Friday, April 27, 2007

a memorable weekend

I had a really wonderful weekend and one of the most memorable at that. :) prepared a surprise treat for my friend alan last friday night and the the boys had one hell of a party and then the next day my dad and i had dinner with mr colayco (author of “wealth within your reach”) and discussed things related mostly to business. :) we got mr colayco as our financial consultant for our business so the whole sunday my family and me were with him. To straighten out some things and to find solutions to some problems and on how to strengthen and protect the business and talk about things that are related to business. :) i really admire mr colayco because i always believe that the best solutions to solve problems are always the simple ones. :) he advised us on what course to take to solve some problems and the beauty is that he gave us simple answers to our problems. :) a very smart guy but he doesnt flaunt his intelligence or make you feel dumb when you talk to him. He is a very humble and helpful person. :) And what i like best about our talk was that somehow he made my dad believe that the stock market is not gambling after all! :) hehehe ive been trying to convince my dad and the rest of my family to invest in the stock market for almost four years already and i cant get through him but just one afternoon with mr colayco and now he is kinda open to the idea of investing in the stock market. :) and our talk with mr colayco further strengthened my resolve about value investing. And i will quote his words “dont mind the weather, know the climate” in other words think long-term. Dont mind the daily fluctuations in price and look at the prospects of the company of what it can achieve in five years or more. :) its just what i posted here around december i think. And im so happy that we both share the same sentiments. If you dont have any knowledge in stocks the next best thing to do is to invest in mutual funds. I believe he mentioned philequity (you guys should love me this is a free advertisement!). And we discussed the most lively part of our talk. How to invest your excess cash. :) and he suggested to put it in equities or in equity mutual funds and let the power of compounding work for you and leave it for as long as 30 or even up to 50 years. :) and i also did the math and our figures are not really far from each other. :) if you invest P240,000 in a mutual fund or stocks and add P12,000 every year for five consecutive years and just leave it and let the money compound here is what you will get.

At 12% compounded per annum. Your total cash outlay is P300,000

in 10 years you will have P850,042.65

in 20 years you will have P2,640,103.44

in 30 years you will have P8,199,760.54

in 40 years you will have P25,467,211.59

in 50 years you will have P79,097,293.59

at 20% compounded per annum. Your total cash outlay is P300,000

in 10 years you will have P1,708,221.73

in 20 years you will have P10,576,858.68

in 30 years you will have P65,489,121.14

in 40 years you will have P405,491,376.64

in 45 years you will have P1.008,992,302.32 welcome to the billionaires club

in 50 years you will have P2,510,695,725.72

at 21% compounded per annum. Your total cash outlay is P300,000

just to show you the difference what 1% could mean to your portfolio.

In 10 years you will have P1,850,814.71

in 20 years you will have P12,451,355.84

in 30 years you will have P83,766,495.80

in 40 years you will have P563,539,096.23

in 50 years you will have P3,791,209,241.23

can you see what a difference of 1% can do to your portfolio over time??? who would think that a difference of 1% in your portfolio would mean having over P1billion more in your portfolio after 50years. :) value investing works and compounding is a very good ally.

i wouldnt be surprised if mr colayco himself has a value investing portfolio with very good returns but he said that hes only into investing thru mutual funds. :) the key is patience and being able to detach yourself from the everyday happening of the market. I believe i wrote about an article about compounding around december of 2006 you could also read that if you like. :) and as mr colayco also said to profit from the stock market you should be able to take advantage of other people's mistakes. Buy when someone is selling cheap and sell if someone is buying expensive. :) in other words being a value investor also means being a contrarian. :)

a warrant of arrest was just issued to the two main suspects of the tan massacre in january last year here in iloilo. The two main suspects were the children of the father from his first marriage. This is really tragic and i hope that everything will be resolved soon and that truth will prevail. Let us be thankful for all the blessings we received. God bless everyone. good luck. :)

Sunday, April 22, 2007

roller coaster week

What a roller coaster week! :) looking at technical data i still believe that the rally is still in place. Up to what level it will reach i really couldnt tell but from what i see i think its still ongoing. :) well what can i say about my week. It has been kind of a roller coaster too! Work and all then with a little bit of pleasure playing basketball. And then gave a surprise to a friend who really enjoyed it. :) hehehe so whats the latest in the investing world??? universal robina corporation (urc) will be included in the new psei index on may 16, 2007! yahoo! This might Just bE the news that this “laggaRd” has been waiTing for?!!?! it needs to break around the P20-P20.50 range to break its downtrend. :) it looks like that our economy is really in full swing right now. With the very big and significant investments in real estate we could somehow see that maybe this is for real. All the big players are in like the ayalas, lucio tan, megaworld, henry sy to name a few. :) and theres this property here in iloilo thats up for bidding which was our old airport. I wonder who really wants it but i believe that mr sy is the one who wants it the most for it is very near an sm mall and the is the new thrust of smdc building residential spaces near sm malls. :) gold and other precious metals are now really going up in price and i suggest to you to start buying jewelry for your wife or loved ones before the price of gold reaches $1,000 per ounce! :) and with the increase of the prices of metals this might also spark our mining sector here. Phew! And of course the stock that i recommended keppel philippines marine (kpm) which was suppose to be a valentines gift for readers of chiefstocks has made a meteoric rise the last few days. :) and if you bought it at 0.94 you have already more than a 50% return but as ive said there is still value in this company. Time will be the one that will unlock its true value we just have to be patient. :) things are really looking good for our economy but dont be overconfident for the market fears no one and if you are careless you will surely get burned! With diligence there is still value to be found in the market. Remember the three p's in investing: patience, patience and patience. Good luck to everyone. :) happy birthday charlene! :) god bless

Thursday, April 19, 2007

crazy mr market

Is the market irrational? Is the market bipolar? :) what do you think? We can see it all happening in front of our very eyes! :) the first two trading days of the week the market went up more than 1% each day and then what happens? It drops more than 1% tsktsktsk is that suppose to be rational??? i bumped into my broker the other day and he told me that the market has forgotten the china sell-off and that includes him too hehehe i remember him telling me a few weeks ago to liquidate my shares but i refused to do so. Now do you think im crazy??? hehehe but my broker is a short term trader or a chartist and from his point of view that was the right thing to do and if i look at it from that point of view he gave me the right advice but i look at my shares of stock in a long term perspective thats why i didnt sell them. :) i really admire my broker spyfrat because he is one of the best at what he does. people really have a short memory span after a month they are all at it again!?!?! can anyone please explain to me if thats rational!!!!! anyway it really doesnt matter just always remember to buy low and sell high! :) volatility is your friend! :) i really believe that. As mr. Buffett said investing is like a baseball game but there are no strikes being called. :) meaning you dont have to buy anything that you dont like. :) just buy something when you really like it. :) nobody is forcing you to buy a stock at a certain price so if thats the case then just wait for it to drop to the price that you want. :) when you do that you lessen the chances of making a mistake. As the master investor said investing is about making as little mistakes as possible! :) anyway there are still cheap stocks in the market and one that im going to discuss right now is fil-estate(LND). Trading at the range of 0.80 to 1.00 :) this is a really cheap stock selling at a very big discount right now!!! around 70%-80% imagine that?but still im having doubts of buying the stock. Because i believe that one very important requirement of a good stock and giving you back superior returns is good management. And no offense meant i really dont have a very high regard for its management. So as of the moment even though holy week is over i think im going to abstain from LND. hehehehehe I will quote again my idol warren buffett “i would rather buy a great company for a fair price than buy a good company for a great price.” good luck guys. :) the nba playoffs are now fast approaching!!! :)

Sunday, April 08, 2007

carlo ponzi

As i promised im going to write an article about what a ponzi scheme is. This is taken from marc faber's book tomorrow's gold pages 176-178.

in fact, every mania involves some sort of Ponzi scheme. Carlo ponzi was a swindler who, in 1920, devised something akin to a chain letter, whereby early investors were paid out of money invested by late buyers. Ponzi promised to pay 50% interest for the use of 45 days' deposits, based on a strategy to arbitrage international postal union coupons bought with depreciated exchange rates abroad and to exchange them at higher fixed exchange rates for US stamps (for which coupons could be redeemed) in the us. The scheme was purely fictitious. Ponzi took in close to us$8million, but had only us$61 worth of stamps in his office when arrested. His “pyramid” scheme, the success of which depended on attracting new depositors at an ever-accelerating rate, collapsed when a number of depositors began to suspect that they wouldn't get their money back and attempted to withdraw their funds.

Ponzi schemes resurface from time to time in emerging economies where a sufficiently large number of naive people can be found who believe that 50% returns on short-term deposits can be achieved. However, it is a fact that for most investments, sooner or later, early buyers will be paid out by late buyers. This would seem to be particularly true in the case of investment booms and manias, which require a large number of participants to fuel and maintain the upward price momentum. The boom ends when the amount of money flowing into the popular investment theme starts to decelerate, as buyers become suspicious about the sustainability of positive returns, or when the supply eventually exceeds the demand. Thus, the early buyers of us stocks in the 1920's, 1960's and 1990's did well, while the latecomers were badly burnt by the subsequent market declines. The same was true of the gold and silver booms, and of the japanese stock market bubble in the 1980's.

In fact, i would argue that one of the principal features of an investment bubble is the existence of a giant ponzi scheme. Entrepreneurs no longer start businesses with the objective of achieving recurring profits from their investments, but rather seek to set up ventures in order to flog them off to speculators through IPOs and secondary offerings. At the same time, investors almost totally abandon the concept of investing according to strict value criteria and real economic merit. Instead they purchase stocks solely because they figure that, as more and more people join the investment party, someone - “the greater fool” - will be willing to pay an even higher price than they did for their stocks.

Ponzi schemes raise some fascinating questions.why are so many people repeatedly fooled by them? And why did carlo ponzi's scheme fail in less than a year, while other similar schemes have lasted so much longer? Investors get caught again and again in ponzi-type chains because of the very high returns they promise. Had carlo ponzi promised to pay a return of only 2% in 45 days' deposit (102% annually), no one would have bothered to invest with him. But with the promise to pay 50% for such a deposit (162,450% annually), he was able to attract quite a sum, considering that he was operating only from boston. His main problem was the regional scope of his scheme. Had he been able to operate globally with the support of cnbc, cnn, internet chatrooms and a variety of questionable stock advisory services, his operation could have flourished for much longer. The money flows that financed his operation would have continued for as long as the incoming funds were sufficient to pay out the redeeming investors. And the longer this had continued, the more confident the investing crowd would have become in the merits of his financing skills, possibly to the extent of attracting even central banks to invest their reserves with him. Morever, ponzi's promised returns were such that even if interest rates had risen 10% per annum, they wouldn't have jeopardised his scheme. It was his inability to raise money fast enough and the loss of investors' confidence that brought him down.

Now suppose that ponzi had reinvested himself. Instead of a questionable character operating regionally in boston and promising to pay 50% for 45 days' deposits, we have the credible and proven capitalistic system and alan greenspan as well as the us treasury guaranteeing that every time there is a crisis there will be a bail-out – as was the case in mexico, asia, ltcm and most recently brazil. Thus, the system and alan greenspan, and not carlo ponzi, were vested by the global investing public with the power to underwrite a 20% per annum return for the us stock market, as was the case from 1982 to 2000. even better, the system and greenspan, supported and cheered on by the media, were believed to guarantee an almost 100% annual gain from investing in a basket of technology stocks, which was the return of the nasdaq 100 a few years leading up to the march 2000 (up nine times in five years and almost four times from 1998 to 2000).

a ponzi scheme may not fly with a 20% guaranteed annual return, but a sure 100% return is a tempting proposition for any investor. So, for as long as the nasdaq could sustain these returns, ebullient investors reallocated more and more money from conservative investments such as short-dated bonds, money market funds, cds, abd even value stocks, into the high-tech sector. Even rising interest rates cannot derail this process, because the returns promised by a ponzi scheme are so much higher than interest rates.

The breaking point, however, is reached when insufficient new money flows into the market, or the supply of equities begins to exceed the demand, and investors start to experience significant capital losses. Only when this happens do investors lose confidence and scramble for the exit, bringing about a meltdown. This was apparent in the us when, in 1999, a total of 555 companies went public (an all-time record) and raised us$73.6 billion. But that us$73.6 billion represented only 27% of tge issuing companies' market caps. In 2000, however, the lock-up period for most of these issues expired and, in addition to the then prevailing heavy new-issue calendar (in early 2000, there were weeks when new issues raised over us$8 billion), insiders were able to sell more than us$200 billion of previously locked-up shares.

Thursday, April 05, 2007

holy week reflection

It was a very busy, stressful and at the same time rewarding week for me. Last sunday afternoon i had coffee with my very good and close friend charlene. :) and we spent the whole afternoon discussing about religion. :) she is a born again christian and im a catholic but we didnt argue, we just discussed how she came to be a born again because she was a catholic before also. I respect her decision to convert for each one has to find his or her path to grow spiritually. i really enjoyed that talk of ours and maybe i do hope that some day she'll go back to the catholic faith but if that doesnt happen it really doesnt matter because what really matters in the end is our faith and if we believe in our one true God. :) its always nice to talk to a smart lady. :) monday was a very busy day for me with my parents going to baguio i had to attend to some of their work so it was a very busy day indeed and then a friend of mine called and asked if he was interested in an investment. Here are the terms of the investment and ready yourself. 30% interest on your money in 10days! Is that even possible? I cant find any legal business that could give you those kind of returns in that short span of time. Is it possibly a ponzi scheme? for those of you who are still not familiar with what a ponzi scheme is i'll write about it in the near future. That was the first kind of investment of that nature that i encountered this year and just a little word of advice when there are a lot of ponzi schemes going around already that means that the end of the bull market is near already. It means that the market is now overheating and usually during bear markets there are little or even no get rich quick schemes. :) so that means that we have nothing to worry about right now and that the market is still healthy. :) and on monday evening i had dinner with charlene again in sbarro then met my cousin for coffee and the same time she entrusted some of her money to me to invest. :) well i just told her that its a long term investment and shes okay with it. :) i will really try to do my best to give my fund the best returns possible. :) my minimum target for returns is 15% which mean double your money in five years and four times your money in 10 years. But of course thats just the minimum i target more than 20% :) my fund will be 3 years old on june 24 this year and more or less the fund has been earning 6.41% per month that is as of march 31, 2007 since i started this fund and i could say that its still growing and im still learning everyday. :) i just hope my fund is going to grow someday and be one of the big boys in our market. Well as of the moment that is just a dream. :) i just hope that some day my dream will come true. :) i think i can say that ive done a good job so far because i have beaten the returns of the psei for that is the only benchmark that i try to beat. And im thankful that ive beaten it so far. :) i thank the lord for all the blessings and the guidance, my family for always being there, friends for cheering me up when times were tough for me, spyfrat for helping me out in investing even though were on the opposite sides if the spectrum when it comes to investing but has opened my eyes and my mind to a different approach in investing and it has helped me a lot, charlene for being patient and understanding when im dificult. Let us not forget to thank the lord for all the blessings we've received and let us not forget the ultimate sacrifice the Lord has made for all of us. :) god bless to everyone this holy week.

Monday, April 02, 2007

first quarter review

The first quarter is finally over and we saw some drama with the global sell-off which started in china but nothing to worry about were still here. The psei went as high as 3,400 but fell sharply due to the sell off and i think in a way i could also say that it was a correction. :) the market's rise this year was kinda meteoric and i would say the correction put the market back in its place. What happened to my little fund this quarter??? well i didnt sell anything even though with all that panic and everything. I bought shares in kpm for its low price and strong fundamentals of the company. That was my only buy this quarter. :) im thinking of adding to my shares in urc. :) i like what ali has in plan for its expansion and also meg which just shows how bullish they are in our economy. :) im still awaiting news for the subsidiary of v, yehey, when they will have their ipo. Jfc has now started to show its true potential and it is now reflected in the share price. :) im also still bullish in ubp, mbt, epci, bpi and of course asia. :) i believe that sgi is still undervalued and could increase its share price by at least 50% still! :) and of course ans is still steadily rising up and with the company continuing to buyback its own shares Just mEan good things foR The company. The market went up by 7.41% since the start of the year and i could say that it is very commendable and i could say rational increase. :) my fund is up by almost 20% since the start of the year and im happy with that because i beat the psei for that is the only gauge to my performance. :) i know tsupiteros or short term traders are having a field time right now with the market conditions being very bullish. :) and i wouldnt be surprised if they are having returns of 50% or more. :) but thats okay i will still stick with my game plan. :) my friend eric just told me to look more into a certain stock and i thank him for doing so for i have found out the company is even more undervalued than i thought. Im going to write about it next time when i can see the true potential and value. And im also thankful to spyfrat for he has pointed me again in the right direction in finding value stocks there are two more that i have to research on. So that means im going to write about three different companies next time. Ill write about the three musketeers next time. :) patience, patience and patience that is the name of the game.
I have a story to tell about life and this could also be connected with value investing. A child asked his father, “why do i need to be humble?” then the father said “when you choose the lowly path, there is no place to fall and the only way is up.” good luck to all of you. Good bless. :)