Hi fellow Investors -
We've all heard stories of lottery winners who lose it all, watching their newfound wealth disappear and their lives spiral into ruin.
I thought about this in two very different contexts recently: watching the negative news continue to cloud the economic situation in Venezuela ... !!
In a way, Venezuela won the geological lottery. The country is awash in the world's most valuable resource -- people fill up their cars for a half penny per gallon!
"It's cheaper than water," said one Venezuelan to a passing reporter. Said another, "It's so cheap, we could wash our hands with it."
And yet, their country is on the brink of ruin.
For residents, stockpiling essential supplies is the norm. The president recently declared martial law. Its economy is collapsing.
And, like the stories of so many lotto winners who fall into easy money without work... it's going broke.
Full of oil... and poverty
You might remember Venezuela from my Oct. 11 column, "Welcome to the Worst Economy in the World."
Venezuela is "blessed" with the LARGEST OIL RESERVES in the world.
Yet, crippling mismanagement of its economy has led to hyperinflation, food shortages, and general misery.
So, what do oil reserves and economic turmoil have to do with my my children?
The best way to build wealth and the incredible feeling that comes with financial freedom is through long-term investment in the stock market. So I've been building a portfolio of stocks to pass on to my children.
It includes companies I believe will be long-term winners: like Analabs, superlon, AFG and many smaller names like watta which I think could have big futures. Many of these are selected from the list of recommendations from Senior Analyst and 009 investigators.
My hope is many of these stocks will repeat the performance of their past winners. That means potentially seeing returns many fold over... In some cases, more than 15x.
And 10 years from now, I'll be able to pass something on to my children that not only delivers hard-earned wealth to the next generation, but also teaches her the tremendous value of saving and how the stock market grows wealth.
Yet, I couldn't help but wonder...
At what point does the blessing of being given something also become a curse?
A 'blessing' in disguise
Keep in mind that Venezuela is hardly the only country awash in a key resource that is staring at a bleak future.
Malaysia and Australia are another blessed countries
The phenomenon is common enough that academics have a name for it: "the resource curse."
Simply put, countries with abundant resources tend to have WORSE economic growth and development than countries with fewer natural resources.
The reasoning is pretty simple: when you're given wealth, you lose the value of hard work and taking risks.
Consider the case of Saudi Arabia. Saudi Arabia has a lot of oil... In parts of the country you could practically stick a straw in the ground and hit pay dirt. So, it's done pretty well for itself over the past 40 years.
Like Venezuela, Saudi citizens get plenty of perks for winning the geological lottery. Gas is cheap, government jobs are plentiful, personal income taxes are non-existent, and higher education is normally free.
Yet all this wealth has had a toxic effect on Saudi society. When surveyed by Gallup, 75% of Saudis said they want to work for the government. Less than 1 in 5 prefer private sector employment! In Malaysia the similiar survey shows 70% of blessed malay citizens prefer to work for the government.
Not exactly a risk-taking society...!!
When oil prices were high, the hundreds of billions in oil money flowing into the country each year were enough to mask Saudi Arabia's and malaysia weaknesses.
But now that oil prices are collapsing...
The country is at risk of running out of cash within the next five to ten years!
The two lessons
While thinking about the destructive elements of being "given" wealth, I came to two conclusions that relate to investing.
First, when it comes to investing in foreign markets, I'm far more comfortable with countries that have exhibited a culture of innovation, hard work, and fierce competition, rather than those that lucked into a valuable resource. I believe markets such as India, China , Taiwan, Korea will define the next generation of winning companies, and I don't see any promise in countries like Venezuela.
And second, in the same way oil-rich nations can be spoiled when they don't have to work as hard for their economic advances, my children could come to expect financial wellbeing if it's just handed to her.
I believe passing on these stocks to my children should be a real blessing... Not something that could diminish her own hard work and risk-taking at such an important time in her life.
So I decided... While I plan on teaching the children about investing, very well before they are 18, I'll hold off on ever letting them know the stocks we're looking at will one day be theirs.
The future country raider see the following future trend;
1. Malaysia will continue downhill in term of competitiveness and wealth
2. The country wealth & talent is deteriorating
3. Cost of living is going up
4. Malaysia will go towards an islamic country like Saudi.
U need to invest in equities to overcome the above challenges to protect yourself and family...!!
We've all heard stories of lottery winners who lose it all, watching their newfound wealth disappear and their lives spiral into ruin.
I thought about this in two very different contexts recently: watching the negative news continue to cloud the economic situation in Venezuela ... !!
In a way, Venezuela won the geological lottery. The country is awash in the world's most valuable resource -- people fill up their cars for a half penny per gallon!
"It's cheaper than water," said one Venezuelan to a passing reporter. Said another, "It's so cheap, we could wash our hands with it."
And yet, their country is on the brink of ruin.
For residents, stockpiling essential supplies is the norm. The president recently declared martial law. Its economy is collapsing.
And, like the stories of so many lotto winners who fall into easy money without work... it's going broke.
Full of oil... and poverty
You might remember Venezuela from my Oct. 11 column, "Welcome to the Worst Economy in the World."
Venezuela is "blessed" with the LARGEST OIL RESERVES in the world.
Yet, crippling mismanagement of its economy has led to hyperinflation, food shortages, and general misery.
So, what do oil reserves and economic turmoil have to do with my my children?
The best way to build wealth and the incredible feeling that comes with financial freedom is through long-term investment in the stock market. So I've been building a portfolio of stocks to pass on to my children.
It includes companies I believe will be long-term winners: like Analabs, superlon, AFG and many smaller names like watta which I think could have big futures. Many of these are selected from the list of recommendations from Senior Analyst and 009 investigators.
My hope is many of these stocks will repeat the performance of their past winners. That means potentially seeing returns many fold over... In some cases, more than 15x.
And 10 years from now, I'll be able to pass something on to my children that not only delivers hard-earned wealth to the next generation, but also teaches her the tremendous value of saving and how the stock market grows wealth.
Yet, I couldn't help but wonder...
At what point does the blessing of being given something also become a curse?
A 'blessing' in disguise
Keep in mind that Venezuela is hardly the only country awash in a key resource that is staring at a bleak future.
Malaysia and Australia are another blessed countries
The phenomenon is common enough that academics have a name for it: "the resource curse."
Simply put, countries with abundant resources tend to have WORSE economic growth and development than countries with fewer natural resources.
The reasoning is pretty simple: when you're given wealth, you lose the value of hard work and taking risks.
Consider the case of Saudi Arabia. Saudi Arabia has a lot of oil... In parts of the country you could practically stick a straw in the ground and hit pay dirt. So, it's done pretty well for itself over the past 40 years.
Like Venezuela, Saudi citizens get plenty of perks for winning the geological lottery. Gas is cheap, government jobs are plentiful, personal income taxes are non-existent, and higher education is normally free.
Yet all this wealth has had a toxic effect on Saudi society. When surveyed by Gallup, 75% of Saudis said they want to work for the government. Less than 1 in 5 prefer private sector employment! In Malaysia the similiar survey shows 70% of blessed malay citizens prefer to work for the government.
Not exactly a risk-taking society...!!
When oil prices were high, the hundreds of billions in oil money flowing into the country each year were enough to mask Saudi Arabia's and malaysia weaknesses.
But now that oil prices are collapsing...
The country is at risk of running out of cash within the next five to ten years!
The two lessons
While thinking about the destructive elements of being "given" wealth, I came to two conclusions that relate to investing.
First, when it comes to investing in foreign markets, I'm far more comfortable with countries that have exhibited a culture of innovation, hard work, and fierce competition, rather than those that lucked into a valuable resource. I believe markets such as India, China , Taiwan, Korea will define the next generation of winning companies, and I don't see any promise in countries like Venezuela.
And second, in the same way oil-rich nations can be spoiled when they don't have to work as hard for their economic advances, my children could come to expect financial wellbeing if it's just handed to her.
I believe passing on these stocks to my children should be a real blessing... Not something that could diminish her own hard work and risk-taking at such an important time in her life.
So I decided... While I plan on teaching the children about investing, very well before they are 18, I'll hold off on ever letting them know the stocks we're looking at will one day be theirs.
The future country raider see the following future trend;
1. Malaysia will continue downhill in term of competitiveness and wealth
2. The country wealth & talent is deteriorating
3. Cost of living is going up
4. Malaysia will go towards an islamic country like Saudi.
U need to invest in equities to overcome the above challenges to protect yourself and family...!!
Koon Bee
Sampah!!
2016-03-26 23:06