It was considered a virtue not to talk unnecessarily at sea and the old man had always considered it so and respected it. But now he said his thoughts aloud many times since there was no one that they could annoy.
“If the others heard me talking out loud they would think I am crazy,” he said aloud. “But since I am not crazy, I do not care. And the rich have radios to talk to them in their boats and to bring them the baseball.” ― Excerpt from The Old Man and the Sea by Ernest Hemingway
The ability to create and imagined reality out of words enabled large numbers of strangers to cooperate effectively. But it also did something more. Since large-scale human cooperation is based on myths, the way people cooperate can be altered by changing the myths – by telling different stories. Under the right circumstances myths can change rapidly. In 1789 the French population switched almost overnight from believing the myth of the divine right of kings to believing in the myth of sovereignty of the people. Consequently, ever since the Cognitive Revolution Homo sapiens has been able to revise its behaviour rapidly in accordance with changing needs. This opened a fast lane of cultural evolution, bypassing the traffic jams of genetic evolution. Speeding down this fast lane, Homo sapiens soon far outstripped all other human and animal species in its ability to cooperate. – Excerpt from Sapiens: A Brief History of Humankind by Yuval Noah Harari
David William Goodall, the 104 year old British-born Australian botanist and ecologist, voluntarily ended his life at a clinic in Basel, Switzerland yesterday. Mr Goodall enjoyed fish & chips and cheesecake for his final meal. He passed away surrounded by family and listening to Beethoven’s Ninth Symphony.
Reportedly, Mr Goodall was not terminally ill but rather had become fed up with his life after having had to stop most of his activities – including conducting research at the Centre for Ecosystem Management at Edith Cowan University – due to his eyesight and mobility deteriorating.
Physician assisted dying, where a patient’s decision to end their lives is aided by a physician, is legal in Canada, the Netherlands, Luxembourg, Switzerland and parts of the US.
On the very day Mr Goodall made his final decision to end his life, Malaysia swore in 92-year old Mahathir Mohamad – the man famously called a ‘moron’ and the ‘Marcos of Malaysia’ by George Soros at the depths of the Asian Financial Crisis – as their prime minister, making him the world’s oldest elected leader.
Mahathir Mohamad, Malaysia’s premier from 1981 to 2003, has pulled off what can only be described as an astonishing upset in the parliamentary elections. His Pakatan Harapan (Alliance of Hope) coalition’s victory brings to an end the governing coalition’s six-decade rule.
The initial international reaction to Dr Mohamad’s victory was negative with both offshore Malaysian ETFs and offshore ringgit non-deliverable forwards selling off sharply. International investors are understandably spooked: Dr Mahathir campaigned on a populist platform. The nonagenarian promised wide-ranging tax cuts, rolling back the previous administration’s subsidy cuts, and to return to state coffers the billions plundered from 1MDB, one of Malaysia’s prominent sovereign wealth funds, as part of his election campaign.
The newly elected prime minister reiterated his populist promises straight after taking the oath of office at the state palace in Kuala Lumpur on Thursday.
Ahead of the election, Dr Mahathir also promised that should he once again become Malaysia’s prime minister, he would hand over power to Anwar Ibrahim – leader of the opposition from 2008 and 2015.
Mr Ibrahim served as Malaysia’s finance minister from 1991 to 1998 and deputy prime minister from 1993 to 1999. He was removed from his post in 1999 and jailed on sodomy charges by Prime Minister Mahathir Mohamad. The charges were overturned and he was released from prison in 2004. After his release Mr Anwar helped form the coalition of three opposition parties, which contested the 2008 and 2013 general elections.
Anwar Ibrahim was arrested a second time on sodomy charges in 2015 and sentenced to five-years in prison. This time the charges were brought against him by Prime Minister Najib Razak just as Mr Anwar was preparing to contest a state by-election he was expected to win and become the chief minister of Selangor, Malaysia’s main economic hub surrounding Kuala Lumpur.
Anwar Ibrahim today received a royal pardon for his five-year prison sentence that he has been serving since 2015. This pardon clears the way for Mr Anwar to replace Dr Mohamad as the prime minister of Malaysia.
The Malaysian economy’s growth surged to 5.9 per cent last year and is forecast by the central bank to reach 5.5 to 6 per cent in 2018. The economic recovery has come on the back of a pick-up in global trade and rising domestic demand. Despite the recovery, the economy remains fragile. Public debt stands at 50 per cent of GDP – much higher than that for other comparable economies – and approximately two fifths of its local currency debt is held by international investors.
Prime Minister Mahathir Mohamad has promised to remove the 6 per cent goods and services tax (GST), introduced by the Najib government in 2015, and reinstate the more lenient sales and services tax (SST) that was in place prior to the GST. This change, if enacted, will put severe pressure on government finances. The GST was estimated to contribute eighteen per cent of total government revenues this year. In contrast, the SST contributed only eight per cent to government revenues in 2014.
Another shift in policy promised by Dr Mohamad is a re-assessment of Chinese investments in to Malaysia. In recent years China has been the primary source of foreign direct investment into Malaysia. Despite the campaign trail promise, we do not expect any meaningful change resulting from the re-assessment. We believe calling out China was the low-hanging fruit for the populist platform as the rhetoric resonates well among ethnic Malay voters.
Investment Perspective
Malaysia Real Effective Exchange Rate (REER)
Source: Bank for International Settlements
The Malaysian ringgit is presently one standard deviation below its fair value. If an election-led sell-off in the currency or a sustained rally in the dollar brings the currency close to two standard deviations below fairly value, we would become eager buyers of Malaysian assets.
Since the end of 2009, the monthly correlation between the Malaysian equity index and the real effective exchange rate is 73.4 per cent with an r-squared of 0.54, i.e. the stock market goes up with a rising real effective exchange rate. If the Malaysian currency were to weaken such that it becomes close to two standard deviations below fair value, we would consider that an attractive entry point into the Malaysian stock market.
Malaysia Real Effective Exchange Rate vs. Malaysian Stock Market Performance
Sources: Bank for International Settlements, Bloomberg
This post should not be considered as investment advice or a recommendation to purchase any particular security, strategy or investment product. References to specific securities and issuers are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Information contained herein