Tuesday, March 31, 2009

1view 2009 04 01

Yesterday market was brought up by China but the global up trend ended when it reached USA. So today KLSE is most likely to open high close low.

However, there is a 30% chance KLSE can have a break from global trend today and trend higher anyhow.

Monday, March 30, 2009

The most long lasting business model

If not mistaken, it was 2,300 BC and 4,500 years ago (no, not a mistake, these are the actual years).   Once upon a time ...

Caby  is a smart man, he understands human nature very well and decide to make a fortune out of it.  Today he is only focusing on the 'greed' part.

He collects $1 from every man he meets and promise to pay half of them $2.  At first, people have doubts and only a handful people join.  But when half of them are paid double the money they put in, words start to spread and everybody rush in like no one business.

Although it was clearly implied that another half will get nothing out of the $1 they paid, but soon the other half start to compalin that this is a scam.  Caby is a smart man, he starts to alternate paying another half of the people double the return.  As far as the people concern, they pay $1 twice and they are guarantee to get back $2 in second round anyway.  So the worst is break even and if 'luck' is on their sides, they can get paid $2 for the $1 they put in.  They can stop playing and immediately earn 100% return !

But who is happy with $2 ?  Illogical but true enough, everyone realize they will keep on playing and all they will ever get is a break even, but everyone still think they can earn 100% return.

You are breaking even at best but
you still think you are winning 100%
at the same time

Finally, the business model works and sustain itself.  Caby is a smart man but he hasn't earn a single cent doing this yet.  He is calm, he waits, for the real phase to kick in.

Finally Greed kicks in.  $2 is not enough anymore.  People start to demand higher pay out.  Caby is a smart man, he starts explaining how the system work.  That if higher payout is made, less people will get paid.  People agree.  People still want higher pay out.  4, 8, 16, 32 ... very soon you start to see games like 3D, 4D, Magnum all over places.  By now, the size is just too big that people cann't keep track of who play and who get paid.  Caby is a smart man, he knows exactly how the money flow and start to get his share out of this whole business model.  As long as there are people, this business model will continue and Caby is a rich smart man.

That is not the end, that is not even the main part of the story yet ... the story starts when there are some smart people among the players.  They start calling this business model gambling and saying all the bad effects it can bring.  Despite that it is a bad thing they say, they didn't say we should stop totally.  They just say we should regulate it.  Normally people would say, "Bad ! Don't do it !", what kind of people would ever say, "Bad, do it under my control, then its ok" ? - - -  Yeap, Politician.

After regulation or in another word, under the umbrella of the protection of a country, this business model grows even bigger and sometimes its an international investment event around the globe.

Ok, now back to the good guys who say don't do it.  Which is also the juice in this story.  Caby is a smart man.  He said to these anti-gambling guys, "what if I pay out according to who need it most?"  Good guys ponder a little bit but after a long haul of exactly what need is and how to determine who need it first etc.  They settle in.  Now the business model has changed and become ...

You pay $1 a day, 365 days a year and should you has the 'need' one day, you will get $100,000 !  Different group of good guys have different needs so many different kind of variation of games are put in place.  Some said the need is 'when I lost my income', others may say 'when I die, pay my family please'.

It turns out Caby is smarter than he think he is.  Now he has one business model for all the greedy illogical guys and another model for the good guys.  Both type of people think they are well taken care off.  As long as there are people, no matter if all of them turns saints or evil, Caby is a rich baster !

Its the most long lasting business models ever built ...

~ Caby is a made up word from 2 big nations, one still exist today, another is a legend.

Sunday, March 29, 2009

US housing at 1995 levels

Some of you may have seen the graphs floating around the Internet.

Inflation-adjusted US Median house prices have now reached the level they were in 1995!

And since there was a peak in 1979 -those who bought in that year - have seen inflation adjusted median prices drop 1.6%. So if you bought at the peak - housing did not even keep up with inflation after 30 years!

Meanwhile even with the huge drop in stock prices, the S and P 500 is still up 8 FOLD 1979-2009. (though that is not inflation adjusted)

This is to make the point how important it is to buy at the right time. How long do you think it will take for those who bought at the 2007/2008 peak to recoup their investments?


Late breaking news...

REBGV numbers out:



West Vancouver benchmark detached prices down 25% YOY. Down 9% over the last 3 years!

Vancouver West benchmark detached prices down 22.2% YOY. Up 6% over the last 3 years.

Port Moody benchmark detached prices down 34.8% YOY. Down 19.4% over the last 3 years.


Here they are, the best charts on the net.


Thanks Mohican

Saturday, March 28, 2009

Here are some West Vancouver list/sales prices

All this year, 2009. All SFH. Oiginal price in green, reduced price in black and sold price in red.

$1.098 List = $1.067 Sold

$1.168 List = $1.00 Sold

$1.549 - $1.298 - $1.198 Final List = $1.00 Sold

$1.375 -$1.250 List = $1.048 Sold

$1.379 List = $1.350 Sold

$1.980 - $1.588 - $1.498 = $1.395 Sold

$1.699 List = $1.510 Sold

$2.795 - $2.695 - $2.450 = $2.015 Sold

Some significant reductions in price and others probably wishing they had bought lower.

I stopped in at some open houses in West Van this week-end. Reasonable foot traffic, especially at the new listings which were priced sharply.

At one, older listing, the realtor was telling us there had been a reduction of several hundred thousand dollars from the original asking price. I asked him how he came by the original price since it was more than the assessed. "It was the fair market value at the time. Of course the landscape has changed a lot since then".

As I have said many times over the years (and I now see repeated on some sites), buyers rarely HAVE to buy- but sellers often HAVE to sell. A buyer could rent. But many sellers have to sell.. due to divorce, death, job loss, job transfer etc. It is this dynamic which will define prices in a falling market. How low do the 'have-to-sellers' have to lower the fruit to tempt the buyers into biting?

So I thought I would do a post soon on how I would value a house- if I was considering buying in this dropping market. Any interest in this?

In a rising market the strategy is simple buy as much as you can afford, bid strong and get on board asap.

In a falling market it is MUCH more complex. The asset is devaluing and while that may not upset long-term holders it is unpleasant to realise six months from now, that you could have bought a better/larger place for the same price or had a much smaller mortgage.

Friday, March 27, 2009

Spring Thaw

Vancouver housing has seen a Spring Thaw. You can see it in Paul/Gavin's numbers and in Kopyrightklepto's numbers here:


However the reasons for the up-tick is clear:

1) Nothing goes up/down in a straight line. There are folks who missed the run-up and have been kicking themselves. This is the first significant down-turn and a chance for some to get into housing.

2) Low mortgage rates buy you more home. 4.05% for a five year fixed is a pretty good rate (ING Direct). There is a concern that with all this debt being piled on by the governments, long rates and hence mortgage rates will eventually head up. I think we are still a long ways from that, but it is driving some buyers to lock in and buy.

3) We had very low sales in December and January. Months of Inventory had reached a catastrophic (and unsustainable level of 20). The sales were down due to many reasons including the heavy snow-fall, which realtors told me cut open house traffic, and of course the shock over the financial crisis, which people have become accustomed to. This demand ended up in Feb and March and added to the normal Seasonal increase in sales.

4) The financial crisis is still a TV event. We have been spared any major disasters so far. The US and Europe are getting hammered, but due to on-going projects, a better banking system and quick action by the Government (forced into acting to stay in power!) we have so far escaped the worst.

However we are not an Island and I can see increasing anxiety about job losses and reduced spending. None of this fills me with glee. Those of you who used to read the old blog know that I was saying a couple of years ago that this would be the final result of reckless unproductive speculation.

In any case we are still well above the previous few years in inventory:


We will have to see how far this Spring thaw goes. I suspect we get a slow struggle until summer when the 'must sell' folks drop their prices, and buyers bargain tough. Then we have a lull as sellers hold out for the hoped for post Olympic euphoria. By then I suspect we will have all come to realisation that this is no ordinary recession and there wont be a quick rebound.

Add in the post-Olympic price tag and you can decide where house prices are headed.

Good to see some old friends in the comments area. Thanks for the welcome back.

World Major Stock Markets Open Time

There are a few stock markets in the world consider as MAJOR because their market value is more than USD 1,000 billions.  Its could be useful to understand which of these major markets open first and see how they affect each other.

Earth turns from west to east so we see sky moving from east to west.  By world definition, earth day starts from GMT +/- 12 which is somewhere near Hawaii.  Moving west the first continent see the first day light of a particular day would be Australia ...

So the first markets that open on earth are Australia and Japan, followed by ChinaHong KongItalyEnglandSpainGermany and finally Nasdaq and NewYork.

These are some of the key data ...

( blue highlight the smallest figures and
red highlights the highest figures
click on the picture to see larger view )

Notice the market start time is reference with GMT where GMT 0 is at London, England.  So at exactly midnight in London, Australia market opens, vice versa for all the other markets.  In short, all these world markets cover GMT 0 to 21.  Active Internation speculators / traders may rest for 3 hours a day :)

Applying these world MAJOR markets and its opening time, I finally fine tune my 1view world market into the following.

The toughest market to work with are Italy, Span and Germany because they are not English based and I don't speak their languages yet.

I think so far not many people find it useful yet but if you do, do leave some comments, thanks !

Thursday, March 26, 2009

Book Review : Top Money Tips - by KC Lau

One of the biggest achievements of this blog is to receive an invitation from KC Lau to review his book released late last year. The sense of being noticed is quite ... rewarding indeed.

I highlighted before the most interesting point in the book is How To Get Your First Car For FREE ! Most people like it a lot but soon there are also a few other not so positive comments about this particular tip. Which is rather important actually because it brings out TWO very important fundamental in personal finance planning - "its all about what you think" and "Personal Finance is boring".
If you think a tip is interesting, then most probably it will be useful to you.
If you think its a lousy tip, then most probably it will bring you nothing.
You can buy the book in most national book stores like Borders, MPH, Popular etc. I had documented my first hand experience with MPH. Very soon, the books were sold out and went into subsequent prints.

Most reviewers have already listed down the content outline of the book so I wouldn't repeat that.

What I would discuss is Why do you want to buy physical book ? Especially when there are alternatives like eBook and Blog on Internet for FREE ? Other than reasons of branding and that you are a fan of KC Lau then ofcourse you would buy his products to know him and his ideas better. There is still a very important factor that we buy books because of the information in it. Which may raise doubts in value for money comparing to other FREE sources.
  1. Physical books are tax deductable up to MYR 1,000. Sometimes after I read a book, I resell it out getting back half the price. So I am claiming $2X from my income tax while actually paying out $X only. ( Sometimes I resell at higher price and earn a profit there too )
  2. I like the convinience that I can pick up any book when I go to toilet, waiting for lover to finish shopping, queueing in hospital etc. By the time my smallest NetBook boot up and connect to Internet, I already finished reading half chapter in the book. When my turn is up, I can just flip the book and go immediately. Even if I put my notebook to standby mode for that extra split seconds only, the nurse, lover usually will change their mood from normal to complaint mode - "we thought you are waiting for us, not us waiting for you !"
  3. Be it with Google or Yahoo, sometimes I find the info I want, sometimes I don't. Sometimes the info I found was there but quickly disappear the next time I look for it. Sometimes I remembered putting a bookmark but just couldn't seem to find it. Very often I am directed to pay for something anyway. With a book, I always know where to find the info once I get in touch with it, and I can start stop at any part of the book the way I like it. Its always there when I want to refer it ...
So fundamentally
  1. The information on physical book is usually different than those available FREEly on Internet. Quite frequently information printed on book is more reliable too, proof read by proffesionals.
  2. Even if the information is the same, book better organizes the info in a pre-determine way. The format could be better or worse but its consistency on where info is, ease us looking for it now and later.
Now back to the book "Top Money Tips for Malaysians".

What first attracted me is the reflection of this book on the author. Honestly till today I do not know who KC Lau is and has no personal relationship whatsover. But I can sense that the intention of the author of this book is PURELY wanting to share all he knows. Suddenly what he knows and what the book says become less important. It is very hard to find a person who are willingly share all he knows in personal finance world today, not to mention for the good for the community. ( rather than like what most of us do - keeps complaining only ).

I waited long enough to write this review just to make sure what I wanted to share was not already shared by other reviewers. And I hope some of you who has read other reviews can comment on this.

Frequestly after I read a book, I do not remember what the book says. But I can firmly share what I get out of it.

  1. I pay more attention to car insurance, saving there could be significant enough as time goes
  2. I make more money from Internet, perhaps thru some of the links the book suggested ...
  3. I came up with the idea to resell the books I have read and no longer need to keep
  4. I reminded myself not to be too self center in finance matters as many other approaches are possible too
  5. ...
Would I buy this book ? Well yes and for the first reason I mentioned as my appreciation to someone who is so dedicated to share in personal finance matters.

Should you buy this book ? Well, if you agree with my reasoning why buying physical book is still a good thing then yes you should.

Would I recommend this book ? Now that is a question required scale answer. From 0 to 10 where 0 is Strongly NO and 10 is Strongly recommended, I would give this book a 7 - also a heavenly number :)

Where does the other 3 go ? Hmm ...
  1. The writting skill can be more balance. Some chapters are exceptionally shorter ...
  2. A small part of the book has too many numbers even though that was meant to be a quick mental exercise.
  3. I personally could not fully agree with certain part of insurance concepts ...
It is also from the 1) and 2) that I got the impression on Author's sincerity. As for number 3), most of my insurance concepts may not be suitable for today's general public yet. Especially if you are not that well verse in insurance industry yet, then this book's explaination on insurance is much more suitable for you. You will have to understand the basics rule of thumbs first and then only come to me for some potential myth or paradox and fun discussion. Else that may lead to more damage and destruction.

Lastly, for people who read this review until here. You must be a very patient person. If you haven't bought this book yet and feel like getting one now, then I will add another reason to it both to thanks for your patient and see if my review is effective or not. For the next 5 books people buy through this article, they can get this book at MYR 21 only !! Instead of the normal price at MYR 29.90

Click here to buy "Top Money Tips For Malaysian" for RM 21 ONLY !!

Thank you to those who have taken above offers, surprisingly quite a few buyers actually didn't even realize the existence of malpf blog at all.  Seems like the 'cheap' price is more an attractive point than the review writen here.

I hope this does not violate any regulation ...

Wednesday, March 25, 2009

Risk revisit

The toughest concept for this blog to get across is the preception of Risk.

This blog preaches that "High Return High Risk" is NOT the entire truth but comes with a twisted myth.  Basically that statement only apply to those who don't know much.  The more you know, the less risk it is.  The correct way of intrepreting Risk will affect another general miss-conception - diversitifaction - "Don't Put your egg in ONE basket".  Putting your eggs all you want but you will have to start with ONE and that better be the best one.

These intrepretations offer explaination to today's situation why so many investors couldn't make it even if they Diversify and believe High Return comes with High Risk.

This is not a new concept actually,
"Risk comes from not knowing what you're doing."  ~ Warren Buffett
"Volatility is NOT Risk." ~ David Dreman
This is not a debate on what the real meaning of Risk is.  Its a matter of how we should look at it so that we can do something about it.

If you believe in High Return High Risk, then when you enter into a potentially high return investment vehicle, you naturally accept that comes with high risk.  This psychological preparation puts you into a 'its ok to lose' state.  More than often people in this state will sit, wait and pray the worse wouldn't happen.  ( which you have just violated the 2 most fundamental flaw in NLP )

On the contrary if you believe Risk is something you don't know, then naturally you will try to find out more about this investment vehicle.  You may eventually pick the right vehicle or you find out how to deal with some of its limitation.  Either way, it puts you in a better position than the earlier scenario.

One of the greatest example of all time is that someone didn't think gambling is all that risky, as a result the whole school of technical analysis was introduced and is one of the hottest study one can get nowadays.

Gambling is risky, yes.  Avoiding it is temporary safe, yes.  By not knowing more about it, you risk getting into it without knowing it.  By thinking risk is when you don't know, you can learn why gambling is risky.  As a result you may come up with some new principals in life about gambling.  If you found out how to deal with this risk, then you would also have a set of solution dealing with 'this kind of risk'.  You may still NOT WANT TO get involve and this time, you can be very sure and understand why you do or do not do something.
"If you risk nothing, then you risk everything." ~ Geena Davis 

Tuesday, March 24, 2009

Malaysia drags down the whole world

last 36 hours of world stock market movement attracted my interest.

As of yesterday all markets have been been going up for about a week following USA's tiny bull moment.  Japan was still going up and strong yesterday.  Then Malaysia market ( the next market opened after Japan) openned and dipped south.  Followed closely by Jakarta, India and then London, following the sequence of market opens.  USA cann't escape the curse by Malaysian and started to go down as well.  As of this morning after one big round, Japan market also openned lower right now.  So seeing the trend as a round the clock cycle, it seems to me that Malaysia has dragged down the whole world ... kind of feel quite powerful as a small country after all, don't we ?  :)

I have this impression after building a simple eye view on the world market in the sequence of market opens so that I can see how other countries market were doing before and after Malaysia open.

Monday, March 23, 2009

One View on World Market

I have always wanted a simple one eye view of world market index before and after Malaysia market open. But couldn't really see something simple enough so I built one ... its still in process, you may view it at stock.malpf.com

Where do you get your world index info ?

Buy Warren Buffect for MYR 100 !

For the first time in Malaysia, AmInvestment Bank Zero Strikes on Berkshire Hathaway allow investors to gain exposure to Warren Buffett’s Berkshire Hathaway Inc. Class B shares for as little as RM100 minimum investment. AmInvestment Bank Zero Strikes are a special kind of warrant listed on Bursa Malaysia, and give investors an alternative to investing in shares, Exchange Traded Funds (ETF) or unit trusts.

OFFER PERIOD – 12 March 2009 to 10 April 2009

Full Info here

I would think if it is buy-sell-able from bursa malaysia, you could get this through other broker too but I haven't checked yet ...

Sunday, March 22, 2009

Medium Income Retire Successfully

Gabriel Pang is 68 years old.  He is one of my most favorite personal finance friends.  As much as I am helping with his personal finance, I learn much more from his experience.

He started earning his first $100 at age 12.  That was $100 for the whole year washing cars for neighbours.  At that time he saved all his $100.  At age 16, he got a part time job earning $1,800 that year.  He saved $1,440 that year.  Later he could save less when he went to college.  For example, at age 20 he earned $1,100 but save only $550.

He got a proper job at age 23 earning $29,700 that year.  He managed to save $8.019 that year, about 30% of his income.  Then when he got married, he can only save 20% instead of 30%.

He started his own business at age 28.  At that year, his salary was $87,600 and side income $12,000.  He managed to save $12,312 that year.  Finally he quited his job at age 31 and worked full time on his own.  His total earning is less than his old salary but he also pay less tax so he ended up with similar NET income.

One thing he does consistently is his saving range from 5% to 30% of his income.  According to his past historical results, his saving has been giving him 5% to 12% return yearly.

At age 42, he retired.  But after resting for 3 years, some opportunities showed up and he earned another $30,000 to $80,000 incidentally a couple of times.  Then he retired for good at age 53.  He finished paying all his loan at age 58.

His last year expenses is $53,915, taken out from his $555,105 saving.

Below is his cash flow chart.  It may be a bit confusing but basically it shows his total income, the taxes and loan he has been paying and a cumulative saving with return.  Top part purple color is the one when he made a lost in his own business or when he retired, then he needs to withdraw money out from his saving in order to survive which happened at age 36, 39 for business lost and then since age 42 for retirement.

Some of the high lights of his life are shown in chart below.

It seems like curently he has half a million saving for his retirement.  His personal inflation for the past 20 over years average is 3% and also for the past 20 years his saving has been giving him an average of 12% return consistently.  So using these 2 figures, I helped him projected that he can live on his saving until he is 98 years old.

This calculation excludes the EPF he didn't take out at age 55 which he has left there by itself.  He stopped contributing to EPF at age 30 with about $50,000 insdie.  Right now there are about $928,849 in there.
(correction 25 March 2009 : $50k was his own contribution only, total balance at age 30 was $115,823.11)

So he can safely enjoy his retirement as the way he has been for the last 20 years.

He only worked for less than 10 years and his own business only lasts 13 years with some years making losts.  His average annual income is about $50,000.  

What has he done that he can retire the way he wanted so easily ?

Saturday, March 21, 2009

Mutual Fund vs Stock fees

Typically equity mutual fund service fee is 5.5% and stock investment is 0.7%. Other than that, another significant difference between them is that mutual fund normally require a minimum investment of $1,000 whlie stock usually charges a minimum fee of $40.

Mutual FundStocks
Minimum Imposed FeeNone$40
Minimum Investment Amount$1,000None

( Mutual fund fee could range from 1-2%
while stock investment can be as low as 0.05%
but those are not really apple to apple comparison )

So first of all, this $40 minimum could become the first trick in your invesment. $40 fee to a $1,000 investment is 4% alone. In stock investment, the fee is per transaction if buy and sell on different days. So a total of $80 out of $1,000 is 8% !! In stock investment, you must understand MOTS : Minimum Optimized Trading Size especially for speculators in order to really enjoy the low percentage fee as advertised.

In addition, this 0.7% is not the only fee imposed for stock investment. This 0.7% is called Brokerage fee. There are also Clearing fee and Stamp duty. Clearing fee is usually 0.04% and Stamp Duty is $1 for every 1,000. However, when you use 0.7% as the brokerage fee, other fees are small enough to be ignored. This is not the case when your brokerage fee is the lowest like 0.05%, then you effective total fee would easily become 0.18%.

Mutual fund on the other hand is simpler and straight forward. ( they charge much higher fee, ofcourse they should make our life easier )

Meaning when you invest $1,000 into a mutual fund, $55 is paid for the service. Assume there is no market movement and you withdraw immediately, you will get back $945.

Says you buy a $3.08 stock with $5,901.30 ( just slighly more than MOTS), your effective fee would be about 0.84% per transaction or 1.68% in total. But assume if you sell it without any market movement, you will have to find a buyer. So withdrawal is not as automatic as mutual fund. If no one wants to buy your shares when you want to sell it, you will NOT be able to liquidate your invesment !

Lets assume you got into a high volume stock where liquidity is not a problem at all. But you may NOT be able to sell at $3.08. There is always a buy and sell spread. Basically how much you can sell depends on how much people want to buy from you. Anything from $0.005 onward is possible. But in a liquid sell, the sensable price you can sell is most probably $3.06. The 0.02 difference is called the tick size and you can learn a bit about them on this post. Note that when your selling price is $3.06, your effective fee rate becomes 0.85% and not 0.84%, an ignorable difference but nevertheless different.

So to wrap this up, you will get back $5,764.98 if you sell immediately of the stock you just bought ! That is an equivalent of 2.31%

So now you can see how a 0.7% turns into 2.31% in stock investment even when you are senstive about MOTS.

Mutual fund ? Its still at 5.5%, not much trick there. Simple and straight foward.

So it is NO Doubt Stock fee is much lower than Mutual Fund fee but it may NOT be as low as you think it is.

Investment TypePublished FeePut InGet BackEffective Rate
Mutual Fund5.5%$1,000$9455.5%

You may also be interested in these articles

or read all about mutual fund articles here
or read all about stock articles here

One of the myth not answered yet
due to lack of commenters :
WHY and WHAT we can do about it ?

I know I am deviating from RE but I will get back to that soon

In the meantime here's a great read on this current financial mess:


Wednesday, March 18, 2009

Deflation here we come (in fact we are already there)

Those of you who remember my old blog, (which I deleted) will remember my frequent references to Galbraith and his bubble theories. We have now burst the ultimate credit bubble.

Previous bubbles were symptoms of excess credit and their bursting (eg the Dotcom bust) were solved by making credit even more lax.

This one is the big kahuna, and the Central banks and policy makers have no idea how big or bad things will get. If you had any doubt about how bad it is, today's announcements that the Fed will buy US treasuries, which follows the Bank of England saying the same a couple of weeks ago...should give you some idea.

We are already at near zero interest rates everywhere, and that wasn't enough. Then they bought damaged assets from the Banks and AIG and paid off their bad debts, but that wasn't enough. Now they are buying their own debt. This is a way of printing money.

So everyone today played the inflation trade- the $US dropped, Gold rose. However I think we are a long way from inflation. I could explain why, but Matt Stiles has done that very eloquently at the link below. He also describe the changes that are taking place in society where conspicuous consumption..big houses and cars are no longer as acceptable as they were.

I think Range Rovers are going to have quite a few years of weak sales.


Insurance, Good or Bad ?

The most confusing financial vehicle in this blog is probably the Insurane element.

Sometimes insurance was cursed here, sometimes this blog says you must have it ... Sometimes I say Don't Buy IT !   Then follow by Yea, You Should Sell Insurance ...  "what in the world is your REAL standpoint on insurace !?"

First of all, "Insurance" doesn't even make it to my wealth pyramid.

but then later I explain Insurance plays a 'supporting' role in protecting the goals you want to achieve or already achieved in life.  ( read here )

I also touch on the "return" of insurance by Comparison among Insurance, Fix Deposit and Mutual Fund.  Since my proposed solution in Personal Finance is to have your very own portfolio, on the insurance part, I propose Buy Term Invest The Rest. to get the best out of all from above comparison.  ( but not suitable for everybody )

I also highligh some of the pit-falls in today's insurance industry

1. Higher than FD insurance is A FAKE marketing talk ! ( case 1, case 2 )
2. But then sometimes it is possible ( case 3 ) with a twist in it
and the solution is to invest monthly instead of yearly 
(but not for traditional insurance)

Then confusion starts when I put up quite a funny article basically saying, "Want to settle your bad debt ? Sell Insurance !".  When someone are in doubt, I even re-assure them with small talk.

So to sum all above up and hopefully can clearify somethings ...

Buy Insurance for Protection - Good !
Buy Insurance for Return - Bad !

Sell Insurance to earn Income - Good !

Don't forget I mentioned before Income is NOT a part of Personal Finance Plan.  So if you have faith in that, you wouldn't have this kind of confusion.  Buying insurance is a part of your finance plan, Selling it, is NOT !  It doesn't matter what the source of your income is, your life plan stay the same.

So recommending you to sell insurance has nothing to do with recommendation to buy.  Different rules apply in Income topics.  You need to be smart and hard working in generating income.  In personal finance, its ok to be dump and lazy when its done the right way - the simple way too.

You may also want to check out other related articles

Tuesday, March 17, 2009

A Foreclosure Tale

A buddy of mine who is a fellow bear, has promised himself that he will only buy a foreclosure.

Now the truth is, foreclosures are often not the best deals. You have to present an offer with 'no subjects' to the court, who can refuse your offer, or you can do all the leg work, and someone else can bid higher on court day and you lose the property.

Usually foreclosures are not left in the best of conditions, as the disgruntled previous owners have neglected maintenance and take anything that isn't (and often is!) nailed down.

However there are bargains to be had, especially in this market.

Anyway back to my buddy. He has been looking over a very nice townhouse in foreclosure on Howe Street, near the water.

Now please note I take this information from what he has shown me, and what the realtor has told him, so if anyone knows of any errors, please tell me and I will correct them.

The unit is 2100 foot +/-
It is listed at $799 K
Built in the early 90's

Now here is some amazing stuff:

The original owners paid $432 K for it 11.5 years ago
The current mortgage on it is apparently over $1 m, due to equity withdrawals
A unit ( I think it was the last one to sell) sold in the complex for around $1.2 Million in December 2007.

Some fishy thoughts :

That is a lot of equity withdrawal the previous owners made! - did they still have any skin in the game when they went inot foreclosure? I doubt it.
This unit is getting close to a cash flow neutral price, for those interested in buying and renting.
Look at the loss of equity the other 20+/- owners of the complex have taken between the Dec 07 sale and this one. That is a lot of paper wealth that has just evaporated.

Monday, March 16, 2009

George Soros - good guy or bad ?

There are a few questions why George Soros is not in my radar in this blog.

Well, because it isn't time yet.  But as usual, since you ask, I will jump the queue and talk a bit about him.

There will be 2 topics in this blog that will lead to Soros.

1.  The Art of investment.
2.  Investment is a game for the Rich.

Unlike Fundamental Assessment like Buffets and Technical Analysis by some other successful investors, Soros is one of those few who do not fall exactly into either of that 2 categories.

As mentioned before, our today's money system is by large at fault but no one really can fix it.  Fundamentalists basically try to filter out the noises by sticking to good and strong businesses.  Technicalists try to follow the trend making some money when they see the big guys move.  

Soros however is the type who perfectly understand how volunerable of our finance system is but do not get bother by it, not even the social problems it may create, and then further exploit it to gain maximum out of it.  He is slightly different than "If you cann't beat it, join it" because at his scale, he sometimes create the chaos or problems himself.

Soros still do fundamental assessment NOT before but usually after he invests.  Fundamental results only add strength to his already decided investment to keep longer.  Soros only look at trends at the area where he doesn't invest too much on because he usually create the trends, why 'chase' the trend you created yourself ?

It takes money to earn more money, no one else practise this principle better than Soros.  People who don't like Soros could easily agree to this point.  Like our famous si chedet.

Despite the chaos and how many claim him as a speculator, Soros way of investment is actually quite systematic.  Although it is not as procedurals as Fundamentalists, but nevertheless quite a system by itself.  Since his system is not quatifiable so its called a investment philosophy more than a system at times.  That is also where I call it The Art of Investment - to cover all the other things Science is not covering.

Art doesn't mean NOT Science.  It just mean there is something to it that we cann't fully explain yet.  In Art, we cannot guarantee the same results even if you follow exactly what was done.

A true art is usually not complicated.  A good piece of art is usually simple.  Sometimes it could be Not Easy but nevertheless Simple.

All Soros does is to catch up with the latest happening in the world and then make investment decisions base on it.  Done !

There is no limit on the knowledge to acquire be it finance, politic or social.  When the data is inside our head, certain patterns form in it.  Then we try to relate these patterns to what we want to do - investment.  As time goes, certain linkages are form between the information and our investments.   These linkages are the formulas in our head.  These formulas usually cannot be written down clearly.  One of the reasons is by the time you write down on a piece of paper, certain event has happened that you may need to change your formula already.

All of us have this ability, like when interest rate is lower, everyone know more cash will flow in the market.  The difference is that a more experience guy would have more dimensions in his head to consider about the forest fire in Australia, the hail storm in northen America, the finish of China Olympia  ... all lead to exactly where the cash will flow to at what time.  At least he thinks so.

So the 'system' Soros use is very simple, its the same as all the other speculators who lost a lot of money.  The only differences is Soros has a very persisted way of keeping himself updated with the correct information.  While other loser speculators acted based on one or 2 piece of 'precious' info.  Secondly, other speculators are not as rich as Soros so even when they do the same thing as Soros, they will still lose out as his is the game of Money earn Money.

So like him or hate him, if you want to be him you better seriously get ready to digest what is happening to the whole world - every single piece of data.  Then you better be already very rich when you pratise what he is doing.  Else you may just be speculating into prey in this money earn money game.

The reason I don't talk much about Soros is because the line between speculation and investment in his method is very loose.  And statistically it is proven people will always stay at the wrong side of the line.

Lastly, be reminded that Buffet is the top 2 richest guy in the world and Soros stays within 20-40th in the rank (37th in 2007/8).

small talk on insurance

A question came in and I thought it was quite fun so I share it out here ...

Asked :
may i ask why insurance and how insurance can really "sell"?

Answered :
everyone needs insurance, its just a matter of time when they will realize it. people who realize it earlier buy cheaper and people who realize it later buy more expensive, either way the insurance saleman earn more.

ppl who never gets to realize that ended up dying with people around him realize the importance of insurance, so the next generation still buy insurance smile.gif

Fish is back!

Hi Friends.

Hope you are all well. After a health related hiatus from the blogging scene, I decided to drop in again with the occasional post.

I had been blogging on the imminent demise of RE, both here, in the US and world-wide for about two years and well what can I say...we made it! We are into the worst of it in the US, and well on the way here.

I suspect some of you old bears will be coming out of hibernation and wondering IF and WHEN you should be buying. That is going to be the new focus of my blog;

1) How much further down do we have to go.
2) What 'deals' are there out there - mortgages, property, etc
3) What is the buying/renting comparison now.
4) What is the BC economy going to look like in the next two years.

On a personal note, I want to thank Paul B for all the hard work he put into his numbers which led us from the lunacy of the bubble to the promised land of a buyer's market. He will be missed, but I wish him all success in PEI.

Mohican has been pounding out his usual high quality posts (I will get all the links up soon) and of course there are some must read blogs..Like Rob Chipman's and Solipsist's.

I want us to exchange some solid information on how things are likely too shape up.

It's good to be back.

Sunday, March 15, 2009

The Battle has Begun !!

Everytime recession comes is a cycle where the rich becomes richer and the poor poorer.

At first some of the rich will get kicked out of the rich world and even get killed by the down cycle (as will be discussed in this article or covered in an upcoming FREE ebook, most probably in April ).  Basically those are the not-so-strong apples among the rich.

Then there will also be some shuffles where the Poor or the Average suddenly join the Rich during and after the recession.  These are either the smart or lucky people who spot on the right thing at the right time within this short period.

However, either way ( rich stay rich or poor turn rich ) these future Rich folks achieved it by doing one thing, by leveraging the power of general public, the biggest human network of all time especially in this Internet era.

If you think above sounds good, then let me rephrase it.  These future rich men will further exploit the ignorance of everyone else on personal finance topics, squeeze every single remaining bits from all so that they can stay or turn rich during this down cycle.

Bailing out failing businesses, pumping more money into a proven-ill-money-system are all questionable moves.  And how they do it is even more threathening, by taking resources from you and me - lowering interest rate and massive issue of bonds.

If above claim sounds too global, economical or you think national stuff don't really affect your 'personal' life then lets examine that claim.

Wherever you are in this world now, you have probably already read, viewed and felt the tendency of goverment, big corporation and famous guys convincing you to invest, buy houses and cars.  All kind of incentives are introduced to pursue that.  Basically it says we have to keep the money flowing or else we all die.  So you all should keep investing in forex, buy houses and cars etc.

Rich Dad Poor Dad re-emphasizes on cash flow lately and explicitly use the term, "Don't Save".  Then followed by some fine print in his book asking you to buy properties.  First of all, his word spreads and most people did not really read the whole book.  All they got is "Don't Save" and as a result, they simply spend more money than before recession.  And they didn't really get into any good property investment neither.  His new book title is Conspiracy of The Rich and I have to suspect his book itself is a big Conspiracy !

If you are a Malaysian, likely that now you are thinking to buy a new car because you can get a $ 5,000 rebate from a rotten old car.  You are thinking to buy new property because you can get $10,000 tax deduction.  Even if you don't have the old car to trade in for, all your friends around you talk about it so much that you started to ponder as well.  In addition, tons of great deals are in the market now where you get up to $30,000 saving if you buy certain properties.  Not to mention not too long ago if you simply do nothing, your EPF saving will Automatically be reduced !

Since when saving less and spend more 
is the cure for a recession ?

Keep the money flowing  M E A Ns  keep buying your food and drinks.  Live heathier lifestyle, buy more veggies, less meat.  Drink more water less beer.  Jog in free park, smoke less.  Paint your own wall, fix your own stuff, do more DIY.  Keep the money flowing DOES NOT include keep paying the rich NOR does it mean keep getting more BAD DEBT !!

Keep the money flowing BETWEEN YOU and ME !
  Not OUT OF our circles !  

Doing so can 'probably' fix the recession.  But let your money flow out of our circle 'definitely' digging a deeper grave for yourself.  For every 1,000 of your new graves, perhaps 1 guy will stay rich or a poor guy may turn rich.

The Battle has Begun !  
The Rich has started working.  
The Poor has started fallen into traps.  

This is the time where the Rich needs your help, the Rich is asking the Poor for some money.  Supposingly this is putting the Poor in an upper hand in the game now.  And this happens almost once every 10 years.  This of our current recession right now, is the 10th times.  For your info, all the past 9 times, the Rich always won.  The match wasn't even close, the Rich won one hand down without a fight at all.

This post gets a bit long now, remind me to talk about what the Rich should do if they are really sincere and what we can do to win the game ( Not that we will actually ).  However, in short, your personal finance principals should STAY THE SAME.  All these so called incentives are NO Different than the saleman who sweet talk you in a coffee shop.

The Battle has Begun, you can leave your Poor and join the Rich, you can get killed and you can also help spread these words so that The Poor has bigger chance to win in next cycle.  ( email this article a friend now ! )

politician salary

Recent public announcement of politicians salary does not really excite me too much.  The full info is at Selangor web site.

Its the way they did it.  Take a look at this ...

Notice the bottom right corner there is a word "SULIT" means Confidential.  So basically they pass out some forms for people to fill up and then just scan it in and publish on their web sites.  All of their NRIC number, age are all revealed.

I am not sure about you, but all these seems a bit redundant and too much info revealed.  To make it worse, the only person's private data not published is Khalid's.  His form was pre-edited before scanning and publishing, unlike other people's.  Seems like they still have a lot of teamwork and fair treatment among themselves to improve on.

Anyway, this is the summary of how much they earn, from varies sources of the positions they are holding.


RM 47,222


RM 32,830.67


RM 23,322.08


RM 20,722.08


RM 18,122.08


RM 17,722.08


RM 17,722.08


RM 17,722.08


RM 17,722.08


RM 17,722.08


RM 17,722.08


RM 17,722.08

These figures turn out to be much higher figures than my original preception.  

Perhaps its not bad afterall to pursue after political career .....

mini Budget 2009 ?

I am neither excited nor disappointed with recent mini budget announcement ...

About the $5,000 rebate if you buy new Proton exchanging your 10 year old car, I think the  rebate should be given no matter what car you brought in !  The rules of 10 year old car is really redundant if the government sincerely want to help us.

The right way to boost car sale is to remove all the unnecessary tariff !  Let it be FREE market for all cars !  I am sure the effect is 10 times better than this $5,000 rebates.  Furthermore, it pushes Proton into a REAL reform, perhaps its easier just let Produa take over.

So in short, this $5,000 rebate program will fail miserably.

As for the case asking graduates to go back study since there are no jobs for them anyway ... I cann't say that is bad but it would be much better if he promotes entrepreneurship. 
No jobs means we need to create jobs, not to avoid them.  No money means we need to find new money, not to spend more !

There are 2 ways we can create jobs.  Government initiates Mega Project like KLCC and Smart Tunel, straight away all level of job positions are opened while bringing in new technology and knowledge into our country.  Second is to let all of us ourselves to create job ourselves - be entrepreneurship !  None were mentioned.

Lastly I personally think we shouldn't need all these helps.  I think recession is the best time to throw out the rubbish.  Its the best time to do house cleaning.  Let the dying be dead and let the strong survive !  Many innocent will die yes ... but most of them is due to ignorance !  Ignorance of not saving for the raining days !  Ignorant of not setup automated saving system !  Human by nature don't learn until they have to.  And let now be the 'HAD TO' time ... then all the remaining survivors would have a good strong personal finance culture.

Saturday, March 14, 2009

Gold Investment : supplement info 090314

It is exciting to read about Carson Ding's take on gold investment, basically he is forseeing immediate up swing soon.

Since this blog's duty is to cool people's head when overheating and heat people up during down mood, so this is a post to supplement Carson Ding's article.

First of all, technical analysis should NOT be the ONLY reason one decide to buy or sell.  Doing so is as good as gambling actually despite what other gurus have told you.

However, in this case, one of the macro principals is that we should buy gold during war time.  So keeping gold during recession is fundamentally the right move.  With that in mind, technical analysis would be able to help in better timing.

This blog also mentioned before that Technical Analysis can be very misleading and could give you different indicators when your X axis changes.  Lets review this claim here.

Below is a chart of 30 day gold.  As you can see, its actually on a down trend.  But recent price move break out of the trend show good sign.  However, up trend has not been formed and it may face resistence at 940.

60 day chart basically tells the same thing as 30 days with slightly bullish longer term trend.  However, it may also seems like forming a head and shoulder pattern which implies potential deep bearish.  However, this head and shoulder pattern is weak and subsequent movement can rule it out by now.  In addition to 940, this chart also shows resistence at 930 and 950.

6 months chart shows very strong up trend and now is one of the best buying time.  Actually just briefly pass the best buying time.

1 year chart reaffirm 6 month analysis with 920 as floor price and 970 as ceiling price.

5 years chart shows weak side trend between 720 to 1000.

10 years chart shows up trend with 1000 as ceiling price.

So summing all up should evident that there is NO CLEAR indication to buy or to sell because it is most likely to trade side ways, with short term down trend pressure and long term up swing potential.  Therefore, overeall tendency is on the buy side especially if you can keep another 2-6 months. ( read this article how to earn money in side trends )

As for those who have bought and wonder when to sell.  Well, there is really no clear sell signal as there are too many resistence lines identified in different period of charts, all the way from 920, 930 ... to 1,000.  Therefore clear selling trend has NOT be formed yet.

Furthermore if you think the economy is going to get worse on the months to come, then both principally or technical analsysis wise, you should buy and hold, revist the trend 2-6 months later to see if selling target has shown up yet.