Tuesday, January 31, 2012

Defending China on shitty products

Those are many isolated cases on poor quality of Chinese products that have been amplified by the media.

Where else can you buy these household stuffs you mentioned? From Thailand, Cambodia, India...? They're even worse than China. Using tires as an example, I do not buy low-end tires but there are folks here who cannot afford higher end products.

Look at the components inside your car, and you will find many are made from China.

We depend on the US companies like Fisher and Apple to check the quality of Chinese products before they put their labels on them.

Actually China is moving up the value chain and many projects/products are won due to better quality. However, there are thousands of companies trying to make a buck and it is hard to distinguish the quality of a product.

It is a kind of reality that we've to face and hopefully China has to move up the quality standard to establish a better reputation for China Inc.

Personally I do not buy food and drink for China, thanks to the publicized cases. I suspect the fish I got from restaurants are from China and suspect the water quality. Recently I bought lamps from China imported by Lowe's and it was hard to assemble and did not last long. I prefer to pay higher prices for better and/or safer stuffs.

2011, when stock pickers die

This is a year stock pickers (particularly the fundamentalists) do not perform. The summary of AAII screens confirm it and so are many mutual funds. Most investment advisers/newsletters are not doing good. Check the performances of your investment newsletters such as ValueLine and IBD. However, do not give them up. They may not perform for a short while but they will return back to the normal performances. It is a characteristic of a bottom market.

The market was volatile with most of the gains in the first half of the year of 2011. Traders (particularly the Technical Analysts) do good.

From data of about 300 stocks for a period of about half a year, I tested out which fundamentals do not work well in 2011 for illustration. They are analysts' grade, cash flow and the short %.  Normally, the stocks with analysts' grade A (or above 8 from Fidelity), cash flow (A from Blue Chip Growth) and shorter % (less than 5) would perform better than the average. Not this time. You can obtain these metrics from many other sources.

I'm adjusting my search criteria accordingly for swing trades. As of 3/2012, I'm not buying a lot and waiting for the big dip I expect it will come. However, when I see bargains I'll buy them and wait for years for the market and these stocks to recover.

Thursday, January 26, 2012

Market Timing

Good market timing predicts market direction more than 50% correct of the time. You make a bundle with this percentage in crap and black jack.

We divide into 3 primary areas: secular market (about 20 years interval for the last 3), market cycle (about 4 years interval) and the yearly corrections (about 3 times in a year). Since it is not an exact science, all the numbers are educated guesses based on historical data.

This post concentrates on the last area: yearly correction which is calender based.

* Presidential cycle. Pre-election like 2011 is the best among the 4 year cycle. Post election like 2012 and mid term like 2013 is the worst.

* With exception of a market plunge, last year's loss could be a good indication of this year's gain. 2007 is the market plunge, and 2008 continues the loss to give a good rise in 2009. Not always works this way.

* Seasonal. Best is the period from Nov. 1 to April 30. So is the saying 'Sell in May and Go away'.

* Worst month. September.

* Best 30 days. Dec. 15 to Jan. 15.


(c) TonyP4 2012. Written in 1/27/12. Last updated in 1/27/12.


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.

Is Apple cheap?

At the current P/E, it is cheap esp. if you consider their cash reserve. However, Apple will not have the same growth rate, so it is turning itself from a growth stock to a value stock with minor dividend. After one or two upgrades by the consumers, the current products will not be economically feasible for upgrades except to boost one's social status.

There are bright spots.

1. Apple Text Book. Imagine all students carry a iPad instead of text books.

2. Apple TV. It is a loser so far and it is a very risky venture. However, the potential is great. It could give all cable companies a run for the money.

3. While he iPad and iPhone are peaking in the hardware, the software and contents for these devices to access have no limit. From TV, we have witnessed how it helps the folks with autism. I can envision many similar applications.

4. Apple moves to Kindle's market.

The minus for Apple it has lost a visionary leader Steve Jobs, I hope he was not replaced by similar managers at Microsoft , who are responsible for Microsoft's lost decade without innovations.


(c) TonyP4 2012. Written in 1/26/12. Last updated in 7/16/12.


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.

Tuesday, January 24, 2012

Apple and dividend

I posted on dividends and buyback.

If I were the CEO of Apple, I'll give a 3% dividend. There is a high premium on dividend stocks. It could boost the stock price by 5%, which is 5% extra from the stock options. Why not? They should not be as silly as they look.

3% is not large percent of the payout ratio. If they feel the stock price is under valued, they can just borrow money to buy back stocks at the lowest interest rate in recent history. Same for new acquisitions.


(c) TonyP4 2012. Written in 1/24/12. Last updated in 1/24/12.


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.

Monday, January 23, 2012

God and Tom Brady

Brady's God must be more powerful than Tebow's God, or God played favorite that day and/or felt Tebow's prayer was just an act.

Being the 4th round pick, most quarterbacks may never go to prime time. Bledsoe's injury could be the answer to Brady's sincere prayer.

With Brady's mediocre performance (or due to his better performance at night) and the worst in defense (due to draft pick errors), the Patriots still head to the Superbowl. How many times kickers miss a 31 yard field goal?

This is a perfect proof that there is a God even for a non-religious guy like me. BTW the stock market is as unpredictable and it seems to be controlled by God despite all our analyses.

If you're not from NY or Boston, you do not know which team to cheer for as they're similar in location, culture, wealth... With the sizes of their markets, both should be on the top of the games - money talks! Compared to other major sports in Boston, the Patriots are under achievers in last 5 years.

Gronk is the bright spot in the team. His huge hands are out of this earth. He runs like a runaway locomotive in steroid through NYC tramping the midgets on his way before and now the giants.

Saturday, January 21, 2012

What China should do in the next 5 years

China has been moving too fast. It is time to slow down and set priorities. They need regulations/enforcements on product quality, stock market, water/air pollutions, corruption, intelligent properties, social welfare… China should not wait for problems to surface and should proactively fix/reduce/prevent problems before they happen.

Without product quality and intelligent property enforcement, China will not move to the next phase of moving to a developed country. Without regulations in stock market, no one, foreign or local, would invest in Chinese companies. Without water/air pollutions, folks will not have a better life.

China has enough airports, highways... comparatively. Boosting GNP with infrastructure is not a effective payback now.

When China moves up the value chain, the low-end manufacturing will become less important. China’s home market will offset the importance of export. Product dumping is not a long-term solution to create jobs, which is used to reduce social unrest.

They do have to improve democracy and human rights gradually and slowly.

They also have to settle disputes with her neighbors. Let both countries drill and explore natural resources. Let the water flow to SE Asia and India as it has been centuries ago.  

The common misperceptions on foreigners

I do not know how the average US citizen is brainwashed by our politicians or the media. I posted the following again trying to correct the wrong perceptions.

* Most jobs taken by illegal foreigners across the border are jobs no one wants to do like farming, emptying your waste bin... Our welfare system encourages folks not to work so they will not lose health care and other entitlements.

* Contrary to popular belief, the H1 visa program helps US to compete. Our kids in this generation do not want to work in science, maths., computer programming as they want to have a easy life. Even when they're in these fields, they want to be managers.

* Export/import restrictions and currency manipulation. You're brainwashed by our leaders who blame China as they cannot fix our problems. Use tariffs on Chinese tires as an example. It does not gain ONE single job for America, but costs our consumers big money. The tires are now from Mexico, Indonesia, Thailand...

*$20 wage will never compete with $2. China is the best among the low-wage countries. Our wage can never go to $2 as our living standard is substantially higher than the competitors in low-end products.

Thursday, January 19, 2012

Strategies for secular bull and bear markets

Joseph Shaefer wrote the following:

My own discipline is to conduct deep research, buying unloved and undervalued stocks in out-of-favor sectors in which I see a catalyst for change in investor perception and/or in the sector or company’s ability to use that change to increase their revenues, market share and margins. I buy the best quality firms anywhere I find them, the less “popular” the area the better (yielding better entry prices,) then hold unless market conditions change or I find a more compelling investment -- if we are in a secular Bull market!

But during secular Bears, no matter how exceptional the company, I know their stock can be battered by a general market malaise as well as by a single news item or event beyond their control. In big "B" Bear markets, people are fickle and will panic at the slightest provocation. So we use the same scrupulous research methodology but we also conduct a daily review of all client accounts and a regular reallocation of assets. Different times call for different measures.

Ideas we can use and argue:

* If you have a screen that includes sector (like choosing the top 3 sectors), you should adjust them for bull market. Buy stocks in out-of-favor sectors in bear market and vice versa. Different from Joeseph's?

* As a confirmation, you can get a better price when certain adverse event happens.

* Buying on value takes a longer time for appreciation as you're against the tide, and vice versa for momentum buys.

More on secular market.

Tuesday, January 17, 2012

Chinese Nobel laureates

According to Wikipedia, we have 11 Nobel laureates of Chinese descent or under their place of birth in China not including Dali Lama.

Most scientists did their research in US and the west as China is building their research facilities and universities. Due to the Cultural Revolution, China lost a lot of top professors, researchers, college students, equipment.... That's one reason they send out a lot of the best minds to study abroad while re-building their college system. After TSM, Chinese students were allowed to stay in US. A good deal for US for a change. During the current recession, a lot of 'sea turtles' return home with practical experiences and knows-how - a win for China.

Nobel prize committee is all screwed up. They gave at least two to Chinese when they left or likely going to leave the country in bad terms - obviously for political reasons. They gave some for 'discovering' modern portfolio theories which are totally useless. They gave one to Obama for doing nothing and not to Deng who lifted millions from starving to death.

Sunday, January 15, 2012

China and its wealth

* No 2 in economy does not mean anything to its citizens and only has meaning to its trading partners. GNP per capita is what every country should fight for. Norway is #1 or close to and US is not too far away from the top.

Unless we're still in high school, being #1 has no meaning. If the world leaders do not care to be #1, we would have a better world.

* China should compare itself to China 5, 10, 20, or 30 years ago. Comparing itself to a developed country like USA has no meaning. China never declares they want to be #1. It is the idea from the media and politicians who have their own agenda.

* GNP even adjusted for purchase power is not meaningful in many cases but it is the only benchmark. Urban China and farm villages are very different and the GNP has no meaning at all. You can live a very decent and healthier life in villages. We should add a happy meter and health meter.

Hong Kong is one of the cities in top GNP per capita. However life is not that great proportionally compared to housing expenses and pollutions. Wealth brings up temptations / lusts and bad human natures like corruption to life. I prefer the good, old days when life was simpler and happier.

* No one steals US jobs as long as we've free trade. $20 wage just does not compete with $2 wage. It is the election theme to blame all our problems on China as our politicians cannot fix our problems. There are many in line to provide same goods produced by China and US is not one of them.

* China will have discovered more new drugs in the future from their research and ease to market a new drug than US and the west.

That is not the point. The point is when you need a drug to cure your life threatening disease, do you care where it comes from? So being #1 is only in the mind of politicians, not in the mind of average citizen.

* China will not gain respect for being wealthy, but on how to deal with the world problems, potential wars, how their citizens behave... At the same time US and the west should not look at China as enemies. When they do, China will be an enemy eventually.

Thursday, January 12, 2012

Sectors you may want to avoid

I have my reasons to eliminate the following sectors:

Loan companies/banks. The financial statements do not show the quality of the loans. Following this advice, you may be able to skip the bank meltdown in 2007.

Drug (generic is ok). You need to know the pipelines and its potential profits of new drugs and the expiration of its current drugs. A lawsuit could wipe out a good percentage of the stock price.

Miners. Hard to find how much ore(s) they have, and how easy to extract/transport them. When the cost costs more than its production price, the company will not be profitable for a while. You need to predict their future ore prices and the demand.

Insurance. You need to know the quality and the performance of the company's portfolio.

Emerging countries (not a sector).  Some of their financial statements cannot be trusted. Frauds and insider trading are common as most do not have similar regulations as the US. Larger companies are better.

If you want to buy companies in these sectors, you may want expert info. from specific newsletters and advisers. Alternatively, buy an ETF and/or mutual fund that concentrates on that specific sector if you think that sector is moving up.


(c) TonyP4 2012. Written in 1/12/12. Last updated in 7/16/12.


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.

Investing Psychology 101

* Emotionally detached.
Investing is about making money at least risk with emotions detached. We should never fall in love with a stock or a group of stocks.

Some folks say sth like the following:
Every asset/class will return to the average value (say 30 years) with one or two minor exceptions (gold and financial stocks).

When a strategy is used by every one, it will lose its performance.

* Do not risk with money you cannot afford to lose.
One recent retiree lost most of his money in a market downturn and he died due to too much worry. After a year, the market recovered and he got back everything except his life. Besides his wife, Uncle Sam was not too happy.

* Buy when market is bleeding and sell when every one is buying.
Buy low and sell high is the best strategy but it is hard to do so.

* Diversify will give you better mental health. The stock could plunge with unexpected events and/or manipulated financial statements. Diamond and Carnival are recent examples.

* Do not buy sin stocks like tobacco company and casino.

* Do not follow the herd without exit strategy. If you are against the herd, make sure you have good reason to.

The flow to money fund proves the average retail investor is usually wrong in market timing.


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


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.

Modern Portfolio theories

Contrary to popular belief and the Nobel prize committees, modern portfolio theory does not work for me. I prove it to myself many times. The testing is all wrong.


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


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.

Debunk some Buffett's preachings

Buffett could be our greatest investor in our generation. Being said, some of his preaching may not be applicable in today's market.

I checked his Berkshire's performance from Yahoo!Finance which has two years for easy choice. He beats S&P500 by 2% in last two years. However, after adding the dividends (about 3.5% total), he does not best S&P500 with dividends added.

He makes a lot of money for himself but not for the stock holder of Berkshire in last two years. Just buy SPY for better diversity and less volatility for the last two years. If he is a hero in picking stocks, every one who beats S&P is a better investor hero. We need to distinguish the term hero and past hero.

Many have been brain washed by many books written on him. You have to think even reading a good book and whether the same strategy applies today.

When the Magellan Fund headed by Peter Lynch lost his touch, I got my money out, but most did not due to the huge capital gain taxes. The result is many years of below average return for them. Hence, his mediocre performance in last three years matters and it could be a canary to his future performance.

Debunking some of his preaching as follows while many are still very good and not to be debunked at least not today. I just want to seek the truths from the facts in today's market. It seems very dumb on my part to argue with success. Let me know if I were wrong.

* 'Never sell'.
Buy and hold is dead since 2000. Most books and comments praising buy and hold are based on data before 2000.

He made big money in Coke company for the first 10 years, but not a lot in the next 10.

I prefer to turn my portfolio to reflect the current market conditions and companies' fundamentals that could have changed. His ownership in Washington Post is good then, but too risky now if their paper does not go on-line.

* 'Only buy the company whose products he understands'.
He must have missed a lot of great companies like Apple. It is better try to understand their products and the potential profits, and make your decision accordingly. He should depend more on his resources and his many analysts.

* 'Rule #1. Do not lose money. Rule #2. Do not forget rule #1.'
If every stock you buy is risk-free, your return cannot be that good like buying treasury bills.

I prefer to own larger number of stocks than most to diversify and spread some risk. One bad apple would not cost me a good sleep, but we need to learn from some losers. Losing money is part of the learning experience, as long as we can control and limit our losses. If you cannot handle loses financially and mentally, most likely investing is not for you.

* 'Margin of safety'.
There will be not too many stocks to buy if every one treats margin of safety as his first priority. It is the herd mentality I posted. However, it should work if less folks concern about the margin of safety.

We use the right strategy that is applicable to current market conditions. To me, today is value and cash waiting for opportunities to buy. In the next phase of the market cycle, it could be momentum and growth which do not care about margin of safety.

* 'Own the stock like owning the business.'
As a stock owner, I do not have to run it like a business. I do not fire employees, do not have legal obligations, make day-to-day decisions... I can sell the stock with a click of the button with no emotion attached. Running a business is different from investing in same company. My objective in investing is to make a profit with least risk.

If you own 30 stocks, do you have time to run 30 companies?

* His portfolio is not diversified enough. When he trades, he pays extra due to the huge volume. Day traders will take advantage of Uncle Warren.

* Insurance is a good business and so is re insurance. However, it depends on how the policy protects his company. It could be a black swan event waiting to happen.

* He has connections and sweetheart deals that most of us do not have access to.

* When he retires, Berkshire stock will lose 5% in one day - my educated guess.

Hope I do not bore you in this lengthy post. All I want to say is: Do not follow any investing hero blindly. Buffett still is my investing hero in our generation.


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


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.

Wednesday, January 11, 2012

Chinese and Italian food

To be fair and very unusually humble on my part, I should say Italian and Chinese learn from each other in cooking. Thanks to Marco Polo.

We respect each others' cookings. The world would be a better one if the world leaders do the same.

The common food between the two countries:
Dumplings (many varieties and I had a banquet of dumplings once in Western China), Peking ravioli, pot stick (very good and is smaller than Peking ravioli in Boston area) similar to Italian ravioli.

Scallion pan cake to pizza.

Noodle to spaghetti.

Tomato sauce is obviously introduced to China with the direct translation in sound in Chinese.

A very unknown fact. Ice cream was invented in Yuan Dynasty. Marco Polo bought it back to Italy, and in turn spread to the rest of the world. Who is more important: the inventor or the one who makes the rest of the world know about it? Same as the concept of zero invented by India and spread to the world.

Chinese cooking is very regionally diverse (it is a large country after all). I'm less adventurous than my son who eats chicken feet. The best, healthy, and low priced Chinese food is from Vancouver and Toronto.

Tuesday, January 10, 2012

Looking for a multi bagger

It is very rewarding to find the next Apple making many times profits. It is possible.

I developed a screen to find multi baggers.  Basically they double in sales, profits... every year. They will be penny stocks with low market cap and not in the three major exchanges initially.  When they move to a major exchange, it is a good sign. Usually they do not pay dividends as most of the profits have to plow back to research and development in the initial years.

Most likely, the screen would find them a few years after their IPOs as we need the initial historical data.

Even so, I suspect many small companies fail for each multi bagger found. The losers may not show up as they're taken from the database when the stock price goes to 0 (termed as survival bias). If your test database does not take care of the survival bias, your test result will appear better than it really is.

You need to have cash for investment, a lot of patience and the mental power to face many losers. It is for riskier investors for their riskier funds.

Apple, Microsoft... have the right products in this generation. Judging from the recent IPOs, I do not think they will be many multi baggers in the current generation, but I could be wrong.

Tax considerations.
As previously stated, most likely you will find many big losers for every multi bagger. You may want to sell a loser when it does not show any promise to offset any gain.

When you find a big winner, you can keep it until you die and the cost basis will step down, give it to your children or give it to a charity for extra deduction. Tax law changes and I'm not a tax professional, so ask your lawyer for advice.


(c) TonyP4 2012. Written in 1/10/12. Last updated in 1/10/12.


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.

Stop loss

You can limit your stock loss with stops. There are some incidents that you do not want to do so.

* Flash crash. It will turn your stops into market orders that are substantially lower than your stop prices. Some brokers offer stop limits, but they do not guarantee the orders are executed.

* My experience with 911. I sold many stocks due to stops. The market came back in 3 days and I missed all the gains from stocks sold.

Monday, January 9, 2012

Write to the investment guru

The following is real except the names are withdrawn to protect the innocent.

Dear Guru, I followed your advices 2 times and both made me money. However, the last time you're totally wrong and I lost a lot. What should I do? John

First the guru did good with 66% correct. Investing is about educated guesses. 51% correct can make you a lot of money (try black jack and craps). Even 50% can make you a lot of money if you bet more on winners and less on losers based on reward/risk.

Fisher, considered to be the father of modern portfolio theories, made several good predictions and made a fortune. However, he bet most in his last major prediction and lost it all. If John bet evenly, he is far ahead of Fisher.

The moral of this true story (that happens many times) is: Do not bet it all as nothing is 100% certain. Even with 99.99% sure, a black swan event could happen and wipe out your entire saving.

When some one tells me he makes millions of dollars in a bet and this is his only bet for a long while, it does not impress me except his good luck and he has violated diversification rules in investment. The only exception is the congressmen / women and corporate CEOs who trade with insider's info.

Friends ask me what to buy and when to buy. I try to avoid the answers like a politician. If they are right, they will not share the winning with me. If they are right, I would be blamed mercilessly. Silence is proven here to be golden.

Do not follow Cramer

The ones who make money are Cramer himself, his brothers-in-laws and the crew who know what he is going to recommend before the show.

I read an article a while ago that he did not do well in his recommendations - Cramer and his beneficiaries must cash in already before the herd.

Buy low and sell high is my game. Buy high and sell higher is a fool's game except when market conditions favor momentum - not today's with so many deeply valued stocks.

By law, advisers do not have to include dividends in the benchmarks like S&P 500 but his holdings can, so hence make him look better. Different rules for mutual funds.

Related links.
Herd theory.

No investor heroes.

Sunday, January 8, 2012

Refining Dogs of Dow strategy

Dogs of Dow is quite popular and even some mutual fund managers are using it. In a nutshell, you buy the ten Dow stocks that pay the highest dividends and repeat the process every year. It does not perform well in last decade except the last two years. The better performance of the last two years could be due to the recent mild bubble on dividend growth stocks as described in at least two WSJ articles. Hence, watch out when the bubble bursts.

When a strategy becomes headline, it will not perform due to the herd mentality. Hopefully we customize the strategy so we will not pick identical stocks as others.

I have my own Dogs strategy. I'll disclose the concepts here. One version has an average annualized return of 15% (12% appreciation + 3% dividend) from Nov. 1, 2000 to Nov. 1, 2010. Buy 5 candidates on Nov. 1 and sell them on May 1 next year. If you have a historical database, try it out and share your findings.

Refining Dogs of Dow:

1. You can include S&P 500, so you have 500 more stocks to choose from.

2. You can adjust the time between Dec. 1 and Dec. 15 (a little earlier is fine) to avoid the herd who follows the same strategy and performs the same task at around the beginning of the year.

3. For non-retirement accounts or you have short-term losers to offset, try to buy on Nov.1 and sell on May 1 to take advantage of this normally favorable period.

4. Sort the selected top 10 with positive earnings by P/E and buy the lowest 5. A value play.

5. Avoid the following sectors as their problems/values are not shown in financial statements: lenders (on the quality of mortgages), drug (generic is OK) and miners.

6. Check any major lawsuits against the companies.

7. Skip the short % ( = No. of shares shorted/Total floating shares) higher than 10.

8. When we're in the second year of recovery, use stop loss or watch your portfolio every week as it is closer to the peak of a market cycle. This is the riskiest time of the market.

It is a lazy man's stock picking and market timing. I bet it performs better than selecting stocks with a hundred of monkeys throwing darts at stock listings, termed as the so-called efficient theory. Some received Nobel prizes on the theories which are proven to be wrong. It shows how out of touch the Nobel committees were/are. Well, they gave Obama one for doing nothing and nothing to Uncle Deng who saved millions from starvation and moved China to second economy.

Related links.
The best strategy that works best.

Is dividend stocks better deal?


(c) TonyP4 2012. Written in 1/8/12.


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.

Thursday, January 5, 2012

Defining freedom

Freedom is a funny term. It can be defined whatever you want. Ask any Iraqi, you will get an honest answer that seems our effort of fighting and all the fallen heroes in the wars for their freedom is totally unjustified.

When my classmate was a child in Hong Kong, he wondered why you westerners fighting to improve his job conditions while it meant it was his only meal for the day.

In many cases, people prefer to live under dictatorship and/or being exploited. Your yardstick is good for your society, and not mine.

Lessons never learned about wars

Why we need a carrier that is driven by TWO nuclear power generators?

Why we need to increase our offense capability when our capability is more than the rest of the world combined? We've the capability to destroy the entire world many times.

Have we learned from Vietnam war (and from the French who failed before us), Afgan. (and from the Russians who failed before us)...?

If the Middle East wars is about oil, shame on us. If it is about modern Crusade, shame on those who misinterpret the religion teachings. If it is about our leaders showing their power, shame on them. If it is about our offense companies, shame on them. If it is due to the Jews controlling our congress, shame on them too.

If we sent the children of our leaders to the front line, we would not have any war. Wars produce orphans, single-parent families, families with disabled veterans physically and mentally... When they return from the wars, do they become heroes with medals costing $20 each or the burden of the society? Be your own judge.

Fighting for ideologies is silly. Fighting for others' freedom appears to be noble but it is really stupid. If they do not want to fight for their own freedom, why should we? Ask any Iraqi and get an honest answer. I rest my case.

The generation before mine suffered from WW2. The US have not really experienced wars in their home land and most US citizens do not understand the suffering from wars. Most of our new soldiers do not know what the Middle East wars are all about. We cannot rob their chances to enjoy their best time of their lives and be educated.

Without wars, we will have a prolonged bull market that will benefit all. We need to protect us from terrorists and our interests overseas. However, we need to calculate the cost/suffering/life lost and benefits like any investment or project, even it is not possible to appraise a price on a life.

Political parties and the economy

Republicans are usually pro-business, but the democratic presidency has better track record for the market.

As for the stock market, the Dow index is up 56% (from 7,949 to 12,418) in the less than 3 years since the day that Obama took office. If you still collect unemployment or your house has been foreclosed, you're still in deep trouble.

The S&P500 performance under Republicans vs Democrats since 1926:
Annualized return under Democratic presidenci­es: 13.74%
Annualized return under Republican presidenci­es: 6.25%

Mitt could trigger a trade war with China, and we would be back to the recession.

The president's appointees for the economy are the ones to watch as they set up the policies. Today interest rate is not a factor as it cannot go much lower. The cut in military expenses is good for the economy.

The problem of two major political parties is they do not agree with each other, so they have to make too many compromises and waste a lot of time and effort. To illustrate, if Obama is re-elected, he will have a hard time to deal with the Congress that is controlled by a party opposite to his.

For a joke, click the differences between a prostitute and a politician.


It is easy to measure how the market does during the presidency. However, it is not easy to measure the economy. Here is one effort:

Alan Blinder, the Princeton economist, had a great article in the NYT back on August 30, 2008. It pointed out that in the 60 previous years, Republicans held the presidency for 34 years and the democrats for 26. Growth in the economy averaged 1.64 percent per capita under Republican presidents versus 2.78 percent under Democrats. Professor Blinder pointed out a second fact: Over the entire 60-year period, income inequality trended substantially upward under Republican presidents but slightly downward under Democrats, thus accounting for the widening income gaps over all. Growth in inequality is an obvious drag on overall economic growth, for if the middle and lower classes don't have the spending power, growth in demand will lag.

Tuesday, January 3, 2012

Our problems, solutions and implementations

This recession is the longest from my memory. Usually we have two to three years at most and then we recover. Some recent college graduates have been out-of-work for over 3 years. It could be all the stimulation, printing money, bailouts do not fix the problem. If we do not do the above, it could be either a deeper recession or a faster recovery. 2012 hopefully could be the year we finally recover.

US problems are easy to fix. I can think of many easy solutions, so the politicians who are hundreds times smarter than I must have many solutions already.

Identifying problems and finding solutions are the easy part, but implementing is hard as the agenda of all politicians is simple: Get reelected. They have to satisfy the special interest groups who finance their campaigns and the voters who do not want to bite the bullet.

To illustrate, why gun control is not an issue in both parties? You have to ask your congressmen/women how much money they receive from NRA.

I wrote the blog titled 'A nation of no-losers' to reflect the current state of our nation. It appears to be funny, but there is some truth in it.