Remembering Steve Jobs and congratulating Heng Long.

Steve Jobs is dead....although it did not come as a surprise, it was still extremely sad when the news finally broke. Many articles have been published on his life over the past few days and I would strongly recommend anyone to read them because it gives us a good insight on how he lived his life. It was one of passion, focus and strong belief that he was making million's of lives better off with his innovative ideas. After reading about him so much over these past few days, it has really made me more reflective about how my work does not make anyone better off. In fact, considering how the markets have gone in 2008 - 2011, we really cannot blame the general public for having such a bad impression of banks.

Really was not in the mood to do anything this weekend nor write anything. Have really been in a more reflective mood. Markets have maintained their volatility this week, with most markets hitting year lows before staging a nice rebound till the later part of the week. Hope some of you managed to profit from it. I cannot deny that stocks do look cheap by valuations after such a steep drop and they have mostly priced in a recession going forward and if the European situation can be stopped, then this is a pretty good level to get back in.

Now it all depends on whether you all think that there is a way to resolve the Euro crisis. This week we saw the ECB do more by extending one year loans and increase their buying of covered bonds. This is to prevent the liquidity crunch in the European banking system. This is not a solution but it should provide some reprieve for funding needs of the banks. We also have witnessed the first European to technically fail. The breaking up of Dexia should be viewed as that because the bank could not operate under normal circumstances and the creation of a good and bad bank out of Dexia just brings back fond memories of 2008 doesn't it?

If you studied finance, you will know risk is one of the core topics for any financial courses. For the longest time, academics have been trying to find means and ways to quantify risks and even categorize them in to systematic, idiosyncratic and systemic risks. Reduction of risks have been the focus for the longest time but what this year has shown is that there are some risks cannot be reduced. In order to reduce risks, risks needs to be quantified, but how does one quantify political incompetence? I am not worried so much about other risks in the market but I am more concerned about the political situation.

As citizens of a country, we tend to look at things from our own nation's perspective and we tend to vote with that in mind. Can you imagine? During our last elections, we had full employment, strong economic growth and growing income but yet we were disgruntled enough to cause the worst ever result for our beloved PAP. Now put yourselves in the shoes of the Germans, French, Italians etc. You will not be thinking of how the Eurozone is going to do, you will be thinking from your own country's perspective. Now put yourselves in the shoes of the politicians. Do you think for your own country or do you think for the whole Eurozone. The problem therein lies in the fact that both are more interlinked than the people think. Having to juggle between your own citizens and the citizens across the whole region is really a big task. That is why I have the feeling that things are going to be tough to solve.

As for stocks in Singapore, I have been looking for companies that have been sold down to ridiculous prices but I still find lots of risks to the downside in terms of earnings. My current criteria before choosing any company is the sustainability of its earnings. During this time, we really need to be forward looking and also the business's ability to weather this coming storm. Take for example, I will not be buying into contract manufacturers or even companies that are very much dependent on volume rather than margins. Have shortlisted a few companies which I would very much like to accumulate during this time but they are definitely not at prices which I feel comfortable with. As for the names, they will be revealed in due course and some will be names which I have mentioned before.

To end off this post, I would like to say I am very proud to see that one of my favourite companies have been offered to be taken private. Not only is it being taken private, it is bought by one of the most admired companies in the world, Louis Vuitton Moet Hennessy. Congrats to those who bought into the stock when I called for it. Pity that we will not be able to benefit from Heng Long's growth going forward. But I do look forward to buying some nice croc products from LV going forward.

In the mean time, let us honor and remember the great Steve Jobs and what he has done to change our lives and his passion is something which we should try to replicate in our own lives. Not the biggest fan of Apple products but I do admire the company that he has built. Like what Steve Jobs said, "Live every day as if it was your last. Stay hungry and foolish." I hope I can do so too.

Best,

SVI