Great Stuff

One my best friends forwarded the below email to me, not sure if it is really from Mr. Warren Buffet but these are certainly great stuff :)

*****
Advice from Warren Buffet.....

Every new year, I adopt a couple of old maxims as my beacons to guide my
future. This self-prescribed therapy has ensured that with each passing year, I
grow wiser and not older. This year, I invite you to tap into the financial
wisdom of our elders along with me, and become financially wiser.

Spending: If you buy things you don't need,
you'll soon sell things you need.

Savings: Don't save what is left after spending;
spend what is left after saving.

Hard work: All hard work brings profit; but mere talk leads only to poverty.

Laziness: A sleeping lobster is carried away by the water current.

Earnings: Never depend on a single source of income.

Borrowings: The borrower becomes the lender's slave.

Accounting: It's no use carrying an umbrella, if your shoes are leaking.

Auditing: Beware of little expenses; a small leak can sink a large ship.

Risk-taking: Never test the depth of the river with both feet.

Investment: Don't put all your eggs in one basket.

I'm certain that those who have already been practicing these principles
remain financially healthy.

I'm equally confident that those who resolve to start practicing these
principles will quickly regain their financial health.

Let us become wiser and lead a happy, healthy,
prosperous and peaceful life.

- Warren Buffet

Are you greedy or fearful now?

it has been quite some time since I last updated my blog, was busy looking for a job... I resigned before Lehman Bros collapsed in Sep 2008, honestly speaking, I would not have resigned if the financial crisis hits earlier, anyway, I have got a new job and started few weeks ago, brand new start :)

while I was not working, I witnessed the dramas in stock markets, few hundred points a day for Dow, few thousand points a day for Hang Seng. It was a great experience and at times, I think it was a blessing in disguise that I was free during the craziest times so that I can witness the VERY FIRST big bear market in my life.

Lots of people got the honey from the bear, I got some too but not a lot. What I did in the past few months was:

#1 Sold some of the weaker stocks and move to the stable quality blue chips (in Chinese, we call it “Change Horse”) – trust me, this works. I sold a weak Malaysian telco stocks at $ 4.58 and changed to a very stable Malaysian bank in Oct 2008 and now the telco’s price is $3.20 while the bank’s price has gone up (slightly up, but at least it is paper gain).

#2 Keep or buy more of the strong stocks in my portfolio – for those quality stocks, I will not sell in a bear market, in fact, I have bought more shares at lower price. I am sure I will be rewarded in long run.

#3 Keep putting money in Unit Trust gradually – I still put few hundred Ringgit each month into the Unit Trust I invest in. It is not the best thing in the world to see your portfolio value shrinks in the bear market but it is definitely very upset to see your portfolio remain the same in the upcoming bull market… therefore I will not stop buying in bear market.

#3 Hunt for “High Cash, Low Debt” – I read lots of articles and forums, most if not all are in the hunt for companies with lots of cash, low or zero debt. In times like this, only those who hold cash can survive, just like the big 3 Autos in US, only Ford is still doing okay and does not need help from government coz she is holding some cash to weather the storm. Some analysts in US mentioned a few stocks with lots of cash and low/zero debt: Apple, Exxonmobil, Cisco, etc.

#4 Hunt for NTA higher than stock price – NTA is Net Tangible Asset, there are believers (I am one of them) who buy the stocks if the stock price is lower than the NTA per share – it is somehow believed that the stock price will eventually go up to match the NTA per share.

#5 Gold – I sold some of my holding when Gold touched USD 900+ in Sep08 but I still keep some. The problem I have for Gold is, there is no interest no dividend or whatsoever return when you hold it, the only thing you can hope for is the price to go up and make capital gain. Lots of people claim that Gold is the safe haven but to me, yeah I agree it will sort of protect the capital but I will rather go for some super blue chips – at least while holding the stocks, I can enjoy some dividend and the share price will not fluctuate too much (having said that, some super blue chips are having roller coaster’s ride these few months). Well, Gold is still in my portfolio but not more than 10% of my total investment.

#6 Real Estate – I thought the financial crisis will allow me to buy some apartment at low price but to my surprise, no desperate sellers and therefore no cheap apartment. My agent told me lots of owners in prime locations are not in a rush to sell the apartment because they either bought the apartment with cash or they have rental every month. Well, maybe Malaysia’s property market is really resilient. What about the properties in the U.K.? It has dropped quite a bit and GBP also dropped more than 25% (against MYR, it was GBP 1= MYR 7 in 2004 and now GBP 1 = MYR 5.10)…

Most of the people are still in fear… I am sure you have heard of the quote “Be fearful when others are greedy and be greedy when others are fearful”.

How many people can really do that?

I have to confess I was not strong enough / experience enough to do it – on 27 Oct 2008, I was in a café with my friend, Hang Seng index dropped like crazy to below 11,000 – the lowest it hit was 10,676… I witnessed that, all the stocks in my watch-list are in negative territory. I did not become greedy, I became a bit fearful – I was thinking:” let’s wait for Hang Seng to break 10,000 and I shall buy when it hits 9,000 or 8,000.

You know what, ever since 27 Oct 2008, Hang Seng went up more than 40% to hit around 15,000+, of course recently it has gone down to the range of 12,000 – 13,000.

If I continue to think like that – I will not buy when Hang Seng hits 8,000 coz I will be telling myself to wait for 6,000 then only I will buy.

This is a very good lesson – at least I found out that I was fearful when others were fearful. Since then I learned my lesson well and start to fine-tune my investment strategy. I am not saying that I am the expert now but at least I am slowly improving.

Are you ready to be greedy when others are fearful? Try, it’s fun, especially when you’re rewarded with your "anti-crowd" strategy.

Saving is sin, and spending is virtue??? (article sharing)

I received this article in my inbox (author/source: Indian Economist), it is considered spam to certain people but I read it and I feel it is very interesting and useful to share with everyone. Enjoy!!!!!!!!!!

Japanese save a lot. They do not spend much. Also Japan
exports far more than it imports. Has an annual trade
surplus of over 100 billions. Yet Japanese economy is
considered weak, even collapsing.

Americans spend, save little. Also US imports more than
it exports. Has an annual trade deficit of over $400
billion. Yet, the American economy is considered strong
and trusted to get stronger.

But where from do Americans get money to spend?
They borrow from Japan, China and even India.
Virtually others save for the US to spend. Global
savings are mostly invested in US, in dollars.

India itself keeps its foreign currency assets of over
$50 billions in US securities. China has sunk over $160
billion in US securities. Japan's stakes in US
securities is in trillions.

Result:

The US has taken over $5 trillion from the world. So, as
the world saves for the US, Americans spend freely.
Today, to keep the US consumption going, that is for the
US economy to work, other countries have to remit $180
billion every quarter, which is $2 billion a day, to the
US!

A Chinese economist asked a neat question. Who has
invested more, US in China, or China in US? The US has
invested in China less than half of what China has
invested in US.

The same is the case with India. We have invested in US
over $50 billion.. But the US has invested less than $20
billion in India..

Why the world is after US?

The secret lies in the American spending, that they
hardly save. In fact they use their credit cards to
spend their future income. That the US spends is what
makes it attractive to export to the US. So US imports
more than what it exports year after year.

The result:

The world is dependent on US consumption for its growth.
By its deepening culture of consumption, the US has
habituated the world to feed on US consumption. But as
the US needs money to finance its consumption, the world
provides the money.

It's like a shopkeeper providing the money to a customer
so that the customer keeps buying from the shop. If the
customer will not buy, the shop won't have business,
unless the shopkeeper funds him. The US is like the
lucky customer. And the world is like the helpless
shopkeeper financier.

Who is America's biggest shopkeeper financier? Japan of
course. Yet it's Japan which is regarded as weak. Modern
economists complain that Japanese do not spend, so they
do not grow. To force the Japanese to spend, the
Japanese government exerted itself, reduced the savings
rates, even charged the savers.
Even then the Japanese did not spend (habits don't
change, even with taxes, do they?). Their traditional
postal savings alone is over $1.2 trillions, about three
times the Indian GDP. Thus, savings, far from being the
strength of Japan, has become its pain.

Hence, what is the lesson?

That is, a nation cannot grow unless the people spend,
not save. Not just spend, but borrow and spend.
Dr. Jagdish Bhagwati, the famous Indian-born economist
in the US, told Manmohan Singh that Indians wastefully
save. Ask them to spend, on imported cars and,
seriously, even on cosmetics! This will put India on a
growth curve. This is one of the reason for MNC's coming
down to India, seeing the consumer spending.
"Saving is sin, and spending is virtue."

But before you follow this neo economics, get some fools
to save so that you can borrow from them and spend!!!

New Caluclation of EPF Withdrawal - For Malaysian

Over lunch, we talked about investment in Unit Trust, some of my colleagues are not comfortable investing with cash, I then gave them another option - provident fund (EPF in Malaysia).

One of the colleagues told me her EPF account has no more money as she has withdrawn all for the new house. I was surprised that some of us, despite working for many years, still are unclear about the money we have in our provident fund.

What she withdrew, was from EPF Account #2, which consists of 30% of your entire provident fund, another 70% is with EPF Account #1 which you cannot withdraw unless for certain purposes:
#1 Attaining retirement age
#2 Leaving the country
#3 Investment - certain approved investment instruments only
etc, please refer to http://www.kwsp.gov.my for more information.

There is a new method to calculate EPF Account#1 withdrawal for Unit Trust investment - the younger you are, the more amount you can withdraw (i.e. you are required to keep less "Basic Savings" in Account #1). However, the minimum amount you should have in Account #1 is MYR 5000.

Example #1: Wong is 27 years old and he has MYR 50,000 in his EPF Account #1, referring to the table below, he is required to have the "Basic Savings required" of MYR 12,000. Wong is allowed to withdraw 20% of the balance.
(50,000 - 12,000) * 20%
=38,000 * 20%
=7,600

Example #2: Joe is 22 years old and he has MYR 15,000 in this EPF Account #1. His "Basic Savings required" is MYR 5,000. He can therefore withdraw:
(15,000 - 5,000) * 20%
=10,000 * 20%
=2,000

Example #3: Gerald is 35 years old and he has MYR 80,000 in his EPF Account #1. His "Basic Savings required" is MYR 29,000 (much more than Wong as Gerald is older). Therefore Gerald is allowed to withdraw:
(80,000 - 29,000) * 20%
=51,000 * 20%
=10,200


Let me know if you need more information on this, I am more than happy to share what I know with you!

Buffett sees U.S. in recession (CNN news)

Read this in CNN this afternoon, the news is short but the message is very important, hope to share with everyone.

Berkshire Hathaway CEO tells German magazine he believes country is now in recession.

BERLIN (AP) -- Warren Buffett, whose business and investment acumen has made him one of the world's wealthiest men, was quoted in an interview published Sunday as saying the U.S. economy is already in a recession.

Asked by Germany's Der Spiegel weekly whether he thinks the U.S. could still avoid a recession, he said that as far as the average person is concerned, it is already here.

"I believe that we are already in a recession," Buffet was quoted as saying. "Perhaps not in the sense as defined by economists. ... But people are already feeling the effects of a recession."

"It will be deeper and longer than what many think," he added.

The 77-year-old chairman and chief executive of Berkshire Hathaway Inc. (BRKB) gave the interview while he was in Europe for what he called a "deferred shopping tour," looking for possible acquisitions.

Omaha-based Berkshire has about $35 billion in cash and is looking to invest. Berkshire's subsidiaries include insurance, clothing, furniture, natural gas, corporate jet and candy companies. Berkshire also has major investments in such companies as Coca-Cola Co. and Anheuser-Busch Cos.

(http://money.cnn.com/2008/05/25/news/economy/buffett_recession.ap
/index.htm?cnn=yes)

Trade Merck - in 20 days

Why I bought?

It dropped 10% on 30Apr as FDA rejected one of its cholesterol control drugs, this is not a big issue as Merck so many other best selling drugs in the market. I am taking a ride of the recent roller coaster in stock market. Another reason: I am also practicing “Buy the good stocks when most people are selling.”

Why I sold?

Markets worldwide can still feel the aftermath of sub-prime crisis, crude oil price is not giving up the strong uptrend, inflation worries are getting worse. Even though holding Merck for long will return me with higher return, however I do see further downside of this stock, even though pharma stocks are usually viewed as “defensive stocks”, which will not have dramatic ups and downs. I love pharma stocks, am also keeping an eye on Schering Plough (NYSE SGP) and Pfizer (NYSE PFE).

Coca-Cola (part 2)

I came across this article today and found out The Coca-Cola Company has bought MORE companies and it is seeking MORE... http://biz.yahoo.com/rb/080513/cocacola.html?.v=1

Coca-Cola seeks more acquisitions to grow business
Tuesday May 13, 3:27 am ET

TOKYO (Reuters) - Coca-Cola Co (NYSE:KO - News), the world's biggest drinks maker, is seeking more acquisition opportunities in the fast-growing soft drinks market to expand its revenue sources, the company's CEO-in-waiting said on Tuesday.

Sales of established soft drinks are declining in the United States as people opt for the likes of bottled water and tea, which they see as healthier.

"You will see us grow organically as well as through targeted acquisitions," said Coca-Cola Chief Operating Officer Muhtar Kent, who is due to become chief executive officer on July 1.

Kent told reporters at the Foreign Correspondents' Club of Japan that such acquisitions would not be large, and the company was looking from country to country for opportunities, though he didn't specify where.

Coca-Cola, whose rivals include PepsiCo Inc (NYSE:PEP - News) and Dr Pepper Snapple Group Inc (NYSE:DPS - News), has benefited from its recent acquisition of FUZE teas and Glaceau vitamin water, which have helped boost the company's sales.



***Picture above: I came across Glaceau vitamin water in Manila last week, selling at PHP 125 (approx. USD 3.10), this is not available in Malaysia, so I removed the label to keep as memory, which I did not know The Coca-Cola Company has already bought it...***

The Atlanta-based company, which gets 78 percent of its sales abroad, also bought Russian juice maker Multon in 2005 for $500 million.

"There is no better industry, truly we believe, to be in than the non-alcohol beverage business," said Kent.

He added that the soft drinks market was growing faster than most other categories of consumer products such as cosmetics, toiletries and beers.

"We see huge opportunities in every category (of soft drinks)," he said.

Kent also reiterated Coke's long-term targets of increasing annual sales volume by 3 to 4 percent, operating income by 6 to 8 percent and earnings-per-share by a high single-digit percentage rate.

On April 16, Coca-Cola reported a higher-than-expected quarterly profit as strong international growth offset the effects of a weak U.S. economy and flat sales volume at home.

Coke's international business, especially in places like China, India, Brazil and Turkey, has grown more important to investors in recent years as growth slows in mature markets like North America.

On Monday, Coke shares closed up 25 cents, or 0.5 percent, at $56.40 on the New York Stock Exchange.

(Reporting by Mariko Katsumura, Editing by Brent Kininmont)