Sino Hero Foods Ltd

The other day I was invited to a ' wealth creation' seminar. The speaker was a 'Guru type' and his message was that he believed in ' abundance' and how all of us should be swimming in abundance  of wealth, health and happiness.  I wondered if we both did live in the same world. And finally his pitch was as expected coaxing us poor souls to come home to Mama and hand over our hard earned wealth to his firm so obviously THEY could charge us big fat Asset management fees and then they could indeed live in abundance of our wealth and be happy !

Fact is, we are constantly bombarded with massive advertising from financial services firms about wealth management strategies and serious financial types on TV talking up ' long term' wealth creation strategies and how to invest like.... you guessed it Warren Buffett ( I always wondered how all the financial experts are disciples of Warren Buffet and yet the massive financial collapse happened in 2008)!!  What is even more striking is how the same financial firms that brought about the financial crisis are now back to telling us to let the ' professionals(them) manage your wealth and pretending nothing ever happened.

Upon some thought, I realised that if one were to look at the past decade, the reality has been more about massive wealth destruction rather than wealth creation. The giant honey trap has been laid out to entice common people to actively engage in one form of gambling to another whether the internet stocks bubble or the USA housing bubble, Dubai, Greece and the financial advisers favourite child-stocks for the so called long run. Fact is the Dow Jones a decade ago was about 14000 points and is now struggling at barely 10,000 while the Japanese Nikkei index was at about 40,000 over 20 years ago and is now struggling at 10, 000 which is down 75 %.  So yes by any measures 10 years for the Dow and 20 years for the Nikkei is a long term frame. While the common folks have seen their 401K's decimated, the financial firms have still picked up their asset management fees for the past 10 -20 years. Great job if you can get it for sure !

Another point that is not highlighted enough is how seriously once mightly corporations have been totally discredited and bankrupted. AIG made ENRON look 'well 'mis'managed' and countries like Greece cooking their books over years make Iceland's banks look like the role model of fiscal conservatism. Not a day passes without another new fraud or insider trading scam with some hedge fund or financier or corporate big wig. No wonder such massive wealth destruction has happened right in front of our eyes. No amount of painstaking research or financial knowledge can help when the game being played is advanced financial book cooking ! When the game is unfair, there is no fair game to be played.

I think today the most important skill we should try teach ourselves is financial literacy from a real world perspective. I do not mean just what conventional finance 101 teaches us like studying balance sheets and P/E (price to earnings) ratios (too much financial crookery is mainstream as we have all seen) but more from a pragmatic and sometimes even cynical perspective with the key point being after every financial advertisement or sales pitch do ask yourself - who gains ? Its after all your hard earned money and you have to use strict risk management principles to judge whom you give it to or maybe manage it yourself (yes it can be done despite what 'professional' managers tell you.If you are smart enough to earn it, you sure can teach yourself how to keep it) One rule that has almost always worked for me is that hot investment themes are inversely proportional to subsequent asset performance. Easier said than done but who ever coined the term' easy money' probably never made any money themselves as  that concept just doesn't exist.

As an entrepreneur, the most valuable lesson one learns is to deal with reality and learn from the school of hard knocks and the big lesson of todays world is we are totally on our own. Despite what the experts say, putting your money in the bank yielding negligible interest over the past decade would have been one of the best investments and would have outperformed some of the most highly paid stock pickers that we have to put up with everyday on TV especially adjusted for volatility and risk.  After all return of capital is what matters rather than negative return on capital that has been delivered due to a toxic combination of gross mismanagement, outright fraud and good old fashioned incompetence on behalf of the people we are 'trained to ' trust' with our life's savings.

Sometimes as they say, it is not the deals we do but  rather the ones that we do not do that are the best ones. Buyer beware !