Kenyantykoon's Blog
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is a university education really that important??
Posted: May 19, 2010, 2:58 pm by kt
When i was younger, like in secondary school and high school, i had teachers that drummed it into our heads that to succeed financially in this life, you needed a college education. It went without saying that the harder the course you chose to do in campus the more money you would make.
It never crossed my mind that this advice that the teachers were giving was hypothetical because most of the primary school teachers did not have degrees and while the secondary school teachers did have them, they were really not as financially well off as they had made us believe that college educated people are supposed to be.
I took the advice they gave as the proverbial gospel truth and applied myself to getting the best grades in the hardest subjects like maths and the sciences and then get the hardest course i could get in campus. I did this because of something called delayed gratification- this is the foregoing of present pleasure for a greater more satisfying one in future. In my mind, the sleepless nights and the lack of any form of social life would be repaid by a better income than most of my peers. To cut a long story short, i got really good grades and subsequently a notoriously hard course in campus.
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Well i am starting to question the wisdom of the advice that i so tenaciously stuck to. Questions that keep swirling in my mind include; is it always that very good grades are a prerequisite to financial success? if the better the grades the deeper your pockets, then why aren’t these professors(that teach thing that for the life of me cannot seem to get my head around) the richest people around? What about the high unemployment rates among new graduates?? If times are so good for those guys that graduated before me, then why is it that i see them still in the campus grounds(some even coming back to do other courses-shouldn’t they be out there making fortunes)?
Of late, the fire of these questions has been rekindled by an article that i read in the wall street journal . It was titled a lament for the class of 2010. It is basically a reality check for the green new graduates that the real world isn’t what we have been made to believe by the so called generation x and the oh so misleading main stream media. It is talking about how ivy league grads(graduates of some of the best schools in the world- harvard, yale etc) are having to do menial jobs like clerks, delivery jobs and the like because of lack of gainful employment. On top of that, they have colossal student loans to pay. Some are even going back to school for other degrees and in so doing getting other student loans. This is extremely thought provoking article here. It posed more questions that answers in the solutions that it gave to this problem.
To make matters worse, there is this article that i read some time back(i had to google keywords to get it) about the bleak situation that college grads in china(keep in mind that china has one of the largest economies in the world). Many grads are living like paupers because they cannot find gainful employment. This is not the situation that we were promised when i was younger. They told us that when we got good grades, the money would just follow. Well clearly this is not entirely accurate.
New york times offers some kind of solution. According to them you can always chose not to go to university. In this somewhat convincing article, plan B- skip college they say that those how skip college education have a better chance of employment than they college educated counterparts. Even though the pay will not be as good as the elusive white collar job promises, at least you wont have to excessively pound the pavement looking for a job because according to their research, it seems that these blue collar jods will need workers in the tens of thousands. You can read the linked article at the beginning of the paragraph. To me it makes sense but there is one little kink. How many adolescent precollege kids actually read this article and thought deeply about what it says? Most teenagers would rather look up celebrity gossip websites and magazines that read things that will complicate their fun lives. Most of those that read this article are either graduates or are in college. The people that this article is supposed to help are probably indifferent to it.
So that said, i have a solution that does not entail dropping out of college or eschewing higher education. In very few words, here goes. TRUST IN GOD WITH ALL YOUR HEART AND LEAN NOT ON YOUR OWN UNDERSTANDING. This bible verse sums up all we need to do. I am for the opinion that it is God that directs us to get income sources and find joy and happiness in his life. If a young person trusts in him, them there is no reason why He should not give you a way to take care of your bills and food and stuff.
I mean, if ivy league grads are having a hard time getting good jobs, what about the rest of us that are in universities that nobody ever heard of?? I have seen and countless semi educated people make more money in a day that college grads make in a year(thats the truth). So instead of trusting in the school you go to, the course that you do, the connections that your parents have(this is mostly how the luckier ones get jobs), trust in the King of kings for a livelihood and i am sure beyond any question or shadow of a doubt, that He got your back for life.
This is the new direction that i have decided to take and i hope it is the right one.
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value investing; underrated or overrated??
Posted: May 17, 2010, 2:43 pm by kt
Sometimes I think that this concept of value investing is under rated.
By value investing, I mean instead of being cautious in your investing endeavors and taking your time to research the company that has caught your eye, perform due diligence by going through the company’s financial documents and making sure the company is sound. Researching the stock brokerages you use would also go a long way in ensuring that your cash is safe from the thieves who break in and steal
Why I say that it under rated is because no matter who much the virtues of cautiousness in investing are preached, there are so many people that will not listen and will always want to do their own thing. There is a common misconception that the stock market and investing in general are like casinos where you get a lucky streak and make it rich with a few trades. The fact that there are a few people that have made millions and billions in the stock markets just serves to fuel this (somewhat deceptive) fantasy.
The idea that one can make a colossal amount of money and with it, all the debt and other money problems disappear into nothingness makes people lose all common sense and just put their money in “investments” that a level headed person would normally not touch. For instance, we all know that at a certain point in time, google and Microsoft were unknown startups but in a few short years they have become phenomenally successful, making millionaires and billionaires(these are mostly the people that invested large amounts of cash when the stock was not a blue chip but a worthless penny stock Just this fact, that you can become so wealthy by just getting in the right IPO at the right time makes people not even want to look at any financials or analyze the company’s future prospects. I mean will it matter when the stock blows up and makes me a millionaire after which I will cash out and retire?? This happens all the time even if when many of the IPOs are low quality. This mistake has caused unprecedented destruction on wealth. The most recent is the stock bubble in the late 90s.
Even with so many examples in the past, we learn from history that we never learn from history. The thrill of making a windfall because you bought a stock at the right time will make the sense of value investing be thrown out the window. Needless to say, more often than not, things never really work out for the investor’s benefit. The ones that bought the stock at the right time, watched it rise will not want to sell it because it seems that it will continue rising forever. They will not know when to sell because they did not analyze the stock and thus have no idea what the book value of the stock is and consequently how grossly overvalued it has become.
To make the point that value investing is very beneficial and can be profitable, seeking alpha as a post on the merits of value investing.
It goes without saying that those that under rate the aspects of value investing get burnt. I am for the opinion that when you want to invest in something, get to know it very well and then go in. This goes for many aspects of life like business, relationships etc, not just wealth creation.
On the other hand you can say that value investing is over rated. This is because when you stick to these maxims like due diligence, poring through financial records, going through the company with a fine tooth comb will mean that you will not get those once in a lifetime stocks that make you more money than the rest of the portfolio. This stock can very well be an IPO, a company that is rolling out a new product in a very important industry, a company that just revamped its management or whatever. The common sense of value investing will mean that you will miss out in these sweet deals that are evidently very rare.
I think this money making business is just confusing. What do you think??
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blast from the past; a few posts that shouldn’t be forgotten
Posted: May 13, 2010, 5:36 pm by kt
I was thinking to do a post on shorting and longing stocks and in the middle of the prep i decided to shelve it and link to a few good(read highly rated) posts that i did months ago but have since fallen into oblivion.
Here we go;
1. Please do not invest in mutual funds: When i had just started reading more into financial things and investing, i came across a few demerits of mutual funds that caused me to be vary weary of mutual funds. This post deals on the demerits of mutual funds and the things that these investment companies will not tell you. It bashes mutual funds and elevates the virtues of index funds.
2 Why the banking industry should be abolished; This post bashed the bloodthirsty faceless corporations that are today’s banks. I could have been more thorough if i had described how these banks came to being but there wasn’t enough space.(i personally don’t like long drawn out posts). I can assure you that they came about because of manipulators and plain old human greed. In this post, i show how banks legally counterfeit money by using something called fractional reserve banking. I tried to make it as easily understandable as i could so if you have any questions, please email it or post it in the comment box.
3. secrets of the self made millionaire; simply put, this is one of those motivational posts that most of us like reading so much. Everyone wants to be a millionaire and this post shows some guidelines on how to be just that. Now sometimes i think that finally getting this coveted title of multimillionaire is over rated because of something that i read in free money finance about a millionaire who gave millions of dollars to charity. Why i am saying that it is over rated is because if this title is so valuable, he wouldn’t have given out all that cash.
4. the alpha woman; myth or fact. This post started as a discussion about these high flying women but the comments just seemed to inflame some readers to no end. The comments were almost becoming a flamewar. Needless to say i decided to steer away from the more controversial posts like this one. In the retrospect, the argument was kinda fun.
5. the types of economic depressions. i wrote this post when the recession was still raging and there was talk of it degenerating into a depression. The only depression that i have ever read about was the one of the 1930s and so i wanted to show readers what i had found out about this economic disaster. Even though i cannot really say that there is a real danger of a depression, i think that you should read and get to understand them a little bit more.
6. are savers losers??. This post was insired by one or robert kiyosaki’s teachings that at the moment don’t really agree with. It makes a little sense but then i guess it is for the hearer to decide. Another post inspired by robert’s teachings was the criticisms of his latest book, the conspiracy of the rich.
There are others but i think i will stop there.
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even super-investors make mistakes
Posted: May 12, 2010, 6:23 pm by kt
I was reading through yahoo finance and I happened to come across this article that shows the losses that Warren Bueffett has made in his time as the CEO of Birkshire Harthaway. Here is another set of mistakes that cost the company billions.This link also includes lessons learnt.
A quick over view of some of the almost fatal mistakes that he made in the past are;
1. A mis-prediction of what would take place in the future and thus buying a stock at a price that was retrospectively too high.
2. Getting caught up in the emotions of the stock market and thus making you not perform the required due diligence. In this respect, he said that the investor that can control his emotions is at an advantage. Something like the human nature and investing post i did a few days ago.
3. Being attracted to near exponential growth in a company while in fact a level headed investor should be skeptical of it.
Instead of spoiling the evidently well written articles, i think that you should read through them. Quite interesting.
Reading the articles actually make me feel good about myself. This is not because I am a sadistic pig that likes watching people losing a lot of hard earned cash. No. I feel good because I see that the super investors that most people in the financial world look up to are just as human as the rest of the small individual investors.
It also makes me see that these people at a certain point in time were small investors will pitiable portfolios and very little skill in the way of analyzing stocks, analyzing bonds, performing due diligence and the like. They have made it in their chosen fields because of being willing to learn from mistakes and always honing their investing skills with an awe inspiring single minded resilience. While they are not perfect money minting machines(evidenced by the losses) they are always trying to be better and better. Persistence in something you want will always work for you.
Seeing them lose a lot of shareholder’s cash makes me see that they are human and that I also can make it in whatever I apply myself to doing.
Those were a young investor’s random thoughts
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robert kiyosaki’s conspiracy of the rich- my criticisms
Posted: May 11, 2010, 2:56 pm by kt
Some time back, I did a personal book review on Robert Kiyosaki’s book the conspiracy of the rich.
I did not want to break any copyright laws so I just did an overview of what the book was all about without saying much in the way of criticism. This post will deal with just that; the criticisms.
While I credit the book in increasing my understanding of the recession, (I read it online when the recession was still raging)there was a lot of advice that was given in the book that a normal small individual investor really cannot use and profit from on a consistent basis.
One of them was the new rule that eschewed diversification of investments and preached the virtues of focusing and specializing. On paper this seems doable but the problem that I see is that this can only be done with very experienced professional investors who know how to look for good quality stocks and put a whole lot of cash in the deal. This will then be helped by the skill sets and policies that are in their disposal to make a major killing. Here, I am thinking that only hedge fund managers can use this advice to their advantage and not be hurt. The book does not say this. It puts the rule in such a way that any john Q public can focus his cash on fewer investments and not be hurt if the selection was badly done.
Another rule that RK preached was leaning how to use debt to make money. This flowery piece of advice seems so easy to do but he does not at all mention exactly how this is done. Not everyone can do to the bank and ask for a loan to invest, get it and use it to make millions more. It is only experienced money managers that have the ability to do this. This is because the super investor is not investing on his own behalf but on behalf of a large company with deep pockets. He will also need to have a good credit worthiness and reputation before he can get cash from a financial institution so that he can invest in an idea. Again the book does not at all mention how the individual investor should go about this and “get richer beyond his wildest dreams”
continuation of post
Something else that I got at the end of the book is that to make fortunes in the stock market you need to use information to your advantage. He said that you do not need money to make money, just information. He said that instead of investing cash in a stock and making cash after the stock has gone up(bull market), you only need to wait for a bear market and short the stock. At the time that I was reading the book, I did not know the intricacies of shorting stocks and so you can guess that my imagination was captivated with this new concept. After scouring the internet I found out that to successfully short stock, you needed experience, nerves of steel, VERY deep pockets and a very skilled financial team behind you. No wonder that it is mainly hedge fund managers and professional investors that sort stock and make killings. The book did not even give any hint like this.
Truth is that I can go on forever looking for kinks in the book but I will stop here. To cut I long story short, I don’t think that Robert kirosaki should be regarded as a professional investor that dishes out credible investment advice. What he does, and I say this to his credit, is to get people out of complacency when it comes to money matters. He is uncannily skilled in this respect. Hey, he made me research about shorting stock and in the process leant a lot of other things.
follow this link to buy the book for less that $10 and make up your own opinions
What is you take after reading the review and the book??
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the human nature; the investor’s enemy
Posted: May 10, 2010, 6:10 pm by kt
For some time now, I have been reading many articles and books about investment, particularly those dedicated to value investing. There is a lot that I have learnt from them about analyzing stocks, analyzing bonds, looking for margins of safety when investing, financial documents that an investor has to analyse, other factors that the investor has to look into before making his investment in the company etc
In all this reading, something that seems to interfere with the investor in ways that cannot be controlled is the human nature.
Let me illustrate. In value investing, we are told to analyze a security by finding out many characteristics like book value, intrinsic value etc. The authors say that one must not invest in a stock unless it is selling at a price that is below this book value so that you will get a discount. The reason given for this is that an investor will have a good margin of safety because the stock can still fall a few points before the invested principal is touched. This margin of safety will mean that you will be in effect safeguarding the cash that you have invested in the stock. What is implied in advice like this is that one has to scout the stock market for these bargain issues. This is where the problem comes in.
Human nature will see short term profits in popular stock and jump right in. We see a popular company that seems to be growing at exponential rates and just indiscriminately buy into the stock before even getting a single financial statement or prospectus to help in decision making. More often than not, this exponentially growing company’s stock is grossly overvalued but we never seem to see that. All we see is the hype the media, websites, finance gurus and the like telling us to BUY, BUY, BUY!!!. It is no wonder that many people have lost so much cash in the markets because they never took the time to study the hole they would be throwing money into.
Due diligence must never be thrown out the window when looking to grow the cash that you have. It makes no sense to work 10 hours a day and then dump all that cash in a worthless media hyped IPO making stock brokers wealthy at your own disadvantage. If you cannot take time to analyze a security for investment, don’t get into it no matter what the stock broker or the neighbors say.
In the intelligent investor, they say that the human nature Is the hardest thing to control and the investor that can keep his emotions in check when undertaking his investment ventures is more likely to be more successful than one that follows the emotions in the market; easier said than done.
There are very few people that have the stomach to watch stock prices loose 80% of their value and not lose any sleep or sell the stock because according to them, the company had not become in any way compromised and the price drop is just because of human emotions following what the market feels. I think that is why dividendmonk advocates for a watch list when investing. This would help an investor analyze stocks and invest or sell when the fundamentals of the company change.
My take is that human nature is hard to control but not impossible. I think that if we can be realistic in investing and have well put out goals when investing, we can avoid the stresses caused by the market emotions.
What do you think on this??
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how to use due diligence in your investing
Posted: May 5, 2010, 4:44 pm by kt
In most cases, this is value investing in a nutshell; due diligence.
For those unfamiliar with this very important term, due diligence is basically exhaustive research of all the aspects of a business whose stock or bonds you with to buy. So in a sense, this is the aspect of value investing that this site deals with and in the research looking for a margin of safety good enough to attract you to that security.
I along with others in the value investors circle believe that is is of major importance to do your research in whatever stock or bond you want to invest in. This research will help you to ascertain whether the security is worthy of your hard earned money.
I have dealt with part of this due diligence in other posts.
When you want to invest in a stock you need to look at the financial documents of the company. This documents include annual and quarterly reports, proxy statements, balance sheets, conference calls from the CEOs of the said companies etc. A more comprehensive explanation of this documents are found in this earlier post in financial documents needed in security analysis.
Other off the record things that you should look at when undertaking due diligence is whether the management is sound. What i mean by this is whether the management agree with each other or whether there are always senseless squabbles all the time. Another thing you could do to gauge the quality of the management is to see whether they are able to create a good working environment for the workers. The simple reason for this is that a motivated workforce increases the quality of the company that will invariably mean higher dividends in future for you the shareholder.
When undertaking due diligence, it is advisable to look into financial record 5-10 years back from the present so as to be in a somewhat good position to judge the quality of the company.
Also there was a time that i did a post on how the investor analyses a stock for investment and i guess this is a good a time as any to link to it . This will also help.
When analysing for bonds, the same is taken into account but since at some point i did a post on how to analyse bonds for investment there is no reason to repeat all that was said. Just read through the linked article for more information.
Another thing that i read in a finance/investment book/guide is that check to see how much of the stock is owned by big investors like banks, bard companies, insurance companies, you know, the big dogs. If more than half is in the hands of these institutional investors, look elsewhere for stock and leave that one. IPOs normally have this disadvantage.
So basically that is due diligence and what the security analyst and super investors like the oracle or omaha do all day long.
how do you undertake your research??
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how to get ripped off by stockbrokers
Posted: May 4, 2010, 6:03 pm by kt
This post has been partly inspired by a movie that i recently watched called boiler room.
In it there are these very shrewd stock brokers that were in the business of selling stocks of IPOs to the public over the phone. What they did is that they would get a the telephone numbers of people from God knows where and talk them into buying a stock that will be floated in the market in the coming days.
Personally i was very impressed by the way the smooth talking brokers ripped so many people(mostly professionals like doctors and businessmen who are supposed to know better) off their cash using financial lingo that if you knew what there were saying, couldn’t fall for it.
To fall for such conmen calling themselves stockbrokers, follow this advice;
1 BE AS IGNORANT AS POSSIBLE ABOUT FINANCE AND INVESTMENT
This is the first thing that they used. They made people believe that the stock market was a place where people in the know went to get cash in the truckloads. They made people believe that the stock they were selling you was quote “the next Microsoft” and you would become rich with a 40% return with a single stock in the next few weeks! Needless to say so many people fell for it hook line and sinker.
So if you want to see all your life savings and maybe your house go poof, then don’t learn anything about finance an investments and then after that ignorance if fully ingrained, go invest in the stock market.
2.TRUST THE STOCKBROKER WITH YOUR LIFE AND MONEY
When your stock broker calls you with the deal of a lifetime, don’t even ask for the financial documents of the company and do your own research. Just do exactly what the broker tells you even though that it is known for a fact that brokers make money each time you, the client makes a trade, whether it is a winning or losing trade. Don’t even consider that he just wants you to buy stock no matter how useless so that later on you will trade it again probably making losses for yourself and making him more commissions in the process.
In that movie most of the clients were convinced by the broker to implicitly trust them even to the point of giving up their life savings to the brokers. Needless to say these clients almost invariably lost all their cash.
3.DON’T DO ANY RESEARCH ON THE BROKERAGE FIRM THAT YOU WANT TO INVEST THROUGH
This is another classic way to maker sure that you lose a lot of cash in your investing. When you fail to research your brokerage firm, you may just end up with bunch of thieves calling themselves brokers and cause your financial ruin caused by mismanagement of funds and illegal trading with YOUR money.
In this movie, the said firm had a terrible reputation among other more reputable firms so an investor who made just one or two calls to find out about the “firm” couldn’t have lost their money.
4.BE UNREALISTIC ABOUT YOUR EXPECTATIONS
When you think that you will get 30 to 40 percent returns in one stock in the span of a few weeks, then you are a prime candidate for unscrupulous brokers who will take advantage of this ignorance and greed to take you for as much as they can at your expense and their profits of course. Don’t even pay attention to the fact that most stock market annual returns are in the single digit figures and just this small fact makes more seasoned investors satisfied.
Continue expecting astronomical returns and see where that ends up, (probably with your demise)
This promise of gargantuan returns was another weapon that the crooked brokers used in netting their fish and it worked very well i might add.
5.DON’T MAKE RECORDS FOR ALL THE TRADES YOU MAKE
When follow this through and not keep track of all times that you have traded stocks and by what amounts, you put yourself right in the chopping block for crooked stock brokers to slice you up. They are in a position to alter your accounts at will, add more imaginary charges on you with impunity because you have no records to show how you account and portfolio should look like. In the end you will just watch your money go down the drain and have nothing to do about it.
Infact this is how the now infamous bernie maddoff made his fortunes.
I did not get this from the movie but is still serves the purpose
There you have it. These are the main points that when followed to the letter will make sure that your savings and probably your investing career will be shot to hell
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Blah blah blah
Fish cakes
Alas a fish cake.
Yet more fish cakes
Guess what ... yeah ... fish cakes.
The end of the fish cakes
