Robert's Case for Real Estate and Capitalism

Financial education is just like a recipe, some people are willing to share it and some people refuse to for various reasons. Some people are afraid if they share them, they might 'lose' their exclusive-ness. Only with some exceptions, sharing your recipe is usually beneficial.

Robert Kiyosaki has been generous enough to share his story with the world. Some people ONLY see the side that Robert is making tons of money selling his books, games, seminars and other various products, and those are the people who may lose out in the current world of the information age and capitalism.We live in the world where capitalists or entrepreneurs thrive and lead, not realising this would be a huge mistake. These are the people leading the pack of being extremely wealthy because they are 'current'. Robert in most of his books explained the old theories of going to school, getting a job, buying a house and saving for retirement, he has made it clear not being 'current' is causing millions of people to lose out. Robert's books have transformed the way millions of people think and if they were all lies or a false marketing plot, he would be broke and his books would no longer sell. Today, he is one of the world's bestselling authors.

There are people who discourage me from sharing powerful tips and advice, but if a person like Robert can take the time to do it, I guess I can spend a little time sharing what I know. Ultimately, Robert is trying to bring changes through different means as it is shown not one man nor one country can make a change to this world. Leaders of the world be it Barack Obama or George Bush, can only do so much, the rest is up to the people themselves. You can have Steve Jobs or Bill Gates as your mentor, but if you don't have what it takes, you won't succeed. Many people view leaders as salvation and hope for the future and not knowing it is themselves who will determine their future.

This post will discuss on the investments people make and whether they are taking into consideration the four perspectives (earlier posts). Also, I will write about why Robert prefers real estate over other classes of investments.

In finance courses, we learn to diversify out portfolios. It means we minimise or eliminate the firm-specific risks and only expose ourselves to systematic risk. We protect ourselves by making sure we have the best risk-return trade off.  One of the biggest mistakes most investors make is diversifying over one asset class; paper assets. When the financial crisis happened in 2007, being 'diversified' or not, most investors were wiped out. Robert questioned the education the world was receiving because despite the principle of diversifying over stocks in different industries, investment grade bonds from around the world and mutual funds who are supposingly one of the best diversified investments, investors lost when the markets went down. So how can it be diversifying if it didn't protect the investor when markets headed south?

Despite numerous successful investors like Warren Buffett and Peter Lynch, there are pitfalls in equities. First of all, I would like to note I've seen equities make fortunes for many people and I personally like equities. There are millions of people today whose wealth and retirement depend on the performance of the equities market. Doesn't that sound risky? In the event the market performs badly, the investor goes from rich to poor or his/her retirement plans gets postponed indefinitely, or until the market recovers, which is never a certainty. An investor usually has no control over the markets, and allowing it to determine their wealth and retirement is just plain risky and not logical.  How about investing for the long term? Many people in the world recommend doing this but it may not be the best advice. Robert noted the lost decade from the 2000-2010 where the returns on the stock index was close to zero. Although the market MAY have a good decade ahead, there's still a big argument why equities may not be the answer to growing wealth and certainty. On a side note, the next recession might not be far away. For the case of equities, the wealth of the richest people in the world have grown tremendously over the last decade (despite the market returns), showing that success can achieved through knowledge, foresight and good decision making.

Next, you don't need to be a mathematician to know it is harder to gain after a loss. If you lose 50% of your money, it takes a 100% return to break even. If you lose 75% of your money, it takes a 300% return to break even. How can an investor take this huge risk of losing? I must note losing more than 50% is not hard in current market conditions where the markets are full of volatility and probably edging to another downturn. So think about it, how much of your wealth and savings for retirement are being determined by the equities market? Relying solely or highly on equities is too risky for anyone and believing the market will always perform the long term is being naive.

Capitalism has changed the world, it created entrepreneurs and capitalist who used their intelligence to become extremely wealthy. Many people know Thomas Edison as the inventor of the light bulb, but less knew that he was very wealthy. People wouldn't be surprised when they know this because capitalism rewards people who are unique and people who bring new ideas to the world.  The big downside to capitalism is the increasing gap in wealth. We see the world improving with so much new technology and breakthrough but rich are getting richer and poor are getting poorer. People who do not understand the rules of capitalism are being left out and only education will help them get back on track. There were two simple illustrations by Robert which delivered the message.

The first was the monopoly game. The lesson was the game is won by owning more properties than anyone and NOT by collecting $200 each round. It's very straightforward, the people who own the properties are the ones who win eventually not the people who grew on the $200.

The second was being the different side of the table. On the interview table, most people only think about BEING the interviewee, not the interviewer. This is because the education system is creating employees rather than employers. Most of us think of getting hired rather than hiring people.


The Real Estate Advantage
Robert loves real estate because it made him a big fortune. He doesn't dislike other classes of assets, he just prefers real estate. One reason being real estate fulfills his debt, taxes, inflation and retirement argument.

Debt
Real estate is probably one of the few investments financial institutions are willing provide finance. The important thing about debt is, it is "NOT your money". The biggest upside is being able to undertake investments while not being wealthy. Although this is subject to knowledge and experience, creating a portfolio of good debt generating positive cash flows is the key main advantage.

Taxes
As I wrote in my previous post, earned income in the form of salaries and wages are the most highly taxed because of limited deductions available. In real estate, the cost of financing and costs relating to the property can mostly be deducted, thus having to pay much lesser in taxes.

Inflation
In the current world of stimulus and quantitative easing, money is worth lesser by the day.  The prices of everything is going up. Although the theory of prices of real estate only going up has been completely dispelled, investing in real estate remains one of the best hedges against inflation. Real estate being 'real' reduces risk of owning 'money' which is no longer money. Higher inflation also lead to higher rents.

Retirement
I have mentioned on the uncertainty on depending on equities. Robert has proven real estate is able to ward off the uncertainty during tough market conditions. His strategy has worked through the financial crisis and is doing even better today. Robert chose his real estate which would be in demand in any market condition namely the energy sector where demand does not significantly slow. During the crisis when credit was frozen, people could only afford to rent houses. This put Robert at an even better position where he could even raise rents, increasing his cash flows and adding more real estate to his portfolio. This might be many people's answer to securing retirement.

Taking everything into account, it still does not mean real estate is the investment for anyone. Furthermore, like equities, not all real estate are equally good investments. Robert also notes it is a fantastic time to own houses in America because interest rates are at a record low, housing prices have dived and most importantly, it's a good time to get a deal on financing. For the rest of the world, whether the economy will worsen or not, investing should still be on the menu. For real estate, it's all about hard work doing research and improving your knowledge. Not having sufficient homework done can make a very good piece of real estate becoming a bad deal. Thanks for reading.


~deyao~

The Food Experience Part 2

My short stay in Sydney and Melbourne was very memorable, and a lot of it will be because of the food. The two cities were different in many ways but were equally wonderful . Sydney gave me the impression of a big and busy city while Melbourne was much smaller but had so much to offer. I was at some pretty amazing places and it was a tremendous experience. There's so much more I could have actually done in both cities, the people living there should be feeling very fortunate.

I'll start off with Sydney, the place with the most awarded restaurants in Australia.

El Loco, Surry Hills
If you want to taste some exceptional Mexican food, El Loco is the place to be. Located in the food haven of Surry Hills, El Loco is the best Mexican place I have ever been to. Although the crowd is a bit of an issue, the other side of the coin is this place is awesome. The hot dog, corn chips with guacamole and salsa, tacos and Torta sandwich was simply amazing. What a high benchmark to start off the trip

Gelato Messina, Darlinghurst and The Star
As if El Loco didn't already make my day, Messina made it memorable. Mind my frequent using of the word 'best' because Messina serves the best Gelato I've eaten. What I really like about this place is the creation of so many flavours that were rare in terms of Gelato. Their selection was exceptional, with more than 30 flavours available. The salted caramel,pandan coconut and blood orange sorbet were the highlights, but there were so many more I would have love to try.

Sydney Fish Market, Pyrmont
In terms of types and varieties of seafood, this place is the best in Australia. We had some really nice sashimi and a delicious dish of huge prawns with noodles. There were so much more things to try like oysters and lobsters. It was Australia's seafood at its best.

Adriano Zumbo, The Star (also in other locations) 
Masterchef made famous Adriano Zumbo created some of the most mouth-watering and difficult desserts on the show. I had to try his famous macarons and his Ssnowmanorr which was the final pressure test of the first Junior Masterchef. Although I got the lychee feeling instead of the original pear, it was quite a treat. It was certainly an appreciation of the delicate and skillful techniques to create this dessert. It didn't blow me away, but it was really good.

Bird Cow Fish, Surry Hills
This place wasn't planned but was an alternative to the very booked Toko next door. It turned out to be a good choice. My highlight was the beef brisket on special and the sword fish.

Kopitiam, Ultimo
If one of my friends had visited this restaurant, I don't think he can ever leave Sydney. Kopitiam represents Malaysian food at its best. The thing about Malaysian food is its diversity and combination of different cultures. Kopitiam is definitely a place for some authentic Malaysian food. My picks would the the chicken rice and claypot rice drop noodles (low see fun).

Black Star Pastry, Newtown
Located in a cozy and narrow street of Newtown lies one of the best patisseries. Many people would not imagine having watermelon in their cake but this place made it possible. Their Strawberry Watermelon Cake with Rose Cream was exquisite.

Max Brenner, Ultimo (also in other locations)
A heavenly place for chocolate lovers. Had some delightful waffles and ice cream. Not far from San Churro though.

Harry's Cafe De Wheels, Woolloomooloo (also in other locations)
It was on top of my list to try on what I reckon now to be the best meat pie I ever had. I knew this place through Anthony Bourdain's No Reservations and it was always kept in memory. Meat pies are something really hard to differentiate. It has to be so different and special. Well, Harry's did it. I had their signature Tiger, which had beef, mash potatoes, mushed peas served on a pastry topped off with beautiful gravy. It definitely isn't your typical Mrs Macs, it was one hell of a meat pie. I even expected to pay more. I heard their hot dogs are really good as well.


Baroque | Bistro Bar Patisserie, The Rocks
I knew this place through French Food Safari, which is a brilliant program. I had to try their macarons as shown on the program. I expected it to be good and it was. On a Sunday afternoon, located with a beautiful view of the markets and good weather, it was terrific.


Pancakes on The Rocks, The Rocks
Rewarding our efforts on crossing the Sydney Habour Bridge, it was time for some pancakes and pizzas. It was the prefect place as it rained as well. Pancakes and pizza was really good.

Melbourne
The Visit Melbourne site describes Melbourne as a maze of hidden laneways, opulent bars, exclusive restaurants and off-the-beaten-track boutiques. I would consider this place one of my favourite cities. The restaurants, bars, cafes, shopping, markets, lanes, sports and a host of others makes this city a world class destination. So here are my favourite places to eat in Melbourne.

Bratwurst, Queen Victoria Market
It's another place I knew through Anthony Bourdain's show. This market is huge to the extent we took awhile to find this place. Bratwurst is a German term describing the sausage and how is it made. Overall we had some good sausages with different flavours, it was quite satisfying.


Brunetti, Carlton (also in other locations)
Brunetti had the largest range of pastries and cakes I have ever seen. We had some delicious tarts, cakes and a very good canned lemon drink. It wouldn't fall into the 'best' category but still a place worth visiting.

MoVida, 1 Hosier Lane, Melbourne
One word to describe this place, "Wow". This place absolutely knocked it out of the park, it was just sensational. This is the best place I've been to in Melbourne and clearly the best Spanish restaurant I have visited. It certainly isn't considered fine dining but it is more than capable of turning into one. We had the anchovy, croquetas and lamb breast for tapas. For raciones (bigger than tapas), Air-dried wagyu, octopus with chorizo, beef cheeks and seafood stew. We had some lovely sorbet for dessert. One of the top restaurants in Melbourne, no doubt.

Chin Chin, Melbourne
From MoVida onwards, things didn't improve, well it couldn't because it was that good. The Chin Chin column deserves some respect so I'll stop mentioning MoVida. Chin Chin serves very delicious Thai food. The ambience is really nice, it certainly did not look like a Thai restaurant. We had a really good Pad Thai and soft shell crab.

P M 24, Melbourne
Another unplanned visit as we needed to wait for several hours for another restaurant (see below). Philipe Moucel is one of the most respected chefs in Melbourne for his work in several Michelin star restaurants around the world and has worked under the legendary Paul Bocuse, the father of Modern French cuisine. P M 24 opened in December 2010, and is one of Melbourne's top modern French bistros. On the upside, we actually ate in this restaurant, the downside, we didn't go for the mains. The restaurant had a fantastic layout and wonderful ambience. We had the pistachio souffle, creme brulee and Canele de Bordeaux. The people there might have had a very few encounters with people ordering dessert at 6.30pm and this was one of them. The desserts were very special, the Canele de Bordeaux stood out. We even saw Philipe himself!

Mamasita, Melbourne
We waited about 4 hours for this place. Was the wait worth it? For a first timer, yes it was. It was a highly recommended place and its queues were already there at 6pm. The food did compensate our wait, it is one of the best Mexican restaurants I have been to. But the Mexican award will remain with El Loco for now.

Cumulus Inc, Melbourne
Our last day in this wonderful city, one of my friends was not leaving till he had his breakfast. It was a really good first meal of the day and it was one of those places that gets your day going. Definitely worth a visit. Cumulus has a rating of 15/20 which is the same for MoVida.


Notables
Passion Flower, Melbourne -A really nice place for desserts and ice creams. Really liked the green tea ice cream.

Places on Lygon Street - We would have visited more places if we had more time. Carlton Espresso was pretty good.

Places on Degraves Street - Some great places for coffee and food.

Melbourne, oh Melbourne, I had a fantastic time. Oh damn, I just thought of the hotel. I can't go on, I'm going to miss it even more.Lol. Cheers to the states in the east!

~deyao~

The Food Experience: Perth

 

If there's a few things I love about about Australia, it would be the food. Contrary to most people missing Asian food while living abroad, I really enjoyed all the different types of food in Australia. Food with so much difference influences from the Middle East, Europe and of course Asia, there was so much to try without having to leave the country. . During my time Down Under, I got to experience and appreciate all the wonderful produce the country had to offer and of course all the wonderful restaurants that left a big mark on my taste buds that I can never forget. I had such a big opportunity to dine in some absolutely fabulous restaurants during my time in Perth and my short stay in Sydney and Melbourne. I will share my experiences in some of the best places I've ever eaten in.

Perth is one of the most livable cities in the world and is situated in Australia's largest state, Western Australia. Although Perth's eastern counterparts do offer more variety and is a comparatively bigger dining scene, Perth should not be discounted as insignificant. Here are some of the best places I have been (not in any particular order)

Hong Kong BBQ, Northbridge
If I have to name the best Chinese restaurant taking into account taste, consistency and value, HK BBQ will be the one. The ambience is great, presentation is nice and their food distinguishes them from most of the other Chinese restaurants. The fish, meat and vege dishes are delicious and I haven't found anything I've disliked.

Yu, Burswood
Yu comes second for Chinese restaurants. Ambience and food is excellent. It has been awhile since my only visit but I can remember it was a good meal. In terms of value for money, HK BBQ is much better.

Prophet, Victoria Park
I never tasted Lebanese food before I had Prophet. And Prophet made it clear I have missed out on one of my favourite cuisines I never knew. Their kebab skewers, rice in different spices and bread are an absolute hit. Their use of spices and lentils leaves their food without a substitute.

Tony Roma's, Perth
A global franchise recognisable in almost every country but this was the first time I tasted such delicious pork ribs. It still remains the best pork ribs I ever had. Generous helping with nice sides as well.But do mind the waiting and booking policies.

Jus Burgers, Subiaco (also in other locations)
The name says it, it is all about the burgers. It's serves the best burgers I know today. The doc may recommend its competitor Grill'd, but Jus Burgers would win the culinary award. Their various beef, fish, chicken and lamb burgers have perfectly grilled bread, patties and quality sides.

Amuse, East Perth
The Good Food Guide's annual awards 2011 ranks Amuse as the top restaurant in Western Australia. Knowing that, I feel privileged to have dined in this restaurant. There is no menu, they only have a 8-9 course degustation. The venue doesn't look very posh from the outside or even the inside, but its food speaks for itself. Amazing was spelled over every course. Texture, flavour, taste, balance and technique was top draw. It was the first time I tasted kangaroo meet and hopefully the last. French cuisine is one of the most respected in the world and Amuse showcased the best of it. It was pretty costly meal, however it will cost you a lot lesser than Vue De Monde or Jacques Reymond.

Rockpool Bar and Grill, Burswood
Owned by the renown Neil Perry, this place is home to the best steak I've had. I wouldn't guarantee it will be everyone's favourite, but I've never eaten a better steak. There's a few reasons their steak is one of the best; good beef, dry aging expertise and perfect cooking. Their sides were exquisite as well. It's fine dining at the highest level and to top it off, having the best wine list in Western Australia. On the downside, it's probably the most expensive steak you'll eat in your lifetime (but it's not out of reach).


Little Creatures, Fremantle
This is one of my favourite places in Fremantle. The Modern Australian restaurant is located in the brewery itself and it needs no mentioning Little Creatures is the name of its beer. Apart from its signature beers, this place serves up very good food. The chili mussels, pizzas, nachos, chorizos and much more are my favourites.

Ciao Italia, South Perth
Just by looking people lining up at 5.30pm waiting for the restaurant to open pretty much tells the story, their food is excellent. I reckon it is the best Italian restaurant in Perth. Pizzas, pasta, chilli mussels and tiramisu are just sensational. A taste of their carbonara or squid ink pasta will leave you very satisfied. It's a wonderful place if you don't mind the long queue everyday, slightly pricey pasta and narrow sitting arrangements.


Other Notables

Clarence's, Mount Lawley - I celebrated my birthday there and it was fantastic. The food was good, the ambience was cozy and the service was good as well.

La Galette de France, various locations - Home to delicious almond croissant and super macarons. Their almond croissant is one of the things you need to try before you die.

Barrett's Bread, Nedlands - A wonderful place for good breads, sandwiches, pastries and cakes. The standout for me is the pistachio tart, which is one of my favourite cakes/tarts of all time.

Corica, Northbridge - One of the prides of Perth for THE best apple strudel. I don't know what else to say because it is simply the best. The amount of people leaving Perth with at least a box of them in their hands is a pretty good sign.

Good Fortune, Northbridge - Duck is seldom on my order list, but I'm more than happy to eat their roast duck.

Dragon Palace and Royal Seafood, Northbridge - People from Hong Kong say you don't have to look any further for some good Dim Sum because the ones here as just as good!

Infusion, Perth - One of my friends loves this place for their excellent coffee. I tried it once and I have to agree. Definitely a place for coffee lovers.
  
The Quarie, Hammond Park - Possibly the best restaurant in its postcode. Has a nice bar and serves decent food. Nice building as well.

Places to consider which I have not visited for food

The Loose Box, Mundaring (French)
Andaluz Bar and Tapas, Perth (Spanish)
Must Winebar Restaurant, Mt. Lawley (French)

That's it for Perth, the city that has come a long way. It will always be a very special place for me. Cheers to Perth! Next up, Melbourne and Sydney.

~deyao~

The Third Factor: Taxes

Links to the first two parts.
Part 1: Inflation
Part 2: Debt

It took me such a long time to finally complete part 2 and now here is part 3. This posts is will be relatively short because I am not going into detail of what you should actually do. It's like most of my other posts, I like to give you the idea of something and hopefully you would take that idea and make something out of it. A memorable quote I read awhile back

“Give a man a fish, you have fed him for today. Teach a man to fish, and you have fed him for a lifetime"

People like Robert Kiyosaki, Napoleon Hill and Warren Buffett gave me the power to make decisions and take control of my destiny. It was never a 'do this and do that', it was more of a 'what do you think you should do'. The power you gain today will carry you for the rest of your life and to acquire power it takes a lot of effort and determination. The sooner you learn how to 'fish', the sooner you will gain power.

A lot of people (including myself sometime ago) see taxes as something we pay to the government for the income we earn. We know we need to pay goods and services taxes, income taxes, medicare levies, duties and many others. What we do is we determine how much taxes we owe and pay it, end of story. Furthermore, we got our professional advisers to make sure we pay our taxes according to the law.

Tax systems differ in every country but the main function of a tax system is to redistribute wealth. Every country has an inequality of wealth problem among its population and the tax system functions to reduce that gap. So the wealthier people get taxed more than the less wealthier people.

This posts is NOT about what constitutes to income or deductions. It is about understanding the tax system well enough and to be able to exploit the opportunities under the law (Quoted from the definition of tax planning). Are we talking about the loopholes in the tax system? Not really. It is more about exploiting the parts of the tax systems which benefit particular groups, and doing it legally of course.

Like how Robert points out, individuals are the most highly taxed in the most of the countries and has the least incentives. In Australia, the highest marginal tax rate for individuals is 45% and for companies it is generally a flat 30%. That already shows an incentive to have your own company. Most personal incomes have limited deductions available and thus contributing to a higher tax payable.

Most of the time, individuals rely on their after-tax dollars to invest, which means the amount remaining after paying taxes is all they have to invest. Worst still, the investments do not take into account the cost of capital, which is the money forgone to undertake that investment. For example, the individuals do not get a tax break on the cost of using that money to invest. This means growth of investments are limited because eventhough investment returns are quite high, the base of investment is not large enough to capitalise on the high return percentage. To increase that base on investment, it requires leverage/debt.

Example 1
An individual earns $100 in salary income, pays 30% in taxes, leaving $70. $70 is invested and gains 10%, which increases to $77. After taxes on the $7 dollar gain, the individual is left with $74.90. You can see the individual gets taxed twice in the process.

The individual has paid $2.10 in taxes for the $7 gain which comes back to the 30% in taxes.And this relies on the salary of the individual.

Example 2
An individual borrows $70 and invests it at a 10% return. Assuming the cost of borrowing is 7%. $70 + $7 (gain) - $4.90(cost) = $72.10

The individual pays $0.63 (30% of $2.10) in taxes for a $7 gain.

The big difference between the two examples is the advantage of leverage. Example 1 shows the usual situation of how individuals use after-tax dollars to invests. The individual pays taxes at every level of income. Example 2 illustrates how an individual uses none of his/her money to invest and pays less taxes by getting a deduction on the cost of borrowing. Of course the cost of borrowing decreases the net profit of the individual, but the fact is the individual is using none of his/her own money to earn income. The lesson here is the tax benefits of using leverage.

I have to note again using leverage increases risk and every investor should consider their risk profile, investment and knowledge before taking on debt.

On a much simpler side. Australian residents should know the tax consequences of investing in real estate and equities as they are the most common. In real estate, there are tax benefits of taking on debt, main residence exemption, first home owners grant and claiming of various expenses relating in maintaining the property. If you pay close attention to the available deductions, you could be saving a lot in taxes.

For equities, it is important to understand Capital Gains Tax (CGT) and franking credits. Tax rates vary for individuals, companies and complying superannuation funds. Some gains may be entitled for a discount capital gains if conditions are met. Franking credits are credits attached to distribution by companies for the taxes they have paid for. Franking percentage varies on different distributions and investors should take note of this. Franking credits can reduce taxes and are entitled to refunds.

Although I said there were limited deductions to individuals, it is still worthwhile to take advantage of incentive when you have a family and children. Items such as the medicare levy surcharge, self-education expenses, family assistance (paid parental leave and baby bonus) and others could save individuals and their families hundreds a year.

For business owners, there are many special concessions for small business owners and rules for carry forward losses. These are the various benefits the government tries to assist businesses. Businesses create jobs and that is good for the economy and that being the reason businesses get more benefits from the government compared to individuals. There are many tax incentives for business owners so if you take time and understand them, it could again save you money.

I will understand if people find it hard to understand tax consequences at the start because of unfamiliarity of terms and facts. But the fact that taxes are such an important part of wealth it will be worthwhile spending the few hours learning it because of the simple fact it can put a lot of money back in your pocket. Having a tax consultant will be beneficial, HOWEVER, you STILL need to understand the facts and process yourself to be able to take advantage of tax benefits. Your tax consultant is here to make sure your tax return is in accordance to the tax laws not with the purpose to give you tax advice based on your financial position and investment profile.

Before I end, I would like to reiterate how saving some money here and there can make a difference. The compounding effect is significant when money is rolled over, over time.

'Real estate, tax laws and debt does not make you rich, it is the knowledge about them that makes you rich'
~deyao~

The Rebuilding Begins

15 years into the job, Arsene Wenger would have thought he would have dominated Europe at least once and being English champions a few more times than he currently has. But things has not turned out the way he wanted and he probably faces his toughest time since his arrival. This season, he does not have the experienced leaders to carry the team forward and he just lost few of his biggest players in the team.He suffered the heaviest defeat in his entire reign and the club's worst start in almost 60 years is not a statistic he would like to be associated with.

Majority of us gooners would call this transfer window a disaster, we've lost our best players and the players we brought in is far from the quality of players we sold. The scouts, CEO and negotiators have to take most of the blame because we had the entire summer to work with and most of the work was done not more than 3 days from the transfer deadline. The early signs are already bad, our performances has been far from convincing and the team's confidence is lacking. The finances of the club has been the biggest story this summer, our club is operating under a tight budget meaning we cap salaries and we don't spend much on transfers. We've made lots of money over the last few seasons with the sale of several players and yet this continues this season. It's by far our biggest selling of players in a season and we can no longer deny being a 'selling club'. It's not a pretty sight for Arsenal fans having to go back to the starting line over and over again. At the end of the day, the stadium is pretty much the biggest item in our financials but without building the stadium, the club cannot compete in the long term. This is not a short term sacrifice for 5 years or even 10, it might take 20! Can we really carry on like this, selling players season after season and having negative spending ....AND 'trying' to competing for honours. It's ridiculous no matter how you look at it.

To the positives, there's still quality in the team without Cesc and Nasri. Gervinho, Arteta and Frimpong have already shown they can galvanize this team.Gervinho looks a threat every time he goes forward, he can provide and as well take a goal himself. Arteta is the most important signing, he becomes the playmaker in the team. He has the experience in the league and I believe will play a big part in the season. Frimpong looks like the midfield hard man we've been looking for in a long time, he might not have the height of Vieira, but he surely has the muscle and aggression.Rosicky has put in some decent performances and could bizarrely have one of his best seasons, fingers crossed. Ramsey will have his biggest season yet and Wilshere's absence will only mean more games and experience. We might not have a clear leader on the field but the experience of Van Persie, Arshavin and Benayoun will bring some much needed strength during tough games. We've got options in attack as well, Chamakh and Walcott could very well deliver 20-25 goals between them. More good news? We've got our new signings in Ju Yong and Alex Chamberlain who could also contribute to the score sheet throughout the season. Ju Yong has the experience and has already scored a few for his national team.  Meanwhile Alex scored a scorcher in the Carling Cup and has impressed for the England Under-21s. Plus, if Arsene gets it right, we got Ryo Miyaichi to deliver us some surprises. If the offensive players get it right, it might be a better season than most people think.

In the defence department, I am less optimistic. We effectively only signed Mertesacker. Jenkinson came in for Eboue and Santos came in for Traore.Koscielny, Djourou and Squillaci remains the biggest liabilities in my view. Koscielny hasn't made the grade I feel when it comes to defending against better teams. Djourou has not improved much and his concentration and alertness has been questioned on many occasions. Squillaci just isn't a good defender at all, nothing else to say. The defence needed a lot of strengthening this summer but there's isn't enough improvement overall. Sagna, Vermaelan, Mertesacker and Gibbs being the back four is probably still acceptable, but it is the understudies who are just not good enough when required. This is Arsene's single biggest error of the transfer window, if we had signed even one more centre back it would have made the difference.

Title aspirations

I have always been optimistic with this team I have supported more than half of my life, but this is the very first time I am less optimistic about competing for the league. The reality is we are rebuilding time after time when a big players leave and I'm not sure when it will end. The squad we had last season were maybe 2 players away from being really excellent. But things happen in life, one cup final lost, injuries and lost of morale caught up on the team.It's going to be even more difficult this season so the minimum would be again be a top four finish.

Roundup and Predictions
I've never got this right ever because I don't like Man Utd winning the title and I think Arsenal are better than they are.Lol. Anyway, here's an overview of the title contenders.

Man Utd
They are by far the favourites this season despite them losing a few players to retirement. They've done very well in the transfer market and their start to the season has been breathtaking. Their new players are blending in very well and they have some exciting players coming back from a loan spell like Cleverly and Welbeck. I believe they are biggest favourites again and it is their title to lose.
Best position: 1st
Worst position: 2nd

Chelsea
It's hasn't been a very high profile transfer window but Chelsea has splashed almost 60mil pounds on  Mata,Lukaku and Meireles. It's a significant year for the blues in addition to the signings on David Luiz and Fernando Torres in January which totaled 70mil pounds. They have also got Sturridge back who did really well on loan last season. They have the most experienced squad in the league but with a higher than average squad age. A new manager too who could well make things more exciting. Chelsea is definitely right up for it this season.
Best position: 1st
Worst position: 3rd

Man City
Money does make things happen and they certainly make title contenders. Man City will probably make their biggest ever push for the title as long as I can remember. They have got one of the most powerful squads in Europe comprising of the best talents in the world today. They have the players to make it happen and it is up to them to mix and match a winning team every game. However, their lack of experience playing with each other would be the only negative. It's a very impressive line up, Aguero, Nasri, Dzeko, Tevez, Silva, Milner, Yaya Toure, Balotelli and many others. This team will be contending for the title this season.
Best position: 2nd
Worst position: 4th

Liverpool
Liverpool are back in business all because of one man, Kenny Dalglish. Since his return to the club, their fortunes have changed dramatically. Despite the sale of Torres, 'King Kenny' has transformed the club capable of challenging for trophies again. The arrival of Suarez and Carroll has been a breath of fresh air for The Reds. Summer also saw the arrival of Downing, Adam, Henderson, Bellamy and Jose Enrique. This has strengthened the team tremendously and this is also due to the support of their new owners. It's definitely a stronger Liverpool side this season but I feel it's one season too early for them.
Best position: 3rd
Worst position: 6th

Arsenal
I've never lost hope on this team but realistically I have yet to be convinced the team can do it.
Best position: 2nd
Worst position : 5th

If the math is done by averaging the best and worst, my prediction will look like this.
1) Man Utd
2) Chelsea
3) Man City
4) Arsenal
5) Liverpool

The top four is exactly how it finished last season. It's a big season ahead and we'll see how it goes.

~deyao~

She's electric, she's the current running through my veins

Just when I thought the my days of blogging about any of the Next Top Model series was over, I am excited to be writing it about it again. When I looked back at my posts on ANTM and BNTM, I didn't think I could ever reproduce any of those things again. Maybe it's because my interest had changed or I have evolved from it. Every post I have ever done came from a sudden inspiration I got from somewhere and often it is a spur of the moment. To make sure I carried it with me, I wrote it on this blog. To write about the same thing I wrote about 2 years ago would be really different. I went back and saw my Next Top Model posts I wrote previously and I was surprised how I wrote them because I wouldn't write them that way if I did it today. My last post about BNTM was more than two years ago.

After a tremendous Britain's Next Top Model Cycle 6 (2010), it has brought me inspiration to write about it again. America's Next Top Model is also hitting new highs in recent times but it lacked that catalyst to get me on the keyboard to write about it. BNTM 6 was just fabulous to watch, full of excitement, humour and surprises.

Just a recap, I started off with Cycle 3 where the stunning Lauren Mccavoy deservingly took honours. Cycle 4 saw Alex coming on top and Cycle 5 saw a determined Mecia edging out Sophie. Cycle 5 started off a bit dull and boring, but things picked up eventually and I really liked it in the end. The quarreling and bitching did put me off a bit during the course but as things got more serious, the quality improved and it was really entertaining. Cycle 5 also was the last for head judge Lisa Snowdon and Huggy Ragnarsson. Milliner Louis Mariette was new to the panel but he wasn't the ideal judge for me. A tribute to the judges for a fantastic show. Overall, it was well worth watching.

Now to the new BNTM 6, reformed and elevated. New judges, new theme and new auditions. From the left: Grace Woodward, Julien MacDonald, Elle Macpherson and Charley Speed. A brief intro, Grace is a fashion stylist and creative director to many huge fashion magazines. She seemed really straight and mean at the start but she became likable. Julien is a top British designer who has worked at the best fashion houses and biggest models in the business. He is not afraid to give you his opinion. 'The Body' Elle Macpherson is one of the world's most famous supermodels ranking on the same level as Naomi Campbell, Linda Evangelista, Cindy Crawford and Christy Turlington. All I can say she represents the best of the fashion industry. And lastly, Charley is a male model who has worked with the top fashion brands in the world and started at the age of 17. No photographers on the panel this time around. There is a surprise international destination (revealed below). The episode where it was revealed took me on a ride and it was just exhilarating. I was absolutely caught out just when I thought I've seen it all.

Now, straight to business, my favourite contestant Charlotte Holmes. I did have a previous favourite named Charlotte as well, but I like the current one more. I was hoping she would finally overcome the challenge of "the pretty girl can't win"(She has entered a few beauty pageants). She did extremely well right till the end and having her on the show was probably the highlight of the series. Her gorgeous face, bubbly personality, constant smile and determination was to die for. I forgot to mention she's so hilarious and I don't know what it is about her, but I just laughed every time she reacted to something. All I can I say I was thoroughly impressed. She proved so many people wrong by having so many good photos, winning challenges and booked job after job. Elle's reaction to her leaving tells the story how highly she rated her. Elle said:

'I realised afterwards that it was because a lot of comments made about Charlotte -  too commercial, too smiley, not fashion enough, too curvy - were the types of comments I heard early on in my career.When she didn’t make it through to the final three, it felt like a part of me was rejected.'

Her versatility proved a challenge to high fashion but I don't think she could have done more in her part. She might not make it to high fashion in the future but there's so much she could still do.  It's not often you get such a 'cool' contestant on a show like her. She was up for it the entire time and personality did bring her very far. She's probably one of my all time favourite contestants.  Charlotte does some modelling nowadays and also works as a tv presenter. She is so talented and I can't wait for career to blossom, really happy for her. Here some of her shots from the series.

Photo of the week. Shot in Alicante, Spain. Top draw. Reminds me of Adriana Lima.

Revlon photoshoot.

In the Norwegian glacier . Negative 4 degrees with a dress made of bottles.

Shoot in Bukit Cahaya, Malaysia! Nice shape, one of her best shoots.

Charlotte: Bring on the rugby boys!

Shot on the roofs of one of the buildings in Kuala Lumpur.

What a journey for Charlotte on BNTM. She didn't need to win the competition to make it big in the future, she just has it in her. And her progress since the competition has showed that. I'll end it here with some of her pictures I found and some of the other contestants from the Cycle 6. Cycle 7 has already started, who knows, I'll be back with more.

 

                         

                        

Other contestants

Joy

Malaysia shoot.

Toughest conditions ever.

Beauty shoot

Tiffany

One of her strongest.

She manages to make the axe look heavy.

If her hair stayed this way, things would be so different.

 Alisha

Her softness finally showed.

 For a finish. Here's an interview of Charlotte with Superstar Magazine with photos from it. Now you can see why she's so funny.


             

Charlotte will be hosting BNTM Live which is coming soon. Can't wait to see it.

The title is part of Example - Won't Go Quietly which was played on the show and I thought it was a perfect description of Charlotte . I guess my inspiration of this post is quite obvious.

 Back with Next Top Model
~deyao~

The Clash with the Champions

It's turbulent times at the moment at the Emirates which have seen so much happening at the club with little being good news. In the last few weeks we have seen the departures of our captain Cesc Fabregas and one of our best players Samir Nasri.A rocky start to the new season with a goalless draw at Newcastle and a defeat to Liverpool. Suspensions to Frimpong, Song and Gervinho has further added to our woes.Injuries to Wilshere, Diaby, Gibbs and Squillaci has stretched the team to its limits. The biggest news this season is obviously our progress to the Champions League proper.

Our start to the season does not get any harder with the trip to Old Trafford. Man Utd are clear favourites to win this. Man Utd are playing really good football, winning their games and have a very strong squad competing for honours again this season.On paper we certainly look like we're heading for defeat but as history has shown, football is unpredictable.

Regardless of what the form book says, we're definitely up for the big match. Our last game against Man Utd should not be forgotten, and yes we did it without Cesc. And just a reminder at that time Arsenal's season was practically over and Man Utd had to win all their games to win the title. Can the win against Udinese be a catalyst for the upcoming matches? I really hope so because we should really start winning now.

I have been very frustrated by Arsene's transfer policy because I have not seen major strengthening to the squad, only days left and I can only hope.I have to be honest we're not in our best shape to face the champions this weekend, but we still have the quality to make an impact and get a result if we do our part. The odds are stacked heavily on us but that shouldn't concern or affect our determination to win the game.

This is a fantastic chance for us to get our season started and with less pressure on us as an away side, let's pull off some surprises. Come On Gunners!

~deyao~

Good Luck Cesc

The last time a big player left the club as I long as I can recall were Marc Overmars and Theirry Henry. Ironically, they both went to Barcelona. It has been a long battle for years to keep Fabregas at the club and one day we knew we would have to give in eventually. It happened this year but it didn't come to our surprise.

Cesc was handed the longest ever contract ever awarded to any Arsenal player (8 years), simply because he was one the best the club had ever seen. His vision and remarkable passing is world class and as good as you can get these days. Even his goal scoring record is admirable. I've used many words describing Cesc over the years on how good and important he really is and he deserves every one of it.

When Patrick Vieira left in 2005, he left a large void. He was the physical presence, the leader and the steel of the midfield. We never really replaced the hard man in midfield ( I have to note Alex Song has emerged recently). Arsene Wenger took the gamble and played Cesc straight away, not as a 'natural' replacement but as a replacement. Cesc played more games at his age compared to any top footballer, got to work with some of the biggest players and his invaluable experience he carries with him today is largely due to the Arsene's tremendous belief. At the age of 24, he has played 303 professional games for the club and that's more an average of 40 games a season since the age of 17! Him being the club's youngest captain also shows how far he has come.

Maestro, talisman, captain and heartbeat are just some of the words Cesc has earned over the years. Every Arsenal fan will be gutted to lose Cesc at this age although we were prepared to lose him eventually. We did make a big compromise on the price tag and we have always lost on that aspect because we respect players wishes to leave. He is easily worth 10 million pounds more. Although Cesc winning the Champion's League may be against our interest, hopefully he will achieve the success he deserves. But of course we would have liked his success to be from North London.

It is a great loss to the club, no doubt about it. Arsene might not look unhappy in front the media but he will be extremely disappointed inside that one of his biggest unearthed talents is leaving. Despite this, no one individual is bigger at the club and the show has to go on. The club has always faced big name departures and Cesc will go down as another. The club has been on a trophy drought but our belief is stronger than ever and that will carry us through. We respect Cesc's decision but we got to respect ourselves and continue fighting for the club.

Thank you for your outstanding contribution Cesc, you will be missed.

~deyao~

Part II : Debt

Debt

This is a continuation from Part 1

One of big problems in the financial world today is debt. It would be very foolish not to take note of debt because the havoc it's causing is affecting every country,even now. Because of the "creative" people in financial world, we have come across some "crazy" debt instruments and the failure of people to understand these products has caused a great deal of problems. A brief introduction, how to we take on debt or borrow. We usually borrow money from banks or other financial institutions and that is the most common way. For large institutions like corporations or governments, they are able to borrow by issuing debt. One party borrows, pays it back in the future plus interest. It all seems like an easy equation but what if the borrowing party can't pay it back? And what determines the riskiness of the borrower?

Debt is such big word that occurs at many levels and sometimes people do not see the entire picture. Borrowing and lending occurs at different levels. It can be at an individual level, a business level or a national level. Understanding debt at these levels is crucial.

Before we get there we have to understand what exactly influences the interest rate on debt? If we would like to borrow money, rationally we would like it at the lowest rate, right? But different kinds of debt give you different rates? But why the difference? One big word any borrower and lender needs to know, and that's RISK. From two extremes, the interest on credit cards (18%) and interest on a home loan (6-7%) are different. Why such a big difference, especially to a person who is going to pay the loan back anyway. The answer...risk. One of the simplest explanations is the debt on credit cards are unsecured while a home loan, the (house/asset) is secured by the lender. If a person goes bust with a credit card debt outstanding, if the person has no assets, the lender (or the issuer of the credit card) would probably write off the debt as unrecoverable. If the a person defaults on a home loan, there are safeguards in place as the asset is secured and the lender could take possession of the asset and try to recover the loan amount by selling it. A home loan is probably the lowest interest rate loan known to individuals, because it is least risky to the lender.

There are many other debt instruments available in the market and to keep track on all of them is impossible. So what I suggest is to know the ones that are frequently used.Another important thing to understand to risk and return trade off. Yes, everyone knows you need to take on more risk for a higher return. But what people sometimes overlook is whether they are compensated SUFFICIENTLY. If you've done some finance, you would have come across the efficient frontier which tells you having a portfolio on the frontier would give you an efficient portfolio (maximising returns for a given level of risk). The model is normally used for stock returns but calculations for debt or stocks are alike and it is directly applicable. So when a corporation or financial institution borrows money from you for a higher interest rate than the normal rate, does it include a risk premium and it is sufficient?

One of the best examples of a risk premium is insurance. You pay a couple of a hundred dollars a year of premium but when there's an accident or claims, you get back a lot more than the "premium" you pay. One friend asked me awhile back, how is the insurance company going to make any money in that case. Well, firstly, the insurance business is very profitable business because they have done the math in terms of estimating claims. They charge premiums based on probability calculations. One thing people fail to remember is when we buy insurance on a building, car or health, it just lowers your risk financially. You won't actually HOPE or EXPECT your building to burn down or your car to get into accident right...So the bottom line is the premium an insurance company charges you more than compensates them for the risk they are taking on (repaying claims). So here you go, the insurance company is more than compensated for the risk they are taking, hence they will be profitable. So on the other side (which is us) buying and paying the premium, we are under-compensated right? Technically yes, but it would be extremely foolish not to buy insurance to reduce risk of loss.

There are many types of debt instruments that are available to public. Debt is normally classified by its duration, short term or long term. Just a clue, when there are words like money market, bills or notes, they usually mean short to medium term. When we talk about longer term debt, you should be seeing the word bond.

Just a rule of thumb and referring to the principle of risk and return, when they are instruments that offer higher returns than the risk-free rate, there will be a risk premium, which is the difference in the price of the instrument or the interest rates paid by the instrument.

Good Debt vs Bad Debt
This section is probably the most important in my view. Debt or leverage is probably the most effective way of growing wealth. The general view is that we should reduce the amount of liabilities (debt) we have, but that should only happen in the case of bad debt. Bad debt are debts that do not generate a net benefit while good debt are debts that will generate a positive benefit. Bad debt are things like credit card or personal loans which do not provide any financial returns.I've actually written about this before in my previous posts so I won't go too in detail.

Leverage or taking on debt allows investors increase risk which achieves potentially higher returns. For example if you want to own an investment property, are you going to save up until you have ALL the money required to buy that property? The answer is no, it would take too long and you would lose out on the potential rental income.The most effective way is borrow a portion of the value of the property and start renting it out immediately. If you worked the numbers out correctly financially then you would probably have an investment with a positive net present value which means you have added value to your wealth.Debt is probably the most common tool used to get rich if managed intelligently. Leverage is also used with many other instruments to increase the potential risk/reward. For example in shares, investors may use margin loans or contract for difference (CFDs) to increase risk. Other instruments such as futures contracts involving commodities and foreign exchange can also be levered to increase risk.

The Debt Crisis
If this post didn't mention about the crisis the world is GOING through, it would be ignorant. The global financial crisis (GFC) started from the subprime mortgage market where banks handed out loans recklessly to home buyers who were borrowing more on rising housing prices. The outcome was the housing bubble bursting where people struggled to meet their repayments and flooded the market with their houses. 15 months after the start of the GFC, Dubai went into trouble. Why? They had too much debt. Building artificial islands in different shapes are cool but how did they do it when they were not even producing oil. They were optimistic on becoming a global hub, conditions were wonderful at that time and banks were more than happy to lend. The result, disaster.

In May 2010, the European debt crisis began. And most notably Greece was was in trouble. They were on the verge on default which would have disastrous for the European Union and most notably the euro (currency). The bigger countries in the EU bailed them out but the story won't end there. Spain and Portugal had their credit ratings cut at that time. What are the significance of these events? Well, didn't we learn sovereign (government) debts were riskless in finance. That assumption no longer holds and we have to be extra careful when evaluating debt we are buying. Yields may be 9% or higher, but this includes a very high portion of risk premium which is the risk of default (non-payment).

Credit Ratings
In finance courses we are taught credit ratings allow us to value a company or a country's debt. A company with a high credit rating can borrow money at the lowest rate, vice versa. So with a AAA (highest) rating, we would think the instrument is pretty save. But, an event has changed the complexities in the already extremely complex world. In April 2010, Goldman Sachs were charged for fraud in issuing one of their products. They basically repackaged subprime mortgage backed securities and sold it to the public as a AAA product. These securities were far riskier than an investment grade instrument. How did they do it? Long story short, it's fraud. Investor's lost more than a billion dollars, Goldman got away with a song (not sure it was even a couple of million dollars). To make matters worse, Goldman was trying help an ally offload these securities. Investors were defrauded and they get nothing in return. Goldman Sachs employees? They shared a pie of $14 billion worth in bonuses, how nice of them. Those investors could have been anyone, the lesson for investors is to be extra careful when evaluating securities they buy because when it comes to money, anyone could have an incentive to take advantage.

Debt Crisis in 2011
2011 might not be the year of an economic recession but it is the worst year since the GFC. Debt problems in the America and Europe has caused lots of uncertainty and economic growth has slowed. The debt crisis which surfaced in 2010 has again caused problems to financial markets. Many considered Greece a small country and brushed off the significance of their decline. With the leading countries in the EU combining, there was little fear Greece couldn't be rescued. But today, Greece is very certain to default. The other countries in trouble are Ireland, Hungary, Portugal, Italy and Spain. These countries are not that small and the impact of these countries defaulting could be massive.Italy has the third largest economy in the EU. Compared to the GFC where the US government were bailing out banks and companies, now we're talking about bailing out COUNTRIES!.It's not going to take billions of dollars but trillions of dollars! It's an ongoing issue today which would take a lot of sacrifices to resolve. A lesson to take from this is even government debt which were generally risk free are no longer the case. And the simplest principle of not spending more than you earn is evident in every of these countries.

More recently, America's credit rating of AAA was slashed for the first time. This is because the government has failed to manage its debts properly. They have raised the debt ceiling numerous times and they have not done enough in reducing their spending. America's debt to GDP ratio is heading to 100% and is the world's largest debtor. So how safe is American debt? Can it still be considered a risk free asset? There are also definitely long term implications to the US Dollar as the world's reserve currency.Even the debt of the world's largest economy is getting riskier, it's definitely important to pay close attention.

~deyao~