The Dark Secret of the Best-Performing Stocks

By Matt Koppenheffer 

March 25, 2010 | Comments (19)

At this point, I've seen this list of the past decade's top-performing stocks so many times that I can recite most of them from memory. But there's good reason to keep picking apart these top performers, because any one of them had the potential to turn a mediocre portfolio into a market-beater.

Here's a peek at 10 of the top 25 performing stocks of the past decade:

Company	Price Change Jan. 1, 2000, to Jan. 1, 2010
Bally Technologies	5,975%
XTO Energy (NYSE: XTO)	5,917%
Southwestern Energy	5,776%
Clean Harbors	4,669%
Deckers Outdoor	3,775%
Jos. A Bank Clothiers	3,196%
Range Resources	2,246%
FTI Consulting	2,022%
CarMax	1,997%
Terra Industries (NYSE: TRA)	1,960%

Source: Capital IQ, a Standard & Poor's company.

The list may look pretty familiar, but what you may not know is that these companies, and many of the decade's other top performers, share a dark secret.

Skeletons in the closet
If you're thinking I'm going to say that all of the companies above were small and that they beat the pants off of large, well-known stocks like Procter & Gamble (NYSE: PG) and Disney(NYSE: DIS) (which returned 10.7% and 10.3%, respectively), I'm not. It's true, but a number of my colleagues have already done a great job highlighting that very important aspect.

So what is the secret, then? Instead of simply telling you, let's take another look at the companies listed above and see if you can figure it out.

Company	Price Change Jan. 1, 1998, to Jan. 1, 2000	Return on Equity in 1999	Debt-to-Equity in Early 2000
Bally Technologies	(84.1%)	Unprofitable	Negative book value
XTO Energy	(45.5%)	19.5%	340.8%
Southwestern Energy	(49%)	5.3%	140.5%
Clean Harbors	(20%)	Unprofitable	230.2%
Deckers Outdoor	(65%)	5.3%	14.6%
JoS. A. Bank Clothiers	(44.2%)	3.2%	35.9%
Range Resources	(80.4%)	Unprofitable	417.5%
FTI Consulting	(60%)	2.9%	206.7%
CarMax	(74.3%)	Unprofitable	62.2%
Terra Industries	(88%)	Unprofitable	77.7%

Source: Capital IQ, a Standard & Poor's company.

Now what would you say ties all of these top-performing companies together?

If you said something to the tune of "they looked like terrible investments," then you get a gold star. Even a quick glance at that chart would send chills up the spine of most fundamental-oriented investors. Many of the companies were unprofitable, the ones that weren't produced lackluster returns on capital, and quite a few were swimming in debt.

Maybe it's not so surprising, then, that the market hated these stocks at the time. Those are some massive declines posted above, and bear in mind that this was over a period when the S&P jumped more than 50%.

Time to scrap everything we know?
Does this mean that we should forget about looking for high-quality companies trading at reasonable prices in favor of looking in the garbage bin? I don't think so.

The list of the decade's top-performing stocks isn't the only place where lousy returns on equity and high debt levels show up. You can also find numbers that look like that on a list of the decade's bankruptcies.

According to Capital IQ, there were 667 publicly traded companies with market caps above $10 million that filed for bankruptcy over the past decade. In 2000, only 22 of those companies could claim a return on equity above 15% and debt-to-equity below 50%. The rest of the companies that went belly up sported numbers that looked a lot like those in the chart above.

In other words, taking fliers on companies with ugly-looking financials could land you a massive winner, but it also gives you a big chance of taking hefty losses.

Swing at good pitches
By sticking to investing in reasonably capitalized and solidly profitable companies that are trading at attractive prices, we may miss out on some of the biggest winners, but we also vastly reduce the chances of sticking ourselves with clunkers headed toward bankruptcy.

And don't worry, there are still plenty of opportunities for big returns. With gains of 9,211% and 7,024%, respectively, Green Mountain Coffee Roasters (Nasdaq: GMCR) andHansen Natural (Nasdaq: HANS) were two of the very best performing stocks of the decade, and both would have fit a "high quality at a reasonable price" strategy back in 2000.

Of course, even companies that produce good-looking numbers can end up being poor investments. Ten years ago, the numbers all seemed to line up for American Capital(Nasdaq: ACAS) and Ethan Allen Interiors, but both stocks ended up getting clobbered.

That's why the team at the Motley Fool Hidden Gems newsletter not only focuses on companies that produce attractive financial returns, but also digs in to evaluate intangibles like competitive moat, growth opportunities, and management effectiveness. The team's research recently led it to buy shares of a fashion retailer for the newsletter's real-money portfolio.

http://www.fool.com/investing/small-cap/2010/03/25/the-dark-secret-of-the-best-performing-stocks.aspx

Risk in Stock Market – Stock Market Risk Management

Risk in the stock market is everywhere. Investing in the stock market is fraught with worry, for good reason. If you lose half of your investment, you must double your return to just breakeven. Warren Buffett, considered by many to be the world’s greatest investor, states his first rule of investing is “do not lose money.” Unfortunately, the risk in the stock market of losing your money is always a possibility. However, without taking some risk there is no reward. Therefore, successful investors employ stock market risk management strategies to minimize their losses. Managing risk in stock market starts with identifying the type of risk and taking action to mitigate the impact of the risk on your investment portfolio.

Risk in the stock market comes in many forms and each can lead to a loss. The most common is the overall trend of the market. Approximately 60 % of the move of an individual stock is attributed to the trend of the stock market. If the stock market is rising, it takes with it most of the other stocks, though not in equal amounts. When the stock market falls, stocks sink with it.

Another big risk in stock market lies with owning an individual stock. While owning the stock of a company can offer greater rewards, it also entails the risk that something might go wrong that can cut the price of the company’s shares in half. It might be news that sales have suddenly fallen due to a new competitor, or a product liability issue has arisen. For whatever the reason, individual stocks are subject to risk associated to them alone.

While there are other risks in the stock market, these encompass the vast majority of the ones you will encounter. Fortunately, investors can employ several strategies as a part of their stock market risk management program.

http://pediaworld.com/risk-in-stock-market-stock-market-risk-management/

Investing in "Fallen Angels"

When it comes to investing, many people are interested in trying to find the "right" stock. Gabriel Wisdom has found a great deal of success in looking for "fallen angels" -- stocks that were once "hot" but have fallen out of favor. In his recent book, Wisdom on Value Investing: How to Profit on Fallen Angels, Wisdom provides helpful hints that you can use to help improve your investing performance. I recently spoke with Wisdom over the phone, and he talked about how you can profit from looking for these fallen angels.

"The old Wall Street used to refer to fallen angels to describe something that was very popular and overpriced for a time before it fell. We've updated the term to refer to stocks and bonds that have fallen -- but that should be rising. Based on revenue and earnings growth, or on balance statements, these are investments that are on sale, and have a great upside potential over time." 

Wisdom describes value investing at its finest: Look for fundamentally sound companies that are undervalued, and invest in them for the long term. "It's important, though, to distinguish between 'fallen' and 'falling'," Wisdom points out. "You want a security that has already come close to reaching its bottom." 

He also insists that investors need to look at markets in terms of cycles, and what happens during these cycles. "Just like cars, groceries and other items, there are good times to buy stocks and bonds, giving you a better deal. You need to study the market and ideally buy when things are on sale. Then you sell when everyone else is excited about what is happening." 

Knowing when to sell is an important part of investing. "It's the hardest part of successful investing," Wisdom says. "J. Paul Getty, possibly the first billionaire of his time, bought when people were complaining and sold when they were celebrating." Wisdom offers three keys to knowing when to sell: 

1. Something has changed fundamentally so that the reason you bought is no longer valid.
2. Your profits come sooner than anticipated. Wisdom recommends that you should at least sell half if you can't part with the whole investment at once.
3. A better investment opportunity comes along, and you need the capital to take advantage of it.

In addition to offering the above insights, Wisdom's book also includes other helpful investing hints. The first chapter offers 10 traits of good bargain hunters, and provides you with great information on how to develop these traits. The book then takes you through bottom fishing, cheap and timely securities, Wall Street cycles, time arbitrage, and profit vs. panic. The book also includes a helpful checklist for effective investing. I like this checklist because it forces you to stop, take stock of the situation and make investment decisions (to buy or sell) based on something approaching rational thought, rather than a visceral reaction to what might be happening in the market. 

You really can become a better investor if you pay attention to fundamentals, and look for investments that are underpriced but have good upside potential.You may not score big in a year or two, but you are more likely to see steady gains over the years if you employ some of the techniques in Wisdom's book.


http://www.allbusiness.com/banking-finance/financial-markets-investing-securities/13837019-1.html

And the message to all fellow Malaysians is .......

...................................... ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?

http://malaysia-today.net/index.php?option=com_content&view=article&id=30855:dr-m-says-perkasa-champions-malay-rights-due-to-weak-umno-&catid=19:newscommentaries&Itemid=100131

But a bear market isn't all bad news.

Sure, it can hurt when your portfolio takes a hit when stock prices fall. But you'd still better be prepared for the inevitable downturns in the stock market, and remember that the situation is only temporary, after all. In every instance when the overall market dropped, it returned and then grew to greater heights. In fact, the stock market has a 100 percent success rate when it comes to recovering from a bear market! The only thing to remember is that sometimes it takes longer for the bounce-back to occur.

If you follow a long-term approach to investing, then you know that patience is a virtue whenever you're investing in the stock market. It also helps to keep your vision focused on your long-term horizon whenever the market hits some turbulence. By using dollar cost averaging and by investing regularly, you can even make the bear market work for you by taking advantage of generally lower prices with additional purchases. Knowing the market's infallible past record, you can sleep easy -- even when other investors are panicking.

The Longs and the Shorts

Longs have unlimited potential.
Shorts have unlimited liabilities.




Related posts:

Don't Be Long and Wrong

Observing Long-Term Investing

Now It's Time for Short-Sellers to Panic

Most look for the bull and neglect the bear. DON'T NEGLECT THE BEAR

Jim Rogers wrote - Don't neglect the Bear - in his book 'A Gift to My Children':

What is it that most investors fail to consider?  Most look for the bull and neglect the bear.  As an investor, I am always in search of "what is bearish."  When people are crazed about an overheated market and are oblivious of other investment possibilities, that's when I find a good deal.

During the stock bubble of 1998, when most people ignored commodities, I started up a commodity index.  Commodities had been in the doldrums for years, so no one had made any money.  Most people fled the field, and few young people even studied natural resources.  Fewer still went into farming or mining (MBAs were all the rage then, remember?). the end result being that we currently have a shortage of farmers and geologists.  That is  true in other countries as well.  These factors led to a multiyear decline in productive capacity, while demand kept rising.  The returns show how well commodities have done.  The Rogers International Commodity Index, which I founded in 1998, quadrupled over the next ten years, while the Standard and Poor's 500 index of stocks rose about 40 percent.


Also read:

Betting on the Blind Side

Learning from Michael Burry: from being a medical resident to being regarded as one of the greatest investors in recent history.

Should these 'not knowable in advance' factors influence your investing?

The economy, interest rates, fuel prices, commodity prices, foreign exchange, price of gold and geopolitical situations; should not these influence your investing?


Yes, these are hugely important factors. However, they are not predictable and largely out of our control. They are not knowable in advance. It is better to distance oneself from thinking about them when assessing the business to invest in.


Therefore, the approach adopted should generally not be a top-down macroeconomic one, but a bottom-up microeconomic one.


“The implication is with the passage of time, a good business over a long period of time produce results to the investor over time.”


Also read:
The Ultimate Signal to Load Up on Stocks?

Legendary fund manager Peter Lynch famously said that if investors spend 13 minutes thinking about the economy, they've wasted 10 minutes. Granted, Lynch wasn't managing money during a mega-macroeconomic crisis of the sort we're facing ...

Asset Allocation and Economic Hedging in Various Economic Environment

Asset Allocation

This is also referred to as economic hedging and can be defined as a conservative method of diversifying assets so they will react different under various economic conditions.

Successful investing can be based on 4 key characteristics as follows:

• Discipline
• Patience
• Historical Prospective
• Common Sense Strategy

Reasons for using asset allocation:

• History repeats itself
• No one can predict the future – not even the experts
• Comfort in knowing you have not painted yourself in a corner
• Acts as a hedge against financial risks you cannot control

To protect against risks, the risks must first be identified and then investments set up to diversify around them. Listed below are the main types of economic environments.

• Hyper Inflation (100%+/year)
• Double Digit Inflation (10%+/year)
• High Inflation (5 to 9%/year)
• Normal Inflation (2 to 4%/year)
• Recession
• Depression

Now lets look at a couple examples of how various investment types do in these differing environments.

In a depression we see the following:

• Stocks go way down (85-90%)
• Real Estate – Also tends to go down
• Interest Rates – drops to very low rates
• Unemployment – this goes way up
• Property – material things tend to lose value
• Bonds – These do well, as bonds tend to vary inversely with interest rates.

Recommended investment in a depressed economy then would be high quality, intermediate term (2-4 year), discounted corporate bonds.

On the other hand in a Hyper-Inflation economy the situation would be completely different.

• Stocks – do well for a while, then collapse
• Real Estate – depends, because it is often bought with debt
• Gold – this has done well in keeping its value in hyper-inflation conditions

Of note, the last time the US was in a hyper-inflation economy was during the civil war. However several other countries have been in this situation in recent years.

Now that we know how the environment can affect different investments, let's look at what investments are best for each environment and how to protect your investments in these changing economic times with economic hedging.

http://www.nassbee.com/wealthy/asset_allocation.html

Economic Hedging

Following our discussion on asset allocation, below is a list of the best types of investments for each type of environment.

Economic Environment	Best Investment
Hyper Inflation	Gold
Double Digit Inflation	Real Estate
High Inflation	Real Estate / Stocks
Normal Inflation	Stocks
Recession	Cash
Depression	High Quality Corporate Bonds

How you will allocate your assets will depend on if you are in or near retirement as well as other personal circumstances. Below are two basic allocation structures. You should review your own needs to decide what type of allocation meets your needs best.

Aggressive

Cash	Bonds	REIT	Stocks	Gold
15-20%	15-20%	30%	30%	2-5%

Retired

Cash	Bonds	REIT	Stocks
25%	25%	25%	25%

(These percentages can be vaired slightly to fit in 2% Gold for better hedging.)

Over the past 30 years, average yields for these types of investments has been about as follows:

Investment	Avg Yield
Cash	4%
Bonds	7%
REIT	8%
Stocks	10%

For the retired plan then this would have yielded a safe 7.25% annual return. For the aggressive investor it would closer to 8%.

Rebalance

In order to keep the advantage of asset allocation you should rebalance your investments every year. When this is done is not important as long as it is done at least once per year. By taking profits from the investment types that are doing well and putting the money in those that are down, you are buying low and selling high without any emotional input that may cloud your decision. Rebalancing should then be done as follows:

• Periodically (at least once per year)
• If there is a major change in your life
• If there is a major change in the financial market

http://www.nassbee.com/wealthy/economic_hedging.html

How to Build a High Return Low Risk Stock Portfolio

A proven strategy for building a stock portfolio that gives decent returns while posing minimun risks. This is a long term strategy that has proven itself over 30 years of markets ups and downs.

There is no single strategy for being successful in the stock market. If we look at the great investors, Warren Buffet, T. Rowe Price and Peter Lynch, they all had different investment strategies. However, few people have the natural investment talents and insights that these men held. Below than is a strategy than can be used by the rest of us to earn high returns while maintaining minimum risks.

This stock portfolio strategy is based on 3 basic principles:
1. Diversify
2. Buy Quality Stock
3. Pay the Right Price




http://www.nassbee.com/wealthy/stock_portfolio.


Read also:

Wealthy
	The Most Common Mistakes People Make with their Money
	Mutual Funds 101
	How to Select a Mutual Fund
	Bonds & Debt Instruments 101
	Types of Bonds
	Build a High Yield, Low Risk Stock Portfolio
	REIT - Real Estate Investment Trusts
	Asset Allocation / Economic Hedging
	Education and Tool Links for Investing

The Three Gs of Buffett: Great, Good and Gruesome

Let us examine Buffett's letter from the year 2007 to the shareholders of Berkshire Hathaway and see the investment wisdom on offer therein.

The Three Gs
Let us suppose that you are planning to lock away the surplus money with you in a bank savings account and three different banks approach you with three different offers:

1.  The first bank 

• takes a one time deposit and 
• pays you a very attractive interest rate, 
• which will continue to increase as years pass by;

2.  The second bank 

• pays a decent interest rate but 
• also asks you to increase your yearly deposits at a fixed rate, 
• which will also bear a decent interest rate; and

3.  The third bank 

• pays you a very poor interest rate and 
• also asks you to increase your deposits at a high rate, 
• which in turn yield the same poor interest rate.

It is difficult to imagine a depositor choosing any other sequence than the one mentioned above if asked to rank his preferences. However, while investing in companies, the very same depositor fumbles quite often. He ends up investing in firms that exhibit the characteristics of deposit schemes similar to options 2) and 3) listed above.

Buffett has mentioned that virtually all the businesses could be classified on the basis of three characteristics mentioned above and he has gone on to name these businesses as

1. Great, 
2. Good and 
3. Gruesome.

Needless to say businesses of the 'Great' kind are what excite him the most and he tends to avoid the businesses labeled 'Gruesome'.

Let us see what he has to say on the characteristics of each of these businesses:



The golden words


1.  On 'Great' businesses, Buffett says, "Long-term competitive advantage in a stable industry is what we seek in a business.

• If that comes with rapid organic growth, great. 
• But even without organic growth, such a business is rewarding. 
• We will simply take the lush earnings of the business and use them to buy similar businesses elsewhere.
• There's no rule that you have to invest money where you've earned it. 
• Indeed, it's often a mistake to do so: Truly great businesses, earning huge returns on tangible assets, can't for any extended period reinvest a large portion of their earnings internally at high rates of return."

2.  Furthermore, Buffett likens "Good" businesses to industries like the utilities 

• where the companies will earn a lot more 10 years from now but 
• will also have to invest a substantial amount to achieve the same. 
• The returns though are likely to be satisfactory.

3.  Let us now move on to businesses that Buffett has labeled as 'Gruesome' and he proffers the following view on them.

• He says, "The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. 
• Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers."

Indeed, if investors stick to 'Great' and 'Good' businesses in their investment lifetimes and buy them at attractive prices, they are unlikely to end up poor.

http://www.equitymaster.com/detail.asp?date=10/22/2008&story=2

How To Identify A Good Stock?

Taking Stock Episode 3 - How To Identify A Good Stock
Channel News Asia TV
http://wealth-mentors.com/wm/Int_TV_CNA_Stock7O3.aspx


Here is your Part 3 of 7 series. In this episode, Mirriam talks about "How to identify a good stock?".

There are over 10,000 stocks listed on the US stock exchanges and how do one go about picking the right stocks?

Do you know that:

-- Mirriam has her personal basket of stocks, just 20 of them?

-- When Mirriam trades, she uses fewer than 5 strategies?

It's indeed a surprise to many people that her trading style is so simple and that would be sufficient to bring her millions!

Yes, things don't have to be so complicated :)

And that's good news for newbies who want to take up trading.

Many of our members lack the financial background and yet they do very well!

Here are some of their success stories:

* * * * * * * * * * * * * * * * * * * * * * *
Joanne Yeo, Florist:
* * * * * * * * * * * * * * * * * * * * * * *
 "For the month of May, I made about US$4,200 profit from 11 trades. I attended the seminar in Jan and went live end of April and within a month of live trading, I've  paid off my tuition fee and still have some profits left. I am very thankful and glad to have done the course with Smart Traders. The methods taught by Mirriam are conservative but they can give you success 70% of the time. Options trading has really given me new opportunities to creating wealth for my future as I've seen it happen before my eyes."

* * * * * * * * * * * * * * * * * * * * * * *
Liew Mei Lan, ex-air stewardess and homemaker:
* * * * * * * * * * * * * * * * * * * * * * *
"Would like to share my 2 winning trades with the OEX. 22 Feb from $2.80 to $4.30 or 54% profit in 1 hour! Then , 23 Feb from $1.00 to $1.80 or 80% profit in 45min! Nice profit & very happy about it :)"


Back to the TV interview, questions Mirriam answers include -

1) How do you identify a good stock or share?

2) Would you recommend a beginner to go into stock markets? Would it be riskier to go into stock markets, considering other instruments?

3) What are growth stocks and dividend-yield stock and what are their differences?

4) Is it possible to find a stock that has both qualities?

5) Would you advise a beginner to invest in a company that has already established its name in the market? Perhaps a Multi-national company?

6) What about Information Technology and Tech stocks?

QUOTABLE QUOTES:

"The way to begin really is to understand the numbers behind the company."

Here's your episode 3 of 7, click here....

http://wealth-mentors.com/wm/Int_TV_CNA_Stock7O3.aspx

We trust that you enjoy watching this set of programs.

We look forward to mentoring you on your journey to successful Options Trading and Financial & Time Freedom.

If you've not yet enrolled in our Smart Traders Mentoring Program and would like to do so, call us today to reserve your priority seat!


To Your Trading Success,


Aaron Sim
CEO, Wealth Mentors
http://www.wealth-mentors.com

Warren Buffett's hidden portfolio

We make no bones about our admiration for Warren Buffett. Truth be told, it springs from a purely selfish motive. The fact that there is a lot one can learn about investing from him. But people sometimes ask us how relevant he is for individual investors. After all, as the head of a gigantic company, isn't he in a different league? He gets deals nobody else can. Our answer is yes and no.

True, the financial might of Berkshire Hathaway does help Buffett bag unusually attractive deals. As we saw during the height of the financial meltdown. But a large portion of his investment style is extremely relevant for small investor even here in India. Take Buffett's investing method in his personal portfolio. That's right, he maintains a personal portfolio. At US$ 1.8 bn, that's a huge fund by most standards (but not by Buffett's). Hence, he has to periodically disclose it to the US regulators.

So, what does Buffett's personal portfolio look like? 

• It is a concentrated portfolio of about 10 stocks. 
• Just 5 stocks make 75% of the portfolio value. 
• Most of them in 'old economy' sectors like banking, FMCG, retail, oil & gas and logistics. 
• Almost all of these companies are really old - founded at least a century back. 
• Most of them have diversified very little from their core area. 
• They are all recognized brand names and have a sustainable competitive advantage. 
• The portfolio generates a dividend yield of 2.3%. 

This does fly against the notion of hot-shot investing, doesn't it? But really, Buffett's portfolio is not beyond the reach of individual investors willing to do their homework and exercise discipline. 


http://www.equitymaster.com/5MinWrapUp/detail.asp?date=3/26/2010&story=1

Lessons from Warren Buffett

Saturday March 27, 2010

Preventing medical bankruptcy at old age

COMMENT
By CAROL YIP

ACCORDING to the United Nations’ projections, there will be about 1.2 billion people aged 65 years and above by 2025.

With numbers such as these, failure to address our health needs today could develop into a costly problem tomorrow.

As our affluence swells, our expectations of better healthcare, financial independence and a peaceful death increases.

But due to the high cost of healthcare, only a few can afford to become seriously ill.

While immediate concerns about rising healthcare costs and retirement fund structure require attention, fundamental long-term questions should not be neglected.

There is urgent need to address what will be very expensive demographic shifts within our lifetime.

The biggest risk

Unless you are among the lucky few with lifetime healthcare coverage, you may need to bear major medical expenses during retirement. Should you need assisted living while ageing, you would enter a whole new world of long-term financial pain.

Those who have seen it happen to family members or acquaintances know first-hand that the unpredictability of our personal health is the biggest risk in retirement planning. It is a nightmare that is unforeseen and rarely controllable.

According to the World Economic Forum 2009 report Transforming Pensions and Healthcare in a Rapidly Ageing World, the question of ageing societies from a perspective that integrates implications and solutions for both healthcare and retirement pensions was addressed.

In taking this integrated approach, which emphasised multi-stakeholder collaboration, the World Economic Forum was reacting to rising concern expressed by financial services and healthcare companies, employers, governments and society.

However, no single stakeholder can hope to tackle the challenges or make the most of the abundant opportunities. Success will require diverse, multi-stakeholder collaboration and innovative approaches.

How much is enough?

With the timing of this report, we are presented with a once-in-a-generation opportunity for transformational change in retirement planning for many of us in Malaysia.

There is a need for hybrid solutions to address the increasing cost of medical and healthcare products and services.

After all, illness or sickness can happen to anyone at any time. We can experience possible medical bankruptcy at any age but the worst time to experience it is during old age. Such financial depression could end our life earlier than expected.

The million dollar question: How much is enough when medical costs could be escalating at double-digit inflation rates as we age?

It is almost impossible to calculate as the amount required is subject to unpredictable variables like types of illness, medical fees, medicine costs and more.

Concerted effort from everyone

The ability for Malaysians to ensure financial sufficiency for medical and healthcare during retirement is becoming severely reduced due to skyrocketing medical costs.

A concerted effort from different stakeholders is necessary. An effective collaboration between the Government, insurance companies, pharmaceutical firms, healthcare providers and the community to keep the financial support and aid within affordable limits is required. Initiatives from all stakeholders are also required:

·Individuals should start early with personal savings, contribution to Employees Provident Fund, life and medical insurances and investments for old age care;

·Employers should consider medical benefits for individuals under employment beyond retirement age;

·The Government should provide medical and old age care subsidies and assistance, and tax incentives to make private health and medical care affordable;

·Insurers should provide affordable medical and age care insurance that caters for specific needs and age;

·Price management is required on private health and medical advice, services, and products (food and medicines) to make them affordable; and

·Family and community assistance should focus on the provision of home care, nursing help, food, accommodation and emotional support with love, care and affection.

These ideas and strategies may not be comprehensive. Neither are they overnight solutions. They need adequate research studies and timely and appropriate decision-making processes from relevant parties.

The private sector can still benefit by catering to the needs of the elderly and the Government can facilitate old-age security while helping to overcome financial pressures on private healthcare systems and retirement plans for current and future generations.

In the bigger picture, it can be a collective and meaningful corporate social responsibility effort and initiative to turn a “greying society” into a “silver society”, in which the elderly live their golden age without financial worries associated with ageing and ill health.

·Yip is a personal financial coach and also founder and CEO of Abacus for Money.

http://biz.thestar.com.my/news/story.asp?file=/2010/3/27/business/5917769&sec=business

Comment:  No easy solution.  'Catastrophic illnesses' like a heart attack, cancer or stroke can easily impoverish the average family.  The costs for such illnesses in the private sector maybe equivalent to that of half the price of a small house.  Yet, for many, this may not be enough. The existing health care insurance schemes in Malaysia have contributed to, rather than curtailed, the escalation of health care costs.

Betting on the Blind Side

Michael Burry always saw the world differently—due, he believed, to the childhood loss of one eye. So when the 32-year-old investor spotted the huge bubble in the subprime-mortgage bond market, in 2004, then created a way to bet against it, he wasn’t surprised that no one understood what he was doing. In an excerpt from his new book, The Big Short, the author charts Burry’s oddball maneuvers, his almost comical dealings with Goldman Sachs and other banks as the market collapsed, and the true reason for his visionary obsession.

By Michael Lewis•

Photograph by Jonas Fredwall Karlsson

April 2010

Dr. Michael Burry in his home office, in Silicon Valley. “My nature is not to have friends,” Burry concluded years ago. “I’m happy in my own head.”

A court had accepted a plea from a software company called the Avanti Corporation. Avanti had been accused of stealing from a competitor the software code that was the whole foundation of Avanti’s business. The company had $100 million in cash in the bank, was still generating $100 million a year in free cash flow—and had a market value of only $250 million! Michael Burry started digging; by the time he was done, he knew more about the Avanti Corporation than any man on earth. He was able to see that even if the executives went to jail (as five of them did) and the fines were paid (as they were), Avanti would be worth a lot more than the market then assumed. To make money on Avanti’s stock, however, he’d probably have to stomach short-term losses, as investors puked up shares in horrified response to negative publicity.

“That was a classic Mike Burry trade,” says one of his investors. “It goes up by 10 times, but first it goes down by half.” This isn’t the sort of ride most investors enjoy, but it was, Burry thought, the essence of value investing. His job was to disagree loudly with popular sentiment. He couldn’t do this if he was at the mercy of very short-term market moves, and so he didn’t give his investors the ability to remove their money on short notice, as most hedge funds did. If you gave Scion your money to invest, you were stuck for at least a year.

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“I have heard that White Mountain would rather I stick to my knitting,” he wrote, testily, to his original backer, “though it is not clear to me that White Mountain has historically understood what my knitting really is.” No one seemed able to see what was so plain to him: these credit-default swaps were all part of his global search for value. “I don’t take breaks in my search for value,” he wrote to White Mountain. “There is no golf or other hobby to distract me. Seeing value is what I do.”

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When he’d started Scion, he told potential investors that, because he was in the business of making unfashionable bets, they should evaluate him over the long term—say, five years. Now he was being evaluated moment to moment. “Early on, people invested in me because of my letters,” he said. “And then, somehow, after they invested, they stopped reading them.” His fantastic success attracted lots of new investors, but they were less interested in the spirit of his enterprise than in how much money he could make them quickly. Every quarter, he told them how much he’d made or lost from his stock picks. Now he had to explain that they had to subtract from that number these & subprime-mortgage-bond insurance premiums. One of his New York investors called and said ominously, “You know, a lot of people are talking about withdrawing funds from you.” As their funds were contractually stuck inside Scion Capital for some time, the investors’ only recourse was to send him disturbed-sounding e-mails asking him to justify his new strategy. “People get hung up on the difference between +5% and -5% for a couple of years,” Burry replied to one investor who had protested the new strategy. “When the real issue is: over 10 years who does 10% or better annually? And I firmly believe that to achieve that advantage on an annual basis, I have to be able to look out past the next couple of years.… I have to be steadfast in the face of popular discontent if that’s what the fundamentals tell me.” In the five years since he had started, the S&P 500, against which he was measured, was down 6.84 percent. In the same period, he reminded his investors, Scion Capital was up 242 percent. He assumed he’d earned the rope to hang himself. He assumed wrong. “I’m building breathtaking sand castles,” he wrote, “but nothing stops the tide from coming and coming and coming.”



http://www.vanityfair.com/business/features/2010/04/wall-street-excerpt-201004?printable=true

Productive Use of Time

Time is a variable continuum.

An afternoon can fly by or it can take 5 hours.

Always productively fill the gaps that most people leave as dead time.

The military had this ‘we do more before 9am than most people do all day’ .... do more than the military.

There are some select people that just find a drive in certain activities that supersedes everything else.