Cheated or Own Ignorance ?

a Guaranteed 20% return investment was introduced earlier and it is indeed legitimate.  But do you know it is like an offer " Give me $10 now, I will give you back $9 ".  And of course it is Guaranteed !

20% Guaranteed Return through GOLD ?

Have you ever heard of an investment with Guaranteed Return 20% ?  Well, this particular one is from The Gold Guaranteed . . . what do you think the catch is ?

21st century Economy Politic Quadrant

The Economy-Political Quadrant may seems like telling where to keep or invest your money despite good or bad time.

It indeed works very well during 20th century. Unfortunately comes to 21st century, not only has the year changed, personal finance arena has changed drastically as well.

Gold has been speculated so much that it MAY no longer be the standard of money.

There used to be only 'property' in the city. Now there are satellite towns, suburbs ... agriculture lands and even dust bins ( recycle ) have become valuable estates too. While property remains the right category to invest into whenever economy is booming, but predict the right future seems like tougher than buying lottery.

Government bonds used to be de-Facto action when a country is stable. But in today's world, a country is as smart as a taicon's finance. One day they are the LARGEST, the next day they are GONE.

Stock market used to be the back bone of a country's economy. However, the market of derivatives has become so HUGE that the REAL and PHYSICAL is NO LONGER more real than VIRTUAL

So in 21st century, the element of Stock-Property-Funds-Gold is really questionable. However, one fundamental that doesn't change is that

you will have to identify what to do at what time that is BEST for YOU !

Hope you will find your own very best Economy-Political Quadrant soon !

Economy Politic Finance Quadrant

There are 2 BIG main external factors affecting our investment decisions

• Economy
• Politic

When the time is really bad (economy downturn and politically unstable), its best to park your money under something that is really stable, ie Gold. Which is by definition usable anywhere you go in anytime.

When its good time, invest direct to the stock market would yield very good return.

When the economy is not so good in a strong country, the government bonds or related money market would be able to yield higher return than just gold.

However, the most dispute solution in good economy unstable country is investment in property. This is mainly due to easier rental and higher chance of capital gain.

By simply moving money around depends on the political and economy situation, one was able to achieve more than 12% compound return for the past 20 years. That is equivalent to a 10X return.

But by no mean this is easily done. Some of the concerns include;

• how would one know exactly when economy/politic turns good/bad ?
• is Gold the ONLY option ?
• property may not easily liquidated
• how to choose which property or stock market ?

. . . which can be explored further.

Is Gold Pawning ALL BAD ?

There was an article that says gold pawning is strategically disadvantaged, usually by a 0.X% This implies that you will most probably lose out when you pawn more often (1) longer of time (2). So does that mean gold pawning is an all bad thing ?

The answer is NO!

There are 2 words in relation, Gold and Pawn. Gold is an investable commodity. As a matter of fact, gold could be viewed as the god of all commodities. There is an old saying "When you don't know what to do with your money, buy gold!". Gold is a well known hedge against inflation. So overall if there is Gold involved, it cann't be too bad.

Pawn on the other hand is a not-so-good-thing in general. Basicaly you exchange your valuable items for cash. Your item will be safe kept for a certain period. You can buy back your item before an expiration date. Usually total buying back is lower than initial surrender price so that the pawn shop can earn a profit. On cases where the opposite may happens, the pawn shop enforces a safe keeping fee to minimize loses.

Although pawning is not a good thing, as in you have cash flow problem and you pay extra fee to safe keep your own stuff, but if there is anything a person should pawn it is Gold and Silver.

So gold pawning is not bad at all.

Rob has Rich Dad in his life, as a matter of fact I went through a similar life path as his, but I have Rich Friend instead of Rich Dad. From where I grew up, gold pawning is a way of life. My Rich Friend runs a gold pawn shop. Despite the fact pawning is disadvantaged both strategically and psychologically but over the years we cann't ignore another fact that some people who pawn their golds are still surviving and some doing pretty well indeed.

Lets review some facts again, a 0.X% disadvantaged investment is still better than gambling, borrow money from illegal sources ( Ah Long ), over draft, credit card interests etc.

Some of the key reasons why quite a number of people can make it through their whole lives simply by pawning golds are;

1. Gold's trend growth is REALLY more than inflation rate and

2. Gold provides an excellent cash flow facility today.

If you are earning an interest that is higher than inflation rate, then minus it with a 0.X% disadvantage by adopting some not-so-good strategy ( pawning ), the worst it gets is you are still hurt a bit by the inflation. Relatively, most people do not save at all! Hence,

Earning Gold trend - pawning disadvantage rate > Not doing anything at all

After all, that is why there is the saying when you don't know what to do, just buy gold ! But there is NEVER a saying "Pawn your gold to get Rich".

The delusion of pawning gold strategy is because it does actually increase cash flow. And sometimes some people mistakenly take extra cash flow as wealth. Pawning gold is also a very valid leverage technique. Hence combining its leveraging 'fun' and extra 'cash flow', people easily mistaken it as a way of 'wealth path'.

Gold is an excellent tool to hedge againsts inflation,

Gold can provide you great cash flow especially at bad times,

but pawning will lower all the advantages you get above although in small scale only.

Pawning your gold is not an all bad thing but its NEVER going to be the best thing you can do in your personal finance.

A Wrong Way in Gold Investment - Pawning

Recently I came across a blog that teaches people in gold investment. Basically it is asking you to buy gold, then pawn it to get back 65% (Arahnu) cash, then use the money to buy more gold. It then shows you if the gold price goes up a little bit, you earn a lot more than just simply buy once. At the very end it also mention there is 'a bit risky' but absolutely in a misleading way.

Basically this is a method called Leverage. You have $10 and you know you can earn $1 out of it but if you apply Leverage techniques you can get more than $1. It is also the same way how Bank can lend out 10 times more than what they actually have. ( currency turns evil story )

However, his teaching is one of those 'seems cool' but Absolutely 'Digging your own grave' case! Which also shows how absolutely a nonsense fool can spread knowledge to make more fools. Also exactly the reason why there are still 90% of world population will NEVER achieve true finance freedom, while digging deeper to their own graves.

This so called Gold Pawn is a very common pratice among one of Malaysia's ethnic group. There is even a standard govern policy for it. Basically you can pawn your gold with them, get back 65% cash. Then you need to pay about 0.75% safekeeping fee per month. Usually You will need to repay your borrowed amount in 6 months.

If you have been following malpf, you may have known one key preaching topic is that 'you must look at the real numbers and NOT just the general concept'. To simplify this discussion, lets ignore the normal 4% price gap in gold trading. Lets just assume we only need to pay 0.75% for one month and the price move up down 10% in one month.

Case 1 : Buy Gold

You invest $10,000 and price moves up 10% in one month, you earn 10%

Case 2 : Buy Gold, Pawn Once and use the pawn money to buy gold again.

The price moves up 10% only, but after minusing the safekeeping fee and repawn back the gold to sell all, you will get 16.46% net return. (sample calculation)

Case 3 : Pawn twice so its as if you have 3 golds, but 2 at the pawn shop, 1 at your hand.

Price moves up 10% a month, your net earning would be 20.66%

As you can see, the total amount of capital is the same, $10,000 but you could earn 10% - 16% or 21%. That is the power of Leverage. But wait, lets see what happened when the price goes DOWN 10% instead.

Case 4 : Buy Gold once

Price goes down 10%, you lost 10%.

Case 5 : Pawn Once

You lost 16.54% (sample calculation)

Case 6 : Pawn Twice

You lost 20.79%

You may already observe that there is a slight difference between winning and losing ratio.

When you win, you win less and

when you lose, you lose slightly more.

Pawn Once : Win 16.46% Lost 16.54% Difference 0.08% Disadvantage

Pawn Twice : Win 20.66% Lost 20.79% Difference 0.13% Disadvantage

Basically there are 2 facts you can get out of this :

1) The longer you use this Leverage technique, the more you will lose.

2) The more number of times you pawn, the more you will lose.

Back to the beginning of this article, the Risk of this technique is NOT a bit but the Risk is DEFINITELY higher than the Reward. The best argument he can legitimately comes up with is the disadvantage rate is not that high. Ie. compares to casino gambling where the disadvantage is at the range of 4%.

Think you found a golden goose ? Look carefully next time ....

Where to Invest in Gold

son of the gun, 5 minutes after I published this article, I found that Cardon Ding has just written almost exactly the same article in a FREE ebook, download here to view all great articles of this group writting project !

When an experience investor does not know what the future holds, he invests in gold.

The best way to invest in gold is to buy the purest form of physical gold as possible, namely the bullion bars or coins.  If given the option, bars are better than coins.  In principal the less art work the better.  The more art work on a bullion will usually comes with higher price spread.  Bullion price spread is usually 3% to 7%

The most common Malaysia gold bullion in Malaysia is the Kijang Emas Gold Bullion Coin.  I only know you can get them from Maybank, you can check current gold counter rate here and it can be purchased from selected Maybank branches nationwide

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UOB also offer saying that they have widest range of gold bullions and it seems they do provide narrower spread (2.6% onwards) in their price list.  You will need to call or email them for info.

There are also some retail sellers like   Poh Kong and PAMP but they don't guarantee buy back at market rate or they may buy back at 15-20% lower than market price.

Other sellers like myNetGold, Gold2Trade, R2Gold, SecureGold aren't really proper gold investment.  As of right now, I don't see them any better than a private company's shopping vouchers.  If you must deal with one, I myself may start looking at Public Gold, which has nothing to do with Public Bank.  Its just a tiny company in Penang.

However, those un-real gold sellers can be a good medium to 'speculate' gold price.  If that is your main goal then you may also open a gold investment account with Public Bank or Maybank.

Generally if you cann't afford even one ounce of gold bullion (MYR 3,000), then you should forget about gold investment.  But you still can speculate them using virtual accounts as mentioned above.  

The heavier bullion bar you buy, the smaller the price spread it is.  There is a saying that for about MYR 100,000 the spread can be as small as 1%+ which makes it extremely attractive over a shorter term accumulation says 1-3 years of fighting inflation during economy down turn.

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.

Stock vs Gold vs Property

Below I share some historical trends for Stock Market, Gold and Property.  They are not directly correlated but each is good enough to represend some form of global historical trend.  So they are good enough as an overview and for layman entry level comparison.

Stock market

Property

Gold

Comparison 1 - 1975 to now

Gold has earned 3.5x

Stock market 8x

Property 10.7x

Comparison 2 - origin to now

Gold 28x ( since 1930 )

Stock 800x  ( since 1944 )

Property  16x ( since 1960 )

normalize above return by the difference in years become

Gold  35.9% 

Stock  1250%

Property   33.33% 

However, stock starts at 1 in 1929 and therefore give too large a gap in above comparison.  So I decide to use 1960 where stock index is at 20.  If I use this 20(1960) instead of 1 (1944 ) for stock, then I get

Gold  35.9% 

Stock  83.33%

Property   33.33% 

Gold Trend in Longer History

Comparison 3 - lowest valley to highest peak

Gold's peak at 1000 at 2007

Property peak at 181 at 1996

Stock dip to 1 in 1984

Gold  40x ( min 1923 max 2007 )

Stock  800x  ( min 1984 max 2008 )

Property  22.6x ( min 1960 max 1996 )

Gold  47.62% 

Stock  2352.94%

Property    62.85% 

Like wise stock's number is too crazy so I use 20 instead of 1 for stock and result this:

Gold  47.62% 

Stock  117.65%

Property    62.85% 

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I am not too excited about any of these return rate because past performance does not guarantee future profits.  However, after looking at these graph I am very excited because I think I see some repeated trends in stock market.  It seems QUITE predictable from this graph alone.  However, I cannot figure out any "Patterns" for Gold and Property.  Therefore I am quite sure what I need to do for stock investment, but not the others.

==================

so my final word on this comparison is you should only read this for 'fun' or at most a guide only.  Remember that global trend and all these 'overall' figure does NOT really affect you.  Because you will NEVER buy the whole world.  You will only buy a few stocks or just 1 or 2 properties.  The unique buys you make for yourself determine the REAL profit for your very self.  Global trend does NOT mean you have no chance to out beat it.  

Finance Big Bang Theory

I have this Big Bang theory about Finance ...

At First, there Was Nothing,

Then there is Everything !

Long long time ago, we exchange goods for a living.  Sometimes I asked for 4 chickens to exchange my 1 bag of rice, but some other times, my friend is only willing to give 3 chickens.  So as times go, more and more people do not like this constant changing of 'price' and they want standardization.  So 'Money' is born.

We look down and there are some stones on the ground.  First we 'define' the chicken as 10 stones, since my bag of rice is 4 chickens then my bag of price is worth 40 stones.  So we started collecting stones instead of keeping too many cows and sheeps at home to represent our wealth.

It was all fine within our own family and friends because we trust each other.  Then some stranger came and just pick up stones from the ground to buy my rice.  Soon I ran out of rice and he has all the rice, so basically he took over my rice business and started to control pricing in my town.

So we need some special way to identify our special stones.  I started marking all the stones that I used to buy and sell things.  The chicken guy did the same.  Soon all sort of marking stones are in the market and guess what ?  A stranger came in and arbituary do some marking on the stone and took over the chicken business.

Then we learn that we have to 'standardize' the marking on the stones and it is too big a task for us because we are already full time producing rice and chicken.  The stranger volunteer, "Since I am able to twist all the systems you guy come up with, apparently I am a smarter guy in this area.  So if you let me come up with a special marking stones for you and everybody use that stones, there will be no problem !"  He ended with a strong .. " Trust me !".

So the first 'modern day money' is born. It is a piece of metal with hard to replicate marking represending the value of the stones we used before - the stranger called it coin.  So all of us including the rice and chicken producers keep our stones in the stranger's house.  For each stone we deposit there, the stranger gives us 100 coins.  Since then our buy and sell activities are better managed.

In case you haven't figured out yet,

the stone is called Gold today

and the stranger's house is called Bank

Our Stones

The Stranger's House

Current Gold Price MYR per gram