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People and Macroeconomics
As you see someone in the chatterbox saying that he or she does not understand IS-LM model, I am not sure whether it is too late to discuss it. Two years ago back, there was a girl talking on the same chatterbox. She was so clever that she knew my email address to add me in her MSN messenger list. I am quite impressed because she never asked and did it herself. It is clear that she has some amount of intelligence to do things on her own. Let me clarify why it is important to find out something on your own within your mean as much as you have tried.
When we look at books learning something from the nature of the subject, it is one-way learning. It will enable to get our mind to have some gist of what is what. It is not end of the process. We need to move on towards to the point where we need to apply of what we learn from that activity by doing questions, real-time thinking process for money making business, or other useful things. Doing this so increase our understanding of the nature of the subject. It may not be 100% absolute understanding. At least we have developed some level of understanding without being distorted by others. Noise, as in combination of relevant and irrelevant information, can make our mind overload. That is why many successful investors, especially Warren Buffett filter irrelevant ones out once they know what these irrelevant can do for them. That is why we need to see the 'pure truth' of the nature of the subject by reading widely on certain topic you wish to understand. If we spend more time to compare two or more author's discussion on the same topic, we will eventually see one result given by the same topic with different methodology of writing. Noise is one problem, Another problem is the meaning of the word. Many authors have not made things clear by pointing out the meaning. For example, in Macroeconomics text, you see a word 'bank'. It is quite general one. With poor understanding of Macroeconomics, one may be unsure whether bank may represent for central bank, commercial bank, or investment bank. It can be eliminated by reading widely too. The pitfall of reading widely is how much time you can spend other than putting most of hours into doing your favourite activity.
All these said, let me point out the gold mine of doing such aforesaid activities. Based on the book I read, Joel Greenblatt does not know a financial asset, I cannot remember the name of it because business school never taught him about it before. He took time to read up and understand the payoff structure of that unheard financial asset. Putting this kind of effect made him some money because upon reading, he discover that it is easy to use it at all. Those who never read and ignore have missed such opportunity. It is the reward of reading up something on your own. Let not forget Michael Burry who graduated from medical school reading a book about derivative on his own and made money by betting against sub-prime crisis. What about reading widely? Consider Warren E Buffett. When he graduated from Columbia Business School with master degree, he was pure value investor based on Benjamin Graham. Of course, he made a lot of money drilling value investing methodology for almost 20 years. When his time is up for his value investment methodology, he evolved himself by combining value and growth investing into Buffett style. Learning quality growth investment from Philips Fisher and importance of the quality of business from Charlie T Munger, he modified his investment style. Today, Buffett is doing the modified version of a combination of value and growth investment on Berkshire's account. I believe he is doing value investment on his personal account secretly on the small scale. Reading widely enable you to increase your circle of competence in certain areas. It is a reward for reading widely.
However, the most important point in doing these activities is to do now and then in action. Talking about that girl, we talked in MSN from time to time. She is really intelligent in some way. It will be nice if I can meet her and talk. Not only one way learning, there is a need to have two way learning. Two way learning is to talk with someone about the problem of understanding nature of the subject. In this case, there is feedback to hear so that it will be easier to pinpoint the problem of understanding. In two years ago, I made a male friend who is junior in the same university school. Today, he consults me about his way of answering a past year Macroeconomics exam question. Two-way learning enables him to realise the problem. He uses the wrong model to answer the question. He knows it immediately. It seems that I somehow instill him the importance of hard work and consistent learning over 2 years. His friend once question him whether there is the point of learning consistently by going to library or studying often. His friend places higher utility - level of happiness in economics term - on entertainment than on non-entertainment like learning, studying, and etc. It is quite unfortunate that many young people do not understand the importance of understanding and then applying them into the real world. Consider sub-prime crisis. There is a guy who do not understand what type of loans are packed into the asset backed securities. He got his finger burnt because he did not know the content of the asset backed securities while his firm was making money. You can learn this more by reading 'The Big Short' book written by Michael Lewis. In the end of the day, your effort gives yourself a result at your old age. It is quite ambiguous to discuss on because of various underlying factors. Warren Buffett worked so hard for his investment fund business for 20 years. If you have read his biography, he work at office in the morning and work at his room with the door closed at his house. Normally, most wives do not like this kind of lifestyle their husbands live. Fortunately, his first wife seem to be independent enough to deal with three children on her own. It is his greatest fortune. That is why the result varies a lot for given underlying factors placed on your life. I can say safely that my friend will get the wonderful reward of studying consistently after his graduation. It is not 100% monetary thing but probably mixture of non-monetary and monetary things.
In summary, it is extremely important to understand what you are learning. For instance, Buffett understood the power of compounding interest and he utilise it by re-investing his money over 20 years before he took CEO position at Berkshire Hathaway. It is the result of applying the understanding correctly. As for myself, I am picking the relevant ones I learn from management, finance, accounting, business and corporate law, to economics for my own investment methodology. In my context, relevant ones implies that something I can apply within my own mean. I cannot use Capital Asset Pricing Model (CAPM) because I do not want to spend money on expensive and power computer to crush the numbers with huge data in real-time. It is too impractical for me and the main assumption of CAPM is unrealistic. So, I have no use for this CAPM.
I know that sometimes smart people do silly things. We have seen enough smart people making expensive mistakes during sub-prime crisis. That girl asked me a lot of interesting questions and insight. I am really impressed because I have not seen anyone else doing something exceptional. I feel that I am fortunate to know this girl and my economics classmate. They indirectly taught me in many ways.
For that person in the chatterbox, I may not have enough time to draw many graphs here. I hope that my simple key points about IS-LM here may be useful for you although you may not have MSN me at all.
IS curve deals goods market because it is concerned in about how consumers spends and firms invests in the economy. Consumers buy goods - products and services from firms that make/offer them. Firms invest in order to get assets to produce/offer products and services. Firms need machines and humans to produce goods. IS curve is very important tool analysis on how government can boost goods market. Hence, in closed economy, you have three key variables in IS equation. LM deals money market, where interest rate and quantity of money are the important determinants. Usually investors, central banks, commercial banks are in LM world. If we read a newspaper, we see a government giving handout, it implies that IS curve will be shifted to the right with an attempt to increase aggregate income/GDP in the economy. If reserve requirement changes, it affect commercial banks and its activity of lending and of course, LM curve has to be shifted. The rest of the details - from your favourite materials- will go to your mind instantly if you understand this brief discussion of IS-LM in non-academic way. Concerning the slope of the curves, it is best to draw different slopes of IS-LM - flatter vs steeper - on the rough paper and do your own experiments by shifting. There are few hints for you understand why the slope of the curves are like that. If LM curve is flat, it implies that there is only one interest rate for every level of income. It is obvious if you draw only LM curve and no IS curve on the interest rate-income framework. At the same time the magnitude of change in income or interest rate differ a lot when the curve is flatter or steeper compared to 'normal' curve. It is the main gist of IS-LM. Do not forget multiplier effect.
Investment
Consider Microeconomics. If we look at the happening of real world, the earthquake, flood, revolts and increasing world population have pushed the price of affected food up. Natural disasters definitely decrease the supply of food and increasing world population increase the demand of food. With both ends, the price unambiguously rises. Therefore it is one of these focused investment theme I am looking at. Food manufactures and suppliers will be affected by the rise of the price of food. I think the winners within the group of food manufacturers will be the one who is prudent in controlling the cost and increasing inventory reserves in the first place before it has happened. Therefore, we should be observing some food manufacturers.
Regarding Matex stock, profit warning and the published unaudited year-end financial statement has drove its share price back to the point it used to be at in few months ago. Gee, till now, there is no explanation as to why share price has risen steadily during December 2010. I see no point re-buying Matex stock when I have better opportunities to invest in. Short-term traders like to re-buy the stock after they sold them very often.
Whoever identify correctly the survivors in the food manufacturing industry is likely to earn big percentage profit over 2-5 years span from the beginning of 2011
Book
Book Title: Commercial Applications of Company Law in Singapore 3rd Edition
Author: Victor Yeo, Joyce Lee, Pamela Hanrahan, Ian Ramsay, and Geof Stapledon
Rating: 9/10
Remark: Very good book for people who have strong background in accounting and finance field.
Movies
Team Batista Special 2011 (Japanese TV Special 2011)
Synopsis:
Following the season 2 of Team Batista drama, there is another chain of letters aimed at Koichi Hayami, who is about to leave hospital. These letters suggest who will be murdered in the hospital at particular time and date.Keisuke Shiratori and Kohei Taguchi once again investigate them. Who is the culprit behind these planned almost murders?
Rating:7/10
Remark: Decently fine movie.
Ninkyo Helper (Japanese Drama 2009)
Synopsis:
Leaders of Yakuza (Japanese gangsters) in different areas of Japan in the same clan are assigned to elderly care facility by new clan boss. They seems to be shocked. Over time, they tries their best to adapt in a new environment. What is the actual aim behind this for those leaders?
Rating:8/10
Remark: Interesting story with sufficient emotions.
Ninkyo Helper Special (Japanese Movie 2010)
Synopsis:
Following its drama serial, Tsubasa Hikoichi is trying hard to live as normal person, doing honest business. At the same time, he is considering the option to reveal his feelings to a lady, who met him in the drama. Being out of his yakuza clan, other yakuza clan still bother him somehow. Can he survive without being yakuza himself?
Rating:7/10
Remark: the story gets stale but nevertheless comfortable to follow up Hikoichi's life
Shinzanmono Special (Japanese Movie 2011)
Synopsis:
This special movie is based before the drama was shown in last year. Meanwhile Kaga Kyoichiro's dad is hospitalised while Kaga Kyoichiro seems to have no intention to visit his dad. His cousin, Matsumiya Shuhei
visit Kaga's dad because he saved Shuhei's life since child. There is a murder case that Kaga and Shuhei have to work together to find clues and uncover suspect's identity. The initial murder finding suggest that a child is killed by child molester. Does Kaga confirm that it is truly the case or otherwise?
Rating:9/10
Remark: Top-notch acting skill by Abe Hiroshi. Each moment where Kaga stuns a potential suspect is brilliant. 'Must See' show!
Unstoppable (Hollywood Movie 2010)
Synopsis:
The worker who is in charge of manning the train miscalculated that he could change the lane while leaving the train unmanned with slow moving setting. As a result, the train accelerated out of blue and is moving fast to create horrible disaster. A veteran engineer and a young conductor join their hands to have an attempt to prevent that horrible disaster that is about to happen. How shall they do it?
Rating:7/10
Remark: Pack of actions...enough to have your Sunday life worthwhile.
Faster (Hollywood Movie 2010)
Synopsis:
A ex-con sets out his mission to avenge his brother upon release of himself out of the prison. One of the persons who kill his brother hired hit man to kill that ex-con. Ex-con proved to be fearless and fast to kill every person who have taken part of his brother's murder. Is it end of revenge?
Rating:6/10
Remark: Very typical Dwayne Johnson's movie.
Piranha (Hollywood Movie 2010)
Synopsis:
Lake Victoria is a peaceful one. A lot of students are there to party on the beach during school holiday. One day, for no reason, piranha began to appear. Sheriff Julie Forester and a professor discover it. They need to set measures to get students off the lake. How will they do it?
Remark: 6/10
Remark: Some motion snapshots of naked ladies. The story lacks substance and the ending looks dumb.
Casino Jack (Hollywood Movie 2010)
Synopsis:
This movie is based on true life but it seems to be modified. It is about Jack Abramoff, licensed lobbyist, trying to accomplish his dream. His dream proved to be expensive. To support that, he has to do somewhat illegal dealings that are against the ethic of lobbyist. How will Jack deal with this mess?
Rating:9/10
Remark: Refreshing and inspiring show.
Psychic (Korean Movie 2010)
Synopsis:
It is a battle of a man who use his eyes to control people against another man who has faked his death three times. The latter is trying to stop the former for the name of justice and goodness.
Rating:6/10
Remark: Decent show
Strawberry Night (Japanese Special 2010)
Synopsis:
A detective story brings you a case where a lady inspector is trying to figure out why the body is cut like that and find clues based on her logical thinking. At the same time, she is trying to complete with a male inspector from another police division for information. What is the truth behind the murder?
Rating:9/10
Remark: Surprising good movie. The story is just right.
Ninja vs Alien (Japanese Movie 2011)
Synopsis:
Ninjas are protecting their villages. One day, alien appears from the sky. Ninjas face the most difficult task to kill alien, which is much more harder than killing other ninjas from other villages.
Rating:5.5/10
Remark: Below par story.
The Green Hornet (Hollywood Movie 2011)
Synopsis:
Britt Reid is struggling to get his life exciting as he wants but his dad, owner of big newspaper company disapproves of what he does. Suddenly, his dad is dead out of sudden, resulting Britt to inherit his dad's assets. One day, he find out what is going on in his dad's company and home. He has upped the ante by becoming Green Hornet that is given by his new partner, who work in his home by maintaining his dad's car and making coffee. By upping the ante, he and his partner ransacked every gang's turf. One day, the biggest gang lord wants to kill Green Hornet. How will the story end?
Rating:6/10
Remark: Too much explosive actions. Enough to keep people with lazy mind entertained.
Tony Del Piero wrote and posted at at 12:14 am
