Drive: The surprising truth about what motivates us

Everyone keeps asking how much I am paid at Google. However, I have been championing that "just" cash compensation cannot be the sole motivator for Googlers. Once you pay someone enough money, then "autonomy", "mastery", and "purpose" are much better motivating forces. This explains the (surprising?) success of open-source projects like Linux operating system, and Wikipedia (hey you do not even need to pay someone!).

Below is a great video that explains this.

Credit scores are bogus

I will say it out loud - credit scores are bogus. Seriously - despite being in the US for over two years, I am still getting rejected for credit cards. The reasons cited in the latest rejected application:

 Your credit report shows too few credit references.

 Your credit report shows your accounts have a low credit limit.

O RLY? You figure? Maybe it's because everybody keeps refusing me credit, and even when they do, they give a ridiculously low credit limit because I have a low credit score. Talk about vicious cycle.

Ah. I see. Brillant, I guess I should have been in the US 10 years ago and gotten a line of credit and made minimum payment, so that I will have a "proven" history of credit. Because, apparently, getting a secured credit card when I first arrived in the US from the same company, then converting it to an unsecured one for another two years and obtaining two other credit cards is still not enough credit references. I even got a loan for my car for the purposes of improving my credit score - I paid it off after 6 months because the amount of interest you pay is ridiculous, because... of my low credit score.

US, please implement what is suggested here:
[Report to the Congress on Credit Scoring and Its Effects on the Availability and Affordability of Credit]

Evidence also shows that recent immigrants have somewhat lower credit scores than would be implied by their performance. This finding appears to derive from the fact that the credit history profiles of recent immigrants resemble those of younger individuals, whose credit performance tends to be poor relative to the rest of the population. Expanding the information supplied to credit-reporting agencies to include rent, other recurring bill payments, nontraditional uses of credit, and the credit histories of the foreign-born in their countries of origin may provide a broader picture of the credit experiences of recent immigrants and other individuals.

/rant

My Current Financial Status - Feb 10

This month I finally got Ohio's 529 plan for my son; We chose a out-of-state 529 plan because the California 529 plan offers no state tax exemption, and it was a toss-up between Utah and Ohio 529 plans. I ended up with Ohio as I preferred to use Vanguard's age-based options rather than Utah's custom age-based options. Furthermore, the fee differences between the two were minor. I imagine I will be equally happy if I had gone with the Utah 529 plan.

This month included adding to my position in UFP Technologies (UFPT), a packaging company specializing in fabricating specialty foams, plastics, and natural fiber materials. Their products are used in automotive, commercial and consumer markets. UFPT announced on Wednesday continued positive non-GAAP earnings of $0.45 per share, for an estimated earnings of $0.94 per year for 2009. This is annualized 3-year growth rate of 86%. UFPT has low debt (quick ratio of 1.04 and current ratio of 3.13); a good thing in this financial climate. Price/Free Cash Flow for Trailing Twelve Months is 8.7 (versus around 20 for S&P in general). UFPT has been undervalued for quite a while - I had been picking up shares from $4.39 to $7.71. Since the earnings announcement on Wednesday, UFPT has risen to $10. 

I have also continued to purchase shares of companies I find fairly-priced but with good growth prospects or undervalued during market downturns, like PBR, PFE and KFT.

Disclaimer: I am not a financial advisor. In fact, I am not trained in finance at all. Investing in any financial products can be highly risky and use of the information provided by here is at your sole risk.

80/20 Rule to Financial Knowledge

The 80/20 rule, or the Pareto principle if you want to sound academic, states approximately that for many events, 80% of the effects is made by 20% of the causes. One digression is that this explains why principal component analysis and related methods work well in practice.

I strive to learn enough (20% effort!) about finance to (1) know when I am out of my element, (2) be able to invest and not speculate, and (3) be confident about my choices. Some of my readings include:

Berkshire Hathaway Inc. shareholder letters can be found online, but this collection of Buffett's letters are arranged and themed. Buffett dispenses pearls of wisdom on excessive CEO pay, commentary on his philanthropic thinking, the excessively esoteric greek symbols of modern finance, and more.

Plain-speaking, simple to understand and direct, Warren Buffett extols the virtues of patience and deliberate study of businesses before investing. It takes a genius to cut the chase and explain things so succinctly.

I had my reservations about The Five Rules for Successful Stock Investing since it is marketed as being written by the Director of Equity Research for Morningstar. Firstly, the majority of active mutual funds underperform passive/index funds (see S&P report), so should I trust the processes of this book? Additionally, the potential conflict of interests (hey, buy whatever Morningstar recommends!) sounded alarm bells for me.

What I found really useful is this book provides a nice framework (including a Discounted cash flow model) to evaluate companies, and provides a basic overview of the various sectors and business concepts.

A simple guide to accounting concepts. Again, I do not strive to be an expert in accounting,  but this book provides enough information to provide context for me to understand annual reports and 10-Q filings.

"Those Who Forget History Are Doomed to Repeat It" - I personally find this book to be difficult to read as it was written in 1949. The book has been republished many times since, but the style of writing and the events it describes are alien to me. However, its timeless philosophy on value investing are worth discovering. I recommend reading this after reading the essays of Warren Buffett.

Read this to pump yourself up - it does not provide sufficient framework or model to become an investor on its own, but it serves (at least to me) as an inspirational guide to how retail investors can succeed in the stock market.

Wells Fargo has no ACH Transfer System? Unbelievable!

Amazing.

Wells Fargo has no ACH transfer system to transfer money outside to other banks. For example, I cannot transfer money from Wells Fargo to Citibank online. Looks like I have to write myself a check.

Unbelievable.

See: http://www.fatwallet.com/forums/finance/957037/

My Current Financial Status - Jan 10

The fall in securities negated the increase in income, so it is another flat month. I did manage to sneak in a few stock purchases, but as a co-worker likes to say, "I'm waiting for financial armageddon again to start buying".

I am doing some financial planning - on top of my usual "fun" stock investments, I believe this year I will be getting a new fund in my Roth IRA: Vanguard International Value (VTRIX), and will be contributing to a 529 plan for the little one.

My Current Financial Status - Dec 09

Happy new year!

A quick update on my financial status - looks like a stagnating month. Mainly due to a lower income due to going on paternity leave and getting slightly less pay, holiday expenditure (new camera, household items, etc) and my financial portfolio staying neutral.

New year resolution: Find passive income sources that can support my monthly expenses within 5 years

My Current Financial Status - Nov 09

In light of me being locked out of my kaching account, I am going to blog more about my financial life and thoughts here. To recap, my investment style so far as being investing small amounts at a time, and every month I do approximately 10 trades since I get 10 free commission trades from Zecco. Stock buys are made with limit order at prices that are priced using Discounted Cash Flow (DCF) and relative pricing models. While there are no guarantees I can fully utilize (or not exceed) the 10 free trades per month, I tend to average close to 10 buys a month.

As I only buy with available cash, I do not have to sell due to margin calls. Mint has an interesting visualization of net-worth trends. Even though I have been investing in the stock market since 2007, I only started using Mint since Oct 08. As a result, my financial information has only been available since last year.

I have been satisfied with my investment performance so far - with an average money-weighted annual return of 22% (includes the great recession of 2008). However, it is unclear to me if this is due to prudent investment strategies, or a case of a rising tide lifting all boats. Only time will tell.

Repeat after me - Don't Worry

Why Investors Need to See the Light and Slow Down by Jason Zweig

In his classic book "The Intelligent Investor," the great money manager Benjamin Graham wrote that "the investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizable declines nor become excited by sizable advances." If you can't exercise that kind of emotional control, then by Graham's definition you aren't an investor at all.

Is the market overvalued? Is this a "real" rally? Do not concern yourself with such worries - find a good business, determine that it is fair-priced (or at a bargain!), and then buy it. Rinse and repeat.

Great Article on US Housing Crash

It's Still A Terrible Time To Buy

The best summary explanation, from Business Week: "Today's housing prices are predicated on an impossible combination: the strong growth in income and asset values of a strong economy, plus the ultra-low interest rates of a weak economy. Either the economy's long-term prospects will get worse or rates will rise. In either scenario, housing will weaken."