Dismayed over the exorbitant consultancy fees, 4 times higher !


GEORGE TOWN: Barisan Nasional leaders have criticised the Penang Government for allegedly over-paying, by four times, the detailed design fees of three road projects.

“Construction is not a new industry. Many people are puzzled by the exorbitant consultancy fees,” said Penang MCA secretary Tang Heap Seng in a press statement yesterday.

He said the Board of Engineers Malaysia (BEM) devised a standardised gazetted scale of fees for professional engineering consultancy in accordance with Section 4(1)(d) of the Registration of Engineers Act 1967 (Act 138), and it was highly irregular to deviate from it.

Yesterday, it was reported that Barisan’s strategic communication team sought the professional opinion of BEM on the costing of the three paired roads.

The board was said to have replied that the RM177mil in detailed design costs was four times higher than the maximum allowed under the gazetted scale of fees, which the board calculated to be RM41mil.

The three roads are from Teluk Bahang to Tanjung Bungah, Air Itam to Tun Dr Lim Chong Eu Expressway and Gurney Drive to the expressway. They are meant to be a traffic dispersal system for the proposed Penang Undersea Tunnel.

Penang MCA Youth chief Datuk Michael Lee Beng Seng also issued a statement, pointing out that the alleged overpaid amount of RM136mil was more than the reported RM100mil the state spent on flood mitigation in the last eight years.

“We are shocked that the Penang government has put the well-being and safety of the rakyat behind the interests of consultants and contractors.”

Gerakan vice-president Datuk Dr Dominic Lau highlighted that affordable housing, flash floods and landslides were issues that concerned Penangites.

On Tuesday, Barisan strategic communications director Datuk Seri Abdul Rahman Dahlan announced that he was giving the Penang Government a week to explain BEM’s findings, failing which the matter would be referred to the Malaysian Anti-Corruption Commission.

When asked to comment, Penang Chief Minister Lim Guan Eng replied: “Another day.” – The Star
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On Mcoin, Bitcoin and points of investment


MCOIN is still very much a talking point, especially in Penang. To the uninitiated, it is the “digital currency” of MBI International, a company involved in a myriad of activities and hogging the limelight for the wrong reasons after being flagged as one of the entities not recognised by Bank Negara.

Since Bank Negara’s warning two weeks ago, the company’s accounts amounting to some RM177mil have been frozen. The cash in question is significantly much more than the previous major scheme that came under probe by Bank Negara and other agencies.

In 2012, the authorities froze RM99.8mil in bank accounts of Genneva Malaysia Sdn Bhd. Also, 126kg of gold were carted away from the office. It has been five years and the investors, most of them ordinary wage earners looking to earn an extra buck from their savings, have yet to receive their money.

One of the reasons is likely that the liabilities of Genneva Malaysia are 10 times more than the assets recovered.

MBI International, which is primarily based in Penang, has a network stretching up to China. According to reports, it has come under pressure from some investors wanting a return of their money.

However, outlets in M Mall in Penang are still accepting Mcoin for the purchase of goods and services. There is no rush to cash out, as one would have expected, considering that the accounts of MBI International have been frozen.

Nonetheless, it is only a matter of time before the value of Mcoin and the ability of MBI International to return money to its investors is put to the test.

Based on previous events that led to companies having their bank accounts seized by the central bank, it would be a long time before the investors are able to retrieve their cash.

There are some who are completely ignorant of the new global order of currencies and money, making comparisons between Mcoin and the rise of cryptocurrencies such as Bitcoin.

If anybody is harbouring any hope that the value of Mcoin would rise just like the phenomenal bull run seen in the world of cryptocurrency, they had better stop dreaming.

There are fundamental differences between instruments such as Mcoin, which in essence is a token to redeem goods at a few outlets, compared to cryptocurrency that is fast gaining traction as an alternative currency around the world.

Mcoin has unlimited supply and its value is controlled by one entity. How the value is derived is not clear.

In contrast, cryptocurrencies such as Bitcoin have a limited supply. And the supply is decentralised – meaning no one entity controls the supply. There is a ledger that tracks all transactions and measures the amount of supply and how much more is available.

The objective of the people behind cryptocurrency is to come up with a currency that is not controlled by central banks. New supply can only come about after hours of a process called `mining’.

The mining process is a complicated one. It involves many hours of programming and utilising high computing skills to predict the next chain in the block of coins. The data used is based on historical transactions and it is said that one block is created every 10 minutes.

Only one successful miner is rewarded with a slice of the cryptocurrency at any one time. He or she can then transact it in an exchange.

The first cryptocurrency is Bitcoin, which began operating in January 2009.

Bitcoin is only one of the hundreds of cryptocurrencies in existence. There are many more new coins coming up, improving on the technology pioneered by Satoshi Nakamoto.

Nobody knows who is Satoshi or if he really exists. However, the legend is that he wanted a currency that is not under the control of central banks, hence the birth of Bitcoin, the first decentralised currency.

The market capitalisation of all cryptocurrency was US$27bil as of April this year – four times more than what the value was in January this year.

Much of the rise is attributed to the volatile US dollar. A few years ago, if anybody had said that cryptocurrency such as Bitcoin would be used to hedge against the US dollar, many would have laughed it off.

Today, however, it is the reality.

The cryptocurrency fever has picked up in China, which has the largest number of “miners” in the world. One reason is said to be because some see it as one way to take capital out of the country.

In India, when the government decided to demonetise the popular 1,000 and 500 rupee notes, there was a 50% increase in the trading of Bitcoin, as people saw it as one way to legalise their black money.

Bitcoin soared past the US$2,500 mark last week, which is a four-fold increase since January this year. There are many other cryptocurrencies, such as Ethereum, that are all seeing a bull run.

The world of cryptocurrency has taken a life of its own. Computer geeks with “blockchain” expertise, the technology that drives the decentralisation settlements of cryptocurrency, are commanding more than US$250,000 per annum.

It is said to be more than what a consultant or a software engineer can earn.

Those who have put their money into cryptocurrency would be laughing all the way to the bank now. But dynamics and fundamentals are complicated. The strength of the cryptocurrency is not based on historical numbers. It does not have an asset backing it.

It is based on future expectations of what the designer of the cryptocurrency offers. It is a complicated investment not meant for the unsophisticated investor.

Only fools will go for investment schemes that are unregulated and offer promises of returns that are unsustainable. They will lose all the time.

The smart investor will rely on traditional stocks and shares with earnings that are visible. Those who are not greedy will surely gain.

The super-smart geeks are banking on the world of cryptocurrency that has a volatile history. Their fate is uncertain.

Source: The Star by M. Shanmugam

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Prospering with Belt and Road to reap the benefits of China’s initiative


Malaysia is one of 64 countries to reap the benefits of China’s initiative.

CAN money grow on fruit trees?

Yes, that is as far as Agriculture and Agro-based Industry Minister Datuk Seri Ahmad Shabery Cheek is concerned.

After witnessing the signing of a deal worth US$1.53bil (RM6.65bil) between Malaysia’s AgroFresh International and China’s Dashang Group for the export of local Cavendish bananas and tropical fruits to China, he said:

“Money does grow on fruit trees if our agriculture products could open up China’s market.”

The deal was part of the nine memorandums of understanding (MoUs) and agreements, with value totalling more than US$7.22bil (RM31.26bil), which were signed between Malaysian and Chinese companies on May 14.

But Datuk Seri Ong Ka Chuan, International Trade and Industry Minister II, sees more money flooding in once Malaysia is linked up with other Asean nations, China and Europe via rail connection under China’s Belt and Road Initiative, now termed as the New Silk Road project.

“Our trade figures can jump by three to four folds once Malaysia can export and import goods to our major trade partners (such as China, Europe and Middle East) overland via rail systems,” he tells Sunday Star.

Both ministers are among Cabinet members in the Malaysian delegation led by Prime Minister Datuk Seri Najib Tun Razak to attend the Belt and Road Forum for International Cooperation held in Beijing from May 14 to 15.

Malaysia is one of the 64 countries outside China that have benefited from the Belt and Road Initiative, propounded by Chinese President Xi Jinping in the autumn of 2013.

One project to be launched soon will be the RM55bil East Coast Rail Link. Examples of existing projects include Xiamen University and the deepening of Kuantan Port.

At the opening ceremony of the forum, Xi injected fresh impetus to his pet project by announcing hundreds of billions in new funds for infrastructure investment in Belt and Road countries that span Asia, Middle East and Europe.

According to some estimates, Chinese funds allocated for investing in Belt and Road countries – which include several exiting funds announced since 2013 – total around US$900bil (about RM4 trillion) now.

“Model of regional cooperation”

From Mongolia to Malaysia, Thailand to Pakistan and Laos to Uzbekistan, many projects, including high-speed railways, bridges, ports, industrial parks, oil pipelines and power grids, are being built, Xi said.

Since 2013, Chinese private businesses have invested more than US$60bil (RM260bil) in countries along the Belt and Road, in addition to the US$50bil invested by the Chinese government.

Xi’s speech also reveals that China will expand China-Europe railway cargo services, which are stirring up excitement in European nations – particularly Britain.

Belt-road: Ong signing Belt and Road MoU with Vice Chairman of National Development and Reform Commission of China Zhong Yong on May 13, 2017. Witnessing are Najib and China’s Premier Li Keqiang.

Calling his brand of globalisation as “project of the century” to achieve a win-win situation for all, Xi has committed to importing US$2 trillion (RM8.7bil) of goods from the 64 Belt and Road countries – many of which are under-developed and impoverished nations hungry for infrastructure and industrial investments.

The Chinese leader’s pledge of “non-interference” with the domestic politics of other countries is comforting, given that there are concerns that China could aim to be a hegemony with its economic and military might.

“What we hope is to create a big family where we can co-exist harmoniously,” Xi said last Sunday in his speech that also focused on connectivity in policy, infrastructure, trade, finance and people.

The forum is by far the most important and largest meeting on the Belt and Road Initiative since 2013.

About 130 countries were represented at the forum and they accounted for two thirds of the world’s population. Their combined gross domestic product accounts for 90% of the world’s total, according to Xinhua.

Klaus Schwab, founder and executive chairman of the World Economic Forum, regards the Belt and Road Initiative as “a shining model for regional collaboration, development and growth”.

“This initiative respects the differences between countries and their various paths for development, not imposing a specific plan or ideological framework, but seeking to create common ground for cooperation and mutual benefit,” Schwab told Xinhua.

UN secretary-general Antonio Guterres, also told Xinhua: “China will play a very important role in multi-lateralism with the Belt and Road. The initiative reflects a new model of international cooperation and interaction with mutually beneficial cooperation through the connection of policies and development strategies.”

And Jack Ma, executive chairman of Alibaba Group, shared: “The initiative goes far beyond the economic strategy of any single country or region. Its mission is to make the world more innovative, dynamic, and equal.”

Big step: Fernandes is excited that China has allowed AirAsia to be the first low-cost carrier to set up shop in the Middle Kingdom.

AirAsia deal – another first in China

On the sideline of the forum, Malaysian and Chinese leaders took the opportunity to clinch more agreements that brought bilateral ties to another new high.

While the deals signed last November were far more than this round and higher in total value, the Chinese Government continued to grant “first” to Malaysia. This was reflected in a project given to Tan Sri Tony Fernandes, group chief executive officer and founder of AirAsia Bhd. Soon, the sky will see AirAsia China.

“It is the first time a foreign airline is given permission to establish and operate a low-cost carrier in China. We are the first country to be granted such licence,” Najib told reporters at the conclusion of his visit to China.

AirAsia is establishing a joint venture with China Everbright Group, with an initial stake of 22%. However, AirAsia may raise its stake in future.

China Everbright is a government-owned financial services conglomerate, which is a major shareholder in China Aircraft Leasing Group Holdings Ltd and the Henan Government Working Group.

The plan is to set up AirAsia China to be based in Zhengzhou, the capital of Henan, to ply domestic and international flights.

“Tony Fernandes was very excited because he was able to meet the top transport and aviation officials, whom he could not secure appointments with previously. He has been working on this project for years,” a minister told Sunday Star.

Other Cabinet ministers are also upbeat after attending the Belt and Road Forum.

“I have witnessed the fruits of the close diplomatic ties between Malaysia and China, and between Najib and Xi Jinping during this trip,” says Transport Minister Datuk Seri Liow Tiong Lai, who signed a MoU on infrastructure cooperation with China.

“In China, economic developments are influenced by government policies. Now that our leaders have good ties with China, it is very timely for Malaysian businessmen to enter China, and vice versa,” he tells Sunday Star.

Important talks: Liow (second from left) leading a Malaysian delegation at a meeting with his Chinese counterpart at China’s Transport Ministry in Beijing on May 12 morning. From left are Transport Ministry deputy secretary-general Datuk Chua Kok Ching, MCA vice president Datuk Dr Hou Kok Chung and Fernandes.

“We have to promote economic growth fast enough so that we can harvest the fruits of the Belt and Road Initiative.

“The opportunities for Malaysia to develop the infrastructure and boost economic growth would not be available if not for the Belt and Road Initiative pushed forward by China,” he adds.

Minister in the Prime Minister’s Department Datuk Seri Dr Wee Ka Siong observes: “There are quite a number of business-to-business MoUs signed during this trip, in addition to the nine witnessed by Prime Minister Datuk Seri Najib Tun Razak.

“I was also invited to attend many discussions and meetings, sometimes I had to have many meals a day! (as discussions were held over meals).”

Wee, whose ministerial portfolio covers development of Chinese small and medium enterprises (SMEs), has personally requested Ma to reduce charges for Malaysian SMEs when they use Alibaba’s platform to sell products.

Ma, an e-commerce wizard and China’s second richest man, is expected to give consideration to the proposal as he has pledged to help Malaysia develop its digital economy. Ma will set up the Asean data centre in Malaysia before the end of the year.

Analysing Belt and Road Initiative, Shabery Cheek says: “Belt and Road is a different form of cooperation from other pacts, such as the Trans-Pacific Partnership (TPP) and World Trade Organisation (WTO). Those emphasised on what goods were tax-free and what were not, which sectors to open up and which could not. Essentially, they focused on how to protect the self-interests of individual countries.

“However, the Belt and Road talks about infrastructure networking, which is very important. They take the cue from the ancient Silk Road, which was not only a channel to transport goods, but also to spread Islam and Buddhism. That is a great thing.”

Source: Sunday Star by Ho Wah FoonTho Xin Yi

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What concerns Malaysians most ?


Supermarket shopping food

THE biggest concern among Malaysians, as we head towards the general election, is the cost of living. It’s as simple as that.

There have been plenty of political and religious side shows, but for many Malaysians, regardless of race, settling the many bills each month is what worries them the most.

Although Malaysia remains one of the cheapest countries to live in, its citizens have been spoilt for too long.

We are so used to having so many food items subsidised, including sugar, at one time, to the point that some of us have had difficulties adjusting ourselves.

Our neighbours still come to Malaysia to buy petrol, because ours is still cheaper than theirs.

But, as in any elections, politicians will always promise the heavens to get our votes. One of the promises, we have already heard, is the abolishment of the Goods and Services Tax.

No doubt that doing away with GST would appeal to voters, but seriously, even the opposition politicians calling for this are aware that it is a counter-productive move.

In the words of Tan Sri Mohd Sheriff Mohd Kassim, a highly-respected retired government servant, “it is too much of a fairy tale.”

The danger, of course, is that populist electoral pledges are always appealing, even if they are not rational.

Malaysia cannot depend on just about two million tax payers to foot the bill in a country of over 30 million people. It is unfair and unsustainable.

Taxing consumption gives more stability to revenue because income tax is regarded as highly volatile, as it depends very much on the ups and downs of businesses, according to Mohd Sheriff. When the market is soft, revenue collection always sees a dip.

For the government, which has already been criticised for having such a huge civil service, without GST, it could even mean its workers may not get paid when there is a downturn in the economy.

In the case of Malaysia, we have lost a substantial amount of revenue following the drop in oil price.

So, when politicians make promises, claiming plugging leakages is sufficient to end GST, it is really far-fetched and irresponsible.

The Malaysian tax system needs to continue to be more consumption-oriented to make it recession-proof, and, more importantly, the tax net just has to be widened. The bottom line is that, it is grossly unfair for two million people to shoulder the burden.

The government has done the right thing by widening the tax base and narrowing the fiscal deficit. The move to implement GST, introduced in 2014, has been proven right.

GST is needed to provide a strong substitute as a tax consumption capable of off-setting revenue loss from personal and corporate tax.

Beginning next month, India will join nearly 160 countries, including Malaysia, in introducing GST. Like Malaysia, when GST was first introduced, plenty of loud grumblings and doubts have rolled out.

Unlike Malaysia’s flat 6% across the board, India is introducing a more complicated four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates for essential items and highest for luxury and demerits goods that would also attract additional cess.

In Singapore, GST was introduced on April 1, 1994, at 3%. The rate was increased to 4% in 2003, then 5% in 2004. It was raised to 7% on July 1, 2007.

Some politicians came under fire recently for purportedly calling for the abolishment of GST, however, some others clarified that they had merely called for a reduction in the tax’s percentage.

Another top opposition politician has come out as the strongest opponent of GST, reportedly saying the claim that Malaysia needs GST is false.

Some other politicians have described GST as regressive, but have not come out with clear ideas on how it should be tackled.

Nonetheless, the ruling party should not make light of these electoral promises.

For many in the urban middle class, they feel the squeeze the most.

They have struggled against the rising cost of living, paying house and car loans, and earning deep levels of debt, as one report aptly put.

The middle class, consisting of over 40% of Malaysians, is also in the income tax bracket, it must be noted.

Last year, an economist was quoted saying that 2016 was a year of a shrinking urban middle class and a happy upper class.

Shankar Chelliah, an associate professor at Universiti Sains Malaysia, said that the Malaysian middle class shrank in metropolitan centres across the country, and that most of its members would end the year almost 40% poorer than they were in 2015.

He said this would be due to the withdrawal of cooking oil and sugar subsidies, depreciation of the ringgit, decrease in foreign inflows and increase in outflows, among other factors.

For many in this middle class range who do not qualify for BR1M handouts, the government clearly has to come up with a range of programmes which can relieve them of these burdens.

It isn’t race or religious issues that will appeal to voters – they want to know how they can lead better lives, and if the opposition thinks contentious issues will translate into votes, they will be in for a surprise.

It is true that the heartland will continue to deliver the crucial votes, and the ruling party will benefit from this, but Malaysia has also become more urban and more connected.

At the end of the day, it is the bread and butter issues that matter most. Let’s hear some solid ideas and programmes which will reduce the burden of Malaysians.

By Wong Chun Wai On the beat, The Star

Wong Chun Wai began his career as a journalist in Penang, and has served The Star for over 27 years in various capacities and roles. He is now the group’s managing director/chief executive officer and formerly the group chief editor.

On The Beat made its debut on Feb 23 1997 and Chun Wai has penned the column weekly without a break, except for the occasional press holiday when the paper was not published. In May 2011, a compilation of selected articles of On The Beat was published as a book and launched in conjunction with his 50th birthday. Chun Wai also comments on current issues in The Star.

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Chinese car-maker Geely to make Malaysia its global hub, help Proton drive into future

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Chinese car-maker Geely to make Malaysia its global hub, help Proton drive into future


PUTRAJAYA: The entry of a major Chinese carmaker into Proton Holdings Bhd will not only ease its financial woes, but also bring fresh capacity to the group’s underutilised factories.

Zhejiang Geely Automotive Co Ltd plans to turn Malaysia into its global hub to manufacture all of its right-hand drive cars, including its premium Volvo brand.

Geely will take a leadership role in production, sales and marketing. Proton will be responsible for distribution of the brand in Malaysia.
These were among the highlights mentioned at the signing ceremony in Putrajaya between DRB-Hicom, the parent company of Proton, and Geely.

Proton and Geely yesterday signed an agreement that would see Geely take a 49.9% stake in Proton. Both parties have not finalised the price Geely would pay for the stake.

Through the partnership, Geely executive vice-president and chief financial officer Daniel Li said Geely would focus on assisting Proton to sell 500,000 cars in Malaysia and around the region by 2020.

He said Geely would be contributing technology, talent and money to Proton. These include platform-sharing that would see the development of Proton’s first-ever SUV model from Geely’s best selling model – the Boyue.

DRB-Hicom group managing director Datuk Seri Syed Faisal Albar said in the competitive automotive industry, partnership among carmakers globally was common.

A partnership would also further expand Proton’s reach to other markets and give it better economies of scale.

“This partnership with Geely will create more jobs in Proton,” he told reporters yesterday.

Proton has a workforce of about 10,000 which produces about 100,000 cars a year. In 2016, sales of Proton cars dropped 30% to 72,290 units from 102,174 previously.

The company reported a loss of almost RM1bil last year.

Proton’s Tanjung Malim plant, which is designed to produce a million cars every year, will be made a new manufacturing hub for Geely.

Syed Faisal said Proton would relocate its entire production from Shah Alam to Tanjung Malim within five years.

Despite the entry of a new foreign partner, Proton will maintain its national car status. This means its industrial linkages, including vendors and dealers, will not be affected by the change in shareholding.

Under the heads of agreement signed between DRB-Hicom and Geely, the Chinese carmaker will take a 49.9% equity interest in Proton and also a controlling stake in Lotus, the British sportscar maker, from Proton.

No financial details were disclosed in the sale of a stake in Proton, while for Lotus, Geely would be paying £51mil (RM284mil) for a 51% stake in Lotus.

Syed Faisal said DRB-Hicom planned to sign a definitive agreement with Geely in July.

Also present at the signing ceremony was Second Finance Minister Datuk Seri Johari Abdul Ghani, who clarified that with the partnership with Geely in place, Proton would need to repay its RM1.25bil soft loan from the Government.

As part of the conditions for the soft loan, Proton was required to collaborate with a well-known strategic partner.

The requirement to collaborate with a well-known strategic partner was imposed on Proton as part of the conditions issued by the Government for its approval of the RM1.25bil soft loan to Proton, in which a bulk of the money was used to pay its vendors.

Separately, Johari said Proton was entitled to a RM1.1bil reimbursement from the Government for its RM3.5bil spent on research and development in the past.

Johari also said there would be no more “subsidy” for Proton from now on, and that the Government would no longer have a golden share in Proton with Geely entering into a partnership with the national carmaker.

Source: The Star by intan farhana zainulandizwan idris

‘Geely to help Proton drive into future’

IPOH: The decision by Proton to embark on a partnership with China’s Zheijiang Geely Automotive Co Ltd is timely because cars are predicted to be next in line to undergo sweeping innovations.

International Trade and Industry Minister II Datuk Seri Ong Ka Chuan said that in light of Industrial Revolution 4.0, bringing in Geely as Proton’s strategic partner would ensure the Malaysian company’s survival as cars increasingly adopt digital technology.

Industrial Revolution 4.0, or Industry 4.0, is the current trend of automation and data exchange in manufacturing technologies which include cyber-physical systems, the Internet of Things and cloud computing.

“After attending the Hannover Messe, the world’s biggest trade fair for industrial technology, I learned that self-driving cars are the next big thing.

“This means that you are looking at a future where cars will have no steering wheel.

“With just the touch of a panel, the car will bring you to your destination,” Ong said after witnessing the swearing-in of the new committee of the Perak Chinese Cemeteries Management Association yesterday.

He said Geely would be Proton’s channel to embracing technological innovations.

“I’m not saying to expect Proton to be a frontliner in this, but at least with a strategic partner it can move along with the times,” he added.

He said Geely would also open a new market for Proton, which was important for the national carmaker’s survival.

He said it was not a decision made purely in favour of China.

“Over the years, it’s been no secret that Proton accumulated losses and will need a big market to cater to in order to settle all the debts. This is the reality.

“Proton only narrowly met its sales target of 580,000 units last year, while Chinese brands sold 28 million units,” he said.

In view of its small volume, Ong said it would be difficult for Proton to fund sophisticated research and development initiatives.

“We need a larger market for things to work out. The Industrial Revolution 4.0 is all about innovation. We can’t do it ourselves, which is why working with advanced nations is our best bet,” he added.

The Star by Amanda Yeap

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Millennials Will Destroy Bitcoin


Irrational exuberance is alive and well.

A textbook bubble in Bitcoin prices is developing right now.
And it has everything to do with Bitcoin’s investors.
Bitcoin Bubble
I’m probably not going to gain any friends with this perspective. But there are inarguable factors that suggest Bitcoin’s own buyers are irrationally driving up prices. And their
exuberance is setting the market up for a crash.
The Secret Gold Market They’re NOT Telling You About
This hidden playground is completely OFF LIMITS to retail investors…
But it holds a secret that can help you predict spikes in gold with mysteriously uncanny accuracy…
Here’s how you can piggyback off it for gains of 468%, 935%, 1,657%, and more…
Click here now for full details.
Let me clear one thing up about Bitcoin before I explain why I think prices are eventually headed for a crash…
As I argued before, Bitcoin is a legitimate form of money. But for the time being, it’s being treated as a speculative investment.
Money is typically used in exchange. And while Bitcoin can be used in exchange, it’s largely not. Gary Schneider, Professor of Accounting at California State University, says only about 10% of Bitcoin is held by people who use it as currency. The large majority are
speculators hoping to sell at higher prices.
The fact that the market is dominated by speculators is not necessarily the problem for Bitcoin. And here’s where I’m sure to piss some people off… The problem for Bitcoin is its
buyers.
Who are they?
Well, according to a recent survey, approximately 60% of Bitcoin owners are under 35 years old.
Bitcoin User Age
In short, most Bitcoin buyers are millennials. And that’s all we need to know about them to make an inarguable point (told you I wouldn’t be making any friends here).
The fact is this: A 35-year-old speculator intrinsically has much less experience in risk management than a 60-year-old. And remember, most Bitcoin owners are mostly speculators, as opposed to users of the product.
AND remember they’re speculating on a currency, which is among the most volatile of financial instruments.
AND remember they’re speculating on what essentially amounts to a new, experimental currency.
All this considered, Bitcoin looks to me as one of the (if not the) most speculative financial instruments available…
Expect for Bitcoin’s derivatives, of course.
Yes, believe it or not, Bitcoin has a futures market. And there are products that offer even more risk. On its Perpetual Bitcoin/USD Swap Contracts, BitMEX offers up to 100x
leverage!
But to really understand why I think Bitcoin is eventually headed for a crash, let’s consider the most famous market bubble in history…
Dutch Tulip Mania
In the 17th century, formal futures markets developed in the Dutch Republic, providing the infrastructure for a massive bubble in the price of tulip bulbs.
The tulip first became fashionable in France, where early modern ladies of the aristocracy began sporting the flower on their dresses. From there, the tulip became the flower to show off social status and wealth. The demand for bulbs subsequently
skyrocketed, and prices immediately followed.
At the peak of Tulip Mania in 1637, a single tulip bulb could cost as much as 10,000 gilders, the price of a nice middle-class townhouse in Amsterdam. According to one author, 12 acres of land was once offered for one rare bulb. For a flower bulb!
Semper Augustus The Semper Augustus was the most coveted of all Dutch tulips.
Of course, the bubble eventually burst. The price of tulip bulbs collapsed, and fortunes in perceived value disappeared over night.
My team of researchers recently uncovered a key patent that exposes a major chink in Tesla’s armor…
This patent describes a groundbreaking
technology that could simply blow Elon Musk, and frankly the entire
solar industry, out of the water.
We’ve managed to uncover the tiny company
with exclusive rights to this technology. It trades at less than $0.15 a
share, but don’t expect it to stay there for long.
Over the next several years, I believe the value of this firm could absolutely explode… by my calculations, upwards of 4,600%.
I’ve included the patent filing and everything you need to know about this small company in this brief, free video presentation.
Here’s what I really want you to take away from this story…
If we consider whom the people were who took part in Dutch Tulip Mania and compare them to the majority of Bitcoin owners, it seems both groups share the same shortcomings.
First, we know both groups are speculators betting on the hot new product. But I think we can also make good assumptions to compare the investment sophistication of the Dutch tulip investors and today’s Bitcoin buyers.
Because formal futures markets were only recently developed, the Dutch tulip buyers were inherently unsophisticated investors. All of them. They simply didn’t have the
experience.
The majority of today’s Bitcoin buyers are generally younger, so they share the same inexperience. For many Bitcoin buyers, I imagine it represents their first real investment. They simply don’t have experience in risk management. And I think that’s pretty clear considering some are buying products with 100x leverage!
Bitcoin could be the tulip of the 21st century with the development of a textbook bubble. And I think could be setting itself up for an eventual crash.
Now, even though I’ve been talking about a crash in Bitcoin prices, there’s an epilogue to the Dutch tulip story that’s often overlooked… and that actually provides a bullish outlook for the technology.
Truth is, the Dutch tulip bubble never really ended… it evolved. The price of tulip bulbs collapsed in the 17th century. But the flower industry at large eventually recovered and
has never been bigger. Global floral production value is currently estimated at $55 billion.
People still pay thousands for rare flowers. In fact, an anonymous buyer paid over $200,000 for a rare orchid in 2005. And that’s not even considered the most expensive flower in the world. Rose breeder David Austin spent 15 years and $5 million to develop Juliet rose.
Juliet rose
My point is, the tulip as an individual product lost favor. But the collapse of the tulip  market didn’t completely kill the flower market. In the same way, I don’t expect a
collapse of Bitcoin prices to completely kill the blockchain-based currency market.
Bitcoin is simply one product of many blockchain-based currencies. A crash in Bitcoin would throw a wrench in the blockchain-based revolution. But there is little doubt that blockchain technologies are the future.
As we speak, every major central bank and large financial institution is researching how to implement blockchain into its own systems. It has already been proven to eliminate
verification redundancies and improve security, and new applications are
being tested every day.
So while I think Bitcoin itself could eventually be headed for a crash, the blockchain technologies that are supporting all these digital currencies seem set for unprecedented
growth.
Until next time,
luke signature
Luke Burgess
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GEORGE TOWN: Two more popular financial schemes in Penang have been red-flagged by Bank Negara Malaysia (BNM).

A check on the financial consumer alert list yesterday showed MBI International Sdn Bhd and Mface International Sdn Bhd to be the latest additions.

Both are subsidiaries of MBI Group International, a company with investors worldwide, many of them from China.

To date, 302 companies have been listed under the BNM financial consumer alert list, for suspicion of not adhering to relevant laws and regulations administered by BNM in their operations.

Under the Financial Services Act 2013, individuals or businesses involved in illegal financial activities can be fined up to RM50mil and jailed for 10 years.

When contacted by a Chinese daily, MBI International chairman Tedy Teow’s special assistant Alfa said he did not think that the company would face any problem.

“And it is unnecessary for us to hold a press conference to explain the situation to our investors.

“We are always doing our work and we believe that our investors can see how we are performing so far,” he told Sin Chew Daily.

An investor, H.L. Teoh, said he put in RM22,500 early this year and was given 10,000 game redemption credits.

“Actually, I can start selling it every six months, but I was advised to wait for it to grow bigger in three years.

“When you have lots of credit, it is like having a lot of virtual shares.

“Now, I will have to wait for further instructions from the company before my next course of action,” he said.

Members are allowed to spend their loyalty points, which are converted from virtual money or coins, in exchange for goods and services at affiliated companies, including a supermarket, restaurants, a gym and even a durian stall.

Meanwhile, a press conference called by a branch representative of another controversial financial scheme operator, JJPTR, was cancelled at the last minute.

Press members in Penang had received an invitation from a man known only as Lim at 8.30am yesterday.

However, no reason was given for the cancellation.

JJPTR has been grabbing headlines in the past few weeks since its founder Johnson Lee claimed that the company had lost US$400mil (RM1.738bil) due to a purported “hacking job”.

Lee and two of his top aides have been detained by the police to facilitate investigations following several police reports lodged against JJPTR.

In another case, 19 Chinese nationals lodged police reports in Kuala Lumpur against another multi-level marketing company, claiming that they had lost hundreds of thousands of ringgit.

They claimed to have lost between 100,000 yuan (RM62,536) and 700,000 yuan (RM437,754) since investing in the scheme by Monspace last year.

Founded in 2014, Monspace is listed as a multi-level marketing company, according to the Com­panies Commission of Malaysia.

In an immediate response, Monspace said it would take legal action against any group or individual making defamatory statements against it.

The company said in a statement to the media that it was functioning professionally and had engaged a law firm to keep track of statements made about it.

Source: The Star/ANN by Crystal Chiam Shiying

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