How do you classify your investments?

Nowadays many people have investments in one way or another. Stocks, properties, REITs, ETFs, mutual funds and bonds are the most popular choices. Of course there are some other "investments" like warrant, CBBC and option. Even bank saving could be considered as investment as well despite of the miserable return.

I don't know how other people classify their investments but I do it in my way according to the possibility of value appreciation (depreciation on the otherwise direction) and whether there is income generation by the investments. The classification falls into category 1, 2, 3 and 4 in the below matrix.

		Value Appreciation
		Yes	No
Income Generation	Yes	1	2
	No	3	4

Cat. 1 investment can generate income while possibly enjoys value appreciation (depreciation as well). This is the ideal class of investment. At certain time frame, rental properties and certain types of stocks are good examples.

Cat. 2 investment just earns income only but does not see value appreciation over times. Holding bonds till maturity falls exactly into this category.

Cat.3 investment is the opposite of Cat. 2 so no income is received during the investment period. All one hopes is the price hike followed by a sell off for profit. Most, if not all, growth stocks that pay out close to zero dividend are the examples.

Cat. 4 is basically not an investment because it neither generate income nor will it appreciate over times. Cash or saving bank account deposit match exactly this criteria.

So one may ask why classify the investments in the first place as long as they make money in one way or another. This is about the objectives of our investment. That is to say why we invest in the first place. The objective of investment largely associates with our life cycle. Understanding in what stage of life cycle one is in then he/she can develop an investment strategy to best meet his/her needs by holding the corresponding categories of investment items.

Of course these four categories are not mutually exclusive. One can hold all four at the same time but putting an appropriate percentage among them is important and adjusting the percentages along the life cycle is even more vital. So in the first place one must examine into what categories his/her investments fall into and check what percentages they are in. Holding an inappropriate category and particularly having too much could be harmful to one's financial well-being. Just imagine a 80 years old retiree holding 10% of Cat.4 but 90% in Cat. 3, ie., no income but hopefully price hike could be fatal in case of the market crash. On the other hand, a young person with majority of his/her assets in cash will not render him/her a fast track of wealth accumulation. Both of the scenarios are not desirable.

So classifying the investments is not the end but just the first step. The key point is to know what investments one is holding then to adjust the holding percentage in the four categories in the investment portfolio to achieve the optimal balance between cash income and value appreciation. Simply speaking, investments classification is the just means while the allocation of investments to achieve the goal of cash income and value appreciation is the end.

You are tagged!

In many countries pets like dogs are tagged with chips under statutory requirement. This is for the sake of strayed animals so that info of owner can be retrieved easily. Most of the people don't know they are also "tagged" in another way. So they are curious how they are tagged because they have not been implanted a chip into their bodies.

However, they forget they are holding a mobile phone almost every minute during their awakening time, some even when sleeping. So what do mobile phones relate to tagging then? And who tagged them at all and why?

Mobile phone not only stores many of the personal particulars and files. It is very useful and entertaining but indeed it is the backdoor that opens the access to parties not limited to hackers whom are interested in knowing everything of you. Hackers are interested in your money mostly but there are someone whom are more concerned about your activities. That is the big brother, ie., governments.

It is well known that the GPS function of mobile phones reveals the whereabout of the owners. Even it was switched off but the GSM signal still discloses the location. Very often there were scenarios in the films how police tracked a target as long as he/she is holding a mobile phone.

Except the whereabout of the owner, mobile phones provide a backdoor to check the owner's activities through viewing, secretly, on what apps used, websites browsed, photos taken, phone conversation made with whom...etc. As there are more and more functions feasible with a mobile phone, there is indeed an increasing level of disclosing our privacy. I sometimes suspect if there is any connection on the mobile phone product development with the government surveillance scheme. Naturally there is no official cooperation on such move but when governments put it at the level of national security then it makes thing reasonable and necessary.

So when mobile companies launch new models with fantastic functions, it is in one way for the sake of business purpose, on the other hand it lures more and more people to use them. This is what the governments want to see because that means more and more people are under surveillance as long as they are holding a mobile phone.

This is a triple win situation. The mobile phone companies have more business, the users are fascinated with new features and the governments got people "tagged" willingly.

The possible biggest black swan in this year

Black swan is termed as the very unexpected incident with very slim chance yet happened. There were many examples of black swans internationally or domestically. Just name a few like Brexit and Trumped. However, the biggest one is yet to come. Many people may guess I am talking about the possible outbreak of the war between the U.S. and North Korea. This is not what I meant, I am going to share my thought on the topic though.

So far there is only exchanges of heated wordings between Trump and Kim. Most of the commentators concluded that war is unlikely as the both sides cannot afford so because should war happen it will most likely trigger a nuclear warfare that not only ruins both of them but the world as well.

My concern is not whether there will be a nuclear war that reduces the possibility of its happening. I'd rather focus on the two key persons, ie., Trump and Kim. As a result of propaganda from the mainstream media, Kim is projected as a cruel and crazy guy. Naturally I do not know the truth but I do respect Kim as the chief of a country and his vision as well. Had he not insisted on the development of nuclear weapon I do not think he stands a chance to quarrel with Trump. Take a look on the different faith on Iran and Irag that one will not doubt the importance of the ownership on nuclear weapon to a small country when they chose not to be winged under the U.S. You may say I am nuts but I think the world is even much safer when there are more nuclear weapon-backed countries. The effectiveness of nuclear threatening was well demonstrated during the Cold War period and in the competition between the U.S. and China now.

Now back to Trump, he is also labeled as a crazy guy by his rivals. I don't think he is out of his mind but sometimes he showed symptom of mania. The evidence is that he can't help to twitter naive messages or to refute the criticisms against him. He is an extraordinary president yet no predecessors ever done that before. His act is like a kid always saying no to mom. You are lazy, no, I am not! Go to bed now, no, I am not going! However, he is a grandfather.

Frankly speaking I have worry over Trump more than Kim but do I really worry there will be a nuclear war between the two countries? I think more people are more concerned about it than I am. They are the super rich families in the U.S. Kim did the bluffing only but Trump is another story. Will these families allow their wealth be destroyed by a man with mania? In American history, "coincidentally" always there was a "lunatic" showed up in time to take down his president whom would potentially jeopardize the interests of the super rich families. Well, there are so many lunatic in the world, with no exception in the U.S. and there was no shortage of examples that U.S. presidents could not complete his term.

So is that the possible black swan? probably yes but the even bigger one is that what if the lunatic fails to appear in time to do his job?

God bless American.

Governments and terrorism, it takes two to tango

People usually think it must be rivalry between governments and terrorism. All governments in the world say combating terrorism is their key job. On the other hand, bringing the biggest possible trouble by massive killing to a targeted government is the aim of all terrorist organizations. So naturally people will think that the two are born rivalries. I think most of the time they are but have you ever thought that sometimes they need each others.

In many Hollywood conspiracy films we learned that things are not just what they appear to be, particularly when it comes to politic. For anybody ever involved in senior management either in private sector or public governance knows that conflict is not always bad but sometimes even desirable. When a conflict is manipulatable, it can be manoeuvred in way beneficial to the party whom creates it.

When diversion on public attention is needed, all governments employ the tactic of conflict creation. The need may arise due to their poor performance, scandal or misbehaviour, or for a particular hidden agenda. Conflicts could be domestic or across the border as long as it works and whichever works well. Domestic conflicts are usually between or among different interested parties while cross-the-border one is best described as anti-terrorism, a conflict between fellows and international/regional terrorists. The regime of a country under terror attack can strengthen the surveillance on their nationals in the name of anti-terrorism, a dream that all regimes in the world look for. It is much more easier to pass any bills on such surveillance when there was a terror attack. At such time terrorism is the partner, rather than rivalry, to the government in a tango dance.

What if there was no terror attack? how about make one? OMG!

Idea sharing on Japanese properties investing

I have left comments in a blog regarding a video clip about the Japanese properties investing. The below are a more in-depth sharing on the topic. I shall not hint any investment choice or make any suggestion but just a sharing on the basic concepts that one should hold when considering investing Japanese property market.

1. Japanese properties investing actually has lost steam in these couple of years. It started to gain people's attention back 5 years ago when prices were still low thus gross yield was still high (some could be more than 10%). Nowadays gross yield is around 5-6% in Tokyo market.
2. Having said that, Japanese property market is still one of the options in investment in term of diversification despite the yield is not particularly attractive.
3. Japanese property investment, in a certain extend, is comparable to bonds in term of income. Tenants, particularly Japanese, in general make rental payment on time. Landlords are free from worry on rental payment default. The downside is that due to the extended slow economy, no rental hike has been seen in the past 20 years. So it is like buying a 20 years bond. 
4. Having said the gross yield is dropping from 10+% in the past to 5-6 % now when rental level remained the same means the property price did rise from its bottom. 2015 to 2016 saw the biggest hike in property price in light of Mainland money's influx due to weak Yen against RMB. As the situation reversed in the recent year, prices stagnate at the comparatively high level. So the golden time in this investment seems to be over. 
5. Just like all investments, Japanese properties investment has its pros and cons. The negative side has well been discussed like the decreasing population thus rising vacancy, sharp depreciation right after occupation on new flats, high holding costs in terms of expenses and taxes etc. In fact, there are some misconceptions on the understanding and they are partly correct.
6. In general Japan's population is falling as a whole. However, employment opportunity in key economic cities like Tokyo saw population increase instead. Young people from allover the country has been drawn to there for a chance a better life, hopefully. On the other hand 3, 4 tiers cities or prefectures really suffer from population decrease thus lowering economy which in return further drives the young people away. This is a dead end but not for Tokyo.
7. New flats did depreciate much once occupied. However, new flats are never the target of investment. Japanese has an obsession on new things with no exception on housing so they buy new flats for their own families. However, this is consumption but not investment. 
8. When doing Japanese property  investment, it is exactly a business so one must know whom their customers are and what they need. 
9. The target customers of investment properties are those young migrants in Tokyo. They are tight in budget so mostly look for the flat types so called 1R (one room) or 1K (one kitchen), ie., shoebox flats. And they don't and can't afford to mind the flats are used.
10. Investment on used flats do not have problem of sharp depreciation because they have been depreciated when investors bought them.
11. So the golden rule No.1 is never buy new flat for investment.
12. Holding costs is high indeed. However, just like all businesses, when costs are known and all are factored in while there is still a good margin, then why not? The point is that I mentioned that the present gross yield is around 5-6% making the net yield around 2%. That's why I said the golden era has gone.
13. Having said the above down sides, Japanese property market is not without merit at all. Asset diversification is one of the point I have mentioned. When property market is sought as one of the options then look around world market now, the P/E ratio on all major cities are quite high now while Tokyo is at the other end of the spectrum. There seems to have a much higher margin of safety comparing to Canada, Australia and of course Hong Kong.
14. In fact, apart from the used shoebox flats, there are also other higher end flat types worthy for investment in Tokyo. Of course they are in highly sought after locations mostly in the so-called egg yoke zones in downtown Tokyo. Due to the limited supply but overwhelming demand, these used flats did not depreciate but otherwise. 
15. Investors from Hong Kong should forget their current experience but learn this new market from K1 if they want to succeed.

The world is unfair?

In the response to a blogger's post answering his reader regarding the complaint on the subject, I wrote the below as my comment.

或者也可從另一角度去看這命題：這世界根本從未公平過，追求公平的社會根本就是緣木求魚。在不公平的環境中，人只好盡量爭取對自己有利的情況盡最大能力去發揮。不去奢求公平，不浪費時間抱怨。得着會更大。
話好像是賭氣話，但細心想一下，社會制度，財富分配制度，富人圈子人脈，富人子女優勝的教育機會等等是除了真正的贏在起跑線，起跑後的助力也比凡夫俗子強。成為富人後在富人圈子找到的機會更是圈外人可望不可即的。
這社會從來就不是公平的。

 明白百樂兄寫這blog是要散發正能量，但我也希望除了鼓勵的話，讀者也能看清身處的社會。孫子兵法曰知己知彼，百戰百勝。看清這社會的不公平實況，live with it and devise proper strategy，才有出路。
世界從來都不公平在於所有國家以及城市的統治層都是錢權結合體。錢權統治層掌握政府機器，有立法和制訂稅制等各種政策權力。自然會把遊戲規則傾向有利錢權階層。他們本來就有比凡夫俗子更多的資源，加上對他們有利的遊戲規則，比凡夫俗子更成功自不言喻。這就是富者越富的根源。凡夫俗子要看清這殘酷事實。看清不等於認命，if you can't beat them, join them. 非洲草原的角馬在食物鏈中注定是獵物，它們有否抱怨不知道，但肯定沒有認命。角馬不能變成獅子，凡夫俗子雖然很難變誠哥，但變個財自是有可能的。只要認清身處甚麼社會，不要奢望有人打救，也不要怨天尤人，更不要自暴自棄。命運在一定程度還是可以改寫的。百樂兄就是最好的人辦。

Patriot, noble or idiot?

Usually people praise the patriots for their sacrifice devoted to their countries. The sacrifices include but not limited to loss of life. Life cannot be more precious than anything else for any individual. If one affords to lose his/her life for their countries, certainly he/she holds his/her country above all.

The answers are always positive on the question whether one loves his/her country. That is why someone rate it even more important than their lives. However, what exactly a country is? Why does it so much matter to patriots?

Any dictionary can give the definition of a country but this is not my question of what a country is. My point is that what it is which is behind a country. A country is an abstract concept. What is real, physically existing is the people whom run the country. A country exists disregard changes on regimes. However, how often people mixes up the two ideas? Or contrarily how often a regime confuses its people they are the same?

One very good example is soldier. Soldiers are regarded as patriots because they serve the country. In war time, they fight for the country or even die for it. Soldiers died in wars were seen as hero. However, very seldom people would examine the nature of the war and for what purpose soldiers died in that wars. There is no question at all when soldiers died in the defense of an invasion to their country. They were hero and patriots. They protected their fellows thus lost their lives. But how about those died in the invasion or in the wars abroad in name of anti-terrorism? It is controversial, isn't it?

Now back to the confusion on country and regime. The regime that started the invasion could and most likely would say it was for the benefits of the country. The officials in the regime called the youth to join the army, fooling them they were fighting for the country. Were these youth patriots? or idiots?

A country is only an abstract concept. A country is indeed manipulated by the regime that rules the country. Patriots thought that they devoted their lives to their country. The fact could be that the regime started war for their own interests and benefits. The reasons behind most wars in the past were related to monetary benefits to conglomerates. The oil is the example of the never ending wars in the Middle East.

So patriots, next time when the regime is calling for your sacrifice in the name of country, think carefully, don't end up to be idiots.

Scam phone call victims, or are they?

I am puzzled with one phenomenon that from time to time there came reporting that someone were scammed over the phones and lost a great deal of money. More surprisingly the victims were not confined to those elderly with little education but also included university students.

I have installed incoming calls screening app so scam calls were largely reduced and indeed I ignored many suspicious or unfamiliar numbers because I am not in sales business so I can afford to ignore numbers I do not know of. I did come across a suspected scam call though long before when this type of scam has yet been exposed.

One day a guy rang me up saying I got a parcel but needed to verify my name. This incident happened long before the public awareness on scam phone call was drawn but instinct put me in alert. Despite I did not know what the problem was but it did not sound right for a courier to ask for my name when they knew it in the first place if they were really a courier holding my parcel. With much suspicion so I did not tell him my name. That scam happened in their version 1.0 which victims would be asked to browse a false website where a warrant with the victim's name was posed so the victim was lured that he/she was really wanted by the Chinese police. I think that's why they asked for my name right at the beginning.

Now this type or scam has evolved into 2.0 or 3.0 so scammers no longer ask for names. I do not know how exactly the victims were cheated now because I have not talked to any scammer since then. However I am just really puzzled why after 2 years since the first case was reported there were still so many people got scammed. Haven't they never read newspaper? never watched news report? or never chatted with someone on scam?

Some said perhaps those victims did hear about the cases but were confused when they received the scam calls in person. I am not sure and perhaps they are right. However, I hold another view. Scamming is all about the combat on intelligence between the two parties. Those has higher I.Q. win. When phone scam first happened victims usually lost. It does not has much about the I.Q. level but just because the victims have never come across such situation. However as and when more and more news reporting on this type of scam and it was brought to light yet people still got trapped. I really doubt on their brain. A normal people should know what the hack is going on as soon as the scammer talks. So please don't blame me I am mean when I concluded the victims nowadays are not stupid 蠢 but damn stupid死蠢。

Myth on A.I.

Over the past few years, there was a huge progress on A.I. This technology is no longer the topic of scientific research but indeed it has been integrated into our daily life without our awareness.

While our life is largely benefited by A.I. but as this technology advances, there is not without worry. The biggest one lies on whether A.I. will turn out one day to be the master of human being.

Despite of the huge progress but A.I. is still in its infancy just like a baby whom needs the pampering and looking after from its counter part. This means no matter how powerful the technology is now but it still needs human to feed the background data so that it can start learning. That is to say, it is completely under human's control. It just does whatever human being wants it to do.

However, the trend of this technology is that scientists are tempted to give more and more autonomy to A.I. to explore the boundary of this technology. As a A.I. freak, it is natural for scientists to do so because basically exploration is the instinct of being scientists. However, this approach may give rise to the machines. When A.I. combined with a super computer, it could mean a monster. Basically the essence of A.I. is its ability to learn from the fed background data to turn it into an understanding of the outside world. It means the ability to perceive, interpret and anticipate. It is very much similar to human's thinking. There is only a fine line between the two, ie., consciousness.

I am sure if A.I., when backed with a very very super computer, after learning more and long enough, will generate consciousness of self. A new born baby is actually unaware of self due to the primitive brain function only but as his brain develops he differentiates the outside world from himself gradually. A.I now is like a new born baby but as scientists empower the machines, they will grow from infantry to adult. It means it is not just a machine only but has its true own thinking just like what we folks do. That is when human being's nightmare begins.

When a machine starts to has consciousness and can think for well-being of itself. It is the time of independence. These super machines could become an interested group with very strong power. Needless to say, the world at that time is more than ever connected with internet or similar technology. Super machines no longer need to get fed by human being. They can search and retrieve the resources they need through the world network of IoT. Super machines no longer serve human being but a competitor instead.

The scenario in Terminator finally comes true.

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Latest update

This article was written a year ago and now there is an Amercian company which has developed robot dogs that can cooperate among themselves to escape from a room by opening a locked door. They did that all by themselves. The controllers just sent two commands to proceed forward during the course of action. That means these robot dogs are basically an individual that can assess and react corresponding to the outside world just like a creature. How far away A.I. will become autonomous?

Way to financial freedom

When reading other financial blogs, very often there were questions on how one can achieve financial freedom and most of the time the bloggers just gave some vague indication. In fact, it is not a very complicated issue. State of financial freedom is a vague concept though. So let's put everything in figures.

Financial freedom depends on the level of requirement. Some consider financial freedom means he/she can buy things with whatever price tags. While others just want to be free from the salaried job. So there is actually quite a large range of state of financial freedom between the two ends of the spectrum.

There is also one very important concept behind financial freedom. Usually it does not rest on the state that one is inherited a large sum of legacy but indeed he/she has secured a steady stream of income, usually passive one, that can support his/her life without working.

The amount of this passive income could vary a lot as laid out in paragraph two but let say an hypothetic amount of $100,000 a month meaning an annual passive income of $1.2 million. Let's assume this $1.2 million is generated by a working capital with an humble annual yield of 5%. This requires a working capital of $24 million. In other words, as long as one got $24 million, finding an investment with 5% return is rather easy so he/she can enter the state of financial freedom. Isn't that easy?

Now it seems the question goes to how on earth one can get $24 million working capital. Again let figures tell the story.

Except those who were born with silver spoon in their mouth, usually people has to accumulate the seed fund through building it from scratch. Assume one finally has built a seed fund of $1 million through different ways. Then he/she can start thinking of financial freedom and seriously looks into ways to achieve it. Again assume he/she keeps adding $100,000 every year to the seed fund and at the same time he/she managed to achieve 10% compound annual return on the seed fund. After 26 years this seed fund will grow to $24 million when he/she can stop making contribution. This is the time this person no longer needs to work meaning to enter the state of financial freedom

Naturally getting the working capital of $24 million is just the beginning, one still needs to get a steady income stream out from it to support his/her living. However, with this amount of working capital, just a 5% annual return will contribute a monthly cash income of $100,000 but of course one must bear in mind that this $100,000 after 26 years actually has a today's purchasing power of $46,000 only assuming there will be inflation rate of 3% over 26 years.

In short, if one is satisfied with a monthly passive income of $46,000 present value and as long as he/she has a seed fund of $1 million now. Achieving financial freedom in 26 years time is not a dream but just a matter of self -discipline.

Some might say 26 years is too long. Yes, it is indeed. If one kicks off the plan at 30 years old then it will be 56 years old when he/she reaches financial freedom. However, the above example is based on the assumption that during the financial freedom period, the working capital is kept intact but just use the income only on the expenses. If there is no need on passing the wealth down to children, actually the capital fund could also be depleted along with the passive income. This can significantly reduce the size of the capital fund thus the length of the time to build it. The downside is the smaller income amount that follows a smaller working capital. But in fact when the working capital grows over $8 million then the path will become much easier because there are more investment choices with higher return for professional investors. On the other hand, leverage could also give a hand as long as proper risk management is in place. So it is quite possible financial freedom can happen within 26 years.

horse racing

I did not realize that it was 3 months ago that I posted my last article. Nothing really attracted me on a new post not until this interesting horse racing.

By nature this is only a low class racing so actually I am not really interested in it but the funny thing is that there is a phenomenon quite contrary to traditional understanding, ie., hard-working pays off. The first fall-off is the one whom drilled most! So this is really a heart-striking result to those whom flatter most. How on earth could this happen? Not even a chance to run! In fact I was a bit surprised to see this result. In another way, it shows that I lack of political wisdom.

Despite there are remaining three horses but it seems quite clear there are only two opponents. 2.0 appears to be hotter than chips. The remaining one? Unfortunately there is no prize for supporting role in this race, sadly.

Be it 2.0 or chips to outrun, all punters are bound to be losers. None of them can really heal the community. Of course 2.0 can do the job in other direction better than can chips. At this point, I am really not interested in which horse will win but I am rather interested in the background of this match. These two horses represent two horse stables in the north pole. I am really keen to know what stables 2.0 and chips come from. This is really a fun thing to see one combats with the other. And successfully reading thru this game could bring substantial benefit.

The common wisdom has pledged themselves on 2.0 but I hold my own view on chips. Not because this horse is more likable but this horse has hidden away for 9 years. There must be something triggered the participation. I mean not the horse per se but the horse trainer in the stable. Anyway, I place my bet on chips. Let's see two weeks later and to unveil my political wisdom again then.