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Bamboo Innovator Daily Insight: 2 Feb (Mon) – Warren Buffett: Know when to hold ’em; Shareholders will be poring over the Berkshire Hathaway chief’s 50th anniversary letter for clues on its future strategy; The Disease of Being Busy; The Difference Between Seeing and Observing; A Navy SEAL Explains 8 Secrets To Grit And Resilience

Life 

  • Warren Buffett: Know when to hold ’em; Shareholders will be poring over the Berkshire Hathaway chief’s 50th anniversary letter for clues on its future strategy: FT
  • The Disease of Being Busy: Onbeing
  • A Navy SEAL Explains 8 Secrets To Grit And Resilience: Barker
  • A Lesson on Elementary Worldly Wisdom As It Relates To Investment Management & Business: Farnam
  • The unsung pioneers of the information age: FT
  • Sergio Mattarella: enemy of the Mafia and champion of the law: FT
  • The Difference Between Seeing and Observing: Farnam
  • This $31 Million Leonardo Da Vinci Codex, Now On View in Phoenix, Holds The Secret To Creativity: Forbes
  • Accomplish More by Committing to Less: HBR
  • The Pleasure of Reading to Impress Yourself: Newyorker
  • The Psychology of We: Farnam
  • Closing The Computer Science Gap, From Classroom To Career: Techcrunch
  • Why the modern world is bad for your brain; In an era of email, text messages, Facebook and Twitter, we’re all required to do several things at once. But this constant multitasking is taking its toll and making us less efficient: Guardian
  • The Toxins That Threaten Our Brains: Atlamtic
  • Innovation’s 3 essential ingredients: here’s how to test if your business has them: BRW
  • 15 examples of Pete Carroll’s unique style of coaching: BI
  • Germany is lagging behind disruptive US start-ups, warns Bosch chief: FT
  • Child’s success depends on holistic education, family support: ESM Goh: TODAY

Books

  • 10% Happier: How I Tamed the Voice in My Head, Reduced Stress Without Losing My Edge, and Found Self-Help That Actually Works–A True Story: Amazon
  • Manage Your Day-to-Day: Build Your Routine, Find Your Focus, and Sharpen Your Creative Mind : Amazon

Investment Process

  • Warren Buffett on Investment Filters [Case Study]: CS

Greater China

  • Is energy tycoon Li Hejun really the richest man in China? WCT
  • HK graduates ‘lack skills’ in solving live problems: SCMP
  • Lots of people inside and outside China have heard Premier Li Keqiang promote mass entrepreneurship and innovation in speeches. Far fewer know where he got the idea. It comes at least in part from Edmund Phelps’ Mass Flourishing: Bloomberg
  • A night out with the Chinese billionaire builder suing local governments: Fortune
  • China to step up anti-graft drive in media and broadcasting sector: SCMP
  • M&A buzz in China last year may result in landmine shares this year: WCT
  • Smartphone shipments from Dongguan 50% of China total: WCT
  • Western schools lead the way to China: FT
  • Yan Jiehe, CPCG: the Chinese billionaire turned debt collector: FT
  • China’s e-commerce firms and banks fight for market share: SCMP
  • China to curb phone, computer purchases in restive Xinjiang: Reuters
  • Sizing Up China Bond ETFs; New China-bond focused ETFs could be intriguing for yield-hungry investors, but there are political risks.: Barron’s
  • Betting Against Macau; The Las Vegas Sands’ weak profit report suggests the depth of the problems as the ex-colony tries to clean up its act.: Barron’s
  • China’s Property Market On Shaky Foundations; Falling house prices and high debt levels are a threat to banks and growth in the world’s second largest economy. Barron’s
  • New Chinese Property Investment Tip: Follow the Graft Inspectors: WSJ
  • Corruption fighters in China may include outsiders: AsiaOne
  • Math Beats English in China as TAL Closes Valuation Gap with New Oriental Education: Bloomberg
  • How the Chinese Are Turning Fecal Sludge Into ‘Black Gold’; “The world has much to learn from China in the way it’s harnessed waste for energy” : Bloomberg

India

  • Statistical revisions add shine to India growth: FT
  • Tata heads list of India’s socially minded pioneers: FT
  • India’s Status As An Art Hub Began With An Airline Sick Bag: Forbes
  • New Outsourcing Frontier in India: Monitoring Drug Safety; Business Is Booming as Regulators Require Closer Tracking of Side Effects: WSJ

Japan & Korea

  • Burberry Asia chief says embracing technology is crucial in Korea: JA
  • Biggest buyers on book apps in Korea are women: JA
  • Hyundai Motor to build tallest building in Korea: JA
  • The curse of owning a small business in Korea: JA
  • Daelim-dong to become Seoul’s Chinatown: KT
  • After 450 years, Japanese maker of squid-guts delicacy seeks bankruptcy protection: AsiaOne
  • More Dead Than Alive: Japan’s Shrinking Regions Abandon Ancestral Graves: Bloomberg

ASEAN

  • Malaysian billionaire Tong Kooi Ong denies allegations he is involved in a US$1.4 billion bet against the ringgit, and denied claims he is engineering a crisis with the Malaysian currency for personal gain: TODAY
  • Big Fish Susi by Far the Most Popular Minister: Survey: JG
  • GM and China’s SAIC to push into Indonesia with no-frills vans: Reuters
  • Malaysia’s 1MDB Delays Loan Payment Again; But Sources Say Malaysian State Fund Closer to Sealing Deal With Tycoon to Help Pay Debt: WSJ
  • Thai business leaders welcomed military coup: FT
  • Thai Union Frozen Products plans to reel in more western seafood brands in the latest phase of the expanding global voyage of the Southeast Asian country’s ambitious consumer industries. FT
  •  In red heartlands, Thai army keeps a lid on dissent: Reuters
  • Juara Beauty Aims to Win Over Indonesia: JG
  • Meet the “Reset Generation”. This is a group of 20 million aspiring, thirsty and sometimes irreverent individuals who will be the drivers of the economy. They were born between 1980 and 1996 and represent almost a third of the entire pop: NM
  • Editorial: Lucrative street business; The Jakarta government has never stopped looking for breakthroughs in its bid to increase revenues from, among other things, parking fees: JP
  • Indonesia: When even kindergarten pupils lose  their appetite for our (beloved) police: JP
  • An introduction to the Jardines; Shunned by local brokers, tightly-controlled, the venerable and storied Jardine group is nevertheless too important to miss: BT
  • Singaporeans lose thousands after US property scheme turns sour: TNP
  • More private properties in Singapore being sold at a loss: AsiaOne
  • Gemstone fever hits Jakarta: AsiaOne
  • Myanmar coffee scene fuelled by middle class caffeine high: AsiaOne
  • Two pipe bombs exploded outside a luxury shopping mall in Bangkok in an attack which Thai police said was aimed at raising tension in a city living under martial law: Reuters

Macro

  • As Regulators Focus on Culture, Wall Street Struggles to Define It; Big Banks Try to Monitor Employee Attitudes to Avoid Future Problems: WSJ
  • Capitalism has broken free of the shackles of democracy; Economic models have proved more portable than political ideas: FT
  • Barack Obama plans to tax overseas cash piles; One-off $238bn levy on earnings held abroad to fund infrastructure: FT
  • Psychometric testing on the rise in emerging markets; Schemes to assess creditworthiness launch in Peru, India and elsewhere: FT
  • The perils of a strong US dollar: FT
  • Biggest Pension Acts Like Teenager on Allocations: Canada Credit: Bloomberg
  • Asia Junk Bond Market Struggles to Rebound; Few Buyers and Sellers Make for Frustration Among Brokers: WSJ
  • Hedge Fund Brevan Howard’s Fortunes Blighted by Billions in Outflows and Management Row: WSJ

TMT

  • In Smartphone Market, It’s Luxury or Rock Bottom: WSJ
  • Netflix Faces Life in the Mainstream; Netflix’s own success means it must spend more on original content to distinguish itself from more traditional networks launching rival streaming service: WSJ
  • Samsung’s Own Chips Were Factor in Blow to Qualcomm: WSJ
  • Sophisticated sensors replicate human senses: JA
  • MyChi, Your Personal Food Therapy Advisor Enabled by Eastern Wisdom: Technode
  • Software that can publish every draft of a book simultaneously shows the true beauty of the creative process: Quartz
  • The SaaS Adventure: Techcrunch
  • How young creators are finding fans and making money on YouTube: BRW
  • Virtual Reality, The Empathy Machine: Techcrumch
  • Google, Microsoft and Amazon pay to get around ad blocking tool: FT
  • This case transforms your iPad’s screen to make typing easier, and it looks like magic: BI
  • What We Know, Now, About the Internet’s Disruptive Power: HBR
  • Apple: what do you do after becoming the world’s most profitable company?: Guardian
  • How Janet Jackson’s Super Bowl ‘Wardrobe Malfunction’ Helped Start YouTube: Forbes
  • Delphi Automotive Wins with Safety Technology; Delphi, a leader in driving technology, is now a robocar player mistaken for an old-line supply company. Barron’s

Healthcare

  •  In pursuit of next-generation Ebola stockpile vaccines: Reuters

Consumer & Others

  • How Cadbury lost the right to sell its own chocolate in the US: Quartz
  • From Holdens to hematopoietic stem cell expansion: meet the investor taking Australian manufacturing way up the value chain: BRW
  • Grocery watchdog to sharpen its teeth following Tesco accounting scandal: FT
  • How Ikea spread the flat-pack revolution across the world; Ikea chief executive Peter Agnefjäll plans to double the size of the business by the end of the decade, and India is Ikea’s next target: telegraph
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This video shows just how geeky Bill Gates still is

This video shows just how geeky Bill Gates still is

JULIE BORT TECH  JAN. 31, 2015, 10:58 PM

Bill Gates loves Reddit. He does “Ask Me Anything” sessions on the chat site on a regular basis, participates in Reddit’s record-breakingly huge Secret Santa program and, for an AMA he did on Wednesday, he even filmed a YouTube love video. If you had any doubt that the Microsoft co-founder and child prodigy computer geek was still a geek at heart, his Reddit humor ought to put that to rest. For instance, his YouTube love video was filled with geeky humor like this web programing reference to the color red.

Descend into the Asian Snake’s Lair: Occult Offshore Centers, Tax-Tunneling, and Consolidation Craftiness

 “Bamboo Innovators bend, not break, even in the most terrifying storm that would snap the mighty resisting oak tree. It survives, therefore it conquers.”
BAMBOO LETTER UPDATE | February 2, 2015
Bamboo Innovator Insight (Issue 68)

  • The weekly insight is a teaser into the opportunities – and pitfalls! – in the Asian capital jungles.
  • Get The Moat Report Asia – a monthly in-depth presentation report of around 30-40 pages covering the business model of the company, why it has a wide moat and why the moat may continue to widen, a special section on “Inside the Leader’s Mind” to understand their thinking process in building up the business, the context – why now (certain corporate or industry events or groundbreaking news), valuations (why it can compound 2-3x in the next 5 years), potential risks and how it is part of the systematic process in the Bamboo Innovator Index of 200+ companies out of 15,000+ in the Asia ex-Japan universe.
  • Our paid Members from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing.
Dear Friends,Descend into the Asian Snake’s Lair: Occult Offshore Centers, Tax-Tunneling, and Consolidation CraftinessLike the ancient legendary Painters descending into the clay pits to study the rudiments of colour, we need to hold our hands together – tightly! – as we descend into darkness, into the Asian Snake’s lair. We need to go deep into the underworld of accounting tunneling to study the occult offshore financial centers, the tax-tunneling mechanism and see up close the consolidation craftiness in accounting of the Asian Snake.This week, we get to observe accounting tunneling and income diversion using “spaceman”, which involves the creation of SPVs (special purpose vehicles), often in offshore financial centers. It is called “spaceman” because it comes from seemingly nowhere, does not perform any real activities, pays almost no taxes, and disappears (“flies into space”) in one-half to two years. This type of firm is also called a “dump”, “flash-light”, “bruise”, “hedgehog”, or “fly-by-night company”. Tax evasion and accounting tunneling using spaceman often involves a long chain of transactions, with each transaction appearing to be legitimate; however, the entire scheme is illegal.

Last week, we shared that In practice, the controlling owner and insiders net less than the full amount that they have tunneled and expropriated because of lawyer fees, tax consultants, payment for discrete financial services etc. We will unearth some shocking empirical findings that can possibly help investors to detect and avoid Asian accounting frauds ahead of the curve, in the form of abnormal levels of professional fee. These include Big 4 audit firms receiving more audit and non-audit fees when their clients transfer more money to fraudulent entities. However, it is difficult to distinguish if the excess fees are a form of price protection by the Big 4 auditors when they take on risky clients or represent payments for not constraining their clients’ fraudulent transfers. A one standard deviation increase in income diversion is said to correspond to 9.4% increase in audit fees at the Big 4 and a one standard deviation increase in income diversion corresponds to 24.1% increase in non-audit fees at the Big 4…

Still, this “professional fee” pales in comparison to that enjoyed by another important capital market participant in the Asian jungle. First understand this: How much money can be tunneled and diverted from such “spaceman” schemes? Typically 40%. Because the amount diverted and tunneled can be large and is usually paid in cash, spaceman schemes require the collaboration of bank officials. These bank officials often charge fees of as much as 5% for customers to withdraw cash and it is a lucrative business.

Over the weekends, shocking news broke out that China Minsheng Banking Corp (600016 CH, MV $49.6bn) chief Mao Xiaofeng had resigned and was taken away by the Communist Party’s Central Commission for Discipline Inspection in connection to the anti-corruption probe of Ling Jihua, former top aide to ex-president Hu  Jintao. The investigation into the youngest-ever Chinese listed-bank president has exposed the tip of the iceberg of rampant power-for-money deals between senior officials and financial leaders.

It is estimated by the International Consortium of Investigative Journalists (ICIJ) that between $1 trillion and $4 trillion in untraced assets have left China since 2000. Nearly 22,000 offshore clients with addresses in mainland China and Hong Kong appear in leaked files obtained by ICIJ. Among them are some of China’s most powerful men and women. The files come from two offshore firms — Singapore-based Portcullis TrustNet and BVI-based Commonwealth Trust Limited — that help clients create offshore companies, trusts and bank accounts. Confidential documents obtained through ICIJ’s “Offshore Leaks” investigation show that Big 4 firms had a close relationship with Portcullis TrustNet, a Singapore-based offshore services firm that sets up hard-to-trace offshore companies for clients around the world. PwC, for example, helped incorporate more than 400 offshore entities through TrustNet for clients from mainland China, Hong Kong and Taiwan, the records show.

We will examine the off balance-sheet entities and financing such as VIE (variable interest entity) and operating leases, and revisit the reverse mergers. We will also look into the consolidation craftiness in accounting in intercorporate investments with regards to affiliates and JVs in Chinese firms, Korean chaebols and Japanese keiretsu and appreciate the mechanics of equity method vs the proportional consolidation method.

As we descend this week into the dark Lair, our spines tingle – we know we are closer to the Asian Snake.

Warm regards,

KB

The Moat Report Asia

www.moatreport.com

http://accountancy.smu.edu.sg/faculty/profile/108141/KEE-Koon-Boon

A new monthly issue of The Moat Report Asia is now available!

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