Tuesday, August 30, 2011

August Summary

This is a hyperbolic month. It can be painful to see how your portfolio shrink rapidly in size just over a couple of days. However, I did not sell anything but did a bit of trading which I typically seldom do. Leverage on the downtrend to make some small investments into SembCorp and Capitaland.

However, on the plus side, the dividends I got for this month is pretty good. I had dividends for the following counters this month:-


Buffet'S Advantage

This is a good article that remind us that you may read as much as you want about financial guru like Buffet but ultimately you just cannot imitate him blindly. With GIC backing, Tony Tan tried but without similar success though.

Warren Buffett is renowned as America's best investor. He's a grandfatherly guy who lives in a modest house in Omaha, Neb. and only invests in everyday companies that he can understand. He is friends with Bill Gates, but never invested in Microsoft or any other Internet company.
Buffett's technique is simple. He finds a good company, invests at a bargain price, and then rides the company to greater success. He's made millions in Coca Cola, American Express, Wells Fargo, and the Washington Post. And he makes it look so easy that anyone could do it. But it's extremely unlikely that you will be able to match Buffett's level of success, even if you pick the same investments he does.

Back in 2008, during the height of the financial crisis, Warren Buffet made a highly publicized investment in the Wall Street firm Goldman Sachs. Buffett was buying when everyone else was panicking, and as a result many experts thought he was getting into a top company at a discount price.
You, too, could have invested in Goldman Sachs in 2008. But here's the difference between you and Buffett. If you had an extra $12,000, you could have purchased 100 shares of Goldman common stock at $120 a share. Considering that Goldman had been worth over $200 a share the year before, you might have thought you were getting a pretty good discount. You also would be receiving the Goldman dividend of $1.40 a share, a rate of just over 1 percent.

But Buffett had more than $12,000 to invest. He had $5 billion. So he negotiated a much better deal. He bought preferred stock that came with a special dividend. Instead of 1 percent, he negotiated a 10 percent dividend. So now every year he receives a check for $500 million. Then, only after he gets paid, do common stockholders get their paltry 1 percent.

So now, three years later, how have we done? Goldman is selling at roughly $110 a share, slightly below its 2008 price. If you had invested with Buffett, you would have lost about $1,000. Buffett's lost some capital too, but he's collected $500 million a year in his special dividend.
Buffett made a similar deal with General Electric. In 2008 he bought $3 billion in preferred shares with a 10 percent dividend. But you wouldn't have done well to follow him. The stock was selling at around $21 a share in the fall of 2008. Now it's running between $15 and $16, a loss of over 20 percent. But remember, unlike regular investors, Buffett's been collecting that 10 percent dividend. He's still ahead of the game.
Now Buffett is investing in beleaguered Bank of America. He invested $5 billion in a special preferred stock and will be getting a 6 percent dividend, while the regular stock you can buy pays less than 1 percent. Now I don't know whether Bank of America is a good deal at current prices. Maybe it is. But the point is, if you buy now, you're not getting the same terms as Buffett. You're just pumping money into his dividend payment and hoping for the best.

Monday, August 15, 2011

Buffet's Suggestion

Just come across an article from Buffet which I totally agree. We, in Singapore should do the same to foster a sense of social cohesion and prevent us from turning into a tax refuge for the super-rich else where.

Here is a segment extract:-
"For those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate. "

Thursday, August 4, 2011


The Dow, S&P, Dax, FTSE, CAX all sank yesterday. This morning, the Asian indexes are all in the red.
I am not going to do anything for this period. No buy or sell. I made some bad calls with SIA and SAT recently but other than that most of my portfolio are profitable todate. These are the times I start to appreciate the defensive stocks in my portfolio.

US stocks plunged because they investors think that a recession may be looming. There is no liquidity nor credit crisis at this stage. I have no exposure to stocks doing a lot of businesses in US or US denominated dollar stock. So, I am not particular worried. A slowdown in US ultimately will affect Asia but the percentage consumption of US relative to the rest of the world are going down year by year.
Ten years from now, it will be a really different world, I believe. If there are no major unforseen events, the shift of economic center of gravity towards will be even more evident.

For Europe, the major fear is that the banks in Germany, France and peripheral region may be hit with the bad loans given to the high risk countries. This is largely an european issue though some American  banks may get hit is spain or italy get dragged in. Again, I do not think the local banks are exposed to the bad loans but may take some indirect hit. In any case, I do not think the impact will be that large compare to what see in 2008/2009 where nobody really know what going on. What is going on is that the uneconomic parts of europe have to adjust their standards of living relative to the rest of the world, albeit painful.

Yess, these are times that people get nervous (including me) but I am going to stay on the sidelines. For most of my portfolio, I did not do any buy/sell since 2009. It is only the 10% of my portfolio that I trade sometimes.