Fate of GM and Chrysler

The decision of President Obama to reject the turnaround plans for both GM and Chrysler must be looked at seriously. I have the same opinion with President Obama regarding GM's future plans i.e. GM has not provided an attractive avenue for its own survival. There is no obvious profitable plan which GM has put forward. Thus my opinion is even with the extra 6o days, GM is still in its way to Chapter 11.

But I am really surprise with President Obama strong stance on Chrysler entering into a partnership with Fiat. I thought the plan was to merge GM and Chrysler but I guess Washington has its own option plan. I have never driven a Fiat BUT I have been in a Fiat i.e. Fiat 124 and Fiat Tempra (Malaysian version)

I look forward to the developments in the coming weeks.

Merger of Canadian Oil Companies

I was reading The Economist.com when all of the sudden I remember that the province of Alberta Canada has the second biggest oil reserve after Saudi Arabia. I feel so awkward because I used to remember this fact on my finger tips when I studied at University of Saskatchewan.

The merger of Suncor Energy and Petro-Canada must be looked at positively. Saving $300 million of operating expenditure is a big sum of money. But more importantly by merging both companies would avert unnecessary rivalry. Although the oil reserve is plenty, one day it will deplete and eventually run dry.

Oil and Energy companies must take the necessary steps to find other source of energy. Malaysian oil Company Petronas has been developing alternative energy because oil reserve in Malaysia would run dry by 2013.

But I am still puzzle as to where I had misplaced my Petro-Canada card!

Devastated

Dear Valentine,
I am listening to Karen Carpenter singing Yesterday Once More,
Over and over again , yet I knew I have to write this in public....
Come March 30th 2009, it will be 3 months since my father passed away. I feel so lost sometimes wondering whether I did any wrong doing on that Tuesday morning 30th December 2008. I did asked my father whether he wanted to see the doctor in the morning but he refused. I knew I should have forced him to do so.

If I have enough cash now, I would have booked the airline ticket to Saskatoon right away. I need a break from this great loss. While on the flight from Vancouver to Saskatoon I should see the beautiful scenery of Banff and Jasper.

But in reality I still need to save more money for that flight to Saskatoon. My emotion is still not stable, my heart pounding fast most of the time but I don't care. I was supposed to undergo a stress test and echo last week but I didn't go to the hospital because I knew I would fail the stress test. I am still unstable emotionally.

One day I will go Saskatoon and Outlook again.

Finally - The Fed Is Going Somewhere

The decision of the Federal Reserve to buy back long term treasury bond and mortgage back securities is long overdue. In fact The Fed should have done so during the 3rd quarter 2008 (before the collapse of Lehman etc).

Put it this way. As an undergraduate I follow by the book. When recession is closed to deflation then the appropriate way to revitalize the economy is to push for inflation. However the threat of hyperinflation could not be ruled out.

I would assume that the Federal Reserve would exercise the buying back strategy in order to improve its Balance Sheet. I predict it won't be long before other central banks follow suit.

Opec's decision to cut oil production has pushed crude oil prices to go higher than USD 50. I think the price between USD 50 to 60 per barrel is acceptable for the oil producing nations and buyers, considering the current economic outlook.

Glass Steagall Act

I was still in darkness when Glass Steagall Act 1933 was repealed in 1998 i.e. my life was still upside down. I was just starting my banana farm then. I was broke like hell. I had to walk 5km to the Kuala Pilah town just to mail a job application letter. Many times I had to drink a tap water to avoid thirst because when I was in town I just had enough sen to cover my bus fare home.

In 2002 With God's grace my mother got some money inherited from my late grandfather thus I bought my Perodua Kancil i.e. the cheapest new car in Malaysia then BUT the people of Kuala Pilah reacted as if they wanted to cut my hand. WHY? Is it that wrong for me to have my own car? IDIOT ! Moreover is it that wrong for me to marry a foreigner?

Coming back to Glass Steagall Act. Honestly even if it is NOT repealed I doubt that the current US credit crunch (which is a global crisis now) could be averted. The reason being Americans are used to non monetary instruments (Credit Cards etc) rather than paying cash.

Obviously many items were overlooked when Glass Steagall Act was repealed even though on paper Riegle-Neil IBBEA 1994 and GLBA of 1999 looked promising. Maybe its time for President Obama to look into this matter again.

RM 60 Billion Stimulus Package

The honorable Deputy Prime Minister and Finance Minister Datuk Najib unveiled the second stimulus package last Tuesday. These are my comments i.e.the undergraduate of Edwards University of Saskatchewan Canada.

1)The amount of RM60 Billion to be spread in 2009 and 2010 - SURPRISE as it is 9% of the Gross Domestic Product
2)Estimate government deficit of 7.6% for 2009 - MANAGEABLE for now
3)Forecast GDP of -1% to +1% for 2009 - EXPECTED although I doubt a positive number is attainable.
4)Carry Back Losses - TIMELY i.e.should have been done years ago. Many quarters expect both tax cuts for companies and individuals but obviously the government still need to maintain its revenue.
5)Car Scrapping Scheme for car owners more than 10 years old to buy Proton and Perodua (discount RM5,000) - Good idea. The government has a duty to protect the local car industry no matter how bad the economy is.
6)One year freeze on housing loan to benefit those retrenched or unemployed due to Voluntarily Separation Scheme - WELCOME but what if the borrower still out of job after one year. May contribute to higher NPL.
7)The RM2 Billion Lower Cost Terminal to be built near KLIA - This is indeed a mega project to be completed by 2011. I lauded the project. Rather than building a separate second LCCT just 10 or 20 km from KLIA which needs another runway and land acquisition of poor Felda settlers, its better for Malaysian Airports Holdings Berhad to build the new LCCT nearby KLIA.
8)Possibility of another stimulus package - YES. There is always Post Balance Sheet event.

I wonder where were those smart Malaysians who criticize me badly during my PTD interview. They battered me for coming home to Malaysia without my Bachelor of Commerce,my poor English (am I) and that I could NOT take the burden of learning Finance.

Hei you Malaysians! you have tons of certificates, I ain't got nothing. Brush up for better ideas.

Its The End For GM?

Reading the newest report regarding GM today has made me closer into believing that the biggest automobile manufacturer in the world cannot avoid asking for chapter 11 protection. The argument that buyers won't buy GM cars if they were asking for chapter 11 maybe valid for only a short time.

GM has been there for so long and questions regarding warranties and spare parts should not arise at all. Yes its true buyers will avoid buying cars from an ailing manufacturer but think about GM cars and its reputation since model T.

I still remember driving a Pontiac Sunbird or Chevy Celebrity then. The ride was smooth although the car seat is bigger than myself.

The LAST thing for GM to do is to go for chapter 11. I don't think GM really need that protection for now.

GDP 2008 is 4.6%

I was listening to Karen Carpenter's Yesterday Once More as I was browsing the Central Bank web site. The not good figures for 2008 justified my concern for the Malaysian economy. For 2008 GDP was 4.6% while Q4 2008 GDP was 0.1%

And now I am still listening to Karen carpenter's song wondering what the economy would be like in the next quarters. Obviously global auto industry is suffering and Proton is no exception. Few years back many quarters suggested Proton find a strategic partner mainly American or European car makers BUT Proton discard the idea and went alone except to renew its partnership with Mitsubishi. Should Proton made that partnership with any western auto makers I guess Proton too would have asked money from the government for restructuring.

Maybe now is the right time for us to ponder the sufferings of the refugees in Africa or even the Palestinians. To these people its not how much bonus or profit which concern them but rather how to put food on the table and sleep under some kind of shelter each night.

To all you smart financiers and economists out there, pull your strengths for new ideas. I have some but I am not a graduate from Saskatchewan yet. So I would put those on hold for the time being.

Overnight Policy Rates and SRR

I caution the decision by the Bank Negara Malaysia to reduce the OPR further down by 5o basis points to 2% as at 24th February 2009. The move by the Malaysian Central Bank could be a hint that a negative is expected for the 4th quarter 2008 GDP figure which is to be announced Friday 27 February 2009. Thus the ceiling rates is now 2.25% and floor rates 1.75% respectively.

Reducing the SRR by 1% to 1% commencing 1st March 2009 is seen now as a needed or just a gimmick. The problem is banks are NOT giving out loans to the needy. Banks have the money to create more money, its only the ordinary Malaysians who are broke.

Datuk Najib as the Finance Minister must take a bold action now. Are we gonna keep reducing OPR into the negatives or are we gonna continue spending public money as sinking funds? More measures must be tackle in the 2nd stimulus package which is to be announced on March 10th 2009. I am certain as an economics graduate Datuk Najib can look beyond fiscal and monetary aspects.

As a human I don't want to take the bus again or lose my home!