Wall Street for dummies...

A funny anecdote for us to share with...

Short, brief and straight to the point!
(Make u understand the financial chaos instantly!!)

WALL STREET FOR DUMMIES...

Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each. The villagers, seeing that there were many monkeys around, went into the forest and started catching them.

The man bought thousands at $10 and, as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy monkeys at $20 for each. This renewed the efforts of the villagers and they started catching monkeys again. Soon the supply diminished even further and people started going back to their farms.

The offer increased to $25 each, and the supply of monkeys became so small that it was an effort to even find a monkey, let alone catch it! The man now announced that he would buy monkeys at $50!

However, since he had to go to the city on some business, his assistant would now buy on behalf of him. In the absence of the man, the assistant told the villagers. 'Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35, and when the man returns from the city, you can sell them to him for $50 each.'

The villagers rounded up all their savings and bought all the monkeys. They never saw the man nor do his assistant again, only monkeys everywhere!

Cheers...

- Zaihan Usman @ Othman, UiTM -

love is a bull run?

Has it occurred to you that investment analysts could make excellent advisers for choosing your life partner? How can analysts, who are good at number crunching, help in relationships? Well, choosing your partner is similar to selecting good stocks for investment, since you want to preserve the value of your hard-earned money plus grow your wealth for retirement (preserve principal + grow earnings).

When you talk to analysts about stock selection, the usual fundamental factors that they tell you to watch out for are:

1. Earnings growth (personal income)
2. Balance sheet strength (wealth)
3. Gearing ratio (indebtedness)
4. Management capability (personality)
5. Corporate governance (integrity and discipline)

First, let's talk about earnings. Stocks that have either high earnings growth or a resilient, steady income flow are generally well-liked. Under normal circumstances, no one wants to pour money into loss-making companies. Similarly, given a choice, no woman wants a partner who can't even earn a living, let alone get rich. Romance can hardly survive without bread.

Don't get me wrong. I'm not saying women are materialistic; they are just being realistic. Of course, there are some who are ruled by passion. Again, this may be something to do with age, which determines one's risk appetite.

Obviously, different age groups have different risk appetites. The same applies to choosing one's partner. A woman's preferences and priorities vary at different stages of her life. Young investors tend to take more risks and don't mind investing in Mesdaq Market counters that have no earnings track record but promise great growth potential. Likewise, a young girl with wishful thinking may find it all right to fall in love with a poor chap because she believes that sooner or later he would make his millions. Hope so.

But those in their mid-30s may not be that gung-ho because stability may be the priority for them. Don't expect them to have a strong heart for risk-taking.

Now the balance sheet, which shows companies' assets and liabilities. Investors pay a premium for stocks that have a healthy balance sheet, namely minimal borrowings, especially short-term ones, little receivables plus a growing cash pile (ah, that would be perfect!). This is simply because a strong balance sheet reflects the solvency of a company. It reflects its ability to survive during harsh economic conditions. These are exactly things that could offer the "security" that women want. A woman will certainly be stumped when she realizes that someone she has fallen for is loaded with debt, worse still if the creditors are "Ah Long" (loan sharks).

Management is said to be the most important factor when selecting a stock. Unfortunately, this is also the most difficult part when it comes to evaluation. Investors don't want to invest in a company that never takes care of its prospects and shareholders' interests. Neither do investors want to invest in a company that is involved in "hanky panky".

A management that is only good at boasting about the company's future prospects but seldom delivers results is not a good pick either. Similarly, someone who always blows his own trumpet could be just a tin horn.

Nonetheless, love is blind when two hearts bind. When that happens, everything will be irrelevant. It is just like in the bull market — all stocks look attractive.

What say you...?

- Kathy Fong, The Edge -