Let’s get back to 76 pages & ‘Creating Value’, Sharpfokus58
Comparisons
With the rupiah falling through 15,000 it’s only natural that many are trying to compare what’s happening now with what has happened during other past periods of weakness. Are the indicators now better or worse than they were before? I don’t think it really matter. It’s definitely worse now.
Definitely worse
Rupiah
Back in the 1997:8 rupiah collapse, it’s true the rupiah got to a lower level than right now. But there was only a month or two that the currency’s moving average was above 12,000. It’s been above 12,000 & rising every month since late 2014. That hits purchasing power & every other measures.
Economy
For example, while we constantly hear about the economy still growing over 5%, in nominal $s economic growth had already slowed to 1% & will now be falling from a year ago. The economy has barely changed since 2012, 6 years ago. In 1998 it took only 4.5 years to recover & rise to a new $ high.
Stocks
Worst of all is the stock market. I’ve always remembered the ratio 0.3 because in 1997 the JCI was 740 & rupiah 2,450. In 1990 it was 640 & 1,800; 2007 3,000 & 10,000. Now we are 5,700 & 15,00 or about 0.38. In other words we haven’t gone anywhere. The Dow was 2,600 in 1990 & is now 26,000.
A tale of 2 Annual Reports
Titles
It hasn’t always been like this. Here’s a short story to illustrate using something close to my personal experience. Two annual report titles, the first ‘Creating Value’ the second ‘Improving Standards of Excellence’’. Which one would you buy the shares of? Hold that thought as we go through the story.
With the rupiah falling through 15,000 it’s only natural that many are trying to compare what’s happening now with what has happened during other past periods of weakness. Are the indicators now better or worse than they were before? I don’t think it really matter. It’s definitely worse now.
Definitely worse
Rupiah
Back in the 1997:8 rupiah collapse, it’s true the rupiah got to a lower level than right now. But there was only a month or two that the currency’s moving average was above 12,000. It’s been above 12,000 & rising every month since late 2014. That hits purchasing power & every other measures.
Economy
For example, while we constantly hear about the economy still growing over 5%, in nominal $s economic growth had already slowed to 1% & will now be falling from a year ago. The economy has barely changed since 2012, 6 years ago. In 1998 it took only 4.5 years to recover & rise to a new $ high.
Stocks
Worst of all is the stock market. I’ve always remembered the ratio 0.3 because in 1997 the JCI was 740 & rupiah 2,450. In 1990 it was 640 & 1,800; 2007 3,000 & 10,000. Now we are 5,700 & 15,00 or about 0.38. In other words we haven’t gone anywhere. The Dow was 2,600 in 1990 & is now 26,000.
A tale of 2 Annual Reports
Titles
It hasn’t always been like this. Here’s a short story to illustrate using something close to my personal experience. Two annual report titles, the first ‘Creating Value’ the second ‘Improving Standards of Excellence’’. Which one would you buy the shares of? Hold that thought as we go through the story.
Binaartha Online Trading
I don’t know about you but I like to do what I want anytime I want, wherever I want. That’s true for my personal stock trading too.
I’ve been using Binaartha Online Trading.
It belongs to my great friend Adi Hartono & is easy to use at home, in the office, in the car, on holiday. Anywhere.
Its also super easy to set up. Fill in this online form & they will get you up & running ASAP.
I’ve been using Binaartha Online Trading.
It belongs to my great friend Adi Hartono & is easy to use at home, in the office, in the car, on holiday. Anywhere.
Its also super easy to set up. Fill in this online form & they will get you up & running ASAP.
Pages
There’s another major difference. The first annual report has a very light weight with only 76 pages. The second is a door stopper with 1,200 pages. The first one is from 2001 & the second one is from 2017. They’re not from 2 different companies they’re from the same Indonesian listed company.
Performance
After the first more modest but very specificity intentioned report, the stock rose by 50X over the next 6-8 years. The annual report pages doubled to about 300. Then the number of pages soared 4X to 1,200, the stock is up only 66% & has declined since the report. Corporate culture & regulations have killed performance.
3 problems
BI
The problems we have are not whether there’s enough reserves or if BI has raised rates sufficiently, they’re institutional. BI websites states their goal is rupiah stability. They achieve this by printing money & it’s clearly not working. We need a change of target. The Fed’s employment would be a good one.
Govt
The system of elections we have now doesn’t work. One person one vote has given us a no majority party parliament & likely an undecided president next year. The 1998 government was reforming & privatizing, today they’re ordering oil companies to sell all their oil production to Pertamina.
Regulators
But probably the most damaging of all has been the regulations. Indonesia feels like it’s gone regulation crazy in recent years One business owner told me they’ve had 6 new regulations just this year. As you can see from the story, the finance sector is one of the worst hit. Regulations strangle growth.
Change
We can look at as many ratios & policy tools as we like, it won’t make any difference. The performance of rupiah, economy & stocks are bad. The causes, institutional. The way to resolution is to get back to the 150 page annual report with the simple clear title, start to create value again. Lets catch up with the Dow & 10X!
Hace a great week!
Sebastian
There’s another major difference. The first annual report has a very light weight with only 76 pages. The second is a door stopper with 1,200 pages. The first one is from 2001 & the second one is from 2017. They’re not from 2 different companies they’re from the same Indonesian listed company.
Performance
After the first more modest but very specificity intentioned report, the stock rose by 50X over the next 6-8 years. The annual report pages doubled to about 300. Then the number of pages soared 4X to 1,200, the stock is up only 66% & has declined since the report. Corporate culture & regulations have killed performance.
3 problems
BI
The problems we have are not whether there’s enough reserves or if BI has raised rates sufficiently, they’re institutional. BI websites states their goal is rupiah stability. They achieve this by printing money & it’s clearly not working. We need a change of target. The Fed’s employment would be a good one.
Govt
The system of elections we have now doesn’t work. One person one vote has given us a no majority party parliament & likely an undecided president next year. The 1998 government was reforming & privatizing, today they’re ordering oil companies to sell all their oil production to Pertamina.
Regulators
But probably the most damaging of all has been the regulations. Indonesia feels like it’s gone regulation crazy in recent years One business owner told me they’ve had 6 new regulations just this year. As you can see from the story, the finance sector is one of the worst hit. Regulations strangle growth.
Change
We can look at as many ratios & policy tools as we like, it won’t make any difference. The performance of rupiah, economy & stocks are bad. The causes, institutional. The way to resolution is to get back to the 150 page annual report with the simple clear title, start to create value again. Lets catch up with the Dow & 10X!
Hace a great week!
Sebastian
