Monday, September 19, 2011


CROX had perfect fundamental metrics. I bought some, and then it went about 25% down. I bought some more and it went down another 25%. I bought more and finally it went up 100%. I still lose money on the purchases as I did not buy enough on my last purchase.

1. You only make good profit when you buy a good stock at the right time.
2. Never buy stocks on its way down.
3. Stock shorters of good stocks will hurt you but eventually the last of them will screw themselves up - it does not apply to emerging markets though.
4. Ugly shoes have nothing to do with the profits of the companies that make them. Beauty has different yardsticks.

Friday, September 9, 2011

Job plan that does not work

The job plan has the same problem: spend, spend, spend and do not know how to get the money.

1. Pass our loan burden to our children.

2. Will have high inflation (not now due to the deflated prices of houses, but not commodities/gold) - an invisible tax for those who have.

3. Will raise our debt ceiling and hence will screw up the stock market.

4. Do not spend wisely.
Education starts at home, not at school. With 40% dropout of Black/Hispanic who will be the majority, we do not have a future even throwing money at schools. Money will be well spent to limit single parent families.

Creating more government jobs is not a good way to boost employment.

We should calculate the actual cost of each job created.

5. The most you can save is to end the two wars - check how many billions we can save a month. We really need to fix our economy and unemployment first. We cannot afford the two wars. Even with the mightiest army on earth, we're really a paper tiger if we cannot fix our internal problems. Same as Mao telling his starving citizens that you're the greatest citizens on earth.

6. Bite the bullet for all by increasing taxes, decreasing welfare/entitlements...

Obama is a good communicator but he should have acted far earlier to solve our economy problem that is created by the previous government. It is obvious Obama is buying votes for the next election.

We elect our leaders, so we have to blame ourselves. The major flaw is our political system to ensure our leaders plan for 4 years and not for the long term. We've more poor than the rich and each has one vote. However, after they're elected, they have to pay back for the special interest groups that have funded their campaigns. That's why democratic system also leads to corruption.

Politicians have to watch out for the benefits/welfare of the poor in order to buy votes. The rich will migrate to other countries with less taxes, and be rewarded for their investment and taking risks. So are the corporations moving jobs and investments overseas.

Greece has been illustrated what, why, and how thoroughly. Democratic system esp. the rich ones could lead to socialism/corruption, and socialism/corruption in turn could lead to self destruction of our society.

(c) TonyP4 2011. Written in 9/9/11. Updated 9/26/11.

Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.

Thursday, September 8, 2011

Defending China

The politicians like to put all blames on China, as they cannot fix our problems. It is not fair though Chinese are not angels.

* China is stealing our trade/military secrets.
Each country has to protect their trades, intelligent properties and technologies secrets. Do you think CIA and all the US spies are not paid to do same? I blame China or any country for stealing our secrets, but also blame ourselves for not protecting them.

* Free trade.
Free trade concept (and many other concepts) are great in concept, but are hard to implement. Most likely, US will restrict some items from China, China will do the same, each will agree to take the restrictions out to save face, will announce victories in both side... It has happened many times.

* Chinese steal all of our jobs.
First, I want to make the point that China is one of the low-wage countries. We can stop Chinese goods, but we need to stop other low-wage countries. Twenty dollar wage will not compete with $2 wage for the same job.

We have to let go some industries as there are no future and protect some industries that we have future like farming, making movies, high tech... Cheap consumer goods are not highly profitable, but high techs are.

Free trade has more advantages than disadvantages. The richer Chinese or Indians will afford now to buy our farm products, high tech products...

We could close ourselves out and can live with full employment and at lower living standard. It is our choice. I do not choose this way.

* China's military expansion.
There is no comparison of our military might over China unless you have been blinded. We have a carrier powered by two nuclear generators while China has a experimental carrier. Have you compared how much US's military budget and China's - better comparison is using a percentage of the GNP.

* China have not helped the poor countries.
China is still a poor country by the GNP per capita. I do not expect a lot of help in global disasters from them. They declined aids from the largest earthquake in Tong Shen in recent history. Their aids to Africa is quite substantial. Though there are no strings attached, it is quite easy to understand they're looking for commodities in Africa. However, I like their approach: better to teach folks how to fish than giving them fish.

* Human rights.
China does not have human rights. However, if you compare their human rights record 30 years ago, it has been improved by leaps and bounds.

Freedom and human rights are funny concept and there are different yardsticks. Ask any Iraq or Afgan. folks to see whether they welcome US' intervention for fighting for their freedom, and you could be surprised. Do we fight these wars for freedom, oil, or just a modern-day crusade? I feel sorry for our losses esp. the fallen heroes and I still try to find out what we gain.

We select our government, so we have to blame ourselves too. Politicians just want to buy votes and do not want to upset the voters who do not want to bite the bullet. It is easy to spend money we do not have and encourage other countries to do so.

To conclude, China has its own problems and US has its own. We should not blame others as a easy fix solution.

(c) TonyP4 2011. Written in 9/8/11. Updated 9/8/11.

Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.

Monday, September 5, 2011

Should we sell MO if you have it over several years

You should keep MO for the dividend yield which is over 5%.

However, I would suggest you to sell some MO for the following reasons:

1. There are some stocks better than MO esp. after the current plunge. Its P/E and other value ratios are below the average at this moment. However, the intangible asset like the cowboy for Marlboro is not included in the financial statement. Its past success may have nothing to do with future success, as indicated by most mutual funds' brochures.

I bet they make the profit from emerging countries like China as the US market for cigarettes is going downhill. China could ban smoking in public. The legal implication is huge. So far, so good for MO.

2. Personally I try not to keep the sin stocks for too long. The most successful they are, the more folks are hurt. I made some quick money on the casinos stocks but I sold them like hot potatoes.

3. It violates my diversification principle in investment. I know one folk who made more than 1 million dollar in one stock and it is his 90% of his portfolio. His good luck (I suspect he could have some insider's info.) does not mean he is a good investor.

#4. L,T. capital gain. It is low (could be the lowest for a while) in these 2 years. You can sell some and buy them back. I got mine almost 0% Federal tax last year as I maintained a 15% tax bracket ('almost' due to raising the social security tax req.)

I do not want to argue with success, but just argue rationally. I made > 80% return in my largest account in 2009 as I timed it right for the recovery phase of the market. It will not happen again at least for a long while, so I change my strategy after that year. Again, I am learning to be a good investor and not trying to be a preacher.

I do not think you will follow my advice like most lottery winners will not stop buying lottery tickets.

(c) TonyP4 2011. Written in 9/5/11. Updated 9/5/11.

Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.

Thursday, September 1, 2011

Should we blame all our problems on China

How about the benefit of our farm products from China? If every Chinese buy a bowl of rice and a cup of soy milk from us, our farmers will be filthy rich! $20 wage just will never compete with $2 wage, no matter it is from China, India, Vietnam, Eastern Europe...

China does not have natural resources/farm lands per capita than US. Population is not a resource but a liability and that's why they have the one child policy. They have to work hard to survive from their lessons in last 250 years.

We do not have enough PhDs in science and technology. It is not China or India's fault. It is ours. It is easy to blame other countries like the politicians are doing as they cannot solve our problems.

When the Chinese, Indians... work hard and maintain a low standard of living, what's wrong with that? We should work hard and maintain a living standard we can afford.

We have free trade with Mexico. Many Chinese products can compete with Mexico products even they have to pay a lot of shipping cost. Let the best products with the lowest cost win.

Some statistics from a conference in Philadelphia earlier this month.

* Just 2.7% of personal consumption expenditures go to Chinese-made goods and services. 88.5% of U.S. consumer spending is on American-made goods and services.

* China owns 7.8% of U.S. government debt outstanding. As of August, China owned $1.14 trillion of Treasuries. Government debt stood at $14.6 trillion that month. That's 7.8%. Who owns the rest? The largest holder of U.S. debt is the federal government itself.

* Just 9.2% of oil consumed in the U.S. comes from the Middle East.

According the U.S. Energy Information Administration, the U.S. consumes 19.2 million barrels of petroleum products per day. Of that amount, a net 49% is produced domestically. The rest is imported.

Where is it imported from?

Only a small fraction comes from the Middle East, and that fraction has been declining in recent years. So far this year, imports from the Persian Gulf region -- which includes Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates -- have made up 9.2% of total petroleum supplied to the U.S. In 2001, that number was 14.1%.

The U.S. imports more than twice as much petroleum from Canada and Mexico than it does from the Middle East. Add in the share produced domestically, and the majority of petroleum consumed in the U.S. comes from North America.


Diversification improves your performance in the long run and reduces risk all the time.

Diversification includes other asset class besides stocks like oil, gold, cash (yes even cash for better opportunities), real estate... However, stock historically produces the best return.

When an asset is over-valued, it will return to the average historical value with one or two exceptions. Gold is one exception, but it is due to the USD depreciating.

Simply put, owning 10-15 good stocks with less than 2-3 stocks in same sector (which have to be good sectors) achieves diversification goals for most.

However, every one's situation is different:
* Depends on your wealth and your age.
For younger folks with limited wealth (less than $50,000 to invest), a portfolio of 3 stocks (preferably in ETFs) in different sectors could be enough.

For retirees, you may want to have a larger percentage in cash and bond. However, if you're wealthy enough, you can have 100% in stocks as your living standard will not change if you lose 50% of your portfolio. Most rich folks prefer to invest in stocks besides their own businesses as their reward/risk ratios are higher even they are more volatile. Cash is safe but it loses to inflation.

If you have a billion dollars like most mutual funds, owning 10 stocks with 100 millions each is just too risky.

* Excessive frequency in re-balancing your portfolio takes up time from evaluating stocks. It may cost you in transaction fees but they are low in most brokerage accounts today. It may have some tax consequences. The advantage of turning over the portfolio (not excessively) is improving its quality with most updated info.

Your broker statements/summaries may display your current diversification. If not, you need a simple spreadsheet on what sector/asset classes your investments are in.

* Diversification can easily be achieved by buying indexed funds and/or ETFs esp. for smaller accounts and they are less volatile.

Personal experience.
In 2007-8, I had over 10% return while most other were losing. The reason is my concentration in energy stocks. When oil price dropped from $130 to $32, I lost big. Under diversification caused me false sign of success and led to big loses.

More readings.
Professor Swensen.

(c) TonyP4 2011. Written in 9/3/11. Updated 9/3/11.

Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.

A double standard at least

I read some comments from Netflix on China Heat, a Chinese movie made in HK 10 or so years ago. Some comments showed the the ugliness of the American public, ignorance, or at least a double standard. It is one of the many examples and comments reflect the general opinion of a country. Here are some:

* Why all Americans in the movie speak Chinese?
Do you think all the ancient Egyptians, Roman, Greeks in Hollywood movies can speak English?

* It is just a low-budget movie.
To me, especially 10 years ago, the budget is quite high compared to the average budget of movies made in Hong Kong at that time. How many foreign countries make movies in US and hire so many union workers?

* I gave up the movie when they shot subjects 20 yards away with a pistol.
Do you believe Superman can fly?