Thursday, April 30, 2009

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 ...

Tuesday, April 28, 2009

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 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.

Sunday, April 26, 2009

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?

Friday, April 24, 2009

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:

Have a good week-end

Thursday, April 23, 2009

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.

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 ?

Wednesday, April 22, 2009

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.

Sunday, April 19, 2009

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.

Saturday, April 18, 2009

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? :)

Friday, April 17, 2009

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

Wednesday, April 15, 2009

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.


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:

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:

$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:


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.

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.

Tuesday, April 14, 2009

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:

Ok happy readers..

So far, from the 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

...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.

Saturday, April 11, 2009

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:

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.

Friday, April 10, 2009

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
  5. JMI
  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 )

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

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.

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

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

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:

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 :

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):

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:

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

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:

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!

China shows some brains ...

By now most should have at least heard that USA is to be blame when they define their own USD currency as "value" and not gold anymore, just in case you still don't know yet, you may read here.

Whatever it was, the fact is USD is the definition of value in today's world simply because everyone agree to use USD as the standard currency in international tradings. When you travel oversea to a less popular country, you are most likely not able to get the currency of that country from the exchange shop in your own country. Instead, you will have exchange to USD and then when you arrive at the destination country, you may exchange your USD to the currency of that country.

During this world recession, everyone is thinking to break away from this association with USD. However, most of the continentals have made their comments that they wouldn't be able to do it. The most disappointing one is from Europe, "It is not easy to use a new currency standard.", they said.

However, today I over heard a TV news saying that China is now starting to quote all international trades in RMB especially with near by regions like Taiwan and South East Asia.

I always have doubts on China's capability to take over USA's responsibility on world finance simply because no brains were shown from China ... well, history starts to change. The transition may happen earlier than I previously predicted after all.

Thursday, April 9, 2009

FREE eBook Released !! eMoney Tips 0904

This is properly the FIRST group writting project in Malaysia, for FREE !  It consist of varies different topics written by very different people.  It should be quite interesting bed time or tea time reading material.  Anyone is welcome to write something too !  Do leave feedback !  Download the ebook here

These are the Contents in this ebook along with my comments.

Creatively Invest Your Money by Amey
I agree mostly that the best time to enter stock market is when it is low.  He even talks about starting your own business verse investing in stock market.  Most of the content in this article is about get creative and manage your 'income', not a part of the finance plan itself in malpf's definition.

Investment diversification is a genuine financial “free lunch.” by Larry Russell
This typically talks about how good diversification is.  But since he didn't mention over diversify could be bad.  I would suggest readers also check out the other side of this story and decide a balance when pratising diversification concept.

Larry is properly the highest profile guy in this ebook edition.  But these contents are also what malpf refers as 20th century methods sometimes.  Its good fundamental knowledge and all, but we will need something more in today's challenges.

But this article is the BEST write up, most suitable for ALL to read and great writting skill in all aspects.

8 Great Tips to Make Your First Million by Jacquelyn
Indeed all are great and important tips to make and keep the million.  Most tips are toward entrepreneurship and how you should become smarter etc.  None on how to still make my million if I am dump and lazy.  Which sometimes is what malpf talk about.

Renting a Property by Mohd Fauzi Puniran
5 basic steps on renting out your property safe and sound ways.

10 tips to stay poor (or things to avoid) By Bob
This is a take-a-break reading material.  Fun to read and all but still many of us indeed commit to exactly doing what keep us stay cool .... no I meant poor ...

Turbo Charging your Financial Transformation by Father Sez
Most probably sharing his very own experience how he did exactly that, turbo charged his own financial transformation.  So very 1st hand info and practical stuff to follow through.  Start a blog can turbo charge your ...

10 Ways How to Make the Recession Works for You by Yow Chuan
One of the best write up.  Contents well structured, followed with self opinionated stories and compensated with great self-drawn-cartoon.  But I got offended personally when he asked me to quit my drinking in order to make recession works for me :p   ... and even draw a carton for that some more !

How To Survive in a Bear Market  by Tushar Mathur  ( not shown in the content section but in page 32 )
3 simple straight forward and practical things to do during a bear market.  Exactly how and when to apply which method could be contraversy.  And that could be very good extension topics for malpf to cover in future.

How to Find a Good Financial Advisor By The Financial Blogger
wow, this is an article hard to comment because I both love and hate it.  Its basically sharing real concerns about non expert managing your finance including yourself, the financial idiot.  If you think he is a financial planner ofcourse he will tell you to use a financial planner therefore all his words are all nonsense; then you may be passing out a great opportunity.  ( but I didn't say he is all right neither ).  The disagreement part is malpf promotes self manage own finance and it should be done in a bold and straight forward way.  If there are truth in personal finance, even an idiot can get it right without understanding much as long as the he did the right things as per the truth.  Which is the opposite of what this article talk about.  Basically he asks everybody not to listen to me anymore :p

Gold Investment In Malaysia by Carson Ding
Simple, straight forward and facts oriented, all Malaysian wanted to invest in gold should definitely read  this. Ironically, this ebook is published 5 minutes after I posted up an article about the same topic too.  And the content is almost exactly the same!  I don't think I can convince anyone I didn't copy Carson's article but it proves to me that Malaysia is really having limited resources in gold investment since both my research and his experience is exactly the same.

How to know if a real estate is worth investing? by OngKL
A bingo article on property investment.  Too bad his experience is more on southern Malaysia, while the most happening area is in central region.  But in fact, it doesn't matter, just like any other investment, when the numbers are right, the investment will most probably turn out the way you want it to be too.

Is It Alright that We Buy Insurance Only After We Get Married? By Loke Cheng Leong
Very short write up but cover all the concerns needed for the above question.  If you are asking that question, this is a must read also.

Accounting Loss vs. Real Loss By Jadelynn
As always, usually I don't really get how an accountant thinks.  Sorry but either this is a plain comparison between paper lost and actual lost or there are something more to it.  Err, no, that is it !  If you don't know wha tis paper lost vs actual lost yet, then read this gua !?

Budget by saltlamp2u
This is actually an article I forced my staff to submit.  Apparently they made it too sale oriented where at the end they ask you to buy salt lamp.  And the transition from the article to the sale pitch is not smooth at all.  Well, cann't complain when you force someone to do something can you ?

Why do Rich People commit suicide during recession? By MTSen
Actually quite poorly written, I am not sure what he is saying.  I think its something about "you should have a solid finance plan or else you may kill yourself even if you get very rich in future".  And he emphasizes that income is not part of the finance plan, as in it doesn't matter how rich you are, your personal finance plan should be an independant entity.  But this guy needs to learn some content management writtings.

All Money Made is Equal by KCLau
I don't know and I cann't be sure.  Together with his recent article about Dummy Finance, I think his recent preaching is matching more and more toward malpf's.  Indeed, no matter what money you got, you should treat it as an income and start saving a portion of it the very FIRST thing you do.  Oh ... that's not what the article say, its just what malpf says .....

So guys, have fun reading this FREE ebook and do leave comments what you think about it so we can improve the next time.  The team is aiming to make this a eMagazine instead of just an eBook, targeting to publish monthly.  Honestly I don't think that is a good idea but I will be wrong if all of you submit your articles too !!  

or simply send me anything and I will make them into a submitable format to kclau's requirments - at my own paste.  And I have to warn you, that could mean forever :P