Book Review: How To Be Rich

"How to be rich" was written by J. Paul Getty and published in 1961. At the time Getty was regarded as one of, if not the, richest men in the world. He was also regarded as something of an eccentric, a miser (somewhat unfairly) and a serious art collector.

How to be rich reads like a collection of articles covering topics such as:

• what Getty looked for in successful company executives
• his approach to selecting investments
• art as a form of investment
• the growth of big government
• the increase in the administrative functions within large corporations
• dealing with your mistakes

On investments, he clearly advocates value based investing, investing in what you know (many of his investments were in the oil industry), long term investing (he slams get rich quick schemes), not buying when the market is expensive and being willing to jump in when everyone else is selling. In may respects, he sounds a lot like Warren Buffet.

One of the more interesting aspects of the book is the way it reflects the times it was written in - pre-oil crisis inflation, communist fears, a drift towards more left wing governments and relatively limited participation of women in the work force.

With or without the social context in which the book was written, it is well written and contains a lot of simple common sense (particularly on the subject of investing) and was well worth reading.

Monthly Review - July 2010

July was an outstanding month for financial progress with strong gains on the equity portfolio being supplemented by positive cash flow on my properties and increases in commodities. All these gains were compounded by positive currency movements as the AUD and NZD rose against the USD. A reasonable savings rate was achieved.

Here are the details:

1. my Hong Kong equity portfolio appreciated significantly. There were no trades this month

2. my ETFs appreciated in line with their respective markets to record very solid gains (Hong Kong, Russia, Taiwan and India)

3. my commodities all appreciated (ETF, silver, HOGS, NICK)

4. all of my properties are let producing a positive cash flow and making a positive contribution to my net worth. I had two repair bill due (for an air conditioning unit and a washing machine)

5. currency movements were positive, as the AUD and NZD appreciated against the USD

6. savings were positive with income being above average and expenses being on the high side due to a short family holiday (which was in the budget), a visit to a relative (which was not in the budget) and paying for this year's en primeur wine purchases - in spite of which, net savings were reasonably good

My low cash position continues to improve and now represents more than a year's worth of expenses.

For the month, net worth increased 4.9%. The year to date increase is 11.1%.

The gains on investments this month were similar in absolute terms to the losses incurred in May and my target retirement window is now looking quite good.

Note: due to holiday travel, the review for July is based on prices etc as at close of business Hong Kong time on Tuesday 3rd August.

The consumer is alive and well

At least in Asia that is. In spite of all the negativity being produced in America and Western Europe, the global credit crisis has been something of a non-event in Asia. In fact, it has been a trivial thing compared to the Asian crisis in 1997 and SARS in 2003.

Three pieces of anecdotal evidence:

1. wine: prices for en primeur wine reached record levels this year. Prices for older vintages have also advanced - a lot. Unfortunately, many of the wines I would once have liked to buy for personal consumption have now reached the point were it is impossible to justify purchasing with a view to drinking them. This would not have happened if not for the Asian driven demand.

2. air tickets: prices for air tickets (especially in business class) have continued to rise. Also, availability in any class is not always a given, especially around peak holiday periods and for some of the more popular flights into China.

3. consumer discretionary: if the queues for the ipad (released in Hong Kong on Friday) were not evidence enough, the results from retail chains in Hong Kong and China have been impressive. A reflection of the rise of the middle class and their confidence in the future (worried people spend less, not more).

4. real estate: residential real estate prices continue to rise in Hong Kong and in China (in spite of cooling off measures in China) as people use their rising incomes to upgrade their homes.

While the world is still an interconnected place, the arguments for their being at least a degree of economic independence from America are looking stronger by the day.