Archive for April, 2009

Role Model (The Financial Athlete #123)

April 28, 2009

by “pastamanvibration” (Ao)
(Copyright 2008)

“Rocket. Rabbit. Rodent,” croaked Abbott the frog.

“No. No. No!” cried his father. “It’s ribbit. Not rocket! Not rabbit. And certainly not rodent! Ribbit. R-I-B-B-I-T. Ribbit! No other croak will do!”

“But I can’t croak r-r-readit,” Abbott said meekly, his head bent down.

“Practice. Practice. Practice!” his father advised. “Practice until you cannot croak anything but ribbit. It is very strange for a frog to croak anything but ribbit.”

All night long Abbott croaked. He croaked, “Midget.” He croaked, “Widget.” He croaked, “Fidget”. And he croaked “ Fixit” and “Mixit”. But no matter how hard he tried, he could not croak ribbit.

Abbott’s croaks annoyed the frogs tremendously. The next morning not one frog mouth smiled. They gathered together, each sitting comfortably on their own lily pad. Frankie the big bullfrog pointed his fat frog finger at Abbott and yelped, “Who can sleep with HIM croaking nonsense all night? It hurts my frog ears. I say Abbott must go!” At once all the frogs but Abbott’s best friends and family croaked, “Ribbit!” But this ribbit was not a friendly ribbit. It was grunt. And it made Abbott shiver.

The frog king of the pond flung out his sticky tongue to catch a fly. The fly disappeared into his mouth as though being flushed down a toilet. Then the king cleared his frog throat and said, “Only the hiss of a snake sounds worse than Abbott’s croaks.” Then he turned to Abbott and barked, “Croak ribbit this instant or leave this pond.”

Abbott the frog jumped on center stage, a lily pad in the middle of the pond. His skinny frog legs trembled. His small frog heart beat as fast as a hummingbird’s. He took a deep breath to calm down. Air swelled his throat in the shape of a ball. His eyes bulged and gazed at the crowd. Then in the loudest croak he could muster he croaked, “Racket!”

Now tears began to fall from his eyes, like leaves falling off a tree in a rushing wind. He murmured, “As you wish, I will leave.” And his mother wiped his tears with her frog belly.

Before he could say, “Farewell, my fellow frogs,” his mother tied a sack with all his belongings to the end of a twig. She handed it to him and said, “Go west young frog! Hop west until you come upon a dragonfly. When you see the dragonfly, follow it wherever she leads. Do not fear. You are a big frog who can go off on his own. Someday you will become known as a great frog, Abbott. In every pond frog folk will tell your story for a thousand moons to come.”

But Abbott did not feel like a great frog. Instead, he felt like a forsaken frog from his first long leap away from the home pond. He leaped westward over grass and weeds and dirt and rocks. For seven days he leaped westward. His limbs grew weary, and his frog feet blistered. He felt he could not leap another inch even if chased by an alligator. He rested under the shade of a weeping willow tree. It was there he saw a dragonfly circle above his frog head. Suddenly, Abbott forgot about his weary legs and blistered feet and sad frog heart. He jumped blissfully over bushes to follow the dragonfly. And the dragonfly led him to a shimmering waterfall cascading into a pond.

“Home!” he said with much relief.

Night after night, Abbott croaked alone all sorts of sounds. He croaked joyfully new sounds like “exhibit” and “inhibit”. No frog was there to complain – that is until one night a young frog lady from some unknown place introduced herself with a toothless smile, “Hello. I’m Bridget.”

Abbott the frog’s face blushed. A frog’s face could blush no more, which – by the way – isn’t very much. He stared at his frog knees and introduced himself. Then in a low voice he said, “I cannot croak r-r-rip-it.”

Bridget laughed, but not at him. She replied, “That’s okay. I can’t say r-r-rip-it, either!”

In that very moment Abbott and Bridget became frog soul mates. Abbott had not been this happy since he was a tadpole. And it was not long before he himself became a father of dozens of tadpoles.

However, during this happy and hot summertime, not a drop of rain fell from the clouds. By the last days of summer the pond shrunk to half its size, while Abbott ballooned into a giant bullfrog, even bigger than Frankie the bullfrog. So loud was Abbott’s croak, little frog ears could hear it hundreds of frog leaps away.

One night as Abbott and Bridget were croaking “inhabit”, familiar frog faces appeared. Among these frog faces were those of Abbott’s mother and father, which glowed in seeing their beloved son. Other frog faces were the king’s and Frankie the bullfrog’s, which showed shame.

Now Abbott was very happy to see his family and old friends. He was even happy to see Frankie and the king. He jumped high off his lily pad and splashed into the water in a belly flop. This hurt his belly, but he did not care. He said, “What brings you here?”

Abbott’s father replied, “Our pond has become dry as a dead bone. First we dug burrows with our webbed feet and hid in the mud from the hot sun. But no rain ever poured and the mud turned hard as a turtle shell. We have been leaping for days to search for a new home pond. But everywhere we leaped was on dry land.

His mother finished the story, “Last night from a great distance, we heard a frog croak loudly, ‘Drink-it’. I shouted, ‘Abbott! Only my boy Abbott croaks ‘drink-it’! Follow his sweet sound!’ And so here we are.”

The frogs bowed to Francis and Bridget and pleaded, “May we live in your pond?”

Now Abbott and Bridget took a giant leap toward them. The frogs flinched, afraid Abbott’s heavy belly might land on them.

Bridget said with open frog arms, “Welcome!”

Abbott added, “Here you are free to croak anyway you please.”

From then on, frogs throughout the world croak many sounds besides ribbit. Some even croak “Abbott” and “Bridget”.


In our culture we misplace role model status to elite athletes and billionaires. When news breaks of their shortcomings, people get disappointed in them. It’s unrealistic to expect them to lead exemplary lives. Most are as foible as the rest of us.

For me, the archetype of a noble and successful person is Joseph, the son of Jacob. His story can be read in the Book of Genesis. Only after writing the children’s book, ‘Ribbit’, did I realize it is an adaptation of the story of Joseph. Driven into a foreign land, both Joseph and Abbott were forced into unwanted circumstances. Both were motivated by guided imagery, Abbott by the dragonfly and Joseph in his trust in God who had a better plan for his life. Both never forgot where they came from or let the world crush them emotionally. Both remained true to themselves while adapting to new environments. Both ultimately succeeded to the highest level achievable despite setbacks. With power at their disposal, both were benevolent, granting freedom and a livelihood to those who had forsaken them. Both made the world a nicer place to live.

So in closing The Financial Athlete, I leave you with this role model to bear in mind.



Trust the racket (The Financial Athlete #122)

April 28, 2009

The discipline of an athlete is readily apparent by a lean and muscular physique. With long hours of weight training, aerobic activity, and proper diet, such a physique may be yours within only one year.

In contrast, the discipline of an investor is only apparent after many years have come to pass. His wealth has been accumulated incrementally.

The all too common impatient investor dismisses the disciplined approach because he craves wealth now. He has convinced himself that he possesses an uncanny ability to increase wealth exponentially, but in reality, he is out of control.

When my tennis instructor sees a student excessively move his body while swinging the racket, he advises, “Trust the racket. Keep the torso quiet.” This is nice way of pointing out that the student is out of control.

Sometimes, I hear my tennis instructor’s voice saying “trust the racket” in my head when I hit the volleyball on the beach with too much movement of my forearms (a bump). I also hear it when I become tempted to take on an outsized position in an investment with high risk. Metaphorically, the tennis racket is a reliable investment system. To “trust the racket” means to be disciplined to stay within its framework. The system must neither be too rigid nor too soft. It is flexible, yet governed by sound principles.

Alignment (The Financial Athlete #121)

April 26, 2009

A baseball pitcher may try to ground out, or fly out, or strike out the batter. Whether the pitch is a fastball, curveball, changeup, or slider, the pitcher’s objective is aligned: Get 3 outs without a run.

Are your investments aligned with your values? Many are those who compromise good values in exchange for gain.


A grandmother dressed in old and tethered clothes walked slowly on a sidewalk of an affluent community. Her right hand held the small hand of her grandson, while her left hand held the even smaller hand of her granddaughter.

Approaching the grandmother were two wealthy ladies dressed in the latest in high fashion, from wide brim hats to high heeled shoes. Gold, diamonds, and sapphire bedecked their necks, wrists, and fingers. Neither had ever experienced financial hardship. One said to the other, “Look at that old woman. She’s so poor she can’t even afford fake jewelry!”

Although the grandmother was old, her hearing was still quite sharp. Now face-to-face with the two ladies, she stopped before them and raised her grandchildren’s arms with hers. Tightly clinching onto their hands she said proudly, “This is my treasure, and it’s worth more to me than all the gold and silver in the world!”

(1. I heard the above story from Pastor Joel Osteen on television. 2. photo above: baseball’s most exciting pitcher to watch, Tim Lincecum)

Both! (The Financial Athlete #120)

April 23, 2009

Thousands of athletes get plenty of exercise but neglect to nourish their bodies with fresh, whole foods.

Make a conscious decision to live an enduring, healthy lifestyle until a ripe old age. Place more emphasis on nutrition than exercise. If I had to put a percentage on it, I’d assign 70% for nutrition and 30% for exercise. Keep in mind exercise is subject to “dose response”, which means up to a certain point more is worse, not better.

How can you easily change your diet to consume more vegetables? Juicing! I regularly juice raw and organic carrots, tomatoes, and celery along with lemons. A side benefit to juicing raw vegetables is enhanced energy, which boosts performance in sports.

Always think both: nutrition and exercise.


When I get asked, “Do you invest for value or for growth?” I reply, “Both!”

Investors should always think of both intrinsic value and potential value. If I had to place a percentage to reflect the importance of each of these, I’d assign 70% for intrinsic value and 30% for potential value.

Intrinsic value is more objective in nature because of its use of ratios. For stocks, ratios such as price/earnings, price/sales, debt/equity and cash/share are derived from financial results.  For residential real estate, the key ratios are price-to-rental income and price-to-average local income compared to historical averages. Ratios are the gateway to understanding the fundamentals, and understanding the fundamentals is the foundation of investing. However, it’s important to note that many value investors (those who emphasize valuations) receive average returns.

What then separates an exceptional investor from an an average one? An exceptional investor chooses assets with great potential and purchases them at or below intrinsic value. The classic example is the buyer of residential property who selectively limits her search to houses in desirable neighborhoods. Crime rates are low. Public schools rank high. The views are scenic. Development is built out. These factors contribute to greater potential value as the population rises. Beyond this, she has an eye for further potential value with capital improvements. She plans to demolish the old house to build a dream home or remodel an already attractive house.

Always think both: intrinsic value and potential value.

A must read on the banking crisis

April 11, 2009

Think big even if you’re small (The Financial Athlete #55 rewrite)

April 10, 2009

Be like a tall tree
reaching for the heavens
and rooted to the earth

Without root in the earth
the wind drifts you away

Without reaching for the heavens
You get stuck in the mud


The road to success is
rarely straight and wide

At times it is
or descends precipitously

The road to success meanders
and when you tire
a mountain climber reaches the summit
one step at a time
proceeding more slowly in higher elevation
where the air is thinner

Think big to develop willpower to persevere
Be grateful for what you have learned
and never stop learning

The journey is ultimately about self-discovery and growth

The strength curve (The Financial Athlete #119)

April 8, 2009

A common mistake in weight lifting is to de-emphasize the eccentric motion (extending the muscle, or lowering portion of repetition) by letting the momentum take over. It’s important to be strong in the full range of motion, also known as the strength curve. This is done through negative training (fighting gravity while lowering the weight) with a full range of motion. A standard way to do negative training is with 2 seconds on the concentric motion (contraction of the muscle) and 4 seconds on the eccentric motion.


Investors typically have a “forte” (strong point) for where to invest money. For example, real estate agents for residential property feel comfortable investing in houses and may own several. This is natural, since they are at the forefront at finding the best bargains. However, the tendency is to not expand beyond the “forte”. This is like a weightlifter who insists on only doing isometric training, which would narrow strength to a small area in the range of motion.

This is not an argument to diversify for the sake of diversification. I am not a proponent of that. Rather, I am proponent of chasing value. Just because the price of an asset drops dramatically should not suggest it is undervalued. The reduced price may still exceed the true value. Discover value through research. Examine the quality and potential of the asset. Avoid “value traps”.

Value cannot always be found in one asset class such as residential real estate. It’s fine to be overweight in your “forte” as long as valuations are reasonable, but when that asset class becomes too overvalued, sell and redirect the money to an undervalued asset class or hold onto cash. The money may be invested under the same major asset class, as there may not necessarily be a correlation between the two in terms of price vs. value. An example of this would be to sell residential property to buy office real estate. The major asset class is still real estate.


The Financial Athlete Strength Curve concerns being aware and financially literate of the full range of asset classes and favoring those undervalued, which can be held for the long-term. In chasing value, there is rarely a situation calling for equal proportion of investment in each major asset class (stocks, bonds, cash, real estate, precious metals).

Reggae meets the Beatles

April 6, 2009

In the past, I’ve heard only one Beatles’ song played in the reggae format, the Israelites’ take on Come Together. For me, it’s an annoying and feeble song and should only be used for the purpose of torture. For those with a touch of masochistic tendencies, click on the link to listen but don’t feel bad if you can’t listen to the entire song.

Now here’s the good news: on April 14, 2009, Easy Star All-Stars release Easy Star’s Lonely Hearts Dub Band, a reggae version of the Beatles’ LP masterpiece, St. Peppers Lonely Hearts Club Band.

You may remember Easy Star All-Stars from their 2003 release of the much acclaimed Dub Side of the Moon, a reggae version of Pink Floyd’s eternally classic Dark Side of the Moon. I consider it one of the best reggae albums ever.

The Lonely Hearts Dub Band LP sounds promising. Pre-released is Lucy in the Sky with Diamonds. You not only will be able to listen to this entire track, but you’ll want to hear it again right away…maybe more than a few times.

Repetition (The Financial Athlete #118)

April 6, 2009

for every right move
corresponds thousands of wrong moves

internalize the right move
to forget the thousands of wrong moves

The human body is designed for movement, but some movements can do more harm than good, like twisting and lifting weight simultaneously. The untrained mind does not appreciate the benefit of moving in harmony with nature.

Motor skill development trains the body to move in harmony with body mechanics.  Take for example the Pilates way of doing a crunch.  Tuck chin slightly as though you are holding a pear below your chin. Roll the head forward (from the atlas bone) just before the shoulders lifts off the ground as you exhale and pull in your lower abdomen inward to engage the transversus abdominus and simultaneously upward to engage the pelvic muscles. Then as you crunch up the diaphragm rolls forward and remains so as you return to the start position flat on the floor. Without strain on the back, this strengthens some inner and outer core muscles.

Motor skill development is learned through repetition. Some movements, like the Pilates crunch described above, are easy to learn. Other movements, such as how to bump a volleyball, take much practice to do effectively.

Repetition is the key to internalize principles, including those of successful investing. Think about these principles many times to ingrain them in your mind.

It is possible to fully understand the principles of successful investing and not apply them. This is often because anxiety for gain interferes. Where there is anxiety for gain, there is misjudgment. Being true to form empties anxiety for gain, just as broad daylight empties darkness.  Adhere to  time tested principles and trust for good results to follow.

“Our way is to practice one step at a time, one breath at a time, with no gaining idea.”
–Shunryu Suzuki Roshi (the man who introduced Zen Buddhism to America)

Inner Core Strength (The Financial Athlete #117)

April 4, 2009

“Develop a strong core!” advise personal trainers to everyone including sufferers of low back pain. Then after months of intensive workouts, those coveted “abs of steel” do reflect in the mirror; however, not reflected is the chronic back pain. It is a prevalent myth that a strong rectus abdominis and external and internal obliques are therapeutic to low back pain. While these are “core muscles”, none are connected to the spine. To alleviate low back pain in many cases, personal trainers should tell their clients, “Stabilize from the inside out. Develop a strong INNER core!”

The inner core muscles are made up of the diaphragm, the transverse abdominus, the multifidi, and the pelvic floor. There are specific exercises to strengthen these muscles, which everyone (not just sufferers of low back pain) should do regularly.

On a parallel level, is there such as thing as an inner core quality for mastery of a craft? Yes. The quality of “stillness” (equanimity) is the stabilizing force from the inside out. To have tension now and then is natural, but to hold onto tension is unhealthy, like a muscle forced into constant contraction. Release tension. Be “still” and fear will not set in. Act upon fear, and you will tend to overreact. To overreact to a problem expands the problem. “Stillness” is the state of mind to deal with difficulty.

Much is written on how to succeed. Little is written on how to deal with success. What is the state of mind to properly deal with success? Again, it is “stillness”. Treat success as the natural course of events. Contain your excitement for success but also appreciate it. Do not let flattery take a foothold in your mind or you will lose your “stillness”.

“Lose your stillness and you will fail in everything you do.” — Lieh-Tzu