) and those who claim plain ignorance, read this first.
Being Rip van Winkle?
When some of us first read about the angle of Asian economies having reached an apotheosis of economic growth, maturity and mutual consumption, we must have immediately wondered if we had become the proverbial Rip van Winkle, having completely missed this phenomenon of decoupling, in the context of Asian economic development.
The hypothesis of decoupling is the proposition that European and Asian economies, especially emerging ones, have broadened and deepened to the point that they no longer depend on the US for growth, leaving them insulated from a severe slowdown there, even a fully fledged recession. Faith in the concept generated strong outperformance for stocks outside the US.
In January 2008 as fears of recession mounted in the US stocks declined heavily. But, Lo! And, behold! Contrary to what the decouplers would have expected, the losses were greater outside the US, with the worst experienced in emerging markets and developed economies like Germany and Japan. Exports make up especially large portions of economic activity in those places, but that was not supposed to matter anymore in a decoupled world because domestic activity was thought to be so robust. Read this in Wikipedia.
And so, the myth of decoupling was very quickly busted. Read Why the US Economy Still Matters for the run-down on the bursting of the myth.
The moral
We should be leery of the spin made by analysts that make a living from investment houses and brokerages or, at the very least, place a huge caveat and weigh what the reports say very carefully. Often, these reports are used to justify a "Hold" position while graduated selling of stock and investment positions are taking place. At other times, these reports generate a classic herd behaviour on the part of the investment community.
The myth of decoupling was perpetuated for many months. I believe many investors who would have taken shorter positions i.e. slowly sold down their investment holdings in regional bourses actually held on or, worse, increased their holdings. So, to the retail investors out there, the world of stock brokerages and investment funds may be awesome with their lingos and numbers-spewing prowess, but at day's end you have to use your innate cow sense because behind the full glass walls, leather upholstery and double-Bloomberg screens, there is a bunch of 20-year old finance graduates (called researchers) who are only crystalball-gazing and reading tea leaves. But, Boy! are they good at stirring and spinning their financial yarns!

3 comments:

Anonymous said...

Kenyataan Media Pasca Penahanan 15 Julai 2008





KUALA LUMPUR, MALAYSIA; JULY 17, 2008

On Saturday, 12-07-2008, the police came to my house to serve a Section 111 Criminal Procedure Code notice, harassing my family and demanding my presence at the IPK Kuala Lumpur (Federal Territories Police headquarters) at 2pm on Monday, 14-07-2008 despite an earlier agreement with my lawyers for me to come to the IPK on Monday 14-07-2008. On the next day, Sunday, the police also served an ex-parte court order, prohibiting me from physically being within 5 km from the Parliament on Monday 14-07-2008. As you can see, my house and the IPK KL are within 5 km radius from the parliament building. The court order effectively put me under house arrest on Monday and at the same time prevented me from going to the IPK.

On Monday, 14-07-2008, the presence of police personnel outside the compound of my house strengthened our suspicions that they would be prepared to arrest me as soon as I left the compound of my residence, on the pretext of me violating the court order. The issue here, is which order should I comply with, the ex-parte court order or the Section 111 notice from the police?

On the same day, the police through the Investigating Officer, one DSP Jude Pereira wrote and faxed to my lawyer at about 1.06pm, informing that I was required to be present at the IPK KL on Wednesday, 16-07-2008 at 2.00 pm to assist with the investigation. I conveyed my agreement to the appointment and it was communicated to the police through my solicitor, Messrs S.N Nair and Partners via telephone and letter on the same day.

On Wednesday, 16-07-2008, I was at the Anti Corruption Agency (BPR) head office to record my statement pursuant to the police report lodged by me at IPK Shah Alam on 01-07-2008, against the Attorney General Gani Patail and the Inspector General of Police Musa Hassan for their involvement in the fabrication of evidence way back in 1998. To ensure that we will be able to attend the appointment with the police at 2pm, we cut short our statement at the BPR’s office, and this fact was clearly conveyed to the BPR officers present.

At about 12.45 pm, the IO, DSP Jude Pereira called Mr Nair to confirm about our attendance and Mr. Nair confirmed that we would attend that 2pm appointment. We were about to have a quick lunch at my house before proceeding to the IPK. 5 minutes later, we were ambushed by a team of masked and heavily armed police personnel near my house.

I was arrested and brought to the IPK. I cooperated fully with the police by giving my cautioned statement from 2.30 pm to about 7.30 pm. At this particular point, the IO and the other officers handling this case were doing their job professionally. I was then given assurances by Assistant Commissioner of Police Razali and later Senior Assistant Commissioner II Khor (through my lawyer) that I would be released on police bail on the same day.

However, later on, upon my return from Kuala Lumpur General Hospotal (HKL), the IO, DSP Jude Pereira informed me and my lawyers that I will be detained and put in the police lock-up overnight for the purpose of recording a further statement in the morning.

I and my lawyers protested, giving our undertaking that we will be back anytime required by the police to continue with the recording of the statement, and there was no need for me to be detained overnight, and that I should be released on police bail. The police, through the IO were adamant that I should be detained and put in the police lock-up overnight, despite them knowing about my physical condition. I had to spend the night sleeping on a cold cement floor, which aggravated my back injury which was due to the beating I received from the then IGP, Tan Sri Rahim Nor on 20th September, 1998.

This morning, after a short statement that was recorded for about 30 minutes, I was released on police bail. I was in pain and had to immediately receive some medical treatment upon my return home.

I now wish to deal with the statement of the Criminal Investigation Department (CID) Director, Dato Mohd Bakri Mohd Zinin as appeared in Utusan Malaysia today, inter alia

“Pasukan khas bertopeng polis terpaksa memintas kenderaan DSAI di Bukit Segambut di sini dan menahan Anwar ekoran tindakan Penasihat PKR itu mengubah haluan kenderaannya pada saat-saat tempoh yang diberi kepadanya untuk menyerah diri kepada polis pada pukul 2 petang ini hampir berakhir”

This is a blatant lie from the CID director to cover up their shameful act of abuse of police powers. I have given the assurances and had just informed the IO 5 minutes before the disgraceful ambush by the police through my lawyer who was with me in the same car.

In addition to the above, the Deputy Home Minister, Wan Farid said, as reported in Star Online that, I “went voluntarily to the police car without any incident.” Again, this is also a blatant lie by the government.

I take to task the IGP for this abuse of police power against me through the events I’ve narrated above. It appears that the events of the last few days, the nature of my unwarranted arrest, my overnight incarceration which was actually absolutely unnecessary, were an act of personal vengeance against me in retaliation to the reports I lodged earlier against him, which are now being investigated by the ACA.

DNA

I have reasonable grounds for having no confidence in the system. In the course of the trial of the false allegations of sodomy in 1998, DNA evidence was fabricated and used against me. The persons responsible for the fabrication then were the IGP, SAC Rodwan and the AG, are new key players in this investigation.

Until now, I have been denied access to the police report made by the accuser against me.

My accuser is still under police protection and as such, any fabrication is possible if they take my DNA. My decision to refuse a DNA test is taken through advice of my lawyers and DNA experts, both local and overseas.

ANWAR IBRAHIM

CT Choo said...

Anon, thank you for the Press Statement.

Jed Yoong said...

Hey CT,

Another great post.

Yeah, I read analysts research with great caution but some older one are quite good. But mostly, they try to sell the shares that their colleagues are advising on some corporate finance deal?

Re decoupling. I feel, without much research, that China probably stands a good chance at riding out the slowdown. In fact I think the "slowdown" is a good control mechanism as inflation is skyrocketing as growth floats around 10 percent. Hopefully with the slowdown, energy prices will drop but with winter coming up, it's hard to say. Here in Malaysia, we don't use gas for heating so we don't feel the pinch so much.

If the Chinese (mainland) are smart, they would have seen this coming. In any case, they can adjust their policies so that the economy less dependent on trade.

The slowdown will also cut away "wastage/inefficiencies".

After this natural diffuser, if China pulls through it, it may emerge stronger than the US. It has tons of reserves, when I last checked (I think highest in the world), so I think it's ok. ;)

Soli, a bit late....tots are all over the place. ;)

Happy Weekend too. ;)