Wednesday, November 10, 2010

running, investing and life

Its been awhile since i wrote because i have been busy the last few months. :) busy with work, friends, my girlfriend, family and my new found love, running. :) running has taught me lot of things in this short love affair of ours. It reminded me that in work and anything in life one should always enjoy the process more and not the outcome... as the saying goes “enjoy the journey.” It has brought me back to my athlete days when discipline was at a premium. I have cut my smoking to about 80% from 4-5 packs per week, i have given myself a limit of only 1 cigarette pack per week so as not to shock my body from the absence of nicotine(im just trying to avoid withdrawals). But eventually i am going to completely stop smoking that will most likely be some time early 2011. :) it has also forced me to eat more healthy meals. :) i have now learned to love eating vegetables and drink milk everyday for healthy bones. :) i am training myself slowly but surely adding more to my mileage a little everytime i can feel that my body gets stronger. It has definitely awakened my competitive spirit in sports and i really want to be good in this sport. I wanna run better times in different distances and maybe sometime end of 2011 run a full marathon. And im also lucky the my girlfriend is really supportive. My run time is also time for myself, its time for me to think and clear my mind. Time to look back at my life the last few years, i now have lessened time using facebook(only to communicate with friends) and i noticed im even happier because of that. :) i do remember a study before that stated that people who spent a lot of time in social networks be it friendster, facebook, multiply or the like was a sign of depression. :) looking back at myself maybe during that time i spent so much time in facebook was really a low point in my life and looking at the people who are so hyperactive in facebook.... i guess maybe some of them have nothing better to do or have nothing going in there life that they need to be in this “fake reality” because it makes them feel cool or they have a lot of friends. :) i read from a book before a saying by a famous author “80% of your friends are not real, 15% look real and the 5% left are your real friends.” :) that saying really hit me hard coz i have been betrayed, used and abused by some of my so-called friends before and in the end we had a “falling-out.” but i dont condemn them because i gained wisdom, strength and now i know who my true friends are. :) i have learned that one should look for people who will have a good influence on you. The only way to be the best is to learn from people better than you. :) and to be able to succeed in life one should have a good partner to walk/run with you along the way. That was what my father repeatedly told me before and it is only now that i have truly understood the wisdom in his advise because after all no man is an island. :) i guess this will be all for now. :) things i have learned the last few years 1. slowly but surely does it 2. dont overdo it. 3. what doesn't kill you only makes you stronger 4. aches and pains will go away 5. learn from the best 6. give it your all in anything you do. As my grandfather always used to say “hurry up slowly” God bless you :)

Monday, August 09, 2010

Cost of Money

Opportunity cost is the cost related to the next-best choice available to someone who has picked between several mutually exclusive choices.[1] It is a key concept in economics. It has been described as expressing "the basic relationship between scarcity and choice."[2] The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently.[3] Thus, opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, pleasure or any other benefit that provides utility should also be considered opportunity costs.

The concept of an opportunity cost was first developed by John Stuart Mill.[4]. This definition is taken from wikipedia. This topic really has intrigued me the past month because my girlfriend and me have been talking about settling down and starting a family. Its basically a talk BUT she doesnt know the SECRET plans that i have in store because i want it to come as a surprise. Anyways, talk of marriage made me think and reevaluate my current position in life emotionally and financially. With increasing costs all around us, it made me think, how much should i save with what i earn? Will it be enough? How much do you need to be able to raise a family? How much should one save for a rainy day? What is extravagant spending? Then it made me realize that using the credit card can be good because you get a “float” of one month but this is assuming you have the discipline to control your buying. Im really working hard so that my monthly expenses can be paid by my bank deposit's monthly interest and i realized that it can be achieved if you live a simple life. :-) i've met people and friends who spend a lot and some who are freebies but i guess its different strokes for different folks. There is no correct solution and do whatever works best for you. Some people can spend a lot on their holidays, cars, houses, clothes, bags and whatever you can think of. People have different resons on how they spend their money maybe because ownership of the said item makes you feel “cool” and maybe also the influence of the media and advertising. But when you spend your money on something you lose so much more not just the amount you spent which is basically opprtunity cost. I have always wanted to have a motorcycle and the cost of a good one is around the P500,000 range and assuming i bought it how much did i lose?

Assuming i can get 3.2% interest net from the bank my 500,00 in these number of years would have been worth:
5years 516,000
10 years 685,120.52
15 years 801,983.56
20years 938,780.26
25 years 1,098,910.79
30 years 1.286,355.25
assuming i put the 500,000 in an investment that can give me 8%net per annum then i would have
5years 734,664
10 years 1,079, 462
15years 1,586,085
20 years2,330,479
25 years 3,424,238
30 years 5.031,328
this is the power of compounding working at its best. But i should say you will lose even more because we havent taken into account the yearly depreciation, gasoline expenses, if you took out a loan to buy it and repairs. So in the end you will lose even more.
What if i bought a car worth 3million with a resale value of 1m after 5 years how much will you lose?
Theoretically you lost 2million. Cost of the car less the resale value. So ill put a chat here amounts if you put your money in an investment that can give you a compounded rate of return of 8% and 15%

2million at 8% compounded return
5 years 2.938,656
10 years 4,317,850
15years 6,344,338
20 years 9,321,914
25 years 13,696,950

2million at 15% compounded return
5years 4,022,714
10years 8.091,115
15years 16,274,123
20 years 32,733,074
25years 65,837,905

what if you put the whole 3million in an investment that could give you an compounded returns of 8% and 15%
3million at 8% compounded return
5 years 4,407,984
10 years 6,476,775
15 years 9.516,507
20years 13,982,871
25 years 20,585,426

3million at 15% compounded return
5years 6,034,072
10years 12,136,673
15years 24,411,185
20years 49,099,612
25years 98,756,858

after doing the calculations it made me so happy that i knew better in where to spend my money cause all these talks of settling down has definitely made me more conscious of my finances. As the saying goes 'your future starts today'. For success two elements are important planning and execution. Now that i have made the plan now its up to me to execute it. God bless :)

Wednesday, June 02, 2010

Amazing Boracay

Boracay is truly an amazing destination, it has a beautiful beach, lovely sunsets and the resorts there are world-class and my girlfriend and i had a truly unforgettable experience there for our anniversary. When i was in Boracay i realized a lot of things especially on the business side of the island. One can see in Boracay how progress can be made possible with the cooperation of the government. The island is truly an attraction of the country and even in my travels abroad and when i say im from the Philippines and 7 out of 10 times the response would be “I've been to Boracay!” or “I wanna go to Boracay.” So i always tell them that it is now easy to get to Caticlan airport from Manila and then just take a pumpboat to the island. Last I've heard this summer there were around 40flights more or less in Caticlan everyday during the peak season. :) It really shows the business that tourism can generate if supported by the government which they have thru the expansion of the Caticlan airport, building of the jetty port in Boracay island and smooth roads to Caticlan. :) my girlfriend and I drove from Iloilo to Caticlan and it took us around 4hours with just one bathroom stop. But if you drive faster I think one can make it a three and a half hour trip. :) the move of the government to move the holidays near the weekends also helps boost the local tourism industry for it encourages our countrymen to explore and travel around the country be it Coron, Subic, Tagaytay, Baguio or Boracay. The country's most visited place by foreigners is Boracay and what brings them to the place is basically the sun and the beach. There is this threat now of global warming and that maybe it might affect the island but the national and local government should make all the necessary efforts to develop the island further and maintain its world-class status. Boracay caters to everybody from class A to C. :) Everything that you need is there be it premium accomodations to the budget hotels. Food is also not a problem because almost all the popular food brands are there and you can also have the local food or buy seafood from the talipapa and have it cooked, you can also try the popular chori-burger of the island or call off the local Jonah's shakes. With activities there is so much to do for the old just to relax, or for the young to party and drink in numerous bars at night. Groups or couples can always try the banana boat, reef walking, Zorb, para-sailing and zipline to name a few. As of last count there have been more than 700,000 visitors last 2009 and there are now more than 5,000rooms available in the island. Boracay was always popular but the boom really started when the big name hotels started arriving a couple of years ago like Shangrila and also the emergence of local players like Discovery Shores, Boracay Regency and Waling-Waling. We stayed in Waling-Waling hotel and the experience was quite memorable because of the good service of the staff and preparing for us a great anniversary dinner(well actually it was more of a surprise anniversary dinner for my girlfriend). :) The food was great and location of hotel is good also :) i couldnt help myself but ask the staff but their clientele and they told me that 70% of their occupants are returning guests and that made me think. Why would those people keep coming back? I can only think of one answer: A SATISFIED CUSTOMER. :) and I have to say I am one also and we'll stay there are next trip back. And as for the tourists of the island of Boracay im sure they will always keep coming back because there always be new memories to be made everytime you're there. :) Let us preserve Boracay and help promote Philippine tourism. :) God bless :)

Friday, March 05, 2010

to buy or not to buy... that is the question

What would you do?

Its good to be back writing after a long lay off. I have been busy with work, busy with stocks, learning what life is all about and i found “the girl.” anyways im not here to talk about my personal life but i do have to admit that what im going to write about has been keeping me busy day and night the past five months. A few months ago we came across this business and the owners were open to selling it to us. So my father and i were interested because it was a business that we were familiar with. The story goes like this... the offer started with a price of around P530m to be paid in three tranches. But after further negotiations the price was brought down to P500m and still to be paid in three tranches. The business has around 100 branches and the takeover of these will also be in three tranches. The estimated returns will be around 16% per annum assuming that everything goes according to plan. The plan is to do cost cutting measures especially on some expenses that we consider “somehwat excessive” and also at the same time making sure that the operations of the business wont be affected when these cost cutting measures are enforced. The only problem with the operations of the business is something i would call extreme. When i say extreme it means that there are a few of very profitable branches and a lot of branches that are either making marginal profits, breaking even or losing money. After further study of the day to day operations of the business and after studying how much we can cut from expenses we discovered that only 40 branches would be making a good profit and the rest would either be losing money or making a marginal profit which if you really think about it... its not worth it to operate and waste your time on. So i would say this would be the most important factor to go or back off the deal. Do you maintain and support all the existing branches or do you close the 60 mediocre or losing branches and then incur a loss of around P30m but in exchange you are able to streamline operations. It was also mentioned that returns would be 16% per annum but we havent yet put into consideration the effect of competition with it driving prices down and with it profits also and that would also mean a longer payback period and lower rate or return. Is 16% return per annum enough for an investment like this? Should we have tried to lower the purchase price? Can you say this is a good investment? Or this is a bad investment? Should one pay a premium for something that one has expertise in? Cause we calculated that the goodwill of this takeover would be around P17m-P20m. Is the goodwill valued fairly? Or is it too much? How can one really value the exact amount of goodwill? Some of the drawbacks of a takeover also would be that you will inherit all the problems of the existing business or as they say “caveat emptor” or buyer beware. Cause no amount of due diligence can really expose ALL the problems of the business it will only be when you takeover and run the business that you will see all its problems. But the main reason why one would consider taking over is that you get into an existing business(one thats running already when you consider it is so hard to start up), one that has clients already, the manpower necessary, the needed infrastructure to conduct business and immediate income(assuming the business is making money). But i do have to point out that despite this not all takeovers are successful also so there would be still some risk. So i would like to hear what you think. Any comment, suggestion or question would be welcome. Or you could also tell me what steps you would take if you were in this situation. Thank you. Take care always and God bless.