Which Tarot Card Are You?

My friend recommended this test, quite 'zun'. Its freaky that how much it reminds me of the quote from Wittgenstein in the previous post. Maybe i should learn how to read tarot this holidays.

You are The Wheel of Fortune

Good fortune and happiness but sometimes a species of
intoxication with success

The Wheel of Fortune is all about big things, luck, change, fortune. Almost always good fortune. You are lucky in all things that you do and happy with the things that come to you. Be careful that success does not go to your head however. Sometimes luck can change.

What Tarot Card are You?
Take the Test to Find Out.

Exchange to Canada

Enoungh ranting in my previos posts. I'm happy again.

Got my exchange approval from SMU, so hopefully the University of Western Ontario will accept my formal application. If everything goes smoothly, i'll be in Canada for about 4 months from Jan next year.

Got my course bids after the second round of bidding. Will be attempting something new, a course called, Biological Models for Business Applications, which will incorporate biological model to understand decision making within firms, how firms behave under certain condition, certain firm behavior that correspond to certain biological theories. Sound really interesting, and it sounds like a truly cross disciplinary type of course. Quite excited about that!

"When we think about the future of the world, we always have something in mind its being where it would be if it continued to move as we see it moving now. We do not realise that it moves not in a striaght line...and that its direction changes constantly."
- Ludwig Wittgenstein (Culture and Value)

Keeping the faith

Bill Miller is one of the few money managers that i truly admire. He has one of the best long term records in the money management business. However, now i've got to say you've got to look REALLY long term to find the stretch of period that he outperformed the broader stock market.



The flag ship Legg Mason Value Trust has suffered a drop in NAV by over -36% for the past year and -8.62 over the past 3 years, and -0.4% over the past 5, which compared unfavorably with S&P 1 year, 3 year, 5 year return of -13.12%, 4.41% and 7.58%. You've got to look at records of over 10 years to see the annualised return of Value Trust outperforming S&P 500.

Value Trust has essentially no energy and commodities stocks in its portfolio, which was the higest return sector in the S&P 500 over the past few years. On the other hand, it is heavy in financials, healthcare and infromation technology firms, which has been the biggest detractors on S&P 500.



Given the facts, the questions are

(1) Has Bill Miller lost his touch?

(2) Did anything go wrong?

(3) If yes to (2), then was it due to process or people?

(4) Is it possible that nothing 'went wrong', just the the general market is not kind to this form of value strategy?

(5) Are there any positive outcome from this dismal performance?

(6) What am i worried about?

(7) Is there a need for any action from my part ?



To answer (1), we have to go through (2) to (4). In general, Miller's strategy has been buying companies that are undervalued relative to its intrinsic value. He sees no arbitriary difference between value / growth stock. The general approach is that of discounted cash flow. He prefers stocks with high return on capital, high competitive advantage, and available in huge chunk for purchase at discounted valuation.

(2) Did anything go wrong?

Miller didn't position the fund to participate in the energy sector. Some value player such as the Davis fund purchased some low cost producer and oil and gas explorer and did not miss out too much on the rise in oil and commodities price.

Miller was also (on 20/20 hindsight) too early on tilting the portfolio into housing and financial sector. Read interview here. Last quater puchase of Freedie Mac and the subsequent 40% fall in stock price will hurt the fund performance.

(3) I believe that the process and people are both sound. But it seems that given the aggressive position the Value Fund takes, investors better be expecting a bumpy ride. Miller commented that perhaps he should take a more diversified view on investing, ie finding situations that are statistically advantageous.

(4) I think something did went wrong, in terms of due dillegence in terms of cutting certain losses, when fundamentals of company deteriorate faster than the market quotation. Companies are dynamic, situation changes and the value of firm (esp financial ones) could change quite rapidly.

(5) A great positive outcome is that the fund size has SHRUNK! I rejoice at this as we know that for most fund managers, fund size penalise performance. Given the concentrated portfolio he runs, i'm much more comfortable with his current $9 bn portfolio than the previously $18bn portfolio.

(6) I'm actually worried about two things. One, the huge recent redemption forces the fund to liquidate huge portion of shareholdings at a huge loss, excarbating the fund performance. Furthermore, expense ration will probably increase with the decrease in fund size. The other question is regarding the 'employment' of Bill Miller. I do have faith in him, but i'm not sure the new CEO of Legg Mason (a public company) will have the same patience with Bill Miller.

(7) I purchased the fund to have my money managed by an established fund manager, if he goes, i'm not sure if i'll stay with the fund. But given that i've got no free cash flow right now, i can't average down my investment in the fund. On the other hand, i will not sell any as i believe that the current portfolio is largely undervalued, and the fund's mandate and priciples has not changed.

As usual, I shall be focused on the long term and takes all the volatility in its stride.

For a great writeup on the principles of building wealth, read this great great article from the Davis Fund, especially on the pages on "Expect periods of disappointments".

Miser...Misery

Round two of my bidding for my next term's module has ended, and i've only managed to get 2 mods. I need at least 4 mods for next sem. Inflation has not only hit the commodities market, but also the modules market. All my 'savings' from year 1 has been eroded away by this ruthless inflation. I'm partly (actually wholly) to blame for this debacle. I like to under bid so as to 'save up' for courses that i really want to take. However, this time the strategy has backfired as i missed 3 of my bids ranging from a few cents to a few dollars. I should have just bidded higher and saved myself all the agony of not having classes to take....

Bored stiff in the office. There's only so many annual report or articles you can read. Sitting in a same cubicle from 8.30am counting down to 5.3o pm is no fun. As the internship is ending in 3 weeks time, no new work is coming to me as they are worried about unfinished business when i leave. Hiaz...and now not only do i feel miserable, i felt stupid too.

Found this quiz online, and i spent about 45min on it and i still can't solve it...stupid and have low perseverance level....

Facts:
There are 5 houses in 5 different colors.
In each house lives a person with a different nationality.
These 5 owners drink a certain beverage, smoke a certain brand of cigar and keep a certain pet.
No owners have the same pet, smoke the same brand of cigar or drink the same drink.

Hints:
1. The Brit lives in a red house.
2. The Swede keeps dogs as pets.
3. The Dane drinks tea.
4. The green house is on the left of the white house.
5. The green house owner drinks coffee.
6. The person who smokes Pall Mall rears birds.
7. The owner of the yellow house smokes Dunhill.
8. The man living in the house right in the centre drinks milk.
9. The Norwegian lives in the first house.
10. The man who smokes Blend lives next to the one who keeps cats.
11. The man who keeps horses lives next to the man who smokes Dunhill.
12. The owner who smokes Blue Master drinks beer.
13. The German smokes Prince.
14. The Norwegian lives next to the blue house.
15. The man who smokes Blend has a neighbor who drinks water.

Question:
Can you determine WHO KEEPS FISH?

source: http://www.amazeingart.com/fun/einstein-quiz.html

On outsourcing

I think that “The World is Flat” is a good book and we should all at least be aware of the global forces at play that is changing the competitive landscape, be it at a country vs. country, corporations vs. one another, or human beings competing for the best job and highest standard of living.

Zhao Bin sent me this hilarious write up from Esquire magazine today. I was laughing so hard that I think I scared a fellow intern at work when she approached me to ask a question. It is a MUST READ. Haha.

The full article is available here.


Excerpts from the article:

The next day I email Brickwork, one of the companies Friedman mentions in his book. Brickwork — based in Bangalore, India — offers "remote executive assistants," mostly to financial firms and health-care companies that want data processed. I explain that I'd like to hire someone to help with Esquire-related tasks — doing research, formatting memos, like that. The company's CEO, Vivek Kulkarni, responds: "It would be a great pleasure to be talking to a person of your stature." Already I'm liking this. I've never had stature before. In America, I barely command respect from a Bennigan's maître d', so it's nice to know that in India I have stature.

A couple of days later, I get an email from my new "remote executive assistant."

Dear Jacobs,
My name is Honey K. Balani. I would be assisting you in your editorial and personal job. . . . I would try to adapt myself as per your requirements that would lead to desired satisfaction.

Desired satisfaction. This is great. Back when I worked at an office, I had assistants, but there was never any talk of desired satisfaction. In fact, if anyone ever used the phrase "desired satisfaction," we'd all end up in a solemn meeting with HR. And I won't even comment on the name Honey except to say that, real or not, it sure carries Anaïs Nin undertones.

Oh, did I mention that Vivek sent me a JPEG of Honey? She's wearing a white sleeveless shirt and has full lips, long hair, skin the color of her first name. She looks a bit like an Indian Eva Longoria. I can't stop staring at her left eyebrow, which is ever so slightly cocked. Is she flirting with me?

Honey has completed her first project for me: research on the person Esquire has chosen as the Sexiest Woman Alive. (See page 232.) I've been assigned to write a profile of this woman, and I really don't want to have to slog through all the heavy-breathing fan Web sites about her. When I open Honey's file, I have this reaction: America is fucked. There are charts. There are section headers. There is a well-organized breakdown of her pets, measurements, and favorite foods (e.g., swordfish). If all Bangalorians are like Honey, I pity Americans about to graduate college. They're up against a hungry, polite, Excel-proficient Indian army. Put it this way: Honey ends her emails with "Right time for right action, starts now!" Your average American assistant believes the "right time for right action" starts after a Starbucks venti latte and a discussion of last night's Amazing Race 8.

As on every morning at 8:30, I get a call from Honey. "Good morning, Jacobs." Her accent is noticeable but not too thick, Americanized by years of voice training. She's the single most upbeat person I've ever encountered. Whatever soul-deadening chore I give her, she says, "That would indeed be interesting" or "Thank you for bestowing this important task." I have a feeling that if I asked her to count the number of semicolons in the Senate energy bill, she would be grateful for such a fascinating project.

Every call ends the same way: I thank her, and she replies, "You are always welcome, Jacobs." I'm starting to like her a lot.


The best rejection notice in journalism history

Honey is my protector. Consider this: For some reason, the Colorado Tourism Board emails me all the time. (Most recently, they informed me about a festival in Colorado Springs featuring the world's most famous harlequin.) I request that Honey gently ask them to stop with the press releases. Here's what she sent:

Dear All,
Jacobs often receives mails from Colorado news, too often. They are definitely interesting topics. However, these topics are not suitable for "Esquire."

Further, we do understand that you have taken a lot of initiatives working on these articles and sending it to us. We understand. Unfortunately, these articles and mails are too time consuming to be read.

Currently, these mails are not serving right purpose for both of us. Thus, we request to stop sending these mails.

We do not mean to demean your research work by this.

We hope you understand too.

Thanking you,

Honey K B

That is the best rejection notice in journalism history. It's exceedingly polite, but there's a little undercurrent of indignation. Honey seems almost outraged that Colorado would waste the valuable time of Jacobs.

--------------------------------------------------

Hope you guys enjoyed the above excerpt.

We live in a hyper competitive world. We may not have witnessed the perils of globalisation firsthand in our daily lives, but its impact will be felt throughout our little island sooner or later. The accounting profession is considered by many a near "iron rice bowl". When SIA outsourced its accounting unit to India, many accountants suddenly find themselves jobless and have no transferable skill as many of them began their career with the firm right from the start.

So unless you are the local barber or the coffeeshop owner, your business / career will be impacted by globalisation sooner or later. Will we soon belong to a bunch of people with education, with obsolete skills and wishful thinking of high pay?

The only certainty in life is change. Change, or be displaced.

Done deal

A new stock symbol has appeared in my list of investment holdings, BAC, aka Bank of America Corporation. But i did not buy this stock, but got it as a result of my investment in Countrywide Financial which got acquired by BAC in a stock deal. Hope to share this experience with anyone out there who is thinking about buying bank stocks.

Countrywide was a very interesting investment experience for me. For it is the first time that i veered away from the buy "good company at fair price" principle and tried to buy fair company at cheap price.

Performance (or the lack of it)
In terms of percentage loss, this venture was a disaster as nearly 80% of initial investment was lost.
In terms of dollar lost was bearable as only a few hundred dollars was invested.
In terms of impact on portfolio it was negligible as only a few percent of investable assets was committed to it.

The Story
I got interested in Countrywide as the subprime mortgage crises started to capture headlines in news report and magazines. Countrywide was the largest US subprime mortgage lender and its stock price got hit hard as fear of loan delinquency and its inability to raise capital was put into question. After BAC injected $2bn in fresh capital into the firm, i thought the capital adequacy ratio of CFC was very comfortable. At about $18 per share, it was selling at a price to book ratio of about 0.75. Which was to me a rather cheap price. So i bought some shares and hope to unload and sell when the market revise its opinion on CFC and value it at its historical premium to book.

Then BAC took an interest in buying out CFC in May earlier this year at for a stock for stock deal which values CFC stocks at around $6 (as of closing date). As of the last quarter 10k report, book value per share of CFC is about $23 per share. So CFC sold itself to BAC at about 0.27 times book value, and i still think that they sold themselves cheap.

Lessons Learnt
1. A stock that is cheap can get cheaper, and outside passive minority shareholder have to accept whatever deals management suggests.

2. In a crises, weaker companies gets gobbled by stronger ones. Stay with the stronger company.
3. Insider may have different incentive as compared to outside shareholders. CEO of CFC, Angelo Mozilo helped sell the company he has built and got a nice severance package along with it as shareholder value gets destroyed.

4. Don't follow blindly. Part of the reason for purchase was that investors such as Wally Weitz and Bill Miller started loading up on CFC in 2007. Wally sold off his shares as of 4th quarter 2007 as he believes that the mortgage crises will hit CFC harder than he thought it would. No managers will tell you when they sell. So please don't buy when they buy. haha, how simple to know what to do yet so hard to follow your own advise.

5. Historical valuation in terms of shorthand like PB or PE tells us little about value.

6. and once again, value can be ignored in the short run but for quite an extended period of time. Have patience.

7. Rectify mistakes as early as possible. I realise that i should not own CFC when i did not wish to average down as the stock price fall as i did not have confidence in the management team of the company. That's when i should have sold. This contrast markedly with American Express and JPMorgan which i happily averaged down my purchase price as i have huge confidence in the company and the management.

Bank of America - haha, forced to acquire this company that Xin Hong loves. Gotta dig his brains for a concise overview of the competitive strength of the bank. At a PB of 0.72 and PE of 9, this acquirer sounds cheap to me. my reasoning sounds all to familiar 9 (see pt 1 & 5) ...darn...old habits die hard.

The Witch of Portobello

Back from one week of camp. Glad that I've brought my ipod and 2 books in, due to the lots of waiting time in between activities. i'm still the mosquitoes-magnet outfield despite multiple layers of inscets. These little commandos paid with their dear life trying to get close to me as i channeled my restless energy from our last sat choir to these buggers.

Read "The Witch of Portobello" by Paulo Coelho in the firing range and in camp over the past few days. Its a very interesting book and forces me to rethink about the relevance of the 'conventional' path. It seeks to explore the following "How do we find the courage to always be true to ourselves—even if we are unsure of whom we are?"

The book is told through a series of interviews with many characters, some who knew Athena (aka The Witch, Sherine Khalil, or The Mother) well, and some who don't know her at all. The second half of the book kept me awake at night thinking about the journey Athena went through to harness her power, to liberate people which led to her ruthless murder. Is it worth it all?

"Athena's great problem was that she was a woman of the twenty-second century living in the twenty-first, and making no secret of the fact, either. Did she pay a price? She certainly did. But she would have paid a still higher price if she had repressed her natural exuberance. She would have been bitter, frustrated, always concerned about 'what other people might think,' always saying, 'I'll just sort these things out, then I'll devote myself to my dream,' always complaining 'that the conditions are never quite right."

Deidre O'Neill, known as Edda (Athena's teacher)

--------------------------------

yes guowei, i do love trival things too. watching Gossip girls is such as splendid waste of time as it allows your brain to completely zonk out.

btw, Wanted is a quite an entertaining show, terrible plot, good acting, and action sequence that is just 'over'...left me wanting to curve my bullet during range after watching the show on wed though.