The 3 stages of Bull & Bear

First time here? You may want to read more about Rich Snail or even receive regular updates via a RSS feed reader or by email. Good read!

Busy weeks are following busy weeks lately. I just finished catching up with some of the reading I saved over the past few weeks & came across this “acorn” of wisdom on bull & bear markets. It is an extract from Howard Marks’ most recent memo to his Oaktree investors on March 18, 2008.

Fortunately, one of the most valuable lessons of my career came in the early 1970s, when I learned about the three stages of a bull market:

  1. When a few forward-looking people begin to believe things will get better,
  2. When most investors realize improvement is actually underway, and
  3. When everyone’s sure things will get better forever.

To aid in your consideration of the future, I’ve formulated the converse of the above, the three stages of a bear market:

  1. When just a few prudent investors recognize that, despite the prevailing bullishness, things won’t always be rosy
  2. When most investors recognize things are deteriorating
  3. When everyone’s convinced things can only get worse

We surely are not in a bull market right now. If I were to guess where we are, I would say in the second phase of a bearish market. Which in my view is good - time to start searching for cheap but fundamentally sound markets !

Camels to Answer Rising Energy Prices

With oil prices hitting new high every day, many Americans are starting to re-consider their SUV, Hummers, and other oil-thirsty cars. Some Indians find another way to solve this problem. The Financial Times has a very interesting article on how the current rising food and energy prices give a second life to traditional transportation “vehicles”.

“It’s excellent for the camel population if the price of oil continues to go up because demand for camels will also go up,” says Ilse Köhler-Rollefson of the League for Pastoral Peoples and Endogenous Livestock Development. “Two years ago, a camel cost little more than a goat, which is nothing. The price has since trebled.”…

Market prices for these “ships of the desert”, which crashed with the growing affordability of motorised transport, are rising again as oil prices soar. A sturdy male with a life expectancy of 60-80 years now fetches up to Rs40,000 ($973), compared to Rs5,000-Rs10,000 three years ago, according to Hanuwant Singh of the Lokhit Pashu-Palak Sansthan, a non-profit welfare organisation for livestock keepers. Entry-level tractors cost around $4,000.

“It’s very good news,” says Mr Singh, whose organisation aims to dispel the image of backwardness associated with camel ownership and tries to promote higher economic returns for breeders. “We had started to see camels, even female ones, being slaughtered for their meat. Now they are replacing the tractor again.”

Funny how things turn out for our spitting friends. Instead of being eaten because of rising food prices, they are now seen as a viable alternative to tractors - despite rising food prices.

Stay on top of your expenses

Pfiou - what a mess ! We just spend an hour yesterday tracking our expenses for the current month. We enjoyed some EPF withdrawal which directly lowered our mortgage principal - it is great, but we did not anticipate the additional work we would have to track it! It kind of messed up all of our calculation. It took us 30mn to get a hand on things. We ended up revamping our excel file - the new one is way better! - and sipping a few beers to help our thinking.

What is important here is that we now are back on tarck. We know how much we spent last month, and can better prepare ourselves. Tracking ones expenses can be difficult; especially when you start doing it. What you need is a few easy tricks and some dedication. You’ll find hereunder a few I found useful:

  • Keep all your receipts
  • Take a piece of paper and write the figure down when you forget or lost the receipt
  • Update your tracking file every 2 days – it only take 5 minutes
  • Keep your excel file with you all the time - a USB key is the idea companion
  • Print your budget and stick it somewhere visible (fridge, mirror, TV…)
  • Do it with your spouse / fiancée / GF / BF – doing it together will help you stay on track

Got any other? Please share :-)

“The Whistle” - Benjamin Franklin

No need to introduce Benjamin Franklin here I guess. He simply was one of the greatest statesman ever. But he was more than a statesman, diplomat, scientist or US of A founding father. He was a great author and satirist. One of his most famous piece is about his childhood whistle and the tough lesson of learning when to quit paying too much for something. The Maestro:

I received my dear friend’s two letters, one for Wednesday and one for Saturday. This is again Wednesday. I do not deserve one for to-day, because I have not answered the former. But, indolent as I am, and averse to writing, the fear of having no more of your pleasing epistles, if I do not contribute to the correspondence, obliges me to take up my pen; and as Mr. B. has kindly sent me word that he sets out to-morrow to see you, instead of spending this Wednesday evening, as I have done its namesakes, in your delightful company, I sit down to spend it in thinking of you, in writing to you, and in reading over and over again your letters.

I am charmed with your description of Paradise, and with your plan of living there; and I approve much of your conclusion, that, in the meantime, we should draw all the good we can from this world. In my opinion we might all draw more good from it than we do, and suffer less evil, if we would take care not to give too much for whistles. For to me it seems that most of the unhappy people we meet with are become so by neglect of that caution.

You ask what I mean? You love stories, and will excuse my telling one of myself.

When I was a child of seven years old, my friends, on a holiday, filled my pocket with coppers. I went directly to a shop where they sold toys for children; and being charmed with the sound of a whistle, that I met by the way in the hands of another boy, I voluntarily offered and gave all my money for one. I then came home, and went whistling all over the house, much pleased with my whistle, but disturbing all the family. My brothers, and sisters, and cousins, understanding the bargain I had made, told me I had given four times as much for it as it was worth; put me in mind what good things I might have bought with the rest of the money; and laughed at me so much for my folly, that I cried with vexation; and the reflection gave me more chagrin than the whistle gave me pleasure.

This, however, was afterwards of use to me, the impression continuing on my mind; so that often, when I was tempted to buy some unnecessary thing, I said to myself, Don’t give too much for the whistle; and I saved my money.

As I grew up, came into the world, and observed the actions of men, I thought I met with many, very many, who gave too much for the whistle.

When I saw one too ambitious of court favor, sacrificing his time in attendance on levees, his repose, his liberty, his virtue, and perhaps his friends, to attain it, I have said to myself, This man gives too much for his whistle.

When I saw another fond of popularity, constantly employing himself in political bustles, neglecting his own affairs, and ruining them by that neglect, “He pays, indeed,” said I, “too much for his whistle.”

If I knew a miser, who gave up every kind of comfortable living, all the pleasure of doing good to others, all the esteem of his fellow-citizens, and the joys of benevolent friendship, for the sake of accumulating wealth, “Poor man,” said I, “you pay too much for your whistle.”

When I met with a man of pleasure, sacrificing every laudable improvement of the mind, or of his fortune, to mere corporeal sensations, and ruining his health in their pursuit, “Mistaken man,” said I, “you are providing pain for yourself, instead of pleasure; you give too much for your whistle.”

If I see one fond of appearance, or fine clothes, fine houses, fine furniture, fine equipages, all above his fortune, for which he contracts debts, and ends his career in a prison, “Alas!” say I, “he has paid dear, very dear, for his whistle.”

When I see a beautiful sweet-tempered girl married to an ill-natured brute of a husband, “What a pity,” say I, “that she should pay so much for a whistle!”

In short, I conceive that great part of the miseries of mankind are brought upon them by the false estimates they have made of the value of things, and by their giving too much for their whistles.

Yet I ought to have charity for these unhappy people, when I consider that, with all this wisdom of which I am boasting, there are certain things in the world so tempting, for example, the apples of King John, which happily are not to be bought; for if they were put to sale by auction, I might very easily be led to ruin myself in the purchase, and find that I had once more given too much for the whistle.

Adieu, my dear friend, and believe me ever yours very sincerely and with unalterable affection.

How To Select Your Financial Adviser?

Everyday I meet people who want get their money to work for them. Most of them realize they need help and they are looking for the right adviser to guide them. They are looking for someone who will listen, understand their needs and objectives, and help them achieve their dreams. Sometimes the dreams are reasonable; other time they are quite grand. What is common is the fear of making the wrong decision - especially when it comes to choosing an adivser. How should one go about selecting his adviser?

A little market research

It all start here. It certainly is not the fun part, but you need to go out there and start checking the current market - selecting the good apples from the bad ones. I’m currently working in Malaysia. I can say that the Malaysian offshore industry has a crap reputation. There are many many advisers out there who are in for a quick buck. Not all apples are rotten though - if you look carefully and ask around you can find some good advisers who will give sound advice and work with you over the long run. To find such a gem you’ll need to (A) Be Lucky - (B) Do the following

  • Ask around and get recommendations - This is the single best piece of advice you will find in this article. The best recommendations always comes from your friends & trusted ones. It will help you narrow things down quite a bit.
  • Meet a few advisers before making your decision - by sitting down with more than one you will tremendously improve your chances of finding a good adivser. This also is a good learning process.
  • Ask questions and check their market knowledge - you’ve got many blogs around with very sound financial advices. By taking an hour or two browsing them you should be able to get your basics up to standard and start asking questions.
  • Never sign straight off. The hard-closing ones usually are in for a quick buck. They tend to listen very little & just talk about how much money their method made them (usually on their clients’ back).
  • Do a quick search online to check if the adviser you met has some kind of track record. Most of them won’t - but it is worth a try.

A personal relationship

At the end of the day, investing is all about the strategy you set in motion. A good adviser will help you define your strategy by listening to your goals and objectives, helping and guiding you through this process, and then work his magic. You will need to trust him/her with very personal stuff - sometimes things you don’t even tell your loved one. It is a very special and personal relationship - so take a bit of time to select the right financial partner !

The Oracle of Omaha’s on the American Economy

When markets are tumbling, people usually turns to Oracles. Some will be optimistic, some will be pessimistic, and Warren Buffett will be down to earth. His “Oracle of Omaha’s” nickname comes from his long term success, witty comments and letters, and he lives in Omaha Nebraska.

Mr Buffet gave us another golden nugget of wisdom in a recent Fortune Magazine article What Warren thinks….

The American economy is going to do fine. But it won’t do fine every year and every week and every month. I mean, if you don’t believe that, forget about buying stocks anyway. But it stands to reason. I mean, we get more productive every year, you know. It’s a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market.

Next Page »