Sunday, November 27, 2011

China 200 years ago

Being raised in Hong Kong, I wonder why we did not learn much on how Hong Kong was ceded to the Brits as a result of the Opium Wars about 200 years ago.

It started when Manchurians conquered China. The Chinese general was frustrated with the rebels who captured his woman and opened the gate of the Great Wall for the Manchurians.

Chinese emperor showed the Brits that his empire had everything and there was no need to trade with their inferior products for China's silk, porcelain and tea, which had the highest quality. The Brits found they had opium grown in India.

Imagine a nation pushing drugs, and use their military might to enforce drug trade openly!!!!!!

After these wars, China was semi colonized and was bankrupt with silver tales being shipped away. The summer palace was burned down in 3 days and 3 nights and all the loots can be found in London and Paris's museums today. They're still loots no matter how many times they have been changed hands. Shame on them for not returning the loots back to China. When you're in China, visit the ruins of the burned down summer palace which is not too far away from the other summer palace.

The emperor ignored the industrial revolution in the west and the powerful canons/iron ships. If Cheng Ho had traveled further west to Europe (his ships were many times bigger than Columbus's), then the Chinese would not be that eccentric.

It demonstrates that if we do not move ahead, others will. Saying Chinese are inferior just shows our ignorance and history will repeat itself but with the roles reversed.

Victoria was not the only one to blame as the Parliament had debated for at least a day. Come to think about it. China suffered first from British Empire and then the Japanese Empire. Today the royal families are just parasites of societies.

Be fair to the Brits, they did provide stability to HK and it was one of the several pillars that HK was prosperous. The other pillars all have to do with its closeness to China.

I benefited the most by avoiding China's problems in 50s and 60s.

Tuesday, November 22, 2011

Is China friend or foe?

China has been prolonging US's prosperity than the other way round:

1. They're our banker. The poorest country (at least at one time) lends money to the supposedly the richest country for gaining market.

It is a double-edged sword: like the modern-day opium that the Brits sent to China about 180 years ago. It increases your enjoyment at least temporarily, makes you addictive, bankrupts you, and finally kills you.

When China parks their money in US, it provides easy money and partially (a small part) causes the subprime melt down.

2. By allowing several corporations to survive like GM and some to prosper like CAT, Boeing...

3. We should be perfect partners as our major products do not compete with each other like farm products, movies, high tech. for their consumer products which would be produced in other low-wage countries if not from China.

4. Low-priced consumer products that our citizens esp. the poor enjoy.

5. Together with other hard working and educated citizens like Indians, they boost our college research and product development. Imagine Google, Microsoft, MIT or Stanford without Indians and Chinese.

6. Politicians can blame all our ills on China as they cannot fix our problems. They can blame China for not following American culture like saving too much and planning for 4 years max.

The power of a printer

Printing money is the way or the only way out of this mess for US and EU:

1. Our debt will be depreciated esp. we can ask our lenders to appreciate their currencies as long as the loan is in USD.

2. It is our children and grand children's problem.

3. There is no meaning for OWS protest as we can make the rich losing half of their buying money invisibly and the poor losing nothing (50% of 0 = 0) via the magic of super inflation.

4. The poor will be poorer with the buying power, but they cannot blame the government as the entitlement pay is the same.

Obama should get another Nobel Prize to solve the global problems for turning up the money printers - more deserved this time when he did not do anything.

The only drawback is USD will be replaced by Yuan soon as a reserve currency, so you better use your printer at the max. and before the next election.

Friday, November 18, 2011

No more hero investor?

As of 1/2012, Bill Miller is stepping down after big recent losses. Buffett's last 3 year performance is so lousy that he should be ashamed and should not show his handsome face in public. Gross, the king of bonds, made serious mistakes, so is Whitney on muni bonds. It is same for a famous shorter of Netflix with convincing arguments. Their arguments are correct but the timing is not. The fund manager of the decade in Morningstar advocated bank stocks and he was burned badly.

There are many examples of heroes turning into disgrace in the past. Recently the Boston Globe has an article on top fund managers and they all have turned into big losers. Even Professor Irvin Fisher, the father of Wall Street, could not predict the 1929 crash and lost a bundle including most of his life-long gains.

Recently Barron's had a round table discussion on 2012 with the experts. They also listed the recommended stocks from same experts a year ago and their performances. Guess what? Their average does not beat Dow. Am I stupid enough to follow their 2012's recommendations?

What do we learn:

- Retire at your peak like Peter Lynch - you can call him a coward but he has a good sleep and laughs all the way to the bank. With his fame, it is easy to sell some books and lives nicely.

- Do not invest on your losing horse like Miller. Doubling on the way down is a fool's game.

- Need specialty advice on banks, bio drugs and mines. Their financial statements do not tell the whole story.

- Do not believe you're always right and put all eggs on a basket. Market is irrational. The black swan could kill you unexpectedly.

- Even the genius could not be right all the time. It only took one big loss to wipe out your entire saving.


Why we, the retail investor, can beat the professional fund managers?

The fund managers usually are 10 times smarter than I, have 10 times more research than I, have 10 times more computer power than I, but they do not beat me, the usual, casual retail investor. It could be:

- Most likely their good performance could be due to 1. taking risky stocks and 2. leverage. When the market is good or the specific bets are good, they make more, but the vice versa kills their performances.

It is like a thousand monkeys banging on the keyboard to find stocks. At least one can find a winning stock.

However, they do not want to take risk. If they do not perform within a certain range of a benchmark, they get canned.

- They cannot beat the market all the time. When they do, money flows in and vice versa. It is very hard for them to perform with extra or lack of fund.

- They cannot play market timing and they have to satisfy all the rules.

- By my estimate, they have about 1,000 stocks (about 600 for most larger funds) to deal with and I as a retail investor have about 3,000 stocks. Their stocks have been fully evaluated by analysts and newsletters/subscriptions like ValueLine. Hence, they do not gain any advantages but follow the herd.

- Their performance as a group is not real. Some bad mutual funds close and their bad performances are not added to the performance of all mutual funds. It is termed as survivorship bias.

- They are so big that they're the market.

The hedge funds perform even far worse. Hence why you pay them 2% plus 20% on the profit?

(c) TonyP4 2011. Written in 11/18/11. Updated 02/06/12.

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

Wednesday, November 16, 2011

The strategy that works best

Buy low and sell high.

It is simple but most retail investors just do the opposite. It turns out to be a reliable contrarian indicator when the flow to/from money market fund.

2003, 2009 and the later part of 2012 (not confirmed yet) could be the best time to buy.

Sell when every one including your silly mother-in-law is making good money and all think they're market geniuses. It could be the riskiest time. The high interest rate could give you some hint as folks falsely expect better return even they pay more to borrow money.

Do not buy the stocks that were the bubble stocks like technology stocks in 2002 and bank stocks in 2009 as some 'optimists' think it is time to return and usually they're wrong. You buy them only when the root problem has been fixed. Many bubble stocks never recover.

Do not buy dividend stocks for big returns as they do not swing much. They may lose less value in a recession, but they will not make a lot when the recession is over. In addition, consider new tax changes and it may not be favorable for dividends.

Buy value stocks that seem to be bottomed out. It is hard to identify the bottom (read investment articles for hints), but usually they give best profit returns.

As of 7/2012, coal stocks may have been bottomed out. Oil and other resource stocks could have been bottomed out before the coal stocks. Health care should be bottomed out judging from their low P/Es unless ObamaCare screws it up.

Buy the stocks that have been losing some money but their burn rates can last for over two more years. They're risky but the potential profits are great. We can find many in 2003. Today many corporations are making good money at historical low P/Es even the economy is lousy with high unemployment.

Buy against the experts who have unfavorable predictions in extremely lousy market. They usually exaggerate to sell their stuffs. This is one of the few times you should bet against them.

You cannot predict when the market is bottom unless you borrow my time machine. :) However, use your better judgement with educated guesses.

Do not gamble your money you cannot afford to lose. Past performance is a guideline and does not guarantee future performance.

(c) TonyP4 2011. Written in 11/16/11. Updated 7/16/12.

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

Corruption, American style

60 Minutes showed a unique way how the Congress men/women get rich. It is a big loop hole as it is legal for congress men to trade with insider info. When they make some decisions without public knowledge and buy stocks and profit based on the knowledge - it is a crime for the powerful. When they sell this info to others, it is a bigger crime.

In addition, many start new jobs in the companies they gave favors to when their tenures are over. Unlike many global leaders, US presidents are usually not corrupt, but they make a lot of money in their books, speeches…

The lobbyists are corrupt but legally if they lobby within the laws. It is buying influence / access with money. Check how many congress men receive money from NRA and how they return the favors.

It is the mutually beneficial ‘co-operation’ between those who have power and those who have money. I would like to change the phrase 'those who have gold make the rules' to 'those who make the rules own the gold.'


Corruption is not an American invention but a global problem. Judging on how may bribes you have to pay in order to open a business, India is the worst, China is in the middle and America is not bad. At least it can be shown on American TV.

US is very strict in insider's trading. Recently Raj was fined and sent to jail for 11 years from my memory. Martha was sent to jail too for the same crime. She is famous so the 'kill one and warn hundreds' works. Folk like Bill Gates know the companies they're going to acquire, so Bill's money is administered by a blind trust.

Last year SEC sued a couple in HK in using insider's info to make millions. That's the primary function of SEC. China does not have similar organization and it is a wild, wild west in China with many making money (legally there but illegally here) and there are many frauds. SEC has delisted many Chinese companies.

That's the social injustice the Occupy Wall Street folks should fight, not that much on income disparity. The folks who make the law will not be stupid to make a law to stop their greed until the voters become so furious on this 'legal' corruption.

Monday, November 14, 2011

Chinese bashers

In blogging in public, I comment against Chinese bashers. In most cases, I try to meet them half way as there are no absolute right and wrong on almost everything. I hope to change some of them esp. the younger folks. It has cost them some money if they have not invested in US companies that invest and benefit in China's rise.

I try to find out why there are so many Chinese bashers.

* We cannot change the older generation as they still see Chinese with pigtails working as cooks and butlers as the top jobs for them. They have to bring their biases to their graves.

* I hope to change the younger generation that is influenced by politicians and the media. Some are true but most are not true. To illustrate, they blamed China on poor construction that caused so many lives in earthquake, but no one blamed same on other poor countries.

Here are some of my comments defending China.

* China will have soft landing.
- China is not run by fools looking for 4 year re-election at all costs. The fixes are fast and efficient (sometimes inhuman to me).

If China were run by fools, why they become #2 in economy and millions were lifted from poverty (i.e. not starving to death) in last 30 years from a economy far worse than India.

- There are a lot of monetary reserves. Money can fix everything, almost.


You must live in a cave in your last 30 years to find US is not a currency manipulator and you do not know the purpose of printing money to lower our debt burden. China applies the same trick by pegging the currency to USD initially.

The middle class in China is the best saver (compared to US easily). The down payment is huge compared to US in 2007.

They're mastering the western technologies from virtually 0. Sometimes it is too fast to me and problems pop up naturally. It is a wake up call and nothing more. You do not know how many train wrecks we've in US.

The space docking is no small task even it is about 35 years behind - 35 years is not too generous estimate if you consider their speed, skilled workers, and today's supporting technologies such as CPU. Not to mention many other advances. The macro view is they've a government and wealth to promote technologies and the qualified scientists - 3 factors US is lacking.

The housing problem is under control and judging from how the government handled crisis in the past I or any intelligent folk would not want to bet against it.

China is not a rich country per capita, but is rich enough for the government to fix all these problems.

- The middle class is a huge internal market. If you go to any Chinese city 10 years ago and now, the changes will surprise you.

- China has moved to the next stage of developing its economy with products of higher value and better quality.

* The only unknown is a trade war with US. The politicians who cannot fix our problems will put all the blames with China in order to buy votes.

The housing bubble should have a soft landing with further 10% depreciation. It is a riskier predication as human psychology is unpredictable. However and as most assets, they will return to the average price.

Nobel prizes take about half a generation of education/development judging from the average age of the winners. I should say they re-started their school system about 50 years ago (about the time after the Cultural Revolution).

Nobel prizes are getting political against China. Why Obama got it for doing nothing and Deng not getting it for lifting millions from starvation? Why the prize winners are awarded to Chinese residents who left China? It is my logic and nothing against Nobel Prize.

Shanghai school kids (above the average in urban China but not too much above) are #1 in science and maths. in the world. Check the % of Chinese PhDs in your top local colleges, and sometimes is higher than the local born. Amazing, or eye-opener for some!

High creativity is not needed for most jobs like accounting, programming, managers, lawyers and even doctors. We need folks like Jobs and Gates to create jobs for the educated group that Chinese have now with rote learning. China does have schools for genius and we will see how they work out in the future.

They do copy. It is a stage of becoming developing country. Japan and S. Korea all passed through the same stage. They need to enforce intelligent property before they can move to the next stage. Did US pay Germany for using their atomic bomb technology?

I do think China should improve (not reform) their education system and enforce intelligent property very soon.

Friday, November 11, 2011

Why stock price surges or purges

It is part of my ritual looking for the holy grail in investing. I try to look at my big winners and big losers to find out the reasons of the big gains/losses, so I can adjust my buy criteria accordingly.

Sometimes I cannot find good reasons or the reasons are not logical or convincing, or some events I cannot control. When this happens, I just ignore these irrational reasons, which could do more harm.

The following is one of the many of such stocks. GTIV just appreciates 50% in 10 days I bought. It seems most experts are wrong and in this case I am right. However, do not bet against the experts. First, the experts are still good to follow, but for some strange reasons, they all rate potentially good stocks to Sell. It could be these stocks have been down for a long and hence very risky, while and the experts do not realize they are headed for a rebounce.

IBD's composite score is 10 out of 100 and usually it is recommended not to buy any stocks with the scores less than 70.

Fidelity's Opinions from advisers is Sell. Usually it is a good advice as the score is according to how the advisers performed historically on the stock.

ProTrader has a grade of F, the lowest.

ValueLine does not have a predicted 3-5 year return.

Zack (the free version) has a rating below average.

To conclude, most newsletters/advisers do not favor this stock. Its sector (health care) is not favorable either and it could be due to the unpredictable ObamaCare. That could be the reason why it had lost 34% in the last 30 days.

At bottom or early recovery, almost all ratings on these stocks are Sell. It happened in last bottom (in 2003), March, 2009 and hopefully today. Do not buy the stocks just because they have Sell ratings. You need to further analyze whether they would go to zero.

Today many companies are making good profits, a lot of cash and low P/Es. In 2003, some companies struggles. At that time I ensured the company could survive in 2 years by dividing the cash position by the burn rate.

I bought this stock based on:
- huge expected earning - from the predictions of the experts even they do not like this stock.
- low P/E esp. with respect to the historical P/E.
- huge net short term asset %.
- this sector could be bottomed out.

This is my contrary stock that works so far. I'm an optimist, so the chance of doing one on a loser is pretty slim as we all look for #1.

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

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, November 10, 2011


Here are my takes and I do not prepare to argue as there is no right or wrong answer - all depending on what you believe.

* I'm pretty believe there is Jesus as the recordings are quite credible and there are many real hints.

* If there were Eve and Adam, who recorded it, how and in what language? I know some scripts in India did not survive the hot climate. The translated script to Chinese helped the Indians to locate an old city and the life at that time. If Eve and Adam were Chinese, they should have eaten the damned snake or dog, we should still be in heaven. :)

* The expedition from Hong Kong found Noel's Ark? Hope it is not a shed that has been there for thousands of years. There have been too many similar incidents and all have been false discovery. If it is the one, then there will be a lot of credit to the old testament.

* No matter what the conclusion is, there is no denial that religions have helped a lot of poor, orphans, the hopeless, the needy...

* Chinese see after life very differently from the west. No Chinese saw the light from the end of the tunnel. There are no angels for Chinese but jumping corpses sticking their tongues out.

If there is after life, they should look the same no matter you're a Westerner or a Chinese.

* Buddhism believes in re-born and Christians believe in eternal life. If one is right, the other must be wrong, or both are wrong.

Click here for religion could cause WW3.

Tuesday, November 8, 2011

My coconut theory

In a tropical island, every one sleeps under a coconut tree. He is waken up by a fallen coconut on his head once a while. He eats the coconut and goes back to sleep. He is lazy due to the nice weather (no need to find shelter) and the nice resource (the coconut tree). He is happy and rich by his own standard.

US is richest by the developed citizens, hard-working immigrants and the huge natural resource per capita . However, Norway is the richest for that size group (3 M) and some smaller oil countries like Brunei is richer.

Norway is rich due to the rich off-shore oil field and the fish export (second in the world after China but far, far #1 per capita wise). It is smart not to boast except in the Olympics to prevent jealousy and invasion.

Singapore is rich due to the port location and hard-working citizens (most are Chinese). When the hard-working folks land to a land of coconuts (i.e. resources), they are natural to be rich as indicated in my coconut theory.

Thursday, November 3, 2011

EU' mess

My predication:

* Euro will be dissolved or will at least kick out the cheaters, free loaders and parasites like Greece. In any case, it would depreciate a lot compared to gold.

* After that, default is not a bad answer.

* The lesson of having a good life without working hard is learned again and again. First it is Ireland, then Greece, then Spain/Italy.

* Another lesson is living off from the treasures/commodities they stole in their colonial days is long, long over.

* EU will be a problem for years to come. When the country has that high debt with regard to GNP, they will not be competitive except sending their citizens to be slaves to work for other countries.

I can hire some to clean my house, cook for me, dance for me and take care of my grand children if the wage is right as long as they're not lazy and cheaters from their bad culture.

* Decoupling is the solution. US and China will not be stupid or big enough to rescue a sinking ship.

* There will be conflicts in the citizens in Greece between those who have (still a lot collecting over $40K USD pension) and those who have to suffer due to passing the debts/miseries to them.

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

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