Since this blog title is partly personal, partly money, maybe I’ll write a bit more on the personal side for this post. So here goes.

We went to have some fun time last week. Took time off work to see some hot air balloons which is rare over here. The half day off was really enjoyable. I did not have so much fun in a long time. I got to practice my photographic skills, (which were quite rusty), ride in a hot air balloon and also a trike for the the first time in my life.

Photographing hot air balloons is also new to me since, like I said, we don’t have them much over here. Even the event was limited due to proximity to our airport. Gosh, I wonder how on earth the organizers planned the event. Granted there are some nice background to photograph the hot air balloons.

Heck, there was even a pair of Levi’s that got inflated.

The balloon ride was tethered, not go with the wind type of ride. Perhaps one of these days, else where, we might just try that. The best best part of the day was riding a trike. If you don’t know what that is, it is a tricycle with 2 wheels up front and you ride it in a reclining position much like a sports car. The trikes can go pretty fast and cycling them is quite different from a normal upright bicycle. After riding the trike, I came back and look up some information about such tricycles online. This is what I found and here we can draw some lessons from history.

Reclining bikes also known as recumbent or “bents” like the one above (those with 2 wheels) have been around in the late 18th century. The story of reclined bicycles is as follows

In 1933, Francois Faure, a Frenchman, rode a recumbent 49.99 km in an hour, a new record. The day of Faure’s hour attempt the other racers jeered at him and his bike. Stand up and pedal like a man they joked, lying down will make you sleepy. Their laughter died as he out paced two professional riders. Faure went on to beat the world hour record, going 45.055 km in one hour. In 1934 the UCI (Union Cyclist International) ruled that the Velocar was not a bicycle and could not be raced in UCI events of for UCI records.

Faure’s record was relegated to a foot note in cycling history with the stroke of their bureaucratic pen. The recumbent was faster, and they didn’t want to have to compete with it. They have not relented to this day. In 1938 Marcel Berthet rode a streamlined velocar 50.5 km/hour, another new record. Francesco Moser surpassed this mark on a wedgie (normal upright bicycle). Moser rode 51.1 km/hour, but not till 1984, 46 years later!

Till today, reclining bikes are still just a tiny niche even though they are faster, more comfortable, allows you to put more power to the wheel and generally much more fun to ride. They are more expensive due to the fact that they are usually larger, need more material to build and production never really reach mass production levels.

What has this got to do with money and progress? Well, the story here goes to show that just because some things are the norm does not mean they are better. Society accepts certain ideas and very few questions them. The same thing goes for ideas relating to money.

For instance, I recently looked at some mutual fund returns over 5 years. Since the market have become a bit more stable and the recovery looks good, it seems reasonable to look at the returns. Over 5 years, some of the better funds achieve in the region of 8 to a little less than 10% return a year. Most funds showed lower returns. Now while the returns are commendable, taking into account inflation, the figures are not that interesting anymore. Fixed deposits would have shown much lower figures and yet, a large portion of people still keep money in FD (where I live anyway). Property prices have jumped quite a bit and here we have largely escaped the property bubble like that in the US.

But to change what has been acceptable and safe might not be easy.

So we bought tickets for the dinner, which by my standards are for the well heeled to say the least. It was a new experience for us. The event was attended by some VIPs (perhaps 10 to 20 percent of the crowd). How I knew? There was only a few of them bidding during the auction.

What I did not expect during the dinner was raffle ticket sales as well as an auction, since we already paid a handsome chunk of change to eat. I have a sneaky suspicion the event was organized by pro’s for this kind of thing. I had to say there was no hardcore pressure of any kind for us to buy anything and no, our table did not once participate in the auction.

Anyway, what I learned during the event.

Tip 1. If you want to support any cause, calculate what you can and cannot afford and stick with it. While you may feel bad if you cannot contribute, I reckon it is better than to pay the price financially and emotionally later on.

Tip 2. While you might feel you have to buy something, in this case raffle tickets, you can always spread the price out among friends instead of bearing the whole bill. This is what we did and somewhat got us off the hook for not buying any at all

Tip 3. If all else fails and you find it hard to say no, run to the gents or the ladies. No, we did not do this but now that I thought of it, I reckon I share it here.

Tip 4. If you feel pressure is over the edge, look at Tip 3 and maybe next time, you might want to reconsider supporting the cause. If you know the person well enough, then some feedback is for them will do them good too. No point raising funds now and losing the important people, the backers right.

Tips 5. Just send them a check. Then you don’t need most of the tips above.

Hope these tips on how to survive a fund raising event help you manage your funds better.

pic credit

For your information, the average return of a fund is taken from the begining of a period (usually the 1 Jan) to the end of the period (usually 31 Dec). This assume no further buying or selling during the period. Investor returns on the other hand are your real life returns that you actually receive.

See the diagram below. Even though the fund below gave say 10% return for the year (from Jan to Dec), it would have been very different if you invested at Point 1 vs Point 2.

From a study conducted by Dalbar Inc. from 1985 to 2004, they found that

the average mutual fund investor achieved is a 3.7% annualized return while the S&P500 achieved a return of 11.9% and inflation averaged 3%.

According to the study,

the reason for the average mutual fund investor’s low return was that these investors invested more in “Hot Performing” mutual funds at the end of bull markets and then became frightened and took money out of the market toward the end of bear markets.

In other words, the investors bought high and sold low; buying when prices are already high, saw the high returns, got tempted by what they see and invested. Shortly after, when markets are on a downward trend, they sold because of fear and not wanting to lose more, when they should be holding.

Financial planning is more of being a smart investor rather than chasing investments!

A tipping point is where “momentum for change becomes unstoppable” according to Malcolm Gladwell, who wrote a book titled “The Tipping Point: How Little Things Can Make a Big Difference”.

Just 2 weeks ago, my sis got herself a new car and I got myself a new mobile phone. She has been putting off getting the car and I have been putting off getting the phone. For me it was a small thing. I just wanted my last phone to make it to 3 full years of use before relegating it to the junk bin. For my sis, buying a new car mean a small chunk of money down plus many months to pay off the loan.

But, the old banger that she was using is reaching past useful life both economically and reliability. You would never know when it need emergency resuscitation on the roadside. Being an old car means repairs and fuel economy suffers and so too the wallet. With the new car, the money she spends on fuel drop nearly a third! After factoring in the repairs and time lost waiting to be rescued when the car breaks down, the extra money she spend each month is not a whole lot more. Which brings me to the tipping point.

In anything you spend money on, eventually it will reach a point where it no longer is financially feasible to hang on to it. It makes sense to pay attention to the tipping point so that you know when to get rid of something.

How about my mobile phone? Similar thing but instead of money, some of the keys were getting stuck, making me frustrated to try to get the keys working sometimes. So getting a new phone increase my level of enjoyment. So too the new car for my sis. There is what money is for after all, isn’t it? To solve problems, make life more pleasant, to achieve an outcome, to do our bidding.

Enjoy it at the appropriate time.

By the way, the book tipping point is here The Tipping Point: How Little Things Can Make a Big Difference

First, let me say, I’ve seen and done quite a lot of all these visualization for success, positive thinking, positive reinforcement whatever. Being in the sales line, we become rich targets for people wanting a piece of our cash. For many years, I believed a lot of this crap. Many colleagues who succeeded swear by the stuff the trainers or so call gurus dish out.

In hindsight, I realized they just worked a lot harder than the less successful ones. I know a couple who worked, and I quote we take 1 day off a month or in 2 months. Other less aggressive colleagues are putting in at least 60 or 70 hours plus weeks. And they did well. Assuming for the moment, we define success being earning more income.

If you have not heard of the Law of Attraction, basically it is summed up as think of something hard enough, long enough, believe that your mind attracts what it thinks about and it becomes true.

The so called Law of Attraction should not be called a law in the first place as there is not concrete proof that it works 100% of the time. Calling is a principle is okay, but a law? Let’s not argue about definition here but off course the word law has a air of authority. However this law, I think, is just a corruption of a principal of sowing and reaping.

You reap what you sow. You sow a mustard seed, you should get a mustard tree but the seed might not grow. Sow enough of seeds, then you will get a tree. No guarantees but you won’t get an apple tree when you sow a mustard see.

Now, there is quite a lot of information arguing both sides of the Law of Attraction. Google for it and you have millions of pages for and against it.What I’d like to know is what do you think about the Law Of Attraction? Better yet, if you have been there, done that. I’d like to hear about it.

I’ll post my thought a bit later.

While there is bad news all over about the financial crisis, there is something to learn from it all. Although this mess is so big that 3 men in black i.e. Henry Paulson, Ben Bernanke and Timothy Geithner have more than their hands full and sleepless night putting out fire across the financial firestorm, the lessons I think are quite simple.

Don’t be Greedy

It was greed that spark this firestorm in the first place. Greed by those on Wall Street, including financial giants like Lehman Brothers, AIG and the similar companies. The greed was relatively easy money on the returns of their investment.

Management of the above companies were also greedy since they are rewarded with bonuses and stock options when the company’s bottom line met or exceeded. What better way than to jump onto a band wagon of easy returns.

Don’t Over Leverage

The other thing is over leveraging their financial positions. Leverage is a double edge sword. If you are leveraged 10 to 1, when the markets goes up 1%, you make 10%. When the markets go down 1%, you lose 10%.

What happens when greed and over leveraging hits you at the wrong time? You have to sell! In the case of financial institution like AIG, they are forced to sell their most valuable assets. For an individual, you might have to liquidate you home, your car, anything that is worth something.

You have to pay back what you borrow. There is no two ways about it. In a sense, this type of investing is no different from gambling. Anyway, that is another post for another time. For now, learn from the financial crisis. While the present crisis is far from over, you can be sure that it will happen again!

In my last post, I mentioned I sort of tracked markets around to get a feel of what’s happening. Off course, I did a fair share of reading to make sense of the financial fiasco.

I say fiasco because as usual, a relatively small group of people in financial and investment circles managed to turn the world’s financial system topsy turvy.

In case you want to understand more what happened, I suggest you take a look at this article on Time magazine. I spent a good amount of time to read and re-read the article to understand. I

In case you don’t understand the article, that’s okay because most people don’t as well.

Warren Buffett, the nation’s most successful investor, back in 2003 called these derivatives — which it turned out almost no one understood — “weapons of financial mass destruction.

Having taken a financial planning level class on investment, I do understand a bit about derivatives, but the level these people do it coming out with all sorts of fancy pants names is altogether a different level. Check this out

Would you know how to rate a collateralized loan obligation? Or commercial-mortgage-backed securities?

I know of people who invested in financial instruments they know nothing about and bought it just because the returns are good. Don’t make the same mistake. Stick to what you know. Something safe and boring is better than losing your retirement money. You can read the full article here.

I’m no market analyst but I was watching markets around the world. The downtrend all around raise flag in my head. Anyway, looking at the way things are going, this is a period of uncertainty still. Many investors are wary of how big a rescue plan need to be to make sure the market’s don’t implode.

Fast forward to today, oil prices drop a little and everyone who drives is looking forward to a drop in gas prices. I have to admit, I’m one of those, optimistic that gas prices will go back to something more normal.

Then, I stumbled on this this article in CNN Money.

The article mentions Matt Simmons who wrote the book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy

Matt Simmons is an investment banker with his own boutique bank, Simmons & Co. In the book, Simmons offers a detailed description of the relationship between Saudi Arabia and the U.S and our long-standing dependence upon Saudi oil.

He also highlights many discrepancies between Saudi Arabia’s actual production potential and its seemingly extravagant resource claims. After writing his book, he has moved to the forefront of the peak-oil movement – a growing contingent of oil industry veterans, independent consultants, investors, and academics who believe that world oil production is at or near an inflection point, after which it will fall inexorably and fail to meet projected future demands.

The article in CNN mentions that while we are not running out of oil tomorrow, we might be pass the point of cheap oil. Why is this important? I think it is important for us to know and make provision for such things that could happen. Perhaps like investing in solar energy, if you live in places that is practical. There are places in the US, where there is loans and subsidies to install solar panels, which make financial sense to do so. At the same time you are going green.

If you are keen on the documentary, you can get the DVD here

Recently I listened to a recording from Crown Ministries as well as read several articles about NOT using credit cards. When it comes to credit cards, I think there are 2 extreme view points. One totally is against using credit cards at all and what I shall call credit card experts.

Credit card experts know everything, almost, of credit cards. I know of people who uses a complex system of using overdraft and credit cards to manage their finances. From what I understand, it is bordering on micro managing money. I have to say, I’ve not tried it myself so my comments may not be exactly true. However, thinking of it already gives me a headache.

Taking the middle road on the use of credit card, I still think that if you CAN control your spending, credit cards are okay. Credit cards have not been a problem for me because I pay off everything when it is due. Having said that, I’ve been penalized twice. Once for paying late because the statement got lost and another time, it totally forgot I had to pay. Since then, I never missed a payment. Thank goodness for auto deductions and internet banking.

My rationale of using cards then is I carry less cash and accumulate points which I have redeemed for a fruit juicer, casseroles sets and more recently a external hard drive plus some petrol vouchers. Quite substantial over the years of using credit cards. I wonder over the inconvenience of NOT using credit cards.

Just 2 weeks ago, I had a major repair on the car which was unplanned. I never had such a huge bill after driving for so many years so when I was presented with a quote for over $1,000 I was in a bit of a shock. But the repairs must be done sooner or later and being someone with some mechanical sense, I knew the longer I delay, the more damage I’ll cause to the transmission. So, in when the car to the workshop and a week later, I was poorer by $1,000.

Now, while the car was in the workshop, we used our second car which was a cheaper car. After using the car fro 2 days, the air conditioner gave up the ghost. Another unexpected bill of $300 came. Gasp. I paid the 2 bills with my credit card but I don’t intend to make partial payment.

We took a hit financially this month but our emergency fund will take care of it. Using the interest free period and timing the transmission repair gave me me additional time to adjust our spending over this and the following month.

First, recently, we had fuel hike up by 40%! Yes, 40%. Fuel prices in Malaysia are government controlled and instead of slowing edging up, they tend to jump up drastically. So now, in order to fill up, it cost me almost RM 100 (US$1= RM3.5) what used to cost RM 70. So I’m feeling the pinch at the moment. Do realize that $28 can buy a very nice dinner out for 2 or less nice dinner for 4, with spare change to boot. With such drastic increase in gas as well as diesel, inflationary pressure really begin to bite.

Now, buying a more fuel efficient smaller car is not an option at this point as I’ll have to put in more money into the car. Based on what I see happening in the local economy and also elsewhere, I reckon stock prices will tumble a bit more. The housing crisis in the US as well as what I observe in markets in Asia plus the fact that we are reaching the 10 – 12 year cycle, makes the perfect storm in financial market. That the local government say they will help small and medium enterprise to weather further confirms what I think is a recession in the making. Disclaimer – I not an analyst nor do I follow the stock market that closely. I just observe what is happening in the business world and based on observations. If you make money, no need to thank me, if you lose money, please don’t blame me.

Reason #2 is since I think a recession is likely to happen, by selling the car for a smaller, cheaper car and invest the money when the markets are really down, I could potentially make some serious dough. All this is based on the assumption that the stock markets are going down.

What can go wrong? What are the pro’s and con’s.

If I guess correctly and the markets go down like what they did in 1997 – 1998, then, there is a potential to triple or quadruple what I invest in the market. If I choose stocks correctly. If I don’t make the correct choices, I could end up with paper that is worth nothing.

If the market don’t go down by that much, it means I’ll end up with a smaller less comfortable car. Buying small used cars tend to be trickier since they are more likely to be abused compared to higher end used cars. I could also end up with huge repair bills.

Writing this, I realize there is are quite a few if’s.

This decision is not easy to make since my current car is still serving me well except it need a major overhaul that will set me back $1000. That’s a bummer. And it just surfaced a few weeks back. It always happen when you want to sell a car. So still thinking….