Douglas learns to walk

A new walking experience on the ice-skating rink. A new cycle of failures and successes. A new self discovery. Basically, that's how I would summarise my ice-skating experience today. Though it may sound absurdly exaggerated, I truly feel that today has become a mini life walkthrough for me.

Well, initially I thought that I would need to hold on to the sides for at least half an hour before I could skate freely. Afterall, it took me quite some time during my last visit (which was in Secondary 4) to muster enough courage to skate without support. However, this time David showed me he could do it in less than 3 minutes, despite the fact that he hasn't tried it for 8 years. Maybe I could argue that he has better motor skills and therefore could maintain his balance faster than me. Nevertheless, I knew that the problem truely lies with me. I was very fearful of letting go, particularly since I was haunted by past experiences and failures. I had set a standard sub-consciously that I would need half an hour at the very least before I could skate freely. If not for this embarrassing defeat to David, I might never have realised how absurd I was! And so, I let go for what seemed like a heart stopping moment and everything seemed fine after that. Well, I'm quite sure that if I were to fall right after I have released my hands I would definitely pick myself up and try again. This is because David is not someone who would hold my hands and slowly coax me to try again like Benedict. Even though David is very close to me, (perhaps I'm his most respected friend, haha) he most probably would have just continued skating round and round and ignored my pitiful existence. Instantly, I realised that the world doesn't stop for me, that I either save myself from embarrassment or wallow in self pity. Thinking back, perhaps I have developed this over-reliance since Secondary One when I thought how easy life would be if people just care for me the whole day. : P

I also noticed several kinds of people during my 2 hour life walkthrough. There was this Malay lady who kept holding on to the sides for a very long time after David and me had skated for what seemed like eternity. However about one hour later, I saw her skating in the inner circle of the rink, far away from her safety zones. Although she was still skating very slowly, I realised she was starting to enjoy her new found independence with a smile occassionally beaming on her face. In real life, there are many people like her. Many of us start to bloom only in JC or university. I'm not trying to say that she is a bad example, and in fact I respect her a lot. She went alone to the ice-skating rink, overcame her fears alone and enjoyed her success ultimately. I thought that this process of finding out what you are capable of achieving and finally attaining success is very important, because this means you have finally found a direction that you are both enthusiastic and proud to stick to. Many people just work their lives off not knowing what they truly want or are proud of, which ends up leaving their lives entirely to the machineries of fate. (An apt description of fate) I'm not trying to say we must land in a classy or well-paid job to feel satisfaction, what I merely mean is we should achieve a goal which will allow us to start every new day with renewed hope and vigour.

Maybe you are thinking that it is obvious everyone should be able to skate after 2 hours. However, I was also surprised by this guy who still refused to let go after 2 hours. Initially, his faithful friend followed him closely while he pushed himself forward very slowly with support from the sides. After one hour, his friend patiently tried to hold his hands and coax him to leave the sides. However, he would stubbornly return to the sides everytime. Still, I was amazed that his friend had never left his side all this while, perhaps hoping that he would gain his confidence. (How I wish I also have such a friend) Finally when 2 hours were up, he fell down for the first time even though he was still holding on to his friend's hands! I thought that he had wasted his entire 2 hours there, just like some people who had wasted their entire lives away. He didn't set a target with a fixed time frame for himself, and neither did he try to overcome his problems with his own will. It's most regretful if a person has neither success nor time left on his side.

Recently, I have come to believe that I could achieve anything as long as I truly trust with all my heart and soul that I can achieve it. Have you ever felt a golden period in your life when you feel that nothing can stand in your way and you feel invincible? Perhaps now is the time to relive this most glorious moment in our lives. It is high time that we fully appreciate our self worth and pride.

Golden Beauty

I have been contemplating whether to write this post. Afterall, investing in gold is a highly specialised field that I'm beginning to understand a little only recently. Therefore, I'm most grateful to anyone who can give constructive inputs and suggestions about this topic.

First of all, I regard gold as more of a hedge than an investment vehicle for capital gains. Gold serves as a store of value more than any kind of asset I can think of. Gold is practically indestructible with its high melting point and chemical inertia. Most of all, it is an asset that does not depend on any individual or institution for its returns. For example, the returns on stocks and bonds are tied to the performances of companies. Even bonds, during a depression, may be totally wiped out if the company in question is bankrupt. Real estate prices also tend to plummet during a depression when people no longer buy or rent estates. Currencies of the affected countries will also decline in value due to speculations and an outflow of trade and capital. However, gold, this ancestral relic that has survived for centuries will most probably still keep its value, or its value may even increase exponentially due to panic buying. This is because no company or government is going to default on gold. Another reason why gold keeps its value is because people still trust that gold is in demand no matter which economic situation we are in. I suppose it has to be our ancestral instincts and ego for the glamorous that protects gold's value. Afterall, though gold has its practical uses in the medicine and industrial fields, 75% of it is used for jewelleries which aren't very productive in a recession.

Actually, gold first caught my attention when Robert Kiyosaki, author of Rich Dad Poor Dad emphasised its value. Later, I found out that some investors have reverted their strategies to the early 1900s whereby 10-20% of assets is allocated to gold. With the abolishment of the Gold Standard and the Bretton Wood's System in the 1970s, fiat dollar, which is currency unbacked by any asset and whose value is set by the government, became the legal tender. The problem is that the US government has time and again shown its incapability to cope with rising inflation with the fiat dollar. Gold prices before the abolishment of the Bretton Wood's System were around 30 dollars per ounce, but now it has risen to almost 600 dollars per ounce! On top of that, several trends have shown the situation would only get worse in times to come. The US burgeoning trade deficit is constantly hurting the dollar's value. The debt situation has reached epidemic levels of $40 trillion which is several times the size of the entire US economy. In the event that the US is unable to pay its debts, either rapid inflation may occur with the government printing more money to finance its debt or the economy may just collapse and liquidate, which will also send the US dollar to its graveyard. A ripple effect will happen which will also devastate our economy seriously since it depends so much on America's imports and investments. However, gold will retain its value as currencies around the world plummet because it is one of the most trusted forms of exchange which does not depend on any government or institution. Since many major currencies are pegged or floated closely to the US dollar, their fall is also inevitable.

Of course, there may be several disagreements regarding the importance of gold in portfolio diversifiation. However, what truly convinced me is that the value of gold has never been successfully suppressed for a long period of time. Even when the major central banks of the world desperately tried to sell their gold reserves to bring down the gold price, history has shown that people quickly hoarded up these gold and the gold price rebounds back. Even during the 1929 Great Depression, gold prices slipped slightly in 1931 but regained to its original level in 1932. In fact, gold prices has been steadily climbing if not for the occassional futile efforts of governments to curb its value. All in all, in my opinion, since "diamonds are a girl's best friends", (quote from Satin in Moulin Rouge), gold bullions are an investor's best friends.

The Perfectionist...

And so I thought... are perfectionists doomed to punish themselves with disappointments everytime they realised nothing in this world can be perfect? After thinking about this for some time, I realised that even if one has the purest and most compassionate heart in the world, one is still not perfect. For example, if this person sees his beloved drowning together with an ex-convict, who would he save if he only has the ability to save one of them? By saving his beloved, he has indeed done a good deed because he has saved a person, especially so if the person he saved is a good person who will continue to contribute to this world. However, it can also be said that he lets the ex-convict die, or to put it more bluntly he chose for the ex-convict to die. It certainly seems a little perverse if we think in such a way. Now, if he saved the ex-convict instead, he has also done a good deed by saving a person. Furthermore, it can be argued that he has saved the ex-convict's soul as well because the ex-convict now has a chance to repay the world and redeem himself. Nevertheless, it also means that he chose for his beloved to die.

The point I'm trying to bring across is as long as we are confronted with choices, there will always be opportunity costs, (sorry for using an economic term) and as long as there are opportunity costs things that appear perfect on one hand may not be so on the other. Now, if we think about perfection, the most likely candidate will be God. Does that mean God doesn't have any choices if he is perfect? Can we also argue that God doesn't have any freedom since he doesn't have any choices? Or is it that God doesn't need choices and hence freedom? Of course, it is also possible that man's logic is fallacious in the first place and therefore unsuitable to discern God's nature.

Actually, I used to be a perfectionist and sure enough, I've encountered so many disappointments along the way that I've also become rather pessimistic. However, I still believe in magical moments when we can see the true quality of human kindness. For example, when some Dutch took a very big risk of secretly housing Jews during the holocaust, they really did it out of pure compassion and not for any rewards or gratitude, especially since they would be humiliated and disgraced if they were found out by the Nazis. (Please read Anne Frank's diary, it is definitely worth reading) A similar thing happened in Singapore recently too when a construction supervisor sacrificed himself to save his workers during the Nicoll Highway collapse. I'm quite sure during that split second of life remaining he was thinking only about saving others and not about glory or fame. Its is such unpretentious kindness, when one does kind acts purely to help others and not to create a kind image for others or himself to see, that truely defines these magical moments. Though I cannot deny that perfections can never exist in this world, especially in the long term for all relationships, these magical moments serve to remind us of the greatness we are capable of achieving. Therefore, this world is not all just a desert with harsh winds and merciless heat waves, it is also a world where an oasis exists in each and everyone of us.

The Makings of a Financial Legend

Who's this financial legend I'm talking about? It has to be the world's 2nd richest person, Mr Warren Buffet himself, who made all his riches through prudent investments. After reading The New Buffettology by Mary Buffet and David Clark, I'm enlightened on a new world of investing where great returns can be expected with minimal risk.

If that is so, why do people always say investing is risky and henceforth the common logic of greater risks beget greater returns? Well, there is nothing wrong with common logic, except the common people who make up the market often do not use common logic. (Seems like a paradox right?) It has the same principle as to why price often is not set at where demand meets supply in the short run. In the short run, people are often myopic and have strong emotions such as fear or greed working for them that blind them to their logic. For example, in a bull market people often rush to buy stocks where p/e ratios have reached a ridiculous 50 or more just because others do the same too. On the other hand, in a bear market people tuck away all their money in banks and become poorer each day.

Warren Buffet is a value investor who employs a strategy called selective contrarian. As a value investor, he buys stocks at low prices and sell them high. However, the word selective distinguishes him from most other investors in that he only invests in companies that offer a durable competitive product or service, which in other words mean that the company's products or services can survive for 50 years down the road and still enjoy a monopoly in the market. Examples of such companies are like Coca-Cola, Macdonalds and Yum Brands. (which control KFC, Pizza Hut and Taco Bell) In a bear market, the stocks of these companies are often grossly undervalued and Warren buys them like a maniac. He knows that the stock value of these companies will certainly bounce back to their original level or even higher because the underlying fundamentals of the company are still strong. A bear market often does not affect such a company's earnings too significantly since its products still enjoy a monopoly position in the market, especially if its products or services are necessities. Therefore, the stock prices of these companies will definitely rise because in the long term the market will reflect the true economic value of a company. When it comes to bull market, it is time for investors like Warren to sell these stocks to investors at crazy prices. With careful analysis and a thorough understanding of the industry, market and operations of these companies, there is truly little risk in making investments on these companies.

Another important thing that most investors tend to neglect is the price of stocks. Some people feel that the dividends of good companies are more than enough to justify their investments. However, if the prices of these stocks are very high you may get an initial rate of return that pales far in comparison with secure investment vehicles like US Treasury bonds with a guaranteed return of 5-6%. Therefore, it is completely illogical to neglect the prices of what you are buying. Another way to determine whether the stock is a good buy besides initial rate of return is calculating the future price of the stock. A good way to project the future price of these companies' stocks will be first to determine the future earning power of a company using its compounded average earnings growth rate and multiply by its average p/e ratio for the past ten years. (By the way, Warren considers investments with a ROI aka return on investment of less than 12% totally unattractive and his portfolio averages on 22% ROI) However, we have to take note that projecting the future price of a company's stocks for 10 years is insane in most situations as many events in the general economy, industry or the company itself can severely distort a company's stock prices and its economic fundamentals. But in the case of Warren Buffet, he only considers companies with a strong durable competitive advantage that he believes can weather through most of the ups and downs of a volatile market. So far, his strategy has worked for the past 40 years which grew his company from $105,000 to $30 billion. With his success in mind, it is up to you to decide whether making investments is really that risky afterall. (P.S It is not the investment that is risky, it it the investor himself)

A little more about me...

I have just finished my NS and I'm going to enter university soon. The problem is I've made up my mind only last minute to change course from chemical engineering to business and accounting. It certainly seems like a very big change in me to switch from science to social science.(or should i say arts) The worst thing is many people around me including my close friends and mum in particular (she's a staunch advocate of taking sciences, not that which science really matters to her) are particularly unsupportive of my decision. Well, no matter what the choice belongs to me ultimately... but the negative statements do affect me especially since I'm having doubts about myself.

However, looking on the bright side of things, one of my most respected teachers recently told me she's confident of me in making the switch. Also, I have done some reading up on my own and even won a cashflow game competition yesterday and got a book for first prize... haha... Anyway, I realised through recent months of information gathering that the most important qualities of a successful businessman are the ability to communicate tactfully and a zest for success. Seems commonsense right? But ask yourself how many times in your life have you made a superb and lasting first impression on someone? Have you also tried fighting for your ideas and selling them until they are accepted? Did you have this unwavering belief for success that small obstacles and failures do not get in your way? I admit that these are probably the hardest obstacles standing in my way to success. (even harder than soc obstacles)

Oh ya... the main reason why I decided to change course in the first place is because I've been greatly influenced by Robert T.Kiyosaki. I want to be financially free and independent... such that even if I don't work I can still achieve lots of passive and portfolio income that can tide me through any crisis. Of course to get there I have to be cash rich to a certain extent, but to be merely cash rich is definitely not my goal. Think about it... if you do not know how to handle your money you will certainly get fearful of it when u get a windfall. The end result will be either you squandered it all away or you never made use of your money, which is the same as not having. And the reasons for being financially free are simple... so that I will be more financially secure, my parents can have a good luxurious life without compromising my needs, I do not need to worry about crossing my budget for this month because I know next month's cashflow will more than make up for any shortfall... and 1001 other reasons. Actually, in my point of view everyone should have this as his or her main goal since all of us want to get out of a "money not enough" situation. Some may argue that as long as we don't spend that much we will not have this problem. But bear in mind that many unpredictable crisis in life such as illness, deaths and disabilities can increase your financial burden a few times more at the very least. So is this strategy of earning little and spending little necessarily secure financially? I do not think so. Most importantly, I think that all of us do not want to be financially desperate, on top of being poor. Right?

First Blog

Hi... it's been a long time since I have created my first online blog... (I created one in JC1 but gave up after 5 entries) With new inspirations in mind, I've decided to test out how effective an online blog can help me convey my ideas on philosophy, finance and science. Also this blog helps to update my friends whom I've not met up with for a long time on important events and milestones in my life. Most importantly, I hope that people can share their ideas and views constructively so that we can benefit from one another's experiences. : )