Becoming a realistic investor
Review by ERROL OH
errol@thestar.com.my
Even Buffett Isn’t Perfect: What You Can – and Can’t – Learn from the World’s Greatest Investor
Author: Vahan Janjigian
Publisher: Portfolio
THE title invites an instant retort: “C’mon, nobody really thinks Warren Buffett is perfect.”
Thus is the shakiness of the book’s apparent premise; that people are so wowed by Buffett’s extraordinary track record as an investor that they are somehow blind to the fact that he has made his share of missteps and that his investment philosophy and strategy are not for everybody.
Referring to many Buffett-watchers, Vahan Janjigian writes: “They believe he has become successful by simply implementing the same basic strategies over and over again. They also like to believe that anyone can be a tremendously successful investor just by learning some of Buffett’s favourite tricks and doing what he has done in the past. If only things were that simple.”
Of course, it’s up to the author to uncover Buffett’s feet of clay and the areas of incompatibility between the Buffett way and what most investors can do, given the latter’s more slender resources.
Some of these points are patently obvious. Do we need to be reminded, for example, that unlike Berkshire Hathaway and Buffett, most investors can’t afford to buy a significant stake in a listed company, let alone entire companies?
Nevertheless, it’s an important distinction. Buffett’s deep pockets and stellar reputation mean he can typically exert influence over the businesses he has invested in, thus improving his chances of getting good returns. Other investors can only hope they have made the right bets or that fellow shareholders with the same kind of clout that Buffett has, will step in when things go wrong.
Also, Buffett doesn’t need to spend much time sniffing out potential investments. Instead, he cherry-picks from the tonnes of deal proposals that he receives regularly.
This book is actually yet another analysis of the Oracle of Omaha’s moves that doubles up as an investment manual. “By studying Buffett you can learn what works and what does not work in most circumstances,” the author writes in the introduction.
“By learning everything you can about Buffett’s strategies, you will ensure that you have the information you need to maximise the probability of success no matter what your investment horizon.
“You will also develop an understanding of and an appreciation for the risks involved in the various kinds of investment strategies that are available to you. And you will make yourself a more realistic investor.”
Even Buffett Isn’t Perfect’s unique selling proposition is that Janjigian, chief investment strategist at Forbes, tackles the job by adopting a less-than-awed stance on some of the things the Berkshire Hathaway CEO has said and done.
The author highlights inconsistencies and mistakes, debunks common misconceptions, and offers alternative opinions, often backed by research findings.
For one thing, our fondness for convenient labels – plus, the man himself cultivates a certain public image – breeds inaccurate notions about Buffett’s approach to investment. Many people see him as strictly a value investor, but he also buys growth stocks. He is famous for his insistence on long-term holdings, but he also trades.
Janjigian takes up a few chapters to pick apart Buffett’s well-known views on corporate governance, succession planning, stock options, taxes and earnings guidance.
The author provides some sturdy arguments against Buffett’s positions, but when you consider the basis of the book, the question has to be asked: Since when is it an imperfection to have opinions that are open to debate?
Again, this exposes the flimsiness of Even Buffett Isn’t Perfect’s gimmicky framing device. But if you look past that, the book is a useful addition to the library of publications about Buffett. Its main value is that it promotes critical thinking over adulation.
And mind you, the book is not meant to put a dent in the Buffett legend. In the last chapter – indeed, the book’s subtitle is already a dead giveaway – Janjigian gives a tip of the hat to Buffett, pointing out that the man has made many of the other Berkshire Hathaway shareholders rich as well.
“Perhaps no other single individual has created more millionaires. Based on the evidence, it is certainly fair to conclude that Buffett is one of the greatest investors – if not the greatest investor – of all time.”
Sunday, January 24, 2010
Saturday, January 23, 2010
(1) Federal Court closes loophole on land fraud (2) Adorna Error Righted (3) A 10-year legal wrong finally righted
(1) Federal Court closes loophole on land fraud
Tan Yi Liang
PUTRAJAYA (Jan 21, 2010): The Federal Court has plugged a legal loophole in Malaysian land law which allowed unscrupulous individuals to transfer land titles to third parties with legal immunity.
In a landmark decision today, a five-man bench led by Chief Justice Tun Zaki Azmi unanimously decided to reverse the ruling in the Adorna Properties Sdn Bhd vs Boonsom Boonyanit case in 2000.
The other four on the panel were Court of Appeal President Tan Sri Alauddin Mohd Sheriff, Chief Judge of Malaya Tan Sri Arifin Zakaria and Federal Court judges Datuk Zulkefli Ahmad Makinudin and Datuk James Foong Cheng Yuen.
In deciding on the case of Tan Ying Hong v Tan Sian San & two others, the court ruled that transfers of property by fraudulent or forged documents were no longer legally valid under Section 340(2) of the National Land Code 1965.
This defeated the application of Section 340(3) of the National Land Code to Section 340(2) as was done in the Boonyanit case by the Federal Court sitting then.
Section 340(2) states that the title or interest of any such person or body shall not be indefeasible:
> in any case of fraud or misrepresentation to which the person or body, or any agent of the person or body, was a party or privy; or
> where registration was obtained by forgery, or by means of an insufficient or void instrument; or
> where the title or interest was unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law.
Zaki said with the closing of the "blatant and obvious" error made by the Federal Court in the Boonyanit case, it would prevent further exploitation of the loophole created by the 2000 decision.
"It is quite well-known that some unscrupulous people had taken advantage (of this loophole) to transfer land to themselves. I hope the land authorities will be extra careful when they register transfers of land," said Zaki.
He added that he was "legally obligated" to correct the problem created for landowners by that decision.
The Federal Court also directed RHB to pay RM75,000 in legal costs to Ying Hong, who is still living in Kuantan, as it held that he had fought for the matter in his personal interest and did not bring the case to court as a public interest case.
The apex court decision, which follows on from a 2009 Court of Appeal decision, marks the end of Ying Hong's long legal battle.
In 1976, the Pahang government alienated and issued a land title for a nine-acre plot in Kuantan in Tan's name without his knowledge. However, in 1985, he received a letter from United Malayan Banking Corporation (UMBC, now RHB) which directed him to pay back RM300,000 for an outstanding loan paid by the bank to Cini Timber Industries.
Ying Hong later discovered that one Tan Sian San had forged his signature in 1977 to obtain a power of attorney acknowledging that Sian San was acting on behalf of Yin Hong.
In 1984, Sian San charged the land to UMBC as security for a loan to Cini Timber Industries, and subsequently disappeared, prompting Ying Hong to file a suit against the then-UMBC.
Ying Hong lost his case in the High Court in 2003, and subsequently in the Court of Appeal last year.
The Federal Court was asked on Oct 29 last year to determine a question of law arising from its decision which was delivered by then-Chief Justice, Tun Eusoff Chin in his four-page Boonyanit decision in 2000.
The Federal Court had ruled then that a person who acquires a title to land either through legal means or by a forged or fraudulent title, had a legal claim to the property.
The Boonyanit case began in 1998, when an impostor claiming to be Mrs Boonsom Boonyanit made a statutory declaration claiming that she had lost the original titles to two plots owned by the real Boonsom Boonyanit in Tanjung Bungah, Penang.
She was able to convince the Land Office to issue certified copies of the title, which were then sold to Adorna Properties for RM12 million, which prompted the suit when Boonyanit, a Thai national, discovered the sale.
She lost her case in the Penang High Court in 1995, but won in the Court of Appeal in 1997. She however lost in the Federal Court appeal which was brought by Adorna Properties in 2000.
The Federal Court also directed RHB to pay RM75,000 in legal costs to Tan, who is still living in Kuantan, as it held that he had fought for the matter in his personal interest and did not bring the case to court as a public interest case. -- theSun
(2) Adorna Error Righted
Extract from The Star (22/01/2010)
PUTRA JAYA: A decade old decision by the Federal Court has finally been corrected in a rare joint effort by the entire legal fraternity including the four highest ranking judges - leading to a landmark decision by the apex court.
It is now no longer legal for anyone to buy a piece of land from another person who got hold of the property through fraudulent means.
Chief Judge of Malaya Tan Sri Arifin Zakaria, one of the five-man Bench presiding over the case, said it was "highly regrettable that it had some time before this contentious issue was put to rest".
The Bench ruled yesterday that the decision in the contentious Adorna Properties case was wrong. In that case, the then Chief Justice Tun Eusoffe Chin had ruled that the person whose property was "stolen" via forged documents could not take legal action against the third party who bought the land from the "thief".
http://thinkproperty.com.my/realestate/images/stories/Image/adarna.jpg
(3) A 10-year legal wrong finally righted — Business Times Singapore
JAN 22 — Ten years ago, Malaysia’s apex court made a decision that many considered bizarre and introduced much uncertainty into investors’ decisions.
In the case of Adorna Properties vs Boonsom Boonyanit, a buyer who had bought a piece of land without knowing it had been fraudulently transferred was allowed to keep it, thus depriving the person who had been defrauded of his rights. Thus, for 10 years, the registered (and therefore rightful) owner of a property who suddenly discovers that his title has been fraudulently transferred to someone else had no legal recourse to reclaim his property. That decision, which had been made by a three-man panel headed by then Chief Justice Tun Eusoff Chin, had set a binding precedent for disputes over land ownership.
Happily, all that changed yesterday when the current Federal Court, now with different judges, reversed what it called the “blatant and obvious” mistake of the Adorna ruling. This time, a five-man bench led by current Chief Justice Tun Zaki Azmi unanimously ruled that the rightful owner of a property title can set aside the second man’s claim even after the title has been transferred to the latter. It was based on Section 340(2) of the National Land Code 1965, which states unequivocally that a title would not be defensible if it had been subject to fraud in any way. What the Federal Court did yesterday was to right a decade-old wrong. CJ Zaki noted that it is “quite well known that some unscrupulous people had taken advantage (of the mistaken Adorna ruling) to transfer land to themselves”.
The Federal Court’s ruling followed submissions last October for Pahang landowner Tan Yin Hong, who was appealing against a Court of Appeal decision in 2009. Tan’s case dates back to 1976, when the Pahang state government mysteriously issued a land title for a 3.6-hectare piece of land in Kuantan in his name and without his knowledge. Land matters come under the ambit of state governments in Malaysia. In 1985, Tan received a letter from RHB Bank telling him to pay back RM300,000 as an outstanding loan given by the bank to a timber company. Upon investigation, Tan found out that a person named Tan Sian San had in 1977 forged his signature and obtained power of attorney to represent Tan. In 1984, Tan Sian San charged the land to RHB as security for a loan to Cini Timber Industries, and subsequently disappeared. Tan sued the bank. In 2003, the High Court dismissed his application and the Court of Appeal upheld that decision.
But yesterday, the Federal Court decided the bank’s charges against Tan were invalid because of the forgery. And, in doing so, it threw the Adorna decision onto the scrapheap of history. It will go a long way in reassuring both Malaysians and foreigners interested in buying land in the country — either for residential or for industrial purposes — that their rights will be protected.
* This article is the personal opinion of the writer or publication. The Malaysian Insider does not endorse the view unless specified.
Comments (7)Add Comment
min/maxShow/Hide comments
...
written by AuntyG, January 22, 2010
Pity its too late to redress the blatant and obvious mistake of the Adorna ruling. EUSOFF CHIN OWES BOONSOM BOONYANIT BIG TIME !!
written by PH Chin, January 22, 2010
Kudos to the Federal Court judges !
Thank God that justice prevailed in these cases albeit years of delay.
written by Tan, January 22, 2010
The Court is the last avenue for distress parties to seek justice. If the decision so made cast the doubt of the distress parties on its fairness, then it makes a mockery of the whole legal process.
written by onenight4, January 22, 2010
This Eusoff Chin after meeting a close lawyer friend of his in Singapore airport accidentally on their flight to New Zealand to spend holiday together fishing trout in a river stream, forget everything on the ethic of law after retunring from the holiday.
written by NoCowSense, January 22, 2010
This case brings into question the integrity of the judges headed by Eusoff Chin. A lot of questions need to be answered.
Comment smaller | bigger
I have read and agree to the Terms of Usage.
Tan Yi Liang
PUTRAJAYA (Jan 21, 2010): The Federal Court has plugged a legal loophole in Malaysian land law which allowed unscrupulous individuals to transfer land titles to third parties with legal immunity.
In a landmark decision today, a five-man bench led by Chief Justice Tun Zaki Azmi unanimously decided to reverse the ruling in the Adorna Properties Sdn Bhd vs Boonsom Boonyanit case in 2000.
The other four on the panel were Court of Appeal President Tan Sri Alauddin Mohd Sheriff, Chief Judge of Malaya Tan Sri Arifin Zakaria and Federal Court judges Datuk Zulkefli Ahmad Makinudin and Datuk James Foong Cheng Yuen.
In deciding on the case of Tan Ying Hong v Tan Sian San & two others, the court ruled that transfers of property by fraudulent or forged documents were no longer legally valid under Section 340(2) of the National Land Code 1965.
This defeated the application of Section 340(3) of the National Land Code to Section 340(2) as was done in the Boonyanit case by the Federal Court sitting then.
Section 340(2) states that the title or interest of any such person or body shall not be indefeasible:
> in any case of fraud or misrepresentation to which the person or body, or any agent of the person or body, was a party or privy; or
> where registration was obtained by forgery, or by means of an insufficient or void instrument; or
> where the title or interest was unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law.
Zaki said with the closing of the "blatant and obvious" error made by the Federal Court in the Boonyanit case, it would prevent further exploitation of the loophole created by the 2000 decision.
"It is quite well-known that some unscrupulous people had taken advantage (of this loophole) to transfer land to themselves. I hope the land authorities will be extra careful when they register transfers of land," said Zaki.
He added that he was "legally obligated" to correct the problem created for landowners by that decision.
The Federal Court also directed RHB to pay RM75,000 in legal costs to Ying Hong, who is still living in Kuantan, as it held that he had fought for the matter in his personal interest and did not bring the case to court as a public interest case.
The apex court decision, which follows on from a 2009 Court of Appeal decision, marks the end of Ying Hong's long legal battle.
In 1976, the Pahang government alienated and issued a land title for a nine-acre plot in Kuantan in Tan's name without his knowledge. However, in 1985, he received a letter from United Malayan Banking Corporation (UMBC, now RHB) which directed him to pay back RM300,000 for an outstanding loan paid by the bank to Cini Timber Industries.
Ying Hong later discovered that one Tan Sian San had forged his signature in 1977 to obtain a power of attorney acknowledging that Sian San was acting on behalf of Yin Hong.
In 1984, Sian San charged the land to UMBC as security for a loan to Cini Timber Industries, and subsequently disappeared, prompting Ying Hong to file a suit against the then-UMBC.
Ying Hong lost his case in the High Court in 2003, and subsequently in the Court of Appeal last year.
The Federal Court was asked on Oct 29 last year to determine a question of law arising from its decision which was delivered by then-Chief Justice, Tun Eusoff Chin in his four-page Boonyanit decision in 2000.
The Federal Court had ruled then that a person who acquires a title to land either through legal means or by a forged or fraudulent title, had a legal claim to the property.
The Boonyanit case began in 1998, when an impostor claiming to be Mrs Boonsom Boonyanit made a statutory declaration claiming that she had lost the original titles to two plots owned by the real Boonsom Boonyanit in Tanjung Bungah, Penang.
She was able to convince the Land Office to issue certified copies of the title, which were then sold to Adorna Properties for RM12 million, which prompted the suit when Boonyanit, a Thai national, discovered the sale.
She lost her case in the Penang High Court in 1995, but won in the Court of Appeal in 1997. She however lost in the Federal Court appeal which was brought by Adorna Properties in 2000.
The Federal Court also directed RHB to pay RM75,000 in legal costs to Tan, who is still living in Kuantan, as it held that he had fought for the matter in his personal interest and did not bring the case to court as a public interest case. -- theSun
(2) Adorna Error Righted
Extract from The Star (22/01/2010)
PUTRA JAYA: A decade old decision by the Federal Court has finally been corrected in a rare joint effort by the entire legal fraternity including the four highest ranking judges - leading to a landmark decision by the apex court.
It is now no longer legal for anyone to buy a piece of land from another person who got hold of the property through fraudulent means.
Chief Judge of Malaya Tan Sri Arifin Zakaria, one of the five-man Bench presiding over the case, said it was "highly regrettable that it had some time before this contentious issue was put to rest".
The Bench ruled yesterday that the decision in the contentious Adorna Properties case was wrong. In that case, the then Chief Justice Tun Eusoffe Chin had ruled that the person whose property was "stolen" via forged documents could not take legal action against the third party who bought the land from the "thief".
http://thinkproperty.com.my/realestate/images/stories/Image/adarna.jpg
(3) A 10-year legal wrong finally righted — Business Times Singapore
JAN 22 — Ten years ago, Malaysia’s apex court made a decision that many considered bizarre and introduced much uncertainty into investors’ decisions.
In the case of Adorna Properties vs Boonsom Boonyanit, a buyer who had bought a piece of land without knowing it had been fraudulently transferred was allowed to keep it, thus depriving the person who had been defrauded of his rights. Thus, for 10 years, the registered (and therefore rightful) owner of a property who suddenly discovers that his title has been fraudulently transferred to someone else had no legal recourse to reclaim his property. That decision, which had been made by a three-man panel headed by then Chief Justice Tun Eusoff Chin, had set a binding precedent for disputes over land ownership.
Happily, all that changed yesterday when the current Federal Court, now with different judges, reversed what it called the “blatant and obvious” mistake of the Adorna ruling. This time, a five-man bench led by current Chief Justice Tun Zaki Azmi unanimously ruled that the rightful owner of a property title can set aside the second man’s claim even after the title has been transferred to the latter. It was based on Section 340(2) of the National Land Code 1965, which states unequivocally that a title would not be defensible if it had been subject to fraud in any way. What the Federal Court did yesterday was to right a decade-old wrong. CJ Zaki noted that it is “quite well known that some unscrupulous people had taken advantage (of the mistaken Adorna ruling) to transfer land to themselves”.
The Federal Court’s ruling followed submissions last October for Pahang landowner Tan Yin Hong, who was appealing against a Court of Appeal decision in 2009. Tan’s case dates back to 1976, when the Pahang state government mysteriously issued a land title for a 3.6-hectare piece of land in Kuantan in his name and without his knowledge. Land matters come under the ambit of state governments in Malaysia. In 1985, Tan received a letter from RHB Bank telling him to pay back RM300,000 as an outstanding loan given by the bank to a timber company. Upon investigation, Tan found out that a person named Tan Sian San had in 1977 forged his signature and obtained power of attorney to represent Tan. In 1984, Tan Sian San charged the land to RHB as security for a loan to Cini Timber Industries, and subsequently disappeared. Tan sued the bank. In 2003, the High Court dismissed his application and the Court of Appeal upheld that decision.
But yesterday, the Federal Court decided the bank’s charges against Tan were invalid because of the forgery. And, in doing so, it threw the Adorna decision onto the scrapheap of history. It will go a long way in reassuring both Malaysians and foreigners interested in buying land in the country — either for residential or for industrial purposes — that their rights will be protected.
* This article is the personal opinion of the writer or publication. The Malaysian Insider does not endorse the view unless specified.
Comments (7)Add Comment
min/maxShow/Hide comments
...
written by AuntyG, January 22, 2010
Pity its too late to redress the blatant and obvious mistake of the Adorna ruling. EUSOFF CHIN OWES BOONSOM BOONYANIT BIG TIME !!
written by PH Chin, January 22, 2010
Kudos to the Federal Court judges !
Thank God that justice prevailed in these cases albeit years of delay.
written by Tan, January 22, 2010
The Court is the last avenue for distress parties to seek justice. If the decision so made cast the doubt of the distress parties on its fairness, then it makes a mockery of the whole legal process.
written by onenight4, January 22, 2010
This Eusoff Chin after meeting a close lawyer friend of his in Singapore airport accidentally on their flight to New Zealand to spend holiday together fishing trout in a river stream, forget everything on the ethic of law after retunring from the holiday.
written by NoCowSense, January 22, 2010
This case brings into question the integrity of the judges headed by Eusoff Chin. A lot of questions need to be answered.
Comment smaller | bigger
I have read and agree to the Terms of Usage.
Thursday, January 21, 2010
Steve Jobs: Bye-bye Google?
Steve Jobs: Bye-bye Google?
January 20, 2010 - 7:04 pm
Brian Caulfield is a senior editor in the Silicon Valley bureau of Forbes
When Apple and Google fight Microsoft could win, and AT&T might lose. That's Oppenheimer analyst Yair Reiner's take Wednesday on reports Apple may bump Google in favor of Microsoft's Bing search service for the iPhone.
► Nexus One Makes Google $20 Billion Richer: http://blogs.forbes.com/velocity/2010/01/13/nexus-one-makes-google-20-billion-richer/
► Apple Could Take On Google With Quattro Wireless: http://blogs.forbes.com/velocity/2010/01/05/apple-could-take-on-google-with-quattro-purchase/
"Structurally, Microsoft and Google pose similar threats to Apple, but Google with the budding success of Android an Chrome, represents a more immediate danger," Yair wrote in a note to investors. "If so, Apple may at least need to contemplate the possibility that the enemy of its enemy might be its friend, even if that special someone is, gasp, Microsoft."
The result: Microsoft might be able to push its way onto the iPhone. It has already displaced Google as the search engine on Verizon's handsets in a deal worth $500 million. So Microsoft has no need to pay stupid money: "We believe MSFT will not grossly overpay," Yair writes.
The surprise loser in this: AT&T. "This move highlights the loss of control over its own customer base that the iPhone has brought," Yair wrote.
January 20, 2010 - 7:04 pm
Brian Caulfield is a senior editor in the Silicon Valley bureau of Forbes
When Apple and Google fight Microsoft could win, and AT&T might lose. That's Oppenheimer analyst Yair Reiner's take Wednesday on reports Apple may bump Google in favor of Microsoft's Bing search service for the iPhone.
► Nexus One Makes Google $20 Billion Richer: http://blogs.forbes.com/velocity/2010/01/13/nexus-one-makes-google-20-billion-richer/
► Apple Could Take On Google With Quattro Wireless: http://blogs.forbes.com/velocity/2010/01/05/apple-could-take-on-google-with-quattro-purchase/
"Structurally, Microsoft and Google pose similar threats to Apple, but Google with the budding success of Android an Chrome, represents a more immediate danger," Yair wrote in a note to investors. "If so, Apple may at least need to contemplate the possibility that the enemy of its enemy might be its friend, even if that special someone is, gasp, Microsoft."
The result: Microsoft might be able to push its way onto the iPhone. It has already displaced Google as the search engine on Verizon's handsets in a deal worth $500 million. So Microsoft has no need to pay stupid money: "We believe MSFT will not grossly overpay," Yair writes.
The surprise loser in this: AT&T. "This move highlights the loss of control over its own customer base that the iPhone has brought," Yair wrote.
Wednesday, January 20, 2010
China Details Homemade Supercomputer Plans
China Details Homemade Supercomputer Plans
The machine will use an unfashionable chip design.
By Christopher Mims
Tuesday, January 19, 2010
It's official: China's next supercomputer, the petascale Dawning 6000, will be constructed exclusively with home-grown microprocessors. Weiwu Hu, chief architect of the Loongson (also known as "Godson") family of CPUs at the Institute of Computing Technology (ICT), a division of the Chinese Academy of Sciences, also confirms that the supercomputer will run Linux. This is a sharp departure from China's last supercomputer, the Dawning 5000a, which debuted at number 11 on the list of the world's fastest supercomputers in 2008, and was built with AMD chips and ran Windows HPC Server.
The arrival of Dawning 6000 will be an important landmark for the Loongson processor family, which to date has been used only in inexpensive, low-power netbooks and nettop PCs. When the Dawning 5000a was initially announced, it too was meant to be built with Loongson processors, but the Dawning Information Industry Company, which built the computer, eventually went with AMD chips, citing a lack of support for Windows, and the ICT's failure to deliver a sufficiently powerful chip in time.
The Dawning 6000 will be completed by mid-2010 at the latest, says Hu, and could be up and running as early as the end of 2010. It is the second time that a representative from the ICT has promised a supercomputer built entirely using Loongson processors.
The development of Loongson 3 began in 2001 as a product of China's 10th five-year program. All of the chips in the Loongson family are based on the MIPS instruction set--originally developed in the 1980s but now out of favor in desktop and server computers, although still used in many embedded devices. Currently, the Top 500 list is dominated by x86 chips, with non-x86 CPUs powering less than 15 percent of the high-performance systems on the list.
"This is a very high-performance MIPS architecture where, when it's run in a cluster configuration, it becomes very powerful," says Art Swift, vice president of marketing at Sunnyvale, CA-based MIPS Technologies, which developed the MIPS architecture.
A paper published in 2009 proposes using Loongson 3 chips in clusters of up to 16 cores to accomplish extremely high performance. Tom Halfhill, analyst at Microprocessor Report, calculates that in this configuration, meeting the petaflop performance mark (one quadrillion operations per second) could require as few as 782 16-core chips.
Halfhill says the Loongson 3 is little different from the latest-generation chip, Loongson 2F, which is already available in consumer PCs. The main differences are that it includes hardware translation of x86 instructions (used in most of the microprocessors made by Intel and AMD), and it incorporates multiple cores--from four up to a proposed 16--each capable of processing commands independently. Conspicuously absent from the Loongson 3 is multithreading, which allows a single core to execute multiple instructions simultaneously. (Both Intel and Sun have already incorporated multithreading into some of their chips.)
Generations 2 and 3 of the Loongson use the same general-purpose core, but the Loongson 3 tethers more cores together. A quad-core Loongson 3 chip is currently in prototype, and a final, 64-nanometer version of the chip was "taped out" in late December, meaning the final description of the chip will soon be sent to the manufacturer, STMicroelectronics.
While the quad-core Loongson 3 could find applications in everything from desktop PCs to set-top boxes (the chip incorporates additional instructions designed specifically to speed up multimedia playback), an eight-core version will likely be need for the proposed petascale supercomputer. That version will incorporate four regular cores, along with four "GStera" coprocessors designed especially for mathematically intensive calculations. These coprocessors are especially significant because they are better at handling intensive mathematical calculations, including the LINPACK test, which uses linear algebra to benchmark the world's fastest supercomputers, and to determine their ranking (and their owners' bragging rights) in the Top 500 list of supercomputers.
Jack Dongarra, the computer scientist who introduced the LINPACK benchmark, says that the proposed architecture of the Dawning 6000--multi-purpose cores coupled to coprocessors for certain types of mathematical calculations--follows the standard supercomputer design.
The quad-core Loongson 3 already incorporates two 64-bit floating-point units in each of its cores. So in theory it could be used as the commodity chip in a supercomputer. However, it would require vastly more of these cores to achieve the same processing power, says Dongarra.
Intel remains unfazed by the prospect of a new, state-sponsored contender in the field of high-performance computing. "Measuring competitive impact for a product that does not exist [yet] is always problematic, and we generally refrain from doing so," says Chuck Mulloy a spokesperson for Intel. "In our entire history there has never been a time when we didn't face a competitor. We don't expect that to change--in fact we welcome it."
Dongarra cautions that it's pointless to speculate about the performance of the forthcoming Dawning 6000 until benchmarks have been run, not least because the MIPS architecture is nonstandard in high-performance computing. "While I wish them well, I see a lot of challenges to making the whole system work, " says Dongarra. These challenges include having to adapt the software that Dawning runs.
Halfhill, who has traveled to the ICT in Beijing to report on the birth of the Loongson 3, believes that whatever the performance of the system, it's only a matter of time before China builds a home-grown chip competitive with those produced in the West. "Technically there's nothing to stop them from doing world-class processors," he says. "They've got architects and computer scientists just as smart as ours."
Comments
*
Another Me-too Chinese Project
Interesting article but what a waste of good research talent! The hard reality is that any new processor that does not solve the parallel programming crisis is on a fast road to failure. No long march to victory in sight for the Loongson, sorry.
China should be trying to become a leader in this field, not just another me-too follower. There is an unprecedented opportunity to make a killing in the parallel processor industry in the years ahead. Intel may have cornered the market for now but they have an Achilles' heel: they are way too big and way too married to last century's flawed computing paradigms to change in time for the coming massively parallel computer revolution. Their x86 technology will be worthless when that happens. The trash bins of Silicon Valley will be filled with obsolete Intel chips.
Here's the problem. The computer industry is in a very serious crisis due to processor performance limitations and low programmer productivity. Going parallel is the right thing to do but the current multicore/multithreading approach to parallel computing is a disaster in the making. Using the erroneous Turing Machine-based paradigms of the last sixty years to solve this century's massive parallelism problem is pure folly. Intel knows this but they will never admit it because they've got too much invested in the old stuff. Too bad. They will lose the coming processor war. That's where China and Intel's competitors can excel if they play their cards right.
The truth is that the thread concept (on which the Loongson and Intel's processors are based) is the cause of the crisis, not the solution. There is an infinitely better way to build and program computers that does not involve threads at all. Sooner or later, an unknown startup will pop out of nowhere and blow everybody out of the water.
My advice to China, Intel, AMD and the other big dogs is this: first invest your resources into solving the parallel programming crisis. Only then will you know enough to properly tackle the embedded systems, supercomputing and cloud computing markets. Otherwise be prepared to lose a boatload of dough. When that happens, there shall be much weeping and gnashing of teeth but I'll be eating popcorn with a smirk on my face and saying "I told you so".
How to Solve the Parallel Programming Crisis:
http://rebelscience.blogspot.com/2008/07/how-to-solve-parallel-programming.html
o
Intel did tried to abandon the x84 architecture until it blow up in its face; Remember Itanium?
Developing a whole new computer architecture require huge amount of resources and talent. I highly doubt ICT have the budget or staff to accomplish it. Face it, scientific program always get the short end of the stick, it's the same everywhere in the world.
You say: "Using the erroneous Turing Machine-based paradigms of the last sixty years ..." I recall learning that, based on TM, parallelizing by a factor of N can improve performance by at most a factor of N. Are you saying that there are parallel architectures that break TM paradigm and so get around this limitation?
o
Turing Machine
No. What I'm saying is that, if the Turing computing model (TCM) were the appropriate model for parallel processing, the industry would not be in the mess that it is currently in and you would not be reading this comment. Regardless of what has been claimed by the experts about universality, a Turing Machine models one thing and one thing only, a sequential computer.
The biggest problem with the TCM is that operation timing (other than the implicit sequentiality of execution) is not part of the model. What is needed is a computing model in which any two operations in a program can be unambiguously determined as being either sequential or parallel (simultaneous). This determinism is impossible with concurrent threads and therein lies the problem.
In sum, the computer industry must abandon threads altogether or resign itself to endure a lot of pain in the years ahead. The Loongson solves nothing. It's just more pain for the Chinese.
Fact Check!
"This is a sharp departure from China's last supercomputer, the Dawning 5000a, which debuted at number 11 on the list of the world's fastest supercomputers in 2008, and was built with AMD chips and ran Windows HPC Server."
WRONG!
As of November 2009, a Chinese system occupies the number 5 position on the TOP500 list. Tianhe-1, assembled by China’s National University of Defense Technology, attains a theoretical peak rate of 1.2 PFLOPS. It includes 2560 compute nodes, each with two quad-core Xeon processors for scalar workloads and two AMD Radeon 4870x2 GPUs for vector workloads.
The machine will use an unfashionable chip design.
By Christopher Mims
Tuesday, January 19, 2010
It's official: China's next supercomputer, the petascale Dawning 6000, will be constructed exclusively with home-grown microprocessors. Weiwu Hu, chief architect of the Loongson (also known as "Godson") family of CPUs at the Institute of Computing Technology (ICT), a division of the Chinese Academy of Sciences, also confirms that the supercomputer will run Linux. This is a sharp departure from China's last supercomputer, the Dawning 5000a, which debuted at number 11 on the list of the world's fastest supercomputers in 2008, and was built with AMD chips and ran Windows HPC Server.
The arrival of Dawning 6000 will be an important landmark for the Loongson processor family, which to date has been used only in inexpensive, low-power netbooks and nettop PCs. When the Dawning 5000a was initially announced, it too was meant to be built with Loongson processors, but the Dawning Information Industry Company, which built the computer, eventually went with AMD chips, citing a lack of support for Windows, and the ICT's failure to deliver a sufficiently powerful chip in time.
The Dawning 6000 will be completed by mid-2010 at the latest, says Hu, and could be up and running as early as the end of 2010. It is the second time that a representative from the ICT has promised a supercomputer built entirely using Loongson processors.
The development of Loongson 3 began in 2001 as a product of China's 10th five-year program. All of the chips in the Loongson family are based on the MIPS instruction set--originally developed in the 1980s but now out of favor in desktop and server computers, although still used in many embedded devices. Currently, the Top 500 list is dominated by x86 chips, with non-x86 CPUs powering less than 15 percent of the high-performance systems on the list.
"This is a very high-performance MIPS architecture where, when it's run in a cluster configuration, it becomes very powerful," says Art Swift, vice president of marketing at Sunnyvale, CA-based MIPS Technologies, which developed the MIPS architecture.
A paper published in 2009 proposes using Loongson 3 chips in clusters of up to 16 cores to accomplish extremely high performance. Tom Halfhill, analyst at Microprocessor Report, calculates that in this configuration, meeting the petaflop performance mark (one quadrillion operations per second) could require as few as 782 16-core chips.
Halfhill says the Loongson 3 is little different from the latest-generation chip, Loongson 2F, which is already available in consumer PCs. The main differences are that it includes hardware translation of x86 instructions (used in most of the microprocessors made by Intel and AMD), and it incorporates multiple cores--from four up to a proposed 16--each capable of processing commands independently. Conspicuously absent from the Loongson 3 is multithreading, which allows a single core to execute multiple instructions simultaneously. (Both Intel and Sun have already incorporated multithreading into some of their chips.)
Generations 2 and 3 of the Loongson use the same general-purpose core, but the Loongson 3 tethers more cores together. A quad-core Loongson 3 chip is currently in prototype, and a final, 64-nanometer version of the chip was "taped out" in late December, meaning the final description of the chip will soon be sent to the manufacturer, STMicroelectronics.
While the quad-core Loongson 3 could find applications in everything from desktop PCs to set-top boxes (the chip incorporates additional instructions designed specifically to speed up multimedia playback), an eight-core version will likely be need for the proposed petascale supercomputer. That version will incorporate four regular cores, along with four "GStera" coprocessors designed especially for mathematically intensive calculations. These coprocessors are especially significant because they are better at handling intensive mathematical calculations, including the LINPACK test, which uses linear algebra to benchmark the world's fastest supercomputers, and to determine their ranking (and their owners' bragging rights) in the Top 500 list of supercomputers.
Jack Dongarra, the computer scientist who introduced the LINPACK benchmark, says that the proposed architecture of the Dawning 6000--multi-purpose cores coupled to coprocessors for certain types of mathematical calculations--follows the standard supercomputer design.
The quad-core Loongson 3 already incorporates two 64-bit floating-point units in each of its cores. So in theory it could be used as the commodity chip in a supercomputer. However, it would require vastly more of these cores to achieve the same processing power, says Dongarra.
Intel remains unfazed by the prospect of a new, state-sponsored contender in the field of high-performance computing. "Measuring competitive impact for a product that does not exist [yet] is always problematic, and we generally refrain from doing so," says Chuck Mulloy a spokesperson for Intel. "In our entire history there has never been a time when we didn't face a competitor. We don't expect that to change--in fact we welcome it."
Dongarra cautions that it's pointless to speculate about the performance of the forthcoming Dawning 6000 until benchmarks have been run, not least because the MIPS architecture is nonstandard in high-performance computing. "While I wish them well, I see a lot of challenges to making the whole system work, " says Dongarra. These challenges include having to adapt the software that Dawning runs.
Halfhill, who has traveled to the ICT in Beijing to report on the birth of the Loongson 3, believes that whatever the performance of the system, it's only a matter of time before China builds a home-grown chip competitive with those produced in the West. "Technically there's nothing to stop them from doing world-class processors," he says. "They've got architects and computer scientists just as smart as ours."
Comments
*
Another Me-too Chinese Project
Interesting article but what a waste of good research talent! The hard reality is that any new processor that does not solve the parallel programming crisis is on a fast road to failure. No long march to victory in sight for the Loongson, sorry.
China should be trying to become a leader in this field, not just another me-too follower. There is an unprecedented opportunity to make a killing in the parallel processor industry in the years ahead. Intel may have cornered the market for now but they have an Achilles' heel: they are way too big and way too married to last century's flawed computing paradigms to change in time for the coming massively parallel computer revolution. Their x86 technology will be worthless when that happens. The trash bins of Silicon Valley will be filled with obsolete Intel chips.
Here's the problem. The computer industry is in a very serious crisis due to processor performance limitations and low programmer productivity. Going parallel is the right thing to do but the current multicore/multithreading approach to parallel computing is a disaster in the making. Using the erroneous Turing Machine-based paradigms of the last sixty years to solve this century's massive parallelism problem is pure folly. Intel knows this but they will never admit it because they've got too much invested in the old stuff. Too bad. They will lose the coming processor war. That's where China and Intel's competitors can excel if they play their cards right.
The truth is that the thread concept (on which the Loongson and Intel's processors are based) is the cause of the crisis, not the solution. There is an infinitely better way to build and program computers that does not involve threads at all. Sooner or later, an unknown startup will pop out of nowhere and blow everybody out of the water.
My advice to China, Intel, AMD and the other big dogs is this: first invest your resources into solving the parallel programming crisis. Only then will you know enough to properly tackle the embedded systems, supercomputing and cloud computing markets. Otherwise be prepared to lose a boatload of dough. When that happens, there shall be much weeping and gnashing of teeth but I'll be eating popcorn with a smirk on my face and saying "I told you so".
How to Solve the Parallel Programming Crisis:
http://rebelscience.blogspot.com/2008/07/how-to-solve-parallel-programming.html
o
Intel did tried to abandon the x84 architecture until it blow up in its face; Remember Itanium?
Developing a whole new computer architecture require huge amount of resources and talent. I highly doubt ICT have the budget or staff to accomplish it. Face it, scientific program always get the short end of the stick, it's the same everywhere in the world.
You say: "Using the erroneous Turing Machine-based paradigms of the last sixty years ..." I recall learning that, based on TM, parallelizing by a factor of N can improve performance by at most a factor of N. Are you saying that there are parallel architectures that break TM paradigm and so get around this limitation?
o
Turing Machine
No. What I'm saying is that, if the Turing computing model (TCM) were the appropriate model for parallel processing, the industry would not be in the mess that it is currently in and you would not be reading this comment. Regardless of what has been claimed by the experts about universality, a Turing Machine models one thing and one thing only, a sequential computer.
The biggest problem with the TCM is that operation timing (other than the implicit sequentiality of execution) is not part of the model. What is needed is a computing model in which any two operations in a program can be unambiguously determined as being either sequential or parallel (simultaneous). This determinism is impossible with concurrent threads and therein lies the problem.
In sum, the computer industry must abandon threads altogether or resign itself to endure a lot of pain in the years ahead. The Loongson solves nothing. It's just more pain for the Chinese.
Fact Check!
"This is a sharp departure from China's last supercomputer, the Dawning 5000a, which debuted at number 11 on the list of the world's fastest supercomputers in 2008, and was built with AMD chips and ran Windows HPC Server."
WRONG!
As of November 2009, a Chinese system occupies the number 5 position on the TOP500 list. Tianhe-1, assembled by China’s National University of Defense Technology, attains a theoretical peak rate of 1.2 PFLOPS. It includes 2560 compute nodes, each with two quad-core Xeon processors for scalar workloads and two AMD Radeon 4870x2 GPUs for vector workloads.
Tuesday, January 19, 2010
Chinese Rocket Launches New Navigation Satellite
Chinese Rocket Launches New Navigation Satellite
By Stephen Clark
posted: 18 January 2010
10:49 am ET
A Chinese Long March rocket hauled a new navigation satellite to a high-altitude perch over Earth on Saturday, marking the first space launch of the year for the world's space programs.
The Long March 3C rocket blasted off from the Xichang space center at 1612 GMT (11:12 a.m. EST) Saturday, or just after midnight Sunday morning local time, state media reported.
The 180-foot-tall booster flew east from Xichang, which is situated in Sichuan province in southwestern China. The Beidou, or Compass, navigation satellite was placed on a trajectory toward geosynchronous orbit, according to the Xinhua news agency.
The satellite is the third member of the second-generation Beidou constellation. Two spacecraft were launched to medium Earth orbit and geosynchronous orbit in 2007 and 2009, respectively.
First-generation satellites were launched between 2000 and 2007 to test the Beidou concept in space and provide limited services for China.
China eventually expects to launch 35 Beidou satellites, allowing the system to have a global reach similar to the U.S. Global Positioning System. Russia operates a fleet of Glonass navigation satellites, and Europe is developing the Galileo satellite navigation system.
Officials hope the Beidou system will provide navigation, timing and messaging services to the Asia-Pacific region by 2012, Xinhua reported.
China says Beidou services will be available at no charge to civilians with positioning accuracy of about 10 meters, or 33 feet. More precise navigation data will be given to Chinese government and military users, according to Xinhua.
By Stephen Clark
posted: 18 January 2010
10:49 am ET
A Chinese Long March rocket hauled a new navigation satellite to a high-altitude perch over Earth on Saturday, marking the first space launch of the year for the world's space programs.
The Long March 3C rocket blasted off from the Xichang space center at 1612 GMT (11:12 a.m. EST) Saturday, or just after midnight Sunday morning local time, state media reported.
The 180-foot-tall booster flew east from Xichang, which is situated in Sichuan province in southwestern China. The Beidou, or Compass, navigation satellite was placed on a trajectory toward geosynchronous orbit, according to the Xinhua news agency.
The satellite is the third member of the second-generation Beidou constellation. Two spacecraft were launched to medium Earth orbit and geosynchronous orbit in 2007 and 2009, respectively.
First-generation satellites were launched between 2000 and 2007 to test the Beidou concept in space and provide limited services for China.
China eventually expects to launch 35 Beidou satellites, allowing the system to have a global reach similar to the U.S. Global Positioning System. Russia operates a fleet of Glonass navigation satellites, and Europe is developing the Galileo satellite navigation system.
Officials hope the Beidou system will provide navigation, timing and messaging services to the Asia-Pacific region by 2012, Xinhua reported.
China says Beidou services will be available at no charge to civilians with positioning accuracy of about 10 meters, or 33 feet. More precise navigation data will be given to Chinese government and military users, according to Xinhua.
Monday, January 18, 2010
Investing in irrational markets
Investing in irrational markets
Hock's Viewpoint - By Choong Khuat Hock
The financial crisis reflects the fallacy of the ‘efficient market hypothesis’
IT is amazing that economic theories still consider that markets are governed by the “efficient market hypothesis” (EMH), which assumes rational investors, an orderly market and that all available information are known.
The global financial crisis reflects the fallacy of EMH and textbooks should be revised to reflect this.
In reality, markets reflect the nature of its creators and participants – a collection of human beings who would like to think they are rational but are often enough irrational and emotional.
Quantitative models often fail to model the irrationality of human behaviour during extreme times.
Blind reliance on such models was also the reason why Long-Term Capital Management (LTCM, which had Nobel Prize-winning economists) failed as the restructuring of defaulting bonds in Russia in 1998 caused volatilities beyond what was predicted by quant models.
The extremely high leverage utilised by LTCM hastened its demise. Alan Greenspan had to engineer a rescue as the failure of LTCM threatened to damage the markets and market participants.
One way of valuing securities is to use the discounted cash flow model, which is to discount the expected future cash flows to obtain the present value.
http://biz.thestar.com.my/archives/2010/1/18/business/p6-brain.JPG
Behavioural finance has many theories to explain why humans are often irrational but the reality is that irrationality is hardwired into our brains.
However, in many cases, future cash flows are difficult to predict and the discount rate used would fluctuate depending on the prevailing interest rates and the perception of risk which may vary from person to person.
This method is more useful in valuing businesses or securities with predictable cash flows like utility stocks where cash flows are stable and funding costs have been determined. Another popular valuation method is to compare securities with its peers.
Such comparisons are ingrained in the nature of human beings as we can only determine the value or utility of something by comparing it to another. Shall I buy the latest Samsung or Sony LCD TV? How does a BlackBerry compare with an iPhone?
Similarly, if the price-earnings ratio (PER) of a stock is 10 times and the sector PER is 20 times, it may be considered cheap if specific company factors are attractive.
Using sector PER as valuation anchor is fraught with danger as the sector valuation may be unreasonable.
Such comparisons may not reflect the value of potential cash flows from an investment. At the height of the dot.com bubble, valuations were based on price to sales with no consideration placed on cash flow.
The prevailing belief then was that there was a sucker willing to pay a higher price to sales for the business.
The same happened during the debt fueled property bubble in the US when rental yields from property could not cover mortgage payments.
Banks were willing to provide 100% financing to those who could not afford houses based on the assumption that property prices could only go up and mortgage loans could be repackaged into much sought after high yielding subprime securities.
Behavioural finance has many theories to explain why humans are often irrational but the reality is that irrationality is hardwired into our brains.
The brain can be divided into two parts – the hypothalamus, or primal brain, (a few hundred million years old) which directs our instinctive behaviour and the neo-cortex, or new brain, (a few million years old) which facilitates logical deductions, learning from experience, language and complex social interactions.
In times of panic, the hypothalamus takes over and markets tend to overshoot on the downside due to panic selling.
Since these moves are often irrational, the movements tend to be many standard deviations more than what is predicted by a normal distribution curve, creating black swan events.
Faced with an avalanche of incomplete information, humans use heuristics, a simplification process to arrive at a decision based on their past experiences and prejudices.
In arriving at a rule of thumb valuation, anchoring is employed by imputing a fair value to the initial entry level even if the entry level is high.
Therefore, in a rising property market, anchoring may result in the belief that the price appreciation will continue.
A bubble can thus form as the herd is blinded by cognitive dissonance whereby investors pay credence only to views and opinions that reinforce their beliefs. However when the discrepancy between fantasy and reality becomes too large, the bubble bursts.
Investment is hence as much an art as it is science. In the final analysis, it is the cash flow that counts.
The science would be in accurately determining the cash flow but the art lies in determining how much investors are willing to pay for the cash flows.
Identifying periods of over pessimism and optimism would help in determining entry and exit points.
In the end, the advantage lies in accurately predicting beforehand where the herd is heading. Understanding the animal in you and others could indeed be a profitableproposition.
# Choong Khuat Hock is head of research at Kumpulan Sentiasa Cemerlang Sdn Bhd.
Hock's Viewpoint - By Choong Khuat Hock
The financial crisis reflects the fallacy of the ‘efficient market hypothesis’
IT is amazing that economic theories still consider that markets are governed by the “efficient market hypothesis” (EMH), which assumes rational investors, an orderly market and that all available information are known.
The global financial crisis reflects the fallacy of EMH and textbooks should be revised to reflect this.
In reality, markets reflect the nature of its creators and participants – a collection of human beings who would like to think they are rational but are often enough irrational and emotional.
Quantitative models often fail to model the irrationality of human behaviour during extreme times.
Blind reliance on such models was also the reason why Long-Term Capital Management (LTCM, which had Nobel Prize-winning economists) failed as the restructuring of defaulting bonds in Russia in 1998 caused volatilities beyond what was predicted by quant models.
The extremely high leverage utilised by LTCM hastened its demise. Alan Greenspan had to engineer a rescue as the failure of LTCM threatened to damage the markets and market participants.
One way of valuing securities is to use the discounted cash flow model, which is to discount the expected future cash flows to obtain the present value.
http://biz.thestar.com.my/archives/2010/1/18/business/p6-brain.JPG
Behavioural finance has many theories to explain why humans are often irrational but the reality is that irrationality is hardwired into our brains.
However, in many cases, future cash flows are difficult to predict and the discount rate used would fluctuate depending on the prevailing interest rates and the perception of risk which may vary from person to person.
This method is more useful in valuing businesses or securities with predictable cash flows like utility stocks where cash flows are stable and funding costs have been determined. Another popular valuation method is to compare securities with its peers.
Such comparisons are ingrained in the nature of human beings as we can only determine the value or utility of something by comparing it to another. Shall I buy the latest Samsung or Sony LCD TV? How does a BlackBerry compare with an iPhone?
Similarly, if the price-earnings ratio (PER) of a stock is 10 times and the sector PER is 20 times, it may be considered cheap if specific company factors are attractive.
Using sector PER as valuation anchor is fraught with danger as the sector valuation may be unreasonable.
Such comparisons may not reflect the value of potential cash flows from an investment. At the height of the dot.com bubble, valuations were based on price to sales with no consideration placed on cash flow.
The prevailing belief then was that there was a sucker willing to pay a higher price to sales for the business.
The same happened during the debt fueled property bubble in the US when rental yields from property could not cover mortgage payments.
Banks were willing to provide 100% financing to those who could not afford houses based on the assumption that property prices could only go up and mortgage loans could be repackaged into much sought after high yielding subprime securities.
Behavioural finance has many theories to explain why humans are often irrational but the reality is that irrationality is hardwired into our brains.
The brain can be divided into two parts – the hypothalamus, or primal brain, (a few hundred million years old) which directs our instinctive behaviour and the neo-cortex, or new brain, (a few million years old) which facilitates logical deductions, learning from experience, language and complex social interactions.
In times of panic, the hypothalamus takes over and markets tend to overshoot on the downside due to panic selling.
Since these moves are often irrational, the movements tend to be many standard deviations more than what is predicted by a normal distribution curve, creating black swan events.
Faced with an avalanche of incomplete information, humans use heuristics, a simplification process to arrive at a decision based on their past experiences and prejudices.
In arriving at a rule of thumb valuation, anchoring is employed by imputing a fair value to the initial entry level even if the entry level is high.
Therefore, in a rising property market, anchoring may result in the belief that the price appreciation will continue.
A bubble can thus form as the herd is blinded by cognitive dissonance whereby investors pay credence only to views and opinions that reinforce their beliefs. However when the discrepancy between fantasy and reality becomes too large, the bubble bursts.
Investment is hence as much an art as it is science. In the final analysis, it is the cash flow that counts.
The science would be in accurately determining the cash flow but the art lies in determining how much investors are willing to pay for the cash flows.
Identifying periods of over pessimism and optimism would help in determining entry and exit points.
In the end, the advantage lies in accurately predicting beforehand where the herd is heading. Understanding the animal in you and others could indeed be a profitableproposition.
# Choong Khuat Hock is head of research at Kumpulan Sentiasa Cemerlang Sdn Bhd.
Sunday, January 17, 2010
Alibaba says Yahoo 'reckless' on Google stance
Alibaba says Yahoo 'reckless' on Google stance
January 16, 2010 Alibaba says Yahoo 'reckless' on Google stance (AP)
(AP) -- China's e-commerce giant Alibaba turned on major shareholder Yahoo Inc. on Saturday, calling the American company's support of Google in its standoff with China "reckless."
Google has promised to stop censoring its search results in China, threatening to pull out of the country altogether if it can't operate an unfiltered search engine. Yahoo has said it was "aligned" with Google's position, though it's not clear what that means.
"Alibaba Group has communicated to Yahoo! that Yahoo's statement that it is 'aligned' with the position Google took last week was reckless given the lack of facts in evidence," Alibaba spokesman John Spelich said Saturday. "Alibaba doesn't share this view."
Yahoo closed its own offices in China several years ago when it sold much of its business there to the Alibaba Group. Yahoo retains a 39 percent stake in Alibaba that represents one of Yahoo's most valuable assets.
Yahoo spokeswoman Nina Blackwell has declined to say whether the company would consider selling its holdings.
Google hopes it can persuade the Chinese government to agree to changes that would enable its China-based Google.cn site to show uncensored search results.
A Google spokeswoman, Jessica Powell, said by e-mail Saturday that Google has not closed its offices in China and that "it's business as usual."
Google's threat to end its China operations has alarmed an Internet-connected public that is the world's largest at 384 million people.
Beijing requires Internet traffic to pass through government-controlled gateways that block access to material deemed subversive or pornographic. Google's China-based site excludes from its results any foreign Web sites to which access is blocked.
©2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
January 16, 2010 Alibaba says Yahoo 'reckless' on Google stance (AP)
(AP) -- China's e-commerce giant Alibaba turned on major shareholder Yahoo Inc. on Saturday, calling the American company's support of Google in its standoff with China "reckless."
Google has promised to stop censoring its search results in China, threatening to pull out of the country altogether if it can't operate an unfiltered search engine. Yahoo has said it was "aligned" with Google's position, though it's not clear what that means.
"Alibaba Group has communicated to Yahoo! that Yahoo's statement that it is 'aligned' with the position Google took last week was reckless given the lack of facts in evidence," Alibaba spokesman John Spelich said Saturday. "Alibaba doesn't share this view."
Yahoo closed its own offices in China several years ago when it sold much of its business there to the Alibaba Group. Yahoo retains a 39 percent stake in Alibaba that represents one of Yahoo's most valuable assets.
Yahoo spokeswoman Nina Blackwell has declined to say whether the company would consider selling its holdings.
Google hopes it can persuade the Chinese government to agree to changes that would enable its China-based Google.cn site to show uncensored search results.
A Google spokeswoman, Jessica Powell, said by e-mail Saturday that Google has not closed its offices in China and that "it's business as usual."
Google's threat to end its China operations has alarmed an Internet-connected public that is the world's largest at 384 million people.
Beijing requires Internet traffic to pass through government-controlled gateways that block access to material deemed subversive or pornographic. Google's China-based site excludes from its results any foreign Web sites to which access is blocked.
©2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Baidu Bulls Hit The Options Hard
Baidu Bulls Hit The Options Hard
Andrew Wilkinson, Interactive Brokers, 01.16.10, 11:05 AM EST
Buying call options on Baidu has created life-changing wealth in the past year for some investors. The fervor for shares is still strong.
Baidu ( BIDU - news - people ): Bullish investors continue to trade January contract calls and puts on the Chinese language Internet search provider today even with expiration close at hand. News reports today indicate some at Credit Suisse ( CS - news - people ) anticipate Google ( GOOG - news - people ) may exit the Chinese market as soon as February. Disbanding Google operations in China could allow Baidu to swoop in and procure one-third of the U.S. company's market share there. Shares of BIDU traded 0.75% higher to $467.86 around noon Friday.
Baidu bulls bought roughly 3,200 calls at the January $470 strike for an average premium of $2.08 apiece. These contracts will expire out-of-the-money and worthless unless shares rally above the $470 level. Investors long the calls break even if the stock rallies up to $472.08 before the contracts expire. Additional buying interest appeared as high as the January $480 strike, where 2,000 calls were picked up for an average premium of 48 cents per contract. Perhaps traders buying these out-of-the-money contracts hope to enjoy short-swing profits by selling the lots by the end of the day for more than the average premium paid.
Optimism is apparent on the put side as well. Investors sold 3,400 puts at the January $460 strike to take in premium of $2.35 each. Another 1,900 puts were shed at the in-the-money January $470 strike for an average premium of $5.85 per contract. In-the-money put sellers are happy to have shares of the underlying stock put to them at an effective price of $464.15 each if BIDU's share price trades below the $470 strike price through expiration.
Jim Oberweis told his subscribers to buy Baidu at $79 and told them to buy more at $110 in early 2009. Click here for Oberweis' current advice and access to the complete model portfolio in the Oberweis Report.
Alcoa ( AA - news - people ): Medium-term optimism on the largest producer of aluminum took root in the July contract today despite the 1.5% decline in the value of the underlying shares to $15.58. It looks like one investor purchased 20,000 calls on the stock at the July $20 strike for a premium of 51 cents per contract. The large bullish stance positions the trader to amass profits if Alcoa's shares surge more than 31.5% over the current price to surpass the break-even point at $20.51 by expiration in six months. Option implied volatility is down 7.17% on the day to stand at 38.05%.
Sprint Nextel ( S - news - people ): Shares of the wireless communications company were trading 1.9% higher Friday to $3.76. Options activity in the August contract indicates that one investor is positioning for a significant rally in shares of the underlying stock in the next seven months to expiration.
It looks like the trader purchased 15,000 calls at the August $7 strike for a premium of 12 cents per contract. Profits on the calls accrue if Sprint's share price jumps 87% from the current level to surpass the break-even point at $7.12 by August expiration. On trades like this it's less likely that the investor has an eye on the strike price as a target price, but uses a larger amount of relatively inexpensive call options to play out a directional play on the underlying stock. In this case the delta on the $7 call option indicates a 15% chance that Sprint's shares will land in-the-money at expiration, while gamma tells us that a $1 rally to $4.80 (an increase of 26%) would shorten those odds to 28%. We note that shares have not traded above $7 since Sept. 19, 2008.
Pfizer ( PFE - news - people ): It looks like one investor rolled a large chunk of now in-the-money call options in the January contract on the global pharmaceutical company forward to a higher strike price in the February contract Friday. Shares slipped slightly lower during the session, falling 0.25% to $19.31. The January $19 strike had approximately 62,000 calls sell for an average premium of 43 cents per contract, spread against the apparent purchase of about the same number of calls at the higher February $20 strike for a premium of 28 cents each. The calendar roll results in a net credit to the investor of about 15 cents per contract. It is unclear how much the trader initially paid for the January contract calls, but looking at the trade in isolation, this individual pockets 15 cents per contract on the transaction. Elsewhere, traders attempted to lock in recent share price gains on the stock by buying 7,700 in-the-money puts at the February $20 strike for a premium of $1.06 apiece. The put contracts provide protection to traders in case Pfizer's shares slip beneath the break-even point at $18.94 by expiration next month.
Pfizer has a fat 3.7% yield, but is Merck, with a 3.9% yield, your better buy in pharmaceutical stocks? Click here to check ratings on hundreds of dividend-paying stocks in Investment Quality Trends.
CurrencyShares Euro Trust ( FXE - news - people ): With the euro under pressure Friday as Greek bond yields rise--indicative of rising Eurozone tensions--it appears one investor sold February call options at the $1.50 strike to reduce the outlay for the same strike put options. By doing so the investor bearish on the euro reduced the cost of downside exposure for the euro by 2.2%. Elsewhere another investor appeared to buy a substantial amount of 5,000 put options expiring in June at the $1.10 strike. If such a decline in the euro was to play out, since it's currently trading at $1.438, would be indicative of a huge slide of confidence in the Eurozone.
Andrew Wilkinson is senior market analyst at Greenwich, Conn.-based Interactive Brokers. Reach him via e-mail: ibanalyst@interactivebrokers.com.
Andrew Wilkinson, Interactive Brokers, 01.16.10, 11:05 AM EST
Buying call options on Baidu has created life-changing wealth in the past year for some investors. The fervor for shares is still strong.
Baidu ( BIDU - news - people ): Bullish investors continue to trade January contract calls and puts on the Chinese language Internet search provider today even with expiration close at hand. News reports today indicate some at Credit Suisse ( CS - news - people ) anticipate Google ( GOOG - news - people ) may exit the Chinese market as soon as February. Disbanding Google operations in China could allow Baidu to swoop in and procure one-third of the U.S. company's market share there. Shares of BIDU traded 0.75% higher to $467.86 around noon Friday.
Baidu bulls bought roughly 3,200 calls at the January $470 strike for an average premium of $2.08 apiece. These contracts will expire out-of-the-money and worthless unless shares rally above the $470 level. Investors long the calls break even if the stock rallies up to $472.08 before the contracts expire. Additional buying interest appeared as high as the January $480 strike, where 2,000 calls were picked up for an average premium of 48 cents per contract. Perhaps traders buying these out-of-the-money contracts hope to enjoy short-swing profits by selling the lots by the end of the day for more than the average premium paid.
Optimism is apparent on the put side as well. Investors sold 3,400 puts at the January $460 strike to take in premium of $2.35 each. Another 1,900 puts were shed at the in-the-money January $470 strike for an average premium of $5.85 per contract. In-the-money put sellers are happy to have shares of the underlying stock put to them at an effective price of $464.15 each if BIDU's share price trades below the $470 strike price through expiration.
Jim Oberweis told his subscribers to buy Baidu at $79 and told them to buy more at $110 in early 2009. Click here for Oberweis' current advice and access to the complete model portfolio in the Oberweis Report.
Alcoa ( AA - news - people ): Medium-term optimism on the largest producer of aluminum took root in the July contract today despite the 1.5% decline in the value of the underlying shares to $15.58. It looks like one investor purchased 20,000 calls on the stock at the July $20 strike for a premium of 51 cents per contract. The large bullish stance positions the trader to amass profits if Alcoa's shares surge more than 31.5% over the current price to surpass the break-even point at $20.51 by expiration in six months. Option implied volatility is down 7.17% on the day to stand at 38.05%.
Sprint Nextel ( S - news - people ): Shares of the wireless communications company were trading 1.9% higher Friday to $3.76. Options activity in the August contract indicates that one investor is positioning for a significant rally in shares of the underlying stock in the next seven months to expiration.
It looks like the trader purchased 15,000 calls at the August $7 strike for a premium of 12 cents per contract. Profits on the calls accrue if Sprint's share price jumps 87% from the current level to surpass the break-even point at $7.12 by August expiration. On trades like this it's less likely that the investor has an eye on the strike price as a target price, but uses a larger amount of relatively inexpensive call options to play out a directional play on the underlying stock. In this case the delta on the $7 call option indicates a 15% chance that Sprint's shares will land in-the-money at expiration, while gamma tells us that a $1 rally to $4.80 (an increase of 26%) would shorten those odds to 28%. We note that shares have not traded above $7 since Sept. 19, 2008.
Pfizer ( PFE - news - people ): It looks like one investor rolled a large chunk of now in-the-money call options in the January contract on the global pharmaceutical company forward to a higher strike price in the February contract Friday. Shares slipped slightly lower during the session, falling 0.25% to $19.31. The January $19 strike had approximately 62,000 calls sell for an average premium of 43 cents per contract, spread against the apparent purchase of about the same number of calls at the higher February $20 strike for a premium of 28 cents each. The calendar roll results in a net credit to the investor of about 15 cents per contract. It is unclear how much the trader initially paid for the January contract calls, but looking at the trade in isolation, this individual pockets 15 cents per contract on the transaction. Elsewhere, traders attempted to lock in recent share price gains on the stock by buying 7,700 in-the-money puts at the February $20 strike for a premium of $1.06 apiece. The put contracts provide protection to traders in case Pfizer's shares slip beneath the break-even point at $18.94 by expiration next month.
Pfizer has a fat 3.7% yield, but is Merck, with a 3.9% yield, your better buy in pharmaceutical stocks? Click here to check ratings on hundreds of dividend-paying stocks in Investment Quality Trends.
CurrencyShares Euro Trust ( FXE - news - people ): With the euro under pressure Friday as Greek bond yields rise--indicative of rising Eurozone tensions--it appears one investor sold February call options at the $1.50 strike to reduce the outlay for the same strike put options. By doing so the investor bearish on the euro reduced the cost of downside exposure for the euro by 2.2%. Elsewhere another investor appeared to buy a substantial amount of 5,000 put options expiring in June at the $1.10 strike. If such a decline in the euro was to play out, since it's currently trading at $1.438, would be indicative of a huge slide of confidence in the Eurozone.
Andrew Wilkinson is senior market analyst at Greenwich, Conn.-based Interactive Brokers. Reach him via e-mail: ibanalyst@interactivebrokers.com.
Subscribe to:
Posts (Atom)