Adventures in Money Making

Investment Jungle is currently hosting the Festival of Stocks #38.

He actually read all the posts and gave his own opinions on them! Great Job! Check them out.

China sentenced its ex-food and drug chief to death for accepting bribes.

Quite a harsh punishment for accepting $800,000 in bribes. Pity the US doesn't have laws like that. It would do wonders for the integrity of system. Here we've become conditioned to accept that politicians will lie and accept bribes and grant favors to people who grease their palms.

I'm against capital punishment because the cost of error is too high. However, in the case of politicians, I'm willing to make an exception. Corrupt politicians should be given the death penalty or reduced sentences for lesser crimes.

Some of the other possible sentences could be
1. Asset confiscation and a life as a social worker on a $24,000 salary. No other income or jobs permitted.
2. Public flogging
3. Exile to a deserted island.
4. Neutering

What do you guys think?

Labels: Rants

American Express has now announced that it will allow borrowers to put their mortgage on their amex cards get earn points!

Its great for AMEX because some of the borrowers will be late and incur penalties of 15-28%! Of course of the savvy ones will also earn a lot more reward points than they normally could.

If I could put all my rental properties on this program, I could probably earn a free ticket to anywhere in the world every year! I'm not a big fan of this idea in principle, but a free ticket is enticing.

Anyway, you can read more about it here.

According to this article, McMansions gain popularity despite the housing slump, national new home sizes are averaging 2,400 sq ft!

Thats a huge increase from about 40 years ago. In the sixties, the average home was about 1100 sq ft with 3 bedrooms and 1 bath.

American homes, on average, are nearly twice as large as those in many European countries, including Britain, France and Germany. Only Luxembourg comes close among European nations, with average homes about three-quarters the size of those in the United States.

U.S. homes are also becoming more expensive. The median home value jumped more than 40 percent form 1990 to 2005, to about $167,500.

As the standard of living keeps growing I can understand the need for more living space, however after a point it becomes ridiculous. It seems difficult to understand that 20% of all new home construction be for "atleast 4 bedroom homes" when the average family size is 2.6. Somehow I can't see that the economy has been growing all that much in the past several years where people can afford to upgrade to such large houses.

I can't help but wonder how many buyers got an option-ARM loan or an interest-only adjustable mortgage and can't really afford to buy it with a "traditional" 20% down 30 year amortized mortgage.

Also, as the cost of oil and gas increases, heating these homes will also become increasingly difficult.

I wouldn't be surprised to see the number of foreclosures sky-rocket over the next few years. According to what I heard from a friend, foreclosures in California for the 1st quarter 2007 are at 86,000. This is opposed to 800 for the entire year in 2006. (I haven't verified the numbers at all, but I believe the trend).

Labels: housing bubble

I was asked to review Optimus Trading website, http://www.optimusfutures.com as part of my ReviewMe membership, which pays me to review relevant websites.

A lot of poeple have been complaining about the price of gas at the pump. In fact, Congress has enacted an anti-gouging law that provides upto 10 years in jail and upto $150 million in penalties.

But my contention is that high gas prices don't make any difference.

Gas isn't expensive
People are willing to pay $4 for a cup of $tarbucks coffee. That works out to about $1,250 per barrel. Compared to that, $65 for a barrel of light sweet crude sounds pretty cheap!

Besides this, compared to what 93% of the rest of the world pays at the pump, its still cheaper in the US.

High gas prices do not cause inflation
Some of you might think that since we use oil and gas in almost every aspect of our lives from commuting and transporting products to making plastics and profilatics that an increase in the price of oil would lead to inflation.

Well in theory thats true, but we're experiencing a much higher rate of inflation through the devaluation of the dollar and mindless government spending (through never-ending government expansion, ill-thought out entitlement programs and a very expensive war). The inflation caused by higher oil prices doesn't compare to this.

The higher oil prices don't affect our lifestyle
The only people who really feel the pinch at the pump are the people who drive SUVs and SAVs (Suburban Assalt Vehicles). Of course, if they couldn't afford the gas they wouldn't have bought them in the first place.

And if they really couldn't afford them to begin with, they should sell them and buy a Honda Fit, a Toyota Yaris or a Nissan Versa. They could also cut down on the number of miles they drive and walk a little bit too. (66% of US adults are overweight or obese).

Before you start complaining about poor people having to spend an extra $1,000/year because of higher gas prices, I know a lot of poor people who drive $25,000 cars. If they spent $15,000 on one of the cheaper cars mentioned about, the $10,000 they'd save would pay for nearly 100,000 miles worth of gas. Yet another reason to sell your car if you can't afford it.

Funny how some of these "poor" people I know can afford a $1,000 Plasma TV and $100/month for every single cable tv.

What about the really poor people?
There are probably a lot of poor people living below the poverty level for whom even a $200/year increase will break their budget. Sadly, these people have bigger problems. I can only suggest two things.
Buy a bicycle and read this article on how to live off $12,000 a year.

Gas prices are going to go even higher. Most of the oil's producers are at maximum capacity and the demand from India and China is growing exponentially. If you're feeling the pain now, imagine what it'll be like in a couple of years when oil is $100/barrel and you're paying $5.50 at the pump?

Labels: Rants

Here's a very short video on what to do in case of a kitchen fire. I'm filling it under personal finance since it could save your house (and maybe even your life).

Labels: personal finance

In the wake of the commodities boom, the Canadian currency has appreciated almost 50% against the U.S. dollar since the beginning of 2002. In the last three months alone, strong economic data, inflows from mergers and acquisitions, buoyant commodity prices and above-target core inflation resulted in a rise of the Canadian dollar (CAD) of about 8%.

I'm really happy since I own a lot of Canadian Income Funds which pay out monthly dividends in Canadian dollars. So as the Loonie appreciates, my monthly dividend increases too!

Will the Loonie ever achieve parity with the US Dollar though? Some analysts are predicted it to hit $0.96 = C$1.00 which is awfully close.

What do you guys think?

Labels: alternate investments, Currency

According to an article in the Wall Street Journal, the rush to produce ethanol has resulted in sharply higher prices for corn. Corn is used to feed cattle and pigs and as a result of the price increase, farmers are feeding their pigs trail mix, candy and Top Ramen noodles!

Besides trail mix, pigs and cattle are downing cookies, licorice, cheese curls, candy bars, french fries, frosted wheat cereal and peanut-butter cups. Some farmers mix chocolate powder with cereal and feed it to baby pigs. "It's kind of like getting Cocoa Puffs," says David Funderburke, a livestock nutritionist at Cape Fear Consulting in Warsaw, N.C., who helps Mr. Smith and other farmers formulate healthy diets for livestock.

California farmers are feeding farm animals grape-skins from vineyards and lemon-pulp from citrus groves. Cattle ranchers in spud-rich Idaho are buying truckloads of uncooked french fries, Tater Tots and hash browns.

In Pennsylvania, farmers are turning to candy bars and snack foods because of the many food manufacturers nearby. Hershey Co. sells farmers waste cocoa and the trimmings from wafers that go into its Kit Kat bars. At Nissin Foods, maker of Top Ramen and Cup Noodles, farmers drive to a Lancaster, Pa., factory and load up on scraps of the squiggly dried noodles, which pile up in bins beneath the assembly line. Hiroshi Kika, a senior manager at the company, says the farm business is "very minor" but helps the company's effort to "do anything to recycle."

Mr. Smith says he's paying about $63 to feed a single pig for five or six months before it goes to market -- up 13% from last year. His costs would be even higher if he didn't augment his feed with trail mix, which he says helps him save on average about $8 a ton on feed. This year, Mr. Smith has bought enough trail mix to feed about 5,000 hogs, and that will save him about $40,000.

Its only a matter of time before corn prices become too expensive for human consumption in the US. Already its too expensive for people in Mexico and being a major ingredient in their diet, thats having an inflationary effect on their lifestyle.

Rather than using corn-based ethanol, I wish the government would look into using vegetable oil instead. There are several kits available for diesel cars that allow the owners to switch to "used" vegetable oil whenever its available. In Southern California, there are companies like Socal Greasers that will fit your diesel car with a converter kit for a reasonable price.

So next time you stop by a fast-food place for a meal you can ask the manager for some of their used cooking oil. They have to pay to dispose of it and are usually happy to give it to you for free. It burns much cleaner than gasoline and your exhaust has a nice french-fry smell too!

Labels: Cars, Commodities, Oil and Gas

In part as a marketing exercise, The Royal Canadian Mint has produced a $1 million face value coin containing 100kg of .99999 pure gold.

With gold currently trading at $660 per ounce and each kilogram containing 31.1 ounces, the actual cost of the gold in the coin is worth just over $2.5 million USD!

It seems to be part of a marketing exercise to promote its .99999 pure gold Maple Leaf bullion coin. Current Maple Leaf gold coins are .9999 pure. In contrast, South African Krugerrands, while containing a full ounce of fine gold, are only .9167 percent pure with the balance made up with copper, so they actually weigh more than an ounce.

Labels: Coins, Gold/Silver

On the front page of today’s South China Morning Post, there’s a quote from Li Ka-shing, Asia’s richest man.

As a Chinese, I am worried about the mainland stock market. History shows that any phenomenon whereby shares are priced at 50 to 60 times forward earnings will end in a disaster. And any economic fluctuation in the mainland will absolutely hit Hong Kong.

In a sharply volatile stock market, small investors will be the victims in the end.

If any of you own China Funds it might be a good idea to lighten up on them now. Li Ka-shing didn't get to be Asia richest person by being dumb!

Here's a comparison between the Shanghai Stock Market Index and the Dow Jones Industrial Average.
If this doesn't look bubblicious, I don't know what does!



Note: There's a difference between the Shanghai Mainland stock market and the Hong Kong Stock Market. The Shanghai Stock Market is where the locals and Jim Rogers trade. The big multi-national companies like PTR trade on the Hong Kong Market which hasn't had such a speculative run-up.

Also of interest is this note from the China Fund (CHN), dated April 30th 2007.

Our returns in April came mostly from the A-share market, which is building up a good head of steam. The 'B word' is increasingly appearing in commentaries on the market, but as veterans of the late-80s bubble in Japan, when any stock under 30X was considered dirt cheap, we think this bubble will inflate still further. There have been disparaging comments about panic buying by local investors, now opening stock accounts at the rate of about 200,000 per day. We think they are reacting perfectly rationally to extremely high earnings growth (34% in 2006, accelerating in the first quarter of 2007) and negative real interest rates (Chinese banks only pay 2.2% after tax on one-year deposits, but the latest official inflation number was 3.3%). Ahead of the 17th party congress in October, it seems unlikely that Chinese politicians will make the 'courageous' decisions necessary to stop the market (big increases in interest and exchange rates), so they will continue to fiddle in vain with increasing equity supply and administrative guidance.

Hmmm....200,000 illiterate poor farmers/workers lining up to open a brokerage account doesn't look like a market top? ok, so they don't believe that the market's over-valued. But then why are they acting like it is? Here's a quote from a few paragraphs later.

The Fund is 93.5% invested with holdings in 65 companies. In April we began a big switch, selling US$19 million of A-shares to cut the Fund’s weighting there to 24.1%, whilst buying a net US$46m of the laggard, low-priced Taiwan market to lift the Fund’s exposure there to 29.4%. We believe that the A-share market has further to run, but Taiwan looks better when risk is balanced against potential reward. The NT dollar has also recently depreciated against the weak US dollar, never mind the mighty renminbi.

In addition to the broad-based buying of Taiwan favourites (Fu Hwa Financial, Formosa Petrochemical, Wah Lee, Synnex, Lien Hwa, Wistron Neweb and Taiwan Secom) the Fund received miniscule allocations to two hot Hong Kong IPOs, Yangzijiang Shipbuilding and China Molybdenum.

Ah, so they want to buy the somewhat undervalued Taiwan stock market and the Hong Kong Market instead of mainland China! Atleast they're not as stupid as you pretend to be!

Disclaimer: I own a miniscule amount of PetroChina (PTR) in my Roth. PTR is traded on the HK stock exchange. I'm not selling it but I'm not actively encouraging you to buy it or anything else, except maybe gold ;-)

Labels: Foreign Stocks, Investing

There is a saying that goes, "When your picture appears on the cover of Time Magazine, your career is over." If you have access to the June 13, 2005 issue of Time Magazine, you will see a picture of a man hugging his home. The title and subtitle say, "HOME SWEET HOME: Why we're going gaga over real estate."

There is another saying that goes, "As General Motors goes, so does the U.S." Well, today, both General Motors and Ford have had their corporate bonds downgraded to "junk bond" status.

Rich dad would say, "As one party ends, another begins." This real estate bubble has made many people very, very, rich. I hope it has made you rich. It has certainly made Kim and I very, very rich. But in my opinion, this party is over... so see you at the next party.

Despite his being widely disliked, I think Kiyoski makes some excellent points. The real estate boom is over (especially in places like California and Florida). You have to blind and deaf (or maybe just incredibly naive) to think otherwise.

The US government is essentially bankrupt. It has trillions of dollars worth of debt on the books. Not a good sign.

But there's always a bull market somewhere. If you keep your eyes and ears open, you'll always make money. You just need to get there before everyone else. As Milton Keynes once said, "The art of investing is anticipating the anticipations of others!".

PS: Kiyosaki was quoted from an August 2005 article which you can read here.

Labels: Investing, Kiyosaki

One of the questions I dread at interview time is the "So, tell me about yourself" question. I usually never have a clue how to answer this. Although in the past 2 years, I have become a lot better at marketing myself and a lot more perceptive of what employers are actually trying to find out.

But its usually these questions that stump me. I once interviewed at Sony, and one of the programmers asked me "so, why do you want to work here?". Unfortunately, I was speechless. I think he was trying to break the ice and by stumbling I just made it very awkward and I'm appalled that I couldn't think of anything nice to say about Sony. All I had to say was "coz Sony rocks!". Of course, I didn't get the job and I don't blame them. I certainly wouldn't hire anyone who didn't have anything good to say about my company!

Since that experience, I've gotten slightly better at interviewing but I until I read The interview that lasts for an hour over at Career Strategist, I didn't really have an idea of how to lead an interview or even start one firing on all cylinders.

Its a somewhat long post, but by far the best I've ever read on that topic. It covers all the salient points concerning an interview including do's and don'ts and what questions to ask the interviewer at the end.

Good luck with your next interview!

Labels: personal finance

After acquiring Chrysler in 1998, Daimler Chrysler AG has cried uncle and found someone to take the loss making unit off their hands. Private Equity firm Cerberus, is paying Chrysler (note: thats Chrysler, not Daimler) $7.5 Billion to acquire 80% of it. Daimler is also chipping in approximately $650 million to get rid of $18 Billion of pension and health care liabilities.

You have to be desperate when you pay someone to take over a business! Not entirely sure what Cerberus gets out of it. I think it'll probably be a strip and flip deal that will entail taking it public again and huge profits for Cerberus (and not the subsequent stockholders). Although, public-private-public deals like Burger King (BKC) have done pretty well (even if the initial period was a bit rocky).

I saw a news item about India introducing $3,000 cars. I don't know if theres a market for such "toys" in the US, but I'm sure the US auto-manufacturers are worried. Plus, there's a good chance that we'll see a recession late this year. (33% chance of recession according to Greenspan, although to be fair his exact words were "2-1 chances we won't see a recession" which is effectively the same thing only with a positive spin on it!)

Labels: Economy

Monish Pabrai is being called the 'young Warrent Buffett'. He's been returning 30% annual returns for his investors, similar to what Warren Buffett had been returning in the initial stages of his career.

He's come out with a new book:
The Dhandho Investor: The Low - Risk Value Method to High Returns

Based on the fact that his previous book, Mosaic: Perspectives on Investing is now selling for about $495, it might be worth picking up a copy as an investment, even if you don't like reading!

I happened to meet Mr. Pabrai when he was giving a speech in Orange County a year ago and was lucky to pick up a signed copy of Mosaic. Signed copies of that book have sold for $2,500!!! I hope I didn't throw it away, it was lying in my car trunk for the longest time.

I haven't read the new book yet, but its next on my list (after I finish The Black Swan: The Impact of the Highly Improbable which is an awesome book on the philosophy on improbably events affecting investing).

Labels: Book Review