The Importance of Integrity

Warren Buffett looks at three character traits in people who surround him:  integrity, energy and intelligence.  He says, if you don't have the first, the last two will kill you.  In fact, if they don't have integrity, he would rather his managers be lazy and dumb.

"Integrity is like oxygen.  If you don't have it, nothing else matters."

"Be honest.  Never lie under any circumstances.  Just basically lay it out as you see it.  Simply speak openly and frankly."

Integrity is also about principles, full disclosure and openness.

Integrity is a choice, and the lack of it most often leads to self destruction.

The Value of a Good Reputation

"Conduct all business way inside the lines. and if it is near the line or on the line don't do it."  This advice would keep you out of trouble.

"Never do anything in business that you wouldn't want printed on the front page of your local newspaper written by an intelligent but critical reporter."

Always be on the lookout for managers and business with excellent reputations as possible acquisitions.

"It takes twenty years to build a reputation and only five minutes to ruin it.  If you'd think about that, you'll do things differently."

"He that is of the opinion that money will do everything may well be suspected of doing everything for money." (Benjamin Franklin)

Respect Yourself and Others

Follow the rules of common courtesy and political politeness.  Answer all letters promptly with a lighthearted one-paragraph reply.

"Of the billionaires I have known, money just brings out the basic traits in them.  If they were jerks before they had money they are simply jerks with a billion dollars." (Warren Buffett)

Good Character, Strong Ethics

Business success and wealth creation can be achieved with the highest ethical standards and without shady, questionable practices.

Warren Buffett treats his shareholders like partners and has created wealth with them, not at their expense.  

Character is tested most in defeat or when you have great power or great wealth.  A powerful man in business has stood the test of time and power.

One of the most powerful messages Buffett delivers in his humorous style is this:  Make a list of all the traits you admire and respect in others.  Think of people close to you or even those who have passed away.  His point is that whatever character traits you put on your list, you can adopt those same qualities and be that person.  Warren Buffett also suggests to his student audiences to make another list of the character traits that they don't admire or respect in others.  If you think about it and put some effort to it, you too can avoid all of the negative characteristics of the person you don't want to be.

Character cannot be hidden or faked.  You can tell if someone is the type of person with whom you want to associate.

A German motto says this, "When wealth is lost, nothing is lost; when health is lost, something is lost; when character is lost, all is lost."

Money Can't Buy Happiness

"No matter how rich you become, how famous or powerful, when you die, the size of your funeral will still pretty much depend on the weather."

Most people agree that if you have created wealth at the expense of your relationships, health or ethics, then you have nothing.   Life is more than money and more than wealth.

"Happiness is not the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort." (Franklin D. Roosevelt)

True happiness is doing what you were born to do, also known as self-actualization or following your bliss.  

Each person is born with a different genetic code.  The challenge for each of us, in order to find our happiness, is to figure out what our passion is, what our talents are and how best to express them.

Many people have found the attainment of wealth is without happiness if you fail to:

• Give credit to others
• Live with moderation
• Select the right heroes and mentors
• Give back and mentor others
• Look after your health.
• Earn the respect you deserve
• Stay well within the laws (including paying taxes)
• Be industrious
• Be socially connected and have friends 
• Have the love of those you want to love you

"Tell me who your heroes are and I'll tell you what kind of person you will become."

With the ability to buy most things, Warren chooses to enjoy few possessions and to keep the things he does have for a lifetime.  Warren finds happiness not in his vast fortune, but instead in delivering newspapers with his grandson and taking his family to the Dairy Queen on Sunday, talking with and mentoring college students, explaining that he lives no better than they do, he just travels better.

"Good managers never take credit for more than they do."

Warren carefully chooses those friends who, when they are around, bring out the best in him.  

Hang out with people who are bigger than you, bring out the best, and inspire you, and you will have a network of giants.

In the end, happiness does not come from Buffett's wealth, but rather from the number of people who love you. The most important thing is not how many or how large his assets are, but how his children feel about him.  Warren considers parenthood vital to happiness,  and unfortunately there is no rewind button on child development.

The more love you give, the more you get, and you can never give too much of it away.  It is inexhaustible.

Reference:  Warren Buffett's Lesson on Having a Rich Life

How then do you assess management quality?

Those in management should have integrity, intelligence and also must be hardworking.  Most importantly, they should have integrity.  Search and look for integrity in the managers; without this, their intelligence and hardworking will work against the interest of the shareholders.

In present day perspective, the shareholders and the management interests are linked or in conflict mainly in two principal areas of:

(1)  competence of management and,
(2)  policies of management toward stockholders - notably in the matter ofdividends.

What are your views of companies hoarding cash aplenty when perhaps, the better decision is to distribute the cash to the shareholders in dividends or share buy-backs?

Is Management in Your Corner?

Morningstar's new Stewardship Ratings for stocks can help reveal if management teams are working in shareholders' best interests or just their own.

http://www.morningstar.com/Cover/videoCenter.aspx?id=548155

The smarter the journalists are, the better off society is.

The smarter the journalists are, the better off society is. For to a degree, people read the press to inform themselves-and the better the teacher, the better the student body.

Warren Buffett



Malaysians deserve better from the press and televisions.  It is obvious that the professional life of some journalists in Malaysia is not easy.


http://mediarakyat.net/old/?p=4576
http://news.mylaunchpad.com.my/Home/Article?Key=6907ca7c-ef3b-44f9-8f35-449a5ba760fc
http://www.youtube.com/watch?v=yTGogMq9NZ0
http://www.themalaysianinsider.com/malaysia/article/suhakam-ambiga-not-given-fair-media-space-during-bersih-2.0/

Value Investing Tips - How to Assess a Company's Management

What Warren Buffett Looks for in Company Management

WHAT WARREN BUFFETT LOOKS FOR IN COMPANY MANAGEMENT

Warren Buffett has identified aspects of management that he looks for in companies in which he invests. They include:

• Buy back of shares where the buy back is in the company’s interests, for example where the company has surplus funds and the shares can be bought back at less than intrinsic value

• Capability in allocation of capital

• Managers who stick to doing what the company does best; ‘the best business returns are usually achieved by companies that are doing something quite similar today to what they were doing five or ten years ago.’

• Ability and readiness to tackle tough problems as they arise

• The use of retained profits to increase company profitability at beyond market rates

• A conservative approach to debt and liquidity

• Demonstrated ability to consistently grow company earnings and rates of return.

WHAT BUFFETT DOES NOT LIKE IN COMPANY MANAGEMENT

Warren Buffett has, throughout his career of public announcements, identified some things that he does not like in company managers:

• Managers who pursue company acquisitions for reasons other than the good of the company – ego trips, the ‘institutional imperative’ of keeping up with other company acquirers, bad judges (they buy a toad and think that it will turn into a princess when they kiss it); as he famously said in 1981, ‘[M]any managerial [princes] remain serenely confident about the future potency of their kisses – even after their corporate backyards are knee-deep in unresponsive toads’.

• Managers who pursue growth for growth’s sake, irrespective of the value of that growth to the company

• Managers who expend too much of the company’s worth by issuing valuable shares to buy overvalued assets or who use debt to do so.

• Managers who enrich themselves at company expense by with extravagant salaries and the abuse of share option arrangements

Fame, popularity and riches don't last; only character endures

Monday October 10, 2011

Monday Starters - By Soo Ewe Jin

ONE of the quotations I remember well is this “Fame is a vapour, popularity an accident, and riches take wings. Only one thing endures and that is character.”

My classmate had written that on my copy of the school magazine after we finished our Form 5. Although I did my Form 6 in the same school, this friend went on to another school and subsequently took over his father's business in operating a shop dealing with antiques.

Although this quote has been attributed to different people, includingPresident Harry Truman, the original author is probably Horace Greeley, an American newspaper editor who is known especially for his articulation of the North's vigorous antislavery sentiments during the 1850s.

It was also around that time of my schooldays that we had a new headmaster who decided to fill up the walls of some of the school blocks with interesting quotations and the most memorable one was, “Academic excellence is no substitute for poverty of character.”

Perhaps in those days much of the significance of these wise sayings were lost on us. But now that I have reached an age when looking back seems to be a favourite pastime (thanks also to The Star that is currently in a “down memory lane” mode), I can better appreciate the true value of character.

Fame and riches are indeed temporary, whether one is a celebrity, a world leader or a corporate icon.

In the past few weeks, you saw many flashback articles of the famous and the infamous from as far as 40 years back published in this newspaper. But unless you are aged 40 and above, I doubt if many of these personalities will be known to you.

Character, fortunately, has a longer legacy. And the wonderful thing is that it applies to ordinary people like us.

Many of the heart-warming stories in the Looking Back series hinge on such a legacy. We may not remember specifically the individuals by name but we remember and applaud their positive traits to this day.

Like the honest cabbie who always returned anything left behind in his taxi. Or the man who brought up a baby abandoned at the hospital as his own. Or the people who dug deep into their savings to help save the Ethiopians, the Palestinians or some stranger needing a heart operation. That is what character is all about.

Some of the best teachers I remember to this day are not the ones who drove me to score a string of As. Rather, they were the ones concerned about the health of my soul and that I would know how to make the right choices when I come by the many junctions in life.

My best bosses were also the ones who understood well the ethical foundations necessary to fight the many temptations in our profession. They were the ones who reminded me that few people will remember the stories we write, even if they made the front page. What is more important, opined one, is how that story touched lives or changed society for the better.

These are lessons that I continue to learn to this day. And they often come afresh when young people are about to start out in their careers and they come to this old uncle for advice. And that is when I find the quotation at the beginning of today's column most useful.

Deputy executive editor Soo Ewe Jin agrees with the opening sentence of the tribute to Steve Jobs posted on the Apple homepage “Apple has lost a visionary and creative genius, and the world has lost an amazing human being.” He was indeed quite a character.

http://biz.thestar.com.my/news/story.asp?file=/2011/10/10/business/9664180&sec=business

Hopefully, Integrity Triumphs

No one’s above law, says Tee Keat

By Debra Chong

July 29, 2010

KUALA LUMPUR, July 29 — Former MCA president Datuk Seri Ong Tee Keat said today the rule of law must be upheld, even as his party senior, Tun Dr Ling Liong Sik was marched into the dock for his role in the multi-billion Port Klang Free Zone (PKFZ) scandal.

“Certainly we need to uphold the rule of law. Nobody should be above the law,” Ong responded immediately to reporters here after learning Dr Ling had just been charged.

“I’m not interested in specific personalities,” he said, adding that he prayed the interest of the general public, especially taxpayers, would be protected.

Dr Ling led the MCA for 17 years, from 1986 to 2003, and is still regarded as a powerhouse in the ruling Barisan Nasional’s (BN) Chinese party.

While Dr Ling pleaded not guilty, the charge will likely jeopardize the MCA’s current efforts to garner the confidence and support from the ethnic Chinese community.

The PKFZ project was mooted during Dr Ling’s term as Transport Minister and the cost of the project, initially estimated at fewer than RM2 billion, more than doubled to RM4.6 billion by 2007.

The cost are reckoned to balloon further to as much as RM12.5 billion, due to interest costs from deferred payments if the trans-shipment hub fails to perform.

Ong acknowledged as much even as he tried to defend his party against its detractors, likely whooping in delight at the latest prosecution development.

“It’s unfair to co-relate an individual’s deed with partisan deeds,” said Ong, after speaking at the 15th Malaysian Law Conference here this afternoon.

http://www.themalaysianinsider.com/malaysia/article/no-ones-above-law-says-tee-keat/

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MCA in shock over Dr Ling’s PKFZ charge
By Clara Chooi July 29, 2010

KUALA LUMPUR, July 29 – Today’s prosecution of Tun Dr Ling Liong Sik over his role in the Port Klang Free Zone (PKFZ) scandal, has sent shockwaves through the MCA, leaving party leaders stuttering in response.
MCA’s usually calm and collected president Datuk Seri Dr Chua Soi Lek himself appeared shaken by the news and admitted that it was unexpected.

“MCA leaders are shocked by this,” he told reporters who surrounded him for a response after he opened the Perak MCA Youth convention at the state liaison body’s headquarters in Ipoh.

He added, however, that he was confident that Dr Ling, 66, who had served as the party’s president from 1986 to 2003, would be given a fair trial.

When contacted later in the evening, MCA secretary-general and Transport Minister Datuk Seri Kong Cho Ha fell silent for several moments when informed of the news.

When asked if he was surprised, Kong said: “Of course I am. Why do you only call me when there is bad news?”

He added that he was “concerned” about Dr Ling’s prosecution, especially since the latter was a prominent figure in the MCA.

Dr Ling was slapped with charges under Section 418 and alternatively, under Section 417 of the Penal Code, for an offence concerning land valuation.

Section 418 concerns “cheating with knowledge that wrongful loss may be thereby caused to a person whose interest the offender is bound to protect” and Section 417 concerns the punishment for cheating.

If convicted under Section 418, Dr Ling faces a maximum jail term of seven years, or a fine, or both, and if convicted under Section 417, he faces a lesser sentence of five years jail, or fine or both.

He claimed trial to the charges and the case has been fixed for mention on September 3.

Dr Ling, believed to be the first Tun in the country to face such prosecution, is the most influential personality to date to be brought to book over the controversial PKFZ scandal.

When contacted, many MCA leaders chose to keep mum over the issue, pleading for more time to study the charges before issuing any comment.

MCA vice-president Datuk Donald Lim told The Malaysian Insider that the matter should only be addressed by the president.

“I would rather not comment. I just heard about it too,” he said.

A fellow vice-president Gan Ping Sieu also declined comment but chose instead to seek information from The Malaysian Insider over the details of the charges against Dr Ling.

“What did they involve? What were the specific charges,” he asked, before saying that he would need more time before speaking on it.

Another vice-president Datuk Chor Chee Heung told The Malaysian Insider that careless comments on such a shocking piece of news should not be made.

“I barely just heard about it myself. I do not know the details, so it would be unfair to make any comment for now. It is a big issue,” he pointed out.

Other MCA leaders could not be reached via the telephone.

On micro-blogging site Twitter, MCA Youth chief Datuk Wee Ka Siong, who is usually active, was uncharacteristically quiet. His last post was at about 4pm, on an unrelated matter.

MCA presidential council member Chua Tee Yong tweeted that the PKFZ case needed transparency if the government wanted to revive the people’s trust in them.

“Give a chance 2 clear d air instd of guessg and hypthosg,” he said in his tweet.

The PKFZ project, Malaysia’s biggest port investment, was initially kickstarted in the early 2000 with a budget of RM1.8 billion.

The amount ballooned, however, allegedly due to mismanagement and corruption, and is estimated to likely cost a whopping RM12.5 billion now, including interest charges.

http://www.themalaysianinsider.com/malaysia/article/mca-in-shock-over-dr-lings-pkfz-charge

SC slaps SJ Asset Management with restrictions

SC slaps SJ Asset with restrictions
Published: 2010/06/30

The Securities Commission (SC) has stopped SJ Asset Management Sdn Bhd (SJAM) from taking care of fresh funds after its examination of the fund manager raised concerns.

In a statement yesterday, the regulator said that with immediate effect, SJAM was prohibited from soliciting new mandates and to maintain and preserve all records in relation to clients' trades and payments.

"On-site examination as well as findings of BDO Consulting Sdn Bhd (BDO), which was appointed to assist in examining SJAM's books, accounts and records, have raised certain concerns," the SC said.

It did not say what the concerns were nor why it had asked BDO to do the job.

The SC has also instructed BDO to further examine, audit and report on SJAM's books, accounts and records, inclusive of assets held.

It said that over the last two years, it had intensified regulatory review and scrutiny over asset management companies.

SJAM, a licensed fund company incorporated in 1992 manages regional investments in Japan, Hong Kong, Singapore, Thailand, Indonesia, the Philippines, Taiwan and South Korea.

Its investment products include

• fund management, 
• managed portfolio, 
• investment services and 
• private equity accounts.

Whai Onn Tan is the managing director of SJAM, while Datuk Kamaruddin Hamzah, who sits on the board of directors of a few public-listed companies, is the director of the company.

Whai is also the head of fund and portfolio management.

Both Whai and Kamaruddin are also the owners of SJAM Holdings Sdn Bhd, the parent firm of SJAM.

Based on the company's website, SJAM has authorised capital of RM10 million and paid-up of RM6.38 million.

Its investment portfolio targets active, quality-growth companies with reasonable prices.


Read more: SC slaps SJ Asset with restrictions http://www.btimes.com.my/Current_News/BTIMES/articles/sjay-2/Article/index_html#ixzz0sK5GySrV

Now, Mr Tan Teng Boo has so many things to sell you other than his newsletter.

Tan Teng Boo’s i Capital Global Fund & i Capital International Value Fund Review (And An Update to ICAP)

Apr 29th, 2010 by AhYap

A few years ago, Tan Teng Boo had only one thing to sell you, his newsletter.

Later he launched his first public fund known as theiCapital.biz Berhad (ICAP) listed in KLSE which I did a long review long long time ago. [iCAP review]

But last few years, he subsequently launched 2 other funds to sell to you, namely the iCapital Global Fund and theiCapital International Value Fund.

Due the the iCapital Global Fund big minimum investment requirement (USD200k!), many are kept out of the boat and so he launched his “International” fund in Australia later that requires only AUD20,000 minimum, so more people can join the “global investing” boat.

Now, Mr Tan has so many things to sell you other than his newsletter.

Some of these stuffs are good stuffs to buy, some are …

Read more:  at Ah Yap's Blog


Related:

A reputation build over 30 years can be destroyed in 5 minutes.

Investment Policies (Based on Benjamin Graham)

Quote: 'Profit from the information and inefficiencies of the market'

A reputation build over 30 years can be destroyed in 5 minutes.

30 Jun 09, 17:32
RR: If you don't believe, or have some doubts on him.. then just forget about ICAP.
30 Jun 09, 17:32
RR: If TTB is my real life buddy, i think i would have put 90% of my portfolio with him. Just wanna stress again, ICAP = TTB. Believe TTB, hold/buy ICAP.
30 Jun 09, 17:30
RR: cause i actually believes WB said "I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will. "
30 Jun 09, 17:30
RR: So.. so far.. I am not with ICAP yet:) I mostly invest in things that the business itself has its own edge, without really counting on the person in charge.
30 Jun 09, 17:25
RR: the only doubts will be, is TTB a person who I can really believe in? A person with integrity where I can put ALL my savings with him? I personally am not sure..
30 Jun 09, 17:22
RR: So.. my 2 cents is that, if you believe in TTB that his investing style works and he will be employing this investing method as long as he lives. I think, you should keep holding the stock.
30 Jun 09, 17:21
RR: You believe what TTB believes. We believe him, because he has been publishing his method of investing for some time. We believe that he will continue with that style.
30 Jun 09, 17:17
RR: However, it is hard to see any durable competetive advantage ICAP has over other funds. ICAP is all about TTB.. If you are buying into ICAP. You must have known TTB well.
30 Jun 09, 17:16
RR: Taking RM1.80 as current price, ICAP has around 16% compounded return since 2005. As for me, ICAP is one of the business that I can understand and its performance is easy to track.


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RR, I find your reasoning interesting and would like to offer my comments here:

The track record of iCAP closed end fund is short. Yes, it has given a very good return (cumulative total return and compound annual return). This cannot be extrapolated to future years. Investment returns are often unpredictable.

Over the longer term, it is generally expected that most funds will give returns close to those of the market returns. This is based on statistics and probabilities. We know that. In fact, given the cost of some funds, most funds will give returns lower that the market return.

If you are an enterprising investor, like Leno, with a proven track record, you should continue your own investing. On the other hand, if you have been an investor who has lost money consistently or with a very poor return from your investment, you should seriously consider whether you should be doing your own investing or otherwise.

The issue of integrity of the fund manager is important and cannot be treated lightly. In the light of Madoff, one cannot be too careful. But then, how do you judge integrity in the person? Review how you judged a person to be your business partner or a lady to be your life partner. What criterias did you use? What outcomes, deemed important, did you factor into these criterias? As much as you and I like to be totally objective, often judgement is also a very subjective matter.

Warren Buffett has written on integrity. He would like his managers to have integrity, intelligence and lots of energy. Above all, integrity. Without integrity, these traits of intelligence and energy in the manager will work against the interest of the owner.

Like Warren Buffett, we should only invest in a fund manager with integrity, intelligence and a lot of energy. The managers of these funds also realise the importance of their integrity in their business and their relationship with their investors. A reputation build over 30 years can be destroyed in 5 minutes.

This assessment of the integrity of the fund manager can best be summed up as difficult, subjective and based on your personal views. This view is also influenced by your interactions with others and this fund manager in the same industry. Eventually, in the majority of situations, it is a personal opinion.

For the defensive investor, what are the options? My personal advice, don't even buy a share, if you are not familiar with equity investing and the market place. It is far too dangerous a place for someone with no investing or financial education. Therefore, park the money in FDs and be grateful for the 'safety of capital' and meagre return these offer. But the risks are those of inflation eroding the real income and capital, and also, not meeting your investing objectives.

The next best thing, is to have friends or relatives who are able to invest for you or to advice you on your investments. I was fortunate to have this guidance for many years. But beware of professionals with some knowledge. I have known of investors who ask their remisiers for some stock recommendations with varying results.

Then, you are still faced with how to invest your money safely, for higher return, over a long period. Who do you turn to now?

Here is my suggested approach to investing into icap fund or any other funds. We start with a very big assumption, that the fund we invest in will perform reasonably well under a good manager, and over the years, the manager will continues to grow the value of the investment.

For the investors of the fund, it would then be the simple matter of investing into the fund at the time when it was trading at a bargain, usually coinciding with the market at a low point. However, there is still another important factor to consider.

It was Peter Lynch (I think), who wrote that during his tenure of his fund, the majority of investors who bought and sold his fund lost money. This was despite the fund growing in value at a compound annual rate of 30% or so, for almost 30 years.

The inference, even if you have selected the right fund or fund manager, your returns may be negative due to factors unrelated to them, but to yourself.

This is what I do for a portion of my money. But then, you are not me. Your circumstances will definitely be different. So, please follow your own analysis and make your own decision. You are the better judge of yourself, always.


Also read:
Games people play
To be a winner, choose the games one wishes to play in carefully. Investing is likewise not dissimilar. One need to have the investing knowledge before "playing this game" intelligently, lest one ends up not winning but losing.