Rich Dad's Prophecy

Paperback: 304 pages

Publisher: Warner Business Books; Reprint edition (January 2004)

Language: English

ISBN-10: 0446690341

ISBN-13: 978-0446690348

Robert Kiyosaki’s book links the impending US market crash to the nation’s 401(K) law. Within the next 20 years, the law encouraging the current way of preparing for retirement would be unsustainable. As the baby-boomers get older and retire, they would withdraw their investments from the stock market, causing a huge demand deficit and hence causing a crash. Kiyosaki also relates well to the changing demographics with the coming crash.

Kiyosaki urges us to start ‘building our arks’ for the future. His safest bet is on financial education. Paper-assets-diversification is for people who don’t have time to educate themselves financially. But if you are a savvy investor, the way to go is concentration. Concentration amplifies the returns due to the risk but education reduces the risk. The only diversification we should do is education and between asset classes. Kiyosaki also advises us to learn to start small and to build our own businesses.

He challenges our financial assumptions and draws our attention to the CASHFLOW Quadrant.

The trends are predicted to occur in the near future are:

1. Millions will be destitute in their old age.
2. Increasingly expensive medical care
3. Increased terrorism
4. Japan will be on the brink of collapse and depression due to demographics and culture.
5. China will become the largest economy
6. The world population will continue to age.
7. Wall Street obsolescence
8. Decline of the huge corporations

The controls over one’s Ark

1. Self – know your financial status and be educated
2. Emotions – the 3 levels of controlling thought
3. Excuses
4. Vision – lookout for emerging technologies and declining (huge, existing and replaceable) technologies
5. Rules
6. Advisors
7. Time (ultimately self)
8. Destiny

This book is a good read and is simple for any beginner who is interested in embarking on a quest for his/her own ark.

My Story - Lim Goh Tong

Paperback: 188 pages

Publisher: Pelanduk Pubns Sdn Bhd (December 30, 2004)

Language: English

ISBN-10: 9679788598

ISBN-13: 978-9679788594

This book is an inspiring story of one who carved his own destiny in construction, real estate, entertainment and the casino industry. Lim Goh Tong is renowned for many ‘firsts’ in Malaysia and even Malaysia. This biography charts his life-story with touching poignancy and motivates any reader to conquer any life obstacles to achieve what he/she wants.

The chapters records Lim Goh Tong’s life according to his …

Beginnings – birth and background

Formative years in business – life in China then in Malaya

Family

Mining ventures

Construction projects

Most renowned project – Genting Highlands

Diversification – into real estate, entertainment especially Star Cruise

Succession

Most people, who would associate him most with Malaysia’s Genting Highlands, would be pleased and inspired to know that Lim Goh Tong has made many other significant contributions which we cannot dream anyone could achieve in a lifetime.

Master Your Money Type

Hardcover: 366 pages

Publisher: Warner Business Books (January 2, 2006)

ISBN-10: 0446578010

ASIN: B000KJTOOO

Product Dimensions: 9.1 x 6.2 x 1.4 inches

This book gives a good insight into how one’s personality and past are closely linked to our management of finances. Awareness of your money type would make you better understand why some people can be entrepreneurs, investors, employees or gamblers. And such awareness can make you understand that it can be useless forcing yourself to stay in a job you dislike.

Goodman categorizes 6 money types. He identifies our money management style with much of our emotions and deals with them at their roots. The book sheds light on how we view money and how we can better react to these issues.

Most of us are “mix-breeds” between money types so we need not strictly fit ourselves into a particular type.

1. Strivers – Value prestige and having money can give you that. May overspend to build on status. Always seeking to acquire.
2. Ostriches – money-phobic
3. Debt Desperadoes – Gets a high on spending blindly or tend to always land in debt situations. Lack of control in spending.
4. Coasters – Take the easy life for granted. Limits self.
5. High Rollers – High risk takers. Over-confident and idealistic.
6. Squirrels – Values money and is afraid of loss. Live below means. Risk-intolerant.

A good beginning book to read in discovering self.

The Next Great Bubble Boom - 2005 to 2009

Hardcover: 336 pages

Publisher: Free Press (September 2004)

Language: English

ISBN-10: 0743222997

ISBN-13: 978-0743222990

Harry S. Dent makes a startling yet convincing argument on the current boom we are now experiencing. He draws much of his conclusion based on demographics. Population and age plays a huge role in the economy due to changes in policies and laws to suit people, and the needs of people change across time. The predictions follow closely to Elliot Wave patterns.

Since he mentioned that the boom will persist from 2005 to 2009, a rudimentary research for the past 2 years till now (2007) has confirmed much of his forecasts. Locally speaking, I can safely say that as the region is still hugely dependent on the US economy, Singapore will continue to ride on this boom as well.

There are much lessons I learnt in this book as listed.

1. Buy and Hold is not advisable. Marketing timing reaps more profits.
2. Technology S-curves
1. Greatest growth is spurred by 50% penetration of a major technology (like the Internet in 1990s and in the future broadband
3. Cyclical trends
2. 80-year economic cycles (4 seasons)
• Innovation (1968 to 1980s) – focus on small cap; rising inflation
• Growth (1980s to 2009) – 2 phases on disinflation followed by stable prices; invest in large cap
• Shakeout (2010 to 2022) – focus on bonds; disinflation
• Maturity (2023 to 2048) – 2 phases on inflation followed by stable prices; more gradual economic growth than ‘growth season’.
3. 10-year cycles
4. 4 year presidential cycle
5. Annual seasonal cycle (note that Feb, May and Sept are probably down periods to buy in
4. Boom from 2005-2009
1. 2003-2004 – recovery
2. 2005-2006 – acceleration
3. 2007-2009 – Bubble
5. Bear market from 2010 to 2022
1. 2010 – 2012/14 – deflationary crash
2. 2015 – 2019 – bear rally
3. 2020 – 2022 – 2^nd crash
4. 2023 onwards – Bull market

The author also guides the reading on certain investment strategies on different regions and sectors as well life-planning at the different years.

The book is an interesting read though there are doubts on how much of it are applicable to Singapore. Nevertheless, the US economy is definitely something we ought to look out for.

A Guide to Investment in Stocks and Shares

(Out of print - You probably can get it in the local Singapore Library as I did in the picture)

Paperback: 124 pages

Publisher: Educational Publications Bureau Pte Ltd (1984)

ISBN-10: 9971023539

ISBN-13: 978-9971023539

Wong Yee managed to condense the essentials of stock market trading into this small book. Given that this book has been published 20 years back, it goes to show that there are some age-old advice we should all follow. I summarize them as follows:

o Big players dominate/manipulate the market to profit

o The way to conquer the market is to first conquer your emotions.

o Know when to take profit and when to cut losses

The author also goes on to explain financial statements, charts/trends and some crucial accounting ratios we ought to pay close attention to, like P/E ratio, liquidity and profitability ratios.

I enjoyed the real life examples given of the bear markets in the 1980s and 1990s because they are locally (Singapore) orientated for me to pick up some tabs. Other than that, quite a bit of the information is outdated – the Straits Times Index, Singapore stock market trading system etc.

The most interesting information I garnered was the author’s Bull Market Analysis (bull phase pattern).

• A bull run typically consists of 3 phases of 3 upthrusts each.
• Each phase has a correction after each upthrust; the last being a consolidation.
• A correction is characterised by a dip of at least 20% of the increased gain during the uptrend.
• A consolidation is a huge correction.
• Upthrust 2 is the shortest while upthrust 3 is the longest.
• Upthrusts are characterised by huge activity and high volume.
• A bear raid follows the final upthrust of the 3^rd phase.

Interestingly as well, there is no apparent pattern (unpredictable rebounds and uncertain low points) to a bear raid hence it is not recommended to trade during a bear market.

Predators and Profits

Hardcover: 304 pages

Publisher: Pearson Education; 1st edition (April 22, 2003)

Language: English

ISBN-10: 0131402447

ISBN-13: 978-0131402447

The theme of the book is investment protection and it covers quite a bit of ground. The author paints a background of the current state of the market system – where an investor-and-organisation-orientated market is replaced by personal-greed-and-quick-profiting market. This can be seen be the in the trend of ballooning stock prices in comparison to company earnings.

Martin Howell exposes the trends and tricks in how investors can be cheated of their money. The book is U.S-oriented, highlighting famous examples like Worldcom, Enron. It also focuses on the Internet Bubble as an illustrative instance where stock prices can hit the ceiling even without any earnings. The number of red flags he assigns to each topic gives an indication on the severity of the outcome.

Admittedly, if an investor is to look into all the points Howell has thrown forth, we might not have enough time to even place our order for any stock. Don’t read this book if you are a beginner. It would be a good book for supplementing a broader knowledge.

The main themes for investment-protection are summarized (the sub-points are contextually-relevant to my understanding and learning) as follows.

1. Fundamentals
• Invest in what you understand only
• Public’s opinion of the company’s product is a good indicator of it possible sales
• Look out for ballooning P/E ratios
• Avoid companies that are too reliant on too few aspects of its business (not diversified)
• Please diversify.
• Sudden change in corporate strategy is suspicious.
• Capital-developing funding is cut to boost profit earnings.
• A company that grows a lot faster than its rivals without apparent reason gives cause for concern.
• Higher debt levels than rivals.

2. CEOs and Board of Directors
• Avoid family-run businesses in general
• Aggressive and bullying CEO
• Excessive remuneration in times of loss is a warning indicator
• Top executive themselves own too little of the company’s stock
• Board rarely meets
• Elderly, non-prominent executives, politicians or academics might not serve the company well.

3. Media
• "Pro Forma", "normalized" and "non-recurring" are key words to mean earnings before possible huge costs.
• Media can excessively hype up stocks but look out for reputable publications (Reuters, Fortune, Wall Street Journal) that gives contrarian views.
• Beware of analysts who summaries other reports than visiting the companies themselves.
• Sell when a rating is cut.

4. Accounting
• Auditor's opinion is an important indicator. Unexplained resignation or firing gives a huge cause for concern.
• Declaration of fraud would only uncover bleaker news in the following months. Recommended immediate sell.
• Confusing and lengthy financial statements can mislead investors.
• Pay attention to cash-flow despite increasing profits.
• Suspicious: Earnings growth is a lot faster than sales growth.
• Unreasonable depreciation can hide costs.

5. Others
• Managers who divert a hot stocks from one fund at the expense of another to boost ratings.
• Fund shareholder letters are used to solicit for more sales than to inform.
• If major funds avoid a particular stock, so should you.
• Sell when there’s a fraud probe or a filing for bankruptcy protection
• Avoid stocks undergoing reverse-stock splits (especially to maintain their share price to be listed)
• A short-seller has the company in mind is a sell-sign.
• Don’t chase IPOs after they start trading
• Rating agencies give good indicators of companies’ debt.

Yes, You Can Time the Market

Hardcover: 240 pages

Publisher: Wiley; 1st edition (April 4, 2003)

Language: English

ISBN-10: 0471430161

ISBN-13: 978-0471430162

Ben Stein and Phil DeMuth managed to distill 4 crucial factors in order to time the market. Their research is based on many assumptions like taking a long-time frame, S&P 500 index (US-based analysis), 15-year moving average, regression-to-mean, mid to large cap stocks etc. I like their pro-statistical stance on the latter and tend to see the market behaving as such as long there are no major upheavals.

I conclude from reading this book that market-timing is impossible for short-term trading and possible for a long-term view. It was shown using historical data that market-timing using the 4 factors beats dollar-cost averaging, these can be warning indicators of imminent slump in the market. All 4 values are compared with their long-term averages and are as follows:

1. Price
   Buy low. We compare this figure to its long-term average. (High if above the average) Relevant using regression-to-mean.
   
2. P/E ratio
   Buy low. Also compare to its long-term average.
   
3. Dividend yields*
   Buy high. This is reasonable when you are looking at large and mid cap stocks. It is an indicator that they have earnings to distribute. For penny or growth stocks, companies usually channel their surplus for growth instead.
   
4. Fundamental value (using Tobin’s Q = market value/asset value here, or alternatively price to book-value)
   Buy low. Note that Tobin’s Q only account for tangible assets while intangible assets can make the company worth a lot more.

The rest of the book calls for diversification and does some analysis on some of the crucial periods from before the Great Depression till after the Internet Boom. There is some discussion on bonds and technical notes on risks as well. A good read especially when their theories are supported by the charts generated.

Some of the current S&P500 ratios are updated here.

http://www.yesyoucantimethemarket.com/

Cell by Stephen King

I read this book when I headed down to Japan for my family trip. It was quite a pretty good read like many of King's gory and bizarre stories. As what the review has mentioned, it can be pretty hard to put the book down sometimes.

The storyline kept me on my toes most of the time due to the curiosity of how the "pulse" came about that triggered the whole sequence of events. I was half expecting a more complete elaboration of the origin but I guess the ending reminded me that King is a fiction eerie story-teller instead of a sci-fi weaver.

After reading the book, I wondered about the real implications of the using the cell-phone too much..