Tuesday, December 22, 2009
Charts on Major Indices - 1y
Friday, December 18, 2009
All about REIT - REIT, Business Trust, and Shipping Trust
Friday, December 18, 2009
- All about REIT, Business Trust, CitySpring, First Ship Lease Trust (FSL), Hyflux Water Trust (HWT), Pacific Shipping Trust (PST), Rickmers Maritime, Shipping Trust
Other than REIT, Business Trust is another investment class that offers investors a way to invest in high yielding cash-generating assets. Shipping Trust is actually a type of Business Trust with assets mainly in ships. Following are brief descriptions of these investment products:
REIT
A Real Estate Investment Trust (“REIT”) raises capital to purchase primarily real estate assets, usually with a view to generating income for unit holders of the fund. It allows individual investors to access real property assets and share the benefits and risks of owning a portfolio of property assets which typically distribute income at regular intervals.
Business Trust
Business Trusts offer investors a new way to invest in cash-generating assets. Business Trusts are business enterprises set up as trusts, instead of companies. They are hybrid structures with elements of both companies and trusts. Like a company, a business trust operates and runs a business enterprise. But unlike a company, a business trust is not a separate legal entity. It is created by a trust deed under which the trustee has legal ownership of the trust assets and manages the assets for the benefit of the beneficiaries of the trust. Purchasers of units in the business trusts, being beneficiaries of the trust, hold beneficial interest in assets of the Business Trust.
As of this writing, CitySpring Infrastructure Trust and Hyflux Water Trust are 2 Business Trusts listed in SGX that owns infrastructure assets.
Shipping Trust
A shipping trust is registered as a business trust, and its business mainly involves acquiring ships and leasing them out to shipping companies for cash income.
Currently there are 3 shipping trusts listed in SGX, namely the Pacific Shipping Trust, First Ship Lease Trust, and Rickmers Maritime. Compared to their REITs cousins, the shipping trusts are not doing as well recently. Their stock prices are still relatively depressed, probably because they are deemed as being riskier with their association to the volatile shipping cycle. The depressed prices in turn means higher yield to compensate for the risk in holding them.
Similarities
Following are some similarities between a REIT and a Business Trust:
Unlike a listed company, the dividend payout of both REIT and Business Trust are from the operation cash flow rather than the accounting profit. As such, for a listed company, appreciation or
depreciation of assets will affect its accounting profit, and will in turn impact the dividend payout.
REIT and Business Trust, on the other hand, can still maintain the same dividend payout even if there is appreciation or depreciation of assets as these are just accounting profit/loss and not loss in cash income.
No tax on individual investors on the distribution income.
Assets they own are usually highly expansive and requires some form of debt financing for the acquisition.
Most of them have a sponsor that injects assets into the trust based on a right of first refusal agreement.
Differences
Following are some differences between a REIT and a Business Trust:
REIT is legislated under the Code on collective Investment Schemes, while the Business Trust is under the The Business Trusts Act.
The REIT has a separate Trustee and asset Manager, while for a Business Trust, these roles are fulfilled by a single entity. The Trustee-Manager of Business Trusts thus has dual responsibility of safeguarding the interests of unitholders and managing the Business Trusts. This stems from the difficulty in apportioning the fiduciary responsibility between two roles given the nature of Business Trusts as active enterprises.
The gearing limit for REIT is 35% without corporate rating, and 60% if it has a rating. There is no gearing limit for Business Trust. Thus it is not surprising to find Business Trust with debt being equal or even few times the value of its total assets.
Assets of REITs are restricted to real estate. Business Trust has no such restriction, and may own a variety of cash generating assets including ships, gas stations, power stations, water treatment plants, etc.
REIT has to maintain a minimum payout ratio of at least 90% of its distributable income. A Business Trust does not have this restriction, but it will usually maintain a high payout ratio.
REIT or Business Trust?
This is a question that cannot be generalized because different REITs and Business Trusts can have different levels of quality and risks. Even among the Business Trusts, we cannot compare apple to apple a Shipping Trust and an Infrastructure based Trust. Having said that, because of some distinct differences in their nature, the are some factors we can consider when deciding between a REIT or a
Business Trust.
As a Busines Trust has no gearing limit, it can potentially have a gearing of 100% or more. So when you have a REIT of 20% gearing and a Business Trust of 300% gearing, both giving the same yield, what should be the decision? Of couse some may argue that having no gearing means that the Business Trust can potentially grow much faster by debt. Well this boils down to the risk tolerance of an individual, whether you are looking for high risk high return kind of investment, or otherwise.
The minimum payout ratio for REIT is 90%, while Business Trust has no such restriction. So Business Trust may have a higher element of surprise in having a drastic cut of payout ratio in times of difficulties. Case in point, Rickmers Maritime. Due to the current difficult operating environment, the Trust has accelerated its cash retention efforts. The distribution payout for 2Q2009 and 3Q2009 was 13% of distributable income compared with 46% in 1Q2009 and an average of 67% for FY2008. Compare this with CDL H-Trust, which cuts the payout ratio from 100% to 90% earlier this year.
- All about REIT, Business Trust, CitySpring, First Ship Lease Trust (FSL), Hyflux Water Trust (HWT), Pacific Shipping Trust (PST), Rickmers Maritime, Shipping Trust
Other than REIT, Business Trust is another investment class that offers investors a way to invest in high yielding cash-generating assets. Shipping Trust is actually a type of Business Trust with assets mainly in ships. Following are brief descriptions of these investment products:
REIT
A Real Estate Investment Trust (“REIT”) raises capital to purchase primarily real estate assets, usually with a view to generating income for unit holders of the fund. It allows individual investors to access real property assets and share the benefits and risks of owning a portfolio of property assets which typically distribute income at regular intervals.
Business Trust
Business Trusts offer investors a new way to invest in cash-generating assets. Business Trusts are business enterprises set up as trusts, instead of companies. They are hybrid structures with elements of both companies and trusts. Like a company, a business trust operates and runs a business enterprise. But unlike a company, a business trust is not a separate legal entity. It is created by a trust deed under which the trustee has legal ownership of the trust assets and manages the assets for the benefit of the beneficiaries of the trust. Purchasers of units in the business trusts, being beneficiaries of the trust, hold beneficial interest in assets of the Business Trust.
As of this writing, CitySpring Infrastructure Trust and Hyflux Water Trust are 2 Business Trusts listed in SGX that owns infrastructure assets.
Shipping Trust
A shipping trust is registered as a business trust, and its business mainly involves acquiring ships and leasing them out to shipping companies for cash income.
Currently there are 3 shipping trusts listed in SGX, namely the Pacific Shipping Trust, First Ship Lease Trust, and Rickmers Maritime. Compared to their REITs cousins, the shipping trusts are not doing as well recently. Their stock prices are still relatively depressed, probably because they are deemed as being riskier with their association to the volatile shipping cycle. The depressed prices in turn means higher yield to compensate for the risk in holding them.
Similarities
Following are some similarities between a REIT and a Business Trust:
Unlike a listed company, the dividend payout of both REIT and Business Trust are from the operation cash flow rather than the accounting profit. As such, for a listed company, appreciation or
depreciation of assets will affect its accounting profit, and will in turn impact the dividend payout.
REIT and Business Trust, on the other hand, can still maintain the same dividend payout even if there is appreciation or depreciation of assets as these are just accounting profit/loss and not loss in cash income.
No tax on individual investors on the distribution income.
Assets they own are usually highly expansive and requires some form of debt financing for the acquisition.
Most of them have a sponsor that injects assets into the trust based on a right of first refusal agreement.
Differences
Following are some differences between a REIT and a Business Trust:
REIT is legislated under the Code on collective Investment Schemes, while the Business Trust is under the The Business Trusts Act.
The REIT has a separate Trustee and asset Manager, while for a Business Trust, these roles are fulfilled by a single entity. The Trustee-Manager of Business Trusts thus has dual responsibility of safeguarding the interests of unitholders and managing the Business Trusts. This stems from the difficulty in apportioning the fiduciary responsibility between two roles given the nature of Business Trusts as active enterprises.
The gearing limit for REIT is 35% without corporate rating, and 60% if it has a rating. There is no gearing limit for Business Trust. Thus it is not surprising to find Business Trust with debt being equal or even few times the value of its total assets.
Assets of REITs are restricted to real estate. Business Trust has no such restriction, and may own a variety of cash generating assets including ships, gas stations, power stations, water treatment plants, etc.
REIT has to maintain a minimum payout ratio of at least 90% of its distributable income. A Business Trust does not have this restriction, but it will usually maintain a high payout ratio.
REIT or Business Trust?
This is a question that cannot be generalized because different REITs and Business Trusts can have different levels of quality and risks. Even among the Business Trusts, we cannot compare apple to apple a Shipping Trust and an Infrastructure based Trust. Having said that, because of some distinct differences in their nature, the are some factors we can consider when deciding between a REIT or a
Business Trust.
As a Busines Trust has no gearing limit, it can potentially have a gearing of 100% or more. So when you have a REIT of 20% gearing and a Business Trust of 300% gearing, both giving the same yield, what should be the decision? Of couse some may argue that having no gearing means that the Business Trust can potentially grow much faster by debt. Well this boils down to the risk tolerance of an individual, whether you are looking for high risk high return kind of investment, or otherwise.
The minimum payout ratio for REIT is 90%, while Business Trust has no such restriction. So Business Trust may have a higher element of surprise in having a drastic cut of payout ratio in times of difficulties. Case in point, Rickmers Maritime. Due to the current difficult operating environment, the Trust has accelerated its cash retention efforts. The distribution payout for 2Q2009 and 3Q2009 was 13% of distributable income compared with 46% in 1Q2009 and an average of 67% for FY2008. Compare this with CDL H-Trust, which cuts the payout ratio from 100% to 90% earlier this year.
Tuesday, November 17, 2009
Cautionary tale from a rogue S-chip
November 17, 2009 Tuesday, 10:59 AM
Goh Eng Yeow comments on the unfolding boardroom scandal at Sino-Environment.
It was with some concerns that I wrote the latest commentary "A cautionary tale for S-chip investors" asking why Sino-Environment was allowed to trade for a further six months when it seemed likely that the firm might not survive the problems that beset it.
The problems faced by Sino-Environment were similar to those that had befallen Fibrechem Technologies and China Sun Bio-chem earlier – and it is difficult to believe that its boss will behave any differently.
For those who have not followed the Sino-Environment saga, a swift recap: Its founder and chairman Sun Jiangrong defaulted on a $120 million loan extended to him by a hedge fund in February. This resulted in his 56 per cent stake in Sino-Environment being seized by the hedge fund and sold on the open market.
His personal financial difficulties plunged the company into turmoil because it was faced with potential early redemption of a $149 million bond.
Under such circumstances, one would have expected someone – anyone in a position of influence in the company – to try to safeguard the company’s precious financial resources and keep it out of harm’s way.
The alarm bells should have been set ringing when the company failed to come out with its first quarter results – due out by mid-May – and had to hire auditors PwC to review "significant cash transactions" between January and March – the period which coincided with Mr Sun’s loan default.
This would have been the first indication of somebody’s suspicions that money might have been moved out of the company – and that an independent party was being hired to track down the transactions.
Instead, our attention was diverted by the charade staged by the management threatening to walk out on the beleaguered company that month, and the independent directors having to beg them to stay to ensure that operations run smoothly.
But buried in a May 25 announcement asking the executive directors to withdraw their resignations was also a "request that the key management co-operate on certain matters in the meantime".
On hindsight, I will not be surprised if these certain matters refer to the suspicious cash transactions that had been made between January and March.
But it will take more than a Sherlock Holmes to decipher all the cryptic meanings in the announcements made by the firm.
It certainly speaks volume about the manner in which Sino-Environment implements the disclosure-based practices. Surely, disclosures should be made in a coherent and transparent manner to let investors make an informed decision – to trade, or in this case, not to trade at all.
We would all be still in the dark about the subsequent report of the PwC findings to the CAD and the boardroom tussle to get rid of Mr Sun, if the management had not sacked the Singapore unit’s financial controller, Mr Raynauld Liang - and caused all these developments to spill into the open.
It makes me wonder once again what can be done if these offshore firms, which are listed here, refuse to play by our rules.
Sino-Environment’s independent directors are clearly out of their depth dealing with a boss who decides to turn roguish.
But I wish that they could have been more forthcoming right from the start about the problems that are festering in the company and not let them suddenly explode in the public eye last week.
Tightening the regulations further or ensuring that the chief financial officer is based here isn’t going to help – if the precious cash resources are out of reach – and in the hands of management far away from Singapore.
The biggest headache now is the sort of redress an investor who bought the stock after May could get from the whole sorry saga when trading should have been stopped after disclosures of the "significant cash transactions" were made by way of the PwC review.
The Bloomberg machine shows that about 15 million Sino-Environment shares were traded daily between March – when Mr Sun’s loan default came to light – and September when trading was suspended.
That is an awfully large number of shares each day during those fateful six months to answer for.
Goh Eng Yeow comments on the unfolding boardroom scandal at Sino-Environment.
It was with some concerns that I wrote the latest commentary "A cautionary tale for S-chip investors" asking why Sino-Environment was allowed to trade for a further six months when it seemed likely that the firm might not survive the problems that beset it.
The problems faced by Sino-Environment were similar to those that had befallen Fibrechem Technologies and China Sun Bio-chem earlier – and it is difficult to believe that its boss will behave any differently.
For those who have not followed the Sino-Environment saga, a swift recap: Its founder and chairman Sun Jiangrong defaulted on a $120 million loan extended to him by a hedge fund in February. This resulted in his 56 per cent stake in Sino-Environment being seized by the hedge fund and sold on the open market.
His personal financial difficulties plunged the company into turmoil because it was faced with potential early redemption of a $149 million bond.
Under such circumstances, one would have expected someone – anyone in a position of influence in the company – to try to safeguard the company’s precious financial resources and keep it out of harm’s way.
The alarm bells should have been set ringing when the company failed to come out with its first quarter results – due out by mid-May – and had to hire auditors PwC to review "significant cash transactions" between January and March – the period which coincided with Mr Sun’s loan default.
This would have been the first indication of somebody’s suspicions that money might have been moved out of the company – and that an independent party was being hired to track down the transactions.
Instead, our attention was diverted by the charade staged by the management threatening to walk out on the beleaguered company that month, and the independent directors having to beg them to stay to ensure that operations run smoothly.
But buried in a May 25 announcement asking the executive directors to withdraw their resignations was also a "request that the key management co-operate on certain matters in the meantime".
On hindsight, I will not be surprised if these certain matters refer to the suspicious cash transactions that had been made between January and March.
But it will take more than a Sherlock Holmes to decipher all the cryptic meanings in the announcements made by the firm.
It certainly speaks volume about the manner in which Sino-Environment implements the disclosure-based practices. Surely, disclosures should be made in a coherent and transparent manner to let investors make an informed decision – to trade, or in this case, not to trade at all.
We would all be still in the dark about the subsequent report of the PwC findings to the CAD and the boardroom tussle to get rid of Mr Sun, if the management had not sacked the Singapore unit’s financial controller, Mr Raynauld Liang - and caused all these developments to spill into the open.
It makes me wonder once again what can be done if these offshore firms, which are listed here, refuse to play by our rules.
Sino-Environment’s independent directors are clearly out of their depth dealing with a boss who decides to turn roguish.
But I wish that they could have been more forthcoming right from the start about the problems that are festering in the company and not let them suddenly explode in the public eye last week.
Tightening the regulations further or ensuring that the chief financial officer is based here isn’t going to help – if the precious cash resources are out of reach – and in the hands of management far away from Singapore.
The biggest headache now is the sort of redress an investor who bought the stock after May could get from the whole sorry saga when trading should have been stopped after disclosures of the "significant cash transactions" were made by way of the PwC review.
The Bloomberg machine shows that about 15 million Sino-Environment shares were traded daily between March – when Mr Sun’s loan default came to light – and September when trading was suspended.
That is an awfully large number of shares each day during those fateful six months to answer for.
Monday, October 19, 2009
A Gift to My Children – A Father’s Lessons for Life & Investing
Readers' Book Reviews
October 19, 2009
Jim Rogers
Background
Legendary investor Rogers cofounded the Quantum Fund with George Soros in 1970, retired at the age of 37 in 1980, and spent a number of years traveling through China and six continents by motorcycle. He has taught at Columbia University and authored many best selling books including; A Bull in China, Hot Commodities, Adventure Capitalist, & Investment Biker
Our Take
As a fan and reader of all of Jim Rogers books I was happy to pour through “A gift to my children”. I read the book in 1 hour and purchased several copies for the younger members of my family. This book is not for advanced value investors; however it is for young minds. If I had this book when I was 8 years old I would be a much wiser and smarter person today. Rogers delivers on his promise of providing gifts to younger members of society and deserves compliments for doing so. If you’re interested in cultivating a young mind and potentially rearing the next Warren Buffett this book is for you.
Keys to Success (Taken from the titles and sub headings of Each Chapter)
1. Do Not Let Others Do Your Thinking For you
2. Focus On What You Like
3. Good Habits For Life & Investing
4. Common Sense? Not So Common
5. Attention to details is what separates success from failure
6. Let the World Be A Part Of Your Perspective
7. Learn Philosophy & Learn To Think
8. Learn History
9. Learn Languages (Make sure Mandarin Is One Of Them)
10. Understand Your Weaknesses & Acknowledge Your Mistakes
11. Recognize Change & Embrace It
12. Look To The Future
13. “Lady Luck Smiles On Those Who Continue Their Efforts”
14. Remember That Nothing is Really New
15. Know when not to do anything
16. Pay attention to what everybody else neglects
17. If anybody laughs at your idea view it as a sign of potential success
Most powerful exercise from the book:
“Reflect on situations where conventional wisdom and custom turned out to be wrong. Take the time to find out what actually happened”
Favorite Quotes
“Anything that is a must see, must try, must read, should almost certainly be avoided, especially if it is popular.”
“Never act upon wishful thinking. Act without checking the facts, and chances are that you will be swept away along with the mob.”
“Learn to stay calm especially in times of pressure or turmoil. You will make much better decisions”
“Do not get married until you are at least 28 and know a bit more about yourself and the world”
“Lean to do as much arithmetic and figures as possible in your head”
Another Reader's Summary:
* Swim your own races
- do not let others do your thinking for you;
- rely on your own intelligence;
- it's important to decide for yourself what's important to you and what you want before you turn to others;
- if anyone laughs at your idea, view it as a sign of potential success;
- be who you are; be original; be bold;
- above all, be ethical;
- save ~ you must avoid the trap of spending $ willy nilly simply because you can;
* Focus on what you like
- Age is irrelevant when you are passionate about a goal;
- when you find something that interests you, just do it!
- The quickest way to success is to do what you like and give your best;
- Dedicate yourself to what you feel passionate about;
- Try as many things as you can, then pursue the one about which you're passionate;
* Good habits for life
- Be a self-starter;
- Attention to details is what separates success from failure;
- However trivial it may seem, you must research and check each and ever piece of information you need to make a decision... Only through meticulous research will you obtain the knowledge necessary for success... it requires abundant work and diligence...
- There is no such thing as "enough". No finish line!
- Live your life with a dream;
- If you continue to be passionate and work hard at what you truly love to do, you eventually find that dream;
* Uncommon Sense
- Always consider alternative interpretations;
- Seek out multiple perspectives on the same story will always help you figure out the truth;
* Your education ~ Let the world be a part of your perspective PART 1
- Do not rely on books; go and see the world;
- Experience life as they do; see the world from the ground up. By observing ordinary life... you will forever be stumbling upon experiences that will raise important question in your mind ;
- Understand the significance of BRICs;
- Be open to people who are different whether at home or abroad;
- Keep an open mind and be a world citizen;
- Be eager to move if you see opportunities;
* Your education ~ Learn philosophy and learn to think PART 2
- Philosophy will teach you how to think for yourself;
- You must learn to think at a profound level if you want to understand yourself and what's important to you. You must know yourself if you want to accomplish anything in life...;
- To think outside the established framework, to examine things independently this is true philosophy...;
- Draw conclusions from your observations as well as on the basis of logic;
- As an investor, look for the bull and the bear;
* Your education ~ Learn history PART 3
- An interest in history, politics, and economics will help you see the world with clearer perspectives;
- Nothing is really new: what is happening now has happened before and will happen again;
* Your education ~ Learn languages (make sure that Mandarin is one of them) PART 4
- Mandarin will be the next global language;
- Pay attention to the major changes taking place in the world now, especially China;
* Know thyself by understanding your weaknesses and acknowledging your mistakes
- Know who you are;
- To be a successful investor you really need to understand psychology, history, and philosophy;
* Recognise change and embrace it
- Everything changes. Everything;
- Embrace the principle of supply and demand;
- Change can be a catalyst;
- Adapt or die;
* Look to the future
- Read the newspapers, but think differently;
- Pay attention to what everyone else neglects;
- If you are looking for success, be quick to start something new, something that no one else has tried;
- The more certain something is, the less likely it is to be profitable;
- Do not think in terms of what you wish (ergo, wishful thinking versus willful doing);
- Know when not to do anything;
* Lady Luck smiles on those who continue in their efforts
- Do your homework'
- If you let vanity and self-importance (ego) take over, you will lose all that you have achieved;
- Never let yourself become arrogant. Study hard. The more you learn, the more you will realise how little you know - armed with this humility, you will never lose sight of the distance between self-confidence and self-importance;
- Do not stop when you are working towards your dream;
* Epilogue
- The devil of life is always in the details;
- Anything that is a must-see, must-try, must-read, must almost certainly be avoided, especially if it is popular;
- Use good manners no matter where you are or whom you meet;
- Learn to do as much arithmetic and figures as possible in your head;
- Take care of yourself;
- Learn to stay calm;
- Once you do get to know and understand yourself, remember who you are and stay with it;
- Don't be greedy
Another Reader's Summary:
At the age of six, in 1948, Jim started his first business. Instead of playing baseball with friends, he preferred to collect empty bottles, sell them and pick up a little cash. Then one day his father offered him to loan $100 to start his second business that was highly successful selling peanuts and drinks at little league games. After 5 years, Jim had paid off the loan and still had $100 in his bank account ($100 were a lot of money in those days.)
Jim won a scholarship to Yale University. After graduating in 1964, he found a job on wall street. In 1973, Jim co-founded the Quantum fund. During the following 10 years, the portfolio of this fund grew 4,200% while the S&P grew less than 47%. At the age of 37, in 1980, Rogers decided to retire and fulfilled his lifelong dream: an around the world motorcycle trip across six continents, the Guinness world record.
Currently he lives in Singapore with his wife and daughters. In this book he has tried to put down all the lessons at one place that he has learned in his adventurous life, for example work hard and never quit, think for yourself, always prepare for the worst, read as much as you can, learn history and philosophy and save and invest your money to live a beautiful life. He has written this book for his young daughters and for anyone seeking success.
Some of my favorite chapters from this book are following:
According to Jim Rogers, China, India, Russia and Brazil are destined to be the world’s leading economies by the year 2050. You need to acquire information to take full advantage of the investment opportunities in these growing economies.
Spain dominated the sixteen century, France was most powerful nation in 17th and 18th century, the 19th century was the century of Great Britain. In 20th century, the United States was the super power. Now 21st century is the century of China. Jim Rogers sold his mansion in New York and moved to Singapore so that his daughters can learn Mandarin and prepare for the 21st century that belongs to China. He thinks English and Mandarin will be the two most powerful languages of 21st century.
October 19, 2009
Jim Rogers
Background
Legendary investor Rogers cofounded the Quantum Fund with George Soros in 1970, retired at the age of 37 in 1980, and spent a number of years traveling through China and six continents by motorcycle. He has taught at Columbia University and authored many best selling books including; A Bull in China, Hot Commodities, Adventure Capitalist, & Investment Biker
Our Take
As a fan and reader of all of Jim Rogers books I was happy to pour through “A gift to my children”. I read the book in 1 hour and purchased several copies for the younger members of my family. This book is not for advanced value investors; however it is for young minds. If I had this book when I was 8 years old I would be a much wiser and smarter person today. Rogers delivers on his promise of providing gifts to younger members of society and deserves compliments for doing so. If you’re interested in cultivating a young mind and potentially rearing the next Warren Buffett this book is for you.
Keys to Success (Taken from the titles and sub headings of Each Chapter)
1. Do Not Let Others Do Your Thinking For you
2. Focus On What You Like
3. Good Habits For Life & Investing
4. Common Sense? Not So Common
5. Attention to details is what separates success from failure
6. Let the World Be A Part Of Your Perspective
7. Learn Philosophy & Learn To Think
8. Learn History
9. Learn Languages (Make sure Mandarin Is One Of Them)
10. Understand Your Weaknesses & Acknowledge Your Mistakes
11. Recognize Change & Embrace It
12. Look To The Future
13. “Lady Luck Smiles On Those Who Continue Their Efforts”
14. Remember That Nothing is Really New
15. Know when not to do anything
16. Pay attention to what everybody else neglects
17. If anybody laughs at your idea view it as a sign of potential success
Most powerful exercise from the book:
“Reflect on situations where conventional wisdom and custom turned out to be wrong. Take the time to find out what actually happened”
Favorite Quotes
“Anything that is a must see, must try, must read, should almost certainly be avoided, especially if it is popular.”
“Never act upon wishful thinking. Act without checking the facts, and chances are that you will be swept away along with the mob.”
“Learn to stay calm especially in times of pressure or turmoil. You will make much better decisions”
“Do not get married until you are at least 28 and know a bit more about yourself and the world”
“Lean to do as much arithmetic and figures as possible in your head”
Another Reader's Summary:
* Swim your own races
- do not let others do your thinking for you;
- rely on your own intelligence;
- it's important to decide for yourself what's important to you and what you want before you turn to others;
- if anyone laughs at your idea, view it as a sign of potential success;
- be who you are; be original; be bold;
- above all, be ethical;
- save ~ you must avoid the trap of spending $ willy nilly simply because you can;
* Focus on what you like
- Age is irrelevant when you are passionate about a goal;
- when you find something that interests you, just do it!
- The quickest way to success is to do what you like and give your best;
- Dedicate yourself to what you feel passionate about;
- Try as many things as you can, then pursue the one about which you're passionate;
* Good habits for life
- Be a self-starter;
- Attention to details is what separates success from failure;
- However trivial it may seem, you must research and check each and ever piece of information you need to make a decision... Only through meticulous research will you obtain the knowledge necessary for success... it requires abundant work and diligence...
- There is no such thing as "enough". No finish line!
- Live your life with a dream;
- If you continue to be passionate and work hard at what you truly love to do, you eventually find that dream;
* Uncommon Sense
- Always consider alternative interpretations;
- Seek out multiple perspectives on the same story will always help you figure out the truth;
* Your education ~ Let the world be a part of your perspective PART 1
- Do not rely on books; go and see the world;
- Experience life as they do; see the world from the ground up. By observing ordinary life... you will forever be stumbling upon experiences that will raise important question in your mind ;
- Understand the significance of BRICs;
- Be open to people who are different whether at home or abroad;
- Keep an open mind and be a world citizen;
- Be eager to move if you see opportunities;
* Your education ~ Learn philosophy and learn to think PART 2
- Philosophy will teach you how to think for yourself;
- You must learn to think at a profound level if you want to understand yourself and what's important to you. You must know yourself if you want to accomplish anything in life...;
- To think outside the established framework, to examine things independently this is true philosophy...;
- Draw conclusions from your observations as well as on the basis of logic;
- As an investor, look for the bull and the bear;
* Your education ~ Learn history PART 3
- An interest in history, politics, and economics will help you see the world with clearer perspectives;
- Nothing is really new: what is happening now has happened before and will happen again;
* Your education ~ Learn languages (make sure that Mandarin is one of them) PART 4
- Mandarin will be the next global language;
- Pay attention to the major changes taking place in the world now, especially China;
* Know thyself by understanding your weaknesses and acknowledging your mistakes
- Know who you are;
- To be a successful investor you really need to understand psychology, history, and philosophy;
* Recognise change and embrace it
- Everything changes. Everything;
- Embrace the principle of supply and demand;
- Change can be a catalyst;
- Adapt or die;
* Look to the future
- Read the newspapers, but think differently;
- Pay attention to what everyone else neglects;
- If you are looking for success, be quick to start something new, something that no one else has tried;
- The more certain something is, the less likely it is to be profitable;
- Do not think in terms of what you wish (ergo, wishful thinking versus willful doing);
- Know when not to do anything;
* Lady Luck smiles on those who continue in their efforts
- Do your homework'
- If you let vanity and self-importance (ego) take over, you will lose all that you have achieved;
- Never let yourself become arrogant. Study hard. The more you learn, the more you will realise how little you know - armed with this humility, you will never lose sight of the distance between self-confidence and self-importance;
- Do not stop when you are working towards your dream;
* Epilogue
- The devil of life is always in the details;
- Anything that is a must-see, must-try, must-read, must almost certainly be avoided, especially if it is popular;
- Use good manners no matter where you are or whom you meet;
- Learn to do as much arithmetic and figures as possible in your head;
- Take care of yourself;
- Learn to stay calm;
- Once you do get to know and understand yourself, remember who you are and stay with it;
- Don't be greedy
Another Reader's Summary:
At the age of six, in 1948, Jim started his first business. Instead of playing baseball with friends, he preferred to collect empty bottles, sell them and pick up a little cash. Then one day his father offered him to loan $100 to start his second business that was highly successful selling peanuts and drinks at little league games. After 5 years, Jim had paid off the loan and still had $100 in his bank account ($100 were a lot of money in those days.)
Jim won a scholarship to Yale University. After graduating in 1964, he found a job on wall street. In 1973, Jim co-founded the Quantum fund. During the following 10 years, the portfolio of this fund grew 4,200% while the S&P grew less than 47%. At the age of 37, in 1980, Rogers decided to retire and fulfilled his lifelong dream: an around the world motorcycle trip across six continents, the Guinness world record.
Currently he lives in Singapore with his wife and daughters. In this book he has tried to put down all the lessons at one place that he has learned in his adventurous life, for example work hard and never quit, think for yourself, always prepare for the worst, read as much as you can, learn history and philosophy and save and invest your money to live a beautiful life. He has written this book for his young daughters and for anyone seeking success.
Some of my favorite chapters from this book are following:
Swim Your Own Races
Do not follow the crowd. Many people are ready to offer you advice but only you can decide what is important to you. You were born with the ability to decide. You know it very well what is good for you and what is not. So most of the time you should follow your instinct to make right decisions. Jim Rogers says when he was new to wall street, he tended to assume that his seniors knew more than him but sooner he realized that he was wrong. He stopped allowing himself to be influenced by others.Be Who you are
If you look at people who have been successful in their chosen field you would find out that they do not try to copy others. They all approach their work in the original ways. He advises that you should find out what you want to do in your life. May be you want to become doctor, lawyer, accountant, web developer or investor. You should do what you want as long as you do not violate the rules and laws of society.Save money
You are living in consumerism age. Every year new technological products are coming out in the market. You feel pressured to spend all the money you are earning. But you should avoid this trap of spending money. You should try to save money. Before buying anything you should ask yourself is this really worthwhile. Jim Rogers was once married to a woman who wanted to spend all they were earning but Jim wanted to save and invest money so that later in their life they could buy anything they want without being dependent on social security. They did not stay married too long.Do what you love to do
Many people find it difficult to figure out what they really love to do. Here is the solution, try as many things as you can and eventually you will find the thing, you love to do the most. Jim Rogers became successful because he found out early in his career that he enjoys the investing most. The least happy people are those who are stuck in the jobs they don’t love.Work hard
If can find out what you love to do, you would surely work harder in that field than other people. You would naturally would do that job in the best way you can do. Jim Rogers says that when he was studying in the Yale University, most of his classmates were better prepared than he was. But his advantage was that he was willing to work much harder than they did. The same strategy he applied to his investing career. He read all the books, he could find on investing. He read several annual reports of companies to find the winning investments.Go see the world
To become successful in your life, you must expand your perspective toward life and world. You need to know yourself to become successful. You need to find out what advantages do you have that other people do not have and how you can make most of your advantages. To find out more about yourself and your advantages, you need to travel around the world and see how other people are living.According to Jim Rogers, China, India, Russia and Brazil are destined to be the world’s leading economies by the year 2050. You need to acquire information to take full advantage of the investment opportunities in these growing economies.
Keep an open Mind and Be a World citizen
Jim Rogers have travelled around the world and he has found out that no matter where you live, we all want the same things out of our lives. We all want to become successful. We must keep an open mind and we need to see ourselves as the citizen of this world. We should treat others well who are different. Do not follow people who want wars. Break the chains and live away from the wars. War has never been good for any nation.Learn Philosophy; Learn How to Think
As we have said before that if you want to become successful, you must figure out what you want to do in your life. What is the purpose of your life. What are your strengths and weaknesses. If you want to know all these things, you must learn philosophy. It will help you to think at profound level to understand yourself. It will also train you to examine every concept and every fact of your life.Learn History
Jim Rogers says that if you want to become a good investor, you must learn the history of different countries of this world. Thus you will understand how the world works. He says what is happening now has happened before. History repeats itself. If you were smart in 1807 you moved to London, if you were smart in 1907 you moved to New York and if you are smart in 2007 you move to Asia. Studying history will help you to learn how to analyze trends and how to anticipate the future.Spain dominated the sixteen century, France was most powerful nation in 17th and 18th century, the 19th century was the century of Great Britain. In 20th century, the United States was the super power. Now 21st century is the century of China. Jim Rogers sold his mansion in New York and moved to Singapore so that his daughters can learn Mandarin and prepare for the 21st century that belongs to China. He thinks English and Mandarin will be the two most powerful languages of 21st century.
Buy Chinese Stocks
Jim Rogers says that if you want to make money in 21st century, you must invest your money in Chinese stocks and commodities. Jim says that he owns two or three dozens Chinese stocks. He likes to invest money in stocks during bear market. He advises you that if you decide to buy Chinese stocks then you should wait for the bear market. As soon as you hear in the news that Chinese stocks and real estate prices have fallen more than 20%, consider it as the best opportunity to start buying Chinese stocks.Final Thoughts on This book
This is a short and easy to read book in which Jim Rogers has assembled some unique ideas about life and investing. He says that everything changes and we need to learn to adjust our lives according to the changing world. I highly recommend you to read this short book to learn some valuable lessons from the life of legendary investor, Jim Rogers.Tuesday, October 13, 2009
Cheap and Good Food in Singapore
Ah Balling (Glutinous ball peanut soup)
Ang Ku Kueh
BBQ Seafood
Bak Chor Mee
Bak Kut Teh
Beef Kway Teow
Black Pepper Crab
Char Kway Teow
Chicken Rice
Chilli Crab
Chocolate Cake
Chwee Kueh
Crayfish Hor Fun
Curry Chicken Noodles
Economy Rice
FishBall
Fish Soup
Hawker Centre
Hokkien Mee
Ice Kacang
Indian Rojak
Kaya Toast
Kway Chap
Laksa
Lor Mee
Mee Rebus
Mutton Soup
Nasi Lemak
Nasi Padang
Oyster Omelette
Peanut Pancake
Popiah
Prawn Mee
Prawn Vadai
Rojak
Roti Prata
Satay
Satay Bee Hoon
Seafood
Soto Ayam
Tau Kwa Pau
Tapioca Cake, Onde Onde, Sweet potato balls
Wanton Mee
Link
Best Local Food
Recipes
Recipes
Home Remedies
Household Tips
- #01-75, Golden Mile Food Centre, 505 Beach Road.
- Hai Sing Ah Balling at Block 335 Smith Street, #02-90 Opens: Noon to 6pm, closed on Sundays.
Ang Ku Kueh
- Tiong Bahru Teochew Kueh #02-02 Tiong Bahru Food Centre.
- Borobudur Nonya Delights Blk 537 Bedok North St 3#01-523
BBQ Seafood
- Leng Heng BBQ Seafood & Claypot Deluxe at Stall 6, East Coast Food Village. Opens: 2pm to 1am, closed on alternate Thursdays.
Bak Chor Mee
- Tai Wah Minced Pork Noodles (Hill Street) Blk 466 Crawford Lane, #01-12.
- Ah Kow Mushroom Minced Pork Mee Blk 531A Upper Cross Street, #02-43.
- Xing Ji Rou Cuo Mian at Blk 85 Bedok North St 4 #01-07 Fengshan Food Centre.
Bak Kut Teh
- Founder Rou Gu Cha at 347 Balestier Road.
- Outram Park Ya Hua Rou Gu Cha at 7 Keppel Road #01-05/07 PSA Tanjong Pagar Complex
Beef Kway Teow
- 237 Geylang Lorong 9.
- Hock Lam Street Beef Kway Teow22 China Street #01-01 Far East Square.
Black Pepper Crab
- A coffee shop called Eng Seng Coffee Shop at the junction of Still Road and Joo Chiat Place.
Char Kway Teow
- Outram Park Fried Kway Teow at Blk 531A Upper Cross St #02-18 Hong Lim Food Centre.
- Hill Street Fried Kway Teow at Block 16 Bedok South Road, #01-187. Opens: 10.30am to 7.30pm, closed on Mondays.
- Lai Heng Fried Kway Teow at Sembawang Hill Hawker Centre #01-12.
Chicken Rice
- Wee Nam Kee 101 Thomson Road #01-08 United Square
- Boon Tong Kee at 401 Balestier Road.
- Sin Kee Chicken Rice at Blk 40A Margeret Drive #02-548
- Tian Tian Hainanese Chicken Rice, Stall 10 at Maxwell Road. Opens: 11am to 8pm, closed on Mondays. This is the stall that had American TV chef Anthony Bourdain and Australian celebrity chef Tetsuya Wakuda raving.
Chilli Crab
- Mattar Road Seafood Barbecue at Blk 51, Old Airport Road, #01-131G.
Chocolate Cake
- choc*a*bloc at Blk 86 Bedok North Streeet 4 #01-179.
Chwee Kueh
- Jian Bo Shui Kueh at #02-05 Tiong Bahru food Centre.
Crayfish Hor Fun
- Tuck Kee (Ipoh) Sah Ho Fun Blk 531A Upper Cross St #02-41 Hong Lim Food Centre.
Curry Chicken Noodles
- #01-127 Hong Lim Market & Food Centre. The gravy is fantastic, while the chicken is of that found in Hainanese Chicken rice.
Economy Rice
- Susan Chan Food #05-100, Far East Plaza, 14 Scotts Road.
FishBall
- Hock Seng Choon Fish Ball at Blk 16 Bedok South Road #01-211.
Fish Soup
- Blanco court fried or sliced fish soup stall at 341 Beach Road. They deep fry pieces of fish with egg. It is then served in a big bowl filled with piping hot fish broth.
- Han Kee Fish Soup at 02-129 Amoy Street Food Centre, 7 Maxwell Road.
Hawker Centre
- Glutton's Bay at #01-05 Esplanade Mall operates from 6pm to 3am. Must try the Char Kway Teow, Fried Hokkien Mee, Oyster Omelette, Satay, BBQ Seafood and Yong Tau Foo.
Hokkien Mee
- One of the best hokkien mee is at Geyland Lorong 29.
- Nam Sing Hokkien Fried Mee at Block 51 Old Airport Road, #01-155J. Opens: 11.30am to 8pm daily.
- Sheng Seng Fried Prawn Noodle at #01-40, Pek Kio Market and Food Centre, Blk 41A Cambridge Road.
Ice Kacang
- Annie Peanut Ice Kacang at #02-36 Tangjong Pagar Plaza & Food Centre.
Indian Rojak
- Sajis Indian Food Blk 262 Waterloo St#01-29 Nan Tai Eating House
Kaya Toast
- Ya Kun Kaya Toast and Kopi.
Kway Chap
- Garden Street Kway Chap at Stall 21, Serangoon Garden Market. Opens: 8am to 3pm, closed on Mondays.
Laksa
- Famous Katong Laksa at No 49, 57, 59 East Coast Road.
- Sungei Road Laksa Blk 27 Jalan Berseh #01-100 Jin Shui Kopitiam.
Lor Mee
- On the 2nd Floor of Amoy Street Market Food Centre, stall you see when you climb up the stairs next to the POSB ATM.
Mee Rebus
- Selera Kita at Blk 58 New Upper Changi Road #01-217
- Afandi Hawa & Family Mee Rebus at 14 Haig Road, #01-21 Haig Road Food Centre.
Mutton Soup
- Bukit Timah Beauty World #01-113N.
- Haji M Abdul Razak Mutton Soup at Blk 17 Boon Keng Road Market and food Centre.
Nasi Lemak
- Selera Rasa Adam Road Stall 2 Adam Road Food Centre.
Nasi Padang
- Warong Nasi Pariaman738 North Bridge Road
Oyster Omelette
- Ah Chuan Oyster Omelette boasts both crispy and mushy textures in one fabulous dish at Block 22 Toa Payoh 7 #01-25.Opens: 3 to 9pm, closed on Tuesdays.
- Ah Hock Fried Oyster#01-111 Whampoa Drive Hawker Centre
Peanut Pancake
- Frankie's 15 Boon Tat Street, Singapore.
Popiah
- Kway Guan Huat at 97 Joo Chiat Road.
- Nonya popiah at Glory Restaurant 139 East Coast Road.
Prawn Mee
- One of the best prawn mee you can ever get is at a coffee shop at Onan Road. It is near to the Geyland Road end. The prawns are very fresh and the soup is delicious.
- 545 Whampoa Prawn Noodles at 01-326, Tekka Food Centre, Off Serangoon Road
Prawn Vadai
- Gordon's Katong Vadai at 936 East Coast Road (Opposite Killiney Kopitiam). Opens: 11am - 8.30pm; closed every alternate Wednesday.
Rojak
- Lau Hong Ser Rojak at #02-14 Dunman Food Centre. Opens: 4.30pm to 1.30am, closed on Sundays. Expect to wait for at least 30 minutes for your dish to be ready.
- Soon Heng Rojak at Gourmet Paradise Food Court, 480 Toa Payoh Lorong 6, #B1-23, HDB Hub
Roti Prata
- Thasevi Food235-239 Jalan Kayu
- 126 Casuarina Road (off Thomson Road).
Satay
- Warong Sudir Mampir at Blk 14, Haig Road #01-19. Opens: 10am to 7pm (weekdays), 10am to 5pm (weekends); closed on Wednesdays and Thursdays.
- Fatman Satay at Blk 51, #01-117D Old Aiport Cooked Food Centre.
Satay Bee Hoon
- Meng Kee's Satay Bee Hoon at Stall 17 East Coast Food Village Opens: 6 to 11.30pm, closed on Tuesdays. The queues may be long, but the ingredients on the bee hoon is delicious.
Seafood
- East Coast Seafood Centre. There're many restaurants all in a row serving everything you fancy, from drunken prawns to the famous black pepper and chilli crab.
Soto Ayam
- Inspirasi Stall at Block 207 New Upper Changi Road, #01-11. Opens: 12.30 to 9pm daily.
Tau Kwa Pau
- 125/127 East Coast Road coffeshop. Tau Kwa stuffed with duck meat, pork, fish balls, cucumber, ngo hiang, etc. Eat with chilli sauce garnished with fresh cut green chillis and chinese parsley.
Tapioca Cake, Onde Onde, Sweet potato balls
- Xing Xing stall at Maxwell Market Food Centre.
- Ri Xing Xiang Ji Stall 76 Maxwell food Centre
Wanton Mee
- Joo Chiat Ah Huat Wanton Mee at Dunman Food Centre #01-04
- Sin Hoi Hin Wanton Mee at 12 Rowell Road
Link
Best Local Food
Recipes
Recipes
Home Remedies
Household Tips
You can run, but you can't hide
Tue, Oct 13, 2009
The Straits Times
By Lorna Tan, Senior Correspondent
Many people do not understand the importance of maintaining a good credit history. Did you know, for instance, that if your credit history is less than satisfactory it may be tough to get a mortgage or a personal loan?
Notching up a poor credit history is not that hard to do but the good news is that those who blot their copybook can make amends over time to help remove the stain.
'Frequent late payments and taking long periods of time to repay outstanding amounts can contribute to a poor credit history, which may lead to unsuccessful loan applications,' said Ms Helen Neo, head of consumer banking, Maybank Singapore.
It is not surprising that your credit history is a key factor lenders look at when deciding whether to extend a loan. Others include salary, job and other financial details.
So if our own credit history is so potentially crucial, we certainly ought to be familiar with this vital statistic that is checked by lenders to determine our financial health.
As it turns out, it is easy and cheap to keep track of your credit history - more details of that later.
Another reason to seek out details of your credit history is that it could act as a red flag when crimes such as identity theft and fraud are being attempted.
If, for instance, an impostor applies for a loan or credit card using your identity, a review of your credit history would bring this to light.
Reviewing this regularly allows you to be aware of any information that is uploaded on your credit file, said Mr William Lim, executive director of Credit Bureau (Singapore).
The Credit Bureau maintains data of consumers' credit history to help financial institutions better assess individuals' creditworthiness.
It compiles the credit history of people based on data from its 20 members which contribute specific credit performance data monthly. These members are all banks and financial institutions involved in providing consumer credit facilities here.
Here are some things you need to know about maintaining a good credit history.
Q What is a credit history and how does it work here?
A credit history is a record of an individual's past and current borrowing and repayment patterns, including information about late payments, said Mr Nanan Waluja, head of credit operations at Citibank Singapore.
This is detailed in one's credit report which is compiled by the Credit Bureau. It is released only under certain conditions to credit providers when they make inquiries about an individual when he applies for, say, a loan. It includes information such as:
a) Basic personal profile details such as address
b) Records of all credit checks made on the consumer
c) The last 12 repayments showing the promptness of payments relative to their due dates
d) Records of default on payments, if any
e) Bankruptcy record, if any
The report gives an indication of the person's track record in handling credit by looking at how reliably he has repaid past debts.
Q What does it mean to have a bad credit history?
A bad credit history would comprise a record of missed payments and defaults. For lenders, meeting payment obligations is important, so a history of timely payments is a clear advantage.
While different credit providers use different methods for credit assessment, here are some of the factors which lenders look at when assessing credit applications:
1. How affordable is the loan for the applicant given his income and expenses?
2. What assets does the applicant own?
3. How does the consumer manage debt? What are his payment patterns?
4. How many loans and other credit facilities does he have? What is his current total debt?
5. Does he have a record of bankruptcy proceedings, litigation or payment defaults?
Q What are the consequences of a bad credit history?
A consumer with a bad credit rating may find it harder to get a credit card, a mortgage, a motor vehicle loan or a personal loan. He may even find his application for such loans rejected.
Mr Lim said in some countries, though not yet in Singapore, credit ratings can affect the pricing of credit. A consumer with a bad credit history or rating will be able to borrow funds only at a higher interest rate. Conversely, a consumer with a good credit record is rewarded with more attractive rates.
In short, a good credit repayment history will make it easier for you to obtain credit and to qualify for loans.
Q How do you clear your bad credit history?
The main emphasis among lenders is on the more recent payment behaviour. For example, an account that shows a delinquency seven months ago but that has been current since is likely be treated as a lower risk by a lender than an account that shows a delinquency in the last one or two months. As recent history carries more weight, getting into the habit of making on-time payments will improve your credit profile even if you have slipped up in the past.
For existing accounts, information on the account's history will be displayed on a rolling 12-month basis in the credit report.
Information on any defaults will be retained in the credit report until such defaults are discharged or otherwise settled.
For defaults where the outstanding amount has been settled in full or on a negotiated settlement basis, this will be shown for three years from the date of settlement.
It is important to note that each lender has a different risk policy and therefore it is possible for one lender to decline an application and another to approve based on the same Bureau data.
Q Where can you go to check on your own credit history?
Your credit profile changes based on your financial activity, such as each time you apply for a credit card or loan. The Credit Bureau suggests that consumers check their credit reports every six to 12 months to ensure that the information is accurate and up-to-date.
At a cost of $5 plus GST, you can get a copy of your credit report through various channels including online from the Credit Bureau at www.creditbureau.com.sg or at any SingPost branch islandwide.
Consumers who wish to guard against identity theft can also subscribe to My Credit Monitor, a 12-month monitoring service that alerts them whenever financial institutions notify the Credit Bureau about missed payments on loans or when an application for credit is made in their names. Once they sign up, they will also receive a complimentary copy of their credit report.
The cost: $35 and $40 plus GST, for e-mail and postal alerts respectively.
This article was first published in The Straits Times.
The Straits Times
By Lorna Tan, Senior Correspondent
Many people do not understand the importance of maintaining a good credit history. Did you know, for instance, that if your credit history is less than satisfactory it may be tough to get a mortgage or a personal loan?
Notching up a poor credit history is not that hard to do but the good news is that those who blot their copybook can make amends over time to help remove the stain.
'Frequent late payments and taking long periods of time to repay outstanding amounts can contribute to a poor credit history, which may lead to unsuccessful loan applications,' said Ms Helen Neo, head of consumer banking, Maybank Singapore.
It is not surprising that your credit history is a key factor lenders look at when deciding whether to extend a loan. Others include salary, job and other financial details.
So if our own credit history is so potentially crucial, we certainly ought to be familiar with this vital statistic that is checked by lenders to determine our financial health.
As it turns out, it is easy and cheap to keep track of your credit history - more details of that later.
Another reason to seek out details of your credit history is that it could act as a red flag when crimes such as identity theft and fraud are being attempted.
If, for instance, an impostor applies for a loan or credit card using your identity, a review of your credit history would bring this to light.
Reviewing this regularly allows you to be aware of any information that is uploaded on your credit file, said Mr William Lim, executive director of Credit Bureau (Singapore).
The Credit Bureau maintains data of consumers' credit history to help financial institutions better assess individuals' creditworthiness.
It compiles the credit history of people based on data from its 20 members which contribute specific credit performance data monthly. These members are all banks and financial institutions involved in providing consumer credit facilities here.
Here are some things you need to know about maintaining a good credit history.
Q What is a credit history and how does it work here?
A credit history is a record of an individual's past and current borrowing and repayment patterns, including information about late payments, said Mr Nanan Waluja, head of credit operations at Citibank Singapore.
This is detailed in one's credit report which is compiled by the Credit Bureau. It is released only under certain conditions to credit providers when they make inquiries about an individual when he applies for, say, a loan. It includes information such as:
a) Basic personal profile details such as address
b) Records of all credit checks made on the consumer
c) The last 12 repayments showing the promptness of payments relative to their due dates
d) Records of default on payments, if any
e) Bankruptcy record, if any
The report gives an indication of the person's track record in handling credit by looking at how reliably he has repaid past debts.
Q What does it mean to have a bad credit history?
A bad credit history would comprise a record of missed payments and defaults. For lenders, meeting payment obligations is important, so a history of timely payments is a clear advantage.
While different credit providers use different methods for credit assessment, here are some of the factors which lenders look at when assessing credit applications:
1. How affordable is the loan for the applicant given his income and expenses?
2. What assets does the applicant own?
3. How does the consumer manage debt? What are his payment patterns?
4. How many loans and other credit facilities does he have? What is his current total debt?
5. Does he have a record of bankruptcy proceedings, litigation or payment defaults?
Q What are the consequences of a bad credit history?
A consumer with a bad credit rating may find it harder to get a credit card, a mortgage, a motor vehicle loan or a personal loan. He may even find his application for such loans rejected.
Mr Lim said in some countries, though not yet in Singapore, credit ratings can affect the pricing of credit. A consumer with a bad credit history or rating will be able to borrow funds only at a higher interest rate. Conversely, a consumer with a good credit record is rewarded with more attractive rates.
In short, a good credit repayment history will make it easier for you to obtain credit and to qualify for loans.
Q How do you clear your bad credit history?
The main emphasis among lenders is on the more recent payment behaviour. For example, an account that shows a delinquency seven months ago but that has been current since is likely be treated as a lower risk by a lender than an account that shows a delinquency in the last one or two months. As recent history carries more weight, getting into the habit of making on-time payments will improve your credit profile even if you have slipped up in the past.
For existing accounts, information on the account's history will be displayed on a rolling 12-month basis in the credit report.
Information on any defaults will be retained in the credit report until such defaults are discharged or otherwise settled.
For defaults where the outstanding amount has been settled in full or on a negotiated settlement basis, this will be shown for three years from the date of settlement.
It is important to note that each lender has a different risk policy and therefore it is possible for one lender to decline an application and another to approve based on the same Bureau data.
Q Where can you go to check on your own credit history?
Your credit profile changes based on your financial activity, such as each time you apply for a credit card or loan. The Credit Bureau suggests that consumers check their credit reports every six to 12 months to ensure that the information is accurate and up-to-date.
At a cost of $5 plus GST, you can get a copy of your credit report through various channels including online from the Credit Bureau at www.creditbureau.com.sg or at any SingPost branch islandwide.
Consumers who wish to guard against identity theft can also subscribe to My Credit Monitor, a 12-month monitoring service that alerts them whenever financial institutions notify the Credit Bureau about missed payments on loans or when an application for credit is made in their names. Once they sign up, they will also receive a complimentary copy of their credit report.
The cost: $35 and $40 plus GST, for e-mail and postal alerts respectively.
This article was first published in The Straits Times.
Thursday, October 1, 2009
Wednesday, August 26, 2009
Trading Psychology. It's More Important Than You Think!
Trading Psychology. It's More Important Than You Think!
Tom Gentile, ProfitStrategies.com
August 25, 2009
With the markets trading at mind boggling ranges, it really makes sense to discuss a part of trading that won't be found on most charts" and that's called Trading Psychology. It's one thing to have a trading plan and system, but actually following it, especially when things aren't exactly going your way, is something else entirely. Following the key trading success rules can help you improve your plans when it comes to real life trading.
Losses
Let's face it: losses are part of any business-especially trading. Losses have to be accepted before a business even begins its operation. Here are a few things to remember about losses and how you can make them part of your trading business.
Remain mentally and emotionally focused while trading.
Losses are part of all systems; knowing when to take losses is important.
Always try to be extremely disciplined, and exit your losing trades when your system requires you to do so.
Not taking losses when indicated is dangerous.
Riding losing trades for too long usually results in larger losses and risk of ruin increases.
It's not a good idea to keep changing stops to avoid a loss.
System traders use stops consistently.
Separate yourself as a trader from yourself as a person.
No system can trade the markets without taking losses at times.
Clumping can happen on the losing side as well as the winning side.
Your ability to take losses quickly is a great asset to your trading.
Discipline
Now this is vital to trading success. Imagine a person trying to become a pro athlete, but he or she sleeps in every day, eats excessively, stays up late and parties every night. Is this person going to become an elite athlete or not? The answer is no, and the reason why has everything to do with the amount of discipline. Discipline, in my mind, is like homework, only it's homework that pays off in dollars in the trading industry. Here are a few rules that I use when it comes to discipline in my life as a trader:
Good trading discipline is vital to my success.
My three successes to the market are: doing my market homework, following through, and using my stop losses.
I train my mind every day to be disciplined and focused.
I see myself every day doing my market homework and following the signals, setting stops.
I track my system exactly as it dictates.
If my system gives me daily signals, I follow them every day.
If my system gives me intraday signals, I follow them during the day.
I do not allow outside influences to affect my discipline.
Placing my orders correctly as my system dictates increases my odds for success.
Discipline to follow through with my system is my friend.
A system without stop losses puts me in a position of unlimited or unknown loss.
I understand that a major aspect of being disciplined is using stops.
Negativity
Negativity is in all aspects of life. I got enough of them in my family. I remember when I told my family that I wanted to be a trader. Now they didn't call me stupid or an idiot-the rolling eyes said enough. The ability to think positively and block out negativity is key to having consistent profits. The biggest thing negativity can do in your trading business is to keep you from taking that next trade, which, ironically, could be a grand slam in profits. Here are my rules to fighting negativity.
My best tool against negative influences is my system.
Being consistent in my trading means following my rules.
As a consistent trader, I place my orders each day at the same time.
Through consistency, negative influences go away.
I follow through on scheduled assignments, such as order entry, exit, and adjustment.
I plan my trades and trade my plans to facilitate consistency.
I use a trading partner to achieve consistency in my trading.
Fear and Greed are the enemies of consistent trading.
My commitment of consistency blocks greed from my goals and objectives.
Keep goals and objectives realistic to combat fear and greed.
Focus
The ability to focus in any business is important. The ability to focus as the president of your own business is vital to its success. This is true in Trading because your report card reveals your focus in daily account statements. Here are a few things that I believe will help your focus as a key to success:
Focus is the opposite of distraction.
Choose to stay on the winning path by focusing on the markets during your market time.
Environment can cause distractions, so remove all distractions such as noise, visual distractions, and clutter from the workplace.
Self discipline, follow through, and consistency are the keys to trading success.
An organized workplace can keep away distractions.
Focus on one trading aspect at a time in small bites.
Success
Success in your trading business is contagious. Having a plan for success, as well as following through and readjusting your goals over time, is highly important. Here are my rules for success:
Success in trading is achieved by working on goals that are specific.
Success is comfortable and positive, not exciting and emotional.
The past is over and done with. I move forward!
I complete trades according to the rules of my trading system. Doing this achieves success in my trading.
Success means seeing my profit goals as well as my security in stops, and I know where my trade will be closed out at any time.
I visualize myself as a master of market skills and as a profitable trader.
Avoiding Bad Habits
You might think this falls into the negativity category, and it will be if you don't block out bad habits and follow the rules below:
Have the capability of reversing any bad trading habits that you may develop.
Accept the fact that as a human, you may fall victim to bad trading habits.
Remember that you can change losing and destructive trading habits.
Know exactly what your bad trading habits are, make a list of them, and refer to them often.
Keep a checklist off all your trading rules and follow all procedures each and every time.
If you are unclear about a trade, simply do not make the trade.
Keep a diary of all your trades and what rules you follow, and follow up on both the winners and losers.
If you have an emotional day, no matter if it's high or low, don't trade that day.
Many errors are subtle, so keep a close eye on your errors and fix them ASAP.
Getting Cocky and Overconfident
Overconfidence can soften your focus and throw you into a state of mind where nothing can go wrong. It is at this stage in trading that everything can go wrong. Really learning the following rules will help you avoid falling into the trap of being overconfident:
Understand that overconfidence can occur if you have too many winning trades.
Catch yourself when you have thoughts that your trading system can do no wrong.
Catch yourself when you say you need to leverage up because you are "never wrong."
Catch yourself when you think you can guess the direction of the markets.
Do not allow overconfidence to cause you to overtrade and bring about losses.
Overconfidence can lead you to a fantasyland of 100% profits, and that leads you to lose your discipline.
If this happens, stop trading and redirect your mind to your trading system.
Live in the reality of your trading system. If you have many winning trades in a row, remember to check the long term results of the trading system, including losses.
Winning Attitude
Following the rules above is great, but it's not enough. Developing a Winning Attitude will stop negative thoughts from creeping in, and outside influences from changing your plan. Here are my thoughts about developing a winning attitude:
A positive attitude enhances your market performance.
Don't dwell on losses if they are part of the system's performance.
Attaining a goal starts by having a goal. Avoid setting goals that cannot be achieved. Achieving your goals means sticking to your system each day.
Achieving your goals means doing the homework before the market opens.
Achieving your goals means placing all of orders ahead of time.
Understand how your system is constructed and its maturity before you take the first trade.
Achieving your goals means following through from start to finish.
Focus on the next winning trade, and leave the last trade behind.
Be organized, consistent, set goals and follow through.
Trading Psychology, in my mind, accounts for half of my trading profits. It doesn't matter how good your system is or how great your trading strategy might be. If you cannot follow both the winners and the losers, then you will not be able to duplicate the system's success.
Learning and following the rules above will help you follow the rules of your system, and that will help you stick to them.
Tom Gentile
Chief Strategist
Profit Strategies Group, Inc.
Tom Gentile, ProfitStrategies.com
August 25, 2009
With the markets trading at mind boggling ranges, it really makes sense to discuss a part of trading that won't be found on most charts" and that's called Trading Psychology. It's one thing to have a trading plan and system, but actually following it, especially when things aren't exactly going your way, is something else entirely. Following the key trading success rules can help you improve your plans when it comes to real life trading.
Losses
Let's face it: losses are part of any business-especially trading. Losses have to be accepted before a business even begins its operation. Here are a few things to remember about losses and how you can make them part of your trading business.
Remain mentally and emotionally focused while trading.
Losses are part of all systems; knowing when to take losses is important.
Always try to be extremely disciplined, and exit your losing trades when your system requires you to do so.
Not taking losses when indicated is dangerous.
Riding losing trades for too long usually results in larger losses and risk of ruin increases.
It's not a good idea to keep changing stops to avoid a loss.
System traders use stops consistently.
Separate yourself as a trader from yourself as a person.
No system can trade the markets without taking losses at times.
Clumping can happen on the losing side as well as the winning side.
Your ability to take losses quickly is a great asset to your trading.
Discipline
Now this is vital to trading success. Imagine a person trying to become a pro athlete, but he or she sleeps in every day, eats excessively, stays up late and parties every night. Is this person going to become an elite athlete or not? The answer is no, and the reason why has everything to do with the amount of discipline. Discipline, in my mind, is like homework, only it's homework that pays off in dollars in the trading industry. Here are a few rules that I use when it comes to discipline in my life as a trader:
Good trading discipline is vital to my success.
My three successes to the market are: doing my market homework, following through, and using my stop losses.
I train my mind every day to be disciplined and focused.
I see myself every day doing my market homework and following the signals, setting stops.
I track my system exactly as it dictates.
If my system gives me daily signals, I follow them every day.
If my system gives me intraday signals, I follow them during the day.
I do not allow outside influences to affect my discipline.
Placing my orders correctly as my system dictates increases my odds for success.
Discipline to follow through with my system is my friend.
A system without stop losses puts me in a position of unlimited or unknown loss.
I understand that a major aspect of being disciplined is using stops.
Negativity
Negativity is in all aspects of life. I got enough of them in my family. I remember when I told my family that I wanted to be a trader. Now they didn't call me stupid or an idiot-the rolling eyes said enough. The ability to think positively and block out negativity is key to having consistent profits. The biggest thing negativity can do in your trading business is to keep you from taking that next trade, which, ironically, could be a grand slam in profits. Here are my rules to fighting negativity.
My best tool against negative influences is my system.
Being consistent in my trading means following my rules.
As a consistent trader, I place my orders each day at the same time.
Through consistency, negative influences go away.
I follow through on scheduled assignments, such as order entry, exit, and adjustment.
I plan my trades and trade my plans to facilitate consistency.
I use a trading partner to achieve consistency in my trading.
Fear and Greed are the enemies of consistent trading.
My commitment of consistency blocks greed from my goals and objectives.
Keep goals and objectives realistic to combat fear and greed.
Focus
The ability to focus in any business is important. The ability to focus as the president of your own business is vital to its success. This is true in Trading because your report card reveals your focus in daily account statements. Here are a few things that I believe will help your focus as a key to success:
Focus is the opposite of distraction.
Choose to stay on the winning path by focusing on the markets during your market time.
Environment can cause distractions, so remove all distractions such as noise, visual distractions, and clutter from the workplace.
Self discipline, follow through, and consistency are the keys to trading success.
An organized workplace can keep away distractions.
Focus on one trading aspect at a time in small bites.
Success
Success in your trading business is contagious. Having a plan for success, as well as following through and readjusting your goals over time, is highly important. Here are my rules for success:
Success in trading is achieved by working on goals that are specific.
Success is comfortable and positive, not exciting and emotional.
The past is over and done with. I move forward!
I complete trades according to the rules of my trading system. Doing this achieves success in my trading.
Success means seeing my profit goals as well as my security in stops, and I know where my trade will be closed out at any time.
I visualize myself as a master of market skills and as a profitable trader.
Avoiding Bad Habits
You might think this falls into the negativity category, and it will be if you don't block out bad habits and follow the rules below:
Have the capability of reversing any bad trading habits that you may develop.
Accept the fact that as a human, you may fall victim to bad trading habits.
Remember that you can change losing and destructive trading habits.
Know exactly what your bad trading habits are, make a list of them, and refer to them often.
Keep a checklist off all your trading rules and follow all procedures each and every time.
If you are unclear about a trade, simply do not make the trade.
Keep a diary of all your trades and what rules you follow, and follow up on both the winners and losers.
If you have an emotional day, no matter if it's high or low, don't trade that day.
Many errors are subtle, so keep a close eye on your errors and fix them ASAP.
Getting Cocky and Overconfident
Overconfidence can soften your focus and throw you into a state of mind where nothing can go wrong. It is at this stage in trading that everything can go wrong. Really learning the following rules will help you avoid falling into the trap of being overconfident:
Understand that overconfidence can occur if you have too many winning trades.
Catch yourself when you have thoughts that your trading system can do no wrong.
Catch yourself when you say you need to leverage up because you are "never wrong."
Catch yourself when you think you can guess the direction of the markets.
Do not allow overconfidence to cause you to overtrade and bring about losses.
Overconfidence can lead you to a fantasyland of 100% profits, and that leads you to lose your discipline.
If this happens, stop trading and redirect your mind to your trading system.
Live in the reality of your trading system. If you have many winning trades in a row, remember to check the long term results of the trading system, including losses.
Winning Attitude
Following the rules above is great, but it's not enough. Developing a Winning Attitude will stop negative thoughts from creeping in, and outside influences from changing your plan. Here are my thoughts about developing a winning attitude:
A positive attitude enhances your market performance.
Don't dwell on losses if they are part of the system's performance.
Attaining a goal starts by having a goal. Avoid setting goals that cannot be achieved. Achieving your goals means sticking to your system each day.
Achieving your goals means doing the homework before the market opens.
Achieving your goals means placing all of orders ahead of time.
Understand how your system is constructed and its maturity before you take the first trade.
Achieving your goals means following through from start to finish.
Focus on the next winning trade, and leave the last trade behind.
Be organized, consistent, set goals and follow through.
Trading Psychology, in my mind, accounts for half of my trading profits. It doesn't matter how good your system is or how great your trading strategy might be. If you cannot follow both the winners and the losers, then you will not be able to duplicate the system's success.
Learning and following the rules above will help you follow the rules of your system, and that will help you stick to them.
Tom Gentile
Chief Strategist
Profit Strategies Group, Inc.
Monday, August 17, 2009
A key life skill that schools don't teach
Financial literacy is one of the most important skills an adult should have. -BT
Mon, Aug 17, 2009
The Business Times
By TEH HOOI LING
SENIOR CORRESPONDENT
A FRIEND from my university days called to say that she and her husband had committed to buying a second property and are finding their finances a little tight despite having two incomes. Then she asked a question that I get rather often: 'Got any good stocks to buy or not? Any inside information?'
'No,' I said. 'I never get any inside information! You go do your own analysis!' She said: 'You mean you do your own analysis when you buy stocks? I buy on 'tips'. Anyway, I don't know how to analyse stocks. Where did you learn how to do that? In school ah?'
Yes, I did. My studies in Business Administration and Applied Finance and the CFA programme did equip me with some of the principles of investment analysis.
I told her that financial literacy is one of the most important skills an adult should have and that it should be taught in schools. Increasingly this is being recognised, and such courses are being offered as part of enrichment programmes.
But for those of us who didn't have that privilege, there is no lack of material available out there if one really takes an interest in the matter. I have friends from non-financial industries who through years of reading the 'how to' investment books, have become very savvy investors. A number of them came to know me through this column.
One of them is from Penang. He used to run his own construction business and is now retired. He said he was an ignorant young man in the 80s and had lost money investing in a fund. He then resolved to educate himself on investment. Like most value investors, he idolises Warren Buffett. He bought a few lots of Berkshire Hathaway shares some years back, with the intention of leaving one lot each to his grand kids as their education fund.
But he sold some near the peak in 2007, sensing the frothiness of the market. Earlier this year, he bought into Citigroup when it sank to around US$1. He has sold some to get back his capital. What's left in the stock now is all 'free money'.
Having experienced and seen the results of wise investments, this friend is very fervent about convincing others of the importance of learning that skill. At 60-plus, he still buys and reads books like Trump Strategies for Real Estate: Billionaire Lessons for the Small Investor and Accounts Demystified by Anthony Rice.
Some months back, he asked me to help him edit a two-pager that he had penned on his investing experience. He wanted to share it with his friends, particularly the younger ones. I think many readers can benefit from his advice as well. Here's what he wrote:
'I have no money to invest in stocks! - This statement is wrong! Why? Because one can always start small. Below are two real life examples. Case 1: With her monthly salary of less than RM200 back in 1958, a 'poor' Chinese primary school teacher (my friend's cousin) managed to put some savings away every month. In the early 1960s, she started to buy stocks as investments.
She did the 'right' thing in investment. She chose the 'good' stocks - companies with good businesses. She held on to the stocks for the long term. Over the years, she bought more of the stocks with her additional savings as well as the dividends received. Her stockholding also grew as the companies distributed bonuses and issued rights.
Thirty years later, she had become a millionaire. She managed to send her kids to England to study. Despite her wealth, she is still very careful with her money. As a retired civil servant, she receives a pension of RM1,000 a month. But dividends from her stocks come to RM3,000 a month. Case 2: In 1985, a young 'ignorant' young man (my friend himself) invested $500,000 of his hard-earned income/savings in a fund managed by a bank. He didn't know much about stock investing. He thought the bank's fund managers would be in a better position to help him invest. But over the next one to two years, his invested fund decreased in value. He lost about $150,000! He lost confidence in the fund managers, and withdrew what was left of his money.
The lessons from the examples are: One, it's not true to say one has no money to invest. Two, even if you have money, without sound knowledge of investment, it is 'useless'. People will try to take away your money. Three, it is better to start learning how to invest when you are young so that your 'good' investment can enjoy the 'magic of compounding' over a longer time frame.
The compounding effect is such that the longer the time, the bigger the money will grow to! For example, a $100,000 invested with a compounded return of 8 per cent a year, will: in 10 years grow to $216,000; in 20 years grow to $466,000; and in 30 years grow to $1,006,000!
It's never too late to start. And from your own experience, you can pass on to your next generation the 'correct' way to invest their hard-earned money.
Also, it is not true that we have no time to manage our own investment. This is the misconception that so-called 'experts' perpetuate to mislead us, so that they can slowly take away our money through the 'clever' knowledge of investment! Remember Bernie Madoff? (How cleverly he cheated his clients!)
It is not a time factor, nor a cost matter. It is a matter of focus and priority. So equip yourself with good knowledge and attitude of investment. There are a few good books to teach/guide us.
•The Richest man in Babylon;
•Rich Dad and Poor Dad;
•Who Moved My Cheese?
•The Intelligent Investors;
•Beating the Street;
•Common Stocks and Uncommon Profits;
•Books on Buffett's investment strategy, including The Warren Buffett Way; Buffettology; The New Buffettology.
You can finish reading these books within one year and they will cost you less than $2,000! This is another way to self-study an Investment MBA course.
Yes, it is simple but yet not so easy. It needs determination and belief that this is the right and only way. 'Yes, you can!' as Mr Obama would say.
Good luck and have a happy life. It's achievable if we choose the 'right' track. Laziness and greed are the biggest enemies! And no 'quick money' mentality, please!'
Well put indeed. To readers who have written in to ask which are the good investment books, perhaps the list above is a good place to start.
Along the vein of 'experts' trying to profit from the uninitiated, another friend pointed out to me what he deemed to be the latest instance of that - the just launched POSB's MyHome Fund.
Managed by DBS Asset Management (DBSAM), the fund will invest in two exchange traded funds (ETFs) - namely the DBS STI ETF and ABF Singapore Bond Index fund. Both ETFs are listed on the Singapore Exchange. Depending on risk appetite, investors can choose from two portfolios offered which differ in their allocation to the two ETFs.
Why pay DBSAM a fee of 0.5 per cent when investors can buy both the ETFs directly from the market, he asked. Some observers see the MyHome Fund as a ploy by POSB - a unit of the DBS Group - to raise funds for the DBS STI ETF which hasn't attracted that much monies since its launch earlier this year.
Another friend cheekily said they could launch their own 'Milk the People Fund'. 'That's why learning to invest or at least understanding the gist of it should be rated as an essential life skill in this world of sharks that we live in,' he said.
'Sadly, most laymen will not be able to pass it down to their kids. And these kids will grow up wondering how to invest, read the ads in the papers and end up enriching those guys selling trading programmes or courses but still end up nowhere.'
Also commenting on the MyHome Fund, the website The Book of Wise Investors concluded: 'Finance companies, insurance companies and banks are not benevolent donors to your wealth. The most important fact in growing your hard- earned money is really more financial literacy and not paying unnecessary expenses for nothing.'
But to be fair, as pointed out by financial adviser Martin Lee of Den of Lion Investors, MyHome Fund investors don't have to incur costs rebalancing their portfolio. For investors who want to do regular investments of $100 to $1,000, the upfront costs will be lower via the fund.
Also, according to him, if MyHome Fund manages to attract a big pool of money, its manager - DBSAM - may be able to get the manager of the DBS STI ETF, also DBSAM, to create units at net asset value. Hence, investors would save on the bid-ask spread, a cost that someone who buys the ETFs directly from the market will have to pay.
My take on all these is: Do your own research, and weigh the costs and benefits of any investments you intend to make. Then decide for yourself whether they suit your needs. Nobody else but you should be the most diligent in safeguarding your hard-earned money.
The writer is a CFA charterholder
This article was first published in The Business Times.
Thursday, August 13, 2009
10 ESSENTIAL RULES FOR NOVICES WHO WANT TO BE FULL-TIME TRADERS
1. Don't get emotional. Adopt an objective view of wins and losses.
2. Build a trading plan. Put together some rules. A trading plan is similar to a business plan. Do's and don'ts are essential but most important are risk management.
3. Collect statistics for review. Record performance measurements in a diary. Put on the hat of an employer and ask yourself if you would fire or hire the person described in the diary.
4. Formalize your trading activity. If you find that you cannot resist breaking the rules, try to make the trading activity as formal as possible. Give it a business name and involve your spouse or best friend to manage your business so that you can't 'hide' your losses and destructive activity.
5. Don't over trade. Don't trade late into the night or for long hours. This is because fatigue can cloud judgment. As part of your trading plan, you can establish trading hours and keep to them as a routine. This will give you time to rest and maintain psychological well-being. It will also make your 'business plan' formal.
6. Walk away from bad deals. Trading is after all really a business so the trader has to look at reward to risk proposition.
7. Admit mistakes and terminate them. Conviction and determination may pay off in other professions but not trading. That's because the market is always right so staying in a bad trade doggedly is a bad idea.
8. Recite trading rules frequently. Remind yourself of the rules before the start of daily 'business' to recall do's and don'ts. This is useful for stubborn or people who refuse to quit.
9. Find a part-time job. It might make you feel more secure by meeting some daily needs. If nothing else, it keeps one from over-trading.
10. Set expectations right. Set realistic targets. Targets that are over-demanding compel the trader to over-trade or jump into bad deals.
2. Build a trading plan. Put together some rules. A trading plan is similar to a business plan. Do's and don'ts are essential but most important are risk management.
3. Collect statistics for review. Record performance measurements in a diary. Put on the hat of an employer and ask yourself if you would fire or hire the person described in the diary.
4. Formalize your trading activity. If you find that you cannot resist breaking the rules, try to make the trading activity as formal as possible. Give it a business name and involve your spouse or best friend to manage your business so that you can't 'hide' your losses and destructive activity.
5. Don't over trade. Don't trade late into the night or for long hours. This is because fatigue can cloud judgment. As part of your trading plan, you can establish trading hours and keep to them as a routine. This will give you time to rest and maintain psychological well-being. It will also make your 'business plan' formal.
6. Walk away from bad deals. Trading is after all really a business so the trader has to look at reward to risk proposition.
7. Admit mistakes and terminate them. Conviction and determination may pay off in other professions but not trading. That's because the market is always right so staying in a bad trade doggedly is a bad idea.
8. Recite trading rules frequently. Remind yourself of the rules before the start of daily 'business' to recall do's and don'ts. This is useful for stubborn or people who refuse to quit.
9. Find a part-time job. It might make you feel more secure by meeting some daily needs. If nothing else, it keeps one from over-trading.
10. Set expectations right. Set realistic targets. Targets that are over-demanding compel the trader to over-trade or jump into bad deals.
Thursday, July 23, 2009
Stock Traders Find Speed Pays, in Milliseconds
By CHARLES DUHIGG
Published: July 23, 2009
It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices.
It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets.
Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.
These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk.
Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer.
And when a former Goldman Sachs programmer was accused this month of stealing secret computer codes — software that a federal prosecutor said could “manipulate markets in unfair ways” — it only added to the mystery. Goldman acknowledges that it profits from high-frequency trading, but disputes that it has an unfair advantage.
Yet high-frequency specialists clearly have an edge over typical traders, let alone ordinary investors. The Securities and Exchange Commission says it is examining certain aspects of the strategy.
“This is where all the money is getting made,” said William H. Donaldson, former chairman and chief executive of the New York Stock Exchange and today an adviser to a big hedge fund. “If an individual investor doesn’t have the means to keep up, they’re at a huge disadvantage.”
For most of Wall Street’s history, stock trading was fairly straightforward: buyers and sellers gathered on exchange floors and dickered until they struck a deal. Then, in 1998, the Securities and Exchange Commission authorized electronic exchanges to compete with marketplaces like the New York Stock Exchange. The intent was to open markets to anyone with a desktop computer and a fresh idea.
But as new marketplaces have emerged, PCs have been unable to compete with Wall Street’s computers. Powerful algorithms — “algos,” in industry parlance — execute millions of orders a second and scan dozens of public and private marketplaces simultaneously. They can spot trends before other investors can blink, changing orders and strategies within milliseconds.
High-frequency traders often confound other investors by issuing and then canceling orders almost simultaneously. Loopholes in market rules give high-speed investors an early glance at how others are trading. And their computers can essentially bully slower investors into giving up profits — and then disappear before anyone even knows they were there.
High-frequency traders also benefit from competition among the various exchanges, which pay small fees that are often collected by the biggest and most active traders — typically a quarter of a cent per share to whoever arrives first. Those small payments, spread over millions of shares, help high-speed investors profit simply by trading enormous numbers of shares, even if they buy or sell at a modest loss.
“It’s become a technological arms race, and what separates winners and losers is how fast they can move,” said Joseph M. Mecane of NYSE Euronext, which operates the New York Stock Exchange. “Markets need liquidity, and high-frequency traders provide opportunities for other investors to buy and sell.”
The rise of high-frequency trading helps explain why activity on the nation’s stock exchanges has exploded. Average daily volume has soared by 164 percent since 2005, according to data from NYSE. Although precise figures are elusive, stock exchanges say that a handful of high-frequency traders now account for a more than half of all trades. To understand this high-speed world, consider what happened when slow-moving traders went up against high-frequency robots earlier this month, and ended up handing spoils to lightning-fast computers.
It was July 15, and Intel, the computer chip giant, had reporting robust earnings the night before. Some investors, smelling opportunity, set out to buy shares in the semiconductor company Broadcom. (Their activities were described by an investor at a major Wall Street firm who spoke on the condition of anonymity to protect his job.) The slower traders faced a quandary: If they sought to buy a large number of shares at once, they would tip their hand and risk driving up Broadcom’s price. So, as is often the case on Wall Street, they divided their orders into dozens of small batches, hoping to cover their tracks. One second after the market opened, shares of Broadcom started changing hands at $26.20.
The slower traders began issuing buy orders. But rather than being shown to all potential sellers at the same time, some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds — 0.03 seconds — in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.
In less than half a second, high-frequency traders gained a valuable insight: the hunger for Broadcom was growing. Their computers began buying up Broadcom shares and then reselling them to the slower investors at higher prices. The overall price of Broadcom began to rise.
Soon, thousands of orders began flooding the markets as high-frequency software went into high gear. Automatic programs began issuing and canceling tiny orders within milliseconds to determine how much the slower traders were willing to pay. The high-frequency computers quickly determined that some investors’ upper limit was $26.40. The price shot to $26.39, and high-frequency programs began offering to sell hundreds of thousands of shares.
The result is that the slower-moving investors paid $1.4 million for about 56,000 shares, or $7,800 more than if they had been able to move as quickly as the high-frequency traders.
Multiply such trades across thousands of stocks a day, and the profits are substantial. High-frequency traders generated about $21 billion in profits last year, the Tabb Group, a research firm, estimates.
“You want to encourage innovation, and you want to reward companies that have invested in technology and ideas that make the markets more efficient,” said Andrew M. Brooks, head of United States equity trading at T. Rowe Price, a mutual fund and investment company that often competes with and uses high-frequency techniques. “But we’re moving toward a two-tiered marketplace of the high-frequency arbitrage guys, and everyone else. People want to know they have a legitimate shot at getting a fair deal. Otherwise, the markets lose their integrity.”
Published: July 23, 2009
It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices.
It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets.
Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.
These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk.
Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer.
And when a former Goldman Sachs programmer was accused this month of stealing secret computer codes — software that a federal prosecutor said could “manipulate markets in unfair ways” — it only added to the mystery. Goldman acknowledges that it profits from high-frequency trading, but disputes that it has an unfair advantage.
Yet high-frequency specialists clearly have an edge over typical traders, let alone ordinary investors. The Securities and Exchange Commission says it is examining certain aspects of the strategy.
“This is where all the money is getting made,” said William H. Donaldson, former chairman and chief executive of the New York Stock Exchange and today an adviser to a big hedge fund. “If an individual investor doesn’t have the means to keep up, they’re at a huge disadvantage.”
For most of Wall Street’s history, stock trading was fairly straightforward: buyers and sellers gathered on exchange floors and dickered until they struck a deal. Then, in 1998, the Securities and Exchange Commission authorized electronic exchanges to compete with marketplaces like the New York Stock Exchange. The intent was to open markets to anyone with a desktop computer and a fresh idea.
But as new marketplaces have emerged, PCs have been unable to compete with Wall Street’s computers. Powerful algorithms — “algos,” in industry parlance — execute millions of orders a second and scan dozens of public and private marketplaces simultaneously. They can spot trends before other investors can blink, changing orders and strategies within milliseconds.
High-frequency traders often confound other investors by issuing and then canceling orders almost simultaneously. Loopholes in market rules give high-speed investors an early glance at how others are trading. And their computers can essentially bully slower investors into giving up profits — and then disappear before anyone even knows they were there.
High-frequency traders also benefit from competition among the various exchanges, which pay small fees that are often collected by the biggest and most active traders — typically a quarter of a cent per share to whoever arrives first. Those small payments, spread over millions of shares, help high-speed investors profit simply by trading enormous numbers of shares, even if they buy or sell at a modest loss.
“It’s become a technological arms race, and what separates winners and losers is how fast they can move,” said Joseph M. Mecane of NYSE Euronext, which operates the New York Stock Exchange. “Markets need liquidity, and high-frequency traders provide opportunities for other investors to buy and sell.”
The rise of high-frequency trading helps explain why activity on the nation’s stock exchanges has exploded. Average daily volume has soared by 164 percent since 2005, according to data from NYSE. Although precise figures are elusive, stock exchanges say that a handful of high-frequency traders now account for a more than half of all trades. To understand this high-speed world, consider what happened when slow-moving traders went up against high-frequency robots earlier this month, and ended up handing spoils to lightning-fast computers.
It was July 15, and Intel, the computer chip giant, had reporting robust earnings the night before. Some investors, smelling opportunity, set out to buy shares in the semiconductor company Broadcom. (Their activities were described by an investor at a major Wall Street firm who spoke on the condition of anonymity to protect his job.) The slower traders faced a quandary: If they sought to buy a large number of shares at once, they would tip their hand and risk driving up Broadcom’s price. So, as is often the case on Wall Street, they divided their orders into dozens of small batches, hoping to cover their tracks. One second after the market opened, shares of Broadcom started changing hands at $26.20.
The slower traders began issuing buy orders. But rather than being shown to all potential sellers at the same time, some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds — 0.03 seconds — in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.
In less than half a second, high-frequency traders gained a valuable insight: the hunger for Broadcom was growing. Their computers began buying up Broadcom shares and then reselling them to the slower investors at higher prices. The overall price of Broadcom began to rise.
Soon, thousands of orders began flooding the markets as high-frequency software went into high gear. Automatic programs began issuing and canceling tiny orders within milliseconds to determine how much the slower traders were willing to pay. The high-frequency computers quickly determined that some investors’ upper limit was $26.40. The price shot to $26.39, and high-frequency programs began offering to sell hundreds of thousands of shares.
The result is that the slower-moving investors paid $1.4 million for about 56,000 shares, or $7,800 more than if they had been able to move as quickly as the high-frequency traders.
Multiply such trades across thousands of stocks a day, and the profits are substantial. High-frequency traders generated about $21 billion in profits last year, the Tabb Group, a research firm, estimates.
“You want to encourage innovation, and you want to reward companies that have invested in technology and ideas that make the markets more efficient,” said Andrew M. Brooks, head of United States equity trading at T. Rowe Price, a mutual fund and investment company that often competes with and uses high-frequency techniques. “But we’re moving toward a two-tiered marketplace of the high-frequency arbitrage guys, and everyone else. People want to know they have a legitimate shot at getting a fair deal. Otherwise, the markets lose their integrity.”
Saturday, July 18, 2009
Standing Meditation
The Relaxed and Calm Standing Form consist of 18 specific requirements:
01 stand with feet parallel at shoulder-width
02 bend your knees
03 relax your hips
04 round your crotch
05 gently contract your anus
06 contract your abdomen
07 relax your waist
08 sink your chest without collapsing it
09 raise your back but don't hunch it
10 allow your shoulders to hang down
11 drop your elbows
12 open your armpits
13 relax your wrists
14 think that your head is suspended from above
15 pull in your chin slightly
16 close your eyes gently
17 close you lips
18 place your tongue against your upper palate
01 stand with feet parallel at shoulder-width
02 bend your knees
03 relax your hips
04 round your crotch
05 gently contract your anus
06 contract your abdomen
07 relax your waist
08 sink your chest without collapsing it
09 raise your back but don't hunch it
10 allow your shoulders to hang down
11 drop your elbows
12 open your armpits
13 relax your wrists
14 think that your head is suspended from above
15 pull in your chin slightly
16 close your eyes gently
17 close you lips
18 place your tongue against your upper palate
Friday, July 17, 2009
Health Quotes
How can anyone, particularly a cancer patient, cope with stress?
"Faith in God is one way. By entrusting one's life to a supreme being, the burden is taken off oneself. Exercise, meditation, leisure activities, counselling and use of anti-anxiety drugs may all help in improving one's psychological well-being too. Be happy and live each day to its fullest." --- Dr Ang Peng Tiam
"Do everything in moderation and stay healthy and happy. I have seen how being happy and positive, with good family support, has worked wonders for cancer patients especially in how they control the disease" -- Prof London Lucien Ooi
"If I am ill or injured such that I cannot express my wishes, if the doctors cannot save me without residual disability, I want no treatment - and that includes no artificial hydration or nutrition, no artificial ventilation or any treatment at all.
However, if my parents are still alive, and if the doctors can save me, although I would have some disabilities, if the disabilities are not of such a degree that I am unable to look after my parents, then salvage me. If the disabilitiles would prevent me from looking after my parents, then I want no treatment
I signed myliving will, witnessed by a friend who is a psychiatrist and another who is not from the medical prefession." ~ Dr Lee Wei Ling
"To die well is to escape the dangers of dying ill" -- Seneca
"Faith in God is one way. By entrusting one's life to a supreme being, the burden is taken off oneself. Exercise, meditation, leisure activities, counselling and use of anti-anxiety drugs may all help in improving one's psychological well-being too. Be happy and live each day to its fullest." --- Dr Ang Peng Tiam
"Do everything in moderation and stay healthy and happy. I have seen how being happy and positive, with good family support, has worked wonders for cancer patients especially in how they control the disease" -- Prof London Lucien Ooi
"If I am ill or injured such that I cannot express my wishes, if the doctors cannot save me without residual disability, I want no treatment - and that includes no artificial hydration or nutrition, no artificial ventilation or any treatment at all.
However, if my parents are still alive, and if the doctors can save me, although I would have some disabilities, if the disabilities are not of such a degree that I am unable to look after my parents, then salvage me. If the disabilitiles would prevent me from looking after my parents, then I want no treatment
I signed myliving will, witnessed by a friend who is a psychiatrist and another who is not from the medical prefession." ~ Dr Lee Wei Ling
"To die well is to escape the dangers of dying ill" -- Seneca
Thursday, July 16, 2009
The Joy of Sachs
By PAUL KRUGMAN
Published: July 16, 2009
The American economy remains in dire straits, with one worker in six unemployed or underemployed. Yet Goldman Sachs just reported record quarterly profits — and it’s preparing to hand out huge bonuses, comparable to what it was paying before the crisis. What does this contrast tell us?
First, it tells us that Goldman is very good at what it does. Unfortunately, what it does is bad for America.
Second, it shows that Wall Street’s bad habits — above all, the system of compensation that helped cause the financial crisis — have not gone away.
Third, it shows that by rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis, and, in fact, has made another crisis more likely.
Let’s start by talking about how Goldman makes money.
Over the past generation — ever since the banking deregulation of the Reagan years — the U.S. economy has been “financialized.” The business of moving money around, of slicing, dicing and repackaging financial claims, has soared in importance compared with the actual production of useful stuff. The sector officially labeled “securities, commodity contracts and investments” has grown especially fast, from only 0.3 percent of G.D.P. in the late 1970s to 1.7 percent of G.D.P. in 2007.
Such growth would be fine if financialization really delivered on its promises — if financial firms made money by directing capital to its most productive uses, by developing innovative ways to spread and reduce risk. But can anyone, at this point, make those claims with a straight face? Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls. They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers.
Goldman’s role in the financialization of America was similar to that of other players, except for one thing: Goldman didn’t believe its own hype. Other banks invested heavily in the same toxic waste they were selling to the public at large. Goldman, famously, made a lot of money selling securities backed by subprime mortgages — then made a lot more money by selling mortgage-backed securities short, just before their value crashed. All of this was perfectly legal, but the net effect was that Goldman made profits by playing the rest of us for suckers.
And Wall Streeters have every incentive to keep playing that kind of game.
The huge bonuses Goldman will soon hand out show that financial-industry highfliers are still operating under a system of heads they win, tails other people lose. If you’re a banker, and you generate big short-term profits, you get lavishly rewarded — and you don’t have to give the money back if and when those profits turn out to have been a mirage. You have every reason, then, to steer investors into taking risks they don’t understand.
And the events of the past year have skewed those incentives even more, by putting taxpayers as well as investors on the hook if things go wrong.
I won’t try to parse the competing claims about how much direct benefit Goldman received from recent financial bailouts, especially the government’s assumption of A.I.G.’s liabilities. What’s clear is that Wall Street in general, Goldman very much included, benefited hugely from the government’s provision of a financial backstop — an assurance that it will rescue major financial players whenever things go wrong.
You can argue that such rescues are necessary if we’re to avoid a replay of the Great Depression. In fact, I agree. But the result is that the financial system’s liabilities are now backed by an implicit government guarantee.
Now the last time there was a comparable expansion of the financial safety net, the creation of federal deposit insurance in the 1930s, it was accompanied by much tighter regulation, to ensure that banks didn’t abuse their privileges. This time, new regulations are still in the drawing-board stage — and the finance lobby is already fighting against even the most basic protections for consumers.
If these lobbying efforts succeed, we’ll have set the stage for an even bigger financial disaster a few years down the road. The next crisis could look something like the savings-and-loan mess of the 1980s, in which deregulated banks gambled with, or in some cases stole, taxpayers’ money — except that it would involve the financial industry as a whole.
The bottom line is that Goldman’s blowout quarter is good news for Goldman and the people who work there. It’s good news for financial superstars in general, whose paychecks are rapidly climbing back to precrisis levels. But it’s bad news for almost everyone else.
Published: July 16, 2009
The American economy remains in dire straits, with one worker in six unemployed or underemployed. Yet Goldman Sachs just reported record quarterly profits — and it’s preparing to hand out huge bonuses, comparable to what it was paying before the crisis. What does this contrast tell us?
First, it tells us that Goldman is very good at what it does. Unfortunately, what it does is bad for America.
Second, it shows that Wall Street’s bad habits — above all, the system of compensation that helped cause the financial crisis — have not gone away.
Third, it shows that by rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis, and, in fact, has made another crisis more likely.
Let’s start by talking about how Goldman makes money.
Over the past generation — ever since the banking deregulation of the Reagan years — the U.S. economy has been “financialized.” The business of moving money around, of slicing, dicing and repackaging financial claims, has soared in importance compared with the actual production of useful stuff. The sector officially labeled “securities, commodity contracts and investments” has grown especially fast, from only 0.3 percent of G.D.P. in the late 1970s to 1.7 percent of G.D.P. in 2007.
Such growth would be fine if financialization really delivered on its promises — if financial firms made money by directing capital to its most productive uses, by developing innovative ways to spread and reduce risk. But can anyone, at this point, make those claims with a straight face? Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls. They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers.
Goldman’s role in the financialization of America was similar to that of other players, except for one thing: Goldman didn’t believe its own hype. Other banks invested heavily in the same toxic waste they were selling to the public at large. Goldman, famously, made a lot of money selling securities backed by subprime mortgages — then made a lot more money by selling mortgage-backed securities short, just before their value crashed. All of this was perfectly legal, but the net effect was that Goldman made profits by playing the rest of us for suckers.
And Wall Streeters have every incentive to keep playing that kind of game.
The huge bonuses Goldman will soon hand out show that financial-industry highfliers are still operating under a system of heads they win, tails other people lose. If you’re a banker, and you generate big short-term profits, you get lavishly rewarded — and you don’t have to give the money back if and when those profits turn out to have been a mirage. You have every reason, then, to steer investors into taking risks they don’t understand.
And the events of the past year have skewed those incentives even more, by putting taxpayers as well as investors on the hook if things go wrong.
I won’t try to parse the competing claims about how much direct benefit Goldman received from recent financial bailouts, especially the government’s assumption of A.I.G.’s liabilities. What’s clear is that Wall Street in general, Goldman very much included, benefited hugely from the government’s provision of a financial backstop — an assurance that it will rescue major financial players whenever things go wrong.
You can argue that such rescues are necessary if we’re to avoid a replay of the Great Depression. In fact, I agree. But the result is that the financial system’s liabilities are now backed by an implicit government guarantee.
Now the last time there was a comparable expansion of the financial safety net, the creation of federal deposit insurance in the 1930s, it was accompanied by much tighter regulation, to ensure that banks didn’t abuse their privileges. This time, new regulations are still in the drawing-board stage — and the finance lobby is already fighting against even the most basic protections for consumers.
If these lobbying efforts succeed, we’ll have set the stage for an even bigger financial disaster a few years down the road. The next crisis could look something like the savings-and-loan mess of the 1980s, in which deregulated banks gambled with, or in some cases stole, taxpayers’ money — except that it would involve the financial industry as a whole.
The bottom line is that Goldman’s blowout quarter is good news for Goldman and the people who work there. It’s good news for financial superstars in general, whose paychecks are rapidly climbing back to precrisis levels. But it’s bad news for almost everyone else.
Wednesday, July 8, 2009
The Rules of Trading and Investing
The objective is not to buy low and sell high, but to buy high and to sell higher.
By MICHAEL PREISS
AMONG economists and on Wall Street in general there is now an active debate whether the massive stock market rally we saw globally since the mid-March lows is the beginning of a new bull market or whether it is simply a bear market rally that is now running out of steam. Since the March lows some stock markets around the world have risen 30-100 per cent while there was an increasing talk about 'green shoots' and the real economy recovering or at least getting less worse.
As we are entering the second half of 2009, most investors would do well to do a 'reality check' and reconsider their risk exposures and portfolio contents.
Investors are moving in lockstep like never before, driving up stocks, commodities and emerging markets and risking a replay of last year, when they all plunged the most since World War II. The herd mentality threatens to leave investors with no refuge amid signs that the worst US recession since 1958 isn't abating.
The market response to sell stocks now suggests a dose of nerves at the end of one of the best quarters for world stock market returns in history. It took the same nerves to go long and buy in March when everyone or at least most people were maximum bearish among widespread end-of-the-world sentiment.
Evidence on whether the positive economic currents have turned into profits for companies, which will start flowing soon, is needed before the rally can progress further. Stock price gains might be harder to come by as investors search for profit growth to justify the 41 per cent rally in the MSCI World Index. Whatever your view is on the state of the global economy, it pays to consider some truths and rules about trading and investing.
Never, under any circumstance, add to a losing position...ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin! Remember Citibank shares at US$55 less than two years ago, it fell to US$30, when our friends in Abu Dhabi tried to save them with a US$7.8 billion lifeline investment. Many thought Citi was cheap and 'averaged-in' only to see the once largest bank in the world slump to less than US$1.
Trade with an open mind. Still too many people only buy stocks and hope they will rise. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
The same applies to emerging markets. While fundamentally a lot of the emerging markets offer great long-term potential, short-term several countries look over-bought. So in emerging markets, it seems 'Short-term SHORT, Longer-term LONG' might be the best tactical advise.
Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital, not to mention stress.
The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is 'low'. Please remember Citibank. Nor can we know what price is 'high'. Always remember that sugar once fell from US$1.25/lb to two cent/lb and seemed 'cheap' many times along the way.
In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many. 'Markets can remain illogical longer than you or I can remain solvent,' according renowned British economist Maynard Keynes. Illogic often reigns and markets are enormously inefficient despite what the academics believe.
Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds. They shall carry us higher than shall lesser ones.
Try to trade the first day of a gap, for gaps usually indicate violent new action. I have come to respect 'gaps' in my nearly 25 years of watching markets; when they happen (especially in stocks), they are usually very important.
Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In 'good times', even errors are profitable; in 'bad times' even the most well researched trades go awry. This is the nature of trading; accept it.
To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we trade.
Respect 'outside reversals' after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more 'weekly' and 'monthly' reversals.
Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds clarity. Respect and embrace the very normal 50-62 per cent retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen just as we are about to give up hope that they shall not.
Bear markets are more violent than are bull markets and so also are their retracements. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making superhuman insights.
Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are 'right' only 30 per cent of the time, as long as our losses are small and our profits are large.
The market is the sum total of the wisdom...and the ignorance...of all of those who deal in it; and we dare not argue with the market's wisdom. If we learn nothing more than this we've learned much indeed. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.
The hard trade is often the right trade: If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable. In mid-march that trade was major bull. Now after the second half and a massive rally, common sense would indicate 'book profits' across the board and move into cash if not out-right short, if you are a tactical trader. In the words of a Chinese saying: 'Fortune favours the brave - and the prepared mind.'
The writer is a Chartered Wealth Manager and can be reached at Michael@michaelpreiss.net
By MICHAEL PREISS
AMONG economists and on Wall Street in general there is now an active debate whether the massive stock market rally we saw globally since the mid-March lows is the beginning of a new bull market or whether it is simply a bear market rally that is now running out of steam. Since the March lows some stock markets around the world have risen 30-100 per cent while there was an increasing talk about 'green shoots' and the real economy recovering or at least getting less worse.
As we are entering the second half of 2009, most investors would do well to do a 'reality check' and reconsider their risk exposures and portfolio contents.
Investors are moving in lockstep like never before, driving up stocks, commodities and emerging markets and risking a replay of last year, when they all plunged the most since World War II. The herd mentality threatens to leave investors with no refuge amid signs that the worst US recession since 1958 isn't abating.
The market response to sell stocks now suggests a dose of nerves at the end of one of the best quarters for world stock market returns in history. It took the same nerves to go long and buy in March when everyone or at least most people were maximum bearish among widespread end-of-the-world sentiment.
Evidence on whether the positive economic currents have turned into profits for companies, which will start flowing soon, is needed before the rally can progress further. Stock price gains might be harder to come by as investors search for profit growth to justify the 41 per cent rally in the MSCI World Index. Whatever your view is on the state of the global economy, it pays to consider some truths and rules about trading and investing.
Never, under any circumstance, add to a losing position...ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin! Remember Citibank shares at US$55 less than two years ago, it fell to US$30, when our friends in Abu Dhabi tried to save them with a US$7.8 billion lifeline investment. Many thought Citi was cheap and 'averaged-in' only to see the once largest bank in the world slump to less than US$1.
Trade with an open mind. Still too many people only buy stocks and hope they will rise. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
The same applies to emerging markets. While fundamentally a lot of the emerging markets offer great long-term potential, short-term several countries look over-bought. So in emerging markets, it seems 'Short-term SHORT, Longer-term LONG' might be the best tactical advise.
Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital, not to mention stress.
The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is 'low'. Please remember Citibank. Nor can we know what price is 'high'. Always remember that sugar once fell from US$1.25/lb to two cent/lb and seemed 'cheap' many times along the way.
In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many. 'Markets can remain illogical longer than you or I can remain solvent,' according renowned British economist Maynard Keynes. Illogic often reigns and markets are enormously inefficient despite what the academics believe.
Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds. They shall carry us higher than shall lesser ones.
Try to trade the first day of a gap, for gaps usually indicate violent new action. I have come to respect 'gaps' in my nearly 25 years of watching markets; when they happen (especially in stocks), they are usually very important.
Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In 'good times', even errors are profitable; in 'bad times' even the most well researched trades go awry. This is the nature of trading; accept it.
To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we trade.
Respect 'outside reversals' after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more 'weekly' and 'monthly' reversals.
Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds clarity. Respect and embrace the very normal 50-62 per cent retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen just as we are about to give up hope that they shall not.
Bear markets are more violent than are bull markets and so also are their retracements. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making superhuman insights.
Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are 'right' only 30 per cent of the time, as long as our losses are small and our profits are large.
The market is the sum total of the wisdom...and the ignorance...of all of those who deal in it; and we dare not argue with the market's wisdom. If we learn nothing more than this we've learned much indeed. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.
The hard trade is often the right trade: If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable. In mid-march that trade was major bull. Now after the second half and a massive rally, common sense would indicate 'book profits' across the board and move into cash if not out-right short, if you are a tactical trader. In the words of a Chinese saying: 'Fortune favours the brave - and the prepared mind.'
The writer is a Chartered Wealth Manager and can be reached at Michael@michaelpreiss.net
Wednesday, July 1, 2009
THE IMPORTANCE OF RISK MANAGEMENT
TEH HOOI LING EDITOR
PULSES JULY 2009
"THE DIFFERENCE between a good trader and a bad trader is risk management," says Victor Sperandeo, a veteran
Wall Street trader with more than 40 years' experience.
Indeed, for reckless traders, events of the past 18 months would have wiped them out completely with a slim chance of any comeback. Typically, in a bull market, investors don't worry too much about risk. But a sudden downturn will drive home the importance of risk management. Unfortunately, that lesson will be forgotten as soon as the good times return.
So perhaps as a constant reminder, an investor should have a checklist on risk placed in a prominent spot on his trading screen. What would be on my checklist? Well, first on the list would be: Don't over-extend yourself by taking on huge loans. Leverage, as we all know, cuts both ways. In a rising market, it boosts your return on equity. In a downmarket, it can bankrupt you. No need to look far for examples of that.
Next, when engaging in speculative trades, risk only the capital you can afford to lose. It is unwise to put one's entire life savings in speculative small-cap stocks or their warrants or even structured products which one may not understand. It absolutely befuddles me that some private bankers would put their clients' entire life savings into structured products alone. Some investors saw their entire portfolios go up in a puff of smoke after the collapse of Lehman Brothers.
Perhaps the private bankers themselves don't understand the risk of these products. Perhaps the collapse of Lehman was totally unforeseeable. Still, putting everything one has into a single investment product is not a good idea.
Also, I always try to remind myself: The lower the market goes, the lower the risk. The higher the market climbs, the higher the risk. This is counter to what our emotions would have us believe. When the market is going down, we are gripped by fear and paralysed into inaction, or worse, panicked into selling. When the market keeps going up, we are motivated by greed to make a quick buck. This reminder is good to have in front of one's trading screen!
According to Mr Sperandeo, nicknamed Trader Vic, only 5 per cent of all rallies go up 40 per cent without a correction. And once a rally goes past 107 days, its risk rises from low to moderate or high. Beyond 242 days, the risk is very high. "Rallies are like humans. Getting into the market now is like buying an 80-year old man. Yes, he can live to 85. But if you buy a 21-year-old, you have better insurance," he said when he was in Singapore recently.
A number of trading rules are also targeted at risk management. Rules like: Use stop-loss orders whenever practical; When in doubt, get out; Be patient, never overtrade; Buy weakness and sell strength; Be just as willing to sell as you are to buy; Never initiate a position in a fast market; Don't trade on the basis of "tips".'
Ultimately, the objective of all these risk management pointers is to PROTECT YOUR CAPITAL. And that should be the heading of your checklist, in bold capital letters!
PULSES JULY 2009
"THE DIFFERENCE between a good trader and a bad trader is risk management," says Victor Sperandeo, a veteran
Wall Street trader with more than 40 years' experience.
Indeed, for reckless traders, events of the past 18 months would have wiped them out completely with a slim chance of any comeback. Typically, in a bull market, investors don't worry too much about risk. But a sudden downturn will drive home the importance of risk management. Unfortunately, that lesson will be forgotten as soon as the good times return.
So perhaps as a constant reminder, an investor should have a checklist on risk placed in a prominent spot on his trading screen. What would be on my checklist? Well, first on the list would be: Don't over-extend yourself by taking on huge loans. Leverage, as we all know, cuts both ways. In a rising market, it boosts your return on equity. In a downmarket, it can bankrupt you. No need to look far for examples of that.
Next, when engaging in speculative trades, risk only the capital you can afford to lose. It is unwise to put one's entire life savings in speculative small-cap stocks or their warrants or even structured products which one may not understand. It absolutely befuddles me that some private bankers would put their clients' entire life savings into structured products alone. Some investors saw their entire portfolios go up in a puff of smoke after the collapse of Lehman Brothers.
Perhaps the private bankers themselves don't understand the risk of these products. Perhaps the collapse of Lehman was totally unforeseeable. Still, putting everything one has into a single investment product is not a good idea.
Also, I always try to remind myself: The lower the market goes, the lower the risk. The higher the market climbs, the higher the risk. This is counter to what our emotions would have us believe. When the market is going down, we are gripped by fear and paralysed into inaction, or worse, panicked into selling. When the market keeps going up, we are motivated by greed to make a quick buck. This reminder is good to have in front of one's trading screen!
According to Mr Sperandeo, nicknamed Trader Vic, only 5 per cent of all rallies go up 40 per cent without a correction. And once a rally goes past 107 days, its risk rises from low to moderate or high. Beyond 242 days, the risk is very high. "Rallies are like humans. Getting into the market now is like buying an 80-year old man. Yes, he can live to 85. But if you buy a 21-year-old, you have better insurance," he said when he was in Singapore recently.
A number of trading rules are also targeted at risk management. Rules like: Use stop-loss orders whenever practical; When in doubt, get out; Be patient, never overtrade; Buy weakness and sell strength; Be just as willing to sell as you are to buy; Never initiate a position in a fast market; Don't trade on the basis of "tips".'
Ultimately, the objective of all these risk management pointers is to PROTECT YOUR CAPITAL. And that should be the heading of your checklist, in bold capital letters!
Saturday, June 6, 2009
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Baltic Dry Index
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Goldman Sach Commodities Index(W)
Goldman Sach Commodities Index(M)
CCI Index (W)
CCI Index (M)
Crude Oil
Gold
Coal
Aluminium
Copper
Dry Baltic Index
Links:
Baltic Dry Index
Commodity Futures Chart
Dram Exchange
FCPO Spot Month Avg Settlement Price
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