Paris Paid To Attend Own Birthday Party

[Image of Paris Hilton]
Its not enough that celebrities people get paid for guest appearances at night clubs and public events. They now are getting paid to host their own birthday parties!

Paris Hilton was reportedly given $200,000 to celebrate her 24th birthday party at “Pure” in Las Vegas. She spent the last 3 at “Light” at the Bellagio, but they were too cheap. They only provided her a free private jet, a free luxury suite, free dinner and free booze. If they didn’t pay me $200,000 to celebrate my birthday, I wouldn’t go there either 😉

Apparently its very profitable for the nightclubs to have celebs. One such club paid Brittany Spears a lousy $83,000 to attend a new years party. They then sold 3,000 tickets to the event at $250 a pop, which means they grossed $750,000 and probably netted around $500,000.

Pure nightclub is estimated to gross $53 million this year!!!! Sounds like a great business to be in.

If any of you are interested in getting your own bar, nightclub or gentleman’s club here’s a list of such businesses for sale.

Become a Better Investor

The Orlando Sentinel has sad story about condo flippers in Miami. They put down $100,000 on a pre-construction condo and now either they lose their deposit or they close on a $585,000 1 bedroom condo thats worth less than $500,000.

The sad part is that people fall for these get-rich quick schemes in every cycle. It happened in Miami during the last boom. It happened in the stock market in 2000. Its been happening regularly for over 400 years in every country. If these flippers had only read Extraordinary Popular Delusions and the Madness of Crowds, they would’ve realised that they’re not geniuses, only the last fools to be left holding the bag.

Unfortunately, I was once such a fool. Taken in by the stock market in 1999 and fooled in 2000. Luckily I learnt my lesson early in life when I had little to risk and many years to implement my new found wisdom. I feel sorry for those that learnt this lesson late in life like the retirees of Enron. Life isn’t fair.

But that doesn’t mean you do not do your homework. Your job as an investor is to know your investment inside and out. But also you need to understand the psychology of investing. Human psychology is the common uniting thread across all investment sectors. If it weren’t for human intervention, stock prices would move only 4 times a year – after quarterly earnings are released.

Read all you can about the economy, the stock market and the world in general. Eventually you will become a better investor.

Related Readings:
1. Books that broaden your mind

How To Start A Vending Machine Business

If you’ve ever wondered how much money the vending machine guy at your office makes, here’s an excellent post by GeniusTypes on how he got into the vending machine business.

It all started with having an open mind and buying a route from someone who had lost interest for well below what it was worth.

You’ll see this theme repeated in many successful investment stories.

Every so often you’ll see ads in the local paper about the company that sells large office-type vending machines holding a presentation. Apparently, the charge $1000 each and it takes a long time to recoup your investment. Most of the buyers give up and sell them for $100-$200 each and the second owner usually has better luck.

GeniusTypes kept his initial investment low by understanding how to value the business to begin with. He thus guaranteed his success by keeping a large margin of safety. He was constantly following sales of vending machines and vending routes on ebay and when he saw a good deal, he pounced on it.

He immediately saw where he could cut costs to increase his net income. He also followed up on some leads and expanded his route and thus the value of his business.

Also note how he takes the positive aspects from Robert Kiyosaki’s books and doesn’t dwell on whether the book is based on fact or fiction. That’s an important virtue in successful people – they don’t spend too much time maligning others, they just focus on getting their own work done.

Click on this link if you’d like to see what vending machines and coin-operated business are selling for.

Yield On 10 Year TBill Keeps On Dropping

Even though the past few sessions in the stock market have been rather choppy, the yield on the 10 year treasury has steadily dropped over the past several weeks.

[Graph of 10 Year Treasury Yield over past 3 months]

Ever since the subprime mortgage issue led to a global liquidity crunch and subsequent stock market correction, the yield has been steadily dropping. This means that large institutions have been selling equities and moving money into safe US treasuries. It doesn’t matter if they get only 4.5% (as of today’s closing price), but at least they know they’ll get the principle back.

There seems to be a repricing of risk in the market. Any stock that is deemed to be risky has dropped in the past 6 weeks.

On the other hand, safe stocks like Warren Buffett’s Bershire Hathaway (BRK) has been rewarded and its stock price is up nearly 10%.

Lets see how long this flight to safety continues. If you have the courage to be greedy when other are fearful, you can make a lot of money.

Happy Investing!

How The Carry Trade Really Works

Here’s a really, really good video on how the carry trade works and what implications it has on global asset prices and the global financial stability.



I think the carry trade will have to reverse at some point in the near future. Trees do not grow to the skies and financial excesses do not last forever. When the average man on the street with no financial education starts talking or investing in a particular sector, it usually marks the end of that run. (In 2000 I overheard my hair-dresser talking about internet stocks – I should’ve sold then. In early 2005, I overheard some guys at the movie theater talking about getting into the local real estate market – I sold then and I’m glad I did!)

With Japanese housewives partaking in the carry-trade now, I think its safe to say that we’re pretty close to the end of the cycle of cheap, easy money. I sold some USD and bought Yen and I’ve also invested some money in Japanese investments (a REIT and a stock ETF).

Related Posts:

Are Jim Cramer’s Stock Picks Worthless?

According to a recent article by Barron’s Magazine title The Cramer Effect (& Defect), readers who follow Jim Cramer’s stock picks from his show are more than likely to lose money in the long run.

We also looked at a database of Cramer’s Mad Money picks maintained by his Website, TheStreet.com. It covers only the past six months, but includes an astounding 3,458 stocks — Buys mainly, punctuated by some Sells. These picks were flat to down in relation to the market. Count commissions and you would have been much better off in an index fund that simply tracks the market.

When we asked Cramer and CNBC for their own records of Mad Money’s stock-picking performance, they had more excuses than a Tour de France cyclist dodging a blood test. They complained that the list from YourMoneyWatch.com contained some stocks from the program’s “Lightning Round,” in which Cramer gives a quick analysis and a buy or sell decision on stocks phoned in live by viewers. These, they argued, shouldn’t count in our tally.

CNBC officials also said that viewers should buy Cramer’s picks a week after they’re aired. They said that the show is mainly educational, and not just about stock-picking. In the end, they said we should focus only on the tiny universe of stock selections — about 12 a week — that Cramer researches the most. And we should do it only for the issues picked this year. CNBC analyzed these stocks, and said that if held for one month, they beat the S&P by 0.8%, or 1.7% after two months. They offered no results for the year-to-date.

It turns out that CNBC did its analysis incorrectly, and that the stocks beat the S&P by 0.4% in one month and 1.2% over two months. CNBC measured the stocks’ performance against the average performance of the S&P year-to-date, instead of against the performance of the S&P from the date of each stock pick. Also, it included more than 100 recently recommended stocks that weren’t held for the full one- or two-month holding period that CNBC claimed.

More important, the stocks fell short of the S&P by a statistically significant 2.2% through last week.

Our question is: How are viewers supposed to know that they should pay attention only to this subset of stock picks each week and ignore the thousands of others that Cramer makes on his show?

Then there’s the day-after-pop phenomenon. Our analysis of Cramer’s picks over the past two years, from YourMoneyWatch.com, showed that, on average, the stocks jumped 2% the day after he mentioned them. From there, they usually moved sideways or down for the following 30 trading days (see chart). This offered an opportunity to make money — 5% to 30% a year — by selling Cramer’s selections short.

Cramer agrees that there is a shorting opportunity in the temporary effect he has on stocks — a trade that he’d jump on if he still were at a hedge fund. “If you short the bump, you will do well,” he said last week. “I’ve said it on the show many times.”

I really don’t think people should be taking stock tips from a guy who has about a minute to analyze the stocks on his show. He may be a really smart guy but how can he properly evaluate a stock in the short time period he has?

I hope there aren’t too many people who base their stock investing solely based on his recommendations. But if they’re that ignorant or lazy, I guess they get what they deserve!

Prosper Update

I started lending money on Prosper.com about 10 months ago. I started out with a total of $1900 in my account. I’ve been mainly targeting people with D and E credit who seem have steady jobs but got into the payday loan trap and can’t get out. My average interest rate is about 19.4% right now and I usually lend out the minimum $50.

I’ve been reinvesting all the interest payments I’ve received. So far I’ve made loans to 40 people and I’ve had 2 defaults and 1 currently late loan – two of which were from Prosper’s auto-pay, which I don’t really recommend using. One of the defaults had a B rating!

Currently my account is worth about $2106, which gives me an annualized return of about 13%. Not bad at all.

If I don’t have any more defaults, this might increase slightly. Even if I get 1 more default, I should still get an annualized rate of 9%, which is about twice what I get in a savings account.

Why should Visa and Mastercard make all the money!

How To Sell a $14 Book For $2,500

Previously, I had mentioned a $2,500 book by Mohnish Pabrai called Mosaics:Perspectives on Investing and how I was hoping I could find my own signed copy to hawk on Amazon.

Well, I did find it and after jumping through several hoops I was finally approved as a seller on Amazon.com. (Don’t know what the issue was, just some technical difficulties on their end).

Not only did I find a signed copy, I also happened to have an unsigned copy too!

I’m selling the autographed copy for $2,395 (don’t want to be too greedy!). Here’s the link on Amazon.com. If anyone’s interested, contact me directly and I’ll let it go for $2,200 with free FEDEX shipping.

I’m not sure what sort of people buy these kind of books. But I know they exist. Someone spent $395 and bought the unsigned edition a few days ago. I know that for a fact because I got a $23 commission from Amazon on the sale of that book(thanks whoever you are!).

I just read Pabrai’s latest book, The Dhandho Investor: The Low – Risk Value Method to High Returns and its really very, very good. I’ll write a review on it shortly.

And yeah, the title of this post is a bit misleading. 😉

Its Official: Hell Freezes Over

Last week, hell froze. The Financial Times reports:

In a rare unplanned investor call, the bank revealed that a flagship global equity fund had lost over 30 per cent of its value in a week because of problems with its trading strategies created by computer models. In particular, the computers had failed to foresee recent market movements to such a degree that they labeled them a ‘25-standard deviation event’ – something that only happens once every 100,000 years or more.

“We are seeing things that were 25-standard deviation events, several days in a row,” said David Viniar, Goldman’s chief financial officer.

Losses in the Goldman fund could go over $1.5 billion. But heck, everyone makes mistakes. And even a great mathematician such as James Simons, founder of Renaissance Technologies, takes a loss from time to time. Simons used to do math for the Pentagon. Then, he discovered that he could make billions running a math-based hedge fund. But last week, Simons was forced to write a letter to his investors. His fund lost about 9% in the first few days of August…and now Simons says, “we cannot predict the duration of the current environment.

So apparently, math whizzes find they don’t know which way the market is going, despite all their fany financial modeling and risk calculation and mitigation through the use of derivates.

No matter what kind of math you do, sometimes things take you by surprise.

According to Nassim Nicholas Taleb’s latest best seller, The Black Swan: The Impact of the Highly Improbable , improbable events with infinitely small odds of occurrance seem to occur every so often, especially in the financial markets. And with disastrous results!

And if this wasn’t enough, Sentinel Management Group, with $1.6 Billion under “management” has frozen access to Money Market Accounts!
According to the Chicago Tribune,

“If you attempt to withdraw money from Sentinel, they will tell you they will not honor that request,” said lawyer Jeffrey Barclay, who represents some of the futures brokers and investment pools whose money is frozen at Sentinel.

With $1.6 billion under management, Sentinel had advertised itself as an ultrasafe cash manager for people in the futures industry, corporate treasurers and well-to-do individuals.

Now the company is saying nothing publicly and has taken down its Web site. “We are not taking any media calls,” said a person who answered the phone at Sentinel on Wednesday.

What is the world coming too?

Related Readings:

1. The Black Swan: The Impact of the Highly Improbable

2. Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

3. When Genius Failed: The Rise and Fall of Long-Term Capital Management