Tuesday, March 31, 2009

The most long lasting business model

If not mistaken, it was 2,300 BC and 4,500 years ago (no, not a mistake, these are the actual years).   Once upon a time ...

Caby  is a smart man, he understands human nature very well and decide to make a fortune out of it.  Today he is only focusing on the 'greed' part.

He collects $1 from every man he meets and promise to pay half of them $2.  At first, people have doubts and only a handful people join.  But when half of them are paid double the money they put in, words start to spread and everybody rush in like no one business.

Although it was clearly implied that another half will get nothing out of the $1 they paid, but soon the other half start to compalin that this is a scam.  Caby is a smart man, he starts to alternate paying another half of the people double the return.  As far as the people concern, they pay $1 twice and they are guarantee to get back $2 in second round anyway.  So the worst is break even and if 'luck' is on their sides, they can get paid $2 for the $1 they put in.  They can stop playing and immediately earn 100% return !

But who is happy with $2 ?  Illogical but true enough, everyone realize they will keep on playing and all they will ever get is a break even, but everyone still think they can earn 100% return.

You are breaking even at best but
you still think you are winning 100%
at the same time

Finally, the business model works and sustain itself.  Caby is a smart man but he hasn't earn a single cent doing this yet.  He is calm, he waits, for the real phase to kick in.

Finally Greed kicks in.  $2 is not enough anymore.  People start to demand higher pay out.  Caby is a smart man, he starts explaining how the system work.  That if higher payout is made, less people will get paid.  People agree.  People still want higher pay out.  4, 8, 16, 32 ... very soon you start to see games like 3D, 4D, Magnum all over places.  By now, the size is just too big that people cann't keep track of who play and who get paid.  Caby is a smart man, he knows exactly how the money flow and start to get his share out of this whole business model.  As long as there are people, this business model will continue and Caby is a rich smart man.

That is not the end, that is not even the main part of the story yet ... the story starts when there are some smart people among the players.  They start calling this business model gambling and saying all the bad effects it can bring.  Despite that it is a bad thing they say, they didn't say we should stop totally.  They just say we should regulate it.  Normally people would say, "Bad ! Don't do it !", what kind of people would ever say, "Bad, do it under my control, then its ok" ? - - -  Yeap, Politician.

After regulation or in another word, under the umbrella of the protection of a country, this business model grows even bigger and sometimes its an international investment event around the globe.

Ok, now back to the good guys who say don't do it.  Which is also the juice in this story.  Caby is a smart man.  He said to these anti-gambling guys, "what if I pay out according to who need it most?"  Good guys ponder a little bit but after a long haul of exactly what need is and how to determine who need it first etc.  They settle in.  Now the business model has changed and become ...

You pay $1 a day, 365 days a year and should you has the 'need' one day, you will get $100,000 !  Different group of good guys have different needs so many different kind of variation of games are put in place.  Some said the need is 'when I lost my income', others may say 'when I die, pay my family please'.

It turns out Caby is smarter than he think he is.  Now he has one business model for all the greedy illogical guys and another model for the good guys.  Both type of people think they are well taken care off.  As long as there are people, no matter if all of them turns saints or evil, Caby is a rich baster !

Its the most long lasting business models ever built ...

~ Caby is a made up word from 2 big nations, one still exist today, another is a legend.

Saturday, March 28, 2009

World Major Stock Markets Open Time

There are a few stock markets in the world consider as MAJOR because their market value is more than USD 1,000 billions.  Its could be useful to understand which of these major markets open first and see how they affect each other.

Earth turns from west to east so we see sky moving from east to west.  By world definition, earth day starts from GMT +/- 12 which is somewhere near Hawaii.  Moving west the first continent see the first day light of a particular day would be Australia ...

So the first markets that open on earth are Australia and Japan, followed by ChinaHong KongItalyEnglandSpainGermany and finally Nasdaq and NewYork.

These are some of the key data ...

( blue highlight the smallest figures and
red highlights the highest figures
click on the picture to see larger view )

Notice the market start time is reference with GMT where GMT 0 is at London, England.  So at exactly midnight in London, Australia market opens, vice versa for all the other markets.  In short, all these world markets cover GMT 0 to 21.  Active Internation speculators / traders may rest for 3 hours a day :)

Applying these world MAJOR markets and its opening time, I finally fine tune my 1view world market into the following.

The toughest market to work with are Italy, Span and Germany because they are not English based and I don't speak their languages yet.

I think so far not many people find it useful yet but if you do, do leave some comments, thanks !

Friday, March 27, 2009

Book Review : Top Money Tips - by KC Lau

One of the biggest achievements of this blog is to receive an invitation from KC Lau to review his book released late last year. The sense of being noticed is quite ... rewarding indeed.

I highlighted before the most interesting point in the book is How To Get Your First Car For FREE ! Most people like it a lot but soon there are also a few other not so positive comments about this particular tip. Which is rather important actually because it brings out TWO very important fundamental in personal finance planning - "its all about what you think" and "Personal Finance is boring".
If you think a tip is interesting, then most probably it will be useful to you.
If you think its a lousy tip, then most probably it will bring you nothing.
You can buy the book in most national book stores like Borders, MPH, Popular etc. I had documented my first hand experience with MPH. Very soon, the books were sold out and went into subsequent prints.

Most reviewers have already listed down the content outline of the book so I wouldn't repeat that.

What I would discuss is Why do you want to buy physical book ? Especially when there are alternatives like eBook and Blog on Internet for FREE ? Other than reasons of branding and that you are a fan of KC Lau then ofcourse you would buy his products to know him and his ideas better. There is still a very important factor that we buy books because of the information in it. Which may raise doubts in value for money comparing to other FREE sources.
  1. Physical books are tax deductable up to MYR 1,000. Sometimes after I read a book, I resell it out getting back half the price. So I am claiming $2X from my income tax while actually paying out $X only. ( Sometimes I resell at higher price and earn a profit there too )
  2. I like the convinience that I can pick up any book when I go to toilet, waiting for lover to finish shopping, queueing in hospital etc. By the time my smallest NetBook boot up and connect to Internet, I already finished reading half chapter in the book. When my turn is up, I can just flip the book and go immediately. Even if I put my notebook to standby mode for that extra split seconds only, the nurse, lover usually will change their mood from normal to complaint mode - "we thought you are waiting for us, not us waiting for you !"
  3. Be it with Google or Yahoo, sometimes I find the info I want, sometimes I don't. Sometimes the info I found was there but quickly disappear the next time I look for it. Sometimes I remembered putting a bookmark but just couldn't seem to find it. Very often I am directed to pay for something anyway. With a book, I always know where to find the info once I get in touch with it, and I can start stop at any part of the book the way I like it. Its always there when I want to refer it ...
So fundamentally
  1. The information on physical book is usually different than those available FREEly on Internet. Quite frequently information printed on book is more reliable too, proof read by proffesionals.
  2. Even if the information is the same, book better organizes the info in a pre-determine way. The format could be better or worse but its consistency on where info is, ease us looking for it now and later.
Now back to the book "Top Money Tips for Malaysians".

What first attracted me is the reflection of this book on the author. Honestly till today I do not know who KC Lau is and has no personal relationship whatsover. But I can sense that the intention of the author of this book is PURELY wanting to share all he knows. Suddenly what he knows and what the book says become less important. It is very hard to find a person who are willingly share all he knows in personal finance world today, not to mention for the good for the community. ( rather than like what most of us do - keeps complaining only ).

I waited long enough to write this review just to make sure what I wanted to share was not already shared by other reviewers. And I hope some of you who has read other reviews can comment on this.

Frequestly after I read a book, I do not remember what the book says. But I can firmly share what I get out of it.

  1. I pay more attention to car insurance, saving there could be significant enough as time goes
  2. I make more money from Internet, perhaps thru some of the links the book suggested ...
  3. I came up with the idea to resell the books I have read and no longer need to keep
  4. I reminded myself not to be too self center in finance matters as many other approaches are possible too
  5. ...
Would I buy this book ? Well yes and for the first reason I mentioned as my appreciation to someone who is so dedicated to share in personal finance matters.

Should you buy this book ? Well, if you agree with my reasoning why buying physical book is still a good thing then yes you should.

Would I recommend this book ? Now that is a question required scale answer. From 0 to 10 where 0 is Strongly NO and 10 is Strongly recommended, I would give this book a 7 - also a heavenly number :)

Where does the other 3 go ? Hmm ...
  1. The writting skill can be more balance. Some chapters are exceptionally shorter ...
  2. A small part of the book has too many numbers even though that was meant to be a quick mental exercise.
  3. I personally could not fully agree with certain part of insurance concepts ...
It is also from the 1) and 2) that I got the impression on Author's sincerity. As for number 3), most of my insurance concepts may not be suitable for today's general public yet. Especially if you are not that well verse in insurance industry yet, then this book's explaination on insurance is much more suitable for you. You will have to understand the basics rule of thumbs first and then only come to me for some potential myth or paradox and fun discussion. Else that may lead to more damage and destruction.

Lastly, for people who read this review until here. You must be a very patient person. If you haven't bought this book yet and feel like getting one now, then I will add another reason to it both to thanks for your patient and see if my review is effective or not. For the next 5 books people buy through this article, they can get this book at MYR 21 only !! Instead of the normal price at MYR 29.90

Click here to buy "Top Money Tips For Malaysian" for RM 21 ONLY !!

Thank you to those who have taken above offers, surprisingly quite a few buyers actually didn't even realize the existence of malpf blog at all.  Seems like the 'cheap' price is more an attractive point than the review writen here.

I hope this does not violate any regulation ...

Thursday, March 26, 2009

Risk revisit

The toughest concept for this blog to get across is the preception of Risk.

This blog preaches that "High Return High Risk" is NOT the entire truth but comes with a twisted myth.  Basically that statement only apply to those who don't know much.  The more you know, the less risk it is.  The correct way of intrepreting Risk will affect another general miss-conception - diversitifaction - "Don't Put your egg in ONE basket".  Putting your eggs all you want but you will have to start with ONE and that better be the best one.

These intrepretations offer explaination to today's situation why so many investors couldn't make it even if they Diversify and believe High Return comes with High Risk.

This is not a new concept actually,
"Risk comes from not knowing what you're doing."  ~ Warren Buffett
"Volatility is NOT Risk." ~ David Dreman
This is not a debate on what the real meaning of Risk is.  Its a matter of how we should look at it so that we can do something about it.

If you believe in High Return High Risk, then when you enter into a potentially high return investment vehicle, you naturally accept that comes with high risk.  This psychological preparation puts you into a 'its ok to lose' state.  More than often people in this state will sit, wait and pray the worse wouldn't happen.  ( which you have just violated the 2 most fundamental flaw in NLP )

On the contrary if you believe Risk is something you don't know, then naturally you will try to find out more about this investment vehicle.  You may eventually pick the right vehicle or you find out how to deal with some of its limitation.  Either way, it puts you in a better position than the earlier scenario.

One of the greatest example of all time is that someone didn't think gambling is all that risky, as a result the whole school of technical analysis was introduced and is one of the hottest study one can get nowadays.

Gambling is risky, yes.  Avoiding it is temporary safe, yes.  By not knowing more about it, you risk getting into it without knowing it.  By thinking risk is when you don't know, you can learn why gambling is risky.  As a result you may come up with some new principals in life about gambling.  If you found out how to deal with this risk, then you would also have a set of solution dealing with 'this kind of risk'.  You may still NOT WANT TO get involve and this time, you can be very sure and understand why you do or do not do something.
"If you risk nothing, then you risk everything." ~ Geena Davis 

Wednesday, March 25, 2009

Malaysia drags down the whole world

last 36 hours of world stock market movement attracted my interest.

As of yesterday all markets have been been going up for about a week following USA's tiny bull moment.  Japan was still going up and strong yesterday.  Then Malaysia market ( the next market opened after Japan) openned and dipped south.  Followed closely by Jakarta, India and then London, following the sequence of market opens.  USA cann't escape the curse by Malaysian and started to go down as well.  As of this morning after one big round, Japan market also openned lower right now.  So seeing the trend as a round the clock cycle, it seems to me that Malaysia has dragged down the whole world ... kind of feel quite powerful as a small country after all, don't we ?  :)

I have this impression after building a simple eye view on the world market in the sequence of market opens so that I can see how other countries market were doing before and after Malaysia open.

Tuesday, March 24, 2009

One View on World Market

I have always wanted a simple one eye view of world market index before and after Malaysia market open. But couldn't really see something simple enough so I built one ... its still in process, you may view it at stock.malpf.com

Where do you get your world index info ?

Monday, March 23, 2009

Buy Warren Buffect for MYR 100 !

For the first time in Malaysia, AmInvestment Bank Zero Strikes on Berkshire Hathaway allow investors to gain exposure to Warren Buffett’s Berkshire Hathaway Inc. Class B shares for as little as RM100 minimum investment. AmInvestment Bank Zero Strikes are a special kind of warrant listed on Bursa Malaysia, and give investors an alternative to investing in shares, Exchange Traded Funds (ETF) or unit trusts.

OFFER PERIOD – 12 March 2009 to 10 April 2009

Full Info here

I would think if it is buy-sell-able from bursa malaysia, you could get this through other broker too but I haven't checked yet ...

Medium Income Retire Successfully

Gabriel Pang is 68 years old.  He is one of my most favorite personal finance friends.  As much as I am helping with his personal finance, I learn much more from his experience.

He started earning his first $100 at age 12.  That was $100 for the whole year washing cars for neighbours.  At that time he saved all his $100.  At age 16, he got a part time job earning $1,800 that year.  He saved $1,440 that year.  Later he could save less when he went to college.  For example, at age 20 he earned $1,100 but save only $550.

He got a proper job at age 23 earning $29,700 that year.  He managed to save $8.019 that year, about 30% of his income.  Then when he got married, he can only save 20% instead of 30%.

He started his own business at age 28.  At that year, his salary was $87,600 and side income $12,000.  He managed to save $12,312 that year.  Finally he quited his job at age 31 and worked full time on his own.  His total earning is less than his old salary but he also pay less tax so he ended up with similar NET income.

One thing he does consistently is his saving range from 5% to 30% of his income.  According to his past historical results, his saving has been giving him 5% to 12% return yearly.

At age 42, he retired.  But after resting for 3 years, some opportunities showed up and he earned another $30,000 to $80,000 incidentally a couple of times.  Then he retired for good at age 53.  He finished paying all his loan at age 58.

His last year expenses is $53,915, taken out from his $555,105 saving.

Below is his cash flow chart.  It may be a bit confusing but basically it shows his total income, the taxes and loan he has been paying and a cumulative saving with return.  Top part purple color is the one when he made a lost in his own business or when he retired, then he needs to withdraw money out from his saving in order to survive which happened at age 36, 39 for business lost and then since age 42 for retirement.

Some of the high lights of his life are shown in chart below.

It seems like curently he has half a million saving for his retirement.  His personal inflation for the past 20 over years average is 3% and also for the past 20 years his saving has been giving him an average of 12% return consistently.  So using these 2 figures, I helped him projected that he can live on his saving until he is 98 years old.

This calculation excludes the EPF he didn't take out at age 55 which he has left there by itself.  He stopped contributing to EPF at age 30 with about $50,000 insdie.  Right now there are about $928,849 in there.
(correction 25 March 2009 : $50k was his own contribution only, total balance at age 30 was $115,823.11)

So he can safely enjoy his retirement as the way he has been for the last 20 years.

He only worked for less than 10 years and his own business only lasts 13 years with some years making losts.  His average annual income is about $50,000.  

What has he done that he can retire the way he wanted so easily ?

Sunday, March 22, 2009

Mutual Fund vs Stock fees

Typically equity mutual fund service fee is 5.5% and stock investment is 0.7%. Other than that, another significant difference between them is that mutual fund normally require a minimum investment of $1,000 whlie stock usually charges a minimum fee of $40.

Mutual FundStocks
Minimum Imposed FeeNone$40
Minimum Investment Amount$1,000None

( Mutual fund fee could range from 1-2%
while stock investment can be as low as 0.05%
but those are not really apple to apple comparison )

So first of all, this $40 minimum could become the first trick in your invesment. $40 fee to a $1,000 investment is 4% alone. In stock investment, the fee is per transaction if buy and sell on different days. So a total of $80 out of $1,000 is 8% !! In stock investment, you must understand MOTS : Minimum Optimized Trading Size especially for speculators in order to really enjoy the low percentage fee as advertised.

In addition, this 0.7% is not the only fee imposed for stock investment. This 0.7% is called Brokerage fee. There are also Clearing fee and Stamp duty. Clearing fee is usually 0.04% and Stamp Duty is $1 for every 1,000. However, when you use 0.7% as the brokerage fee, other fees are small enough to be ignored. This is not the case when your brokerage fee is the lowest like 0.05%, then you effective total fee would easily become 0.18%.

Mutual fund on the other hand is simpler and straight forward. ( they charge much higher fee, ofcourse they should make our life easier )

Meaning when you invest $1,000 into a mutual fund, $55 is paid for the service. Assume there is no market movement and you withdraw immediately, you will get back $945.

Says you buy a $3.08 stock with $5,901.30 ( just slighly more than MOTS), your effective fee would be about 0.84% per transaction or 1.68% in total. But assume if you sell it without any market movement, you will have to find a buyer. So withdrawal is not as automatic as mutual fund. If no one wants to buy your shares when you want to sell it, you will NOT be able to liquidate your invesment !

Lets assume you got into a high volume stock where liquidity is not a problem at all. But you may NOT be able to sell at $3.08. There is always a buy and sell spread. Basically how much you can sell depends on how much people want to buy from you. Anything from $0.005 onward is possible. But in a liquid sell, the sensable price you can sell is most probably $3.06. The 0.02 difference is called the tick size and you can learn a bit about them on this post. Note that when your selling price is $3.06, your effective fee rate becomes 0.85% and not 0.84%, an ignorable difference but nevertheless different.

So to wrap this up, you will get back $5,764.98 if you sell immediately of the stock you just bought ! That is an equivalent of 2.31%

So now you can see how a 0.7% turns into 2.31% in stock investment even when you are senstive about MOTS.

Mutual fund ? Its still at 5.5%, not much trick there. Simple and straight foward.

So it is NO Doubt Stock fee is much lower than Mutual Fund fee but it may NOT be as low as you think it is.

Investment TypePublished FeePut InGet BackEffective Rate
Mutual Fund5.5%$1,000$9455.5%

You may also be interested in these articles

or read all about mutual fund articles here
or read all about stock articles here

One of the myth not answered yet
due to lack of commenters :
WHY and WHAT we can do about it ?

Thursday, March 19, 2009

Insurance, Good or Bad ?

The most confusing financial vehicle in this blog is probably the Insurane element.

Sometimes insurance was cursed here, sometimes this blog says you must have it ... Sometimes I say Don't Buy IT !   Then follow by Yea, You Should Sell Insurance ...  "what in the world is your REAL standpoint on insurace !?"

First of all, "Insurance" doesn't even make it to my wealth pyramid.

but then later I explain Insurance plays a 'supporting' role in protecting the goals you want to achieve or already achieved in life.  ( read here )

I also touch on the "return" of insurance by Comparison among Insurance, Fix Deposit and Mutual Fund.  Since my proposed solution in Personal Finance is to have your very own portfolio, on the insurance part, I propose Buy Term Invest The Rest. to get the best out of all from above comparison.  ( but not suitable for everybody )

I also highligh some of the pit-falls in today's insurance industry

1. Higher than FD insurance is A FAKE marketing talk ! ( case 1, case 2 )
2. But then sometimes it is possible ( case 3 ) with a twist in it
and the solution is to invest monthly instead of yearly 
(but not for traditional insurance)

Then confusion starts when I put up quite a funny article basically saying, "Want to settle your bad debt ? Sell Insurance !".  When someone are in doubt, I even re-assure them with small talk.

So to sum all above up and hopefully can clearify somethings ...

Buy Insurance for Protection - Good !
Buy Insurance for Return - Bad !

Sell Insurance to earn Income - Good !

Don't forget I mentioned before Income is NOT a part of Personal Finance Plan.  So if you have faith in that, you wouldn't have this kind of confusion.  Buying insurance is a part of your finance plan, Selling it, is NOT !  It doesn't matter what the source of your income is, your life plan stay the same.

So recommending you to sell insurance has nothing to do with recommendation to buy.  Different rules apply in Income topics.  You need to be smart and hard working in generating income.  In personal finance, its ok to be dump and lazy when its done the right way - the simple way too.

You may also want to check out other related articles

Tuesday, March 17, 2009

George Soros - good guy or bad ?

There are a few questions why George Soros is not in my radar in this blog.

Well, because it isn't time yet.  But as usual, since you ask, I will jump the queue and talk a bit about him.

There will be 2 topics in this blog that will lead to Soros.

1.  The Art of investment.
2.  Investment is a game for the Rich.

Unlike Fundamental Assessment like Buffets and Technical Analysis by some other successful investors, Soros is one of those few who do not fall exactly into either of that 2 categories.

As mentioned before, our today's money system is by large at fault but no one really can fix it.  Fundamentalists basically try to filter out the noises by sticking to good and strong businesses.  Technicalists try to follow the trend making some money when they see the big guys move.  

Soros however is the type who perfectly understand how volunerable of our finance system is but do not get bother by it, not even the social problems it may create, and then further exploit it to gain maximum out of it.  He is slightly different than "If you cann't beat it, join it" because at his scale, he sometimes create the chaos or problems himself.

Soros still do fundamental assessment NOT before but usually after he invests.  Fundamental results only add strength to his already decided investment to keep longer.  Soros only look at trends at the area where he doesn't invest too much on because he usually create the trends, why 'chase' the trend you created yourself ?

It takes money to earn more money, no one else practise this principle better than Soros.  People who don't like Soros could easily agree to this point.  Like our famous si chedet.

Despite the chaos and how many claim him as a speculator, Soros way of investment is actually quite systematic.  Although it is not as procedurals as Fundamentalists, but nevertheless quite a system by itself.  Since his system is not quatifiable so its called a investment philosophy more than a system at times.  That is also where I call it The Art of Investment - to cover all the other things Science is not covering.

Art doesn't mean NOT Science.  It just mean there is something to it that we cann't fully explain yet.  In Art, we cannot guarantee the same results even if you follow exactly what was done.

A true art is usually not complicated.  A good piece of art is usually simple.  Sometimes it could be Not Easy but nevertheless Simple.

All Soros does is to catch up with the latest happening in the world and then make investment decisions base on it.  Done !

There is no limit on the knowledge to acquire be it finance, politic or social.  When the data is inside our head, certain patterns form in it.  Then we try to relate these patterns to what we want to do - investment.  As time goes, certain linkages are form between the information and our investments.   These linkages are the formulas in our head.  These formulas usually cannot be written down clearly.  One of the reasons is by the time you write down on a piece of paper, certain event has happened that you may need to change your formula already.

All of us have this ability, like when interest rate is lower, everyone know more cash will flow in the market.  The difference is that a more experience guy would have more dimensions in his head to consider about the forest fire in Australia, the hail storm in northen America, the finish of China Olympia  ... all lead to exactly where the cash will flow to at what time.  At least he thinks so.

So the 'system' Soros use is very simple, its the same as all the other speculators who lost a lot of money.  The only differences is Soros has a very persisted way of keeping himself updated with the correct information.  While other loser speculators acted based on one or 2 piece of 'precious' info.  Secondly, other speculators are not as rich as Soros so even when they do the same thing as Soros, they will still lose out as his is the game of Money earn Money.

So like him or hate him, if you want to be him you better seriously get ready to digest what is happening to the whole world - every single piece of data.  Then you better be already very rich when you pratise what he is doing.  Else you may just be speculating into prey in this money earn money game.

The reason I don't talk much about Soros is because the line between speculation and investment in his method is very loose.  And statistically it is proven people will always stay at the wrong side of the line.

Lastly, be reminded that Buffet is the top 2 richest guy in the world and Soros stays within 20-40th in the rank (37th in 2007/8).

small talk on insurance

A question came in and I thought it was quite fun so I share it out here ...

Asked :
may i ask why insurance and how insurance can really "sell"?

Answered :
everyone needs insurance, its just a matter of time when they will realize it. people who realize it earlier buy cheaper and people who realize it later buy more expensive, either way the insurance saleman earn more.

ppl who never gets to realize that ended up dying with people around him realize the importance of insurance, so the next generation still buy insurance smile.gif

Monday, March 16, 2009

The Battle has Begun !!

Everytime recession comes is a cycle where the rich becomes richer and the poor poorer.

At first some of the rich will get kicked out of the rich world and even get killed by the down cycle (as will be discussed in this article or covered in an upcoming FREE ebook, most probably in April ).  Basically those are the not-so-strong apples among the rich.

Then there will also be some shuffles where the Poor or the Average suddenly join the Rich during and after the recession.  These are either the smart or lucky people who spot on the right thing at the right time within this short period.

However, either way ( rich stay rich or poor turn rich ) these future Rich folks achieved it by doing one thing, by leveraging the power of general public, the biggest human network of all time especially in this Internet era.

If you think above sounds good, then let me rephrase it.  These future rich men will further exploit the ignorance of everyone else on personal finance topics, squeeze every single remaining bits from all so that they can stay or turn rich during this down cycle.

Bailing out failing businesses, pumping more money into a proven-ill-money-system are all questionable moves.  And how they do it is even more threathening, by taking resources from you and me - lowering interest rate and massive issue of bonds.

If above claim sounds too global, economical or you think national stuff don't really affect your 'personal' life then lets examine that claim.

Wherever you are in this world now, you have probably already read, viewed and felt the tendency of goverment, big corporation and famous guys convincing you to invest, buy houses and cars.  All kind of incentives are introduced to pursue that.  Basically it says we have to keep the money flowing or else we all die.  So you all should keep investing in forex, buy houses and cars etc.

Rich Dad Poor Dad re-emphasizes on cash flow lately and explicitly use the term, "Don't Save".  Then followed by some fine print in his book asking you to buy properties.  First of all, his word spreads and most people did not really read the whole book.  All they got is "Don't Save" and as a result, they simply spend more money than before recession.  And they didn't really get into any good property investment neither.  His new book title is Conspiracy of The Rich and I have to suspect his book itself is a big Conspiracy !

If you are a Malaysian, likely that now you are thinking to buy a new car because you can get a $ 5,000 rebate from a rotten old car.  You are thinking to buy new property because you can get $10,000 tax deduction.  Even if you don't have the old car to trade in for, all your friends around you talk about it so much that you started to ponder as well.  In addition, tons of great deals are in the market now where you get up to $30,000 saving if you buy certain properties.  Not to mention not too long ago if you simply do nothing, your EPF saving will Automatically be reduced !

Since when saving less and spend more 
is the cure for a recession ?

Keep the money flowing  M E A Ns  keep buying your food and drinks.  Live heathier lifestyle, buy more veggies, less meat.  Drink more water less beer.  Jog in free park, smoke less.  Paint your own wall, fix your own stuff, do more DIY.  Keep the money flowing DOES NOT include keep paying the rich NOR does it mean keep getting more BAD DEBT !!

Keep the money flowing BETWEEN YOU and ME !
  Not OUT OF our circles !  

Doing so can 'probably' fix the recession.  But let your money flow out of our circle 'definitely' digging a deeper grave for yourself.  For every 1,000 of your new graves, perhaps 1 guy will stay rich or a poor guy may turn rich.

The Battle has Begun !  
The Rich has started working.  
The Poor has started fallen into traps.  

This is the time where the Rich needs your help, the Rich is asking the Poor for some money.  Supposingly this is putting the Poor in an upper hand in the game now.  And this happens almost once every 10 years.  This of our current recession right now, is the 10th times.  For your info, all the past 9 times, the Rich always won.  The match wasn't even close, the Rich won one hand down without a fight at all.

This post gets a bit long now, remind me to talk about what the Rich should do if they are really sincere and what we can do to win the game ( Not that we will actually ).  However, in short, your personal finance principals should STAY THE SAME.  All these so called incentives are NO Different than the saleman who sweet talk you in a coffee shop.

The Battle has Begun, you can leave your Poor and join the Rich, you can get killed and you can also help spread these words so that The Poor has bigger chance to win in next cycle.  ( email this article a friend now ! )

Sunday, March 15, 2009

politician salary

Recent public announcement of politicians salary does not really excite me too much.  The full info is at Selangor web site.

Its the way they did it.  Take a look at this ...

Notice the bottom right corner there is a word "SULIT" means Confidential.  So basically they pass out some forms for people to fill up and then just scan it in and publish on their web sites.  All of their NRIC number, age are all revealed.

I am not sure about you, but all these seems a bit redundant and too much info revealed.  To make it worse, the only person's private data not published is Khalid's.  His form was pre-edited before scanning and publishing, unlike other people's.  Seems like they still have a lot of teamwork and fair treatment among themselves to improve on.

Anyway, this is the summary of how much they earn, from varies sources of the positions they are holding.


RM 47,222


RM 32,830.67


RM 23,322.08


RM 20,722.08


RM 18,122.08


RM 17,722.08


RM 17,722.08


RM 17,722.08


RM 17,722.08


RM 17,722.08


RM 17,722.08


RM 17,722.08

These figures turn out to be much higher figures than my original preception.  

Perhaps its not bad afterall to pursue after political career .....

mini Budget 2009 ?

I am neither excited nor disappointed with recent mini budget announcement ...

About the $5,000 rebate if you buy new Proton exchanging your 10 year old car, I think the  rebate should be given no matter what car you brought in !  The rules of 10 year old car is really redundant if the government sincerely want to help us.

The right way to boost car sale is to remove all the unnecessary tariff !  Let it be FREE market for all cars !  I am sure the effect is 10 times better than this $5,000 rebates.  Furthermore, it pushes Proton into a REAL reform, perhaps its easier just let Produa take over.

So in short, this $5,000 rebate program will fail miserably.

As for the case asking graduates to go back study since there are no jobs for them anyway ... I cann't say that is bad but it would be much better if he promotes entrepreneurship. 
No jobs means we need to create jobs, not to avoid them.  No money means we need to find new money, not to spend more !

There are 2 ways we can create jobs.  Government initiates Mega Project like KLCC and Smart Tunel, straight away all level of job positions are opened while bringing in new technology and knowledge into our country.  Second is to let all of us ourselves to create job ourselves - be entrepreneurship !  None were mentioned.

Lastly I personally think we shouldn't need all these helps.  I think recession is the best time to throw out the rubbish.  Its the best time to do house cleaning.  Let the dying be dead and let the strong survive !  Many innocent will die yes ... but most of them is due to ignorance !  Ignorance of not saving for the raining days !  Ignorant of not setup automated saving system !  Human by nature don't learn until they have to.  And let now be the 'HAD TO' time ... then all the remaining survivors would have a good strong personal finance culture.

Gold Investment : supplement info 090314

It is exciting to read about Carson Ding's take on gold investment, basically he is forseeing immediate up swing soon.

Since this blog's duty is to cool people's head when overheating and heat people up during down mood, so this is a post to supplement Carson Ding's article.

First of all, technical analysis should NOT be the ONLY reason one decide to buy or sell.  Doing so is as good as gambling actually despite what other gurus have told you.

However, in this case, one of the macro principals is that we should buy gold during war time.  So keeping gold during recession is fundamentally the right move.  With that in mind, technical analysis would be able to help in better timing.

This blog also mentioned before that Technical Analysis can be very misleading and could give you different indicators when your X axis changes.  Lets review this claim here.

Below is a chart of 30 day gold.  As you can see, its actually on a down trend.  But recent price move break out of the trend show good sign.  However, up trend has not been formed and it may face resistence at 940.

60 day chart basically tells the same thing as 30 days with slightly bullish longer term trend.  However, it may also seems like forming a head and shoulder pattern which implies potential deep bearish.  However, this head and shoulder pattern is weak and subsequent movement can rule it out by now.  In addition to 940, this chart also shows resistence at 930 and 950.

6 months chart shows very strong up trend and now is one of the best buying time.  Actually just briefly pass the best buying time.

1 year chart reaffirm 6 month analysis with 920 as floor price and 970 as ceiling price.

5 years chart shows weak side trend between 720 to 1000.

10 years chart shows up trend with 1000 as ceiling price.

So summing all up should evident that there is NO CLEAR indication to buy or to sell because it is most likely to trade side ways, with short term down trend pressure and long term up swing potential.  Therefore, overeall tendency is on the buy side especially if you can keep another 2-6 months. ( read this article how to earn money in side trends )

As for those who have bought and wonder when to sell.  Well, there is really no clear sell signal as there are too many resistence lines identified in different period of charts, all the way from 920, 930 ... to 1,000.  Therefore clear selling trend has NOT be formed yet.

Furthermore if you think the economy is going to get worse on the months to come, then both principally or technical analsysis wise, you should buy and hold, revist the trend 2-6 months later to see if selling target has shown up yet.

Saturday, March 14, 2009

Maybank : Premier Capital Income True Saver

full plan details at maybank2u site

This seems like the plan that break one of the rule of thumbs I have been sharing all along

All kind of guarantee plan will not have interest higher than FD rate

Lets take a quick look on what it offers

So basically if you put in $80,000 you will get $100,000 insurance coverage.  Assuming this insurane coverage would cost you $340, then effectively this plan is giving you a guarantee compound rate of 3.87%

Higher Than today's FD at 2.7%

If you don't really need the insurance or you don't want to consider that.  Then your effective rate is 3.44% return.

So the next time an insurance agent is selling you guarantee return plan, make sure you compare with this plan.

Even though this plan does BREAK my 1st rule of thumb but it didn't break my 2nd one.

I did say if there is a plan that can offer higher than FD rate, it will be closed down by Bank Negara very soon.  Indeed Maybank knows this very well so they say this is a LIMITED OFFER only and it will be closed down after 10 April !

If you read the detail page, it also say Fund Size 150 million.  So effectively this is really NOT an insurance plan.  This is a Mutual Fund comes with combined insurance coverage.

Another derived message you can get out of this plan is that the largest bank in Malaysia is telling you that they think your mutual fund can easily give you a guarantee return of 3.8% in 8 years time.

Which is kind of a no brainer because 8 years from now, the stock market will most probably peak at its next bull run.

Just in case you did miss the 10 April deadline, don't worry, this kind of plan is always available at

only without the word "guarantee".

track records of GREATest investors of all time

These are the coolest data I have ever worked with, totally worth me working on it until now ... 3am+.

Basically these are all the greatest stock investors of all time, their actual perfomance vs Standard and Poor index ( pink line with square mark).  Click on the picture on view in full size.

Graph below shows that Warren Buffet stands out quite significantly as the best profit and also worst lost ( brown line with circle mark ).

Joel seems to perform quite well most recently but the pattern is also big gain big drop ( light blue with square mark )

However its easier to earn profit during bull run vice versa.  So the real good investor should out perform the index during good time and perserve capital during bad times.  So I minus out each great investor's return with S&P return to come up with a Net Return, as an indication of how well these investors out perform the market.

Ok, its still hard to see anything from this graph.  But basically it seems that even the greatest investors of all time didn't really out perform market that much at all !

Average return of all time among all greatest investors is 19.6% while the average of S&P is 13.13%.  So they really out preform market by 6.46% only !

Among them, the best out preformer is Joel by 19.72% and Warren Buffet by 15.6%

How much were you thinking you can out preform market by ?

Friday, March 13, 2009

Get Out Of Bad Debt

I briefly touched on how to reduce bad debt in a case study about a middle income guy.  And most of us are the Average Joe, so no doubt the questions of How to Get Out Of Debt persist.  Furthermore, there is a book saying that 21st century is all about Debt.

Ok, lets start with the boring, "You shouldn't have got into bad debt at the first place !"

Sorry but Honestly, personal bad debt is a pure mistake on greed and ignorance.  Bad debt is not a personal finance problem.  Its the opposite of personal finance.  As mentioned before, the only thing you MUST do in Personal Finance is to setup an automated saving system right after your income.  Bad debt is the reverse !  By using up more than your income even before the income comes in.

That would be the FIRST thing one must understand, realize and FEEL it !  Else it is not going to be any helps in reducing bad debt.  It will just come back again and again.

Secondly ofcourse we can blame it on the education we received.  Off the 12 long years of FREE and compulsory education, we didn't learn a single thing about bad debt, not to mention automated saving.  Although its not a personal finance problem, it is a global trend and it becomes a national problem where it affects our daily social life.  Crimes rate increase.  You lose job, I die.

Ok, now that we take responsibility of the problem and we get someone to share the burden, we can now look at it face to face.

The problem originates from Income, so the real solution is within income as well.  But before that, lets review some of the common advices :

1.  categorize debt by different interest rates
12-18%  Credit Card or Ah Long debt
5-7%  House Loan
2.  work on the highest interest rates category first
including transfer all the high interest rate loan to lower rate like using house loan to pay for credit card debt
3.  within the same category, pay off the smallest amount first !
4.  call up banks and ask for waiver or reduction

other than that, there are some uncommon methods and services offered by private agency.  Basically they work around these methods:

1.  Pay a little more monthly, cut down total number of years to save on total sum
2.  Instead of paying 18% to credit card, borrow from them and you pay only 16% etc.
3.  Changing interest calculation method from daily rest to monthly rest etc.

It is possible to have some businesses out there sincerely come up with plans to help people reduce debt.  Afterall, the ultimate benchmark for world best stock investors is only 15%.  So it makes more sense to run a Ah Long business than starting a company like Warren Buffect's  BERKSHIRE HATHAWAY

However there are more businesses out there taking opportunity out of these ignorant debtors and further exploit them to the limit by squeezing every penny out.  So my advice is approach these agencies with care, only work with those who can provide you clear figures / numbers how the system works and then you send the figures to me for verification.

Most countries have also setup proper agency to provide similar helps like above private ones.  That is a must know for poor debtors.  In Malaysia, you must go to AKPK personally and ask them to help you face to face.

Ok, lets get back to this blog.  Just a reminder that all above are the common methods debt adviser would have shared with you.  They are effective ... to contain the problem, not really solving it.  This blog stresses that personal bad debt is NOT a personal finance problem.  Its problem is from income and the solution is to work on income.

So what you really need is to focus on Getting More Income to pay off the debt.

No one can go back and change a BAD beginning 
but everyone CAN create a successful ending !

And you bet double the effort is needed to correct a small mistake.

Some may curse by now what a stupid recommendation. 

"If I could earn more money, I wouldn't be in this debt at the first place !!"

Well, thats why and how this article is written.  You must first admit and take resposbility for your own mistake, then you can also blame someone for it and now you should face it to solve it yourself.  Including thinking positively how every single suggestion comes in, despite how stupid some of them may sound.

Fortunately, there are proven methods on how to increase income to solve debt.  All you need is as mentioned above, expect double extra effort to come.

Statistically 3-5% of people who started a business end with great finance success.  The unique difference in this 3-5% of people is their smartness and ability to adapt to changes.  Lets face it, how smart we are is something imprinted within us.  Its not something we can change overnight.  By the time we are as smart as we should be, debt rate has already compounded to sky level.  Afterall, if we have the smartness in us, we wouldn't have reach this bad debt situation anyway, would we ?

On the other hand, people who 'join' a human network business has 20-30% success rate.  Off the other 70% who didn't make it even though they are in the same human network business as those who make it, is because they didn't spend enough effort on it.

A Human network business that you can 'join' includes multi level marketing, insurance and mutual fund agents.

If you are serious about solving your bad debt which you admit was a mistake on your part.  Then you better focus on increasing your income.  And if you don't know how to increase income on your own.  You better temporary forget about all your preception on MLM and insurance agents.  Join them and really spend a good amount of effort on it for 2-3 years.  I guarantee you will solve your current debt problems.

Forget about morale, forget the right thing to do, forget about helping others, you have to even forget about finance planning as a matter of fact.  Your focus should be on solving your debt and you are just 'working' toward it.  You don't have to 'like' your work in this case as long as it can get you off this bad debt which is killing you.  You probably don't like your current job anyway.  And since you are already in bad debt, you probably been brain wash by some incorrect ideas.  So what's wrong being brain wash by this MLM and insurance ?  While your brain is already filled with get into bad debt procedures.

After all, both income and bad debt is NOT a part of personal finance planning.  One is the pre-requsite and another is the oppositive.

Among the 3 choices above, insurance is the safest and best choice if you don't know which to pick.  

Although MLM is  perfect in concept but in practical world, MLM is still new and there are still a lot of bad apples in MLM industry.  Since insurance industry is older and better regulated, there are really no BAD insurance companies out there, there are only less good choices.  Mutual fund is more toward finance planning or investment ideas, immediate and short term reward on mutual fund sales are less encouraging.  So to sum all up, insurance industry is the most suitable human network business for people to join to reduce their debt.

Take an example to solve a $20,000 bad debt.  You probably need to make a total sales of $60,000.  Assuming each sale is $2,000 then you will need to make 30 sales.  In order to make 30 sales, you may need to make 150 attempts.  Assuming each attemp needs 4 follow ups, then you need to prepare for 600 sessions of work.  Assuming each session is 2 hours, you will need to spend 1,200 hours in order to solve your $20,000 debt.  Now, if you spend 3 hours a day, 7 days a week, your debt can be settled slightly after a year

If above example is not acceptable, then you will need to have the smart in you to entrepreneur about how to get the extra income you need.  But just to beware, the 'smart' you think you have in you may be is the 'smart' that gets you into bad debt at the first place.  Just beware ... but don't let any wild imagination stop you when pursuing income.

Lastly, if you setup an automated saving system, then you are more likely to solve your bad debt problem too.  Exactly why would probably require another long topic on human psychology.  But in short, setting up such a saving system implies you already solve the 2 most original fault in bad debt, greed and ignorance.

Good luck all, I know this is a tough topic and not many people will agree but nevertheless its already proven solving many bad debts again and again.  Although these people never come back and help me propagate the right finance planning ideas, but they did get their debts solved.