Why is it so tough to earn from stock market ?

The theory to earn easy money from stock market is one of the simplest theory in this world.  It is proven practical as well when some of the dumpest men on earth has successfully gained from it.  But yet majority of the so called analyst experts fail to predict the market correctly.  Why ?

In order to consistently earn money from an investment, one must KNOW the investment vehicle very well, how it works, the tips and tricks etc.  For example, in stock investment you need to know MOTS, Best Speculatable Price Range, Value a stock worth, trends, strategy to earn despite any movements, stock pick methods, successful trader methods, world influence, fee effect, ...

But in order to CONSISTENTLY earn from stock market, one must NOT follow too closely until emotion takes over the investment strategy.  In order NOT to follow too close, one MUST NOT KNOW about it.

So you must KNOW about it first, 

take action and then

NOT KNOW about it at all 

in order to become a TRUE investor.

It is almost IMPossible to Unlearn something once you learned it, especially when you have found a Winning Formula, it is Darn Tough to forget about something that you think is a sure win strategy, isn't it ?

Well, that's why its tough to earn from stock market ...

The Knowing part is the Science part, it requires a lot of logical thinking and analysis  ... the NOT Knowing part is the Art part.  Try to NOT KNOWing what you already know and you may feel the level of understanding you may need.  ( sorry for the creepy sentence, but its required to deliver the message )

Well, there you go, now you know why most people simply cann't make money from stock market consistently.  Simply because they fail to NOT KNOWing ... or forgot the Art part in stock investment.

Don't worry too much, there is also simple to follow methods to NOT KNOWing ... but thats future topic ...

Ironically enough if you DO NOT KNOW anything to start with but do the SAME Action as if those who know it, then you don't need to try hard to forget anything and yet able to enjoy the same big gain.  Thats why some old dump investors are earning so much better and more consistently than the experts ...

never knew this is how it turns out ...

Ironically enough on how the stock market turns out to be ...

Everyone was watching closely on politics, economy, commodities, oils and golds ... but at the end, its the pig who triggers the market crash ...

Most may say this is totally irrelevant and just an arbituary incident.  But I cann't help to think that 

recession brings out the greed

more people cut cost into the ethic arena

animals are not fed right

environment is not kept well

which eventually trigger the out spread of the micro organism ...

"If you big guys don't want the world, we will take over just like how you took over dinasour last time!" - virus said.

Welcome to the balanced market

We have moved from a rapidly descending market to one where a bid has appeared for listings.

MOI is in the 5-6 range. Some of the huge drops from list/sell have disappeared and most sold prices I see are coming in near (within 5-15%) the ask price.

This was to be expected. Record low mortgage rates have brought the cost of owning, even at inflated prices, closer to renting, as I showed you in the renting v owning post earlier this month.

As the market strengthens, it then panics those who sat out the long run-up, with the thought that the drop we just had may be it! and we will now embark on a new round of price rises.

I think this current blip will take out the buyers who had been sitting waiting for the smallest drop to get in. Then the driver will be the economic situation once again. On that score things are not a lot better. We had stopped falling as fast, but things are far from a rebound or even stability yet, with huge job cuts continuing in the US and Canada. And we will now have to see what transpires with this swine flu.

This darned disease is another brake on the velocity of money, and an economic damper, when we can least afford it.

I posted before that I thought the market would be stable until June and would then resume it's downward pressure. Lets see if my guess was right and let us hope that the RE market is the only thing we have to worry about.

.....................................................................

From Mohican's post http://housing-analysis.blogspot.com/2009/04/teranet-house-price-index.html Vancouver's Housing index is at 135, with 100 being the 2005 price. So we are now 35% over 2005 prices now. Toronto is already down to 106.

I would be very surprised if that's IT for us and we don't get nearer 100. However, as mentioned, we may have price stability for a few months. Then reality rears it's ugly head again.

I suspect the economy and the Olympics have buried any chance of a budget surplus or even a balanced budget for the foreseeable future, so don't expect the Provincial government to be able to bail anyone out.

another food price analysis obsession - burger

It’s Burger King, my favorite beef burger store !

 And this time is more serious analysis than previous queue-in-line KFC example.  It comes with proper price gap analysis and order optimizing system.  I had to analyse in proper spreadsheet before I place order.  ( can you feel the obsession I have with numbers yet ? )

It all started when I saw an advertisement that if you buy up to RM 50 in Burger King, they will give you one FREE Chicken Royale burger and a FREE Touch N Go card!  I do vaguely remember I need an extra TouchNgo card but I forgot for what reason!  Normal price of a TouchNgo card is RM 10, and the FREE burger would be around RM10 too.  So saving RM 20 out of a RM 50 price is a HUGE 40% discount !!  

All I wanted was just ONE Whopper and see what advertisement has up sold me to.

Ok, this is the price list ...

First, all upgrades from medium to large set add RM1 standard across the board.  Size upgrade for individual fries and drinks add up to RM 1.20 so ALL sets upgrade saves 20 cents.  So this is as straight forward as if you want to eat more, simply get the size upgrades on the set.

Then I check the price differences between Ala-Carte and medium set.  The set costs extra from RM 1.40 to RM 4.85 with an average of RM 3.50.  So I presume I do not want to buy the set if the set extra cost is more than the average RM 3.50, marked in pink color.

The set comes with fries and drinks.  If you want only one of the items i.e. drink, then the extra fries is NOT really a saving but a redundancy.  The drink is RM 3 and the fries are RM 3.55 so I use RM 3 as the smaller price item. So I also decided not to get the set if the ala carte to set cost more than RM 3, marked in peach color.

Very soon, I have new order logic.  If I were to order sets in burger king, I should only consider whopper set and chicken tender set.  All other sets provide less value than these 2 sets.  And chicken tender set is the cheapest way to get your set.

So now I know what to order ala-carte and what to order sets, let match the RM 50 deal.  I wrote some formulas into the spreadsheet and auto calculate how much more to order in order to match my target.  Not to forget the 5% government tax in the calculation.  Items that can be purchased to match the target will pop up in green (in excel it would, not in google docs).

First select what I want to eat ... wait a minute, how to finish all these RM50 burgers by myself?  I quickly made a few calls and throw a small family dinner party.  The meal maker does not need to cook that much and the kids would love it too!  Add in a few more considerations like some doesn't eat beef etc.  Walla !!  Here is my order:

1 Chicken Tender medium set and ala-carte whopper, single mushroom swiss, fish, grill chicken and 9 pcs chicken tender.  Total RM 50.14 after tax.

Just in case they require before tax amount to be RM 50, I also come up with a similar order of:

1 whopper medium set and 1 chicken tender medium set.
Ala-carte single mushroom swiss, fish, french chicken, grill chicken one each.

Totalling at exact RM 50 before tax !

Did I just waste more money or have I just saved some?  I should have a great dinner party tonight and goes home with an extra TouchNgo card.  That couldn't be too bad right?

The Financial Crisis is Over!

The stockmarket is on the up and up. The RE market is roaring back with list/sell ratios moving up and MOI down to 5 months and change.

How things have changed! A few months ago, the world was coming to end, banks were in trouble and big companies were on the verge of bankruptcy.

Now the world is a beautiful place.

Except...while the banks are US and European banks are making money on their day to day operations they still have more enormous write downs ahead of them, and big companies like Chrysler and GM are still on the verge of bankruptcy and have their heads kept above water by massive and regular infusions of tax-payer money.

The companies that are still making money are doing so by cutting costs and laying workers off. This is not the stuff of rebounds. It is an interlude in my opinion.

We have driven off a financial cliff and thanks to the enormous and unprecedented intervention of Governments and Central banks across the world, we have a small parachute to cushion the fall. However fall we must.

Nevertheless the mood has shifted slightly more to the positive and that is reflected in increased economic activity. It also helps having a President across the border who is trying to hit the crisis from several angles (which he didn't cause BTW) instead of having a moron who says.."economics was never my strong point".

So we should expect this little stabilisation to continue a little longer, maybe one month or maybe three or four. The same shills who DID NOT see this financial crisis coming will now tell you with a straight face that it is OVER!

There are many of us on the blogsphere who did see this coming- as a result of the excesses. Yes we were early, but as any economist will tell you foretelling the what and the when requires religious capabilities.

And most of us don't think it is over, though are glad that we have this interlude (who wants a total collapse and food lines and street violence- not I).

Another nice post from Matt on the new social trend of frugality:

http://futronomics.blogspot.com/2009/04/against-empirical-analysis.html

Have a good week-end

KLCI 090423

It is rather interesting to see how KLCI performs opposite of the rest of the world.  Although today's world chart patterns are the same but KLCI stays above of previous closed price while others dangling along their prevous closed prices.  Which is still considered significantly out-performing.

view real time world stock market data here

There are a few indications from this scenario.  Most are bad and one posibility to be good.

Bad 1 : General public do not believe in correction and still trade in bullish mode.  (more than 60% of my trading friends are actually in this group too)  People are still rushing in hoping to get similar returns like the past few weeks.  Although some would still able to enjoy some quick profit but such a 'delay' correction will only cause a bigger than expected correction.

Bad 2 : Goverment agencies pumping fund into the market to substain the illusion of new PM effect.  Should it really correct later at worsen level, then what is doing now will make 'us' lose more of our EPF and/or tax money.  However, the few companies that are invested by the fund managers happened to be the ones that I can agree with (able to buy now to keep for the next 2-3 years).

Good 1 : Recent varies changes instilled in China and also a few other countries are mostly considered as the 'correct' moves.  The sign of China reducing its dependencies to the western world has already started.  Although the affected industries will never revive as it used to be, but a lot of new businesses are given the chances to mushroom too.  However, any kind of policies changes will take as least 1-2 years before any real benefits are gain from them.

After above qualitative accessment, let's look at the technical analysis.

Stochastic (14-5-5) has been long oversold so the trigger to crash isn't exactly apparent anymore.  But some experts do recommend 'stay away from market' based on this pattern alone.

MACD (17-8) is about to cross.  If markets stay at 970-975 for another day, the signal will be triggered.  The only worry is the fund managers will use this as the trigger point and market will crash from there onward.

Moving Average (10d) shows that as long as KLCI stays above 965 on Friday 24 April, it should be fine for another day.

Having seen all, I think that there are not much foreign fund in our market anymore.  So its only a game between the public and the fund managers.  Since the public seems bullish so as long as the fund managers do not trigger any panics, we can live through another week.

It would be very interesting to see if this 'delay' correction would actually cause a worse crash in the next 2 months to come, ie. touches 816.

As of right now, half of my long term fund is in place riding this up trend now.  All of my speculation funds are out of the market now.  I am staying away from the market, most probably no need to come back until 1 month later.

What is your view ?

When to buy...if at all?

Everyone has their own reasons and timing to buy or not.

However if you were a potential buyer and didn't have to worry about moving during the middle of a school year or other issues...when is the best time to buy?

Spring..when there is more inventory, Summer...when sellers are getting more anxious..or Fall when only the desperate are left on the market and buyers have withdrawn for the year?

Tough one.

I had coffee with a seasoned RE investor today and asked him what he suggested. "Wait until after the Olympics. Any time after that should work". Was what he said.

Like me he thinks the Olympics was an unnecessary waste of time and effort. Vancouver never needed to be 'put on the map'. All it did was add kerosene to the speculative fire.

Just imagine how many bubbles we had running concurrently in our city..

1) We had the world wide real estate bubble, pumped up by low interest rates and lax lending.

2) We had the commodity bubble with copper, oil, zinc, natural gas and odd stuff like molybdenum hitting the stratosphere. The result was the venture exchange went flying and money poured into Vancouver penny stocks enriching their promoters.

3) We had the huge build out for the Olympics, competing for labour with condo builders.

And now all these bubbles are popping sequentially. There is every reason to believe that the Olympics will be an excellent and colourful spectacle, which will make us very proud to be Canadian and Vancouverites (BC-ites really, since the whole Province is going to be paying for this) and then leave us with a very big hang-over and a bill which we cannot afford.

So his advice to me was wait until all the fanfare and excitement has passed and there is nothing left to prop up RE.

What about interest rates? I asked him.

"If the market gets worried about inflation, then 5 year fixed rates could start heading up. That will certainly weaken the market further. However, one year variable mortgages (which is more closely related to the BOC rate) should remain low for a long time."

He could be wrong of course, we could have hoards of Finns and Swedes coming over after the big O to snap up our RE. Or we could be in the middle of a big inflationary boom this time next year, which would send up both long and short mortgage rates.

It works for me though, since I just signed a lease to take me past the Olympics.

The Rights NOT to pay tax ?

This is a respond to Hafix's article and some readers' intrepretation on it

Hafiz is one of the columnists for Malaysia Insider and definitely one of the greatest writters you should read more if you are interested in Malaysia economy and politics.  Basically in his article, he mentioned that if the citizen loves the country more then everyone will be more willingly paying taxes.

While what the article says is true, but unfortunately it was read into a different kind of signal : "... we have the rights not to pay tax ... ".  A relatively destructive way to interpret the article, although Hafix may disagree.

Although what the article mentioned could be right on the disappointment we may have with the goverment.  But it doesn't give us any Rights NOT to pay taxes.  This example of doing evil upon the devil doesn't really work.

The fundamentals of life is still simple.  The story of goverment didn't do a good job and therefore you don't need to pay tax only lead to 2 practical ends;

1) You decide to leave this country.  Then yes, abuse it and forget about all the family and friends who stay back.  Don't pay any taxes.

2) You still want or need or have to stay and work here.  Then you should still pay your taxes.  As for the disappoinment from the goverment, you should continue to can them into doing better, fix them!  At the moment you stop paying tax, you would also lose your right to fix the goverment.

Complain all you want to release tension, but when it comes to real pratical life, we should still do the smart actions - the right thing as well.

Weekend Wanderings

I headed around a few open houses on the North Shore on Sunday.

Fair amount of traffic, though less than two weeks when I last ventured out.

At one house I had an interesting conversation with the realtor. He informed me on entry that the house was now listed below the current market price.

"Well why hasn't it sold then?" I asked.

"It will. We have a lot of interest".

"Market price is what a buyer like me or another fool is willing to pay".

"Well, it is priced significantly below assessed value too."

I then gave my assessed value talk, which I have posted previously. Assessed prices have been frozen by the Provincial Government because prices are falling. The last thing they want is for the municipalities to be inundated with appeals as comparables drop in price. It just means the taxable amount would have to be raised or services cut.

So these assessed values are what the local government (hardly a wise judge of value as we can se from the Millenium Olympic debacle) guesstimates what the worth of a property was between 2007-2008 at the very tippy top of the market!

Since then we have had a financial crisis which has vaporized banks and trillions of dollars and has caused a tsunami of unemployment to spread across the world. How on earth can it be used as any yard-stick for measuring value?

The realtor agreed. It then became apparent that this was what the seller needed to get out at break-even since they had bought a few years ago and put quite a bit of money into renovations.

So that is how selling prices are decided..based on market value (lets guess what someone would pay for this), assessed value (which if the government hadn't frozen it, would be 10-15% less in any case) and what the seller 'needs' to get.

What I am trying to say, is if you still thinking of buying in this little spring bounce, at least judge for yourself what you think the property is worth (how about replacement cost) and what you can afford, and if your number is a lot lower than the list price. Go with yours!

This also illustrates how difficult it can be for realtors. Often it is the seller who is delusional and thinks their home is worth much more than it is and the unfortunate realtor is then left trying to defend the price to buyers.

Calm down bears

OK I see my last post caused some bear angst.

Yes, buying and renting are coming closer due to dropping prices and low interest rates.

However buy/rent comparisons are just one factor and even though logically it SHOULD be one of the main drivers of price, we do not live in a logical world and therefore it is not.

Let me explain

Generally speaking people prefer to own than rent. There are many reasons and I have listed some of them in my previous post. So buying should have a small premium over renting.

However as we all know this premium reached crazy levels over the last few years. Bears noticed this and it had been mentioned by me, VHB, Freako, Mohican and the many other housing bear bloggers.

Why buy something when you can rent it for almost half the price!

What we forgot is that most people are not logical or analytical. When they see something running up in price they jump on board, fundamentals be damned. That is exactly the same reason why a stock can sell for a price/earnings ratio of 10 one day and 15 the next month, even when fundamentals are unchanged.

Things have flipped the other way now. The asset is dropping in price, instability and job uncertainty reigns. The risk has moved from missing the RE band-wagon to falling off it and getting bones broken. So, as Jesse said in the comments section, buying should be at least balanced and probably cheaper than renting, since there is less risk in renting than buying right now.

Previously you could over-extend and buy, and then if you needed to repair the water heater or roof, you would get an appraisal which would show your property up X% and would get an home equity loan and off you go.

Now with prices dropping, you will have trouble getting that extra money and may have to sell. Throw in an illness, job loss, divorce or other life calamity and the house is in foreclosure.

So by buying you are taking on a lot more risk.

As I said In good times people prefer to buy. In bad times, they have to rent.

Also one more point, the buy/sell comparison only works, because you are paying down the debt and are 'forced to build equity'. However as bonuses, and then wages drop people will have trouble meeting their primary obligations never mind putting aside equity.

Also building equity in a dropping asset is a losing proposition.

It is exactly the same as cost-averaging into the stock market for the last 10 years. If you had put $10,000 of your savings on the first day of trading into the fasting growing US companies in the US - the Nasdaq- you would now be down nearly 40%. So much for building equity.

So am I buying now?- No. I am expecting the cost of owning to drop BELOW the cost of renting.

...and I am expecting rents to drop too, as jobs disappear. So both should come down. However there will blips up, on the way down.

However that is just my opinion, and like all bears I have been wrong for a long time, and have vindication is not as sweet when you have to wait half a decade to be proven right.

What happened earlier this year was the near complete collapse of the capitalist system. It took the irresponsible central bankers who did NOTHING while the bubble expanded -an enormous amount of money, zero interest rates (near enough) and huge bail-outs to prevent implosion.

However, in less than a year we have gone from full employment to rapidly increasing unemployment around the world. SO is this over? I don't think so. I think we have an interlude while folks enjoy and adjust to the new lower interest rates and then we realise that a bubble of this magnitude will take more than half a year and a quick, contained drop in RE to end it.

Feeling better bears? :)

stock market cures all deceases

Opps, did I spell it wrong ?  ... cure all diseases that is ... :)

quick note 2009 04 17

If you are one of those who have been enjoying exciting moments for the past couple of weeks, buckle up and prepare to exit anytime soon ....

don't worry, you will have another chance again ... not too soon away ...

Traits of Successful Traders

I was clearing up my junk images and found this one.  I forgot if I have shared this before but it is a great reminder anyway ... and I forgot what the source is, sorry to owner.

The key difference between a self employed and a real business is that business has a proven running system despite who operate the system.

Same goes with investment, you either invest for fun or serious about earning an income

Here it is...

OK - here are some buy/rent comparisons. The results may surprise you. My conclusions at the end will surprise you even more.

They are just random cases I found on the net, and I have applied my less than perfect analysis to them.

I read some posters state that a house should sell for 200X it's rent or some such simplistic formula.

In fact the relationship between renting and buying is very complex, and there is no 'right formula', it all depends on what is happening to housing and the economy. I will explain this all at the bottom.

Assumptions:

I have used the ING 5 year fixed @ 3.9%.

Some folks will compare mortgage payments with rent. However some of the mortgage payment is used to pay down the debt. This is a way of 'forced saving'. Over time the debt will diminish, however over time, rents generally go up. So I have put down the amount the debt is reduced for the first year of the mortgage as an indication. I think this gives you a fairer comparison. (I am a fair bear after all)

I have assumed a 20% down-payment +/- for rounding.

I may have played down the costs of owning. A new roof would set you back many thousands, as would any significant repairs.

Lets look at a few examples:

1) Small Condo in Coal Harbour:

# 807 555 JERVIS ST, Coal Harbour, Vancouver West, $358,000.00
HARBOUR SIDE PARK. Located in prestigious Coal Harbour just steps from Stanley Park, Marina and best downtown living. Updated kitchen/bathroom w/granite countertop. Hdwd flr. 1 parking/2 storage. Rent $1300/mth.

Rental cost: $15,600 a year

To buy:

Assume 20% down ($70,000)

Lost opportunity @ 1% = 700 a year

Mortgage on $288,000 = $18,000 a year

Strata fees = $2444

Repairs = $500

Taxes = $1200

Total = $22,844

In the above example nearly $7000 would be applied to reduce the loan. So there is no significant difference between the two.

2) Port Coquitlam home:

Rental: http://vancouver.en.craigslist.ca/apa/1124662280.html

2100sf. house on an 8100sf. lot with 4 bedroom and 2.5 bath. House is like new with hardwood floors, granite counter top, island kitchen, vaulted formal living room, two gas fireplaces, master bedroom with ensuite bathroom, attached garage, and alarm system. Fenced back yard with large inground saltwater pool, sunken deluxe hot tub, garden shed/pool house, garden area, nicely landscaped with stamped concrete patio. To keep the yard beautiful the property has inground irrigation system. House is on a no thru road 1 min. walk to bus stop, close to park and school. 5 min. from Home Depot. Available June1, but flexible. No smoking and no pets please. Reference a must. $2100 +util

For Sale Comparison few doors down: V757487 $532,000

Rental cost: $25,200 a year

Owning with $100,000 down.

Lost opportunity on D/P = $1000

Maintenance etc= $2000

Mortgage on $432,000 = $27,120

Taxes (estimated) = $2200

Total = $32,300

However $10,000 of that will reduce the debt.

3) Large Luxury House in West Vancouver:

This http://www.manderrealestate.com/7.html rental would cost

$41,880 a year.

To buy something equivalent look at 1265 INGLEWOOD AV, Ambleside, West Vancouver, (V724242) $1,288,000. Same area, though the rental property has a view. The property for sale is assessed at $1,127,000 and last year's taxes were $4241. (source: https://ecom.westvancouver.net/tempestlive/WebInquiry/frames.cfm)

So:

Lost opportunity on D/P $200,000 x 1% = $2000

Mortgage on $1088,000 = $68,300 a year

Maintenance. Roof/yard work/painting etc = $2000 a year

Total = $72,300 a year.

However $26,000 of this is applied to the reduce the loan. So the difference is not that much.

.....................................................................

Ok now for the chat:

As you can see, once we account for the amount which is used to pay down the debt, the cost of renting and buying are remarkably close. This has not been the usual case in Vancouver. There has been a premium to buying due to several reasons:

1) Due to limited land, population growth and inflation, property has trended up, leading to capital appreciation.

2) This capital appreciation is a tax-free gain and as such was regarded by financial planners as one of the best ways of accumulating wealth tax free.

3) When you rent -there are many tangible costs such as moving expenses and intangible ones such as being at the whim of your landlord for lease renewals and the anxiety of frequent moves, stability for schooling, neighbours etc.

Because of these, renting has been cheaper than buying for as long as I can remember. However as the lunatic boom of the last few years got going and everyone wanted to get on the capital appreciation band-wagon this difference expanded to 100% or more is some cases.

So how did we end up near even now?

1) Prices have dropped

2) Mortgage rates are at remarkably low rates.

3) The 'lost opportunity' on the down-payment is very low (unless you can time the stock-market)

So is this the time to buy?

There is no magic formula for when to buy. The most important factors are the mortgage interest rates and the state of the economy.

The fact that rent/buy costs are so close, is a sign of how unusual (and potentially bad) our current situation is. If things weren't bad- interest rates would not be so low, and yet house prices are dropping even though it costs as much or less to buy than rent.

If you expect rents to drop, prices to drop, no bonus or worse no job-do you buy- whatever the comparisons?? No!

It is the current uncertainty that is causing the rent/buy parameters to get so close. While it has stimulated some demand, I would expect the uncertainty to trump it very soon...perhaps this summer.

I expect that by the time this is all over we will see rents and prices fall further and just as a pendulum swung too far to one side, it will then swing too far to the other side and there will be a period when it will be CHEAPER to buy than rent! A complete repudiation of the bubble we just had.

However this is just may opinion, and worth as much or as little as anyone's. Opinions welcome..

FREE Personal Income Tax Software Released !

Although a bit late, but finally its released.  Or has it been released for sometime and only now they email me ?  Anyway taxsaya is one of the few great softwares given that we have limited choice in personal finance softwares for malaysian.

2008 version is much better than 2007.  You will have to download different version for different filing years. 

You will also need to uninstall previous version of 2007 if you want to work on your 2008 version.  Else the 2008 version will report problems looking for something from 2007.  This has already been reported to Taxsaya and may be fixed by the time you read this article.

Actually Taxsaya commented that you don't need to uninstall 2007 to use 2008's version.  Above comment is only specific to my own case.  When running the 2008 version, it will automatically import some of your 2007 info over so that you have less hassle.  Things like personal details, child, spouse, employment, rental property, insurance etc. do not need to be re-entered in 2008 version if you already enter those in 2007's version

2008 versions are concentrading on asking relevant and crucial questions and then give you the key information straight away.  This is much better when comparing to 2007 version.  But if you are using it for the first time, you may still find it cumbersome going through the wizard; which would be a feeling you should get over with if you are serious in your tax filing.

This is the screen you will see at the end.  Notice that they will tell you how many tips they think they can help you optimize your tax filing.  That is the part you will need to pay about RM 20 for it.

I haven't get the full version yet and I haven't explored all functions yet.  I am also not associated with Taxsaya and I don't get benefits from them.  But I admire their persistency in getting it through this 2nd year, despite the not-so-good 2007 version.  So in the good spirit of (1) promoting more people to care about their own income tax and also (2) encouraging local software development company (on personal finance software), I am thinking to sponsor this MYR 20 fee for my readers.  But I haven't figures out exactly how to do it yet.  It wouldn't be free money give away to avoid abuse, but rather something like if you buy some of my trading items up to RM 50-60 then I will sponsor the paid version of Taxsaya as well.

 + accessories  x 5 pcs   x 10 pcs

It would be a scam if the selling price of above items are higher than market price so I would throw in lowest price guarantee as well.

Or simply email me why I should simply give you RM 20 for free :)  I always appreciate honest and direct truthful sharing.  Decision to give would be at my mercy :)

Sorry above offer is NO LONGER valid.  After testing the paid version, I think its better to just use the FREE version first.  Unless you are REALLY HAPPY with it, then go ahead pay for it.  Otherwise, the optimization tips are just too simple and you are most probably already know those tips.  And usually not implementable at this stage of time.

Things that I think TaxSaya can improve on:

1. Income Tax is not really an after event.  For example, 2009 income tax software should start to be used in 2009 itself, not in 2010.  Income tax planning for 2009 starts now and not next year.
2. Tax optimizing is really an education, so a lot of tips and education notes should be shared on the same screen along the tax filing wizard 
3. Other than the wizard, it should also provide a big screen facility for data entry, for some hard core tax filing people out there
4. An online version that does not require upgrade and installation perhaps ?
5. cater for business income ...

Try download immediately here, or actually you should visit their web site and let them verify your email first.

Can 12% return cope with 3% inflation ?

('’)
If you have an investment that consistently gives you a 12% return while you have been controlling your own personal inflation at 3%, would that mean you are financially free forever ?

The first trick you may think off could be the actual amount of money involved. For example, a $100 12% investment will never be able to cope with $200 3% inflation. But in this case, the investment amount starts at $567,803 and the annual living expense is $53,915.

So do you think a 12% return from $567,803 is able to substain 3% inflation on $53,915 ?

This is actually the 3rd part of Gabriel's story. ( part 1, part 2 )

If you are one of those who cann't believe 12% return is still not enough to substain even 3% inflation, then buckle up and stay very close to this blog as you may not believe still how under educate we all are in our personal finances.

As shown in part 1 of the story, this is the projection to the question above.

and these are the first few years of calculation:

$53,915 inflated 3% becomes $55,532 next year. $567,803 with 12% return becomes $635,939. Minus out the $55,532 becomes $580,407. These are the numbers for subsequent years.

Everything seems fine as the total investment capital keeps growing.

However ... things start to change about 15 years later when annual expense reaches $83,997 and capital changes from $692,754 to $691,887; marking the end of capital up trend.

As you can see, the investment capital is rapidly deprecating after that until it completely disappears 30 years later.

So a 12% return on half a million can only substain a 3% inflated $50,000 for 30 years! 30 years is VERY far from eternity at all.

The case is quite ok for Gabriel because he is already 68 years old now and he has another backup fund other than the numbers shown here. But if this is a total retirement plan for a 30 years old person, this will only last him until 60 years old. Not to mention the potential short fall on the 12% return in some years and 3% inflation seems like a very tough target for a 30 years old person in today's environment.

Consistent 12% return is very close to the top performance you can ever get. (imagine Warren Buffect's average return from 1999 to 2007 is 9.23%). And a 3% inflation comes with very little hobby life style and I would consider it far from luxury. So even the best return can only last the most controlled life style for 30 years

Just like how other articles have been emphasizing, put down ALL your numbers on a paper, not just look at the overall concept or just the interest rate. Every case could bring a different result but if you look at the real numbers, you will put all other doubts and tricks away.

( part 1, part 2 ,part 3)

You may also be interested in these articles:

January 2009 Inflation Update

Calculate Future Living Cost

Bigget Killer in Malaysian Personal Finance - Car

Inflation vs BLR

Ok happy readers..

So far, from the poll...it seems more people couldn't be bothered than contacted their MP.

The rest of you think politicians wont listen to your concerns? Really? Well you are probably right!

But if we are silent, then don't complain when they spend our tax money on propping up these monopolies.

You all know how politics work; they try $150 Million first. If the outcry from the public is manageable then they will send more money...much more.

If they want to support Canadian program content...who commissions the most Canadian content?..THE CBC! so why are they taking the knife to the CBC?

Anyway I have made it really easy for you:

Step one:

Click Here http://www2.parl.gc.ca/Parlinfo/Compilations/HouseOfCommons/MemberByPostalCode.aspx?Menu=HOC

...and put in your post code

Step two:

Click on your MP's e-mail address. Write your concerns about the governments plan to pay out millions to the big media companies. Make sure you put your correct name down and ask for a reply.

Step three:

There is no step three! It's that easy.

I know most of you are bored with this subject. But this is incredibly important. A democracy works if there is a free press. We have had a media shackled by the views of a family or corporation, now it will get even get worse if the government decides who should survive and who should not.

Lets make our voice heard.

I will be working on my big post comparing buying v renting. You may be surprised by the results. I will need some encouragement to crunch the numbers. If you e-mail your MP, tell me in the comments section and I will get this post out quicker.

BTW $150 Million = 2000 low income housing units = 4000 folks off the streets.

Be careful what you wish for...

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Ok Folks this needs to be said - we are in a terrible mess.

I know most of you read this blog hoping for clues on the direction of RE and patiently waiting for it to drop decisively. Well we are well on the way - down 15% form the peak and huge drops, 25% or more, in some areas like West Van and Port Moody.

But take a look at this graph and it will show you that Vancouver RE may be the least of our worries:

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgUoVKepykxY3_yOLEXeRWKFgkgpT9Lnt-mfMhNTJi7M3jDUsygAc6_XJ6_kLbxlH4k5bTYJJvKDrc2URamXrgtEvwkLj3lbl53S5pJoYBwhY6csc27prHiqA_AKeIOrP9EbO1AEq42op9T/s1600-h/g7industrialproduct.jpg

I have never seen a graph like that. If anyone had shown that to me a year ago, I would have said they were crazy.

That is as near a total collapse in world-wide industrial production, as I had ever thought possible without a world war or pandemic.

Look at Japan!! Industrial output is crashing there - add that to an aging population and a Debt/GDP ratio well over 100% (with the GDP dropping rapidly) and the Japanese miracle has come to an abrupt end. Even Toyota, arguably the best car maker in the world is slashing production.

Anyway, back to my main point. I hope what lies ahead is not so dire, that even though RE is dropping, few bears will be left unscathed to enjoy it!

...............................................................................................

Yeah, yeah. I know I said I wouldn't mention it again. But I put up a poll on the right hand side. It is self-explanatory.

10 value buy on consumer stocks ?

Saw a site that recommends 10 value Consumer stocks to buy base on what he learned from Benjamin Graham

1. DNP
2. EKOWOOD
3. IBERHAD
4. IQGROUP
5. JMI
6. LIIHEN
7. MINTYE
8. PROTON
9. SERNKOU
10. TOMEI

After gathering all the numbers for these 10 companies, this is their EPS

Some EPS are trending downwards so I would ignore them for now.  So I would only have a few left

EKOWOOD ( best formation )

IBHD ( has quite a few negatives )

LIIHEN 

TOMEI ( has a down trend but I just want to keep it in my consideration list as it is the best among the other down trends stocks )

These are their respective EPS trend graphs

EKOWOOD

IBHD

LIIHEN

TOMEI

Next I calculate the value of their stocks using this site with the following assumptions

use the lowest PE in past 10 years

use the 2 years EPS that can best match EPS growth trend

use 2008 EPS as the last known good result

I then find out the stock price that is worth me buying using the following assumptions

average of 15% growth yearly

for the next 10 years

a 50% safety margin ( I want to buy $2 with only $1 )

and these are my target buying price

Lets take a look at the technical charts for these stocks.  Basically these stocks have no volume which mean once buy in, you would have to at least keep for 3-5 years.  There is no apparent room for speculation.

After checking the last closing prices, EKOWOOD and LIIHEN both are just marginly under my target buying price, which smell like opportunity.  IBHD's price is $0.78 while my target buying price is $2.50, the difference is a bit too big which may require a re-examination to see what has happened.

So far all above are the stuff what you can get out of the numbers.  Lets take a look at the qualitative sides too.

Ekowood deal with wood and have a lot of trading sources all over the world.  While wood is not exactly a rising business, but if done correctly the resource is limited and supposinly the price can easily be appreciated.  However, Ekowood is too large and may not be easily transform into the new era of wood business.  Its not a business that will go away tomorrow but I do not forsee them to excel anymore.  Unless serious business model change is in place.  With only MYR 30 millions, you can take over the management to instill this change but TSH wouldn't let you.

LIIHEN is selling furniture, although also mostly wood based but they present themselves as the integrated solution provider.  Furniture isn't exactly a must buy item in consumer market.  So I do have doubts in any furniture based businesses that if they can survive through the next 2 years.  Before investing in LIIHEN, I may want to meet the management in LIIHEN and see what they plan to overcome today's problem while have big dreams to set for 5, 10 years future.  Without that, I wouldn't simply pick them.  I would also wait until mid of next year before heavily investment in them.

If you don't know IBHD, then you should know Sanyo electrical products.  They also built I-City in Shah Alam which is supposed to be the hot of the century.  If you are a Malaysian and don't know about I-City, then you may feel they aren't really that successful as a property developer neither.  Which I wouldn't disagree.  They tends to always spend a lot of money to make an event very hot for a very short time, but then without any supporting system at all for the crowd to come in and turn the marketing talks into real sales.  Imagine you see a flyer and call in but find that the operator do not even know what his own company is selling ?  If someone pick up your call at all.  This is one of the typical business that you need to know more internally what their linkages are economically and politically.  I don't have those knowledge and I usually stay away from it.  But if one day they have heavy volume traded, it could become a great stock to speculate in.

Summary

Out of these 10 stocks, I would put EKOWOOD as my top choice.  Followed by IBHD and Proton for future speculation targets.

Other Related of Supporting information

Calculate worth of a stock

use this FREE system to calculate the price

use the CORRECT EPS

if you are ready to invest in stocks, you should also know

MOTS - Minimum Optimized Trading Size

current Stock Prices could affect your strategy position

how the world has performed before your market opens

mutual fund vs stock fees

Week-end RE Round Up- Will add to this post as things come up.

1) When was the last time you saw a builder advertise for work? Been a while:

http://vancouver.en.craigslist.ca/reo/1115917836.html

2) Canada lost 61,300 jobs last month. Add that to the 82,600 lost in Feb and the 129,000 lost in Jan and it start to add up. The only growth areas were public employees.

BC and Alberta were hit the hardest, with BC losing a huge 23,000 jobs, or one third of the total. Half of that loss being construction-related.

This ain't no ordinary recession.

I feel for those who have lost their jobs. Hopefully they are not too extended on debt and have some savings. At least it should mean there are more trades and labourers available for new projects.

Pretty soon, it will be a great time for a private buyer to build a house. Lower labour costs. Lumbar and copper and of course land have come down significantly. But humans being humans, there was a frenzy of building when everything was outrageously expensive and a dearth now.

3) I see ING offering 3.95% for a five year fixed. That's a pretty good deal. Will these low rates reignite the housing market?

Everyone has an opinion. For the (very) little it is worth here is mine.

These efforts may temporarily stabilise housing. However unless you think that's it for the recession, and we bounce straight up from here, then we have further down to go. The driver will be employment security above all.

Even with lower payments, no one wants to get into a big obligation, be that a large mortgage or car payments, if they are not sure they will have a job in a year. It's all about confidence. That's what the car manufacturers are learning. Even with near zero lease and financing options, they cannot stimulate demand.

So I think the lower rates will put a temporary floor under housing - but if, as I expect, the employment situation worsens, or interest rates start to back up with inflation (which I doubt,but is possible), then we get our second big leg down.

So far our pattern is following the US's remarkably closely. A big initial drop from the blow-off high. A period of stabilisation and then a bigger drop as those that have to sell and foreclosures crowd out other sellers.

4) I also don't think the Canadian banks are quite as strong as we keep boasting. Matt Stiles did a post on this : http://futronomics.blogspot.com/2009/04/is-canada-envy-of-world.html

I think we are in better shape than the US and Europe, however if we have a further 15-20% in house prices. Equity will vanish and the banks and CMHC will end up as significant property owners.

Also we may not have had Canadian Fannies and Freddies, but we do have CHMC - which in IMHO was so anxious to get people into home-ownership at the peak of the boom, that it helped fan the fire. I would like the government to tell us how much liability we are on the hook for due to CHMC's creativeness.

Of course don't expect any major news outlets to question the government or they may not get any funding.

5) Vancouver leads the pack. West Vancouver leads Vancouver (down):

http://www.bivinteractive.com/index.php?option=com_content&task=view&id=1543&Itemid=32

6) My last plug on the topic...please e-mail your MP and tell them not to give money to the mega-media corporations.

If you own a restaurant or a dry-cleaners and you fail, no-one comes to your rescue. These media companies were greedy, they borrowed and bought too much and paid their senior executives MANY millions of dollars a year. They jacked up advertising rates and have near-monopolies in some markets eg Vancouver!

Now the restaurateur and the dry-cleaner have to pick up their bill. It would be a national disgrace.

Here is the site for your MP again:

http://canada.gc.ca/directories-repertoires/direct-eng.html

You can contact the Minister of Heritage to insist they only fund Canadian content:

http://www.pch.gc.ca/pc-ch/minstr/moore/index-eng.cfm

If the Government decides which news organisation gets money, then we kiss democracy goodbye.

6) As I mentioned ING has a great rate of 3.95% five year fixed. Well here's how much the ING calculator says you should buy:

Annual income $100,000

Down-payment $100,000

Car payments $500/month

Property taxes $2500

Purchase price $550,654

That will buy you a very nice house in Surrey now or a shoe-box on the Westside.

7) What's up in the Central OK?

Sales up from Feb but MOI looks huge. Any eye-witness reports?

Stats here:

http://www.omreb.com/files/03%20-%20CO%20Statistics%20March%202009.pdf

Summary:

Ist number March 2009. 2nd number March 2008. % change from previous year.
1 Units Listed 1766 1997 -11.57%

2 Units Sold 379 697 -45.62%

3 Sales Volume $130,507,200. $277,257,344. -52.93%
4 List/Sell Ratio 89.53% 96.39%

5 Days to Sell 109 75 45.33%

6 Active Listings 8792 6766 29.94%

MOI: 8792/379 = 23!