Economics

[kennynah]

poland :

whether it is 10%, 30%, 60% 100% or whatever the targetted % of return on capital maybe, that is the absolute aim. The downside that you referred to, is classically called Risk.

in my earlier suggestion, such risks would have already been taken into account when one targets a X% ROC. This has to be the case, because Risks and Returns are positively correlated without a doubt. The higher the intended returns, the higher must be the risks assumed.

i can understand why most I/T view anything more than 10% returns as being aggressive and even unrealistic. but understanding doesn't mean i agree with this notion. it is understandable because most I/T know only to Long stock positions, and maybe the more seasoned, dabble Short positions.

throughout the 2 posts in "mathematics" above, i did not specify on "HOW" to go about achieving the target X% ROC. i only tabled the mathematics of "compounding" gains for discussion.

but just as well, we should dwell into the specifics of how to achieve that 10%, 30%, 75% or maybe just that meagre 3% annual ROC. but then, this discussion would be in the wrong thread... (after thoughts...W will housekeep if this is really out of topic here)

so..let's begin....

stocks is a NON leveraged investment vehicle. this means, if you buy 700 shares of Citi at $7, you will need to have $4900 in your account. well, not precisely. american brokerages and SEC allows for 50% margin. This means, you need only have 1/2 of $4900 in your trading account to buy 700 shares of C at $7. The other $2450 is "lent" to you by your brokerage, at a nominal interest rate. If C rallies $1, fine and well, you profit $700 (700 shares x $1 profit). If C dives, substantially, you will receive a margin call notice from your broker to top up or be closed out. Most people will simply ensure that they have $4900 in their account in the first place to avoid such margin calls. So, in general, Long stock positions are NOT leveraged.

as in leveraging, you prosper or die by it.

BUT, unless one has a very substantial capital to begin with, investing purely on non-leveraged underlying, will not usually make you very rich, even with compounding annual returns.

think about it. do you expect Citi's share to rise 30% yoy ? or even 15% yoy, every year ? The logical answer must be NO.

hence, if i decide to aim at a 60% annualized returns, it would be very foolish and idiotic of me to imagine that i can achieve that through a non-leveraged vehicle like pure stocks. corollary to this, must imply that i mean using leveraging as a means to an end. i do, no questions about it.

now, i can hear murmurs about CFD; ie Contract For Difference. it can be a highly leveraged tool to capture massive profits. it can, however, also be a shinkansen to bankruptcy. engaging purely in CFD as an I/T tool is not my idea of using leverage wisely. it isn't, simply because of the enormous Risks involve in the actual structure of CFD (search for the word "CFD" in this forum, and you will read some earlier discussion on this topic). Have you ever heard of a CFD house offering you options trading? I have NEVER and the reason is very simple. Option hedges risks and risks is what CFD houses want every retail trader to be exposed to every single day and in every single trade. so, if you are using CFD currently, i urge you to relook seriously at your risks exposure.

yes, i am driving home the concept that in order to achieve meaningful ROC, one usually needs to employ leveraging....wisely and prudently. without the use of leveraging, it would be rather difficult to a achieve consistent high % of ROC. consistency is the word here...because anyone who bought C at $3.80 3 weeks ago, would be >100% up in ROC since C traded ~$9 just a few days ago. But will we always hit a "C" every month? unlikely.

earlier, i mentioned that to achieve 30% annualized return, all that one needs to achieve is 2.2% ROC every month. let's be more specific here. if I Long a stock and it rallies, achieving 2.2% is really a walk in the park. but let's get real, most times, we Long a position, it dives, almost as if our purchase caused the price to drop...hahahaha... c'mon dont bluff, you dont have this experience. but of cos, at times, we were luckier... after a Long position, the price stagnates for weeks and months... dont move means dont move...WTF !!! capital stuck there, feed mosquitoes.
so, i realised that if i Long stock, i can only profit when that stock rallies..period ! it stays put or tanks, i lose money. knn...this is not a very smart proposition, is it ? 1 in 3 ways I win, 2 in 3 ways, I lose and when i win, I target a win of 2.2% only. I must be an idiot.

therefore, it would seem smarter to have better odds than 1 in 3 to win the market, right? RIGHT !!!

this is where KNOWLEDGE plays the very key role in making money. Have you seen a businessman operating a successful business, when he is a blur sotong of his trade? no way, right? so, it is true in I/T, knowledge of our tool we use to earn us money from the market is essential. and i am not referring to knowledge of the market, that's a different matter altogether.

ok.... time for others to comment and share thoughts..

thanks...

[kennynah]

the best way to describe RISK is use an example...

singapore pools allow retail betters to punt on soccer... this is one match that is playing tonight

............................................................Home..Draw...Away
28/12/08 7.55PM NEWCASTLE vs LIVERPOOL 5.40 3.50 1.52

Now look at William Hill's odds. WillHill is a very established and licensed UK bookie.

............................................................Home..Draw...Away
28/12/08 7.55PM NEWCASTLE vs LIVERPOOL 5.50 3.70 1.72


WillHill pays better than Singaporpools for all outcomes...which means, if i wanted to punt on Liverpool to win, i would be a damn fool to place my bets with Singpools. I should instead bet with William Hill

But let's get back to RISK....

All that Singapore Pool has to do is accept ALL bets fromthe retail customers (that's uncles, aunties, ah bengs, ah sengs, you and me) and to hedge against their risks...the ARBITRAGE EVERY SINGLE BET by placing all their received bets out to WillHill...

Eg, I buy Newcastle to Win...singpool will pay me $5.4 but guess what? singpool wins from willhill $5.50...that 10cents of almost RISK FREE profits...

ladies and gentlemen....this is what arbitrage, which is a form of risk free endeavour that happens in our markets everyday... singaporepool is NOT in a risk business. they will NEVER lose, as long as they have monopoly over the soccer gaming in singapore. they will always offer poorer odds to customers thereby ensuring they are RISK FREE and forever profitable...

enjoy the matches later...cheers mate !!! oleeeee ole ole ole....ole ole.....

[winston]

Less Expenses....

Sometimes, the expenses of administrating such arbitrage can be quite high ...

[millionairemind]

Beat on the Brat
The economics of spanking.
By Steven E. Landsburg

In child discipline, as in pretty much everything else, the rich have more options than the poor. If you're rich (or even modestly middle-class), you can take away the Game Boy, confiscate the car keys, or turn off the Instant Messenger. But for families with no Game Boys, no cars, and no Internet access, that whole range of punishments is unavailable.

If you're rich or middle-class, you can cut your kid's allowance; if you're poor, your kid might need the allowance to live on. When a middle-class kid loses his allowance, he makes do with fewer CDs or video games. When a poor kid loses his allowance, he makes do with fewer school lunches. Depriving a kid of luxuries can be an effective punishment; depriving a kid of necessities can be a form of child abuse.

Spanking, by contrast, is an equal-opportunity punishment; it works equally well whether you're rich or poor. So simple economics suggests that the very poor, with fewer alternatives available, should spank their kids more—and they do.

Professor Bruce Weinberg of Ohio State University has studied this. He found that if you're a kid in a $6,000-a-year household, you probably get spanked every six weeks or so. If your parents' annual income goes up to $17,000, you'll get spanked about once every four months. As income rises above about $17,000, spanking falls off more slowly; $40,000 and $120,000 households are not much different from $17,000 households. That makes sense; in today's America, you don't have to be very wealthy before your kid has a Game Boy, so even a $20,000 household has good non-spanking alternatives.

For allowance withdrawal, the numbers go exactly the opposite way, Weinberg found. If you're a kid in a typical $6,000-a-year family, you'll almost never lose your allowance, but in a family that makes $17,000 or more, you'll lose your allowance four or five times a year.

It might seem like a stretch to explain spanking with economics, but what else could account for these patterns? Well, there's always culture. The very poor are disproportionately black, and blacks physically discipline their children more than whites do. But according to Weinberg, the effect of income persists even after you've controlled for race and other cultural variables.

Anyway, black parents punish their children more than white parents in all ways. If you're black and you misbehave, you're both more likely to get spanked and more likely to lose your allowance than your white neighbor, who in turn is both more likely to get spanked and more likely to lose his allowance than the Hispanic kid down the street. So on average, poor people spank more and withdraw allowances less, whereas black people spank more and withdraw allowances more. The income pattern fails to match the racial pattern, so the income pattern can't be fully explained by race.

It is true, though, that racial differences are more pronounced for spanking than for allowance denial: In both cases blacks punish the most, then whites, then Hispanics, but the gaps between racial groups are much bigger for corporal than for financial punishment.

There are other cultural factors: Boys are punished more than girls, with substantially more spankings and a bit more in the way of allowance withdrawals. Single mothers spank a little less, and withdraw allowances quite a bit less, than other parents. Older and better-educated parents are a bit less likely to spank and a bit more likely to withdraw allowances. Bigger families spank less and withdraw allowances more. But Weinberg's study finds that the poor spank more even after you've accounted for all of these effects. The question is why.

Here's one good alternative to the economic explanation: University of New Hampshire sociologist Murray Straus has published multiple studies concluding that children who are spanked are less successful as adults. If the link is causal—that is, if being spanked actually lowers your earnings potential—and if spanking runs in families, then we have an alternative explanation for Weinberg's numbers: Low-income parents are more likely to spank their children because low-income parents are more likely to have been spanked themselves. Or maybe it's as simple as this: Poverty breeds frustration, and frustrated parents lash out at their kids. Does any reader have a better story?

[millionairemind]

Bargains that aren’t
An article written by Tim Harford on the 20th of July, 2008.
First published: Parade Magazine, 13 July 2008

Not everything that seems like a bargain will really end up saving you money. Luckily, behavioral economists are finding the gimmicks and tricks that regularly lure us to spend more. Read this—and don’t get caught!

ANYTHING YOU BUY ON CREDIT
Putting a purchase on a credit card with a zero interest rate may seem like a good deal, but you’re less likely to shop frugally when you’re using it—or any kind of credit card. MIT researchers Drazen Prelec and Duncan Simester ran an experiment in which two groups of subjects were allowed to bid on tickets to sporting events. One group had to pay in cash within 24 hours, the other with a credit card. The credit-card group offered much more for the tickets—and more than twice as much for a sold-out game. Other studies suggest that people who pay with plastic spend more and tend to forget how much they spent.

MANUFACTURERS’ REBATES
Many electronics are sold with a rebate, and those tempting discounts can sometimes sway buyers to particular brands. But studies show that less than half of all rebates are successfully redeemed. That’s no accident, says Prof. Richard McKenzie of the University of California, Irvine, author of Why Popcorn Costs So Much at the Movies. Companies can introduce an obstacle by manipulating the window in which a rebate can be redeemed (for example, making it 10 days long, starting three weeks after purchase). Then there’s “slippage”—customers are mailed checks but never cash them because the checks expire first or people throw them away without realizing what they are. “Rebate checks can be mailed in envelopes designed to look like junk mail,” McKenzie says, adding that “rebates are fading out. People are beginning to learn.”

AN EBAY AUCTION DEAL
Auctions get people excited, and excited people are likely to overpay. “Almost half of all auctions contain overbidding,” says Assistant Prof. Ulrike Malmendier of the University of California, Berkeley. Overpayments are easy to spot, because eBay sellers often offer identical goods for a fixed price. Malmendier and colleague Young Han Lee found that some eBay winners could have gotten higher-quality goods from more reputable sellers and paid less—by buying at a set amount. To avoid succumbing to auction-induced exuberance, they suggest submitting a one-time maximum bid equal to the fixed price available elsewhere on eBay. If you are outbid, forget the auction and buy it at the set price.

MID-RANGE PRODUCTS
Think that a mid-range camera—or dishwasher or toaster—is the perfect compromise between value and luxury? Think again. Prof. Itamar Simonson of Stanford University revealed the catch in a classic experiment where subjects were asked to choose between an expensive, high-end camera and a cheaper model. He found that more subjects went for the high-end camera when they also were presented with a third choice: an even more expensive, feature-laden product, which made the “mid-range” option seem modest by comparison. “A company can exploit customers’ preference for the middle item,” says Simonson, “by presenting a more expensive item next to the one it is really trying to sell.”

FREE STUFF
Prof. Dan Ariely of Duke University, the author of Predictably Irrational, has discovered that free products trigger an emotional reaction that can cause consumers to lower their guard. “Most transactions have an upside and a downside,” he explains. “When something is free, we forget the downside.” Some of Ariely’s examples: free shipping on larger orders from an Internet retailer that causes you to buy things you don’t need in order to qualify, or “free” DVDs that come with an overpriced DVD player. Even free entry to a museum or gallery can cost you in time due to longer lines and crowds.

YEARLY GYM MEMBERSHIPS
We all know people who sign up for a 12-month gym membership- in January—and give up their fitness regimes by March. Why do they enter into such costly commitments? “People make a choice that suggests they’re too confident about their future attendance,” says Ulrike Malmendier of UC Berkeley. Malmendier and colleague Stefano DellaVigna found that four out of five of the gym-goers they studied could have saved money by paying per visit instead. So before joining for a year, be realistic about how much you’ll go.

[iam802]

I was at Tiong Bahru market this morning.

I noticed that the traffic was fairly thin at the carpark. Ample parking space to go around.

The aunties, uncles at the various stalls were sharing with me how business seems poorer. They are wondering where the crowd has went to (so do I?)

Granted that Tiong Bahru aren't really the 'cheapest' market around. Is this a sign that consumers are tightening their belts further?

[winston]

Ching Ming mah ...

A lot of people go one week early before the crowd next week ..

[millionairemind]

More Sex Is Safer Sex
The economic case for promiscuity.
By Steven E. Landsburg
Posted Saturday, July 6, 1996, at 3:30 AM ET
It's true: AIDS is nature's awful retribution for our tolerance of immoderate and socially irresponsible sexual behavior. The epidemic is the price of our permissive attitudes toward monogamy, chastity, and other forms of sexual conservatism.

You've read elsewhere about the sin of promiscuity. Let me tell you about the sin of self-restraint.

Suppose you walk into a bar and find four potential sex partners. Two are highly promiscuous; the others venture out only once a year. The promiscuous ones are, of course, more likely to be HIV-positive. That gives you a 50-50 chance of finding a relatively safe match.

But suppose all once-a-year revelers could be transformed into twice-a-year revelers. Then, on any given night, you'd run into twice as many of them. Those two promiscuous bar patrons would be outnumbered by four of their more cautious rivals. Your odds of a relatively safe match just went up from 50-50 to four out of six.

That's why increased activity by sexual conservatives can slow down the rate of infection and reduce the prevalence of AIDS. In fact, according to Professor Michael Kremer of MIT's economics department, the spread of AIDS in England could plausibly be retarded if everyone with fewer than about 2.25 partners per year were to take additional partners more frequently. That covers three-quarters of British heterosexuals between the ages of 18 and 45. (Much of this column is inspired by Professor Kremer's research.)
If multiple partnerships save lives, then monogamy can be deadly. Imagine a country where almost all women are monogamous, while all men demand two female partners per year. Under those conditions, a few prostitutes end up servicing all the men. Before long, the prostitutes are infected; they pass the disease to the men; and the men bring it home to their monogamous wives. But if each of those monogamous wives was willing to take on one extramarital partner, the market for prostitution would die out, and the virus, unable to spread fast enough to maintain itself, might die out along with it.
Or consider Joan, who attended a party where she ought to have met the charming and healthy Martin. Unfortunately Fate, through its agents at the Centers for Disease Control, intervened. The morning of the party, Martin ran across one of those CDC-sponsored subway ads touting the virtues of abstinence. Chastened, he decided to stay home. In Martin's absence, Joan hooked up with the equally charming but considerably less prudent Maxwell--and Joan got AIDS. Abstinence can be even deadlier than monogamy.
If those subway ads are more effective against the cautious Martins than against the reckless Maxwells, then they are a threat to the hapless Joans. This is especially so when they displace Calvin Klein ads, which might have put Martin in a more socially beneficent mood.

You might object that even if Martin had dallied with Joan, he would only have freed Maxwell to prey on another equally innocent victim. To this there are two replies. First, we don't know that Maxwell would have found another partner: Without Joan, he might have struck out that night. Second, reducing the rate of HIV transmission is in any event not the only social goal worth pursuing: If it were, we'd outlaw sex entirely. What we really want is to minimize the number of infections resulting from any given number of sexual encounters; the flip side of this observation is that it is desirable to maximize the number of (consensual) sexual encounters leading up to any given number of infections. Even if Martin had failed to deny Maxwell a conquest that evening, and thus failed to slow the epidemic, he could at least have made someone happy.

To an economist, it's clear why people with limited sexual pasts choose to supply too little sex in the present: Their services are underpriced. If sexual conservatives could effectively advertise their histories, HIV-conscious suitors would compete to lavish them with attention. But that doesn't happen, because such conservatives are hard to identify. Insufficiently rewarded for relaxing their standards, they relax their standards insufficiently.
So a socially valuable service is under-rewarded and therefore under-supplied. This is a problem we've experienced before. We face it whenever a producer fails to safeguard the environment.
Extrapolating from their usual response to environmental issues, I assume that liberals will want to attack the problem of excessive sexual restraint through coercive regulation. As a devotee of the price system, I'd prefer to encourage good behavior through an appropriate system of subsidies.
The question is: How do we subsidize Martin's sexual awakening without simultaneously subsidizing Maxwell's ongoing predations? Just paying people to have sex won't work--not with Maxwell around to reap the bulk of the rewards. The key is to subsidize something that is used in conjunction with sex and that Martin values more than Maxwell.
Quite plausibly, that something is condoms. Maxwell knows that he is more likely than Martin to be infected already, and hence probably values condoms less than Martin does. Subsidized condoms could be just the ticket for luring Martin out of his shell without stirring Maxwell to a new frenzy of activity.

As it happens, there is another reason to subsidize condoms: Condom use itself is under-rewarded. When you use one, you are protecting both yourself and your future partners, but you are rewarded (with a lower chance of infection) only for protecting yourself. Your future partners don't know about your past condom use and therefore can't reward it with extravagant courtship. That means you fail to capture the benefits you're conferring, and as a result, condoms are underused.

It is often argued that subsidized (or free) condoms have an upside and a downside: The upside is that they reduce the risk from a given encounter, and the downside is that they encourage more encounters. But it's plausible that in reality, that's not an upside and a downside--it's two upsides. Without the subsidies, people don't use enough condoms, and the sort of people who most value condoms don't have enough sex partners.

All these problems--along with the case for subsidies--would vanish if our sexual pasts could somehow be made visible, so that future partners could reward past prudence and thereby provide appropriate incentives. Perhaps technology can ultimately make that solution feasible. (I envision the pornography of the future: "Her skirt slid to the floor and his gaze came to rest on her thigh, where the imbedded monitor read, 'This site has been accessed 314 times.' ") But until then, the best we can do is to make condoms inexpensive--and get rid of those subway ads.

[winston]

16 Operators can also price-fix ? What about one subway operator, a few taxi & bus companies, a few big domestic banks ? etc..

===================================================

Sixteen coach operators operating between Singapore and Malaysia and their association have been fined S$1.69 million ($1.21 million) for price fixing.

[kennynah]

16 Operators can also price-fix ? What about one subway operator, a few taxi & bus companies, a few big domestic banks ? etc..

===================================================

Sixteen coach operators operating between Singapore and Malaysia and their association have been fined S$1.69 million ($1.21 million) for price fixing.

didnt you know that many of the larger coach operators are really owned by same people....so, it appears as if you are travelling on a difference company coach..but they are all interconnected..

i must go check if the price of coach trips to KL has now dropped after the fine...