Archives for posts with tag: secret millionaire

Markets in this region have been tanking and the STI has fallen below the 200-day EMA to the point that it’s about to pull the 50-day EMA below the 200-day. While this isn’t a perfectly reliable indicator in itself, this could present a good buying opportunity if this trend continues for another 6-9 months.

Anyway, if you’ve had a tough week, here are some reads to make it better.

 

‘Stingy’ millionaire donates S$3.35 million from S$20 million fortune to charity after his death (TODAY)

I’ve written about people like Agnes Plumb and Ronald Read. Finally, there’s an example from our local shores. Mr. Low Kum Moh was a sub-accountant who was born into a family of fishmongers. The secret to his wealth? Frugality and investing in the stock market over a long time-frame. This is pretty much the same story as the other ones I’ve featured here. The point of it all is that great fortunes can be made by people that most would consider very normal. The trick is to find a strategy that works and keep plugging away at it.

Which brings us to the second read.

 

In Praise of Incrementalism (Rebroadcast) (Freakonomics)

Freakonomics was the book that convinced me that economics could be interesting and that probably saved my university life.

In this episode of their podcast, they make the point that lots of progress in this world are based on incremental progress. The problem with most of us is that we tend to view great events or inventions as if they happened miraculously.

In particular, I love this example that their guest, economist David Laibson points out:

LAIBSON: One has the impression that it’s impossible to save enough for retirement — and to a certain extent, it is impossible if you start at age 50. But if you start early in life, and every year, you contribute let’s say 10 percent of your income, and maybe there’s an employer match, so now we’re up to maybe 15 percent, and you invest that savings in a diversified mutual fund, stocks and bonds, and you have low fees, and you keep going at that year in and year out, and you don’t decumulate prematurely — it’s amazing how that process produces millions of dollars of retirement savings. So it’s kind of hard to imagine how you go from what seems like a little bit of money each year to being a millionaire but that’s exactly the way it works when you work out the math.

Instead, most people often aim for that lottery ticket like buying bitcoin. Most people who do this put very little at the beginning (like a lottery ticket) and when it starts to pay out in a substantial way, they then proceed to bet the farm thinking that what has happened will go on indefinitely.

Unfortunately, this is almost always precisely the time when things start to go bad. Think of someone who bought bitcoin at $500 or $1,000. After seeing the price of bitcoin go to $10,000, they feel like a genius and proceed to place even bigger bets. Well, the bet may have paid off temporarily but look at how it’s turned out.

Which brings us to…

 

Bitcoin Bloodbath Nears Dot-Com Levels as Many Tokens Go to Zero (Bloomberg)

I’ve been writing about the problems with Cryptos since late last year (see here, here and here). To be honest, I’m not as pessimistic about crypto now as I was last year. Of course, there’s nothing fundamental to base my thoughts on but buyers are surely not as euphoric about cryptos as they were late last year.

I suppose the article compares the crash in cryptos to the crash in the tech sector during the dot-com era as prices in both situations have nothing fundamental to support them but I would argue that bitcoin is in a worse situation because, in case of the dot-com stocks, you could at least see if things were getting better based on a turn-around in cashflows and profits.

For bitcoin and cryptos, you have to track whatever these cryptos are meant to replace and see if those things are getting replaced at all.

Anyway, here’s the million-dollar picture from the article above.

bitcoinCrashJun18

 

Have a great week ahead!

An acquaintance of mine posted this (along with a picture of the book ‘Reminiscence of a stock operator’*) on his facebook wall the other day:

“Retail investors quote Warren Buffett. Fund managers quote Jesse Livermore.
Who would you rather trust?”

I’m not sure why these two financial market personalities were even mentioned in the same breath but given this particular acquaintance’s recently found interest in trading I think the point he was trying to make is that if you want to make serious money, go down the path of the fund manager and not the retail investor.

There are a couple of ideas implied in that sentence that I find terribly misinformed.

First off, not all fund managers are going to have short holding periods (and therefore, should be classified as ‘traders’). Most do but that doesn’t change the fact that different fund managers have different styles and mandates.

Second, studies (championed by financial market luminaries such as Jack Bogle) have shown that fund turnover correlates strongly with worse returns.

Next, I like to present to you Jack Macdonald.

Jack who? Well, Jack MacDonald was a retired attorney from a Washington State who left close to US$200 million in his trust to three charities. That’s right. You didn’t read that wrongly, he left almost US$200 million. How did Jack do it? He didn’t do it by running an extremely profitable legal practice. Nor did he trade his way to those riches. He just stuck to good old fashioned investing and playing really strong (financial) defence. So strong, in fact, that no one in his retirement community even figured he was a millionaire, much less a hectomillionaire. The beauty of what he’s left behind is that his trust will probably be able to generate millions of dollars to disburse year after year to his charities in perpetuity. This is the kind of legacy you can build through proper investing. (you can read more about him here. h/tip: Joshua Kennon)

Trading might be a way to get you to riches but ultimately, to leave behind a legacy that lasts, one will have to adopt proper investing.

Lastly, I thought I’d mention that Jesse Livermore died penniless and of a self inflicted gun wound while Warren Buffett looks likely to eventually pass on a wealthy and happy man.

I think I’ll continue to listen to the retail investor in me.

*This book, of course, is the biography of Jesse Livermore.