8 Days in Japan - Day 5 in Kyoto

Jul 17, 2017 -

Day 5 in Hakone, Ashigarashimo - Kyoto

Key Highlights

- Breakfast at Aura Tachibana

- Take the Shinkansen (Bullet Train) to Kyoto
- Check into Prime Pod in Kyoto
- Walk to Gion District
- Lunch at fast food Japanese place
- Visited Otowa Waterfall at Kiyomizu Temple
- Shrimp tempura udon dinner at Sanshiki
- Matcha shaved ice dessert

The night before, Aura Tachibana gave us a choice of a 7:30 AM breakfast at or sometime earlier. My travel partner and I decided that we would take the last possible breakfast time because we wanted to enjoy the Japanese hot springs (onsen) more. We went to the meal in traditional Japanese clothing provided by the hotel. Again every dish was introduced to us and the food was amazing. There were pickled vegetables, squid sashimi, rice, miso soup with a crab claw, a whole fried fish, and some vegetables that we could dip in delicious sauce. By the time we had finished our meal, everyone else had left. The entire hotel staff was waiting for us. As we left they all bowed. It was then that I made use of my Japanese and thanked them for the meal. Check out was at 10:00 AM and we were definitely sad to leave.

This time instead of having to lug our luggage all the way to the metro station, we hitched a ride with a hotel driver. He dropped us off in front of the metro train station. Now that is service! Our next destination was about 5 hours away via the Shinkansen (bullet train) in Kyoto. Kyoto was the capital of Japan until 1868. It is known for its deep history in its Buddhist temples, imperial palaces, shrines and traditional houses. Geishas and female entertainers are often found in the Gion district.

Prime Pod Entrance
We purposely booked our stay at Prime Pod in Kyoto because it was only about a 5-10 minute walk from the metro station. The Prime Pod is a hostel located on the 9th floor of a skyscraper. Across the street are a bunch of street vendors and small shops catering to the large tourist crowd. In Japan there are a lot of these indoor restaurant malls except there isn't a door to get it. It's really just a huge open entrance. You are walking on the road and then next thing you know you've stumbled upon an indoor restaurant mall. Cars actually drive through the area, so it can be quite dangerous if you don't keep your eye out. One of the first things we noticed about Kyoto was that there were a lot more English friendly places than we saw in Tokyo. Maybe because the Olympics was held in Kyoto a couple decades ago?

After we checked into our hostels and dropped off our luggage, we went on a search for food. Lunch hour had passed and it was about 3:00 PM. Most of the restaurants we saw on the streets were closed or on break. Incidentally, we spotted a Japanese fast food joint with a lot of people. My travel partner made it seem like she wasn't hungry and didn't want to eat inside the fast food joint. So we decided to take the meal to go. After ordering an eel and egg with rice dish from the ticket machine, I handed the chef the ticket. We got our food in about 7 minutes.

My brother had warned me that people in Japan don't eat and walk at the same time nor do they eat on the streets. At the time, I didn't see any seats around and I forgot what my brother had said. So, we plopped down outside the restaurant and started to chow down in the middle of the street. Yeah, we got a couple glances here and there. Nobody said anything because they probably recognized that we were foreigners.

One of the things to do in Kyoto is to watch a geisha show. We made our way towards Gion district of Kyoto, but were disappointed as we only found super touristy geisha shows. They didn't get good reviews online, so we ended up passing on it. With no geisha show to watch and a couple hours to fill, we decided to head over to the Otowa Waterfall at Kiyomizu Temple. The temple was a finalist in for the New Seven Wonders of the World.

To get to the Kiyomizu Temple, you hike up a fairly steep paved road. It isn't a difficult hike because you are surrounded by touristy little shops selling Japanese souvenirs. When you get to the temple entrance, you'll see a ticket station to the right where they charge you about 400 Yen per person as an entrance fee. Once you get into the temple area and make your way to the other side of the temple, you can take stairs down to the outside lower level. There you will find three "waterfalls". Popular local belief has it that one is for longevity, another for love, and another is for knowledge. Supposedly you are to make a wish behind the falls and drink one cup. The courtyard was so large, we ended up staying until the temple closed.

Otowa Waterfall at Kiyomizu Temple
By this time the sun had set and we were chasing daylight. We decided to head back and look for a restaurant along the way. My partner was hangry. Yes, the wonderful combination of angry and hungry. Eventually we stumbled upon a small tempura udon shop at Sanshiki and since we hadn't eaten tempura or udon in Japan yet, we settled. I had the largest shrimp tempura in an udon at this place. The tempura was crispy and delicious. We decided that the tempura udon was not enough, so we got shaved ice and ice cream at a matcha place near our hostel. Both places didn't take credit card, so my cash balance was drained, but my stomach was satisfied.

Shrimp Tempura Udon 
Eventually, we wore ourselves out with walking around the touristy shops near our hostel. At that point, we decided to head for the hostel where we retired for the night.

8 Days in Japan - Day 6 in Kyoto/Nara
8 Days in Japan - Day 7 in Yamazaki/Osaka
8 Days in Japan - Day 8 in Tokyo
8 Days in Japan - Day 1 in Tokyo
8 Days in Japan - Day 2 in Tokyo
8 Days in Japan - Day 3 in Tokyo
8 Days in Japan - Day 4 in Hakone
[Continue reading...]

8 Days in Japan - Day 4 in Hakone

Jul 11, 2017 -

Day 4 in Hakone, Ashigarashimo

Key Highlights

- Arrived in Hakone via Metro
- Checked into Aura Tachibana Hotel
- Pirate Ship ride around Lake Ashi
- Public Onsen at the Hotel
- Dinner at Aura Tachibana
- Private Onsen

At 8:30 AM, my girlfriend and I left the Nihombashi Bay Hotel. We made our way to the metro station and were on our way to Hakone, which is about two hours south of Tokyo. Hakone is a popular tourist destination to experience Japanese hot springs. Originally we had decided to hike part of Mt. Fuji, but the weather suggested it would be too dangerous. Our back-up plan was to visit somewhere close enough to Mt. Fuji where we could see it.

When we arrived at the station, we used Google Maps to navigate to our hotel. Although we passed a couple restaurants and small shops, we knew we were in the country side. It was about a 10 minute up hill and side-winding walk to the hotel. The moment we started to walk up to the hotel, we were surprisingly greeted by a westerner. He started speaking English to us! The whole trip up till our Hakone visit, everyone started off by speaking Japanese to us.

Pirate Ship at Lake Ashi with a view of Mt. Fuji
My girlfriend and I were ready to check in, but they were still cleaning the hotel. One of the hotel ladies said that we could keep our luggage at the hotel. Luckily we had made alternative plans to visit the nearby lake. When we figured out which bus to take, it was relatively easy to follow the plan. We took one bus all the way to a small town with a large lake. I stepped out of the bus and saw this huge lake. Lone behold, we had the opportunity to ride a pirate ship around the Lake Ashi. Although it was a bit pricey at about $15 per person, we did it anyways. One side tip, I would recommend buying the tourist package deal at the metro station. It saves you money on bus and also you get to ride the pirate ride. Individually, we probably would've saved like $20 bucks had we done that.

To offset the costs we spent at the Two Michelin Starred Omotesando Ukai-Tei, we decided to grab lunch at the local 7-11. Actually, there weren't that many food options, so we had to settle. Ramen and a rice ball were the two things we paired with two cold tea drinks for lunch. We probably spent about two and a half hours near the lake. There isn't that much to do other than taking a ride on the pirate ship. At the gift shop, they sold cheesecake Kit Kats!

One of many dishes for dinner at Aura Tachibana
We eventually made our way back to the hotel via the bus. Either the Japanese bus driver didn't really like the fact that we couldn't speak Japanese or he disliked that we didn't load our Suica cards with enough money to pay for the bus. We had enough cash to cover the bus right though, it just wasn't loaded on our cards. In any event, when we got back to the hotel, we were given a brief tour of where the public hot spring was. Then we got to our hotel room and saw a private onsen!

Private Onsen at our Hotel
Dinner was served at 7:30 PM, which was an incredible 2 hour experience. The meal was different from the Teppanyaki place in that it consisted of more traditional dishes. We were definitely full when we finished eating. Not only did we have a great view during dinner, but the server introduced each dish. After dinner, we just chilled and relaxed in the private osen.

8 Days in Japan - Day 5 in Kyoto
8 Days in Japan - Day 6 in Kyoto/Nara
8 Days in Japan - Day 7 in Yamazaki/Osaka
8 Days in Japan - Day 8 in Tokyo
8 Days in Japan - Day 1 in Tokyo
8 Days in Japan - Day 2 in Tokyo
8 Days in Japan - Day 3 in Tokyo
[Continue reading...]

8 Days in Japan - Day 3 in Tokyo

Jul 4, 2017 -

Day 3 in Nihonbashi, Chūō - Shibuya - Taito - Asakusa - Tokyo, Japan

Key Highlights

- Breakfast Japanese Pancakes at Shinwase no pancake Omotesando
- Walking around Uenoonshi Park
- Tourist shopping around Ameya Yokocho
- Japanese Curry Lunch at Bondi jinbocho
- Visiting the Emperor's Imperial Palace
- Exploring Sensō-ji Buddhist temple
- Dinner at the Two Michelin Starred Omotesando Ukai-Tei

My travel buddy and I woke up and the first thing she wanted was Japanese pancakes. The Japanese pancakes are known for their fluffiness and lightness. We found a place in Shibuya at Shiawase no pancake Omotesando. The underground metro took us about twenty minutes from the hostel and then we walked about ten minutes to get to the hidden cafe. When we got to the pancake place, we noticed that you had to take the stairs down to get to the cafe. Luckily for us we came early enough around 8:00 AM to escape the line that would form just after we left. They were delicious to say the least and definitely not something I've found back in the United States.

We then backtracked and made our way to Uenoonshi Park in Taito, which probably took about 40-50 minutes from Shibuya. When we arrived at Ueno station, we noticed a huge shopping area across the street in Ameya Yokocho. There were a lot of street vendors trying to sell cheap stuff or touristy things. We passed by a crepes place that we sadly did not get to try. There were tons of little adorable Japanese trinkets, which I presume would've made good souvenirs. We even stumbled upon a small bakery selling animal shaped pastries near the Ueno station.

This is the Imperial Palace where the Emperor lives!
Uenoonshi Park itself was huge. We walked through the temple area and passed by a couple gardens. As with most high traffic places, there were street performers. I watched a westerner play a huge cello on the side of the street. Unfortunately, we didn't get to explore all of the park, I would have definitely loved to strolling around longer.

By the time we was finished exploring Uenoonshi Park, it was getting pretty close lunch time. We had some hungry bellies to feed. So off we went to look for our next food adventure. We had made plans to meet up with a buddy of mine in Chiyoda at around 1:00 PM. He is from the States, but lived in Japan for almost three years. We picked that spot because we also wanted to see the Tokyo Imperial Palace. This is where the emperor and his family lives. Nowadays the emperor and his family are largely figureheads much like the King and Queen in Britain. The family's palace was enormous and surrounded by a body of water, which created a huge moat. At every entrance there were multiple guards surrounding the premises. The grounds were immaculately kept. I can only imagine how much of the Japanese tax payer money goes to ensuring the place is secured and maintained.

Let's not speak of the bill, but enjoy the memories that came with the experience. 

In any case, our stomachs made the case for food. Luckily, we found a hole in the wall curry place that locals frequent. Bondi jinbocho was hidden just above an old bookstore where the entrance was in a back alley. We had difficulty finding it, but was able to ask a local couple on the street for help. Actually, my travel partner found it before they had a chance to figure out what I was saying. When we arrived it was around 1:00 PM. We were already late in meeting our friend. But he had to run some errands so he encouraged us to continue with our quest for food. The wait was about 20 minutes and well worth it as it was by far the best Japanese curry I've had anywhere in the world. Though you have to take that statement with a grain of salt. I've only eaten Japanese curry in the U.S. and now Japan.

We met up with my friend close to the Imperial Palace and circled around it to take pictures. There is a famous spot where you can take a picture of the water and have the backdrop be one of the palace's buildings. The Japanese do not allow people inside the Imperial Palace without being in a tour group and there wasn't that much to see outside, so we left after about 30 minutes. Our next stop was Sensō-ji Buddhist temple in Asakusa, Tokyo via Tokyo Station. Tokyo station itself was remodeled with a 1920s kind of theme. This was around the time when they were trying to westernize Tokyo.

Sensō-ji Buddhist temple with a bunch of people
Sensō-ji Buddhist temple is Tokyo's oldest temple and a famous touristy location easily recognized by the large lantern dangling at the entrance. Once you enter the temple grounds, there are a lot of different vendor stands to the left and right leading up to the temple itself. We spent some time at the temple just walking around and admiring the architecture. The crowds were enormous and there were a lot of school children on field trips.

By the time we finished at the temple, it was starting to get close to 7:30 PM. Another friend of mine had helped us make a dinner reservation at one of Tokyo's two Michelin starred Teppanyaki places. This would be our splurge meal and let me tell you it was quite the experience. Omotesando Ukai-Tei was located on the top floor of what looked like a shopping mall. My friend was kind enough to walk me to the door because he was also curious what the restaurant entailed. When I arrived at the door, I said in my broken Japanese that I had a reservation. The hostess replied quickly in Japanese and I was left befuddled. When I turned to my friend who was still standing beside me, he said, "she is asking for your name".

She welcomed us in and I bid farewell to my American friend. We were taken to a waiting area just past the hostess podium. I asked in Japanese if shoes were okay to wear at the waiting area, which they were. Immediately, I did a 360 view of my surroundings and noticed the high quality Japanese luxury decor. What have I gotten myself into? Am I going to have to pay an arm and a leg after we are all said and done? 

Within 5 minutes of sitting down, we were taken to our seats in another room. I could see the chef lined up and people from all sides were greeting us as we made our way to our seats. I'll have to admit, I was a bit nervous, so I asked to use the bathroom to gather myself. I asked in Japanese of course. To my surprise, the hostess led me straight to the bathroom door. When I came back to my seat, they started asking me in Japanese what would we like to drink. I was thrown off and told them I didn't speak Japanese. So, they started to speak English and asked if English was okay. Of course, I replied in Japanese yes. They got really confused when I answered them in Japanese, but told them that I don't speak Japanese. 

Anyways, when we finally ordered our drinks, they started pushing out the dishes. Now I am not a huge foodie, however there were some great dishes in front of me. My friend who made the reservation had already put in our orders. We had the abalone and Ukai selected beef course. The meal started with a small prawn marinated in jelly followed by foie gas roasted with eggplant and bonito marinated. When they made the Ukai-Tei's specialty abalone, it was steamed in its shell covered in a mountain of salt. The salt doesn't season the abalone, but instead was used to keep the abalone fresh and juicy. After the abalone, we had corn cream soup. The Ukai selected beef steak followed shortly after. I will tell you this is by far the best steak I've ever had. The steak melted in my mouth and had rich flavorful natural taste. It was cooked to perfection. We were then served steamed rice with small shrimps. By the end of the meal we were full.

Kobe Beef! Look at that meat marbleization!
When I was about to ask for the check, they insisted on taking us to another room for dessert and coffee with baked confectioneries! We were led to another part of the restaurant where we were allowed to select two desserts from a list of five or six. Then they brought out a cart with a bunch of desserts. We were in heaven. All in all, the meal took about 2 hours. Let's not speak of the bill, but enjoy the memories that came with the experience. 

When we finished our desserts, the hostess escorted us out of the 5 stories shopping mall. I thought she was going to walk me to the entrance and then just leave us. But, she literally walked us out to the street! I thanked her for the meal and left a satisfied customer.

We somehow found our way back home and knocked out in our pods.

8 Days in Japan - Day 4 in Hakone
8 Days in Japan - Day 5 in Kyoto
8 Days in Japan - Day 6 in Kyoto/Nara
8 Days in Japan - Day 7 in Yamazaki/Osaka
8 Days in Japan - Day 8 in Tokyo
8 Days in Japan - Day 1 in Tokyo
8 Days in Japan - Day 2 in Tokyo
[Continue reading...]

8 Days in Japan - Day 2 in Tokyo

Jun 26, 2017 -

Day 2 in Nihonbashi and Tsukiji, Chūō - Harujuku, Shibuya - Tokyo, Japan

Key Highlights

- Metro to Tsukiji Fish Market
- Wakaba Ramen Stand
- Tsukiji Sushisei Honten
- Shibuya Crossing
- Silkream Ice Cream
- One Piece Anime Gift Shop
- Meiji Shrine
- Harujuku Department Store and Window Shopping
- Menya Masashi Ramen

Lucky for us the flight wore us out the night before, so we knocked out at a reasonable time. Therefore we were not jet lagged at all. In the morning, we took advantage of the Nihonbashi hostel providing coffee and two croissants for breakfast.

After which, we immediately decided to head to the famous Tsukiji fish market where there were over 400 different types of seafood. Tsukiji fish market was a couple of subway stops from our hostel and less than half a mile of walking from the nearest subway stop. Along the way we passed a lot of skyscrapers and a couple of small restaurants. If you get to the Tsukiji fish market early enough say like 3:00 AM you have an opportunity to see the famous tuna auction. Evidently, we did not make that time.

Tsukiji Market Tuna with Head
At around 7:30 AM, we made our way down the outskirts of the fish market and stopped at our first food adventure. For the record, if you see locals line up, it is a good sign that the place is good. We had a second breakfast and this time it was a small ramen stand called Wakaba that barely fit the old couple running it. By the time we made it to the ramen shop, there was already a small line forming! I used my Japanese to ask for one bowl. The lady asked me to wait. Once the previous round of noodles was served, she took my order and I gave her my money. Apparently the ramen stand was featured in the New York Times as an article was taped to the side of the stand. Needless to say, the ramen was perfectly cooked and broth was flavorful, but not overly oily or salty. Definitely worth the 900 Yen or so.

Wakaba Ramen
By around 9:00 AM, we started to see random lines form in front of what looked like restaurants. Some of these restaurants just blend in with the building and look like people's houses. The Tsukiji marketplace had a tons of people trying to usher you into their restaurants. One booth purposely put out a large tuna head just to attract attention. When in fact they were only selling small pieces of the tuna for expensive prices. Other vendors would stand on a stool and pretend to be sorting out dried squid. One vendor had white strawberries, which were about 1,500 Yen or $15 USD. We hadn't seen anything like it before and had heard they were super sweet, but we resisted at the time.

The whole marketplace was about half a block. There were so many booths that we didn't know where to have our third breakfast. After circling the place about three times, we stopped at Tsukiji Sushisei Honten where it appeared to have a lot of locals lining up. We decided to line up as well not knowing if the place was good or not. After about a 30-40 minute wait the door opens and they start seating people. We were close enough to the front of the line to become one of the first 12 to be seated.

Sushi Restaurant with only 12 Seats. Best Sushi we had in Japan.

Not knowing what to get, we defaulted to the infamous omakase or meal selected by the chef. 12 pieces of sushi from the freshest fish market in the world ran us 3,600 Yen per person. The small and intimate sushi restaurant had 3 chef serving 12 people. I'm not sure if it was the fact that we were in Japan eating sushi or the fresh fish that made it good. But, every piece of sushi was incredible. You get different kinds of seafood in Japan then you do in the States. The toro part of the tuna is a lot better quality in Japan. We had a squid that was exceptionally smooth and tasty not chewy at all. We finished our third breakfast satisfied and ready to head towards Shibuya.

Exotic Fish and Delicious Mouthwatering Toro Sushi
Our next stop was Shibuya, Tokyo, which was made famous for the Shibuya crossing. Shibuya is also known for its fashion and nightlife. There are literally tens of department stores filled with people. After browsing through 9 floors of all women clothing and accessories, we found a department building with 8 floors of just men's clothing. All this walking meant we were ready to get some cremia ice cream. Creamia ice cream consists of Hokkaido milk and heavy whipped cream served in a thin cookie twisted into a cone shape. If you are looking to try this, we found ours at Silkream was where we spent $500 yen on one cone.

Cremia Ice Cream
One of my favorite stores was the Mugiwara store where I spent about an hour before purchasing three pieces of One Piece anime mugs and cups. We also stumbled upon a fruit store that sold some outrageously priced fruit. Something like a $50 USD (translated from Yen) cantaloupe. Ultimately we held off on buying any big purchases and the day was spent browsing because we didn't want to have to carry it throughout the trip.

One Piece Anime Shop in Shibuya
Next on our list was the Meiji shrine, which is also in Shibuya. The shrine itself is located in a forest consisting of 120,000 trees and over 360 different species. On the way to the main shrine up the hill, there are a couple touristy places to visit such as the cultural hall and large stacks of sake wine barrels.

When you do get to the shrine, it is important to respect the Shinto religion. You can do this by bowing at the entrance gate each time you enter and leave. Also by rinsing your hands and mouth at the temizuya and offering coins at the shrine. There is a certain way to do all of this, but it is easy enough to learn from others or by reading the instructions located near the temizuya. We witnessed two weddings ceremonies while we were at the shrine.

Near the Meiji shrine is the Harujuku metro stop, where we went down yet another busy street. We passed by a candy store with locally made candy. It was almost like a Sugarfina, but not as fancy. They made children's candy packaged in small pouches. Further down the street, we stumbled upon yet another department store. This one had a Starbucks on the top floor and then a Coldstones that served cotton candy surrounding ice cream in a cone.

More Ramen for Dinner
By the time we finished all of that, it was close to dinner time. We met up with a couple friends from United States who happened to have moved back to Japan after elementary school. Their English was not great, but we made it to Menya Musashi Ramen for our dinner. This was the first time in Japan where we saw a ticket machine. Instead of having a server take the order, there is a machine who does it. Basically what you do is put money into the machine and select the type of ramen you want. Then a ticket pops out and you give this to the chef. In any event, Menya Masashi Ramen is famous for there Tsukemen which is their dipping ramen. We ordered a couple bowls of that. All of us agreed the broth was a bit fishy, but still tasted great.

For the after dinner, we struggled between going to a bar for drinks or just doing something more low key. We learned from our Japanese friends that the Japanese love to drink and unwind after work. First we ended up at a loud drinking bar/restaurant. When we noticed that the crowd was college freshmen, we decided to go to some where quieter and get shaved ice. A lot of the department stores have specialty restaurants on the bottom floors. The malls close around 10:00 PM, so we decided to retire for the night after the scrumptious matcha shaved ice.

8 Days in Japan - Day 3 in Tokyo
8 Days in Japan - Day 4 in Hakone
8 Days in Japan - Day 5 in Kyoto
8 Days in Japan - Day 6 in Kyoto/Nara
8 Days in Japan - Day 7 in Yamazaki/Osaka
8 Days in Japan - Day 8 in Tokyo
8 Days in Japan - Day 1 in Tokyo
[Continue reading...]

8 Days in Japan - Day 1 in Tokyo

Jun 19, 2017 -

Day 1 in Nihonbashi, Chūō, Tokyo, Japan

Key Highlights

- Exchanged USD to JPY at a 7 Bank ATM
- Activated JR passes at Haneda Airport
- Metro and Walked to Hostel at Nihonbashi Muromachi Bay Hotel
- Ate Dinner at Ginza Noodles Clam Ramen at the Coredo Shopping Mall

It was Thursday night and I was rushing to the Los Angeles airport at 9:00 PM to catch my 1:00 AM flight. This would be my first experience in a foreign country in just over a year. My last international trip was ten days in Australia. We had planned a 9 days 8 nights vacation eating fest in Japan. This post documents our arrival and first night in Japan.

The flight to Japan was not direct as we had a 7 hour layover in Shanghai Pudong Airport. When we finally arrived at Haneda airport it was already two days later and nighttime. Aside from using the restroom in the airport, the first thing we did was to find the nearest 7 Bank or 7-11 ATM. The 7-11 ATMs don't charge my Capital One 360 bank account any fees. The best thing about them is that they will translate fairly close to the latest foreign exchange rate. After the ATM, we went to activate our Japan Rail passes in a nearby information center. We took the first metro rail out to our hostel. The reason why we chose this location was because it was fairly close to the famous Tsukiji fish market, Shibuya crossing, and metro stop.

Knowing my first day in Japan could've been my last, I thanked her in Japanese and then headed towards the direction she pointed. 

What you will notice in Japan is that the street signs mean nothing to foreigners. They are hard to read and it is even more difficult to figure out what street you are on and what the building address is. The street lighting at night was extremely dim. It made hauling our luggage difficult. All the while, I was trying to navigate us via Google Maps to our hostel. After walking back and forth for about ten minutes, I was at a loss.

Hostel Bay Hotel Entrance
It was time for me to go into a Lawson (common convenience store in Japan) and ask for directions. I had heard the Japanese were extremely helpful. Here was my chance to put my broken Japanese to the test and see if the rumors of helpful Japanese were true.

"Konnichiwa, kore (pointed to the hostel name) doko desu ka?" (hi, where is this?), I said to the lady working the register. She started firing off a bunch of Japanese, which I had no idea what she meant. She saw my puzzled face and started to walk outside of the shop and pointed in the direction of the hostel. All I could see was pitch black in the direction she pointed. I replied in English, "That way?". She nodded. Knowing my first day in Japan could've been my last, I thanked her in Japanese and then headed towards the direction she pointed.

We arrived in front of the Nihonbashi Muromachi Bay Hotel, the entrance was clearly labeled Bay Hotel. We had to enter two automatic sliding doors before getting to the lobby. One thing about Japanese hostels is that most of them make you take off your shoes. Call it an Asian thing or whatever.

We proceeded to take off our shoes and to the left of us there were lockers with keys. The idea was to swap out your shoes for the slippers in the lockers. We locked our shoes in the lockers and then took the key to the receptionist and told him that we were checking in. He then asked for our passports. When everything was said and done, I had a towel, toiletries, my room and locker key, and was on my way to the second floor where I would be staying for the duration of my visit.

A view of 4 Hostel Pods at the Nihonbashi Muromachi Bay Hotel
My room key let me into the men's locker room. Luckily enough, my carry-on was able to fit in the luggage locker. The hostels we stayed at in Japan had sleeping pods, which were individual rectangular shaped sleeping areas. Japanese hostels are extremely clean because they typically make you check out at 10:00 AM and spend the entire day until 3:00 PM cleaning. You aren't allowed back to the hostel during that time.

Finally it was time for the first meal of the day. Again we asked in broken Japanese, where was the nearest restaurant. He said down the street. We used Yelp and was able to find a tempura place, but found out that it was about to close. Then we went to a Japanese shopping mall nearby called Coredo. It must have had at least four floors and was connected to the subway. Our first meal of the day was ramen with clam at Ginza Noodles Clam Ramen.

Clam Ramen from Ginza Noodles Clam Ramen at the Coredo Floor 2
After dinner, it was getting pretty late, so we headed back through the dim lit streets of Nihonbashi and knocked out in our sleeping pods.

8 Days in Japan - Day 2 in Tokyo
8 Days in Japan - Day 3 in Tokyo
8 Days in Japan - Day 4 in Hakone
8 Days in Japan - Day 5 in Kyoto
8 Days in Japan - Day 6 in Kyoto/Nara
8 Days in Japan - Day 7 in Yamazaki/Osaka
8 Days in Japan - Day 8 in Tokyo

[Continue reading...]

Book Review - The Value Investors: Lessons from the World's Top Fund Managers

Jun 14, 2017 -

*About Mr. Ronald W. Chan

Mr. Ronald W. Chan is the founder of Chartwell Capital Limited, an investment management company based in Hong Kong.

Ronald holds Bachelor of Science degrees in Finance and Accounting from the Stern School of Business at New York University, and is a columnist whose informative articles appear regularly on Reuters and in The Standard newspaper in Hong Kong and Better Investing magazine in the United States.

In 2010, he published a book about the career successes of Warren Buffett's top managers - Behind the Berkshire Hathaway Curtain: Lessons from Warren Buffett's Top Business Leaders. In 2012, he published his second book, The Value Investors: Lessons from the World's Top Fund Managers, which focuses on the investment philosophy and careers of twelve value investors from around the world.

Overview and Thoughts about the Book

In The Value Investors: Lessons from the World's Top Fund Managers, Ronald Chan takes you on a journey into the minds of the world's greatest fund managers. The book is structured with a forward by Donlad Keough, Chairman of the Board of Allen & Company Inc., followed by a preface, then 12 chapters of lessons from fund managers that he gathered from interviewing them personally, and finally in the final chapter, a wrap-up and summation of the lessons. This book contains thirteen fully loaded and insightful lessons from the best fund manager each who have significantly outperformed their benchmarks over a long period of time.

The book starts with Ronald's interviews with well-known value investors in the United States including, but not limited to Walter Schloss, Irving Kahn and Thomas Kahn. Then the book moves into the Europe with lessons from fund managers including Jean-Marie Eveillard and Francisco García Paramés, and finally into Asia with the likes of Shuhei Abe and Cheah Cheng Hye. The Value Investors: Lessons from the World's Top Fund Managers is an incredible treat with many high quality fund managers all in one book.

Ronald meticulously dives deep into the core of understanding the investment mindsets of the world's most highly regarded value investors. Not only do we learn the details of their upbringing and career history, but we also learn to understand how each of them view value investing. He takes you on a wonderful journey through time and around the world. Each chapter focuses on an individual value investor's story including his struggles in life, how they overcame the difficulties, and eventually get to where they are today. Ronald has a unique ability to be able to extract and communicate to the reader incredible key insights from all the value investors.

Most books we've come across talk about the track recorded of value investors over a one or three year period. Or they focus on making market predictions versus understanding the process. But, we all know that it is the long-term track record that counts. We've already read about the likes of Warren Buffett and Charlie Munger through numerous publications. Ronald's book is different. It is an absolute treat to have different points of view from the world's most highly regarded investors insights at your fingertips.

“All in all, investing should be fun and challenging, not stressful and worrying. In an uncertain world, the practice of value investing is really a way to maintain a peaceful mind-set. By focusing on a margin of safety, thinking for the long term, and having patience, the goal is to achieve investment stability over time. In the process, investors may well achieve happiness and satisfaction in life” — Ronald W. Chan

Final Word

One of my biggest financial regrets was dabbling in technical analysis and not focusing on value investing during the time when the 2008-2009 financial crisis occurred. Had I had the The Value Investors: Lessons from the World's Top Fund Managers book, I'd probably be able to call value investing my full-time job. Nonetheless, I am perfectly happy doing it as a hobby with aspirations to do it full-time in the future. There will be other recessions around the world to be had and euphoria will come to an end in the world at different points in time. Focus on lifelong learning and we will be prepared for when the next time we have profound insight on a company whose price has fallen below the intrinsic value by a significant margin. Whether or not you've read other publications on value investing, The Value Investors: Lessons from the World's Top Fund Managers is definitely one that I would re-read again and again.

*Source: Amazon.com author bio and cover jacket of The Value Investors.
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25 Useful Japanese Words and Phrases When Visiting Japan

Jun 5, 2017 -

While in most places around the world you can get by with speaking English, Japan is one of those countries were the majority of people do not speak English. The Japanese culture is one that values respect, honor and quality. They will appreciate you making the effort to speak Japanese in their country.


You are looking for a couple for phrases or useful words just to get around Japan. We are not looking to learn the language to be fluent for your two week trip. I was able to get around with just these few phrases and words below.

1. sumimasen (su-mi-ma-sen)- excuse me or sorry

2. konnichiwa (kon-ni-chi-wa)- hi or good afternoon

3. konbanwa (con-ban-wa) - good evening

4. nihongo ga wakarimasen (ni-hon-go- gah-wa-kari-ma-sen) - don't understand Japanese

5. eigo dekimasu ka (eggo-de-ki-mas-ka) - speak English?

6. ____ doko desu ka - (do-ku-des-ka) - [Add or point to place] where is it?

7. arigato gozaimasu (are-yi-gato go-zai-mas) - thank you (formal way)

8. ___ arimasu ka (are-yi-mas-ka) - does it exist, do you have this?

9. gen ki desu ka (gen-key-des-ka) - how are you?

10. gen ki desu (gen-key-des) - I'm fine

11. go chisou sama deshita (go-chi-so-sama-desh-ta) - thanks for the meal

*In Japan, after finishing your meal, it is customary to thank the chef and your server for the meal. This is to show that you appreciate their efforts. There isn't really a word or phrase in English for this. We might say thank you very much. But, the above phrase will impress the Japanese especially if you are clearly a foreigner.

12. resutoran (res-tow-ran) - restaurant

13. eki (ey-key)- train station

14. torie (toy re)- bathroom

15. kouban (ko-ban) - police station

16. shoppingu mooru (shop-ping-gu-moo-ru) - shopping mall

17. pasupoto (pa-su-po-to) - passport

18. nakushimashita (na-kush-yi-mas-ta) - misplaced

19. kagi (ka-ge)- key

20. keitai (k-ey-tai) - cellphone

21. kaban (ka-ban) - bag

22. katsu (ka-su) - shoes

23. yo yaku shite imasu (yo-yaku-shita-mas) - I have a reservation

24. hitotsu (hi-tot-su) - one quantity when ordering

25. futatsu (fu-tat-su) - two quantity when ordering
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5 Essential Must Know Tips Before You Go to Japan

May 31, 2017 -

Should you get a Pocket WiFi or a Sim Card?

A couple years ago, when I was traveled to Australia, I bought a local sim card at the airport for about $20 USD to use over seven days. At the time it was barely enough for me to use Google Maps and search things to do and places to visit with the capped data plan.

For my trip to Japan, I opted to rent a pocket WiFi instead of getting a sim card. When you are traveling with multiple people, everyone can tether to the pocket WiFi whereas with a sim card only one phone is able to connect to internet. In addition, you can get unlimited data plans for the duration of your trip. The cost of a pocket WiFi for seven days in Japan was about $50 USD. WiFi is definitely necessary when traveling in Japan because there is not free WiFi everywhere.


The subway and metro systems in Japan are extremely complicated, but Google maps will tell you which lines to take and transfer at, if necessary. Before my trip to Japan, we reserved our pocket WiFi with HISGO. The great thing about this is that the company will mail the pocket WiFi to your first hotel or hostel destination. From there you just pick up the WiFi at the hotel or hostel reception. Towards the end of the trip, all you have to do is put the WiFi with its charger in the pre-stamped envelope and drop it off in a mailbox at the airport. We had no issues with the WiFi and the pocket WiFi itself easily lasts the whole day on a single charge.

Get a Japan Rail Pass (JR Pass)

In Japan, the railway, subway, and public transit systems are run by several different companies. The JR line is one of the companies that allows foreigners to purchase an unlimited transit pass good for multiple days. While the JR pass will not let you travel freely on all rail lines, JR is one of the bigger rail companies.

Though you can buy the pass in Japan, it is highly recommended that you do so before arriving. It will definitely cost you more to buy the JR pass in Japan. For about $255 you can travel on JR lines for seven days. They also have longer term options. For example, traveling from Tokyo to Osaka on a normal priced JR ticket will cost you at least $200 round trip. You definitely save money with the JR pass that is only exclusive to foreigners. The pass gets you access to the speed trains and all the local lines on the JR.

When you buy the JR pass it is recommended that you activate it upon your arrival at the Narita or Haneda airports. There should be information desks where they can help you with that. They are able to change the start date of the pass and offer any other travel tips. For example, say you want the pass to start on your second day of the stay in Japan instead of the first because you don't feel like you will be using it the first day.


Another tip when traveling from city to city is to get seat reservations at least a day in advance. For most JR bullet trains (Shinkansen) there is a section of the train for reserved seating and non-reserved seating. If you don't reserve your seat at the train station, then you might be forced to stand for long periods of time. For example, Tokyo to Osaka is about a 4 hour train ride.

Use Google Maps to figure out which train you will be taking and at what time. That way the attendant can make seat reservations for you. What they will do is put a stamp on your JR pass for your seat reservation and give you a ticket. It probably took us about ten minutes from waiting in line to getting the seat reservation. Best of all, it is free to make reservations. Highly recommended to do so.

Make reservations prior to arriving in Japan. 

My friends and I are big fans of whiskey. The famous Yamazaki distillery is on the way to Osaka from Tokyo. Make sure to make reservation in advance for the self-guided tour or about guided tour. For the guided tour, I think you should make reservations at least three months in advance. They fill up fast. It is definitely worth it if you are a whiskey fan.

It's a small visitor center, but they have a whiskey tasting section. They have a list of whiskeys that they don't sell to the general public that you can taste. It is super affordable. For example, we tried 3 different whiskeys. A 15 year Yamazaki, 17 year Hibiki and 12 year Hibiki tasting cost less than $10 USD.

To get to the Yamazaki distillery is very easy. Just take the JR line to the JR Yamazaki Station and make a right when you get out of the station. From there follow the Yamazaki signs for about ten minutes. You'll then be brought past some rail tracks and on to the distillery campus.


Better to Fly into Haneda or Narita?

If you are planning to go to Tokyo, which I assume you are, then it is better to fly in to Haneda Airport than Narita Airport. The reason is because Narita is about 2 hours by rail away from Tokyo proper, Japan. Haneda is about an hour via rail from Tokyo proper. Haneda Airport is even closer if you decided to stay on the outskirts of Tokyo. You'll want to spend as much time vacationing as possible versus having to deal with transit times.


Where is the best place to exchange your US dollar to Japanese Yen?

From my personal experience, the 7 bank or 7-11 ATMs in Japan do not charge withdrawal or foreign exchange fees on foreign cards. Your bank may charge you fees, but if you use the Capital 360 Mastercard debit card there are no fees. When I arrived at the Haneda airport, I went straight to a 7 bank ATM and withdrew money without being charged a fee. The great thing about this is that it automatically converts your USD to Japanese Yen at the current exchange rate.


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Places to Go When You Have a 7 Hour Layover Near Pudong Airport

May 25, 2017 -

Get the Best Deals on Flights from California, US to Japan

Rumor is to get the best deal when flying to Asia, you should book your flight 129 days prior to your departure date. That is approximately four and a half months in advance. 

If you are willing to take a 5 to 7 hour layover in Shanghai, you can find a number of flight deals to Japan. The airline I found on my trip to Japan was with China Eastern. 

If you are planning to go to Tokyo then Haneda airport is the one you want fly into since it is about 20-30 minutes away from Tokyo versus Narita airport which is about 2 hours from Tokyo. 

If you are a U.S. citizen and plan to stay in China, they typically will require that you obtain a visa. However you don't need a visa to leave the airport if you have a layover before flying to another country in less than 24 hours. 

Model of Shanghai Maglev

When you arrive at Pudong airport, you'll want to follow the signs that go to the transit visa areas. You don't need to pre-register or anything. You just need to have your passport and flight ticket, tell them you have a layover, and they will stamp your passport for the temporary stay. 

Places to Go on a 7 hour Layover near Pudong Airport 

First and Only Maglev Stop from Airport
You can buy Maglev (magnetic levitation train) round trip tickets at the airport for 80 RMB. There is only one stop and it goes to a subway station. From there you'll have to hop onto the Shanghai Metro where you can then go out to Shanghai Disney (Line 11: Disney Resort Station) or Line 2: Lujiazui Station where all of the iconic parts of Pudong are like the Pearl Tower and lots of malls and restaurants. 

I'd recommend taking a taxi back to the airport to save time or at least to the Maglev station. If you take a taxi back to the station, it is highly recommended that you write it on a piece of paper or have some way of showing the cab driver where you want to go. It is highly likely that the driver won't speak English. 

At the first Maglev stop from the airport, if you are there early enough, you'll see street food. There you'll find a 85 degree bakery, a KFC and MacDonald's. Interesting enough, KFC was one of the first american chains to start up in China in around 1987. Both MacDonald's and KFC have some Chinese dishes that may be worth trying. 

Do rush back to the airport because sometimes there are security lines. They also ask that you take out all iPad like devices, external batteries, and bottles. It can take up to two hours to go through security. 
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5 Tips to Choosing Stocks from Walter J Schloss

May 10, 2017 -

"Walter J. Schloss was an American investor, fund manager, and philanthropist. He was a well-regarded value investor, as well as a notable disciple of the Benjamin Graham school of investing. Schloss averaged a 15.3% compound return over the course of four and a half decades. Warren Buffett named him as one of The Superinvestors of Graham-and-Doddsville." - Wikipedia


Walter was known to have owned a hundred stocks at once, focusing on the valuation and to a lesser extent the business economics compared to that of Warren Buffett's concentrated holdings. Walter enjoyed buying companies trading at their new lows. However, because these companies usually have issues, he would look for downside protection. This meant companies with low debt.

While different from Li Lu, Walter would not engage management as he did not believe he was a good judge of character. As he believe management could portray their companies in a brighter light than they actually were in. After all, who would follow a pessimistic CEO? Through the annual reports and proxy statements filed to the SEC and made available on SEC.gov, we can see the statistics of the company and whether or not management owned a fair amount of stock. In addition, you could learn about the company's history. 

The bottom line is to do everything in your power to not lose money. 

Summary of Key Points 

1) Look for opportunities where stocks have made new lows.
2) Avoid companies with large amounts of debt.
3) Review the company's annual reports and proxy and then make a judgment about the company.
4) Unless you are a good judge of people's character, don't talk to management because they could portray the company in a light different from reality.
5) Don't lose money.  
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4 Steps to a Pristine Mind and Unconditional Happiness

May 1, 2017 -

Grab the snow globe on your table. Give it a couple shakes. You'll notice that the snow that once settled at the bottom of the globe now covers the small town. Set the globe aside and eventually the snow settles back to the bottom of the globe and the small town is revealed.



Our minds are a lot like snow globes. Throughout the days we are bombarded with thoughts that augment and collide together. Eventually, all of our concerns, worries and expectations cloud our minds. As a result, we lose sight of the small town within. Often times this build up within our minds lead us to experience anger, fear, stress and unhappiness. The more clouded our minds are the more our negative thoughts feed off of the discourse within.

When you clear your mind, these mental constructions of anger, fear, stress and unhappiness subside just like when you let the snow in the globe settle. How do we clear our minds of such snowiness? In meditation, your mind is brought back to the present time. You let all our concerns, worries, and expectations that have built up over time settle.

Spend twenty minutes a day meditating and your anxiety and stresses will dissipate. If you want to clear your mind, focus on these four key steps.

1) Don't follow the past.
2) Don't anticipate the future.
3) Stay in the present moment.
4) Leave your mind alone.

If your mind is not in the past or in the future, it stays in the present. Twenty minutes of meditation a day will give you a whole day to enjoy everything throughout the day. Find happiness within yourself and you'll find happiness everywhere.

Our Pristine Mind: A Practical Guide to Unconditional Happiness

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3 Steps to Valuing Hidden Asset Companies

Apr 25, 2017 -

Hidden Asset Value Companies

Companies like Coca-Cola are relatively easy to value. As we all know Coca-Cola sells various drinks. You can judge the market size, the growth, and their margins. In short, you can get a pretty good handle on its estimated valuation.


Companies that are not as easy to value are commonly referred to as hidden asset value companies. They tend to be a bit more complicated to value because of their different initiatives, financial characteristics, when their net operating losses expire, or what happens when there is a takeover. Basically, you’d have to do a lot of custom detailed research and it takes a long time to work through. You have to untangle the story.

One way of doing this custom research is to:

1) Define the company’s different lines of businesses. 
2) Separate the components and identify the business drivers of each. 
3) Value each of the components. 

When you do this there will be a bunch of offsets like pension liability, debt, and other hidden liabilities. Ultimately, you get to a net asset value of the company.

While it is not necessary to value all companies this way, this is one way to value a complex business.
 

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What Does it Take to become a Contrarian Value Investor?

Apr 17, 2017 -

How do you become a contrarian if most of us, if not all, are innately born to follow the crowd? For starters, some of you may have that mutated gene to be a contrarian. Aside from possessing that mutated gene, being a value investor depends on how you view risk.


Charlie Munger has always said that one of the best ways to solve a problem is to invert it. It gives you a different perspective. While most of us are focused on the upside of investments, take the time to invert your perspective and look at what you can lose.

Ask yourself, what can I lose and what would cause the pain. Focus on mitigating your undesirable outcome will keep you in the game longer.

When the group gave the right answer, Tony agreed. And when everyone gave the wrong answer -- Tony still agreed.

Unwittingly, Tony had demonstrated Berns' point precisely. The group's influence on Tony profoundly altered the results: He went from 90 percent on his written test to 10 percent when he heard the others' answers.

Most investors can recant their losses better than their gains. While losses are inevitable, it is how you continually refine your strategy that defines you. The more you learn from your mistakes the closer you get to developing into a stronger value investor.




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Excel Tip #18 - Add One Year or Months to a Date

Apr 11, 2017 -

In finance and accounting we are constantly looking back or forward. Suppose you've been tasked to create a complex lease schedule or even a simple mortgage payment spreadsheet. While you can manually type in the dates for your 30 year mortgage schedule, that is most definitely time consuming. You don't want to have to type everything in from 5/10/2017 all the way to 5/10/2047.

Suppose there was a formula that would be able to help you add one year to a date or even one month. What would that formula look like and how would it work?

Here is a two step process on how to quickly add one year to a date or even add one month. 

1) Use the EDATE() function and fill in the brackets () with the cell in which your start date resides

2) Follow your start date cell with a comma and then enter in the number of months you'd like to add



For more excel tips, be sure to visit the rest of our site.


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How to Scale a Business - Netflix CEO Reed Hastings

Mar 12, 2017 -

How does Netflix hire?

Netflix doesn't try to hire perfectly. If instinctively the manager feels like there is potential or would like to give the employee a try, the company will make the hire. You use a lot of data when picking stocks; but when you pick a spouse, you don't use a lot of data. The more emotional gut feeling involved then the less useful data is. And they use Linkedin for references. If within a certain period of time, they discover it isn't a good fit then they move them out. When doing so, it is important to be upfront and honest with the person.


When Netflix hires, they are looking for first principal thinkers. People who question things, are curious, and self-confident

During the on-boarding of new employees, management would go over a 100 slide PowerPoint deck. At the end of it, 2 out of 3 employees would understand what it all meant. But because there were some forward remarks in there, the other 33% would not. Some forward remarks included "adequate performance gets you a severance package" or "we are a team not a family". To those who didn't get it, they were slightly taken aback. It was as if they were ambushed. 

The decision was made to make the information available to every candidate. That way they are upfront with the culture. If every candidate got it then it would essentially be public. So that is what Netflix did. Netflix decided to just make it public. In addition, when something is written down it allows for more debate, which could lead to more collaboration and improvement. 

Reed attunes hiring and employment similar to that of running a professional sports team. Every year you compete for your position. For the company/team to be great, you need to have great people in their respective positions. When people were no longer good fits for the company, he would proactively provide them with severance packages. If he didn't do this, then the employee would probably undergo a three month behavior correction program and then when all of that is documented then that person would be let go. Either way there is a cost. There are three benefits to this methodology. First would be that the employee doesn't feel as bad because a minimum of 4 months pay is doled out. It is almost a bribe to the manager letting that person go, so he or she doesn't feel as bad either. Thirdly, there are no employee lawsuits because of the severance. 

What kind of culture should you build?

Strong cultures work regardless of what kind of culture they are. Weak cultures are essentially diverse cultures whereby people don't understand each other. 

Netflix didn't approach culture with "what is the most theoretical efficient culture?". Instead it was about the group of people working there and what they valued most. That was working with talented people. 

When the company was forced to downsize after the dot com crash, Reed thought that they would barely be surviving. Instead they got more productive because there was less "dummy proofing necessary" and everyone could focus on doing it right and fast. 

When Netflix became publicly traded, the employees were worried about less freedom and more control. However, quite the opposite happened. The company's managers focused on setting context to issues. They inspired and led people rather than micromanaged them. This involved explaining what they were trying to do. What constraints there were. Whether or not they needed to do it 100% precise or if there could be room for an approximation and then tidy it up afterwards. If you set it up this way there is less micromanaging. 

What is the role of the CEO?

The role of the CEO varies at different stages of the company. The first couple years you do everything from washing the dishes to coding to marketing and dealing with investors. You have so many disadvantages that you have to make up for it with talent and brute force. At every 5x or 10x you have to adapt to be more strategic, but still be a great leader. On Reed's scale, he is looking at whether or not they should focus globally or original content. But, he doesn't pick which country to be in or what shows. He delegates that down.

What are scale businesses versus network businesses? 

The bigger get scale economic businesses get the lower the marginal customer cost. Examples of this include Amazon and Netflix. You do have to run up losses to some extent before you start to make a profit. When Amazon and Netflix were smaller, they grew at great rates such as 80% and eventually down to 25%. These are good growth rates. A company can start 2-3 years before you do, but with scale you can knock them out.

Linkedin and Facebook are network effect businesses. The prize of being first is much larger than a scale business. For example, it could be worth selling 90% of the business to raise a billion dollars. It is a winner takes all business. In these kinds of businesses, you get these crazy practices where you grow by 300% to maximize opportunity. 

In network effect you get more of the first is forever because of the barriers to entry. Think of a barrier as how much pricing power you have. A ton of pricing power means you can raise prices and it is still hard to come after you.  


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Book Review - Shoe Dog: A Memoir by the Creator of Nike

Mar 1, 2017 -

About Phil Knight

Phil Knight is best known for being the co-founder and former CEO of Nike, multinational corporation that is engaged in the design, development, manufacturing and worldwide marketing and sales of footwear, apparel, equipment, accessories and services. Phil is a philanthropist giving away millions each year to support health care, higher education, and other causes, primarily in his home state of Oregon. He also the author of Shoe Dog: A Memoir by the Creator of Nike.



Overview and Thoughts about the Book

In Shoe Dog: A Memoir by the Creator of Nike, Phil Knight takes the reader on a front seat ride through his journey from borrowing $50 from his father to start a shoe company to creating one of the most profitable retail brands in the world. As many others have said before, including Warren Buffet in his 2016 Berkshire Hathaway shareholder letter, "Phil is a very wise, intelligent and competitive fellow who is also a gifted storyteller."

In a time where Adidas and Puma dominated the shoe market, Phil Knight and his business partner and coach Bill Bowerman overcame tremendous odds to create a company to compete on the same level. Phil takes us through with tremendous detail his business negotiations with not only the Japanese manufacturers, but his bankers, employees, how he met his wife, and even chalks up a couple life lessons he's learned along the way.

“What if there were a way, without being an athlete, to feel what athletes feel? To play all the time, instead of working? Or else to enjoy work so much it becomes essentially the same thing.” —Phil Knight

He reveals his secrets of how he become a successful entrepreneur. In the early days while working on Blue Ribbon, Phil juggled working firstly with Price Waterhouse, and then Coopers & Lybrand. Then became an accounting professor at Portland State University (PSU). The reason he did so was so that he could stay on his feet or in effect somewhat hedge his bet against his business, while growing his business at the same time. But, he quickly quit both to focus on shoes.

As someone who has been more curious about how businesses thrive and build competitive advantages, Phil offers enormous insight using Nike as somewhat of a case study. He had a great business partner in Bill Bowerman who was constantly inventing and improving shoes for his Olympic athletes. In addition, his extreme passion for sports and shoes helped him get through the ups and downs. By combining constant innovation from feedback from athletes on the highest levels, athletic endorsements, and shrewd manufacturing tactics, Nike became what it is now today.

Final Word

While Shoe Dog is largely a book about Phil Knight and Blue Ribbon becoming Nike, towards the end of the book Phil parts with some encouraging life lessons over his seventy plus years. For those that are less business oriented, these alone are noteworthy tidbits. He like many other successful individuals highly recommend that men and women in their mid-twenties not settle for a job or a career. Instead, find a calling. The fatigue and disappointments in life will be easier managed and your highs will be much more gratifying. Overall, this is an entertaining and contains a lot of useful business lessons.

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17 Key Takeaways from Berkshire Hathaway's 2016 Shareholder Letter

Feb 25, 2017 -

Warren Buffett's Berkshire Hathaway shareholder letter offers a vast amount of insights into business, life and investing every year. The 2016 Berkshire Hathaway shareholder letter is no exception. We have distilled the 29 page letter into key takeaways with added commentary below.

The italicized text is what we have added, while the normal font is directly taken from Warren Buffett's Berkshire Hathaway shareholder letter. You can find all of Warren's other shareholder letters on the company aggregated in a book.


Berkshire Hathaway's 2016 Shareholder Letter Takeaways

Over time stock prices gravitate towards intrinsic value. That's what has happened at Berkshire, a fact explaining why the company's 52-year market-price gain- shown on the facing page- materially exceeds its book-value gain.

Intrinsic value is the true inherent value of a business when considering  both tangible and intangible factors. The book value is the value as depicted by the businesses' books, which can be subject to accounting quirks. For example, amortization and depreciation expense. Later described below. The market price may or may not reflect true intrinsic value. In the long run, the price of a company gravitates to its intrinsic value. 

Unfortunately, I followed the GEICO purchase by foolishly using Berkshire stock – a boatload of stock – to buy General Reinsurance in late 1998. After some early problems, General Re has become a fine insurance operation that we prize. It was, nevertheless, a terrible mistake on my part to issue 272,200 shares of Berkshire in buying General Re, an act that increased our outstanding shares by a whopping 21.8%. My error caused Berkshire shareholders to give far more than they received (a practice that – despite the Biblical endorsement – is far from blessed when you are buying businesses).

Warren has made several mistakes in paying for companies using Berkshire stock. Included of which was Dexter Shoes, whereby the business went to zero. To compound that mistakes, he paid in Berkshire stock, which is now worth tens of billions. He gave up more than he got. As Berkshire gets larger and their cash balance builds, they are less likely to pay for acquisitions with share than with cash.

You need not be an economist to understand how well our system has worked. Just look around you. See the 75 million owner-occupied homes, the bountiful farmland, the 260 million vehicles, the hyper-productive factories, the great medical centers, the talent-filled universities, you name it – they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776. Starting from scratch, America has amassed wealth totaling $90 trillion.

However our wealth may be divided, the mind-boggling amounts you see around you belong almost exclusively to Americans.

Warren has often said that the luckiest humans are the ones who are born today. The reason is because we've made tremendous strides in all facets of life. The issue we have to deal with is how all that wealth is divided. Right now it is concentrated in a small group as compared to the entire U.S. population.

During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted. Investors who avoid high and unnecessary costs and simply sit for an extended period with a collection of large, conservatively-financed American businesses will almost certainly do well.

This is counter-intuitive and precisely why you'll make money if you follow it. Warren often says, "Be fearful when others are greedy and greedy when others are fearful." In the long-run if you buy good businesses, you'll do well. 

For continuing shareholders, however, repurchases only make sense if the shares are bought at a price below intrinsic value. When that rule is followed, the remaining shares experience an immediate gain in intrinsic value. Consider a simple analogy: If there are three equal partners in a business worth $3,000 and one is bought out by the partnership for $900, each of the remaining partners realizes an immediate gain of $50. If the exiting partner is paid $1,100, however, the continuing partners each suffer a loss of $50. The same math applies with corporations and their shareholders. Ergo, the question of whether a repurchase action is value-enhancing or value-destroying for continuing shareholders is entirely purchase-price dependent.

Not all share repurchases are equal. Ideally, you'd want the business to repurchase shares when they are below intrinsic value. Otherwise it is just like buying an overpriced business

To recap Berkshire’s own repurchase policy: I am authorized to buy large amounts of Berkshire shares at 120% or less of book value because our Board has concluded that purchases at that level clearly bring an instant and material benefit to continuing shareholders.

Berkshire's total shareholder equity is approximately $286B as of 12/31/16. Per Google Finance, the total market cap is $420B, so we are significantly above book value. A market cap of $343B or 120% of shareholder equity, would be a good time to buy Berkshire shares. 

Insurance

One reason we were attracted to the P/C business was its financial characteristics: P/C insurers receive premiums upfront and pay claims later. In extreme cases, such as claims arising from exposure to asbestos, payments can stretch over many decades. This collect-now, pay-later model leaves P/C companies holding large sums – money we call “float” – that will eventually go to others. Meanwhile, insurers get to invest this float for their own benefit.

At bottom, a sound insurance operation needs to adhere to four disciplines. It must (1) understand all exposures that might cause a policy to incur losses; (2) conservatively assess the likelihood of any exposure actually causing a loss and the probable cost if it does; (3) set a premium that, on average, will deliver a profit after both prospective loss costs and operating expenses are covered; and (4) be willing to walk away if the appropriate premium can’t be obtained. Many insurers pass the first three tests and flunk the fourth. They simply can’t turn their back on business that is being eagerly written by their competitors. That old line, “The other guy is doing it, so we must as well,” spells trouble in any business, but in none more so than insurance.

Warren distills all insurance business models in these two paragraphs. What differentiates successful insurance companies from unsuccessful ones is their ability to underwrite to obtain the appropriate premium. A lot of businesses will underwrite even at a loss. What happens is those companies eventually they have to pay out and they can lose significant amounts of money. Such was the case with Genworth (GNW), which at one point underwrote their insurance at a huge loss. 

It was clear to me that GEICO would succeed because it deserved to succeed.

Charlie Munger often echos this similar thought. The best way to get something is to deserve it. For example, to deserve a great partner in life, you need to be a great partner. 

Regulated, Capital-Intensive Businesses

All told, BHE and BNSF invested $8.9 billion in plant and equipment last year, a massive commitment to their segments of America’s infrastructure. We relish making such investments as long as they promise reasonable returns – and, on that front, we put a large amount of trust in future regulation.

BNSF, like other Class I railroads, uses only a single gallon of diesel fuel to move a ton of freight almost 500 miles. Those economics make railroads four times as fuel-efficient as trucks! Furthermore, railroads alleviate highway congestion – and the taxpayer-funded maintenance expenditures that come with heavier traffic – in a major way.

The railroad business is a great business. There are huge barriers to entry including the capital investment piece (which could be a double edge sword) and the fact that you can only have one railroad in one place. It is similar to that of the electric utilities business, whereby it's impractical to have multiple electricity lines going to and from the same places. Warren has shifted towards these high capital intensive businesses because of how big Berkshire has gotten. 

Manufacturing, Service and Retailing Operations

This collection of businesses is truly a motley crew. Some operations, measured by earnings on unleveraged net tangible assets, enjoy terrific returns that, in a couple of instances, exceed 100%. Most are solid businesses generating good returns in the area of 12% to 20%.

Of course, a business with terrific economics can be a bad investment if it is bought at too high a price.

In its essence, the less capital you invest with greater cash generation, the better the business. However, you can pay too much for a business and that becomes a bad investment. When you pay up for a business, you are paying for future earnings and it could take years before the business' intrinsic value catches up to the price you pay. During that time, you may realize less than desirable returns. 

On that page, we show that the 2016 amortization charge to GAAP earnings was $1.5 billion, up $384 million from 2015. My judgment is that about 20% of the 2016 charge is a “real” cost.

But the problem still prevails, big time, in the railroad industry, where current costs for many depreciable items far outstrip historical costs. At BNSF, to get down to particulars, our GAAP depreciation charge last year was $2.1 billion. But were we to spend that sum and no more annually, our railroad would soon deteriorate and become less competitive.

Accounting has some peculiarities. You may purchase software and based on past experiences let's say you need to replace it after 5 years. So you pay upfront for the software costs, but the costs on the books is taken over the 5 years. Five years later, the technology didn't change that much and you are still using that software. While your initial cash out is a true cost, the amortization doesn't reflect true economic cost because there is no replacement cost or maybe it might cost you half the amount. In railroad, depreciation expense is different as Warren has described above. 

Charlie and I cringe when we hear analysts talk admiringly about managements who always “make the numbers.” In truth, business is too unpredictable for the numbers always to be met. Inevitably, surprises occur. When they do, a CEO whose focus is centered on Wall Street will be tempted to make up the numbers.

When companies are pressured either from internal or external forces to meet numbers, they have a tenancy to be tempted to make up the numbers when they aren't really met. This can lead to a whole slew of issues including whether or not shareholders can trust management. For example, Comscore Inc.(SCOR) recently misreported revenues and its stock price took a huge hit and is currently trading over the counter. It subsequently missed its required SEC filings due dates. 

Listen carefully while I tell these enablers that stock-based compensation usually comprises at least 20% of total compensation for the top three or four executives at most large companies.

Back to reality: If CEOs want to leave out stock-based compensation in reporting earnings, they should be required to affirm to their owners one of two propositions: why items of value used to pay employees are not a cost or why a payroll cost should be excluded when calculating earnings.

Many companies show stock-based compensation as not true costs. In GAAP (Generally Accepted Accounting Principals), the expense you incur from issuing stock as compensation to your employees/director is considered an expense. After all, accounting says you are giving up a part of the business. Many companies will show Non-GAAP measures in order to bolster what they believe is the "true cost" of the business. 

Finance and Financial Products

Clayton’s earnings in recent years have materially benefited from extraordinarily low interest rates. The company’s mortgage loans to home-buyers are at fixed-rates and for long terms (averaging 25 years at inception). But Clayton’s own borrowings are short-term credits that re-price frequently. When rates plunge, Clayton’s earnings from its portfolio greatly increase. We normally would shun that kind of lend-long, borrowshort approach, which can cause major problems for financial institutions. As a whole, however, Berkshire is always asset-sensitive, meaning that higher short-term rates will benefit our consolidated earnings, even as they hurt at Clayton."

Given that you consolidate Clayton into Berkshire, how does higher short-term rates benefit the consolidated earnings if it hurts Clayton? Maybe Warren is looking at the fact that overall, higher short-term rates is better for other pieces of Berkshire. Therefore, he dismisses Clayton's use of short-term borrowing. Feel free to chime in on this. 

Investments

Sometimes the comments of shareholders or media imply that we will own certain stocks “forever.” It is true that we own some stocks that I have no intention of selling for as far as the eye can see (and we’re talking 20/20 vision). But we have made no commitment that Berkshire will hold any of its marketable securities forever. That principle covers controlled businesses, not marketable securities.

Well this debunks the myth that everyone thinks Buffett holds businesses forever. When Berkshire buys controlled businesses, they evidently become the majority stakeholder if not 100% owner. There's a different aspect involved when you are in charge of the livelihood of all its employees and such versus being a minority shareholder in a large corporation. 

Before we leave this investment section, a few educational words about dividends and taxes: Berkshire, like most corporations, nets considerably more from a dollar of dividends than it reaps from a dollar of capital gains. That will probably surprise those of our shareholders who are accustomed to thinking of capital gains as the route to tax-favored returns.The rationale for the low corporate taxes on dividends is that the dividend-paying investee has already paid its own corporate tax on the earnings being distributed.

This is an interesting tidbit that I otherwise would not have known. 

“The Bet” (or how your money finds its way to Wall Street)

Now, to my bet and its history. In Berkshire’s 2005 annual report, I argued that active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund. (See pages 114 - 115 for a reprint of the argument as I originally stated it in the 2005 report.)

Finally, there are three connected realities that cause investing success to breed failure. First, a good record quickly attracts a torrent of money. Second, huge sums invariably act as an anchor on investment performance: What is easy with millions, struggles with billions (sob!). Third, most managers will nevertheless seek new money because of their personal equation – namely, the more funds they have under management, the more their fees.

The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.

So basically just invest in low-cost index funds if you don't have the desire or want to research companies.
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