PF 28/8/13

Reflect

Awesome presentations went really well last class. "Car vs Taxi", "University Opportunity Cost",... They were great. The presentations were really in details. But some of them were really hard to understand. There were a lots numbers in one slide. I think they should divide them into two or more than a slide or put bullet points, highlight the numbers,...
My presentation didn't go quite good. I should find the amount of of money through each year instead of just only a year. I was really nervous. And my goal is to do a better job in the next presentation. I really want to get at least a B.

US Market vs China Market

1993 -> 2013
What is the overall gain?
$ 10,000 (1993) -> $50,000  (value today)
($50,000 - $10,000)/ $10,000 = 400% gain
(Future value) - ( Current Value) / (past value)

It is very difficult to predict the stock market. unpredictable the markets are.
more selling than buying. the market goes down
deal with their emos.


1993 - 2013

• USA
• Stock market: Stock + 455%
• CHINA
• Economic growth: Chinese economic growth destroy the USA's growth
• Stock market: Stock + 1%
• http://andrewhallam.com/2013/08/can-experts-predict-the-stock-markets-direction/

People always think that the better economic growth, the better the stock market.

To predict a stock market, investors own a piece of each market.

CXO Advisory : they track their prediction. they wanna see how accurate their prediction are.
They jot down what their predicted. After many years, to see if their prediction is true. They are only 46.8% accurate. Even if a normal person flip a coin and predict the market. It would be more accurate than the CXO Advisory.

By 

LARRY SWEDROE / 

MONEYWATCH/ September 6, 2012, 7:00 AM

China vs U.S.: Economy vs stock market

AP

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(MoneyWatch) There's an old saying that it isn't what a man doesn't know that gets him into trouble, but what he knows for sure that isn't true. This certainly applies to the belief that you should favor investing in countries that will have the fastest economic growth. Unfortunately, the historical evidence shows that not only is this wrong, but you might miss out on better returns.

The financial media is regularly feeding investors stories about the great growth prospects in some country, with China typically leading the headlines. Even Burton Malkiel, author of A Random Walk Down Wall Street, has beenpromoting the China story.

The first half of this year provided us with a perfect example. In the first quarter China's GDP grew 8.1 percent. In the second quarter it grew 7.6 percent. The figures for the U.S. economy were just 2.0 percent and 1.7 percent, respectively. Yet through August 31, based on the change in its net asset value (NAV) the SPDR S&P China ETF (GXC) returned 0.7 percent, while Vanguard's 500 Index fund (VFINX) returned 13.4 percent.

Let's take a look now at the data back to 2008. In the four years from 2008 through 2011, China's economy didn't skip a beat. China's GDP grew 9.6 percent in 2008, 9.2 percent in 2009, 10.4 percent in 2010 and 9.1 percent in 2011. During this period, the U.S. not only suffered through a recession, but the ensuing recovery was the weakest in the post-war era. The rate of growth in our GDP was -0.4 percent in 2008, -3.5 percent in 2009, 3.0 percent in 2010 and 1.7 percent in 2011.

Given these results, most investors would be pretty confident that an investment in Chinese stocks would far outperform an investment in U.S. stocks. However, the data tells another story. Based on the changes in the NAV, GXC returned -50.7 percent in 2008, 65.5 percent in 2009, 6.7 percent in 2010 and -17.2 percent in 2011. Each dollar invested in GXC at the start of 2008, would have been worth less than 73 cents by the end of August 2012. For the same period, VFINX returned -37.0 percent, 26.5 percent, 14.9 percent, and 2.0 percent, respectively. A dollar invested in VFINX would have been worth about $1.06 -- 41 percent more than a similar investment in GXC.

The rate of growth of a country's economy doesn't determine investment returns. What determines the rate of return are valuations and whether the market's expectations about future growth are matched:

• If valuations such as price-to-earnings ratios are low, that means investors are demanding large risk premiums and expected returns are high. The reverse is true if valuations are high.
• If the market receives positive surprises (the news is better than expected), the risk premiums investors demand will fall and prices will rise. The reverse is true when the market receives negative surprises.

In the case of China, not only were their valuations much higher (reflecting the expectations for rapid growth), but the growth of the economy was less than what the market expected. In the case of the U.S., our economy weathered the financial crisis better than expected. In other words, surprises can determine a large percentage of returns. And by definition, surprises aren't forecastable.

It's important to note that the same growth story that applies to countries also applies to companies. Keep this tale in mind the next time you're tempted to invest in a country because of some forecast of rapid growth in its economy or some company because of some forecast of rapid growth in its earnings.

© 2012 CBS Interactive Inc.. All Rights Reserved.

Reflect: The article shows that country's economic growth doesn't determine the investment returns. So people shouldn't predict the stock market by the economic's growth. Example by the China stock market. 

"Yet through August 31, based on the change in its net asset value (NAV) the SPDR S&P China ETF (GXC) returned 0.7 percent, while Vanguard's 500 Index fund (VFINX) returned 13.4 percent."

"Given these results, most investors would be pretty confident that an investment in Chinese stocks would far outperform an investment in U.S. stocks. However, the data tells another story. Based on the changes in the NAV, GXC returned -50.7 percent in 2008, 65.5 percent in 2009, 6.7 percent in 2010 and -17.2 percent in 2011. Each dollar invested in GXC at the start of 2008, would have been worth less than 73 cents by the end of August 2012. For the same period, VFINX returned -37.0 percent, 26.5 percent, 14.9 percent, and 2.0 percent, respectively. A dollar invested in VFINX would have been worth about $1.06 -- 41 percent more than a similar investment in GXC."

that would be a shock for investors who strongly believe in china stock market. Through out the years. the result proved that China stock market is far above US stock market years ago but it isn't the same by now. US market is way a lot better than China Stock Market. 

Personal Finance 26/8/13

Personal Finance A1 26/8/13

At first, I thought this project would be really complicated but as some people in  my class present it, it doesn't seems as hard as I thought it was. To be honest, I knew nothing about finance. And this project would be my first project ever in SAS. The presentations on Monday was really interesting. They are related to everyone, eg: university opportunity cost, Mr. hoes vs Subway,... And now at least I had some idea on how the project should look like. My presentation will be based on a real scenario. It will be Renting Cheap Condominium vs Expensive Condominium

"GOLDEN LINES" part 2 Death Of A Salesman

“You’re doing wonderful, dear” Linda to Willy

“Well, next week you’ll do better” Linda to Willy

“Biff, dear, if you don’t have any felling for him, then you don’t have any feeling for me” Linda to Biff

“I won’t have anyone making him feel blue” Linda to Biff

In the beginning of the play, the author clearly depicts the relationship between Linda and Willy. Linda acts differently with her husband, Willy and her sons, Biff and Happy. By showing her unconditional love toward Willy and how much she cares about him. Linda always shows her patience to Willy’s problem.  Even though Willy gets angry easily, he often scolds her for no reason; Linda always being positive and help Willy to come down. “You’re doing wonderful, dear”, “Well, next week you’ll do better.” Even though Willy is making no money being a salesman, Linda still keep on motivate and encourage him to continue. In the other hand, instead of being calm and positive, Linda shows her confidence, she can be very stern, and she even raises her voice with Biff and Happy for insulting their father. Linda even says “Biff, dear, if you don’t have any feeling for him, then you don’t have any feeling for me” and “He’s the dearest man in the world for me, and I won’t have anyone making him feel blue.” She loves him with all her soul. She’s defending that anything happen to Willy will matter to her. Linda is always the one care for Willy the most. Willy is appreciate and grateful for her effort by saying “You’re my foundation and my support, Linda”

"GOLDEN LINE" Death Of A Salesman (Act 2)

"I put thirty-four years into this firm." "You can't eat the orange and throw the peel away - man is not a piece of fruit!" Act 2. Pg. 61, 62 (Willy)

Willy has worked for Howard's company all his life. He's turning old and he can't compete with other salesman. Howard is casting him off because he doesn't make lots of money. After hearing Linda's speech early in the morning. Willy heads out to meet Howard. He has got some personality in him. He's arguing with his employer that there must a responsible since he gave his thirty-four years working for the company and now the company have to take care of him and give him a stand in work. He feels that he should have earn some awards and that they can't just leave him after years he has worked for them. Willy has even recall his relationship between him and Howard's father but it gets him nowhere. 

"GOLDEN LINE" Death Of A Salesman (Act 1)

"The man knew what he wanted and went out and got it! Walked into a jungle and comes out, the age of twenty-one, and he's rich!The world is an oyster, but you don't crack it open on a mattress!""    Act I

I chose that quote to be my golden line because it is repeated so many times. Willy is the one who use the line first, but Ben repeats it lots of time throughout the play. First, it clearly shows that Ben is always appear in Willy's head, Ben is only the figment of Willy's imagination. Willy has always want to be success, to be rich. He's a talented carpenter but he believes salesman make most money. He wants his sons to become salesman just like him. But things don't go his way. Willy said that the world is like an oyster, there's a lot of opportunities, as an oyster contains a pearl. But it's hard to get it, we can't accomplish anything by sleeping, being lazy. 

Spend like You Want To Grow Rich

In the first chapter of Millionaire Teacher, teaches us the first rule of wealth which is “Spend Like You Want To Grow Rich”. Beside that, Mr Andrew Hallam explains to us what his definition of wealth is.  ARE THINGS ALWAYS WHAT THEY APPEAR TO BE? DOES ONE LOOK RICH REALLY RICH?

How would he define wealth?

For people to be considered wealthy, they should meet the following two criteria:

1. They should have enough money to never have to work again, if that’s their choice.
2. They should have investments, a pension, or a trust fund that can provide them twice the level of their country’s median household income over a lifetime.

“Just because someone collects a large paycheck, drove a Jaguar and lives like Persian royalty doesn’t necessarily mean he or she is rich.”

To be honest, i really like luxurious cars, sport cars, expensive cars,...eg: Ferrari, Lamborghini, Subaru,... I’ve always wanted and want to own one of those. But after i read the first chapter of Millionaire Teacher, my mind is totally changed. I’ve learn that looking wealthy isn’t being wealthy.

Family connection: In the first 17 years of my life, i lived in Vietnam, Malaysia and Singapore. I moved to Malaysia 3 years ago. And that was the ever first time my family actually bought a car. We owned a Toyota Vios 1.5G. I was really upset when my parents decided to buy that car. I expected more than just a Vios. I thought that it would be a shame when my dad ride me school with that car. I was really upset so my mom came to me and explained to me. She told me that making money is not easy and when we had it we have to appreciate use it wisely. We are not poor but we ain’t rich. My mom’s company supported my family for buying cars but we had to pay them back monthly. I asked her “Since your company is helping us in paying for the cars, why don’t you choose a nicer car?”. “Buying car is a waste but since we need transport to live here so the company give us the opportunity. Car uses up lots of money, gas, oil, maintenance,...” And she explained to me that she came to Malaysia to find her a better opportunity and have me a better education as well as my little sister. Instead of spending all the money to the car, we could use them to invest in something else usefull.

Active Managed Funds vs Passively Managed Funds

• Passively Managed Funds (Index Funds):

• Is a collection of stocks.
• Like a S&P 500, which can buy.
• No fund manager trades stocks looking for opportunities.

• Active Managed Funds:

Active management: the use human element, a manager or a team of managers, to active manage the funds' portfolio.

     Example of Active Managed Funds:    

Lucas works for "Fidelity"

• Lucas fund.
• Lucas is a fund manager and he buys and sells stocks with a large pool of money. 
• Retail investors can buy an interest in the Lucas Fund
• Investor profits or losses are indirect proportion to how the Lucas fund performs.
• Lucas watches the economy global interest rates and he research stocks to maximize profits.
  
  
  
  
  3 specific advantages index funds have over actively managed funds, which they call Passive Portfolio Multipliers (PPM):
  1. Portfolio advantage: Index funds have a higher probability of outperforming actively managed funds when combined together in a portfolio.
  2. Time advantage: The probability of index fund portfolio outperformance increased when the time period was extended from 5 years to 15 years.
  3. Active manager diversification disadvantage: The probability of index fund portfolio outperformance increased when two or more actively managed funds were held in each asset class.
  
  
  Read more: http://www.businessinsider.com/index-funds-beat-actively-managed-funds-2013-6#ixzz2cQYrcBKW
  
  
  
  
  
  
  
  

The single greatest thing about America is...

What would you say is undoubtedly the single greatest thing about America?

Undoubtedly, i would say the single greatest thing about America is "Fast Food". It is quick, convenient and usually inexpensive. McDonald's, Burger King, KFC, ... they are all from American and well known. American fast food is all over the world. They taste good but it isn't considered healthy, contain a lot of fats, sugar and salt. The most common places to find fast food are the convenience stores, drive-through restaurants, ... It is so popular because you can get a full meal just less than 5 dollars. fast food will never be forgotten.