Why cash is a position and why letting inflation gets to you is crazy.

Dennis Ng, of Leverage Holdings, posted a good article on this issue.
Good for a read for anyone who's interested. Compared to him, I am ball-less 'coz he also short CDL in this article. This is conviction man..


http://www.masteryourfinance.com/forum/phpBB2/viewtopic.php?p=17586#17586

Short term trading vs Investing, what's the difference?

Based on the Rich people I know, including myself, NONE of us become Rich or make millions from short term trading. We make millions by Investing, by Buy Low, Sell High based on Major Market Trends.

There are times we do NOTHING, and money sits there idly, (actually we purposely raise our Cash level to have Opportunity Fund). Becos to a Real Investor, there is a Time to Invest, and there is a time to Raise Cash and do nothing. eg. right now I have 70% of my wealth sitting in Cash.

I don't bother about inflation, becos when I deploy my Opportunity Fund, minimum returns I aim is 50%, so what is 5% inflation to me?

Becos when we invest, we don't invest like 1% to 5% of our wealth (that is what a prudent trader should limit max exposure to each trade), we may invest 50% of our wealth or even 100% of our wealth fully invested (but in different investments).

And we deploy our funds to make minimum 50% returns. So imagine, if a person has wealth of S$100,000. Investing 100% of it, and make 50% make S$50,000. While a trader has S$100,00, cap trading to max 1% to 5% of wealth to a trade, or only traded $5,000 and even if make 100%, only make $5,000.

So in this example, the Trader needs to have 10 winning trade to make as much money as the Investor making a 1 time investment. And what if the investor makes 2 rounds of 100%....well, then the trader is left further and further behind, since the Investor now would have S$300,000 (grew from S$100,000) and the Trader might have S$100,000 + S$10,000 or S$110,000 Wealth.

Trading is lots of fun, quite a lot of action, but really, look around at all the Rich people around, and you would realise that NONE of them make REALLY Big money from Trading.

Even Remiser King Peter Lim (a billionaire) cautions people that one can't make much money from trading when he was interviewed.

For me, I think overall market trend is down, so I shorted City Development at S$10 instead, of course price can rebound, but overall trend is down.

Last round, I shorted S$10.70 and bought back at S$9.20, then I waited for price to shoot up to S$10 and shorted it again, still holding on to my short position.

I'm unlikely to Long, buy any stocks for the near future as long as the overall Market Trend is down, not up.
_________________
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.

Robert Kiyosaki - Everyday CASH Heist

Robert Kiyosaki was the one who flipped my mind when I read his book the Cashflow Quandrant when I was 29yrs old. From then on, I started to focus on becoming financial independence thru' the acquisition of assets, prudent leverage of debt and generation of cashflow to finance expenses and do more investments.

Do take a look if nothing else at this wonderful video and the rest of the series.
Of particular interest to me is his dim view on mutual funds(have to agree right??) in the 24mins onwards.

http://vimeo.com/5490590

As for stocks..well.. it's anybody's guess. For me, I am becoming more interested in acquiring tangible properties and not sell them anymore... hehe..

Investment Myth : Inflation erodes your savings

Don't invest your money in stocks, says Mark Cuban. Wall Street is no longer a good place to make money.
Cuban discusses how average investors looking to invest $25,000, $50,000, $100,000 or more can get return on their money.
"There is a transactional value to cash, and I think that the whole concept of you fall further and further behind because of inflation is ridiculous," he says.

Read more: http://www.businessinsider.com/mark-cuban-investing-tips-2011-12#ixzz1fvuOkgzT

Sometimes, when you hear investment managers tell you the savings rates are below inflation rates and if you don't invest in equities, your savings will be eroded by inflation. This compelled retail investors to look for alternatives (which incidentally will be the equities the investment firm is trying to sell you).

To a certain extend, the manager is right if you are one who will never invest but only saved. However, if you have been investing and is just merely waiting for a better entry point, then the 1 or 2 years of "inflation" erosion is not going to hurt you as you will be able to get 10-20% min. discount on prices.

So... no hurry, just be patient with your cash. Cash is not King but it certainly allows you to grab discounted items when the time comes.

谁是大英雄

In SALUTE! to a great post by Master CW888. 无形胜有形。。。Once you confined yourself to a form, you will not break thru ... Like in accounting, substance over form (if I am correct at all)...

The moral of the story

When rules of the stock market are not set and defined, there is no way to know what it is so we have to master the Art of  Formless Form. When we cling to the form, there will be attachment of the mind to this form. You will not be able to see your true self..


So the Art of Formless Form is not based on specific techniques of TA or FA or both. It is just as who you are. You and you alone can master it! Like Zhang Wuji, you need to forget first!

The link ... http://createwealth8888.blogspot.com/2011/10/master-act-of-formless-form-greatest-of.html

The only thing that matters in Residential Property Investment

Actually all these talk to justify why must buy properties is just to please people who need factual evidence.

I tell you... the only thing that affect property prices is Confidence of the Market you are in invested in.

1) Supply and Demand? Irrelevant -> you know in 2009, we talk abt oversupply in 2011. Prices still went up (confidence in the system was strong. Recovery, bright blue sky) Now in 2011, we talk about massive oversupply in 2013.

2) Low or High Interest Rate? Irrelevant -> you know prices climb amid high interest rate of 4% from 2003-2006? But it dropped in 2008-2009(when interest rate was reducing) because of the crisis (confidence eroded in the system).

3) Rental yield? Irrelevant. CCR has a lot of properties that are not yield-supportive. In fact, a lot are left vacant. Again, Confidence in the system that ppty prices will go up.

Only thing relevant is get a good unit, good location and most important TIME YOUR ENTRY.. If you don't know how, don't chase the market. just let the recession come to you then you start buying. Now you enter, you got 50/50 chance. During recession you enter, you raise your success chance to 80%(cannot say above that coz you never know). But if you really want to time more perfectly, watch the govt counter-measures for property speculation. Once IAS, DPS, 90% LTV all these start coming in, you better be in the market.

Above are all based on my own recollection of events. No research are made to ensure the integrity and accuracy of the data provided... hehe...

Portfolio Update July 2011

No charts, No returns.

I have cashed out of all my equities as of Friday 5th August 2011. Dividends collected was $127k but by year end, I should be in the region of $160-170k with my deposits and bonds.

Based on my gut instinct (which is wrong most of the time), I bailed out myself. Did I just sold into the Selling Climax? ..hehe...

A confluence of factors just make the future looks bleak. Upside is limited in my opinion. Downside is not.

1) A lot of countries are downgrading their own economic forcasts
2) A lot of analysts are downgrading the target prices of companies they covered
3) The start of financial institutions slashing jobs in the major economies and moving part of it to Asia.
4) Indecisiveness and Lack of Conviction as shown by the actions of ECB on Debts and Europeans countries on austerity measures
5) Same can be said of the US of A . But their hands are tied with the ultra-low rates and they have already unleased 2 monetary easing. It does not work. Will a third one worked?

After so many fake scares since 2009, this time, this one... really scared the shit out of me to compel me into action.

As with all things, this is the view now.. Until my guts starts feeling again, I think I'll step aside and watch the market. I will be BACK! Maybe sooner than I think.

无股一身轻，无须太操心。
自救一夜眠，又能见周公。

Portfolio Update June 2011

2011 Year to date (YTD) Return Portfolio -0.91% Equities -5.63% Dividend/Interest for 2011    $106,578 Absolute Return Since 11/2007 Portfolio 11.06% Equities 23.39%

Lousy performance by myself. I don't know what to say! :p But to make myself happier, since Nov 2007(when i started the portfolio), I had an equity portfolio XIRR of 8.16% and a total portfolio XIRR of 3.85%. What does this means? It means, I have only tracked the long-term average of 8-10% in equity. The total portfolio XIRR of 3.85% means I have beaten the local deposit rates and I would have done better simply putting all my money into a SGD Corporate Bond like DBS which could yield me more than 4%. But then again, bonds will never give you equity-like return of 8-10% :) and my weightage of bonds/cash makes performance a drag on the total portfolio XIRR.

I've been wondering... how can a bull market end this year or next when it haven't actually felt like a bull since end 2010. Is the herd on the pessimistic side? Does it even feel like a bull. I only felt the bull in the property market for the last 3 yrs. Time for equities to outperform? :)

Portfolio Update May 2011

2011 Year to date (YTD) Return Portfolio 0.51% Equities -3.48% Dividend/Interest for 2011    $78,909 Absolute Return Since 11/2007 Portfolio 12.33% Equities 25.98%

Time to be cautious? The last month, 3 notable fund managers (Howard Marks, Doug Kass, Jeremy Grantham) felt the market is going to experience a significant correction and possibly a crisis soon. Their advice were to lighten up on your portfolio in equities going forward. The scariest piece of news I've seen is when bond manager, Bill Gross, questioned who will be buying Treasuries when the FED stopped buying. *GULP*. QE2 ending 30th June. Watch that space....

Just yesterday, the mood swung and it seems no news was good news. How the mood swings. So, what do we do now? For myself, I would watch the market and if the long-term trend changes bearish, we will have to react accordingly and reduce our weightage to equities (probably 30% or less for me).

Portfolio Update March 2011

2011 Year to date (YTD) Return Portfolio 2.59% Equities 4.03% Dividend/Interest for 2011    $48,605 Absolute Return Since 11/2007 Portfolio 14.10% Equities 35.75%

World markets remain resilient to any negative news such as uprising or natural or man-made disasters. Just back from Taiwan and the investment sentiments there are also very positive with Tai-ex making new highs. What will turn the tide for the market? Probably the tipping point will come from high oil prices, property crashes in Asia or total devastation of a huge region of Japan due to Nuclear leakage? I have no idea. 

Black Swans and Asset Mix

Good article by Douglas Kass on the more frequent occurrence of Black Swans and the interlocking effect they have on the globalised world. Of particular note, the asset mix in this age of frequent high impact unknown unknowns. Do you want to be too concentrated in your holdings? Do you think Cash is an asset class to be treasured and appropriate raised in weight-age even if it pays pittance?

We can no longer turn the clock back to a simpler time. We must play the hand we are dealt. And our time is interconnected, interlinked and increasingly complex. And our hand has, at its core, a rising number of outlier or Black Swan events.  

Given the "newness" of these and other nontraditional and secular challenges as well as the greater frequency of Black Swan events, P/E multiples might be pressured and could even contract as a comparison between today's valuations to those of history can be expected to lose some of its significance and relevance. 

In this setting, a more conservative asset mix and higher cash position than normal seems to be a prudent strategy.

The full link for your perusal , A contagion of Black Swans.

Private Equity Funding

A Straits Times article again highlighting the allure of private equity. They enticed you with phrases like "Though not easily accessible to the average investor, such funds outperform public equities" . Hmm...where have I heard that before.. it seems to be transplantable to Hedge Funds.


If you want to do private equity, don't need to approach private equity fund via private banks or specialised private equity fund manager. This is like hedge funds. They promised you the skies but ultimately, it benefits them more than you after the fees. I'm sure only the institutional investors and family offices will get more out of private equity via those managers than normal hnws. This is just my view since I have not personally experienced investing in a private equity fund of institutional size.

For example, if you have $500k to spare, why not invest $100k into 5 different local companies of your liking. You could have spoken to a private owner of a ID shop and his business model and management gives you confidence, approach him and ask him whether he is interested in letting in a sleeping partner or an active partner.

How about some assistant chef you know who can cooked very well and you get to know during your meetup with him his intention to start a hawker stall ? Why not be his partner for $100k.

You will be assuming the same risk and illiquidity as the private equity fund but the upside is you are personally involved with the party you are funding.

Even better, how about becoming a private equity fund? Set up a small pte ltd company with like-minded investors. Assuming 5 investors pooled $200k each into the pte ltd company, you could have your diversify your risks again by putting up less upfront (200k each instead of $500k) while increasing your companies invested to 10 ($100k each).

Just my thoughts... I would do that. So any business out there who needs micro-funding? Or how about like-minded investors who want to involve in micro-funding? :)

How to get Rich in Investments?

How to get rich? Read on and see my own conclusion at the end.

Here's Jim Roger's Investment nuggets and this is what he has to say...

On getting Rich

“Historically, you buy stocks when they're yielding 6% and selling at eight times earnings. You sell them when they're at 22 times earnings and yielding 2%”

"Take your money; put it in Treasury bills or a money-market fund. Just sit back, go to the beach, go to the movies, play checkers, do whatever you want to. Then something will come along where you know its right. Take all your money out of the money-market fund, put it in whatever it happens to be and stay with it for three or four or five or 10 years, whatever it is.

You'll know when to sell again, because you'll know more about it than anybody else. Take your money out, put it back in the money-market fund, and wait for the next thing to come along. When it does, you'll make a whole lot of money."

 This is what Buffett did to this Personal Account (not Berkshire) as reflected in his 2008 New York Times op-ed article "Buy America, I am" :

“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors." 

Mr. Buffett indicated that his personal account, which had been invested entirely in government bonds, would soon be 100 percent in United States equities if prices continued to become more attractive. He clearly stated that there was no way to predict where stocks would be in a month or a year but that prices would recover substantially well before widespread positive sentiment returned. As it turns out, it is a good thing his goal was not to predict the short term direction of the market because he was several months too early in terms of identifying the market bottom which finally arrived in March 2009.

 A popular Hong Kong Investor , 曹仁超, made his millions (est. worth of USD$40mil if I'm not wrong) thru' cycling between assets. I don't know much of the exact details but he moved from HK stocks to real estate(in UK) to HK stocks to real estate(in HK) to Gold to HK stocks to probably China stocks now. You can read about his story here : 从穷困潦倒到亿万富翁 曹仁超演绎股市传奇. To me, he is a trend investor and his timing seems impeccable.


How about some local fare like Mr Isaac Chin's gutsy moves? Read the NextInsight article here. I will summarize what I see (but probably you might not agree with what i see.. ).

"I think the most important thing about investment is timing. I could sense the financial storm coming in 2008/9  and I had employed the ‘withdrawal’ technique (instead of the price-averaging down) to fight the crashing market. When STI hit 1457 in March 2009, I used all my available ammunition to bet on the 4 Reits and the rest was history. "

A one-hit wonder? How about considering he first jackpot (and thus started his career as private investor) was selling off his condo(real estate) at $1.2mil in 2000. He subsequently put his money into Bonds, Real estates(Big jackpot here I believe) and bonds and finally the 2009 Jackpot of $2mil gain in Reits. He is now waiting for his thesis of STI powering another 15% before re-allocating his cash into Bonds again.


Most of them seemed to have move the bulk of their resource($$$) into overweighting an asset class deemed undervalued and moving out subsequently to other asset classes like real estate, bonds and the ultimate safe haven of the "Cash and Alternatives" Asset class subsequently. Thus, asset allocation is very important in a person's investing journey. You don't have to move 100% into one asset class at one time, but you do need to maintain the weight-age of the asset class depending on your judgment call. For know nothing investor like me, I like to have "Cash & Alternatives" on hand and overweight where I see the most value. But if you are a know-something investor, probably concentration could better for you. No right or wrong.

Portfolio Update January 2011

2011 Year to date (YTD) Return Portfolio 0.76% Equities 1.42% Dividend/Interest for 2011    $16,609 Absolute Return Since 11/2007 Portfolio 12.48% Equities 33.75%

Egypt and the Arab countries "crisis" on display but no hit to the market. Rightfully so I might think as they do not dominate World GDP as much as China, USA, Japan or Europe. Market has been exceedingly bullish in my humble opinion. Every small dip is supported within a few days by huge positive buying. I believe market is efficient to the extent of discounting news that are already known. Only black swan or Recessions will cause human emotions to run amok making irrational behavior and thus, making market inefficient.

So, right now.. I can't think of anything that will derail the market. As usual.. Only the unknown unknowns will kill you, not the known unknowns.

Of Reit, Leveraged Instrument and Leveraged Investment

When you buy a Reit, you are not a fractional owner of a string of properties. You will be another anonymous shareholder in a company that happens to be dealing with properties and returning you dividends. This is much like any other companies out there who is dealing with any other form of business(e.g, selling newspaper) and returning dividends to you.

Reits are leveraged instrument. True. So are any other companies that employed leverage(debt). It is just a matter of amount of leverage employed. But it is not the same as you leveraging your CAPITAL in your investment. You will not get the full effect of the leverage. For example, if a company by virtue of its leveraged gained 20%, the value of the company might be up by 20%. The share price might reflect the revaluation and your INVESTED CAPITAL in it will go up by 20%.  Reits behaves like any other companies with leveraged out there in the stock market.


However, if you leveraged on your investment in Reits, you will pay $20 and borrow $80 to buy $100 worth of shares in the Reit. If the same Reit have a re-evaluation gain of 20% and the share price goes up 20%, you will have essentially gotten back 100% of your INVESTED CAPITAL.

In conclusion, Reits are leveraged instrument(like other listed companies with debt) ,but it is not equivalent to a leveraged investment on your capital and you do not gain fractional ownership to properties. You are just buying a company listed in the stock market that happens to employ leveraged(like most of them) and paying you dividends(like most others) with gains that are not leveraged.

By the way, I do not recommend leveraging on your capital to buy shares. Read Createwealth8888's Understanding Debt, Risk and Leverage on the danger and risk of leverage. Though, I would think if leverage on investment is needed, the only one I would do will be properties.

Paralysis by Analysis

More Investing and Less Analysing. Don't be paralyzed by Analysis. You can be an expert in fore-hand, back-hand, smash, volley.. but if you don't win the game, nothing else matters.

More retail investors...Market Crash?

Was reading thru a discussion forum and people were citing the increased coverage of media reports on bullish retail investors late to the party as an INDICATION the market is going to Crash.

I beg to differ, the appearance of more late-comers retail investors(unlike the early retail investors like ourselves) does not fore-tell a crash.
It is actually just an indication of optimism and possibly exuberance.

Exuberance will only mean PRICES of stocks will fly higher and higher..
It can go on for years...

The CRASH comes only because of ECONOMIC UNCERTAINTY or ENVIRONMENT UNCERTAINTY.

So there is a difference.. is more retail investors a CAUSE of the Crash... or is it an EFFECT of the Optimism in animal spirits.

Portfolio Update December 2010

2010 Year to date (YTD) Return Portfolio 6.79% Equities 13.17% Dividend/Interest for 2010    $191,875 Absolute Return Since 11/2007 Portfolio 12.03% Equities 32.41%

As expected, M&A activities have been going on and it might indicate the optimism of economic recovery by companies.

2008 was the year of doom, 2009 was the year of gloom/uncertainty, 2010 was the year of reviving confidence, 2011 could be the year of optimism and euphoria. If you have not enough equity allocation, allocate more(buy on dips). If you have the desired allocation, keep on the sidelines or do short-term trades (buy on dips and sell on rallies) instead.