Wednesday, January 19, 2011

Lines/Soundbytes that annoy me...and you better watch out for!

When reading an article or listening to a sales pitch, do you ever read/hear a line that sounds too good to be true that it's annoying? Well, I do! So here's my rant/dissection of these lines which I think are just annoying!

Screen Shot of Pemandu's Website

1. "Yes, and you know the Government has the ETP..."

Context: Anything! If you're trying to sell something which remotely has anything to do with one of the many projects or the companies benefit ting from the government's ETP plan ( or anything to do with Malaysia, mention the ETP!

Yes, mentioning those 3 letters will make you think of the billions of ringgit being pumped into our Malaysian economy. I remember I was being given a sales pitch for a Palm Oil Investment Scheme and I listened carefully, being quite intrigued until the saleslady mentioned ETP and I just looked at her. She said "You know alot of money coming in from the ETP..." and I could only just playing along "yeah.. yeah.." yet alarm bells was going into my head.

In fact, our PM has mentioned how this has benefited the stock market! And that is true, the KLSE is at its highest ever and reaching new highs the last few weeks.

But whoa... let's think about it carefully. Where is this money actually going into? If it's a company getting a contract from the government like say Gamuda-MMC who will develop the MRT system, of course it would rise being a direct beneficiary. From the economic point of view, besides directly benefiting companies like Dialog in the O&G department, there is generally a trickle down effect as the employees of these companies directly benefiting would earn more (or more people will be employed and more money will go around) and will buy more goods and services from other companies. And this cycle continues as people from those companies spend more too. This will naturally boost the economy all round and is known as the 'trickle-down' effect.

The point I am trying to make is that don't be taken in by such sweet words and always do your research and back it up with cold hard facts/figures and not to be taken in by generalisations (especially those with these 3 little "magic" letters!)''

This post is not to examine the pros and cons of the ETP in fact, the spirit of achieving a high income economy is admirable but don't let your emotions be swayed by it. I will admit there is a good momentum going with some stocks because of the ETP news but remember, all good things must come to an end.

My philosophy's not about chasing the next trend but choosing a strong fundamental investment with long term potential. If it's a beneficiary of the ETP, that's the icing on the cake but not the main reason why I am buying into something.

A green light for property? (image credit: Dreamtime, Phil Date)

2. "Property prices in KL have not reached the same levels as in Singapore and Hong Kong"
Context: Investing in KL property and even Penang.

This line seems to be used by anyone talking up the property sector in Malaysia. This gets speculators' excited but does not actually examine the fundamentals of the location or growth of KL/Penang.

First thing, Singapore and Hong Kong has limited land area right? This comes with being Islands having limited land and they are even forced to spend millions on land reclamation to create more land!

Does KL have the same problem?No. Maybe, Penang does.

Kuala Lumpur is growing and in fact, it has merged with its satellite towns like Bandar Utama, PJ and more developments are coming out on the outskirts. Yet, if you read this : it would seem high end rentals are down.

And also let's face the facts - KL versus Singapore and HK - are our economies as vibrant and robust as these two cities? As much as I wish to say yes, the reality makes it very hard to say No. Let's see facts:

Infrastructure wise : We still face perpetual traffic jams against such efficient public transport systems in these two cities. Need I say more?

Growth-wise : Yes, we do have Malaysians from other states coming to the Klang Valley as the better paying jobs are coming in but not all areas will be desirable and factors like distance and accessibility to workplace/education are key points to research.

Expat/Foreign Occupants growth wise: Maybe with the ETP - more projects - even the nuclear plant would need foreign specialities. But I won't be quick to say we have much more to offer than say, Singapore!

Economy-wise: Whoa, don't get me started here. HK and Singapore are considered developed nation states with much higher GDP per capita. Their citizens earn much more and naturally are willing to pay more for property. What about KL? A city with the highest twin towers at best! In fact, a minister just said that RM3,000 is high income!

Supply-wise: So, we have dealt with demand-side, there's still the matter of whether there is a good supply or even over supply of property in KL. I can't really comment for sure but my observation of condos that seem unoccupied and the huge amount of properties coming on-line seems to tell me we have a good supply meeting demand or I might even say there is an oversupply. The reason why most property are being sold but not rented up is because these properties are being bought by baby-boomers (those 40 and above) who have reached the peak of their earning power by moving high up in their career ladders and are looking to buy 2nd, 3rd homes and so on. In fact, read into Bank Negara's measure last year to increase the down payment to 70% for housing loans for 3rd homes onwards as confirmation of this. (Of course, in any market you will have your bargains and there are niche markets like landed property and certain areas where this is the exception so make sure you have a good margin of safety and/or know your stuff when looking for a good deal!)

In conclusion, is it really fair comparing our humble KL (which I do love still with its imperfections!) compare to Singapore and HK?

Again, like the 1st line I hate- This is probably an-over generalisation a myth. In fact, I will be careful when I hear this line.

Don't get me wrong - invest in KL/Penang property and make sure you do your due diligence/research! Don't simply buy into simple lines like these.

3. "Only time will tell..."
Context : End of any article!

This has to be the biggest cliché used which is like an escape clause of any writer/analyst at the end of their articles. I mean, comeon lar! If time could tell, I would look at my watch and not read your article, right?!


That's the end of the rant-ish post. *phew*

But I would love to hear from you guys! What common lines do you hate the most and why?

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