LAFITE ’08 DOWN 45% AS FINE WINE PRICES PLUMMET

According to Liv-ex, prices of the 100 top-traded wines fell by an average 22.5% between June and December last year(2011) – the steepest fall since the beginning of the recession nearly four years ago.

Lafite ‘08 peaked in January 2011 at £14,043 a case, but was trading this month at £8,108, while Lafite 2009 has dropped 28% in value in the last six months, from £13,831 a case in July 2011 to £9,800 in December 2011.

Year to date prices for Lafite 2008 were already down 26% last August with the wine proving the worst performer in terms of price of the last 10 physical vintages from the estate.

“SPH is cash-rich with the near monopoly it enjoys in the city-state. There is very little option to invest in media entities in tiny Singapore. Newspapers are a political sacred cow in most Asean countries. Foreign investment is unwelcome.

Hong Kong is an open media environment. SPH could well consider the SCMP a good buy as its share is grossly underpriced. It has good upside potential if China access can be engineered.”

In 2011 under the new pay scheme, PM’s pay is $2.2 million while minister’s pay is 1.1 million.

The annual compounded growth rate for PM’s pay from 1973 to 2011 (38 years) is 15.4%.

The annual compounded growth rate for Minister’s pay from 1973 to 2011 (38 years) is 14.2%.

The per capita GDP in 1973 is $4737. The per capita GDP in 2010 is $59813. Assuming GDP per capita increased by 5% in 2011, GDP per capita for 2011 is $62803 .

The annual compounded growth rate for per capita GDP from 1973 to 2011 (38 years) is 7%.

Looks like PM and ministers salaries have outrun GDP per capita by a wide margin. No wonder many citizens are unhappy.

Despite of all the worrying events of european sovereign debt crisis, america’s fiscal debt, the index remained flat after ups and downs throughout the year. Although, the components of the index switched places as some grew while others shrank in market capitalisation, one who invest in index fund/ETF need not have bothered about this and can sleep soundly through the commotion.

Wonder will next year be the same, with ups and downs but ending almost flat again?

Einstein said that compound interest is the 8th wonder of the world. White house valuation has grown by a compounded annual rate of about 3.26% for a period of 219 years. In between these 219 years, its valuation has gone through ups and downs, but in the long term, its value has grown tremendously due to growth of US economy.

Obviously, the winner of this revamp, if successful, is SGX and the brokers for if they can get more investors to perform more transactions, they will increase revenue and thus profits. However, for long-term DIY investor like me, i prefer not to let broker interfere with my buy/sell decisions. Hopefully, it is an opt-in option to grant permission to broker to know what’s in your CDP account.

Unless you are a genius which very few are, it isn’t wise to perform transactions frequently which SGX is encouraging. What’s wrong with a boring market if it can deliver consistent,growing dividends? Not if it hurts SGX chances of increasing profits at expense of investors who trade frequently.

Haven’t you heard of the story of the fox which guards the henhouse?

Although the crisis will abate with ECB printing money and thus raising inflation and depreciating the Euro, the real work still lies ahead with structural reforms to restore competitiveness,grow the economy and reduce deficits. Of course, a fiscal union will be the long term goal which must be attained faster if they don’t want their marriage to end in tatters again.

“You know a marriage is not that strong if spouses keep their finances separate. This is exactly the same with the member nations of the EU. For many years, lead by politicians and like a dog to a bone the markets and big business wore the flag of the yellow stars and blue flag. Everyone is happy with Europe as a work in progress and nobody really cared about the destination as long as they are all happy. Easy debt had made them happy. But debt must be repaid and that is now.

So why wouldn’t they file for divorce eventually? Because going separate ways take courage. Also they are masters at self denial to the point that they have been eating their own propaganda for years. Like I had written before, much of Europe is theatre. Europeans want to be safe, but that is exactly where danger is. Safety comes from the courage to be free, but they fear risk.

In the end they might allow the ECB to print money as this is the least painful option. The Germans would hate this thoroughly but do they have the courage to go alone? France cannot hold hands with them. She may not even be able to keep her AAA rating.”- From the blog “Bloggingformyself”

However, IBM is no ordinary tech stock, it is growing business in emerging markets and it has “sticky” customers thus ensuring constant cash flow. It also doesn’t spend much on capital expenditure and has a business model that is hard to replicate by competitors.

http://knowledgetoday.wharton.upenn.edu/2011/11/whats-behind-buffetts-ibm-buy/

“They also noted IBM’s particular strengths, including its market-driven approach, its established presence in BRIC countries and its innovative focus on business solutions — a strategy that “is sound and hard to copy,” according to Wharton marketing professor George S. Day.

Overall, it is difficult “for a company like Berkshire Hathaway not to have exposure to the technology sector, given the sector’s importance to the economy,” notes Wharton management professor David Hsu. “I think Buffett probably evaluated several possibilities in the technology domain before selecting IBM.”

According to Hsu, “IBM has been well managed, and has done an admirable job remaking itself and shifting to the service space. Its timely divestiture of computer hardware — as compared to HP, for example — is especially notable.”

Simultaneously, Hsu adds, for quite some time IBM has been one of the “world-wide innovation leaders, as measured by patent grants, and investors in R&D, as compared to Dell, for example. The end result is that IBM is valued more now than it has ever been. Clearly, Buffett sees more upside in the coming years for IBM.”

However, this will not happen soon as ECB will not be forced to act unless the stock market tumbles badly again. That’s the story for 2012.

The stock market: The market will be much higher 10 years from now, he said, but he can’t tell where it will be 10 months from now.

The dollar: It will be a worth a lot less 10 years from now — a good reason to buy stocks!

The housing market: “A lot of people paid too much for their houses!” he said. When you build 2 million houses a year and there are only 1 million new households being formed to live in them, you have an oversupply and prices drop. Buffett said he supports a plan to refinance underwater mortgages for those who have continued to pay on time.

Politics: Gerrymandering election districts to create “safe” seats has allowed extremists to be elected, making compromise tough.

Our children: Parenting is the most important job anyone has. We need to improve our public school system to create equal opportunities

China: They finally found a market system that allows them to unleash their potential. . . . Growth is not a zero-sum game. . . . Their growth will benefit us.

Greek debt: The banks holding Greek bonds accept a 50 percent haircut on the value, but will others accept that cut in value? He’s not sure the European debt crisis is solved.