Saturday, December 31, 2011

Cantonese songs 抱緊眼前人 許美靜 - 明知故犯 許美靜 - 城裡的月光 張宇 - 用心良苦 陳 慧嫻 千千闕歌 陳 慧嫻多少柔情多少夢 陳 慧嫻 跳 舞 街
http// 陳 慧嫻 逝去的諾言 林 志美 感情的段落 周 啟生 天長地久 彭羚 讓我跟你走 仇雲峰 半真半假 方麗盈- 傷感雨天 李 國祥 - 餘情未了 總有你鼓勵 - 倫永亮 + 李國祥 王 菲-愛與痛的邊緣 劉 嘉亮 - 你到底愛誰 本 多RuRu 美麗心情 林 宸希不再問 張學友 + 湯寶如 - 相思風雨中 張學 友 + 黎瑞恩 - 長流不息 林淑容 + 羅時豐 - 無言的結局 陳淑樺--夢醒 時分 黃凱芹 晚秋 盧 巧音 好心分手 關 心妍 你有心 關心妍 - 我太强 容 祖兒 痛愛 野孩子 - 楊千嬅 楊千 嬅-可惜我是水瓶座 陳 慧琳 - 最佳位置 梁 詠琪 死 心塌地 衛 蘭 - 大哥 明天 會更好 劉 德華-緣盡 劉德華-一起 走過的日子 劉德華-真我的風 采 葉振棠 - 勝利雙手創 紅 塵戀歌 安以軒 、 叢浩楠 華 夏英雄 鄧超 許冠傑 斤兩十足 (37首歌完整版) 詠梅 - 關正傑 蔡 楓華 - 何必曾相識 人之初 陳浩德、方伊琪 - 平湖秋月 張德蘭 鮮花滿月樓 情義兩心堅 神鵰2006 情 若無花不結果 - 張德蘭 杯酒當歌 周華健/成龍/黃耀明/李宗盛-在晴朗的天空下 童年 - 蔡國權 彭家麗-昨天今天下雨天 《借來的美夢》--彭健新 鄭君綿 - 賭仔自嘆 蔡楓華 - 煙外曉雲輕 蔡楓華 倩 影 陳奕迅-明年今日 陳百强 - 等 陳百强 - 今宵多珍重 陳百强 ~ 偏 偏喜歡你 張國榮, 許冠傑 - 沉默是金 陳百强 - 不 陳百強-漣漪 喝采 - 陳百強 林珊珊 - 戀愛預告 傷感雨天 方麗盈

Friday, December 30, 2011

Efficient Charities

Leaving money to the government is the same as leaving money to an addict of spending money like no tomorrow.

Leaving money to Gates Foundation does not fare well all the time. They should teach the poor how to fish, not giving them fish for their entire life. They should use a model specific to Africa (like the one from China) instead of the American model. However, they do some good deeds in many other areas. Really helping the poor is not a science but an art. Throwing money will not solve any long-term problem.

As Buffett's son said, once Americans leave with the big machines/equipments, Africans will return to the bad old days. You do not need to automate with abundant labor available. From his talk, I think he has better insight and vision to handle his father's foundation than giving it to Gates. He would contribute more to our world in heading the charity instead of running his father's fund company that he has no interest and desire to.

Buffett and Gates donate their life-time savings to charities. It is the most noble deed to mankind. I argue against the comments that they profit themselves. Of course, both should donate their appreciated stocks so they maximize their donations. They should appoint their heirs to supervise their foundations and get salaries for the work. The only objection is Buffett should not advocate the way he wants to change the tax laws. Without deduction to charities, the poor will get less aids.

The African farming industry is being destroyed as they cannot compete with freebees. Ensure your donation is not skimmed by the corrupt officials like in Haiti and some African countries.

Donate money to the charities with low overheads and spending the money correctly. If you donate limited funds, try to limit yourself to one charity. They will send you letters... and these are the cause of their high overheads. I also would ask how much their presidents are making.

US and its citizens are the kindest folks on earth as long as donations to the foreign poor is concerned. I hope our new tax laws will maintain the same deduction. As Gandhi said, the world has enough resources for all but we're not unselfish enough to share.

Friday, December 23, 2011

Reponse to James's all 100% cash for 2012

James recommended 100% cash in an article in seekingAlpha.

I analyze 2012 a little differently from James. I expect not much change from now to mid 2012 - we'll have the same volatile market. In mid 2012, we've to evaluate the market conditions again. If the problem like EU crisis is resolved, I would move all cash to equities and expect a 10% return for 2012.

It is not practical to predict for the entire year and we have to change our strategy when market changes. Other than that, I am pretty much with James.

Update. Even with the market up, James did not change his position and predicted sth bad could happen in April, 2012. Pretty agree with him that EU have to do sth drastic.

Click here for my crystal ball for 2012.

My profit calculator = (my rate of return - SPY return)/abs(SPY return)

Or, how well I did against S&P500 at year end.

If S&P loses 5% and my return is 0%, then I'm 100% better than S&P 500 even I gained $0.

You do not have to make money every year and you do not want to violate Buffett's first 2 rules of investment: Do not lose money and do not forget rule #1.

If you're good market timer, you can gamble with shorts and contraETFs. Personally I do everything with emphasize on safety at least for the next 3 months.


(c) TonyP4 2012. Written in 12/23/11. Last updated in 12/23/11.


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

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

Diets that always work

I know one diet that really works and I'm importing it from China. Millions of thin Chinese are the best living proof. It is the tape worm therapy. You inject big-mouth tape worms under control environment into your body. You need to sign a no-sue contract but life insurance (trust me it will come in handy) is included free. They will eat up all the nutrients in your body.

The other therapy that also works is sending you to a remote location in Africa where you cannot find a TV and processed food like chips and beer. You have to perform a daily exercise by running from wild animals that could eat you alive if they catch up with you. This is the ONLY motivating exercise that works.

In either therapy, your obesity problem will be fixed. Even if the therapy fails and you die, your obesity is still fixed GUARANTEED or your money back - well money may not be useful for you then :).

If you try it and it works, please share your experience and be my spokesman /woman in my new venture.

If you're offended and/or think the above is not a joke, please check into your neighborhood clinic to ensure what's wrong with you esp. in the sense of humor department.

Retail investors and market timing

The average retail investor has advantages over fund managers.

However, the average retail investor does worse than the market. Most just buy high and sell low - a kind of herd mentality.

In quarterly summaries, Fidelity demonstrated this more than one time. It shows the retail investors moved to money market fund when the market was at temporary bottoms (or close to), and moved to equities when market was at temporary peaks (or close to). It could be a good contradictory indicator if Fidelity or any fund company publishes this money market flow consistently.

Morningstar has similar proof. During 2000 to 2010, equity funds earn an annualized return 1.6% while an average investor captured a .2% return due to moving in and out of the funds at the wrong time.

Click here for Psychology 101 for investing.


(c) TonyP4 2012. Written in 12/23/12. Last updated in 12/23/11.


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

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

Tuesday, December 20, 2011

No Nativity Scene?

I got a email from my potential congressman as follows:

The Supreme Court has ruled that there cannot be a Nativity Scene in the United States’ Capital this Christmas Season. This isn’t for any religious reason. They simply have not been able to find Three Wise Men in the Nation’s Capital. The Search for a Virgin continues. There was no problem, however, finding enough asses to fill the stable.

My reply:

Beg to differ. All congressmen including yourself are wise men if you compare your bank account before your term and after.

You can find a lot of virgins but you've to lower your age requirement or change the definition of a virgin. For definition, borrow the example from Clinton's no smoker policy: As long as you do not exhale, you're a non-smoker. Change the word 'exhale' with many words I can think of but they are not too polite to write them down here - just in case the naive Sister Teresa is reading my blog secretly.

It appears to be a fact that there are more mouths kissing asses than asses available to be kissed. Hence, we really have a shortage of asses.

A true incident to TonyP4

Monday, December 19, 2011

The 'smell' of victory

When we tested out some strategies, we found out we could be a billionaire if we followed the successful one for the last 10 years. Most likely this is the false smell of victory, so do not wake up your wife to tell her your holy trail discovery. If it is that easy, most of us should be sipping some exotic, tropical drinks in some exotic, tropical island served by some exotic, tropical ladies :)

There are no investor heroes including Buffett.

The follow are the reasons I can think of now.

* The strategy worked last 10 years may not work for next 10 years. When one strategy is a headliner, most likely it is the top for the strategy. When too many follow, it will fail. It is the herd psychology.

* Survivorship bias. When you play with penny stocks that usually are big winners or big losers, half of them may bankrupt. Most historical database may not keep them. It gives you better performance than the actual. If you do not include Lehman Brothers, would your portfolio perform better?

* When you deal with penny stocks, you may end up to buy most of the company if you're successful. In reality, we never do so.

However, click for the strategy that always works and most likely will beat S&P 500.

(c) TonyP4 2011. Written in 12/19/11. Updated 12/19/11.

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

Saturday, December 17, 2011

My crystal ball for 2012

First, I'm no market predictor and my crystal ball is as good as yours. I try to digest what experts are saying (from negative return to 25% gain) and try to make a conclusive conclusion . We should predict at 3-month intervals and plan accordingly. Market conditions change and hence it is not beneficial to predict for the entire year.

Being said, I predict we've the same volatility on the market based on headlines. After half a year and assuming the Euro problem resolved, we should be on our upward swing to a 10% gain (S&P and not counting dividends) at the end of the year.

If we believe the market will be volatile with no gain at the end of the next three months, we should sell covered calls, buy low and sell high on deeply valued stocks, but remain a good percentage in cash. I put my money where my mouth is so far. However, I'm an opportunist and change direction when I see fit.

Click here for why I have a rosier picture. Remember the market is usually 6 months ahead of the economy.

The following is based on my Oct 7, 2011 post My crystal ball. At least for the first 6 months of 2012, most are relevant so there is no need to update.

The perfect storm with the following unknowns:

* Portugal, Spain and Italy could follow Greece. They are far larger than Greece.
Click here for detail.

* Trade war with China over currency.
Can we afford to have a trade war with China and take the risk of China pulling out their huge debt from us?
Click here for detail.

If one of the above two happens, we will see Dow below 9000. Otherwise it will cruise between 10,500 and 12,500 (used to be 12,200).

When it goes up to 12,800 (used to be 12,500), I'll sell most of my stocks as the roots of our problems have not been resolved.

If you believe we'll have a good Q3 earning announcements, year-end rally, first two-week rally, huge cash held by corporations, and/or there are signs the wars are ending (update: one is done), you may want to act accordingly. I've started buying selectively and it could be the best time for a while for some stocks that have been beaten down badly.

My crystal ball is as good as yours.

(c) TonyP4 2011. Written in 12/11/11. Updated 01/10/12.

Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
Posted by TonyP4 at 5:25 AM

Friday, December 16, 2011

Rosy outlook

The secular market will be started with USD appreciating for a change within 2-4 years. It is a presidential year.

* One war has been ended, and the other should be over hopefully. It would be peaceful for at least next 10 years if we do not irritate China from trade wars to a physical war.

* We already seen improvement in employment. It is slow but steady. Our high standard of living prevents us from competing with low-wage countries in low consumer products.

* Housing will recover. It may take 2 more years. It cannot take for ever to absorb the inventory.

* We're still the food supermarket of the world, the best universities in the world, highest research center, making movies/music... China is catching up but they're still a long way away.

* We have a lot of natural resources per capita. Gas will be the driving commodity when the environment regulations are relaxed. The pipeline from Canada will be materialized - to me it is a political balloon.


(c) TonyP4 2012. Written in 12/16/11. Last updated in 12/16/11.


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

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

Buyback vs dividend

Buyback is an excellent tool to boost the compensation of insiders who have a lot of options. Usually it could be a tax advantage over paying dividends. The decision on how to use the extra cash should be how beneficial to the average stock holder.

Besides dividends and buybacks, corporation can use the extra cash to plow back to the business such as reducing debts, boosting research and development, acquiring companies...

If the company is in developing stage, it should plow it back to research and development. Matured companies like Microsoft give dividends as there is not much the company can improve in theory.

We buy the company's stock is not solely due to dividend, but the earning potential (i.e. expected E/P) and the market conditions.

Some companies gives good dividends to cover their problems. Check out C, AIG, BOA, Lehman Brothers, Stern... If they fool you twice, shame on you. They all gave good dividends. Check their performances and I rest my case.


(c) TonyP4 2012. Written in 12/16/11. Last updated in 12/16/11.


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

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

Tuesday, December 13, 2011

Another screen - will test it out

Ben Graham later on in his life moved from specific stock picking to picking groups of stocks. In a 1975 seminar - not long before he died - he laid this out very well:

The last paragraph of this article makes a good point clear:

"It’s also important to remember that in this study, Graham was advising the purchase of a basket of around 30 stocks matching any one criteria of undervaluation, e.g. 2/3 of book. He even went so far as to say “You can’t lose when you do that.” His experience proved that buying a stock at such a criteria was a dependable indication of group undervaluation."

He recommended a basket of 30 stocks when using just one criteria to find an undervalued stock - low Price/Book as an example. I would assume (and it has worked in practical real life investing) that using more than one criteria would make the need for investing in 30 stocks at once less important.

I personally like to screen for:
1) low Price/Book
2) low Price/Sales
3) Price/Free Cash Flow under 15
4) Price/Operating Cash Flow under 5

I also look for a Price Earning Growth Ratio (PEG Ratio) of less than 1. It should be Number 2 or 3 in that list making 5 value finding ratios in that first set and a total of 8 rather than 7....

The next three criteria are used to eliminate too many choices usually although I have been known to use the Piotroski Score of 8 or 9 as a starting point rather than use the score as a tie-breaker...

5) Piotroski F-Score = to or better than 5. If they have an Altman Z-Score better than 3 at the same time - they are a standout company in their financials.
6) Dividend Payment over 1%
7) A Forward Intrinsic Value higher than today's price with a negative value being an instant washout no matter how good the stock looks otherwise....

This finds high quality stocks at a value price (Value outperforms Growth over time in any cap stock - company size does not matter) that will pay me to wait until the market finds them. Depending on how long they have paid that dividend and if it is a rising dividend and the percentage of that dividend - the stock could end up in either the Core Portfolio or the Exploration (Trading) Portfolio. The Core reinvests the dividends and is a long-term hold unless the stock fundamentals change (Stock price changes up or down make very little difference here.) and eliminate the stock from the Core.

The trading portfolio can be very short-term or much longer depending on the performance of the stock price itself. If it loses right away, it is gone right away. If it moves up - then I sell some at certain points until I have my starting cash out of the stock. My results doing this have given me 500% profits in a single year more than once and I very seldom ever have a year where I lose by the end of it. Profits from trading are split at the end of the year - one half going to add cash to the Core Portfolio and retaining half to increase trading cash. Free stock (stock with no starting investment left in them) may be kept in the trading portfolio for more than a year and may eventually qualify to go into the Core give time.

Between the two portfolios - I have not had a year that I have not beaten the S&P 500 benchmark in decades....Even when I am not doing well in the trading portfolio - the core supports me and is quite capable of beating the benchmark all by itself with no trading in the trading portfolio at all.

There are years when I have NO stocks in the Trading Portfolio - The Core just keeps right on keeping on - making effortless profits and growing larger every year from the effects of rising dividends that are reinvested and that marvelous compounding that comes from that reinvestment.

A suggested search - will try it out.

For this year, the following strategy has yielded over 50%:

Every fifteen weeks starting from the first full week of the year buy the two stocks that have done the best over the previous eight weeks. Close all positions on the closing day of the last week of the year.

This strategy applied to the basket of stocks that are currently in the SP500 does very well during 2001-2011 (only one year of 48% loss, but that followed a year of 100% gain), but obviously the result suffers from selection bias for the years prior to 2011.

The following are the trades for 2011 (the dates are the first days of the weeks at the close of which the trades were made).

THC 1/ 3/2011 TO 4/18/2011 -1.74%
TSO 1/ 3/2011 TO 4/18/2011 42.38%
GME 4/18/2011 TO 8/ 1/2011 -16.62%
COG 4/18/2011 TO 8/ 1/2011 22.40%
COG 8/ 1/2011 TO 11/14/2011 22.93%
VFC 8/ 1/2011 TO 11/14/2011 18.97%
FFIV 11/14/2011 TO 12/12/2011 5.81%
GR 11/14/2011 TO 12/12/2011 -0.18%

Thursday, December 8, 2011

Pearl Harbor memorial day

Japanese suffering from the 2 atomic bombs is TOTALLY JUSTIFIED. Most died in dignity at least. Without the two bombs, US would invade Japan and many innocent folks would die.

The two atomic bombs should have dropped on the imperial palace whose master (now becomes the parasite of society) started the Asian invasion, and some smaller bombs should drop on the 'shrines' of war criminals, who invented the term 'comfort women', raped women and even killed babies.

It seems heartless to say the punishment from God on Japan should start 50 years earlier as most of these war criminals have passed away. Consider the millions of Asians were killed, raped by these war criminals, the head cutting competition on innocent Chinese and the river of flood, and you'll agree it is TOTALLY JUSTIFIED.

If you're still now convinced, watch the Nanjing documentary which is available from Netflix. We should not hate a nation because of the past history but we have to learn from history. I do not think the current generation of Japanese with their high education will repeat history. However, Chinese should learn how to defend themselves and also not to offend others.

The rewrite of Japanese text books on invasion and worship the 'shrines' of war criminals will fool no one but the fools who acted cowardly to cover their conscience and sins.

Tuesday, December 6, 2011

Secular bull and bear market

* Secular Bull and Bear *

Even if you do not invest in the stock market, you need to understand it. The market is a forecast of our economy which in turn affects every aspect of our life. If the market is good, the economy is good and every one would have a job. Even the poor would benefit with more generous benefits from the government and more donations from individuals.

We have a secular bull and bear market as follows (the years are not exact but useful for illustration) as follows:

Secular bear market: 1960-1980
Secular bull market: 1980-2000
Secular bear market: 2000- now

In a secular bull market, every investor is a genius. Their stocks rise with the tide. With the profits from the market, they spend more on disposable consumer products and even give to the poor generously.

What causes the secular market condition that last for about 20 years? To me, the major common denominator is the war and it is my contribution to this theory if not already mentioned before. In 1960s, it is the Vietnam War and the effect after this war. Today it is the two wars in the Middle East.

After the war, our leaders do not forget the harmful effects. They cannot get re-elected with the war, so there will be no war for a long while. That’s my explanation of the secular bull market from 1980-2000. After 2000 our leaders forgot the wars and history repeated itself.

Wars are the primary cause of a secular market and bubbles are the triggers to recessions. In 2000, we had the internet bubble and we had the housing bubble in 2007 (derivatives is the pin that burst the bubble). With minor exceptions, all bubbles are caused by excessive valuation (housing value was too high due to the government easy money) and they will come back to the average value eventually. The only exception could be gold which does not really appreciate but the dollar depreciates.

If we concentrate our energy/wealth in economy rather than wars, we could fix the bubble easier before they’re burst and at least soft landing instead of hard landing.

I expect we’ll have a prolonged bull market three years after ending the two wars. By then, the housing problem will be solved by absorbing the inventory and the settling a solution on Euro crisis. Until the politicians forget the harmful effects on the war, the prolonged cycle will continue.

If the next secular bull market starts in 2015, we would shorten the cycle from 20 years to 15. For this reasoning, we may have to check again (on the possibility of war similar to Vietnam and these two Middle East wars) at the 10th year or so of the next bull market to see whether it would be 15 or 20 years.

There are market cycles within the secular market. I change the predicted duration from 4 to 5 years for similar reasoning.

Click on Strategies on Secular Markets.


(c) TonyP4 2012. Written in 12/06/11. Last updated in 1/18/12.


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

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

Saving some good links

China aims for high tech future.

Larry's portfolio.

Sunday, December 4, 2011

Dear recent college graduates,

Many of you do not have a job for over 2 years. Your generation of some EU countries have 50% or so unemployment. Do not be frustrated and we're seeing the light from the tunnel.

I had similar experience. After graduation I had no job. It was only 1 month (lucky me compared to today's graduates) but it seemed to me more than a year of desperation. The worst is that I ran out of money and my student visa had expired. I was so jealous of my room mates going to work, and they may be jealous of me for sleeping all day long. Some harsh words would hurt a lot but I pretended to be sleeping and crying inside. I was ashamed of not sharing my part of the rent.

It turns out to be a good experience. For example, I have not wasted a dollar since then. At that time, with that whole dollar I can kill 3 hours by watching double features. Too much free time drove me crazy.

It is a similar lesson I learned from my co-worker who lived through the depression. He finished his plate completely without leaving a speck of food.

If you like to protest for income disparity, bankers not going to jail for their crimes, plutocracy... by occupying your local city hall, it is fine to let some steam out, but you need to obey the law. Life is full of injustice. The best to resolve them is to prepare yourself so you will be in a position to make a difference.

You should also know most rich folks obtain their wealth by working hard (with many starting with nothing) and taking chances. Gates and Buffett even give back all their wealth to charities.

The economic problem gives us a temporary setback. Hopefully, we will look back and treat them as good lessons that we cannot learn from schools except by experiencing it. It is life's ups and downs. Without the downs, life would be no meaning and we do not appreciate and treasure the ups.

We should not let our destiny control our life, and the strong ones (I am not among them) can change their destinies. Bad experiences in life always make us a stronger man/woman.

Saturday, December 3, 2011

How to solve trade imbalance

US's $20 per hour cannot compete with $2 per hour (no matter it is from China, India, or Vietnam).

You cannot live with $2 per hour in US. It is better to live on welfare with food stamp, housing subsidies, free health care... when your income is low or 0.

The solutions are:

1. Abandon industries that use low-wage labor and/or outsource manufacturing jobs like Apple is doing. There is no quality problem of Apple products being outsourced to China, so it really depends on one to outsource.

2. Beg China and other countries to loan us more money with states as collateral (by now no one is stupid enough to use USD for future repayment) starting with all non-Democratic states first (according to Obama) and DC will be the last to sell. Just a joke. :)

Selling AK with Sarah to Russia for oil is no brainer. It is just like killing two birds with one stone.

Selling Hawaii is just genius like selling something you do not have as Hawaii is pretty much owned by Japanese already.

If we sold NYC to China, we would make a huge, huge capital gain. It is even more sweet if you recall we bought (cheated is a better word) it from native Indians for peanuts. The Indians/Eskimos were Chinese crossing the frozen strait due to losing their direction after too many drinks. I have my genes to prove my theory. So, it is selling to the original owner for a huge gain. :)

3. Close all trades with all foreign countries and enjoy the $50 toaster!

We can stimulate our farming like planting sugar cane in Alaska, but the chicken feet would be thrown to ocean instead of shipping them to China for cash. Don't laugh. It is smarter than building a bridge to no where or Obama getting his Nobel prize for doing nothing.

You can laugh, cry, or do both, but do not argue the above with me - it is just a satire.

Friday, December 2, 2011

Different styles in investing

There are two major styles to evaluate stocks: fundamental and technical analysis (TA).

The debate of TA and fundamental could be endless. I believe TA is good for short term and fundamental is good from longer term (> 3 months) - from one who makes good return for using fundamental.

When the insiders see some new products or unexpected earnings, they buy and tell their families to buy. The TAers notice the rise in stock price and buy. The last one to buy may end up losing money as the insiders would unload when the stock price is over-valued.

Try the following to see whether fundamental is better and share your conclusion.

1. Include all stocks that are below the 200 day ma - opposite to what a TAer would do.
2. The expected P/Es have to be lower than 15.
3. Exclude financial like banks and insurance, miners and bio drugs.
4. Buy these stocks less than 5% market prices - TAers give us the benefit.

Check the result in 6 months and 12 months.

A 200 ma is one every one uses even most fundamentalists know how to use it if they want. It is a good indicator for general market but not the best one for individual stock. There are many sophisticated tech. indicators.

The best ones in TA and the best ones in fundamental always make money in either market. However, fundamental is easier to master and many have make money than TA.

Fundamental can be divided into the following.

Value. I use it most. Esp. good for early recovery.

Dividend growth.

Momentum. Best in Up of the market cycle. Be careful of market crashes.

Day trade. In a nutshell on my definition of day trading, you want to get into the wagon when pension, mutual fund managers are buying and sell them at the end of the day. You can identify them from the increases of volumes. It is part of momentum.

Most likely you will make a lot of small profits every day. Watch out for losing a big one that could wipe out all the previous profits and sometimes even more. I enjoy the daily result esp. the good ones.

I just started day trading and so far so good. I do not use any charts.


(c) TonyP4 2012. Written in 12/02/11. Last updated in 12/02/11.


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

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

Covered calls

For basic description from Wikipedia, click here.

Covered calls do have its disadvantages like higher commission rate, forcing you to sell at higher tax rate for short-term capital gain, and you need to buy them back when they increase in prices beyond your strike price or lose its potential to appreciate more. Using another put costs could allow you not to lose any gain beyond the strike price. However I prefer to use my time for something more productive and insurance is not cheap. One's opinion.

My recent bad experience. I sold Netflix covered call with the strike price about 2% higher and 3% premium (from my memory) but the price shot up 12% higher in one day, so I'm potentially losing 7% profit.

It is like collecting rents from your apartment you bought. The difference is that the renter has an option to buy the apartment at a preset time and price.

Normally I prefer to sell covered options for stocks for 100 to 600 shares (i.e. 1 to 6 contracts) for the longest time (about 2-3 months). Some smaller stocks do not have a market and some stocks are not optionable. Usually high tech stocks have higher premiums to be collected. The right stocks can generate 25% or more in a year in addition to the fluctuations of the stock prices.

In general, if I feel the market will be down for the period, I use covered calls esp. for stocks over 1 year holding (unless I have short term loss to offset short term gain) or in retirement accounts. Watch out for any tax changes that may affect your total return.

When Dow doubles

Dow will double before the end of this decade if most of the following materialize.

* End the two wars and not to start another one for any reason other than protecting our trade/interest. We cannot afford to be the world policeman fighting for our idealism. Let others fight for their own freedom.

* Sleep with China to avoid any trade war and take the risk of pulling out their trillion debts. No slaves would talk back to their master unless he does not know he is one.

* Buy more printers to print money. It would lead to super high inflation (so 30K can only buy 15K goods). In this case, Dow doubles but not in real purchasing power.

* Cut down entitlements and force those able, long-term welfare recipients to work on jobs taken by illegal aliens now.

* No more bailout.
No one including the government is too big to fail. Cut the government size to half.  It will be no reduction in service as most government workers work 20 hours a week. Sell Alaska with Sarah (not as a bonus) to Russia, sell Hawaii to Japan, file Chapter 11 for most states...:)

* Give incentives to businesses to invest here such as low tax rates, no ObamaCare, no complicated regulations/laws, low legal claims... We cannot compete if our wage is so high. We need to bring our living standard to how much we earn, and not to how much we can borrow.

They will not materialize as the politicians cannot buy votes with most measures and nobody wants to bite the bullet.

Fool of all fools aks Herd Theory

When the herd makes money, they think they're genius. The last one to leave the herd will be the fool of all fools like the last holders of Lehman Brothers, AIG, Stern...

The real genius is the one who makes money on the way up but leaves before the bubble bursts. Even a genius cannot predict the peak and the bottom but I'll call him/her a genius if s/he is right better than 80%.

It is our nature and bias to ignore others' ideas. We cannot be wrong, but usually we are.

We try to cover the entire sky by placing our hand between our eyes and the sky, so it is covered but every one else can see the sky. It is a rough translation from a Chinese proverb.

Now dividend growth stocks have the highest premium in last 30 years. It is a mild bubble when we've many retired or retiring folks seeking for income.

Same for internet bubble in 2000.


(c) TonyP4 2012. Written in 12/02/11. Last updated in 12/02/11.


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

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

Thursday, December 1, 2011

India vs China

In the 50s, India was ahead of China. For the last 30 years, China is decades ahead of India and the next 30 years will not look good for India.

Most favorable articles on India are written by Indians with their dumb nationalism and few have been written by Chinese which likely like to compare itself with US. Tier I cities in India cannot compete with Tier III cities in China in subway, airport, train, high rises, electricity, corruption, intelligent property enforcement, protectionism, quality… The last four must be a surprise to the westerners, but they are true. The list is endless.

Indians are happier, and it could be due to less internal competition. From my contact in US, Indians here are as smart as the Chinese.

Most Indians want to stay in US without waiting for the improvement in their native country while Chinese have a lot of ‘sea turtles’ swimming back to the mother land. India is grossly mis governed.

Why there are so little FDI to India compared to China? You have to ask how long it takes to open a business in India and how many bribes you have to pay.

I do not see a lot of Chinese settling down in India, but Indians could be the second among all Asian countries settling down in Hong Kong after the housekeepers from Philippine.

Count how many high rises in Hong Kong and how many in the largest city in India. Count how many articles in WSJ on China and India. Count how many top 100 computers, literacy rate (compare apple to apple for 10 years of education)...  The list again is endless.

From my contact, Indians and Chinese in US have the same intellectual level. Actually Indians are doing better here in US due to mastering English better and better educated (with H1 visas). The problem with India is mis governance, similar to Mao's reign in China.

India cannot catch up with China in the next 10 years. It is better for the world that India would catch up with the rest of the world and it is my hope and wish they do. However, the reality looks too bleak for India. You need to understand the problems of your country before you can fix it.



Click for more on this topic.

Political systems and the economy

Economy is controlled by political systems at least to some extent. Use China as an example.

Communism is good in principle to solve the class problem. However, it makes folks lazy and managers not taking risk - your extra effort is not rewarded.

Socialism is just in between the communism and capitalism. Laziness is encouraged and leaders are taking easy steps by buying votes. It happens in Greece, Italy and gradually in USA. The current ratios of debt over GNP in most PIIGS do not allow them to compete.

Does democracy lead to socialism?

Mao was a great revolutionist, and he is respected esp. in China.

Do you remember the Peter's Principle? When a successful manager is promoted to another position s/he has no experience and/or is not qualified for, s/he usually screws up big times. Mao is the poster boy of this principle when he was promoted from a revolutionist to a governor.

The last 30 year success in China is due to: 1. US played China hand against Russia and 2. Deng's reform with the economic special zone which is so simple but so genius. So the political system is as good as how it is administered and some luck helps a lot. Another example is how democracy is mis governed in India. Hence, we cannot conclude democracy is always good. I believe democracy needs a educated and developed country to make it useful.

As Deng said, we have to let some to make money and the 1% capitalists are the ones. We need them to invest so they can hire more folks. Hope the world economy would not go to another recession. The rising market yesterday and most likely today (if most market timers use the 200 day moving average as a guideline) does not mean anything as EU's problems have not been resolved.