The Goal of the End Game - Financial Independence

The goal of the End Game is to accumulate enough wealth for you and your family to stop.

Having enough is more important than having more. If you've reached enough, you don't want to be gambling for more. Stop putting your wealth at risk. Stop the gambling and risk taking with investments of any kind. You would finally have enough money and personal power to walk away from the investing game and spend the rest of your life doing something else!

When exactly do you reach the End Game?

When you have enough principal invested safely for your after tax-income to match or exceed your annual expenses on an ongoing basis. This would include budgeting for the lifestyle you truly want.

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So I reach there on time and on target or will I be late? Tomorrow is the new beginning ....

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"Human beings, by changing the inner attitudes of their minds, can change the outer aspects of their lives." - William James

Who Took My Wealth?

Loss of -34.2% of nett worth. From the high of 93.2% to close at 58.98% for 2008.

Who Took My Weath?

No 1. Success can be one of life's worst enemies. It engenders overconfidence and, as a result, one tends to let one's guard down - in some instances, to the extent of recklessness

I have met my worst enemies in 2007, and failed to recognize them sooner, and thus the downfall in 2008. I have previously survived two major corrections with heavy losses and recovered with even more nett profits. But, this Bear killed.

No 2. Leverage

I use a wheelbarrow to lift more dirt than I can carry by myself, I am employing leverage. Leverage involves using a tool to increase my power. That tool is Contra Trading, the tool of leverage is "no upfront money". Just loaded up.

But, I have put too much dirt into a wheelbarrow, and broke my back trying to lift it. Too highly leveraged, and did not have enough cushioning to hold out and when the market turned against me and forced me into liquidation — game over.


Going forward, I WILL ONLY LIFT dirt with my two bare hands. Trade and survive like an American Cockroach. Eat when there is food to be found, and can survive without water for 1 month and without food for 3 months. Goodbye 2008, Welcome 2009. More food to be found. Cheers.

Propert Investing - doing the math (Part II)

me & my money, invest, Dec 28, 2008, thesundaytimes,

It is always at the back of my mind. If I have a lump sum and without doing any leverage, should I be doing stock or property investing? To be or not to be is the question?

Today, in thesundaytimes, we have this article from the property whiz .

Let look at Syed's property gain as follows:

Bought Sold Capital Profit Total% Years Annualized%
1997 2003 $345,000 $100,000 29% 6 4.8%
1986 1989 $230,000 $100,000 43% 3 14.5%
2005 2008 $430,000 $100,000 23% 3 7.8%

Just doing the math, there is nothing fantastic to shout about on these annualized ROC.

Is this true that on average, the risks of investing in property are understated and returns from investing in property are overstated. I believe so.

The most difficult part in stock investing is the emotional roller coastal ride of watching the value of your portfolio dropping by hours if not by days.

But, not for property as the pricing of residential property is infrequent and informal. Property investors never see red ink on a statement unless it is on the day of the sale. And most property investors never formally evaluate the performance of their investments at all. Imagine if you looked in a newspaper at the price of your home each day, just as you do with the price of your shares. Your attitude to risk would most likely be quite different.

Do you hear the guy going home to tell his wife: "Honey, jialiat liao, our home value drops by 50%". But, when your portfolio value drop by 50%, probably, that guy will say to his wife: "Honey, jialiat liao, you need to cut down your Christmas shopping by 70%".

Some will argue that property value will NEVER drop to ZERO, and companies can go bankrupt. But, surely, there are some blue chips that will not go bankrupt, as govt will certainly step in to rescue them as they are too critical to fail and will cause chaos to the country.

Likewise, property value will NEVER be a multi bagger as the govt will certainly step in to COOL IT DOWN before the country goes into riots.

Look at Hyflux, a $20K company with 3 staff grew into company of market cap of over $1B.

For property value to appreciate, it is true that a GREATER FOOL needs to appear, but it is not always true for a stock as the company can really grow big; e.g. Hyflux. Can the property grow over time????? from 2 rooms to 5 rooms???? No. But a GREATER FOOL must come and happy to pay much more.

Investor is very comfortable in dumping $500K into one property, but, to dump $500K into the stocks will be a nerve breaking experience. Investing in property require probably one off of real hard work, but for stock investing, it is endless chores of stocks picking, and heartbreaking at times when the stock plummet minutes after you have bought them.

So it is ALL IN THE INVESTORS MIND. Finally, INVESTING is still a Game of Strategy and Emotional Management. Choose your best strategy and emotions that fit you. It is ONLY YOU THAT COUNTS.

Other related articles:

http://createwealth8888.blogspot.com/2008/12/property-investing-doing-math.html

http://createwealth8888.blogspot.com/2008/12/investing-in-property-may-be-less.html

http://createwealth8888.blogspot.com/2008/11/assets-in-your-portfolio.html

So You Think You Can Trade?

You can have anything you want if you want it desperately enough. You must want it with an exuberance that erupts through the skin and joins the energy that created the world… Martha Graham (1894-1991; fierce, innovative dancer and choreographer)
OK — I fudged the title of this post from the TV series called “So You Think You Can Dance?”

Dr. Janice Dorn
The Trading Doctor


Having been a dancer since age 5, I actually thought I could dance! That was before I watched these amazing young dancers battling it out week after week; one by one, falling down, getting up, getting safe and getting booted. The field continues to narrow until, one day soon, the winner will be chosen. These people have talent, training and experience. So what separates the winners from the losers? Passion, commitment and discipline. That is what separates the winners from the losers in dancing, life and trading.

Why do so many people think they can do something with confidence, courage and competence when they cannot? The so-called overconfidence bias and other cognitive (thinking) biases are topics for another day. Today, I would like to focus on the Learning Ladder of Trading.


One day, you get up and realize that you are in a dead-end job, and just sick and tired of being sick and tired. Your buddy has been trading the markets for a few years and doing OK…not great...but getting by. Your buddy's buddy just set up a trading account, paid thousands for software, books and courses, but is not making any money.

In fact, he has lost half of his initial stake. Yet, you hear others touting returns of 100-1000 percent gains a year, and the siren call of greed coupled with the idea that if they can do it, you can do it better, is too tempting to resist. I mean, how difficult can it be? You just buy the right books, get the best software, go to the right seminars, subscribe to the hottest newsletter, and--with the click, click of your mouse--buy low and sell high or buy high and sell higher or sell high and buy lower. No problem. Piece of cake.

So, you announce to your family that you are going to quit your job, become a full time trader, monies will flow effortless into your account and everything is going to change. It all seems so easy, and the seminar people are doing it, so why can't you. You are just as intelligent as the next guy.

This type of thinking borders on the delusional. Just as one cannot wake up one day and announce that one, without any formal education training (including the school of hard knocks) is going to start practicing law or medicine, one does not become a proficient trader overnight. Get over yourself, because it just isn't going to happen.

No matter how many bells, whistles, indicators, seminars and books with which you surround yourself, you have to pay your dues. You must learn that that piece of cake needs to be converted into humble pie, and that the most-successful traders got that way by first getting a Ph.D. in losses.

Trading is simple, but it is not easy. Trading is a skill and an art that takes time, patience, perseverance and courage. Successful trading and investing are skills, which combine both art and science. In order to achieve and master these skills, one must progress on a path, which is mental, emotional, physical and spiritual. For many, this is the most difficult journey ever taken. Start where you are, and understand that it is about the process, that it takes time and that the rewards are worth it if you just keep going with passion. Without passion, why bother?

There are no secrets to success. It is the result of preparation, hard work, and learning from failure… Colin L. Powell

Every trader must climb the four rungs of the Ladder of Learning, and must do this one step at a time. You cannot skip a step, but if you let your guard down, do not continue to study and practice, you can and will fall down a step or two.

What do I mean by the Ladder of Learning and the four steps? In this case (and putting other learning theories and the neuroanatomical bases for them aside for now) I am referring specifically to the four stages of trading competence:
Somewhere in your make-up, there lies sleeping, the seed of achievement which, if aroused and put into action, would carry you to heights such as you may never have hoped to attain… Napoleon Hill

(1) Unconscious Incompetence: You don't know that you don't know, and you don't know what you don't know, a.k.a. ignorance is bliss.

At this stage of your trading, you are not aware of the existence of, or need for, specific trading skills. You don’t know what you don’t know, including that you have any deficiencies (since you don't know that there are any specific trading skills). Denial may come into play here as well, as you may think that such skills are unnecessary or not useful, and all you have to do is to subscribe to a service or hotline, or jump on the next "hot" pick and money will come rolling into your account. In order to move to the next stage, you most overcome your denial and become consciously aware of your incompetence. Without taking this next step, you will not progress and no new skill will be acquired. There will be no learning. The next step is:

(2) Conscious Incompetence: You know that you don't know, but you are not entirely sure what you don't know.

At this stage, you become aware that trading is a skill, which exists, which is practiced by many and is relevant to your success. You also become aware of your deficiencies in this area by attempting to trade or practicing how to trade. This is the stage in which you begin to figure out how much you don't know. Successful traders will, at some point during this stage of the learning process, make a commitment to learn. They will make a commitment to study, to be teachable and to practice, practice and practice until you know what you don’t know. Now, you are ready to progress to:

(3) Conscious Competence: You know what you know, and you can trade, but you have to think about it.

During this stage, the skill of trading can be performed reliably, consistently and at will. However, you have to concentrate a lot, and think a lot, in order to do it. It is not second nature, nor is it automatic. At this stage, you are open totally to more learning, but you are not able to teach anyone else how to do it. The only way to proceed from this stage to the final stage is to practice more and more until— eureka — one day you have reached the stage of:

(4) Unconscious Competence: You know how to do it, and don't have to think about it. You just do it.

At this stage, the act and process of trading consolidates within the memory and pattern recognition areas of your brain…it becomes second nature. If you are really good at it, you can trade and do other things at the same time (I do not recommend this, however). Certain people at this stage are capable of teaching others, but this is not universal. In fact, it may be more difficult to teach at this stage since the skill has become largely instinctual. It is at this stage when, if someone asks you how you knew to do that, you have to pause, think and say, "I don't really know. I just did it." This is trading mastery.

There is another, final and rarely-discussed stage that is called Conscious Unconscious Competence. Those who have reached this stage are the best teachers, and they are rare and difficult to find. Find one of these people to guide and support you if you really want to learn how to trade.

Champions execute the fundamentals with unconscious competence. That means they've practiced the moves so many times in the past that they can do them almost perfectly without thinking about it. When you can perform brilliantly without thinking, you can perform at a very high level…June Jones (Head Football Coach, University of Hawaii Warriors)

Noble - Getting difficult to play?

Tales of fortunes made and lost in recessions

Success can be one of life's worst enemies. It engenders overconfidence and, as a result, one tends to let one's guard down - in some instances, to the extent of recklessness

(Createwealth has met his worst enemies in 2007, and failed to recognize them sooner, and thus the downfall in 2008)

By TEH HOOI LING
SENIOR CORRESPONDENT

MARKET crashes are the greatest redistributor of wealth. This has been true of previous crashes. But in the current turmoil, there are few beneficiaries, a friend noted. It is more a great destruction of wealth on a global scale so far.


A recession is a good time to start a business as costs are low. Disney, Microsoft, Hewlett-Packard, Oracle and Cisco are some of the companies that were founded in downturns.

Well, okay, some short-sellers may have profited from some of their trades. But many get wiped out in their next trade. Perhaps it is those who are not invested at all and who have the cash to pick through the carnage in the next few years who will really come out ahead. Who knows? Nobody is certain of anything anymore.

A lot of people have been hit hard this time around. There are a few reasons for this. One, prior to this, we've had four years of a bull market where prices had gone in only one direction.

Success, notes a friend, is one of life's worst enemies. It engenders overconfidence and, as a result, one tends to let down one's guard - in some instances, to the extent of recklessness. Economist Hyman Minsky sees the cycle of risk-taking in the economy as following a pattern: stability and absence of crises encourage risk-taking, complacency, and lowered awareness of the possibility of problems.

But even for those who are conservative and have their heads centred and feet firmly planted on the ground, the economics just a few months back suggested that being invested was the right course of action. Then, inflation was running at 5 or 6 per cent and banks' interest rates were at less than one per cent.

For someone who didn't want to have his or her purchasing power eroded, keeping the money in the bank wasn't the most logical of options. Which was why a lot of people are invested - and, worse, a lot took loans to invest. If the borrowing cost was so low, and one was expecting to make a return higher than that cost of borrowing, it made sense to borrow.

Of course, we know now that a lot of people had underestimated or even ignored the risk of trying to earn those extra percentage points of returns.

A friend shared with me some of the horrendous stories of how an enormous amount of wealth was destroyed in the last few months.

Up till last year, one man had $100 million of his worth in only one stock. Towards the end of last year, that stock started to decline. By early this year, the stock was down more than 50 per cent from its peak just a few months before.

The man picked up quite a few additional shares - on margin - thinking that the stock had bottomed and would eventually rebound. Since then, the stock has plunged by another 80 per cent. The $100 million is more than wiped out! The stock is Cosco Corp, which went from 10 cents in March 2003 to $8.20 in October last year - an 82 times jump. It is now trading at less than 70 cents.

Another guy had relatively much more modest means. His net worth was estimated at $2-3 million. He heard from 'reliable' sources that a particular company would be taken over by another at a significantly higher price than the stock's then market price. He bet all he had and, if I remember correctly, also took margin financing to buy that stock. The stock was FerroChina, which has since been suspended because it had run out of money to pay its suppliers and debtors.

One value investor thought Thailand was cheap a few years back. One particular company, a very big one, was trading at 1.2 baht - significantly below its book value. The investor concentrated his bet on that company. And, indeed, the market began to recognise the value of the company and the stock tripled to over 3 baht.

The value investor's portfolio grew to $26 million. In the last year or so, the stock has plunged to below 0.7 baht. The investor is now down some 50 per cent on his original capital.

Another man was shrewd enough to think that the market was overvalued towards the end of 2007. So he got out of the market, and even shorted it. He was happy that the market went the way he predicted. He was the smartest guy in town.

By June or July, thinking that the market had fallen enough, he loaded up on shares. Like the guys above, he too used margin financing to pick up the shares. As we know, the market took an even more severe turn in September and October. He too was dealt a severe blow.

A friend was also bearish about the market towards the end of last year. He had put in some shorts. Then last October, the market went on to hit record highs. He lost his resolve, and reversed his trades and got hit as well.

Another made quite a bit of money in the Singapore market. His confidence grew. He wanted a bigger stage. He bought US shares on margin. US stocks took a precipitous plunge a few months back. He has had a few rounds of margin calls.

A young banker in his late 20s made $2-3 million from the property market in the last few years. He ploughed all the profits into a $10 million property, and took loans of some $7 million. He's now saddled with a mortgage payment of some $30,000 a month.

Many of the real-life examples above show just how lethal leverage can be. In a rising market, leverage is your friend; in a down market, the blow dealt by leverage can knock one out for good.

Perhaps another lesson is to always take some profit off the table. Today, the valuations of stocks are at levels unseen in years, if not decades. 'It is at times like these, when there is a lot of fear, that one can make three or four times return on your capital,' a friend said.

Yes, we all know that. But so far this year, every time one thinks that fear is at its maximum, it moves up another level. And another problem is that a lot of investors have run out of money to buy. A lot of the 'liquidity in the system' before the crisis was from loans; now, that has dried up.

In any case, whether a stock is cheap or not is still debatable. According to State Street Global Markets, its global Investor Confidence Index® for November fell another 1.4 points to a historic low of 57 points. Commenting on the index, Andrew Capon of State Street said: 'Investors face a difficult dilemma. On the one hand, equities are cheap. Using earnings adjusted for leverage and cyclicality, the equity strategy team at State Street Global Markets estimates that the US price-earnings multiple is 26 per cent below its 147-year average.

'These are levels seen only in periods of extreme dislocation such as the Great Depression, World War II and the 1870s. On the other hand, nobody can be confident that this current economic slowdown will not turn out to be just such a period rather than a more typical recession. 'So far, during this crisis, it is the bleakest forecasters who have been proved right.'

Indeed, we are in unprecedented times now. The euro area and Japan are now officially in recession. Even without the US officially joining this unhappy club, countries representing close to 50 per cent of global GDP are now seeing growth contract, noted Mr Capon. Consensus economic forecasts for GDP growth in the developed world have been falling for 16 months and are at 20-year lows.

Growth in the last seven years or so was propped up by debt-financed consumption from the US. And Asia has built up tremendous capacities to cater to that growth. Now, that consumption has contracted because the enormous financial leverage has to be unwound. That deleveraging process and contraction of consumption will drag on for some time because income has also diminished - if not totally disappeared, given the waves of job losses.

In Asia, companies have to deal with all the excess capacities and the vanishing demand. Many companies will go bust. Jobs will be lost, pay cut. In China, the hardship could trigger social unrest. It could be apocalyptic. We just don't know what will happen in the future.

But the fact is that we are now in the throes of a crisis and that itself may colour our judgment. 'Last year, it felt like the sky was the limit; now, it's like we are sinking into a bottomless pit,' said a friend.

Back to what economist Hyman Minsky says about the cycle of risk-taking: stability encourages risk-taking and complacency. But when a crisis strikes, people become shell-shocked and scared of investing their resources.

People also often overestimate the probability of the worst-case scenario after a crisis has occurred.

So, for the optimists out there (if there are still any left), here's an inspiring story.

In 1939, with Hitler's Germany ravaging Europe, John Templeton - who believed in buying into companies at points of what he called 'maximum pessimism' - bought US$100of every stock trading below US$1 on the New York and American stock exchanges.

Templeton's trade got him a junk pile of some 104 companies, 34 of which were bankrupt, for a total investment of roughly US$10,400. Four years later, he sold these stocks for more than US$40,000! Only four out of the 104 became worthless.

Yet another positive spin. A recession is also a good time to start a business. Costs are low. But it is not a good time to do financial deals - that's for a bull market, an investment banker told me recently.

Indeed, in a downturn, established firms tend to cut back on their growth investments to focus on defending their established core activities. That will create niches to be served by smaller companies. And once the start-ups develop to a certain size and the general economy picks up, there will be no lack of big company buyers that are willing to absorb these start-ups into their fold. That fits into the theory of starting a business in a recession and selling it in a bull market.

Well, here are some of the companies that were founded in downturns: Disney, Microsoft, Hewlett-Packard, Oracle and Cisco. There is no lack of examples in the local context as well. The first Sakae Sushi outlet was set up in September 1997. Financial PR, one of the largest investor relations firms in Singapore, was founded in August 2001.

Over the next year, there will certainly be more people forced to work for themselves because they will lose their jobs and not be able to find other suitable employment. And it will be no surprise if some of the talented people now unable to find work in an investment bank or other big company direct their energies towards creating a new generation of successful start- ups, said The Economist in a recent article.

I'm sure we all know of friends who created businesses which are now worth millions of dollars because they decided to venture out on their own after being retrenched. Retrenchment can be a blessing in disguise for some. (I knew someone who was retrenched by ST Aerospace, and today he is running his own business, and rich enough to buy a private landed property. I don't think he could afford it if he had remained as Senior Technician in ST Aerospace)

The key, I guess, is not to lose hope - despite how bleak the outlook may seem now. And if one were to assume risk, let it be with capital that one will not need for at least 3-5 years. In the meantime, be grateful for what you have - be it your health or time with your family.

The writer is a CFA charterholder

Property investing - doing the math

MOST individual investors of real estate have a gut feel about whether they made, lost or broke even after holding their property for a certain period. In reality, few attempt to do the math to measure how well the investment truly performed and whether they were rewarded for the risks they took.

The only ones who are fairly confident of quantifying their profit or loss are the 'flippers' who speculate and deal in the sub-sale market without involving bank loans, rental income and outgoings.

This article takes the reader through two real-life case studies of investing in private residential properties in Singapore over two different time periods. The focus is on getting a sense of timing, time horizon, interest rates, rental yields and rate of returns. The outcome is to help an individual investor assess if real estate investing is worth the risks involved.

Case 1: 1982 to 1991

Not many of us will recall that there was a red-hot residential property market in Singapore in the early 1980s. Condominiums were making a splash and the Central Provident Fund was made available for investment in properties. It's hard to believe but mortgage rates were in the low teens in Singapore at that time. The particular property in this case was in the Pandan Valley area. It was a brand new 1,000 sq ft studio apartment that was launched at $300 per sq ft. The initial tenancy was at $2,500 a month. This translated to a gross rental yield of 10 per cent, bearing in mind that mortgage rates were around 13 per cent a year.

Everything was fine until the recession of 1984. The monthly rent dropped to $900. The value of the condo unit languished at the $200,000 level for the next two years. The gross rental yield fell to a more realistic 5.4 per cent (annual rental of $10,800 divided by prevailing market value of $200,000), almost in line with mortgage rates prevailing through the brief recession.

If the owner had sold the property after holding it for five years, the capital loss would have been massive. However, the property market recovered and by 1991, this studio apartment was sold for $400,000. The owner was not prepared to hold on because of the uncertainties connected with the first Gulf War.

More importantly, the investor decided to use the proceeds to upgrade his primary residence. Intuitively, he was satisfied that he had broken even in terms of cash flow. But he did not know (or care) that his actual internal rate of return (IRR) was only 6 per cent a year for the 10-year holding period.

Incidentally, an opportunistic investor who bought an identical unit in 1987 would have realised an IRR of 34 per cent a year in 1991. (see sidebar).

The question is: Was the investor who held the property from 1982 to 1991 - while suffering the throes of economic upheavals - fairly rewarded for the risks he took?

Case 2: 1996 to 2007

This period in time will be more familiar to most of us. The climax of the bull market of the 1990s came about unexpectedly when the government intervened in May 1996 with anti-speculation measures. Our second investor bought a brand-new condo in District 9, a few months prior to the drastic new housing rules. The 1,300 sq ft three-bedroom unit was acquired at $1,200 psf, or $1.56 million. The first tenant paid $4,500 a month for a gross rental yield of 3.6 percent. The interest rate was 5 per cent a year in the initial period, but steadily dropped to 1.5 per cent in 2001.

Till today, this condo is very marketable and the maximum period of vacancy between tenants was six weeks. The rent fell to $3,000 a month in 2000 for a gross yield of 4 per cent (annual rental of $36,000 divided by the market value of $900,000 in the downturn years).

Other property owners who did not have the holding power were forced to sell at a loss at around the turn of the millennium. Our investor took the lumps and hung on. By the end of 2006, with strong interest for second tier properties, the investment broke even compared to the original purchase price in 1996.

If this unit is sold today, the investor can pocket $1 million after settling with the bank (sales price of $1.8 million less outstanding mortgage of $800,000). The internal rate of return from the date of acquisition now stands at 3 percent a year over 11 long years.

The question is: Should the owner sell now or wait for a more respectable return? What is the appropriate benchmark to gauge if this investment has met the threshold for an acceptable return?

The two real-life cases were selected to demonstrate that timing in property investment is critical. Peak to peak time horizon within a property cycle may result in a lower than optimal rate of return. Investors cannot anticipate external forces that may derail the best laid plans. Speculators know this too well and they have no intention of holding property longer than necessary. It's simply capital gain they chase.

Exposure to real estate is part of a sound overall investment strategy. This exposure may not necessarily be in bricks and mortar (which has no liquidity) and should be beyond Singapore (for diversification). One alternative for liquidity and diversification is to invest in a portfolio of global property shares, funds and Reits. Due to higher risks, the expected rate of return from a well-timed property investment will be higher than a globally diversified portfolio of property securities.

If we assume an average inflation rate of 3 per cent a year in Singapore, then any investment should exceed this minimum return in the medium to long term. Then, there is the risk premium for property: an average net rental yield of 3 per cent and capital gain of 5 per cent add up to 8 per cent a year total return, or 5 per cent a year above inflation.

A useful proxy for the local landscape is the All Singapore Equities Property Index (left). The total return for the period August 1997 to August 2007 was 4 per cent a year. That's a dreadful performance indeed for the long-term investor in Singapore property stocks during this eventful decade. Maybe our Case 2 investor should not feel too badly after all.

In conclusion, investing in residential property provides pride of ownership and a hedge against inflation. Whether it delivers adequate income or capital gains to an investor depends on many factors. In a nutshell, the property investor should acquire a quality product, pay a reasonable price and have the ability to hold for a long enough time horizon to earn the appropriate return.

The property agent, conveyancing lawyer and banker play their part in the buying and selling of the asset. These roles are necessary to ensure a smooth transaction. An experienced financial adviser can offer advice on the required return on investment, asset allocation and risks connected with the property as part of an overall investment portfolio.



Roy Varghese is director, financial planning practice at ipac Singapore. The views expressed are his.

Investing in property may be less profitable than buying shares

Investing in property may be less profitable than buying shares

SHARE markets have generally produced higher investment returns than residential property over the long term.

Theoretically, then, those who rent a property and invest their money in quality shares should be wealthier than those who concentrate on paying off their homes.

However, the discipline of meeting regular mortgage payments and gradually taking ownership of a tangible asset, means home owners usually do better financially than those who rent.

Nevertheless, investing in residential property other than your family home is likely to result in higher risk and lower returns than investing in quality shares.

An economy in which business is performing well is likely to be one in which the property market is also growing strongly.

One of the main reasons shares outperform property over long periods is that demand for property, in a market-based economy, is derived from the success of business.

Of course, the business cycle and the property market do not work in perfect lockstep.

There are periods of economic stagnation in which the property market enjoys a 'catch-up' boom, and periods of recovery in which it goes through a down cycle.

On average, the risks of investing in property are understated and returns from investing in property are overstated.

As a result, investors pour too much money into residential property, forcing prices higher than they would be if investors accounted fully for the potential risks and returns.

Five myths about property investment hold sway in every boom:

- Property values are not as volatile as share prices;

- Property prices never fall;

- Property prices might fall occasionally, but never as far as share prices;

- Property prices rise with the cost of living, so investment in property always keeps you ahead of inflation; and

The only way to lose money on property is to buy real estate in a declining population centre, or a house on the main road.

So why are property risks understated?

Property seems easy to understand, so investors may have a perception of control. Property has the ability to elicit an emotional response unlike shares or bonds, which lack the sense of substance and permanence that attracts people to property.

Just as important, the pricing of residential property is infrequent and informal. Property investors never see red ink on a statement unless it is on the day of the sale.

And most property investors never formally evaluate the performance of their investments at all. Imagine if you looked in a newspaper at the price of your home each day, just as you do with the price of your shares. Your attitude to risk would most likely be quite different.

Returns achieved from property are also generally overstated, which has the effect of further narrowing the risk/return trade-off for the asset.

Indexes that measure property market performance generally capture only the increase in the sale price of existing dwellings, but fail to take into account major developments in a nation's housing stock.

Share investors can effectively 'buy the market' and participate in its long-term performance because of the ready availability of accumulation indexes that are net of costs incurred in achieving gains.

Investors cannot 'buy' the return of the residential property market like this, because the sales measures available are gross of costs such as construction outlays.

In practical terms, investing in residential property has it own risks, not unlike investing in a single stock. While these risks can be mitigated through research into location, the quality of the property and so on, opportunities for broad diversification and protection of a residential property investment portfolio are more restricted.

The one main advantage of investing in residential property is that individual investors with time on their hands have a greater ability to add value to their investment.

For many people, buying a family home is their one truly effective means of saving.

But for the amateur investor, who does not wish to become a property investor, investing in a residential property is likely to be expensive, more time-consuming and riskier than investing in a well-run, diversified share portfolio. And it will probably yield a lower return too.

Arun Abey and Andrew Ford
Sun, Oct 28, 2007
The Sunday Times

Noble - Got it back @ 0.96

Gone fishing at Batam for 2 nights and now back to Market to fish for Noble. Oh, got a catch @ 0.96. Hope for a biggie. Cheers!

Noble - consolidating or breakout coming?

I won't make the same MISTAKE

During the lunch break, one guy wearing a T-shirt with his back facing me with the words "I won't make the same MISTAKE" sitting directly opposite my table.

Hey, it is disturbing and reminding me of the repeated mistakes that I have made that leading to big losses in 2008. I have already chopped off all the five fingers on the left hand. Any more same mistake, I got to chop off the toes now as I can't probably chop off the fingers on the right hand while still holding a chopper.

Really no more same MISTAKE!!! Cheers.

Noble - Santa filled the Noel Socking @ 1.11

Noble again provided weekly allowance.


Round 4 (1st Half): ROC 14%, 8 days
Round 3: ROC 7.1%, 8 days
Round 2: ROC 31.6%, 20 days
Round 1: ROC 16.3%, 28 days

Noble - consolidating?

Trade successfully for a Pillow Stock

It is my dream to trade successfully for a series of wins and to get a pillow stock, and slowly over time to build up a portfolio of pillow stocks to become a bed for me to sleep soundly and have nice dreams.

Hope that in 2009 this dream will come true. Cheers.

When it comes to Money Management - irrational behaviour?

A 45-year-old widow - believed to have lost HK$5 million of her late husband's insurance money in Lehman minibonds - was discovered on Thursday night trying to kill herself, local media reported.

Irrational behaviour - dump all eggs to buy one Golden Goose to lay golden eggs and hopefully to grow into a Golden Cow.

Having lunch with a colleague, she has about $200K saving and thinking of dumping into property next year. Wise investing or irrational behaviour like dumping all eggs to buy one Golden Goose to lay golden eggs and hopefully to grow into a Golden Cow.

The couple is working with two pre-school kids. Wise investing strategy? Hope so. Going forward. How bad and how long will this recession last? Nobody can be sure of staying employed or future earning will not be cut. Once cut, it will unlikely to be restored.

Their kids are growing up and entering school soon, their family expenses are going up, and will ever be increasing until their kids start working. Saving is going to be harder and not easier.

Expenses on kids will be the biggest single household expenses going forward after their residential home.

With $200K, and using leveraged Golden Goose to lay eggs and hopefully to grow the Golden Goose into Golden Cow. Wise investing?

The big difference between stock and property investing is the risk and leverage factors. Stocks are always riskier as company can go bankrupt, but it can be mitigated through money management by not exposing any one counter to more than 5% of your capital or portfolio value (periodically, taking off some profit to re balance the portfolio.

When you invested in stocks, most likely you are investing your own money to make money. When you lose, you lose your own money and that is all.

When you buy property, most likely you will be leveraged and you are using somebody Else's money to make money. When you cannot pay up, and since it is not your money, the lender is going after your blood to make sure that his money is safe.

When the tide is high, the beach looks so beautiful and the sea water so clear. When the tide ebbs and becomes so low, the sea water becomes so muddy, and the beach now looked so dirty and ugly. You will be sorry how you have ended in this beach.

So one has to decide the right strategy: To have an Investment Strategy of 20 Ugly Ducklings, and hopefully a few of these Ugly Ducklings will turn into some Beautiful Swans or one Golden Goose that turns into a Golden Cow.

Finally, it is ROC over a particular time frame that counts. Probably, the attractiveness in Property Investing over Stock Investing is that you can afford to be lazy and there is no need to watch the Market and property as an asset class is relatively safer.

It is damned tiring and heartbreaking to watch your portfolio dropping each day.

But, hey when your valuation of your property or your car drop, you feel okay leh.

Strange behaviour hor???

---------------------------------------------------------

I hope she will understand what I am telling her. Probably, by looking at her facial expression, she may think that I am a Heartlander and know nuts about property investing.

Noble - still in up trend?

Noble - breaking resistance?

Is STI nearer or farther away from 1200?

To wait for 1200 or to jump in at the next correction.

Like a man who once saw ten rabbits coming out from a hole to chew at juicy grasses near the hole. He quickly approached the rabbits with a small net hoping to catch some, but the rabbits saw him coming and quickly jump back into the hole.

Later, he went back home to prepare a huge net to catch the rabbits. This time, he stood near the hole and waited patiently for the rabbits to come out of the hole. If the rabbits appeared, he would then scoop them up with his huge net. But, alas, he waited each day, but no rabbit came out of the hole.

Many days has passed but still no rabbits so he waited and waited ...

Noble - Looking at Exit, where?

Life of a Trader is hard. After getting onto the HIGHWAY, now have to look EXIT or may get crushed again.

Noble- Got @ 0.965 for Round 4

Bought @ 0.965 after waiting for Christmas Sale which somehow did not start early

Noble - another day of waiting

What is Wealth? I am not Rich nor a Millionaire

Wealth as measured by time

Wealth has also been defined as "the amount of time an individual can maintain his current lifestyle for, without any new income." For example if a person has $1000, and their lifestyle dictates $1000 per week of expenses, then their wealth is measured as 1 week. Under this definition, a person with $10,000 of savings and expenses of $1000 per week (10 weeks of wealth) would be considered wealthier than a person with $20,000 of savings and expenses of $5000 per week (4 weeks of wealth).

The difference between income and wealth

Wealth is a stock that can be represented in an accounting balance sheet, meaning that it is a total accumulation over time, that can be seen in a snapshot. Income is a flow, meaning it is a rate of change, as represented in an Income/Expense or Cashflow Statement. Income represents the increase in wealth (as can be quantified on a Cashflow statement), expenses the decrease in wealth.

If you limit wealth to net worth, then mathematically net income (income minus expenses) can be thought of as the first derivative of wealth, representing the change in wealth over a period of time.

Sustainable wealth

According to the author of Wealth Odyssey, Larry R. Frank Sr, wealth is what sustains you when you are not working. It is net worth, not income, which is important when you retire or are unable to work (premature loss of income due to injury or illness is actually a risk management issue).

The key question is how long would a certain wealth last? Ongoing withdrawal research has sustainable withdrawal rates anywhere between approximately 3 percent and 8 percent, depending on the research’s assumptions. Time, how long wealth might last, then becomes a function of how many times does the percentage withdrawal rate go into all the assets. Example: withdrawing 3 percent a year into 100 percent equals 33.3 years; 4 percent equals 25 years (My Targetted Wealth); 8 percent equals 12.5 years, etc.

This ignores any growth, which presumably would be used to offset the effects of inflation. Growth greater than the withdrawal rate would extend the time assets may last, while negative growth would reduce the time assets may last. Clearly a lower withdrawal rate is more conservative. Knowing this helps you determine how much wealth you need also. Example: you know you will need $40,000 a year and use a 4 percent withdrawal rate, then you need to use 5 percent and therefore need $800,000, etc. This simple “wealth rule” helps you estimate both the time and the amount.

Finally, I am not Rich nor a Millionaire. Know the difference.

Noble - next entry?

Noble - Sold @ 0.895 ROC 7.1%

Noble provided the weekly allowance again. For month of Nov, Noble has provided three weekly allowances.

Round 1: ROC 16.3%, 28 days
Round 2: ROC 31.6%, 20 days
Round 3: ROC 7.1%, 8 days

Looking forward for Round 4. This is what I call the true Margin of Safety for my next trade on Noble.

A series of successful short term trading is a strategy that provides true Margin of Safety for long term investing on that counter.

Your First Million Is the Toughest

by Chuck Saletta

The old saying that the rich get richer is very true. As long as you manage your money well, it's far easier to make money if you've already got some cash socked away than it is to start from scratch. The reason is simple: compounding.
When you've already got money working on your behalf, each percentage point of return simply adds that many more dollars to your account balances. After all, if a stock you own goes up in value, it's far better to own 10,000 shares than it is to own 100.

Start small

Fortunately, anyone with even a little cash to invest can take advantage of the power of compounding. It just takes a little while longer for the rest of us to get to the point where it can really work its magic.

To show how it works, here are a few charts that showcase how many years it takes to reach each $1 million threshold given that you regularly invest and earn a decent rate of return.

To go from $0 to $1 million:

Monthly
Contribution 8% Return 9% Return 10% Return 11% Return
$100 52.9 years 48.3 years 44.5 years 41.4 years
$250 41.6 38.3 35.5 33.1
$500 33.4 30.9 28.8 27.0
$1,000 25.5 23.9 22.4 21.2
$1,291.66 22.8 21.4 20.2 19.1

To go from $1 million to $2 million:
Monthly
Contribution 8% Return 9% Return 10% Return 11% Return
$100 8.6 years 7.7 years 6.9 years 6.3 years
$250 8.5 7.5 6.8 6.2
$500 8.2 7.4 6.7 6.1
$1,000 7.8 7.1 6.4 5.9
$1,291.66 7.6 6.9 6.3 5.7

To go from $2 million to $3 million:
Monthly
Contribution 8% Return 9% Return 10% Return 11% Return
$100 5.1 years 4.5 years 4.1 years 3.7 years
$250 5.0 4.5 4.0 3.7
$500 4.9 4.4 4.0 3.6
$1,000 4.8 4.3 3.9 3.5
$1,291.66 4.7 4.2 3.8 3.5

That $1,291.66 number didn't come out of thin air -- it represents the current maximum monthly contributions available in a 401(k) or 403(b) account for most people. What these charts mean is that you can go from $0 to $3 million in as few as 28 years with a little bit of determination to take advantage of the opportunities you have available. Most of that time is spent getting to that first million. Once you hit that milestone, compounding really takes over to help you reach your ultimate goal.

Get from here to there

The most difficult part is getting started. After all, if you're not already saving money now, going from $0 to nearly $1,300 a month may seem an impossible task.

Fortunately, though, you can get some major assistance in your quest to invest.
For instance, any money you contribute to your traditional 401(k) or 403(b) plan to help you earn your millions will most likely come with an immediate tax reduction. Thanks to that tax break, it's as if Uncle Sam will kick in a significant chunk of that cash on your behalf, reducing the total out-of-pocket cost of your contribution. For folks in the 25% tax bracket, it works out to an out-of-pocket cost of only $75 per $100 of contributions -- a significant savings.

You really can get rich

Once you get started investing, though, the rest is largely a matter of owning solid companies and letting compounding work its magic. Over the past 20 years, for instance, the following companies have all produced decent returns:
Company Price on
8/10/1987 Price on
8/10/2007 Dividends/
Spin-offs Annualized
Return
Boeing (NYSE: BA)
$11.36 $98.44 $12.54 12.1%
United Technologies (NYSE: UTX)
$7.35 $73.08 $8.22 12.8%
Fannie Mae (NYSE: FNM)
$2.73 $66.46 $17.12 18.7%
Wendy's (NYSE: WEN)
$11.25 $30.80 $42.23 9.8%
PepsiCo $6.58 $67.95 $13.31 13.4%
General Mills (NYSE: GIS)
$10.24 $55.34 $18.70 10.4%
Automatic Data Processing (NYSE: ADP)
$6.31 $48.42 $10.98 11.9%
All values split-adjusted.

Those solid returns came from companies that were already fairly well known, even 20 years ago. Better yet, owners of those stocks earned those returns in spite of short-term problems like Fannie Mae's accounting issues and the effect that September 11 had on air travel.

This goes to show that you don't have to buy the perfect companies to receive solid returns and build your wealth over time. What matters most is freeing up the cash to make those regular investments.

The two most important parts of getting to -- and past -- your first $1 million in investments are a bit of time and regular contributions of cash.

Stuck in long term investing - What is the Opportunity cost in investing?

I would define Opportunity cost in Investing as the loss of chance of compounding your available investing capital and gain of the next best alternative stocks foregone as the result of staying invested in a losing position held for many years; whether it is due to silly stubborness and cannular conviction.

As the Market changes, and very often sectors are rotated into favour or out of favour. Likewise, we should also be flexible and evaluate the Opportunity cost and continously adjusting the portfolio to the flow of the Market and allowing the effect of compounding to work for us and then accumulating profit to offset against losses.

BTW, it is your money. Who care!

Tales of fortunes made and lost in recessions

Tales of fortunes made and lost in recessions
Success can be one of life's worst enemies. It engenders overconfidence and, as a result, one tends to let one's guard down - in some instances, to the extent of recklessness


By TEH HOOI LING
SENIOR CORRESPONDENT

MARKET crashes are the greatest redistributor of wealth. This has been true of previous crashes. But in the current turmoil, there are few beneficiaries, a friend noted. It is more a great destruction of wealth on a global scale so far.

A recession is a good time to start a business as costs are low. Disney, Microsoft, Hewlett-Packard, Oracle and Cisco are some of the companies that were founded in downturns.
Well, okay, some short-sellers may have profited from some of their trades. But many get wiped out in their next trade. Perhaps it is those who are not invested at all and who have the cash to pick through the carnage in the next few years who will really come out ahead. Who knows? Nobody is certain of anything anymore.

A lot of people have been hit hard this time around. There are a few reasons for this. One, prior to this, we've had four years of a bull market where prices had gone in only one direction. Success, notes a friend, is one of life's worst enemies. It engenders overconfidence and, as a result, one tends to let down one's guard - in some instances, to the extent of recklessness. Economist Hyman Minsky sees the cycle of risk-taking in the economy as following a pattern: stability and absence of crises encourage risk-taking, complacency, and lowered awareness of the possibility of problems.

But even for those who are conservative and have their heads centred and feet firmly planted on the ground, the economics just a few months back suggested that being invested was the right course of action. Then, inflation was running at 5 or 6 per cent and banks' interest rates were at less than one per cent.

For someone who didn't want to have his or her purchasing power eroded, keeping the money in the bank wasn't the most logical of options. Which was why a lot of people are invested - and, worse, a lot took loans to invest. If the borrowing cost was so low, and one was expecting to make a return higher than that cost of borrowing, it made sense to borrow.

If one were to assume risk, let it be with capital that one will not need for at least 3-5 years. In the meantime, be grateful for what you have - be it your health or time with your family.

Of course, we know now that a lot of people had underestimated or even ignored the risk of trying to earn those extra percentage points of returns.

A friend shared with me some of the horrendous stories of how an enormous amount of wealth was destroyed in the last few months.

Up till last year, one man had $100 million of his worth in only one stock. Towards the end of last year, that stock started to decline. By early this year, the stock was down more than 50 per cent from its peak just a few months before. The man picked up quite a few additional shares - on margin - thinking that the stock had bottomed and would eventually rebound. Since then, the stock has plunged by another 80 per cent. The $100 million is more than wiped out! The stock is Cosco Corp, which went from 10 cents in March 2003 to $8.20 in October last year - an 82 times jump. It is now trading at less than 70 cents.

Another guy had relatively much more modest means. His net worth was estimated at $2-3 million. He heard from 'reliable' sources that a particular company would be taken over by another at a significantly higher price than the stock's then market price. He bet all he had and, if I remember correctly, also took margin financing to buy that stock. The stock was FerroChina, which has since been suspended because it had run out of money to pay its suppliers and debtors.

One value investor thought Thailand was cheap a few years back. One particular company, a very big one, was trading at 1.2 baht - significantly below its book value. The investor concentrated his bet on that company. And, indeed, the market began to recognise the value of the company and the stock tripled to over 3 baht. The value investor's portfolio grew to $26 million. In the last year or so, the stock has plunged to below 0.7 baht. The investor is now down some 50 per cent on his original capital.

Another man was shrewd enough to think that the market was overvalued towards the end of 2007. So he got out of the market, and even shorted it. He was happy that the market went the way he predicted. He was the smartest guy in town.

By June or July, thinking that the market had fallen enough, he loaded up on shares. Like the guys above, he too used margin financing to pick up the shares. As we know, the market took an even more severe turn in September and October. He too was dealt a severe blow.

A friend was also bearish about the market towards the end of last year. He had put in some shorts. Then last October, the market went on to hit record highs. He lost his resolve, and reversed his trades and got hit as well.

Another made quite a bit of money in the Singapore market. His confidence grew. He wanted a bigger stage. He bought US shares on margin. US stocks took a precipitous plunge a few months back. He has had a few rounds of margin calls.

A young banker in his late 20s made $2-3 million from the property market in the last few years. He ploughed all the profits into a $10 million property, and took loans of some $7 million. He's now saddled with a mortgage payment of some $30,000 a month.

Many of the real-life examples above show just how lethal leverage can be. In a rising market, leverage is your friend; in a down market, the blow dealt by leverage can knock one out for good.

Perhaps another lesson is to always take some profit off the table. Today, the valuations of stocks are at levels unseen in years, if not decades. 'It is at times like these, when there is a lot of fear, that one can make three or four times return on your capital,' a friend said.

Yes, we all know that. But so far this year, every time one thinks that fear is at its maximum, it moves up another level. And another problem is that a lot of investors have run out of money to buy. A lot of the 'liquidity in the system' before the crisis was from loans; now, that has dried up.

In any case, whether a stock is cheap or not is still debatable. According to State Street Global Markets, its global Investor Confidence Index® for November fell another 1.4 points to a historic low of 57 points. Commenting on the index, Andrew Capon of State Street said: 'Investors face a difficult dilemma. On the one hand, equities are cheap. Using earnings adjusted for leverage and cyclicality, the equity strategy team at State Street Global Markets estimates that the US price-earnings multiple is 26 per cent below its 147-year average.

'These are levels seen only in periods of extreme dislocation such as the Great Depression, World War II and the 1870s. On the other hand, nobody can be confident that this current economic slowdown will not turn out to be just such a period rather than a more typical recession. 'So far, during this crisis, it is the bleakest forecasters who have been proved right.'

Indeed, we are in unprecedented times now. The euro area and Japan are now officially in recession. Even without the US officially joining this unhappy club, countries representing close to 50 per cent of global GDP are now seeing growth contract, noted Mr Capon. Consensus economic forecasts for GDP growth in the developed world have been falling for 16 months and are at 20-year lows.

Growth in the last seven years or so was propped up by debt-financed consumption from the US. And Asia has built up tremendous capacities to cater to that growth. Now, that consumption has contracted because the enormous financial leverage has to be unwound. That deleveraging process and contraction of consumption will drag on for some time because income has also diminished - if not totally disappeared, given the waves of job losses.

In Asia, companies have to deal with all the excess capacities and the vanishing demand. Many companies will go bust. Jobs will be lost, pay cut. In China, the hardship could trigger social unrest. It could be apocalyptic. We just don't know what will happen in the future.

But the fact is that we are now in the throes of a crisis and that itself may colour our judgment. 'Last year, it felt like the sky was the limit; now, it's like we are sinking into a bottomless pit,' said a friend.

Back to what economist Hyman Minsky says about the cycle of risk-taking: stability encourages risk-taking and complacency. But when a crisis strikes, people become shell-shocked and scared of investing their resources. People also often overestimate the probability of the worst-case scenario after a crisis has occurred.

So, for the optimists out there (if there are still any left), here's an inspiring story.

In 1939, with Hitler's Germany ravaging Europe, John Templeton - who believed in buying into companies at points of what he called 'maximum pessimism' - bought US$100 of every stock trading below US$1 on the New York and American stock exchanges.

Templeton's trade got him a junk pile of some 104 companies, 34 of which were bankrupt, for a total investment of roughly US$10,400. Four years later, he sold these stocks for more than US$40,000! Only four out of the 104 became worthless.

Yet another positive spin. A recession is also a good time to start a business. Costs are low. But it is not a good time to do financial deals - that's for a bull market, an investment banker told me recently.

Indeed, in a downturn, established firms tend to cut back on their growth investments to focus on defending their established core activities. That will create niches to be served by smaller companies. And once the start-ups develop to a certain size and the general economy picks up, there will be no lack of big company buyers that are willing to absorb these start-ups into their fold. That fits into the theory of starting a business in a recession and selling it in a bull market.

Well, here are some of the companies that were founded in downturns: Disney, Microsoft, Hewlett-Packard, Oracle and Cisco. There is no lack of examples in the local context as well. The first Sakae Sushi outlet was set up in September 1997. Financial PR, one of the largest investor relations firms in Singapore, was founded in August 2001.

Over the next year, there will certainly be more people forced to work for themselves because they will lose their jobs and not be able to find other suitable employment. And it will be no surprise if some of the talented people now unable to find work in an investment bank or other big company direct their energies towards creating a new generation of successful start- ups, said The Economist in a recent article.

I'm sure we all know of friends who created businesses which are now worth millions of dollars because they decided to venture out on their own after being retrenched. Retrenchment can be a blessing in disguise for some.

The key, I guess, is not to lose hope - despite how bleak the outlook may seem now. And if one were to assume risk, let it be with capital that one will not need for at least 3-5 years. In the meantime, be grateful for what you have - be it your health or time with your family.

The writer is a CFA charterholder

HOLDING POWER AND GUTS

Temporary putting aside FA and TA, it is all about holding power and guts. Easy money can be made or lost in hours if not days. Amazing market. Full of fearful and the fear-not.

Why I go fishing?

Fishing and the Stock Market

1. Be on the lake when the fish are feeding. (Know what sectors the market likes.)

Opportunity

2. Don't go fishing when the lake is packed with tourists. You probably won't be able to get near your favorite fishing hole, and even if you do, all those churning propellers will scare the fish away. (If everyone is playing the same stock idea, the easy money has already been made.)

Risk is higher when buyers already push up the share.

3. Come prepared with well-maintained fishing equipment, an adequate supply of bait, lures and sharp hooks, and an extra supply of patience. (Give your best ideas time to work, but don't use margin to see them out.)

Do your homework, i.e. have some profit target and action plan.

4. Don't make noise; you will scare the fish away. (Fidelity never speaks; why should you?)


Buy before others rushing in.

5. Don't fish where there are no fish. Know the structure of the lake and the habits of the fish you are trying to catch. Electronic fish finders can help you locate fish, but it won't make them bite. (If no one else is buying, why should you? Catching falling daggers can kill a dip-buyer.)


Don't waste time on those share that Big Boys are not interested.

6. Despite your best preparations, sometimes the fish just won't bite. (Don't be discouraged; go back to shore and enjoy the day, then come back another time.)

Be patient

Even the best traders are only 60% right. (Just make the winners big ones.)

7. Sometimes you find yourself in the middle of a school of feeding fish. Keep your hook baited and in the water. Correct equipment problems quickly, and get the bait back in the water. (When your stocks are running up, stay with the trend.)

8. When a big one takes your bait or hits the lure, set the hook firmly, keep tension on the line at all times and play the fish until it tires. Keep the landing net out of sight. (Don't sell winners too soon.)

Sell 50% first and let the stock run than sell others later.

9. When a really big one breaks your line, take it in stride. He may still be in the area, so always have a backup fishing outfit aboard. (If a market decline washes out a group, get ready when the group takes off again.)


10. Know when to come back to shore, particularly when whitecaps start to appear or there are storm clouds in the distance. (If the market gets crazy, go to cash while you figure things out.)

Noble - Got @ 0.83

Wow, heavy selling!!!

Noble - Will it break support tmr?

A Little Investment Secret ... It's All About YOU

This post is from Michael Yoshikami, President and Chief Investment Strategist of YCMNET Advisors, a wealth management firm:
Kathy Willens / AP
--------------------------------------------------------------------------------


The rollercoaster ride continues. We shriek as the market pitches and heels – but the ride’s not over yet. This rollercoaster ride isn't fun anymore. While my kids might like the thrill of fear, I'm no fan of it. And I’m guessing the average investor’s not liking it either.

Well, here's a little secret that’s built investment empires through the years. Employ this piece of advice and you’ll find yourself in control rather than wandering aimlessly, listening to so-called experts telling you what to do.

YOU decide what to do.

Make investment decisions based on what's important to you. What do you believe? You decide. After all, it's only your financial future here at stake, right? And in the end, no one else will care more for your finances then YOU.

That's the secret. You decide.

Decide what’s important to you and then listen to yourself. And be skeptical. Understand that every voice you hear has a framework, which, may or may not suit your needs. Take for example, Warren Buffett.

Warren Buffett Watch
Oh, to be Warren Buffett. He has made and lost billions. One day's market move for Berkshire Hathaway often totals in the billions of dollars. When he says to buy, do you think he is concerned about what will happen next week or next year? Nope. He's looking at fundamental value, and he can afford to take a hit for a long time frame. He can afford to wait and simply stroll down to Dairy Queen for an ice cream.

What about you? How long can you wait? Warren Buffet says to be greedy when other people panic. Well that sounds great except that he lost $10 billion last month but still has $30 billion to fall back on. So let’s get to the real question -- Do you agree with the philosophy that says you can be patient and wait for value to emerge? Are you able to have a hot fudge sundae and let it pass?

Decide and follow your best judgment. Don't avoid making decisions -- that can be a disaster. Like a deer caught frozen in the headlights of an oncoming car, investing from this perspective makes little sense and will likely get you the same result -- trust me it doesn't work out well for the deer.

What is YOUR philosophy? It's been oftentimes said that if you don't stand for something, you will fall for anything. Psssssst ... this applies in investing as well. So pause and answer these questions:

Is the economic world coming to an end or is this a shorter-term challenge?

When do you need to pull out money?

How much pain (fluctuation down) can you take before you panic?

The last time you panicked, what did you do and how did that work for you?

Figure out what you believe, your time horizon, the direction of the economy and your willingness to endure pain/pleasure. This will unlock the key to an investment strategy that’s right for you. And really in the end, aren't you sick of listening to everyone telling you what to do especially when it changes every 15 minutes? Be free now. Read and listen with curiosity not desperation.

You'll sleep a whole lot better.

Leverage and Greed - Double edged sword

One has $200K investing capital to invest, but not enough to invest on an asset of $1M. One becomes greedy and want a multi-bagger ROC (return on $200K capital). This can only be achieved by taking excessive risks, through leveraging (i.e. borrowing several times of one's initial investing capital of $200K).

If one is overly greedy and is leveraged more than 10, 20 or 30 times their annual earning, (30 times is maddness) and thinking one has control over future earning like a man who has plenty of drinks and still thinking that he has control over his driving.

Assets in your portfolio

Make sure the assets in your portfolio suit your needs and your personality, just your furniture fit your living room and your own individual style.

If you have a large and fully air-con living room, by all means fit in a really big, leather sofa set, and a 60" wall mounted LCD TV and enjoy yourself.

If you have a small living room with no air-con, try to fit in a really big, leather sofa set, and a 60" wall mounted LCD TV. Are you really enjoying yourself? See how long you can sit in your sofa without getting heated up (credit squeeze happen, will happen again). Are you going to have a stiff neck and shoulder watching 60 " LCD TV from a short distance? (Investing in property is like putting your big eggs in one basket at one big bang, leveraged or some overleveraged to seek high debts for one big single return)

Choose your assets wisely, and do not follow others blindly because our living rooms are of different size.

Noble

Thinking of Risks before Profit

It is very important when investing to think of risks before profit, whether in stock or property investing. Do we need to learn through the painful way of losing huge sum of money before we learn how to think of risks before profit.

Also there is such no investment that is low risk, and moderate return; otherwise, this investment will definitely be overbought by the Market and return will be significantly reduced or out of stocks.

In another word, for better return, higher risk is expected, and chance of losing your invested capital is real, and can happen unexpectedly.

Think of risks before profit.

1) How much I could lose without hurting me financially, if not to reduce the investing capital to the level that is not hurting.

2)For smaller capital, one could take higher risk as one could have not much difficulty in restoring the lost capital through more aggressive saving or reduced expenses to rebuild the investing capital to resume investing. Investing is a marathon, once started, no matter how, one have to stay invested; otherwise, there is no chance to recover those losses through return on safe financial instrument like fixed deposits. For bigger capital, one will have to take lesser risk approach and diversify the risks, it will be harder and take longer time to rebuild capital back to this level again.

3) If one thinking of using leverage (borrowing or taking loan to buy property), it is better to consider the numer of times of leverage against your annual earned income. Do you want to be 20 or 30 times leveraged? Look at those bankruptcies, they all killed by overleveraged. Period.

4) Long term investing does not mean no risks. In the market, corporate raiders are constantly prowling the Street to take companies private. It is not wise to overweight one counter to more than 40% of your portfolio. Overweight is a double edge sword, it can boost profit signicantly but it can kill too.

The market is not your mother.

The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

Noble - to buy back

Likely, tommorrow, it will break its support and trigger stop losses. See any chance to get some at 0.85 - 0.80?

Your Money or Your Life

There was a Wall Street analyst by the name of Joe Dominguez who saved enough money to retire at 31. He spent the rest of his life enjoying himself, doing volunteer work, and writing a book called “Your Money or Your Life”

We aren’t making a living, we are making a dying. Consider the average American worker. The alarm rings at 6.45 and our working man or woman is up and running. Shower. Dress in the professional uniform – suits or dresses for some, overalls for others, whites for the medical professions, jeans and flannel shirts for construction workers. Breakfast, if there’s time. Grab commuter mug and briefcase (or lunch box) and hop in the car for the daily punishment called rush hour.

On the job from nine to five. Deal with the boss. Deal with coworker sent by the devil to rub you the wrong way. Deal with suppliers. Deal with clients/customers/patients.

Act busy. Hide mistakes. Smile when handed impossible deadlines. Give a sigh of relief when the ax known as “restructuring” or “downsizing” – or just plain getting laid off – falls on other heads. Shoulder the added load. Watch the clock. Argue with your conscience but agree with the boss. Smile again. Five o’clock.

Back in the car and onto the freeway foe the evening commute. Home. Act human with mates, kids or roommates. Eat. Watch TV. Bed. Eight hours of oblivion.

And they called this making a living? Think about it. How many people have you seen who are alive at the end of the work day than they were at the beginning? … Aren’t we killing ourselves – our health, our relationships, our sense of joy and wonder – for our jobs? We are sacrificing our lives for money – but it’s happening so slowly that we barely notice.


You have enough for your survival, enough for your comforts, and even some special luxuries, with no excess to burden you unnecessarily. Enough is a powerful and free place. A confident and flexible place.

Become conscious of your expenditures. Stop trying to impress people with your possessions. They are not paying attention because they are too busy trying to impress you. Pay off all your debts, including your mortgage. That’s not too hard once you reduce your expenses.

Stock Picking: FA or TA or Both?

Stock picking is part science (FA), part art (TA), part luck, part intuition, and always uncertain - "not precisely knowing."

Because of these inherent subjective elements, success investing depends on understanding our emotional reactions to the market and its participants. Buried in these emotional reactions are both investment errors and investment strengths that remain mostly unconscious unless we devote substantial energy to unearthing them and then leveraging what we learn about ourselves into profitable decision-making.

Young Investors should be thankful to Mr Bear

Young investors should be thankful to meet Mr Bear while they are young and they may have not accumulated more investing fund from their income. If they were to meet Mr Bear 10 years later, they could have lost alot more in their portfolio.

SPC

Probably, some has missed Great SPC Sales. Got to wait for crude oil to crash again to buy SPC.

Can you wait that long?? 2020

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By 2020, China will produce more cars than the U.S. China is also buying its way into the oil infrastructure around the world. They are doing it in the open market and paying fair market prices, but millions of barrels of oil that would have gone to the U.S. are now going to China . China 's quest to assure it has the oil it needs to fuel its economy is a major factor in world politics and economics.

Value investor & Margin of Safety

Value investor diligently carries out fundamental analysis to determine the margin of safety for their entry level. But, I am thinking what if, the same value investor turns into a short term trader after the purchase, then sell into strength during this volatile bear market, and buy it back. Does this not significantly increase the margin of safety for the next purchase? What if he is successful for 15% gain, does not that increase the margin of safety by another 15% on top of the initial margin of saftety. Start thinking brothers... maybe I am talking nonsense leh

Noble

After selling off Noble, where is my entry now?

some news:

Company has purchased US$20,000,000 of its US$700,000,000 6.625% Senior Notes due 2015 ("Notes"), on 28 October 2008. Noble has instructed the Trustee to cancel the purchased Notes

Sold Noble at 1.05 ROC 28%

Next week allowance secured. Can relax a bit to catch the next fish. Cheers!

Sold some Noble ROC 17%

For past 4 weeks, no weekly allowances so jialiat. Cheers at last!

Get yourself financial educated to become savvy???

We can read, and read and then become very financially educated and will be successful in our investment. I don't think so. I believe that we will only be truly smarter, and financially wiser after going through at least one round of Baptism of Huge Losses, then we will become successful in investment.

So don't feel depressed in this Great 800 Pound Bear Market if you only previously encountered 1 Kg Teddy Bear.

Cold Winter will not last forever, Spring is nearer now and not farther. Cheers!

Noble - bloody hell! Punt more @ 0.80

Olam - Punted @ 1.37

Punting only. Will commodity be back in play due to weak USD?

Noble - Top volume today @ 75.8M

Tug of War, today. Probably, rotation to commodities play due to weak USD.

Commodities stocks did very well today. WMI, Olam, FRS, GAR, INDOAGRI

Noble - Got in at 0.91 during extreme market fear

Worst to come. Yes, probably. Snake catcher fear of snake bite. Maybe sometime

Extreme Cold Market testing your Fear Factors

This is going to be an extreme Cold Market that will be testing your Fear Factors again and again.

Be emotionally, mentally, and financially prepared to see yourself through for next three years, and don't get caught in the situation where you have to force sell some of holdings to fund your expenses or obligations.

Olam - Chew some nuts @ 1.68

Save for Tomorrow, Be Happy Today

Sponsored by
by Walter Updegrave,
Monday, September 29, 2008

Another reason to plan hard for retirement: It might cheer you up right now.

In a sense, retirement planning is all about deferred gratification. You live below your means while you work so you can save for a time when you can live however you want. In short, you give up something today so you can live better tomorrow.

But what if preparing for retirement had a more immediate payoff? Wouldn't it be neat if you could enjoy the fruits of your effort now?

Well, maybe you already do. That, at least, is the implication of a recent survey by insurer Northwestern Mutual and health education company LLuminari. The study didn't address retirement per se.

But as the charts below show, people who do the sorts of things that constitute good planning tend to feel happier than those who don't. It appears that the very act of preparing for retirement may deliver a reward now as well as later.

No one is suggesting that getting ready for your post-career days guarantees lifelong bliss or that there's a formula for achieving nirvana. (Save an extra $100 a month and be 50% more fulfilled!)

But the notion that taking steps toward a secure retirement can make you more content is hardly a stretch. Economists, psychologists and others who study happiness find that people who have a sense of control over their lives cope better with stress and live more happily, while those who feel powerless are more likely to be depressed.

Or as the playwright George Bernard Shaw put it: "To be in hell is to drift; to be in heaven is to steer."

So what can you do to make yourself feel better about feathering your nest? Apply these three happiness-linked actions to your retirement planning:

Set Goals

If you fail to set goals early on, you'll be drifting instead of steering. So think about the percentage of pre-retirement income you'll want to replace once you retire - say, 80% to 90%. Then use a calculator like our Retirement Planner to see how much you must save each year to have a shot at reaching that goal. Keep refining your savings target as you near retirement.

Take Steps to Achieve Your Goals

If the amount you're putting into your 401(k) falls short of your savings target, boost your contribution. If maxing out your 401(k) still leaves a gap, you can funnel additional savings into an IRA or tax-efficient options like index funds or tax-managed funds.

Control Debt

It's unrealistic to avoid borrowing altogether. But you can prevent debt from undermining your retirement security by not carrying a credit-card balance. Not only will you avoid onerous interest charges, but the Northwestern study shows that people who are most committed to paying off their cards are almost 20% more likely to describe themselves as cheerful.

So the next time you're trying to decide between a higher 401(k) contribution and a big-screen TV, you might want to go with the option that may make you feel good now and in the years ahead.

Retirement Drawdown and passive income investment plan

Can one retire comfortably at 55 if one has accumulated 25 years of overestimated expected annual expenses in one retirement fund; and taking inflation rate at 3%, and passive income coming from investment in 15-20 stocks of dividend yield of 7%. The spreadsheet has indicated it is possible. I believe as one grow older, it is likely to spend less on some areas but offset by higher spending in healthcare and medical.

One also must have some medical insurance, full medisave and special CPF account remain intact at 55 as contingency plan, and the final fallback will be selling of the residential home and staying in old age home or rental flat.

Singapore Past Inflation rate

We need to know what is the inflation rate for planning the retirement fund. Based on past historical inflation rate, average is 2.65%, probably using 3% is good estimate.

Freedom at 44

Freedom at 44

Last week, we discussed how retiring young and rich can be an attainable goal if one plans early and invests wisely. Today, we run a personal letter from RONALD HEE, who shows it is possible to become financially free as a hardworking salaryman, without needing to rob a bank or be a corporate high-flier

To the graduating class of 2008:

YOU are entering a world of amazing possibilities - possibilities that people of my generation barely believed would be possible. The world is, quite literally, your oyster. You also enter a world fraught with challenges and dangers, and ever rising costs of everything.

In our day, the options were limited, but inflation remained low most of the time, and there was job security. I still have friends who are in the same company since they graduated 20 years ago. For you today, inflation is roughly twice the interest the banks are giving you. You will probably change jobs every two to three years. And you can be fired from any of them at any time. Or, any company you work for could downsize or close down just when you least expect it.

So, for middle-class working Joes like us, does it mean that just to survive, we will be chained to our desks until the day we die - if we're lucky and not get replaced or downsized? Is financial freedom at the tender age of 44 - for you, 20 years of earning - an impossible dream? It really boils down to one simple formula. Earn more than you spend; invest what you save.

The first thing, of course, is to find a good job. There will be many, here and around the world. But don't rely on your company or your boss to take care of you. You have to take care of yourself, regardless of the profession you choose. Assuming you are not in the lucky handful who will inherit a fortune or get a job that pays you in the six figures, or win the lottery, the career you choose is what makes your path to financial freedom possible. But you have to plan that path.

Let's first look at the cost side of the equation. Buy what you need and some of what you want and know the difference. Do you really need a 200-inch high-definition plasma TV, complete with state-of-the-art home theatre system? And how many hours per day are you going to enjoy that system? Instead of spending tens of thousands on something you will use for a few hours a week, consider instead how that money could work for you.

One thing that surprises me about the younger generation is your propensity to spend on credit. Why buy things you don't need, with money you don't have? To impress people you don't like? Here's a crazy idea: Have the bank pay you interest for your money, rather than you pay the bank interest for their money. Twenty-four per cent interest? That's approaching loan shark rates.

Always, always, pay your credit card bills in full. Can't afford to pay? Simple solution. Spend less. Be low maintenance.

At some point, you'd probably want to buy a car. With an excellent MRT and bus system, and taxis when you need them, is it worth getting a car? Unless you have a real need - you're a salesman, you have a family to ferry around, your child is sick all the time, your mum is old, your girlfriend will leave you otherwise - the reality is that a car is simply not worth it. Over 10 years, a $50,000 car will cost you about $130,000, once you factor in petrol, road tax, repairs, car payments and interest on the payments, parking tickets, a few minor accidents... Again, it's better for that money to work for you.

Like most people, your biggest purchase will probably be a home. For most of us, our first home will be a government flat. Whether you buy public or private, consider buying something that you can continue to pay for, for at least six months, should you be suddenly out of work. If you don't mind the loss of privacy, consider renting out any spare rooms. It's not impossible for your rental income to match your mortgage payments.

Now let's look at the income side. Your basic fallback is your CPF account. Let's assume that by age 44, you've worked 20 years. Assuming an average of $1,000 a month, you will accumulate $240,000, not including interest. Invest it if you wish, but the main use of CPF should be to pay for your home, so your cash outlay is minimised. In 20 years, with $240,000, you could quite easily pay off your flat. With your spouse also chipping in 50 per cent for the flat, you should have more than enough.

If you've managed your expenses right, it's quite possible to save an average of $1,000 a month. This, of course, gets easier as you grow older and earn more. Put some away into a savings account as your rainy day fund, eventually building up enough to keep you going for six months or more. Put the rest in the hands of a good financial planner. This is someone who should be able to give you an average return of at least 10 per cent a year. The miracle of compound interest will yield you $756,030 at the end of 20 years, more than three times what you put in!

It's now 2028. Twenty years have passed and it's your 44th birthday. You are into your second or third home by now, or maybe even have a spare house, each time either breaking even or making a small profit. You have a healthy CPF balance that covers basic needs. You've taken care of some health risks by buying insurance policies when you were young and they were cheap. And your investment portfolio is chugging along very nicely, yielding around $70,000 a year, without depleting your capital, so it's sustainable for the long-term. $70,000 a year is equal to a tax-free monthly 'salary' of $5,800. Not too bad.

CPF + savings + especially your investments = financial freedom. Work part time. Start your own business. Do something else that pays a lot less but fulfils you more, such as church or charity work. Become a beach bum in Bali. Or travel round the world for six months. Financial freedom means the freedom to make these kinds of choices.

So, my young friends, my wish for you as you embark on the next stage of your life is that you will plan from the beginning to be financially free. May you have the discipline and luck to accomplish it!

Ronald Hee, 44, is a freelance writer, and just a little shy of financial freedom