by capital flowing

Jim Rogers Books

86189-_uy450_ss450_I highly recommend Jim Rogers’ books, they are entertaining, funny, and have helped me see investments in a different way. I have read “The Investment Biker”, “Adventure Capitalist”, and “Street Smarts” so far.

If you want to read these book I would recommend reading them in the same order as above. On his first two books, he narrates his experience of traveling throughout the world. Even though the intention of his trips was not to invest, he cannot control his investor self and opens a bank and brokerage account every country where he sees a change.

In his second book, he drives around the world and describes all the countries he visits, and mentions the changes he has seen from last time. This is very interesting because the reader sees all the changes, and is impressive how his predictions were sometimes right.

He mentions in his books that talking with locals and understanding their motives, their points of view, and ways of life, he can make better investments in those countries than a researcher analyst that is just reading about that country while sitting at his desk.

 

Every time I travel I try to hold that same attitude towards investing and started to analyze the country by trying to notice things while going out, analyzing people’s motives, and attitudes.

I have opened a discount brokerage account to invest on my own.

by capital flowing

CFA Level I

cfa-logoIn two days I will be taking the CFA Level I examination. Since I started a new job at an Investment Bank Boutique it has been harder to study. The first couple of months I started waking up every day at 5 am to study, which was working for a while before my long work nights started. I guess is a trade-off between experience and certifications.

Let’s see what happens

by capital flowing

Invirtiendo a Largo Plazo

Francisco García Paramés

Image from: frdelpino.es

When I was younger I thought that everyone who invested in the stock market was gambling with their money, Francisco García Paramés thought the same way when he was younger and today he has the record of managing the most profitable fund in Spain. García Paramés was born in La Coruña, same city as the founder of Inditex Armancio Ortega. Paramés is considered the spanish version of Warren Buffet for his long term value investment strategy. In his book “Invirtiendo a Largo Plazo”(Long Term Investing) he talks about his experience as a fund manager and how he developed his long term investing strategy. Generally he mentions that stocks can give you a higher return on investment than any other value. He agrees with Warren Buffet that we need to analyze a stock as if we are buying the whole company and not only a ticker. As many other fund managers he says that if people are interested in investing their savings but do not have time to analyze the stock market and have a lot of patience, they should be better off by investing in an index fund which could also give you a higher return on your investment than a hedge fund. The downside is that investors would not be able to take full advantage of the inefficiencies in the market.

Something that impressed me about this book is that he does not believe that central bankers offer a great benefit to the economy and that countries would be better off by backing their currency with gold. Charles Wheelan in his book “Naked Money” is against this and mentions some setbacks about this thinking. He mentions that countries can experience a higher economic growth than their rate of gold extraction and that makes the economy not reliant on the resourcefoulness of its citizens and businesses. While countries with paper money have the flexibility to adjust their monetary policies according to inflation, economic growth, and productivity. The downside about paper money is that central banks can create big problems for the economy if they are not careful, this has happened to Zimbabwe, Argentina, Mexico, and other Latin American economies.

This has been one of the best books I have read on value investing, very interesting to learn from his own experiences of how he became who he is today. I really liked the fact that he included a list of books that have inspired his strategy throughout his life.

 

 

 

by capital flowing

Compartamos

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Image by ideograma.com

A few months ago I read “Banker to the poor” by Muhammad Yunus. Yunus is famous for the microcredit system in the modern world, with the purpose of lending money to the poor at low-interest rates. In his book, Yunus explains the whole process of how Grameen Bank was born and how he got the idea of lending money to the poor, and all the struggles it involved with the Bangladesh government’s bureaucracy. Personally, I really liked the idea, because he created a whole new system that helped poor people to be more independent by starting their own small businesses, pension funds, and even a private health care system, at very low-interest rates.  Yunus mentions that governments are not very good at helping the poor and that this type of systems where the lenders own the community bank that offers different private services, is more helpful in the long run to get them out of poverty and to activate the local economy.

Similar banks were inspired by Yunus’ idea around the world, but not all of them followed the same path.  Compartamos is one of them,  a Mexican microlending institution founded in 1990 as an NGO. In 2000 it changed its path and it was transformed into a *Sofol (Sociedad Financiera de Objeto Limitado), and in 2007 it held its IPO in the Mexican Stock Exchange. What? A micro-credit institution listed on a stock exchange? Yes, Yunus had the same reaction, and he even criticized this institution by saying that “Microcredit was created to fight the money lender, not to become the money lender”. Grameen charges an interest rate of 20% and 10% go back to its operations(bloomberg.com), while Compartamos charged an average  71% in 2013 (expansion.mx). Big difference right?, but they are also different type of businesses.

I am sure that Compartamos has helped many families, and single mothers as they claim,  but it would have been more beneficial for the borrowers if it would have remained as an NGO or as another organization that would have permitted a community banking system, like Grameen. Today, Compartamos’ mission might be to help people to get out of poverty, but they also need to be profitable for their investors. They are in their right to do it, and I think that they are a social responsible business with a positive impact in society, but I agree with Yunus that “when you discuss microcredit, don’t bring Compartamos into it”.

*A Sofol is basically a financial institution that can only lend to the public, but cannot receive deposits.

Sources:

Click to access infoanua_687825_2015_1.pdf

http://expansion.mx/especiales/2013/02/15/los-directores-que-comparten-el-poder

http://www.bloomberg.com/news/articles/2007-12-12/online-extra-yunus-blasts-compartamos