Tuesday 16 August 2016

Income Statement versus Balance Sheet



Equities investors focus on the Income (Profit & Loss) statement - how much you make?

Corporate bond investors focus on the Balance Sheet statement - can you pay me back?



Some corporate bond investors and peer-to-peer lenders have found out the hard way the differences between making secured and unsecured loans...

Have you seen the title deed to your property? The smart bank is "safe keeping" it for us until we have paid our loans in full. So very the kind of them!


As a minority shareholder, especially if you belong to the camp where you believe that makes you part owner of the listed company, does earnings matter to you?


Warren Buffett has famously said he does not understand gold - it has no yield.

How do you value an asset that does not generate any yield? Can't use Discounted Cash Flow can you?

And yield is just another word for earnings.


Now comes the tyre hits the road moment.

What if I tell you earnings don't matter for equities?

Will you swallow it hook, line, and sinker?

But its free info!

Excellent! You are awake!

You know the Singaporean retort if you complain about your losses after following "free" advice:

"If I tell you to jump off a bridge, would you jump?"


But I'm kind. I'll give you a refund.

You paid me "nothing"; I'll refund "nothing" in return.

There! Happy now? Take "nothing" and go.




P.S.   For the record, I disagree with Warren Buffett's view on gold. If you share Warren's view, I'll be most glad to be the karung guni man to take all the worthless pieces of yellow metal off your hand.

I'm generous. I'll give you in exchange my e-book valued at $88.88 retail for absolutely nothing at all!

What good is conviction if we don't act upon them?






13 comments:

  1. 7th month's Gold can exchange for ebook?

    ReplyDelete
    Replies
    1. CW,

      I take!

      I now am a regular buyer of paper money and incense - mom walk difficult so she now use me as man Friday to do her shopping.

      7th month gold $3.50 one stack. Unburnt one I accept ;)

      Karang guni man knows value!

      Delete
  2. The young generation has the same mentality, mostly. They said,"you give me "nothing" then be sure to get nothing from me when you are old. You give birth to me so you are responsible for me". Their wants can be ridiculous at times - good smartphone with as much data possible, larger pocket money, etc etc. No "gold" for them so not even "gold paper" in return.

    ReplyDelete
    Replies
    1. Money Honey,

      I'm single so there are some topics what I say will have to be heavily "discounted".


      All I can add is that mom is always there for me growing up. So its natural I am here for here now.

      What I noticed is busy and harried parents are the ones who buy "toys" to their children to "compensate".

      When we "outsource" parenting to maids, why are we surprised when children mimic us by "outsourcing" parental care to nursing homes?

      What goes around, comes around.

      "Success" is what we have to give up to achieve it.

      Delete
  3. Smol,

    After a while, I find understanding the story began The the business more intriguing than the numbers, balance Sheet or whatever.

    No saying which is more important, there are most properly equally important. But I do think complicated valuation model that looks like university calculus a bit stretching it too far.

    U think businessmen who "buy business" of bankers/ fund managers do that often meh?

    Maybe DCF , DCM for reit and businesses that is very cash flow stable possible la.

    But the assumptions made is too subjective; if every variable I also conservative, u key in u get beat market valuation. Huh OCBC at $4? Who dun know dirt cheap?

    Walmart at $1.9, sgx $6.

    I no need a model to tell me, my nose can tell me.

    But I need a model and tinker with it to convince myself it's cheap enough o buy now lol

    ReplyDelete
    Replies
    1. Sillyinvestor,

      Ah! You are more qualitative biased ;)

      As ex-salesman and purchaser, I have to make educated guesses and find out the numbers of my important customers and suppliers.

      If you are a supplier to Swiber, would you dare to make a big sale on credit to them?

      If I am a big customer of Swiber, do you think I would look for a backup supplier?

      Accounting is the language of commerce. So even someone like me who is weak in math has to be conversant with numbers. What do you think?

      And yes, the businessmen and money managers I studied ALL will look at the numbers.

      Not looking at the numbers is like playing poker without looking at your own cards.

      Jio me if you want to play Poker OK?



      P.S. Qualitative investing is all about being subjective. You buy OCBC at $4 as a no brainer; the person opposite who knew the quantitative numbers is glad to offload to you at $4 based on cold logic.

      It's a tug of war. Hence we have a market!

      Delete
    2. A market is where all think they are probably right. Buyers, Sellers, Holders, Researchers, Analysts, "Gurus", and "Waiters/Waitresses". :-)

      Delete
    3. CW,

      The market is the great equaliser.

      One where the primary school leaver with his gambling instincts is not afraid to pit his wits against the Phd quant.

      The same goes for the academic with his market efficient hypothesis and how you can't time the market; yet facing opposite him is the hedge fund professional who practices market timing to seek alpha performance - if not how to justify his 2/20 fees?


      It's intellectually stimulating for me as I prefer to see investing as a zero-sum game - 2 men walks into the cage; one comes out.

      Trading is a hardcore MMORPG!!!

      Delete
    4. Oh Smol,

      Think u misunderstood me. Numbers is important. Seriously, those business people that look at numbers, they look at DCF, DMM models or whatever Gordon model that look like A maths formula?

      Delete
    5. I find formula for academic satisfaction, trying to explain things that cannot really be effectively explained.

      I am ok with Graham ratios for adequacy of MoS of bonds. But the rest like a bit ...

      Delete
    6. Sillyinvestor,

      Sorli, sorli... My England not powderful.


      Any number crunching more complicated than primary school math is beyond me :(

      I have my limitations.

      Luckily, accounting statements not hard to understand ;)

      Delete
  4. i partially agree at times and partially disagree at times.

    which times? ;)

    "For the record, I disagree with Warren Buffett's view on gold. "

    ReplyDelete
    Replies
    1. SMK,

      Asian civilisations have a different memory and view on gold.

      Too many episodes of wars, famine, disease, failed regimes, and dynasty changes...

      Asian gangsters deck themselves with gaudy gold chains, rings, watches, etc; for one simple reason:

      You never know when you'll need to "run road" when all your bank accounts and credit cards were frozen by the authorities!

      Delete

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