Investing in 2014

Value Investing Summit 2014 - 'Live'

The end of the year is the time to reflect on the past and the beginning of the year is time to reflect on the future. 

SO how did your portfolio do last year?

The Dow Jones Industrial Average for US stocks hit 16,576 with a 26% gain for the year, the best year since 1996. By comparison, the Hang Seng Index performed 3%; Tokyo Nikkei did best at 57% and Bursa Malaysia ended 10.5% higher, just a tad off its record high.

On the other hand, the fastest growing economy in the world had the worst stock performance – the Shanghai A share index closed the year at -8%. Gold prices fell 27% to US$1,196 per oz, while property prices seemed to have done well in the United States and China. Bond prices are now extremely shaky, with the JPM Global Aggregate Bond Index falling by 2% during the year.

What is going on?

The answer has to be quantitative easing (QE) by the advanced country central banks. The world is still flush with liquidity and since investors are unclear on what direction to invest in, they have reversed investments in commodities (such as gold), avoided bonds because of prospective rises in interest rates and essentially piled into stocks.

Individual investors like you and I tend to forget that the market is really driven today by large institutional investors, including fast traders with computer-driven algorithms that have better information than the retail investor and can trade in and out faster and cheaper. It is not surprising that retail investors who have traditionally driven Asian markets have been moving more to the sidelines.

Even institutional investors are not equal. Long-term fund managers like pension funds and insurance companies are, by and large, highly regulated, with restrictions on what they can or cannot buy. So it is not surprising that the biggest money managers are today even larger than banks. BlackRock, the largest independent fund manager alone looks after nearly US$4 trillion, larger than most banks in emerging markets.

There are, of course, two types of asset management – active (where the managers actively invest according to their judgement on your behalf) and passive, where they simply follow the market indices or buy exchange traded funds (ETFs) that track market indices. According to the Towers-Perrin study of top 500 global asset managers, during the last decade, passive managers did better than the group as a whole.

So should we trust the market experts? I have been reading for years Byron Wien’s annual Predictions for Ten Surprises for the Year. Byron used to be a top investment pundit for Morgan Stanley but he is now working for Blackstone. His prediction of surprises is defined as events where average investor would assign one-third change of happening, but which he believed would have a better than 50% change of happening. He got roughly seven out of ten wrong in 2013, the more relevant mis-calls being the price of gold, a possible drop in S&P 500, the price of oil and the A share index.

Bill Gross, one of the top bond fund managers, pointed out that retail investors tend to be conservative, focusing largely on safe portfolios, such as investment grade and high yield bonds and stocks. But institutional investors have gravitated instead into alternative assets, hedge funds and more unconventional assets. Unfortunately, all these assets are “based on artificially low interest rates”. So if low interest rate policies are reversed, investors have to be prepared.

He rightly pointed out that the advanced country central banks are “basically telling investors that they have no alternative than to invest in riskier assets or to lever high-quality assets.” But if they withdraw QE or “taper”, then higher interest rates will cause a reversal of investment prices and also cause de-leveraging.

In other words, in order to bail out the world and keep the advanced economies afloat, their central banks are asking global investors to bear quite a lot of the risks of the downside. The smart money might be able to get out fast enough, but most retail investors do not have the skills to time their investments right.

So what should the retail investor do?

Peter Churchouse, who writes one of the best reports in Asia called Asia Hard Assets Report, quoted his son’s advice as “Buy good companies with strong earnings, strong growth and rock solid management. The world will go on.”

Quite right.

But how do we know which companies have rock solid management? My answer is: watch not what the annual report say (by all means read them), but look at what the management does. I have always tended to shy away from companies with high-profile CEOs who tend to win “Manager of the Year” awards.

There is, of course, no substitute for solid own research and look for yourself how the company or the economy that it operates in is doing.

The consumer or tourist is still the best investor because seeing for yourself gives you a feel of what is quite right or wrong with the country and just visiting the retail outlet, getting a sense of the service quality and the employee attitude would give you first hand what is right or wrong with the company you are investing in.

My favourite economy in Asia right now has to be Indonesia. I spent nearly 10 days over Christmas going through the markets of the most densely populated cities in Java and my conclusion was that Indonesia is on the move – literally. The population is young, mobile and connected. Every other shop seems to be selling mobile phones, cars or motorbikes. The quality of the retail shops, design and service has been improving over the years. And despite the coming elections, there is hope for change.

My bet, therefore, for 2014 is that if we stick to the better-run companies in the stronger economies, we should be better prepared for any tapering of QE to come.

Contributed by Tan Sri Andrew Sheng

Tan Sri Andrew Sheng is president of the Fung Global Institute.

Diaoyu islands activist makes a splash

A mainlander who tried to fly a hot-air balloon hundreds of kilometers to the disputed Diaoyu Islands was rescued by Japan's coast guard after ditching in the sea.

Xu Shuaijun, 35, took off from Fujian province on Wednesday morning in an attempt to land on one of the Tokyo- controlled islands, a Japan coast guard official said.

It was an ambitious goal - hot-air balloons travel largely at the mercy of the wind, and the islands are tiny specks in the East China Sea 359 kilometers away from the take-off point.

Xu sent a request for help several hours into his flight and ditched in the sea, with a Japanese rescue helicopter picking him up 22 kilometers south of his goal.

Xu, who was unhurt, was handed over to a Chinese patrol ship outside Japanese territorial waters. Photos distributed by the Japan coast guard showed a striped, multicolored balloon drifting half-deflated.

On his verified account on Weibo, Xu posted a short message declaring that he had been returned safely to Fuqing city in Fujian.

"I have returned safely," he wrote. "Thanks everyone for your concern."

His supporters wrote back with words of support, with many declaring him a "hero" who had done well even if he had fallen short of his target.

"So awesome!" one user wrote. "What innovative thinking and action!"

"It's enough that you came back safely," wrote another. "Brother Xu, your countrymen are proud of your pioneering act!"

Xu did not post any further details on his voyage but in two September microblog postings, he excitedly made note of his plans. 

In one, he shared a photo of a red Chinese flag with islands in the background.

"I got some expert advice today and am now full of meteorological knowledge! I'm flying to the Diaoyu Islands! Be Chinese with attitude."

In another, he posted what appeared to be a map of his planned route, with a bright yellow line drawn between the Fujian coast and the islands.

He declared the mission "the most difficult in the history of hot-air balloon flight."

-  AGENCE FRANCE-PRESSE

Related posts:
1.Japan stole Diaoyu Islands
2.Japan’s buying Diaoyu Islands provokes China to strike back
3.Defeated Japan ought to honor terms dictated by Cairo Declaration in post-war world order

Japan Prime Minister Abe’s Yasukuni visit deals blow to Japanese-US ties

Illustration: Liu Rui/GT

Japanese Prime Minister Shinzo Abe's shameful visit to the notorious Yasukuni Shrine on Thursday strikes a serious blow against US-Japan relations. The visit was completely unnecessary and directly flouted friendly and constructive advice from the Obama administration. Americans should view the present Cold War era alliance with Japan as not only unnecessary but in fact counterproductive given the trend of rising militarism in Japan.

Often people in the US and in Europe perceive that WWII started in Europe with Hitler's attack on Poland in 1939. But the fact is that the road to WWII started with the Japanese invasion of China in September 1931.

Then 10 years later, the Japanese treacherously attacked Pearl Harbor on December 7, 1941. Americans will never forget this day of infamy and betrayal.

Abe's visit to the notorious shrine is a direct affront to US President Barack Obama and Vice President Joe Biden who both have worked hard to calm tensions over issues in the East China Sea. Just recently, Biden on his visit to the region encouraged the creation of joint Sino-Japanese mechanisms for crisis management.

Obama and Biden are doing their best to respond to a changing world and to the emerging multipolar international system. They have been acting in good faith toward Japan on the basis that Japan is believed to be a friend.

The American people have not held a grudge against Japan about WWII. But the increasing militarism and unacceptable behavior of leaders such as Abe may well bring back memories of WWII and cause perspectives to change.

My godfather served in the US Navy during WWII. He fought in the Pacific. I remember as a child in the 1950s hearing about his participation in the Battle of the Coral Sea. He returned home after the war and lived out his days in San Diego, California. I still have some letters he wrote to my late parents during the war.

A cousin of my father was not so fortunate. He did not return from his duty in the navy in the Pacific as he died from a kamikaze attack against his ship.

There was never once that I recall a negative word about Japan or the Japanese in my family's household. The war was over and that was that. Soldiers, sailors, marines, and airmen on both sides had done their duty for their respective countries. Time to move on, was the feeling Americans had.

This generous attitude of many in the older generation of Americans can change as Americans of the present generation and future generations reflect on WWII. The insulting behavior of Japanese politicians such as Abe, combined with Japan's trend toward militarization and extremism, may well open eyes and dispense with a heretofore "polite" attitude. The world has seen the results of such trends before.  American opinion, if betrayed, turns rapidly.

Has Japan ever really sincerely apologized for WWII? Germany so apologized and the memory of Nazi horrors is seared into German consciousness. It has consistently demonstrated its good faith through its economic integration in Western Europe and through its constructive and peaceful foreign policy. 

Abe's shameful behavior shows Japan's official attitude for the entire world to see. He is the prime minister of Japan. He is not a private citizen making a personal religious commemoration for spirits of the war dead.

Washington must reflect carefully on its national strategy and the Asia-Pacific component. So far, the unimaginative policy has been to continue the Cold War alliance structure and to revamp US relations with the region on the basis of increased military power projection to encircle a rising China.

The Abe shrine visit should be a clear warning to Washington that this strategy is deeply flawed and not sustainable.  The US alliance with Japan and Japan's rising militarism may well prove fatally counterproductive.

Contributed by Clifford A. Kiracofe

The author is an educator and former senior professional staff member of the Senate Committee on Foreign Relations. opinion@globaltimes.com.cn

Related posts:

1. Japan PM Abe's visits to Yasukuni glorifying Japan's war criminals, stirs new tension in Asia! 

2.Yasukuni glorifies Japan's inglorious past 

3. Defeated Japan ought to honor terms dictated by Cario Declaration in post-war-order

Time to change!

.

LADIES and gentlemen, we are now moments away from 2014. If you are an employee, most of you will be looking forward to this time of the year as it may mean year-end holidays and bonuses.

Some of you may also be busy making your New Year resolutions. But if you are a business owner, you may be busy coming up with your business plan for next year.

Planning for the year ahead requires a bit of both reflecting on the past and looking forward to the future. Apart from my own annual business plan, as a marketing consultant, I also help some of my clients come up with their marketing plans for the year ahead, or elements of the plan.

The first order of the day is to narrow down the objectives and then come up with goals and plans to achieve those goals.

Naturally, the goals and objectives are always positive and geared towards growth. But any marketer or business owner will tell you, the marketing plan is always one of the plans that are changed the most throughout the year. Depending on what the company is offering and which market they operate in, for some companies, the marketing plan can be so fluid and dynamic that it can be changed as frequently as once a month or week.

Marketers have it tough and I often tell people who aspire to be marketing managers or want to be hired as one that if you are the type of person who likes routine work or following a set of rules, you are not suitable to be a marketer. People who are successful marketers are not just required to be able to change quickly when it comes to their marketing activities but also know how to run faster than the pack. Basically you cannot provide strategic marketing direction without knowing what is ahead or at least having the foresight to understand what will take place.

But change is something not everyone can embrace with open arms, especially for entrepreneurs. It always feels safe to stick to the same business model or plan every year. They think that as long as that plan is not “killing” the business, why not? For example, I am always amazed by one of my friends who is still using a very old handphone (I think it is eight years old) while I have already changed three phones in the span of that period.

He can afford a new one, but stubbornly refuses to get one. Two years ago, his nephew had enough of his stubbornness and bought him a touchscreen smartphone. When I met this friend again recently, I saw he was still using the old phone. I asked about the new phone and he said it was sitting in his drawer as he found it just too troublesome to transfer all his contact details from the old phone to the new one. He was comfortable with the functions of the old one and did not feel like learning the functions of the new phone.

He does not realise just how much he is missing out on.

While there are few people like my friend, I think sometimes entrepreneurs can be like that when it comes to things they need to change in their business. It could be a non-performing employee whom they know they should have let go a long time ago, but just did not want to for fear of rocking the boat.

So they end up paying for non-performance year in and year out, to the detriment of the business.

It could be products they need to retire from their offerings or offices or outlets they need to relocate. It could also be about learning new things or new technology and starting from zero again.

All are hard and uncomfortable decisions especially when change is involved. Change is risky and can be a scary path, but if deep down we know and realise that the change will bring about something better, then we should not be afraid to change. Now is the time.

Contributed by Jeanisha Wan

Jeanisha doesn’t like last minute changes, but equates the need to change with water that needs to be constantly flowing to be fresh. She is more fearful of having her business end up like the water in the Dead Sea. Talk to her at talk2jeanisha@gmail.com. Happy New Year!

Related articles:

1.The finish line
2.The little things count
3.Being good matters
4.Standing on the shoulders of giants
5.Don't give up in the face of failure
6.Purpose-driven work
8.Focusing on the positives can do wonders
9.Give unconditionally
10.Dreams do come true
11.Eagerness to win customers makes people forget how to keep existing ones
12.Staying the course
13.Improvement through observation
14.Make your brank stick
15.Hard work equates to good work?
16.Great surprises
17.The power of surprise
18.A bold lesson

Five steps to business success for 2014

Preparations: A well-crafted business plan is like a roadmap for the year.

 How to develop a business plan for the new year

Here we are at the end of another year. For many business owners, it’s the right time to map out a strategic plan for next year. A well-crafted business plan is your roadmap to success and an easy way to stay on task for future growth, projected income and increased profits. Take one or two days now to develop a plan and you will save time, energy and maybe even a few dollars. Here’s how to develop a business plan for 2014 in five easy steps.

Set projected income

The very first thing you need to do when creating a business plan for the year ahead is to decide how much you plan on earning and what specifically you are looking to achieve. Setting these goals is only the first step, because outlining your plan for future months describes how you will get there and is the true blueprint for success.

Reflect on your current business models and income sources to help you determine your ideal income. If you’re having difficulty, evaluate these factors:

• ·Do you need to identify a different profile that can spend more?
• ·Would including a recurring element to your business increase profit?
• ·Should your pricing be re-evaluated?
• ·How is your marketing plan? How can you expand it to achieve more?

Set incremental goals 

The key to success in creating a business plan is detail and consistency. And every goal needs to be broken down into smaller tasks and objectives to ensure you are reaching your target audience and you have a plan for how to obtain your new income level.

Even the best plan is useless without milestones and success at reaching large goals comes from knowing how to create smaller, more attainable objectives. Simplify your income goals by this equation: Income per client x number of clients x frequency of clients = income. Clearly defined and manageable objectives- six months, monthly and weekly- will give you the momentum you need to reach difficult milestones while keeping a larger goal in view. Besides, this process gives you a bird’s eye view of exactly what income level needs to be reached within a certain time frame to stay on track for success.

Map out marketing

After determining what your income stream should be, it’s time to create a formula for acquiring the clients. The most effective way to reach a target audience and the only way to secure new customers is through marketing. After all, if no one knows you exist, no one will buy your products or services.

Take a long hard look at your current marketing activities and decide which strategies are effective and can be reused, even expanded, and which should be discarded. The right marketing can bring a steady stream of new clients, as well as build brand loyalty and solidify trust with existing customers.

Here are the most effective and commonly used platforms for acquiring new clients. Make sure to allocate sufficient time and budget for each:

• ·Strategic Print Advertisement (Appear in front of your ideal prospects)
• ·Online Marketing Strategies (Content to educate and entice)
• ·Media Recognition (Position yourself as the expert authority)
• ·Social Media (Facebook, Twitter, LinkedIn, Google+)
• ·Networking and collaborations

Develop your team

Now that you have clearly defined, obtainable goals and a strategic marketing plan, it’s time to start thinking about how you are going to make it happen. It’s nearly impossible to achieve all of your goals by yourself and the best plans are always complemented by a strong team. Decide who you need and how they will help you achieve your milestones within your deadline.

Virtual teams are always an option, and can execute elements of your business plan simultaneously. On the other hand, you can also evaluate a current team or bring in someone new to free up time for you to execute growth campaigns.

Evaluate expenses 

Unfortunately, like everything in life — business costs money. However, by carefully evaluating all of your marketing activity and tracking return on investment stringently, you’ll have a better idea of where the money is going and how best it should be spent. Many business owners make the mistake of looking exclusively at gross profits, neglecting net profits. Make certain to record everything and be very clear about profits before taking on any new activities. This disciplined approach will help ensure that your ideal income is indeed profits.

Crafting an effective business plan is easy with a few good tips and the right information. By defining incremental goals, developing a marketing strategy, building your team and keeping an eye on expenses, you will be more than ready to charge into 2014 with spirited enthusiasm as you watch your business transform.

Contributed by Pam Siew

> Pam Siow is the founder of ThinkSpace. A renowned business coach within the region, Pam helps hundreds of business owners and corporations gain true success and profits with her knowledge and real-world experience. Find out more at ThinkSpace.com.my/ Internetbizownersclub.comnow.

Related articles:

1. Towards business success
2. It's all about the profits
3.In business, think different
4.Simple steps to sales success
5.How to hire winners 
6.Outshine competition
7.From small to big
8.Grow your business faster
9.How to create ‘luck’ in your business