Financial Crisis In Europe Gets Worse

Friday the l3th was not good for Eurozone Countries.  S & P removed the highest triple A rating from Austria and France.  It is especially difficult because France and Germany are looked upon as white knight of the Eurozone community.  Germany maintains its triple A status.  (For your information, Greece is C, the lowest in Standard & Poor rating)  Moody's and Fitch have not downgraded France.  But a number of debt laden countries in Europe were downgraded one or two notches.

What is the meaning of all these?

First, the Euro dived $l.2624, and 97.20 to a yen, the lowest since 2000.

How will this affect the local economy?

How will it affect OFW in Europe?  Will it mean slowdown in house sales and domestic consumption?

Keys to Financial Success

Making a New Year's resolution to improve your financial status is a good thing (regardless of when you begin) but its much better to start at the beginning of the year.

1. Spend less than you earn

No matter how much or how little you're paid, you'll never get ahead if you spend more than you earn. 

2.  Stick to your budget

Set spending and saving goal to know where your money will go.

3. Pay off your debt

Credit card (or any form of debt) is easy to use but hard to pay. Interest can eat you. It better to use cash.

4. Have a savings plan

Set aside a portion of your income (at least 5% to 10%). Pay your self first. First! not the left overs.

5. Invest

Put your some money to investment. You can buy real estate property like Holy Gardens memorial plots - the only bankable memorial lot in the Philippines.

6. Update your will

If you have dependents, no matter how little or how much you own, you need a will. For an easy reference and convenience, you can ask a copy of Estate Planning at Holy Gardens Memorial Park office (San Fernando City, La Union; San Carlos City, Pangasinan; Barandal, Calamba City, Laguna; Calapan City, Oriental Mindoro; Oton, Iloilo)

Purpose Driven Life; Are You Retiring?

A former classmate in college some 40 years ago sent me this article.  It is thought provoking about life and wealth creation.

Please read and enjoy:

[ateneo_college1972] Fw: Lee Kuan Yew - On Getting the Best Out of Life and Out of Retirement

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FROM:

• Francisco Varona

TO:

• Ateneohs68  
• Ateneo_college1972

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Thursday, January 5, 2012 2:55 PM

This is good reading, from a colleague at Lyceum...

If you think Retirement is all about putting your feet up, play golf and read a few books, THINK AGAIN!   Lee Kuan Yew: Have A Purpose Driven Life And Finish Well! “The human being needs a challenge, and my advice to every person in Singapore and elsewhere: Keep yourself interested, have a challenge. If you’re not interested in the world and the world is not interested in you, the biggest punishment a man can receive is total isolation in a dungeon, black and complete withdrawal of all stimuli. That’s real torture.” MY CONCERN today is, what is it I can tell you which can add to your knowledge about ageing and what ageing societies can do. You know more about this subject than I do. A lot of it is out in the media, Internet and books. So I thought the best way would be to take a personal standpoint and tell you how I approach this question of ageing. If I cast my mind back, I can see turning points in my physical and mental health. You know, when you’re young, I didn’t bother, assumed good health, was God-given and would always be there. When I was about 57 that was – I was about 34, we were competing in elections, and I was really fond of drinking beer and smoking.  And after the election campaign, in Victoria Memorial Hall – we had won the election, the City Council election – I couldn’t thank the voters because I had lost my voice. I’d been smoking furiously. I’d take a packet of 10 to deceive myself, but I’d run through the packet just sitting on the stage, watching the crowd, getting the feeling, the mood before I speak. In other words, there were three speeches a night. Three speeches a night, 30 cigarettes, a lot of beer after that and the voice was gone. I remember I had a case in Kuching, Sarawak . So I took the flight and I felt awful. I had to make up my mind whether I was going to be an effective campaigner and a lawyer, in which case I cannot destroy my voice and I can’t go on. So I stopped smoking. It was a tremendous deprivation because I was addicted to it. And I used to wake up dreaming. The nightmare was that I had resumed smoking. But I made a choice and said, “If I continue this, I will not be able to do my job”. I didn’t know anything about cancer of the throat or oesophagus or the lungs, etc. But it turned out it had many other deleterious effects. Strangely enough after that, I became very allergic, hyper-allergic to smoking, so much so that I would plead with my Cabinet ministers not to smoke in the Cabinet room. You want to smoke, please go outside because I was allergic. Then one day I was at the home of my colleague, Mr Rajaratnam, meeting foreign correspondents including some from the London Times and they took a picture of me and I had a big belly like that (puts his hands in front of his belly), a beer belly. I felt no, no, this will not do. So I started playing more golf, hit hundreds of balls on the practice tee. But this didn’t go down. There was only one way it could go down: Consume less, burn up more. Another turning point came when (this was 1976, after the general election) I was feeling tired. I was breathing deeply at the Istana, on the lawns. My daughter, who at that time was just graduating as a doctor, said: ‘What are you trying to do?’ I said: ‘I feel an effort to breathe in more oxygen.’ She said: ‘Don’t play golf. Run. Aerobics.’ So she gave me a book, quite a famous book and, then, very current in America on how you score aerobic points swimming, running, whatever it is, cycling. I looked at it sceptically. I wasn’t very keen on running. I was keen on golf. So I said, ‘Let’s try’. So in-between golf shots while playing on my own, sometimes nine holes at the Istana, I would try and walk fast between shots. Then I began to run between shots. And I felt better. After a while, I said: ‘Okay, after my golf, I run.’ And after a few years, I said: ‘Golf takes so long. The running takes 15 minutes. Let’s cut out the golf and let’s run.’ I think the most important thing in ageing is you got to understand yourself. And the knowledge now is all there. When I was growing up, the knowledge wasn’t there. I had to get the knowledge from friends, from doctors. But perhaps the most important bit of knowledge that the doctor gave me was, one day, when I said: ‘Look, I’m feeling slower and sluggish.’ So he gave me a medical encyclopaedia and he turned the pages to ageing. I read it up and it was illuminating. A lot of it was difficult jargon but I just skimmed through to get the gist of it. As you grow, you reach 20, 21, 22, 23, 24, 25 and then, thereafter, you are on a gradual slope down physically. Mentally, you carry on and on and on until I don’t know what age, but mathematicians will tell you that they know their best output is when they’re in their 20s and 30s when your mental energy is powerful and you haven’t lost many neurons. That’s what they tell me. So, as you acquire more knowledge, you then craft a programme for yourself to maximise what you have. It’s just common sense. I never planned to live till 84 or 85.! I just didn’t think about it. I said: ‘Well, my mother died when she was 74, she had a stroke. My father died when he was 94.’ But I saw him, and he lived a long life, well, maybe it was his DNA. But more than that, he swam every day and he kept himself busy. He was working for the Shell company. He was in charge, he was a superintendent of an oil depot. When he retired, he started becoming a salesman. So people used to tell me: ‘Your father is selling watches at BP de Silva.’ My father was then living with me. But it kept him busy. He had that routine: He meets people, he sells watches, he buys and sells all kinds of semi-precious stones, he circulates coins. And he keeps going. But at 87, 88, he fell, going down the steps from his room to the dining room, broke his arm, three months incapacitated. Thereafter, he couldn’t go back to swimming. Then he became wheelchair-bound. Then it became a problem because my house was constructed that way. So my brother, who’s a doctor and had a flat (one-level) house, took him in. And he lived on till 94. But towards the end, he had gradual loss of mental powers. So my calculations, I’m somewhere between 74 and 94. And I’ve reached the halfway point now. But have I? Well, 1996 when I was 73, I was cycling and I felt tightening on the neck. Oh, I must retire today. So I stopped. Next day, I returned to the bicycle. After five minutes it became worse. So I said, no, no, this is something serious, it’s got to do with the blood vessels. Rung up my doctor, who said, ‘Come tomorrow’. Went tomorrow, he checked me, and said: ‘Come back tomorrow for an angiogram.’ I said: ‘What’s that ?’ He said: ‘We’ll pump something in and we’ll see whether the coronary arteries are cleared or blocked.’ I was going to go home. But an MP who was a cardiologist happened to be around, so he came in and said: ‘What are you doing here?’ I said: ‘I’ve got this.’ He said: ‘Don’t go home. You stay here tonight. I’ve sent patients home and they never came back. Just stay here. They’ll put you on the monitor. They’ll watch your heart. And if anything, an emergency arises, they will take you straight to the theatre. You go home. You’ve got no such monitor. You may never come back.’ So I stayed there. Pumped in the dye, yes it was blocked, the left circumflex, not the critical, lead one. So that’s lucky for me. Two weeks later, I was walking around, I felt it’s coming back. Yes it has come back, it had occluded. So this time they said: ‘We’ll put in a stent.’ I’m one of the first few in Singapore to have the stent, so it was a brand new operation. Fortunately, the man who invented the stent was out here selling his stent. He was from San Jose, La Jolla something or the other. So my doctor got hold of him and he supervised the operation.  He said put the stent in. My doctor did the operation, he just watched it all and then that’s that. That was before all this problem about lining the stent to make sure that it doesn’t occlude and create a disturbance. So at each stage, I learnt something more about myself and I stored that. I said: ‘Oh, this is now a danger point.’ So all right, cut out fats, change diet, went to see a specialist in Boston, Massachusetts General Hospital . He said: ‘Take statins.’ I said: ‘What’s that?’ He said: ‘(They) help to reduce your cholesterol.’ My doctors were concerned. They said: ‘You don’t need it. Your cholesterol levels are okay.’ Two years later, more medical evidence came out. So the doctors said: ‘Take statins.’ Had there been no angioplasty, had I not known that something was up and I cycled on, I might have gone at 74 like my mother. So I missed that decline. So next deadline: my father’s fall at 87. I’m very careful now because sometimes when I turn around too fast, I feel as if I’m going to get off balance. So my daughter, a neurologist, she took me to the NNI, there’s this nerve conduction test, put electrodes here and there. The transmission of the messages between the feet and the brain has slowed down. So all the exercise, everything, effort put in, I’m fit, I swim, I cycle. But I can’t prevent this losing of conductivity of the nerves and this transmission. So just go slow. So when I climb up the steps, I have no problem. When I go down the steps, I need to be sure that I’ve got something I can hang on to, just in case. So it’s a constant process of adjustment. But I think the most important single lesson I learnt in life was that if you isolate yourself, you’re done for. The human being is a social animal – he needs stimuli, he needs to meet people, to catch up with the world. I don’t much like travel but I travel very frequently despite the jetlag, because I get to meet people of great interest to me, who will help me in my work as chairman of our GIC. So I know, I’m on several boards  of banks, international advisory boards of banks, of oil companies and so on. And I meet them and I get to understand what’s happening in the world, what has changed since I was here one month ago, one year ago. I go to India. I go to China. And that stimuli brings me to the world of today. I’m not living in the world, when I was active, more active 20, 30 years ago. So I tell my wife. She woke up late today. I said: ‘Never mind, you come along by 12 o’clock. I go first.’ If you sit back – because part of the ending part of the encyclopaedia which I read was very depressing – as you get old, you withdraw from everything and then all you will have is your bedroom and the photographs and the furniture that you know, and that’s your world. So if you’ve got to go to hospital, the doctor advises you to bring some photographs so that you’ll know you’re not lost in a different world, that this is like your bedroom. I’m determined that I will not, as long as I can, to be reduced, to have my horizons closed on me like that. It is the stimuli, it is the constant interaction with people across the world that keeps me aware and alive to what’s going on and what we can do to adjust to this different world. In other words, you must have an interest in life. If you believe that at 55, you’re retiring, you’re going to read books, play golf and drink wine, then I think you’re done for. So statistically they will show you that all the people who retire and lead sedentary lives, the pensioners die off very quickly. So we now have a social problem with medical sciences, new procedures, new drugs, many more people are going to live long lives. If the mindset is that when I reach retirement age 62, I’m old, I can’t work anymore, I don’t have to work, I just sit back, now is the time I’ll enjoy life, I think you’re making the biggest mistake of your life. After one month or after two months, even if you go travelling with nothing to do, with no purpose in life, you will just degrade, you’ll go to seed. The human being needs a challenge, and my advice to every person in Singapore and elsewhere: Keep yourself interested, have a challenge. If you’re not interested in the world and the world is not interested in you, the biggest punishment a man can receive is total isolation in a dungeon, black and complete withdrawal of all stimuli, that’s real torture. So when I read that people believe, Singaporeans say: ‘Oh, 62 I’m retiring.’ I say to them: ‘You really want to die quickly?’ If you want to see sunrise tomorrow or sunset, you must have a reason, you must have the stimuli to keep going.’ Have a purpose driven life and finish well, my friends.

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The Power of Compounding

What is compounding?  It is the multiplication or doubling of value every once turn. 

l.  So there was a story about a chess player who was so good that the king asked him what he reward he wants.  He said that all the king has to do is double the number (compound) the number of grains for every square of the chessboard.  The chess player ended owning warehouses upon warehouses of grains.,

2.  How many pieces of paper would you have if you folded it 52 times?   (You know that it only physically feasible to fold a paper, no matter how large 7 times).  Maybe you cant figure that out.

You experience compounding if you do not pay your credit card bills on deferred payment on time.  You sink deep into the debt sinkhole because the amount of indebtedness has doubled in such a short time.

So Warren Buffet used this powe of compounding to the hilt in his wealth building journey at Berkshsire Hathaway.

Benjamin Franklin,s endowment for the city of Philadelphia of several thousand dollars became millions after eons of year.

If you put your money in a egg nest that never loses, then the small amount doubles after several years. 

Here you can use the rule of 72.  If it is 7.2  %, the money doubles in l0 years. etc.

The Zurich Axioms

I lost the book on the Zurich Axioms.  But as we all know, Zurich is Swiss city, and as we all know private banking and wealth management center of the world is Switzerland.   There is a dozen Zurich axioms and I plan to research on them again.

But what I recall is not to be greedy. Do not wait too long for an asset value to peak up.  Sell or unload when assets have peaked in value.

Also do not have regrets if you unloaded sooner.

Here is the link to the Zurich Axioms by Max Gunther

/the-zurich-axioms/

Two Basic Rules in Investing

According to Benjamin Graham and Warren Buffet, there are two basic rules in investing:

Rule No. l:    Do not Lose

Rule No. 2:  Go back to Rule No. l

Frugality is the Key to Capital Formation

Frugality is the Key

Do not be confused by what people say about investment.  The only way you can invest is if you save.  If you are frugal.  Without frugality, there can be no savings.  Without savings, there is no capital market, there is no money or capital market to speak of.

How can you be Frugal

l.  Spend less than you earn.

2.  Avoid going to the mall, do not listen or read much sales pitches for things you do no need.

3.  Always find the best value for your purchases.  Canvass

4.  Always try to pay in cash;  do not buy more than cash at hand.

5.  Avoid use of credit cards.

6.  Use credit card as debit card.  It is expensive to buy food on a deferred payment.  After you eat an expensive meal in a fine dining, the interest and the penalties will eat your money or what is left of it.

7.  If you have money in the bank earning only 0.5% per annum and 3% monthly charge and 4% late payment penalties for a credit card, which is better alternative for you?

Some Funny Things About Money

What Does it Profit a Man.....

You might have misconceptions about money:

l.  There is no gold backing our money.  Since the Bretton Woods agreement in l945, the gold backing for currency was removed.  In its place was fiat standard:   faith in the government, or sovereign guarantee.  Most currencies have expressed guarantees, with no less than the President of the state signing the note.

2.  Money may be your asset, but in reality it is a debt instrument;  it is a promise to pay by the government.  And when you go to the cash department of BSP, (or Federal Reserve Bank in US), what will they give you to redeem that promissory note?

You guessed it right, another note....

3.  The note is not a value per se, but a promise of value.  It is only as valuable as the note it is printed on.  Thus, all notes are worthless;  just like Mickey Mouse or Japanese WW II scrips.  Only the productive activities of people, ie farming, construction, manufacturing, gives value to the currency and vice versa.

4.  The increase in money supply (ie bills in circulation) is not backed by any real asset of the government, or BSP.  It is notes debit on the asset side, and credit on the other side.  BSPs capitalization is only Pl0 B supporting billions of notes and coins in circulation.

5.  Printing more money causes value of goods and wealth to go down.  Law of supply and demand.  More money vs goods means, higher prices, but value of goods remain the same or lower.  Inflation means real value of money gets eroded.  It is the same for your other financial assets.

6.  The taxes that we pay stabilize the government and the currency;  more borrowings by the government diminishes the value of the currency. In a way, inflation robs people of value blind;  because you can not control it;  it comes without your consent (taxation needs your consent)

People are migrating to purchase of hard assets like gold;  unlike notes which are paper, gold is more stable and its price has gone up to $l,500+ @ ounce.

According to Andrew Tobias, the best place to park your money is in stocks  -  stocks of food that you need.  Your gain on the stocks you hold, is equivalent to the price increases and you are better off with a hoarded case of tooth paste or detergent, than investing in Treasuries or Stock Market.

Do they make sense?

Five Basic Rules of Personal Finance

Rule #1
Pay Yourself First

Pay yourself first. This means putting something away for your future each and every month. Don't use the excuse that you have nothing left to work with.  

Rule #2
Get Out Of Debt

Debt is financial cancer. There's no other way to say it. You must make it a priority to pay off your debts and then stay out of debt.
 

Rule #3
Protect What You Own

Yes, you need to pay for insurance. No one likes paying for insurance -health, life, car, home, etc. and even a memorial lot. If you want your family to have a great life while you're here, don't you want to make sure they're safe if you pass away early? This may not be the most exciting personal finance education rule, but protect what you own. You can start by buying a memorial lots in Holy Gardens Memorial Park near you :)

 

Rule #4
Control Your Income

 It's financially unhealthy to depend on only one source of income these days. If you have a great job making a great income, are you absolutely sure you'll have that job all the way to retirement?

So, whether you have a great job or you're struggling with income, I believe you'll be doing yourself a huge favor by adding other income sources.

Begin a home business, build a website, invest in real estate, etc. Do something that will eventually allow you to control your own income. The last thing you want in the coming years is to be dependent on someone else to allow to keep working for them.And if you are a Holy Gardens lot owner, you can borrow loan from Majorem Lending Investor Inc. to start your own business. Inquire at Holy Gardens office near you to know how.

Rule #5
Leverage

 This personal finance education rule deals with controlling your income. You want to leverage your income. This means you earn income that is not completely dependent on your efforts.

A job is the opposite of this. At your job, you don't make any money unless you're there trading your time for money. So you can start to be an entrepreneur.

 

I hope you take these financial education ideas seriously and use them. If you do, you'll create the financial abundance that will free you to live an over-all life of abundance.

@MLII 2012. All rights reserved.

 

Twin Difficulties at USA: Inflation and Unemployment

We just received  a newsfeed from News max regarding forthcoming 2nd depression in the USA.  It would be like a repeat of  1970.  Inflation at US for the last two years has been at 34% and real unemployment figure is at l7%.  If you add the two, that is the misery index.  And when real figures come out, the misery index is at all time high.   Money supply, which drives up inflation, is at all time high. Debt level went up from l0 trillion at the start of Obama's presidency to more than l4.2 trillion as of July 2011,

Inflation can destroy wealth and liberty of Americans, and their future.

The video promotes the book of Milton Friedman, the economic adviser to Pres. Ronald Reagan who brought new morning to America, post Carter.  It enttiled Money Mischief.  It gives guide on how to counter inflation.

Here is the link to the informative video

money_mischief.cfm?promo

'Santa Rally' May Face Test This Week

Stocks for the last week of December 2011 is the moment of truth or the test week if the stock market of US will improve for 2012.

Read the article from Thomson/Reuters:

Get ready. The last trading week of the year will be a test for stocks to prove whether they have the strength to carry a rally into next year.
The broad S&P 500 index broke through its 200-day moving average on Friday after turning positive for the year as a four-day rally lifted stocks following a spell of better-than-expected economic data. At Friday's close, the S&P 500 was up 0.6 percent for the year.
But despite the recent economic data that suggest the U.S. economy is on the right track to recovery, Europe's sovereign debt crisis is troubling investors and weighing on the market.
Many market participants are reluctant to believe in a "Santa Claus rally" this year, which refers to stocks' seasonal tendency to gain in the final five trading days of the year and first two trading days of the new year.
Warnings from major credit rating agencies on a potential downgrade of several European nations have kept investors on edge. After Standard & Poor's surprised financial markets back in August with a downgrade of the United States' triple-A credit rating on a Friday evening, investors worry a similar move could come at any time - even between Christmas and New Year's.
But the absence of European sovereign bond auctions for the next two weeks could lend support to stocks.
"The fact that there won't be a (European) bond auction until the second week of January, that takes away some spotlight from Europe, at least for a little while," TD Ameritrade chief derivatives strategist J.J. Kinahan said.
"Unless we get earth-shattering news, the S&P could go up to (the) 1,300 levels," he said.
The S&P 500 closed on Friday at 1,265.33.
The correlation between U.S. stocks and European sovereign bond yields has been high, especially the link with Spanish, Italian and German bonds. A poor bond auction in any one of these countries could trigger an instant selloff in the U.S. stock market.
SANTA CLAUS VS BEAR CLAWS
What happens this week is important as it sets a tone for the coming year.
"If Santa should fail to call, bears may come to Broad & Wall," so goes the Wall Street adage, according to the Stock Trader's Almanac.
Ari Wald, a technical strategist at Brown Brothers Harriman, said the key level on the S&P 500 to watch is 1,260, which is a resistance from the index's downward sloping 200-day moving average and the downtrend connecting its October and December peaks.
"A breakout above this supply would argue for continued seasonal strength through the first quarter of 2012," he said.
He also noted that 1,200 is support from the index's downward sloping 100-day moving average and the uptrend connecting its October & November lows.
"A breach of this demand could stir additional technical selling to 1,130-1,150 intermediate-term support," Wald said.
With many investors absent until the start of 2012, trading volume is expected to be light, creating more volatility.
This week's data includes the S&P 500 Case-Shiller House Price Index and consumer confidence data on Tuesday.
The Chicago Purchasing Managers Index and pending home sales data are due on Thursday. After a strong gain in November, the Chicago index is seen giving back a modest amount in December.

© 2011 Thomson/Reuters. All rights reserved.

Analysts: Gold Prices Poised to Set Record Highs in 2012

Gold prices may be off from highs seen earlier in 2011 but get ready for a rebound because gold is set to soar again and may break records in 2012, analysts say.

Gold prices broke records in 2011, shooting to over $1,900 an ounce in September although they have fallen by about 16 percent more recently.

As the prognosis for U.S. recovery looks better, the outlook for Europe looks worse.

That scenario allowed the dollar to resume its status as a safe haven asset that it lost amid economic uncertainty, which sent investors running to the yellow metal on fears the dollar was getting too weak.

While Europe looks increasingly worse, investors will still run to dollars early in 2012, but watch out for gold bugs jumping back in later in the year, when inflationary pressures rise in the U.S. as a side effect of loose monetary policies over the last couple of years.

"Although investors are currently not focused on an inflationary environment, longer term we believe with the amount of stimulus injected globally and higher inflation expectations will continue to support investment demand in gold," says Tanya Jakusconek, an analyst for the unit of Canada's Scotiabank Group, the Christian Science Monitor reports.

Others agree that as long as bad news seeps in from Europe and while the U.S. recovers amid a sea of inflation-fueling liquidity, gold will rise again even if at a more modest pace.

"The gold price is primarily supported by investment demand. Investors look to gold as a safe haven and the limited supply of the metal could push prices to very high levels in 2012, potentially exceeding $2,000 in the next six months," says Angelos Damaskos, the chief executive of Sector Investment Managers and an adviser to the Junior Gold Fund, according to the Telegraph.
© Moneynews. All rights reserved.

Read more: Analysts: Gold Prices Poised to Set Record Highs in 2012
Important: Can you afford to Retire? Shocking Poll Results