Sunday, August 31, 2014

Financial Freedom: Penang kia vs. Chow Yun Fatt

Today is 31 August 2014, Hari Kemerdekaan. May be a good idea to sit back and relax to think about the meaning of freedom. Since this is a finance blog, the more relevant theme will be financial freedom. I came across 2 articles recently and it has been quite a talk of the town.

The first one was:


When even RM12,000 a month isn’t enough to get by in Malaysia

While Putrajaya talks up proposals to help the people mitigate rising prices with cost of living labs and possibly even more targeted subsidies, most Malaysians are looking at the prospect of expenditure exceeding their monthly salaries.

One of them is Caroline Wong, who believes her combined household income of RM12,000 is not enough to sustain a living in Penang, famed for its beaches as much as it electronics manufacturing sector.

The 34-year-old clerk lives with her husband, a sales manager and their young daughter are starting to feel the pinch despite earning an income that was once sufficient to live comfortably.“We are always eating in at home now and we can no longer afford to buy goods like branded clothing,” Wong told The Malaysian Insider in Penang's capital city George Town.

According to Wong, every month the couple have to fork out RM4,000 for the house and car, RM1,500 on food and another RM1,500 on daycare, baby food and milk for their child.
On top of that, there is RM750 on insurance and a family medical card, RM700 on petrol, RM600 on phone bills, WiFi and broadband, RM120 on Astro, RM140 on water and electricity bills and RM110 on a weekly housekeeper.

“We put aside RM500 every month for road tax and car insurance. Come May next year, we will have to spend another RM1,500 a month on our second child when it arrives,” Wong said.
- See more at: http://www.themalaysianinsider.com/malaysia/article/when-even-rm12000-a-month-isnt-enough-to-get-by-in-malaysia#sthash.SDDBvKlL.dpuf
It is quite wordy, so I just put them in a table.




The other article was:

He may be an international superstar having appeared in blockbuster productions from Hong Kong to Hollywood, but Chow Yun Fatt is still a frugal man deep down.
 According to a My Paper report, Chow, who is said to be worth S$126 million, claimed that he is still using a first-generation Nokia phone, and that he can survive on just 500 Chinese Yuan (S$103) a month.
Speaking at a public event, Chow jokingly gave a detailed look into how that monk will look like.
The breakdown of that survivalist month is as such: He doesn't need food for the month as he can survive on just water for 28 days, which will get him 1000 yuan of savings (S$206).

With that amount of money for the next month, he needs now to only eat a meal costing 10 yuan (S$2) a day, which can save him 200 yuan (S$41).
 The remaining 200 yuan is used for transportation.
He went on to explain the rationale behind his survivalist plan, saying that money should not be the barometer to one's happiness in life.

As long as one live his or her life to the max, he or she can be happy too no matter how poor, he added.

Full article: http://www.malaysia-chronicle.com/index.php?option=com_k2&view=item&id=349761:you-wont-believe-what-mobile-phone-chow-yun-fatts-using&Itemid=4#ixzz3Bw0LHUug Follow us: @MsiaChronicle on Twitter

Again, if it is too wordy, this is how Chow Yun Fatt financial survivalist budget looks like.


BTW, if you decided to follow Chow Yun Fatt survival plan, this is how one will look like. It's too extreme for me but he got a good point.


So, what lessons can we draw from Penang Kia vs. Chow Yun Fatt? The first thing that jumped on top of my mind was: is Financial Freedom a myth? Is Financial Freedom is a cliche that over abused and over used marketed by personal financial planner?

There is a flaw in the argument itself? To say we need to achieve financial freedom mean we are already a slave or in bondage. On the contrary, in reality each of us already have financial freedom. The real issue is what do you want to do when you are already financially free.

In Chow Yun Fatt survival version, he said he is free with RM 526/month. However, our Penang Kia thinks RM 12,000 or having 22 times more than survivalist income is not enough to get by. Our Penang Kia was quite sure they are quite proud that they created a budget. They live within their means. When they say they cook and eat at home, that was their version of getting more frugal. All sounds too logical to many but there is a flaw. The problem that infecting city dweller is they are too obsessed with the concept of Quality of Life.

The version of Quality of Life that many have in mind was to live a scale down of rich and famous. Many did not realize they were brainwashed constantly by the media to conform into their image of success. When one cannot afford to drive Lamborghini, one picks Volkswagen GTi. One cannot afford to stay in high floor penthouse with 5,000 sq ft, one pays for almost similar cost/sq feet over-priced condominium with 1,000 sq st. Unconsciously, we may even have image of 10 servants and butler service, we want people to serve us.

By the way, do you know why Bollywood prospers despite of have some many poor people in India? Because it is a form of escapism. Part of the reason of why Hindi movies are so long, 3 hours, is because it will help people to forget about the pains and lost in fantasy for a while. Similarly, when urban dwellers confront with pressure of so called costs of living, they try to tell themselves that they need entertainment by gluing to Astro or pubs hence need more time by getting weekly helpers to do housework for them.

We go into justifying to have quality family time by going to restaurant but most ended up starring at iPhone and Galaxy without talking to each other. We talk but we don't communicate.

We buy more insurance because we are afraid of getting sick. We constantly looking at our beer belly thinking of having high risk of heart attack but rarely exercise. What is worse, we ended paying thousands of Ringgit swearing we will work out at Absolute fitness centre but constantly feeling guilty because we did not make good on our promise.

Many forgot the essence of life. I ask myself a lots - What makes life worth living?  Many put their energy in the wrong place. They focus too much at EFFECT and not CAUSE. Happiness is an EFFECT. Financial Freedom is an EFFECT. Many organized their lives as if putting a check mark on their to do list. Many spent way too little time on CAUSES.

Some of these images will remind me of the love of my mum. My mum will feel so happy watching me eating as if I was still 7 years old though I have a lot of grey hairs.





I remembered I was driving a car slightly better than this condition. But I was very happy and going into office with full of energy and enthusiasm.


I learn secrets from many wealthy people. They always live by pretending they earn a lot lesser. A person earns RM 12 k/month should live by pretending they earn RM 4 k/month only.


Saturday, August 23, 2014

Retailers @ the losing end again.....fingers burnt

(The Star - 23 Aug 2014) --- my write up is at the end of this long cut and paste article

Don’t be fooled by the high trading volume

LAST week a broker got an order from a client who has not bought or sold shares for the past three years. The client, who is retired, placed an order to buy shares in Sumatec Resources Bhd at 61 sen.
Sumatec was among the few stocks that saw heavy volume being traded last week. The broker advised the elderly man that he should not be taken in by the euphoria that the market had seen last week, with trading volumes hitting record high of more than 7.6 billion shares in a single day.
Apart from Sumatec, the bulk of the shares were traded in two other stocks, namely, Globaltec Formation Bhd and PDZ Holdings Bhd. The three stocks have a combined market capitalisation of RM2.6bil, which is a fraction of the entire market capitalisation of Bursa Malaysia that stood at RM1.76 trillion yesterday.
The elderly retail investor did not listen to the broker’s advice. Sumatec ended at 45 sen that day. Now, the retail investor has to wait for Sumatec to recover or lose a few thousand ringgit if he chooses to sell.
The large trading volumes of stocks should not be a reason for retail investors to invest in stocks. Fundamentals should be the primary reason. The large volume is a game for a select group of market participants called proprietary day traders, or better known as stockists.
There are about 80 of them attached to various brokerages in Bursa Malaysia. Their job is to trade for the brokerage as principals. They don’t have any clients. The stockists can buy and sell as much as they want in a day. There is no limit imposed.
They are not imposed any brokerage fees but have to pay stamp duty and clearing fee to Bursa Malaysia based on the value of trades done. The duty is capped at RM250 or less, while the clearing fee is minimal.
A brokerage will normally place their stockists in a room where they conduct their buying and selling operations with minimum disruptions. Even phone calls are restricted.
The stockists can short-sell stocks without having the shares in hand. But they have to cover their positions by buying back from the market before the end of the day’s trading.
The profit from buying and selling are shared between the brokerage and the stockist. Normally 60% goes to the brokerage and the trader gets 40%. However, an “ace stockist” can command up to 90% of the profits. But the stockist has to absorb all the losses.
Normally, the brokerage will hold the profits of the stockist and pay out only after a year. An ace stockist can earn RM10mil or more a year by just being a principal stockist for the company.
But there are limitations to what a stockist can do to generate the volume of stocks. They generally shy away from stocks that are more than RM1 and that have a small paid-up capital.
Apart from having to incur a higher clearing fee, normally stocks that are held tightly tend not to have enough shares in the market to generate the volume without causing a substantial rise in the price.
The typical targets for a stockist are stocks that are priced at less than RM1 and that have a large share capital. For instance, Globletec Formation, which is an amalgamation of three stocks that were involved in manufacturing automotive components, has a capital of more than 5 billion shares.
Some companies like to see the activities of the stockist because it supposedly adds excitement to the market, not to mention to the stock as well.
But there is also a view that the stockists hold an unfair advantage over the normal investors because they can short a stock or take long positions several bids higher.
This allows a few stockists to “gang up” and deliberately cause a panic sell-down of a particular stock.
In jurisdictions such as Hong Kong, while short-selling is allowed, there are rules that prevent deliberate sell-downs. Anyway, this volume game of trading in stocks is not for retailers. It is only for the traders of the market where the risk and returns are high.
For retailers, ultimately value investing is the game. Value stocks may not have the kind of volume one would like to see nor would it be cheap. But it attracts the kind of investors who generally take a long-long term view.
Berkshire Hathaway Inc, the flagship listed entity of Warren Buffett crossed the US$205,000 per share mark last week, making it the highest-priced stock on the New York Stock Exchange. Despite calls from shareholders to split the stock, Buffett has stayed firm in refusing to undertake such an exercise on the grounds that it would attract a “different breed” of investors that he does not fancy.
A hard-to-trade stock encourages investors to take a long-term view and cuts out those trading on emotions. This is something retail investors should take heed of. The volume game in trading stocks is not their cup of tea. It is only for a select few.
My comments:

My heart ache whenever I heard a story like this especially retired people who has never been or out of stock market got seduced and slaughtered. If this thing keep on happening with more people having their fingers burnt, it certainly does not help when the retail investors have just shown some interest to get back to the stock markets. Now that "they" drove them to the ground.......it is just too cruel. The damage is pretty severe.

My this post is not to add salt to the injury but rather to remind ourselves that stock market is like a coliseum.. Once we have decided to enter the fight, there are only two outcomes - you kill someone or killed by someone. It is a no mercy game. 

There are no amount of laws or regulations that can protect the ignorant, the unprepared or innocent. I certainly condemned short sellers with unscrupulous tactics to talk down market or stockists who "pump and dump".  





We have been taught about food chain since we have been a kid. When we think about it, it is pretty cruel but that is the way whole eco-system works. There is always a prey and a predator. But not every caterpillar will be eatened. Many in fact turn into beautiful butterflies. What can we do to protect ourselves?





This short video taught us a lot about principles to stay alive in the stock market. It helps us to understand our brain better. Understanding of our brain and how to control them especially the amygdala part of our brain. 




Don't lose faith. Stock market is still one of the best places to build long term wealth if we do it correctly. Cheers!





Thursday, August 21, 2014

Just for my record....stock volume crossed 7 billions



(The Star) PETALING JAYA: It was a record-setting day yet again on Bursa Malaysia, with total volume reaching a fresh high on consecutive days and the volume of shares traded in one company crossing the one-billion-share mark for the first time.
The euphoria surrounding the stock market, however, soured a tinge as share prices of heavily traded Sumatec Resources Bhd and PDZ Holdings Bhd plunged due to profit-taking after a steep rise recently. Shares of Globaltec Formation Bhd hit 1.01 billion shares and saw its share price pare early gains.
Shares traded on the stock exchange hit a feverish 7.67 billion shares yesterday after heavy churning the day before saw the volume of shares reaching 5.11 billion.
Active trading, especially among the penny stocks, saw the 10 most-active stocks on Bursa accounting for about half the traded volume of shares.
The selldown in selected penny stocks spooked sentiment, as the number of losers outpaced gainers at a ratio of three-to-one, but that did not deter the buying of blue chips. The FTSE Bursa Malaysia KL Composite Index closed up 6.73 points to 1,878.89 yesterday.
Some 13% of the market’s total trade was contributed by Globaltec. Heavy trading in the stock sent Globaltec shares up 1.5 sen to 12 sen. The highest the stock recorded yesterday was 14 sen.
Meanwhile, red-hot penny stocks finally took a breather, led by the steep falls of Sumatec and PDZ in the afternoon trading session.
Over the past few weeks, Sumatec and PDZ had been at the centre of much trading interest among the lower liners. Penny stocks that have hogged the volume list include Luster Industries Bhd, Talam Transform Bhd, Marco Holdings Bhd and Nexgram Holdings Bhd.
Yesterday, many of these penny stocks, which had been scaling new highs, were given a reality check.
Shares in Sumatec and PDZ fell almost in synchronised fashion in the afternoon.
Sumatec retraced 17 sen or 27.87% to 44 sen on a volume of 739.24 million shares. On Monday, it closed at 61 sen, which was its highest level in 10 years.
PDZ, meanwhile, plummeted eight sen or 21.33% to 29.5 sen on a volume of 455.55 million shares.
“Well, are you surprised? We knew the euphoria had to come to an end. These stocks were rising purely on speculation and no solid backing,” remarked one observer.
The run in PDZ had been especially meteoric, as it had doubled in the last few weeks.
“Yes, we hear that a new shareholder is coming into the company, but we don’t know the plans yet. The stock is running on ecstasy,” said the observer.
In April, Pelaburan Mara Bhd had bought a 27% stake in PDZ from its major shareholder Tan Sri Robert Tan.
A research head pointed out that the fervour in the penny stocks had caught on to the retailers in the last few weeks.
“Investors need to be cautious because this is rotational. It’s a matter of time before the play goes elsewhere. The movement of the penny stocks has been getting out of hand,” said a research head.
Brokers said the active trading among the small caps meant that these stocks would eventually take a breather.
“The market is temporarily overbought, especially among the small caps. However, I foresee the rotational play continuing for the time being. There will be some temporary consolidation before the uptrend continues,” said Kenanga Research head Chan Ken Yew.
Chan felt the market would form a strong base at the 1,860-point level before encountering resistance at the 1,880-point level.
The research head agreed. He said that penny stocks aside, he did not view the local bourse as being too frothy. “There are opportunities among the bigger stocks, such as Felda Global Ventures Holdings Bhd or SapuraKencana Petroleum Bhd. These companies won’t give you excitement like what the penny stocks are giving you today, but over the long run, they will hold you in better stead,” he said.
He added that these companies had real businesses and investors could wake up not having to worry that something had gone awry.

Saturday, August 2, 2014

Who Wants to be a Millionaire?-11th Febuary 2014- Chris Tarrants Final A...





Stock market is a bit like a popular quiz show of Who Wants to be a Millionaire? You started with simple questions, small wins. As the questions progress, stakes are getting higher. Getting it wrong would cost the contestant to be wiped out completely.



In this final episode of the show, it was mentioned that  over a period of time of 15 years, there were 1,200 people wasted 64 millions while 5 people went on and won the 1 million prize.



Each of us who stay in the market faces with unfamiliar questions. Unfamiliar possible answers. The question was always asked : what is your final answer?



The recent sharp market dropped left with many scratching their heads: Is this the end? Yes or No? What is your final answer?



Hanging on to positions to maximize profits at lower entry price is a good strategy but committing new funds to buy may not be a wise thing to do. This is my final answer.


Saturday, July 26, 2014

Investor Sentiment : Betwen Thrill and Euphoria

It's really a long time I did not feel like posting because I really do not know what to say. Throwing cautions will look like an idiot. Cheer leading will also look odds because reader think some of my brain cells must have "short plug".

Anyway, I certainly feel that we have passed the Thrill stage but about to reach Euphoria stage in the investor sentiment cycle.


First most people certainly feel that they are very smart. I recently came across some data from Fundsupermart


2014 has been a good year for investors so far, with funds on the platform averaging a 4.9% year-to-date return at “half time”. Of the 150 equity funds we cover on our platform, 126 (84%) equity funds recorded positive returns in 1H 2014.

Those who buying equity funds at the beginning of the year would have 84% chance of making money. 84% is very very good and certainly will make people feel smart.

Despite of most people feeling they are smart, they are still feeling cautious. Retail participation certainly had improved a lot. 30% participation is not bad. To reach Euphoria stage, I would think it has to reach may be 40-50% for at least 6 - 9 months strech. In fact, retail investors have been quick to flee the moment they see something is wobbling and they have been net sellers for a while(profits taking) recently.


The KLCI market is already above the 10 years long term average but it has not reach may be around 18 to 20 times PE yet to be in the Euphoria stage.



The bull is aging but the chance of potential to over-shoot will  remain high. We will see more of Euphoria phenomena when we begin to see laggards like China market begin to revert above their long term valuation. For now, I think people will still chase price.



The rhyme seems pretty familiar to me. In the late cycle bull run prior to 2007 worldwide peak, the Chinese market were going no where for many years and suddenly the energy just burst and tripped within 12 months.Here is the chart of Shanghai Stock Exchange. See from 1997 to 2006, nothing was moving and it went wild completely in a short time.


This post is not to encourage people to lead people to think we have another 12 months rally to go. But to remember:

BE FEARFUL WHEN OTHERS ARE GREEDY!






Tuesday, June 3, 2014

PE ratio of major US indexes


The US small caps and Nasdaq are getting very frothy.


Saturday, May 31, 2014

Bulls and Bears are divided

The tittle was This Chart may make you less worried about US stocks from Market Watch

http://www.marketwatch.com/story/this-chart-may-make-you-less-worried-about-us-stocks-2014-05-30


There are 9 bull runs and 8 bear markets since 1900. 4 of the bull runs exceeded 100 months while 5 of below 100 months. Of 8 bear markets 4 of them with 40% drop and the remaining experiencing  between 20 to 30%.

Bullish camp thinks we are going to have long boom. Their reasons? Statistically they think  the odds are good. They also think liquidity is ample and cheap and many yet to enter stock markets, global economy is still ok with no financial crisis in sights.

Trusting statistics without understandings in my view is over-simplistic. Post 1929, US gained the status of superpower and growing middle class powered the world economy for almost 100 years. In 80s, many of the US companies regained their competitiveness by doing a lot of restructuring. In the 90s, the IT revolution and globalization created a lot of productivity gains and global prosperity. Post Dot.com burst, despite of increasingly weaker advanced countries, the rise of emerging economies led by China lending a strong boost.

The way I see it now, every heavyweight economy has their own problems - US consumer is deleveraging and middle class struggles with stagnant  income growth. China engineered a slower economy growth, reining shadow banking threats and putting a lid over-heated property market, etc.....Japan is running of arrows and the rest of emerging economies are struggling due to lower demand from advanced countries, commodities and etc......In short, I just don't see any catalysts that can powered the rally into 100 months and beyond. I believe the bull run is really getting more and more aging rather than more and more raging!