In the beginning, everything is clear cut, Search belongs to Google, Social network belongs to Facebook, online retailing belongs to Amazon, and ieverything (Mp3 players, smartphone, tablets and even personal computer) belong to Apple. Each is king in their respective markets, and each is lacking something another has, and each has the potential to be all things to all people.

Google

In barely a decade since Google is founded in 1998, it has since produce countless innovations, back when people told Sergey Brin and Larry Page that search engine is a dying business simply because there is no way to effectively monetize the high traffic. They actually believe in it, which is why they offered the whole of Google to Yahoo for US$1billions. However, a decision by then Yahoo CEO means that they are fated not to be become multi-millionaires but billionaires.

Google innovation philosophy – Life is always in beta, multiple iterations are always better than trying to get it right the first time.

In its 12 years of existence, Google total produced not one, not two but three brilliance and resulting US$30 billion per year from these three brilliance – Pagerank technology, Adwords search advertising and Adsense contextual advertising. Many of key concepts behind them were burrowed and then iterated.

Adwords quality score and alignment of interests’ concepts

Adwords advertising model was burrowed from Overtune but it does not stopped there. Overture’s pay-per-click auction model allowed advertisers to buy their way to the top of the listings — highest bid gets the most exposure. On the surface, it seems that this will result in maximum revenue for Google, but it is not, when one does not balance the interests of all involved parties, the outcome is a smaller economic pie. Adwords quality score is introduced to balance the interests of all three parties – searchers, advertisers and Google itself, and to bring search advertising to be more in line with the ideal of developing a more perfect search engine.

Facebook increasingly dominating of the social graph and eyeballs, and taking away of some advertising pie along with it, prompted Google to start Google Plus and cofounder Larry Page to tie all employees’ bonus to success of making Google more social. Its announcements on acquiring cell phone maker Motorola Mobility also send the company into Apple’s smartphone turf. Apple built its success by selling hardware and making them work seamlessly with its software programs. The Motorola deal practically means Google will not only be offering Andriod but also make the smartphone.

Facebook

In the movie, the Social Network, Mark Zuckerburg became well known as the person who turned down a million dollars from Microsoft. But what is relatively unknown is that he actually turned down a billion dollars from Yahoo just years later. In the summer of year 2006, Yahoo attempted to acquire the company for $1 billion dollars. Reports actually indicated that Mark Zuckerberg made a verbal agreement to sell Facebook to Yahoo. A few days later when Yahoo’s stock price took a dive, the offer was lowered to $800 million and he walked away from the deal. Yahoo later offered $1 billion again, this time Mark Zuckerberg decided to turn down Yahoo and earned instant notoriety as the “kid” who turned down a billion.

Wisdom of friends Vs Wisdom of crowds – Do some information and answers best provided by networks of friends instead of search queries?

Facebook announcement of intention to enter online search market put it directly into Google’s home ground. But the social network ideal of a search engine is one based on wisdom of friends instead of wisdom of crowds.

Harvard programming genius Mark Zuckerburg actually gets an A+ for a non-computing module at Harvard University. His grander vision in which people consult their network of friends for information instead of entering search queries in text field comes from this same module for which he receives an A+ at Harvard University. The professor of the Arts module gives him an A+ because he created a platform where students collaborate with each other and result in a better outcome. The class as a whole got better grades than usual.

Indeed, how is Google going to develop a perfect search engine when the information that people wanted has not been created yet. Google powerful search algorithms depended on the wisdom of crowd while Facebook for a subset of information spaces , such as the problem faced by Mark himself at Harvard, is more able to give you exactly what you want based on the wisdom of friends. As you can see, a particular subset of information is something that Google is unable to offer because first, it has not been created until you asked the question, and second its accuracy is better when depended upon the wisdom of friends and lastly, the answers and information can only be created by network of friends.

Apple

Apple makes its billions from selling something that is supposedly to be a commodity business. Hewlett Packard recently announces the sale of its PC division even though it is still making a profit. The sale marked further consolidation in Windows based desktop PC industry, leaving behind only Lenovo, Dell and Acer.

Steve Jobs goal and mission to make the best computers, not to place a PC on every home and office desk may cause Apple to lose the entire PC market to Microsoft Windows, yet ironically, when applied to other technology gadgets such as Mp3 players, Smartphone and tablets (i-redesign for a better user experience), allows Apple to overtake Microsoft as the world’s most valuable technology company.

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2. Business Tips for online career portals
3. Entrepreneurship 101

Economic and Financial Lessons

Earthquakes happening within a geographic region of a country seldom have significant effects on the economy and financial markets of the world at large. We can see this in most recent Earthquakes in Christchurch, New Zealand in February this year, three years ago in Sichuan, China during year 2008 and six years ago during year 2004 in Indian Ocean that caused tsunamis in Southeast Asia regions. Notice the increasing short time frame between each successive major Earthquake – a signal of coming of end of the world according to the biblical book of revelations?

Let us rewind back to 1923, when a major Earthquake occur in Tokyo, Japan, which destructs almost all of the then Japanese capital. Other than, causing an economic downturn in Japan, it hardly creates any scratches on the financial markets in other parts of the world. However, the world’s currency, capital and other financial instruments markets are now more interlinked and integrated than ever before. With that, there will be turbulence in other countries as far away as United States. How a Fukushima nuclear incident in Japan can affect the world’s financial markets can be easily understand by how Japanese money flow in and out, the basic concept of supply and demand affecting prices of securities and last but not least how recession occurs from changes in supply and demand of capital.

Savings from ordinary Japanese went into banks and insurance companies, who then invest this savings into various securities around the world. These securities include but not limited to, treasuries bonds, corporate bonds and stocks of blue chips around the world. It turns out that these savings amount to trillions of dollars, of which a substantial percentage of it is now required to repatriate back to Japan. Insurance money for Earthquakes in Japan will have to invest overseas based on common sense since cash out from investments will be needed if an Earthquake is to occur and if Earthquake were to occur, Japanese will need the cash instead of spending them to buy stocks and bonds in Japanese financial markets. Thus if Earthquake were to occur, Japan stock markets will usually tanked.

Due to large amount invested in US treasuries, and the need to generate the cash for insurance pay-outs for the Earthquakes, selling off of US Treasuries began almost immediately shortly after the incident, causing bond prices to fall and interest rates to increase. The problem with repatriating cash invested overseas back to Japan also means that the cash in US currency will also need to exchange back to yen, thus causing yen to strengthen against US dollar.

In summary, bonds of US Treasuries and corporate companies would have to be sold in order for savings to be withdraw and meeting insurance claims – for damages to houses and other properties, life insurance and for rebuilding efforts. Bond prices will fall and interest rate rises, overseas currencies would need to exchange back to yen, causing yen to rise.

Social Lessons

The annual labour of every nation is the fund which supplies it with all the necessaries and conveniences of life, and which consist always either in the immediate produce of its labour, or in what is purchased with that produce from other nations.

Wealth of Nations, Adam Smith

The solution to energy crisis or a cure to cancer will not disappear by itself. They can only disappear if the world’s brightest minds put their brains to work on the solution and the cure instead of devising Lehman Brothers Minibonds and other complicated subprime investments. For years, people have asked, what the fuck did investment bankers do to deserve exorbitant salaries, and maybe some political leaders as well, not only do they bring down the world’s economy, but most importantly, the obscene salary cause a brain drain away from work that will create the real wealth, thus creating even less wealth. Not having a cap on the earnings of lucrative banking and finance sector destroys the wealth of humanity as a whole since the best and brightest is not figuring out the solutions to energy crisis or figuring out a cure for cancer.

Critical Thinking Lessons

Humans will only make reasonable sacrifices to meet ethical obligations. Sometimes the reasonable sacrifices by all of us resulted in a smart for one but dumb for all scenario. People will always say and do things that are in line with their best self-interests, and when there is an ethical obligation, they will only make reasonable sacrifices to meet that obligation.

The question is – has humanity been engaging in a false dilemma all along regarding the energy crisis. So far, the dilemma regarding generation of energy has been between either stay at using fossil fuel or going nuclear, because so far wind, hydro and solar energy have not been able to gain significant inroads. It isn’t a false dilemma in this case, we have a third option – using nuclear power with Thorium based fuel cycle.

The fact is that if President Obama were to spearhead another Manhattan Project with a nuclear dash for Thorium would potentially killed fossil fuel overnight. Solving the energy crisis would have affect the interest groups of many – from people of oil producing countries starving themselves to death and potential billions dollars of oil and gas industries evaporated. As such, we can easily see that it is beyond reasonable sacrifices of many people. One may argue that rich and powerful interests groups from oil and gas industries are able to influence politics and prevent policies from developing permanent solutions to energy crisis, but they cannot stop Facebook from connecting liked minded people, just as Facebook can overthrow an authoritarian government, it can also let the whole world knows that a permanent solution to energy crisis is in sight.

If we go back to history, unfortunately, at the dawn of the atomic age, the USA and USSR is at cold war and both were completing to stockpile nuclear weapons. Thorium based fuel cycle was abandoned in favour of the Uranium fueled Reactor because the latter could produce lots of weapons grade nuclear material, while Thorium could not. This is despite the fact that Thorium fueled rector was clearly superior in every aspect, efficiency, safety to the extent that it is safe to fail and Chernobyl/Fukushima accidents are highly unlikely, low waste production, size and cost of operation.

The importance of Freedom of Information Act

As such, we can see that without democracy, there will be no freedom of information. If there is no freedom of information, all of us will still be in a false dilemma that either we depend on fossil fuels or nuclear power with uranium fuel cycle. The fact that it is not, there is relatively safe nuclear power based on Thorium fuel cycle which produces far less radiation, waste, more efficient and superior in almost every aspect.

Democracy cannot solve every problem does not mean that democracy cannot solve any problem. However, in order for democracy to function effectively, its citizens need to be well educated. Well educated means able to think critically, the fact that books on critical thinking can disappear from public libraries of a place and the design of its education system most probably means that the government would not wished its citizens to detect fallacy in arguments and reasoning.

Environmental Lessons

Back to the fallacy of a false dilemma, the moral of the Fukushima nuclear incident is not really we should donate more money if we can afford if similar disaster happen again. The real lesson is to once and for all remove the energy crisis. Instead of donating money to Japan, thinking that it is the only way to do good, why not spread the words around to support and to fund research into nuclear power based on Thorium fuel cycle so that no Chernobyl and Fukushima nuclear accident will ever happen again. I likened it to donating money to a hospital operating entirely on charity funds, only to see its rent hiked by the government an amount equivalent to its surplus, that one may as well change the government first, if not, all donations are fruitless.

Related posts:

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3. Viewing the world through investment lens

1. Incur low fees and charges

Unlike mutual funds and unit trusts, where there are high management fees, together with performance fees that need to be paid when the fund is doing well but no non-performance fees credited to you when things cork up and fund is not doing well. Due to the fact that ETFs is traded like a stock, one only need to pay brokerage commissions and exchange charges during selling and buying of ETFs, plus the fact that management fees for ETFs is relatively low compared to mutual funds.

Low expense ratio simply means that investors will have more money to invest at the end of the day.

2. ETFs give out dividends

There are ETFs funds that yield dividends to investors. While some directly gives out dividends from underlying assets to shareholders, those that did not is due to fund managers deciding whether to re-invest same dividends or distributed to investors. This makes it no difference from individual stocks for those intending to invest for cash flow.

3. Liquidity also exists in ETFs market, diversification at a low cost, diversification with a low capital

For ETFs tracking large and well known blue chips like S&P500 and STI, liquidity definitely exists for both the ETFs itself and its underlying assets. Since many small time investors will be adverse to the focus and value investing style of Warren Buffett, they will want to diversify their investment capital into different stocks as well as asset classes. However, at the same time, the same people will not have the capital size needed to diversity adequately, especially when it comes to blue chips. This is where ETFs can help where one unit is equivalent to all stocks in the index and is affordable to many.

4. ETFs is a simple and non-complex product

Theoretically speaking, ETFs is a simple to understand investment vehicle, for cash based ETFs, where one unit of ETF is equivalent to 500 companies of S&P500, or 30 companies for the case of STI. What is complex is some exotic and sophisticated sway based, leveraged or inverse versions. Those should not lump them together, especially for a governmental financial regulatory authority, unless of course, it also coincidentally owns a bank and the bank needs to sell mutual funds and unit trusts to generate more revenue, hence will have to do something to prevent the popularity of cash based ETFs – a relatively simple and non-complex product.

Cash based ETFs is simply those where your invested capital is backed up by shares of underlying companies as assets. The only time when you lose the whole of your capital is when all the stocks of the companies’ trade at zero dollar value. This is not the same for sway based, leveraged or inverse versions, where things can get complicated.

5. ETFs can expose you to every single market imaginable

At this day and age, due to the benefits and advantages conferred by ETFs, which eventually leads to its popularity, means that there are just about an ETF for every continent, geographic region, country, major index, sectors, industries, asset class, and niche area that one can possibly imagine, to suit the personality and risk profile of everyone. In other words, an entire portfolio diversified until cannot diversified can be constructed easily, quickly and cost effectively by simply using ETFs alone.

In addition, as a specific country’s key index, such as S&P500 for United States, Hang Seng Index for Hong Kong and Straits Times Index for Singapore, aims to provide a reflection of the market and economic composition for that country, index providers will have to adjust companies in index in order to provide and maintain this relevance. Due to this requirement, there is no additional effort or cost to ETFs investors for ETFs that seeks to mirror the returns of these indexes.

Related posts:

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2. Danger of leveraged and inverse index funds and ETFs
3. Exchange Traded Funds 101 – a simple introduction

1. Allows freely exchange of ideas in your head

Humans like to compare faces of opposite sex and having unclean thoughts about the better one and they like to look around their surroundings for faces of opposite sex to compare. This is an idea, taking it online is also an idea, like Amazon.com took retailing giant Walmart online, Groupon.com took the coupon cutting experience online.

Two ideas from Facemash.com freely exchange with each other resulted in Facebook.com, Facemash.com is not the first website to show two faces and compare which one is the better one for having unclean thoughts, hotornot.com is the first to come up with that idea, the success of Facemash.com within a few hours at Harvard university showed or surface the idea that a subset of an original large idea/market in the online world can also achieved some success as well, like Facemash.com operate on the same concept as hotornot.com but only contain faces of Harvard University students, while Facebook.com, a social networking site initially only opens to Harvard students, also has some level of success as well. Another example is like what Beeconomic.com is to Groupon.com.

As people go through life itself, we are constantly bombarded by many ideas, insights, concepts and other types/kinds of knowledge. It is how these ideas and insights interchanged and freely exchanged with each other that result in innovation. Sergey Brin and Larry Page observation of citations in academic publishing, that the more relevant and better a published academic article is, the more it will be cited in other academic essays can be used in determine the relevancy of a web page much more accurately than keywords density. This idea later transplanted in search engine algorithms become the foundation of Google Pagerank technology.

Between, one may wondered, how come somehow there is always the sex and pornography niche for every website idea that people come up with. Like when Friendster as the first social networking site is founded result in adultfriendfinder.com some time later, while the idea of video sharing site like YouTube also result in similar outcomes in a particular niche for video sharing websites. And guess what, when there is Facebook, a fellow come up with Fuckbook.

2. The beauty of blue ocean strategy

Friendster and MySpace together got more than 100 million users at the time Facebook is founded in year 2004, and throughout the years, users grow at a certain rate and stagnate at that rate. People assumed that is the market size for online social network as they thought those who wanted to join an online social networking service has already been on Friendster and My Space already. What is a fact is that humans have social needs and social networking site took the entire social networking experience online. The then largest social networking site Friendster and Myspace having only 90 million and 130 million registered users respectively doesn’t mean that Facebook is competing with them for the 90 + 130 million people, it means that there are more than 90% of the Internet population of the whole world that got access to the Internet who still have not connect to a social network yet for some reasons and Facebook provides the reasons for them to do so and stay connected with other people. In other words, there is Blue Ocean and not really completing in the bloody red ocean.

As an employee and in a traditional corporate environment, the higher you go, the harder it is to go up further due to its pyramid hierarchy structure. But this is not the case in other areas.

3. The wealth generated from political and economic freedom

In the movie, Mark Zuckerberg mentioned that there are hundreds of thousands people with almost the same programming genius and capability as him in China yet none of them founded companies like Facebook and YouTube, or the first to come up with technologies like MSN messaging. Almost all their versions of Facebook, Twitter (i.e. Weibo.com) YouTube (i.e. Tudou) and MSN messaging (China version is QQ) arises because the Chinese Communist Party blocked the first mover and their domestic companies become a substitute.

In a short span of 30 years, one was to see the most creative output in the entertainment industry from a population of 7.5 million people in Hong Kong. In contrast, China with 1 billion people, Taiwan with 22 million people and South Korea with 20 million people and another country even with 6.5 million people most probably nothing good will ever come out of it due to its strifling political climate, during the same period of time does not managed to produce movies and dramas that were to match the quality of Hong Kong. In fact, the size of Hong Kong movie industry then were second only to Hollywood and Bollywood.

4. Without vision, the business perished.

It seems that not only without vision the men perished but businesses also. Google and Facebook metamorphic rise to dominate their respective markets at the same time spell the end of Yahoo and Friendster, when is the last time that you are on Friendster?

While Yahoo made its founders billionaires initially, it has since decrease substantially in total market value since then and Friendster did not do any other thing other than plastering some Google Adsense ads on its site.

Where there is no vision, the people perished.

(Proverbs 29:18)

One just need to look and and compare the vision of Yahoo/Google and Friendster/Facebook and can see the wisdom of this statement. For years since the founding of Yahoo and Friendster, they are guided by vague and unclear mission statements. Yahoo vision is to be the center of people’s online life? What does it mean exactly to be the center of people’s online life, compared with Google’s goal of developing the perfect search engine and to make information universally accessible.

The perfect search engine is something that understands exactly what you mean and gives you back exactly what you want.

Larry Page, co-founder of Google

This is mentioned in an article by Paul Graham that Yahoo couldn’t decide whether it is a media or technology company.

He has first-hand experience — his company, Viaweb, was bought by Yahoo and he worked there for a while. In a nutshell, he felt that Yahoo was too conflicted about whether they were a technology company or a media company.

Paul Graham

5. Surfacing of any business opportunities or creative ideas is limited by your pre-existing frameworks

I once read another blog on financial planning regarding the Scarcity Plato thinking mindset when it comes to having diverse learning and interests. Scarcity Plato thinking is the idea that you need to get As for for your exam subjects or progress in your career, therefore one should do nothing other than learning and thinking about studies or things in jobs only, since spending more time on this means less time for the others. However, this logic is flawed in the first place when it comes to having diverse interests and hobbies. A person learning to play piano for the first time and spending his time struggling with piano keyboards the day before exams is sure going to affect his exams results the next day, however the same person already with piano grade 8 effortlessly playing a piece of music for relaxation is not going to affect his studies or work by any bit.

I wasn’t someone who got play magic cards, and up to this day, I still cannot believe that a deck of magic cards from Japan can worth as much as US$6000, as I found out two years ago from a friend. Think about whether to have the scarcity Plato thinking mindset when it comes to having diverse interests and hobbies or so called only focusing on studies before graduation and work after graduation is better. (Climbing a corporate ladder is like completing in a bloody red ocean while starting companies like Facebook is like a blue ocean strategy?)

As I mentioned in first point on freely exchange of ideas, the more diverse interests and hobbies a person has, the more permutations and combination of them can result, the more likely one can become a millionaire.

6. Focus on strengths and ignore weakness?

Steven Covey, the author of New York Times best seller, The Seven Habits of Highly Effective People, mentioned about focusing on strengths and ignoring weakness. He does says about this but whether to accept this is up to individual choice.

Mark Zuckerburg most probably won’t be a successful network marketer, going by what is portrayed in the Social Network movie, though not necessarily so in reality. In this movie about him, he is being seem as someone without friends and only got one best friend at Harvard University who is Eduardo Saverin, which he restored as a co-founder of Facebook after a lawsuit in which Mark Zuckerburg is sued by the same best friend of him.

It is fortunate that he focus on his strengths in computing, founded Facebook and became the youngest billionaire in history. Had he thought that the only way to make millions is through networking marketing or insurance man, he will have flopped terribly due to his less than ideal interpersonal skills. In network marketing and insurance sales, one need to have excellent rapport with his downlines so that they can sell some magnetic beds or investment linked policies for you. Note that he got excellent verbal communications skills from the way he talk at technology forums.

7. Look for Sean Parker when aspire to become a dot com millionaire/billionaire

In the movie Social Network, basically after having one night stand with a hot bondie, the Sean Parker(played by Justin Timberlake) open the laptop of the bondlie that he slept with the night before, saw the Facebook website and immediately recognized its potential. The next minute, he already contact Facebook founders about the possibility of joint ventures. At the end of the day, Sean Parker held a 5% stake in Facebook, currently valued at US$2.5 billions.

Sean Parker is by no means a simpleton when it comes to dot com startups companies, being a founder of Napster that caused a storm in the music industry, he not only has the foresight to see the potential viability of a dot com company but also got wide contacts with venture capitalists in Silicon Valley.

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1. Potential loss of remaining unpaid mortgage value for oneself and next-of-kin if were to become disabled or died

This is perhaps the single largest reason for not paying off housing loan even for primary residence. Most breadwinners will have mortgage insurance for this home to pay off remaining loan in the event of death or total permanent disability. If one has $200 000 cash lying idling in various bank accounts and use for a fully paid out house, then in the event of death, his family only got the fully paid out house while if he instead leave it lying in the banks, his family will have got a fully paid out house (paid off by mortgage insurance) and the $200 000 cash as well in the event of death.

2. Opportunity cost of locking cash in house

In general, the housing loan interest rate is around 3% to 4%, by fully paid out the loan, one can save the 3% to 4% for the next 10 to 30 years, depending on period chosen. However, one will also be cash strapped by the same amount of the next 10 to 30 years, because the amount is going to be substantial, somewhere in the region of $100 000 or more, the opportunity cost will also be great if it is not used to pick up stocks selling in bargain price during stock market crashes. Even if one were to play it safe in the stock market by investing in ETFs tracking indexes, the return will most probably be more than 3% to 4% more than 20 years down the road.

3. A mortgage is the least expensive loan

To give a figure for illustration, it doesn’t make sense to lock $200 000 in house to save 3% to 4% interest rate only to pay 24% interest in credit cards debt when you want to buy something that you like or 7% in car loan when the $200 000 is used to exchange for 100% house equity. The idea is to leverage on the loan with the least interest rate.

4. Invest in a single premium endowment

This is for those who are particularly risk adverse. One of the considerations in purchasing endowment policies despite offering guaranteed yield that is higher than a bank fixed deposit is that given a relatively long period of premiums commitments and economic uncertainty in today’s times, there is a good chance of inability to make payments years down the road. The single premium endowments do away with the risk of inability to pay off the premiums.

In the case of having a windfall of $200 000 (figure used is for example) or $200 000 savings from a high income and bonus job, one will still do better to invest in a single premium endowment for around the same loan period and interest rate as mortgage, than to use the same $200 000 for a fully paid out house, as this not only offset the interest rate from housing loan but also provide additional death and total permanent disability benefits.

There may be a penalty for surrendering before a certain date, but if did not surrender, $200 000 inside an endowment policy can earn compound interest with the final amount be substantial 20 years down the road than if were to lock inside the house, since the $200 000 will not increase in value and the market price of house will continue to rise regardless of whether the house is 20% equity/80% mortgage, or 100% equity.

5. Net Worth remain the same if paid off the housing loan

Net worth of an individual is calculated by total assets minus total liabilities of that person. If $200 000 cash is shifted into $200 000 house equity, the net result is the same as $200 000 cash in banks and $200 000 in mortgages. The only difference being that of having your $200 000 cash frozen inside housing equity.

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2. All the interest rates that everyone needs to know
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I believe that we all at one time went through the following, it showcases how the general public invest when it come to stocks to a great extent, emotion almost always win over logic when it comes to money.

Contrast this with a well known advice from the sage of Omaha,

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.

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Since a computer is an indispensable tool for study, work and businesses, there is a need to keep it running fast and effective in order to increase productivity using some essential cleaning and maintaining software. These softwares range from enhancing security like firewall, antivirus, antispyware to systems tools for cleaning Windows registry, defragmentation of hard disks, shredding of confidential files to various open source alternatives for some essential commercial software. All of them are freeware or open source released under GNU, not trial versions or demo.

Freeware as well as open source software for a PC security and optimizations needs,

1. Antivirus

Forget about Norton, McAfee and Trend Micro Antivirus. There is a concept from economics called marginal benefit and marginal cost, that a wise and rational person should take an action when its marginal benefit exceeds its marginal cost. We shall see how it applies to spending money on antivirus software. Suppose that an antivirus software that cost money detect 99.98% of existing virus out there and a free alternative like AVG Free edition and Avast detect a bit less at 99.97%. Is it worth to pay more than US$50 for a licensed copy and subsequent fees in order to continue updating the virus database for the marginal increase of 0.01% of existing virus out there? Take note that a paid version of antivirus still does not detect 100% of the viruses and malwares out there and the fact that a free alternative does not necessarily fare worse than a paid one in the first place if you look at the results of this report from a trustful source. The subscription fees for continuing to update antivirus database, which I think one will be better off spending on MacDonald’s happy meal.

Home Page: http://www.avast.com/index

Download Page: http://www.avast.com/free-antivirus-download

2. Antispyware

Similar to antivirus, there are many well known free antispyware for installing on a home PC that renders a paid one a waste of money. Windows Defender that comes with Windows from Windows 7 onwards is one good free antispyware.

Home Page: http://www.lavasoft.com/products/ad_aware.php

Download Page: http://www.lavasoft.com/products/ad_aware_free.php

3. Ccleaner

There are many temporary files left behind by Windows itself and other applications in many normal day to day operations. These include but not limited to temporary Internet files, cookies, Windows log files, recent documents, start menu and desktop shortcuts and many others. While Windows disk cleanup also cleans unnecessary files, Ccleaner is more comprehensive in the range of files to delete. In addition, for those who got surf porn, who got sensitive banking data to securely delete, Ccleaner also got secure file delete to remove Internet cache and history files.

Home Page: http://www.piriform.com/ccleaner

Download Page: http://www.piriform.com/ccleaner/download

This Ccleaner also includes a function for removing startup keys, though Start > Run > msconfig for Windows XP or Start > Search > msconfig for Windows 7 can also do the same. One of the simplest ways to decrease startup time and reduce unnecessary usage of computer memory is to remove unnecessary startup keys using msconfig, startup keys are entries listing programs that load when Windows load and run when Windows run, as you install programs over time, some startup keys are added but most of them are really not necessary and increase Windows startup time and memory usage, thus slowing the PC both when booting and when using as well. Google the meaning of the startup keys before disabling them for faster boot time and more efficient usage, take note that some of them are system critical processes while some is like Antivirus software and need to load when Windows load in order to have real time protection, though not a system critical process.

4. Disk Defragmenter

As you may have already known, over time, as you install and uninstall programs, create and delete files, the hard disk get fragment over time. Fragmentation of hard disk increases mechanical load on read and write head of the hard disk itself since it will take more time and physical movements for it to read/write a file for a fragmented hard disk, thus there is more wear and tear in the long run and ultimately leads to higher probability of hard disk failing in shorter time. While Windows also got provide disk defragmentation tool, it can only defragment when you are totally not using any programs including screensaver, not a very good idea since need to leave the CPU on while defragmenting and waste electricity. This defragger allows multitasking, doing other things like web surfing while the software defrag in the background.

Home Page: http://www.piriform.com/defraggler

Download Page: http://www.piriform.com/defraggler/download

5. Windows Registry Cleaner

Last but not least, another important PC system optimizations tool is Windows registry cleaner. As you install and uninstall programs (games, applications, other software), there will be orphans registries entries from programs uninstalled, lying around and slowing the PC boot up time and processing speed as well. As a result, having one or two Windows registry cleaners and cleaning registry regularly is one essential computer maintenance task to do often.

Home Page: http://www.wisecleaner.com/wiseregistrycleanerfree.html

Download Page: http://download.cnet.com/Wise-Registry-Cleaner-Free/3000-18512_4-10605508.html?part=dl-6288537&subj=dl&tag=button

Open source alternatives to commonly used and essential commercial software,

1. Office Productivity Suites

The great majority of us only use functions from Microsoft Word, Excel, PowerPoint and Outlook. The rest like Onenote, Access and Publisher are what most can do without. A common open source and free alternative to Microsoft Office is OpenOffice which offers a free and open source alternative to Word, Excel and PowerPoint. In addition, its extensions created by the open source community offers almost everything that Microsoft Office has, like templates for Impress (OpenOffice version of PowerPoint) and special characters to insert mathematical equations. Only problem is Microsoft Office 2007 and above got the ribbon tabs that make things atheistically pleasing and more productive too while OpenOffice user interface still resembles that of Microsoft Office 2003 and previous versions.

Download OpenOffice here, an open source alternative to Microsoft Office,

Home Page: http://www.openoffice.org/

Download Page: http://download.openoffice.org/other.html#tested-full

2. Image Editing Software

Ever since digital cameras become popular and affordable, there is greater need for photo editing software with more functions like Adobe Photoshop because there are greater user created images to edit now. However, save for those professional graphic designers, most of us don’t really need the sophisticated features and functions found in the latest release of Adobe Photoshop CS5. As a result, using the free and open source image editing program known as GIMP will do fine.

Download GIMP here, an open source alternative to Adobe Photoshop,

Home Page: http://www.gimp.org/

Download Page: http://www.gimp.org/downloads/

3. Email Client

Whether you are using a web based email account like Yahoo Mail or Gmail, etc, or not, using email client like Microsoft Outlook is a great way to access own email account, simply because one only needs to click to open the program instead of entering user ID and password every time, provided the email client has already been properly set up.

Download Mozilla Thunderbird here, an open source alternative to Microsoft Outlook,

Home Page: http://www.mozilla.org/

Download Page: http://www.mozillamessaging.com/en-US/thunderbird/

4. Secure File Deletion

For those of you who are like Edison Chen, have confidential personal and financial information that needs to be securely deleted until beyond recovery from computer hard disk. There are a few freeware on this available also.

Home Page: http://www.fileshredder.org/

Download Page: http://www.fileshredder.org/files/file_shredder_setup.exe

5. Download Manager

While there is widespread broadband usage now, the fact is that files also got larger and electricity bills also got more expensive. Suppose that you got a more than 500MB file to download, you wouldn’t want to re-download again if your PC hangs or the Internet connection breaks for no good reason. In addition, for a large enough file, you wouldn’t want to let the CPU on for the purpose of downloading only while go and sleep, and since there will be excess bandwidth when doing light web surfing such that the PC can multi-task effectively and save electricity, the optimal option when downloading is to stop when you are about to switch off the PC and resume when you turn on the PC the next day. To do this, a download manager is a good thing to have which allows you to stop and resume from the percentage of data left to download.

Download Free Download Manager here, an open source alternative to GetRight,with Firefox integration,

Home Page: http://www.freedownloadmanager.org/

Download Page: http://www.freedownloadmanager.org/download.htm

6. File archive and zip utility

While the Windows in-built zip function is more than enough for most purposes, the fact is people sometimes send you zip files in rar and other archive formats which cannot be opened by Windows. As a result, using a commonly used open source zip utility for unzipping rar and other archive formats instead of buying the WinRAR archiver is a good idea.

Home Page: http://www.7-zip.org/

Download Page: http://www.7-zip.org/download.html

7. PDF Files Writer

There is no need to buy and install the whole Adobe Acrobat Professional for a whopping hundreds of dollars if your only purpose is to create a PDF file from other types of files like Word, Excel and PowerPoint and don’t really need other features like setting passwords and editing an existing PDF file. Not only is it wasting money but also wasting system resources since the Adobe Acrobat Professional took up quite some memory after installation. Here is a list of PDF files writer to choose from, the most commonly used open source PDF writer is the PDF Creator.

Home Page: http://sourceforge.net/projects/pdfcreator/

Download Page: http://sourceforge.net/projects/pdfcreator/

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1. When net income far exceeds free cash flow for long period of time

All the accounting red flags mentioned below ultimately leads to net income gradually exceeding free cash flow. As mentioned earlier, due to accrual accounting basis, revenue are reported as and when it occurs, while the cash for sale of products and services will received sometime earlier or later from the time when sales occur, this leads to discrepancy in net income and free cash flow, with potential for manipulation.

2. Great mismatch between rate of accounts receivables and revenue/sales growth

As a company is expanding its market and finding new growth areas, its revenue and sales will grow, this will normally accompany by growing accounts receivables. By right, theoretically speaking, if the sales increase at a certain rate, then the account receivables should also increase at around the same rate unless the sales are to customers with bad credit which will translate to bad debt down the road in future. Significantly higher account receivables growth rate than growth in revenue is a clear signal to fraud that warrants some investigations. Comparing and contrasting annual rate of growth in revenue and accounts receivables is a way to detect if the company is recognising revenue too early.

3. Imagine revenue from thin air

The legitimate revenue or sales from a retail shop selling bread is simply amount earned from sales of bread and similarly for other types of companies, there will be other proper things where the company core earnings is. However, there are a few ways where company revenue can be falsified. For instance, if the firm sells its property investments but report the proceeds gain from sale as current income, net income will increase substantially for that year but the earnings will be deceptive since it is not really its core earnings and is nonrecurring. Another way of imagine some revenue out of thin air is simply reporting cash proceeds from a loan as revenue instead of booking it under liability since the loan needs to repay one day and is not really income.

4. Using subsidiaries to generate fake income and store expenses and losses

A subsidiary of a parent company is another company with more than 50% shares owned by the parent company. This category of accounting manipulation is particularly hard to detect because the subsidiary may not be listed on the balance sheet, may be found somewhere in the footnotes or even not being disclosed in the first place. One way a parent company use subsidiary to generate fake income is by lending money to its subsidiaries but no cash actually changed hands while interest income from the subsidiaries are reported by the company. In a similar sense, by shifting expenses to subsidiaries, net income increases for the parent company.

5. Increasing the time period for depreciation and amortizations

Plant equipment being used for 10 years will have its value depreciated over 10 years with depreciation expense booked over the 10 years and capital asset decreases to zero at the end of the 10 years. The firm can decide the period of depreciation, with the longer the time period, like instead of 10 years, it is 15 years now, and there will be smaller depreciation expense for each year of the 15 years. This can also occurs for intangible asset with amortizations.

6. Capitalizing expenses for current year

When physical plant equipments are bought for current year, the expense for purchasing the plant equipment is capitalised as an asset and not reported as expenses based on accrual accounting basis. This is to properly recognise expenses by depreciation over the time period that the equipment is in use but when present year expenses is also capitalised, it will be sort of a fraud or manipulation because the company intend to write those current year expenses off over next few years herby reducing expenses for current year, boasting net income now. But this will get worse in coming years since if it booked most expenses as deferred assets, the amount will only get larger in future, leading to some reduced net income or even large losses in future.

7. Changes in accounting policies used my companies

One of the common ways companies boast net income is how it values its inventory. Take for example the type of inventory holds by business farming and selling pigs. How it defines the cost of goods sold is highly questionable. Red flag when there are changes in inventory valuation policies can be detected through sudden changes in cost of goods sold and gross profit which is profit before other expenses except cost of goods sold. In addition to this, firms can also utilises different ways to recognise revenue. Again, one can see this through abrupt changes in revenue from year to year and fine prints in notes accompany financial statements.

8. Declining revenues for several years in a row

There is only so much you can do in relentless cost cutting, like wasteful spending, unnecessary headcount and inventory management. Long term profitability is eventually still dependent on growth in sales. Like what happen when Steve Jobs is ousted from Apple last time, there is unrelentless cost cutting by the management board that the company may as well axe everyone so that the expenses is zero. There are no new innovative products and sales declined gradually, and then continue to axe and cut cost. What happens with Steve Jobs on board and increasing revenue from new innovative products like IMac, IPod, IPhone and IPad, is Apple surpassed Microsoft to become the world’s most valuable technology company even though Microsoft still owns more than 90% of the operating system market. In general, a company with more than 3 continuous years of declining revenue will not be wise to invest in since any cost cutting will have been realised over this time period already.

9. Current ratio less than 1

Current ratio is current assets over current liabilities and is a financial ratio to measure a company’s liquidity over a short term of one year or its ability to fulfil its debt obligations in one year time. Current ratio of less than 1 is a serious concern for companies in cyclical industries. Cyclical companies are those whose revenue decrease by more than 25% in bad times of economic downturn and contraction compared to good times of economic prosperity and expansion.

Current ratio of less than 1 is not really a cause for concern for non-cyclical stocks like utilities and even tobacco, as their revenue is relatively stable during both good times and bad like for example, smokers find it hard to smoke even during recession and people still need water, heat and electricity during downturn.

10. Ever increasing in outstanding shares

The not so good companies will see their outstanding shares increase over the years (not due to stock split). As this simply implies that the company is diluting current stock owner’s stake through both options and secondary stock offerings. This implies that they don’t generate much profit and don’t have much retained earnings to invest for growth, hence the need to use equity to finance growth.

11. Astronomically large “other” items under income statement and balance sheet

What items does the “other” contain, especially when the amount is in the billions as in a case of a sovereign wealth fund? This includes but not limited to “other expenses” on the income statement, and “other assets”/”other liabilities” on the balance sheet. While most companies have this, the question is when the amount booked under them is too large to be of a concern, i.e. a high percentage of the total net profits, such as fishy deals (related party deals) or non-business related items.

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Detecting the activity of institutional investors is important regardless of your investment methods – be it taking significant positions into small caps with good fundamentals before it became mid-caps due to institutional ownerships, massive sell downs at the start of financial/economic crisis or stock market recovery after end of financial/economic crisis for the case of well known blue chips, for the simple reason that it will leads to large swings in prices. Take note that analysing the activities of institutional investors does not apply when one is trading micro and small caps in general since they don’t usually invest in them.

There may be more than one way to detect institutional investor’s activity but the fastest and easiest way is to look at changes in volume and prices.

Whenever you see large volume increases accompanied by substantial price increases, then it is a signal that intuitional investors are buying into the stock. Conversely, it also means that when there are large volume increases accompanied by substantial price decreases, it means that large capital are shifting out of it.

Key Terminologies

1. Volume in stock market realm is a measure of how many shares are changing hands for that stock.

2. When institutional investors as a whole buy more of a particular stock than they sell, they are in institutional accumulation.

3. When institutional investors as a whole sell more of a particular stock than they buy, they are in institutional distribution.

Elephant analogy

A very good and commonly used analogy used to describe and illustrate the ideas of institutional investors will be that of an elephant in a swimming pool. The stock is the swimming pool itself and the water level sort of represents the price level. When it is in institutional accumulation, more elephants are in the swimming pool, the water level rises (or stock prices). When it is in institutional distribution, less elephants are in the swimming pool and the water level drops (or stock prices). Due to relative physical size of elephants to swimming pool, there is significant rise and drop in water level whenever there is net movement of elephants into and out of swimming pool.

By extension of this analogy, a stock that is owned by almost every insurance companies, mutual funds, pension funds, index funds/ETFs, hedge funds, is likened to a swimming pool having too many elephants inside and the swimming pool can no longer contain any more elephants. In other words, the stock is close to peak of price. A perfect example would be during the dot com bubble in the late 1990s, whereby many technology companies like Intel, Amazon, Dell and Ebay had an amount of institutional ownerships unseen in the past. A free fall in share prices follow shortly afterward.

One can look at a wide range of information regarding institutional activity from some financial websites like the percentage of institutional ownership, number of shares bought and sold in last three months by institutional investors, etc., as they list daily and average volume figures. Most stock exchanges websites also state information on this for each company. One such website is http://www.iimagazine.com/

Arguments for institutional investors are making sound fundamental investments

These large financial companies got the resources to employ teams of analysts to invest billions of dollars, and have to hire team of qualified analysts because billions of dollars are at stake. So the companies they invest in must be fundamentally sound?

Arguments against institutional investors are making sound fundamental investments

It is wrong to assume that institutional investors and individual investors invest or trade with common objectives. Some of them, like mutual funds, have performance goals to meet and exceed so that more investors will placed their money with them, so they cannot possibly buy and hold since doing so will result in approximately market return and hence longer than one year time to see substantial returns. Which means to say that they will trade more often than individual investors, resulting in high turnover, without regard to each company’s fundamentals, hence the outcome that a large mutual fund company dumping their shares of a stock even if there is nothing fundamentally wrong with the stock’s fundamentals.

Another legendary investor, Peter Lynch, once mentioned in his bestselling book, “One Up on Wall Street”, a total of 13 characteristics of the perfect stock, and one regarding institutional sponsorships is “Institutions Don’t Own It and the Analysts Don’t Follow It.”, which follows back to the first point mentioned earlier, Microsoft and Dell were once small caps not owned by any mutual funds and pension funds yet. When they were substantially owned, that is when their prices are overly valued.

Some Caveats

As with most methods of analyses for financial markets, do not always look at one factor in isolation, volume can also be affected significantly by options expirations, short selling and other types of trading noise. Activity of smart money alone also does not tell the whole story.

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The problems inherent in market value for physical properties,

Most realty investors continue to believe that a below market value means getting a good deal, just like if a blue chip trades at $10 2 days ago and $5 now means that it is a good buy. However, whether it is a bargain depends on the sale price in future and not the purchase price today. Market value comes from appraisals doing the valuation. There are three reasons why appraisals are less than accurate in accessing the true value of a piece of property.

1. Appraisals almost ignore fundamentals of economics

Basically, they give little thoughts to whether there will be changes in some geographic areas demographic profiles. Three keys factors that will affect value of properties more than 10 years down the road at least are jobs, incomes earned by the jobs and amount of population having those jobs and incomes 10 years later, or when you wished to sell in future.

2. Fallacy on extrapolating from recent past

Just like with stocks, people almost always have the tendency to focus on the recent past, by recent, I mean at most relevant data from 1 year ago until now. The rationale behind it is simple, if similar properties in the same neighborhood sell for this price in the recent past, then this one by right, based on common sense should sell for this price also.

3. Other areas are ignored

A same size apartment in state A may costs more than another in state B, it does not mean that the one in state A is not a bargain buy, because market values in state A are accessed based on other properties in the specific urban area in state A, it ignored other factors like economics fundamentals between these two areas.

Even for a given urban area in a state and city, there are different neighborhoods, communities and subdivisions. Houses for these different subcategories may offer more value for money than others.

In conclusion,

There is a need to source for and analyze other current market data on real estate market in order to reach a reasonable conclusion on the intrinsic value of a piece of property rather than just simply below market price. This is true for stocks as much as it is true for real estate. In other words, the returns and how much returns depend on both purchase price now and sale price in future.

What are some other market data that value investors need to look into for more accurate assessment of intrinsic value, not market value?

There are at least six, briefly listed here and elaborate in the coming post.

1. Difference between asking price and selling price, in a statistical sense.

2. Amount of inventory of unsold apartments.

3. Time taken for listed properties to sell, on average.

4. Vacancy rates and number of for rent ads.

5. Amount of mortgage applications, delinquencies in mortgage payments and rates of increase/decrease in foreclosures.

6. Properties under contract

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