Book of Wise Investors » General Investing Advices

How Japan Fukushima nuclear incidents affect the world’s financial markets

wiseinvestor — Sat, 07 May 2011 11:03:29 +0000

The initial reactions to earthquakes and damages by earthquakes have always been some percentage drops in the country stock market and does not really affect economy and financial markets of other countries. 29 April 2011 mark the 25th anniversary of the Chernobyl nuclear disaster. 25 years after the worse disastrous nuclear accident in history, humanity has yet to devise a permanent solution to the energy crisis. The Japanese Fukushima nuclear incident holds many lessons from social, economic, financial to environmental for us.

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.

What are the human weaknesses to capitalize on when it comes to investing?

wiseinvestor — Mon, 24 Aug 2009 09:28:41 +0000

The sum of market capitalization of all the companies listed on the stock exchange at any one time is what investors as a whole would want to pay for it at that time. However, this value and of each individual companies keep changing from day to day. This post is going to talk about some of the bias in judgment and weakness in behavior when it comes to investing for many investors, bias and weakness which you can exploit if you are aware of them and know how.

In fact, there is a well known asset management company managing assets for institutional investors, known as LSV asset management, focusing on investing in value equity by “systematically exploiting the judgmental biases and behavioral weaknesses that influence the decisions of many investors.”

Monkey see monkey do

What you can learn from history is that people don’t learn from history. Of course, learning from history is a rational act. However, humans are essentially emotional creatures.

Most of us, even for myself, like to rationalize when we make mistakes. This is especially so when it comes to money, we can avoid feeling regret when at the end of the day, the decisions are wrong when we followed conventional wisdom or what everyone else is doing.

In addition, many so called professional fund managers prefer well-known companies is precisely because of this reason. They are less likely to get retrenched should well known companies do not perform as well. This will “wrongly equate a good company with a good investment irrespective of price.”

Since most of the trades are done by institutional investors like mutual fund companies, it follows that why most low price-to-book ratios achieve better returns by a great margin than popular stocks.

Investors are irrational because investors are humans, not robots.

Modern finance and even economic theories make a lot of assumptions about investors which are not true to a wide extent in real life,

1. Investors are rational.

2. Investors consider all information when making decisions and there is perfect information

3. Investors are risk adverse.

Look at the following economic choices and think about how closely it relates to stock investing,

Given a choice of

a. Guaranteed gain of $300

b. 25% chance of winning $3000

Most would choose choice a.

Given a choice of

a. Guaranteed loss of $300

b. 80% chance of losing $3000

Most would choose choice b.

Expected value = probability of event X value of that event

By looking at the expected values, most would be irrational.

In other words, a guaranteed win cause them to become risk adverse while a guaranteed lost cause them to become risk takers.

You can see this in stock trading when most people refuses to cut losses.

Why is that during the dot com bubble, when most average investors lose money but Warren Buffett increase his net worth by a high margin?

Investors become irrational when the exciting dot com companies caused them to be too over confidence and cash out from old economy stocks for Warren to invest in. Most investors “ignore statistical evidence”, such as high prices will erode returns.

Tendency to extrapolate the past too far into the future

We see this in Newton’s Second Law, most of us accept the gospel truth of F=ma, for all values of F (=force), a (=acceleration) will also increase accordingly by multiplying by m (=mass). Until Albert Einstein question whether this extrapolation is correct in physical reality, that is after a certain point, successive increase in force leads to lesser and lesser increases in acceleration for a constant mass, the limit is speed of light.

Whether Apple computer can continue its outstanding success from now rests a lot on its future products launches, compared to Microsoft, Steve Jobs is the key. Remember the time when Steve Jobs was ousted from Apple, there is no new innovative products and the company revenue and stock prices nose dives.

This is in sharp contrast compared to Coca-Cola and Procter and Gamble, when earnings (and stock prices) can safely extrapolated into future. People who drinks coke now, most likely will do so in future. We still need most of the products being sold by Procter and Gamble in future also. This is in addition to brand loyalty.

Over confidence in own abilities

In general, we like to feel that we are better than others. It is good to have high esteem. But this translates into fund managers and investors belief that they can outperform the market. However statistically speaking, most do not perform better than the market.

Higher confidence does not necessarily correlate with higher success, especially when it comes to investing, greater knowledge and knowing when to apply the knowledge does. Asking good questions after having acquired the knowledge does.

The following probability exercise shows that using intuition in estimating probability may be seriously wrong.

What is the probability that a 20 year old man who does not involve in casual sex or any other risky sexual behavior but really got infect with HIV if he obtains a positive result on an Aids test?

Using the following data,

1. Out of 10 000 20 year old mans, one man got HIV.

2. The test is accurate 99.8% of the time.

3. False positive for the HIV test is 0.01%

The answer is 50%, but intuition tells you otherwise.

The greatest enemy is ourselves.

How to exit rat race as early as possible?

wiseinvestor — Sun, 12 Jul 2009 04:02:30 +0000

As most of us know by now, life long employment is going to become extinct like dinosaurs in the near future. Corporations and businesses are placing profits first in the midst of globalization, translating into extreme cost cutting measures like retrenchments with minimal compensations.

Honestly speaking, it will require many long hours of self study on financial concepts and investigations into various investment vehicles. This website alone will not provide every piece of knowledge you need; neither will any single book and magazine in personal finance and investing. Constant ongoing learning and relearning, knowing what is going on in every single thing you invest is something indispensable if one wants to exit from and never to enter rat race again.

Image Credit: csatch

Rich Dad Poor Dad lesson number 3 is “mind your own business”, this does not really mean starting your own business but it includes starting own businesses too. It does mean that to achieve financial freedom, to exit from rat race, managing own income and current wealth well is a must. In today’s time, you really cannot play it safe by putting money in fixed deposits and government bonds, and then slog for rest of your life. You have to play it smart.

All of us have a mind and the same time. It is up to each of us to do what we want with both.

This may sounds like an old cliché but the fact is that the only way to ever have a chance of leaving rat race is to live within your means, pay yourself first, and accumulate investment capitals, to invest and re-invest returns, reduce uncertainty through more knowledge and knowing what you are doing.

Short of winning the $10 millions lottery, to go from $0 to $1 millions, there is no doubt that one needs hard work in earning income and learning everything about managing own personal finance and deciding on best investments given what you know, perseverance in starting over when a wrong investment is made, discipline in really investing and not speculating, taking calculated risks and not anyhow sink in everything on a thing, timing of entering and exiting the markets, and some luck.

The following wise words are from a millionaire,

“If you don’t build up the means to invest, you will never generate any returns. The only way to build up the ability to invest is to spend within your means. Otherwise, salary is the only cashflow and that would mean running the rat race for a long time.”

Perhaps forever until lie inside coffin if salary is the only cashflow.

Why reading is the most crucial factor in getting rich?

wiseinvestor — Thu, 28 May 2009 04:10:05 +0000

Humans regardless of race, language and religions, pledged themselves as one united people when it comes to money.That is, we all want to become rich. Of course, the definition of rich is different for each one of us.

For my case, as long as I have acquired enough assets to generate enough income to cover my living expenses along with wants clearly defined like a completely paid off Japanese brand car, housing loan in some prime district and vacations in exotic locations once every year, etc. Then I considered myself rich. I don’t really need to found companies like Microsoft or a web 2.0 site like Youtube. But it will be ideal if got since it will also means that I am rich.

There is a Chinese saying that a book holds a house of gold and a book holds a house of beauties.

This is not to say that books really contain beauties and without wearing clothes as in magazines like Playboy.

The inspired and far sighted forefathers of Chinese people are trying to tell us that to accumulate wealth in great abundance, one need to acquire ideas, insights, concepts, multiple mental models, data and knowledge. Most of which are to be found and can only found in books (or in today terms, various online and offline media), though networking with people is equally important.

After you have accumulated great wealth, would you be unable to buy gold houses and beauties?

Although the words luxurious houses and beauties are used, the intention behind advising future generations to read books is not to simply acquiring wealth but wisdom and to use the wisdom to help other people.

This is like the Chinese word for martial arts are actually made up of two words, one is stop and the other is war. The original intention of martial arts is to stop warring.

It has been said that reading is the habit most common to rich people while poor people have the latest LCD TV, rich people has a shelf of books.

They read to learn, read to gain additional insights to issues, read to unlearn, read to look for ideas to apply to their businesses, most importantly read to gain multiple mental models to look at this world.

It is important to look at the world through multiple mental models because that is the essence of wisdom.

For example, when there is Ponzi scheme likes Sunshine Empire, most invested their whole life savings after receiving back their capitals one year later.

Simply because, they only look at this investment with only one mental model – I got receive back my capital with the high returns so it cannot be a scam. A scam means that I will lose my first investment with them immediately.

But what rich people knows is that they have business and finance concepts, they look at it from cashflow point of view, even the business being claim is true, funds should be tied up in developing the projects and not pay out high dividends so early. In addition, the repeated issuing of shares to anyone with $10 000 basically means that existing shareholder interests is being diluted.

With more mental models like being aware that anyone can check the registration date for a domain name of a website simply by using whois, and that is the company website is only being registered yesterday. Then it is hard to believe that the company is not a scam.

If concluded that something is a Ponzi scheme beyond reasonable doubt, still want to invest because of greed, having multiple mental models also helps in the sense that you are aware of a concept called modern portfolio theory which teaches us that diversification reduces risk without reducing returns.

One can diversifies the original $100 000 intent to invest in Sunshine Empire across other various Ponzi schemes.

Concepts from value investing and statistical probability also help in this case, keeping other variables constant; a Ponzi scheme that is 1 year old is safer to invest than a Ponzi scheme that is more than 3 years simply because based on historical data, Ponzi schemes seldom last more than 3 years due to high payouts involved and the fact that only a certain percentage of population within a geographic location will fall trick to scam. (Consistency in percentage, just like only a fixed number of people will contribute revenue to casinos)

Once it reached the limit and/or operators are satisfied with what they have earned, finally run off with the money to a remote Caribbean Island and hire 30 hot chicks to dance Macarena for them.

Remember what mentor of George Soros said, that all life is problem solving. Creative problem solving, including doing well for business, means taking ideas, insights, concepts, multiple mental models, data and knowledge found elsewhere and sees how it can solve the problem at hand.

That is why rich people read, and why you should too.

Does life starts at 60 years old?

wiseinvestor — Tue, 26 May 2009 08:10:49 +0000

Abraham religions used to teach us that life start at conception while some other religions say that life start at birth.

Now insurance agents and financial planners are trying to preach us that life starts at 60 years old.

Their arguments are that save now, buy insurance, and invest in unit trusts. In other words, make your money work harder so that you can still enjoy present lifestyle after being forced to retire by your employers.

People are being instilled in their minds from as early as childhood, the need to plan for retirement.

As a result, we are lead into believing that based on current inflation rates; we actually need more than $1 million dollars to retire comfortably when the masses even have problems accumulating $1 million of wealth 40 years later.

Given that the average American earns about $32 000 per year, I wonder how he is going to have $1 million for retirement unless he is able to pick stocks like Warren Buffet.

This is considering the investment vehicles available to masses like mutual funds, fixed deposits etc, it is not feasible to have $1 million without saving and scrimping too much.

The mentality of save and invest until got million dollar nest egg leads a group of cautious people who plan more than 30 years ahead when still in their 20s, making themselves suffer with strict budgets, save every single cent whenever possible and buy things only when there are discounts.

But there is something wrong with the arguments that one needs to maintain his or her current lifestyle due to the following points.

Both needs and wants are totally different as you grow older.

Think about it. When you are 10 years old, all you need to feel happy and contented are the latest Teenage Mutant Ninja Turtles and Transformers toys.

Then when you are 20 years old, you want hot chicks and fast cars. Both of which require substantial financial expenditure.

Or if you are a woman, branded handbags and designer clothing.

Fine dining and holidays in exotic locations are common dreams to us all.

Finally when you are 70 years old, there is nothing much you can do other than wait to eat, wait to sleep and wait to die.

So what if you have $10 millions when you are 60 years old already? There is a good chance that you may already suffer from erectile dysfunctions, no use having millions and hot chicks.

For women, would you still want branded handbags and designer clothing if the whole body is already wrinkled?

Image at the end of everything, unlucky (highly possible considering the statistics now) get some heart disease, high cholesterol resulting in strokes, cancer and kidney failure that requires expensive medical care, some more long term also. All the money painstakingly saved and invest at the end of the day give back to doctors.

How much one need to retire depends very much on what you want after retirement age and your income level throughout your life.

One can try calculating the medical costs for chronic medical treatment for those common old age ailments as of now; compound it with inflation rate which is higher for medical costs than for other things, assume figures for income and savings rate in the years ahead.

If at the end of the day, all the nest egg barely covers medical costs decades later, may as well forget it. Enjoy life now and call it a day if the situation calls for it as in become chronically ill and requires expensive medical treatment forever until you steps into coffin.

Since you will just be saving and investing your hard earn savings only to give doctors later.

I think one will be better off enjoy branded handbags, designer clothing, fine dining and holidays in exotic locations now or within the forseeable future if it is not possible to have $1 million 40 years later.

Danger of Rich Dad Poor Dad

wiseinvestor — Sun, 29 Mar 2009 03:55:07 +0000

This is not to say that I disagree with what the author of Rich Dad Poor Dad says. In fact, I totally agree with all points mentioned by Robert Kiyosaki in his best selling book on personal finance.

He does a very good job of introducing us to some important basic ideas in personal finance – 1. the idea that rich people don’t work for money, 2. the fact that having $5000 monthly income from assets is far better and stable than $5000 from a job as an employee. 3. Buy assets but not liabilities. Honestly speaking, without his bestseller book, most people will continue in working until they physically cannot work and not realize the need to invest for cashflow.

The following are some of the pitfalls that arises as a result of reading his book,

1. The idea that S and E quadrants are not good as B and I quadrants

His first book implied negativity towards professional and self-employed, and his later books specifically mentioned negativity towards these two quadrants of income generation.

Giving reasons ranging from a high risk due to income from specialty, that if something happens to you, high income will be gone. That it is better to have assets generating that income.

Well, I agree with his points, but in order to acquire assets generating $5000 per month as early as possible, it is more possible if you were a medical doctor making 5 figures per month. Good assets (stocks or physical properties) that provide substantial positive cashflow per month don’t drop from the sky.

Or that if you were a toilet cleaner, you most probably need to save and scrimp for 50 years before finally can buy enough assets to generate $5000 per month. Who knows? After saving and scrimping for 20 years, some freak car accidents means that your relatives will get to enjoy your little wealth or that a major disease like cancer wipe out all your entire savings.

No one says that you cannot be both E and I quadrants at the same time, you need high income in order to have substantial capital to invest without sacrificing current consumption.

If you owns a small business that creates $10 000 in profits per month, I believe that one has more money to invest at the end of the month. You don’t really need a B quadrant business if don’t have that opportunity and fortune.

2. Successful business founders like Bill Gates and Michael Dell are college dropouts, so if you want to be rich and happy, then don’t go to school.

I totally agree that if God were to appears and ask me whether I want a college degree or a US$10 millions fortune, I were definitely choose the latter and I believe that most people decisions are same as me.

The equation is not that Bill Gates is not degree holder, so you can be rich as him if you are not also.

While it is true that there are many wealthy people who never completes school or have high educational qualifications, there is also equally number of multi-millionaires to billionaires with college degree like Warren Buffet and Google founders.

Schools are where long lasting friendships are made, not in workplace or business environment; these are things far more valuable than any economic considerations.

You don’t need formal education to be a successful business owner but you do need good paper qualifications to earn higher income as an employee.

You don’t need formal education to be a successful business owner but you do need how to think creatively, critically and acquiring essential knowledge for your business on your own.

Don’t forget, whether you can business multi-millionaires is something that may or may not happen in future, a degree is a good backup just in case you didn’t make it in entrepreneurship.

3. Over-emphasing the benefits of network marketing

While I don’t dispute the fact that in business of network marketing may be good for some people, but I definitely choose to become a medical doctor rather than subscribing to some hyped up success stories common in network marketing.

Of course people at the top of a network marketing company make millions and want to hype up that it is possible if you believe in it. It is not hard to see from the picture of cashflows, money don’t drop from sky, network marketers need to sell something in order to make money. When success stories of people at top are told, coupled with standard motivational talks, all downlines will be motivated to sell products and/or recruit people to sell products, of course, the company can make millions.

But when everyone around you sells the same products, your chances of make some money will be reduced but no matter which person sells the products, the network company gains.

But does network marketing really suitable for everyone? What if the products is not really that good, overpriced, or simply don’t have such a need for it? Do you really want to force your friends and relatives to buy?

How to make a million dollars then?

There is no single answer to above golden question.

4. Your home is a liability, not an asset.

The answer is it depends.

Let us assume a hypoethical situation.

Mr Poor is an odd job laborer, working in a high risk environment but is fortunately adequately covered by life insurance which totally covers all mortgages for his primary residence should something happens to him tomorrow. Then some accidents really happen to him and he really die, leaving behind his wife and schooling kids. His life insurance paid off all mortgages and wife and kids can continue living in current house.

What is going to happen if he believes that his house is a liability and instead of owning a house, ends up renting instead. While it is true that he needs to pay for mortgages every month from his meager pay, he also needs to pay rent if did not own a house.

The fact is that a buy/rent decision on housing for primary residence depends on various factors and not simply asset and liability point of view.

Even from a cashflow point of view, a house is still constitute asset and liability components.

Finance Lessons from Wing Chun

wiseinvestor — Thu, 08 Jan 2009 04:29:05 +0000

I recently watched a movie about a brief history of Ip-Man (played by Donnie Yen), grandmaster of Wing Chun and mentor of International superstar Bruce Lee. The 107 minutes passes quite fast and I totally immersed myself in the story and fight scenes.

There are several principles of Wing Chun that can be translated into Personal Finance.

Wing Chun, Chinese name, ??, is a form of Chinese martial arts invented in quite recent times, rumored to be by a nun during late Qing Dynasty period. The essence of this close range combat techniques lies in having little movements but nevertheless more than enough to defend and attack opponents who are physically stronger than you. Unlike Tai Chi, this form of martial arts is more practical to an average person.

Finance lesson 1 – guys learn it to protect girlfriends and girls should learn it to protect yourself. Imagine bumping into some gangsters or potential rapists, getting raped though is a criminal offense for them but result in no financial compensations from them to you. The additional emotional trauma most probably resulted in lower productivity at work and today high paced competitive work environment means that future career prospects will be affected.

Time spent in learning martial arts not only for defenses but also as a mean of keeping physically fit. One hour expended achieve 2 purposes and free up other time to make money.

The 3 tenets of Wing Chun are practicality, efficiency and economy of movement. In one fight scene between Ip-Man and a tall and big sized figure who practiced Northern style of kung fu, one can observe that each movement of Donnie Yen is short and to the point while the other guy got wide stances. By moving less, one can conserve more energy to strike at the target when opportunity presents itself.

Economy of movement – During fights, longer distance of movement will only attract an approiate response from your opponents.

Efficiency - In actual fighting, the main purpose is to pin down your opponent using the least effort and time. The same punch with the same force delivered to vital points like head, face, groin, etc. have greater effect than to his biceps.

Finance lesson 2 – Do you make use of your hard earned dollars effectively? Housing prices go through a repetitive cycle; one should plan purchases of big ticket item like housing during the trough of the cycle instead of rushing into buying due to a shotgun marriage. The same house, at the same location can cost tens of thousands difference if purchased at different times. With mortgages stretching into decades, this figure will be compounded.

Do you pay your bills all at the same time? In current modern society, we got all sorts of stuffs that need to pay money like water, electricity, Internet access, handphone, credit cards, car loans, housing loans, etc. Instead of paying those bills as and when you receive them, a much more “economy of movement” is to pay all of them at the same time even though the locations, physical or online, for all these bills may be different. But just make sure that the time chosen for all the bills is not after the deadline, this is especially so for credit cards.

The Certainty in Uncertainty

wiseinvestor — Mon, 18 Aug 2008 17:43:44 +0000

There is an age old saying that there are only two certainties in life, one is taxes, the other is death.

It is no wonder that being uncertain about what future will brings is a natural condition for humanity. In life, as in investing, accepting uncertainty and growing beyond it is something we all need to do. If it weren’t, no child would walk, no one would learn to drive, and there will be no businesses providing goods and services essential to our survival, needs and wants.

There are two techniques that successful investors employed successfully throughout the ages to deal with uncertainty. First is considering the worst case scenario. Second is the certainty in uncertainty.

No man is God, not even Warren Buffet and George Soros, they don’t have crystal balls as much as you and me. But they do know what is the worst case scenarios of each investment they under took. That is also the certainty in uncertainty of investment universe.

For instance, in purchasing of properties and necessary insurances to cover them, the worst thing that can happen is that their values will drop to a certain amount but never to zero, unlike stocks. In other words, you can actually safely predict to a high degree the maximum financial losses of each investment, not only in real estate but also in other cases.

Do reflect deeply on the fact that the worst case scenarios of most financial investments is actually a certain event, meaning to say that it is the worse thing that can happened.

The concept of certainty in uncertainty is well illustrated in many of our every day life which wise investors put to good use to achieve their financial goals. You do not have to look far to see how this idea translates into millions and billions of dollars profits consistently in various businesses and almost guaranteed returns in some investments.

First thing first, in the flipping of coins, whether the next flip is a head or tail is uncertain and no one can guess accurately every time but the fact that there will be no 100 consecutive heads or tails is a certain outcome. This is what I mean by the certainty in uncertainty.

In lottery, who will wins the top prize is what no one will be able to guess, but revenue from lottery ticket sales far exceeds that of prize money given out is a certain event for some lottery companies within some countries.

If you looked at the overall performance of the stock market, it is difficult to predict the prices of any individual stocks the next day but that overall the combined value of all the stocks increased substantially over the decades. The same occurs for properties.

Therefore, you should not avoid investing just because there is no guaranteed returns.

Why Investing is important?

wiseinvestor — Mon, 11 Aug 2008 14:16:19 +0000

Everyone at everywhere talks about investing.

In my view, there are top 5 personal reason whys investing is important.

1. Only option to save your money

It is no mystery that money kept under a pillow or in a savings account is losing its value (or purchasing power) with each passing day.

2. Only option to save yourself

With achieving of financial freedom from sound investing and investments, you can save yourself from the drudge of work, of unreasonable or irritating boss.

3. Sleep and grow rich (or money work for you)

Don’t you feel like beating yourself up if your friend next to you buy a house for $500 000 today and sell it for $1 millions one year later?

4. Time to return flavor from money

You spend 80% of your life, time and efforts working for money. Why not have money return you some flavors and have it working for you.

5. Control your own destiny

Let’s face it. Without money, you can’t do anything and can’t go anywhere. You will be a slave to your job, your boss and basically no difference to a slave.

6. Work less and less but earn more and more

You don’t see Warren Buffet do double work when his net worth increased by a few billions. But you seemed need to put in extra effort for each pay raise from your boss.