Drawing inspiration

The 2008 Olympics has officially ended. As we look back at the events which have taken place in the last 16 days, we can draw inspiration from many athletes who have overcome all odds to win a medal for themselves and their own country. Among this special group of athletes, we have one that is handicapped and some who have battled with cancer prior to the Olympics.

However, there is one athlete worth mentioning in this posting. He is not a handicap and is not battling with any illness. Rather, it is his life story so far that has captivated me. I believe it is the events in his life that shaped him into the Olympic champion he is today. His achievements are absolutely impressive considering he is the youngest American to win an Olympic wrestling gold medal.

The guy’s name is none other than Henry Cejudo, the 21-year-old prodigy who had won the gold medal in Olympic freestyle 55-kilogram wrestling. His parents were undocumented Mexicans who met in Los Angeles. His mother had six kids, four with his father, Jorge, who was in and out of prison until dying of heart problems at age 44 last year. Henry never saw him after age 4.

When you've had as tough a life as Cejudo, a grueling day is routine. When he was young, the family was miserably poor, sometimes moving from apartment to apartment under the cover of night because they lacked rent money. His mom worked several jobs at a time, stealing home for a few hours to make sure her family wasn't in trouble. So far in Cejudo’s life, he has shifted house approximately 50 times. And all this time, Cejudo didn't get his own bed until he was 17, when he moved into the U.S. Olympic Committee (USOC) training center in Colorado Springs. Sometimes they stayed with friends, sometimes with relatives, sleeping six or seven to a room in bad neighborhoods, drug deals going on down the street. He spent his first four years in South Central Los Angeles. The family spent a couple of years there before moving to the Phoenix area.

Henry and older brother Angel emulated the pro wrestlers they saw on TV and the Mexican boxers they revered, and they entered a youth wrestling program in Phoenix. Angel was the first ace, winning four high school state titles, and Henry did the same. American wrestlers are supposed to go to college, then enter the Olympic program when they're experienced and ready; Cejudo did so at age 17 and is the only wrestler to win a national senior championship before leaving high school.

Neither liked studying, so when Angel was invited to the Olympic training center, Henry tagged along and won his last two state titles while living there. Within a year, younger brother was the rising star. As they say, what took place in the Beijing Olympics is now history.

To persevere and never give up is something we can all learn from Cejudo. Especially in the current tough economic outlook, investors need some patience and self belief. Bad times will pass. They always do if you look back at history. The night is darkest before dawn. Look forward to each new day with enthusiasm and vigor so as to continue the fight.

The value of house work

Generally, economists have applied the replacement cost (RC) method in valuing the work done by housewives. The replacement cost approach to the problem asks: “how much would it cost to replace the services of the housewife?” The idea being one could go into the market place, find the wage for nannies, cooks, maids, etc., then use these wages as the value of the housewife services.

As i last checked, some agencies are charging $8.5 per hour for housework.
Assuming this amount is the same for hiring a cook and for child care, and that a housewife will carry out these activities for 10 hours, we are looking at a cost of $85 per day.
Over the period of a year, the services contributed by a housewife adds up to a pricey sum of $31025 (85x365). In actual fact, the amount should be higher taking into consideration higher charges for weekends.
Ok, owe up those who thought that housework costs nothing!
So guys, time to show some appreciation to your wife or mum.... :-)

However, the fundamental problem with RC method is that it is based on market oriented economic theory, and as a result they ignore the institutional aspect of marriage. Marriage, as an institution, is designed to produce a set of goods that the market does not produce. Certainly some market goods get jointly produced in the marriage, but these are secondary to the main purpose of marriage. Marriage restricts the behavior of both the husband and wife such that they have an incentive over their life-cycle to cooperate in procreation and the successful rearing of the next generation. To confuse the value of a housewife with the services of domestic service misses the point entirely. The market based procedures are only crude, unreliable, and biased under-estimates of the true value of a housewife.

Marriage is a sharing arrangement. A husband does not hire his wife, nor does the wife hire her husband. When the marriage is doing well both benefit, and in hard times both suffer: “for better or for worse.” Some shares are better than others. A spouse who gets a small share of the pie has little incentive to work within the marriage. The gains from an increased share to this person will more than offset the disincentives caused by reducing the share to the other spouse. Economists have shown that for a given man and woman there is an “optimal share” which creates the best incentives for the husband and wife to contribute to the marriage.

Couples do not marry in a vacuum. Individuals compete with one another for mates. This competition for spouses, along with the optimal sharing rule above, forces people to marry individuals they expect will make an equal contribution to the marriage. A person will always do better marrying someone of equal quality and sharing equally, rather than marry someone with of a lower quality, even though their share is higher in the latter case. The result is that in equilibrium husbands match with wives who are expected to contribute equally over the life of the marriage.

Recognizing the incentives of sharing explains why full time working wives still tend to do more than half of the housework in a marriage. Women still earn 70% of men, on average. Since total contributions must be equal in successful marriages, women who contribute less market value to the marriage must contribute more household services.

If we accept the argument that individuals marry others of equal expected value, then we have a simple, but better, method of measuring the value of household services for marriages that remain intact. If a marriage is on-going, the partners must feel that on average they are getting out of the marriage what they are putting in, and that this marriage provides a higher value than marriages to other people. The condition for this is that the partners are making approximately equal contributions and are sharing 50-50. Thus, to determine the value of household services we need only look at the market earnings of the husband and adjust for the market earnings of the wife, and the household services of the husband. Or:

Value of housewife = Husband’s income – Wife’s income + value of husband’s household services

Suppose the wife does not work outside the home, and the husband never does any work around the house. Then the value of the wife’s household service is simply equal to the husband’s income. This methodology is not only easier than the standard ones, it is better in that it is a true measure of value, rather than just cost. It is better because it does not have any of the ad hoc aspects of the market measures since it relies on the revealed behavior of the individuals to assess their own value.

Countdown to recession

We are currently witnessing the beginning of economic downturn in many countries.
Remember that a recession is defined by 2 consecutive quarters of negative economic growth. Based on the above definition, there is already one country in the recession list. It is Denmark, with New Zealand and Germany not far behind. Denmark’s economy has now contracted for two consecutive quarters, by 0.2 percent in the last quarter of 2007 and by 0.6 percent in the first quarter of 2008. With reports appearing last month that inflation had reached 18-year highs, the situation is not improving. The New Zealand economy shrank 0.3 per cent over the three months to March. Official growth figures for the second quarter are due in September.
For the second quarter, the German economy, one of the biggest in the euro zone, contracted for the first time in nearly four years, shrinking 0.5 per cent. Meanwhile, the French economy contracted by 0.3 per cent over the quarter, as did Italy’s, while Spanish gross domestic product was up by 0.1 per cent.
As for the Asia side, Japan said its own economy had contracted in the second quarter, as falling exports and weak consumer spending sent Asia’s largest economy hurtling toward its first recession in six years.
This time round, the downtrend will be slower and more gradual as compared to the financial crisis more than 10 years ago. The main reason being that various governments are willing to pump in the cash and bailout banks who are on the verge of collapsing. They wanted to prevent mass withdrawal by the public. Those who are unsucessful may take to the streets so protests and riots may occur. Unfortunately, this is done at the expense of taxpayers’ money and the effects will be felt for many years to come.

Price Movement

This posting is not to encourage readers to trade. For most people, it has been proven that constant trading is detrimental to their investment return. However, as a retail investor, we should have a general knowledge of the signals that the price movement is indicating to us.

The price movement of a stock is dependent on the demand and supply of the stock, which in turn is influenced by the buyers’ buying interest and the sellers’ selling interest. Every buyer or seller has different purposes when entering into a trade. The followings are general “rules”, which provide us with some hints on whether the stock price will probably go up or down. One should not view these “rules” as a foolproof method that will hold true all the time. There are certain occasions that market manipulators might be using these “rules” to mislead the general public.

Rule 1: Buyers are showing small orders and sellers are showing big orders. However, the stock prices are holding quite well – buy signal.
A lot of selling orders with only a few buying orders on the stock may imply that the stock price would come down. However, if the stock prices are holding quite well, it could mean there are some net buyers accumulating the stock. The reason for this is buyers may refuse to show their buying orders to attract sellers to sell at the buyers’ buying price. Showing high buying orders may delay selling interest, as sellers will wait for the buyers to buy at their selling price. Hence, it is a “buy” signal if we notice the above rule on any stock.

Rule 2: The overall market is weak but your stock price is moving against the overall market trend – buy signal.
In a down market, if a stock that you own is inching up steadily despite the overall weak stock market sentiment, this may imply that there are some net buyers on this stock. This is viewed as a “buy” signal where buyers are eagerly accumulating the stock in spite of the weak market. In most instances, the stock price will move higher the moment the overall market sentiment recovers.

Rule 3: Stocks carry a lot of bad news and are trading at high volume but stock price remains stable – buy signal.
Sometimes a certain stock is facing huge bad news but the stock price is holding on quite well. Normally, it may imply that buyers are not worried about the market concerns on this stock. The current stock price may have discounted all the bad news.