James Leong | Web Developer

Wow… everybody is getting excited about the office….

Yesterday, just came out with more conservative office layouts.   Hmmm… 215 square feet does not look that big after all…

Office Layout (More Conservative)

Just finished reading up on the book about “Common Stocks and Uncommon Profits” by Philip A. Fisher.

The fifteen points mentioned are:

• Company must have prospect of increasing growth over the next few years
• Company must be constantly evolving to promise increasing growth once existing products mature
• Company must have a wide profit margin in their products.
• Company must be constantly evolving to sustain their already wide profit margin
• Research and Development Effectiveness
• Sales Effectiveness
• Personal Relationship
• Labour
• Executive
• Depth in management
• Competency in managing finance and accounts
• Does company have a short range or long range outlook
• Inherent Sustainable Competitive Advantage, i.e. patents
• Probability of Share Dilution to raise capital in the future.
• Management is transparent and do not clam-up on bad news.
• Management has Integrity.

It started off with something cheap like a SGD 450 at Toh Guan Center (inclusive of parking and office furnishings like tables and chairs).  We shopped around a little and now ended up with SGD 850 + SGD 120 (for parking) + another 2k costs to procure office furnishings + 800 SGD to buy portable air-conditioner.  Man…. the evils of shopping….

But all in all, it was a pretty nice place.  Just 2 blocks away from National Library.  Just hope that the additional investments will generate lots of returns!  Anyway, D just drew up for me a plan of the office… (however, it has to be revised… as it was a bit too ambitious for an office with only 215 square feet).

Doing up the Office

I just liked this few sentences written by Warren Buffet… so here it goes:

The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.”

Recently, there has been a burst of the housing bubble over at the United States.  A hedge fund got bankrupt and many suffer losses.  Based on reports, there are a total of about 1.5 trillion dollars of  mortgage in US backed by 20 trillion  in real estate worth.

Liquidity has dried up, resulting on high borrowing costs for companies.

The Feds and all the world banks everywhere has injected a large amount of money to boost of liquidity.   Based on latest news, it seems that the funds injection is working so well that it lowered the interbank lending rate to 0.75 percent beneath the targeted 5.25 percent.

Honestly, I do not think it will cause a recession.  Initially I thought there was a high chance as I remembered most of the financial crisis is triggered by a burst of the housing bubble.  In Japan’s case, properties crashed by over 80% resulting in a lot of banks being saddled with monstrous bad loans.  This lead to a credit crunch in the country resulting in the recession that lasted over a decade and a half (think the housing was depressed for 17 years if I am not mistaken).

However, this US sub-prime thing feels different.  It is different in a few ways…

Use of sophisticated financial instruments to protect the banking sector 

The US financial system seems to be pretty developed and much of the financial risks has been taken off banks and sold off as Asset Backed Securities/Collaterised Debt Obligation.  In the case of a default, the risks and liabilities are spread far and wide….. a heavy load over many shoulders is definitely a lot more bearable than in the case of Japan.  I mean.. even Singapore banks like OCBC and UOB helps takes up part of the CDO risks, i.e. 600 million and 500 million… and they have set aside about 30 million as losses because of the CDOs…

That is good actually… so when the Central Banks put in the money… there should be effect.  The banks might still be unwilling to lend initially, but their unwillingness cannot be compared to the Japanese counterpart who has to bear the brunt of the bad loans.  I mean… if some guy offers me money at 5% and i see a lot opportunity of lending it out at 6% to companies… I dun see why not…

Prices are not as exhorbitant as Japan

I just did a check on the house pricing index on US properties and am pretty surprised.  It seems that since 1980 till before the crash, properties have only appreciated about 400%.  400% over 27 years… if u compound it… I believe should be only around 10%?  Surely there is no way for prices to drop over 80% in the case of Japan… as if that was so, the houses would even be cheaper than before the information revolution in the US….

Anyway, maybe it is time to pick up some shares in our local banks… who have been hit by the subprimes….