Rejoicing the Rescue of the Chilean Miners

2010 Copiapó mining accident

Bravo and well done ........

	Miner	Age[68]	Rescue time (CLDT)[5][6]	Transit time
1.	Florencio Ávalos	31	13 October 00:10	0:51
2.	Mario Sepúlveda	40	13 October 01:10	1:00
3.	Juan Illanes	52	13 October 02:07	0:57
4.	Carlos Mamani	23	13 October 03:11	1:04
5.	Jimmy Sánchez	19	13 October 04:11	1:00
6.	Osmán Araya	30	13 October 05:35	1:24
7.	José Ojeda	46	13 October 06:22	0:47
8.	Claudio Yáñez	34	13 October 07:04	0:42
9.	Mario Gómez	64	13 October 08:00	0:56
10.	Alex Vega	31	13 October 08:53	0:53
11.	Jorge Galleguillos	56	13 October 09:31	0:38
12.	Edison Peña	34	13 October 10:13	0:42
13.	Carlos Barrios	27	13 October 10:55	0:42
14.	Víctor Zamora	33	13 October 11:32	0:37
15.	Víctor Segovia	48	13 October 12:08	0:36
16.	Daniel Herrera	27	13 October 12:50	0:42
17.	Omar Reygadas	56	13 October 13:39	0:49
18.	Esteban Rojas	44	13 October 14:49	1:10
19.	Pablo Rojas	45	13 October 15:28	0:39
20.	Darío Segovia	48	13 October 15:59	0:31
21.	Yonni Barrios	52	13 October 16:31	0:32
22.	Samuel Ávalos	43	13 October 17:04	0:33
23.	Carlos Bugueño	27	13 October 17:33	0:29
24.	José Henríquez	54	13 October 17:59	0:26
25.	Renán Ávalos	29	13 October 18:24	0:25
26.	Claudio Acuña	44	13 October 18:51	0:27
27.	Franklin Lobos	53	13 October 19:18	0:27
28.	Richard Villarroel	27	13 October 19:45	0:27
29.	Juan Carlos Aguilar	49	13 October 20:13	0:28
30.	Raúl Bustos	40	13 October 20:37	0:24
31.	Pedro Cortez	26	13 October 21:02	0:25
32.	Ariel Ticona Yáñes	29	13 October 21:30	0:26
33.	Luis Urzúa	54	13 October 21:55	0:27

	Rescue worker	Age	Descent time (CLDT)	Extraction time (CLDT)	Transit time
1.	Pedro Gomez[69]		13 October, after 14:05	13 October 22:30	0:31
2.	Roberto Ríos[69]		13 October 00:16	14 October 00:05	0:23
3.	Patricio Robledo[69]		13 October 01:18	13 October 23:42	0:25
4.	Jorge Bustamante[69]		13 October 10:22	13 October 23:17	0:24
5.	Patricio Sepúlveda[69]		13 October 12:14	13 October 22:53	0:23
6.	Manuel González[70]		12 October 23:18	14 October 00:32	0:27

Note: The recovery times for several of the rescuers do not necessarily match with the correct names although the names and times are correct.

http://en.wikipedia.org/wiki/2010_Copiap%C3%B3_mining_accident

The Top 5 Ways to Lose Money Investing

The Top 5 Ways to Lose Money Investing

By Dan Dzombak
October 11, 2010


It is heart-wrenching when you hear stories of investors losing their life savings for avoidable reasons. A recent story in Bloomberg BusinessWeek about Leona Miller, an 84-year-old retired beautician who invested in derivatives, got me thinking of ways people lose money in stocks and how to avoid them.

1. Investing in a product or business you don't understand

Leona Miller bought a structured note called a "reverse convertible note with a knock-in put option tied to Merck stock." Even I was unsure what this meant, and this is one of the more basic structured notes.

Leona collected a 9% coupon and the right to receive her initial capital back at maturity. However, if at any time Merck fell below a certain level (called the "knock-in" level), instead of giving Leona her money back, the bank could give her a predetermined number of shares of Merck. As long as Merck's stock didn't fall, Leona collected her 9%.

If Merck did fall, she would lose huge amounts of money. As you might expect, Merck's price fell below the "knock-in" price, and Leona was left holding stock worth 30% less than her initial investment. I am hard-pressed to believe any amateur investor could fully understand exactly what a "reverse convertible note with a knock-in put option" is. By investing in products you don't understand, you are setting yourself up for disaster.

Peter Lynch has said to invest in businesses and products you understand. Leona's broker wrote that she was familiar with Merck as they manufactured one of her medications. Baloney!

Many people own mortgages and are having trouble paying them off, but that doesn't mean they should go out and invest in Annaly Capital Management (NYSE: NLY) or Chimera Investments (NYSE: CIM), which are real-estate investment trusts (REITs) that specialize in buying up mortgage-backed securities and assessing the risk inherent in residential real estate.

If you don't have an understanding of how a business truly works, don't invest in it! There are many simple businesses out there that anyone can understand.

Two examples: Netflix (Nasdaq: NFLX) has warehouses with DVDs and mail them to people that pay a monthly fee. Waste Management (NYSE: WM) collects trash and recycling. It's that simple.

2. Speculating

If the price of a stock you own drops by 50% tomorrow, do you like the stock more? If not, you are speculating. For example, if Philip Morris (NYSE: PM) drops by half tomorrow, Godsend! It's a financially sound business, recurring revenues, and a strong brand. I would love to be able to buy shares at $25 compared to the $50 per share you can get them for today.

3. Ignoring incentives

If you give someone incentives they will game them, meaning: Do what is in their best interest.

Regular investors, you would never ask a used car salesman if you need another car, or a life insurance salesman if you need more life insurance, so why would you ask a stock broker for advice on stocks? They don't have a professional obligation to put your interests before theirs, what's known as a fiduciary responsibility. If you are looking for advice, seek out a reputable financial advisor and double check they aren't merely brokers under a different name. Make sure they put your interests first and aren't being paid extra based on what funds and products you choose.

Stock pickers, if management is paid and incentivized based on revenue goals or share price goals, management will game them. Be wary of investing in companies with perverse management incentives, and recognize how management will likely game their incentives. Invest in companies in which management owns a considerable stake and how your interests and managements interests are aligned. The best example is Berkshire Hathaway (NYSE: BRK-B), whose management of Warren Buffett and Charlie Munger own a combined 24% of the company's stock.

4. Ignoring valuation

Buying outrageously priced companies is setting yourself up for disaster. Investors' memories are very short; does anyone remember the tech stock crash? Baidu (Nasdaq: BIDU) is trading at 100 times earnings. If you want to earn 10% on your money annually, the company must grow its earnings 30% a year for 10 years! One misstep and Baidu will be crushed. Buying a stock hoping to sell it to the next sucker that comes along is a fool's game; buy undervalued companies.

5. Putting all your eggs in one basket

When I meet people who have 50% or more of their portfolio in their company's stock I shudder. While they may "know" their company will do well, if something goes wrong they can be walloped by losing their jobs at the same time their portfolios take a dive. Anyone who worked at Lehman, Enron, etc., can attest to this.

This list could be much longer, but five is good enough for now (No. 6 would be paying high fees). As Warren Buffett once said, "An investor needs to do very little right as long as he or she avoids big mistakes." Avoid these mistakes and prosper.



http://www.fool.com/investing/general/2010/10/11/the-top-5-ways-to-lose-money-investing.aspx

Behavioural Finance: Irrational Behaviour and Stock Market Investing

"You have great skill with your bow, but little control of your mind", said the master to his young archer.

This is also applicable in investing.  You can know everything about valuing companies, but it'll come to nothing if you can't apply it rationally when the heat is on.

Human behaviour is directed by a combination of evolutionary hardwiring and development programming, and you can see both in everything we do.

The trouble is that in stock market investing, a very recent phenomenon in human evolution, we haven't developed behaviours appropriate to it.

The usual range of other behaviour responses that we picked up in our early life are often completely inappropriate.

The greatest enemy in investing is actually yourself.  Beware of your irrational and yet human behaviour jeorpadising your investing.

Warren Buffett fund illustrates 'rip off' management charges

Warren Buffett fund illustrates 'rip off' management charges


By Ian Cowie Your Money
Last updated: September 29th, 2010

If you think the row about fund management charges is a tedious technicality then prepare for a rude awakening. Terry Smith is the latest outspoken multi-millionaire to lob a hand grenade into this debate which will shake the City to its foundations and could bring several institutions crashing down.

He claims investors are left with less than a tenth of the total returns some fund managers receive – and uses Warren Buffett’s famous Berkshire Hathaway fund to illustrate the impact charges can have on long-term returns. Mr Smith says he is “not so much shocked as flabbergasted by the number of people who do not realise the impact of these performance fee structures”.

Taking typical hedge fund fees as an example – but widening his attack to performance fees charged by rising numbers of unit trusts and open-ended investment companies (OEICs) – Mr Smith said: “”As you are aware, Warren Buffett has produced a stellar investment performance over the past 45 years, compounding returns at 20.46 per cent per annum. If you had invested $1,000 in the shares of Berkshire Hathaway when Buffett began running it in 1965, by the end of 2009 your investment would have been worth $4.8m.

“However, if instead of running Berkshire Hathaway as a company in which he co-invests with you, Buffett had set it up as a hedge fund and charged 2 per cent of the value of the funds as an annual fee plus 20 per cent of any gains, of that $4.8m, $4.4m would belong to him as manager and only $400,000 would belong to you, the investor. And this is the result you would get if your hedge fund manager had equalled Warren Buffett’s performance. Believe me, he or she won’t.

“Two and twenty does not work. That does not mean that 1.5 per cent and 15 per cent is OK, or even 1 per cent and 10 per cent. Performance fees do not work. They extract too much of the return and encourage risky behaviour.”

Mr Smith, who was rated the best banking analyst in Britain for five consecutive years in the 1980s before going on to become chief executive of brokers Collins Stewart since 1996 is the latest City gamekeeper to turn poacher by blowing the whistle on established practice in the Square Mile. Like Alan Miller, a former senior fund manager at New Star, Mr Smith plans to launch his own fund management company, offering lower costs and higher returns to investors.

Whether either or both can pull off that double remains to be seen. But, here and now, there is growing resentment among investors about high charges and low returns. Earlier this year, The Daily Telegraph revealed how fund managers pocket more than £7bn a year from charges despite a decade of falling share prices. Mr Miller, a founder of Spencer Churchill Miller Private said: “The time is right for exposure of various elements of the industry.

“It is riddled with blatant self-interest and conflicts of interest that would never be tolerated elsewhere. Investors have become victims as the charges they have to pay have risen and risen while the returns they get have been consistently below par and the actual cost of managing their money has continued to fall.”

Data from Morningstar, a research company, shows the average investment fund has an annual charge of 1.25 per cent. But lesser known administrative fees amount to 0.45 per cent. And trading costs total another 1.35 per cent, according to the Financial Services Authority and Financial Express. When this 1.8 per cent is deducted from the total £406 billion invested, that amounts to £7.3bn being “skimmed off” each year.

Some fund managers have consistently delivered investor returns that more than justified their charges; Neil Woodford at Invesco, Evy Hambro at BlackRock, Robin Geffen at Neptune, Tom Dobell at M&G, Ian Henderson at JP Morgan and Job Curtis at Henderson are six that spring to mind. But many others have failed to do so and while investment returns remain low, interest in charges is likely to increase.

Few investors cared if annual management fees were 1 per cent or 2 per cent back in the 1990s when total returns often ran into double digits. Now they are glad to be grossing 6 per cent or 7 per cent, many more investors are much keener to keep costs to a minimum. Regulatory changes that take effect in 2012 will force further disclosure of costs and accelerate this trend. However much their former colleagues may hate them, Messrs Miller and Smith know which way the wind is blowing and are, as usual, ahead of the game.



http://blogs.telegraph.co.uk/finance/ianmcowie/100007842/warren-buffett-fund-illustrates-rip-off-management-charges/

Act in investors' interests

John Collett

September 22, 2010

Financial advice reforms under new minister Bill Shorten will benefit consumers.  
Photo: Glen McCurtayne

The new minority government may not last three years but if it can last at least two, there's a good chance the key reforms to financial advice will become law. The new minister responsible for financial services and superannuation, Bill Shorten, was a union official and trustee of an industry super fund. He should need only a short time to get across his portfolio responsibilities. That's good, because there's much to be implemented from the raft of reforms the previous government proposed in an effort to protect investors seeking financial advice.

The two big reforms - a ban on commissions and other kickbacks and putting planners under a legal obligation to act in their clients' best interest - are badly needed to enhance consumer protection. The reforms will be too late for those hundreds of thousands of retirees who have lost billions of dollars over the past decade with the collapse of Westpoint, Storm Financial, Fincorp, Basis Capital, Great Southern, Timbercorp, Australian Capital Reserve, Opes Prime and dozens of others.

These schemes invested in all sorts of things but the payment of generous commissions to advisers and accountants was a common thread running through them.

Ask yourself this: if it's such a good investment scheme, why would it be offering commissions to incentivise advisers and accountants to sell those products?

Placing planners under a legal obligation to put their clients' interests first should also strengthen the hand of the regulator, the Australian Securities and Investments Commission, in policing its beat, which it has not done effectively.

Just about all of the financial services industry, except industry funds, was hoping for a Coalition victory, as the Coalition was against most of the reforms and noncommittal on others. The Greens will hold the balance of power in the Senate from July next year, and will probably support the reforms.

The planning industry needs to get on with moving its businesses away from commissions and to a fee-based model. The collapse last week of yet another forestry scheme, the Melbourne-based Willmott Forests, has renewed criticism of planners and tax accountants who received commissions for recommending it to clients. These schemes were mostly tax rorts for high-income earners, with the investment merits less clear.

Salespeople should be working in sales, not financial planning. The minority Labor government has a plan that will help ensure sales are removed from the advice process. It is a plan that has taken about two years to formulate. At some point there has to be an end to consultation with the financial services industry and adoption of the reforms.

Shorten is ambitious and will probably be keen to push through reforms. It is always a balancing act between competing interests but for too long the interests of the powerful financial services lobby have been put before the interests of consumers.

http://www.smh.com.au/money/investing/act-in-investors-interests-20100922-15m3v.html

Dive back into the market

By Michael Laurence from smartcompany.com.au

It's not too late! That's the key message for cashed-up investors who feel like a deer caught in the headlights and cannot make up their minds whether to re-enter the sharemarket.

On the surface, this may seem a tough call given the S&P/ASX200 has risen more than 60% from its bear market low almost exactly 12 months ago to reach its highest point for 18 months.

And yesterday, the market burst through the 5,000-point barrier – a key psychological marker in its extraordinary comeback.

The bottom-line is that investors have powerful reasons to believe the market will keep rising for some years, and they shouldn't overly focus on returns forfeited to date if they were out of the market.

As Prasad Patkar, portfolio manager for Platypus Asset Management, realistically says: "The quick bucks have been made". No longer are "companies priced to fail which we knew weren't going to fail."

But Patkar believes there is a solid case for cashed-up investors to re-enter the market now – provided they are investing for the long-term and not chasing quick, easy money.

The strongest corporate reporting season for years and expectations for rising profits on the back of improving local and global economies suggest to many market professionals that shares are in the early stages of an extended bull market. Further, companies are enjoying the rewards of sharp cost-cutting during the GFC.

David Cassidy, chief equity strategist for UBS, has a simple message for cashed-up investors who are thinking about re-entering the market: "Equities are still moderately undervalued. Valuations still look quite reasonable – particularly on forward earnings."

Cassidy expects the market to reach 5,500 by the end of the 2010 calendar year. And he believes that inevitable market dips in this volatile market will produce good buying opportunities for investors who are ready to jump.

Shane Oliver, head of investment strategy and chief economist for AMP Capital Investors, says to cashed-up investors who can't make up their minds whether to now re-enter the market: "My view is that the market is still heading higher [but] with more moderate gains." His year-end target for the S&P/ASX200 is 5,600.

"If history is any guide, there is much more upside to come and we are nowhere near the peaks," Oliver adds. He points out that the average cyclical bull market in Australian shares lasts four years and produces gains of 132%. "But so far we have only seen a portion of that."

While Oliver says shares are no longer trading at "dirt cheap" prices, they are not expensive. Their price/earnings multiples (P/E) are still below their long-term average of 14 times. And he expects that corporate earnings will rise by 20% over the next 12 months.

Oliver says AMP Capital Investor's figures for its investors show that there are "lots and lots" of people who moved into cash during the bear market and are still in cash today.

Prasad Patkar's "gut feeling" is that the market will be higher in 12 months time. But over the next two months, he expects the market to move between 4,500 and 5,000 until the world economic outlook becomes clear.

Ideally, the best time to buy would have been 13 months ago before the market sprung back into life. But investors rarely manage to correctly time the market – picking the best time to buy or sell – and attempting to do so usually results in losing money.

Perhaps keep in the back of your mind for the next market downturn that you will pay a high price for missing the sharpest rebound in share prices which usually occurs in first year of a market's recovery.

Here are five tips for moving cash back into the market:

1. Drip-feed your purchases: Don't put all of your cash back into the market at one time – invest progressively in equal proportions every month or quarter, over perhaps 12 months. This will reduce the possibility of investing shortly before an abrupt fall in prices. And you will average-out your buying costs.

2. Buy in market dips: This volatile market will inevitably produce dips in prices. Cassidy and Oliver say this is a time to buy.

Oliver suggests that a strategy is for investors who are drip-feeding their way back into the market – as discussed in strategy one – is to progressively buy more stock during market dips.

3. Keep gearing at cautious levels: Reserve Bank statistics show the outstanding debt on margin share loans is on the rise again – after falling from a record high to a long-time low in the GFC fallout.

A particular danger now is getting carried away with market optimism and taking excessive debt, which caught out numerous investors during the bear market.

4. Consider mixing an index fund and direct-share strategy: Among the biggest beneficiaries of the market rebound to date, have been investors in low-cost, market-tracking index funds.

But with the highest gains from this recovery surely behind us, more investors may decide to use the strategy of investing in both index funds to replicate a chosen market and carefully-selected direct shares and/or actively-managed share funds.

In Patkar's view, this a stockpicker's market after the extraordinary gains with particular opportunities for investors who are highly selective. (Platypus Asset Management is an active funds manager.)

One of the risks with stockpicking of course is selecting duds yourself – or not having a professional adviser or fund which succeeds in its stockpicking.

Cashed-up investors wanting to re-enter this market could consider using an index fund as the core of their share portfolios and direct shares/and or actively-managed funds as "satellites". The performance of your widely-diversified core portfolio should mirror the market.

This core/satellite approach is a safer way of re-entering the market than relying on a small number of selected shares. This would be particularly the case for inexperienced investors who are uncertain about where to invest.

Many more investors are turning to low-cost exchange traded funds (ETFs) that track a chosen market such as the S&P/ASX300 as the core of their portfolios. ASX figures show the market capitalisation of exchange traded funds listed on the local market rose by 150% in the 12 months to March 31.

5. Look to potentially winning sectors for direct-share component of your portfolio: Market professionals believe that certain sharemarket sectors will standout at this stage of the recovery. Here are a few suggestions of Cassidy, Patkar and Oliver.

Oliver: "We are very positive in resources given the China growth story." He expects resource company earnings to rapidly increase. And he also points to the consumer discretionary sector such as electronic retailers (which should benefit from increasing employment and household wealth); airlines (with the stronger Australian dollar keeping fuel prices down and rising passenger numbers); and telcos (given share prices have fallen so much).

Cassidy: Sectors that he is "comfortable" with include mining, mining services, banking and media.

Patkar: "Health care is an outstanding source of out-performance, depending on the dollar." He specifically includes Sonic Healthcare, Cochlear and ResMed. Patkar also points to consumer discretionary (naming JB HiFi and David Jones, praising their business models); and banks ("powered through crisis" and should reverse bad-debt position over next 18 months or so).

http://money.ninemsn.com.au/article.aspx?id=1043390

Share clubs: learning together

By Gillian Bullock, ninemsn Money

The lessons learnt from a share market correction can prove invaluable for the many investment clubs around Australia. Those that can ride market volatility are the survivors.

But that's the point — share clubs are in the main all about learning … and there's a lot to learn from market downturns.

As Kerrie Brown of LIPS (Ladies Investment Portfolio Syndicate), which has been running for 11 years, says, "An investment club is for learning, not for making huge amounts of money."

But of course you can make money. Indeed, Brown says her club has enjoyed an annualised return of 14 percent [prior to this year's market correction] and that was "despite making some doozie mistakes".

Another long-running investment club is Sheba Investment Network. Frances Beck says her club has posted returns of up to 30 to 35 percent a year following a range of basic investment techniques, including willingness to sell when the investment reaches a predetermined amount and reinvesting all profits and dividends.

Beck and three of her fellow club members have just launched their book The Money Club, which provides information on establishing and running a club.

A key to success is for members of the club to have common goals. According to the Australian Stock Exchange, clubs that fail within 18 months are those that have disagreement among members on an investment strategy.

That's not to say a strategy cannot evolve over time. For instance, Beck says, "Our strategy has changed over the years, with a consolidation of our investment portfolio to fewer, larger stocks. We have sold out of our non-performing shares and now concentrate on stocks which deliver earnings and dividends." The club's portfolio includes AMP, Argo, BHP, Rio, Alesco and Bank of Queensland.

Similarly, LIPS changed its strategy over the years and now no longer invests in speculative stocks. "Our best purchase was the small Queensland company Campbell Bros that we bought at $4 to $5 and it's now trading around $29," says Brown. Most investment clubs have a partnership structure. You cannot have more than 20 partners otherwise the club would be classified as a managed investment scheme and you would need to issue a prospectus. And all members need to be actively involved in the club otherwise the non-active partners may be deemed to be receiving advice from the active partners who would then need an advisory licence to operate.

According to Beck, the best number of members is fewer than 12. Sheba Investment Network at one stage had 15 members but that proved unwieldy. The club now has six members.

LIPS, meanwhile has eight members, five original while the other three joined a long time ago.

Half the point of an investment club is the social aspect, but you should still pay meticulous attention to taking minutes at every meeting so that there are no arguments down the track about which shares you buy and how much you pay for them. And you need to keep records for tax purposes. Most clubs meet monthly — any less frequently and you could miss buying opportunities.

Success lies in buying at the right time. Brown says she and her partners were "rubbing our hands together when the market recently dropped as we hadn't been buying for a while".

Most clubs require a contribution of $50 or $100 a month.

Before you set up a club, get advice. The Australian Stock Exchange (http://www.asx.com.au/investor/education/investment_clubs/) has some good guidelines but you can also check out The Money Club website (www.themoneyclub.com.au).

Given you are buying and selling shares, you need to register your club, acquire a tax file number, open a bank account and file an annual tax return. But with the legalities out of the way, a share investment club can be a lot of fun.

http://money.ninemsn.com.au/article.aspx?id=304466