Magic Loans

Magic Loans.

The name itself makes you wonder if the lender will just disappear with your money, doesn't it?

This company basically offers 3 types of loans:-
(a) Homeowner Loans - For new homebuyers or for existing homeowners who can use the money towards the refurbishment/improvement of their houses;
(b) Consolidation Loans - To pay off those outstanding repayments and high interest credit card bills; and
(c) Secured Loans - For those miscelleaneous purposes like buying a new car, taking that dream holiday or financing something very special, such as a family wedding or similar special celebration.

At the prevailing interest rate of 10.9% per annum, I think you can get a better deal elsewhere.

My advise? Caveat Emptor.

My article was featured!

I have previously written a finance article for Helium back in May, and it was recently featured on the homepage! (Don't ask me why they took 5 months to feature it as I have no idea) This is the first time my writing has been recognized! And it's not even highly ranked amongst the Helium readers... Hmmm... I wonder why it made the cut in the first place...

Here's a link to the article.

I have stopped writing for Helium since 18th May 2007 because my consolidated earnings for these 5 months has been a staggering 65 cents... Haha...

PayPerPost has definitely been more rewarding, although I am only picking up drips and draps... Those US$100+ Opps are out of my reach due to my low Google PR...

Do you have adequate insurance?

With over a thousand general insurance companies operating in the UK, wouldn't it be great if there's a website that will compare the insurance plans, premiums, T&Cs, etc., and simply tell you which plan is most suited for your particular profile? Well, head on down to nationsfinance.co.uk then!

To adequately protect your wealth in the event of a fire or a burglary, I would advise that you do not save on Home insurance.

Similarly, if you own a car, you should protect yourself by buying adequate Car insurance, especially if you are still servicing a loan on it.

Lastly, to minimize your loasses from the loss of a luggage during an overseas trip, you should have travel insurance before you even embark on the holiday.

In conclusion, whatever you may do, mitigate your risk with the appropriate insurance policies. It's money you cannot afford to not spend.

Why oil isn't so expensive after all

Source: Moneyweek.com

I was reading an email form an ex-colleague in America this morning. He was arguing that the oil price would hit $300 a barrel should the US invade Iran. This seems more and more likely in my mind as the rhetoric ratchets up - and I hold my head in despair. (aC: US$300 per barrel on pure speculation?? Can that still be considered speculation or a calculated move?)

I fear that an attack on Iran is becoming a real and present danger, despite US government denials. After all, I remember Donald Rumsfeld saying on TV soon after 9/11 that the US government hawks would not use the terrorist attacks in New York as an excuse to attack Iraq. We all know what happened next.

The thought of oil at $300 is shocking, but is it realistic? Isn’t oil really expensive at the moment as it is?

Well, although I believe that $300 a barrel is unlikely in the short, or even the medium term, but I don’t think that oil is particularly expensive at the moment, despite it being at historic nominal highs.

I expect the price to rise – we should easily see $100 a barrel next year… maybe even this year should the White House warmongers hit the red Iran button. (aC: Hmmm... somehow I can picture the US President having a physical red button labelled "War"... Not as hard to imagine, compared to a $300 per barrel of crude oil.)

If you adjust for inflation, the oil price peak at the start of 1981 was in excess of $100. We are still below that figure. But this is not why I believe that the current oil price is cheap. Let’s take a look at some figures to illustrate my point of view.

First, let’s ask ourselves a basic question – how much crude is there in a barrel of oil…

One barrel of oil officially contains 42 US gallons…
This converts into 35 imperial gallons…
There are 8 pints in a gallon…
That means one barrel of oil contains 280 pints...
WTI futures are currently approximately $87 a barrel…
That means one pint of crude oil costs 31 cents, or 15p in real money...

When put like that, it does not sound as outrageously expensive as some commentators claim. So, what else can you buy for 15p a pint?

I took a quick look around Tesco.com to try and find out…

One pint of milk costs 40p.
The one pint equivalent of Evian water costs around 70p.
The cheapest vegetable oil costs 39p a pint.
Extra virgin olive oil costs 227p a pint.

And then there’s beer… The average cost of a pint of beer in the UK is 250p, according to a report I read on the BBC. However, that’s not what it costs the pub. It is not exactly easy to find out how much your local boozer pays for its beer, so I have to go as far back as 2004 and a written submission from the Federation of Small Businesses to the Trade & Industry Committee.

In this submission, it was revealed that Carlsberg-Tetley charged 42p a pint for Carlsberg lager when it supplied it to a freehouse. You can expect it to be higher than this level now, but 42p for a pint of Carling is significantly higher than 15p for a pint of crude.

Now, of course we are not really comparing like with like here, I understand that. Crude oil is a feed substrate not a finished product like the items on my Tesco shopping list or a pint of beer from a brewery. However, I think for illustrative purposes it makes a good point.

The truth is that oil is NOT extortionately priced and it is almost inevitable that the price is going to rise.

Also worth noting is that in 1981, when oil hit its peak price because of the Iran-Iraq war, a pint of milk cost 17p. That is still more expensive than a pint of crude costs today; without even taking the monster of inflation into consideration.

Oil is cheap, despite the newspaper headlines. The world population is soaring and demand is rising significantly. According to US government forecasts, world petroleum liquids consumption is expected to increases from 83 million barrels per day in 2004 to 118 million barrels per day in 2030.

That’s an increase of almost 30%... and we are not finding enough new oil reserves to meet this demand.

The price of oil has to increase otherwise it would be betraying the laws of economics. I bet that in 10 year’s time after the Asian population has boomed and gentrified and peak oil has hit home hard, you will have to agree with me that oil at $87 a barrel was cheap, cheap, cheap… (aC: Just like how we thought the prices of 1981 were expensive when oil was just traded at $21 per barrel...)

(aC: Hmmm... But it leaves me to ponder - What if mankind discovered other renewable sources of energy that could replace or potentially replace crude oil? Would oil price still mindlessly climb up? Well, we all know from economics 101 what near perfect substitutes does to the price of a commodity. And in this day and age, is it impossible to make such a "discovery" in chemical laboratories? So before you buy go all out to buy gallons of oil futures at $89, think again...)

Taking the Credit for Credit Cards

cardguide.com.uk is an online website that provides a comparison guide of all the major credit cards available in the UK.

With regard to the hot topic of balance transfers, the above website recommends that one selects a credit card that offers 0% balance transfer and use it solely for its balance transfer feature. Do not make purchases on it. Why? This way, any repayment made to that card goes straight to repaying the balance transfer - and only the balance transfer. Make sure the balance is fully paid off before the 0% deal expires to avoid incurring interest charges, or transfer the debt remaining to another card.

There are also 0% purchase credit cards available. In a nutshell, these 0% credit cards offer you free credit for an introductory period before the standard annual interest reate is applied, in essence giving you a loan at 0% for a specified period of time before the credit card's standard rate kicks in. The "free period" ranges from 3 months to 13 months. My advise? Grab the 13-month one of course!

Singapore Banking Stocks - DBS & UOB (Part 1)

DBS Group Holdings

DBS will be releasing its Q3 Results on 26 Oct 07 before market opens for trading.

On Sept 19 07, DBS announched a S$400 million share buy-back programme. Share buy-back tends to give a lift to the stock price, due to a decrease in the Shares Outstanding. As this buy-back has not been effected yet, we will not see the upward movement in the stock price in the short term due to the buy-back.

On 27 Sept 07, DBS announced that DBS Vickers Securities Online is now fully owned by its subsidiary. Given the current trading volume of the Singapore Stock market, and DBS Vickers' market share of online brokerage, this should have a positive contribution to DBS's bottomline, even after accounting for the cash consideration of $6.5 million. However, we should see this contributing to the Q4 results and not Q3.

On Oct 8 07, DBS China launched its RMB products - Although this has no material impact to its upcoming results, it should nonetheless have a positive contribution to its Q4 results.

From the above, I think my recommendation is kinda obvious by now. Hold DBS stocks/warrants till the release of its Q4 (FY) results.

Price target: $24 by year end.

eDeal Finder

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Online Christmas Shopping has never been easier.

Bernanke has warning for Wall Street

In a speech in New York, the Fed chairman said the central bank's big interest rate cut last month has helped but that the Fed can't 'insulate investors from risk.'

(Source: CNNMoney.com)

In a speech to the New York Economic Club Monday night, Federal Reserve Chairman Ben Bernanke said the central bank's rate cut in September has shown signs of success, but cautioned that lenders and investors must bear responsibility for financial decisions that caused the subprime mortgage meltdown.

"Although the Federal Reserve can seek to provide a more stable economic background that will benefit both investors and non-investors, the truth is that it can hardly insulate investors from risk, even if it wished to do so," Bernanke said, adding that "over the past few months...those who made bad investment decisions lost money."

The Fed slashed the federal funds rate, a key short-term interest rate that impacts rates on consumer loans, by a half of a percentage point on September 18. Bernanke said the rate cut, combined with an earlier cut to the symbolic discount rate in August, helped to "reduce some of the pressure in financial markets" and that "the improved functioning of financial markets is a positive development."

Behind the Citigroup rescue
Bernanke also said that the weakness in the housing market "is likely to be a significant drag on growth in the current quarter and through early next year."

But he hinted that it may not get that much worse and that investors and lenders may have learned from their mistakes. He did not specifically mention a plan unveiled Monday by a group of big banks to create a fund to buy mortgage-backed securities in his prepared remarks, however.

"Rather than becoming more crisis-prone, the financial system is likely to emerge from this episode healthier and more stable than before," he said.

Investors looking for a sign that the Fed may cut rates again at the conclusion of a two-day meeting on October 31 may be disappointed though. He indicated that the Fed "was prepared to reverse the policy easing if inflation pressures proved stronger than expected."

But during a question and answer session following his speech, David Malpass, chief economist at Bear Stearns, asked Bernanke if he thought the value of the dollar impacts inflation. Bernanke said he did not think a fixed exchange rate system affects the economy.

(aC: I will stick my neck out and state it here that I do not think the Fed will cut its rates any further at its coming Oct 31 meeting. Reason? The Dow is back to its all time high at the 14,000 level; There has been no news lately with regard to any financial institutions going bankrupt because of the sub-prime mortgage crisis; Consumer confidence is back judging from job data and Consumer Price Index.)

National Pay Day

Everybody's after your salary even before you earn it. Nope, not just your wife, but Everybody!

Banks are charging lesser on transaction costs if you invest in their mutual funds products on a monthly basis using your salary. This is becasue your salary acts as a form of guaranteed monthly cash flow for the bank, and they are "banking" on the fact that most people tend to forget where their money is being siphoned off to if its done electronically and remains hassle free for the investor.

Anyway, coming back to the point of short term loans, who needs short term loans in the first place? If you barely qualify for the no faxing payday loan that National Pay Day offers, then you are probably the right candidate. If you make about $1,000 per month, a 16-day tenure loan of a max of $600 means a 60% increase in your salary. But if $600 is considered critical for your needs, and you have no other avenues to turn to except for short-term loan companies, my advise is that you start saving. Seriously, please start examining your financial health because you should have at least 3 months worth of savings for emergency users.

I know this is probably easy for me to say esp. since I am not in any financial crisis, but I'm saying this because you will probably just dig yourself in a deeper hole by turning to short term loans. Don't forget that the interest rate is 25% - that's 1% higher than what most credit card companies are charging on a late payment. So, I guess the only reason you should take out a short term loan is if you can find an investment that guarantees you a 26% return within 16 days on a $600 principal. If you can find such a vehicle, pls let me know; I don't mind earning $6 every 16 days.

For those with strong willpower, that's a good offer for you - Your first $300 from National Pay Day is Free. Free in the sense that you just have to pay back $300 after 16 days and not $375. Again I stress that this is for those with strong willpower.

Are You A Better Investor (Part 3)

This Post is continued from Part 2.

Three rules to invest by
So how do you put all the innovations of the past 35 years to the best use for you, not Wall Street? Follow these rules:

(1) If there's a cheap way and an expensive way to solve an investing
problem, stick with the cheap one.
The typical hedge fund gouges clients but produces mediocre returns. As for mutual funds, a recent study found that each 1 percent increase in annual expenses reduces performance by 1.6 percent; managers may be taking on more risk to overcome the drag of higher costs.
(aC: Some studies have shown that an actively managed stock portfolio is not able to beat the after cost net profits of a randonly picked stock portfolio that is passively managed. This means that you don't get anything in return for paying more)

(2) High returns and low risks don't come in the same package.
As Milton Friedman said, "There's no such thing as a free lunch." Just this summer, bank-loan and long-short funds became the latest "low risk, high return" products to flame out.
(aC: Maybe to make this more complete, it should be mentioned that High Returns and High Risks dont necessarily come in the same package either)

(3)If you are presented with too many choices, you'll end up afraid to choose at all.
Psychologists have shown that having to pick among dozens of options not only makes it much harder for us to make up our minds, but it also fills us with regret. No matter what we choose, we worry that another choice must have been better. So don't bother scouring among thousands of mutual funds and packing your 401(k) and other accounts with 78 of them. Instead, own a handful of low-cost, diversified index funds, add to them every month and do nothing else.
(aC: How true this is; If we are unable to filter the barrage of information that bombards us everyday, we will end up being paralysed by the wealth of information that the Internet and Media has brought us in today's world. I think one way to filter choices is to know clearly what you want in the first place, only after that when you presented with choices/options, you know which is the best/right choice. If you do not know what you want in the first place, you can be overwhelmed by the sheer amount of information)

The bottom line
Despite Wall Street's unrelenting efforts to complicate it, investing can be simple. But it isn't easy. In 2007 as in 1972, building wealth is very much like losing weight. Eat less, exercise more: That's simple! But it's not easy, because the world is teeming with chocolate cake and Cheetos.

Likewise, buy a diversified basket of index funds and do nothing: That's simple! But it's not easy because the world is full of TV touts, cold-calling brokers and (temporarily) hot funds. Realize that what's good about the difference between 1972 and 2007 is also what's bad. Lower cost is great if you trade rarely and wisely, but
not if it tempts you into buying and selling constantly. More choice is great if you add a few selected good things to your portfolio in moderation, but not if you end up with an unplanned jumble of investments. More convenience is great if you use it to make your life easier, but not if you take time away from family and friends to update your stock portfolio.

Lower cost, more choice and greater convenience are not means to an end, they are the end. Use them to achieve some other result, and you will fritter away the advantages the past 35 years have brought. You might as well be back in 1972, wearing plaid bell-bottoms and driving a Dodge Dart.