Freaky freakonomics

Want to read a book that will blow your mind? Then Freakonomics is the book. It is a book that will make you question the goodness of society. Does it sound like an economics book? Well its not what you think it is, no inflation, deficit or debates about capitalism or communism. The author gathers statistical data and draws some conclusions that are scary including:

• Teachers cheat by upping their class marks when performance incentives are introduced.
• It explains why drug dealers live with their mothers.
• Derives a conclusion that the legalisation of abortion reduced crime in the USA
• Shows how sumo wrestlers cheat.

I must say, quite a freaky book and a worthwhile read.

Another wealthy man believes the US dollar is in trouble

Another wealthy investor has indicated his belief that these stimulus packages will not help the US or global economy and refers to it as just printing money, a historic way to cause a currency crisis and high inflation. Jim Rogers apparently made a lot of money when he predicted the Pound would lose its value some years back and now predicts the same for the US dollar. I am no economist but it concerns me that some very financially successfully individuals like Jim Rogers and Robert Kiyosaki are making such predictions. They are asking why rich wall street bankers are being bailed out by the American tax payer. Both of them suggest buying commodities like Gold and Silver. In South Africa on the JSE you can do this with ABSA’s EFT New Gold, code GLD. I am still trying to make my mind up! A least in the short term it seems like the markets like these bailouts. I have also heard to interesting reports that say the Meryl Lynch CEO bought a carpet for his office cost R 1 000 000, total office decor $ 1 000 000. Another saying the Lehman Brother’s CEO Richard Fuld sold his multi-million dollar mansion ($14 000 000) to his wife for $100. Sounds like someone is protecting his personal assets from litigation???? Anyhow use the google search on my page to listen to some of Jim Roger’s interviews, it’s very interesting.

Make money in a falling market

With the credit crisis everyone is concerned at the rate at which their assets are losing value. If you own a house I am sure you wouldn’t risk not insuring it. So why take that chance with your stock portfolio in market conditions like this. Many people don’t know that you can protect your investment or make money in a falling market using financial instruments like warrants and futures. Standard Bank Online Share Trading has some good courses to help you understand these products as they are not for those that have not educated themselves on how they work. I am sure other brokers have similar courses. The point is you can either hedge you current portfolio, preventing a substantial loss in a falling market by buying put warrants on the shares you own. This ensures that if the share you own tumbles, the put warrant shoots up protecting your investment and allowing you to hold onto the stock for the long term. There are other benefits to these instruments but hedging is one of them.

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Stuff White People Like

I always wonder what will draw one to a blog and it isn’t always a wealth of important information. Sometimes it’s just nonsense that gets interest in your blog going. Gareth Cliff on 5FM mentioned a Blog called Stuff White People Like. I must say I found the discussion very amusing. This guy not only set up a blog (claiming millions of hits) but also managed to publish a book. Guess what’s top of the list? Organic Food J. The Blog is www.stuffwhitepeoplelike.com .

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United States dollar to crash?

The best selling Rich Dad, Poor Dad author, Robert Kiyosaki recons the financial crisis is far from over. His view is that the US government bailout won't work and in the long run will lead to hyper inflation, since they are basically printing money to bailout the financial institutions. This may sound far fetched, however if the bailout is not funded by the tax payer I guess that is how they fund it, they will print money! I guess time will tell!

Roberts view is that prepare for it by buying gold and silver, what he calls God's money and a great hedge against inflation. In SA there is a Gold exchange traded fund, or I suppose you can buy gold coins. Apparently Mandela coins have or will be released into the market shortly.

With commodity prices dropping this seems like a leap of faith, I wonder how things will pan out.

Passive Income - Cell C Franchise

Speaking of passive income in the previous post; Cell C has an interesting franchise opportunity. It is an opportunity to offer cell phone contracts and prepaid starter packs directly to the market. The operational costs are fairly low since this is a direct marketing franchise and therefore you don't have to have a physical premises. In addition you don't carry any stock, you sign the customer up and Cell C delivers the goods. The start up costs to register the franchise is R 55 000, I hear that it is due to increase shortly. What I really like though is the fact that it involves passive income. Not only do you get income from signing people up you get a certain percentage of their ongoing bill as long as they remain on the Cell C network. This is just the type of cash flow idea that Robert Kiyosaki talks about in his Rich Dad, Poor Dad book. If any of you run one of these Cell C franchises, let me know I would value your input.

Books to read

Keen to read some good books? On the business side, a book I found really good was "Rich Dad, Poor Dad" by Robert Kiyosaki. He really makes a lot of sense and challenges some of the conventionally held views on making money. The theme he takes in the concept of generating passive income, that requires very little work once it has started. Rental income is an example of passive income, as once it is set up and the money starts flowing it requires you spending little time in order to maintain that income stream.

He is more focused on cashflow rather than capital growth and suggests that you focus on ensuring you cashflow grows. He also challenges the general belief that the house you live in and own is your greatest assest and suggests it is rather your greatest liability as it does not generate income. Hence the big distinction between assests and revenue generating assets. He also challenges the value that some financial advisors can provide suggesting that you should ask them whether they are living off their investments rather than their salaries and if not ask them why not? This book certainly gets the juices flowing and makes you look at financial planning differently.

Mozambique the place to go!

Last year my wife and I decided to go to Mozambique for the first time. We had heard quite a lot about it and were rewarded with a lovely holiday. What a lovely place at a reasonable price. We flew out from Lanseria airport to Mozambique on one of those prop planes, yes they do still exist outside a museum. We were on a package deal that cost about R 7500 per person for the week including flights, accommodation, breakfast and dinner for a week.

We spent the first 4 nights at Barra Lodge. The lodge is right on the beach and has basic accommodation, but is clean which is the main requirement for us. We went towards the end of April and I must say it was nice and hot, I wouldn't go there at a hotter time of the year! There are a number of activities that are co-ordinated from Barra Lodge, including Scuba Diving, Ocean Safaris and activities like quad biking. When on the Ocean Safari we had the opportunity to snorkel with Whale Sharks, which would have been a real experience had we both not been so sea sick!

We then moved to Flamingo Bay a resort also owned by Barra Resorts. Now if you want a romantic setting this is the place to be. The chalets are on stilts above the water that is crystal clear allowing you to see some amazing fish from your chalet as the tide goes in and out. If you lazy or if you have had too much wine, you can be transported to and from your chalet on a golf cart to the resturant.

Here is a picture of Flamingo Bay

Monster beats iTrip hands down

I recently bought an iTrip so that I could listen to my iPod on my car radio. What a mistake, the quality was poor and half the time it just stopped working and I would have to disconnect it from the cigarette lighter and then reconnect it for it to work again. I decided then to try out the monster attachment. What a difference! The clarity is much better, with a stronger signal strength and it also keeps your iPod charged, unlike the iTrip. I am just waiting for iTunes to start selling online music in South Africa, they missing out on a big music market here I recon!! Come on Apple get your act together!

Software sms package for Sony Ericsson m600i

I have finally found a software package that allows me to send smses or text messages as the rest of the world would sat via my cell phone from my PC. One wonders why Sony Ericsson does provide this in their PC suite?? The product is called Float's Mobile agent or FMA and is open source and downloadable free of charge which is great. I think these guys have done a fantastic job, the only problem is that since it doesn't support the m600i officially it does not yet sync your phones contacts, hopefully there will be a future release that does! The download can be found at http://fma.sourceforge.net/

Enjoy

Working out the return on your share portfolio.

One would think it isn't too difficult to work out the return on one's share portfolio. There are however some interesting complications. Lets say you have a share portfolio that has done well during the 1st part of the year but makes a loss during the second. Lets also assume that you make contributions and withdrawals (negative contributions) throughout the year. If you had R 20 000 in the portfolio at the beginning of the year and withdrew R 15 000 in the middle of the year what is your percentage return? Surely the 1st half of the year should have a heavier weighting than the second in calculating your return on investment, since more was invested during this time period. I did some searching on the Internet looking to find a solution to this problem. I found what is called the "money-weighted" return. Excel has a function called XIRR that can compute this, here is Microsoft's description of the function:

"The following information describes the algorithm used by the XIRR() function of Microsoft Excel to compute the internal rate of return on a schedule of cash flows that are not necessarily periodic, that is, payments may be made at different time intervals."

Click here for more info.