East will take over West in ... 2020 ?

G7 are the 7 countries who have been dominating world finance since 20th century. Most of them are from Europe and North America, plus Japan.

However, most would have known by now that some of them are no longer as great as they used to be in this 21st century.

So E7 comes about where generally people think a new economical forces will emerge out taking over G7, they are (China, India, Brazil, Russia, Mexico, Indonesia and Turkey).

According to chart below, E7 will take over G7 in 2020.

There are also stories that says this will happen in 2050. Either way, generally people expect E7 to take over G7 in due time.

However, the fact is that will NEVER happen.

What will happen instead is that 1-2 G7 members may drop out from the list because they fail to make a come back despite how hard they try. Like wise 2-3 E7 members never make it to the bar, hence E7 will NEVER be formed.

At the end, there may be a G11 formed, which has nothing to do with G7, G8 and G10.

G11 is seamlessly integrated among themselves with latest technology. Forex and logistic are no longer issues a small business owner need to worry about among these G11 member countries.

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 ?

( part 1, part 2 ,part 3)

George Soros - good guy or bad ?

who the hell are you to comment about me ?

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).

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.

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 zzzz 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

http://safepay.com.my/ins101.asp

only without the word "guarantee".

Allianz Power Saver Guaranteed 4% = 0.28%

note : updated content found at the bottom of this post 

Copy from Lowyat forum that :

Allianz Power Saver gives guaranteed 4% interest return. Every year invest certain amout of money on it and on the 5th year, the 4% return will be given out. Maturity of 30 years For example,

For RM100,000 sum asured (Every year payment of RM20,000. So total of RM100,000)

So in the 5th year, payment of RM4k will be given out for 26 years. So total collection of RM104,000 over the years.

Hmm wondering if this power saver is really the best in the market? For sure it is a lot better than the current FD rate.

If I understand it correctly, then it should be like below spreadsheet.



click here to view the spreedsheet

It is like you save into a Fix Deposit who pay you 0.28% interest rate ONLY !!

Far from 2.X % that is paid by most banks now ! Not to mention the calculation above is compounding yearly while real FD accounts compound monthly

Ofcourse they will pay you more money at the end of 30th year. That will boost up your effective interest rate but want to bet ? As shown in earlier posts in Capital guarantee plan ? and 2,400 get 800 = 33% ? Whatever the guaranteed maturity value is, the final effective rate will be less than 3%.

any kind of insurance guarantee return policy will provide you slightly less than FD return at that point of time !!

do correct any of the info here if mistake found, all confrontation welcome for the good of all.

Blogged with the Flock Browser

---

2009 03 13

Allianz personel showed up in the forum above and provided more info and complete picture.  First of all this is the full illustration provided :

One very important fact shared is that the life coverage in this plan is a Reducing Term Average which means the life coverage reduces as it approaches the end of 30th year.  I can safely assume the Sum Assured is $100,000 and as the SA reduces, the guarantee $4,000 pay out will eventually make up to the reduced Sum Assured.  So sum it all up, you will get back your $104,000 whether you die early or you don't die at all.

If you scroll to the right in the spreed sheet at the beginning of this article, this plan basically gives a 2.93% to 3.47% non guarantee return.  Although its NOT guarantee but looking at today's recession ( entry time ) and a period of 30 years ( exit time ), its almost no brainer this return can be easily paid out as promised.  So not exactly as FD but can be as safe as FD.

I hope this exercise benefits some people.  First of all, guarantee return is usually not able to be higher than Fix Deposit.  2nd of all, we cann't really assess a plan correctly until we get the full info and quotation.  As mentioned by this blog before, analyse the actual numbers, not the rate published by the promoter or sellers.

Who would you listen to ?

Two persons are promoting you great ways to earn good money which you are eagerly looking for.

Melva is a multi-millionaires who owns an international business. He is currently semi retire but still appear in office from time to time review progress and make new decisions base on latest world trend.

Andy seems like a very charming guy. He is very enthusiastic and energetic. He has done many great work in past 10 years but has not achieved enough yet. Sometimes his friends even doubt if he is in debt or just barely make through everyday's life. But he does have many great ideas and a very attractive guy.

Both Melva and Andy are sharing with you ways to get rich. Who would you favor more, listening to ?


Most people pick Melva because she has done it before. Andy is fine with almost everything except that he is not where we want to be yet. So we pick our idol or a symbolism where we want to be and favor to her advices more.

... Next story ... two persons are advising you not to steal.

One was a thief, now locked up in Pudu prison (1986). After serving 7 out of his 10 years term, he will be released next year due to good behavior. Ahmad is sharing with you why you shouldn't steal.



Priest Michael is the most respected person in town. He has been preaching for more than 15 years. Ofcourse he has never steal a single thing in his whole life. He is asking you not to steal.

Who would you listen to in favor ?



Most people pick Michael the priest because he has better reputation. Why should we listen to Ahmad at all if he himself was stealing?

.
.
.

Sometimes we choose to follow those who has done it before.

But other times, we magically believe in someone's words even if he himself has never done it.

what a Double Standard !

But why is this happening ?

That is because even before we listen to any of them, we have had some preceptions ourselves. We think that Rich is a good thing and Steal is a bad thing. So for good stuff, we look up to those who has achieved it and for bad stuff, we look down to the people who has done it before.

Some may say this is due to reputation. We naturally choose to follow people with better reputation. Actually this so call reputation also orients from our preceptions of good and bad. So in short, we use our own internal preception to determine what we like to hear.

Which in a way is a funny thing. If we already know what we want to know, why do we bother listening or learning what we alraedy know ?

Actually it has been sometimes since Melva the rich work her way up. All she remembers now is some high lights in her past and most of what she did are no longer workable in today's world.

A few guys listen to Andy eventually form a team which become one of the biggest advertising agent in this region.

Most of Michael's students still end up stealing. Because the priest was boring and just talk about what you shouldn't do. The more the kids listen to "shouldn't steal", the deeper in their mind is implanted with "Stealing is one of the options I shouldn't do".

A group of 32 who listened to prisoner Ahmad decided not to steal anymore. Almost all of them eventually contribute a lot back to the society in many different ways. Whatever Ahmad shared in 15 minutes that day, it deeply touches those who were thinking to steal something to achieve their goals.

We have done quite an extensive studys and surveys on this topic in past 4 years. A total of 68 case studies are finished examined with a 1 year follow up. Guess what our conclusion is on "Who You Should Listen To?"

Most people listen to better reputation speakers, some of them (12%) manage to benefits, some not. A smaller fraction of people listen to people who has done it before, some of their lives improved (13%), some not.

So our conclusion up to now is In-conclusive! It doesn't matter if you listen to the highly reputated speaker or to those who has done it before, they may or may not leave effect on you.

So it doesn't really matter Who tells you what, the important thing is what you can make out of it!



In real life, many important things do not have clear distinction between good and bad, correct and wrong. So using our instinct of listening to more reputated person may not usually work. Furtheremore, we really have no control over what people say. We also have limited ability to shut down our hearing ability.


What we are in total control is ...
how we process what we hear,
despite what it is and who said it.


So, should your personal finance planner or consultant better than you or should you use them as part of your whole plan ?

Blogged with the Flock Browser

One of the Darkest day for KLSE:KNM

I recommended before KNM is a worth buying stock because its current price is below its worth. But today marks one of the darkest day for such a recommendation. Let's face it straight flat to the face and see what happens ...

First of all, the support lines for KNM is 0.40 followed closely by 0.395 as shown in graph below.





KNM has been re-bouncing or more correctly lingering around 0.40 support line for quite some time. A lot of speculator are waiting to queue at 0.40 but never got their wishes come true. Until today and they regreted their wishes were granted. KNM drops all the way to 3.70

Why and What Happen ?
First of all, let's review what support lines mean. It means the price may bounce back up when it touches that level but if it break that level then it will fall much further. In KNM, there is no apparent next support line and it will go FREE FALL if it breaks 0.395 !! Which in this case, once KNM drops below 0.395, it goes straight to 3.70 !!



Why and What Happen ?
Actually the answer was anounced later at 6:17pm

7164 KNM KNM GROUP BHD
Notice of Shares Buy Back - Immediate Announcement

Date of Buy Back : 27/02/2009
Description of Shares Purchased : Ordinary shares of RM0.25 each
No. of Shares Purchased : 1,500,000 shares
Minimum Price Paid For Each Share Purchased : RM 0.370
Maximum Price Paid For Each Share Purchased : RM 0.390
Total Consideration Paid : RM 574,005.00
No. of Shares Purchased Retained in Treasury : 0 shares
No. of Shares Which Are Proposed To Be Cancelled : 0 shares
Cumulative Net Outstanding Treasury Shares As At To-Date : 40,135,100 shares
Adjusted Issued Capital After Cancellation : 0
Date Lodged With Registrar of Company :
Lodged By :

27/02/2009 06:17 PM

Ref Code: 20090227NI00515

Actually one could have detected this as early as 10:06am when a series of constant high volume sell transactions are done.




If you remember the concept of supply and demand, when there are more selling than buying, the price will drop. Especially when the buying pattern consist of many small lots but selling is done by a few big quantity ! This means some big shots are selling off this stock !

This can be further observed at 12noon, 2:50pm, 4:10pm, 4:30pm and 4:40pm.



The green color shows the price. The red color shows the sell volume and blue is the buying demand.

You may observe you can hardly see any blue in that graph. So its almost no doubt this stock is going all the way down !

What to do now ?

If you have purchased this stock and already lost more than 10%, the general rule of thumb is to cut loss now. However, if you do not have any other better choices/stocks anyway and if you believe the fundamental business of KNM is still strong then you may choose to hold on to another 15-20% lost. All purely speculation at your own risk.

If you haven't bought this stock yet, you will need to find out what the next support line is and prepare to buy it assuming no new surprising news.

btw, KNM will be giving out 1.5 cents dividen early March. 1.5 cents out of 0.37 stock price is 4.05% pay out, which is better than today's FD @ 2+ % ( see top right for latest best FD rate ). And you could have earn this 'annual' FD rate in just within a couple of weeks ! Which is equivalent to a 100% annual gain. But ofcourse, stick to 4.05% is a more realistic figure.

So a lot of small players will be accumulating this stock like mad but there is no clear signal what the big guy will do. Supposingly in this no-support-line condition, price will drop like no one's business. I even suspect there is some internal dealing for this downside so the risk is still high on this stock where speculation is more than fundamental analysis.

The best reason to buy this stock now is you don't care about the dividen and recent lost of projects, if you know you can keep it for 2-5 years, this is still a keeper !

me ? I am accumulating more bullets and hope to hit jackpot yes ....

Blogged with the Flock Browser

Stock Picks methods 2009 02 24

First scroll down on forexguidehowto blog on the left hand side.  There is a link to download KLSE End Of Day data.

Select the latest date and you should be able to see a list of that day's stock data. 

Copy and paste that into a text editor


Subsequently use a spreadsheet program to filter out stocks between RM 0.10 to RM 0.50 (?)  then sort the stock list by volume.

There you go !  Here is a list of stocks that you may consider !

First, find something that you understand and like, have a strong feeling about etc.  For example;

You think oil price will go back up eventually, then you may want to look at KNM, Scomi, Ramunia etc.

You think zzzz has the best resources for furniture industry - LCL.

To understand what a business does, you may check from http://biz.thestar.com.my/  Just enter the stock name at top right corner and click search ! 

click on the Fundamental link to view more info about this company.  You may need to sign up as a member first.  I think it should still be FREE.

Then, make sure the company has been strong by making sure its pass years Return on Equity are always more than 15% !!

Then collect its pass years EPS and use this web site to calculate how much this stock is worth.

If current stock price is below its worth, then you can buy this stock as per the assumptions made in your worth calculation method.

Don't forget the Qualitative assesment - the management. Which is very important to make sure pass year records can be repeated in future.

Lastly after passing all the criterias above, you may use trend and technical analysis to further fine tune the timing of your entry point !

====

The following has ROE >= 14% for the past 3 years :

KNM

LIONDIV PANTECH RCECAP DUFU HUAAN HSL SCOMI LCL AZRB NTPM

After analysing the EPS growth trend
and calculated their worth,
revised with latest released EPS data
there is only one stock worth buying now

KNM worth is RM 1.10 and current price RM 0.405  ( seems suspicious but lets review this in detail next )

followed by 2nd best choice

PANTECH worth RM 0.41 but current price is RM 0.455.  Cann't buy now but just a small gap away.

The rest of the stocks has too big a gap between its worth and current market price so they are out for now !

One interesting stock is DUFU where I couldn't find enough data for assessment but its past 2-3 years record seems great except the most recent 2 years EPS trend downward.  ( which is common to ALL businesses )

2009 01 19 KLSE:KNM worth RM 0.49

KLSE:KNM worths RM 0.49

if you believe in this fundamental analysis method

Data Used:

1999 EPS 0.9 and 2004 EPS 1.7 for EPS growth rate

2008 EPS 20 for Future EPS estimation

PE 5.5

Assumptions:

Earn compound 15% for the next 10 years

Buy at 50% discount

Current price is already lower than RM 0.49 so you can buy anytime if you plan to keep for 5-10 years to come.  The next few days drop or rise wouldn't make much different.

My roof and floor price for this stock is RM 0.49 on 19 Jan and 0.40, so I may buy either when it breaks RM 0.49 today or when it hit bottom at RM 0.40 for the next few days.

.... more write up about this soon ...

Save $2400 get back $800 = 33% return ?

Someone asked this in a forum ...

Save RM200 a month for 21 years with 'Guarantee' RM 800 interest a year, payable every 3 years at RM 2,400.  

It sounds like saving RM 2,400 a year can get back RM 800 return GUARANTEE - that is 33% rate  !!  Is it a really a good deal ?

I always see this kind of question being asked, the answer is quite simply ... you have to plug in the number and run the analysis.  ( read about that here )

For above example, if you also take back all your saving of RM 50,400 then add together with your RM 2,400 x 21 / 3 = RM 16, 800.  You are getting a total return of RM 67,200 21 years later.

If you assume a FD interest of 2.65%, you will get back MORE THAN the mentioned return above !!!  

And it is not 33% return but only less than 2.65% return !!

Guess what ?  Today's FD rate is at 3% and most likely to rise for the next few years.

Take this rule of thumb with you ...

any kind of insurance guarantee return policy will provide you slightly less than FD return at that point of time !!

Case Study : Buy Stock IOICorp 20081008

This is a short post just lay down my scratch pad showing how I determine the value of a stock without step by step guide.

The table on the left is IOICorp EPS trend in the past.

If I take 1990 to 2006 for calculation, the EPS growth rate is 28.8%

If I forecast future EPS for the next 10 years using above growth rate, I would get 9.28

Assuming PE is 16, the Future Value of this stock is $148.48

The numbers used in above calculation is up to 2006 only, so let's do a quick check.

1.  2008 Jun EPS is 0.991, so EPS growth rate used above is ok.

2.  There is a 1 to 5 split on Jun 2007, so all calculation above should reflects that too.

After 1 to 5 split, the Future Value of the stock becomes $29.696

My target return for this investment is 15% in 10 years, so $29.696 future price translate to $7.424 today price.

I also use 50% as a safety margin so that if things go wrong I can still feel confident that I am in good shape, so finally I think this stock is worth $ 3.712 !!

The last price I got for this stock is about RM 3.7   Seems like the price of this stock is ready to be bought in.

All I need to do tomorrow is to reconfirm PE value and read some of the latest company report on their future plan, any change of management etc.  If nothing serious came out from those, I am buying this stock NOW !!

=== 2008 10 09 ====

Sorry guys, just did a check this morning ... PE for plantation is at most 10x, so this is still a NO GO stock.