We Should Give Benefits of the Doubt, Sometimes?

An article published on 6-10-2008 in a local financial newspaper caught my attention.

The writer expressed his dissappointment over the unpredictability of the decisions made by companies listed in Bursa Malaysia and suggesting that the priciples of "Buffettology" is not applicable in Malaysia. Instead, he suggested "buy on rumour and sell on fact", and to be a stock market trader instead as being an investor.

How he present his dissappointment by "writing to Warren Buffet", he gives an example of a Malaysian bank (Bank Harimau) , whom has no toxic debts but suddenly bought a neighbouring country's bank for more than its book value, which is against the principles of "Buffetology".

I think you should read the article first, otherwise, I might be misunderstood in my proceedings.

In my opinion:
1. There is a better way to express dissappointment on this issue, as there are a lot of corporate Malaysians who are reading his ideas; so, respect should be given first.
2. Suggesting that being a trader is a perfect way to participate in Bursa Malaysia is perhaps inaccurate and maybe not a good adivse at all.

Now, lets discuss about it.

Maybank bought BII for 4 to 5 times of BII's book value, which is higher considering the current scenario and the risks associated with the financial services companies. Analyst mostly disagreed with it as it is expensive, the terms are unfavourable, and it may expose Maybank to various repercussions, later.

Understood. But, in my opinion, sometimes, we should give benefit of the doubt on some issues and try to evaluate pros and cons of the business decisions made.

1. The move is consistent with Maybank's vision and mission, and it has been widely anticipated by those analyst at least a year ago. Remember, when all banking stocks rallied but Maybank, those analyst pointed out that it was due to Maybank's lack of drive towards business expansion.

2. Opportunity to grow Islamic Banking product, and Indonesia is the perfect choice, regionally. The current crisis presents opportunity to promote Islamic Banking products, and there is no better time but now. Indonesia has a lot of muslim population and the product caters to non-muslim too. Of course it is not there right now but, is there not a growth potential over there?

3. Seeing the fall of large banks across the Pacific, we are witnessing the struggle of those capitalists to save capitalism; and it ends up this way : "Profits are privatized (by those owners), but losses are socialized (by tax-payers). Is is totally against what they're preaching for not long ago. I am very grateful that Maybank does not venture into US (no matter how low the valuations are right now, as they are very skillful at introducing new products that would later deemed as toxic and it is not Maybank's competency right now).

4. Maybank is not a stock market trader but the acquisition is driven by business justification, which is to promote future and sustainable long-term growth. The issue is only the payback period and how to shorten it. Thats what motivates the price. Can they buy cheaper? Yes but the deal was agreed long before.

I can still go on in this topic. But, still, my opinion is that it is too premature to jump into conclusion at this point. However, the writer's way of putting it is totally emotional, rude and somewhat misleading.

One more thing, to all my friends, please listen carefully.

There are lots of people out there who quotes Warren Buffet or Buffettology, just to make their ideas popular and to sound correct. Fool me once, shame on you; fool me twice, shame on me.