An Island GET AWAY

An Island GET AWAY

The Philippines is a country of some 7107 islands (depending on what time of the day you asked and whether it is low tide or high tide) and surely, there are quite a number of those islands that present themselves as a perfect island get away. One of the world’s famous islands frequented by tourists in this part of the globe is the Boracay Island in the Province of Aklan. But that is not what this post is all about.

This is about another island with pristine white beaches in the northernmost tip of the Province of Cebu. It is called Bantayan Island. It is in the Province of Cebu but not in the same island as Cebu City. Just like the way Mactan (where Cebu International Airport is located) is in another island.

bantayan island stocks

Island in the northernmost tip of Cebu Province

The word “Bantayan” came from the root word “bantay” which in Filipino means “guard” or “to guard“. Local folks said their small island was named Bantayan Island as it was the place where the brave Cebuano fighters used to station their first line of defense against their seaborne invaders or enemies. The town of Madridejos, the second biggest town in the island, still has the old guard and observations posts used by their ancestors.

By the way, for the clueless, Cebu is the second biggest city in the Philippines. It is located in the Central Visayas about an hour away by commercial plane from Manila.

Money may not be able to buy everything but, it certainly can buy comforts and, if money is of no object to you, a chartered plane may prove to be the most convenient way of getting you directly to Bantayan Island. Just don’t bring your big war machines the size of C-130s (or bigger) as the island only has a small strip that can accommodate very light planes.

Ordinary mortals, like many of us, can take a little comfort by renting an air-conditioned car or van from Cebu City to bring us to Hagnaya Port in the town of San Remegio some 60 kilomenters away to the north. A forty five minute boat ride from Hagnaya, San Remegio will bring us to Sta. Fe where those pristine white beaches are located.

Idyllic island get away

Idyllic island get away

The place is far enough from the hustle and bustle of the city life (and perfect for those who would like to get away from it all) but not too far away that one is totally cut off from civilization.

You can choose to ignore unwanted calls but competing mobile phone service providers have good coverage in the area and even surfing the internet is a breeze using your mobile phone as a modem.

There is cable television and you have access even to TV channels that you do not want or do not understand. In fact, it has more TV channels than a polyglot would be happy to have.

They have jet skis and kayaks and diving equipment and almost practically anything that you can find in any other popular resorts – but with lesser crowd and definitely, a lot lesser pollution.

Here, you can have all the sun that you want (just don’t forget your sun block lotion as the tropical sun can be harsh to anyone who lives in the temperate zones), but if you are not crazy about getting that tan, you can still have a dip in the crystal clear saline water of the island by going into their own version of a river underground.

river-underwater

Down here, you can forget about your sun block lotion!

Enjoy!

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Make Money by Doing NOTHING

Make Money by Doing NOTHING

Isn’t that a nice idea? To continuously make money while doing nothing? Ha ha ha! I can almost see it happening, thousands of eyebrows rising at the same moment – everyone probably thinking what rubbish this author is dishing out today.

make money by doing nothing only stocks

Shhhhh, pleasee, silence! I’m making money…zzz

But can anyone really make money by doing nothing? Well, maybe not. But thousands (whether they know it or not) are actually making a lot of money by doing almost nothing at all. And who are these blasted sons of b…’s who are so darn lucky they make money even when they are sleeping?

belgian-malinois-dog

These canines are not yet trained to count money so, I wasn’t referring to them.

Actually, all of us can make money by doing almost nothing at all. How?

Buy the right stocks.

Buy the right stocks? Is that it? Just buy the right stocks? Essentially, yes. Just buy the right stocks and do nothing.

It may sound crazy, but if we consider that the world’s richest man (Warren Buffet) is advocating “Value Investing” the idea become a little less nutty. But this discussion is not about Buffet and Value Investing. This is about the words coined by Benjamin Graham – the Columbia University professor who is believed to have taught Buffet Value Investing.

Graham identified the biggest problem in investing. He said: “The investor’s chief problem, even his worst enemy, is likely to be himself.” If this is so, and I am inclined to believe that it is, then it follows that doing nothing may actually help the investors.

And why is this so? If we really want to know why, we need to throw vanity out of the window and allow a little bit of honesty shine into our world – even just to our own private selves. If we have already done that and we are currently invested, then, let’s try to look back and see how we reacted in the latest market developments.

If we are honest enough and if we know what we are supposed to be doing, then we can tell if we are our own biggest problem. And yes, this has to do with Fear and Greed.

Having learned his lesson well, Buffet is advocating that investors should buy stocks because of the business the company (which shares they are buying) is in and how that company is managed. Not because of the price movements of its shares.

I realize that momentum traders will disagree with this concept but then, the way value investors and momentum traders disagree with a lot of things, they might as well belong to different hemispheres.

Again, I am not the expert here remember? So, I am not about to even guess which one has the best investing concepts. All I am doing here is show how things are being done by other people to make a lot of money. And people in Warren Buffet’s side of the investing world are saying that inactivity could actually be helpful.

I will be remiss in my duty here, however, if I did not emphasize that inactivity is not going to work if we are not careful in choosing the company to invest in.

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BIG Profits from ‘DISSENTERS’

BIG Profits from ‘DISSENTERS’

 

A friend of mine went to the stock market the other day and came back saying that judging by the number of people that he met at the exchange that day, there seem to be a lot of people who are packing their suitcases these days to go on some vacation somewhere than there are minding their investments. But that was just an assumption. At any rate, I don’t think we can blame anybody if they want to stay as far away from financial risks as they can these days.

4 coins portfolio

Uh, let’s just pretend this is our whole portfolio, okay?

Anyway, if we are going to some unfamiliar places for a vacation, we need to have at least an understanding of the places we are going to visit if we want to be safe, right? And we are going to want to have that knowledge before, not after, we get there, right?

Well, that is the same thing in investing. And that is what we are trying to do here – to arm the future investors with even just a little bit of knowledge about investing, so that at least they would know what in the world is going on, should they ever feel lost along the way.

We have already mentioned in previous posts that there is such a thing as Modern Portfolio Theory (MPT). In that theory, there are a lot of terms with fancy names like “negative covariance” and “negative correlation,” etc. that could make our head spin.

But if we try to peel off the high sounding terminologies and look at them without those swanky titles the words actually begin to make sense. If we change the moniker of those two (negative covariance and negative correlation) for example in the realm of investing, they would simply refer to stocks or assets that are moving in opposite directions.To illustrate using stock A and stock B: If those two stocks are positively correlated they will move in exactly the same direction. If A is going up, B is also going up. If they are negatively correlated: A would be going up if B is going down and vice versa.

To avoid getting confused, let’s do our best to forget those terms with elegant titles for the time being (unless you are more comfortable using those terms) and just concentrate on remembering the stocks or assets that are moving in opposite ways.

Markowitz, the author of the Modern Portfolio Theory, believes that to minimize our losses in our investments we need to have assets that move in opposite directions.

Why?

To answer, let us imagine that we have four (4) twenty five centavo coins (quarters) in our pocket. Let us also imagine that economic crisis is a natural occurrence and that every time it happens, all the coins in our pocket that move in the same direction will fall into the floor and disappear. Now, if all of our four coins are stocks, and they are all moving in the same direction, they will all fall into the floor (lose value) during an economic crisis.

Following this line of thought, if only three of them move in the same direction, you will have one coin left in your pocket, right? Well, then, you have minimized your losses -simple right?
Let us try to simplify this some more by calling that coin that moved in the opposite direction as “dissenter.”

In good times, when the coins that move in the same direction are going up, the dissenter will give us some problems by reducing the amount of profits we are making, right? This is because it moves down while the other coins are going up. But conversely, in bad times, it will give us some relief because while the rest of the coins are giving us losses the dissenter is earning us a little money, right?

If this is already clear to you, let’s move on to the discussion of the theory in modern portfolio and see how the dissenter can help us during economic crisis, because no matter what we say, if only one out of our four assets are making us money and the three others are bleeding our pockets, we are still losing money, right?

Well, what will really help us in this process is our developed ability to spot those dissenters. That is the reason why we need to be good at identifying them. The fact that we do not know exactly when a crisis is going to hit the economy (and spill all the coins in out pockets) is the reason why we need those dissenters in our portfolio. Not necessarily to lessen our profits during good times but to act as cushion during the bad times.

But how can those dissenters make us money, instead of just “save” us money?

Come on! Don’t tell me you still haven’t figured that one out yet.

Anyway, you can actually reverse the process and see if you can get more of those “dissenters” during economic crisis – then you get your profits.

Many will go for another strategy baptized with another elegant title called “Hedge” but I wouldn’t do it that way if it would be as damaging to most of us – as oil is these days.

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Economics of a Wasteland

Economics of a Wasteland

Economics of a wasteland and about a year ago, an odd advertisement came out of a major daily in the Philippines and it read something like this: “In the land of the blinds, a one eyed man is king!”

Those of us in the office who saw that ad tried to put heads and tails together and decided that the ad was actually a derogatory remark made by one company to belittle the achievements of another company (their competition).

The ad was ignored by the targeted company and it was soon forgotten.

Anyway, in our office (where very few people play the market) every question on news stories related to the stock market almost always end up with me.

That abysmal drop of the DJIA a few days ago (almost 400 points) sent another shiver up the spine of some of our colleagues who are now on the verge of giving up on the idea of making their millions by betting on the market.

“Well, just look at how bloody red that screen is. And now, this?” one of them quipped. Funny, I thought, there was only one thing green left in that setting. Me. And they chose ME to ask the questions! In essence, the question goes something like this: “What in the world are we doing in this mess?”

It wasn’t me who got them into the market. 2006 was a good year and they went in on their own volition. So, I thought, I wasn’t about to get lynched by my own officemates. But it is I who is always urging them to learn more about the goings on in the market, and thus, I am the usual victim of interrogation.

I suppose their stocks received so much beating in the latest crash (just like everyone else’s) and they are licking their wounds. “Hey, why waste time learning about a market that’s practically on its knees begging for mercy, eh?” asked another.

I cannot argue with these guys. Not when they are in that state of mind. So, I digressed and talked about a large track of land that used to be considered a wasteland. Nobody wanted it. The story goes that it was so useless you can’t grow anything on it. You cannot even bribe or take your clothes off to seduce anything edible to sprout on the ground.

Well, that was the time when every piece of land can only be deemed valuable if you can plant on it and harvest from it.

Still, an affluent family from Spain’s mountainous region of Alava bought a rather big chunk of the entire badlands sometime in the 1800’s and turned it into what is now known as the Makati Commercial District. Maybe it was true that nobody can germinate a good seed in that place before, but look at what sprung out of every square inch of it eventually!

salcedo village

Sorry, can’t grow corn stalks here.

 

And guess what? One of the buildings there is housing the Makati side of the Philippine stock Exchange (there is another trading floor at Ortigas Center in Mandaluyong but they are integrated).

 

makati at night

Makati at night. Pics source: Wikipedia

So, okay, it is a bad year and you cannot even make a cross-eyed penny out of your stock market investments. So what? Is that an excuse not to learn the intricacies of investing in securities? Say, how many market crashes and economic crisis and recessions and stagflation and bubble bursts have there been, put together? And isn’t it true that, every time, the market recovers, and in the recovery, millionaires and billionaires are made because of their market shares?

Now, would you rather that you still don’t know how to make your money in the market in the next Bull Run?

Admittedly, it’s like a “winter wasteland” in the stock exchanges right now. The shares are shedding prices like they carry some deadly communicable diseases. So, what? Would you rather check them out when the whole planet is scrambling to snatch them up?

Boy, if I only have a big box full of those crisp 100 denominated greens…

 

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Earn by killing Mice and Butterflies

Earn by killing Mice and Butterflies

Whoa…! Wait! Read first okay? Uh…I know we are not that greedy. I understand that everybody just wants to earn a living but… before we start, let’s disable that nuke and disassemble that smart bomb first, shall we? Some mice are cute and butterflies are just colorful, harmless, airborne creatures that are nice to look at. Hurting them won’t get us anything.

Kidding aside, there’s a kind of rat that is supposed to be in our chest, and a kind of butterflies that are supposed to be in our tummy (whenever the going gets tough), and they don’t just drum up and strain our hearts, and they don’t just produce and pour acid in our intestines – they also mess up our brains. They make us see things rather differently.

Those are the kinds of mice and butterflies that we should be exterminating…but still… I suppose, we don’t really want to nuke them, do we?

The reason we have to control those kinds of mice and butterflies is because, in most instances, they exaggerate things. They make mountains out of molehills, typhoons out of drizzles, and maybe even floods, out of somebody’s piss coming from the floor above us.

Maybe they help us recognize danger…? Maybe so, but why leave “danger recognition” to our senses? In cloak and dagger operations, or maybe even in a recon, where a decision made in a blink of an eye may mean life and death to a combatant, it is probably justified to depend on one’s senses in identifying dangers.

But in a business environment, where you have all the time in the world to study your options before making any decision, where you can even refuse to buy into the action, one has to know the risks and be prepared for it before going in. After all, those risks are all written in some documents that are available for the taking. To pinpoint danger in the investing world, one only has to read and/or seek counsel.

Okay, fine, so we know how to detect danger now. Then, what? Freeze? Like we have just been taken out of a cryogenic facility? Or, run the hell out, to god knows where, in panic not knowing what to do? In times like that, if we can compose ourselves for a bit, we might realize that we’d be better off keeping about our wits. Still, isn’t this scenario a tad too exaggerated?

We are talking about earning from our investments here, so let’s see how keeping ourselves together (I mean, as opposed to falling apart) can help us spot opportunities rather than see scary ghosts where there are none.

The market moves just like the sea. In rough times, it looks as if it is going to cause the end of everything – especially if we are caught in a boat right in the middle of the raging waters. But even the worst of storms never last forever. At worst, its fury lashes for less than a week. The moment it has dropped all its rains and the wind has dissipated, the sea could be as still as a sleeping baby. And everything all goes back to normal again.

It will, of course, be too bad if the storm hit while we are in the middle of the ocean riding a leaky tub that has holes like a hamper. That is why it is best that we choose our stocks properly. In good economic times when the market is driven by a raging bull and not by the stampeding bear, we may sometimes get lucky by speculating on “garbage stocks” (the ones with questionable fundamentals) but I, personally, don’t want to get caught holding them in times of economic disasters.

It is when we are not sure with the fundamentals of the stocks in our portfolio that we unconsciously breed those mice and butterflies. And they grow into some of those freaky giant monsters when the ground we are standing on begins to shake and we have no idea what is causing it.
Well, if we are the panicky sort, we are going to make a lot of sharks and predators happy. And they are the real kind too, not just a figure of speech. You know, sometimes, they are the ones causing the grounds to shake. Some of those guys, with considerable resources, at times will drive the prices of a certain stock so high (enough to cause you to panic and buy) so they can sell them to you – and then leave you holding the bag full of worthless stocks.

Sometimes, when they have nothing better to do (they always have nothing better to do) they will turn around and start dumping their favorite stocks (causing everyone to panic and sell) so they can buy them all back when the prices hit the ground. You know, buy low, sell high?

In the meantime, thanks to your well bred mice and butterflies, you just traded your stocks the other way around.

cheers!

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Bourse, NOT Horse!

Bourse, NOT Horse!

In a country where less than one percent (1%) of the population invests in the capital market, it is not uncommon for people to think that investing is pretty much like gambling. You know, like betting on a horse or going to a casino. But reading about people who are jumping out of building windows due to stock market losses makes one wonder if investors in more developed countries know any better.

It must be my “cranial capacity”, but quite frankly, I could not see the similarities between a bourse and a horse! Or, maybe I need to be a rocket scientist to see that a “game room” is the same as the trading floor?

Let’s try this with a wee bit less of scorn.

Talking to a number of officemates who heard a story or two about people who got burned in the securities market, I had to scramble for some analogies that might help me explain why I suddenly became so “suicidal” (that I am willing to gamble away whatever little money I have saved or “allocated”).

I told them that I could be miles and miles off the mark, but here is how I see the difference between the casino and the stock market: In the casino, it is in the interest of the gambling house that the bettors lose – so the house can win. In the casino, you are betting on deck of cards and contraptions that may or may not be rigged. In the casino, you are just betting plainly against the odds. In short, in the casino, nothing works in your favor aside from the occasional luck.

In the stock market, you don’t have to lose for the exchange to win. In fact, the more you win the more money the stock market makes. In the stock market, you are betting on companies that employ thousands of workers and executives whose common objective is to make a lot of money for those companies. And since your bet in the stock market comes in the form of shares, the more money those companies make, the more money you make. So, what similarities are we discussing again?

Oh, of course, people make money and lose money in the stock market. It is like gambling, remember? Except, in the stock market the odds are in favor of the bettors winning – not losing.

From what I have personally seen so far, you are most likely to lose money in the stock market if: 1. you treat it like you treat gambling, (meaning, you just go in there and place your bet without studying the stocks you are buying); 2. you don’t allow your money to grow, (meaning, you have a very short investing horizon – which further means that the money you are using in your investments is probably the same money that you will immediately need); 3. you are too greedy, (this means, that the stock has already ran its course and you still want more from it) 4. you are too scared to take the risks, ( which means, you are too quick on the sell button).
Studying the stocks you are going to buy may sound a bit too daunting. I will not argue the point that this job is probably better left with the experts, but a bit of a layman’s exercise of cognitive power will not hurt either.

If you frequent the mall and you noticed a restaurant that is always filled with customers because of good food, good service, good ambience and affordable prices, and you heard that they are going public thru an Initial Public Offering (IPO) so they can build more branches, and your broker asked you if you would like to buy their shares, would you buy them?

Suppose the shares that your broker is asking you to buy is that of another restaurant which has a good sounding name, not so good food, very expensive ambience with rather expensive prices and a service that is a bit snobbish. Let’s say this restaurant has already been there awhile with a good number of branches all over the country but whose tables are almost always empty. Would you buy their shares instead?

It seems like I don’t run out of confessions to make, so let me make another one here: At the risk of sounding too simplistic, I am trying my darn best not to sound like a professor or an expert (both of which, I am not) in my posts. My undying wish is to be able to bring down the level of discussion on investing to “chat-room” level in the hope that I will be able to encourage more investors among those who, more than anyone else, need to learn how to invest.

That having said, let’s try to go into the electronics business. Using the same standards on popularity (except, of course, you cannot eat cell phones and gadgets) as applied in an electronic “thingy” plus maybe ease of use and after-sales service, durability, dependability and nice designs, would you rather buy the stocks of a least known competitor whose products are, say, half as bad as the company we just described?

Or, in the case of mobile phone service provider, will you buy shares from a company which services are known more for causing more expletives (due to drop calls and limited coverage) from coming out of our mouths than for singing praises? Or would you go for that company that already has a respectable reach and area of coverage, yet still continue to build cell sites to further improve its services?

Okay, to accountants, economists, mathematical gurus, and financial analysts (who may, or may not be very comfortable with math and related disciplines) numbers is still the universal language. They will be checking out ratios of one company as compared to the next or as compared to industry standards (and all that dance) and I’ll say all of that are important (maybe one of these days we may even learn how to judge whether the financial statement we are studying is not done by unscrupulous people like those that figured in the world famous WorldCom scandal) but in the meantime, let’s start with the signs that are visible to our naked eyes.

We are pushed closer to the losing end if we cannot recognize things for what they are.

We eventually have to learn everything we need to learn (to a certain degree) to make the securities market a safer place (for us) to make money, but while taking our “baby-steps” there are things that we can do (initially) to make certain that we are investing in a bourse and not betting on a horse.

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