Sunday, September 19, 2010

The Opinions That Men Hold

Two years ago Lehman imploded. I was in Alaska on that fateful week of September 15. It took a trip to Alaska for me to see What’s the Matter with Kansas.

That, as you may know, is the title of Tom Frank's 2005 book, in which he argues that through “push button” issues such as gay marriage and abortion, blue collar Kansans are systematically fooled into voting for rich Republicans and against their own interests.

That sort of manipulation is not new. European writers and historians have traced its wholesale adaptation to the outbreak of WWI which saw young men forced to march to the slaughter fields of Europe. John Berger argues that the abrupt end of Cubism had to do with the end of the optimism that the new century had generated but which WWI crushed.

Frank’s general thesis is not incorrect. Propaganda does play a role in shaping men's opinions even against their interests. But what happened to the observation that people in general vote with their pocketbooks? I doubt that the poor cannot see their own interests, no matter how incessant the brainwashing. I think something else, something more material, is at work there that I noticed during my Alaska trip.

Alaska is a desolate place. Living conditions are hard. Except for a few transplanted New Yorkers with “liberal” views, the native Alaskan generally believes that if “it” cannot be hunted, drilled or mined, it is not worth having around. Concern for the environment, wild life protection and the like take a back seat to the daily challenges of survival. Self preservation trumps such concerns, as it perhaps should.

The immediate concern for survival is the instinct of primitive species and savages. As man learns to exploit nature and his material conditions improve, day-to-day survival ceases to be of immediate concern. He then has the luxury of turning his attention to broader issues and longer horizons. That luxury is a defining characteristic of civilization, what separates the civilized man from the savage.

In the U.S., tens of millions of people live under such “primitive” conditions. In places like Alaska, the extreme weather exacerbates the situation. But the commonality of distress in all 50 states that transcends the natural conditions alerts us that the root cause is economic. The daily struggle for survival is not less intense in Kansas and Virginia than in Alaska.

The existence of these “pockets” of poverty in rich, industrial countries is the evidence of the failure of the social system, plain and simple. It is the failure to raise the living standards and therefore, the concerns, of citizenry beyond those of the savages.

In Anchorage, Alaska, Wichita, Kansas or Olympia, Washington, everybody is strongly pro business — unbridled, no strings attached, any kind of business – because it offers the promise of a meal ticket. Hence, the poor’s support for the pro-business, millionaires’ agenda. The “push button” issues are generally a side show, never more than of secondary importance. The relatively affluent bi-coastal states, meanwhile, can afford to be environmentally and socially conscious. That’s the story behind “Two America” and “red” and “blue” America.

But the poor are not the only victims of their own self-defeating actions. The rich are in that trap too, only in their case, the estimated time to destruction is longer; it takes relatively longer time for them to be hit with the consequences of their own actions. Let me explain this through three recent news stories.

The first one pertains to one Sydney Morris, an up and coming young teacher as covered by The Wall Street Journal, Monday, September 13, page 1 of the Greater New York Section. The story’s heading is Teachers Break Union Rank:
As a teacher, Sydney Morris wants to be rewarded if she can show she helps students make progress in her classroom. She also wants to make job protections such as tenure more difficult to get, and in the event that layoffs have to happen she wants the worst teacher to be let go first, no matter how long they've been teaching.

Those are radically different positions than those espoused by the union that represents her.
A self-centered, selfish brat, you say, caring only about herself?

Then, listen to a business captain in the person of Paul Otellini, the CEO of Intel. He was being interviewed the other day on CNN:
The way Otellini sees it, Washington must decide what the industries of the future are. “We still subsidize trains and agriculture – industries of the 19th century. We should decide what’s important to us going forward and make sure we’ve got the education system in place and the capital incentive system in place to do the investment here.”
The man who runs the crown jewel of the world’s technological infrastructure has this view on the U.S. infra-structure: he thinks trains are passé and the government is spending too much money on the embarrassment that is Amtrak.

Has he not traveled at all, one wonders? Is he not aware of modern trains and their role in the economies of Europe, Japan and increasingly, China? It is difficult to say. Throw in his bizarre comment about agriculture being a “19th century industry” and one begins to wonder if he is insane.

He is not, strictly speaking. The “madness” that comes across is made of the same stuff that makes a poor Kansan voting Republican seem mad. It is the pressure of the immediate for which the future is being sacrificed against common sense. Our protagonists, however, are not aware of that, having been forced into a particular “angle of vision to reality” which dictates a certain way of thinking and, from there, a certain conduct.

Look at this excerpt from Mortimer Zuckerman to see what I mean. The man had written an opinion piece in the Wall Street Journal to explain the country’s current problems and offer a solution:
The most obvious source of distress right now is lack of payroll growth, and it’s likely to get worse.
Look at his description of unemployment. He calls it a “lack of payroll growth”. He is not trying to tone down a negative word with a bland and neutered expression, like collateral damage for killing bystanders or energetic disassembly for explosion. He is in earnest. For him, unemployment is lack of payroll growth. That is the only way he sees the problem.

I have written about this phenomenon of humans assuming the point of view of speculative capital. See, for example here and here

To prove that the point of view of this cutting edge low life is the point of view of speculative capital, let me quote his “solution” to the “lack of payroll growth” problem from the same article:
To improve our performance will involve massive increase in scholarship support for higher education, and an increase in H-1B visas for foreign students who get M.B.As and Ph.D.s in the hard sciences.
To fight unemployment, he wants more foreign programmers in the country so they could push down the wages of skilled, technical workers even further.

If you do not know Mortimer Zuckerman, you will be happy to know that his views play a critical role in shaping U.S. economic and foreign policy, especially in the Middle East.

Speculative capital is self-destructive. As it expands to permeate the different aspects of social life, it imparts its traits onto its human agents. They, too, become self-destructive. A few mountaineers showed this phenomenon better than I could ever explain.

Tuesday, September 14, 2010

There is NO such thing as Passive Income !?



21st century personal finance is moving away from saving and focus into the income arena. In short, the gurus are now educating public that saving is NOT good enough, hence sourcing for passive incomes on the another hand is a BETTER solution, than just saving alone.


While the concept is definitely true and correct but unfortunately as the hypes go bigger and bigger, the idea of passive income has been abused and more scams started to appear in the market, as if they were the gurus as well. Except the 'passive income' they refer to is barely promoting their own original same old products. The personal finance market has become so competitive that even some real gurus have no choice but to go beyond the line in their marketing effort - Robert Kiyosaki is no exception in spreading "Saving is bad".


Although passive income is very well defined here using income ratio 1:100 but is there really such thing as Passive income ? When I looked up dictionary, these words come up


PASSIVE : not participating, inactive, not reacting, inert or quiescent.


None of these words correctly describe a well implemented passive income. I use my best judgement to find a good location, a value property and a pay master tenant. I setup a profit take target and an exit strategy in my investments before I leave and let them auto pilot. All of these are very participating, actively applying my knowledge and experience, reacting appropriately when necessary etc.


The word "Passive" also gives people a psychology of No Need To Do Anything; As if an easy to get rich scheme with a better cover.


Hence this article wants to pursue all readers to stay away from the term Passive Income. Its negative, misleading and now abusive by the over-stress marketing effect. Instead, think of Smart Income !


There is no hard and fast rules for Smart Income. Any income can be earned the regular way or the Smart way !




An employee can use minimum of his time effectively to earn the highest salary or benefits. A self employ can easily leverage on Internet to earn income repeatedly. A business owner can employ a system to run his business. An investor can setup an autopilot mechanism.


So no matter which income quadrant you are in, it is possible for you to turn that income into a smart one. Its a matter of HOW you earn your income, NOT WHAT you do.


Are you pursuing smart income ?

Monday, September 13, 2010

September Resolution

The elephant-in-the-room of my to-do list is Vol. 4 of Speculative Capital that of late has been demanding the attention it deserves.

The manuscript is complete. That is the good news. The bad news is that the time of one page commentaries and “notes to myself” is over. I must now sit down and pull the manuscript together into a coherent whole. That requires large blocks of uninterrupted time.

All this is to say that I will be writing shorter posts; long pieces such as the Goldman case take up too much time.

This, needless to say, is only a pronouncement of the intent. We shall see how it works out in practice. If it works as intended, look for shorter, more frequent pieces here until Vol. 4 is submitted to the publisher.

Sunday, September 12, 2010

Epilogue: The Conspiracy Theory – True Destruction

Physical destruction could be an end in itself. You destroy a farm, a building or a city and let the ruin stand. End of story. Mission accomplished.

Social destruction is different. A social system cannot be destroyed by force or laws and edicts. The only way to destroy it is to replace it. This latter kind is the province of speculative capital, which even the blissfully ignorant perceive. Writing more than a decade ago in the New York Times, a Clinton administration official opined:
In July 1945, a group of scientists huddled in the new Mexico dawn to witness the first nuclear explosion. They had created a terrible power, but one that nations have successfully controlled for more than 50 years. Now we have unleashed a very different but similarly awesome force, one capable of overthrowing governments and their policies almost overnight. And there are no systems in place for controlling it. This force is the global financial marketplace.
“Global financial marketplace” is the effect, which the writer confuses with the cause, speculative capital, which he does not know. And he cannot differentiate between physical and social destruction, which is why his language comes across as hyperbole. But on the severity and extent of destruction, he is right on the money.

The destructiveness of speculative capital is the logical consequence of its tendency to expand in constant search for arbitrage opportunities; expansion is a condition for its preservation. In the early stages, such expansion took place within speculative capital’s birthplace, in the realm of finance. As those opportunities were arbitraged away, speculative capital must look beyond financial markets. “Beyond” soon becomes everywhere. Speculative capital intrudes into every corner of social life, replacing, i.e. destroying, the old order.

That is the common thread linking the momentous events taking place all around us and about which – the common thread – you hear nary a word. Through the conspiracy of ignorance or malice, the destruction proceeds at full speed.

21st century Economy Politic Quadrant


The Economy-Political Quadrant may seems like telling where to keep or invest your money despite good or bad time.


It indeed works very well during 20th century. Unfortunately comes to 21st century, not only has the year changed, personal finance arena has changed drastically as well.

Gold has been speculated so much that it MAY no longer be the standard of money.

There used to be only 'property' in the city. Now there are satellite towns, suburbs ... agriculture lands and even dust bins ( recycle ) have become valuable estates too. While property remains the right category to invest into whenever economy is booming, but predict the right future seems like tougher than buying lottery.

Government bonds used to be de-Facto action when a country is stable. But in today's world, a country is as smart as a taicon's finance. One day they are the LARGEST, the next day they are GONE.

Stock market used to be the back bone of a country's economy. However, the market of derivatives has become so HUGE that the REAL and PHYSICAL is NO LONGER more real than VIRTUAL

So in 21st century, the element of Stock-Property-Funds-Gold is really questionable. However, one fundamental that doesn't change is that

you will have to identify what to do at what time that is BEST for YOU !

Hope you will find your own very best Economy-Political Quadrant soon !


Saturday, September 4, 2010

East will take over West in ... 2020 ?


G7 are the 7 countries who have been dominating world finance since 20th century. Most of them are from Europe and North America, plus Japan.

However, most would have known by now that some of them are no longer as great as they used to be in this 21st century.

So E7 comes about where generally people think a new economical forces will emerge out taking over G7, they are (China, India, Brazil, Russia, Mexico, Indonesia and Turkey).

According to chart below, E7 will take over G7 in 2020.


There are also stories that says this will happen in 2050. Either way, generally people expect E7 to take over G7 in due time.

However, the fact is that will NEVER happen.

What will happen instead is that 1-2 G7 members may drop out from the list because they fail to make a come back despite how hard they try. Like wise 2-3 E7 members never make it to the bar, hence E7 will NEVER be formed.

At the end, there may be a G11 formed, which has nothing to do with G7, G8 and G10.

G11 is seamlessly integrated among themselves with latest technology. Forex and logistic are no longer issues a small business owner need to worry about among these G11 member countries.

Friday, September 3, 2010

Individual Income Tax Relief 2010

List of Tax Relief for Resident Individual 2010

No.

Individual Relief Types

Amount (RM)

1

Self and Dependent

9,000

2

Medical expenses for parents

5,000 (Limited)

3

Basic supporting equipment

5,000 (Limited)

4

Disabled Individual

6,000

5

Education Fees (Individual)

5,000 (Limited)

6

Medical expenses for serious diseases

5,000 (Limited)

7

Complete medical examination

5,00 (Limited)

8

Purchase of books, journals and magazines

1,000 (Limited)

9

Purchase of personal computer

3,000 (Limited)

10

Net saving in SSPN's scheme

3,000 (Limited)

11

Purchase of sport equipment for sport activities

300 (Limited)

12

Subscription fees for broadband registered in the name of the individual.

500 (Limited)

13

Interest expended to finance purchase of residential property. Relief of up to RM10000 a year for three consecutive years from the first year the interest is paid.
Subject to the following conditions:

(i) the taxpayer is a Malaysian citizen and a resident;
(ii) limited to one residential unit;
(iii) the sale and purchase agreement is signed between 10th March 2009
and 31st December 2010; and
(iv) the residential property is not rented out.
Where:
(a) 2 or more individuals are eligible to claim relief for the same property ; and
(b) total interest expended by those individuals exceeds the allowable amount for that year ,
Each individual is allowed an amount of relief for each year based on the following formula:
A x B
C
where;
A = total interest allowable in the relevant year;
B = total interest expended by the relevant individual in the relevant year;
C = total interest expended by all the individuals.

10,000 (Limited)

14

Husband/Wife/Alimony Payments

3,000 (Limited)

15

Disable Wife/Husband

3,500

16

Ordinary Child relief

1,000

17

Child age 18 years old and above, not married and receiving full-time tertiary education

1,000

18

Child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities

4,000

19

Disabled child

Additional exemption of RM4,000 disable child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities

5,000

20

Life insurance dan EPF

6,000 (Limited)

21

Premium on new annuity scheme or additional premium paid on existing annuity scheme commencing payment from 01/01/2010 (amount exceeding RM1000 can be claimed together with life insurance premium)

1,000 (Limited)

22

Insurance premium for education or medical benefit

3,000 (Limited)