Wise Wealth Advisors

D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Archive for the ‘Giving’ Category

Gold Savings and Cancer Cure

Posted by Muthu on February 13, 2011

My contribution has appeared in the Q&A of current issue (dated 20.02.11) of Nanayam Vikatan which has hit the stands today. Thank you NV!

For those of us who feel 30% taxation in India is high can take consolation from the following data provided by Nanayam Vikatan.

In Sweden, the income tax rate is 59.17%. Likewise income tax rate for few other countries are as follows: Denmark- 59%, Netherland- 52%, Finland-51.5%, Austria-50%, Belguim-50%, Canada-48.25%, Israel- 46% and our unfriendly neighbour China- 45%.

Of course in western countries higher tax rates are matched by better social security. The only security we’ve is the guy standing outside the apartment with a blue uniform and a stick, paid out of the monthly maintenance fee collected from us!  

We’ve written in the past about poor performance of companies under Reliance Anil Ambani group. Some clients asked us last week about Reliance mutual fund coming under this group.

Mutual funds do not own either your money or the securities. They are with the custodians, supervised by trustees. Mutual funds only manage the assets for a fee. As long as the performance of a fund is good, there is no reason to move the money out.

I do not see a need to link the performance of the group companies while evaluating a mutual fund scheme.

For example, LIC appears very sound and profitable. But many of their mutual fund schemes are performing poorly and we do not recommend schemes of LIC mutual fund to our clients.

All mutual fund houses run under a premise that not all the investors would demand money at the same time. Something similar to your bank. If all the depositors demand money from the bank at the same time, a bank would cease to exist.

At the time of financial calamities, every banker dreads this scenario known as ‘bank run’.

If you recollect there was a beginning of a bank run with a leading private bank in 2008. Timely intervention by RBI and the finance minister saved the day for the bank.

In case of a fund house, the usual settlement period is T+3 days. This is for a normal redemption. Assuming all investors demand money at the same time, it would take a while to liquidate all the securities and pay the money. In such cases regulator may intervene, merge the fund house with another or take any other action which is in the best interests of investors. Only the regulator knows what it would do depending upon the situation. I can only guess.

However I can quote one example. In late 2008, due to global financial crisis, there was a huge redemption pressure on FMPs (Fixed Maturity Plans). There was an asset- liability mismatch due to the tenure of the security and immediate pressure on redemption. RBI opened a liquidity window to all mutual fund houses to meet the redemption pressure. The crisis was effectively managed with the help of RBI.

FMPs were subsequently restructured removing the redemption option before the tenure of the investments.

All I can tell you that mutual fund industry is well regulated in India. Protection of investors’ interest is of paramount importance to the regulator. As you are aware, value of mutual fund investments are subject to market risks. This is something inherent for all mutual fund investments. However given the regulatory structure, I do not see any fund house disappearing with the investors’ money. There is no need for fear on this front.

We never write about individual funds. We want to make an exemption and write about two unique offerings commencing this week which are not there in the industry so far.

First is the Gold Savings Fund offered by Reliance. Now investors can buy, hold and sell 24 carats gold without the hassles of storing it in the physical format. There is also no need for demat account and pay brokerage for each transaction. This fund holds the Gold ETF in demat form and issue an account statement for the same. This is similar to your other mutual fund investments where the fund house holds the securities in demat form and issue an account statement for the same.

Another example is like holding the money in bank and getting the bank statement. The money is safely held by bank and you can obtain one more statement if you loose or misplace the existing one.

Buying physical gold from banks or jewellers involves significant mark up price and wastages are also significant in many cases at the time of reselling it. Storage cost and risk of theft is also high.

You can be sure of the purity here and there is no entry load. There is also no exit load if the units are held for more than a year.

For gold owned through mutual funds, there is no wealth tax irrespective of the amount.

It is further tax efficient as holding of more than a year is considered as long term and the taxation is like that of a debt product.

One can invest as a low as even Rs.100/- every month in gold.

We would advise you to start saving gold through SIP mode for social occasions like daughter’s marriage etc.

We generally do not advice to hold more than 10% of one’s asset as Gold. Gold is a good inflation hedge. It does not provide superior returns like equity or real estate in the long run.

Like any other commodity, gold also goes through bull and bear cycles. The current bull cycle started in 1999. The last bear cycle lasted between 1980 to 1999.

Whenever there is war or any global financial crisis, gold becomes the most sought after commodity. However in the long run, gold has proven to match only inflation. So at best gold protects your capital from inflation. Also in a county like India, gold has lot of social value.

I do not know how the global financial situation would pan out in the next few years. The price movement of gold is likely to be correlated to this scenario.

However all I can suggest, for all your social needs, buy gold through SIP instead of buying it at one go. Likewise, invest up to 10% of your total assets in gold through SIP.

As far as investing lump sum is concerned, only invest smaller amounts. Given that gold has had a more than a decade of bull run, it is safe to be cautious and opt SIP route.

The next one is the debt fund for cancer cure, a social initiative by HDFC.

This is a 3 year debt fund rated AAA (so) by CRISIL. This is a capital protection oriented income scheme.

To support the social cause, there is no investment and advisory fee charged by the AMC. I understand that there is no expense ratio at all and the entire income is fully passed through.

There would be annual dividend. The investor has the option of donating 50% or 100% of the dividend income.

The dividend donation beneficiary is Indian Cancer Society (ICS).

Section 80G benefit is available for the donations made through dividend.

Minimum application amount is Rs.1 Lakh and in multiples of Rs.1000/- thereafter.

Assuming you opt for 50% dividend donation, you would still end up earning better than your savings bank account and would also receive the capital back at the end of 3 years.

We would be glad if each of you can invest atleast Rs.1 lakh in this scheme.  By this

1)    You would be donating a decent sum every year for 3 years towards cancer prevention and eradication

2)    You would also get a return superior to your SB A/C after donating 50% of your dividend income

3)    Your capital also would be back in your hands after 3 years.

Hats off to HDFC and Mr. Deepak Parekh for this initiative.

You now have option of SIP in gold and philanthropy for cancer cure.

You may choose either or both or neither!

Posted in Giving, Gold, Media, Mutual Funds | Leave a Comment »

The Unfortunate Billions

Posted by Muthu on August 6, 2010

This article is dedicated to billions of unfortunate people, about whom I am going to write today.

Before that some musings, as usual.

Being a ‘Personal Financial Advisor’, I come across a wide spectrum of people. Majority of  them belongs to ‘Higher Middle Class’ and ‘Middle Class’. HNIs and ‘Lower Middle Class’ constitutes a smaller portion.

One thing I notice in significant number of people is the sense of inadequacy, though they are financially adequate. We forget the fact that we are lucky to be among a small percentage of global population who have money or assets worth speaking about.

I’m really surprised when I come across Crorepathis feeling insecure and extremely anxious about their finances than my maid or driver.

I’m amused when our relatives (many of them are very rich) evaluate me on what (they think) I own. They are most curious to know how I’m managing my livelihood and sympathise me for quitting a ‘good job’ and is ‘foolishly’ doing something. Many of them neither understands nor tries taking effort to know what I do. Their ‘anxiety’ was high especially when I was operating from our ‘Home Office’ and now they should have been bit relieved that ‘I’m doing something’ from a separate office.

All these people understand is Money, Possessions and Activities which should be visible to their eyes. Since they are lucky to have these, many of them are snobbish, high handed and are in the continuous rat race of acquiring more and more till they drop down to death. They do not value knowledge, thinking, reading and other finer aspects of life.

Why should I live to impress someone? As Will Rogers says ‘Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like’.

I know about my networth, which are in financial assets and hence not visible to them. Why should I declare them that? If they want to respect me for what I am, then it is fine. I don’t value the respect I receive based on what I own. Likewise I respect people for what they are and not based on their money and possessions.

I’m glad that I’ve lot of friends, wellwishers and clients who values me for what I am. Also I work with people whom I enjoy working with. Unfortunately one cannot choose his relatives. Simply they happen to be one.

I wanted to share today some facts and stats today on the extreme inequality and poverty our world is facing today. I’m sharing this so that we do not complain about we do not have but be grateful for what we’ve been endowed with.

Since the whole life is interconnected, let us think about our unlucky brethren and do whatever possible from our end to alleviate their suffering.

To quote my mentor Warren Buffet, ‘If you are in the luckiest 1% of humanity, you owe to the humanity to think about the other 99%’.

Now let us come to the facts and stats of poverty, worldwide.

Almost half the world, over three billion people, lives on less than $2.50 a day.

At least 80% of humanity lives on less than $10 a day.

More than 80 percent of the world’s population lives in countries where income differentials are widening.

The poorest 40% of the world’s population accounts for 5% of global income. The richest 20% accounts for three-quarters (75%) of world income.

The wealthiest 10% accounts for 59% of all the consumption and the poorest 10% accounted for just 0.5% of overall consumption.

The GDP of the 41 Heavily Indebted poor countries is less than the wealth of just the world’s 7 richest people combined.

0.13% of the world’s population controls 25% of the world’s financial assets.

For every $1 in aid a developing country receives, over $25 is spent on debt repayment. The poorer the country, the more likely it is that debt repayments are being extracted from the people who neither contracted the loans nor received any of the money.
According to UNICEF, 24,000 children die each day due to poverty. And they die quietly in some of the poorest villages on earth, far removed from the scrutiny and the conscience of the world. Being meek and weak in life makes these dying multitudes even more invisible in death.

Around 28% of all children in developing countries are estimated to be underweight or stunted. The two regions that account for the bulk of the deficit are South Asia and sub-Saharan Africa.

Nearly a billion people entered the 21st century unable to read a book or sign their names.

1.6 billion People, a quarter of humanity, live without electricity.

Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn’t happen.

Infectious diseases continue to blight the lives of the poor across the world. Every year there are 350–500 million cases of malaria, with 1 million fatalities. Africa accounts for 90 percent of malarial deaths and African children account for over 80 percent of malaria victims worldwide.

1.8 billion People who have access to a water source within 1 Kilometer, but not in their house or yard, consumes around 20 litres per day. Millions of women spending several hours a day collecting water.

Whereas in U.K the average person uses more than 50 litres of water a day flushing toilets. The average daily water usage is about 150 litres a day. The highest average water use in the world is in the U.S., at 600 litres a day.

A mere 12% of the world’s population uses 85% of its water, and these 12% do not live in the Third World.

Some 1.8 million children die each year as a result of diarrhea.

Close to half of all people  (50%) in developing countries suffering at any given time from a health problem caused by water and sanitation deficits.

Number of children in the world is 2.2 billion. Number of them in poverty is 1 billion (every second child).

10.6 million Children (size equivalent to total children population in France, Germany, Greece and Italy) died in 2003 before they reached the age of five.

1.4 million Children die each year from lack of access to safe drinking water and adequate sanitation.

2.2 million Children die each year because they are not immunized.

15 million children (similar to the total children population in Germany or UK) orphaned due to HIV/ AIDS.

In sub-Saharan Africa 80% of the population depends on traditional biomass (fuelwood, charcoal and animal dung) for cooking, as do 50% of populations of India and China.

Indoor air pollution resulting from the use of above claims the lives of 1.5 million people each year, more than half of them below the age of five, that is 4000 deaths a day.

Approximately 790 million people in the developing world are still chronically undernourished, almost two-thirds of whom reside in Asia and the Pacific. 

That is why ‘Giving’ is very important. Kindly click the link below to refer to the article I wrote recently in this regard.

https://wisewealthadvisors.com/2010/07/28/giving-2/

Humanity is one. Let us do whatever possible from our end.

(with inputs from ‘Globalissues’)

Posted in Basics, Economy, Giving, Muthu's Musings | Leave a Comment »

The Sage’s Son: What became of the Buffett billions?

Posted by Muthu on August 1, 2010

A bit lengthy article. But  in my opinion, a definite and worth read.

When the super-investor, Warren Buffett, gave a chunk of his fortune to his son, Howard, there was one proviso: it had to be spent on charitable projects. Paola Totaro goes on the road with the billionaire philanthropist.

It is a typical midsummer’s day, duck-egg blue skies, a wisp of cloud, not a hint of breeze. A convoy of vehicles is burrowing deep into the impossibly green mountains of rural Congo. The first, a flat-top, is bristling with men and machine guns and the last, a jeep, is driven by a brilliant young anthropologist who also happens to be heir to the now defunct Belgian throne. I am in the truck in the middle sitting next to the son of the second richest man in the world.

Howard Buffett, eldest son of the billionaire investor Warren Buffett, is a big man blessed with a big, easy laugh. As we hurtle past forests, fields and farms, you wouldn’t know it. The Illinois farmer, photographer and philanthropist has been awake all night fighting a kidney stone in a tiny hotel room in Kindu, one of Congo’s poorest and most miserable townships. He is not the type to complain. But he is pale and the last wretched hours are etched on his face.

We’ve been on the road a few days already: Rwanda first, then carefully, almost surreptitiously, with the help of the UN, over the border into Congo. He is travelling incognito in this dangerous, conflict-torn part of East Africa to avoid VIP fuss.

It has been this way since 2006, when Buffett Senior not only stunned the global financial community by bequeathing $30bn to the Bill and Melinda Gates Foundation, but also earmarked $1bn in family company shares to each of his three children. Raised in the knowledge that their father doesn’t believe in inherited wealth, the gift was a huge surprise, but the unusual caveat didn’t raise a blink from the siblings: the money was theirs but only if they could find ways to give it all away.

“My dad calls it the ovarian lottery,” says Buffett, gazing pensively out of the Land Cruiser window. “I could have been born in Bangladesh, I could have been born royalty, I could have been born black or Hispanic in America. But I was not. It was a lesson I learnt as a child from my mum, too. She said that with privilege comes responsibility.”

Ever since, Howard G Buffett has used his dad’s money to live his mother’s credo. The 55-year-old has travelled to 96 countries, spanning both hemispheres and every continent – except Australia. He has had an AK-47 poked into his chest in Ethiopia, been arrested in Bosnia, had his arm mauled by a cheetah in South Africa and held the hand of a young mother in Ghana as she watched her child die.

Today, he is swallowing painkillers to ensure the punishing schedule is not disrupted by his health. Buffett is here to get his hands in the dirt and see if the villagers who are testing sustainable farming techniques funded by his Foundation really are reaping rewards, or if there’s a way to get more bang for his (billion) bucks.

“I’ve been to Africa countless times and I have learnt something every time,” he says. “The 20th visit was different to the 40th visit which will be completely different again to this one.” Buffett’s understanding of the countries to which he channels aid is best expressed through his photography: unflinching gazes into the eyes of the dying, children wracked by disease, old women traumatised by violence, babies born to a world with very little. There is the spirit of the foreign correspondent in him, driven by adrenalin and a better story or picture just around the corner. Last year, with National Geographic, he produced a spectacular tome documenting his travels and the Foundation’s work. Not one of the 15,000 print run will be sold, but every US Congressman and Senator in Washington has a copy.

Ensconced in the rattling truck, the farmer-turned-philanthropist outlines an ambitious new plan for his Foundation, evolving from a traditional aid and development charity to a powerful advisor geared to help Washington shape food security policies for the developing world.

Unlike his father, who has spent a lifetime happily communicating his investment philosophies worldwide, Howard has been a virtual unknown until now. Last year, the head of a major anti-poverty think-tank told the New York Times that she hadn’t seen Buffett – or his ideas – out there: “He’s not reclusive, but he’s a kind of to-the-ground person,” said Julie Howard of the Partnership to Cut Hunger and Poverty in Africa. Buffett wants to redress that critique, conceding “I can’t change anything while being a hermit”.

“There is some vital work being done by the Gates Foundation, by the Rockefellers, the State Department,” he says candidly. “But I see a disconnect ? they all talk about yield as if farmers in Africa have a choice: to sow particular types of seed, to get to market. But these are the poorest, most disenfranchised farmers in the world. They often have a small plot of dust and that’s it.

“Give these farmers improved seeds and fertiliser and he might up his yield, but the important thing is high diversity crops so if one’s hit by drought, another might provide a bridge.

“We’ve helped many people, and it’s all needed, but I have also watched really poor policy being made ? and bad policy can wipe out all the good work. We want to affect change from the top rather than just from the bottom.”

These words from many others might spell pie in the sky, but this is a Buffett talking, and when a Buffett and his money talks, governments tend to sit up and take notice.

No matter what they do, Warren Buffett’s children are likely to be judged by the paternal gene. Howard carries the names of his grandfather, a legendary Republican Congressman, and yet some of his earliest memories are of his maternal side. And when it comes to his life’s work, he cites his mother, Susie, as his greatest influence.

“My maternal granddad was a Church of Christ minister,” he explains. “He was a staunch prohibitionist who’d put me on his knee and tell me not to drink. “I’d say, ‘Why not, grandpa?’ and he’d reply, ‘Because every time you drink alcohol it kills brain cells and Howie, you don’t have any to waste’.” The anecdote, delivered with infectious guffaws, is funny, but also seems a touch cruel. Buffett tells the story to explain why he is teetotal, but I wonder what effect the words, and their implication that he wasn’t smart enough, might have had on a young boy forced to grow up in the enormous shadow cast by his father.

Warren Buffett’s life story is the stuff of economic legend. Blessed with a prodigious mathematical brain and canny intuition, he made his fortune by picking under-valued stocks for investment and sticking by them with determined patience. His prowess over half a century gave him the nickname the Oracle of Omaha, and his wealth, estimated at $64 billion, has until recently been second only to Microsoft king Bill Gates. Buffett’s gentle eccentricities have earnt him cult status: he still lists hamburgers and Cherry Coke among his favourite foods, eschews the fast and furious strategies of Wall Street and lives in Nebraska.

Son Howard is a similar enigma: a character who can ooze compassion and humanity in one breath and a steely conservatism the next. Like Warren, he wears his homespun “I’m just a farmer from central Illinois” like a badge. He loves meat and minimal vegetables and, much to his GP’s frustration, avoids drinking water, instead living on two litres of Coke a day. I met Howard on an Italian coastguard’s boat during a mid-sea rescue of a refugee boat between Libya and Sicily. He was taking photos for his book. I wonder what it’s like for him to meet new people, knowing their primary response is probably shaped by curiosity about his father. And does having billions of dollars to give away put you on guard with everyone that you meet?

Buffett nods, his answer clear though wordless, and quickly returns to his mother: “When it comes to my work ? the biggest influence is my mum. When I was young, she used to take me to the Omaha projects, tough areas in the north of the city where kids really needed help.”

When he was five, the family opened their home to a young Sudanese refugee – one of the first to arrive in the US – and she lived with the Buffetts until she finished university. He also remembers a troubled local black boy that he mentored when he was a Cub Scout leader: “Watching mum try to help other people, getting involved in civil rights ? she worked tirelessly, trying to empower small organisations of African-Americans to make change in their communities.”

“He gets his head from me and his heart from his mother,” laughs dad Warren, who gives a rare interview about his family. “The money may have come from me but ? they [Howard and his siblings] reflect much more of their mother in their attitudes than they do of me. There is ? enormous support and great pride from me but they were learning these things from her when they were very small children.”

Susie Buffett, unconventional and free-spirited, left her husband and the family home in 1977 when she moved to San Francisco to pursue a career in music. The kids had all finished high school and while Warren was devastated, he accepted the unusual arrangement. The couple never divorced, took annual holidays together and retained an intimate friendship. Susie never stopped caring for her husband, even finding – and later encouraging – a relationship with the woman, Astrid Menks, who would become Warren’s second wife after Susie’s death in 2004.

Howard has also been unconventional, in 1982 marrying a woman not only nine years his senior but with four daughters by her first marriage. He and Devon remain happily married with a son of their own, Howard junior, who is in his mid-twenties: “I met her on a tennis court in California. She has been the most amazing, supportive person you could ever ask for who makes everything I’ve ever tried to do work.”

Significantly, the other Buffett children made career choices that echoed their mother’s passions. The eldest, “Little Susie”, has steered her philanthropic Foundation to children’s projects in poor Omaha neighbourhoods. Peter, aged 51, followed his mum’s love of music, writing musical scores for movies including the Kevin Costner epic, Dances with Wolves. His Foundation targets the education of girls in developing countries.

Howard concedes that his familial influences are a mass of political and social contradictions, from his arch-conservative grandfather and business titan, liberal Democrat father to his free-spirited and unorthodox mother, a champion not only of the poor but of women, abortion rights and population control.

In a later exchange of e-mails, I ask him how he reconciles his self-identification as a Republican, the philosophies of his altruistic mother and his work: “When a person needs help they are not a Democrat or Republican – they are a human being. Too often we get wrapped up in philosophy or how things will look.

“My mother taught me that the most important things in life come from inside of you. I’m not Republican or a Democrat inside – I’m a person who hopes I can play a very small role in improving as many lives as possible.”

The Congo township of Kindu is one of the most miserable, yet strangely exhilarating places on earth; scattered haphazardly at the feet of an active volcano, its streets are black from lava and fringed by row after row of tumbledown shacks. Life is defined by the rhythms of survival; every available space is covered with meagre produce – potatoes, firewood and beans displayed for sale on threadbare cloths, jerry cans of petrol, bottles of clean water and the occasional stall with second-hand clothes.

Buffett slows the car to point out a table piled high with what look like mud doughnuts stacked on broomsticks. Fashioned from scrap paper pulp, water and leaf litter, the briquettes are an alternative fuel trialled to save the habitat of the rare mountain gorilla. It may seem strange that in the midst of such human suffering, the philanthropist should be channelling resources into the plight of the gorilla but in Africa, when war and conflict are involved, everything is linked.

Every year, thousands of hectares of forest are burnt to make charcoal for people to cook and boil water. The refugee camps that circle the town have enormous fuel needs – and the very militia that drove people from their homes also controls the charcoal trade, hiking prices and using the profits to fund their arms.

The pilot project has worked better than they dreamed and Howard Buffett wants to see the production for himself, even asking workers how they think the product can be improved. But for all his interest, there is no guarantee of funding. Buffett, like his father, detests waste: projects are not funded if their impact is short term. But here, the potential is unlimited: “If I am somewhere that I can see I can do something that might work – and I see a partner with which we can do it – it’s hard for me not to go in there and do it.”

Buffett’s foray into global philanthropy began with animal conservation. Early on, his father had provided $100,000 for each of his children. Taken by the plight of the cheetah, Howard bought 2,500 hectares in South Africa and set up a private reserve and research station to secure vanishing habitat for the animals to breed.

But the more time passed, the more he was struck by the dissonance of focusing on animals while humans struggled to survive; it began to eat away at him. Buffett invested in land near the reserve where plant researchers are now working on drought-tolerant maize. He has not looked back since.

Howard Buffett, restless as a child and a bit of a troublemaker as a teen, found it difficult to deal with his dad’s emotional distance: “I used to misinterpret his tone to mean that he didn’t care about me,” he told Roger Lowenstein, author of the unauthorised 1995 biography of Warren Buffett. “It’s the exact same quality that makes him so good as an investor. There was no emotion in it.”

As we drive through the lush equatorial landscapes of North Kivu, the subject of his father comes up regularly. Howard says his twenties were a little haphazard: school, a couple of colleges, a little bit of real estate work, “then I bought a bulldozer and dug basements which got me into farming”.

At the age of 28, however, his Republican grandfather’s spirit reared its head: reading a newspaper, he noticed that two local government positions had become vacant. He ran and won office as Republican county commissioner in Omaha. Howard was elected for a four-year term but ended up resigning just before it ended to join Archer Daniels Midland (ADM), America’s biggest farm commodities processor. CEO Dwayne Andreas, credited with turning ADM into a global agricultural behemoth, was also one of the biggest political donors in US history. He gave to both Republicans and Democrats but will be remembered for contributing (illegally) $25,000 to Richard Nixon’s campaign via the Watergate burglar, Bernard Barker. Buffett had deep misgivings about leaving political office prematurely but, at 37, was fascinated by Andreas and agreed to take a senior managerial position.

“It was one of those times that you don’t know if you’ve made the right choice, but it turned out to be fantastic. ADM opened a whole new world to me.

“Have you heard of the movie The Informant?” he asks. (I read later that it stars Matt Damon, is set in Decatur, Illinois, where Buffett lives and tells the story of America’s biggest price-fixing scandal.) He tells me of the day in June 1995, when FBI agents knocked on his door: “The company was apparently involved in a major price-fixing scandal. I’m there thinking, what are my duties? I am spokesman for ADM worldwide. I am in charge of all investor relations ? I share all the political duties.”

The first interview lasted more than three hours. When it was over, he rang his father: “I said ‘Dad, you’re not going to believe what happened ? they have almost 400 agents out in the field interviewing several hundred ADM employees ? This is huge. Do you think I should resign?’

“And this is so classic of Warren Buffett. He doesn’t say you should resign or you shouldn’t resign. [Instead] he gives you a more important, key question to think about. He says to me: ‘Only you can decide that. But you don’t have more than 24 hours to make that decision’.

“And he was right. You are either in it or you are not in it.”

Buffett made a gut call, went to work the following day and left at noon: “The pressure on me was unbelievable; that expectation that if you are not with us then you are against us – big-time corporate America putting the biggest walls around themselves. And dad was right; you are either in it or you are not.”

Buffett went home to his wife and together they grappled with the fear that he had made the smartest – or the most stupid – decision of his career. It turned out to be the right call, but also the most difficult period of their lives. In the months that followed, the Department of Justice unearthed an international scandal. Three executives, including Andreas’ son Michael, went to prison and in 1997 the company was fined $100m, the biggest anti-trust fine in US history.

It was also life-changing for the Buffett family. Howard Junior, aged 11, had been in his father’s den when the FBI agent arrived: “The first thing he said after the agent left was, ‘Dad are you going to jail?’ I told him no and then he asked me if anyone I work with or know was going to jail. I had to say, ‘I don’t know’. I’m sure that I was reassuring but think, what does that do to a kid?” 

He may have appeared distant while the kids were growing up, but Warren Buffett’s voice exudes paternal pride and affection when he talks of his eldest son now: “He has managed to blend this love of farming with his empathy for people who have gotten the short straws in life.”

Howard’s own experience being a dad has been vastly different. He and Howie Junior have travelled together at least three times a year since his boy was 12: “Sometimes I felt that I pushed him to see too much. He was 15 years old when I took him to Bangladesh and there were people dying before our eyes. He became very uncommunicative. I said to Devon, ‘I think I’ve pushed him too much’. But he talked to his mother and he was OK. He has this amazing sense of humanity.”

Howie Junior, who now works in the White House on the Domestic Policy Council, has completed the Republican-Democrat generational cycle of the Buffett family. He says travelling with his father was a fundamental formative influence on his life.

“Everywhere we went was to determine something – to meet local people, to understand their problems, and then to try and determine what interventions would be successful. People welcomed us in their homes, gave us more food or drink than they could possibly afford to part with, and left us by asking that we not forget them.”

Family influence and legacy is more complicated: a nurturing mother and the unconditional love of a grandmother, a father who taught him integrity and a paternal grandfather with “immeasurable indirect influence”.

“Every father,” says Howard, “in some way, strives to right the wrongs of his own father. My father understood that any opinion he expressed to me would be taken as prescriptive, so he was wary of not directing me in my childhood. He allowed me to process and think through things independently. Philanthropy has been an integral part of my life. I could think of few things more fulfilling than to affect positive and lasting change in the lives of millions of disadvantaged people around the world.”

The Congo sun is blazing and a group of young farmers, men carrying scythes and women with babes at the breast, are crowded around a field. A heat shimmer rises from the earth and Howard is on his haunches examining the roots of a maize seedling. Encased toe-to-knee in rubber waders, he has tramped out into the dirt to see close-up how one of his pet agri-projects is going.

Here, the traditional slash-and-burn techniques that have depleted forests and worn out farming land, have been replaced with “no till agriculture” – a brand new notion for the local farmers. It’s what we would call mulching: land is cleared and all cut vegetation returned to the soil. At the same time, a field nearby is sown with the same seeds, with farmers using the old ways to allow for comparison of yields, seed growth and soil quality. This experiment is being repeated in scores of places to prove to the farmers that they will benefit.

Buffett wants to know what women think: after all, it is they who will do most of the field-work. It is clear that they are anxious about extra work and the time it will take to see results.

Buffett asks that they persevere. It might take three years to see the difference, he tells them: “I am a farmer. I use the same methods on my land. Some people give up but trust me, please. It takes time and it will get better.”

Walking back later, I chat with an official from the Catholic Relief Service, a partner in the scheme. She is a tough, no-nonsense black American aid worker who has led some of the toughest African missions and postings in her 30-year career and met many donors who visit to see their work first-hand.

“Howard is different; he’s hands-on and has this great humility. He is easy with people, they talk to him and there is a trust straight away,” she said. “But he’s also upfront about asking tough questions and it is clear he wants real answers.”

This project is just one experiment being repeated in scores of villages, not only in Africa but in Central America. It is a good example of sustainable agriculture, what Buffett calls “nurturing”, and a fundamental building block he believes is necessary on the road to food security. Water is the other, and $150m is being channelled into trialling new methods to secure reliable supplies: these are the basics he wants re-injected into the global discourse on food security. Genetic research to improve seeds, much of it funded by Gates, is not enough: “Current food security arguments are all based around easy answers and a quick fix, but there is no such thing,” he says.

“Africa is the only place where food production per capita has declined, soils have low fertility, three quarters of the land is depleted,” he says. “Farmers will stay trapped in poverty without a commitment to develop small-scale agriculture.”

The amount Howard Buffett’s Foundation gives depends on the market value of the Berkshire Hathaway stock – roughly $65m a year.

“It sounds like a lot,” he says, “but everyone’s resources have limits. My goal is to give away all the new money we receive each year. I do not see the point in increasing our endowment – why would you put money in the bank when people are dying of hunger or when people need clean water? I would rather judge our success by our impact on people’s lives, not the size of our bank account”.

(Courtesy: The Independent)

 

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Giving…

Posted by Muthu on July 28, 2010

As mentioned few days ago, I’m modifying and presenting you an article I wrote long back on ‘Giving’.

In my opinion, Money or Wealth basically has three primary functions 1) Current Consumption – spending for our life style 2) Savings and Investments- for our future safety or ‘rainy days’  3) Giving- what we spend for others. Most of us focus either on the first or second or both but completely ignore the last one.

For the last 3 ½  years, I’ve been an Investment advisor, Financial Planner, Trainer and Teacher and hence come across lot of people. I’ve made presentation on Wealth Building in various forums including Spiritual Organizations. So I feel that I’ve seen wide spectrum of people to obtain certain insights. When it comes to Money, the focus is primarily on either consumption or investment. But I feel that we should start giving equal importance to ‘Giving’- donations or charities.  

To some extent, all of us give some money to others for helping them. No doubt about it. But it is very random and impulsive. We are not as methodical or as planned like how we approach our expenses or savings.

I did some research about western societies on how they give. On an average, they donate 2.7% to 4.2% of their post tax earnings for helping the under privileged in their local community. One interesting observation I found was that the Lower and Middle income group donate around 5%  of their post tax earning where as the Rich and Ultra Rich donate close to 3% of their Post Tax earnings.

In Modern India, though we are rooted in a rich culture and tradition, I feel that giving is relatively less and is not in an organized manner.

You may ask me, since I’m talking about giving, what I’m doing for others. As I always tell you, even when I recommend investments, I eat the same food I serve others. So the same is the case with ‘Giving’ too.

Till  last year, even though I was considering myself ‘generous’, when it comes to helping others, I was also giving only on a random and impulsive basis. I did not plan for giving, like I used to meticulously plan my expenses and investments. On introspection, I felt that I need to change this trait of mine.

So in discussion with my family, I’ve made a decision. Either after next 2 decades or after I die, whichever is earlier, depending upon the life situation then, a minimum of 1/3 ‘rd to a maximum of 50% of my wealth would go for charity. Our family would form and run a trust along with some wellwishers towards this cause. The rest of my wealth would only go to my family.

I strongly urge you to read again, an article of Warren Buffett posted by us earlier, ‘I’m giving back 99% of my wealth, can you give atleast 50%’. Please click the below link to read his moving message

https://wisewealthadvisors.wordpress.com/2010/06/19/im-giving-back-99-of-my-wealth-can-you-give-atleast-50/

Literally, not philosophically, we came with empty hands and are going  to go back with empty hands. Whatever wealth we got is from the society only, and it is our duty give back atleast a part of it to society.

As Warren Buffett says ‘If you’re in the luckiest 1% of humanity, you owe to the humanity to think about the other 99%’.

People who read this article are either middle class or higher middle class or wealthy. Given the poverty in the world, we’ve been lucky to be part of the 1% of the humanity.

To quote Bhagwan Ramana Maharishi, “What one gives to the other, he gives himself’. If we look this statement in a narrow perspective, we may understand that if we give others, God will give more to us. But this is an incorrect way of understanding wherein we are making ‘Giving’ an ‘Investment’ for better returns in future. In a broader perspective, this statement means that we are all inter connected. In an inter connected world, pain and suffering of others affects oneself. That is why Ramana also used to say that ‘There are no others’.

For the purpose of this article, I’ve restricted ‘Giving’ to the monetary giving. As you all know, giving is not limited only to money. Giving can also be in the form of time, energy, kind words, listening with empathy, prayers, sending goodwill and peace through meditation etc. Some times these intangible giving is more valuable than monetary giving. Let us keep this perspective in mind while we donate money.

Also giving need not be restricted to the organizations which are registered under Income Tax and offering us Section 80G benefit. Giving can also extend to ‘unorganized group’ (i.e.) helping our maid servant’s children education, helping the old security guard for his medical expenses, feeding the poor old and disabled people we come across in streets etc.

I would strongly urge that let us give  atleast 3% of our income every year exclusively for the benefit of others. Other option is, if you are good in building wealth, ensure that atleast 10% of your wealth at the time of retirement or death, whichever is earlier, goes for charitable causes. This is only the minimum threshold, the more one is capable and willing to give, it is better for our society. In a country like ours, where around 800 million people are earning less than 2 dollars per day, we can understand how each one of us can make a significant contribution to the society through our giving.

Usually I write a lot on investments, wealth building on a regular basis. But had a strong urge to share my thoughts on giving with all of you.

Posted in Basics, Giving, Muthu's Musings | Leave a Comment »

Giving

Posted by Muthu on January 1, 2009

Wish you and your family a very happy, prosperous, healthy and wonderful new year.

 

Today we’ve stepped into the New Year 2009. There are people who take new year resolutions and there are others who say why one should wait for a new year day to take a resolution. Whichever category you belong to, I wanted to share few thoughts with you on this new year day.

 

In my opinion, Money or Wealth basically has three primary functions 1) Current Consumption – spending for our life style 2) Savings and Investments- for our future safety or ‘rainy days’  3) Giving- what we spend for others. Most of us focus either on the first or second or both but completely ignore the last one.

 

For the last 2 years, I’ve been an Investment advisor, Financial Planner, Trainer and Teacher and hence come across lot of people. I’ve made presentation on Wealth Building in various forums including Spiritual Organizations. So I feel that I’ve seen wide spectrum of people to obtain certain insights. When it comes to Money, the focus is primarily on either consumption or investment. But I feel that we should start giving equal importance to ‘Giving’- donations or charities.  

 

To some extent, all of us give some money to others for helping them. No doubt about it. But it is very random and impulsive. We are not as methodical or as planned like how we approach our expenses or savings.

 

I did some research about western societies on how they give. On an average, they donate 2.7% to 4.2% of their post tax earnings for helping the under privileged in their local community. One interesting observation I found was that the Lower and Middle income group donate around 5%  of their post tax earning where as the Rich and Ultra Rich donate close to 3% of their Post Tax earnings.

 

In Modern India, though we are rooted in a rich culture and tradition, I feel that giving is relatively less and is not in an organized manner.

 

You may ask me, since I’m talking about giving, what I’m doing for others. As I always tell you, even when I recommend investments, I eat the same food I serve others. So the same is the case with ‘Giving’ too.

 

Till 2006, even though I was considering myself ‘generous’, when it comes to helping others, I was also giving only on a random and impulsive basis. I did not plan for giving, like I used to meticulously plan my expenses and investments. On introspection, I felt that I need to change this trait of mine.

 

Hence I resolved and has started giving 10% of my post tax income towards charities from last financial year. Also my wife is sponsoring the annual cost of education for couple of needy children and is planning to do more. To have an external check, I’ve requested my Auditor to verify if my contribution to others is not lesser than 10% of my post tax income. For some reason, either I’m unable to find a suitable recipient or due to liquidity issue, if there is a short fall in giving, it would be automatically carried over to next financial year.  Since all my income and wealth is 100% accounted for (i.e. no black money), it is easier for my auditor to verify whether I’m carrying out the self imposed obligation.

 

A word here about my Auditor, Mr.S.Ravi. When I discussed the above issue with him initially, I also came to know about how much he is giving for charities, despite his huge commitments and liabilities. It is not appropriate for me to discuss further his personal details. All I can say is ‘Hats off to him and May his tribe grow’.

 

To quote Bhagwan Ramana Maharishi, “What one gives to the other, he gives himself’. If we look this statement in a narrow perspective, we may understand that if we give others, God will give more to us. But this is an incorrect way of understanding wherein we are making ‘Giving’ an ‘Investment’ for better returns in future. In a broader perspective, this statement means that we are all inter connected. In an inter connected world, pain and suffering of others affects oneself. That is why Ramana also used to say that ‘There are no others’.

 

For the purpose of this article, I’ve restricted ‘Giving’ to the monetary giving. As you all know, giving is not limited only to money. Giving can also be in the form of time, energy, kind words, listening with empathy, prayers, sending goodwill and peace through meditation etc. Some times these intangible giving is more valuable than monetary giving. Let us keep this perspective in mind while we donate money.

 

Also giving need not be restricted to the organizations which are registered under Income Tax and offering us Section 80G benefit. Giving can also extend to ‘unorganized group’ (i.e.) helping our maid servant’s children education, helping the old security guard for his medical expenses, feeding the poor old and disabled people we come across in streets etc.

 

I would strongly urge that let us give 1% to 3% of our income exclusively for the benefit of others. This is only the minimum threshold, the more one is capable and willing to give, it is better for our society. In a country like ours, where around 750 million people are earning less than a dollar per day, we can understand how each one of us can make a significant contribution to the society through our giving.

 

Usually I write a lot on investments, wealth building on a regular basis. But had a strong urge to share my thoughts on giving with all of you on this New year Day. Hence this article.  

Posted in Giving, Muthu's Musings | Leave a Comment »