Wednesday, February 14, 2018

Another school shooting

It is NOT the last one - many more to come.

It has not even been discussed much in our last presidential election by either party. They must have received a lot of contributions to their campaigns from NRA and gun manufacturers. Do not vote for politicians who do not talk about gun control.

Do something useful instead of saying condolences.We've prayed for thousands of years for world peace - God must leave us ourselves to fix our own problems.

We have more guns than citizens. It is not practical to have full gun controls overnight. However, there are many ways to limit the guns falling into the wrong hands such as criminals and mentally challenged. Semi automatic guns and the adapters should be banned if not already. Gun registrations should be reviewed thoroughly. Do we have a database for mentally challenged? Enforce gun regulations.Cut down violence in video games.

Hope some day we can send our children to schools, attend a concert or a movie without worrying being shot at.

Wednesday, February 7, 2018

When should we return to the market

I was asked when should we come back from WSB yesterday. Here it is:

In my book such as "Profit from the coming crash", the market timing has exit and reentry points based on technical. One uses charts and the other one does not.For a ballpark number, it COULD be 45% loss from the peak.

The above is assuming we've a market crash. For corrections, it could be 15% (10% average but adjusted due to the recent huge gain) loss from the peak.

The trillion-dollar question is: Is it a crash or a fierce correction? Many factors have been described in the book. However, corrections are harder to detect. A book is just a book. It is based on historical data (2 last market crashes for me) and every market is different. If you're very conservative like me, you should take actions. I've been too conservative having a lot on CDs for a while and missed some of the recent gain. Again, depends on your risk tolerance.

For conservative investors, use 40% for crashes and 12% for corrections (or even lower so you do not miss the boat at the risk of coming too early). If you feel the crash will last for a year, buy some CDs that mature in 1 year - better than your broker's account collecting virtually no interest.

You are responsible for your actions, NOT me.

Sunday, February 4, 2018

Superbowl day

Football and investing (written a while ago)



There are some similarities in football and investing with a few exceptions. Being a Pats fan, I was motivated by the impossible and greatest comeback of the Patriots in Super Bowl LI to write this article. Hence I use Brady/Belichick as an example as often as possible.

Belichick

He is the greatest chess player. In most of his talks after a win, he always shows he is the ‘loser’ in his monotone voice. He moves his facial muscles to a minimum. Politely speaking, he is boring. Do you want a boring coach who gives results? I sincerely like his boredom. I prefer him over the well-presentable x-CEO of Pennies or the best-seller written by a Ph.D. telling us to exit the market in 2009 (I am not 100% sure as I do not have his original edition).

Belichick and Brady’s philosophy

It is quite simple and most are applicable to investing and actually to most we do in life.

·         The coaches and players have to love football.
·         Work hard.
·         Evaluate all possibilities and prepare for them. Study the match ups.

In investing, select the stocks that have the highest appreciation potential at acceptable risk in the current market conditions. To illustrate, select high-dividend stocks when interest rate is low or defensive stocks in risky markets.
·         Understand the opposing coaches will work on your last hero; use the last hero as a decoy if possible.
·         Eat humble pies; do not motivate your opponent team.
·         Concentrate on your next game (next stock to trade in investing).
·         Multiple skills. If you say you play one position only, you do not fit into their system. Investing requires multi disciplines from evaluating, psychology to simple computer skills.
·         Draft the best players at reasonable prices. Brady is a sixth round pick. In investing, buy low and sell high.
·         The Pats never spend a lot on one or two players. In investing, we do not put all eggs in one basket.
·         Trade the player who does not fit in with the team such as the backup quarterback when Brady is playing at his peak. In investing, trade stocks to improve the portfolio.
·         Prefer players with potentials, not what they have accomplished. From the last two SB wins, God must be a fan of Pats. It is similar to trading value stocks.
·         A successful person does not depend on luck although luck has something to do with this Super Bowl win to me.
·         Take advantage of the misfits, changes and their bad decisions. The Falcons defense was exhausted for working too hard and too long in the first half. In the last quarter, Falcons could win easily by running with the ball. In investing, it is the contrary investing to institution investors but ensure they are really making errors.
·         Never give up. When you had 25 points to make up against a worthy opponent, do not give up.

It is a little exception in investing: Sometimes we have to give up bad stocks due to our original bad evaluations or the fundamentals change.
·         Brady and most successful quarterbacks throw the ball to the open receiver consistently, not always to the star receiver. In investing, it is called diversification.
·         Adjust your strategy if appropriate. Being a Monday quarterback, I would like the Pats to adjust the strategy in the start of the second quarter.

In investing, no strategy is evergreen and no metric such as P/E always works. Only use the ones that work recently – adaptive investing in my term.
 
       Football is a team work. Everyone in the team contributes. No one including Brady cannot be replaced. Hightower and White contributed a lot to the comeback. In investing, do not depend on your own research only but check out other researches from reliable sources.

Saturday, February 3, 2018

Why the market falls this week

Market update today.


The market drops 1,100 points this week, the worst in 9 years. The market cannot make record highs forever. As Trump takes over, it has been up almost 30% and now it gives back a little.

The fall of about 300 points during the week was due to several major companies talking how to fix the high cost of health delivery. It is no surprise.


The fall today is due to expecting the higher Treasury interest rate. The primary reason is the booming economy as evidenced by the better employment figures. It would boost inflation as folks have more money to spend. Comparatively, both the inflation and inflation rate are still low compared to historical averages. Hence it is not the reason to panic. However, it would make new bonds more attractive than stocks.

The trillion-dollar question: Is it the beginning of the market plunge?

Yes

·      -   The market has been fundamentally unsound (check out my article “Market Peak as of 7/4/2017”) and with this fall, short-term wise it is technically unsound. It is still sound long-term wise as evidenced by the 200-day single moving average or the 350-day single moving average.
·         - “What goes up must come down” – Newton’s Law of Gravity or elastic theory. Excuse me for my humor.
·        - Margin calls. Many traders buying stocks using margins are forced to sell when their stocks drop to specific values.
·      - The ones who control the market are the institution investors. They rotate stocks, sectors… I bet they’re moving to cash now ahead of the retail investors described next.
·      - Due to the recent rising market, many retail investors have moved their safe investments such as bonds, money market funds, Treasury bills, cash and etc. to stocks. Their moves usually are wrong and historically it makes a good  contrary indicator.
·       - When the market has been saturated and overbought as evidenced by technical indicators, there is no fresh money to invest into the market to move it higher.
·       - Being a global policeman takes a big hole in our economy and jacks up our national debts. It could weaken the US dollar.

No
·         With the corporate tax cut to 21%, companies should be more profitable except for those companies having their headquarters in some Caribbean islands. 
·         The low energy cost should bring more profit to corporations.
 -      Trump’s policy could boost up our economy even I do not agree with him on many issues.



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Update. As of 7/2017, the market is fundamentally unsound but technically sound. The over-valued market could stay for a long while. When the technical turns to unsound, it is time to exit the market. There may be false alarms but it is the price to pay for insurance. When the market plunges, it will be steep and fast. Adjust your actions to your risk tolerance. I recommend using trailing stops to protect your profits. I’m a retiree and am ultra conservative and I had most (besides my annuity) were in laddered CDs. From 7/2017 to today, I blamed myself every time the market made another record.

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When should we return (if you already left the market):
http://tonyp4idea.blogspot.com/2018/02/when-should-we-return-to-market.html

The Update of 7/2017 is from my book "Profit from coming market crash" available from Amazon.com.


https://www.amazon.com/dp/B078NYR9DD