The End of One Party Democracy in Asia- RIP LDP
All these shows the awakening of the people in Asia to the idea that a government of the people, by the people and for the people is something that is not limited to America or just a Western ideal or concept.
The choice to choose one's government is key to the idea of democracy.
Despite being entrenched within their countries, all those authoritarian or despotic rulers lost the respect of their population and eventually their veneer of being all powerful and all conquering.
The LDP rule Japan since its found in 1955. Its party members thought they were invulnerable, as despite previous scandals, unpopular policies like a consumer tax etc, they were voted back to office by an electorate which knew no better alternative.
Power corrupts and absolute power corrupts absolutely.
Over 50 years of unhindered path to the rule of Japan brought much early economic success. In a way, people in Japan are similar to Singapore, conservative, deferring to authority,
But the challenges of a declining birthrate, stagnating economy, and a multitude of problems which the LDP did not handle properly or totally ignored, opened the door to the Democratic Party of Japan.
The Democratic Party promised to strengthen social safety net, and raise the birthrate by giving families a straight cash handouts of $270 per month per child. It will curb the power of the all powerful ministries in Japan.
The world's second largest economy has just become a truly functional democracy, one that will make politicians nervous, sober instead of being drunk.
Its reverberations are being felt, all the way to Singapore to beyond our shores. All the dominant one party quasi democracy or dictatorship must be sweating now.
Time to look at buying into the Japanese economy? ETFs for the Nikkei index anyone?
Sources:
1.http://www.nytimes.com/2009/08/31/world/asia/31japan.html?pagewanted=1&_r=2&src=twt&twt=nytimes
2. http://en.wikipedia.org/wiki/Liberal_Democratic_Party_%28Japan%29
Hang That Car Around Your Neck- Take the Train
Especially if you don't even earn S$3000 (around US$2060) a month as take home pay.
Consider this:
1. Petrol - Top up 3 times a month around $70 each time = $210
2. Road tax - $ 800 for 6 months for a 1.5 litre car.
3. Radio licence - $27 per year
4. Car Insurance - around $700 per year on average
5. Car Servicing - around $100 a month
6. Parking at open air HDB - $65
7. Add a buffer of $80 for miscellaneous costs like repair, washing, increase in petrol prices (like what happened in 2008), parking fines.
What is the total amount? That is around $650 a month.
And we haven't even account for people who buy the car on installment, or you going out to town to park at that expensive city parking lot. Or even the dreaded and hated ERP(electronic road pricing- for those who are not living in Singapore, every time you drive a car to the city area, a toll is automatically deducted from a fixed gantry).
So if you pay via installment, go past the ERP a few times every day to and back home, wash your car every week at the petrol kiosk, your monthly costs of maintaining the car will easily go beyond $1000.
If you earn less than $3000 a month, that is more than 1/3 of your salary gone.
More importantly, when you place that $50,000 for your car (which in Singapore can probably only buy you the cheapest Japanese made car) it is valid for only 10 years, after which it will probably take around $10,000-$20,000 (or even higher depending on how many rich people are buying cars at the point in time) to get the privilege to drive it around for another 10 years.
Assuming you put this same $50,000 instead to work as investment and earn a return of 7% a year when you are 30 years old instead of buying the car. When you are 60 years old, guess what amount would you be left with?
S$380,612. That is almost four hundred thousand dollars.
If you put that $1000 you spend on the car each month to work for 30 years continously as investment, what would you have after 30 years with 7% as the target return each year?
A cool $1.2 million. That's the power of compounding interest.
Take the public transport instead.
It could mean the difference between whether you have the million in your pocket come retirement or just a car key in your pocket.
5 Financial Lessons From Movie 'Up'
1. The Importance of an Emergency Fund
The characters, Ellie and Carl tried to save for their dream to go to Paradise Falls, but kept breaking their piggy bank they had to use it for emergencies. To repair the house, to repair their car. You never know what is around the corner and it is better to have a piggy bank of savings than to live life day by day, pay cheque to pay cheque.
2. Persistency At What You Do
If at first you don't succeed, try and try again. Witness Russell persistence at the door of Carl's house. Carl's and Ellie's persistence at trying to save for their dreams despite one setback after another. And finally, Carl's fulfillment of their joint dreams with whatever means possible- an airship with balloons :) What will they think of next?
3. Your House is an Asset Only if You Can Walk Away From it
In a lot of property obsessed countries like Singapore, USA and Japan, a lot of people acquire houses to stay in, invest in, show it off. How many will use it as a tool to fulfill your dream and then walk away from it like Carl? Fixation with property or any one investment method or asset class is a recipe for disaster.
4. Don't Count Your Chickens Before They're Hatched
Russell losing the GPS shows the importance of not counting your chickens before they're hatched. One moment the market puts a smile on your face, the next, it is likely to wipe it off and replace it with a grimace.
5. The Heroes You Worship May Turn Out to Be the Villain
At the start of the movie, Carl and Ellie had the same explorer idol, Charles Muntz, which they idolize. In the end, he turn out to be the villain of the story. Two words- Bernie Madoff. As someone once remarked, when the tide goes down you can see who is swimming naked.
USA Leading Economic Index Up for 4th Month
This leading economic index is a good indicator of an impending recession as they have sloped downwards before a recession as shown for the December 2007 recession. The graph of the red line shows a general downward trend in the previous months in the year of 2007.
The indicators, while useful in predicting all eight of the recessions since 1957, has also predicted recessions which did not occur.
The recession if it was marked at December 2007, have already lasted 21 months, making it the longest downturn since the Great Depression.
With the start of growth, and the rising of the tide, it bodes well for investors looking for or who have already looked for long term bargains in the market.
It also signals that you should be looking to actively look for investment targets whether they are in United States, Singapore, China or in specific sectors like the financial sectors.
If you are a value investor, you probably wouldn't want to spend time looking at all these and prefer to spend your time on analysing companies, but it wouldn't hurt to know that there is such a tool like this to consider if it is a good time to rebalance your portfolio and get more or less equities.
Have a good week ahead and happy hunting for that elusive 10 bagger stock.
Sources:
1. A Beginner's Guide to Economic Indicators
4. Leading Indicators Are Signaling the Recession's End- The New York Times
5. Leading Economic Indicators Explained from the Investor Guide
10 Common Misconceptions About Investing
10. If I have enough information, timing the market is possible.
9. Historical figures can predict future returns.
8. If I trade in and out of the market, I will do well.
7. Work like mad, read all the financial news, see all the financial channels and I can be an 'expert' at investment.
6. If only the resident market guru broker or financial analyst can give me their predictions and views, I'd do well.
5. I can buy stocks and investment by reading the predictions of financial magazines and buying myself some of those.
4. Putting all my money into savings account is my investment.
3. It is possible to get 20% per annum every year for my investment
2. My hotshot financial advisor, fund manager etc has a CFP, CFA, CPA, PhD in Financial Economics, so I can put my money safely with them.
1. Put all my money into one place and watch it like a hawk.
How Much Do You Need For Your Retirement?
Do you know if you have enough for your retirement and financial freedom?
Say your expenses each month now is around $2500 for two persons (you and your spouse). You would assume that after retirement, you would probably still spend that amount, although it is likely to be a higher amount due to inflation, it is tempered by the fact that you'd probably spend less when you aren't working. You'd probably be at home and do a lot of stuff like watching re-runs of movies and drama serials.
So if you stop work when you are 55, and assuming you will live on till 88 years old, you'd need: (88-55) x 2500 x 12 = $990,000. You'd need almost a cool million.
How far are you from your retirement age?
If you are interested, you can download this simple excel sheet to put in the values in the blue boxes to see how much you are projected to have upon your retirement to see if you are ready for your financial freedom.
Remember though that the figures are only projected and you may earn less than the 7% targeted returns for your investments.
If you have a shortfall, either you
- make do with whatever you have at the end
- you extend your working life and postpone retirement
- invest more each month
- take a bit more calculated risks (like take out the $30k from the bank and invest it after putting aside an emergency fund of about 3 months' expenses)
- earn some money on the side to build your retirement kitty
- pray you go earlier than the average life expectancy (not recommended)
Without a plan, you wouldn't know if you are on the way to a comfortable retirement or an unpleasant shock.
Are you on the way to your financial freedom?
Using Earnings Per Share to Buy a Stock.
For that, you will have to look at the predictability of the company's earnings record. Company A has consistently earned returns and it has been increasing at a steady pace. Company B has fluctuating returns albeit with bigger positive returns in certain years but with losses in some years.
| Year | Company A | Company B |
| 2005 | $0.50 | $0.75 |
| 2006 | $0.55 | ($0.20) |
| 2007 | $0.65 | $0.67 |
| 2008 | $0.72 | ($0.25) |
As you look forward and try to predict the future earnings for the next year till 5 years later, which company will you be more confident of predicting?
So the next time you see a company like A, you will be interested to dig deeper to see if the company is worth investing into as you will be able to predict the initial rate of return that you can get.
Assume that in the year 2008, you find that company A is worth investing into after detailed research. At the point that you were interesting in buying into company A, the price was $9.50. Thus, the initial rate of returns will be 7.6% (0.72/9.50=7.6% rounded to 1 decimal place).
What if the price of company A was suddenly down, as negative news affected sentiment in the industry it was in and the price of its stock became $9.00? At this price point, the initial rate of returns becomes 8% (0.72/9.00=8%). And imagine if you can extrapolate this 8% and more growth into the next few years.
Thus, for us as investors, the key crucial point become whether EPS of the company has a predictable pattern which you can confidently predict for at least 5 years ahead. Then the next point will be at what price you buy into the company at.
If you are interested to know more, you can read Mary Buffett and David Clark's book, Buffettology, which gives a very clear methodology to how Warren Buffett goes about looking at companies and analyses them.
Therefore, there is a very calculative methodology to why Warren Buffett is buying into companies when there is a recession going on. His initial rate of returns becomes high when the companies he buys into has consistent positive EPS despite depressed prices.
He just bought into another company, Becton Dickinson. Do yourself a favor and look into it if you have spare cash for investment.
Monday's Reflections- Government of the People
Yesterday was Singapore's high water mark for the government- the annual National Day Rally. I have forgotten since when it slowly became drab and then later almost nonsensical. From something I used to look forward to listening, it is now to me almost like the colourless chatter of a DJ's monologue. I didn't watch one minute of the latest installment.
The disenchantment of ordinary people like me with the present crop of self serving, money and or power grubbing politicians you find now, seems to extend to many countries in Asia. Japan will likely lose its dominant party that has been entrenched in its country for many long decades. From a vibrant and energetic party that led the country on a stunning recovery from the ashes of war to one of the top economies of the world to a party that has become ineffectual and a laughing stock.
Then in Taiwan, you see the slow reactions of the local government to the disaster struck by the massive typhoon that hit its shores. Their leader has taken responsibility, beyond that it has probably huge implications on the Taiwanese elections that is due at the end of the year. It could mean that the opposition party could recover and become a more effective countervailing force in the politics and be a proper watchdog that the President will have to be careful of.
You mess up and be prepared to be voted out.
In Singapore, there is no such force. Thus, you lose billions or a terrorist in jail, you can walk away smiling while your subordinates or some fall guys get fired. Will we suffer from it? Only time will tell.
I am currently reading a book "Team of Rivals" that chronicles the life of Abraham Lincoln, one of the greatest leader that ever lived. It showed the dedication, humanity, selflessness and democratic principles that enabled the rise of the Republican party in American politics. It showed how a group of disparate people, who were intense rivals coming together to serve their country, can do despite the obstacles like a full blown civil war during their administration.
I've not finished the book, but it has made me want to find out more about Lincoln. Someone who believes in the right of all the people to choose and their right to freedom and the benefits it will bring to his country, even though these people were slaves.
A government of the people, by the people and for the people.
It should be the definitive textbook for all aspiring politicians or civil servant.
Singapore's government has become one of the millionaires, by the millionaires and for the millionaires.
What does this have to do with the economy or financial freedom? Nothing and everything.
August Financial Freedom Carnival
We look at four different strategies for investing for you to ponder this Sunday.
Strategy 2- Being Honest to Yourself- Think seriously about whether you have or are beating the market. Investing Edge by Kay talks about how most investors don't do well in the market because they follow the majority- that is listen to stock recommendation by brokers or rumours etc. He gives some useful examples of what you can do as an investor to improve your odds. Or just do the honest thing and buy index stock and leave analysis to the majority who will do badly and only some who will do well- and then not every time too.
Strategy 3- Not Accepting Everything You Read. Frank Curmudgeon's blog, Bad Money Advice, is one whom I subscribe to on Google Reader and is an entertaining and educational read. His article, Hedging for Beginners, pokes holes in a blog article he read, showing that one shouldn't just accept blindly whatever you read.
Strategy 4- Rethink What You are Doing and Change If Necessary. This Wall Street Journal article, Wary Investors Are Seeking Out Objective Voices, shows that investors are cottoning on to the fact that most investment advisors can't do better than index funds. Have you read any broker's recommendations that asks you to "hold" everything when all hell was breaking loose? More likely, they would have ask you to sell or buy something because if you sit on your stocks, they don't get the commission.
How to Select a Stock to Keep? Part 3 of 3
Now, it gets harder.
Step 5
If you have done the previous steps correctly, you would have a list of stocks with the different criteria of price to tangible book and return on equity.
Your Excel file will look something like this list of 42 stocks.
I have sort it by price to tangible book to find stock whose prices are depressed and are cheap relative to its tangible book.
Next, I scan through the list of stocks with less than 1 in the price to tangible book and look at the Return on Equity (ROE) column to pick out the most promising stock to look at. It turns out that it is Golden Agri-Resources Ltd.
Step 6
Next, it is time to look more carefully at the company's financial statements:
The first thing to look at is the auditor's report if you can get hold of their annual report. If the auditor's submits a qualified report or an adverse report, it means that the auditor disagrees with the method or way the financial reports are being prepared. It is one warning sign that there are some financial shenanigans going on in the company.
Another is to look in the auditor's report to see whether the auditor issues a 'going concern' alarm bell. It just means that the auditor feels that there is a possibility the company may go belly up.
A caveat to note is that we live in an age where these annual reports that tell us the company financial statements may not be totally accurate or even truthful. Witness the Enron and WorldCom debacles and the fall of the audit firm Arthur Andersen. You can download and read in more about the different frauds at this powerpoint slide "Financial Statement Fraud."
Step 7
We come next to the place where the more hardworking investor must trudge through.
I remember reading that in Warren Buffett's office, you don't see computer screens with Bloomberg running their tickers and tracking the moving indices. Instead he is more likely to be bent over looking at annual reports looking for the next company to invest.
These are the two basic things to focus on in the reports:
- the balance sheet
- profit and loss statement or income statement.
The items to look at includes the past year's figures so that you can make a good appraisal of the company's prospects. A good figure will be at least 5 to if possible 10 years. Basically it is a quick scan through of the items to look for something extraordinary like a big unexplained jump in the figures.
You also need to look at these items within the reports:
- balance sheet
- current assets (what the company has)
- current liabilities (what the company owes others)
- net asset/liabilities or current asset/current liabilities or current ratio
- Income statement
- gross profit
- income from operations (has the bulk come from operations or other activities, it could mean management is spending too much time on speculating in properties, investment or other non core activities)
- net income (has the figures been increasing over the years, or is the company showing starting to show signs it is running to difficulties)
- operating expenses (are there big jump or corresponding decreases when the company scale down operations especially during a recession)
- cash flow statement
- net working capital (is there a big decrease- there could be cash flow problems later, or if a big increase- the company could put it to better use to expand operations else give it back as dividends)
When you have done all of that, it is just the bare minimum, as you journey on the road towards financial freedom. Later, you will be looking at long term liabilities, the company's accounting policies, amount of short term debt, risk management, any changes in accounting policies, potential lawsuits mentioned in reports etc.
I hope that this series has given you something to think about when you next buy a stock. I've not covered everything I wanted to, but it should help you understand what to look out for when you buy a stock.
We'd look at how Earning Per Share (EPS) affects the share price of a company in the next series on Wednesday.
Other posts in this series:
1. How to Select a Stock to Keep? Part 1 of 3
How to Select a Stock to Keep? Part 2 of 3
Step 3
Stock Screening
I use POEMS to help me look at a more manageable list of companies to look at.
Using the Data Tools, there is a useful little program "Search Stocks" which can help you to sift out the different criteria that you use to whittle down the many companies to the several that are worth looking further into.
The criteria I look for are:
- Market Capitalisation
- 600 to 50,00 million
- ROE (Return on Equity)
- 11 to 100
- ROA (Return on Asset)
- 1 to 100
- Price to Tangible Book
- 0.5 to 12
- Dividend Yield %
- 11 to 100%
When you key in the limits to these criteria, this nifty program will generate all the companies that fits what you are looking for.
As to why I used those numbers, market cap is because of my own opinion that bigger companies are safer and less likely to fail, witness the saving of banks too big to fail recently. Return on equity is key to high prices or dividend so this is a key indicator to see if a company is doing well.
Return on asset is basically how the management is making use of their asset to generate returns, so it shows how good the management of the company is. Price to tangible book is another important indicator to judge if you are paying too much and also if the stock is not being fairly valued, so a minimum number below 1.
Dividend yield is what the company is paying back to you the investor so you can use this for further investment or buy stuff with.
From hundreds of companies, at one click, it reduces them all to the type of numbers- 41, that you are looking for. (In case you are doing it at the same time and gotten 42, the reason why it is 41 is because one stock appeared twice in the table, the other is just the same stock except that you can buy in lots of 10 shares.)
Now that it is a manageable list of 41 stocks for you to look at we can move on.
Step 4
Using this chart, you can copy the whole table to your Excel sheet for saving and storing, so that you can remember these are the stocks that you are keeping track of. Remember to select around the same number of rows and columns in Excel (it doesn't have to be exact) and use "paste special" command and select "unicode text".
Next, I'd sort according to the price to tangible book to see which are the stocks which are not fully priced. The reason for it could be that the market has yet to fully price what this company does, or there could be some short term bad news hanging around it. However, it can be the company has structural problems that you may discover from a careful reading of their financial statements.
This is a lot to digest. So on Saturday (I don't normally blog on Fridays as I am normally out) we will look at how to do Internet scuttlebutt work to kick more companies out from the list. It will narrow the list to a more manageable number to consider for buying.
Next up, balance sheets and cash flow statements.
Other posts in this series:
How to Select a Stock to Keep?- Part 1 of 3
When I started buying stocks, it was more of a gut feel. You know, when you think to yourself, "Hey, maybe this stock will go up". I'd go and get it and it is because there is a large dose of luck involved that I managed to make any money at all. I'd go for the famous companies, the blue chip and the IPOs of large companies in stable industries like finance, transportation etc. On hindsight, it wasn't too bad a choice, luckily I didn't choose speculating in penny stocks for example.
After reading up and gathering more information to beef up my skimpy knowledge of investment from what I had learnt in school studying economics as my major and hearing what my Dad had to say about the subject (my studies was in large part because my Dad had invested in companies like BAT-British American Tobacco which gave out great dividends), I slowly developed the investing methodology that have worked for me so far.
Step 1
Acquire as much knowledge from different sources as possible to build up your confidence, ability and humility about the subject. Yes, humility is needed in investing. Often you hear brash and loud opinions to get this, sell that, short it there.
Humility is to know that you know next to nothing about investing even after you have read over 50 books plus numerous papers and articles on it. In the end, you'd probably find out that if you can be average in investing, just do simple things like buy index stocks with the bulk of your money, you'd end up in a better state than that brash and braggart of a financial advisor.
Through humility, you'd get the ability to make more right choices and slowly build the confidence to manage your investment portfolio which will be the ticket to your financial freedom.
Read William Bernstein's Four Pillars of Investing to get started on the journey to learn more about investment. It'd be worth every minute of your time. And go on to learn from different authors about the myriad ways to select and choose your investments.
Step 2
Read the papers, especially the companies and finance pages to get a feel of the companies in the stock market. Skip the predictions, read about what is happening in the various companies and the industries and from a variety of sources.
I find the local Central Library stocked with great financial newspapers like the Wall Street Journal. I also read the financial blogs that I subscribe to on Google Reader and Yahoo finance pages to see what are the latest news out there. If I have the time, I will read the Economist in the library and the Fortune magazine, scanning and skimming to pick out the articles about companies and the general economy.
Everything is free so far. I don't read the Straits Times anymore. Couldn't stand their one sided perspective on local politics(is there any?). Except sometimes I buy the Business Times in the morning once in a long while when the book I am reading is really boring and tedious. Like most of my blog post :)
What can be taken away? You can gain leads to what to do, what to focus on and what investors like Warren Buffett is doing. I read the Fortune article about him buying BYD and after working out all the sums, I bought into the company too. At the moment, I have doubled on my initial sum. Not too shabby from spending around 30 minutes reading a dated copy of the Fortune magazine, although it is just paper profits at the moment.
However, you do not act on all the leads, some you file it away at the back of your mind so that when there are opportunities, like a drop in the prices of the stock, you can act on the lead as the stock has become attractive. At other times, after check through, you find it not what it was written out to be and you basically put that writer on your personal **** list.
I'd continue tomorrow to talk about how you look at the numbers in the annual report or figures that you are able to get hold of in part 2 of How to Select a Stock to Keep?
Other posts in this series:
1. How to Select a Stock to Keep? Part 2 of 3
Top 30 Investing Quotations
It is always good to hear and learn from sages. Some you make sure you know it by heart others, well, some are just rubbish :)
29. You had a lot of novice investors who got into the market looking for easy money, without any regard to the fundamentals. These stocks were running on fumes. Bernard Madoff on Internet stocks (Looks who's talking here)
28. An Investment in knowledge always pays the best interest. Benjamin Franklin.
27. Every time history repeats itself, the price goes up. Anonymous.
26. There is no finer investment for any community than putting milk into babies. Sir Winston Churchill.
25. I will tell you how to become rich. Close the door. Be fearful when others are greedy. Be greedy when others are fearful. Warren Buffett.
24. It's not how much money you make, but how much money you keep, how hard it works for you and how many generations you keep it. Robert Kiyosaki.
23. How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case. Robert G Allen.
22. Index Investing outperforms active management year after year. Jim Rogers.
21. Successful investing is anticipating the anticipations of others. John Maynard Keynes (go figure).
20. I can calculate the motion of heavenly bodies, but not the madness of people. Sir Issac Newton after losing money in investing in the South Sea bubble.
19. We are certainly not happy with the negative wealth added in March last year, as well as March this year. Ho Ching, CEO of Temasek, after losing US$40 billion- understatement of the year (please just go before March next year).
18. Before this century is over, the Dow Jones Industrial Average will probably be over one million versus around 10,000 now. So for the long-term, the outlook is tremendously bullish if you buy stocks blindly to keep for a century. John Templeton on Bull Market or is it bullshit?
17. In the long run, everyone is dead. Anonymous- my personal favorite quotation.
16. The financial markets generally are unpredictable. So that one has to have different scenarios.. The idea that you can actually predict what's going to happen contradicts my way of looking at the market. George Soros.
15. If you took our top fifteen decisions out, we’d have a pretty average record. It wasn’t hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor. Charlie Munger.
14. You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets. Peter Lynch (I must remember this quote when the next roller coaster ride down comes along)
13. Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas. Paul Samuelson.
12. As people seek to improve their living environment, there will be continuous demand for residential property. Investment in real estate market should have reasonable prospects in the long run. Li Ka Shing.
11. When it is a question of money, everybody is of the same religion. Voltaire.
10. For investors as a whole, returns decrease as motion increases. Warren Buffett again, trying to put in place a 4th Law of Motion to help the departed Sir Isaac Newton complete his laws of motion.
9. The market is a voting machine but in the long run it is a weighing machine. Ben Graham.
8. The best way to spot investment fraud is the promise of safety and high returns. If someone offers you this, turn 180 degrees and do not walk – run. William Bernstein.
7. Dividends have been a way to show that earnings are real. That there is money behind those earnings. Jeremy Siegel.
6. Time is your friend; impulse is your enemy. John Bogle.
5. I don't want a lot of good investments; I want a few outstanding ones. Philip Fisher.
4. Oh my God, you've got to be buying stocks here. Don Luskin- CNBC (in January 2008 and pretty much all of 2008)
3. Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as they have predicted. I expect to see the stock market a good deal higher within a few months. Irving Fisher, Professor of Economics at Yale University speaking on 17 October 1929, just days before the Great Crash of 1929.
2. The next five to 10 years will be the most promising in the Republic’s entire history. Lee Kuan Yew on Singapore entering a golden period in a speech on 12th July 2007, a few quarters later, Singapore's GDP plunged 16.4% in 4th quarter 2008, fell another 14.6% first quarter 2009. Let's just hope he's right for the rest of the 8 years.
1. I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years. Warren Buffett for the third time.
Two Funny Videos to Make Your Day
First is the video about a passenger's experience traveling with United Airlines. It rocks and delivers the ultimate complaint which went viral and forced United to go on its knees. Enjoy the power of Web 2.0 --> Complaint 2.0 :)
To add more punch to this, another user in Youtube used his creativity and came up with a video with hilarious subtitles. You just have to watch this:
My Stock Portfolio- Preparing for Financial Freedom
At the moment, my wife and me are holding on to:
- A food company
- A regional ETF
- A commodity/Agriculture company
- An educational firm
- A local bank
- A stock exchange company
- A property Reit
- An electronic manufacturer
- A country EFT
- An index fund- S&P 500 which is dollar averaging each month
- A unit trust/mutual fund buying to the Asian region, again dollar averaging each month
- A Europe regional unit trust
- A country unit trust
- A sub-Asian unit trust
- A battery company
It looks like we are pretty much into equities and funds without any consideration for bonds or fixed income funds. At the moment, we rate ourselves as investors who are comfortable with a relatively high level of risk.
Our property price has risen and we see flyers advertising the last housing sale which indicate that we are sitting on a rise of around 70%, which is around 14% per annum.
Fingers crossed, we are hoping to be able to still in a job for a few years yet while we build up our retirement nest and look for opportunities to continue to build up our holdings in various companies, financial instruments which we will scrutinize and try to understand.
As you prepare for your own financial freedom and retirement, what is your portfolio like?
An Eye Opening Advertisement
While looking around for the OCBC advertisement that I wanted, I managed to find an even more enjoyable one. But you have to watch it till the end. It'd be worth your while.
5 Reasons Why I like OCBC.
2. Its ATMs are not lined up like those you see outside a popular condo launch, or a certain you know which bank. If you are desperate and cannot find one, you can use the UOB ATMs too.
3. The advertisement by the bank will strike a chord with you, the one about the guy remitting money back to his aged mother. This one is pretty good too, about making mistakes in life.
4. I've been using OCBC for 15 years so far, it has also been the first bank and only financial institution that I've tried dollar cost averaging with.
5. Its subsidiary, Great Eastern is the first financial institution that offers full refund to ALL its investors in the structured deposit, minibonds, high notes etc debacle. As this post by Tan Kin Lian shows: Tan Kin Lian's Blog: Great Eastern Life shows the way.
Which banks do you like to use?
Buffett Makes US $1 billion Paper Profit on BYD
Buffett made a US$2 billion paper profit from Goldman Sachs Group preferred stock. And paper profits of US1 billion from investing in BYD.
If you look at the background of Warren Buffett, of Berkshire Hathaway, you'd understand a lot more what just happened. Buffett has been investing and honing the art of investment since he was young with experience in looking for value in companies since 1960s. Whereas the head of Temasek, Ho Ching, is first a scholar and an engineer not an investor.
Actually, the writing was already on the wall, with "spectacular misjudgment" by her in the purchase of Shin Corp by Temasek in 2006 (according to Fortune Magazine). Even before that, $340 million were blown by investing in Micropolis as Singapore Technologies CEO.
As an investor, what lessons can you learn from this episode? A CEO's or leader's track record matters. And an investor like Warren Buffett is what some people call a six-sigma event, which is at the very extreme end of a statistical table- the extremely astute end.
To top it off, this guy gets paid $200,000 a year compared to the fat cats at Citibank whose CEO's pay is $38.2 million despite losing money. At a few years ago, Buffett gave away his billions to the Gates foundation.
One of the quotes attributed to a hedge fund principal, Guy Spier, of Aquamarine Funds LLC, says it best, "When Warren Buffett says the sun shines out of somebody's backside, it's worth paying attention."
I've paid attention. Did you?
Sources:
1. http://www.bloomberg.sg/apps/news?pid=20601087&sid=aMxWXJAaHF34
2. http://online.wsj.com/article/SB124884829105889367.html
3. http://www.reuters.com/article/marketsNews/idUSN3141974420090731
4. http://www.chinadaily.com.cn/bizchina/2009-08/01/content_8502800.htm
5. http://www.bloomberg.sg/apps/news?pid=20601087&sid=amaKePJpsGCk
7. http://en.wikipedia.org/wiki/Ho_Ching
8. http://www.singapore-window.org/sw02/020624b1.htm
9.http://money.cnn.com/magazines/fortune/fortune_archive/2006/10/16/8390330/index.htm
10. http://compuserve.businessweek.com/magazine/content/02_25/b3788068.htm
11. http://projects.nytimes.com/executive_compensation?ref=business
Automatic Investment- Time not Timing
However, the correct question to ask is not 'when to buy' because the answer is always 'I should have....'. Instead the question to ask should be how long you are going to be investing for.
No one knows for sure when is it a good time to sell nor when it is a good time to buy.
Once you know what is the question to ask yourself, how do you make time become the critical factor but not timing?
The answer is to make buying an automatic decision using dollar cost averaging where you are buying into a market/fund/stock at regular intervals. This only require you to initiate the first buy order after which everything is set up so that it becomes an automatic decision which will go on, until you decide to stop it.
This means that you are thinking only of what investments you should be going into and spending your time doing the analysis of that, rather than futile efforts at trying to time your investment such that you sell at the top and catch the bottom when it turns.
I used this method for about 5 years investing a regular sum of $100 to build a position in Greater China unit trust/mutual fund. This yielded a final sum of more than $23,000 after sinking around $9000.
I now use this technique to buy $100 of an Asian fund on top of $200 to buy S&P each month. With this method, when the market falls, you actually smile, because you know you are getting more units of what you are buying.
Make your investment automatic, earn higher returns through a disciplined approach and be rewarded with the financial freedom you yearn for.
