It's been a while since I read a self help motivational book. Steve Chandler's book was picked more or less at random and for the principle reason that I wanted some ideas to keep myself motivated once I transit into retirement and no longer have anyone imposing deadlines on me, no one paying me to get off my butt and get things done and no longer have the sense of professional responsibility to fall back on when all else fails. I've a long list of things I want to do once I leave the work force for good and don't want to wake up four or five years into retirement and find that my only achievement has been to gain weight and leave a permanent indentation in the sofa.
Chandler's book might have been designed just for me - 100 different techniques (actually 101) for motivating yourself to get things done, to find inspiration, to lift you mood, deal with pessimism and other similar problems.
I particularly liked the sheer diversity of the techniques offered. Approaches ranging from "welcoming the unexpected" to "get on your deathbed" all struck a chord with me. I can see this book staying on my book shelf (Kindle) for some time as a pick me up for times when I'm struggling to get going.
This one joins Richard Wiseman's 59 Seconds as one of the few self help books that I can see myself revisiting in the future.
Sunday, May 29, 2011
Friday, May 27, 2011
Corporate governance issues as a risk factor
In the space of 24 hours two reasonably prominent PRC companies listed in Hong Kong have been subject to allegations involving accounting irregularities:
1. Chaoda Modern Agriculture (HK:682) was subject to an allegation by a tabloid newspaper that it had overstated the size of its land bank (among other issues). The company's general denial carried no weight with investors and the share price dropped by about 25% during the course of yesterday's trading. This is from a company that was already deeply unpopular with investors due to various actual and proposed capital raisings which had diluted and damaged existing shareholders' interests;
2. Real Gold Mining (HK: 246) has been subject to claims reported in the SCMP that it filed different sets of accounts with the Hong Kong Stock Exchange and the regulatory authorities in the PRC. For 2009 (the most recent year for which both sets of reports are available) the revenue reported to the HKEX was in excess of 0ne billion RMB while the company's PRC operating companies collectively reported sales of only RMB3.45 million. The reports filed in the PRC have now gone "missing". These allegations have followed a number of top level management changes in 2009. As at the time of writing, the shares are suspended from trading.
In both cases, the companies have denied the allegations. In both cases, the denials are general rather than specific, there has been no confirmation that a more detailed explanation will be forthcoming and no proposals to verify the companies positions (unlike in the case of China Gas (HK:384) which dealt with its own much less serious issues in a robust and open manner).
While Real Gold was not a company that I ever considered investing in (I am not a believer in gold), I did take a long hard look at Chaoda Modern Agriculture but (fortunately) decided not to invest. If I did hold shares in either company, at this point I would be taking my losses and heading for the exits (where possible) - if the allegations are true then the problems are very serious.
The two cases illustrate some of the risks of investing in equities. These sorts of problems can occur in any market (and even the most heavily regulated markets have had their share), but are not going to deter me from maintaining my bias towards risk assets. Almost all companies are run honestly and there are few other investments which offer the potential returns of equities over the longer term. The "safe" alternatives simply represent a different types of risk. IMHO, being aware of and managing risk is a better strategy than avoiding it altogether.
1. Chaoda Modern Agriculture (HK:682) was subject to an allegation by a tabloid newspaper that it had overstated the size of its land bank (among other issues). The company's general denial carried no weight with investors and the share price dropped by about 25% during the course of yesterday's trading. This is from a company that was already deeply unpopular with investors due to various actual and proposed capital raisings which had diluted and damaged existing shareholders' interests;
2. Real Gold Mining (HK: 246) has been subject to claims reported in the SCMP that it filed different sets of accounts with the Hong Kong Stock Exchange and the regulatory authorities in the PRC. For 2009 (the most recent year for which both sets of reports are available) the revenue reported to the HKEX was in excess of 0ne billion RMB while the company's PRC operating companies collectively reported sales of only RMB3.45 million. The reports filed in the PRC have now gone "missing". These allegations have followed a number of top level management changes in 2009. As at the time of writing, the shares are suspended from trading.
In both cases, the companies have denied the allegations. In both cases, the denials are general rather than specific, there has been no confirmation that a more detailed explanation will be forthcoming and no proposals to verify the companies positions (unlike in the case of China Gas (HK:384) which dealt with its own much less serious issues in a robust and open manner).
While Real Gold was not a company that I ever considered investing in (I am not a believer in gold), I did take a long hard look at Chaoda Modern Agriculture but (fortunately) decided not to invest. If I did hold shares in either company, at this point I would be taking my losses and heading for the exits (where possible) - if the allegations are true then the problems are very serious.
The two cases illustrate some of the risks of investing in equities. These sorts of problems can occur in any market (and even the most heavily regulated markets have had their share), but are not going to deter me from maintaining my bias towards risk assets. Almost all companies are run honestly and there are few other investments which offer the potential returns of equities over the longer term. The "safe" alternatives simply represent a different types of risk. IMHO, being aware of and managing risk is a better strategy than avoiding it altogether.
Monday, May 23, 2011
Power shortages in China
Manufacturers in the PRC are complaining about power shortages. Reports of electricity being cut for 1-3 days a week in some areas are common. Electricity shortages are adding to the problems of rising raw material costs, rising labour costs and currency appreciation which businesses in China now face. To make matters worse, the peak season for electricity demand is over the summer months and a number of power stations will experience disruptions to operations due to scheduled maintenance work. In short, the situation is expected to worsen.
The cause of the problem is fairly basic: a shortage of coal to use as fuel in China's power generators. Given the comparative global abundance of coal (of most grades), at first glance this is surprising. However, the reasons for a shortage of coal are also not hard to identify: increased demand, price controls and a much needed government plan to "clean up" the appalling safety and environmental standards of China's coal mining industry. Of these, the price controls are the easiest to deal with - simply remove the controls.
While one would also think that reduced electricity consumption would be a good thing for the environment, its not. Many of the manufacturers affected by disruption to their power supply will fall back on diesel powered generators which produce more pollution than coal generators.
From an investment perspective, the case for investing in coal companies looks quite good (I already hold a large position in Yangzhou Coal (HK:1171)). China's leading coal mining companies typically have very solid balance sheets and sell at reasonable forward looking valuation multiples (if you believe the forecasts). The greater risk to the sector is the possibility of further price controls being adopted. Logically, additional price controls would lead to further shortages, but since when has either logic or historical experience had much impact on government policy?
The coal shortage also makes the case for investing in China's nuclear programme and possibly some clean tech companies (about which I know relatively little). I also took a look at IPP sector but struggled with both the highly leveraged balance sheets and the PRC government's efforts to tame inflation through price controls.
The cause of the problem is fairly basic: a shortage of coal to use as fuel in China's power generators. Given the comparative global abundance of coal (of most grades), at first glance this is surprising. However, the reasons for a shortage of coal are also not hard to identify: increased demand, price controls and a much needed government plan to "clean up" the appalling safety and environmental standards of China's coal mining industry. Of these, the price controls are the easiest to deal with - simply remove the controls.
While one would also think that reduced electricity consumption would be a good thing for the environment, its not. Many of the manufacturers affected by disruption to their power supply will fall back on diesel powered generators which produce more pollution than coal generators.
From an investment perspective, the case for investing in coal companies looks quite good (I already hold a large position in Yangzhou Coal (HK:1171)). China's leading coal mining companies typically have very solid balance sheets and sell at reasonable forward looking valuation multiples (if you believe the forecasts). The greater risk to the sector is the possibility of further price controls being adopted. Logically, additional price controls would lead to further shortages, but since when has either logic or historical experience had much impact on government policy?
The coal shortage also makes the case for investing in China's nuclear programme and possibly some clean tech companies (about which I know relatively little). I also took a look at IPP sector but struggled with both the highly leveraged balance sheets and the PRC government's efforts to tame inflation through price controls.
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