Saturday, June 20, 2009

Straits Times : Temasek better than Warren Buffett....

UPDATE: Someone did point out the same flaw in the comparison [Link]. Equating Bershire's stock performance to Buffett's performance is flawed. Temasek is not a stock.

FURTHER UPDATE : Buffett's Annual report actually gives the return for the past 40 years as measured by the book value

The first column gives the book value return, the 2nd gives the S&P returns and the 3rd gives the outperformance vs S&P. A simple calculation from 1999-2008 will give you 6-7% return based on book value.

Sometimes the spin become so tiresome, you really become sick of it. So when I read the 19 June 2009 article on how Temasek outperformed Warren Buffett, I was somewhat numb. Still, I was completely baffled by the report's claim that Buffett returned 0.7% for the period from 1999 to 2009. I'm a Buffett watcher and can't for the hell of it figure out how this 0.7% return reported by the Straits Times is computed. Bershire's book value grew 9.3% from 2002 and 2008[Link]...and its intrinic value grew about 15% annualised for the past 15 years.

Then today while discussing this with some investment kakis, one of them suggested the Straits Times could have used Berkshire's stock price from 1999 to 2009 to compare against Temasek's investment returns. This would be highly misleading. Unlike Temasek, Warren Buffett's company, Bershire, is listed and its stock price fluctuate based on speculation, the animal spirits and emotion of the markets. In 1999, if you recall, there was a stock market bubble due to the dot.coms, companies like Microsoft, Cisco and Berkshire saw their stock price shooting to the stratosphere. Microsoft's and Cisco's stock today is still lower than in 1999 even though their revenues and profits have grown. Comparing Bershire's stock performance to Temasek's investment returns is completely invalid Temasek is NOT a listed stock. Buffett himself warned that speculators have pushed Berkshire's stock price too high in 1999 and would see sub-par returns if they buy the stock. In March 2009, speculators pushed Berkshire's stock 12% below book value as they panic from the banking crisis. Berkshires stock price is not a good measure of Buffett's performance and is completely off as a measure of his performance when you use the euphoric highs of the stock market in 1999 and compare it with the panic lows of 2009. They should compare Buffett's investment returns (book value, intrinsic value) with Temasek's investment returns - apples to apples. Temasek also has assets transferred from Ministry of Finance/Singapore govt which became listed or were subsequently sold off - the gains from these should be excluded because they are not investments made by Temasek otherwise it will create the wrong impression of Temasek's investment performance.

I'm still not convinced by my friend's hypothesis that Straits Times has used Berkshire's stock price to created a highly misleading article because while it is a mouthpiece of the govt and frequently publishes propaganda, something like this would require such a lack of integrity..... So I'm still baffled by the claims that Buffett returned 0.7%....anyone has an alternative explanation?

The Straits Times June 19, 2009

Temasek outdid benchmarks Long term, it did even better than Buffett

By Alvin Foo SINGAPORE investment agency Temasek Holdings may have taken a hit recently on some of its high-profile banking investments, but over the longer term it has outperformed key global benchmarks.

Figures obtained by The Straits Times show that over a 10-year period to March this year, Temasek outgunned several closely-watched equity indexes. It also beat other notable long-term investors such as Berkshire Hathaway, a top US investment company headed by billionaire Warren Buffett.

Temasek's performance has come under scrutiny in recent months after it suffered significant losses earlier this year on investments in Western banks Barclays and Bank of America (BoA). The state investment house delivered an annualised total shareholder return by market value of 5.4 per cent from March 1999 to March this year, assuming the value of its portfolio remained unchanged since November last year. That is the date of the last available update of the value of its investments. This compares with a return of 4.5 per cent in the same period for the MSCI Asia Pacific excluding Japan index, 3.1 per cent for the MSCI Singapore index, and -3 per cent for the MSCI World index, according to figures obtained by The Straits Times. MSCI indexes are key indicators commonly used by institutional investors to see how well they are doing relative to the market. Temasek's main investments are in stocks, with the bulk of its assets in Singapore and Asia, so these indexes are regarded as a useful gauge of its performance. Temasek's returns were also better than that of long-term investors like Swedish investment firm Investor AB, which delivered 3.7 per cent, and Berkshire Hathaway, which yielded 0.7 per cent. Last month, Finance Minister Tharman Shanmugaratnam told Parliament that Temasek has performed 'respectably' compared to relevant market indexes and reputable institutional investors.


skeptic said...

I just realised that the returns may have been calculated in Sing $ which has appreciated against the US $.

Temasek has a lot of Singapore assets which they inherit from the PAP. Merely sitting on them gives a better relative performace by virtue of the currency strengthening.

If that is the case, Temasek would have to calculate the return of non singaporean US$ denominated investments to compare against Berkshire. But by lumping everything together, it could provide a false picture.

WL said...

The more they try to spin the performance of Temasek, we know how desperate they are for us not to know the true story. And, the truth is that the investment performance of Temasek is dismal.

Anonymous said...

I think what is really mind-boggling is that the reporter did not stop to ponder over what seems to be a ridiculously low yield of 0.7 for Berkshire Hathaway. I wouldn't trust anyone that only had 0.7% yield on investments, and yet Warren Buffet is one of the most highly respected investor out there. Someone must be wrong? No?

It doesn't take a financial wiz to notice the apparent gaps in analysis of the article. What with the use of different yardsticks for comparison with Temasek and the seeming 10 year period used (from Mar 1999-2008) but in reality is Mar 1999 - Nov 2007. This is most disingenuous.

I will wait with bated breath for the financial folks, especially those from Bershire Hathaway, to refute the reports of ST. ;)

Anonymous said...

anon 11:13,

Did not stop to ponder or did not want to ponder so he can jump into a conclusion favorable for propaganda generation.

Anonymous said...

anon 11:13,

Did not stop to ponder or did not want to ponder so he can jump into a conclusion favorable for propaganda generation.

Anonymous said...

Not to forget that Temasek just inherit the need any capital and which already paid by the citizens...and what do citizens get in return??

This BS of Temasek outperfroms Buffett...what a joke...

No Money said...

In a sense all this thing about "long term" is all meaningless. You can always pick and choose a period - along or longer period, start and end whenever you like - to make whatever your want your investments to look.

For example you could be losing value on your investment every year until the last year and it climb 10% above the purchase price 10 years ago, and you can still boast your strategy was successful. And you report in that year.

And the converse can be true too, ie you think you are profitable all along until in the last year it crashed. Then you just shift your reporting period, if you do need to make a report.

And so all these measures of "profitability" are meaningless. So what if you measure and you are making money? or so what if you are losing money?

A possibly more meaningful measure can be what are you doing with your money?

What is Temasek making all these money for?

Maybe all its losses are inconsequential too.

So if there are people earning $450 or less a month, can money be used to change this situation?

Is holing up the majority of Singaporeans in apartments 110 m2 or less the best quality of life the country all its money can afford?

Can the cost of medical care be made further affordable for the poorest of the poor, if not free entirely?

And certainly many more, and more significant and more important use of money questions can be asked.

And we also have to ask whether we have been using money properly, eg all the tons of billions pumped in life sciences or education. What have we got for the country for these? Just more money for Temasek? Is that it? Ought there not be some measure of the benefits, or lack, to the ordinary Singaporean?

Or is it the case that in the final analysis whatever the government spends, it is for the ultimate benefit of themselves. The leftovers, spills, and waste are what lesser mortals gets to feed; and given that the pie is big, crumbs are also substantial: So no complaints, please; eat your crumbs and praise us, like those immigrants from the third world.

As for the long term, can anyone say why we need to have and able to spend $200bn in 2020? Perhaps we do. But if we don't cross the short term and the immediate, that future is irrelevant anyway.

Anonymous said...

Does anyone remember someone by the name of James Phang claiming to outdo Warrenr Buffet not too long ago?????? I hope Temasek will not end up in such terrible shape as well.

Anonymous said...

Does Temasek file financial reports like the other companies listed on the stock market? If not, does the reporter have access to the inside information? Otherwise, he was just reporting what was fed to him - the same BS presented to the "owner(s)" of Temasek. Only naive/incompetent people will buy into this BS.

Anonymous said...

Yes, only incompetent and ignorant people will believe in this BS.

Otherwise, the dogs, the lackeys and the PLPs.

Anonymous said...

This Alvin Foo is either foolishly taken in by his informant or fooling his way to the PAP elite circle. He could be made an MP in the next GE to reward his foolhardy loyalty to the party.

Alan Wong said...

The irony part of it is that if Temasek's return had indeed been much better off than Buffet's investment stock, then why is it that our own interest rate for CPF's savings still hovering around a meagre 2.5~4% ?

Does this not mean that Temasek has been siphoning off all the extra profits made out of our hard earned compulsory CPF funds and keeping it for themselves (in order to maintain & pay for the Ministers' skyhigh salaries ?

On one hand they spin their stories that they are perfoming much better than other in their investment funds but on the other hand, they are squeezing more out of CPF funds by imposing more restrictions on withdrawal ?

Where is the logic, may I ask ?

Anonymous said...

As for the long term, can anyone say why we need to have and able to spend $200bn in 2020?

Look at number of Singapore Citizens and birth rate now.

3 to 3.5 millions and 1.29.

1.29 is way below replacement level.

The $200 billions will spend on future new citizens in future like 2020.

No wonder foreigners from third countries want to come here.

Because stupid Singaporeans are saving for them to spend.

DanielXX said...

The logical conclusion from this episode is to boycott idiot-poses-as-journalist Alvin Foo and probably his employer as well.

Anonymous said...

It's interesting that the Alvin Foo selected the starting price of bershire at around $80100 in Mar 1999 and the ending price of around $86000 mar 2009 to get such a low compounded return for Bershire.

Look at the price chart of Bershire and one can see that Mar 2009 is the lowest price in recent history. And $80100 about 10 years ago was near the peak at that period.

The price of $80100 was so high 10 years ago that Buffet used 20% of Bershire stock to buy Gen Re - even Buffet was willing to give his stocks away at that price.

SPH is really trying too hard to make its owner Temasek look good. Imagine conjuring up a silly investor who bought Bershire at its all-time overvalued price 10 years ago and sell it at its all-time recent lowest price.

Come to think of it, buying high and selling low does remind you of someone from Temasek, right?

Anonymous said...

Chinese saying - "Paper can never contain fire".

The more ST and FM try to contain it, the more their fingers will get burned by the "online fire".

We didn't throw thinner and light up fire on you guys, so don't lock us up in IMH "without trial", ok?

Anonymous said...

What is Temasek making all these money for?
<- It was to pay Ho Ching and other cronies a fat salary of course.

muebles madrid said...

Well, I do not really believe this will have success.

Anonymous said...

The fallacy here is those gullible young Singaporean investors who foolishly think following Buffet is the path to financial success. It isn't. What worked for Buffet in the past won't work for a modern investor in today's markets, especially with a smaller starting capital.
I have made good money over the years by never following Buffet. My hard learnt lesson: If you follow Buffett, you will never make money in the modern local market. NEVER.
However, many young people would rather follow their prejudices and fantasies rather than succeed in reality.
Every young local investor I know who is a follower of Buffet, none of them have made any money in the markets. Not one.
I'm not going to bother explaining why this is so. People who want to succeed need to find out by themselves.