Financial Planning

I strongly agree with Obama’s strategic approach in rebuilding the economy.  It is no use flogging the dead horse, trying to bail out troubled beyond hope companies.  It is better to focus the limited resources to enhance infra and technology.  By doing so itself would be creating jobs and opportunities.  People need to relearn and learn new things to be relevant in this economy.  What is more important is getting ready for the next wave of prosperity….. The following was extracted from CNN website.

Proposal centers on repairing infrastructure and boosting technology.

December 6, 2008: 12:25 PM ET

(CNN) — President-elect Barack Obama on Saturday revealed five parts of his plan to save or create 2.5 million jobs by 2011, and said he will push for immediate action by Congress when he takes office in January.

Obama wants to make public buildings more energy-efficient; repair roads and bridges; modernize schools; increase broadband access; and ensure health care uses the latest technology.

“Our government now pays the highest energy bill in the world,” he said in the weekly Democratic Radio Address.

“We need to upgrade our federal buildings by replacing old heating systems and installing efficient light bulbs. That won’t just save you, the American taxpayer, billions of dollars each year. It will put people back to work.”

In addition, he said, “It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the Internet, every child should have the chance to get online.”

“In addition to connecting our libraries and schools to the Internet, we must also ensure that our hospitals are connected to each other through the Internet.”

“These are a few parts of the economic recovery plan that I will be rolling out in the coming weeks. When Congress reconvenes in January, I look forward to working with them to pass a plan immediately.

“We won’t do it the old Washington way. We won’t just throw money at the problem.

“We’ll measure progress by the reforms we make and the results we achieve — by the jobs we create, by the energy we save, by whether America is more competitive in the world,” Obama added…………….

This article came to my email and I would like to give credit to the writer.  Read on and you will know why Warren Buffett is so successful in his investment decisions.


I had the good fortune to attend the 2008- Berkshire Hathaway Shareholders meeting at Omaha, Nebraska a few weeks back.

It was a wonderful experience listening to and learning from the Master Investor- Warren Buffett himself and all I can say is that he stands alone as the reigning deity of financial world’s Mt Olympus!

The degree of humility and composure he exhibited, although he is the richest and most well respected human is stunning!

I tried to take some notes and would like to share with you some of the best questions and answers which came across during the conversation between we mortals and God.

Having read about him, observed him and worshipped him for a few years now, I think it is reasonable to believe that this guy is exactly what he seems: a plain-speaking, tee totalling man of uncrackable integrity who works really, really hard and sticks to his investing and management principles through boom and bust which makes him a freak of nature since he is above normal human tendencies. He is like a comet streaking through the heavens every 75 years or so.

The questions the shareholders threw at him for 7 continuous hours ranged from finances, life, religion, career, politics, sports and several other streams. And he answered everything with a Zen like calm and confidence.

Even if you are least bothered about investments and finances, I insist, Pl read on.

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What does it take to become a successful investor? Brilliance or Smartness?

Neither, Success in investing doesn’t correlate with I.Q. Once you have ordinary intelligence, what you need is the temperament to control the urges that gets other people into trouble in investing.

When do you deicide to invest in a firm?

The best thing that happens to us is when a great company gets into temporary trouble. We want to buy them when they’re on the operating table. (Mr. Buffett bought Coke when it had its biggest fiasco after launching New Coke; he bought American Express when it went through a loss making phase in the early 60’s)

What do you look for in people when they come to sell their firms to you?

I don’t look for the usual credentials such as an MBA, a pedigree (Harvard, Wharton), or cash reserves or market cap of their firm. What I look for is just a passion in their eyes; I think that’s the key. A person who is hungry will always do well. I prefer it when people even after selling stay on and work for the firm; they are people who can’t wait to get off their bed to get to work. Passion is everything; there is no replacement for innate interest.

Mr. Buffett, you told us that Berkshire Hathaway has $ 45 Billion in cash. Why aren’t you investing?

Up until a few years back I had more ideas than money. Now I have more money than ideas.

When do you plan to retire?

I love my job; I love it so much that I tap dance to work. Mrs. B, the founder of Nebraska Furniture Mark worked until she was 104, she died within 6 months of her retirement, that’s a lesson to all my managers, don’t retire! I personally am going to work 6-7 years after I die, probably that’s what they mean when they say- “Thinking out of the Box”!!

Why do stock market crashes happen?

Because of human nature for greed and insecurity. The 1970s were unbelievable. The world wasn’t going to end, but businesses were being given away. Human nature has not changed. People will always behave in a manic-depressive way over time. They will offer great values to you.”

What are the things that are taught wrong in Business school and the corporate world?

I like such open ended questions, I think Business schools should refrain from teaching their wards about profit making and profit making alone, it gives a sense of 1 dimensional outlook to the young students that loss is a curse. In reality, in the corporate world, failure and loss making are inevitable. The capital market without loss is like Christianity without hell. I think they should teach the student on how to buy a business, how to value a business? Not just on how to determine the price of a business. Because price is what you pay, value is what you get.

Do you still hate Technology stocks?

With Coke I can come up with a very rational figure for the cash it will generate in the future.. But with the top 10 Internet companies, how much cash will they produce over the next 25 years? If you say you don’t know, then you don’t know what it is worth and you are speculating, not investing. All I know is that I don’t know, and if I don’t know, I don’t invest.”

How to think about Investing?

The first investment primer was written by Aesop in 600 B.C. He said, ‘A bird in the hand is worth two in the bush.’ Aesop forgot to say when you get the two in the bush and what interest rates are; investing is simply figuring out your cash outlay (the bird in the hand) and comparing it to how many birds are in the bush and when you get them.”

How do you feel after donating $ 40 Billion to the Bill and Melinda Gates foundation? You are a hero to us!
I feel nothing. I haven’t sacrificed anything in life. I have had a good life. I donated after I turned 75. I think I admire those people who sacrifice their time, share their food and home, as the people to be emulated not me. Besides, what is money before a man’s life?

What do you think are the pitfalls in donation?

I have never donated a dime to churches or other such organizations; I need to believe in something before I end up doing that. I have been observing the Bill & Melinda Gates foundation for years now and I am confident they will do a fantastic job of making use of the money. I am a big believer in Outsourcing, others believed in me as an Investor and gave their hard earned money to invest. I believe in Bill Gates, he is a better donor than me.

You seem to be so well read, tell us how it all started.

My father was a stock broker, so we had all these financial books in our library. He introduced me to those classics and I got into them. I am lucky that my father was not a fan of Playboy! Reading is the best habit you can get. Well, you can learn from teachers too, and have mentors but there are so many constraints attached- they will talk fast, talk slow, they might talk like a pro or they might be terrible communicators. Books are a different animal altogether, I love reading! The beauty about reading and learning is that the more you learn the more you want to learn.

People who join Berkshire Hathaway seldom leave. How do you get along well with all your executives?

I try to get quality people. I always say - Hire someone in your organization who is better than you are. If you do that, you build a company of giants. If you get people worse than yourself, you build a company of dwarfs. And do not try to do everything yourself. Delegate the jobs and look out of the window. The results will come. That’s how you build institutions. It happens only when you empower others, believe in others. Iam an investor, Iam very secured at that, I have no clue how to make Coca-Cola or how to dole out credit cards (Mr. Buffett owns 8% of Coca-Cola and 13 % of American Express). I understand the wisdom of the aphorism that you cannot please all the people all the time. Of Course, you will always find qualities that you don’t like in people around you, but if you observe carefully the love of the work unites you both. There is no point in being obsessive about a bad quality in a person, whom you otherwise respect.

I am a small time businessman from Dallas, Texas, what do I need to do to hit big time?

Be patient, Achieving your financial goals and dreams will not happen overnight. As much as we would all really love to accomplish our goals in a few years, this is an ongoing process. Defining your financial goals is not a one-time task; you need to keep adding new plans at different stages in your life. We all admire the skills of Olympic ice skaters, pro golfers, and concert pianists. But do we remember that they didn’t acquire their skills overnight? They had to practice hours on end for years to achieve their dreams. The key to success is to continue learning throughout your life with a voracious appetite.

My rule is to be fearful when others are greedy, and be greedy when others are fearful. Besides, I call investing the greatest job in the world because you never have to swing. You stand at the plate; the pitcher throws you General Motors at 47! U.S. Steel at 39! And nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it. Stay dispassionate and be patient. You’re dealing with a lot of silly people in the marketplace; it’s like a great big casino and everyone else is boozing. If you can stick with drinking Coke, you should be OK. First the crowd is boozy on optimism and buying every new issue in sight. The next moment it is boozy on pessimism, buying gold bars and predicting another Great Depression, most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.

What is the 1 biggest advice you would impart to a young investor like me?

Think for a moment that you are given a car and told this is the only car you would get for the rest of your life. Then you would make sure that you car is taken care of well, it is oiled and detailed every now and then. You would make sure that it never gets rusted, and you would garage it. Think of yourself as that car. You just get 1 body, 1 mind and 1 soul. Take care of it well. Invest in yourself that would be my advice.

You personally know many of the Financial executives who are engineers of the current turmoil in the financial world, surprisingly even after record losses, those executives receive astronomical salaries and bonuses and arrogantly declare that they deserve it, why dint you advice them from making such decisions and what’s your view on their justification for their pay?

I like sharing my ideas but don’t like imposing my ideas on anybody. It doesn’t make sense and is a waste of time. If somebody has decided that they know everything that is there to know, nobody can help them. The best way to learn and succeed is to know that we know nothing. There is an entire universe out there and still some of us think we can know everything. In the world of investing a few people after making some money tend to imagine they are invincible and great. This is the worst thing that could happen to any investor, because it surely means that the investor will end up taking unnecessary risks and end up losing everything – arrogance, ego and overconfidence are very lethal. Personally I don’t feel too comfortable with too much extravagance, because I always think like an investor. My thought process doesn’t see a lot of value in a fancy car or a designer suit. Thinking like an investor always is very important to bring in a sense of discipline and focus. Before reading balance sheets and investing you need to make sure your outlook and mindset is that of an investor. Never let ego, arrogance and over-confidence control you - not just as an investor but also as a human being. You will never have internal peace if you are unable to look at everybody around you with love, compassion and understanding. Irrespective of who the person is, he or she can teach you something you don’t know. I have learnt so much from people all around me and I wouldn’t have been able to learn all these wonderful things if I had not spoken to them with a smile. To quote Sir Isaac Newton- If I have seen farther than others, it is because I have stood on the shoulders of giants.

It was a 7 hour conversation and I could just capture some of the best questions and answers. As 37,000+ dazed, amazed and grateful shareholders trooped out of the stadium after the meeting, I found myself recalling one of my favorite quotes-

“A man has to learn that he cannot command things, but that he can command himself; that he cannot coerce the wills of others, but that he can mold and master his own will: and things serve him who serves truth; people seek guidance of him who is master of himself”.

I came across an article and I would like to share part of it.  This article is written at a time the stock markets are falling.  As investment is one of the greatest inventions to increase the wealth of many millionaires I believe if we want to get more in life we should think and act like a millionaires with whatever resources we have.  As they say if you aim for the moon, you may end up amongst the Stars.  I like to highlight the following statements in the article:

According to Nassim Nicholas Taleb in his book entitled The Black Swan, we should stop trying to predict anything and instead take advantage of uncertainty.

A lot of investors or analysts may spend a lot of time trying to predict the market bottom. We should not try to predict when the market will reach its bottom as we will never know until it happens.

The key thing is to focus on is whether we have already identified which good quality stocks to invest in when the market is getting nearer to the bottom. Instead of trying to catch the stock at the lowest point, we hold the principle that we would be happy if we are able to catch those stocks 20% from the low.

Looking back at history in the Asian financial crisis which is still fresh in our mind, the market took 18months to fall to the bottom.  It took 18 months for it to peak again.  Do you see it as a crisis or an opportunity?  How many investor made money from this crisis?  Only the ones that see the opportunity.  The rest was frozen with fear and wait until too late, the market has recovered.  The top guns, 20% of investors are now salivating.  Among them is Mr. Warren Buffet.  The balance 80% has fear all written over their face.  Are you the 20% taking this as an opportunity or 80% stricken by fear?

Is this the best time to start investing?  I don’t know but what I do know is this is the right time.  Using dollar cost averaging, I have started the ball rolling.  Investing into Unit Trust funds and selected blue chips.  Do not be someone that “only sees things happen or worst still do not know what happened”.  We know this story by hard now.

Semi-retirement is no life of leisure
Sacrifices part of the price to quit working

Jonathan Chevreau, Financial Post
Published: Saturday, September 06, 2008

Having spent the month of August on book leave, a self-published book sitting on my desk on my return got my attention. Are You Ready for Semi-Retirement? is by Ian Taylor, who semi-retired in 1988 at the age of 38, when he got a handsome double-severance package from the federal government and vowed never to return to fulltime employment. He had been the chief media spokesperson for Pearson International Airport in Toronto.

Taylor concedes such generous packages are rare today, but nonetheless believes Baby Boomers can embrace semiretirement with financial assets of as little as $500,000, provided they have mortgage-free homes.

Born in 1950, Taylor is at the vanguard of semi-retiring Baby Boomers. Indeed, Boomer trends and semi-retirement are the main topics for his public speaking career that complements his self-publishing ventures. The book, his fourth, bears the subtitle A Boomer’s Guide to Success, Freedom and Adventure. Practicing what he preaches, Taylor says he “accepts engagements when he’s not vacationing at a villa, undergoing an adventure or writing a new book.”

Currently, Taylor runs a media training business from his home in Hamilton, Ont. Revealing a knack for marketing, he inscribed my personal review copy with the words “Get ready. Be frugal. Have fun.”

I’m working on it! But like most North American Boomers, semi-retirement is going to require some serious advance planning. Citing a pivotal 2005 study by Merrill Lynch, Taylor says 69% of Canadian Baby Boomers and 75% of American Baby Boomers intend to keep working and earning in retirement, either because they can’t afford to stop altogether or don’t want to.

“The vast majority will move into some form of semiretirement,” Taylor said in an interview this week. “They will invent semi-retirement.”

The key word is “semi,” which means semi-retirement is one-half of a lifestyle that also includes “semi-work,” or what Taylor dubs the “semi-career.” Typically, this is a part-time business run out of one’s home with all the tax advantages that go with self-employment. Taylor identifies seven “hot” semi-careers including: consulting, creative communications, full-time investing, real estate management, home-care services, online niche businesses and a concept he terms the “gift-driven dream job.” He also describes some not-so-hot jobs such, as McJobs, franchising and various get-rich-quick schemes that are better avoided.

Merrill Lynch found Boomers reject either a life of fulltime leisure or one of full-time work. Taylor says: “It’s not all about money; it’s about happiness and freedom and independence, which money can’t buy.”

After talking to many middle managers about retirement at his seminars and training courses, Taylor says semi-retirement “is the realization of your success, the achievement of freedom and the opportunity for adventure.” He cites his older brother Don, who retired from teaching at 58, as now one of the “busiest and most successful semi-retired people I know,” with income generated from eight different sources.

But people like that are still rare. Taylor devotes an entire chapter to the fact that few are ready even to semi-retire, let alone fully retire. If you’re not prepared to rebalance your time, talents and treasures, “you’re not ready for semi-retirement,” Taylor writes. He estimates only 10% to 15% of Boomers are financially successful enough that they could easily semi-retire before age 65. The rest will have to be prepared to make big changes if they wish to change gears.

One of the qualities successful semi-retirees will have to cultivate is frugality. Boomers will have to realize that the short luxury vacations they took when they grabbed a week or two from full-time employment are out, while long-stay vacations with light housekeeping are in. They’ll have to avoid travelling at peak seasons like March Break, choosing the more affordable off-season. Shared cars are in and commuting is out. In the realm of personal finances, being in debt is out and being an investor is in.

Two years ago, Taylor and his same-sex partner sold their Toronto home to rent a penthouse apartment in Hamilton, Ont. They also maintain a summer house in Turkey Point, Ont., and are considering buying a condo in Hamilton and/or a home in Florida.

The book is a quick read, with a few leading questions to stimulate readers to start reinventing their own semiretirement.

There are some good news among all the bad. If you are a long term investor this is good news but if you are a short term speculator, you will still need to try to catch the short term up and down fluctuations in the share market. This piece of news is from Reuters.

Wednesday August 20, 2:38 am ET
By Kevin Plumberg HONG KONG (Reuters) - Most Asian stock markets edged higher on Wednesday, rebounding from a two-year low as Chinese shares surged on hopes for policies from Beijing to jumpstart growth, though many analysts said it was a long shot.

The dollar struggled as crude oil crept above $115 a barrel and gold prices edged higher, taking some of the steam out of the U.S. currency’s recent surge to a seven-month high.

World stock markets slid to the lowest since September 2006 on Tuesday, with investors increasingly skeptical about earnings expectations for 2009 given the mixed results so far in 2008 and constant reminders about instability in the financial sector.

However, most Asian indexes turned higher as cheap valuations proved irresistible, especially with markets rife with chatter about fiscal stimulus in China.

“Bargain hunters have returned to the market on talks that a rescue package is on the way,” said Francis Lun, general manager from Fulbright Securities in Hong Kong. “We are all waiting for a miracle,” Lun added.

Hong Kong’s Hang Seng index (HKSE:^HSI - News) rose 1.9 percent, after closing at a one-year low on Tuesday, with shares of China Mobile (HKSE:0941.HK - News) providing the biggest boost.

Shares of Asia’s largest wireless carrier, up 2 percent, hit a one-year low before the rally swept through the region.

The Shanghai composite index (^SSEC - News) surged 6 percent after touching a 20-month low. The index is watched by many global investors as a gauge of risk taking and a leading indicator for the world’s fastest growing economy.