The end of BN is like the collapse of GE. The signs are there but no one wants to see.

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Almost all analysts, except The Rembau Times, are predicting Barisan Nasional will win this election. Oxford Economics, CIMB, 1MDB, Maybank and the best, “Bloomberg.”

Let me first say a few things about Bloomberg.

They are always behind the curve because they have never really predicted anything.

Their job is to report. They got Brexit prediction wrong (they had some Macha from the UK create a model to predict the probability of Brexit which was totally wrong), they got Trump wrong, in fact, if you ask a Bloomberg reporter “will the stock market go up or down tomorrow” they will probably get it wrong 50% of the time. Or maybe more.

Another example of Bloomberg analysts, reporters and columnists getting things completely and totally wrong is this article : “Saudis Announce Oil Deal (In Your Dreams)”.  They completely missed the beginning of actions taken by the Saudis and OPEC to stabilise the oil market. If you traded on their analysis , you would have lost a lot of money as they said that Saudi Arabia will never agree to an OPEC oil cut in their Special meeting in Algiers in Sep 2016. Oil was trading around $45 then, it is $66 right now.

Of course, no analyst will dare predict a BN defeat because they are afraid that if they predict BN will lose and instead BN wins, they will get fired and have shame. If they predict status quo and BN actually loses, nobody will blame them because “everybody was stupid at the same time.” This is called ‘status quo’ bias,  one of the worst bias to have in a volatile market.

In politics there is no “hard data” out there – you have to be right with the voting models and keep a very close attention to the early indicators.  Remember, Malays are going to keep their cards close to their chest before burying BN on polling day, but the early signs are plain to see. (ROS disband Bersatu, Tun factor, EC hold election on midweek, sad faces of BN leaders, Malay participation in Pakatan Harapan rallies, PH unity, PAS no longer a spoiler, young demography, connected population, BN narrow margin of victory in 13th GE, BN weak campaign machinery and possibiliy of sabotage, BN ministers endless stupidity, etc, etc, etc).

Thousands of rakyat of different races showed up yesterday night at Pakatan Harapan’s rally in Temerloh. The youth vote is swinging strongly in Pakatan Harapan’s favour – up to 80% will vote Pakatan Harapan.

 

As a Fund Manager, we have to be right. Not only on the call but on the timing. This is not easy because we risk our own capital.  If we are right we make, if we are wrong we lose. And we can lose ‘bigly’, even if we are slightly wrong but because we take a big position.

And The Rembau Times is betting big that Barisan Nasional will lose this GE. There are no two ways about it.

Let me explain with a story about my favourite analyst, Stephen Tusa from JP Morgan.

If you followed what Stephen Tusa said in 2017, you would be a multi-millionaire with a capital of $10,000 to $20,000. This is the man who became famous because he predicted the collapse of General Electric share price.

I will put in context. A year ago, General Electic was trading around $30,. The stock was so stable, only moving beween $29 to $30 that traders ignored it. No volatility – like BN’s 60 year unbroken rule.  To the American investor, General Electric was old, safe and will be forever. They were offering a rich 96 cent dividend, which many investors loved. GE deep out of the money put options must have been trading on the pennies.

But Stephen Tusa, an Executive Director  from JP Morgan, kept on saying that GE is a disaster. In truth, he has been saying it for about a year and a half.  His analysis was their free cash flow could not cover the dividend. Their electrical power generation business was outdated and losing money. Their earnings quality was crap. Their Board was asleep and their management was a joke.

Stephen Tusa delivering his death blow analysis of why GE is a disaster. Today it is worth only $13 a share.

I still remember a debate Stephen Tusa once had with a billionaire investor on Friday October 20, 2017 after GE stock opened at $22.14 after a bad earnings miss. It was down a massive $1.23, considered a massive amount then. The billionaire was saying that “he will buy a couple of million shares of GE” and then forget about it.  The price was sure to recover.

But Stephen Tusa shot back. He said that “I’m no Warren Buffet or George Soros. I’m just a kid from Connecticut” and then proceeded to refute all the arguments made by the investor.

On that day, he lost the argument because GE rose to close at $23.47.

His thesis however was spot on. Today GE stock is “a curse word.” It is trading at $12.97. If you’re an analyst and you tell people that GE will go back to $23.47 by October 20th, 2018, the same price it was trading on that fateful day in October 20th, 2017,  your boss will fire you. It fact, people are afraid of “badi GE” or the GE curse. A lot of people do not want GE in their portfolio.

But why was Stephen Tusa right and the rest of Corporate America wrong?

His secret, – good, solid analysis.  Not afraid to give a dissenting opinion.

For the Rembau Times the analysis is not very difficult. Malays are not a homogenous group. They are segmented by age, by gender, but many different tastes. Moreover, for the Malays, a sizeable group will be below 40 and BN is “destroyed” in this segment. They will lose the bulk of the Males Below 40 segment to Pakatan Harapan by at least 10 to 15 percentage points. That means they are dead on arrival (‘DOA’) in the election booth because they have lost the majority of the Malay segment. They have to rely on the women voters, but only the Wanita UMNO and Puteri UMNO “type” voters will vote for them. They may still carry this segment, but only by a few percentage points.  They will not dominate the Malay segment like they had previously. They will lose the non-political young mothers and single slim lady segment by a very wide margin as many of them accept Tun as a ‘father figure.’ They, however are expected to win the ‘non slim’ single lady segment.

But the GE CEO then, Jeff Immelt was just like Najib. He told the world that GE was going to earn $2 per share in 2017. In the end GE had a horrible loss, worse than ever imagined as GE Capital was under-reserved and had to take a $6 billion hit and replenish $15 billion of capital.

Same like Najib is promising there is no Malay tsunami, because he said that a Malay tsunami meant a rejection of UMNO and so far he has not seen signs of a rejection of UMNO.

Why so sad? BN leaders have been caught off camera looking sad and stressed.

Er, maybe a Malay tsunami is caused by a rejection of Najib? And UMNO is collateral damage.

Can you see signs of a rejection of Najib?  Does any analyst want to dare say whether the Malaysian public rejects or supports Najib as a leader?

Once the darling of Corporate America, GE is a cursed stock and many feel GE may remain a cursed stock for some time. And the same will be true of BN, the storied party ruling unbroken for 60 years.  As in the words of Tun Dr Mahathir, come this election and “Wait and See. This election will see a Malay tsunami which will bury you forever.”

(PS: Rembau Times feels that GE will trade lower next week as Trump decides to go to war with Russia. But we are not putting much capital on the decision. It is a low conviction belief, an “agak-agak”, don’t trade on it. As for BN, we reiterate the call – BN is doomed and finished. They have injured their brand too much and lost too many supporters from the Malays and the “lain-lain” in Perlis and Kedah. In Johor Bahru, they dare not even show Najib’s picture. Finish lah tu. Masak, confam).

14 COMMENTS

  1. Dear Editor,

    I have been an avid reader of your blog.
    Anyway, is there any typo or error in the following sentence;

    Quote:

    Of course, no analyst will dare predict a BN defeat because if they are afraid that if they predict BN will lose and BN wins, they will get fired and have shame.

    End quote.

    Hope for prompt clarification.
    Thanks

  2. Was chatting with some Malay truckers from Johor in the Below 40 age grp. When asked abt the election, they smiled and said ‘Itu hak individu’.
    These guys are akin to playing poker and keeping their cards very close to the chest. Now ppl only do that if they are going to play an Ace, and an Ace means an unexpected card. Do you think an ‘unexpected card’ means supporting status quo?

  3. Mr. Rembau Times.. I love this article like hell. I used to be an Investment Analyst once upon a time, and I know abt GE well enough to agree with the comparison u are making with BN. Whether PH wins or loses in this upcoming election, that’s a different story. The important to me here and now is : U made a great analysis. U are bold and sharp, and u addressed all the important and relevant points abt BN vs PH in not too many words. Salaam and cheers to u bro!! Keep up the good work.

    • Hey bro, to be honest we were looking at GE very closely. Was long in January, thinking that with the cost cutting, there would be a positive catalyst. But alas!, We remember the day Flannery announced the $6 billion hit due to GE Capital and the $15 billion capital requirement.
      The risk GE faces today is the explosion in LIBOR. GE’s business model requires it to fund its contracts with customers. An increase in interest rates due to LIBOR and downgrading of GE credit makes it very very dangerous. Moreover, we heard the new macha in charge of GE Power mention that they are most likely to record a loss in Q1 18. No guts to go long GE here, unless it trades at $12 bucks.

  4. Editor,
    I’m so glad you’re 100% sure BN will lose. I respect your prediction. Care to put your money where you mouth is? A small sum, USD$5,000.00? Let me know how to put my sum in escrow.
    Thanks,
    Milan

  5. Hey dudes why the golden silence after Ed got this result spot on ? Heartiest congrats to the team and brave individual who penned this amongst others GE et al. I hv shared yr thoughts to select investors and hope we hv all taken action to profit from the result. Keep up the great work. Drop a line nxt time something big like this comes up. I’ll always lend an ear. YNWA.

    • YNWA bro! Champions league awaits. Lets try to meet up when Im in KL. Btw did anybody take a big short on 1MDB bond?

    • I have one small favour to ask. I’ll be running a charitable auction to help a Pastor put his 4 children thru school in Batam. If your bros made big perhaps they could set aside just a small amt to support this. I’ll be auctioning off a specially designed souvenier of the Rembau Times. Reserve Price abt US $800. Delivery in KL or SG can be arranged.

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